NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Background
The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, General Mills, or the Company) have been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the rules and regulations for reporting on Form
10-Q.
Accordingly, they do not include certain information and disclosures required for comprehensive
financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions and any
noncontrolling and redeemable interests share of those transactions. Operating results for the quarter ended November 27, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending May 28,
2017.
These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in our Annual Report
on Form
10-K
for the fiscal year ended May 29, 2016. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 2 to the Consolidated
Financial Statements in that Form
10-K.
Certain terms used throughout this report are defined in the Glossary section below.
(2) Divestitures
During the second quarter of fiscal 2017, we sold our Martel, Ohio
manufacturing facility in our Convenience Stores and Foodservice segment and simultaneously entered into a
co-packing
arrangement with the purchaser. We received $17.5 million in cash, and recorded a
pre-tax
loss of $13.5 million.
During the second quarter of fiscal 2016, we sold our North
American Green Giant product lines for $822.7 million in cash, and we recorded a
pre-tax
gain of $199.1 million. We received net cash proceeds of $788.0 million after transaction-related costs.
After the divestiture, we retained a brand intangible asset on our Consolidated Balance Sheets of $30.1 million related to our continued use of the
Green Giant
brand in certain markets outside of North America.
8
(3) Restructuring Initiatives
We are currently pursuing several multi-year restructuring initiatives designed to increase our efficiency and focus our business behind our key growth strategies. Charges related to these activities were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
Nov. 27,
2016
|
|
|
Quarter Ended
Nov. 29,
2015
|
|
In Millions
|
|
Severance
|
|
|
Asset
Write-
offs
|
|
|
Accelerated
Depreciation
|
|
|
Other
|
|
|
Total
|
|
|
Severance
|
|
|
Asset
Write-
offs
|
|
|
Accelerated
Depreciation
|
|
|
Other
|
|
|
Total
|
|
Closure of Melbourne, Australia plant
|
|
$
|
11.3
|
|
|
$
|
|
|
|
$
|
0.7
|
|
|
$
|
|
|
|
$
|
12.0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Restructuring of certain International product lines
|
|
|
4.1
|
|
|
|
2.2
|
|
|
|
(0.3
|
)
|
|
|
0.9
|
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure of Vineland, New Jersey plant
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
7.0
|
|
|
|
0.1
|
|
|
|
7.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project Compass
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
2.1
|
|
Project Century
|
|
|
0.2
|
|
|
|
5.0
|
|
|
|
5.4
|
|
|
|
5.3
|
|
|
|
15.9
|
|
|
|
25.8
|
|
|
|
10.1
|
|
|
|
21.2
|
|
|
|
23.9
|
|
|
|
81.0
|
|
Total
|
|
$
|
15.5
|
|
|
$
|
7.2
|
|
|
$
|
12.8
|
|
|
$
|
6.3
|
|
|
$
|
41.8
|
|
|
$
|
28.0
|
|
|
$
|
10.1
|
|
|
$
|
21.2
|
|
|
$
|
23.8
|
|
|
$
|
83.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
Nov. 27, 2016
|
|
|
Six-Month
Period Ended
Nov. 29, 2015
|
|
In Millions
|
|
Severance
|
|
|
Asset
Write-
offs
|
|
|
Accelerated
Depreciation
|
|
|
Other
|
|
|
Total
|
|
|
Severance
|
|
|
Asset
Write-
offs
|
|
|
Accelerated
Depreciation
|
|
|
Other
|
|
|
Total
|
|
Closure of Melbourne, Australia plant
|
|
$
|
11.3
|
|
|
$
|
|
|
|
$
|
0.7
|
|
|
$
|
|
|
|
$
|
12.0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Restructuring of certain International product lines
|
|
|
6.4
|
|
|
|
35.8
|
|
|
|
(0.3
|
)
|
|
|
1.4
|
|
|
|
43.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure of Vineland, New Jersey plant
|
|
|
12.3
|
|
|
|
|
|
|
|
14.0
|
|
|
|
1.6
|
|
|
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project Compass
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
0.8
|
|
|
|
1.0
|
|
|
|
47.1
|
|
|
|
|
|
|
|
|
|
|
|
6.5
|
|
|
|
53.6
|
|
Project Century
|
|
|
0.5
|
|
|
|
8.1
|
|
|
|
14.6
|
|
|
|
6.9
|
|
|
|
30.1
|
|
|
|
28.1
|
|
|
|
12.5
|
|
|
|
42.6
|
|
|
|
28.0
|
|
|
|
111.2
|
|
Project Catalyst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
Total
|
|
$
|
30.5
|
|
|
$
|
43.9
|
|
|
$
|
29.2
|
|
|
$
|
10.7
|
|
|
$
|
114.3
|
|
|
$
|
75.4
|
|
|
$
|
12.5
|
|
|
$
|
42.6
|
|
|
$
|
34.5
|
|
|
$
|
165.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the second quarter of fiscal 2017, we notified the employees and their representatives of our decision to close our
pasta manufacturing facility in Melbourne, Australia in our International segment to improve our margin structure. This action will affect approximately 350 positions, and we expect to incur approximately $34 million of net expenses relating to
this action, most of which will be
non-cash.
We recorded $12.0 million of restructuring charges in the second quarter of fiscal 2017 relating to this action. We expect these actions to be completed by the
end of fiscal 2018.
In the first quarter of fiscal 2017, we announced a plan to restructure certain product lines in our International
segment. To eliminate excess capacity, we will close our snacks manufacturing facility in Marília, Brazil and cease production operations for meals and snacks at our facility in São Bernardo do Campo, Brazil. We will also cease
production of certain underperforming snack products at our facility in Nanjing, China. These and other actions, which are subject to appropriate consultation with employees and their representatives where required by law or practice, will affect
approximately 420 positions in our Brazilian operations and approximately 440 positions in our Greater China operations. We expect to incur approximately $46 million of net expenses of which approximately $8 million will be cash. We
recorded $6.9 million of restructuring charges in the second quarter of fiscal 2017 and $43.3 million in the
six-month
period ended November 27, 2016 relating to this action. We expect these
actions to be completed by the end of fiscal 2017.
