J M SMUCKER Co (Form: 10-Q, Received: 11/22/2019 16:19:40)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________________

FORM 10-Q

___________________________________________________



☒	QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: October 31, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-5111

___________________________________________________

The J. M. Smucker Company

(Exact name of registrant as specified in its charter)

___________________________________________________



Ohio			34-0538550
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

One Strawberry Lane
Orrville,	Ohio		44667-0280
(Address of principal executive offices)			(Zip code)

Registrant’s telephone number, including area code:			(330)	682-3000

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol	Name of each exchange on which registered
Common shares, no par value		SJM	New York Stock Exchange

___________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The Company had 114,056,389 common shares outstanding on November 15, 2019.

Table of Contents

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Statements of Consolidated Income	2
	Condensed Statements of Consolidated Comprehensive Income	2
	Condensed Consolidated Balance Sheets	3
	Condensed Statements of Consolidated Cash Flows	4
	Condensed Statements of Consolidated Shareholders’ Equity	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	31

SIGNATURES		32

INDEX OF EXHIBITS		33

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE J. M. SMUCKER COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)



	Three Months Ended October 31,						Six Months Ended October 31,
Dollars in millions, except per share data	2019			2018			2019			2018
Net sales	$	1,957.8		$	2,021.5		$	3,736.7		$	3,924.0
Cost of products sold	1,203.8			1,250.2			2,283.1			2,474.5
Gross Profit	754.0			771.3			1,453.6			1,449.5
Selling, distribution, and administrative expenses	361.5			382.4			742.0			765.7
Amortization	58.8			59.7			117.6			120.2
Other special project costs ^(A)	3.3			25.4			6.6			33.1
Other operating expense (income) – net	0.6			(26.7		)	—			(26.9		)
Operating Income	329.8			330.5			587.4			557.4
Interest expense – net	(49.1		)	(53.6		)	(98.5		)	(107.2		)
Other income (expense) – net	(1.6		)	(7.5		)	(3.1		)	(7.7		)
Income Before Income Taxes	279.1			269.4			485.8			442.5
Income tax expense	67.9			80.9			120.0			121.0
Net Income	$	211.2		$	188.5		$	365.8		$	321.5
Earnings per common share:
Net Income	$	1.85		$	1.66		$	3.21		$	2.83
Net Income – Assuming Dilution	$	1.85		$	1.66		$	3.21		$	2.83


(A)	Other special project costs includes integration and restructuring costs. For more information, see Note 4: Integration and Restructuring Costs.

See notes to unaudited condensed consolidated financial statements.

THE J. M. SMUCKER COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended October 31,						Six Months Ended October 31,
Dollars in millions	2019			2018			2019			2018
Net income	$	211.2		$	188.5		$	365.8		$	321.5
Other comprehensive income (loss):
Foreign currency translation adjustments	0.6			(5.6		)	5.1			(11.7		)
Cash flow hedging derivative activity, net of tax	(33.8		)	6.1			(74.6		)	8.2
Pension and other postretirement benefit plans activity, net of tax	1.4			1.6			2.5			3.2
Available-for-sale securities activity, net of tax	0.1			0.3			0.4			0.6
Total Other Comprehensive Income (Loss)	(31.7		)	2.4			(66.6		)	0.3
Comprehensive Income	$	179.5		$	190.9		$	299.2		$	321.8

See notes to unaudited condensed consolidated financial statements.

Table of Contents

THE J. M. SMUCKER COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



Dollars in millions	October 31, 2019			April 30, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	48.8		$	101.3
Trade receivables, less allowance for doubtful accounts	522.4			503.8
Inventories:
Finished products	667.3			590.8
Raw materials	346.0			319.5
Total Inventory	1,013.3			910.3
Other current assets	74.7			109.8
Total Current Assets	1,659.2			1,625.2
Property, Plant, and Equipment
Land and land improvements	123.4			122.1
Buildings and fixtures	953.2			903.2
Machinery and equipment	2,354.4			2,185.0
Construction in progress	171.6			321.8
Gross Property, Plant, and Equipment	3,602.6			3,532.1
Accumulated depreciation	(1,687.1		)	(1,619.7		)
Total Property, Plant, and Equipment	1,915.5			1,912.4
Other Noncurrent Assets
Operating lease right-of-use assets	153.2			—
Goodwill	6,313.6			6,310.9
Other intangible assets – net	6,602.7			6,718.8
Other noncurrent assets	146.8			144.0
Total Other Noncurrent Assets	13,216.3			13,173.7
Total Assets	$	16,791.0		$	16,711.3

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	521.8		$	591.0
Accrued trade marketing and merchandising	214.2			142.7
Current portion of long-term debt	799.5			798.5
Short-term borrowings	327.9			426.0
Current operating lease liabilities	44.4			—
Other current liabilities	402.3			383.3
Total Current Liabilities	2,310.1			2,341.5
Noncurrent Liabilities
Long-term debt, less current portion	4,584.5			4,686.3
Deferred income taxes	1,377.6			1,398.6
Noncurrent operating lease liabilities	116.2			—
Other noncurrent liabilities	307.3			314.4
Total Noncurrent Liabilities	6,385.6			6,399.3
Total Liabilities	8,695.7			8,740.8
Shareholders’ Equity
Common shares	29.0			28.9
Additional capital	5,781.7			5,755.8
Retained income	2,533.0			2,367.6
Accumulated other comprehensive income (loss)	(248.4		)	(181.8		)
Total Shareholders’ Equity	8,095.3			7,970.5
Total Liabilities and Shareholders’ Equity	$	16,791.0		$	16,711.3

See notes to unaudited condensed consolidated financial statements.

Table of Contents

THE J. M. SMUCKER COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)



	Six Months Ended October 31,
Dollars in millions	2019			2018
Operating Activities
Net income	$	365.8		$	321.5
Adjustments to reconcile net income to net cash provided by (used for) operations:
Depreciation	103.4			102.9
Amortization	117.6			120.2
Share-based compensation expense	13.7			10.5
Gain on divestiture	—			(26.6		)
Other noncash adjustments – net	6.6			3.0
Changes in assets and liabilities, net of effect from acquisition and divestiture:
Trade receivables	(18.2		)	(111.2		)
Inventories	(102.0		)	(60.4		)
Other current assets	13.3			17.6
Accounts payable	(41.3		)	15.2
Accrued liabilities	25.7			60.4
Income and other taxes	(32.6		)	18.5
Other – net	(6.5		)	(25.7		)
Net Cash Provided by (Used for) Operating Activities	445.5			445.9
Investing Activities
Business acquired, net of cash acquired	—			(1,903.0		)
Additions to property, plant, and equipment	(136.4		)	(179.1		)
Proceeds from divestiture	—			372.1
Other – net	32.2			(8.9		)
Net Cash Provided by (Used for) Investing Activities	(104.2		)	(1,718.9		)
Financing Activities
Short-term borrowings (repayments) – net	(102.9		)	246.0
Proceeds from long-term debt	—			1,500.0
Repayments of long-term debt	(100.0		)	(300.0		)
Quarterly dividends paid	(196.6		)	(184.9		)
Purchase of treasury shares	(3.5		)	(5.0		)
Proceeds from stock option exercises	7.0			—
Other – net	0.8			0.1
Net Cash Provided by (Used for) Financing Activities	(395.2		)	1,256.2
Effect of exchange rate changes on cash	1.4			(4.6		)
Net increase (decrease) in cash and cash equivalents	(52.5		)	(21.4		)
Cash and cash equivalents at beginning of period	101.3			192.6
Cash and Cash Equivalents at End of Period	$	48.8		$	171.2

( ) Denotes use of cash

See notes to unaudited condensed consolidated financial statements.

Table of Contents

THE J. M. SMUCKER COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY

(Unaudited)



Dollars in millions	Common Shares Outstanding		Common Shares		Additional Capital			Retained Income			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance at May 1, 2019	113,742,296		$	28.9	$	5,755.8		$	2,367.6		$	(181.8	)	$	7,970.5
Net income								154.6						154.6
Other comprehensive income (loss)											(34.9		)	(34.9		)
Comprehensive income														119.7
Purchase of treasury shares	(22,793	)	—		(2.7		)	(0.2		)				(2.9		)
Stock plans	330,289		0.1		20.4									20.5
Cash dividends declared, $0.88 per common share								(100.1		)				(100.1		)
Other								—						—
Balance at July 31, 2019	114,049,792		$	29.0	$	5,773.5		$	2,421.9		$	(216.7	)	$	8,007.7
Net income								211.2						211.2
Other comprehensive income (loss)											(31.7		)	(31.7		)
Comprehensive income														179.5
Purchase of treasury shares	(4,930	)	—		(0.6		)	—						(0.6		)
Stock plans	14,882		—		8.8									8.8
Cash dividends declared, $0.88 per common share								(100.1		)				(100.1		)
Other								—						—
Balance at October 31, 2019	114,059,744		$	29.0	$	5,781.7		$	2,533.0		$	(248.4	)	$	8,095.3



Dollars in millions	Common Shares Outstanding		Common Shares		Additional Capital			Retained Income			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance at May 1, 2018	113,572,840		$	28.9	$	5,739.7		$	2,239.2		$	(116.7	)	$	7,891.1
Net income								133.0						133.0
Other comprehensive income (loss)											(2.1		)	(2.1		)
Comprehensive income														130.9
Purchase of treasury shares	(43,913	)	—		(4.6		)	(0.1		)				(4.7		)
Stock plans	243,521		—		10.0									10.0
Cash dividends declared, $0.85 per common share								(96.5		)				(96.5		)
Other								—						—
Balance at July 31, 2018	113,772,448		$	28.9	$	5,745.1		$	2,275.6		$	(118.8	)	$	7,930.8
Net income								188.5						188.5
Other comprehensive income (loss)											2.4			2.4
Comprehensive income														190.9
Purchase of treasury shares	(2,485	)	—		(0.3		)	—						(0.3		)
Stock plans	(9,883	)	—		5.1									5.1
Cash dividends declared, $0.85 per common share								(96.5		)				(96.5		)
Other			—					—						—
Balance at October 31, 2018	113,760,080		$	28.9	$	5,749.9		$	2,367.6		$	(116.4	)	$	8,030.0

See notes to unaudited condensed consolidated financial statements.

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THE J. M. SMUCKER COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Note 1: Basis of Presentation

The unaudited interim condensed consolidated financial statements of The J. M. Smucker Company (“Company,” “we,” “us,” or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included.

Operating results for the six months ended October 31, 2019, are not necessarily indicative of the results that may be expected for the year ending April 30, 2020. For further information, reference is made to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended April 30, 2019.

Note 2: Recently Issued Accounting Standards

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for us on May 1, 2020, but we elected to early adopt on May 1, 2019, as permitted, on a prospective basis. During the six months ended October 31, 2019, we capitalized implementation costs related to third-party cloud computing services of $2.4, which is reflected in other noncurrent assets in the Condensed Consolidated Balance Sheet.

In August 2018, the FASB also issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20) Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial and adds new, as well as clarifies certain other, disclosure requirements. ASU 2018-14 will be effective for us on May 1, 2020, with the option to early adopt at any time prior to the effective date, and it will require adoption on a retrospective basis. We do not anticipate that the adoption of this ASU will have a material impact on our disclosures.

In August 2018, the U.S. Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, to eliminate or modify certain disclosure rules that are redundant, outdated, or duplicative of U.S. GAAP or other regulatory requirements. This rule was effective on November 5, 2018, and as a result, we adopted a portion of the amendments during 2019. This rule also amended the disclosure requirements related to the analysis of shareholders’ equity, which was expanded to the interim financial statements and was effective for us on May 1, 2019. While the new shareholders’ equity disclosure requirements impacted our interim financial statements beginning May 1, 2019, the amendments in this rule did not have a material impact on our other financial statements and disclosures.

In February 2016, in an effort to increase transparency and comparability among organizations, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and lease liability for all leases with a term of more than 12 months. We adopted the requirements of ASU 2016-02 and all related amendments on May 1, 2019, utilizing an optional transition method that allows for a cumulative-effect adjustment in the period of adoption with no restatement of prior periods. This transition method also does not require new lease disclosures for periods prior to the effective date. We elected certain practical expedients available under the guidance, including a package of practical expedients which allowed us to not reassess prior conclusions related to existing contracts containing leases, lease classification, and initial direct costs.

Adoption of ASU 2016-02 on May 1, 2019, resulted in the recognition of operating lease right-of-use assets and lease liabilities of $159.2 and $166.6, respectively, in the Condensed Consolidated Balance Sheet. The difference between the additional lease assets and lease liabilities was primarily due to an existing deferred rent balance that was reclassified to the operating lease liability. The new standard did not materially impact our Condensed Statement of Consolidated Income or Condensed Statement of Consolidated Cash Flows. The additional disclosures required are presented within Note 12: Leases.

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Note 3: Acquisition

On May 14, 2018, we acquired the stock of Ainsworth Pet Nutrition, LLC (“Ainsworth”), a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S., in an all-cash transaction valued at $1.9 billion. The transaction was funded with a bank term loan and borrowings under our commercial paper program of approximately $1.5 billion and $400.0, respectively. For additional information on the financing associated with this transaction, refer to Note 8: Debt and Financing Arrangements.

During 2019, the final purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices, and other estimates made by management. The purchase price allocation included total intangible assets of $1.3 billion. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired and, as a result, the excess was allocated to goodwill. As a result of the acquisition, we recognized total goodwill of $617.8 within the U.S. Retail Pet Foods segment, which represented the value we expected to achieve through the implementation of operational synergies and growth opportunities as a result of integrating Ainsworth into our U.S. Retail Pet Foods segment. Of the total goodwill, $446.0 was deductible for income tax purposes at the acquisition date, of which $400.7 remains deductible at October 31, 2019.

The carrying values of the goodwill and indefinite-lived intangible assets within the U.S. Retail Pet Foods segment were $2.4 billion and $1.5 billion, respectively, as of October 31, 2019. The goodwill and indefinite-lived trademarks within the U.S. Retail Pet Foods segment, inclusive of the recently acquired Ainsworth business, remain susceptible to future impairment charges due to the narrow differences between fair value and carrying value. Any significant adverse change in our near or long-term projections or macroeconomic conditions would result in future impairment charges.

Note 4: Integration and Restructuring Costs

Integration and restructuring costs primarily consist of employee-related costs and other transition and termination costs related to certain acquisition or restructuring activities. Employee-related costs include severance, retention bonuses, and relocation costs. Severance costs and retention bonuses are recognized over the estimated future service period of the affected employees, and relocation costs are expensed as incurred. Other transition and termination costs include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. These integration and restructuring costs are not allocated to segment profit and are reported in other special project costs in the Condensed Statements of Consolidated Income. The obligation related to employee separation costs is included in other current liabilities in the Condensed Consolidated Balance Sheets.

Integration Costs: Total integration costs related to the acquisition of Ainsworth are anticipated to be approximately $50.0, the majority of which are expected to be cash charges. Of the total anticipated integration costs, we expect approximately one-third to be employee-related costs. All remaining integration costs are expected to be incurred by the end of 2020.

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



	Three Months Ended October 31,				Six Months Ended October 31,				Total Costs Incurred to Date at October 31, 2019
	2019		2018		2019		2018		Total Costs Incurred to Date at October 31, 2019
Employee-related costs	$	0.6	$	6.9	$	1.4	$	7.8	$	16.9
Other transition and termination costs	2.7		7.3		5.2		8.4		21.8
Total integration costs	$	3.3	$	14.2	$	6.6	$	16.2	$	38.7

Noncash charges of $0.2 and $1.0 were included in the integration costs incurred during the three months ended October 31, 2019 and 2018, respectively, and $0.4 and $1.8 during the six months ended October 31, 2019 and 2018, respectively. Cumulative noncash charges incurred to date were $4.5 and primarily consisted of accelerated depreciation. The obligation related to severance costs and retention bonuses was $0.3 and $1.6 at October 31, 2019, and April 30, 2019, respectively.

Restructuring Costs: We completed the restructuring activities associated with our organization optimization program as of April 30, 2019, and as a result, we did not incur any related costs during the three and six months ended October 31, 2019. We incurred restructuring costs of $11.2 and $16.9 during the three and six months ended October 31, 2018, respectively, primarily consisting of employee-related costs. Total restructuring costs of $74.6 were incurred related to the program, which included $48.7 and $25.9 of employee-related costs and other transition and termination costs, respectively. Noncash charges included in the total restructuring costs were $15.2, of which $0.9 and $1.0 were incurred during the three and six months

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ended October 31, 2018, respectively. Noncash charges primarily consisted of accelerated depreciation. The obligation related to severance costs and retention bonuses was $0.1 and $0.8 at October 31, 2019, and April 30, 2019, respectively.

Note 5: Divestiture

The operating results for this business were primarily included in the U.S. Retail Consumer Foods segment prior to the sale. We received proceeds from the divestiture of $369.5, which were net of cash transaction costs and included a working capital adjustment. We recognized a pre-tax gain of $27.7 related to this transaction, of which $26.6 was recognized during the second quarter of 2019 and was included in other operating expense (income) – net within the Condensed Statement of Consolidated Income.

Note 6: Reportable Segments

We operate in one industry: the manufacturing and marketing of food and beverage products. We have four reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, U.S. Retail Consumer Foods, and International and Away From Home.

The U.S. Retail Pet Foods segment primarily includes the domestic sales of Rachael Ray^TM Nutrish^®, Meow Mix^®, Milk-Bone^®, Natural Balance^®, Kibbles ’n Bits^®, 9Lives^®, Nature’s Recipe^®, and Pup-Peroni^®branded products; the U.S. Retail Coffee segment primarily includes the domestic sales of Folgers^®, Dunkin’ Donuts^®, and Café Bustelo^®branded coffee; and the U.S. Retail Consumer Foods segment primarily includes the domestic sales of Smucker’s^®, Jif^®, and Crisco^®branded products. The International and Away From Home segment comprises products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., restaurants, lodging, schools and universities, health care operators).

Segment profit represents net sales, less direct and allocable operating expenses, and is consistent with the way in which we manage our segments. However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment profit set forth below, as segment profit excludes certain expenses such as corporate administrative expenses, unallocated gains and losses on commodity and foreign currency exchange derivative activities, as well as amortization expense and impairment charges related to intangible assets.

Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. We would expect that any gain or loss in the estimated fair value of the derivatives would generally be offset by a change in the estimated fair value of the underlying exposures.

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	Three Months Ended October 31,						Six Months Ended October 31,
	2019			2018			2019			2018
Net sales:
U.S. Retail Pet Foods	$	709.9		$	728.1		$	1,379.8		$	1,399.3
U.S. Retail Coffee	543.4			544.9			1,009.1			1,034.4
U.S. Retail Consumer Foods	426.1			461.9			828.3			945.2
International and Away From Home	278.4			286.6			519.5			545.1
Total net sales	$	1,957.8		$	2,021.5		$	3,736.7		$	3,924.0
Segment profit:
U.S. Retail Pet Foods	$	137.0		$	123.9		$	257.1		$	224.3
U.S. Retail Coffee	182.5			174.3			311.4			322.1
U.S. Retail Consumer Foods	91.4			134.3			172.4			231.6
International and Away From Home	50.4			56.7			82.7			100.1
Total segment profit	$	461.3		$	489.2		$	823.6		$	878.1
Amortization	(58.8		)	(59.7		)	(117.6		)	(120.2		)
Interest expense – net	(49.1		)	(53.6		)	(98.5		)	(107.2		)
Unallocated derivative gains (losses)	0.9			(0.1		)	29.9			(22.1		)
Other special project costs ^(A)	(3.3		)	(25.4		)	(6.6		)	(33.1		)
Corporate administrative expenses	(70.3		)	(73.5		)	(141.9		)	(145.3		)
Other income (expense) – net	(1.6		)	(7.5		)	(3.1		)	(7.7		)
Income before income taxes	$	279.1		$	269.4		$	485.8		$	442.5


(A)	Other special project costs includes integration and restructuring costs. For more information, see Note 4: Integration and Restructuring Costs.

The following table presents certain geographical information.



	Three Months Ended October 31,				Six Months Ended October 31,
	2019		2018		2019		2018
Net sales:
United States	$	1,815.9	$	1,873.2	$	3,473.5	$	3,645.5
International:
Canada	$	113.4	$	114.3	$	210.2	$	212.5
All other international	28.5		34.0		53.0		66.0
Total international	$	141.9	$	148.3	$	263.2	$	278.5
Total net sales	$	1,957.8	$	2,021.5	$	3,736.7	$	3,924.0

The following table presents product category information.



	Three Months Ended October 31,				Six Months Ended October 31,
	2019		2018		2019		2018		Primary Reportable Segment ^(A)
Coffee	$	627.1	$	635.5	$	1,173.8	$	1,213.8	U.S. Retail Coffee
Dog food	302.6		334.9		598.2		643.4		U.S. Retail Pet Foods
Cat food	213.8		207.3		409.7		396.3		U.S. Retail Pet Foods
Pet snacks	210.0		201.9		403.2		389.7		U.S. Retail Pet Foods
Peanut butter	175.4		186.9		353.3		386.1		U.S. Retail Consumer Foods
Fruit spreads	86.5		83.0		175.7		168.6		U.S. Retail Consumer Foods
Frozen handheld	93.4		78.7		164.9		143.2		U.S. Retail Consumer Foods
Shortening and oils	71.8		79.3		123.3		132.2		U.S. Retail Consumer Foods
Portion control	42.5		41.6		81.9		82.5		International and Away From Home
Juices and beverages	32.4		33.9		63.6		66.1		U.S. Retail Consumer Foods
Baking mixes and ingredients	26.0		58.4		39.7		142.7		International and Away From Home ^(B)
Other	76.3		80.1		149.4		159.4		International and Away From Home
Total net sales	$	1,957.8	$	2,021.5	$	3,736.7	$	3,924.0


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

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(B)	During the three and six months ended October 31, 2018, the primary reportable segment was U.S. Retail Consumer Foods, as the majority of the net sales within this category were related to the divested U.S. baking business. For more information, see Note 5: Divestiture.

Note 7: Earnings per Share

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



	Three Months Ended October 31,				Six Months Ended October 31,
	2019		2018		2019		2018
Net income	$	211.2	$	188.5	$	365.8	$	321.5
Less: Net income allocated to participating securities	1.3		1.0		2.1		1.7
Net income allocated to common stockholders	$	209.9	$	187.5	$	363.7	$	319.8
Weighted-average common shares outstanding	113.4		113.2		113.3		113.1
Add: Dilutive effect of stock options	—		—		—		—
Weighted-average common shares outstanding – assuming dilution	113.4		113.2		113.3		113.1
Net income per common share	$	1.85	$	1.66	$	3.21	$	2.83
Net income per common share – assuming dilution	$	1.85	$	1.66	$	3.21	$	2.83

Note 8: Debt and Financing Arrangements

Long-term debt consists of the following:



	October 31, 2019				April 30, 2019
	Principal Outstanding		Carrying Amount (A)		Principal Outstanding		Carrying Amount (A)
2.20% Senior Notes due December 6, 2019	$	300.0	$	300.0	$	300.0	$	299.5
2.50% Senior Notes due March 15, 2020	500.0		499.5		500.0		499.0
3.50% Senior Notes due October 15, 2021	750.0		764.8		750.0		768.4
3.00% Senior Notes due March 15, 2022	400.0		398.3		400.0		398.0
3.50% Senior Notes due March 15, 2025	1,000.0		995.6		1,000.0		995.2
3.38% Senior Notes due December 15, 2027	500.0		496.5		500.0		496.2
4.25% Senior Notes due March 15, 2035	650.0		643.7		650.0		643.5
4.38% Senior Notes due March 15, 2045	600.0		586.3		600.0		586.0
Term Loan Credit Agreement due May 14, 2021	700.0		699.3		800.0		799.0
Total long-term debt	$	5,400.0	$	5,384.0	$	5,500.0	$	5,484.8
Current portion of long-term debt	800.0		799.5		800.0		798.5
Total long-term debt, less current portion	$	4,600.0	$	4,584.5	$	4,700.0	$	4,686.3


(A)	Represents the carrying amount included in the Condensed Consolidated Balance Sheets, which includes the impact of capitalized debt issuance costs, terminated interest rate contracts, and offering discounts.

We entered into interest rate contracts in November 2018 and June 2018, with notional values of $300.0 and $500.0, respectively, to manage our exposure to interest rate volatility associated with anticipated debt financing in 2020. These interest rate contracts are designated as cash flow hedges, and as a result, the mark-to-market gains or losses on these contracts are deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transactions affect earnings. At October 31, 2019, unrealized losses of $146.2 were deferred in accumulated other comprehensive income (loss) for these derivative instruments. For additional information, see Note 10: Derivative Financial Instruments.

In April 2018, we entered into a senior unsecured delayed-draw Term Loan Credit Agreement (“Term Loan”) with a syndicate of banks and an available commitment amount of $1.5 billion. The full amount of the Term Loan was drawn on May 14, 2018, to partially finance the Ainsworth acquisition, as discussed in Note 3: Acquisition. Borrowings under the Term Loan bear interest on the prevailing U.S. Prime Rate or London Interbank Offered Rate (“LIBOR”), based on our election, and are payable either on a quarterly basis or at the end of the borrowing term. The Term Loan does not require scheduled amortization payments. Voluntary prepayments are permitted without premium or penalty. As of October 31, 2019, we have prepaid $800.0 on the Term Loan to date, including $100.0 in the second quarter of 2020. The interest rate on the Term Loan at October 31,

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2019, was 2.94 percent. Subsequent to the second quarter, on November 14, 2019, we entered into an amendment to the Term Loan that decreased the applicable margins on LIBOR, based on our long-term unsecured debt rating. This amendment did not have a material impact on our condensed consolidated financial statements.

All of our Senior Notes outstanding at October 31, 2019, are unsecured and interest is paid semiannually, with no required scheduled principal payments until maturity. We may prepay all or part of the Senior Notes at 100 percent of the principal amount thereof, together with the accrued and unpaid interest, and any applicable make-whole amount.

We have available a $1.8 billion unsecured revolving credit facility with a group of 11 banks that matures in September 2022. Borrowings under the revolving credit facility bear interest on the prevailing U.S. Prime Rate, LIBOR, or Canadian Dealer Offered Rate, based on our election. Interest is payable either on a quarterly basis or at the end of the borrowing term. We did not have a balance outstanding under the revolving credit facility at October 31, 2019, or April 30, 2019.

We participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $1.8 billion at any time. The commercial paper program is backed by our revolving credit facility and reduces what we can borrow under the revolving credit facility by the amount of commercial paper outstanding. Commercial paper will be used as a continuing source of short-term financing for general corporate purposes. As of October 31, 2019, and April 30, 2019, we had $327.9 and $426.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 2.07 percent and 2.75 percent, respectively.

Interest paid totaled $78.4 and $84.1 for the three months ended October 31, 2019 and 2018, respectively, and $100.0 and $107.4, for the six months ended October 31, 2019 and 2018, respectively. This differs from interest expense due to the effect of interest rate contracts, amortization of debt issuance costs and discounts, capitalized interest, and payment of other debt fees.

Our debt instruments contain certain financial covenant restrictions, including a leverage ratio and an interest coverage ratio. We are in compliance with all covenants.

Note 9: Pensions and Other Postretirement Benefits

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



	Three Months Ended October 31,
	Defined Benefit Pension Plans						Other Postretirement Benefits
	2019			2018			2019			2018
Service cost	$	0.4		$	0.5		$	0.4		$	0.5
Interest cost	5.3			5.8			0.6			0.6
Expected return on plan assets	(6.1		)	(6.7		)	—			—
Amortization of net actuarial loss (gain)	2.0			2.1			—			(0.2		)
Amortization of prior service cost (credit)	0.2			0.3			(0.3		)	(0.3		)
Net periodic benefit cost	$	1.8		$	2.0		$	0.7		$	0.6



	Six Months Ended October 31,
	Defined Benefit Pension Plans						Other Postretirement Benefits
	2019			2018			2019			2018
Service cost	$	0.8		$	1.1		$	0.9		$	0.9
Interest cost	10.5			11.7			1.2			1.2
Expected return on plan assets	(12.1		)	(13.5		)	—			—
Amortization of net actuarial loss (gain)	4.0			4.1			(0.1		)	(0.3		)
Amortization of prior service cost (credit)	0.4			0.5			(0.6		)	(0.6		)
Net periodic benefit cost	$	3.6		$	3.9		$	1.4		$	1.2

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Note 10: Derivative Financial Instruments

We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable instrument types we may enter into and establish controls to limit our market risk exposure.

Commodity Price Management: We enter into commodity derivatives to manage price volatility and reduce the variability of future cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, corn, edible oils, soybean meal, and wheat. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas. Our derivative instruments generally have maturities of less than one year.

We do not qualify commodity derivatives for hedge accounting treatment, and as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all of our commodity derivatives are economic hedges of our risk exposure.

The commodities hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.

Foreign Currency Exchange Rate Hedging: We utilize foreign currency derivatives to manage the effect of foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts generally have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for hedge accounting treatment.

Interest Rate Hedging: We utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt. At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet, and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no net impact on earnings.

In 2015, we terminated the interest rate swap on the Senior Notes due October 15, 2021, which was designated as a fair value hedge and used to hedge against the changes in the fair value of the debt. As a result of the early termination, we received $58.1 in cash, which included $4.6 of accrued and prepaid interest. The gain on termination was recorded as an increase in the long-term debt balance and is being recognized over the remaining life of the underlying debt as a reduction to interest expense. To date, we have recognized $37.1 of the gain, of which $2.1 and $4.1 was recognized during the three and six months ended October 31, 2019, respectively. The remaining gain will be recognized as follows: $4.0 through the remainder of 2020, $8.4 in 2021, and $4.0 in 2022.

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



	October 31, 2019
	Other Current Assets		Other Current Liabilities		Other Noncurrent Assets		Other Noncurrent Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts	$	—	$	146.2	$	—	$	—
Total derivatives designated as hedging instruments	$	—	$	146.2	$	—	$	—
Derivatives not designated as hedging instruments:
Commodity contracts	$	5.6	$	3.0	$	0.5	$	0.5
Foreign currency exchange contracts	0.2		0.3		—		—
Total derivatives not designated as hedging instruments	$	5.8	$	3.3	$	0.5	$	0.5
Total derivative instruments	$	5.8	$	149.5	$	0.5	$	0.5



	April 30, 2019
	Other Current Assets		Other Current Liabilities		Other Noncurrent Assets		Other Noncurrent Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts	$	—	$	49.1	$	—	$	—
Total derivatives designated as hedging instruments	$	—	$	49.1	$	—	$	—
Derivatives not designated as hedging instruments:
Commodity contracts	$	4.8	$	25.8	$	—	$	—
Foreign currency exchange contracts	1.4		0.2		—		—
Total derivatives not designated as hedging instruments	$	6.2	$	26.0	$	—	$	—
Total derivative instruments	$	6.2	$	75.1	$	—	$	—

We have elected to not offset fair value amounts recognized for our exchange-traded derivative instruments and our cash margin accounts executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to maintain cash margin accounts in connection with funding the settlement of our open positions. At October 31, 2019, and April 30, 2019, we maintained cash margin account balances of $8.6 and $40.7, respectively, included in other current assets in the Condensed Consolidated Balance Sheets. The change in the cash margin account balances is included in other – net, investing activities in the Condensed Statements of Consolidated Cash Flows. In the event of default and immediate net settlement of all of our open positions with individual counterparties, all of our exchange-traded derivative liabilities would be fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our individual counterparties.

Interest expense – net, as presented in the Condensed Statements of Consolidated Income, was $49.1 and $53.6 for the three

months ended October 31, 2019 and 2018, respectively, and was $98.5 and $107.2 for the six months ended October 31, 2019 and 2018, respectively. The following table presents information on the pre-tax gains and losses recognized on interest rate contracts designated as cash flow hedges.



	Three Months Ended October 31,						Six Months Ended October 31,
	2019			2018			2019			2018
Gains (losses) recognized in other comprehensive income (loss)	$	(44.1	)	$	7.9		$	(97.1	)	$	10.5
Less: Gains (losses) reclassified from accumulated other comprehensive income (loss) to interest expense	(0.1		)	(0.1		)	(0.2		)	(0.2		)
Change in accumulated other comprehensive income (loss)	$	(44.0	)	$	8.0		$	(96.9	)	$	10.7

Included as a component of accumulated other comprehensive income (loss) at October 31, 2019, and April 30, 2019, were deferred net pre-tax losses of $149.4 and $52.5, respectively, related to the active and terminated interest rate contracts. The related net tax benefit recognized in accumulated other comprehensive income (loss) at October 31, 2019, and April 30, 2019, was $34.4 and $12.1, respectively. Approximately $5.6 of the net pre-tax loss will be recognized over the next 12 months related to the active and terminated interest rate contracts.

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



	Three Months Ended October 31,						Six Months Ended October 31,
	2019			2018			2019			2018
Gains (losses) on commodity contracts	$	(10.1	)	$	(3.2	)	$	2.5		$	(30.1	)
Gains (losses) on foreign currency exchange contracts	(0.1		)	0.8			(1.1		)	1.5
Total gains (losses) recognized in cost of products sold	$	(10.2	)	$	(2.4	)	$	1.4		$	(28.6	)

Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. The following table presents the activity in unallocated derivative gains and losses.



	Three Months Ended October 31,						Six Months Ended October 31,
	2019			2018			2019			2018
Net gains (losses) on mark-to-market valuation of unallocated derivative positions	$	(10.2	)	$	(2.4	)	$	1.4		$	(28.6	)
Less: Net gains (losses) on derivative positions reclassified to segment operating profit	(11.1		)	(2.3		)	(28.5		)	(6.5		)
Unallocated derivative gains (losses)	$	0.9		$	(0.1	)	$	29.9		$	(22.1	)

The net cumulative unallocated derivative losses were $22.6 and $52.5 at October 31, 2019, and April 30, 2019, respectively.

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



	October 31, 2019		April 30, 2019
Commodity contracts	$	432.8	$	544.8
Foreign currency exchange contracts	93.9		144.9
Interest rate contracts	800.0		800.0

Note 11: Other Financial Instruments and Fair Value Measurements

Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of cash investments, short-term borrowings, and trade receivables. The carrying value of these financial instruments approximates fair value. Our remaining financial instruments, with the exception of long-term debt, are recognized at estimated fair value in the Condensed Consolidated Balance Sheets.

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



	October 31, 2019						April 30, 2019
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Marketable securities and other investments	$	40.5		$	40.5		$	40.9		$	40.9
Derivative financial instruments – net	(143.7		)	(143.7		)	(68.9		)	(68.9		)
Total long-term debt	(5,384.0		)	(5,640.7		)	(5,484.8		)	(5,504.0		)

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.

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The following tables summarize the fair values and the levels within the fair value hierarchy in which the fair value measurements fall for our financial instruments.



	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Fair Value at October 31, 2019
Marketable securities and other investments: ^(A)
Equity mutual funds	$	8.8		$	—		$	—	$	8.8
Municipal obligations	—			31.3			—		31.3
Money market funds	0.4			—			—		0.4
Derivative financial instruments: ^(B)
Commodity contracts – net	2.6			—			—		2.6
Foreign currency exchange contracts – net	(0.1		)	—			—		(0.1		)
Interest rate contracts	—			(146.2		)	—		(146.2		)
Total long-term debt ^(C)	(4,910.1		)	(730.6		)	—		(5,640.7		)
Total financial instruments measured at fair value	$	(4,898.4	)	$	(845.5	)	$	—	$	(5,743.9	)



	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Fair Value at April 30, 2019
Marketable securities and other investments: ^(A)
Equity mutual funds	$	8.7		$	—		$	—	$	8.7
Municipal obligations	—			31.7			—		31.7
Money market funds	0.5			—			—		0.5
Derivative financial instruments: ^(B)
Commodity contracts – net	(20.7		)	(0.3		)	—		(21.0		)
Foreign currency exchange contracts – net	(0.1		)	1.3			—		1.2
Interest rate contracts	—			(49.1		)	—		(49.1		)
Total long-term debt ^(C)	(4,646.6		)	(857.4		)	—		(5,504.0		)
Total financial instruments measured at fair value	$	(4,658.2	)	$	(873.8	)	$	—	$	(5,532.0	)

(A)

Marketable securities and other investments consist of funds maintained for the payment of benefits associated with nonqualified retirement plans. The funds include equity securities listed in active markets, municipal obligations valued by a third party using valuation techniques that utilize inputs that are derived principally from or corroborated by observable market data, and money market funds with maturities of three months or less. Based on the short-term nature of these money market funds, carrying value approximates fair value. As of October 31, 2019, our municipal obligations are scheduled to mature as follows: $0.4 in 2020, $1.0 in 2021, $1.6 in 2022, $1.0 in 2023, and the remaining $27.3 in 2024 and beyond.

(B)

Level 1 commodity and foreign currency exchange derivatives are valued using quoted market prices for identical instruments in active markets. Level 2 commodity and foreign currency exchange derivatives are valued using quoted prices for similar assets or liabilities in active markets. The Level 2 interest rate contracts are valued using standard valuation techniques, the income approach, and observable Level 2 market expectations at the measurement date to convert future amounts to a single discounted present value. Level 2 inputs for the valuation of the interest rate contracts are limited to prices that are observable for the asset or liability. For additional information, see Note 10: Derivative Financial Instruments.

(C)

Long-term debt is composed of public Senior Notes classified as Level 1 and the Term Loan classified as Level 2. The public Senior Notes are traded in an active secondary market and valued using quoted prices. The fair value of the Term Loan is based on the net present value of each interest and principal payment calculated utilizing an interest rate derived from an estimated yield curve obtained from independent pricing sources for similar types of term loan borrowing arrangements. For additional information, see Note 8: Debt and Financing Arrangements.

Note 12: Leases

We lease certain warehouses, manufacturing facilities, office space, equipment, and vehicles, primarily through operating lease agreements. We have elected to not recognize leases with a term of 12 months or less on the balance sheet. Instead, we recognize the related lease expense on a straight-line basis over the lease term.

Although the majority of our right-of-use asset and lease liability balances consist of leases with renewal options, we generally are not reasonably certain to exercise them, and, therefore, the optional periods do not typically impact the lease term. Certain

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leases also include termination provisions or options to purchase the leased property. Since we are not reasonably certain to exercise these types of options, minimum lease payments do not include any amounts related to these termination or purchase options. Our lease agreements generally do not contain residual value guarantees or restrictive covenants that are material.

We determine if an agreement is or contains a lease at inception by evaluating whether an identified asset exists that we control over the term of the arrangement. A lease commences when the lessor makes the identified asset available for our use. We generally account for lease and non-lease components as a single lease component. Minimum lease payments do not include variable lease payments other than those that depend on an index or rate.

For the majority of our leases, the interest rate implicit in the lease cannot be readily determined, so we utilize our incremental borrowing rate to present value lease payments using information available at the lease commencement date. We consider our credit rating and the current economic environment in determining this collateralized rate. For the initial implementation of the lease standard, the incremental borrowing rate at May 1, 2019, was used to calculate all operating lease liabilities.

As of October 31, 2019, we have entered into a lease commitment related to a distribution center for which the lease has not yet commenced. We anticipate that the lease will begin during the third quarter of 2020. Upon commencement, we expect to recognize a right-of-use asset and lease liability of approximately $27.0 in the Condensed Consolidated Balance Sheet.

