General Mills Reports Fiscal 2013 Second Quarter Results

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. These forward-looking statements, including the statements under the caption “Outlook,” and statements made by Mr. Powell, are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. In particular, our predictions about future net sales and earnings could be affected by a variety of factors, including: 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; changes in capital structure; changes in laws and regulations, including labeling and advertising regulations; 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; 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 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. The company undertakes no obligation to publicly revise any forward-looking statement to reflect any future events or circumstances.

Consolidated Statements of Earnings and Supplementary Information
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
			Quarter Ended													Six-Month Period Ended
				Nov. 25, 2012				Nov. 27, 2011			% Change						Nov. 25, 2012				Nov. 27, 2011			% Change
Net sales			$	4,881.8			$	4,623.8			5.6		%			$	8,932.8			$	8,471.4			5.4		%
Cost of sales				3,139.5				3,029.1			3.6		%				5,562.2				5,430.2			2.4		%
Selling, general, and administrative expenses				910.6				877.1			3.8		%				1,749.6				1,684.6			3.9		%
Restructuring, impairment, and otherexit costs				2.7				0.7			NM						11.9				0.8			NM
Operating profit				829.0				716.9			15.6		%				1,609.1				1,355.8			18.7		%
Interest, net				75.5				87.2			(13.4	)	%				158.5				172.6			(8.2	)	%
Earnings before income taxes and after-taxearnings from joint ventures				753.5				629.7			19.7		%				1,450.6				1,183.2			22.6		%
Income taxes				245.4				209.4			17.2		%				403.5				386.9			4.3		%
After-tax earnings from joint ventures				32.9				28.9			13.8		%				56.0				57.2			(2.1	)	%
Net earnings, including earnings attributableto redeemable and noncontrolling interests				541.0				449.2			20.4		%				1,103.1				853.5			29.2		%
Net earnings (loss) attributable to redeemableand noncontrolling interests				(0.6	)			4.4			NM						12.6				3.1			NM
Net earnings attributable to General Mills			$	541.6			$	444.8			21.8		%			$	1,090.5			$	850.4			28.2		%
Earnings per share - basic			$	0.84			$	0.69			21.7		%			$	1.68			$	1.31			28.2		%
Earnings per share - diluted			$	0.82			$	0.67			22.4		%			$	1.64			$	1.28			28.1		%
Dividends per share			$	0.330			$	0.305			8.2		%			$	0.660			$	0.610			8.2		%
				Quarter Ended													Six-Month Period Ended
Comparisons as a % of net sales:				Nov. 25, 2012				Nov. 27, 2011			Basis Pt Change						Nov. 25, 2012				Nov. 27, 2011			Basis Pt Change
Gross margin				35.7	%			34.5	%		120						37.7	%			35.9	%		180
Selling, general, and administrative expenses				18.7	%			19.0	%		(30	)					19.6	%			19.9	%		(30	)
Operating profit				17.0	%			15.5	%		150						18.0	%			16.0	%		200
Net earnings attributable to General Mills				11.1	%			9.6	%		150						12.2	%			10.0	%		220
				Quarter Ended													Six-Month Period Ended
Comparisons as a % of net sales excludingcertain items affecting comparability (a):				Nov. 25, 2012				Nov. 27, 2011			Basis Pt Change						Nov. 25, 2012				Nov. 27, 2011			Basis Pt Change
Gross margin				36.7	%			36.5	%		20						37.3	%			37.5	%		(20	)
Operating profit				18.1	%			17.6	%		50						17.8	%			17.6	%		20
Net earnings attributable to General Mills				11.8	%			11.0	%		80						11.4	%			11.0	%		40
(a) See Note 8 for a reconciliation of this measure not defined by generally accepted accounting principles (GAAP).
See accompanying notes to consolidated financial statements.

Operating Segment Results and Supplementary Information
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
				Quarter Ended											Six-Month Period Ended
				Nov. 25,			Nov. 27,								Nov. 25,			Nov. 27,
				2012			2011		% Change						2012			2011		% Change
Net sales:
U.S. Retail			$	2,985.0		$	2,938.3		1.6		%			$	5,478.9		$	5,448.6		0.6		%
International				1,381.2			1,163.3		18.7		%				2,466.7			2,019.6		22.1		%
Bakeries and Foodservice				515.6			522.2		(1.3	)	%				987.2			1,003.2		(1.6	)	%
Total			$	4,881.8		$	4,623.8		5.6		%			$	8,932.8		$	8,471.4		5.4		%
Operating profit:
U.S. Retail			$	723.2		$	661.4		9.3		%			$	1,298.3		$	1,246.6		4.1		%
International				139.2			133.5		4.3		%				265.0			214.2		23.7		%
Bakeries and Foodservice				96.2			77.8		23.7		%				163.9			139.2		17.7		%
Total segment operating profit				958.6			872.7		9.8		%				1,727.2			1,600.0		8.0		%
Unallocated corporate items				126.9			155.1		(18.2	)	%				106.2			243.4		(56.4	)	%
Restructuring, impairment, and
other exit costs				2.7			0.7		NM						11.9			0.8		NM
Operating profit			$	829.0		$	716.9		15.6		%			$	1,609.1		$	1,355.8		18.7		%
				Quarter Ended											Six-Month Period Ended
				Nov. 25,			Nov. 27,		Basis Pt						Nov. 25,			Nov. 27,		Basis Pt
				2012			2011		Change						2012			2011		Change
Segment operating profit as a
% of net sales:
U.S. Retail				24.2%			22.5%		170						23.7%			22.9%		80
International				10.1%			11.5%		(140	)					10.7%			10.6%		10
Bakeries and Foodservice				18.7%			14.9%		380						16.6%			13.9%		270
Total segment operating profit				19.6%			18.9%		70						19.3%			18.9%		40
See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
			Nov. 25,				Nov. 27,				May 27,
			2012				2011				2012
			(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	734.9			$	509.1			$	471.2
Receivables			1,673.8				1,510.4				1,323.6
Inventories			1,770.2				1,628.7				1,478.8
Deferred income taxes			51.9				20.2				59.7
Prepaid expenses and other current assets			334.7				353.2				358.1
Total current assets			4,565.5				4,021.6				3,691.4
Land, buildings, and equipment			3,814.0				3,507.4				3,652.7
Goodwill			8,604.1				8,115.9				8,182.5
Other intangible assets			5,026.0				4,795.5				4,704.9
Other assets			943.3				1,026.4				865.3
Total assets		$	22,952.9			$	21,466.8			$	21,096.8
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	1,244.9			$	1,096.5			$	1,148.9
Current portion of long-term debt			820.8				1,732.4				741.2
Notes payable			1,939.9				849.0				526.5
Other current liabilities			1,730.8				1,464.1				1,426.6
Total current liabilities			5,736.4				5,142.0				3,843.2
Long-term debt			5,571.9				5,247.6				6,161.9
Deferred income taxes			1,148.7				1,374.1				1,171.4
Other liabilities			2,178.3				1,818.4				2,189.8
Total liabilities			14,635.3				13,582.1				13,366.3
Redeemable interest			877.6				831.6				847.8
Stockholders' equity:
Common stock, 754.6 shares issued, $0.10 par value			75.5				75.5				75.5
Additional paid-in capital			1,261.8				1,318.8				1,308.4
Retained earnings			10,614.5				9,642.2				9,958.5
Common stock in treasury, at cost,shares of 108.7, 109.7 and 106.1			(3,364.8	)			(3,254.6	)			(3,177.0	)
Accumulated other comprehensive loss			(1,603.3	)			(1,204.6	)			(1,743.7	)
Total stockholders' equity			6,983.7				6,577.3				6,421.7
Noncontrolling interests			456.3				475.8				461.0
Total equity			7,440.0				7,053.1				6,882.7
Total liabilities and equity		$	22,952.9			$	21,466.8			$	21,096.8
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. 25,					Nov. 27,
			2012					2011
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemableand noncontrolling interests			$	1,103.1				$	853.5
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization				286.1					263.3
After-tax earnings from joint ventures				(56.0	)				(57.2	)
Distributions of earnings from joint ventures				42.8					36.4
Stock-based compensation				61.3					66.2
Deferred income taxes				(25.2	)				39.7
Tax benefit on exercised options				(58.5	)				(31.1	)
Pension and other postretirement benefit plan contributions				(11.6	)				(8.5	)
Pension and other postretirement benefit plan costs				65.2					38.9
Restructuring, impairment, and other exit costs				(32.6	)				(1.8	)
Changes in current assets and liabilities,excluding the effects of acquisitions				63.6					(26.6	)
Other, net				(121.1	)				(16.3	)
Net cash provided by operating activities				1,317.1					1,156.5
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment				(264.1	)				(264.8	)
Acquisitions, net of cash acquired				(851.8	)				(900.1	)
Investments in affiliates, net				(3.7	)				(22.1	)
Proceeds from disposal of land, buildings, and equipment				3.5					1.3
Exchangeable note				16.2					(131.6	)
Other, net				(3.3	)				6.6
Net cash used by investing activities				(1,103.2	)				(1,310.7	)
Cash Flows - Financing Activities
Change in notes payable				1,292.4					548.8
Payment of long-term debt				(521.6	)				(9.1	)
Proceeds from common stock issued on exercised options				152.7					99.2
Tax benefit on exercised options				58.5					31.1
Purchases of common stock for treasury				(479.2	)				(210.8	)
Dividends paid				(434.5	)				(399.5	)
Distributions to noncontrolling and redeemable interest holders				(34.6	)				(3.3	)
Other, net				-					(0.4	)
Net cash provided by financing activities				33.7					56.0
Effect of exchange rate changes on cash and cash equivalents				16.1					(12.3	)
Increase (decrease) in cash and cash equivalents				263.7					(110.5	)
Cash and cash equivalents - beginning of year				471.2					619.6
Cash and cash equivalents - end of period			$	734.9				$	509.1
Cash Flow from Changes in Current Assets and Liabilities, excluding the effects of acquisitions:
Receivables			$	(252.6	)			$	(205.6	)
Inventories				(187.2	)				(1.3	)
Prepaid expenses and other current assets				49.5					146.0
Accounts payable				123.6					11.1
Other current liabilities				330.3					23.2
Changes in current assets and liabilities			$	63.6				$	(26.6	)
See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)		The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, General Mills, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States for annual and interim financial information. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature.
(2)		At the beginning of fiscal 2013, we realigned certain divisions within our U.S. Retail operating segment and certain geographic regions within our International operating segment. These realignments had no effect on previously reported consolidated net sales, operating segments’ net sales, operating profit, segment operating profit, net earnings attributable to General Mills or earnings per share.
(3)		On August 1, 2012, we acquired Yoki Alimentos S.A. (Yoki), a privately held food company headquartered in Sao Bernardo do Campo, Brazil, for an aggregate purchase price of $940 million, comprised of $820 million of cash, net of $31 million of cash acquired, and $120 million of non-cash consideration for debt assumed. Yoki operates in several food categories, including snacks, convenient meals, basic foods, and seasonings. We consolidated Yoki into our Consolidated Balance Sheets and recorded goodwill of $358 million. Indefinite lived intangible assets acquired include brands of $253 million. Finite lived intangible assets acquired primarily include customer relationships of $18 million. As of the date of the acquisition, the pro forma effects of this acquisition were not material.
(4)		During the second quarter of fiscal 2013, we recorded a $3 million restructuring charge related to a productivity and cost savings plan approved in the fourth quarter of fiscal 2012. The plan was designed to improve organizational effectiveness and focus on key growth strategies, and included organizational changes to strengthen business alignment and actions to accelerate administrative efficiencies across all of our operating segments and support functions. During the second quarter of fiscal 2013, we recorded restructuring charges of $2 million related to our International segment and less than $1 million related to our Bakeries and Foodservice segment. For the six-month period ended November 25, 2012, we recorded $12 million related to these actions. These restructuring actions are expected to be completed by the end of fiscal 2014.
(5)		For the second quarter of fiscal 2013, unallocated corporate expense totaled $127 million compared to $155 million in the same period last year. We recorded a $48 million net increase in expense related to the mark-to-market valuations of certain commodity positions and grain inventories in the second quarter of fiscal 2013, compared to a $94 million net increase in expense in the second quarter of fiscal 2012. Additionally, pension expense increased $10 million in the second quarter of fiscal 2013 compared to the same period last year.
		For the six-month period ended November 25, 2012, unallocated corporate expense totaled $106 million compared to $243 million in the same period last year. We recorded a $34 million net decrease in expense related to the mark-to-market valuations of certain commodity positions and grain inventories in the six-month period ended November 25, 2012, compared to a $132 million net increase in expense in the six-month period ended November 27, 2011. Additionally, pension expense increased $20 million in the six-month period ended November 25, 2012, compared to the same period in fiscal 2012.
(6)		Basic and diluted earnings per share (EPS) were calculated as follows:

			Quarter Ended							Six-Month Period Ended
				Nov. 25,			Nov. 27,				Nov. 25,			Nov. 27,
In Millions, Except per Share Data				2012			2011				2012			2011
Net earnings attributable to General Mills			$	541.6		$	444.8			$	1,090.5		$	850.4
Average number of common shares - basic EPS				648.1			646.3				649.2			647.1
Incremental share effect from: (a)
Stock options				11.9			14.8				12.2			14.6
Restricted stock, restricted stock units, and other				4.5			4.7				4.6			4.6
Average number of common shares - diluted EPS				664.5			665.8				666.0			666.3
Earnings per share - basic			$	0.84		$	0.69			$	1.68		$	1.31
Earnings per share - diluted			$	0.82		$	0.67			$	1.64		$	1.28
(a) Incremental shares from stock options and restricted stock units are computed by the treasury stock method.

(7)		The effective tax rate for the six-month period ended November 25, 2012 was 27.8 percent compared to 32.7 percent for the six-month period ended November 27, 2011. The 4.9 percentage point decrease was primarily related to the restructuring of a subsidiary during the first quarter of fiscal 2013 which resulted in a $67 million decrease to deferred income tax liabilities related to the tax basis of the investment in the subsidiary and certain distributed assets, with a corresponding discrete non-cash reduction to income taxes in the first quarter of fiscal 2013.
(8)		We have included five measures in this release that are not defined by generally accepted accounting principles (GAAP): (1) diluted earnings per share excluding mark-to-market valuation of certain commodity positions and grain inventories (“mark-to-market effects”), restructuring costs reflecting employee severance expense (“restructuring costs”), integration costs resulting from the acquisitions of Yoki in fiscal 2013 and Yoplait S.A.S. and Yoplait Marques S.A.S. in fiscal 2012 (“acquisition integration costs”), and a discrete tax item related to a subsidiary (“tax item”) (collectively, these four items are referred to as “certain items affecting comparability” in this footnote), (2) earnings comparisons as a percent of net sales excluding certain items affecting comparability, (3) total segment operating profit, (4) net sales growth rates for our International segment in total and by region excluding the impact of changes in foreign currency exchange, and (5) effective income tax rates excluding certain items affecting comparability. We believe that these measures provide useful supplemental information to assess our operating performance. These measures are reconciled below to the measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our diluted earnings per share and operating performance measures as calculated in accordance with GAAP.

