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Item 7. Management’s Discussion and Analysis

2025-07-10 compared with 2024-07-11 · 134 added, 138 removed, 254 unchanged (52% of the section changed)

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Forward-looking statements provide our current expectations and beliefs concerning future events and are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.

These risks, uncertainties, and factors include, among other things:

risks associated with general economic and industry conditions, including inflation, reduced consumer confidence and spending, recessions, increased energy costs, supply chain challenges, labor shortages, and geopolitical conflicts;

These risks, uncertainties, and factors include:

risks associated with general economic and industry conditions, including inflation, reduced consumer confidence and spending, declining benefits or increased limitations under government food assistance programs for consumers, rising unemployment, recessions, increased energy costs, supply chain challenges, increased tariffs and taxes, labor cost increases or shortages, currency rate fluctuations, actual or threatened hostilities or war, and or other geopolitical conflicts;

risks related to the availability and prices of commodities and other supply chain resources, including raw materials, packaging, energy, and transportation, weather conditions, health pandemics or outbreaks of disease, or other geopolitical uncertainty;

disruptions or inefficiencies in our supply chain and/or operations;

risks related to the effectiveness of our hedging activities and ability to respond to volatility in commodities;

risks related to the ultimate impact of, including reputational harm caused by, any product recalls and product liability or labeling litigation, including litigation related to lead-based paint and pigment and cooking spray;

risks related to our ability to execute operating and value creation plans and achieve returns on our investments and targeted operating efficiencies from cost-saving initiatives, and to benefit from trade optimization programs;

risks related to our ability to deleverage on currently anticipated timelines, and to continue to access capital on acceptable terms or at all;

risks related to the Company’s competitive environment, cost structure, and related market conditions;

risks related to our ability to respond to changing consumer preferences and the success of our innovation and marketing investments;

risks related to our ability to respond to changing consumer preferences including health and wellness perceptions and the success of our innovation and marketing investments;

risks associated with actions by our customers, including changes in distribution and purchasing terms;

risks related to the effectiveness of our hedging activities and ability to respond to volatility in commodities;

disruptions or inefficiencies in our supply chain and/or operations;

risks related to the seasonality of our business;

risks associated with our co-manufacturing arrangements and other third-party service provider dependencies;

risks associated with actions of governments and regulatory bodies that affect our businesses, including the ultimate impact of new or revised regulations or interpretations including to address climate change or implement changes to taxes and tariffs;

risks associated with our contract manufacturing arrangements and other third-party service provider dependencies;

risks related to the Company’s ability to execute on its strategies or achieve expectations related to environmental, social, and governance matters, including as a result of evolving legal, regulatory, and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon pricing or carbon taxes;

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risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges;

risk relating to our ability to protect our intellectual property rights;

risks relating to

our ability to protect our intellectual property rights;

risks relating to acquisition, divestiture, joint venture or investment activities;

the amount and timing of future dividends, which

remain subject to Board approval and depend on market and other conditions;

the amount and timing of future dividends, which remain subject to Board approval and depend on market and other conditions;

the amount and timing of future stock repurchases;

and other risks described in our reports filed from time to time with the Securities and Exchange Commission (the “SEC”).

and other risks described in our reports filed from time to time with the U.S.

Securities and Exchange Commission (the “SEC”).

We caution readers not to place undue reliance on any forward-looking statements included in this report, which speak only as of the date of this report.

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Fiscal 2025 Results

Fiscal 2024 performance compared to fiscal 2023 reflected a decrease in net sales, with organic (excludes the impacts of foreign exchange) decreases in our Grocery & Snacks and Refrigerated & Frozen segments, partially offset by increases in our International and Foodservice segments.

The overall decrease in net sales was primarily due to lower consumption trends, consumer behavior shifts, and strategic trade investment as consumers continue to adapt to the current environment of new reference prices.

Overall gross profit increased primarily as a result of higher productivity, lower transportation costs, and lower inventory write-offs, which were partially offset by input cost inflation, lower net sales, and unfavorable operating leverage.

Excluding items impacting comparability, overall segment operating profit increased in our Grocery & Snacks, International, and Foodservice segments, which was more than offset by a decrease in our Refrigerated & Frozen segment.

Corporate expenses were lower primarily due to lower share-based payment expense and items impacting comparability, as discussed below.

Selling, general and administrative ("SG&A") expenses were higher due primarily to items impacting comparability and higher payroll and incentive compensation expense.

We recognized lower equity method investment earnings, higher interest expense, and higher income tax expense, in each case compared to fiscal 2023.

Excluding items impacting comparability, our effective tax rate was slightly lower compared to fiscal 2023.

Fiscal 2025 performance compared to fiscal 2024 reflected a decrease in net sales, with organic (excludes the impacts of foreign exchange, acquisitions, and divestitures) decreases in our Grocery & Snacks, Refrigerated & Frozen, and Foodservice segments, partially offset by an increase in our International segment.

Overall gross profit decreased primarily as a result of lower net sales, input cost inflation, and unfavorable operating leverage, partially offset by productivity.

Excluding items impacting comparability, overall segment operating profit decreased in all of our segments compared to the prior year.

Corporate expenses and selling, general and administrative (“SG&A”) expenses were higher primarily due to items impacting comparability, as discussed below, partially offset by lower incentive compensation expense.

We recognized higher equity method investment earnings, lower interest expense, and lower income tax expense, in each case compared to fiscal 2024.

Excluding items impacting comparability, our effective tax rate was lower compared to fiscal 2024.

Diluted earnings per share were $2.40 and $0.72 in fiscal 2025 and 2024, respectively.

Diluted earnings per share were affected by lower net income as well as several significant items affecting the comparability of year-over-year results (see “Items Impacting Comparability” below).

The increase in diluted earnings per share reflected higher net income.

See “Items Impacting Comparability” below as several significant items affected the comparability of year-over-year results.

Trends Impacting our Business

Our industry continues to be impacted by commodity cost fluctuations, labor cost inflation, input cost inflation, supply chain disruptions, and other global macroeconomic challenges.

While in recent years we experienced material increases to input costs and supply chain disruptions, during fiscal 2024, we experienced a moderate amount of input cost inflation and increased supply chain stability, which we expect to continue throughout fiscal 2025.

We also have experienced a reduction to our volumes due to lower consumption trends seen throughout the industry and consumer behavior shifts, including retail channel preferences.

We expect consumer trends to continue to evolve and our volumes to improve over time, however, economic pressures on consumers, including the challenges of high inflation, may continue to negatively impact our volumes throughout fiscal 2025.

Our industry continues to be impacted by shifting consumer behavior, commodity cost fluctuations, exchange rate volatility, labor cost inflation, input cost inflation, supply chain pressures, and other global macroeconomic challenges.

Although rapidly changing trade policies and announcements of potential tariff increases caused increased uncertainty in the second half of fiscal 2025, we saw little impact to our results in fiscal 2025 due to delayed implementation or effect of the announced tariffs.

Throughout fiscal 2025, we experienced an elevated amount of input cost inflation and negative impacts from foreign exchange rates, which we were able to partially offset through our on-going productivity initiatives.

Our industry is anticipating increased supply chain challenges, commodity cost volatility, and consumer and economic uncertainty due to rapid changes in global trade policies including increasing or fluctuating tariffs.

We expect inflation and tariffs to negatively impact our costs of goods sold in fiscal 2026.

We expect consumer trends to continue to evolve and our volumes to improve over time;

however, in the near-term, we expect economic pressures on consumers, including the challenges of high inflation and the impact of increased or fluctuating tariffs, and related price increases, to continue to negatively impact our volumes throughout fiscal 2026.

We also expect foreign exchange rates to continue to negatively impact our earnings through fiscal 2026.

We will continue to evaluate the evolving macroeconomic environment to take action to mitigate the impact on our business, consolidated results of operations, and financial condition.

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Items of note impacting comparability of results for fiscal 2025 included the following:

● income tax benefits of $253.5 million associated with the release of valuation allowances on certain deferred tax assets based primarily on interactions with the taxing authorities,

● charges totaling $101.7 million ($77.0 million after-tax) in connection with our restructuring plans,

● net charges totaling $88.7 million ($67.0 million after-tax) related to legacy legal matters,

● charges of $72.1 million ($55.4 million after-tax) related to the impairments of certain brand intangible assets,

● charges totaling $29.5 million ($24.4 million after-tax) primarily related to the impairment of a business held for sale,

● a gain of $17.0 million ($12.8 million after-tax) associated with insurance proceeds from the previous fire that occurred at one of our manufacturing facilities,

● a non-cash settlement gain of $13.0 million ($9.8 million after-tax) associated with a partial transfer of our U.S.

defined benefit pension plan obligation to a third-party insurance provider through the purchase of an annuity contract, and

● charges of $7.2 million ($5.5 million after-tax) related to restructuring activities of the Ardent Mills joint venture.

Items of note impacting comparability of results for fiscal 2024 included the following:

● charges totaling $956.7 million ($847.7 million after-tax) related to the impairments of goodwill and certain brand intangible assets,

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● a net gain of $8.7 million ($6.6 million after-tax) primarily associated with insurance proceeds from the previous fire that occurred at one of our manufacturing facilities.

Items of note impacting comparability of results for fiscal 2023 included the following:

● charges totaling $730.9 million ($592.2 million after-tax and net of noncontrolling interest) related to the impairments of goodwill and certain brand intangible assets,

● an income tax benefit of $28.1 million associated with concluding that certain tax elections made by a subsidiary had a confidence level of more-likely-than-not, which allowed us to release a valuation allowance,

● charges totaling $26.7 million ($20.1 million after-tax) related to the impairment of businesses previously held for sale,

● charges of $13.4 million ($10.1 million after-tax) associated with fires occurring at one of our manufacturing facilities,

● charges totaling $13.1 million ($9.9 million after-tax) in connection with our restructuring plans,

● charges of $8.4 million ($6.7 million after-tax) related to transaction costs associated with a planned divestiture that was not ultimately consummated,

● charges totaling $4.4 million ($3.3 million after-tax) related to a third-party vendor’s cybersecurity incident, and

● charges totaling $3.8 million ($2.8 million after-tax) related to a legacy legal matter.

Segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and economic hedging of foreign currency exchange rate risks of anticipated transactions are discussed in the segment review below.

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International

Net sales for fiscal 2024 in our Grocery & Snacks segment included a decrease in volumes of 3.1% compared to fiscal 2023 primarily due to the elasticity impact from inflation-driven pricing actions and lower consumption trends seen throughout the industry.

Price/mix increased by 2.6% compared to fiscal 2023 primarily due to favorable brand mix and favorability in inflation-driven pricing, partially offset by an increase in strategic trade investments.

In fiscal 2023, we had a product recall primarily related to our Armour Star ® brand, which resulted in a $7.8 million reduction to net sales for customer returns and fees in addition to estimated lost sales of approximately $40 million.

Net sales for fiscal 2024 in our Refrigerated & Frozen segment included a decrease in volumes of 4.1% compared to fiscal 2023 primarily due to lower consumption trends seen throughout the industry partially offset by the impacts of our strategic trade investments.

Price/mix decreased by 1.5% compared to fiscal 2023 primarily attributable to an increase in strategic trade investments slightly offset by favorability in inflation-driven pricing that was implemented in the prior year.

Net sales for fiscal 2024 in our International segment reflected a 2.9% increase due to favorable foreign exchange rates, a 2.6% increase in volumes, and a 2.1% increase in price/mix, in each case compared to fiscal 2023.

The increase in volumes was driven by growth in our Mexico business compared to fiscal 2023.

The increase in price/mix was primarily due to favorability in inflation-driven pricing that was implemented in the prior year.

Net sales for fiscal 2024 in our Foodservice segment included an increase in price/mix of 6.7% compared to fiscal 2023, reflecting inflation-driven pricing.

Volumes decreased by 5.7% compared to fiscal 2023.

The decrease in volumes was driven by the ongoing impact of lost business, ongoing softness in restaurant traffic, and the elasticity impact from inflation-driven pricing actions.

Net sales for fiscal 2025 in our Grocery & Snacks segment included a decrease in organic volumes and price/mix of 1.1% and 0.9%, respectively, when compared to fiscal 2024.

Price/mix was impacted by an increase in strategic trade investments.

The acquisitions of Sweetwood Smoke & Co.

in August 2024 and an existing contract manufacturer of our cooking spray products in July 2024 contributed $38.0 million to our Grocery & Snacks segment net sales during fiscal 2025.

Net sales for fiscal 2025 in our Refrigerated & Frozen segment included a decrease in price/mix of 3.5% compared to fiscal 2024, primarily attributable to an increase in strategic trade investments.

Volume decreased by 0.7% compared to fiscal 2024.

During fiscal 2025, the largest impact to our volumes was a result of supply constraints impacting the company’s frozen meals containing chicken and frozen vegetable products.

Additionally, we estimate that net sales during fiscal 2025 were impacted by approximately $24 million due to temporary manufacturing disruptions in our Hebrew National ® business during the key grilling season.

Net sales for fiscal 2025 in our International segment reflected a 5.7% decrease due to unfavorable foreign exchange rates, a 3.9% increase in organic price/mix, and a 3.4% decrease in organic volume, in each case compared to fiscal 2024.

The unfavorable foreign exchange rates were primarily due to the devaluation of the Mexican Peso relative to the US dollar.

Fiscal 2025 and 2024 included $23.6 million and $93.2 million, respectively, of net sales related to our ownership stake in Agro Tech Foods Limited (“ATFL”), which was sold in the first quarter of fiscal 2025.

Net sales for fiscal 2025 in our Foodservice segment included a decrease in organic volume of 8.1% compared to fiscal 2024, driven by the ongoing softness in restaurant traffic and the impact of lost business from the prior year.

Organic price/mix increased by 3.3% compared to fiscal 2024, reflecting inflation-driven pricing.

Additionally, we estimate that net sales in our Foodservice segment during fiscal 2025 were impacted by approximately $3 million due to the temporary manufacturing disruptions in our Hebrew National ® business.

SG&A Expenses (Includes general corporate expenses)

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Items impacting comparability of earnings

● charges totaling $956.7 million related to the impairments of goodwill and certain brand intangible assets,

● net charges of $47.5 million in connection with our restructuring plans,

● charges totaling $36.4 million related to the impairment of a business held for sale,

● net charges of $34.8 million related to legacy legal matters, and

● a net gain of $8.1 million primarily associated with insurance proceeds from the previous fire that occurred at one of our manufacturing facilities.

● net charges of $91.1 million in connection with our restructuring plans and

● net charges totaling $88.7 million related to legacy legal matters.

Other changes in expenses compared to fiscal 2024

● a decrease in share-based payment expense of $48.4 million primarily due to volatility between periods in our share price and a decrease in the estimated level of achievement of certain performance targets,

● an increase in salary, wage, and fringe benefit expense of $28.0 million primarily due to higher employee headcount and merit increases,

● an increase in short-term incentive expense of $23.0 million primarily due to an increase in the estimated level of achievement of certain performance targets,

● an increase in deferred compensation expense of $8.7 million primarily due to market volatility between periods,

● an increase in information technology-related expenses of $6.9 million, in part due to implementation of a new enterprise resource planning software system in Mexico, and

● a decrease in fixed asset impairments of $4.7 million.

● a decrease in short-term incentive expense of $43.9 million primarily due to a decrease in the estimated level of achievement of certain performance targets,

● a decrease in advertising and promotion expense of $26.4 million,

● an increase in salary, wage, and fringe benefit expense of $18.4 million due to merit and employee insurance costs,

● a decrease in consulting and professional fees of $11.8 million, partially due to the implementation of a new enterprise resource planning software system in Mexico in the prior year, and

● an increase in share-based payment expense of $10.5 million.

SG&A expenses for fiscal 2024 included the following items impacting the comparability of earnings:

● charges totaling $730.9 million related to the impairments of goodwill and certain brand intangible assets,

● charges totaling $26.7 million related to the impairment of businesses previously held for sale,

● net charges of $47.5 million in connection with our restructuring plans,

● charges of $8.4 million related to transaction costs associated with a planned divestiture that was not ultimately consummated,

● charges of $3.8 million related to a legacy legal matter, and

● a net gain of $2.6 million associated with fires occurring at one of our manufacturing facilities.

Segment Operating Profit (Loss) (Earnings before general corporate expenses, pension and postretirement non-service income, interest expense, net, income taxes, and equity method investment earnings)

● net charges of $34.8 million related to legacy legal matters, and

● a net gain of $8.1 million primarily associated with insurance proceeds from the previous fire that occurred at one of our manufacturing facilities.

Segment Operating Profit

($ in millions)

Reporting Segment

Operating Profit (Loss)

Operating Profit

Grocery & Snacks

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International

Operating profit in our Grocery & Snacks segment for fiscal 2024 reflected an increase in gross profits of $30.8 million compared to fiscal 2023.

The higher gross profit was due to inflation driven pricing that was primarily implemented in the prior year, productivity, lower transportation costs, lower inventory write-offs, and a net benefit of $14.4 million related to insurance proceeds received for lost sales from our Armour Star ® brand recall.

These increases were partially offset by the impacts of input cost inflation and unfavorable fixed cost leverage.

The increase in gross profits was partially offset by higher SG&A expenses, including an increase of $10.0 million in advertising and promotion expenses.

Operating profit of the Grocery & Snacks segment included certain brand intangible impairment charges of $77.6 million and $78.9 million in fiscal 2024 and 2023, respectively.

Fiscal 2024 and 2023 included charges of $10.3 million and $0.6 million, respectively, related to our restructuring plans.

Fiscal 2023 included expenses of $3.5 million related to a municipal water break that impacted one of our production facilities.

Operating profit in our Refrigerated & Frozen segment for fiscal 2024 reflected a decrease in gross profits of $95.0 million compared to fiscal 2023.

The decrease was driven by the net sales decline discussed above, impacts of input cost inflation, and unfavorable fixed cost leverage, partially offset by productivity, lower transportation costs, and lower inventory write-offs.

Operating profit of the Refrigerated & Frozen segment included higher SG&A expenses compared to fiscal 2023, which included a decrease of $19.3 million in advertising and promotion expenses.

The segment was impacted by charges of $879.1 million and $252.6 million related to the impairment of goodwill and certain brand intangible assets as part of our annual impairment testing during fiscal 2024 and 2023, respectively.

Fiscal 2023 also included charges of $385.7 million related to the goodwill and Birds Eye ® brand impairments in connection with certain reporting unit changes within our Refrigerated & Frozen segment.

Fiscal 2024 and 2023 included $32.1 million and $5.1 million, respectively, of charges related to our restructuring plans.

Fiscal 2024 and 2023 included a net benefit of $2.8 million and net charges of $15.3 million, respectively, associated with fires occurring at certain of our manufacturing facilities and related insurance recoveries.

Operating profit in fiscal 2023 was also impacted by $4.2 million of incremental transportation costs and inventory write-offs as a result of supply chain disruptions caused by a third-party vendor’s system shutdown in connection with the third party experiencing a cybersecurity incident and $5.7 million related to the impairment of businesses previously held for sale.

Operating profit in our International segment for fiscal 2024 reflected an increase in gross profits of $32.9 million compared to fiscal 2023, reflecting the net sales growth discussed above and productivity, partially offset by the impacts of input cost inflation.

The increase in gross profits was partially offset by higher SG&A expenses, including an increase of $6.3 million in advertising and promotion expenses.

Operating profit in fiscal 2024 included charges of $36.4 million related to the impairment of a business held for sale and $20.8 million of net charges related to our restructuring plans.

Fiscal 2023 was impacted by charges of $13.7 million related to the impairment of certain brand intangible assets.

Operating profit in our Foodservice segment for fiscal 2024 reflected an increase in gross profits of $46.7 million compared to fiscal 2023.

The increase in gross profit was driven by the net sales growth discussed above, productivity, and lower transportation costs, partially offset by the impacts of input cost inflation and unfavorable fixed cost leverage.

Operating profit in fiscal 2024 and 2023 was impacted by net benefits of $5.9 million and $1.9 million, respectively, associated with insurance recoveries related to a fire that occurred at one of our manufacturing facilities.

Fiscal 2023 included expense of $20.5 million related to the impairment of businesses previously held for sale.

Segment operating profit in our Grocery & Snacks segment for fiscal 2025 reflected a decrease in gross profits of $86.6 million compared to fiscal 2024.

The decrease in gross profit was driven by the decrease in net sales discussed above, the impacts of input cost

inflation, and unfavorable operating leverage, partially offset by productivity.

In addition, we recognized a benefit of $11.3 million and $14.4 million in fiscal 2025 and 2024, respectively, related to insurance proceeds for lost sales from our fiscal 2023 brand recall on Armour Star ® .

The decrease in gross profits was partially offset by lower SG&A expenses compared to fiscal 2024.

Segment operating profit in our Refrigerated & Frozen segment for fiscal 2025 reflected a decrease in gross profits of $211.3 million compared to fiscal 2024.

The decrease was driven by the net sales decline discussed above, impacts of input cost inflation, and unfavorable operating leverage, partially offset by productivity.

In fiscal 2025, we also experienced manufacturing challenges at the primary facility that prepares and cooks chicken used in our frozen meals.

This resulted in increased product costs from utilizing third-party manufacturers, as well as abnormal inventory costs while we temporarily stopped production.

In addition, we estimate that gross profits during fiscal 2025 were negatively impacted by approximately $10 million, primarily due to lost profits, abnormal manufacturing variances, and certain inventory write-offs resulting from the temporary manufacturing disruptions in our Hebrew National ® business.

The decrease in gross profits was partially offset by lower SG&A expenses compared to fiscal 2024, which included a decrease of $20.9 million in advertising and promotion expenses.

Segment operating profit in our International segment for fiscal 2025 reflected a decrease in gross profits of $29.9 million compared to fiscal 2024.

The decrease was driven by a reduction in profit associated with the sale of our ownership stake in ATFL, the impacts of input cost inflation, and unfavorable foreign exchange rates, partially offset by productivity.

The decrease in gross profits was partially offset by lower SG&A expenses, including a decrease of $5.1 million in advertising and promotion expenses due primarily to the sale of our ownership stake in ATFL.

Segment operating profit in our Foodservice segment for fiscal 2025 reflected a decrease in gross profits of $19.1 million compared to fiscal 2024.

The decrease in gross profits was driven by the net sales declines discussed above, the impacts of input cost inflation, and unfavorable operating leverage, partially offset by productivity.

Pension and Postretirement Non-service Income

In fiscal 2024, pension and postretirement non-service income was $10.3 million, a decrease of $13.9 million compared to fiscal 2023.

Fiscal 2024 reflected higher interest costs, partially offset by a benefit of $11.5 million related primarily to our annual remeasurement of an hourly pension plan liability.

In fiscal 2025, pension and postretirement non-service income was $25.9 million, an increase of $15.6 million compared to fiscal 2024.

Fiscal 2025 reflected lower interest costs and a non-cash settlement gain of $13.0 million associated with a partial transfer of our U.S.

defined benefit pension plan obligation to a third-party insurance provider through the purchase of an annuity contract.

Fiscal 2024 included a benefit of $11.5 million related primarily to our annual remeasurement of an hourly pension plan liability.

Interest Expense, Net

In fiscal 2024, net interest expense was $430.5 million, an increase of $20.9 million, or 5.1%, from fiscal 2023.

The increase was driven by a higher weighted average interest rate on outstanding debt.

In fiscal 2025, net interest expense was $416.7 million, a decrease of $13.8 million, or 3.2%, from fiscal 2024.

The decrease was driven by an overall reduction of our debt balances.

See Note 4, “Long-Term Debt” , to the Consolidated Financial Statements contained in this report for further discussion.

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Our share of earnings from our equity method investment earnings were $182.4 million and $177.6 million for fiscal 2025 and 2024, respectively.

Ardent Mills earnings for fiscal 2024 reflected slightly lower volume trends as seen throughout the industry, partially offset by improved product margins.

Ardent Mills earnings for fiscal 2025 reflected improved commodity revenue, partially offset by continued lower volume trends as seen throughout the industry.

Results for fiscal 2025 included charges of $7.2 million related to Ardent Mills restructuring activities.

Our income tax expense was $3.7 million and $262.5 million in fiscal 2025 and 2024, respectively.

The decrease in our income tax expense was principally related to a release of a valuation allowance from a federal audit settlement that gave rise to a $225.8 million tax benefit in fiscal 2025.

The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 0.3% and 43.0% for fiscal 2025 and 2024, respectively.

The higher effective tax rate was largely due to the goodwill impairment that we recorded in our Sides, Components, Enhancers reporting unit.

See Note 14, “Pre-Tax Income and Income Taxes” , to the Consolidated Financial Statements contained in this report for a further discussion on the change in effective tax rates.

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Diluted earnings per share in fiscal 2025 and 2024 were $2.40 and $0.72, respectively.

The decrease in diluted earnings per share reflected lower net income.

The increase in diluted earnings per share reflected higher net income.

See “Items Impacting Comparability” above as several significant items affected the comparability of year-over-year results of operations.

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As of May 25, 2025, there were no outstanding borrowings under the Revolving Credit Facility.

On June 27, 2025, subsequent to our fiscal year end, we terminated and replaced our existing revolving credit facility by entering into an amendment which extends the maturity date to June 27, 2030.

We had $259.0 million outstanding under our commercial paper program as of May 25, 2025 and $586.0 million outstanding as of May 26, 2024.

The highest level of borrowings during fiscal 2024 was $697.0 million.

The highest level of borrowings during fiscal 2025 was $1.0 billion.

During the fourth quarter of fiscal 2025, we entered into an unsecured Term Loan with a financial institution and borrowed the full principal amount, $200.0 million, available thereunder (the “2025 Term Loan”).

The net proceeds, along with the issuance of commercial paper and operating cash flows, were used to repay the $1.00 billion aggregate principal amount of our 4.30% senior notes on their maturity date of May 1, 2024.

The 2024 Term Loan matures on April 29, 2025.

During the second quarter of fiscal 2024, we prepaid $250.0 million of the $500.0 million aggregate principal amount outstanding under our unsecured Term Loan Agreement, dated August 26, 2023 (the "2023 Term Loan").

The repayment was funded by operating cash flows and the issuance of commercial paper.

The remaining balance of the 2023 Term Loan matures on August 26, 2025.

During the first quarter of fiscal 2024, we issued $500.0 million aggregate principal amount of 5.30% senior notes due October 1, 2026.

The net proceeds, along with operating cash flows, were used to repay the outstanding $500.0 million aggregate principal amount of our 0.50% senior notes on their maturity date of August 11, 2023.

Additional information about our long-term debt balances as of May 26, 2024 can be found in Note 3, “Long-Term Debt” , to the Consolidated Financial Statements contained in this report.

The net proceeds were used to repay outstanding borrowings under our commercial paper program.

On June 4, 2025, subsequent to our fiscal year end, we repaid $100.0 million of the $200.0 million aggregate principal amount outstanding under the 2025 Term Loan with a portion of the proceeds received in connection with the sale of our Chef Boyardee ® business.

The 2025 Term Loan matures on October 29, 2025.

During the fourth quarter of fiscal 2024, we entered into an unsecured Term Loan with a financial institution and borrowed the full principal amount, $300.0 million, available thereunder (the “2024 Term Loan”).

During the fourth quarter of fiscal 2025, we entered into a letter agreement extending the maturity date of the 2024 Term Loan to October 29, 2025.

On June 4, 2025, subsequent to our fiscal year end, we repaid $150.0 million of the $300.0 million aggregate principal amount outstanding under the 2024 Term Loan with a portion of the proceeds received in connection with the sale of our Chef Boyardee ® business.

During the second quarter of fiscal 2025, we repaid the remaining $250.0 million aggregate principal amount outstanding under our unsecured Term Loan Agreement, dated August 26, 2023 (the “2023 Term Loan”).

The repayment was primarily funded by operating cash flows.

See Note 4, “Long-Term Debt” and Note 5, “Credit Facilities and Borrowings” , to the Consolidated Financial Statements contained in this report for additional information on our debt transactions.

The weighted-average coupon interest rate of the long-term debt obligations outstanding as of May 25, 2025, was approximately 4.9%.

We expect to maintain or have access to sufficient liquidity to retire or refinance long-term debt at maturity or otherwise, from operating cash flows, our commercial paper program, access to the capital markets, and our Revolving Credit Facility.

billion aggregate principal amount of 4.6% senior notes maturing in November 2025 that we expect to pay and/or refinance using available sources which may include the investment grade note market, bank loans, commercial paper, and cash on hand.

We continuously evaluate opportunities to refinance our debt;

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The share repurchase authorization has no expiration date.

We did not repurchase any shares of common stock during fiscal 2024.

During fiscal 2025, we repurchased 2.1 million shares of our common stock under this authorization for an aggregate of $64.0 million.

The Company’s total remaining share repurchase authorization as of May 25, 2025 was $852.6 million.

On April 2, 2025, we announced that our Board had authorized a quarterly dividend payment of $0.35 per share, which was paid on May 29, 2025, to stockholders of record as of the close of business on April 28, 2025.

Subsequent to our fiscal year end, on July 11, 2024, we announced that our Board had authorized a quarterly dividend of $0.35 per share to be paid on August 29, 2024 to stockholders of record as of the close of business on August 1, 2024.

Subsequent to our fiscal year end, on July 9, 2025, we announced that our Board had authorized a quarterly dividend of $0.35 per share to be paid on August 28, 2025 to stockholders of record as of the close of business on July 30, 2025.

