What changed in this filing

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Item 1. Financial Statements

2020-11-24 compared with 2020-08-25 · 165 added, 98 removed, 523 unchanged (33% of the section changed)

2 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

Dollars in millions, except per share data 2020 2019 2020 2019

21 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

Dollars in millions 2020 2019 2020 2019

10 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in millions July 31, 2020 April 30, 2020

Dollars in millions October 31, 2020 April 30, 2020

Current Assets

47 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

Three Months Ended July 31,

Six Months Ended October 31,

Dollars in millions 2020 2019

4 unchanged sentences

Amortization 119.1 117.6

Pension settlement loss (gain) 30.6 —

Share-based compensation expense 13.4 13.7

29 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY

Three months ended July 31, 2020

Six Months Ended October 31, 2020

Dollars in millions Common

7 unchanged sentences

Cash dividends declared, $ 0.90 per common share

( 102.4 ) ( 102.4 )

Other ( 0.5 ) 0.5 — —

Balance at July 31, 2020 114,087,442 $ 28.5 $ 5,795.3 $ 2,882.3 $ ( 360.9 ) $ 8,345.2

Three months ended July 31, 2019

Net income 230.8 230.8

Other comprehensive income (loss) 33.4 33.4

Comprehensive income 264.2

Purchase of treasury shares ( 14,769 ) — ( 1.7 ) 0.1 ( 1.6 )

Stock plans 24,588 — 9.5 9.5

Cash dividends declared, $ 0.90 per common share

( 102.3 ) ( 102.3 )

Balance at October 31, 2020 114,097,261 $ 28.5 $ 5,803.1 $ 3,010.9 $ ( 327.5 ) $ 8,515.0

Six Months Ended October 31, 2019

Dollars in millions Common

7 unchanged sentences

Cash dividends declared, $ 0.88 per common share

( 100.1 ) ( 100.1 )

Balance at July 31, 2019 114,049,792 $ 29.0 $ 5,773.5 $ 2,421.9 $ ( 216.7 ) $ 8,007.7

Net income 211.2 211.2

Other comprehensive income (loss) ( 31.7 ) ( 31.7 )

Comprehensive income 179.5

Purchase of treasury shares ( 4,930 ) — ( 0.6 ) — ( 0.6 )

Stock plans 14,882 — 8.8 8.8

Cash dividends declared, $ 0.88 per common share

( 100.1 ) ( 100.1 )

Balance at October 31, 2019 114,059,744 $ 29.0 $ 5,781.7 $ 2,533.0 $ ( 248.4 ) $ 8,095.3

See notes to unaudited condensed consolidated financial statements.

9 unchanged sentences

In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included.

Operating results for the three months ended July 31, 2020, are not necessarily indicative of the results that may be expected for the year ending April 30, 2021.

Operating results for the six months ended October 31, 2020, are not necessarily indicative of the results that may be expected for the year ending April 30, 2021.

For further information, reference is made to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended April 30, 2020.

Recently Issued Accounting Standards

In August 2020, the U.S.

Securities and Exchange Commission (the “SEC”) adopted the final rule under SEC Release No.

33-10825, Modernization of Regulation S-K Items 101, 103, and 105 , to modernize certain disclosure requirements for the description of business, legal proceedings, and risk factors.

These updates are part of the SEC’s broader disclosure effectiveness initiative, and reflect a principles-based, registrant-specific approach to disclosure, intended to improve the content and simplify compliance for registrants.

The amendments were effective on November 9, 2020.

While there was no impact to our interim disclosures, our annual disclosures will be updated accordingly to comply with these amendments.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes , which removes certain exceptions for investments, intraperiod allocations, and interim calculations, and adds guidance to reduce complexity in accounting for income taxes.

13 unchanged sentences

These integration and restructuring costs are not allocated to segment profit and are reported in other special project costs in the Condensed Statement of Consolidated Income.

The obligation related to employee separation costs is included in other current liabilities in the Condensed Consolidated Balance Sheets.

The obligation related to employee separation costs is included in other current liabilities in the Condensed Consolidated Balance Sheet.

Integration Costs:

As of April 30, 2020, integration of the Ainsworth Pet Nutrition, LLC (“Ainsworth”) acquisition was considered complete.

We incurred total integration costs of $ 48.6 related to the acquisition, of which $ 4.7 were noncash charges.

Noncash charges primarily consisted of accelerated depreciation.

While we did no t incur any costs during the three months ended July 31, 2020, we incurred integration costs of $ 3.3 during the three months ended July 31, 2019, primarily consisting of other transition and termination costs.

The obligation related to severance costs and retention bonuses was $ 0.4 and $ 0.5 at July 31, 2020, and April 30, 2020, respectively.

As of April 30, 2020, the integration of the Ainsworth Pet Nutrition, LLC (“Ainsworth”) acquisition was considered complete.

We incurred total integration costs of $ 48.6 related to the acquisition, of which $ 4.7 were noncash charges, primarily consisting of accelerated depreciation.

While we did no t incur any costs during 2021, we incurred integration costs of $ 3.3 and $ 6.6 during the three and six months ended October 31, 2019, respectively, primarily consisting of other

transition and termination costs.

The obligation related to severance costs and retention bonuses was fully satisfied as of October 31, 2020, and was $ 0.5 at April 30, 2020.

On October 26, 2020, we announced a definitive agreement to sell our Crisco ® oils and shortening business to B&G Foods, Inc.

(“B&G Foods”).

We expect the transaction to close during the third quarter of 2021, subject to customary closing conditions.

The transaction includes oils and shortening products sold under the Crisco brand, certain trademarks and licensing agreements, dedicated manufacturing and warehouse facilities located in Cincinnati, Ohio, and approximately 160 employees who support the Crisco business.

The business generated net sales of approximately $ 270.0 in 2020.

The transaction also includes our oils and shortening business outside the U.S., which is primarily in Canada.

We expect to receive approximately $ 550.0 in proceeds from the divestiture, which is subject to a final working capital adjustment, and anticipate recognizing a gain upon completion of the transaction.

The pre-tax gain is estimated to be approximately $ 115.0 based on the expected proceeds, including the assumed working capital and the carrying value of the net assets, less estimated costs to sell, at the closing date.

The operating results for this business were primarily included in the U.S.

Retail Consumer Foods segment for the six months ended October 31, 2020.

Additionally, the disposal group met the criteria to be classified as held for sale as of October 31, 2020, and was measured at the lower of carrying amount or fair value less costs to sell.

The assets and liabilities held for sale at October 31, 2020, are as follows:

October 31, 2020

Assets held for sale:

Inventories $ 37.9

Property, plant, and equipment 36.9

Operating lease right-of-use assets 1.6

Goodwill 227.6

Other intangible assets – net 117.5

Other noncurrent assets 0.1

Total assets held for sale $ 421.6

Liabilities held for sale:

Current operating lease liabilities $ 0.6

Noncurrent operating lease liabilities 1.0

Total liabilities held for sale 1.6

Net assets held for sale $ 420.0

Reportable Segments

6 unchanged sentences

Effective during the first quarter of 2021, the presentation of International and Away From Home represents a combination of all other operating segments that are not individually reportable.

As a result of recent leadership changes, these operating segments are now being managed and reported separately, and no longer represent a reportable segment for segment reporting purposes.

As a result of leadership changes, these operating segments are being managed and reported separately and no longer represent a reportable segment for segment reporting purposes.

Prior year segment results have not been modified, as the combination of these operating segments represents the previously reported International and Away From Home reportable segment.

Retail Pet Foods segment primarily includes the domestic sales of Rachael Ray ® Nutrish ® , Meow Mix ® , Milk-Bone ® , 9Lives ® , Kibbles ’n Bits ® , Natural Balance ® , Pup-Peroni ® , and Nature’s Recipe ® branded products;

Retail Coffee segment primarily includes the domestic sales of Folgers ® , Dunkin’ Donuts ® , and Café Bustelo ® branded coffee;

Retail Coffee segment primarily includes the domestic sales of Folgers ® , Dunkin’ TM , and Café Bustelo ® branded coffee;

Retail Consumer Foods segment primarily includes the domestic sales of Smucker’s ® , Jif ® , and Crisco branded products.

International and Away From Home includes the sale of products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., health care operators, restaurants, lodging, hospitality, offices, K-12, colleges and universities, and convenience stores).

International and Away From Home includes the sale of products distributed domestically and in foreign countries through retail channels

and foodservice distributors and operators (e.g., health care operators, restaurants, lodging, hospitality, offices, K-12, colleges and universities, and convenience stores).

Segment profit represents net sales, less direct and allocable operating expenses, and is consistent with the way in which we manage our segments.

However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment profit set forth below, as segment profit excludes certain expenses such as corporate administrative expenses, unallocated gains and losses on commodity and foreign currency exchange derivative activities, as well as amortization expense and impairment charges related to intangible assets.

However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment profit set forth below, as segment profit excludes certain expenses such as corporate administrative expenses, gains and losses related to the sale of a business, unallocated gains and losses on commodity and foreign currency exchange derivative activities, as well as amortization expense and impairment charges related to intangible assets.

Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold.

1 unchanged sentence

We would expect that any gain or loss in the estimated fair value of the derivatives would generally be offset by a change in the estimated fair value of the underlying exposures.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Retail Pet Foods $ 708.7 $ 709.9 $ 1,401.3 $ 1,379.8

13 unchanged sentences

Other special project costs (A)

— ( 3.3 ) — ( 6.6 )

Corporate administrative expenses ( 93.0 ) ( 70.3 ) ( 158.8 ) ( 141.9 )

5 unchanged sentences

The following table presents certain geographical information.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

United States $ 1,882.2 $ 1,815.9 $ 3,711.9 $ 3,473.5

5 unchanged sentences

The following table presents product category information.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019 Primary Reportable Segment (A)

9 unchanged sentences

Retail Consumer Foods

Fruit spreads 104.3 89.2 U.S.

Retail Consumer Foods

Frozen handheld 106.3 93.4 201.8 164.9 U.S.

Retail Consumer Foods

Fruit spreads 89.2 86.5 193.5 175.7 U.S.

Retail Consumer Foods

Shortening and oils 82.7 71.8 160.0 123.3 U.S.

10 unchanged sentences

The following table sets forth the computation of net income per common share and net income per common share – assuming dilution under the two-class method.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Net income $ 230.8 $ 211.2 $ 467.8 $ 365.8

8 unchanged sentences

The following table summarizes the components of our long-term debt.

July 31, 2020 April 30, 2020

October 31, 2020 April 30, 2020

Outstanding Carrying

1 unchanged sentence

3.50 % Senior Notes due October 15, 2021

$ 750.0 $ 757.4 $ 750.0 $ 761.1

3.00 % Senior Notes due March 15, 2022

400.0 399.1 400.0 398.7

3.50 % Senior Notes due March 15, 2025

1,000.0 996.4 1,000.0 996.0

3.38 % Senior Notes due December 15, 2027

500.0 496.9 500.0 496.7

2.38 % Senior Notes due March 15, 2030

500.0 495.5 500.0 495.2

4.25 % Senior Notes due March 15, 2035

650.0 644.1 650.0 643.9

4.38 % Senior Notes due March 15, 2045

600.0 586.8 600.0 586.5

3.55 % Senior Notes due March 15, 2050

300.0 295.7 300.0 295.7

Term Loan Credit Agreement due May 14, 2021 200.0 199.9 700.0 699.5

6 unchanged sentences

Borrowings under the Term Loan bear interest on the prevailing U.S.

Prime Rate or London Interbank Offered Rate (“LIBOR”), based on our election, and is payable either on a quarterly basis or at the end of the borrowing term.

Prime Rate or London Interbank Offered Rate (“LIBOR”), based on our election, and are payable either on a quarterly basis or at the end of the borrowing term.

The Term Loan does not require scheduled amortization payments.

Voluntary prepayments are permitted without premium or penalty.

As of July 31, 2020, we have prepaid $ 1.1 billion on the Term Loan to date, including $ 300.0 in the first quarter of 2021.

The interest rate on the Term Loan at July 31, 2020, was 0.97 percent.

As of October 31, 2020, we have prepaid $ 1.3 billion on the Term Loan to date, including $ 500.0 during the first half of 2021, of which $ 200.0 was paid during the second quarter.

The interest rate on the Term Loan at October 31, 2020, was 0.95 percent .

We have available a $ 1.8 billion unsecured revolving credit facility with a group of 11 banks that matures in September 2022.

2 unchanged sentences

Interest is payable either on a quarterly basis or at the end of the borrowing term.

We did no t have a balance outstanding under the revolving credit facility at July 31, 2020, or April 30, 2020.

We did no t have a balance outstanding under the revolving credit facility at October 31, 2020, or April 30, 2020.

We participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $ 1.8 billion at any time.

1 unchanged sentence

Commercial paper will be used as a continuing source of short-term financing for general corporate purposes.

As of July 31, 2020, and April 30, 2020, we had $ 296.0 and $ 248.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 0.25 percent and 0.40 percent, respectively.

Interest paid totaled $ 10.2 and $ 21.6 for the three months ended July 31, 2020 and 2019, respectively.

This differs from interest expense due to the timing of interest payments, amortization of debt issuance costs and discounts, effect of interest rate contracts, capitalized interest, and payment of other debt fees.

As of October 31, 2020, and April 30, 2020, we had $ 280.0 and $ 248.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 0.17 percent and 0.40 percent, respectively.

Interest paid totaled $ 76.2 and $ 78.4 for the three months ended October 31, 2020 and 2019, respectively, and $ 86.4 and $ 100.0 , for the six months ended October 31, 2020 and 2019, respectively.

This differs from interest expense due to the amortization of debt issuance costs and discounts, effect of interest rate contracts, capitalized interest, payment of other debt fees, and the timing of interest payments.

Our debt instruments contain certain financial covenant restrictions, including a leverage ratio and an interest coverage ratio.

2 unchanged sentences

The components of our net periodic benefit cost for defined benefit pension and other postretirement benefit plans are shown below.

Three Months Ended July 31,

Three Months Ended October 31,

Defined Benefit Pension Plans Other Postretirement Benefits

5 unchanged sentences

Amortization of prior service cost (credit) 0.2 0.2 ( 0.2 ) ( 0.3 )

Settlement loss (gain) 30.6 — — —

Net periodic benefit cost $ 32.9 $ 1.8 $ 0.7 $ 0.7

Six Months Ended October 31,

Defined Benefit Pension Plans Other Postretirement Benefits

2020 2019 2020 2019

Service cost $ 0.9 $ 0.8 $ 0.9 $ 0.9

Interest cost 7.8 10.5 0.9 1.2

Expected return on plan assets ( 10.1 ) ( 12.1 ) — —

Amortization of net actuarial loss (gain) 5.8 4.0 — ( 0.1 )

Amortization of prior service cost (credit) 0.4 0.4 ( 0.5 ) ( 0.6 )

Settlement loss (gain) 30.6 — — —

Net periodic benefit cost $ 35.4 $ 3.6 $ 1.3 $ 1.4

During the second quarter of 2021, we transferred $ 82.6 in obligations of our Canadian defined benefit pension plan to an insurance company through the purchase of an irrevocable group annuity contract (referred to as a buy-out contract).

The group annuity contract was purchased using assets from the pension trust.

As a result of this transaction, during the second quarter of 2021, we recognized a noncash pre-tax settlement charge of $ 27.9 to accelerate the unrecognized losses within accumulated other comprehensive income (loss) that would have otherwise been recognized in subsequent periods.

This settlement charge was included within other income (expense) – net in the Condensed Statement of Consolidated Income.

Derivative Financial Instruments

3 unchanged sentences

Commodity Price Management:

We enter into commodity derivatives to manage price volatility and reduce the variability of future cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, corn, edible oils, soybean meal, and wheat.

We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas.

6 unchanged sentences

We utilize foreign currency derivatives to manage the effect of foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods.

The contracts generally have maturities of less than one year .

contracts generally have maturities of less than one year .

We do not qualify instruments used to manage foreign currency exchange exposures for hedge accounting treatment.

10 unchanged sentences

As a result of the early termination, we received $ 58.1 in cash, which included $ 4.6 of accrued and prepaid interest.

The gain on termination was recorded as an increase in the long-

term debt balance and is being recognized over the remaining life of the underlying debt as a reduction to interest expense.

To date, we have recognized $ 43.3 of the gain, of which $ 2.2 and $ 2.0 was recognized during the three months ended July 31, 2020 and 2019, respectively.

The gain on termination was recorded as an increase in the long-term debt balance and is being recognized over the remaining life of the underlying debt as a reduction to interest expense.

To date, we have recognized $ 45.3 of the gain, of which $ 2.0 and $ 4.2 was recognized during the three and six months ended October 31, 2020, respectively, and $ 2.1 and $ 4.1 was recognized during the three and six months ended October 31, 2019, respectively.

The remaining gain will be recognized as follows:

1 unchanged sentence

The following tables set forth the gross fair value amounts of derivative instruments recognized in the Condensed Consolidated Balance Sheets.

July 31, 2020

October 31, 2020

Liabilities Other

11 unchanged sentences

We are required to maintain cash margin accounts in connection with funding the settlement of our open positions.

At July 31, 2020, and April 30, 2020, we maintained cash margin account balances of $ 15.6 and $ 43.2 , respectively, included in other current assets in the Condensed Consolidated Balance Sheets.

At October 31, 2020, and April 30, 2020, we maintained cash margin account balances of $ 15.3 and $ 43.2 , respectively, included in other current assets in the Condensed Consolidated Balance Sheets.

The change in the cash margin account balances is included in other – net, investing activities in the Condensed Statements of Consolidated Cash Flows.

In the event of default and immediate net settlement of all of our open positions with individual counterparties, all of our derivative liabilities would be fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our individual counterparties.

Interest expense – net, as presented in the Condensed Statements of Consolidated Income was $ 46.1 and $ 49.4 for the three months ended July 31, 2020 and 2019, respectively.

Interest expense – net, as presented in the Condensed Statements of Consolidated Income was $ 45.1 and $ 49.1 for the three months ended October 31, 2020 and 2019, respectively, and was $ 91.2 and $ 98.5 for the six months ended October 31, 2020

and 2019, respectively.

The following table presents information on the pre-tax gains and losses recognized on terminated interest rate contracts that were designated as cash flow hedges.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Gains (losses) recognized in other comprehensive income (loss) $ — $ ( 44.1 ) $ — $ ( 97.1 )

3 unchanged sentences

Change in accumulated other comprehensive income (loss) $ 3.5 $ ( 44.0 ) $ 6.9 $ ( 96.9 )

Included as a component of accumulated other comprehensive income (loss) at July 31, 2020, and April 30, 2020, were deferred net pre-tax losses of $ 237.7 and $ 241.1 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) at July 31, 2020, and April 30, 2020, was $ 54.7 and $ 55.5 , respectively.

Included as a component of accumulated other comprehensive income (loss) at October 31, 2020, and April 30, 2020, were deferred net pre-tax losses of $ 234.2 and $ 241.1 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) at October 31, 2020, and April 30, 2020, was $ 53.9 and $ 55.5 , respectively.

Approximately $ 13.9 of the net pre-tax loss will be recognized over the next 12 months related to the terminated interest rate contracts.

The following table presents the net gains and losses recognized in cost of products sold on derivatives not designated as hedging instruments.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Gains (losses) on commodity contracts $ 13.4 $ ( 10.1 ) $ 24.8 $ 2.5

4 unchanged sentences

The following table presents the activity in unallocated derivative gains and losses.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Net gains (losses) on mark-to-market valuation of unallocated derivative positions $ 13.0 $ ( 10.2 ) $ 22.1 $ 1.4

1 unchanged sentence

Unallocated derivative gains (losses) $ 31.5 $ 0.9 $ 47.7 $ 29.9

The net cumulative unallocated derivative losses were $ 16.7 and $ 32.9 at July 31, 2020, and April 30, 2020, respectively.

As of October 31, 2020, the net cumulative unallocated derivative gains were $ 14.8 , and at April 30, 2020, the net cumulative unallocated derivative losses were $ 32.9 .

The following table presents the gross notional value of outstanding derivative contracts.

July 31, 2020 April 30, 2020

October 31, 2020 April 30, 2020

Commodity contracts $ 662.1 $ 890.1

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The following table provides information on the carrying amounts and fair values of our financial instruments.

July 31, 2020 April 30, 2020

October 31, 2020 April 30, 2020

Amount Fair Value Carrying

12 unchanged sentences

(Level 2) Significant

(Level 3) Fair Value at July 31, 2020

(Level 3) Fair Value at October 31, 2020

Marketable securities and other investments:

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Based on the short-term nature of these money market funds, carrying value approximates fair value.

As of July 31, 2020, our municipal obligations are scheduled to mature as follows:

As of October 31, 2020, our municipal obligations are scheduled to mature as follows:

$ 1.1 in 2021, $ 1.5 in 2022, $ 3.5 in 2024, and the remaining $ 20.8 in 2025 and beyond.

23 unchanged sentences

The following table sets forth the right-of-use assets and lease liabilities recognized in the Condensed Consolidated Balance Sheets.

July 31, 2020 April 30, 2020

October 31, 2020 April 30, 2020

Operating lease right-of-use assets $ 129.8 $ 148.4

14 unchanged sentences

The following table summarizes the components of lease expense.

Three Months Ended July 31,

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Operating lease cost $ 11.1 $ 12.9 $ 22.4 $ 25.3

7 unchanged sentences

The following table sets forth cash flow and noncash information related to leases.

Three Months Ended July 31,

Six Months Ended October 31,

Cash paid for amounts included in the measurement of lease liabilities:

7 unchanged sentences

The following table summarizes the maturity of our lease liabilities by fiscal year.

July 31, 2020

October 31, 2020

Operating Leases Finance Leases

9 unchanged sentences

The following table sets forth the weighted average remaining lease term and discount rate.

July 31, 2020 April 30, 2020

October 31, 2020 April 30, 2020

Weighted average remaining lease term (in years):

4 unchanged sentences

Finance leases

The effective tax rates for the three months ended July 31, 2020 and 2019, were 24.4 and 25.2 percent, respectively.

During the three months ended July 31, 2020 and 2019, the effective tax rates varied from the U.S.

The effective tax rates for the three months ended October 31, 2020 and 2019, were 24.0 and 24.3 percent, respectively, and for the six months ended October 31, 2020 and 2019, were 24.2 and 24.7 percent, respectively.

During the three and six months ended October 31, 2020 and 2019, the effective tax rates varied from the U.S.

statutory income tax rate of 21.0 percent primarily due to the impact of state income taxes.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an additional $ 2.6 , primarily as a result of expiring statute of limitations periods.

As of July 31, 2020, the undistributed earnings of our foreign subsidiaries remain permanently reinvested.

During 2020, the Coronavirus Aid, Relief, and Economic Security Act was enacted, which included rollbacks of certain provision of the U.S.

As of October 31, 2020, the undistributed earnings of our foreign subsidiaries remain permanently reinvested.

During 2020, the Coronavirus Aid, Relief, and Economic Security Act was enacted, which included rollbacks of certain provisions of the U.S.

Tax Cuts and Jobs Act (the “Tax Act”).

14 unchanged sentences

Income tax benefit (expense) — ( 1.6 ) ( 10.1 ) ( 0.2 ) ( 11.9 )

Balance at July 31, 2020 $ ( 37.6 ) $ ( 183.0 ) $ ( 145.0 ) $ 4.7 $ ( 360.9 )

Balance at October 31, 2020 $ ( 35.3 ) $ ( 180.3 ) $ ( 116.3 ) $ 4.4 $ ( 327.5 )

Adjustment Net Gains (Losses)

10 unchanged sentences

Income tax benefit (expense) — 22.3 ( 0.7 ) ( 0.1 ) 21.5

Balance at July 31, 2019 $ ( 31.0 ) $ ( 81.2 ) $ ( 108.9 ) $ 4.4 $ ( 216.7 )

Balance at October 31, 2019 $ ( 30.4 ) $ ( 115.0 ) $ ( 107.5 ) $ 4.5 $ ( 248.4 )

(A) The reclassification from accumulated other comprehensive income (loss) to interest expense was related to terminated interest rate contracts.

The current period charge in 2020 relates to losses on the interest rate contracts entered into in November 2018 and June 2018 that were terminated in 2020.

The current period charge in 2020 is related to losses on the interest rate contracts entered into in November 2018 and June 2018 that were terminated in 2020.

For additional information, see Note 9:

1 unchanged sentence

(B) Amortization of net losses and prior service costs was reclassified from accumulated other comprehensive income (loss) to other income (expense) – net.

The current period charge in 2021 primarily includes the impact of the nonrecurring settlement charge related to the purchase of a group annuity contract to transfer the obligations of our Canadian defined benefit pension plan to an insurance company.

For additional information, see Note 8:

Pensions and Other Postretirement Benefits.

Contingencies

We, like other food manufacturers, are from time to time subject to various administrative, regulatory, and other legal proceedings arising in the ordinary course of business.

We are currently a defendant in a variety of such legal proceedings, including certain lawsuits related to the alleged price-fixing of shelf stable tuna products prior to 2011 by a business previously owned by, but divested prior to our acquisition of, Big Heart Pet Brands, the significant majority of which were settled and paid during the second half of 2019.

While we cannot predict with certainty the ultimate results of these proceedings or potential settlements associated with these or other matters, we have accrued losses for certain contingent liabilities that we have determined are probable and reasonably estimable at July 31, 2020.

Based on the information known to date, with the exception of the matter discussed below, we do not believe the final outcome of these proceedings would have a material adverse effect on our financial position, results of operations, or cash flows.

On May 9, 2011, an organization named Council for Education and Research on Toxics (“Plaintiff” or “CERT”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against us and additional defendants who manufacture, package, distribute, or sell packaged coffee.

The lawsuit is CERT v.

Brad Barry LLC, et al., and was a tag along to a 2010 lawsuit against companies selling “ready-to-drink” coffee based on the same claims.

Both cases have since been consolidated and now include nearly eighty defendants, which constitute the great majority of the coffee industry in California.

The Plaintiff alleges that we and the other defendants failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”).

The Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of $2,500 per day per violation of Proposition 65.

The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

As part of a joint defense group organized to defend against the lawsuit, we dispute the claims of the Plaintiff.

Acrylamide is not added to coffee but is inherently present in all coffee in small amounts (measured in parts per billion) as a byproduct of the coffee bean roasting process.

We have asserted multiple affirmative defenses.

Trial of the first phase of the case commenced on

September 8, 2014, and was limited to three affirmative defenses shared by all defendants.

On September 1, 2015, the trial court issued a final ruling adverse to the defendants on all Phase 1 defenses.

Trial of the second phase of the case commenced in the fall of calendar year 2017.

On March 28, 2018, the trial court issued a proposed ruling adverse to the defendants on the Phase 2 defense, our last remaining defense to liability.

The trial court finalized and affirmed its Phase 2 ruling on May 7, 2018, and therefore, the third phase of the trial regarding remedies issues was scheduled to commence on October 15, 2018.

The trial did not proceed on the scheduled date as further described below.

On June 15, 2018, the state agency responsible for administering the Proposition 65 program, the California Office of Environmental Health Hazard Assessment (“OEHHA”), issued a proposed regulation clarifying that cancer warnings are not required for coffee under Proposition 65.

The California Court of Appeals granted the defendants’ requests to stay the trial on remedies until a final determination was made on OEHHA’s proposed regulation.

During the interim period, the California Office of Administrative Law approved the proposed regulation on June 3, 2019, and the regulation went into effect on October 1, 2019.

In response to CERT’s objection, the defendants amended their answer to raise the regulation as a complete defense to the claims.

CERT unsuccessfully challenged the defendants’ right to assert the regulation as an affirmative defense but continues to challenge the validity of the regulation.

During the third quarter of 2020, CERT filed several motions seeking judgment in its favor as a matter of law, and the defendants also filed their own motion.

On July 15, 2020, and August 10, 2020, seven of CERT’s motions were denied, and the remainder of the pending motions, including the defendants motion for summary judgement, were rescheduled for hearing on August 25, 2020, due to COVID-19.

At this stage of the proceedings, prior to and without knowing whether the regulation will stand as a defense or the trial on remedies issues will move forward in light of the challenge, we are unable to predict or reasonably estimate the potential loss or effect on our operations.

Accordingly, no loss contingency has been recorded for this matter as of July 31, 2020, as the likelihood of loss is not considered probable or estimable.

The trial court has discretion to impose zero penalties against us or to impose significant statutory penalties if the case proceeds.

Significant labeling or warning requirements that could potentially be imposed by the trial court may increase our costs and adversely affect sales of our coffee products, as well as involve substantial expense and operational disruption, which could have a material adverse impact on our financial position, results of operations, or cash flows.

Furthermore, a future appellate court decision could reverse the earlier trial court rulings should the regulation be held invalid.

The outcome and the financial impact of settlement, the trial, or the appellate court rulings of the case, if any, cannot be predicted at this time.

In addition to the legal proceedings discussed above, we are currently a defendant in Council for Education and Research on Toxics (the “Plaintiff” or “CERT”) v.

Brad Barry LLC, et al., which alleges that we, in addition to nearly eighty other defendants (collectively the “Defendants”) who manufacture, package, distribute, or sell packaged coffee, failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”).

The Plaintiff sought equitable relief, including warnings to consumers, as well as civil penalties in the amount of the statutory maximum of $2,500 per day per violation of Proposition 65.

The Plaintiff asserted that every consumed cup of coffee, absent a compliant warning, was equivalent to a violation under Proposition 65.

In June 2019, the state agency responsible for administering the Proposition 65 program, the California Office of Environmental Health Hazard Assessment (“OEHHA”), approved a regulation clarifying that cancer warnings are not required for coffee under Proposition 65, and in August 2020, the Court granted the Defendants’ motion for summary judgment based on the regulation.

The Plaintiff submitted its formal notice to appeal on November 20, 2020.

The outcome and the financial impact of the case, if any, cannot be predicted at this time.

Accordingly, no loss contingency has been recorded for this matter as of October 31, 2020, and the likelihood of loss is not

considered probable or estimable.

However, if we are required to pay significant statutory penalties or to add warning labels to any of our products or place warnings in certain locations where our products are sold as a result of Proposition 65, our business and financial results could be adversely impacted, and sales of those products could suffer not only in these locations but elsewhere.

Common Shares

The following table sets forth common share information.

July 31, 2020 April 30, 2020

October 31, 2020 April 30, 2020

Common shares authorized 300.0 300.0

2 unchanged sentences

Repurchase Program:

During the three months ended July 31, 2020 and 2019, we did no t repurchase any common shares under a repurchase plan authorized by the Board of Directors (the “Board”).

Share repurchases during the three months ended July 31, 2020 and 2019, consisted of shares repurchased from stock plan recipients in lieu of cash payments.

At July 31, 2020, approximately 3.6 million common shares remain available for repurchase pursuant to the Board’s authorizations.

During the six months ended October 31, 2020 and 2019, we did no t repurchase any common shares under a repurchase plan authorized by the Board of Directors (the “Board”).

Share repurchases during the six months ended October 31, 2020 and 2019, consisted of shares repurchased from stock plan recipients in lieu of cash payments.

On October 22, 2020, the Board authorized the repurchase of up to 5.0 million common shares, in addition to the 3.6 million common shares that remain available for repurchase pursuant to prior authorizations of the Board.

Therefore, at October 31, 2020, approximately 8.6 million common shares remain available for repurchase pursuant to the Board’s authorizations.

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-Q

Item 1. Financial Statements