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 27, 2011

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. (Check one):

Large accelerated filer   x	Accelerated filer   o

Non-accelerated filer     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 11, 2011: 638,405,347 (excluding 116,207,981 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 27, 2011, and February 28, 2010		3
		Consolidated Balance Sheets as of February 27, 2011, and May 30, 2010		4
		Consolidated Statements of Total Equity and Comprehensive Income for the nine-month period ended February 27, 2011, and the fiscal year ended May 30, 2010		5
		Consolidated Statements of Cash Flows for the nine-month periods ended February 27, 2011, and February 28, 2010		6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		37
Item 4.		Controls and Procedures		37
PART II – Other Information
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 6.		Exhibits		39
Signatures				40
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. 27,				Feb. 28,				Feb. 27,				Feb. 28,
		2011				2010				2011				2010
Net sales		$	3,646.2			$	3,589.3			$	11,245.9			$	11,106.4
Cost of sales			2,215.4				2,229.5				6,656.8				6,577.5
Selling, general, and administrative expenses			790.2				791.9				2,363.2				2,365.3
Divestiture (gain)			(14.3	)			—				(14.3	)			—
Restructuring, impairment, and other exit costs			0.1				6.3				2.1				30.4
Operating profit			654.8				561.6				2,238.1				2,133.2
Interest, net			85.0				94.2				256.9				274.6
Earnings before income taxes and after-tax earnings from joint ventures			569.8				467.4				1,981.2				1,858.6
Income taxes			181.7				157.9				565.4				622.7
After-tax earnings from joint ventures			5.4				24.0				66.6				86.4
Net earnings, including earnings attributable to noncontrolling interests			393.5				333.5				1,482.4				1,322.3
Net earnings attributable to noncontrolling interests			1.4				1.0				4.3				3.7
Net earnings attributable to General Mills		$	392.1			$	332.5			$	1,478.1			$	1,318.6
Earnings per share - basic		$	0.61			$	0.50			$	2.30			$	2.00
Earnings per share - diluted		$	0.59			$	0.48			$	2.22			$	1.94
Dividends per share		$	0.28			$	0.25			$	0.84			$	0.72

See accompanying notes to consolidated financial statements.

GENERAL MILLS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Millions, Except Par Value)

		Feb. 27,				May 30,
		2011				2010
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	540.3			$	673.2
Receivables			1,185.9				1,041.6
Inventories			1,668.1				1,344.0
Deferred income taxes			30.9				42.7
Prepaid expenses and other current assets			417.7				378.5
Total current assets			3,842.9				3,480.0
Land, buildings, and equipment			3,180.4				3,127.7
Goodwill			6,702.9				6,592.8
Other intangible assets			3,802.8				3,715.0
Other assets			752.5				763.4
Total assets		$	18,281.5			$	17,678.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	830.1			$	849.5
Current portion of long-term debt			1,031.2				107.3
Notes payable			974.5				1,050.1
Other current liabilities			1,675.5				1,762.2
Total current liabilities			4,511.3				3,769.1
Long-term debt			4,843.1				5,268.5
Deferred income taxes			988.6				874.6
Other liabilities			1,826.3				2,118.7
Total liabilities			12,169.3				12,030.9
Stockholders’ equity:
Common stock, 754.6 shares issued, $0.10 par value			75.5				75.5
Additional paid-in capital			1,300.7				1,307.1
Retained earnings			9,053.0				8,122.4
Common stock in treasury, at cost, shares of 116.3 and 98.1			(3,400.8	)			(2,615.2	)
Accumulated other comprehensive loss			(1,162.2	)			(1,486.9	)
Total stockholders’ equity			5,866.2				5,402.9
Noncontrolling interests			246.0				245.1
Total equity			6,112.2				5,648.0
Total liabilities and equity		$	18,281.5			$	17,678.9

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 31, 2009			754.6			$	75.5			$	1,212.1				(98.6	)		$	(2,473.1	)		$	7,235.6			$	(877.8	)		$	244.2			$	5,416.5
Comprehensive income:
Net earnings, including earnings attributable to noncontrolling interests																							1,530.5								4.5				1,535.0
Other comprehensive income (loss)																											(609.1	)			0.2				(608.9	)
Total comprehensive income																																			926.1
Cash dividends declared ($0.96 per share)																							(643.7	)											(643.7	)
Stock compensation plans (includes income tax benefits of $114.0)											53.3				21.8				549.7																603.0
Shares purchased															(21.3	)			(691.8	)															(691.8	)
Unearned compensation related to restricted stock unit awards											(65.6	)																							(65.6	)
Distributions to noncontrolling interest holders																															(3.8	)			(3.8	)
Earned compensation											107.3																								107.3
Balance as of May 30, 2010			754.6				75.5				1,307.1				(98.1	)			(2,615.2	)			8,122.4				(1,486.9	)			245.1				5,648.0
Comprehensive income:
Net earnings, including earnings attributable to noncontrolling interests																							1,478.1								4.3				1,482.4
Other comprehensive income																											324.7				0.4				325.1
Total comprehensive income																																			1,807.5
Cash dividends declared ($0.84 per share)																							(547.5	)											(547.5	)
Stock compensation plans (includes income tax benefits of $75.1)											(9.7	)			13.6				377.9																368.2
Shares purchased															(31.8	)			(1,163.5	)															(1,163.5	)
Unearned compensation related to restricted stock awards											(78.1	)																							(78.1	)
Distributions to noncontrolling interest holders																															(3.8	)			(3.8	)
Earned compensation											81.4																								81.4
Balance as of Feb. 27, 2011			754.6			$	75.5			$	1,300.7				(116.3	)		$	(3,400.8	)		$	9,053.0			$	(1,162.2	)		$	246.0			$	6,112.2

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. 27,				Feb. 28,
		2011				2010
Cash Flows - Operating Activities
Net earnings, including earnings attributable to noncontrolling interests		$	1,482.4			$	1,322.3
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			354.5				340.3
After-tax earnings from joint ventures			(66.6	)			(86.4	)
Stock-based compensation			81.4				83.0
Deferred income taxes			105.8				—
Tax benefit on exercised options			(75.1	)			(86.2	)
Distributions of earnings from joint ventures			31.4				32.5
Pension and other postretirement benefit plan contributions			(11.3	)			(9.1	)
Pension and other postretirement benefit plan expense (income)			55.1				(28.0	)
Divestiture (gain)			(14.3	)			—
Restructuring, impairment, and other exit costs (income)			(2.5	)			23.9
Changes in current assets and liabilities			(612.4	)			(75.6	)
Other, net			(80.3	)			41.5
Net cash provided by operating activities			1,248.1				1,558.2
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment			(423.4	)			(418.9	)
Acquisitions			(84.8	)			—
Investments in affiliates, net			(1.8	)			(121.8	)
Proceeds from disposal of land, buildings, and equipment			3.5				7.1
Proceeds from divestiture of product line			24.9				—
Other, net			14.7				48.9
Net cash used by investing activities			(466.9	)			(484.7	)
Cash Flows - Financing Activities
Change in notes payable			(78.4	)			(234.1	)
Issuance of long-term debt			500.0				—
Payment of long-term debt			(5.5	)			(505.0	)
Proceeds from common stock issued on exercised options			256.3				321.2
Tax benefit on exercised options			75.1				86.2
Purchases of common stock for treasury			(1,163.5	)			(324.3	)
Dividends paid			(547.5	)			(478.3	)
Other, net			(8.5	)			(0.1	)
Net cash used by financing activities			(972.0	)			(1,134.4	)
Effect of exchange rate changes on cash and cash equivalents			57.9				2.4
Decrease in cash and cash equivalents			(132.9	)			(58.5	)
Cash and cash equivalents - beginning of year			673.2				749.8
Cash and cash equivalents - end of period		$	540.3			$	691.3
Cash Flow from Changes in Current Assets and Liabilities:
Receivables		$	(110.3	)		$	(244.9	)
Inventories			(304.6	)			(136.3	)
Prepaid expenses and other current assets			(33.0	)			117.1
Accounts payable			4.1				(53.9	)
Other current liabilities			(168.6	)			242.4
Changes in current assets and liabilities		$	(612.4	)		$	(75.6	)

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, 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. Operating results for the quarterly and nine-month periods ended February 27, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending May 29, 2011.

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 30, 2010. 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, 17, and 18 to these Consolidated Financial Statements.

