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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

Commission file number: 1-1185

GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)

(763) 764-7600
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X   No     

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes   X   No     

As of December 17, 2002, General Mills had 368,766,826 shares of its $.10 par value common stock outstanding (excluding 133,539,838 shares held in treasury).

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)

See accompanying notes to consolidated condensed financial statements.

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GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)

See accompanying notes to consolidated condensed financial statements.

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GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)

See accompanying notes to consolidated condensed financial statements.

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

(1) Background

These consolidated condensed financial statements do not include certain information and disclosures required by accounting principles generally accepted in the United States for comprehensive financial statements. However, 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 twenty-six weeks ended November 24, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending May 25, 2003.

These statements should be read in conjunction with the consolidated financial statements and footnotes included in our annual report for the year ended May 26, 2002. The accounting policies used in preparing these consolidated condensed financial statements are the same as those described in Note One of our annual report, except as described in Note 10, “Accounting Rules Adopted.”

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation.

(2) Acquisition

On October 31, 2001, we acquired the worldwide Pillsbury operations from Diageo plc (Diageo). The total acquisition consideration (exclusive of direct acquisition costs) was approximately $9,724 million. Under terms of the agreement, Diageo holds contingent value rights that may require payment to Diageo on April 30, 2003, of up to $395 million, depending on the General Mills stock price and the number of General Mills shares that Diageo continues to hold on that date. If the General Mills stock price averages less than $49 per share for the 20 trading days prior to that date, Diageo will receive an amount per share equal to the difference between $49 and the General Mills stock trading price, up to a maximum of $5 per share.

The allocation of the purchase price was completed in the second quarter of fiscal 2003. Intangible assets included in the final allocation of the purchase price were acquired brands totaling $3.5 billion and goodwill of $5.6 billion. Deferred income taxes of $1.3 billion, associated with the brand intangibles, also were recorded.

In the course of completing the purchase price allocation during the first six months of fiscal 2003, adjustments were made as management finalized plans to exit certain Pillsbury facilities as part of consolidating manufacturing, warehouse and distribution activities into fewer locations. In the first quarter, we announced that we would close the Hillsdale, Michigan plant which produced dry mix products and flour for our foodservice business. The production capacity for the dry mix product lines will be absorbed within other facilities throughout the General Mills supply chain, while the flour mill business will be sold. A total of 119 employees were affected by the closure. In the second quarter, we announced plans to close plants in Eden Prairie, Minnesota; St. Louis, Missouri; Lithonia, Georgia; and Denison, Texas. The Eden Prairie plant, which is planned to close in the fall of 2003, employs 323 people and produces frozen breakfast products for the Company’s bakeries and foodservice segment. The St. Louis plant, which is planned to close in the fall of 2003, employs 421 people and produces frozen bakery goods for the Company’s bakeries and foodservice segment. The Lithonia plant, which is planned to close in the spring of 2003, employs 215 people and produces refrigerated dough products for the Company’s retail segment. The Denison plant, which is planned to close in the spring of 2003, employs 243 people and produces refrigerated dough products for the Company’s retail segment.

Actual results of acquired business operations are included in the consolidated statement of earnings for the period from November 1, 2001. The following unaudited pro forma information for the prior year’s second quarter and first half summarizes our consolidated results of operations and the acquired Pillsbury operations as if the acquisition had occurred at the beginning of fiscal 2002.

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These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt. They do not reflect the effect of synergies that would have been expected to result from the integration of the Pillsbury businesses. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of fiscal 2002, or of future results of the consolidated entities.

(3) Unusual Items

In the second quarter of fiscal 2003, we recorded unusual items of $21 million pretax expense, $14 million after tax ($.04 per diluted share), representing $24 million of expenses related to relocating production from former Pillsbury facilities being closed and other Pillsbury transaction and integration costs. These costs were partially offset by additional insurance settlements of $3 million pretax covering a 1994 oats handling incident.

