What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-06-20 compared with 2022-06-16 · 320 added, 326 removed, 1225 unchanged (35% of the section changed)

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Smucker Tucker H.

President and Chief Financial Officer

Chief Executive Officer

Chair of Board, President, and Chief Executive Officer

Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Retail Pet Foods goodwill is susceptible to impairment due to the narrow difference between fair value and carrying value.

Auditing the Company’s U.S.

Auditing the Company’s annual U.S.

Retail Pet Foods goodwill impairment evaluation was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting unit.

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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.

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.

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.

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.

Allocation of Goodwill Related to the Divestiture of Certain Pet Food Brands

Description of the Matter As discussed in Note 3 and Note 6 to the consolidated financial statements, on April 28, 2023, the Company divested certain pet food brands.

In conjunction with the divestiture, management allocated goodwill previously included primarily in the U.S.

Retail Pet Foods segment to the pet food brands disposal group using a relative fair value approach.

Goodwill of $790.3 million was allocated to the pet food brands disposal group as part of the divestiture.

Auditing the Company’s allocation of goodwill to the pet food brands disposal group was complex due to the significant estimation required to determine the relative fair values of the U.S.

Retail Pet Foods segment and the pet food brands disposal group referred to above.

These fair value estimates were sensitive to significant assumptions such as the weighted-average cost of capital, discrete revenue growth rates, terminal period revenue growth rate, and profitability assumptions.

Elements of these significant assumptions are forward-looking and could be affected by future economic conditions and/or changes in consumer preferences.

How We Addressed the Matter in Our Audit

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 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.

We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls over the goodwill allocation process.

For example, we tested controls over management’s review of the significant assumptions described above along with the completeness and accuracy of the data used in these fair value estimates.

To test the estimated fair value of the goodwill allocated to the divested pet food brands, 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 and profitability assumptions, we compared the significant assumptions used by management to current industry and economic trends.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate any hypothetical change in the fair value of the U.S.

Retail Pet Foods segment and pet food brands disposal group that would result from changes in significant assumptions.

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

We also tested the allocation of goodwill by recalculating the amounts based on the estimated fair values of the U.S.

Retail Pet Foods segment and the pet food brands disposal group.

Furthermore, we have evaluated the Company’s disclosures in relation to the allocation of goodwill.

/s/ Ernst & Young LLP

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Smucker Tucker H.

President and Chief Financial Officer

Chief Executive Officer

Chair of Board, President, and Chief Executive Officer

Chief Financial Officer

SMUCKER COMPANY

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Other special project costs (A)

8.0 20.7 16.5

Loss (gain) on divestitures – net 1,018.5 ( 9.6 ) ( 25.3 )

Other operating expense (income) – net ( 40.8 ) ( 55.8 ) ( 3.4 )

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Other income (expense) – net ( 14.7 ) ( 19.1 ) ( 37.8 )

Income Before Income Taxes 843.8 1,171.9 1,026.7

Income (Loss) Before Income Taxes ( 9.2 ) 843.8 1,171.9

Income tax expense 82.1 212.1 295.6

Net Income $ 631.7 $ 876.3 $ 779.5

Net Income (Loss) $ ( 91.3 ) $ 631.7 $ 876.3

Earnings per common share:

Net Income $ 5.84 $ 7.79 $ 6.84

Net Income – Assuming Dilution $ 5.83 $ 7.79 $ 6.84

(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.

Net Income (Loss) $ ( 0.86 ) $ 5.84 $ 7.79

Net Income (Loss) – Assuming Dilution $ ( 0.86 ) $ 5.83 $ 7.79

(A) Special project costs include certain 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 and Note 4:

Special Project Costs and Note 4:

Reportable Segments.

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(Dollars in millions) 2023 2022 2021

Net income $ 631.7 $ 876.3 $ 779.5

Net income (loss) $ ( 91.3 ) $ 631.7 $ 876.3

Other comprehensive income (loss):

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Total Other Comprehensive Income (Loss) ( 1.8 ) 40.0 101.6

Comprehensive Income $ 671.7 $ 977.9 $ 582.3

Comprehensive Income (Loss) $ ( 93.1 ) $ 671.7 $ 977.9

See notes to consolidated financial statements.

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Total Inventory 1,009.8 1,089.3

Investment in equity securities 487.8 —

Other current assets 107.7 226.2

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Dividends payable 106.3 105.3

Current portion of long-term debt — 1,152.9

Short-term borrowings — 180.0

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Noncurrent Liabilities

Long-term debt, less current portion 4,310.6 3,516.8

Long-term debt 4,314.2 4,310.6

Defined benefit pensions 62.1 114.9

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Authorized – 300,000,000 shares;

outstanding – 106,458,317 at April 30, 2022, and 108,339,057

at April 30, 2021 (net of 40,039,413 and 38,158,673 treasury shares, respectively), at stated value

outstanding – 104,398,618 at April 30, 2023, and 106,458,317 at April 30, 2022 (net of 42,099,112 and 40,039,413 treasury shares, respectively), at stated value

Additional capital 5,371.8 5,457.9

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Operating Activities

Net income $ 631.7 $ 876.3 $ 779.5

Adjustments to reconcile net income to net cash provided by (used for) operations:

Net income (loss) $ ( 91.3 ) $ 631.7 $ 876.3

Adjustments to reconcile net income (loss) to net cash provided by (used for) operations:

Depreciation 224.1 235.5 219.5

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Share-based compensation expense 25.6 22.3 28.7

Gain on divestitures – net ( 9.6 ) ( 25.3 ) —

Loss (gain) on divestitures – net 1,018.5 ( 9.6 ) ( 25.3 )

Deferred income tax expense (benefit) ( 190.8 ) ( 38.1 ) ( 13.9 )

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Other noncash adjustments – net 23.9 14.9 11.8

Settlement of interest rate contracts — — ( 239.8 )

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:

Defined benefit pension contributions ( 74.1 ) ( 5.3 ) ( 13.1 )

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

Trade receivables ( 74.8 ) 7.5 22.0

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Investing Activities

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

Proceeds from divestitures – net 686.3 130.0 564.0

Additions to property, plant, and equipment ( 477.4 ) ( 417.5 ) ( 306.7 )

Other – net 47.3 ( 68.0 ) 53.8

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Balance at May 1, 2020 114,072,726 $ 29.0 $ 5,794.1 $ 2,746.8 $ ( 379.0 ) $ 8,190.9

Net income 779.5 779.5

Net income (loss) 876.3 876.3

Other comprehensive income (loss) 101.6 101.6

Comprehensive Income 582.3

Comprehensive Income (Loss) 977.9

Purchase of treasury shares ( 5,834,904 ) ( 1.5 ) ( 301.5 ) ( 375.4 ) ( 678.4 )

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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

Net income 876.3 876.3

Net income (loss) 631.7 631.7

Other comprehensive income (loss) 40.0 40.0

Comprehensive Income 977.9

Comprehensive Income (Loss) 671.7

Purchase of treasury shares ( 2,059,083 ) ( 0.5 ) ( 109.6 ) ( 160.3 ) ( 270.4 )

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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

Net income 631.7 631.7

Net income (loss) ( 91.3 ) ( 91.3 )

Other comprehensive income (loss) ( 1.8 ) ( 1.8 )

Comprehensive Income 671.7

Comprehensive Income (Loss) ( 93.1 )

Purchase of treasury shares ( 2,423,196 ) ( 0.6 ) ( 132.2 ) ( 238.3 ) ( 371.1 )

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

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

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

Actual results could differ from these estimates.

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Other costs include the depreciation and maintenance of research facilities.

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

Total R&D expense was $ 47.3 , $ 48.8 , and $ 57.7 in 2023, 2022, and 2021, respectively.

Share-Based Payments:

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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.

As required by ASC 260, we computed net income (loss) per common share (“basic earnings per share”) under the two-class method for 2023, 2022, and 2021, due to certain unvested common shares that contained non-forfeitable rights to dividends (i.e., participating securities) during the periods.

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

In 2023, we recognized a net loss, and as a result, excluded the anti-dilutive effect of stock-based awards from the computation of net income (loss) per common share – assuming dilution.

Therefore, in 2023, diluted earnings per share was computed under the two-class method.

In 2022, the computation of diluted earnings per share was more dilutive under the treasury stock method, while in 2021, diluted earnings per share was more dilutive under the two-class method.

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

Under the two-class method, net income (loss) available to common and participating common shareholders is reduced by the net income (loss) 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.

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We account for the financial statement recognition and measurement criteria of a tax position taken or expected to be taken in a tax return under FASB ASC 740, Income Taxes .

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.

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.

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

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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.

At April 30, 2023 and 2022, the reserve for credit loss was $ 2.3 .

We believe there is no concentration of risk with any single customer whose failure or nonperformance would materially affect results other than as discussed in Note 4:

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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 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 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 generally 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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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.

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

Further, upon disposal of a business, a relative fair value analysis is utilized to determine the amount of goodwill to be disposed of for each impacted reporting unit, using estimates and assumptions consistent with the annual test.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives.

For additional information, see Note 6:

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Included in accumulated other comprehensive income (loss) at April 30, 2023 and 2022, were unrealized pre-tax gains of $ 1.8 and $ 2.4 , respectively.

Investment in Equity Securities:

Investments in common stock of entities other than our consolidated subsidiaries in which we own less than 20 percent of an entity’s common stock and do not provide significant influence are accounted for as a financial instrument in accordance with FASB ASC 321, Investments – Equity Securities.

As required by ASC 321, the ownership interest in the entity is recognized at fair value based on fixed or determinable prices within current assets in the Consolidated Balance Sheets, and any change in fair value is included in other income (expense) – net in the Statements of Consolidated Income.

The net proceeds received from the divestiture of certain pet food brands included approximately 5.4 million shares of Post common stock, which represents approximately an 8 percent equity interest in Post.

At April 30, 2023, the fair value of the investment in Post common stock was $ 487.8 , which included an unrealized pre-tax loss of $ 3.8 .

In connection with the divestiture of certain pet food brands and the acquisition of Post common stock, we entered into a registration rights agreement with Post (the “Registration Rights Agreement”) on April 28, 2023.

Under the Registration Rights Agreement, Post must use reasonable best efforts to keep its existing registration statement on Form S-3, or any applicable subsequent shelf registration statement, continuously effective and usable for the resale of the Post common stock that we received in the divestiture, and upon receipt of a request or notice from us, Post must, subject to the terms and conditions of the Registration Rights Agreement, register the sale of the Post common stock under the Securities Act of 1933, as amended.

In May 2023, we entered into an agreement with an unrelated third party giving us the ability to enter into forward derivative transactions to provide flexibility with respect to the potential sale of Post common stock during the first two quarters of 2024.

Subsequent to April 30, 2023, we have not entered into any forward derivative transactions.

Equity Method Investments:

Investments in common stock of entities other than our consolidated subsidiaries are accounted for under the equity method in accordance with FASB ASC 323, Investments – Equity Method and Joint Ventures .

Investments in common stock of entities other than our consolidated subsidiaries in which we own between 20 percent and 50 percent of an entity’s common stock and are able to exercise significant influence over them are accounted for under the equity method in accordance with FASB ASC 323, Investments – Equity Method and Joint Ventures .

Under the equity method, the initial investment is recorded at cost, and the investment is subsequently adjusted for its proportionate share of earnings or losses, including consideration of basis differences resulting from the difference between the initial carrying amount of the investment and the underlying equity in net assets.

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 approximately 42 percent equity interest in Numi, Inc.

We have a 20 percent equity interest in Mountain Country Foods, LLC, and approximately a 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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Supplier Financing Program:

During 2020, we entered into an agreement with a third-party administrator to provide an accounts payable tracking system and facilitate a supplier financing program which allows participating suppliers the ability to monitor and voluntarily elect to sell our payment obligations to a designated third-party financial institution.

We have an agreement with a third-party administrator to provide an accounts payable tracking system and facilitate a supplier financing program which allows participating suppliers the ability to monitor and voluntarily elect to sell our payment obligations to a designated third-party financial institution.

Participating suppliers can sell one or more of our payment obligations at their sole discretion, and our rights and obligations to our suppliers are not impacted.

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

Included in accounts payable in the Consolidated Balance Sheets as of April 30, 2022 and 2021 were $ 314.3 and $ 304.2 of outstanding payment obligations, respectively, that were elected and sold to a financial institution by participating suppliers.

Included in accounts payable in the Consolidated Balance Sheets as of April 30, 2023 and 2022, were $ 414.2 and $ 314.3 of our outstanding payment obligations, respectively, that were elected and sold to a financial institution by participating suppliers.

Foreign Currency Translation:

Assets and liabilities of foreign subsidiaries are translated using the exchange rates in effect at the balance sheet dates, while income and expenses are translated using average rates throughout the periods.

Translation adjustments are reported as a component of shareholders’ equity in accumulated other comprehensive income (loss).

Translation adjustments are reported as a component of accumulated other comprehensive income (loss).

Included in accumulated other comprehensive income (loss) at April 30, 2023 and 2022, were foreign currency losses of $ 34.3 and $ 21.1 , respectively.

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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 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 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, 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, 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.

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

The availability, quality, and costs of many of these commodities have fluctuated, and may continue to fluctuate over time, partially driven by the elevated commodity and supply chain costs we experienced in 2023.

We actively monitor changes in commodity and supply chain costs, and to mitigate the rising costs, we may be required to implement material price increases across our business.

Green coffee, along with certain other raw materials, is sourced solely from foreign countries, and its supply and price is subject to high volatility due to factors such as weather, global supply and demand, product scarcity, plant disease, investor speculation, armed hostilities (including the ongoing conflict between Russia and Ukraine), changes in governmental agricultural and energy policies and regulation, 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 for our Folgers coffee products, as well as our Jif peanut butter, and certain 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 obtain adequate supplies and that alternatives to single-sourced materials are available.

We have not historically encountered significant shortages of key raw materials.

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

Of our full-time employees, 26 percent are covered by union contracts at eight manufacturing locations.

The contracts vary in term depending on location, with two contracts expiring in 2023, representing 9 percent of our total employees.

Of our full-time employees, 22 percent are covered by union contracts at seven manufacturing locations.

The contracts vary in term depending on location, with one contract expiring in 2024, representing approximately one 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.

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, integration, or restructuring activities.

Special Project Costs

Special project costs primarily consist of employee-related costs and other transition and termination costs related to approved 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 impacted 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.

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.

These 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.

Integration Costs:

As of April 30, 2020, all integration activities related to the acquisition of Ainsworth were considered complete.

The following table summarizes our integration costs incurred related to the Ainsworth acquisition.

2020 Total Costs

Incurred to Date

at April 30, 2020

Employee-related costs $ 2.4 $ 17.9

Other transition and termination costs 14.1 30.7

Total integration costs $ 16.5 $ 48.6

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 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 2021, associated with opportunities identified to reduce our overall cost structure, optimize our organizational design, and support our portfolio reshape.

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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.

During 2022, we completed the transition of production to JDE Peet’s, and expanded the restructuring program to include certain costs associated with the divestitures of the private label dry pet food and natural beverage and grains businesses, as well as the closure of our Ripon, Wisconsin production facility to further optimize operations for our U.S.

Retail Consumer Foods business.

We completed the closure of the Ripon facility during 2023, as planned, and the remaining restructuring activities were completed as of April 30, 2023.

The costs incurred associated with these restructuring activities include other transition and termination costs associated with our cost reduction and margin management initiatives, inclusive of accelerated depreciation, as well as employee-related costs.

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

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Total restructuring costs $ 11.1 $ 28.5 $ 24.1 $ 63.7

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

The obligation related to severance costs and retention bonuses was $ 1.6 and $ 2.4 at April 30, 2023 and 2022, respectively, and is expected to be settled in the first quarter of 2024.

As of April 30, 2023, cumulative noncash charges incurred to date were $ 33.2 , including $ 10.2 , $ 18.6 , and $ 4.4 incurred during 2023, 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.

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.

On April 28, 2023, we sold certain pet food brands to Post.

The transaction included the Rachael Ray Nutrish, 9Lives, Kibbles ’n Bits, Nature’s Recipe , and Gravy Train brands, as well as our private label pet food business, inclusive of certain trademarks and licensing agreements, manufacturing and distribution facilities in Bloomsburg, Pennsylvania, manufacturing facilities in Meadville, Pennsylvania and Lawrence, Kansas, and approximately 1,100 employees who supported these pet food brands.

Under our ownership, these brands generated net sales of $ 1.5 billion in 2023, and $ 1.4 billion in both 2022 and 2021, primarily included in the U.S.

Retail Pet Foods segment.

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.

Net proceeds from the divestiture were $ 1.2 billion, consisting of $ 684.7 in cash, net of a preliminary working capital adjustment and cash transaction costs, and approximately 5.4 million shares of Post common stock, valued at $ 491.6 at the close of the transaction.

Upon close of the transaction, we recognized a pre-tax loss of $ 1.0 billion.

The net proceeds and pre-tax loss will be finalized during the first quarter of 2024, upon finalization of the working capital adjustment and cash transaction costs.

The following table summarizes the net assets and liabilities included in the disposal group associated with the divestiture of certain pet food brands.

April 30, 2023

Natural Beverage and Grains Private Label Dry Pet Food

Assets disposed:

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Property, plant, and equipment – net 179.4

Operating lease right-of-use assets 0.4 0.1

Goodwill 790.3

Other intangible assets – net 1,014.4

Other noncurrent assets 1.7

Total assets disposed $ 2,196.5

Liabilities disposed:

Current operating lease liabilities $ 0.3 $ 0.1

Noncurrent operating lease liabilities 0.1 —

Other current liabilities $ 0.3

Other noncurrent liabilities 2.0

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Net assets disposed $ 2,194.2

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 and $ 143.4 , in 2022 and 2021, respectively, primarily included in the U.S.

Retail Consumer Foods segment.

Final net proceeds from the divestiture were $ 98.7 , net of a working capital adjustment and cash transaction costs.

We recognized a pre-tax gain of $ 28.3 related to the natural beverage and grains businesses, of which $ 26.7 was recognized during 2022, and the remaining $ 1.6 was recognized upon finalization of the working capital adjustment in 2023.

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

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 and $ 94.0 in 2022 and 2021, respectively, included in the U.S.

Retail Pet Foods segment.

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

Upon completion of this transaction during 2022, we recognized a pre-tax loss of $ 17.1 .

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.

Under our ownership, the business generated net sales of $ 156.7 in 2021, 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.

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

Upon completion of this transaction, we recognized a pre-tax loss of $ 89.5 .

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

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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 and $ 269.2 in 2021 and 2020, respectively, primarily included in the U.S.

Under our ownership, the business generated net sales of $ 198.9 in 2021, 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.

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

Upon completion of this transaction, we recognized a pre-tax gain of $ 114.8 .

Reportable Segments

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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 Pet Foods segment primarily includes the domestic sales of Meow Mix , Milk-Bone , Pup-Peroni, and Canine Carry Outs branded products;

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

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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).

Under our ownership, the divested Rachael Ray Nutrish, 9Lives, Kibbles ’n Bits, Nature’s Recipe , and Gravy Train brands generated net sales of $ 1.5 billion in 2023, and $ 1.4 billion in both 2022 and 2021, primarily included in the U.S.

Retail Pet Foods segment.

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

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2023 2022 2021

Retail Pet Foods $ 2,764.3 $ 2,844.5 $ 2,869.5

Retail Pet Foods (A)

$ 3,038.1 $ 2,764.3 $ 2,844.5

Retail Coffee 2,735.3 2,497.3 2,374.6

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Segment profit:

Retail Pet Foods $ 395.9 $ 487.0 $ 552.7

Retail Pet Foods (A)

$ 494.9 $ 395.9 $ 487.0

Retail Coffee 737.7 736.7 769.1

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

Gain on divestitures – net 9.6 25.3 —

Gain (loss) on divestitures – net ( 1,018.5 ) 9.6 25.3

Interest expense – net ( 152.0 ) ( 160.9 ) ( 177.1 )

Change in net cumulative unallocated derivative gains and losses ( 21.4 ) ( 23.4 ) 93.6

Cost of products sold – special project costs (A)

Cost of products sold – special project costs (B)

( 6.4 ) ( 20.5 ) ( 3.4 )

Other special project costs (A)

Other special project costs (B)

( 4.7 ) ( 8.0 ) ( 20.7 )

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Other income (expense) – net ( 14.7 ) ( 19.1 ) ( 37.8 )

Income before income taxes $ 843.8 $ 1,171.9 $ 1,026.7

Retail Pet Foods $ 7,167.4 $ 7,480.8 $ 7,731.4

Income (loss) before income taxes $ ( 9.2 ) $ 843.8 $ 1,171.9

Retail Pet Foods (A)

$ 4,994.3 $ 7,167.4 $ 7,480.8

Retail Coffee 4,808.9 4,891.8 4,793.9

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International and Away From Home 978.3 973.9 1,013.8

Unallocated (B)

Unallocated (C)

1,237.2 329.8 442.3

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Depreciation, amortization, and impairment charges:

Retail Pet Foods $ 342.8 $ 194.8 $ 243.0

Retail Pet Foods (A)

$ 178.7 $ 342.8 $ 194.8

Retail Coffee 101.6 100.2 96.7

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International and Away From Home 31.7 46.2 50.2

Unallocated (C)

Unallocated (D)

42.7 55.7 39.2

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Additions to property, plant, and equipment:

Retail Pet Foods $ 74.0 $ 72.4 $ 60.1

Retail Pet Foods (A)

$ 64.3 $ 74.0 $ 72.4

Retail Coffee 49.0 49.8 42.5

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Total additions to property, plant, and equipment $ 477.4 $ 417.5 $ 306.7

(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.

(A) On April 28, 2023, we sold certain pet food brands to Post, and the divested net sales were primarily included in the U.S.

Retail Pet Foods segment.

In addition, the net assets disposed of during 2023 were primarily included in the U.S.

Retail Pet Foods segment.

For more information, see Note 3:

Integration and Restructuring Costs.

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

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

Divestitures.

(B) Special project costs include certain 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:

Special Project Costs.

(D) 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 Pet Foods

Peanut butter 801.1 796.1 730.6 U.S.

Retail Consumer Foods

Frozen handheld 686.4 510.7 430.3 U.S.

Retail Consumer Foods

Peanut butter 635.6 801.1 796.1 U.S.

Retail Consumer Foods

Fruit spreads 426.2 386.5 385.9 U.S.

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Portion control 163.7 158.2 120.5 Other (B)

Juices and beverages 106.3 139.0 125.7 U.S.

Retail Consumer Foods

Baking mixes and ingredients 94.3 85.5 93.5 Other (B)

Juices and beverages 3.2 106.3 139.0 Other (B)(C)

Shortening and oils — — 193.9 U.S.

Retail Consumer Foods (C)

Retail Consumer Foods (D)

Other 297.5 304.6 287.3 Other (B)

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

(C) During 2022 and 2021, the net sales within this category were primarily related to the divested natural beverage business included in the U.S.

Retail Consumer Foods segment.

For more information, see Note 3:

Divestitures.

(D) During 2021, the net sales within this category were related to the divested Crisco business.

For more information, see Note 3:

Divestitures.

Sales to Walmart Inc.

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

and subsidiaries amounted to 34 percent of net sales in both 2023 and 2022 and 32 percent of net sales in 2021.

These sales are primarily included in our U.S.

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Earnings Per Share

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.

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2023 2022 2021

Net income $ 631.7 $ 876.3 $ 779.5

Net income allocated to participating securities 1.8 3.7 4.4

Net income allocated to common stockholders $ 629.9 $ 872.6 $ 775.1

Net income (loss) $ ( 91.3 ) $ 631.7 $ 876.3

Net income (loss) allocated to participating securities ( 0.1 ) 1.8 3.7

Net income (loss) allocated to common stockholders $ ( 91.2 ) $ 629.9 $ 872.6

Weighted-average common shares outstanding 106.2 107.9 112.0

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Weighted-average common shares outstanding – assuming dilution 106.2 107.9 112.0

Net income per common share $ 5.84 $ 7.79 $ 6.84

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

Net income (loss) per common share $ ( 0.86 ) $ 5.84 $ 7.79

Net income (loss) per common share – assuming dilution $ ( 0.86 ) $ 5.84 $ 7.79

The following table sets forth the computation of diluted earnings per share under the treasury stock method.

Year Ended April 30,

2023 2022 2021

Net income (loss) $ ( 91.3 ) $ 631.7 $ 876.3

Weighted-average common shares outstanding – assuming dilution:

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Weighted-average common shares outstanding – assuming dilution 106.2 108.4 112.4

Net income per common share – assuming dilution $ 5.83

Net income (loss) per common share – assuming dilution $ ( 0.86 ) $ 5.83 $ 7.80

We computed basic earnings per share under the two-class method for 2023, 2022, and 2021, due to certain unvested common shares that contained non-forfeitable rights to dividends (i.e., participating securities) during these periods.

Further, we computed diluted earnings per share under the two-class method and treasury stock method to determine the method that was most dilutive, in accordance with FASB ASC 260, Earnings Per Share .

In 2023, we recognized a net loss, and as a result, excluded the anti-dilutive effect of stock-based awards from the computation of net income (loss) per common share – assuming dilution.

Therefore, in 2023, diluted earnings per share was computed under the two-class method.

In 2022, the computation of diluted earnings per share was more dilutive under the treasury stock method, while in 2021, diluted earnings per share was more dilutive under the two-class method.

Goodwill and Other Intangible Assets

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Balance at May 1, 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 )

Balance at April 30, 2022 $ 2,368.2 $ 2,090.9 $ 1,147.5 $ 409.2 $ 6,015.8

Divestiture ( 788.0 ) — — ( 2.3 ) ( 790.3 )

— — — ( 8.6 ) ( 8.6 )

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$ 1,580.2 $ 2,090.9 $ 1,147.5 $ 398.3 $ 5,216.9

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

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

(B) Included in goodwill as of April 30, 2023, are accumulated goodwill impairment charges of $ 242.9 .

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

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

April 30, 2023 April 30, 2022

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Amortization/

Exchange Net Acquisition

Currency Translation Net Acquisition

Cost Accumulated

Amortization/

Translation Net

Finite-lived intangible assets subject to

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Total other intangible assets $ 6,648.7 $ 2,219.4 $ 4,429.3 $ 8,112.4 $ 2,460.2 $ 5,652.2

The decrease in finite-lived intangible assets from April 30, 2022, includes the disposal of the Rachael Ray Nutrish, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Gravy Train trademarks, as well as select customer and contractual relationships and licensing agreements during the fourth quarter of 2023.

For additional information, see Note 3:

Divestitures.

Amortization expense for finite-lived intangible assets was $ 205.9 , $ 222.5 , and $ 232.0 in 2023, 2022, and 2021, 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.

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.

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

As of February 1, 2023, we completed the annual impairment review, in which goodwill impairment was tested at the reporting unit level for all of our reporting units with goodwill.

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

The estimated fair value exceeded the carrying value by greater than 10 percent for all our reporting units 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 7 percent.

Subsequent to the annual impairment review, on April 28, 2023, we divested certain pet food brands, and as a result, we disposed $ 790.3 of goodwill, primarily within the Pet Foods reporting unit.

The amount of goodwill allocated to the disposal group was determined based on a relative fair value analysis.

In addition, the impacted reporting units were re-assessed for impairment as of April 30, 2023, and we concluded there were no indicators of impairment, as the estimated fair values were in excess of the carrying values for all reporting units.

Further, the estimated fair value exceeded the carrying value of the Pet Foods reporting unit by greater than 10 percent as of April 30, 2023.

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

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

Accounting Policies and Note 3:

Divestitures.

In 2022, we recognized an impairment charge of $ 150.4 related to the divested 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.

Both scenarios independently yielded an estimated fair value for the Pet Foods reporting unit below carrying value.

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

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, 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.

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

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Outstanding Carrying

3.50 % Senior Notes due October 15, 2021

$ — $ — $ 750.0 $ 753.5

3.50 % Senior Notes due March 15, 2025

$ 1,000.0 $ 998.4 $ 1,000.0 $ 997.6

3.50 % Senior Notes due March 15, 2025

1,000.0 997.6 1,000.0 996.8

3.38 % Senior Notes due December 15, 2027

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Total long-term debt $ 4,350.0 $ 4,314.2 $ 4,350.0 $ 4,310.6

Current portion of long-term debt — — 1,150.0 1,152.9

Total long-term debt, less current portion $ 4,350.0 $ 4,310.6 $ 3,550.0 $ 3,516.8

(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 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.

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

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.

Furthermore, during 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 2022, 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 2022 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.

Prime Rate, SOFR, 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.

We did not have a balance outstanding under the revolving credit facility at April 30, 2023, or 2022.

We participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $ 2.0 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 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.

As of April 30, 2022, we had $ 180.0 of short-term borrowings outstanding, which were issued under our commercial paper program at a weighted-average interest rate of 0.65 percent.

As of April 30, 2023, we did not have a balance outstanding under the commercial paper program.

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

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

Concurrent with the pricing of these Senior Notes, we terminated 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.

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Interest paid totaled $ 153.1 , $ 155.2 , and $ 169.9 in 2023, 2022, and 2021, respectively.

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.

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

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.

Our financial covenant restrictions were amended to remove the leverage ratio in 2022, in conjunction with entering into the $2.0 billion unsecured revolving credit facility.

We are in compliance with all covenants.

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Settlement loss (gain) 7.4 10.8 35.5 — — —

Termination benefit cost — — 0.2 — — —

Net periodic benefit cost $ 15.7 $ 16.8 $ 44.2 $ 1.5 $ 1.5 $ 2.6

93 unchanged sentences

Foreign currency translation ( 0.4 ) ( 0.4 ) — —

During 2021, we transferred $ 82.6 in obligations as part of the Canadian buy-out contract.

During 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 (the “Canadian buy-out contract”).

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

1 unchanged sentence

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.

We did not recognize any additional charges related to the Canadian buy-out contract during 2023 and 2022.

We expect to finalize the wind-up of the Canadian pension plan impacted by the buy-out in 2024, upon Board approval for payout of the surplus.

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

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Plans with an accumulated benefit obligation in excess of plan assets:

Accumulated benefit obligation $ 422.4 $ 536.9

Accumulated benefit obligation (A)

$ 194.6 $ 422.4

Fair value of plan assets 133.1 309.0

Plans with a projected benefit obligation in excess of plan assets:

Projected benefit obligation $ 427.8 $ 545.4

Projected benefit obligation (A)

$ 198.9 $ 427.8

Fair value of plan assets 133.1 309.0

(A) The decrease in our defined benefit pension plan obligations for plans in excess of plan assets, as compared to 2022, is primarily driven by the fact that we made contributions during 2023, which significantly improved the funded status of the majority of our defined benefit pension plans.

We employ a total return on investment approach for the defined benefit pension plans’ assets.

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In determining the expected long-term rate of return on the defined benefit pension plans’ assets, we consider the historical rates of return, the nature of investments, the asset allocation, and expectations of future investment strategies.

The actual rate of return was ( 4.6 ) percent and 12.9 percent for the years ended April 30, 2022 and 2021, respectively, which excludes administrative and investment expenses.

Our current investment policy is to invest approximately 63 percent of assets in fixed-income securities, with the remaining invested primarily in equity securities.

Based on our improved funded status, our current investment policy includes a mix of investments that consist of approximately 80 percent fixed-income securities and 20 percent equity securities.

The following tables summarize the major asset classes for the U.S.

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Equity securities:

29.8 — — 29.8

International (C)

33.3 — — 33.3

Fixed-income securities:

259.6 — — 259.6

Fixed income (E)

Other types of investments (F)

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Fixed income (E)

13.6 — — 13.6

Other types of investments (F)

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

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

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

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

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

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

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

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

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

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

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

Furthermore, as a practical expedient equivalent to our defined benefit plan’s ownership interest in the partners’ capital, a proportionate share of the net assets is attributed and further corroborated by our review.

The private equity fund and private limited investment partnership are non-redeemable, and the return of principal is based on the liquidation of the underlying assets.

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 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 .

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

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

Furthermore, as a practical expedient equivalent to our defined benefit plan’s ownership interest in the partners’ capital, a proportionate share of the net assets was attributed and further corroborated by our review.

The private equity fund and private limited investment partnership were non-redeemable, and the return of principal was based on the liquidation of the underlying assets.

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

In 2024, we do not expect to make any contributions to our U.S.

qualified defined benefit pension plans;

however, we do expect to make direct benefit payments of approximately $ 9.8 in 2024.

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.

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.

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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A funding improvement plan, or rehabilitation plan, has been implemented.

The American Rescue Plan Act (the “ARPA”), signed into law on March 11, 2021, established a special financial assistance program for financially troubled multi-employer pension plans.

Under the ARPA, eligible multi-employer plans can apply to receive a cash payment in an amount projected by the Pension Benefit Guaranty Corporation to pay pension benefits through the plan year ending 2051.

On March 1, 2023, the Bakery and Confectionery Union Fund applied for assistance under the ARPA program.

Derivative Financial Instruments

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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, soybean meal, corn, wheat, and edible oils.

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

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The commodities hedged have a high inverse correlation to price changes of the derivative instrument.

Thus, we would expect that over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.

Thus, we would expect that over time any gain or loss in the estimated fair value of its derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.

Foreign Currency Exchange Derivatives:

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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 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, 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.

Our cash margin accounts represented collateral pledged of $ 17.0 and $ 54.6 at April 30, 2023 and 2022, respectively, and are included in other current assets in the Consolidated Balance Sheets.

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

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

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Cash Flow Hedges

In 2020, we terminated interest rate contracts concurrent with the pricing of the Senior Notes due March 15, 2030, and March 15, 2050.

They were designated as cash flow hedges and were used to manage our exposure to interest rate volatility associated with the anticipated debt financing.

In 2020, we terminated all outstanding interest rate contracts concurrent with the pricing of the Senior Notes due March 15, 2030, and March 15, 2050.

The contracts were designated as cash flow hedges and were used to manage our exposure to interest rate volatility associated with the anticipated debt financing.

The termination resulted in a pre-tax loss of $ 239.8 , which was deferred and included as a component of accumulated other comprehensive income (loss) and is being amortized as interest expense over the life of the debt.

In 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.

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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(A) Interest expense – net, as presented in the Statements of Consolidated Income, was $ 152.0 , $ 160.9 , and $ 177.1 in 2023, 2022, and 2021, 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 includes terminated contracts which were designated as cash flow hedges.

(B) Other income (expense) – net, as presented in the Statements of Consolidated Income, was $ 14.7 , $ 19.1 , and $ 37.8 in 2023, 2022, and 2021, respectively.

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

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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.

As of April 30, 2022, we had fully recognized the gain of $ 53.5 , of which $ 4.0 and $ 8.4 were recognized in 2022 and 2021, respectively.

Other Financial Instruments and Fair Value Measurements

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Derivative financial instruments – net 4.7 4.7 24.8 24.8

Investment in equity securities 487.8 487.8 — —

Total long-term debt ( 4,314.2 ) ( 3,879.1 ) ( 4,310.6 ) ( 3,977.7 )

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Foreign currency exchange contracts – net 0.2 1.1 — 1.3

Total long-term debt (C)

Investment in equity securities (C)

487.8 — — 487.8

Total long-term debt (D)

( 3,879.1 ) — — ( 3,879.1 )

Total financial instruments measured at fair value $ ( 3,383.0 ) $ 20.4 $ — $ ( 3,362.6 )

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Foreign currency exchange contracts – net 0.2 1.5 — 1.7

Total long-term debt (C)

Total long-term debt (D)

( 3,977.7 ) — — ( 3,977.7 )

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Derivative Financial Instruments.

