0000091419false2021Q1--04-300.900.883.503.503.003.003.503.503.383.382.382.384.254.254.384.383.553.55021.0—00000914192020-05-012020-07-31xbrli:shares00000914192020-08-18iso4217:USD00000914192019-05-012019-07-31iso4217:USDxbrli:shares00000914192020-07-3100000914192020-04-3000000914192019-04-3000000914192019-07-310000091419us-gaap:CommonStockMember2020-04-300000091419us-gaap:AdditionalPaidInCapitalMember2020-04-300000091419us-gaap:RetainedEarningsMember2020-04-300000091419us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-300000091419us-gaap:RetainedEarningsMember2020-05-012020-07-310000091419us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-05-012020-07-310000091419us-gaap:CommonStockMember2020-05-012020-07-310000091419us-gaap:AdditionalPaidInCapitalMember2020-05-012020-07-310000091419us-gaap:CommonStockMember2020-07-310000091419us-gaap:AdditionalPaidInCapitalMember2020-07-310000091419us-gaap:RetainedEarningsMember2020-07-310000091419us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-310000091419us-gaap:CommonStockMember2019-04-300000091419us-gaap:AdditionalPaidInCapitalMember2019-04-300000091419us-gaap:RetainedEarningsMember2019-04-300000091419us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-300000091419us-gaap:RetainedEarningsMember2019-05-012019-07-310000091419us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-05-012019-07-310000091419us-gaap:CommonStockMember2019-05-012019-07-310000091419us-gaap:AdditionalPaidInCapitalMember2019-05-012019-07-310000091419us-gaap:CommonStockMember2019-07-310000091419us-gaap:AdditionalPaidInCapitalMember2019-07-310000091419us-gaap:RetainedEarningsMember2019-07-310000091419us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-310000091419sjm:AinsworthMember2020-04-300000091419sjm:AinsworthMember2020-05-012020-07-310000091419sjm:AinsworthMember2019-05-012019-07-310000091419us-gaap:EmployeeSeveranceMembersjm:AinsworthMember2020-07-310000091419us-gaap:EmployeeSeveranceMembersjm:AinsworthMember2020-04-30sjm:Industrysjm:Segment0000091419sjm:U.S.RetailPetFoodsMember2020-05-012020-07-310000091419sjm:U.S.RetailPetFoodsMember2019-05-012019-07-310000091419sjm:U.S.RetailCoffeeMember2020-05-012020-07-310000091419sjm:U.S.RetailCoffeeMember2019-05-012019-07-310000091419sjm:U.S.RetailConsumerFoodsMember2020-05-012020-07-310000091419sjm:U.S.RetailConsumerFoodsMember2019-05-012019-07-310000091419us-gaap:AllOtherSegmentsMember2020-05-012020-07-310000091419us-gaap:AllOtherSegmentsMember2019-05-012019-07-310000091419country:US2020-05-012020-07-310000091419country:US2019-05-012019-07-310000091419country:CA2020-05-012020-07-310000091419country:CA2019-05-012019-07-310000091419sjm:AllOtherInternationalMember2020-05-012020-07-310000091419sjm:AllOtherInternationalMember2019-05-012019-07-310000091419sjm:InternationalMember2020-05-012020-07-310000091419sjm:InternationalMember2019-05-012019-07-310000091419sjm:CoffeeMembersjm:U.S.RetailCoffeeMember2020-05-012020-07-310000091419sjm:CoffeeMembersjm:U.S.RetailCoffeeMember2019-05-012019-07-310000091419sjm:DogFoodMembersjm:U.S.RetailPetFoodsMember2020-05-012020-07-310000091419sjm:DogFoodMembersjm:U.S.RetailPetFoodsMember2019-05-012019-07-310000091419sjm:CatFoodMembersjm:U.S.RetailPetFoodsMember2020-05-012020-07-310000091419sjm:CatFoodMembersjm:U.S.RetailPetFoodsMember2019-05-012019-07-310000091419sjm:U.S.RetailPetFoodsMembersjm:PetSnacksMember2020-05-012020-07-310000091419sjm:U.S.RetailPetFoodsMembersjm:PetSnacksMember2019-05-012019-07-310000091419sjm:PeanutButterMembersjm:U.S.RetailConsumerFoodsMember2020-05-012020-07-310000091419sjm:PeanutButterMembersjm:U.S.RetailConsumerFoodsMember2019-05-012019-07-310000091419sjm:U.S.RetailConsumerFoodsMembersjm:FruitSpreadsMember2020-05-012020-07-310000091419sjm:U.S.RetailConsumerFoodsMembersjm:FruitSpreadsMember2019-05-012019-07-310000091419sjm:HandheldFrozenSandwichesMembersjm:U.S.RetailConsumerFoodsMember2020-05-012020-07-310000091419sjm:HandheldFrozenSandwichesMembersjm:U.S.RetailConsumerFoodsMember2019-05-012019-07-310000091419sjm:U.S.RetailConsumerFoodsMembersjm:ShorteningAndOilsMember2020-05-012020-07-310000091419sjm:U.S.RetailConsumerFoodsMembersjm:ShorteningAndOilsMember2019-05-012019-07-310000091419sjm:JuicesAndBeveragesMembersjm:U.S.RetailConsumerFoodsMember2020-05-012020-07-310000091419sjm:JuicesAndBeveragesMembersjm:U.S.RetailConsumerFoodsMember2019-05-012019-07-310000091419us-gaap:AllOtherSegmentsMembersjm:PortionControlMember2020-05-012020-07-310000091419us-gaap:AllOtherSegmentsMembersjm:PortionControlMember2019-05-012019-07-310000091419us-gaap:AllOtherSegmentsMembersjm:BakingMixesandIngredientsMember2020-05-012020-07-310000091419us-gaap:AllOtherSegmentsMembersjm:BakingMixesandIngredientsMember2019-05-012019-07-310000091419us-gaap:AllOtherSegmentsMembersjm:OtherProductMember2020-05-012020-07-310000091419us-gaap:AllOtherSegmentsMembersjm:OtherProductMember2019-05-012019-07-31xbrli:pure0000091419sjm:SeniorNotesDuePeriodSevenMember2020-07-310000091419sjm:SeniorNotesDuePeriodSevenMember2020-04-300000091419sjm:SeniorNotesDuePeriodNineMember2020-07-310000091419sjm:SeniorNotesDuePeriodNineMember2020-04-300000091419sjm:SeniorNotesDuePeriodTenMember2020-07-310000091419sjm:SeniorNotesDuePeriodTenMember2020-04-300000091419sjm:SeniorNotesDuePeriodSixteenMember2020-07-310000091419sjm:SeniorNotesDuePeriodSixteenMember2020-04-300000091419sjm:SeniorNotesDueMarch2030Member2020-07-310000091419sjm:SeniorNotesDueMarch2030Member2020-04-300000091419sjm:SeniorNotesDuePeriodElevenMember2020-07-310000091419sjm:SeniorNotesDuePeriodElevenMember2020-04-300000091419sjm:SeniorNotesDuePeriodTwelveMember2020-07-310000091419sjm:SeniorNotesDuePeriodTwelveMember2020-04-300000091419sjm:SeniorNotesDueMarch2050Member2020-07-310000091419sjm:SeniorNotesDueMarch2050Member2020-04-300000091419sjm:SeniorNotesDuePeriodThirteenMember2020-07-310000091419sjm:SeniorNotesDuePeriodThirteenMember2020-04-300000091419sjm:CurrentPortionOfLongTermDebtMember2020-07-310000091419sjm:CurrentPortionOfLongTermDebtMember2020-04-300000091419sjm:TotalLongTermDebtLessCurrentPortionMember2020-07-310000091419sjm:TotalLongTermDebtLessCurrentPortionMember2020-04-300000091419sjm:SeniorNotesDuePeriodThirteenMember2018-05-140000091419sjm:SeniorNotesDuePeriodThirteenMember2018-05-142020-07-310000091419sjm:SeniorNotesDuePeriodThirteenMember2020-05-012020-07-310000091419us-gaap:RevolvingCreditFacilityMember2020-07-31sjm:Bank0000091419us-gaap:CommercialPaperMember2020-07-310000091419us-gaap:CommercialPaperMember2020-04-300000091419us-gaap:RevolvingCreditFacilityMember2020-04-300000091419us-gaap:PensionPlansDefinedBenefitMember2020-05-012020-07-310000091419us-gaap:PensionPlansDefinedBenefitMember2019-05-012019-07-310000091419us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-05-012020-07-310000091419us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-05-012019-07-310000091419us-gaap:CommodityContractMember2020-05-012020-07-310000091419us-gaap:ForeignExchangeContractMember2020-05-012020-07-310000091419us-gaap:InterestRateContractMember2019-05-012020-04-300000091419us-gaap:FairValueHedgingMemberus-gaap:InterestRateSwapMemberus-gaap:CashMember2014-05-012015-04-300000091419us-gaap:FairValueHedgingMemberus-gaap:InterestRateSwapMembersjm:AccruedandPrepaidInterestNetMember2014-05-012015-04-300000091419sjm:TotalThroughQ12021Member2020-05-012020-07-310000091419sjm:TwoThousandTwentyOneMember2020-05-012020-07-310000091419sjm:TwoThousandAndTwentyTwoMember2020-05-012020-07-310000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherCurrentAssetsMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherCurrentLiabilitiesMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherNoncurrentAssetsMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherNoncurrentLiabilitiesMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:OtherCurrentAssetsMemberus-gaap:ForeignExchangeContractMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherCurrentLiabilitiesMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNoncurrentAssetsMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNoncurrentLiabilitiesMember2020-07-310000091419us-gaap:OtherCurrentAssetsMember2020-07-310000091419us-gaap:OtherCurrentLiabilitiesMember2020-07-310000091419us-gaap:OtherNoncurrentAssetsMember2020-07-310000091419us-gaap:OtherNoncurrentLiabilitiesMember2020-07-310000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherCurrentAssetsMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherCurrentLiabilitiesMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherNoncurrentAssetsMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:CommodityContractMemberus-gaap:OtherNoncurrentLiabilitiesMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:OtherCurrentAssetsMemberus-gaap:ForeignExchangeContractMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherCurrentLiabilitiesMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNoncurrentAssetsMember2020-04-300000091419us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNoncurrentLiabilitiesMember2020-04-300000091419us-gaap:OtherCurrentAssetsMember2020-04-300000091419us-gaap:OtherCurrentLiabilitiesMember2020-04-300000091419us-gaap:OtherNoncurrentAssetsMember2020-04-300000091419us-gaap:OtherNoncurrentLiabilitiesMember2020-04-300000091419us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMember2020-05-012020-07-310000091419us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMember2019-05-012019-07-310000091419us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberus-gaap:InterestExpenseMember2020-05-012020-07-310000091419us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberus-gaap:InterestExpenseMember2019-05-012019-07-310000091419us-gaap:InterestRateContractMember2020-07-310000091419us-gaap:InterestRateContractMember2020-04-300000091419us-gaap:InterestRateContractMember2020-05-012020-07-310000091419us-gaap:CommodityContractMember2019-05-012019-07-310000091419us-gaap:ForeignExchangeContractMember2019-05-012019-07-3100000914192019-05-012020-04-300000091419us-gaap:CommodityContractMember2020-07-310000091419us-gaap:CommodityContractMember2020-04-300000091419us-gaap:ForeignExchangeContractMember2020-07-310000091419us-gaap:ForeignExchangeContractMember2020-04-300000091419us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-07-310000091419us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-07-310000091419us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-04-300000091419us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquityFundsMemberus-gaap:FairValueInputsLevel1Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:EquityFundsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquityFundsMemberus-gaap:FairValueInputsLevel3Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquityFundsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MunicipalBondsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MunicipalBondsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MunicipalBondsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MunicipalBondsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherAggregatedInvestmentsMemberus-gaap:FairValueInputsLevel1Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:OtherAggregatedInvestmentsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:OtherAggregatedInvestmentsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherAggregatedInvestmentsMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel1Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommodityContractMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel3Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommodityContractMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel1Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel3Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-07-310000091419us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMember2020-07-310000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquityFundsMemberus-gaap:FairValueInputsLevel1Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:EquityFundsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquityFundsMemberus-gaap:FairValueInputsLevel3Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquityFundsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MunicipalBondsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MunicipalBondsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MunicipalBondsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MunicipalBondsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherAggregatedInvestmentsMemberus-gaap:FairValueInputsLevel1Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:OtherAggregatedInvestmentsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:OtherAggregatedInvestmentsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherAggregatedInvestmentsMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel1Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommodityContractMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel3Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommodityContractMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel1Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel3Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-04-300000091419us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-04-300000091419us-gaap:FairValueMeasurementsRecurringMember2020-04-300000091419us-gaap:MachineryAndEquipmentMember2020-07-310000091419us-gaap:MachineryAndEquipmentMember2020-04-300000091419sjm:AccumulatedDepreciationMember2020-07-310000091419sjm:AccumulatedDepreciationMember2020-04-300000091419us-gaap:PropertyPlantAndEquipmentMember2020-07-310000091419us-gaap:PropertyPlantAndEquipmentMember2020-04-300000091419us-gaap:AccumulatedTranslationAdjustmentMember2020-04-300000091419us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-04-300000091419us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-04-300000091419us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-04-300000091419us-gaap:AccumulatedTranslationAdjustmentMember2020-05-012020-07-310000091419us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-05-012020-07-310000091419us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-05-012020-07-310000091419us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-05-012020-07-310000091419us-gaap:AccumulatedTranslationAdjustmentMember2020-07-310000091419us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-07-310000091419us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-07-310000091419us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-07-310000091419us-gaap:AccumulatedTranslationAdjustmentMember2019-04-300000091419us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-04-300000091419us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-04-300000091419us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-04-300000091419us-gaap:AccumulatedTranslationAdjustmentMember2019-05-012019-07-310000091419us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-05-012019-07-310000091419us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-05-012019-07-310000091419us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-05-012019-07-310000091419us-gaap:AccumulatedTranslationAdjustmentMember2019-07-310000091419us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-07-310000091419us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-07-310000091419us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-07-31
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: July 31, 2020
or
|
|
|
|
|
|
|
☐ |
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 114,073,840 common shares outstanding on
August 18, 2020.
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
Page No. |
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2. |
|
|
|
|
|
|
|
Item 3. |
|
|
|
|
|
|
|
Item 4. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
|
|
|
|
|
Item 1A. |
|
|
|
|
|
|
|
Item 2. |
|
|
|
|
|
|
|
Item 6. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
Dollars in millions, except per share data |
2020 |
|
2019 |
|
|
|
|
|
Net sales |
$ |
1,971.8 |
|
|
$ |
1,778.9 |
|
|
|
|
|
|
Cost of products sold |
1,196.4 |
|
|
1,079.3 |
|
|
|
|
|
|
Gross Profit |
775.4 |
|
|
699.6 |
|
|
|
|
|
|
Selling, distribution, and administrative expenses |
357.5 |
|
|
380.5 |
|
|
|
|
|
|
Amortization |
59.6 |
|
|
58.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other special project costs
(A)
|
— |
|
|
3.3 |
|
|
|
|
|
|
Other operating expense (income) – net |
(2.8) |
|
|
(0.6) |
|
|
|
|
|
|
Operating Income |
361.1 |
|
|
257.6 |
|
|
|
|
|
|
Interest expense – net |
(46.1) |
|
|
(49.4) |
|
|
|
|
|
|
Other income (expense) – net |
(1.4) |
|
|
(1.5) |
|
|
|
|
|
|
Income Before Income Taxes |
313.6 |
|
|
206.7 |
|
|
|
|
|
|
Income tax expense |
76.6 |
|
|
52.1 |
|
|
|
|
|
|
Net Income |
$ |
237.0 |
|
|
$ |
154.6 |
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
Net Income |
$ |
2.08 |
|
|
$ |
1.36 |
|
|
|
|
|
|
Net Income – Assuming Dilution |
$ |
2.08 |
|
|
$ |
1.36 |
|
|
|
|
|
(A) Other special project costs includes integration and
restructuring costs. For more information, see Note 3: 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 July 31, |
|
|
|
|
|
|
|
Dollars in millions |
2020 |
|
2019 |
|
|
|
|
|
Net income |
$ |
237.0 |
|
|
$ |
154.6 |
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
12.9 |
|
|
4.5 |
|
|
|
|
|
|
Cash flow hedging derivative activity, net of tax |
2.6 |
|
|
(40.8) |
|
|
|
|
|
|
Pension and other postretirement benefit plans activity, net of
tax |
1.7 |
|
|
1.1 |
|
|
|
|
|
|
Available-for-sale securities activity, net of tax |
0.9 |
|
|
0.3 |
|
|
|
|
|
|
Total Other Comprehensive Income (Loss) |
18.1 |
|
|
(34.9) |
|
|
|
|
|
|
Comprehensive Income |
$ |
255.1 |
|
|
$ |
119.7 |
|
|
|
|
|
See notes to unaudited condensed consolidated financial
statements.
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in millions |
July 31, 2020 |
|
April 30, 2020 |
|
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash equivalents |
$ |
396.6 |
|
|
$ |
391.1 |
|
|
Trade receivables – net |
497.6 |
|
|
551.4 |
|
|
Inventories: |
|
|
|
|
Finished products |
615.8 |
|
|
563.5 |
|
|
Raw materials |
379.2 |
|
|
331.8 |
|
|
Total Inventory |
995.0 |
|
|
895.3 |
|
|
Other current assets |
95.6 |
|
|
134.9 |
|
|
Total Current Assets |
1,984.8 |
|
|
1,972.7 |
|
|
Property, Plant, and Equipment |
|
|
|
|
Land and land improvements |
130.9 |
|
|
129.5 |
|
|
Buildings and fixtures |
986.4 |
|
|
977.9 |
|
|
Machinery and equipment |
2,434.6 |
|
|
2,398.3 |
|
|
Construction in progress |
217.5 |
|
|
232.6 |
|
|
Gross Property, Plant, and Equipment |
3,769.4 |
|
|
3,738.3 |
|
|
Accumulated depreciation |
(1,820.8) |
|
|
(1,768.9) |
|
|
Total Property, Plant, and Equipment |
1,948.6 |
|
|
1,969.4 |
|
|
Other Noncurrent Assets |
|
|
|
|
Operating lease right-of-use assets |
138.3 |
|
|
148.4 |
|
|
Goodwill |
6,310.7 |
|
|
6,304.5 |
|
|
Other intangible assets – net |
6,371.6 |
|
|
6,429.0 |
|
|
Other noncurrent assets |
148.3 |
|
|
146.4 |
|
|
Total Other Noncurrent Assets |
12,968.9 |
|
|
13,028.3 |
|
|
Total Assets |
$ |
16,902.3 |
|
|
$ |
16,970.4 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable |
$ |
780.6 |
|
|
$ |
782.0 |
|
|
Accrued trade marketing and merchandising |
188.3 |
|
|
167.5 |
|
|
Current portion of long-term debt |
399.8 |
|
|
— |
|
|
Short-term borrowings |
296.0 |
|
|
248.0 |
|
|
Current operating lease liabilities |
35.9 |
|
|
36.5 |
|
|
Other current liabilities |
372.5 |
|
|
353.1 |
|
|
Total Current Liabilities |
2,073.1 |
|
|
1,587.1 |
|
|
Noncurrent Liabilities |
|
|
|
|
Long-term debt, less current portion |
4,672.8 |
|
|
5,373.3 |
|
|
Deferred income taxes |
1,353.9 |
|
|
1,351.6 |
|
|
Noncurrent operating lease liabilities |
112.5 |
|
|
120.0 |
|
|
Other noncurrent liabilities |
344.8 |
|
|
347.5 |
|
|
Total Noncurrent Liabilities |
6,484.0 |
|
|
7,192.4 |
|
|
Total Liabilities |
8,557.1 |
|
|
8,779.5 |
|
|
Shareholders’ Equity |
|
|
|
|
Common shares |
28.5 |
|
|
29.0 |
|
|
Additional capital |
5,795.3 |
|
|
5,794.1 |
|
|
Retained income |
2,882.3 |
|
|
2,746.8 |
|
|
Accumulated other comprehensive income (loss) |
(360.9) |
|
|
(379.0) |
|
|
Total Shareholders’ Equity |
8,345.2 |
|
|
8,190.9 |
|
|
Total Liabilities and Shareholders’ Equity |
$ |
16,902.3 |
|
|
$ |
16,970.4 |
|
See notes to unaudited condensed consolidated financial
statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
Dollars in millions |
2020 |
|
2019 |
|
Operating Activities |
|
|
|
|
Net income |
$ |
237.0 |
|
|
$ |
154.6 |
|
|
Adjustments to reconcile net income to net cash provided by (used
for) operations: |
|
|
|
|
Depreciation |
54.1 |
|
|
50.8 |
|
|
Amortization |
59.6 |
|
|
58.8 |
|
|
|
|
|
|
Share-based compensation expense |
5.9 |
|
|
6.2 |
|
|
|
|
|
|
Other noncash adjustments – net |
3.8 |
|
|
0.2 |
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
Trade receivables |
55.1 |
|
|
30.4 |
|
|
Inventories |
(98.5) |
|
|
(102.1) |
|
|
Other current assets |
0.3 |
|
|
6.4 |
|
|
Accounts payable |
41.1 |
|
|
(61.0) |
|
|
Accrued liabilities |
7.1 |
|
|
63.6 |
|
|
Income and other taxes |
43.4 |
|
|
21.8 |
|
|
Other – net |
0.1 |
|
|
(8.2) |
|
|
Net Cash Provided by (Used for) Operating Activities |
409.0 |
|
|
221.5 |
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment |
(76.6) |
|
|
(73.0) |
|
|
|
|
|
|
|
|
|
|
Other – net |
27.4 |
|
|
20.9 |
|
|
Net Cash Provided by (Used for) Investing Activities |
(49.2) |
|
|
(52.1) |
|
|
Financing Activities |
|
|
|
|
Short-term borrowings (repayments) – net |
47.8 |
|
|
(130.0) |
|
|
Repayments of long-term debt |
(300.0) |
|
|
— |
|
|
Quarterly dividends paid |
(100.1) |
|
|
(96.5) |
|
|
Purchase of treasury shares |
(4.6) |
|
|
(2.9) |
|
|
Proceeds from stock option exercises |
— |
|
|
7.0 |
|
|
Other – net |
(0.4) |
|
|
(0.2) |
|
|
Net Cash Provided by (Used for) Financing Activities |
(357.3) |
|
|
(222.6) |
|
|
Effect of exchange rate changes on cash |
3.0 |
|
|
0.7 |
|
|
Net increase (decrease) in cash and cash equivalents |
5.5 |
|
|
(52.5) |
|
|
Cash and cash equivalents at beginning of period |
391.1 |
|
|
101.3 |
|
|
Cash and Cash Equivalents at End of Period |
$ |
396.6 |
|
|
$ |
48.8 |
|
( ) Denotes use of cash
See notes to unaudited condensed consolidated financial
statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’
EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
Dollars in millions |
Common
Shares
Outstanding |
|
Common Shares |
|
Additional Capital |
|
Retained Income |
|
Accumulated Other Comprehensive Income (Loss) |
|
Total Shareholders’ Equity |
|
Balance at May 1, 2020 |
114,072,726 |
|
|
$ |
29.0 |
|
|
$ |
5,794.1 |
|
|
$ |
2,746.8 |
|
|
$ |
(379.0) |
|
|
$ |
8,190.9 |
|
|
Net income |
|
|
|
|
|
|
237.0 |
|
|
|
|
237.0 |
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
18.1 |
|
|
18.1 |
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
255.1 |
|
|
Purchase of treasury shares |
(42,194) |
|
|
— |
|
|
(5.5) |
|
|
0.9 |
|
|
|
|
(4.6) |
|
|
Stock plans |
56,910 |
|
|
— |
|
|
6.2 |
|
|
|
|
|
|
6.2 |
|
|
Cash dividends declared, $0.90 per common share |
|
|
|
|
|
|
(102.4) |
|
|
|
|
(102.4) |
|
|
Other |
|
|
(0.5) |
|
|
0.5 |
|
|
— |
|
|
|
|
— |
|
|
Balance at July 31, 2020 |
114,087,442 |
|
|
$ |
28.5 |
|
|
$ |
5,795.3 |
|
|
$ |
2,882.3 |
|
|
$ |
(360.9) |
|
|
$ |
8,345.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited condensed consolidated financial
statements.
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 three months ended July 31, 2020,
are not necessarily indicative of the results that may be expected
for the year ending April 30, 2021. 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, 2020.
Note 2: Recently Issued Accounting Standards
In December 2019, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2019-12,
Income Taxes (Topic 740) Simplifying the Accounting for Income
Taxes,
which removes certain exceptions for investments, intraperiod
allocations and interim calculations, and adds guidance to reduce
complexity in accounting for income taxes. ASU 2019-12 will be
effective for us on May 1, 2021, with the option to early adopt at
any time prior to the effective date. Accounting for franchise
taxes will require adoption on a retrospective or modified
retrospective basis through a cumulative-effect adjustment to
retained earnings as of the beginning of the fiscal year of
adoption. All other applicable provisions will require adoption on
a retrospective, modified retrospective, or prospective basis, as
required by ASU 2019-12. We do not anticipate that the adoption of
this ASU will have a material impact on our financial statements
and disclosures.
In August 2018, the FASB 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 was effective
for us on May 1, 2020. It did not impact our interim disclosures
and we do not anticipate a material impact on our annual
disclosures.
Note 3: 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 Statement of Consolidated Income.
The obligation related to employee separation costs is included in
other current liabilities in the Condensed Consolidated Balance
Sheets.
Integration Costs:
As of April 30, 2020, integration of the Ainsworth Pet Nutrition,
LLC (“Ainsworth”) acquisition was considered complete. We incurred
total integration costs of $48.6 related to the acquisition, of
which $4.7 were noncash charges. Noncash charges primarily
consisted of accelerated depreciation. While we did not incur any
costs during the three months ended July 31, 2020, we incurred
integration costs of $3.3 during the three months ended
July 31, 2019, primarily consisting of other transition and
termination costs. The obligation related to severance costs and
retention bonuses was $0.4 and $0.5 at July 31, 2020, and
April 30, 2020, respectively.
Note 4: Reportable Segments
We operate in one industry: the manufacturing and marketing of food
and beverage products. We have three reportable segments: U.S.
Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer
Foods. Effective during the first quarter of 2021, the presentation
of International and Away From Home represents a combination of all
other operating segments that are not individually reportable. As a
result of recent leadership changes, these operating segments are
now being managed and reported separately, and no longer represent
a reportable segment for segment reporting purposes. Prior year
segment results have not been modified, as the combination of these
operating segments represents the previously reported International
and Away From Home reportable segment.
The U.S. Retail Pet Foods segment primarily includes the domestic
sales of Rachael
Ray®
Nutrish®,
Meow Mix®,
Milk-Bone®,
9Lives®,
Kibbles ’n Bits®,
Natural Balance®,
Pup-Peroni®, and
Nature’s Recipe®
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. International and Away From Home includes the
sale of products distributed domestically and in foreign countries
through retail channels and foodservice distributors and operators
(e.g., health care operators, restaurants, lodging, hospitality,
offices, K-12, colleges and universities, and convenience
stores).
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
U.S. Retail Pet Foods |
$ |
692.6 |
|
|
$ |
669.9 |
|
|
|
|
|
|
U.S. Retail Coffee |
570.9 |
|
|
465.7 |
|
|
|
|
|
|
U.S. Retail Consumer Foods |
489.2 |
|
|
402.2 |
|
|
|
|
|
|
International and Away From Home |
219.1 |
|
|
241.1 |
|
|
|
|
|
|
Total net sales |
$ |
1,971.8 |
|
|
$ |
1,778.9 |
|
|
|
|
|
|
Segment profit: |
|
|
|
|
|
|
|
|
U.S. Retail Pet Foods |
$ |
125.3 |
|
|
$ |
120.1 |
|
|
|
|
|
|
U.S. Retail Coffee |
182.6 |
|
|
128.9 |
|
|
|
|
|
|
U.S. Retail Consumer Foods |
131.5 |
|
|
81.0 |
|
|
|
|
|
|
International and Away From Home |
30.9 |
|
|
32.3 |
|
|
|
|
|
|
Total segment profit |
$ |
470.3 |
|
|
$ |
362.3 |
|
|
|
|
|
|
Amortization |
(59.6) |
|
|
(58.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense – net |
(46.1) |
|
|
(49.4) |
|
|
|
|
|
|
Unallocated derivative gains (losses) |
16.2 |
|
|
29.0 |
|
|
|
|
|
|
Other special project costs
(A)
|
— |
|
|
(3.3) |
|
|
|
|
|
|
Corporate administrative expenses |
(65.8) |
|
|
(71.6) |
|
|
|
|
|
|
Other income (expense) – net |
(1.4) |
|
|
(1.5) |
|
|
|
|
|
|
Income before income taxes |
$ |
313.6 |
|
|
$ |
206.7 |
|
|
|
|
|
(A)Other
special project costs includes integration and restructuring costs.
For more information, see Note 3: Integration and Restructuring
Costs.
The following table presents certain geographical
information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
United States |
$ |
1,829.7 |
|
|
$ |
1,657.6 |
|
|
|
|
|
|
International: |
|
|
|
|
|
|
|
|
Canada |
$ |
108.2 |
|
|
$ |
96.8 |
|
|
|
|
|
|
All other international |
33.9 |
|
|
24.5 |
|
|
|
|
|
|
Total international |
$ |
142.1 |
|
|
$ |
121.3 |
|
|
|
|
|
|
Total net sales |
$ |
1,971.8 |
|
|
$ |
1,778.9 |
|
|
|
|
|
The following table presents product category
information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
|
Primary Reportable Segment
(A)
|
|
Coffee |
$ |
635.7 |
|
|
$ |
546.7 |
|
|
|
|
|
|
|
U.S. Retail Coffee |
|
Dog food |
277.7 |
|
|
295.6 |
|
|
|
|
|
|
|
U.S. Retail Pet Foods |
|
Cat food |
220.0 |
|
|
195.9 |
|
|
|
|
|
|
|
U.S. Retail Pet Foods |
|
Pet snacks |
212.8 |
|
|
193.2 |
|
|
|
|
|
|
|
U.S. Retail Pet Foods |
|
Peanut butter |
199.9 |
|
|
177.9 |
|
|
|
|
|
|
|
U.S. Retail Consumer Foods |
|
Fruit spreads |
104.3 |
|
|
89.2 |
|
|
|
|
|
|
|
U.S. Retail Consumer Foods |
|
Frozen handheld |
95.5 |
|
|
71.5 |
|
|
|
|
|
|
|
U.S. Retail Consumer Foods |
|
Shortening and oils |
77.3 |
|
|
51.5 |
|
|
|
|
|
|
|
U.S. Retail Consumer Foods |
|
Juices and beverages |
33.6 |
|
|
31.2 |
|
|
|
|
|
|
|
U.S. Retail Consumer Foods |
|
Portion control |
24.0 |
|
|
39.4 |
|
|
|
|
|
|
|
Other
(B)
|
|
Baking mixes and ingredients |
23.2 |
|
|
13.7 |
|
|
|
|
|
|
|
Other
(B)
|
|
Other |
67.8 |
|
|
73.1 |
|
|
|
|
|
|
|
Other
(B)
|
|
Total net sales |
$ |
1,971.8 |
|
|
$ |
1,778.9 |
|
|
|
|
|
|
|
|
(A)The
identified primary reportable segment generally represents at least
75 percent of total net sales for each respective product
category.
(B)Represents
the combined International and Away From Home operating
segments.
Note 5: 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 July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Net income |
$ |
237.0 |
|
|
$ |
154.6 |
|
|
|
|
|
|
Less: Net income allocated to participating securities |
1.1 |
|
|
0.8 |
|
|
|
|
|
|
Net income allocated to common stockholders |
$ |
235.9 |
|
|
$ |
153.8 |
|
|
|
|
|
|
Weighted-average common shares outstanding |
113.5 |
|
|
113.2 |
|
|
|
|
|
|
Add: Dilutive effect of stock options |
— |
|
|
0.1 |
|
|
|
|
|
|
Weighted-average common shares outstanding – assuming
dilution |
113.5 |
|
|
113.3 |
|
|
|
|
|
|
Net income per common share |
$ |
2.08 |
|
|
$ |
1.36 |
|
|
|
|
|
|
Net income per common share – assuming dilution |
$ |
2.08 |
|
|
$ |
1.36 |
|
|
|
|
|
Note 6: Debt and Financing Arrangements
The following table summarizes the components of our long-term
debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
|
|
April 30, 2020 |
|
|
|
|
Principal
Outstanding |
|
Carrying
Amount (A)
|
|
Principal
Outstanding |
|
Carrying
Amount (A)
|
|
3.50% Senior Notes due October 15, 2021 |
$ |
750.0 |
|
|
$ |
759.2 |
|
|
$ |
750.0 |
|
|
$ |
761.1 |
|
|
3.00% Senior Notes due March 15, 2022 |
400.0 |
|
|
398.9 |
|
|
400.0 |
|
|
398.7 |
|
|
3.50% Senior Notes due March 15, 2025 |
1,000.0 |
|
|
996.2 |
|
|
1,000.0 |
|
|
996.0 |
|
|
3.38% Senior Notes due December 15, 2027 |
500.0 |
|
|
496.8 |
|
|
500.0 |
|
|
496.7 |
|
|
2.38 % Senior Notes due March 15, 2030 |
500.0 |
|
|
495.3 |
|
|
500.0 |
|
|
495.2 |
|
|
4.25% Senior Notes due March 15, 2035 |
650.0 |
|
|
644.0 |
|
|
650.0 |
|
|
643.9 |
|
|
4.38% Senior Notes due March 15, 2045 |
600.0 |
|
|
586.7 |
|
|
600.0 |
|
|
586.5 |
|
|
3.55% Senior Notes due March 15, 2050 |
300.0 |
|
|
295.7 |
|
|
300.0 |
|
|
295.7 |
|
|
Term Loan Credit Agreement due May 14, 2021 |
400.0 |
|
|
399.8 |
|
|
700.0 |
|
|
699.5 |
|
|
Total long-term debt |
$ |
5,100.0 |
|
|
$ |
5,072.6 |
|
|
$ |
5,400.0 |
|
|
$ |
5,373.3 |
|
|
Current portion of long-term debt |
400.0 |
|
|
399.8 |
|
|
— |
|
|
— |
|
|
Total long-term debt, less current portion |
$ |
4,700.0 |
|
|
$ |
4,672.8 |
|
|
$ |
5,400.0 |
|
|
$ |
5,373.3 |
|
(A) Represents the carrying amount included in the Condensed
Consolidated Balance Sheets, which includes the impact of
capitalized debt issuance costs, offering discounts, and terminated
interest rate contracts.
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. 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 is 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
July 31, 2020, we have prepaid $1.1 billion on the Term Loan
to date, including $300.0 in the first quarter of 2021. The
interest rate on the Term Loan at July 31, 2020, was 0.97
percent.
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
July 31, 2020, or April 30, 2020.
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
July 31, 2020, and April 30, 2020, we had $296.0 and
$248.0 of short-term borrowings outstanding, respectively, which
were issued under our commercial paper program at weighted-average
interest rates of 0.25 percent and 0.40 percent,
respectively.
Interest paid totaled $10.2 and $21.6 for the three months ended
July 31, 2020 and 2019, respectively. This differs from
interest expense due to the timing of interest payments,
amortization of debt issuance costs and discounts, effect of
interest rate contracts, 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 7: 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 July 31, |
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans |
|
|
|
Other Postretirement Benefits |
|
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Service cost |
$ |
0.5 |
|
|
$ |
0.4 |
|
|
$ |
0.5 |
|
|
$ |
0.5 |
|
|
Interest cost |
4.6 |
|
|
5.2 |
|
|
0.4 |
|
|
0.6 |
|
|
Expected return on plan assets |
(6.1) |
|
|
(6.0) |
|
|
— |
|
|
— |
|
|
Amortization of net actuarial loss (gain) |
3.3 |
|
|
2.0 |
|
|
— |
|
|
(0.1) |
|
|
Amortization of prior service cost (credit) |
0.2 |
|
|
0.2 |
|
|
(0.3) |
|
|
(0.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
$ |
2.5 |
|
|
$ |
1.8 |
|
|
$ |
0.6 |
|
|
$ |
0.7 |
|
Note 8: 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 2020, we terminated interest rate contracts concurrent with the
pricing of the Senior Notes due March 15, 2030, and March 15, 2050.
They were designated as cash flow hedges and were used to manage
our exposure to interest rate volatility associated with the
anticipated debt financing. The termination resulted in a pre-tax
loss of $239.8, which was deferred and included as a component of
accumulated other comprehensive income (loss) and is being
amortized as interest expense over the life of the
debt.
In 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 $43.3 of the gain, of which $2.2 and $2.0 was
recognized during the three months ended July 31, 2020 and
2019, respectively. The remaining gain will be recognized as
follows: $6.2 through the remainder of 2021 and $4.0 in
2022.
The following tables set forth the gross fair value amounts of
derivative instruments recognized in the Condensed Consolidated
Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
|
|
|
|
|
|
|
Other
Current
Assets |
|
Other
Current
Liabilities |
|
Other
Noncurrent
Assets |
|
Other
Noncurrent
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
Commodity contracts |
$ |
20.4 |
|
|
$ |
17.6 |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
Foreign currency exchange contracts |
0.5 |
|
|
1.3 |
|
|
— |
|
|
— |
|
|
Total derivative instruments |
$ |
20.9 |
|
|
$ |
18.9 |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2020 |
|
|
|
|
|
|
|
|
Other
Current
Assets |
|
Other
Current
Liabilities |
|
Other
Noncurrent
Assets |
|
Other
Noncurrent
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
Commodity contracts |
$ |
14.7 |
|
|
$ |
33.2 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Foreign currency exchange contracts |
2.4 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
Total derivative instruments |
$ |
17.1 |
|
|
$ |
33.3 |
|
|
$ |
— |
|
|
$ |
— |
|
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 July 31, 2020, and April 30, 2020, we
maintained cash margin account balances of $15.6 and $43.2,
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 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 $46.1 and $49.4 for the three months ended
July 31, 2020 and 2019, respectively. The following table
presents information on the pre-tax gains and losses recognized on
terminated interest rate contracts that were designated as cash
flow hedges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Gains (losses) recognized in other comprehensive income
(loss) |
$ |
— |
|
|
$ |
(53.0) |
|
|
|
|
|
Less: Gains (losses) reclassified from accumulated other
comprehensive income (loss)
to interest expense
|
(3.4) |
|
|
(0.1) |
|
|
|
|
|
|
Change in accumulated other comprehensive income (loss) |
$ |
3.4 |
|
|
$ |
(52.9) |
|
|
|
|
|
Included as a component of accumulated other comprehensive income
(loss) at July 31, 2020, and April 30, 2020, were
deferred net pre-tax losses of $237.7 and $241.1, respectively,
related to the terminated interest rate contracts. The related net
tax benefit recognized in accumulated other comprehensive income
(loss) at July 31, 2020, and April 30, 2020, was $54.7
and $55.5, respectively. Approximately $13.9 of the net pre-tax
loss will be recognized over the next 12 months related to the
terminated interest rate contracts.
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 July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Gains (losses) on commodity contracts |
$ |
11.4 |
|
|
$ |
12.6 |
|
|
|
|
|
|
Gains (losses) on foreign currency exchange contracts |
(2.3) |
|
|
(1.0) |
|
|
|
|
|
|
Total gains (losses) recognized in cost of products
sold |
$ |
9.1 |
|
|
$ |
11.6 |
|
|
|
|
|
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 July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Net gains (losses) on mark-to-market valuation of unallocated
derivative positions |
$ |
9.1 |
|
|
$ |
11.6 |
|
|
|
|
|
|
Less: Net gains (losses) on derivative positions reclassified to
segment operating profit |
(7.1) |
|
|
(17.4) |
|
|
|
|
|
|
Unallocated derivative gains (losses) |
$ |
16.2 |
|
|
$ |
29.0 |
|
|
|
|
|
The net cumulative unallocated derivative losses were $16.7 and
$32.9 at July 31, 2020, and April 30, 2020,
respectively.
The following table presents the gross notional value of
outstanding derivative contracts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
April 30, 2020 |
|
Commodity contracts |
$ |
679.5 |
|
|
$ |
890.1 |
|
|
Foreign currency exchange contracts |
74.3 |
|
|
65.6 |
|
|
|
|
|
Note 9: 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
|
|
April 30, 2020 |
|
|
|
|
Carrying
Amount |
|
Fair Value |
|
Carrying
Amount |
|
Fair Value |
|
Marketable securities and other investments |
$ |
39.3 |
|
|
$ |
39.3 |
|
|
$ |
38.6 |
|
|
$ |
38.6 |
|
|
Derivative financial instruments – net |
2.1 |
|
|
2.1 |
|
|
(16.2) |
|
|
(16.2) |
|
|
Total long-term debt |
(5,072.6) |
|
|
(5,659.7) |
|
|
(5,373.3) |
|
|
(5,740.6) |
|
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.
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 July 31, 2020 |
|
Marketable securities and other investments:
(A)
|
|
|
|
|
|
|
|
|
Equity mutual funds |
$ |
9.3 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9.3 |
|
|
Municipal obligations |
— |
|
|
24.6 |
|
|
— |
|
|
24.6 |
|
|
Money market funds |
5.4 |
|
|
— |
|
|
— |
|
|
5.4 |
|
|
Derivative financial instruments:
(B)
|
|
|
|
|
|
|
|
|
Commodity contracts – net |
2.4 |
|
|
0.5 |
|
|
— |
|
|
2.9 |
|
|
Foreign currency exchange contracts – net |
(0.2) |
|
|
(0.6) |
|
|
— |
|
|
(0.8) |
|
|
Total long-term debt
(C)
|
(5,255.6) |
|
|
(404.1) |
|
|
— |
|
|
(5,659.7) |
|
|
Total financial instruments measured at fair value |
$ |
(5,238.7) |
|
|
$ |
(379.6) |
|
|
$ |
— |
|
|
$ |
(5,618.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2020 |
|
Marketable securities and other investments:
(A)
|
|
|
|
|
|
|
|
|
Equity mutual funds |
$ |
8.7 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8.7 |
|
|
Municipal obligations |
— |
|
|
24.2 |
|
|
— |
|
|
24.2 |
|
|
Money market funds |
5.7 |
|
|
— |
|
|
— |
|
|
5.7 |
|
|
Derivative financial instruments:
(B)
|
|
|
|
|
|
|
|
|
Commodity contracts – net |
(18.3) |
|
|
(0.2) |
|
|
— |
|
|
(18.5) |
|
|
Foreign currency exchange contracts – net |
0.2 |
|
|
2.1 |
|
|
— |
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
Total long-term debt
(C)
|
(5,032.0) |
|
|
(708.6) |
|
|
— |
|
|
(5,740.6) |
|
|
Total financial instruments measured at fair value |
$ |
(5,035.7) |
|
|
$ |
(682.5) |
|
|
$ |
— |
|
|
$ |
(5,718.2) |
|
(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 July 31, 2020, our
municipal obligations are scheduled to mature as follows: $1.0 in
2021, $1.6 in 2022, $3.5 in 2024, and the remaining $18.5 in 2025
and beyond. We do not have any municipal obligations scheduled to
mature in 2023.
(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. For additional information, see Note
8: 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 6:
Debt and Financing Arrangements.
Note 10: 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, these optional
periods do not typically impact the lease term as we are not
reasonably certain to exercise them. Certain leases also include
termination provisions or options to purchase the leased property.
Since we are not reasonably certain to exercise these types of
options, minimum lease payments do not include any amounts related
to these termination or purchase options. 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.
The following table sets forth the right-of-use assets and lease
liabilities recognized in the Condensed Consolidated Balance
Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
April 30, 2020 |
|
Operating lease right-of-use assets |
$ |
138.3 |
|
|
$ |
148.4 |
|
|
Operating lease liabilities: |
|
|
|
|
Current operating lease liabilities |
$ |
35.9 |
|
|
$ |
36.5 |
|
|
Noncurrent operating lease liabilities
|
112.5 |
|
|
120.0 |
|
|
Total operating lease liabilities |
$ |
148.4 |
|
|
$ |
156.5 |
|
|
|
|
|
|
|
Finance lease right-of-use assets: |
|
|
|
|
Machinery and equipment
|
$ |
10.2 |
|
|
$ |
11.6 |
|
|
Accumulated depreciation
|
(4.9) |
|
|
(5.9) |
|
|
Total property, plant, and equipment |
$ |
5.3 |
|
|
$ |
5.7 |
|
|
Finance lease liabilities: |
|
|
|
|
Other current liabilities
|
$ |
2.1 |
|
|
$ |
2.2 |
|
|
Other noncurrent liabilities
|
3.2 |
|
|
3.5 |
|
|
Total finance lease liabilities |
$ |
5.3 |
|
|
$ |
5.7 |
|
The following table summarizes the components of lease
expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Operating lease cost |
$ |
11.3 |
|
|
$ |
12.4 |
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
0.6 |
|
|
0.8 |
|
|
|
|
|
|
Interest on lease liabilities
|
0.1 |
|
|
0.1 |
|
|
|
|
|
|
Variable lease cost |
5.6 |
|
|
6.3 |
|
|
|
|
|
|
Short-term lease cost |
9.0 |
|
|
7.7 |
|
|
|
|
|
|
Sublease income |
(1.5) |
|
|
(0.8) |
|
|
|
|
|
|
Net lease cost |
$ |
25.1 |
|
|
$ |
26.5 |
|
|
|
|
|
The following table sets forth cash flow and noncash information
related to leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
2020 |
|
2019 |
|
Cash paid for amounts included in the measurement of lease
liabilities: |
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
$ |
10.4 |
|
|
$ |
13.1 |
|
|
Operating cash flows from finance leases |
|
|
— |
|
|
0.1 |
|
|
Financing cash flows from finance leases
|
|
|
0.9 |
|
|
0.7 |
|
|
Right-of-use assets obtained in exchange for new lease
liabilities: |
|
|
|
|
|
|
Operating leases |
|
|
— |
|
|
— |
|
|
Finance leases
|
|
|
0.3 |
|
|
0.5 |
|
The following table summarizes the maturity of our lease
liabilities by fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
|
|
|
Operating Leases |
|
Finance Leases |
|
2021 (remainder of the year) |
$ |
30.2 |
|
|
$ |
1.8 |
|
|
2022 |
37.1 |
|
|
1.7 |
|
|
2023 |
34.4 |
|
|
1.0 |
|
|
2024 |
22.8 |
|
|
0.7 |
|
|
2025 |
14.8 |
|
|
0.3 |
|
|
2026 and beyond |
20.1 |
|
|
0.1 |
|
|
Total undiscounted minimum lease payments |
$ |
159.4 |
|
|
$ |
5.6 |
|
|
Less: Imputed interest |
11.0 |
|
|
0.3 |
|
|
Lease liabilities |
$ |
148.4 |
|
|
$ |
5.3 |
|
The following table sets forth the weighted average remaining lease
term and discount rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
April 30, 2020 |
|
Weighted average remaining lease term (in years): |
|
|
|
|
Operating leases
|
4.6 |
|
4.7 |
|
Finance leases |
3.2 |
|
3.4 |
|
|
|
|
|
|
Weighted average discount rate: |
|
|
|
|
Operating leases |
3.1 |
% |
|
3.1 |
% |
|
Finance leases
|
2.9 |
% |
|
2.9 |
% |
Note 11: Income Taxes
The effective tax rates for the three months ended July 31,
2020 and 2019, were 24.4 and 25.2 percent, respectively. During the
three months ended July 31, 2020 and 2019, the effective tax
rates varied from the U.S. statutory income tax rate of 21.0
percent primarily due to the impact of state income
taxes.
Within the next 12 months, it is reasonably possible that we could
decrease our unrecognized tax benefits by an additional $2.6,
primarily as a result of expiring statute of limitations
periods.
As of July 31, 2020, the undistributed earnings of our foreign
subsidiaries remain permanently reinvested.
During 2020, the Coronavirus Aid, Relief, and Economic Security Act
was enacted, which included rollbacks of certain provision of the
U.S. Tax Cuts and Jobs Act (the “Tax Act”) . While these specific
rollbacks did not impact us, future legislative actions in response
to the novel coronavirus (“COVID-19”) could further modify
provisions of the Tax Act, and such changes will need to be
analyzed for their respective impacts on our income taxes at that
time.
Note 12: 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, 2020 |
$ |
(50.5) |
|
|
$ |
(185.6) |
|
|
$ |
(146.7) |
|
|
$ |
3.8 |
|
|
$ |
(379.0) |
|
|
Reclassification adjustments |
— |
|
|
3.4 |
|
|
2.2 |
|
|
— |
|
|
5.6 |
|
|
Current period credit (charge) |
12.9 |
|
|
— |
|
|
— |
|
|
1.1 |
|
|
14.0 |
|
|
Income tax benefit (expense) |
— |
|
|
(0.8) |
|
|
(0.5) |
|
|
(0.2) |
|
|
(1.5) |
|
|
Balance at July 31, 2020 |
$ |
(37.6) |
|
|
$ |
(183.0) |
|
|
$ |
(145.0) |
|
|
$ |
4.7 |
|
|
$ |
(360.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
— |
|
|
0.1 |
|
|
1.4 |
|
|
— |
|
|
1.5 |
|
|
Current period credit (charge) |
4.5 |
|
|
(53.0) |
|
|
— |
|
|
0.4 |
|
|
(48.1) |
|
|
Income tax benefit (expense) |
— |
|
|
12.1 |
|
|
(0.3) |
|
|
(0.1) |
|
|
11.7 |
|
|
Balance at July 31, 2019 |
$ |
(31.0) |
|
|
$ |
(81.2) |
|
|
$ |
(108.9) |
|
|
$ |
4.4 |
|
|
$ |
(216.7) |
|
(A)The
reclassification from accumulated other comprehensive income (loss)
to interest expense was related to terminated interest rate
contracts. The current period charge in 2020 relates to losses on
the interest rate contracts entered into in November 2018 and June
2018 that were terminated in 2020. For additional information, see
Note 8: 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 13: 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 July 31, 2020. 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 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. During the third quarter of 2020, CERT filed several
motions seeking judgment in its favor as a matter of law, and the
defendants also filed their own motion. On July 15, 2020, and
August 10, 2020, seven of CERT’s motions were denied, and the
remainder of the pending motions, including the defendants motion
for summary judgement, were rescheduled for hearing on August 25,
2020, due to COVID-19.
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 July 31, 2020, 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 14: Common Shares
The following table sets forth common share
information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
April 30, 2020 |
|
Common shares authorized |
300.0 |
|
|
300.0 |
|
|
Common shares outstanding |
114.1 |
|
|
114.1 |
|
|
Treasury shares |
32.4 |
|
|
32.4 |
|
Repurchase Program:
During the three months ended July 31, 2020 and 2019, we did
not repurchase any common shares under a repurchase plan authorized
by the Board of Directors (the “Board”). Share repurchases during
the three months ended July 31, 2020 and 2019, consisted of
shares repurchased from stock plan recipients in lieu of cash
payments. At July 31, 2020, approximately 3.6 million common
shares remain available for repurchase pursuant to the Board’s
authorizations.
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 months ended July 31, 2020 and 2019.
All comparisons presented are to the corresponding period of the
prior year, unless otherwise noted.
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, e-commerce, and drug stores. All
references to
Dunkin’
in this Quarterly Report on Form 10-Q are deemed to include
the
Dunkin’
and
Dunkin’ Donuts
trademarks. 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.
COVID-19
The continued spread of COVID-19 throughout the United States and
the international community has had, and will continue to have, an
impact on financial markets, economic conditions, and portions of
our business and industry.
During the first quarter of 2021, many state governments began a
phased reopening of their economies. These phased approaches
include limited foodservice offerings, outdoor dining, travel, and
the reopening of certain retail establishments, among others, while
adhering to new guidelines and enhanced safety measures, such as
physical distancing and face mask protocols. However, certain
states have delayed or reversed plans to reopen their economies as
new cases of COVID-19 and related illnesses continue to rise. In
general, consumers continue to stay at home as a precaution due to
the sustained increase in new cases, and as a result, at-home food
consumption and consumer demand remains high.
In June, we commenced a phased approach to reopen our corporate
headquarters in Orrville, Ohio, with increased safety protocols.
However, occupancy levels remain low as the majority of our
office-based employees continue to work remotely where possible,
and we continue to monitor the latest public health and government
guidance related to COVID-19. We have crisis management teams in
place at all of our facilities, which are monitoring the
continually evolving situation and implementing risk mitigation
actions as necessary. To date, there has been minimal disruption in
our supply chain network, including the supply of our ingredients,
packaging, or other sourced materials, although it is possible that
more significant disruptions could occur if the COVID-19 pandemic
continues to impact markets around the world. We also continue to
work closely with our customers and external business partners,
taking additional actions to ensure safety and business continuity
and maximize product availability. We have increased production at
all of our facilities and expanded the availability of appointments
at distribution centers. All of our production operations remain
open and none have experienced significant disruptions or labor
reductions related to COVID-19. Furthermore, we have implemented
measures to allocate order volumes to ensure a consistent supply
across our retail partners during this period of high
demand.
We continued to experience an increase in orders during the first
quarter of 2021, primarily across our U.S. Retail Coffee and U.S.
Retail Consumer Foods segments, in response to the increased
consumer demand for our products related to the elevated at-home
consumption. The continued increase in consumer demand may slow in
the coming months as consumer purchasing behavior may change as a
result of
the
length and severity of the pandemic, duration of physical
distancing requirements, stay-at-home orders, and macroeconomic
implications. However, during the first quarter of 2021, consumer
demand and customer orders for the U.S. Retail Coffee and U.S
Retail Consumer Foods segments remain elevated compared to
historical comparison periods. We have also experienced a decline
in products sold in the away from home channels as a result of
COVID-19, which has negatively impacted our net sales in our Away
From Home operating segment, and we expect COVID-19 to continue to
adversely affect our net sales while government restrictions and
physical distancing measures are in place. However, as certain
states have begun to reopen their economies, our net sales for the
away from home channels has improved compared to the initial months
of the pandemic and relative to our initial expectations. The
impact of COVID-19 remains uncertain and ultimately will be
dictated by the length and severity of the pandemic; the federal,
state, and local government actions taken in response; and the
macroeconomic environment. We will continue to evaluate the nature
and extent to which COVID-19 will impact our business, consolidated
results of operations, financial condition, and
liquidity.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
% Increase (Decrease) |
|
|
|
|
|
|
|
Net sales |
$ |
1,971.8 |
|
|
$ |
1,778.9 |
|
|
11 |
% |
|
|
|
|
|
|
|
Gross profit |
$ |
775.4 |
|
|
$ |
699.6 |
|
|
11 |
|
|
|
|
|
|
|
|
% of net sales |
39.3 |
% |
|
39.3 |
% |
|
|
|
|
|
|
|
|
|
Operating income |
$ |
361.1 |
|
|
$ |
257.6 |
|
|
40 |
|
|
|
|
|
|
|
|
% of net sales |
18.3 |
% |
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
Net income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
237.0 |
|
|
$ |
154.6 |
|
|
53 |
|
|
|
|
|
|
|
|
Net income per common share – assuming dilution |
$ |
2.08 |
|
|
$ |
1.36 |
|
|
53 |
|
|
|
|
|
|
|
|
Adjusted gross profit
(A)
|
$ |
759.2 |
|
|
$ |
670.6 |
|
|
13 |
|
|
|
|
|
|
|
|
% of net sales |
38.5 |
% |
|
37.7 |
% |
|
|
|
|
|
|
|
|
|
Adjusted operating income
(A)
|
$ |
404.5 |
|
|
$ |
290.7 |
|
|
39 |
|
|
|
|
|
|
|
|
% of net sales |
20.5 |
% |
|
16.3 |
% |
|
|
|
|
|
|
|
|
|
Adjusted income:
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
$ |
270.0 |
|
|
$ |
179.7 |
|
|
50 |
|
|
|
|
|
|
|
|
Earnings per share – assuming dilution |
$ |
2.37 |
|
|
$ |
1.58 |
|
|
50 |
|
|
|
|
|
|
|
(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.
Net Sales
Net sales in the first three months of 2021 increased $192.9, or 11
percent, driven by favorable volume/mix across all of our retail
businesses, supported by increased at-home consumption for the U.S.
Retail Coffee and U.S. Retail Consumer Foods segments. The retail
business growth was partially offset by unfavorable volume/mix for
the Away From Home operating segment.
Operating Income
The following table presents the components of operating income as
a percentage of net sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Gross profit |
39.3 |
% |
|
39.3 |
% |
|
|
|
|
|
Selling, distribution, and administrative expenses: |
|
|
|
|
|
|
|
|
Marketing |
6.2 |
% |
|
7.5 |
% |
|
|
|
|
|
Selling |
3.3 |
|
|
3.9 |
|
|
|
|
|
|
Distribution |
3.5 |
|
|
3.6 |
|
|
|
|
|
|
General and administrative |
5.1 |
|
|
6.5 |
|
|
|
|
|
|
Total selling, distribution, and administrative
expenses |
18.1 |
% |
|
21.4 |
% |
|
|
|
|
|
Amortization |
3.0 |
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other special project costs |
— |
|
|
0.2 |
|
|
|
|
|
|
Other operating expense (income) – net |
(0.1) |
|
|
— |
|
|
|
|
|
|
Operating income |
18.3 |
% |
|
14.5 |
% |
|
|
|
|
Amounts may not add due to rounding.
Gross profit increased $75.8, or 11 percent, in the first quarter
of 2021, primarily driven by favorable volume/mix and lower costs,
partially offset by an unfavorable change in derivative gains and
losses as compared to the prior year. Operating income increased
$103.5, or 40 percent, primarily reflecting the increase in
gr