Global Growth
and Returns
GENERAL MILLS
01 ANNUAL REPORT
GLOBAL GROWTH AND RETURNS
At General Mills, we serve the world by making food
people love. Our goal is to create market-leading
growth to deliver top-tier returns to shareholders.
And we’ll do that by focusing on our consumers —
giving them the foods they love and brands they
trust in more than 100 markets around the world.
FISCAL 2017 FINANCIAL HIGHLIGHTS
52 weeks ended
May 28, 2017
52 weeks ended
May 29, 2016
$ 15,620
$ 16,563
In millions, except per share
and profit margin data
Net Sales
Organic Net Sales*
Operating Profit
Total Segment Operating Profit*
Operating Profit Margin
Adjusted Operating Profit Margin*
Net Earnings Attributable to General Mills
Diluted Earnings per Share (EPS)
Adjusted Diluted EPS, Excluding Certain
Items Affecting Comparability*
Average Diluted Shares Outstanding
Dividends per Share
$ 2,566
$ 2,953
16.4%
18.1%
$ 1,658
$ 2.77
$ 3.08
598
$ 1.92
Change on a
constant
*
currency basis
-1%
6%
Change
-6%
-4%
-5%
-2%
+10 basis points
$ 2,707
$ 3,000
16.3%
16.8%
+130 basis points
$ 1,697
$ 2.77
$ 2.92
612
$ 1.78
-2%
0%
5%
-2%
8%
Net Sales
Dollars in millions
Total Segment Operating Profit*
Dollars in millions
Adjusted Diluted Earnings per Share*
Dollars
2017
2016
2015
2014
2013
$15,620
$16,563
$17,630
$17,910
$17,774
2017
2016
2015
2014
2013
*See page 35 for discussion of non-GAAP measures.
$2,953
$3,000
$3,035
$3,154
$3,223
2017
2016
2015
2014
2013
$3.08
$2.92
$2.86
$2.82
$2.72
ANNUAL REPORT 01
GENERAL MILLS AT A GLANCE
$1. Billion FISCAL 2017 NET SALES
Total Company Net Sales by Product Platform
We are focused on five global growth platforms — cereal,
snacks, yogurt, convenient meals and super-premium ice
cream. These categories are projected to grow at attractive
rates because they are on-trend with consumers’ food
interests. Seventy-five percent of our worldwide consolidated
net sales are concentrated in these five platforms.
2%
1%
11%
21%
11%
5%
15%
17%
17%
Snacks
Cereal
Convenient meals
Yogurt
Super-premium
ice cream
Dough
Baking mixes and
ingredients
Vegetables
Other
Total Company Net Sales by Segment
In fiscal 2017, we implemented a new global organization
structure. Our company is now organized into four
operating segments.
11%
12%
12%
North America
Retail
Convenience Stores
& Foodservice
Europe & Australia
Asia & Latin America
65%
$1.0 Billion FISCAL 2017 JOINT VENTURE NET SALES
In addition to $15. billion of consolidated net sales, our proportionate share of non-consolidated joint venture net sales was
$0.8 billion from Cereal Partners Worldwide (CPW) and $0.2 billion from Häagen-Dazs Japan (HDJ).
02 GENERAL MILLS
Jeff Harmening (left)
Chief Executive Officer
Ken Powell (right)
Chairman of the Board
TO OUR SHAREHOLDERS
Fiscal 2017 was a year of significant change for General Mills.
We implemented a new global organizational structure to enhance
our agility in a rapidly changing consumer environment. We also
implemented a business plan that aggressively shifted resources to
our best growth opportunities and eliminated low-return investments
and volume. While these actions were the right thing to do for our
company, we did not execute up to our standards in certain areas
and our results fell short of our plan. In 2018, we are focused
on delivering improved performance, with a balance between sales
growth and margin expansion, and building on our track record
of superior value creation for our shareholders over the long term.
ANNUAL REPORT 0
Total Shareholder Return
Fiscal years, stock price appreciation plus
reinvested dividends, compound annual growth
18%
15%
11%
10%
7%
-6%
2017
Latest
5 Years
Latest
10 Years
S&P 500 Index
General Mills
Source: FactSet
Dividends per Share
Dollars
$1.55 $1.67
$1.78
$1.32
$1.92 $1.96
2013
2014
2015
2016
2017
2018
New annualized rate
FISCAL 2017
PERFORMANCE
General Mills consolidated net sales
for the fiscal year ended May 28, 2017,
declined percent to $15. billion.
Organic net sales declined 4 percent.*
Total segment operating profit
decreased 2 percent to $2.5 billion.
On a constant-currency basis,
total segment operating profit
declined 1 percent.
Diluted earnings per share were
comparable to last year at $2.77.
Adjusted diluted earnings per
share, which excludes certain items
affecting comparability of results,
rose 5 percent to $3.08. Excluding the
impact of foreign exchange, adjusted
diluted earnings per share increased
percent. Our total shareholder
return, which is a combination
of stock price appreciation and
dividends, declined percent,
reflecting our challenging topline
performance during the year.
In the third quarter of the fiscal
year, we reorganized our reporting
segments to align with our new
global organization structure. We
combined our U.S. Retail operating
units and Canada region into a
North America Retail segment, due
to their similar product portfolio
and go-to-market structure. We
divided our International segment
into two segments: Europe &
Australia and Asia & Latin America.
Our fourth reporting segment,
Convenience Stores & Foodservice,
remained unchanged from our
previous structure.
Fiscal 2017 net sales for North
America Retail, our largest segment,
declined 7 percent to $10.2 billion,
due in large part to sales declines in
our yogurt, refrigerated dough, cereal
and soup businesses. This net sales
decline also included the impact of
the divestiture of the North American
Green Giant vegetables business in
fiscal 201. On an organic basis, net
sales declined 5 percent. Segment
operating profit decreased 2 percent
as reported and on a constant-
currency basis, driven by the Green
Giant divestiture.
Our Convenience Stores & Foodservice
segment posted a 3 percent net sales
decline, driven primarily by market
index pricing on bakery flour and
declines on frozen dough products.
Segment operating profit increased
percent for the year, exceeding
$400 million. These results reflect our
*See page 35 for a reconciliation of this and other non-GAAP measures used in this letter.
CEREAL GOODNESS AROUND
THE GLOBE
We’ve been gaining share in many cereal markets around
the world. From Lucky Charms and Cinnamon Toast
Crunch in the U.S. to Honey Nut Cheerios in Canada to
new Lion Wild cereal in France, we’re driving growth by
emphasizing the great taste and nutrition of our well-
known brands. And we continue to promote the whole
grain goodness of our cereals worldwide.
0 GENERAL MILLS
continued focus on six key product
platforms in growing foodservice
channels: cereal, snacks, yogurt,
mixes, biscuits and frozen meals.
These businesses, which account
for half of the segment’s sales and
70 percent of the segment’s operating
profit, posted combined net sales
growth of 2 percent for the year.
on Häagen-Dazs ice cream, Old El
Paso Mexican foods, and Nature
Valley snacks across the segment.
These results were partially offset
by declines on our yogurt business
in Europe and an extra month of
results for Yoplait Europe last year,
as we aligned that business to our
fiscal calendar.
Net sales for our Europe & Australia
segment declined percent to
$1.8 billion and operating profit
declined 18 percent, primarily
reflecting unfavorable foreign
currency exchange. On an organic
basis, segment net sales decreased
4 percent. Segment operating profit
decreased percent in constant
currency. We posted good growth
Net sales for our Asia & Latin
America segment grew 1 percent and
segment operating profit increased
21 percent. Segment net sales
increased 3 percent on an organic
basis, and segment operating profit
grew 20 percent in constant currency.
Good growth in China, led by
Häagen-Dazs ice cream and Yoplait
yogurt, along with growth in India,
was offset by a challenging operating
environment in Latin America. We
also benefited from an extra month
of results in Brazil, as we aligned that
business to our fiscal calendar.
In addition to these four operating
segments, we hold 50-percent, non-
consolidated interests in two joint
ventures outside of North America.
Constant-currency net sales for
Cereal Partners Worldwide (CPW)
and Häagen-Dazs Japan (HDJ) grew
3 percent and 8 percent, respectively,
in fiscal 2017. Together, these joint
ventures contributed $85 million in
after-tax earnings in 2017. This was
percent below last year on a constant-
currency basis, driven primarily by
an asset write-off for CPW, partially
offset by volume gains on HDJ.
In fiscal 2017, we returned $2.7 billion
to shareholders through net
share repurchases and dividends.
We repurchased approximately
25 million shares of common stock,
reducing our average number
of diluted shares outstanding by
2 percent, which is in line with
our longer-term goal. In June 2017,
we increased our quarterly
dividend rate by 2 percent. The
new annualized rate of $1. per
share represents a yield of around
3.5 percent at recent prices for
General Mills stock. Our goal is to
continue to increase dividends as
earnings grow.
OUR PRIORITIES FOR
FUTURE GROWTH
For the past 150 years, General Mills
has been living its purpose of serving
the world by making food people
love. We aspire to continued growth
for our brands and our company.
EXPANDING OUR
YOGURT PORTFOLIO
In the U.S., we’re introducing some
delicious yogurt products, including
new Oui by Yoplait, a thick and
creamy yogurt that builds on Yoplait’s
French heritage. Yoplait yogurt in
China is gaining market share, as we
expand distribution in existing cities
and prepare to enter new ones. And
Carolina yogurt competes in the
large yogurt category in Brazil, with
varieties ranging from beverages to
decadent, dessert-style yogurts.
IT’S ALWAYS SNACK TIME!
Our portfolio of snack bars satisfies consumers
everywhere. The Nature Valley brand can be found in
90 markets worldwide. We launched Fiber One bars
in Europe in 201 and continue to expand distribution.
And retail sales for Lärabar fruit and nut bars and EPIC
meat snacks grew by strong double-digit rates in 2017,
as we increased distribution for these natural and organic
snacks in North America.
General Mills Long-term Growth Model
Growth Factor
Organic Net Sales
Total Segment Operating Profit
Adjusted Diluted Earnings per Share
Dividend Yield
Total Return to Shareholders
*In constant currency
Compound Growth Rate
Low single-digit
Mid single-digit*
High single-digit*
2 to 3 percent
Double-digit
Our goal is to create market-leading
growth that will deliver top-tier
returns to shareholders.
We remain committed to our long-
term growth model. While the
operating environment has been
challenging in the short term, over the
long run, we believe our businesses
can generate low single-digit organic
net sales growth, mid single-digit
constant-currency total segment
operating profit growth and high
single-digit growth in adjusted diluted
earnings per share on a constant-
currency basis. Adding in a dividend
yield of between 2 and 3 percent,
we should deliver double-digit returns
to shareholders over the long term.
To drive future growth, we are
focused on our Consumer First
strategy where we work to gain a
deep understanding of consumer
needs and respond quickly to give
them what they want. Whether
it’s bringing marshmallow news to
Lucky Charms cereal in the U.S. or
providing consumers in China with
the creamy yogurt they desire, we
have many examples of how this
strategy has driven growth across
our product portfolio, and we
see plenty more opportunities for
future growth. We’re also making
strategic choices about our level of
investments and expectations for
growth across our businesses. We
continue to manage three quarters
of our company as a Growth portfolio,
where we are focusing the majority
of our investments for long-term
growth. Our Foundation portfolio
represents the remaining quarter of
our company and provides strong,
consistent profit and cash generation
that helps fund topline growth
initiatives. We are making selective
investments in our Foundation
brands, focusing on strong returns.
With our Consumer First strategy
and our Growth and Foundation
designations firmly in place, we’re
focused on the following key priorities
for fiscal 2018.
Grow Cereal Globally
According to Euromonitor, cereal
is a $23 billion category worldwide,
and it’s projected to grow at a
low single-digit rate over the next
several years. With our North
America cereal business and CPW
combined, we compete in more
than 130 markets around the world
and hold leading share positions
MORE OPTIONS FOR
TASTY MEALS
Old El Paso Mexican foods are
popular worldwide with their zesty
flavors, use of fresh ingredients,
and innovative products, like new
varieties of Stand ’N Stuff shells.
Wanchai Ferry dumplings in China
make authentic Chinese meals
convenient, and we recently
introduced a line for kids. Totino’s
pizza snacks continue to grow in the
U.S. with bold flavors and strong
consumer support. And watch for
Progresso organic soup varieties in
the upcoming soup season.
expectations. We believe innovating
in new and fast-growing segments
of the category is the key to improving
our performance in yogurt. In 201
and 2017, we introduced Annie’s and
Liberté organic yogurts. In 2018,
we’re launching Oui by Yoplait, a
thick and creamy yogurt, based on a
French recipe, that brings a new taste
and texture to the U.S. market. We
also see good growth opportunities
outside of North America. Our yogurt
platform in China continues to deliver
strong results, and we have plans to
expand into new cities in 2018.
Invest in High-performing
Brands Worldwide
Our Häagen-Dazs and Old El Paso
brands have been posting good
growth around the world. In 2018,
we’ll expand our very successful
Häagen-Dazs ice cream stick bars
into new markets and also introduce
mini varieties. We have new Old
El Paso taco shell varieties coming
in the U.S., Europe and Australia.
We’ll continue to expand distribution
on our snack bars, including new
flavors of Nature Valley granola
cups, biscuits and bars. And Lärabar
fruit and nut bars continue to post
strong double-digit retail sales
growth in North America behind
increased distribution and strong
advertising.
Drive Continued Growth on
Natural & Organic Products
Our natural and organic portfolio
generates $1 billion in net sales in
North America, and we expect to
reach $1.5 billion in net sales by 2020.
Annie’s is our largest natural and
organic brand and now competes in
14 food categories. We continue
to add new offerings, including more
snacks and macaroni and cheese
varieties coming in fiscal 2018. We
also continue to expand distribution
in Canada, where the brand is only
two years old, but growing quickly.
And we’re investing in smaller natural
and organic brands that show great
growth potential, such as EPIC meat
snacks in the U.S.
Manage Foundation Portfolio
with Appropriate Investment
Our Foundation brands deliver stable
revenue performance and solid
earnings and cash flow. We’re making
opportunistic investments in many of
them to keep them competitive
in many of them. Wellness and taste
news are delivering growth on many
of our cereal brands. In fiscal 2018,
we have a strong line-up of product
news, including new flavors of
iconic Cheerios, that we’ll support with
solid levels of consumer investment
to grow our global cereal platform.
Innovate to Improve Yogurt
Performance
With its combination of great taste
and inherent health benefits, the
yogurt category is projected to grow
at high single-digit rates worldwide.
Our U.S. results have been challenging
in recent years as our product line
hasn’t kept pace with consumer
ANNUAL REPORT 07
we will achieve our performance
goals. We also what to thank you, our
shareholders, for your investment
in General Mills. We are committed
to delivering on our performance
goals on your behalf and appreciate
your confidence in our plans for
future growth.
Kendall J. Powell
Chairman of the Board
Jeffrey L. Harmening
Jeffrey L. Harmening
Chief Executive Officer
August 1, 2017
and relevant with consumers.
For example, we’re launching a line
of Progresso organic soups for
consumers seeking a “better for you”
soup option. And we’re adding a
new rolled pizza crust to our Pillsbury
refrigerated dough offerings,
making homemade pizza even more
convenient to prepare.
Building an Agile
Organization
The new structure we implemented in
2017 has increased our organizational
agility to operate as a truly global
food company. We accelerated
the global restructuring of our
supply chain, organized under new
operating segments and streamlined
our support functions, allowing for
more fluid use of resources and idea
sharing around the world. We’re
also building new capabilities to
support our businesses in the future.
We’re enhancing our e-commerce
know-how to capture more growth
in this emerging channel. And we
continue to invest in strategic revenue
management tools to optimize
our promotions, prices and mix of
products to drive sales growth.
We’ve entered fiscal 2018 with some
significant executive changes. In June
2017, Jeff Harmening was named
Chief Executive Officer. Jeff has more
than 20 years of experience with
General Mills, running both domestic
and international businesses. Ken
Powell remains as our Chairman and
we thank him for the 10 years he
served as our Chief Executive Officer.
Ken led us through challenging and
exciting times as we grew into a
more global food company. Under his
leadership as CEO, total returns to
General Mills shareholders grew at
an 11 percent compound annual rate.
We also want to acknowledge Chris
O’Leary, Executive Vice President and
Chief Operating Officer of our former
International segment, and Gary Chu,
Senior Vice President and President,
Greater China, who announced their
retirements this year. We appreciate
the contributions they made to our
company during their combined
40 years with General Mills. In addition,
Bob Ryan and Dorothy Terrell will be
retiring from our board in September.
They have provided invaluable counsel
during their combined 35 years of
service to General Mills.
In closing, we want to thank our
38,000 employees around the world
for their dedication and commitment
to our company. Their talent and
skills are what drive our organization
and what give us confidence that
COME ÄND GET SOME ICE CREAM
Häagen-Dazs is a leading worldwide brand of super-premium
ice cream. Net sales for the brand grew percent in fiscal 2017,
driven by the success of stick bars in Europe. We’re expanding
these bars to more international markets and launching mini-bars
in select European markets, too. In China, we posted good sales
growth in our shops and in retail outlets with new flavor varieties.
And we recently entered Australia and already hold a 0 percent
share of the super-premium ice cream category there.
08 GENERAL MILLS
GLOBAL SUSTAINABILITY
AT GENERAL MILLS
Throughout our history, General Mills
has been making food people love while
investing to make the world around us
better. We believe that being successful
in the marketplace and being a force
for good go hand in hand. This belief
is more important than ever as our
company navigates the enormous
changes in our industry and the global
economy. Consumer expectations for
food companies have never been higher.
Consumers are increasingly looking
for foods that reflect their values from
a company they trust. And we have
responded with expanded offerings,
new product benefits and increasing
transparency about our food.
At the same time, our planet is changing.
More than perhaps any other industry,
ours relies on nature’s bounty for the
ingredients in our products. And in order
to feed a growing global population,
we have to be good stewards of our
earth — from farm to fork and beyond.
Increasingly, the health of our business
depends on the health of the planet.
For more information about our initiatives to stand among
the most socially and environmentally responsible
food companies in the world, see our Global Responsibility
Report available at GeneralMills.com/Responsibility.
Our sustainability goal is to protect the resources
upon which our business depends. Our company’s
size, scale and global scope enable us to have a
material impact on environmental issues, and we
have taken bold actions to advance sustainability.
Here are a few examples:
CLIMATE CHANGE
We have set a goal to reduce
absolute greenhouse gas
emissions across our full value
chain by 28 percent by 2025
from 2010 levels and to achieve
sustainable emission levels in line
with scientific consensus by 2050.
WATER STEWARDSHIP
We will develop water stewardship
plans for the most material and at-
risk watersheds in our global value
chain by 2025.
POLLINATORS AND
BIODIVERSITY
We are partners with the U.S.
Department of Agriculture and
The Xerces Society on a project to
establish and protect more than
100,000 acres of pollinator habitat
in the U.S. by the end of 2021.
SUSTAINABLE SOURCING
We remain committed to
sustainably sourcing 100 percent
of our 10 priority ingredients
by 2020, which represents more
than 40 percent of our annual raw
material purchases globally.
ANNUAL REPORT 09
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
Basis of Presentation and Reclassifications
Summary of Significant Accounting Policies
Acquisition and Divestitures
Restructuring, Impairment, and Other Exit Costs
Investments in Unconsolidated Joint Ventures
Goodwill and Other Intangible Assets
Financial Instruments, Risk Management Activities,
and Fair Values
Debt
Redeemable and Noncontrolling Interests
Stockholders’ Equity
Stock Plans
Earnings per Share
Retirement Benefits and Postemployment Benefits
Income Taxes
Leases, Other Commitments, and Contingencies
Business Segment and Geographic Information
Supplemental Information
Quarterly Data
Glossary
Total Return to Shareholders
10
12
1
7
89
91
10 GENERAL MILLS
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 First initiatives. While input cost
inflation remained low in fiscal 2017, 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. In fiscal 2017, we generated $30 million in HMM cost
savings, and we’ve been able to hold our gross margin relatively steady over the past
five years.
We also have been taking additional actions to streamline our organization, increase
our efficiency and generate cost savings. These additional actions combined,
including zero-based budgeting initiatives, generated a cumulative $540 million in
savings in fiscal 2017. Our gross margin increased 40 basis points to 35. percent
of sales. We posted a 50-basis-point increase in adjusted gross margin, which
excludes certain items affecting comparability, and adjusted operating profit margin
increased 130 basis points to 18.1 percent of sales. We continue to see opportunities
for further margin expansion in fiscal 2018. Looking forward, we’re focused on
delivering a balance of sales growth and margin expansion to deliver top-tier returns
to shareholders.
GENERATING CASH
Our businesses have a long history of strong cash generation. In fiscal 2017, our cash
flow from operations totaled $2.3 billion, down 12 percent from last year driven by
higher core working capital, changes in income taxes payable, and lower trade and
advertising accruals. Over the past five years, we generated a cumulative $13 billion
of operating cash flow. Our free cash flow, which is operating cash flow less capital
expenditures, was $1. billion, or 8 percent of our adjusted after-tax earnings in
fiscal 2017. We have a goal to convert 5 percent of our adjusted after-tax earnings
to free cash on a long-term basis. Our rolling three-year cumulative free cash flow,
which balances out the inherent volatility in the annual figures, exceeded our goal
in the most recent three-year period with a conversion rate of 7 percent. For fiscal
2018, we expect our cash conversion rate will remain above 5 percent of our adjusted
after-tax earnings.
Adjusted Operating Profit Margin*
Percent of net sales
2017
2016
2015
2014
2013
18.1%
16.8%
15.9%
16.2%
16.3%
Cash Flow from Operations
Dollars in millions
2017
2016
2015
2014
2013
$2,313
$2,630
$2,543
$2,541
$2,926
Free Cash Flow*
Three-year rolling total, dollars in millions
2017
2016
2015
2014
2013
$5,360
$5,608
$6,020
$5,921
$4,926
Core Working Capital
Dollars in millions
2017
2016
2015
2014
2013
$794
$729
$1,244
$1,432
$1,569
ANNUAL REPORT 11
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
2017, our core working capital increased percent as the timing of receivables and
higher inventory balances were partially offset by continued progress on accounts
payable. However, over the past five years, we’ve driven core working capital down
by nearly 50 percent. We still see opportunities for further core working capital
efficiency, and we expect to reduce our core working capital in fiscal 2018.
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 fiscal 2017, fixed asset investments
totaled $84 million, largely in line with our long-term target of 4 percent of net sales.
In fiscal 2018, we expect to invest another $50 million in capital expenditures to fund
projects to increase our efficiency and enable growth.
After capital investment, we prioritize cash returns to shareholders through dividends
and share repurchases. Cash dividends to shareholders totaled $1.1 billion in fiscal
2017, a percent increase from last year. Over the past five years, our dividends
per share have grown at a 10 percent compound rate. In June 2017, our board of
directors approved an increase to our quarterly dividend rate, effective with the
August 2017 payment. The new annualized dividend rate of $1. per share represents
a 2 percent increase over the annual dividend paid in fiscal 2017. General Mills and
its predecessor firm have paid regular dividends for 118 years. Our goal is to continue
increasing dividends over time, in line with our earnings growth.
We also return cash to shareholders though share repurchases. Net share repurchases
totaled more than $1.5 billion in 2017. We reduced average diluted shares outstanding
by 2 percent, in line with our long-term share-reduction target. For fiscal 2018, we
are targeting a net reduction of 1 to 2 percent in average diluted shares outstanding.
We have a goal of returning 0 percent of our free cash flow to shareholders through
dividends and share repurchases. Over the past several years, we have exceeded
our goal with 11 percent of free cash flow returned to shareholders between fiscal
2015 and 2017.
Net income growth and disciplined uses of cash are the drivers of increasing
returns on average total capital. In fiscal 2017, our return on average total capital
was 12.7 percent. Adjusted return on average total capital increased 30 basis points
to 11. percent due to continued prudent capital management.
Fixed Asset Investment
Percent of net sales
2017
2016
2015
2014
2013
Dividends Paid
Dollars in millions
2017
2016
2015
2014
2013
4.4%
4.4%
4.0%
3.7%
3.4%
$1,135
$1,072
$1,018
$983
$868
Average Diluted Shares Outstanding
Shares in millions
2017
2016
2015
2014
2013
Adjusted Return on
Average Total Capital*
Percent
2017
2016
2015
2014
2013
598
612
619
646
666
11.6%
11.3%
11.2%
11.6%
12.0%
*See page 35 for a reconciliation of this and other non-GAAP measures used in this summary.
12 GENERAL MILLS
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 28, 2017:
In Millions, Except Per Share Data, Percentages and Ratios
2017
2016
2015 (a)
2014
2013
Fiscal Year
Operating data:
Net sales
Gross margin (b)
Selling, general, and administrative expenses
Operating profi t
Total segment operating profi t (c)
Divestitures loss (gain)
$ 15,619.8
$ 16,563.1
$ 17,630.3
$ 17,909.6
$ 17,774.1
5,563.8
5,829.5
5,949.2
6,369.8
6,423.9
2,801.3
3,118.9
3,328.0
3,474.3
3,552.3
2,566.4
2,707.4
2,077.3
2,957.4
2,851.8
2,952.6
2,999.5
3,035.0
3,153.9
3,222.9
13.5
(148.2)
—
(65.5)
—
Net earnings attributable to General Mills
1,657.5
1,697.4
1,221.3
1,824.4
1,855.2
Advertising and media expense
Research and development expense
Average shares outstanding:
Diluted
Earnings per share:
623.8
218.2
754.4
222.1
823.1
229.4
869.5
243.6
895.0
237.9
598.0
611.9
618.8
645.7
665.6
Diluted
$
Diluted, excluding certain items aff ecting comparability (c) $
2.77
3.08
$
$
2.77
2.92
$
$
1.97
2.86
$
$
2.83
2.82
$
$
2.79
2.72
Operating ratios:
Gross margin as a percentage of net sales
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:
Land, buildings, and equipment
Total assets
Long-term debt, excluding current portion
Total debt (b)
Cash fl ow data:
Net cash provided by operating activities
Capital expenditures
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
35.6%
35.2%
33.7%
35.6%
36.1%
17.9%
16.4%
18.8%
16.3%
18.9%
11.8%
19.4%
16.5%
20.0%
16.0%
18.1%
16.8%
15.9%
16.2%
16.3%
18.9%
28.8%
12.7%
11.6%
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%
$ 3,687.7
$ 3,743.6
$ 3,783.3
$ 3,941.9
$ 3,878.1
21,812.6
21,712.3
21,832.0
23,044.7
22,505.7
7,642.9
7,057.7
7,575.3
6,396.6
5,901.8
9,481.7
8,430.9
9,191.5
8,758.9
7,944.8
$ 2,313.3
$ 2,629.8
$ 2,542.8
$ 2,541.0
$ 2,926.0
684.4
729.3
712.4
663.5
613.9
1,628.9
1,900.5
1,830.4
1,877.5
2,312.1
7.26
24.4%
7.40
31.2%
5.54
27.7%
8.04
29.0%
7.62
36.8%
$
55.91
$
54.12
$
48.86
$
46.86
$
72.64
57.32
1.92
65.36
62.87
1.78
57.14
56.15
1.67
54.40
53.81
1.55
37.55
50.93
48.98
1.32
Number of full- and part-time employees
38,000
39,000
42,000
43,000
41,000
(a) Fiscal 2015 was a 53-week year; all other fi scal years were 52 weeks.
(b) See “Glossary” on page 89 of this report for defi nition.
(c) See “Non-GAAP Measures” on page 35 of this report for our discussion of this measure not defi ned by generally accepted accounting principles.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANNUAL REPORT 13
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 operat-
ing profi t, earnings per share (EPS), free cash fl ow, cash
return to shareholders, and return on average total
capital are key drivers of fi nancial performance for our
business.
Our long-term growth objectives are to consistently
deliver:
• low single-digit annual growth in organic net sales;
• mid single-digit annual growth in total segment
operating profi t on a constant-currency basis;
• high single-digit annual growth in diluted EPS
excluding certain items aff ecting comparability on a
constant-currency basis;
• 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 2017 was a year of significant change for
General Mills. We implemented a new global organi-
zational structure to enhance our agility in a rapidly
changing consumer environment. We expanded our
global supply chain restructuring initiative to further
increase our effi ciency. We also implemented a busi-
ness plan that aggressively shift ed resources to our
best growth opportunities and eliminated low-return
investments and volume. While these actions were the
right thing to do for our company, we did not execute
up to our standards in certain areas and our results
did not meet our expectations. Consolidated net sales
and total segment operating profi t growth fell short
of our plans, largely because of competitive price gaps
in our North American Retail segment. We underes-
timated the impact that our aggressive reductions in
promotional spending, implemented early in the fi scal
year, would have on our net pricing relative to com-
petitors. Th e gaps were most pronounced in the U.S.
Meals & Baking operating unit, and competitive activity
also signifi cantly impacted U.S. Yogurt. We took correc-
tive actions to improve our performance in the second
half of fi scal 2017, but it was not suffi cient to stem
the early declines. Yogurt in the Europe & Australia
segment also did not meet expectations as competi-
tive pressure from smaller branded players increased
signifi cantly. Excluding yogurt, the segment’s net sales
and share increased driven by ice cream and snack bars
innovation and improved merchandising performance.
In the Convenience Stores & Foodservice segment, seg-
ment operating profi t grew driven by lower input costs
and benefi ts from cost savings initiatives. Net sales for
the Focus 6 platforms grew modestly, but were more
than off set by market index pricing on fl our. In the Asia
& Latin America segment, macroeconomic weakness
in Latin America and the Middle East created a chal-
lenging environment while greater China returned to
net sales growth, including contributions from the new
Yoplait business. We continued to realize planned ben-
efi ts from our numerous restructuring initiatives and
cost reduction eff orts in our supply chain and adminis-
trative areas which helped us to increase our adjusted
operating profi t margin and adjusted diluted earnings
per share (EPS) in fi scal 2017.