At the beginning of fiscal 2011, we revised the classification of certain revenues and expenses to better align our income statement line items with how we manage our business. We revised the classification of amounts previously reported in our Consolidated Statements of Earnings to conform to the current year presentation. These revised classifications had no effect on previously reported net earnings attributable to General Mills or earnings per share. The changes include:

     • Revising the classification of certain customer logistics allowances as a reduction of net sales (previously recorded as cost of sales). The impact of this change was a decrease in net sales of $39.8 million for the quarter ended and $119.7 million for the nine-month period ended February 28, 2010 with a corresponding decrease to cost of sales.

     • Revising the classification of certain promotion-related costs, customer allowances, and supply chain costs as cost of sales or selling, general, and administrative (SG&A) expenses (previously recorded as a reduction of net sales or SG&A expenses). The impact of these changes was a net increase to cost of sales of $17.7 million for the quarter ended and $53.4 million for the nine-month period ended February 28, 2010 with a corresponding decrease to SG&A expenses.

     • Shifting allocation of certain SG&A expenses, primarily stock-based compensation, between segment operating profit and unallocated corporate items. The impact of this change was an increase to segment operating profit of $1.7 million and a corresponding increase in unallocated corporate items for the quarter ended February 28, 2010. For the nine-month period ended February 28, 2010, the impact of this change was a decrease to segment operating profit of $7.0 million and a corresponding decrease in unallocated corporate items.

     • Shifting sales responsibility for a customer from our Bakeries and Foodservice segment to our U.S. Retail segment. For the quarter ended February 28, 2010, net sales of $2.7 million and segment operating profit of $1.2 million previously recorded in our Bakeries and Foodservice segment have now been reported in the U.S. Retail segment. For the nine-month period ended February 28, 2010, net sales of $7.9 million and segment operating profit of $3.4 million previously recorded in our Bakeries and Foodservice segment have now been reported in the U.S. Retail segment.

In May 2010, our Board of Directors approved a two-for-one stock split to be effected in the form of a 100 percent stock dividend to stockholders of record on May 28, 2010. The Company’s stockholders received one additional share of common stock for each share of common stock in their possession on that date. The additional shares were distributed on June 8, 2010. This did not change the proportionate interest that a stockholder maintained in the Company. All shares and per share amounts have been adjusted for the two-for-one stock split throughout this report.

During the third quarter of fiscal 2011, we acquired the Mountain High yoghurt business for $84.8 million. We recorded the purchase price less the fair value of tangible and intangible net assets acquired as goodwill of $44.6 million. The pro forma effect of this acquisition was not material.

During the third quarter of fiscal 2011, we reached a definitive agreement to acquire Pasta Master Pty Ltd., an Australian producer of chilled Italian meals, pasta and sauces, for $36.6 million in cash subject to certain purchase price adjustments. We expect the transaction to be completed in the fourth quarter of fiscal 2011.

During the third quarter of fiscal 2011, we sold a foodservice frozen baked goods product line in our International segment for $24.9 million in cash. We recorded a pre-tax gain of $14.3 million.

Restructuring, impairment, and other exit costs (income) were as follows:

										Nine-Month
		Quarter Ended								Period Ended
		Feb. 27,				Feb. 28,				Feb. 27,				Feb. 28,
In Millions		2011				2010				2011				2010
Discontinuation of kids’ refrigerated yogurt beverage and microwave soup product lines		$	0.1			$	—			$	1.9			$	24.1
Sale of Contagem, Brazil bread and pasta plant			—				0.2				—				(0.6	)
Discontinuation of the breadcrumbs product line at Federalsburg, Maryland plant			—				6.1				—				6.1
Charges associated with restructuring actions previously announced			—				—				0.2				0.8
Total		$	0.1			$	6.3			$	2.1			$	30.4

During the nine-month period ended February 27, 2011, we did not undertake any new restructuring actions.

During the third quarter of fiscal 2010, we decided to exit our breadcrumbs product line at our Federalsburg, Maryland plant in our Bakeries and Foodservice segment. As a result of this decision, we concluded that the future cash flows generated by these products were 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 by this action.

During the nine-month period ended February 28, 2010, we took restructuring actions in addition to the item described above. We decided to exit our kids’ refrigerated yogurt beverage product line at our Murfreesboro, Tennessee plant and our microwave soup product line at our Vineland, New Jersey plant 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. 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.

The changes in the carrying amount of goodwill during fiscal 2011 were as follows:

										Bakeries and				Joint
In Millions		U.S. Retail				International				Foodservice				Ventures				Total
Balance as of May 30, 2010		$	5,098.3			$	122.0			$	923.0			$	449.5			$	6,592.8
Acquisition			44.6				—				—				—				44.6
Other activity, primarily foreign currency translation			—				11.4				—				54.1				65.5
Balance as of Feb. 27, 2011		$	5,142.9			$	133.4			$	923.0			$	503.6			$	6,702.9

The changes in the carrying amount of other intangible assets during fiscal 2011 were as follows:

										Joint
In Millions		U.S. Retail				International				Ventures				Total
Balance as of May 30, 2010		$	3,206.6			$	445.3			$	63.1			$	3,715.0
Acquisition			39.3				—				—				39.3
Other activity, primarily foreign currency translation			(2.5	)			43.8				7.2				48.5
Balance as of Feb. 27, 2011		$	3,243.4			$	489.1			$	70.3			$	3,802.8

The components of inventories were as follows:

		Feb. 27,				May 30,
In Millions		2011				2010
Raw materials and packaging		$	289.3			$	247.5
Finished goods			1,294.9				1,131.4
Grain			249.9				107.4
Excess of FIFO or weighted-average cost over LIFO cost			(166.0	)			(142.3	)
Total		$	1,668.1			$	1,344.0

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 27, 2011, and May 30, 2010, 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. 27,				May 30,				Feb. 27,				May 30,				Feb. 27,				May 30,				Feb. 27,				May 30,
In Millions		2011				2010				2011				2010				2011				2010				2011				2010
Available for sale:
Debt securities		$	9.0			$	11.8			$	9.1			$	11.9			$	0.1			$	0.1			$	—			$	—
Equity securities			2.0				6.1				6.0				15.5				4.0				9.4				—				—
Total		$	11.0			$	17.9			$	15.1			$	27.4			$	4.1			$	9.5			$	—			$	—

Earnings include $3.7 million of 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 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 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)		$	2.7			$	2.7
From 1 to 3 years			0.7				0.8
From 4 to 7 years			4.5				4.5
Over 7 years			1.1				1.1
Equity securities			2.0				6.0
Total		$	11.0			$	15.1

Marketable securities with a market value of $2.3 million as of February 27, 2011, were pledged as collateral for certain derivative contracts.

The fair values and carrying amounts of long-term debt, including the current portion, were $6,386.7 million and $5,874.3 million, respectively, as of February 27, 2011. 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 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 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 27, 2011, and February 28, 2010, included:

										Nine-Month
		Quarter Ended								Period Ended
		Feb. 27,				Feb. 28,				Feb. 27,				Feb. 28,
In Millions		2011				2010				2011				2010
Net gain (loss) on mark-to-market valuation of commodity positions		$	56.4			$	1.6			$	146.2			$	(9.6	)
Net (gain) loss on commodity positions reclassified from unallocated corporate items to segment operating profit			(28.6	)			(0.1	)			(41.7	)			60.5
Net mark-to-market revaluation of certain grain inventories			5.6				(6.5	)			28.8				(3.3	)
Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items		$	33.4			$	(5.0	)		$	133.3			$	47.6

As of February 27, 2011, the net notional value of commodity derivatives was $229.3 million, of which $106.6 million related to agricultural inputs and $122.7 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 zero as of February 27, 2011.

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 27, 2011.

During the fourth quarter of fiscal 2010, in advance of a planned debt financing, we entered into $500 million of treasury lock derivatives with an average fixed rate of 4.3 percent. All of these treasury locks were cash settled for $17.1 million during the first quarter of fiscal 2011, coincident with the issuance of our $500 million 30-year fixed-rate notes. As of February 27, 2011, a $16.4 million pre-tax loss remained in AOCI, which will be reclassified to earnings over the term of the underlying debt.

During the second quarter of fiscal 2010, we entered into $700 million of interest rate swaps to convert $700 million of 5.65 percent fixed-rate notes to floating rates. In May 2010, we repurchased $179.2 million of our 5.65 percent notes, and as a result, we received $2.7 million to settle a portion of these swaps that related to the repurchased debt.

