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

Change on a
In millions, except per share 52 weeks ended 52 weeks ended constant
and profit margin data May 28, 2017 May 29, 2016 Change currency basis*
Net Sales $ 15,620 $ 16,563 -6%
Organic Net Sales* -4%
Operating Profit $ 2,566 $ 2,707 -5%
Total Segment Operating Profit* $ 2,953 $ 3,000 -2% -1%
Operating Profit Margin 16.4% 16.3% +10 basis points
Adjusted Operating Profit Margin* 18.1% 16.8% +130 basis points
Net Earnings Attributable to General Mills $ 1,658 $ 1,697 -2%
Diluted Earnings per Share (EPS) $ 2.77 $ 2.77 0%
Adjusted Diluted EPS, Excluding Certain
Items Affecting Comparability* $ 3.08 $ 2.92 5% 6%
Average Diluted Shares Outstanding 598 612 -2%
Dividends per Share $ 1.92 $ 1.78 8%

Net Sales Total Segment Operating Profit* Adjusted Diluted Earnings per Share*
Dollars in millions Dollars in millions Dollars

2017 $15,620 2017 $2,953 2017 $3.08

2016 $16,563 2016 $3,000 2016 $2.92
2015 $17,630 2015 $3,035 2015 $2.86
2014 $17,910 2014 $3,154 2014 $2.82
2013 $17,774 2013 $3,223 2013 $2.72

*See page 35 for discussion of non-GAAP measures.

 ANNUAL REPORT  01

GENERAL MILLS AT A GLANCE

$1. Billion FISCAL 2017 NET SALES
Total Company Net Sales by Product Platform Total Company Net Sales by Segment
We are focused on five global growth platforms — cereal, In fiscal 2017, we implemented a new global organization
snacks, yogurt, convenient meals and super-premium ice structure. Our company is now organized into four
cream. These categories are projected to grow at attractive operating segments.
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%
Snacks North America
Cereal 11% Retail
11% 21%
Convenient meals Convenience Stores
Yogurt
12% & Foodservice
11% Europe & Australia
Super-premium
65% Asia & Latin America
5% ice cream
17% 12%
Dough
15% Baking mixes and
17% ingredients
Vegetables
Other

$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

FISCAL 2017 to their similar product portfolio Total Shareholder Return

PERFORMANCE and go-to-market structure. We Fiscal years, stock price appreciation plus
divided our International segment reinvested dividends, compound annual growth
General Mills consolidated net sales into two segments: Europe &
for the fiscal year ended May 28, 2017, 18%
Australia and Asia & Latin America. 15%
declined  percent to $15. billion. Our fourth reporting segment, 11% 10%
Organic net sales declined 4 percent.* 7%
Convenience Stores & Foodservice,
Total segment operating profit remained unchanged from our -6%
decreased 2 percent to $2.5 billion. previous structure. Latest Latest
On a constant-currency basis, 2017 5 Years 10 Years

total segment operating profit Fiscal 2017 net sales for North  S&P 500 Index  General Mills
declined 1 percent. America Retail, our largest segment,
Source: FactSet
declined 7 percent to $10.2 billion,
Diluted earnings per share were due in large part to sales declines in
comparable to last year at $2.77. our yogurt, refrigerated dough, cereal Dividends per Share
Adjusted diluted earnings per and soup businesses. This net sales Dollars
share, which excludes certain items decline also included the impact of
affecting comparability of results, $1.78 $1.92 $1.96
the divestiture of the North American $1.55 $1.67
rose 5 percent to $3.08. Excluding the $1.32
Green Giant vegetables business in
impact of foreign exchange, adjusted fiscal 201. On an organic basis, net
diluted earnings per share increased sales declined 5 percent. Segment
 percent. Our total shareholder operating profit decreased 2 percent
2013 2014 2015 2016 2017 2018

return, which is a combination as reported and on a constant-  New annualized rate

of stock price appreciation and currency basis, driven by the Green
dividends, declined  percent, Giant divestiture.
reflecting our challenging topline
performance during the year. Our Convenience Stores & Foodservice
segment posted a 3 percent net sales
In the third quarter of the fiscal decline, driven primarily by market
year, we reorganized our reporting index pricing on bakery flour and
segments to align with our new declines on frozen dough products.
global organization structure. We Segment operating profit increased
combined our U.S. Retail operating  percent for the year, exceeding
units and Canada region into a $400 million. These results reflect our
North America Retail segment, due

*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 on Häagen-Dazs ice cream, Old El in fiscal 2017. Together, these joint
platforms in growing foodservice Paso Mexican foods, and Nature ventures contributed $85 million in
channels: cereal, snacks, yogurt, Valley snacks across the segment. after-tax earnings in 2017. This was
mixes, biscuits and frozen meals. These results were partially offset  percent below last year on a constant-
These businesses, which account by declines on our yogurt business currency basis, driven primarily by
for half of the segment’s sales and in Europe and an extra month of an asset write-off for CPW, partially
70 percent of the segment’s operating results for Yoplait Europe last year, offset by volume gains on HDJ.
profit, posted combined net sales as we aligned that business to our
growth of 2 percent for the year. fiscal calendar. In fiscal 2017, we returned $2.7 billion
to shareholders through net
Net sales for our Europe & Australia Net sales for our Asia & Latin share repurchases and dividends.
segment declined  percent to America segment grew 1 percent and We repurchased approximately
$1.8 billion and operating profit segment operating profit increased 25 million shares of common stock,
declined 18 percent, primarily 21 percent. Segment net sales reducing our average number
reflecting unfavorable foreign increased 3 percent on an organic of diluted shares outstanding by
currency exchange. On an organic basis, and segment operating profit 2 percent, which is in line with
basis, segment net sales decreased grew 20 percent in constant currency. our longer-term goal. In June 2017,
4 percent. Segment operating profit Good growth in China, led by we increased our quarterly
decreased  percent in constant Häagen-Dazs ice cream and Yoplait dividend rate by 2 percent. The
currency. We posted good growth yogurt, along with growth in India, new annualized rate of $1. per
was offset by a challenging operating share represents a yield of around
environment in Latin America. We 3.5 percent at recent prices for
also benefited from an extra month General Mills stock. Our goal is to
of results in Brazil, as we aligned that continue to increase dividends as
business to our fiscal calendar. earnings grow.

In addition to these four operating

OUR PRIORITIES FOR
segments, we hold 50-percent, non-
consolidated interests in two joint FUTURE GROWTH
ventures outside of North America. For the past 150 years, General Mills
Constant-currency net sales for has been living its purpose of serving
Cereal Partners Worldwide (CPW) the world by making food people
and Häagen-Dazs Japan (HDJ) grew love. We aspire to continued growth
3 percent and 8 percent, respectively, 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 Compound Growth Rate
Organic Net Sales Low single-digit

Total Segment Operating Profit Mid single-digit*

Adjusted Diluted Earnings per Share High single-digit*

Dividend Yield 2 to 3 percent

Total Return to Shareholders Double-digit

*In constant currency

Our goal is to create market-leading deep understanding of consumer consistent profit and cash generation
growth that will deliver top-tier needs and respond quickly to give that helps fund topline growth
returns to shareholders. them what they want. Whether initiatives. We are making selective
it’s bringing marshmallow news to investments in our Foundation
We remain committed to our long- Lucky Charms cereal in the U.S. or brands, focusing on strong returns.
term growth model. While the providing consumers in China with
operating environment has been the creamy yogurt they desire, we With our Consumer First strategy
challenging in the short term, over the have many examples of how this and our Growth and Foundation
long run, we believe our businesses strategy has driven growth across designations firmly in place, we’re
can generate low single-digit organic our product portfolio, and we focused on the following key priorities
net sales growth, mid single-digit see plenty more opportunities for for fiscal 2018.
constant-currency total segment future growth. We’re also making
operating profit growth and high strategic choices about our level of Grow Cereal Globally
single-digit growth in adjusted diluted investments and expectations for According to Euromonitor, cereal
earnings per share on a constant- growth across our businesses. We is a $23 billion category worldwide,
currency basis. Adding in a dividend continue to manage three quarters and it’s projected to grow at a
yield of between 2 and 3 percent, of our company as a Growth portfolio, low single-digit rate over the next
we should deliver double-digit returns where we are focusing the majority several years. With our North
to shareholders over the long term. of our investments for long-term America cereal business and CPW
To drive future growth, we are growth. Our Foundation portfolio combined, we compete in more
focused on our Consumer First represents the remaining quarter of than 130 markets around the world
strategy where we work to gain a our company and provides strong, 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 strong double-digit retail sales

in new and fast-growing segments growth in North America behind
of the category is the key to improving increased distribution and strong
our performance in yogurt. In 201 advertising.
and 2017, we introduced Annie’s and
Liberté organic yogurts. In 2018, Drive Continued Growth on
we’re launching Oui by Yoplait, a Natural & Organic Products
thick and creamy yogurt, based on a
Our natural and organic portfolio
French recipe, that brings a new taste
generates $1 billion in net sales in
and texture to the U.S. market. We
North America, and we expect to
also see good growth opportunities
reach $1.5 billion in net sales by 2020.
outside of North America. Our yogurt
Annie’s is our largest natural and
platform in China continues to deliver
organic brand and now competes in
strong results, and we have plans to
14 food categories. We continue
expand into new cities in 2018.
in many of them. Wellness and taste to add new offerings, including more
news are delivering growth on many snacks and macaroni and cheese
Invest in High-performing varieties coming in fiscal 2018. We
of our cereal brands. In fiscal 2018,
Brands Worldwide also continue to expand distribution
we have a strong line-up of product
news, including new flavors of Our Häagen-Dazs and Old El Paso in Canada, where the brand is only
iconic Cheerios, that we’ll support with brands have been posting good two years old, but growing quickly.
solid levels of consumer investment growth around the world. In 2018, And we’re investing in smaller natural
to grow our global cereal platform. we’ll expand our very successful and organic brands that show great
Häagen-Dazs ice cream stick bars growth potential, such as EPIC meat
Innovate to Improve Yogurt into new markets and also introduce snacks in the U.S.
Performance mini varieties. We have new Old
El Paso taco shell varieties coming Manage Foundation Portfolio
With its combination of great taste
in the U.S., Europe and Australia. with Appropriate Investment
and inherent health benefits, the
We’ll continue to expand distribution
yogurt category is projected to grow Our Foundation brands deliver stable
on our snack bars, including new
at high single-digit rates worldwide. revenue performance and solid
flavors of Nature Valley granola
Our U.S. results have been challenging earnings and cash flow. We’re making
cups, biscuits and bars. And Lärabar
in recent years as our product line opportunistic investments in many of
fruit and nut bars continue to post
hasn’t kept pace with consumer them to keep them competitive
 ANNUAL REPORT  07

and relevant with consumers. Chief Executive Officer. Jeff has more we will achieve our performance
For example, we’re launching a line than 20 years of experience with goals. We also what to thank you, our
of Progresso organic soups for General Mills, running both domestic shareholders, for your investment
consumers seeking a “better for you” and international businesses. Ken in General Mills. We are committed
soup option. And we’re adding a Powell remains as our Chairman and to delivering on our performance
new rolled pizza crust to our Pillsbury we thank him for the 10 years he goals on your behalf and appreciate
refrigerated dough offerings, served as our Chief Executive Officer. your confidence in our plans for
making homemade pizza even more Ken led us through challenging and future growth.
convenient to prepare. exciting times as we grew into a
more global food company. Under his
Building an Agile leadership as CEO, total returns to
Organization General Mills shareholders grew at
an 11 percent compound annual rate. Kendall J. Powell
The new structure we implemented in
We also want to acknowledge Chris Chairman of the Board
2017 has increased our organizational
O’Leary, Executive Vice President and
agility to operate as a truly global
Chief Operating Officer of our former
food company. We accelerated
International segment, and Gary Chu,
the global restructuring of our
Senior Vice President and President,
supply chain, organized under new
Greater China, who announced their Jeffrey L. Harmening
operating segments and streamlined
retirements this year. We appreciate Chief Executive Officer
our support functions, allowing for
the contributions they made to our
more fluid use of resources and idea August 1, 2017
company during their combined
sharing around the world. We’re
40 years with General Mills. In addition,
also building new capabilities to
Bob Ryan and Dorothy Terrell will be
support our businesses in the future.
retiring from our board in September.
We’re enhancing our e-commerce
They have provided invaluable counsel
know-how to capture more growth
during their combined 35 years of
in this emerging channel. And we
service to General Mills.
continue to invest in strategic revenue
management tools to optimize In closing, we want to thank our
our promotions, prices and mix of 38,000 employees around the world
products to drive sales growth. for their dedication and commitment
to our company. Their talent and
We’ve entered fiscal 2018 with some
skills are what drive our organization
significant executive changes. In June
and what give us confidence that
2017, Jeff Harmening was named

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 Our sustainability goal is to protect the resources
upon which our business depends. Our company’s
has been making food people love while
size, scale and global scope enable us to have a
investing to make the world around us material impact on environmental issues, and we
better. We believe that being successful have taken bold actions to advance sustainability.

in the marketplace and being a force Here are a few examples:

for good go hand in hand. This belief
CLIMATE CHANGE
is more important than ever as our
We have set a goal to reduce
company navigates the enormous absolute greenhouse gas
changes in our industry and the global emissions across our full value
economy. Consumer expectations for chain by 28 percent by 2025
from 2010 levels and to achieve
food companies have never been higher. sustainable emission levels in line
Consumers are increasingly looking with scientific consensus by 2050.
for foods that reflect their values from
a company they trust. And we have WATER STEWARDSHIP
We will develop water stewardship
responded with expanded offerings,
plans for the most material and at-
new product benefits and increasing risk watersheds in our global value
transparency about our food. chain by 2025.

At the same time, our planet is changing. POLLINATORS AND

More than perhaps any other industry, BIODIVERSITY
ours relies on nature’s bounty for the We are partners with the U.S.
Department of Agriculture and
ingredients in our products. And in order
The Xerces Society on a project to
to feed a growing global population, establish and protect more than
we have to be good stewards of our 100,000 acres of pollinator habitat
in the U.S. by the end of 2021.
earth — f​ rom farm to fork and beyond.
Increasingly, the health of our business SUSTAINABLE SOURCING
depends on the health of the planet. 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.

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.
 ANNUAL REPORT  09

FINANCIAL REVIEW
CONTENTS
Financial Summary 10
Selected Financial Data 12
Management’s Discussion and Analysis of Financial
Condition and Results of Operations 1
Non-GAAP Measures 
Reports of Management and Independent Registered
Public Accounting Firm 
Consolidated Financial Statements 7
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 89
Total Return to Shareholders 91
10  GENERAL MILLS

FINANCIAL SUMMARY

MARGIN EXPANSION HELPS FUND OUR FUTURE Adjusted Operating Profit Margin*
Percent of net sales
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 2017 18.1%
inflation remained low in fiscal 2017, we still expect costs to remain inflationary 2016 16.8%
for the foreseeable future. Holistic Margin Management (HMM) is our company-
wide initiative to use productivity savings, mix management and price realization 2015 15.9%
to offset input cost inflation, protect margins and generate funds to reinvest in
2014 16.2%
sales-generating activities. In fiscal 2017, we generated $30  million in HMM cost
savings, and we’ve been able to hold our gross margin relatively steady over the past 2013 16.3%
five years.

We also have been taking additional actions to streamline our organization, increase Cash Flow from Operations
our efficiency and generate cost savings. These additional actions combined, Dollars in millions
including zero-based budgeting initiatives, generated a cumulative $540 million in
2017 $2,313
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 2016 $2,630
excludes certain items affecting comparability, and adjusted operating profit margin
2015 $2,543
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 2014 $2,541
delivering a balance of sales growth and margin expansion to deliver top-tier returns
to shareholders. 2013 $2,926

GENERATING CASH Free Cash Flow*

Our businesses have a long history of strong cash generation. In fiscal 2017, our cash Three-year rolling total, dollars in millions
flow from operations totaled $2.3 billion, down 12 percent from last year driven by 2017 $5,360
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 2016 $5,608
of operating cash flow. Our free cash flow, which is operating cash flow less capital
2015 $6,020
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 2014 $5,921
to free cash on a long-term basis. Our rolling three-year cumulative free cash flow,
2013 $4,926
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
Core Working Capital
after-tax earnings. Dollars in millions

2017 $794

2016 $729

2015 $1,244

2014 $1,432

2013 $1,569
 ANNUAL REPORT  11

Fixed Asset Investment Our continued discipline on core working capital, which is accounts receivable plus
Percent of net sales inventories less accounts payable, has contributed to our operating cash flow. In fiscal
2017 4.4% 2017, our core working capital increased  percent as the timing of receivables and
higher inventory balances were partially offset by continued progress on accounts
2016 4.4% 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
2015 4.0%
efficiency, and we expect to reduce our core working capital in fiscal 2018.
2014 3.7%

2013 3.4% 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
Dividends Paid totaled $84 million, largely in line with our long-term target of 4 percent of net sales.
Dollars in millions
In fiscal 2018, we expect to invest another $50 million in capital expenditures to fund
2017 $1,135 projects to increase our efficiency and enable growth.

2016 $1,072 After capital investment, we prioritize cash returns to shareholders through dividends
and share repurchases. Cash dividends to shareholders totaled $1.1 billion in fiscal
2015 $1,018
2017, a   percent increase from last year. Over the past five years, our dividends
2014 $983 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
2013 $868 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
Average Diluted Shares Outstanding
Shares in millions
increasing dividends over time, in line with our earnings growth.

2017 598 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
2016 612 by 2 percent, in line with our long-term share-reduction target. For fiscal 2018, we
2015 619 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
2014 646 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
2013 666
2015 and 2017.

Net income growth and disciplined uses of cash are the drivers of increasing
Adjusted Return on returns on average total capital. In fiscal 2017, our return on average total capital
Average Total Capital*
Percent was 12.7 percent. Adjusted return on average total capital increased 30 basis points
to 11. percent due to continued prudent capital management.
2017 11.6%

2016 11.3%

2015 11.2%

2014 11.6%

2013 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

The following table sets forth selected financial data for each of the fiscal years in the five-year period ended
May 28, 2017:

Fiscal Year
In Millions, Except Per Share Data, Percentages and Ratios 2017 2016 2015 (a) 2014 2013

Operating data:
Net sales $ 15,619.8 $ 16,563.1 $ 17,630.3 $ 17,909.6 $ 17,774.1
Gross margin (b) 5,563.8 5,829.5 5,949.2 6,369.8 6,423.9
Selling, general, and administrative expenses 2,801.3 3,118.9 3,328.0 3,474.3 3,552.3
Operating profit 2,566.4 2,707.4 2,077.3 2,957.4 2,851.8
Total segment operating profit (c) 2,952.6 2,999.5 3,035.0 3,153.9 3,222.9
Divestitures loss (gain) 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 623.8 754.4 823.1 869.5 895.0
Research and development expense 218.2 222.1 229.4 243.6 237.9
Average shares outstanding:
Diluted 598.0 611.9 618.8 645.7 665.6
Earnings per share:
Diluted $ 2.77 $ 2.77 $ 1.97 $ 2.83 $ 2.79
Diluted, excluding certain items affecting comparability (c)
$ 3.08 $ 2.92 $ 2.86 $ 2.82 $ 2.72
Operating ratios:
Gross margin as a percentage of net sales 35.6% 35.2% 33.7% 35.6% 36.1%
Selling, general, and administrative expenses as a
percentage of net sales 17.9% 18.8% 18.9% 19.4% 20.0%
Operating profit as a percentage of net sales 16.4% 16.3% 11.8% 16.5% 16.0%
Adjusted operating profit
as a percentage of net sales (b) (c) 18.1% 16.8% 15.9% 16.2% 16.3%
Total segment operating profit
as a percentage of net sales (c) 18.9% 18.1% 17.2% 17.6% 18.1%
Effective income tax rate 28.8% 31.4% 33.3% 33.3% 29.2%
Return on average total capital (b) 12.7% 12.9% 9.1% 12.5% 13.4%
Adjusted return on average total capital (b) (c) 11.6% 11.3% 11.2% 11.6% 12.0%
Balance sheet data:
Land, buildings, and equipment $ 3,687.7 $ 3,743.6 $ 3,783.3 $ 3,941.9 $ 3,878.1
Total assets 21,812.6 21,712.3 21,832.0 23,044.7 22,505.7
Long-term debt, excluding current portion 7,642.9 7,057.7 7,575.3 6,396.6 5,901.8
Total debt (b) 9,481.7 8,430.9 9,191.5 8,758.9 7,944.8
Cash flow data:
Net cash provided by operating activities $ 2,313.3 $ 2,629.8 $ 2,542.8 $ 2,541.0 $ 2,926.0
Capital expenditures 684.4 729.3 712.4 663.5 613.9
Free cash flow (b) (c) 1,628.9 1,900.5 1,830.4 1,877.5 2,312.1
Fixed charge coverage ratio (b) 7.26 7.40 5.54 8.04 7.62
Operating cash flow to debt ratio (b) 24.4% 31.2% 27.7% 29.0% 36.8%
Share data:
Low stock price $ 55.91 $ 54.12 $ 48.86 $ 46.86 $ 37.55
High stock price 72.64 65.36 57.14 54.40 50.93
Closing stock price 57.32 62.87 56.15 53.81 48.98
Cash dividends per common share 1.92 1.78 1.67 1.55 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 fiscal years were 52 weeks.
(b) See “Glossary” on page 89 of this report for definition.
(c) See “Non-GAAP Measures” on page 35 of this report for our discussion of this measure not defined by generally accepted accounting principles.
 ANNUAL REPORT 13

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE OVERVIEW and total segment operating profit growth fell short
of our plans, largely because of competitive price gaps
We are a global consumer foods company. We develop in our North American Retail segment. We underes-
distinctive value-added food products and market them timated the impact that our aggressive reductions in
under unique brand names. We work continuously to promotional spending, implemented early in the fiscal
improve our core products and to create new products year, would have on our net pricing relative to com-
that meet consumers’ evolving needs and preferences. petitors. The gaps were most pronounced in the U.S.
In addition, we build the equity of our brands over time Meals & Baking operating unit, and competitive activity
with strong consumer-directed marketing, innovative also significantly impacted U.S. Yogurt. We took correc-
new products, and effective merchandising. We believe tive actions to improve our performance in the second
our brand-building strategy is the key to winning and half of fiscal 2017, but it was not sufficient to stem
sustaining leading share positions in markets around the early declines. Yogurt in the Europe & Australia
the globe. segment also did not meet expectations as competi-
Our fundamental financial goal is to generate supe- tive pressure from smaller branded players increased
rior returns for our shareholders over the long term. significantly. Excluding yogurt, the segment’s net sales
We believe that increases in net sales, segment operat- and share increased driven by ice cream and snack bars
ing profit, earnings per share (EPS), free cash flow, cash innovation and improved merchandising performance.
return to shareholders, and return on average total In the Convenience Stores & Foodservice segment, seg-
capital are key drivers of financial performance for our ment operating profit grew driven by lower input costs
business. and benefits from cost savings initiatives. Net sales for
Our long-term growth objectives are to consistently the Focus 6 platforms grew modestly, but were more
deliver: than offset by market index pricing on flour. In the Asia
• low single-digit annual growth in organic net sales; & Latin America segment, macroeconomic weakness
• mid single-digit annual growth in total segment in Latin America and the Middle East created a chal-
operating profit on a constant-currency basis; lenging environment while greater China returned to
• high single-digit annual growth in diluted EPS net sales growth, including contributions from the new
excluding certain items affecting comparability on a Yoplait business. We continued to realize planned ben-
constant-currency basis; efits from our numerous restructuring initiatives and
• improvement in adjusted return on average total cost reduction efforts in our supply chain and adminis-
capital; trative areas which helped us to increase our adjusted
• free cash flow conversion averaging above 95 percent operating profit margin and adjusted diluted earnings
of adjusted net earnings after tax; and per share (EPS) in fiscal 2017.
• cash return to shareholders averaging above 90 per- Our consolidated net sales for fiscal 2017 declined 6
cent of free cash flow, including an attractive divi- percent to $15.6 billion, primarily driven by declining
dend yield. contributions from volume, including the impact of the
We believe that this financial performance should divestiture of the North American Green Giant prod-
result in long-term value creation for shareholders. uct lines (Green Giant). On an organic basis, net sales
Fiscal 2017 was a year of significant change for decreased 4 percent. Operating profit of $2.6 billion
General Mills. We implemented a new global organi- decreased 5 percent. Total segment operating profit of
zational structure to enhance our agility in a rapidly $3.0 billion declined 2 percent and declined 1 percent on
changing consumer environment. We expanded our a constant-currency basis. Diluted EPS of $2.77 was flat
global supply chain restructuring initiative to further compared to fiscal 2016. Adjusted diluted EPS, which
increase our efficiency. We also implemented a busi- excludes certain items affecting comparability of results,
ness plan that aggressively shifted resources to our rose 5 percent to $3.08 per share and increased 6 per-
best growth opportunities and eliminated low-return cent on a constant-currency basis. Our return on aver-
investments and volume. While these actions were the age total capital was 12.7 percent, and adjusted return
right thing to do for our company, we did not execute on average total capital increased 30 basis points to
up to our standards in certain areas and our results 11.6 percent and increased 40 basis points on a con-
did not meet our expectations. Consolidated net sales stant-currency basis (See the “Non-GAAP Measures”
14 GENERAL MILLS

section below for discussion of total segment operating These savings should more than offset our estimate of
profit, adjusted diluted EPS, organic net sales growth 3 percent input cost inflation.
rate, constant-currency total segment operating profit This cost management discipline has helped us sig-
growth rate, constant-currency adjusted diluted EPS nificantly expand our adjusted operating profit margin
growth rate, and adjusted return on average total over the past two years. We continue to see opportuni-
capital, which are not defined by generally accepted ties for further margin expansion, including an increase
accounting principles (GAAP)). in adjusted operating profit margin in fiscal 2018, but
Net cash provided by operations totaled $2.3 billion we will moderate the pace of expansion as we invest to
in fiscal 2017 at a conversion rate of 136 percent of net restore topline growth. Looking forward, we are focused
earnings, including earnings attributable to redeemable on delivering a balance of sales growth and margin
and noncontrolling interests. This cash generation sup- expansion, along with strong cash conversion and cash
ported capital investments totaling $684 million, and returns, to create top-tier returns for our shareholders.
our resulting free cash flow was $1.6 billion at a con- With these assumptions in mind:
version rate of 86 percent of adjusted net earnings, • We expect fiscal 2018 organic net sales to decline
including earnings attributable to redeemable and non- between 1 and 2 percent from fiscal 2017 levels.
controlling interests. We also returned significant cash • We expect fiscal 2018 total segment operating profit
to shareholders through a 6 percent dividend increase will be in a range between flat and up 1 percent on a
and share repurchases totaling $1,652 million. Total constant-currency basis.
cash returned to shareholders represented 164 percent • We expect fiscal 2018 adjusted diluted EPS to increase
of our free cash flow (see the “Non-GAAP Measures” 1 to 2 percent in constant currency from the base of
section below for a description of our use of measures $3.08 earned in fiscal 2017.
not defined by GAAP). • Our plans call for continued strong cash returns to
A detailed review of our fiscal 2017 performance shareholders. The current annualized dividend rate of
appears below in the section titled “Fiscal 2017 $1.96 per share is up 2 percent from the annual div-
Consolidated Results of Operations.” idend paid in fiscal 2017. Share repurchases in fiscal
We remain committed to our Consumer First strategy 2018 are expected to result in a net reduction in aver-
and our focus on driving growth and returns for our age diluted shares outstanding of approximately 1 to
shareholders. Our top priority in fiscal 2018 is to make 2 percent.
significant strides toward returning our business to See the “Non-GAAP Measures” section below for a
sustainable topline growth. Our fiscal 2018 plans call for description of our use of measures not defined by GAAP.
investment in product news and innovation to accel- Certain terms used throughout this report are defined
erate growth for businesses where we have positive in a glossary on page 89 of this report.
momentum, and to improve those that are underper-
forming. We will also increase investment in capabilities FISCAL 2017 CONSOLIDATED RESULTS
like e-commerce and Strategic Revenue Management,
OF OPERATIONS
which are critical to future growth. We will continue
to prioritize resources against our Growth platforms,
Fiscal 2017 includes an additional month of results from
where we see the strongest profitable growth poten-
General Mills Brasil Alimentos Ltda (Yoki) (please refer
tial. And we will make selective investments in our
to Note 1 to the Consolidated Financial Statements on
Foundation brands while focusing on profitability and
page 51 of this report).
cash generation.
In fiscal 2017, operating results reflected challenging
We plan to continue to drive efficiency in fiscal 2018,
net sales performance. However, we continued to make
including delivering approximately $390 million in
progress against our cost savings and margin expan-
supply chain productivity savings through our ongo-
sion initiatives. The net sales decline of 6 percent was
ing Holistic Margin Management (HMM) efforts. We
driven by declining contributions from volume in the
also expect to deliver approximately $160 million in
North America Retail and Europe & Australia segments
incremental savings from our other restructuring and
including the impact of the divestiture of Green Giant
cost-reduction initiatives, which equates to approxi-
in fiscal 2016, which were partially offset by favorable
mately $700 million in savings versus fiscal 2015 levels.
 ANNUAL REPORT 15

net price realization and mix. Operating profit margin The 6 percent decline in net sales primarily reflected
of 16.4 percent was up 10 basis points from year-ago lower organic net sales, unfavorable foreign currency
levels primarily driven by benefits from cost savings exchange, and the Green Giant divestiture in fiscal 2016
and spending optimization initiatives, and favorable net (please refer to Note 3 to the Consolidated Financial
price realization, partially offset by the gain from the Statements on page 55 of this report).
Green Giant divestiture. Adjusted operating profit mar- Organic net sales declined 4 percent driven by vol-
gin increased 130 basis points to 18.1 percent, driven by ume declines in the North America Retail and Europe &
benefits from cost savings and spending optimization Australia segments which were partially offset by posi-
initiatives and favorable net price realization. Diluted tive net price realization and mix. To improve compara-
earnings per share of $2.77 was flat to fiscal 2016 and bility of results from period to period, organic net sales
adjusted diluted EPS, which excludes certain items exclude the impacts of foreign currency exchange rate
affecting comparability, on a constant-currency basis fluctuations, as well as acquisitions, divestitures, and a
increased 6 percent compared to fiscal 2016 (see the 53rd week of results, when applicable.
“Non-GAAP Measures” section below for a description Components of organic net sales growth are shown
of our use of measures not defined by GAAP). in the following table:
A summary of our consolidated financial results for
Fiscal 2017
fiscal 2017 follows: vs. Fiscal 2016

In millions, Fiscal 2017 Percent Constant- Contributions from organic volume growth (a) (7) pts
except vs. of Net Currency Organic net price realization and mix 3 pts
Fiscal 2017 per share Fiscal 2016 Sales Growth (a)
Organic net sales growth (4) pts
Net sales $ 15,619.8 (6)%
Foreign currency exchange (1) pt
Operating profit 2,566.4 (5)% 16.4%
Acquisitions and divestitures (b) (1) pt
Net earnings attributable
Net sales growth (6) pts
to General Mills 1,657.5 (2)%
(a) Measured in tons based on the stated weight of our product shipments.
Diluted EPS $ 2.77 Flat (b) Primarily the Green Giant divestiture in fiscal 2016 (please refer to Note
Organic net sales 3 to the Consolidated Financial Statements on page 55 of this report).
growth rate (a) (4)%
Total segment Cost of sales decreased $678 million in fiscal 2017
operating profit (a) 2,952.6 (2)% (1)% to $10,056 million. The decrease included an $814 mil-
Adjusted operating lion decrease attributable to lower volume and a $137
profit margin (a) 18.1% million increase attributable to product rate and mix.
Diluted EPS, excluding
We recorded a $14 million net decrease in cost of sales
certain items affecting
related to mark-to-market valuation of certain commod-
comparability (a) $ 3.08 5% 6%
ity positions and grain inventories as described in Note
(a) S
 ee the “Non-GAAP Measures” section below for our use of measures
7 to the Consolidated Financial Statements on page 61
not defined by GAAP.
of this report, compared to a net decrease of $63 mil-
lion in fiscal 2016. In fiscal 2017, we recorded $42 mil-
Consolidated net sales were as follows:
lion of restructuring charges in cost of sales compared
Fiscal 2017 vs. to $78 million in fiscal 2016. We also recorded $44 mil-
Fiscal 2017 Fiscal 2016 Fiscal 2016 lion of restructuring initiative project-related costs in
Net sales (in millions) $ 15,619.8 (6)% $ 16,563.1 cost of sales in fiscal 2017 compared to $58 million in
Contributions from fiscal 2016 (please refer to Note 4 to the Consolidated
volume growth (a) (8) pts Financial Statements on page 55 of this report).
Net price realization and mix 3 pts
Gross margin declined 5 percent in fiscal 2017 ver-
Foreign currency exchange (1) pt
sus fiscal 2016. Gross margin as a percent of net sales
(a) Measured in tons based on the stated weight of our product shipments. of 36 percent increased 40 basis points compared to
fiscal 2016.
16 GENERAL MILLS

Selling, general and administrative (SG&A) expenses in fiscal 2016 primarily from the sale of Green Giant
decreased $318 million to $2,801 million in fiscal 2017 (please refer to Note 3 of the Consolidated Financial
versus fiscal 2016 primarily due to a 17 percentage point Statements on page 55 of this report).
decrease in media and advertising expense and cost Restructuring, impairment, and other exit costs
savings initiatives. SG&A expenses as a percent of net totaled $183 million in fiscal 2017, compared to $151 mil-
sales decreased 90 basis points compared to fiscal 2016. lion in fiscal 2016, and $284 million in fiscal 2015.
During fiscal 2017, we recorded a $14 million dives- Total charges associated with our restructuring ini-
titure loss from the sale of our Martel, Ohio manufac- tiatives recognized in fiscal 2017, 2016 and 2015 con-
turing facility. Divestiture net gain totaled $148 million sisted of the following:

As Reported Estimated
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
Restructuring of certain
international product lines 45.1 10.3 — — — — (3) (10) 42 —
Closure of Vineland, New Jersey plant 41.4 7.3 — — — — 17 12 58 19
Project Compass (0.4) 12.8 54.7 36.1 — — — 5 54 54
Project Century 44.0 49.4 182.6 34.1 181.8 12.0 6 48 414 143
Project Catalyst — 1.3 (7.5) 47.8 148.4 45.0 — — 141 94
Combination of certain operational facilities — 5.1 — 4.5 13.9 6.5 1 (2) 15 14
Other — — — 0.1 (0.6) 0.1 — — — —
Total restructuring charges (a) 224.1 107.8 229.8 122.6 343.5 63.6 36 109 833 402
Project-related costs classified in cost of sales 43.9 46.9 57.5 54.5 13.2 9.7 15 19 130 130
Restructuring charges and
project-related costs $ 268.0 $ 154.7 $ 287.3 $ 177.1 $ 356.7 $ 73.3 $ 51 $ 128 $ 963 $ 532
Future cumulative annual savings $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 After-tax earnings from joint ventures for fiscal
million lower than fiscal 2016, primarily driven by lower 2017 decreased to $85 million compared to $88 million
rates and changes in the mix of debt, partially offset by in fiscal 2016 primarily driven by unfavorable foreign
higher average debt balances. currency exchange and an asset write-off for Cereal
Our consolidated effective tax rate for fiscal 2017 was Partners Worldwide (CPW), partially offset by con-
28.8 percent compared to 31.4 percent in fiscal 2016. tributions from volume growth and favorable foreign
The 2.6 percentage point decrease was primarily due currency exchange for Häagen-Dazs Japan, Inc. (HDJ).
to non-deductible expenses related to the Green Giant On a constant-currency basis, after-tax earnings from
divestiture in fiscal 2016. Our effective tax rate exclud- joint ventures decreased 6 percent (see the “Non-GAAP
ing certain items affecting comparability was 29.2 per- Measures” section below for a description of our use of
cent in fiscal 2017 compared to 29.8 percent in fiscal this measure not defined by GAAP). The components of
2016 (see the “Non-GAAP Measures” section below for our joint ventures’ net sales growth are shown in the
a description of our use of measures not defined by following table:
GAAP).
 ANNUAL REPORT 17

Fiscal 2017 vs. Fiscal 2016 CPW HDJ A summary of our consolidated financial results for
Contributions from volume growth (a)
3 pts 6 pts fiscal 2016 follows:
Net price realization and mix Flat 2 pts
Foreign currency exchange (5) pts 10 pts In millions, Fiscal 2016 Percent Constant-
except vs. of Net Currency
Net sales growth (2) pts 18 pts Fiscal 2016 per share Fiscal 2015 Sales Growth (a)
(a) Measured in tons based on the stated weight of our product shipments. Net sales $ 16,563.1 (6)%
Operating profit 2,707.4 30% 16.3%
The change in net sales for each joint venture on a Net earnings attributable
constant-currency basis is set forth in the following to General Mills 1,697.4 39%
table: Diluted earnings
Fiscal 2017 vs. Fiscal 2016 per share $ 2.77 41%
Percentage
Percentage Impact of Change in Joint
Organic net sales
Change in Joint Foreign Venture Net Sales growth rate (a) Flat
Venture Net Currency on Constant-
Sales as Reported Exchange Currency Basis
Total segment
operating profit (a) 2,999.5 (1)% 1%
CPW (2)% (5) pts 3%
Adjusted operating
HDJ 18% 10 pts 8%
profit margin (a) 16.8%
Joint Ventures 2% (2) pt 4%
Diluted earnings per
share, excluding certain
Average diluted shares outstanding decreased by items affecting
14 million in fiscal 2017 from fiscal 2016 due to share comparability (a) $ 2.92 2% 5%
repurchases, partially offset by option exercises. (a) S
 ee the “Non-GAAP Measures” section below for our use of measures
not defined by GAAP.

FISCAL 2016 CONSOLIDATED RESULTS

OF OPERATIONS Consolidated net sales were as follows:

Fiscal 2016 vs.

Fiscal 2016 had 52 weeks compared to 53 weeks in fis- Fiscal 2016 Fiscal 2015 Fiscal 2015
cal 2015. Fiscal 2016 includes an additional month of Net sales (in millions) $ 16,563.1 (6)% $ 17,630.3
results from Annie’s and Yoplait SAS (please refer to Contributions from
Note 1 to the Consolidated Financial Statements on volume growth (a) (3) pts
page 51 of this report). Net price realization and mix 1 pt
Fiscal 2016 net sales declined 6 percent to $16,563 Foreign currency exchange (4) pt
million and were flat to fiscal 2015 on an organic basis. (a) Measured in tons based on the stated weight of our product shipments.
Operating profit of $2,707 million was 30 percent
higher than fiscal 2015. Total segment operating profit The 6 percent decline in fiscal 2016 net sales included
was $3,000 million, 1 percent lower than fiscal 2015 and a 1 percent decrease from acquisitions and divestitures,
1 percent higher on a constant-currency basis. In fiscal primarily the Green Giant divestiture in fiscal 2016 and
2016, net earnings attributable to General Mills were Annie’s acquisition in fiscal 2015, reflecting 2 percentage
$1,697 million, up 39 percent from $1,221 million in fis- points of decline from volume (please refer to Note 3 to
cal 2015, and we reported diluted EPS of $2.77 in fiscal the Consolidated Financial Statements on page 55 of
2016, up 41 percent from $1.97 in fiscal 2015. Adjusted this report). The 53rd week in fiscal 2015 contributed
diluted EPS which excludes certain items affecting com- approximately 1 percentage point of net sales decline in
parability totaled $2.92 in fiscal 2016, up 2 percent from fiscal 2016, reflecting approximately 1 percentage point
$2.86 in fiscal 2015. Diluted EPS excluding certain items of decline from volume.
affecting comparability on a constant-currency basis Organic net sales were flat to fiscal 2015. To improve
increased 5 percent compared to fiscal 2015 (see the comparability of results from period to period, organic
“Non-GAAP Measures” section below for a description net sales exclude the impacts of foreign currency
of our use of measures not defined by GAAP). 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 subsidiary in Venezuela, and our foodservice business
in the following table: in Argentina (please refer to Note 3 of the Consolidated
Financial Statements on page 55 of this report).
Fiscal 2016
vs. Fiscal 2015
Restructuring, impairment, and other exit costs
Contributions from organic volume growth (a) Flat totaled $151 million in fiscal 2016 compared to $544 mil-
Organic net price realization and mix Flat lion in fiscal 2015.
Organic net sales growth Flat In fiscal 2015, we made a strategic decision to redirect
Foreign currency exchange (4) pts certain resources supporting our Green Giant business
Acquisitions and divestitures (b) (1) pt in our North America Retail segment to other busi-
53rd week impact (c) (1) pt nesses within the segment. As a result, we recorded a
Net sales growth (6) pts $260 million impairment charge in fiscal 2015 related to
(a) Measured in tons based on the stated weight of our product shipments. the Green Giant brand intangible asset.
(b) Primarily the Green Giant divestiture in fiscal 2016 and Annie’s acquisi- Restructuring charges recorded in restructuring,
tion in fiscal 2015.
(c) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
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-
Cost of sales decreased $948 million in fiscal 2016 to
tives recognized in fiscal 2016 and 2015 consisted of the
$10,734 million. In fiscal 2016, product mix drove a $486
following:
million decrease in cost of sales and lower volume drove
a $369 million decrease. We recorded a $63 million As Reported
net decrease in cost of sales related to mark-to-mar- Fiscal 2016 Fiscal 2015

ket valuation of certain commodity positions and grain In Millions Charge Cash Charge Cash

inventories as described in Note 7 to the Consolidated Project Compass $ 54.7 $ 36.1 $ — $ —

Financial Statements on page 61 of this report, com- Total Century (a) 182.6 34.1 181.8 12.0
pared to a net increase of $90 million in fiscal 2015. Project Catalyst (7.5) 47.8 148.4 45.0
In fiscal 2016, we recorded $78 million of restructuring Combination of certain
charges in cost of sales compared to $60 million in fiscal operational facilities — 4.5 13.9 6.5
2015. We recorded $58 million of restructuring initiative Other — 0.1 (0.6) 0.1
project-related costs in cost of sales in fiscal 2016 com- Total restructuring charges (a) 229.8 122.6 343.5 63.6
pared to $13 million in fiscal 2015 (please refer to Note Project-related costs
4 to the Consolidated Financial Statements on page 55 recorded in costs of sales 57.5 54.5 13.2 9.7
Restructuring charges and
of this report). We also recorded a $3 million foreign
project-related costs $287.3 $177.1 $356.7 $73.3
exchange loss in cost of sales in fiscal 2015 related to
(a) Includes $78.4 million of restructuring charges recorded in cost of sales
Venezuela currency devaluation.
in fiscal 2016 and $59.6 million in fiscal 2015.
Gross margin declined 2 percent in fiscal 2016 versus
fiscal 2015. Gross margin as a percent of net sales of 35
Please refer to Note 4 to the Consolidated Financial
percent increased 150 basis points compared to fiscal
Statements on page 55 of this report for more informa-
2015.
tion regarding our restructuring activities.
SG&A expenses decreased $209 million in fiscal
Interest, net for fiscal 2016 totaled $304 million, $12
2016 versus fiscal 2015 primarily due to an 8 percent
million lower than fiscal 2015, primarily driven by lower
decrease in advertising and media expense, and sav-
average debt balances, partially offset by changes in the
ings from Project Catalyst, Project Compass, and our
mix of debt.
other cost-management initiatives. In fiscal 2015, we
Our consolidated effective tax rate for fiscal 2016 was
recorded a $5 million charge in SG&A expenses related
31.4 percent compared to 33.3 percent in fiscal 2015. The
to Venezuela currency devaluation and $16 million of
1.9 percentage point decrease was primarily due to the
integration costs related to our acquisition of Annie’s.
unfavorable impact of our repatriation of historical for-
SG&A expenses as a percent of net sales decreased 10
eign earnings in fiscal 2015, partially offset by non-de-
basis points compared to fiscal 2015.
ductible expenses related to the Green Giant divestiture
During fiscal 2016, we recorded a $148 million dives-
in fiscal 2016. Our effective tax rate excluding certain
titures gain (net) from the sale of Green Giant, our
 ANNUAL REPORT 19

items affecting comparability was 29.8 percent in fiscal Fiscal 2016 vs. Fiscal 2015 CPW HDJ

2016 compared to 30.5 percent in fiscal 2015 (see the Contributions from volume growth (a)
Flat 11 pts
“Non-GAAP Measures” section below for a description Net price realization and mix Flat (6)pts
of our use of measures not defined by GAAP). Foreign currency exchange (12) pts (5)pts
After-tax earnings from joint ventures for fiscal 2016 Net sales growth (12) pts Flat
increased to $88 million compared to $84 million in fis- (a) Measured in tons based on the stated weight of our product shipments.
cal 2015 primarily driven by favorable input costs in
fiscal 2016, favorable product mix for HDJ, and lapping The change in net sales for each joint venture on a
an impairment charge of $3 million at CPW in South constant-currency basis is set forth in the following
Africa in fiscal 2015, partially offset by unfavorable for- table:
eign currency exchange. On a constant-currency basis,
after-tax earnings from joint ventures increased 12 per- Fiscal 2016 vs. Fiscal 2015
Percentage
cent (see the “Non-GAAP Measures” section below for a Percentage Impact of Change in Joint
description of our use of these measures not defined by Change in Joint Foreign Venture Net Sales
Venture Net Currency on Constant-
GAAP). The components of our joint ventures’ net sales Sales as Reported Exchange Currency Basis
growth are shown in the following table:
CPW (12)% (12) pts Flat
HDJ Flat (5) pts 5%
Joint Ventures (10)% (11) pts 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 consolidated net sales, operating profit, net earnings
attributable to General Mills, or earnings per share.
In the third quarter of fiscal 2017, we announced a new Our North America Retail operating segment con-
global organization structure to streamline our leader- sists of our former U.S. Retail operating units and our
ship, enhance global scale, and drive improved opera- Canada region. Within our North America Retail oper-
tional agility to maximize our growth capabilities. As ating segment, our former U.S. Meals operating unit
a result of this global reorganization, beginning in the and U.S. Baking operating unit have been combined
third quarter of fiscal 2017, we reported results for our into one operating unit: U.S. Meals & Baking. Our
four operating segments as follows: North America Convenience Stores & Foodservice operating segment
Retail; Convenience Stores & Foodservice; Europe & was unchanged. Our Europe & Australia operating seg-
Australia; and Asia & Latin America. We have restated ment consists of our former Europe region. Our Asia &
our net sales by segment and segment operating profit Latin America operating segment consists of our for-
amounts to reflect our new operating segments. These mer Asia/Pacific and Latin America regions.
segment changes had no effect on previously reported

The following tables provide the dollar amount and percentage of net sales and operating profit from each segment
for fiscal 2017, 2016, and 2015:

Fiscal Year
2017 2016 2015
Percent Percent Percent
In Millions Dollars of Total Dollars of Total Dollars of Total
Net Sales
North America Retail $10,196.9 65% $10,936.6 66% $11,612.1 66%
Convenience Stores & Foodservice 1,870.0 12 1,923.8 12 1,995.1 11
Europe & Australia 1,824.5 12 1,998.0 12 2,126.5 12
Asia & Latin America 1,728.4 11 1,704.7 10 1,896.6 11
Total $15,619.8 100% $16,563.1 100% $17,630.3 100%

Segment Operating Profit

North America Retail $2,303.6 78% $2,351.2 78% $2,382.7 78%
Convenience Stores & Foodservice 401.2 14 378.9 13 353.1 12
Europe & Australia 164.2 5 200.3 7 179.4 6
Asia & Latin America 83.6 3 69.1 2 119.8 4
Total $2,952.6 100% $2,999.5 100% $3,035.0 100%

Segment operating profit excludes unallocated corpo- discount chains, and e-commerce grocery providers.
rate items, net gain/loss on divestitures, and restruc- Our product categories in this business segment are
turing, impairment, and other exit costs because these ready-to-eat cereals, refrigerated yogurt, soup, meal kits,
items affecting operating profit are centrally managed refrigerated and frozen dough products, dessert and
at the corporate level and are excluded from the mea- baking mixes, frozen pizza and pizza snacks, grain, fruit
sure of segment profitability reviewed by our executive and savory snacks, and a wide variety of organic prod-
management. ucts including refrigerated yogurt, nutrition bars, meal
kits, salty snacks, ready-to-eat cereal, and grain snacks.
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
 ANNUAL REPORT 21

North America Retail net sales were as follows:

Fiscal Fiscal
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015 Fiscal
2017 Percentage Change 2016 Percentage Change 2015

Net sales (in millions) $10,196.9 (7)% $10,936.6 (6)% $11,612.1

Contributions from volume growth (a) (11) pts (7) pts
Net price realization and mix 4 pts 2 pts
Foreign currency exchange Flat (1) pt
(a) Measured in tons based on the stated weight of our product shipments.

The 7 percent decrease in North America Retail net 2016 which reflects the impact of reduced marketing
sales for fiscal 2017 was driven by declines in the U.S. support.
Meals & Baking, U.S. Yogurt, U.S. Cereal, and Canada Net sales for our North America Retail operating units
operating units. The decline in net sales also includes are shown in the following table:
the impact of the Green Giant divestiture from the U.S.
Fiscal Year
Meals & Baking and Canada operating units in fiscal
In Millions 2017 2016 2015
2016.
The 6 percent decrease in North America Retail net U.S. Meals & Baking (a) $3,876.6 $4,297.3 $4,644.1
sales for fiscal 2016 was driven by declines in all oper- U.S. Cereal 2,251.8 2,312.8 2,330.1
ating units. These results include 3 percentage points U.S. Snacks (a) 2,098.2 2,094.3 2,134.4
U.S. Yogurt and Other 1,064.3 1,302.7 1,398.4
of net sales decline from the net impact of acquisitions
Canada 906.0 929.5 1,105.1
and divestitures, primarily Green Giant and Annie’s,
Total (a) $10,196.9 $10,936.6 $11,612.1
reflecting approximately 3 percentage points of decline
(a) Th
 e impact of an additional month of results from Annie’s in fiscal 2016
from volume. The 53rd week in fiscal 2015 contributed
was not material to U.S. Meals & Baking, U.S. Snacks, or the North
1 percentage point of net sales decline in fiscal 2016, America Retail segment.
reflecting approximately 2 percentage points of decline
from volume. 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 Fiscal 2016
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015 vs. 2016 vs. 2015
Percentage Change Percentage Change
U.S. Meals & Baking (a) (10)% (7)%
Contributions from organic U.S. Yogurt (18) (7)
volume growth (a) (9) pts (2) pts U.S. Cereal (3) (1)
Organic net price realization and mix 4 pts 1 pt Canada (b) (2) (16)
Organic net sales growth (5) pts (1) pt U.S. Snacks (a) Flat (2)
Foreign currency exchange Flat (1) pt Total (a) (7)% (6)%
Acquisitions and divestitures (b) (2) pts (3) pts (a) F
 iscal 2016 net sales for the U.S. Meals & Baking and U.S. Snacks operat-
53rd week impact (c) — (1) pt ing units include an additional month of results from Annie’s.
(b) On a constant currency basis, Canada net sales decreased 2 percent in
Net sales growth (7) pts (6) pt
fiscal 2017 and decreased 4 percent in fiscal 2016. See the “Non-GAAP
(a) Measured in tons based on the stated weight of our product shipments. Measures” section below for our use of this measure not defined by GAAP.
(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. Segment operating profit of $2,304 million in fiscal
2017 decreased $48 million, or 2 percent, from fiscal
North America Retail organic net sales decreased 2016. The decrease was primarily driven by declining
5 percentage points in fiscal 2017 which reflects the contributions from volume growth, currency-driven
impact of reduced marketing and higher pricing as a inflation on products imported into Canada, and the
result of lower promotional spending. North America impact of the Green Giant divestiture, partially offset by
Retail organic net sales decreased 1 percent in fiscal benefits from cost savings initiatives, favorable net price
22 GENERAL MILLS

realization, and a decrease in SG&A expenses, including compared to fiscal 2015 (see the “Non-GAAP Measures”
a 16 percentage point decline in media and advertising section below for our use of this measure).
expense. Segment operating profit decreased 2 percent
on a constant-currency basis in fiscal 2017 compared Convenience Stores & Foodservice Segment In our
to fiscal 2016 (see the “Non-GAAP Measures” section Convenience Stores & Foodservice segment our major
below for our use of this measure). product categories are ready-to-eat cereals, snacks,
Segment operating profit of $2,351 million in fiscal refrigerated yogurt, frozen meals, unbaked and fully
2016 decreased $32 million, or 1 percent, from fiscal baked frozen dough products, and baking mixes. Many
2015. The decrease was primarily driven by curren- products we sell are branded to the consumer and
cy-driven inflation on products imported into Canada nearly all are branded to our customers. We sell to dis-
and the impact of the Green Giant divestiture, partially tributors and operators in many customer channels
offset by a decrease in SG&A expenses, including a including foodservice, convenience stores, vending, and
decline in media and advertising expense and benefits supermarket bakeries in the United States.
from cost savings initiatives. Segment operating profit Convenience Stores & Foodservice net sales were as
was flat on a constant-currency basis in fiscal 2016 follows:

Fiscal Fiscal
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015 Fiscal
2017 Percentage Change 2016 Percentage Change 2015

Net sales (in millions) $1,870.0 (3)% $1,923.8 (4)% $1,995.1

Contributions from volume growth (a) Flat (3) pts
Net price realization and mix (3) pts (1) pt
(a) Measured in tons based on the stated weight of our product shipments.

The 3 percent decline in fiscal 2017 Convenience In fiscal 2017, segment operating profit was $401 mil-
Stores & Foodservice net sales was driven primarily lion, an increase of 6 percent from $379 million in fiscal
by market index pricing on bakery flour and volume 2016 primarily driven by lower input costs and bene-
declines in non-Focus 6 platforms, partially offset by an fits from cost savings initiatives. In fiscal 2016, segment
increase in the Focus 6 platforms. operating profit was up 7 percent from $353 million in
The 4 percentage point decline in fiscal 2016 net sales fiscal 2015 primarily driven by favorable product mix
was primarily driven by the impact of the 53rd week and cost savings from Project Catalyst and other cost
in fiscal 2015 which contributed approximately 2 per- management initiatives.
centage points of net sales decline in fiscal 2016, reflect-
ing approximately 2 percentage points of decline from Europe & Australia Segment Our Europe & Australia
volume. operating segment consists of our former Europe
The components of Convenience Stores & Foodservice region. The segment includes retail and foodservice
organic net sales growth are shown in the following businesses in the greater Europe and Australia regions.
table: Our product categories include refrigerated yogurt, meal
kits, super-premium ice cream, refrigerated and frozen
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015
Percentage Change Percentage Change dough products, shelf stable vegetables, grain snacks,
and dessert and baking mixes. We also sell super-pre-
Contributions from organic
mium ice cream directly to consumers through com-
volume growth (a) Flat (1) pt
pany-owned retail shops. Revenues from franchise fees
Organic net price realization and mix (3) pts (1) pt
Organic net sales growth (3) pts (2) pts
are reported in the region or country where the fran-
53rd week impact (b) — (2) pts chisee is located.
Net sales growth (3) 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.
 ANNUAL REPORT 23

Europe & Australia net sales were as follows:

Fiscal Fiscal
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015 Fiscal
2017 Percentage Change 2016 Percentage Change 2015

Net sales (in millions) (a) $1,824.5 (9)% $1,998.0 (6)% $2,126.5
Contributions from volume growth (b) (7) pts 5 pts
Net price realization and mix 3 pts (2) pts
Foreign currency exchange (5) pts (9) pts
(a) Th
 e 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 a 6 percentage point increase from contributions from
2017 net sales was driven by lower contributions from organic volume growth, which primarily reflects the
volume growth, including the impact of an additional impact of an additional month of results from Yoplait
month of results from Yoplait SAS in fiscal 2016, and SAS, and contributions from volume growth in our
unfavorable foreign currency exchange, partially offset Häagen-Dazs and Old El Paso businesses.
by favorable net price realization and mix. Segment operating profit for fiscal 2017 decreased
The 6 percent decline in Europe & Australia fiscal 18 percent to $164 million from $200 million in fis-
2016 net sales was driven by unfavorable foreign cur- cal 2016, primarily driven by unfavorable foreign cur-
rency exchange, unfavorable net price realization and rency exchange, including currency-driven inflation on
mix, and the impact of the 53rd week in fiscal 2015, imported products in certain markets, and the impact
partially offset by higher contributions from volume of the additional month of results from Yoplait SAS
growth, including the impact of an additional month of in fiscal 2016, partially offset by a decrease in SG&A
results from Yoplait SAS in fiscal 2016. expenses, including a 24 percentage point decline in
The components of Europe & Australia organic net media and advertising expense. Europe & Australia seg-
sales growth are shown in the following table: ment operating profit decreased 9 percent on a con-
stant-currency basis in fiscal 2017 compared to fiscal
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015
Percentage Change Percentage Change
2016 (see the “Non-GAAP Measures” section below for
our use of this measure).
Contributions from organic
Segment operating profit for fiscal 2016 increased
volume growth (a) (7) pts 6 pts
12 percent to $200 million from $179 million in fiscal
Organic net price realization and mix 3 pts (2) pts
2015, primarily driven by lower input costs, favorable
Organic net sales growth (4) pts 4 pts
mix, and an additional month of results from Yoplait
Foreign currency exchange (5) pts (9) pts
53rd week impact (b) — (1) pt
SAS, partially offset by unfavorable foreign currency
Net sales growth (9) pts (6) pts exchange. Europe & Australia segment operating profit
increased 28 percent on a constant-currency basis in
(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. fiscal 2016 compared to fiscal 2015 (see the “Non-GAAP
Measures” section below for our use of this measure).
The 4 percent decrease in Europe & Australia organic
net sales growth in fiscal 2017 was primarily driven Asia & Latin America Segment Our Asia & Latin
by a 7 percentage point decline from contributions America operating segment consists of our former
from organic volume growth, which primarily reflects Asia/Pacific and Latin America regions. The segment
increased competition in key categories and the impact includes retail and foodservice businesses in the greater
of an additional month of results from Yoplait SAS in Asia and South America regions. Our product catego-
fiscal 2016. ries include super-premium ice cream and frozen des-
The 4 percent increase in Europe & Australia organic serts, refrigerated and frozen dough products, dessert
net sales growth in fiscal 2016 was primarily driven by and baking mixes, meal kits, salty and grain snacks,
24 GENERAL MILLS

wellness beverages, and refrigerated yogurt. We also sell well as products we manufacture for sale to our inter-
super-premium ice cream and frozen desserts directly national joint ventures. Revenues from export activities
to consumers through company-owned retail shops. and franchise fees are reported in the region or country
Our Asia & Latin America segment also includes prod- where the end customer or franchisee, is located.
ucts manufactured in the United States for export, Asia & Latin America net sales were as follows:
mainly to Caribbean and Latin American markets, as

Fiscal Fiscal
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015 Fiscal
2017 Percentage Change 2016 Percentage Change 2015

Net sales (in millions) (a) $1,728.4 1% $1,704.7 (10)% $1,896.6

Contributions from volume growth (b) Flat 5 pts
Net price realization and mix 1 pt 1 pt
Foreign currency exchange Flat (16) pts
(a) Th
 e 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 The 3 percent increase in Asia & Latin America
in fiscal 2017 primarily driven by favorable net price organic net sales in fiscal 2017 was primarily driven by
realization in Latin America and China. Contributions a 5 percentage point increase from organic net price
from volume growth in fiscal 2017 were flat, including realization and mix resulting from pricing actions in the
the impact of an additional month of results for Yoki in Latin America and China markets, partially offset by a 2
fiscal 2017. percentage point decline in contributions from organic
Asia & Latin America net sales declined 10 percent- volume which reflects the impact of macroeconomic
age points in fiscal 2016 primarily driven by 16 percent- challenges in Latin America and the restructuring of
age points of net sales decline from unfavorable foreign our snacks business in China. The 2 percentage point
currency exchange and the impact of the 53rd week decline in contributions from organic volume included
in fiscal 2015, partially offset by favorable contributions the impact of an additional month of results from Yoki
from volume growth and favorable net price realization in fiscal 2017.
and mix. The 7 percent increase in Asia & Latin America
The components of Asia & Latin America organic net organic net sales growth in fiscal 2016 was primarily
sales growth are shown in the following table: driven by a 4 percentage point increase from organic
net price realization and mix primarily driven by pricing
Fiscal 2017 vs. 2016 Fiscal 2016 vs. 2015
Percentage Change Percentage Change
actions in the Latin America region and a 3 percent-
age point increase in contributions from organic volume
Contributions from organic
which reflects increased contributions from the Asia
volume growth (a) (2) pts 3 pts
region.
Organic net price realization and mix 5 pts 4 pts
Segment operating profit for fiscal 2017 increased 21
Organic net sales growth 3 pts 7 pts
percent to $84 million from $69 million in fiscal 2016,
Foreign currency exchange Flat (16) pts
Acquisitions and divestitures (b) (2) pts Flat
primarily driven by growth in the Häagen-Dazs busi-
53rd week impact (c) — (1) pt ness in China and the impact of an additional month of
Net sales growth 1 pt (10) pts results from Yoki in fiscal 2017. Asia & Latin America
(a) Measured in tons based on the stated weight of our product shipments.
segment operating profit increased 20 percent on a
(b) Primarily our Venezuela subsidiary divestiture, Argentina foodservice constant-currency basis in fiscal 2017 compared to fis-
divestiture, and Laticinios Carolina Ltda acquisition in fiscal 2016. cal 2016 (see the “Non-GAAP Measures” section below
(c) Fiscal 2016 had 52 weeks compared to 53 weeks in fiscal 2015.
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

unfavorable foreign currency exchange, and input and liabilities of our Venezuelan subsidiary in fiscal
cost inflation, including currency-driven inflation on 2015. We also recorded $16 million of integration costs
imported products in certain markets. Asia & Latin resulting from the acquisition of Annie’s in fiscal 2015.
America segment operating profit declined 33 percent The decrease in unallocated corporate expense also
on a constant-currency basis in fiscal 2016 compared reflects cost savings from Project Catalyst and other
to fiscal 2015 (see the “Non-GAAP Measures” section cost management initiatives.
below for our use of this measure).
IMPACT OF INFLATION
Unallocated Corporate Items Unallocated corporate
items include corporate overhead expenses, variances Our gross margin performance reflects the impact of
to planned domestic employee benefits and incentives, 1 percent input cost inflation in fiscal 2017, 2 percent
contributions to the General Mills Foundation, asset in fiscal 2016, and 2 percent in fiscal 2015, primarily
and liability remeasurement impact of hyperinflationary on commodity inputs. We expect input cost inflation
economies, restructuring initiative project-related costs, of 3 percent in fiscal 2018. We attempt to minimize the
and other items that are not part of our measurement effects of inflation through HMM, planning, and oper-
of segment operating performance. This includes gains ating practices. Our risk management practices are dis-
and losses from the mark-to-market valuation of certain cussed on page 44 of this report.
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 In fiscal 2017, cash provided by operations was $2.3

billion compared to $2.6 billion in fiscal 2016. The $316
The primary source of our liquidity is cash flow from million decrease is primarily driven by a $490 million
operations. Over the most recent three-year period, our change in current assets and liabilities. The $490 million
operations have generated $7.5 billion in cash. A sub- change in current assets and liabilities is primarily due
stantial portion of this operating cash flow has been to changes in other current liabilities driven by changes
returned to shareholders through share repurchases in income taxes payable, a decrease in incentive accru-
and dividends. We also use cash from operations to als and changes in trade and advertising accruals due
fund our capital expenditures and acquisitions. We to reduced spending. The change in current assets and
typically use a combination of cash, notes payable, and liabilities was also impacted by the timing of accounts
long-term debt to finance significant acquisitions and payable. Additionally, we recorded a $14 million loss on
major capital expansions. a divestiture during fiscal 2017, compared to a $148 mil-
As of May 28, 2017, we had $703 million of cash and lion net gain on divestitures during fiscal 2016 and clas-
cash equivalents held in foreign jurisdictions, which will sified the related cash flows as investing activities.
be used to fund foreign operations and acquisitions. We strive to grow core working capital at or below
There is currently no need to repatriate these funds in the rate of growth in our net sales. For fiscal 2017, core
order to meet domestic funding obligations or sched- working capital increased 9 percent, primarily due to
uled cash distributions. If we choose to repatriate his- timing of accounts receivable and inventory build late in
torical earnings held in foreign jurisdictions, we intend fiscal 2017, compared to a net sales decline of 6 percent.
to do so only in a tax-neutral manner. In fiscal 2016, core working capital decreased 41 per-
cent, compared to a net sales decline of 6 percent, and
Cash Flows from Operations in fiscal 2015, core working capital decreased 13 percent,
compared to net sales decline of 2 percent.
Fiscal Year In fiscal 2016, our operations generated $2.6 billion of
In Millions 2017 2016 2015 cash, compared to $2.5 billion in fiscal 2015. The $477
Net earnings, including million increase in net earnings included a $96 million
earnings attributable to change in deferred income taxes and a $148 million
redeemable and net gain on divestitures and was also offset by a $424
noncontrolling interests $1,701.1 $1,736.8 $1,259.4 million decrease in non-cash restructuring charges.
Depreciation and amortization 603.6 608.1 588.3 The $43 million change in current assets and liabilities
After-tax earnings was primarily driven by the timing of accounts payable
from joint ventures (85.0) (88.4) (84.3) including the impact of longer terms offset by the tim-
Distributions of earnings ing of inventory build.
from joint ventures 75.6 75.1 72.6
Stock-based compensation 95.7 89.8 106.4
Cash Flows from Investing Activities
Deferred income taxes 183.9 120.6 25.3
Tax benefit on exercised options (64.1) (94.1) (74.6) Fiscal Year
Pension and other postretirement In Millions 2017 2016 2015
benefit plan contributions (45.4) (47.8) (49.5)
Purchases of land, buildings,
Pension and other postretirement
and equipment $ (684.4) $ (729.3) $ (712.4)
benefit plan costs 35.7 118.1 91.3
Acquisitions, net of cash acquired — (84.0) (822.3)
Divestitures loss (gain) 13.5 (148.2) —
Investments in affiliates, net 3.3 63.9 (102.4)
Restructuring, impairment,
Proceeds from disposal of land,
and other exit costs 117.0 107.2 531.1
buildings, and equipment 4.2 4.4 11.0
Changes in current assets
Proceeds from divestitures 17.5 828.5 —
and liabilities, excluding the
Exchangeable note 13.0 21.1 27.9
effects of acquisitions
Other, net (0.5) (11.2) (4.0)
and divestitures (232.0) 258.2 214.7
Net cash provided (used)
Other, net (86.3) (105.6) (137.9)
by investing activities $ (646.9) $ 93.4 $ (1,602.2)
Net cash provided by
operating activities $2,313.3 $2,629.8 $2,542.8
 ANNUAL REPORT 27