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



	October 31, 2019
Operating lease right-of-use assets	$	153.2
Operating lease liabilities:
Current operating lease liabilities	$	44.4
Noncurrent operating lease liabilities	116.2
Total operating lease liabilities	$	160.6

Finance lease right-of-use assets:
Machinery and equipment	$	12.1
Accumulated depreciation	(6.1		)
Total property, plant, and equipment	$	6.0
Finance lease liabilities:
Other current liabilities	$	2.4
Other noncurrent liabilities	3.7
Total finance lease liabilities	$	6.1

The following table summarizes the components of lease expense.



	Three Months Ended October 31, 2019			Six Months Ended October 31, 2019
Operating lease cost	$	12.9		$	25.3
Finance lease cost:
Amortization of right-of-use assets	0.8			1.6
Interest on lease liabilities	—			0.1
Variable lease cost	6.3			12.6
Short-term lease cost	9.7			17.4
Sublease income	(1.5		)	(2.3		)
Net lease cost	$	28.2		$	54.7

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



	Six Months Ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25.3
Operating cash flows from finance leases	0.1
Financing cash flows from finance leases	1.5
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	16.2
Finance leases	0.8

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



	October 31, 2019
	Operating Leases		Finance Leases
2020 (remainder of the year)	$	26.0	$	1.4
2021	43.1		2.1
2022	36.4		1.5
2023	30.2		0.7
2024	17.2		0.4
2025 and beyond	19.8		0.3
Total undiscounted minimum lease payments	$	172.7	$	6.4
Less: Imputed interest	12.1		0.3
Lease liabilities	$	160.6	$	6.1

As of April 30, 2019, our minimum operating lease obligations were as follows: $43.0 in 2020, $36.7 in 2021, $30.5 in 2022, $24.8 in 2023, and $12.3 in 2024.

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



	October 31, 2019
Weighted average remaining lease term (in years):
Operating leases	4.4
Finance leases	3.3

Weighted average discount rate:
Operating leases	3.2	%
Finance leases	3.2	%

Note 13: Income Taxes

The effective tax rates for the three months ended October 31, 2019 and 2018, were 24.3 and 30.0 percent, respectively, and for the six months ended October 31, 2019 and 2018, were 24.7 and 27.3 percent, respectively. During the three and six months ended October 31, 2019, the effective tax rate varied from the U.S. statutory income tax rate of 21.0 percent primarily due to the impact of state income taxes. The effective tax rates for the three and six months ended October 31, 2018, were also unfavorably impacted by the state income taxes, as well as the income tax expense related to the sale of the U.S. baking business.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an additional $2.8, primarily as a result of expiring statute of limitations periods.

As of October 31, 2019, the undistributed earnings of our foreign subsidiaries remain permanently reinvested.

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Note 14: Accumulated Other Comprehensive Income (Loss)

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



	Foreign Currency Translation Adjustment			Net Gains (Losses) on Cash Flow Hedging Derivatives (A)			Pension and Other Postretirement Liabilities (B)			Unrealized Gain (Loss) on Available- for-Sale Securities			Accumulated Other Comprehensive Income (Loss)
Balance at May 1, 2019	$	(35.5	)	$	(40.4	)	$	(110.0	)	$	4.1		$	(181.8	)
Reclassification adjustments	—			0.2			3.2			—			3.4
Current period credit (charge)	5.1			(97.1		)	—			0.5			(91.5		)
Income tax benefit (expense)	—			22.3			(0.7		)	(0.1		)	21.5
Balance at October 31, 2019	$	(30.4	)	$	(115.0	)	$	(107.5	)	$	4.5		$	(248.4	)



	Foreign Currency Translation Adjustment			Net Gains (Losses) on Cash Flow Hedging Derivatives (A)			Pension and Other Postretirement Liabilities (B)			Unrealized Gain (Loss) on Available- for-Sale Securities			Accumulated Other Comprehensive Income (Loss)
Balance at May 1, 2018	$	(16.4	)	$	(2.9	)	$	(101.0	)	$	3.6		$	(116.7	)
Reclassification adjustments	—			0.2			4.3			—			4.5
Current period credit (charge)	(11.7		)	10.5			—			0.8			(0.4		)
Income tax benefit (expense)	—			(2.5		)	(1.1		)	(0.2		)	(3.8		)
Balance at October 31, 2018	$	(28.1	)	$	5.3		$	(97.8	)	$	4.2		$	(116.4	)


(A)	The reclassification from accumulated other comprehensive income (loss) to interest expense was related to terminated interest rate contracts. The current period credit (charge) relates to the unrealized gains (losses) on the interest rate contracts entered into in November 2018 and June 2018. For additional information, see Note 10: Derivative Financial Instruments.


(B)	Amortization of net losses and prior service costs was reclassified from accumulated other comprehensive income (loss) to other income (expense) – net.

Note 15: 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, including certain lawsuits related to the alleged price-fixing of shelf stable tuna products prior to 2011 by a business previously owned by, but divested prior to our acquisition of, Big Heart Pet Brands, the significant majority of which were settled and paid during the second half of 2019. 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, 2019. Based on the information known to date, with the exception of the matter discussed below, we do not believe the final outcome of these proceedings would have a material adverse effect on our financial position, results of operations, or cash flows.

On May 9, 2011, an organization named Council for Education and Research on Toxics (“Plaintiff” or “CERT”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against us and additional defendants who manufacture, package, distribute, or sell packaged coffee. The lawsuit is CERT v. Brad Barry LLC, et al., and was a tag along to a 2010 lawsuit against companies selling “ready-to-drink” coffee based on the same claims. Both cases have since been consolidated and now include nearly eighty defendants, which constitute the great majority of the coffee industry in California. The Plaintiff alleges that we and the other defendants failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”). The Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of $2,500 per day per violation of Proposition 65. The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

As part of a joint defense group organized to defend against the lawsuit, we dispute the claims of the Plaintiff. Acrylamide is not added to coffee but is inherently present in all coffee in small amounts (measured in parts per billion) as a byproduct of the coffee bean roasting process. We have asserted multiple affirmative defenses. Trial of the first phase of the case commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants. On September 1, 2015, the trial

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court issued a final ruling adverse to the defendants on all Phase 1 defenses. Trial of the second phase of the case commenced in the fall of calendar year 2017. On March 28, 2018, the trial court issued a proposed ruling adverse to the defendants on the Phase 2 defense, our last remaining defense to liability. The trial court finalized and affirmed its Phase 2 ruling on May 7, 2018, and therefore, the third phase of the trial regarding remedies issues was scheduled to commence on October 15, 2018. The trial did not proceed on the scheduled date as further described below.

On June 15, 2018, the state agency responsible for administering the Proposition 65 program, the California Office of Environmental Health Hazard Assessment (“OEHHA”), issued a proposed regulation clarifying that cancer warnings are not required for coffee under Proposition 65. The California Court of Appeals granted the defendants’ requests to stay the trial on remedies until a final determination was made on OEHHA’s proposed regulation. During the interim period, the California Office of Administrative Law approved the proposed regulation on June 3, 2019, and the regulation went into effect on October 1, 2019. In response to CERT’s objection, the defendants amended their answer to raise the regulation as a complete defense to the claims. CERT unsuccessfully challenged the defendants’ right to assert the regulation as an affirmative defense but continues to challenge the validity of the regulation. A hearing on CERT’s challenge is scheduled for January 22, 2020. At this stage of the proceedings, prior to and without knowing whether the regulation will stand as a defense or the trial on remedies issues will move forward in light of the challenge, we are unable to predict or reasonably estimate the potential loss or effect on our operations. Accordingly, no loss contingency has been recorded for this matter as of October 31, 2019, as the likelihood of loss is not considered probable or estimable. The trial court has discretion to impose zero penalties against us or to impose significant statutory penalties if the case proceeds. Significant labeling or warning requirements that could potentially be imposed by the trial court may increase our costs and adversely affect sales of our coffee products, as well as involve substantial expense and operational disruption, which could have a material adverse impact on our financial position, results of operations, or cash flows. Furthermore, a future appellate court decision could reverse the earlier trial court rulings should the regulation be held invalid. The outcome and the financial impact of settlement, the trial, or the appellate court rulings of the case, if any, cannot be predicted at this time.

Note 16: Common Shares

The following table sets forth common share information.



	October 31, 2019	April 30, 2019
Common shares authorized	300.0	300.0
Common shares outstanding	114.1	113.7
Treasury shares	32.4	32.8

Repurchase Program: During the six months ended October 31, 2019 and 2018, we did not repurchase any common shares under a repurchase plan authorized by the Board of Directors (the “Board”). Share repurchases during the six months ended October 31, 2019 and 2018, consisted of shares repurchased from stock plan recipients in lieu of cash payments. At October 31, 2019, we had approximately 3.6 million common shares available for repurchase pursuant to the Board’s authorizations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(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, 2019 and 2018. All comparisons presented are to the corresponding period of the prior year, unless otherwise noted.

On May 14, 2018, we acquired the stock of Ainsworth in an all-cash transaction, which was funded by debt and valued at $1.9 billion. Ainsworth was a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S. Annual cost synergies of approximately $55.0 are expected to be fully realized by the end of 2020. We realized total cumulative synergies of $47.4 as of October 31, 2019.

On August 31, 2018, we sold our U.S. baking business to Brynwood Partners VII L.P. and Brynwood Partners VIII L.P., subsidiaries of Brynwood Partners, an unrelated party. The transaction included products that were primarily sold in U.S. retail channels under the Pillsbury, Martha White, Hungry Jack, White Lily, and Jim Dandy brands, along with all relevant trademarks and licensing agreements, and our manufacturing facility in Toledo, Ohio. This business generated net sales of approximately $370.0 in 2018, primarily in the U.S. Retail Consumer Foods segment. The transaction did not include our baking business in Canada. We received proceeds from the divestiture of $369.5, which were net of cash transaction costs and included a working capital adjustment. We recognized a pre-tax gain of $27.7 related to this transaction, of which $26.6 was recognized during the second quarter of 2019 and was included in other operating expense (income) – net within the Condensed Statement of Consolidated Income.

We are the owner of all trademarks referenced herein, except for the following, which are used under license: Dunkin’^TM and Dunkin’ Donuts are trademarks of DD IP Holder LLC, and Rachael Ray is a trademark of Ray Marks II LLC. The Dunkin’ and Dunkin’ Donuts brands are licensed to us for packaged coffee products, including K-Cup^® pods, sold in retail channels such as grocery stores, mass merchandisers, club stores, and drug stores. Information in this document does not pertain to products for sale in Dunkin’ restaurants. K-Cup^® is a trademark of Keurig Green Mountain, Inc., used with permission.

Results of Operations



	Three Months Ended October 31,								Six Months Ended October 31,
	2019			2018			% Increase (Decrease)		2019			2018			% Increase (Decrease)
Net sales	$	1,957.8		$	2,021.5		(3	)%	$	3,736.7		$	3,924.0		(5	)%
Gross profit	$	754.0		$	771.3		(2	)	$	1,453.6		$	1,449.5		—
% of net sales	38.5		%	38.2		%			38.9		%	36.9		%
Operating income	$	329.8		$	330.5		—		$	587.4		$	557.4		5
% of net sales	16.8		%	16.3		%			15.7		%	14.2		%
Net income:
Net income	$	211.2		$	188.5		12		$	365.8		$	321.5		14
Net income per common share – assuming dilution	$	1.85		$	1.66		11		$	3.21		$	2.83		13
Adjusted gross profit ^(A)	$	753.1		$	771.4		(2	)	$	1,423.7		$	1,471.6		(3	)
% of net sales	38.5		%	38.2		%			38.1		%	37.5		%
Adjusted operating income ^(A)	$	391.0		$	415.7		(6	)	$	681.7		$	732.8		(7	)
% of net sales	20.0		%	20.6		%			18.2		%	18.7		%
Adjusted income: ^(A)
Income	$	257.5		$	246.5		4		$	437.2		$	448.9		(3	)
Earnings per share – assuming dilution	$	2.26		$	2.17		4		$	3.84		$	3.95		(3	)


(A)	We use non-GAAP financial measures to evaluate our performance. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for a reconciliation to the comparable GAAP financial measure.

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Net Sales



	Three Months Ended October 31,										Six Months Ended October 31,
	2019		2018			Increase (Decrease)			%		2019			2018			Increase (Decrease)			%
Net sales	$	1,957.8	$	2,021.5		$	(63.7	)	(3	)%	$	3,736.7		$	3,924.0		$	(187.3	)	(5	)%
Ainsworth acquisition	—		—			—			—		(25.4		)	—			(25.4		)	(1	)
Baking divestiture	—		(32.8		)	32.8			2		—			(105.9		)	105.9			3
Foreign currency exchange	1.8		—			1.8			—		3.6			—			3.6			—
Net sales excluding acquisition, divestiture, and foreign currency exchange ^(A)	$	1,959.6	$	1,988.7		$	(29.1	)	(1	)%	$	3,714.9		$	3,818.1		$	(103.2	)	(3	)%

Amounts may not add due to rounding.


(A)	Net sales excluding acquisition, divestiture, and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information because it enables comparison of results on a year-over-year basis.

Net sales in the second quarter of 2020 decreased $63.7, or 3 percent, reflecting $32.8 of noncomparable net sales in the prior year related to the U.S. baking business, which was divested during the second quarter of 2019. Net sales excluding divestiture and foreign currency exchange decreased $29.1, or 1 percent, as lower net price realization impacted net sales by 1 percentage point, primarily due to lower net pricing for coffee and peanut butter, partially offset by higher pricing for pet food and pet snacks. Volume/mix had a neutral impact on net sales, as decreases for dog food and shortening and oils were mostly offset by increases for coffee and Smucker’s Uncrustables^®.

Net sales in the first six months of 2020 decreased $187.3, or 5 percent, reflecting $105.9 of noncomparable net sales in the prior year related to the U.S. baking business, partially offset by incremental net sales in the current year of $25.4 related to the Ainsworth acquisition. Net sales excluding acquisition, divestiture, and foreign currency exchange decreased $103.2, or 3 percent. This reflected a 1 percentage point impact from unfavorable volume/mix, primarily driven by declines for private label pet food offerings, as well as the Natural Balance and Folgers brands, partially offset by gains for the Smucker’s brand. Lower net price realization also impacted net sales by 1 percentage point, primarily due to lower net pricing for coffee and peanut butter, partially offset by higher pricing for pet food and pet snacks.

Operating Income

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,
	2019		2018		2019		2018
Gross profit	38.5	%	38.2	%	38.9	%	36.9	%
Selling, distribution, and administrative expenses:
Marketing	6.3	%	6.8	%	6.9	%	7.1	%
Selling	3.2		3.3		3.5		3.4
Distribution	3.6		3.3		3.6		3.4
General and administrative	5.4		5.6		5.9		5.7
Total selling, distribution, and administrative expenses	18.5	%	18.9	%	19.9	%	19.5	%
Amortization	3.0		3.0		3.1		3.1
Other special project costs	0.2		1.3		0.2		0.8
Other operating expense (income) – net	—		(1.3	)	—		(0.7	)
Operating income	16.8	%	16.3	%	15.7	%	14.2	%

Amounts may not add due to rounding.

Gross profit decreased $17.3, or 2 percent, in the second quarter of 2020, primarily driven by the noncomparable impact related to the U.S. baking business divestiture and an unfavorable net impact of lower prices and lower costs, partially offset by favorable volume/mix. Operating income was comparable to the prior year, as the impact of the $26.6 pre-tax gain related to the sale of the U.S. baking business in the prior year and the decrease in gross profit were mostly offset by a $22.1 decrease in special project costs and a $20.9 decrease in selling, distribution, and administrative (“SD&A”) expenses.

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Our non-GAAP adjustments include amortization expense and impairment charges related to intangible assets, integration and restructuring costs, and unallocated gains and losses on commodity and foreign currency exchange derivatives. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for further information. Gross profit excluding non-GAAP adjustments (“adjusted gross profit”) decreased $18.3, or 2 percent, in the second quarter of 2020. Operating income excluding non-GAAP adjustments (“adjusted operating income”) decreased $24.7, or 6 percent, reflecting the exclusion of the impact of reduced special project costs, as compared to the prior year.

Gross profit increased $4.1 in the first six months of 2020, primarily driven by a favorable net impact of lower prices and lower costs and the noncomparable benefit of Ainsworth, mostly offset by the noncomparable impact related to the U.S. baking business divestiture and unfavorable volume/mix. The favorable net impact of price and cost was mostly driven by a favorable change in the impact of derivative gains and losses. Operating income increased $30.0, or 5 percent, primarily due to a $26.5 decrease in special project costs, a $23.7 decrease in SD&A expenses, and higher gross profit, partially offset by the impact of the $26.6 pre-tax gain related to the sale of the U.S. baking business in the prior year.

Adjusted gross profit decreased $47.9, or 3 percent, in the first six months of 2020, reflecting a $52.0 unfavorable impact of the exclusion of unallocated derivative gains and losses, as compared to the prior year. Adjusted operating income decreased $51.1, or 7 percent, further reflecting the exclusion of the impact of reduced special project costs, as compared to the prior year.

Interest Expense

Net interest expense decreased $4.5, or 8 percent, in the second quarter of 2020, and decreased $8.7, or 8 percent, in the first six months of 2020, primarily as a result of reduced debt, as compared to the prior year, driven by repayments made during the last twelve months.

Income Taxes

Income taxes decreased $13.0, or 16 percent, in the second quarter of 2020, and decreased $1.0, or 1 percent, in the first six months of 2020, due to lower effective tax rates in 2020 of 24.3 percent for the second quarter and 24.7 percent for the first six months. The 2019 effective tax rates were 30.0 percent for the second quarter and 27.3 percent for the first six months.

During the current year and the prior year, the effective tax rates varied from the U.S. statutory tax rate of 21.0 percent, primarily due to the impact of state income taxes. The effective tax rates for the prior year were also unfavorably impacted by the income tax expense associated with the sale of the U.S. baking business. We anticipate a full-year effective tax rate for 2020 to be approximately 24.5 percent. For further information, refer to Note 13: Income Taxes.

Integration Activities

We expect to incur approximately $50.0 in total integration costs related to the Ainsworth acquisition, the majority of which are expected to be cash charges. Of the total anticipated integration costs, we expect approximately one-third to be employee-related costs. We have incurred total cumulative integration costs of $38.7, of which $3.3 and $6.6 were incurred in the second quarter and first six months of 2020, respectively. All remaining integration costs are expected to be incurred by the end of 2020. For further information, refer to Note 4: Integration and Restructuring Costs.

Segment Results

We have four reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, U.S. Retail Consumer Foods, and International and Away From Home. The U.S. Retail Pet Foods segment primarily includes the domestic sales of Rachael Ray Nutrish, Meow Mix, Milk-Bone, Natural Balance, Kibbles ’n Bits, 9Lives, Nature’s Recipe, and Pup-Peroni branded products; the U.S. Retail Coffee segment primarily includes the domestic sales of Folgers, Dunkin’ Donuts, and Café Bustelobranded coffee; and the U.S. Retail Consumer Foods segment primarily includes the domestic sales of Smucker’s, Jif, and Crisco branded products. The International and Away From Home segment comprises products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., restaurants, lodging, schools and universities, health care operators).

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	Three Months Ended October 31,								Six Months Ended October 31,
	2019			2018			% Increase (Decrease)		2019			2018			% Increase (Decrease)
Net sales:
U.S. Retail Pet Foods	$	709.9		$	728.1		(2	)%	$	1,379.8		$	1,399.3		(1	)%
U.S. Retail Coffee	543.4			544.9			—		1,009.1			1,034.4			(2	)
U.S. Retail Consumer Foods	426.1			461.9			(8	)	828.3			945.2			(12	)
International and Away From Home	278.4			286.6			(3	)	519.5			545.1			(5	)
Segment profit:
U.S. Retail Pet Foods	$	137.0		$	123.9		11	%	$	257.1		$	224.3		15	%
U.S. Retail Coffee	182.5			174.3			5		311.4			322.1			(3	)
U.S. Retail Consumer Foods	91.4			134.3			(32	)	172.4			231.6			(26	)
International and Away From Home	50.4			56.7			(11	)	82.7			100.1			(17	)
Segment profit margin:
U.S. Retail Pet Foods	19.3		%	17.0		%			18.6		%	16.0		%
U.S. Retail Coffee	33.6			32.0					30.9			31.1
U.S. Retail Consumer Foods	21.5			29.1					20.8			24.5
International and Away From Home	18.1			19.8					15.9			18.4

U.S. Retail Pet Foods

The U.S. Retail Pet Foods segment net sales in the second quarter of 2020 decreased $18.2, reflecting a $19.5 decline related to private label products, which was due to both planned exits and softness at certain retailers. Volume/mix reduced net sales by 4 percentage points, primarily driven by private label and the Natural Balance brand, partially offset by gains for the Milk-Bone and Rachael Ray Nutrish brands. Net price realization contributed 1 percentage point, primarily related to the Meow Mix, 9Lives, and Nature’s Recipe brands, reflecting list price increases taken during the second half of the prior year across most brands, partially offset by increased trade spend. Segment profit increased $13.1, primarily driven by higher net pricing, synergy realization, and reduced marketing expense, partially offset by higher input costs and unfavorable volume/mix.

The U.S. Retail Pet Foods segment net sales in the first six months of 2020 decreased $19.5, including the impact of two weeks of incremental Ainsworth sales in the current year. Excluding the incremental Ainsworth business, net sales decreased $44.9, reflecting a $45.8 decline related to private label products. Volume/mix reduced net sales by 5 percentage points, primarily driven by private label and the Natural Balance brand. Net price realization contributed 2 percentage points, primarily related to the Meow Mix, Kibbles ’n Bits, and Milk-Bone brands, reflecting the list price increases taken during the second half of the prior year, partially offset by increased trade spend. Segment profit increased $32.8, reflecting a $10.9 unfavorable fair value purchase accounting adjustment in the prior year and the benefit from the incremental Ainsworth sales. Profit improvement was also driven by higher net pricing, synergy realization, and reduced marketing expense, partially offset by higher input costs and unfavorable volume/mix.

U.S. Retail Coffee

The U.S. Retail Coffee segment net sales decreased $1.5 in the second quarter of 2020, reflecting lower net price realization, mostly offset by favorable volume/mix. Lower net pricing on the Folgers and Dunkin’ Donuts brands reduced net sales by 4 percentage points, which reflected promotional activity across both brands resulting from lower green coffee costs. The favorable volume/mix increased net sales by 4 percentage points, primarily due to growth of the Dunkin’ Donuts and Café Bustelo brands. Segment profit increased $8.2, primarily due to favorable volume/mix, as lower input costs offset the impact of lower net pricing.

The U.S. Retail Coffee segment net sales decreased $25.3 in the first six months of 2020, reflecting lower net price realization, partially offset by favorable volume/mix. Lower net pricing, which reduced net sales by 4 percentage points, reflected promotional activity across all brands resulting from lower green coffee costs. The favorable volume/mix, which increased net sales by 1 percentage point, was driven by the Dunkin’ Donuts and Café Bustelo brands, partially offset by declines for the Folgers brand. Segment profit decreased $10.7, primarily due to unfavorable volume/mix and the net unfavorable impact of lower net pricing and lower green coffee costs.

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U.S. Retail Consumer Foods

The U.S. Retail Consumer Foods segment net sales decreased $35.8 in the second quarter of 2020, primarily reflecting $32.0 of net sales in the prior year related to the divested U.S. baking business. Excluding the noncomparable impact of the divested business, net sales decreased 1 percent, reflecting lower net price realization, partially offset by favorable volume/mix. Lower net pricing reduced net sales by 3 percentage points, primarily driven by a list price decrease on the Jif brand in the fourth quarter of the prior year. Favorable volume/mix contributed 2 percentage points, primarily related to Smucker’s Uncrustables and the Jif brand, partially offset by declines for the Crisco brand. Segment profit decreased $42.9, primarily reflecting $35.4 of segment profit in the prior year related to the divested business, of which $26.6 represented the pre-tax gain related to the sale. Excluding the impact of the divestiture, segment profit decreased 8 percent, driven primarily by the impact of lower pricing, partially offset by favorable volume/mix and reduced SD&A expenses.

The U.S. Retail Consumer Foods segment net sales decreased $116.9 in the first six months of 2020, driven by a $102.2 noncomparable impact of the U.S. baking business. Excluding the noncomparable impact of the divested business, net sales decreased 2 percent, primarily due to lower net price realization, which reduced net sales by 3 percentage points, primarily driven by the list price decrease on the Jif brand. Favorable volume/mix contributed 2 percentage points, primarily related to Smucker’s Uncrustables, partially offset by declines for the Crisco brand. Segment profit decreased $59.2, primarily reflecting $44.3 of segment profit in the prior year related to the divested business, of which $26.6 represented the pre-tax gain related to the sale. Excluding the impact of the divestiture, segment profit decreased 8 percent, driven primarily by the unfavorable net impact of lower pricing and lower input costs for peanut butter, partially offset by decreased marketing expense.

International and Away From Home

The International and Away From Home segment net sales decreased $8.2 in the second quarter of 2020, primarily reflecting unfavorable volume/mix, which reduced net sales by 2 percentage points driven primarily by increased shipments in the prior year related to the closing of facilities in Mexico and transition to a distributor export model. Foreign currency had a $1.8 unfavorable impact on net sales. Segment profit decreased $6.3, primarily reflecting the unfavorable volume/mix and higher input costs.

The International and Away From Home segment net sales decreased $25.6 in the first six months of 2020, including a noncomparable impact of $3.7 of net sales in the prior year related to the divested U.S. baking business. Unfavorable volume/mix reduced net sales by 2 percentage points, primarily driven by the Folgers brand and the increased shipments in the prior year related to the closing of facilities in Mexico and transition to a distributor export model, partially offset by gains for the Smucker’s brand. Lower net price realization across most brands reduced net sales by 1 percentage point. Foreign currency exchange had a $3.6 unfavorable impact on net sales. Segment profit decreased $17.4, primarily reflecting the unfavorable volume/mix and lower net pricing.

Financial Condition – Liquidity and Capital Resources

Liquidity

Our principal source of funds is cash generated from operations, supplemented by borrowings against our commercial paper program and revolving credit facility. At October 31, 2019, total cash and cash equivalents was $48.8, compared to $101.3 at April 30, 2019.

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The following table presents selected cash flow information.



	Six Months Ended October 31,
	2019			2018
Net cash provided by (used for) operating activities	$	445.5		$	445.9
Net cash provided by (used for) investing activities	(104.2		)	(1,718.9		)
Net cash provided by (used for) financing activities	(395.2		)	1,256.2

Net cash provided by (used for) operating activities	$	445.5		$	445.9
Additions to property, plant, and equipment	(136.4		)	(179.1		)
Free cash flow ^(A)	$	309.1		$	266.8


(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.

Cash provided by operating activities for the first six months of 2020 was comparable to the prior year, as the higher net income adjusted for noncash items in the current year was mostly offset by the increase in cash required to fund working capital in 2020. The increase in working capital requirements, as compared to the prior year, was mainly driven by higher payments for accounts payable items and an increase in inventory levels. These increases were partially offset by a reduction in trade receivables compared to the prior year, due to lower sales.

Cash used for investing activities in the first six months of 2020 consisted of $136.4 in capital expenditures, partially offset by a $32.1 decrease in our derivative cash margin account balances. Cash used for investing activities in the first six months of 2019 consisted of $1.9 billion related to the Ainsworth acquisition and $179.1 in capital expenditures, partially offset by net proceeds from the divestiture of the U.S. baking business of $372.1.

Cash used for financing activities in the first six months of 2020 consisted primarily of dividend payments of $196.6, a net decrease in short-term borrowings of $102.9, and a long-term debt repayment of $100.0. Cash provided by financing activities in the first six months of 2019 consisted primarily of $1.5 billion in long-term debt proceeds and a $246.0 net increase in short-term borrowings, partially offset by a long-term debt repayment of $300.0 and dividend payments of $184.9.

In addition to the legal proceedings discussed above, we are currently a defendant in CERT v. Brad Barry LLC, et al., which alleges that we, in addition to nearly eighty other defendants who manufacture, package, distribute, or sell coffee, failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under Proposition 65. As part of a joint defense group organized to defend against the lawsuit, we dispute these claims. Acrylamide is not added to coffee, but is inherently present in all coffee in small amounts (measured in parts per billion) as a byproduct of the coffee bean roasting process. The outcome and the financial impact of the case, if any, cannot be predicted at this time. Accordingly, no loss contingency has been recorded for this matter as of October 31, 2019, as the likelihood of loss is not considered probable or estimable. However, if we are required to pay significant statutory penalties or to add warning labels to any of our products or place warnings in certain locations where our products are sold as a result of Proposition 65, our business and financial results could be adversely impacted, and sales of those products could suffer not only in those locations but elsewhere. For additional information, see Note 15: Contingencies.

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Capital Resources

The following table presents our capital structure.



	October 31, 2019		April 30, 2019
Current portion of long-term debt	$	799.5	$	798.5
Short-term borrowings	327.9		426.0
Long-term debt, less current portion	4,584.5		4,686.3
Total debt	$	5,711.9	$	5,910.8
Shareholders’ equity	8,095.3		7,970.5
Total capital	$	13,807.2	$	13,881.3

In April 2018, we entered into a Term Loan with a syndicate of banks and an available commitment amount of $1.5 billion. The full amount of the Term Loan was drawn on May 14, 2018, to partially finance the Ainsworth acquisition. Borrowings under the Term Loan bear interest on the prevailing U.S. Prime Rate or LIBOR, based on our election, and are payable either on a quarterly basis or at the end of the borrowing term. The Term Loan matures on May 14, 2021, and does not require scheduled amortization payments. Voluntary prepayments are permitted without premium or penalty. As of October 31, 2019, we have prepaid $800.0 on the Term Loan to date, including $100.0 in the second quarter of 2020. The interest rate on the Term Loan at October 31, 2019, was 2.94 percent. Subsequent to the second quarter, on November 14, 2019, we entered into an amendment to the Term Loan that decreased the applicable margins on LIBOR, based on our long-term unsecured debt rating. This amendment did not have a material impact on our condensed consolidated financial statements.

We have available a $1.8 billion unsecured revolving credit facility with a group of 11 banks that matures in September 2022. Additionally, we participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $1.8 billion at any time. The commercial paper program is backed by our revolving credit facility and reduces what we can borrow under the revolving credit facility by the amount of commercial paper outstanding. Commercial paper will be used as a continuing source of short-term financing for general corporate purposes. As of October 31, 2019, we had $327.9 of short-term borrowings outstanding, all of which were issued under our commercial paper program, at a weighted-average interest rate of 2.07 percent.

We are in compliance with all of our debt covenants. For additional information on our long-term debt, sources of liquidity, and debt covenants, see Note 8: Debt and Financing Arrangements.

During the second quarter of 2020, we did not repurchase any common shares under a repurchase plan authorized by the Board. At October 31, 2019, approximately 3.6 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.

Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations, borrowings available under our commercial paper program and revolving credit facility, and access to capital markets, will be sufficient to meet our cash requirements for the next 12 months, including capital expenditures, the payment of quarterly dividends, principal and interest payments on debt outstanding, and share repurchases.

During the first six months of 2020, we reduced our capital investment in certain foreign subsidiaries in conjunction with a restructuring of our international holding and operating entities, returning $39.1 of international cash to the U.S. No foreign withholding taxes were applicable, and state income taxes were not significant. As of October 31, 2019, total cash and cash equivalents of $41.8 was held by our foreign subsidiaries, primarily in Canada. The undistributed earnings of our foreign subsidiaries remain permanently reinvested.

Non-GAAP Financial Measures

We use non-GAAP financial measures, including: net sales excluding acquisition, divestiture, 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. Furthermore, these non-GAAP financial measures are used by management in preparation of the annual budget and for the monthly analyses of our operating results. The Board also utilizes certain non-GAAP financial measures as components for measuring performance for incentive compensation purposes.

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Non-GAAP 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, integration and restructuring costs (“special project costs”), and unallocated gains and losses on commodity and foreign currency exchange derivatives (“unallocated derivative gains and losses”), as well as the related tax impact of these exclusions. The special project costs in the following table relate to specific integration and restructuring projects, and the unallocated derivative gains and losses reflect the changes in fair value of our commodity and foreign currency exchange contracts. Additionally, income taxes, as adjusted is calculated using an adjusted effective income tax rate that is applied to adjusted income before income taxes. While this adjusted effective income tax rate does not generally differ materially from our GAAP effective income tax rate, certain items 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. GAAP. Rather, the presentation of these non-GAAP financial measures supplements other metrics we use to internally evaluate our businesses and facilitate the comparison of past and present operations and liquidity. These non-GAAP financial measures may not be comparable to similar measures used by other companies and may exclude certain nondiscretionary expenses and cash payments. The following table reconciles certain non-GAAP measures to the comparable GAAP financial measure. See page 21 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,
	2019			2018		2019			2018
Gross profit reconciliation:
Gross profit	$	754.0		$	771.3	$	1,453.6		$	1,449.5
Unallocated derivative losses (gains)	(0.9		)	0.1		(29.9		)	22.1
Adjusted gross profit	$	753.1		$	771.4	$	1,423.7		$	1,471.6
Operating income reconciliation:
Operating income	$	329.8		$	330.5	$	587.4		$	557.4
Amortization	58.8			59.7		117.6			120.2
Unallocated derivative losses (gains)	(0.9		)	0.1		(29.9		)	22.1
Other special project costs	3.3			25.4		6.6			33.1
Adjusted operating income	$	391.0		$	415.7	$	681.7		$	732.8
Net income reconciliation:
Net income	$	211.2		$	188.5	$	365.8		$	321.5
Income tax expense	67.9			80.9		120.0			121.0
Amortization	58.8			59.7		117.6			120.2
Unallocated derivative losses (gains)	(0.9		)	0.1		(29.9		)	22.1
Other special project costs	3.3			25.4		6.6			33.1
Adjusted income before income taxes	$	340.3		$	354.6	$	580.1		$	617.9
Income taxes, as adjusted	82.8			108.1		142.9			169.0
Adjusted income	$	257.5		$	246.5	$	437.2		$	448.9
Weighted-average shares – assuming dilution	114.1			113.7		114.0			113.7
Adjusted earnings per share – assuming dilution	$	2.26		$	2.17	$	3.84		$	3.95

Off-Balance Sheet Arrangements and Contractual Obligations

We do not have material off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as variable interest entities. Transactions with related parties are in the ordinary course of business and not material to our results of operations, financial condition, or cash flows.

As of October 31, 2019, there were no material changes to our future contractual obligations as previously reported in our

Annual Report on Form 10-K for the year ended April 30, 2019.

Critical Accounting Estimates and Policies

A discussion of our critical accounting estimates and policies can be found in the “Management’s Discussion and Analysis” section of our Annual Report on Form 10-K for the year ended April 30, 2019. There were no material changes to the information previously disclosed.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

(Dollars in millions, unless otherwise noted)

The following discussions about our market risk disclosures involve forward-looking statements. Actual results could differ from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates, foreign currency exchange rates, and commodity prices.

Interest Rate Risk: The fair value of our cash and cash equivalents at October 31, 2019, approximates carrying value. We are exposed to interest rate risk with regard to existing debt consisting of fixed- and variable-rate maturities. Our interest rate exposure primarily includes U.S. Treasury rates, LIBOR, and commercial paper rates in the U.S. The Financial Conduct Authority in the United Kingdom has stated that it will not require banks to submit LIBOR beyond 2021. We do not anticipate a significant impact to our financial position as a result of this action given our current mix of variable- and fixed-rate debt.

We utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt. At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss), and reclassified to interest expense in the period during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet, and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no net impact on earnings.

We entered into interest rate contracts in November 2018 and June 2018, with notional values of $300.0 and $500.0, respectively, to manage our exposure to interest rate volatility associated with anticipated debt financing in 2020. These interest rate contracts are designated as cash flow hedges, and as a result, unrealized losses of $146.2 were deferred in accumulated other comprehensive income (loss) at October 31, 2019. A hypothetical 10 percent decrease in treasury rates at October 31, 2019, would result in an incremental loss of $21.7 on the fair value of these interest rate contracts.

In 2015, we terminated the interest rate swap on the Senior Notes due October 15, 2021, which was designated as a fair value hedge and used to hedge against the changes in the fair value of the debt. As a result of the early termination, we received $58.1 in cash, which included $4.6 of accrued and prepaid interest and a $53.5 benefit that is deferred as a component of the carrying value of the long-term debt and is being recognized ratably as a reduction to interest expense over the remaining life of the related debt. At October 31, 2019, the remaining benefit of $16.4 was recorded as an increase in the long-term debt balance.

In measuring interest rate risk by the amount of net change in the fair value of our financial liabilities, a hypothetical 100 basis-point decrease in interest rates at October 31, 2019, would increase the fair value of our long-term debt by $307.0.

Foreign Currency Exchange Risk: We have operations outside the U.S. with foreign currency denominated assets and liabilities, primarily denominated in Canadian currency. Because we have foreign currency denominated assets and liabilities, financial exposure may result, primarily from the timing of transactions and the movement of exchange rates. The foreign currency balance sheet exposures as of October 31, 2019, are not expected to result in a significant impact on future earnings or cash flows.

We utilize foreign currency derivatives to manage the effect of foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts generally have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for hedge accounting treatment. Therefore, the change in value of these instruments is immediately recognized in cost of products sold. Based on our hedged foreign currency positions as of October 31, 2019, a hypothetical 10 percent change in exchange rates would not materially impact the fair value.

Revenues from customers outside the U.S., subject to foreign currency exchange, represented 5 percent of net sales during the six months ended October 31, 2019. Thus, certain revenues and expenses have been, and are expected to be, subject to the effect of foreign currency fluctuations, and these fluctuations may have an impact on operating results.

Commodity Price Risk: We use certain raw materials and other commodities that are subject to price volatility caused by supply and demand conditions, political and economic variables, weather, investor speculation, and other unpredictable factors. To manage the volatility related to anticipated commodity purchases, we use derivatives with maturities of generally less than

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one year. We do not qualify commodity derivatives for hedge accounting treatment, and as a result, the gains and losses on all commodity derivatives are immediately recognized in cost of products sold.

The following sensitivity analysis presents our potential loss of fair value resulting from a hypothetical 10 percent change in market prices related to commodities.



	October 31, 2019		April 30, 2019
High	$	43.7	$	51.6
Low	13.3		25.3
Average	28.4		37.0

The estimated fair value was determined using quoted market prices and was based on our net derivative position by commodity for the previous four quarters. The calculations are not intended to represent actual losses in fair value that we expect to incur. In practice, as markets move, we actively manage our risk and adjust hedging strategies as appropriate. The commodities hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that over time any gain or loss in the estimated fair value of its derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.

Certain Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of federal securities laws. The forward-looking statements may include statements concerning our current expectations, estimates, assumptions, and beliefs concerning future events, conditions, plans, and strategies that are not historical fact. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “expect,” “anticipate,” “believe,” “intend,” “will,” “plan,” and similar phrases.

Federal securities laws provide a safe harbor for forward-looking statements to encourage companies to provide prospective information. We are providing this cautionary statement in connection with the safe harbor provisions. Readers are cautioned not to place undue reliance on any forward-looking statements, as such statements are by nature subject to risks, uncertainties, and other factors, many of which are outside of our control and could cause actual results to differ materially from such statements and from our historical results and experience. These risks and uncertainties include, but are not limited to, the following:


•	our ability to achieve synergies and cost savings related to the Ainsworth acquisition in the amounts and within the time frames currently anticipated;


•	our ability to achieve cost savings related to our cost management programs in the amounts and within the time frames currently anticipated;


•	our ability to generate sufficient cash flow to meet our cash deleveraging objectives;


•	volatility of commodity, energy, and other input costs;


•	risks associated with derivative and purchasing strategies we employ to manage commodity pricing and interest rate risks;


•	the availability of reliable transportation on acceptable terms;


•	our ability to implement and realize the full benefit of price changes, and the impact of the timing of the price changes to profits and cash flow in a particular period;


•	the success and cost of marketing and sales programs and strategies intended to promote growth in our businesses, including product innovation;


•	general competitive activity in the market, including competitors’ pricing practices and promotional spending levels;


•	the impact of food security concerns involving either our products or our competitors’ products;


•	the impact of accidents, extreme weather, and natural disasters;


•	the concentration of certain of our businesses with key customers and suppliers, including single-source suppliers of certain key raw materials and finished goods, and our ability to manage and maintain key relationships;


•	the timing and amount of capital expenditures and share repurchases;

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•	impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets or changes in useful lives of other intangible assets;


•	the impact of new or changes to existing governmental laws and regulations and their application, including tariffs;


•	the outcome of tax examinations, changes in tax laws, and other tax matters;


•	foreign currency and interest rate fluctuations; and


•	risks related to other factors described under “Risk Factors” in other reports and statements we have filed with the SEC.

Readers are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented in this Quarterly Report on Form 10-Q. We do not undertake any obligation to update or revise these forward-looking statements to reflect new events or circumstances subsequent to the filing of this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Management, including the principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of October 31, 2019 (the “Evaluation Date”). Based on that evaluation, the principal executive officer and principal financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls. During the first quarter of 2020, we began using a new integrated software solution to plan, authorize, and record trade promotion-related activities, as well as initiate payments associated with our trade programs. Additionally, in connection with the adoption of ASU 2016-02, Leases (Topic 842), as described in Note 2: Recently Issued Accounting Standards and Note 12: Leases, we implemented a new software solution that is used to record right-of-use assets and lease liabilities and prepare disclosures related to the new standard. As a result of the implementation of these systems, new controls and processes were executed during the first quarter of 2020.

There have been no changes in our internal control over financial reporting during the three months ended October 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information required for Part II, Item 1 is incorporated by reference to the discussion in Note 15: Contingencies in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended April 30, 2019, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC, in connection with evaluating the Company, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may affect us. The occurrence of any of these known or unknown risks could have a material adverse impact on our business, financial condition, and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers: The following table presents the total number of shares of common stock purchased during the second quarter of 2020, the average price paid per share, the number of shares that were purchased as part of a publicly announced repurchase program, if any, and the approximate dollar value of the maximum number of shares that may yet be purchased under the share repurchase program:



	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
August 1, 2019 - August 31, 2019	404	$	114.02	—	3,586,598
September 1, 2019 - September 30, 2019	3,306	106.31		—	3,586,598
October 1, 2019 - October 31, 2019	1,220	107.72		—	3,586,598
Total	4,930	$	107.29	—	3,586,598


(a)	Shares in this column include shares repurchased from stock plan recipients in lieu of cash payments.


(d)	As of October 31, 2019, there were 3,586,598 common shares remaining available for future repurchase pursuant to the Board’s authorizations.

Item 6. Exhibits.

See the Index of Exhibits that appears on Page No. 33 of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



November 22, 2019	THE J. M. SMUCKER COMPANY

	/s/ Mark T. Smucker
	By: MARK T. SMUCKER
	President and Chief Executive Officer

	/s/ Mark R. Belgya
	By: MARK R. BELGYA
	Vice Chair and Chief Financial Officer

Table of Contents

INDEX OF EXHIBITS

The following exhibits are either attached or incorporated herein by reference to another filing with the SEC.



Exhibit Number	Exhibit Description
10.1	Special One-Time Grant of Restricted Stock Agreement*
10.2	Special One-Time Grant of Restricted Stock Agreement*
10.3	Amendment No. 1 to Credit Agreement dated as of November 14, 2019, to the Term Loan Credit Agreement, dated as of April 27, 2018, among the Company, as borrower, the lenders party thereto, and Bank of America, N.A., as administrative agent.
31.1	Certifications of Mark T. Smucker pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
31.2	Certifications of Mark R. Belgya pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
104	The cover page of this Quarterly Report on Form 10-Q for the quarter ended October 31, 2019, formatted in Inline XBRL

* Management contract or compensatory plan or arrangement

Exhibit 10.1

THE J. M. SMUCKER COMPANY

RESTRICTED STOCK AGREEMENT

WHEREAS, ______________ (the “Grantee”) is an employee of The J. M. Smucker Company, an Ohio corporation (the “Company”), or one of its Subsidiaries; and

WHEREAS, the execution of an agreement in the form hereof (this “Agreement”) has been authorized by a resolution of the Executive Compensation Committee of the Board or its designee (the “Committee”), pursuant to The J. M. Smucker Company 2010 Equity and Incentive Compensation Plan (the “Plan”), as of ______________ (the “Date of Grant”);

NOW, THEREFORE, the Company hereby grants to the Grantee __________ shares of Restricted Stock (the “Restricted Stock”), effective as of the Date of Grant, subject to the terms and conditions of the Plan and the following additional terms, conditions, limitations and restrictions.

ARTICLE I

DEFINITIONS

All terms used herein with initial capital letters and not otherwise defined herein that are defined in the Plan shall have the meanings assigned to them in the Plan.

“Disability” means the occurrence of either of the following: (i) the Grantee becoming unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) the Grantee is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under the Company’s accident and health plan for employees of the Company.

ARTICLE II

CERTAIN TERMS OF THE RESTRICTED STOCK

1. Issuance of the Restricted Stock. The Restricted Stock covered by this Agreement shall be issued to the Grantee effective upon the Date of Grant. The Restricted Stock shall be registered in the Grantee’s name and shall be fully paid and nonassessable. Any certificates or evidence of award shall bear an appropriate legend referring to the restrictions hereinafter set forth.

2. Restrictions on Transfer of the Restricted Stock. The Restricted Stock may not be sold, exchanged, assigned, transferred, pledged, encumbered, or otherwise disposed of by the Grantee, except to the Company, unless the Restricted Stock has become nonforfeitable as provided in Article II, Section 3 hereof; provided, however, that the Grantee’s rights with respect to such

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Restricted Stock may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer or encumbrance in violation of the provisions of this Article II, Section 2 shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such Restricted Stock. The Committee in its sole discretion, when and as permitted by the Plan, may waive the restrictions on transferability with respect to all or a portion of the Restricted Stock.

3. Vesting of the Restricted Stock. Subject to the terms of this Agreement and the Grantee’s compliance with the provisions set forth in the Restrictive Covenant Agreement attached hereto as Exhibit A (the “Restrictive Covenant Agreement”), the Restricted Stock conditionally vests as follows:

(a) The Restricted Stock covered by this Agreement shall vest and become nonforfeitable on the fifth anniversary of the Date of Grant (or, if such date is not a business day, then on the next succeeding business day), subject to the Grantee’s continuous service with the Company or a Subsidiary (“Continuous Service”) during that five-year period.

(b) Notwithstanding the provisions of Article II, Section 3(a), if the following occur: (i) the death of the Grantee, (ii) the Grantee’s Continuous Service is terminated by the Company or a Subsidiary for Disability, or (iii) the occurrence of a Change in Control, then all of the Restricted Stock covered by this Agreement shall become nonforfeitable or transferable, as applicable.

(c) Notwithstanding the provisions of Article II, Section 3(a), if the Grantee leaves the employ of the Company or a Subsidiary within five years from the Date of Grant under circumstances determined by the Committee to be for the convenience of the Company, the Committee may, when, and as permitted by the Plan, determine that all of the Restricted Stock covered by this Agreement shall become nonforfeitable or transferable, as applicable.

4. Forfeiture of Shares. The Restricted Stock shall be forfeited, except as otherwise provided in Article II, Section 3 above, if the Grantee ceases to be in Continuous Service prior to the fifth anniversary of the Date of Grant or in the event the Committee determines the Grantee has engaged in Detrimental Activity as such term is defined in the Plan. In the event of a forfeiture, any certificate(s) representing the Restricted Stock or any evidence of direct registration of the Restricted Stock covered by this Agreement shall be cancelled.

5. Dividend, Voting and Other Rights. Except as otherwise provided herein, from and after the Date of Grant, the Grantee shall have all of the rights of a shareholder with respect to the Restricted Stock covered by this Agreement, including the right to vote such Restricted Stock; provided, however, that the Grantee shall have no right to any dividends (whether in the form of cash, Common Shares, or other securities) that are declared prior to the date the applicable Restricted Stock vests.

6. Retention of Restricted Stock in Book Entry Form. The Restricted Stock shall be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Restricted Stock until all restrictions thereon shall have lapsed.

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ARTICLE III

GENERAL PROVISIONS

7. Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal, state, and foreign securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any Common Shares pursuant to this Agreement if the issuance thereof would result in a violation of any such law.

8. Withholding Taxes. To the extent that the Company or any Subsidiary is required to withhold federal, state, local, or foreign taxes in connection with the Restricted Stock or any delivery of Common Shares pursuant to this Agreement, and the amounts available to the Company or such Subsidiary for such withholding are insufficient, it shall be a condition to the receipt of the Restricted Stock or such delivery that the Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld. The Grantee hereby elects to satisfy this withholding obligation by having withheld, from the Common Shares otherwise deliverable to the Grantee, Common Shares having a value equal to the minimum amount of taxes required to be withheld (except where the Grantee has made an election under Section 83(b) of the Code with respect to the Common Shares subject to delivery). The Common Shares so retained shall be credited against such withholding requirement at the Market Value per Share on the date of such retention. The Company may, at the request of the Grantee, withhold Common Shares for payment of taxes in excess of the minimum amount of taxes required to be withheld; provided, however, that in no event shall the Company withhold Common Shares for payment of taxes in excess of the maximum statutory individual tax rate in the jurisdiction(s) applicable to the Grantee.

9. Continuous Service. For purposes of this Agreement, the Continuous Service of the Grantee with the Company or a Subsidiary shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company or Subsidiary, by reason of the (a) transfer of his or her employment among the Company and its Subsidiaries or (b) a leave of absence approved by a duly constituted officer of the Company or a Subsidiary.

10. Right to Terminate Employment. No provision of this Agreement shall limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the employment of the Grantee at any time. Nothing herein shall be deemed to create a contract or a right to employment with respect to the Grantee.

11. Relation to Other Benefits. Any economic or other benefit to the Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which the Grantee may be entitled under any profit-sharing, retirement, or other benefit or compensation plan maintained by the Company or a Subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.

12. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall impair the rights of the Grantee under this Agreement without the Grantee’s

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consent; further provided, however, that the Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with (or exemption from) Section 409A of the Code or the Dodd-Frank Wall Street Reform and Consumer Protection Act or any regulations promulgated thereunder.

13. Severability. In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

14. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of the Restricted Stock.

15. Nature of Grant. The Grantee agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended, or terminated by the Company at any time; (b) the grant of the Restricted Stock is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock, or benefits in substitution of restricted stock, even if restricted stock have been granted repeatedly in the past; (c) all decisions with respect to future restricted stock grants shall be at the sole discretion of the Company; (d) participation in the Plan is voluntary; (e) the Restricted Stock are not a part of normal or expected pay package for any purposes; (f) if the Grantee is a Covered Employee within the meaning of the Company’s Clawback of Incentive Compensation Policy (the “Policy”), he or she acknowledges and accepts the terms and conditions of the Policy as in effect on the Date of Grant; and (g) in consideration of the grant of the Restricted Stock, no claim or entitlement to compensation or damages shall be created by any forfeiture or other termination of the Restricted Stock or diminution in value of the Restricted Stock, and the Grantee releases the Company and its Subsidiaries from any such claim that may arise. If any such claim is found by a court of competent jurisdiction to have been created, then, by signing this Agreement, the Grantee shall be deemed irrevocably to have waived the Grantee’s entitlement to pursue such claim.

16. Restrictive Covenants. By executing this Agreement, the Grantee hereby agrees to the terms and conditions set forth in the Restrictive Covenant Agreement.

17. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the Restricted Stock and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

18. Governing Law. This Agreement is made under, and shall be governed by and construed in accordance with the internal substantive laws of, the State of Ohio, without giving effect to the choice of law principles thereof.

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19.Transfer Restrictions. The Restricted Stock shall be subject to the provisions of Section 16 of the Plan relating to the prohibition on the assignment or transfer of the rights granted hereunder.

20.Professional Advice. The acceptance of the Restricted Stock may have consequences under federal and state tax and securities laws that may vary depending upon the individual circumstances of the Grantee. Accordingly, the Grantee acknowledges that the Grantee has been advised to consult his or her personal legal and tax advisors in connection with this Agreement and the Restricted Stock.

21.Notices. Any notice hereunder by the Grantee shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the Corporate Secretary of the Company at the Company’s principal executive offices. Any notice hereunder by the Company shall be given to the Grantee in writing at the most recent address as the Grantee may have on file with the Company.

22.Data Privacy. The Grantee explicitly and unambiguously consents to the collection, use, and transfer, in electronic or other form, of the Grantee’s personal data as described in this Agreement by and among the Company and its Subsidiaries for the exclusive purpose of implementing, administering, and managing the Grantee’s participation in the Plan. The Grantee understands that the Company and its Subsidiaries hold (but only process or transfer to the extent required or permitted by local law) the following personal information about the Grantee: the Grantee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Common Shares or directorships held in the Company, details of all options or any other entitlement to Common Shares awarded, canceled, exercised, vested, unvested, or outstanding in the Grantee’s favor, for the purpose of implementing, administering, and managing the Plan (“Data”). The Grantee understands that Data may be transferred to third parties assisting in the implementation, administration, and management of the Plan, including Fidelity Stock Plan Services, LLC and Fidelity Brokerage Services LLC, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than those that apply in the Grantee’s country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantee’s local human resources representative. The Grantee authorizes these recipients to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the purposes of implementing, administering, and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee may elect to deposit any shares acquired upon the vesting of the Restricted Stock. The Grantee understands that Data shall be held only as long as is necessary to implement, administer, and manage the Grantee’s participation in the Plan and in accordance with local law. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantee’s local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantee’s consent may affect the Grantee’s ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent

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or withdrawal of consent, the Grantee hereby understands that the Grantee may contact the Grantee’s local human resources representative.

23.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

24.Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors, and assigns.

25.Entire Agreement. This Agreement, the Plan, and the Restrictive Covenant Agreement constitute the entire agreement between the parties hereto with respect to the subject matter hereof and thereof, merging any and all prior agreements.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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This Agreement is executed by the Company as of the ______ day of __________.

THE J. M. SMUCKER COMPANY

_____________________________

Name:

Title:

The undersigned hereby acknowledges receipt of an executed original of this Agreement, together with a copy of the prospectus for the Plan, dated June 15, 2017, summarizing key provisions of the Plan, and accepts the award of the Restricted Stock granted hereunder on the terms and conditions set forth herein and in the Plan.

Date: ______________________
Grantee:

EXHIBIT A

Restrictive Covenant Agreement

As a condition to the Grantee’s receipt of the Restricted Stock awarded to the Grantee under the terms of the Restricted Stock Agreement between the Grantee and The J. M. Smucker Company, an Ohio corporation (the “Company”), dated as of ________ (the “Award Agreement”), the Grantee agrees to be subject to the terms and conditions of this Restrictive Covenant Agreement (this “Agreement”).

1. Definitions.

All terms used herein with initial capital letters and not otherwise defined herein shall have the meanings assigned to them in the Award Agreement (including any definitions incorporated by reference to the Plan).

“Affiliated Company” means any organization controlling, controlled by, or under common control with the Company.

“Confidential Information” means the Company’s technical or business or personnel information not readily available to the public or generally known in the trade, including inventions, developments, trade secrets and other confidential information, knowledge, data and know-how of the Company or any Affiliated Company, whether or not they originated with the Grantee, or information which the Company or any Affiliated Company received from third parties under an obligation of confidentiality.

“Conflicting Product” means any product, process, machine, or service of any person or organization, other than the Company or any Affiliated Company, in existence or under development (i) that resembles or competes with a product, process, machine, or service upon or with which the Grantee shall have worked during the two years prior to the Grantee’s termination of service with the Company or any Affiliated Company or (ii) with respect to which during that period of time the Grantee, as a result of his or her job performance and duties, shall have acquired knowledge of Confidential Information, and whose use or marketability could be enhanced by application to it of Confidential Information. For purposes of this section, it shall be conclusively presumed that the Grantee has knowledge of information to which he or she has been directly exposed through actual receipt or review of memoranda or documents containing such information or through actual attendance at meetings at which such information was discussed or disclosed.

“Conflicting Organization” means any person or organization that is engaged in or about to become engaged in research on or development, production, marketing, or selling of a Conflicting Product.

“Look-back Period” means a 12-month period prior to a breach of the applicable section of this Agreement.

“Restricted Period” means the period during which the Grantee is employed by the Company or a Subsidiary plus one year after the date the Grantee’s Continuous Service is terminated.

2. Right to Retain Common Shares Contingent on Protection of Confidential Information.

The Grantee agrees that at all times, both during and after the term of the Grantee’s service with the Company or any Affiliated Company, to hold in the strictest confidence, and not to use (except for the benefit of the Company at the Company’s direction) or disclose (except for the benefit of the Company at the Company’s direction), regardless of when disclosed to the Grantee, any and all Confidential Information of the Company or any Affiliated Company. The Grantee understands that for purposes of this Section 2, Confidential Information further includes, but is not limited to, information pertaining to any aspect of the business of the Company or any Affiliated Company which is either information not known (or known as a result of a wrongful act of the Grantee or of others who were under confidentiality obligations as to the item or items involved) by actual or potential competitors of the Company or other third parties not under confidentiality obligations to the Company. If, during the Restricted Period, the Grantee discloses or uses, or threatens to disclose or use, any Confidential Information other than in the course of performing authorized services for the Company (or any Affiliated Company), the Restricted Stock, whether vested or not, shall be immediately forfeited and cancelled, and the Grantee shall immediately return to the Company the Common Shares received in connection with any vesting of the Restricted Stock during the Look-back Period or the pre-tax income derived from any disposition of the Common Shares during the Look-back Period.

3. No Interference with Customers or Suppliers.

In order to forestall the disclosure or use of Confidential Information as well as to deter the Grantee’s intentional interference with the contractual relations of the Company or any Affiliated Company, the Grantee’s intentional interference with prospective economic advantage of the Company or any Affiliated Company, and to promote fair competition, the Grantee agrees that the Grantee’s right to the Common Shares upon vesting of the Restricted Stock is contingent upon the Grantee refraining, during the Restricted Period, for himself or herself or any third party, directly or indirectly, from using Confidential Information to (i) divert or attempt to divert from the Company (or any Affiliated Company) any business of any kind in which it is engaged, or (ii) intentionally solicit its customers with which it has a contractual relationship as to Conflicting Products, or to interfere with the contractual relationship with any of its suppliers or customers (collectively, “Interfere”). If, during the Restricted Period, the Grantee breaches his or her obligation not to Interfere, the Grantee’s right to the Common Shares upon vesting of the Restricted Stock shall not have been earned and the Restricted Stock, whether vested or not, shall be immediately forfeited and cancelled, and the Grantee shall immediately return to the Company the Common Shares received in connection with any vesting of the Restricted Stock during the Look-back Period or the pre-tax income derived from any disposition of the Common Shares during the Look-back Period. For avoidance of doubt, the term “Interfere” shall not include any advertisement of Conflicting Products through the use of media intended to reach a broad public audience (such as television, cable, or radio broadcasts, or newspapers or magazines) or the broad distribution of coupons through

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the use of direct mail or through independent retail outlets. THE GRANTEE UNDERSTANDS THAT THIS SECTION 3 IS NOT INTENDED TO AND DOES NOT PROHIBIT THE CONDUCT DESCRIBED BUT PROVIDES FOR THE CANCELLATION OF THE RESTRICTED STOCK AND A RETURN TO THE COMPANY OF THE COMMON SHARES RECEIVED IN CONNECTION WITH ANY VESTING OF THE RESTRICTED STOCK DURING THE LOOK-BACK PERIOD OR THE GROSS TAXABLE PROCEEDS OF ANY DISPOSITION OF THE COMMON SHARES DURING THE LOOK-BACK PERIOD IF THE GRANTEE SHOULD CHOOSE TO VIOLATE THIS “NO INTERFERENCE WITH CUSTOMERS OR SUPPLIERS” PROVISION DURING THE RESTRICTED PERIOD.

4. No Solicitation of Employees.

In order to forestall the disclosure or use of Confidential Information, as well as to deter the Grantee’s intentional interference with the contractual relations of the Company or any Affiliated Company, the Grantee’s intentional interference with prospective economic advantage of the Company or any Affiliated Company, and to promote fair competition, the Grantee agrees that the Grantee’s right to the Common Shares upon vesting of the Restricted Stock is contingent upon the Grantee refraining, during the Restricted Period, for himself or herself or any third party, directly or indirectly, from soliciting for employment any person employed by the Company, or by any Affiliated Company, during the period of the solicited person’s employment and for a period of one year after the termination of the solicited person’s employment with the Company or any Affiliated Company (collectively, “Solicit”). If, during the Restricted Period, the Grantee breaches his or her obligation not to Solicit, the Grantee’s right to the Common Shares upon vesting of the Restricted Stock shall not have been earned and the Restricted Stock, whether vested or not, shall be immediately forfeited and cancelled, and the Grantee shall immediately return to the Company the Common Shares received in connection with any vesting of the Restricted Stock during the Look-back Period or the pre-tax income derived from any disposition of the Common Shares during the Look-back Period. THE GRANTEE UNDERSTANDS THAT THIS SECTION 4 IS NOT INTENDED TO AND DOES NOT PROHIBIT THE CONDUCT DESCRIBED BUT PROVIDES FOR THE CANCELLATION OF THE RESTRICTED STOCK AND A RETURN TO THE COMPANY OF THE COMMON SHARES RECEIVED IN CONNECTION WITH ANY VESTING OF THE RESTRICTED STOCK DURING THE LOOK-BACK PERIOD OR THE GROSS TAXABLE PROCEEDS OF ANY DISPOSITION OF THE COMMON SHARES DURING THE LOOK-BACK PERIOD IF THE GRANTEE SHOULD CHOOSE TO VIOLATE THIS “NO SOLICITATION OF EMPLOYEES” PROVISION DURING THE RESTRICTED PERIOD.

5. Right to Retain Common Shares Contingent on Continuing Non-Conflicting Employment.

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Grantee refraining, during the Restricted Period, from rendering services, directly or indirectly, as director, officer, employee, agent, consultant, or otherwise, to any Conflicting Organization, except a Conflicting Organization whose business is diversified and that, as to that part of its business to which the Grantee renders services, is not a Conflicting Organization, provided that the Company shall receive separate written assurances satisfactory to the Company from the Grantee and the Conflicting Organization that the Grantee shall not render services during such period with respect to a Conflicting Product. If, during the Restricted Period, the Grantee shall render services to any Conflicting Organization other than as expressly permitted herein, the Grantee’s right to the Common Shares upon vesting of the Restricted Stock shall not have been earned and the Restricted Stock, whether vested or not, shall be immediately forfeited and cancelled, and the Grantee shall immediately return to the Company the Common Shares received in connection with any vesting of the Restricted Stock during the Look-back Period or the pre-tax income derived from any disposition of the Common Shares during the Look-back Period. THE GRANTEE UNDERSTANDS THAT THIS SECTION 5 IS NOT INTENDED TO AND DOES NOT PROHIBIT THE GRANTEE FROM RENDERING SERVICES TO A CONFLICTING ORGANIZATION BUT PROVIDES FOR THE CANCELLATION OF THE RESTRICTED STOCK AND A RETURN TO THE COMPANY OF THE COMMON SHARES RECEIVED IN CONNECTION WITH ANY VESTING OF THE RESTRICTED STOCK DURING THE LOOK-BACK PERIOD OR THE GROSS TAXABLE PROCEEDS OF ANY DISPOSITION OF THE COMMON SHARES DURING THE LOOK-BACK PERIOD IF THE GRANTEE SHOULD CHOOSE TO RENDER SUCH SERVICES DURING THE RESTRICTED PERIOD.

6. Injunctive and Other Available Relief.

To the extent not prohibited by law, any cancellation of the Restricted Stock pursuant to any of Sections 2 through 5 above shall not restrict, abridge, or otherwise limit in any fashion the types and scope of injunctive and other available relief to the Company. Notwithstanding any provision of this Agreement to the contrary, nothing under this Agreement shall limit, abridge, modify, or otherwise restrict the Company (or any Affiliated Company) from pursuing any or all legal, equitable, or other appropriate remedies to which the Company may be entitled under any other agreement with the Grantee, any other plan, program, policy, or arrangement of the Company (or any Affiliated Company) under which the Grantee is covered or participates, or any applicable law, all to the fullest extent not prohibited under applicable law.

7. Permitted Reporting and Disclosure.

Notwithstanding any language in this Agreement to the contrary, nothing in this Agreement prohibits the Grantee from reporting possible violations of federal law or regulation to any governmental agency or governmental entity, or making other disclosures that are protected under federal law or regulation; provided, that, in each case such communications and disclosures are consistent with applicable law. Notwithstanding the foregoing, under no circumstance is the Grantee authorized to disclose any information covered by the Company’s attorney-client privilege or attorney work product or the Company’s trade secrets without prior written consent of the Company’s General Counsel. Any reporting or disclosure permitted under this Section 7 shall not result in the cancellation of the Restricted Stock. The Grantee is entitled to certain immunities from liability

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under state and federal law for disclosing trade secrets if the disclosure was made to report or investigate an alleged violation of law, subject to certain conditions.

8. Severability.

If any provisions of this Agreement is determined to be invalid or unenforceable for any reason, that provision shall be modified rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. If any provision in this Agreement is held to be invalid or unenforceable for any non-material reason, and cannot be modified to make it enforceable, the remaining provisions shall be construed as if the invalid or unenforceable provision had not been included. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the fullest extent possible.

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(1)	I have reviewed this quarterly report on Form 10-Q of The J. M. Smucker Company;


(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;


(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



/s/ Mark T. Smucker
Name:		Mark T. Smucker
Title:		President and Chief Executive Officer



/s/ Mark R. Belgya
Name:		Mark R. Belgya
Title:		Vice Chair and Chief Financial Officer


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.