Our consolidated net sales for fi scal 2017 declined 6
percent to $15.6 billion, primarily driven by declining
contributions from volume, including the impact of the
divestiture of the North American Green Giant prod-
uct lines (Green Giant). On an organic basis, net sales
decreased 4 percent. Operating profi t of $2.6 billion
decreased 5 percent. Total segment operating profi t of
$3.0 billion declined 2 percent and declined 1 percent on
a constant-currency basis. Diluted EPS of $2.77 was fl at
compared to fi scal 2016. Adjusted diluted EPS, which
excludes certain items aff ecting comparability of results,
rose 5 percent to $3.08 per share and increased 6 per-
cent on a constant-currency basis. Our return on aver-
age total capital was 12.7 percent, and adjusted return
on average total capital increased 30 basis points to
11.6 percent and increased 40 basis points on a con-
stant-currency basis (See the “Non-GAAP Measures”
14 GENERAL MILLS
section below for discussion of total segment operating
profit, adjusted diluted EPS, organic net sales growth
rate, constant-currency total segment operating profit
growth rate, constant-currency adjusted diluted EPS
growth rate, and adjusted return on average total
capital, which are not defined by generally accepted
accounting principles (GAAP)).
Net cash provided by operations totaled $2.3 billion
in fiscal 2017 at a conversion rate of 136 percent of net
earnings, including earnings attributable to redeemable
and noncontrolling interests. This cash generation sup-
ported capital investments totaling $684 million, and
our resulting free cash flow was $1.6 billion at a con-
version rate of 86 percent of adjusted net earnings,
including earnings attributable to redeemable and non-
controlling interests. We also returned significant cash
to shareholders through a 6 percent dividend increase
and share repurchases totaling $1,652 million. Total
cash returned to shareholders represented 164 percent
of our free cash flow (see the “Non-GAAP Measures”
section below for a description of our use of measures
not defined by GAAP).
A detailed review of our fiscal 2017 performance
appears below in the section titled “Fiscal 2017
Consolidated Results of Operations.”
We remain committed to our Consumer First strategy
and our focus on driving growth and returns for our
shareholders. Our top priority in fiscal 2018 is to make
significant strides toward returning our business to
sustainable topline growth. Our fiscal 2018 plans call for
investment in product news and innovation to accel-
erate growth for businesses where we have positive
momentum, and to improve those that are underper-
forming. We will also increase investment in capabilities
like e-commerce and Strategic Revenue Management,
which are critical to future growth. We will continue
to prioritize resources against our Growth platforms,
where we see the strongest profitable growth poten-
tial. And we will make selective investments in our
Foundation brands while focusing on profitability and
cash generation.
We plan to continue to drive efficiency in fiscal 2018,
including delivering approximately $390 million in
supply chain productivity savings through our ongo-
ing Holistic Margin Management (HMM) efforts. We
also expect to deliver approximately $160 million in
incremental savings from our other restructuring and
cost-reduction initiatives, which equates to approxi-
mately $700 million in savings versus fiscal 2015 levels.
These savings should more than offset our estimate of
3 percent input cost inflation.
This cost management discipline has helped us sig-
nificantly expand our adjusted operating profit margin
over the past two years. We continue to see opportuni-
ties for further margin expansion, including an increase
in adjusted operating profit margin in fiscal 2018, but
we will moderate the pace of expansion as we invest to
restore topline growth. Looking forward, we are focused
on delivering a balance of sales growth and margin
expansion, along with strong cash conversion and cash
returns, to create top-tier returns for our shareholders.
With these assumptions in mind:
• We expect fiscal 2018 organic net sales to decline
between 1 and 2 percent from fiscal 2017 levels.
• We expect fiscal 2018 total segment operating profit
will be in a range between flat and up 1 percent on a
constant-currency basis.
• We expect fiscal 2018 adjusted diluted EPS to increase
1 to 2 percent in constant currency from the base of
$3.08 earned in fiscal 2017.
• Our plans call for continued strong cash returns to
shareholders. The current annualized dividend rate of
$1.96 per share is up 2 percent from the annual div-
idend paid in fiscal 2017. Share repurchases in fiscal
2018 are expected to result in a net reduction in aver-
age diluted shares outstanding of approximately 1 to
2 percent.
See the “Non-GAAP Measures” section below for a
description of our use of measures not defined by GAAP.
Certain terms used throughout this report are defined
in a glossary on page 89 of this report.
FISCAL 2017 CONSOLIDATED RESULTS
OF OPERATIONS
Fiscal 2017 includes an additional month of results from
General Mills Brasil Alimentos Ltda (Yoki) (please refer
to Note 1 to the Consolidated Financial Statements on
page 51 of this report).
In fiscal 2017, operating results reflected challenging
net sales performance. However, we continued to make
progress against our cost savings and margin expan-
sion initiatives. The net sales decline of 6 percent was
driven by declining contributions from volume in the
North America Retail and Europe & Australia segments
including the impact of the divestiture of Green Giant
in fiscal 2016, which were partially offset by favorable
ANNUAL REPORT 15
net price realization and mix. Operating profit margin
of 16.4 percent was up 10 basis points from year-ago
levels primarily driven by benefits from cost savings
and spending optimization initiatives, and favorable net
price realization, partially offset by the gain from the
Green Giant divestiture. Adjusted operating profit mar-
gin increased 130 basis points to 18.1 percent, driven by
benefits from cost savings and spending optimization
initiatives and favorable net price realization. Diluted
earnings per share of $2.77 was flat to fiscal 2016 and
adjusted diluted EPS, which excludes certain items
affecting comparability, on a constant-currency basis
increased 6 percent compared to fiscal 2016 (see the
“Non-GAAP Measures” section below for a description
of our use of measures not defined by GAAP).
A summary of our consolidated financial results for
fiscal 2017 follows:
Fiscal 2017
Net sales
Operating profit
In millions, Fiscal 2017 Percent Constant-
of Net Currency
vs.
Sales Growth (a)
per share Fiscal 2016
except
$ 15,619.8
2,566.4
(6)%
(5)%
16.4%
Net earnings attributable
to General Mills
1,657.5
(2)%
Diluted EPS
$
2.77
Flat
Organic net sales
growth rate (a)
Total segment
operating profit (a)
Adjusted operating
profit margin (a)
Diluted EPS, excluding
(4)%
2,952.6
(2)%
(1)%
18.1%
certain items affecting
comparability (a)
$
3.08
5%
6%
(a) See the “Non-GAAP Measures” section below for our use of measures
not defined by GAAP.
Consolidated net sales were as follows:
Net sales (in millions) $ 15,619.8
(6)%
$ 16,563.1
Fiscal 2017
Fiscal 2016
Fiscal 2016
Fiscal 2017 vs.
Contributions from
volume growth (a)
Net price realization and mix
Foreign currency exchange
(8) pts
3 pts
(1) pt
(a) Measured in tons based on the stated weight of our product shipments.
The 6 percent decline in net sales primarily reflected
lower organic net sales, unfavorable foreign currency
exchange, and the Green Giant divestiture in fiscal 2016
(please refer to Note 3 to the Consolidated Financial
Statements on page 55 of this report).
Organic net sales declined 4 percent driven by vol-
ume declines in the North America Retail and Europe &
Australia segments which were partially offset by posi-
tive net price realization and mix. To improve compara-
bility of results from period to period, organic net sales
exclude the impacts of foreign currency exchange rate
fluctuations, as well as acquisitions, divestitures, and a
53rd week of results, when applicable.
Components of organic net sales growth are shown
in the following table:
Contributions from organic volume growth (a)
Organic net price realization and mix
Organic net sales growth
Foreign currency exchange
Acquisitions and divestitures (b)
Net sales growth
Fiscal 2017
vs. Fiscal 2016
(7) pts
3 pts
(4) pts
(1) pt
(1) pt
(6) pts
(a) Measured in tons based on the stated weight of our product shipments.
(b) Primarily the Green Giant divestiture in fiscal 2016 (please refer to Note
3 to the Consolidated Financial Statements on page 55 of this report).
Cost of sales decreased $678 million in fiscal 2017
to $10,056 million. The decrease included an $814 mil-
lion decrease attributable to lower volume and a $137
million increase attributable to product rate and mix.
We recorded a $14 million net decrease in cost of sales
related to mark-to-market valuation of certain commod-
ity positions and grain inventories as described in Note
7 to the Consolidated Financial Statements on page 61
of this report, compared to a net decrease of $63 mil-
lion in fiscal 2016. In fiscal 2017, we recorded $42 mil-
lion of restructuring charges in cost of sales compared
to $78 million in fiscal 2016. We also recorded $44 mil-
lion of restructuring initiative project-related costs in
cost of sales in fiscal 2017 compared to $58 million in
fiscal 2016 (please refer to Note 4 to the Consolidated
Financial Statements on page 55 of this report).
Gross margin declined 5 percent in fiscal 2017 ver-
sus fiscal 2016. Gross margin as a percent of net sales
of 36 percent increased 40 basis points compared to
fiscal 2016.
16 GENERAL MILLS
Selling, general and administrative (SG&A) expenses
decreased $318 million to $2,801 million in fiscal 2017
versus fiscal 2016 primarily due to a 17 percentage point
decrease in media and advertising expense and cost
savings initiatives. SG&A expenses as a percent of net
sales decreased 90 basis points compared to fiscal 2016.
During fiscal 2017, we recorded a $14 million dives-
titure loss from the sale of our Martel, Ohio manufac-
turing facility. Divestiture net gain totaled $148 million
in fiscal 2016 primarily from the sale of Green Giant
(please refer to Note 3 of the Consolidated Financial
Statements on page 55 of this report).
Restructuring, impairment, and other exit costs
totaled $183 million in fiscal 2017, compared to $151 mil-
lion in fiscal 2016, and $284 million in fiscal 2015.
Total charges associated with our restructuring ini-
tiatives recognized in fiscal 2017, 2016 and 2015 con-
sisted of the following:
In Millions
Fiscal 2017
Fiscal 2016
Fiscal 2015
Future
Total
Charge
Cash Charge
Cash Charge
Cash Charge
Cash Charge
Cash Savings (b)
Global reorganization
$ 72.1 $ 20.0 $ — $ — $ — $ —
$ 3 $ 55 $ 75 $ 75
Closure of Melbourne, Australia plant
21.9
1.6
—
—
—
—
12
1
34
3
As Reported
Estimated
Restructuring of certain
international product lines
Closure of Vineland, New Jersey plant
Project Compass
Project Century
Project Catalyst
Combination of certain operational facilities
45.1
41.4
10.3
7.3
—
—
—
—
(0.4)
12.8
54.7
36.1
—
—
—
44.0
49.4 182.6
34.1 181.8
—
—
1.3
5.1
—
(7.5)
47.8 148.4
—
—
4.5
0.1
13.9
(0.6)
—
—
—
12.0
45.0
6.5
0.1
63.6
9.7
(3)
17
—
6
—
1
—
36
15
(10)
12
5
48
—
(2)
—
109
19
42
58
54
414
141
15
—
833
130
—
19
54
143
94
14
—
402
130
Other
Total restructuring charges (a)
Project-related costs classified in cost of sales 43.9
—
224.1 107.8 229.8 122.6 343.5
46.9
57.5
54.5
13.2
Restructuring charges and
project-related costs
Future cumulative annual savings
$ 268.0 $ 154.7 $ 287.3 $ 177.1 $ 356.7 $ 73.3
$ 51 $ 128 $ 963 $ 532
$700
(a) Includes restructuring charges recorded in cost of sales of $41.5 million in fiscal 2017, $78.4 million in fiscal 2016 and $59.6 million in fiscal 2015.
(b) Cumulative annual savings estimated by fiscal 2018. Includes savings from SG&A cost reduction projects.
Please refer to Note 4 to the Consolidated Financial Statements on page 55 of this report for more information
regarding our restructuring activities.
Interest, net for fiscal 2017 totaled $295 million, $9
million lower than fiscal 2016, primarily driven by lower
rates and changes in the mix of debt, partially offset by
higher average debt balances.
Our consolidated effective tax rate for fiscal 2017 was
28.8 percent compared to 31.4 percent in fiscal 2016.
The 2.6 percentage point decrease was primarily due
to non-deductible expenses related to the Green Giant
divestiture in fiscal 2016. Our effective tax rate exclud-
ing certain items affecting comparability was 29.2 per-
cent in fiscal 2017 compared to 29.8 percent in fiscal
2016 (see the “Non-GAAP Measures” section below for
a description of our use of measures not defined by
GAAP).
After-tax earnings from joint ventures for fiscal
2017 decreased to $85 million compared to $88 million
in fiscal 2016 primarily driven by unfavorable foreign
currency exchange and an asset write-off for Cereal
Partners Worldwide (CPW), partially offset by con-
tributions from volume growth and favorable foreign
currency exchange for Häagen-Dazs Japan, Inc. (HDJ).
On a constant-currency basis, after-tax earnings from
joint ventures decreased 6 percent (see the “Non-GAAP
Measures” section below for a description of our use of
this measure not defined by GAAP). The components of
our joint ventures’ net sales growth are shown in the
following table:
ANNUAL REPORT 17
Fiscal 2017 vs. Fiscal 2016
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Net sales growth
CPW
3 pts
Flat
(5) pts
(2) pts
HDJ
6 pts
2 pts
10 pts
18 pts
(a) Measured in tons based on the stated weight of our product shipments.
A summary of our consolidated financial results for
fiscal 2016 follows:
Fiscal 2016
Net sales
Operating profit
In millions, Fiscal 2016 Percent Constant-
of Net Currency
vs.
Sales Growth (a)
per share Fiscal 2015
except
$ 16,563.1
2,707.4
(6)%
30% 16.3%
The change in net sales for each joint venture on a
constant-currency basis is set forth in the following
table:
Fiscal 2017 vs. Fiscal 2016
Net earnings attributable
to General Mills
1,697.4
39%
Diluted earnings
per share
$
2.77
41%
Percentage
Change in Joint
Venture Net
Sales as Reported
Impact of
Foreign
Currency
Exchange
Percentage
Change in Joint
Venture Net Sales
on Constant-
Currency Basis
CPW
HDJ
Joint Ventures
(2)%
18%
2%
(5) pts
10 pts
(2) pt
3%
8%
4%
Average diluted shares outstanding decreased by
14 million in fiscal 2017 from fiscal 2016 due to share
repurchases, partially offset by option exercises.
FISCAL 2016 CONSOLIDATED RESULTS
OF OPERATIONS
Fiscal 2016 had 52 weeks compared to 53 weeks in fis-
cal 2015. Fiscal 2016 includes an additional month of
results from Annie’s and Yoplait SAS (please refer to
Note 1 to the Consolidated Financial Statements on
page 51 of this report).
Fiscal 2016 net sales declined 6 percent to $16,563
million and were flat to fiscal 2015 on an organic basis.
Operating profit of $2,707 million was 30 percent
higher than fiscal 2015. Total segment operating profit
was $3,000 million, 1 percent lower than fiscal 2015 and
1 percent higher on a constant-currency basis. In fiscal
2016, net earnings attributable to General Mills were
$1,697 million, up 39 percent from $1,221 million in fis-
cal 2015, and we reported diluted EPS of $2.77 in fiscal
2016, up 41 percent from $1.97 in fiscal 2015. Adjusted
diluted EPS which excludes certain items affecting com-
parability totaled $2.92 in fiscal 2016, up 2 percent from
$2.86 in fiscal 2015. Diluted EPS excluding certain items
affecting comparability on a constant-currency basis
increased 5 percent compared to fiscal 2015 (see the
“Non-GAAP Measures” section below for a description
of our use of measures not defined by GAAP).
Organic net sales
growth rate (a)
Total segment
operating profit (a)
Adjusted operating
profit margin (a)
Diluted earnings per
Flat
2,999.5
(1)%
1%
16.8%
share, excluding certain
items affecting
comparability (a)
$
2.92
2%
5%
(a) See the “Non-GAAP Measures” section below for our use of measures
not defined by GAAP.
Consolidated net sales were as follows:
Net sales (in millions) $ 16,563.1
(6)%
$ 17,630.3
Fiscal 2016
Fiscal 2016 vs.
Fiscal 2015
Fiscal 2015
Contributions from
volume growth (a)
Net price realization and mix
Foreign currency exchange
(3) pts
1 pt
(4) pt
(a) Measured in tons based on the stated weight of our product shipments.
The 6 percent decline in fiscal 2016 net sales included
a 1 percent decrease from acquisitions and divestitures,
primarily the Green Giant divestiture in fiscal 2016 and
Annie’s acquisition in fiscal 2015, reflecting 2 percentage
points of decline from volume (please refer to Note 3 to
the Consolidated Financial Statements on page 55 of
this report). The 53rd week in fiscal 2015 contributed
approximately 1 percentage point of net sales decline in
fiscal 2016, reflecting approximately 1 percentage point
of decline from volume.
Organic net sales were flat to fiscal 2015. To improve
comparability of results from period to period, organic
net sales exclude the impacts of foreign currency
exchange rate fluctuations, as well as acquisitions, dives-
titures, and a 53rd week of results, when applicable.
18 GENERAL MILLS
Components of organic net sales growth are shown
in the following table:
Contributions from organic volume growth (a)
Organic net price realization and mix
Organic net sales growth
Foreign currency exchange
Acquisitions and divestitures (b)
53rd week impact (c)
Net sales growth
Fiscal 2016
vs. Fiscal 2015
Flat
Flat
Flat
(4) pts
(1) pt
(1) pt
(6) pts
(a) Measured in tons based on the stated weight of our product shipments.
(b) Primarily the Green Giant divestiture in fiscal 2016 and Annie’s acquisi-
tion in fiscal 2015.
(c) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
Cost of sales decreased $948 million in fiscal 2016 to
$10,734 million. In fiscal 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-mar-
ket valuation of certain commodity positions and grain
inventories as described in Note 7 to the Consolidated
Financial Statements on page 61 of this report, com-
pared to a net increase of $90 million in fiscal 2015.
In fiscal 2016, we recorded $78 million of restructuring
charges in cost of sales compared to $60 million in fiscal
2015. We recorded $58 million of restructuring initiative
project-related costs in cost of sales in fiscal 2016 com-
pared to $13 million in fiscal 2015 (please refer to Note
4 to the Consolidated Financial Statements on page 55
of this report). We also recorded a $3 million foreign
exchange loss in cost of sales in fiscal 2015 related to
Venezuela currency devaluation.
Gross margin declined 2 percent in fiscal 2016 versus
fiscal 2015. Gross margin as a percent of net sales of 35
percent increased 150 basis points compared to fiscal
2015.
SG&A expenses decreased $209 million in fiscal
2016 versus fiscal 2015 primarily due to an 8 percent
decrease in advertising and media expense, and sav-
ings from Project Catalyst, Project Compass, and our
other cost-management initiatives. In fiscal 2015, we
recorded a $5 million charge in SG&A expenses related
to Venezuela currency devaluation and $16 million of
integration costs related to our acquisition of Annie’s.
SG&A expenses as a percent of net sales decreased 10
basis points compared to fiscal 2015.
During fiscal 2016, we recorded a $148 million dives-
titures gain (net) from the sale of Green Giant, our
subsidiary in Venezuela, and our foodservice business
in Argentina (please refer to Note 3 of the Consolidated
Financial Statements on page 55 of this report).
Restructuring, impairment, and other exit costs
totaled $151 million in fiscal 2016 compared to $544 mil-
lion in fiscal 2015.
In fiscal 2015, we made a strategic decision to redirect
certain resources supporting our Green Giant business
in our North America Retail segment to other busi-
nesses within the segment. As a result, we recorded a
$260 million impairment charge in fiscal 2015 related to
the Green Giant brand intangible asset.
Restructuring charges recorded in restructuring,
impairment, and other exit costs were $151 million in
fiscal 2016 compared to $284 million in fiscal 2015.
Total charges associated with our restructuring initia-
tives recognized in fiscal 2016 and 2015 consisted of the
following:
As Reported
Fiscal 2016
Fiscal 2015
In Millions
Charge
Cash
Charge
Cash
Project Compass
Total Century (a)
Project Catalyst
$ 54.7 $ 36.1 $ —
$ —
182.6
(7.5)
34.1
47.8
181.8
148.4
12.0
45.0
Combination of certain
operational facilities
—
Other
—
Total restructuring charges (a) 229.8
Project-related costs
4.5
0.1
13.9
(0.6)
6.5
0.1
122.6
343.5
63.6
recorded in costs of sales
57.5
54.5
13.2
9.7
Restructuring charges and
project-related costs
$287.3 $177.1 $356.7
$73.3
(a) Includes $78.4 million of restructuring charges recorded in cost of sales
in fiscal 2016 and $59.6 million in fiscal 2015.
Please refer to Note 4 to the Consolidated Financial
Statements on page 55 of this report for more informa-
tion regarding our restructuring activities.
Interest, net for fiscal 2016 totaled $304 million, $12
million lower than fiscal 2015, primarily driven by lower
average debt balances, partially offset by changes in the
mix of debt.
Our consolidated effective tax rate for fiscal 2016 was
31.4 percent compared to 33.3 percent in fiscal 2015. The
1.9 percentage point decrease was primarily due to the
unfavorable impact of our repatriation of historical for-
eign earnings in fiscal 2015, partially offset by non-de-
ductible expenses related to the Green Giant divestiture
in fiscal 2016. Our effective tax rate excluding certain
items affecting comparability was 29.8 percent in fiscal
2016 compared to 30.5 percent in fiscal 2015 (see the
“Non-GAAP Measures” section below for a description
of our use of measures not defined by GAAP).
After-tax earnings from joint ventures for fiscal 2016
increased to $88 million compared to $84 million in fis-
cal 2015 primarily driven by favorable input costs in
fiscal 2016, favorable product mix for HDJ, and lapping
an impairment charge of $3 million at CPW in South
Africa in fiscal 2015, partially offset by unfavorable for-
eign currency exchange. On a constant-currency basis,
after-tax earnings from joint ventures increased 12 per-
cent (see the “Non-GAAP Measures” section below for a
description of our use of these measures not defined by
GAAP). The components of our joint ventures’ net sales
growth are shown in the following table:
ANNUAL REPORT 19
Fiscal 2016 vs. Fiscal 2015
CPW
Contributions from volume growth (a)
Net price realization and mix
Flat
Flat
Foreign currency exchange
Net sales growth
(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.
The change in net sales for each joint venture on a
constant-currency basis is set forth in the following
table:
Fiscal 2016 vs. Fiscal 2015
Percentage
Change in Joint
Venture Net
Sales as Reported
Impact of
Foreign
Currency
Exchange
Percentage
Change in Joint
Venture Net Sales
on Constant-
Currency Basis
CPW
HDJ
Joint Ventures
(12)%
Flat
(10)%
(12) pts
(5) pts
(11) pts
Flat
5%
1%
Average diluted shares outstanding decreased by
7 million in fiscal 2016 from fiscal 2015 due to share
repurchases, partially offset by option exercises.
20 GENERAL MILLS
RESULTS OF SEGMENT OPERATIONS
In the third quarter of fiscal 2017, we announced a new
global organization structure to streamline our leader-
ship, enhance global scale, and drive improved opera-
tional agility to maximize our growth capabilities. As
a result of this global reorganization, beginning in the
third quarter of fiscal 2017, we reported results for our
four operating segments as follows: North America
Retail; Convenience Stores & Foodservice; Europe &
Australia; and Asia & Latin America. We have restated
our net sales by segment and segment operating profit
amounts to reflect our new operating segments. These
segment changes had no effect on previously reported
consolidated net sales, operating profit, net earnings
attributable to General Mills, or earnings per share.
Our North America Retail operating segment con-
sists of our former U.S. Retail operating units and our
Canada region. Within our North America Retail oper-
ating segment, our former U.S. Meals operating unit
and U.S. Baking operating unit have been combined
into one operating unit: U.S. Meals & Baking. Our
Convenience Stores & Foodservice operating segment
was unchanged. Our Europe & Australia operating seg-
ment consists of our former Europe region. Our Asia &
Latin America operating segment consists of our for-
mer Asia/Pacific and Latin America regions.
The following tables provide the dollar amount and percentage of net sales and operating profit from each segment
for fiscal 2017, 2016, and 2015:
In Millions
Net Sales
North America Retail
Convenience Stores & Foodservice
Europe & Australia
Asia & Latin America
Total
Segment Operating Profit
North America Retail
Convenience Stores & Foodservice
Europe & Australia
Asia & Latin America
Total
2017
Fiscal Year
2016
2015
Dollars
Percent
of Total
Dollars
Percent
of Total
Dollars
Percent
of Total
$10,196.9
65%
$10,936.6
66%
$11,612.1
66%
1,870.0
1,824.5
1,728.4
12
12
11
1,923.8
1,998.0
1,704.7
12
12
10
1,995.1
2,126.5
1,896.6
11
12
11
$15,619.8
100%
$16,563.1
100%
$17,630.3
100%
$2,303.6
401.2
164.2
83.6
78%
14
5
3
$2,351.2
378.9
200.3
69.1
78%
13
7
2
$2,382.7
353.1
179.4
119.8
78%
12
6
4
$2,952.6
100%
$2,999.5
100%
$3,035.0
100%
Segment operating profit excludes unallocated corpo-
rate items, net gain/loss on divestitures, and restruc-
turing, impairment, and other exit costs because these
items affecting operating profit are centrally managed
at the corporate level and are excluded from the mea-
sure of segment profitability reviewed by our executive
management.
North America Retail Segment Our North America
Retail operating segment reflects 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.
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 prod-
ucts including refrigerated yogurt, nutrition bars, meal
kits, salty snacks, ready-to-eat cereal, and grain snacks.
ANNUAL REPORT 21
North America Retail net sales were as follows:
Net sales (in millions)
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Fiscal
2017
Fiscal
2017 vs. 2016
Percentage Change
Fiscal
2016
Fiscal
2016 vs. 2015
Percentage Change
Fiscal
2015
$10,196.9
(7)%
$10,936.6
(6)%
$11,612.1
(11) pts
4 pts
Flat
(7) pts
2 pts
(1) pt
(a) Measured in tons based on the stated weight of our product shipments.
The 7 percent decrease in North America Retail net
sales for fiscal 2017 was driven by declines in the U.S.
Meals & Baking, U.S. Yogurt, U.S. Cereal, and Canada
operating units. The decline in net sales also includes
the impact of the Green Giant divestiture from the U.S.
Meals & Baking and Canada operating units in fiscal
2016.
The 6 percent decrease in North America Retail net
sales for fiscal 2016 was driven by declines in all oper-
ating units. These results include 3 percentage points
of net sales decline from the net impact of acquisitions
and divestitures, primarily Green Giant and Annie’s,
reflecting approximately 3 percentage points of decline
from volume. The 53rd week in fiscal 2015 contributed
1 percentage point of net sales decline in fiscal 2016,
reflecting approximately 2 percentage points of decline
from volume.
2016 which reflects the impact of reduced marketing
support.
Net sales for our North America Retail operating units
are shown in the following table:
Fiscal Year
In Millions
2017
2016
2015
U.S. Meals & Baking (a)
U.S. Cereal
U.S. Snacks (a)
U.S. Yogurt and Other
Canada
Total (a)
$3,876.6
$4,297.3
$4,644.1
2,251.8
2,098.2
1,064.3
906.0
2,312.8
2,094.3
1,302.7
929.5
2,330.1
2,134.4
1,398.4
1,105.1
$10,196.9 $10,936.6 $11,612.1
(a) The impact of an additional month of results from Annie’s in fiscal 2016
was not material to U.S. Meals & Baking, U.S. Snacks, or the North
America Retail segment.
North America Retail net sales percentage change by
The components of North America Retail organic net
operating unit are shown in the following table:
sales growth are shown in the following table:
Fiscal 2017 vs. 2016
Percentage Change
Fiscal 2016 vs. 2015
Percentage Change
Contributions from organic
volume growth (a)
Organic net price realization and mix
Organic net sales growth
Foreign currency exchange
Acquisitions and divestitures (b)
53rd week impact (c)
Net sales growth
(9) pts
4 pts
(5) pts
Flat
(2) pts
—
(7) pts
(2) pts
1 pt
(1) pt
(1) pt
(3) pts
(1) pt
(6) pt
(a) Measured in tons based on the stated weight of our product shipments.
(b) Primarily the Green Giant divestiture in fiscal 2016 and Annie’s acquisi-
tion in fiscal 2015.
(c) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
North America Retail organic net sales decreased
5 percentage points in fiscal 2017 which reflects the
impact of reduced marketing and higher pricing as a
result of lower promotional spending. North America
Retail organic net sales decreased 1 percent in fiscal
U.S. Meals & Baking (a)
U.S. Yogurt
U.S. Cereal
Canada (b)
U.S. Snacks (a)
Total (a)
Fiscal 2017
vs. 2016
Fiscal 2016
vs. 2015
(10)%
(18)
(3)
(2)
Flat
(7)%
(7)
(1)
(16)
(2)
(7)%
(6)%
(a) Fiscal 2016 net sales for the U.S. Meals & Baking and U.S. Snacks operat-
ing units include an additional month of results from Annie’s.
(b) On a constant currency basis, Canada net sales decreased 2 percent in
fiscal 2017 and decreased 4 percent in fiscal 2016. See the “Non-GAAP
Measures” section below for our use of this measure not defined by GAAP.
Segment operating profit of $2,304 million in fiscal
2017 decreased $48 million, or 2 percent, from fiscal
2016. The decrease was primarily driven by declining
contributions from volume growth, currency-driven
inflation on products imported into Canada, and the
impact of the Green Giant divestiture, partially offset by
benefits from cost savings initiatives, favorable net price
22 GENERAL MILLS
realization, and a decrease in SG&A expenses, including
a 16 percentage point decline in media and advertising
expense. Segment operating profit decreased 2 percent
on a constant-currency basis in fiscal 2017 compared
to fiscal 2016 (see the “Non-GAAP Measures” section
below for our use of this measure).
Segment operating profit of $2,351 million in fiscal
2016 decreased $32 million, or 1 percent, from fiscal
2015. The decrease was primarily driven by curren-
cy-driven inflation on products imported into Canada
and the impact of the Green Giant divestiture, partially
offset by a decrease in SG&A expenses, including a
decline in media and advertising expense and benefits
from cost savings initiatives. Segment operating profit
was flat on a constant-currency basis in fiscal 2016
compared to fiscal 2015 (see the “Non-GAAP Measures”
section below for our use of this measure).
Convenience Stores & Foodservice Segment In our
Convenience Stores & 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 dis-
tributors and operators in many customer channels
including foodservice, convenience stores, vending, and
supermarket bakeries in the United States.
Convenience Stores & Foodservice net sales were as
follows:
Net sales (in millions)
Contributions from volume growth (a)
Net price realization and mix
Fiscal
2017
$1,870.0
Fiscal
2017 vs. 2016
Percentage Change
Fiscal
2016
Fiscal
2016 vs. 2015
Percentage Change
$1,923.8
(3)%
Flat
(3) pts
(4)%
(3) pts
(1) pt
Fiscal
2015
$1,995.1
(a) Measured in tons based on the stated weight of our product shipments.
The 3 percent decline in fiscal 2017 Convenience
Stores & Foodservice net sales was driven primarily
by market index pricing on bakery flour and volume
declines in non-Focus 6 platforms, partially offset by an
increase in the Focus 6 platforms.
The 4 percentage point decline in fiscal 2016 net sales
was primarily driven by the impact of the 53rd week
in fiscal 2015 which contributed approximately 2 per-
centage points of net sales decline in fiscal 2016, reflect-
ing approximately 2 percentage points of decline from
volume.
The components of Convenience Stores & Foodservice
organic net sales growth are shown in the following
table:
Fiscal 2017 vs. 2016
Percentage Change
Fiscal 2016 vs. 2015
Percentage Change
Contributions from organic
volume growth (a)
Organic net price realization and mix
Organic net sales growth
53rd week impact (b)
Net sales growth
Flat
(3) pts
(3) pts
—
(3) pts
(1) pt
(1) pt
(2) pts
(2) pts
(4) pts
(a) Measured in tons based on the stated weight of our product shipments.
(b) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
In fiscal 2017, segment operating profit was $401 mil-
lion, an increase of 6 percent from $379 million in fiscal
2016 primarily driven by lower input costs and bene-
fits from cost savings initiatives. In fiscal 2016, segment
operating profit was up 7 percent from $353 million in
fiscal 2015 primarily driven by favorable product mix
and cost savings from Project Catalyst and other cost
management initiatives.
Europe & Australia Segment Our Europe & Australia
operating segment consists of our former Europe
region. The segment includes retail and foodservice
businesses in the greater Europe and Australia regions.
Our product categories include refrigerated yogurt, meal
kits, super-premium ice cream, refrigerated and frozen
dough products, shelf stable vegetables, grain snacks,
and dessert and baking mixes. We also sell super-pre-
mium ice cream directly to consumers through com-
pany-owned retail shops. Revenues from franchise fees
are reported in the region or country where the fran-
chisee is located.
ANNUAL REPORT 23
Europe & Australia net sales were as follows:
Net sales (in millions) (a)
Contributions from volume growth (b)
Net price realization and mix
Foreign currency exchange
Fiscal
2017
$1,824.5
Fiscal
2017 vs. 2016
Percentage Change
Fiscal
2016
Fiscal
2016 vs. 2015
Percentage Change
$1,998.0
(9)%
(7) pts
3 pts
(5) pts
(6)%
5 pts
(2) pts
(9) pts
Fiscal
2015
$2,126.5
(a) The 9 percent decline in fiscal 2017 net sales for the Europe & Australia segment includes approximately 3 percentage points of decline due to an additional
month of results from Yoplait SAS in fiscal 2016. The 6 percent decline in fiscal 2016 net sales for the Europe & Australia segment includes 3 percentage
points of growth due to an additional month of results from Yoplait SAS in fiscal 2016.
(b) Measured in tons based on the stated weight of our product shipments.
The 9 percent decline in Europe & Australia fiscal
2017 net sales was driven by lower contributions from
volume growth, including the impact of an additional
month of results from Yoplait SAS in fiscal 2016, and
unfavorable foreign currency exchange, partially offset
by favorable net price realization and mix.
The 6 percent decline in Europe & Australia fiscal
2016 net sales was driven by unfavorable foreign cur-
rency exchange, unfavorable net price realization and
mix, and the impact of the 53rd week in fiscal 2015,
partially offset by higher contributions from volume
growth, including the impact of an additional month of
results from Yoplait SAS in fiscal 2016.
The components of Europe & Australia organic net
sales growth are shown in the following table:
Fiscal 2017 vs. 2016
Percentage Change
Fiscal 2016 vs. 2015
Percentage Change
Contributions from organic
volume growth (a)
Organic net price realization and mix
Organic net sales growth
Foreign currency exchange
53rd week impact (b)
Net sales growth
(7) pts
3 pts
(4) pts
(5) pts
—
(9) pts
6 pts
(2) pts
4 pts
(9) pts
(1) pt
(6) pts
(a) Measured in tons based on the stated weight of our product shipments.
(b) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
The 4 percent decrease in Europe & Australia organic
net sales growth in fiscal 2017 was primarily driven
by a 7 percentage point decline from contributions
from organic volume growth, which primarily reflects
increased competition in key categories and the impact
of an additional month of results from Yoplait SAS in
fiscal 2016.
The 4 percent increase in Europe & Australia organic
net sales growth in fiscal 2016 was primarily driven by
a 6 percentage point increase from contributions from
organic volume growth, which primarily reflects the
impact of an additional month of results from Yoplait
SAS, and contributions from volume growth in our
Häagen-Dazs and Old El Paso businesses.
Segment operating profit for fiscal 2017 decreased
18 percent to $164 million from $200 million in fis-
cal 2016, primarily driven by unfavorable foreign cur-
rency exchange, including currency-driven inflation on
imported products in certain markets, and the impact
of the additional month of results from Yoplait SAS
in fiscal 2016, partially offset by a decrease in SG&A
expenses, including a 24 percentage point decline in
media and advertising expense. Europe & Australia seg-
ment operating profit decreased 9 percent on a con-
stant-currency basis in fiscal 2017 compared to fiscal
2016 (see the “Non-GAAP Measures” section below for
our use of this measure).
Segment operating profit for fiscal 2016 increased
12 percent to $200 million from $179 million in fiscal
2015, primarily driven by lower input costs, favorable
mix, and an additional month of results from Yoplait
SAS, partially offset by unfavorable foreign currency
exchange. Europe & Australia segment operating profit
increased 28 percent on a constant-currency basis in
fiscal 2016 compared to fiscal 2015 (see the “Non-GAAP
Measures” section below for our use of this measure).
Asia & Latin America Segment Our Asia & Latin
America operating segment consists of our former
Asia/Pacific and Latin America regions. The segment
includes retail and foodservice businesses in the greater
Asia and South America regions. Our product catego-
ries include super-premium ice cream and frozen des-
serts, refrigerated and frozen dough products, dessert
and baking mixes, meal kits, salty and grain snacks,
24 GENERAL MILLS
wellness beverages, and refrigerated yogurt. We also sell
super-premium ice cream and frozen desserts directly
to consumers through company-owned retail shops.
Our Asia & Latin America segment also includes prod-
ucts 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 or franchisee, is located.
Asia & Latin America net sales were as follows:
Net sales (in millions) (a)
Contributions from volume growth (b)
Net price realization and mix
Foreign currency exchange
Fiscal
2017
$1,728.4
Fiscal
2017 vs. 2016
Percentage Change
Fiscal
2016
Fiscal
2016 vs. 2015
Percentage Change
Fiscal
2015
1%
Flat
1 pt
Flat
$1,704.7
(10)%
$1,896.6
5 pts
1 pt
(16) pts
(a) The 1 percent increase in fiscal 2017 net sales for the Asia & Latin America segment includes approximately 3 percentage points of growth due to an addi-
tional month of results from Yoki in fiscal 2017.
(b) Measured in tons based on the stated weight of our product shipments.
Asia & Latin America net sales increased 1 percent
in fiscal 2017 primarily driven by favorable net price
realization in Latin America and China. Contributions
from volume growth in fiscal 2017 were flat, including
the impact of an additional month of results for Yoki in
fiscal 2017.
Asia & Latin America net sales declined 10 percent-
age points in fiscal 2016 primarily driven by 16 percent-
age points of net sales decline from unfavorable foreign
currency exchange and the impact of the 53rd week
in fiscal 2015, partially offset by favorable contributions
from volume growth and favorable net price realization
and mix.
The components of Asia & Latin America organic net
sales growth are shown in the following table:
Fiscal 2017 vs. 2016
Percentage Change
Fiscal 2016 vs. 2015
Percentage Change
Contributions from organic
volume growth (a)
Organic net price realization and mix
Organic net sales growth
Foreign currency exchange
Acquisitions and divestitures (b)
53rd week impact (c)
Net sales growth
(2) pts
5 pts
3 pts
Flat
(2) pts
—
1 pt
3 pts
4 pts
7 pts
(16) pts
Flat
(1) pt
(10) pts
(a) Measured in tons based on the stated weight of our product shipments.
(b) Primarily our Venezuela subsidiary divestiture, Argentina foodservice
divestiture, and Laticinios Carolina Ltda acquisition in fiscal 2016.
(c) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
The 3 percent increase in Asia & Latin America
organic net sales in fiscal 2017 was primarily driven by
a 5 percentage point increase from organic net price
realization and mix resulting from pricing actions in the
Latin America and China markets, partially offset by a 2
percentage point decline in contributions from organic
volume which reflects the impact of macroeconomic
challenges in Latin America and the restructuring of
our snacks business in China. The 2 percentage point
decline in contributions from organic volume included
the impact of an additional month of results from Yoki
in fiscal 2017.
The 7 percent increase in Asia & Latin America
organic net sales growth in fiscal 2016 was primarily
driven by a 4 percentage point increase from organic
net price realization and mix primarily driven by pricing
actions in the Latin America region and a 3 percent-
age point increase in contributions from organic volume
which reflects increased contributions from the Asia
region.
Segment operating profit for fiscal 2017 increased 21
percent to $84 million from $69 million in fiscal 2016,
primarily driven by growth in the Häagen-Dazs busi-
ness in China and the impact of an additional month of
results from Yoki in fiscal 2017. Asia & Latin America
segment operating profit increased 20 percent on a
constant-currency basis in fiscal 2017 compared to fis-
cal 2016 (see the “Non-GAAP Measures” section below
for our use of this measure).
Segment operating profit for fiscal 2016 declined
42 percent to $69 million from $120 million in fiscal
2015, primarily driven by increased SG&A expenses,
ANNUAL REPORT 25
and liabilities of our Venezuelan subsidiary in fiscal
2015. We also recorded $16 million of integration costs
resulting from the acquisition of Annie’s in fiscal 2015.
The decrease in unallocated corporate expense also
reflects cost savings from Project Catalyst and other
cost management initiatives.
IMPACT OF INFLATION
Our gross margin performance reflects the impact of
1 percent input cost inflation in fiscal 2017, 2 percent
in fiscal 2016, and 2 percent in fiscal 2015, primarily
on commodity inputs. We expect input cost inflation
of 3 percent in fiscal 2018. We attempt to minimize the
effects of inflation through HMM, planning, and oper-
ating practices. Our risk management practices are dis-
cussed on page 44 of this report.
unfavorable foreign currency exchange, and input
cost inflation, including currency-driven inflation on
imported products in certain markets. Asia & Latin
America segment operating profit declined 33 percent
on a constant-currency basis in fiscal 2016 compared
to fiscal 2015 (see the “Non-GAAP Measures” section
below for our use of this measure).
Unallocated Corporate Items Unallocated corporate
items include corporate overhead expenses, variances
to planned domestic employee benefits and incentives,
contributions to the General Mills Foundation, asset
and liability remeasurement impact of hyperinflationary
economies, restructuring initiative project-related costs,
and other items that are not part of our measurement
of segment operating performance. This 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 61 of this report.
For fiscal 2017, unallocated corporate expense totaled
$190 million compared to $289 million last year. In
fiscal 2017, we recorded a $14 million net decrease in
expense related to mark-to-market valuation of certain
commodity positions and grain inventories compared to
a $63 million net decrease in expense in the prior year.
In addition, we recorded $42 million of restructuring
charges, and $44 million of restructuring initiative proj-
ect-related costs in cost of sales in fiscal 2017, compared
to $78 million of restructuring charges and $58 million
of restructuring initiative project-related costs in cost
of sales in fiscal 2016. The decrease in unallocated cor-
porate expense also reflects lower incentive expense in
fiscal 2017 compared to fiscal 2016.
For fiscal 2016, unallocated corporate expense totaled
$289 million compared to $414 million in fiscal 2015. In
fiscal 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 fiscal 2016, compared
to $60 million of restructuring charges and $13 million
of restructuring initiative project-related costs in cost of
sales in fiscal 2015. We recorded an $8 million foreign
exchange loss related to the remeasurement of assets
26 GENERAL MILLS
LIQUIDITY
The primary source of our liquidity is cash flow from
operations. Over the most recent three-year period, our
operations have generated $7.5 billion in cash. A sub-
stantial portion of this operating cash flow 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 finance significant acquisitions and
major capital expansions.
As of May 28, 2017, we had $703 million of cash and
cash equivalents held in foreign jurisdictions, which will
be used to fund foreign operations and acquisitions.
There is currently no need to repatriate these funds in
order to meet domestic funding obligations or 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.
Cash Flows from Operations
In Millions
2017
2016
2015
Fiscal Year
Net earnings, including
earnings attributable to
redeemable and
noncontrolling interests
$1,701.1 $1,736.8 $1,259.4
Depreciation and amortization
603.6
608.1
588.3
(85.0)
(88.4)
(84.3)
After-tax earnings
from joint ventures
Distributions of earnings
from joint ventures
Stock-based compensation
75.6
95.7
75.1
89.8
72.6
106.4
25.3
(74.6)
Deferred income taxes
183.9
120.6
Tax benefit on exercised options
(64.1)
(94.1)
Pension and other postretirement
benefit plan contributions
(45.4)
(47.8)
(49.5)
Pension and other postretirement
benefit plan costs
Divestitures loss (gain)
Restructuring, impairment,
35.7
13.5
118.1
(148.2)
91.3
—
and other exit costs
117.0
107.2
531.1
Changes in current assets
and liabilities, excluding the
effects of acquisitions
and divestitures
Other, net
Net cash provided by
(232.0)
258.2
214.7
(86.3)
(105.6)
(137.9)
operating activities
$2,313.3 $2,629.8 $2,542.8
In fiscal 2017, cash provided by operations was $2.3
billion compared to $2.6 billion in fiscal 2016. The $316
million decrease is primarily driven by a $490 million
change in current assets and liabilities. The $490 million
change in current assets and liabilities is primarily due
to changes in other current liabilities driven by changes
in income taxes payable, a decrease in incentive accru-
als and changes in trade and advertising accruals due
to reduced spending. The change in current assets and
liabilities was also impacted by the timing of accounts
payable. Additionally, we recorded a $14 million loss on
a divestiture during fiscal 2017, compared to a $148 mil-
lion net gain on divestitures during fiscal 2016 and clas-
sified the related cash flows as investing activities.
We strive to grow core working capital at or below
the rate of growth in our net sales. For fiscal 2017, core
working capital increased 9 percent, primarily due to
timing of accounts receivable and inventory build late in
fiscal 2017, compared to a net sales decline of 6 percent.
In fiscal 2016, core working capital decreased 41 per-
cent, compared to a net sales decline of 6 percent, and
in fiscal 2015, core working capital decreased 13 percent,
compared to net sales decline of 2 percent.
In fiscal 2016, our operations generated $2.6 billion of
cash, compared to $2.5 billion in fiscal 2015. The $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 offset by a $424
million decrease in non-cash restructuring charges.
The $43 million change in current assets and liabilities
was primarily driven by the timing of accounts payable
including the impact of longer terms offset by the tim-
ing of inventory build.
Cash Flows from Investing Activities
In Millions
2017
2016
2015
Purchases of land, buildings,
and equipment
$ (684.4) $ (729.3) $ (712.4)
Fiscal Year
Acquisitions, net of cash acquired
Investments in affiliates, net
Proceeds from disposal of land,
buildings, and equipment
Proceeds from divestitures
Exchangeable note
Other, net
Net cash provided (used)
—
3.3
(84.0)
(822.3)
63.9
(102.4)
4.2
4.4
17.5
828.5
13.0
21.1
(0.5)
(11.2)
11.0
—
27.9
(4.0)
by investing activities
$ (646.9) $
93.4 $ (1,602.2)
ANNUAL REPORT 27
In fiscal 2017, we used $647 million of cash through
investing activities compared to generating $93 million
in fiscal 2016. We invested $684 million in land, build-
ings, and equipment in fiscal 2017, $45 million less than
last year.
In fiscal 2016, we generated $93 million of cash
through investing activities compared to a use of
$1.6 billion in fiscal 2015. We invested $729 million in
land, buildings, and equipment in fiscal 2016, $17 mil-
lion more than fiscal 2015. In fiscal 2016, we received
proceeds of $828 million from the divestitures of cer-
tain businesses, primarily Green Giant. In fiscal 2015,
we acquired Annie’s for an aggregate purchase price of
$809 million, net of $12 million of cash acquired.
We expect capital expenditures to be approximately
$650 million in fiscal 2018. These expenditures will
fund initiatives that are expected to fuel international
growth, support innovative products, and continue
HMM initiatives throughout the supply chain.
Cash Flows from Financing Activities
in proceeds from common stock issued on exercised
options.
During fiscal 2017, we repurchased 25 million shares
of our common stock for $1,652 million. During fiscal
2016, we repurchased 11 million shares of our common
stock for $607 million. During fiscal 2015, we repur-
chased 22 million shares of our common stock for
$1,162 million.
Dividends paid in fiscal 2017 totaled $1,135 million,
or $1.92 per share, an 8 percent per share increase
from fiscal 2016. Dividends paid in fiscal 2016 totaled
$1,072 million, or $1.78 per share, a 7 percent per share
increase from fiscal 2015 dividends of $1.67 per share.
Selected Cash Flows from Joint Ventures
Selected cash flows from our joint ventures are set
forth in the following table:
Inflow (Outflow), in Millions
2017
2016
2015
Fiscal Year
Fiscal Year
Dividends received
Investments in affiliates, net
$3.3
75.6
$63.9
$(102.4)
75.1
72.6
CAPITAL RESOURCES
Total capital consisted of the following:
In Millions
Notes payable
May 28, 2017 May 29, 2016
$ 1,234.1
$
269.8
Current portion of long-term debt
604.7
1,103.4
Long-term debt
Total debt
Redeemable interest
Noncontrolling interests
Stockholders’ equity
Total capital
7,642.9
7,057.7
9,481.7
8,430.9
910.9
357.6
845.6
376.9
4,327.9
4,930.2
$15,078.1
$14,583.6
In Millions
2017
2016
2015
Change in notes payable
$ 962.4 $ (323.8) $ (509.8)
Issuance of long-term debt
1,072.1
542.5
2,253.2
Payment of long-term debt
(1,000.0) (1,000.4) (1,145.8)
Proceeds from common stock
issued on exercised options
112.6
171.9
163.7
Tax benefit on exercised options
64.1
94.1
74.6
Purchases of common
stock for treasury
(1,651.5)
(606.7) (1,161.9)
Dividends paid
(1,135.1) (1,071.7) (1,017.7)
Distributions to noncontrolling
and redeemable interest holders
(61.0)
(84.3)
Other, net
Net cash used by
(9.1)
(7.2)
(25.0)
(16.1)
financing activities
$ (1,645.5) $ (2,285.6) $ (1,384.8)
Net cash used by financing activities decreased by
$640 million in fiscal 2017. We had $1.8 billion more
net debt issuances in fiscal 2017 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 69 of this report.
During fiscal 2017, we received $113 million in pro-
ceeds from common stock issued on exercised options
compared to $172 million in fiscal 2016, a decrease of
$59 million. During fiscal 2015, we received $164 million
28 GENERAL MILLS
The following table details the fee-paid committed
and uncommitted credit lines we had available as of
May 28, 2017:
In Billions
Credit facility expiring:
May 2022
June 2019
Total committed credit facilities
Uncommitted credit facilities
Total committed and
Facility
Amount
Borrowed
Amount
$2.7
0.2
2.9
0.5
$ —
0.1
0.1
0.1
uncommitted credit facilities
$3.4
$0.2
In fiscal 2016, we entered into a $2.7 billion fee-paid
committed credit facility that was originally scheduled
to expire in May 2021. During the fourth quarter of fis-
cal 2017 we amended the credit facility’s expiration date
by one year to May 2022.
To ensure availability of funds, we maintain bank
credit lines sufficient to cover our outstanding notes
payable. Commercial paper is a continuing source of
short-term financing. 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. The credit
facilities contain several covenants, including a require-
ment to maintain a fixed charge coverage ratio of at
least 2.5 times.
Certain of our long-term debt agreements, our credit
facilities, and our noncontrolling interests contain
restrictive covenants. As of May 28, 2017, we were in
compliance with all of these covenants.
We have $605 million of long-term debt maturing in
the next 12 months that is classified as current, includ-
ing $500 million of 1.4 percent notes due October 2017
and $100 million of 6.39 percent fixed rate medium
term notes due for remarketing in February 2018. We
believe that cash flows from operations, together with
available short- and long-term debt financing, will be
adequate to meet our liquidity and capital needs for at
least the next 12 months.
As of May 28, 2017, our total debt, including the
impact of derivative instruments designated as hedges,
was 67 percent in fixed-rate and 33 percent in float-
ing-rate instruments, compared to 78 percent in fixed-
rate and 22 percent in floating-rate instruments on
May 29, 2016.
Return on average total capital was 12.7 percent in
fiscal 2017 compared to 12.9 percent in fiscal 2016.
Improvement in adjusted return on 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 defined by GAAP). Adjusted
return on average total capital increased 30 basis points
from 11.3 percent in fiscal 2016 to 11.6 percent in fis-
cal 2017 as fiscal 2017 adjusted earnings increased. On
a constant-currency basis, adjusted return on average
total capital increased 40 basis points.
We also believe that our fixed charge coverage ratio
and the ratio of operating cash flow to debt are import-
ant measures of our financial strength. Our fixed charge
coverage ratio in fiscal 2017 was 7.26 compared to 7.40
in fiscal 2016. The measure decreased from fiscal 2016
as earnings before income taxes and after-tax earnings
from joint ventures decreased by $132 million in fiscal
2017. Our operating cash flow to debt ratio decreased
6.8 percentage points to 24.4 percent in fiscal 2017,
driven by a decrease in cash provided by operations and
an increase in notes payable.
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 financial 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.
These 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 28,
2017, the redemption value of the redeemable interest
was $911 million which approximates its fair value.
The 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 floating 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 floating preferred return
rate on GMC’s Class A Interests was reset to the sum
of three-month LIBOR plus 125 basis points. The pre-
ferred return rate is adjusted every three years through
a negotiated agreement with the Class A Interest holder
or through a remarketing auction.
ANNUAL REPORT 29
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 28, 2017, we have issued guarantees and
comfort letters of $505 million for the debt and other
obligations of consolidated subsidiaries, and guarantees
and comfort letters of $165 million for the debt and
other obligations of non-consolidated affiliates, mainly
CPW. In addition, off-balance sheet arrangements
are generally limited to the future payments under
non-cancelable operating leases, which totaled $501
million as of May 28, 2017.
As of May 28, 2017, we had invested in five variable
interest entities (VIEs). None of our VIEs are material to
our results of operations, financial condition, or liquidity
as of and for the fiscal year ended May 28, 2017.
Our defined benefit 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 fiscal 2017.
The following table summarizes our future estimated
cash payments under existing contractual obligations,
including payments due by period:
In Millions
Payments Due by Fiscal Year
Total
2023 and
2018 2019 -20 2021-22 Thereafter
Long-term debt (a)
$ 8,290.6
604.2 2,647.7 1,559.3 3,479.4
Accrued interest
83.8
83.8
—
—
Operating leases (b)
500.7
118.8
182.4
110.4
Capital leases
1.2
0.4
0.6
0.1
Purchase obligations (c) 3,191.0 2,304.8
606.8
264.3
—
89.1
0.1
15.1
Total contractual
obligations
12,067.3 3,112.0 3,437.5 1,934.1 3,583.7
Other long-term
obligations (d)
1,372.7
—
—
—
—
Total long-term
obligations
$13,440.0 $3,112.0 $3,437.5 $1,934.1 $3,583.7
(a) Amounts represent the expected cash payments of our long-term debt
and do not include $1.2 million for capital leases or $44.4 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) The majority of the purchase obligations represent commitments for raw
material and packaging to be utilized in the normal course of business and
for consumer marketing spending commitments that support our brands.
For purposes of this table, arrangements are considered purchase obliga-
tions if a contract specifies all significant terms, including fixed or minimum
quantities to be purchased, a pricing structure, and approximate timing of
the transaction. Most arrangements are cancelable without a significant
penalty and with short notice (usually 30 days). Any amounts reflected on
the Consolidated Balance Sheets as accounts payable and accrued liabilities
are excluded from the table above.
(d) The fair value of our foreign exchange, equity, commodity, and grain
derivative contracts with a payable position to the counterparty was $24
million as of May 28, 2017, 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 bene-
fits, including the underfunded status of certain of our defined benefit pen-
sion, other postretirement benefit, and postemployment benefit plans, and
miscellaneous liabilities. We expect to pay $21 million of benefits from our
unfunded postemployment benefit plans and $14.6 million of deferred com-
pensation in fiscal 2018. We are unable to reliably estimate the amount of
these payments beyond fiscal 2018. As of May 28, 2017, our total liability for
uncertain tax positions and accrued interest and penalties was $158.6 million.
SIGNIFICANT ACCOUNTING ESTIMATES
For a complete description of our significant account-
ing policies, see Note 2 to the Consolidated Financial
Statements on page 51 of this report. Our significant
accounting estimates are those that have a meaning-
ful impact on the reporting of our financial condition
and results of operations. These estimates include our
accounting for promotional expenditures, valuation of
long-lived assets, intangible assets, redeemable interest,
stock-based compensation, income taxes, and defined
benefit pension, other postretirement benefit, and pos-
temployment benefit plans.
Promotional Expenditures Our promotional activi-
ties are conducted through our customers and directly
or indirectly with end consumers. These activities
include: payments to customers to perform merchan-
dising activities on our behalf, such as advertising or
in-store displays; discounts to our list prices to lower
retail shelf prices; payments to gain distribution of new
products; coupons, contests, and other incentives; and
media and advertising expenditures. The recognition of
these costs requires estimation of customer participa-
tion and performance levels. These estimates are based
30 GENERAL MILLS
on the forecasted customer sales, the timing and fore-
casted costs of promotional activities, and other factors.
Differences between estimated expenses and actual
costs are recognized as a change in management esti-
mate in a subsequent period. Our accrued trade, coupon,
and consumer marketing liabilities were $483 million as
of May 28, 2017, and $564 million as of May 29, 2016.
Because our total promotional expenditures (including
amounts classified as a reduction of revenues) are sig-
nificant, if our estimates are inaccurate we would have
to make adjustments in subsequent periods that could
have a significant effect on our results of operations.
Valuation of Long-Lived Assets We estimate the useful
lives of long-lived assets and make estimates concern-
ing undiscounted cash flows to review for impairment
whenever events or changes in circumstances indicate
that the carrying amount of an asset (or asset group)
may not be recoverable. Fair value is measured using
discounted cash flows or independent appraisals, as
appropriate.
Intangible Assets Goodwill and other indefinite-lived
intangible assets are not subject to amortization and are
tested for impairment annually and whenever events or
changes in circumstances indicate that impairment may
have occurred. Our estimates of fair value for goodwill
impairment testing are determined based on a dis-
counted cash flow model. We use inputs from our long-
range planning process to determine growth rates for
sales and profits. We also make estimates of discount
rates, perpetuity growth assumptions, market compara-
bles, and other factors.
We evaluate the useful lives of our other intangible
assets, mainly brands, to determine if they are finite or
indefinite-lived. Reaching a determination on useful life
requires significant judgments and assumptions regard-
ing the future effects of obsolescence, demand, compe-
tition, other economic factors (such as the stability of
the industry, known technological advances, legislative
action that results in an uncertain or changing regula-
tory environment, and expected changes in distribution
channels), the level of required maintenance expendi-
tures, and the expected lives of other related groups of
assets. Intangible assets that are deemed to have 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 flow model using inputs
which include projected revenues from our long-range
plan, assumed royalty rates that could be payable if we
did not own the brands, and a discount rate.
As of May 28, 2017, we had $12.9 billion of good-
will and indefinite-lived intangible assets. While we
currently believe that the fair value of each intangible
exceeds its carrying value and that those intangibles so
classified will contribute indefinitely to our cash flows,
materially different assumptions regarding future per-
formance of our businesses or a different weighted-av-
erage cost of capital could result in material impairment
losses and amortization expense. We performed our fis-
cal 2017 assessment of our intangible assets as of August
29, 2016. 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 Latin America report-
ing unit and the Immaculate Baking brand intangible
asset. The excess fair value above the carrying value of
the Latin America reporting unit and the Immaculate
Baking brand intangible asset is as follows:
In Millions
Latin America
Immaculate Baking
Excess Fair
Value Above
Carrying
Value
15%
17%
Carrying
Value
$ 523.0
$ 12.0
Our Latin America reporting unit and Immaculate
Baking brand have experienced declining business per-
formance. In addition, while not impaired as of May 28,
2017, the Progresso, Green Giant, and Food Should Taste
Good brand intangible assets and U.S. Yogurt reporting
unit had risk of decreasing coverage. We will continue to
monitor these businesses for potential impairment.
Redeemable Interest In fiscal 2017, we adjusted the
redemption value of Sodiaal’s redeemable interest in
Yoplait SAS based on a discounted cash flow model.
The significant assumptions used to estimate the
redemption value include projected revenue growth and
profitability from our long-range plan, capital spending,
depreciation and taxes, foreign currency exchange rates,
and a discount rate. As of May 28, 2017, the redemption
value of the redeemable interest was $911 million.
Stock-based Compensation The valuation of stock
options is a significant accounting estimate that
requires us to use judgments and assumptions that
ANNUAL REPORT 31
are likely to have a material impact on our financial
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 73 of this report.
The estimated fair values of stock options granted
and the assumptions used for the Black-Scholes
option-pricing model were as follows:
Fiscal Year
2017
2016
2015
Estimated fair values of
stock options granted
$8.80
$7.24
$7.22
Assumptions:
Risk-free interest rate
1.7%
2.4%
2.6%
Expected term
Expected volatility
Dividend yield
8.5 years 8.5 years 8.5 years
17.8%
17.6%
17.5%
2.9%
3.2%
3.1%
The risk-free interest rate for periods during the
expected term of the options is based on the U.S.
Treasury zero-coupon yield curve in effect at the time of
grant. An increase in the expected term by 1 year, leav-
ing all other assumptions constant, would increase the
grant date fair value by 1 percent. If all other assump-
tions are held constant, a one percentage point increase
in our fiscal 2017 volatility assumption would increase
the grant date fair value of our fiscal 2017 option awards
by 7 percent.
To the extent that actual outcomes differ from our
assumptions, we are not required to true up grant-
date fair value-based expense to final intrinsic values.
However, these differences can impact the classifica-
tion of cash tax benefits realized upon exercise of stock
options, as explained in the following two paragraphs.
Furthermore, historical data has a significant bearing
on our forward-looking assumptions. Significant vari-
ances between actual and predicted experience could
lead to prospective revisions in our assumptions, which
could then significantly impact the year-over-year com-
parability of stock-based compensation expense.
Any corporate income tax benefit realized upon exer-
cise or vesting of an award in excess of that previously
recognized in earnings (referred to as a windfall tax
benefit) is presented in the Consolidated Statements of
Cash Flows as a financing cash flow. The actual impact
on future years’ cash flows will depend, in part, on the
volume of employee stock option exercises during a
particular year and the relationship between the exer-
cise-date market value of the underlying stock and the
original grant-date fair value previously determined for
financial reporting purposes.
Realized windfall tax benefits are credited to addi-
tional paid-in capital within the Consolidated Balance
Sheets. Realized shortfall tax benefits (amounts which
are less than that previously recognized in earnings) are
first offset against the cumulative balance of windfall
tax benefits, if any, and then charged directly to income
tax expense, potentially resulting in volatility in our con-
solidated effective income tax rate. Because employee
stock option exercise behavior is not within our control,
it is possible that significantly different reported results
could occur if different assumptions or conditions were
to prevail.
See the new accounting requirements for the
accounting and presentation of stock-based payments
in the Recently Issued Accounting Pronouncements
section below for forthcoming changes to stock-based
compensation.
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 benefit that has a greater than 50 percent likelihood
of being ultimately realized upon settlement. Future
changes in judgment related to the expected ultimate
resolution of uncertain tax positions will affect earnings
in the quarter of such change. For more information on
income taxes, please refer to Note 14 to the Consolidated
Financial Statements on page 82 of this report.
Defined Benefit Pension, Other Postretirement Benefit,
and Postemployment Benefit Plans We have defined
benefit pension plans covering many employees in the
United States, Canada, France, and the United Kingdom.
We also sponsor plans that provide health care benefits
to many of our retirees in the United States, Canada,
and Brazil. Under certain circumstances, we also pro-
vide accruable benefits, primarily severance, to former
and inactive employees in the United States, Canada,
and Mexico. Please refer to Note 13 to the Consolidated
Financial Statements on page 76 of this report for a
description of our defined benefit pension, other post-
retirement benefit, and postemployment benefit plans.
We recognize benefits provided during retirement or
following employment over the plan participants’ active
32 GENERAL MILLS
working lives. Accordingly, we make various assump-
tions to predict and measure costs and obligations
many years prior to the settlement of our obligations.
Assumptions that require significant management judg-
ment and have a material impact on the measurement
of our net periodic benefit expense or income and accu-
mulated benefit obligations include the long-term rates
of return on plan assets, the interest rates used to dis-
count the obligations for our benefit plans, and health
care cost trend rates.
Expected Rate of Return on Plan Assets Our expected
rate of return on plan assets is determined by our
asset allocation, our historical long-term investment
performance, our estimate of future long-term returns
by asset class (using input from our actuaries, invest-
ment services, and investment managers), and long-
term inflation assumptions. We review this assumption
annually for each plan; however, our annual investment
performance for one particular year does not, by itself,
significantly influence our evaluation.
Our historical investment returns (compound annual
growth rates) for our United States defined benefit
pension and other postretirement benefit plan assets
were 11.8 percent, 10.0 percent, 6.0 percent, 8.4 percent,
and 8.4 percent for the 1, 5, 10, 15, and 20 year periods
ended May 31, 2017.
On a weighted-average basis, the expected rate of
return for all defined benefit plans was 8.17 percent for
fiscal 2017, 8.53 percent for fiscal 2016, and 8.53 percent
for fiscal 2015. For fiscal 2018, we lowered our weight-
ed-average expected rate of return on plan assets for
our principal defined benefit pension and other postre-
tirement plans in the United States to 7.95 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 $66 million for fiscal
2018. A market-related valuation basis is used to reduce
year-to-year expense volatility. The market-related valu-
ation recognizes certain investment gains or losses over
a five-year period from the year in which they occur.
Investment gains or losses for this purpose are the dif-
ference between the expected return calculated using
the market-related value of assets and the actual return
based on the market-related value of assets. Our out-
side actuaries perform these calculations as part of our
determination of annual expense or income.
Discount Rates Beginning in fiscal 2017, we changed
the method used to estimate the service and interest
cost components of the net periodic benefit expense for
our United States and most of our international defined
benefit pension, other postretirement benefit, and pos-
temployment benefit plans. We adopted a full yield curve
approach to estimate service cost and interest cost by
applying the specific spot rates along the yield curve
used to determine the benefit obligation to the relevant
projected cash flows. This method provides a more pre-
cise measurement of service and interest costs by cor-
relating the timing of the plans’ liability cash flows to
the corresponding rate on the yield curve. Previously,
we estimated service cost and interest cost using a sin-
gle weighted-average discount rate derived from the
yield curve used to measure the benefit obligation at the
beginning of the period. This change does not affect the
measurement of our benefit obligations related to these
plans. We have accounted for this change prospectively
as a change in accounting estimate beginning in the
first quarter of fiscal 2017. The change in methodology
resulted in a decrease in service and interest cost of
approximately $68 million in fiscal 2017 compared to
what our costs would have been under the previous
method. The fiscal 2017 reduction in our net periodic
benefit expense as a result of this change in methodol-
ogy was partially offset by a reduction in our weight-
ed-average expected rate of return on plan assets for
our principal defined benefit pension and other postre-
tirement plans in the United States to 8.25 percent as a
result of changes that decreased investment risk in the
portfolio.
Our discount rate assumptions are determined annu-
ally as of May 31 for our defined benefit pension, other
postretirement benefit, and postemployment benefit
plan obligations. We work with our outside actuaries
to determine the timing and amount of expected future
cash outflows to plan participants and, using the Aa
Above Median corporate bond yield, to develop a for-
ward interest rate curve, including a margin to that
index based on our credit risk. This forward interest
rate curve is applied to our expected future cash out-
flows to determine our discount rate assumptions.
ANNUAL REPORT 33
Our weighted-average discount rates were as follows:
Defined
Other
Benefit Postretirement Postemployment
Benefit
Benefit
Pension
Plans
Plans
Plans
premium. Assumed trend rates for health care costs
have an important effect on the amounts reported for
the other postretirement benefit plans.
A one percentage point change in the health care cost
trend rate would have the following effects:
Effective rate for fiscal
2018 service costs
4.37%
4.27%
3.54%
Effective rate for fiscal
2018 interest costs
3.45%
3.24%
2.67%
In Millions
One
One
Percentage Percentage
Point
Decrease
Point
Increase
Obligations as of
May 31, 2017
Effective rate for fiscal
4.08%
3.92%
2.87%
Effect on the aggregate of the
service and interest cost
components in fiscal 2018
$ 2.2
$ (1.9)
2017 service costs
4.57%
4.42%
3.55%
Effective rate for fiscal
Effect on the other post retirement
accumulated benefit obligation
2017 interest costs
3.44%
3.17%
2.67%
as of May 28, 2017
59.5
(53.8)
Obligations as of
May 29, 2016
Obligations as of
May 31, 2015 and
4.19%
3.97%
2.94%
fiscal 2016 expense
4.38%
4.20%
3.55%
Lowering the discount rates by 100 basis points would
increase our net defined benefit pension, other post-
retirement benefit, and postemployment benefit plan
expense for fiscal 2018 by approximately $85 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. This
information includes recent plan experience, plan
design, overall industry experience and projections, and
assumptions used by other similar organizations. Our
initial health care cost trend rate is adjusted as neces-
sary to remain consistent with this review, recent expe-
riences, and short-term expectations. Our initial health
care cost trend rate assumption is 7.3 percent for retir-
ees age 65 and over and 7.0 percent for retirees under
age 65 at the end of fiscal 2017. Rates are graded down
annually until the ultimate trend rate of 5.0 percent
is reached in 2024 for all retirees. The trend rates are
applicable for calculations only if the retirees’ benefits
increase as a result of health care inflation. The ulti-
mate trend rate is adjusted annually, as necessary, to
approximate the current economic view on the rate of
long-term inflation plus an appropriate health care cost
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 fiscal 2017, we recorded
net defined benefit pension, other postretirement ben-
efit, and postemployment benefit plan expense of $56
million compared to $163 million of expense in fiscal
2016 and $153 million of expense in fiscal 2015. As of
May 28, 2017, we had cumulative unrecognized actu-
arial net losses of $1.6 billion on our defined benefit
pension plans and $24 million on our postretirement
and postemployment benefit plans, mainly as the result
of liability increases from lower interest rates, partially
offset by recent increases in the values of plan assets.
These unrecognized actuarial net losses will result in
increases in our future pension and postretirement
benefit expenses because they currently exceed the cor-
ridors defined by GAAP.
Actual future net defined benefit pension, other post-
retirement benefit, and postemployment benefit plan
income or expense will depend on investment perfor-
mance, changes in future discount rates, changes in
health care cost trend rates, and other factors related to
the populations participating in these plans.
34 GENERAL MILLS
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
In March 2017, the Financial Accounting Standards
Board (FASB) issued new accounting requirements
related to the presentation of net periodic defined
benefit pension expense, net periodic postretirement
benefit expense, and net periodic postemployment ben-
efit expense. The new standard requires the service
cost component of net periodic benefit expense to be
recorded in the same line items as other employee com-
pensation costs within our Consolidated Statements
of Earnings. Other components of net periodic benefit
expense must be presented separately outside of oper-
ating profit in our Consolidated Statements of Earnings.
In addition, the new standard requires that only the
service cost component of net periodic benefit expense
is eligible for capitalization. We recognized net peri-
odic benefit expense of $56 million in fiscal 2017, $163
million in fiscal 2016, and $153 million in fiscal 2015
of which $141 million, $161 million, and $167 million,
respectively, related to service cost. These amounts may
not necessarily be indicative of future amounts that
may be recognized subsequent to the adoption of this
new standard. The requirements of the new standard
are effective for annual reporting periods beginning
after December 15, 2017, and interim periods within
those annual periods, which for us is the first quarter of
fiscal 2019. Early adoption is permitted.
In January 2017, the FASB issued new accounting
requirements related to goodwill impairment testing.
The new standard eliminates the requirement to mea-
sure a goodwill impairment loss by determining the
implied fair value of goodwill. Instead, goodwill impair-
ment losses will be measured by the amount by which
a reporting unit’s carrying value exceeds the reporting
unit’s fair value, limited to the amount of goodwill allo-
cated to the reporting unit. The requirements of the
new standard are effective for annual or any interim
goodwill impairment tests in fiscal years beginning
after December 15, 2019, which for us is fiscal 2021.
Early adoption is permitted. We intend to adopt this
standard in fiscal 2018 and do not expect this guidance
to have a material impact on our results of operations
or financial position.
In October 2016, the FASB issued new account-
ing requirements related to the recognition of income
taxes resulting from intra-entity transfers of assets
other than inventory. This will result in the recogni-
tion of the income tax consequences resulting from
the intra-entity transfer of assets in our Consolidated
Statements of Earnings in the period of the transfer.
The requirements of the new standard are effective for
annual reporting periods beginning after December 15,
2017, and interim periods within those annual periods,
which for us is the first quarter of fiscal 2019. Early
adoption is permitted. We are in the process of analyz-
ing the impact of this standard on our results of opera-
tions and financial position.
In March 2016, the FASB issued new accounting
requirements for the accounting and presentation of
stock-based payments. This will result in realized wind-
fall and shortfall tax benefits upon exercise or vesting of
stock-based awards being recorded in our Consolidated
Statements of Earnings instead of additional paid-in
capital within our Consolidated Balance Sheets. In addi-
tion, realized windfall and shortfall tax benefits will be
reclassified from financing activities to operating activ-
ities in our Consolidated Statements of Cash Flows. We
recognized windfall tax benefits of $64 million in fiscal
2017, $94 million in fiscal 2016, and $75 million in fiscal
2015. These amounts may not necessarily be indicative
of future amounts that may be recognized subsequent to
the adoption of this new standard as windfall and short-
fall tax benefits are dependent upon future stock prices,
employee exercise behavior, and applicable tax rates.
The requirements of the new standard are effective for
annual reporting periods beginning after December 15,
2016, and interim periods within those annual periods,
which for us is the first quarter of fiscal 2018.
In February 2016, the FASB issued new accounting
requirements for accounting, presentation and classifi-
cation of leases. This will result in most leases being
capitalized as a right of use asset with a related liability
on our Consolidated Balance Sheets. The requirements
of the new standard are effective for annual reporting
periods beginning after December 15, 2018, and interim
periods within those annual periods, which for us is
the first quarter of fiscal 2020. We are in the process
of evaluating lease accounting software and analyzing
the impact of this standard on our results of operations
and financial position. Based on our assessment to date,
we expect this guidance will have a material impact on
our Consolidated Balance Sheets due to the amount of
our lease commitments but we are unable to quantify
the impact at this time.
In May 2014, the FASB issued new accounting
requirements for the recognition of revenue from con-
tracts with customers. The requirements of the new
standard and its subsequent amendments are effective
ANNUAL REPORT 35
for annual reporting periods beginning after December
15, 2017, and interim periods within those annual peri-
ods, which for us is the first quarter of fiscal 2019. We
are in the process of documenting the impact of the
guidance on our current accounting policies and prac-
tices in order to identify material differences, if any,
that would result from applying the new requirements
to our revenue contracts. We continue to make progress
on our revenue recognition review and are also in the
process of evaluating the impact, if any, on changes to
our business processes, systems, and controls to sup-
port recognition and disclosure requirements under
the new guidance. In addition, we continue to assess
our adoption approach. Based on our assessment to
date, we do not expect this guidance to have a material
impact on our results of operations or financial position.
NON-GAAP MEASURES
We have included in this report measures of financial
performance that are not defined 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 financial measures, we
are providing below a reconciliation of the differences
between the non-GAAP measure and the most directly
comparable GAAP measure, an explanation of why we
believe the non-GAAP measure provides useful infor-
mation to investors and any additional purposes for
which our management or Board of Directors uses the
non-GAAP measure. These non-GAAP measures should
be viewed in addition to, and not in lieu of, the compa-
rable GAAP measure.
Organic Net Sales Growth Rates This 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 provide organic net sales growth rates for our con-
solidated net sales and segment net sales. We believe
that organic net sales growth rates provide useful infor-
mation to investors because they provide transparency
to underlying performance in our net sales by excluding
the effect that foreign currency exchange rate fluctu-
ations, as well as acquisitions, divestitures, and a 53rd
week, when applicable, have on year-to-year compara-
bility. A reconciliation of these measures to reported net
sales growth rates, the relevant GAAP measures, are
included in our Consolidated Results of Operations and
Results of Segment Operations discussions above.
Total Segment Operating Profit and Total Segment
Operating Profit as a Percent of Net Sales Total seg-
ment operating profit is used in reporting to our exec-
utive management and as a component of the Board of
Director’s measurement of our performance for incen-
tive compensation purposes. We believe that this mea-
sure provides useful information to investors because it
is the profitability measure we use to evaluate segment
performance.
Percent of Net Sales
2017
2016
Fiscal Year
2015
2014
2013
Operating profit as reported
$2,566.4 16.4% $2,707.4 16.3% $2,077.3 11.8% $2,957.4 16.5%
$2,851.8 16.0%
Unallocated corporate items
190.1 1.2%
288.9 1.8%
413.8 2.3%
258.4 1.5%
351.3
Divestitures loss (gain)
13.5
0.1%
(148.2) (0.9)%
— —%
(65.5) (0.4)%
—
2.0%
—%
Restructuring, impairment,
and other exit costs
182.6 1.2%
151.4 0.9%
543.9 3.1%
3.6 —%
19.8
0.1%
Total segment operating profit
$2,952.6 18.9% $2,999.5 18.1% $3,035.0 17.2% $3,153.9 17.6%
$3,222.9 18.1%
36 GENERAL MILLS
Diluted EPS Excluding Certain Items Affecting Comparability and Related Constant-currency Growth Rate
(Adjusted Diluted EPS) This 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 profitability measure we use to evaluate earnings
performance on a comparable year-over-year basis. The adjustments are either items resulting from infrequently
occurring events or items that, in management’s judgment, significantly affect the year-over-year assessment of
operating results.
The reconciliation of our GAAP measure, diluted EPS, to diluted EPS excluding certain items affecting comparabil-
ity and the related constant-currency growth rate follows:
Per Share Data
Diluted earnings per share, as reported
Mark-to-market effects (a)
Divestitures loss (gain), net (b)
Tax items (c)
Acquisition integration costs (d)
Venezuela currency devaluation (a)
Restructuring costs (e)
Project-related costs (e)
Indefinite-lived intangible asset impairment (f)
Diluted earnings per share, excluding
2017
$2.77
(0.01)
0.01
—
—
—
0.26
0.05
—
$2.77
(0.07)
(0.10)
—
—
—
0.26
0.06
—
certain items affecting comparability
$3.08
$2.92
Foreign currency exchange impact
Diluted earnings per share growth, excluding
certain items affecting comparability, on a
constant-currency basis
(a) See Note 7 to the Consolidated Financial Statements on page 61 of this report.
(b) See Note 3 to the Consolidated Financial Statements on page 55 of this report.
2017 vs. 2016
Change
2016
2016 vs. 2015
Change
2015
2014
2013
Fiscal Year
Flat
5%
(1)
6%
$1.97
0.09
—
0.13
0.02
0.01
0.35
0.01
0.28
41%
$2.83
(0.05)
(0.06)
—
—
0.09
0.01
—
—
$2.79
—
—
(0.13)
0.01
0.03
0.02
—
—
$2.86
2%
$2.82
$2.72
(3)
5%
(c) The fiscal 2015 tax item is related to the one-time repatriation of historical foreign earnings in fiscal 2015. The fiscal 2013 tax items consist of a reduction
to income taxes related to the restructuring of our GMC subsidiary and an increase to income taxes related to the liquidation of a corporate investment.
Additionally, fiscal 2013 includes changes in deferred taxes associated with the Medicare Part D subsidies related to the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
(d) Integration costs resulting from the acquisitions of Annie’s in fiscal 2015 and Yoki in fiscal 2013.
(e) See Note 4 to the Consolidated Financial Statements on page 55 of this report.
(f) See Note 6 to the Consolidated Financial Statements on page 59 of this report.
See our reconciliation below of the effective income tax rate as reported to the effective income tax rate excluding
certain items affecting comparability for the tax impact of each item affecting comparability.
ANNUAL REPORT 37
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 affect year-to-year
comparability. The calculation of adjusted return on average total capital and return on average total capital, its
GAAP equivalent follows:
In Millions
2017
2016
2015
2014
2013
2012
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$ 1,701.1 $ 1,736.8 $ 1,259.4 $ 1,861.3 $ 1,892.5
Fiscal Year
Interest, net, after-tax
Earnings before interest, after-tax
Adjustments, after-tax: (a)
Mark-to-market effects
Divestitures loss (gain), net
Tax items
Acquisition integration costs
Venezuela currency devaluation
Restructuring costs
Project-related costs
Indefinite-lived intangible asset impairment
Adjusted earnings before interest, after-tax for
187.9
193.1
199.8
190.9
201.2
1,889.0
1,929.9
1,459.2
2,052.2
2,093.7
(8.8)
9.2
—
—
—
153.9
28.2
—
(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
—
—
adjusted return on capital calculation
$ 2,071.5 $ 2,021.9 $ 2,015.6 $ 2,047.1 $ 2,051.0
Current portion of long-term debt
$
604.7 $ 1,103.4 $ 1,000.4 $ 1,250.6 $ 1,443.3 $
741.2
526.5
Notes payable
Long-term debt
Total debt
Redeemable interest
Noncontrolling interests
Stockholders’ equity
Total capital
Accumulated other comprehensive loss
After-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
1,234.1
269.8
615.8
1,111.7
599.7
7,642.9
7,057.7
7,575.3
6,396.6
5,901.8
6,139.5
9,481.7
8,430.9
9,191.5
8,758.9
7,944.8
7,407.2
910.9
357.6
845.6
376.9
778.9
396.0
984.1
470.6
967.5
456.3
847.8
461.0
4,327.9
4,930.2
4,996.7
6,534.8
6,672.2
6,421.7
15,078.1
14,583.6
15,363.1
16,748.4
16,040.8
15,137.7
2,244.5
2,612.2
2,310.7
1,340.3
1,585.3
1,743.7
621.6
439.1
347.1
(209.3)
(204.2)
(161.5)
$ 17,944.2 $ 17,634.9 $ 18,020.9 $ 17,879.4 $ 17,421.9 $ 16,719.9
$ 14,830.9 $ 14,973.4 $ 16,055.8 $ 16,394.6 $ 15,589.2
12.7%
12.9%
9.1%
12.5%
13.4%
$ 17,789.6 $ 17,827.9 $ 17,950.1 $ 17,650.6 $ 17,070.8
11.6%
11.3%
11.2%
11.6%
12.0%
30 bps
(10) bps
40 bps
(a) See our reconciliation below of the effective income tax rate as reported to the effective income tax rate excluding certain items affecting comparability for
the tax impact of each item affecting comparability.
(b) Sum of current year and previous year after-tax adjustments.
(c) See “Glossary” on page 89 of this report for definition.
38 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. The calculation of free cash flow conver-
sion rate and net cash provided by operating activities conversion rate, its equivalent GAAP measure follows:
In Millions
2017
2016
2015
2014
2013
2012
2011
Fiscal Year
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests, as reported
Mark-to-market, net of tax (a)
Divestitures loss (gain), net of tax (b)
Tax related Items (c)
Acquisition integration costs, net of tax (b)
Venezuela currency devaluation, net of tax (a)
Restructuring costs, net of tax (d)
Project-related costs, net of tax (d)
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 flow
Net cash provided by operating
activities conversion rate
Free cash flow conversion rate
$ 1,701.1
(8.8)
$
9.2
—
—
—
153.9
28.2
—
$ 1,883.6
2,313.3
(684.4)
$ 1,628.9
$ 1,736.8
(39.6)
$
(66.0)
—
—
—
160.8
36.8
—
$ 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 $ 1,803.5
(60.0)
65.6 $
$
—
—
(88.9)
—
—
9.7
—
—
2.8
64.3
—
—
—
—
$ 1,828.8 $ 1,815.8 $ 1,856.2 $ 1,849.8 $ 1,728.7 $ 1,657.4
2,629.8
2,542.8
2,541.0
2,926.0
2,407.2
1,531.1
(729.3)
(648.8)
$ 1,900.5 $ 1,830.4 $ 1,877.5 $ 2,312.1 $ 1,731.3 $ 882.3
(712.4)
(675.9)
(663.5)
(613.9)
136%
86%
151%
104%
202%
101%
137%
101%
155%
125%
151%
100%
85%
53%
Rolling 3 Years, in Millions
Fiscal
2015-2017
Fiscal
2014-2016
Fiscal
2013-2015
Fiscal
2012-2014
Fiscal
2011-2013
Adjusted earnings, including earnings
attributable to redeemable and
noncontrolling interests
Free cash flow, rolling 3 years
Free cash flow conversion rate, rolling 3 years
$ 5,528.2
$ 5,359.8
$ 5,500.8 $ 5,521.8 $ 5,434.7 $ 5,235.9
$ 5,608.4 $ 6,020.0 $ 5,920.9 $ 4,925.7
97%
102%
109%
109%
94%
The calculation of total cash returned to shareholders as a percentage of free cash flow follows:
In Millions
Fiscal Year
2017
2016
2015
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 flow
Total cash returned to shareholders as percentage of free cash flow - cumulative 2015-2017
$ 1,135.1
1,651.5
(112.6)
$ 2,674.0
164%
116%
606.7
(171.9)
$ 1,071.7 $ 1,017.7
1,161.9
(163.7)
$ 1,506.5 $ 2,015.9
79%
110%
(a) See Note 7 of the Consolidated Financial Statements on page 61 of this report.
(b) See Note 3 of the Consolidated Financial Statements on page 55 of this report.
(c) The fiscal 2015 tax item is related to the one-time repatriation of historical foreign earnings in fiscal 2015. The fiscal 2013 tax items consist of a reduction
to income taxes related to the restructuring of our GMC subsidiary and an increase to income taxes related to the liquidation of a corporate investment.
Additionally, fiscal 2013 includes changes in deferred taxes associated with the Medicare Part D subsidies related to the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
(d) See Note 4 of the Consolidated Financial Statements on page 55 of this report.
(e) See Note 6 to the Consolidated Financial Statements on page 59 of this report.
See our reconciliation below of the effective income tax rate as reported to the effective income tax rate excluding
certain items affecting comparability for the tax impact of each item affecting comparability.
See our reconciliation below of the effective income tax
rate as reported to the effective income tax rate exclud-
ing certain items affecting comparability for the tax
impact of each item affecting comparability.
Total Segment Operating Profit Constant-currency
Growth Rates We believe that this measure provides
useful information to investors because it provides
transparency to underlying performance of our seg-
ments by excluding the effect that foreign currency
exchange rate fluctuations have on year-to-year com-
parability given volatility in foreign currency exchange
markets.
Total segment operating profit growth rates on a
constant-currency basis are calculated as follows:
Percentage change in total segment
operating profit as reported
Impact of foreign currency exchange
Percentage change in total segment
Fiscal
2017
2016
(2)%
(1) pt
(1)%
(2) pts
operating profit on a constant-currency basis
(1)%
1%
See our reconciliation of total segment operating
profit to operating profit, its GAAP-equivalent, above.
ANNUAL REPORT 39
Constant-currency After-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 effect that foreign
currency exchange rate fluctuations have on year-to-
year comparability given volatility in foreign currency
exchange markets.
After-tax earnings from joint ventures growth rates
on a constant-currency basis are calculated as follows:
Percentage change in after-tax earnings
from joint ventures as reported
Impact of foreign currency exchange
Percentage change in after-tax earnings from
Fiscal
2017
2016
(4)%
2 pts
5%
(7) pts
joint ventures on a constant-currency basis
(6)%
12%
Net Sales Growth Rates for Canada Operating Unit
on a Constant-currency Basis We believe this measure
of our Canada operating unit net sales provides use-
ful information to investors because it provides trans-
parency to the underlying performance for the Canada
operating unit within our North America Retail segment
by excluding the effect that foreign currency exchange
rate fluctuations have on year-to-year comparability
given volatility in foreign currency exchange markets.
Net sales growth rates for our Canada operating unit
on a constant-currency basis are calculated as follows:
Percentage change in net sales as reported
Impact of foreign currency exchange
Percentage change in net sales on a
Fiscal
2017
2016
(2)%
Flat
(16)%
(12) pts
constant-currency basis
(2)%
(4)%
40 GENERAL MILLS
Constant-currency Segment Operating Profit Growth Rates We believe that this measure provides useful infor-
mation to investors because it provides transparency to underlying performance of our segments by excluding the
effect that foreign currency exchange rate fluctuations have on year-to-year comparability given volatility in foreign
currency exchange markets.
Our segments’ operating profit growth rates on a constant-currency basis are calculated as follows:
North America Retail
Europe & Australia
Asia & Latin America
North America Retail
Europe & Australia
Asia & Latin America
Percentage Change
in Operating Profit
as Reported
(2)%
(18)
21
Fiscal 2017
Impact of Foreign
Currency
Exchange
Flat
Percentage Change in
Operating Profit on
Constant-Currency Basis
Fiscal 2016
Percentage Change
in Operating Profit
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in
Operating Profit on
Constant-Currency Basis
Flat
(1)%
12
(42)
(9) pts
1 pt
(1) pt
(16) pts
(9) pts
(2)%
(9)
20
28%
(33)
Effective Income Tax Rate Excluding Certain Items Affecting Comparability We believe this measure provides
useful information to investors because it is important for assessing the effective tax rate excluding certain items
affecting year-to-year comparability and presents the income tax effects of certain items affecting comparability.
Effective income tax rates excluding certain items affecting comparability are calculated as follows:
May 28, 2017
May 29, 2016
May 31, 2015
May 25, 2014
May 26, 2013
May 27, 2012
May 29, 2011
Fiscal Year Ended
Pretax
Pretax
Pretax
Pretax
(a) Taxes
(a) Taxes
(a) Taxes
In Millions
As reported
Mark-to-market effects (b)
Divestitures loss (gain) (c)
Tax items (d)
—
Acquisition integration costs (e) —
Venezuela currency devaluation (b) —
Restructuring costs (f)
Project-related costs (f)
224.1
43.9
(13.9)
13.5
89.7 33.2
Pretax
Income Earnings Income Earnings
(a)
Pretax
Earnings Income Earnings Income Earnings Income Earnings Income Earnings
(a)
Income
Taxes
$2,271.3 $655.2 $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
(95.2) (35.2)
—
—
— 88.9
—
—
—
—
1.6
4.4
—
—
—
—
62.2
3.6
—
—
$2,538.9 $740.3 $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
(5.1)
(23.2)
(62.8)
4.3 (148.2) (82.2)
—
—
—
70.2
15.7
—
(48.5) (18.0)
(29.5)
—
—
4.4
—
—
—
(1.6)
(4.4)
—
—
— 85.4
3.5
4.4
2.7
—
—
343.5 125.8
4.9
13.2
83.1
— 260.0
—
— (78.6)
5.6
—
12.3
25.2
18.6
—
—
—
100.6
—
—
—
—
1.5
—
104.2
—
—
—
—
—
—
—
—
229.8
57.5
16.0
8.0
69.0
20.7
—
—
—
—
— (65.5)
Intangible asset impairment (g)
(a) Taxes
(a) Taxes
36.3
38.6
11.2
—
—
Pretax
Taxes
As adjusted
Effective tax rate:
As reported
As adjusted
Sum of adjustments to income taxes
Average number of common
28.8%
29.2%
31.4%
29.8%
33.3%
30.5%
33.3%
32.2%
$85.1
$(15.7)
$174.0
$(43.1)
29.2%
32.3%
$94.4
32.1%
32.4%
29.7%
33.2%
$76.4
$55.3
shares - diluted EPS
598.0
611.9
618.8
645.7
665.6
666.7
664.8
Impact of income tax
adjustments on diluted
EPS excluding certain items
affecting comparability
$(0.14)
$0.03
$(0.28)
$0.07
$(0.14)
$(0.11)
$(0.08)
(a) Earnings before income taxes and after-tax earnings from joint ventures.
(b) See Note 7 to the Consolidated Financial Statements on page 61 of this report.
(c) See Note 3 to the Consolidated Financial Statements on page 55 of this report.
(d) The fiscal 2015 tax item is related to the one-time repatriation of historical foreign earnings in fiscal 2015. The fiscal 2013 tax items consist of a reduction
to income taxes related to the restructuring of our GMC subsidiary and an increase to income taxes related to the liquidation of a corporate investment.
Additionally, fiscal 2013 includes changes in deferred taxes associated with the Medicare Part D subsidies related to the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
(e) Integration costs resulting from the acquisitions of Annie’s in fiscal 2015 and Yoki in fiscal 2013.
(f) See Note 4 to the Consolidated Financial Statements on page 55 of this report.
(g) See Note 6 to the Consolidated Financial Statements on page 59 of this report.
ANNUAL REPORT 41
Adjusted Operating Profit as a Percent of Net Sales Excluding Certain Items Affecting Comparability We believe
this measure provides useful information to investors because it is important for assessing our operating profit mar-
gin on a comparable basis. Adjusted operating profit excludes certain items affecting comparability.
Percent of Net Sales
2017
2016
Fiscal Year
2015
2014
2013
Operating profit as reported
Mark-to-market effects (a)
Divestitures loss (gain), (b)
Acquisition integration costs (c)
Venezuela currency devaluation (a)
Restructuring costs (d)
Project-related costs (d)
$2,566.4 16.4% $2,707.4 16.3% $2,077.3 11.8% $2,957.4 16.5% $2,851.8 16.0%
(13.9) (0.1)%
(62.8) (0.4)%
89.7
0.5%
(48.5) (0.3)%
(4.4)
—%
13.5
0.1%
(148.2) (0.9)%
—
—%
(65.5) (0.4)%
—
—%
—
—
—%
—%
— —%
—
—%
16.0
0.1%
—
—%
8.0
—%
62.2
0.4%
224.1
1.4%
229.8
1.4%
343.5
1.9%
3.6
—%
43.9
0.3%
57.5
0.4%
13.2
0.1%
—
—
—%
—%
12.3
0.1%
25.2
0.1%
18.6
0.1%
—
—
—%
—%
Intangible asset impairment (e)
—
—%
—
—%
260.0
1.5%
Adjusted operating profit
$2,834.0 18.1% $2,783.7 16.8% $2,807.7 15.9% $2,909.2 16.2% $2,903.5 16.3%
(a) See Note 7 to the Consolidated Financial Statements on page 61 of this report.
(b) See Note 3 to the Consolidated Financial Statements on page 55 of this report.
(c) Integration costs resulting from the acquisitions of Annie’s in fiscal 2015 and Yoki in fiscal 2013.
(d) See Note 4 to the Consolidated Financial Statements on page 55 of this report.
(e) See Note 6 to the Consolidated Financial Statements on page 59 of this report.
42 GENERAL MILLS
Adjusted Gross Margin We believe this measure pro-
vides useful information to investors because it is
important for assessing our gross margin on a com-
parable basis. Adjusted gross margin excludes certain
items affecting comparability.
Gross margin, as reported
Mark-to-market effects
Restructuring costs
Project-related costs
Adjusted gross margin
Fiscal 2017
Fiscal 2016
% of Net Sales % of Net Sales
35.6%
(0.1)
0.3
0.3
35.2%
(0.4)
0.5
0.3
36.1%
35.6%
Forward-Looking Financial Measures Our fiscal 2018
outlook for organic net sales growth, constant-currency
total segment operating profit and adjusted diluted
EPS, and adjusted operating profit margin are non-
GAAP financial measures that exclude, or have other-
wise been adjusted for, items impacting comparability,
including the effect of foreign currency exchange rate
fluctuations, restructuring charges and project-related
costs, and commodity mark-to-market effects. Our
fiscal 2018 outlook for organic net sales growth also
excludes the effect of acquisitions and divestitures. We
are not able to reconcile these forward-looking non-
GAAP financial measures to their most directly compa-
rable forward-looking GAAP financial measures without
unreasonable efforts because we are unable to predict
with a reasonable degree of certainty the actual impact
of changes in foreign currency exchange rates and com-
modity prices or the timing of acquisitions, divestitures
and restructuring actions throughout fiscal 2018. The
unavailable information could have a significant impact
on our fiscal 2018 GAAP financial results.
For fiscal 2018, we currently expect: foreign currency
exchange rates (based on blend of forward and fore-
casted rates and hedge positions), acquisitions, and
divestitures to have an immaterial impact on net sales
growth; foreign currency exchange rates to have an
immaterial impact on total segment operating profit and
adjusted diluted EPS growth; and total restructuring
charges and project-related costs related to actions pre-
viously announced to total approximately $45 million.
ANNUAL REPORT 43
issues, including recalls and product liability; changes
in consumer demand for our products; effectiveness
of advertising, marketing, and promotional programs;
changes in consumer behavior, trends, and preferences,
including weight loss trends; consumer perception of
health-related issues, including obesity; consolidation
in the retail environment; changes in purchasing and
inventory levels of significant customers; fluctuations
in the cost and availability of supply chain resources,
including raw materials, packaging, and energy; disrup-
tions or inefficiencies in the supply chain; effectiveness
of restructuring and cost savings initiatives; volatility
in the market value of derivatives used to manage price
risk for certain commodities; benefit plan expenses due
to changes in plan asset values and discount rates used
to determine plan liabilities; failure or breach of our
information technology systems; foreign economic con-
ditions, including currency rate fluctuations; 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 2017 Form 10-K, which could
also affect our future results.
We undertake no obligation to publicly revise any
forward-looking statements to reflect events or circum-
stances after the date of those statements or to reflect
the occurrence of anticipated or unanticipated events.
CAUTIONARY STATEMENT RELEVANT TO
FORWARD-LOOKING INFORMATION FOR THE
PURPOSE OF “SAFE HARBOR” PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
This report contains or incorporates by reference for-
ward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that
are based on our current expectations and assumptions.
We also may make written or oral forward-looking
statements, including statements contained in our fil-
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 differ materially
from historical results and those currently anticipated
or projected. We wish to caution you not to place undue
reliance on any such forward-looking statements.
In connection with the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995, we
are identifying important factors that could affect our
financial performance and could cause our actual results
in future periods to differ materially from any current
opinions or statements.
Our future results could be affected by a variety
of factors, such as: competitive dynamics in the con-
sumer foods industry and the markets for our products,
including new product introductions, advertising activ-
ities, pricing actions, and promotional activities of our
competitors; economic conditions, including changes
in inflation rates, interest rates, tax rates, or the avail-
ability of capital; product development and innovation;
consumer acceptance of new products and product
improvements; consumer reaction to pricing actions
and changes in promotion levels; acquisitions or 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-
nificant accounting estimates; product quality and safety
44 GENERAL MILLS
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 61 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 28, 2017, and May 29, 2016, and the average
fair value impact during the year ended May 28, 2017.
In Millions
Fair Value Impact
May 28,
2017
Average
During
Fiscal 2017
Interest rate instruments
$25.1
Foreign currency instruments
24.6
Commodity instruments
Equity instruments
3.2
1.3
$26.5
22.9
2.5
1.4
May 29,
2016
$33.3
27.6
3.3
1.7
REPORTS OF MANAGEMENT AND INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
ANNUAL REPORT 45
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.
The 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 inde-
pendent registered public accounting fi rm for fi scal 2018.
J. L. Harmening
Chief Executive Offi cer
D. L. Mulligan
Executive Vice President
and Chief Financial
Offi cer
June 29, 2017
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
28, 2017 and May 29, 2016, 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
28, 2017. In connection with our audits of the consoli-
dated fi nancial statements, we have audited the accom-
panying fi nancial statement schedule. We also have
audited General Mills, Inc.’s internal control over fi nan-
cial reporting as of May 28, 2017, based on criteria estab-
lished in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). General Mills,
Inc.’s management is responsible for these consolidated
fi nancial statements and fi nancial statement schedule,
for maintaining eff ective internal control over fi nancial
reporting, and for its assessment of the eff ectiveness
of internal control over fi nancial reporting, included in
Item 9a Management’s Report on Internal Control over
Financial Reporting in our 2017 Form 10-K. Our respon-
sibility is to express an opinion on these consolidated
fi nancial statements and fi nancial statement schedule
and an opinion on the Company’s internal control over
fi nancial reporting based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Th ose standards require that we
plan and perform the audits to obtain reasonable assur-
ance about whether the fi nancial statements are free of
material misstatement and whether eff ective internal
control over fi nancial reporting was maintained in all
material respects. Our audits of the consolidated fi nan-
cial statements included examining, on a test basis, evi-
dence supporting the amounts and disclosures in the
fi nancial statements, assessing the accounting princi-
ples used and signifi cant estimates made by manage-
ment, and evaluating the overall fi nancial statement
presentation. Our audit of internal control over fi nancial
reporting included obtaining an understanding of inter-
nal control over fi nancial reporting, assessing the risk
that a material weakness exists, and testing and evalu-
ating the design and operating eff ectiveness of internal
46 GENERAL MILLS
control based on the assessed risk. Our audits also
included performing such other procedures as we con-
sidered necessary in the circumstances. We believe that
our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external pur-
poses in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in rea-
sonable detail, accurately and fairly reflect 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 finan-
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 effect on the financial
statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect mis-
statements. Also, projections of any evaluation of effec-
tiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of General Mills, Inc. and subsid-
iaries as of May 28, 2017 and May 29, 2016, and the
results of their operations and their cash flows for each
of the fiscal years in the three-year period ended May
28, 2017, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the accom-
panying financial statement schedule, when considered
in relation to the basic consolidated financial state-
ments taken as a whole, presents fairly, in all material
respects, the information set forth therein. Also in our
opinion, General Mills, Inc. maintained, in all material
respects, effective internal control over financial report-
ing as of May 28, 2017, based on criteria established in
Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the
Treadway Commission.
Minneapolis, Minnesota
June 29, 2017
ANNUAL REPORT 47
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 loss (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
2017
2016
2015
$ 15,619.8
$ 16,563.1
$ 17,630.3
10,056.0
2,801.3
13.5
182.6
2,566.4
295.1
2,271.3
655.2
85.0
1,701.1
43.6
10,733.6
3,118.9
(148.2)
151.4
2,707.4
303.8
2,403.6
755.2
88.4
1,736.8
39.4
11,681.1
3,328.0
—
543.9
2,077.3
315.4
1,761.9
586.8
84.3
1,259.4
38.1
$ 1,657.5
$ 1,697.4
$ 1,221.3
$
$
$
2.82
2.77
1.92
$
$
$
2.83
2.77
1.78
$
$
$
2.02
1.97
1.67
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions
Fiscal Year
2017
2016
2015
Net earnings, including earnings attributable to redeemable and noncontrolling interests
$ 1,701.1
$ 1,736.8
$ 1,259.4
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.
6.3
197.9
0.8
53.3
(25.7)
122.5
355.1
(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)
2,056.2
1,437.4
58.0
31.0
41.5
(192.9)
$ 2,025.2
$ 1,395.9
$
250.9
48 GENERAL MILLS
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 177.7 and 157.8
Accumulated other comprehensive loss
Total stockholders' equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated fi nancial statements.
May 28, 2017 May 29, 2016
$
766.1
$
763.7
1,430.1
1,360.8
1,483.6
1,413.7
381.6
399.0
4,061.4
3,937.2
3,687.7
3,743.6
8,747.2
8,741.2
4,530.4
4,538.6
785.9
751.7
$ 21,812.6
$ 21,712.3
$ 2,119.8
$ 2,046.5
604.7
1,103.4
1,234.1
269.8
1,372.2
1,595.0
5,330.8
5,014.7
7,642.9
7,057.7
1,719.4
1,399.6
1,523.1
2,087.6
16,216.2
15,559.6
910.9
845.6
75.5
75.5
1,120.9
1,177.0
13,138.9
12,616.5
(7,762.9)
(6,326.6)
(2,244.5)
(2,612.2)
4,327.9
4,930.2
357.6
376.9
4,685.5
5,307.1
$ 21,812.6
$ 21,712.3
ANNUAL REPORT 49
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
$1,231.8
Shares
Amount
Accumulated
Other
Retained Comprehensive Noncontrolling
Interests
Earnings
Loss
Total Redeemable
Interest
Equity
(142.3) $(5,219.4) $ 11,787.2
1,221.3
$(1,340.3)
(970.4)
$470.6 $7,005.4
180.9
(70.0)
$984.1
(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)
(29.2)
(29.2)
754.6
75.5
1,177.0
(157.8)
(6,326.6) 12,616.5
(2,612.2)
376.9
5,307.1
91.5
(55.1)
845.6
1,657.5
367.7
13.8
2,039.0
17.2
(25.4)
(1,651.5)
(1,135.1)
3.6
5.5
215.2
(78.5)
94.9
(75.9)
(0.2)
(1,135.1)
(1,651.5)
218.8
(78.5)
94.9
(75.9)
(0.1)
0.1
75.9
(33.2)
(33.2)
(27.8)
In Millions, Except per Share Data
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
Total comprehensive
income
Cash dividends declared
($1.92 per share)
Shares purchased
Stock compensation plans (includes
income tax benefi ts of $64.1)
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 28, 2017
754.6
$75.5
$1,120.9
(177.7) $(7,762.9) $13,138.9
$(2,244.5)
$357.6 $4,685.5
$910.9
See accompanying notes to consolidated fi nancial statements.
50 GENERAL MILLS
CONSOLIDATED STATEMENTS OF CASH FLOWS
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Aft er-tax earnings from joint ventures
Distributions of earnings from joint ventures
Stock-based compensation
Deferred income taxes
Tax benefi t on exercised options
Pension and other postretirement benefi t plan contributions
Pension and other postretirement benefi t plan costs
Divestitures loss (gain)
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
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.
Fiscal Year
2017
2016
2015
$ 1,701.1
$ 1,736.8
$ 1,259.4
603.6
(85.0)
75.6
95.7
183.9
(64.1)
(45.4)
35.7
13.5
117.0
(232.0)
(86.3)
2,313.3
(684.4)
—
3.3
4.2
17.5
13.0
(0.5)
(646.9)
962.4
1,072.1
(1,000.0)
112.6
64.1
(1,651.5)
(1,135.1)
(61.0)
(9.1)
(1,645.5)
(18.5)
2.4
763.7
$ 766.1
$
$
(69.2)
(61.5)
16.6
99.5
(217.4)
(232.0)
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
ANNUAL REPORT 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTE 1. BASIS OF PRESENTATION AND
RECLASSIFICATIONS
Basis of Presentation Our Consolidated Financial
Statements include the accounts of General Mills, Inc.
and all subsidiaries in which we have a 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 2017 and 2016 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 2017 we changed the reporting period
of General Mills Brasil Alimentos Ltda (Yoki) within
our Asia & Latin America segment from an April fi s-
cal year-end to a May fi scal year-end to match our
fi scal calendar. Accordingly, in fi scal 2017, our results
included 13 months of results from the aff ected oper-
ations. Th e impact of these changes was not material
to our consolidated results of operations. Our General
Mills India business remains on an April fi scal year end.
In fiscal 2016 we changed the reporting period
of Yoplait SAS and Yoplait Marques SNC within our
Europe & Australia segment and Annie’s, Inc. (Annie’s)
within our North America Retail segment from an April
fi scal year-end to a May fi scal year-end to match our
fi scal calendar. Accordingly, in fi scal 2016, our results
included 13 months of results from the aff ected opera-
tions. Th e impact of these changes was not material to
our consolidated results of operations.
Certain reclassifi cations to our previously reported
fi nancial information have been made to conform to
the current period presentation.
NOTE . 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 are valued at net realizable value, and all related
cash contracts and derivatives are valued at fair value,
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 net realizable value.
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.
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 28, 2017, 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
52 GENERAL MILLS
and indefinite-lived intangible asset impairment assess-
ment from the first day of the third quarter to the first
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 often requires allocation of shared or corporate
items among reporting units. If the carrying amount
of a reporting unit exceeds its fair value, we revalue
all assets and liabilities of the reporting unit, excluding
goodwill, to determine if the fair value of the net assets
is greater than the net assets including goodwill. If the
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 flow model. Growth
rates for sales and profits are determined using inputs
from our long-range planning process. We also make
estimates of discount rates, perpetuity growth assump-
tions, market comparables, and other factors.
We evaluate the useful lives of our other intangible
assets, mainly brands, to determine if they are finite or
indefinite-lived. Reaching a determination on useful life
requires significant judgments and assumptions regard-
ing the future effects of obsolescence, demand, compe-
tition, other economic factors (such as the stability of
the industry, known technological advances, legislative
action that results in an uncertain or changing regula-
tory environment, and expected changes in distribution
channels), the level of required maintenance expendi-
tures, and the expected lives of other related groups of
assets. Intangible assets that are deemed to have defi-
nite lives are amortized on a straight-line basis, over
their useful lives, generally ranging from 4 to 30 years.
Our indefinite-lived intangible assets, mainly intangible
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 indi-
cate that their carrying value may not be recoverable.
Our estimate of the fair value of the brands is based
on a discounted cash flow model using inputs which
included projected revenues from our long-range plan,
assumed royalty rates that could be payable if we did
not own the brands, and a discount rate.
Our finite-lived intangible assets, primarily acquired
franchise agreements and customer relationships, are
reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss
would be recognized when estimated undiscounted
future cash flows from the operation and disposition
of the asset are less than the carrying amount of the
asset. Assets generally have identifiable cash flows and
are largely independent of other assets. Measurement
of an 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 flow 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 significant influence 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-finished goods, and finished
goods to the joint ventures, generally at market prices.
In addition, we assess our investments in our joint
ventures if we have reason to believe an impairment
may have occurred including, but not limited to, as a
result of ongoing operating losses, projected decreases
in earnings, increases in the weighted average cost of
capital, or significant business disruptions. The signif-
icant assumptions used to estimate fair value include
revenue growth and profitability, 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
ANNUAL REPORT 53
all or a portion of its redeemable interest to us at fair
value once per year, up to three times before December
2024. This put option requires us to classify Sodiaal’s
interest as a redeemable interest outside of equity on
our Consolidated Balance Sheets for as long as the put is
exercisable by Sodiaal. When the put is no longer exercis-
able, the redeemable interest will be reclassified to non-
controlling 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 sec-
ond and third quarters of fiscal 2017, we adjusted the
redeemable interest’s redemption value based on a dis-
counted cash flow model. The significant assumptions
used to estimate the redemption value include projected
revenue growth and profitability from our long-range
plan, capital spending, depreciation, taxes, foreign cur-
rency 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 offered
programs at the time of sale. We generally do not allow
a right of return. However, on a limited case-by-case
basis with prior approval, we may allow 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. The 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 specific account data. Account
balances are written off against the allowance when
we deem the amount is uncollectible.
Environmental Environmental costs relating to exist-
ing conditions caused by past operations that do not
contribute to current or future revenues are expensed.
Liabilities for anticipated remediation costs are recorded
on an undiscounted basis when they are probable and
reasonably estimable, generally no later than the com-
pletion of feasibility studies or our commitment to a
plan of action.
Advertising Production Costs We expense the produc-
tion costs of advertising the first time that the 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 reflected 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. These
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 effective as a hedge
transaction and, if so, the type of hedge transaction.
Gains or losses on derivative instruments reported
in AOCI are reclassified to earnings in the period the
hedged item affects earnings. If the underlying hedged
54 GENERAL MILLS
transaction ceases to exist, any associated amounts
reported in AOCI are reclassified to earnings at that
time. Any ineffectiveness 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 compensation is recognized straight line over the
vesting 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 benefits of tax deductions in excess of
recognized compensation cost as a financing cash flow,
thereby reducing net operating cash flows and increas-
ing net financing cash flows.
Defined Benefit Pension, Other Postretirement
Benefit, and Postemployment Benefit Plans We spon-
sor several domestic and foreign defined benefit plans
to provide pension, health care, and other welfare ben-
efits to retired employees. Under certain circumstances,
we also provide accruable benefits, primarily severance,
to former or inactive employees in the United States,
Canada, and Mexico. We recognize an obligation for
any of these benefits that vest or accumulate with ser-
vice. Postemployment benefits that do not vest or accu-
mulate with service (such as severance based solely on
annual pay rather than years of service) are charged to
expense when incurred. Our postemployment benefit
plans are unfunded.
We recognize the underfunded or overfunded status
of a defined benefit pension plan as an asset or liability
and recognize changes in the funded status in the year
in which the changes occur through AOCI.
Use of Estimates Preparing our Consolidated Financial
Statements in conformity with accounting principles
generally accepted in the United States requires us to
make estimates and assumptions that affect reported
amounts of assets and liabilities, disclosures of contin-
gent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and
expenses during the reporting period. These estimates
include our accounting for promotional expenditures,
valuation of long-lived assets, intangible assets, redeem-
able interest, stock-based compensation, income taxes,
and defined benefit pension, other postretirement ben-
efit and postemployment benefit plans. Actual results
could differ from our estimates.
Other New Accounting Standards In the first quar-
ter of fiscal 2017, we adopted new accounting require-
ments for the presentation of certain investments
using the net asset value, providing a practical expe-
dient to exclude such investments from categorization
within the fair value hierarchy and separate disclosure.
We adopted the guidance retrospectively and restated
the fiscal 2016 fair value of plan asset tables in Note
13. The adoption of this guidance did not impact our
results of operations or financial position.
In the first quarter of fiscal 2017, we adopted new
accounting requirements which permit reporting enti-
ties with a fiscal year-end that does not coincide with a
month-end to apply a practical expedient that permits
the entity to measure defined benefit plan assets and
obligations using the month-end that is closest to the
entity’s fiscal year-end and apply such practical expedi-
ent consistently to all plans. The adoption of this guid-
ance did not have a material impact on our results of
operations or financial position.
In the fourth quarter of fiscal 2016, we adopted
new accounting requirements for the presentation of
deferred tax assets and liabilities, requiring noncurrent
classification for all deferred tax assets and liabilities on
the statement of financial position. This presentation
change has been implemented retroactively. The adop-
tion of this guidance did not have a material impact on
our financial position.
In the first quarter of fiscal 2016, we adopted new
accounting requirements for the classification 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. The adoption of this guidance did
not have a material impact on our financial position.
In the second quarter of fiscal 2015, we adopted new
accounting requirements for share-based payment
awards issued based upon specific performance targets.
The adoption of this guidance did not have a material
impact on our results of operations or financial position.
In the first quarter of fiscal 2015, we adopted new
accounting requirements on the financial statement pre-
sentation of unrecognized tax benefits when a net oper-
ating loss, a similar tax loss, or a tax credit carryforward
exists. The adoption of this guidance did not have an
impact on our results of operations or financial position.
NOTE 3. ACQUISITION AND DIVESTITURES
During the second quarter of fiscal 2017, we sold our
Martel, Ohio manufacturing facility in our Convenience
Stores & Foodservice segment and simultaneously
entered into a co-packing agreement with the pur-
chaser. We received $17.5 million in cash, and recorded
a pre-tax loss of $13.5 million.
During the fourth quarter of fiscal 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 fiscal 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
after transaction related costs. After 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 fiscal 2015, we acquired
Annie’s, a publicly traded food company headquartered
In Millions
Global reorganization
Closure of Melbourne, Australia plant
Severance
$ 66.3
11.4
ANNUAL REPORT 55
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
indefinite lived intangible asset for the Annie’s brand of
$244.5 million, and a finite lived customer relationship
asset of $23.9 million. The pro forma effects of this
acquisition were not material.
NOTE 4. RESTRUCTURING, IMPAIRMENT, AND
OTHER EXIT COSTS
We view our restructuring activities as actions that
help us meet our long-term growth targets. Activities
we undertake must meet internal rate of return and
net present value targets. Each restructuring action
normally takes one to two years to complete. At com-
pletion (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. These
activities result in various restructuring costs, includ-
ing asset write-offs, exit charges including severance,
contract termination fees, and decommissioning and
other costs. Accelerated depreciation associated with
restructured assets, as used in the context of our dis-
closures regarding restructuring activity, refers to the
increase in depreciation expense caused by shortening
the useful life or updating the salvage value of deprecia-
ble fixed assets to coincide with the end of production
under an approved restructuring plan. Any impairment
of the asset is recognized immediately in the period the
plan is approved.
We are currently pursuing several multi-year restruc-
turing initiatives designed to increase our efficiency
and focus our business behind our key growth strat-
egies. Charges recorded in fiscal 2017 related to these
initiatives were as follows:
Fiscal 2017
Asset
Write-offs
Pension
Related
Accelerated
Depreciation
Other
Total
$ —
$
—
$ —
$ 5.8
$ 72.1
Restructuring of certain international product lines
7.0
37.0
Closure of Vineland, New Jersey plant
Project Compass
Project Century
Total
12.3
(1.5)
(1.0)
$ 94.5
7.9
0.1
13.0
$ 62.5
4.5
—
—
1.5
—
0.7
$ 2.2
5.6
(0.3)
14.5
0.2
18.5
$ 38.5
0.4
1.4
5.2
0.8
12.8
$ 26.4
21.9
45.1
41.4
(0.4)
44.0
$ 224.1
56 GENERAL MILLS
In the third quarter of fiscal 2017, we approved
restructuring actions designed to better align our orga-
nizational structure with our strategic initiatives. This
action will affect approximately 600 positions, and
we expect to incur approximately $75 million of net
expenses relating to these actions, all of which will be
cash. We recorded $72.1 million of restructuring charges
relating to these actions in fiscal 2017. We expect these
actions to be completed by the end of fiscal 2018.
In the second quarter of fiscal 2017, we notified the
employees and their representatives of our decision to
close our pasta manufacturing facility in Melbourne,
Australia in our Europe & Australia segment to improve
our margin structure. This action will affect approxi-
mately 350 positions, and we expect to incur approx-
imately $34 million of net expenses relating to this
action, of which approximately $3 million will be cash.
We recorded $21.9 million of restructuring charges
relating to this action in fiscal 2017. We expect this
action to be completed by the end of fiscal 2019.
In the first quarter of fiscal 2017, we announced a
plan to restructure certain product lines in our Asia &
Latin America segment. To eliminate excess capacity,
we closed our snacks manufacturing facility in Marília,
Brazil and ceased production operations for meals and
snacks at our facility in São Bernardo do Campo, Brazil.
We also ceased production of certain underperforming
snack products at our facility in Nanjing, China. These
and other actions will affect approximately 420 posi-
tions in our Brazilian operations and approximately 440
positions in our Greater China operations. We expect to
incur approximately $42 million of net expenses related
to these actions, most of which will be non-cash. We
recorded $45.1 million of restructuring charges relating
to these actions in fiscal 2017. We expect these actions
to be completed by the end of fiscal 2019.
In the first quarter of fiscal 2017, we approved a plan
to close our Vineland, New Jersey facility to eliminate
excess soup capacity in our North America Retail seg-
ment. This action will affect approximately 380 posi-
tions, and we expect to incur approximately $58 million
of net expenses related to this action, of which approx-
imately $19 million will be cash. We recorded $41.4 mil-
lion of restructuring charges relating to this action in
fiscal 2017. We expect this action to be completed by
the end of fiscal 2019.
Charges recorded in fiscal 2016 were as follows:
In Millions
Project Compass
Project Catalyst
Project Century
Total
Severance
$ 45.4
(8.7)
30.9
$ 67.6
Asset
Write-offs
$ —
1.2
30.7
$ 31.9
Fiscal 2016
Pension
Related
Accelerated
Depreciation
$ 1.4
—
19.1
$ 20.5
$ —
—
76.5
$ 76.5
Other
Total
$ 7.9
—
25.4
$ 33.3
$ 54.7
(7.5)
182.6
$ 229.8
In the first quarter of fiscal 2016, we approved Project
Compass, a restructuring plan designed to enable our
international operations to accelerate long-term growth
through increased organizational effectiveness and
reduced administrative expense. In connection with
this project, we eliminated 749 positions. We incurred
$54.3 million of net expenses, all of which was cash. In
fiscal 2017, we reduced the estimate of charges related
to this action by $0.4 million. We recorded $54.7 mil-
lion of restructuring charges relating to this action in
fiscal 2016. This action was completed in fiscal 2017.
In fiscal 2015, we announced Project Century
(Century) which initially involved a review of our North
American manufacturing and distribution network to
streamline operations and identify potential capacity
reductions. In fiscal 2016, we broadened the scope of
Century to identify opportunities to streamline our
supply chain outside of North America.
As part of Century, in the second quarter of fiscal
2016, we approved a restructuring plan to close man-
ufacturing facilities in our Europe & Australia segment
supply chain located in Berwick, United Kingdom and
East Tamaki, New Zealand. These actions affected 287
positions and we incurred $31.8 million of net expenses
related to these actions, of which $12 million was cash.
We recorded $1.8 million of restructuring charges relat-
ing to these actions in fiscal 2017 and $30.0 million in
fiscal 2016. These actions were completed in fiscal 2017.
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 manufactur-
ing plant in our North America Retail segment supply
ANNUAL REPORT 57
chain. This action affected 484 positions, and we expect
to incur approximately $104 million of net expenses
relating to this action, of which approximately $41 mil-
lion will be cash. We recorded $23.2 million of restruc-
turing charges relating to this action in fiscal 2017 and
$79.2 million in fiscal 2016. We expect this action to be
completed by the end of fiscal 2018.
As part of Century, in the first quarter of fiscal 2016,
we approved a restructuring plan to close our Joplin,
Missouri snacks plant in our North America Retail seg-
ment’s supply chain. This action affected 125 positions,
and we incurred $6.6 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
to this action in fiscal 2016. This action was completed
in fiscal 2016.
