Midyear Report 2002
General Mills
The New
The first half of General Mills’ 2002 fiscal year ended
on a very high note, as we completed our acquisition
of the worldwide Pillsbury businesses and brought
27,000 people together to form our new organiza-
tion.We believe more strongly than ever that this
acquisition enhances General Mills’ future growth
prospects, by giving us leading brand positions in
attractive new
retail food cate-
gories, by expand-
ing our reach in
foodservice
channels, and by
increasing our
presence and
growth capabilities
in international
markets. Pages 2
through 4 of this report highlight some of these
new business opportunities and introduce the new
members of General Mills’ senior leadership team.
We’ve also completed two transactions related to
our Pillsbury acquisition. In order to gain regulatory
clearance for that acquisition, we divested the
C O N T E N T S
SHAREHOLDER INFORMATION
Transfer Agent, Registrar, Dividend
Payments, Direct Deposit and
Dividend Reinvestment Plan
Wells Fargo Bank Minnesota, N.A.
161 North Concord Exchange
P.O. Box 64854
St. Paul, MN 55164-0854
Phone: (800) 670-4763
or (651) 450-4084
E-mail:
stocktransfer@WellsFargo.com
Account access via Web site:
www.shareowneronline.com
Shareholder Reports/
Investor Inquiries
Shareholders seeking information
about General Mills are invited to
contact the Investor Relations
Department at (800) 245-5703.
Within the 612, 651, 763 or 952
area codes, call (763) 764-3202.
Company Addresses
Number One General Mills
Minneapolis, MN 55426
Phone: (763) 764-7600
Mailing Address:
P.O. Box 1113
Minneapolis, MN 55440
For more information about
General Mills, including financial
results, SEC filings and product
news, visit our newly updated
Web site at www.generalmills.com.
This report to shareholders contains forward-looking statements based on management’s current views
and assumptions.Actual events may differ. Please refer to our 2001 Form 10-K for further discussion
of these matters.
© 2002 General Mills, Inc.
Printed on recycled paper contain-
ing at least 10 percent post-consumer
material.
R E P O R T
T O
S H A R E
“We believe more
strongly than ever
that the Pillsbury
acquisition enhances
our future growth
prospects.”
Visit us on the Web
www.generalmills.com
1 From the Chairman
2 The new General Mills
Pillsbury enhances our
portfolio in many ways.
5 A tale of two companies
From opposite sides of the
Mississippi, Pillsbury and
General Mills have grown
up together.
6 Annual Meeting summary
7 Financials
12 Briefly noted
Cheerios turns 60, new
product news and more.
14 2002 Olympic Winter Games
General Mills is an Official
Supplier to the 2002 Games.
Boulevard
H O L D E R S
Pillsbury desserts and specialty products businesses
along with certain General Mills brands. Our sale
of these businesses to International Multifoods
Corporation was completed on Nov. 13, 2001.
Subsequent to the end of the second quarter, we
completed a transaction with Nestlé USA, in
which it exercised its right to purchase our
50-percent equity stake in a U.S. ice cream joint
venture. Pillsbury and Nestlé formed this joint
venture in 1999, and Nestlé’s right to buy
Pillsbury’s 50-percent interest was triggered by our
purchase of Pillsbury.This transaction also included
a license for the
Häagen-Dazs brand in Canada
.
We will continue to own the
Häagen-Dazs business
outside the United States and Canada. Combined
cash proceeds to General Mills from these transac-
tions total $957 million.We intend to use the after-
tax proceeds, which we estimate will exceed
$600 million, to reduce the debt we incurred
to purchase Pillsbury.
Our reported financial results for the first half
of fiscal 2002 include three weeks of Pillsbury per-
formance.Total sales rose 15 percent to $4.11 bil-
lion. If you exclude sales contributed by Pillsbury
and by businesses we’ve divested, our first-half
revenues grew 4 percent. First-half earnings after
tax before unusual items grew 5 percent to
$381.1 million. Earnings per share before unusual
items totaled $1.24, a penny below prior-year
results.This reflects the impact of increased shares
outstanding, as we issued a net 79 million shares of
General Mills common stock to Diageo in con-
junction with the Pillsbury acquisition.
General Mills’ shares performed well in calendar
2001 relative to our food company peers and the
broader market. For the year, General Mills’ stock
price rose 17 percent, while the S&P Packaged
Foods Index declined 1 percent, and the S&P 500
Index fell 13 percent.Total return to General Mills
shareholders in calendar 2001, including both stock
price appreciation and dividends, was 20 percent.
On Dec. 17, 2001, your board of directors approved
a quarterly dividend of $.275 per share, payable
Feb. 1, 2002, to shareholders of record Jan. 10,
2002.While our number of shares outstanding has
increased significantly, we intend to maintain our
prevailing annual dividend rate of $1.10 per share.
As we move into the second half of the fiscal
year, our focus is on continuing to make good
progress in our integration of Pillsbury and achieve
our targeted financial objectives for the year.We
also have some new products and merchandising
activities planned – you’ll find some of these events
described on pages 12 to 14 of this report.
In closing, I want to acknowledge the 27,000
people working across General Mills to drive our
integration forward and deliver strong business
results.The talent and commitment of General
Mills people give me great confidence in our
future prospects.
Sincerely,
Stephen W. Sanger
Chairman and Chief Executive Officer
January 25, 2002
120
100
80
Mar
May
Jul
Sep
No
v
In 2001, General Mills stock outperformed both the
S&P 500 Index and the S&P Packaged Foods Index.
Calendar 2001 Stock Price Trend
(
Index Dec. 29, 2000 = 100)
General Mills +17%
S&P Packaged
Foods -1%
S&P 500
-13%
2
G E N E R A L M I L L S M I D Y E A R R E P O R T
General
The New
MORE CONVENIENCE
DOUGH EXPERTISE
What’s new about General Mills?
Lots of things! With the acquisi-
tion of Pillsbury, our company has
gained new product lines, such as refrigerated
and frozen dough, and the technologies that
go with them.We have increased our portfolio
of convenient meals for consumers strapped
for time.And our presence around the globe
has expanded significantly with the addition of
Pillsbury’s international businesses.All these
additions give us more opportunities to grow.
DOUGH KNOW-HOW
Since acquiring a small, refrigerated dough
business in 1951, Pillsbury has changed the
shape of baking. Consumers embraced the
cans of
Poppin’ Fresh dough, which provided a
convenient way to bake fresh rolls and biscuits,
eliminating the time and mess involved in bak-
ing from scratch. Five decades later, Pillsbury has
a 74 percent dollar share of a category that gen-
erates $1.4 billion in annual retail sales.
In 2001, Pillsbury took baking convenience
a step further, introducing freezer-to-oven
retail dough products. Using innovative form-
ing and packaging technology, these products
give consumers quick, easy-to-prepare biscuits
in a portion-controlled, resealable bag.This
new line joins
Pillsbury frozen breakfast pas-
tries and waffles in the freezer aisle.
The
Totino’s brand, a part of the Pillsbury
portfolio since 1975, uses dough to create
savory, frozen snacks and pizzas.These products
appeal to moms and teens for an after-school
snack or quick dinner.
Over the past 10 years, the combination
of Pillsbury’s refrigerated and frozen dough
products has generated 7 percent compound
annual sales growth.We expect to see contin-
ued good growth as we capitalize on Pillsbury’s
dough expertise.
Dough innovation also has played a major
role in the success of Pillsbury’s bakeries and
foodservice business. Foodservice operators
want products that can reduce preparation time
Mills
GLOBAL GROWTH
PETER ROBINSON
SENIOR VICE PRESIDENT
PRESIDENT, PILLSBURY USA
U.K. native Peter Robinson explains that he
wanted to tour the United States while in col-
lege.“To raise money for a Greyhound bus
ticket, I took my first job in the foods industry,
as a cutter in a meat packing plant.” So began a
31-year career in consumer foods.While
running Pillsbury’s North American busi-
ness for three years, Robinson has been
working hard to develop dough-based
products to meet the needs of con-
sumers everywhere. He is especially
pleased with Pillsbury’s latest innova-
tion – freezer-to-oven biscuits,
packaged in resealable bags.These
biscuits have been so popular,
Robinson and his team have
expanded the concept to
cookies, sweet rolls and dinner
rolls. By focusing on product
quality and meeting consumer
needs with innovative, convenient
new offerings, Robinson expects
good growth ahead for the
Pillsbury
mega-brand.
PAUL OLIVER
SENIOR VICE PRESIDENT
PRESIDENT, BAKERIES AND FOODSERVICE
When Paul Oliver moved to Minneapolis nine
years ago to lead the Bakeries and Foodservice
division for Pillsbury, he wasn’t sure about leav-
ing his native Canada. After all, he had spent 11
years developing the Canadian business for
Pillsbury. Turns out it was a good move.
Oliver has grown the Bakeries and
Foodservice business to more than
$1 billion in sales.When combined with
General Mills’ foodservice business,
Oliver’s expanded division grows to
$1.7 billion in sales. Oliver developed
the Bakeries and Foodservice busi-
ness by expanding Pillsbury’s exper-
tise with dough, and partnering
with restaurants and bakeries to
create products customized for
that specific operator’s needs.
“I am excited about our contin-
uing opportunities for cus-
tomized products,” Oliver says,
“and about the expanded portfo-
lio of General Mills products we
have to offer foodservice operators.”
and waste. Pillsbury has worked hard to meet
those needs by offering dough products in a
variety of forms, including frozen ready-to-bake,
partially baked, and heat-and-serve.
The next time you grab a sandwich at
Subway or a meal with a biscuit at KFC, you
will be enjoying a
Pillsbury dough product.
Pillsbury has developed expertise in customizing
products for foodservice operators. Pillsbury also
provides mixes for bakeries in grocery stores like
Kroger and Albertson’s. In addition, customized
mixes are sold to wholesale bakeries that make
dough-based products for brands like
Entenmann’s and Hostess.
A TECHNOLOGICAL EDGE
Pillsbury has been very successful in using tech-
nology to develop and manufacture new prod-
ucts. Pillsbury researchers and product developers
have built strong capabilities in forming, filling
and packaging dough. Pillsbury has made tech-
nological advances in a number of other areas,
too. It has created proprietary vegetable seeds
RORY DELANEY
SENIOR VICE PRESIDENT
INNOVATION AND TECHNOLOGY
Irish-born Rory Delaney says the best advice he
ever received paraphrases Winston Churchill
and says,“Courage is what it takes to stand up
and speak, and also what it takes to sit down
and listen.” During his 31 years of working in
the field of technology development for con-
sumer products companies, Delaney has taken
that advice to heart by championing break-
through technologies while also listening to
consumers.A good example of this is the
development of
Pillsbury fresh bread.
By applying proprietary technology
that extends a product’s shelf life,
this bread not only tastes great,
but stays fresh twice as long as
traditional bread. In his new
position at General Mills,
Delaney, in partnership with
Danny Strickland, is leading
the combined Innovation,
Technology and Quality orga-
nization to further develop
technological horsepower
for the new General Mills.
LUCIO RIZZI
SENIOR VICE PRESIDENT
PRESIDENT, GENERAL MILLS INTERNATIONAL
Who do you know who has lived in seven
countries and can speak five languages? Meet
Lucio Rizzi, president of General Mills’
International division.Throughout his 32 years
of experience in the consumer products field,
Rizzi has lived in France, Iran, Colombia, Brazil,
Belgium and the United States, in addition to
his native Italy. Rizzi joined Pillsbury in 1994
and, for the most part, started Pillsbury’s
international business from scratch.“I particu-
larly enjoy finding a locally favorite food and
turning it into a global success. For
example,
Häagen-Dazs Dulce de
Leche ice cream was developed for
Latin America and now is a best-
selling flavor in Asia,” he says.
Under his leadership, Pillsbury’s
international presence has
grown significantly in the
past seven years and,
when combined with
General Mills’ wholly
owned businesses, totals
$1 billion in sales with a
presence in 70 countries.
that increase the size and quality of a harvest.And
it has developed tools to link product design
expertise directly with the consumer, resulting in
the creation of whole new categories, such as
frozen meal starters and value-added sauces and
vegetables. By combining Pillsbury’s technologi-
cal expertise with ours, we have greatly expanded
our ability to develop new products.
MORE CONVENIENT MEALS
When you need a meal fast, General Mills now
has more quick and easy options to answer the
question,“What’s for dinner?”
Old El Paso dinner
kits give you almost everything you need to
prepare a quick meal with a Mexican flavor.
Progresso soup is a ready-to-serve, hot and hearty
meal alternative for lunch or supper.And
Green
Giant has gone beyond plain vegetables with its
frozen
Create a Meal! dinners.These dinners-in-a-
bag pioneered the frozen meal starter category,
and became even more convenient when meat
was added to the bag.With Pillsbury’s products
added to our portfolio, nearly 80 percent of our
retail sales will come from products that are ready
to eat in 15 minutes or less.
INTERNATIONAL EXPANSION
When in Rome … have an
Old El Paso dinner.
When in France, enjoy a product considered a
special treat:
Green Giant canned corn.And when
in Japan, chill out with
Häagen-Dazs Green Tea
ice cream. Pillsbury brings more global brands in
promising international markets to the new
General Mills, resulting in an International
division with sales of over $1 billion. In addition
to the brands already mentioned, Pillsbury is
known internationally for dough-based products
such as empanadas in Argentina and filled
dumplings in China.These products can be
found under either the Pillsbury name or local
brand names. Pillsbury has established manu-
facturing facilities and channels for product
distribution that will enhance the existing
General Mills international business.
In Canada, the addition of Pillsbury products
nearly doubles our sales there.And products like
Pillsbury Pizza Pops and refrigerated dough give
us a new presence in both the refrigerated and
frozen sections of the store.
So, when you put it all together, Pillsbury’s
dough know-how, convenient meals and inter-
national businesses add up to strong new oppor-
tunities for growth at the new General Mills.
G E N E R A L M I L L S M I D Y E A R R E P O R T
5
In 1869, three years after Cadwallader
Washburn opened his mill on the west bank
of the Mississippi River in Minneapolis,
Charles Pillsbury opened a competing mill
across the river.That signaled the beginning of
a legendary business rivalry.As industry pio-
neers and fierce competitors,Washburn, along
with his partner John Crosby, and Pillsbury
revolutionized the flour milling business.They
branded
Gold Medal and
Pillsbury’s Best flour
and created two of the world’s leading food
companies. In 1928, the Washburn Crosby
Company merged with several mills to form
General Mills.
Since then, General Mills and Pillsbury
followed remarkably similar paths to success,
each with a history that’s rich in innovation
and breakthrough ingenuity. Both companies
built some of the country’s most trusted
brands, such as
Cheerios,
Wheaties,
Green Giant
and
Old El Paso, and introduced the world to
two well-known icons:
Betty Crocker and the
Pillsbury Doughboy.
Betty Crocker wrote her
“Big Red” cookbook in 1950, and it’s now
in its ninth edition.The
Pillsbury Bake-Off
Contest started in 1949 as a one-time cooking
competition. It’s now a biannual event
celebrating its 52nd year.
Both companies developed trend-setting
insights into consumers’ tastes, preferences and
needs everywhere.They continuously deli-
vered many of the “firsts” that shaped how we
shop for, prepare and eat food: ready-to-eat
cereal, convenient baking products such as pie
crust and cake mix, refrigerated dough, instant
meals and even specially packaged food for
the Aurora Seven space mission in 1962.
Pillsbury’s development of the microbe-free
space food led to pioneering work in food
safety that set the federal standard across
industries. Innovative changes in
Cheerios
helped the oat-based cereal meet rigid, clinical
testing to earn a heart-healthy claim from the
Food and Drug Administration in 1997.
In the 1970s and 1980s, both companies
diversified by entering into retail businesses
and operating restaurant chains, including
The Olive Garden® and Burger King®. Both
companies also ventured internationally and
began developing products that showcased
their know-how around the world while
catering to local tastes. By the mid-1990s, both
companies were singularly focused on growing
their food businesses worldwide.
The
Gold Medal and
Pillsbury’s Best signs
still light the Minneapolis skyline from
opposite banks of the Mississippi.They are
landmarks of our shared heritage in the
Minneapolis milling community, as well as
symbols of a promising future working
together to build an even better General Mills.
A TALE OF TWO
COMPANIES
G E N E R A L M I L L S M I D Y E A R R E P O R T
6
G E N E R A L M I L L S M I D Y E A R R E P O R T
Chairman and CEO
Steve Sanger reports
strong fiscal 2001 results
to shareholders.
ANNUAL MEETING SUMMARY
On Sept. 24, 2001, General Mills held its 73rd annual meeting in Minneapolis,
Minn. Chairman and CEO Steve Sanger reported on another year of record
performance for the company. He also reinforced the value of the Pillsbury
acquisition, citing Pillsbury’s leading market positions in fast-growing categories,
the strength of its international and foodservice businesses, and the opportunity
for significant cost synergies as the two companies are combined.
QUESTION AND ANSWER SUMMARY
The following summarizes management’s responses to key shareholder questions.
Q. Is Häagen-Dazs going to be a part of General Mills’ product line?
A.As part of the acquisition of Pillsbury, General Mills will own the
Häagen-
Dazs ice cream business outside the United States. Ice Cream Partners (ICP), a
joint venture between Pillsbury and Nestlé, owned the U.S.
Häagen-Dazs busi-
ness.With the change in ownership of Pillsbury, Nestlé has the option to pur-
chase Pillsbury’s share of ICP and, therefore, be the sole licensee of the
Häagen-Dazs brand in the United States. (Subsequent to the annual meeting, Nestlé did pur-
chase Pillsbury’s share of ICP and the Canadian
Häagen-Dazs license from us.)
Q. Does General Mills have products for people who have an intolerance to gluten?
A. Gluten is a protein found predominantly in wheat. General Mills does have cereal products,
such as
Corn Chex and
Rice Chex, which do not contain gluten.
Q.What are the three-year financial projections for General Mills after the acquisi-
tion of Pillsbury? With the delay in approval from the FTC, does General Mills
expect those projections to change from what had been issued previously?
A.While the finalization of the Pillsbury acquisition was delayed from the original completion
date, the company believes that when the Pillsbury acquisition is completed, the return for
shareholders will be as good as anticipated when the acquisition was first announced.
However, any changes in terms, or in products to be divested would cause some change
in financial projections. (New financial projections were announced in a press release on
Nov. 9, 2001.)
Voting Results
A total of 239,889,095 shares, or 84.7 percent of the outstanding
shares eligible to vote, were represented at the 2001 annual meeting.
Item
Results
Elected 11 directors
At least 95.6% for each
Approved KPMG LLP as the company’s
independent auditor
99% approved
Adopted the General Mills 2001 Compensation
Plan for Non-employee Directors
65% approved
Acted on a stockholder proposal concerning
labeling genetically engineered food products
90.6% rejected
2001
C O N S O L I D A T E D S T A T E M E N T S O F E A R N I N G S
Sales
$ 2,342.6
$ 1,895.2
$ 4,113.8
$ 3,570.1
Costs and Expenses:
Cost of sales
1,039.8
753.1
1,760.2
1,406.4
Selling, general and administrative
917.1
784.7
1,656.0
1,509.6
Interest, net
68.7
52.4
117.6
107.2
Unusual items
109.0
1.0
94.2
1.6
Total Costs and Expenses
2,134.6
1,591.2
3,628.0
3,024.8
Earnings before Taxes and Earnings
from Joint Ventures
208.0
304.0
485.8
545.3
Income Taxes
80.5
107.2
175.9
192.6
Earnings from Joint Ventures
3.3
5.9
12.0
8.9
Earnings before cumulative effect
of change in accounting principle
130.8
202.7
321.9
361.6
Cumulative effect of change
in accounting principle
–
–
(3.1)
–
Net Earnings
$ 130.8
$ 202.7
$ 318.8
$ 361.6
Earnings per Share - Basic
Earnings before cumulative effect
of change in accounting principle
.43
.72
1.09
1.28
Cumulative effect of change
in accounting principle
–
–
(.01)
–
Earnings per Share - Basic
$
.43
$
.72
$ 1.08
$
1.28
Average Number of Common Shares
307.4
282.9
296.0
283.3
Earnings per Share - Diluted
Earnings before cumulative effect
of change in accounting principle
.41
.70
1.05
1.25
Cumulative effect of change
in accounting principle
–
–
(.01)
–
Earnings per Share - Diluted
$
.41
$
.70
$ 1.04
$
1.25
Average Number of Common Shares -
Assuming Dilution
318.3
290.2
306.6
290.3
Dividends per Share
$
.275
$ .275
$ .550
$
.550
See accompanying notes to consolidated condensed financial statements.
Unaudited
13 Weeks Ended
26 Weeks Ended
In Millions, Except Per Share Data
Nov. 25, 2001
Nov. 26, 2000
Nov. 25, 2001
Nov. 26, 2000
G E N E R A L M I L L S M I D Y E A R R E P O R T
7
8
G E N E R A L M I L L S M I D Y E A R R E P O R T
C O N S O L I D A T E D C O N D E N S E D B A L A N C E S H E E T S
(Unaudited)
(Unaudited)
In Millions
Nov. 25, 2001
Nov. 26, 2000
May 27, 2001
ASSETS
Current Assets:
Cash and cash equivalents
$ 853.5
$
66.9
$
64.1
Receivables
1,218.8
588.9
664.0
Inventories:
Valued primarily at FIFO
423.0
251.1
282.3
Valued at LIFO (FIFO value exceeds LIFO
by $29.8, $30.4 and $29.8, respectively)
656.3
311.1
236.6
Prepaid expenses and other current assets
222.3
83.8
99.3
Deferred income taxes
61.9
65.9
61.9
Assets held for sale
641.0
–
–
Total Current Assets
4,076.8
1,367.7
1,408.2
Land, Buildings and Equipment, at cost
4,581.3
3,060.0
3,179.3
Less accumulated depreciation
(1,764.1)
(1,608.8)
(1,678.1)
Net Land, Buildings and Equipment
2,817.2
1,451.2
1,501.2
Goodwill
8,377.2
815.0
804.0
Other Intangible Assets
83.4
55.3
66.0
Other Assets
1,769.7
1,210.2
1,311.8
Total Assets
$17,124.3
$ 4,899.4
$ 5,091.2
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
$ 1,183.7
$ 568.9
$ 619.1
Current portion of long-term debt
583.6
347.8
349.4
Notes payable
7,220.5
1,117.1
857.9
Accrued taxes
83.0
160.6
111.1
Other current liabilities
738.3
256.2
271.3
Total Current Liabilities
9,809.1
2,450.6
2,208.8
Long-term Debt
2,206.4
2,026.4
2,221.0
Deferred Income Taxes
418.1
307.2
349.5
Deferred Income Taxes - Tax Leases
75.2
82.2
73.7
Other Liabilities
1,062.8
193.9
186.0
Total Liabilities
13,571.6
5,060.3
5,039.0
Stockholders’ Equity:
Cumulative preference stock, none issued
–
–
–
Common stock, 502.3 shares issued
5,698.1
695.2
744.7
Retained earnings
2,630.1
2,320.2
2,467.6
Less common stock in treasury, at cost,
shares of 137.3, 124.5 and 123.1, respectively (4,351.0)
(3,026.2)
(3,013.9)
Unearned compensation
(54.3)
(60.7)
(53.4)
Accumulated other comprehensive income
(370.2)
(89.4)
(92.8)
Total Stockholders’ Equity
3,552.7
(160.9)
52.2
Total Liabilities and Equity
$17,124.3
$ 4,899.4
$ 5,091.2
See accompanying notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
26 Weeks Ended
Unaudited, In Millions
Nov. 25, 2001
Nov. 26, 2000
Cash Flows - Operating Activities:
Net earnings
$ 318.8
$ 361.6
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization
114.0
104.0
Deferred income taxes
16.8
6.4
Change in current assets and liabilities
excluding effects of businesses acquired
(116.8)
(138.7)
Tax benefit on exercised options
25.2
13.0
Cumulative effect of change in accounting principle
3.1
–
Unusual items expense
94.2
1.6
Other, net
(44.9)
(38.6)
Cash provided by continuing operations
410.4
309.3
Cash used by discontinued operations
(1.4)
(.9)
Net Cash Provided by Operating Activities
409.0
308.4
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment
(142.8)
(137.8)
Investments in businesses, intangibles and affiliates,
net of investment returns and dividends
(3,592.9)
(57.6)
Purchases of marketable investments
(96.1)
(14.2)
Proceeds from sale of marketable investments
45.7
.8
Proceeds from disposal of land, buildings and equipment
8.4
.4
Proceeds from disposition of businesses
299.4
–
Other, net
(4.2)
(11.2)
Net Cash Used by Investment Activities
(3,482.5)
(219.6)
Cash Flows - Financing Activities:
Change in notes payable
6,362.1
37.5
Issuance of long-term debt
6.6
289.8
Payment of long-term debt
(23.2)
(82.6)
Common stock issued
75.7
41.4
Purchases of common stock for treasury
(2,408.5)
(173.4)
Dividends paid
(156.6)
(155.9)
Other, net
6.8
(4.3)
Net Cash Provided (Used) by Financing Activities
3,862.9
(47.5)
Increase in Cash and Cash Equivalents
$ 789.4
$ 41.3
See accompanying notes to consolidated condensed financial statements.
G E N E R A L M I L L S M I D Y E A R R E P O R T
9
1 0
G E N E R A L M I L L S M I D Y E A R R E P O R T
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. Background
These consolidated condensed financial state-
ments do not include certain information and
footnotes required by accounting principles gen-
erally accepted in the United States for complete
financial statements. However, in the opinion of
management, all adjustments necessary for a fair
presentation have been included and are of a
normal recurring nature. Operating results for the
26 weeks ended Nov. 25, 2001, are not necessarily
indicative of the results that may be expected for
the fiscal year ending May 26, 2002.
These statements should be read in conjunc-
tion with the consolidated financial statements
and footnotes included in our annual report for
the year ended May 27, 2001.The accounting
policies used in preparing these financial state-
ments are the same as those described in our
annual report, except as described in Note 4.
Certain amounts in the prior year financial
statements have been reclassified to conform to
the current year presentation.
2. Acquisitions
On Oct. 31, 2001, we acquired the worldwide
Pillsbury operations from Diageo plc (Diageo).
The transaction was accounted for as a purchase.
Under terms of the agreement between General
Mills and Diageo, we acquired The Pillsbury
Company (Pillsbury) in a stock and cash transac-
tion. Consideration to Diageo included 134 mil-
lion General Mills common shares. Under a
stockholders agreement, Diageo had a put option
to sell directly to us 55 million shares of General
Mills common stock at a price of $42.14 per
share. Diageo exercised that option on Nov. 1,
2001.Those 55 million shares were valued at a
total of $2,318 million.The 79 million shares of
General Mills common stock retained by Diageo
were valued at $3,576 million, based on the
three-day average selling price prior to the closing
of $45.27 per share.Therefore, the total stock
consideration was $5,894 million. Cash paid
to Diageo and assumed debt of Pillsbury totaled
$3,830 million.As a result, the total acquisition
consideration (exclusive of direct acquisition
costs) was approximately $9,724 million.
Under the agreement, Diageo holds contin-
gent value rights to be paid to Diageo on the
18-month anniversary of the deal closing, based
on the number of General Mills shares Diageo
continues to hold on that date. If the General
Mills stock price is less than $49 per share at the
18-month anniversary, Diageo will receive an
amount per share equal to the difference between
$49 and the actual General Mills stock trading
price, up to a maximum of $5 per share.
The excess of the purchase price over the
estimated fair value of the net assets purchased
was approximately $8 billion.The allocation of
the purchase price is based on preliminary esti-
mates, subject to revisions when appraisals and
integration plans have been finalized. Revisions to
the allocation, which may be significant, will be
reported as changes to various assets and liabilities,
including goodwill, other intangible assets, and
deferred income taxes.As of Nov. 25, 2001, the
goodwill balance includes all of the excess pur-
chase price of the Pillsbury acquisition, as the
valuation of specific intangible assets has not yet
been completed.We do not anticipate significant
amounts to be allocated to amortizable
intangible assets.
In order to obtain regulatory clearance
for the acquisition of Pillsbury, we arranged to
divest certain businesses. On Nov. 13, 2001,
International Multifoods Corporation (IMC)
purchased the Pillsbury dessert and specialty
products businesses as well as certain General
Mills brands and the General Mills Toledo
production facilities for $316 million.After-tax
cash proceeds from this transaction are being
used to reduce the debt we incurred to purchase
Pillsbury.Additionally, under our agreement with
IMC, we expect to expend approximately
$70 million for the purchase and installation
of certain production assets.
As part of the transaction, IMC received
an exclusive royalty-free license to use the
Doughboy trademark and
Pillsbury brand in
the desserts and baking mix categories. Since
the sale of the assets to IMC was integral to the
Pillsbury acquisition, and because the assets sold
were adjusted to fair market value as part of the
purchase of Pillsbury, there was no gain or loss
recorded on the sale in the Company’s consoli-
dated statement of earnings.
Pillsbury had a 50 percent equity interest in
Ice Cream Partners USA LLC (ICP), a joint
venture formed with Nestlé USA to manufac-
ture, market and distribute
Häagen-Dazs and
Nestlé ice cream products in the United States.
On Dec. 26, 2001, Nestlé USA exercised its right,
triggered by the change of ownership of Pillsbury,
to buy the 50 percent stake of ICP that it did not
already own. Nestlé paid us $641 million for our
50 percent of the joint venture and a long-term
paid-in-full license for the
Häagen-Dazs brands in
the United States.The after-tax proceeds from
this transaction will be used to reduce debt.
We are reconfiguring our cereal production as
a result of selling our Toledo, Ohio, plant to IMC.
We are also incurring a number of one-time costs
associated with the acquisition of Pillsbury and
the divestiture of certain businesses and assets to
IMC. See Note 3.
We are evaluating plans to consolidate manu-
facturing, warehouse and distribution activities
into fewer locations.The closure of certain
Pillsbury facilities could result in additional
severance and other exit liabilities, which would
increase the excess purchase price.The integration
of Pillsbury into General Mills’ operations may
result in the restructuring of certain General Mills
activities.These actions could result in unusual
charges.