Contractual Obligations

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Our preliminary estimate of capital expenditures for fiscal 2026 is approximately $450 million.

In fiscal 2024, we used $14.9 million of cash, which was the net result of $2.02 billion generated from operating activities, $375.0 million used in investing activities, $1.66 billion used in financing activities, and an increase of $1.2 million due to the effects of changes in foreign currency exchange rates.

Cash generated from operating activities totaled $2.02 billion in fiscal 2024, as compared to $995.4 million generated in fiscal 2023.

The increase in operating cash flows for fiscal 2024 compared to fiscal 2023 was primarily driven by a reduction in our inventory balances, which were impacted by lower net sales volumes in addition to an inventory rebuild from previous supply chain constraints in fiscal 2023.

Other changes in working capital were positively impacted by decreased accounts receivables and extended payment terms with certain vendors resulting in reduced cash outflows for accounts and other payables.

Operating cash flows in fiscal 2024 also benefited from higher dividend payments received from one of our equity method investments.

In fiscal 2025, we used $11.0 million of cash, which was the net result of $1.69 billion generated from operating activities, $542.2 million used in investing activities, $1.16 billion used in financing activities, and a decrease of $2.4 million due to the effects of changes in foreign currency exchange rates.

Cash generated from operating activities totaled $1.69 billion in fiscal 2025, as compared to $2.02 billion generated in fiscal 2024.

The decrease in operating cash flows for fiscal 2025 compared to fiscal 2024 was primarily driven by lower operating profits, lower dividend payments received from one of our equity method investments, and higher inventory balances.

These decreases were partially offset by the accelerated receipt of our outstanding receivables in exchange for a slightly higher prompt pay discount, which increased our cash flow from operations by approximately $140 million.

Operating cash flows in fiscal 2025 also benefited from lower tax payments as a result of lower taxable income and recent interactions with the U.S.

Internal Revenue Service (“IRS”) allowing for additional tax deductions.

Cash used in investing activities totaled $542.2 million in fiscal 2025 compared to $375.0 million in fiscal 2024.

Net cash outflows from investing activities in fiscal 2024 and 2023 consisted primarily of capital expenditures totaling $388.1 million and $362.2 million, respectively.

Cash used in financing activities totaled $1.66 billion in fiscal 2024 compared to $631.6 million in fiscal 2023.

Investing activities in fiscal 2025 consisted primarily of capital expenditures totaling $389.3 million, and the purchases of an existing contract manufacturer and Sweetwood Smoke & Co.

for a total of $230.6 million, net of cash acquired, which were partially offset by net proceeds totaling $76.8 million from the sale of our ownership stake in ATFL.

Investing activities in fiscal 2024 consisted primarily of capital expenditures totaling $388.1 million.

Cash used in financing activities totaled $1.16 billion in fiscal 2025 compared to $1.66 billion in fiscal 2024.

Financing activities in fiscal 2025 principally reflected repayments of long-term debt of $281.3 million, net short-term borrowing repayments of $125.6 million, cash dividends paid of $669.2 million, and common stock repurchases of $64.0 million.

Financing activities in fiscal 2024 principally reflected repayments of long-term debt of $1.77 billion, the issuance of long-term debt totaling $500.0 million, net short-term borrowing issuances of $290.6 million, and cash dividends paid of $659.3 million.

Financing activities in fiscal 2023 reflected repayments of long-term debt of $712.4 million, the issuance of long-term debt totaling $500.0 million, net short-term borrowing issuances of $351.4 million, cash dividends paid of $623.8 million, and common stock repurchases of $150.0 million.

Cash Held by International Subsidiaries

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Our Audit/Finance Committee has reviewed management’s development, selection, and disclosure of the critical accounting estimates.

Marketing Costs —We offer various forms of trade promotions which are mostly recorded as a reduction in revenue.

The methodologies for determining these provisions are dependent on local customer pricing and promotional practices, which range from contractually fixed percentage price reductions to provisions based on actual occurrence or performance.

Marketing Costs —We offer various forms of advertising, trade promotions, and consumer incentives which are primarily recorded as a reduction in revenue.

Advertising costs are expensed as incurred and recorded in SG&A expenses.

The methodologies for determining trade promotions and consumer incentives are dependent on local customer pricing practices, which range from contractually fixed percentage price reductions to provisions based on actual occurrence or performance.

Our promotional activities are conducted either through the retail trade or directly with consumers and include activities such as in-store displays and events, feature price discounts, consumer coupons, and loyalty programs.

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Differences between estimated expense and actual redemptions are recognized as a change in management estimate in a subsequent period.

We have recognized trade promotion liabilities of $120.4 million as of May 26, 2024.

We have recognized trade promotion and advertising liabilities of $131.5 million as of May 25, 2025.

Changes in the assumptions used in estimating the cost of any individual customer marketing program would not result in a material change in our results of operations or cash flows.

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Employee-Related Benefits —We incur certain employment-related expenses associated with our pension plans.

