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 February 28, 2010

o		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		(I.R.S. Employer
incorporation or organization)		Identification No.)
Number One General Mills Boulevard		55426
Minneapolis, Minnesota		(Zip Code)
(Address of principal executive offices)

(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 o

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 o

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   o

Non-accelerated             o   (Do not check if a smaller reporting company)	Smaller reporting company   o

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

Number of shares of Common Stock outstanding as of March 12, 2010: 331,776,618 (excluding 45,530,046 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 nine-month periods ended February 28, 2010, and February 22, 2009		3
		Consolidated Balance Sheets as of February 28, 2010, and May 31, 2009		4
		Consolidated Statements of Total Equity and Comprehensive Income for the nine-month period ended February 28, 2010, and the fiscal year ended May 31, 2009		5
		Consolidated Statements of Cash Flows for the nine-month periods ended February 28, 2010, and February 22, 2009		6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.		Controls and Procedures		33
PART II – Other Information
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6.		Exhibits		35
Signatures				36
EX-10.1
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

GENERAL MILLS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)

										Nine-Month
		Quarter Ended								Period Ended
		Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,
		2010				2009				2010				2009
Net sales		$	3,629.1			$	3,537.4			$	11,226.1			$	11,045.6
Cost of sales			2,251.6				2,259.9				6,643.8				7,356.7
Selling, general, and administrative expenses			809.6				670.6				2,418.7				2,118.1
Divestiture (gain)			—				—				—				(128.8	)
Restructuring, impairment, and other exit costs			6.3				1.2				30.4				6.4
Operating profit			561.6				605.7				2,133.2				1,693.2
Interest, net			94.2				98.6				274.6				281.6
Earnings before income taxes and after-tax earnings from joint ventures			467.4				507.1				1,858.6				1,411.6
Income taxes			157.9				231.7				622.7				538.0
After-tax earnings from joint ventures			24.0				15.7				86.4				79.7
Net earnings, including earnings attributable to noncontrolling interests			333.5				291.1				1,322.3				953.3
Net earnings attributable to noncontrolling interests			1.0				2.2				3.7				7.7
Net earnings		$	332.5			$	288.9			$	1,318.6			$	945.6
Earnings per share - basic		$	1.00			$	0.88			$	4.01			$	2.84
Earnings per share - diluted		$	0.96			$	0.85			$	3.87			$	2.73
Dividends per share		$	0.49			$	0.43			$	1.43			$	1.29

See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Millions, Except Par Value)

		Feb. 28,				May 31,
		2010				2009
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	691.3			$	749.8
Receivables			1,180.2				953.4
Inventories			1,474.6				1,346.8
Deferred income taxes			8.1				15.6
Prepaid expenses and other current assets			322.9				469.3
Total current assets			3,677.1				3,534.9
Land, buildings, and equipment			3,004.4				3,034.9
Goodwill			6,645.7				6,663.0
Other intangible assets			3,740.9				3,747.0
Other assets			1,148.1				895.0
Total assets		$	18,216.2			$	17,874.8
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	690.5			$	803.4
Current portion of long-term debt			107.4				508.5
Notes payable			581.1				812.2
Other current liabilities			1,607.4				1,481.9
Total current liabilities			2,986.4				3,606.0
Long-term debt			5,671.6				5,754.8
Deferred income taxes			1,141.4				1,165.3
Other liabilities			1,939.7				1,932.2
Total liabilities			11,739.1				12,458.3
Stockholders’ equity:
Common stock, 377.3 shares issued, $0.10 par value			37.7				37.7
Additional paid-in capital			1,314.5				1,249.9
Retained earnings			8,075.9				7,235.6
Common stock in treasury, at cost, shares of 45.7 and 49.3			(2,336.3	)			(2,473.1	)
Accumulated other comprehensive loss			(859.7	)			(877.8	)
Total stockholders’ equity			6,232.1				5,172.3
Noncontrolling interests			245.0				244.2
Total equity			6,477.1				5,416.5
Total liabilities and equity		$	18,216.2			$	17,874.8

See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF TOTAL EQUITY AND COMPREHENSIVE INCOME
(Unaudited) (In Millions, Except per Share Data)

		$.10 Par Value Common Stock
		(One Billion Shares Authorized)
		Issued												Treasury
																										Accumulated
										Additional																Other
						Par				Paid-In												Retained				Comprehensive				Noncontrolling
		Shares				Amount				Capital				Shares				Amount				Earnings				Income (Loss)				Interests				Total
Balance as of May 25, 2008			377.3			$	37.7			$	1,149.1				(39.8	)		$	(1,658.4	)		$	6,510.7			$	173.1			$	246.6			$	6,458.8
Comprehensive income:
Net earnings, including earnings attributable to noncontrolling interests																							1,304.4								9.3				1,313.7
Other comprehensive loss																											(1,050.9	)			(1.2	)			(1,052.1	)
Total comprehensive income																																			261.6
Cash dividends declared ($1.72 per share)																							(579.5	)											(579.5	)
Stock compensation plans (includes income tax benefits of $94.0)											23.0				9.8				443.1																466.1
Shares purchased															(20.2	)			(1,296.4	)															(1,296.4	)
Shares issued for acquisition											16.4				0.9				38.6																55.0
Unearned compensation related to restricted stock awards											(56.2	)																							(56.2	)
Distributions to noncontrolling interest holders																															(10.5	)			(10.5	)
Earned compensation											117.6																								117.6
Balance as of May 31, 2009			377.3				37.7				1,249.9				(49.3	)			(2,473.1	)			7,235.6				(877.8	)			244.2				5,416.5
Comprehensive income:
Net earnings, including earnings attributable to noncontrolling interests																							1,318.6								3.7				1,322.3
Other comprehensive income																											18.1				0.3				18.4
Total comprehensive income																																			1,340.7
Cash dividends declared ($1.43 per share)																							(478.3	)											(478.3	)
Stock compensation plans (includes income tax benefits of $86.2)											42.8				9.1				461.1																503.9
Shares purchased															(5.5	)			(324.3	)															(324.3	)
Unearned compensation related to restricted stock awards											(61.2	)																							(61.2	)
Distributions to noncontrolling interest holders																															(3.2	)			(3.2	)
Earned compensation											83.0																								83.0
Balance as of Feb. 28, 2010			377.3			$	37.7			$	1,314.5				(45.7	)		$	(2,336.3	)		$	8,075.9			$	(859.7	)		$	245.0			$	6,477.1

See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)

		Nine-Month Period Ended
		Feb. 28,				Feb. 22,
		2010				2009
Cash Flows - Operating Activities
Net earnings		$	1,318.6			$	945.6
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			340.3				333.6
After-tax earnings from joint ventures			(86.4	)			(79.7	)
Stock-based compensation			83.0				98.5
Deferred income taxes			—				(19.6	)
Tax benefit on exercised options			(86.2	)			(91.0	)
Distributions of earnings from joint ventures			32.5				29.9
Pension and other postretirement benefit plan contributions			(9.1	)			(12.3	)
Pension and other postretirement benefit plan income			(28.0	)			(20.1	)
Divestiture (gain)			—				(128.8	)
Gain on insurance settlement			—				(41.3	)
Restructuring, impairment, and other exit costs (income)			23.9				(1.6	)
Changes in current assets and liabilities			(75.6	)			139.8
Other, net			45.2				(23.1	)
Net cash provided by operating activities			1,558.2				1,129.9
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment			(418.9	)			(351.1	)
Investments in affiliates, net			(121.8	)			(6.8	)
Proceeds from disposal of land, buildings, and equipment			7.1				2.0
Proceeds from divestiture of product line			—				192.5
Proceeds from insurance settlement			—				41.3
Other, net			48.9				(34.2	)
Net cash used by investing activities			(484.7	)			(156.3	)
Cash Flows - Financing Activities
Change in notes payable			(234.1	)			(775.7	)
Issuance of long-term debt			—				1,850.0
Payment of long-term debt			(505.0	)			(358.1	)
Proceeds from common stock issued on exercised options			321.2				286.6
Tax benefit on exercised options			86.2				91.0
Purchases of common stock for treasury			(324.3	)			(1,232.4	)
Dividends paid			(478.3	)			(437.8	)
Other, net			(0.1	)			(9.5	)
Net cash used by financing activities			(1,134.4	)			(585.9	)
Effect of exchange rate changes on cash and cash equivalents			2.4				(111.4	)
Increase (decrease) in cash and cash equivalents			(58.5	)			276.3
Cash and cash equivalents - beginning of year			749.8				661.0
Cash and cash equivalents - end of period		$	691.3			$	937.3
Cash Flow from Changes in Current Assets and Liabilities:
Receivables		$	(244.9	)		$	(130.4	)
Inventories			(136.3	)			(61.5	)
Prepaid expenses and other current assets			117.1				72.1
Accounts payable			(53.9	)			(137.6	)
Other current liabilities			242.4				397.2
Changes in current assets and liabilities		$	(75.6	)		$	139.8

