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: JanuaryJuly 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)
___________________________________________________ 
Ohio34-0538550
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
One Strawberry Lane
Orrville,Ohio44667-0280
(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 symbolName of each exchange on which registered
Common shares, no par valueSJMNew 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 ýAccelerated 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 114,037,925114,073,840 common shares outstanding on February 19,August 18, 2020.

Table of Contents
TABLE OF CONTENTS
 
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

1


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 January 31,Nine Months Ended January 31,Three Months Ended July 31,
Dollars in millions, except per share dataDollars in millions, except per share data2020201920202019Dollars in millions, except per share data20202019
Net salesNet sales$1,972.3  $2,011.9  $5,709.0  $5,935.9  Net sales$1,971.8 $1,778.9 
Cost of products soldCost of products sold1,212.3  1,238.1  3,495.4  3,712.6  Cost of products sold1,196.4 1,079.3 
Gross ProfitGross Profit760.0  773.8  2,213.6  2,223.3  Gross Profit775.4 699.6 
Selling, distribution, and administrative expensesSelling, distribution, and administrative expenses358.9  373.1  1,100.9  1,138.8  Selling, distribution, and administrative expenses357.5 380.5 
AmortizationAmortization58.8  59.7  176.4  179.9  Amortization59.6 58.8 
Other intangible assets impairment charges52.4  107.2  52.4  107.2  
Other special project costs (A)
Other special project costs (A)
3.3  18.8  9.9  51.9  
Other special project costs (A)
 3.3 
Other operating expense (income) – netOther operating expense (income) – net(2.4) (2.6) (2.4) (29.5) Other operating expense (income) – net(2.8)(0.6)
Operating IncomeOperating Income289.0  217.6  876.4  775.0  Operating Income361.1 257.6 
Interest expense – netInterest expense – net(45.1) (51.6) (143.6) (158.8) Interest expense – net(46.1)(49.4)
Other income (expense) – netOther income (expense) – net(1.4) (8.8) (4.5) (16.5) Other income (expense) – net(1.4)(1.5)
Income Before Income TaxesIncome Before Income Taxes242.5  157.2  728.3  599.7  Income Before Income Taxes313.6 206.7 
Income tax expenseIncome tax expense55.1  35.8  175.1  156.8  Income tax expense76.6 52.1 
Net IncomeNet Income$187.4  $121.4  $553.2  $442.9  Net Income$237.0 $154.6 
Earnings per common share:Earnings per common share:Earnings per common share:
Net IncomeNet Income$1.64  $1.07  $4.85  $3.89  Net Income$2.08 $1.36 
Net Income – Assuming DilutionNet Income – Assuming Dilution$1.64  $1.07  $4.85  $3.89  Net Income – Assuming Dilution$2.08 $1.36 
(A)Other special project costs includes integration and restructuring costs. For more information, see Note 4:3: 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 January 31,Nine Months Ended January 31, Three Months Ended July 31,
Dollars in millionsDollars in millions2020201920202019Dollars in millions20202019
Net incomeNet income$187.4  $121.4  $553.2  $442.9  Net income$237.0 $154.6 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Foreign currency translation adjustmentsForeign currency translation adjustments(2.5) 1.6  2.6  (10.1) Foreign currency translation adjustments12.9 4.5 
Cash flow hedging derivative activity, net of taxCash flow hedging derivative activity, net of tax(17.4) (37.0) (92.0) (28.8) Cash flow hedging derivative activity, net of tax2.6 (40.8)
Pension and other postretirement benefit plans activity, net of taxPension and other postretirement benefit plans activity, net of tax1.5  (0.5) 4.0  2.7  Pension and other postretirement benefit plans activity, net of tax1.7 1.1 
Available-for-sale securities activity, net of taxAvailable-for-sale securities activity, net of tax0.5  (1.0) 0.9  (0.4) Available-for-sale securities activity, net of tax0.9 0.3 
Total Other Comprehensive Income (Loss)Total Other Comprehensive Income (Loss)(17.9) (36.9) (84.5) (36.6) Total Other Comprehensive Income (Loss)18.1 (34.9)
Comprehensive IncomeComprehensive Income$169.5  $84.5  $468.7  $406.3  Comprehensive Income$255.1 $119.7 
See notes to unaudited condensed consolidated financial statements.
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Table of Contents
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Dollars in millions

Dollars in millions

January 31, 2020April 30, 2019Dollars in millionsJuly 31, 2020April 30, 2020
ASSETSASSETSASSETS
Current AssetsCurrent AssetsCurrent Assets
Cash and cash equivalentsCash and cash equivalents$74.4  $101.3  Cash and cash equivalents$396.6 $391.1 
Trade receivables, less allowance for doubtful accounts477.3  503.8  
Trade receivables – netTrade receivables – net497.6 551.4 
Inventories:Inventories:Inventories:
Finished productsFinished products615.1  590.8  Finished products615.8 563.5 
Raw materialsRaw materials343.7  319.5  Raw materials379.2 331.8 
Total InventoryTotal Inventory958.8  910.3  Total Inventory995.0 895.3 
Other current assetsOther current assets92.2  109.8  Other current assets95.6 134.9 
Total Current AssetsTotal Current Assets1,602.7  1,625.2  Total Current Assets1,984.8 1,972.7 
Property, Plant, and EquipmentProperty, Plant, and EquipmentProperty, Plant, and Equipment
Land and land improvementsLand and land improvements123.7  122.1  Land and land improvements130.9 129.5 
Buildings and fixturesBuildings and fixtures958.2  903.2  Buildings and fixtures986.4 977.9 
Machinery and equipmentMachinery and equipment2,369.0  2,185.0  Machinery and equipment2,434.6 2,398.3 
Construction in progressConstruction in progress194.9  321.8  Construction in progress217.5 232.6 
Gross Property, Plant, and EquipmentGross Property, Plant, and Equipment3,645.8  3,532.1  Gross Property, Plant, and Equipment3,769.4 3,738.3 
Accumulated depreciationAccumulated depreciation(1,734.1) (1,619.7) Accumulated depreciation(1,820.8)(1,768.9)
Total Property, Plant, and EquipmentTotal Property, Plant, and Equipment1,911.7  1,912.4  Total Property, Plant, and Equipment1,948.6 1,969.4 
Other Noncurrent AssetsOther Noncurrent AssetsOther Noncurrent Assets
Operating lease right-of-use assetsOperating lease right-of-use assets168.0  —  Operating lease right-of-use assets138.3 148.4 
GoodwillGoodwill6,312.8  6,310.9  Goodwill6,310.7 6,304.5 
Other intangible assets – netOther intangible assets – net6,491.4  6,718.8  Other intangible assets – net6,371.6 6,429.0 
Other noncurrent assetsOther noncurrent assets149.6  144.0  Other noncurrent assets148.3 146.4 
Total Other Noncurrent AssetsTotal Other Noncurrent Assets13,121.8  13,173.7  Total Other Noncurrent Assets12,968.9 13,028.3 
Total AssetsTotal Assets$16,636.2  $16,711.3  Total Assets$16,902.3 $16,970.4 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
Current LiabilitiesCurrent LiabilitiesCurrent Liabilities
Accounts payableAccounts payable$575.0  $591.0  Accounts payable$780.6 $782.0 
Accrued trade marketing and merchandisingAccrued trade marketing and merchandising198.7  142.7  Accrued trade marketing and merchandising188.3 167.5 
Current portion of long-term debtCurrent portion of long-term debt499.8  798.5  Current portion of long-term debt399.8  
Short-term borrowingsShort-term borrowings310.0  426.0  Short-term borrowings296.0 248.0 
Current operating lease liabilities
Current operating lease liabilities
41.7  —  Current operating lease liabilities35.9 36.5 
Other current liabilitiesOther current liabilities452.2  383.3  Other current liabilities372.5 353.1 
Total Current LiabilitiesTotal Current Liabilities2,077.4  2,341.5  Total Current Liabilities2,073.1 1,587.1 
Noncurrent LiabilitiesNoncurrent LiabilitiesNoncurrent Liabilities
Long-term debt, less current portionLong-term debt, less current portion4,583.3  4,686.3  Long-term debt, less current portion4,672.8 5,373.3 
Deferred income taxesDeferred income taxes1,364.2  1,398.6  Deferred income taxes1,353.9 1,351.6 
Noncurrent operating lease liabilitiesNoncurrent operating lease liabilities133.5  —  Noncurrent operating lease liabilities112.5 120.0 
Other noncurrent liabilitiesOther noncurrent liabilities307.4  314.4  Other noncurrent liabilities344.8 347.5 
Total Noncurrent LiabilitiesTotal Noncurrent Liabilities6,388.4  6,399.3  Total Noncurrent Liabilities6,484.0 7,192.4 
Total LiabilitiesTotal Liabilities8,465.8  8,740.8  Total Liabilities8,557.1 8,779.5 
Shareholders’ EquityShareholders’ EquityShareholders’ Equity
Common sharesCommon shares29.0  28.9  Common shares28.5 29.0 
Additional capitalAdditional capital5,787.2  5,755.8  Additional capital5,795.3 5,794.1 
Retained incomeRetained income2,620.5  2,367.6  Retained income2,882.3 2,746.8 
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(266.3) (181.8) Accumulated other comprehensive income (loss)(360.9)(379.0)
Total Shareholders’ EquityTotal Shareholders’ Equity8,170.4  7,970.5  Total Shareholders’ Equity8,345.2 8,190.9 
Total Liabilities and Shareholders’ EquityTotal Liabilities and Shareholders’ Equity$16,636.2  $16,711.3  Total Liabilities and Shareholders’ Equity$16,902.3 $16,970.4 
See notes to unaudited condensed consolidated financial statements.
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Table of Contents
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Nine Months Ended January 31, Three Months Ended July 31,
Dollars in millionsDollars in millions20202019Dollars in millions20202019
Operating ActivitiesOperating ActivitiesOperating Activities
Net incomeNet income$553.2  $442.9  Net income$237.0 $154.6 
Adjustments to reconcile net income to net cash provided by (used for) operations:Adjustments to reconcile net income to net cash provided by (used for) operations:Adjustments to reconcile net income to net cash provided by (used for) operations:
DepreciationDepreciation156.7  154.1  Depreciation54.1 50.8 
AmortizationAmortization176.4  179.9  Amortization59.6 58.8 
Other intangible assets impairment charges52.4  107.2  
Share-based compensation expenseShare-based compensation expense19.8  16.5  Share-based compensation expense5.9 6.2 
Gain on divestiture—  (27.6) 
Other noncash adjustments – netOther noncash adjustments – net15.9  4.6  Other noncash adjustments – net3.8 0.2 
Defined benefit pension contributions(1.1) (20.1) 
Changes in assets and liabilities, net of effect from acquisition and divestiture:
Changes in assets and liabilities:Changes in assets and liabilities:
Trade receivablesTrade receivables26.7  (51.4) Trade receivables55.1 30.4 
InventoriesInventories(48.0) (18.8) Inventories(98.5)(102.1)
Other current assetsOther current assets7.0  19.5  Other current assets0.3 6.4 
Accounts payableAccounts payable12.3  (11.2) Accounts payable41.1 (61.0)
Accrued liabilitiesAccrued liabilities44.6  73.1  Accrued liabilities7.1 63.6 
Income and other taxesIncome and other taxes(40.9) 10.1  Income and other taxes43.4 21.8 
Other – netOther – net(7.9) (11.8) Other – net0.1 (8.2)
Net Cash Provided by (Used for) Operating ActivitiesNet Cash Provided by (Used for) Operating Activities967.1  867.0  Net Cash Provided by (Used for) Operating Activities409.0 221.5 
Investing ActivitiesInvesting ActivitiesInvesting Activities
Business acquired, net of cash acquired—  (1,903.0) 
Additions to property, plant, and equipmentAdditions to property, plant, and equipment(192.9) (267.2) Additions to property, plant, and equipment(76.6)(73.0)
Proceeds from divestiture—  371.4  
Other – netOther – net15.3  (24.0) Other – net27.4 20.9 
Net Cash Provided by (Used for) Investing ActivitiesNet Cash Provided by (Used for) Investing Activities(177.6) (1,822.8) Net Cash Provided by (Used for) Investing Activities(49.2)(52.1)
Financing ActivitiesFinancing ActivitiesFinancing Activities
Short-term borrowings (repayments) – netShort-term borrowings (repayments) – net(122.6) 360.0  Short-term borrowings (repayments) – net47.8 (130.0)
Proceeds from long-term debt—  1,500.0  
Repayments of long-term debtRepayments of long-term debt(400.0) (600.0) Repayments of long-term debt(300.0) 
Quarterly dividends paidQuarterly dividends paid(296.7) (281.4) Quarterly dividends paid(100.1)(96.5)
Purchase of treasury sharesPurchase of treasury shares(4.3) (5.2) Purchase of treasury shares(4.6)(2.9)
Proceeds from stock option exercisesProceeds from stock option exercises7.0  —  Proceeds from stock option exercises 7.0 
Other – netOther – net0.5  0.2  Other – net(0.4)(0.2)
Net Cash Provided by (Used for) Financing ActivitiesNet Cash Provided by (Used for) Financing Activities(816.1) 973.6  Net Cash Provided by (Used for) Financing Activities(357.3)(222.6)
Effect of exchange rate changes on cashEffect of exchange rate changes on cash(0.3) (3.9) Effect of exchange rate changes on cash3.0 0.7 
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents(26.9) 13.9  Net increase (decrease) in cash and cash equivalents5.5 (52.5)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period101.3  192.6  Cash and cash equivalents at beginning of period391.1 101.3 
Cash and Cash Equivalents at End of PeriodCash and Cash Equivalents at End of Period$74.4  $206.5  Cash and Cash Equivalents at End of Period$396.6 $48.8 
( ) Denotes use of cash
See notes to unaudited condensed consolidated financial statements.
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Table of Contents
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY
(Unaudited)
Three months ended July 31, 2020
Dollars in millionsDollars in millionsCommon
Shares
Outstanding
Common SharesAdditional CapitalRetained IncomeAccumulated Other Comprehensive Income (Loss)Total Shareholders’ EquityDollars in millionsCommon
Shares
Outstanding
Common SharesAdditional CapitalRetained IncomeAccumulated Other Comprehensive Income (Loss)Total Shareholders’ Equity
Balance at May 1, 2019113,742,296  $28.9  $5,755.8  $2,367.6  $(181.8) $7,970.5  
Balance at May 1, 2020Balance at May 1, 2020114,072,726 $29.0 $5,794.1 $2,746.8 $(379.0)$8,190.9 
Net incomeNet income154.6  154.6  Net income237.0 237.0 
Other comprehensive income (loss)Other comprehensive income (loss)(34.9) (34.9) Other comprehensive income (loss)18.1 18.1 
Comprehensive incomeComprehensive income119.7  Comprehensive income255.1 
Purchase of treasury sharesPurchase of treasury shares(22,793) —  (2.7) (0.2) (2.9) Purchase of treasury shares(42,194) (5.5)0.9 (4.6)
Stock plansStock plans330,289  0.1  20.4  20.5  Stock plans56,910  6.2 6.2 
Cash dividends declared, $0.88 per common share(100.1) (100.1) 
Cash dividends declared, $0.90 per common shareCash dividends declared, $0.90 per common share(102.4)(102.4)
OtherOther—  —  Other(0.5)0.5   
Balance at July 31, 2019114,049,792  $29.0  $5,773.5  $2,421.9  $(216.7) $8,007.7  
Net income211.2  211.2  
Other comprehensive income (loss)(31.7) (31.7) 
Comprehensive income179.5  
Purchase of treasury shares(4,930) —  (0.6) —  (0.6) 
Stock plans14,882  —  8.8  8.8  
Cash dividends declared, $0.88 per common share(100.1) (100.1) 
Other—  —  
Balance at October 31, 2019114,059,744  $29.0  $5,781.7  $2,533.0  $(248.4) $8,095.3  
Net income187.4  187.4  
Other comprehensive income (loss)(17.9) (17.9) 
Comprehensive income169.5  
Purchase of treasury shares(7,180) —  (1.0) 0.2  (0.8) 
Stock plans(11,251) —  6.5  6.5  
Cash dividends declared, $0.88 per common share(100.1) (100.1) 
Other—  —  
Balance at January 31, 2020114,041,313  $29.0  $5,787.2  $2,620.5  $(266.3) $8,170.4  
Balance at July 31, 2020Balance at July 31, 2020114,087,442 $28.5 $5,795.3 $2,882.3 $(360.9)$8,345.2 