Charges recorded in fiscal 2015 were as follows:
In Millions
Project Catalyst
Project Century
Combination of certain operational facilities
Charges associated with restructuring
actions previously announced
Total
Severance
$ 121.5
44.3
13.0
Asset
Write-offs
$ 12.3
42.3
0.7
Fiscal 2015
Pension
Related
Accelerated
Depreciation
$ 6.6
31.2
—
$ —
53.1
—
Other
Total
$ 8.0
10.9
0.2
$ 148.4
181.8
13.9
(0.6)
$ 178.2
—
$ 55.3
—
$ 37.8
—
$ 53.1
—
$ 19.1
(0.6)
$ 343.5
In the second quarter of fiscal 2015, we approved
Project Catalyst, a restructuring plan to increase orga-
nizational effectiveness and reduce overhead expense.
In connection with this project, 759 positions were
impacted, primarily in the United States. We incurred
$140.9 million of net expenses relating to this action
of which approximately $94 million was cash. We
recorded $148.4 million of restructuring charges relat-
ing to this action in fiscal 2015. This action was sub-
stantially completed in fiscal 2015.
As part of Century, in the third quarter of fiscal 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 North America Retail and Convenience Stores
& Foodservice segments’ supply chains. The Midland
action affected 94 positions and we expect to incur
approximately $13 million of net expenses relating to
this action, of which approximately $7 million will be
cash. We recorded $1.8 million of restructuring charges
relating to this action in fiscal 2017, $2.7 million in fiscal
2016 and $6.5 million in fiscal 2015. The New Albany
action will affect 412 positions, and we expect to incur
approximately $83 million of net expenses relating to
this action of which approximately $40 million will
be cash. We recorded $14.6 million of restructuring
charges relating to this action in fiscal 2017, $17.1 mil-
lion in fiscal 2016 and $51.3 million in fiscal 2015. We
anticipate these actions will be completed by the end of
fiscal 2018.
As part of Century, in the second quarter of fiscal
2015, we approved a restructuring plan to consolidate
yogurt manufacturing capacity and exit our Methuen,
Massachusetts facility in our North America Retail and
Convenience Stores & Foodservice segments’ supply
chains. This action affected 170 positions. We incurred
$59.7 million of net expenses relating to this action of
which $13 million was cash. We recorded $15.6 million
of restructuring charges relating to this action in fiscal
2016 and $43.6 million in fiscal 2015. This action was
substantially completed in fiscal 2017.
As part of Century, in the second quarter of fiscal
2015, we approved a restructuring plan to eliminate
excess cereal and dry mix capacity and exit our Lodi,
California facility in our North America Retail segment
supply chain. This action affected 409 positions. We
incurred $95.3 million of net expenses related to this
action of which $22 million was cash. We recorded $1.5
million of restructuring charges relating to this action
in fiscal 2017, $30.6 million in fiscal 2016 and $63.2 mil-
lion in fiscal 2015. This action was substantially com-
pleted in fiscal 2016.
In addition to the actions taken at certain facilities
described above, we incurred restructuring charges
related to Century of $1.1 million in fiscal 2017, none
of which was cash, $1.1 million in fiscal 2016 and $17.2
million in fiscal 2015.
During the first quarter of fiscal 2015, we approved
a plan to combine certain Yoplait and General Mills
58 GENERAL MILLS
operational facilities within our North America Retail
and Europe & Australia segments to increase efficien-
cies and reduce costs. This action affected approxi-
mately 240 positions. We expect to incur $15 million of
net expenses relating to this action of which $14 million
will be cash. We recorded $13.9 million of restructuring
charges in fiscal 2015. We anticipate these actions will
be completed by the end of fiscal 2018.
We paid cash related to restructuring initiatives of
$107.8 million in fiscal 2017, $122.6 million in fiscal 2016
and $63.6 million in fiscal 2015.
In addition to restructuring charges, we expect to
incur approximately $130 million of additional proj-
ect-related costs, which will be recorded in cost of
sales, all of which will be cash. We recorded project-re-
lated costs in cost of sales of $43.9 million in fiscal
2017, $57.5 million in fiscal 2016 and $13.2 million in
fiscal 2015. We paid cash for project-related costs of
$46.9 million in fiscal 2017, $54.5 million in fiscal 2016
and $9.7 million in fiscal 2015.
Restructuring charges and project-related costs are
classified 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 classified
2017
Fiscal
2016
2015
$ 41.5
$ 78.4
$ 59.6
182.6
224.1
151.4
229.8
283.9
343.5
in cost of sales
$ 43.9
$ 57.5
$ 13.2
The roll forward of our restructuring and other exit
cost reserves, included in other current liabilities, is as
follows:
In Millions
Reserve balance as
of May 25, 2014
Fiscal 2015 charges,
including foreign
currency translation
Utilized in fiscal 2015
Reserve balance as
of May 31, 2015
Fiscal 2016 charges,
including foreign
currency translation
Utilized in fiscal 2016
Reserve balance as
of May 29, 2016
Fiscal 2017 charges,
including foreign
currency translation
Utilized in fiscal 2017
Reserve balance as
Other
Severance Termination Exit Costs
Contract
Total
$ 3.5
$ —
$ — $ 3.5
176.4
(61.3)
0.6
—
185.1
8.1
(6.5) (67.8)
118.6
0.6
1.6
120.8
64.3
(109.3)
1.6
(0.7)
4.3
70.2
(4.4) (114.4)
73.6
1.5
1.5
76.6
95.0
(86.8)
0.9
(1.7)
8.1
(7.1)
104.0
(95.6)
of May 28, 2017
$ 81.8
$0.7
$2.5 $ 85.0
The charges recognized in the roll forward of our
reserves for restructuring and other exit costs do not
include items charged directly to expense (e.g., asset
impairment charges, the gain or loss on the sale of
restructured assets, and the write-off of spare parts)
and other periodic exit costs recognized as incurred, as
those items are not reflected in our restructuring and
other exit cost reserves on our Consolidated Balance
Sheets.
NOTE 5. INVESTMENTS IN 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). This joint venture manufactures
and markets Häagen-Dazs ice cream products and fro-
zen novelties.
Results from our CPW and HDJ joint ventures are
reported for the 12 months ended March 31.
Joint venture related balance sheet activity follows:
In Millions
Cumulative investments
Goodwill and other intangibles
Aggregate advances included in
May 28,
2017
$505.3
472.0
May 29,
2016
$518.9
469.2
cumulative investments
284.7
300.3
Joint venture earnings and cash flow activity follows:
Fiscal Year
In Millions
2017
2016
2015
Sales to joint ventures
$ 7.0
$ 10.5
$ 11.6
Net advances (repayments)
(3.3)
(63.9)
Dividends received
75.6
75.1
102.4
72.6
Summary combined financial 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 after income taxes
In Millions
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Fiscal Year
2017
2016
2015
$1,648.4 $1,674.8 $1,894.5
435.1
369.4
370.2
2,083.5 2,044.2
2,264.7
865.9
243.3
190.3
867.6
234.8
186.7
925.4
220.9
170.7
May 28,
2017
May 29,
2016
$ 849.7
$ 814.1
858.9
959.9
1,469.6
1,457.3
55.2
81.7
ANNUAL REPORT 59
NOTE 6. GOODWILL AND OTHER
INTANGIBLE ASSETS
The components of goodwill and other intangible assets
are as follows:
May 28,
2017
May 29,
2016
$ 8,747.2 $ 8,741.2
In Millions
Goodwill
Other intangible assets:
Intangible assets not subject
to amortization:
Brands and other
indefinite-lived intangibles
4,161.1
4,147.5
Intangible assets subject to amortization:
Franchise agreements, customer
relationships, and other
finite-lived intangibles
Less accumulated amortization
Intangible assets subject to amortization
Other intangible assets
Total
524.8
(155.5)
369.3
4,530.4
536.9
(145.8)
391.1
4,538.6
$13,277.6 $13,279.8
Based on the carrying value of finite-lived intangi-
ble assets as of May 28, 2017, amortization expense
for each of the next five fiscal years is estimated to be
approximately $28 million.
During the third quarter of fiscal 2017, we announced
a new global organization structure to streamline our
leadership, enhance global scale, and drive improved
operational agility to maximize our growth capabili-
ties. As a result of this global reorganization, we reas-
sessed our operating segments and our reporting units.
Under our new organization structure, our chief oper-
ating decision maker assesses performance and makes
decisions about resources to be allocated to our seg-
ments at the North America Retail, Convenience Stores
& Foodservice, Europe & Australia, and Asia & Latin
America operating segment level. See Note 16 for addi-
tional information on our operating segments. Our
reporting units were unchanged with the exception
of combining our former U.S. Meals and U.S. Baking
reporting units into a single reporting unit.
60 GENERAL MILLS
The changes in the carrying amount of goodwill for fiscal 2015, 2016, and 2017 are as follows:
In Millions
Balance as of May 25, 2014
Acquisition
Other activity, primarily foreign
currency translation
Balance as of May 31, 2015
Acquisitions
Divestitures
Other activity, primarily foreign
currency translation
Balance as of May 29, 2016
Divestiture
Other activity, primarily foreign
currency translation
Balance as of May 28, 2017
North
America
Retail
Convenience
Stores &
Foodservice
Europe &
Australia
Asia & Latin
America
$ 5,975.1
589.8
$ 921.1
—
$ 866.1
—
$ 390.0
—
(18.7)
6,546.2
54.1
(184.5)
(5.5)
6,410.3
—
—
921.1
—
—
—
921.1
(2.3)
(147.0)
719.1
—
—
(2.6)
716.5
—
(103.0)
287.0
29.4
(1.9)
(27.4)
287.1
—
Joint
Ventures
$ 498.2
—
(96.7)
401.5
—
—
4.7
406.2
—
Total
$ 8,650.5
589.8
(365.4)
8,874.9
83.5
(186.4)
(30.8)
8,741.2
(2.3)
(3.8)
$ 6,406.5
—
$ 918.8
(15.7)
$ 700.8
25.3
$ 312.4
2.5
$ 408.7
8.3
$ 8,747.2
The changes in the carrying amount of other intangi-
ble assets for fiscal 2015, 2016, and 2017 are as follows:
In Millions
Balance as of May 25, 2014
Acquisition
Impairment charge
Other activity, primarily amortization
and foreign currency translation
Balance as of May 31, 2015
Acquisitions
Divestiture
Other activity, primarily amortization
and foreign currency translation
Balance as of May 29, 2016
Other activity, primarily amortization
and foreign currency translation
Balance as of May 28, 2017
Total
$5,014.3
268.4
(260.0)
(345.7)
4,677.0
30.1
(119.6)
(48.9)
4,538.6
(8.2)
$4,530.4
Our annual goodwill intangible asset test was per-
formed on the first day of the second quarter of fiscal
2017. As of the assessment date, we determined there
was no impairment of our goodwill intangible assets
as their related fair values were substantially in excess
of the carrying values, except for the Latin America
reporting unit. We did not consider the new organiza-
tion structure to be a triggering event requiring a sub-
sequent goodwill impairment test as our reporting units
remain unchanged, with the exception of combining the
former U.S. Meals and U.S. Baking reporting units.
Our indefinite-lived intangible asset test was per-
formed on the first day of the second quarter of fiscal
2017. As of the assessment date, there was no impair-
ment of any of our indefinite-lived intangible assets as
their related fair values were substantially in excess of
the carrying values, except for the Immaculate Baking
brand intangible asset.
The excess fair value above the carrying value of
the Latin America reporting unit and the Immaculate
Baking brand intangible asset is as follows:
In Millions
Latin America
Immaculate Baking
Excess Fair
Value Above
Carrying
Value
15%
17%
Carrying
Value
$523.0
$12.0
While having significant coverage as of our fiscal
2017 assessment date, the Progresso, Green Giant, and
Food Should Taste Good brand intangible assets and
U.S. Yogurt reporting unit had risk of decreasing cover-
age. We will continue to monitor these businesses for
potential impairment.
In fiscal 2015, we made a strategic decision to redirect
certain resources supporting our Green Giant business
in our North America Retail segment to other busi-
nesses within the segment. Therefore, future sales and
profitability projections in our long-range plan for this
business declined. As a result of this triggering event,
we performed an interim impairment assessment of
ANNUAL REPORT 61
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. Significant 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 fiscal
2015 related to this asset.
NOTE 7. FINANCIAL INSTRUMENTS, RISK
MANAGEMENT ACTIVITIES, AND FAIR VALUES
Financial Instruments
The carrying values of cash and cash equivalents,
receivables, accounts payable, other current liabilities,
and notes payable approximate fair value. Marketable
securities are carried at fair value. As of May 28, 2017
and May 29, 2016, a comparison of cost and market
values 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
2017 2016
2017 2016 2017 2016 2017
2016
Available for sale:
Debt securities
$265.4 $165.7 $265.5 $165.8
$0.1 $0.1 $ —
$ —
Equity securities
1.8
1.8
9.9
8.4
8.1
6.6 —
—
Total
$267.2 $167.5 $275.4 $174.2
$8.2 $6.7 $ —
$ —
There were no realized gains or losses from sales of
available-for-sale marketable securities. Gains and losses
are determined by specific identification. Classification of
marketable securities as current or noncurrent is depen-
dent upon our intended holding period and the securi-
ty’s maturity date. The aggregate unrealized gains and
losses on available-for-sale securities, net of tax effects,
are classified in AOCI within stockholders’ equity.
Scheduled maturities of our marketable securities are
as follows:
In Millions
Under 1 year (current)
Equity securities
Total
Available for Sale
Cost
$ 265.4
1.8
$ 267.2
Fair
Value
$ 265.5
9.9
$ 275.4
As of May 28, 2017, we did not any have cash and
cash equivalents pledged as collateral for derivative
contracts. As of May 28, 2017, $19.6 million of certain
accounts receivable were pledged as collateral against a
foreign uncommitted line of credit.
The fair value and carrying amounts of long-term
debt, including the current portion, were $8,547.0 mil-
lion and $8,247.6 million, respectively, as of May 28,
2017. The fair value of long-term debt was estimated
using market quotations and discounted cash flows
based on our current incremental borrowing rates for
similar types of instruments. Long-term debt is a Level
2 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 offset our exposures
based on current and projected market conditions and
generally seek to acquire the inputs at as close to our
planned cost as possible.
We use derivatives to manage our exposure to changes
in commodity prices. We do not perform the assess-
ments required to achieve hedge accounting for com-
modity derivative positions. Accordingly, the changes in
the values of these derivatives are recorded currently in
cost of sales in our Consolidated Statements of Earnings.
Although we do not meet the criteria for cash flow
hedge accounting, we believe that these instruments
are effective in achieving our objective of providing cer-
tainty in the future price of commodities purchased for
62 GENERAL MILLS
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 affects earnings.
At that time we reclassify the gain or loss from unal-
located corporate items to segment operating profit,
allowing our operating segments to realize the eco-
nomic effects of the derivative without experiencing
any resulting mark-to-market volatility, which remains
in unallocated corporate items.
Unallocated corporate items for fiscal 2017, 2016 and
2015 included:
In Millions
2017
2016
2015
Net loss on mark-to-market
valuation of commodity positions $ (22.0)
$ (69.1)
$ (163.7)
Fiscal Year
Net loss on commodity
positions reclassified from
unallocated corporate items
to segment operating profit
32.0
127.9
84.4
Net mark-to-market revaluation
of certain grain inventories
3.9
4.0
(10.4)
Net mark-to-market valuation
of certain commodity positions
recognized in unallocated
corporate items
$ 13.9
$ 62.8
$ (89.7)
As of May 28, 2017, the net notional value of com-
modity derivatives was $410.3 million, of which $289.6
million related to agricultural inputs and $120.7 million
related to energy inputs. These contracts relate to inputs
that generally will be utilized within the next 12 months.
Interest Rate Risk
We are exposed to interest rate volatility with regard
to future issuances of fixed-rate debt, and existing and
future issuances of floating-rate debt. Primary exposures
include U.S. Treasury rates, LIBOR, Euribor, and commer-
cial 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 volatility of our financing costs,
and to achieve a desired proportion of fixed rate versus
floating-rate debt, based on current and projected mar-
ket conditions. Generally under these swaps, we agree
with a counterparty to exchange the difference between
fixed-rate and floating-rate interest amounts based on an
agreed upon notional principal amount.
Floating Interest Rate Exposures — Floating-to-fixed
interest rate swaps are accounted for as cash flow
hedges, as are all hedges of forecasted issuances of debt.
Effectiveness is assessed based on either the perfectly
effective hypothetical derivative method or changes in
the present value of interest payments on the under-
lying debt. Effective gains and losses deferred to AOCI
are reclassified into earnings over the life of the asso-
ciated debt. Ineffective gains and losses are recorded as
net interest. The amount of hedge ineffectiveness was
less than $1 million in each of fiscal 2017, 2016, and 2015.
Fixed Interest Rate Exposures — Fixed-to-floating
interest rate swaps are accounted for as fair value
hedges with effectiveness assessed based on changes
in the fair value of the underlying debt and derivatives,
using incremental borrowing rates currently available
on loans with similar terms and maturities. Ineffective
gains and losses on these derivatives and the under-
lying hedged items are recorded as net interest. The
amount of hedge ineffectiveness was a $4.3 million
gain in fiscal 2017, less than $1 million in fiscal 2016,
and a $1.6 million gain in fiscal 2015.
In advance of planned debt financing, in the first
quarter of fiscal 2017 and the third quarter of fiscal
2016, we entered into $100 million and $400 million,
respectively, of treasury locks due February 15, 2017
with an average fixed rate of 2.0 percent. All of these
treasury locks were cash settled for $17.2 million during
the third quarter of fiscal 2017, concurrent with the
issuance of our $750.0 million 10-year fixed-rate notes.
In fiscal 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
fixed-rate notes due October 21, 2019, to floating rates.
As of May 28, 2017, the pre-tax amount of cash-set-
tled interest rate hedge gain or loss remaining in AOCI,
which will be reclassified to earnings over the remain-
ing term of the related underlying debt, follows:
In Millions
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
3.2% notes due February 10, 2027
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)
$ 0.8
(45.0)
(1.4)
12.0
16.6
(3.2)
(12.9)
10.1
$ (23.0)
ANNUAL REPORT 63
The following table summarizes the notional amounts
and weighted-average interest rates of our interest rate
derivatives. Average floating rates are based on rates as
of the end of the reporting period.
In Millions
May 28,
2017
May 29,
2016
Pay-floating swaps - notional amount
$ 1,000.0 $ 1,000.0
Average receive rate
Average pay rate
1.8%
1.6%
1.8%
1.1%
The swap contracts mature as follows:
In Millions
2018
2020
Total
Pay Floating
$ 500.0
$ 500.0
$ 1,000.0
The following tables reconcile the net fair values of
assets and liabilities subject to offsetting arrangements
that are recorded in our Consolidated Balance Sheets
to the net fair values that could be reported in our
Consolidated Balance Sheets:
May 28, 2017
Assets
Gross Amounts Not
Offset in the
Balance Sheet (e)
Liabilities
Gross Amounts Not
Offset in the
Balance Sheet (e)
Gross
Gross
Assets
Gross
Gross
Liabilities
Amounts of Offset in
Recognized the Balance Amounts of Financial
Net
In Millions
Assets
Sheet (a)
Assets (b)
Amounts of Offset 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
Commodity
contracts
Interest rate
contracts
Foreign
exchange
contracts
Equity
contracts
Total
$ 11.5
$ —
$ 11.5
$ (7.2)
$ —
$ 4.3
$(8.2)
$ —
$(8.2)
$ 7.2
$ —
$(1.0)
0.9
—
0.9
(0.5)
—
0.4
(0.5)
—
(0.5)
0.5
—
—
16.5
—
16.5
(7.2)
—
9.3
(10.2)
—
(10.2)
7.2
—
(3.0)
1.9
$30.8
—
$ —
1.9
$30.8
—
$(14.9)
—
$ —
1.9
$15.9
—
$(18.9)
—
$ —
—
$(18.9)
—
$14.9
—
$ —
—
$(4.0)
(a) Includes related collateral offset 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 29, 2016
Assets
Gross Amounts Not
Offset in the
Balance Sheet (e)
Liabilities
Gross Amounts Not
Offset in the
Balance Sheet (e)
Gross
Gross
Assets
Gross
Gross
Liabilities
Amounts of Offset in
Recognized the Balance Amounts of Financial
Net
In Millions
Assets
Sheet (a)
Assets (b)
Amounts of Offset 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
Commodity
contracts
Interest rate
contracts
Foreign
exchange
contracts
Equity
contracts
Total
$ 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)
25.4
—
25.4
(8.7)
—
16.7
(13.7)
—
(13.7)
8.7
—
(5.0)
2.4
$40.7
—
$ —
2.4
$40.7
—
$(12.6)
—
$ —
2.4
$28.1
—
$(38.9)
—
$ —
—
$(38.9)
—
$12.6
—
—
$7.5 $(18.8)
(a) Includes related collateral offset 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.
64 GENERAL MILLS
Foreign Exchange Risk
Foreign currency fluctuations affect our net invest-
ments in foreign subsidiaries and foreign currency cash
flows 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
flow 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. The gains or losses on these deriv-
atives offset 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 28, 2017, the net notional value of foreign
exchange derivatives was $850.2 million. The amount
of hedge ineffectiveness was less than $1 million in
each of fiscal 2017, 2016, and 2015.
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. As of May 28, 2017, we
hedged a portion of these net investments with €2,200
million of euro denominated bonds. As of May 28,
2017, we had deferred net foreign currency transac-
tion losses of $39.1 million in AOCI associated with net
investment hedging activity.
Venezuela is a highly inflationary 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 fiscal 2015,
we recorded an $8 million foreign exchange loss. In the
fourth quarter of fiscal 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 28, 2017,
the net notional amount of our equity swaps was $138.9
million. These swap contracts mature in fiscal 2018.
ANNUAL REPORT 65
Fair Value Measurements and Financial Statement Presentation
The fair values of our assets, liabilities, and derivative positions recorded at fair value and their respective levels in
the fair value hierarchy as of May 28, 2017 and May 29, 2016, were as follows:
In Millions
Level 1 Level 2 Level 3
Total Level 1 Level 2 Level 3 Total
May 28, 2017
May 28, 2017
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
$ — $ 0.7 $ — $ 0.7 $ — $ (0.4) $ — $ (0.4)
—
16.3
— 16.3
—
(3.6) —
(3.6)
—
17.0
— 17.0
—
(4.0) —
(4.0)
—
0.2
— 0.2
—
(6.6) —
(6.6)
4.1
7.4
— 11.5
(3.4)
(4.8) —
(8.2)
—
2.7
— 2.7
—
(5.6) —
(5.6)
4.1
10.3
— 14.4
(3.4) (17.0) —
(20.4)
9.9
265.5
— 275.4
— —
—
—
—
43.7
— 43.7
— —
—
—
9.9
309.2
— 319.1
— —
—
—
Total assets, liabilities, and derivative positions recorded at fair value
$ 14.0 $ 336.5 $ — $ 350.5 $ (3.4) $ (21.0) $ — $ (24.4)
(a) These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as
appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.
(b) Based on LIBOR and swap rates.
(c) These contracts are recorded as prepaid expenses and other current assets, other assets, other current liabilities, or other 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 $47.4 million in non-cash impairment charges in fiscal 2017 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. These assets had a carrying value of $91.1 million and were associated with the
restructuring actions described in Note 4.
66 GENERAL MILLS
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
19.9
—
2.6
—
2.6
13.2
1.7
1.8
16.7
—
—
—
—
—
—
12.2
19.9
—
—
(12.2) —
(12.2)
(15.2) —
(15.2)
13.2
—
(1.5) —
(1.5)
4.3
1.8
(0.6)
(21.6) —
(22.2)
—
(5.5) —
(5.5)
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) These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as
appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.
(b) Based on LIBOR and swap rates.
(c) These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss
position.
(d) Based on observable market transactions of spot currency rates and forward currency prices.
(e) Based on prices of futures exchanges and recently reported transactions in the marketplace.
(f) Based on prices of common stock and bond matrix pricing.
(g) We recorded $11.4 million in non-cash impairment charges in fiscal 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. These assets had a carrying value of $28.2 million and were associated with the
restructuring actions described in Note 4.
We did not significantly change our valuation techniques from prior periods.
ANNUAL REPORT 67
Information related to our cash flow hedges, fair value hedges, and other derivatives not designated as hedging
instruments for the fiscal years ended May 28, 2017 and May 29, 2016, 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
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
comprehensive income (OCI) (a)
$ 24.0 $ (2.6) $46.3 $21.2
$ —
$ —
$ —
$ — $ 70.3 $18.6
Amount of net gain (loss) reclassified from
AOCI into earnings (a) (b)
Amount of net gain (loss) recognized
(5.0)
(10.6) 33.8
22.1
—
—
—
—
28.8
11.5
in earnings (c)
0.1
(0.1)
0.6
(0.7)
—
—
—
—
0.7
(0.8)
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) Effective portion.
4.3
0.1
—
—
—
—
—
—
4.3
0.1
—
—
—
(0.2)
—
—
—
—
—
(0.2)
—
—
7.6
1.1 17.8
(4.5) (16.2)
(56.1)
9.2
(59.5)
(b) Gain (loss) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign
exchange contracts.
(c) Gain (loss) recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts
and interest, net for interest rate contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.
(d) Gain (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for
equity contracts and foreign exchange contracts.
68 GENERAL MILLS
Amounts Recorded in Accumulated Other
Comprehensive Loss
As of May 28, 2017, the after-tax amounts of unrealized
gains and losses in AOCI related to hedge derivatives
follows:
In Millions
After-Tax Gain/(Loss)
Unrealized losses from interest rate cash flow hedges
$ (12.9)
Unrealized gains from foreign currency cash flow hedges 14.4
After-tax gain in AOCI related to hedge derivatives
$ 1.5
The net amount of pre-tax gains and losses in AOCI
as of May 28, 2017 that we expect to be reclassified
into net earnings within the next 12 months is $11.7
million of gain.
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. The aggregate
fair value of all derivative instruments with cred-
it-risk-related contingent features that were in a lia-
bility position on May 28, 2017, was $1.0 million. We
have posted no collateral under these contracts. If the
credit-risk-related contingent features underlying these
agreements had been triggered on May 28, 2017, we
would have been required to post $1.0 million of collat-
eral to counterparties.
Concentrations of Credit and Counterparty
Credit Risk
During fiscal 2017, 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 diversified group of highly rated counterparties.
We continually monitor our positions and the credit
ratings of the counterparties involved and, by policy,
limit the amount of credit exposure to any one party.
These transactions may expose us to potential 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.
The 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 $5.8
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
financial instruments subject to threshold levels of
exposure and counterparty credit risk. Collateral assets
are either cash or U.S. Treasury instruments and are
held in a trust account that we may access if the coun-
terparty defaults.
We offer certain suppliers access to third party ser-
vices that allows them to view our scheduled payments
online. The third party services also allow suppliers to
finance advances on our scheduled payments at the
sole discretion of the supplier and the third party. We
have no economic interest in these financing arrange-
ments and no direct relationship with the suppliers, the
third parties, or any financial institutions concerning
these services. All of our accounts payable remain as
obligations to our suppliers as stated in our supplier
agreements. As of May 28, 2017, $639.0 million of our
accounts payable is payable to suppliers who utilize
these third party services.
Percent of total Consolidated
North Convenience
America
Asia &
Latin
Stores & Europe &
Retail Foodservice Australia America
Wal-mart: (a)
Net sales
Accounts receivable
Five largest customers:
20%
29%
24%
7%
8%
2%
1%
4%
4%
Net sales
52%
48%
31%
10%
(a) Includes Wal-Mart Stores, Inc. and its affiliates.
ANNUAL REPORT 69
NOTE 8. DEBT
Notes Payable The components of notes payable and
their respective weighted-average interest rates at the
end of the periods were as follows:
May 28, 2017
May 29, 2016
Weighted-
average
Interest
Rate
Notes
Payable
Weighted-
average
Interest
Rate
Notes
Payable
In Millions
U.S. commercial paper $ 954.7
1.1%
$ —
Financial institutions
279.4
7.0
269.8
Total
$ 1,234.1
2.4%
$ 269.8
—%
8.6
8.6%
To ensure availability of funds, we maintain bank
credit lines sufficient to cover our outstanding notes
payable. Commercial paper is a continuing source of
short-term financing. 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.
The following table details the fee-paid committed
and uncommitted credit lines we had available as of
May 28, 2017:
In Billions
Credit facility expiring:
May 2022
June 2019
Total committed credit facilities
Uncommitted credit facilities
Total committed and uncommitted
Facility
Amount
Borrowed
Amount
$ 2.7
0.2
2.9
0.5
$ —
0.1
0.1
0.1
credit facilities
$ 3.4
$ 0.2
In fiscal 2016, we entered into a $2.7 billion fee-paid
committed credit facility that was originally scheduled
to expire in May 2021. In fiscal 2017, we amended the
credit facility’s expiration date by one year to May
2022.
The credit facilities contain covenants, including a
requirement to maintain a fixed charge coverage ratio
of at least 2.5 times. We were in compliance with all
credit facility covenants as of May 28, 2017.
Long-Term Debt In March 2017, we issued €300.0 mil-
lion principal amount of floating-rate notes due March
20, 2019. Interest on the notes is payable quarterly in
arrears. The notes are not generally redeemable prior to
maturity. These notes are senior unsecured obligations
that include a change of control repurchase provision.
The net proceeds were used to repay a portion of our
outstanding commercial paper.
In February 2017, we repaid $1.0 billion of 5.7 percent
fixed-rate notes.
In January 2017, we issued $750.0 million principal
amount of 3.2 percent fixed-rate notes due February
10, 2027. Interest on the notes is payable semi-annu-
ally in arrears. We may redeem the notes in whole or
in part at any time at the applicable redemption price.
The notes are senior unsecured obligations that include
a change of control repurchase provision. The net pro-
ceeds were used to repay a portion of our maturing
long-term debt.
In January 2016, we issued €500.0 million principal
amount of floating-rate notes due January 15, 2020.
Interest on the notes are payable quarterly in arrears.
The notes are not generally redeemable prior to matu-
rity. These notes are senior unsecured obligations
that include a change of control repurchase provision.
The 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 fixed-rate notes and $750 million of floating-rate
notes.
In April 2015, we issued €500.0 million principal
amount of 1.0 percent fixed-rate notes due April 27,
2023 and €400.0 million principal amount of 1.5 per-
cent fixed-rate notes due April 27, 2027. Interest on
the notes is payable annually in arrears. The notes may
be redeemed in whole or in part at our option at any
time at the applicable redemption price. These notes
are senior unsecured obligations that include a change
of control repurchase provision. The net proceeds were
used for general corporate purposes and to reduce our
commercial paper borrowings.