See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, 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. Operating results for the quarterly and nine-month periods ended February 28, 2010, are not necessarily indicative of the results that may be expected for the fiscal year ending May 30, 2010.

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 31, 2009. 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, except as discussed in Notes 2, 16, and 17 to these Consolidated Financial Statements.

In December 2007, the Financial Accounting Standards Board (FASB) issued new guidance on noncontrolling interests in financial statements. The guidance established accounting and reporting standards that require: the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the Consolidated Balance Sheets within equity, but separate from the parent’s equity; the amount of consolidated net earnings attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the Consolidated Statements of Earnings; and changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently.

We adopted the guidance at the beginning of fiscal 2010. To conform to the current period presentation, we made the following reclassifications to net earnings attributable to noncontrolling interests in our Consolidated Statements of Earnings:

						Nine-Month
		Quarter Ended				Period Ended
In Millions		Feb. 22, 2009				Feb. 22, 2009
From interest, net		$	1.8			$	6.0
From selling, general, and administrative expenses			0.4				1.7
Total net earnings attributable to noncontrolling interests		$	2.2			$	7.7

Also, noncontrolling interests previously reported as minority interests have been reclassified to a separate section in equity on the Consolidated Balance Sheets as a result of the adoption. In addition, certain other reclassifications to our previously reported financial information have been made to conform to the current period presentation.

There were no acquisitions or divestitures in the nine-month period ended February 28, 2010.

During the second quarter of fiscal 2009, we sold our Pop•Secret microwave popcorn product line for $192.5 million in cash, and we recorded a pre-tax gain of $128.8 million. We received cash proceeds of $158.9 million after repayment of a lease obligation and transaction costs.

During the first quarter of fiscal 2009, we acquired Humm Foods, Inc. (Humm Foods), the maker of Lärabar fruit and nut energy bars. We issued 0.9 million shares of our common stock with a value of $55.0 million to the shareholders of Humm Foods as consideration for the acquisition. We recorded the purchase price less tangible and intangible net assets acquired as goodwill of $41.6 million. The pro forma effect of this acquisition was not material.

Restructuring, impairment, and other exit costs were as follows:

										Nine-Month
		Quarter Ended								Period Ended
		Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,
In Millions		2010				2009				2010				2009
Discontinuation of underperforming products in our U.S. Retail segment		$	—			$	—			$	24.1			$	—
Discontinuation of underperforming products in our Bakeries and Foodservice segment			6.1				—				6.1				—
Closure and sale of Contagem, Brazil bread and pasta plant			0.2				—				(0.6	)			—
Charges associated with restructuring actions previously announced			—				1.2				0.8				6.4
Total		$	6.3			$	1.2			$	30.4			$	6.4

During the third quarter of fiscal 2010, we decided to exit certain underperforming products in our Bakeries and Foodservice segment. As a result of this decision, we concluded that the future cash flows generated by these products will be insufficient to recover the net book value of the associated long-lived assets. Accordingly, we recorded a non-cash charge of $6.1 million primarily related to the impairment of these long-lived assets. No employees were affected and we expect this action to be completed by the end of the third quarter of fiscal 2011.

During the nine-month period ended February 28, 2010, we took restructuring actions in addition to the item described above. We decided to exit certain underperforming products in our U.S. Retail segment to rationalize capacity for more profitable items. Our decisions to exit these products resulted in a $24.1 million non-cash charge against the related long-lived assets. No employees were affected by these actions. We expect to recognize $2.5 million of other exit costs related to these actions, which we anticipate will be completed by the end of the second quarter of fiscal 2011. During the nine-month period ended February 28, 2010, we also recorded a net gain of $0.6 million related to the closure and sale of our Contagem, Brazil bread and pasta plant. In addition, we recorded $0.8 million of costs related to previously announced restructuring actions.

During the nine-month period ended February 22, 2009, we did not undertake any new restructuring actions. We incurred incremental plant closure expenses related to previously announced restructuring activities of $1.2 million in the third quarter of fiscal 2009, and $6.4 million in the nine-month period ended February 22, 2009.

The changes in the carrying amount of goodwill during fiscal 2010 were as follows:

										Bakeries and				Joint
In Millions		U.S. Retail				International				Foodservice				Ventures				Total
Balance as of May 31, 2009		$	5,098.3			$	123.3			$	923.0			$	518.4			$	6,663.0
Other activity, primarily foreign currency translation			—				2.1				—				(19.4	)			(17.3	)
Balance as of Feb. 28, 2010		$	5,098.3			$	125.4			$	923.0			$	499.0			$	6,645.7

The changes in the carrying amount of other intangible assets during fiscal 2010 were as follows:

										Joint
In Millions		U.S. Retail				International				Ventures				Total
Balance as of May 31, 2009		$	3,208.9			$	462.6			$	75.5			$	3,747.0
Other activity, primarily foreign currency translation			(1.5	)			0.7				(5.3	)			(6.1	)
Balance as of Feb. 28, 2010		$	3,207.4			$	463.3			$	70.2			$	3,740.9

The components of inventories were as follows:

		Feb. 28,				May 31,
In Millions		2010				2009
Raw materials and packaging		$	262.2			$	273.1
Finished goods			1,196.6				1,096.1
Grain			149.0				126.9
Excess of FIFO or weighted-average cost over LIFO cost			(133.2	)			(149.3	)
Total		$	1,474.6			$	1,346.8

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 February 28, 2010, and May 31, 2009, a comparison of cost and market values of our marketable debt and equity securities is as follows:

		Cost								Market Value								Gross Gains								Gross Losses
		Feb. 28,				May 31,				Feb. 28,				May 31,				Feb. 28,				May 31,				Feb. 28,				May 31,
In Millions		2010				2009				2010				2009				2010				2009				2010				2009
Available for sale:
Debt securities		$	11.8			$	35.1			$	11.9			$	35.0			$	0.1			$	0.1			$	—			$	(0.2	)
Equity securities			6.1				6.1				14.4				13.8				8.3				7.7				—				—
Total		$	17.9			$	41.2			$	26.3			$	48.8			$	8.4			$	7.8			$	—			$	(0.2	)

Earnings include insignificant realized gains 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 management’s 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 income (loss) (AOCI) within stockholders’ equity. Scheduled maturities of our marketable securities are as follows:

		Available for Sale
						Market
In Millions		Cost				Value
Under 1 year (current)		$	4.8			$	4.8
From 1 to 3 years			0.8				0.8
From 4 to 7 years			4.1				4.1
Over 7 years			2.1				2.2
Equity securities			6.1				14.4
Total		$	17.9			$	26.3

Marketable securities with a market value of $2.3 million as of February 28, 2010, were pledged as collateral for certain derivative contracts.

The fair values and carrying amounts of long-term debt, including the current portion, were $6,334.0 million and $5,779.0 million, respectively, as of February 28, 2010. 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.

Risk Management Activities. As a part of our ongoing operations, we are exposed to market risks such as changes in interest rates, foreign currency exchange rates, and commodity 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 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 these 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 any resulting mark-to-market volatility, which remains in unallocated corporate items.

Unallocated corporate items for the quarterly and nine-month periods ended February 28, 2010, and February 22, 2009, included:

										Nine-Month
		Quarter Ended								Period Ended
		Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,
In Millions		2010				2009				2010				2009
Net gain (loss) on mark-to-market valuation of commodity positions		$	1.6			$	(28.4	)		$	(9.6	)		$	(300.4	)
Net loss (gain) on commodity positions reclassified from unallocated corporate items to segment operating profit			(0.1	)			81.9				60.5				47.2
Net mark-to-market revaluation of certain grain inventories			(6.5	)			17.7				(3.3	)			(36.2	)
Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items		$	(5.0	)		$	71.2			$	47.6			$	(289.4	)

As of February 28, 2010, the net notional value of commodity derivatives was $598.7 million, of which $461.5 million related to agricultural inputs and $137.2 million related to energy 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, and commercial paper rates in the United States and Europe. We use interest rate swaps and forward-starting interest rate swaps 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 — Except as discussed below, floating-to-fixed interest rate swaps are accounted for as cash flow hedges, as are all hedges of forecasted issuances of debt. 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 as of February 28, 2010.

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 less than $1 million as of February 28, 2010.

During the second quarter of fiscal 2010 we entered into $700 million of interest rate swaps to convert $700 million of 5.65% fixed-rate notes due September 10, 2012, to floating rates.

In anticipation of our acquisition of The Pillsbury Company (Pillsbury) and other financing needs, we entered into pay-fixed interest rate swap contracts during fiscal 2001 and 2002 totaling $7.1 billion to lock in our interest payments on the associated debt. As of February 28, 2010, we still owned $1.6 billion of Pillsbury-related pay-fixed swaps that were previously neutralized with offsetting pay-floating swaps in fiscal 2002.

In advance of a planned debt financing in fiscal 2007, we entered into $700.0 million pay-fixed, forward-starting interest rate swaps with an average fixed rate of 5.7 percent. All of these forward-starting interest rate swaps were cash settled for $22.5 million coincident with our $1.0 billion 10-year fixed-rate note offering on January 24, 2007. As of February 28, 2010, a $15.5 million pre-tax loss remained in AOCI, which will be reclassified to earnings over the term of the underlying debt.

The following table summarizes the notional amounts and weighted-average interest rates of our interest rate swaps. As discussed above, we have neutralized all of our Pillsbury-related pay-fixed swaps with pay-floating swaps;

however, we cannot present them on a net basis in the following table because the offsetting occurred with different counterparties. Average floating rates are based on rates as of the end of the reporting period.

		Feb. 28,				May 31,
In Millions		2010				2009
Pay-floating swaps - notional amount		$	2,344.9			$	1,859.3
Average receive rate			4.6	%			5.7	%
Average pay rate			0.2	%			0.3	%
Pay-fixed swaps - notional amount		$	1,600.0			$	2,250.0
Average receive rate			0.2	%			0.5	%
Average pay rate			7.3	%			6.4	%

The swap contracts mature at various dates from fiscal 2010 to 2013 as follows:

In Millions		Pay Floating				Pay Fixed
2010		$	9.3			$	—
2011			17.6				—
2012			1,603.4				850.0
2013			714.6				750.0
Total		$	2,344.9			$	1,600.0

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

The amount of hedge ineffectiveness was less than $1 million as of February 28, 2010.

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. As of February 28, 2010, we had deferred net foreign currency transaction losses of $95.7 million in AOCI associated with hedging activity.