Three months ended July 31, 2019
Dollars in millionsDollars in millionsCommon
Shares
Outstanding
Common SharesAdditional CapitalRetained IncomeAccumulated Other Comprehensive Income (Loss)Total Shareholders’ EquityDollars in millionsCommon
Shares
Outstanding
Common SharesAdditional CapitalRetained IncomeAccumulated Other Comprehensive Income (Loss)Total Shareholders’ Equity
Balance at May 1, 2018113,572,840  $28.9  $5,739.7  $2,239.2  $(116.7) $7,891.1  
Balance at May 1, 2019Balance at May 1, 2019113,742,296 $28.9 $5,755.8 $2,367.6 $(181.8)$7,970.5 
Net incomeNet income133.0  133.0  Net income154.6 154.6 
Other comprehensive income (loss)Other comprehensive income (loss)(2.1) (2.1) Other comprehensive income (loss)(34.9)(34.9)
Comprehensive incomeComprehensive income130.9  Comprehensive income119.7 
Purchase of treasury sharesPurchase of treasury shares(43,913) —  (4.6) (0.1) (4.7) Purchase of treasury shares(22,793) (2.7)(0.2)(2.9)
Stock plansStock plans243,521  —  10.0  10.0  Stock plans330,289 0.1 20.4 20.5 
Cash dividends declared, $0.85 per common share(96.5) (96.5) 
Cash dividends declared, $0.88 per common shareCash dividends declared, $0.88 per common share(100.1)(100.1)
OtherOther—  —  Other  
Balance at July 31, 2018113,772,448  $28.9  $5,745.1  $2,275.6  $(118.8) $7,930.8  
Net income188.5  188.5  
Other comprehensive income (loss)2.4  2.4  
Comprehensive income190.9  
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, 2018113,760,080  $28.9  $5,749.9  $2,367.6  $(116.4) $8,030.0  
Net income121.4  121.4  
Other comprehensive income (loss)(36.9) (36.9) 
Comprehensive income84.5  
Purchase of treasury shares(1,746) —  (0.2) —  (0.2) 
Stock plans122  —  3.7  3.7  
Cash dividends declared, $0.85 per common share(96.4) (96.4) 
Balance at July 31, 2019Balance at July 31, 2019114,049,792 $29.0 $5,773.5 $2,421.9 $(216.7)$8,007.7 
Balance at January 31, 2019113,758,456  $28.9  $5,753.4  $2,392.6  $(153.3) $8,021.6  
See notes to unaudited condensed consolidated financial statements.
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Table of Contents
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 ninethree months ended JanuaryJuly 31, 2020, are not necessarily indicative of the results that may be expected for the year ending April 30, 2020.2021. 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, 2019.2020.
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 2018-15, 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 nine months ended January 31, 2020, we capitalized implementation costs related to third-party cloud computing services of $3.4, 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 impacted2020. It did not impact our interim financial statements beginning May 1, 2019, the amendments in this rule diddisclosures and we do not haveanticipate a material impact on our other financial statements andannual 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.
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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 13: Leases.
Note 3: Acquisition
On May 14, 2018, we acquired the equity 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 9: 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 $392.9 remains deductible at January 31, 2020. 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 could result in future impairment charges. For more information, see Note 8: Goodwill and Other Intangible Assets.
Note 4:3: 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 StatementsStatement of Consolidated Income. The obligation related to employee separation costs is included in other current liabilities in the Condensed Consolidated Balance Sheets.
Integration Costs: TotalAs 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 Ainsworth are anticipated to be approximately $50.0, the majority of which are expected to be cash$4.7 were noncash 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 January 31,Nine Months Ended January 31,Total Costs Incurred to Date at January 31, 2020
2020201920202019
Employee-related costs$0.3  $5.4  $1.7  $13.2  $17.2  
Other transition and termination costs3.0  2.3  8.2  10.7  24.8  
Total integration costs$3.3  $7.7  $9.9  $23.9  $42.0  
Noncash charges primarily consisted of $0.1 and $1.0 were included in the integrationaccelerated depreciation. While we did 0t incur any costs incurred during the three months ended JanuaryJuly 31, 2020, and 2019, respectively, and $0.5 and $2.8we incurred integration costs of $3.3 during the ninethree months ended JanuaryJuly 31, 20202019, primarily consisting of other transition and 2019, respectively. Cumulative noncash charges incurred to date were $4.6 and primarily consisted of accelerated depreciation.termination costs. The obligation related to severance costs and retention bonuses was $0.3$0.4 and $1.6$0.5 at JanuaryJuly 31, 2020, and April 30, 2019,2020, respectively.
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Restructuring Costs: We completed the restructuring activities associated with our organization optimization program as of April 30, 2019, and as a result, we did 0t incur any related costs during the three and nine months ended January 31, 2020. We incurred restructuring costs of $11.1 and $28.0 during the three and nine months ended January 31, 2019, 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 $1.2 and $2.2 were incurred during the three and nine months ended January 31, 2019, respectively. Noncash charges primarily consisted of accelerated depreciation. The obligation related to severance costs and retention bonuses was fully satisfied as of January 31, 2020, and was $0.8 at April 30, 2019.
Note 5: Divestiture
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. The transaction did not include our baking business in Canada.
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. During 2019, we recognized a pre-tax gain of $27.7 related to this transaction, of which $1.0 was recognized during the third quarter associated with the working capital adjustment that was finalized during the fourth quarter. The gain was included in other operating expense (income) – net within the Condensed Statement of Consolidated Income.
Note 6:4: Reportable Segments
We operate in 1 industry: the manufacturing and marketing of food and beverage products. We have 43 reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods, andFoods. Effective during the first quarter of 2021, the presentation of International and Away From Home.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 RayTM® Nutrish®, Meow Mix®, Milk-Bone®, Natural Balance9Lives®, Kibbles ’n Bits®, 9Lives Natural Balance®,Nature’s RecipePup-Peroni®, and Pup-PeroniNature’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. The International and Away From Home segment comprisesincludes 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, schoolshospitality, offices, K-12, colleges and universities, health care operators)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.
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Three Months Ended January 31,Nine Months Ended January 31, Three Months Ended July 31,
2020201920202019 20202019
Net sales:Net sales:Net sales:
U.S. Retail Pet FoodsU.S. Retail Pet Foods$721.9  $759.0  $2,101.7  $2,158.3  U.S. Retail Pet Foods$692.6 $669.9 
U.S. Retail CoffeeU.S. Retail Coffee558.8  561.6  1,567.9  1,596.0  U.S. Retail Coffee570.9 465.7 
U.S. Retail Consumer FoodsU.S. Retail Consumer Foods422.9  422.7  1,251.2  1,367.9  U.S. Retail Consumer Foods489.2 402.2 
International and Away From HomeInternational and Away From Home268.7  268.6  788.2  813.7  International and Away From Home219.1 241.1 
Total net salesTotal net sales$1,972.3  $2,011.9  $5,709.0  $5,935.9  Total net sales$1,971.8 $1,778.9 
Segment profit:Segment profit:Segment profit:
U.S. Retail Pet FoodsU.S. Retail Pet Foods$146.0  $147.9  $403.1  $372.2  U.S. Retail Pet Foods$125.3 $120.1 
U.S. Retail CoffeeU.S. Retail Coffee189.5  183.7  500.9  505.8  U.S. Retail Coffee182.6 128.9 
U.S. Retail Consumer FoodsU.S. Retail Consumer Foods84.2  95.9  256.6  327.5  U.S. Retail Consumer Foods131.5 81.0 
International and Away From HomeInternational and Away From Home49.0  52.5  131.7  152.6  International and Away From Home30.9 32.3 
Total segment profitTotal segment profit$468.7  $480.0  $1,292.3  $1,358.1  Total segment profit$470.3 $362.3 
AmortizationAmortization(58.8) (59.7) (176.4) (179.9) Amortization(59.6)(58.8)
Other intangible assets impairment charges(52.4) (107.2) (52.4) (107.2) 
Interest expense – netInterest expense – net(45.1) (51.6) (143.6) (158.8) Interest expense – net(46.1)(49.4)
Unallocated derivative gains (losses)Unallocated derivative gains (losses)7.7  (2.9) 37.6  (25.0) Unallocated derivative gains (losses)16.2 29.0 
Other special project costs (A)
Other special project costs (A)
(3.3) (18.8) (9.9) (51.9) 
Other special project costs (A)
 (3.3)
Corporate administrative expensesCorporate administrative expenses(72.9) (73.8) (214.8) (219.1) Corporate administrative expenses(65.8)(71.6)
Other income (expense) – netOther income (expense) – net(1.4) (8.8) (4.5) (16.5) Other income (expense) – net(1.4)(1.5)
Income before income taxesIncome before income taxes$242.5  $157.2  $728.3  $599.7  Income before income taxes$313.6 $206.7 
(A)Other special project costs includes integration and restructuring costs. For more information, see Note 4:3: Integration and Restructuring Costs.

The following table presents certain geographical information.
Three Months Ended January 31,Nine Months Ended January 31,
2020201920202019
Net sales:
United States$1,837.6  $1,880.6  $5,311.1  $5,526.1  
International:
Canada$108.7  $106.7  $318.9  $319.2  
All other international26.0  24.6  79.0  90.6  
Total international$134.7  $131.3  $397.9  $409.8  
Total net sales$1,972.3  $2,011.9  $5,709.0  $5,935.9  

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The following table presents certain geographical information.
Three Months Ended July 31,
20202019
Net sales:
United States$1,829.7 $1,657.6 
International:
Canada$108.2 $96.8 
All other international33.9 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 January 31,Nine Months Ended January 31,Three Months Ended July 31,
2020201920202019
Primary Reportable Segment (A)
20202019
Primary Reportable Segment (A)
CoffeeCoffee$650.7  $653.5  $1,824.5  $1,867.3  U.S. Retail CoffeeCoffee$635.7 $546.7 U.S. Retail Coffee
Dog foodDog food300.8  337.5  899.0  980.9  U.S. Retail Pet FoodsDog food277.7 295.6 U.S. Retail Pet Foods
Cat foodCat food223.9  218.9  633.6  615.2  U.S. Retail Pet FoodsCat food220.0 195.9 U.S. Retail Pet Foods
Pet snacksPet snacks214.6  217.9  617.8  607.6  U.S. Retail Pet FoodsPet snacks212.8 193.2 U.S. Retail Pet Foods
Peanut butterPeanut butter180.0  188.5  533.3  574.6  U.S. Retail Consumer FoodsPeanut butter199.9 177.9 U.S. Retail Consumer Foods
Fruit spreadsFruit spreads88.3  86.0  264.0  254.6  U.S. Retail Consumer FoodsFruit spreads104.3 89.2 U.S. Retail Consumer Foods
Frozen handheldFrozen handheld82.6  67.3  247.5  210.5  U.S. Retail Consumer FoodsFrozen handheld95.5 71.5 U.S. Retail Consumer Foods
Shortening and oilsShortening and oils68.9  74.8  192.2  207.0  U.S. Retail Consumer FoodsShortening and oils77.3 51.5 U.S. Retail Consumer Foods
Juices and beveragesJuices and beverages33.6 31.2 U.S. Retail Consumer Foods
Portion controlPortion control42.0  40.1  123.9  122.6  International and Away From HomePortion control24.0 39.4 
Other (B)
Juices and beverages30.4  30.6  94.0  96.7  U.S. Retail Consumer Foods
Baking mixes and ingredientsBaking mixes and ingredients19.6  21.9  59.3  164.6  
International and Away From Home (B)
Baking mixes and ingredients23.2 13.7 
Other (B)
OtherOther70.5  74.9  219.9  234.3  International and Away From HomeOther67.8 73.1 
Other (B)
Total net salesTotal net sales$1,972.3  $2,011.9  $5,709.0  $5,935.9  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)DuringRepresents the threecombined International and nine months ended January 31, 2019, 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.Away From Home operating segments.
Note 7:5: 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 January 31,Nine Months Ended January 31, Three Months Ended July 31,
2020201920202019 20202019
Net incomeNet income$187.4  $121.4  $553.2  $442.9  Net income$237.0 $154.6 
Less: Net income allocated to participating securitiesLess: Net income allocated to participating securities1.1  0.6  3.2  2.3  Less: Net income allocated to participating securities1.1 0.8 
Net income allocated to common stockholdersNet income allocated to common stockholders$186.3  $120.8  $550.0  $440.6  Net income allocated to common stockholders$235.9 $153.8 
Weighted-average common shares outstandingWeighted-average common shares outstanding113.4  113.2  113.3  113.1  Weighted-average common shares outstanding113.5 113.2 
Add: Dilutive effect of stock optionsAdd: Dilutive effect of stock options—  —  —  —  Add: Dilutive effect of stock options 0.1 
Weighted-average common shares outstanding – assuming dilutionWeighted-average common shares outstanding – assuming dilution113.4  113.2  113.3  113.1  Weighted-average common shares outstanding – assuming dilution113.5 113.3 
Net income per common shareNet income per common share$1.64  $1.07  $4.85  $3.89  Net income per common share$2.08 $1.36 
Net income per common share – assuming dilutionNet income per common share – assuming dilution$1.64  $1.07  $4.85  $3.89  Net income per common share – assuming dilution$2.08 $1.36 

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Note 8: Goodwill and Other Intangible Assets

The following table summarizes our other intangible assets and related accumulated amortization and impairment charges including foreign currency exchange adjustments.
January 31, 2020April 30, 2019
Acquisition CostAccumulated Amortization/Impairment Charges/Foreign Currency ExchangeNetAcquisition CostAccumulated Amortization/Impairment Charges/Foreign Currency ExchangeNet
Finite-lived intangible assets subject to
amortization:
Customer and contractual relationships$4,471.1  $1,302.8  $3,168.3  $4,471.1  $1,156.8  $3,314.3  
Patents and technology168.5  135.6  32.9  168.5  127.4  41.1  
Trademarks502.0  188.0  314.0  499.9  166.9  333.0  
Total intangible assets subject to amortization$5,141.6  $1,626.4  $3,515.2  $5,139.5  $1,451.1  $3,688.4  
Indefinite-lived intangible assets not subject to
amortization:
Trademarks$3,319.0  $342.8  $2,976.2  $3,321.1  $290.7  $3,030.4  
Total other intangible assets$8,460.6  $1,969.2  $6,491.4  $8,460.6  $1,741.8  $6,718.8  
We review goodwill and other indefinite-lived intangible assets at least annually on February 1 for impairment, and more often if indicators of impairment exist.
During the third quarter of 2020, we began our annual planning cycle, which was not complete as of January 31, 2020; however, certain brand-level decisions were made during the quarter that we evaluated to determine whether the carrying value of certain indefinite-lived intangible assets more likely than not exceeded fair value. As a result, we recognized an impairment charge of $52.4 related to the Natural Balance brand within the U.S. Retail Pet Foods segment due to a decline in current year and long-term net sales expectations and the royalty rate used in the interim analysis, primarily driven by the market environment and re-positioning of this brand within the Pet Foods brand portfolio. This charge was included as a noncash charge in our Condensed Statement of Consolidated Income. Additionally, we reassessed the long-term strategic expectations for the Natural Balance brand and will reclassify this brand as a finite-lived intangible asset as of February 1, 2020, resulting in annual amortization expense of $4.5.
As of January 31, 2020, there were no other indicators of impairment, and as a result, we do not believe that our reporting units or any of our remaining indefinite-lived intangible assets are more likely than not impaired. However, 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 could result in future impairment charges. The carrying values of the goodwill and indefinite-lived intangible assets within the U.S. Retail Pet Foods segment were $2.4 billion and $1.4 billion, respectively, as of January 31, 2020.
During the third quarter of 2019, we recognized a noncash impairment charge of $107.2 related to certain indefinite-lived intangible assets within the U.S. Retail Pet Foods segment.
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Note 9:6: Debt and Financing Arrangements
Long-term debt consistsThe following table summarizes the components of the following:our long-term debt.
January 31, 2020April 30, 2019 July 31, 2020April 30, 2020
Principal
Outstanding
Carrying
Amount (A)
Principal
Outstanding
Carrying
Amount (A)
Principal
Outstanding
Carrying
Amount (A)
Principal
Outstanding
Carrying
Amount (A)
2.20% Senior Notes due December 6, 2019$—  $—  $300.0  $299.5  
2.50% Senior Notes due March 15, 2020500.0  499.8  500.0  499.0  
3.50% Senior Notes due October 15, 20213.50% Senior Notes due October 15, 2021750.0  762.9  750.0  768.4  3.50% Senior Notes due October 15, 2021$750.0 $759.2 $750.0 $761.1 
3.00% Senior Notes due March 15, 20223.00% Senior Notes due March 15, 2022400.0  398.5  400.0  398.0  3.00% Senior Notes due March 15, 2022400.0 398.9 400.0 398.7 
3.50% Senior Notes due March 15, 20253.50% Senior Notes due March 15, 20251,000.0  995.8  1,000.0  995.2  3.50% Senior Notes due March 15, 20251,000.0 996.2 1,000.0 996.0 
3.38% Senior Notes due December 15, 20273.38% Senior Notes due December 15, 2027500.0  496.6  500.0  496.2  3.38% Senior Notes due December 15, 2027500.0 496.8 500.0 496.7 
2.38 % Senior Notes due March 15, 20302.38 % Senior Notes due March 15, 2030500.0 495.3 500.0 495.2 
4.25% Senior Notes due March 15, 20354.25% Senior Notes due March 15, 2035650.0  643.8  650.0  643.5  4.25% Senior Notes due March 15, 2035650.0 644.0 650.0 643.9 
4.38% Senior Notes due March 15, 20454.38% Senior Notes due March 15, 2045600.0  586.4  600.0  586.0  4.38% Senior Notes due March 15, 2045600.0 586.7 600.0 586.5 
3.55% Senior Notes due March 15, 20503.55% Senior Notes due March 15, 2050300.0 295.7 300.0 295.7 
Term Loan Credit Agreement due May 14, 2021Term Loan Credit Agreement due May 14, 2021700.0  699.3  800.0  799.0  Term Loan Credit Agreement due May 14, 2021400.0 399.8 700.0 699.5 
Total long-term debtTotal long-term debt$5,100.0  $5,083.1  $5,500.0  $5,484.8  Total long-term debt$5,100.0 $5,072.6 $5,400.0 $5,373.3 
Current portion of long-term debtCurrent portion of long-term debt500.0  499.8  800.0  798.5  Current portion of long-term debt400.0 399.8   
Total long-term debt, less current portionTotal long-term debt, less current portion$4,600.0  $4,583.3  $4,700.0  $4,686.3  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, 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 January 31, 2020, unrealized losses of $168.9 were deferred in accumulated other comprehensive income (loss) for these derivative instruments. For additional information, see Note 11: Derivative Financial Instruments.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, as discussed in Note 3: Acquisition.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 areis 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 JanuaryJuly 31, 2020, we have prepaid $800.0$1.1 billion on the Term Loan to date, including $100.0$300.0 in 2020.the first quarter of 2021. The interest rate on the Term Loan at JanuaryJuly 31, 2020, was 2.450.97 percent. In November 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 January 31, 2020, 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 0t have a balance outstanding under the revolving credit facility at JanuaryJuly 31, 2020, or April 30, 2019.2020.
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 JanuaryJuly 31, 2020, and April 30, 2019,2020, we had $310.0$296.0 and $426.0$248.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 1.790.25 percent and 2.750.40 percent, respectively.
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Interest paid totaled $18.3$10.2 and $24.4$21.6 for the three months ended January 31, 2020 and 2019, respectively, and $118.3 and $131.8, for the nine months ended JanuaryJuly 31, 2020 and 2019, respectively. This differs from interest expense due to the timing of interest payments, effect of interest rate contracts, 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.
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Note 10:7: 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 January 31,
 Defined Benefit Pension PlansOther Postretirement Benefits
 2020201920202019
Service cost$0.4  $0.6  $0.4  $0.5  
Interest cost5.2  5.9  0.5  0.6  
Expected return on plan assets(6.0) (6.8) —  —  
Amortization of net actuarial loss (gain)2.0  2.0  (0.1) (0.1) 
Amortization of prior service cost (credit)0.2  0.2  (0.2) (0.4) 
Curtailment loss (gain)—  0.3  —  —  
Settlement loss (gain)—  4.2  —  —  
Net periodic benefit cost$1.8  $6.4  $0.6  $0.6  

Nine Months Ended January 31, Three Months Ended July 31,
Defined Benefit Pension PlansOther Postretirement Benefits Defined Benefit Pension PlansOther Postretirement Benefits
2020201920202019 2020201920202019
Service costService cost$1.2  $1.7  $1.3  $1.4  Service cost$0.5 $0.4 $0.5 $0.5 
Interest costInterest cost15.7  17.6  1.7  1.8  Interest cost4.6 5.2 0.4 0.6 
Expected return on plan assetsExpected return on plan assets(18.1) (20.3) —  —  Expected return on plan assets(6.1)(6.0)  
Amortization of net actuarial loss (gain)Amortization of net actuarial loss (gain)6.0  6.1  (0.2) (0.4) Amortization of net actuarial loss (gain)3.3 2.0  (0.1)
Amortization of prior service cost (credit)Amortization of prior service cost (credit)0.6  0.7  (0.8) (1.0) Amortization of prior service cost (credit)0.2 0.2 (0.3)(0.3)
Curtailment loss (gain)—  0.3  —  —  
Settlement loss (gain)—  4.2  —  —  
Net periodic benefit costNet periodic benefit cost$5.4  $10.3  $2.0  $1.8  Net periodic benefit cost$2.5 $1.8 $0.6 $0.7 

Note 11:8: 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.
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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.
We entered into
In 2020, we terminated interest rate contracts in November 2018concurrent with the pricing of the Senior Notes due March 15, 2030, and June 2018, with notional values of $300.0March 15, 2050. They were designated as cash flow hedges and $500.0, respectively,were used to manage our exposure to interest rate volatility associated with the anticipated debt financingfinancing. The termination resulted in 2020. These interest rate contracts are designated as cash flow hedges,a pre-tax loss of $239.8, which was deferred and included as a result, unrealized lossescomponent of $168.9 were deferred in accumulated other comprehensive income (loss) at January 31, 2020.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-termlong-
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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 $39.2$43.3 of the gain, of which $2.1$2.2 and $6.2$2.0 was recognized during the three and nine months ended JanuaryJuly 31, 2020 and 2019, respectively. The remaining gain will be recognized as follows: $1.9$6.2 through the remainder of 2020, $8.4 in 2021 and $4.0 in 2022.
The following tables set forth the gross fair value amounts of derivative instruments recognized in the Condensed Consolidated Balance Sheets.
January 31, 2020 July 31, 2020
Other
Current
Assets
Other
Current
Liabilities
Other
Noncurrent
Assets
Other
Noncurrent
Liabilities
Other
Current
Assets
Other
Current
Liabilities
Other
Noncurrent
Assets
Other
Noncurrent
Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts$—  $168.9  $—  $—  
Total derivatives designated as hedging instruments$—  $168.9  $—  $—  
Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:
Commodity contractsCommodity contracts$8.6  $16.4  $—  $—  Commodity contracts$20.4 $17.6 $0.1 $ 
Foreign currency exchange contractsForeign currency exchange contracts0.4  0.1  —  —  Foreign currency exchange contracts0.5 1.3   
Total derivatives not designated as hedging instruments$9.0  $16.5  $—  $—  
Total derivative instrumentsTotal derivative instruments$9.0  $185.4  $—  $—  Total derivative instruments$20.9 $18.9 $0.1 $ 

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April 30, 2019 April 30, 2020
Other
Current
Assets
Other
Current
Liabilities
Other
Noncurrent
Assets
Other
Noncurrent
Liabilities
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:Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:
Commodity contractsCommodity contracts$4.8  $25.8  $—  $—  Commodity contracts$14.7 $33.2 $ $ 
Foreign currency exchange contractsForeign currency exchange contracts1.4  0.2  —  —  Foreign currency exchange contracts2.4 0.1   
Total derivatives not designated as hedging instruments$6.2  $26.0  $—  $—  
Total derivative instrumentsTotal derivative instruments$6.2  $75.1  $—  $—  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 JanuaryJuly 31, 2020, and April 30, 2019,2020, we maintained cash margin account balances of $25.7$15.6 and $40.7,$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 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 $45.1$46.1 and $51.6$49.4 for the three months ended January 31, 2020 and 2019, respectively, and was $143.6 and $158.8 for the nine months ended JanuaryJuly 31, 2020 and 2019, respectively. The following table presents information on the pre-tax gains and losses recognized on terminated interest rate contracts that were designated as cash flow hedges.
Three Months Ended January 31,Nine Months Ended January 31,Three Months Ended July 31,
202020192020201920202019
Gains (losses) recognized in other comprehensive income (loss)Gains (losses) recognized in other comprehensive income (loss)$(22.7) $(48.1) $(119.8) $(37.6) Gains (losses) recognized in other comprehensive income (loss)$ $(53.0)
Less: Gains (losses) reclassified from accumulated other
comprehensive income (loss) to interest expense
Less: Gains (losses) reclassified from accumulated other
comprehensive income (loss) to interest expense
(0.1) (0.1) (0.3) (0.3) Less: Gains (losses) reclassified from accumulated other comprehensive income (loss)
to interest expense
(3.4)(0.1)
Change in accumulated other comprehensive income (loss)Change in accumulated other comprehensive income (loss)$(22.6) $(48.0) $(119.5) $(37.3) Change in accumulated other comprehensive income (loss)$3.4 $(52.9)
Included as a component of accumulated other comprehensive income (loss) at JanuaryJuly 31, 2020, and April 30, 2019,2020, were deferred net pre-tax losses of $172.0$237.7 and $52.5,$241.1, respectively, related to the active and terminated interest rate contracts. The related net tax benefit recognized in accumulated other comprehensive income (loss) at JanuaryJuly 31, 2020, and April 30, 2019,2020, was $39.6$54.7 and $12.1,$55.5, respectively. Approximately $8.9$13.9 of the net pre-tax loss will be recognized over the next 12 months related to the active and terminated interest rate contracts.
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The following table presents the net gains and losses recognized in cost of products sold on derivatives not designated as hedging instruments.
 Three Months Ended January 31,Nine Months Ended January 31,
 2020201920202019
Gains (losses) on commodity contracts$(7.3) $(25.8) $(4.8) $(55.9) 
Gains (losses) on foreign currency exchange contracts0.3  0.2  (0.8) 1.7  
Total gains (losses) recognized in cost of products sold$(7.0) $(25.6) $(5.6) $(54.2) 
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 Three Months Ended July 31,
 20202019
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 January 31,Nine Months Ended January 31,
2020201920202019
Net gains (losses) on mark-to-market valuation of
unallocated derivative positions
$(7.0) $(25.6) $(5.6) $(54.2) 
Less: Net gains (losses) on derivative positions
reclassified to segment operating profit
(14.7) (22.7) (43.2) (29.2) 
Unallocated derivative gains (losses)$7.7  $(2.9) $37.6  $(25.0) 
 Three Months Ended July 31,
20202019
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 $14.9$16.7 and $52.5$32.9 at JanuaryJuly 31, 2020, and April 30, 2019,2020, respectively.
The following table presents the gross notional value of outstanding derivative contracts.
January 31, 2020April 30, 2019July 31, 2020April 30, 2020
Commodity contractsCommodity contracts$808.9  $544.8  Commodity contracts$679.5 $890.1 
Foreign currency exchange contractsForeign currency exchange contracts88.1  144.9  Foreign currency exchange contracts74.3 65.6 
Interest rate contracts800.0  800.0  

Note 12:9: 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.
January 31, 2020April 30, 2019 July 31, 2020April 30, 2020
Carrying
Amount
Fair ValueCarrying
Amount
Fair Value Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Marketable securities and other investmentsMarketable securities and other investments$40.7  $40.7  $40.9  $40.9  Marketable securities and other investments$39.3 $39.3 $38.6 $38.6 
Derivative financial instruments – netDerivative financial instruments – net(176.4) (176.4) (68.9) (68.9) Derivative financial instruments – net2.1 2.1 (16.2)(16.2)
Total long-term debtTotal long-term debt(5,083.1) (5,386.8) (5,484.8) (5,504.0) 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.
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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 January 31, 2020Quoted 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)
Marketable securities and other investments: (A)
Marketable securities and other investments: (A)
Equity mutual fundsEquity mutual funds$9.6  $—  $—  $9.6  Equity mutual funds$9.3 $ $ $9.3 
Municipal obligationsMunicipal obligations—  31.1  —  31.1  Municipal obligations 24.6  24.6 
Money market fundsMoney market funds—  —  —  —  Money market funds5.4   5.4 
Derivative financial instruments: (B)
Derivative financial instruments: (B)
Derivative financial instruments: (B)
Commodity contracts – netCommodity contracts – net(7.5) (0.3) —  (7.8) Commodity contracts – net2.4 0.5  2.9 
Foreign currency exchange contracts – netForeign currency exchange contracts – net—  0.3  —  0.3  Foreign currency exchange contracts – net(0.2)(0.6) (0.8)
Interest rate contracts—  (168.9) —  (168.9) 
Total long-term debt (C)
Total long-term debt (C)
(4,662.4) (724.4) —  (5,386.8) 
Total long-term debt (C)
(5,255.6)(404.1) (5,659.7)
Total financial instruments measured at fair valueTotal financial instruments measured at fair value$(4,660.3) $(862.2) $—  $(5,522.5) Total financial instruments measured at fair value$(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, 2019
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)
Marketable securities and other investments: (A)
Marketable securities and other investments: (A)
Equity mutual fundsEquity mutual funds$8.7  $—  $—  $8.7  Equity mutual funds$8.7 $ $ $8.7 
Municipal obligationsMunicipal obligations—  31.7  —  31.7  Municipal obligations 24.2  24.2 
Money market fundsMoney market funds0.5  —  —  0.5  Money market funds5.7   5.7 
Derivative financial instruments: (B)
Derivative financial instruments: (B)
Derivative financial instruments: (B)
Commodity contracts – netCommodity contracts – net(20.7) (0.3) —  (21.0) Commodity contracts – net(18.3)(0.2) (18.5)
Foreign currency exchange contracts – netForeign currency exchange contracts – net(0.1) 1.3  —  1.2  Foreign currency exchange contracts – net0.2 2.1  2.3 
Interest rate contracts—  (49.1) —  (49.1) 
Total long-term debt (C)
Total long-term debt (C)
(4,646.6) (857.4) —  (5,504.0) 
Total long-term debt (C)
(5,032.0)(708.6) (5,740.6)
Total financial instruments measured at fair valueTotal financial instruments measured at fair value$(4,658.2) $(873.8) $—  $(5,532.0) Total financial instruments measured at fair value$(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 JanuaryJuly 31, 2020, our municipal obligations are scheduled to mature as follows: $0.3 in 2020, $1.0 in 2021, $1.5$1.6 in 2022, $1.0$3.5 in 2023,2024, and the remaining $27.3$18.5 in 20242025 and beyond. We do 0t 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. 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 11:8: 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 9:6: Debt and Financing Arrangements.
During the third quarter of 2020 and 2019, we recognized impairment charges of $52.4 and $107.2, respectively, related to certain indefinite-lived trademarks in the U.S. Retail Pet Foods segment, which were included as a noncash charge in our Condensed Statements of Consolidated Income. We utilized Level 3 inputs based on management's best estimates and assumptions to estimate the fair value of the indefinite-lived trademarks. For additional information, see Note 8: Goodwill and Other Intangible Assets.
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Note 13:10: 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, we generally are not reasonably certain to exercise them, and therefore, thethese optional periods do not typically impact the lease term.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.
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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.
The following table sets forth the right-of-use assets and lease liabilities recognized in the Condensed Consolidated Balance Sheet.Sheets.
January 31, 2020
Operating lease right-of-use assets$168.0 
Operating lease liabilities:
Current operating lease liabilities$41.7 
Noncurrent operating lease liabilities133.5 
Total operating lease liabilities$175.2 
Finance lease right-of-use assets:
Machinery and equipment$13.4 
Accumulated depreciation(6.9)
Total property, plant, and equipment$6.5 
Finance lease liabilities:
Other current liabilities$2.2 
Other noncurrent liabilities3.7 
Total finance lease liabilities$5.9 
July 31, 2020April 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 liabilities112.5 120.0 
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 liabilities3.2 3.5 
Total finance lease liabilities$5.3 $5.7 
The following table summarizes the components of lease expense.
Three Months Ended July 31,
Three Months Ended January 31, 2020  Nine Months Ended January 31, 2020  20202019
Operating lease costOperating lease cost$13.2  $38.5  Operating lease cost$11.3 $12.4 
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets0.7  2.3  Amortization of right-of-use assets0.6 0.8 
Interest on lease liabilitiesInterest on lease liabilities0.1  0.2  Interest on lease liabilities0.1 0.1 
Variable lease costVariable lease cost5.0  17.6  Variable lease cost5.6 6.3 
Short-term lease costShort-term lease cost8.5  25.9  Short-term lease cost9.0 7.7 
Sublease incomeSublease income(1.1) (3.4) Sublease income(1.5)(0.8)
Net lease costNet lease cost$26.4  $81.1  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,
20202019
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 leases0.9 0.7 
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases  
Finance leases0.3 0.5 
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The following table sets forth cash flow and noncash information related to leases.
Nine Months Ended January 31, 2020 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$38.8 
Operating cash flows from finance leases0.2 
Financing cash flows from finance leases2.1 
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases56.6 
Finance leases2.4 
The following table summarizes the maturity of our lease liabilities by fiscal year.
January 31, 2020
Operating LeasesFinance Leases
2020 (remainder of the year)$12.3  $0.7  
202143.8  2.2  
202240.5  1.6  
202334.6  0.9  
202422.8  0.7  
2025 and beyond34.8  0.2  
Total undiscounted minimum lease payments$188.8  $6.3  
Less: Imputed interest13.6  0.4  
Lease liabilities$175.2  $5.9  
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.
July 31, 2020
Operating LeasesFinance Leases
2021 (remainder of the year)$30.2 $1.8 
202237.1 1.7 
202334.4 1.0 
202422.8 0.7 
202514.8 0.3 
2026 and beyond20.1 0.1 
Total undiscounted minimum lease payments$159.4 $5.6 
Less: Imputed interest11.0 0.3 
Lease liabilities$148.4 $5.3 
The following table sets forth the weighted average remaining lease term and discount rate.
January 31, 2020
Weighted average remaining lease term (in years):
Operating leases4.8
Finance leases3.4
Weighted average discount rate:
Operating leases3.1 %
Finance leases3.0 %
July 31, 2020April 30, 2020
Weighted average remaining lease term (in years):
Operating leases4.64.7
Finance leases3.23.4
Weighted average discount rate:
Operating leases3.1 %3.1 %
Finance leases2.9 %2.9 %

Note 14:11: Income Taxes
The effective tax rates for the three months ended JanuaryJuly 31, 2020 and 2019, were 22.724.4 and 22.8 percent, respectively, and for the nine months ended January 31, 2020 and 2019, were 24.0 and 26.125.2 percent, respectively. During the three and nine months ended JanuaryJuly 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. The effective tax rate for the nine months ended January 31, 2019, was also unfavorably impacted by additional 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 $2.6, primarily as a result of expiring statute of limitations periods.
As of JanuaryJuly 31, 2020, the undistributed earnings of our foreign subsidiaries remain permanently reinvested.
During 2020, the Coronavirus Aid, Relief, and Economic Security Act was enacted, which included rollbacks of certain provision of the U.S. Tax Cuts and Jobs Act (the “Tax Act”) . While these specific rollbacks did not impact us, future legislative actions in response to the novel coronavirus (“COVID-19”) could further modify provisions of the Tax Act, and such changes will need to be analyzed for their respective impacts on our income taxes at that time.
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Note 15:12: Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), including the reclassification adjustments for items that are reclassified from accumulated other comprehensive income (loss) to net income, are shown below.
Foreign
Currency
Translation
Adjustment
Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
Pension and
Other
Postretirement
Liabilities (B)
Unrealized 
Gain (Loss)
on Available-
for-Sale
Securities
Accumulated
Other
Comprehensive
Income (Loss)
Foreign
Currency
Translation
Adjustment
Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
Pension and
Other
Postretirement
Liabilities (B)
Unrealized 
Gain (Loss)
on Available-
for-Sale
Securities
Accumulated
Other
Comprehensive
Income (Loss)
Balance at May 1, 2019$(35.5) $(40.4) $(110.0) $4.1  $(181.8) 
Balance at May 1, 2020Balance at May 1, 2020$(50.5)$(185.6)$(146.7)$3.8 $(379.0)
Reclassification adjustmentsReclassification adjustments—  0.3  5.2  —  5.5  Reclassification adjustments 3.4 2.2  5.6 
Current period credit (charge)Current period credit (charge)2.6  (119.8) —  1.2  (116.0) Current period credit (charge)12.9   1.1 14.0 
Income tax benefit (expense)Income tax benefit (expense)—  27.5  (1.2) (0.3) 26.0  Income tax benefit (expense) (0.8)(0.5)(0.2)(1.5)
Balance at January 31, 2020$(32.9) $(132.4) $(106.0) $5.0  $(266.3) 
Balance at July 31, 2020Balance at July 31, 2020$(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)
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  $(116.7) 
Balance at May 1, 2019Balance at May 1, 2019$(35.5)$(40.4)$(110.0)$4.1 $(181.8)
Reclassification adjustmentsReclassification adjustments—  0.3  6.0  —  6.3  Reclassification adjustments 0.1 1.4  1.5 
Current period credit (charge)Current period credit (charge)(10.1) (37.6) (2.4) (0.5) (50.6) Current period credit (charge)4.5 (53.0) 0.4 (48.1)
Income tax benefit (expense)Income tax benefit (expense)—  8.5  (0.9) 0.1  7.7  Income tax benefit (expense) 12.1 (0.3)(0.1)11.7 
Balance at January 31, 2019$(26.5) $(31.7) $(98.3) $3.2  $(153.3) 
Balance at July 31, 2019Balance at July 31, 2019$(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 credit (charge)charge in 2020 relates to the unrealized gains (losses)losses on the interest rate contracts entered into in November 2018 and June 2018.2018 that were terminated in 2020. For additional information, see Note 11:8: 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 16:13: 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 JanuaryJuly 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
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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'sCERT’s objection, the defendants amended their answer to raise the regulation as a complete defense to the claims. CERT unsuccessfully challenged the defendants'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. BriefingOn 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 all motions is expectedAugust 25, 2020, due to continue into March 2020.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 JanuaryJuly 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 17:14: Common Shares
The following table sets forth common share information.
January 31, 2020April 30, 2019July 31, 2020April 30, 2020
Common shares authorizedCommon shares authorized300.0  300.0  Common shares authorized300.0 300.0 
Common shares outstandingCommon shares outstanding114.0  113.7  Common shares outstanding114.1 114.1 
Treasury sharesTreasury shares32.5  32.8  Treasury shares32.4 32.4 
Repurchase Program: During the ninethree months ended JanuaryJuly 31, 2020 and 2019, we did 0t repurchase any common shares under a repurchase plan authorized by the Board of Directors (the “Board”). Share repurchases during the ninethree months ended JanuaryJuly 31, 2020 and 2019, consisted of shares repurchased from stock plan recipients in lieu of cash payments. At JanuaryJuly 31, 2020, we had approximately 3.6 million common shares remain 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 nine months ended JanuaryJuly 31, 2020 and 2019. All comparisons presented are to the corresponding period of the prior year, unless otherwise noted.
On May 14, 2018, we acquired the equity 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. We expected to achieve annual cost synergies related to this acquisition of approximately $55.0 by the end of 2020, which was fully realized as of January 31, 2020.

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. During 2019, we recognized a pre-tax gain of $27.7 related to this transaction, of which $1.0 was recognized during the third quarter associated with the working capital adjustment that was finalized during the fourth quarter. The gain 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, 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.
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Results of Operations
Three Months Ended January 31,Nine Months Ended January 31, Three Months Ended July 31,
20202019% Increase (Decrease)20202019% Increase (Decrease) 20202019% Increase (Decrease)
Net salesNet sales$1,972.3  $2,011.9  (2)%$5,709.0  $5,935.9  (4)%Net sales$1,971.8 $1,778.9 11 %
Gross profitGross profit$760.0  $773.8  (2) $2,213.6  $2,223.3  —  Gross profit$775.4 $699.6 11 
% of net sales% of net sales38.5 %38.5 %38.8 %37.5 %% of net sales39.3 %39.3 %
Operating incomeOperating income$289.0  $217.6  33  $876.4  $775.0  13  Operating income$361.1 $257.6 40 
% of net sales% of net sales14.7 %10.8 %15.4 %13.1 %% of net sales18.3 %14.5 %
Net income:Net income:Net income:
Net incomeNet income$187.4  $121.4  54  $553.2  $442.9  25  Net income$237.0 $154.6 53 
Net income per common share –
assuming dilution
Net income per common share –
assuming dilution
$1.64  $1.07  53  $4.85  $3.89  25  Net income per common share – assuming dilution$2.08 $1.36 53 
Adjusted gross profit (A)
Adjusted gross profit (A)
$752.3  $776.7  (3) $2,176.0  $2,248.3  (3) 
Adjusted gross profit (A)
$759.2 $670.6 13 
% of net sales% of net sales38.1 %38.6 %38.1 %37.9 %% of net sales38.5 %37.7 %
Adjusted operating income (A)
Adjusted operating income (A)
$395.8  $406.2  (3) $1,077.5  $1,139.0  (5) 
Adjusted operating income (A)
$404.5 $290.7 39 
% of net sales% of net sales20.1 %20.2 %18.9 %19.2 %% of net sales20.5 %16.3 %
Adjusted income: (A)
Adjusted income: (A)
Adjusted income: (A)
IncomeIncome$268.5  $256.7   $705.7  $705.6  —  Income$270.0 $179.7 50 
Earnings per share – assuming dilutionEarnings per share – assuming dilution$2.35  $2.26   $6.19  $6.20  —  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.
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Net Sales
Three Months Ended January 31,Nine Months Ended January 31,
20202019Increase
(Decrease)
%20202019Increase
(Decrease)
%
Net sales$1,972.3  $2,011.9  $(39.6) (2)%$5,709.0  $5,935.9  $(226.9) (4)%
Ainsworth acquisition—  —  —  —  (25.4) —  (25.4) —  
Baking divestiture—  —  —  —  —  (105.9) 105.9   
Foreign currency exchange(1.3) —  (1.3) —  2.3  —  2.3  —  
Net sales excluding acquisition, divestiture, and foreign currency exchange (A)
$1,971.0  $2,011.9  $(40.9) (2)%$5,685.9  $5,830.0  $(144.1) (2)%
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 third quarter of 2020 decreased $39.6, or 2 percent, reflecting unfavorable volume/mix in the U.S. Retail Pet Foods segment, primarily driven by dog food. Lower net price realization for the remaining segments was primarily driven by lower net pricing for coffee and peanut butter, which was mostly offset by favorable volume/mix for coffee and Smucker’s Uncrustables®.
Net sales in the first ninethree months of 2020 decreased $226.9,2021 increased $192.9, or 411 percent, reflecting $105.9driven by favorable volume/mix across all of noncomparable net sales in the prior year related toour retail businesses, supported by increased at-home consumption for the U.S. bakingRetail Coffee and U.S. Retail Consumer Foods segments. The retail business growth was 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 $144.1, or 2 percent. Lower net price realization impacted net sales by 2 percentage points, primarily due to lower net pricing for coffee and peanut butter, partially offset by higher pricing for pet food and pet snacks. Unfavorableunfavorable volume/mix impacted net sales by 1 percentage point, primarily driven by declines for private label dog food, as well as the Natural Balance brand, partially offset by gains for the Smucker’s and Dunkin’ Donuts brands.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 January 31,Nine Months Ended January 31, Three Months Ended July 31,
2020201920202019 20202019
Gross profitGross profit38.5 %38.5 %38.8 %37.5 %Gross profit39.3 %39.3 %
Selling, distribution, and administrative expenses:Selling, distribution, and administrative expenses:Selling, distribution, and administrative expenses:
MarketingMarketing6.1 %6.7 %6.6 %6.9 %Marketing6.2 %7.5 %
SellingSelling2.9  2.9  3.3  3.2  Selling3.3 3.9 
DistributionDistribution3.7  3.2  3.6  3.3  Distribution3.5 3.6 
General and administrativeGeneral and administrative5.5  5.7  5.8  5.7  General and administrative5.1 6.5 
Total selling, distribution, and administrative expensesTotal selling, distribution, and administrative expenses18.2 %18.5 %19.3 %19.2 %Total selling, distribution, and administrative expenses18.1 %21.4 %
AmortizationAmortization3.0  3.0  3.1  3.0  Amortization3.0 3.3 
Other intangible assets impairment charges2.7  5.3  0.9  1.8  
Other special project costsOther special project costs0.2  0.9  0.2  0.9  Other special project costs 0.2 
Other operating expense (income) – netOther operating expense (income) – net(0.1) (0.1) —  (0.5) Other operating expense (income) – net(0.1) 
Operating incomeOperating income14.7 %10.8 %15.4 %13.1 %Operating income18.3 %14.5 %
Amounts may not add due to rounding.
Gross profit decreased $13.8,increased $75.8, or 211 percent, in the thirdfirst quarter of 2020,2021, primarily driven by unfavorablefavorable volume/mix and lower costs, partially offset by an unfavorable net impact of lower priceschange in derivative gains and lower costs.losses as compared to the prior year. Operating income increased $71.4,$103.5, or 3340 percent, primarily reflecting a $54.8 decreasethe increase in intangible asset impairment charges, a $15.5 decrease in special project costs,gross profit and a $14.2$23.0 decrease in selling, distribution, and administrative (“SD&A”) expenses, partially offset by the decline in gross profit. During the third quarter of 2020, we recognized a noncash impairment charge of $52.4 associated with the Natural Balance brand within the U.S. Retail Pet Foods segment. For further information on this charge, refer to “Critical Accounting Estimates and Policies” in this discussion and analysis.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 furtheradditional information. Gross profit excluding non-GAAP adjustments (“adjusted gross profit”) decreased $24.4,increased $88.6, or 313 percent, in the thirdfirst quarter of 2020, as compared to prior year, further2021, reflecting a $10.6 unfavorable change related to the exclusion of unallocated derivative gains and losses, as compared to GAAP gross profit. Operating income excluding non-GAAP adjustments (“adjusted operating income”) decreased $10.4,increased $113.8, or 339 percent, as compared to prior year, further reflecting the change related to the exclusion of impairment charges and special project costs, as compared to GAAP operating income.
Gross profit decreased $9.7 in the first nine months of 2020, primarily driven by the noncomparable impact related to the U.S. baking business divestiture and unfavorable volume/mix, mostly offset by a favorable net impact of lower prices and lower costs and the noncomparable benefit of Ainsworth. 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 $101.4, or 13 percent, primarily due to the $54.8 decrease in intangible asset impairment charges, a $42.0 decrease in special project costs, and a $37.9 decrease in SD&A expenses, partially offset by the impact of the $27.6 pre-tax gain related to the sale of the U.S. baking business in the prior year and the decline in gross profit.year.
Adjusted gross profit
Interest Expense

Net interest expense decreased $72.3,$3.3, or 37 percent, in the first nine monthsquarter of 2020,2021, primarily as a result of a decrease in interest rates and reduced debt outstanding, as compared to the prior year, further reflecting a $62.6 unfavorable changepartially offset by interest expense related to the exclusion of unallocated derivative gains and losses, as compared to GAAP gross profit. Adjusted operating income decreased $61.5, or 5 percent, as compared to the prior year, further reflecting the change related to the exclusion of impairment charges and special project costs, as compared to GAAP operating income.
Interest Expense
Net interest expense decreased $6.5, or 13 percent,rate contracts terminated in the thirdfourth quarter of 2020, and decreased $15.2, or 10 percent, in the first nine 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.2020.
Income Taxes
Income taxes increased $19.3,$24.5, or 54 percent, in the third quarter of 2020, and increased $18.3, or 1247 percent, in the first nine monthsquarter of 2020. The 20202021, due to the increase in income before income taxes and partially offset by a lower effective tax rates were 22.7rate of 24.4 percent, for the third quarter and 24.0compared to 25.2 percent for the first nine months. The 2019 effective tax rates were 22.8 percent for the third quarter and 26.1 percent for the first nine months.
of 2020. During both the current year and the prior year,years, 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 rate for the first nine months of the prior year was 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 be2021 of approximately 24.0 percent. For further information, refer to Note 14:11: 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 $42.0, of which $3.3 and $9.9 were incurred in the third quarter and first nine 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 fourthree reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods, andFoods. Effective during the first quarter of 2021, the presentation of International and Away From Home. 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, Natural Balance9Lives, Kibbles ’n Bits, 9LivesNatural Balance,, Nature’s RecipePup-Peroni, and Pup-PeroniNature’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. The International and Away From Home segment comprisesincludes 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, schoolshospitality, offices, K-12, colleges and universities, health care operators)and convenience stores).
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 Three Months Ended January 31,Nine Months Ended January 31,
20202019% Increase
(Decrease)
20202019% Increase
(Decrease)
Net sales:
U.S. Retail Pet Foods$721.9  $759.0  (5)%$2,101.7  $2,158.3  (3)%
U.S. Retail Coffee558.8  561.6  —  1,567.9  1,596.0  (2) 
U.S. Retail Consumer Foods422.9  422.7  —  1,251.2  1,367.9  (9) 
International and Away From Home268.7  268.6  —  788.2  813.7  (3) 
Segment profit:
U.S. Retail Pet Foods$146.0  $147.9  (1)%$403.1  $372.2  %
U.S. Retail Coffee189.5  183.7   500.9  505.8  (1) 
U.S. Retail Consumer Foods84.2  95.9  (12) 256.6  327.5  (22) 
International and Away From Home49.0  52.5  (7) 131.7  152.6  (14) 
Segment profit margin:
U.S. Retail Pet Foods20.2 %19.5 %19.2 %17.2 %
U.S. Retail Coffee33.9  32.7  31.9  31.7  
U.S. Retail Consumer Foods19.9  22.7  20.5  23.9  
International and Away From Home18.2  19.5  16.7  18.8  

 Three Months Ended July 31,
20202019% Increase
(Decrease)
Net sales:
U.S. Retail Pet Foods$692.6 $669.9 3 %
U.S. Retail Coffee570.9 465.7 23 
U.S. Retail Consumer Foods489.2 402.2 22 
International and Away From Home219.1 241.1 (9)
Segment profit:
U.S. Retail Pet Foods$125.3 $120.1 4 %
U.S. Retail Coffee182.6 128.9 42 
U.S. Retail Consumer Foods131.5 81.0 62 
International and Away From Home30.9 32.3 (4)
Segment profit margin:
U.S. Retail Pet Foods18.1 %17.9 %
U.S. Retail Coffee32.0 27.7 
U.S. Retail Consumer Foods26.9 20.1 
International and Away From Home14.1 13.4 
U.S. Retail Pet Foods
The U.S. Retail Pet Foods segment net sales increased $22.7 in the thirdfirst quarter of 2020 decreased $37.1,2021, primarily reflecting unfavorablefavorable volume/mix, which reduced net sales bycontributed 5 percentage points andto net sales. The favorable volume/mix was primarily driven by thegrowth for 9Lives and Meow Mix cat food and Milk-Bone dog snacks, partially offset by declines for Natural Balance, Nature’s Recipe, brand and private label dog food. NetLower net price realization was neutral, as list price increases implemented during the second half of the prior year were mostly offset by increased trade spend. Segment profit decreased $1.9, as unfavorable volume/mix was mostly offset by an $8.1 recovery from a legal settlement related to a prior year supplier issue, synergy realization, and reduced marketing expense.
The U.S. Retail Pet Foods segment net sales in the first nine months of 2020 decreased $56.6, including the impact of two weeks of incremental Ainsworth sales in the current year. Excluding the incremental Ainsworth business, net sales decreased $82.0, reflecting a $59.6 decline related to private label products. Volume/mix reduced net sales by 52 percentage points, primarily driven by private labelreflecting increased trade spend for dog food and cat food. Segment profit increased $5.2, driven by lower manufacturing costs, the Natural Balance brand. Net price realization contributed 1 percentage point, primarily related to the Meow Mix, 9Lives,favorable volume/mix, and Kibbles ’n Bits brands, reflecting the list price increases implemented during the second half of the prior year,lower SD&A expenses, partially offset by increased trade spend. Segment profit increased $30.9, 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 synergy realization, higher net pricing, reduced marketing expense, and the recovery from a legal settlement related to a prior year supplier issue, partially offset by unfavorable volume/mix and higher input costs.lower pricing.
U.S. Retail Coffee
The U.S. Retail Coffee segment net sales decreased $2.8increased $105.2 in the thirdfirst quarter of 2020,2021, reflecting lower net price realization, mostly offset by favorable volume/mix. Lower net pricing on the Folgers and Dunkin’ Donuts brands reducedmix, which contributed 23 percentage points to net sales, by 5 percentage points, which reflected increased promotional activity across both brands, primarily supported by lower green coffee costs. The favorable volume/mix increased net sales by 5 percentage points, duerelated to growth offor the Dunkin’ Donuts, Folgers, and Café Bustelo and Folgers brands. Segment profit increased $5.8, primarily due to favorable volume/mix and reduced marketing expense, partially offset by the unfavorable net impact of lower net pricing and lower input costs.
The U.S. Retail Coffee segment net sales decreased $28.1 in the first nine 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, primarily supported by lower green coffee costs. The favorable volume/mix whichis reflective of elevated at-home consumption and re-stocking of retailer inventory following the surge in consumer demand during the fourth quarter of 2020. Segment profit increased net sales by 3 percentage points, was primarily driven by the Dunkin’ Donuts and Café Bustelo brands. Segment profit decreased $4.9,$53.7, primarily due to the net unfavorable impact of lower net pricing and lower green coffee costs, partially offset by decreased marketing expense and favorable volume/mix.
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U.S. Retail Consumer Foods
The U.S. Retail Consumer Foods segment net sales increased $87.0 in the thirdfirst quarter of 2020 was comparable to the prior year,2021, as favorable volume/mix was offset by lower net price realization. Favorable volume/mix contributed 419 percentage points to net sales, primarily related toreflecting growth for the Smucker’s brand, inclusive of Uncrustables®frozen sandwiches and fruit spreads, Crisco oils and theshortening, and Jif brand. Lower net pricing reduced net sales by 4 percentage points, primarily driven by a list price decrease onpeanut butter. The favorable volume/mix is reflective of elevated at-home consumption and retailer inventory re-stocking following the Jif brandsurge in consumer demand during the fourth quarter of the prior year, partially offset by decreased trade spend. Segment profit decreased $11.7, which included a $7.5 write-off of equipment related to the discontinuation of Jif Power Ups®. Excluding this impact, segment profit decreased $4.2, primarily reflecting an unfavorable2020. Higher net impact of lower pricing and lower input costs, partially offset by favorable volume/mix.
The U.S. Retail Consumer Foods segment net sales decreased $116.7 in the first nine 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 1 percent. Lower net price realization reducedincreased net sales by 3 percentage points, primarily driven by the list price decrease on theattributable to reduced promotional activity for Jif brand, partially offset by decreased trade spend. Favorablepeanut butter and Smucker’s fruit spreads. Segment profit increased $50.5, primarily reflecting the favorable volume/mix, contributed 2 percentage points tohigher net sales, primarily related to growth for Smucker’s Uncrustables and the Jif brand, partially offset by a decline for the Crisco brand. Segment profit decreased $70.9, primarily reflecting $44.3 of segment profit in the prior year related to the divested business, of which $27.6 represented the pre-tax gain related to the sale. Excluding the impact of the divestiture, segment profit decreased 9 percent, driven primarily by the unfavorable net impact of lower pricing, and lower input costs and the write-off of equipment related to the discontinuation of Jif Power Ups, partially offset by the favorable volume/mix and decreased marketing expense.SD&A expenses.
International and Away From Home
The International and Away From Home segment net sales decreased $22.0 in the thirdfirst quarter of 2020 was comparable to the prior year, as a favorable foreign currency impact on net sales was offset by unfavorable net price realization and unfavorable volume/mix. Segment profit decreased $3.5,2021, primarily reflecting a 33 percent decline for the unfavorable volume/mix.
The International and Away From Home operating segment, partially offset by net sales decreased $25.5 ingrowth of 21 percent for the first nine months of 2020, including a noncomparable impact of $3.7 of net sales in the prior year related to the divested U.S.International operating segment, most notably for flour and baking business.ingredients. Unfavorable volume/mix for the combined businesses reduced net sales by 28 percentage points primarily driven by increased shipments in the prior year related to the closing of facilities in Mexico and transition to a distributor export model, in addition to declines for the Folgers and Jif brands. These declines were partially offset by gains for the Smucker’s brand. Lower net price realization reducedforeign currency decreased net sales by 1 percentage point, primarily related to the Folgers and Jif brands. Foreign currency exchange had a $2.3 unfavorable impact on net sales.point. Segment profit decreased $20.9,$1.4, primarily reflecting higher input costs and the unfavorable volume/mix, andpartially offset by lower net pricing.SD&A expenses.
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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 JanuaryJuly 31, 2020, total cash and cash equivalents was $74.4,$396.6, compared to $101.3$391.1 at April 30, 2019.
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2020.
The following table presents selected cash flow information.
Nine Months Ended January 31, Three Months Ended July 31,
20202019 20202019
Net cash provided by (used for) operating activitiesNet cash provided by (used for) operating activities$967.1  $867.0  Net cash provided by (used for) operating activities$409.0 $221.5 
Net cash provided by (used for) investing activitiesNet cash provided by (used for) investing activities(177.6) (1,822.8) Net cash provided by (used for) investing activities(49.2)(52.1)
Net cash provided by (used for) financing activitiesNet cash provided by (used for) financing activities(816.1) 973.6  Net cash provided by (used for) financing activities(357.3)(222.6)
Net cash provided by (used for) operating activitiesNet cash provided by (used for) operating activities$967.1  $867.0  Net cash provided by (used for) operating activities$409.0 $221.5 
Additions to property, plant, and equipmentAdditions to property, plant, and equipment(192.9) (267.2) Additions to property, plant, and equipment(76.6)(73.0)
Free cash flow (A)
Free cash flow (A)
$774.2  $599.8  
Free cash flow (A)
$332.4 $148.5 
(A)Free cash flow is a non-GAAP financial measure used by management to evaluate the amount of cash available for debt repayment, dividend distribution, acquisition opportunities, share repurchases, and other corporate purposes.
The $100.1$187.5 increase in cash provided by operating activities forin the first nine monthsquarter of 20202021 was primarily driven by lower working capital requirements in 2021, as well as higher net income adjusted for noncash items in the current year. The decrease in cash required to fund working capital, decreasedas compared to the prior year, excluding the impact of the realization of a $30.0 income tax refund received in 2019. The decrease in working capital requirements was primarily driven by a reduction in trade receivables due to lower sales, in additionattributable to lower payments for accounts payable items driven by working capital initiatives. These decreases were partially offset by an increaseinitiatives, inclusive of a supplier financing program entered into during the second half of 2020, as well as a reduction in inventory levels comparedtrade receivables this quarter, due to the prior year.timing of sales and payments.
Cash used for investing activities in the first ninethree months of 20202021 consisted of $192.9$76.6 in capital expenditures, partially offset by a $15.0$27.6 decrease in our derivative cash margin account balances. Cash used for investing activities in the first ninethree months of 20192020 consisted of $1.9 billion related to the Ainsworth acquisition, $267.2$73.0 in capital expenditures, andpartially offset by a $22.8 increase$20.9 decrease in our derivative cash margin account balances, partially offset by net proceeds from the divestiture of the U.S. baking business of $371.4.balances.
Cash used for financing activities in the first ninethree months of 20202021 consisted primarily of long-term debt repayments of $400.0,$300.0 and dividend payments of $296.7, and$100.1, partially offset by a net increase in short-term borrowings of $47.8. Cash used for financing activities in the first three months of 2020 consisted primarily of a $130.0 net decrease in short-term borrowings of $122.6. Cash provided by financing activities in the first nine months of 2019 consisted primarily of $1.5 billion in long-term debt proceeds and a $360.0 net increase in short-term borrowings, partially offset by long-term debt repayments of $600.0 and dividend payments of $281.4. $96.5. 
Supplier Financing Program

As part of ongoing efforts to maximize working capital, we work with our suppliers to optimize our terms and conditions, which includes the extension of payment terms. Payment terms with our suppliers, which we deem to be commercially reasonable, generally range from 0 to 180 days. During the second half of 2020, we entered into an agreement with a third-party administrator to provide an accounts payable tracking system and facilitate a supplier financing program which allows participating suppliers the ability to monitor and voluntarily elect to sell our payment obligations to a designated third-party financial institution. Participating suppliers can sell one or more of our payment obligations at their sole discretion, and our rights and obligations to our suppliers are not impacted. We have no economic interest in a supplier’s decision to enter into these agreements. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by our suppliers’ decisions to sell amounts under these arrangements. As of July 31, 2020, $192.3 of our outstanding payment obligations were elected and sold to a financial institution by participating suppliers. During the first quarter of 2021, we paid $122.1 to a financial institution for payment obligations that were settled through the supplier financing program.

Contingencies

We, like other food manufacturers, are from time to time subject to various administrative, regulatory, and other legal proceedings arising in the ordinary course of business. We are currently a defendant in a variety of such legal proceedings, 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
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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 JanuaryJuly 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 wouldwill have a material adverse effect on our financial position, results of operations, or cash flows.

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 JanuaryJuly 31, 2020, 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 16:13: Contingencies.
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Capital Resources
The following table presents our capital structure.
January 31, 2020April 30, 2019July 31, 2020April 30, 2020
Current portion of long-term debt
Current portion of long-term debt
$499.8  $798.5  Current portion of long-term debt$399.8 $ 
Short-term borrowingsShort-term borrowings310.0  426.0  Short-term borrowings296.0 248.0 
Long-term debt, less current portionLong-term debt, less current portion4,583.3  4,686.3  Long-term debt, less current portion4,672.8 5,373.3 
Total debtTotal debt$5,393.1  $5,910.8  Total debt$5,368.6 $5,621.3 
Shareholders’ equityShareholders’ equity8,170.4  7,970.5  Shareholders’ equity8,345.2 8,190.9 
Total capitalTotal capital$13,563.5  $13,881.3  Total capital$13,713.8 $13,812.2 
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 areis 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 JanuaryJuly 31, 2020, we have prepaid $800.0$1.1 billion on the Term Loan to date, including $100.0$300.0 in 2020.the first quarter of 2021. The interest rate on the Term Loan at JanuaryJuly 31, 2020, was 2.450.97 percent. In November 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 JanuaryJuly 31, 2020, we had $310.0$296.0 of short-term borrowings outstanding, all of which were issued under our commercial paper program, at a weighted-average interest rate of 1.790.25 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 9:6: Debt and Financing Arrangements.
During the thirdfirst quarter of 2020,2021, we did not repurchase any common shares under a repurchase plan authorized by the Board. At JanuaryJuly 31, 2020, 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.capital expenditures. However, as a result of COVID-19, we may
During
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experience an increase in the first nine months of 2020, we returned $39.7 of international cashcost or the difficulty to obtain debt or equity financing, or to refinance our debt in the U.S., primarily driven by a reduction infuture, which could affect our capitalfinancial condition or our ability to fund operations or future investment in certain foreign subsidiaries in conjunction with a restructuring of our international holding and operating entities. No foreign withholding taxes were applicable, and state income taxes were not significant. opportunities.
As of JanuaryJuly 31, 2020, total cash and cash equivalents of $64.5$85.1 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;profit, adjusted operating income;income, adjusted income;income, adjusted earnings per share;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 financial measures exclude certain items affecting comparability that can significantly affect the year-over-year assessment of operating results, which include amortization expense and impairment charges related to intangible assets, 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 impactimpacts 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 itemsexclusions from non-GAAP results can significantly impact our adjusted effective income tax rate.
These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with U.S. 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 23 for a reconciliation of net sales adjusted for certain noncomparable items to the comparable GAAP financial measure.
Three Months Ended January 31,Nine Months Ended January 31, Three Months Ended July 31,
2020201920202019 20202019
Gross profit reconciliation:Gross profit reconciliation:Gross profit reconciliation:
Gross profitGross profit$760.0  $773.8  $2,213.6  $2,223.3  Gross profit$775.4 $699.6 
Unallocated derivative losses (gains)Unallocated derivative losses (gains)(7.7) 2.9  (37.6) 25.0  Unallocated derivative losses (gains)(16.2)(29.0)
Adjusted gross profitAdjusted gross profit$752.3  $776.7  $2,176.0  $2,248.3  Adjusted gross profit$759.2 $670.6 
Operating income reconciliation:Operating income reconciliation:Operating income reconciliation:
Operating incomeOperating income$289.0  $217.6  $876.4  $775.0  Operating income$361.1 $257.6 
AmortizationAmortization58.8  59.7  176.4  179.9  Amortization59.6 58.8 
Other intangible assets impairment charges52.4  107.2  52.4  107.2  
Unallocated derivative losses (gains)Unallocated derivative losses (gains)(7.7) 2.9  (37.6) 25.0  Unallocated derivative losses (gains)(16.2)(29.0)
Other special project costsOther special project costs3.3  18.8  9.9  51.9  Other special project costs 3.3 
Adjusted operating incomeAdjusted operating income$395.8  $406.2  $1,077.5  $1,139.0  Adjusted operating income$404.5 $290.7 
Net income reconciliation:Net income reconciliation:Net income reconciliation:
Net incomeNet income$187.4  $121.4  $553.2  $442.9  Net income$237.0 $154.6 
Income tax expenseIncome tax expense55.1  35.8  175.1  156.8  Income tax expense76.6 52.1 
AmortizationAmortization58.8  59.7  176.4  179.9  Amortization59.6 58.8 
Other intangible assets impairment charges52.4  107.2  52.4  107.2  
Unallocated derivative losses (gains)Unallocated derivative losses (gains)(7.7) 2.9  (37.6) 25.0  Unallocated derivative losses (gains)(16.2)(29.0)
Other special project costsOther special project costs3.3  18.8  9.9  51.9  Other special project costs 3.3 
Adjusted income before income taxesAdjusted income before income taxes$349.3  $345.8  $929.4  $963.7  Adjusted income before income taxes$357.0 $239.8 
Income taxes, as adjustedIncome taxes, as adjusted80.8  89.1  223.7  258.1  Income taxes, as adjusted87.0 60.1 
Adjusted incomeAdjusted income$268.5  $256.7  $705.7  $705.6  Adjusted income$270.0 $179.7 
Weighted-average shares – assuming dilutionWeighted-average shares – assuming dilution114.0  113.8  114.0  113.7  Weighted-average shares – assuming dilution114.1 113.9 
Adjusted earnings per share – assuming dilutionAdjusted earnings per share – assuming dilution$2.35  $2.26  $6.19  $6.20  Adjusted earnings per share – assuming dilution$2.37 $1.58 

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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 are not material to our results of operations, financial condition, or cash flows.

As of JanuaryJuly 31, 2020, 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, 2019.2020.
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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, 2019.2020. There were no material changes to the information previously disclosed, with the exception of the item discussed below.
During the third quarter of 2020, we began our annual planning cycle, which was not complete as of January 31, 2020; however, certain brand-level decisions were made during the quarter that we evaluated to determine whether the carrying value of certain indefinite-lived intangible assets more likely than not exceeded fair value. As a result, we recognized an impairment charge of $52.4 related to the Natural Balance brand within the U.S. Retail Pet Foods segment due to a decline in current year and long-term net sales expectations and the royalty rate used in the interim analysis, primarily driven by the market environment and re-positioning of this brand within the Pet Foods brand portfolio. This charge was included as a noncash charge in our Condensed Statement of Consolidated Income. Additionally, we reassessed the long-term strategic expectations for the Natural Balance brand and will reclassify this brand as a finite-lived intangible asset as of February 1, 2020, resulting in annual amortization expense of $4.5.
As of January 31, 2020, there were no other indicators of impairment, and as a result, we do not believe that our reporting units or any of our remaining indefinite-lived intangible assets are more likely than not impaired. However, 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 could result in future impairment charges. The carrying values of the goodwill and indefinite-lived intangible assets within the U.S. Retail Pet Foods segment were $2.4 billion and $1.4 billion, respectively, as of January 31, 2020.
During the third quarter of 2019, we recognized a noncash impairment charge of $107.2 related to certain indefinite-lived intangible assets within the U.S. Retail Pet Foods segment.disclosed.
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 JanuaryJuly 31, 2020, 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 intoIn 2020, we terminated interest rate contracts in November 2018concurrent with the pricing of the Senior Notes due March 15, 2030, and June 2018, with notional values of $300.0March 15, 2050. They were designated as cash flow hedges and $500.0, respectively,were used to manage our exposure to interest rate volatility associated with the anticipated debt financingfinancing. The termination resulted in 2020. These interest rate contracts are designated as cash flow hedges,a pre-tax loss of $239.8, which was deferred and included as a result, unrealized lossescomponent of $168.9 were deferred in accumulated other comprehensive income (loss) at January 31, 2020. A hypothetical 10 percent decrease in treasury rates at January 31, 2020, would result in an incremental lossand is being amortized as interest expense over the life of $20.4 on the fair value of these interest rate contracts.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 and a $53.5 benefit that is deferred as a component of the carrying
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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 JanuaryJuly 31, 2020, the remaining benefit of $14.3$10.2 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 JanuaryJuly 31, 2020, would increase the fair value of our long-term debt by $305.8.$448.9.
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 JanuaryJuly 31, 2020, are not expected to result in a significant impact on future earnings or cash flows.
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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 JanuaryJuly 31, 2020, 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 ninethree months ended JanuaryJuly 31, 2020. 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 one year. We do not qualify commodity derivatives for hedge accounting treatment, and astreatment. 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.
January 31, 2020April 30, 2019July 31, 2020April 30, 2020
HighHigh$38.7  $51.6  High$37.6 $37.8 
LowLow13.3  25.3  Low13.6 14.5 
AverageAverage26.1  37.0  Average25.7 26.9 
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.
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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:
the impact of the COVID-19 pandemic on our business, industry, suppliers, customers, consumers, employees, and communities, particularly with respect to our Away From Home business;
disruptions or inefficiencies in our operations or supply chain, including any impact of the COVID-19 pandemic;
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 meetcontinue operating under our cash deleveraging objectives;capital deployment model, including capital expenditures, debt repayment, dividend payments, and share repurchases;
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;
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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, natural disasters, and natural disasters;pandemics (such as COVID-19);
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;
impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets or changes in useful lives of other intangible assets or other long-lived 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 exchange rate 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.Securities and Exchange Commission (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.
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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 JanuaryJuly 31, 2020 (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 13: 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 JanuaryJuly 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information required for Part II, Item 1 is incorporated by reference to the discussion in Note 16:13: 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, as revised below,2020, 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.

The risk factor described below updates the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended April 30, 2019, to include information on an interim impairment analysis, which was performed during the third quarter of 2020.
• A material impairment in the carrying value of acquired goodwill or other intangible assets could negatively affect our consolidated operating results and net worth.

A significant portion of our assets is goodwill and other intangible assets, the majority of which are not amortized but are reviewed for impairment at least annually on February 1, and more often if indicators of impairment exist. At April 30, 2019, the carrying value of goodwill and other intangible assets totaled $13.0 billion, compared to total assets of $16.7 billion and total shareholders’ equity of $8.0 billion. If the carrying value of these assets exceeds the current estimated fair value, the asset would be considered impaired, and this would result in a noncash charge to earnings, which could be material. Events and conditions that could result in impairment include a sustained drop in the market price of our common shares, increased competition or loss of market share, obsolescence, product claims that result in a significant loss of sales or profitability over the product life, deterioration in macroeconomic conditions, or declining financial performance in comparison to projected results.

As of January 31, 2020, the carrying values of the goodwill and indefinite-lived intangible assets within the U.S. Retail Pet Foods segment were $2.4 billion and $1.4 billion, respectively. These intangible assets are susceptible to future impairment charges due to narrow differences between fair value and carrying value as a result of recent impairment charges and the acquisition of Ainsworth in May 2018. To date, we have recognized $465.0 million of impairment charges related to the goodwill and indefinite-lived intangible assets acquired as part of the Big Heart Pet Brands acquisition in 2015, which includes an impairment charge of $52.4 recognized during the third quarter of 2020 related to the Natural Balance brand. These impairment charges are primarily the result of reductions in our long-term net sales and profitability projections.

We do not believe that our Pet Foods reporting unit or any of the remaining indefinite-lived trademarks within the U.S. Retail Pet Foods segment are more likely than not impaired as of January 31, 2020. However, further changes to the assumptions regarding the future performance of the U.S. Retail Pet Foods segment or its brands, an adverse change to macroeconomic conditions, or a change to other assumptions could result in additional impairment losses in the future, which could be significant. As of April 30, 2019, the estimated fair value was substantially in excess of the carrying value for the majority of the remaining reporting units and material indefinite-lived intangible assets, and in all instances, the estimated fair value exceeded the carrying value by greater than 10 percent, with the exception of the Natural Foods reporting unit, which has no remaining goodwill as a result of the impairment charge recorded during the fourth quarter of 2019. For further information, refer to Note 8: Goodwill and Other Intangible Assets.

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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 thirdfirst quarter of 2020,2021, 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)
PeriodTotal 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
November 1, 2019 - November 30, 2019—  $—  —  3,586,598  
December 1, 2019 - December 31, 20191,300  105.22  —  3,586,598  
January 1, 2020 - January 31, 20205,880  105.00  —  3,586,598  
Total7,180  $105.04  —  3,586,598  
Period(a)(b)(c)(d)
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
May 1, 2020 - May 31, 2020245 $108.40  3,586,598 
June 1, 2020 - June 30, 202039,451 108.32  3,586,598 
July 1, 2020 - July 31, 202015,812 108.37  3,586,598 
Total55,508 $108.33  3,586,598 
 
(a)Shares in this column include shares repurchased from stock plan recipients in lieu of cash payments.
(d) As of JanuaryJuly 31, 2020, 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. 3730 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.
 
February 27,August 25, 2020THE J. M. SMUCKER COMPANY
/s/ Mark T. Smucker
By: MARK T. SMUCKER
President and Chief Executive Officer
/s/ Mark R. BelgyaTucker H. Marshall
By: MARK R. BELGYATUCKER H. MARSHALL
Vice Chair and Chief Financial Officer

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INDEX OF EXHIBITS

The following exhibits are either attached or incorporated herein by reference to another filing with the SEC.
Exhibit NumberExhibit Description
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
104The cover page of this Quarterly Report on Form 10-Q for the quarter ended JanuaryJuly 31, 2020, formatted in Inline XBRL

* ManagementIdentifies exhibits that consist of a management contract or compensatory plan or arrangement

arrangement.



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