What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-06-16 compared with 2021-06-17 · 295 added, 287 removed, 1256 unchanged (32% of the section changed)

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Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting 45

Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements 40

Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements (PCAOB ID:

Report of Management on Responsibility for Financial Reporting 49

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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

Rachael Ray Nutrish Brand Indefinite-Lived Intangible Asset Impairment Evaluation

Description of the Matter At April 30, 2022, the Company’s total indefinite-lived intangible assets, excluding goodwill, were $2.6 billion, of that, $1.1 billion relates to the U.S.

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

Retail Coffee segment (collectively, the “Pet Foods and Coffee indefinite-lived intangible assets”).

Retail Pet Foods segment.

As discussed in Note 1 and Note 6 of the consolidated financial statements, indefinite-lived intangible assets are quantitatively tested for impairment at least annually on February 1, or when events or circumstances occur that would more likely than not reduce the fair value of the asset below its carrying amount.

The Company uses an income approach in its quantitative impairment tests.

Certain Pet Foods and Coffee indefinite-lived intangible assets are individually material, have had recently recognized impairment charges, or are susceptible to future charges due to the narrow differences between fair value and carrying value, or a combination of some or all three of these criteria.

Auditing the Company’s Pet Foods and Coffee indefinite-lived intangible assets impairment evaluation was complex and highly judgmental due to the significant estimation required in determining the fair value of the indefinite-lived intangible assets.

During the third quarter of 2022, the Company made certain strategic decisions related to its U.S.

Retail Pet Foods segment.

As a result, the Company completed an interim review to determine the impact these strategic decisions had on the fair value of certain indefinite-lived intangible assets within the U.S.

Retail Pet Foods segment.

The Company recognized an impairment charge of $150.4 million related to the Rachael Ray Nutrish brand indefinite-lived intangible asset as of January 31, 2022.

Additionally, the Company reclassified the Rachael Ray Nutrish brand as a finite-lived intangible asset as of January 31, 2022.

Auditing the Company’s interim indefinite-lived intangible asset impairment evaluation of the Rachael Ray Nutrish brand was complex and highly judgmental due to the significant estimation required in determining the fair value of the indefinite-lived intangible asset.

In particular, the fair value estimate was sensitive to significant assumptions such as the required rate of return, revenue growth rates, terminal period revenue growth rates, and royalty rates.

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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 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 obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Rachael Ray Nutrish brand interim indefinite-lived intangible asset impairment, including controls over the significant assumptions mentioned above.

To test the estimated fair value used in the Company’s Rachael Ray Nutrish brand interim indefinite-lived intangible assets 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.

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

We assessed the historical accuracy of management’s estimates.

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 rates 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.

In addition, we involved our valuation specialists 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 assumption used by the Company by performing an independent corroborative calculation with the involvement of our valuation specialists.

We also evaluated the premium applied to the weighted average cost of capital of the Rachael Ray Nutrish brand indefinite-lived intangible asset based on the asset’s characteristics.

As it pertains to the royalty rate used in the impairment analysis, we performed an independent corroborative profit split calculation to evaluate the royalty rate selected by the Company.

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

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The audit committee also regularly satisfies itself as to the adequacy of controls, systems, and financial records.

The director of the internal audit department is required to report directly to the audit committee as to internal audit matters.

The lead internal auditor of the internal audit department is required to report directly to the audit committee as to internal audit matters.

It is our best judgment that our policies and procedures, our program of internal and independent audits, and the oversight activity of the audit committee work together to provide reasonable assurance that our operations are conducted according to law and in compliance with the high standards of business ethics and conduct to which we subscribe.

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Net sales $ 7,998.9 $ 8,002.7 $ 7,801.0

Cost of products sold 4,864.0 4,799.0 4,922.3

Cost of products sold (A)

5,298.2 4,864.0 4,799.0

Gross Profit 2,700.7 3,138.7 3,002.0

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Amortization 223.6 233.0 236.3

Goodwill impairment charge — — 97.9

Other intangible assets impairment charges 150.4 3.8 52.4

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Income Before Income Taxes 843.8 1,171.9 1,026.7

Income tax expense (benefit) 295.6 247.2 187.2

Income tax expense 212.1 295.6 247.2

Net Income $ 631.7 $ 876.3 $ 779.5

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Net Income – Assuming Dilution $ 5.83 $ 7.79 $ 6.84

(A) Other special project costs includes integration and restructuring costs.

(A) Special project costs include certain divestiture, acquisition, integration, and restructuring costs, which are recognized in cost of products sold and other special project costs.

For more information, see Note 2:

Integration and Restructuring Costs.

Integration and Restructuring Costs and Note 4:

Reportable Segments.

See notes to consolidated financial statements.

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Amortization 223.6 233.0 236.3

Goodwill impairment charge — — 97.9

Other intangible assets impairment charges 150.4 3.8 52.4

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Defined benefit pension contributions ( 5.3 ) ( 13.1 ) ( 5.1 )

Make-whole payments included in financing activities 7.0 — —

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

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Investing Activities

Business acquired, net of cash acquired — — ( 1,903.0 )

Additions to property, plant, and equipment ( 417.5 ) ( 306.7 ) ( 269.3 )

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Proceeds from long-term debt 797.6 — 798.2

Repayments of long-term debt ( 700.0 ) ( 900.0 ) ( 700.0 )

Repayments of long-term debt, including make-whole payments ( 1,157.0 ) ( 700.0 ) ( 900.0 )

Capitalized debt issuance costs ( 10.4 ) — —

Quarterly dividends paid ( 418.1 ) ( 403.2 ) ( 396.8 )

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( 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

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( 425.9 ) ( 425.9 )

Other ( 0.5 ) 0.5 — —

Balance at April 30, 2022 106,458,317 $ 26.6 $ 5,457.9 $ 2,893.0 $ ( 237.4 ) $ 8,140.1

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To estimate the impact of these costs, we consider customer contract provisions, historical data, and our current expectations.

Our trade marketing and merchandising programs consist of various promotional activities conducted through retail, distributors, or directly with consumers, including in-store display and product placement programs, price discounts, coupons, and other similar activities.

We regularly review and revise, when we deem necessary, estimates of costs for these promotional programs based on estimates of what will be redeemed by retail, distributors, or consumers.

These estimates are made using various techniques, including historical data on performance of similar promotional programs.

Differences between estimated expenditures and actual performance are recognized as a change in estimate in a subsequent period.

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 of net sales in both 2021 and 2020, and 36 percent of net sales in 2019.

We have trade marketing and merchandising programs that consist of various promotional activities conducted through retailers, distributors, or directly with consumers, including in-store display and product placement programs, price discounts, coupons, and other similar activities.

For additional discussion on these programs, refer to “Critical Accounting Estimates and Policies” within Management’s Discussion and Analysis of Financial Condition and Results of Operations.

For revenue disaggregated by reportable segment, geographical region, and product category, see Note 4:

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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 innovations, 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 in both 2021 and 2020 and $ 56.0 in 2019.

Total R&D expense was $ 48.8 in 2022 and $ 57.7 in both 2021 and 2020.

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 three 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 1 to 3 years.

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

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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.

In 2022 and 2020, the excess tax benefits realized upon exercise or vesting of share-based compensation were $ 1.1 and $ 0.9 , respectively, and in 2021, there were tax deficiencies realized of $ 0.1 .

For additional discussion on share-based compensation expense, see Note 12:

Share-Based Payments.

Earnings Per Share:

Earnings per share is computed in accordance with FASB ASC 260, Earnings Per Share .

As required by ASC 260, we computed net income per common share (“basic earnings per share”) under the two-class method for 2022, 2021, and 2020, due to certain unvested common shares that contained non-forfeitable rights to dividends (i.e., participating securities) during the periods.

We compute net income per common share – assuming dilution (“diluted earnings per share”) under either the treasury method or the two-class method, dependent on which is more dilutive.

As a result, diluted earnings per share for 2022 was computed under the treasury stock method, and the two-class method was applied in computing diluted earnings per share for 2021 and 2020.

Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period.

Under the two-class method, net income available to common and participating common shareholders is reduced by the net income allocated to participating securities, which is equal to the amount of dividends declared in the current period and by the contractual amount of dividends that must be paid for the current period related to participating securities.

Under the treasury stock method, the diluted earnings per share calculation includes potential common shares assumed to be issued, which reflects the potential dilution that would occur if any outstanding options or warrants were exercised or restricted stock becomes vested, and includes the “if converted” method for participating securities if the effect is dilutive.

For additional information on the earnings per share calculations, see Note 5:

Earnings Per Share.

Defined Contribution Plans:

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Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in the applicable tax rate is recognized in income or expense in the period that the change is enacted.

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ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.

In accordance with the requirements of ASC 740, uncertain tax positions have been classified in the Consolidated Balance Sheets as noncurrent, except to the extent payment is expected within one year.

In accordance with the requirements of ASC 740, uncertain tax

positions have been classified in the Consolidated Balance Sheets as noncurrent, except to the extent payment is expected within one year.

We recognize net interest and penalties related to unrecognized tax benefits in income tax expense.

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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.

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

At April 30, 2022 and 2021, the reserve for credit loss was $ 2.3 and $ 2.4 , respectively.

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Derivative Financial Instruments:

We account for derivative instruments in accordance with FASB ASC 815, Derivatives and Hedging , which requires all derivative instruments to be recognized in the financial statements and measured at fair value, regardless of the purpose or intent for holding them.

We account for derivative instruments in accordance with FASB ASC 815, Derivatives and Hedging , which requires all derivative instruments to be recognized at fair value in the financial statements, regardless of the purpose or intent for holding them.

We do not qualify commodity derivatives or instruments used to manage foreign currency exchange exposures for hedge accounting treatment, and, as a result, the derivative gains and losses are immediately recognized in earnings.

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At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment.

If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transaction affects earnings.

If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are typically deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transaction affects earnings.

If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet, and changes in the fair value are recognized in interest expense.

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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 exceeds the 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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We conduct our annual test for impairment of goodwill and other indefinite-lived intangible assets as of February 1 of each year.

A discounted cash flow valuation technique was utilized to estimate the fair value of our reporting units and indefinite-lived intangible assets.

We also used a market-based approach to estimate the fair value of our reporting units.

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

A discounted cash flow valuation technique is utilized to estimate the fair value of our reporting units and indefinite-lived intangible assets.

We also use a market-based approach to estimate the fair value of our reporting units.

The discount rates utilized in the cash flow analyses are 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 value.

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The difference between the carrying amount of the investment and the underlying equity in net assets is primarily attributable to goodwill and other intangible assets.

We have a 20 percent equity interest in Mountain Country Foods, LLC, and a 42 percent equity interest in Numi, Inc.

We have a 20 percent equity interest in Mountain Country Foods, LLC, and approximately 42 percent equity interest in Numi, Inc.

The carrying amount of these investments is included in other noncurrent assets in the Consolidated Balance Sheets.

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Recently Issued Accounting Standards:

In March 2022, the SEC issued the proposed rule under SEC Release No.

33-11042, The Enhancement and Standardization of Climate-Related Disclosures for Investors, to enhance and standardize the climate-related disclosures provided by public companies.

This update will require the disclosure of greenhouse gas emissions, climate-related targets and goals, how the Board and management oversee climate-related risks, and Scope 1 and 2 emissions, which will be subject to third-party assurance.

As of April 30, 2022, these amendments were not adopted by the SEC;

however, we anticipate that the adoption of these amendments will have a material impact on our financial statements and disclosures.

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.

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

During 2021, we early adopted certain updates to section 301, Selected Financial Data, and 302, Supplementary Financial Information .

As required, we adopted the remaining amendments during 2022, which did not have a material impact on our financial statements and disclosures.

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.

Accounting for franchise taxes will require adoption on a retrospective or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

All other applicable provisions will require

adoption on a retrospective, modified retrospective, or prospective basis, as required by ASU 2019-12.

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

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20) Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans , which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans.

The guidance removes disclosures that are no longer considered cost beneficial and adds new, as well as clarifies certain other, disclosure requirements.

ASU 2018-14 was effective for us on May 1, 2020, 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 .

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

The accounting guidance for franchise taxes and foreign investments was adopted on a modified retrospective basis and all other applicable provisions were adopted on a prospective basis, as required by ASU 2019-12.

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

Risks and Uncertainties:

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

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, peanuts, protein meals, 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, partially driven by COVID-19.

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.

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, our Pup-Peroni dog snacks, and liquid coffee, from single sources of supply pursuant to long-term contracts.

While availability may vary from year-to-year, we believe that we will continue to be able to obtain adequate supplies and that alternatives to single-sourced materials are available.

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We consider our relationships with key raw material suppliers to be in good standing.

We have consolidated our production capacity for certain products, including substantially all of our coffee, Milk-Bone dog snacks, fruit spreads, toppings, and syrups, into single manufacturing sites.

We have consolidated production capacity at a single manufacturing site for certain products, including substantially all of our coffee, Milk-Bone dog snacks, and fruit spreads.

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 full-time employees, 26 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.

The contracts vary in term depending on location, with two contracts expiring in 2023, representing 9 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 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.

We determined the estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices, and other estimates made by management.

The purchase price allocation included total intangible assets of $ 1.3 billion.

The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired and, as a result, the excess was allocated to goodwill.

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.

Of the total goodwill, $ 446.0 was deductible for income tax purposes at the acquisition date, of which $ 354.6 remains deductible at April 30, 2021.

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

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.

For more information, see Note 7:

Goodwill and Other Intangible Assets.

Integration and Restructuring Costs

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

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

Severance costs and retention bonuses are recognized over the estimated future service period of the affected employees, and relocation costs are expensed as incurred.

Other transition and termination costs include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred.

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

Severance costs and retention bonuses are recognized over the estimated future service period of the impacted employees, and relocation costs are expensed as incurred.

With the exception of accelerated depreciation, these costs are expensed as incurred.

These integration and restructuring costs are reported in cost of products sold and other

special project costs in the Statements of Consolidated Income and are not allocated to segment profit.

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

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Total integration costs $ 16.5 $ 48.6

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

Noncash charges of $ 0.6 were included in the integration costs incurred during 2020.

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.

We did no t incur any costs during 2022 and 2021.

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

Restructuring Costs:

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:

A restructuring program was approved by the Board during 2021, associated with opportunities identified to reduce our overall cost structure, optimize our organizational design, and support our portfolio reshape.

This is inclusive of certain restructuring costs associated with the divestitures of the Crisco, Natural Balance , private label dry pet food, and natural beverage and grains businesses.

For additional information related to the divestitures, see Note 3:

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.

During 2021, we substantially completed an organizational redesign related to our corporate headquarters and announced plans to close our Suffolk, Virginia, facility as a result of a new strategic partnership for the production of our liquid coffee products.

During 2022, we completed the transition of production to JDE Peet’s, as anticipated.

Furthermore, the restructuring program was expanded during the third quarter of 2022 to include certain costs associated with the recent divestitures of the private label dry pet food and natural beverage and grains businesses, as well as the recently announced plans to close our Ripon, Wisconsin, production facility by the end of calendar year 2022 to further optimize operations for our Consumer Foods business.

We expect to incur costs of approximately $ 70.0 associated with the restructuring activities planned to date.

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

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

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

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Total restructuring costs $ 28.5 $ 24.1 $ 52.6

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.

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.

The obligation related to severance costs and retention bonuses was $ 2.4 and $ 14.6 at April 30, 2022 and 2021, respectively.

As of April 30, 2022, cumulative noncash charges incurred to date were $ 23.0 , including $ 18.6 and $ 4.4 incurred during 2022 and 2021, respectively, and primarily consisted of accelerated depreciation.

On January 31, 2022, we sold the natural beverage and grains businesses to Nexus.

The transaction included products sold under the R.W.

Knudsen and TruRoots brands, inclusive of certain trademarks, a licensing agreement for Santa Cruz Organic beverages, dedicated manufacturing and distribution facilities in Chico, California, and Havre de Grace, Maryland, and approximately 150 employees who supported the natural beverage and grains businesses.

The transaction did not include Santa Cruz Organic nut butters, fruit spreads, syrups, or applesauce.

Under our ownership, the businesses generated net sales of $ 106.7 , $ 143.4 , and $ 131.6 in 2022, 2021, and 2020, 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.

Net proceeds from the divestiture were $ 97.1 , which were inclusive of a preliminary working capital adjustment and cash transaction costs, and will be finalized during the first quarter of 2023.

On December 1, 2021, we sold the private label dry pet food business to Diamond Pet Foods.

The transaction included dry pet food products sold under private label brands, a dedicated manufacturing facility located in Frontenac, Kansas, and approximately 220 employees who supported the private label dry pet food business.

The transaction did not include any branded products or our private label wet pet food business.

Under our ownership, the business generated net sales of $ 62.3 , $ 94.0 , and $ 120.6 in 2022, 2021, and 2020, 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.

