What changed in this filing

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Item 1. Financial Statements

2021-02-25 compared with 2020-11-24 · 202 added, 112 removed, 576 unchanged (35% of the section changed)

2 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

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

Three Months Ended January 31, Nine Months Ended January 31,

Dollars in millions, except per share data 2021 2020 2021 2020

4 unchanged sentences

Amortization 57.0 58.8 176.1 176.4

Other intangible assets impairment charge — 52.4 — 52.4

Other special project costs (A)

1.7 3.3 1.7 9.9

Other operating expense (income) – net ( 27.2 ) ( 2.4 ) ( 34.9 ) ( 2.4 )

14 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

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

Three Months Ended January 31, Nine Months Ended January 31,

Dollars in millions 2021 2020 2021 2020

10 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in millions October 31, 2020 April 30, 2020

Dollars in millions January 31, 2021 April 30, 2020

Current Assets

47 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

Six Months Ended October 31,

Nine Months Ended January 31,

Dollars in millions 2021 2020

4 unchanged sentences

Amortization 176.1 176.4

Other intangible assets impairment charge — 52.4

Pension settlement loss (gain) 30.8 —

Share-based compensation expense 20.9 19.8

Gain on divestitures – net ( 27.2 ) —

Other noncash adjustments – net 11.6 15.9

Changes in assets and liabilities:

Changes in assets and liabilities, net of effect from divestitures:

Trade receivables ( 50.4 ) 26.7

8 unchanged sentences

Additions to property, plant, and equipment ( 198.7 ) ( 192.9 )

Proceeds from divestitures – net 569.3 —

Other – net 48.5 15.3

16 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY

Six Months Ended October 31, 2020

Nine Months Ended January 31, 2021

Dollars in millions Common

18 unchanged sentences

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

Net income 261.5 261.5

Other comprehensive income (loss) 24.0 24.0

Comprehensive income 285.5

Purchase of treasury shares ( 4,301,631 ) ( 1.1 ) ( 219.0 ) ( 277.8 ) ( 497.9 )

Stock plans ( 6,480 ) — 7.5 7.5

Cash dividends declared, $ 0.90 per common share

( 98.5 ) ( 98.5 )

Balance at January 31, 2021 109,789,150 $ 27.4 $ 5,591.6 $ 2,896.1 $ ( 303.5 ) $ 8,211.6

See notes to unaudited condensed consolidated financial statements.

SMUCKER COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY

Nine Months Ended January 31, 2020

Dollars in millions Common

17 unchanged sentences

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

Net income 187.4 187.4

Other comprehensive income (loss) ( 17.9 ) ( 17.9 )

Comprehensive income 169.5

Purchase of treasury shares ( 7,180 ) — ( 1.0 ) 0.2 ( 0.8 )

Stock plans ( 11,251 ) — 6.5 6.5

Cash dividends declared, $ 0.88 per common share

( 100.1 ) ( 100.1 )

Balance at January 31, 2020 114,041,313 $ 29.0 $ 5,787.2 $ 2,620.5 $ ( 266.3 ) $ 8,170.4

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

Operating results for the nine months ended January 31, 2021, 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.

In November 2020, the U.S.

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

33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to modernize and simplify Management’s Discussion and Analysis and certain financial disclosure requirements.

These updates reflect a continued principles-based disclosure approach, similar to the standards released earlier in the year.

We will be required to apply these amendments for 2022, with early adoption permitted.

We do not anticipate that the adoption of these amendments will have a material impact on our disclosures.

In August 2020, 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.

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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.

Integration and restructuring costs primarily consist of employee-related costs and other transition and termination costs related to certain divestiture, acquisition, or restructuring activities.

Employee-related costs include severance, retention bonuses, and relocation costs.

1 unchanged sentence

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.

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

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

Integration Costs:

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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.

While we did no t incur any costs during 2021, we incurred integration costs of $ 3.3 and $ 9.9 during the three and nine months ended January 31, 2020, respectively, primarily consisting of other transition and termination costs.

The obligation related to severance costs and retention bonuses was fully satisfied as of January 31, 2021, and was $ 0.5 at April 30, 2020.

Restructuring Costs:

A restructuring program was approved by the Board of Directors (the “Board”) during the third quarter of 2021.

Under this program, we have identified opportunities to reduce our overall cost structure and optimize our organizational design, inclusive of stranded overhead associated with recent divestitures of the Crisco ® and Natural Balance ® businesses.

For additional information, see Note 4:

Divestitures.

While the entire scope of the program cannot be quantified at this time, we expect to incur approximately $ 60.0 in costs associated with the restructuring activities approved to date.

Over half of these costs are expected to be employee-related costs, while the remainder represent other transition and termination costs associated with our cost reduction and margin management initiatives.

We anticipate the activities and costs associated with this restructuring program will be completed by the end of 2023, with the majority of the costs expected to be incurred in 2022.

During the three and nine months ended January 31, 2021, we incurred $ 1.7 of employee-related costs, all of which were cash charges.

The obligation related to severance costs and retention bonuses was $ 1.4 at January 31, 2021.

On December 1, 2020, we sold the 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:

The transaction included oils and shortening products sold under the Crisco brand, primarily in the U.S.

and Canada, certain trademarks and licensing agreements, dedicated manufacturing and warehouse facilities located in Cincinnati, Ohio, and approximately 160 employees who supported the Crisco business.

The business generated net sales of approximately $ 270.0 in 2020, included primarily in the U.S.

Retail Consumer Foods segment.

Net proceeds from the divestiture were $ 533.4 , inclusive of a preliminary working capital adjustment and transaction costs paid to date, which will be finalized during the fourth quarter of 2021.

On January 29, 2021, we sold the Natural Balance premium pet food business to Nexus Capital Management LP (“Nexus”).

The transaction encompassed pet food products sold under the Natural Balance brand, certain trademarks and licensing agreements, and select employees who supported the Natural Balance business.

The business generated net sales of approximately $ 220.0 in 2020, included in the U.S.

Retail Pet Foods segment.

Net proceeds from the divestiture were $ 35.9 , inclusive of a preliminary working capital adjustment and transaction costs paid to date, which will be finalized during the fourth quarter of 2021.

Upon completion of these transactions during the third quarter of 2021, we recognized a pre-tax gain of $ 114.9 related to the Crisco business and a pre-tax loss of $ 87.7 related to the Natural Balance business, which were included in other operating expense (income) – net within the Condensed Statement of Consolidated Income.

The following table summarizes the net assets and liabilities disposed, which were measured at the lower of carrying amount or fair value less costs to sell.

January 31, 2021

Crisco Natural Balance

Assets disposed:

Inventories $ 32.9 $ 18.2

Property, plant, and equipment 36.9

Property, plant, and equipment – net 37.2 —

Operating lease right-of-use assets 1.6 0.1

2 unchanged sentences

Other noncurrent assets 0.2 —

Total assets held for sale $ 421.6

Liabilities held for sale:

Total assets disposed $ 417.0 $ 133.7

Liabilities disposed:

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

Deferred income taxes — 10.1

Other noncurrent liabilities — 0.3

Total liabilities disposed 1.6 10.4

Net assets disposed $ 415.4 $ 123.3

Reportable Segments

8 unchanged sentences

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

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).

Retail Consumer Foods segment primarily includes the domestic sales of Smucker’s ® and Jif ® 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).

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.

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 (“unallocated derivative gains and losses”), 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 October 31, Six Months Ended October 31,

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

11 unchanged sentences

Amortization ( 57.0 ) ( 58.8 ) ( 176.1 ) ( 176.4 )

Other intangible assets impairment charge — ( 52.4 ) — ( 52.4 )

Gain on divestitures – net 27.2 — 27.2 —

Interest expense – net ( 43.5 ) ( 45.1 ) ( 134.7 ) ( 143.6 )

9 unchanged sentences

The following table presents certain geographical information.

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

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

6 unchanged sentences

The following table presents product category information.

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

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020 Primary Reportable Segment (A)

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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,

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

7 unchanged sentences

Net income per common share – assuming dilution $ 2.32 $ 1.64 $ 6.42 $ 4.85

Goodwill and Other Intangible Assets

A summary of changes in goodwill is as follows:

Pet Foods U.S.

Consumer Foods International

From Home Total

Balance at May 1, 2020 $ 2,442.3 $ 2,090.9 $ 1,358.2 $ 413.1 $ 6,304.5

Divestitures ( 74.1 ) — ( 210.7 ) ( 16.9 ) ( 301.7 )

— — — 14.1 14.1

Balance at January 31, 2021 (B)

$ 2,368.2 $ 2,090.9 $ 1,147.5 $ 410.3 $ 6,016.9

(A) The amounts classified as other represent foreign currency exchange adjustments.

(B) Included in goodwill as of May 1, 2020, are accumulated goodwill impairment charges of $ 242.9 .

No impairment charges have been recognized in 2021.

The following table summarizes our other intangible assets and related accumulated amortization and impairment charges including foreign currency exchange adjustments.

January 31, 2021

April 30, 2020

Acquisition Cost Accumulated Amortization/Impairment Charges/Foreign Currency Exchange Net Acquisition Cost Accumulated Amortization/Impairment Charges/Foreign Currency Exchange Net

Finite-lived intangible assets subject to

amortization:

Customer and contractual relationships $ 4,471.1 $ 1,497.2 $ 2,973.9 $ 4,471.1 $ 1,353.0 $ 3,118.1

Patents and technology 168.5 145.1 23.4 168.5 138.4 30.1

Trademarks 348.0 177.9 170.1 662.0 311.0 351.0

Total intangible assets subject to amortization $ 4,987.6 $ 1,820.2 $ 3,167.4 $ 5,301.6 $ 1,802.4 $ 3,499.2

Indefinite-lived intangible assets not subject to

amortization:

Trademarks $ 3,158.1 $ 226.1 $ 2,932.0 $ 3,158.1 $ 228.3 $ 2,929.8

Total other intangible assets $ 8,145.7 $ 2,046.3 $ 6,099.4 $ 8,459.7 $ 2,030.7 $ 6,429.0

The decrease in finite-lived intangible assets from April 30, 2020, is primarily due to the divestitures of the Crisco and Natural Balance trademarks during the third quarter of 2021.

For additional information, see Note 4:

Divestitures.

We review goodwill and other indefinite-lived intangible assets for impairment at least annually on February 1, and more often if indicators of impairment exist.

As a result of the divestitures during the third quarter of 2021, we reviewed all impacted reporting units and concluded that the estimated fair values were in excess of the carrying values as of the date of the divestitures.

Furthermore, there were no other indicators of impairment, and as a result, we do not believe that our reporting units or any of our material indefinite-lived intangible assets are more likely than not impaired as of January 31, 2021.

However, the goodwill and indefinite-lived trademarks within the U.S.

Retail Pet Foods segment remain susceptible to future impairment charges due to the narrow differences between fair value and carrying value.

Any significant adverse change in our near or long-term projections or macroeconomic conditions could result in future impairment charges.

The carrying values of the goodwill and indefinite-lived intangible assets within the U.S.

Retail Pet Foods segment were $ 2.4 billion and $ 1.4 billion, respectively, as of January 31, 2021.

In addition, we continue to evaluate the nature and extent to which the novel coronavirus (“COVID-19”) could impact our business, specifically as it relates to the fair value of our goodwill and indefinite-lived intangible assets.

While we have concluded there were no indicators of impairment as of January 31, 2021, any significant sustained adverse change in consumer purchasing behaviors, government restrictions, financial results, or macroeconomic conditions could result in future impairment, specifically as it relates to the Away From Home reporting unit, which has experienced a decline in demand as a result of COVID-19.

As of January 31, 2021, the goodwill related to the Away From Home reporting unit represented approximately 65 percent of the goodwill within the combined International and Away From Home operating segments.

During the third quarter of 2020, we recognized an impairment charge of $ 52.4 related to the recently divested Natural Balance brand within the U.S.

Retail Pet Foods segment due to a decline in the 2020 and long-term net sales expectations and the royalty rate used in the interim analysis, primarily driven by the market environment and re-positioning of this brand within the Pet Foods brand portfolio.

This charge was included as a noncash charge in our Condensed Statement of Consolidated Income.

Additionally, we reclassified the Natural Balance brand as a finite-lived intangible asset as of February 1, 2020, as a result of a change in our long-term strategic expectations for the brand.

Debt and Financing Arrangements

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

October 31, 2020 April 30, 2020

January 31, 2021 April 30, 2020

Outstanding Carrying

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(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 .

During the third quarter of 2021, we prepaid, in full, the remaining outstanding balance of the $ 1.5 billion senior unsecured delayed-draw Term Loan Credit Agreement (“Term Loan”) that was entered into in April 2018 to partially finance the Ainsworth acquisition.

During the three and nine months ended January 31, 2021, we prepaid $ 200.0 and $ 700.0 on the Term Loan, respectively.

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 October 31, 2020, or April 30, 2020.

We did no t have a balance outstanding under the revolving credit facility at January 31, 2021, 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.

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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.

As of January 31, 2021, and April 30, 2020, we had $ 166.0 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 $ 8.7 and $ 18.3 for the three months ended January 31, 2021 and 2020, respectively, and $ 95.1 and $ 118.3 , for the nine months ended January 31, 2021 and 2020, 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.

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 October 31,

Three Months Ended January 31,

Defined Benefit Pension Plans Other Postretirement Benefits

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Net periodic benefit cost $ 2.2 $ 1.8 $ 0.6 $ 0.6

Six Months Ended October 31,

Nine Months Ended January 31,

Defined Benefit Pension Plans Other Postretirement Benefits

7 unchanged sentences

Net periodic benefit cost $ 37.6 $ 5.4 $ 1.9 $ 2.0

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).

During the second quarter of 2021, we transferred $ 82.6 of our Canadian defined benefit pension plan obligations 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.

As a result of this transaction, 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.

We did no t recognize any additional charges related to the buy-out contract during the third quarter of 2021.

Derivative Financial Instruments

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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.

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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.

contracts generally have maturities of less than one year .

The 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.

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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.

To date, we have recognized $ 47.5 of the gain, of which $ 2.2 and $ 6.4 was recognized during the three and nine months ended January 31, 2021, respectively, and $ 2.1 and $ 6.2 was recognized during the three and nine months ended January 31, 2020, 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.

October 31, 2020

January 31, 2021

Liabilities Other

11 unchanged sentences

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.

At January 31, 2021, our cash margin accounts represented collateral received of $ 5.6 , and at April 30, 2020, our cash margin accounts represented collateral pledged of $ 43.2 , 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

and 2019, respectively.

Interest expense – net, as presented in the Condensed Statements of Consolidated Income was $ 43.5 and $ 45.1 for the three months ended January 31, 2021 and 2020, respectively, and was $ 134.7 and $ 143.6 for the nine months ended January 31, 2021 and 2020, 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,

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

4 unchanged sentences

Change in accumulated other comprehensive income (loss) $ 3.5 $ ( 22.6 ) $ 10.4 $ ( 119.5 )

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.

Included as a component of accumulated other comprehensive income (loss) at January 31, 2021, and April 30, 2020, were deferred net pre-tax losses of $ 230.7 and $ 241.1 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) at January 31, 2021, and April 30, 2020, was $ 53.3 and $ 55.5 , respectively.

Approximately $ 13.7 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,

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

5 unchanged sentences

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

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

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

2 unchanged sentences

Unallocated derivative gains (losses) $ 33.8 $ 7.7 $ 81.5 $ 37.6

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 .

As of January 31, 2021, the net cumulative unallocated derivative gains were $ 48.6 , 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

January 31, 2021 April 30, 2020

Commodity contracts $ 373.3 $ 890.1

5 unchanged sentences

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

October 31, 2020 April 30, 2020

January 31, 2021 April 30, 2020

Amount Fair Value Carrying

12 unchanged sentences

(Level 2) Significant

(Level 3) Fair Value at October 31, 2020

(Level 3) Fair Value at January 31, 2021

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

As of January 31, 2021, our municipal obligations are scheduled to mature as follows:

$ 0.3 in 2021, $ 1.5 in 2022, $ 3.5 in 2024, and the remaining $ 24.0 in 2025 and beyond.

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Derivative Financial Instruments.

(C) Long-term debt is composed of public Senior Notes, which are classified as Level 1, and the Term Loan, which was classified as Level 2 prior to the prepayment of the remaining balance during the third quarter of 2021.

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.

The fair value of the Term Loan was 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 8:

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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

January 31, 2021 April 30, 2020

Operating lease right-of-use assets $ 147.9 $ 148.4

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Machinery and equipment

$ 10.1 $ 11.6

Accumulated depreciation

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The following table summarizes the components of lease expense.

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

Three Months Ended January 31, Nine Months Ended January 31,

2021 2020 2021 2020

3 unchanged sentences

Interest on lease liabilities

— 0.1 0.1 0.2

Variable lease cost 6.6 5.0 17.7 17.6

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

Six Months Ended October 31,

Nine Months Ended January 31,

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

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

October 31, 2020

January 31, 2021

Operating Leases Finance Leases

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

October 31, 2020 April 30, 2020

January 31, 2021 April 30, 2020

Weighted average remaining lease term (in years):

4 unchanged sentences

Finance leases

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.

The effective tax rates for the three months ended January 31, 2021 and 2020, were 27.7 and 22.7 percent, respectively, and for the nine months ended January 31, 2021 and 2020, were 25.5 and 24.0 percent, respectively.

During the three and nine months ended January 31, 2021 and 2020, the effective tax rates varied from the U.S.

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

The effective tax rates for the current year were also unfavorably impacted by additional net income tax expense related to the divestitures of the Crisco and Natural Balance businesses during the third quarter of 2021.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an additional $ 1.8 , 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.

As of January 31, 2021, the undistributed earnings of our foreign subsidiaries remain permanently reinvested.

During calendar year 2020, the Coronavirus Aid, Relief, and Economic Security Act and Consolidated Appropriations Act of 2021 were enacted in response to the COVID-19 pandemic and economic downturn.

These statutes included rollbacks of certain provisions of the U.S.

Tax Cuts and Jobs Act (the “Tax Act”), tax extenders for expiring tax breaks, and other tax provisions.

While these specific rollbacks and tax provisions had minimal impact to the Company, any future legislative actions in response to COVID-19 could further modify provisions of the Tax Act, and such changes will need to be analyzed for their respective impact on our income taxes at that time.

Accumulated Other Comprehensive Income (Loss)

12 unchanged sentences

Income tax benefit (expense) — ( 2.2 ) ( 11.8 ) ( 0.3 ) ( 14.3 )

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

Balance at January 31, 2021 $ ( 21.1 ) $ ( 177.4 ) $ ( 110.0 ) $ 5.0 $ ( 303.5 )

Adjustment Net Gains (Losses)

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Income tax benefit (expense) — 27.5 ( 1.2 ) ( 0.3 ) 26.0

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

Balance at January 31, 2020 $ ( 32.9 ) $ ( 132.4 ) $ ( 106.0 ) $ 5.0 $ ( 266.3 )

(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.

The current period charge in 2020 was 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 10:

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.

(B) The reclassification from accumulated other comprehensive income (loss) to other income (expense) – net is composed of settlement charges and amortization of net losses and prior service costs.

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

For additional information, see Note 9:

3 unchanged sentences

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.

Based on the information known to date, with the exception of the matters 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 (“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.

CERT 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.

In addition, CERT 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 trial court granted the Defendants’ motion for summary judgment based on the regulation.

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

We are also defendants in nine pending putative class action lawsuits filed in federal courts in California, Florida, Illinois, Missouri, Texas, Washington, and Washington D.C.

The plaintiffs in those actions assert claims arising under various state laws for false advertising, consumer protection, deceptive and unfair trade practices, and similar statutes.

Their claims are premised on allegations that we have misrepresented the number of servings that can be made from various canisters of Folgers coffee on the packaging for those products.

Similar claims have been asserted against certain retailers of our Folgers coffee products, and indemnity claims have been asserted by such retailers against us.

Various other potential plaintiffs have threatened to assert similar claims against us.

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

Accordingly, no loss contingency has been recorded for these matters as of January 31, 2021, and the likelihood of loss is not considered probable or estimable.

However, if we are required to pay significant damages, 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.

October 31, 2020 April 30, 2020

January 31, 2021 April 30, 2020

Common shares authorized 300.0 300.0

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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.

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 remained available for repurchase pursuant to prior authorizations of the Board, for a total of 8.6 million common shares available for repurchase.

Under our repurchase program, 4.5 million common shares were repurchased for $ 521.9 between December 2, 2020, and January 29, 2021, of which 0.2 million common shares will be settled during the fourth quarter of 2021.

Included in the total repurchases during the third quarter of 2021 were 2.0 million common shares repurchased under a 10b5-1 plan entered into on December 30, 2020.

At January 31, 2021, approximately 4.1 million common shares remain available for repurchase pursuant to the Board’s authorizations.

The remaining shares repurchased during the nine months ended January 31, 2021 and 2020, consisted of shares repurchased from stock plan recipients in lieu of cash payments.

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