In last year’s second quarter, we recorded unusual items totaling $109 million pretax expense, $68 million after tax ($.22 per diluted share), representing $25 million pretax of Pillsbury integration costs and $87 million pretax of cereal reconfiguration charges, partially offset by additional insurance settlements of $3 million pretax covering the 1994 oats handling incident.

For the six months ended November 24, 2002, unusual items totaled $76 million pretax expense, $49 million after tax ($.13 per diluted share), representing $41 million pretax charges associated with the closure of our St. Charles, Illinois plant, and $38 million of expenses related to relocating production from former Pillsbury facilities being closed and other Pillsbury transaction and integration costs. These costs were partially offset by additional insurance settlements of $3 million pretax covering the 1994 oats handling incident.

For the six months ended last fiscal year, unusual items totaled $94 million pretax expense, $59 million after tax ($.19 per diluted share), representing $30 million pretax of Pillsbury transaction and integration costs; $87 million pretax of cereal reconfiguration charges; $4 million, primarily severance, for the exit from the Squeezit beverage business; and $3 million pretax, net of insurance recovery, associated with a flash flood at our Cincinnati, Ohio, cereal plant; partially offset by additional insurance settlements of $30 million pretax covering the 1994 oats handling incident.

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(4) Goodwill and Intangible Assets

The components of goodwill and intangible assets are as follows:

The changes in the carrying amount of goodwill for the six months ended November 24, 2002, are as follows:

The Pillsbury acquisition valuation and purchase price allocation was completed in the second quarter of fiscal 2003. The activity in the first half of fiscal 2003 primarily reflects the allocation of the purchase price to brand intangibles, net of tax (see Note 2, “Acquisition”).

(5) Debt

On September 18, 2002, we began a new medium-term note program under our existing shelf registration statement for the sale to individual investors of up to $750 million of fixed-rate notes with maturities of nine months or more (“Core Notes”). As of November 24, 2002, we had issued approximately $17 million of notes under the Core Notes program.

On November 20, 2002, we sold $350 million of 3 7/8% fixed-rate notes due November 30, 2007. Concurrent with that offering, we sold $135 million of 3.901% fixed-rate notes due November 30, 2007. Interest for both the 3 7/8% notes and the 3.901% notes is payable semiannually on May 30 and November 30, beginning May 30, 2003. After giving effect to the issuance of these notes and the sale of notes under the Core Notes program, approximately $4.0 billion remains available under our existing shelf registration statement for future use.

On October 28, 2002, we completed a private placement of zero coupon convertible debentures with a face value of approximately $2.23 billion for gross proceeds of approximately $1.50 billion. The issue price of the debentures was $671.65 for each $1,000 in face value, which represents a yield to maturity of 2.00%. The debentures cannot be called by General Mills for three years after issuance and will mature in 20 years. Holders of the debentures can require the Company to repurchase the notes on the third, fifth, tenth and fifteenth anniversaries of the issuance. We have the option to pay the repurchase price in cash or in stock. The debentures are convertible into General Mills common stock at a rate of 13.0259 shares for each $1,000 debenture. This results in an initial conversion price of approximately $51.56 per share and represents a premium of 25% over the closing sale price of $41.25 per share on October 22, 2002. The conversion price will increase with the accretion of the original issue discount on the debentures. Generally, except upon the occurrence of specified events, holders of the debentures are not entitled to exercise their conversion rights until the Company’s stock price is greater than a specified percentage (beginning at 125% and declining by 0.25% each six months) of the accreted conversion price per share.

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In order to offset any dilution to General Mills’ shareholders from future conversion of the debentures, the Company has purchased call options from Diageo plc on approximately 29 million shares that Diageo currently owns. The premiums paid for the call options totaled approximately $89 million. The options are exercisable in whole or in part from time to time, subject to certain limitations, during a three-year period from the date of the sale of the debentures.

A summary of our short and long-term debt is as follows (in millions):

(6) Minority Interest

In the first quarter of 2003, General Mills Capital, Inc. (GM Capital), a wholly owned subsidiary, sold $150 million of its Series A preferred stock to an unrelated third-party investor. GM Capital regularly enters into transactions with the Company to purchase receivables of the Company. These receivables are included in the consolidated balance sheet of the Company and the $150 million purchase price for the Series A preferred stock is included in minority interest on the balance sheet. The proceeds from the issuance of the preferred stock were used to reduce short-term debt.

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(7) Comprehensive Income

The following table summarizes total comprehensive income for the periods presented (in millions):

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Accumulated other comprehensive income (loss) balances were as follows (in millions):

The changes in other comprehensive income are primarily non-cash items.

(8) Statements of Cash Flows

During the first six months of fiscal 2003, we made interest payments of $273 million (net of amounts capitalized), versus $85 million last year. In the first six months of fiscal 2003, we made tax payments of $76 million and received a $109 million refund of fiscal 2002 tax overpayments. In the corresponding period of fiscal 2002, we made tax payments of $132 million.

In addition, we had a large non-cash transaction in the second quarter of last year, when we issued 134 million common shares of General Mills to Diageo plc for the acquisition of Pillsbury.

(9) Operating Segments

We operate exclusively in the consumer foods industry, with multiple operating segments organized generally by product categories.

We have aggregated our operating segments into three reportable segments: 1) U.S. Retail; 2) Bakeries and Foodservice; and 3) International. U.S. Retail consists of cereals, meals, refrigerated and frozen dough products, baking products, snacks, yogurt and other. Our Bakeries and Foodservice segment consists of products marketed to bakeries and offered to the commercial and non-commercial foodservice sectors throughout the United States and Canada. The International segment is comprised of retail markets outside the United States and foodservice markets outside of the United States and Canada. At the beginning of fiscal 2003, the Lloyd’s foodservice and the bakery flour businesses were realigned from the U.S. Retail segment to the Bakeries and Foodservice segment. All prior year amounts are restated.

Management reviews operating results to evaluate segment performance. Operating profit for the reportable segments excludes general corporate expenses. Interest expense and income taxes are centrally managed at the corporate level and, therefore, are not allocated to segments since they are excluded from the measure of segment profitability reviewed by the Company’s management. Under our supply chain organization, our manufacturing, warehouse, distribution and sales activities are substantially integrated across our operations in order to maximize efficiency and productivity. As a result, fixed assets, capital expenditures, and depreciation and amortization expenses are not maintained nor available by operating segments.

The measurement of operating segment results is consistent with the presentation of the Consolidated Statements of Earnings. Intercompany transactions between reportable operating segments were not material in the periods presented.

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Operating Segments
(Unaudited) (In Millions)

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(10) Accounting Rules Adopted

Effective the first quarter of fiscal 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The adoption of SFAS No. 144 did not have a material impact on the Company’s financial statements.

Effective 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. At May 28, 2001, we recorded the cumulative effect of adopting this accounting change, as follows:

The cumulative effect on earnings and on Accumulated Other Comprehensive Income was primarily associated with the impact of lower interest rates on the fair-value calculation for the delayed-starting interest rate swaps we entered into in anticipation of our Pillsbury acquisition and other financing requirements.

Effective the fourth quarter of fiscal 2002, we adopted the Financial Accounting Standard Board’s (FASB’s) Emerging Issues Task Force (EITF) Issue 01-09, “Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Products”, which requires recording certain coupon and trade promotion expenses as reductions of revenues. Since adopting this requirement resulted only in the reclassification of certain expenses from selling, general and administrative expense to a reduction of net sales, it did not affect our financial position or net earnings. The impact was a reduction of net sales, and a corresponding reduction in selling, general and administrative expense, of $501 million in the second quarter of 2002, and $868 million for the first half of fiscal 2002.

(11) New Accounting Rules

In July 2002, The Financial Accounting Standards Board (FASB) issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS No. 146). SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of this Standard may affect the timing of the recognition of future exit or disposal costs. However, we do not expect the impact to be material.