Final net proceeds from the divestiture were $ 32.9 , which were net of cash transaction costs.

Upon completion of these transactions during 2022, we recognized a pre-tax gain of $ 26.7 related to the natural beverage and grains businesses and a pre-tax loss of $ 17.1 related to the private label dry pet food 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, 2022

Crisco Natural Balance

Natural Beverage and Grains Private Label Dry Pet Food

Assets disposed:

Inventories $ 28.3 $ 19.0

Other current assets 0.5 —

Property, plant, and equipment – net 28.1 31.1

Operating lease right-of-use assets 0.4 0.1

Goodwill 227.6 74.1

Other intangible assets – net 13.6 —

Other noncurrent assets 0.2 —

Total assets disposed $ 70.9 $ 50.2

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Noncurrent operating lease liabilities 0.1 —

Deferred income taxes — 10.1

Other noncurrent liabilities 0.1 —

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Net assets disposed $ 70.4 $ 50.1

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

baking business to Brynwood Partners VII L.P.

and Brynwood Partners VIII L.P., subsidiaries of Brynwood Partners, an unrelated party.

The transaction included products that were primarily sold in U.S.

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 $ 105.9 in 2019, primarily included in the U.S Retail Consumer Foods segment.

The transaction did not include our baking business in Canada.

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.

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 and $ 222.8 in 2021 and 2020, respectively, included in the U.S.

Retail Pet Foods segment.

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

Upon completion of this transaction, we recognized a pre-tax loss of $ 89.5 , which was included in other operating expense (income) – net within the Statement of Consolidated Income.

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.

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

Retail Consumer Foods segment.

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

Upon completion of this transaction, we recognized a pre-tax gain of $ 114.8 , which was included in other operating expense (income) – net within the Statement of Consolidated Income.

Reportable Segments

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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;

The presentation of International and Away From Home represents a combination of all other operating segments that are not individually reportable.

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

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

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

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

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

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

However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment profit set forth below, as segment profit excludes certain expenses such as corporate administrative expenses, gains and losses related to the sale of a business, unallocated 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.

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 amortization expense and impairment charges related to intangible assets, gains and losses on divestitures, change in net cumulative unallocated derivative gains and losses, special project costs, as well as corporate administrative expenses.

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.

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 ( 223.6 ) ( 233.0 ) ( 236.3 )

Goodwill impairment charge — — ( 97.9 )

Other intangible assets impairment charges ( 150.4 ) ( 3.8 ) ( 52.4 )

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Interest expense – net ( 160.9 ) ( 177.1 ) ( 189.2 )

Unallocated derivative gains (losses) 93.6 19.6 ( 54.2 )

Change in net cumulative unallocated derivative gains and losses ( 23.4 ) 93.6 19.6

Cost of products sold – special project costs (A)

( 20.5 ) ( 3.4 ) —

Other special project costs (A)

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Total additions to property, plant, and equipment $ 417.5 $ 306.7 $ 269.3

(A) Special project costs include integration and restructuring costs.

(A) Special project costs include certain divestiture, acquisition, integration, and restructuring costs, which are recognized in cost of products sold and other special project costs in the Statements of Consolidated Income.

For more information, see Note 2:

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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.

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

The following table presents certain geographical information.

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Retail Coffee

Dog food 1,090.8 1,217.6 1,313.1 U.S.

Retail Pet Foods

Cat food 969.9 918.4 869.2 U.S.

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Retail Pet Foods

Dog food 926.5 1,090.8 1,217.6 U.S.

Retail Pet Foods

Peanut butter 801.1 796.1 730.6 U.S.

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Retail Consumer Foods

Shortening and oils 193.9 262.3 253.6 U.S.

Retail Consumer Foods

Portion control 158.2 120.5 153.3 Other (B)

Juices and beverages 106.3 139.0 125.7 U.S.

Retail Consumer Foods

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)

Baking mixes and ingredients 85.5 93.5 89.9 Other (B)

Shortening and oils — 193.9 262.3 U.S.

Retail Consumer Foods (C)

Other 304.6 287.3 292.0 Other (B)

Total net sales $ 7,998.9 $ 8,002.7 $ 7,801.0

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

(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.

baking business.

(B) Represents the combined International and Away From Home operating segments.

For more information, see Note 3:

Divestitures.

Sales to Walmart Inc.

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

and subsidiaries amounted to 34 percent of net sales in 2022 and 32 percent of net sales in both 2021 and 2020.

These sales are primarily included in our U.S.

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Earnings Per Share

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

We computed basic earnings per share under the two-class method for 2022, 2021, and 2020, due to certain unvested common shares that contained non-forfeitable rights to dividends (i.e., participating securities) during these periods.

For 2022, the computation of diluted earnings per share was more dilutive under the treasury stock method, as compared to the two-class method;

therefore, the treasury stock method was used in accordance with FASB ASC 260, Earnings Per Share .

Diluted earnings per share for 2021 and 2020 was computed under the two-class method.

The following table sets forth the computation of basic earnings per share and diluted earnings per share under the two-class method.

Year Ended April 30,

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Net income per common share – assuming dilution $ 5.84 $ 7.79 $ 6.84

The following table sets forth the computation of diluted earnings per share under the treasury stock method for the year ended April 30, 2022.

Net income $ 631.7

Weighted-average common shares outstanding – assuming dilution:

Weighted-average common shares outstanding 107.9

Dilutive effect of stock options —

Dilutive effect of restricted shares, restricted stock units, and performance units 0.5

Weighted-average common shares outstanding – assuming dilution 108.4

Net income per common share – assuming dilution $ 5.83

Goodwill and Other Intangible Assets

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

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

— — — 20.8 20.8

Balance at April 30, 2021 $ 2,368.2 $ 2,090.9 $ 1,147.5 $ 417.0 $ 6,023.6

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

— — — ( 7.8 ) ( 7.8 )

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Total other intangible assets $ 8,112.4 $ 2,460.2 $ 5,652.2 $ 8,145.2 $ 2,104.0 $ 6,041.2

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 $ 222.5 , $ 232.0 , and $ 235.3 in 2022, 2021, and 2020, respectively.

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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 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.

During the third quarter of 2022, we made certain strategic decisions related to our U.S.

Retail Pet Foods segment in support of our continued focus on prioritizing and accelerating growth in dog snacks, driving momentum in cat food, and improving dog food performance, which will require further allocation of resources to support more strategic, faster growth opportunities.

As a result, we completed an interim review to determine the impact these strategic decisions had on the fair value of the goodwill and certain indefinite-lived intangible assets within the U.S.

Retail Pet Foods segment.

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

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

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

We recognized an impairment charge of $ 150.4 related to the Rachael Ray Nutrish brand within the U.S.

Retail Pet Foods segment, primarily driven by the re-positioning of this brand within the Pet Foods brand portfolio, which led to a decline in the current and long-term net sales expectations and the royalty rate used in the valuation analysis.

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

Additionally, we reassessed the long-term strategic expectations for the Rachael Ray Nutrish brand and reclassified this brand as a finite-lived intangible asset as of January 31, 2022.

As of February 1, 2022, 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 exceeded the carrying value by greater than 10 percent for all our goodwill and indefinite-lived intangible assets, with the exception of the Pet Foods reporting unit, for which its fair value exceeded its carrying value by approximately 6 percent.

The carrying value of the goodwill within the U.S.

Retail Pet Foods segment was $ 2.4 billion as of April 30, 2022, and remains susceptible to future impairment charges due to the narrow difference 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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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.

While we have concluded there were no

indicators of impairment as of April 30, 2022, any significant sustained adverse change in our consumer purchasing behaviors, government restrictions, financial results, or macroeconomic conditions could result in future impairment.

During 2021, we recognized an impairment charge of $ 3.8 related to an immaterial trademark within the U.S.

Retail Consumer Foods segment.

During 2020, we recognized an impairment charge of $ 52.4 related to the 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.

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

Debt and Financing Arrangements

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650.0 644.7 650.0 644.3

2.75 % Senior Notes due September 15, 2041

300.0 297.1 — —

4.38 % Senior Notes due March 15, 2045

600.0 587.6 600.0 587.1

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

3.55 % Senior Notes due March 15, 2050

300.0 296.0 300.0 295.8

Total long-term debt $ 4,350.0 $ 4,310.6 $ 4,700.0 $ 4,669.7

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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.

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.

During the second quarter of 2022, we completed an offering of $ 800.0 in Senior Notes due March 15, 2032, and September 15, 2041.

The Senior Notes included $ 7.2 of capitalized debt issuance costs and $ 2.4 of offering discounts, which are amortized to interest expense over the life of the debt.

The net proceeds from the offering were primarily used to repay $ 750.0 in principal of the Senior Notes due October 15, 2021.

Furthermore, during the first quarter of 2022, we prepaid $ 400.0 in principal of the Senior Notes due March 15, 2022, and as a result, we recognized a net loss on extinguishment of $ 6.9 , which primarily consisted of a make-whole payment and was included in other income (expense) – net in the Statement of Consolidated Income.

In August 2021, we entered into an unsecured revolving credit facility with a group of 11 banks, which provides for a revolving credit line of $ 2.0 billion and matures in August 2026, and terminated the previous $ 1.8 billion revolving credit facility.

The new revolving credit facility included $ 4.3 of capitalized debt issuance costs, and is amortized to interest expense over the time for which the revolving credit facility is effective.

Borrowings under the revolving credit facility bear interest on the prevailing U.S.

Prime Rate, LIBOR, Euro Interbank Offered Rate, or Canadian Dealer Offered Rate, based on our election.

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

We have not drawn upon the new revolving credit facility as of April 30, 2022, and did not have a balance outstanding under the previous revolving credit facility as of April 30, 2021.

We participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $ 2.0 billion, which was increased from $ 1.8 billion in August 2021, in conjunction with entering into the $2.0 billion unsecured revolving credit facility.

The commercial paper program is backed by our revolving credit facility and reduces what we can borrow under the revolving credit facility by the amount of commercial paper outstanding.

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

As of April 30, 2022 and 2021, we had

$ 180.0 and $ 82.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 0.65 percent and 0.17 percent, respectively.

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

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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.

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 amortized as interest expense over the life of the debt.

For additional information, see Note 9:

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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.

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

Borrowings under the revolving credit facility bear interest on the prevailing U.S.

Prime Rate, LIBOR, or Canadian Dealer Offered Rate, based on our election.

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

We did no t have a balance outstanding under the revolving credit facility at 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.

The commercial paper program is backed by our revolving credit facility and reduces what we can borrow under the revolving credit facility by the amount of commercial paper outstanding.

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

As of April 30, 2021 and 2020, we had $ 82.0 and $ 248.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 0.17 percent and 0.40 percent, respectively.

Interest paid totaled $ 155.2 , $ 169.9 , and $ 193.4 in 2022, 2021, and 2020, respectively.

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.

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

Our debt instruments contain certain covenant restrictions, including an interest coverage ratio.

Our financial covenant restrictions were amended to remove the leverage ratio in August 2021, in conjunction with entering into the $2.0 billion unsecured revolving credit facility.

We are in compliance with all covenants.

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Amortization of net actuarial loss (gain) 6.9 10.9 7.9 ( 0.4 ) — ( 0.3 )

Curtailment loss (gain) — — 0.3 — — —

Settlement loss (gain) 10.8 35.5 0.1 — — —

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Amortization of net actuarial loss (gain) 6.9 10.9 7.9 ( 0.4 ) — ( 0.3 )

Curtailment loss (gain) — — 0.3 — — —

Settlement loss (gain) 10.8 35.5 0.1 — — —

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Interest cost 12.4 14.4 1.3 1.8

Amendments 0.4 — — —

Actuarial loss (gain) (A)

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Settlement ( 44.1 ) ( 101.2 ) — —

Termination benefit cost — 0.2 — —

Foreign currency translation adjustments — 4.6 ( 0.1 ) 0.8

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Discount rate 2.41 % 2.15 % 4.50 % 3.03 %

Rate of compensation increase — 3.00 — —

For 2023, the assumed health care trend rates are 6.5 percent and 4.5 percent for the U.S.

and Canadian plans, respectively.

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

The rate for participants under age 65 is assumed to decrease to 5.0 percent in 2032 for the U.S.

plan and remain at 4.5 percent for the Canadian plan.

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Components of net periodic benefit cost:

Service cost $ — $ 0.1 $ — $ —

Interest cost 0.1 0.9 0.1 0.2

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Settlement loss (gain) — 29.6 — —

Termination benefit cost — 0.2 — —

Net periodic benefit cost (credit) $ 0.2 $ 29.8 $ — $ 0.2

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Foreign currency translation ( 0.4 ) 5.7 — —

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).

During 2021, we transferred $ 82.6 in obligations as part of the Canadian 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.

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

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

We did not recognize any additional charges related to the Canadian buy-out contract during 2022.

We expect to finalize the wind-up of the Canadian pension plan impacted by the buy-out in 2023, and anticipate a minimal settlement charge associated with the wind-up.

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

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Fixed income (E)

13.6 — — 13.6

Other types of investments (F)

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

In 2023, we expect to make contributions of $ 80.0 to increase funding for our U.S.

qualified defined benefit pension plans, while making direct benefit payments of approximately $ 9.6 .

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.

unfunded obligations of the plan allocable to the withdrawing employer may be the responsibility of the remaining 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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Commodity Derivatives:

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, soybean meal, wheat, and edible oils.

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

11 unchanged sentences

At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment.

If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet and changes in the fair value are recognized in interest expense.

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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, 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.

At April 30, 2022, our cash margin accounts represented collateral pledged of $ 54.6 , and at April 30, 2021, our cash margin accounts represented collateral received of $ 10.8 , 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.

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2022 2021 2020

Gains (losses) on commodity contracts $ 101.4 $ ( 31.4 ) $ ( 98.6 )

Gains (losses) on foreign currency exchange contracts ( 8.8 ) 2.3 3.0

Total gains (losses) recognized in costs of products sold $ 92.6 $ ( 29.1 ) $ ( 95.6 )

Derivative gains (losses) on commodity contracts $ 74.1 $ 101.4 $ ( 31.4 )

Derivative gains (losses) on foreign currency exchange contracts 4.2 ( 8.8 ) 2.3

Total derivative gains (losses) recognized in cost of products sold $ 78.3 $ 92.6 $ ( 29.1 )

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

At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility.

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

The following table presents the net change in cumulative unallocated derivative gains and losses.

Year Ended April 30,

2022 2021 2020

Net gains (losses) on mark-to-market valuation of unallocated derivative positions $ 92.6 $ ( 29.1 ) $ ( 95.6 )

Net gains (losses) on derivative positions reclassified to segment operating profit ( 1.0 ) ( 48.7 ) ( 41.4 )

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

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 .

Net derivative gains (losses) recognized and classified as unallocated $ 78.3 $ 92.6 $ ( 29.1 )

Net derivative gains (losses) reclassified to segment operating profit 101.7 ( 1.0 ) ( 48.7 )

Change in net cumulative unallocated derivative gains and losses $ ( 23.4 ) $ 93.6 $ 19.6

The net cumulative unallocated derivative gains were $ 37.3 and $ 60.7 at April 30, 2022 and 2021, respectively.

Cash Flow Hedges

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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.

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.

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.

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

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

Gains (losses) reclassified from accumulated other comprehensive income (loss) to interest expense – net (A)

( 13.7 ) ( 13.8 ) ( 2.1 )

Gains (losses) reclassified from accumulated other comprehensive income to other (expense) – net (B)

Change in accumulated other comprehensive income (loss) $ 13.1 $ 13.8 $ ( 188.6 )

(A) Interest expense – net, as presented in the Statements of Consolidated Income, was $ 160.9 , $ 177.1 , and $ 189.2 in 2022, 2021, and 2020, respectively.

(B) Other expense – net, as presented in the Statements of Consolidated Income, was $ 19.1 , $ 37.8 , and $ 7.2 in 2022, 2021, and 2020, respectively.

The reclassification is related to the debt extinguishment during 2022, as discussed in Note 7:

Debt and Financing Arrangements.

Included as a component of accumulated other comprehensive income (loss) at April 30, 2022 and 2021, were deferred net pre-tax losses of $ 214.2 and $ 227.3 , respectively, related to the terminated interest rate contracts.

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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.

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

As of the second quarter of 2022, we had fully recognized the gain of $ 53.5 , of which $ 4.0 , $ 8.4 , and $ 8.1 were recognized in 2022, 2021, and 2020, respectively.

Other Financial Instruments and Fair Value Measurements

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As of April 30, 2022, our municipal obligations are scheduled to mature as follows:

$ 1.7 in 2022, $ 2.5 in 2024, $ 3.0 in 2025, and the remaining $ 17.2 in 2026 and beyond.

We do no t have any municipal obligations scheduled to mature in 2023.

$ 0.2 in 2023, $ 1.9 in 2024, $ 1.8 in 2025, $ 2.1 in 2026, $ 4.4 in 2027, and the remaining $ 9.5 in 2028 and beyond.

For additional information, see Marketable Securities and Other Investments in Note 1:

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Derivative Financial Instruments.

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

The public Senior Notes are traded in an active secondary market and valued using quoted prices.

The fair value of the Term Loan 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.

(C) Long-term debt is composed of public Senior Notes, which are traded in an active secondary market and valued using quoted prices.

For additional information, see Note 7:

Debt and Financing Arrangements.

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.

We recognized an impairment charge of $ 150.4 during 2022 related to the Rachael Ray Nutrish brand within the U.S.

Retail Pet Foods segment.

These charges were included as noncash charges in our Statements of

Consolidated Income.

During 2021, we recognized an impairment charge of $ 3.8 related to an immaterial trademark within the U.S.

Retail Consumer Foods segment, and in 2020, we recognized an impairment charge of $ 52.4 related to the divested Natural Balance brand within the U.S.

Retail Pet Foods segment.

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.

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Minimum lease payments do not include variable lease payments other than those that depend on an index or rate.

For the majority of our leases, the interest rate implicit in the lease cannot be readily determined, so we utilize our incremental borrowing rate to present value lease payments using information available at the lease commencement date.

Because the interest rate implicit in the lease cannot be readily determined for the majority of our leases, we utilize our incremental borrowing rate to present value lease payments using information available at the lease commencement date.

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

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.

As of April 30, 2022, we have entered into a lease commitment related to a commercial building, which will be used for fruit processing, and begin during the first quarter of 2023.

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

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Year Ended April 30,

2022 2021 2020

Operating lease cost $ 43.8 $ 45.4 $ 51.7

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Year Ended April 30,

2022 2021 2020

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

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2026 18.9 0.4

2026 18.7 0.1

2028 and beyond 2.7 0.2

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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.

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 granted to our non-employee directors, consultants, officers, and other employees.

During 2022, these awards were administered through the 2020 Equity and Incentive Compensation Plan (the “2020 Plan”), which was approved by our shareholders in August 2020.

The previous 2010 Equity and Incentive Compensation Plan (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.

During 2021, awards were administered through the 2010 Plan and 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, and they 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.

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Stock Options:

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

Under the 2020 Plan, we granted 152,971 stock options during 2022, and under the 2010 Plan, we granted 296,619 and 193,831 stock options during 2021 and 2020, respectively.

Stock options granted in 2022, 2021, and 2020 vest ratably over a period of three years .

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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:

2022 2021 2020

Expected volatility (%) 24.0 % 23.0 % 20.1 %

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Exercised ( 145,312 ) 112.22

Cancelled ( 26,591 ) 108.90

Outstanding at April 30, 2022

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April 30, 2022, respectively, with an average remaining contractual term of 7.0 years and 5.4 years, respectively.

The total intrinsic value of stock options exercised during 2021 and 2020 was $ 0.6 and $ 0.2 , respectively, and there were no stock options exercised in 2019.

The total intrinsic value of stock options exercised during 2022, 2021, and 2020 was $ 3.6 , $ 0.6 , and $ 0.2 , respectively.

The closing market price of our common stock on the last trading day of 2022 was $ 136.93 per share.

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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 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.

During 2022, 2021 and 2020, we recognized compensation cost of $ 3.0 , $ 2.3 , and $ 1.3 ,

respectively.

The tax benefit related to the stock option expense was $ 0.7 , $ 0.5 , and $ 0.3 for 2022, 2021, and 2020, respectively.

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Cash received from stock option exercises was $ 16.3 , $ 4.5 , and $ 7.1 for the years ended April 30, 2022, 2021, and 2020, respectively.

There were no stock options exercised in 2019.

Other Equity Awards:

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2020 245,945 121.19 168,212 123.68

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 restricted shares and deferred stock units granted in 2022, 2021, and 2020 under our new long-term incentive compensation program vest ratably over three years from the 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 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.

The performance units granted in 2022, 2021, and 2020 vest three years from the date of grant and are converted to common shares upon vesting based on the performance achieved during the service period.

The performance goal for the performance units is based on adjusted earnings per share and return on invested capital targets.

Dividend equivalents are accumulated on the performance units from the date of grant, but participants only receive payment if the awards vest.

Income before income taxes is as follows:

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Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

Tax reform – transition tax — — ( 0.5 )

Goodwill impairment charge — — 2.9

Sale of the U.S.

baking business — — 2.4

Sale of the Crisco business

1 unchanged sentence

State and local income taxes 2.6 2.9 3.3

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

Deferred tax expense from internal restructuring 2.0 — —

Other items – net ( 0.5 ) ( 0.2 ) ( 0.2 )

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Income taxes paid $ 233.0 $ 333.2 $ 227.1

The income tax expense of $ 212.1 for 2022 includes an unfavorable deferred tax impact, primarily related to an internal legal entity simplification in the third quarter to support multiple work locations for office-based employees and our continued strategic activities.

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.

baking business and a goodwill impairment charge, partially offset by a noncash deferred tax benefit related to the integration of Ainsworth into the Company.

On December 22, 2017, 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.

federal income tax base, required companies to pay a one-time transition tax, and created new taxes on certain foreign-sourced earnings as part of a new territorial tax regime.

During 2019, we finalized our accounting for the income tax effects of enactment of the Tax Act, as required by

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 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 examination for the tax year ended April 30, 2018.

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

Tax Cuts and Jobs Act (the “Tax Act”), tax extenders for expiring tax breaks, and other tax provisions, which had minimal impact to us.

We continue to monitor any future legislative actions in response to COVID-19 and other policy initiatives for their respective impacts on our income taxes at the time such legislative changes are enacted.

