At the beginning of fiscal 2007, we shifted selling responsibility for several customers from our Bakeries and Foodservice segment to U.S. Retail. All prior year amounts have been restated for comparative purposes. Second quarter net sales for our Bakeries and Foodservice segment increased 6 percent to $480 million, driven by 8 points of favorable pricing/product mix and 1 point of volume growth, partially offset by a 3 point increase in trade promotion spending. Operating profits for the segment reached $56 million, up 40 percent from $40 million in last year’s second quarter as favorable net pricing realization (defined as the impact of list and promoted price increases net of trade and other promotion costs) and higher volumes were partially offset by higher commodity and fuel costs.

For first twenty-six weeks of fiscal 2007, net sales for our Bakeries and Foodservice segment increased 8 percent to $925 million, driven primarily by a 7 point increase in pricing/product mix and 3 points of volume growth, offset partially by a 2 point increase in trade promotion spending. Operating profits for the segment were $85 million, up 27 percent from $67 million last year.

First-quarter net sales for Bakeries & Foodservice grew 9 percent to $445 million, reflecting 4 percent unit volume growth, pricing and favorable mix. Operating profits grew 7 percent to $29 million despite significantly higher commodity and fuel costs.

Third quarter net sales for our Bakeries and Foodservice segment increased 3 percent to $424 million, reflecting net price realization (defined as the impact of list and promoted price increases net of increases in trade promotion costs). Third-quarter unit volume for Bakeries and Foodservice was flat compared to prior-year levels. Operating profits for the segment of $22 million were down from $25 million in last year’s third quarter due to higher ingredient and transportation costs.

For thirty-nine weeks, net sales for our Bakeries and Foodservice segment increased 1 percent to $1.31 billion, as net price realization and product mix more than offset a 1 percent decline in volume. Operating profits for the segment were $101 million, up 8 percent from $94 million last year.

Second quarter net sales for our Bakeries and Foodservice segment increased 2 percent to $465 million. This increase was primarily the result of net price realization and favorable product mix. Second-quarter unit volume for Bakeries and Foodservice essentially matched prior-year levels. Operating profits for the segment of $46 million also matched last year’s second quarter.

For twenty-six weeks, net sales for our Bakeries and Foodservice segment increased 1 percent to $882 million, as net price realization and product mix offset a 1 percent decline in volume. Operating profits for the segment were $79 million, up 14 percent from $69 million last year.

Second-quarter net sales for General Mills’ Bakeries and Foodservice segment totaled $465 million, up 2 percent from year-ago results. Unit volume essentially matched prior-year levels. Operating profits also matched prior-year results and totaled $46 million.

        Through the first six months, Bakeries and Foodservice net sales were up slightly to $882 million and operating profits were up 14 percent to $79 million.

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First quarter net sales for our Bakeries and Foodservice segment declined 1 percent to $417 million. Operating profits for the segment reached $33 million, up from $23 million in last year’s first quarter as favorable product mix and operating efficiencies offset a three percent decline in volume.

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FINANCIAL CONDITION

During the first thirteen weeks of fiscal 2006, operating activities provided cash of $138 million. This compares to cash provided by operations in the first thirteen weeks of fiscal 2005 of $39 million. This $99 million improvement was due primarily to the increase in net earnings of $69 million and a reduction in the use of working capital year-over-year of $43 million.

During the first thirteen weeks of fiscal 2006, investments for land, buildings and equipment and intangibles totaled $45 million. We expect to spend approximately $450 million for capital projects in fiscal 2006, primarily for fixed assets to support future growth and increase supply chain productivity.

On September 15, 2005, we notified holders of our Zero Coupon Senior Debentures Due 2022 of their right to surrender the debentures to us for purchase on October 28, 2005. There is $2.23 billion aggregate principal amount at maturity of the debentures outstanding, which would result in an aggregate purchase price of $1.59 billion if all of the debentures are surrendered to us for purchase. We will not incur a gain or loss on extinguishment if these bonds are surrendered to us for purchase. We intend to pay for debentures surrendered to us for purchase entirely in cash. We expect to fund our purchase of the debentures through the issuance of commercial paper, or, alternatively, through direct borrowings from our committed bank lines.

Commercial paper is a continuing source of short-term financing. We issue commercial paper in the United States, Canada and Europe. Our commercial paper borrowings are supported by fee-paid committed credit lines consisting of a $1.1 billion facility expiring in January 2006, a $750 million facility expiring in April 2006, and a $750 million facility expiring in January 2009. As of August 28, 2005, we had no outstanding borrowings under these facilities.

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.