In order to measure the annual expense associated with these pension benefits, management must make a variety of estimates including, but not limited to, discount rates used to measure the present value of certain liabilities, assumed rates of return on assets set aside to fund these expenses, employee turnover rates, and anticipated mortality rates.

In order to measure the annual expense associated with these pension benefits, management must make a variety of estimates including discount rates used to measure the present value of certain liabilities, assumed rates of return on assets set aside to fund these expenses, and anticipated mortality rates.

The estimates used by management are based on our historical experience as well as current facts and circumstances.

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In developing the assumed long-term rate of return on plan assets for determining pension expense, we consider long-term historical returns (arithmetic average) of the plan’s investments, the asset allocation among types of investments, estimated long-term returns by investment type from external sources, and the current economic environment.

Based on this information, we selected 5.00% for the weighted-average expected long-term rate of return on plan assets for determining our fiscal 2024 pension expense.

A 25-basis point increase/decrease in our weighted-average expected long-term rate of return assumption as of the beginning of fiscal 2024 would decrease/increase annual pension expense for our pension plans by $7.1 million.

Based on this information, we selected a weighted-average expected long-term rate of return on plan assets of 5.53% and 5.89% for determining our fiscal 2025 and 2026 pension expense, respectively.

A 50-basis point increase/decrease in our expected long-term rate of return assumption as of the beginning of fiscal 2026 would decrease/increase annual pension expense for our pension plans by $9.4 million.

We selected a weighted-average expected rate of return on plan assets of 5.53% to be used to determine our pension expense for fiscal 2025.

Business Combinations, Impairment of Long-Lived Assets (including property, plant and equipment), Identifiable Intangible Assets, and Goodwill —We use the acquisition method in accounting for acquired businesses.

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Estimating future cash flows requires significant judgment by management in such areas as future economic conditions, industry-specific conditions, product pricing, and necessary capital expenditures.

The use of different assumptions or estimates for selected EBITDA multiples and future cash flows could produce different impairment amounts (or none at all) for goodwill and indefinite-lived intangible assets.

The use of different assumptions or

estimates for selected EBITDA multiples and future cash flows could produce different impairment amounts (or none at all) for goodwill and indefinite-lived intangible assets.

For further information on our indefinite-lived intangible assets and goodwill, see Note 1, “ Summary of Significant Accounting Policies ”, to the Consolidated Financial Statements contained in this report.

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Historically, we have experienced material impairments in brand intangibles and goodwill as a result of declining sales, reductions to our assumed royalty rates due to lower-than-expected profit margins, and other economic conditions such as increases to interest rates.

In the fourth quarter of fiscal 2024, we recorded goodwill impairments of $526.5 million in our Sides, Components, Enhancers reporting unit.

The carrying value in our Sides, Components, Enhancers reporting unit was approximately $3.2 billion as of our fiscal 2024 annual impairment testing date and was the only reporting unit with 10% or less excess fair value over carrying value as of that date.

For our Sides, Components, Enhancers reporting unit, we selected a discount rate of 8.50% and a long-term growth rate that approximated 1%.

In fiscal 2025, 2024, and 2023, we recorded total indefinite-lived intangibles impairments of $72.1 million, $430.2 million, and $589.2 million, respectively, primarily related to brands acquired as part of the Pinnacle acquisition that were recorded at fair value in fiscal 2019.

We continue to be more susceptible to impairment charges in the future if our long-term sales forecasts, royalty rates, and other assumptions change as a result of lower than expected performance or other economic conditions.

We continue to be susceptible to impairment charges in the future if our long-term sales forecasts, royalty rates, and other assumptions change as a result of lower than expected performance or other economic conditions.

We will monitor these assumptions as management continues to achieve gross margin improvement and long-term sales growth.

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These estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.

If we had changed the assumptions used to estimate the fair value of our reporting unit and brands with 10% or less excess fair value over carrying amount as of the fiscal 2024 annual impairment test, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of this reporting unit and certain brands (in millions):

If we had changed the assumptions used to estimate the fair value of our brands with 10% or less excess fair value over carrying amount as of the fiscal 2025 annual impairment test, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of certain brands (in millions):

Discount Rate

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100-Basis-Point

Reporting unit

Brands (<10% cushion)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The disclosure requirements must be applied retrospectively to all prior periods presented in the financial statements.

The effective date for the standard is for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are in the process of analyzing the impact of the ASU on our related disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , to provide more detailed income tax disclosure requirements.

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We are in the process of analyzing the impact of the ASU on our related disclosures.

In March 2024, the Securities and Exchange Commission ("SEC") issued final climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and/or material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2).

Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds.

In April 2024, the SEC stayed its implementation of this rule pending the outcome of legal challenges.

However, we continue to monitor developments and analyze the potential impact of the new rules on our related disclosures.

We will adopt this guidance in the fourth quarter of fiscal 2026, when it becomes effective.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , to provide disaggregated disclosures of specific expense categories underlying certain income statement expense line items on an annual and interim basis.

The disclosure requirements will be applied on a prospective basis, with the option to apply it retrospectively.

The effective date for the standard is for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

We are in the process of analyzing the impact of the ASU on our related disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis