UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

FOR THE QUARTERLY PERIOD ENDED November 25, 2018

FOR THE TRANSITION PERIOD FROMTO  

Commission file number:001-01185

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

(763)764-7600

(Registrant’s telephone number, including area code)

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

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act.

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 Rule12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares of Common Stock outstanding as of March 12,December 7, 2018: 570,162,724596,748,917 (excluding 184,450,604157,864,411 shares held in the treasury).

General Mills, Inc.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.         Financial Statements

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

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

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except Par Value)

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)

See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

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 (U.S. GAAP) for interim financial information and with the rules and regulations for reporting on Form10-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 FebruaryNovember 25, 2018, are not necessarily indicative of the results that may be expected for the fiscal year ending May 27, 2018.26, 2019.

These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in our Annual Report on Form10-K for the fiscal year ended May 28, 2017.27, 2018. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 2 to the Consolidated Financial Statements in that Form10-K with the exception of the new accounting requirements adopted in the first quarter of fiscal 2018 for stock-based payments and goodwill impairment testing and new accounting requirements adopted in the third quarter of fiscal 2018 for the reclassification of certain income tax effects from accumulated other comprehensive income to retained earnings. See Note 15 and Note 172019 related to the Consolidated Financial Statements in Part I, Item 1presentation of this reportnet periodic defined benefit pension expense, net periodic postretirement benefit expense, and net periodic postemployment benefit expense and to revenue recognition. Please see Note 17 for additional information. Certain terms used throughout this report are defined in the “Glossary” section below.

In the nine-month period ended February 25, 2018, we recorded an adjustment related to a prior year which increased income tax expense and total liabilities by $40.5 million in our Consolidated Financial Statements. We determined the adjustment to be immaterial to our estimated Consolidated Statements of Earnings for the fiscal year ended May 27, 2018.

(2) Acquisition and Divestiture

During the thirdfourth quarter of fiscal 2018, we entered into a definitive agreement and plan of merger withacquired Blue Buffalo Pet Products, Inc. (“Blue Buffalo”), a publicly held pet food company, pursuant to which for an aggregate purchase price of $8.0 billion, including $103.0 million of consideration for net debt repaid at the time of the acquisition. In accordance with the definitive agreement and plan of merger, a subsidiary of General Mills will mergemerged into Blue Buffalo, with Blue Buffalo surviving the merger as a wholly owned subsidiary of General Mills. EquityIn accordance with the merger agreement, equity holders of Blue Buffalo will receivereceived $40.00 per share in cash, representing an enterprise value of approximately $8.0 billion in addition to the assumption of approximately $394 million of outstanding debt which will be repaid upon transaction close.cash. We expect to financefinanced the transaction with a combination of $6.0 billion in debt, cash on hand and approximately $1.0 billion in equity. The transaction, which has been approved byequity, and cash on hand. In the Boardsquarter andsix-month periods ended November 25, 2018, we recorded acquisition integration costs of Directors of General Mills$6.8 million and $15.5 million respectively, in selling, general, and administrative (SG&A) expenses.

We consolidated Blue Buffalo into our Consolidated Balance Sheets and recorded goodwill of $5.3 billion, an indefinite-lived intangible asset for the Blue Buffalo brand of $2.7 billion, and a finite-lived customer relationship asset of $269.0 million. The goodwill was primarily attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. The goodwill is subject to regulatory approvals and other customary closing conditions,included in the Pet reporting unit and is expectednot deductible for tax purposes. We have conducted a preliminary assessment of certain assets and liabilities related to close by the end of fiscal 2018. Invus, LP and founding Bishop family shareholders, representing more than 50 percentacquisition of Blue Buffalo’s outstanding shares, have delivered written consents approvingBuffalo, and we are continuing our review of these items during the transactionmeasurement period. If new information is obtained about facts and no other approvalcircumstances that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to current estimates of Blue Buffalo’s Board of Directors or shareholders is required to complete the transaction. We expect to report the consolidatedthese items.

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

(3) Restructuring, Impairment, and Other Exit Costs

Restructuring and impairment charges were as a segmentfollows:

In the second quarter of fiscal 2019, we recorded $192.6 million of charges related to the impairment of ourProgresso,Food Should Taste Good andMountain Highbrand intangible assets in future periods.restructuring, impairment, and other exit costs. Please see Note 4 for additional information.

During the second quarter of fiscal 2017,2019, we sold our Martel, Ohio manufacturing facilityrecorded a $13.2 million charge in our Convenience Stores & Foodservice segmentrestructuring, impairment, and simultaneously entered into aco-packing arrangement with the purchaser. We received $17.5 million in cash, and recorded apre-tax loss of $13.5 million.

(3) Restructuring Initiatives

We are currently pursuing several multi-year restructuring initiatives designed to increase our efficiency and focus our business behind our key growth strategies. Chargesother exit costs related to these activities were as follows:the impairment of certain manufacturing assets within our North America Retail segment.

In the thirdsix-month period ended November 25, 2018, we did not undertake any new restructuring actions. We recorded $3.6 million of charges for previously announced restructuring actions in the second quarter of fiscal 2017, we approved restructuring actions designed2019 and $2.4 million in thesix-month period ended November 25, 2018, compared to better align our organizational structure with our strategic initiatives. This action will affect approximately 600 positions$2.2 million in the second quarter of fiscal 2018 and we expect to incur approximately $76$19.7 million of net expensesin thesix-month period ended November 26, 2017. We paid $29.2 million in cash relating to these actions all of which will be cash. We have recorded $1.4 million of restructuring charges in the nine-monthsix-month period ended FebruaryNovember 25, 2018, relatingcompared to these actions. We recorded $73.1$27.1 million ofin thesix-month period ended November 26, 2017. These restructuring charges in the third quarter of fiscal 2017. We expect these actions are expected to be completed by the end of fiscal 2018.2020.

In the second quarter of fiscal 2017, we notified the employees and their representatives of our decision to close our pasta manufacturing facility in Melbourne, Australia in our Europe & Australia segment to improve our margin structure. This action will affect approximately 350 positions, and we expect to incur approximately $34 million of net expenses relating to this action, of which approximately $3 million will be cash. We recorded $3.1 million of restructuring charges in the third quarter of fiscal 2018 and $8.0 million in the nine-month period ended February 25, 2018 relating to this action. We recorded $5.7 million of restructuring charges in the third quarter of fiscal 2017 and $17.7 million in the nine-month period ended February 26, 2017. We expect this action to be completed by the end of fiscal 2019.

In the first quarter of fiscal 2017, we announced a plan to restructure certain product lines in our Asia & Latin America segment. To eliminate excess capacity, we closed our snacks manufacturing facility in Marília, Brazil and ceased production operations for meals and snacks at our facility in São Bernardo do Campo, Brazil. We also ceased production of certain underperforming snack products at our facility in Nanjing, China. These and other actions affected approximately 420 positions in our Brazilian operations and approximately 440 positions in our greater China operations. We expect to incur approximately $42 million of net expenses related to these actions, of which approximately $6 million will be cash. There have been no restructuring charges in fiscal 2018 relating to these

actions. We recorded $2.3 million of restructuring charges in the third quarter of fiscal 2017 and $45.6 million in the nine-month period ended February 26, 2017. We expect these actions to be completed by the end of fiscal 2019.

In the first quarter of fiscal 2017, we approved a plan to close our Vineland, New Jersey facility to eliminate excess soup capacity in our North America Retail segment. This action affected 380 positions, and we expect to incur approximately $54 million of net expenses relating to this action, of which approximately $11 million will be cash. We recorded $0.2 million of restructuring charges in the third quarter of fiscal 2018 and $12.3 million in the nine-month period ended February 25, 2018. We recorded $7.7 million of restructuring charges in the third quarter of fiscal 2017 and $35.6 million in the nine-month period ended February 26, 2017. We expect this action to be completed by the end of fiscal 2018.

During the nine-month period ended February 25, 2018, we paid $39.6 million in cash relating to restructuring initiatives and $67.1 million in the nine-month period ended February 26, 2017.

In addition to restructuring charges, we recorded $3 million of project-related costs in cost of sales in the third quarter of fiscal 2018 and $8.4 million in the nine-month period ended February 25, 2018. We paid $8.0$0.3 million in cash in the nine-monthsix-month period ended FebruaryNovember 25, 2018, for project-related costs and $40.2compared to $5.0 million in the nine-monthsame period ended February 26, 2017.of fiscal 2018.

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

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

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 thewrite-off of spare parts) and other periodic exit costs are recognized as incurred, as those items are not reflected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets.

(4) Goodwill and Other Intangible Assets

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