In fiscal 2017, we used $647 million of cash through in proceeds from common stock issued on exercised
investing activities compared to generating $93 million options.
in fiscal 2016. We invested $684 million in land, build- During fiscal 2017, we repurchased 25 million shares
ings, and equipment in fiscal 2017, $45 million less than of our common stock for $1,652 million. During fiscal
last year. 2016, we repurchased 11 million shares of our common
In fiscal 2016, we generated $93 million of cash stock for $607 million. During fiscal 2015, we repur-
through investing activities compared to a use of chased 22 million shares of our common stock for
$1.6 billion in fiscal 2015. We invested $729 million in $1,162 million.
land, buildings, and equipment in fiscal 2016, $17 mil- Dividends paid in fiscal 2017 totaled $1,135 million,
lion more than fiscal 2015. In fiscal 2016, we received or $1.92 per share, an 8 percent per share increase
proceeds of $828 million from the divestitures of cer- from fiscal 2016. Dividends paid in fiscal 2016 totaled
tain businesses, primarily Green Giant. In fiscal 2015, $1,072 million, or $1.78 per share, a 7 percent per share
we acquired Annie’s for an aggregate purchase price of increase from fiscal 2015 dividends of $1.67 per share.
$809 million, net of $12 million of cash acquired.
We expect capital expenditures to be approximately Selected Cash Flows from Joint Ventures
$650 million in fiscal 2018. These expenditures will
fund initiatives that are expected to fuel international Selected cash flows from our joint ventures are set
growth, support innovative products, and continue forth in the following table:
HMM initiatives throughout the supply chain.
Fiscal Year
Inflow (Outflow), in Millions 2017 2016 2015
Cash Flows from Financing Activities
Investments in affiliates, net $3.3 $63.9 $(102.4)
Fiscal Year Dividends received 75.6 75.1 72.6
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
CAPITAL RESOURCES
Payment of long-term debt (1,000.0) (1,000.4) (1,145.8)
Proceeds from common stock Total capital consisted of the following:
issued on exercised options 112.6 171.9 163.7
In Millions May 28, 2017 May 29, 2016
Tax benefit on exercised options 64.1 94.1 74.6
Purchases of common Notes payable $ 1,234.1 $ 269.8
stock for treasury (1,651.5) (606.7) (1,161.9) Current portion of long-term debt 604.7 1,103.4
Dividends paid (1,135.1) (1,071.7) (1,017.7) Long-term debt 7,642.9 7,057.7
Distributions to noncontrolling Total debt 9,481.7 8,430.9
and redeemable interest holders (61.0) (84.3) (25.0) Redeemable interest 910.9 845.6
Other, net (9.1) (7.2) (16.1) Noncontrolling interests 357.6 376.9
Net cash used by Stockholders’ equity 4,327.9 4,930.2
financing activities $ (1,645.5) $ (2,285.6) $ (1,384.8) Total capital $15,078.1 $14,583.6

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 Improvement in adjusted return on average total capital
and uncommitted credit lines we had available as of is one of our key performance measures (see the “Non-
May 28, 2017: GAAP Measures” section below for our discussion of
this measure, which is not defined by GAAP). Adjusted
Facility Borrowed
In Billions Amount Amount return on average total capital increased 30 basis points
from 11.3 percent in fiscal 2016 to 11.6 percent in fis-
Credit facility expiring:
cal 2017 as fiscal 2017 adjusted earnings increased. On
May 2022 $2.7 $ —
a constant-currency basis, adjusted return on average
June 2019 0.2 0.1
Total committed credit facilities 2.9 0.1
total capital increased 40 basis points.
Uncommitted credit facilities 0.5 0.1 We also believe that our fixed charge coverage ratio
Total committed and and the ratio of operating cash flow to debt are import-
uncommitted credit facilities $3.4 $0.2 ant measures of our financial strength. Our fixed charge
coverage ratio in fiscal 2017 was 7.26 compared to 7.40
In fiscal 2016, we entered into a $2.7 billion fee-paid in fiscal 2016. The measure decreased from fiscal 2016
committed credit facility that was originally scheduled as earnings before income taxes and after-tax earnings
to expire in May 2021. During the fourth quarter of fis- from joint ventures decreased by $132 million in fiscal
cal 2017 we amended the credit facility’s expiration date 2017. Our operating cash flow to debt ratio decreased
by one year to May 2022. 6.8 percentage points to 24.4 percent in fiscal 2017,
To ensure availability of funds, we maintain bank driven by a decrease in cash provided by operations and
credit lines sufficient to cover our outstanding notes an increase in notes payable.
payable. Commercial paper is a continuing source of We have a 51 percent controlling interest in Yoplait
short-term financing. We have commercial paper pro- SAS and a 50 percent interest in Yoplait Marques SNC
grams available to us in the United States and Europe. and Liberté Marques Sàrl. Sodiaal holds the remaining
We also have uncommitted and asset-backed credit interests in each of these entities. We consolidate these
lines that support our foreign operations. The credit entities into our consolidated financial statements. We
facilities contain several covenants, including a require- record Sodiaal’s 50 percent interest in Yoplait Marques
ment to maintain a fixed charge coverage ratio of at SNC and Liberté Marques Sàrl as noncontrolling inter-
least 2.5 times. ests, and its 49 percent interest in Yoplait SAS as a
Certain of our long-term debt agreements, our credit redeemable interest on our Consolidated Balance Sheets.
facilities, and our noncontrolling interests contain These euro- and Canadian dollar-denominated interests
restrictive covenants. As of May 28, 2017, we were in are reported in U.S. dollars on our Consolidated Balance
compliance with all of these covenants. Sheets. Sodiaal has the ability to put all or a portion of
We have $605 million of long-term debt maturing in its redeemable interest to us at fair value once per year,
the next 12 months that is classified as current, includ- up to three times before December 2024. As of May 28,
ing $500 million of 1.4 percent notes due October 2017 2017, the redemption value of the redeemable interest
and $100 million of 6.39 percent fixed rate medium was $911 million which approximates its fair value.
term notes due for remarketing in February 2018. We The third-party holder of the General Mills Cereals,
believe that cash flows from operations, together with LLC (GMC) Class A Interests receives quarterly pre-
available short- and long-term debt financing, will be ferred distributions from available net income based
adequate to meet our liquidity and capital needs for at on the application of a floating preferred return rate to
least the next 12 months. the holder’s capital account balance established in the
As of May 28, 2017, our total debt, including the most recent mark-to-market valuation (currently $252
impact of derivative instruments designated as hedges, million). On June 1, 2015, the floating preferred return
was 67 percent in fixed-rate and 33 percent in float- rate on GMC’s Class A Interests was reset to the sum
ing-rate instruments, compared to 78 percent in fixed- of three-month LIBOR plus 125 basis points. The pre-
rate and 22 percent in floating-rate instruments on ferred return rate is adjusted every three years through
May 29, 2016. a negotiated agreement with the Class A Interest holder
Return on average total capital was 12.7 percent in or through a remarketing auction.
fiscal 2017 compared to 12.9 percent in fiscal 2016.
 ANNUAL REPORT 29

We have an option to purchase the Class A Interests (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
for consideration equal to the then current capital unamortized debt issuance costs, premiums and discounts, and fair value
account value, plus any unpaid preferred return and the adjustments.
prescribed make-whole amount. If we purchase these (b) Operating leases represents the minimum rental commitments under
interests, any change in the third-party holder’s capital non-cancelable operating leases.

account from its original value will be charged directly (c) The majority of the purchase obligations represent commitments for raw
material and packaging to be utilized in the normal course of business and
to retained earnings and will increase or decrease the for consumer marketing spending commitments that support our brands.
net earnings used to calculate EPS in that period. 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
OFF-BALANCE SHEET ARRANGEMENTS AND the transaction. Most arrangements are cancelable without a significant
penalty and with short notice (usually 30 days). Any amounts reflected on
CONTRACTUAL OBLIGATIONS the Consolidated Balance Sheets as accounts payable and accrued liabilities
are excluded from the table above.
As of May 28, 2017, we have issued guarantees and (d) The fair value of our foreign exchange, equity, commodity, and grain
comfort letters of $505 million for the debt and other 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.
obligations of consolidated subsidiaries, and guarantees Future changes in market values will impact the amount of cash ultimately
and comfort letters of $165 million for the debt and paid or received to settle those instruments in the future. Other long-term
obligations mainly consist of liabilities for accrued compensation and bene-
other obligations of non-consolidated affiliates, mainly fits, including the underfunded status of certain of our defined benefit pen-
CPW. In addition, off-balance sheet arrangements sion, other postretirement benefit, and postemployment benefit plans, and
are generally limited to the future payments under miscellaneous liabilities. We expect to pay $21 million of benefits from our
unfunded postemployment benefit plans and $14.6 million of deferred com-
non-cancelable operating leases, which totaled $501 pensation in fiscal 2018. We are unable to reliably estimate the amount of
million as of May 28, 2017. 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.
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 SIGNIFICANT ACCOUNTING ESTIMATES
as of and for the fiscal year ended May 28, 2017.
Our defined benefit plans in the United States are For a complete description of our significant account-
subject to the requirements of the Pension Protection ing policies, see Note 2 to the Consolidated Financial
Act (PPA). In the future, the PPA may require us to Statements on page 51 of this report. Our significant
make additional contributions to our domestic plans. accounting estimates are those that have a meaning-
We do not expect to be required to make any contribu- ful impact on the reporting of our financial condition
tions in fiscal 2017. and results of operations. These estimates include our
The following table summarizes our future estimated accounting for promotional expenditures, valuation of
cash payments under existing contractual obligations, long-lived assets, intangible assets, redeemable interest,
including payments due by period: stock-based compensation, income taxes, and defined
benefit pension, other postretirement benefit, and pos-
Payments Due by Fiscal Year temployment benefit plans.
2023 and
In Millions Total 2018 2019 -20 2021-22 Thereafter
Promotional Expenditures Our promotional activi-
Long-term debt (a) $ 8,290.6 604.2 2,647.7 1,559.3 3,479.4
ties are conducted through our customers and directly
Accrued interest 83.8 83.8 — — —
or indirectly with end consumers. These activities
Operating leases (b) 500.7 118.8 182.4 110.4 89.1
include: payments to customers to perform merchan-
Capital leases 1.2 0.4 0.6 0.1 0.1
dising activities on our behalf, such as advertising or
Purchase obligations (c) 3,191.0 2,304.8 606.8 264.3 15.1
Total contractual
in-store displays; discounts to our list prices to lower
obligations 12,067.3 3,112.0 3,437.5 1,934.1 3,583.7
retail shelf prices; payments to gain distribution of new
Other long-term products; coupons, contests, and other incentives; and
obligations (d) 1,372.7 — — — — media and advertising expenditures. The recognition of
Total long-term these costs requires estimation of customer participa-
obligations $13,440.0 $3,112.0 $3,437.5 $1,934.1 $3,583.7 tion and performance levels. These estimates are based
30 GENERAL MILLS

on the forecasted customer sales, the timing and fore- which include projected revenues from our long-range
casted costs of promotional activities, and other factors. plan, assumed royalty rates that could be payable if we
Differences between estimated expenses and actual did not own the brands, and a discount rate.
costs are recognized as a change in management esti- As of May 28, 2017, we had $12.9 billion of good-
mate in a subsequent period. Our accrued trade, coupon, will and indefinite-lived intangible assets. While we
and consumer marketing liabilities were $483 million as currently believe that the fair value of each intangible
of May 28, 2017, and $564 million as of May 29, 2016. exceeds its carrying value and that those intangibles so
Because our total promotional expenditures (including classified will contribute indefinitely to our cash flows,
amounts classified as a reduction of revenues) are sig- materially different assumptions regarding future per-
nificant, if our estimates are inaccurate we would have formance of our businesses or a different weighted-av-
to make adjustments in subsequent periods that could erage cost of capital could result in material impairment
have a significant effect on our results of operations. losses and amortization expense. We performed our fis-
cal 2017 assessment of our intangible assets as of August
Valuation of Long-Lived Assets We estimate the useful 29, 2016. As of our annual assessment date, there was
lives of long-lived assets and make estimates concern- no impairment of any of our intangible assets as their
ing undiscounted cash flows to review for impairment related fair values were substantially in excess of the
whenever events or changes in circumstances indicate carrying values except for the Latin America report-
that the carrying amount of an asset (or asset group) ing unit and the Immaculate Baking brand intangible
may not be recoverable. Fair value is measured using asset. The excess fair value above the carrying value of
discounted cash flows or independent appraisals, as the Latin America reporting unit and the Immaculate
appropriate. Baking brand intangible asset is as follows:
Excess Fair
Intangible Assets Goodwill and other indefinite-lived Value Above
Carrying Carrying
intangible assets are not subject to amortization and are In Millions Value Value
tested for impairment annually and whenever events or
Latin America $ 523.0 15%
changes in circumstances indicate that impairment may
Immaculate Baking $ 12.0 17%
have occurred. Our estimates of fair value for goodwill
impairment testing are determined based on a dis-
Our Latin America reporting unit and Immaculate
counted cash flow model. We use inputs from our long-
Baking brand have experienced declining business per-
range planning process to determine growth rates for
formance. In addition, while not impaired as of May 28,
sales and profits. We also make estimates of discount
2017, the Progresso, Green Giant, and Food Should Taste
rates, perpetuity growth assumptions, market compara-
Good brand intangible assets and U.S. Yogurt reporting
bles, and other factors.
unit had risk of decreasing coverage. We will continue to
We evaluate the useful lives of our other intangible
monitor these businesses for potential impairment.
assets, mainly brands, to determine if they are finite or
indefinite-lived. Reaching a determination on useful life
Redeemable Interest In fiscal 2017, we adjusted the
requires significant judgments and assumptions regard-
redemption value of Sodiaal’s redeemable interest in
ing the future effects of obsolescence, demand, compe-
Yoplait SAS based on a discounted cash flow model.
tition, other economic factors (such as the stability of
The significant assumptions used to estimate the
the industry, known technological advances, legislative
redemption value include projected revenue growth and
action that results in an uncertain or changing regula-
profitability from our long-range plan, capital spending,
tory environment, and expected changes in distribution
depreciation and taxes, foreign currency exchange rates,
channels), the level of required maintenance expendi-
and a discount rate. As of May 28, 2017, the redemption
tures, and the expected lives of other related groups of
value of the redeemable interest was $911 million.
assets. Intangible assets that are deemed to have defi-
nite lives are amortized on a straight-line basis, over
Stock-based Compensation The valuation of stock
their useful lives, generally ranging from 4 to 30 years.
options is a significant accounting estimate that
Our estimate of the fair value of our brand assets is
requires us to use judgments and assumptions that
based on a discounted cash flow model using inputs
 ANNUAL REPORT 31

are likely to have a material impact on our financial volume of employee stock option exercises during a
statements. Annually, we make predictive assumptions particular year and the relationship between the exer-
regarding future stock price volatility, employee exer- cise-date market value of the underlying stock and the
cise behavior, dividend yield, and the forfeiture rate. For original grant-date fair value previously determined for
more information on these assumptions, please refer financial reporting purposes.
to Note 11 to the Consolidated Financial Statements on Realized windfall tax benefits are credited to addi-
page 73 of this report. tional paid-in capital within the Consolidated Balance
The estimated fair values of stock options granted Sheets. Realized shortfall tax benefits (amounts which
and the assumptions used for the Black-Scholes are less than that previously recognized in earnings) are
option-pricing model were as follows: first offset against the cumulative balance of windfall
tax benefits, if any, and then charged directly to income
Fiscal Year
tax expense, potentially resulting in volatility in our con-
2017 2016 2015
solidated effective income tax rate. Because employee
Estimated fair values of stock option exercise behavior is not within our control,
stock options granted $8.80 $7.24 $7.22 it is possible that significantly different reported results
Assumptions: could occur if different assumptions or conditions were
Risk-free interest rate 1.7% 2.4% 2.6%
to prevail.
Expected term 8.5 years 8.5 years 8.5 years
See the new accounting requirements for the
Expected volatility 17.8% 17.6% 17.5%
accounting and presentation of stock-based payments
Dividend yield 2.9% 3.2% 3.1%
in the Recently Issued Accounting Pronouncements
section below for forthcoming changes to stock-based
The risk-free interest rate for periods during the compensation.
expected term of the options is based on the U.S.
Treasury zero-coupon yield curve in effect at the time of Income Taxes We apply a more-likely-than-not thresh-
grant. An increase in the expected term by 1 year, leav- old to the recognition and derecognition of uncertain
ing all other assumptions constant, would increase the tax positions. Accordingly, we recognize the amount of
grant date fair value by 1 percent. If all other assump- tax benefit that has a greater than 50 percent likelihood
tions are held constant, a one percentage point increase of being ultimately realized upon settlement. Future
in our fiscal 2017 volatility assumption would increase changes in judgment related to the expected ultimate
the grant date fair value of our fiscal 2017 option awards resolution of uncertain tax positions will affect earnings
by 7 percent. in the quarter of such change. For more information on
To the extent that actual outcomes differ from our income taxes, please refer to Note 14 to the Consolidated
assumptions, we are not required to true up grant- Financial Statements on page 82 of this report.
date fair value-based expense to final intrinsic values.
However, these differences can impact the classifica- Defined Benefit Pension, Other Postretirement Benefit,
tion of cash tax benefits realized upon exercise of stock and Postemployment Benefit Plans We have defined
options, as explained in the following two paragraphs. benefit pension plans covering many employees in the
Furthermore, historical data has a significant bearing United States, Canada, France, and the United Kingdom.
on our forward-looking assumptions. Significant vari- We also sponsor plans that provide health care benefits
ances between actual and predicted experience could to many of our retirees in the United States, Canada,
lead to prospective revisions in our assumptions, which and Brazil. Under certain circumstances, we also pro-
could then significantly impact the year-over-year com- vide accruable benefits, primarily severance, to former
parability of stock-based compensation expense. and inactive employees in the United States, Canada,
Any corporate income tax benefit realized upon exer- and Mexico. Please refer to Note 13 to the Consolidated
cise or vesting of an award in excess of that previously Financial Statements on page 76 of this report for a
recognized in earnings (referred to as a windfall tax description of our defined benefit pension, other post-
benefit) is presented in the Consolidated Statements of retirement benefit, and postemployment benefit plans.
Cash Flows as a financing cash flow. The actual impact We recognize benefits provided during retirement or
on future years’ cash flows will depend, in part, on the following employment over the plan participants’ active
32 GENERAL MILLS

working lives. Accordingly, we make various assump- Discount Rates Beginning in fiscal 2017, we changed
tions to predict and measure costs and obligations the method used to estimate the service and interest
many years prior to the settlement of our obligations. cost components of the net periodic benefit expense for
Assumptions that require significant management judg- our United States and most of our international defined
ment and have a material impact on the measurement benefit pension, other postretirement benefit, and pos-
of our net periodic benefit expense or income and accu- temployment benefit plans. We adopted a full yield curve
mulated benefit obligations include the long-term rates approach to estimate service cost and interest cost by
of return on plan assets, the interest rates used to dis- applying the specific spot rates along the yield curve
count the obligations for our benefit plans, and health used to determine the benefit obligation to the relevant
care cost trend rates. projected cash flows. This method provides a more pre-
cise measurement of service and interest costs by cor-
Expected Rate of Return on Plan Assets Our expected relating the timing of the plans’ liability cash flows to
rate of return on plan assets is determined by our the corresponding rate on the yield curve. Previously,
asset allocation, our historical long-term investment we estimated service cost and interest cost using a sin-
performance, our estimate of future long-term returns gle weighted-average discount rate derived from the
by asset class (using input from our actuaries, invest- yield curve used to measure the benefit obligation at the
ment services, and investment managers), and long- beginning of the period. This change does not affect the
term inflation assumptions. We review this assumption measurement of our benefit obligations related to these
annually for each plan; however, our annual investment plans. We have accounted for this change prospectively
performance for one particular year does not, by itself, as a change in accounting estimate beginning in the
significantly influence our evaluation. first quarter of fiscal 2017. The change in methodology
Our historical investment returns (compound annual resulted in a decrease in service and interest cost of
growth rates) for our United States defined benefit approximately $68 million in fiscal 2017 compared to
pension and other postretirement benefit plan assets what our costs would have been under the previous
were 11.8 percent, 10.0 percent, 6.0 percent, 8.4 percent, method. The fiscal 2017 reduction in our net periodic
and 8.4 percent for the 1, 5, 10, 15, and 20 year periods benefit expense as a result of this change in methodol-
ended May 31, 2017. ogy was partially offset by a reduction in our weight-
On a weighted-average basis, the expected rate of ed-average expected rate of return on plan assets for
return for all defined benefit plans was 8.17 percent for our principal defined benefit pension and other postre-
fiscal 2017, 8.53 percent for fiscal 2016, and 8.53 percent tirement plans in the United States to 8.25 percent as a
for fiscal 2015. For fiscal 2018, we lowered our weight- result of changes that decreased investment risk in the
ed-average expected rate of return on plan assets for portfolio.
our principal defined benefit pension and other postre- Our discount rate assumptions are determined annu-
tirement plans in the United States to 7.95 percent due ally as of May 31 for our defined benefit pension, other
to asset changes that decreased investment risk in the postretirement benefit, and postemployment benefit
portfolio. plan obligations. We work with our outside actuaries
Lowering the expected long-term rate of return on to determine the timing and amount of expected future
assets by 100 basis points would increase our net pen- cash outflows to plan participants and, using the Aa
sion and postretirement expense by $66 million for fiscal Above Median corporate bond yield, to develop a for-
2018. A market-related valuation basis is used to reduce ward interest rate curve, including a margin to that
year-to-year expense volatility. The market-related valu- index based on our credit risk. This forward interest
ation recognizes certain investment gains or losses over rate curve is applied to our expected future cash out-
a five-year period from the year in which they occur. flows to determine our discount rate assumptions.
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.
 ANNUAL REPORT 33

Our weighted-average discount rates were as follows: premium. Assumed trend rates for health care costs
have an important effect on the amounts reported for
Defined Other
Benefit Postretirement Postemployment
the other postretirement benefit plans.
Pension Benefit Benefit A one percentage point change in the health care cost
Plans Plans Plans
trend rate would have the following effects:
Effective rate for fiscal
2018 service costs 4.37% 4.27% 3.54% One One
Percentage Percentage
Effective rate for fiscal Point Point
2018 interest costs 3.45% 3.24% 2.67% In Millions Increase Decrease
Obligations as of Effect on the aggregate of the
May 31, 2017 4.08% 3.92% 2.87% service and interest cost
Effective rate for fiscal components in fiscal 2018 $ 2.2 $ (1.9)
2017 service costs 4.57% 4.42% 3.55% Effect on the other post retirement
Effective rate for fiscal 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 4.19% 3.97% 2.94%
Any arising health care claims cost-related experience
Obligations as of
gain or loss is recognized in the calculation of expected
May 31, 2015 and
future claims. Once recognized, experience gains and
fiscal 2016 expense 4.38% 4.20% 3.55%
losses are amortized using a straight-line method over
10 years, resulting in at least the minimum amortization
Lowering the discount rates by 100 basis points would required being recorded.
increase our net defined benefit pension, other post-
retirement benefit, and postemployment benefit plan
Financial Statement Impact In fiscal 2017, we recorded
expense for fiscal 2018 by approximately $85 million.
net defined benefit pension, other postretirement ben-
All obligation-related experience gains and losses are
efit, and postemployment benefit plan expense of $56
amortized using a straight-line method over the average
million compared to $163 million of expense in fiscal
remaining service period of active plan participants.
2016 and $153 million of expense in fiscal 2015. As of
May 28, 2017, we had cumulative unrecognized actu-
Health Care Cost Trend Rates We review our health arial net losses of $1.6 billion on our defined benefit
care cost trend rates annually. Our review is based on pension plans and $24 million on our postretirement
data we collect about our health care claims experi- and postemployment benefit plans, mainly as the result
ence and information provided by our actuaries. This of liability increases from lower interest rates, partially
information includes recent plan experience, plan offset by recent increases in the values of plan assets.
design, overall industry experience and projections, and These unrecognized actuarial net losses will result in
assumptions used by other similar organizations. Our increases in our future pension and postretirement
initial health care cost trend rate is adjusted as neces- benefit expenses because they currently exceed the cor-
sary to remain consistent with this review, recent expe- ridors defined by GAAP.
riences, and short-term expectations. Our initial health Actual future net defined benefit pension, other post-
care cost trend rate assumption is 7.3 percent for retir- retirement benefit, and postemployment benefit plan
ees age 65 and over and 7.0 percent for retirees under income or expense will depend on investment perfor-
age 65 at the end of fiscal 2017. Rates are graded down mance, changes in future discount rates, changes in
annually until the ultimate trend rate of 5.0 percent health care cost trend rates, and other factors related to
is reached in 2024 for all retirees. The trend rates are the populations participating in these plans.
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
34 GENERAL MILLS

RECENTLY ISSUED ACCOUNTING the intra-entity transfer of assets in our Consolidated

PRONOUNCEMENTS Statements of Earnings in the period of the transfer.
The requirements of the new standard are effective for
In March 2017, the Financial Accounting Standards annual reporting periods beginning after December 15,
Board (FASB) issued new accounting requirements 2017, and interim periods within those annual periods,
related to the presentation of net periodic defined which for us is the first quarter of fiscal 2019. Early
benefit pension expense, net periodic postretirement adoption is permitted. We are in the process of analyz-
benefit expense, and net periodic postemployment ben- ing the impact of this standard on our results of opera-
efit expense. The new standard requires the service tions and financial position.
cost component of net periodic benefit expense to be In March 2016, the FASB issued new accounting
recorded in the same line items as other employee com- requirements for the accounting and presentation of
pensation costs within our Consolidated Statements stock-based payments. This will result in realized wind-
of Earnings. Other components of net periodic benefit fall and shortfall tax benefits upon exercise or vesting of
expense must be presented separately outside of oper- stock-based awards being recorded in our Consolidated
ating profit in our Consolidated Statements of Earnings. Statements of Earnings instead of additional paid-in
In addition, the new standard requires that only the capital within our Consolidated Balance Sheets. In addi-
service cost component of net periodic benefit expense tion, realized windfall and shortfall tax benefits will be
is eligible for capitalization. We recognized net peri- reclassified from financing activities to operating activ-
odic benefit expense of $56 million in fiscal 2017, $163 ities in our Consolidated Statements of Cash Flows. We
million in fiscal 2016, and $153 million in fiscal 2015 recognized windfall tax benefits of $64 million in fiscal
of which $141 million, $161 million, and $167 million, 2017, $94 million in fiscal 2016, and $75 million in fiscal
respectively, related to service cost. These amounts may 2015. These amounts may not necessarily be indicative
not necessarily be indicative of future amounts that of future amounts that may be recognized subsequent to
may be recognized subsequent to the adoption of this the adoption of this new standard as windfall and short-
new standard. The requirements of the new standard fall tax benefits are dependent upon future stock prices,
are effective for annual reporting periods beginning employee exercise behavior, and applicable tax rates.
after December 15, 2017, and interim periods within The requirements of the new standard are effective for
those annual periods, which for us is the first quarter of annual reporting periods beginning after December 15,
fiscal 2019. Early adoption is permitted. 2016, and interim periods within those annual periods,
In January 2017, the FASB issued new accounting which for us is the first quarter of fiscal 2018.
requirements related to goodwill impairment testing. In February 2016, the FASB issued new accounting
The new standard eliminates the requirement to mea- requirements for accounting, presentation and classifi-
sure a goodwill impairment loss by determining the cation of leases. This will result in most leases being
implied fair value of goodwill. Instead, goodwill impair- capitalized as a right of use asset with a related liability
ment losses will be measured by the amount by which on our Consolidated Balance Sheets. The requirements
a reporting unit’s carrying value exceeds the reporting of the new standard are effective for annual reporting
unit’s fair value, limited to the amount of goodwill allo- periods beginning after December 15, 2018, and interim
cated to the reporting unit. The requirements of the periods within those annual periods, which for us is
new standard are effective for annual or any interim the first quarter of fiscal 2020. We are in the process
goodwill impairment tests in fiscal years beginning of evaluating lease accounting software and analyzing
after December 15, 2019, which for us is fiscal 2021. the impact of this standard on our results of operations
Early adoption is permitted. We intend to adopt this and financial position. Based on our assessment to date,
standard in fiscal 2018 and do not expect this guidance we expect this guidance will have a material impact on
to have a material impact on our results of operations our Consolidated Balance Sheets due to the amount of
or financial position. our lease commitments but we are unable to quantify
In October 2016, the FASB issued new account- the impact at this time.
ing requirements related to the recognition of income In May 2014, the FASB issued new accounting
taxes resulting from intra-entity transfers of assets requirements for the recognition of revenue from con-
other than inventory. This will result in the recogni- tracts with customers. The requirements of the new
tion of the income tax consequences resulting from standard and its subsequent amendments are effective
 ANNUAL REPORT 35

for annual reporting periods beginning after December non-GAAP measure. These non-GAAP measures should
15, 2017, and interim periods within those annual peri- be viewed in addition to, and not in lieu of, the compa-
ods, which for us is the first quarter of fiscal 2019. We rable GAAP measure.
are in the process of documenting the impact of the
guidance on our current accounting policies and prac- Organic Net Sales Growth Rates This measure is used
tices in order to identify material differences, if any, in reporting to our executive management and as a
that would result from applying the new requirements component of the Board of Directors’ measurement of
to our revenue contracts. We continue to make progress our performance for incentive compensation purposes.
on our revenue recognition review and are also in the We provide organic net sales growth rates for our con-
process of evaluating the impact, if any, on changes to solidated net sales and segment net sales. We believe
our business processes, systems, and controls to sup- that organic net sales growth rates provide useful infor-
port recognition and disclosure requirements under mation to investors because they provide transparency
the new guidance. In addition, we continue to assess to underlying performance in our net sales by excluding
our adoption approach. Based on our assessment to the effect that foreign currency exchange rate fluctu-
date, we do not expect this guidance to have a material ations, as well as acquisitions, divestitures, and a 53rd
impact on our results of operations or financial position. week, when applicable, have on year-to-year compara-
bility. A reconciliation of these measures to reported net
NON-GAAP MEASURES sales growth rates, the relevant GAAP measures, are
included in our Consolidated Results of Operations and
We have included in this report measures of financial Results of Segment Operations discussions above.
performance that are not defined by GAAP. We believe
that these measures provide useful information to Total Segment Operating Profit and Total Segment
investors, and include these measures in other commu- Operating Profit as a Percent of Net Sales Total seg-
nications to investors. ment operating profit is used in reporting to our exec-
For each of these non-GAAP financial measures, we utive management and as a component of the Board of
are providing below a reconciliation of the differences Director’s measurement of our performance for incen-
between the non-GAAP measure and the most directly tive compensation purposes. We believe that this mea-
comparable GAAP measure, an explanation of why we sure provides useful information to investors because it
believe the non-GAAP measure provides useful infor- is the profitability measure we use to evaluate segment
mation to investors and any additional purposes for performance.
which our management or Board of Directors uses the