Diluted EPS excluding certain items affecting comparability follows:

											Six-Month
			Quarter Ended								Period Ended
				Nov. 25,				Nov. 27,				Nov. 25,					Nov. 27,
Per Share Data				2012				2011				2012					2011
Diluted earnings per share, as reported			$	0.82			$	0.67			$	1.64				$	1.28
Mark-to-market effects (a)				0.04				0.09				(0.03	)				0.13
Restructuring costs (b)				-				-				0.01					-
Tax item (c)				-				-				(0.10	)				-
Diluted earnings per share, excludingcertain items affectingcomparability (d)			$	0.86			$	0.76			$	1.52				$	1.41

		(a)		See Note 5.
		(b)		See Note 4.
		(c)		See Note 7.
		(d)		Items affecting comparability includes integration costs resulting from the acquisitions of Yoki in fiscal 2013 and Yoplait S.A.S. and Yoplait Marques S.A.S. in fiscal 2012. The impact on diluted earnings per share, excluding certain items affecting comparability was less than $.01 for both the quarterly and six-month periods ended November 25, 2012, and November 27, 2011.

Earnings comparisons as a percent of net sales excluding certain items affecting comparability follows:

			Quarter Ended
In Millions				Nov. 25, 2012								Nov. 27, 2011
							Percent of								Percent of
Comparisons as a % of Net Sales				Value			Net Sales						Value		Net Sales
Gross margin as reported (a)			$	1,742.3			35.7		%			$	1,594.7		34.5		%
Mark-to-market effects (b)				47.9			1.0		%				94.4		2.0		%
Adjusted gross margin			$	1,790.2			36.7		%			$	1,689.1		36.5		%
Operating profit as reported			$	829.0			17.0		%			$	716.9		15.5		%
Mark-to-market effects (b)				47.9			1.0		%				94.4		2.0		%
Restructuring costs (c)				2.7			-		%				-		-		%
Acquisition integration costs (d)				4.8			0.1		%				3.9		0.1		%
Adjusted operating profit			$	884.4			18.1		%			$	815.2		17.6		%
Net earnings attributable to General Mills as reported			$	541.6			11.1		%			$	444.8		9.6		%
Mark-to-market effects, net of tax (b)				30.2			0.6		%				59.5		1.3		%
Restructuring costs, net of tax (c)				2.2			-		%				-		-		%
Acquisition integration costs, net of tax (d)				3.4			0.1		%				3.0		0.1		%
Adjusted net earnings attributable to General Mills			$	577.4			11.8		%			$	507.3		11.0		%
			Six-Month Period Ended
In Millions				Nov. 25, 2012								Nov. 27, 2011
							Percent of								Percent of
Comparisons as a % of Net Sales				Value			Net Sales						Value		Net Sales
Gross margin as reported (a)			$	3,370.6			37.7		%			$	3,041.2		35.9		%
Mark-to-market effects (b)				(33.7	)		(0.4	)	%				132.1		1.6		%
Adjusted gross margin			$	3,336.9			37.3		%			$	3,173.3		37.5		%
Operating profit as reported			$	1,609.1			18.0		%			$	1,355.8		16.0		%
Mark-to-market effects (b)				(33.7	)		(0.4	)	%				132.1		1.6		%
Restructuring costs (c)				11.7			0.1		%				-		-		%
Acquisition integration costs (d)				5.3			0.1		%				4.0		-		%
Adjusted operating profit			$	1,592.4			17.8		%			$	1,491.9		17.6		%
Net earnings attributable to General Mills as reported			$	1,090.5			12.2		%			$	850.4		10.0		%
Mark-to-market effects, net of tax (b)				(21.2	)		(0.2	)	%				83.2		1.0		%
Restructuring costs, net of tax (c)				9.7			0.1		%				-		-		%
Acquisition integration costs, net of tax (d)				3.9			-		%				3.1		-		%
Tax item (e)				(66.7	)		(0.7	)	%				-		-		%
Adjusted net earnings attributable to General Mills			$	1,016.2			11.4		%			$	936.7		11.0		%

		(a)		Net sales less cost of sales.
		(b)		See Note 5.
		(c)		See Note 4.
		(d)		Integration costs resulting from the acquisitions of Yoki, Yoplait S.A.S., and Yoplait Marques S.A.S.
		(e)		See Note 7.

A reconciliation of total segment operating profit to the relevant GAAP measure, operating profit, is included in the Statements of Operating Segment Results.

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