within the most attractive foodservice channels will drive per- formance for this segment. We remain committed to using HMM to help manage our costs. We are targeting mid single-digit growth in segment operating profit, despite renewed input cost inflation and continued investment in advertising and media. Our businesses generate strong levels of cash flows. We use some of this cash to reinvest in our business, and our fiscal 2011 plans call for $700 million of expenditures for capital projects. We also prioritize returning cash to stockholders. Our plan for fiscal 2011 includes significant cash returned to stockholders through share repurchases and dividends. Our long-term objective is to reduce outstanding shares by a net 2 percent per year. We intend to continue repurchasing shares in fiscal 2011 in-line with our long- term objective. On June 28, 2010, our Board of Directors approved a dividend increase to an annual rate of $1.12 per share, a 17 percent increase from the rate paid in fiscal 2010. Our Board of Directors also approved and we announced an authorization for the repur- chase of up to 100 million shares of our common stock. This new authorization terminated and replaced a December 11, 2006 repurchase authorization. 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 Compa- ny’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 main- tained in the Company. All shares and per share amounts have been adjusted for the two-for-one stock split throughout this report. Certain terms used throughout this report are defined in a glossary on page 85 of this report. In fiscal 2010, net earnings attributable to General Mills was $1,530 million, up 17 percent from $1,304 million in fiscal 2009, and we reported diluted EPS of $2.24 in fiscal 2010, up 18 percent from $1.90 in fiscal 2009. Fiscal 2010 and 2009 results include losses from the mark-to-market valuation of certain commodity posi- tions and grain inventories. Fiscal 2010 results also include income General Mills 20 Gross margin grew 12 percent in fiscal 2010 versus fiscal 2009. Gross margin as a percent of net sales increased by 410 basis Cost of sales decreased $535 million in fiscal 2010 to $8,923 mil- lion. This decrease was mainly driven by favorable mix, HMM initiatives, and lower input costs. In fiscal 2010, we recorded a $7 million net increase in cost of sales related to mark-to-market valuation of certain commodity positions and grain inventories as described in Note 7 to the Consolidated Financial Statements on page 59 of this report, compared to a net increase of $119 million in fiscal 2009. In fiscal 2010, we recorded a charge of $48 million resulting from a change in the capitalization threshold for certain equipment parts, enabled by an upgrade to our parts manage- ment system. Net sales grew 1 point in fiscal 2010, driven by 1 percentage point of growth from net price realization and mix. Contributions from volume were flat, including the loss of 2 points of growth from divested products and a 1 percentage point loss from an additional week in fiscal 2009. Foreign exchange did not affect sales growth in fiscal 2010. (a)Measured in tons based on the stated weight of our product shipments. FISCAL 2010 CONSOLIDATED RESULTS OF OPERATIONS Components of Net Sales Growth tax expense related to the enactment of federal health care reform, and the fiscal 2009 results include a net divestiture gain, income from a settlement with an insurance carrier, and the impact of a court decision on an uncertain tax matter. Diluted EPS excluding these items affecting comparability, a non-GAAP mea- sure used for management reporting and incentive compensation purposes, was $2.30 in fiscal 2010, up 16 percent from $1.99 in fiscal 2009 (see the “Reconciliation of Non-GAAP Measures” section on page 87 for our use of this measure and our discussion of the items affecting comparability). The components of net sales growth are shown in the following table: Fiscal 2010 vs. 2009 ......................................................................................................................................................................................... Contributions from volume growth (a) Flat Net price realization and mix 1pt Foreign currency exchange Flat ......................................................................................................................................................................................... Net sales growth 1pt