Fiscal Year
Percent of Net Sales 2017 2016 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 2.0%
Divestitures loss (gain) 13.5 0.1% (148.2) (0.9)% — —% (65.5) (0.4)% — —%
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:

Fiscal Year
2017 vs. 2016 2016 vs. 2015
Per Share Data 2017 2016 Change 2015 Change 2014 2013

Diluted earnings per share, as reported $2.77 $2.77 Flat $1.97 41% $2.83 $2.79
Mark-to-market effects (a) (0.01) (0.07) 0.09 (0.05) —
Divestitures loss (gain), net (b) 0.01 (0.10) — (0.06) —
Tax items (c) — — 0.13 — (0.13)
Acquisition integration costs (d) — — 0.02 — 0.01
Venezuela currency devaluation (a) — — 0.01 0.09 0.03
Restructuring costs (e) 0.26 0.26 0.35 0.01 0.02
Project-related costs (e) 0.05 0.06 0.01 — —
Indefinite-lived intangible asset impairment (f) — — 0.28 — —
Diluted earnings per share, excluding
certain items affecting comparability $3.08 $2.92 5% $2.86 2% $2.82 $2.72
Foreign currency exchange impact (1) (3)
Diluted earnings per share growth, excluding
certain items affecting comparability, on a
constant-currency basis 6% 5%
(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) Th
 e 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:

Fiscal Year
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
Interest, net, after-tax 187.9 193.1 199.8 190.9 201.2
Earnings before interest, after-tax 1,889.0 1,929.9 1,459.2 2,052.2 2,093.7
Adjustments, after-tax: (a)
Mark-to-market effects (8.8) (39.6) 56.5 (30.5) (2.8)
Divestitures loss (gain), net 9.2 (66.0) — (36.0) —
Tax items — — 78.6 — (85.4)
Acquisition integration costs — — 10.4 — 8.8
Venezuela currency devaluation — — 8.0 57.8 20.8
Restructuring costs 153.9 160.8 217.7 3.6 15.9
Project-related costs 28.2 36.8 8.3 — —
Indefinite-lived intangible asset impairment — — 176.9 — —
Adjusted earnings before interest, after-tax for
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
Notes payable 1,234.1 269.8 615.8 1,111.7 599.7 526.5
Long-term debt 7,642.9 7,057.7 7,575.3 6,396.6 5,901.8 6,139.5
Total debt 9,481.7 8,430.9 9,191.5 8,758.9 7,944.8 7,407.2
Redeemable interest 910.9 845.6 778.9 984.1 967.5 847.8
Noncontrolling interests 357.6 376.9 396.0 470.6 456.3 461.0
Stockholders’ equity 4,327.9 4,930.2 4,996.7 6,534.8 6,672.2 6,421.7
Total capital 15,078.1 14,583.6 15,363.1 16,748.4 16,040.8 15,137.7
Accumulated other comprehensive loss 2,244.5 2,612.2 2,310.7 1,340.3 1,585.3 1,743.7
After-tax earnings adjustments (b) 621.6 439.1 347.1 (209.3) (204.2) (161.5)
Adjusted total capital $ 17,944.2 $ 17,634.9 $ 18,020.9 $ 17,879.4 $ 17,421.9 $ 16,719.9
Average total capital (c) $ 14,830.9 $ 14,973.4 $ 16,055.8 $ 16,394.6 $ 15,589.2
Return on average total capital (c) 12.7% 12.9% 9.1% 12.5% 13.4%
Adjusted average total capital (c) $ 17,789.6 $ 17,827.9 $ 17,950.1 $ 17,650.6 $ 17,070.8
Adjusted return on average total capital (c) 11.6% 11.3% 11.2% 11.6% 12.0%
Change in adjusted return on average total capital 30 bps
Foreign currency exchange impact (10) bps
Change in adjusted return on average total capital
on a constant-currency basis 40 bps
(a) S
 ee 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:
Fiscal Year
In Millions 2017 2016 2015 2014 2013 2012 2011

Net earnings, including earnings

attributable to redeemable and
noncontrolling interests, as reported $ 1,701.1 $ 1,736.8 $ 1,259.4 $ 1,861.3 $ 1,892.5 $ 1,589.1 $ 1,803.5
Mark-to-market, net of tax (a) $ (8.8) $ (39.6) $ 56.5 $ (30.5) $ (2.8) $ 65.6 $ (60.0)
Divestitures loss (gain), net of tax (b) 9.2 (66.0) — (36.0) — — —
Tax related Items (c) — — 78.6 — (85.4) — (88.9)
Acquisition integration costs, net of tax (b) — — 10.4 — 8.8 9.7 —
Venezuela currency devaluation, net of tax (a) — — 8.0 57.8 20.8 — —
Restructuring costs, net of tax (d) 153.9 160.8 217.7 3.6 15.9 64.3 2.8
Project-related costs, net of tax (d) 28.2 36.8 8.3 — — — —
Intangible asset impairment, net of tax (e) — — 176.9 — — — —
Adjusted net earnings, including earnings
attributable to redeemable and
noncontrolling interests $ 1,883.6 $ 1,828.8 $ 1,815.8 $ 1,856.2 $ 1,849.8 $ 1,728.7 $ 1,657.4
Net cash provided by
operating activities, as reported 2,313.3 2,629.8 2,542.8 2,541.0 2,926.0 2,407.2 1,531.1
Purchases of land, buildings,
and equipment (684.4) (729.3) (712.4) (663.5) (613.9) (675.9) (648.8)
Free cash flow $ 1,628.9 $ 1,900.5 $ 1,830.4 $ 1,877.5 $ 2,312.1 $ 1,731.3 $ 882.3
Net cash provided by operating
activities conversion rate 136% 151% 202% 137% 155% 151% 85%
Free cash flow conversion rate 86% 104% 101% 101% 125% 100% 53%

Fiscal Fiscal Fiscal Fiscal Fiscal

Rolling 3 Years, in Millions 2015-2017 2014-2016 2013-2015 2012-2014 2011-2013

Adjusted earnings, including earnings

attributable to redeemable and
noncontrolling interests $ 5,528.2 $ 5,500.8 $ 5,521.8 $ 5,434.7 $ 5,235.9
Free cash flow, rolling 3 years $ 5,359.8 $ 5,608.4 $ 6,020.0 $ 5,920.9 $ 4,925.7
Free cash flow conversion rate, rolling 3 years 97% 102% 109% 109% 94%

The calculation of total cash returned to shareholders as a percentage of free cash flow follows:
Fiscal Year
In Millions 2017 2016 2015

Dividends paid $ 1,135.1 $ 1,071.7 $ 1,017.7

Purchases of common stock for treasury 1,651.5 606.7 1,161.9
Proceeds from common stock issued on exercised options (112.6) (171.9) (163.7)
Total cash returned to shareholders $ 2,674.0 $ 1,506.5 $ 2,015.9
Total cash returned to shareholders as a percentage of f ree cash flow 164% 79% 110%
Total cash returned to shareholders as percentage of free cash flow - cumulative 2015-2017 116%
(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.
 ANNUAL REPORT 39

See our reconciliation below of the effective income tax Constant-currency After-Tax Earnings from Joint
rate as reported to the effective income tax rate exclud- Ventures Growth Rates We believe that this mea-
ing certain items affecting comparability for the tax sure provides useful information to investors because
impact of each item affecting comparability. it provides transparency to underlying performance of
our joint ventures by excluding the effect that foreign
Total Segment Operating Profit Constant-currency currency exchange rate fluctuations have on year-to-
Growth Rates We believe that this measure provides year comparability given volatility in foreign currency
useful information to investors because it provides exchange markets.
transparency to underlying performance of our seg- After-tax earnings from joint ventures growth rates
ments by excluding the effect that foreign currency on a constant-currency basis are calculated as follows:
exchange rate fluctuations have on year-to-year com-
Fiscal
parability given volatility in foreign currency exchange 2017 2016
markets.
Percentage change in after-tax earnings
Total segment operating profit growth rates on a
from joint ventures as reported (4)% 5%
constant-currency basis are calculated as follows:
Impact of foreign currency exchange 2 pts (7) pts
Percentage change in after-tax earnings from
Fiscal
2017 2016 joint ventures on a constant-currency basis (6)% 12%
Percentage change in total segment
operating profit as reported (2)% (1)% Net Sales Growth Rates for Canada Operating Unit
Impact of foreign currency exchange (1) pt (2) pts on a Constant-currency Basis We believe this measure
Percentage change in total segment of our Canada operating unit net sales provides use-
operating profit on a constant-currency basis (1)% 1% ful information to investors because it provides trans-
parency to the underlying performance for the Canada
See our reconciliation of total segment operating operating unit within our North America Retail segment
profit to operating profit, its GAAP-equivalent, above. 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:

Fiscal
2017 2016

Percentage change in net sales as reported (2)% (16)%

Impact of foreign currency exchange Flat (12) pts
Percentage change in net sales on a
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:
Fiscal 2017
Percentage Change Impact of Foreign Percentage Change in
in Operating Profit Currency Operating Profit on
as Reported Exchange Constant-Currency Basis
North America Retail (2)% Flat (2)%
Europe & Australia (18) (9) pts (9)
Asia & Latin America 21 1 pt 20

Fiscal 2016
Percentage Change Impact of Foreign Percentage Change in
in Operating Profit Currency Operating Profit on
as Reported Exchange Constant-Currency Basis
North America Retail (1)% (1) pt Flat
Europe & Australia 12 (16) pts 28%
Asia & Latin America (42) (9) pts (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:
Fiscal Year Ended
May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013 May 27, 2012 May 29, 2011
Pretax Pretax Pretax Pretax Pretax Pretax Pretax
Earnings Income Earnings Income Earnings Income Earnings Income Earnings Income Earnings Income Earnings Income
In Millions
(a) Taxes (a) Taxes (a) Taxes (a) Taxes (a) Taxes (a) Taxes (a) Taxes
As reported $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
Mark-to-market effects (b) (13.9) (5.1) (62.8) (23.2) 89.7 33.2 (48.5) (18.0) (4.4) (1.6) 104.2 38.6 (95.2) (35.2)
Divestitures loss (gain) (c) 13.5 4.3 (148.2) (82.2) — — (65.5) (29.5) — — — — — —
Tax items (d) — — — — — (78.6) — — — 85.4 — — — 88.9
Acquisition integration costs (e) — — — — 16.0 5.6 — — 12.3 3.5 11.2 1.5 — —
Venezuela currency devaluation (b) — — — — 8.0 — 62.2 4.4 25.2 4.4 — — — —
Restructuring costs (f) 224.1 70.2 229.8 69.0 343.5 125.8 3.6 — 18.6 2.7 100.6 36.3 4.4 1.6
Project-related costs (f) 43.9 15.7 57.5 20.7 13.2 4.9 — — — — — — — —
Intangible asset impairment (g) — — — — 260.0 83.1 — — — — — — — —
As adjusted $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
Effective tax rate:
As reported 28.8% 31.4% 33.3% 33.3% 29.2% 32.1% 29.7%
As adjusted 29.2% 29.8% 30.5% 32.2% 32.3% 32.4% 33.2%
Sum of adjustments to income taxes $85.1 $(15.7) $174.0 $(43.1) $94.4 $76.4 $55.3
Average number of common
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.

Fiscal Year
Percent of Net Sales 2017 2016 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%
Mark-to-market effects (a) (13.9) (0.1)% (62.8) (0.4)% 89.7 0.5% (48.5) (0.3)% (4.4) —%
Divestitures loss (gain), (b) 13.5 0.1% (148.2) (0.9)% — —% (65.5) (0.4)% — —%
Acquisition integration costs (c) — —% — —% 16.0 0.1% — —% 12.3 0.1%
Venezuela currency devaluation (a) — —% — —% 8.0 —% 62.2 0.4% 25.2 0.1%
Restructuring costs (d) 224.1 1.4% 229.8 1.4% 343.5 1.9% 3.6 —% 18.6 0.1%
Project-related costs (d) 43.9 0.3% 57.5 0.4% 13.2 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- excludes the effect of acquisitions and divestitures. We
vides useful information to investors because it is are not able to reconcile these forward-looking non-
important for assessing our gross margin on a com- GAAP financial measures to their most directly compa-
parable basis. Adjusted gross margin excludes certain rable forward-looking GAAP financial measures without
items affecting comparability. unreasonable efforts because we are unable to predict
Fiscal 2017 Fiscal 2016
with a reasonable degree of certainty the actual impact
% of Net Sales % of Net Sales of changes in foreign currency exchange rates and com-
Gross margin, as reported 35.6% 35.2% modity prices or the timing of acquisitions, divestitures
Mark-to-market effects (0.1) (0.4) and restructuring actions throughout fiscal 2018. The
Restructuring costs 0.3 0.5 unavailable information could have a significant impact
Project-related costs 0.3 0.3 on our fiscal 2018 GAAP financial results.
Adjusted gross margin 36.1% 35.6% For fiscal 2018, we currently expect: foreign currency
exchange rates (based on blend of forward and fore-
Forward-Looking Financial Measures Our fiscal 2018 casted rates and hedge positions), acquisitions, and
outlook for organic net sales growth, constant-currency divestitures to have an immaterial impact on net sales
total segment operating profit and adjusted diluted growth; foreign currency exchange rates to have an
EPS, and adjusted operating profit margin are non- immaterial impact on total segment operating profit and
GAAP financial measures that exclude, or have other- adjusted diluted EPS growth; and total restructuring
wise been adjusted for, items impacting comparability, charges and project-related costs related to actions pre-
including the effect of foreign currency exchange rate viously announced to total approximately $45 million.
fluctuations, restructuring charges and project-related
costs, and commodity mark-to-market effects. Our
fiscal 2018 outlook for organic net sales growth also
 ANNUAL REPORT 43

CAUTIONARY STATEMENT RELEVANT TO issues, including recalls and product liability; changes
FORWARD-LOOKING INFORMATION FOR THE in consumer demand for our products; effectiveness
of advertising, marketing, and promotional programs;
PURPOSE OF “SAFE HARBOR” PROVISIONS OF changes in consumer behavior, trends, and preferences,
THE PRIVATE SECURITIES LITIGATION REFORM including weight loss trends; consumer perception of
ACT OF 1995 health-related issues, including obesity; consolidation
in the retail environment; changes in purchasing and
This report contains or incorporates by reference for- inventory levels of significant customers; fluctuations
ward-looking statements within the meaning of the in the cost and availability of supply chain resources,
Private Securities Litigation Reform Act of 1995 that including raw materials, packaging, and energy; disrup-
are based on our current expectations and assumptions. tions or inefficiencies in the supply chain; effectiveness
We also may make written or oral forward-looking of restructuring and cost savings initiatives; volatility
statements, including statements contained in our fil- in the market value of derivatives used to manage price
ings with the SEC and in our reports to shareholders. risk for certain commodities; benefit plan expenses due
The words or phrases “will likely result,” “are to changes in plan asset values and discount rates used
expected to,” “will continue,” “is anticipated,” “estimate,” to determine plan liabilities; failure or breach of our
“plan,” “project,” or similar expressions identify “for- information technology systems; foreign economic con-
ward-looking statements” within the meaning of the ditions, including currency rate fluctuations; and politi-
Private Securities Litigation Reform Act of 1995. Such cal unrest in foreign markets and economic uncertainty
statements are subject to certain risks and uncertain- due to terrorism or war.
ties that could cause actual results to differ materially You should also consider the risk factors that we
from historical results and those currently anticipated identify in Item 1A of our 2017 Form 10-K, which could
or projected. We wish to caution you not to place undue also affect our future results.
reliance on any such forward-looking statements. We undertake no obligation to publicly revise any
In connection with the “safe harbor” provisions of forward-looking statements to reflect events or circum-
the Private Securities Litigation Reform Act of 1995, we stances after the date of those statements or to reflect
are identifying important factors that could affect our the occurrence of anticipated or unanticipated events.
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 and correlation of these rates in the future. The market
in interest and foreign exchange rates and commod- data were drawn from the RiskMetrics™ data set. The
ity and equity prices. Changes in these factors could calculations are not intended to represent actual losses
cause fluctuations in our earnings and cash flows. In in fair value that we expect to incur. Further, since
the normal course of business, we actively manage our the hedging instrument (the derivative) inversely cor-
exposure to these market risks by entering into vari- relates with the underlying exposure, we would expect
ous hedging transactions, authorized under established that any loss or gain in the fair value of our derivatives
policies that place clear controls on these activities. would be generally offset by an increase or decrease in
The counterparties in these transactions are generally the fair value of the underlying exposure. The positions
highly rated institutions. We establish credit limits for included in the calculations were: debt; investments;
each counterparty. Our hedging transactions include interest rate swaps; foreign exchange forwards; com-
but are not limited to a variety of derivative financial modity swaps, futures and options; and equity instru-
instruments. For information on interest rate, foreign ments. The calculations do not include the underlying
exchange, commodity price, and equity instrument foreign exchange and commodities or equity-related
risk, please see Note 7 to the Consolidated Financial positions that are offset by these market-risk-sensitive
Statements on page 61 of this report. instruments.
The table below presents the estimated maximum
VALUE AT RISK potential VAR arising from a one-day loss in fair value
for our interest rate, foreign currency, commodity, and
The estimates in the table below are intended to mea- equity market-risk-sensitive instruments outstanding
sure the maximum potential fair value we could lose in as of May 28, 2017, and May 29, 2016, and the average
one day from adverse changes in market interest rates, fair value impact during the year ended May 28, 2017.
foreign exchange rates, commodity prices, and equity
Fair Value Impact
prices under normal market conditions. A Monte Carlo
Average
value-at-risk (VAR) methodology was used to quantify May 28, During May 29,
the market risk for our exposures. The models assumed In Millions 2017 Fiscal 2017 2016

normal market conditions and used a 95 percent confi- Interest rate instruments $25.1 $26.5 $33.3
dence level. Foreign currency instruments 24.6 22.9 27.6
The VAR calculation used historical interest and for- Commodity instruments 3.2 2.5 3.3
eign exchange rates, and commodity and equity prices Equity instruments 1.3 1.4 1.7
from the past year to estimate the potential volatility
 ANNUAL REPORT 45

REPORTS OF MANAGEMENT AND INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF MANAGEMENT RESPONSIBILITIES REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM
The management of General Mills, Inc. is responsible
for the fairness and accuracy of the consolidated finan- The Board of Directors and Stockholders
cial statements. The statements have been prepared in General Mills, Inc.:
accordance with accounting principles that are gener-
ally accepted in the United States, using management’s We have audited the accompanying consolidated balance
best estimates and judgments where appropriate. The sheets of General Mills, Inc. and subsidiaries as of May
financial information throughout the Annual Report on 28, 2017 and May 29, 2016, and the related consolidated
Form 10-K is consistent with our consolidated financial statements of earnings, comprehensive income, total
statements. equity and redeemable interest, and cash flows for each
Management has established a system of inter- of the fiscal years in the three-year period ended May
nal controls that provides reasonable assurance that 28, 2017. In connection with our audits of the consoli-
assets are adequately safeguarded and transactions are dated financial statements, we have audited the accom-
recorded accurately in all material respects, in accor- panying financial statement schedule. We also have
dance with management’s authorization. We maintain audited General Mills, Inc.’s internal control over finan-
a strong audit program that independently evaluates cial reporting as of May 28, 2017, based on criteria estab-
the adequacy and effectiveness of internal controls. Our lished in Internal Control – Integrated Framework (2013)
internal controls provide for appropriate separation of issued by the Committee of Sponsoring Organizations
duties and responsibilities, and there are documented of the Treadway Commission (COSO). General Mills,
policies regarding use of our assets and proper financial Inc.’s management is responsible for these consolidated
reporting. These formally stated and regularly commu- financial statements and financial statement schedule,
nicated policies demand highly ethical conduct from all for maintaining effective internal control over financial
employees. reporting, and for its assessment of the effectiveness
The Audit Committee of the Board of Directors meets of internal control over financial reporting, included in
regularly with management, internal auditors, and our Item 9a Management’s Report on Internal Control over
independent registered public accounting firm to review Financial Reporting in our 2017 Form 10-K. Our respon-
internal control, auditing, and financial reporting mat- sibility is to express an opinion on these consolidated
ters. The independent registered public accounting firm, financial statements and financial statement schedule
internal auditors, and employees have full and free and an opinion on the Company’s internal control over
access to the Audit Committee at any time. financial reporting based on our audits.
The Audit Committee reviewed and approved the We conducted our audits in accordance with the
Company’s annual financial statements. The Audit standards of the Public Company Accounting Oversight
Committee recommended, and the Board of Directors Board (United States). Those standards require that we
approved, that the consolidated financial statements be plan and perform the audits to obtain reasonable assur-
included in the Annual Report. The Audit Committee also ance about whether the financial statements are free of
appointed KPMG LLP to serve as the Company’s inde- material misstatement and whether effective internal
pendent registered public accounting firm for fiscal 2018. control over financial reporting was maintained in all
material respects. Our audits of the consolidated finan-
cial statements included examining, on a test basis, evi-
dence supporting the amounts and disclosures in the
financial statements, assessing the accounting princi-
J. L. Harmening D. L. Mulligan ples used and significant estimates made by manage-
Chief Executive Officer Executive Vice President ment, and evaluating the overall financial statement
and Chief Financial presentation. Our audit of internal control over financial
Officer reporting included obtaining an understanding of inter-
nal control over financial reporting, assessing the risk
June 29, 2017 that a material weakness exists, and testing and evalu-
ating the design and operating effectiveness of internal
46 GENERAL MILLS

control based on the assessed risk. Our audits also In our opinion, the consolidated financial statements
included performing such other procedures as we con- referred to above present fairly, in all material respects,
sidered necessary in the circumstances. We believe that the financial position of General Mills, Inc. and subsid-
our audits provide a reasonable basis for our opinions. iaries as of May 28, 2017 and May 29, 2016, and the
A company’s internal control over financial reporting results of their operations and their cash flows for each
is a process designed to provide reasonable assurance of the fiscal years in the three-year period ended May
regarding the reliability of financial reporting and the 28, 2017, in conformity with U.S. generally accepted
preparation of financial statements for external pur- accounting principles. Also in our opinion, the accom-
poses in accordance with generally accepted accounting panying financial statement schedule, when considered
principles. A company’s internal control over financial in relation to the basic consolidated financial state-
reporting includes those policies and procedures that ments taken as a whole, presents fairly, in all material
(1) pertain to the maintenance of records that, in rea- respects, the information set forth therein. Also in our
sonable detail, accurately and fairly reflect the transac- opinion, General Mills, Inc. maintained, in all material
tions and dispositions of the assets of the Company; respects, effective internal control over financial report-
(2) provide reasonable assurance that transactions are ing as of May 28, 2017, based on criteria established in
recorded as necessary to permit preparation of finan- Internal Control – Integrated Framework (2013) issued
cial statements in accordance with generally accepted by the Committee of Sponsoring Organizations of the
accounting principles, and that receipts and expendi- Treadway Commission.
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 Minneapolis, Minnesota
assets that could have a material effect on the financial June 29, 2017
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.
 ANNUAL REPORT 47

CONSOLIDATED STATEMENTS OF EARNINGS

GENERAL MILLS, INC. AND SUBSIDIARIES

Fiscal Year
In Millions, Except per Share Data 2017 2016 2015

Net sales $ 15,619.8 $ 16,563.1 $ 17,630.3

Cost of sales 10,056.0 10,733.6 11,681.1
Selling, general, and administrative expenses 2,801.3 3,118.9 3,328.0
Divestitures loss (gain) 13.5 (148.2) —
Restructuring, impairment, and other exit costs 182.6 151.4 543.9
Operating profit 2,566.4 2,707.4 2,077.3
Interest, net 295.1 303.8 315.4
Earnings before income taxes and after-tax earnings from joint ventures 2,271.3 2,403.6 1,761.9
Income taxes 655.2 755.2 586.8
After-tax earnings from joint ventures 85.0 88.4 84.3
Net earnings, including earnings attributable to redeemable and noncontrolling interests 1,701.1 1,736.8 1,259.4
Net earnings attributable to redeemable and noncontrolling interests 43.6 39.4 38.1
Net earnings attributable to General Mills $ 1,657.5 $ 1,697.4 $ 1,221.3
Earnings per share - basic $ 2.82 $ 2.83 $ 2.02
Earnings per share - diluted $ 2.77 $ 2.77 $ 1.97
Dividends per share $ 1.92 $ 1.78 $ 1.67

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

GENERAL MILLS, INC. AND SUBSIDIARIES

Fiscal Year
In Millions 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 6.3 (108.7) (957.9)
Net actuarial income (loss) 197.9 (325.9) (358.4)
Other fair value changes:
Securities 0.8 0.1 0.8
Hedge derivatives 53.3 16.0 4.1
Reclassification to earnings:
Hedge derivatives (25.7) (9.5) 4.9
Amortization of losses and prior service costs 122.5 128.6 105.1
Other comprehensive income (loss), net of tax 355.1 (299.4) (1,201.4)
Total comprehensive income 2,056.2 1,437.4 58.0
Comprehensive income (loss) attributable to redeemable
and noncontrolling interests 31.0 41.5 (192.9)
Comprehensive income attributable to General Mills $ 2,025.2 $ 1,395.9 $ 250.9

See accompanying notes to consolidated financial statements.

48 GENERAL MILLS

CONSOLIDATED BALANCE SHEETS

GENERAL MILLS, INC. AND SUBSIDIARIES

In Millions, Except Par Value May 28, 2017 May 29, 2016

ASSETS
Current assets:
Cash and cash equivalents $ 766.1 $ 763.7
Receivables 1,430.1 1,360.8
Inventories 1,483.6 1,413.7
Prepaid expenses and other current assets 381.6 399.0
Total current assets 4,061.4 3,937.2
Land, buildings, and equipment 3,687.7 3,743.6
Goodwill 8,747.2 8,741.2
Other intangible assets 4,530.4 4,538.6
Other assets 785.9 751.7
Total assets $ 21,812.6 $ 21,712.3

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable $ 2,119.8 $ 2,046.5
Current portion of long-term debt 604.7 1,103.4
Notes payable 1,234.1 269.8
Other current liabilities 1,372.2 1,595.0
Total current liabilities 5,330.8 5,014.7
Long-term debt 7,642.9 7,057.7
Deferred income taxes 1,719.4 1,399.6
Other liabilities 1,523.1 2,087.6
Total liabilities 16,216.2 15,559.6
Redeemable interest 910.9 845.6
Stockholders' equity:
Common stock, 754.6 shares issued, $0.10 par value 75.5 75.5
Additional paid-in capital 1,120.9 1,177.0
Retained earnings 13,138.9 12,616.5
Common stock in treasury, at cost, shares of 177.7 and 157.8 (7,762.9) (6,326.6)
Accumulated other comprehensive loss (2,244.5) (2,612.2)
Total stockholders' equity 4,327.9 4,930.2
Noncontrolling interests 357.6 376.9
Total equity 4,685.5 5,307.1
Total liabilities and equity $ 21,812.6 $ 21,712.3

See accompanying notes to consolidated financial statements.

 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
Accumulated
Additional Other
Par Paid-In Retained Comprehensive Noncontrolling Total Redeemable
In Millions, Except per Share Data Shares Amount Capital Shares Amount Earnings Loss Interests Equity Interest

Balance as of May 25, 2014 754.6 $75.5 $1,231.8 (142.3) $(5,219.4) $11,787.2 $(1,340.3) $470.6 $7,005.4 $984.1
Total comprehensive income (loss) 1,221.3 (970.4) (70.0) 180.9 (122.9)
Cash dividends declared
($1.67 per share) (1,017.7) (1,017.7)
Shares purchased (22.3) (1,161.9) (1,161.9)
Stock compensation plans (includes
income tax benefits of $74.6) (38.1) 8.7 325.7 287.6
Unearned compensation related
to stock unit awards (80.8) (80.8)
Earned compensation 111.1 111.1
Decrease in redemption
value of redeemable interest 83.2 83.2 (83.2)
Addition of noncontrolling interest 20.7 20.7
Acquisition of interest in subsidiary (10.5) 0.6 (9.9)
Distributions to redeemable and
noncontrolling interest holders (25.9) (25.9) 0.9
Balance as of May 31, 2015 754.6 75.5 1,296.7 (155.9) (6,055.6) 11,990.8 (2,310.7) 396.0 5,392.7 778.9
Total comprehensive
income (loss) 1,697.4 (301.5) 11.2 1,407.1 30.3
Cash dividends declared
($1.78 per share) (1,071.7) (1,071.7)
Shares purchased (10.7) (606.7) (606.7)
Stock compensation plans (includes
income tax benefits of $94.1) (46.3) 8.8 335.7 289.4
Unearned compensation related
to stock unit awards (63.3) (63.3)
Earned compensation 84.8 84.8
Increase in redemption
value of redeemable interest (91.5) (91.5) 91.5
Acquisition of interest in subsidiary (3.4) (1.1) (4.5)
Distributions to redeemable and
noncontrolling interest holders (29.2) (29.2) (55.1)
Balance as of May 29, 2016 754.6 75.5 1,177.0 (157.8) (6,326.6) 12,616.5 (2,612.2) 376.9 5,307.1 845.6
Total comprehensive
income 1,657.5 367.7 13.8 2,039.0 17.2
Cash dividends declared
($1.92 per share) (1,135.1) (1,135.1)
Shares purchased (25.4) (1,651.5) (1,651.5)
Stock compensation plans (includes
income tax benefits of $64.1) 3.6 5.5 215.2 218.8
Unearned compensation related
to stock unit awards (78.5) (78.5)
Earned compensation 94.9 94.9
Increase in redemption
value of redeemable interest (75.9) (75.9) 75.9
Acquisition of interest in subsidiary (0.2) 0.1 (0.1)
Distributions to redeemable and
noncontrolling interest holders (33.2) (33.2) (27.8)
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 financial statements.