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. The remaining $1.6 billion of these pay-fixed swap contracts along with $1.6 billion of offsetting pay-floating swaps were cash settled for $22.3 million during the third quarter of fiscal 2011. As of February 27, 2011, a $3.1 million pre-tax loss remained in AOCI, which will be reclassified to earnings over the remaining term of the underlying debt.

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 27, 2011, a $13.3 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. Average floating rates are based on rates as of the end of the reporting period.

		Feb. 27,				May 30,
In Millions		2011				2010
Pay-floating swaps - notional amount		$	546.6			$	2,155.6
Average receive rate			2.1	%			4.8	%
Average pay rate			0.3	%			0.3	%
Pay-fixed swaps - notional amount		$	—			$	1,600.0
Average receive rate			—	%			0.3	%
Average pay rate			—	%			7.3	%

The swap contracts mature at various dates from fiscal 2011 to 2013 as follows:

In Millions		Pay Floating
2011		$	8.7
2012			3.3
2013			534.6
Total		$	546.6

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 27, 2011.

We also have many net investments in foreign subsidiaries that are denominated in euros. We hedged a portion of these net investments by issuing euro-denominated commercial paper and foreign exchange forward contracts. As of February 27, 2011, 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

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 27, 2011, 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) (b)		$	—			$	10.2			$	—			$	10.2			$	—			$	—			$	—			$	—
Foreign exchange contracts (c) (d)			—				3.9				—				3.9				—				(18.9	)			—				(18.9	)
Total			—				14.1				—				14.1				—				(18.9	)			—				(18.9	)
Derivatives not designated as hedging instruments:
Interest rate contracts (a) (b)			—				2.7				—				2.7				—				(1.1	)			—				(1.1	)
Foreign exchange contracts (c) (d)			—				26.6				—				26.6				—				(3.8	)			—				(3.8	)
Commodity contracts (c) (e)			10.0				22.7				—				32.7				—				—				—				—
Total			10.0				52.0				—				62.0				—				(4.9	)			—				(4.9	)
Other assets and liabilities reported at fair value:
Marketable investments (a) (f)			6.0				9.1				—				15.1				—				—				—				—
Grain contracts (c) (e)			—				55.9				—				55.9				—				(28.1	)			—				(28.1	)
Total			6.0				65.0				—				71.0				—				(28.1	)			—				(28.1	)
Total assets, liabilities, and derivative positions recorded at fair value		$	16.0			$	131.1			$	—			$	147.1			$	—			$	(51.9	)		$	—			$	(51.9	)

(a)		These contracts and investments are recorded as other assets or as 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, net investment hedges, and other derivatives not designated as hedging instruments for the quarterly and nine-month periods ended February 27, 2011 and February 28, 2010, were as follows:

										Foreign
		Interest Rate								Exchange								Equity								Commodity
		Contracts								Contracts								Contracts								Contracts								Total
		Quarter Ended								Quarter Ended								Quarter Ended								Quarter Ended								Quarter Ended
		Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.
		27,				28,				27,				28,				27,				28,				27,				28,				27,				28,
In Millions		2011				2010				2011				2010				2011				2010				2011				2010				2011				2010
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in other comprehensive income (OCI) (a)		$	—			$	2.1			$	(13.0	)		$	(3.6	)		$	—			$	—			$	—			$	—			$	(13.0	)		$	(1.5	)
Amount of loss reclassified from AOCI into earnings (a) (b)			(3.2	)			(3.8	)			(2.0	)			(9.8	)			—				—				—				—				(5.2	)			(13.6	)
Amount of gain recognized in earnings (c) (d)			—				—				—				0.1				—				—				—				—				—				0.1
Derivatives in Fair Value Hedging Relationships:
Amount of net loss recognized in earnings (e)			(0.9	)			(2.0	)			—				—				—				—				—				—				(0.9	)			(2.0	)
Derivatives Not Designated as Hedging Instruments:
Amount of gain recognized in earnings (e)			1.8				0.2				7.0				12.1				—				0.1				56.4				1.6				65.2				14.0
										Foreign
		Interest Rate								Exchange								Equity								Commodity
		Contracts								Contracts								Contracts								Contracts								Total
		Nine-Month								Nine-Month								Nine-Month								Nine-Month								Nine-Month
		Period Ended								Period Ended								Period Ended								Period Ended								Period Ended
		Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.				Feb.
		27,				28,				27,				28,				27,				28,				27,				28,				27,				28,
In Millions		2011				2010				2011				2010				2011				2010				2011				2010				2011				2010
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in other comprehensive income (OCI) (a)		$	—			$	5.1			$	(20.4	)		$	(12.2	)		$	—			$	—			$	—			$	—			$	(20.4	)		$	(7.1	)
Amount of loss reclassified from AOCI into earnings (a) (b)			(9.8	)			(11.4	)			(11.5	)			(9.0	)			—				—				—				—				(21.3	)			(20.4	)
Amount of gain (loss) recognized in earnings (c) (d)			—				—				0.3				(0.2	)			—				—				—				—				0.3				(0.2	)
Derivatives in Fair Value Hedging Relationships:
Amount of net gain (loss) recognized in earnings (e)			0.3				(0.2	)			—				—				—				—				—				—				0.3				(0.2	)
Derivatives Not Designated as Hedging Instruments:
Amount of gain (loss) recognized in earnings (e)			0.9				4.2				20.4				12.1				—				0.2				146.2				(9.6	)			167.5				6.9