Fair Value Measurements and Financial Statement Presentation. In September 2006, the FASB issued new accounting guidance on fair value measurements. This guidance provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. The guidance applies to instruments accounted for under previously issued pronouncements that prescribe fair value as the relevant measure of value. We partially adopted the guidance at the beginning of fiscal 2009 for all instruments recorded at fair value on a recurring basis. In the first quarter of fiscal 2010 we adopted the remaining provisions of the guidance for all nonfinancial assets and liabilities that are not remeasured at fair value on a recurring basis. Our adoption of these provisions did not have a material impact on our results of operations or financial condition.

We categorize assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1:		Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2:		Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3:		Unobservable inputs reflecting management’s assumptions about the inputs used in pricing the asset or liability.

The fair values of our assets, liabilities, and derivative positions recorded at fair value as of February 28, 2010, were as follows:

		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) (d)		$	—			$	8.1			$	—			$	8.1			$	—			$	—			$	—			$	—
Foreign exchange contracts (b) (c)			—				4.5				—				4.5				—				(19.5	)			—				(19.5	)
Total			—				12.6				—				12.6				—				(19.5	)			—				(19.5	)
Derivatives not designated as hedging instruments:
Interest rate contracts (a) (d)			—				148.7				—				148.7				—				(189.5	)			—				(189.5	)
Foreign exchange contracts (b)			—				5.8				—				5.8				—				(0.1	)			—				(0.1	)
Commodity contracts (b) (f)			2.2				14.4				—				16.6				—				—				—				—
Total			2.2				168.9				—				171.1				—				(189.6	)			—				(189.6	)
Other assets and liabilities reported at fair value:
Marketable investments (e)			14.4				11.9				—				26.3				—				—				—				—
Grain contracts (f)			—				11.9				—				11.9				—				(13.1	)			—				(13.1	)
Long-lived assets (g)			—				2.9				—				2.9				—				—				—				—
Total			14.4				26.7				—				41.1				—				(13.1	)			—				(13.1	)
Total assets, liabilities, and derivative positions recorded at fair value		$	16.6			$	208.2			$	—			$	224.8			$	—			$	(222.2	)		$	—			$	(222.2	)

(a)		These contracts are recorded as other assets or as other liabilities, as appropriate, based on whether in a gain or loss position.
(b)		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.
(c)		Based on observable market transactions of spot currency rates and forward currency prices.
(d)		Based on LIBOR and swap rates.
(e)		Based on prices of common stock and bond matrix pricing.
(f)		Based on prices of futures exchanges and recently reported transactions in the marketplace.
(g)		We recorded a $4.8 million non-cash impairment charge in the third quarter of fiscal 2010 to write down certain long-lived assets to their fair value of $2.5 million. Fair value was based on historical activity for transactions of similar assets in the marketplace and third party appraisals. These assets had a book value of $7.3 million and were associated with the restructuring activities described in Note 4. Also during the second quarter of fiscal 2010 we recorded a $6.6 million non-cash impairment charge to write down certain long-lived assets to their fair value of $0.4 million. Fair value was based on recently reported transactions for similar assets in the marketplace. These assets had a book value of $7.0 million and were associated with the exit activities described in Note 4.

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

Information related to our cash flow hedges, net investment hedges, and other derivatives not designated as hedging instruments for the quarterly and nine-month periods ended February 28, 2010, and February 22, 2009, follows:

		Interest Rate								Foreign Exchange																Commodity
		Contracts								Contracts								Equity Contracts								Contracts								Total
		Quarter Ended								Quarter Ended								Quarter Ended								Quarter Ended								Quarter Ended
		Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,
In Millions		2010				2009				2010				2009				2010				2009				2010				2009				2010				2009
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in other comprehensive income (OCI) (a)		$	2.1			$	1.1			$	(3.6	)		$	(1.5	)		$	—			$	—			$	—			$	—			$	(1.5	)		$	(0.4	)
Amount of gain (loss) reclassified from AOCI into earnings (a) (b)			(3.8	)			4.0				(9.8	)			(6.8	)			—				—				—				—				(13.6	)			(2.8	)
Amount of (gain) loss recognized in earnings (c) (d)			—				—				0.1				(0.2	)			—				—				—				—				0.1				(0.2	)
Derivatives in Fair Value Hedging Relationships:
Amount of net loss recognized in earnings (e)			(2.0	)			—				—				—				—				—				—				—				(2.0	)			—
Derivatives Not Designated as Hedging Instruments:
Amount of gain (loss) recognized in earnings (f)			0.2				(0.4	)			12.1				0.3				0.1				—				1.6				(28.4	)			14.0				(28.5	)

		Interest Rate								Foreign Exchange																Commodity
		Contracts								Contracts								Equity Contracts								Contracts								Total
		Nine-Month								Nine-Month								Nine-Month								Nine-Month								Nine-Month
		Period Ended								Period Ended								Period Ended								Period Ended								Period Ended
		Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,				Feb. 28,				Feb. 22,
In Millions		2010				2009				2010				2009				2010				2009				2010				2009				2010				2009
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in OCI (a)		$	5.1			$	(0.7	)		$	(12.2	)		$	48.2			$	—			$	—			$	—			$	—			$	(7.1	)		$	47.5
Amount of gain (loss) reclassified from AOCI into earnings (a) (b)			(11.4	)			11.7				(9.0	)			(12.3	)			—				—				—				—				(20.4	)			(0.6	)
Amount of loss recognized in earnings (c) (d)			—				(0.1	)			(0.2	)			(0.2	)			—				—				—				—				(0.2	)			(0.3	)
Derivatives in Fair Value Hedging Relationships:
Amount of net loss recognized in earnings (e)			(0.2	)			—				—				—				—				—				—				—				(0.2	)			—
Derivatives in Net Investment Hedging Relationships:
Amount of gain recognized in OCI (a)			—				—				—				6.0				—				—				—				—				—				6.0
Derivatives Not Designated as Hedging Instruments:
Amount of gain (loss) recognized in earnings (f)			4.2				2.6				12.1				(74.5	)			0.2				0.1				(9.6	)			(300.4	)			6.9				(372.2	)

(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)		All loss recognized in earnings is related to the ineffective portion of the hedging relationship. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.
(d)		Loss recognized in earnings is reported in SG&A expenses for foreign exchange contracts.
(e)		The net amount of loss recognized in earnings is related to the ineffective portion of the hedging relationship and the related hedged items. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.
(f)		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. Unrealized losses from interest rate cash flow hedges recorded in AOCI as of February 28, 2010, totaled $18.8 million after tax. These deferred losses are primarily related to interest rate swaps we entered into in contemplation of future borrowings and other financing

requirements and are being reclassified into net interest over the lives of the hedged forecasted transactions. As of February 28, 2010, we had no amounts from commodity derivatives recorded in AOCI. Unrealized losses from foreign currency cash flow hedges recorded in AOCI as of February 28, 2010, were $15.5 million after-tax. The net amount of pre-tax gains and losses in AOCI as of February 28, 2010, that we expect to be reclassified into net earnings within the next 12 months is $36.8 million of expense.

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 February 28, 2010, was $3.2 million. We have not posted any collateral associated with these contracts. If the credit-risk-related contingent features underlying these agreements were triggered on February 28, 2010, we would be required to post an additional $3.2 million of collateral to the counterparties.

Counterparty Credit Risk. We enter into interest rate, foreign exchange, and certain 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 and do not anticipate incurring any such material losses. 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 $56.1 million against which we hold $4.3 million of 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.

The components of notes payable were as follows:

		Feb. 28,				May 31,
In Millions		2010				2009
U.S. commercial paper		$	437.8			$	401.8
Euro commercial paper			—				275.0
Financial institutions			143.3				135.4
Total		$	581.1			$	812.2

Our commercial paper borrowings are supported by fee-paid committed credit lines consisting of a $1.8 billion facility expiring in October 2012 and a $1.1 billion facility expiring in October 2010. As of February 28, 2010, we did not have any outstanding borrowings under these credit lines.

