What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-06-17 compared with 2020-06-19 · 346 added, 342 removed, 1197 unchanged (36% of the section changed)

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Smucker Company (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of April 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of April 30, 2020 and 2019, the related statements of consolidated income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended April 30, 2020, and the related notes and our report dated June 19, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the 2021 consolidated financial statements of the Company and our report dated June 17, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Retail Pet Foods impairment analysis, we performed audit procedures that included, among others, assessing fair value methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

For example, we compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s business model, customer base or product mix and other relevant factors.

As it pertains to revenue growth rates and profitability assumptions, we compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s business model, customer base or product mix, as applicable.

We assessed the historical accuracy of management’s estimates.

We also performed sensitivity analyses of significant assumptions, including the weighted average cost of capital and terminal period revenue growth rate, to evaluate the changes in fair value that would result from changes in the assumptions and the potential impact on the Company’s conclusion of whether or not the goodwill was impaired.

In addition, we involved our valuation specialist to assist with our evaluation of the methodology used by the Company and significant assumptions, including, among others, the weighted average cost of capital.

In addition, we involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions, including, the weighted average cost of capital.

Specifically, we evaluated the components of the weighted average cost of capital assumptions used by the Company by performing an independent corroborative calculation with the involvement of our valuation specialists.

Retail Pet Foods and U.S.

Retail Coffee Indefinite-Lived Intangible Assets Impairment Evaluation

Description of the Matter At April 30, 2020, the Company’s total indefinite-lived intangible assets were $2.9 billion, of that, $1.4 billion relates to the U.S.

Description of the Matter At April 30, 2021, the Company’s total indefinite-lived intangible assets, excluding goodwill, were $2.9 billion, of that, $1.4 billion relates to the U.S.

Retail Pet Foods segment and $1.2 billion relates to the U.S.

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How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Pet Foods and Coffee indefinite-lived intangible asset impairment review process, including controls over the significant assumptions mentioned above.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Pet Foods and Coffee indefinite-lived intangible assets impairment review process, including controls over the significant assumptions mentioned above.

To test the estimated fair value used in the Company’s Pet Foods and Coffee indefinite-lived intangible assets impairment analyses, we performed audit procedures that included, among others, assessing fair value methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

As it pertains to revenue growth rates, we compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s business model, customer base or product mix, as applicable.

We assessed the historical accuracy of management’s estimates.

We also performed sensitivity analyses of significant assumptions, including the required rates of return and royalty rates, to evaluate the changes in the fair value of the indefinite-lived intangible assets that would result from changes in the assumptions and the potential impact on the Company’s conclusion of whether or not the indefinite-lived intangible assets were impaired.

In addition, we involved our valuation specialist to assist with our evaluation of the methodology used by the Company and significant assumptions, including the required rate of return and royalty rate.

As it pertains to the required rate of return, we evaluated the components of the weighted average cost of capital assumptions used by the Company by performing an independent corroborative calculation with the involvement of our valuation specialists.

We also evaluated the premia applied to the weighted average cost of capital of the Pet Foods and Coffee indefinite-lived intangible assets based on the characteristics of each asset subject to the evaluation.

As it pertains to the royalty rates used in the impairment analyses, we performed independent corroborative profit split calculations to evaluate the royalty rates selected by the Company.

We also evaluated market royalty rates cited by the Company as to their relevance to the Company’s conclusions.

/s/ Ernst & Young LLP

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Amortization 233.0 236.3 240.3

Goodwill impairment charges — 97.9 145.0

Goodwill impairment charge — — 97.9

Other intangible assets impairment charges 3.8 52.4 107.2

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Cash and cash equivalents $ 334.3 $ 391.1

Trade receivables, less allowance for doubtful accounts 551.4 503.8

Trade receivables – net 533.7 551.4

Finished products 607.6 563.5

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Amortization 233.0 236.3 240.3

Goodwill impairment charges — 97.9 145.0

Goodwill impairment charge — — 97.9

Other intangible assets impairment charges 3.8 52.4 107.2

Pension settlement loss (gain) 35.5 0.1 7.1

Share-based compensation expense 28.7 26.8 20.7

Gain on divestiture — ( 27.7 ) —

Gain on divestitures – net ( 25.3 ) — ( 27.7 )

Deferred income tax expense (benefit) ( 13.9 ) 7.6 ( 93.5 )

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Defined benefit pension contributions ( 13.1 ) ( 5.1 ) ( 29.3 )

Changes in assets and liabilities, net of effect from acquisition and divestiture:

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

Trade receivables 22.0 ( 49.1 ) ( 53.0 )

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Additions to property, plant, and equipment ( 306.7 ) ( 269.3 ) ( 359.8 )

Proceeds from divestiture — 369.5 —

Proceeds from disposal of property, plant, and equipment 2.4 1.1 13.4

Proceeds from divestitures – net 564.0 — 369.5

Other – net 53.8 ( 2.2 ) ( 30.9 )

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Cash dividends declared, $ 3.40 per common share

Reclassification of stranded tax effects (A)

( 386.0 ) ( 386.0 )

Other 0.5 ( 0.5 ) —

Balance at April 30, 2019 113,742,296 28.9 5,755.8 2,367.6 ( 181.8 ) 7,970.5

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Cash dividends declared, $ 3.52 per common share

( 400.4 ) ( 400.4 )

Balance at April 30, 2020 114,072,726 29.0 5,794.1 2,746.8 ( 379.0 ) 8,190.9

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Cash dividends declared, $ 3.60 per common share

( 400.2 ) ( 400.2 )

Other ( 0.5 ) 0.5 — —

Balance at April 30, 2021 108,339,057 $ 27.1 $ 5,527.6 $ 2,847.5 $ ( 277.4 ) $ 8,124.8

(A) During 2018, we elected to early adopt Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allowed us to reclassify the stranded income tax effects resulting from the U.S.

Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income (loss) to retained earnings.

See notes to consolidated financial statements.

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GAAP requires that we make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Significant estimates in these consolidated financial statements include, among others:

estimates of future cash flows associated with assets, potential asset impairments, useful lives and residual values of long-lived assets used in determining depreciation and amortization, net realizable value of inventories, accruals for trade marketing and merchandising programs, income taxes, and the determination of discount rates and other assumptions for defined benefit pension and other postretirement benefit expenses.

Significant estimates in these consolidated financial statements include, among others, estimates of future cash flows associated with assets, potential asset impairments, useful lives and residual values of long-lived assets used in determining depreciation and amortization, net realizable value of inventories, accruals for trade marketing and merchandising programs, income taxes, and discount rates and other assumptions used in determining defined benefit pension and other postretirement benefit expenses.

Actual results could differ from these estimates.

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Based on the short-term nature of these assets, carrying value approximates fair value.

Cash equivalents within cash and cash equivalents in the Consolidated Balance Sheet was $ 300.2 at April 30, 2020.

There were no cash equivalents included in cash and cash equivalents at April 30, 2019.

Cash equivalents within cash and cash equivalents in the Consolidated Balance Sheets were $ 294.5 and $ 300.2 at April 30, 2021 and 2020, respectively.

Revenue Recognition:

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During 2021, 2020, and 2019, subsequent period adjustments were less than 2 percent of both consolidated pre-tax income and cash provided by operating activities.

Total promotional expenditures, including amounts classified as a reduction of sales, represented 39 percent, 36 percent, and 35 percent of net sales in 2020, 2019, and 2018, respectively.

The possibility exists that reported results could be different if factors such as the level and success of the promotional programs or other conditions differ from expectations.

Total promotional expenditures, including amounts classified as a reduction of sales, represented 39 percent of net sales in both 2021 and 2020, and 36 percent of net sales in 2019.

For revenue disaggregated by reportable segment, geographical region, and product category, see Note 5:

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Transportation costs included in cost of products sold relate to the costs incurred to ship our products.

Distribution costs are included in selling, distribution, and administrative (“SD&A”) expenses and primarily relate to the warehousing costs incurred to store our products.

Distribution costs are included in SD&A expenses and primarily relate to the warehousing costs incurred to store our products.

Total distribution costs recorded within SD&A were $ 281.8 , $ 286.4 , and $ 266.6 in 2021, 2020, and 2019, respectively.

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Research and development (“R&D”) costs are expensed as incurred and are included in SD&A in the Statements of Consolidated Income.

R&D costs include expenditures for new and existing product and manufacturing process innovation, which are comprised primarily of internal salaries and wages, consulting, testing, and other supplies attributable to time spent on R&D activities.

R&D costs include expenditures for new and existing product and manufacturing process innovation, which are comprised primarily of internal salaries and wages, consulting, testing, and

other supplies attributable to time spent on R&D activities.

Other costs include the depreciation and maintenance of research facilities.

Total R&D expense was $ 57.7 , $ 56.0 , and $ 56.0 in 2020, 2019, and 2018, respectively.

Total R&D expense was $ 57.7 in both 2021 and 2020 and $ 56.0 in 2019.

Share-Based Payments:

Share-based compensation expense, including stock options, is recognized on a straight-line basis over the requisite service period, and generally vest over a period of one to four years.

Share-based compensation expense, including stock options, is recognized on a straight-line basis over the requisite service period, and generally vest over a period of one to three years .

The following table summarizes amounts related to share-based payments.

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Share-based compensation expense included in SD&A $ 28.3 $ 26.4 $ 20.1

Share-based compensation expense (benefit) included in other special project costs 0.4 0.6 1.7

Share-based compensation expense included in other special project costs 0.4 0.4 0.6

Total share-based compensation expense $ 28.7 $ 26.8 $ 20.7

Related income tax benefit $ 6.6 $ 6.4 $ 4.9

As of April 30, 2020, total unrecognized share-based compensation cost related to nonvested share-based awards was $ 45.9 .

As of April 30, 2021, total unrecognized share-based compensation cost related to nonvested share-based awards, including stock options, was $ 45.0 .

The weighted-average period over which this amount is expected to be recognized is 2.0 years.

Realized excess tax benefits are presented in the Statements of Consolidated Cash Flows as an operating activity and are recognized within income taxes in the Statements of Consolidated Income.

For 2020, 2019, and 2018, the excess tax benefits realized upon exercise or vesting of share-based compensation were $ 0.9 , $ 0.5 , and $ 1.5 , respectively.

Realized excess tax benefits and tax deficiencies are presented in the Statements of Consolidated Cash Flows as an operating activity and are recognized within income taxes in the Statements of Consolidated Income.

For 2021, the tax deficiencies realized upon exercise or vesting of share-based compensation were $ 0.1 , and the excess tax benefits realized in 2020 and 2019 were $ 0.9 and $ 0.5 , respectively.

For additional discussion on share-based compensation expense, see Note 13:

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In the normal course of business, we extend credit to customers.

Trade receivables, less allowances, reflects the net realizable value of receivables and approximates fair value.

We evaluate our trade receivables and establish an allowance for doubtful accounts based on a combination of factors.

Trade receivables, less credit losses, reflects the net realizable value of receivables and approximates fair value.

We account for trade receivables, less credit losses, under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses .

We evaluate our trade receivables and establish a reserve for credit loss based on a combination of factors.

When aware that a specific customer has been impacted by circumstances such as bankruptcy filings or deterioration in the customer’s operating results or financial position, potentially making it unable to meet its financial obligations, we record a specific reserve for bad debt to reduce the related receivable to the amount we reasonably believe is collectible.

We also record reserves for bad debt for all other customers based on a variety of factors, including the length of time the receivables are past due, historical collection experience, and an evaluation of current and projected economic conditions at the balance sheet date.

Trade receivables are charged off against the allowance after we determine that the potential for recovery is remote.

At April 30, 2020 and 2019, the allowance for doubtful accounts was $ 3.0 and $ 1.8 , respectively.

We also record reserves for credit loss for all other customers based on a variety of factors, including the length of time the receivables are past due, historical collection experience, and an evaluation of current and projected economic conditions at the balance sheet date.

Trade receivables are charged off against the reserve for credit loss after we determine that the potential for recovery is remote.

At April 30, 2021 and 2020, the reserve for credit loss was $ 2.4 and $ 3.0 , respectively.

We believe there is no concentration of risk with any single customer whose failure or nonperformance would materially affect results other than as discussed in Note 5:

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Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows estimated to be generated by such assets.

If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds its estimated fair value of the assets.

If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount exceeds the estimated fair value of the assets.

Assets to be disposed of by sale are recognized as held for sale at the lower of carrying value or fair value less costs to sell.

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The discount rates utilized in the cash flow analyses were developed using a weighted-average cost of capital methodology.

In addition to the annual test, we test for impairment if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying amount.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, which are evaluated on an annual basis.

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However, our right to offset balances due from suppliers against our payment obligations is restricted by the agreement for those payment obligations that have been sold by our suppliers.

The payment of these obligations is included in cash provided by operating activities in the Consolidated Statement of Cash Flows.

Included in accounts payable in the Consolidated Balance Sheet as of April 30, 2020, were $ 157.5 of outstanding payment obligations that were elected and sold to a financial institution by participating suppliers.

The payment of these obligations is included in cash provided by operating activities in the Statements of Consolidated Cash Flows.

Included in accounts payable in the Consolidated Balance Sheets as of April 30, 2021 and 2020 were $ 304.2 and $ 157.5 of outstanding payment obligations, respectively, that were elected and sold to a financial institution by participating suppliers.

Foreign Currency Translation:

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Recently Issued Accounting Standards:

In November 2020, 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 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.

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

As of April 30, 2021, we elected to early adopt certain updates to section 301, Selected Financial Data , and 302, Supplementary Financial Information , resulting in immaterial impacts to our financial statements and disclosures.

Furthermore, in conjunction with the above-mentioned disclosure effectiveness initiative, the SEC also adopted the final rule under SEC Release No.

33-10825, Modernization of Regulation S-K Items 101, 103, and 105 , in August 2020.

These amendments modernize the description of business, legal proceedings, and risk factor disclosure requirements, and were effective on November 9, 2020.

Our disclosures were updated accordingly to comply with these amendments.

In December 2019, the FASB issued 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.

ASU 2019-12 will be effective for us on May 1, 2021.

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.

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 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

ASU 2018-15 is effective for us on May 1, 2020, but we elected to early adopt on May 1, 2019, as permitted, on a prospective basis.

During 2020, we capitalized implementation costs related to third-party cloud computing services of $ 4.9 which is reflected in other noncurrent assets in the Consolidated Balance Sheet.

In August 2018, the FASB also 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 will be effective for us on May 1, 2020, and it will require adoption on a retrospective basis.

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

In February 2016, in an effort to increase transparency and comparability among organizations, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize a right-of-use asset and lease liability for all leases with a term of more than 12 months.

We adopted the requirements of ASU 2016-02 and all related amendments on May 1, 2019, utilizing an optional transition method that allows for a cumulative-effect adjustment in the period of adoption with no restatement of prior periods.

This transition method also does not require new lease disclosures for periods prior to the effective date.

We elected certain practical expedients available under the guidance, including a package of practical expedients which allowed us to not reassess prior conclusions related to existing contracts containing leases, lease classification, and initial direct costs.

Adoption of ASU 2016-02 on May 1, 2019, resulted in the recognition of operating lease right-of-use assets and lease liabilities of $ 159.2 and $ 166.6 , respectively, in our Consolidated Balance Sheet.

The difference between the additional lease assets and lease liabilities was primarily due to an existing deferred rent balance that was reclassified to the operating lease liability.

The new standard did not materially impact our Statement of Consolidated Income or Statement of Consolidated Cash Flows.

The additional disclosures required are presented within Note 12:

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, and required adoption on a retrospective basis.

The adoption of this ASU did not have a material impact on our disclosures.

For additional information, see Note 9:

Pensions and Other Postretirement Benefits .

Risks and Uncertainties:

The raw materials we use are primarily commodities, agricultural-based products, and packaging materials.

The raw materials used in each of our segments are primarily commodities, agricultural-based products, and packaging materials.

The principal packaging materials we use are plastic, glass, metal cans, caps, carton board, and corrugate.

Green coffee, peanuts, animal protein meals, oils and fats, sweeteners, grains, fruit, and other ingredients are obtained from various suppliers.

Green coffee, peanuts, protein meals, grains, oils and fats, grains, sweeteners, fruit, and other ingredients are obtained from various suppliers.

The availability, quality, and cost of many of these commodities have fluctuated, and may continue to fluctuate over time.

Green coffee is sourced solely from foreign countries, and its supply and price are subject to high volatility due to factors such as weather, global supply and demand, plant disease, investor speculation, and political and economic conditions in the source countries.

Green coffee, along with certain other raw materials, is sourced solely from foreign countries and its supply and price are subject to high volatility due to factors such as weather, global supply and demand, plant disease, investor speculation, and political and economic conditions in the source countries.

Raw materials are generally available from numerous sources, although we have elected to source certain plastic packaging materials and finished goods, such as K-Cup ® pods and our Pup-Peroni dog snacks, from single sources of supply pursuant to long-term contracts.

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Although steps are taken at all of our manufacturing sites to reduce the likelihood of a production disruption, an interruption at a single manufacturing site would result in a reduction or elimination of the availability of some of our products for a period of time.

Of our total employees, 24 percent are covered by union contracts at nine manufacturing locations.

The contracts vary in term, with two contracts expiring in 2021, representing 2 percent of our total employees.

Of our full-time employees, 24 percent are covered by union contracts at eight manufacturing locations.

The contracts vary in term depending on location, with five contracts expiring in 2022, representing 8 percent of our total employees.

We insure our business and assets in each country against insurable risks, to the extent that we deem appropriate, based upon an analysis of the relative risks and costs.

On May 14, 2018, we acquired the equity of Ainsworth, a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S., in an all-cash transaction valued at $ 1.9 billion.

The transaction was funded with a bank term loan and borrowings under our commercial paper program of approximately $ 1.5 billion and $ 400.0 , respectively.

For additional information on the financing associated with this transaction, refer to Note 8:

Debt and Financing Arrangements.

On May 14, 2018, we acquired the outstanding equity of Ainsworth, a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S., in an all-cash transaction valued at $ 1.9 billion.

The transaction was funded with a bank term loan and borrowings under our commercial paper program of $ 1.5 billion and $ 400.0 , respectively.

During 2019, the final purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition.

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As a result of the acquisition, we recognized total goodwill of $ 617.8 within the U.S.

Retail Pet Foods segment, which represented the value we expected to achieve through the implementation of operational synergies and growth opportunities as a result of

integrating Ainsworth into our U.S.

Retail Pet Foods segment, which represented the value we expected to achieve through the implementation of operational synergies and growth opportunities as a result of integrating Ainsworth into our U.S.

Retail Pet Foods segment.

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The goodwill and indefinite-lived trademarks within the U.S.

Retail Pet Foods segment, inclusive of the recently acquired Ainsworth business, remain susceptible to future impairment charges due to the narrow differences between fair value and carrying value.

Retail Pet Foods segment, inclusive of the acquired Ainsworth business, 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.

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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.

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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 Statements of Consolidated Income.

These integration and restructuring costs are not allocated to segment profit and are primarily reported in other special project costs in the Statements of Consolidated Income, with the remaining reported in costs of products sold.

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

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Noncash charges of $ 0.6 and $ 4.1 were included in the integration costs incurred during 2020 and 2019, respectively.

Cumulative noncash charges incurred to date were $ 4.7 and primarily consisted of accelerated depreciation.

The obligation related to severance costs and retention bonuses was $ 0.5 and $ 1.6 at April 30, 2020 and 2019, respectively.

All integration activities related to the acquisition of Big Heart were complete as of April 30, 2018, and as a result, we did no t incur any integration costs during 2020 and 2019.

During 2018, we incurred total integration costs of $ 26.6 .

Noncash charges of $ 2.6 were included in the total integration costs incurred in 2018 and primarily consisted of share-based compensation and accelerated depreciation.

The obligation related to severance costs and retention bonuses was fully satisfied at April 30, 2019.

Cumulative noncash charges incurred were $ 4.7 and primarily consisted of accelerated depreciation.

We did no t incur any costs during 2021.

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

Restructuring Costs:

We completed the restructuring activities associated with our organization optimization program as of April 30, 2019, and as a result, we did no t incur any related costs during 2020.

We incurred restructuring costs of $ 32.0 and $ 22.7 during 2019 and 2018, respectively.

A restructuring program was approved by the Board during the third quarter of 2021 associated with opportunities identified 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 related to these divestitures, see Note 4:

Divestitures.

During the fourth quarter of 2021, we substantially completed an organizational redesign related to our corporate headquarters and announced plans to close our Suffolk, Virginia, production facility by the end of 2022, as a result of a new strategic partnership for the production of our Away From Home liquid coffee.

While the entire scope of the program cannot be quantified at this time, we expect to incur approximately $ 85.0 in costs associated with the restructuring activities approved to date.

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

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

The following table summarizes our restructuring costs incurred related to the restructuring program.

2021 Total Costs

Incurred to Date

at April 30, 2021

Employee-related costs $ 17.3 $ 17.3

Other transition and termination costs 6.8 6.8

Total restructuring costs $ 24.1 $ 24.1

The obligation related to severance costs and retention bonuses was $ 14.6 at April 30, 2021.

Noncash charges of $ 4.4 were included in the restructuring costs incurred during 2021, which primarily consists of accelerated depreciation.

During 2019, we completed a multi-year organization optimization program and incurred restructuring costs of $ 32.0 , of which $ 3.3 were noncash charges.

Total restructuring costs of $ 74.6 were incurred related to the program, which included $ 48.7 and $ 25.9 of employee-related costs and other transition and termination costs, respectively.

Noncash charges included in the total restructuring costs were $ 15.2 , of which $ 3.3 and $ 9.8 were incurred during 2019 and 2018, respectively.

Noncash charges primarily consisted of accelerated depreciation.

The obligation related to severance costs and retention bonuses was fully satisfied as of April 30, 2020, and was $ 0.8 at April 30, 2019.

Total noncash charges were $ 15.2 , which primarily consisted of accelerated depreciation.

The obligation related to severance costs and retention bonuses was fully satisfied as of April 30, 2020.

On December 1, 2020, we sold the Crisco oils and shortening business to B&G Foods.

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.

Under our ownership, the business generated net sales of $ 198.9 , $ 269.2 , and $ 258.5 in 2021, 2020, and 2019, respectively, primarily included in the U.S.

Retail Consumer Foods segment.

We received net proceeds from the divestiture of $ 530.2 , which were net of cash transaction costs and a working capital adjustment.

On January 29, 2021, we sold the Natural Balance premium pet food business to Nexus.

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

Under our ownership, the business generated net sales of $ 156.7 , $ 222.8 , and $ 274.2 in 2021, 2020, and 2019, respectively, included in the U.S.

Retail Pet Foods segment.

We received net proceeds from the divestiture of $ 33.8 , which were net of cash transaction costs and a working capital adjustment.

Upon completion of these transactions during 2021, we recognized a pre-tax gain of $ 114.8 related to the Crisco business and a pre-tax loss of $ 89.5 related to the Natural Balance business, which were included in other operating expense (income) – net within the 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.

April 30, 2021

Crisco Natural Balance

Assets disposed:

Inventories $ 32.9 $ 18.2

Property, plant, and equipment – net 37.2 —

Operating lease right-of-use assets 1.6 0.1

Goodwill 227.6 74.1

Other intangible assets – net 117.5 41.3

Other noncurrent assets 0.2 —

Total assets disposed $ 417.0 $ 133.7

Liabilities disposed:

Current operating lease liabilities $ 0.6 $ —

Noncurrent operating lease liabilities 1.0 —

Deferred income taxes — 10.1

Other noncurrent liabilities — 0.3

Total liabilities disposed 1.6 10.4

Net assets disposed $ 415.4 $ 123.3

On August 31, 2018, we sold our U.S.

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retail channels under the Pillsbury , Martha White , Hungry Jack , White Lily , and Jim Dandy brands, along with all relevant trademarks and licensing agreements, and our manufacturing facility in Toledo, Ohio.

This business generated net sales of approximately $ 370.0 in 2018.

This business generated net sales of $ 105.9 in 2019, primarily included in the U.S Retail Consumer Foods segment.

The transaction did not include our baking business in Canada.

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

Retail Consumer Foods segment prior to the sale.

We received proceeds from the divestiture of $ 369.5 , which were net of cash transaction costs and included a working capital adjustment.

Upon completion of the transaction, we recognized a pre-tax gain of $ 27.7 during 2019, which is included in other operating expense (income) – net within the Statement of Consolidated Income.

We received proceeds from the divestiture of $ 369.5 , which were net of cash transaction costs and a working capital adjustment.

Upon completion of the transaction, we recognized a pre-tax gain of $ 27.7 during 2019, which was included in other operating expense (income) – net within the Statement of Consolidated Income.

Reportable Segments

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the manufacturing and marketing of food and beverage products.

We have four reportable segments:

We have three reportable segments:

Retail Pet Foods, U.S.

Retail Coffee, U.S.

Retail Consumer Foods, and International and Away From Home.

Retail Pet Foods segment primarily includes domestic sales of Rachael Ray Nutrish, Meow Mix , Milk-Bone ,

Kibbles ’n Bits , 9Lives , Natural Balance , Nature’s Recipe , and Pup-Peroni branded products;

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.

Segment results for prior periods 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 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’ , and Café Bustelo branded coffee;

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

The International and Away From Home segment comprises 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 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, 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 derivative gains and losses, as well as amortization expense and impairment charges related to intangible assets.

During 2021, we revised our segment profit calculation to exclude the impact of gains and losses related to the sale of a business, as we believe excluding these items from segment operating results is more reflective of ongoing operating performance.

Prior year segment results have been modified to conform to the revised segment profit presentation.

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.

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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.

The following table reconciles segment profit to income before income taxes and presents total assets, total depreciation, amortization, and impairment charges, and total additions to property, plant, and equipment by segment.

Year Ended April 30,

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Amortization ( 233.0 ) ( 236.3 ) ( 240.3 )

Goodwill impairment charges — ( 97.9 ) ( 145.0 )

Goodwill impairment charge — — ( 97.9 )

Other intangible assets impairment charges ( 3.8 ) ( 52.4 ) ( 107.2 )

Gain on divestitures – net 25.3 — 27.7

Interest expense – net ( 177.1 ) ( 189.2 ) ( 207.9 )

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(B) Primarily represents unallocated cash and cash equivalents and corporate-held investments.

(C) Primarily represents unallocated corporate administrative expense, mainly consisting of depreciation and software amortization.

The following table presents certain geographical information.

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Retail Consumer Foods

Fruit spreads 370.3 341.6 353.8 U.S.

Retail Consumer Foods

Frozen handheld 430.3 365.0 289.0 U.S.

Retail Consumer Foods

Fruit spreads 385.9 370.3 341.6 U.S.

Retail Consumer Foods

Shortening and oils 193.9 262.3 253.6 U.S.

Retail Consumer Foods

Portion control 153.3 162.7 160.3 International and Away From Home

Juices and beverages 139.0 125.7 123.9 U.S.

Retail Consumer Foods

Baking mixes and ingredients 89.9 185.2 437.9 International and Away From Home (B)

Other 292.0 305.0 310.8 International and Away From Home

Portion control 120.5 153.3 162.7 Other (C)

Baking mixes and ingredients 93.5 89.9 185.2 Other (B)(C)

Other 287.3 292.0 305.0 Other (C)

Total net sales $ 8,002.7 $ 7,801.0 $ 7,838.0

(A) The primary reportable segment generally represents at least 75 percent of total net sales for each respective product category.

(B) During 2019 and 2018, the primary reportable segment was U.S.

(B) During 2019, the primary reportable segment was U.S.

Retail Consumer Foods, as the majority of the net sales within this category were related to the divested U.S.

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For more information, see Note 4:

Divestitures.

Sales to Walmart Inc.

and subsidiaries amounted to 32 percent, 32 percent, and 31 percent of net sales in 2020, 2019, and 2018, respectively.

and subsidiaries amounted to 32 percent of net sales in 2021, 2020, and 2019.

These sales are primarily included in our U.S.

retail market segments.

No other customer exceeded

10 percent of net sales for any year.

Trade receivables at April 30, 2020 and 2019, included amounts due from Walmart Inc.

No other customer exceeded 10 percent of net sales for any year.

Trade receivables – net at April 30, 2021 and 2020, included amounts due from Walmart Inc.

and subsidiaries of $ 149.7 and $ 131.9 , respectively.

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Goodwill and Other Intangible Assets

A summary of changes in goodwill by reportable segment is as follows:

The following table summarizes the changes in our goodwill.

Pet Foods U.S.

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Balance at May 1, 2019 $ 2,442.3 $ 2,090.9 $ 1,358.2 $ 419.5 $ 6,310.9

Acquisition 617.8 — — — 617.8

Divestiture — — ( 144.3 ) — ( 144.3 )

Impairment charge (A)

— — — ( 6.4 ) ( 6.4 )

— — — ( 6.9 ) ( 6.9 )

Balance at April 30, 2020 $ 2,442.3 $ 2,090.9 $ 1,358.2 $ 413.1 $ 6,304.5

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

— — — 20.8 20.8

Balance at April 30, 2020 $ 2,442.3 $ 2,090.9 $ 1,358.2 $ 413.1 $ 6,304.5

(A) We have recognized accumulated goodwill impairment charges of $ 242.9 as of April 30, 2020.

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

Balance at April 30, 2021 (B)

$ 2,368.2 $ 2,090.9 $ 1,147.5 $ 417.0 $ 6,023.6

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

(B) Included in goodwill as of April 30, 2021, are accumulated goodwill impairment charges of $ 242.9 .

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

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Total other intangible assets $ 8,145.2 $ 2,104.0 $ 6,041.2 $ 8,459.7 $ 2,030.7 $ 6,429.0

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

For additional information, see Note 4:

Divestitures .

Amortization expense for finite-lived intangible assets was $ 232.0 , $ 235.3 , and $ 239.1 in 2021, 2020, and 2019, respectively.

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The weighted-average useful life of total finite-lived intangible assets is

Based on the carrying amount of intangible assets subject to amortization at April 30, 2020, the estimated amortization expense is $ 238.7 for 2021, $ 232.8 for 2022, $ 225.5 for 2023, $ 220.8 for 2024, and $ 217.3 for 2025.

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

During the third quarter of 2020, we began our annual planning cycle, which was not complete at the end of the quarter;

however, certain brand-level decisions were made that we evaluated to determine whether the carrying value of certain indefinite-lived intangible assets more likely than not exceeded fair value.

As a result, we recognized an impairment charge of $ 52.4 during the third quarter of 2020, related to the Natural Balance brand within the U.S.

Retail Pet Foods segment due to a decline in current year 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 Statement of Consolidated Income.

Additionally, we reassessed the long-term strategic expectations for the Natural Balance brand and reclassified this brand as a finite-lived intangible asset as of February 1, 2020.

Based on the carrying value of intangible assets subject to amortization at April 30, 2021, the estimated amortization expense is $ 221.6 for 2022, $ 214.2 for 2023, $ 209.6 for 2024, $ 206.0 for 2025, and $ 205.0 for 2026.

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 of February 1, 2021, we completed the annual impairment review, in which goodwill impairment was tested at the reporting unit level for our six reporting units with goodwill.

As part of our annual evaluation, we did not recognize any additional impairment charges related to our goodwill and indefinite-lived intangible assets.

The estimated fair value was substantially in excess of the carrying value for the majority of the reporting units and material indefinite-lived intangible assets, and in all instances, the estimated fair value exceeded the carrying value by greater than 10 percent, with the exception of the Pet Foods reporting unit and the Rachael Ray Nutrish brand within the U.S.

As part of our annual evaluation, we did not recognize any impairment charges related to goodwill or any of our material indefinite-lived trademarks.

However, we did recognize an impairment charge of $ 3.8 related to an immaterial trademark within the U.S.

Retail Consumer Foods segment.

For the majority of the reporting units and indefinite-lived intangible assets, the estimated fair value was substantially in excess of the carrying value, and in all instances, the estimated fair value exceeded the carrying value by greater than 10 percent, with the exception of the Pet Foods reporting unit and the Rachael Ray Nutrish brand within the U.S.

Retail Pet Foods segment.

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Retail Pet Foods segment were $ 2.4 billion and $ 1.4 billion, respectively, as of April 30, 2021.

These intangible assets remain susceptible to future impairment charges due to narrow differences between fair value and carrying value, which is primarily attributable to the recent impairment charges and the acquisition of Ainsworth in May 2018.

These intangible assets remain susceptible to future impairment charges due to narrow differences between fair value and carrying value.

Additional sensitivity analyses were performed for the Pet Foods reporting unit, assuming a hypothetical 50-basis-point decrease in the expected long-term growth rate or a hypothetical 50-basis-point increase in the weighted-average cost of capital.

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Therefore, any significant adverse change in our near or long-term projections or macroeconomic conditions could result in future impairment charges, which could be material.

Following the completion of our annual impairment review, we further evaluated the potential impact of COVID-19 on the fair value of our goodwill and indefinite-lived intangible assets.

While we concluded there were no indicators of impairment

as of April 30, 2020, 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 significant decline in demand as a result of COVID-19.

We will continue to evaluate the nature and extent to which COVID-19 could impact our business and our goodwill and other intangible assets.

As of April 30, 2020, the goodwill related to the Away From Home reporting unit represented approximately 65 percent of the goodwill within the International and Away From Home segment.

During 2019, we recognized impairment charges of $ 97.9 related to the goodwill of the Natural Foods reporting unit within the U.S.

Retail Consumer Foods segment and $ 107.2 related to certain indefinite-lived intangible assets within the U.S.

Retail Pet Foods segment.

These charges were primarily the result of reductions in our long-term net sales and profitability projections and were included as noncash charges in our Statement of Consolidated Income.

In addition, we continue to evaluate the nature and extent to which 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 April 30, 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 April 30, 2021, the goodwill related to the Away From Home reporting unit represented approximately 60 percent of the goodwill within the combined International and Away From Home operating segments.

During 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 Statement of Consolidated Income.

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

Debt and Financing Arrangements

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Outstanding Carrying

2.20% Senior Notes due December 6, 2019 $ — $ — $ 300.0 $ 299.5

2.50% Senior Notes due March 15, 2020 — — 500.0 499.0

3.50 % Senior Notes due October 15, 2021

$ 750.0 $ 753.5 $ 750.0 $ 761.1

3.00 % Senior Notes due March 15, 2022

400.0 399.4 400.0 398.7

3.50 % Senior Notes due March 15, 2025

1,000.0 996.8 1,000.0 996.0

3.38 % Senior Notes due December 15, 2027

500.0 497.1 500.0 496.7

2.38 % Senior Notes due March 15, 2030

500.0 495.7 500.0 495.2

4.25 % Senior Notes due March 15, 2035

650.0 644.3 650.0 643.9

4.38 % Senior Notes due March 15, 2045

600.0 587.1 600.0 586.5

3.55 % Senior Notes due March 15, 2050

300.0 295.8 300.0 295.7

Term Loan Credit Agreement due May 14, 2021 — — 700.0 699.5

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(A) Represents the carrying amount included in the Consolidated Balance Sheets, which includes the impact of capitalized debt issuance costs, offering discounts, and terminated interest rate contracts.

In March 2020, we completed an offering of $ 800.0 in Senior Notes due March 15, 2030, and March 15, 2050.

The Senior Notes included $ 7.4 of capitalized debt issuance costs and $ 1.8 of offering discounts to be amortized to interest expense over the life of the debt.

During the third quarter of 2021, we prepaid, in full, the remaining outstanding balance of the $ 1.5 billion Term Loan that was entered into in April 2018 to partially finance the Ainsworth acquisition, as discussed in Note 2:

During 2021 and 2020, we prepaid $ 700.0 and $ 100.0 on the Term Loan, respectively.

In 2020, we completed an offering of $ 800.0 in Senior Notes due March 15, 2030, and March 15, 2050.

A portion of the net proceeds from the offering was used to repay the $ 500.0 Senior Notes due March 15, 2020, with the balance being held as a cash equivalent to be used for general corporate purposes.

Concurrent with the pricing of these Senior Notes, we terminated the interest rate contracts entered into in November 2018 and June 2018, resulting 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.

Concurrent with the pricing of these Senior Notes, we terminated interest rate contracts that 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.

For additional information, see Note 10:

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We may prepay all or part of the Senior Notes at 100 percent of the principal amount thereof, together with the accrued and unpaid interest, and any applicable make-whole amount.

In April 2018, we entered into a 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, as discussed in Note 2:

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

Prime Rate or LIBOR, based on our election, and is 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 April 30, 2020, we have prepaid $ 800.0 on the Term Loan to date, including $ 100.0 in 2020.

The interest rate on the Term Loan at April 30, 2020, was 1.21 percent.

In November 2019, we entered into an amendment to the Term Loan that decreased the applicable

margins on LIBOR, based on our long-term unsecured debt rating.

This amendment did not have a material impact on our consolidated financial statements.

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

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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 both April 30, 2020 and 2019.

We did no t have a balance outstanding under the revolving credit facility at April 30, 2021 or 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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Interest paid totaled $ 169.9 , $ 193.4 , and $ 213.3 in 2021, 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 timing of interest payments.

This differs from interest expense due to capitalized interest, amortization of debt issuance costs and discounts, effect of interest rate contracts, 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.

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Defined Benefit Pension Plans Other Postretirement Benefits

Year Ended April 30, 2020 2019 2018 2020 2019 2018

Year Ended April 30, Year Ended April 30,

2021 2020 2019 2021 2020 2019

Service cost $ 1.8 $ 1.6 $ 2.1 $ 1.8 $ 1.8 $ 1.9

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Net periodic benefit cost $ 44.2 $ 7.5 $ 15.1 $ 2.6 $ 2.7 $ 2.5

Other changes in plan assets and benefit liabilities recognized in accumulated other comprehensive income (loss) before income taxes:

Other changes in plan assets and benefit liabilities recognized in

accumulated other comprehensive income (loss) before income taxes:

Prior service credit (cost) arising during the year $ — $ — $ — $ — $ — $ ( 2.0 )

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We amortize gains and losses for our postretirement plans over the average expected future period of vested service.

For plans that consist of less than 5 percent of participants that are active, average life expectancy is used instead of the average expected useful service period.

For plans that consist of less than 5 percent of participants that are active, average life expectancy is used instead of the average expected future service period.

We use a measurement date of April 30 to determine defined benefit pension and other postretirement benefit plans’ assets and benefit obligations.

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Defined Benefit Pension Plans Other Postretirement Benefits

April 30, 2020 2019 2020 2019

Year Ended April 30, Year Ended April 30,

2021 2020 2021 2020

Change in benefit obligation:

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Interest cost 14.4 20.9 1.8 2.3

Amendments — — — 2.0

Actuarial loss (gain) 61.8 17.0 4.4 2.8

Actuarial loss (gain) (A)

10.8 61.8 ( 5.9 ) 4.4

Benefits paid ( 35.9 ) ( 39.6 ) ( 3.4 ) ( 3.8 )

Curtailment — ( 1.3 ) — —

Settlement ( 101.2 ) ( 4.9 ) — —

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Net benefit liability $ ( 149.0 ) $ ( 180.7 ) $ ( 69.6 ) $ ( 74.5 )

(A) The actuarial losses and gains for our defined benefit pension plans and other postretirement benefits were primarily due to changes in the discount rates used in determining the plan obligations.

The following table summarizes amounts recognized in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets, before income taxes.

Defined Benefit Pension Plans Other Postretirement Benefits

April 30, 2020 2019 2020 2019

Year Ended April 30, Year Ended April 30,

2021 2020 2021 2020

Net actuarial gain (loss) $ ( 140.5 ) $ ( 199.7 ) $ 11.6 $ 5.5

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Total recognized in accumulated other comprehensive income (loss) $ ( 142.2 ) $ ( 202.3 ) $ 15.3 $ 10.2

During 2021, we expect to recognize amortization of net actuarial losses and prior service credit of $ 11.7 and $ 0.1 , respectively, in net periodic benefit cost.

The following table sets forth the weighted-average assumptions used in determining the benefit obligations.

Defined Benefit Pension Plans Other Postretirement Benefits

April 30, 2020 2019 2020 2019

Year Ended April 30, Year Ended April 30,

2021 2020 2021 2020

Discount rate 3.13 % 3.05 % 2.97 % 2.98 %

Rate of compensation increase 3.55 3.58 — —

Interest crediting rate 4.50 4.50 — —

Canadian plans:

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and Canadian plans, respectively.

The rate for participants under age 65 is assumed to decrease to 5.0 percent in calendar 2026 for the U.S.

The rate for participants under age 65 is assumed to decrease to 5.0 percent in calendar year 2026 for the U.S.

plan and remain at 4.5 percent for the Canadian plan.

The health care cost trend rate assumption impacts the amount of the other postretirement benefits obligation and periodic other postretirement benefits cost reported.

A one percentage point annual change in the assumed health care cost trend rate would have the following effect as of April 30, 2020:

One Percentage Point

Increase Decrease

Effect on total service and interest cost components $ — $ —

Effect on benefit obligation 1.1 1.1

The following table sets forth selective information pertaining to our Canadian pension and other postretirement benefit plans, which is included in the consolidated information presented on pages 62 and 63.

Defined Benefit Pension Plans Other Postretirement Benefits

Year Ended April 30, 2020 2019 2020 2019

Year Ended April 30, Year Ended April 30,

2021 2020 2021 2020

Benefit obligation at end of year $ 2.0 $ 80.1 $ 6.1 $ 6.8

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Amortization of net actuarial loss (gain) 0.4 1.1 — —

Settlement loss (gain) 29.6 — — —

Termination benefit cost — 0.2 — —

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Changes in plan assets:

Actual return on plan assets $ 0.9 $ 9.2 $ — $ —

Company contributions ( 1.1 ) 0.1 0.4 0.3

Benefits paid ( 4.4 ) ( 6.8 ) ( 0.4 ) ( 0.3 )

Actual return on plan assets 9.2 6.1 — —

Settlement ( 83.2 ) — — —

Foreign currency translation 5.7 ( 3.6 ) — —

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, we recognized noncash pre-tax settlement charges of $ 29.6 during 2021 to accelerate the unrecognized losses within accumulated other comprehensive income (loss) that would have otherwise been recognized in subsequent periods.

These settlement charges were included within other income (expense) – net in the Statement of Consolidated Income.

The following table sets forth additional information related to our defined benefit pension plans.

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The Level 1 assets are valued using quoted market prices for identical securities in active markets.

The Level 2 asset in 2019 was comprised of a pooled fund that consists of equity securities traded on active exchanges.

(C) This category is invested primarily in common stocks and other equity securities traded on active exchanges of foreign issuers located outside the U.S.

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The Level 1 assets are valued using quoted market prices for identical securities in active markets.

The Level 2 asset in 2019 was comprised of a pooled fund that consists of equity securities traded on active exchanges.

(D) This category is primarily comprised of bond funds, which seek to duplicate the return characteristics of high-quality U.S.

(D) This category is primarily composed of bond funds, which seek to duplicate the return characteristics of high-quality U.S.

and foreign corporate bonds with a duration range of 10 to 13 years, as well as various U.S.

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These assets are valued using quoted market prices for identical securities in active markets and are classified as Level 1 assets.

(E) This category is comprised of fixed-income funds that invest primarily in government-related bonds of non-U.S.

(E) This category is composed of fixed-income funds that invest primarily in government-related bonds of non-U.S.

issuers and include investments in the Canadian, as well as emerging markets.

These assets are valued using quoted market prices for identical securities in active markets and are classified as Level 1 assets.

(F) This category is comprised of a real estate fund whereby the underlying investments are contained in the Canadian market, and a common collective trust fund investing in direct commercial property funds.

(F) This category is composed of a real estate fund whereby the underlying investments are contained in the Canadian market and a common collective trust fund investing in direct commercial property funds.

The real estate fund and the collective trust fund investing in direct commercial property are classified as Level 2 assets, whereby the underlying securities are valued utilizing quoted market prices for identical securities in active markets and based on the quoted market prices of the underlying investments in the common collective trust, respectively.

(G) This category is comprised of a private equity fund that consists primarily of limited partnership interests in corporate finance and venture capital funds, as well as a private limited investment partnership.

(G) This category is composed of a private equity fund that consists primarily of limited partnership interests in corporate finance and venture capital funds, as well as a private limited investment partnership.

The fair value estimates of the private equity fund and private limited investment partnership are based on the underlying funds’ net asset values.

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In accordance with ASU 2015-07, the private equity fund and private limited investment partnership are removed from the total financial assets measured at fair value and disclosed separately.

In 2021, we expect to make contributions of approximately $ 1.0 , while making direct benefit payments of approximately $ 13.5 , primarily related to our defined benefit pension plans.

In 2022, we expect to make contributions of approximately $ 2.7 , while making direct benefit payments of approximately $ 10.0 .

Further, we expect the following payments to be made from the defined benefit pension and other postretirement benefit plans:

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The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans.

For instance, the assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, and if a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to the withdrawing employer may be the responsibility of the remaining participating employers.

participating employers.

Additionally, if we stop participating in the multi-employer pension plan, we may be required to pay the plan an amount based on our allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

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

Commodity Derivatives:

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

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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:

Foreign Currency Exchange Derivatives:

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.

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

Interest Rate Hedging:

Interest Rate Derivatives:

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.

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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.

We entered into interest rate contracts in November 2018 and June 2018, with notional values of $ 300.0 and $ 500.0 , respectively, to manage our exposure to interest rate volatility associated with anticipated debt financing in 2020.

These interest rate contracts were designated as cash flow hedges.

In March 2020, we terminated the interest rate contracts concurrent with the pricing of the Senior Notes due March 15, 2030, and March 15, 2050, which resulted in a pre-tax loss of $ 239.8 .

The loss 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 2018, we terminated a treasury lock concurrent with the pricing of the Senior Notes due December 15, 2027, which was designated as a cash flow hedge and used to manage our exposure to interest rate volatility.

The termination resulted in a pre-tax gain of $ 2.7 , which was deferred and included as a component of accumulated other comprehensive income (loss) and is being amortized as a reduction to 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 of interest expense.

To date, we have recognized $ 41.1 of the gain, of which $ 8.1 , $ 8.0 , and $ 7.8 were recognized in 2020, 2019, and 2018, respectively.

The remaining gain will be recognized as follows:

$ 8.4 in 2021 and $ 4.0 in 2022.

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

Year Ended April 30,

Commodity contracts $ 861.0 $ 890.1

Foreign currency exchange contracts 88.4 65.6

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

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Liabilities Other

Derivatives designated as hedging instruments:

Interest rate contracts $ — $ 49.1 $ — $ —

Total derivatives designated as hedging instruments $ — $ 49.1 $ — $ —

Derivatives not designated as hedging instruments:

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Foreign currency exchange contracts 2.4 0.1 — —

Total derivative not designated as hedging instruments $ 6.2 $ 26.0 $ — $ —

Total derivative instruments $ 17.1 $ 33.3 $ — $ —

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

At April 30, 2020 and 2019, we maintained cash margin account balances of $ 43.2 and $ 40.7 , respectively, included in other current assets in the Consolidated Balance Sheets.

At April 30, 2021, our cash margin accounts represented collateral received of $ 10.8 , and at April 30, 2020, our cash margin accounts represented collateral pledged of $ 43.2 , included in other current assets in the Consolidated Balance Sheets.

The change in the cash margin account balances is included in other – net, investing activities in the 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 Statements of Consolidated Income, was $ 189.2 , $ 207.9 , and $ 174.1 in 2020, 2019, and 2018, respectively.

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

Year Ended April 30,

2020 2019 2018

Gains (losses) recognized in other comprehensive income (loss) $ ( 190.7 ) $ ( 49.1 ) $ 2.7

Gains (losses) reclassified from accumulated other comprehensive

income (loss) to interest expense ( 2.1 ) ( 0.4 ) ( 0.5 )

Change in accumulated other comprehensive income (loss) $ ( 188.6 ) $ ( 48.7 ) $ 3.2

Included as a component of accumulated other comprehensive income (loss) at April 30, 2020 and 2019, were deferred net pre-tax losses of $ 241.1 and $ 52.5 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) was $ 55.5 and $ 12.1 at April 30, 2020 and 2019, 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.

Cash flows associated with the settlement of derivative instruments are classified in the same line item as the cash flows of the related hedged item, which is within operating activities in the Statements of Consolidated Cash Flows.

Economic Hedges

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

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Unallocated derivative gains (losses) $ 93.6 $ 19.6 $ ( 54.2 )

The net cumulative unallocated derivative gains and losses at April 30, 2020 and 2019, were losses of $ 32.9 and $ 52.5 , respectively.

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

As of April 30, 2021, the net cumulative unallocated derivative gains were $ 60.7 , and at April 30, 2020 the net cumulative unallocated derivative losses were $ 32.9 .

Cash Flow Hedges

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 other accumulated other comprehensive income (loss) and is being amortized as interest expense over the life of the debt.

Interest expense – net, as presented in the Statements of Consolidated Income, was $ 177.1 , $ 189.2 , and $ 207.9 in 2021, 2020, and 2019, respectively.

The following table presents information on the pre-tax gains and losses recognized on all contracts previously designated as cash flow hedges.

Year Ended April 30,

Commodity contracts $ 890.1 $ 544.8

Foreign currency exchange contracts 65.6 144.9

Interest rate contracts — 800.0

2021 2020 2019

Gains (losses) recognized in other comprehensive income (loss) $ — $ ( 190.7 ) $ ( 49.1 )

Gains (losses) reclassified from accumulated other comprehensive income (loss) to interest expense ( 13.8 ) ( 2.1 ) ( 0.4 )

Change in accumulated other comprehensive income (loss) $ 13.8 $ ( 188.6 ) $ ( 48.7 )

Included as a component of accumulated other comprehensive income (loss) at April 30, 2021 and 2020, were deferred net pre-tax losses of $ 227.3 and $ 241.1 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) was $ 52.5 and $ 55.5 at April 30, 2021 and 2020, respectively.

Approximately $ 13.6 of the net pre-tax loss will be recognized over the next 12 months related to the terminated interest rate contracts.

Fair Value Hedges

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 life of the debt as a reduction of interest expense.

To date, we have recognized $ 49.5 of the gain, of which $ 8.4 , $ 8.1 , and $ 8.0 were recognized in 2021, 2020, and 2019, respectively.

The remaining gain of $ 4.0 will be recognized in 2022.

Other Financial Instruments and Fair Value Measurements

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Foreign currency exchange contracts – net 0.2 2.1 — 2.3

Interest rate contracts — ( 49.1 ) — ( 49.1 )

Total long-term debt (C)

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Level 2 commodity and foreign currency exchange derivatives are valued using quoted prices for similar assets or liabilities in active markets.

The Level 2 interest rate contracts were valued using standard valuation techniques, the income approach, and observable Level 2 market expectations at the measurement date to convert future amounts to a single discounted present value.

Level 2 inputs for the valuation of the interest rate contracts are limited to prices that are observable for the asset or liability.

For additional information, see Note 10:

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:

Debt and Financing Arrangements.

We recognized impairment charges of $ 52.4 during 2020, related to the Natural Balance brand in the U.S.

We recognized impairment charges of $ 3.8 during 2021 related to an immaterial trademark within the U.S.

Retail Consumer Foods segment.

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

Retail Pet Foods segment.

During 2019, we recognized impairment charges of $ 205.1 , of which $ 97.9 and $ 107.2 related to the goodwill of the Natural Foods reporting unit within the U.S.

Retail Consumer Foods segment and certain indefinite-lived trademarks in the U.S.

Retail Pet Foods segment, respectively.

These adjustments were included as noncash charges in our Statements of Consolidated Income.

We utilized Level 3 inputs based on management’s best estimates and assumptions to estimate the fair value of the reporting unit and indefinite-lived trademarks.