(a)

Effective portion.

(b)		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.
(c)		All gain (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)		Gain (loss) recognized in earnings is reported in SG&A expenses for foreign exchange contracts.
(e)		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 27, 2011, totaled $19.0 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. Unrealized losses from foreign currency cash flow hedges recorded in AOCI as of February 27, 2011, were $11.0 million after-tax. The net amount of pre-tax gains and losses in AOCI as of February 27, 2011, that we expect to be reclassified into net earnings within the next 12 months is $18.9 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 27, 2011, was $4.2 million. We would be required to post this amount of collateral to the counterparties if the contingent features were triggered.

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. 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 $65.3 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.

The components of notes payable were as follows:

		Feb. 27,				May 30,
In Millions		2011				2010
U.S. commercial paper		$	862.0			$	973.0
Financial institutions			112.5				77.1
Total		$	974.5			$	1,050.1

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 issue commercial paper in the United States and Europe. Our commercial paper borrowings are supported by $2.9 billion of 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 2013. As of February 27, 2011, we did not have any outstanding borrowings under these credit lines. We also have $304.9 million in uncommitted credit lines that support our foreign operations.

In June 2010, we issued $500.0 million aggregate principal amount of 5.4 percent notes due 2040. 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.

In May 2010, we paid $437.0 million to repurchase in a cash tender offer $400.0 million of our previously issued debt. We repurchased $220.8 million of our 6.0 percent notes due 2012 and $179.2 million of our 5.65 percent notes due 2012. We issued commercial paper to fund the repurchase.

Our credit facilities and certain of our long-term debt and noncontrolling interests agreements contain restrictive covenants. As of February 27, 2011, we were in compliance with all of these covenants.

The following table provides details of total comprehensive income:

		Quarter Ended												Quarter Ended
		Feb. 27, 2011												Feb. 28, 2010
In Millions		Pretax				Tax				Net				Pretax				Tax				Net
Net earnings attributable to General Mills										$	392.1											$	332.5
Net earnings attributable to noncontrolling interests											1.4												1.0
Net earnings, including earnings attributable to noncontrolling interests										$	393.5											$	333.5
Other comprehensive income (loss):
Foreign currency translation		$	102.6			$	—			$	102.6			$	(148.4	)		$	—			$	(148.4	)
Other fair value changes:
Securities			(3.6	)			1.4				(2.2	)			1.0				(0.4	)			0.6
Hedge derivatives			(13.0	)			6.1				(6.9	)			(1.5	)			1.1				(0.4	)
Reclassification to earnings:
Hedge derivatives			5.2				(4.3	)			0.9				13.6				(5.2	)			8.4
Amortization of losses and prior service costs			27.2				(10.4	)			16.8				4.7				(1.8	)			2.9
Other comprehensive income (loss) in accumulated other comprehensive loss			118.4				(7.2	)			111.2				(130.6	)			(6.3	)			(136.9	)
Other comprehensive income attributable to noncontrolling interests			0.1				—				0.1				0.1				—				0.1
Other comprehensive income (loss)		$	118.5			$	(7.2	)		$	111.3			$	(130.5	)		$	(6.3	)		$	(136.8	)
Total comprehensive income										$	504.8											$	196.7