In March 2015, we repaid $750.0 million of 5.2 per-
cent fixed-rate notes.
70 GENERAL MILLS
A summary of our long-term debt is as follows:
In Millions
May 28, 2017 May 29, 2016
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
3.2% notes due February 10, 2027
750.0
1,000.0
1,000.0
—
Euro-denominated 2.1% notes
due November 16, 2020
559.2
555.8
Euro-denominated 1.0% notes
due April 27, 2023
559.2
555.8
Euro-denominated floating-rate 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
Euro-denominated 1.5% notes
559.2
500.0
500.0
500.0
500.0
500.0
555.8
500.0
500.0
500.0
500.0
500.0
due April 27, 2027
447.3
444.6
Euro-denominated floating-rate notes
due March 20, 2019
335.5
—
Euro-denominated 2.2% notes
due June 24, 2021
222.8
221.0
Medium-term notes, 0.02% to 6.59%,
due fiscal 2018 or later
204.2
204.2
Other, including debt issuance
costs and capital leases
(39.8)
(26.1)
8,247.6
8,161.1
Less amount due within one year
(604.7)
(1,103.4)
Total long-term debt
$7,642.9
$7,057.7
Principal payments due on long-term debt in the
next five years based on stated contractual maturities,
our intent to redeem, or put rights of certain note hold-
ers are $604.7 million in fiscal 2018, $1,585.9 million
in fiscal 2019, $1,062.5 million in fiscal 2020, $559.4
million in fiscal 2021, and $1,001.1 million in fiscal 2022.
Certain of our long-term debt agreements contain
restrictive covenants. As of May 28, 2017, we were in
compliance with all of these covenants.
As of May 28, 2017, the $23.0 million pre-tax loss
recorded in AOCI associated with our previously des-
ignated interest rate swaps will be reclassified to net
interest over the remaining lives of the hedged trans-
actions. The amount expected to be reclassified from
AOCI to net interest in fiscal 2018 is a $6.7 million pre-
tax loss.
NOTE 9. REDEEMABLE AND
NONCONTROLLING INTERESTS
Our principal redeemable and noncontrolling interests
relate to our Yoplait SAS, Yoplait Marques SNC, Liberté
Marques Sàrl, and General Mills Cereals, LLC (GMC)
subsidiaries. In addition, we have four foreign subsid-
iaries that have noncontrolling interests totaling $8.5
million as of May 28, 2017.
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 financial metrics
set forth in its shareholders agreement. As of May 28,
2017, the redemption value of the euro-denominated
redeemable interest was $910.9 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 agreement
with Yoplait SAS for the rights to Yoplait and related
trademarks. Liberté Marques Sàrl earns a royalty stream
through licensing agreements with certain Yoplait group
companies for the rights to Liberté and related trade-
marks. These entities pay dividends annually based on
their available cash as of their fiscal year end.
We paid dividends of $48.6 million in fiscal 2017, and
$74.5 million in fiscal 2016, to Sodiaal under the terms
of the Yoplait SAS and Yoplait Marques SNC share-
holder 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 $186.4 million for fiscal
2017 and $321.0 million for fiscal 2016.
ANNUAL REPORT 71
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. The authorization
has no specified termination date.
Share repurchases were as follows:
In Millions
2017
2016
2015
Shares of common stock
Aggregate purchase price
25.4
22.3
10.7
$ 1,651.5 $ 606.7 $ 1,161.9
Fiscal Year
The holder of the GMC Class A Interests receives
quarterly preferred distributions from available net
income based on the application of a floating preferred
return rate to the holder’s capital account balance
established in the most recent mark-to-market valu-
ation (currently $251.5 million). On June 1, 2015, the
floating preferred return rate on GMC’s Class A inter-
ests was reset to the sum of three-month LIBOR plus
125 basis points. The preferred return rate is adjusted
every three years through a negotiated agreement with
the Class A Interest holder or through a remarketing
auction.
For financial reporting purposes, the assets, liabilities,
results of operations, and cash flows of our non-wholly
owned subsidiaries are included in our Consolidated
Financial Statements. The third-party investor’s share
of the net earnings of these subsidiaries is reflected in
net earnings attributable to redeemable and noncon-
trolling interests in our Consolidated Statements of
Earnings.
Our noncontrolling interests contain restrictive cove-
nants. As of May 28, 2017, we were in compliance with
all of these covenants.
The following table provides details of total comprehensive income (loss):
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive income (loss):
Foreign currency translation
Net actuarial income
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Hedge derivatives (a)
Amortization of losses and
prior service costs (b)
Other comprehensive income (loss)
Total comprehensive income
Pretax
General Mills
Tax
Net
Noncontrolling
Interests
Net
Redeemable
Interests
Net
Fiscal 2017
$ 1,657.5
$ 11.3
$ 32.3
$ 19.5
307.3
$ —
(109.4)
1.3
65.9
(0.5)
(16.1)
19.5
197.9
0.8
49.8
(25.2)
2.4
(22.8)
197.2
566.0
(74.7)
(198.3)
122.5
367.7
$ 2,025.2
2.5
—
—
—
—
—
2.5
$ 13.8
(15.7)
—
—
3.5
(2.9)
—
(15.1)
$ 17.2
(a) Gain reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange
contracts.
(b) Loss reclassified from AOCI into earnings is reported in SG&A expenses.
72 GENERAL MILLS
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
Reclassification 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 reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange
contracts.
(b) Loss reclassified from AOCI into earnings is reported in SG&A expense.
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive income (loss):
Foreign currency translation
Net actuarial income
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Hedge derivatives (a)
Amortization of losses and
prior service costs (b)
Other comprehensive 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 reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange
contracts.
(b) Loss reclassified from AOCI into earnings is reported in SG&A expense.
ANNUAL REPORT 73
In fiscal 2017, 2016, and 2015, 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 effects, were as follows:
Fiscal Year
2017
2016
2015
2017
2016
Estimated fair values of
stock options granted
$8.80
$7.24
$7.22
$
(624.7) $
(644.2)
Assumptions:
4.6
1.5
3.8
(25.5)
Risk-free interest rate
1.7%
2.4%
2.6%
Expected term
8.5 years
8.5 years
8.5 years
Expected volatility
Dividend yield
17.8%
2.9%
17.6%
3.2%
17.5%
3.1%
In Millions
Foreign currency
translation adjustments
Unrealized gain (loss) from:
Securities
Hedge derivatives
Pension, other postretirement,
and postemployment benefits:
Net actuarial loss
Prior service credits
(1,645.4)
(1,958.2)
19.5
11.9
Accumulated other comprehensive loss $ (2,244.5) $ (2,612.2)
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 28, 2017, a total of 20.3 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 2016
Compensation Plan for Non-Employee Directors. The
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 and the 2011 compen-
sation plan for non-employee directors, under which no
further awards may be granted. The stock plans pro-
vide for potential accelerated vesting of awards upon
retirement, 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 insufficient 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. The weighted-aver-
age expected term for all employee groups is presented
in the table above. The 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 effect at
the time of grant.
Any corporate income tax benefit realized upon exer-
cise or vesting of an award in excess of that previously
recognized in earnings (referred to as a windfall tax
benefit) is presented in our Consolidated Statements of
Cash Flows as a financing cash flow.
Realized windfall tax benefits are credited to addi-
tional paid-in capital within our Consolidated Balance
Sheets. Realized shortfall tax benefits (amounts which
are less than that previously recognized in earnings)
74 GENERAL MILLS
are first offset against the cumulative balance of wind-
fall tax benefits, if any, and then charged directly to
income tax expense, potentially resulting in volatility
in our consolidated effective income tax rate. We calcu-
lated a cumulative memo balance of windfall tax ben-
efits for the purpose of accounting for future shortfall
tax benefits.
Options may be priced at 100 percent or more of the
fair market value on the date of grant, and generally
vest four years after the date of grant. Options gen-
erally expire within 10 years and one month after the
date of grant.
Information on stock option activity follows:
Weighted-
Average
Exercise
Weighted-
Average
Exercise
Exercisable Price Per Outstanding Price Per
Share
(Thousands)
(Thousands)
Options
Options
Share
Balance as of
May 25, 2014
29,452.8 $28.37
44,169.0
$32.10
Granted
Exercised
Forfeited or expired
Balance as of
2,253.1
(7,297.2)
(47.7)
53.70
26.68
43.73
May 31, 2015
26,991.5 $30.44
39,077.2
$34.35
Granted
Exercised
Forfeited or expired
Balance as of
1,930.2
(8,471.0)
(134.8)
55.72
28.49
48.16
May 29, 2016
22,385.1 $32.38
32,401.6
$37.09
Granted
Exercised
Forfeited or expired
Balance as of
2,446.0
(4,904.9)
(108.3)
66.52
30.76
57.52
May 28, 2017
20,899.2 $33.83
29,834.4
$40.47
Stock-based compensation expense related to stock
option awards was $18.0 million in fiscal 2017, $14.8
million in fiscal 2016, and $18.1 million in fiscal 2015.
Compensation expense related to stock-based pay-
ments recognized in our Consolidated Statements of
Earnings includes amounts recognized in restructuring,
impairment, and other exit costs for fiscal 2017, 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
2017
2016
2015
Fiscal Year
Net cash proceeds
Intrinsic value of
$112.6
$171.9
$163.7
options exercised
$176.5
$268.4
$201.9
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 after 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 flow. Performance share units
are settled in common stock and are generally subject
to a three year performance and vesting period. The
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. These awards accumulate
dividends from the date of grant, but participants only
receive payment if the awards vest.
ANNUAL REPORT 75
Information on restricted stock unit and performance share units activity follows:
Non-vested as of May 29, 2016
Granted
Vested
Forfeited, expired, or reclassified
Non-vested as of May 28, 2017
Number of units granted (thousands)
Weighted average price per unit
The total grant-date fair value of restricted stock unit
awards that vested was $78.1 million in fiscal 2017 and
$101.8 million in fiscal 2016.
As of May 28, 2017, unrecognized compensation
expense related to non-vested stock options, restricted
stock units, and performance share units was $98.1
million. This expense will be recognized over 18 months,
on average.
Stock-based compensation expense related to
restricted stock units and performance share units
was $77.9 million for fiscal 2017, $76.8 million for fiscal
2016, and $96.6 million for fiscal 2015. 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 fiscal 2017, 2016 and 2015.
Equity Classified
Liability Classified
Share-
Settled
Units
(Thousands)
Weighted-
Average
Grant-Date
Fair Value
Share-
Settled
Units
(Thousands)
Weighted-
Average
Grant-Date
Fair Value
5,100.4
1,418.7
(1,710.3)
(317.6)
$48.60
67.02
42.50
57.96
4,491.2
$56.08
2017
1,462.3
$67.01
211.4
43.6
(119.8)
(11.9)
123.3
Fiscal Year
2016
1,351.5
$56.00
$48.37
66.75
41.21
57.76
$56.93
2015
1,708.2
$53.45
NOTE 12. EARNINGS PER SHARE
Basic and diluted EPS were calculated using the
following:
In Millions, Except per Share Data
2017
2016
2015
Net earnings attributable to
General Mills
$1,657.5 $1,697.4 $1,221.3
Fiscal Year
Average number of common
shares - basic EPS
Incremental share effect from: (a)
Stock options
Restricted stock units,
performance share units,
587.1
598.9
603.3
8.1
9.8
11.3
and other
2.8
3.2
4.2
Average number of common
shares - diluted EPS
598.0
611.9
618.8
Earnings per share - basic
$ 2.82 $ 2.83 $ 2.02
Earnings per share - diluted
$ 2.77 $ 2.77 $ 1.97
(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
2017
2016
2015
Fiscal Year
Anti-dilutive stock options,
restricted stock units,
and performance share units
2.3
1.1
2.1
76 GENERAL MILLS
NOTE 13. RETIREMENT BENEFITS AND
POSTEMPLOYMENT BENEFITS
Health Care Cost Trend Rates Assumed health care
cost trends are as follows:
Defined Benefit Pension Plans We have defined benefit
pension plans covering many employees in the United
States, Canada, France, and the United Kingdom.
Benefits for salaried employees are based on length of
service and final average compensation. Benefits for
hourly employees include various monthly amounts for
each year of credited service. Our funding policy is con-
sistent with the requirements of applicable laws. We
made no voluntary contributions to our principal U.S.
plans in fiscal 2017, 2016, and 2015. We do not expect
to be required to make any contributions in fiscal 2018.
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 five years of a change in
control. All salaried employees hired on or after June 1,
2013 are eligible for a retirement program that does not
include a defined benefit pension plan.
In May 2017, we announced changes to the United
States pension plans. The Company will freeze the pay
and service amounts used to calculate pension bene-
fits for active employees who participate in the United
States pension plans as of December 31, 2027. Beginning
January 1, 2028, active employees in the United States
will not accrue additional benefits for future service and
eligible compensation received under these plans. These
changes resulted in a $130.9 million decline in the pro-
jected benefit obligation as of May 28, 2017, due to the
decrease in expected future pensionable compensation.
Other Postretirement Benefit Plans We also sponsor
plans that provide health care benefits to many of our
retirees in the United States, Canada, and Brazil. The
United States salaried health care benefit 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 voluntary contributions to these plans of $20.0
million in in fiscal 2017 and $24.0 million in fiscal 2016.
Fiscal Year
2017
2016
Health care cost trend rate
for next year
7.0% and 7.3%
7.3% and 7.5%
Rate to which the cost
trend rate is assumed to
decline (ultimate rate)
5.0%
5.0%
Year that the rate reaches the
ultimate trend rate
2024
2024
We review our health care cost trend rates annu-
ally. Our review is based on data we collect about our
health care claims experience and information provided
by our actuaries. This information includes recent plan
experience, plan design, overall industry experience and
projections, and assumptions used by other similar
organizations. Our initial health care cost trend rate is
adjusted as necessary to remain consistent with this
review, recent experiences, and short-term expectations.
Our initial health care cost trend rate assumption is 7.3
percent for retirees age 65 and over and 7.0 percent for
retirees under age 65 at the end of fiscal 2017. Rates are
graded down annually until the ultimate trend rate of
5.0 percent is reached in 2024 for all retirees. The trend
rates are applicable for calculations only if the retirees’
benefits increase as a result of health care inflation. The
ultimate trend rate is adjusted annually, as necessary, to
approximate the current economic view on the rate of
long-term inflation plus an appropriate health care cost
premium. Assumed trend rates for health care costs
have an important effect on the amounts reported for
the other postretirement benefit plans.
A one percentage point change in the health care
cost trend rate would have the following effects:
In Millions
One
One
Percentage Percentage
Point
Decrease
Point
Increase
Effect on the aggregate of the service and
interest cost components in fiscal 2018
$ 2.2
$ (1.9)
Effect on the other postretirement
accumulated benefit obligation as of
May 28, 2017
59.5
(53.8)
The Patient Protection and Affordable Care Act,
as amended by the Health Care and Education
Reconciliation Act of 2010 (collectively, the Act) was
signed into law in March 2010. The Act codifies health
ANNUAL REPORT 77
care reforms with staggered effective dates from 2010
to 2018. Estimates of the future impacts of several of
the Act’s provisions are incorporated into our postre-
tirement benefit liability.
Postemployment Benefit Plans Under certain circum-
stances, we also provide accruable benefits, primar-
ily severance, to former or inactive employees in the
United States, Canada, and Mexico. We recognize an
obligation for any of these benefits that vest or accu-
mulate with service. Postemployment benefits that do
not vest or accumulate with service (such as severance
based solely on annual pay rather than years of service)
are charged to expense when incurred. Our postem-
ployment benefit plans are unfunded.
In the first quarter of fiscal 2017, we adopted new
accounting requirements which permit reporting enti-
ties with a fiscal year-end that does not coincide with
a month-end to apply a practical expedient to measure
defined benefit plan assets and obligations using the
month-end that is closest to the entity’s fiscal year-end
and apply such practical expedient consistently to all
plans. We measured the plan assets and obligations
for our defined benefit pension, other postretirement
benefit, and postemployment benefit plans as of May
31, 2017.
Summarized financial information about defined benefit pension, other postretirement benefit, and postemploy-
ment benefit plans is presented below:
In Millions
2017
2016
2017
2016
2017
2016
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
Change in Plan Assets:
Fair value at beginning of year
Actual return on assets
Employer contributions
Plan participant contributions
Benefits payments
Foreign currency
Fair value at end of year
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan amendment
Curtailment/other
Plan participant contributions
Medicare Part D reimbursements
Actuarial loss (gain)
Benefits payments
Foreign currency
Projected benefit obligation at end of year
Plan assets less than benefit
obligation as of fiscal year end
$5,539.9 $ 5,758.5
36.3
23.7
5.7
(277.5)
(6.8)
$5,925.2 $ 5,539.9
645.6
25.4
8.8
(282.2)
(12.3)
$ 602.4 $ 582.8
(0.1)
24.1
14.1
(18.5)
—
$ 694.8 $ 602.4
75.2
20.1
15.2
(18.1)
—
$6,448.5 $ 6,252.1
$ 1,028.9 $ 1,079.6
$ 164.1
$ 146.6
119.7
216.5
(130.9)
1.9
8.8
—
88.5
(282.6)
(11.8)
134.6
267.8
0.9
7.1
5.7
—
65.2
(278.0)
(6.9)
$ 6,458.6 $ 6,448.5
12.5
32.2
—
(0.3)
15.2
3.4
(77.6)
(63.3)
0.4
19.0
44.1
—
0.5
14.1
3.5
(64.5)
(66.4)
(1.0)
$ 951.4 $ 1,028.9
8.8
2.6
—
1.3
—
—
(7.4)
(34.7)
(0.2)
$ 134.5
7.6
3.9
1.1
10.7
—
—
11.2
(16.9)
(0.1)
$ 164.1
$ (533.4) $ (908.6)
$ (256.6) $ (426.5)
$ (134.5)
$ (164.1)
The accumulated benefit obligation for all defined benefit pension plans was $6,104.5 million as of May 28, 2017,
and $5,950.7 million as of May 29, 2016.
78 GENERAL MILLS
Amounts recognized in AOCI as of May 28, 2017 and May 29, 2016, are as follows:
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
Total
Fiscal Year
In Millions
2017
2016
2017
2016
2017
2016
2017
2016
Net actuarial loss
$(1,621.4) $(1,886.0)
$(14.5)
$(57.6)
$ (9.5)
$ (14.6)
$(1,645.4) $(1,958.2)
Prior service (costs) credits
(3.9)
(6.8)
22.8
19.9
0.6
(1.2)
19.5
11.9
Amounts recorded in accumulated
other comprehensive loss
$(1,625.3) $(1,892.8)
$ 8.3
$(37.7)
$ (8.9)
$(15.8)
$(1,625.9) $(1,946.3)
Plans with accumulated benefit obligations in excess of plan assets are as follows:
In Millions
Projected benefit obligation
Accumulated benefit obligation
Plan assets at fair value
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2017
2016
2017
2016
2017
2016
$610.1 $5,490.3
$
5.5 $
—
$ 4.4
$
4.8
542.3
4,998.3
947.9
1,024.7
130.1
159.3
51.9
4,498.5
694.8
602.4
—
—
Components of net periodic benefit expense are as follows:
In Millions
Service cost
Interest cost
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2017
2016
2015
2017
2016
2015
2017
2016
2015
$ 119.7 $ 134.6 $ 137.0
$ 12.5
$ 19.0
$ 22.4
$ 8.8
$ 7.6
$ 7.5
Expected return on plan assets
(486.7)
(496.9)
(476.4)
Amortization of losses
190.2
189.8
141.7
216.5
267.8
249.2
32.2
(48.5)
2.5
44.1
(46.2)
6.6
Amortization of prior service
costs (credits)
Other adjustments
Settlement or curtailment
2.5
3.1
3.8
4.7
5.0
13.1
7.4
15.1
18.0
(5.4)
1.3
(0.9)
(5.4)
2.3
(1.0)
46.9
(40.2)
4.9
(1.6)
3.3
1.3
2.6
—
1.7
0.6
1.3
(1.4)
3.9
—
0.7
2.5
10.7
—
4.3
—
0.7
2.4
9.5
—
Net expense
$ 49.1 $ 118.1 $ 92.0
$ (6.3)
$ 19.4
$ 37.0
$ 13.6
$ 25.4
$ 24.4
We expect to recognize the following amounts in net periodic benefit expense in fiscal 2018:
In Millions
Amortization of losses
Amortization of prior service costs (credits)
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
$176.9
1.9
$0.8
(5.4)
$0.6
0.8
ANNUAL REPORT 79
Assumptions Weighted-average assumptions used to determine fiscal year-end benefit obligations are as follows:
Discount rate
Rate of salary increases
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2017
2016
2017
2016
2017
2016
4.08%
4.19%
3.92%
3.97%
2.87%
2.94%
4.25
4.28
—
—
4.46
4.35
Weighted-average assumptions used to determine fiscal year net periodic benefit expense are as follows:
Defined Benefit
Pension Plans
Fiscal Year
Other Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2017 (a)
2016
2015
2017 (a)
2016
2015
2017 (a)
2016
2015
Discount rate
4.19%
4.38%
4.54%
3.97%
4.20%
4.51%
2.94%
3.55%
3.82%
Service cost effective rate
Interest cost effective rate
Rate of salary increases
Expected long-term rate of
4.57
3.44
4.28
—
—
—
—
4.31
4.44
4.42
3.17
—
—
—
—
—
—
—
3.55
2.67
4.35
—
—
—
—
4.36
4.44
return on plan assets
8.17
8.53
8.53
7.85
8.14
8.13
—
—
—
(a) Beginning in fiscal 2017, we adopted the full yield curve method.
Discount Rates Beginning in fiscal 2017, we changed
the method used to estimate the service and interest
cost components of the net periodic benefit expense
for our United States and most of our international
defined benefit pension, other postretirement bene-
fit, and postemployment benefit plans. We adopted a
full yield curve approach to estimate service cost and
interest cost by applying the specific spot rates along
the yield curve used to determine the benefit obliga-
tion to the relevant projected cash flows. This method
provides a more precise measurement of service and
interest costs by correlating the timing of the plans’
liability cash flows to the corresponding rate on the
yield curve. Previously, we estimated service cost and
interest cost using a single weighted-average discount
rate derived from the yield curve used to measure the
benefit obligation at the beginning of the period. This
change does not affect the measurement of our benefit
obligations related to these plans. We have accounted
for this change prospectively as a change in accounting
estimate beginning in the first quarter of fiscal 2017.
The change in methodology resulted in a decrease in
service and interest cost of approximately $68 million
for fiscal 2017 compared to our previous methodology.
The fiscal 2017 reduction in our net periodic benefit
expense as a result of this change in methodology was
partially offset by a reduction in our weighted-average
expected rate of return on plan assets for our princi-
pal defined benefit pension and other postretirement
plans in the United States to 8.25 percent as a result of
changes that decreased investment risk in the portfolio.
Beginning in fiscal 2017, our discount rate assump-
tions are determined annually as of May 31 for our
defined benefit pension, other postretirement benefit,
and postemployment benefit plan obligations. We also
use discount rates as of May 31 to determine defined
benefit pension, other postretirement benefit, and pos-
temployment benefit plan income and expense for the
following fiscal year. We work with our outside actu-
aries to determine the timing and amount of expected
future cash outflows to plan participants and, using the
Aa Above Median corporate bond yield, to develop a
forward interest rate curve, including a margin to that
index based on our credit risk. This forward interest
rate curve is applied to our expected future cash out-
flows to determine our discount rate assumptions.
Fair Value of Plan Assets The fair values of our pen-
sion and postretirement benefit plans’ assets and their
respective levels in the fair value hierarchy at May
28, 2017, and May 29, 2016, by asset category were as
follows:
80 GENERAL MILLS
In Millions
Level 1
Level 2
Level 3
Total
Assets
Level 1
Level 2
Level 3
Total
Assets
May 28, 2017
May 29, 2016
Fair value measurement of
pension plan assets:
Equity (a)
Fixed income (b)
Real asset investments (c)
Other investments (d)
Cash and accruals
Fair value measurement
of pension plan assets in the
$ 1,773.0 $ 781.2 $
— $ 2,554.2
$ 1,543.7 $ 741.9 $
— $ 2,285.6
951.9
742.2
253.1
95.8
—
174.2
—
—
—
—
0.3
—
1,694.1
348.9
0.3
903.8
745.8
193.6
95.2
—
—
—
—
—
0.4
—
1,649.6
288.8
0.4
195.1
174.2
195.1
fair value hierarchy
$ 3,152.2 $ 1,619.2 $
0.3 $ 4,771.7
$ 2,836.2 $ 1,582.9 $
0.4 $ 4,419.5
Investments measured at
net asset value (e)
Total pension plan investments
Fair value measurement of postretirement
1,153.5
$ 5,925.2
1,120.4
$ 5,539.9
benefit plan assets:
Equity (a)
Fixed income (b)
Real asset investments (c)
Other investments (d)
Cash and accruals
$ 122.3 $
67.5 $
— $ 189.8
$ 128.9 $
87.6 $
— $ 216.5
34.1
18.0
—
11.3
160.0
14.5
—
—
—
—
—
—
194.1
32.5
—
11.3
18.0
—
—
8.9
83.4
14.3
—
—
—
—
—
—
101.4
14.3
—
8.9
Fair value measurement of postretirement
benefit plan assets
in the fair value hierarchy
$ 185.7 $ 242.0 $
— $ 427.7
$ 155.8 $ 185.3 $
— $ 341.1
Investments measured at
net asset value (e)
Total postretirement benefit plan investments
267.1
$ 694.8
261.3
$ 602.4
(a) Primarily publicly traded common stock 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
valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments.
(b) Primarily government and corporate debt securities and futures for purposes of total return, managing fixed income exposure to policy allocations, and
managing duration targets. Investments include: fixed income securities and bond futures generally valued at closing prices from national exchanges, fixed
income pricing models, and independent financial analysts; and fixed income commingled funds valued at unit values provided by the investment managers,
which are based on the fair value of the underlying investments.
(c) Publicly traded common stock and limited partnerships in the energy and real estate sectors for purposes of total return. Investments include: energy and
real estate securities generally valued at closing prices from national exchanges; and commingled funds valued at unit values provided by the investment
managers, which are based on the fair value of the underlying investments.
(d) Global balanced fund of equity, fixed income, and real estate securities for purposes of meeting Canadian pension plan asset allocation policies, and insur-
ance and annuity contracts to provide a stable stream of income for retirees and to fund postretirement medical benefits. Fair values are derived from unit
values provided by the investment managers, which are generally based on the fair value of the underlying investments and contract fair values from the
providers.
(e) Primarily private investments and common collective trusts that are measured at fair value using the net asset value per share (or its equivalent) practical
expedient and have not been classified in the fair value hierarchy.
There were no material changes in our level 3 investments in fiscal 2017 and fiscal 2016.
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 inflation assumptions. We review this assumption
annually for each plan; however, our annual investment
performance for one particular year does not, by itself,
significantly influence our evaluation.
Weighted-average asset allocations for the past two
fiscal years for our defined benefit pension and other
postretirement benefit plans are as follows:
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Fiscal Year
Fiscal Year
2017
2016
2017
2016
Asset category:
United States equities 28.5%
30.5%
31.9%
37.2%
International equities 17.9
Private equities
Fixed income
Real assets
7.8
31.7
14.1
19.0
8.3
28.6
13.6
17.8
3.6
40.0
6.7
23.4
3.9
29.4
6.1
Total
100.0%
100.0% 100.0%
100.0%
The investment objective for our defined benefit pen-
sion and other postretirement benefit plans is to secure
the benefit obligations to participants at a reasonable
cost to us. Our goal is to optimize the long-term return
on plan assets at a moderate level of risk. The defined
benefit pension plan and other postretirement bene-
fit plan portfolios are broadly diversified across asset
classes. Within asset classes, the portfolios are further
diversified across investment styles and investment
organizations. For the defined benefit pension plans, the
long-term investment policy allocation is: 20 percent to
equities in the United States; 15 percent to international
equities; 10 percent to private equities; 40 percent to
fixed income; and 15 percent to real assets (real estate,
energy, and timber). For other postretirement benefit
plans, the long-term investment policy allocations are:
30 percent to equities in the United States; 15 percent
to international equities; 10 percent to private equities;
40 percent to fixed income; and 5 percent to real assets
(real estate, energy, and timber). The actual allocations
to these asset classes may vary tactically around the
long-term policy allocations based on relative market
valuations.
ANNUAL REPORT 81
Contributions and Future Benefit Payments We do
not expect to be required to make contributions to our
defined benefit pension, other postretirement benefit,
and postemployment benefit plans in fiscal 2018. Actual
fiscal 2018 contributions could exceed our current pro-
jections, as influenced by our decision to undertake
discretionary funding of our benefit trusts and future
changes in regulatory requirements. Estimated bene-
fit payments, which reflect expected future service, as
appropriate, are expected to be paid from fiscal 2018 to
2027 as follows:
In Millions
2018
2019
2020
2021
2022
Other
Defined
Benefit
Pension
Subsidy
Benefit Plans
Plans Gross Payments Receipts
Postretirement Medicare Postemployment
Benefit
Plans
$ 290.2
$ 59.5
$ 4.3
$ 21.2
298.6
307.7
316.4
325.7
61.6
63.0
64.1
64.8
4.6
4.2
3.5
3.6
18.8
19.0
17.4
16.1
15.0
61.5
2023-2027
1,767.8
328.8
Defined Contribution Plans The General Mills Savings
Plan is a defined contribution plan that covers domestic
salaried, hourly, nonunion, and certain union employ-
ees. This plan is a 401(k) savings plan that includes
a number of investment funds, including a Company
stock fund and an Employee Stock Ownership Plan
(ESOP). We sponsor another money purchase plan for
certain domestic hourly employees with net assets of
$23.0 million as of May 28, 2017, and $21.0 million as
of May 29, 2016. We also sponsor defined contribution
plans in many of our foreign locations. Our total recog-
nized expense related to defined contribution plans was
$54.1 million in fiscal 2017, $61.2 million in fiscal 2016,
and $44.0 million in fiscal 2015.
We match a percentage of employee contributions to
the General Mills Savings Plan. The Company match
is directed to investment options of the participant’s
choosing. The number of shares of our common stock
allocated to participants in the ESOP was 6.3 million
as of May 28, 2017, and 6.9 million as of May 29, 2016.
