UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

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.

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 Rule12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares of Common Stock outstanding as of March 12,September 10, 2018: 570,162,724596,229,932 (excluding 184,450,604158,383,396 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 February 25,August 26, 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 Boardsfirst quarter of Directorsfiscal 2019, we recorded acquisition integration costs of General Mills$8.7 million 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 as a segment in future periods.

During the second quarter of fiscal 2017, we sold our Martel, Ohio manufacturing facilityare reported in our Convenience Stores & FoodservicePet operating segment and simultaneously entered intoon aco-packingone-month arrangement with the purchaser. We received $17.5 million in cash, and recorded apre-tax loss of $13.5 million.lag.

(3) Restructuring Initiatives

We are currently pursuing several multi-year restructuring initiatives designed to increase our efficiencyRestructuring, impairment, and focus our business behind our key growth strategies. Charges related to these activitiesother exit costs were as follows:

InDuring the thirdfirst quarter of fiscal 2017,2019, we approveddid not undertake any new restructuring actions. We recorded a $1.2 million net recovery of restructuring charges for previously announced restructuring actions, designed to better align our organizational structure with our strategic initiatives. This action will affect approximately 600 positions and we expect to incur approximately $76which included $2.8 million of net expenses relatingrestructuring charges offset by a $4.0 million recovery, compared to these actions, all of which will be cash. We have recorded $1.4$17.5 million of restructuring charges in the nine-month period ended February 25, 2018first quarter of fiscal 2018. The restructuring charges relate to cost savings initiatives across all operating segments with the exception of Pet. We paid $17.7 million in cash relating to these actions. We recorded $73.1 million of restructuring chargesactions in the thirdfirst quarter of fiscal 2017. We expect these actions to be completed by2019 and $26.7 million in the endsame period of fiscal 2018.

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 These 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 actionactions are expected 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

In addition to restructuring charges, we recorded $3$1.2 million of project-related costs in cost of sales in the thirdfirst quarter of fiscal 20182019 and $8.4$1.2 million in the nine-month period ended February 25,first quarter of fiscal 2018. We paid $8.0$0.3 million in cash in the nine-monthfirst quarter of fiscal 2019 and $2.7 million in the same period ended February 25,of fiscal 2018 for project-related costs and $40.2 million in the nine-month period ended February 26, 2017.costs.

Restructuring 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:

Based on the carrying value of finite-lived intangible assets as of February 25,August 26, 2018, annual amortization expense for each of the next five fiscal years is estimated to be approximately $28$40 million.

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

The changes in the carrying amount of goodwill during fiscal 20182019 were as follows:

The changes in the carrying amount of other intangible assets during fiscal 20182019 were as follows:

In Millions		Total
Balance as of May 27, 2018		$	7,445.1
Other activity, primarily foreign currency translation			(24.3	)
Balance as of Aug. 26, 2018		$	7,420.8

Our annual goodwill and indefinite-lived intangible assets impairment test was performed on the first day of the second quarter of fiscal 2018, 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 theYokiand Progresso brand intangible assets and the Latin America reporting unit.

The excess fair value as of the fiscal 2018 test date of theYokiandProgressobrand intangible assets and the Latin America reporting unit iswas as follows:

In addition, whileWhile having significant coverage as of our fiscal 2018 assessment date, the Food Should Taste GoodandGreen Giantbrand intangible assets and the U.S. Yogurt reporting unit had risk of decreasing coverage. We will continue to monitor these businesses, as well as the businesses supporting the Yoki and Progresso brand intangible assets and the Latin America reporting unit for potential impairment.

During the fourth quarter of fiscal 2018, we executed our fiscal 2019 planning process and preliminary long-range planning process, which resulted in lower future sales and profitability projections in our plans for the businesses supporting ourYoki, Mountain High, andImmaculate Baking brand intangible assets. As a result of this triggering event, we performed an interim impairment assessment of theseassets as of May 27, 2018, and determined that the fair value of these brand assets no longer exceeded the carrying values of the respective assets. Significant assumptions used in that assessment included our updated long-range cash flow projections for the businesses, royalty rates, weighted average cost of capital rates, and tax rates. We recorded a $96.9 million impairment charge in the fourth quarter of fiscal 2018 related to these assets as follows: