What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-27 compared with 2023-12-05 · 190 added, 155 removed, 274 unchanged (56% of the section changed)

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(Dollars and shares in millions, unless otherwise noted, except per share data)

This discussion and analysis deals with comparisons of material changes in the unaudited condensed consolidated financial statements for the three and six months ended October 31, 2023 and 2022.

This discussion and analysis deals with comparisons of material changes in the unaudited condensed consolidated financial statements for the three and nine months ended January 31, 2024 and 2023.

All comparisons presented are to the corresponding period of the prior year, unless otherwise noted.

During the second quarter of 2024, we announced a definitive agreement to acquire Hostess Brands.

On November 7, 2023, we completed the cash and stock transaction, valued at approximately $5.5 billion.

The transaction was funded with new debt, inclusive of $3.5 billion of Senior Notes, a Term Loan of $800.0, and $700.0 of short-term borrowings under our commercial paper program, as well as the issuance of approximately 4.0 million of our common shares valued at $450.2.

On January 2, 2024, we sold our Canada condiment business to TreeHouse Foods.

The transaction included Bick’s pickles, Habitant pickled beets, Woodman’s horseradish, and McLarens pickled onions brands, inclusive of certain trademarks.

Under our ownership, these brands generated net sales of approximately $60.0 in 2023, which were included in the International operating segment.

Net proceeds from the divestiture were $25.3, n et of cash transaction costs and includes a receivable related to a preliminary working capital adjustment.

Du ring the second quarter of 2024, the disposal group was classified as held for sale, and as a result, an estimated pre-tax loss of $5.2 was recognized within other operating expense (income) – net in the Condensed Statement of Consolidated Income.

Upon close of the transaction during the third quarter of 2024, the pre-tax loss was adjusted to $5.7, reflecting the fair value of the disposal group as of the transaction date.

On November 7, 2023, we completed a cash and stock transaction to acquire Hostess Brands.

The total purchase consideration in connection with the acquisition was $5.4 billion, which reflects an exchange offer of all outstanding shares of Hostess Brands common stock at a price of $34.25 per share, consisting of $30.00 in cash and 0.03002 shares of our common shares, based on the closing stock price on September 8, 2023, that were exchanged for each share of Hostess Brands common stock as of the transaction date.

The purchase price included the issuance of approximately 4.0 million of our common shares to Hostess Brands’ shareholders, valued at $450.2.

In addition, we paid $3.9 billion in cash, net of cash acquired, and assumed $991.0 of

debt from Hostess Brands and $67.8 of an other debt-like item, reflecting consideration transferred for the cash payment of Hostess Brands’ employee equity awards.

New debt of $5.0 billion was borrowed, consisting of $3.5 billion in Senior Notes, a $800.0 Term Loan, and $700.0 of short-term borrowings under our commercial paper program to partially fund the transaction and pay off the debt assumed as part of the acquisition.

Hostess Brands is a manufacturer and marketer of sweet baked goods brands including Hostess Donettes , Twinkies , CupCakes , DingDongs , Zingers , CoffeeCakes , HoHos , Mini Muffins , and Fruit Pies , and the Voortman cookie brand.

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and Arkadelphia, Arkansas, a distribution facility in Edgerton, Kansas, and a commercial center of excellence in Chicago, Illinois.

Approximately 3,000 employees transitioned with the business at close of the transaction.

Approximately 3,000 employees transitioned with the business at the close of the transaction.

We anticipate the acquired business to contribute net sales of approximately $650.0 in 2024.

We anticipate cost synergies of approximately $100.0, which are expected to be achieved by the end of 2026.

On October 17, 2023, we entered into a definitive agreement to sell our Canada condiment business to TreeHouse Foods.

We expect the transaction to close during the third quarter of 2024, subject to customary closing conditions.

The transaction includes Bick’s pickles, Habitant pickled beets, Woodman’s horseradish, and McLarens pickled onions brands, inclusive of certain trademarks.

Under our ownership, these brands generated net sales of approximately $60.0 in 2023, which were included in the International operating segment.

The transaction is valued at approximately $20.0, subject to a working capital adjustment.

As of October 31, 2023, the disposal group met the criteria to be classified as held for sale, and as a result, a valuation allowance was established to reflect the fair value less costs to sell of the disposal group, which was based on the expected proceeds and the estimated carrying value of the net assets to be disposed.

The valuation allowance was included within other current assets in the Condensed Consolidated Balance Sheet and the estimated pre-tax loss on the disposal group was included within other operating expense (income) – net in the Condensed Statement of Consolidated Income and within loss (gain) on divestitures – net in the Condensed Statement of Consolidated Cash Flows.

On September 27, 2023, we entered into a definitive agreement to sell the Sahale Snacks business to Second Nature, which closed on November 1, 2023.

The transaction included products sold under our Sahale Snacks brand, inclusive of certain trademarks and licensing agreements, a leased manufacturing facility in Seattle, Washington, and approximately 100 employees who supported the brand.

We anticipate cost synergies o f approximately $100.0, which are expected to be achieved by the end of 2026.

On November 1, 2023, we sold our Sahale Snacks business to Second Nature.

The transaction included products sold under our Sahale Snacks brand, inclusive of certain trademarks and licensing agreements;

a leased manufacturing facility in Seattle, Washington;

and approximately 100 employees who supported the brand.

Under our ownership, the Sahale Snacks brand generated net sales of approximately $48.0 in 2023, primarily included in the U.S.

Retail Consumer Foods segment.

The transaction is valued at approximately $34.0, subject to a working capital adjustment.

Retail Frozen Handheld and Spreads segment.

Final net proceeds from the divestiture were $31.6, net of a working capital adjustment and cash transaction costs.

During the second quarter of 2024, the disposal group was classified as he ld for sale, and as a result, an estimated pre-tax loss of $6.8 was recognized within other operating expense (income) – net in the Condensed Statement of Consolidated Income.

Upon close of the transaction during the third quarter of 2024, the pre-tax loss was adjusted to $6.7, r eflecting the fair value of the disposal group as of the transaction date.

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

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Final net proceeds from the divestiture were $1.2 billion, consisting of $683.9 in cash, net of a 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, net of a working capital adjustment and cash transaction costs.

During 2024, we finalized the working capital adjustment and transaction costs, which resulted in an immaterial adjustment to the pre-tax loss.

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.

All 5.4 million shares of Post common stock were hedged as of October 31, 2023, and were subsequently settled for $466.3 on November 15, 2023.

For additional information, see Note 10:

Derivative Financial Instruments.

