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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

General Mills Inc., economic profit calculation

US$ in thousands

12 months ended:	May 26, 2019	May 27, 2018	May 28, 2017	May 29, 2016	May 31, 2015	May 25, 2014
Net operating profit after taxes (NOPAT)¹	2,274,308)	1,920,512)	2,079,159)	2,028,941)	1,616,844)	2,219,325)
Cost of capital²	8.88%	8.31%	9.49%	10.20%	9.70%	9.75%
Invested capital³	27,385,340)	27,608,082)	18,984,610)	18,400,346)	19,241,428)	19,362,635)

Economic profit⁴	(157,815)	(372,408)	277,531)	151,761)	(249,728)	331,599)

Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,274,308 – 8.88% × 27,385,340 = -157,815

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	General Mills Inc. economic profit decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

General Mills Inc., NOPAT calculation

US$ in thousands

12 months ended:	May 26, 2019	May 27, 2018	May 28, 2017	May 29, 2016	May 31, 2015	May 25, 2014
Net earnings attributable to General Mills	1,752,700)	2,131,000)	1,657,500)	1,697,400)	1,221,300)	1,824,400)
Deferred income tax expense (benefit)¹	96,000)	(504,300)	183,900)	120,600)	25,300)	172,500)
Increase (decrease) in allowance for doubtful accounts²	400)	4,100)	(5,300)	4,300)	4,300)	1,100)
Increase (decrease) in LIFO reserve³	300)	4,100)	(10,200)	5,100)	(2,700)	(4,900)
Increase (decrease) in reserve for restructuring and other exit charges⁴	(30,300)	(18,200)	8,400)	(44,200)	117,300)	(16,000)
Increase (decrease) in equity equivalents⁵	66,400)	(514,300)	176,800)	85,800)	144,200)	152,700)
Interest expense, net of capitalized interest	527,400)	385,400)	302,100)	311,900)	328,600)	318,500)
Interest expense, operating lease liability⁶	14,607)	17,903)	14,529)	13,648)	12,667)	13,485)
Adjusted interest expense, net of capitalized interest	542,007)	403,303)	316,629)	325,548)	341,267)	331,985)
Tax benefit of interest expense, net of capitalized interest⁷	(113,822)	(118,571)	(110,820)	(113,942)	(119,443)	(116,195)
Adjusted interest expense, net of capitalized interest, after taxes⁸	428,186)	284,732)	205,809)	211,606)	221,824)	215,790)
(Gain) loss on marketable securities	(2,600)	(6,600)	—)	—)	—)	—)
Interest income	(5,600)	(11,700)	(7,000)	(8,100)	(13,200)	(16,100)
Investment income, before taxes	(8,200)	(18,300)	(7,000)	(8,100)	(13,200)	(16,100)
Tax expense (benefit) of investment income⁹	1,722)	5,380)	2,450)	2,835)	4,620)	5,635)
Investment income, after taxes¹⁰	(6,478)	(12,920)	(4,550)	(5,265)	(8,580)	(10,465)
Net income (loss) attributable to noncontrolling interest	33,500)	32,000)	43,600)	39,400)	38,100)	36,900)
Net operating profit after taxes (NOPAT)	2,274,308)	1,920,512)	2,079,159)	2,028,941)	1,616,844)	2,219,325)

Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in reserve for restructuring and other exit charges.

⁵ Addition of increase (decrease) in equity equivalents to net earnings attributable to General Mills.

⁶ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 437,340 × 3.34% = 14,607

⁷ 2019 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 542,007 × 21.00% = 113,822

⁸ Addition of after taxes interest expense to net earnings attributable to General Mills.

⁹ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 8,200 × 21.00% = 1,722

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	General Mills Inc. NOPAT decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

General Mills Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	May 26, 2019	May 27, 2018	May 28, 2017	May 29, 2016	May 31, 2015	May 25, 2014
Income taxes	367,800)	57,300)	655,200)	755,200)	586,800)	883,300)
Less: Deferred income tax expense (benefit)	96,000)	(504,300)	183,900)	120,600)	25,300)	172,500)
Add: Tax savings from interest expense, net of capitalized interest	113,822)	118,571)	110,820)	113,942)	119,443)	116,195)
Less: Tax imposed on investment income	1,722)	5,380)	2,450)	2,835)	4,620)	5,635)
Cash operating taxes	383,900)	674,791)	579,670)	745,707)	676,323)	821,360)

Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	General Mills Inc. cash operating taxes increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

General Mills Inc., invested capital calculation (financing approach)

US$ in thousands

	May 26, 2019	May 27, 2018	May 28, 2017	May 29, 2016	May 31, 2015	May 25, 2014
Current portion of long-term debt	1,396,500)	1,600,100)	604,700)	1,103,400)	1,000,400)	1,250,600)
Notes payable	1,468,700)	1,549,800)	1,234,100)	269,800)	615,800)	1,111,700)
Long-term debt, excluding current portion	11,624,800)	12,668,700)	7,642,900)	7,057,700)	7,607,700)	6,423,500)
Operating lease liability¹	437,340)	501,482)	452,610)	356,346)	357,828)	340,535)
Total reported debt & leases	14,927,340)	16,320,082)	9,934,310)	8,787,246)	9,581,728)	9,126,335)
Stockholders’ equity	7,054,500)	6,141,100)	4,327,900)	4,930,200)	4,996,700)	6,534,800)
Net deferred tax (assets) liabilities²	2,031,000)	2,003,800)	1,719,400)	1,399,600)	1,450,200)	1,591,900)
Allowance for doubtful accounts³	28,800)	28,400)	24,300)	29,600)	25,300)	21,000)
Excess of FIFO over LIFO cost⁴	213,500)	213,200)	209,100)	219,300)	214,200)	216,900)
Reserve for restructuring and other exit charges⁵	36,500)	66,800)	85,000)	76,600)	120,800)	3,500)
Equity equivalents⁶	2,309,800)	2,312,200)	2,037,800)	1,725,100)	1,810,500)	1,833,300)
Accumulated other comprehensive (income) loss, net of tax⁷	2,625,400)	2,429,000)	2,244,500)	2,612,200)	2,310,700)	1,340,300)
Redeemable interest	551,700)	776,200)	910,900)	845,600)	778,900)	984,100)
Noncontrolling interests	313,200)	351,300)	357,600)	376,900)	396,000)	470,600)
Adjusted stockholders’ equity	12,854,600)	12,009,800)	9,878,700)	10,490,000)	10,292,800)	11,163,100)
Construction in progress⁸	(343,800)	(692,900)	(553,000)	(702,700)	(622,200)	(600,800)
Marketable securities⁹	(52,800)	(28,900)	(275,400)	(174,200)	(10,900)	(326,000)
Invested capital	27,385,340)	27,608,082)	18,984,610)	18,400,346)	19,241,428)	19,362,635)

Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See details »

⁵ Addition of reserve for restructuring and other exit charges.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	General Mills Inc. invested capital increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

General Mills Inc., cost of capital calculations

May 26, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,614,919)	31,614,919)	÷	46,793,759)	=	0.68	0.68	×	11.88%	=	8.03%
Debt³	14,741,500)	14,741,500)	÷	46,793,759)	=	0.32	0.32	×	3.34% × (1 – 21.00%)	=	0.83%
Operating lease liability⁴	437,340)	437,340)	÷	46,793,759)	=	0.01	0.01	×	3.34% × (1 – 21.00%)	=	0.02%
Total:	46,793,759)					1.00					8.88%

Based on: 10-K (reporting date: 2019-05-26).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

May 27, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	26,262,461)	26,262,461)	÷	42,483,443)	=	0.62	0.62	×	11.88%	=	7.34%
Debt³	15,719,500)	15,719,500)	÷	42,483,443)	=	0.37	0.37	×	3.57% × (1 – 29.40%)	=	0.93%
Operating lease liability⁴	501,482)	501,482)	÷	42,483,443)	=	0.01	0.01	×	3.57% × (1 – 29.40%)	=	0.03%
Total:	42,483,443)					1.00					8.31%

Based on: 10-K (reporting date: 2018-05-27).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