3. Unusual Items
In the second quarter of fiscal 2002, we
recorded unusual items totaling $109.0 million
pretax expense, $68.5 million after tax ($.22 per
diluted share), representing $24.8 million pretax
of Pillsbury integration costs and $86.8 million
pretax of cereal reconfiguration charges, partially
offset by insurance settlement proceeds of $2.6
million pretax relating to a 1994 oats handling
incident. Last year’s second quarter included
unusual expense associated with the acquisition
of Pillsbury, totaling $1.0 million pretax, $.6 mil-
lion after tax (no impact on earnings per
diluted share).
For the six months ended Nov. 25, 2001,
unusual items totaled $94.2 million pretax
expense, $59.2 million after tax ($.19 per diluted
share), representing $29.3 million pretax of
Pillsbury transaction/integration costs; $86.8 mil-
lion pretax of cereal reconfiguration charges;
$4.5 million pretax charges to exit the
Squeezit
beverage business; and $3.5 million pretax, net
of insurance recovery, associated with a flash flood
at our Cincinnati, Ohio, cereal plant; partially off-
set by insurance proceeds of $29.9 million pretax
from the 1994 oats incident. For the six months
last year, unusual expenses associated with the
acquisition of Pillsbury were $1.6 million pretax,
$1.0 million after tax (no impact on earnings per
diluted share).
4. Accounting Rules Adopted
Effective with the first quarter of fiscal 2002,
we adopted Statement of Financial Accounting
Standards (SFAS) No. 133,“Accounting for
Derivative Instruments and Hedging Activities,”
which requires all derivatives to be recorded at
fair value on the balance sheet and establishes
new accounting rules for hedging. On the first
day of the current fiscal year, we recorded the
cumulative effect of adopting this accounting
change, which amounted to $3.1 million after-
tax charge ($.01 per diluted share) included in
earnings and $158.0 million after-tax charge
included in Accumulated Other Comprehensive
Income.
On May 28, 2001, we adopted SFAS No. 141,
“Business Combinations” and SFAS No. 142,
“Goodwill and Intangible Assets.” SFAS No. 141
requires that the purchase method be used for all
business combinations initiated after June 30,
2001. SFAS No. 142 eliminates the amortization
of goodwill and instead requires that goodwill
be tested for impairment.As a result, we do not
have goodwill amortization in the current year.
Goodwill amortization expense in the first six
months of the previous fiscal year totaled $11.3
million pretax, $11.0 million after tax ($.03 per
diluted share).We will test our goodwill for
impairment during fiscal 2002 and, if necessary,
adjust its carrying value.
For complete notes pertaining to these
financial statements as well as Management’s
Discussion and Analysis, see our 10-Q report,
available at www.generalmills.com in the
Investor Information section under SEC filings.
Copies also can be obtained by calling
(800) 245-5703.
G E N E R A L M I L L S M I D Y E A R R E P O R T
1 1
B R I E F L Y N O T E D
Happy 60th
birthday,
Cheerios!
In 2001, the
Cheerios brand
turned 60.That
might be
retirement age
for most con-
sumer brands,
but
Cheerios
is still going
strong.As a
part of the
birthday
celebration,
General Mills
issued a com-
memorative
60th anniversary box
featuring the
American folk hero,
the Lone Ranger,
who was a
Cheerios
spokesperson in the
1940s.
The popularity of
the Lone Ranger
got kids eating
Cheerios for a nutri-
tious breakfast.
Today, the health
benefits of this
toasted oat cereal
appeal to adults, too.
In the 1970s, oats
was found to be the
grain highest in pro-
tein, a necessary
nutrient.Then in
1998,
Cheerios was
clinically proven to
help lower choles-
terol as part of a
low-fat diet, further
advancing its
reputation as a
nutritious part of
a healthy breakfast.
While cereals have
come and gone
over its 60-year
history,
Cheerios
continues to be the
top-selling cereal in
the United States
based on dollar sales.
Yoplait’s whipped
up something
new for you!
Is eating healthier
one of your New
Year’s resolutions?
Yoplait is making it
easier for you with
its newest product,
Yoplait Whips!
Introduced nation-
ally in January,
Whips! gives you a
great-tasting,
mousse-like treat
with all the health
benefits of tradi-
tional yogurt.You
probably know
yogurt is a good
source of calcium.
Yoplait has made it
even better by forti-
fying
Whips! with
vitamins A and D.
Providing con-
sumers with deli-
cious new products
is one of the reasons
Yoplait leads the
$2.3 billion yogurt
category, where sales
have grown at a
13 percent rate over
the last year. So go
ahead and indulge –
you won’t be break-
ing that New Year’s
resolution, thanks to
Yoplait Whips!
And the
winner is...
In February 2002,
the lucky winners of
the 2001
Pillsbury
Bake-Off Contest
will be announced
in Orlando, Fla.This
contest, with its
million-dollar grand
prize, is the nation’s
most prestigious
cooking competi-
tion. Every other
year, tens of thou-
sands of hopeful
cooks vie for honors
and national recog-
nition by submitting
an original recipe
using a
Pillsbury
product as a main
ingredient. Entrants
compete in a num-
ber of recipe cate-
gories including
“Easy Weeknight
Meals” and “Fast and
Fabulous Desserts
and Treats.”
This 52-year-old
event generates
extraordinary con-
sumer awareness and
excitement, and is
one of the com-
pany’s largest in-
store merchandising
opportunities for its
brands. Product pro-
motions at local gro-
cers get consumers
involved in the
Bake-Off Contest,
which leads to
increased product
sales.You can find
out more about the
Bake-Off Contest
and find winning
recipes of years
past by visiting the
contest’s Web site at
www.bakeoff.com.
1 2
G E N E R A L M I L L S M I D Y E A R R E P O R T
Can you say
Wahoos?
If you can, you
know the name of
our newest salty
snack.
Wahoos! is a
light, crispy, corn-
based snack avail-
able in three flavors
– Original, Nacho
Fiesta and
Backyard BBQ.
Our salty snacks
business began in
1966 with the
introduction of
Bugles.With the
acquisition of the
Chex Mix line in
1997 and
Gardetto’s
savory snack mix in
1999, sales in our
portfolio of salty
snacks have more
than tripled in the
past five years.The
warehouse-delivered
snack category has
seen significant
growth over the past
five years and today
generates retail sales
of more than $1.2
billion. Our expanded
snack line allows us
to capitalize on this
large and growing
category.
Hooray and
olé for quick
meal options
The folks in our
Meals division have
been hard at work
coming up with
great-tasting, quick
meal options your
whole family will
love.
In January,
Old El Paso joins
Lloyd’s heat-and-eat
barbecue products
with its introduction
of refrigerated taco
meat.This fully
cooked, seasoned
beef or chicken is
ready for the taco
shells after six min-
utes in the micro-
wave.With its
leading dollar share
of the $1.8 billion
shelf-stable Mexican
food category,
Old
El Paso is well posi-
tioned to drive
further growth
with this convenient
new product for
today’s busy families.
The
Green Giant
is helping you round
out your meal with
large-sized bags of
frozen vegetables
and sauce.These
resealable bags com-
bine one of five
vegetables with deli-
cious sauces for
combinations like
Broccoli and Three
Cheese Sauce or
Niblets Corn in
Butter Sauce. By
providing the sauces
in chip form, you
can prepare one to
six servings, depend-
ing on how many
people are coming
to dinner.
A blue chip day
for General Mills
The completion of
the Pillsbury acquisi-
tion was certainly a
milestone for
General Mills – and
the company cele-
brated it. On Nov. 1,
2001, General Mills
enjoyed its first day
trading on the New
York Stock
Exchange (NYSE)
as the newly
enlarged company.
To commemorate
the day, General
Mills distributed
thousands of blue
chip cookies on the
floor of the
Exchange, and ads
announcing the new
blue chip company
ran in newspapers
nationwide. In addi-
tion, Steve Sanger
had the honor of
ringing the opening
bell at the Exchange.
News of the com-
pleted acquisition
was well received on
Wall Street, as the
stock price rose over
a dollar from the
previous day’s close,
to a then all-time
high.
With the
Pillsbury Doughboy looking on, NYSE Chairman Dick
Grasso presents Steve Sanger with the Exchange’s bull and bear
statue. Sanger was in New York City on Nov. 1 to celebrate the
first day of trading as the newly expanded General Mills.
G E N E R A L M I L L S M I D Y E A R R E P O R T
1 3
General Mills is bringing “Dinner and the Games” to America by
providing dinners, yogurt and tons of snacks as an Official Supplier
to the 2002 Olympic Winter Games. Over 75,000 people per day
are expected to attend the Games in Salt Lake City, Utah
Feb. 8 - 24, and General Mills products will be there for everyone to enjoy.
“As a company with a long history of supporting great sports
champions, General Mills is proud to supply the training tables
of the 2002 U.S. Olympic Team,” says General Mills Chairman
and CEO Steve Sanger.
General Mills’ involvement in the 2002
Games will drive sales through innovative
promotions and product merchandising.
Bonnie Blair, five-time U.S. Olympic Gold
Medalist and mother of two, is the spokes-
person for the “Dinner and the Games” program, a promotion that combines
Betty Crocker meals and baking products for a great dinner at home. Blair is
traveling around the country, talking to consumers about the importance of the
family meal. Michelle Kwan, the reigning World and U. S. National Champion
in women’s figure skating, is partnering with
Yoplait Exprèsse to develop future
athletes. For every certificate consumers submit from an
Exprèsse yogurt carton,
Yoplait will donate $2.00 (up to $100,000) to the U.S. Olympic Committee.
General Mills also is offering two unique new products for a limited
time during the 2002 Games.
Pop Secret Caramel Nut Clusters
are delicious clusters of popcorn, almonds and cashews
wrapped in a coating of caramel.And
Fruit Roll-Ups
fruit snacks are showing their support for the U.S. Olympic
Team by turning red and blue. Even if you don’t attend the
2002 Games, you can join in on the fun by collecting five dif-
ferent General Mills Olympic Winter Games pins. Look for
them on product displays at your local grocery store.
General Mills, Inc.
P.O. Box 1113
Minneapolis, MN
55440
Midyear 2002
LET THE GAMES BEGIN!
These winning snacks
are available for a
limited time during
the 2002 Games.
GENERAL MILLS IS AN OFFICIAL SUPPLIER TO THE 2002 OLYMPIC WINTER GAMES
Join Michelle Kwan in
supporting future
skating champions by
purchasing Yoplait
Exprèsse yogurt.