These charges were included as noncash charges in our Statements of

Consolidated Income.

We utilized Level 3 inputs based on management’s best estimates and assumptions to estimate the fair value of the indefinite-lived trademarks.

For additional information, see Goodwill and Other Intangible Assets in Note 1:

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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, we generally are not reasonably certain to exercise them, and therefore, the optional periods do not typically impact 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.

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We consider our credit rating and the current economic environment in determining this collateralized rate.

For the initial implementation of the lease standard, the incremental borrowing rate at May 1, 2019, was used to calculate all operating lease liabilities.

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

April 30, 2020

As of April 30, 2021, we have entered into a lease commitment related to one distribution center which will begin during the first quarter of 2022.

Upon commencement of this lease, we expect to recognize a right-of-use asset and lease liability of approximately $ 1.9 in the Condensed Consolidated Balance Sheet.

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

Year Ended April 30,

Operating lease right-of-use assets $ 142.0 $ 148.4

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Accumulated depreciation

( 5.5 ) ( 5.9 )

Total property, plant, and equipment $ 4.3 $ 5.7

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The following table summarizes the components of lease expense.

April 30, 2020

Year Ended April 30,

Operating lease cost $ 45.4 $ 51.7

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

April 30, 2020

Year Ended April 30,

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

Operating cash flows from operating leases

$ 45.7 $ 50.8

Operating cash flows from finance leases 0.2 0.2

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Lease liabilities $ 153.9 $ 4.3

As of April 30, 2019, our minimum operating lease obligations were as follows:

$ 43.0 in 2020, $ 36.7 in 2021, $ 30.5 in 2022, $ 24.8 in 2023, and $ 12.3 in 2024.

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

April 30, 2020

Year Ended April 30,

Weighted average remaining lease term (in years):

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Currently, these incentives consist of restricted shares, restricted stock units (which may also be referred to as deferred stock units), performance units, and stock options.

These awards are administered primarily through the 2010 Equity and Incentive Compensation Plan initially approved by our shareholders in August 2010 and re-approved in August 2015.

Awards under this plan may be in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units, incentive awards, and other share-based awards.

Awards under this plan may be granted to our non-employee directors, consultants, officers, and other employees.

During 2021, these awards were administered primarily through the 2010 Equity and Incentive Compensation Plan (the “2010 Plan”) and the 2020 Equity and Incentive Compensation Plan (the “2020 Plan”).

The 2010 Plan was initially approved by our shareholders in August 2010 and re-approved in August 2015, and the 2020 Plan was approved by our shareholders in August 2020.

The 2010 Plan expired and the 2020 Plan became effective in November 2020, at which time the common shares remaining available for issuance under the 2010 Plan were transferred to the 2020 Plan.

Awards under these plans may be in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units, incentive awards, and other share-based awards.

Awards under these plans may be granted to our non-employee directors, consultants, officers, and other employees.

Deferred stock units granted to non-employee directors vest immediately and, along with dividends credited on those deferred stock units, are paid out in the form of common shares upon termination of service as a non-employee director.

At April 30, 2020, there were 4,781,736 shares available for future issuance under this plan.

Under the 2010 Equity and Incentive Compensation Plan, we have the option to settle share-based awards by issuing common shares from treasury, issuing new Company common shares, or issuing a combination of common shares from treasury and new Company common shares.

At April 30, 2021, there were 4,431,824 shares available for future issuance under the 2020 Plan.

Under the 2020 Plan, we have the option to settle share-based awards by issuing common shares from treasury, issuing new Company common shares, or issuing a combination of common shares from treasury and new Company common shares.

Stock Options:

Under the 2010 Equity and Incentive Compensation Plan, we granted 193,831 options during 2020 and granted no stock options during 2019 and 2018.

Stock options granted in 2020 vest ratably over a period of three years .

Under the 2010 Plan, we granted 296,619 options during 2021, 193,831 during 2020, and there were no stock options granted during 2019.

Stock options granted in 2021 and 2020 vest ratably over a period of three years .

The exercise price of all stock options granted was equal to the market value of the shares on the date of grant, and all stock options granted and outstanding have a contractual term of 10 years.

The fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions for stock options granted in 2020:

The fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions for stock options granted:

Expected volatility (%) 23.0 % 20.1 %

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Outstanding at April 30, 2021

720,083 $ 113.48

Exercisable at April 30, 2021

347,545 $ 114.69

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the stock option.

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Compensation cost related to stock options is recognized ratably over the service period from the grant date through the end of the requisite service period.

During 2020, we recognized compensation cost of $ 1.3 , and during 2019, we did no t recognize

any compensation cost, as the requisite service period for the previous options granted ended on April 30, 2018.

The compensation expense for stock option awards totaled $ 0.4 for the year ended April 30, 2018, which was included in other special project costs in the Statement of Consolidated Income.

During 2021 and 2020, we recognized compensation cost of $ 2.3 and $ 1.3 , respectively, and during 2019, we did no t recognize any compensation cost, as the requisite service period for the previous options granted ended on April 30, 2018.

The tax benefit related to the stock option expense was $ 0.5 and $ 0.3 for 2021 and 2020, respectively.

As of April 30, 2020, we had unrecognized compensation cost of $ 1.8 related to the stock options that were granted in 2020.

As of April 30, 2021, we had unrecognized compensation cost of $ 3.4 related to the stock options that were granted in 2021 and 2020.

Cash received from stock option exercises was $ 4.5 and $ 7.1 for the years ended April 30, 2021 and 2020, respectively.

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Stock Units Weighted-

Fair Value Performance

Per Share Performance

Units Weighted-

Date Fair Value

Outstanding at May 1, 2020

736,684 $ 119.93 153,217 $ 123.68

Granted 83,188 110.66 194,786 113.70

Converted 85,154 123.68 ( 85,154 ) 123.68

Vested ( 180,954 ) 127.83 ( 10 ) 123.68

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Outstanding at April 30, 2021

598,738 $ 116.54 325,453 $ 118.21

The weighted-average grant date fair value of equity awards other than stock options that vested in 2021, 2020, and 2019 was $ 23.1 , $ 14.7 , and $ 17.0 , respectively.

The vesting date fair value of equity awards other than stock options that vested in 2020, 2019, and 2018 was $ 14.5 , $ 17.0 , and $ 20.7 , respectively.

The weighted-average grant date fair value of restricted shares, deferred stock units, and performance units is the average of the high and the low share price on the date of grant.

The vesting date fair value of equity awards other than stock options that vested in 2021, 2020, and 2019 was $ 19.7 , $ 14.5 , and $ 17.0 , respectively.

The following table summarizes the weighted-average fair values of the equity awards granted.

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Stock Units Weighted-

Fair Value Performance

Per Share Performance

Units Weighted-

Average Conversion

Date Fair Value

2021 83,188 $ 110.66 194,786 $ 113.70

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2019 194,932 104.33 85,154 123.68

The restricted shares and deferred stock units granted in 2020 under our new long-term incentive compensation program vest ratably over a three -year period from date of grant.

The restricted shares and deferred stock units granted in 2021 and 2020 under our new long-term incentive compensation program vest ratably over a three -year period from date of grant.

The remaining restricted shares and deferred stock units generally vest over four years from the date of grant or upon the attainment of a defined age and years of service, subject to certain retention requirements.

The performance units granted in 2020 vest over three years from the date of grant and are converted to restricted shares upon vest based on the performance achieved during the service period.

During 2019 and 2018, the performance units granted represented the number of restricted shares received by certain executive officers, subsequent to year-end, upon conversion of the performance units earned during the one year period.

The performance units granted in 2021 and 2020 vest three years from the date of grant and are converted to common shares upon vest based on the performance achieved during the service period.

During 2019, the performance units granted represented the number of restricted shares received by certain executive officers, subsequent to year-end, upon conversion of the performance units earned during the one year period.

Income before income taxes is as follows:

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Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

Tax reform – net impact on U.S.

deferred tax assets and liabilities — — ( 92.0 )

Tax reform – transition tax — — ( 0.5 )

Goodwill impairment charges — 2.9 5.5

Goodwill impairment charge — — 2.9

Sale of the U.S.

baking business — — 2.4

Sale of the Crisco business

Sale of the Natural Balance business

State and local income taxes 2.9 3.3 2.7

Domestic manufacturing deduction — — ( 3.0 )

Deferred tax benefit from integration — ( 2.4 ) —

Deferred tax benefit from the Ainsworth integration — — ( 2.4 )

Other items – net ( 0.2 ) ( 0.2 ) 0.6

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Income taxes paid $ 333.2 $ 227.1 $ 250.9

The income tax expense of $ 295.6 for 2021 includes the permanent tax impacts associated with the sale of the Crisco and Natural Balance businesses.