The ESOP’s only assets are our common stock and
temporary cash balances.
The Company stock fund and the ESOP collectively
held $598.7 million and $711.5 million of Company
common stock as of May 28, 2017 and May 29, 2016,
respectively.
82 GENERAL MILLS
NOTE 14. INCOME TAXES
The components of earnings before income taxes and
after-tax earnings from joint ventures and the corre-
sponding income taxes thereon are as follows:
The tax effects of temporary differences that give
rise to deferred tax assets and liabilities are as follows:
In Millions
May 28, 2017 May 29, 2016
Accrued liabilities
$
70.0
$
89.9
In Millions
2017
2016
2015
Tax credit carryforwards
Fiscal Year
Pension
196.3
18.4
Compensation and employee benefits
419.2
491.5
322.0
4.5
Stock, partnership, and
miscellaneous investments
276.4
353.6
Earnings before income
taxes and after-tax earnings
from joint ventures:
United States
Foreign
Total earnings before income
taxes and after-tax earnings
$1,941.6 $1,941.4 $1,338.6
Capital losses
Net operating losses
329.7
462.2
423.3
Other
from joint ventures
$ 2,271.3 $ 2,403.6 $ 1,761.9
Income taxes:
Currently payable:
Federal
State and local
Foreign
Total current
Deferred:
Federal
State and local
Foreign
Total deferred
Total income taxes
$ 368.5 $ 489.8 $ 392.7
21.1
81.7
471.3
30.8
114.0
634.6
201.3
123.0
10.2
(27.6)
(6.9)
4.5
183.9
120.6
29.3
139.5
561.5
70.3
(8.7)
(36.3)
25.3
$ 655.2 $ 755.2 $ 586.8
The following table reconciles the United States statu-
tory income tax rate with our effective income tax rate:
Fiscal Year
2017
2016
2015
United States statutory rate
35.0%
35.0%
35.0%
State and local income taxes,
net of federal tax benefits
Foreign rate differences
Repatriation of foreign earnings
Non-deductible goodwill
Domestic manufacturing deduction
Other, net (a)
Effective income tax rate
0.8
(3.5)
—
—
(2.8)
(0.7)
0.7
(2.2)
—
2.6
(2.0)
(2.7)
0.7
(3.1)
4.5
—
(2.9)
(0.9)
28.8%
31.4%
33.3%
(a) Fiscal 2016 includes 0.6 percent tax benefit related to the divestiture of
our business in Venezuela. See Note 3 for additional information.
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Brands
Fixed assets
Intangible assets
Tax lease transactions
Inventories
Stock, partnership, and
29.8
109.5
85.6
1,205.2
231.8
973.4
1,310.1
484.5
238.6
45.8
60.0
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
miscellaneous investments
479.4
476.0
Unrealized hedges
Other
45.4
29.0
22.6
21.2
Gross deferred tax liabilities
2,692.8
2,630.6
Net deferred tax liability
$ 1,719.4
$ 1,399.6
We have established a valuation allowance against
certain of the categories of deferred tax assets described
above as current evidence does not suggest we will real-
ize sufficient taxable income of the appropriate charac-
ter (e.g., ordinary income versus capital gain income)
within the carryforward period to allow us to realize
these deferred tax benefits.
Of the total valuation allowance of $231.8 million,
the majority relates to a deferred tax asset for losses
recorded as part of the Pillsbury acquisition in the
amount of $167.2 million, $53.3 million relates to var-
ious state and foreign loss carryforwards, and $11.1
million relates to various foreign capital loss carryfor-
wards. As of May 28, 2017, we believe it is more-likely-
than-not that the remainder of our deferred tax assets
are realizable.
We have $142.1 million of tax loss carryforwards.
Of this amount, $125.3 million is foreign loss carryfor-
wards. The carryforward periods are as follows: $93.2
million do not expire; $3.7 million expire in fiscal 2018
and 2019; and $28.4 million expire in fiscal 2020 and
beyond. The remaining $16.8 million are state operating
ANNUAL REPORT 83
loss carryforwards, the majority of which expire after
fiscal 2023.
We have not recognized a deferred tax liability for
unremitted earnings of approximately $2.3 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
indefinitely reinvested earnings. Deferred taxes are
recorded for earnings of our foreign operations when
we determine that such earnings are no longer indefi-
nitely reinvested. In fiscal 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 fiscal
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 finally resolved.
While it is often difficult to predict the final outcome or
the timing of resolution of any particular uncertain tax
position, we believe that our liabilities for income taxes
reflect the most likely outcome. We adjust these liabili-
ties, as well as the related interest, in light of changing
facts and circumstances. Settlement of any particular
position would usually require the use of cash.
The number of years with open tax audits varies
depending on the tax jurisdiction. Our major taxing
jurisdictions include the United States (federal and
state) and Canada. Various tax examinations by United
States state taxing authorities could be conducted for
any open tax year, which vary by jurisdiction, but are
generally from 3 to 5 years.
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 financial position.
During fiscal 2017, the Internal Revenue Service
(IRS) concluded its field examination of our federal tax
returns for fiscal 2013 and 2014. The audit closure and
related adjustments did not have a material impact on
our results of operations or financial position. As of
May 28, 2017, we have effectively settled all issues with
the IRS for fiscal years 2014 and prior.
During fiscal 2017, the Brazilian tax authority,
Secretaria da Receita Federal do Brasil (RFB), concluded
audits of our 2012 and 2013 tax return years. These
audits included a review of our determinations of amor-
tization of certain goodwill arising from the acquisition
of Yoki Alimentos S.A. (Yoki). The RFB has proposed
adjustments that effectively eliminate the goodwill
amortization benefits related to this transaction. We
believe we have meritorious defenses and intend to
contest the disallowance.
We apply a more-likely-than-not threshold to the rec-
ognition and derecognition of uncertain tax positions.
Accordingly, we recognize the amount of tax benefit
that has a greater than 50 percent likelihood of being
ultimately realized upon settlement. Future changes in
judgment related to the expected ultimate resolution
of uncertain tax positions will affect earnings in the
period of such change.
The following table sets forth changes in our total
gross unrecognized tax benefit liabilities, exclud-
ing accrued interest, for fiscal 2017 and fiscal 2016.
Approximately $62 million of this total in fiscal 2017
represents the amount that, if recognized, would
affect our effective income tax rate in future periods.
This amount differs from the gross unrecognized tax
benefits 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 benefits
included therein.
In Millions
Fiscal Year
2017
2016
Balance, beginning of year
$176.5
$161.1
Tax positions related to current year:
Additions
27.2
31.6
Tax positions related to prior years:
Additions
Reductions
Settlements
Lapses in statutes of limitations
0.9
(47.9)
(9.6)
(11.6)
23.9
(25.7)
(4.0)
(10.4)
Balance, end of year
$135.5
$176.5
As of May 28, 2017, we expect to pay approximately
$1.8 million of unrecognized tax benefit liabilities and
accrued interest within the next 12 months. We are not
84 GENERAL MILLS
able to reasonably estimate the timing of future cash
flows beyond 12 months due to uncertainties in the
timing of tax audit outcomes. The remaining amount
of our unrecognized tax liability was classified in other
liabilities.
We report accrued interest and penalties related
to unrecognized tax benefit liabilities in income tax
expense. For fiscal 2017, we recognized a net benefit of
$5.6 million of tax-related net interest and penalties,
and had $23.1 million of accrued interest and penalties
as of May 28, 2017. For fiscal 2016, we recognized a net
benefit 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.
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 $188.1 million
in fiscal 2017, $189.1 million in fiscal 2016, and $193.5
million in fiscal 2015.
Some operating leases require payment of property
taxes, insurance, and maintenance costs in addition to
the rent payments. Contingent and escalation rent in
excess of minimum rent payments and sublease income
netted in rent expense were insignificant.
Noncancelable future lease commitments are:
In Millions
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
After fiscal 2022
Total noncancelable future
Operating
Leases
Capital
Leases
$ 118.8
$ 0.4
101.7
80.7
60.7
49.7
89.1
0.4
0.2
0.1
—
0.1
lease commitments
$ 500.7
$ 1.2
Less: interest
Present value of obligations under capital leases
(0.1)
$ 1.1
Depreciation on capital leases is recorded as deprecia-
tion expense in our results of operations.
As of May 28, 2017, we have issued guarantees and
comfort letters of $504.7 million for the debt and other
obligations of consolidated subsidiaries, and guarantees
and comfort letters of $165.3 million for the debt and
other obligations of non-consolidated affiliates, mainly
CPW. In addition, off-balance sheet arrangements
are generally limited to the future payments under
non-cancelable operating leases, which totaled $500.7
million as of May 28, 2017.
NOTE 16. BUSINESS SEGMENT AND
GEOGRAPHIC INFORMATION
We operate in the consumer foods industry. In the third
quarter of fiscal 2017, we announced a new global orga-
nization structure to streamline our leadership, enhance
global scale, and drive improved operational agility to
maximize our growth capabilities. As a result of this
global reorganization, beginning in the third quarter of
fiscal 2017, we reported results for our four operating
segments as follows: North America Retail, 65.3 percent
of our fiscal 2017 consolidated net sales; Convenience
Stores & Foodservice, 12.0 percent of our fiscal 2017
consolidated net sales; Europe & Australia, 11.7 percent
of our fiscal 2017 consolidated net sales; and Asia &
Latin America, 11.0 percent of our fiscal 2017 consoli-
dated net sales. We have restated our net sales by seg-
ment and segment operating profit amounts to reflect
our new operating segments. These segment changes
had no effect on previously reported consolidated net
sales, operating profit, net earnings attributable to
General Mills, or earnings per share.
Our North America Retail operating segment consists
of our former U.S. Retail operating units and our Canada
region. Within our North America Retail operating seg-
ment, our former U.S. Meals operating unit and U.S.
Baking operating unit have been combined into one
operating unit: U.S. Meals & Baking. Our Convenience
Stores & Foodservice operating segment is unchanged.
Our Europe & Australia operating segment consists of
our former Europe region. Our Asia & Latin America
operating segment consists of our former Asia/Pacific
and Latin America regions.
Under our new organization structure, our chief
operating decision maker assesses performance and
makes decisions about resources to be allocated to our
segments at the North America Retail, Convenience
Stores & Foodservice, Europe & Australia, and Asia &
Latin America operating segment level.
Our North America Retail operating segment reflects
business with a wide variety of grocery stores, mass
merchandisers, membership stores, natural food chains,
drug, dollar and discount chains, and e-commerce gro-
cery providers. Our product categories in this business
ANNUAL REPORT 85
variances to planned domestic employee benefits
and incentives, contributions to the General Mills
Foundation, asset and liability remeasurement impact
of hyperinflationary economies, restructuring initiative
project-related costs, and other items that are not part
of our measurement of segment operating performance.
These include gains and losses arising from the revalu-
ation of certain grain inventories and gains and losses
from mark-to-market valuation of certain commodity
positions until passed back to our operating segments.
These items affecting operating profit are centrally
managed at the corporate level and are excluded from
the measure of segment profitability reviewed by exec-
utive management. Under our supply chain organiza-
tion, our manufacturing, warehouse, and distribution
activities are substantially integrated across our opera-
tions in order to maximize efficiency and productivity.
As a result, fixed assets and depreciation and amortiza-
tion expenses are neither maintained nor available by
operating segment.
Our operating segment results were as follows:
In Millions
Net sales:
Fiscal Year
2017
2016
2015
North America Retail
$10,196.9 $10,936.6 $11,612.1
Convenience Stores
& Foodservice
Europe & Australia
Asia & Latin America
Total
Operating profit:
1,870.0
1,824.5
1,728.4
1,923.8
1,998.0
1,704.7
1,995.1
2,126.5
1,896.6
$15,619.8 $16,563.1 $17,630.3
North America Retail
$ 2,303.6 $ 2,351.2 $ 2,382.7
Convenience Stores
& Foodservice
Europe & Australia
Asia & Latin America
401.2
164.2
83.6
378.9
200.3
69.1
353.1
179.4
119.8
Total segment operating profit 2,952.6
2,999.5
3,035.0
Unallocated corporate items
Divestitures loss (gain)
Restructuring, impairment,
190.1
13.5
288.9
(148.2)
413.8
—
and other exit costs
182.6
151.4
543.9
Operating profit
$ 2,566.4 $ 2,707.4 $ 2,077.3
segment are ready-to-eat cereals, refrigerated yogurt,
soup, meal kits, refrigerated and frozen dough prod-
ucts, dessert and baking mixes, frozen pizza and pizza
snacks, grain, fruit and savory snacks, and a wide vari-
ety of organic products including refrigerated yogurt,
nutrition bars, meal kits, salty snacks, ready-to-eat
cereal, and grain snacks.
In our Convenience Stores & 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 in the United States.
Our Europe & Australia operating segment consists
of our former Europe region. The segment includes
retail and foodservice businesses in the greater Europe
and Australia regions. Our product categories include
refrigerated yogurt, meal kits, super-premium ice
cream, refrigerated and frozen dough products, shelf
stable vegetables, grain snacks, and dessert and baking
mixes. We also sell super-premium ice cream directly
to consumers through company-owned retail shops.
Revenues from franchise fees are reported in the region
or country where the franchisee is located.
Our Asia & Latin America operating segment con-
sists of our former Asia/Pacific and Latin America
regions. The segment includes retail and foodservice
businesses in the greater Asia and South America
regions. Our product categories include super-premium
ice cream and frozen desserts, refrigerated and frozen
dough products, dessert and baking mixes, meal kits,
salty and grain snacks, wellness beverages, and refrig-
erated yogurt. We also sell super-premium ice cream
and frozen desserts directly to consumers through
company-owned retail shops. Our Asia & Latin America
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 or
franchisee is located.
Operating profit 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,
86 GENERAL MILLS
Net sales by class of similar products were as follows:
Fiscal Year
In Millions
Inventories:
May 28,
2017
May 29,
2016
2017
2016
2015
Raw materials and packaging
$ 395.4 $ 397.3
$ 3,302.2 $ 3,297.2 $ 3,392.0
Finished goods
In Millions
Snacks
Cereal
Convenient meals
Yogurt
Dough
2,673.2
2,653.6
2,403.5
1,690.6
738.4
310.5
193.7
2,731.5
2,779.0
2,760.9
1,820.0
1,704.3
731.2
532.3
206.7
2,771.3
2,810.3
2,938.3
1,877.0
1,867.7
769.5
937.3
266.9
Baking mixes and ingredients 1,654.1
Super-premium ice cream
Vegetables
Other
Total
Grain
Excess of FIFO over LIFO cost (a)
Total
1,224.3
1,163.1
73.0
72.6
(209.1)
(219.3)
$ 1,483.6 $ 1,413.7
(a) Inventories of $893.8 million as of May 28, 2017, and $841.0 million as of
May 29, 2016, were valued at LIFO. The difference between replacement
cost and the stated LIFO inventory value is not materially different from
the reserve for the LIFO valuation method.
$15,619.8 $16,563.1 $17,630.3
In Millions
Prepaid expenses and other current assets:
The following table provides financial information by
geographic area:
In Millions
Net sales:
Fiscal Year
2017
2016
2015
United States
$11,160.9 $11,930.9 $12,501.8
Non-United States
4,458.9
4,632.2
5,128.5
Other receivables
Prepaid expenses
Derivative receivables,
primarily commodity-related
Grain contracts
Miscellaneous
Total
Total
$15,619.8 $16,563.1 $17,630.3
In Millions
In Millions
Cash and cash equivalents:
United States
Non-United States
Total
In Millions
Land, buildings, and equipment:
United States
Non-United States
Total
May 28,
2017
May 29,
2016
$
62.9 $ 118.5
645.2
$ 766.1 $ 763.7
703.2
May 28,
2017
May 29,
2016
983.7
988.5
$ 3,687.7 $ 3,743.6
Land, buildings, and equipment:
Land
Buildings
Buildings under capital lease
Equipment
Equipment under capital lease
Capitalized software
Construction in progress
Total land, buildings, and equipment
9,526.6
9,503.5
Less accumulated depreciation
(5,838.9)
(5,759.9)
$ 2,704.0 $ 2,755.1
Total
$ 3,687.7 $ 3,743.6
May 28,
2017
May 29,
2016
$ 163.7 $ 159.3
168.9
177.9
35.0
2.7
11.3
44.6
1.8
15.4
$ 381.6 $ 399.0
May 28,
2017
May 29,
2016
$
79.8 $
92.9
2,249.2
2,236.0
0.3
0.3
6,095.9
5,945.6
3.0
545.4
553.0
3.0
523.0
702.7
In Millions
Other assets:
Investments in and advances
to joint ventures
Pension assets
Exchangeable note with related party
Life insurance
Miscellaneous
May 28,
2017
May 29,
2016
$ 505.3 $ 518.9
144.9
—
25.6
110.1
90.9
12.7
26.3
102.9
$ 785.9 $ 751.7
NOTE 17. SUPPLEMENTAL INFORMATION
The components of certain Consolidated Balance Sheet
accounts are as follows:
In Millions
Receivables:
Customers
May 28,
2017
May 29,
2016
Total
$ 1,454.4 $ 1,390.4
Less allowance for doubtful accounts
(24.3)
(29.6)
Total
$ 1,430.1 $ 1,360.8
ANNUAL REPORT 87
May 28,
2017
May 29,
2016
Certain Consolidated Statements of Cash Flows
amounts are as follows:
$ 482.6
326.6
21.5
58.0
$ 563.7
386.4
23.8
110.5
In Millions
2017
2016
2015
Cash interest payments
Cash paid for income taxes
$285.8
551.1
$292.0
533.8
$305.3
562.6
Fiscal Year
In Millions
Other current liabilities:
Accrued trade and
consumer promotions
Accrued payroll
Dividends payable
Accrued taxes
Accrued interest, including
interest rate swaps
Grain contracts
Restructuring and other exit costs reserve
Derivative payable
Miscellaneous
83.8
5.6
85.0
18.1
291.0
90.4
5.5
76.6
35.6
302.5
Total
In Millions
$1,372.2
$1,595.0
May 28,
2017
May 29,
2016
Other noncurrent liabilities:
Accrued compensation and benefits,
including obligations for underfunded
other postretirement benefit and
postemployment benefit plans
Accrued taxes
Miscellaneous
Total
$1,249.7
162.3
111.1
$1,523.1
$1,755.0
204.0
128.6
$2,087.6
Certain Consolidated Statements of Earnings
amounts are as follows:
In Millions
2017
2016
2015
Fiscal Year
Depreciation and amortization
Research and
development expense
Advertising and media expense
(including production and
$603.6
$608.1
$588.3
218.2
222.1
229.4
communication costs)
623.8
754.4
823.1
The components of interest, net are as follows:
Fiscal Year
Expense (Income), in Millions
2017
2016
2015
Interest expense
Capitalized interest
Interest income
Interest, net
$306.7
(4.6)
(7.0)
$319.6
(7.7)
(8.1)
$335.5
(6.9)
(13.2)
$295.1
$303.8
$315.4
88 GENERAL MILLS
NOTE 18. QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for fiscal 2017 and fiscal 2016 follows:
In Millions, Except Per Share Amounts
2017
2016
2017
2016
2017
2016
2017
2016
First Quarter
Fiscal Year
Second Quarter
Fiscal Year
Third Quarter
Fiscal Year
Fourth Quarter
Fiscal Year
Net sales
Gross margin
Net earnings attributable
to General Mills
EPS:
Basic
Diluted
$3,907.9 $4,207.9
$4,112.1 $4,424.9
$3,793.2 $4,002.4
$3,806.6 $3,927.9
1,416.9 1,554.6
1,519.5 1,540.6
1,307.7 1,357.5
1,319.7 1,376.8
409.0
426.6
481.8
529.5
357.8
361.7
408.9
379.6
$ 0.68 $ 0.71
$ 0.82 $ 0.88
$ 0.62 $ 0.61
$ 0.70 $ 0.63
$ 0.67 $ 0.69
$ 0.80 $ 0.87
$ 0.61 $ 0.59
$ 0.69 $ 0.62
Dividends per share
$ 0.48 $ 0.44
$ 0.48 $ 0.44
$ 0.48 $ 0.44
$ 0.48 $ 0.46
Market price of common stock:
High
Low
$ 72.64 $ 59.55
$ 71.42 $ 59.23
$ 63.87 $ 60.14
$ 61.16 $ 65.36
$ 62.78 $ 54.36
$ 60.65 $ 55.41
$ 59.23 $ 54.12
$ 55.91 $ 58.85
The effective tax rate for the fourth quarter of fiscal 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 fiscal 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.
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 interest,
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
United States dollars using constant foreign currency
exchange rates based on the rates in eff ect for the com-
parable prior-year period. To present this information,
current period results for entities reporting in curren-
cies 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 s-
cal 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 aver-
age foreign currency exchange rate between the cur-
rent 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
ANNUAL REPORT 89
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. The 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.
Focus 6 platforms. The Focus 6 platforms for the
Convenience Stores & Foodservice segment consist of
cereal, yogurt, snacks, frozen meals, biscuits, and baking
mixes.
Foundation businesses. Foundation businesses con-
sist primarily of refrigerated dough, desserts, and soup
in our North America Retail segment and bakery fl our
and frozen dough products in our Convenience Stores
& Foodservice segment, as well as other product lines
not included in Growth businesses.
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.
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.
90 GENERAL MILLS
Growth businesses. Growth businesses include cereal,
snack bars, the natural and organic portfolio, hot snacks,
Mexican products, and yogurt in our North America
Retail segment; our Europe & Australia segment; our
Asia & Latin America segment; and our Focus 6 plat-
forms in our Convenience Stores & Foodservice segment.
Gross margin. Net sales less cost of sales.
Hedge accounting. Accounting for qualifying hedges
that allows changes in a hedging instrument’s fair value
to offset corresponding changes in the hedged item in
the same reporting period. Hedge accounting is permit-
ted for certain hedging instruments and hedged items
only if the hedging relationship is highly effective, and
only prospectively from the date a hedging relationship
is formally documented.
Holistic Margin Management (HMM). Company-
wide initiative to use productivity savings, mix manage-
ment and price realization to offset input cost inflation,
protect margins and generate funds to reinvest in
sales-generating activities.
Interest bearing instruments. Notes payable, long-
term debt, including current portion, cash and cash
equivalents, and certain interest bearing investments
classified within prepaid expenses and other current
assets and other assets.
LIBOR. London Interbank Offered Rate.
Mark-to-market. The act of determining a value
for financial instruments, commodity contracts, and
related assets or liabilities based on the current market
price for that item.
Net mark-to-market valuation of certain commod-
ity positions. Realized and unrealized gains and losses
on derivative contracts that will be allocated to seg-
ment operating profit when the exposure we are hedg-
ing affects earnings.
Net price realization. The impact of list and pro-
moted price changes, net of trade and other price pro-
motion costs.
Net realizable value. The estimated selling price in
the ordinary course of business, less reasonably predict-
able costs of completion, disposal, and transportation.
Noncontrolling interests. Interests of consolidated
subsidiaries held by third parties.
Notional principal amount. The principal amount on
which fixed-rate or floating-rate interest payments are
calculated.
OCI. Other comprehensive income (loss).
Operating cash flow conversion rate. Net cash pro-
vided by operating activities, divided by net earnings,
including earnings attributable to redeemable and non-
controlling interests.
Operating cash flow to debt ratio. Net cash provided
by operating activities, divided by the sum of notes pay-
able and long-term debt, including the current portion.
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 consolidated subsid-
iaries held by a third party that can be redeemed out-
side of our control and therefore cannot be classified as
a noncontrolling interest in equity.
Reporting unit. An operating segment or a business
one level below an operating segment.
Return on average total capital. Net earnings includ-
ing earnings attributable to redeemable and noncon-
trolling interests, excluding after-tax net interest,
divided by average total capital.
Segment operating profit margin. Segment operat-
ing profit divided by net sales for the segment.
Strategic Revenue Management (SRM). A compa-
ny-wide capability focused on generating sustainable
benefits from net price realization and mix by identify-
ing and executing against specific opportunities to apply
tools including pricing, sizing, mix management, and
promotion optimization across each of our businesses.
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. The impact of the con-
version of our foreign affiliates’ financial statements to
United States dollars for the purpose of consolidating
our financial statements.
Variable interest entities (VIEs). A legal structure
that is used for business purposes that either (1) does
not have equity investors that have voting rights and
share in all the entity’s profits and losses or (2) has
equity investors that do not provide sufficient financial
resources to support the entity’s activities.
Working capital. Current assets and current liabili-
ties, all as of the last day of our fiscal year.
ANNUAL REPORT 91
TOTAL RETURN TO SHAREHOLDERS
Th ese line graphs compare the cumulative total return
for holders of our common stock with the cumulative
total return of the Standard & Poor’s 500 Stock Index
and Standard & Poor’s 500 Packaged Foods Index for
the last fi ve-year and ten-year fi scal periods. Th e graphs
assume the investment of $100 in each of General Mills’
common stock and the specifi ed indexes at the begin-
ning of the applicable period, and assume the reinvest-
ment of all dividends.
On June 9, 2017, there were approximately 31,000
record holders of our common stock.
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Total Return to Shareholders
Total Return to Shareholders
5 Years
5 Years
May 13
May 13
May 14
May 14
May 15
May 15
May 16
May 16
May 17
May 17
240
240
220
220
200
200
180
180
160
160
140
140
120
120
100
100
80
80
60
60
40
40
20
20
0
0
May 12
May 12
Total Return to Shareholders
Total Return to Shareholders
10 Years
10 Years
340
320
340
300
320
280
300
260
280
240
260
220
240
200
220
180
200
160
180
140
160
120
140
100
120
80
100
60
80
40
60
20
40
0
20
0
May 07 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17
May 07 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17
General Mills (GIS)
General Mills (GIS)
S&P 500
S&P 500
S&P Packaged Foods
S&P Packaged Foods
92 GENERAL MILLS
BOARD OF DIRECTORS As of August 1, 2017
Bradbury H. Anderson (2*, 5)
Retired Chief Executive Officer
and Vice Chairman,
Best Buy Co., Inc.
(electronics retailer)
Alicia Boler Davis (3, 5)
Executive Vice President,
Global Manufacturing,
General Motors Company
(automobile manufacturing)
R. Kerry Clark** (3, 4)
Retired Chairman and
Chief Executive Officer,
Cardinal Health, Inc.
(healthcare products and
services)
David M. Cordani (1, 2)
President and Chief Executive
Officer, Cigna Corporation
(health insurance and services)
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 and investment
services)
Jeffrey L. Harmening
Chief Executive Officer,
General Mills, Inc.
Maria G. Henry (1, 2)
Senior Vice President and
Chief Financial Officer,
Kimberly-Clark Corporation
(consumer products)
Heidi G. Miller (1*, 3)
Retired President,
JPMorgan International,
J.P. Morgan Chase & Co.
(banking and financial services)
SENIOR MANAGEMENT As of August 1, 2017
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 of the Board,
General Mills, Inc.
Robert L. Ryan (1, 3*)+
Retired Senior Vice President
and Chief Financial Officer,
Medtronic, Inc.
(medical technology)
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,
The 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 2017
Richard C. Allendorf
Senior Vice President;
General Counsel and Secretary
Kofi A. Bruce
Vice President;
Controller
John R. Church
Executive Vice President;
Chief Supply Chain Officer and
Global Business Solutions
David V. Clark
Vice President;
President, U.S. Yogurt
Mary J. Ekman
Senior Vice President,
North America Retail Finance
Peter C. Erickson
Executive Vice President,
Innovation, Technology
and Quality
Olivier Faujour
Vice President;
President, Dairy Strategic
Brand Unit
Ricardo Fernandez
Vice President;
President, Latin America
John M. Foraker
Vice President;
President, Annie’s Foods
Jeffrey L. Harmening
Chief Executive Officer
David P. Homer
Senior Vice President;
Chief Executive Officer,
Cereal Partners Worldwide
Christina Law
Senior Vice President;
Group President, Asia &
Latin America
Dana M. McNabb
Vice President;
President, U.S. Cereal
Michele S. Meyer
Senior Vice President;
President, U.S. Snacks
Donal L. Mulligan
Executive Vice President;
Chief Financial Officer
James H. Murphy
Senior Vice President;
President, U.S. Meals & Baking
Kimberly A. Nelson
Senior Vice President,
External Relations;
President, General Mills
Foundation
Jonathon J. Nudi
Senior Vice President;
Group President, North
America Retail
Shawn P. O’Grady
Senior Vice President;
Group President, Convenience
Stores & Foodservice and
Global Revenue Management
Ivan Pollard
Senior Vice President;
Chief Marketing Officer
Kendall J. Powell
Chairman of the Board
Bethany C. Quam
Senior Vice President;
Group President, Europe &
Australia
Sean N. Walker
Senior Vice President,
Corporate Strategy
Brett M. White
Vice President;
Treasurer
Jacqueline R. Williams-Roll
Senior Vice President;
Chief Human Resources Officer
SHAREHOLDER INFORMATION
World Headquarters
Number One General Mills Boulevard
Minneapolis, MN 55-3
Phone: (3) -
Website
GeneralMills.com
Markets
New York Stock Exchange
Trading Symbol: GIS
Independent Auditor
KPMG LLP
Wells Fargo Center
South Seventh Street
Minneapolis, MN 55-3
Phone: () 35-5
Investor Inquiries
General Shareholder Information:
Investor Relations Department
Phone: () 5-53 or (3) -3
Analysts/Investors:
Jeff Siemon
Vice President, Investor Relations
Phone: (3) -3
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.
Centre Pointe Curve
Mendota Heights, MN 55-
Phone: () -3 or (5) 5-
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 :3 a.m., Central Daylight Time, Tuesday,
Sept. , , at the Radisson Blu Hotel in
downtown Minneapolis at 35 South Seventh
Street, Minneapolis, MN 55. 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.
HOLIDAY GIFT BOXES
General Mills gift boxes are part of many shareholders’ December
holiday traditions. To request an order form, call us toll-free at
() - or write, including your name, street address, city,
state, ZIP code and phone number (including area code) to:
General Mills Holiday Gift Box
Department 553
P.O. Box 5
Stacy, MN 55-5
Or you can place an order online at: GMIHolidayGiftBox.com
Please contact us after October 5, .
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This report is printed on recycled paper.
© 2017 General Mills
NUMBER ONE GENERAL MILLS BOULEVARD
MINNEAPOLIS, MN -1
GENERALMILLS.COM