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

The investment in equity securities represents our equity interest in Post of approximately 8 percent as of April 30, 2023, which is valued using the trading value of Post common stock.

In 2023, we recognized an unrealized pre-tax loss of $ 3.8 on the investment, which was included in other income (expense) – net in the Statement of Consolidated Income.

For additional information, see Investment in Equity Securities in Note 1:

Accounting Policies and Note 3:

Divestitures.

(D) 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 an impairment charge of $ 150.4 during 2022 related to the Rachael Ray Nutrish brand within the U.S.

During 2023, we recognized a loss on divestiture in our Statement of Consolidated Income related to the divestiture of certain pet food brands.

The loss on divestiture included the impact of an allocation of $ 790.3 of goodwill, primarily in the U.S.

Retail Pet Foods segment, which was determined based on a relative fair value analysis.

The impact of the goodwill disposed was included in the noncash pre-tax loss on the divestiture in our Statement of Consolidated Income.

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

Retail Pet Foods segment.

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.

Retail Consumer Foods segment.

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

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We lease certain warehouses, manufacturing facilities, office space, equipment, and vehicles, primarily through operating lease agreements.

We have elected to not recognize leases with a term of 12 months or less on the balance sheet.

We have elected to not recognize leases with a term of 12 months or less in the Consolidated Balance Sheets.

Instead, we recognize the related lease expense on a straight-line basis over the lease term.

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

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.

As of April 30, 2023, we have entered into a lease commitment related to a distribution center for which the lease has not yet commenced as of that date.

The lease will begin during the first quarter of 2024, and upon commencement, we expect to recognize a right-of-use asset and lease liability of approximately $ 75.8 in the Condensed Consolidated Balance Sheet.

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

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Short-term lease cost 44.5 43.5 37.6

Sublease income ( 1.5 ) ( 3.7 ) ( 4.3 )

Net lease cost $ 109.5 $ 105.0 $ 108.5

Total lease cost (A)

$ 113.3 $ 111.0 $ 108.7

(A) Total lease cost does not include sublease income which is immaterial for all years presented.

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

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2026 23.8 0.7

2026 18.9 0.4

2029 and beyond 19.9 —

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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 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.

During 2023 and 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.

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Stock Options:

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.

Under the 2020 Plan, we granted 113,970 and 152,971 stock options during 2023 and 2022, respectively, and under the 2010 Plan, we granted 296,619 stock options during 2021.

Stock options granted in 2023, 2022, and 2021 vest ratably over a period of three years .

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Exercised ( 207,576 ) 113.14

Cancelled ( 27,658 ) 123.40

Outstanding at April 30, 2023

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

respectively.

During 2023, 2022 and 2021, we recognized compensation cost of $ 3.1 , $ 3.0 , and $ 2.3 , respectively.

The tax benefit related to the stock option expense was $ 0.7 , $ 0.7 , and $ 0.5 for 2023, 2022, and 2021, respectively.

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The weighted-average grant date fair value of equity awards other than stock options that vested in 2023, 2022, and 2021 was $ 30.6 , $ 21.7 , and $ 23.1 , respectively.

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

The weighted-average grant date fair value of restricted shares, deferred stock units,

and performance units is the average of the high and the low share price on the date of grant.

The vesting date fair value of equity awards other than stock options that vested in 2023, 2022, and 2021 was $ 36.2 , $ 24.0 , and $ 19.7 , respectively.

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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:

The following table sets forth our income (loss) before income taxes.

Year Ended April 30,

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Foreign 14.4 37.8 ( 4.7 )

Income before income taxes $ 843.8 $ 1,171.9 $ 1,026.7

The components of the provision for income taxes are as follows:

Income (loss) before income taxes $ ( 9.2 ) $ 843.8 $ 1,171.9

The following table summarizes the components of the provision for income taxes.

Year Ended April 30,

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State and local ( 31.2 ) 9.9 ( 2.9 )

Total income tax expense (benefit) $ 212.1 $ 295.6 $ 247.2

A reconciliation of the statutory federal income tax rate and the effective income tax rate is as follows:

Total income tax expense $ 82.1 $ 212.1 $ 295.6

The following table sets forth a reconciliation of the statutory federal income tax rate and the effective income tax rate.

Year Ended April 30,

1 unchanged sentence

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

Sale of certain pet food brands ( 776.4 ) — —

Sale of the Crisco business

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Income taxes paid $ 254.8 $ 233.0 $ 333.2

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.

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 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.

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, 2019 through April 30, 2023.

The income tax expense of $ 82.1 for 2023 includes a permanent tax impact associated with the sale of certain pet food brands.

The income tax expense of $ 212.1 for 2022 includes an unfavorable deferred tax impact, primarily related to an internal legal entity simplification 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 sales of the Crisco and Natural Balance businesses.

For the 2019 through 2022 tax years, the CAP examination is substantially complete and awaiting final closing documentation.

The tax years prior to 2020 are no longer subject to U.S.

federal tax examination.

With limited exceptions, we are no longer subject to examination for state and local jurisdictions for the tax years prior to 2018 and for the tax years prior to 2015 for foreign jurisdictions.

federal tax examination under the statute of limitations.

With limited exceptions, we are no longer subject to examination for state, local, and foreign jurisdictions for the tax years prior to 2019.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting.

Significant components of our deferred tax assets and liabilities are as follows:

The following table summarizes significant components of our deferred tax assets and liabilities.

Deferred tax liabilities:

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

during both 2023 and 2022.

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

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Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $ 1.8 , primarily as a result of the expiration of statute of limitation periods.

A reconciliation of our unrecognized tax benefits is as follows:

The following table sets forth a reconciliation of our unrecognized tax benefits.

2023 2022 2021

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Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), including the reclassification adjustments for items that are reclassified from accumulated other comprehensive income (loss) to net income, are shown below.

Adjustment Net Gains (Losses)

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$ ( 34.3 ) $ ( 153.6 ) $ ( 52.7 ) $ 1.4 $ ( 239.2 )

(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.

(A) The reclassification from accumulated other comprehensive income (loss) is primarily composed of deferred gains (losses) related to terminated interest rate contracts which were reclassified to interest expense.

For additional information, see Note 9:

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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 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.

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

In June 2019, the state agency responsible for administering the Proposition 65 program, OEHHA, approved a regulation clarifying that cancer warnings are not required for coffee under Proposition 65, and in August 2020, the trial court granted the Defendants’ motion for summary judgment based on the regulation.

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

We are also defendants in 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.

In addition to the legal proceedings discussed above, we are defendants in a series of putative class action lawsuits that were 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.

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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.

In May 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 and temporarily paused shipments from our Memphis, Tennessee facility to eliminate confusion while customers cleared their shelves of potentially impacted products manufactured at the Lexington facility.

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

In June 2022, we resumed manufacturing Jif peanut butter products at our Lexington facility, as well as shipping from our Memphis facility.

We partnered with retailers to restock Jif peanut butter products during the first quarter of 2023, and as of April 30, 2023, we have returned to normal levels.

To date, we have recognized total direct costs associated with the recall of approximately $ 120.0 , net of insurance recoveries, related to customer returns, fees, unsaleable inventory, and other product recall-related costs, primarily within 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.

We expect costs associated with the recall to be minimal in 2024.

Further, the FDA issued a Warning Letter on January 24, 2023, following an inspection of our Lexington facility completed in June 2022 in connection with the Jif voluntary recall, identifying concerns regarding certain practices and controls at the facility.

We have responded to the Warning Letter with a detailed explanation of our food safety plan and extensive verification activities to prevent contamination in Jif peanut butter products.

In addition, we have worked diligently to further strengthen our already stringent quality processes, including doubling our finished product testing and tripling our environmental testing to verify the efficacy of our actions.

The FDA or other agencies may nonetheless conclude that certain practices or controls were not in compliance with the Federal Food, Drug, and Cosmetic Act or other laws.

Any potential regulatory action based on such an agency conclusion could result in the imposition of injunctive terms and monetary payments that could have a material adverse effect on our business, reputation, brand, results of operations, and financial performance, as well as affect ongoing consumer litigation associated with the voluntary recall of Jif peanut butter products.

The outcome and financial impact of the ongoing consumer litigation or any potential regulatory action associated with the Jif voluntary recall cannot be predicted at this time.

Accordingly, no loss contingency has been recorded for these matters as of April 30, 2023, and the likelihood of loss is not considered probable or estimable.

Common Shares

The Amended Articles of Incorporation (“Articles”) provide that each holder of a common share outstanding is entitled to one vote on each matter submitted to a vote of the shareholders, except for the following specific matters:

• any matter that relates to or would result in the dissolution or liquidation of the Company;

• 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;

• the adoption of any agreement or plan of or for the merger, consolidation, or majority share acquisition of us or any of our subsidiaries with or into any other person, whether domestic or foreign, corporate or noncorporate, or the authorization of the lease, sale, exchange, transfer, or other disposition of all, or substantially all, of our assets;

• any matter submitted to our shareholders pursuant to Article Fifth (which relates to procedures applicable to certain business combinations) or Article Seventh (which relates to procedures applicable to certain proposed acquisitions of specified percentages of our outstanding common shares) of the Articles, as they may be further amended, or any issuance of our common shares for which shareholder approval is required by applicable stock exchange rules;

• any matter relating to the issuance of our common shares or the repurchase of our common shares that the Board determines is required or appropriate to be submitted to our shareholders under the Ohio Revised Code or applicable stock exchange rules.

On the matters listed above, common shares are entitled to 10 votes per share if they meet the requirements set forth in the Articles.

Common shares which would be entitled to 10 votes per share must meet one of the following criteria:

• common shares for which there has not been a change in beneficial ownership in the past four years;

• common shares received through our various equity plans that have not been sold or otherwise transferred.

In the event of a change in beneficial ownership, the new owner of that common share will be entitled to only one vote with respect to that share on all matters until four years pass without a further change in beneficial ownership of the share.

The Amended Articles of Incorporation provide that each holder of a common share outstanding is entitled to one vote on each matter submitted to a vote of the shareholders.

Repurchase Programs:

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.

During the fourth quarter of 2023, we repurchased approximately 2.4 million common shares for $ 358.0 pursuant to the authorizations of the Board.

Under the repurchase plan, a total of approximately 3.5 million common shares remain available for repurchase as of April 30, 2023.

In accordance with the Inflation Reduction Act, a one percent excise tax was applied to share repurchases after December 31, 2022.

As a result, an excise tax of $ 3.6 was accrued on the repurchased shares during 2023, and included within additional capital in our Consolidated Balance Sheet.

A total of 2.0 million common shares were repurchased for $ 262.5 during 2022 under authorizations by the Board, and no excise tax was accrued on the repurchased shares.

All other share repurchases during 2023 and 2022 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.

On March 2, 2023, we also entered into the 10b5-1 Plan that was established in accordance with Rule 10b5-1 of the Exchange Act in connection with the remaining common shares authorized for repurchase by the Board.

In accordance with the 10b5-1 Plan, our designated broker has the authority to repurchase approximately 2.4 million commons shares, which commenced on the consummation of the sale of certain pet food brands on April 28, 2023, and will expire 45 calendar days after the closure of the transaction, which is in the first quarter of 2024, unless terminated earlier in accordance with the terms of the 10b5-1 Plan.

Subsequent to April 30, 2023, we repurchased approximately 2.4 million common shares for $ 362.8 under this 10b5-1 Plan, and approximately 1.1 million common shares remain available for repurchase.

An excise tax of $ 3.6 was also accrued on the repurchased shares during the first quarter of 2024.

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