All 5.4 million shares of Post common stock were settled for $466.3 on November 15, 2023.

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

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Trends Affecting our Business

During the first half of 2024, we continued to experience a dynamic macroeconomic environment, which we anticipate will persist through the remainder of 2024, although with less volatility than experienced in 2023.

In addition, an increase in costs may require us to implement price increases across our business in 2024, and we anticipate the price elasticity of demand will remain elevated throughout 2024 while consumers continue to experience broader inflationary pressures.

During the first nine months of 2024, we continued to experience a dynamic macroeconomic environment, which we anticipate will persist through the remainder of 2024, although with less volatility than experienced in 2023.

In addition, we anticipate the price elasticity of demand will remain elevated throughout 2024 while consumers continue to experience broader inflationary pressures.

It is possible significant disruptions in our supply chain could occur if certain geopolitical events continue to impact markets around the world, including the impact of potential shipping delays due to supply and demand imbalances, as well as labor shortages.

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Although we do not have any operations in Russia or Ukraine, we continue to monitor the environment for any significant escalation or expansion of economic or supply chain disruptions, including broader inflationary costs, as well as regional or global economic recessions.

During the first half of 2024, we continued to experience high volatility in the price of grains, oils, and fat-based products as a result of the conflict between Russia and Ukraine, which may continue to have an adverse impact on our results of operations during the remainder of 2024.

During the first nine months of 2024, we continued to experience high volatility in the price of grains, oils, and fat-based products as a result of the conflict between Russia and Ukraine, which may continue to have an adverse impact on our results of operations during the remainder of 2024.

Overall, broad-based supply chain disruptions and the impact of inflation remain uncertain.

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Results of Operations

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

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

2024 2023 % Increase (Decrease) 2024 2023 % Increase (Decrease)

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Refer to “Non-GAAP Financial Measures” in this discussion and analysis for a reconciliation to the comparable GAAP financial measure.

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

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

2024 2023 Increase

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Net sales $ 2,229.2 $ 2,216.3 $ 12.9 1 % $ 5,973.0 $ 6,294.4 $ (321.4) (5) %

Hostess Brands acquisition (300.3) — (300.3) (14) (300.3) — (300.3) (5)

Pet food brands divestiture — (378.4) 378.4 17 — (1,137.5) 1,137.5 18

Sahale Snacks divestiture

— (11.4) 11.4 1 — (11.4) 11.4 —

Canada condiment divestiture — (3.8) 3.8 — — (3.8) 3.8 —

Foreign currency exchange 0.3 — 0.3 — 6.6 — 6.6 —

Net sales excluding divestiture and foreign currency exchange (A)

Net sales excluding acquisition, divestitures, and foreign currency exchange (A)

$ 1,929.2 $ 1,822.7 $ 106.5 6 % $ 5,679.3 $ 5,141.7 $ 537.6 10 %

Amounts may not add due to rounding.

(A) Net sales excluding divestiture and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally.

(A) Net sales excluding acquisition, divestitures, and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally.

This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.

Net sales in the second quarter of 2024 decreased $266.5, or 12 percent, which includes $385.0 of noncomparable net sales in the prior year related to the divestiture of certain pet food brands.

Net sales excluding the divestiture and foreign currency exchange increased $121.0, or 7 percent.

Favorable volume/mix contributed 4 percentage points to net sales, primarily driven by Smucker’s Uncrustables ® frozen sandwiches and contract manufacturing sales related to the divested pet food brands, partially offset by a decrease for Jif peanut butter.

Net sales in the third quarter of 2024 increased $12.9, or 1 percent, which includes $393.6 of noncomparable net sales in the prior year related to divestitures, partially offset by incremental net sales in the current year of $300.3 related to the Hostess Brands acquisition.

Net sales excluding acquisition, divestitures, and foreign currency exchange increased $106.5, or 6 percent.

Favorable volume/mix contributed 4 percentage points to net sales, primarily driven by an increase for Meow Mix cat food , contract manufacturing sales related to the divested pet food brands, and growth for the Café Bustelo brand.

Higher net price realization contributed 2 percentage points to net sales, primarily due to list price increases for our U.S.

Retail Pet Foods and U.S.

Retail Consumer Foods segments and for International and Away From Home, partially offset by a net price decline for the U.S.

Retail Frozen Handheld and Spreads segments and for International and Away From Home, partially offset by lower net price realization for the U.S.

Retail Coffee segment.

Net sales in the first six months of 2024 decreased $334.3, or 8 percent, which includes $759.1 of noncomparable net sales in the prior year related to the divestiture of certain pet food brands.

Net sales excluding the divestiture and foreign currency exchange increased $431.1, or 13 percent.

Favorable volume/mix contributed 8 percentage points to net sales, primarily driven by Jif peanut butter due to lapping the impact of the product recall in the prior year, contract manufacturing sales related to the divested pet food brands, Smucker’s Uncrustables frozen sandwiches, and coffee products.

Net sales in the first nine months of 2024 decreased $321.4, or 5 percent, which includes incremental net sales in the current year of $300.3 related to the Hostess Brands acquisition, partially offset by $1,152.7 of noncomparable net sales in the prior year related to the divestitures.

Net sales excluding acquisition, divestitures, and foreign currency exchange increased $537.6, or 10 percent.

Favorable volume/mix contributed 7 percentage points to net sales, primarily driven by contract manufacturing sales related to the divested pet food brands, lapping the impact of the Jif peanut butter product recall in the prior year, Smucker’s Uncrustables frozen sandwiches, and coffee products.

Higher net price realization contributed 4 percentage points to net sales, primarily due to list price increases for our U.S.

Retail Pet Foods and U.S.

Retail Consumer Foods segments and for International and Away From Home and the favorable impact of lapping customer returns and fees related to the Jif peanut butter product recall in the prior year, partially offset by a net price decline for the U.S.

Retail Frozen Handheld and Spreads and U.S.

Retail Pet Foods segments and for International and Away From Home, as well as the favorable impact of lapping customer returns and fees related to the Jif peanut butter product recall in the prior year, partially offset by a net price decline for the U.S.

Retail Coffee segment.

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The following table presents the components of operating income as a percentage of net sales.

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

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

2024 2023 2024 2023

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Amounts may not add due to rounding.

Gross profit increased $23.1, or 3 percent, in the second quarter of 2024, primarily reflecting higher net price realization, lower green coffee costs, and favorable volume/mix, partially offset by the noncomparable impact of the divested pet food brands.

Operating income increased $5.5, or 2 percent, primarily driven by the increase in gross profit, a $20.8 decrease in selling, distribution, and administrative (“SD&A”) expenses, and a $16.0 decrease in amortization expense as a result of the divested pet food brands.

These benefits were partially offset by a $48.3 decrease in net other operating income, primarily reflecting a $39.1 unfavorable impact related to the termination of a supplier agreement and the net pre-tax loss on divestitures.

Gross profit increased $67.3, or 9 percent, in the third quarter of 2024, primarily reflecting the noncomparable benefit of Hostess Brands, higher net price realization, favorable volume/mix, and lower commodity costs, partially offset by the noncomparable impact of divestitures.

Operating income decreased $20.5, or 6 percent, primarily driven by a $98.3 increase in special project costs, reflecting integration costs related to the acquisition of Hostess Brands, partially offset by the increase in gross profit and a $6.7 decrease in selling, distribution, and administrative (“SD&A”) expenses.

Our non-GAAP adjustments include amortization expense and impairment charges related to intangible assets, special project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other infrequently occurring items that do not directly reflect ongoing operating results.

Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information.

Gross profit excluding non-GAAP adjustments (“adjusted gross profit”), primarily reflecting the exclusion of the change in net cumulative unallocated derivative gains and losses, as compared to GAAP gross profit, increased $19.5, or 3 percent, in the second quarter of 2024.

Operating income excluding non-GAAP adjustments (“adjusted operating income”) increased $5.8, or 2 percent, as compared to the prior year, further reflecting the exclusion of amortization expense, the net pre-tax loss on divestitures, and special project costs.

Gross profit increased $125.4, or 10 percent, in the first six months of 2024, primarily reflecting higher net price realization, favorable volume/mix, including the price and cost benefits from lapping the impact of the Jif peanut butter product recall, and lower green coffee costs.

The increase in gross profit was partially offset by the noncomparable impact of the divested pet food brands.

Operating income increased $129.3, or 27 percent, primarily driven by the increase in gross profit, a $51.0 decrease in SD&A expenses, and a $31.8 decrease in amortization expense as a result of the divested pet food brands, partially offset by a $74.2 decrease in net other operating income, primarily reflecting the unfavorable impact related to the termination of a supplier agreement, lapping the prior year insurance recovery from the Jif peanut butter product recall, and the net pre-tax loss on divestitures.

Adjusted gross profit, primarily reflecting the exclusion of the change in net cumulative unallocated derivative gains and losses, as compared to GAAP gross profit, decreased $76.5, or 6 percent, in the first six months of 2024.

Adjusted operating income increased $67.5, or 10 percent, as compared to the prior year, further reflecting the exclusion of amortization expense, the net pre-tax loss on divestitures, and special project costs.

Operating income excluding non-GAAP adjustments (“adjusted operating income”) increased $99.9, or 28 percent, as compared to the prior year, primarily reflecting the exclusion of special project costs.

Gross profit increased $192.7, or 10 percent, in the first nine months of 2024, primarily reflecting higher net price realization, the noncomparable benefit of Hostess Brands, favorable volume/mix, including the price and cost benefits from lapping the impact of the Jif peanut butter product recall, and lower commodity costs.

The increase in gross profit was partially offset by the noncomparable impact of divestitures.

Operating income increased $108.8, or 14 percent, primarily driven by the increase in gross profit, a $57.7 decrease in SD&A expenses, and a $31.7 decrease in amortization expense.

These increases to operating income were partially offset by a $103.0 increase in special project costs, reflecting integration costs related to the acquisition of Hostess Brands, and a $70.3 decrease in net other operating income, primarily reflecting an unfavorable impact related to the termination of a supplier agreement, lapping the prior year insurance recovery from the Jif peanut butter product recall, and the net pre-tax loss on divestitures.

Adjusted gross profit, primarily reflecting the exclusion of the change in net cumulative unallocated derivative gains and losses, as compared to GAAP gross profit, increased $165.5, or 8 percent, in the first nine months of 2024.

Adjusted operating income increased $167.4, or 17 percent, as compared to the prior year, further reflecting the exclusion of special project costs, the net pre-tax loss on divestitures, and amortization expense.

Interest Expense

Net interest expense decreased $4.6 and $11.6 in the second quarter and first six months of 2024, respectively, primarily due to an increase in interest income, reflecting an increase in our cash investments and higher interest rates as compared to the prior year, and a decrease in interest expense related to our commercial paper program, as there was no balance outstanding as of October 31, 2023.

The decrease in net interest expense was partially offset by increased interest expense related to the new

Senior Notes issued during the second quarter of 2024 to partially fund the acquisition of Hostess Brands.

Net interest expense increased $61.9 and $50.3 in the third quarter and first nine months of 2024, respectively, primarily due to increased interest expense related to the new Senior Notes and Term Loan issued during 2024 to partially finance the acquisition of Hostess Brands, partially offset by an increase in interest income, reflecting an increase in our cash investments and higher interest rates as compared to the prior year.

For additional information, refer to Note 9:

Debt and Financing Arrangements.

Income taxes decreased $7.3, or 12 percent, in the second quarter of 2024, primarily due to the lower effective income tax rate of 21.9 percent, as compared to 24.4 percent, and the decrease in income before income taxes.

Income taxes increased $16.2, or 17 percent, in the first six months of 2024, primarily due to the increase in income before income taxes, partially offset by a lower effective income tax rate of 22.4 percent, as compared to 23.6 percent.

Income taxes increased $8.2, or 12 percent, in the third quarter of 2024, primarily due to the higher effective income tax rate of 38.4 percent, as compared to 24.3 percent in the prior year.

Income taxes increased $24.4, or 15 percent, in the first nine months of 2024, primarily due to the higher effective income tax rate of 27.0 percent, as compared to 23.9 percent in the prior year.

During the current year, the effective income tax rates varied from the U.S.

statutory income tax rate of 21.0 percent, primarily due to state income taxes, partially offset by the recognition of a deductible outside basis difference related to the divestiture of the Sahale Snacks brand, which was classified as held for sale as of October 31, 2023.

statutory income tax rate of 21.0 percent, primarily due to state income taxes and unfavorable tax impacts associated with the acquisition of Hostess Brands.

The effective income tax rate for the nine months ended January 31, 2024, also included a favorable tax impact from the recently divested Sahale Snacks business.

During the prior year, 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.

We anticipate a full-year effective income tax rate for 2024 of approximately 26.4 percent, inclusive of the estimated impact of the acquisition of Hostess Brands.

