GENERAL MILLS INC - Quarter Report: 2019 November (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

RQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 24, 2019

£TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-01185

________________

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

Delaware	41-0274440
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Number One General Mills Boulevard
Minneapolis, Minnesota	55426
(Address of principal executive offices)	(Zip Code)

(763)764-7600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 par value	GIS	New York Stock Exchange
Floating Rate Notes due 2020	GIS20A	New York Stock Exchange
2.100% Notes due 2020	GIS20	New York Stock Exchange
1.000% Notes due 2023	GIS23A	New York Stock Exchange
1.500% Notes due 2027	GIS27	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

________________

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

Yes RNo £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). Yes RNo £

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

Large accelerated filer R

Accelerated filer £

Non-accelerated filer ££

Smaller reporting company£

Emerging growth company £

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

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

Yes £No R

Number of shares of Common Stock outstanding as of December 10, 2019: 604,816,813 (excluding 149,796,515 shares held in the treasury).

General Mills, Inc.

Table of Contents

	Page
PART I – Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings for the quarters and six-month periods ended November 24, 2019 and November 25, 2018	4
Consolidated Statements of Comprehensive Income for the quarters and six-month periods ended November 24, 2019 and November 25, 2018	5
Consolidated Balance Sheets as of November 24, 2019, and May 26, 2019	6
Consolidated Statements of Total Equity and Redeemable Interest for the quarters and six-month periods ended November 24, 2019 and November 25, 2018	7
Consolidated Statements of Cash Flows for the six-month periods ended November 24, 2019 and November 25, 2018	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II – Other Information
Item 6. Exhibits	44
Signatures	45

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Earnings
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)

	Quarter Ended				Six-Month Period Ended
		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Net sales	$	4,420.8	$	4,411.2	$	8,423.3	$	8,505.2
Cost of sales		2,851.7		2,901.5		5,464.7		5,652.7
Selling, general, and administrative expenses		759.0		753.3		1,477.9		1,496.0
Restructuring, impairment, and other exit costs (recoveries)		(1.1)		209.4		7.1		208.0
Operating profit		811.2		547.0		1,473.6		1,148.5
Benefit plan non-service income		(30.2)		(21.0)		(60.4)		(41.9)
Interest, net		119.4		132.7		238.1		266.2
Earnings before income taxes and after-tax earnings from joint ventures		722.0		435.3		1,295.9		924.2
Income taxes		155.5		106.6		222.7		217.3
After-tax earnings from joint ventures		24.9		22.5		46.7		40.2
Net earnings, including earnings attributable to redeemable and noncontrolling interests		591.4		351.2		1,119.9		747.1
Net earnings attributable to redeemable and noncontrolling interests		10.6		7.8		18.5		11.4
Net earnings attributable to General Mills	$	580.8	$	343.4	$	1,101.4	$	735.7
Earnings per share - basic	$	0.96	$	0.57	$	1.82	$	1.23
Earnings per share - diluted	$	0.95	$	0.57	$	1.80	$	1.22
Dividends per share	$	0.49	$	0.49	$	0.98	$	0.98

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)

	Quarter Ended				Six-Month Period Ended
		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Net earnings, including earnings attributable to redeemable and noncontrolling interests	$	591.4	$	351.2	$	1,119.9	$	747.1
Other comprehensive income (loss), net of tax:
Foreign currency translation		(2.8)		37.4		(6.5)		(68.8)
Other fair value changes:
Hedge derivatives		(12.8)		2.1		(9.0)		9.2
Reclassification to earnings:
Securities		-		-		-		(2.0)
Hedge derivatives		0.2		0.1		(0.4)		0.7
Amortization of losses and prior service costs		19.6		20.6		39.2		42.5
Other comprehensive income (loss), net of tax		4.2		60.2		23.3		(18.4)
Total comprehensive income		595.6		411.4		1,143.2		728.7
Comprehensive income (loss) attributable to redeemable and noncontrolling interests		4.0		(12.0)		6.2		(16.8)
Comprehensive income attributable to General Mills	$	591.6	$	423.4	$	1,137.0	$	745.5

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
		Nov. 24, 2019		May 26, 2019
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	560.2	$	450.0
Receivables		1,772.7		1,679.7
Inventories		1,719.5		1,559.3
Prepaid expenses and other current assets		426.5		497.5
Total current assets		4,478.9		4,186.5
Land, buildings, and equipment		3,588.5		3,787.2
Goodwill		13,973.9		13,995.8
Other intangible assets		7,133.0		7,166.8
Other assets		1,278.1		974.9
Total assets	$	30,452.4	$	30,111.2
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,063.0	$	2,854.1
Current portion of long-term debt		1,537.2		1,396.5
Notes payable		1,345.1		1,468.7
Other current liabilities		1,417.0		1,367.8
Total current liabilities		7,362.3		7,087.1
Long-term debt		10,953.1		11,624.8
Deferred income taxes		2,015.9		2,031.0
Other liabilities		1,555.4		1,448.9
Total liabilities		21,886.7		22,191.8
Redeemable interest		545.1		551.7
Stockholders' equity:
Common stock, 754.6 shares issued, $0.10 par value		75.5		75.5
Additional paid-in capital		1,387.0		1,386.7
Retained earnings		15,501.8		14,996.7
Common stock in treasury, at cost, shares of 150.0 and 152.7		(6,662.2)		(6,779.0)
Accumulated other comprehensive loss		(2,589.8)		(2,625.4)
Total stockholders' equity		7,712.3		7,054.5
Noncontrolling interests		308.3		313.2
Total equity		8,020.6		7,367.7
Total liabilities and equity	$	30,452.4	$	30,111.2

See accompanying notes to consolidated financial statements.

Consolidated Statements of Total Equity and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)

	$.10 Par Value Common Stock
	(One Billion Shares Authorized)
	Issued					Treasury
	Shares		Par Amount		Additional Paid-In Capital	Shares		Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non- controlling Interests		Total Equity		Redeemable Interest
Balance as of May 26, 2019	754.6	$	75.5	$	1,386.7	(152.7)	$	(6,779.0)	$	14,996.7	$	(2,625.4)	$	313.2	$	7,367.7	$	551.7
Total comprehensive income										520.6		24.8		2.1		547.5		0.1
Cash dividends declared ($0.49 per share)										(298.5)						(298.5)
Stock compensation plans					18.0	2.2		97.2								115.2
Unearned compensation related to restricted stock unit awards					(66.5)											(66.5)
Earned compensation					28.7											28.7
Decrease in redemption value of redeemable interest					4.0											4.0		(4.0)
Distributions to noncontrolling and redeemable interest holders														(2.5)		(2.5)
Balance as of August 25, 2019	754.6	$	75.5	$	1,370.9	(150.5)	$	(6,681.8)	$	15,218.8	$	(2,600.6)	$	312.8	$	7,695.6	$	547.8
Total comprehensive income										580.8		10.8		1.6		593.2		2.4
Cash dividends declared ($0.49 per share)										(297.8)						(297.8)
Shares purchased						-		(0.1)								(0.1)
Stock compensation plans					(4.2)	0.5		19.7								15.5
Unearned compensation related to restricted stock unit awards					(3.4)											(3.4)
Earned compensation					18.6											18.6
Decrease in redemption value of redeemable interest					5.1											5.1		(5.1)
Distributions to noncontrolling and redeemable interest holders														(6.1)		(6.1)
Balance as of November 24, 2019	754.6	$	75.5	$	1,387.0	(150.0)	$	(6,662.2)	$	15,501.8	$	(2,589.8)	$	308.3	$	8,020.6	$	545.1
See accompanying notes to consolidated financial statements.

Consolidated Statements of Total Equity and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)

	$.10 Par Value Common Stock
	(One Billion Shares Authorized)
	Issued					Treasury
	Shares		Par Amount		Additional Paid-In Capital	Shares		Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non- controlling Interests		Total Equity		Redeemable Interest
Balance as of May 27, 2018	754.6	$	75.5	$	1,202.5	(161.5)	$	(7,167.5)	$	14,459.6	$	(2,429.0)	$	351.3	$	6,492.4	$	776.2
Total comprehensive income (loss)										392.3		(70.2)		1.8		323.9		(6.6)
Cash dividends declared ($0.49 per share)										(294.2)						(294.2)
Shares purchased								(0.2)								(0.2)
Stock compensation plans					(2.5)	3.0		131.8								129.3
Unearned compensation related to restricted stock unit awards					(65.2)											(65.2)
Earned compensation					28.1											28.1
Increase in redemption value of redeemable interest					(2.0)											(2.0)		2.0
Distributions to noncontrolling and redeemable interest holders														(2.4)		(2.4)
Adoption of revenue recognition accounting requirements										(33.9)						(33.9)
Balance as of August 26, 2018	754.6	$	75.5	$	1,160.9	(158.5)	$	(7,035.9)	$	14,523.8	$	(2,499.2)	$	350.7	$	6,575.8	$	771.6
Total comprehensive income (loss)										343.4		80.0		(3.2)		420.2		(8.8)
Cash dividends declared ($0.49 per share)										(295.0)						(295.0)
Shares purchased						-		(0.1)								(0.1)
Stock compensation plans					(13.0)	0.6		26.3								13.3
Unearned compensation related to restricted stock unit awards					(1.5)											(1.5)
Earned compensation					15.7											15.7
Increase in investment in redeemable interest																		55.7
Decrease in redemption value of redeemable interest					270.9											270.9		(270.9)
Distributions to noncontrolling and redeemable interest holders														(19.9)		(19.9)
Balance as of November 25, 2018	754.6	$	75.5	$	1,433.0	(157.9)	$	(7,009.7)	$	14,572.2	$	(2,419.2)	$	327.6	$	6,979.4	$	547.6
See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
	Six-Month Period Ended
		Nov. 24, 2019		Nov. 25, 2018
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests	$	1,119.9	$	747.1
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		307.7		310.1
After-tax earnings from joint ventures		(46.7)		(40.2)
Distributions of earnings from joint ventures		28.9		34.7
Stock-based compensation		47.8		44.5
Deferred income taxes		(9.9)		43.8
Pension and other postretirement benefit plan contributions		(14.3)		(14.6)
Pension and other postretirement benefit plan costs		(15.5)		3.1
Restructuring, impairment, and other exit costs		11.3		179.0
Changes in current assets and liabilities		7.7		100.0
Other, net		19.7		(11.0)
Net cash provided by operating activities		1,456.6		1,396.5
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment		(158.5)		(253.8)
Investments in affiliates, net		(14.3)		(1.5)
Proceeds from disposal of land, buildings, and equipment		0.6		11.3
Other, net		9.5		(51.4)
Net cash used by investing activities		(162.7)		(295.4)
Cash Flows - Financing Activities
Change in notes payable		(119.7)		(482.1)
Payment of long-term debt		(509.3)		(0.4)
Proceeds from common stock issued on exercised options		68.6		87.3
Purchases of common stock for treasury		(0.1)		(0.3)
Dividends paid		(596.3)		(589.2)
Investment in redeemable interest		-		55.7
Distributions to noncontrolling and redeemable interest holders		(8.6)		(6.8)
Other, net		(14.4)		(11.5)
Net cash used by financing activities		(1,179.8)		(947.3)
Effect of exchange rate changes on cash and cash equivalents		(3.9)		(20.1)
Increase in cash and cash equivalents		110.2		133.7
Cash and cash equivalents - beginning of year		450.0		399.0
Cash and cash equivalents - end of period	$	560.2	$	532.7
Cash Flow from changes in current assets and liabilities:
Receivables	$	(97.0)	$	(64.0)
Inventories		(167.2)		(15.3)
Prepaid expenses and other current assets		67.6		45.3
Accounts payable		245.7		144.1
Other current liabilities		(41.4)		(10.1)
Changes in current assets and liabilities	$	7.7	$	100.0
See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Background

The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, General Mills, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions and any noncontrolling and redeemable interests’ share of those transactions. Operating results for the quarter ended November 24, 2019, are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2020.

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 26, 2019. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 2 to the Consolidated Financial Statements in that Form 10-K with the exception of new requirements adopted in the first quarter of fiscal 2020.

In the first quarter of fiscal 2020, we adopted new accounting requirements for hedge accounting. The new standard amends the hedge accounting recognition and presentation requirements to better align an entity’s risk management activities and financial reporting. The new standard also simplifies the application of hedge accounting guidance. The adoption did not have a material impact on our results of operations or financial position.

In the first quarter of fiscal 2020, we adopted new requirements for the accounting, presentation, and classification of leases. This results in certain leases being capitalized as a right of use asset with a related liability on our Consolidated Balance Sheet. We have performed a review of our lease portfolio, implemented lease accounting software, and developed a centralized business process with corresponding controls. We adopted this guidance utilizing the cumulative effect adjustment approach, which required application of the guidance at the adoption date, and elected certain practical expedients permitted under the transition guidance, including not reassessing whether existing contracts contain leases and carrying forward the historical classification of those leases. In addition, we elected not to recognize leases with an initial term of 12 months or less on our Consolidated Balance Sheet and to continue our historical treatment of land easements, under permitted elections. This guidance did not have a material impact on retained earnings, our Consolidated Statements of Earnings, or our Consolidated Statements of Cash Flows. See Note 5 to the Consolidated Financial Statements for additional information on the impact to our Consolidated Balance Sheets.

Certain terms used throughout this report are defined in the “Glossary” section below.

(2) Restructuring, Impairment, and Other Exit Costs

Restructuring and impairment charges were as follows:

		Quarter Ended				Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Charges associated with restructuring actions previously announced	$	10.5	$	3.6	$	24.8	$	2.4
Asset impairments		-		205.8		-		205.8
Total	$	10.5	$	209.4	$	24.8	$	208.2

In the six-month period ended November 24, 2019, we did not undertake any new restructuring actions. We recorded $10.5 million of restructuring charges for previously announced restructuring actions in the second quarter of fiscal 2020 and $24.8 million in the six-month period ended November 24, 2019, compared to $3.6 million of restructuring charges in the second quarter of fiscal 2019 and $2.4 million in the six-month period ended November 25, 2018. Certain actions are subject to union negotiations and works counsel consultations, where required. We expect these actions to be completed by the end of fiscal 2022.

We did not record any asset impairments in the six-month period ended November 24, 2019. In the second quarter of fiscal 2019, we recorded $192.6 million of charges related to the impairment of certain brand intangible assets in restructuring, impairment, and other exit costs. During the second quarter of fiscal 2019, we recorded a $13.2 million charge in restructuring, impairment, and other exit costs related to the impairment of certain manufacturing assets within our North America Retail segment.

We paid $13.5 million of cash related to restructuring actions previously announced in the six-month period ended November 24, 2019, compared to $29.2 million in the same period of fiscal 2019.

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

		Quarter Ended				Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Cost of sales	$	11.6	$	-	$	17.7	$	0.2
Restructuring, impairment, and other exit costs (recoveries)		(1.1)		209.4		7.1		208.0
Total restructuring and impairment charges		10.5		209.4		24.8		208.2
Project-related costs classified in cost of sales	$	0.7	$	-	$	0.7	$	1.2

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

In Millions
Reserve balance as of May 26, 2019	$	36.5
Fiscal 2020 charges, including foreign currency translation		0.8
Utilized in fiscal 2020		(9.8)
Reserve balance as of Nov. 24, 2019	$	27.5

The reserve balance primarily consists of expected severance payments associated with previously announced restructuring actions.

The charges recognized in the roll forward of our reserves for restructuring and other exit costs do not include items charged directly to expense (e.g., asset impairment charges, accelerated depreciation, the gain or loss on the sale of restructured assets, and the write-off of spare parts) and other periodic exit costs are recognized as incurred, as those items are not reflected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets.

(3) Goodwill and Other Intangible Assets

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

In Millions		Nov. 24, 2019		May 26, 2019
Goodwill	$	13,973.9	$	13,995.8
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles		6,580.0		6,590.8
Intangible assets subject to amortization:
Franchise agreements, customer relationships, and other finite-lived intangibles		778.8		786.1
Less accumulated amortization		(225.8)		(210.1)
Intangible assets subject to amortization, net		553.0		576.0
Other intangible assets		7,133.0		7,166.8
Total	$	21,106.9	$	21,162.6

Based on the carrying value of finite-lived intangible assets as of November 24, 2019, annual amortization expense for each of the next five fiscal years is estimated to be approximately $40 million.

The changes in the carrying amount of goodwill during the second quarter of fiscal 2020 were as follows:

In Millions		North America Retail		Pet		Convenience Stores & Foodservice		Europe & Australia		Asia & Latin America		Joint Ventures		Total
Balance as of May 26, 2019	$	6,406.5	$	5,300.5	$	918.8	$	700.4	$	260.2	$	409.4	$	13,995.8
Other activity, primarily foreign
currency translation		1.2		-		-		(7.9)		(8.6)		(6.6)		(21.9)
Balance as of Nov. 24, 2019	$	6,407.7	$	5,300.5	$	918.8	$	692.5	$	251.6	$	402.8	$	13,973.9

The changes in the carrying amount of other intangible assets for the six-month period ended November 24, 2019, were as follows:

In Millions		Total
Balance as of May 26, 2019	$	7,166.8
Other activity, primarily foreign currency translation		(33.8)
Balance as of Nov. 24, 2019	$	7,133.0

Our annual goodwill and indefinite-lived intangible assets impairment test was performed on the first day of the second quarter of fiscal 2020, and we determined there was no impairment of our intangible assets as their related fair values were substantially in excess of the carrying values, except for the Europe & Australia reporting unit and the Progresso brand intangible asset.

The excess fair value as of the fiscal 2020 test date of the Europe & Australia reporting unit and the Progresso brand intangible asset is as follows:

In Millions		Carrying Value of Intangible Asset	Excess Fair Value as of Fiscal 2020 Test Date
Europe & Australia	$	672.6	14%
Progresso	$	330.0	5%

In addition, while having significant coverage as of our fiscal 2020 assessment date, the Pillsbury brand intangible asset had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.

(4) Inventories

The components of inventories were as follows:

In Millions		Nov. 24, 2019		May 26, 2019
Raw materials and packaging	$	398.0	$	434.9
Finished goods		1,433.6		1,245.9
Grain		99.2		92.0
Excess of FIFO over LIFO cost		(211.3)		(213.5)
Total	$	1,719.5	$	1,559.3

(5) Leases

We determine whether an arrangement is a lease at inception. Our lease portfolio primarily consists of operating lease arrangements for certain warehouse and distribution space, office space, retail shops, production facilitates, rail cars, production and distribution equipment, automobiles, and office equipment. When our lease arrangements include lease and non-lease components, we account for lease components and non-lease components (e.g. common area maintenance) separately based on their relative standalone prices.

Any lease arrangements with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheet and we recognize lease costs for these lease arrangements on a straight-line basis over the lease term. Many of our lease arrangements provide

us with the options to exercise one or more renewal terms or to terminate the lease arrangement. We include these options when we are reasonably certain to exercise them in the lease term used to establish our right of use assets and lease liabilities. Generally, our lease agreements do not include an option to purchase the leased asset, residual value guarantees, or material restrictive covenants.

We have certain lease arrangements with variable rental payments. Our lease arrangements for our Häagen-Dazs retail shops often include rental payments that are based on a percentage of retail sales. We have other lease arrangements that are adjusted periodically based on an inflation index or rate. The future variability of these payments and adjustments are unknown and therefore they are not included as minimum lease payments used to determine our right of use assets and lease liabilities. Variable rental payments are recognized in the period in which the obligation is incurred.

As most of our lease arrangements do not provide an implicit interest rate, we apply an incremental borrowing rate based on the information available at the commencement date of the lease arrangement to determine the present value of lease payments.

Our lease costs associated with finance leases and sale-leaseback transactions and our lease income associated with lessor and sublease arrangements are not material to our Consolidated Financial Statements.

Our operating leases are reported in our Consolidated Balance Sheet as follows:

In Millions	Classification	Nov. 24, 2019
Right of use assets (a)	Other assets	$	403.8
Current lease liabilities	Other current liabilities		108.6
Non-current lease liabilities	Other liabilities		308.5

(a) Net of accumulated amortization

Components of our lease cost are as follows:

				Six-Month
		Quarter Ended		Period Ended
In Millions		Nov. 24, 2019		Nov. 24, 2019
Operating lease cost	$	35.1	$	68.0
Variable lease cost		4.7		9.9
Short-term lease cost		7.2		13.6

Rent expense under all operating leases from continuing operations was $184.9 million in fiscal 2019.

Maturities of our operating lease obligations by fiscal year are as follows:

In Millions
Fiscal 2020 (a)	$	65.7
Fiscal 2021		111.6
Fiscal 2022		93.8
Fiscal 2023		69.4
Fiscal 2024		52.8
After fiscal 2024		62.6
Total noncancelable future lease obligations	$	455.9
Less: Interest		(38.8)
Present value of lease obligations	$	417.1

(a) Excludes the six-month period ended November 24, 2019.

The lease payments presented in the table above exclude $12.4 million of minimum lease payments for operating leases we have committed to but have not yet commenced as of November 24, 2019.

Noncancelable future operating lease commitments as of May 26, 2019, were as follows:

In Millions
Fiscal 2020	$	120.0
Fiscal 2021		101.7
Fiscal 2022		85.0
Fiscal 2023		63.8
Fiscal 2024		49.1
After fiscal 2024		63.0
Total noncancelable future lease commitments	$	482.6

The weighted-average remaining lease term and weighted-average discount rate for our operating leases are as follows:


	Nov. 24, 2019
Weighted-average remaining lease term	4.7	years
Weighted-average discount rate	4.1	%

Supplemental operating cash flow information and non-cash activity related to our operating leases are as follows:

		Six-Month
		Period Ended
In Millions		Nov. 24, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	64.7
Right of use assets obtained in exchange for new lease liabilities		28.2

(6) Risk Management Activities

Many commodities we use in the production and distribution of our products are exposed to market price risks. We utilize derivatives to manage price risk for our principal ingredients and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), dairy products, natural gas, and diesel fuel. Our primary objective when entering into these derivative contracts is to achieve certainty with regard to the future price of commodities purchased for use in our supply chain. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and over-the-counter options and swaps. We offset our exposures based on current and projected market conditions and generally seek to acquire the inputs at as close to our planned cost as possible.

We use derivatives to manage our exposure to changes in commodity prices. We do not perform the assessments required to achieve hedge accounting for commodity derivative positions. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings.

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

Unallocated corporate items for the quarters and six-month periods ended November 24, 2019, and November 25, 2018, included:

	Quarter Ended				Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Net gain (loss) on mark-to-market valuation of certain commodity positions	$	9.7	$	(17.5)	$	(11.0)	$	(37.0)
Net loss (gain) on commodity positions reclassified from unallocated corporate items to segment operating profit		4.0		2.2		15.3		(1.5)
Net mark-to-market revaluation of certain grain inventories		8.9		3.5		3.3		(4.4)
Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items	$	22.6	$	(11.8)	$	7.6	$	(42.9)

As of November 24, 2019, the net notional value of commodity derivatives was $260.3 million, of which $91.8 million related to energy inputs and $168.5 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.

During the second quarter of fiscal 2020, we entered into a $500 million interest rate swap to convert a portion of our $850 million floating-rate notes due April 16, 2021, to a fixed rate.

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 24, 2019, and were Level 1 or Level 2 assets and liabilities in the fair value hierarchy. We did not significantly change our valuation techniques from prior periods.

We offer certain suppliers access to third party services that allow them to view our scheduled payments online. The third party services also allow suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third parties, or any financial institutions concerning these services. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of November 24, 2019, $1,279.2 million of our total accounts payable were payable to suppliers who utilize these third party services.

(7) Debt

The components of notes payable were as follows:

In Millions		Nov. 24, 2019		May 26, 2019
U.S. commercial paper	$	1,183.5	$	1,298.5
Financial institutions		161.6		170.2
Total	$	1,345.1	$	1,468.7

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 24, 2019:

In Billions		Facility Amount		Borrowed Amount
Credit facility expiring:
May 2022	$	2.7	$	-
September 2022		0.2		-
Total committed credit facilities		2.9		-
Uncommitted credit facilities		0.7		0.2
Total committed and uncommitted credit facilities	$	3.6	$	0.2

The credit facilities contain covenants, including a requirement to maintain a fixed charge coverage ratio of at least 2.5 times. We were in compliance with all credit facility covenants as of November 24, 2019.

Long-Term Debt

The fair values and carrying amounts of long-term debt, including the current portion, were $13,285.2 million and $12,490.3 million, respectively, as of November 24, 2019. 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 the second quarter of fiscal 2020, we repaid $500.0 million of 2.20 percent fixed-rate notes with proceeds from commercial paper.

In the fourth quarter of fiscal 2019, we issued €300.0 million principal amount of 0.0 percent fixed-rate notes due January 15, 2020. 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. We used the net proceeds, together with cash on hand, to repay our €300.0 million floating rate notes.

In the third quarter of fiscal 2019, we repaid $1,150.0 million of 5.65 percent fixed-rate notes with proceeds from commercial paper.

Certain of our long-term debt agreements contain restrictive covenants. As of November 24, 2019, we were in compliance with all of these covenants.

(8) Redeemable and Noncontrolling Interests

We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal International (Sodiaal) holds the remaining interests in each of the entities. On the acquisition date, we recorded the $904.4 million fair value of Sodiaal’s 49 percent euro-denominated interest in Yoplait SAS as a redeemable interest on our Consolidated Balance Sheets. Sodiaal has the ability to put all or a portion of its redeemable interest to us at fair value once per year, up to three times before December 2024. We adjust the value of the redeemable interest through additional paid-in capital on our Consolidated Balance Sheets quarterly to the redeemable interest’s redemption value, which approximates its fair value. Yoplait SAS pays dividends annually if it meets certain financial metrics set forth in its shareholders’ agreement. As of November 24, 2019, the redemption value of the euro-denominated redeemable interest was $545.1 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 $95.8 million for the six-month period ended November 24, 2019, and $107.8 million for the six-month period ended November 25, 2018.

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

On the acquisition dates, we recorded the $281.4 million fair value of Sodiaal’s 50 percent euro-denominated interest in Yoplait Marques SNC and 50 percent Canadian dollar-denominated interest in Liberté Marques Sàrl as noncontrolling interests on our Consolidated Balance Sheets. Yoplait Marques SNC earns a royalty stream through a licensing agreement with Yoplait SAS for the rights to Yoplait and related trademarks. Liberté Marques Sàrl earns a royalty stream through licensing agreements with certain Yoplait group companies for the rights to Liberté and related trademarks. These entities pay dividends annually based on their available cash as of their fiscal year end.

The third-party holder of the General Mills Cereals, LLC (GMC) Class A Interests receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $251.5 million). On June 1, 2018, the floating preferred return rate on GMC’s Class A Interests was reset to the sum of three-month LIBOR plus 142.5 basis points. The preferred return rate is adjusted every three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction.

Our noncontrolling interests contain restrictive covenants. As of November 24, 2019, we were in compliance with all of these covenants.

(9) Stockholders’ Equity

The following tables provide details of total comprehensive income:


		Quarter Ended										Quarter Ended
		Nov. 24, 2019										Nov. 25, 2018
		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					$	580.8	$	4.9	$	5.7					$	343.4	$	5.1	$	2.7
Other comprehensive income (loss):
Foreign currency translation	$	1.7	$	-		1.7		(3.3)		(1.2)	$	56.5	$	-		56.5		(8.3)		(10.8)
Other fair value changes:
Hedge derivatives		(11.6)		0.9		(10.7)		-		(2.1)		2.0		0.7		2.7		-		(0.6)
Reclassification to earnings:
Hedge derivatives (a)		0.4		(0.2)		0.2		-		-		0.5		(0.3)		0.2		-		(0.1)
Amortization of losses and prior service costs (b)		25.5		(5.9)		19.6		-		-		26.8		(6.2)		20.6		-		-
Other comprehensive income (loss)	$	16.0	$	(5.2)		10.8		(3.3)		(3.3)	$	85.8	$	(5.8)		80.0		(8.3)		(11.5)
Total comprehensive income (loss)					$	591.6	$	1.6	$	2.4					$	423.4	$	(3.2)	$	(8.8)

(a)Loss (gain) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange contracts.

(b)Loss reclassified from AOCI into earnings is reported in benefit plan non-service income.


		Six-Month Period Ended										Six-Month Period Ended
		Nov. 24, 2019										Nov. 25, 2018
		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					$	1,101.4	$	8.5	$	10.0					$	735.7	$	8.2	$	3.2
Other comprehensive income (loss):
Foreign currency translation	$	4.4	$	-		4.4		(4.8)		(6.1)	$	(40.3)	$	-		(40.3)		(9.6)		(18.9)
Other fair value changes:
Hedge derivatives		(9.2)		1.6		(7.6)		-		(1.4)		9.2		(0.3)		8.9		-		0.3
Reclassification to earnings:
Securities (a)		-		-		-		-		-		(2.6)		0.6		(2.0)		-		-
Hedge derivatives (b)		(0.2)		(0.2)		(0.4)		-		-		1.0		(0.3)		0.7		-		-
Amortization of losses and prior service costs (c)		51.0		(11.8)		39.2		-		-		53.7		(11.2)		42.5		-		-
Other comprehensive income (loss)	$	46.0	$	(10.4)		35.6		(4.8)		(7.5)	$	21.0	$	(11.2)		9.8		(9.6)		(18.6)
Total comprehensive income (loss)					$	1,137.0	$	3.7	$	2.5					$	745.5	$	(1.4)	$	(15.4)

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

(b)Loss (gain) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange contracts.

(c)Loss reclassified from AOCI into earnings is reported in benefit plan non-service income.

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

In Millions		Nov. 24, 2019		May 26, 2019
Foreign currency translation adjustments	$	(735.5)	$	(739.9)
Unrealized loss from:
Hedge derivatives		(27.4)		(19.4)
Pension, other postretirement, and postemployment benefits:
Net actuarial loss		(1,840.2)		(1,880.5)
Prior service credits		13.3		14.4
Accumulated other comprehensive loss	$	(2,589.8)	$	(2,625.4)

(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 26, 2019.

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. 24, 2019

Nov. 25, 2018

Nov. 24, 2019

Nov. 25, 2018

Compensation expense related to stock-based payments

19.0

18.4

47.8

44.6

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 2019.

We recognized windfall tax benefits from stock-based payments in income tax expense in our Consolidated Statements of Earnings of $1.6 million for the second quarter of fiscal 2020 and $8.2 million for the six-month period ended November 24, 2019, compared to $1.9 million in the second quarter of fiscal 2019 and $6.7 million for the six-month period ended November 25, 2018.

As of November 24, 2019, unrecognized compensation expense related to non-vested stock options, restricted stock units, and performance share units was $134.5 million. This expense will be recognized over 25 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. 24, 2019		Nov. 25, 2018
Net cash proceeds	$	68.6	$	87.3
Intrinsic value of options exercised	$	36.5	$	39.0

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 26, 2019.

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. 24, 2019			Nov. 25, 2018
Estimated fair values of stock options granted	$	7.10		$	5.35
Assumptions:
Risk-free interest rate		2.0	%		2.9	%
Expected term		8.5	years		8.5	years
Expected volatility		17.4	%		16.3	%
Dividend yield		3.6	%		4.3	%

The total grant date fair value of restricted stock unit awards that vested during the period follows:

		Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018
Total grant date fair value	$	50.7	$	37.9

(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. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Net earnings attributable to General Mills	$	580.8	$	343.4	$	1,101.4	$	735.7
Average number of common shares - basic EPS		607.4		599.4		606.7		598.7
Incremental share effect from: (a)
Stock options		2.7		3.3		2.9		3.4
Restricted stock, restricted stock units, and other		2.2		1.8		2.2		1.7
Average number of common shares - diluted EPS		612.3		604.5		611.8		603.8
Earnings per share - basic	$	0.96	$	0.57	$	1.82	$	1.23
Earnings per share - diluted	$	0.95	$	0.57	$	1.80	$	1.22

(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. 24, 2019

Nov. 25, 2018

Nov. 24, 2019

Nov. 25, 2018

Anti-dilutive stock options, restricted stock units, and

performance share units

10.6

14.4

10.3

14.0

(12) Statements of Cash Flows

Our Consolidated Statements of Cash Flows include the following:

	Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018
Net cash interest payments	$	216.1	$	252.0
Net income tax payments	$	267.0	$	235.2

(13) Retirement and Postemployment Benefits

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. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Service cost	$	23.2	$	23.7	$	2.4	$	2.7	$	2.1	$	1.9
Interest cost		57.7		62.0		6.8		8.2		0.6		0.8
Expected return on plan assets		(112.5)		(111.5)		(10.5)		(10.1)		-		-
Amortization of losses (gains)		26.7		27.5		(0.6)		0.1		0.1		-
Amortization of prior service costs (credits)		0.4		0.4		(1.4)		(1.4)		0.3		0.2
Other adjustments		-		-		-		-		2.2		2.8
Net expense (income)	$	(4.5)	$	2.1	$	(3.3)	$	(0.5)	$	5.3	$	5.7

		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. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Service cost	$	46.4	$	47.4	$	4.8	$	5.1	$	4.2	$	3.8
Interest cost		115.3		124.0		13.6		16.5		1.3		1.5
Expected return on plan assets		(225.0)		(223.0)		(21.0)		(20.2)		-		-
Amortization of losses (gains)		53.4		55.0		(1.1)		0.3		0.3		0.1
Amortization of prior service costs (credits)		0.8		0.8		(2.8)		(2.8)		0.4		0.3
Other adjustments		-		-		-		-		4.4		5.6
Net expense (income)	$	(9.1)	$	4.2	$	(6.5)	$	(1.1)	$	10.6	$	11.3

(14) Income Taxes

During the first quarter of fiscal 2020, we reorganized certain wholly owned subsidiaries, including the movement of certain assets between legal entities. As a result of these actions, we recorded a $53.1 million decrease to our deferred income tax liabilities, with a corresponding discrete, non-cash reduction to income taxes in the first quarter of fiscal 2020.

(15) Contingencies

During the second quarter of fiscal 2020, we received notice from the tax authorities of the State of São Paulo, Brazil regarding our compliance with its state sales tax requirements. As a result, we have been assessed additional state sales taxes, interest, and penalties. We believe that we have meritorious defenses against this claim and will vigorously defend our position. As of November 24, 2019, we are unable to estimate any possible loss and have not recorded a loss contingency for this matter.

(16) Business Segment and Geographic Information

We operate in the packaged foods industry. Our operating segments are as follows: North America Retail; Convenience Stores & Foodservice; Europe & Australia; Asia & Latin America; and Pet.

Our North America Retail operating segment reflects business with a wide variety of grocery stores, mass merchandisers, membership stores, natural food chains, drug, dollar and discount chains, and e-commerce grocery providers. Our product categories in this business segment are ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and a wide variety of organic products including refrigerated yogurt, nutrition bars, meal kits, salty snacks, ready-to-eat cereal, and grain snacks.

Our major product categories in our Convenience Stores & Foodservice operating segment are ready-to-eat cereals, snacks, refrigerated yogurt, frozen meals, unbaked and fully baked frozen dough products, and baking mixes. Many products we sell are branded to the consumer and nearly all are branded to our customers. We sell to distributors and operators in many customer channels including foodservice, convenience stores, vending, and supermarket bakeries in the United States.

Our Europe & Australia operating segment reflects retail and foodservice businesses in the greater Europe and Australia regions. Our product categories include refrigerated yogurt, meal kits, super-premium ice cream, refrigerated and frozen dough products, shelf stable vegetables, grain snacks, and dessert and baking mixes. We also sell super-premium ice cream directly to consumers through owned retail shops. Revenues from franchise fees are reported in the region or country where the franchisee is located.

Our Asia & Latin America operating segment consists of retail and foodservice businesses in the greater Asia and South America regions. Our product categories include super-premium ice cream and frozen desserts, refrigerated and frozen dough products, dessert and baking mixes, meal kits, salty and grain snacks, wellness beverages, and refrigerated yogurt. We also sell super-premium ice cream and frozen desserts directly to consumers through owned retail shops. Our Asia & Latin America segment also includes products manufactured in the United States for export, mainly to Caribbean and Latin American markets, as well as products we manufacture for sale to our international joint ventures. Revenues from export activities and franchise fees are reported in the region or country where the end customer or franchisee is located.

Our Pet operating segment includes pet food products sold primarily in the United States in national pet superstore chains, e-commerce retailers, grocery stores, regional pet store chains, mass merchandisers, and veterinary clinics and hospitals. Our product categories include dog and cat food (dry foods, wet foods, and treats) made with whole meats, fruits and vegetables, and other high-quality natural ingredients. Our tailored pet product offerings address specific dietary, lifestyle, and life-stage needs and span different product types, diet types, breed sizes for dogs, lifestages, flavors, product functions and textures, and cuts for wet foods. We are reporting the Pet operating segment results on a one-month lag.

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 for all operating segments.

Our operating segment results were as follows:

		Quarter Ended				Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Net sales:
North America Retail	$	2,676.1	$	2,677.1	$	5,052.2	$	5,064.9
Convenience Stores & Foodservice		513.5		514.4		958.5		977.6
Europe & Australia		432.9		453.8		887.0		954.5
Asia & Latin America		409.6		430.7		769.1		829.7
Pet		388.7		335.2		756.5		678.5
Total	$	4,420.8	$	4,411.2	$	8,423.3	$	8,505.2
Operating profit:
North America Retail	$	642.5	$	619.8	$	1,202.4	$	1,167.9
Convenience Stores & Foodservice		115.2		109.6		206.3		206.7
Europe & Australia		31.4		22.5		59.0		57.0
Asia & Latin America		24.4		17.9		34.5		30.1
Pet		80.8		70.8		161.7		85.3
Total segment operating profit	$	894.3	$	840.6	$	1,663.9	$	1,547.0
Unallocated corporate items		84.2		84.2		183.2		190.5
Restructuring, impairment, and other exit costs (recoveries)		(1.1)		209.4		7.1		208.0
Operating profit	$	811.2	$	547.0	$	1,473.6	$	1,148.5

Net sales for our North America Retail operating units were as follows:

		Quarter Ended				Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
U.S. Meals & Baking	$	1,164.3	$	1,174.6	$	1,994.9	$	2,012.1
U.S. Cereal		571.8		543.9		1,161.7		1,128.3
U.S. Snacks		493.8		504.3		1,022.0		1,037.8
U.S. Yogurt and Other		219.0		228.1		438.2		447.2
Canada		227.2		226.2		435.4		439.5
Total	$	2,676.1	$	2,677.1	$	5,052.2	$	5,064.9

Net sales by class of similar products were as follows:

	Quarter Ended					Six-Month Period Ended
In Millions		Nov. 24, 2019		Nov. 25, 2018		Nov. 24, 2019		Nov. 25, 2018
Snacks	$	837.9	$	857.5	$	1,707.3	$	1,745.4
Cereal		688.1		655.1		1,373.6		1,332.2
Convenient meals		686.0		675.9		1,255.2		1,257.8
Yogurt		515.1		537.7		1,010.3		1,052.5
Dough		538.4		525.3		869.0		853.7
Baking mixes and ingredients		461.3		501.6		817.0		881.9
Pet		388.7		335.2		756.5		678.5
Super-premium ice cream		192.6		202.4		419.8		450.1
Other		112.7		120.5		214.6		253.1
Total	$	4,420.8	$	4,411.2	$	8,423.3	$	8,505.2

During the first quarter of fiscal 2020, we made certain changes in the classification of products and updated fiscal 2019 net sales figures to match the current-year presentation.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

INTRODUCTION

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2019 for important background regarding, among other things, our key business drivers. Significant trademarks and service marks used in our business are set forth in italics herein. Certain terms used throughout this report are defined in the “Glossary” section below.

CONSOLIDATED RESULTS OF OPERATIONS

Second Quarter Results

In the second quarter of fiscal 2020, net sales essentially matched the same period last year. Organic net sales increased 1 percent in the second quarter of fiscal 2020 compared to the same period last year. Operating profit margin of 18.3 percent increased 590 basis points, primarily driven by impairment charges recorded for certain intangible and manufacturing assets in the second quarter of fiscal 2019, lower input costs, and a gain related to the mark-to-market valuation of certain commodity positions in the second quarter of fiscal 2020 compared to expense in the same period last year. Adjusted operating profit margin increased 110 basis points to 18.4 percent compared to the same period last year, primarily driven by lower input costs and lower consumer promotional expenses. Diluted earnings per share of $0.95 increased 67 percent compared to the second quarter of fiscal 2019. Adjusted diluted earnings per share of $0.95 increased 11 percent on a constant-currency basis compared to the second quarter of last year. See the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP.

A summary of our consolidated financial results for the second quarter of fiscal 2020 follows:

Quarter Ended Nov. 24, 2019	In millions, except per share		Quarter Ended Nov. 24, 2019 vs. Nov. 25, 2018		Percent of Net Sales		Constant-Currency Growth (a)
Net sales	$	4,420.8	Flat
Operating profit		811.2	48	%	18.3	%
Net earnings attributable to General Mills		580.8	69	%
Diluted earnings per share	$	0.95	67	%
Organic net sales growth rate (a)			1	%
Adjusted operating profit (a)		813.1	6	%	18.4	%	7	%
Adjusted diluted earnings per share (a)	$	0.95	12	%			11	%
(a) See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.

Consolidated net sales were as follows:

	Quarter Ended
	Nov. 24, 2019		Nov. 24, 2019 vs Nov. 25, 2018		Nov. 25, 2018
Net sales (in millions)	$	4,420.8	Flat		$	4,411.2
Contributions from volume growth (a)			Flat
Net price realization and mix			Flat
Foreign currency exchange			(1)	pt
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Net sales in the second quarter of fiscal 2020 essentially matched the same period in fiscal 2019.

Components of organic net sales growth are shown in the following table:

Quarter Ended Nov. 24, 2019 vs.
Quarter Ended Nov. 25, 2018
Contributions from organic volume growth (a)		1 pt
Organic net price realization and mix		Flat
Organic net sales growth		1 pt
Foreign currency exchange		(1)pt
Divestitures		Flat
Net sales growth		Flat
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Organic net sales increased 1 percent in the second quarter of fiscal 2020 driven by higher contributions from organic volume growth.

Cost of sales decreased $50 million from the second quarter of fiscal 2019 to $2,852 million. The decrease was primarily driven by a $40 million decrease attributable to product rate and mix, partially offset by a $12 million increase due to higher volume. We recorded a $23 million net decrease in cost of sales related to the mark-to-market valuation of certain commodity positions and grain inventories in the second quarter of fiscal 2020 compared to a net increase of $12 million in the second quarter of fiscal 2019. In addition, we recorded $12 million of restructuring charges and $1 million of restructuring initiative project-related costs in cost of sales in the second quarter of fiscal 2020 (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report).

Selling, general, and administrative (SG&A) expenses increased $6 million to $759 million in the second quarter of fiscal 2020 compared to the same period in fiscal 2019. The increase in SG&A expenses primarily reflects certain corporate investment valuation adjustments, the loss on sale of certain corporate investments, and increased media and advertising expenses, partially offset by lower consumer promotional expenses. SG&A expenses as a percent of net sales in the second quarter of fiscal 2020 increased 10 basis points compared with the second quarter of fiscal 2019.

Restructuring, impairment, and other exit costs totaled a $1 million net recovery in the second quarter of fiscal 2020 compared to $209 million of charges in the same period last year. We recorded impairment charges of $193 million in the second quarter of fiscal 2019 related to certain brand intangible assets. During the second quarter of fiscal 2019, we also recorded a $13 million charge related to the impairment of certain manufacturing assets within the North America Retail segment.

Benefit plan non-service income totaled $30 million in the second quarter of fiscal 2020 compared to $21 million in the same period last year.

Interest, net for the second quarter of fiscal 2020 totaled $119 million, down $13 million from the second quarter of fiscal 2019, primarily driven by lower average debt balances.

The effective tax rate for the second quarter of fiscal 2020 was 21.5 percent compared to 24.5 percent for the second quarter of fiscal 2019. The 3.0 percentage point decrease was primarily due to certain discrete tax benefits in fiscal 2020 and favorable changes in earnings mix by jurisdiction. Our adjusted effective tax rate was 21.9 percent in the second quarter of fiscal 2020 compared to 23.8 percent in the second quarter of fiscal 2019 (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP).

After-tax earnings from joint ventures for the second quarter of fiscal 2020 increased to $25 million compared to $22 million in the same period in fiscal 2019, primarily driven by favorable net price realization and mix at Cereal Partners Worldwide (CPW), partially offset by lower net sales for Häagen-Dazs Japan, Inc. (HDJ). On a constant-currency basis, after-tax earnings from joint ventures increased 11 percent (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP). The components of our joint ventures’ net sales growth are shown in the following table:

Quarter Ended Nov. 24, 2019 vs.
Quarter Ended Nov. 25, 2018	CPW		HDJ		Total
Contributions from volume growth (a)	(2)	pts	(11)	pts
Net price realization and mix	3	pts	5	pts
Net sales growth in constant currency	1	pt	(6)	pts	(1)	pt
Foreign currency exchange	(3)	pts	4	pts	(1)	pt
Net sales growth	(2)	pts	(2)	pts	(2)	pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Average diluted shares outstanding increased by 8 million in the second quarter of fiscal 2020 from the same period a year ago due to option exercises.

Six-Month Results

In the six-month period ended November 24, 2019, net sales decreased 1 percent compared to the same period last year. Organic net sales in the six-month period ended November 24, 2019, essentially matched the same period last year. Operating profit margin of 17.5 percent increased 400 basis points from year-ago levels, primarily driven by impairment charges recorded for certain intangible and manufacturing assets in the six-month period ended November 25, 2018, favorable net price realization and mix, and the purchase accounting inventory adjustment in the first quarter of fiscal 2019 related to our acquisition of Blue Buffalo Products, Inc. (Blue Buffalo). Adjusted operating profit margin increased 130 basis points to 17.8 percent, primarily driven by favorable net price realization and mix and the purchase accounting inventory adjustment in the first quarter of fiscal 2019 related to our acquisition of Blue Buffalo, partially offset by higher input costs. Diluted earnings per share of $1.80 increased 48 percent in the six-month period ended November 24, 2019, and adjusted diluted earnings per share of $1.74 increased 12 percent on a constant-currency basis compared to the same period last year (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP).

A summary of our consolidated financial results for the six-month period ended November 24, 2019, follows:

Six-Month Period Ended Nov. 24, 2019	In millions, except per share		Six-Month Period Ended Nov. 24, 2019 vs. Nov. 25, 2018		Percent of Net Sales		Constant-Currency Growth (a)
Net sales	$	8,423.3	(1)	%
Operating profit		1,473.6	28	%	17.5	%
Net earnings attributable to General Mills		1,101.4	50	%
Diluted earnings per share	$	1.80	48	%
Organic net sales growth rate (a)			Flat
Adjusted operating profit (a)		1,495.2	6	%	17.8	%	7	%
Adjusted diluted earnings per share (a)	$	1.74	12	%			12	%
Note: Table may not foot due to rounding
(a) See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.

Consolidated net sales were as follows:

	Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019 vs Nov. 25, 2018		Nov. 25, 2018
Net sales (in millions)	$	8,423.3	(1)	%	$	8,505.2
Contributions from volume growth (a)			(2)	pts
Net price realization and mix			2	pts
Foreign currency exchange			(1)	pt
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

The 1 percent decrease in net sales for the six-month period ended November 24, 2019 reflects lower contributions from volume growth and unfavorable foreign currency exchange, partially offset by favorable net price realization and mix.

Components of organic net sales growth are shown in the following table:

Six-Month Period Ended Nov. 24, 2019 vs.
Six-Month Period Ended Nov. 25, 2018
Contributions from organic volume growth (a)		(1)pt
Organic net price realization and mix		1 pt
Organic net sales growth		Flat
Foreign currency exchange		(1)pt
Divestitures		Flat
Net sales growth		(1)pt
Note: Table may not foot due to rounding

(a) Measured in tons based on the stated weight of our product shipments.

Organic net sales in the six-month period ended November 24, 2019 essentially matched the same period last year as favorable organic net price realization and mix was offset by lower contributions from organic volume growth.

Cost of sales decreased $188 million from the six-month period ended November 25, 2018, to $5,465 million. The decrease was driven by a $104 million decrease due to lower volume, partially offset by a $2 million increase attributable to product rate and mix. We recorded a $53 million charge in the six-month period ended November 25, 2018, related to the fair value adjustment of inventory acquired in the Blue Buffalo acquisition. We recorded an $8 million net decrease in cost of sales related to the mark-to-market valuation of certain commodity positions and grain inventories in the six-month period ended November 24, 2019, compared to a net increase of $43 million in the six-month period ended November 25, 2018. In addition, we recorded $18 million of restructuring charges in cost of sales in the six-month period ended November 24, 2019 (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report).

SG&A expenses decreased $18 million to $1,478 million in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019. The decrease in SG&A expenses primarily reflects lower consumer promotional expenses, partially offset by higher media and advertising expenses. SG&A expenses as a percent of net sales in the six-month period ended November 24, 2019, decreased 10 basis points compared with the same period of fiscal 2019.

Restructuring, impairment, and other exit costs totaled $7 million in the six-month period ended November 24, 2019, compared to $208 million in the same period last year. In the six-month period ended November 25, 2018, we recorded impairment charges of $193 million related to certain brand intangible assets. In addition, we recorded a $13 million charge related to the impairment of certain manufacturing assets within the North America Retail segment in the six-month period ended November 25, 2018.

Benefit plan non-service income totaled $60 million in the six-month period ended November 24, 2019, compared to $42 million in the same period last year.

Interest, net for the six-month period ended November 24, 2019, decreased $28 million to $238 million compared to the same period of fiscal 2019, primarily driven by lower average debt balances.

The effective tax rate for the six-month period ended November 24, 2019, was 17.2 percent compared to 23.5 percent for the same period last year. The 6.3 percentage point decrease was primarily due to the net benefit related to the reorganization of certain wholly owned subsidiaries, certain discrete tax benefits in fiscal 2020, and favorable changes in earnings mix by jurisdiction. Our adjusted effective tax rate was 21.5 percent in the six-month period ended November 24, 2019, compared to 23.3 percent in the same period of fiscal 2019 (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP).

After-tax earnings from joint ventures increased to $47 million for the six-month period ended November 24, 2019 compared to $40 million in the same period in fiscal 2019, primarily driven by our share of lower after-tax restructuring charges at CPW compared to the same period in fiscal 2019, partially offset by lower contributions from net sales growth for HDJ. On a constant-currency basis, after-tax earnings from joint ventures increased 16 percent (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP). The components of our joint ventures’ net sales growth are shown in the following table:

Six-Month Period Ended Nov. 24, 2019 vs.
Six-Month Period Ended Nov. 25, 2018	CPW		HDJ		Total
Contributions from volume growth (a)	(2)	pts	(6)	pts
Net price realization and mix	3	pts	5	pts
Net sales growth in constant currency	2	pts	Flat		1	pt
Foreign currency exchange	(3)	pts	4	pts	(2)	pts
Net sales growth	(1)	pt	3	pts	Flat
Note: Table may not foot due to rounding
(a) Measured in tons based on the stated weight of our product shipments.

Average diluted shares outstanding increased by 8 million in the six-month period ended November 24, 2019 from the same period a year ago due to option exercises.

SEGMENT OPERATING RESULTS

Our businesses are organized into five operating segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; Asia & Latin America; and Pet. We are reporting the Pet operating segment results on a one-month lag. Please refer to Note 16 of the Consolidated Financial Statements in Part I, Item 1 of this report for a description of our operating segments.

North America Retail Segment Results

North America Retail net sales were as follows:

Quarter Ended

Six-Month Period Ended

Nov. 24, 2019

Nov. 24, 2019 vs Nov. 25, 2018

Nov. 25, 2018

Nov. 24, 2019

Nov. 24, 2019 vs Nov. 25, 2018

Nov. 25, 2018

Net sales (in millions)

2,676.1

Flat

2,677.1

5,052.2

Flat

5,064.9

Contributions from volume growth (a)

Flat

(1)

Net price realization and mix

Flat

Foreign currency exchange

Flat

Note: Table may not foot due to rounding.

(a)Measured in tons based on the stated weight of our product shipments.

North America Retail net sales in the quarter and the six-month periods ended November 24, 2019, essentially matched the same periods in fiscal 2019.

The components of North America Retail organic net sales growth are shown in the following table:


	Quarter Ended	Six-Month Period Ended
	Nov. 24, 2019	Nov. 24, 2019
Contributions from organic volume growth (a)	Flat	(1)	pt
Organic net price realization and mix	Flat	Flat
Organic net sales growth	Flat	Flat
Foreign currency exchange	Flat	Flat
Net sales growth	Flat	Flat
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

North America Retail organic net sales in the quarter and the six-month periods ended November 24, 2019, essentially matched the same periods in fiscal 2019.

North America Retail net sales percentage change by operating unit are shown in the following table:

	Quarter Ended		Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019
U.S. Cereal	5	%	3	%
U.S. Meals & Baking	(1)		(1)
U.S. Snacks	(2)		(2)
U.S. Yogurt and Other	(4)		(2)
Canada (a)	Flat		(1)
Total	Flat		Flat

(a)On a constant-currency basis, Canada net sales increased 2 percent for the second quarter of fiscal 2020 and were flat for the six-month period ended November 24, 2019, compared to the same periods in fiscal 2019. See the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP.

Segment operating profit increased 4 percent to $642 million in the second quarter of fiscal 2020 compared to $620 million in the same period in fiscal 2019, primarily driven by lower input costs. Segment operating profit increased 4 percent on a constant-currency basis in the second quarter of fiscal 2020 compared to the same period in fiscal 2019 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

Segment operating profit increased 3 percent to $1,202 million in the six-month period ended November 24, 2019, compared to $1,168 million in the same period in fiscal 2019, primarily driven by lower input costs. Segment operating profit increased 3 percent on a constant-currency basis in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

Convenience Stores & Foodservice Segment Results

Convenience Stores & Foodservice net sales were as follows:

			Quarter Ended						Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019 vs Nov. 25, 2018		Nov. 25, 2018		Nov. 24, 2019		Nov. 24, 2019 vs Nov. 25, 2018		Nov. 25, 2018
Net sales (in millions)	$	513.5	Flat		$	514.4	$	958.5	(2)	%	$	977.6
Contributions from volume growth (a)			2	pts					(2)	pts
Net price realization and mix			(2)	pts					Flat
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Convenience Stores & Foodservice net sales in the second quarter of fiscal 2020 essentially matched the same period in fiscal 2019.

Convenience Stores & Foodservice net sales decreased 2 percent in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019, driven by a decrease in contributions from volume growth.

The components of Convenience Stores & Foodservice organic net sales growth are shown in the following table:


	Quarter Ended	Six-Month Period Ended
	Nov. 24, 2019	Nov. 24, 2019
Contributions from organic volume growth (a)	2 pts	(2)pts
Organic net price realization and mix	(2)pts	Flat
Organic net sales growth	Flat	(2)pts
Net sales growth	Flat	(2)pts

Note: Table may not foot due to rounding.

(a) Measured in tons based on the stated weight of our product shipments.

Segment operating profit increased 5 percent to $115 million in the second quarter of fiscal 2020 compared to $110 million in the same period in fiscal 2019, primarily driven by lower input costs, partially offset by unfavorable net price realization and mix.

Segment operating profit of $206 million in the six-month period ended November 24, 2019, essentially matched the same period of fiscal 2019.

Europe & Australia Segment Results

Europe & Australia net sales were as follows:

			Quarter Ended						Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019 vs. Nov. 25, 2018		Nov. 25, 2018		Nov. 24, 2019		Nov. 24, 2019 vs. Nov. 25, 2018		Nov. 25, 2018
Net sales (in millions)	$	432.9	(5)	%	$	453.8	$	887.0	(7)	%	$	954.5
Contributions from volume growth (a)			(1)	pt					(5)	pts
Net price realization and mix			Flat						1	pt
Foreign currency exchange			(4)	pts					(4)	pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Europe & Australia net sales decreased 5 percent in the second quarter of fiscal 2020 compared to the same period in fiscal 2019, driven by unfavorable foreign currency exchange and a decrease in contributions from volume growth.

Europe & Australia net sales decreased 7 percent in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019, driven by a decrease in contributions from volume growth and unfavorable foreign currency exchange, partially offset by favorable net price realization and mix.

The components of Europe & Australia organic net sales growth are shown in the following table:


	Quarter Ended		Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019
Contributions from organic volume growth (a)	(1)	pt	(5)	pts
Organic net price realization and mix	Flat		1	pt
Organic net sales growth	(1)	pt	(3)	pts
Foreign currency exchange	(4)	pts	(4)	pts
Net sales growth	(5)	pts	(7)	pts

Note: Table may not foot due to rounding.

(a) Measured in tons based on the stated weight of our product shipments.

Europe & Australia organic net sales decreased 1 percent in the second quarter of fiscal 2020 compared to the same period in fiscal 2019, driven by a decrease in contributions from organic volume growth.

Europe & Australia organic net sales decreased 3 percent in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019, driven by a decrease in contributions from organic volume growth partially offset by favorable organic net price realization and mix.

Segment operating profit increased to $31 million in the second quarter of fiscal 2020 from $22 million in the same period in fiscal 2019, primarily driven by lower SG&A expenses. Segment operating profit increased 45 percent on a constant-currency basis in the second quarter of fiscal 2020 compared to the same period in fiscal 2019 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

Segment operating profit increased to $59 million in the six-month period ended November 24, 2019, from $57 million in the same period in fiscal 2019, primarily driven by lower SG&A expenses, partially offset by a decrease in contributions from volume growth. Segment operating profit increased 8 percent on a constant-currency basis in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

Asia & Latin America Segment Results

Asia & Latin America net sales were as follows:

			Quarter Ended					Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019 vs. Nov. 25, 2018			Nov. 25, 2018		Nov. 24, 2019	Nov. 24, 2019 vs. Nov. 25, 2018		Nov. 25, 2018
Net sales (in millions)	$	409.6	(5)	%	$	430.7	$	769.1	(7)	%	$	829.7
Contributions from volume growth (a)			(6)	pts					(8)	pts
Net price realization and mix			3	pts					3	pts
Foreign currency exchange			(2)	pts					(2)	pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Asia & Latin America net sales decreased 5 percent in the second quarter of fiscal 2020 compared to the same period in fiscal 2019, driven primarily by lower contributions from volume growth and unfavorable foreign currency exchange, partially offset by favorable net price realization and mix.

Asia & Latin America net sales decreased 7 percent in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019, driven primarily by lower contributions from volume growth and unfavorable foreign currency exchange, partially offset by favorable net price realization and mix.

The components of Asia & Latin America organic net sales growth are shown in the following table:


	Quarter Ended		Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019
Contributions from organic volume growth (a)	(1)	pt	(3)	pts
Organic net price realization and mix	2	pts	2	pts
Organic net sales growth	1	pt	(1)	pt
Foreign currency exchange	(2)	pts	(2)	pts
Divestitures (b)	(4)	pts	(4)	pts
Net sales growth	(5)	pts	(7)	pts

Note: Table may not foot due to rounding.

(a)Measured in tons based on the stated weight of our product shipments.

(b)Impact of the divestiture of our La Salteña business in Argentina and our Yoplait business in China.

Asia & Latin America organic net sales increased 1 percent in the second quarter of fiscal 2020 compared to the same period in fiscal 2019, driven by favorable organic net price realization and mix, partially offset by lower contributions from organic volume growth.

Asia & Latin America organic net sales decreased 1 percent in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019, driven by lower contributions from organic volume growth, partially offset by favorable organic net price realization and mix.

Segment operating profit increased to $24 million in the second quarter of fiscal 2020 from $18 million in the same period in fiscal 2019, primarily driven by lower SG&A expenses, partially offset by a decrease in contributions from volume growth. Segment operating profit increased 42 percent on a constant-currency basis in the second quarter of fiscal 2020 compared to the same period in fiscal 2019 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

Segment operating profit increased to $34 million in the six-month period ended November 24, 2019, from $30 million in the same period in fiscal 2019, primarily driven by lower SG&A expenses, partially offset by a decrease in contributions from volume growth and higher input costs. Segment operating profit increased 20 percent on a constant-currency basis in the six-month period ended November 24, 2019, compared to the same period in fiscal 2019 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

Pet Segment Results

Pet net sales were as follows:

			Quarter Ended						Six-Month Period Ended
	Nov. 24, 2019		Nov. 24, 2019 vs Nov. 25, 2018		Nov. 25, 2018		Nov. 24, 2019		Nov. 24, 2019 vs Nov. 25, 2018		Nov. 25, 2018
Net sales (in millions)	$	388.7	16	%	$	335.2	$	756.5	11	%	$	678.5
Contributions from volume growth (a)			13	pts					7	pts
Net price realization and mix			3	pts					5	pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Pet net sales increased 16 percent in the second quarter of fiscal 2020 and 11 percent in the six-month period ended November 24, 2019, compared to the same periods in fiscal 2019, primarily driven by increased contributions from volume growth and favorable net price realization and mix.

The components of Pet organic net sales growth are shown in the following table:


	Quarter Ended	Six-Month Period Ended
	Nov. 24, 2019	Nov. 24, 2019
Contributions from organic volume growth (a)	13 pts	7 pts
Organic net price realization and mix	3 pts	5 pts
Organic net sales growth	16 pts	11 pts
Net sales growth	16 pts	11 pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.

Segment operating profit increased 14 percent to $81 million in the second quarter of fiscal 2020 compared to $71 million in the same period in fiscal 2019, primarily driven by an increase in contributions from volume growth and favorable net price realization and mix, partially offset by higher media and advertising expenses.

Segment operating profit increased 90 percent to $162 million in the six-month period ended November 24, 2019, compared to $85 million in the same period of fiscal 2019, primarily driven by a $53 million purchase accounting adjustment related to inventory acquired in the first quarter of fiscal 2019 and favorable net price realization and mix.

UNALLOCATED CORPORATE ITEMS

Unallocated corporate expense of $84 million in the second quarter of fiscal 2020 essentially matched the same period in fiscal 2019. We recorded $12 million of restructuring charges and $1 million of restructuring initiative project-related costs in cost of sales in the

second quarter of fiscal 2020. We recorded a $23 million gain related to the mark-to-market valuation of certain commodity positions and grain inventories in the second quarter of fiscal 2020 compared to a $12 million net increase in expense in the same period last year. We recorded $13 million of losses related to certain investment valuation adjustments and the loss on sale of certain corporate investments in the second quarter of fiscal 2020 compared to $13 million of gains in the second quarter of fiscal 2019. We recorded $7 million of integration costs related to the acquisition of Blue Buffalo in the second quarter of fiscal 2019. In addition, we recorded a $3 million loss related to the impact of hyperinflationary accounting for our Argentina subsidiary in the second quarter of fiscal 2019.

Unallocated corporate expense totaled $183 million in the six-month period ended November 24, 2019, compared to $190 million in the same period last year. In the six-month period ended November 24, 2019, we recorded $18 million of restructuring charges and $1 million of restructuring initiative project-related costs in cost of sales compared to $1 million of restructuring initiative project-related costs in cost of sales in the same period last year. We recorded an $8 million net gain related to the mark-to-market valuation of certain commodity positions and grain inventories in the six-month period ended November 24, 2019, compared to a $43 million net increase in expense in the same period last year. We recorded $4 million of net losses related to certain investment valuation adjustments and the loss on sale of certain corporate investments in the six-month period ended November 24, 2019, compared to $13 million of gains in the same period last year. In addition, we recorded $16 million of integration costs related to the acquisition of Blue Buffalo and a $3 million loss related to the impact of hyperinflationary accounting for our Argentina subsidiary in the six-month period ended November 25, 2018.

LIQUIDITY

During the six-month period ended November 24, 2019, cash provided by operations was $1,457 million compared to $1,396 million in the same period last year. The $61 million increase was primarily driven by a $373 million increase in net earnings, partially offset by a $168 million change in non-cash restructuring, impairment, and other exit costs driven by impairment charges recorded from certain intangible and manufacturing assets in the six-month period ended November 25, 2018, and a $92 million change in current assets and liabilities. The $92 million change in current assets and liabilities included a $152 million change in inventories driven by higher inventory build and a $31 million change in other current liabilities primarily driven by derivative activity and incentive accruals, partially offset by a $102 million change related to the timing of accounts payable including the impact of terms extensions.

Cash used by investing activities during the six-month period ended November 24, 2019, was $163 million compared to $295 million for the same period in fiscal 2019. Investments of $158 million in land, buildings, and equipment in the six-month period ended November 24, 2019, decreased by $95 million compared to the same period a year ago. In addition, other investment activity decreased by $61 million compared to the same period in fiscal 2019.

Cash used by financing activities during the six-month period ended November 24, 2019, was $1,180 million compared to $947 million in the same period in fiscal 2019. We had $629 million of net debt repayments in the six-month period ended November 24, 2019, compared to $482 million of net debt repayments in the same period a year ago. Sodiaal International (Sodiaal) made an additional investment of $56 million in our Yoplait SAS subsidiary during the six-month period ended November 25, 2018. We paid $596 million of dividends in the six-month period ended November 24, 2019, compared to $589 million in the same period last year.

As of November 24, 2019, we had $514 million of cash and cash equivalents held in foreign jurisdictions. As a result of the Tax Cuts and Jobs Act (TCJA), the historic undistributed earnings of our foreign subsidiaries were taxed in the U.S. via the one-time repatriation tax in fiscal 2018. We have re-evaluated our permanent reinvestment assertion and have concluded that although earnings prior to fiscal 2018 will remain permanently reinvested, we will no longer make a permanent reinvestment assertion beginning with our fiscal 2018 earnings. We record local country withholding taxes on our international earnings, as applicable. As a result of the transition tax, we may repatriate our cash and cash equivalents held by our foreign subsidiaries without such funds being subject to further U.S. income tax liability.

CAPITAL RESOURCES

Our capital structure was as follows:

In Millions		Nov. 24, 2019		May 26, 2019
Notes payable	$	1,345.1	$	1,468.7
Current portion of long-term debt		1,537.2		1,396.5
Long-term debt		10,953.1		11,624.8
Total debt		13,835.4		14,490.0
Redeemable interest		545.1		551.7
Noncontrolling interests		308.3		313.2
Stockholders' equity		7,712.3		7,054.5
Total capital	$	22,401.1	$	22,409.4

The following table details the fee-paid committed and uncommitted credit lines we had available as of November 24, 2019:

In Billions		Facility Amount		Borrowed Amount
Credit facility expiring:
May 2022	$	2.7	$	-
September 2022		0.2		-
Total committed credit facilities		2.9		-
Uncommitted credit facilities		0.7		0.2
Total committed and uncommitted credit facilities	$	3.6	$	0.2

We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal holds the remaining interests in each of these entities. We consolidate these entities into our consolidated financial statements. We record Sodiaal’s 50 percent interests in Yoplait Marques SNC and Liberté Marques Sàrl as noncontrolling interests, and its 49 percent 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. As of November 24, 2019, the redemption value of the redeemable interest was $545 million, which approximates its fair value.

During the second quarter of fiscal 2019, Sodiaal made an additional investment of $56 million in Yoplait SAS.

The third-party holder of the General Mills Cereals, LLC (GMC) Class A Interests receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $252 million). On June 1, 2018, the floating preferred return rate on GMC’s Class A Interests was reset to the sum of three-month LIBOR plus 142.5 basis points. The preferred return rate is adjusted every three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction.

We have an option to purchase the Class A Interests for consideration equal to the then current capital account value, plus any unpaid preferred return and the prescribed make-whole amount. If we purchase these interests, any change in the third-party holder’s capital account from its original value will be charged directly to retained earnings and will increase or decrease the net earnings used to calculate EPS in that period.

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 uncommitted and asset-backed credit lines that support our foreign operations.

Certain of our long-term debt agreements, our credit facilities, and our noncontrolling interests contain restrictive covenants. As of November 24, 2019, we were in compliance with all of these covenants.

We have $1,537 million of long-term debt maturing in the next 12 months that is classified as current, including €500 million of floating-rate notes due January 2020, €300 million of 0.0 percent notes due January 2020, $100 million of 6.61 percent fixed-rate medium-term notes due for remarketing in October 2020, €500 million of 2.1 percent notes due November 2020, and $4 million of floating-rate medium term notes due for remarketing in November 2020. We believe that cash flows from operations, together with available short- and long-term debt financing, will be adequate to meet our liquidity and capital needs for at least the next 12 months.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

There were no material changes outside the ordinary course of our business in our contractual obligations or off-balance sheet arrangements during the second quarter of fiscal 2020.

SIGNIFICANT ACCOUNTING ESTIMATES

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2019. The accounting policies used in preparing our interim fiscal 2020 Consolidated Financial Statements are the same as those described in our Form 10-K with the exception of new accounting requirements adopted in the first quarter of fiscal 2020 related to hedge accounting and the accounting, presentation, and classification of leases. Please see Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report for additional information.

Our significant accounting estimates are those that have meaningful impact on the reporting of our financial condition and results of operations. These estimates include our accounting for promotional expenditures, valuation of long-lived assets, intangible assets, redeemable interest, stock-based compensation, income taxes, and defined benefit pension, other postretirement benefit, and postemployment benefit plans. The assumptions and methodologies used in the determination of those estimates as of November 24, 2019, are the same as those described in our Annual Report on Form 10-K for the fiscal year ended May 26, 2019.

The excess fair value as of the fiscal 2020 test date of the Europe & Australia reporting unit and the Progresso brand intangible asset is as follows:

In Millions		Carrying Value of Intangible Asset	Excess Fair Value as of Fiscal 2020 Test Date
Europe & Australia	$	672.6	14%
Progresso	$	330.0	5%

NON-GAAP MEASURES

We have included in this report measures of financial performance that are not defined by GAAP. We believe that these measures provide useful information to investors, and include these measures in other communications to investors.

For each of these non-GAAP financial measures, we are providing below a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure, an explanation of why we believe the non-GAAP measure provides useful information to investors, and any additional material purposes for which our management or Board of Directors uses the non-GAAP measure. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.

Several measures below are presented on an adjusted basis. The adjustments are either items resulting from infrequently occurring events or items that, in management’s judgment, significantly affect the year-to-year assessment of operating results.

Organic Net Sales Growth Rates

We provide organic net sales growth rates for our consolidated net sales and segment net sales. This measure is used in reporting to our Board of Directors and executive management and as a component of the measurement of our performance for incentive compensation purposes. We believe that organic net sales growth rates provide useful information to investors because they provide transparency to underlying performance in our net sales by excluding the effect that foreign currency exchange rate fluctuations, as well as acquisitions, divestitures, and a 53^rd week, when applicable, have on year-to-year comparability. A reconciliation of these

measures to reported net sales growth rates, the relevant GAAP measures, are included in our Consolidated Results of Operations and Results of Segment Operations discussions in the MD&A above.

Adjusted Operating Profit as a Percent of Net Sales (Adjusted Operating Profit Margin)

We believe this measure provides useful information to investors because it is important for assessing our operating profit margin on a comparable basis.

Our adjusted operating profit margins are calculated as follows:

	Quarter Ended
		Nov. 24, 2019			Nov. 25, 2018
In Millions		Value	Percent of Net Sales			Value	Percent of Net Sales
Operating profit as reported	$	811.2	18.3	%	$	547.0	12.4	%
Mark-to-market effects (a)		(22.6)	(0.5)	%		11.8	0.3	%
Restructuring charges (b)		10.5	0.2	%		3.6	-	%
Project-related costs (b)		0.7	-	%		-	-	%
Asset impairments (b)		-	-	%		205.8	4.7	%
Investment activity, net (c)		13.2	0.3	%		(13.0)	(0.3)	%
Acquisition integration costs (d)		-	-	%		6.8	0.2	%
Hyperinflationary accounting (e)		-	-	%		3.2	-	%
Adjusted operating profit	$	813.1	18.4	%	$	765.2	17.3	%

	Six-Month Period Ended
		Nov. 24, 2019			Nov. 25, 2018
In Millions		Value	Percent of Net Sales			Value	Percent of Net Sales
Operating profit as reported	$	1,473.6	17.5	%	$	1,148.5	13.5	%
Mark-to-market effects (a)		(7.6)	(0.1)	%		42.9	0.5	%
Restructuring charges (b)		24.8	0.3	%		2.4	-	%
Project-related costs (b)		0.7	-	%		1.2	-	%
Asset impairments (b)		-	-	%		205.8	2.4	%
Investment activity, net (c)		3.7	-	%		(13.0)	(0.1)	%
Acquisition integration costs (d)		-	-	%		15.5	0.2	%
Hyperinflationary accounting (e)		-	-	%		3.2	-	%
Adjusted operating profit	$	1,495.2	17.8	%	$	1,406.5	16.5	%

Note: Tables may not foot due to rounding.

(a)See Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(b)See Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(c)Valuation adjustments and the loss on sale of certain corporate investments.

(d)Integration costs resulting from the acquisition of Blue Buffalo in fiscal 2018.

(e)Represents the impact of hyperinflationary accounting for our Argentina subsidiary, which was sold in the third quarter of fiscal 2019.

Adjusted Operating Profit Growth on a Constant-currency Basis

We believe that this measure provides useful information to investors because it is the operating profit measure we use to evaluate operating profit performance on a comparable year-to-year basis. Additionally, the measure is evaluated on a constant-currency basis by excluding the effect that foreign currency exchange rate fluctuations have on year-to year comparability given the volatility in foreign currency exchange rates.

Our adjusted operating profit growth on a constant-currency basis is calculated as follows:

		Quarter Ended						Six-Month Period Ended
		Nov. 24, 2019		Nov. 25, 2018	Change			Nov. 24, 2019		Nov. 25, 2018	Change
Operating profit as reported	$	811.2	$	547.0	48	%	$	1,473.6	$	1,148.5	28	%
Mark-to-market effects (a)		(22.6)		11.8				(7.6)		42.9
Restructuring charges (b)		10.5		3.6				24.8		2.4
Project-related costs (b)		0.7		-				0.7		1.2
Asset impairments (b)		-		205.8				-		205.8
Investment activity, net (c)		13.2		(13.0)				3.7		(13.0)
Acquisition integration costs (d)		-		6.8				-		15.5
Hyperinflationary accounting (e)		-		3.2				-		3.2
Adjusted operating profit	$	813.1	$	765.2	6	%	$	1,495.2	$	1,406.5	6	%
Foreign currency exchange impact					Flat						Flat
Adjusted operating profit growth, on a constant-currency basis					7	%					7	%

Note: Table may not foot due to rounding.

(a)See Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(b)See Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(c)Valuation adjustments and the loss on sale of certain corporate investments.

(d)Integration costs resulting from the acquisition of Blue Buffalo in fiscal 2018.

(e)Represents the impact of hyperinflationary accounting for our Argentina subsidiary, which was sold in the third quarter of fiscal 2019.

Adjusted Diluted EPS and Related Constant-currency Growth Rate

This measure is used in reporting to our Board of Directors and executive management and as a component of the 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-to-year basis.

The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted EPS and the related constant-currency growth rate follows:

	Quarter Ended						Six-Month Period Ended
Per Share Data		Nov. 24, 2019		Nov. 25, 2018	Change			Nov. 24, 2019		Nov. 25, 2018	Change
Diluted earnings per share, as reported	$	0.95	$	0.57	67	%	$	1.80	$	1.22	48	%
Tax item (a)		-		-				(0.09)		-
Mark-to-market effects (b)		(0.03)		0.02				(0.01)		0.06
Restructuring charges (c)		0.01		-				0.03		-
Asset impairments (c)		-		0.26				-		0.26
Investment activity, net (d)		0.01		(0.01)				-		(0.01)
CPW restructuring charges (e)		-		-				-		0.01
Acquisition integration costs (f)		-		0.01				-		0.02
Adjusted diluted earnings per share	$	0.95	$	0.85	12	%	$	1.74	$	1.56	12	%
Foreign currency exchange impact					1	pt					Flat
Adjusted diluted earnings per share growth, on a constant-currency basis					11	%					12	%

Note: Table may not foot due to rounding.

(a)See Note 14 to the Consolidated Financial Statement in Part I, Item 1 of this report.

(b)See Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(c)See Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(d)Valuation adjustments and the loss on sale of certain corporate investments.

(e)The CPW restructuring charges are related to initiatives designed to improve profitability and growth that were approved in fiscal 2018 and 2019.

(f)Integration costs resulting from the acquisition of Blue Buffalo in fiscal 2018.

See our reconciliation below of the effective income tax rate as reported to the adjusted effective income tax rate for the tax impact of each item affecting comparability.

Constant-currency After-tax Earnings from Joint Ventures Growth Rates

We believe that this measure provides useful information to investors because it provides transparency to underlying performance of our joint ventures by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given volatility in foreign currency exchange markets.

After-tax earnings from joint ventures growth rate on a constant-currency basis is calculated as follows:

	Percentage Change in After-Tax Earnings from Joint Ventures as Reported		Impact of Foreign Currency Exchange		Percentage Change in After-Tax Earnings from Joint Ventures on Constant-Currency Basis
Quarter Ended Nov. 24, 2019	11	%	(1)	pt	11	%
Six-Month Period Ended Nov. 24, 2019	16	%	Flat		16	%
Note: Table may not foot due to rounding.

Net Sales Growth Rates for Our Canada Operating Unit on Constant-currency Basis

We believe that this measure of our Canada operating unit net sales provides useful information to investors because it provides transparency to the underlying performance for the Canada operating unit within our North America Retail segment by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given volatility in foreign currency exchange markets.

Net sales growth rates for our Canada operating unit on a constant-currency basis are calculated as follows:


	Percentage Change in Net Sales as Reported		Impact of Foreign Currency Exchange		Percentage Change in Net Sales on Constant- Currency Basis
Quarter Ended Nov. 24, 2019	Flat		(1)	pt	2	%
Six-Month Period Ended Nov. 24, 2019	(1)	%	(1)	pt	Flat
Note: Table may not foot due to rounding.

Constant-currency Segment Operating Profit Growth Rates

We believe that this measure provides useful information 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:

	Quarter Ended Nov. 24, 2019
	Percentage Change in Operating Profit as Reported		Impact of Foreign Currency Exchange		Percentage Change in Operating Profit on Constant-Currency Basis
North America Retail	4	%	Flat		4	%
Europe & Australia	40	%	(5)	pts	45	%
Asia & Latin America	36	%	(5)	pts	42	%

	Six-Month Period Ended Nov. 24, 2019
	Percentage Change in Operating Profit as Reported		Impact of Foreign Currency Exchange		Percentage Change in Operating Profit on Constant-Currency Basis
North America Retail	3	%	Flat		3	%
Europe & Australia	4	%	(5)	pts	8	%
Asia & Latin America	15	%	(6)	pts	20	%
Note: Tables may not foot due to rounding.

Adjusted Effective Income Tax Rate

We believe this measure provides useful information to investors because it presents the adjusted effective income tax rate on a comparable year-to-year basis.

Adjusted effective income tax rates are calculated as follows:

		Quarter Ended							Six-Month Period Ended
		Nov. 24, 2019				Nov. 25, 2018			Nov. 24, 2019		Nov. 25, 2018
In Millions (Except Per Share Data)		Pretax Earnings (a)		Income Taxes		Pretax Earnings (a)		Income Taxes	Pretax Earnings (a)	Income Taxes	Pretax Earnings (a)	Income Taxes
As reported	$	722.0	$	155.5	$	435.3	$	106.6	$1,295.9	$222.7	$924.2	$217.3
Tax item (b)		-		-		-		-	-	53.1	-	-
Mark-to-market effects (c)		(22.6)		(5.2)		11.8		2.7	(7.6)	(1.7)	42.9	9.9
Restructuring charges (d)		10.5		1.7		3.6		0.5	24.8	4.3	2.4	0.2
Project-related costs (d)		0.7		0.1		-		-	0.7	0.1	1.2	0.3
Asset impairments (d)		-		-		205.8		47.4	-	-	205.8	47.4
Investment activity, net (e)		13.2		6.6		(13.0)		(3.0)	3.7	4.4	(13.0)	(3.0)
Acquisition integration costs (f)		-		-		6.8		1.6	-	-	15.5	3.6
Hyperinflationary accounting (g)		-		-		3.2		-	-	-	3.2	-
As adjusted	$	723.8	$	158.6	$	653.5	$	155.8	$1,317.5	$282.8	$1,182.2	$275.7
Effective tax rate:
As reported				21.5%				24.5%		17.2%		23.5%
As adjusted				21.9%				23.8%		21.5%		23.3%
Sum of adjustment to income taxes			$	3.2			$	49.2	$	60.2	$	58.4
Average number of common shares - diluted EPS				612.3				604.5		611.8		603.8
Impact of income tax adjustments on adjusted diluted EPS			$	0.01			$	0.08		$0.10		$0.10

Note: Table may not foot due to rounding.

(a)Earnings before income taxes and after-tax earnings from joint ventures.

(b)See Note 14 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(c)See Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(d)See Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.

(e)Valuation adjustments and the loss on sale of certain corporate investments.

(f)Integration costs resulting from the acquisition of Blue Buffalo in fiscal 2018.

(g)Represents the impact of hyperinflationary accounting for our Argentina subsidiary, which was sold in the third quarter of fiscal 2019.

Glossary

Accelerated depreciation associated with restructured assets. The increase in depreciation expense caused by updating the salvage value and shortening the useful life of depreciable fixed assets to coincide with the end of production under an approved restructuring plan, but only if impairment is not present.

AOCI. Accumulated other comprehensive income (loss).

Adjusted diluted EPS. Diluted EPS adjusted for certain items affecting year-to-year comparability.

Adjusted operating profit. Operating profit adjusted for certain items affecting year-to-year comparability.

Adjusted operating profit margin. Operating profit adjusted for certain items affecting year-over-year comparability, divided by net sales.

Constant currency. Financial results translated to United States dollars using constant foreign currency exchange rates based on the rates in effect for the comparable prior-year period. To present this information, current period results for entities reporting in currencies other than United States dollars are translated into United States dollars at the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

Core working capital. Accounts receivable plus inventories less accounts payable.

Derivatives. Financial instruments such as futures, swaps, options, and forward contracts that we use to manage our risk arising from changes in commodity prices, interest rates, foreign exchange rates, and stock prices.

Euribor. Euro Interbank Offered Rate.

Fair value hierarchy. For purposes of fair value measurement, we categorize assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1:Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3:Unobservable inputs reflecting management’s assumptions about the inputs used in pricing the asset or liability.

Focus 6 platforms. The Focus 6 platforms for the Convenience Stores & Foodservice segment consist of cereal, yogurt, snacks, frozen meals, frozen biscuits, and frozen baked goods.

Free cash flow. Net cash provided by operating activities less purchases of land, buildings, and equipment.

Free cash flow conversion rate. Free cash flow divided by our net earnings, including earnings attributable to redeemable and noncontrolling interests adjusted for certain items affecting year-to-year comparability.

Generally Accepted Accounting Principles (GAAP). Guidelines, procedures, and practices that we are required to use in recording and reporting accounting information in our financial statements.

Goodwill. The difference between the purchase price of acquired companies plus the fair value of any noncontrolling and redeemable interests and the related fair values of net assets acquired.

Gross margin. Net sales less cost of sales.

Hedge accounting. Accounting for qualifying hedges that allows changes in a hedging instrument’s fair value to offset corresponding changes in the hedged item in the same reporting period. Hedge accounting is permitted for certain hedging instruments and hedged

items only if the hedging relationship is highly effective, and only prospectively from the date a hedging relationship is formally documented.

Holistic Margin Management (HMM). Company-wide initiative to use productivity savings, mix management, and price realization to offset input cost inflation, protect margins, and generate funds to reinvest in sales-generating activities.

Interest bearing instruments. Notes payable, long-term debt, including current portion, cash and cash equivalents, and certain interest bearing investments classified within prepaid expenses and other current assets and other assets.

LIBOR. London Interbank Offered Rate.

Mark-to-market. The act of determining a value for financial instruments, commodity contracts, and related assets or liabilities based on the current market price for that item.

Net mark-to-market valuation of certain commodity positions. Realized and unrealized gains and losses on derivative contracts that will be allocated to segment operating profit when the exposure we are hedging affects earnings.

Net price realization. The impact of list and promoted price changes, net of trade and other price promotion costs.

Net realizable value. The estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Noncontrolling interests. Interests of subsidiaries held by third parties.

Notional amount. The amount of a position or an agreed upon amount in a derivative contract on which the value of financial instruments are calculated.

OCI. Other Comprehensive Income.

Organic net sales growth. Net sales growth adjusted for foreign currency translation, as well as acquisitions, divestitures and a 53^rd week impact, when applicable.

Project-related costs. Costs incurred related to our restructuring initiatives not included in restructuring charges.

Redeemable interest. Interest of subsidiaries held by a third party that can be redeemed outside of our control and therefore cannot be classified as a noncontrolling interest in equity.

Reporting unit. An operating segment or a business one level below an operating segment.

Strategic Revenue Management (SRM). A company-wide capability focused on generating sustainable benefits from net price realization and mix by identifying and executing against specific opportunities to apply tools including pricing, sizing, mix management, and promotion optimization across each of our businesses.

Supply chain input costs. Costs incurred to produce and deliver product, including costs for ingredients and conversion, inventory management, logistics, and warehousing.

TCJA. U.S. Tax Cuts and Jobs Act which was signed into law on December 22, 2017.

Translation adjustments. The impact of the conversion of our foreign affiliates’ financial statements to United States dollars for the purpose of consolidating our financial statements.

Variable interest entities (VIEs). A legal structure that is used for business purposes that either (1) does not have equity investors that have voting rights and share in all the entity’s profits and losses or (2) has equity investors that do not provide sufficient financial resources to support the entity’s activities.

Working capital. Current assets and current liabilities, all as of the last day of our fiscal year.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. We also may make written or oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and in our reports to stockholders.

The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “plan,” “project,” or similar expressions identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those currently anticipated or projected. We wish to caution you not to place undue reliance on any such forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that could affect our financial performance and could cause our actual results in future periods to differ materially from any current opinions or statements.

Our future results could be affected by a variety of factors, such as: competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, tax rates, or the availability 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 dispositions of businesses or assets, including our acquisition of Blue Buffalo and issues in the integration of Blue Buffalo and retention of key management and employees; unfavorable reaction to our acquisition of Blue Buffalo by customers, competitors, suppliers, and employees; changes in capital structure; changes in the legal and regulatory environment, including tax legislation, labeling and advertising regulations, and litigation; 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 significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging, and energy; disruptions or inefficiencies in the supply chain; effectiveness of restructuring and cost saving initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war.

You should also consider the risk factors that we identify in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended May 26, 2019, which could also affect our future results.

We undertake no obligation to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The estimated maximum potential value-at-risk arising from a one-day loss in fair value for our interest rate, foreign exchange, commodity, and equity market-risk-sensitive instruments outstanding as of November 24, 2019 was $92 million, $13 million, $3 million, and $2 million, respectively. During the quarter ended November 24, 2019, the interest rate value-at-risk increased by $17 million, the foreign exchange value-at-risk decreased by $4 million, and commodity value-at-risk decreased by $1 million, while equity value-at-risk was flat compared to these measures as of May 26, 2019. The value-at-risk for interest rate positions increased due to higher market volatility. The value-at-risk for foreign exchange positions decreased due to a smaller portfolio and decreased market volatility. The value-at-risk for commodity positions decreased due to a smaller portfolio. For additional information, see Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended May 26, 2019.

Item 4. Controls and Procedures.

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of November 24, 2019, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the quarter ended November 24, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6.	Exhibits.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended November 24, 2019, formatted in Inline Extensible Business Reporting Language: (i) Consolidated Statements of Earnings; (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets; (iv) Consolidated Statements of Total Equity and Redeemable Interest; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.
104	Cover Page, formatted in Inline Extensible Business Reporting Language and contained in Exhibit 101.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	GENERAL MILLS, INC.
	(Registrant)

Date: December 18, 2019	/s/ Kofi A. Bruce
	Kofi A. Bruce
	Vice President, Financial Operations
	(Principal Accounting Officer and Duly Authorized Officer)