GIS 10-Q Quarter ended Nov. 25, 2018

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED November 25, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-01185

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

Delaware		41-0274440
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
Number One General Mills Boulevard Minneapolis, Minnesota		55426
(Address of principal executive offices)		(Zip Code)

(763) 764-7600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑		Accelerated filer ☐		Non-accelerated filer ☐		Smaller reporting company    ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares of Common Stock outstanding as of December 7, 2018: 596,748,917 (excluding 157,864,411 shares held in the treasury).

General Mills, Inc.

Table of Contents

		Page
PART I – Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings for the quarters and six-month periods ended November 25, 2018 and November 26, 2017		3
Consolidated Statements of Comprehensive Income for the quarters and six-month periods ended November 25, 2018 and November 26, 2017		4
Consolidated Balance Sheets as of November 25, 2018, and May  27, 2018		5
Consolidated Statements of Total Equity and Redeemable Interest for the six-month period ended November 25, 2018 and fiscal year ended May 27, 2018		6
Consolidated Statements of Cash Flows for the six-month periods ended November 25, 2018 and November 26, 2017		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk		43
Item 4. Controls and Procedures		44
PART II – Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 6. Exhibits		45
Signatures		46

2

PART I. FINANCIAL INFORMATION

Item 1.         Financial Statements

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions, Except per Share Data)

		Quarter Ended								Six-Month Period Ended
		Nov. 25, 2018				Nov. 26, 2017				Nov. 25, 2018				Nov. 26, 2017
Net sales		$	4,411.2			$	4,198.7			$	8,505.2			$	7,967.9
Cost of sales			2,901.5				2,752.5				5,652.7				5,208.4
Selling, general, and administrative expenses			753.3				735.6				1,496.0				1,438.4
Restructuring, impairment, and other exit costs			209.4				1.6				208.0				6.8
Operating profit			547.0				709.0				1,148.5				1,314.3
Benefit plan non-service income			(21.0)				(20.8)				(41.9)				(41.3)
Interest, net			132.7				74.9				266.2				147.3
Earnings before income taxes and after-tax earnings from joint ventures			435.3				654.9				924.2				1,208.3
Income taxes			106.6				234.9				217.3				403.4
After-tax earnings from joint ventures			22.5				23.8				40.2				47.5
Net earnings, including earnings attributable to redeemable and noncontrolling interests			351.2				443.8				747.1				852.4
Net earnings attributable to redeemable and noncontrolling interests			7.8				13.3				11.4				17.2
Net earnings attributable to General Mills		$	343.4			$	430.5			$	735.7			$	835.2
Earnings per share - basic		$	0.57			$	0.75			$	1.23			$	1.46
Earnings per share - diluted		$	0.57			$	0.74			$	1.22			$	1.43
Dividends per share		$	0.49			$	0.49			$	0.98			$	0.98

See accompanying notes to consolidated financial statements.

3

Consolidated Statements of Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

			Quarter Ended								Six-Month Period Ended
			Nov. 25, 2018				Nov. 26, 2017				Nov. 25, 2018				Nov. 26, 2017
Net earnings, including earnings attributable to redeemable and noncontrolling interests		$	351.2			$	443.8			$	747.1			$	852.4
Other comprehensive income (loss), net of tax:
Foreign currency translation			37.4				(42.0)				(68.8)				19.5
Other fair value changes:
Securities			-				0.5				-				0.8
Hedge derivatives			2.1				(0.1)				9.2				(8.9)
Reclassification to earnings:
Securities			-				-				(2.0)				-
Hedge derivatives			0.1				0.8				0.7				0.6
Amortization of losses and prior service costs			20.6				27.9				42.5				55.7
Other comprehensive income (loss), net of tax			60.2				(12.9)				(18.4)				67.7
Total comprehensive income			411.4				430.9				728.7				920.1
Comprehensive income (loss) attributable to redeemable and noncontrolling interests			(12.0)				12.8				(16.8)				84.8
Comprehensive income attributable to General Mills		$	423.4			$	418.1			$	745.5			$	835.3

See accompanying notes to consolidated financial statements.

4

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except Par Value)

		Nov. 25, 2018				May 27, 2018
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	532.7			$	399.0
Receivables			1,716.8				1,684.2
Inventories			1,639.2				1,642.2
Prepaid expenses and other current assets			345.1				398.3
Total current assets			4,233.8				4,123.7
Land, buildings, and equipment			3,897.4				4,047.2
Goodwill			14,018.3				14,065.0
Other intangible assets			7,202.7				7,445.1
Other assets			1,031.8				943.0
Total assets		$	30,384.0			$	30,624.0
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	2,823.9			$	2,746.2
Current portion of long-term debt			1,990.6				1,600.1
Notes payable			1,056.3				1,549.8
Other current liabilities			1,427.3				1,445.8
Total current liabilities			7,298.1				7,341.9
Long-term debt			12,208.6				12,668.7
Deferred income taxes			2,036.9				2,003.8
Other liabilities			1,313.4				1,341.0
Total liabilities			22,857.0				23,355.4
Redeemable interest			547.6				776.2
Stockholders’ equity:
Common stock, 754.6 shares issued, $0.10 par value			75.5				75.5
Additional paid-in capital			1,433.0				1,202.5
Retained earnings			14,572.2				14,459.6
Common stock in treasury, at cost, shares of 157.9 and 161.5			(7,009.7)				(7,167.5)
Accumulated other comprehensive loss			(2,419.2)				(2,429.0)
Total stockholders’ equity			6,651.8				6,141.1
Noncontrolling interests			327.6				351.3
Total equity			6,979.4				6,492.4
Total liabilities and equity		$	30,384.0			$	30,624.0

See accompanying notes to consolidated financial statements.

5

Consolidated Statements of Total Equity and Redeemable Interest

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions, Except per Share Data)

			$.10 Par Value Common Stock
		(One Billion Shares Authorized)
		Issued												Treasury
			Shares				Par Amount				Additional Paid-In Capital				Shares				Amount				Retained Earnings				Accumulated Other Comprehensive Loss				Non- controlling Interests				Total Equity				Redeemable Interest
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
Total comprehensive income																							2,131.0				144.9				26.9				2,302.8				43.6
Cash dividends declared ($1.96 per share)																							(1,139.7	)											(1,139.7	)
Shares purchased															(10.9	)			(601.6	)															(601.6	)
Shares issued											(39.1	)			22.7				1,009.0																969.9
Stock compensation plans											(57.9	)			4.4				188.0																130.1
Unearned compensation related to restricted stock unit awards											(58.1	)																							(58.1	)
Earned compensation											77.0																								77.0
Decrease in redemption value of redeemable interest											159.7																								159.7				(159.7	)
Distributions to noncontrolling and redeemable interest holders																															(33.2	)			(33.2	)			(18.6	)
Reclassification of certain income tax effects																							329.4				(329.4	)							-
Balance as of May 27, 2018			754.6				75.5				1,202.5				(161.5	)			(7,167.5	)			14,459.6				(2,429.0	)			351.3				6,492.4				776.2
Total comprehensive income (loss)																							735.7				9.8				(1.4	)			744.1				(15.4	)
Cash dividends declared ($0.98 per share)																							(589.2	)											(589.2	)
Shares purchased															-				(0.3	)															(0.3	)
Stock compensation plans											(15.5	)			3.6				158.1																142.6
Unearned compensation related to restricted stock unit awards											(66.7	)																							(66.7	)
Earned compensation											43.8																								43.8
Increase in investment in redeemable interest																																							55.7
Decrease in redemption value of redeemable interest											268.9																								268.9				(268.9	)
Distributions to noncontrolling and redeemable interest holders																															(22.3	)			(22.3	)			-
Adoption of revenue recognition accounting requirements																							(33.9	)											(33.9	)
Balance as of Nov. 25, 2018			754.6			$	75.5			$	1,433.0				(157.9	)		$	(7,009.7	)		$	14,572.2			$	(2,419.2	)		$	327.6			$	6,979.4			$	547.6

See accompanying notes to consolidated financial statements.

6

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

			Six-Month Period Ended
			Nov. 25, 2018				Nov. 26, 2017
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests		$	747.1			$	852.4
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			310.1				290.8
After-tax earnings from joint ventures			(40.2)				(47.5)
Distributions of earnings from joint ventures			34.7				45.1
Stock-based compensation			44.5				48.2
Deferred income taxes			43.8				70.2
Pension and other postretirement benefit plan contributions			(14.6)				(12.6)
Pension and other postretirement benefit plan costs			3.1				2.4
Restructuring, impairment, and other exit costs			179.0				(7.4)
Changes in current assets and liabilities			100.0				362.3
Other, net			(11.0)				(37.1)
Net cash provided by operating activities			1,396.5				1,566.8
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment			(253.8)				(260.0)
Investments in affiliates, net			(1.5)				(7.4)
Proceeds from disposal of land, buildings, and equipment			11.3				0.6
Other, net			(51.4)				(3.9)
Net cash used by investing activities			(295.4)				(270.7)
Cash Flows - Financing Activities
Change in notes payable			(482.1)				53.1
Issuance of long-term debt			-				500.0
Payment of long-term debt			(0.4)				(500.1)
Proceeds from common stock issued on exercised options			87.3				50.6
Purchases of common stock for treasury			(0.3)				(600.5)
Dividends paid			(589.2)				(565.2)
Investment in redeemable interest			55.7				-
Distributions to noncontrolling and redeemable interest holders			(6.8)				(45.3)
Other, net			(11.5)				(23.6)
Net cash used by financing activities			(947.3)				(1,131.0)
Effect of exchange rate changes on cash and cash equivalents			(20.1)				30.9
Increase in cash and cash equivalents			133.7				196.0
Cash and cash equivalents - beginning of year			399.0				766.1
Cash and cash equivalents - end of period		$	532.7			$	962.1
Cash Flow from changes in current assets and liabilities:
Receivables		$	(64.0)			$	(53.9)
Inventories			(15.3)				(15.6)
Prepaid expenses and other current assets			45.3				42.3
Accounts payable			144.1				377.0
Other current liabilities			(10.1)				12.5
Changes in current assets and liabilities		$	100.0			$	362.3

See accompanying notes to consolidated financial statements.

7

GENERAL MILLS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Background

The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, General Mills, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions and any noncontrolling and redeemable interests’ share of those transactions. Operating results for the quarter ended November 25, 2018, are not necessarily indicative of the results that may be expected for the fiscal year ending May 26, 2019.

These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended May 27, 2018. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 2 to the Consolidated Financial Statements in that Form 10-K with the exception of the new accounting requirements adopted in the first quarter of fiscal 2019 related to the presentation of net periodic defined benefit pension expense, net periodic postretirement benefit expense, and net periodic postemployment benefit expense and to revenue recognition. Please see Note 17 for additional information. Certain terms used throughout this report are defined in the “Glossary” section below.

(2) Acquisition

During the fourth quarter of fiscal 2018, we acquired Blue Buffalo Pet Products, Inc. (“Blue Buffalo”) for an aggregate purchase price of $8.0 billion, including $103.0 million of consideration for net debt repaid at the time of the acquisition. In accordance with the definitive agreement and plan of merger, a subsidiary of General Mills merged into Blue Buffalo, with Blue Buffalo surviving the merger as a wholly owned subsidiary of General Mills. In accordance with the merger agreement, equity holders of Blue Buffalo received $40.00 per share in cash. We financed the transaction with a combination of $6.0 billion in debt, $1.0 billion in equity, and cash on hand. In the quarter and six-month periods ended November 25, 2018, we recorded acquisition integration costs of $6.8 million and $15.5 million respectively, in selling, general, and administrative (SG&A) expenses.

We consolidated Blue Buffalo into our Consolidated Balance Sheets and recorded goodwill of $5.3 billion, an indefinite-lived intangible asset for the Blue Buffalo brand of $2.7 billion, and a finite-lived customer relationship asset of $269.0 million. The goodwill was primarily attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. The goodwill is included in the Pet reporting unit and is not deductible for tax purposes. We have conducted a preliminary assessment of certain assets and liabilities related to the acquisition of Blue Buffalo, and we are continuing our review of these items during the measurement period. If new information is obtained about facts and circumstances that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to current estimates of these items.

The results of Blue Buffalo are reported in our Pet operating segment on a one-month lag.

(3) Restructuring, Impairment, and Other Exit Costs

Restructuring and impairment charges were as follows:

				Quarter Ended								Six-Month Period Ended
In Millions				Nov. 25, 2018				Nov. 26, 2017				Nov. 25, 2018				Nov. 26, 2017
Asset impairments		$			205.8			$	-			$	205.8			$	-
Charges associated with restructuring actions previously announced					3.6				2.2				2.4				19.7
Total		$			209.4			$	2.2			$	208.2			$	19.7

In the second quarter of fiscal 2019, we recorded $192.6 million of charges related to the impairment of our Progresso , Food Should Taste Good and Mountain High brand intangible assets in restructuring, impairment, and other exit costs. Please see Note 4 for additional information.

8

During the second quarter of fiscal 2019, we recorded a $13.2 million charge in restructuring, impairment, and other exit costs related to the impairment of certain manufacturing assets within our North America Retail segment.

In the six-month period ended November 25, 2018, we did not undertake any new restructuring actions. We recorded $3.6 million of charges for previously announced restructuring actions in the second quarter of fiscal 2019 and $2.4 million in the six-month period ended November 25, 2018, compared to $2.2 million in the second quarter of fiscal 2018 and $19.7 million in the six-month period ended November 26, 2017. We paid $29.2 million in cash relating to these actions in the six-month period ended November 25, 2018, compared to $27.1 million in the six-month period ended November 26, 2017. These restructuring actions are expected to be completed by the end of fiscal 2020.

We paid $0.3 million in cash in the six-month period ended November 25, 2018, for project-related costs compared to $5.0 million in the same period of fiscal 2018.

Restructuring and impairment charges and project-related costs are recorded in our Consolidated Statements of Earnings as follows:

		Quarter Ended								Six-Month Period Ended
In Millions		Nov. 25, 2018				Nov. 26, 2017				Nov. 25, 2018				Nov. 26, 2017
Restructuring, impairment, and other exit costs		$	209.4			$	1.6			$	208.0			$	6.8
Cost of sales			-				0.6				0.2				12.9
Total restructuring and impairment charges			209.4				2.2				208.2				19.7
Project-related costs classified in cost of sales		$	-			$	4.2			$	1.2			$	5.4

The roll forward of our restructuring and other exit cost reserves, included in other current liabilities, is as follows:

In Millions		Severance				Contract Termination				Other Exit Costs				Total
Reserve balance as of May 27, 2018		$	66.0			$	0.1			$	0.7			$	66.8
Fiscal 2019 charges, including foreign currency translation			(6.4	)			0.9				1.9				(3.6	)
Utilized in fiscal 2019			(20.9	)			(1.0	)			(2.3	)			(24.2	)
Reserve balance as of Nov. 25, 2018		$	38.7			$	-			$	0.3			$	39.0

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, accelerated depreciation, the gain or loss on the sale of restructured assets, and the write-off of spare parts) and other periodic exit costs are recognized as incurred, as those items are not reflected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets.

(4) Goodwill and Other Intangible Assets

The components of goodwill and other intangible assets are as follows:

In Millions		Nov. 25, 2018				May 27, 2018
Goodwill		$	14,018.3			$	14,065.0
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles			6,604.2				6,818.7
Intangible assets subject to amortization:
Franchise agreements, customer relationships, and other finite-lived intangibles			793.0				811.7
Less accumulated amortization			(194.5	)			(185.3	)
Intangible assets subject to amortization, net			598.5				626.4
Other intangible assets			7,202.7				7,445.1
Total		$	21,221.0			$	21,510.1

9

Based on the carrying value of finite-lived intangible assets as of November 25, 2018, annual amortization expense for each of the next five fiscal years is estimated to be approximately $40 million.

During the fourth quarter of fiscal 2018, we acquired Blue Buffalo, which became our Pet operating segment and we recorded $5.3 billion of goodwill, $2.7 billion related to an indefinite-lived brand intangible asset, and $269.0 million related to a customer relationships intangible asset.

The changes in the carrying amount of goodwill during fiscal 2019 were as follows:

In Millions		North America Retail				Pet				Convenience Stores & Foodservice				Europe & Australia				Asia & Latin America				Joint Ventures				Total
Balance as of May 27, 2018		$	6,410.6			$	5,294.9			$	918.8			$	729.9			$	285.0			$	425.8			$	14,065.0
Other activity, primarily foreign currency translation			(2.3	)			-				-				(21.3	)			(11.7	)			(11.4	)			(46.7	)
Balance as of Nov. 25, 2018		$	6,408.3			$	5,294.9			$	918.8			$	708.6			$	273.3			$	414.4			$	14,018.3

The changes in the carrying amount of other intangible assets during fiscal 2019 were as follows:

In Millions		Total
Balance as of May 27, 2018		$	7,445.1
Impairment charges			(192.6	)
Other activity, primarily foreign currency translation			(49.8	)
Balance as of Nov. 25, 2018		$	7,202.7

We performed our annual goodwill and indefinite-lived intangible assets impairment test as of the first day of the second quarter of fiscal 2019. As a result of lower sales projections in our long-range plans for the businesses supporting the Progresso , Food Should Taste Good , and Mountain High brand intangible assets, we recorded the following impairment charges:

In Millions		Impairment Charge				Fair Value as of Nov. 25, 2018 (a)
Progresso		$	132.1			$	330.0
Food Should Taste Good			45.1				-
Mountain High			15.4				-
Total		$	192.6			$	330.0

(a)	Level 3 assets in the fair value hierarchy

Significant assumptions used in that assessment included our long-range cash flow projections for the businesses, royalty rates, weighted average cost of capital rates, and tax rates.

All other intangible asset fair values were substantially in excess of the carrying values, except for the Latin America reporting unit and the Yoki brand intangible asset. The excess fair value as of the fiscal 2019 test date of the Latin America reporting unit and the Yoki brand intangible asset were as follows:

In Millions		Carrying Value of Intangible Asset				Excess Fair Value as of Fiscal 2019 Test Date
Latin America		$	209.0				7	%
Yoki		$	49.1				10	%

While having significant coverage as of our fiscal 2019 assessment date, the Pillsbury brand intangible asset and U.S. Yogurt reporting unit had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.

10

(5) Inventories

The components of inventories were as follows:

In Millions		Nov. 25, 2018				May 27, 2018
Raw materials and packaging		$	396.7			$	400.0
Finished goods			1,349.2				1,364.2
Grain			112.5				91.2
Excess of FIFO over LIFO cost			(219.2	)			(213.2	)
Total		$	1,639.2			$	1,642.2

(6) Risk Management Activities

Many commodities we use in the production and distribution 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 assessments required to achieve hedge accounting for commodity derivative positions. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings.

Although we do not meet the criteria for cash flow hedge accounting, we believe that these instruments are effective in achieving our objective of providing certainty in the future price of commodities purchased for use in our supply chain. Accordingly, for purposes of measuring segment operating performance, these gains and losses are reported in unallocated 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 unallocated corporate items to segment operating profit, allowing our operating segments to realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in unallocated corporate items.

Unallocated corporate items for the quarters and six-month periods ended November 25, 2018 and November 26, 2017 included:

		Quarter Ended										Six-Month Period Ended
In Millions		Nov. 25, 2018				Nov. 26, 2017						Nov. 25, 2018				Nov. 26, 2017
Net loss on mark-to-market valuation of certain commodity positions		$	(17.5	)		$	(0.6	)				$	(37.0	)		$	(8.4	)
Net loss (gain) on commodity positions reclassified from unallocated corporate items to segment operating profit			2.2				2.5						(1.5	)			6.1
Net mark-to-market revaluation of certain grain inventories			3.5				2.6						(4.4	)			8.6
Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items		$	(11.8	)		$	4.5					$	(42.9	)		$	6.3

As of November 25, 2018, the net notional value of commodity derivatives was $172.1 million, of which $73.6 million related to energy inputs and $98.5 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.

The fair values of the derivative positions used in our risk management activities and other assets recorded at fair value were not material as of November 25, 2018, and were Level 1 or Level 2 assets and liabilities in the fair value hierarchy. We did not significantly change our valuation techniques from prior periods.

We offer certain suppliers access to third party services that allow 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 arrangements 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

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supplier agreements. As of November 25, 2018, $1,033.1 million of our total accounts payable were payable to suppliers who utilize these third party services.

(7) Debt

The components of notes payable were as follows:

In Millions		Nov. 25, 2018				May 27, 2018
U.S. commercial paper		$	867.6			$	1,213.5
Financial institutions			188.7				336.3
Total		$	1,056.3			$	1,549.8

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 programs available to us in the United States and Europe. We also have committed, 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 November 25, 2018:

In Billions		Facility Amount				Borrowed Amount
Credit facility expiring:
May 2022		$	2.7			$	-
June 2019			0.2				-
Total committed credit facilities			2.9				-
Uncommitted credit facilities			0.6				0.2
Total committed and uncommitted credit facilities		$	3.5			$	0.2

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 November 25, 2018.

Long-Term Debt

The fair values and carrying amounts of long-term debt, including the current portion, were $13,874.0 million and $14,199.2 million, respectively, as of November 25, 2018. 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.

In April 2018, we issued $4,800.0 million principal amount of fixed-rate notes. Interest on the notes is payable semi-annually 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 proceeds were used to finance a portion of the Blue Buffalo acquisition. The principal amounts of these fixed-rate notes were as follows:

In Millions		Principal
4.2% notes due April 17, 2028		$	1,400.0
3.7% notes due October 17, 2023			850.0
4.0% notes due April 17, 2025			800.0
4.7% notes due April 17, 2048			650.0
3.2% notes due April 16, 2021			600.0
4.55% notes due April 17, 2038			500.0
Total		$	4,800.0

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In April 2018, we issued $1,250.0 million principal amount of floating-rate notes. 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 finance a portion of the Blue Buffalo acquisition.

The principal amounts of these floating-rate notes were as follows:

In Millions		Principal
Floating-rate notes due April 16, 2021		$	850.0
Floating-rate notes due October 17, 2023			400.0
Total		$	1,250.0

In the third quarter of fiscal 2018, we paid $113.8 million to repurchase $100.0 million of our previously issued 6.39 percent medium term notes due 2023. We recorded the $13.8 million premium paid in the repurchase as interest expense.

In October 2017, we issued $500.0 million principal amount of 2.6 percent fixed-rate notes due October 12, 2022. Interest on the notes is payable semi-annually 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 proceeds, together with cash on hand, were used to repay $500.0 million of 1.4 percent fixed-rate notes.

Certain of our long-term debt agreements contain restrictive covenants. As of November 25, 2018, we were in compliance with all of these covenants.

(8) Redeemable and Noncontrolling Interests

We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal International (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 November 25, 2018, the redemption value of the euro-denominated redeemable interest was $547.6 million.

A subsidiary of Yoplait SAS has an exclusive milk supply agreement for its European operations with Sodiaal through July 1, 2021. Net purchases totaled $107.8 million for the six-month period ended November 25, 2018, and $112.3 million for the six-month period ended November 26, 2017.

During the second quarter of fiscal 2019, Sodiaal made an additional investment of $55.7 million in Yoplait SAS.

On the acquisition dates, we recorded the $281.4 million fair value of Sodiaal’s 50 percent euro-denominated interest in Yoplait Marques SNC and 50 percent 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 trademarks. These entities pay dividends annually based on their available cash as of their fiscal year end.

The third-party holder of the General Mills Cereals, LLC (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 valuation (currently $251.5 million). On June 1, 2018, the floating preferred return rate on GMC’s Class A Interests was reset to the sum of three-month LIBOR plus 142.5 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.

Our noncontrolling interests contain restrictive covenants. As of November 25, 2018, we were in compliance with all of these covenants.

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(9) Stockholders’ Equity

The following tables provide details of total comprehensive income:

		Quarter Ended																				Quarter Ended
		Nov. 25, 2018																				Nov. 26, 2017
		General Mills												Noncontrolling Interests				Redeemable Interest				General Mills												Noncontrolling Interests				Redeemable Interest
In Millions		Pretax				Tax				Net				Net				Net				Pretax				Tax				Net				Net				Net
Net earnings, including earnings attributable to redeemable and noncontrolling interests										$	343.4			$	5.1			$	2.7											$	430.5			$	4.5			$	8.8
Other comprehensive income (loss):
Foreign currency translation		$	56.5			$	-				56.5				(8.3	)			(10.8	)		$	(43.3	)		$	-				(43.3	)			0.6				0.7
Other fair value changes:
Securities			-				-				-				-				-				0.9				(0.4	)			0.5				-				-
Hedge derivatives			2.0				0.7				2.7				-				(0.6	)			3.5				(2.5	)			1.0				-				(1.1	)
Reclassification to earnings:
Hedge derivatives (a)			0.5				(0.3	)			0.2				-				(0.1	)			2.5				(1.0	)			1.5				-				(0.7	)
Amortization of losses and prior service costs (b)			26.8				(6.2	)			20.6				-				-				43.8				(15.9	)			27.9				-				-
Other comprehensive income (loss)		$	85.8			$	(5.8	)			80.0				(8.3	)			(11.5	)		$	7.4			$	(19.8	)			(12.4	)			0.6				(1.1	)
Total comprehensive income (loss)										$	423.4			$	(3.2	)		$	(8.8	)										$	418.1			$	5.1			$	7.7

(a)	Loss (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 benefit plan non-service income. Please refer to Note 17.

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		Six-Month Period Ended																				Six-Month Period Ended
		Nov. 25, 2018																				Nov. 26, 2017
		General Mills												Noncontrolling Interests				Redeemable Interest				General Mills												Noncontrolling Interests				Redeemable Interest
In Millions		Pretax				Tax				Net				Net				Net				Pretax				Tax				Net				Net				Net
Net earnings, including earnings attributable to redeemable and noncontrolling interests										$	735.7			$	8.2			$	3.2											$	835.2			$	6.0			$	11.2
Other comprehensive income (loss):
Foreign currency translation		$	(40.3	)		$	-				(40.3	)			(9.6	)			(18.9	)		$	(48.6	)		$	-				(48.6	)			22.1				46.0
Other fair value changes:
Securities			-				-				-				-				-				1.3				(0.5	)			0.8				-				-
Hedge derivatives			9.2				(0.3	)			8.9				-				0.3				(12.2	)			2.7				(9.5	)			-				0.6
Reclassification to earnings:
Securities (a)			(2.6	)			0.6				(2.0	)			-				-				-				-				-				-				-
Hedge derivatives (b)			1.0				(0.3	)			0.7				-				-				3.3				(1.6	)			1.7				-				(1.1	)
Amortization of losses and prior service costs (c)			53.7				(11.2	)			42.5				-				-				87.6				(31.9	)			55.7				-				-
Other comprehensive income (loss)		$	21.0			$	(11.2	)			9.8				(9.6	)			(18.6	)		$	31.4			$	(31.3	)			0.1				22.1				45.5
Total comprehensive income (loss)										$	745.5			$	(1.4	)		$	(15.4	)										$	835.3			$	28.1			$	56.7

(a)	Gain reclassified from AOCI into earnings is reported in interest, net for securities.

(b)	Loss (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.

(c)	Loss reclassified from AOCI into earnings is reported in benefit plan non-service income. Please refer to Note 17.

Accumulated other comprehensive loss balances, net of tax effects, were as follows:

In Millions		Nov. 25, 2018				May 27, 2018
Foreign currency translation adjustments		$	(741.9	)		$	(701.6	)
Unrealized gain (loss) from:
Securities			-				2.0
Hedge derivatives			(22.5	)			(32.1	)
Pension, other postretirement, and postemployment benefits:
Net actuarial loss			(1,679.9	)			(1,723.6	)
Prior service credits			25.1				26.3
Accumulated other comprehensive loss		$	(2,419.2	)		$	(2,429.0	)

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