In the first quarter of fiscal 2017, we approved a plan to close our Vineland, New Jersey
facility to eliminate excess soup capacity in our U.S. Retail segment. This action will affect approximately 370 positions, and we expect to
9
incur approximately $66 million of net expenses, of which approximately $23 million will be cash. We recorded $7.0 million of restructuring charges in the second quarter of fiscal
2017 and $27.9 million in the
six-month
period ended November 27, 2016 relating to this action. We expect this action to be completed by the end of fiscal 2019.
In the first quarter of fiscal 2016, we approved Project Compass, a restructuring plan designed to enable our International segment to accelerate
long-term growth through increased organizational effectiveness and reduced administrative expense. In connection with this project, we expect to eliminate approximately 725 to 775 positions. We expect to incur approximately $58 million of net
expenses, all of which will be cash. We recorded $1.0 million of restructuring expenses in the
six-month
period ended November 27, 2016 relating to this action. We recorded $2.1 million of
restructuring charges in the second quarter of fiscal 2016 and $53.6 million in the
six-month
period ended November 29, 2015. We expect this action to be completed by the end of fiscal 2017.
Project Century (Century) began in fiscal 2015 and is a review of our manufacturing and distribution network to streamline operations and
identify potential capacity reductions. As part of Century, in the second quarter of fiscal 2016, we notified the employees and their representatives of our decision to close the dough and dry mix manufacturing facility in our International segment
supply chain located in Berwick, United Kingdom. This action will affect approximately 265 positions, and we expect to incur approximately $33 million of net expenses related to this action, of which $12 million will be cash. We recorded
$0.5 million of restructuring charges in the second quarter of fiscal 2017 and $2.0 million in the
six-month
period ended November 27, 2016 relating to this action. We expect these actions to be
completed by the end of fiscal 2018.
As part of Century, in the second quarter of fiscal 2016, we notified the employees and their
representatives of our decision to close our pasta manufacturing facility located in East Tamaki, New Zealand in our International segment supply chain. This action affected 20 positions, and we incurred less than $1 million of net expenses
related to this action, most of which was cash. We recorded $0.4 million of restructuring charges in the
six-month
period ended November 29, 2015. This action was completed in fiscal
2017.
As part of Century, in the first quarter of fiscal 2016, we approved a restructuring plan to close our cereal
and dry dinner manufacturing plant in West Chicago, Illinois in our U.S. Retail segment supply chain. This action will affect approximately 500 positions, and we expect to incur approximately $108 million of net expenses relating to this
action, of which approximately $44 million will be cash. We recorded $5.5 million of restructuring charges in the second quarter of fiscal 2017 and $12.9 million in the
six-month
period ended
November 27, 2016 relating to this action. We recorded $64.0 million in the second quarter of fiscal 2016 and the
six-month
period ended November 29, 2015 relating to this action. We expect this
action to be completed by the end of fiscal 2019.
As part of Century, in the first quarter of fiscal 2016, we approved a restructuring plan
to close our snacks manufacturing facility in Joplin, Missouri in our U.S. Retail segment supply chain. This action affected approximately 120 positions, and we incurred $6.6 million of net expenses relating to this action, including
$2.9 million in the second quarter of fiscal 2016 and $7.8 million in the six-month period ended November 29, 2015, of which less than $1 million was cash. This action was completed in fiscal 2016.
In addition, we recorded restructuring charges of $9.9 million in the second quarter of fiscal 2017, $13.7 million in the second quarter of
fiscal 2016, $15.2 million in the
six-month
period ended November 27, 2016, and $39.0 million in the
six-month
period ended November 29, 2015
relating to other Century actions previously announced.
During the
six-month
period ended
November 27, 2016, we paid $43.3 million in cash relating to restructuring initiatives.
In addition to restructuring charges, we
recorded $11.1 million of project-related costs in cost of sales in the second quarter of fiscal 2017 and $24.9 million in the
six-month
period ended November 27, 2016. We paid
$28.6 million in cash in the
six-month
period ended November 27, 2016 for project-related costs. We expect to incur approximately $29.5 million of project-related costs in future periods related
to our restructuring initiatives.
10
Restructuring charges and project-related costs are recorded in our Consolidated Statements of Earnings as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27, 2016
|
|
|
Nov. 29, 2015
|
|
|
Nov. 27, 2016
|
|
|
Nov. 29, 2015
|
|
Cost of sales
|
|
$
|
12.8
|
|
|
$
|
21.8
|
|
|
$
|
26.4
|
|
|
$
|
43.6
|
|
Restructuring, impairment, and other exit costs
|
|
|
29.0
|
|
|
|
61.3
|
|
|
|
87.9
|
|
|
|
121.4
|
|
Total restructuring charges
|
|
|
41.8
|
|
|
|
83.1
|
|
|
|
114.3
|
|
|
|
165.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project-related costs classified in cost of sales
|
|
$
|
11.1
|
|
|
$
|
16.2
|
|
|
$
|
24.9
|
|
|
$
|
29.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The roll forward of our restructuring and other exit cost reserves, included in other current liabilities, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Millions
|
|
Severance
|
|
|
Contract
Termination
|
|
|
Other
Exit Costs
|
|
|
Total
|
|
Reserve balance as of May 29, 2016
|
|
$
|
73.6
|
|
|
$
|
1.5
|
|
|
$
|
1.5
|
|
|
$
|
76.6
|
|
Fiscal 2017 charges, including foreign currency translation
|
|
|
31.2
|
|
|
|
|
|
|
|
2.2
|
|
|
|
33.4
|
|
Utilized in fiscal 2017
|
|
|
(37.5
|
)
|
|
|
(1.7
|
)
|
|
|
(2.4
|
)
|
|
|
(41.6
|
)
|
Reserve balance as of Nov. 27, 2016
|
|
$
|
67.3
|
|
|
$
|
(0.2
|
)
|
|
$
|
1.3
|
|
|
$
|
68.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The charges recognized in the roll forward of our reserves for restructuring and other exit costs do not include items
charged directly to expense (e.g., asset impairment charges, the gain or loss on the sale of restructured assets, and the
write-off
of spare parts) and other periodic exit costs recognized as incurred, as
those items are not reflected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets.
(4) Goodwill and Other
Intangible Assets
The components of goodwill and other intangible assets are as follows:
|
|
|
|
|
|
|
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
May 29,
2016
|
|
Goodwill
|
|
$
|
8,679.1
|
|
|
$
|
8,741.2
|
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
Brands and other indefinite-lived intangibles
|
|
|
4,125.4
|
|
|
|
4,147.5
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
Franchise agreements, customer relationships, and other finite-lived intangibles
|
|
|
513.7
|
|
|
|
536.9
|
|
Less accumulated amortization
|
|
|
(151.7
|
)
|
|
|
(145.8
|
)
|
Intangible assets subject to amortization, net
|
|
|
362.0
|
|
|
|
391.1
|
|
Other intangible assets
|
|
|
4,487.4
|
|
|
|
4,538.6
|
|
Total
|
|
$
|
13,166.5
|
|
|
$
|
13,279.8
|
|
|
|
|
|
|
|
|
|
|
Based on the carrying value of finite-lived intangible assets as of November 27, 2016, annual amortization expense
for each of the next five fiscal years is estimated to be approximately $27 million.
11
The changes in the carrying amount of goodwill during fiscal 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Millions
|
|
U.S.
Retail
|
|
|
International
|
|
|
Convenience Stores
and Foodservice
|
|
|
Joint
Ventures
|
|
|
Total
|
|
Balance as of May 29, 2016
|
|
$
|
6,292.9
|
|
|
$
|
1,121.0
|
|
|
$
|
921.1
|
|
|
$
|
406.2
|
|
|
$
|
8,741.2
|
|
Divestiture
|
|
|
|
|
|
|
|
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
(2.3
|
)
|
Other activity, primarily foreign currency translation
|
|
|
|
|
|
|
(40.8
|
)
|
|
|
|
|
|
|
(19.0
|
)
|
|
|
(59.8
|
)
|
Balance as of Nov. 27, 2016
|
|
$
|
6,292.9
|
|
|
$
|
1,080.2
|
|
|
$
|
918.8
|
|
|
$
|
387.2
|
|
|
$
|
8,679.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in the carrying amount of other intangible assets during fiscal 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Millions
|
|
U.S.
Retail
|
|
|
International
|
|
|
Joint
Ventures
|
|
|
Total
|
|
Balance as of May 29, 2016
|
|
$
|
3,211.7
|
|
|
$
|
1,263.9
|
|
|
$
|
63.0
|
|
|
$
|
4,538.6
|
|
Other activity, primarily foreign currency translation
|
|
|
(1.8
|
)
|
|
|
(50.5
|
)
|
|
|
1.1
|
|
|
|
(51.2
|
)
|
Balance as of Nov. 27, 2016
|
|
$
|
3,209.9
|
|
|
$
|
1,213.4
|
|
|
$
|
64.1
|
|
|
$
|
4,487.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our annual goodwill and indefinite-lived intangible asset testing was performed on the first day of the second quarter of
fiscal 2017. As of the assessment date, there was no impairment of any of our goodwill or indefinite-lived intangible assets as their related fair values were substantially in excess of the carrying values, except for the
Immaculate Baking
brand and the Latin America reporting unit. The excess fair value above the carrying value of this brand asset and reporting unit is as follows:
|
|
|
|
|
|
|
|
|
In Millions
|
|
Carrying
Value
|
|
|
Excess Fair Value
Above Carrying
Value
|
|
Immaculate Baking
|
|
$
|
12.0
|
|
|
|
17
|
%
|
Latin America
|
|
$
|
523.0
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
In addition, while having significant coverage as of our fiscal 2017 assessment date, the
Progresso
,
Green
Giant
and
Food Should Taste Good
brand assets had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.
(5) Inventories
The components of inventories were as follows:
|
|
|
|
|
|
|
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
May 29,
2016
|
|
Raw materials and packaging
|
|
$
|
384.3
|
|
|
$
|
397.3
|
|
Finished goods
|
|
|
1,239.0
|
|
|
|
1,163.1
|
|
Grain
|
|
|
102.3
|
|
|
|
72.6
|
|
Excess of FIFO over LIFO cost
|
|
|
(200.1
|
)
|
|
|
(219.3
|
)
|
Total
|
|
$
|
1,525.5
|
|
|
$
|
1,413.7
|
|
|
|
|
|
|
|
|
|
|
12
(6) Risk Management Activities
Many commodities we use in the production and distribution of our products are exposed to market price risks. We utilize derivatives to manage price risk for our principal ingredients and energy costs,
including grains (oats, wheat, and corn), oils (principally soybean),
non-fat
dry milk, natural gas, and diesel fuel. Our primary objective when entering into these derivative contracts is to achieve certainty
with regard to the future price of commodities purchased for use in our supply chain. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and
over-the-counter
options and swaps. We offset our exposures based on current and projected market conditions and generally seek to acquire the inputs at as close to our
planned cost as possible.
We use derivatives to manage our exposure to changes in commodity prices. We do not perform the assessments
required to achieve hedge accounting for commodity derivative positions. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings.
Although we do not meet the criteria for cash flow hedge accounting, we believe that these instruments are effective in achieving our objective of
providing certainty in the future price of commodities purchased for use in our supply chain. Accordingly, for purposes of measuring segment operating performance, certain gains and losses are reported in unallocated corporate items outside of
segment operating results until such time that the exposure we are managing affects earnings. At that time we reclassify the gain or loss from unallocated corporate items to segment operating profit, allowing our operating segments to realize the
economic effects of the derivative without experiencing the resulting
mark-to-market
volatility, which remains in unallocated corporate items.
Unallocated corporate items for the quarters and
six-month
periods ended November 27, 2016, and
November 29, 2015 included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Net gain (loss) on
mark-to-market
valuation of
certain commodity positions
|
|
$
|
3.0
|
|
|
$
|
(31.7
|
)
|
|
$
|
(15.9
|
)
|
|
$
|
(54.0
|
)
|
Net loss on commodity positions reclassified from unallocated corporate items to segment operating profit
|
|
|
14.4
|
|
|
|
35.2
|
|
|
|
23.7
|
|
|
|
62.1
|
|
Net
mark-to-market
revaluation of certain grain inventories
|
|
|
11.7
|
|
|
|
4.2
|
|
|
|
4.7
|
|
|
|
2.3
|
|
Net
mark-to-market
valuation of certain commodity positions recognized in unallocated corporate items
|
|
$
|
29.1
|
|
|
$
|
7.7
|
|
|
$
|
12.5
|
|
|
$
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 27, 2016, the net notional value of commodity derivatives was $164.0 million, of which
$72.4 million related to energy inputs and $91.6 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.
In advance of planned debt financing, during the third quarter of fiscal 2016 and the first quarter of fiscal 2017, we entered into $400 million and $100 million, respectively, of treasury locks
due February 15, 2017 with an average fixed rate of 2.0 percent.
As of November 27, 2016, the net notional value of foreign
exchange derivatives was $900.0 million.
The fair values of the derivative positions used in our risk management activities and other
assets recorded at fair value were not material as of November 27, 2016, and were Level 1 or Level 2 assets and liabilities in the fair value hierarchy. We did not significantly change our valuation techniques from prior periods.
We offer certain suppliers access to a third party service that allows them to view our scheduled payments online. The third party service
also allows suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct
13
relationship with the suppliers, the third party, or any financial institutions concerning this service. All of our accounts payable remain as obligations to our suppliers as stated in our
supplier agreements. As of November 27, 2016, $560.2 million of our total accounts payable is payable to suppliers who utilize this third party service.
(7) Debt
The components of notes payable were as follows:
|
|
|
|
|
|
|
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
May 29,
2016
|
|
U.S. commercial paper
|
|
$
|
1,184.9
|
|
|
$
|
|
|
Financial institutions
|
|
|
236.8
|
|
|
|
269.8
|
|
Total
|
|
$
|
1,421.7
|
|
|
$
|
269.8
|
|
|
|
|
|
|
|
|
|
|
To ensure availability of funds, we maintain bank credit lines sufficient to cover our outstanding notes payable.
Commercial paper is a continuing source of short-term financing. We have commercial paper programs available to us in the United States and Europe. We also have committed, uncommitted, and asset-backed credit lines that support our foreign
operations.
The following table details the
fee-paid
committed and uncommitted credit lines we had
available as of November 27, 2016:
|
|
|
|
|
|
|
|
|
In Billions
|
|
Facility
Amount
|
|
|
Borrowed
Amount
|
|
Credit facility expiring:
|
|
|
|
|
|
|
|
|
May 2021
|
|
$
|
2.7
|
|
|
$
|
|
|
June 2019
|
|
|
0.2
|
|
|
|
0.1
|
|
Total committed credit facilities
|
|
|
2.9
|
|
|
|
0.1
|
|
Uncommitted credit facilities
|
|
|
0.4
|
|
|
|
0.1
|
|
Total committed and uncommitted credit facilities
|
|
$
|
3.3
|
|
|
$
|
0.2
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2016, we entered into a $2.7 billion
fee-paid
committed credit
facility that is scheduled to expire in May 2021. Concurrent with the execution of this credit facility, we terminated our $1.7 billion and $1.0 billion credit facilities.
The credit facilities contain covenants, including a requirement to maintain a fixed charge coverage ratio of at least 2.5 times. We were in compliance with all credit facility covenants as of
November 27, 2016.
Long-Term Debt
The fair values and carrying amounts of long-term debt, including the current portion, were $8,347.2 million and $8,049.6 million, respectively, as of November 27, 2016. The fair value of
long-term debt was estimated using market quotations and discounted cash flows based on our current incremental borrowing rates for similar types of instruments. Long-term debt is a Level 2 liability in the fair value hierarchy.
In January 2016, we issued 500.0 million principal amount of floating-rate notes due January 15, 2020. Interest on the notes is payable
quarterly in arrears. We may redeem the notes if certain tax laws change and we would be obligated to pay additional amounts on the notes. These notes are senior unsecured obligations that include a change of control repurchase provision. The net
proceeds were used to repay a portion of our maturing long-term debt.
In January 2016, we repaid $250 million of 0.875 percent
fixed-rate notes and $750 million of floating-rate notes.
14
Certain of our long-term debt agreements contain restrictive covenants. As of November 27, 2016, we
were in compliance with all of these covenants.
(8) Redeemable and Noncontrolling Interests
We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques
Sàrl. Sodiaal International (Sodiaal) holds the remaining interests in each of the entities. On the acquisition date, we recorded the $904.4 million fair value of Sodiaals 49 percent euro-denominated interest in Yoplait SAS as
a redeemable interest on our Consolidated Balance Sheets. Sodiaal has the ability to put all or a portion of its redeemable interest to us at fair value once per year, up to three times before December 2024. We adjust the value of the redeemable
interest through additional
paid-in
capital on our Consolidated Balance Sheets quarterly to the redeemable interests redemption value, which approximates its fair value. Yoplait SAS pays dividends
annually if it meets certain financial metrics set forth in its shareholders agreement. As of November 27, 2016, the redemption value of the euro-denominated redeemable interest was $801.7 million.
A subsidiary of Yoplait SAS has an exclusive milk supply agreement for its European operations with Sodiaal through July 1, 2021. Net purchases
totaled $123.5 million for the
six-month
period ended November 27, 2016 and $107.6 million for the
six-month
period ended November 29, 2015.
On the acquisition dates, we recorded the $281.4 million fair value of Sodiaals 50 percent euro-denominated interest in
Yoplait Marques SNC and 50 percent Canadian dollar-denominated interest in Liberté Marques Sàrl as noncontrolling interests on our Consolidated Balance Sheets. Yoplait Marques SNC earns a royalty stream through a licensing
agreement with Yoplait SAS for the rights to
Yoplait
and related trademarks. Liberté Marques Sàrl earns a royalty stream through licensing agreements with certain Yoplait group companies for the rights to
Liberté
and related trademarks. These entities pay dividends annually based on their available cash as of their fiscal year end.
The third-party
holder of the Class A Interests in our General Mills Cereals, LLC (GMC) consolidated subsidiary receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate to the
holders capital account balance established in the most recent
mark-to-market
valuation (currently $251.5 million). The preferred return rate is adjusted every
three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction. On June 1, 2015, the floating preferred return rate on GMCs Class A Interests was reset to the sum of three-month
LIBOR plus 125 basis points.
Our noncontrolling interests contain restrictive covenants. As of November 27, 2016, we were in compliance
with all of these covenants.
15
(9) Stockholders Equity
The following tables provide details of total comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
Nov. 27, 2016
|
|
|
Nov. 29, 2015
|
|
|
|
General Mills
|
|
|
Noncontrolling
Interests
|
|
|
Redeemable
Interest
|
|
|
General Mills
|
|
|
Noncontrolling
Interests
|
|
|
Redeemable
Interest
|
|
In Millions
|
|
Pretax
|
|
|
Tax
|
|
|
Net
|
|
|
Net
|
|
|
Net
|
|
|
Pretax
|
|
|
Tax
|
|
|
Net
|
|
|
Net
|
|
|
Net
|
|
Net earnings, including earnings attributable to redeemable and noncontrolling
interests
|
|
|
|
|
|
|
|
|
|
$
|
481.8
|
|
|
$
|
6.0
|
|
|
$
|
8.0
|
|
|
|
|
|
|
|
|
|
|
$
|
529.5
|
|
|
$
|
3.9
|
|
|
$
|
10.2
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
$
|
(49.6
|
)
|
|
$
|
|
|
|
|
(49.6
|
)
|
|
|
(18.0
|
)
|
|
|
(38.1
|
)
|
|
$
|
(22.8
|
)
|
|
$
|
|
|
|
|
(22.8
|
)
|
|
|
(17.5
|
)
|
|
|
(30.0
|
)
|
Other fair value changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
Hedge derivatives
|
|
|
48.5
|
|
|
|
(16.0
|
)
|
|
|
32.5
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
2.1
|
|
|
|
(1.1
|
)
|
|
|
1.0
|
|
|
|
|
|
|
|
(0.9
|
)
|
Reclassification to earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge derivatives (a)
|
|
|
(7.0
|
)
|
|
|
0.2
|
|
|
|
(6.8
|
)
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
(1.2
|
)
|
|
|
0.2
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
0.7
|
|
Amortization of losses and prior service costs (b)
|
|
|
51.4
|
|
|
|
(19.6
|
)
|
|
|
31.8
|
|
|
|
|
|
|
|
|
|
|
|
57.7
|
|
|
|
(21.8
|
)
|
|
|
35.9
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$
|
43.2
|
|
|
$
|
(35.4
|
)
|
|
|
7.8
|
|
|
|
(18.0
|
)
|
|
|
(39.5
|
)
|
|
$
|
35.9
|
|
|
$
|
(22.7
|
)
|
|
|
13.2
|
|
|
|
(17.5
|
)
|
|
|
(30.2
|
)
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
$
|
489.6
|
|
|
$
|
(12.0
|
)
|
|
$
|
(31.5
|
)
|
|
|
|
|
|
|
|
|
|
$
|
542.7
|
|
|
$
|
(13.6
|
)
|
|
$
|
(20.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
(Gain) loss reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and selling, general, and administrative
(SG&A) expenses for foreign exchange contracts.
|
(b)
|
Loss reclassified from AOCI into earnings is reported in SG&A expenses.
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
|
|
|
Six-Month
Period Ended
|
|
|
|
Nov. 27, 2016
|
|
|
Nov. 29, 2015
|
|
|
|
General Mills
|
|
|
Noncontrolling
Interests
|
|
|
Redeemable
Interest
|
|
|
General Mills
|
|
|
Noncontrolling
Interests
|
|
|
Redeemable
Interest
|
|
In Millions
|
|
Pretax
|
|
|
Tax
|
|
|
Net
|
|
|
Net
|
|
|
Net
|
|
|
Pretax
|
|
|
Tax
|
|
|
Net
|
|
|
Net
|
|
|
Net
|
|
Net earnings, including earnings attributable to redeemable and noncontrolling
interests
|
|
|
|
|
|
|
|
|
|
$
|
890.8
|
|
|
$
|
7.8
|
|
|
$
|
16.7
|
|
|
|
|
|
|
|
|
|
|
$
|
956.1
|
|
|
$
|
6.5
|
|
|
$
|
16.1
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
$
|
37.0
|
|
|
$
|
|
|
|
|
37.0
|
|
|
|
(15.2
|
)
|
|
|
(47.1
|
)
|
|
$
|
(172.7
|
)
|
|
$
|
|
|
|
|
(172.7
|
)
|
|
|
(12.2
|
)
|
|
|
(27.6
|
)
|
Other fair value changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
0.5
|
|
|
|
(0.2
|
)
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge derivatives
|
|
|
58.7
|
|
|
|
(14.1
|
)
|
|
|
44.6
|
|
|
|
|
|
|
|
2.7
|
|
|
|
15.3
|
|
|
|
(4.2
|
)
|
|
|
11.1
|
|
|
|
|
|
|
|
(0.7
|
)
|
Reclassification to earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge derivatives (a)
|
|
|
(8.6
|
)
|
|
|
(0.4
|
)
|
|
|
(9.0
|
)
|
|
|
|
|
|
|
(1.6
|
)
|
|
|
(2.3
|
)
|
|
|
0.8
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
1.9
|
|
Amortization of losses and prior service costs (b)
|
|
|
100.8
|
|
|
|
(38.4
|
)
|
|
|
62.4
|
|
|
|
|
|
|
|
|
|
|
|
107.4
|
|
|
|
(40.6
|
)
|
|
|
66.8
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$
|
188.4
|
|
|
$
|
(53.1
|
)
|
|
|
135.3
|
|
|
|
(15.2
|
)
|
|
|
(46.0
|
)
|
|
$
|
(52.3
|
)
|
|
$
|
(44.0
|
)
|
|
|
(96.3
|
)
|
|
|
(12.2
|
)
|
|
|
(26.4
|
)
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
$
|
1,026.1
|
|
|
$
|
(7.4
|
)
|
|
$
|
(29.3
|
)
|
|
|
|
|
|
|
|
|
|
$
|
859.8
|
|
|
$
|
(5.7
|
)
|
|
$
|
(10.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
(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.
|
(b)
|
Loss reclassified from AOCI into earnings is reported in SG&A expenses.
|
Accumulated other comprehensive loss balances, net of tax effects, were as follows:
|
|
|
|
|
|
|
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
May 29,
2016
|
|
Foreign currency translation adjustments
|
|
$
|
(607.2
|
)
|
|
$
|
(644.2
|
)
|
Unrealized gain (loss) from:
|
|
|
|
|
|
|
|
|
Securities
|
|
|
4.1
|
|
|
|
3.8
|
|
Hedge derivatives
|
|
|
10.1
|
|
|
|
(25.5
|
)
|
Pension, other postretirement, and postemployment benefits:
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
|
(1,898.0
|
)
|
|
|
(1,958.2
|
)
|
Prior service costs
|
|
|
14.1
|
|
|
|
11.9
|
|
Accumulated other comprehensive loss
|
|
$
|
(2,476.9
|
)
|
|
$
|
(2,612.2
|
)
|
|
|
|
|
|
|
|
|
|
17
(10) Stock Plans
We have various stock-based compensation programs under which awards, including stock options, restricted stock, restricted stock units, and performance awards, may be granted to employees and
non-employee
directors. These programs and related accounting are described in Note 11 to the Consolidated Financial Statements included in our Annual Report on Form
10-K
for
the fiscal year ended May 29, 2016.
Compensation expense related to stock-based payments recognized in the Consolidated Statements of
Earnings was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Compensation expense related to stock-based payments
|
|
$
|
18.6
|
|
|
$
|
21.4
|
|
|
$
|
57.6
|
|
|
$
|
54.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense related to stock-based payments recognized in the Consolidated Statements of Earnings includes
amounts recognized in restructuring, impairment, and other exit costs in fiscal 2016.
As of November 27, 2016, unrecognized compensation
expense related to
non-vested
stock options, restricted stock units, and performance share units was $136.7 million. This expense will be recognized over 23 months, on average.
Net cash proceeds from the exercise of stock options less shares used for withholding taxes and the intrinsic value of options exercised were as follows:
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Net cash proceeds
|
|
$
|
77.0
|
|
|
$
|
64.5
|
|
Intrinsic value of options exercised
|
|
$
|
131.9
|
|
|
$
|
102.0
|
|
|
|
|
|
|
|
|
|
|
We estimate the fair value of each stock option on the grant date using a Black-Scholes option-pricing model.
Black-Scholes option-pricing models require us to make predictive assumptions regarding future stock price volatility, employee exercise behavior, and dividend yield. We estimate our future stock price volatility using the historical volatility over
the expected term of the option, excluding time periods of volatility we believe a marketplace participant would exclude in estimating our stock price volatility. We also have considered, but did not use, implied volatility in our estimate, because
trading activity in options on our stock, especially those with tenors of greater than 6 months, is insufficient to provide a reliable measure of expected volatility. Our method of selecting the other valuation assumptions is explained in Note 11 to
the Consolidated Financial Statements included in our Annual Report on Form
10-K
for the fiscal year ended May 29, 2016.
18
The estimated fair values of stock options granted and the assumptions used for the Black-Scholes
option-pricing model were as follows:
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
|
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Estimated fair values of stock options granted
|
|
$
|
8.80
|
|
|
$
|
7.24
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.7
|
%
|
|
|
2.4
|
%
|
Expected term
|
|
|
8.5 years
|
|
|
|
8.5 years
|
|
Expected volatility
|
|
|
17.8
|
%
|
|
|
17.6
|
%
|
Dividend yield
|
|
|
2.9
|
%
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
Information on stock option activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
(Thousands)
|
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
(Millions)
|
|
Balance as of May 29, 2016
|
|
|
32,401.6
|
|
|
$
|
37.09
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,446.0
|
|
|
|
66.52
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(3,302.9
|
)
|
|
|
30.37
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(62.4
|
)
|
|
|
58.48
|
|
|
|
|
|
|
|
|
|
Outstanding as of Nov. 27, 2016
|
|
|
31,482.3
|
|
|
$
|
40.04
|
|
|
|
4.57
|
|
|
$
|
710.9
|
|
Exercisable as of Nov. 27, 2016
|
|
|
22,465.8
|
|
|
$
|
33.63
|
|
|
|
3.15
|
|
|
$
|
644.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information on restricted stock and performance share unit activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Classified
|
|
|
Liability Classified
|
|
|
|
Share-Settled
Units
(Thousands)
|
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
|
Share-Settled
Units
(Thousands)
|
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Non-vested
as of May 29, 2016
|
|
|
5,100.4
|
|
|
$
|
48.60
|
|
|
|
211.4
|
|
|
$
|
48.37
|
|
Granted
|
|
|
1,335.7
|
|
|
|
67.35
|
|
|
|
48.7
|
|
|
|
66.95
|
|
Vested
|
|
|
(1,392.5
|
)
|
|
|
39.99
|
|
|
|
(89.6
|
)
|
|
|
38.77
|
|
Forfeited
|
|
|
(160.2
|
)
|
|
|
55.50
|
|
|
|
(5.9
|
)
|
|
|
56.56
|
|
Exercisable as of Nov. 27, 2016
|
|
|
4,883.4
|
|
|
$
|
55.96
|
|
|
|
164.6
|
|
|
$
|
56.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total grant date fair value of restricted stock unit awards that vested during the period follows:
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Total grant date fair value
|
|
$
|
59.6
|
|
|
$
|
93.7
|
|
|
|
|
|
|
|
|
|
|
19
(11) Earnings Per Share
Basic and diluted earnings per share (EPS) were calculated using the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions, Except per Share Data
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Net earnings attributable to General Mills
|
|
$
|
481.8
|
|
|
$
|
529.5
|
|
|
$
|
890.8
|
|
|
$
|
956.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares - basic EPS
|
|
|
588.8
|
|
|
|
599.4
|
|
|
|
594.4
|
|
|
|
600.8
|
|
Incremental share effect from: (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
8.1
|
|
|
|
9.8
|
|
|
|
8.8
|
|
|
|
10.1
|
|
Restricted stock, restricted stock units, and other
|
|
|
2.8
|
|
|
|
3.2
|
|
|
|
2.8
|
|
|
|
3.2
|
|
Average number of common shares - diluted EPS
|
|
|
599.7
|
|
|
|
612.4
|
|
|
|
606.0
|
|
|
|
614.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
$
|
0.82
|
|
|
$
|
0.88
|
|
|
$
|
1.50
|
|
|
$
|
1.59
|
|
Earnings per share - diluted
|
|
$
|
0.80
|
|
|
$
|
0.87
|
|
|
$
|
1.47
|
|
|
$
|
1.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Incremental shares from stock options, restricted stock units, and performance share units are computed by the treasury stock method. Stock options, restricted stock
units, and performance share units excluded from our computation of diluted EPS because they were not dilutive were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Anti-dilutive stock options, restricted stock units, and performance share
units
|
|
|
2.5
|
|
|
|
2.2
|
|
|
|
2.2
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) Share Repurchases
Share repurchases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Shares of common stock
|
|
|
14.9
|
|
|
|
6.8
|
|
|
|
20.5
|
|
|
|
9.5
|
|
Aggregate purchase price
|
|
$
|
950.2
|
|
|
$
|
385.2
|
|
|
$
|
1,349.9
|
|
|
$
|
537.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the second quarter of fiscal 2016, we entered into an accelerated share repurchase (ASR) agreement with an
unrelated third party financial institution to repurchase an aggregate of $225.0 million of our outstanding common stock. Under the ASR agreement, we paid $225.0 million to the financial institution and received 3.7 million shares of
common stock with a fair value of $213.3 million during the second quarter of fiscal 2016. We recorded an additional 0.2 million shares of common stock upon the completion of the ASR agreement in the third quarter of fiscal 2016. We
recorded this transaction as an increase in treasury stock of $213.3 million, and recorded the remaining $11.7 million as a decrease to additional
paid-in
capital on our Consolidated Balance Sheets
as of November 29, 2015. Upon completion of the ASR agreement, we reclassified the $11.7 million to treasury stock from additional
paid-in
capital on our Consolidated Balance Sheets.
20
(13) Statements of Cash Flows
Our Consolidated Statements of Cash Flows include the following:
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Net cash interest payments
|
|
$
|
141.9
|
|
|
$
|
145.1
|
|
Net income tax payments
|
|
$
|
290.8
|
|
|
$
|
346.9
|
|
|
|
|
|
|
|
|
|
|
(14) Retirement and Postemployment Benefits
Beginning in fiscal 2017, we changed the method used to estimate the service and interest cost components of the net periodic benefit expense for our U.S. and most of our international defined benefit
pension, other postretirement benefit and postemployment benefit plans. We adopted a full yield curve approach to estimate service cost and interest cost by applying the specific spot rates along the yield curve used to determine the benefit
obligation to the relevant projected cash flows. This method provides a more precise measurement of service and interest costs by correlating the timing of the plans liability cash flows to the corresponding rate on the yield curve.
Previously, we estimated service cost and interest cost using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. This change does not affect the measurement of
our benefit obligations related to these plans. We have accounted for this change prospectively as a change in accounting estimate beginning in the first quarter of fiscal 2017. The change in methodology resulted in a decrease in service and
interest cost of approximately $17 million in the three months ended November 27, 2016 and approximately $34 million in the
six-month
period ended November 27, 2016 compared to what our
costs would have been under the previous method. We expect this change to result in a reduction in our service and interest cost of approximately $68 million for fiscal 2017 compared to our previous methodology. The fiscal 2017 reduction in our
net periodic benefit expense as a result of this change in methodology is partially offset by a reduction in our weighted-average expected rate of return on plan assets for our principal defined benefit pension and other postretirement plans in the
United States to 8.25 percent as a result of asset changes that decreased investment risk in the portfolio.
21
Components of net periodic benefit expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
Pension Plans
|
|
|
Other Postretirement
Benefit
Plans
|
|
|
Postemployment
Benefit
Plans
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Service cost
|
|
$
|
30.0
|
|
|
$
|
33.7
|
|
|
$
|
3.1
|
|
|
$
|
4.7
|
|
|
$
|
2.2
|
|
|
$
|
1.9
|
|
Interest cost
|
|
|
54.1
|
|
|
|
67.0
|
|
|
|
7.9
|
|
|
|
11.0
|
|
|
|
0.7
|
|
|
|
1.0
|
|
Expected return on plan assets
|
|
|
(121.7
|
)
|
|
|
(124.3
|
)
|
|
|
(12.1
|
)
|
|
|
(11.5
|
)
|
|
|
|
|
|
|
|
|
Amortization of losses
|
|
|
47.6
|
|
|
|
47.3
|
|
|
|
0.7
|
|
|
|
1.6
|
|
|
|
0.5
|
|
|
|
0.2
|
|
Amortization of prior service costs (credits)
|
|
|
0.6
|
|
|
|
1.2
|
|
|
|
(1.3
|
)
|
|
|
(1.3
|
)
|
|
|
0.1
|
|
|
|
0.6
|
|
Other adjustments
|
|
|
2.1
|
|
|
|
5.0
|
|
|
|
1.3
|
|
|
|
2.4
|
|
|
|
3.4
|
|
|
|
3.3
|
|
Settlement or curtailment losses
|
|
|
2.9
|
|
|
|
11.3
|
|
|
|
0.7
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Net expense
|
|
$
|
15.6
|
|
|
$
|
41.2
|
|
|
$
|
0.3
|
|
|
$
|
7.1
|
|
|
$
|
6.9
|
|
|
$
|
7.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
Pension Plans
|
|
|
Other Postretirement
Benefit
Plans
|
|
|
Postemployment
Benefit Plans
|
|
|
|
Six-Month
Period Ended
|
|
|
Six-Month
Period Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Service cost
|
|
$
|
60.0
|
|
|
$
|
67.4
|
|
|
$
|
6.2
|
|
|
$
|
9.5
|
|
|
$
|
4.4
|
|
|
$
|
3.8
|
|
Interest cost
|
|
|
108.3
|
|
|
|
134.0
|
|
|
|
16.0
|
|
|
|
22.0
|
|
|
|
1.4
|
|
|
|
2.0
|
|
Expected return on plan assets
|
|
|
(243.5
|
)
|
|
|
(248.6
|
)
|
|
|
(24.2
|
)
|
|
|
(23.1
|
)
|
|
|
|
|
|
|
|
|
Amortization of losses
|
|
|
95.0
|
|
|
|
94.7
|
|
|
|
1.3
|
|
|
|
3.3
|
|
|
|
0.9
|
|
|
|
0.4
|
|
Amortization of prior service costs (credits)
|
|
|
1.2
|
|
|
|
2.4
|
|
|
|
(2.6
|
)
|
|
|
(2.7
|
)
|
|
|
0.3
|
|
|
|
1.2
|
|
Other adjustments
|
|
|
2.1
|
|
|
|
5.0
|
|
|
|
1.3
|
|
|
|
2.4
|
|
|
|
6.8
|
|
|
|
6.5
|
|
Settlement or curtailment losses
|
|
|
4.4
|
|
|
|
11.3
|
|
|
|
0.7
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Net expense (income)
|
|
$
|
27.5
|
|
|
$
|
66.2
|
|
|
$
|
(1.3
|
)
|
|
$
|
11.6
|
|
|
$
|
13.8
|
|
|
$
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15) Business Segment Information
We operate in the consumer foods industry. We have three operating segments by type of customer and geographic region as follows: U.S. Retail; International; and Convenience Stores and Foodservice.
Our U.S. Retail segment reflects business with a wide variety of grocery stores, mass merchandisers, membership stores, natural food chains,
drug, dollar and discount chains, and
e-commerce
grocery providers operating throughout the United States. Our product categories in this business segment are
ready-to-eat
cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and a wide variety
of organic products including meal kits, granola bars, and cereal.
Our International segment consists of retail and foodservice businesses
outside of the United States. Our product categories include
ready-to-eat
cereals, shelf stable and frozen vegetables, meal kits, refrigerated and frozen dough products,
dessert and baking mixes, frozen pizza snacks, refrigerated yogurt, grain and fruit snacks, and super-premium ice cream and frozen desserts. We also sell super-premium ice cream and frozen desserts directly to consumers through owned retail shops.
Our International segment also includes products manufactured in the United States for export, mainly to Caribbean and Latin American markets, as well as products we manufacture for sale to
22
our international joint ventures. Revenues from export activities and franchise fees are reported in the region or country where the end customer is located.
In our Convenience Stores and Foodservice segment, our major product categories are
ready-to-eat
cereals, snacks, refrigerated yogurt, frozen meals, unbaked and fully baked frozen dough products, and baking mixes. Many products we sell are branded to
the consumer and nearly all are branded to our customers. We sell to distributors and operators in many customer channels including foodservice, convenience stores, vending, and supermarket bakeries in the United States.
Operating profit for these segments excludes unallocated corporate items, gain or loss on divestitures, and restructuring, impairment, and other exit
costs. Unallocated corporate items include corporate overhead expenses, variances to planned domestic employee benefits and incentives, contributions to the General Mills Foundation, asset and liability remeasurement impact of hyperinflationary
economies, restructuring initiative project-related costs, and other items that are not part of our measurement of segment operating performance. These include gains and losses arising from the revaluation of certain grain inventories and gains and
losses from
mark-to-market
valuation of certain commodity positions until passed back to our operating segments. These items affecting operating profit are centrally
managed at the corporate level and are excluded from the measure of segment profitability reviewed by executive management. Under our supply chain organization, our manufacturing, warehouse, and distribution activities are substantially integrated
across our operations in order to maximize efficiency and productivity. As a result, fixed assets and depreciation and amortization expenses are neither maintained nor available by operating segment.
Our operating segment results were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six-Month
Period Ended
|
|
In Millions
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
|
Nov. 27,
2016
|
|
|
Nov. 29,
2015
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail
|
|
$
|
2,521.3
|
|
|
$
|
2,761.9
|
|
|
$
|
4,853.1
|
|
|
$
|
5,293.1
|
|
International
|
|
|
1,103.3
|
|
|
|
1,157.2
|
|
|
|
2,233.1
|
|
|
|
2,356.2
|
|
Convenience Stores and Foodservice
|
|
|
487.5
|
|
|
|
505.8
|
|
|
|
933.8
|
|
|
|
983.5
|
|
Total
|
|
$
|
4,112.1
|
|
|
$
|
4,424.9
|
|
|
$
|
8,020.0
|
|
|
$
|
8,632.8
|
|
Operating profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail
|
|
$
|
615.4
|
|
|
$
|
600.4
|
|
|
$
|
1,209.8
|
|
|
$
|
1,230.1
|
|
International
|
|
|
105.9
|
|
|
|
136.2
|
|
|
|
205.9
|
|
|
|
253.2
|
|
Convenience Stores and Foodservice
|
|
|
109.1
|
|
|
|
102.8
|
|
|
|
201.8
|
|
|
|
182.6
|
|
Total segment operating profit
|
|
|
830.4
|
|
|
|
839.4
|
|
|
|
1,617.5
|
|
|
|
1,665.9
|
|
Unallocated corporate items
|
|
|
19.0
|
|
|
|
71.5
|
|
|
|
101.4
|
|
|
|
154.6
|
|
Divestitures loss (gain)
|
|
|
13.5
|
|
|
|
(199.1
|
)
|
|
|
13.5
|
|
|
|
(199.1
|
)
|
Restructuring, impairment, and other exit costs
|
|
|
29.0
|
|
|
|
61.3
|
|
|
|
87.9
|
|
|
|
121.4
|
|
Operating profit
|
|
$
|
768.9
|
|
|
$
|
905.7
|
|
|
$
|
1,414.7
|
|
|
$
|
1,589.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16) New Accounting Pronouncements
In the first quarter of fiscal 2017, we adopted new accounting requirements for the presentation of certain investments using the net asset value, providing a practical expedient to exclude such
investments from categorization within the fair value hierarchy and separate disclosure. The adoption of this guidance did not impact our results of operations or financial position.
In the first quarter of fiscal 2017, we adopted new accounting requirements which permit reporting entities with a fiscal
year-end
that does not coincide with a
month-end
to apply a practical expedient that permits the entity to measure defined benefit plan assets and obligations using the
month-end
that is closest to the
entitys fiscal
year-end
23
and apply such practical expedient consistently to all plans. The adoption of this guidance is not expected to have a material impact on our results of operations or financial position.
(17) Subsequent Events
Subsequent to the end of our second quarter, we approved restructuring actions designed to better align our organizational structure with our strategic
initiatives. In connection with these actions, we expect to eliminate approximately 400 to 600 positions globally, subject to consultation with employees and employee representatives in locations as required. In the third quarter of fiscal 2017, we
expect to record total
pre-tax
restructuring charges of approximately $60 to $90 million, reflecting primarily
one-time,
cash employee severance expenses. These
restructuring actions are expected to be completed by the end of fiscal 2018. We expect to generate $70 to $90 million in savings in connection with these actions by the end of fiscal 2018. In addition, we are currently assessing the impact of
these organizational structure changes on our reporting segments and expect to begin reporting in modified segments in the third quarter of fiscal 2017.
24