In January 2009, we sold $1.2 billion aggregate principal amount of our 5.65 percent notes due 2019. In August 2008, we sold $700.0 million aggregate principal amount of our 5.25 percent notes due 2013. The proceeds of these notes were used to repay a portion of our outstanding commercial paper. Interest on these notes is payable semi-annually in arrears. These notes may be redeemed at our option at any time for a specified make-whole amount. These notes are senior unsecured, unsubordinated obligations that include a change of control repurchase provision.

Our credit facilities and certain of our long-term debt and noncontrolling interests agreements contain restrictive covenants. As of February 28, 2010, we were in compliance with all of these covenants.

The following table provides details of total comprehensive income:

		Quarter Ended												Quarter Ended
		Feb. 28, 2010												Feb. 22, 2009
In Millions		Pretax				Tax				Net				Pretax				Tax				Net
Net earnings										$	332.5											$	288.9
Net earnings attributable to noncontrolling interests											1.0												2.2
Net earnings, including earnings attributable to noncontrolling interests										$	333.5											$	291.1
Other comprehensive income (loss):
Foreign currency translation adjustments		$	(148.4	)		$	—			$	(148.4	)		$	23.0			$	—			$	23.0
Net actuarial gain			2.8				(1.1	)			1.7				—				—				—
Other fair value changes:
Securities			1.0				(0.4	)			0.6				2.8				(1.1	)			1.7
Hedge derivatives			(1.5	)			1.1				(0.4	)			(0.4	)			(0.8	)			(1.2	)
Reclassification to earnings:
Hedge derivatives			13.6				(5.2	)			8.4				(2.8	)			1.4				(1.4	)
Amortization of losses and prior service costs			1.9				(0.7	)			1.2				6.1				(2.3	)			3.8
Other comprehensive income (loss) in accumulated other comprehensive loss			(130.6	)			(6.3	)			(136.9	)			28.7				(2.8	)			25.9
Other comprehensive income attributable to noncontrolling interests			0.1				—				0.1				—				—				—
Other comprehensive income (loss)		$	(130.5	)		$	(6.3	)		$	(136.8	)		$	28.7			$	(2.8	)		$	25.9
Total comprehensive income										$	196.7											$	317.0
		Nine-Month Period Ended												Nine-Month Period Ended
		Feb. 28, 2010												Feb. 22, 2009
In Millions		Pretax				Tax				Net				Pretax				Tax				Net
Net earnings										$	1,318.6											$	945.6
Net earnings attributable to noncontrolling interests											3.7												7.7
Net earnings, including earnings attributable to noncontrolling interests										$	1,322.3											$	953.3
Other comprehensive income (loss):
Foreign currency translation adjustments		$	1.3			$	—			$	1.3			$	(531.2	)		$	—			$	(531.2	)
Net actuarial gain			8.4				(3.3	)			5.1				—				—				—
Other fair value changes:
Securities			0.8				(0.3	)			0.5				(2.6	)			1.0				(1.6	)
Hedge derivatives			(7.1	)			2.1				(5.0	)			47.5				(14.5	)			33.0
Reclassification to earnings:
Hedge derivatives			20.4				(7.8	)			12.6				(0.6	)			0.7				0.1
Amortization of losses and prior service costs			5.8				(2.2	)			3.6				16.3				(6.2	)			10.1
Other comprehensive income (loss) in accumulated other comprehensive loss			29.6				(11.5	)			18.1				(470.6	)			(19.0	)			(489.6	)
Other comprehensive income attributable to noncontrolling interests			0.3				—				0.3				—				—				—
Other comprehensive income (loss)		$	29.9			$	(11.5	)		$	18.4			$	(470.6	)		$	(19.0	)		$	(489.6	)
Total comprehensive income										$	1,340.7											$	463.7