The income tax expense of $ 187.2 for 2019 included the permanent tax impacts associated with the sale of the U.S.

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On December 22, 2017, the U.S.

government enacted the Tax Act, legislating comprehensive tax reform that reduced the U.S.

government enacted the U.S.

Tax Cuts and Jobs Act (the “Tax Act”), legislating comprehensive tax reform that reduced the U.S.

federal statutory corporate tax rate from 35.0 percent to 21.0 percent effective January 1, 2018, broadened the U.S.

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ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

118 , which resulted in an immaterial adjustment to the net provisional benefit of $ 765.8 previously recorded during 2018.

The net benefit included the revaluation of net deferred tax liabilities at the reduced federal income tax rate, offset in part by the estimated impact of the one-time transition tax.

Despite the completion of our accounting for the Tax Act, the amounts recorded may change as a result of future guidance and interpretation from the Internal Revenue Service (“IRS”) and various other taxing jurisdictions, all of which are continuing to analyze the complexities and interdependencies of the provisions within the Tax Act.

Any future legislative and interpretive actions could result in additional income tax impacts which could be material in the period any such changes are enacted.

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

While these specific rollbacks did not impact us, 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 impacts on our income taxes at that time.

118 , which resulted in an immaterial adjustment to the net provisional benefit of $ 765.8 that was previously recorded during 2018.

The net benefit included the revaluation of net deferred tax liabilities at the reduced federal income tax rate, partially offset by the estimated impact of the one-time transition tax.

During calendar 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 Tax Act, tax extenders for expiring tax breaks, and other tax provisions.

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

We are a voluntary participant in the Compliance Assurance Process (“CAP”) program offered by the IRS and are currently under a CAP examination for the tax years ended April 30, 2021, 2020, and 2019.

Through the contemporaneous exchange of information with the IRS, this program is designed to identify and resolve tax positions with the IRS prior to the filing of a tax return, which allows us to remain current with our IRS examinations.

The IRS has completed the CAP examinations for the tax years ended April 30, 2018 and 2017.

The IRS has completed the CAP examination for the tax year ended April 30, 2018.

The tax years prior to 2018 are no longer subject to U.S.

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We evaluate the realizability of deferred tax assets for each of the jurisdictions in which we operate.

The total valuation allowance increased by a net amount of $ 26.2 during the year, primarily related to the foreign tax credit deferred tax assets that were determined to not be realizable.

During 2020, we returned $ 39.7 of international cash to the U.S., primarily driven by a reduction in our capital investment in certain foreign subsidiaries in conjunction with a restructuring of our international holding and operating entities.

No foreign withholding taxes were applicable.

The state income taxes were not significant and have been included in income tax expense.

Deferred income taxes have not been provided on approximately $ 29.7 of remaining temporary differences related to our investments in foreign subsidiaries since these amounts remain permanently reinvested.

It is not practical to estimate the amount of additional taxes that might be payable on these basis differences because of the numerous methods by which these differences could reverse.

The total valuation allowance increased by an immaterial amount during the year.

During 2021, we returned $ 100.0 of foreign cash to the U.S.

The repatriation was subject to $ 5.0 of foreign withholding taxes, while U.S.

federal and state income taxes were not significant.

As of April 30, 2021, we have re-evaluated our global cash needs and determined that a portion of our undistributed earnings, primarily in Canada, are no longer permanently reinvested, resulting in the recognition of an immaterial deferred tax liability.

Deferred income taxes have not been provided on approximately $ 23.9 of the remaining temporary differences related to our investments in our other foreign subsidiaries since these amounts remain permanently reinvested, with immaterial tax effects.

Our unrecognized tax benefits were $ 10.2 , $ 13.1 , and $ 15.0 , of which $ 8.1 , $ 10.5 , and $ 12.0 would affect the effective tax rate, if recognized, as of April 30, 2021, 2020, and 2019, respectively.

Our accrual for tax-related net interest and penalties totaled $ 1.7 , $ 1.9 , and $ 3.3 as of April 30, 2021, 2020, and 2019, respectively.

The amount of tax related to net interest and penalties credited to earnings totaled $ 0.1 and $ 0.8 for 2020 and 2019, respectively, and charged to earnings totaled $ 0.1 during 2018.

The amount of tax related to net interest and penalties credited to earnings totaled $ 0.2 , $ 0.1 , and $ 0.8 for 2021, 2020, and 2019, respectively.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $ 3.3 , primarily as a result of the expiration of statute of limitation periods.

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Expiration of statute of limitations periods 2.6 3.5 9.5

Prior year tax positions 1.0 — —

Balance at April 30, $ 10.2 $ 13.1 $ 15.0

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Income tax benefit (expense) — 11.2 2.8 ( 0.2 ) 13.8

Reclassification of stranded tax effects (C)

— ( 0.5 ) ( 15.3 ) 0.8 ( 15.0 )

Balance at April 30, 2019 $ ( 35.5 ) $ ( 40.4 ) $ ( 110.0 ) $ 4.1 $ ( 181.8 )

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Balance at April 30, 2021

$ ( 9.0 ) $ ( 174.8 ) $ ( 97.3 ) $ 3.7 $ ( 277.4 )

(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 and 2019 relates to losses on the interest rate contracts entered into in November 2018 and June 2018 that were terminated in 2020.

The current period credit in 2018 relates to the gain on the interest rate contract terminated in 2018.

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.

(C) During 2018, we adopted ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allowed us to reclassify the stranded income tax effects resulting from the Tax Act from accumulated other comprehensive income (loss) to retained earnings.

(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 charges 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:

Pensions and Other Postretirement Benefits .

Contingencies

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

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

While we cannot predict with certainty the ultimate results of these proceedings or potential settlements associated with these matters, we have accrued losses for certain contingent liabilities that we have determined are probable and reasonably estimable at April 30, 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 will have a material adverse effect on our financial position, results of operations, or cash flows.

On May 9, 2011, CERT filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against us and additional defendants who manufacture, package, distribute, or sell packaged coffee.

The lawsuit is CERT v.

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

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

The Plaintiff alleges that we and the other defendants failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under Proposition 65.

The Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of $2,500.00 per day per violation of Proposition 65.

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

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

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

We have asserted multiple affirmative defenses.

Trial of the first phase of the case commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants.

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

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

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

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

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

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

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

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

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

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

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

The hearing on the motions has been pushed back until at least July 22, 2020, due to COVID-19.

This past quarter, CERT issued discovery requests seeking information regarding acrylamide in coffee flavorings, thereby introducing a new theory into the lawsuit, over the objection of the defendants.

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

Accordingly, no loss contingency has been recorded for this matter as of April 30, 2020, as the likelihood of loss is not considered probable or estimable.

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

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

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

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

While we cannot predict with certainty the ultimate results of the remaining 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 April 30, 2021.

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 CERT v.

Brad Barry LLC, et al., which alleges that we, in addition to 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 Proposition 65.

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, 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 appealed the ruling in November 2020 to the California Court of Appeals for the Second Appellate District, which is currently pending.

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.

Five of the lawsuits have been transferred to the United States District Court for the Western District of Missouri for coordinated pre-trial proceedings.

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 April 30, 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

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Repurchase Programs:

We did no t repurchase any common shares under a repurchase plan authorized by the Board during 2020 and 2019.

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 the repurchase program, a total of 5.8 million common shares were repurchased for $ 671.9 during 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 April 30, 2021, approximately 2.8 million common shares remain available for repurchase pursuant to the Board’s authorizations.

Quarterly Results of Operations (Unaudited)

The following tables summarize the unaudited quarterly results of operations for the years ended April 30, 2020 and 2019.

First Quarter Second Quarter Third Quarter Fourth Quarter

Net sales $ 1,778.9 $ 1,957.8 $ 1,972.3 $ 2,092.0

Gross profit 699.6 754.0 760.0 788.4

Net income 154.6 211.2 187.4 226.3

Earnings per common share (A) :

Net income $ 1.36 $ 1.85 $ 1.64 $ 1.98

Net income – assuming dilution 1.36 1.85 1.64 1.98

Dividends declared per common share 0.88 0.88 0.88 0.88

First Quarter Second Quarter Third Quarter Fourth Quarter

Net sales $ 1,902.5 $ 2,021.5 $ 2,011.9 $ 1,902.1

Gross profit 678.2 771.3 773.8 692.4

Net income 133.0 188.5 121.4 71.5

Earnings per common share (A) :

Net income $ 1.17 $ 1.66 $ 1.07 $ 0.63

Net income – assuming dilution 1.17 1.66 1.07 0.63

Dividends declared per common share 0.85 0.85 0.85 0.85

(A) Annual net income per common share may not equal the sum of the individual quarters due to differences in the average number of shares outstanding during the respective periods, primarily due to share repurchases.

We did no t repurchase any common shares under a repurchase plan authorized by the Board during 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data