50 GENERAL MILLS

CONSOLIDATED STATEMENTS OF CASH FLOWS

GENERAL MILLS, INC. AND SUBSIDIARIES

Fiscal Year
In Millions 2017 2016 2015

Cash Flows - Operating Activities

Net earnings, including earnings attributable to redeemable and noncontrolling interests $ 1,701.1 $ 1,736.8 $ 1,259.4
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 603.6 608.1 588.3
After-tax earnings from joint ventures (85.0) (88.4) (84.3)
Distributions of earnings from joint ventures 75.6 75.1 72.6
Stock-based compensation 95.7 89.8 106.4
Deferred income taxes 183.9 120.6 25.3
Tax benefit on exercised options (64.1) (94.1) (74.6)
Pension and other postretirement benefit plan contributions (45.4) (47.8) (49.5)
Pension and other postretirement benefit plan costs 35.7 118.1 91.3
Divestitures loss (gain) 13.5 (148.2) —
Restructuring, impairment, and other exit costs 117.0 107.2 531.1
Changes in current assets and liabilities, excluding the effects of acquisitions and divestitures (232.0) 258.2 214.7
Other, net (86.3) (105.6) (137.9)
Net cash provided by operating activities 2,313.3 2,629.8 2,542.8
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment (684.4) (729.3) (712.4)
Acquisitions, net of cash acquired — (84.0) (822.3)
Investments in affiliates, net 3.3 63.9 (102.4)
Proceeds from disposal of land, buildings, and equipment 4.2 4.4 11.0
Proceeds from divestitures 17.5 828.5 —
Exchangeable note 13.0 21.1 27.9
Other, net (0.5) (11.2) (4.0)
Net cash provided (used) by investing activities (646.9) 93.4 (1,602.2)
Cash Flows - Financing Activities
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) (25.0)
Other, net (9.1) (7.2) (16.1)
Net cash used by financing activities (1,645.5) (2,285.6) (1,384.8)
Effect of exchange rate changes on cash and cash equivalents (18.5) (8.1) (88.9)
Increase (decrease) in cash and cash equivalents 2.4 429.5 (533.1)
Cash and cash equivalents - beginning of year 763.7 334.2 867.3
Cash and cash equivalents - end of year $ 766.1 $ 763.7 $ 334.2
Cash Flow from Changes in Current Assets and Liabilities,
excluding the effects of acquisitions and divestitures:
Receivables $ (69.2) $ (6.9) $ 6.8
Inventories (61.5) (146.1) (24.2)
Prepaid expenses and other current assets 16.6 (0.1) (50.5)
Accounts payable 99.5 318.7 145.8
Other current liabilities (217.4) 92.6 136.8
Changes in current assets and liabilities $ (232.0) $ 258.2 $ 214.7
See accompanying notes to consolidated financial statements.
 ANNUAL REPORT 51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GENERAL MILLS, INC. AND SUBSIDIARIES Inventories All inventories in the United States other
than grain are valued at the lower of cost, using the
NOTE 1. BASIS OF PRESENTATION AND last-in, first-out (LIFO) method, or market. Grain inven-
tories are valued at net realizable value, and all related
RECLASSIFICATIONS
cash contracts and derivatives are valued at fair value,
with all net changes in value recorded in earnings
Basis of Presentation Our Consolidated Financial
currently.
Statements include the accounts of General Mills, Inc.
Inventories outside of the United States are generally
and all subsidiaries in which we have a controlling
valued at the lower of cost, using the first-in, first-out
financial interest. Intercompany transactions and
(FIFO) method, or net realizable value.
accounts, including any noncontrolling and redeemable
Shipping costs associated with the distribution of
interests’ share of those transactions, are eliminated in
finished product to our customers are recorded as cost
consolidation.
of sales, and are recognized when the related finished
Our fiscal year ends on the last Sunday in May. Fiscal
product is shipped to and accepted by the customer.
years 2017 and 2016 consisted of 52 weeks, while fiscal
year 2015 consisted of 53 weeks.
Land, Buildings, Equipment, and Depreciation Land
is recorded at historical cost. Buildings and equipment,
Change in Reporting Period As part of a long-term
including capitalized interest and internal engineering
plan to conform the fiscal year ends of all our opera-
costs, are recorded at cost and depreciated over esti-
tions, in fiscal 2017 we changed the reporting period
mated useful lives, primarily using the straight-line
of General Mills Brasil Alimentos Ltda (Yoki) within
method. Ordinary maintenance and repairs are charged
our Asia & Latin America segment from an April fis-
to cost of sales. Buildings are usually depreciated over
cal year-end to a May fiscal year-end to match our
40 years, and equipment, furniture, and software are
fiscal calendar. Accordingly, in fiscal 2017, our results
usually depreciated over 3 to 10 years. Fully depreciated
included 13 months of results from the affected oper-
assets are retained in buildings and equipment until
ations. The impact of these changes was not material
disposal. When an item is sold or retired, the accounts
to our consolidated results of operations. Our General
are relieved of its cost and related accumulated depre-
Mills India business remains on an April fiscal year end.
ciation and the resulting gains and losses, if any, are
In fiscal 2016 we changed the reporting period
recognized in earnings. As of May 28, 2017, assets held
of Yoplait SAS and Yoplait Marques SNC within our
for sale were insignificant.
Europe & Australia segment and Annie’s, Inc. (Annie’s)
Long-lived assets are reviewed for impairment when-
within our North America Retail segment from an April
ever events or changes in circumstances indicate that
fiscal year-end to a May fiscal year-end to match our
the carrying amount of an asset (or asset group) may
fiscal calendar. Accordingly, in fiscal 2016, our results
not be recoverable. An impairment loss would be recog-
included 13 months of results from the affected opera-
nized when estimated undiscounted future cash flows
tions. The impact of these changes was not material to
from the operation and disposition of the asset group
our consolidated results of operations.
are less than the carrying amount of the asset group.
Certain reclassifications to our previously reported
Asset groups have identifiable cash flows and are largely
financial information have been made to conform to
independent of other asset groups. Measurement of an
the current period presentation.
impairment loss would be based on the excess of the
carrying amount of the asset group over its fair value.
NOTE . SUMMARY OF SIGNIFICANT Fair value is measured using a discounted cash flow
ACCOUNTING POLICIES model or independent appraisals, as appropriate.

Cash and Cash Equivalents We consider all invest- Goodwill and Other Intangible Assets Goodwill is not
ments purchased with an original maturity of three subject to amortization and is tested for impairment
months or less to be cash equivalents. annually and whenever events or changes in circum-
stances indicate that impairment may have occurred. In
fiscal 2016, we changed the date of our annual goodwill
52 GENERAL MILLS

and indefinite-lived intangible asset impairment assess- Our finite-lived intangible assets, primarily acquired
ment from the first day of the third quarter to the first franchise agreements and customer relationships, are
day of the second quarter to more closely align with reviewed for impairment whenever events or changes
the timing of our annual long-range planning process. in circumstances indicate that the carrying amount of
Impairment testing is performed for each of our report- an asset may not be recoverable. An impairment loss
ing units. We compare the carrying value of a reporting would be recognized when estimated undiscounted
unit, including goodwill, to the fair value of the unit. future cash flows from the operation and disposition
Carrying value is based on the assets and liabilities of the asset are less than the carrying amount of the
associated with the operations of that reporting unit, asset. Assets generally have identifiable cash flows and
which often requires allocation of shared or corporate are largely independent of other assets. Measurement
items among reporting units. If the carrying amount of an impairment loss would be based on the excess of
of a reporting unit exceeds its fair value, we revalue the carrying amount of the asset over its fair value. Fair
all assets and liabilities of the reporting unit, excluding value is measured using a discounted cash flow model
goodwill, to determine if the fair value of the net assets or other similar valuation model, as appropriate.
is greater than the net assets including goodwill. If the
fair value of the net assets is less than the carrying Investments in Unconsolidated Joint Ventures Our
amount of net assets including goodwill, impairment investments in companies over which we have the abil-
has occurred. Our estimates of fair value are deter- ity to exercise significant influence are stated at cost
mined based on a discounted cash flow model. Growth plus our share of undistributed earnings or losses. We
rates for sales and profits are determined using inputs receive royalty income from certain joint ventures,
from our long-range planning process. We also make incur various expenses (primarily research and develop-
estimates of discount rates, perpetuity growth assump- ment), and record the tax impact of certain joint ven-
tions, market comparables, and other factors. ture operations that are structured as partnerships. In
We evaluate the useful lives of our other intangible addition, we make advances to our joint ventures in
assets, mainly brands, to determine if they are finite or the form of loans or capital investments. We also sell
indefinite-lived. Reaching a determination on useful life certain raw materials, semi-finished goods, and finished
requires significant judgments and assumptions regard- goods to the joint ventures, generally at market prices.
ing the future effects of obsolescence, demand, compe- In addition, we assess our investments in our joint
tition, other economic factors (such as the stability of ventures if we have reason to believe an impairment
the industry, known technological advances, legislative may have occurred including, but not limited to, as a
action that results in an uncertain or changing regula- result of ongoing operating losses, projected decreases
tory environment, and expected changes in distribution in earnings, increases in the weighted average cost of
channels), the level of required maintenance expendi- capital, or significant business disruptions. The signif-
tures, and the expected lives of other related groups of icant assumptions used to estimate fair value include
assets. Intangible assets that are deemed to have defi- revenue growth and profitability, royalty rates, capi-
nite lives are amortized on a straight-line basis, over tal spending, depreciation and taxes, foreign currency
their useful lives, generally ranging from 4 to 30 years. exchange rates, and a discount rate. By their nature,
Our indefinite-lived intangible assets, mainly intangible these projections and assumptions are uncertain. If we
assets primarily associated with the Pillsbury, Totino’s, were to determine the current fair value of our invest-
Progresso, Yoplait, Old El Paso, Yoki, Häagen-Dazs, and ment was less than the carrying value of the invest-
Annie’s brands, are also tested for impairment annually ment, then we would assess if the shortfall was of a
and whenever events or changes in circumstances indi- temporary or permanent nature and write down the
cate that their carrying value may not be recoverable. investment to its fair value if we concluded the impair-
Our estimate of the fair value of the brands is based ment is other than temporary.
on a discounted cash flow model using inputs which
included projected revenues from our long-range plan, Redeemable Interest We have a 51 percent controlling
assumed royalty rates that could be payable if we did interest in Yoplait SAS, a consolidated entity. Sodiaal
not own the brands, and a discount rate. 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 Liabilities for anticipated remediation costs are recorded
value once per year, up to three times before December on an undiscounted basis when they are probable and
2024. This put option requires us to classify Sodiaal’s reasonably estimable, generally no later than the com-
interest as a redeemable interest outside of equity on pletion of feasibility studies or our commitment to a
our Consolidated Balance Sheets for as long as the put is plan of action.
exercisable by Sodiaal. When the put is no longer exercis-
able, the redeemable interest will be reclassified to non- Advertising Production Costs We expense the produc-
controlling interests on our Consolidated Balance Sheets. tion costs of advertising the first time that the adver-
We adjust the value of the redeemable interest through tising takes place.
additional paid-in capital on our Consolidated Balance
Sheets quarterly to the redeemable interest’s redemption Research and Development All expenditures for
value, which approximates its fair value. During the sec- research and development (R&D) are charged against
ond and third quarters of fiscal 2017, we adjusted the earnings in the period incurred. R&D includes expen-
redeemable interest’s redemption value based on a dis- ditures for new product and manufacturing process
counted cash flow model. The significant assumptions innovation, and the annual expenditures are comprised
used to estimate the redemption value include projected primarily of internal salaries, wages, consulting, and
revenue growth and profitability from our long-range supplies attributable to R&D activities. Other costs
plan, capital spending, depreciation, taxes, foreign cur- include depreciation and maintenance of research facil-
rency exchange rates, and a discount rate. ities, including assets at facilities that are engaged in
pilot plant activities.
Revenue Recognition We recognize sales revenue when
the shipment is accepted by our customer. Sales include Foreign Currency Translation For all significant
shipping and handling charges billed to the customer foreign operations, the functional currency is the
and are reported net of consumer coupon redemption, local currency. Assets and liabilities of these opera-
trade promotion and other costs, including estimated tions are translated at the period-end exchange rates.
allowances for returns, unsalable product, and prompt Income statement accounts are translated using the
pay discounts. Sales, use, value-added, and other excise average exchange rates prevailing during the period.
taxes are not recognized in revenue. Coupons are Translation adjustments are reflected within accumu-
recorded when distributed, based on estimated redemp- lated other comprehensive loss (AOCI) in stockholders’
tion rates. Trade promotions are recorded based on esti- equity. Gains and losses from foreign currency transac-
mated participation and performance levels for offered tions are included in net earnings for the period, except
programs at the time of sale. We generally do not allow for gains and losses on investments in subsidiaries for
a right of return. However, on a limited case-by-case which settlement is not planned for the foreseeable
basis with prior approval, we may allow customers future and foreign exchange gains and losses on instru-
to return product. In limited circumstances, product ments designated as net investment hedges. These
returned in saleable condition is resold to other cus- gains and losses are recorded in AOCI.
tomers or outlets. Receivables from customers gener-
ally do not bear interest. Terms and collection patterns Derivative Instruments All derivatives are recognized
vary around the world and by channel. The allowance on our Consolidated Balance Sheets at fair value based
for doubtful accounts represents our estimate of prob- on quoted market prices or our estimate of their fair
able non-payments and credit losses in our existing value, and are recorded in either current or noncurrent
receivables, as determined based on a review of past assets or liabilities based on their maturity. Changes in
due balances and other specific account data. Account the fair values of derivatives are recorded in net earn-
balances are written off against the allowance when ings or other comprehensive income, based on whether
we deem the amount is uncollectible. the instrument is designated and effective as a hedge
transaction and, if so, the type of hedge transaction.
Environmental Environmental costs relating to exist- Gains or losses on derivative instruments reported
ing conditions caused by past operations that do not in AOCI are reclassified to earnings in the period the
contribute to current or future revenues are expensed. hedged item affects earnings. If the underlying hedged
54 GENERAL MILLS

transaction ceases to exist, any associated amounts Use of Estimates Preparing our Consolidated Financial
reported in AOCI are reclassified to earnings at that Statements in conformity with accounting principles
time. Any ineffectiveness is recognized in earnings in generally accepted in the United States requires us to
the current period. make estimates and assumptions that affect reported
amounts of assets and liabilities, disclosures of contin-
Stock-based Compensation We generally measure gent assets and liabilities at the date of the financial
compensation expense for grants of restricted stock statements, and the reported amounts of revenues and
units using the value of a share of our stock on the expenses during the reporting period. These estimates
date of grant. We estimate the value of stock option include our accounting for promotional expenditures,
grants using a Black-Scholes valuation model. Stock- valuation of long-lived assets, intangible assets, redeem-
based compensation is recognized straight line over the able interest, stock-based compensation, income taxes,
vesting period. Our stock-based compensation expense and defined benefit pension, other postretirement ben-
is recorded in selling, general and administrative efit and postemployment benefit plans. Actual results
(SG&A) expenses and cost of sales in our Consolidated could differ from our estimates.
Statements of Earnings and allocated to each report-
able segment in our segment results. Other New Accounting Standards In the first quar-
Certain equity-based compensation plans contain ter of fiscal 2017, we adopted new accounting require-
provisions that accelerate vesting of awards upon ments for the presentation of certain investments
retirement, termination, or death of eligible employees using the net asset value, providing a practical expe-
and directors. We consider a stock-based award to be dient to exclude such investments from categorization
vested when the employee’s retention of the award is within the fair value hierarchy and separate disclosure.
no longer contingent on providing subsequent service. We adopted the guidance retrospectively and restated
Accordingly, the related compensation cost is generally the fiscal 2016 fair value of plan asset tables in Note
recognized immediately for awards granted to retire- 13. The adoption of this guidance did not impact our
ment-eligible individuals or over the period from the results of operations or financial position.
grant date to the date retirement eligibility is achieved, In the first quarter of fiscal 2017, we adopted new
if less than the stated vesting period. accounting requirements which permit reporting enti-
We report the benefits of tax deductions in excess of ties with a fiscal year-end that does not coincide with a
recognized compensation cost as a financing cash flow, month-end to apply a practical expedient that permits
thereby reducing net operating cash flows and increas- the entity to measure defined benefit plan assets and
ing net financing cash flows. obligations using the month-end that is closest to the
entity’s fiscal year-end and apply such practical expedi-
Defined Benefit Pension, Other Postretirement ent consistently to all plans. The adoption of this guid-
Benefit, and Postemployment Benefit Plans We spon- ance did not have a material impact on our results of
sor several domestic and foreign defined benefit plans operations or financial position.
to provide pension, health care, and other welfare ben- In the fourth quarter of fiscal 2016, we adopted
efits to retired employees. Under certain circumstances, new accounting requirements for the presentation of
we also provide accruable benefits, primarily severance, deferred tax assets and liabilities, requiring noncurrent
to former or inactive employees in the United States, classification for all deferred tax assets and liabilities on
Canada, and Mexico. We recognize an obligation for the statement of financial position. This presentation
any of these benefits that vest or accumulate with ser- change has been implemented retroactively. The adop-
vice. Postemployment benefits that do not vest or accu- tion of this guidance did not have a material impact on
mulate with service (such as severance based solely on our financial position.
annual pay rather than years of service) are charged to In the first quarter of fiscal 2016, we adopted new
expense when incurred. Our postemployment benefit accounting requirements for the classification of debt
plans are unfunded. issuance costs presented in the balance sheet as a
We recognize the underfunded or overfunded status direct reduction from the carrying amount of the debt
of a defined benefit pension plan as an asset or liability liability. This presentation change has been imple-
and recognize changes in the funded status in the year mented retroactively. The adoption of this guidance did
in which the changes occur through AOCI. not have a material impact on our financial position.
 ANNUAL REPORT 55

In the second quarter of fiscal 2015, we adopted new in Berkeley, California, for an aggregate purchase price
accounting requirements for share-based payment of $821.2 million, which we funded by issuing debt.
awards issued based upon specific performance targets. We consolidated Annie’s into our Consolidated Balance
The adoption of this guidance did not have a material Sheets and recorded goodwill of $589.8 million, an
impact on our results of operations or financial position. indefinite lived intangible asset for the Annie’s brand of
In the first quarter of fiscal 2015, we adopted new $244.5 million, and a finite lived customer relationship
accounting requirements on the financial statement pre- asset of $23.9 million. The pro forma effects of this
sentation of unrecognized tax benefits when a net oper- acquisition were not material.
ating loss, a similar tax loss, or a tax credit carryforward
exists. The adoption of this guidance did not have an NOTE 4. RESTRUCTURING, IMPAIRMENT, AND
impact on our results of operations or financial position.
OTHER EXIT COSTS
NOTE 3. ACQUISITION AND DIVESTITURES We view our restructuring activities as actions that
help us meet our long-term growth targets. Activities
During the second quarter of fiscal 2017, we sold our we undertake must meet internal rate of return and
Martel, Ohio manufacturing facility in our Convenience net present value targets. Each restructuring action
Stores & Foodservice segment and simultaneously normally takes one to two years to complete. At com-
entered into a co-packing agreement with the pur- pletion (or as each major stage is completed in the
chaser. We received $17.5 million in cash, and recorded case of multi-year programs), the project begins to
a pre-tax loss of $13.5 million. deliver cash savings and/or reduced depreciation. These
During the fourth quarter of fiscal 2016, we sold our activities result in various restructuring costs, includ-
General Mills de Venezuela CA subsidiary to a third ing asset write-offs, exit charges including severance,
party and exited our business in Venezuela. As a result contract termination fees, and decommissioning and
of this transaction, we recorded a pre-tax loss of $37.6 other costs. Accelerated depreciation associated with
million. In addition, we sold our General Mills Argentina restructured assets, as used in the context of our dis-
S.A. foodservice business in Argentina to a third party closures regarding restructuring activity, refers to the
and recorded a pre-tax loss of $14.8 million. increase in depreciation expense caused by shortening
During the second quarter of fiscal 2016, we sold our the useful life or updating the salvage value of deprecia-
North American Green Giant product lines for $822.7 ble fixed assets to coincide with the end of production
million in cash, and we recorded a pre-tax gain of $199.1 under an approved restructuring plan. Any impairment
million. We received net cash proceeds of $788.0 million of the asset is recognized immediately in the period the
after transaction related costs. After the divestiture, we plan is approved.
retained a brand intangible asset on our Consolidated We are currently pursuing several multi-year restruc-
Balance Sheets of $30.1 million related to our continued turing initiatives designed to increase our efficiency
use of the Green Giant brand in certain markets out- and focus our business behind our key growth strat-
side of North America. egies. Charges recorded in fiscal 2017 related to these
During the second quarter of fiscal 2015, we acquired initiatives were as follows:
Annie’s, a publicly traded food company headquartered

Fiscal 2017
Asset Pension Accelerated
In Millions Severance Write-offs Related Depreciation Other Total

Global reorganization $ 66.3 $ — $ — $ — $ 5.8 $ 72.1

Closure of Melbourne, Australia plant 11.4 4.5 — 5.6 0.4 21.9
Restructuring of certain international product lines 7.0 37.0 — (0.3) 1.4 45.1
Closure of Vineland, New Jersey plant 12.3 7.9 1.5 14.5 5.2 41.4
Project Compass (1.5) 0.1 — 0.2 0.8 (0.4)
Project Century (1.0) 13.0 0.7 18.5 12.8 44.0
Total $ 94.5 $ 62.5 $ 2.2 $ 38.5 $ 26.4 $ 224.1
56 GENERAL MILLS

In the third quarter of fiscal 2017, we approved Brazil and ceased production operations for meals and
restructuring actions designed to better align our orga- snacks at our facility in São Bernardo do Campo, Brazil.
nizational structure with our strategic initiatives. This We also ceased production of certain underperforming
action will affect approximately 600 positions, and snack products at our facility in Nanjing, China. These
we expect to incur approximately $75 million of net and other actions will affect approximately 420 posi-
expenses relating to these actions, all of which will be tions in our Brazilian operations and approximately 440
cash. We recorded $72.1 million of restructuring charges positions in our Greater China operations. We expect to
relating to these actions in fiscal 2017. We expect these incur approximately $42 million of net expenses related
actions to be completed by the end of fiscal 2018. to these actions, most of which will be non-cash. We
In the second quarter of fiscal 2017, we notified the recorded $45.1 million of restructuring charges relating
employees and their representatives of our decision to to these actions in fiscal 2017. We expect these actions
close our pasta manufacturing facility in Melbourne, to be completed by the end of fiscal 2019.
Australia in our Europe & Australia segment to improve In the first quarter of fiscal 2017, we approved a plan
our margin structure. This action will affect approxi- to close our Vineland, New Jersey facility to eliminate
mately 350 positions, and we expect to incur approx- excess soup capacity in our North America Retail seg-
imately $34 million of net expenses relating to this ment. This action will affect approximately 380 posi-
action, of which approximately $3 million will be cash. tions, and we expect to incur approximately $58 million
We recorded $21.9 million of restructuring charges of net expenses related to this action, of which approx-
relating to this action in fiscal 2017. We expect this imately $19 million will be cash. We recorded $41.4 mil-
action to be completed by the end of fiscal 2019. lion of restructuring charges relating to this action in
In the first quarter of fiscal 2017, we announced a fiscal 2017. We expect this action to be completed by
plan to restructure certain product lines in our Asia & the end of fiscal 2019.
Latin America segment. To eliminate excess capacity, Charges recorded in fiscal 2016 were as follows:
we closed our snacks manufacturing facility in Marília,

Fiscal 2016
Asset Pension Accelerated
In Millions Severance Write-offs Related Depreciation Other Total

Project Compass $ 45.4 $ — $ 1.4 $ — $ 7.9 $ 54.7

Project Catalyst (8.7) 1.2 — — — (7.5)
Project Century 30.9 30.7 19.1 76.5 25.4 182.6
Total $ 67.6 $ 31.9 $ 20.5 $ 76.5 $ 33.3 $
229.8

In the first quarter of fiscal 2016, we approved Project Century to identify opportunities to streamline our
Compass, a restructuring plan designed to enable our supply chain outside of North America.
international operations to accelerate long-term growth As part of Century, in the second quarter of fiscal
through increased organizational effectiveness and 2016, we approved a restructuring plan to close man-
reduced administrative expense. In connection with ufacturing facilities in our Europe & Australia segment
this project, we eliminated 749 positions. We incurred supply chain located in Berwick, United Kingdom and
$54.3 million of net expenses, all of which was cash. In East Tamaki, New Zealand. These actions affected 287
fiscal 2017, we reduced the estimate of charges related positions and we incurred $31.8 million of net expenses
to this action by $0.4 million. We recorded $54.7 mil- related to these actions, of which $12 million was cash.
lion of restructuring charges relating to this action in We recorded $1.8 million of restructuring charges relat-
fiscal 2016. This action was completed in fiscal 2017. ing to these actions in fiscal 2017 and $30.0 million in
In fiscal 2015, we announced Project Century fiscal 2016. These actions were completed in fiscal 2017.
(Century) which initially involved a review of our North As part of Century, in the first quarter of fiscal 2016,
American manufacturing and distribution network to we approved a restructuring plan to close our West
streamline operations and identify potential capacity Chicago, Illinois cereal and dry dinner manufactur-
reductions. In fiscal 2016, we broadened the scope of ing plant in our North America Retail segment supply
 ANNUAL REPORT 57

chain. This action affected 484 positions, and we expect Missouri snacks plant in our North America Retail seg-
to incur approximately $104 million of net expenses ment’s supply chain. This action affected 125 positions,
relating to this action, of which approximately $41 mil- and we incurred $6.6 million of net expenses relating to
lion will be cash. We recorded $23.2 million of restruc- this action, of which less than $1 million was cash. We
turing charges relating to this action in fiscal 2017 and recorded $6.3 million of restructuring charges relating
$79.2 million in fiscal 2016. We expect this action to be to this action in fiscal 2016. This action was completed
completed by the end of fiscal 2018. in fiscal 2016.
As part of Century, in the first quarter of fiscal 2016, Charges recorded in fiscal 2015 were as follows:
we approved a restructuring plan to close our Joplin,

Fiscal 2015
Asset Pension Accelerated
In Millions Severance Write-offs Related Depreciation Other Total

Project Catalyst $
121.5 $
12.3 $ 6.6 $ — $ 8.0 $
148.4
Project Century 44.3 42.3 31.2 53.1 10.9 181.8
Combination of certain operational facilities 13.0 0.7 — — 0.2 13.9
Charges associated with restructuring
actions previously announced (0.6) — — — — (0.6)
Total $
178.2 $
55.3 $
37.8 $
53.1 $
19.1 $
343.5

In the second quarter of fiscal 2015, we approved As part of Century, in the second quarter of fiscal
Project Catalyst, a restructuring plan to increase orga- 2015, we approved a restructuring plan to consolidate
nizational effectiveness and reduce overhead expense. yogurt manufacturing capacity and exit our Methuen,
In connection with this project, 759 positions were Massachusetts facility in our North America Retail and
impacted, primarily in the United States. We incurred Convenience Stores & Foodservice segments’ supply
$140.9 million of net expenses relating to this action chains. This action affected 170 positions. We incurred
of which approximately $94 million was cash. We $59.7 million of net expenses relating to this action of
recorded $148.4 million of restructuring charges relat- which $13 million was cash. We recorded $15.6 million
ing to this action in fiscal 2015. This action was sub- of restructuring charges relating to this action in fiscal
stantially completed in fiscal 2015. 2016 and $43.6 million in fiscal 2015. This action was
As part of Century, in the third quarter of fiscal 2015, substantially completed in fiscal 2017.
we approved a restructuring plan to reduce our refrig- As part of Century, in the second quarter of fiscal
erated dough capacity and exit our Midland, Ontario, 2015, we approved a restructuring plan to eliminate
Canada and New Albany, Indiana facilities, which sup- excess cereal and dry mix capacity and exit our Lodi,
port our North America Retail and Convenience Stores California facility in our North America Retail segment
& Foodservice segments’ supply chains. The Midland supply chain. This action affected 409 positions. We
action affected 94 positions and we expect to incur incurred $95.3 million of net expenses related to this
approximately $13 million of net expenses relating to action of which $22 million was cash. We recorded $1.5
this action, of which approximately $7 million will be million of restructuring charges relating to this action
cash. We recorded $1.8 million of restructuring charges in fiscal 2017, $30.6 million in fiscal 2016 and $63.2 mil-
relating to this action in fiscal 2017, $2.7 million in fiscal lion in fiscal 2015. This action was substantially com-
2016 and $6.5 million in fiscal 2015. The New Albany pleted in fiscal 2016.
action will affect 412 positions, and we expect to incur In addition to the actions taken at certain facilities
approximately $83 million of net expenses relating to described above, we incurred restructuring charges
this action of which approximately $40 million will related to Century of $1.1 million in fiscal 2017, none
be cash. We recorded $14.6 million of restructuring of which was cash, $1.1 million in fiscal 2016 and $17.2
charges relating to this action in fiscal 2017, $17.1 mil- million in fiscal 2015.
lion in fiscal 2016 and $51.3 million in fiscal 2015. We During the first quarter of fiscal 2015, we approved
anticipate these actions will be completed by the end of a plan to combine certain Yoplait and General Mills
fiscal 2018.
58 GENERAL MILLS

operational facilities within our North America Retail The roll forward of our restructuring and other exit
and Europe & Australia segments to increase efficien- cost reserves, included in other current liabilities, is as
cies and reduce costs. This action affected approxi- follows:
mately 240 positions. We expect to incur $15 million of
Contract Other
net expenses relating to this action of which $14 million In Millions Severance Termination Exit Costs Total
will be cash. We recorded $13.9 million of restructuring
Reserve balance as
charges in fiscal 2015. We anticipate these actions will
of May 25, 2014 $ 3.5 $ — $ — $ 3.5
be completed by the end of fiscal 2018. Fiscal 2015 charges,
We paid cash related to restructuring initiatives of including foreign
$107.8 million in fiscal 2017, $122.6 million in fiscal 2016 currency translation 176.4 0.6 8.1 185.1
and $63.6 million in fiscal 2015. Utilized in fiscal 2015 (61.3) — (6.5) (67.8)
In addition to restructuring charges, we expect to Reserve balance as
incur approximately $130 million of additional proj- of May 31, 2015 118.6 0.6 1.6 120.8
ect-related costs, which will be recorded in cost of Fiscal 2016 charges,
sales, all of which will be cash. We recorded project-re- including foreign
lated costs in cost of sales of $43.9 million in fiscal currency translation 64.3 1.6 4.3 70.2
Utilized in fiscal 2016 (109.3) (0.7) (4.4) (114.4)
2017, $57.5 million in fiscal 2016 and $13.2 million in
Reserve balance as
fiscal 2015. We paid cash for project-related costs of
of May 29, 2016 73.6 1.5 1.5 76.6
$46.9 million in fiscal 2017, $54.5 million in fiscal 2016 Fiscal 2017 charges,
and $9.7 million in fiscal 2015. including foreign
Restructuring charges and project-related costs are currency translation 95.0 0.9 8.1 104.0
classified in our Consolidated Statements of Earnings Utilized in fiscal 2017 (86.8) (1.7) (7.1) (95.6)
as follows: Reserve balance as

Fiscal
of May 28, 2017 $ 81.8 $0.7 $2.5 $ 85.0
In Millions 2017 2016 2015

Cost of sales $ 41.5 $ 78.4 $ 59.6 The charges recognized in the roll forward of our
Restructuring, impairment, reserves for restructuring and other exit costs do not
and other exit costs 182.6 151.4 283.9 include items charged directly to expense (e.g., asset
Total restructuring charges 224.1 229.8 343.5 impairment charges, the gain or loss on the sale of
Project-related costs classified restructured assets, and the write-off of spare parts)
in cost of sales $ 43.9 $ 57.5 $ 13.2 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.
 ANNUAL REPORT 59

We also have a 50 percent equity interest in Häagen- NOTE 6. GOODWILL AND OTHER
Dazs Japan, Inc. (HDJ). This joint venture manufactures INTANGIBLE ASSETS
and markets Häagen-Dazs ice cream products and fro-
zen novelties. The components of goodwill and other intangible assets
Results from our CPW and HDJ joint ventures are are as follows:
reported for the 12 months ended March 31.
May 28, May 29,
Joint venture related balance sheet activity follows: In Millions 2017 2016

May 28, May 29, Goodwill $ 8,747.2 $ 8,741.2

In Millions 2017 2016 Other intangible assets:
Cumulative investments $505.3 $518.9 Intangible assets not subject
Goodwill and other intangibles 472.0 469.2 to amortization:
Aggregate advances included in Brands and other
indefinite-lived intangibles 4,161.1 4,147.5
cumulative investments 284.7 300.3
Intangible assets subject to amortization:
Franchise agreements, customer
Joint venture earnings and cash flow activity follows:
relationships, and other
finite-lived intangibles 524.8 536.9
Fiscal Year
Less accumulated amortization (155.5) (145.8)
In Millions 2017 2016 2015
Intangible assets subject to amortization 369.3 391.1
Sales to joint ventures $ 7.0 $ 10.5 $ 11.6
Other intangible assets 4,530.4 4,538.6
Net advances (repayments) (3.3) (63.9) 102.4
Total $13,277.6 $13,279.8
Dividends received 75.6 75.1 72.6

Based on the carrying value of finite-lived intangi-

Summary combined financial information for the
ble assets as of May 28, 2017, amortization expense
joint ventures on a 100 percent basis follows:
for each of the next five fiscal years is estimated to be
Fiscal Year approximately $28 million.
In Millions 2017 2016 2015 During the third quarter of fiscal 2017, we announced
Net sales: a new global organization structure to streamline our
CPW $1,648.4 $1,674.8 $1,894.5 leadership, enhance global scale, and drive improved
HDJ 435.1 369.4 370.2 operational agility to maximize our growth capabili-
Total net sales 2,083.5 2,044.2 2,264.7 ties. As a result of this global reorganization, we reas-
Gross margin 865.9 867.6 925.4 sessed our operating segments and our reporting units.
Earnings before income taxes 243.3 234.8 220.9 Under our new organization structure, our chief oper-
Earnings after income taxes 190.3 186.7 170.7 ating decision maker assesses performance and makes
decisions about resources to be allocated to our seg-
May 28, May 29,
In Millions 2017 2016 ments at the North America Retail, Convenience Stores
& Foodservice, Europe & Australia, and Asia & Latin
Current assets $ 849.7 $ 814.1
America operating segment level. See Note 16 for addi-
Noncurrent assets 858.9 959.9
Current liabilities 1,469.6 1,457.3
tional information on our operating segments. Our
Noncurrent liabilities 55.2 81.7
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:

North Convenience
America Stores & Europe & Asia & Latin Joint
In Millions Retail Foodservice Australia America Ventures Total

Balance as of May 25, 2014 $ 5,975.1 $ 921.1 $ 866.1 $ 390.0 $ 498.2 $ 8,650.5
Acquisition 589.8 — — — — 589.8
Other activity, primarily foreign
currency translation (18.7) — (147.0) (103.0) (96.7) (365.4)
Balance as of May 31, 2015 6,546.2 921.1 719.1 287.0 401.5 8,874.9
Acquisitions 54.1 — — 29.4 — 83.5
Divestitures (184.5) — — (1.9) — (186.4)
Other activity, primarily foreign
currency translation (5.5) — (2.6) (27.4) 4.7 (30.8)
Balance as of May 29, 2016 6,410.3 921.1 716.5 287.1 406.2 8,741.2
Divestiture — (2.3) — — — (2.3)
Other activity, primarily foreign
currency translation (3.8) — (15.7) 25.3 2.5 8.3
Balance as of May 28, 2017 $ 6,406.5 $ 918.8 $ 700.8 $ 312.4 $ 408.7 $ 8,747.2

The changes in the carrying amount of other intangi- Our indefinite-lived intangible asset test was per-
ble assets for fiscal 2015, 2016, and 2017 are as follows: formed on the first day of the second quarter of fiscal
2017. As of the assessment date, there was no impair-
In Millions Total
ment of any of our indefinite-lived intangible assets as
Balance as of May 25, 2014 $5,014.3 their related fair values were substantially in excess of
Acquisition 268.4 the carrying values, except for the Immaculate Baking
Impairment charge (260.0) brand intangible asset.
Other activity, primarily amortization The excess fair value above the carrying value of
and foreign currency translation (345.7) the Latin America reporting unit and the Immaculate
Balance as of May 31, 2015 4,677.0 Baking brand intangible asset is as follows:
Acquisitions 30.1
Divestiture (119.6) Excess Fair
Other activity, primarily amortization Value Above
Carrying Carrying
and foreign currency translation (48.9) In Millions Value Value
Balance as of May 29, 2016 4,538.6
Latin America $523.0 15%
Other activity, primarily amortization
Immaculate Baking $12.0 17%
and foreign currency translation (8.2)
Balance as of May 28, 2017 $4,530.4
While having significant coverage as of our fiscal
2017 assessment date, the Progresso, Green Giant, and
Our annual goodwill intangible asset test was per-
Food Should Taste Good brand intangible assets and
formed on the first day of the second quarter of fiscal
U.S. Yogurt reporting unit had risk of decreasing cover-
2017. As of the assessment date, we determined there
age. We will continue to monitor these businesses for
was no impairment of our goodwill intangible assets
potential impairment.
as their related fair values were substantially in excess
In fiscal 2015, we made a strategic decision to redirect
of the carrying values, except for the Latin America
certain resources supporting our Green Giant business
reporting unit. We did not consider the new organiza-
in our North America Retail segment to other busi-
tion structure to be a triggering event requiring a sub-
nesses within the segment. Therefore, future sales and
sequent goodwill impairment test as our reporting units
profitability projections in our long-range plan for this
remain unchanged, with the exception of combining the
business declined. As a result of this triggering event,
former U.S. Meals and U.S. Baking reporting units.
we performed an interim impairment assessment of
 ANNUAL REPORT 61

the Green Giant brand intangible asset as of May 31, As of May 28, 2017, we did not any have cash and
2015, and determined that the fair value of the brand cash equivalents pledged as collateral for derivative
asset no longer exceeded the carrying value of the contracts. As of May 28, 2017, $19.6 million of certain
asset. Significant assumptions used in that assessment accounts receivable were pledged as collateral against a
included our updated long-range cash flow projec- foreign uncommitted line of credit.
tions for the Green Giant business, an updated royalty The fair value and carrying amounts of long-term
rate, a weighted-average cost of capital, and a tax rate. debt, including the current portion, were $8,547.0 mil-
We recorded a $260.0 million impairment charge in lion and $8,247.6 million, respectively, as of May 28,
restructuring, impairment, and other exit costs in fiscal 2017. The fair value of long-term debt was estimated
2015 related to this asset. using market quotations and discounted cash flows
based on our current incremental borrowing rates for
NOTE 7. FINANCIAL INSTRUMENTS, RISK similar types of instruments. Long-term debt is a Level
2 liability in the fair value hierarchy.
MANAGEMENT ACTIVITIES, AND FAIR VALUES

Financial Instruments Risk Management Activities

The carrying values of cash and cash equivalents, As a part of our ongoing operations, we are exposed to
receivables, accounts payable, other current liabilities, market risks such as changes in interest and foreign
and notes payable approximate fair value. Marketable currency exchange rates and commodity and equity
securities are carried at fair value. As of May 28, 2017 prices. To manage these risks, we may enter into var-
and May 29, 2016, a comparison of cost and market ious derivative transactions (e.g., futures, options, and
values of our marketable debt and equity securities is swaps) pursuant to our established policies.
as follows:
Commodity Price Risk
Fair Gross Gross
Cost Value Gains Losses Many commodities we use in the production and dis-
Fiscal Year Fiscal Year Fiscal Year Fiscal Year tribution of our products are exposed to market price
In Millions 2017 2016 2017 2016 2017 2016 2017 2016 risks. We utilize derivatives to manage price risk for
Available for sale: our principal ingredients and energy costs, including
Debt securities $265.4 $165.7 $265.5 $165.8 $0.1 $0.1 $ — $— grains (oats, wheat, and corn), oils (principally soybean),
Equity securities 1.8 1.8 9.9 8.4 8.1 6.6 — — dairy products, natural gas, and diesel fuel. Our primary
Total $267.2 $167.5 $275.4 $174.2 $8.2 $6.7 $ — $— objective when entering into these derivative contracts
is to achieve certainty with regard to the future price
There were no realized gains or losses from sales of of commodities purchased for use in our supply chain.
available-for-sale marketable securities. Gains and losses We manage our exposures through a combination of
are determined by specific identification. Classification of purchase orders, long-term contracts with suppliers,
marketable securities as current or noncurrent is depen- exchange-traded futures and options, and over-the-
dent upon our intended holding period and the securi- counter options and swaps. We offset our exposures
ty’s maturity date. The aggregate unrealized gains and based on current and projected market conditions and
losses on available-for-sale securities, net of tax effects, generally seek to acquire the inputs at as close to our
are classified in AOCI within stockholders’ equity. planned cost as possible.
Scheduled maturities of our marketable securities are We use derivatives to manage our exposure to changes
as follows: in commodity prices. We do not perform the assess-
ments required to achieve hedge accounting for com-
Available for Sale modity derivative positions. Accordingly, the changes in
Fair the values of these derivatives are recorded currently in
In Millions Cost Value
cost of sales in our Consolidated Statements of Earnings.
Under 1 year (current) $ 265.4 $ 265.5
Although we do not meet the criteria for cash flow
Equity securities 1.8 9.9
hedge accounting, we believe that these instruments
Total $ 267.2 $ 275.4
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 Floating Interest Rate Exposures — Floating-to-fixed
measuring segment operating performance these gains interest rate swaps are accounted for as cash flow
and losses are reported in unallocated corporate items hedges, as are all hedges of forecasted issuances of debt.
outside of segment operating results until such time Effectiveness is assessed based on either the perfectly
that the exposure we are managing affects earnings. effective hypothetical derivative method or changes in
At that time we reclassify the gain or loss from unal- the present value of interest payments on the under-
located corporate items to segment operating profit, lying debt. Effective gains and losses deferred to AOCI
allowing our operating segments to realize the eco- are reclassified into earnings over the life of the asso-
nomic effects of the derivative without experiencing ciated debt. Ineffective gains and losses are recorded as
any resulting mark-to-market volatility, which remains net interest. The amount of hedge ineffectiveness was
in unallocated corporate items. less than $1 million in each of fiscal 2017, 2016, and 2015.
Unallocated corporate items for fiscal 2017, 2016 and Fixed Interest Rate Exposures — Fixed-to-floating
2015 included: interest rate swaps are accounted for as fair value
hedges with effectiveness assessed based on changes
Fiscal Year
in the fair value of the underlying debt and derivatives,
In Millions 2017 2016 2015
using incremental borrowing rates currently available
Net loss on mark-to-market on loans with similar terms and maturities. Ineffective
valuation of commodity positions $ (22.0) $ (69.1) $ (163.7) gains and losses on these derivatives and the under-
Net loss on commodity lying hedged items are recorded as net interest. The
positions reclassified from
amount of hedge ineffectiveness was a $4.3 million
unallocated corporate items
gain in fiscal 2017, less than $1 million in fiscal 2016,
to segment operating profit 32.0 127.9 84.4
and a $1.6 million gain in fiscal 2015.
Net mark-to-market revaluation
In advance of planned debt financing, in the first
of certain grain inventories 3.9 4.0 (10.4)
quarter of fiscal 2017 and the third quarter of fiscal
Net mark-to-market valuation
2016, we entered into $100 million and $400 million,
of certain commodity positions
respectively, of treasury locks due February 15, 2017
recognized in unallocated
with an average fixed rate of 2.0 percent. All of these
corporate items $
13.9 $
62.8 $
(89.7)
treasury locks were cash settled for $17.2 million during
the third quarter of fiscal 2017, concurrent with the
As of May 28, 2017, the net notional value of com-
issuance of our $750.0 million 10-year fixed-rate notes.
modity derivatives was $410.3 million, of which $289.6
In fiscal 2015, we entered into swaps to convert
million related to agricultural inputs and $120.7 million
$500.0 million of 1.4 percent fixed-rate notes due
related to energy inputs. These contracts relate to inputs
October 20, 2017, and $500.0 million of 2.2 percent
that generally will be utilized within the next 12 months.
fixed-rate notes due October 21, 2019, to floating rates.
As of May 28, 2017, the pre-tax amount of cash-set-
Interest Rate Risk
tled interest rate hedge gain or loss remaining in AOCI,
We are exposed to interest rate volatility with regard
which will be reclassified to earnings over the remain-
to future issuances of fixed-rate debt, and existing and
ing term of the related underlying debt, follows:
future issuances of floating-rate debt. Primary exposures
include U.S. Treasury rates, LIBOR, Euribor, and commer- In Millions Gain/(Loss)
cial paper rates in the United States and Europe. We use 5.65% notes due February 15, 2019 $ 0.8
interest rate swaps, forward-starting interest rate swaps, 3.15% notes due December 15, 2021 (45.0)
and treasury locks to hedge our exposure to interest rate 1.0% notes due April 27, 2023 (1.4)
changes, to reduce the volatility of our financing costs, 3.65% notes due February 15, 2024 12.0
and to achieve a desired proportion of fixed rate versus 3.2% notes due February 10, 2027 16.6
floating-rate debt, based on current and projected mar- 1.5% notes due April 27, 2027 (3.2)
ket conditions. Generally under these swaps, we agree 5.4% notes due June 15, 2040 (12.9)
with a counterparty to exchange the difference between 4.15% notes due February 15, 2043 10.1
fixed-rate and floating-rate interest amounts based on an Net pre-tax hedge loss in AOCI $ (23.0)
agreed upon notional principal amount.
 ANNUAL REPORT 63

The following table summarizes the notional amounts The swap contracts mature as follows:
and weighted-average interest rates of our interest rate
In Millions Pay Floating
derivatives. Average floating rates are based on rates as
of the end of the reporting period. 2018 $ 500.0
2020 $ 500.0
May 28, May 29, Total $ 1,000.0
In Millions 2017 2016

Pay-floating swaps - notional amount $ 1,000.0 $ 1,000.0

The following tables reconcile the net fair values of
Average receive rate 1.8% 1.8%
assets and liabilities subject to offsetting arrangements
Average pay rate 1.6% 1.1%
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 Liabilities
Gross Amounts Not Gross Amounts Not
Offset in the Offset in the
Balance Sheet (e) Balance Sheet (e)
Gross Gross
Gross Liabilities Gross Assets
Amounts of Offset in Net Cash Amounts of Offset in Net Cash
Recognized the Balance Amounts of Financial Collateral Net Recognized the Balance Amounts of Financial Collateral Net
In Millions Assets Sheet (a) Assets (b) Instruments Received Amount (c) Liabilities Sheet (a) Liabilities (b) Instruments Pledged Amount (d)

Commodity
contracts $ 11.5 $ — $ 11.5 $ (7.2) $ — $ 4.3 $(8.2) $ — $(8.2) $ 7.2 $ — $(1.0)
Interest rate
contracts 0.9 — 0.9 (0.5) — 0.4 (0.5) — (0.5) 0.5 — —
Foreign
exchange
contracts 16.5 — 16.5 (7.2) — 9.3 (10.2) — (10.2) 7.2 — (3.0)
Equity
contracts 1.9 — 1.9 — — 1.9 — — — — — —
Total $30.8 $ — $30.8 $(14.9) $ — $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 Liabilities
Gross Amounts Not Gross Amounts Not
Offset in the Offset in the
Balance Sheet (e) Balance Sheet (e)
Gross Gross
Gross Liabilities Gross Assets
Amounts of Offset in Net Cash Amounts of Offset in Net Cash
Recognized the Balance Amounts of Financial Collateral Net Recognized the Balance Amounts of Financial Collateral Net
In Millions Assets Sheet (a) Assets (b) Instruments Received Amount (c) Liabilities Sheet (a) Liabilities (b) Instruments Pledged Amount (d)

Commodity
contracts $ 4.4 $ — $ 4.4 $ (3.9) $ — $ 0.5 $(22.2) $ — $(22.2) $ 3.9 $7.5 $(10.8)
Interest rate
contracts 8.5 — 8.5 — — 8.5 (3.0) — (3.0) — — (3.0)
Foreign
exchange
contracts 25.4 — 25.4 (8.7) — 16.7 (13.7) — (13.7) 8.7 — (5.0)
Equity
contracts 2.4 — 2.4 — — 2.4 — — — — — —
Total $40.7 $ — $40.7 $(12.6) $ — $28.1 $(38.9) $ — $(38.9) $12.6 $7.5 $(18.8)
(a) Includes related collateral 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 hedged a portion of these net investments by issu-

Foreign currency fluctuations affect our net invest- ing euro-denominated commercial paper and foreign
ments in foreign subsidiaries and foreign currency cash exchange forward contracts. As of May 28, 2017, we
flows related to third party purchases, intercompany hedged a portion of these net investments with €2,200
loans, product shipments, and foreign-denominated million of euro denominated bonds. As of May 28,
debt. We are also exposed to the translation of for- 2017, we had deferred net foreign currency transac-
eign currency earnings to the U.S. dollar. Our principal tion losses of $39.1 million in AOCI associated with net
exposures are to the Australian dollar, Brazilian real, investment hedging activity.
British pound sterling, Canadian dollar, Chinese ren- Venezuela is a highly inflationary economy and as
minbi, euro, Japanese yen, Mexican peso, and Swiss such, we remeasured the value of the assets and liabil-
franc. We primarily use foreign currency forward con- ities of our former Venezuelan subsidiary based on the
tracts to selectively hedge our foreign currency cash exchange rate at which we expected to remit dividends
flow exposures. We also generally swap our foreign-de- in U.S. dollars from the SIMADI market. In fiscal 2015,
nominated commercial paper borrowings and nonfunc- we recorded an $8 million foreign exchange loss. In the
tional currency intercompany loans back to U.S. dollars fourth quarter of fiscal 2016, we sold our General Mills
or the functional currency of the entity with foreign de Venezuela CA subsidiary to a third party and exited
exchange exposure. The gains or losses on these deriv- our business in Venezuela.
atives offset the foreign currency revaluation gains or
losses recorded in earnings on the associated borrow- Equity Instruments
ings. We generally do not hedge more than 18 months Equity price movements affect our compensation
in advance. expense as certain investments made by our employees
As of May 28, 2017, the net notional value of foreign in our deferred compensation plan are revalued. We use
exchange derivatives was $850.2 million. The amount equity swaps to manage this risk. As of May 28, 2017,
of hedge ineffectiveness was less than $1 million in the net notional amount of our equity swaps was $138.9
each of fiscal 2017, 2016, and 2015. million. These swap contracts mature in fiscal 2018.
We also have many net investments in foreign sub-
sidiaries that are denominated in euros. We previously
 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:

May 28, 2017 May 28, 2017

Fair Values of Assets Fair Values of Liabilities
In Millions Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Derivatives designated as hedging instruments:

Interest rate contracts (a) (b) $ — $ 0.7 $ — $ 0.7 $ — $ (0.4) $ — $ (0.4)
Foreign exchange contracts (c) (d) — 16.3 — 16.3 — (3.6) — (3.6)
Total — 17.0 — 17.0 — (4.0) — (4.0)
Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d) — 0.2 — 0.2 — (6.6) — (6.6)
Commodity contracts (c) (e) 4.1 7.4 — 11.5 (3.4) (4.8) — (8.2)
Grain contracts (c) (e) — 2.7 — 2.7 — (5.6) — (5.6)
Total 4.1 10.3 — 14.4 (3.4) (17.0) — (20.4)
Other assets and liabilities reported at fair value:
Marketable investments (a) (f) 9.9 265.5 — 275.4 — — — —
Long-lived assets (g) — 43.7 — 43.7 — — — —
Total 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

May 29, 2016 May 29, 2016

Fair Values of Assets Fair Values of Liabilities
In Millions Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Derivatives designated as hedging instruments:

Interest rate contracts (a) (b) $ — $ 7.7 $ — $ 7.7 $ — $ (3.0) $ — $ (3.0)
Foreign exchange contracts (c) (d) — 12.2 — 12.2 — (12.2) — (12.2)
Total — 19.9 — 19.9 — (15.2) — (15.2)
Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d) — 13.2 — 13.2 — (1.5) — (1.5)
Commodity contracts (c) (e) 2.6 1.7 — 4.3 (0.6) (21.6) — (22.2)
Grain contracts (c) (e) — 1.8 — 1.8 — (5.5) — (5.5)
Total 2.6 16.7 — 19.3 (0.6) (28.6) — (29.2)
Other assets and liabilities reported at fair value:
Marketable investments (a) (f) 8.4 165.8 — 174.2 — — — —
Long-lived assets (g) — 26.0 — 26.0 — — —
Total 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:

Interest Rate Foreign Exchange Equity Commodity

Contracts Contracts Contracts Contracts Total
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
In Millions 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Derivatives in Cash Flow Hedging Relationships:

Amount of gain (loss) recognized in other
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) (5.0)
(10.6) 33.8 22.1 — — — — 28.8 11.5
Amount of net gain (loss) recognized
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) 4.3 0.1 — — — — — — 4.3 0.1
Derivatives in Net Investment Hedging Relationships:
Amount of loss recognized in OCI (a) — — — (0.2) — — — — — (0.2)
Derivatives Not Designated as Hedging Instruments:
Amount of net gain (loss) recognized in earnings (d) — — 7.6 1.1 17.8 (4.5) (16.2) (56.1) 9.2 (59.5)
(a) Effective portion.
(b) Gain (loss) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign
exchange contracts.
(c) Gain (loss) recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts
and interest, net for interest rate contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.
(d) Gain (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for
equity contracts and foreign exchange contracts.
68 GENERAL MILLS

Amounts Recorded in Accumulated Other No customer other than Wal-Mart accounted for 10
Comprehensive Loss percent or more of our consolidated net sales.
As of May 28, 2017, the after-tax amounts of unrealized We enter into interest rate, foreign exchange, and
gains and losses in AOCI related to hedge derivatives certain commodity and equity derivatives, primarily
follows: with a diversified group of highly rated counterparties.
We continually monitor our positions and the credit
In Millions After-Tax Gain/(Loss)
ratings of the counterparties involved and, by policy,
Unrealized losses from interest rate cash flow hedges $ (12.9) limit the amount of credit exposure to any one party.
Unrealized gains from foreign currency cash flow hedges 14.4 These transactions may expose us to potential losses
After-tax gain in AOCI related to hedge derivatives $ 1.5 due to the risk of nonperformance by these counter-
parties; however, we have not incurred a material loss.
The net amount of pre-tax gains and losses in AOCI We also enter into commodity futures transactions
as of May 28, 2017 that we expect to be reclassified through various regulated exchanges.
into net earnings within the next 12 months is $11.7 The amount of loss due to the credit risk of the
million of gain. counterparties, should the counterparties fail to per-
form according to the terms of the contracts, is $5.8
Credit-Risk-Related Contingent Features million against which we do not hold collateral. Under
Certain of our derivative instruments contain provi- the terms of our swap agreements, some of our trans-
sions that require us to maintain an investment grade actions require collateral or other security to support
credit rating on our debt from each of the major credit financial instruments subject to threshold levels of
rating agencies. If our debt were to fall below invest- exposure and counterparty credit risk. Collateral assets
ment grade, the counterparties to the derivative instru- are either cash or U.S. Treasury instruments and are
ments could request full collateralization on derivative held in a trust account that we may access if the coun-
instruments in net liability positions. The aggregate terparty defaults.
fair value of all derivative instruments with cred- We offer certain suppliers access to third party ser-
it-risk-related contingent features that were in a lia- vices that allows them to view our scheduled payments
bility position on May 28, 2017, was $1.0 million. We online. The third party services also allow suppliers to
have posted no collateral under these contracts. If the finance advances on our scheduled payments at the
credit-risk-related contingent features underlying these sole discretion of the supplier and the third party. We
agreements had been triggered on May 28, 2017, we have no economic interest in these financing arrange-
would have been required to post $1.0 million of collat- ments and no direct relationship with the suppliers, the
eral to counterparties. third parties, or any financial institutions concerning
these services. All of our accounts payable remain as
Concentrations of Credit and Counterparty obligations to our suppliers as stated in our supplier
Credit Risk agreements. As of May 28, 2017, $639.0 million of our
During fiscal 2017, customer concentration was as accounts payable is payable to suppliers who utilize
follows: these third party services.

North Convenience Asia &

America Stores & Europe & Latin
Percent of total Consolidated Retail Foodservice Australia America

Wal-mart: (a)
Net sales 20% 29% 7% 2% 4%
Accounts receivable 24% 8% 1% 4%
Five largest customers:
Net sales 52% 48% 31% 10%
(a) Includes Wal-Mart Stores, Inc. and its affiliates.
 ANNUAL REPORT 69

NOTE 8. DEBT Long-Term Debt In March 2017, we issued €300.0 mil-

lion principal amount of floating-rate notes due March
Notes Payable The components of notes payable and 20, 2019. Interest on the notes is payable quarterly in
their respective weighted-average interest rates at the arrears. The notes are not generally redeemable prior to
end of the periods were as follows: maturity. These notes are senior unsecured obligations
that include a change of control repurchase provision.
May 28, 2017 May 29, 2016 The net proceeds were used to repay a portion of our
Weighted- Weighted- outstanding commercial paper.
average average
Notes Interest Notes Interest In February 2017, we repaid $1.0 billion of 5.7 percent
In Millions Payable Rate Payable Rate fixed-rate notes.
U.S. commercial paper $ 954.7 1.1% $ — —% In January 2017, we issued $750.0 million principal
Financial institutions 279.4 7.0 269.8 8.6 amount of 3.2 percent fixed-rate notes due February
Total $ 1,234.1 2.4% $ 269.8 8.6% 10, 2027. Interest on the notes is payable semi-annu-
ally in arrears. We may redeem the notes in whole or
To ensure availability of funds, we maintain bank in part at any time at the applicable redemption price.
credit lines sufficient to cover our outstanding notes The notes are senior unsecured obligations that include
payable. Commercial paper is a continuing source of a change of control repurchase provision. The net pro-
short-term financing. We have commercial paper pro- ceeds were used to repay a portion of our maturing
grams available to us in the United States and Europe. long-term debt.
We also have uncommitted and asset-backed credit In January 2016, we issued €500.0 million principal
lines that support our foreign operations. amount of floating-rate notes due January 15, 2020.
The following table details the fee-paid committed Interest on the notes are payable quarterly in arrears.
and uncommitted credit lines we had available as of The notes are not generally redeemable prior to matu-
May 28, 2017: rity. These notes are senior unsecured obligations
that include a change of control repurchase provision.
Facility Borrowed The net proceeds were used to repay a portion of our
In Billions Amount Amount
maturing long-term debt.
Credit facility expiring:
In January 2016, we repaid $250 million of 0.875 per-
May 2022 $ 2.7 $ —
cent fixed-rate notes and $750 million of floating-rate
June 2019 0.2 0.1
notes.
Total committed credit facilities 2.9 0.1
In April 2015, we issued €500.0 million principal
Uncommitted credit facilities 0.5 0.1
Total committed and uncommitted
amount of 1.0 percent fixed-rate notes due April 27,
credit facilities $ 3.4 $ 0.2
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
In fiscal 2016, we entered into a $2.7 billion fee-paid
be redeemed in whole or in part at our option at any
committed credit facility that was originally scheduled
time at the applicable redemption price. These notes
to expire in May 2021. In fiscal 2017, we amended the
are senior unsecured obligations that include a change
credit facility’s expiration date by one year to May
of control repurchase provision. The net proceeds were
2022.
used for general corporate purposes and to reduce our
The credit facilities contain covenants, including a
commercial paper borrowings.
requirement to maintain a fixed charge coverage ratio
In March 2015, we repaid $750.0 million of 5.2 per-
of at least 2.5 times. We were in compliance with all
cent fixed-rate notes.
credit facility covenants as of May 28, 2017.
 
70 GENERAL MILLS

A summary of our long-term debt is as follows: NOTE 9. REDEEMABLE AND

In Millions May 28, 2017 May 29, 2016
NONCONTROLLING INTERESTS
5.65% notes due February 15, 2019 $1,150.0 $1,150.0
Our principal redeemable and noncontrolling interests
5.7% notes due February 15, 2017 — 1,000.0
relate to our Yoplait SAS, Yoplait Marques SNC, Liberté
3.15% notes due December 15, 2021 1,000.0 1,000.0
Marques Sàrl, and General Mills Cereals, LLC (GMC)
3.2% notes due February 10, 2027 750.0 —
subsidiaries. In addition, we have four foreign subsid-
Euro-denominated 2.1% notes
due November 16, 2020 559.2 555.8
iaries that have noncontrolling interests totaling $8.5
Euro-denominated 1.0% notes
million as of May 28, 2017.
due April 27, 2023 559.2 555.8 We have a 51 percent controlling interest in Yoplait
Euro-denominated floating-rate notes SAS and a 50 percent interest in Yoplait Marques SNC
due January 15, 2020 559.2 555.8 and Liberté Marques Sàrl. Sodiaal holds the remaining
1.4% notes due October 20, 2017 500.0 500.0 interests in each of the entities. On the acquisition date,
5.4% notes due June 15, 2040 500.0 500.0 we recorded the $904.4 million fair value of Sodiaal’s
4.15% notes due February 15, 2043 500.0 500.0 49 percent euro-denominated interest in Yoplait SAS
3.65% notes due February 15, 2024 500.0 500.0 as a redeemable interest on our Consolidated Balance
2.2% notes due October 21, 2019 500.0 500.0 Sheets. Sodiaal has the ability to put all or a portion of
Euro-denominated 1.5% notes its redeemable interest to us at fair value once per year,
due April 27, 2027 447.3 444.6 up to three times before December 2024. We adjust
Euro-denominated floating-rate notes the value of the redeemable interest through additional
due March 20, 2019 335.5 — paid-in capital on our Consolidated Balance Sheets
Euro-denominated 2.2% notes quarterly to the redeemable interest’s redemption value,
due June 24, 2021 222.8 221.0 which approximates its fair value. Yoplait SAS pays
Medium-term notes, 0.02% to 6.59%, dividends annually if it meets certain financial metrics
due fiscal 2018 or later 204.2 204.2 set forth in its shareholders agreement. As of May 28,
Other, including debt issuance
2017, the redemption value of the euro-denominated
costs and capital leases (39.8) (26.1)
redeemable interest was $910.9 million.
8,247.6 8,161.1
On the acquisition dates, we recorded the $281.4
Less amount due within one year (604.7) (1,103.4)
million fair value of Sodiaal’s 50 percent euro-denom-
Total long-term debt $7,642.9 $7,057.7
inated interest in Yoplait Marques SNC and 50 per-
cent Canadian dollar-denominated interest in Liberté
Principal payments due on long-term debt in the
Marques Sàrl as noncontrolling interests on our
next five years based on stated contractual maturities,
Consolidated Balance Sheets. Yoplait Marques SNC
our intent to redeem, or put rights of certain note hold-
earns a royalty stream through a licensing agreement
ers are $604.7 million in fiscal 2018, $1,585.9 million
with Yoplait SAS for the rights to Yoplait and related
in fiscal 2019, $1,062.5 million in fiscal 2020, $559.4
trademarks. Liberté Marques Sàrl earns a royalty stream
million in fiscal 2021, and $1,001.1 million in fiscal 2022.
through licensing agreements with certain Yoplait group
Certain of our long-term debt agreements contain
companies for the rights to Liberté and related trade-
restrictive covenants. As of May 28, 2017, we were in
marks. These entities pay dividends annually based on
compliance with all of these covenants.
their available cash as of their fiscal year end.
As of May 28, 2017, the $23.0 million pre-tax loss
We paid dividends of $48.6 million in fiscal 2017, and
recorded in AOCI associated with our previously des-
$74.5 million in fiscal 2016, to Sodiaal under the terms
ignated interest rate swaps will be reclassified to net
of the Yoplait SAS and Yoplait Marques SNC share-
interest over the remaining lives of the hedged trans-
holder agreements.
actions. The amount expected to be reclassified from
A subsidiary of Yoplait SAS has entered into an exclu-
AOCI to net interest in fiscal 2018 is a $6.7 million pre-
sive milk supply agreement for its European operations
tax loss.
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

The holder of the GMC Class A Interests receives NOTE 10. STOCKHOLDERS’ EQUITY
quarterly preferred distributions from available net
income based on the application of a floating preferred Cumulative preference stock of 5.0 million shares, with-
return rate to the holder’s capital account balance out par value, is authorized but unissued.
established in the most recent mark-to-market valu- On May 6, 2014, our Board of Directors authorized
ation (currently $251.5 million). On June 1, 2015, the the repurchase of up to 100 million shares of our com-
floating preferred return rate on GMC’s Class A inter- mon stock. Purchases under the authorization can be
ests was reset to the sum of three-month LIBOR plus made in the open market or in privately negotiated
125 basis points. The preferred return rate is adjusted transactions, including the use of call options and other
every three years through a negotiated agreement with derivative instruments, Rule 10b5-1 trading plans, and
the Class A Interest holder or through a remarketing accelerated repurchase programs. The authorization
auction. has no specified termination date.
For financial reporting purposes, the assets, liabilities, Share repurchases were as follows:
results of operations, and cash flows of our non-wholly
owned subsidiaries are included in our Consolidated Fiscal Year

Financial Statements. The third-party investor’s share In Millions 2017 2016 2015

of the net earnings of these subsidiaries is reflected in Shares of common stock 25.4 10.7 22.3
net earnings attributable to redeemable and noncon- Aggregate purchase price $ 1,651.5 $ 606.7 $ 1,161.9
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):

Fiscal 2017
Noncontrolling Redeemable
General Mills Interests Interests
In Millions Pretax Tax Net Net Net

Net earnings, including earnings

attributable to redeemable and
noncontrolling interests $ 1,657.5 $ 11.3 $ 32.3
Other comprehensive income (loss):
Foreign currency translation $ 19.5 $ — 19.5 2.5 (15.7)
Net actuarial income 307.3 (109.4) 197.9 — —
Other fair value changes:
Securities 1.3 (0.5) 0.8 — —
Hedge derivatives 65.9 (16.1) 49.8 — 3.5
Reclassification to earnings:
Hedge derivatives (a) (25.2) 2.4 (22.8) — (2.9)
Amortization of losses and
prior service costs (b) 197.2 (74.7) 122.5 — —
Other comprehensive income (loss) 566.0 (198.3) 367.7 2.5 (15.1)
Total comprehensive income $ 2,025.2 $ 13.8 $ 17.2
(a) G
 ain 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

Fiscal 2016
Noncontrolling Redeemable
General Mills Interests Interests
In Millions Pretax Tax Net Net Net

Net earnings, including earnings

attributable to redeemable and
noncontrolling interests $ 1,697.4 $ 8.4 $ 31.0
Other comprehensive income (loss):
Foreign currency translation $ (107.6) $ — (107.6) 2.8 (3.9)
Net actuarial loss (514.2) 188.3 (325.9) — —
Other fair value changes:
Securities 0.2 (0.1) 0.1 — —
Hedge derivatives 16.5 (2.2) 14.3 — 1.7
Reclassification to earnings:
Hedge derivatives (a) (13.5) 2.5 (11.0) — 1.5
Amortization of losses and
prior service costs (b) 206.8 (78.2) 128.6 — —
Other comprehensive income (loss) (411.8) 110.3 (301.5) 2.8 (0.7)
Total comprehensive income $ 1,395.9 $ 11.2 $ 30.3
(a) G
 ain 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.

Fiscal 2015
Noncontrolling Redeemable
General Mills Interests Interests
In Millions Pretax Tax Net Net Net

Net earnings, including earnings

attributable to redeemable and
noncontrolling interests $ 1,221.3 $ 8.2 $ 29.9
Other comprehensive income (loss):
Foreign currency translation $ (727.9) $ — (727.9) (78.2) (151.8)
Net actuarial income (561.1) 202.7 (358.4) — —
Other fair value changes:
Securities 1.3 (0.5) 0.8 — —
Hedge derivatives 13.6 (4.8) 8.8 — (4.7)
Reclassification to earnings:
Hedge derivatives (a) 0.7 0.5 1.2 — 3.7
Amortization of losses and
prior service costs (b) 170.2 (65.1) 105.1 — —
Other comprehensive loss (1,103.2) 132.8 (970.4) (78.2) (152.8)
Total comprehensive income (loss) $ 250.9 $ (70.0) $ (122.9)
(a) L
 oss 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- Stock Options The estimated fair values of stock
cations to earnings, changes in other comprehensive options granted and the assumptions used for the
income (loss) were primarily non-cash items. Black-Scholes option-pricing model were as follows:
Accumulated other comprehensive loss balances, net
Fiscal Year
of tax effects, were as follows:
2017 2016 2015

In Millions 2017 2016 Estimated fair values of

Foreign currency stock options granted $8.80 $7.24 $7.22
translation adjustments $ (624.7) $ (644.2) Assumptions:
Unrealized gain (loss) from: Risk-free interest rate 1.7% 2.4% 2.6%
Securities 4.6 3.8 Expected term 8.5 years 8.5 years 8.5 years
Hedge derivatives 1.5 (25.5) Expected volatility 17.8% 17.6% 17.5%
Pension, other postretirement, Dividend yield 2.9% 3.2% 3.1%
and postemployment benefits:
Net actuarial loss (1,645.4) (1,958.2) We estimate the fair value of each option on the
Prior service credits 19.5 11.9 grant date using a Black-Scholes option-pricing model,
Accumulated other comprehensive loss $ (2,244.5) $ (2,612.2) which requires us to make predictive assumptions
regarding future stock price volatility, employee exer-
cise behavior, dividend yield, and the forfeiture rate. We
NOTE 11. STOCK PLANS
estimate our future stock price volatility using the his-
torical volatility over the expected term of the option,
We use broad-based stock plans to help ensure that
excluding time periods of volatility we believe a market-
management’s interests are aligned with those of our
place participant would exclude in estimating our stock
shareholders. As of May 28, 2017, a total of 20.3 mil-
price volatility. We also have considered, but did not
lion shares were available for grant in the form of
use, implied volatility in our estimate, because trading
stock options, restricted stock, restricted stock units,
activity in options on our stock, especially those with
and shares of unrestricted stock under the 2011
tenors of greater than 6 months, is insufficient to pro-
Stock Compensation Plan (2011 Plan) and the 2016
vide a reliable measure of expected volatility.
Compensation Plan for Non-Employee Directors. The
Our expected term represents the period of time
2011 Plan also provides for the issuance of cash-set-
that options granted are expected to be outstanding
tled share-based units, stock appreciation rights, and
based on historical data to estimate option exercises
performance-based stock awards. Stock-based awards
and employee terminations within the valuation model.
now outstanding include some granted under the 2005,
Separate groups of employees have similar historical
2006, 2007 and 2009 stock plans and the 2011 compen-
exercise behavior and therefore were aggregated into a
sation plan for non-employee directors, under which no
single pool for valuation purposes. The weighted-aver-
further awards may be granted. The stock plans pro-
age expected term for all employee groups is presented
vide for potential accelerated vesting of awards upon
in the table above. The risk-free interest rate for peri-
retirement, termination, or death of eligible employees
ods during the expected term of the options is based on
and directors.
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- Stock-based compensation expense related to stock
fall tax benefits, if any, and then charged directly to option awards was $18.0 million in fiscal 2017, $14.8
income tax expense, potentially resulting in volatility million in fiscal 2016, and $18.1 million in fiscal 2015.
in our consolidated effective income tax rate. We calcu- Compensation expense related to stock-based pay-
lated a cumulative memo balance of windfall tax ben- ments recognized in our Consolidated Statements of
efits for the purpose of accounting for future shortfall Earnings includes amounts recognized in restructuring,
tax benefits. impairment, and other exit costs for fiscal 2017, 2016
Options may be priced at 100 percent or more of the and 2015.
fair market value on the date of grant, and generally Net cash proceeds from the exercise of stock options
vest four years after the date of grant. Options gen- less shares used for minimum withholding taxes and
erally expire within 10 years and one month after the the intrinsic value of options exercised were as follows:
date of grant.
Fiscal Year
Information on stock option activity follows:
In Millions 2017 2016 2015

Weighted- Weighted- Net cash proceeds $112.6 $171.9 $163.7

Average Average
Options Exercise Options Exercise Intrinsic value of
Exercisable Price Per Outstanding Price Per options exercised $176.5 $268.4 $201.9
(Thousands) Share (Thousands) Share

Balance as of
Restricted Stock, Restricted Stock Units, and
May 25, 2014 29,452.8 $28.37 44,169.0 $32.10
Performance Share Units Stock and units settled in
Granted 2,253.1 53.70
stock subject to a restricted period and a purchase price,
Exercised (7,297.2) 26.68
Forfeited or expired (47.7) 43.73
if any (as determined by the Compensation Committee
Balance as of of the Board of Directors), may be granted to key
May 31, 2015 26,991.5 $30.44 39,077.2 $34.35 employees under the 2011 Plan. Restricted stock and
Granted 1,930.2 55.72 restricted stock units generally vest and become unre-
Exercised (8,471.0) 28.49 stricted four years after the date of grant. Performance
Forfeited or expired (134.8) 48.16 share units are earned based on our future achievement
Balance as of of three-year goals for average organic net sales growth
May 29, 2016 22,385.1 $32.38 32,401.6 $37.09 and cumulative free cash flow. Performance share units
Granted 2,446.0 66.52 are settled in common stock and are generally subject
Exercised (4,904.9) 30.76 to a three year performance and vesting period. The
Forfeited or expired (108.3) 57.52 sale or transfer of these awards is restricted during the
Balance as of vesting period. Participants holding restricted stock, but
May 28, 2017 20,899.2 $33.83 29,834.4 $40.47 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:

Equity Classified Liability Classified

Share- Weighted- Share- Weighted-

Settled Average Settled Average
Units Grant-Date Units Grant-Date
(Thousands) Fair Value (Thousands) Fair Value

Non-vested as of May 29, 2016 5,100.4 $48.60 211.4 $48.37

Granted 1,418.7 67.02 43.6 66.75
Vested (1,710.3) 42.50 (119.8) 41.21
Forfeited, expired, or reclassified (317.6) 57.96 (11.9) 57.76
Non-vested as of May 28, 2017 4,491.2 $56.08 123.3 $56.93

Fiscal Year
2017 2016 2015
Number of units granted (thousands) 1,462.3 1,351.5 1,708.2
Weighted average price per unit $67.01 $56.00 $53.45

The total grant-date fair value of restricted stock unit NOTE 12. EARNINGS PER SHARE
awards that vested was $78.1 million in fiscal 2017 and
$101.8 million in fiscal 2016. Basic and diluted EPS were calculated using the
As of May 28, 2017, unrecognized compensation following:
expense related to non-vested stock options, restricted
stock units, and performance share units was $98.1 Fiscal Year

million. This expense will be recognized over 18 months, In Millions, Except per Share Data 2017 2016 2015

on average. Net earnings attributable to

Stock-based compensation expense related to General Mills $1,657.5 $1,697.4 $1,221.3
restricted stock units and performance share units Average number of common
was $77.9 million for fiscal 2017, $76.8 million for fiscal shares - basic EPS 587.1 598.9 603.3
2016, and $96.6 million for fiscal 2015. Compensation Incremental share effect from: (a)
expense related to stock-based payments recognized Stock options 8.1 9.8 11.3
in our Consolidated Statements of Earnings includes Restricted stock units,
performance share units,
amounts recognized in restructuring, impairment, and
and other 2.8 3.2 4.2
other exit costs for fiscal 2017, 2016 and 2015.
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:

Fiscal Year
In Millions 2017 2016 2015
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 Health Care Cost Trend Rates Assumed health care
POSTEMPLOYMENT BENEFITS cost trends are as follows:
Fiscal Year
Defined Benefit Pension Plans We have defined benefit 2017 2016
pension plans covering many employees in the United Health care cost trend rate
States, Canada, France, and the United Kingdom. for next year 7.0% and 7.3% 7.3% and 7.5%
Benefits for salaried employees are based on length of Rate to which the cost
service and final average compensation. Benefits for trend rate is assumed to
hourly employees include various monthly amounts for decline (ultimate rate) 5.0% 5.0%
each year of credited service. Our funding policy is con- Year that the rate reaches the
sistent with the requirements of applicable laws. We ultimate trend rate 2024 2024
made no voluntary contributions to our principal U.S.
plans in fiscal 2017, 2016, and 2015. We do not expect We review our health care cost trend rates annu-
to be required to make any contributions in fiscal 2018. ally. Our review is based on data we collect about our
Our principal domestic retirement plan covering sala- health care claims experience and information provided
ried employees has a provision that any excess pen- by our actuaries. This information includes recent plan
sion assets would be allocated to active participants if experience, plan design, overall industry experience and
the plan is terminated within five years of a change in projections, and assumptions used by other similar
control. All salaried employees hired on or after June 1, organizations. Our initial health care cost trend rate is
2013 are eligible for a retirement program that does not adjusted as necessary to remain consistent with this
include a defined benefit pension plan. review, recent experiences, and short-term expectations.
In May 2017, we announced changes to the United Our initial health care cost trend rate assumption is 7.3
States pension plans. The Company will freeze the pay percent for retirees age 65 and over and 7.0 percent for
and service amounts used to calculate pension bene- retirees under age 65 at the end of fiscal 2017. Rates are
fits for active employees who participate in the United graded down annually until the ultimate trend rate of
States pension plans as of December 31, 2027. Beginning 5.0 percent is reached in 2024 for all retirees. The trend
January 1, 2028, active employees in the United States rates are applicable for calculations only if the retirees’
will not accrue additional benefits for future service and benefits increase as a result of health care inflation. The
eligible compensation received under these plans. These ultimate trend rate is adjusted annually, as necessary, to
changes resulted in a $130.9 million decline in the pro- approximate the current economic view on the rate of
jected benefit obligation as of May 28, 2017, due to the long-term inflation plus an appropriate health care cost
decrease in expected future pensionable compensation. premium. Assumed trend rates for health care costs
have an important effect on the amounts reported for
Other Postretirement Benefit Plans We also sponsor the other postretirement benefit plans.
plans that provide health care benefits to many of our A one percentage point change in the health care
retirees in the United States, Canada, and Brazil. The cost trend rate would have the following effects:
United States salaried health care benefit plan is con-
One One
tributory, with retiree contributions based on years of Percentage Percentage
service. We make decisions to fund related trusts for Point Point
In Millions Increase Decrease
certain employees and retirees on an annual basis. We
made voluntary contributions to these plans of $20.0 Effect on the aggregate of the service and
interest cost components in fiscal 2018 $ 2.2 $ (1.9)
million in in fiscal 2017 and $24.0 million in fiscal 2016.
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 are charged to expense when incurred. Our postem-
to 2018. Estimates of the future impacts of several of ployment benefit plans are unfunded.
the Act’s provisions are incorporated into our postre- In the first quarter of fiscal 2017, we adopted new
tirement benefit liability. accounting requirements which permit reporting enti-
ties with a fiscal year-end that does not coincide with
Postemployment Benefit Plans Under certain circum- a month-end to apply a practical expedient to measure
stances, we also provide accruable benefits, primar- defined benefit plan assets and obligations using the
ily severance, to former or inactive employees in the month-end that is closest to the entity’s fiscal year-end
United States, Canada, and Mexico. We recognize an and apply such practical expedient consistently to all
obligation for any of these benefits that vest or accu- plans. We measured the plan assets and obligations
mulate with service. Postemployment benefits that do for our defined benefit pension, other postretirement
not vest or accumulate with service (such as severance benefit, and postemployment benefit plans as of May
based solely on annual pay rather than years of service) 31, 2017.

Summarized financial information about defined benefit pension, other postretirement benefit, and postemploy-
ment benefit plans is presented below:

Other
Defined Benefit Postretirement Postemployment
Pension Plans Benefit Plans Benefit Plans
Fiscal Year Fiscal Year Fiscal Year
In Millions 2017 2016 2017 2016 2017 2016

Change in Plan Assets:

Fair value at beginning of year $5,539.9 $ 5,758.5 $ 602.4 $ 582.8
Actual return on assets 645.6 36.3 75.2 (0.1)
Employer contributions 25.4 23.7 20.1 24.1
Plan participant contributions 8.8 5.7 15.2 14.1
Benefits payments (282.2) (277.5) (18.1) (18.5)
Foreign currency (12.3) (6.8) — —
Fair value at end of year $5,925.2 $ 5,539.9 $ 694.8 $ 602.4
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year $6,448.5 $ 6,252.1 $ 1,028.9 $ 1,079.6 $ 164.1 $ 146.6
Service cost 119.7 134.6 12.5 19.0 8.8 7.6
Interest cost 216.5 267.8 32.2 44.1 2.6 3.9
Plan amendment (130.9) 0.9 — — — 1.1
Curtailment/other 1.9 7.1 (0.3) 0.5 1.3 10.7
Plan participant contributions 8.8 5.7 15.2 14.1 — —
Medicare Part D reimbursements — — 3.4 3.5 — —
Actuarial loss (gain) 88.5 65.2 (77.6) (64.5) (7.4) 11.2
Benefits payments (282.6) (278.0) (63.3) (66.4) (34.7) (16.9)
Foreign currency (11.8) (6.9) 0.4 (1.0) (0.2) (0.1)
Projected benefit obligation at end of year $ 6,458.6 $ 6,448.5 $ 951.4 $ 1,028.9 $ 134.5 $ 164.1
Plan assets less than benefit
obligation as of fiscal year end $ (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:

Other
Defined Benefit Postretirement Postemployment
Pension Plans Benefit Plans Benefit Plans Total
Fiscal Year Fiscal Year Fiscal Year 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:

Other
Defined Benefit Postretirement Postemployment
Pension Plans Benefit Plans Benefit Plans
Fiscal Year Fiscal Year Fiscal Year
In Millions 2017 2016 2017 2016 2017 2016

Projected benefit obligation $610.1 $5,490.3 $ 5.5 $ — $ 4.4 $ 4.8

Accumulated benefit obligation 542.3 4,998.3 947.9 1,024.7 130.1 159.3
Plan assets at fair value 51.9 4,498.5 694.8 602.4 — —

Components of net periodic benefit expense are as follows:

Other
Defined Benefit Postretirement Postemployment
Pension Plans Benefit Plans Benefit Plans
Fiscal Year Fiscal Year Fiscal Year
In Millions 2017 2016 2015 2017 2016 2015 2017 2016 2015

Service cost $ 119.7 $ 134.6 $ 137.0 $ 12.5 $ 19.0 $ 22.4 $ 8.8 $ 7.6 $ 7.5
Interest cost 216.5 267.8 249.2 32.2 44.1 46.9 2.6 3.9 4.3
Expected return on plan assets (486.7) (496.9) (476.4) (48.5) (46.2) (40.2) — — —
Amortization of losses 190.2 189.8 141.7 2.5 6.6 4.9 1.7 0.7 0.7
Amortization of prior service
costs (credits) 2.5 4.7 7.4 (5.4) (5.4) (1.6) 0.6 2.5 2.4
Other adjustments 3.1 5.0 15.1 1.3 2.3 3.3 1.3 10.7 9.5
Settlement or curtailment 3.8 13.1 18.0 (0.9) (1.0) 1.3 (1.4) — —
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:

Defined Benefit Other Postretirement Postemployment

In Millions Pension Plans Benefit Plans Benefit Plans

Amortization of losses $176.9 $0.8 $0.6

Amortization of prior service costs (credits) 1.9 (5.4) 0.8
 ANNUAL REPORT 79

Assumptions Weighted-average assumptions used to determine fiscal year-end benefit obligations are as follows:

Other
Defined Benefit Postretirement Postemployment
Pension Plans Benefit Plans Benefit Plans
Fiscal Year Fiscal Year Fiscal Year
2017 2016 2017 2016 2017 2016

Discount rate 4.08% 4.19% 3.92% 3.97% 2.87% 2.94%

Rate of salary increases 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 Other Postretirement Postemployment

Pension Plans Benefit Plans Benefit Plans
Fiscal Year Fiscal Year 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 4.57 — — 4.42 — — 3.55 — —
Interest cost effective rate 3.44 — — 3.17 — — 2.67 — —
Rate of salary increases 4.28 4.31 4.44 — — — 4.35 4.36 4.44
Expected long-term rate of
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 partially offset by a reduction in our weighted-average
the method used to estimate the service and interest expected rate of return on plan assets for our princi-
cost components of the net periodic benefit expense pal defined benefit pension and other postretirement
for our United States and most of our international plans in the United States to 8.25 percent as a result of
defined benefit pension, other postretirement bene- changes that decreased investment risk in the portfolio.
fit, and postemployment benefit plans. We adopted a Beginning in fiscal 2017, our discount rate assump-
full yield curve approach to estimate service cost and tions are determined annually as of May 31 for our
interest cost by applying the specific spot rates along defined benefit pension, other postretirement benefit,
the yield curve used to determine the benefit obliga- and postemployment benefit plan obligations. We also
tion to the relevant projected cash flows. This method use discount rates as of May 31 to determine defined
provides a more precise measurement of service and benefit pension, other postretirement benefit, and pos-
interest costs by correlating the timing of the plans’ temployment benefit plan income and expense for the
liability cash flows to the corresponding rate on the following fiscal year. We work with our outside actu-
yield curve. Previously, we estimated service cost and aries to determine the timing and amount of expected
interest cost using a single weighted-average discount future cash outflows to plan participants and, using the
rate derived from the yield curve used to measure the Aa Above Median corporate bond yield, to develop a
benefit obligation at the beginning of the period. This forward interest rate curve, including a margin to that
change does not affect the measurement of our benefit index based on our credit risk. This forward interest
obligations related to these plans. We have accounted rate curve is applied to our expected future cash out-
for this change prospectively as a change in accounting flows to determine our discount rate assumptions.
estimate beginning in the first quarter of fiscal 2017.
The change in methodology resulted in a decrease in Fair Value of Plan Assets The fair values of our pen-
service and interest cost of approximately $68 million sion and postretirement benefit plans’ assets and their
for fiscal 2017 compared to our previous methodology. respective levels in the fair value hierarchy at May
The fiscal 2017 reduction in our net periodic benefit 28, 2017, and May 29, 2016, by asset category were as
expense as a result of this change in methodology was follows:
80 GENERAL MILLS

May 28, 2017 May 29, 2016

Total Total
In Millions Level 1 Level 2 Level 3 Assets Level 1 Level 2 Level 3 Assets

Fair value measurement of

pension plan assets:
Equity (a) $ 1,773.0 $ 781.2 $ — $ 2,554.2 $ 1,543.7 $ 741.9 $ — $ 2,285.6
Fixed income (b) 951.9 742.2 — 1,694.1 903.8 745.8 — 1,649.6
Real asset investments (c) 253.1 95.8 — 348.9 193.6 95.2 — 288.8
Other investments (d) — — 0.3 0.3 — — 0.4 0.4
Cash and accruals 174.2 — — 174.2 195.1 — — 195.1
Fair value measurement
of pension plan assets in the
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) 1,153.5 1,120.4
Total pension plan investments $ 5,925.2 $ 5,539.9
Fair value measurement of postretirement
benefit plan assets:
Equity (a) $ 122.3 $ 67.5 $ — $ 189.8 $ 128.9 $ 87.6 $ — $ 216.5
Fixed income (b) 34.1 160.0 — 194.1 18.0 83.4 — 101.4
Real asset investments (c) 18.0 14.5 — 32.5 — 14.3 — 14.3
Other investments (d) — — — — — — — —
Cash and accruals 11.3 — — 11.3 8.9 — — 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) 267.1 261.3
Total postretirement benefit plan investments $ 694.8 $ 602.4

(a) P
 rimarily 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) P
 rimarily 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) P
 ublicly 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) G
 lobal 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) P
 rimarily 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.
 ANNUAL REPORT 81

Expected Rate of Return on Plan Assets Our expected Contributions and Future Benefit Payments We do
rate of return on plan assets is determined by our not expect to be required to make contributions to our
asset allocation, our historical long-term investment defined benefit pension, other postretirement benefit,
performance, our estimate of future long-term returns and postemployment benefit plans in fiscal 2018. Actual
by asset class (using input from our actuaries, invest- fiscal 2018 contributions could exceed our current pro-
ment services, and investment managers), and long- jections, as influenced by our decision to undertake
term inflation assumptions. We review this assumption discretionary funding of our benefit trusts and future
annually for each plan; however, our annual investment changes in regulatory requirements. Estimated bene-
performance for one particular year does not, by itself, fit payments, which reflect expected future service, as
significantly influence our evaluation. appropriate, are expected to be paid from fiscal 2018 to
Weighted-average asset allocations for the past two 2027 as follows:
fiscal years for our defined benefit pension and other
Defined Other
postretirement benefit plans are as follows: Benefit Postretirement Medicare Postemployment
Pension Benefit Plans Subsidy Benefit
Defined Benefit Other Postretirement In Millions Plans Gross Payments Receipts Plans
Pension Plans Benefit Plans
2018 $ 290.2 $ 59.5 $ 4.3 $ 21.2
Fiscal Year Fiscal Year
2019 298.6 61.6 4.6 19.0
2017 2016 2017 2016
2020 307.7 63.0 4.2 17.4
Asset category: 2021 316.4 64.1 3.5 16.1
United States equities 28.5% 30.5% 31.9% 37.2% 2022 325.7 64.8 3.6 15.0
International equities 17.9 19.0 17.8 23.4 2023-2027 1,767.8 328.8 18.8 61.5
Private equities 7.8 8.3 3.6 3.9
Fixed income 31.7 28.6 40.0 29.4 Defined Contribution Plans The General Mills Savings
Real assets 14.1 13.6 6.7 6.1
Plan is a defined contribution plan that covers domestic
Total 100.0% 100.0% 100.0% 100.0%
salaried, hourly, nonunion, and certain union employ-
ees. This plan is a 401(k) savings plan that includes
The investment objective for our defined benefit pen- a number of investment funds, including a Company
sion and other postretirement benefit plans is to secure stock fund and an Employee Stock Ownership Plan
the benefit obligations to participants at a reasonable (ESOP). We sponsor another money purchase plan for
cost to us. Our goal is to optimize the long-term return certain domestic hourly employees with net assets of
on plan assets at a moderate level of risk. The defined $23.0 million as of May 28, 2017, and $21.0 million as
benefit pension plan and other postretirement bene- of May 29, 2016. We also sponsor defined contribution
fit plan portfolios are broadly diversified across asset plans in many of our foreign locations. Our total recog-
classes. Within asset classes, the portfolios are further nized expense related to defined contribution plans was
diversified across investment styles and investment $54.1 million in fiscal 2017, $61.2 million in fiscal 2016,
organizations. For the defined benefit pension plans, the and $44.0 million in fiscal 2015.
long-term investment policy allocation is: 20 percent to We match a percentage of employee contributions to
equities in the United States; 15 percent to international the General Mills Savings Plan. The Company match
equities; 10 percent to private equities; 40 percent to is directed to investment options of the participant’s
fixed income; and 15 percent to real assets (real estate, choosing. The number of shares of our common stock
energy, and timber). For other postretirement benefit allocated to participants in the ESOP was 6.3 million
plans, the long-term investment policy allocations are: as of May 28, 2017, and 6.9 million as of May 29, 2016.
30 percent to equities in the United States; 15 percent The ESOP’s only assets are our common stock and
to international equities; 10 percent to private equities; temporary cash balances.
40 percent to fixed income; and 5 percent to real assets The Company stock fund and the ESOP collectively
(real estate, energy, and timber). The actual allocations held $598.7 million and $711.5 million of Company
to these asset classes may vary tactically around the common stock as of May 28, 2017 and May 29, 2016,
long-term policy allocations based on relative market respectively.
valuations.
82 GENERAL MILLS

NOTE 14. INCOME TAXES The tax effects of temporary differences that give
rise to deferred tax assets and liabilities are as follows:
The components of earnings before income taxes and
In Millions May 28, 2017 May 29, 2016
after-tax earnings from joint ventures and the corre-
sponding income taxes thereon are as follows: Accrued liabilities $ 70.0 $ 89.9
Compensation and employee benefits 419.2 491.5
Fiscal Year Pension 196.3 322.0
In Millions 2017 2016 2015 Tax credit carryforwards 18.4 4.5
Earnings before income Stock, partnership, and
taxes and after-tax earnings miscellaneous investments 276.4 353.6
from joint ventures: Capital losses 29.8 14.5
United States $1,941.6 $1,941.4 $1,338.6 Net operating losses 109.5 97.9
Foreign 329.7 462.2 423.3 Other 85.6 84.1
Total earnings before income Gross deferred tax assets 1,205.2 1,458.0
taxes and after-tax earnings Valuation allowance 231.8 227.0
from joint ventures $ 2,271.3 $ 2,403.6 $ 1,761.9 Net deferred tax assets 973.4 1,231.0
Income taxes: Brands 1,310.1 1,311.7
Currently payable: Fixed assets 484.5 476.3
Federal $ 368.5 $ 489.8 $ 392.7 Intangible assets 238.6 221.8
State and local 21.1 30.8 29.3 Tax lease transactions 45.8 48.0
Foreign 81.7 114.0 139.5 Inventories 60.0 53.0
Total current 471.3 634.6 561.5 Stock, partnership, and
Deferred: miscellaneous investments 479.4 476.0
Federal 201.3 123.0 70.3 Unrealized hedges 45.4 22.6
State and local 10.2 (6.9) (8.7) Other 29.0 21.2
Foreign (27.6) 4.5 (36.3) Gross deferred tax liabilities 2,692.8 2,630.6
Total deferred 183.9 120.6 25.3 Net deferred tax liability $ 1,719.4 $ 1,399.6
Total income taxes $ 655.2 $ 755.2 $ 586.8
We have established a valuation allowance against
The following table reconciles the United States statu- certain of the categories of deferred tax assets described
tory income tax rate with our effective income tax rate: above as current evidence does not suggest we will real-
ize sufficient taxable income of the appropriate charac-
Fiscal Year ter (e.g., ordinary income versus capital gain income)
2017 2016 2015 within the carryforward period to allow us to realize
United States statutory rate 35.0% 35.0% 35.0% these deferred tax benefits.
State and local income taxes, Of the total valuation allowance of $231.8 million,
net of federal tax benefits 0.8 0.7 0.7 the majority relates to a deferred tax asset for losses
Foreign rate differences (3.5) (2.2) (3.1) recorded as part of the Pillsbury acquisition in the
Repatriation of foreign earnings — — 4.5 amount of $167.2 million, $53.3 million relates to var-
Non-deductible goodwill — 2.6 — ious state and foreign loss carryforwards, and $11.1
Domestic manufacturing deduction (2.8) (2.0) (2.9) million relates to various foreign capital loss carryfor-
Other, net (a) (0.7) (2.7) (0.9)
wards. As of May 28, 2017, we believe it is more-likely-
Effective income tax rate 28.8% 31.4% 33.3%
than-not that the remainder of our deferred tax assets
(a) Fiscal 2016 includes 0.6 percent tax benefit related to the divestiture of
are realizable.
our business in Venezuela. See Note 3 for additional information.
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 our results of operations or financial position. As of
fiscal 2023. May 28, 2017, we have effectively settled all issues with
We have not recognized a deferred tax liability for the IRS for fiscal years 2014 and prior.
unremitted earnings of approximately $2.3 billion from During fiscal 2017, the Brazilian tax authority,
our foreign operations because our subsidiaries have Secretaria da Receita Federal do Brasil (RFB), concluded
invested or will invest the undistributed earnings indef- audits of our 2012 and 2013 tax return years. These
initely, or the earnings will be remitted in a tax-neutral audits included a review of our determinations of amor-
transaction. It is not practicable for us to determine the tization of certain goodwill arising from the acquisition
amount of unrecognized deferred tax liabilities on these of Yoki Alimentos S.A. (Yoki). The RFB has proposed
indefinitely reinvested earnings. Deferred taxes are adjustments that effectively eliminate the goodwill
recorded for earnings of our foreign operations when amortization benefits related to this transaction. We
we determine that such earnings are no longer indefi- believe we have meritorious defenses and intend to
nitely reinvested. In fiscal 2015, we approved a one-time contest the disallowance.
repatriation of $606.1 million of historical foreign earn- We apply a more-likely-than-not threshold to the rec-
ings to reduce the economic cost of funding restruc- ognition and derecognition of uncertain tax positions.
turing initiatives and the acquisition of Annie’s. We Accordingly, we recognize the amount of tax benefit
recorded a discrete tax charge of $78.6 million in fiscal that has a greater than 50 percent likelihood of being
2015 related to this action. We have previously asserted ultimately realized upon settlement. Future changes in
that our historical foreign earnings are permanently judgment related to the expected ultimate resolution
reinvested and will only be repatriated in a tax-neu- of uncertain tax positions will affect earnings in the
tral manner, and this one-time repatriation does not period of such change.
change this on-going assertion. The following table sets forth changes in our total
We are subject to federal income taxes in the United gross unrecognized tax benefit liabilities, exclud-
States as well as various state, local, and foreign juris- ing accrued interest, for fiscal 2017 and fiscal 2016.
dictions. A number of years may elapse before an Approximately $62 million of this total in fiscal 2017
uncertain tax position is audited and finally resolved. represents the amount that, if recognized, would
While it is often difficult to predict the final outcome or affect our effective income tax rate in future periods.
the timing of resolution of any particular uncertain tax This amount differs from the gross unrecognized tax
position, we believe that our liabilities for income taxes benefits presented in the table because certain of the
reflect the most likely outcome. We adjust these liabili- liabilities below would impact deferred taxes if recog-
ties, as well as the related interest, in light of changing nized. We also would record a decrease in U.S. federal
facts and circumstances. Settlement of any particular income taxes upon recognition of the state tax benefits
position would usually require the use of cash. included therein.
The number of years with open tax audits varies
Fiscal Year
depending on the tax jurisdiction. Our major taxing
In Millions 2017 2016
jurisdictions include the United States (federal and
state) and Canada. Various tax examinations by United Balance, beginning of year $176.5 $161.1
States state taxing authorities could be conducted for Tax positions related to current year:
any open tax year, which vary by jurisdiction, but are Additions 27.2 31.6
Tax positions related to prior years:
generally from 3 to 5 years.
Additions 0.9 23.9
Several state and foreign examinations are currently
Reductions (47.9) (25.7)
in progress. We do not expect these examinations to
Settlements (9.6) (4.0)
result in a material impact on our results of operations
Lapses in statutes of limitations (11.6) (10.4)
or financial position.
Balance, end of year $135.5 $176.5
During fiscal 2017, the Internal Revenue Service
(IRS) concluded its field examination of our federal tax
As of May 28, 2017, we expect to pay approximately
returns for fiscal 2013 and 2014. The audit closure and
$1.8 million of unrecognized tax benefit liabilities and
related adjustments did not have a material impact on
accrued interest within the next 12 months. We are not
84 GENERAL MILLS

able to reasonably estimate the timing of future cash CPW. In addition, off-balance sheet arrangements
flows beyond 12 months due to uncertainties in the are generally limited to the future payments under
timing of tax audit outcomes. The remaining amount non-cancelable operating leases, which totaled $500.7
of our unrecognized tax liability was classified in other million as of May 28, 2017.
liabilities.
We report accrued interest and penalties related NOTE 16. BUSINESS SEGMENT AND
to unrecognized tax benefit liabilities in income tax
GEOGRAPHIC INFORMATION
expense. For fiscal 2017, we recognized a net benefit of
$5.6 million of tax-related net interest and penalties,
We operate in the consumer foods industry. In the third
and had $23.1 million of accrued interest and penalties
quarter of fiscal 2017, we announced a new global orga-
as of May 28, 2017. For fiscal 2016, we recognized a net
nization structure to streamline our leadership, enhance
benefit of $2.7 million of tax-related net interest and
global scale, and drive improved operational agility to
penalties, and had $32.1 million of accrued interest and
maximize our growth capabilities. As a result of this
penalties as of May 29, 2016.
global reorganization, beginning in the third quarter of
fiscal 2017, we reported results for our four operating
NOTE 15. LEASES, OTHER COMMITMENTS, segments as follows: North America Retail, 65.3 percent
AND CONTINGENCIES of our fiscal 2017 consolidated net sales; Convenience
Stores & Foodservice, 12.0 percent of our fiscal 2017
The Company’s leases are generally for warehouse consolidated net sales; Europe & Australia, 11.7 percent
space and equipment. Rent expense under all operating of our fiscal 2017 consolidated net sales; and Asia &
leases from continuing operations was $188.1 million Latin America, 11.0 percent of our fiscal 2017 consoli-
in fiscal 2017, $189.1 million in fiscal 2016, and $193.5 dated net sales. We have restated our net sales by seg-
million in fiscal 2015. ment and segment operating profit amounts to reflect
Some operating leases require payment of property our new operating segments. These segment changes
taxes, insurance, and maintenance costs in addition to had no effect on previously reported consolidated net
the rent payments. Contingent and escalation rent in sales, operating profit, net earnings attributable to
excess of minimum rent payments and sublease income General Mills, or earnings per share.
netted in rent expense were insignificant. Our North America Retail operating segment consists
Noncancelable future lease commitments are: of our former U.S. Retail operating units and our Canada
region. Within our North America Retail operating seg-
Operating Capital
In Millions Leases Leases
ment, our former U.S. Meals operating unit and U.S.
Baking operating unit have been combined into one
Fiscal 2018 $ 118.8 $ 0.4
operating unit: U.S. Meals & Baking. Our Convenience
Fiscal 2019 101.7 0.4
Stores & Foodservice operating segment is unchanged.
Fiscal 2020 80.7 0.2
Our Europe & Australia operating segment consists of
Fiscal 2021 60.7 0.1
our former Europe region. Our Asia & Latin America
Fiscal 2022 49.7 —
After fiscal 2022 89.1 0.1
operating segment consists of our former Asia/Pacific
Total noncancelable future and Latin America regions.
lease commitments $ 500.7 $ 1.2 Under our new organization structure, our chief
Less: interest (0.1) operating decision maker assesses performance and
Present value of obligations under capital leases $ 1.1 makes decisions about resources to be allocated to our
segments at the North America Retail, Convenience
Depreciation on capital leases is recorded as deprecia- Stores & Foodservice, Europe & Australia, and Asia &
tion expense in our results of operations. Latin America operating segment level.
As of May 28, 2017, we have issued guarantees and Our North America Retail operating segment reflects
comfort letters of $504.7 million for the debt and other business with a wide variety of grocery stores, mass
obligations of consolidated subsidiaries, and guarantees merchandisers, membership stores, natural food chains,
and comfort letters of $165.3 million for the debt and drug, dollar and discount chains, and e-commerce gro-
other obligations of non-consolidated affiliates, mainly cery providers. Our product categories in this business
 ANNUAL REPORT 85

segment are ready-to-eat cereals, refrigerated yogurt, variances to planned domestic employee benefits
soup, meal kits, refrigerated and frozen dough prod- and incentives, contributions to the General Mills
ucts, dessert and baking mixes, frozen pizza and pizza Foundation, asset and liability remeasurement impact
snacks, grain, fruit and savory snacks, and a wide vari- of hyperinflationary economies, restructuring initiative
ety of organic products including refrigerated yogurt, project-related costs, and other items that are not part
nutrition bars, meal kits, salty snacks, ready-to-eat of our measurement of segment operating performance.
cereal, and grain snacks. These include gains and losses arising from the revalu-
In our Convenience Stores & Foodservice segment ation of certain grain inventories and gains and losses
our major product categories are ready-to-eat cereals, from mark-to-market valuation of certain commodity
snacks, refrigerated yogurt, frozen meals, unbaked and positions until passed back to our operating segments.
fully baked frozen dough products, and baking mixes. These items affecting operating profit are centrally
Many products we sell are branded to the consumer managed at the corporate level and are excluded from
and nearly all are branded to our customers. We sell to the measure of segment profitability reviewed by exec-
distributors and operators in many customer channels utive management. Under our supply chain organiza-
including foodservice, convenience stores, vending, and tion, our manufacturing, warehouse, and distribution
supermarket bakeries in the United States. activities are substantially integrated across our opera-
Our Europe & Australia operating segment consists tions in order to maximize efficiency and productivity.
of our former Europe region. The segment includes As a result, fixed assets and depreciation and amortiza-
retail and foodservice businesses in the greater Europe tion expenses are neither maintained nor available by
and Australia regions. Our product categories include operating segment.
refrigerated yogurt, meal kits, super-premium ice Our operating segment results were as follows:
cream, refrigerated and frozen dough products, shelf
Fiscal Year
stable vegetables, grain snacks, and dessert and baking
In Millions 2017 2016 2015
mixes. We also sell super-premium ice cream directly
to consumers through company-owned retail shops. Net sales:
Revenues from franchise fees are reported in the region North America Retail $10,196.9 $10,936.6 $11,612.1
or country where the franchisee is located. Convenience Stores
& Foodservice 1,870.0 1,923.8 1,995.1
Our Asia & Latin America operating segment con-
Europe & Australia 1,824.5 1,998.0 2,126.5
sists of our former Asia/Pacific and Latin America
Asia & Latin America 1,728.4 1,704.7 1,896.6
regions. The segment includes retail and foodservice
Total $15,619.8 $16,563.1 $17,630.3
businesses in the greater Asia and South America
Operating profit:
regions. Our product categories include super-premium
North America Retail $ 2,303.6 $ 2,351.2 $ 2,382.7
ice cream and frozen desserts, refrigerated and frozen
Convenience Stores
dough products, dessert and baking mixes, meal kits,
& Foodservice 401.2 378.9 353.1
salty and grain snacks, wellness beverages, and refrig- Europe & Australia 164.2 200.3 179.4
erated yogurt. We also sell super-premium ice cream Asia & Latin America 83.6 69.1 119.8
and frozen desserts directly to consumers through Total segment operating profit 2,952.6 2,999.5 3,035.0
company-owned retail shops. Our Asia & Latin America Unallocated corporate items 190.1 288.9 413.8
segment also includes products manufactured in the Divestitures loss (gain) 13.5 (148.2) —
United States for export, mainly to Caribbean and Latin Restructuring, impairment,
American markets, as well as products we manufacture and other exit costs 182.6 151.4 543.9
for sale to our international joint ventures. Revenues Operating profit $ 2,566.4 $ 2,707.4 $ 2,077.3
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: May 28, May 29,
In Millions 2017 2016

Fiscal Year Inventories:

In Millions 2017 2016 2015 Raw materials and packaging $ 395.4 $ 397.3
Snacks $ 3,302.2 $ 3,297.2 $ 3,392.0 Finished goods 1,224.3 1,163.1
Cereal 2,673.2 2,731.5 2,771.3 Grain 73.0 72.6
Convenient meals 2,653.6 2,779.0 2,810.3 Excess of FIFO over LIFO cost (a) (209.1) (219.3)
Yogurt 2,403.5 2,760.9 2,938.3 Total $ 1,483.6 $ 1,413.7
Dough 1,690.6 1,820.0 1,877.0 (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
Baking mixes and ingredients 1,654.1 1,704.3 1,867.7
cost and the stated LIFO inventory value is not materially different from
Super-premium ice cream 738.4 731.2 769.5 the reserve for the LIFO valuation method.
Vegetables 310.5 532.3 937.3
Other 193.7 206.7 266.9 May 28, May 29,
In Millions 2017 2016
Total $15,619.8 $16,563.1 $17,630.3
Prepaid expenses and other current assets:
The following table provides financial information by Other receivables $ 163.7 $ 159.3
Prepaid expenses 168.9 177.9
geographic area:
Derivative receivables,
Fiscal Year primarily commodity-related 35.0 44.6
In Millions 2017 2016 2015 Grain contracts 2.7 1.8
Net sales: Miscellaneous 11.3 15.4
United States $11,160.9 $11,930.9 $12,501.8 Total $ 381.6 $ 399.0
Non-United States 4,458.9 4,632.2 5,128.5
May 28, May 29,
Total $15,619.8 $16,563.1 $17,630.3 In Millions 2017 2016

Land, buildings, and equipment:

May 28, May 29,
In Millions 2017 2016 Land $ 79.8 $ 92.9
Cash and cash equivalents: Buildings 2,249.2 2,236.0
United States $ 62.9 $ 118.5 Buildings under capital lease 0.3 0.3
Equipment 6,095.9 5,945.6
Non-United States 703.2 645.2
Equipment under capital lease 3.0 3.0
Total $ 766.1 $ 763.7
Capitalized software 545.4 523.0
May 28, May 29, Construction in progress 553.0 702.7
In Millions 2017 2016 Total land, buildings, and equipment 9,526.6 9,503.5
Land, buildings, and equipment: Less accumulated depreciation (5,838.9) (5,759.9)
United States $ 2,704.0 $ 2,755.1 Total $ 3,687.7 $ 3,743.6
Non-United States 983.7 988.5
Total $ 3,687.7 $ 3,743.6 May 28, May 29,
In Millions 2017 2016

Other assets:
Investments in and advances
NOTE 17. SUPPLEMENTAL INFORMATION to joint ventures $ 505.3 $ 518.9
Pension assets 144.9 90.9
The components of certain Consolidated Balance Sheet Exchangeable note with related party — 12.7
accounts are as follows: Life insurance 25.6 26.3
Miscellaneous 110.1 102.9
May 28, May 29,
In Millions 2017 2016
Total $ 785.9 $ 751.7

Receivables:
Customers $ 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, May 29, Certain Consolidated Statements of Cash Flows

In Millions 2017 2016
amounts are as follows:
Other current liabilities:
Accrued trade and Fiscal Year
consumer promotions $ 482.6 $ 563.7 In Millions 2017 2016 2015
Accrued payroll 326.6 386.4
Cash interest payments $285.8 $292.0 $305.3
Dividends payable 21.5 23.8
Cash paid for income taxes 551.1 533.8 562.6
Accrued taxes 58.0 110.5
Accrued interest, including
interest rate swaps 83.8 90.4
Grain contracts 5.6 5.5
Restructuring and other exit costs reserve 85.0 76.6
Derivative payable 18.1 35.6
Miscellaneous 291.0 302.5
Total $1,372.2 $1,595.0

May 28, May 29,

In Millions 2017 2016

Other noncurrent liabilities:

Accrued compensation and benefits,
including obligations for underfunded
other postretirement benefit and
postemployment benefit plans $1,249.7 $1,755.0
Accrued taxes 162.3 204.0
Miscellaneous 111.1 128.6
Total $1,523.1 $2,087.6

Certain Consolidated Statements of Earnings

amounts are as follows:

Fiscal Year
In Millions 2017 2016 2015

Depreciation and amortization $603.6 $608.1 $588.3

Research and
development expense 218.2 222.1 229.4
Advertising and media expense
(including production and
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 $306.7 $319.6 $335.5

Capitalized interest (4.6) (7.7) (6.9)
Interest income (7.0) (8.1) (13.2)
Interest, net $295.1 $303.8 $315.4
88 GENERAL MILLS

NOTE 18. QUARTERLY DATA (UNAUDITED)

Summarized quarterly data for fiscal 2017 and fiscal 2016 follows:

First Quarter Second Quarter Third Quarter Fourth Quarter

Fiscal Year Fiscal Year Fiscal Year Fiscal Year
In Millions, Except Per Share Amounts 2017 2016 2017 2016 2017 2016 2017 2016

Net sales $3,907.9

$4,207.9 $4,112.1
$4,424.9 $3,793.2
$4,002.4 $3,806.6
$3,927.9
Gross margin 1,416.9 1,554.6 1,519.5 1,540.6 1,307.7 1,357.5 1,319.7 1,376.8
Net earnings attributable
to General Mills 409.0 426.6 481.8 529.5 357.8 361.7 408.9 379.6
EPS:
Basic $ 0.68 $ 0.71 $ 0.82
$ 0.88 $ 0.62
$ 0.61 $ 0.70 $ 0.63
Diluted $ 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 $ 72.64 $ 59.55 $ 71.42 $ 59.23 $ 63.87 $ 60.14 $ 61.16 $ 65.36
Low $ 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.
 ANNUAL REPORT 89

GLOSSARY

Accelerated depreciation associated with restructured manage our risk arising from changes in commodity prices,
assets. The increase in depreciation expense caused by interest rates, foreign exchange rates, and equity prices.
updating the salvage value and shortening the useful
Euribor. European Interbank Offered Rate.
life of depreciable fixed assets to coincide with the end
of production under an approved restructuring plan, Fair value hierarchy. For purposes of fair value mea-
but only if impairment is not present. surement, we categorize assets and liabilities into one
of three levels based on the assumptions (inputs) used
AOCI. Accumulated other comprehensive income (loss).
in valuing the asset or liability. Level 1 provides the
Adjusted average total capital. Notes payable, long- most reliable measure of fair value, while Level 3 gen-
term debt including current portion, redeemable inter- erally requires significant management judgment. The
est, noncontrolling interests, and stockholders’ equity three levels are defined as follows:
excluding AOCI, and certain after-tax earnings adjust-
Level 1: Unadjusted quoted prices in active markets
ments are used to calculate adjusted return on average
for identical assets or liabilities.
total capital. The average is calculated using the aver-
age of the beginning of fiscal year and end of fiscal Level 2: Observable inputs other than quoted prices
year Consolidated Balance Sheet amounts for these line included in Level 1, such as quoted prices for
items. similar assets or liabilities in active markets
or quoted prices for identical assets or liabili-
Adjusted operating profit margin. Operating profit
ties in inactive markets.
adjusted for certain items affecting year-over-year com-
parability, divided by net sales. Level 3: Unobservable inputs reflecting management’s
assumptions about the inputs used in pricing
Adjusted return on average total capital. Net earn-
the asset or liability.
ings including earnings attributable to redeemable and
noncontrolling interests, excluding after-tax net interest, Fixed charge coverage ratio. The sum of earnings
and adjusted for certain items affecting year-over-year before income taxes and fixed charges (before tax), divided
comparability, divided by adjusted average total capital. by the sum of the fixed charges (before tax) and interest.
Average total capital. Notes payable, long-term debt Focus 6 platforms. The Focus 6 platforms for the
including current portion, redeemable interest, noncon- Convenience Stores & Foodservice segment consist of
trolling interests, and stockholders’ equity are used to cereal, yogurt, snacks, frozen meals, biscuits, and baking
calculate return on average total capital. The average is mixes.
calculated using the average of the beginning of fiscal
year and end of fiscal year Consolidated Balance Sheet Foundation businesses. Foundation businesses con-
amounts for these line items. sist primarily of refrigerated dough, desserts, and soup
in our North America Retail segment and bakery flour
Constant currency. Financial results translated to and frozen dough products in our Convenience Stores
United States dollars using constant foreign currency & Foodservice segment, as well as other product lines
exchange rates based on the rates in effect for the com- not included in Growth businesses.
parable prior-year period. To present this information,
current period results for entities reporting in curren- Free cash flow. Net cash provided by operating activ-
cies other than United States dollars are translated into ities less purchases of land, buildings, and equipment.
United States dollars at the average exchange rates in Free cash flow conversion rate. Free cash flow
effect during the corresponding period of the prior fis- divided by our net earnings, including earnings attrib-
cal year, rather than the actual average exchange rates utable to redeemable and noncontrolling interests
in effect during the current fiscal year. Therefore, the adjusted for certain items affecting year-over-year
foreign currency impact is equal to current year results comparability.
in local currencies multiplied by the change in the aver-
age foreign currency exchange rate between the cur- Generally accepted accounting principles (GAAP).
rent fiscal period and the corresponding period of the Guidelines, procedures, and practices that we are
prior fiscal year. required to use in recording and reporting accounting
information in our financial statements.
Core working capital. Accounts receivable plus
inventories less accounts payable, all as of the last day Goodwill. The difference between the purchase price
of our fiscal year. of acquired companies plus the fair value of any non-
controlling and redeemable interests and the related
Derivatives. Financial instruments such as futures, fair values of net assets acquired.
swaps, options, and forward contracts that we use to
90 GENERAL MILLS

Growth businesses. Growth businesses include cereal, Operating cash flow conversion rate. Net cash pro-
snack bars, the natural and organic portfolio, hot snacks, vided by operating activities, divided by net earnings,
Mexican products, and yogurt in our North America including earnings attributable to redeemable and non-
Retail segment; our Europe & Australia segment; our controlling interests.
Asia & Latin America segment; and our Focus 6 plat-
Operating cash flow to debt ratio. Net cash provided
forms in our Convenience Stores & Foodservice segment.
by operating activities, divided by the sum of notes pay-
Gross margin. Net sales less cost of sales. able and long-term debt, including the current portion.
Hedge accounting. Accounting for qualifying hedges Organic net sales growth. Net sales growth adjusted
that allows changes in a hedging instrument’s fair value for foreign currency translation, as well as acquisitions,
to offset corresponding changes in the hedged item in divestitures, and a 53rd week impact, when applicable.
the same reporting period. Hedge accounting is permit-
Project-related costs. Costs incurred related to our
ted for certain hedging instruments and hedged items
restructuring initiatives not included in restructuring
only if the hedging relationship is highly effective, and
charges.
only prospectively from the date a hedging relationship
is formally documented. Redeemable interest. Interest of consolidated subsid-
iaries held by a third party that can be redeemed out-
Holistic Margin Management (HMM). Company-
side of our control and therefore cannot be classified as
wide initiative to use productivity savings, mix manage-
a noncontrolling interest in equity.
ment and price realization to offset input cost inflation,
protect margins and generate funds to reinvest in Reporting unit. An operating segment or a business
sales-generating activities. one level below an operating segment.
Interest bearing instruments. Notes payable, long- Return on average total capital. Net earnings includ-
term debt, including current portion, cash and cash ing earnings attributable to redeemable and noncon-
equivalents, and certain interest bearing investments trolling interests, excluding after-tax net interest,
classified within prepaid expenses and other current divided by average total capital.
assets and other assets.
Segment operating profit margin. Segment operat-
LIBOR. London Interbank Offered Rate. ing profit divided by net sales for the segment.
Mark-to-market. The act of determining a value Strategic Revenue Management (SRM). A compa-
for financial instruments, commodity contracts, and ny-wide capability focused on generating sustainable
related assets or liabilities based on the current market benefits from net price realization and mix by identify-
price for that item. ing and executing against specific opportunities to apply
tools including pricing, sizing, mix management, and
Net mark-to-market valuation of certain commod-
promotion optimization across each of our businesses.
ity positions. Realized and unrealized gains and losses
on derivative contracts that will be allocated to seg- Supply chain input costs. Costs incurred to produce
ment operating profit when the exposure we are hedg- and deliver product, including costs for ingredients
ing affects earnings. and conversion, inventory management, logistics, and
warehousing.
Net price realization. The impact of list and pro-
moted price changes, net of trade and other price pro- Total debt. Notes payable and long-term debt, includ-
motion costs. ing current portion.
Net realizable value. The estimated selling price in Translation adjustments. The impact of the con-
the ordinary course of business, less reasonably predict- version of our foreign affiliates’ financial statements to
able costs of completion, disposal, and transportation. United States dollars for the purpose of consolidating
our financial statements.
Noncontrolling interests. Interests of consolidated
subsidiaries held by third parties. Variable interest entities (VIEs). A legal structure
that is used for business purposes that either (1) does
Notional principal amount. The principal amount on
not have equity investors that have voting rights and
which fixed-rate or floating-rate interest payments are
share in all the entity’s profits and losses or (2) has
calculated.
equity investors that do not provide sufficient financial
OCI. Other comprehensive income (loss). 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

These line graphs compare the cumulative total return

for holders of our common stock with the cumulative
total return of the Standard & Poor’s 500 Stock Index
and Standard & Poor’s 500 Packaged Foods Index for
the last five-year and ten-year fiscal periods. The graphs
assume the investment of $100 in each of General Mills’
common stock and the specified indexes at the begin-
ning of the applicable period, and assume the reinvest-
ment of all dividends.
On June 9, 2017, there were approximately 31,000
record holders of our common stock.

Total Return to Shareholders

Total Return to Shareholders
5 Years
240 5 Years
240
220
220
200
Index

200
180
Index

180
160
160
140
Return

140
Return

120
120
100
100
80
Total

80
Total

60
60
40
40
20
20
0
0
May 12 May 13 May 14 May 15 May 16 May 17
May 12 May 13 May 14 May 15 May 16 May 17

Total Return to Shareholders

Total Return
10 to Shareholders
Years
340 10 Years
320
340
300
320
280
300
Index

260
280
Index

240
260
220
240
Return

200
220
Return

180
200
160
180
140
160
120
Total

140
100
120
Total

80
100
60
80
40
60
20
40
0
20
0 07 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17
May
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) S&P 500 S&P Packaged Foods

General Mills (GIS) S&P 500 S&P Packaged Foods
92 GENERAL MILLS

BOARD OF DIRECTORS As of August 1, 2017

Bradbury H. Anderson (2*, 5) Roger W. Ferguson Jr. (3, 4) Steve Odland (2, 4*) Dorothy A. Terrell (4, 5)+
Retired Chief Executive Officer President and Chief Executive President and Chief Executive Managing Partner,
and Vice Chairman, Officer, TIAA Officer, Committee for FirstCap Advisors
Best Buy Co., Inc. (financial services) Economic Development (venture capital)
(electronics retailer) (public policy) and Former
Henrietta H. Fore (4, 5*) Chairman and Chief Executive Jorge A. Uribe (2, 5)
Alicia Boler Davis (3, 5) Chairman and Chief Executive Officer, Office Depot, Inc. Retired Global Productivity
Executive Vice President, Officer, Holsman International (office products retailer) and Organization
Global Manufacturing, (manufacturing and investment Transformation Officer,
General Motors Company services) Kendall J. Powell The Procter & Gamble Company
(automobile manufacturing) Chairman of the Board, (consumer products)
Jeffrey L. Harmening General Mills, Inc.
R. Kerry Clark** (3, 4) Chief Executive Officer,
Retired Chairman and General Mills, Inc. Robert L. Ryan (1, 3*)+
Chief Executive Officer, Retired Senior Vice President Board Committees
Cardinal Health, Inc. Maria G. Henry (1, 2) and Chief Financial Officer, 1 Audit
(healthcare products and Senior Vice President and Medtronic, Inc. 2 Compensation
services) Chief Financial Officer, (medical technology) 3 Finance
Kimberly-Clark Corporation 4 Corporate Governance
David M. Cordani (1, 2) (consumer products) Eric D. Sprunk (1, 5) 5 Public Responsibility
President and Chief Executive Chief Operating Officer, * Denotes Committee Chair
Officer, Cigna Corporation Heidi G. Miller (1*, 3) NIKE, Inc. ** Independent Lead Director
(health insurance and services) Retired President, (athletic footwear and apparel) + Retiring from the board
JPMorgan International, September 2017
J.P. Morgan Chase & Co.
(banking and financial services)

SENIOR MANAGEMENT As of August 1, 2017

Richard C. Allendorf Olivier Faujour Michele S. Meyer Ivan Pollard

Senior Vice President; Vice President; Senior Vice President; Senior Vice President;
General Counsel and Secretary President, Dairy Strategic President, U.S. Snacks Chief Marketing Officer
Brand Unit
Kofi A. Bruce Donal L. Mulligan Kendall J. Powell
Vice President; Ricardo Fernandez Executive Vice President; Chairman of the Board
Controller Vice President; Chief Financial Officer
President, Latin America Bethany C. Quam
John R. Church James H. Murphy Senior Vice President;
Executive Vice President; John M. Foraker Senior Vice President; Group President, Europe &
Chief Supply Chain Officer and Vice President; President, U.S. Meals & Baking Australia
Global Business Solutions President, Annie’s Foods
Kimberly A. Nelson Sean N. Walker
David V. Clark Jeffrey L. Harmening Senior Vice President, Senior Vice President,
Vice President; Chief Executive Officer External Relations; Corporate Strategy
President, U.S. Yogurt President, General Mills
David P. Homer Foundation Brett M. White
Mary J. Ekman Senior Vice President; Vice President;
Senior Vice President, Chief Executive Officer, Jonathon J. Nudi Treasurer
North America Retail Finance Cereal Partners Worldwide Senior Vice President;
Group President, North Jacqueline R. Williams-Roll
Peter C. Erickson Christina Law America Retail Senior Vice President;
Executive Vice President, Senior Vice President; Chief Human Resources Officer
Innovation, Technology Group President, Asia & Shawn P. O’Grady
and Quality Latin America Senior Vice President;
Group President, Convenience
Dana M. McNabb Stores & Foodservice and
Vice President; Global Revenue Management
President, U.S. Cereal
 SHAREHOLDER INFORMATION
World Headquarters Electronic Access to Proxy Statement,
Number One General Mills Boulevard Annual Report and Form 10-K
Minneapolis, MN 55-3 Shareholders who have access to the Internet
Phone: (3) - are encouraged to enroll in the electronic
delivery program. Please see the Investors
Website section of GeneralMills.com, or go directly to
GeneralMills.com the website, ICSDelivery.com/GIS and follow
the instructions to enroll. If your General Mills
Markets
shares are not registered in your name, contact
New York Stock Exchange
your bank or broker to enroll in this program.
Trading Symbol: GIS
Notice of Annual Meeting
Independent Auditor
The annual meeting of shareholders will be held
KPMG LLP
at :3 a.m., Central Daylight Time, Tuesday,
 Wells Fargo Center
Sept. , , at the Radisson Blu Hotel in
 South Seventh Street
downtown Minneapolis at 35 South Seventh
Minneapolis, MN 55-3
Street, Minneapolis, MN 55. Proof of share
Phone: () 35-5
ownership is required for admission. Please
Investor Inquiries refer to the Proxy Statement for information
General Shareholder Information: concerning admission to the meeting.
Investor Relations Department
General Mills Direct Stock Purchase Plan
Phone: () 5-53 or (3) -3
This plan provides a convenient and economical
Analysts/Investors: way to invest in General Mills stock. You can
Jeff Siemon increase your ownership over time through
Vice President, Investor Relations purchases of common stock and reinvestment
Phone: (3) -3 of cash dividends, without paying brokerage
commissions and other fees on your purchases
Transfer Agent and Registrar and reinvestments. For more information and
Our transfer agent can assist you with a variety a copy of a plan prospectus, go to the Investors
of services, including change of address or section of GeneralMills.com.
questions about dividend checks:

Wells Fargo Bank, N.A.

 Centre Pointe Curve
Mendota Heights, MN 55-
Phone: () -3 or (5) 5-
shareowneronline.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,
Design by Addison www.addison.com Printing by GLS Companies

state, ZIP code and phone number (including area code) to:
FROM:
 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, .

This report is printed on recycled paper. © 2017 General Mills

NUMBER ONE GENERAL MILLS BOULEVARD
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