What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-28 compared with 2024-02-27 · 138 added, 238 removed, 226 unchanged (62% 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 nine months ended January 31, 2024 and 2023.

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

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

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

On January 2, 2024, we sold the 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.

Under our ownership, these brands generated net sales of $43.8 in 2024, included in the International operating segment.

Final n et proceeds from the divestiture were $25.3, inclusive of a working capital adjustment and cash transaction costs.

We recognized a pre-tax loss of $5.7 during the third quarter of 2024.

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

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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.

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, an $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 the close of the transaction.

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

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.

During the first quarter of 2025, the acquired business contributed net sales of $333.7.

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

To date, we have achieved cost synergies of approximately $25.0, of which approximately $14.0 was achieved during the first quarter of 2025.

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

The transaction included products sold under the 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 $24.1 in 2024, primarily included in the U.S.

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.

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

We recognized a pre-tax loss of $6.7 during the third quarter of 2024.

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

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

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

Retail Pet Foods segment.

The transaction included the Rachael Ray Nutrish , 9Lives , Kibbles ’n Bits , Nature’s Recipe , and Gravy Train brands, as well as the 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.

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 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 settled for $466.3 on November 15, 2023.

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

The transaction included products sold under the R.W.

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

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

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 first quarter of 2023, within other operating expense (income) – net in the Condensed Statement of Consolidated Income, upon finalization of the working capital adjustment.

We recognized a pre-tax loss of $1.0 billion upon completion of this transaction in 2023.

During the first half of 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 entered 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 settled for $466.3 under the equity forward contract on November 15, 2023.

For additional information, see Note 3:

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Trends Affecting our Business

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.

During the first quarter of 2025, we continued to experience input cost inflation and a dynamic macroeconomic environment, which we anticipate will persist through the remainder of 2025.

Further, the higher costs may require price increases across our business, and we anticipate the price elasticity of demand will remain elevated during 2025 as consumers continue to experience broader inflationary pressures.

In response to the inflationary pressures, we continue to focus on the delivery of our company-wide transformation initiative to deliberately translate our continuous improvement mindset into sustainable productivity initiatives in order to grow our profit margins and reinvest in the Company to enable future growth and cost savings.

In addition, 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.

We also continue to work closely with our customers and external business partners, taking additional actions to ensure safety, business continuity, and maximize product availability.

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However, to the extent that high demand levels or supply chain disruptions delay order fulfillment, we may experience volume loss and elevated penalties.

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 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.

Although we do not have any operations in Russia, Ukraine, Israel, or Palestine, 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.

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

We will continue to evaluate the nature and extent to which supply chain disruptions and inflation will impact our business;

results of operations;

financial condition;

and liquidity.

We will continue to evaluate the nature and extent to which supply chain disruptions and inflation will impact our business, supply chain, including labor availability and attrition, results of operations, financial condition, and liquidity.

Results of Operations

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

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

Three Months Ended July 31,

2024 2023 % Increase (Decrease)

Net sales $ 2,125.1 $ 1,805.2 18 %

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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 January 31, Nine Months Ended January 31,

Three Months Ended July 31,

2024 2023 Increase

(Decrease) % 2024 2023 Increase

Net sales $ 2,125.1 $ 1,805.2 $ 319.9 18 %

Hostess Brands acquisition (333.7) — (333.7) (18)

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

Canada condiment divestiture — (17.6) 17.6 1

Sahale Snacks divestiture

— (11.0) 11.0 1

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

Foreign currency exchange 2.1 — 2.1 —

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

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 in the first quarter of 2025 increased $319.9, or 18 percent, which includes incremental net sales in the current year of $333.7 related to the Hostess Brands acquisition, partially offset by $28.6 of noncomparable net sales in the prior year related to divestitures.

Net sales excluding acquisition, divestitures, and foreign currency exchange increased $16.9, or 1 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.

Favorable volume/mix contributed 1 percentage point to net sales, primarily driven by increases for the Uncrustables , Café Bustelo , and Meow Mix brands, partially offset by lower contract manufacturing sales related to the divested pet food brands and a decrease for the Dunkin’ brand.

Net price realization was neutral to net sales, as higher net pricing for International and Away From Home and for our U.S.

Retail Frozen Handheld and Spreads segment was offset by lower net pricing for the U.S.

Retail Pet Foods and 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 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 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.

Retail Coffee segments.

Operating Income

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

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

2024 2023 2024 2023

Three Months Ended July 31,

Gross profit 37.5 % 36.3 %

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Amounts may not add due to rounding.

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.

Gross profit increased $142.4, or 22 percent, in the first quarter of 2025, primarily reflecting the noncomparable benefit of Hostess Brands and favorable volume/mix, partially offset by the noncomparable impact of divestitures.

Operating income increased $46.0, or 15 percent, primarily driven by the increase in gross profit, partially offset by a $76.5 increase in selling, distribution, and administrative (“SD&A”) expenses and a $16.2 increase in amortization expense, mostly attributable to the addition of Hostess Brands.

Operating income also reflects a $7.1 increase in special project costs primarily related to integration costs associated with the acquisition of Hostess Brands.

Our non-GAAP financial measures are adjusted to exclude 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 $89.0, or 12 percent, in the third quarter of 2024.

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.

Gross profit excluding non-GAAP adjustments

(“adjusted gross profit”) increased $188.1, or 29 percent, as compared to the prior year, primarily reflecting a favorable impact of the exclusion of a $40.4 change in net cumulative unallocated derivative gains and losses, as compared to GAAP gross profit.

Operating income excluding non-GAAP adjustments (“adjusted operating income”) increased $116.2, or 35 percent, as compared to the prior year, further reflecting the exclusion of other special project costs and amortization expense.

Interest Expense

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.

Net interest expense increased $68.3 in the first quarter of 2025, primarily due to increased interest expense related to the new Senior Notes issued during 2024 to partially finance the acquisition of Hostess Brands and an increase in short-term borrowings under our commercial paper program.

For additional information, refer to Note 8:

Debt and Financing Arrangements.

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 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.

Income taxes increased $6.2, or 11 percent, in the first quarter of 2025, primarily due to the higher effective income tax rate of 24.8 percent, as compared to 23.0 percent for the first quarter of 2024, which was primarily due to the discrete unfavorable impact of share-based compensation, as compared to the prior year.

During both the current and prior years, 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 2025 of approximately 24.3 percent.

For further information, refer to Note 14:

For additional information, refer to Note 13:

Income Taxes.

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Divestiture Costs :

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.

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

The majority of these costs were recognized in 2024, and the remainder are expected to be recognized during the first half of 2025.

We have recognized total cumulative divestiture costs of $5.8, of which $0.3 were recognized during the first quarter of 2025.

Furthermore, we identified opportunities to address certain distribution inefficiencies, as a result of the divestiture of certain pet food brands.

We anticipate incurring approximately $12.0 of costs related to these efforts, consisting primarily of other transition and termination charges.

The majority of these costs are expected to be cash charges and incurred by the end of 2026, with approximately half of the costs expected to be recognized in 2025.

We have recognized total cumulative costs of $0.1 related to these efforts, all of which has been recognized during the first quarter of 2025.

Integration Costs :

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 :

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.

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

We anticipate the remaining integration costs will be incurred by the end of 2026 and are expected to be split between employee-related and other transition and termination costs.

We have recognized total cumulative integration costs of $159.4, of which $12.0 were recognized during the first quarter of 2025.

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

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

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 Frozen Handheld and Spreads 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 Uncrustables , 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;

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,

and the Sweet 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., healthcare operators, restaurants, educational institutions, offices, lodging and gaming establishments, and convenience stores).

Three Months Ended July 31,

2024 2023 % Increase

(Decrease) 2024 2023 % Increase

Retail Coffee $ 623.4 $ 625.1 — %

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Retail Pet Foods 399.7 441.0 (9)

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

Sweet Baked Snacks 333.7 — n/a

International and Away From Home 271.5 275.1 (1)

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Retail Pet Foods 115.3 81.3 42

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

Sweet Baked Snacks 74.4 — n/a

International and Away From Home 48.6 36.4 34

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Retail Pet Foods 28.8 18.4

Sweet Baked Snacks 22.6 — 22.6 —

Sweet Baked Snacks 22.3 n/a

International and Away From Home 17.9 13.2

Retail Coffee

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.

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.

Retail Coffee segment net sales decreased $1.7 in the first quarter of 2025.

Net price realization decreased net sales by 1 percentage point, primarily driven by a net price decline for the Dunkin’ brand, partially offset by higher net pricing for the Folgers brand.

The decrease in net price realization was mostly offset by favorable volume/mix, reflecting an increase for the Café Bustelo brand, partially offset by a decrease for the Dunkin’ brand.

Segment profit increased $2.5, primarily reflecting lower marketing spend and selling expense, partially offset by lower net price realization and higher commodity costs.

Retail Frozen Handheld and Spreads

Retail Frozen Handheld and Spreads segment net sales increased $32.8 in the first quarter of 2025, inclusive of the impact of $6.9 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 $39.7, or 9 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 $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.

Volume/mix contributed 7 percentage points to net sales, primarily reflecting an increase for Uncrustables sandwiches.

Higher net price realization contributed 1 percentage point to net sales, primarily reflecting a list price increase for peanut butter implemented in the prior year.

Segment profit increased $13.3, primarily reflecting lower costs, favorable volume/mix, and higher net price realization, partially offset by higher marketing spend and pre-production expenses related to the new Uncrustables sandwiches manufacturing facility.

Retail Pet Foods

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 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 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 $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.

Retail Pet Foods segment net sales decreased $41.3 in the first quarter of 2025.

Volume/mix decreased net sales by 6 percentage points, primarily reflecting decreased contract manufacturing sales related to the divested pet food brands, partially offset by increases for cat food and dog snacks.

Net price realization decreased net sales by 4 percentage points, primarily reflecting higher trade spend for the Jerky Treats ® and Meow Mix brands.

Segment profit increased $34.0, reflecting lower costs, favorable volume/mix, and lower distribution costs, partially offset by lower net price realization and higher marketing spend.

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.

During the first quarter of 2025, the Sweet Baked Snacks segment contributed net sales of $333.7 and segment profit of $74.4.

Prior year net sales and segment profit are not provided due to differences in reporting periods and certain financial measures under previous ownership.

International and Away From Home

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 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 $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 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.

International and Away From Home net sales decreased $3.6 in the first quarter of 2025, including the noncomparable impact of $21.7 of net sales in the prior year related to the divestitures and $2.1 of unfavorable foreign currency exchange.

Excluding the noncomparable impact of the divested businesses and foreign currency exchange, net sales increased $20.2, or 8 percent.

Net price realization contributed 5 percentage points to net sales, primarily driven by list price increases across the majority of the portfolio.

Volume/mix contributed 3 percentage points to net sales, primarily reflecting increases for Uncrustables sandwiches, coffee, and portion control products, partially offset by a decrease for dog snacks.

Segment profit increased $12.2, primarily driven by higher net price realization, favorable volume/mix, lower costs, and decreased marketing spend, partially offset by the impact of noncomparable segment profit in the prior year related to the divested businesses and higher pre-production expenses related to the new Uncrustables sandwiches manufacturing facility.

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 decreased to $35.9 at January 31, 2024, compared to $655.8 at April 30, 2023.

Total cash and cash equivalents decreased to $39.5 at July 31, 2024, compared to $62.0 at April 30, 2024.

The following table presents selected cash flow information.

Nine Months Ended January 31,

Three Months Ended July 31,

Net cash provided by (used for) operating activities $ 172.9 $ 217.9

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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 $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.

The $45.0 decrease in cash provided by operating activities in the first three months of 2025 was primarily driven by higher working capital requirements in 2025, partially offset by higher net income adjusted for noncash items in the current year.

The cash required to fund working capital increased compared to the prior year primarily driven by an increase in cash used for accrued liabilities reflecting timing of interest payments, a decrease in accounts payable due to timing of spend and payments, and higher inventory levels in the current year.

Cash used for investing activities in the first three months of 2025 consisted primarily of $123.7 in capital expenditures, reflecting our investments in the new Uncrustables sandwiches manufacturing and distribution facilities in McCalla, Alabama, as well as plant maintenance across our facilities.

The use of cash for 2025 also included an increase of $48.6 in our derivative cash margin account balances.

Cash used for investing activities in the first three months of 2024 consisted primarily of $150.3 in capital expenditures related to the new manufacturing and distribution facilities in McCalla, Alabama and plant maintenance across our facilities.

Cash used for financing activities in the first three months of 2025 consisted primarily of dividend payments of $112.1, partially offset by a net increase in short-term borrowings of $96.2.

Cash used for financing activities in the first three months of 2024 consisted primarily of the purchase of treasury shares of $372.0 and dividend payments of $105.2.

Supplier Financing Program

As part of ongoing efforts to maximize working capital, we work with our suppliers to optimize our terms and conditions, which includes the extension of payment terms.

Payment terms with our suppliers, which we deem to be commercially reasonable, range fro m 0 to 180 days.

Payment terms with our suppliers, which we deem to be commercially reasonable, range from 0 to 180 days.

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

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

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.

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

We have no economic interest in a supplier’s decision to enter into these agreements.

Our rights and obligations to our suppliers, in cluding amounts due and scheduled payment terms, are not impacted by our suppliers’ decisions to sell amounts under these arrangements.

As of July 31, 2024, and April 30, 2024, $366.8 and $384.9 of our outstanding payment obligations, respectively, that were elected and sold to a financial institution by partici pating suppliers.

During the first three months of 2025 and 2024, we p aid $422.6 and $441.7, 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 January 31, 2024.

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.

Class Action Lawsuits:

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

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

Accordingly, no loss contingency has been recorded for these matters as of July 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.

Product Recall:

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.

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 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.

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

We are defendants in ongoing consumer litigation associated with the voluntary recall of select Jif peanut butter products initiated in May 2022.

The outcome and financial impact of this litigation cannot be predicted at this time.

Accordingly, no loss contingency has been recorded for these matters as of July 31, 2024, and the likelihood of loss is not considered probable or reasonably estimable.

Voortman Contingency:

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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.

Per agreement with the RWI insurers, we will not be required to return the Proceeds under any circumstances.

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.

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.

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The following table presents our capital structure.

January 31, 2024 April 30, 2023

July 31, 2024 April 30, 2024

Current portion of long-term debt $ 999.5 $ 999.3

Short-term borrowings 697.0 591.0

Long-term debt 8,121.1 4,314.2

Long-term debt, less current portion 6,775.3 6,773.7

Total debt $ 8,471.8 $ 8,364.0

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Total capital $ 16,241.3 $ 16,057.9

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

Borrowings under the Term Loan bear interest on the prevailing SOFR and are payable at the end of the borrowing term.

The Term Loan matures on November 7, 2026, and does not require scheduled amortization payments.

Voluntary prepayments are permitted without premium or penalty.

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:

No balances were drawn against this facility, as the commitment letter was terminated after completion of the Senior Notes offering and drawing on the Term Loan.

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.

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

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.

As of July 31, 2024, we had $697.0 of short-term borrowings outstanding, which were issued under our commercial paper program at a weighted-average interest rate of 5.48 percent.

We are in compliance with all our debt covenants as of July 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 8:

Debt and Financing Arrangements.

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.

Dividend payments were $112.1 and $105.2 in the first three months of 2025 and 2024, respectively, and quarterly dividends declared per share were $1.08 and $1.06 in the first three months of 2025 and 2024, 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.

During the three months ended July 31, 2024, we did not repurchase any common shares under a repurchase plan authorized by the Board.

As of July 31, 2024, approximately 1.1 million common shares remain available for repurchase pursuant to the Board’s authorizations.

There is no guarantee as to the exact number of shares that may be repurchased or when such purchases may occur.

On March 2, 2023, we entered into 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 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.

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

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 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.

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 to partially fund the acquisition of Hostess Brands.

All other share repurchases during the three months ended July 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.

For additional information on the acquisition of Hostess Brands, see Note 3:

In November 2021, we announced plans to invest $1.1 billion to build a new manufacturing facility and distribution center in McCalla, Alabama, dedicated to the production of Smucker’s Uncrustables frozen sandwiches.

Construction of this facility began in 2022, with production expected to begin in 2025.

In November 2021, we announced plans to invest $1.1 billion to build a new manufacturing facility and distribution center in McCalla, Alabama dedicated to the production of Uncrustables sandwiches.

Construction of this facility began in 2022, with production expected to begin during the second quarter of 2025.

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, 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.

However, as a result of the current macroeconomic environment and the recent acquisition, we may experience an increase in the cost or the difficulty to obtain debt or equity financing, or to refinance our debt in the future.

We intend to use a combination of the aforementioned sources of liquidity to fund our obligations with respect to the Senior Notes due March 15, 2025.

However, as a result of the current macroeconomic environment and the recent

acquisition, we may experience an increase in the cost or the difficulty to obtain debt or equity financing, or to refinance our debt in the future.

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

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.

As of July 31, 2024, total cash and cash equivalents of $16.5 was held by our foreign subsidiaries, primarily in Canada.

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

during the first three months of 2025.

Material Cash Requirements

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Transactions with related parties are in the ordinary course of business and are not material to our results of operations, financial condition, or cash flows.

During the second quarter of 2024, 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.

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 and pay off the debt assumed as part of the acquisition.

For additional information, see Note 9:

Debt and Financing Arrangements.

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.

As of July 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, 2024.

NON-GAAP FINANCIAL MEASURES

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

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.

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.

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, such as unfavorable tax impacts associated with the acquisition of Hostess Brands, 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 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 24 for a reconciliation of net sales adjusted for certain noncomparable items to the comparable GAAP financial measure.

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

2024 2023 2024 2023

Three Months Ended July 31,

Gross profit reconciliation:

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Other special project costs (A)

98.9 0.6 105.7 2.7

Adjusted operating income $ 447.9 $ 331.7

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Other special project costs (A)

98.9 0.6 105.7 2.7

Other debt costs – special project costs (A)

Other expense – special project costs (A)

(0.1) — 0.3 —

Other infrequently occurring items:

Realized loss on investment in equity

securities – net (B)

Unrealized loss on investment in equity securities – net (B)

Pension plan termination settlement charge (C)

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For more information, see Note 5:

Special Project Costs, Note 6:

Reportable Segments, and Note 9:

Debt and Financing Arrangements.

(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.

Special Project Costs and Note 6:

Reportable Segments.

(B) Unrealized loss on investment in equity securities – net includes gains and losses resulting from 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:

Divestitures, Note 11:

Derivative Financial Instruments, and Note 12:

Other Financial Instruments and Fair Value Measurements.

Divestitures and Note 10:

Derivative Financial Instruments.

(C) Represents the nonrecurring pre-tax settlement charge recognized during the first quarter of 2024 related to the acceleration of prior service cost for the portion of the plan surplus to be allocated to plan members within our Canadian defined benefit plans, which is subject to regulatory approval before a payout can be made.

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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