Edgar Filing: GENERAL MILLS INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED November 23, 2014

¨	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 incorporation or organization)		(I.R.S. Employer 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)

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 x 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 Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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


Large accelerated filer	x	Accelerated filer	¨
Non-accelerated	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Number of shares of Common Stock outstanding as of December 5, 2014: 603,747,687 (excluding 150,865,641 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 quarterly and six-month periods ended November 23, 2014, and November 24, 2013		3
	Consolidated Statements of Comprehensive Income for the quarterly and six-month periods ended November 23, 2014, and November 24, 2013		4
	Consolidated Balance Sheets as of November 23, 2014, and May 25, 2014		5
	Consolidated Statements of Total Equity and Redeemable Interest for the six-month period ended November 23, 2014, and the fiscal year ended May 25, 2014		6
	Consolidated Statements of Cash Flows for the six-month periods ended November 23, 2014, and November 24, 2013		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		45

Item 4.	Controls and Procedures		45

PART II – Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		46

Item 6.	Exhibits		47

Signatures			48

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. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Net sales	$	4,712.2	$	4,875.7	$	8,980.6	$	9,248.4

Cost of sales		3,093.1		3,114.0		5,922.8		5,873.7

Selling, general, and administrative expenses		845.5		890.9		1,712.7		1,766.3

Restructuring, impairment, and other exit costs		214.6		0.7		228.6		3.5


Operating profit		559.0		870.1		1,116.5		1,604.9

Interest, net		77.3		68.7		155.8		147.5


Earnings before income taxes and after-tax earnings from joint ventures		481.7		801.4		960.7		1,457.4

Income taxes		153.4		266.7		306.0		478.7

After-tax earnings from joint ventures		27.1		26.1		53.1		50.2


Net earnings, including earnings attributable to redeemable and noncontrolling interests		355.4		560.8		707.8		1,028.9

Net earnings attributable to redeemable and noncontrolling interests		9.3		10.9		16.5		19.7


Net earnings attributable to General Mills	$	346.1	$	549.9	$	691.3	$	1,009.2


Earnings per share - basic	$	0.58	$	0.87	$	1.14	$	1.58


Earnings per share - diluted	$	0.56	$	0.84	$	1.11	$	1.54


Dividends per share	$	0.41	$	0.38	$	0.82	$	0.76

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. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013
Net earnings, including earnings attributable to redeemable and noncontrolling interests	$	355.4		$	560.8		$	707.8		$	1,028.9

Other comprehensive income (loss), net of tax:

Foreign currency translation		(297.3	)		62.1			(389.8	)		(24.5	)

Other fair value changes:
Securities		0.2			0.5			0.3			0.7
Hedge derivatives		5.8			(8.2	)		4.6			3.9

Reclassification to earnings:
Hedge derivatives		1.8			(1.5	)		5.3			(3.5	)
Amortization of losses and prior service costs		29.5			28.3			53.0			54.7


Other comprehensive income (loss), net of tax		(260.0	)		81.2			(326.6	)		31.3


Total comprehensive income		95.4			642.0			381.2			1,060.2

Comprehensive income (loss) attributable to redeemable and noncontrolling interests		(66.0	)		28.4			(90.8	)		72.4


Comprehensive income attributable to General Mills	$	161.4		$	613.6		$	472.0		$	987.8

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except Par Value)


	Nov. 23, 2014			May 25, 2014
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	894.5		$	867.3
Receivables		1,705.8			1,483.6
Inventories		1,893.4			1,559.4
Deferred income taxes		98.5			74.1
Prepaid expenses and other current assets		394.2			409.1


Total current assets		4,986.4			4,393.5

Land, buildings, and equipment		3,824.2			3,941.9
Goodwill		9,078.7			8,650.5
Other intangible assets		5,127.9			5,014.3
Other assets		1,186.5			1,145.5


Total assets	$	24,203.7		$	23,145.7


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,656.7		$	1,611.3
Current portion of long-term debt		750.7			1,250.6
Notes payable		2,071.4			1,111.7
Other current liabilities		1,614.9			1,449.9


Total current liabilities		6,093.7			5,423.5

Long-term debt		7,713.1			6,423.5
Deferred income taxes		1,761.5			1,666.0
Other liabilities		1,623.8			1,643.2


Total liabilities		17,192.1			15,156.2


Redeemable interest		901.4			984.1

Stockholders’ equity:

Common stock, 754.6 shares issued, $0.10 par value		75.5			75.5
Additional paid-in capital		1,260.3			1,231.8
Retained earnings		11,975.3			11,787.2
Common stock in treasury, at cost, shares of 157.9 and 142.3		(6,079.2	)		(5,219.4	)
Accumulated other comprehensive loss		(1,559.6	)		(1,340.3	)


Total stockholders’ equity		5,672.3			6,534.8

Noncontrolling interests		437.9			470.6


Total equity		6,110.2			7,005.4


Total liabilities and equity	$	24,203.7		$	23,145.7

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, 2013		754.6	$	75.5	$	1,166.6			(113.8	)	$	(3,687.2	)	$	10,702.6		$	(1,585.3	)	$	456.3		$	7,128.5		$	967.5
Total comprehensive income															1,824.4			245.0			24.9			2,094.3			70.0
Cash dividends declared ($1.17 per share)															(739.8	)								(739.8	)
Shares purchased						30.0			(35.6	)		(1,775.3	)											(1,745.3	)
Stock compensation plans (includes income tax benefits of $69.3)						13.8			7.1			243.1												256.9
Unearned compensation related to restricted stock unit awards						(91.3	)																	(91.3	)
Earned compensation						108.5																		108.5
Decrease in redemption value of redeemable interest						4.2																		4.2			(4.2	)
Addition of noncontrolling interest																					17.6			17.6
Distributions to noncontrolling and redeemable interest holders																					(28.2	)		(28.2	)		(49.2	)
Balance as of May 25, 2014		754.6		75.5		1,231.8			(142.3	)		(5,219.4	)		11,787.2			(1,340.3	)		470.6			7,005.4			984.1
Total comprehensive income (loss)															691.3			(219.3	)		(32.0	)		440.0			(58.8	)
Cash dividends declared ($0.82 per share)															(503.2	)								(503.2	)
Shares purchased									(18.6	)		(968.8	)											(968.8	)
Stock compensation plans (includes income tax benefits of $26.8)						14.8			3.0			109.0												123.8
Unearned compensation related to restricted stock unit awards						(76.0	)																	(76.0	)
Earned compensation						64.9																		64.9
Decrease in redemption value of redeemable interest						24.8																		24.8			(24.8	)
Addition of noncontrolling interest																					20.7			20.7
Distributions to noncontrolling and redeemable interest holders																					(21.4	)		(21.4	)		0.9
Balance as of Nov. 23, 2014		754.6	$	75.5	$	1,260.3			(157.9	)	$	(6,079.2	)	$	11,975.3		$	(1,559.6	)	$	437.9		$	6,110.2		$	901.4

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. 23, 2014			Nov. 24, 2013
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests	$	707.8		$	1,028.9
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		290.4			297.6
After-tax earnings from joint ventures		(53.1	)		(50.2	)
Distributions of earnings from joint ventures		28.9			25.6
Stock-based compensation		64.9			64.6
Deferred income taxes		13.2			67.9
Tax benefit on exercised options		(26.8	)		(39.5	)
Pension and other postretirement benefit plan contributions		(24.4	)		(24.7	)
Pension and other postretirement benefit plan costs		46.0			62.3
Restructuring, impairment, and other exit costs		236.6			(11.1	)
Changes in current assets and liabilities, excluding the effects of acquisitions		(414.4	)		(338.9	)
Other, net		(5.9	)		(73.6	)


Net cash provided by operating activities		863.2			1,008.9


Cash Flows - Investing Activities
Purchases of land, buildings, and equipment		(317.6	)		(268.8	)
Acquisitions, net of cash acquired		(822.3	)		—
Investments in affiliates, net		(32.3	)		(46.9	)
Proceeds from disposal of land, buildings, and equipment		1.1			1.0
Other, net		(0.1	)		(2.7	)


Net cash used by investing activities		(1,171.2	)		(317.4	)


Cash Flows - Financing Activities
Change in notes payable		922.3			455.1
Issuance of long-term debt		1,274.5			923.0
Payment of long-term debt		(393.3	)		(720.3	)
Proceeds from common stock issued on exercised options		35.9			27.5
Tax benefit on exercised options		26.8			39.5
Purchases of common stock for treasury		(968.8	)		(863.9	)
Dividends paid		(503.2	)		(489.8	)
Distributions to noncontrolling and redeemable interest holders		(20.5	)		(24.6	)
Other, net		(4.0	)		(0.7	)


Net cash provided (used) by financing activities		369.7			(654.2	)


Effect of exchange rate changes on cash and cash equivalents		(34.5	)		(4.5	)

Increase in cash and cash equivalents		27.2			32.8
Cash and cash equivalents - beginning of year		867.3			741.4


Cash and cash equivalents - end of period	$	894.5		$	774.2


Cash Flow from Changes in Current Assets and Liabilities, excluding the effects of acquisitions:
Receivables	$	(248.8	)	$	(277.1	)
Inventories		(309.6	)		(214.4	)
Prepaid expenses and other current assets		(6.6	)		53.1
Accounts payable		139.7			38.9
Other current liabilities		10.9			60.6


Changes in current assets and liabilities	$	(414.4	)	$	(338.9	)

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 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 23, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2015.

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 25, 2014. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 2 to the Consolidated Financial Statements in that Form 10-K. Certain reclassifications to our previously reported financial information have been made to conform to the current period presentation.

(2) Acquisition and Divestiture

On October 21, 2014, we acquired Annie’s, Inc. (Annie’s), a publicly traded food company headquartered in Berkeley, California, for an aggregate purchase price of $821.2 million, which we funded by issuing debt. We consolidated Annie’s into our Consolidated Balance Sheets and recorded goodwill of $589.8 million, an indefinite lived intangible asset for the Annie’s brand of $244.5 million and a finite lived customer relationship asset of $23.9 million. The pro forma effects of this acquisition were not material.

We have conducted a preliminary assessment of certain assets and liabilities related to the acquisition of Annie’s. We are continuing our review of these items during the measurement period, and if new information is obtained about facts and circumstances that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to current estimates of these items.

During the fourth quarter of fiscal 2014, we sold certain grain elevators in our U.S. Retail segment for $124.0 million in cash and recorded a pre-tax gain of $65.5 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. Charges related to these activities were as follows:


	Quarter Ended														Six-Month Period Ended
	Nov. 23, 2014														Nov. 23, 2014
In Millions	Severance			Asset Write- offs		Pension Related		Accelerated Depreciation		Other		Total			Severance			Asset Write- offs		Pension Related		Accelerated Depreciation		Other		Total
Project Catalyst	$	145.0		$	—	$	—	$	—	$	—	$	145.0		$	145.0		$	—	$	—	$	—	$	—	$	145.0
Project Century		21.7			32.6		15.6		12.6		6.4		88.9			21.7			32.6		15.6		12.6		6.4		88.9
Combination of certain operational facilities		(0.1	)		—		—		—		—		(0.1	)		13.0			0.7		—		—		0.2		13.9
Charges associated with restructuring actions previously announced		(0.6	)		—		—		—		—		(0.6	)		(0.6	)		—		—		—		—		(0.6	)
Total	$	166.0		$	32.6	$	15.6	$	12.6	$	6.4	$	233.2		$	179.1		$	33.3	$	15.6	$	12.6	$	6.6	$	247.2

These charges are classified in our Consolidated Statements of Earnings as follows:


	Quarter Ended				Six-Month Period Ended
In Millions	Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Cost of sales	$	18.6	$	—	$	18.6	$	—
Restructuring, impairment, and other exit costs		214.6		0.7		228.6		3.5
Total	$	233.2	$	0.7	$	247.2	$	3.5

During the second quarter of fiscal 2015, we approved Project Catalyst, a restructuring plan to increase organizational effectiveness and reduce overhead expense. In connection with this project, we expect to eliminate approximately 700 to 800 positions primarily in the United States. We expect to incur approximately $160 million of net expenses relating to these actions of which approximately $123 million will be cash. We expect these actions to be largely completed by the end of fiscal 2015.

Project Century is a review of our North American manufacturing and distribution network to streamline operations and identify potential capacity reductions which we expect to complete by the end of fiscal 2017. During the second quarter of fiscal 2015, we approved a restructuring plan to consolidate yogurt manufacturing capacity and exit our Methuen, MA facility in our U.S. Retail and Convenience Stores and Foodservice supply chains as part of Project Century. This action will affect approximately 250 positions. We expect to incur approximately $65 million of net expenses relating to this action of which approximately $17 million will be cash. We expect this action to be completed by the end of fiscal 2016.

Also as part of Project Century, during the second quarter of fiscal 2015, we approved a restructuring plan to eliminate excess cereal and dry mix capacity and exit our Lodi, CA facility in our U.S. Retail supply chain. This action will affect approximately 430 positions. We expect to incur approximately $123 million of net expenses relating to this action of which approximately $24 million will be cash. We expect this action to be completed by the end of fiscal 2016.

During the first quarter of fiscal 2015, we approved a plan to combine certain Yoplait and General Mills operational facilities within our International segment to increase efficiencies and reduce costs. This action will affect approximately 240 positions. We expect to incur approximately $15 million of net expenses relating to this action of which approximately $14 million will be cash. We expect this action to be completed in fiscal 2016.

During the six-month period ended November 23, 2014, we paid $10.5 million in cash related to restructuring actions.

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


In Millions	Severance			Contract Termination		Other Exit Costs		Total
Reserve balance as of May 25, 2014	$	3.5		$	—	$	—	$	3.5
Fiscal 2015 charges, including foreign currency translation		168.2			0.7		0.1		169.0
Utilized in fiscal 2015		(4.0	)		—		—		(4.0	)
Reserve balance as of Nov. 23, 2014	$	167.7		$	0.7	$	0.1	$	168.5

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

(4) Goodwill and Other Intangible Assets

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


In Millions	Nov. 23, 2014			May 25, 2014
Goodwill	$	9,078.7		$	8,650.5
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles		4,651.9			4,504.1
Intangible assets subject to amortization:
Franchise agreements, customer relationships, and other finite-lived intangibles		602.7			630.7
Less accumulated amortization		(126.7	)		(120.5	)
Intangible assets subject to amortization, net		476.0			510.2
Other intangible assets		5,127.9			5,014.3
Total	$	14,206.6		$	13,664.8

Based on the carrying value of finite-lived intangible assets as of November 23, 2014, annual amortization expense for each of the next five fiscal years is estimated to be approximately $32 million.

The changes in the carrying amount of goodwill during fiscal 2015 were as follows:


In Millions	U.S. Retail		International			Convenience Stores and Foodservice		Joint Ventures			Total
Balance as of May 25, 2014	$	5,829.2	$	1,402.0		$	921.1	$	498.2		$	8,650.5
Acquisition		589.8		—			—		—			589.8
Other activity, primarily foreign currency translation		—		(116.4	)		—		(45.2	)		(161.6	)
Balance as of Nov. 23, 2014	$	6,419.0	$	1,285.6		$	921.1	$	453.0		$	9,078.7

During the second quarter of fiscal 2015, we reorganized certain reporting units within our U.S. Retail operating segment. We evaluated the fair value relative to the book value of the reorganized reporting units and determined that no impairment had occurred as a result of the changes to the reporting units. Our chief operating decision maker continues to assess performance and make decisions about resources to be allocated to our segments at the U.S. Retail, International, and Convenience and Foodservice operating segment level.

We performed our fiscal 2014 impairment assessment as of the first day of the third quarter of fiscal 2014, and determined there was no impairment of goodwill for any of our reporting units as their related fair values were substantially in excess of their carrying values. Our Europe and U.S. Yogurt reporting units have experienced declining business performance. While these reporting units had significant coverage as of the assessment date, we will continue to monitor these businesses and will perform our annual impairment test in the third quarter of fiscal 2015.

The changes in the carrying amount of other intangible assets during fiscal 2015 were as follows:


In Millions	U.S. Retail			International			Joint Ventures		Total
Balance as of May 25, 2014	$	3,307.5		$	1,641.8		$	65.0	$	5,014.3
Acquisition		268.4			—			—		268.4
Amortization and foreign currency translation		(2.2	)		(152.9	)		0.3		(154.8	)
Balance as of Nov. 23, 2014	$	3,573.7		$	1,488.9		$	65.3	$	5,127.9

We performed our fiscal 2014 impairment assessment as of the first day of the third quarter of fiscal 2014. As of our assessment date, there was no impairment of any of our indefinite-lived intangible assets as their related fair values were substantially in excess of the carrying values, except for the Uncle Toby’s brand, which had a fair value 8 percent greater than its carrying value of $63.0 million. In addition, our Mountain High brand had a fair value 23 percent greater than its carrying value of $35.0 million. We will continue to monitor these businesses and will perform our annual impairment test in the third quarter of fiscal 2015.

(5) Inventories

The components of inventories were as follows:


In Millions	Nov. 23, 2014			May 25, 2014
Raw materials and packaging	$	432.6		$	419.0
Finished goods		1,546.1			1,260.2
Grain		139.0			97.1
Excess of FIFO over LIFO cost		(224.3	)		(216.9	)
Total	$	1,893.4		$	1,559.4

(6) Financial Instruments, Risk Management Activities, and Fair Values

Financial Instruments. The carrying values of cash and cash equivalents, receivables, accounts payable, other current liabilities, and notes payable approximate fair value. Marketable securities are carried at fair value. As of November 23, 2014, and May 25, 2014, a comparison of cost and market values of our marketable debt and equity securities is as follows:


	Cost				Market Value				Gross Gains				Gross Losses
In Millions	Nov. 23, 2014		May 25, 2014		Nov. 23, 2014		May 25, 2014		Nov. 23, 2014		May 25, 2014		Nov. 23, 2014		May 25, 2014
Available-for-sale:
Debt securities	$	247.6	$	318.6	$	247.8	$	318.8	$	0.2	$	0.2	$	—	$	—
Equity securities		1.8		1.8		7.6		7.2		5.8		5.4		—		—
Total	$	249.4	$	320.4	$	255.4	$	326.0	$	6.0	$	5.6	$	—	$	—

For the second quarter of fiscal 2015, there were no gains or losses from sales of available-for-sale marketable securities. Gains and losses are determined by specific identification. Classification of marketable securities as current or noncurrent is dependent upon our intended holding period, the security’s maturity date, or both. The aggregate unrealized gains and losses on available-for-sale securities, net of tax effects, are classified in accumulated other comprehensive loss (AOCI) within stockholders’ equity. Scheduled maturities of our marketable securities are as follows:


	Available-for-Sale
In Millions	Cost		Market Value
Under 1 year (current)	$	247.0	$	247.2
From 1 to 3 years		0.6		0.6
From 4 to 7 years		—		—
Equity securities		1.8		7.6
Total	$	249.4	$	255.4

Marketable securities with a market value of $2.3 million as of November 23, 2014, were pledged as collateral for certain derivative contracts. As of November 23, 2014, $21.5 million of certain accounts receivable were pledged as collateral against a foreign uncommitted line of credit.

The fair values and carrying amounts of long-term debt, including the current portion, were $8,914.8 million and $8,463.8 million, respectively, as of November 23, 2014. 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.

Risk Management Activities. As a part of our ongoing operations, we are exposed to market risks such as changes in interest and foreign currency exchange rates and commodity and equity prices. To manage these risks, we may enter into various derivative transactions (e.g., futures, options, and swaps) pursuant to our established policies.

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

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

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

Unallocated corporate items for the quarter ended November 23, 2014, and November 24, 2013, included:


	Quarter Ended						Six-Month Period Ended
In Millions	Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013
Net loss on certain mark-to-market valuation of commodity positions	$	(40.2	)	$	(3.7	)	$	(81.6	)	$	(16.0	)
Net loss on commodity positions reclassified from unallocated corporate items to segment operating profit		32.8			18.7			28.0			34.5
Net mark-to-market revaluation of certain grain inventories		2.3			6.0			(0.7	)		1.7
Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items	$	(5.1	)	$	21.0		$	(54.3	)	$	20.2

As of November 23, 2014, the net notional value of commodity derivatives was $634.9 million, of which $264.8 million related to energy inputs and $370.1 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.

Interest Rate Risk. We are exposed to interest rate volatility with regard to future issuances of fixed-rate debt, and existing and future issuances of floating-rate debt. Primary exposures include U.S. Treasury rates, LIBOR, Euribor, and commercial paper rates in the United States and Europe. We use interest rate swaps, forward-starting interest rate swaps, and treasury locks to hedge our exposure to interest rate changes, to reduce the volatility of our financing costs, and to achieve a desired proportion of fixed versus floating-rate debt, based on current and projected market conditions. Generally under these swaps, we agree with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed upon notional principal amount.

Floating Interest Rate Exposures — Floating-to-fixed interest rate swaps and hedges of forecasted issuances of debt are accounted for as cash flow hedges. Effectiveness is assessed based on either the perfectly effective hypothetical derivative method or changes in the present value of interest payments on the underlying debt. Effective gains and losses deferred to AOCI are reclassified into earnings over the life of the associated debt. Ineffective gains and losses are recorded as net interest. The amount of hedge ineffectiveness was less than $1 million for the quarter and six-month periods ended November 23, 2014.

Fixed Interest Rate Exposures — Fixed-to-floating interest rate swaps are accounted for as fair value hedges with effectiveness assessed based on changes in the fair value of the underlying debt and derivatives, using incremental borrowing rates currently available on loans with similar terms and maturities. Ineffective gains and losses on these derivatives and the underlying hedged items are recorded as net interest. The amount of hedge ineffectiveness was a gain of $1.2 million for the quarter ended November 23, 2014 and less than $1 million for the six-month period ended November 23, 2014.

During the second quarter of fiscal 2015, we entered into swaps to convert $500.0 million of 1.4 percent fixed-rate notes due October 20, 2017, and $500.0 million of 2.2 percent fixed-rate notes due October 21, 2019, to floating rates.

In advance of a planned debt financing, we entered into $250.0 million of treasury locks with an average fixed rate of 1.99 percent. All of these treasury locks were cash settled for $17.9 million during the third quarter of fiscal 2014, coincident with the issuance of our $500.0 million 10-year fixed-rate notes.

During the third quarter of fiscal 2013, we entered into swaps to convert $250.0 million of 0.875 percent fixed-rate notes due January 29, 2016, to floating rates.

As of November 23, 2014, the pre-tax amount of cash-settled interest rate hedge gain or loss remaining in AOCI that will be reclassified to earnings over the remaining term of the related underlying debt is as follows:


In Millions	Gain/(Loss)
5.2% notes due March 17, 2015	$	(0.1	)
5.7% notes due February 15, 2017		(4.9	)
5.65% notes due February 15, 2019		2.1
3.15% notes due December 15, 2021		(69.9	)
3.65% notes due February 15, 2024		16.4
5.4% notes due June 15, 2040		(14.3	)
4.15% notes due February 15, 2043		11.1
Net pre-tax hedge loss in AOCI	$	(59.6	)

The following table summarizes the notional amounts and weighted-average interest rates of our interest rate derivatives. Average floating rates are based on rates as of the end of the reporting period.


In Millions	Nov. 23, 2014			May 25, 2014
Pay-floating swaps - notional amount	$	1,250.0		$	250.0
Average receive rate		1.6	%		0.9	%
Average pay rate		0.6	%		0.5	%

The swap contracts mature at various dates from fiscal 2016 to 2020 as follows:


In Millions	Pay Floating
2016	$	250.0
2017		—
2018		500.0
2019		—
2020		500.0
Total	$	1,250.0

The following tables reconcile the net fair values of assets and liabilities subject to offsetting arrangements that are recorded in the Consolidated Balance Sheets to the net fair values that could be reported in the Consolidated Balance Sheets:


	Nov. 23, 2014
	Assets													Liabilities
							Gross Amounts Not Offset in the Balance Sheet (e)															Gross Amounts Not Offset in the Balance Sheet (e)
In Millions	Gross Amounts of Recognized Assets		Gross Liabilities Offset in the Balance Sheet (a)		Net Amounts of Assets (b)		Financial Instruments			Cash Collateral Received		Net Amount (c)		Gross Amounts of Recognized Liabilities			Gross Assets Offset in the Balance Sheet (a)		Net Amounts of Liabilities (b)			Financial Instruments		Cash Collateral Received		Net Amount (d)
Commodity contracts	$	0.7	$	—	$	0.7	$	(0.3	)	$	—	$	0.4	$	(21.1	)	$	—	$	(21.1	)	$	0.3	$	—	$	(20.8	)
Interest rate contracts		0.5		—		0.5		—			—		0.5		(2.5	)		—		(2.5	)		—		—		(2.5	)
Foreign exchange contracts		14.1		—		14.1		(8.6	)		—		5.5		(13.3	)		—		(13.3	)		8.6		—		(4.7	)
Total	$	15.3	$	—	$	15.3	$	(8.9	)	$	—	$	6.4	$	(36.9	)	$	—	$	(36.9	)	$	8.9	$	—	$	(28.0	)

(a)	Includes related collateral offset in the Consolidated Balance Sheets.

(b)	Net fair value as recorded in the Consolidated Balance Sheets.

(c)	Fair value of assets that could be reported net in the Consolidated Balance Sheets.

(d)	Fair value of liabilities that could be reported net in the Consolidated Balance Sheets.

(e)	Fair value of assets and liabilities reported on a gross basis in the Consolidated Balance Sheets.


	May 25, 2014
	Assets													Liabilities
							Gross Amounts Not Offset in the Balance Sheet (e)															Gross Amounts Not Offset in the Balance Sheet (e)
In Millions	Gross Amounts of Recognized Assets		Gross Liabilities Offset in the Balance Sheet (a)		Net Amounts of Assets (b)		Financial Instruments			Cash Collateral Received		Net Amount (c)		Gross Amounts of Recognized Liabilities			Gross Assets Offset in the Balance Sheet (a)		Net Amounts of Liabilities (b)			Financial Instruments		Cash Collateral Received		Net Amount (d)
Commodity contracts	$	19.1	$	—	$	19.1	$	(3.4	)	$	—	$	15.7	$	(4.0	)	$	—	$	(4.0	)	$	3.4	$	—	$	(0.6	)
Interest rate contracts		0.7		—		0.7		—			—		0.7		—			—		—			—		—		—
Foreign exchange contracts		10.5		—		10.5		(8.0	)		—		2.5		(19.1	)		—		(19.1	)		8.0		—		(11.1	)
Total	$	30.3	$	—	$	30.3	$	(11.4	)	$	—	$	18.9	$	(23.1	)	$	—	$	(23.1	)	$	11.4	$	—	$	(11.7	)

(a)	Includes related collateral offset in the Consolidated Balance Sheets.

(b)	Net fair value as recorded in the Consolidated Balance Sheets.

(c)	Fair value of assets that could be reported net in the Consolidated Balance Sheets.

(d)	Fair value of liabilities that could be reported net in the Consolidated Balance Sheets.

(e)	Fair value of assets and liabilities reported on a gross basis in the Consolidated Balance Sheets.

Foreign Exchange Risk. Foreign currency fluctuations affect our net investments in foreign subsidiaries and foreign currency cash flows related to third party purchases, intercompany loans, product shipments, and foreign-denominated commercial paper. We are also exposed to the translation of foreign currency earnings to the U.S. dollar. Our principal exposures are to the Australian dollar, Brazilian real, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen, Mexican peso, and Swiss franc. We mainly use foreign currency forward contracts to selectively hedge our foreign currency cash flow exposures. We also generally swap our foreign-denominated commercial paper borrowings and nonfunctional currency intercompany loans back to U.S. dollars or

the functional currency of the entity with foreign exchange exposure; the gains or losses on these derivatives offset the foreign currency revaluation gains or losses recorded in earnings on the associated borrowings. We generally do not hedge more than 18 months forward.

As of November 23, 2014, the net notional value of foreign exchange derivatives was $1.1 billion. The amount of hedge ineffectiveness was less than $1 million for the quarter and six-month periods ended November 23, 2014.

We also have many net investments in foreign subsidiaries that are denominated in euros. We previously hedged a portion of these net investments by issuing euro-denominated commercial paper and foreign exchange forward contracts. During the second quarter of fiscal 2014, we entered into a net investment hedge for a portion of our net investment in foreign operations denominated in euros by issuing €500.0 million of euro-denominated bonds. As of November 23, 2014, we had deferred net foreign currency losses of $42.4 million in AOCI associated with net investment hedging activity.

Venezuela is a highly inflationary economy and as such, we remeasure the value of the assets and liabilities of our Venezuelan subsidiary based on the exchange rate at which we expect to remit dividends in U.S. dollars. In February 2014, the Venezuelan government established a new foreign exchange market mechanism (“SICAD 2”) and has indicated that this will be the market through which U.S. dollars will be obtained for the remittance of dividends. This market has significantly higher foreign exchange rates than those available through the other foreign exchange mechanisms. In the six-month period ended November 23, 2014, we recorded an immaterial impact in unallocated corporate items resulting from the remeasurement of assets and liabilities of our Venezuelan subsidiary at the SICAD 2 rate. We have been able to access U.S. dollars through the SICAD 2 market. Our Venezuela operations represent less than 1 percent of our consolidated assets, liabilities, net sales, and segment operating profit. As of November 23, 2014, we had $1.0 million of non-U.S. dollar cash balances in Venezuela.

Equity Instruments. Equity price movements affect our compensation expense as certain investments made by our employees in our deferred compensation plan are revalued. We use equity swaps to manage this risk. As of November 23, 2014, the net notional value of our equity swaps was $119.4 million. These swap contracts mature in fiscal 2015.

Fair Value Measurements and Financial Statement Presentation

The fair values of our assets, liabilities, and derivative positions recorded at fair value and their respective levels in the fair value hierarchy as of November 23, 2014 and May 25, 2014, were as follows:

Nov. 23, 2014

Fair Values of Assets

Fair Values of Liabilities

In Millions

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Derivatives designated as hedging instruments:

Interest rate contracts (a) (b)

—

0.5

—

0.5

—

(2.5

)

—

(2.5

)

Foreign exchange contracts (c) (d)

—

12.6

—

12.6

—

(8.4

)

—

(8.4

)

Total

—

13.1

—

13.1

—

(10.9

)

—

(10.9

)

Derivatives not designated as hedging instruments:

Foreign exchange contracts (c) (d)

—

1.5

—

1.5

—

(4.9

)

—

(4.9

)

Equity contracts (a) (e)

—

(0.5

)

—

(0.5

)

Commodity contracts (c) (e)

0.3

0.4

—

0.7

—

(21.1

)

—

(21.1

)

Grain contracts (c) (e)

—

5.5

—

5.5

—

(6.8

)

—

(6.8

)

Long-lived assets (f)

—

11.5

—

11.5

—

Total

0.3

18.9

—

19.2

—

(33.3

)

—

(33.3

)

Other assets and liabilities reported at fair value:

Marketable investments (a) (g)

7.6

247.8

—

255.4

—

Total

7.6

247.8

—

255.4

—

Total assets, liabilities, and derivative positions recorded at fair value

7.9

279.8

—

287.7

—

(44.2

)

—

(44.2

)

(a)	These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.

(b)	Based on LIBOR and swap rates.

(c)	These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss position.

(d)	Based on observable market transactions of spot currency rates and forward currency prices.

(e)	Based on prices of futures exchanges and recently reported transactions in the marketplace.

(f)

We recorded a $15.2 million non-cash impairment charge in the second quarter to write down certain long-lived assets to their fair value of $11.5 million. Fair value was based on recently reported transactions for similar assets in the marketplace. These assets had a book value of $26.7 million and were associated with the restructuring actions described in Note 3.

(g)	Based on prices of common stock and bond matrix pricing.


	May 25, 2014
	Fair Values of Assets								Fair Values of Liabilities
In Millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2			Level 3		Total
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)	$	—	$	0.7	$	—	$	0.7	$	—	$	—		$	—	$	—
Foreign exchange contracts (c) (d)		—		9.9		—		9.9		—		(12.6	)		—		(12.6	)
Total		—		10.6		—		10.6		—		(12.6	)		—		(12.6	)
Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d)		—		0.6		—		0.6		—		(6.5	)		—		(6.5	)
Commodity contracts (c) (e)		11.1		8.0		—		19.1		—		(4.0	)		—		(4.0	)
Grain contracts (c) (e)		—		7.5		—		7.5		—		(4.9	)		—		(4.9	)
Total		11.1		16.1		—		27.2		—		(15.4	)		—		(15.4	)
Other assets and liabilities reported at fair value:
Marketable investments (a) (f)		7.2		318.8		—		326.0		—		—			—		—
Total		7.2		318.8		—		326.0		—		—			—		—
Total assets, liabilities, and derivative positions recorded at fair value	$	18.3	$	345.5	$	—	$	363.8	$	—	$	(28.0	)	$	—	$	(28.0	)

(a)	These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.

(b)	Based on LIBOR and swap rates.

(c)	These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss position.

(d)	Based on observable market transactions of spot currency rates and forward currency prices.

(e)	Based on prices of futures exchanges and recently reported transactions in the marketplace.

(f)	Based on prices of common stock and bond matrix pricing.

We did not significantly change our valuation techniques from prior periods.

Information related to our cash flow hedges, fair value hedges, and other derivatives not designated as hedging instruments for the quarter and six-month periods ended November 23, 2014 and November 24, 2013, were as follows:


	Interest Rate Contracts						Foreign Exchange Contracts					Equity Contracts				Commodity Contracts						Total
	Quarter Ended						Quarter Ended					Quarter Ended				Quarter Ended						Quarter Ended
In Millions	Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014		Nov. 24, 2013			Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013
Derivatives in Cash Flow Hedging Relationships:

Amount of gain (loss) recognized in other comprehensive income (OCI) (a)	$	—		$	(3.7	)	$	7.3	$	(6.5	)	$	—	$	—	$	—		$	—		$	7.3		$	(10.2	)

Amount of gain (loss) reclassified from AOCI into earnings (a) (b)		(2.6	)		(3.1	)		0.2		4.4			—		—		—			—			(2.4	)		1.3

Amount of gain recognized in earnings (c)		—			—			0.1		—			—		—		—			—			0.1			—

Derivatives in Fair Value Hedging Relationships:

Amount of net gain recognized in earnings (d)		1.2			1.5			—		—			—		—		—			—			1.2			1.5

Derivatives Not Designated as Hedging Instruments:

Amount of gain (loss) recognized in earnings (d)		—			—			2.3		(6.0	)		1.1		5.1		(40.2	)		(3.7	)		(36.8	)		(4.6	)

(a)	Effective portion.

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

(c)	Loss recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts and interest, net for interest rate contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.

(d)	Gain (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for equity contracts and foreign exchange contracts.


	Interest Rate Contracts						Foreign Exchange Contracts						Equity Contracts				Commodity Contracts						Total
	Six-Month Period Ended						Six-Month Period Ended						Six-Month Period Ended				Six-Month Period Ended						Six-Month Period Ended
In Millions	Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013
Derivatives in Cash Flow Hedging Relationships:

Amount of gain (loss) recognized in other comprehensive income (OCI) (a)	$	—		$	10.7		$	5.8		$	(2.8	)	$	—	$	—	$	—		$	—		$	5.8		$	7.9

Amount of gain (loss) reclassified from AOCI into earnings (a) (b)		(5.2	)		(6.1	)		(1.5	)		9.5			—		—		—			—			(6.7	)		3.4

Amount of gain (loss) recognized in earnings (c)		—			—			0.1			(0.2	)		—		—		—			—			0.1			(0.2	)

Derivatives in Fair Value Hedging Relationships:

Amount of net gain recognized in earnings (d)		0.9			0.3			—			—			—		—		—			—			0.9			0.3

Derivatives Not Designated as Hedging Instruments:

Amount of gain (loss) recognized in earnings (d)		—			—			0.9			(11.1	)		5.2		5.6		(81.6	)		(16.0	)		(75.5	)		(21.5	)

(a)	Effective portion.

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

(c)	Loss recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts and interest, net for interest rate contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.

(d)	Gain (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for equity contracts and foreign exchange contracts.

Amounts Recorded in Accumulated Other Comprehensive Loss. As of November 23, 2014, the after-tax amounts of unrealized gains and losses in AOCI related to hedge derivatives follows:


In Millions	After-Tax Gain/(Loss)
Unrealized losses from interest rate cash flow hedges	$	(36.1	)
Unrealized gains from foreign currency cash flow hedges		6.8
After-tax loss in AOCI related to hedge derivatives	$	(29.3	)

The net amount of pre-tax gains and losses in AOCI as of November 23, 2014, that we expect to be reclassified into net earnings within the next 12 months is $2.0 million of loss.

Credit-Risk-Related Contingent Features. Certain of our derivative instruments contain provisions that require us to maintain an investment grade credit rating on our debt from each of the major credit rating agencies. If our debt were to fall below investment grade, the counterparties to the derivative instruments could request full collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on November 23, 2014, was $37.8 million. We would be required to post this amount of collateral to the counterparties if the contingent features were triggered.

Credit Risk. We enter into interest rate, foreign exchange, commodity, and equity derivatives primarily with a diversified group of highly rated counterparties. We continually monitor our positions and the credit ratings of the counterparties involved and, by policy, limit the amount of credit exposure to any one party. These transactions may expose us to potential losses due to the risk of nonperformance by these counterparties; however, we have not incurred a material loss. We also enter into commodity futures transactions through various regulated exchanges.

The amount of loss due to the credit risk of the counterparties, should the counterparties fail to perform according to the terms of the contracts, is $5.6 million against which we do not hold any collateral. Under the terms of master swap agreements, some of our transactions require collateral or other security to support financial instruments subject to threshold levels of exposure and counterparty credit risk. Collateral assets are either cash or U.S. Treasury instruments and are held in a trust account that we may access if the counterparty defaults.

We offer certain suppliers access to a third party service that allows them to view our scheduled payments online. The third party service also allows suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third party, or any financial institutions concerning this service. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of November 23, 2014, $436.8 million of our total accounts payable is payable to suppliers who utilize this third party service.

(7) Debt

The components of notes payable were as follows:


In Millions	Nov. 23, 2014		May 25, 2014
U.S. commercial paper	$	1,814.9	$	1,007.6
Financial institutions		256.5		104.1
Total	$	2,071.4	$	1,111.7

To ensure availability of funds, we maintain bank credit lines sufficient to cover our outstanding short-term borrowings. 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.

In June 2014, our subsidiary, Yoplait S.A.S. entered into a €200.0 million fee-paid committed credit facility that is scheduled to expire in June 2019.

The following table details the fee-paid committed and uncommitted credit lines we had available as of November 23, 2014:


In Billions	Facility Amount		Borrowed Amount
Credit facility expiring:
April 2017	$	1.7	$	—
May 2019		1.0		—
June 2019		0.3		0.1

Total committed credit facilities		3.0		0.1
Uncommitted credit facilities		0.4		0.2
Total committed and uncommitted credit facilities	$	3.4	$	0.3

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 23, 2014.

Long-Term Debt

In October 2014, we issued $500.0 million aggregate principal amount of 1.4 percent fixed-rate notes due October 20, 2017 and $500.0 million aggregate principal amount of 2.2 percent fixed-rate notes due October 21, 2019. Interest on the notes is payable semi-annually in arrears. The notes may be redeemed in whole, or in part, at our option at any time at the applicable redemption price. The notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds were used to fund our acquisition of Annie’s and for general corporate purposes.

In June 2014, we issued €200.0 million principal amount of 2.2 percent fixed-rate senior unsecured notes due June 24, 2021 in a private placement offering. Interest on the notes is payable semi-annually. The notes may be redeemed in whole, or in part, at our option at any time for a specific make-whole amount and include a change of control repurchase provision. The net proceeds were used to refinance existing debt.

In May 2014, we repaid $400.0 million of floating-rate notes and $300.0 million of 1.55 percent fixed-rate notes.

In January 2014, we issued $500.0 million aggregate principal amount of 3.65 percent fixed-rate notes due February 15, 2024 and $250.0 million aggregate principal amount of floating-rate notes due January 28, 2016. Interest on the fixed-rate notes is payable semi-annually in arrears. The fixed-rate notes may be redeemed in whole, or in part, at our option at any time prior to November 15, 2023 for a specified make whole amount and any time on or after that date at par. The floating-rate notes bear interest equal to three-month LIBOR plus 20 basis points, subject to quarterly reset. Interest on the floating-rate notes is payable quarterly in arrears. The floating-rate notes are not redeemable prior to maturity. The fixed-rate and floating-rate notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds were used for general corporate purposes and to reduce our commercial paper borrowings.

In November 2013, we issued €500.0 million aggregate principal amount of 2.1 percent fixed-rate notes due November 16, 2020. Interest on the notes is payable annually in arrears. The notes may be redeemed in whole, or in part, at our option at any time prior to August 16, 2020 for a specified make whole amount and any time on or after that date at par. These notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds were used for general corporate purposes and to reduce our commercial paper borrowings.

In January 2013, we issued $250.0 million aggregate principal amount of floating-rate notes due January 29, 2016. In October 2013, we issued an additional $250.0 million aggregate principal amount of these notes. The notes bear interest equal to three-month LIBOR plus 30 basis points, subject to quarterly reset. Interest on the notes is payable quarterly in arrears. The notes are not redeemable prior to maturity. These notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds were used to reduce our commercial paper borrowings.

In August 2013, we repaid $700.0 million of 5.25 percent fixed-rate notes.

Certain of our long-term debt agreements contain restrictive covenants. As of November 23, 2014, we were in compliance with all of these covenants.

(8) Redeemable and Noncontrolling Interests

We have a 51 percent controlling interest in Yoplait S.A.S. and a 50 percent interest in Yoplait Marques S.A.S. and Libertè Marques, S.a.r.l. Sodiaal International (Sodiaal) holds the remaining interests in each of the entities. On the acquisition date in fiscal 2012, we recorded the $904.4 million fair value of Sodiaal’s 49 percent euro-denominated interest in Yoplait S.A.S. as a redeemable interest on our Consolidated Balance Sheets. Sodiaal has the ability to put a limited portion of its redeemable interest to us at fair value once per year through a maximum term expiring December 2020. 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 S.A.S. pays dividends annually if it meets certain financial metrics set forth in its shareholders’ agreement. As of November 23, 2014, the redemption value of the euro-denominated redeemable interest was $901.4 million.

In addition, a subsidiary of Yoplait S.A.S. has entered into an exclusive milk supply agreement for its European operations with Sodiaal through July 1, 2021. Net purchases totaled $148.7 million for the six-month period ended November 23, 2014, and $156.2 million for the six-month period ended November 24, 2013.

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

The third-party holder of the Class A Interests in our General Mills Cereals, LLC (GMC) consolidated subsidiary receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate, currently equal to the sum of three-month LIBOR plus 110 basis points, to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $251.5 million). The preferred return rate is adjusted every three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction.

Our noncontrolling interests contain restrictive covenants. As of November 23, 2014, we were in compliance with all of these covenants.

(9) Stockholders’ Equity

During the fourth quarter of fiscal 2013, we entered into an accelerated share repurchase (ASR) agreement with an unrelated third party financial institution to repurchase an aggregate of $300.0 million of our outstanding common stock. Under the ASR agreement, we paid $300.0 million to the financial institution and received 5.5 million shares of common stock with a fair value of $270.0 million during the fourth quarter of fiscal 2013. We received an additional 0.6 million shares of common stock upon completion of the ASR agreement during the first quarter of fiscal 2014. As of May 26, 2013, we recorded this transaction as an increase in treasury stock of $270.0 million, and recorded the remaining $30.0 million as a decrease to additional paid in capital on our Consolidated Balance Sheets. Upon completion of the ASR agreement in the first quarter of fiscal 2014, we reclassified the $30.0 million to treasury stock from additional paid-in capital on our Consolidated Balance Sheets.

The following tables provide details of total comprehensive income (loss):


	Quarter Ended Nov. 23, 2014															Quarter Ended Nov. 24, 2013
	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							$	346.1		$	4.0		$	5.3								$	549.9		$	2.0	$	8.9
Other comprehensive income (loss):
Foreign currency translation	$	(221.7	)	$	—			(221.7	)		(26.0	)		(49.6	)	$	43.0		$	—			43.0			5.3		13.8
Other fair value changes:
Securities		0.4			(0.2	)		0.2			—			—			0.8			(0.3	)		0.5			—		—
Hedge derivatives		7.9			(1.7	)		6.2			—			(0.4	)		(8.8	)		1.8			(7.0	)		—		(1.2	)
Reclassification to earnings:
Hedge derivatives (a)		1.4			(0.3	)		1.1			—			0.7			(0.8	)		(0.3	)		(1.1	)		—		(0.4	)
Amortization of losses and prior service costs (b)		47.4			(17.9	)		29.5			—			—			44.6			(16.3	)		28.3			—		—
Other comprehensive income (loss):	$	(164.6	)	$	(20.1	)		(184.7	)		(26.0	)		(49.3	)	$	78.8		$	(15.1	)		63.7			5.3		12.2
Total comprehensive income (loss)							$	161.4		$	(22.0	)	$	(44.0	)							$	613.6		$	7.3	$	21.1

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

(b)	Loss reclassified from AOCI into earnings is reported in SG&A expenses.


	Six-Month Period Ended Nov. 23, 2014															Six-Month Period Ended Nov. 24, 2013
	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							$	691.3		$	5.6		$	10.9								$	1,009.2		$	4.1	$	15.6
Other comprehensive income (loss):
Foreign currency translation	$	(282.1	)	$	—			(282.1	)		(37.6	)		(70.1	)	$	(78.7	)	$	—			(78.7	)		17.3		36.9
Other fair value changes:
Securities		0.6			(0.3	)		0.3			—			—			1.1			(0.4	)		0.7			—		—
Hedge derivatives		7.1			(1.5	)		5.6			—			(1.0	)		9.0			(4.2	)		4.8			—		(0.9	)
Reclassification to earnings:
Hedge derivatives (a)		4.8			(0.9	)		3.9			—			1.4			(2.6	)		(0.3	)		(2.9	)		—		(0.6	)
Amortization of losses and prior service costs (b)		86.3			(33.3	)		53.0			—			—			87.2			(32.5	)		54.7			—		—
Other comprehensive income (loss)	$	(183.3	)	$	(36.0	)		(219.3	)		(37.6	)		(69.7	)	$	16.0		$	(37.4	)		(21.4	)		17.3		35.4
Total comprehensive income (loss)							$	472.0		$	(32.0	)	$	(58.8	)							$	987.8		$	21.4	$	51.0

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

(b)	Loss reclassified from AOCI into earnings is reported in SG&A expenses.

Except for reclassifications to earnings, changes in other comprehensive income (loss) are primarily non-cash items.

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


In Millions	Nov. 23, 2014			May 25, 2014
Foreign currency translation adjustments	$	(90.8	)	$	191.3
Unrealized gain (loss) from:
Securities		3.2			2.9
Hedge derivatives		(29.3	)		(38.8	)
Pension, other postretirement, and postemployment benefits:
Net actuarial loss		(1,423.8	)		(1,469.2	)
Prior service costs		(18.9	)		(26.5	)
Accumulated other comprehensive loss	$	(1,559.6	)	$	(1,340.3	)

(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 25, 2014.

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. 23,
2014

Nov. 24,
2013

Nov. 23,
2014

Nov. 24,
2013

Compensation expense related to stock-based payments

22.1

27.8

67.7

69.1

As of November 23, 2014, unrecognized compensation expense related to non-vested stock options, restricted stock units, and performance award units was $139.8 million. This expense will be recognized over 27 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. 23, 2014		Nov. 24, 2013
Net cash proceeds	$	35.9	$	27.5
Intrinsic value of options exercised	$	40.1	$	71.0

We estimate the fair value of each 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 25, 2014.

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. 23, 2014			Nov. 24, 2013
Estimated fair values of stock options granted	$	7.22		$	6.03
Assumptions:
Risk-free interest rate		2.6	%		2.6	%
Expected term		8.5 years			9.0 years
Expected volatility		17.5	%		17.4	%
Dividend yield		3.0	%		3.1	%

Information on stock option activity follows:


	Options Outstanding (Thousands)			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (Millions)
Balance as of May 25, 2014		44,169.0		$	32.10
Granted		2,253.1			53.70
Exercised		(1,850.4	)		26.16
Forfeited or expired		(21.6	)		43.79
Outstanding as of Nov. 23, 2014		44,550.1		$	33.44		4.63	$	824.5
Exercisable as of Nov. 23, 2014		32,407.5		$	29.83		3.39	$	713.5

Information on restricted stock and performance award unit activity follows:


	Equity Classified					Liability Classified
	Share- Settled Units (Thousands)			Weighted- Average Grant-Date Fair Value		Share- Settled Units (Thousands)			Weighted- Average Grant-Date Fair Value		Cash-Settled Share-Based Units (Thousands)			Weighted- Average Grant-Date Fair Value
Non-vested as of May 25, 2014		7,893.7		$	40.81		249.5		$	25.67		822.8		$	36.52
Granted		1,575.4			53.46		49.5			53.70		—			—
Vested		(1,899.0	)		35.07		(54.9	)		37.63		(822.1	)		37.40
Forfeited		(116.3	)		44.24		(3.8	)		43.60		(0.7	)		37.40
Non-vested as of Nov. 23, 2014		7,453.8		$	44.32		240.3		$	44.37		—		$	—

The total grant-date fair value of restricted stock unit awards that vested in the six-month period ended November 23, 2014 was $99.0 million, and restricted stock units with a grant-date fair value of $96.4 million vested in the six-month period ended November 24, 2013.

(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. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Net earnings attributable to General Mills	$	346.1	$	549.9	$	691.3	$	1,009.2


Average number of common shares - basic EPS		602.6		633.2		607.6		638.1
Incremental share effect from: (a)
Stock options		11.3		12.2		11.7		12.5
Restricted stock, restricted stock units, and other		4.5		4.6		4.5		4.5
Average number of common shares - diluted EPS		618.4		650.0		623.8		655.1

Earnings per share - basic	$	0.58	$	0.87	$	1.14	$	1.58
Earnings per share - diluted	$	0.56	$	0.84	$	1.11	$	1.54

(a)	Incremental shares from stock options and restricted stock units are computed by the treasury stock method. Stock options and restricted stock 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. 23,
2014

Nov. 24,
2013

Nov. 23,
2014

Nov. 24,
2013

Anti-dilutive stock options and restricted stock units

2.4

2.0

2.0

3.4

(12) Share Repurchases

During the second quarter of fiscal 2015, we repurchased 9.8 million shares of common stock for an aggregate purchase price of $506.3 million. During the six-month period ended November 23, 2014, we repurchased 18.6 million shares of common stock for an aggregate purchase price of $968.8 million. During the second quarter of fiscal 2014, we repurchased 11.5 million shares of common stock with an aggregate purchase price of $565.7 million. During the six-month period ended November 24, 2013, we repurchased 18.0 million shares of common stock for an aggregate purchase price of $893.0 million, including 0.6 million shares pursuant to the completion of an ASR agreement.

(13) Statements of Cash Flows

During the six-month period ended November 23, 2014, we made net cash interest payments of $157.5 million, compared to $152.2 million in the same period last year. Also, in the six-month period ended November 23, 2014, we made tax payments of $353.1 million, compared to $378.2 million in the same period last year.

(14) Retirement and Postemployment Benefits

Components of net pension, other postretirement, and postemployment expense were as follows:


	Defined Benefit Pension Plans						Other Postretirement Benefit Plans						Postemployment Benefit Plans
	Quarter Ended						Quarter Ended						Quarter Ended
In Millions	Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014		Nov. 24, 2013
Service cost	$	34.4		$	33.3		$	5.6		$	5.5		$	1.9	$	2.0
Interest cost		62.4			59.9			11.7			12.5			1.0		1.1
Expected return on plan assets		(119.2	)		(113.9	)		(10.1	)		(8.6	)		—		—
Amortization of losses		35.4			38.3			1.3			3.9			0.2		0.1
Amortization of prior service costs (credits)		1.8			1.4			(0.4	)		(0.8	)		0.6		0.6
Other adjustments		4.4			—			0.3			—			3.2		2.5
Settlement or curtailment losses (gains)		10.1			—			0.8			(2.8	)		—		—
Net expense	$	29.3		$	19.0		$	9.2		$	9.7		$	6.9	$	6.3


	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. 23, 2014			Nov. 24, 2013			Nov. 23, 2014			Nov. 24, 2013			Nov. 23, 2014		Nov. 24, 2013
Service cost	$	68.8		$	66.5		$	11.2		$	11.4		$	3.8	$	3.9
Interest cost		124.9			119.7			23.5			25.1			2.1		2.1
Expected return on plan assets		(238.5	)		(227.7	)		(20.1	)		(17.3	)		—		—
Amortization of losses		70.8			75.8			2.5			7.7			0.4		0.3
Amortization of prior service costs (credits)		3.7			2.8			(0.8	)		(1.7	)		1.2		1.2
Other adjustments		4.4			—			0.3			—			6.3		5.0
Settlement or curtailment losses (gains)		10.1			—			0.8			(2.8	)		—		—
Net expense	$	44.2		$	37.1		$	17.4		$	22.4		$	13.8	$	12.5

(15) Business Segment Information

We operate in the consumer foods industry. We have three operating segments by type of customer and geographic region as follows: U.S. Retail; International; and Convenience Stores and Foodservice.

Beginning in the first quarter of fiscal 2015, we have changed how we assess operating segment performance to exclude the asset and liability remeasurement impact from hyperinflationary economies. This impact is now included in unallocated corporate items. All periods presented have been changed to conform to this presentation.

Our U.S. Retail segment reflects business with a wide variety of grocery stores, mass merchandisers, membership stores, natural food chains, and drug, dollar and discount chains operating throughout the United States. Our product categories in this business segment are ready-to-eat cereals, refrigerated yogurt, soup, meal kits, shelf stable and frozen vegetables, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and a wide variety of organic products including meal kits, granola bars, and cereal.

Our International segment consists of retail and foodservice businesses outside of the United States. Our product categories include ready-to-eat cereals, shelf stable and frozen vegetables, meal kits, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza snacks, refrigerated yogurt, and grain and fruit snacks, and super-premium ice cream and frozen desserts. We also sell super-premium ice cream and frozen desserts directly to consumers through owned retail shops. Our International segment also includes products manufactured in the United States for export, mainly to Caribbean and Latin American markets, as well as products we manufacture for sale to our international joint ventures. Revenues from export activities and franchise fees are reported in the region or country where the end customer is located.

In our Convenience Stores and Foodservice segment our major product categories are ready-to-eat cereals, snacks, refrigerated yogurt, frozen breakfast, unbaked and fully baked frozen dough products, baking mixes, and flour. 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. Substantially all of this segment’s operations are located in the United States.

Operating profit for these segments excludes unallocated corporate items 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 and other items that are not part of our measurement of segment operating performance. These include gains and losses arising from the revaluation of certain grain inventories and gains and losses from mark-to-market valuation of certain commodity positions until passed back to our operating segments. These items affecting operating profit are centrally managed at the corporate level and are excluded from the measure of segment profitability reviewed by executive management. Under our supply chain organization, our manufacturing, warehouse, and distribution activities are substantially integrated across our operations in order to maximize efficiency and productivity. As a result, fixed assets and depreciation and amortization expenses are neither maintained nor available by operating segment.

Our operating segment results were as follows:


	Quarter Ended				Six-Month Period Ended
In Millions	Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Net sales:
U.S. Retail	$	2,861.6	$	2,965.4	$	5,305.9	$	5,549.5
International		1,321.1		1,403.3		2,672.2		2,724.1
Convenience Stores and Foodservice		529.5		507.0		1,002.5		974.8
Total	$	4,712.2	$	4,875.7	$	8,980.6	$	9,248.4
Operating profit:
U.S. Retail	$	616.1	$	681.6	$	1,073.3	$	1,293.5
International		134.3		153.2		280.3		278.8
Convenience Stores and Foodservice		96.2		84.9		183.5		159.0
Total segment operating profit		846.6		919.7		1,537.1		1,731.3
Unallocated corporate items		73.0		48.9		192.0		122.9
Restructuring, impairment, and other exit costs		214.6		0.7		228.6		3.5
Operating profit	$	559.0	$	870.1	$	1,116.5	$	1,604.9

(16) New Accounting Pronouncements

In the first quarter of fiscal 2015, we adopted new accounting requirements on the financial statement presentation of unrecognized tax benefits when a net operating loss, a similar tax loss or a tax credit carryforward exists. The adoption of this guidance did not have an impact on our results of operations or financial position.

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 25, 2014, 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

For the second quarter of fiscal 2015, net sales declined 3 percent to $4,712 million. Total segment operating profit was $847 million, 8 percent lower than the second quarter of fiscal 2014 and 6 percent lower on a constant currency basis. Diluted earnings per share (EPS) of $0.56 was down 33 percent compared to the second quarter of fiscal 2014. Diluted EPS excluding certain items affecting comparability was $0.80 in the second quarter of fiscal 2015 compared to $0.83 in the same period last year. Diluted EPS excluding certain items affecting comparability on a constant currency basis was flat compared to the second quarter of fiscal 2014 (see the “Non-GAAP Measures” section below for our use of these measures not defined by GAAP).

Net sales declined 3 percent to $4,712 million for the second quarter of fiscal 2015 compared to the same period last year due to a 2 percentage point decrease in contributions from volume growth and 2 percentage points of unfavorable foreign currency exchange, partially offset by 1 percentage point of favorable net price realization and mix.

Components of net sales growth

Second Quarter of Fiscal 2015 vs.

Second Quarter of Fiscal 2014

U.S. Retail

International

Convenience Stores
and Foodservice

Combined
Segments

Contributions from volume growth (a)

-3pts

Flat

-1pt

-2pts

Net price realization and mix

-1pt

3pts

5pts

1pt

Foreign currency exchange

-9pts

-2pts

Net sales growth

-4pts

-6pts

4pts

-3pts

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

Cost of sales decreased $21 million from the second quarter of fiscal 2014 to $3,093 million. The decrease was driven by a $59 million decrease in cost of sales attributable to lower volume and a $7 million decrease attributable to product mix. We also recorded $19 million of restructuring charges related to Project Century in the second quarter of fiscal 2015. In the second quarter of fiscal 2015, we recorded a $5 million net increase in cost of sales related to the mark-to-market valuation of certain commodity positions and grain inventories compared to a net decrease