What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-22 compared with 2023-08-23 · 75 added, 124 removed, 219 unchanged (48% of the section changed)

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• a significant infrastructure improvement and capacity expansion project for our frozen pasta facility in Altoona, Iowa that was completed in March 2022;

• the establishment of a Transformation Program Office in 2019 that serves to coordinate our various capital and integration efforts, including our enterprise resource planning system (“ERP”) project and related initiatives, Project Ascent, that is currently in the implementation phase.

Project Ascent commenced in late 2019 and entails the replacement of our primary customer and manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA system.

• our enterprise resource planning system (“ERP”) project and related initiatives, Project Ascent, that reached completion of the implementation phase in August 2023.

Project Ascent entailed the replacement of our primary customer and manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA system.

Implementation of this system began in July 2022 and continued throughout fiscal 2023.

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During fiscal 2023, we progressed through our ERP implementation with no major disruptions.

We completed the final wave of the implementation phase in August 2023 as planned and will shift our focus towards leveraging the capabilities of our new ERP system in the coming year.

Project Ascent will evolve into an on-going Center of Excellence that will provide oversight for all future upgrades of the S/4HANA environment, evaluation of future software needs to support the business, acquisition integration support and master data standards.

BUSINESS TRENDS

Dating back to the onset of the COVID-19 pandemic in 2020, the effects of COVID-19 on consumer behavior have impacted the relative demand for our Retail and Foodservice products.

More specifically, beginning in March 2020, consumer demand shifted towards increased at-home food consumption and away from in-restaurant dining.

Over the course of the following two years, while this shift in demand was inconsistent and volatile, on balance it positively impacted our Retail segment sales volumes and negatively impacted our Foodservice segment sales volumes.

From an operations standpoint, the shift in demand over the two-year period, combined with other COVID-19-related issues, unfavorably impacted the operating results of both our segments.

Beginning near the end of 2022, the volatility and shifts in demand between our Retail and Foodservice products subsided and our operating environment became more predictable and stable.

The inflationary cost environment we experienced during 2022 resulted in significantly higher input costs for our business.

During 2022, we endured unprecedented inflationary costs for commodities, particularly soybean oil and flour, in addition to notably higher costs for packaging, freight and warehousing, and labor.

This cost inflation was attributed to numerous factors such as the impacts of the COVID-19 pandemic, the war in Ukraine, climate and weather conditions, supply chain disruptions, including some raw material and packaging shortages, a tight labor market, and government policy decisions.

We continued to experience significant cost inflation through 2023, particularly for soybean oil, eggs and flour.

However, our pricing actions served to offset these inflationary costs.

In addition, the operating environment stabilized as we did not experience the supply chain disruptions and demand swings of the preceding years.

We completed the final wave of the implementation phase in August 2023 as planned and have shifted our focus towards leveraging the capabilities of our new ERP system.

RESULTS OF CONSOLIDATED OPERATIONS

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Selling, General and Administrative Expenses 218,065 222,091 212,098 (4,026) (1.8) % 9,993 4.7 %

Change in Contingent Consideration — (3,470) (5,687) 3,470 (100) % 2,217 (39) %

Restructuring and Impairment Charges 24,969 35,180 1,195 (10,211) (29) % 33,985 N/M

Change in Contingent Consideration — — (3,470) — N/M 3,470 (100.0) %

Restructuring and Impairment Charges 14,874 24,969 35,180 (10,095) (40.4) % (10,211) (29.0) %

Operating Income 199,363 141,508 111,911 57,855 40.9 % 29,597 26.4 %

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Diluted Net Income Per Common Share $ 5.76 $ 4.04 $ 3.25 $ 1.72 42.6 % $ 0.79 24.3 %

Consolidated net sales for the year ended June 30, 2023 increased 9% to a new record of $1,823 million from the prior-year record total of $1,676 million, reflecting higher net sales for both the Retail and Foodservice segments driven by pricing to offset inflationary costs.

Sales in the current year were unfavorably impacted by approximately $25 million in incremental sales attributed to advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live that commenced on July 1.

Consolidated sales volumes, measured in pounds shipped, decreased 5% in 2023.

In the prior year, consolidated sales volumes increased 2%.

Consolidated net sales for the year ended June 30, 2024 increased 2.7% to a new record of $1,871.8 million from the prior-year record total of $1,822.5 million, reflecting higher net sales for both the Retail and Foodservice segments driven primarily by volume gains.

Deflationary pricing was a headwind to Foodservice segment sales growth.

Sales in the prior year were unfavorably impacted by an estimated $25 million in net sales attributed to advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live that commenced on July 1, 2022.

Breaking down the 2.7% increase in consolidated net sales, approximately 1.8% is attributed to volume/mix impacts, approximately 1.4% is attributed to the ERP go-live sales shift and the remaining offset is net pricing.

Consolidated sales volumes, measured in pounds shipped, increased 3.7% in 2024.

Excluding the impact of last year’s shift in sales due to our ERP go-live, consolidated sales volumes increased 2.1%.

The relative proportion of sales contributed by each of our business segments can impact a year-to-year comparison of the consolidated statements of income.

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See discussion of net sales by segment following the discussion of “Earnings Per Share” below.

Consolidated gross profit increased 9% to $388.6 million in 2023 compared to $355.7 million in 2022 as our pricing actions effectively offset the significant inflationary costs we have experienced for commodities, packaging, labor and warehousing.

The higher gross profit also reflects the benefits of a more stable operating environment, improved manufacturing efficiencies and reduced reliance upon co-manufacturers.

The current-year gross profit compares to a challenging prior-year period characterized by escalating inflationary costs across our entire supply chain, the unfavorable effects of supply chain disruptions, demand volatility and uncertainty, suboptimal capacity utilization, and overall lower productivity resulting in substantially higher costs to produce our products and service our customers.

Note that last year’s gross profit included an estimated $5 million impact from the advance customer orders ahead of our ERP go-live.

Consolidated gross profit increased 11.3% to $432.3 million in 2024 compared to $388.6 million in 2023 as influenced by favorability in pricing net of commodity costs, our cost savings programs and the higher sales volumes.

In the prior year, gross profit was unfavorably impacted by an estimated $5 million due to the aforementioned shift of net sales into the quarter ended June 30, 2022 ahead of our ERP go-live.

Selling, General and Administrative Expenses

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Total SG&A Expenses $ 218,065 $ 222,091 $ 212,098 $ (4,026) (1.8) % $ 9,993 4.7 %

Selling, general and administrative (“SG&A”) expenses increased 5% to $222.1 million in 2023.

This increase reflects increased investments in personnel and IT;

higher brokerage costs associated with the increased sales;

higher travel expenses;

and some nonrecurring legal charges for closed operations.

Project Ascent expenses decreased $9.5 million to $29.9 million.

Selling, general and administrative (“SG&A”) expenses decreased 1.8% to $218.1 million in 2024 compared to $222.1 million in 2023.

This decrease reflects lower expenditures for Project Ascent, largely offset by higher expenditures to support the continued growth of our business, including investments in personnel, a more normalized level of consumer promotions, higher brokerage costs and IT investments.

Project Ascent expenses totaled $8.2 million in 2024 compared to $29.9 million in 2023.

Project Ascent expenses are included within Corporate Expenses.

A portion of the costs that have been classified as Project Ascent expenses represent ongoing costs that will continue subsequent to the completion of our ERP implementation.

Change in Contingent Consideration

In 2022, the change in contingent consideration resulted in a benefit of $3.5 million.

This benefit was attributed to a reduction in the fair value of the contingent consideration liability for Bantam Bagels, LLC (“Bantam”) based on our fair value measurements, resulting in a zero balance at March 31, 2022.

We recorded $2.6 million in our Foodservice segment and $0.9 million in our Retail segment.

We ultimately exited the Bantam business near the end of fiscal 2022.

See further discussion in Note 2 to the consolidated financial statements.

A portion of the costs classified as Project Ascent expenses represent ongoing costs that have continued subsequent to the completion of our ERP implementation.

Beginning in 2025, these ongoing costs will no longer be classified separately as Project Ascent expenses.

Restructuring and Impairment Charges

In 2023, we recorded impairment charges of $25.0 million related to the intangible assets of Flatout, Inc.

(“Flatout”) due to lowered expectations for the projected sales and profitability of the Flatout business.

In 2024, we committed to a plan to exit our perimeter-of-the-store bakery product lines and close our Flatout flatbread facility in Saline, Michigan and our Angelic Bakehouse sprouted grain bakery facility in Cudahy, Wisconsin.

Due to a lack of scale and direct-to-store distribution capabilities for these products, we were not able to achieve the desired operational or financial performance.

Production at these facilities ceased in March 2024, and we completed the divestiture of the real estate and manufacturing equipment at these locations during the quarter ended June 30, 2024.

The operations of these facilities have not been classified as discontinued operations as the closures do not represent a strategic shift that would have a major effect on our operations or financial results.

In 2024, we recorded restructuring and impairment charges of $14.9 million related to these closures, as well as $2.6 million recorded in Cost of Sales for the write-down of inventories.

The restructuring and impairment charges, which consisted of impairment charges for fixed assets and intangible assets, one-time termination benefits and other closing costs, were not allocated to our two reportable segments due to their unusual nature whereas the $2.6 million write-down of inventories was recorded in our Retail segment.

In 2023, we recorded impairment charges of $25.0 million related to the intangible assets of Flatout due to lowered expectations for the projected sales and profitability of the Flatout product lines that we subsequently exited in 2024.

These impairment charges were reflected in our Retail segment.

In 2022, we recorded restructuring and impairment charges totaling $35.2 million related to the following items:

• our decision to explore strategic alternatives and ultimately exit the Bantam business;

• the impact of a revision to the forecasted cash flows of Bantam on the intangible assets of this business;

• the impact of a revision to the forecasted branded sales of Angelic Bakehouse, Inc.

(“Angelic”) on the intangible assets of this business;

• the closure of our frozen garlic bread facility in Baldwin Park, California.

Based on our decision to explore strategic alternatives for the Bantam business, impairment testing was triggered for the related long-lived assets of the asset group.

The restructuring and impairment charges of $24.8 million included impairment charges for intangible assets, fixed assets and an operating lease right-of-use asset, as well as other closure-related costs.

Due to their unusual nature, these charges were not allocated to our two reportable segments.

As noted above, we ultimately exited the Bantam business near the end of fiscal 2022.

The operations of this business were not classified as discontinued operations as the closure did not represent a strategic shift that would have a major effect on our operations or financial results.

In 2022, prior to our decision to explore strategic alternatives for the Bantam business, we also recorded an impairment charge of $0.9 million related to Bantam’s Retail customer relationships intangible asset, which reflected lower projected cash flows for Bantam’s Retail business.

This impairment charge was reflected in our Retail segment.

In 2022, we also recorded an impairment charge of $8.8 million related to the tradename intangible asset of Angelic, which reflected the impact of lower projected sales for Angelic’s branded Retail business.

This impairment charge was reflected in our Retail segment.

In 2022, we committed to a plan to close our frozen garlic bread facility in Baldwin Park, California in support of our ongoing efforts to better optimize our manufacturing network.

The operations of this facility were not classified as discontinued operations as the closure did not represent a strategic shift that would have a major effect on our operations or financial results.

We recorded restructuring and impairment charges of $0.7 million, which consisted of one-time termination benefits and impairment charges for fixed assets and an operating lease right-of-use asset.

These charges were not allocated to our two reportable segments due to their unusual nature.

Operating Income

Operating income increased 26% to $141.5 million in 2023 driven by the increase in gross profit as our pricing actions served to offset the significant inflationary costs we have experienced for commodities, packaging, labor and warehousing, as well as the impact of lower restructuring and impairment charges.

Operating income also benefited from a more stable operating environment, improved manufacturing efficiencies and reduced reliance upon co-manufacturers.

The increase in SG&A expenses partially offset these positive factors.

Additionally, operating income in the current year was unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live and accounted for an estimated $5 million in operating income.

Operating income increased 40.9% to $199.4 million in 2024 compared to $141.5 million in 2023 driven by the increase in gross profit, reduced expenditures for Project Ascent and lower restructuring and impairment charges.

See discussion of operating results by segment following the discussion of “Earnings Per Share” below.

Other, net resulted in a benefit of $6.2 million in 2024 compared to a benefit of $1.8 million in 2023.

This change reflects higher interest rates for our cash holdings and increased balances of cash and equivalents.

Taxes Based on Income

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We may experience increased volatility to our income tax expense and resulting net income dependent upon, among other variables, the price of our common stock and the timing and volume of share-based payment award activity such as employee exercises of stock-settled stock appreciation rights and vesting of restricted stock awards.

For 2023 and 2022, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by 0.4% and 0.1%, respectively.

For 2024 and 2023, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by less than 0.1% and 0.4%, respectively.

Earnings Per Share

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Diluted weighted average common shares outstanding for each of the years ended June 30, 2024 and 2023 have remained relatively stable.

In 2023 and 2022, expenditures for Project Ascent reduced diluted earnings per share by $0.84 and $1.09, respectively, and restructuring and impairment charges reduced diluted earnings per share by $0.70 and $0.98, respectively.

In 2022, the adjustments to Bantam’s contingent consideration increased diluted earnings per share by $0.10.

In 2024, costs related to our decision to exit our perimeter-of-the-store bakery product lines reduced diluted earnings per share by a total of $0.49.

These exit costs included restructuring and impairment charges, which reduced diluted earnings per share by $0.42, and the inventory write-down, which reduced diluted earnings per share by $0.07.

In 2023, impairment charges related to Flatout’s intangible assets reduced diluted earnings per share by $0.70.

In 2024 and 2023, expenditures for Project Ascent reduced diluted earnings per share by $0.23 and $0.84, respectively.

RESULTS OF OPERATIONS - SEGMENTS

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Operating Margin 21.0 % 14.4 % 16.6 %

In 2023, net sales for the Retail segment reached a record $965.4 million, a 5% increase from the prior-year total of $915.2 million, including the favorable impact of our pricing actions.

Sales in the current year were unfavorably impacted by advance orders accounting for an estimated $11 million in Retail net sales near the end of fiscal 2022 ahead of our ERP go-live, which commenced on July 1, 2022.

Retail segment sales volumes, measured in pounds shipped, declined 4% in the current year.

Sales volumes were unfavorably impacted by the advance ordering ahead of our ERP go-live, price elasticity and product line rationalizations that were implemented during fiscal 2022.

In 2022, Retail sales volumes increased 2%.

In 2023, Retail segment operating income decreased 8% to $139.5 million, including the unfavorable impact of higher impairment charges.

As referenced in the “Restructuring and Impairment Charges” section above, Retail segment operating income included impairment charges totaling $25.0 million and $9.7 million in 2023 and 2022, respectively.

Operating income was favorably impacted by our pricing actions, which served to offset significant cost inflation.

Operating income also benefited from our reduced reliance upon co-manufacturers.

In the prior year, the net impact of our pricing actions lagged the extraordinary levels of cost inflation, and the segment’s operating income also reflected an unstable operating environment that resulted in increased costs to manufacture products and service the business.

In 2024, net sales for the Retail segment reached a record $988.4 million, a 2.4% increase from the prior-year total of $965.4 million, including the carryover benefit from pricing actions that were taken in 2023.

The increase in 2024 Retail net sales also reflects that prior-year sales were unfavorably impacted by advance orders accounting for an estimated $11 million in Retail net sales near the end of fiscal 2022 ahead of our ERP go-live, which commenced on July 1, 2022.

Retail segment sales volumes, measured in pounds shipped, increased 1.4% in the current year.

Retail sales volume growth was driven by the continued success of our program for licensed sauces and dressings.

Our New York BRAND ® Bakery frozen garlic bread products also contributed to the increase in the Retail sales volumes.

Excluding the impact of last year’s shift in sales due to our ERP go-live, the impact of a value engineering initiative we implemented in 2024, and all sales attributed to the perimeter-of-the-store bakery product lines we exited in 2024, Retail segment sales volumes increased 1.7%.

In 2024, Retail segment operating income increased $68.2 million, or 48.9%, to $207.7 million.

Beyond the impacts of last year’s impairment charges and this year’s write-down of inventories, which combined to contribute a net increase to Retail segment operating income of $22.4 million, the growth in Retail segment operating income was driven by:

favorability in our pricing net of commodity costs, including pricing impacts from investments in trade spending;

our cost savings programs;

and the beneficial impact of higher sales volumes.

Foodservice Segment

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Operating Margin 11.0 % 12.4 % 10.9 %

In 2023, Foodservice segment net sales increased 13% to a record $857.2 million from the 2022 total of $761.2 million driven by inflationary pricing and volume gains from certain quick-service restaurant customers in our mix of national chain restaurant accounts.

Sales in the current year were unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live, which reduced Foodservice net sales in the current year by an estimated $14 million.

Foodservice segment sales volumes, measured in pounds shipped, decreased 5% in the current year.

Sales volumes were unfavorably impacted by the advance ordering ahead of our ERP go-live and our decision to exit some less profitable SKUs during fiscal 2022.

In 2022, Foodservice sales volumes increased 2%.

In 2023, Foodservice segment operating income increased 29% to $106.3 million as our pricing actions effectively offset inflationary costs.

Operating income in the current year also benefited from a more stable operating environment, improved manufacturing efficiencies and our decision to discontinue some less profitable SKUs.

Prior-year operating income reflected a lag in pricing relative to inflationary costs, as partially offset by the adjustments to Bantam’s contingent consideration.

In 2024, Foodservice segment net sales increased 3.1% to a record $883.3 million from the 2023 total of $857.2 million driven by increased demand from several of our national chain restaurant account customers and growth for our branded Foodservice products.

Deflationary pricing was a headwind to Foodservice segment sales growth.

Sales in the prior year were unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live, which reduced Foodservice net sales in the prior year by an estimated $14 million.

Foodservice segment sales volumes, measured in pounds shipped, increased 5.3% in the current year.

Excluding the impact of last year’s shift in sales due to our ERP go-live, Foodservice segment sales volumes increased 3.5%.

In 2024, Foodservice segment operating income decreased 8.7% to $97.1 million driven by higher supply chain costs, as partially offset by the beneficial impact of higher sales volumes.

Foodservice segment operating income for 2024 also compares to a strong prior-year result.

Corporate Expenses

In 2024, corporate expenses totaled $90.5 million as compared to $104.3 million in 2023.

This increase primarily reflects increased investments in personnel and IT, as well as some nonrecurring legal charges for closed operations.

Lower expenditures for Project Ascent partially offset these higher expenses.

This decrease reflects lower expenditures for Project Ascent, as partially offset by higher expenditures to support the continued growth of our business, including investments in personnel and IT.

Project Ascent expenses totaled $8.2 million and $29.9 million in 2024 and 2023, respectively.

LOOKING FORWARD

For 2024, we anticipate Retail segment sales will benefit from volume growth led by our licensing program, including incremental growth from the new products, flavors and sizes we introduced in 2023, along with some new items we have planned for 2024.

We also foresee continued positive momentum for our New York BRAND ® Bakery frozen garlic bread products.

In Foodservice, we expect sales volumes to be led by growth from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including U.S.

economic performance and potential changes in consumer sentiment, may impact demand.

Consolidated net sales will also continue to benefit from the pricing actions taken in 2023.

We project the impact of inflationary costs to subside notably in the coming year compared to fiscal 2023.

The pricing actions we have implemented along with our cost savings initiatives will help to offset remaining inflationary costs.

With respect to Project Ascent, we completed the final wave of the implementation phase in August 2023 as planned and have shifted towards leveraging the capabilities of our new ERP system to improve execution in the coming year.

For 2025, we anticipate Retail segment sales will continue to benefit from volume growth led by our licensing program, including increased sales from the new products, flavors and sizes we introduced in 2024 along with the recent addition of Subway ® and Texas Roadhouse ® as license partners.

We also anticipate continued positive sales momentum for our New York BRAND ® Bakery frozen garlic bread products in 2025 as well as volume growth for our Marzetti ® refrigerated dressings.

In the Foodservice segment, we expect sales volumes to be led by growth from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including U.S.

economic performance and consumer behavior, may impact demand.

With respect to our input costs, in aggregate we do not foresee significant impacts from commodity cost inflation or deflation in the coming year.

We also expect to drive margin improvement through our cost savings programs.

We will continue to periodically reassess our allocation of capital to ensure that we maintain adequate operating flexibility while providing appropriate levels of cash returns to our shareholders.

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Our balance sheet maintained fundamental financial strength during 2024 as we ended the year with $163 million in cash and equivalents, along with shareholders’ equity of $926 million and no debt.

Under our unsecured revolving credit facility (“Facility”), we may borrow up to a maximum of $150 million at any one time.

Under our unsecured revolving credit facility (“Facility”), which we renewed in March 2024, we may borrow up to a maximum of $150 million at any one time.

We had no borrowings outstanding under the Facility at June 30, 2024.

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Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt.

The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions, and financial covenants relating to interest coverage and leverage.

The Facility contains certain restrictive covenants, including limitations on liens, asset sales and acquisitions, and financial covenants relating to interest coverage and leverage.

At June 30, 2024, we were in compliance with all applicable provisions and covenants of this facility, and we exceeded the requirements of the financial covenants by substantial margins.

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Cash provided by operating activities in 2024 totaled $251.6 million, an increase of 11.4% as compared with the 2023 total of $225.9 million.

The 2023 increase was primarily due to the year-over-year changes in net working capital, particularly receivables and accrued liabilities.

Receivables reflect the favorable impacts of a current-year decrease in receivables as well as a prior-year increase in receivables.

These fluctuations were due in part to an elevated level of receivables at the end of fiscal 2022 resulting from the advance ordering by our customers ahead of our ERP go-live.

Accrued liabilities reflect the favorable impacts of a current-year increase in the accruals for compensation and employee benefits as well as a prior-year decline in these balances.

Higher net income, as partially offset by the year-over-year change in noncash restructuring and impairment charges, also contributed to the increase in cash provided by operating activities.

The 2024 increase was primarily due to higher net income, as partially offset by the year-over-year changes in deferred income taxes and lower noncash restructuring and impairment charges in the current year.

Cash used in investing activities totaled $67.4 million in 2024 as compared to $90.8 million in 2023.

The 2023 decrease primarily reflects a lower level of payments for property additions, which totaled $90.2 million in 2023 compared to $132.0 million in 2022.

Current-year capital expenditures included spending on a capacity expansion project at our dressing and sauce facility in Horse Cave, Kentucky that reached substantial completion in March 2023.

Notable prior-year capital expenditures included spending on:

the Horse Cave capacity expansion project;

a capacity expansion project for one of our Marzetti dressing and sauce facilities in Columbus, Ohio that was completed in January 2022;

and infrastructure improvements and capacity expansion investments at our frozen pasta facility in Altoona, Iowa that was completed in March 2022.

The 2024 decrease primarily reflects a lower level of payments for property additions, which totaled $67.6 million in 2024 compared to $90.2 million in 2023, as the capacity expansion project at our dressing and sauce facility in Horse Cave, Kentucky reached substantial completion in March 2023.

Financing activities used net cash totaling $109.2 million and $106.9 million in 2024 and 2023, respectively.

The vast majority of the cash used in financing activities is attributed to the payment of dividends, and the 2023 increase in cash used in financing activities primarily reflects higher levels of dividend payments, tax withholdings for stock-based compensation and share repurchases.

The vast majority of the cash used in financing activities is attributed to the payment of dividends, and the 2024 increase in cash used in financing activities primarily reflects higher levels of dividend payments, as partially offset by lower levels of share repurchases and tax withholdings for stock-based compensation.

The regular dividend payout rate for 2024 was $3.55 per share, as compared to $3.35 per share in 2023.

This past fiscal year marked the 60 th consecutive year of increased regular cash dividends.

This past fiscal year marked the 61 st consecutive year of increased regular cash dividends.

Future levels of share repurchases and declared dividends are subject to the periodic review of our Board of Directors and are generally determined after an assessment is made of various factors, such as anticipated earnings levels, cash flow requirements and general business conditions.

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Although typically less notable, we are also exposed to the unfavorable effects of general inflation beyond material and freight costs, especially in the areas of labor rates, including annual wage adjustments and benefit costs.

Over time, we attempt to minimize the exposure to such cost increases through ongoing improvements and greater efficiencies throughout our manufacturing operations, including benefits gained through our lean six sigma program and strategic investments in plant equipment.

Over time, we attempt to minimize the exposure to such cost increases through ongoing improvements and greater efficiencies throughout our manufacturing operations, including benefits gained through our cost savings programs and strategic investments in plant equipment.

With regard to the impact of commodity and freight costs on Foodservice segment operating income, most of our supply contracts with national chain restaurant accounts incorporate pricing adjustments to account for changes in ingredient and freight costs.

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These allowances can fluctuate based on the level of sales and promotional programs as well as the timing of deductions.

Goodwill and Other Intangible Assets

Goodwill is not amortized.

It is evaluated annually at April 30 by applying impairment testing procedures.

Other intangible assets are amortized on a straight-line basis over their estimated useful lives to Selling, General and Administrative Expenses.

We evaluate the future economic benefit of the recorded goodwill and other intangible assets when events or circumstances indicate potential recoverability concerns.

We evaluate the future economic benefit of the recorded goodwill when events or circumstances indicate potential recoverability concerns.

Carrying amounts are adjusted appropriately when determined to have been impaired.

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• efficiencies in plant operations and our overall supply chain network;

• the reaction of customers or consumers to pricing actions we take to offset inflationary costs;

• price and product competition;

• adequate supply of labor for our manufacturing facilities;

• changes in demand for our products, which may result from changes in consumer behavior or loss of brand reputation or customer goodwill;

• the impact of customer store brands on our branded retail volumes;

• inflationary pressures resulting in higher input costs;

• adequate supply of labor for our manufacturing facilities;

• stability of labor relations;

• adverse changes in freight, energy or other costs of producing, distributing or transporting our products;

• the reaction of customers or consumers to pricing actions we take to offset inflationary costs;

• inflationary pressures resulting in higher input costs;

• fluctuations in the cost and availability of ingredients and packaging;

• capacity constraints that may affect our ability to meet demand or may increase our costs;

• dependence on contract manufacturers, distributors and freight transporters, including their operational capacity and financial strength in continuing to support our business;

• stability of labor relations;

• the impact of any regulatory matters affecting our food business, including any additional requirements imposed by the FDA or any state or local government;

• dependence on key personnel and changes in key personnel;

• cyber-security incidents, information technology disruptions, and data breaches;

• capacity constraints that may affect our ability to meet demand or may increase our costs;

• geopolitical events, such as Russia’s invasion of Ukraine, that could create unforeseen business disruptions and impact the cost or availability of raw materials and energy;

• the potential for loss of larger programs or key customer relationships;

• failure to maintain or renew license agreements;

• geopolitical events that could create unforeseen business disruptions and impact the cost or availability of raw materials and energy;

• significant shifts in consumer demand and disruptions to our employees, communities, customers, supply chains, production planning, operations, and production processes resulting from the impacts of epidemics, pandemics or similar widespread public health concerns and disease outbreaks;

• changes in demand for our products, which may result from loss of brand reputation or customer goodwill;

• the possible occurrence of product recalls or other defective or mislabeled product costs;

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• the lack of market acceptance of new products;

• the extent to which business acquisitions are completed and acceptably integrated;

• the ability to successfully grow acquired businesses;

• the extent to which good-fitting business acquisitions are identified, acceptably integrated, and achieve operational and financial performance objectives;

• the effect of consolidation of customers within key market channels;

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• changes in estimates in critical accounting judgments;

• the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand;

• the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs;

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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