The tax years prior to 2019 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 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 $ 0.2 , $ 0.1 , and $ 0.8 for 2021, 2020, and 2019, respectively.

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

We did not repatriate foreign cash to the U.S.

We returned $ 100.0 of foreign cash to the U.S.

from Canada during 2021, net of $ 5.0 of foreign withholding taxes and insignificant U.S.

federal and state income taxes.

Consistent with the prior year, as of April 30, 2022, we have determined that a portion of our undistributed earnings, in Canada, is not permanently reinvested, resulting in the recognition of an immaterial deferred tax liability.

Deferred income taxes have not been provided on approximately $ 30.0 of the remaining temporary differences of our foreign subsidiaries, primarily Canada, that are determined to be permanently reinvested, the tax effects of which are immaterial.

Our unrecognized tax benefits were $ 6.5 , $ 10.2 , and $ 13.1 , of which $ 5.1 , $ 8.1 , and $ 10.5 would affect the effective income tax rate, if recognized, as of April 30, 2022, 2021, and 2020, respectively.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $ 1.2 , primarily as a result of the expiration of statute of limitation periods.

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Prior year tax positions 0.2 — 0.2

Settlement with tax authorities — — 9.0

Expiration of statute of limitations periods 4.0 2.6 3.5

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$ ( 21.1 ) $ ( 163.9 ) $ ( 54.2 ) $ 1.8 $ ( 237.4 )

(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.

(A) The reclassification is composed of deferred gains (losses) related to terminated interest rate contracts.

During 2022, 2021, and 2020, the reclassification was primarily from accumulated other comprehensive income (loss) to interest expense.

In addition, during 2022, a portion of the reclassification was to other income (expense) – net, which was driven by the prepayment of the Senior Notes due March 15, 2022.

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

For additional information, see Note 9:

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(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.

The reclassification in 2021 primarily includes the impact of the nonrecurring settlement charges related to the Canadian buy-out contract.

For additional information, see Note 8:

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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 were settled and paid during 2019 and 2020.

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.

While we cannot predict with certainty the ultimate results of these proceedings or potential settlements associated with these or other matters, we have accrued losses for certain contingent liabilities that we have determined are probable and reasonably estimable at April 30, 2022.

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.

Brad Barry LLC, et al., which alleges that we, in addition to the other 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.

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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.

We are also defendants in a series of putative class action lawsuits that were originally filed in federal courts in California, Florida, Illinois, Missouri, New York, Texas, Washington, and Washington D.C.

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

The plaintiffs 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.

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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.

Product Recall:

Subsequent to April 30, 2022, we initiated a voluntary recall of select Jif peanut butter products produced at our Lexington, Kentucky, facility and sold primarily in the U.S., due to potential salmonella contamination.

At that time, we also suspended the manufacturing of Jif peanut butter products at the Lexington facility.

No other products produced at our other facilities were affected by this recall.

As a result, and in accordance with U.S.

GAAP, we recorded reserves of $ 52.3 in our consolidated financial statements as of April 30, 2022, within our U.S.

Retail Consumer Foods segment, which was inclusive of unsaleable inventory as of April 30, 2022, as well as estimated customer returns and consumer refunds related to net sales in 2022.

We anticipate these costs will be recovered by insurance, and as a result, an insurance receivable of $ 49.8 , net of the deductible, was also recorded as of April 30, 2022.

On June 10, 2022, we announced our plans to resume manufacturing Jif peanut butter products at our Lexington facility.

Further, our Memphis, Tennessee, facility was not affected by the recall and has continued to manufacture Jif peanut butter products.

However, we temporarily paused shipments from the Memphis facility to eliminate confusion while customers cleared their shelves of potentially impacted products manufactured at the Lexington facility.

We will resume shipping from both the Lexington and Memphis facilities and are partnering with retailers to restock Jif peanut butter products as soon as possible.

Based on progress to date, we believe this matter will be substantially resolved during the first quarter of 2023.

Based on our best estimates, we anticipate an unfavorable pre-tax impact of approximately $ 125.0 in 2023, net of the remaining anticipated insurance recoveries, primarily related to the estimated impact of manufacturing downtime, customer returns and penalties, and unsaleable inventory, as well as other recall related costs.

The recall will primarily impact our U.S.

Retail Consumer Foods segment.

Our ultimate loss from the Jif peanut butter recall could differ materially from these estimates, primarily dependent upon the magnitude of lost sales resulting from the unavailability of products for a longer period of time than anticipated, as well as any resulting adverse consumer reaction, including the loss of perceived value and any shift in consumer preferences.

Common Shares

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• the adoption of any amendment to the Articles or Amended Regulations, or the adoption of amended Articles, other than the adoption of any amendment or amended Articles that increases the number of votes to which holders of our common shares are entitled or expands the matters to which time-phased voting applies;

• any proposal or other action to be taken by our shareholders relating to any successor plan to the Rights Agreement, dated as of May 20, 2009, between the Company and Computershare Trust Company, N.A, which expired on

June 25, 2018;

• any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement;

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Repurchase Programs:

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.

On October 22, 2021, the Board authorized the repurchase of up to 5.0 million common shares, in addition to the 2.8 million common shares that remained available for repurchase pursuant to prior authorization of the Board, for a total of 7.8 million common shares available for repurchase.

Under the repurchase program, a total of 2.0 million common shares were repurchased for $ 262.5 during 2022, and a total of 5.8 million common shares were repurchased for $ 671.9 during 2021.

All other share repurchases during 2022 and 2021 consisted of shares repurchased from stock plan recipients in lieu of cash payments.

At April 30, 2022, approximately 5.8 million common shares remain available for repurchase pursuant to the Board’s authorizations.

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