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Item 1. Financial Statements

2023-08-29 compared with 2023-02-28 · 215 added, 274 removed, 478 unchanged (51% of the section changed)

2 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

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

Three Months Ended July 31,

Dollars in millions, except per share data 2023 2022

Net sales $ 1,805.2 $ 1,873.0

Cost of products sold (A)

1,460.5 1,374.0 4,285.0 3,931.1

Cost of products sold 1,150.4 1,320.5

Gross Profit 654.8 552.5

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Amortization 39.8 55.6

Other intangible assets impairment charge — 150.4 — 150.4

Other special project costs (A)

0.6 2.0 2.7 5.1

Other operating expense (income) – net ( 2.1 ) ( 26.6 )

8 unchanged sentences

Net Income – Assuming Dilution $ 1.79 $ 1.03

(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 3:

Restructuring Costs and Note 5:

Reportable Segments.

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

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

Three Months Ended July 31,

Dollars in millions 2023 2022

5 unchanged sentences

Available-for-sale securities activity, net of tax ( 0.2 ) ( 0.3 )

Total Other Comprehensive Income (Loss) 10.1 1.2 0.2 8.1

Total Other Comprehensive Income 10.2 4.0

Comprehensive Income $ 193.8 $ 113.8

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in millions January 31, 2023 April 30, 2022

Dollars in millions July 31, 2023 April 30, 2023

Current Assets

4 unchanged sentences

Total Inventory 1,093.4 1,009.8

Investment in equity securities 459.8 487.8

Other current assets 110.1 107.7

19 unchanged sentences

Accrued trade marketing and merchandising 171.8 187.7

Short-term borrowings — 180.0

Current operating lease liabilities 35.9 33.2

18 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

Nine Months Ended January 31,

Three Months Ended July 31,

Dollars in millions 2023 2022

4 unchanged sentences

Amortization 39.8 55.6

Other intangible assets impairment charge — 150.4

Pension settlement loss (gain) 3.2 —

Unrealized loss (gain) on investment in equity securities 27.4 —

Share-based compensation expense 5.1 7.9

Gain on divestitures – net ( 1.6 ) ( 9.6 )

Deferred income tax expense (benefit) ( 8.9 ) —

Other noncash adjustments – net 4.8 2.5

Make-whole payments included in financing activities — 7.0

Defined benefit pension contributions ( 0.7 ) ( 70.7 )

Changes in assets and liabilities:

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

Trade receivables 6.1 ( 80.2 )

8 unchanged sentences

Additions to property, plant, and equipment ( 150.3 ) ( 88.3 )

Proceeds from divestitures – net 1.6 130.2

Other – net ( 1.6 ) 16.8

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Short-term borrowings (repayments) – net — 207.0

Proceeds from long-term debt — 797.6

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

Capitalized debt issuance costs — ( 10.4 )

Quarterly dividends paid ( 105.2 ) ( 105.1 )

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CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY

Nine Months Ended January 31, 2023

Three Months Ended July 31, 2023

Dollars in millions Common

2 unchanged sentences

Net income 183.6 183.6

Other comprehensive income (loss) 4.0 4.0

Other comprehensive income 10.2 10.2

Comprehensive income 193.8

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Balance at July 31, 2023 102,132,673 $ 25.5 $ 5,242.1 $ 1,964.8 $ ( 229.0 ) $ 7,003.4

Net income 191.1 191.1

Other comprehensive income (loss) ( 13.9 ) ( 13.9 )

Comprehensive income 177.2

Purchase of treasury shares ( 580 ) — ( 0.1 ) — ( 0.1 )

Stock plans 67,757 — 4.4 4.4

Cash dividends declared, $ 1.02 per common share

( 108.5 ) ( 108.5 )

Balance at October 31, 2022 106,626,536 $ 26.6 $ 5,462.0 $ 2,976.0 $ ( 247.3 ) $ 8,217.3

Net income 208.5 208.5

Other comprehensive income (loss) 10.1 10.1

Comprehensive income 218.6

Purchase of treasury shares ( 746 ) — ( 0.1 ) — ( 0.1 )

Stock plans 8,499 — 7.5 7.5

Cash dividends declared, $ 1.02 per common share

( 108.3 ) ( 108.3 )

Balance at January 31, 2023 106,634,289 $ 26.6 $ 5,469.4 $ 3,076.2 $ ( 237.2 ) $ 8,335.0

Nine Months Ended January 31, 2022

Three Months Ended July 31, 2022

Dollars in millions Common

2 unchanged sentences

Net income 109.8 109.8

Other comprehensive income (loss) ( 4.2 ) ( 4.2 )

Other comprehensive income 4.0 4.0

Comprehensive income 113.8

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Balance at July 31, 2022 106,559,359 $ 26.6 $ 5,457.7 $ 2,893.4 $ ( 233.4 ) $ 8,144.3

Net income 206.0 206.0

Other comprehensive income (loss) 11.1 11.1

Comprehensive income 217.1

Purchase of treasury shares ( 5,676 ) — ( 0.6 ) ( 0.1 ) ( 0.7 )

Stock plans 8,521 — 6.6 6.6

Cash dividends declared, $ 0.99 per common share

( 106.9 ) ( 106.9 )

Balance at October 31, 2021 108,362,839 $ 27.1 $ 5,537.0 $ 2,992.8 $ ( 270.5 ) $ 8,286.4

Net income 69.7 69.7

Other comprehensive income (loss) 1.2 1.2

Comprehensive income 70.9

Purchase of treasury shares ( 1,505 ) — ( 0.2 ) — ( 0.2 )

Stock plans 100,996 — 16.8 16.8

Cash dividends declared, $ 0.99 per common share

( 107.0 ) ( 107.0 )

Balance at January 31, 2022 108,462,330 $ 27.1 $ 5,553.6 $ 2,955.5 $ ( 269.3 ) $ 8,266.9

See notes to unaudited condensed consolidated financial statements.

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The unaudited interim condensed consolidated financial statements of The J.

Smucker Company (“Company,” “we,” “us,” or “our”) have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Smucker Company (“Company,” “we,” “us,” or “our”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all the information and notes required by U.S.

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In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included.

Operating results for the nine months ended January 31, 2023, are not necessarily indicative of the results that may be expected for the year ending April 30, 2023.

Operating results for the three months ended July 31, 2023, are not necessarily indicative of the results that may be expected for the year ending April 30, 2024.

For further information, reference is made to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended April 30, 2023.

Recently Issued Accounting Standards

In March 2022, the U.S.

Securities and Exchange Commission (the “SEC”) issued the proposed rule under SEC Release No.

In July 2023, the U.S.

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

33-11216, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure , requiring current reporting about material cybersecurity incidents, and annual disclosures on management’s processes for assessing, identifying, and managing material cybersecurity risks, the material impacts of cybersecurity threats and previous cybersecurity incidents, the Board of Directors’ (the “Board”) oversight of cybersecurity risks, and management’s role and expertise in assessing and managing material cybersecurity risks.

SEC Release No.

33-11216 will be effective for us during the third quarter of 2024.

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

In May 2023, the SEC adopted the final rule under SEC Release No.

34-97424, Share Repurchase Disclosure Modernization , requiring disclosures related to issuers’ share repurchases pursuant to authorizations by the Board, inclusive of 10b5-1 plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that will provide investors with enhanced information to assess the purposes and effects of the repurchases.

SEC Release No.

34-97424 will be effective for us during the third quarter of 2024.

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

In December 2022, the SEC adopted the final rule under SEC Release No.

33-11138, Insider Trading Arrangements and Related Disclosures , which requires new disclosures regarding insider trading policies and procedures, the use of Rule 10b5-1 plans by directors and officers, and stock option grants issued in close proximity to the release of material nonpublic information.

SEC Release No.

33-11138 was effective for us on May 1, 2023, and did not have a material impact on our financial statements and disclosures.

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

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

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

As of January 31, 2023, these amendments were not adopted by the SEC;

As of July 31, 2023, these amendments were not adopted by the SEC;

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

Restructuring Costs

Restructuring costs primarily consist of employee-related costs and other transition and termination costs related to approved 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.

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

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

These restructuring costs are reported in cost of products sold and other operating expense (income) – net in the Condensed 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 Condensed Consolidated Balance Sheets.

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

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

For additional information related to the divestitures, see Note 4:

Divestitures.

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 N.V.

Furthermore, the restructuring program was expanded during the third quarter of 2022 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 the third quarter of 2023, as planned, and anticipate the remaining restructuring activities will be completed by the end of 2023.

We expect to incur total costs of approximately $ 65.0 associated with the restructuring activities, of which 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.

The remaining costs represent employee-related 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, and was further expanded in 2022 to include the costs associated with the divestitures of the private label dry pet food and natural beverage and grains businesses as well as the closure of certain production facilities.

The restructuring activities were considered complete as of April 30, 2023.

The costs incurred associated with these restructuring activities included other transition and termination costs related to 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.

Three Months Ended January 31, Nine Months Ended January 31, Total Costs Incurred to Date at January 31, 2023

2023 2022 2023 2022

Three Months Ended July 31, 2022 Total Costs Incurred to Date at April 30, 2023

Employee-related costs $ 1.1 $ 27.1

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Total restructuring costs $ 2.5 $ 63.7

The obligation related to severance costs and retention bonuses was $ 0.5 and $ 2.4 at January 31, 2023, and April 30, 2022, respectively.

Noncash charges of $ 3.2 and $ 6.7 were included in the restructuring costs during the three months ended January 31, 2023 and 2022, respectively, and $ 10.2 and $ 15.9 during the nine months ended January 31, 2023 and 2022, respectively.

As of January 31, 2023, cumulative noncash charges incurred to date were $ 33.2 and primarily consisted of accelerated depreciation.

Subsequent to January 31, 2023, we entered into a definitive agreement to sell several of our pet food brands to Post Holdings, Inc.

We expect the transaction to close during the fourth quarter of 2023, subject to closing conditions, including the receipt of required regulatory approvals.

The transaction includes 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 support these pet food brands.

Under our ownership, these brands are expected to generate net sales of approximately $ 1.5 billion in 2023, primarily included in the U.S.

The obligation related to severance costs and retention bonuses was $ 1.6 at April 30, 2023, and was fully satisfied during the first quarter of 2024.

Cumulative noncash charges incurred through April 30, 2023, were $ 33.2 , and included $ 4.8 incurred during the three months ended July 31, 2022, which primarily consisted of accelerated depreciation.

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

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, primarily included in the U.S.

Retail Pet Foods segment.

The transaction is valued at approximately $ 1.2 billion, consisting of $ 700.0 in cash, subject to a working capital adjustment, and approximately 5.39 million shares of Post common stock.

Based on the expected proceeds, less estimated costs to sell, we anticipate recognizing a pre-tax loss of approximately $ 815.0 in the fourth quarter of 2023, inclusive of the estimated carrying value of the net assets to be disposed, primarily consisting of goodwill and other intangible assets.

Net proceeds from the divestiture were $ 1.2 billion, consisting of $ 683.9 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.

We recognized a pre-tax loss of $ 1.0 billion upon completion of this transaction during the fourth quarter of 2023 within other operating expense (income) – net in the Statement of Consolidated Income, which is subject to the finalization of the working capital adjustment and cash transaction costs.

The net proceeds and pre-tax loss will be finalized during the second quarter of 2024.

Furthermore, during the first quarter of 2024, we began entering into equity forward derivative transactions under an agreement with an unrelated third party to facilitate the forward sale of the Post common stock.

Subsequent to July 31, 2023, all 5.4 million shares of Post common stock were hedged and will settle for $ 466.3 during the third quarter of 2024.

For additional information, see Note 9:

Derivative Financial Instruments.

On January 31, 2022, we sold the natural beverage and grains businesses to Nexus Capital Management LP (“Nexus”).

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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 in 2022, primarily included in the U.S.

Retail Consumer Foods segment.

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

We recognized a pre-tax gain of $ 28.3 related to the natural beverage and grains businesses within other operating expense (income) – net in the Condensed Statements of Consolidated Income, of which $ 26.7 was recognized during the second half of 2022, and the remaining $ 1.6 was recognized upon finalization of the working capital adjustment during the first quarter of 2023.

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

(“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 in 2022, 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 this transaction during the third quarter of 2022, we recognized a pre-tax loss of $ 17.1 , within other operating expense (income) – net in the Condensed Statement of Consolidated Income.

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 $ 1.6 was recognized during the three months ended July 31, 2022, within other operating expense (income) – net in the Condensed Statement of Consolidated Income, upon finalization of the working capital adjustment.

Reportable Segments

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We have three reportable segments:

Retail Pet Foods, U.S.

Retail Coffee, and U.S.

Retail Consumer Foods.

Retail Coffee, U.S.

Retail Consumer Foods, and U.S.

Retail Pet Foods.

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

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

Retail Coffee segment primarily includes

the domestic sales of Folgers ® , Dunkin’ ® , and Café Bustelo ® branded coffee;

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

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

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

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

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The following table reconciles segment profit to income before income taxes.

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

2023 2022 2023 2022

Retail Pet Foods $ 758.6 $ 696.6 $ 2,252.8 $ 2,046.2

Three Months Ended July 31,

Retail Coffee $ 625.1 $ 597.9

Retail Consumer Foods 464.0 311.1

Retail Pet Foods (A)

International and Away From Home 275.1 235.0

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Segment profit:

Retail Pet Foods $ 109.0 $ 95.7 $ 349.4 $ 275.2

Retail Coffee $ 170.1 $ 145.9

Retail Consumer Foods 105.7 54.8

Retail Pet Foods (A)

International and Away From Home 36.4 16.6

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Amortization ( 39.8 ) ( 55.6 )

Other intangible assets impairment charge — ( 150.4 ) — ( 150.4 )

Gain on divestitures – net — 9.6 1.6 9.6

Gain (loss) on divestitures – net 1.2 1.6

Interest expense – net ( 32.1 ) ( 39.1 )

Change in net cumulative unallocated derivative gains and losses 10.4 ( 33.8 )

Cost of products sold – special project costs (A)

( 1.0 ) ( 6.8 ) ( 4.9 ) ( 17.5 )

Other special project costs (A)

( 0.6 ) ( 2.0 ) ( 2.7 ) ( 5.1 )

Cost of products sold – special project costs (B)

Other special project costs (B)

Corporate administrative expenses ( 61.8 ) ( 67.6 )

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Income before income taxes $ 238.4 $ 141.1

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

For more information, see Note 4:

Restructuring Costs.

Divestitures.

(B) Special project costs include certain restructuring costs, which were recognized in cost of products sold and other operating expense (income) – net in the Condensed Statement of Consolidated Income during the three months ended July 31, 2022.

For more information, see Note 3:

Special Project Costs.

The following table presents certain geographical information.

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

2023 2022 2023 2022

Three Months Ended July 31,

United States $ 1,676.4 $ 1,759.9

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The following table presents product category information.

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

Three Months Ended July 31,

2023 2022 Primary Reportable Segment (A)

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Retail Coffee

Cat food 271.3 243.7 821.4 707.5 U.S.

Retail Pet Foods

Pet snacks 243.4 244.2 U.S.

Retail Pet Foods

Dog food 241.8 219.9 729.8 696.7 U.S.

Retail Pet Foods

Frozen handheld 172.6 120.2 501.4 380.9 U.S.

Retail Consumer Foods

Retail Pet Foods (C)

Peanut butter 212.0 60.6 U.S.

Retail Consumer Foods

Cat food 191.1 265.4 U.S.

Retail Pet Foods (C)

Frozen handheld 179.4 160.5 U.S.

Retail Consumer Foods

Fruit spreads 106.6 100.1 U.S.

Retail Consumer Foods

Portion control 42.9 42.4 114.2 117.6 Other (B)

Baking mixes and ingredients 25.7 23.4 70.8 61.3 Other (B)

Juices and beverages 0.8 36.0 2.4 105.7 Other (B)(C)

Other 69.7 77.6 221.7 231.5 Other (B)

Portion control 48.6 27.8 Other (D)

Dog food 26.8 241.7 U.S.

Retail Pet Foods (B) (C)

Toppings and syrups 24.8 24.4 U.S.

Retail Consumer Foods

Baking mixes and ingredients 14.8 16.3 Other (D)

Other 48.6 52.1 Other (D)

Total net sales $ 1,805.2 $ 1,873.0

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

(B) Represents the International and Away From Home operating segments, which are combined for segment reporting purposes.

(C) During the three and nine months ended January 31, 2022, the net sales within this category were primarily related to the divested natural beverage business included in the U.S.

Retail Consumer Foods segment.

(B) During the three months ended July 31, 2022, the net sales within this product category were primarily related to the divested pet food brands, primarily included in the U.S.

Retail Pet Foods segment.

For more information, see Note 4:

Divestitures.

(C) During the three months ended July 31, 2023, a portion of the net sales within this product category relates to sales associated with a contract manufacturing agreement resulting from the divestiture of certain pet food brands, primarily included in the U.S.

Retail Pet Foods segment.

This portion of net sales will continue throughout the remainder of 2024 and into 2025.

(D) Primarily represents the International and Away From Home operating segments, which are combined for segment reporting purposes.

Earnings per Share

We computed net income per common share (“basic earnings per share”) under the two-class method for the three and nine months ended January 31, 2023 and 2022, due to certain unvested common shares that contained non-forfeitable rights to dividends (i.e., participating securities) during these periods.

For the three and nine months ended January 31, 2023, the computation of net income per common share – assuming dilution (“diluted earnings per share”) was more dilutive under the treasury stock method, as compared to the two-class method;

We computed net income per common share (“basic earnings per share”) under the two-class method for the three months ended July 31, 2023 and 2022, due to certain unvested common shares that contained non-forfeitable rights to dividends (i.e., participating securities) during these periods.

For the three months ended July 31, 2023 and 2022, the computation of net income per common share – assuming dilution (“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 Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share .

Diluted earnings per share for the three and nine months ended January 31, 2022, 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.

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

2023 2022 2023 2022

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

Three Months Ended July 31,

Net income $ 183.6 $ 109.8

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

Three Months Ended January 31, 2023 Nine Months Ended January 31, 2023

Three Months Ended July 31,

Net income $ 183.6 $ 109.8

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Net income per common share – assuming dilution $ 1.79 $ 1.03

Goodwill and Other Intangible Assets

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

As of January 31, 2023, there were no indicators of impairment, and as a result, we do not believe that any of our reporting units or material indefinite-lived intangible assets are more likely than not impaired.

The goodwill within the U.S.

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

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

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

Retail Pet Foods segment was $ 2.4 billion as of January 31, 2023.

During the third quarter of 2022, we recognized an impairment charge of $ 150.4 related to the Rachael Ray Nutrish brand within the U.S.

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

This charge was included as a noncash charge in our Condensed 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.

Debt and Financing Arrangements

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

January 31, 2023 April 30, 2022

July 31, 2023 April 30, 2023

Outstanding Carrying

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

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

Prime Rate, Secured Overnight Funding 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 did no t have a balance outstanding under the revolving credit facility at January 31, 2023, or April 30, 2022.

We did no t have a balance outstanding under the revolving credit facility at July 31, 2023, or April 30, 2023.

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.

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

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

As of January 31, 2023, we did not have a balance outstanding under the commercial paper program.

Interest paid totaled $ 9.9 and $ 8.6 for the three months ended January 31, 2023 and 2022, respectively, and $ 87.2 and $ 90.4 for the nine months ended January 31, 2023 and 2022, respectively.

As of July 31, 2023 and April 30, 2023, we did not have a balance outstanding under the commercial paper program.

Interest paid totaled $ 8.4 and $ 9.4 for the three months ended July 31, 2023 and 2022, respectively.

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

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

As of January 31, 2023, we are in compliance with all covenants.

As of July 31, 2023, we are in compliance with all covenants.

Pensions and Other Postretirement Benefits

The components of our net periodic benefit cost for defined benefit pension and other postretirement benefit plans are shown below.

Three Months Ended January 31,

Defined Benefit Pension Plans Other Postretirement Benefits

2023 2022 2023 2022

Service cost $ 0.3 $ 0.4 $ 0.2 $ 0.3

Interest cost 4.6 3.1 0.6 0.3

Expected return on plan assets ( 3.6 ) ( 3.9 ) — —

Amortization of net actuarial loss (gain) 1.0 1.7 ( 0.3 ) ( 0.1 )

Amortization of prior service cost (credit) 0.1 0.3 ( 0.1 ) ( 0.2 )

Settlement loss (gain) 1.4 1.3 — —

Net periodic benefit cost $ 3.8 $ 2.9 $ 0.4 $ 0.3

Nine Months Ended January 31,

Three Months Ended July 31,

Defined Benefit Pension Plans Other Postretirement Benefits

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Net periodic benefit cost $ 4.9 $ 1.8 $ 0.3 $ 0.4

During the first nine months of 2023, we made contributions of $ 70.0 to increase funding for our U.S.

qualified defined benefit pension plans and direct benefit payments of $ 2.8 .

In 2021, we transferred obligations of our Canadian defined benefit pension plan 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.

During the first quarter of 2024, we received Board Resolution to proceed with distribution of the surplus that remains within the Canadian defined benefit pension plan.

As a result, we recognized a noncash pre-tax settlement charge of $ 3.2 related to the acceleration of prior service cost for the portion of the plan surplus to be allocated to plan members, which is subject to participant and regulatory approval before a payout can be made.

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

We did not recognize any charges related to the Canadian buy-out contract during the three months ended July 31, 2022.

During the first quarter of 2023, we made contributions of $ 70.0 to increase funding for our U.S.

qualified defined benefit pension plans.

Additionally, we made direct benefit payments of $ 0.7 for both the three months ended July 31, 2023 and 2022.

Derivative Financial Instruments

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Commodity Derivatives:

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

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

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

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We do not qualify commodity derivatives for hedge accounting treatment, and as a result, the derivative gains and losses are immediately recognized in earnings.

Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all our commodity derivatives are economic hedges of our risk exposure.

Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all of our commodity derivatives are economic hedges of our risk exposure.

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

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

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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Interest Rate Derivatives:

We utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt.

From time to time, we utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt.

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

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Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no net impact on earnings.

Equity Forward Derivative :

During the first quarter of 2024, we began entering into equity forward derivative transactions under an agreement with an unrelated third party to facilitate the forward sale of the Post common stock.

We do not qualify the forward sale derivative contract for hedge accounting treatment, and as a result, derivative gains and losses associated with the economic hedge are immediately recognized in earnings within other income (expense) – net in the Condensed Statement of Consolidated Income, netting with the change in fair value of the underlying shares.

As of July 31, 2023, approximately 1.1 million shares of the available 5.4 million shares of Post common stock were hedged under the contract, resulting in an unrealized gain of $ 0.6 during the three months ended July 31, 2023.

Subsequent to July 31, 2023, all 5.4 million shares of Post common stock were hedged and will settle for $ 466.3 during the third quarter of 2024.

For additional information, see Note 4:

Divestitures.

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

January 31, 2023 April 30, 2022

July 31, 2023 April 30, 2023

Commodity contracts $ 412.4 $ 448.1

Foreign currency exchange contracts 131.9 98.1

Equity forward contract 91.6 —

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

January 31, 2023

July 31, 2023

Liabilities Other

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Foreign currency exchange contracts 0.3 1.6 — —

Equity forward contract 0.6 — — —

Total derivative instruments $ 9.3 $ 10.2 $ — $ —

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

Our cash margin accounts represented collateral pledged of $ 33.4 and $ 54.6 at January 31, 2023, and April 30, 2022, respectively, and are included in other current assets in the Condensed Consolidated Balance Sheets.

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

In the event of default and immediate net settlement of all our open positions with individual counterparties, all 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.

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

Our cash margin accounts represented collateral pledged of $ 18.1 and $ 17.0 at July 31, 2023, and April 30, 2023, respectively, and are included in other current assets in the Condensed Consolidated Balance Sheets.

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

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

Cash flows associated with the settlement of derivative instruments are classified in the same line item as the

cash flows of the related hedged item, which is within operating activities in the Condensed Statements of Consolidated Cash Flows.

Economic Hedges

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

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

2023 2022 2023 2022

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

Three Months Ended July 31,

Derivative gains (losses) on commodity contracts $ 7.8 $ ( 8.9 )

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

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

2023 2022 2023 2022

Three Months Ended July 31,

Net derivative gains (losses) recognized and classified as unallocated $ 5.6 $ ( 9.1 )

Net derivative gains (losses) reclassified to segment

operating profit ( 2.1 ) 36.9 35.2 80.4

Net derivative gains (losses) reclassified to segment operating profit ( 4.8 ) 24.7

Change in net cumulative unallocated derivative gains and losses $ 10.4 $ ( 33.8 )

The net cumulative unallocated derivative losses were $ 6.1 at January 31, 2023, and net cumulative unallocated derivative gains were $ 37.3 at April 30, 2022.

The net cumulative unallocated derivative gains were $ 26.3 and $ 15.9 at July 31, 2023, and April 30, 2023, respectively.

Cash Flow Hedges

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

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

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

2023 2022 2023 2022

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

Three Months Ended July 31,

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

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( 3.4 ) ( 3.3 )

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

Change in accumulated other comprehensive income (loss) $ 3.4 $ 3.3

(A) Interest expense – net, as presented in the Condensed Statements of Consolidated Income was $ 37.9 and $ 39.5 for the three months ended January 31, 2023 and 2022, respectively, and $ 116.7 and $ 122.9 for the nine months ended January 31, 2023 and 2022, respectively.

(B) Other income (expense) – net, as presented in the Condensed Statements of Consolidated Income was expense of $ 4.6 and $ 1.5 for the three months ended January 31, 2023 and 2022, respectively, and expense of $ 4.9 and $ 15.3 for the nine months ended January 31, 2023 and 2022, respectively.

The reclassification during the nine months ended January 31, 2022, is related to the debt extinguishment of the $400.0 Senior Notes due March 15, 2022.

Included as a component of accumulated other comprehensive income (loss) at January 31, 2023, and April 30, 2022, were deferred net pre-tax losses of $ 204.0 and $ 214.2 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) at January 31, 2023, and April 30, 2022, was $ 47.9 and $ 50.3 , respectively.

(A) Interest expense – net, as presented in the Condensed Statements of Consolidated Income was $ 32.1 and $ 39.1 for the three months ended July 31, 2023 and 2022, respectively.

The reclassification includes terminated contracts which were designated as cash flow hedges.

Included as a component of accumulated other comprehensive income (loss) at July 31, 2023, and April 30, 2023, were deferred net pre-tax losses of $ 197.3 and $ 200.7 , respectively, related to the terminated interest rate contracts.

The related net tax benefit recognized in accumulated other comprehensive income (loss) at July 31, 2023, and April 30, 2023, was $ 46.3 and $ 47.1 , respectively.

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

Fair Value Hedges

In 2015, we terminated the interest rate swap on the Senior Notes due October 15, 2021, which was designated as a fair value hedge and used to hedge against the changes in the fair value of the debt.

As a result of the early termination, we received $ 58.1 in cash, which included $ 4.6 of accrued and prepaid interest.

The gain on termination was recorded as an increase in the long-term debt balance and 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 was recognized during the nine months ended January 31, 2022.

Other Financial Instruments and Fair Value Measurements

Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of cash investments, short-term borrowings, and trade receivables.

Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of cash investments and trade receivables.

The carrying value of these financial instruments approximates fair value.

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

January 31, 2023 April 30, 2022

July 31, 2023 April 30, 2023

Amount Fair Value Carrying

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Derivative financial instruments – net ( 0.9 ) ( 0.9 ) 4.7 4.7

Investment in equity securities 459.8 459.8 487.8 487.8

Total long-term debt ( 4,315.1 ) ( 3,752.6 ) ( 4,314.2 ) ( 3,879.1 )

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(Level 2) Significant

(Level 3) Fair Value at January 31, 2023

(Level 3) Fair Value at July 31, 2023

Marketable securities and other investments:

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Foreign currency exchange contracts – net 0.2 ( 1.5 ) — ( 1.3 )

Total long-term debt (C)

Equity forward contract – net — 0.6 — 0.6

Investment in equity securities (C)

459.8 — — 459.8

Total long-term debt (D)

( 3,752.6 ) — — ( 3,752.6 )

Total financial instruments measured at fair value $ ( 3,287.5 ) $ 17.6 $ — $ ( 3,269.9 )

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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 )

(A) Marketable securities and other investments consists of funds maintained for the payment of benefits associated with nonqualified retirement plans.

The funds include equity securities listed in active markets, municipal obligations valued by a third party using valuation techniques that utilize inputs that are derived principally from or corroborated by observable market data, and money market funds with maturities of three months or less.

The funds include equity securities listed in active markets, municipal obligations valued by a third-party using

valuation techniques that utilize inputs that are derived principally from or corroborated by observable market data, and money market funds with maturities of three months or less.

Based on the short-term nature of these money market funds, carrying value approximates fair value.

As of January 31, 2023, our municipal obligations are scheduled to mature as follows:

As of July 31, 2023, our municipal obligations are scheduled to mature as follows:

$ 1.4 in 2024, $ 1.3 in 2025, $ 0.8 in 2026, $ 4.9 in 2027, $ 0.4 in 2028, and the remaining $ 9.4 in 2029 and beyond.

(B) Level 1 commodity and foreign currency exchange derivatives are valued using quoted market prices for identical instruments in active markets.

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

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

The unrealized pre-tax gain on the equity forward derivative was included in other income (expense) – net in the Condensed Statement of Consolidated Income.

For additional information, see Note 9:

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 July 31, 2023, which is valued using the trading value of Post common stock.

In the first quarter of 2024, we recognized an unrealized pre-tax loss of $ 28.0 on the investment, which was included in other income (expense) – net in the Condensed Statement of Consolidated Income.

For additional information, see Note 4:

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 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 Condensed Consolidated Balance Sheets.

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

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Certain leases also include termination provisions or options to purchase the leased property.

Since we are not reasonably certain to exercise these types of

options, minimum lease payments do not include any amounts related to these termination or purchase options.

Since we are not reasonably certain to exercise these types of options, minimum lease payments do not include any amounts related to these termination or purchase options.

Our lease agreements generally do not contain residual value guarantees or restrictive covenants that are material.

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

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

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

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

As of January 31, 2023, we have entered into lease commitments related to two distribution centers for which the leases have not yet commenced as of that date.

The leases will begin during the fourth quarter of 2023 and the first quarter of 2024, and upon commencement, we expect to recognize a right-of-use asset and lease liability of approximately $ 28.8 and $ 72.8 , respectively, in the Condensed Consolidated Balance Sheets.

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

January 31, 2023 April 30, 2022

July 31, 2023 April 30, 2023

Operating lease right-of-use assets $ 169.2 $ 103.0

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The following table summarizes the components of lease expense.

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

2023 2022 2023 2022

Three Months Ended July 31,

Operating lease cost $ 12.7 $ 10.5

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Interest on lease liabilities

0.1 — 0.1 0.1

Variable lease cost 6.1 6.1

Short-term lease cost 9.4 11.8

Sublease income ( 0.3 ) ( 0.3 ) ( 0.9 ) ( 0.9 )

Net lease cost $ 28.7 $ 27.1 $ 84.0 $ 80.2

Total lease cost (A)

$ 28.6 $ 28.8

(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.

Nine Months Ended January 31,

Three Months Ended July 31,

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

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

January 31, 2023

July 31, 2023

Operating Leases Finance Leases

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2027 18.8 0.4

2028 14.3 0.1

2029 and beyond 73.1 0.1

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

January 31, 2023 April 30, 2022

July 31, 2023 April 30, 2023

Weighted average remaining lease term (in years):

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Finance leases

The effective income tax rates for the three months ended January 31, 2023 and 2022, were 24.3 and 36.4 percent, respectively, and for the nine months ended January 31, 2023 and 2022, were 23.9 and 26.4 percent, respectively.

During the three and nine months ended January 31, 2023, the effective income tax rates varied from the U.S.

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

The effective income tax rates for the three and nine months ended January 31, 2022, varied from the U.S.

statutory income tax rate due to the impact of state income taxes, including an unfavorable one-time deferred tax impact of an internal legal entity simplification.

The effective income tax rates for the three months ended July 31, 2023 and 2022, were 23.0 and 22.2 percent, respectively.

During the three months ended July 31, 2023 and 2022, the effective income tax rates varied from the U.S.

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

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $ 2.1 , primarily as a result of the expiration of statute of limitation periods.

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Income tax benefit (expense) — ( 0.8 ) ( 0.1 ) 0.1 ( 0.8 )

Balance at January 31, 2023 $ ( 29.6 ) $ ( 156.1 ) $ ( 52.7 ) $ 1.2 $ ( 237.2 )

Balance at July 31, 2023 $ ( 26.9 ) $ ( 151.0 ) $ ( 52.3 ) $ 1.2 $ ( 229.0 )

Adjustment Net Gains (Losses)

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Income tax benefit (expense) — ( 0.8 ) ( 0.3 ) 0.1 ( 1.0 )

Balance at January 31, 2022 $ ( 18.0 ) $ ( 166.4 ) $ ( 88.7 ) $ 3.8 $ ( 269.3 )

(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.

Balance at July 31, 2022 $ ( 19.7 ) $ ( 161.4 ) $ ( 53.8 ) $ 1.5 $ ( 233.4 )

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

For additional information, see Note 9:

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

We are currently a defendant in a variety of such legal proceedings, including certain lawsuits related to the alleged price-fixing of shelf stable tuna products prior to 2011 by a business previously owned by, but divested prior to our acquisition of, Big Heart Pet Brands, the significant majority of which were settled and paid during 2019 and 2020.

While we cannot predict with certainty the ultimate results of these proceedings or potential settlements associated with these or other matters, we have accrued losses for certain contingent liabilities that we have determined are probable and reasonably estimable at January 31, 2023.

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, in May 2011, we were named a defendant in Council for Education and Research on Toxics (“CERT”) v.

Brad Barry LLC, et al., which alleged that we, in addition to nearly eighty other defendants (collectively the “Defendants”) who manufacture, package, distribute, or sell packaged coffee, failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”).

In August 2020, the trial court granted the Defendants’ motion for summary judgment based on a 2019 regulation clarifying that cancer warnings are not required for coffee under Proposition 65.

CERT appealed the ruling in November 2020 to the California Court of Appeals for the Second Appellate District, which affirmed the trial court's decision.

CERT then petitioned for further appeal to the California Supreme Court, which was denied on February 15, 2023.

The California Supreme Court will send the case back to the trial court to affirm judgement in favor of the Defendants thereby effectively concluding this litigation.

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

The plaintiffs assert claims arising under

various state laws for false advertising, consumer protection, deceptive and unfair trade practices, and similar statutes.

We are currently a defendant in a variety of such legal proceedings, and while we cannot predict with certainty the ultimate results of these proceedings or potential settlements associated with these or other matters, we have accrued losses for certain contingent liabilities that we have determined are probable and reasonably estimable at July 31, 2023.

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 will have a material adverse effect on our financial position, results of operations, or cash flows.

We are defendants in a series of putative class action lawsuits that were transferred to the U.S.

District Court for the Western District of Missouri for coordinated pre-trial proceedings.

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

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

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

Accordingly, no loss contingency has been recorded for these matters as of January 31, 2023, and the likelihood of loss is not considered probable or estimable.

Accordingly, no loss contingency has been recorded for these matters as of July 31, 2023, and the likelihood of loss is not considered probable or estimable.

However, if we are required to pay significant damages, our business and financial results could be adversely impacted, and sales of those products could suffer not only in these locations but elsewhere.

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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 these products at our Lexington facility and temporarily paused shipments from our Memphis, Tennessee, facility.

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

In June 2022, we resumed manufacturing and shipping 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 anticipate a return to normal levels by the end of 2023.

During the three and nine months ended January 31, 2023, approximately $ 20.0 and $ 110.0 of direct costs were recognized, respectively, net of insurance recoveries, related to customer returns, fees, unsaleable inventory, and other product recall-related costs, primarily within our U.S.

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.

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

In June 2022, we resumed manufacturing 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 returned to normal levels at the end of 2023.

We 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.

The majority of the direct costs were incurred through the third quarter of 2023, and additional direct costs are expected to be minimal during the remainder of 2023.

Further, we are a defendant in five putative class action lawsuits as a result of our voluntary recall of select Jif peanut butter products.

The plaintiffs assert causes of action for negligence, breach of warranties, fraudulent concealment, unjust enrichment, and, in some of the lawsuits, violations of state consumer protection and deceptive trade practices laws.

Their claims are premised on allegations that we engaged in business practices designed to mislead the public regarding the safety of Jif peanut butter for human consumption due to the alleged presence of salmonella.

The cases are pending and consolidated in the United States District Court for the Northern District of Ohio.

Additionally, the U.S.

Food and Drug Administration (the “FDA”) issued a warning letter on January 24, 2023, following an inspection of our Lexington facility completed in June 2022, 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 but 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 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 pending consumer litigation associated with the voluntary recall of Jif peanut butter products.

The outcome and financial impact, if any, of the ongoing consumer litigation or 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 January 31, 2023, and the likelihood of loss is not considered probable or estimable.

Approximately $ 65.0 of direct costs were recognized during the first quarter of 2023 and no significant direct costs were recognized during the first quarter of 2024.

Further, the U.S.

Food and Drug Administration (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 July 31, 2023, and the likelihood of loss is not considered probable or estimable.

Common Shares

The following table sets forth common share information.

January 31, 2023 April 30, 2022

July 31, 2023 April 30, 2023

Common shares authorized 300.0 300.0

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Repurchase Program:

During the nine months ended January 31, 2023 and 2022, we did no t repurchase any common shares under a repurchase plan authorized by the Board.

The shares repurchased during the nine months ended January 31, 2023 and 2022, consisted of shares repurchased from stock plan recipients in lieu of cash payments.

At January 31, 2023, approximately 5.8 million common shares remain available for repurchase pursuant to the Board’s authorizations.

On March 2, 2023, we entered into a share repurchase plan (the “10b5-1 Plan”) established in accordance with Rule 10b5-1 of the Exchange Act in connection with the remaining common shares authorized for repurchase by the Board, which was approximately 3.5 million common shares as of April 30, 2023.

In accordance with the 10b5-1 Plan, our designated broker had the authority to repurchase approximately 2.4 million common shares, which commenced upon the sale of certain pet food brands on April 28, 2023, and expired 45 calendar days after the closure of the transaction.

During the three months ended July 31, 2023, we repurchased approximately 2.4 million common shares for $ 362.8 under the 10b5-1 Plan, and approximately 1.1 million common shares remain available for repurchase.

In accordance with The Inflation Reduction Act of 2022, H.R.

5376 (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 the first quarter of 2024 and included within additional capital in our Condensed Consolidated Balance Sheet.

During the three months ended July 31, 2022, we did not repurchase any common shares under a repurchase plan authorized by the Board.

All other share repurchases during the three months ended July 31, 2023 and 2022, consisted of shares repurchased from stock plan recipients in lieu of cash payments.

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

What changed 10-Q

Item 1. Financial Statements