Item 1. Financial Statements
Item 1. Financial Statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended October 31, Six Months Ended October 31,
Dollars in millions, except per share data 2020 2019 2020 2019
Net sales $ 2,034.0 $ 1,957.8 $ 4,005.8 $ 3,736.7
Cost of products sold 1,215.8 1,203.8 2,412.2 2,283.1
Gross Profit 818.2 754.0 1,593.6 1,453.6
Selling, distribution, and administrative expenses 382.8 361.5 740.3 742.0
Amortization 59.5 58.8 119.1 117.6
Other special project costs (A)
— 3.3 — 6.6
Other operating expense (income) – net ( 4.9 ) 0.6 ( 7.7 ) —
Operating Income 380.8 329.8 741.9 587.4
Interest expense – net ( 45.1 ) ( 49.1 ) ( 91.2 ) ( 98.5 )
Other income (expense) – net ( 32.2 ) ( 1.6 ) ( 33.6 ) ( 3.1 )
Income Before Income Taxes 303.5 279.1 617.1 485.8
Income tax expense 72.7 67.9 149.3 120.0
Net Income $ 230.8 $ 211.2 $ 467.8 $ 365.8
Earnings per common share:
Net Income $ 2.02 $ 1.85 $ 4.10 $ 3.21
Net Income – Assuming Dilution $ 2.02 $ 1.85 $ 4.10 $ 3.21
(A) Other special project costs includes integration and restructuring costs. For more information, see Note 3: Integration and Restructuring Costs.
See notes to unaudited condensed consolidated financial statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended October 31, Six Months Ended October 31,
Dollars in millions 2020 2019 2020 2019
Net income $ 230.8 $ 211.2 $ 467.8 $ 365.8
Other comprehensive income (loss):
Foreign currency translation adjustments 2.3 0.6 15.2 5.1
Cash flow hedging derivative activity, net of tax 2.7 ( 33.8 ) 5.3 ( 74.6 )
Pension and other postretirement benefit plans activity, net of tax 28.7 1.4 30.4 2.5
Available-for-sale securities activity, net of tax ( 0.3 ) 0.1 0.6 0.4
Total Other Comprehensive Income (Loss) 33.4 ( 31.7 ) 51.5 ( 66.6 )
Comprehensive Income $ 264.2 $ 179.5 $ 519.3 $ 299.2
See notes to unaudited condensed consolidated financial statements.
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THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Dollars in millions October 31, 2020 April 30, 2020
ASSETS
Current Assets
Cash and cash equivalents $ 405.6 $ 391.1
Trade receivables – net 577.0 551.4
Inventories:
Finished products 639.7 563.5
Raw materials 354.1 331.8
Total Inventory 993.8 895.3
Other current assets 90.7 134.9
Total Current Assets 2,067.1 1,972.7
Property, Plant, and Equipment
Land and land improvements 131.7 129.5
Buildings and fixtures 992.6 977.9
Machinery and equipment 2,492.1 2,398.3
Construction in progress 205.7 232.6
Gross Property, Plant, and Equipment 3,822.1 3,738.3
Accumulated depreciation ( 1,865.8 ) ( 1,768.9 )
Total Property, Plant, and Equipment 1,956.3 1,969.4
Other Noncurrent Assets
Operating lease right-of-use assets 129.8 148.4
Goodwill 6,311.8 6,304.5
Other intangible assets – net 6,312.8 6,429.0
Other noncurrent assets 151.9 146.4
Total Other Noncurrent Assets 12,906.3 13,028.3
Total Assets $ 16,929.7 $ 16,970.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 857.2 $ 782.0
Accrued trade marketing and merchandising 258.6 167.5
Current portion of long-term debt 957.3 —
Short-term borrowings 280.0 248.0
Current operating lease liabilities 35.5 36.5
Other current liabilities 304.2 353.1
Total Current Liabilities 2,692.8 1,587.1
Noncurrent Liabilities
Long-term debt, less current portion 3,914.5 5,373.3
Deferred income taxes 1,357.1 1,351.6
Noncurrent operating lease liabilities 105.7 120.0
Other noncurrent liabilities 344.6 347.5
Total Noncurrent Liabilities 5,721.9 7,192.4
Total Liabilities 8,414.7 8,779.5
Shareholders’ Equity
Common shares 28.5 29.0
Additional capital 5,803.1 5,794.1
Retained income 3,010.9 2,746.8
Accumulated other comprehensive income (loss) ( 327.5 ) ( 379.0 )
Total Shareholders’ Equity 8,515.0 8,190.9
Total Liabilities and Shareholders’ Equity $ 16,929.7 $ 16,970.4
See notes to unaudited condensed consolidated financial statements.
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THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Six Months Ended October 31,
Dollars in millions 2020 2019
Operating Activities
Net income $ 467.8 $ 365.8
Adjustments to reconcile net income to net cash provided by (used for) operations:
Depreciation 108.2 103.4
Amortization 119.1 117.6
Pension settlement loss (gain) 30.6 —
Share-based compensation expense 13.4 13.7
Other noncash adjustments – net 7.3 6.6
Changes in assets and liabilities:
Trade receivables ( 24.2 ) ( 18.2 )
Inventories ( 97.5 ) ( 102.0 )
Other current assets 8.5 13.3
Accounts payable 107.5 ( 41.3 )
Accrued liabilities 65.8 25.7
Income and other taxes ( 24.1 ) ( 32.6 )
Other – net 5.3 ( 6.5 )
Net Cash Provided by (Used for) Operating Activities 787.7 445.5
Investing Activities
Additions to property, plant, and equipment ( 129.0 ) ( 136.4 )
Other – net 28.1 32.2
Net Cash Provided by (Used for) Investing Activities ( 100.9 ) ( 104.2 )
Financing Activities
Short-term borrowings (repayments) – net 31.7 ( 102.9 )
Repayments of long-term debt ( 500.0 ) ( 100.0 )
Quarterly dividends paid ( 202.4 ) ( 196.6 )
Purchase of treasury shares ( 6.2 ) ( 3.5 )
Proceeds from stock option exercises 0.7 7.0
Other – net 0.4 0.8
Net Cash Provided by (Used for) Financing Activities ( 675.8 ) ( 395.2 )
Effect of exchange rate changes on cash 3.5 1.4
Net increase (decrease) in cash and cash equivalents 14.5 ( 52.5 )
Cash and cash equivalents at beginning of period 391.1 101.3
Cash and Cash Equivalents at End of Period $ 405.6 $ 48.8
( ) Denotes use of cash
See notes to unaudited condensed consolidated financial statements.
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THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY
(Unaudited)
Six Months Ended October 31, 2020
Dollars in millions Common
Shares
Outstanding Common Shares Additional Capital Retained Income Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity
Balance at May 1, 2020 114,072,726 $ 29.0 $ 5,794.1 $ 2,746.8 $ ( 379.0 ) $ 8,190.9
Net income 237.0 237.0
Other comprehensive income (loss) 18.1 18.1
Comprehensive income 255.1
Purchase of treasury shares ( 42,194 ) — ( 5.5 ) 0.9 ( 4.6 )
Stock plans 56,910 — 6.2 6.2
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
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 )
Other — —
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
Shares
Outstanding Common Shares Additional Capital Retained Income Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity
Balance at May 1, 2019 113,742,296 $ 28.9 $ 5,755.8 $ 2,367.6 $ ( 181.8 ) $ 7,970.5
Net income 154.6 154.6
Other comprehensive income (loss) ( 34.9 ) ( 34.9 )
Comprehensive income 119.7
Purchase of treasury shares ( 22,793 ) — ( 2.7 ) ( 0.2 ) ( 2.9 )
Stock plans 330,289 0.1 20.4 20.5
Cash dividends declared, $ 0.88 per common share
( 100.1 ) ( 100.1 )
Other — —
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 )
Other — —
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.
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THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, unless otherwise noted, except per share data)
Note 1: Basis of Presentation
The unaudited interim condensed consolidated financial statements of The J. M. Smucker Company (“Company,” “we,” “us,” or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. 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 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.
Note 2: 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. ASU 2019-12 will be effective for us on May 1, 2021, with the option to early adopt at any time prior to the effective date. Accounting for franchise taxes will require adoption on a retrospective or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other applicable provisions will require adoption on a retrospective, modified retrospective, or prospective basis, as required by ASU 2019-12. We do not anticipate that the adoption of this ASU will have a material impact on our financial statements and disclosures.
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20) Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans , which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial and adds new, as well as clarifies certain other, disclosure requirements. ASU 2018-14 was effective for us on May 1, 2020. It did not impact our interim disclosures, and we do not anticipate a material impact on our annual disclosures.
Note 3: Integration and Restructuring Costs
Integration and restructuring costs primarily consist of employee-related costs and other transition and termination costs related to certain acquisition or restructuring activities. Employee-related costs include severance, retention bonuses, and relocation costs. Severance costs and retention bonuses are recognized over the estimated future service period of the affected employees, and relocation costs are expensed as incurred. Other transition and termination costs include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. 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 Sheet.
Integration Costs: 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
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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.
Note 4: Divestiture
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
Note 5: Reportable Segments
We operate in one industry: the manufacturing and marketing of food and beverage products. We have three reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods. 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 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.
The U.S. 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; the U.S. Retail Coffee segment primarily includes the domestic sales of Folgers ® , Dunkin’ TM , and Café Bustelo ® branded coffee; and the U.S. 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
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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, 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. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. 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 October 31, Six Months Ended October 31,
2020 2019 2020 2019
Net sales:
U.S. Retail Pet Foods $ 708.7 $ 709.9 $ 1,401.3 $ 1,379.8
U.S. Retail Coffee 594.7 543.4 1,165.6 1,009.1
U.S. Retail Consumer Foods 479.1 426.1 968.3 828.3
International and Away From Home 251.5 278.4 470.6 519.5
Total net sales $ 2,034.0 $ 1,957.8 $ 4,005.8 $ 3,736.7
Segment profit:
U.S. Retail Pet Foods $ 124.9 $ 137.0 $ 250.2 $ 257.1
U.S. Retail Coffee 202.1 182.5 384.7 311.4
U.S. Retail Consumer Foods 135.3 91.4 266.8 172.4
International and Away From Home 39.5 50.4 70.4 82.7
Total segment profit $ 501.8 $ 461.3 $ 972.1 $ 823.6
Amortization ( 59.5 ) ( 58.8 ) ( 119.1 ) ( 117.6 )
Interest expense – net ( 45.1 ) ( 49.1 ) ( 91.2 ) ( 98.5 )
Unallocated derivative gains (losses) 31.5 0.9 47.7 29.9
Other special project costs (A)
— ( 3.3 ) — ( 6.6 )
Corporate administrative expenses ( 93.0 ) ( 70.3 ) ( 158.8 ) ( 141.9 )
Other income (expense) – net ( 32.2 ) ( 1.6 ) ( 33.6 ) ( 3.1 )
Income before income taxes $ 303.5 $ 279.1 $ 617.1 $ 485.8
(A) Other special project costs includes integration and restructuring costs. For more information, see Note 3: Integration and Restructuring Costs.
The following table presents certain geographical information.
Three Months Ended October 31, Six Months Ended October 31,
2020 2019 2020 2019
Net sales:
United States $ 1,882.2 $ 1,815.9 $ 3,711.9 $ 3,473.5
International:
Canada $ 123.2 $ 113.4 $ 231.4 $ 210.2
All other international 28.6 28.5 62.5 53.0
Total international $ 151.8 $ 141.9 $ 293.9 $ 263.2
Total net sales $ 2,034.0 $ 1,957.8 $ 4,005.8 $ 3,736.7
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The following table presents product category information.
Three Months Ended October 31, Six Months Ended October 31,
2020 2019 2020 2019 Primary Reportable Segment (A)
Coffee $ 659.6 $ 627.1 $ 1,295.3 $ 1,173.8 U.S. Retail Coffee
Dog food 277.8 302.6 555.5 598.2 U.S. Retail Pet Foods
Cat food 231.9 213.8 451.9 409.7 U.S. Retail Pet Foods
Pet snacks 216.7 210.0 429.5 403.2 U.S. Retail Pet Foods
Peanut butter 192.8 175.4 392.7 353.3 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. Retail Consumer Foods
Juices and beverages 36.7 32.4 70.3 63.6 U.S. Retail Consumer Foods
Portion control 31.1 42.5 55.1 81.9 Other (B)
Baking mixes and ingredients 30.0 26.0 53.2 39.7 Other (B)
Other 79.2 76.3 147.0 149.4 Other (B)
Total net sales $ 2,034.0 $ 1,957.8 $ 4,005.8 $ 3,736.7
(A) The identified primary reportable segment generally represents at least 75 percent of total net sales for each respective product category.
(B) Represents the combined International and Away From Home operating segments.
Note 6: Earnings per Share
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 October 31, Six Months Ended October 31,
2020 2019 2020 2019
Net income $ 230.8 $ 211.2 $ 467.8 $ 365.8
Less: Net income allocated to participating securities 0.9 1.3 2.0 2.1
Net income allocated to common stockholders $ 229.9 $ 209.9 $ 465.8 $ 363.7
Weighted-average common shares outstanding 113.7 113.4 113.6 113.3
Add: Dilutive effect of stock options — — — —
Weighted-average common shares outstanding – assuming dilution 113.7 113.4 113.6 113.3
Net income per common share $ 2.02 $ 1.85 $ 4.10 $ 3.21
Net income per common share – assuming dilution $ 2.02 $ 1.85 $ 4.10 $ 3.21
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Note 7: Debt and Financing Arrangements
The following table summarizes the components of our long-term debt.
October 31, 2020 April 30, 2020
Principal
Outstanding Carrying
Amount (A)
Principal
Outstanding Carrying
Amount (A)
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
Total long-term debt $ 4,900.0 $ 4,871.8 $ 5,400.0 $ 5,373.3
Current portion of long-term debt 950.0 957.3 — —
Total long-term debt, less current portion $ 3,950.0 $ 3,914.5 $ 5,400.0 $ 5,373.3
(A) Represents the carrying amount included in the Condensed Consolidated Balance Sheets, which includes the impact of capitalized debt issuance costs, offering discounts, and terminated interest rate contracts.
In April 2018, we entered into a senior unsecured delayed-draw Term Loan Credit Agreement (“Term Loan”) with a syndicate of banks and an available commitment amount of $ 1.5 billion. The full amount of the Term Loan was drawn on May 14, 2018, to partially finance the Ainsworth acquisition. 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 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 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. Borrowings under the revolving credit facility bear interest on the prevailing U.S. Prime Rate, LIBOR, or Canadian Dealer Offered Rate, based on our election. 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 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. The commercial paper program is backed by our revolving credit facility and reduces what we can borrow under the revolving credit facility by the amount of commercial paper outstanding. Commercial paper will be used as a continuing source of short-term financing for general corporate purposes. 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. We are in compliance with all covenants.
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Note 8: Pensions and Other Postretirement Benefits
The components of our net periodic benefit cost for defined benefit pension and other postretirement benefit plans are shown below.
Three Months Ended October 31,
Defined Benefit Pension Plans Other Postretirement Benefits
2020 2019 2020 2019
Service cost $ 0.4 $ 0.4 $ 0.4 $ 0.4
Interest cost 3.2 5.3 0.5 0.6
Expected return on plan assets ( 4.0 ) ( 6.1 ) — —
Amortization of net actuarial loss (gain) 2.5 2.0 — —
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.
Note 9: Derivative Financial Instruments
We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable instrument types we may enter into and establish controls to limit our market risk exposure.
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, soybean meal, edible oils, and wheat. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas. Our derivative instruments generally have maturities of less than one year .
We do not qualify commodity derivatives for hedge accounting treatment, and as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all of our commodity derivatives are economic hedges of our risk exposure.
The commodities hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.
Foreign Currency Exchange Rate Hedging: 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
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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.
Interest Rate Hedging: We utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt. At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no net impact on earnings.
In 2020, we terminated interest rate contracts concurrent with the pricing of the Senior Notes due March 15, 2030, and March 15, 2050. They were designated as cash flow hedges and were used to manage our exposure to interest rate volatility associated with the anticipated debt financing. The termination resulted in a pre-tax loss of $ 239.8 , which was deferred and included as a component of accumulated other comprehensive income (loss) and is being amortized as interest expense over the life of the debt.
In 2015, we terminated the interest rate swap on the Senior Notes due October 15, 2021, which was designated as a fair value hedge and used to hedge against the changes in the fair value of the debt. 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 $ 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: $ 4.2 through the remainder of 2021 and $ 4.0 in 2022.
The following tables set forth the gross fair value amounts of derivative instruments recognized in the Condensed Consolidated Balance Sheets.
October 31, 2020
Other
Current
Assets Other
Current
Liabilities Other
Noncurrent
Assets Other
Noncurrent
Liabilities
Derivatives not designated as hedging instruments:
Commodity contracts $ 17.3 $ 11.3 $ 1.1 $ 0.3
Foreign currency exchange contracts 0.7 0.8 — —
Total derivative instruments $ 18.0 $ 12.1 $ 1.1 $ 0.3
April 30, 2020
Other
Current
Assets Other
Current
Liabilities Other
Noncurrent
Assets Other
Noncurrent
Liabilities
Derivatives not designated as hedging instruments:
Commodity contracts $ 14.7 $ 33.2 $ — $ —
Foreign currency exchange contracts 2.4 0.1 — —
Total derivative instruments $ 17.1 $ 33.3 $ — $ —
We have elected to not offset fair value amounts recognized for our exchange-traded derivative instruments and our cash margin accounts executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to maintain cash margin accounts in connection with funding the settlement of our open positions. 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 $ 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
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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 October 31, Six Months Ended October 31,
2020 2019 2020 2019
Gains (losses) recognized in other comprehensive income (loss) $ — $ ( 44.1 ) $ — $ ( 97.1 )
Less: Gains (losses) reclassified from accumulated other comprehensive income (loss)
to interest expense
( 3.5 ) ( 0.1 ) ( 6.9 ) ( 0.2 )
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 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 October 31, Six Months Ended October 31,
2020 2019 2020 2019
Gains (losses) on commodity contracts $ 13.4 $ ( 10.1 ) $ 24.8 $ 2.5
Gains (losses) on foreign currency exchange contracts ( 0.4 ) ( 0.1 ) ( 2.7 ) ( 1.1 )
Total gains (losses) recognized in cost of products sold $ 13.0 $ ( 10.2 ) $ 22.1 $ 1.4
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. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. The following table presents the activity in unallocated derivative gains and losses.
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
Less: Net gains (losses) on derivative positions reclassified to segment operating profit ( 18.5 ) ( 11.1 ) ( 25.6 ) ( 28.5 )
Unallocated derivative gains (losses) $ 31.5 $ 0.9 $ 47.7 $ 29.9
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.
October 31, 2020 April 30, 2020
Commodity contracts $ 662.1 $ 890.1
Foreign currency exchange contracts 81.1 65.6
Note 10: Other Financial Instruments and Fair Value Measurements
Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of cash investments, short-term borrowings, and trade receivables. The carrying value of these financial instruments approximates fair value. Our remaining financial instruments, with the exception of long-term debt, are recognized at estimated fair value in the Condensed Consolidated Balance Sheets.
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The following table provides information on the carrying amounts and fair values of our financial instruments.
October 31, 2020 April 30, 2020
Carrying
Amount Fair Value Carrying
Amount Fair Value
Marketable securities and other investments $ 39.4 $ 39.4 $ 38.6 $ 38.6
Derivative financial instruments – net 6.7 6.7 ( 16.2 ) ( 16.2 )
Total long-term debt ( 4,871.8 ) ( 5,385.4 ) ( 5,373.3 ) ( 5,740.6 )
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.
The following tables summarize the fair values and the levels within the fair value hierarchy in which the fair value measurements fall for our financial instruments.
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Fair Value at October 31, 2020
Marketable securities and other investments: (A)
Equity mutual funds $ 8.2 $ — $ — $ 8.2
Municipal obligations — 26.9 — 26.9
Money market funds 4.3 — — 4.3
Derivative financial instruments: (B)
Commodity contracts – net 6.3 0.5 — 6.8
Foreign currency exchange contracts – net 0.1 ( 0.2 ) — ( 0.1 )
Total long-term debt (C)
( 5,184.3 ) ( 201.1 ) — ( 5,385.4 )
Total financial instruments measured at fair value $ ( 5,165.4 ) $ ( 173.9 ) $ — $ ( 5,339.3 )
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Fair Value at
April 30, 2020
Marketable securities and other investments: (A)
Equity mutual funds $ 8.7 $ — $ — $ 8.7
Municipal obligations — 24.2 — 24.2
Money market funds 5.7 — — 5.7
Derivative financial instruments: (B)
Commodity contracts – net ( 18.3 ) ( 0.2 ) — ( 18.5 )
Foreign currency exchange contracts – net 0.2 2.1 — 2.3
Total long-term debt (C)
( 5,032.0 ) ( 708.6 ) — ( 5,740.6 )
Total financial instruments measured at fair value $ ( 5,035.7 ) $ ( 682.5 ) $ — $ ( 5,718.2 )
(A) Marketable securities and other investments consist of funds maintained for the payment of benefits associated with nonqualified retirement plans. The funds include equity securities listed in active markets, municipal obligations valued by a third party using valuation techniques that utilize inputs that are derived principally from or corroborated by observable market data, and money market funds with maturities of three months or less. Based on the short-term nature of these money market funds, carrying value approximates fair value. 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. We do no t have any municipal obligations scheduled to mature in 2023.
(B) Level 1 commodity and foreign currency exchange derivatives are valued using quoted market prices for identical instruments in active markets. Level 2 commodity and foreign currency exchange derivatives are valued using quoted prices for similar assets or liabilities in active markets. For additional information, see Note 9: Derivative Financial Instruments.
(C) Long-term debt is composed of public Senior Notes classified as Level 1 and the Term Loan classified as Level 2. The public Senior Notes are traded in an active secondary market and valued using quoted prices. The fair value of the Term Loan is based on the net present value of each interest and principal payment calculated utilizing an interest rate derived from an estimated yield curve obtained from independent pricing sources for similar types of term loan borrowing arrangements. For additional information, see Note 7: Debt and Financing Arrangements.
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Note 11: Leases
We lease certain warehouses, manufacturing facilities, office space, equipment, and vehicles, primarily through operating lease agreements. We have elected to not recognize leases with a term of 12 months or less on the balance sheet. Instead, we recognize the related lease expense on a straight-line basis over the lease term.
Although the majority of our right-of-use asset and lease liability balances consist of leases with renewal options, these optional periods do not typically impact the lease term as we are not reasonably certain to exercise them. Certain leases also include termination provisions or options to purchase the leased property. Since we are not reasonably certain to exercise these types of options, minimum lease payments do not include any amounts related to these termination or purchase options. Our lease agreements generally do not contain residual value guarantees or restrictive covenants that are material.
We determine if an agreement is or contains a lease at inception by evaluating whether an identified asset exists that we control over the term of the arrangement. A lease commences when the lessor makes the identified asset available for our use. We generally account for lease and non-lease components as a single lease component. Minimum lease payments do not include variable lease payments other than those that depend on an index or rate.
For the majority of our leases, the interest rate implicit in the lease cannot be readily determined, so we utilize our incremental borrowing rate to present value lease payments using information available at the lease commencement date. We consider our credit rating and the current economic environment in determining this collateralized rate.
The following table sets forth the right-of-use assets and lease liabilities recognized in the Condensed Consolidated Balance Sheets.
October 31, 2020 April 30, 2020
Operating lease right-of-use assets $ 129.8 $ 148.4
Operating lease liabilities:
Current operating lease liabilities $ 35.5 $ 36.5
Noncurrent operating lease liabilities
105.7 120.0
Total operating lease liabilities $ 141.2 $ 156.5
Finance lease right-of-use assets:
Machinery and equipment
$ 10.1 $ 11.6
Accumulated depreciation
( 5.2 ) ( 5.9 )
Total property, plant, and equipment $ 4.9 $ 5.7
Finance lease liabilities:
Other current liabilities
$ 2.1 $ 2.2
Other noncurrent liabilities
2.9 3.5
Total finance lease liabilities $ 5.0 $ 5.7
The following table summarizes the components of lease expense.
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
Finance lease cost:
Amortization of right-of-use assets 0.6 0.8 1.2 1.6
Interest on lease liabilities
— — 0.1 0.1
Variable lease cost 5.5 6.3 11.1 12.6
Short-term lease cost 10.3 9.7 19.3 17.4
Sublease income ( 1.0 ) ( 1.5 ) ( 2.5 ) ( 2.3 )
Net lease cost $ 26.5 $ 28.2 $ 51.6 $ 54.7
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The following table sets forth cash flow and noncash information related to leases.
Six Months Ended October 31,
2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$ 20.2 $ 25.3
Operating cash flows from finance leases 0.1 0.1
Financing cash flows from finance leases
1.4 1.5
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases — 16.2
Finance leases
0.5 0.8
The following table summarizes the maturity of our lease liabilities by fiscal year.
October 31, 2020
Operating Leases Finance Leases
2021 (remainder of the year) $ 20.2 $ 1.2
2022 37.2 1.7
2023 34.6 1.1
2024 22.9 0.8
2025 15.0 0.3
2026 and beyond 20.7 0.1
Total undiscounted minimum lease payments $ 150.6 $ 5.2
Less: Imputed interest 9.4 0.2
Lease liabilities $ 141.2 $ 5.0
The following table sets forth the weighted average remaining lease term and discount rate.
October 31, 2020 April 30, 2020
Weighted average remaining lease term (in years):
Operating leases
4.5 4.7
Finance leases 3.2 3.4
Weighted average discount rate:
Operating leases 3.0 % 3.1 %
Finance leases
2.8 % 2.9 %
Note 12: Income Taxes
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 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”). While these specific rollbacks did not impact us, future legislative actions in response to the novel coronavirus (“COVID-19”) could further modify provisions of the Tax Act, and such changes will need to be analyzed for their respective impacts on our income taxes at that time.
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Note 13: Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), including the reclassification adjustments for items that are reclassified from accumulated other comprehensive income (loss) to net income, are shown below.
Foreign
Currency
Translation
Adjustment Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
Pension and
Other
Postretirement
Liabilities (B)
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities Accumulated
Other
Comprehensive
Income (Loss)
Balance at May 1, 2020 $ ( 50.5 ) $ ( 185.6 ) $ ( 146.7 ) $ 3.8 $ ( 379.0 )
Reclassification adjustments — 6.9 5.2 — 12.1
Current period credit (charge) 15.2 — 35.3 0.8 51.3
Income tax benefit (expense) — ( 1.6 ) ( 10.1 ) ( 0.2 ) ( 11.9 )
Balance at October 31, 2020 $ ( 35.3 ) $ ( 180.3 ) $ ( 116.3 ) $ 4.4 $ ( 327.5 )
Foreign
Currency
Translation
Adjustment Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
Pension and
Other
Postretirement
Liabilities (B)
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities Accumulated
Other
Comprehensive
Income (Loss)
Balance at May 1, 2019 $ ( 35.5 ) $ ( 40.4 ) $ ( 110.0 ) $ 4.1 $ ( 181.8 )
Reclassification adjustments — 0.2 3.2 — 3.4
Current period credit (charge) 5.1 ( 97.1 ) — 0.5 ( 91.5 )
Income tax benefit (expense) — 22.3 ( 0.7 ) ( 0.1 ) 21.5
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 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: Derivative Financial Instruments.
(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.
Note 14: 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 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 October 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.
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
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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.
Note 15: Common Shares
The following table sets forth common share information.
October 31, 2020 April 30, 2020
Common shares authorized 300.0 300.0
Common shares outstanding 114.1 114.1
Treasury shares 32.4 32.4
Repurchase Program: 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.