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

FINANCIAL CONDITION

During the first six months of fiscal 2003, cash flow from continuing operations totaled $680 million, up $270 million from last year’s first half. The increase was due largely to the $181 million improvement in operating earnings before depreciation, amortization and unusual items, and a $103 million decrease in use of working capital.

During the first six months of fiscal 2003, capital investment totaled $233 million. Fiscal 2003 capital investment is estimated to be approximately $750 million, including construction costs to consolidate the Company’s headquarters and costs of integrating Pillsbury into the Company’s information systems.

At the end of the first half, we had adjusted debt plus minority interests of approximately $9.1 billion, essentially the same as at the end of fiscal 2002. Approximately 74 percent of our debt was long term, 19 percent was short term (excluding the impact of reclassification from our long-term credit facility), and the balance was leases and tax-benefit leases. This reflects refinancing of approximately $5.8 billion in commercial paper with longer-term debt and minority interest since February 2002. Approximately $2.1 billion of this refinancing occurred during the first half of fiscal 2003.

During fiscal 2002, General Mills filed a shelf registration statement with the Securities and Exchange Commission covering the sale of up to $8.0 billion in debt securities. As of November 24, 2002, approximately $4.0 billion remained available under the shelf registration statement for future debt issuance.

On September 18, 2002, we began a new medium-term note program for the sale to individual investors of up to $750 million of notes with maturities of nine months or more. As of November 24, 2002, we had issued approximately $17 million of notes under the program.

On October 28, 2002, we completed a private placement of zero coupon convertible debentures with a face value of approximately $2.23 billion for gross proceeds of approximately $1.50 billion.

On November 20, 2002, we sold $350 million of 3 7/8% fixed-rate notes due November 30, 2007, and $135 million of 3.901% fixed-rate notes due November 30, 2007.

Commercial paper is a continuing source of short-term financing. We can issue commercial paper in the United States and Canada, as well as in Europe. Our commercial paper borrowings are supported by $2.1 billion in fee-paid committed credit lines. As part of our core facilities we have $1.05 billion in 364-day facilities that expire in January 2003, which we expect to renew in January 2003 for an additional year, and $1.05 billion in five-year facilities that expire in January 2006. As of November 24, 2002, the Company had no outstanding borrowings under these facilities. Additionally, we have $41 million in uncommitted credit lines available.

We believe that cash flows from operations together with available short- and long-term debt financing will be adequate to meet our liquidity and capital needs.

As of November 24, 2002, we have recorded approximately $300 million of minority interest financing on our balance sheet. In May 2002, we sold a minority interest in a subsidiary to an unrelated third-party investor for $150 million. This subsidiary holds some of our manufacturing assets and trademarks. In the first quarter of 2003, we sold a minority interest in another subsidiary for $150 million, as described in Note 6 “Minority Interest.” We did not recognize any gain or loss in connection with the issuance of the minority interests. All assets, liabilities and results of operations of these subsidiaries are reflected in our financial statements, and the third party’s investment is reflected as minority interest on our balance sheet.

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RESULTS OF OPERATIONS

Net sales for the 13 weeks ended November 24, 2002 grew 60 percent to $2.95 billion, including the incremental contribution of Pillsbury businesses acquired October 31, 2001. Total worldwide volume grew 3 percent on a comparable basis, as if General Mills had owned the Pillsbury businesses for all of the previous year.

Reported earnings were $276 million in the second quarter of fiscal 2003 as compared to $131 million earnings last year. Basic earnings per share of 75 cents for the second quarter ended November 24, 2002, were up 74 percent from 43 cents a year earlier. Diluted earnings per share of 73 cents for the second quarter of fiscal 2003 were up 78 percent from 41 cents per share earned in the same period last year.

Second-quarter results for both fiscal 2003 and 2002 included unusual items. In fiscal 2003, the Company recorded unusual expenses of $21 million pretax, $14 million after tax ($.04 per diluted share), consisting of $24 million pretax charges associated with certain expenses related to relocating production from former Pillsbury facilities being closed and other Pillsbury transaction and integration costs, partially offset by additional insurance settlements of $3 million pretax covering a 1994 oats handling incident. In last year’s second quarter, the Company had net unusual items totaling $109 million pretax expense, $68 million after tax ($.22 per diluted share), representing $25 million pretax of Pillsbury integration costs and $87 million pretax of cereal reconfiguration charges, partially offset by additional insurance settlements of $3 million pretax covering the 1994 oats handling incident.

Excluding unusual items in both years, second-quarter earnings after tax grew 46 percent to $290 million from $199 million. Second-quarter diluted earnings per share excluding unusual items were 77 cents, compared to 63 cents last year. The average number of diluted shares outstanding was 377 million shares in this year’s second quarter compared to 318 million last year, primarily reflecting shares issued for the Pillsbury acquisition.

First-Half Results

Net sales for the 26 weeks ended November 24, 2002 grew 64 percent to $5.32 billion, including the incremental contribution of Pillsbury businesses. Total worldwide volume in the first half grew 2 percent on a comparable basis, as if General Mills had owned the Pillsbury businesses in the previous year.

Reported earnings were $452 million in the first half of fiscal 2003 as compared to $319 million earnings last year. Basic earnings per share of $1.23 for the first half ended November 24, 2002, were up 14 percent from $1.08 a year earlier. Diluted earnings per share of $1.20 for the first half of fiscal 2003 were up 15 percent from $1.04 per share earned in the same period last year.

First-half results for both fiscal 2003 and 2002 included unusual items. In fiscal 2003, the Company recorded unusual expenses of $76 million pretax, $49 million after tax ($.13 per diluted share), consisting of $41 million pretax charges associated with the closure of our St. Charles, Illinois plant, and $38 million pretax charges associated with certain expenses related to relocating production from former Pillsbury facilities being closed and other Pillsbury transaction and integration costs, partially offset by additional insurance settlements of $3 million pretax covering the 1994 oats handling incident. In last year’s first half, the Company had unusual items totaling $94 million pretax expense, $59 million after tax ($.19 per diluted share), representing $30 million pretax of Pillsbury transaction and integration costs; $87 million pretax of cereal reconfiguration charges; $4 million, primarily severance, for the exit from the Squeezit beverage business; and $3 million pretax, net of insurance recovery, associated with a flash flood at our Cincinnati, Ohio, cereal plant; partially offset by additional insurance settlements of $30 million pretax covering the 1994 oats handling incident.

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Excluding unusual items in both years and the impact of last year’s accounting change (SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities), six-month’s earnings after tax grew 31 percent to $501 million from $381 million. First-half diluted earnings per share excluding unusual items and the accounting change were $1.33, compared to $1.24 last year. The average number of diluted shares outstanding was 22 percent higher this year, reflecting shares issued for the Pillsbury acquisition.

[Note: Sales figures provided below are as reported and net of expenses reclassified under EITF 01-09. Operating profits are as reported, before unusual items. Unit volume comparisons provided below are on a comparable basis, as if General Mills had owned the Pillsbury businesses in the previous year.]

U.S. Retail Segment Results

Second-quarter net sales for General Mills’ domestic retail operations grew 42 percent to $2.15 billion, and operating profits before unusual items rose 39 percent to $494 million. Comparable unit volume increased 4 percent, with gains posted by five of the Company’s six major retail divisions.

Unit volume for Big G was up 5 percent. Top established cereal brands, including Honey Nut Cheerios, Cinnamon Toast Crunch and Lucky Charms, posted good volume gains, and the popular line of Big G Milk ‘N Cereal Bars contributed 1 percentage point to the growth rate. In the Meals Division, unit volume rose 4 percent, led by Green Giant vegetables, Betty Crocker dinner mixes, and Progresso soup. Pillsbury USA unit volume grew 3 percent, with the strongest gains posted by frozen baked goods, Totino’s pizza and hot snacks, and refrigerated ready-to-bake cookies, sweet rolls and biscuits. Yogurt unit volume was up 20 percent for the quarter, on continued strong performance by new Yoplait Whips! and established product lines. In Snacks, granola bars led unit volume growth of 2 percent. Baking products volume declined 10 percent in the quarter, reflecting the impact of heavy competitive promotional activity. Consumer movement for the Company’s major brands also was good, with composite retail sales across all outlets up 3 percent in the quarter, which did not include the Thanksgiving holiday this year.

Bakeries and Foodservice Segment Results

Net sales for the Company’s Bakeries and Foodservice segment doubled for the quarter to $483 million, and operating profits rose 34 percent to $51 million. Comparable unit volume was up 2 percent, outpacing foodservice industry trends. Performance in supercenter retail bakeries and convenience stores led the second-quarter volume increase.

International Segment Results

Net sales for General Mills’ consolidated international businesses more than tripled for the second quarter to $325 million and operating profits rose to $21 million. Comparable unit volume was down 2 percent overall, due to continuing macroeconomic weakness in Latin America. However, comparable volumes grew in all other major geographic regions. Dough products delivered good growth in Asia, and Old El Paso and Green Giant led performance in Europe. Comparable unit volume in Canada was up 3 percent, led by good growth in cereal.

Joint Venture Summary

Second-quarter earnings after tax from joint ventures totaled $14 million compared to $3 million last year. The strong increase reflects a full three months of incremental profit contribution from Häagen-Dazs ice cream joint ventures in Asia, along with volume-driven gains by the Cereal Partners Worldwide (CPW) joint venture with Nestlé and the Snack Ventures Europe (SVE) joint venture with PepsiCo. Together, CPW and SVE contributed $10 million in after-tax profits for the quarter.

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Total joint-venture results also included introductory marketing expenses for 8th Continent, the Company’s soymilk joint venture with DuPont. Through the first six months, joint venture earnings after tax totaled $31 million.

Corporate Items

Corporate unallocated expense before unusual items totaled a net $4 million in the second quarter. Last year’s second-quarter unallocated expense was higher due to costs associated with completion of the Pillsbury acquisition.

Interest expense for the second quarter of fiscal 2003 totaled $140 million, lower than forecast due to favorable rates and the Company’s recent actions to refinance much of its commercial paper with longer-term debt. The Company now expects fiscal 2003 interest expense will be between $555 and $580 million. The effective tax rate excluding unusual items for the first half was 35.0 percent, consistent with the estimated full-year rate.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note One to the Consolidated Financial Statements included in our annual report for the year ended May 26, 2002. The accounting policies used in preparing our interim fiscal 2003 consolidated condensed financial statements are the same as those described in our annual report, except as described in Note 10, “Accounting Rules Adopted.”

Our critical accounting policies are those that have meaningful impact on the reporting of our financial condition and results, and that require significant management judgment and estimates. These policies include our accounting for (a) trade and consumer promotion activities; (b) asset impairments; and (c) income taxes.

The amount and timing of recognition of trade and consumer promotion expense involves management judgment related to the estimated utilization of the promotion activities. The vast majority of balance sheet liabilities associated with these activities are resolved within the following twelve-month period, and therefore do not require highly uncertain long-term estimates.

Evaluating the impairment of long-lived assets, including goodwill and other intangible assets, involves management judgment in estimating the fair values and future cash flows related to these assets. Although the predictability of long-term cash flows may be somewhat uncertain, our evaluations indicate fair values of assets significantly in excess of stated book values. Therefore, we believe the risk of unrecognized impairment is low.

Income tax expense involves management judgment as to the ultimate resolution of any tax issues. Historically, our assessments of the ultimate resolution of tax issues have been reasonably accurate. The current open issues are not dissimilar from historical items.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the Company’s market risk during the thirteen weeks and twenty-six weeks ended November 24, 2002. For additional information, see “Market Risk Management” on page 17 of the Company’s 2002 Annual Report to Shareholders.

Item 4. Controls and Procedures.

Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. 

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the disclosure controls, since the date of their evaluation.

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Part II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds.

On October 28, 2002, the Company completed a private offering of $2.23 billion aggregate principal amount of zero coupon convertible debentures due 2022 for aggregate gross proceeds of approximately $1.5 billion. The issue price of the convertible debentures was $671.65 for each $1,000 in principal amount, which represents a yield to maturity of 2.00%. The Company may redeem some or all of the convertible debentures on or after October 28, 2005. Holders of the convertible debentures can require the Company to repurchase the debentures on the third, fifth, tenth and fifteenth anniversaries of the issuance. We have the option to pay the repurchase price in cash or in shares of common stock. The debentures are convertible into General Mills common stock at a rate of 13.0259 shares for each $1,000 of principal amount. The initial conversion price of approximately $51.56 per share represents a premium of 25% over the closing sale price of $41.25 per share on October 22, 2002. The conversion price will increase with the accretion of the original issue discount on the debentures. The convertible debentures were sold pursuant to a Purchase Agreement between the Company and Banc of America Securities LLC and Morgan Stanley & Co. Incorporated as representatives of the initial purchasers. The debentures were sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act. Each initial purchaser agreed that it would only offer and sell the convertible debentures to qualified institutional buyers. The initial purchasers of the convertible debentures received aggregate purchase discounts or commissions of $22.5 million. Net proceeds were used to reduce short-term borrowings.

In order to offset any dilution to General Mills’ shareholders from future conversion of the debentures, the Company has purchased call options from Diageo plc on approximately 29 million shares that Diageo currently owns. The premiums paid for the call options totaled approximately $89 million. The options are exercisable in whole or in part from time to time, subject to certain limitations, during a three-year period from the date of the sale of the debentures.

Item 4. Submission of Matters to a Vote of Security Holders.

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Item 5. Other Information.

This report contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations and assumptions. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such statements. In particular, our predictions about future volume and earnings could be affected by difficulties resulting from the Pillsbury acquisition, such as integration problems; failure to achieve synergies; unanticipated liabilities; inexperience in new business lines; and changes in the competitive environment. Our future results also could be affected by a variety of additional factors such as: competitive dynamics in the U.S. ready-to-eat cereal market, including pricing and promotional spending levels by competitors; the impact of competitive products and pricing; product development; actions of competitors other than as described above; acquisitions or disposals of businesses or assets; changes in capital structure; changes in laws and regulations, including changes in accounting standards; customer demand; effectiveness of advertising and marketing spending or programs; consumer perception of health-related issues; economic conditions, including changes in inflation rates or interest rates; fluctuation in the cost and availability of supply chain resources; and foreign economic conditions, including currency rate fluctuations. The Company undertakes no obligations to publicly revise any forward-looking statements to reflect future events or circumstances.

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Item 6. Exhibits and Reports on Form 8-K.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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I, Stephen W. Sanger, Chairman of the Board and Chief Executive Officer of General Mills, Inc., certify that:

Date: January 6, 2003

/s/ Stephen W. Sanger

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I, James A. Lawrence, Chief Financial Officer of General Mills, Inc., certify that:

Date: January 6, 2003

/s/ James A. Lawrence

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Exhibit 11

GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)

Notes to Exhibit 11:

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Exhibit 12

RATIO OF EARNINGS TO FIXED CHARGES

For purposes of computing the ratio of earnings to fixed charges, earnings represent pretax income from continuing operations, plus pretax earnings or losses of joint ventures plus fixed charges (net of capitalized interest). Fixed charges represent interest (whether expensed or capitalized) and one-third (the proportion deemed representative of the interest factor) of rents of continuing operations.

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