With respect to the holders of minority interests in General Mills Cereals LLC (GMC), certain interests will be exchanged for shares of our perpetual preferred stock upon the occurrence of certain events, including a decrease in our long-term debt rating below either Ba3 as rated by Moody’s or BB- as rated by Standard & Poor’s or Fitch, Inc., or a failure to pay a quarterly dividend on our common stock. In addition, if GMC fails to make certain required distributions, we will be restricted from paying any dividend (other than dividends in the form of shares of common stock) or other distributions on shares of our common stock, and may not repurchase or redeem shares of our common stock, until such distributions are paid. Our cash and cash equivalents have included $10 million in GMC and $100 million in General Mills Capital, Inc. that have been restricted from use for general corporate purposes since the sale of the minority interests.

There were no material changes outside the ordinary course of our business in our contractual obligations during the first thirteen weeks of fiscal 2006.

Throughout the first quarter of fiscal 2006 we repurchased 16 million shares of common stock for $749 million, including 4 million shares in a secondary offering in late August. At August 28, 2005, we had unpaid obligations associated with our share repurchases totaling $203 million included in other current liabilities. We settled these obligations shortly after the end of our fiscal quarter.

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Our total debt balances were as follows:

Our notes payable increased during the quarter primarily as a result of our share repurchases.

Bakeries & Foodservice net sales totaled $1.74 billion in 2005 compared to $1.76 billion in 2004. Operating profits totaled $134 million, essentially matching prior-year results. Unit volume declined 5 percent overall. While shipments to convenience store and vending customers rose 17 percent, that strong growth was more than offset by volume declines with foodservice distributors, restaurants and bakery accounts. Excluding last year’s extra week, total Bakeries and Foodservice unit volume would have been down 3 percent in 2005.

        For the fourth quarter, net sales totaled $450 million and operating profits totaled $40 million. Unit volume was 7 percent below last year’s fourth-quarter results. On a comparable 13-week basis, however, unit volume was up 1 percent for the period.

Third quarter net sales for the Company’s Bakeries and Foodservice segment grew 5 percent to $413 million. Unit volume declined 1 percent overall, but this was more than offset by pricing, mix and promotional spending efficiency. Volumes in convenience stores and vending channels grew by 23 percent. Unit volume declines of 3 percent in bakery channels and 5 percent in shipments to restaurants and foodservice distributors both showed sequential improvements compared to the first and second quarters. Operating profits for the segment totaled $25 million, up from $13 million in last year’s third quarter.

Through thirty-nine weeks, net sales for the Company’s Bakeries and Foodservice segment matched year-ago levels at $1.29 billion. Unit volume declined 4 percent from last year. The volume decline was offset by pricing, mix and promotional spending efficiency. Volumes in convenience stores and vending channels grew by 20 percent, but unit volumes declined 6 percent in bakery channels and 8 percent for restaurants and foodservice distributors. Operating profits for the segment totaled $94 million, matching last year’s first thirty-nine weeks.

Third quarter net sales for the company’s Bakeries and Foodservice segment grew 5 percent to $413 million. Unit volume declined slightly overall, but this was more than offset by pricing, mix and promotional spending efficiency. Volumes in convenience stores and vending channels grew by 23 percent. Unit volume declines of 3 percent in bakery channels, and 5 percent in shipments to restaurants and foodservice distributors both showed sequential improvement from first and second quarter results. Operating profits totaled $25 million, up from $13 million in last year’s third quarter.

        Through nine months, net sales for the Bakeries and Foodservice segment matched year-ago levels at $1.29 billion, and operating profit of $94 million also matched prior-year results.

Second quarter net sales for the Company’s Bakeries and Foodservice segment fell 3 percent to $456 million. Unit volume declined 7 percent. That was partially offset by pricing, mix and trade spending efficiency. Volumes in convenience stores and vending channels grew by 7 percent. Unit volume in bakery channels was down 5 percent, an improving trend compared to an 11 percent decline in the first quarter. Shipments to restaurants and foodservice operators were down 11 percent. Operating profits for the segment totaled $46 million, down from $52 million in last year’s second quarter due to lower volumes and higher supply chain costs.

First-half net sales for the Company’s Bakeries and Foodservice segment fell 2 percent to $877 million. Unit volume declined 6 percent from last year. That was partially offset by pricing, mix and trade spending efficiency. Volumes in convenience stores and vending channels grew by 18 percent, but unit volumes declined 7 percent in bakery channels, and declined 9 percent for restaurants and foodservice distributors. Operating profits for the segment totaled $69 million, down from $81 million in last year’s first half due to lower volumes and higher supply chain costs.