We anticipate a full-year effective income tax rate for 2024 of approximately 26.2 percent.

For further information, refer to Note 14:

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Divestiture Costs :

We expect to incur approximately $4.6 primarily in employee-related costs associated with the recently announced divestitures of our Sahale Snacks and Canada condiment businesses, all of which are expected to be cash charges and will primarily be recognized in 2024.

We incurred $0.5 of employee-related costs during the three months ended October 31, 2023, related to these divestitures.

Total divestiture costs related to the divested Sahale Snacks and Canada condiment businesses are anticipated to be approximately $6.0 and consist primarily of employee-related costs and lease termination costs, all of which are expected to be cash charges and recognized in 2024.

We incurred $2.3 and $2.8 of employee-related costs during the three and nine months ended January 31, 2024, respectively, related to these divestitures.

We also incurred $1.6 of other transition and termination costs during the three months ended January 31, 2024, primarily related to lease termination costs.

Integration Costs :

We expect to incur approximately $210.0 in integration costs related to the acquisition of Hostess Brands, which include transaction costs, employee-related costs, and other transition and termination charges.

Of the total anticipated integration costs, approximately half reflect transaction costs, with the remainder split between employee-related costs and other transition and termination charges, the majority of which are expected to be cash charges.

We have incurred $26.2 of total integration costs during the three months ended October 31, 2023, all of which were cash charges and primarily related to transaction costs incurred related to the Bridge Loan that provided committed financing for the acquisition.

All remaining integration costs are expected to be incurred by the end of 2026, with over half of the costs expected to be recognized in 2024.

Total integration costs related to the acquisition of Hostess Brands are anticipated to be approximately $210.0 and include transaction costs, employee-related costs, and other transition and termination charges.

Of the total anticipated integration costs, approximately half reflect transaction costs, with the remainder split between employee-related costs and other transition and termination charges.

The majority of the integration costs are expected to be cash charges and to be incurred by the end of 2026, with over half of the costs expected to be recognized in 2024.

Restructuring Costs :

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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.

We incurred total cumulative restructuring costs of $63.7.

For further information, refer to Note 5:

We incurred total cumulative restructuring costs of $63.7 related to this program.

For further information on these costs, refer to Note 5:

Special Project Costs.

Segment Results

We have three reportable segments:

We have four reportable segments:

Retail Coffee, U.S.

Retail Consumer Foods, and U.S.

Retail Pet Foods.

Retail Frozen Handheld and Spreads, U.S.

Retail Pet Foods, and Sweet Baked Snacks.

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

As disclosed in Note 3:

Acquisition, we acquired Hostess Brands in a cash and stock transaction on November 7, 2023.

The transaction resulted in a new reportable segment for 2024, Sweet Baked Snacks.

Further, the historical U.S.

Retail Consumer Foods reportable segment has been renamed to U.S.

Retail Frozen Handheld and Spreads;

however, there is no change to the manner in which the segment was previously presented.

We do not anticipate any impact to our other historical reportable segments, as we do not anticipate any changes to the internal manner in which we will manage and report these reportable segments.

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 Frozen Handheld and Spreads 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).

Subsequent to the second quarter of 2024, we acquired Hostess Brands in a cash and stock transaction on November 7, 2023, as discussed in Note 3:

As a result, beginning with the third quarter of 2024, we will present a new reportable segment, Sweet Baked Snacks, and the U.S.

Retail Consumer Foods reportable segment will be renamed U.S.

Retail Frozen Handheld and Spreads.

With the exception of renaming the current U.S.

Retail Consumer Foods reportable segment, we do not anticipate any other changes to the internal or external reporting of our reportable segments.

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

and the Swe et Baked Snacks segment primarily includes all domestic and foreign sales of Hostess and Voortman branded products in all channels.

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

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

2024 2023 % Increase

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Retail Coffee $ 727.5 $ 735.1 (1) % $ 2,038.3 $ 2,042.8 — %

Retail Consumer Foods 464.3 432.2 7 928.3 743.3 25

Retail Frozen Handheld and Spreads 436.8 434.2 1 1,365.1 1,177.5 16

Retail Pet Foods 465.2 758.6 (39) 1,370.2 2,252.8 (39)

Sweet Baked Snacks 300.3 — n/a 300.3 — n/a

International and Away From Home 299.4 288.4 4 899.1 821.3 9

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Retail Coffee $ 207.8 $ 204.0 2 % $ 548.9 $ 537.6 2 %

Retail Consumer Foods 128.5 100.3 28 234.2 155.1 51

Retail Frozen Handheld and Spreads 104.1 94.1 11 338.3 249.2 36

Retail Pet Foods 109.5 109.0 — 288.0 349.4 (18)

Sweet Baked Snacks 68.0 — n/a 68.0 — n/a

International and Away From Home 50.4 37.6 34 147.0 95.7 54

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Retail Coffee 28.6 % 27.8 % 26.9 % 26.3 %

Retail Consumer Foods 27.7 23.2 25.2 20.9

Retail Frozen Handheld and Spreads 23.8 21.7 24.8 21.2

Retail Pet Foods 23.5 14.4 21.0 15.5

Sweet Baked Snacks 22.6 — 22.6 —

International and Away From Home 16.8 13.0 16.3 11.7

Retail Coffee

Retail Coffee segment net sales decreased $24.1 in the second quarter of 2024, reflecting a 4 percentage point decrease to net sales from lower net price realization, primarily driven by list price decreases, partially offset by reduced trade spend.

Volume/mix was neutral to net sales, as increases for the Café Bustelo and Dunkin’ brands were mostly offset by the Folgers brand.

Segment profit decreased $16.7, primarily reflecting the $39.1 unfavorable impact related to the termination of a supplier agreement, partially offset by a favorable net impact of decreased commodity costs and lower net price realization.

Retail Coffee segment net sales increased $3.1 in the first six months of 2024.

Favorable volume/mix contributed 2 percentage points to net sales, primarily driven by the Café Bustelo and Dunkin’ brands.

Retail Coffee segment net sales decreased $7.6 in the third quarter of 2024.

Net price realization decreased net sales by 4 percentage points, primarily driven by list price decreases, partially offset by reduced trade spend.

Volume/mix contributed 3 percentage points to net sales, primarily driven by increases for the Café Bustelo and Dunkin’ brands.

Segment profit increased $3.8, primarily reflecting favorable volume/mix, partially offset by an unfavorable net impact of lower net price realization and lower coffee costs.

Retail Coffee segment net sales decreased $4.5 in the first nine months of 2024.

Net price realization decreased net sales by 3 percentage points, primarily reflecting list price decreases, partially offset by reduced trade spend.

Segment profit increased $7.5, primarily reflecting a favorable net impact of decreased commodity costs and lower net price realization and favorable volume/mix, partially offset by the unfavorable impact related to the termination of a supplier agreement.

Retail Consumer Foods

Retail Consumer Foods segment net sales increased $32.1 in the second quarter of 2024.

Higher net price realization contributed 7 percentage points to net sales, primarily reflecting a favorable impact of lapping customer returns and fees related to the Jif peanut butter product recall in the prior year and a list price increase for Jif peanut butter.

Volume/mix was neutral to net sales, as an increase for Smucker’s Uncrustables frozen sandwiches was mostly offset by a decrease for Jif peanut butter.

Segment profit increased $28.2, primarily reflecting higher net price realization and lower costs, inclusive of a favorable impact of lapping the recall, partially offset by higher marketing spend.

Retail Consumer Foods segment net sales increased $185.0 in the first six months of 2024.

Favorable volume/mix contributed 2 percentage points to net sales, primarily driven by the Café Bustelo and Dunkin’ brands.

Segment profit increased $11.3, primarily reflecting a favorable net impact of lower coffee costs and lower net price realization and favorable volume/mix, partially offset by the unfavorable impact related to the termination of a supplier agreement.

Retail Frozen Handhelds and Spreads

Retail Frozen Handheld and Spreads segment net sales increased $2.6 in the third quarter of 2024, including the impact of $7.8 of noncomparable net sales in the prior year related to the divested Sahale Snacks business.

Excluding the noncomparable impact of the divestiture, net sales increased $10.4, or 2 percent.

Higher net price realization contributed 5 percentage points to net sales, primarily reflecting the favorable impact of lapping customer returns and fees related to the Jif peanut butter product recall in the prior year and a list price increase for Jif peanut butter.

Unfavorable volume/mix decreased net sales by 2 percentage points, primarily reflecting decreases for the Smucker’s and Jif brands.

Segment profit increased $10.0, primarily reflecting higher net price realization, inclusive of a favorable impact of lapping the recall, partially offset by higher marketing, pre-production expenses, and unfavorable volume/mix.

Retail Frozen Handheld and Spreads segment net sales increased $187.6 in the first nine months of 2024, including the impact of $7.8 of noncomparable net sales in the prior year related to the divested Sahale Snacks business.

Excluding the noncomparable impact of the divestiture, net sales increased $195.4, or 17 percent.

Net price realization contributed 10 percentage points to net sales, primarily reflecting the favorable impact of lapping customer returns and fees related to the Jif peanut butter product recall in the prior year and the list price increase for Jif peanut butter.

Volume/mix increased net sales by 7 percentage points, primarily driven by Jif peanut butter and Smucker’s Uncrustables frozen sandwiches.

Segment profit increased $79.1, primarily reflecting a net favorable impact of lapping the recall and favorable volume/mix for Smucker’s Uncrustables frozen sandwiches, partially offset by an unfavorable net impact of increased costs and higher net price realization and higher marketing spend.

Segment profit increased $89.1, primarily reflecting a favorable net impact of lapping the recall and favorable volume/mix for Smucker’s

Uncrustables frozen sandwiches, partially offset by an unfavorable net impact of increased costs and higher net price realization and higher marketing spend.

Retail Pet Foods

Retail Pet Foods segment net sales decreased $301.2 in the second quarter of 2024, including the impact of $377.8 of noncomparable net sales in the prior year related to the divestiture of certain pet food brands.

Retail Pet Foods segment net sales decreased $293.4 in the third quarter of 2024, including the impact of $372.5 of noncomparable net sales in the prior year related to the divestiture of certain pet food brands.

Excluding the noncomparable impact of the divested brands, net sales increased $79.1, or 20 percent.

Favorable volume/mix contributed 12 percentage points to net sales, primarily reflecting $38.4 of contract manufacturing sales related to the divested pet food brands and growth for dog snacks, primarily driven by the Milk-Bone brand.

Favorable volume/mix contributed 13 percentage points to net sales, primarily reflecting an increase for Meow Mix cat food, $24.5 of contract manufacturing sales related to the divested pet food brands, and growth for Milk-Bone dog snacks.

Higher net price realization increased net sales by 7 percentage points, primarily reflecting list price increases across the portfolio.

Segment profit decreased $22.9, reflecting the impact of noncomparable segment profit in the prior year related to the divested brands and increased distribution costs, partially offset by a favorable net impact of higher net price realization and increased costs and favorable volume/mix.

Retail Pet Foods segment net sales decreased $589.2 in the first six months of 2024, including the impact of $745.5 of noncomparable net sales in the prior year related to the divestiture of certain pet food brands.

Segment profit increased $0.5, reflecting higher net price realization, favorable volume/mix, lower costs, and lower marketing spend, mostly offset by the impact of noncomparable segment profit in the prior year related to the divested brands and increased distribution costs.

Retail Pet Foods segment net sales decreased $882.6 in the first nine months of 2024, including the impact of $1,118.0 of noncomparable net sales in the prior year related to the divestiture of certain pet food brands.

Excluding the noncomparable impact of the divested brands, net sales increased $235.4, or 21 percent.

Favorable volume/mix contributed 12 percentage points to net sales, primarily reflecting $89.0 of contract manufacturing sales related to the divested pet food brands and the Milk-Bone brand, partially offset by the Pup-Peroni brand.

Higher net price realization increased net sales by 9 percentage points, primarily reflecting list price increases across the majority of the portfolio, partially offset by increased trade spend.

Favorable volume/mix contributed 12 percentage points to net sales, primarily reflecting $113.5 of contract manufacturing sales related to the divested pet food brands and growth for the Meow Mix and Milk-Bone brands, partially offset by the Pup-Peroni brand.

Higher net price realization increased net sales by 8 percentage points, primarily reflecting list price increases across the portfolio, partially offset by increased trade spend.

Segment profit decreased $61.4, reflecting the impact of noncomparable segment profit in the prior year related to the divested brands, increased distribution costs, and higher marketing spend, partially offset by a favorable net impact of higher net price realization and increased costs and favorable volume/mix.

Sweet Baked Snacks

We acquired Hostess Brands on November 7, 2023, as discussed in Note 3:

During the third quarter of 2024, the Sweet Baked Snacks segment contributed net sales of $300.3 and segment profit of $68.0, including the recognition of an unfavorable fair value purchase accounting adjustment of approximately $8.1 attributable to the acquired inventory, which increased cost of products sold for the segment.

International and Away From Home

International and Away From Home net sales increased $26.7 in the second quarter of 2024, including the noncomparable impact of $7.2 of net sales in the prior year related to the divested pet food brands and $2.5 of unfavorable foreign currency exchange.

International and Away From Home net sales increased $11.0 in the third quarter of 2024, including the noncomparable impact of $13.3 of net sales in the prior year related to the divestitures and $0.3 of unfavorable foreign currency exchange.

Excluding the noncomparable impact of the divested brands and foreign currency exchange, net sales increased $24.6, or 9 percent.

Favorable volume/mix contributed 7 percentage points to net sales, primarily reflecting increases for frozen handheld and coffee products.

Favorable volume/mix contributed 5 percentage points to net sales, primarily reflecting increases for Smucker’s Uncrustables frozen sandwiches.

Net price realization contributed 4 percentage points to net sales, primarily driven by list price increases across the majority of the portfolio, partially offset by increased trade spend.

Segment profit increased $18.7, primarily driven by higher net price realization and favorable volume/mix.

International and Away From Home net sales increased $66.8 in the first six mont hs of 2024, including the noncomparable impact of $13.6 of net sales in the prior year related to the divested pet food brands and $6.3 of unfavorable foreign currency exchange.

Segment profit increased $12.8, primarily reflecting higher net price realization and lower costs.

International and Away From Home net sales increased $77.8 in the first nine months of 2024, including the noncomparable impact of $26.9 of net sales in the prior year related to the divestitures and $6.6 of unfavorable foreign currency exchange.

Excluding the noncomparable impact of the divested brands and foreign currency exchange, net sales increased $111.3, or 14 percent.

Favorable volume/mix contributed 10 percentage points to net sales, primarily reflecting increases for portion control, peanut butter, inclusive of the impact of lapping the Jif peanut butter product recall in the prior year, frozen handheld, and coffee products.

Net price realization contributed 6 percentage points to net sales, primarily driven by list price increases across the portfolio, partially offset by increased trade spend.

Segment profit increased $38.5, primarily driven by favorable volume/mix, reflecting the recovery from the Jif peanut butter product recall, and a favorable net impact of higher net price realization and increased costs.

Favorable volume/mix contributed 8 percentage points to net sales, primarily reflecting increases for portion control, frozen handheld, peanut butter, inclusive of the impact of lapping the Jif peanut butter product recall in the prior year, and coffee products.

Net price realization contributed 6 percentage points to net sales, primarily driven by list price increases across the majority of the portfolio, partially offset by increased trade spend.

Segment profit increased $51.3, primarily driven by a favorable net impact of higher net price realization and increased costs and favorable volume/mix, reflecting the recovery from the Jif peanut butter product recall.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of funds is cash generated from operations, supplemented by borrowings against our commercial paper program and revolving credit facility.

Total cash and cash equivalents increased to $3,623.9 at October 31, 2023, compared to $655.8 at April 30, 2023, primarily reflecting the proceeds received from long-term debt to partially finance the acquisition of Hostess Brands subsequent to the quarter.

Total cash and cash equivalents decreased to $35.9 at January 31, 2024, compared to $655.8 at April 30, 2023.

The following table presents selected cash flow information.

Six Months Ended October 31,

Nine Months Ended January 31,

Net cash provided by (used for) operating activities $ 801.3 $ 750.6

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(A) Free cash flow is a non-GAAP financial measure used by management to evaluate the amount of cash available for debt repayment, dividend distribution, acquisition opportunities, share repurchases, and other corporate purposes.

The $228.8 increase in cash provided by operating activities in the first six months of 2024 was primarily driven by lower working capital requirements in 2024, lapping the $70.0 contribution to our U.S.

qualified defined benefit pension plans in the prior year, and higher net income adjusted for noncash items in the current year.

The cash required to fund working capital decreased compared to the prior year primarily driven by the moderation of input cost inflation related to our inventories and an increase in cash from trade receivables due to the timing of sales and payments, partially offset by a decrease in cash for accounts payable due to timing.

Cash used for investing activities in the first six months of 2024 consisted primarily of $299.0 in capital expenditures, primarily driven by investments in Smucker’s Uncrustables frozen sandwiches to support the new manufacturing and distribution facilities in McCalla, Alabama, as well as plant maintenance across our facilities.

Cash used for investing activities in the first six months of 2023 consisted primarily of $ 190.4 in capital expenditures, primarily related to the new manufacturing and distribution facilities in McCalla, Alabama, and capacity expansions in Longmont, Colorado, as well as plant maintenance across our facilities.

Furthermore, an increase in collateral pledged of $23.3 in our derivative cash margin account balances contributed to the use of cash in 2023.

Cash provided by financing activities in the first six months of 2024 consisted primarily of proceeds from long-term debt of $3,485.0, partially offset by the purchase of treasury shares of $372.4 and dividend payments of $213.2.

Cash used for financing activities in the first six months of 2023 consisted primarily of dividend payments of $213.5, partially offset by a net increase in short-term borrowings of $118.2.

The $50.7 increase in cash provided by operating activities in the first nine months of 2024 was primarily driven by lapping the $70.0 contribution to our U.S.

qualified defined benefit pension plans in the prior year and the $42.5 proceeds received from settlement of the interest rate contracts assumed as part of the acquisition of Hostess Brands, partially offset by lower net income adjusted for noncash items in the current year and higher working capital requirements in 2024.

The cash required to fund working capital increased compared to the prior year primarily driven by a decrease in cash for accounts payable due to timing and lower spend in the current year, partially offset by lower inventory levels and the moderation of input cost inflation in the current year.

Cash used for investing activities in the first nine months of 2024 consisted primarily of $3.9 billion related to the acquisition of Hostess Brands, including $67.8 of consideration transferred for the cash payment of Hostess Brands’ employee equity awards, and $455.9 in capital expenditures, primarily driven by investments in Smucker’s Uncrustables frozen sandwiches to support the new manufacturing and distribution facilities in McCalla, Alabama, as well as plant maintenance across our facilities.

These uses of cash for 2024 were partially offset by proceeds of $466.3 received from the settlement of our equity investment in Post common stock and net proceeds received of $50.5 from the divested Sahale Snacks and Canada condiment businesses.

Cash used for investing activities in the first nine months of 2023 consisted primarily of $332.3 in capital expenditures, primarily related to the new manufacturing and distribution facilities in McCalla, Alabama, and capacity expansions in Longmont, Colorado, as well as plant maintenance across our facilities.

The use of cash in 2023 was partially offset by a decrease in collateral pledged of $21.2 in our derivative cash margin account balances.

Cash provided by financing activities in the first nine months of 2024 consisted primarily of proceeds from long-term debt of $4.3 billion to partially finance the acquisition of Hostess Brands and a net increase in short-term borrowings of $413.2.

These proceeds were partially offset by the $991.0 repayment of Hostess Brands debt assumed, the $450.0 Term Loan prepayment, purchase of treasury shares of $372.5, dividend payments of $325.5, and the $86.4 payment to terminate the tax receivable agreement assumed with the acquisition of Hostess Brands.

Cash used for financing activities in the first nine months of 2023 consisted primarily of dividend payments of $321.8 and a net decrease in short-term borrowings of $185.2.

Supplier Financing Program

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Participating suppliers can sell one or more of our payment obligations at their sole discretion.

We have no economic interest in a supplier’s decision to enter into these agreements as our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by these arrangements.

As of October 31, 2023, and April 30, 2023, $402.7 and $414.2 of our outstanding payment obligations, respectively, were elected and sold to a financial institution by participating suppliers.

During the first six months of 2024 and 2023, we pai d $882.8 a nd $692.4, respectively, to a financial institution for payment obligations that were settled through the supplier financing program.

We have no economic interest in a supplier’s decision to enter into these agreements as our rights and obligations to our suppliers, in cluding amounts due and scheduled payment terms, are not impacted by these arrangements.

As of January 31, 2024, and April 30, 2023, $421.3 and $414.2 of our outstanding payment obligations, respectively, were elected and sold to a financial institution by partici pating suppliers.

During the first

nine months of 2024 and 2023, we p aid $1,280.6 and $1,069.9, respectively, to a financial institution for payment obligations that were settled through the supplier fi nancing program.

Contingencies

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

We are currently a defendant in a variety of such legal proceedings, 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 October 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.

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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 October 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 January 31, 2024, and the likelihood of loss is not considered probable or reasonably 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 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.

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

Approximately $25.0 and $90.0 of direct costs were recognized during the three and six months ended October 31, 2022, and no significant direct costs were recognized during the three and six months ended October 31, 2023.

Retail Frozen Handheld and Spreads segment.

Approximately $20.0 and $110.0 of direct costs were recognized during the three and nine months ended January 31, 2023, respectively, and no significant direct costs were recognized during the three and nine months ended January 31, 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.

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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 October 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 January 31, 2024, and the likelihood of loss is not considered probable or reasonably estimable.

Voortman Contingency:

In December 2020, Hostess Brands asserted claims for indemnification against the Sellers under the terms of the Purchase Agreement pursuant to which Hostess Brands acquired Voortman.

The claims were for damages arising out of alleged breaches by the Sellers of certain representations, warranties and covenants contained in the Purchase Agreement relating to periods prior to the closing of the acquisition.

Hostess Brands also submitted claims relating to these alleged breaches under RWI that was purchased in connection with the acquisition.

In the third quarter of calendar 2022, the RWI insurers paid Hostess Brands the Proceeds related to these breaches.

Per agreement with the RWI insurers, under no circumstances would we be required to return the Proceeds.

On November 3, 2022, pursuant to the agreement with the RWI insurers, Voortman brought the Claim related to the breaches against certain of the Sellers.

The Claim alleges the seller defendants made certain non-disclosures and misrepresentations to induce Hostess Brands to overpay for Voortman.

We are seeking damages of $109.0 CAD representing the amount of the aggregate liability of the Sellers for indemnification under the Purchase Agreement, $5.0 CAD in punitive or aggravated

damages, interest, proceedings fees, and any other relief the presiding court deems appropriate.

A portion of any recovery will be shared with the RWI insurers.

Although we believe that the Claim is meritorious, no assurance can be given as to whether we will recover all, or any part, of the amounts being pursued.

Capital Resources

The following table presents our capital structure.

October 31, 2023 April 30, 2023

January 31, 2024 April 30, 2023

Short-term borrowings $ 418.0 $ —

Long-term debt 8,121.1 4,314.2

Total debt 8,539.1 4,314.2

Shareholders’ equity 7,560.1 7,290.8

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Voluntary prepayments are permitted without premium or penalty.

As of October 31, 2023, no balance was drawn on the Term Loan.

On November 7, 2023, the full amount was drawn on the Term Loan at an interest rate of 6.67 percent, to partially finance the acquisition of Hostess Brands, as discussed in Note 3:

In November 2023, the full amount was drawn on the Term Loan to partially finance the acquisition of Hostess Brands and pay off the debt assumed as part of the acquisition, as discussed in Note 3:

During the third quarter of 2024, we prepaid $450.0 on the Term Loan.

The interest rate on the Term Loan at January 31, 2024, was 6.69 percent.

Subsequent to January 31, 2024, we prepaid an additional $100.0 on the Term Loan.

In September 2023, we entered into a commitment letter for a $5.2 billion Bridge Loan that provided committed financing for the acquisition of Hostess Brands, as disclosed in Note 3:

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In October 2023, we completed an offering of $3.5 billion in Senior Notes due November 15, 2028, November 15, 2033, November 15, 2043, and November 15, 2053.

The net proceeds from the offering were used to partially finance the acquisition of Hostess Brands.

The net proceeds from the offering were used to partially finance the acquisition of Hostess Brands and pay off the debt assumed as part of the acquisition.

We have available a $2.0 billion unsecured revolving credit facility with a group of 11 banks that matures in August 2026.

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

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

However, on November 7, 2023, we issued $700.0 of short-term borrowings under our commercial paper program at a weighted-average interest rate of 5.47 percent, to partially finance the acquisition of Hostess Brands.

Further, we sold all 5.4 million shares of our investment in Post common stock on November 15, 2023 for $466.3, and as a result, these funds were used to partially pay down the commercial paper balance outstanding.

We are in compliance with all our debt covenants as of October 31, 2023, and expect to be for the next 12 months.

As of January 31, 2024, we had $418.0 of short-term borrowings outstanding under the commercial paper program at a weighted-average interest rate of 5.45 percent.

We are in compliance with all our debt covenants as of January 31, 2024, and expect to be for the next 12 months.

For additional information on our long-term debt, sources of liquidity, and debt covenants, see Note 9:

Debt and Financing Arrangements.

Dividend payments were $213.2 and $213.5 in the first six months of 2024 and 2023, respectively, and quarterly dividends declared per share were $1.06 and $1.02 in the first six months of 2024 and 2023, respectively.

Dividend payments were $325.5 and $321.8 in the first nine months of 2024 and 2023, respectively, and quarterly dividends declared per share were $1.06 and $1.02 in the first nine months of 2024 and 2023, respectively.

The declaration of dividends is subject to the discretion of our Board and depends on various factors, such as our net income, financial condition, cash requirements, future events, and other factors deemed relevant by the Board.

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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 six months ended October 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.

During the nine months ended January 31, 2024, 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, 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 six months ended October 31, 2022, we did not repurchase any common shares under a repurchase plan authorized by the Board.

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

On November 7, 2023, we acquired Hostess Brands, and as a result, we issued approximately 4.0 million common shares valued at $450.2 in exchange for the outstanding shares of Hostess Brands common stock.

During the nine months ended January 31, 2023, we did not repurchase any common shares under a repurchase plan authorized by the Board.

All other share repurchases during the nine months ended January 31, 2024 and 2023, consisted of shares repurchased from stock plan recipients in lieu of cash payments.

The shares issued were based on each outstanding share of Hostess Brands common stock receiving $30.00 per share in cash and 0.03002 shares of our common shares, which represents a value of $4.25 based on the closing stock price of our common shares on September 8, 2023, the last trading day preceding September 11, 2023, the date on which the execution of the Hostess Brands merger agreement was publicly announced.

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The project demonstrates our commitment to meet increasing demand for this highly successful product and deliver on our strategy to focus on brands with the most significant growth opportunities.

Construction of the facility and production will occur in three phases over multiple years and will result in the creation of up to 750 jobs.

Financial investments and job creation will align with each of the three phases.

Construction of the facility and production will occur in three phases over multiple years, with financial investments and job creation aligning across each of the three phases.

Subsequent to January 31, 2024, property damage was incurred at the new manufacturing facility as a result of an equipment fire.

Based on our initial assessment of the damage, our preliminary estimate of the financial impact, net of an anticipated insurance recovery, is not expected to be material.

Further, we do not anticipate a significant delay in beginning production in 2025.

Absent any material acquisitions, apart from the recent acquisition of Hostess Brands, or other significant investments, we believe that cash on hand, combined with cash provided by operations, borrowings available under our revolving credit facility and commercial paper program, and access to capital markets, will be sufficient to meet our cash requirements for the next 12 months, including the payment of quarterly dividends, principal and interest payments on debt outstanding, and capital expenditures, including an estimated $60.0 of additional capital expenditures related to the acquisition of Hostess Brands for the second half of 2024.

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We continue to evaluate these risks, which could affect our financial condition or our ability to fund operations or future investment opportunities.

As of October 31, 2023, total cash and cash equivalents of $35.8 was held by our foreign subsidiaries, primarily in Canada.

We have not repatriated foreign cash to the U.S.

during the first six months of 2024.

During the third quarter of 2024, we returned $50.0 of foreign cash to the U.S.

from Canada, reflecting an intercompany debt repayment, and as a result, there were no tax impacts.

As of January 31, 2024, total cash and cash equivalents of $23.3 was held by our foreign subsidiaries, primarily in Canada.

Material Cash Requirements

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In addition, on November 7, 2023, we entered into a Term Loan with a group of banks for an unsecured $ 800.0 term facility.

The Senior Notes and Term Loan were used to partially finance the acquisition of Hostess Brands.

The Senior Notes and Term Loan were used to partially finance the acquisition of Hostess Brands and pay off the debt assumed as part of the acquisition.

For additional information, see Note 9:

Debt and Financing Arrangements.

As of October 31, 2023, there were no other material changes to our material cash requirements as previously reported in our Annual Report on Form 10-K for the year ended April 30, 2023.

As of January 31, 2024, there were no other material changes to our material cash requirements as previously reported in our Annual Report on Form 10-K for the year ended April 30, 2023.

NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial measures including:

net sales excluding divestitures and foreign currency exchange, adjusted gross profit, adjusted operating income, adjusted income, adjusted earnings per share, and free cash flow, as key measures for purposes of evaluating performance internally.

net sales excluding acquisition, divestitures, and foreign currency exchange, adjusted gross profit, adjusted operating income, adjusted income, adjusted earnings per share, and free cash flow, as key measures for purposes of evaluating performance internally.

We believe that investors’ understanding of our performance is enhanced by disclosing these performance measures.

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The Board also utilizes certain non-GAAP financial measures as components for measuring performance for incentive compensation purposes.

Non-GAAP financial measures exclude certain items affecting comparability that can significantly affect the year-over-year assessment of operating results, which include amortization expense and impairment charges related to intangible assets, special project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other infrequently occurring items that do not directly reflect ongoing operating results.

project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other infrequently occurring items that do not directly reflect ongoing operating results.

Income taxes, as adjusted is calculated using an adjusted effective income tax rate that is applied to adjusted income before income taxes and reflects the exclusion of the previously discussed items, as well as any adjustments for one-time tax related activities, when they occur.

While this adjusted effective income tax rate does not generally differ materially from our GAAP effective income tax rate, certain exclusions from non-GAAP results can significantly impact our adjusted effective income tax rate.

While this adjusted effective income tax rate does not generally differ materially from our GAAP effective income tax rate, certain exclusions from non-GAAP results, such as unfavorable tax impacts associated with the acquisition of Hostess Brands, can significantly impact our adjusted effective income tax rate.

These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with U.S.

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See page 30 for a reconciliation of net sales adjusted for certain noncomparable items to the comparable GAAP financial measure.

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

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

2024 2023 2024 2023

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Other debt costs – special project costs (A)

19.5 — 19.5 —

Other expense – special project costs (A)

(0.1) — 0.3 —

Other infrequently occurring items:

Unrealized loss (gain) on investment in equity

Realized loss on investment in equity

securities – net (B)

(5.9) — 21.5 —

Pension plan termination settlement charge (C)

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Debt and Financing Arrangements.

(B) Unrealized loss (gain) on investment in equity securities includes unrealized gains and losses on the change in fair value on our investment in Post common stock and the related equity forward contract.

(B) Realized loss on investment in equity securities – net includes gains and losses on the change in fair value on our investment in Post common stock and the related equity forward contract, which was settled on November 15, 2023.

For more information, see Note 4:

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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 2. Management’s Discussion and Analysis