May 28, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,723,169)	31,723,169)	÷	41,956,879)	=	0.76	0.76	×	11.88%	=	8.98%
Debt³	9,781,100)	9,781,100)	÷	41,956,879)	=	0.23	0.23	×	3.21% × (1 – 35.00%)	=	0.49%
Operating lease liability⁴	452,610)	452,610)	÷	41,956,879)	=	0.01	0.01	×	3.21% × (1 – 35.00%)	=	0.02%
Total:	41,956,879)					1.00					9.49%

Based on: 10-K (reporting date: 2017-05-28).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

May 29, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,579,531)	42,579,531)	÷	51,834,677)	=	0.82	0.82	×	11.88%	=	9.76%
Debt³	8,898,800)	8,898,800)	÷	51,834,677)	=	0.17	0.17	×	3.83% × (1 – 35.00%)	=	0.43%
Operating lease liability⁴	356,346)	356,346)	÷	51,834,677)	=	0.01	0.01	×	3.83% × (1 – 35.00%)	=	0.02%
Total:	51,834,677)					1.00					10.20%

Based on: 10-K (reporting date: 2016-05-29).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

May 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	33,882,568)	33,882,568)	÷	43,852,795)	=	0.77	0.77	×	11.88%	=	9.18%
Debt³	9,612,400)	9,612,400)	÷	43,852,795)	=	0.22	0.22	×	3.54% × (1 – 35.00%)	=	0.50%
Operating lease liability⁴	357,828)	357,828)	÷	43,852,795)	=	0.01	0.01	×	3.54% × (1 – 35.00%)	=	0.02%
Total:	43,852,795)					1.00					9.70%

Based on: 10-K (reporting date: 2015-05-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

May 25, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	32,493,574)	32,493,574)	÷	42,134,409)	=	0.77	0.77	×	11.88%	=	9.16%
Debt³	9,300,300)	9,300,300)	÷	42,134,409)	=	0.22	0.22	×	3.96% × (1 – 35.00%)	=	0.57%
Operating lease liability⁴	340,535)	340,535)	÷	42,134,409)	=	0.01	0.01	×	3.96% × (1 – 35.00%)	=	0.02%
Total:	42,134,409)					1.00					9.75%

Based on: 10-K (reporting date: 2014-05-25).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

General Mills Inc., economic spread ratio calculation, comparison to benchmarks

	May 26, 2019	May 27, 2018	May 28, 2017	May 29, 2016	May 31, 2015	May 25, 2014
Selected Financial Data (US$ in thousands)
Economic profit¹	(157,815)	(372,408)	277,531)	151,761)	(249,728)	331,599)
Invested capital²	27,385,340)	27,608,082)	18,984,610)	18,400,346)	19,241,428)	19,362,635)
Performance Ratio
Economic spread ratio³	-0.58%	-1.35%	1.46%	0.82%	-1.30%	1.71%
Benchmarks
Economic Spread Ratio, Competitors⁴
Altria Group Inc.	-9.73%	—	—	—	—	—
Coca-Cola Co.	3.23%	—	—	—	—	—
PepsiCo Inc.	5.81%	—	—	—	—	—
Philip Morris International Inc.	17.79%	—	—	—	—	—

Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -157,815 ÷ 27,385,340 = -0.58%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	General Mills Inc. economic spread ratio deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

General Mills Inc., economic profit margin calculation, comparison to benchmarks

	May 26, 2019	May 27, 2018	May 28, 2017	May 29, 2016	May 31, 2015	May 25, 2014
Selected Financial Data (US$ in thousands)
Economic profit¹	(157,815)	(372,408)	277,531)	151,761)	(249,728)	331,599)
Net sales	16,865,200)	15,740,400)	15,619,800)	16,563,100)	17,630,300)	17,909,600)
Performance Ratio
Economic profit margin²	-0.94%	-2.37%	1.78%	0.92%	-1.42%	1.85%
Benchmarks
Economic Profit Margin, Competitors³
Altria Group Inc.	-16.51%	—	—	—	—	—
Coca-Cola Co.	6.40%	—	—	—	—	—
PepsiCo Inc.	5.14%	—	—	—	—	—
Philip Morris International Inc.	18.67%	—	—	—	—	—

Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -157,815 ÷ 16,865,200 = -0.94%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	General Mills Inc. economic profit margin deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

General Mills Inc. (NYSE:GIS)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin