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Form 10-K J M SMUCKER Co For: Apr 30

June 16, 2022 4:17 PM EDT

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sjm-20220430
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
 FORM 10-K
_________________________________________________________________________________________________________________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2022
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 001-5111
_______________________________________________
THE J. M. SMUCKER COMPANY
(Exact name of registrant as specified in its charter)
______________________________________________________________________________________________________________________
Ohio 34-0538550
(State or other jurisdiction of
  incorporation or organization)
 (I.R.S. Employer
  Identification No.)
One Strawberry Lane 
Orrville,Ohio 44667-0280
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code(330)682-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common shares, no par valueSJMNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
___________________________________________________________________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No  
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      No  
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      No  
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. (Check one):
Large Accelerated Filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The aggregate market value of the common shares held by nonaffiliates of the registrant at October 31, 2021, was $12,691,431,980.
As of June 9, 2022, 106,457,951 common shares of The J. M. Smucker Company were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant’s definitive Proxy Statement to be filed in connection with its Annual Meeting of Shareholders to be held on August 17, 2022, are incorporated by reference into Part III of this Annual Report on Form 10-K.



TABLE OF CONTENTS 
PART I. Page No.
Item 1.Business
Item 1A.Risk Factors
Item 1B.Unresolved Staff Comments
Item 2.Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.[Reserved]
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV.
Item 15. Exhibits and Financial Statement Schedules
Signatures




PART I
Item 1.    Business.
The Company: The J. M. Smucker Company (“Company,” “registrant,” “we,” “us,” or “our”), often referred to as Smucker’s (a registered trademark), was established in 1897 and incorporated in Ohio in 1921. We operate principally in one industry, the manufacturing and marketing of branded food and beverage products on a worldwide basis, although the majority of our sales are in the U.S. Our operations outside the U.S. are principally in Canada, although products are exported to other countries as well. Net sales outside the U.S., subject to foreign currency translation, represented 5 percent of consolidated net sales for 2022. Our branded food and beverage products include a strong portfolio of trusted, iconic, market-leading brands that are sold to consumers through retail outlets in North America.
We have three reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods. The U.S. retail market segments in total comprised 87 percent of 2022 consolidated net sales and represent a major portion of our strategic focus – the sale of branded food and beverage products with leadership positions to consumers through retail outlets in North America. International and Away From Home represents sales outside of the U.S. retail market segments. For additional information on our reportable segments, see Note 4: Reportable Segments.
On January 31, 2022, we sold the natural beverage and grains businesses to Nexus Capital Management LP (“Nexus”). The transaction included products sold under the R.W. Knudsen® and TruRoots® brands, inclusive of certain trademarks, a licensing agreement for Santa Cruz Organic® beverages, dedicated manufacturing and distribution facilities in Chico, California, and Havre de Grace, Maryland, and approximately 150 employees who supported the natural beverage and grains businesses. The transaction did not include Santa Cruz Organic nut butters, fruit spreads, syrups, or applesauce. Under our ownership, the businesses generated net sales of $106.7, $143.4, and $131.6 in 2022, 2021, and 2020, respectively, primarily included in the U.S. Retail Consumer Foods segment.
On December 1, 2021, we sold the private label dry pet food business to Diamond Pet Foods, Inc. (“Diamond Pet Foods”). The transaction included dry pet food products sold under private label brands, a dedicated manufacturing facility located in Frontenac, Kansas, and approximately 220 employees who supported the private label dry pet food business. The transaction did not include any branded products or our private label wet pet food business. Under our ownership, the business generated net sales of $62.3, $94.0, and $120.6 in 2022, 2021, and 2020, respectively, included in the U.S. Retail Pet Foods segment.
On January 29, 2021, we sold the Natural Balance® premium pet food business to Nexus. The transaction included pet food products sold under the Natural Balance brand, certain trademarks and licensing agreements, and select employees who supported the Natural Balance business. Under our ownership, the business generated net sales of $156.7 and $222.8 in 2021 and 2020, respectively, included in the U.S. Retail Pet Foods segment.

On December 1, 2020, we sold the Crisco® oils and shortening business to B&G Foods, Inc. (“B&G Foods”). The transaction included oils and shortening products sold under the Crisco brand, primarily in the U.S. and Canada, certain trademarks and licensing agreements, dedicated manufacturing and warehouse facilities located in Cincinnati, Ohio, and approximately 160 employees who supported the Crisco business. Under our ownership, the business generated net sales of $198.9 and $269.2 in 2021 and 2020, respectively, primarily included in the U.S. Retail Consumer Foods segment.

For additional information on these divestitures, see Note 3: Divestitures.
Principal Products: Our principal products as of April 30, 2022, are coffee, cat food, pet snacks, dog food, peanut butter, frozen handheld products, fruit spreads, portion control products, juices and beverages, as well as baking mixes and ingredients. Product sales information for the years 2022, 2021, and 2020 is included within Note 4: Reportable Segments.
In the U.S. retail market segments, our products are primarily sold through a combination of direct sales and brokers to food retailers, club stores, discount and dollar stores, online retailers, pet specialty stores, natural foods stores and distributors, drug stores, military commissaries, and mass merchandisers. In International and Away From Home, our products are distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., health care operators, restaurants, lodging, hospitality, offices, K-12, colleges and universities, and convenience stores).
Sources and Availability of Raw Materials: The raw materials used in each of our segments are primarily commodities, agricultural-based products, and packaging materials. Green coffee, peanuts, protein meals, oils and fats, grains, sweeteners, fruit, and other ingredients are obtained from various suppliers. The availability, quality, and costs of many of these
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commodities have fluctuated, and may continue to fluctuate over time, partially driven by the novel coronavirus (“COVID-19”) pandemic. Futures, basis, options, and fixed price contracts are used to manage price volatility for a significant portion of our commodity costs. Green coffee, along with certain other raw materials, is sourced solely from foreign countries and its supply and price is subject to high volatility due to factors such as weather, global supply and demand, plant disease, investor speculation, and political and economic conditions in the source countries. We source peanuts, protein meals, and oils and fats mainly from North America. The principal packaging materials we use are plastic, glass, metal cans, caps, carton board, and corrugate. For additional information on the commodities we purchase, see “Commodities Overview” within Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
Raw materials are generally available from numerous sources, although we have elected to source certain plastic packaging materials and finished goods, such as K-Cup® pods, our Pup-Peroni® dog snacks, and liquid coffee, from single sources of supply pursuant to long-term contracts. While availability may vary year-to-year, we believe that we will continue to obtain adequate supplies and that alternatives to single-sourced materials are available. We have not historically encountered significant shortages of key raw materials. We consider our relationships with key raw material suppliers to be in good standing.
Trademarks and Patents: Many of our products are produced and sold under various patents or patents pending, and marketed under trademarks owned or licensed by us or one of our subsidiaries. Our major trademarks as of April 30, 2022, are listed below.
Primary Reportable Segment  Major Trademark
U.S. Retail Pet Foods
Meow Mix®, Rachael Ray® Nutrish®, Milk-Bone®, 9Lives®, Kibbles ‘n Bits®, Pup-Peroni, and Nature’s Recipe®
U.S. Retail Coffee  
Folgers®, Dunkin’®, and Café Bustelo®
U.S. Retail Consumer Foods  
Uncrustables®, Jif®, and Smucker’s®
Other (A)
  
Smucker’s and Folgers
(A) Represents the combined International and Away From Home operating segments.
Dunkin’ is a trademark of DD IP Holder LLC 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. Information included in this document does not pertain to coffee or other products for sale in Dunkin’ restaurants. The terms of the Dunkin’ license includes the payment of royalties to an affiliate of DD IP Holder LLC and other financial commitments by the Company. The Dunkin’ license is in effect until January 1, 2039. Keurig® and K-Cup® are trademarks of Keurig Green Mountain, Inc. (“Keurig”), used with permission.
We utilize Rachael Ray’s image and likeness and related Rachael Ray trademarks for premium pet food and pet snacks under an exclusive license which expires in 2063. The terms of the license include the payment of royalties to The Rachael Ray Foundation. Rachael Ray is a trademark of Ray Marks II LLC. In addition, we and our subsidiaries license the use of several other trademarks, none of which are individually material to our business.
Slogans or designs considered to be important trademarks include, without limitation, “With A Name Like Smucker’s, It Has To Be Good®,” “The Best Part of Wakin’ Up Is Folgers In Your Cup®,” “Choosy Moms Choose Jif®,” “That Jif’ing GoodTM, The Only One Cats Ask For By Name®,” the Smucker’s banner, the Crock Jar shape, the Gingham design, the Jif Color Banner design, the Café Bustelo Angelina design, and the Milk-Bone, Meow Mix, and 9Lives logos.
We own many patents worldwide in addition to proprietary trade secrets, technology, know-how processes, and other intellectual property rights that are not registered.
We consider all of our owned and licensed intellectual property, taken as a whole, to be essential to our business.
Seasonality: The U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods segments do not experience significant seasonality, as demand for our products is generally consistent throughout the year.
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Customers: Sales to Walmart Inc. and subsidiaries amounted to 34 percent of net sales in 2022 and 32 percent of net sales in both 2021 and 2020. These sales are primarily included in our U.S. retail market segments. No other customer exceeded 10 percent of net sales for any year.
During 2022, our top 10 customers, collectively, accounted for approximately 60 percent of consolidated net sales. Supermarkets, warehouse clubs, and food distributors continue to consolidate, and we expect that a significant portion of our revenues will continue to be derived from a limited number of customers. Although the loss of any large customer for an extended length of time could negatively impact our sales and profits, we do not anticipate that this will occur to a significant extent due to strong consumer demand for our brands.
Government Business: No material portion of our business is subject to renegotiation of profits or termination of contracts at the election of the government.
Competition: We are the branded market leader in the coffee, dog snacks, peanut butter, and fruit spreads categories in the U.S. In Canada, we are the branded market leader in the pickles, flour, fruit spreads, canned milk, and ice cream toppings categories. Our business is highly competitive as all of our brands compete for retail shelf space with other branded products as well as private label products.
In order to remain competitive, companies in the food industry need to consider emerging consumer preferences, technological advances, product and packaging innovations, and the growth of certain retail channels, such as the
e-commerce market. The primary ways in which products and brands are distinguished are brand recognition, product quality, price, packaging, new product introductions, nutritional value, convenience, advertising, promotion, and the ability to identify and satisfy consumer preferences. Positive factors pertaining to our competitive position include well-recognized brands, high-quality products, consumer trust, experienced brand and category management, a single national grocery broker in the U.S., varied product offerings, product innovation, good customer service, and an integrated distribution network.
The packaged foods industry has been challenged by a general decline in sales volume in the center of the store. However, there has been a recent increase in sales primarily driven by changes in consumer behaviors, including employees working at home more frequently as a result of the pandemic. Certain evolving consumer trends have contributed to the longer-term decline, such as a heightened focus on health and wellness, an increased desire for fresh foods, and the growing impact of social media and e-commerce on consumer behavior. To address these dynamics, we continue to focus on innovation with an increased emphasis on products that satisfy evolving consumer trends.
In addition, private label continues to be a competitor in many of the categories in which we compete, partially due to improvements in private label quality and the increased emphasis of store brands by retailers in an effort to cultivate customer loyalty. In our total U.S. retail categories, private label held a 11.5 dollar average market share during the 52 weeks ended April 17, 2022, as compared to a 12.2 dollar average market share during the same period in the prior year. We believe that both private label and leading brands play an important role in the categories in which we compete, appealing to different consumer segments. We closely monitor the price gap, or price premium, between our brands and private label brands, with the view that value is about more than price and the expectation that number one brands will continue to be an integral part of consumers’ shopping baskets.








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Our primary brands and major competitors as of April 30, 2022, are listed below.
Our Primary ProductsOur Primary BrandsCompeting BrandsCompetitors
U.S. Retail Pet Foods
Mainstream pet food
Meow Mix, 9Lives, and Kibbles ‘n Bits
Dog Chow (A), Beneful, Cat
Chow (A), Friskies, Kit & Kaboodle,
and Fancy Feast
Nestlé Purina PetCare Company
Pedigree, Iams, and Sheba
Mars, Incorporated
Pet snacks
Milk-Bone (A) and Pup-Peroni
Beggin’ StripsNestlé Purina PetCare Company
NudgesGeneral Mills, Inc.
Dentastix and Greenies
Mars, Incorporated
Premium pet food
Rachael Ray Nutrish and Nature’s Recipe
Blue Buffalo (A)
General Mills, Inc.
NutroMars, Incorporated
Hill’sHill’s Pet Nutrition, Inc.
Pro Plan, ONE, and Merrick
Nestlé Purina PetCare Company
U.S. Retail Coffee
Mainstream roast and ground coffee
Folgers (A) and Café Bustelo
Maxwell House and Yuban
The Kraft Heinz Company
Private Label BrandsVarious
McCaféKeurig Dr. Pepper
Cafe La LlaveF. Gaviña & Sons, Inc.
Single serve coffee - K-Cup®
Dunkin’, Folgers, Café Bustelo, and 1850®
Green Mountain Coffee (A) , Donut Shop, and McCafé
Keurig Dr. Pepper
StarbucksNestlé S.A.
Private Label BrandsVarious
Maxwell House and Gevalia
The Kraft Heinz Company
Premium coffee
Dunkin’ and 1850
Starbucks (A) and Seattle’s Best Coffee
Nestlé S.A.
Peet’s Coffee & TeaJDE Peet’s N.V.
Private Label BrandsVarious
Eight O’ClockTata Global Beverages Limited
Gevalia The Kraft Heinz Company
U.S. Retail Consumer Foods
Peanut butter and specialty spreads
Jif (A)
Private Label BrandsVarious
SkippyHormel Foods Corporation
NutellaFerrero SpA
Peter PanPost Holding, Inc.
Fruit spreads
Smucker’s (A)
Private Label BrandsVarious
Welch’sWelch Foods Inc.
Bonne MamanAndros Foods USA, Inc.
Frozen sandwiches and snacksSmucker’s Uncrustables
Hot Pockets (A)
Nestlé S.A.
Totino’sGeneral Mills, Inc.
El MonterreyRuiz Foods
International and Away From Home
Foodservice hot beverage
Folgers, 1850, and Café Bustelo
StarbucksNestlé S.A.
Private Label BrandsVarious
NescaféSociété des Produits Nestlé S.A.
Foodservice portion control
Smucker’s and Jif
Private Label BrandsVarious
Heinz, Welch’s, and Private Label Brands
The Kraft Heinz Company
Foodservice frozen handheldSmucker’s UncrustablesHot Off the GrillIntegrated Food Service
Canada coffeeFolgers
Tim Hortons (A)
Restaurant Brands International Inc.
Maxwell HouseThe Kraft Heinz Company
Private Label BrandsVarious
Canada flour
Robin Hood® (A) and Five Roses®
Private Label BrandsVarious
(A) Identifies the current market leader within the product category. In certain categories, the market leader is not identified as two or more brands compete for the largest share.
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Government Regulations: Our operations are subject to various regulations and laws administered by federal, state, and local government agencies in the U.S., including the Food and Drug Administration, Federal Trade Commission, Departments of Labor, Commerce, and Agriculture, Environmental Protection Agency, and Occupational Safety and Health Administration. Additionally, we are subject to regulations and laws administered by government agencies in Canada and other countries in which we have operations and our products are sold. In particular, the manufacturing, marketing, packaging, labeling, transportation, storage, distribution, and sale of food products are each subject to governmental regulation, encompassing such matters as ingredients, pricing, advertising, relations with distributors and retailers, health, safety, data privacy and security, anti-corruption, and the environment. Additionally, we are subject to tax and securities regulations, accounting and reporting standards, and other financial laws and regulations. We rely on legal and operational compliance programs, including in-house and outside counsel, to guide our businesses in complying with applicable laws and regulations of the countries in which we do business. We believe we are in compliance with such laws and regulations and do not expect continued compliance to have a material impact on our capital expenditures, earnings, or competitive position in 2023.

Environmental Matters: Compliance with environmental regulations and prioritizing our environmental sustainability efforts are important to us as a good corporate citizen. As such, we have public goals related to waste diversion, water usage intensity reduction, greenhouse gas emissions intensity reduction, and sustainable packaging. In support of our commitment to environmental sustainability, we have implemented and manage a variety of programs across our operations, including energy optimization, utilization of renewable energy, water conservation, recycling, and partnerships with farmers who implement sustainable practices. We continue to evaluate and modify our processes to further limit our impact on the environment.
Human Capital Management: Our values and principles are rooted in our Basic Beliefs and serve as the foundation for our strategic and daily decisions. As demonstrated by our Basic Beliefs of Quality, People, Ethics, Growth, and Independence, we are committed to supporting our employees holistically, both personally and professionally. With approximately 6,700 full-time employees worldwide, every employee makes a difference to our Company. We believe it is critical that we have an inclusive and diverse environment and that we take proactive steps to ensure we are enabling our employees to reach their full potential. In order to hold ourselves accountable, we conduct an employee engagement survey every two to three years to provide an opportunity for open and confidential feedback from our employees and to identify opportunities for improvement. Additionally, we conduct pulse surveys as needed to gain additional information based on responses to the larger engagement survey and other topics that may be immediately applicable. Employees also have the opportunity to anonymously report violations to the Commitment to Integrity: Our Code (“Code of Conduct”) or complaints regarding accounting, auditing, and financial-related matters through our Smucker Voice Line, which is managed by an independent third-party service provider.

Additional information regarding our human capital management is available in our 2021 Corporate Impact Report that can be found on our website at www.jmsmucker.com/news-stories/corporate-publications. Information on our website, including our 2021 Corporate Impact Report, is not incorporated by reference into this Annual Report on Form 10-K.

Health and Wellness: Maintaining a safe and healthy workplace is among our top priorities. We are diligent in ensuring workforce health and safety through education and training which is provided at all locations. These efforts resulted in our achievement of a total recordable incident rate during 2022 that is three times below the industry average. Further, we have maintained an unwavering commitment to supporting the health and well-being of our employees during the COVID-19 pandemic. We have implemented extensive safety and sanitation measures to help ensure employee health and well-being, encouraged remote work for all who are able, and introduced protocols in our manufacturing facilities to allow for appropriate social distancing and protection of our employees. During the second half of 2022, COVID-19 cases began to trend downward, and consistent with national and local health department direction, certain pandemic related safety measures were relaxed at our corporate offices and manufacturing facilities. However, if these trends were to reverse or another variant became prevalent, we would reevaluate our safety protocols at that time. Further, we have continued to promote the importance of self-care and the availability of mental health resources to our employees. In recognition of the need for mental health resources across society, we have partnered with the United Way® of Summit County 211 program and the National Council for Behavioral Health to provide support for our employees and communities.

As part of our focus on well-being, we emphasize the need for our employees to embrace healthy lifestyles. We offer all employees a variety of free and discounted services, as well as education opportunities, to support their physical, emotional, and financial well-being, including free sessions through our Employee Assistance Program and access to discounted gym memberships. We also offer on-site conveniences, such as health and wellness centers at several of our locations and a Child
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Development Center at our corporate headquarters in Orrville, Ohio. In addition, we provide our employees with time to renew and programs to promote workplace flexibility.

Diversity and Inclusion: We believe having an inclusive culture and the expertise of diverse professionals across our business is critical to our success. Our commitment to inclusion, diversity, and equity is focused around the following three pillars:
Workforce | Promoting a diverse workforce;
Workplace | Maintaining an inclusive environment for all employees; and
Marketplace | Sharing our efforts with external constituents to support greater cultural awareness and sensitivity in society.

In support of these pillars, we have made important progress over the past year on our commitment to create an environment where our employees are supported and differences are truly celebrated. We have successfully introduced six business resource groups (as part of our employee resource groups network) and our Advocate Alliance group to support employees and encourage allyship. Our business resource groups include BLAC (Black Leadership and Ally Council); PRIDE Alliance (i.e., LGBTQ+); GROW (Greater Resources and Opportunities for Women); RAICES (i.e., Latino/a/x and Hispanic contributions); AFVA (Armed Forces Veterans and Allies); and CAPIA (Community of Asians, Pacific Islanders, and Allies), and we are continuing to work on the introduction of other groups. Additionally, we have coordinated more than 8,500 hours of employee programming on education and understanding, hosted panels to reflect the unique experiences of underrepresented groups to increase employee awareness while encouraging empathy and allyship, and published regular content to celebrate our differences and increase understanding.

We approach diversity from the top-down, exemplified by our Board of Directors (the “Board”), where 4 of 12 directors are women and 2 of 12 directors are racially or ethnically diverse. Additionally, 46 percent of our executive and senior management team members are women, inclusive of 3 of 7 members of our Executive Leadership Team, demonstrating our belief that a diverse team with a variety of viewpoints is important and further contributes to a more effective decision-making process and overall greater success. Furthermore, approximately 30 percent of our employees are women and 25 percent of our employees are racially or ethnically diverse. We recognize we have work to do to ensure a more inclusive and diverse organization, which is why we are implementing changes to our recruiting, hiring, and retention programs to improve diversity at all levels within our Company. Beginning in 2022, all executive officers have 10 percent of their annual cash incentive awards based on the achievement of our environmental, social, and governance (“ESG”) objectives, which are focused on our inclusion, diversity, and equity efforts.

Further, we have partnered with the Akron Urban League, the Urban League of Greater Cleveland, the Equal Justice Initiative, the Human Rights Campaign, the NAACP Legal Defense and Educational Fund, the Asian Americans Advancing Justice, and the Toronto Chapter of Chinese Canadian National Council to further our commitment to this cause and have committed more than $600,000 to these partners as part of multi-year partnerships. These organizations advocate for inclusion, racial justice, and the advancement of underrepresented and vulnerable people. To ensure ongoing progress against our commitments, we are evaluating our success through several measures, including reviews of organization health assessments, evaluation of workforce composition and minority representation across all levels of the organization, and successful integration of key programming.

During 2022, due to our increased effort to support diversity and inclusion, our Corporate Equality Index (“CEI”) from the Human Rights Campaign was 95 out of 100 points, which increased from 80 and 55 points in 2021 and 2020, respectively. Specifically, we were able to increase the CEI index through enhancements to our transgender-inclusive health benefits, philanthropic contributions to and partnerships with LGBTQ+ organizations, pledging our support of the Human Rights Campaign’s Business Coalition for the Equality Act, enhancement of charitable giving guidelines to prohibit philanthropic support of organizations with an explicit policy of sexual orientation and gender identity discrimination, having a supplier diversity program that includes the outreach to LGBTQ+ owned businesses, and the establishment of the PRIDE Alliance business resource group.

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Learning and Development: We strive to foster an environment of growth for our people and support our culture of continuous learning. We support and challenge our employees to increase their knowledge, skills, and capabilities through all phases of their career. Our Employee Development programs offer foundational instruction on Company culture and provide employees additional learning opportunities throughout their careers. This is reflected in annual reviews, which allows management and employees to partner and determine specific opportunities for growth within each role through important work, new experiences generated through a dynamic environment, regular feedback, and purposeful development opportunities. Building a career at our Company is fundamental to who we are and is evidenced by our Executive Leadership Team, where 6 of 7 members were promoted from within. For additional information, see Information about Executive Officers.

In addition, we are committed to providing the tools and resources our employees need to learn, develop, and grow with us, including virtual sessions. A suite of online training and education programs are available to our employees, ranging from role-specific training to education on soft skills and our Company culture. Through these tools and resources, in 2022, we have coordinated more than 20,000 hours of professional development training for our employees. Our best-in-class “Discovering the Art of Leadership” series, developed in collaboration with Case Western Reserve University, teaches our people managers how to effectively lead teams and develop employees. We dedicate time to developing and coaching our people managers to provide support to our employees holistically. This means promoting resonant leadership and the practice of emotional intelligence and mindfulness, so our people managers have the knowledge and tools to support the unique needs of each employee.

Compensation and Benefits: We believe compensating our employees at market competitive rates and with performance-based awards supports the overall well-being of our employees. Our Total Rewards program offers competitive, comprehensive benefits to meet the unique needs of each employee at each life stage, including insurance coverage options for domestic partners in addition to married couples. The rewards program also addresses the holistic needs of our employees by supporting their physical well-being, providing tools and resources to help them actively take responsibility, share in the cost, and make the best decisions regarding their personal well-being. These programs provide resources that respond to their changing needs throughout their careers, including access to our Child Development Center, flexible work schedules, tuition assistance, pet insurance, and expanded parental leave. Additionally, our approach to paid time off is competitive with our industry peers, which includes at least three weeks of paid time off (and increases based on an employee’s tenure), 12 paid Company holidays per calendar year, including a floating holiday, which can be used at the employees’ discretion to observe and celebrate occasions that align with their personal interests and beliefs, 12 weeks of parental leave, in addition to up to 12 weeks of short-term disability available to birth mothers, and pet bereavement leave. In 2022, we extended our Total Rewards benefits package to include advocacy resources to help LGBTQ+ employees navigate obstacles and identify LGBTQ+ knowledgeable providers. In addition, we broadened our family building benefits to support the desire for all aspiring parents to build their family through enhanced infertility benefits, including adoption and surrogacy reimbursement.

Community and Social Impact: Supporting the communities where we live and work has been a Company priority since our inception. Through our many partnerships, we are able to understand the needs and support required within our local communities and leverage these relationships to make the connections necessary to offer this critical assistance. With our partners, including the American Red Cross®, United Way®, Feeding America®, and Habitat for Humanity®, we have helped support disaster relief efforts with product and financial donations. We have supported the LeBron James Family Foundation and its work with the I PROMISE School, including helping supply the school’s on-site food pantry, donating funds to the school’s library, and the development of the I PROMISE School’s J. M. Smucker Hometown Hall. In addition to our work to support those in the communities where we live and work, we believe it is important that we help facilitate business success globally and are proud that our employees share in this belief. Through our relationship with Partners in Food Solutions and TechnoServe®, we have opened up skills-based employee volunteer opportunities to our workforce, allowing our people to share their talents and expertise with companies that work to help provide a secure and consistent food supply for families in Africa.

Our Company is fortunate to have the expertise and passion of talented employees who help us deliver high-quality products to our customers and consumers across North America. We are also fortunate to have employees who share our commitment to ensure that people, pets, and communities where we live and work have access to the support and essential resources they need. We believe it is important to celebrate their contributions, including recognizing organizations they are especially passionate about. One way we do this is through our Company Matching Gift Program, which gives employees the opportunity to donate to partner charities and have their donation matched by the Company, dollar-for-dollar, from a minimum of $5 up to a maximum of $2,500 per calendar year per employee. In addition, each year we offer employees the opportunity to nominate the organizations most important to them to be added to the program.
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Information about our Executive Officers: The names, ages as of June 14, 2022, and current positions of our executive officers are listed below. All executive officers serve at the pleasure of the Board, with no fixed term of office.
NameAgeYears
with
Company
PositionServed as
an Officer
Since
Richard K. Smucker7449
Executive Chairman (A)
1974
Mark T. Smucker5224
President and Chief Executive Officer (B)
2001
John P. Brase542
Chief Operating Officer (C)
2020
Amy C. Held489
Chief Strategy and International Officer (D)
2018
Jeannette L. Knudsen5219
Chief Legal and Compliance Officer and Secretary (E)
2009
Tucker H. Marshall4610
Chief Financial Officer (F)
2020
Jill R. Penrose4918
Chief People and Administrative Officer (G)
2014
Geoff E. Tanner4819
Chief Commercial and Marketing Officer (H)
2019
 
(A)Mr. Richard Smucker was elected to his present position in May 2016, previously serving as Chief Executive Officer since August 2011.
(B)Mr. Mark Smucker was elected to his present position in May 2016, previously serving as President and President, Consumer and Natural Foods since April 2015.
(C)Mr. Brase was elected to his present position in April 2020, having previously served at The Procter & Gamble Company (“P&G”) for 30 years. He was the Vice President and General Manager of P&G’s North American Family Care business from April 2016 through March 2020.
(D)Ms. Held was elected to her present position in November 2019, having served as Senior Vice President, Corporate Strategy, M&A, and International since July 2018. Prior to that time, she served as Senior Vice President, Strategy and M&A since March 2018, and Vice President, Corporate Strategy and Development since May 2016.
(E)Ms. Knudsen was elected to her present position in November 2019, having served as Senior Vice President, General Counsel and Secretary since May 2016.
(F)Mr. Marshall was elected to his present position in May 2020, having served as Senior Vice President and Deputy Chief Financial Officer since November 2019. Prior to that time, he served as Vice President, Finance since May 2016.
(G)Ms. Penrose was elected to her present position in November 2019, having served as Senior Vice President, Human Resources and Corporate Communications since May 2016.
(H)Mr. Tanner was elected to his present position in November 2019, having served as Senior Vice President, Growth and Consumer Engagement since May 2016.
Available Information: Access to all of our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is provided, free of charge, on our website (investors.jmsmucker.com/sec-filings) as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC.
Item 1A.    Risk Factors.
Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described below should be carefully considered, together with the other information contained or incorporated by reference in this Annual Report on Form 10-K and our other filings with the SEC, in connection with evaluating the Company, our business, and the forward-looking statements contained in this Annual Report. Although the risks are organized and described separately, many of the risks are interrelated. 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.
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Risks Related to Our Business
The COVID-19 pandemic and related ongoing implications could negatively impact our business, financial condition, and results of operations.
The COVID-19 pandemic has had, and could continue to have, a negative impact on financial markets, economic conditions, and portions of our business and industry as a result of changes in consumer behaviors, retailer inventory levels, cost inflation, manufacturing and supply chain disruption, vaccination rates and effectiveness, the impact of vaccination requirements, and overall macroeconomic conditions. While our overall business has benefited from increased at-home consumption due to COVID-19, our ability to sustain heightened sales is dependent on evolving consumer mobility and purchasing behavior. Though the vaccination requirements and effectiveness may partially mitigate the risks around the continued spread of COVID-19, the related ongoing implications of the pandemic could negatively impact our business and results of operations in a number of ways, including, but not limited to, the following:
a shutdown or slowdown of one or more of our manufacturing facilities due to illness or labor shortages could significantly disrupt our production capabilities, particularly with respect to our coffee production, substantially all of which takes place in New Orleans, Louisiana;
a slowdown or stoppage in our supply chain could result from government restrictions or labor shortages due to illness or vaccination requirements, or if our suppliers, vendors, distributors, or third-party manufacturers fail to meet their obligations to us or experience disruptions in their ability to do so;
a portion of our workforce, including our management team, could become unable to work as a result of illness or government restrictions, or the attention of our management team could be diverted if any key employees become ill from COVID-19 and are unable to work;
a strain on our supply chain could result from increased consumer demand at our retail and e-commerce customers;
an increase in commodity and other input costs could result from market volatility, particularly with respect to protein meals, fats, corn products, and green coffee, the supply chain for which has been significantly disrupted by COVID-19;
an impairment in the carrying value of goodwill, other intangible assets, or other long-lived assets, or a change in the useful life of finite-lived intangible assets could occur if there are sustained changes in consumer purchasing behaviors, government restrictions, financial results, or a deterioration of macroeconomic conditions;
a decrease in demand for away from home establishments, resulting from government restrictions and social distancing measures, may adversely affect our away from home operations;
an increase in working capital needs could occur, caused by an increase in days sales outstanding or an extension of payment terms by our customers or a reduction of payment terms by our suppliers resulting from increased financial pressures;
a change in demand resulting from restrictions on social interactions could affect customers’ and consumers’ plans to purchase or methods of purchasing our products;
a change in demand for or availability of our products could result from retailers, distributors, or carriers modifying their restocking, fulfillment, or shipping practices;
a shift in consumer spending as a result of the economic downturn could result in consumers moving to private label or competitive products or our lower-priced products;
a change in trade promotions and marketing activities could occur in response to changes in consumer viewing and shopping habits resulting from the cancellation of major events, travel restrictions, and changes in in-store shopping practices;
a fluctuation in foreign currency exchange rates, interest rates, or inflation could result from market uncertainties;
an increase in the cost or the difficulty to obtain debt or equity financing, or to refinance our debt in the future, could affect our financial condition or our ability to fund operations or future investment opportunities; and
an increase in regulatory restrictions or continued market volatility could hinder our ability to implement price increases resulting from commodity or other input cost increases or to execute strategic business activities, including acquisitions and divestitures.

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These and other impacts of the COVID-19 pandemic could also heighten many of the other risk factors discussed in this section. Overall, the impact of COVID-19 remains uncertain and ultimately depends on the length and severity of the pandemic, inclusive of the introduction of new strains of the virus; the federal, state, and local government actions taken in response; vaccination rates and effectiveness; the impact of vaccination requirements; and the macroeconomic environment. We will continue to evaluate the nature and extent to which COVID-19 impacts our business, supply chain, including labor availability and attrition, consolidated results of operations, financial condition, and liquidity.
Our proprietary brands, packaging designs, and manufacturing methods are essential to the value of our business, and the inability to protect our intellectual property could harm the value of our brands and adversely affect our sales and profitability.

The success of our business depends significantly on our brands, know-how, and other intellectual property. We rely on a combination of trademarks, service marks, trade secrets, patents, copyrights, licensing agreements, and similar rights to protect our intellectual property. The success of our growth strategy depends on our continued ability to use our existing trademarks and service marks in order to maintain and increase brand awareness and further develop our brands. If our efforts to protect our intellectual property are not adequate, if any third party misappropriates or infringes on our intellectual property, or if we are alleged to be misappropriating or infringing on the intellectual property rights of others, the value of our brands may be harmed, which could have a material adverse effect on our business. From time to time, we are engaged in litigation to protect our intellectual property, which could result in substantial costs as well as diversion of management attention.
In particular, we consider our proprietary coffee roasting methods essential to the consistent flavor and richness of our coffee products and, therefore, essential to our coffee brands. Because many of the roasting methods we use are not protected by patents, it may be difficult for us to prevent competitors from copying our roasting methods if such methods become known. We also believe that our packaging innovations, such as our AromaSeal canisters, are important to the coffee business’ marketing and operational efforts. If our competitors copy our roasting or packaging methods or develop more advanced roasting or packaging methods, the value of our coffee brands may be diminished, and we could lose customers to our competitors.
We use a single national broker to represent a portion of our branded products to the retail grocery trade and any failure by the broker to effectively represent us could adversely affect our business.
We use a single national broker in the U.S. to represent a portion of our branded products to the retail grocery trade. Our business would suffer disruption if this broker were to fail to perform brokerage services or to effectively represent us to the retail grocery trade, which could adversely affect our business.
Loss or interruption of supply from single-source suppliers of raw materials and finished goods could have a disruptive effect on our business and adversely affect our results of operations.
We have elected to source certain raw materials, such as packaging for our Folgers coffee products, as well as our Jif peanut butter, and finished goods, such as K-Cup® pods, our Pup-Peroni dog snacks, and liquid coffee, from single sources of supply. While we believe that, except as set forth below, alternative sources of these raw materials and finished goods could be obtained on commercially reasonable terms, loss or an extended interruption in supplies from a single-source supplier would result in additional costs, could have a disruptive short-term effect on our business, and could adversely affect our results of operations.
Keurig is our single-source supplier for K-Cup® pods, which are used in its proprietary Keurig® K-Cup® brewing system. There are a limited number of manufacturers other than Keurig that are making pods that will work in such proprietary brewing system. In addition, JDE Peet’s N.V. (“JDE Peet’s”) is our single-source supplier for liquid coffee for our Away From Home business, and there are a limited number of manufacturers other than JDE Peet’s that are able to manufacture liquid coffee. If either Keurig or JDE Peet’s are unable to supply K-Cup® pods or liquid coffee, respectively, to us for any reason, it could be difficult to find an alternative supplier for such goods on commercially reasonable terms, which could have a material adverse effect on our results of operations.
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Certain of our products are produced at single manufacturing sites.
We have consolidated our production capacity for certain products into single manufacturing sites, including substantially all of our coffee, Milk-Bone dog snacks, and fruit spreads. We could experience a production disruption at these or any of our manufacturing sites resulting in a reduction or elimination of the availability of some of our products. If we are not able to obtain alternate production capability in a timely manner, our business, financial condition, and results of operations could be adversely affected.
A significant interruption in the operation of any of our supply chain or distribution capabilities could have an adverse effect on our business, financial condition, and results of operations.
Our ability and the ability of our third-party suppliers and service providers, distributors, and contract manufacturers to manufacture, distribute, and sell products is critical to our success. A significant interruption in the operation of any of our manufacturing or distribution capabilities, or the manufacturing or distribution capabilities of our suppliers, distributors, or contract manufacturers, or a service failure by a third-party service provider, whether as a result of adverse weather conditions or a natural disaster, fire, or water availability, whether caused by climate change or otherwise; work stoppage or labor shortages; or political instability, terrorism, armed hostilities (including the recent conflict between Russia and Ukraine), pandemic illness (such as COVID-19), government restrictions, or other causes could significantly impair our ability to operate our business. In particular, substantially all of our coffee production takes place in New Orleans, Louisiana, and is subject to risks associated with hurricane and other weather-related events, and some of our production facilities are located in places where tornadoes or wildfires can frequently occur, such as Alabama, Kansas, and California. In addition, we are actively monitoring COVID-19 and its impact on our supply chain and consolidated results of operations, which could be negatively impacted in a number of ways, as previously noted. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition, and results of operations.

In November 2021, we announced plans to invest $1.1 billion to build a new manufacturing facility and distribution center in McCalla, Alabama, dedicated to the production of Smucker’s Uncrustables frozen sandwiches. Construction of this facility began in the third quarter of 2022, with production expected to begin in calendar year 2025. Production of new manufacturing facilities and distribution centers could cause delays and increased costs, such as shortages of materials or skilled labor, unforeseen construction, scheduling, engineering, or environmental problems, impacts of adverse weather, and unanticipated cost increases. In addition, any construction delays may impact the future demand for Smucker’s Uncrustables frozen sandwiches. If we are unable to complete the construction of the McCalla facility within the anticipated timeframe and within our cost estimates, our financial condition and results of operations could be adversely affected.
Our business could be harmed by strikes or work stoppages.
As of April 30, 2022, 26 percent of our full-time employees, located at eight manufacturing locations, are covered by collective bargaining agreements. These contracts vary in term depending on location, with two contracts expiring in 2023, representing 9 percent of our total employees. We cannot assure that we will be able to renew these collective bargaining agreements on the same or more favorable terms as the current agreements, or at all, without production interruptions caused by labor stoppages. If a strike or work stoppage were to occur in connection with negotiations of new collective bargaining agreements or as a result of disputes under collective bargaining agreements with labor unions, our business, financial condition, and results of operations could be materially adversely affected.
The success of our business depends substantially on consumer perceptions of our brands.
We are the branded market leader in several categories both in the U.S. and Canada. We believe that maintaining and continually enhancing the value of our brands is critical to the success of our business. Brand value is based in large part on consumer perceptions. Success in promoting and enhancing brand value depends in large part on our ability to provide high-quality products. Brand value could diminish significantly as a result of a number of factors, such as if we fail to preserve the quality of our products, if we are perceived to act in an irresponsible manner, if the Company or our brands otherwise receive negative publicity, if our brands fail to deliver a consistently positive consumer experience, or if our products become unavailable to consumers. The growing use of social and digital media by consumers increases the speed and extent that information and opinions can be shared. Negative posts or comments about us or our brands or products on social or digital media could damage our brands and reputation. If we are unable to build and sustain brand equity by offering recognizably superior products, we may be unable to maintain premium pricing over private label products. If our brand values are diminished, our revenues and operating results could be materially adversely affected. In addition, anything that harms the
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Dunkin’ or Rachael Ray brands could adversely affect the success of our exclusive licensing agreements with the owners of these brands.
We may not be able to attract, develop, and retain the highly skilled people we need to support our business.

We depend on the skills and continued service of key employees, including our experienced management team. In addition, our ability to achieve our strategic and operating goals depends on our ability to identify, recruit, hire, train, and retain qualified individuals. We compete with other companies both within and outside of our industry for talented people, and we may lose key employees or fail to attract, recruit, train, develop, and retain other talented individuals. Any such loss, failure, or negative perception with respect to these individuals may adversely affect our business or financial results. In addition, activities related to identifying, recruiting, hiring, integrating, and training qualified individuals may require significant time and expense. We may not be able to locate suitable replacements for any key employees who leave or to offer employment to potential replacements on reasonable terms, each of which may adversely affect our business and financial results.

During 2022, we experienced an increasingly competitive labor market, increased employee turnover, changes in the availability of our workers, including COVID-19-related absences, and labor shortages in our supply chain. These challenges have resulted in, and could continue to result in, increased costs and could impact our ability to meet consumer demand, each of which may adversely affect our business and financial results.
Our operations are subject to the general risks associated with acquisitions, divestitures, and restructurings.
Our stated strategic vision is to own and market a portfolio of food and beverage brands that combines number one and leading brands with emerging, on-trend brands to drive balanced, long-term growth, primarily in North America. We have historically made strategic acquisitions of brands and businesses, and intend to do so in the future in support of this strategy. If we are unable to complete acquisitions or to successfully integrate and develop acquired businesses, including the effective management of integration and related restructuring costs, we could fail to achieve the anticipated synergies and cost savings, or the expected increases in revenues and operating results, either of which could have a material adverse effect on our financial results.
In addition, we have made strategic divestitures of brands and businesses, including the sale of the natural beverage and grains, private label dry pet food, Crisco, and Natural Balance businesses, and we may do so in the future. If we are unable to complete divestitures or successfully transition divested businesses, including the effective management of the related separation and stranded overhead costs and transition services, our business and financial results could be negatively impacted. Divestitures and related restructuring costs, such as the restructuring plan entered into in 2021 and expanded in 2022, require a significant amount of management and operational resources. These additional demands could divert management’s attention from core business operations, potentially adversely impacting existing business relationships and employee morale, resulting in negative impacts on our financial performance.
We may not realize the benefits we expect from our cost reduction and other cash management initiatives.
We continuously pursue initiatives to reduce costs, increase effectiveness, and optimize cash flow. We may not realize all of the anticipated cost savings or other benefits from such initiatives. Other events and circumstances, such as financial or strategic difficulties, delays, or unexpected costs, may also adversely impact our ability to realize all of the anticipated cost savings or other benefits, or cause us not to realize such cost savings or other benefits on the expected timetable. If we are unable to realize the anticipated benefits, our ability to fund other initiatives may be adversely affected. Finally, the complexity of the implementation will require a substantial amount of management and operational resources. Our management team must successfully execute the administrative and operational changes necessary to achieve the anticipated benefits of the initiatives. These and related demands on our resources may divert the organization’s attention from other business issues, have adverse effects on existing business relationships with suppliers and customers, and impact employee morale. Any failure to implement these initiatives in accordance with our plans could adversely affect our business and financial results.
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Risks Related to Our Industry

Our operations are subject to the general risks of the food industry.
The food industry is subject to risks posed by food spoilage and contamination, product tampering, mislabeling, food allergens, adulteration of food products resulting in product recall, and consumer product liability claims. Our operations could be impacted by both genuine and fictitious claims regarding our products as well as our competitors’ products. In the event of product contamination, tampering, or mislabeling, we may need to recall some of our products. A widespread product recall could result in significant loss due to the cost of conducting a product recall, including destruction of inventory and the loss of sales resulting from the unavailability of product for a period of time. We could also suffer losses from a significant product liability judgment against us. A significant product recall or a product liability judgment, involving either us or our competitors, could also result in a loss of consumer confidence in our food products or the food category, and an actual or perceived loss of value of our brands, materially impacting consumer demand.
Subsequent to April 30, 2022, we initiated a voluntary recall of select Jif peanut butter products produced at our Lexington, Kentucky, facility and sold primarily in the U.S., due to potential salmonella contamination. At that time, we also suspended the manufacturing of Jif peanut butter products at the Lexington facility. No other products produced at our other facilities were affected by this recall. As a result, and in accordance with U.S. GAAP, we recorded reserves of $52.3 in our consolidated financial statements as of April 30, 2022, within our U.S. Retail Consumer Foods segment, which was inclusive of unsaleable inventory as of April 30, 2022, as well as estimated customer returns and consumer refunds related to net sales in 2022. We anticipate these costs will be recovered by insurance, and as a result, an insurance receivable of $49.8, net of the deductible, was also recorded as of April 30, 2022.

On June 10, 2022, we announced our plans to resume manufacturing Jif peanut butter products at our Lexington facility. Further, our Memphis, Tennessee, facility was not affected by the recall and has continued to manufacture Jif peanut butter products. However, we temporarily paused shipments from the Memphis facility to eliminate confusion while customers cleared their shelves of potentially impacted products manufactured at the Lexington facility. We will resume shipping from both the Lexington and Memphis facilities and are partnering with retailers to restock Jif peanut butter products as soon as possible. Based on progress to date, we believe this matter will be substantially resolved during the first quarter of 2023. Based on our best estimates, we anticipate an unfavorable pre-tax impact of approximately $125.0 in 2023, net of the remaining anticipated insurance recoveries, primarily related to the estimated impact of manufacturing downtime, customer returns and penalties, and unsaleable inventory, as well as other recall related costs. The recall will primarily impact our U.S. Retail Consumer Foods segment. Our ultimate loss from the Jif peanut butter recall could differ materially from these estimates, primarily dependent upon the magnitude of lost sales resulting from the unavailability of products for a longer period of time than anticipated, as well as any resulting adverse consumer reaction, including the loss of perceived value and any shift in consumer preferences.
Changes in our relationships with significant customers, including the loss of our largest customer, could adversely affect our results of operations.
Sales to Walmart Inc. and subsidiaries amounted to 34 percent of net sales in 2022. These sales are primarily included in our U.S. retail market segments. Trade receivables – net at April 30, 2022, included amounts due from Walmart Inc. and subsidiaries of $179.9 million, or 34 percent of the total trade receivables – net balance. During 2022, our top 10 customers, collectively, accounted for approximately 60 percent of consolidated net sales. We expect that a significant portion of our revenues will continue to be derived from a limited number of customers as the retail environment continues to consolidate. Our customers are generally not contractually obligated to purchase from us. These customers make purchase decisions based on a combination of price, promotional support, product quality, consumer demand, customer service performance, their desired inventory levels, and other factors. Changes in customers’ strategies, including a reduction in the number of brands they carry or a shift of shelf space to private label products, may adversely affect sales and profitability. Customers also may respond to price increases by reducing distribution, resulting in reduced sales of our products. Additionally, our customers may face financial or other difficulties that may impact their operations and their purchases from us, which could adversely affect our results of operations. A reduction in sales to one or more major customers could have a material adverse effect on our business, financial condition, and results of operations.
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We operate in the competitive food industry and continued demand for our products may be affected by our failure to effectively compete or by changes in consumer preferences.
We face competition across our product lines from other food companies with the primary methods and factors in competition being product quality, price, packaging, product innovation, nutritional value, convenience, customer service, advertising, and promotion. Continued success is dependent on product innovation, the ability to secure and maintain adequate retail shelf space and to compete in new and growing channels, and effective and sufficient trade merchandising, advertising, and marketing programs. In particular, technology-based systems, which give consumers the ability to shop through e-commerce websites and mobile commerce applications, are also significantly altering the retail landscape in many of our markets. We are committed to serving customers and consumers in e-commerce, transforming our manufacturing, commercial, and corporate operations through digital technologies, and enhancing our data analytics capabilities to develop new commercial insights. However, if we are unable to effectively compete in the expanding e-commerce market, adequately leverage technology to improve operating efficiencies, or develop the data analytics capabilities needed to generate actionable commercial insights, our business performance may be impacted, which may negatively impact our financial condition and results of operations.
Some of our competitors have substantial financial, marketing, and other resources, and competition with them in our various markets, channels, and product lines could cause us to reduce prices, increase marketing or other expenditures, or lose category share. Category share and growth could also be adversely impacted if we are not successful in introducing new products. Introduction of new products and product extensions requires significant development and marketing investment. If our products fail to meet consumer preferences, or we fail to introduce new and improved products on a timely basis, then the return on that investment will be less than anticipated and our strategy to grow sales and profits through investment in innovation will be less successful. In order to generate future revenues and profits, we must continue to sell products that appeal to our customers and consumers. Specifically, there are a number of trends in consumer preferences that may impact us and the food industry as a whole, including convenience, flavor variety, an emphasis on protein and snacking, and the desire for transparent product labeling and simple and natural ingredients.
We may be limited in our ability to pass cost increases on to our customers in the form of price increases or may realize a decrease in sales volume to the extent price increases are implemented.
We may not be able to pass some or all of any increases in the price of raw materials, energy, and other input costs to our customers by raising prices. To the extent competitors do not also increase their prices, customers and consumers may choose to purchase competing products, including private label or other lower-priced offerings, which may adversely affect our results of operations.
Consumers may be less willing or able to pay a price differential for our branded products and may increasingly purchase lower-priced offerings or may forego some purchases altogether, especially during economic downturns or instances of increased inflationary pressures. Retailers may also increase levels of promotional activity for lower-priced offerings as they seek to maintain sales volumes during times of economic uncertainty. Accordingly, sales volumes of our branded products could be reduced or lead to a shift in sales mix toward our lower-margin offerings. As a result, decreased demand for our products may adversely affect our results of operations.
Our ability to competitively serve customers depends on the availability of reliable transportation. Increases in logistics and other transportation-related costs could adversely impact our results of operations.
Logistics and other transportation-related costs have a significant impact on our earnings and results of operations. We use multiple forms of transportation, including ships, trucks, and railcars, to bring our products to market. Disruption to the timely supply of these services or increases in the cost of these services for any reason, including availability or cost of fuel, regulations affecting the industry, labor shortages in the transportation industry, service failures by third-party service providers, accidents, natural disasters, inflation, or a pandemic illness (such as the COVID-19 pandemic), which may impact the transportation infrastructure or demand for transportation services, could have an adverse effect on our ability to serve our customers, and could have a material adverse effect on our business, financial condition, and results of operations.
We must leverage our brand value to compete against private label products.
In nearly all of our product categories, we compete against branded products as well as private label products. Our products must provide higher value and/or quality to our consumers than alternatives, particularly during periods of economic
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uncertainty or inflation. Consumers may not buy our products if relative differences in value and/or quality between our products and private label products change in favor of competitors’ products or if consumers perceive this type of change. If consumers prefer private label products, which are typically sold at lower prices, then we could lose category share or sales volumes or shift our product mix to lower margin offerings, which could have a material effect on our business and consolidated financial position and on the consolidated results of our operations and profitability.
Financial Risks
Our results may be adversely impacted as a result of increased cost, limited availability, and/or insufficient quality of raw materials, including commodities and agricultural products.
We and our business partners purchase and use large quantities of many different commodities and agricultural products in the manufacturing of our products, including green coffee, peanuts, protein meals, oils and fats, grains, sweeteners, and fruit. In addition, we and our business partners utilize significant quantities of plastic, glass, metal cans, caps, carton board, and corrugate to package our products and natural gas and fuel oil to manufacture, package, and distribute our products. The prices of these commodities, agricultural-based products, and other materials are subject to volatility and can fluctuate due to conditions that are difficult to predict, including global supply and demand, commodity market fluctuations, crop sizes and yield fluctuations, adverse weather conditions, natural disasters, water supply, pandemic illness (such as the COVID-19 pandemic), foreign currency fluctuations, investor speculation, trade agreements, political instability, armed hostilities (including the recent conflict between Russia and Ukraine), consumer demand, general economic conditions (such as inflationary pressures), and changes in governmental agricultural programs. In particular, the supply chain for protein meals, fats, corn products, and green coffee has been significantly disrupted by the COVID-19 pandemic, and therefore, the price for these commodities has increased and may continue to increase due to such disruptions. Furthermore, the price of grains and oils and fat-based products has been impacted by the recent conflict between Russia and Ukraine.
We also compete for certain raw materials, notably corn and soy-based agricultural products, with the biofuels industry, which has resulted in increased prices for these raw materials. Additionally, farm acreage currently devoted to other agricultural products we purchase may be utilized for biofuels crops resulting in higher costs for the other agricultural products we utilize. Although we use futures, options, basis, and fixed price contracts to manage commodity price volatility in some instances, commodity price increases ultimately result in corresponding increases in our raw material and energy costs.
During 2022, we experienced materially higher commodity and supply chain costs, including transportation, packaging, manufacturing, and ingredient costs, due to inflationary pressures. We expect the pressures of cost inflation to continue into 2023. Although we take measures to mitigate inflation through the use of derivatives and pricing actions, if these measures are not effective, our financial condition, results of operations, and cash flows could be materially adversely affected.

We expect the green coffee commodity markets to continue to be challenging due to the significant ongoing price volatility. For example, during 2022, we experienced drought and frost impacts, which substantially reduced green coffee production in Brazil. Due to the significance of green coffee to our coffee business, combined with our ability to only partially mitigate future price risk through purchasing practices and hedging activities, significant increases or decreases in the cost of green coffee could have an adverse impact on our profitability, as compared to that of our competitors. In addition, if we are not able to purchase sufficient quantities of green coffee due to any of the above factors or to a worldwide or regional shortage, we may not be able to fulfill the demand for our coffee, which could have a material adverse effect on our business, financial condition, and results of operations.

Our efforts to manage commodity, foreign currency exchange, and other price volatility through derivative instruments could adversely affect our results of operations and financial condition.
We use derivative instruments, including commodity futures and options, to reduce the price volatility associated with anticipated commodity purchases. The extent of our derivative position at any given time depends on our assessment of the markets for these commodities. If we fail to take a derivative position and costs subsequently increase, or if we institute a position and costs subsequently decrease, our costs may be greater than anticipated or higher than our competitors’ costs and our financial results could be adversely affected. In addition, our liquidity may be adversely impacted by the cash margin requirements of the commodities exchanges or the failure of a counterparty to perform in accordance with a contract.
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We currently do not qualify any of our commodity or foreign currency exchange derivatives for hedge accounting treatment. We instead mark-to-market our derivatives through the Statement of Consolidated Income, which results in changes in the fair value of all of our derivatives being immediately recognized in consolidated earnings, resulting in potential volatility in both gross profit and net income. These gains and losses are reported in cost of products sold in our Statement of Consolidated Income but are excluded from our segment operating results and non-GAAP earnings until the related inventory is sold, at which time the gains and losses are reclassified to segment profit and non-GAAP earnings. Although this accounting treatment aligns the derivative gains and losses with the underlying exposure being hedged within segment results, it may result in volatility in our consolidated earnings.
Weak financial performance, downgrades in our credit ratings, or disruptions in the financial markets may adversely affect our ability to access capital in the future.
We may need new or additional financing in the future to conduct our operations, expand our business, or refinance existing indebtedness, which would be dependent upon our financial performance. Any downgrade in our credit ratings, particularly our short-term rating, would likely impact the amount of commercial paper we could issue and increase our commercial paper borrowing costs. The liquidity of the overall capital markets and the state of the economy, including the food and beverage industry, may make credit and capital markets more difficult for us to access, even though we have an established revolving credit facility. From time to time, we have relied, and also may rely in the future, on access to financial markets as a source of liquidity for working capital requirements, acquisitions, and general corporate purposes. In particular, our access to funds under our revolving credit facility is dependent on the ability of the financial institutions that are parties to that facility to meet their funding commitments. The obligations of the financial institutions under our revolving credit facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others. In addition, long-term volatility and disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives, or the failure of significant financial institutions could adversely affect our access to the liquidity needed for our businesses in the longer term. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Disruptions in the capital and credit markets could also result in higher interest rates on publicly issued debt securities and increased costs under credit facilities. Continuation of these disruptions would increase our interest expense and capital costs and could adversely affect our results of operations and financial position. Furthermore, as a result of COVID-19, we may experience an increase in the cost of or the difficulty to obtain debt or equity financing, or to refinance our debt in the future, which could also affect our financial condition or our ability to fund operations or future investment opportunities.
Our fixed- and variable-rate debt use the London Interbank Offered Rate (“LIBOR”) as a benchmark for establishing interest rates, and we enter into interest rate swaps from time to time that contain a variable element based on LIBOR. The Financial Conduct Authority in the United Kingdom no longer requires banks to submit LIBOR. Since LIBOR ceases to be available, we may need to amend affected agreements, and we cannot predict what alternative index will be negotiated with our counterparties. Although we do not anticipate a significant impact to our financial position as a result of this transition given our current mix of fixed- and variable-rate debt, our interest expense could increase, and our available cash flow for general corporate requirements may be adversely affected.
Our substantial debt obligations could restrict our operations and financial condition. Additionally, our ability to generate cash to make payments on our indebtedness depends on many factors beyond our control.
As of April 30, 2022, we had $4.5 billion of short-term borrowings and long-term debt. We may also incur additional indebtedness in the future. Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness rather than for other corporate purposes, including funding future expansion of our business and ongoing capital expenditures, which could impede our growth. Our substantial indebtedness could have other adverse consequences, including:
making it more difficult for us to satisfy our financial obligations;
increasing our vulnerability to adverse economic, regulatory, and industry conditions, and placing us at a disadvantage compared to our competitors that are less leveraged;
limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
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limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions, and general corporate or other purposes; and
exposing us to greater interest rate risk, including the risk to variable borrowings of a rate increase and the risk to fixed borrowings of a rate decrease.
Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient to enable us to pay our indebtedness when scheduled payments are due or to fund other liquidity needs. In these circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. Any refinancing of our debt could be at higher interest rates and may require make-whole payments and compliance with more onerous covenants, which could further restrict our business operations. Our ability to refinance our indebtedness or obtain additional financing would depend on, among other things, our financial condition at the time, restriction in the agreements governing our indebtedness, and the condition of the financial markets and the industry in which we operate. As a result, we may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. Without this financing, we may have to seek additional equity or debt financing or restructure our debt, which could harm our long-term business prospects. Our failure to comply with the terms of any existing or future indebtedness could result in an event of default which, if not cured or waived, could result in the acceleration of the payment of all of our debt.
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 composed of 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, 2022, the carrying value of goodwill and other intangible assets totaled $11.7 billion, compared to total assets of $16.1 billion and total shareholders’ equity of $8.1 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 April 30, 2022, goodwill and indefinite-lived intangible assets totaled $6.0 billion and $2.6 billion, respectively. The carrying values of the goodwill and indefinite-lived intangible assets were $2.4 billion and $1.1 billion, respectively, within the U.S. Retail Pet Foods segment, and $2.1 billion and $1.2 billion, respectively, within the U.S. Retail Coffee segment, which represent approximately 80 percent of the total goodwill and indefinite-lived intangible assets as of April 30, 2022. Furthermore, the goodwill within the U.S. Retail Pet Foods segment remains susceptible to future impairment charges due to narrow differences between fair value and carrying value, which is primarily attributable to the recognition of these assets at fair value resulting from impairment charges in recent years. To date, we have recognized $465.0 of impairment charges related to the goodwill and indefinite-lived intangible assets acquired as part of the Big Heart Pet Brands (“Big Heart”) acquisition in 2015, primarily as a result of reductions in our long-term net sales and profitability projections. Furthermore, during 2022, we recognized an impairment charge of $150.4 related to the Rachael Ray Nutrish brand that was acquired as part of the acquisition of Ainsworth Pet Nutrition LLC (“Ainsworth”) in 2019, primarily driven by the re-positioning of this brand within the Pet Foods brand portfolio, which led to a decline in the current and long-term net sales expectations and the royalty rate used in the valuation analysis. We reassessed the long-term strategic expectations for the Rachael Ray Nutrish brand and reclassified this brand as a finite-lived intangible asset on January 31, 2022. For additional information, refer to Note 6: Goodwill and Other Intangible Assets.
We do not believe that the Pet Foods reporting unit or any of the indefinite-lived assets within the U.S. Retail Pet Foods segment are more likely than not impaired as of April 30, 2022. 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, 2022, the estimated fair value was substantially in excess of the carrying value for the remaining reporting units and material indefinite-lived intangible assets, and in all such instances, the estimated fair value exceeded the carrying value by greater than 10 percent.
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Furthermore, we continue to evaluate the potential impact of COVID-19 on the fair value of our goodwill and indefinite-lived intangible assets. While we concluded there were no indicators of impairment as of April 30, 2022, any significant sustained adverse change in consumer purchasing behaviors, government restrictions, financial results, or macroeconomic conditions could result in future impairment.

We work with our suppliers to extend our payment terms, which are then supplemented by a third-party administrator to assist in effectively managing our working capital. If the extension of payment terms is reversed or the financial institution terminates its participation in the program, our ability to maintain acceptable levels of working capital may be adversely affected.

As part of ongoing efforts to maximize working capital, we work with our suppliers to optimize our terms and conditions, which includes the extension of payment terms. Payment terms with our suppliers, which we deem to be commercially reasonable, range from 0 to 180 days. During 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. We have no economic interest in a supplier’s decision to enter into these agreements. Our rights and 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 April 30, 2022 and 2021, $314.3 and $304.2 of our outstanding payment obligations, respectively, were elected and sold to a financial institution by participating suppliers.

If the financial institution terminates its participation in our supplier financing program and we are unable to modify related consumer payment terms or payment terms are shortened as a result of supplier negotiations, working capital could be adversely affected. In addition, due to terminations or negotiations, we may be unable to secure alternative programs and may have to utilize various financing arrangements for short-term liquidity or increase our long-term debt.
Risks Related to Regulation and Litigation
We could be subject to adverse publicity or claims from consumers.
Certain of our products contain ingredients which are the subject of public scrutiny, including the suggestion that consumption may have adverse health effects. Although we strive to respond to consumer preferences and social expectations, we may not be successful in these efforts. An unfavorable report on the effects of ingredients present in our products, product recalls, such as the Jif peanut butter product recall, or negative publicity or litigation could influence consumer preferences, significantly reduce the demand for our products, and adversely affect our profitability.
We may also be subject to complaints from or litigation by consumers who allege food and beverage-related illness, or other quality, health, or operational concerns. Adverse publicity resulting from such allegations could materially adversely affect us, regardless of whether such allegations are true or whether we are ultimately held liable. A lawsuit or claim could result in an adverse decision against us, which could have a material adverse effect on our business, financial condition, and results of operations.
Changes in tax, environmental, or other regulations and laws, or their application, or failure to comply with existing licensing, trade, and other regulations and laws could have a material adverse effect on our financial condition.

We are subject to income and other taxes, primarily in the U.S. and Canada, based upon the jurisdictions in which our sales and profits are determined to be earned and taxed. Federal, state, and foreign statutory income tax rates and taxing regimes have been subject to significant change and continue to evolve. Our interpretation of current tax laws and their applicability to our business, as well as any changes to existing laws, can significantly impact our effective income tax rate and deferred tax balances. In particular, recent proposals brought forth by the U.S. presidential administration include increases to federal income tax rates that, if enacted, could have a material impact to our financial results. We are also subject to regular reviews, examinations, and audits by the Internal Revenue Service (“IRS”) and other taxing authorities with respect to taxes within and outside of the U.S. Although we believe our tax estimates are reasonable, the final outcome of tax controversies could result in material incremental tax liabilities, including interest and penalties. Our effective income tax rate is also influenced by the geography, timing, nature, and magnitude of transactions, such as acquisitions and divestitures, restructuring activities, and impairment charges. Further, in November 2021, the Infrastructure Investment and Jobs Act reinstated and expanded the
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federal Superfund chemical excises tax, which will be in place July 1, 2022, through December 31, 2031, and could materially increase our costs and impact margins.
Our operations are subject to various regulations and laws, in addition to tax laws, administered by federal, state, and local government agencies in the U.S., including the U.S. Food and Drug Administration, U.S. Federal Trade Commission, the U.S. Department of Agriculture, Commerce, and Labor, state regulatory agencies, and other agencies, as well as to regulations and laws administered by government agencies in Canada and other countries in which we have operations and our products are sold. In particular, the manufacturing, marketing, packaging, labeling, distribution, and sale of food products are each subject to governmental regulation that is increasingly extensive, encompassing such matters as ingredients (including whether a product contains bioengineered ingredients), packaging, pricing, advertising, relations with distributors and retailers, health, safety, data privacy, and the environment. Additionally, we are routinely subject to new or modified securities regulations, other laws and regulations, and accounting and reporting standards.
In the U.S., we are required to comply with federal laws, such as the Food, Drug and Cosmetic Act, the Food Safety Modernization Act, the Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Tariff Act, laws governing equal employment opportunity, and various other federal statutes and regulations. We are also subject to various state and local statutes and regulations, including the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”), which requires that a specific warning appear on any product sold in the State of California that contains a substance listed by that state as having been found to cause cancer or birth defects. Proposition 65 exposes all food and beverage producers to the possibility of having to provide warnings on their products, as well as civil penalties.
We regularly move data across national and state borders to conduct our operations and, consequently, are subject to a variety of laws and regulations in the U.S. and other jurisdictions regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. There is significant uncertainty with respect to compliance with such privacy and data protection laws and regulations because they are continuously evolving and developing and may be interpreted and applied differently from country to country and state to state and may create inconsistent or conflicting requirements.
Complying with new regulations and laws, or changes to existing regulations and laws, or their application could increase our costs or adversely affect our sales of certain products. In addition, our failure or inability to comply with applicable regulations and laws could subject us to civil remedies, including fines, injunctions, recalls or seizures, and potential criminal sanctions, which could have a material adverse effect on our business and financial condition.
Our operations in certain developing markets expose us to regulatory risks.
In many countries outside of the U.S., particularly in those with developing economies, it may be common for others to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act or similar local anti-bribery or anti-corruption laws. These laws generally prohibit companies and their employees, contractors, or agents from making improper payments to government officials for the purpose of obtaining or retaining business. Failure to comply with these laws could subject us to civil and criminal penalties that could have a material adverse effect on our financial condition and results of operations.
Risks associated with climate change and other environmental impacts or legal, regulatory, or market measures to address climate change may negatively affect our business and operations.

As set forth in the Intergovernmental Panel on Climate Change Sixth Assessment Report, global average temperatures are gradually increasing due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere, which have contributed to and are expected to continue contributing to significant changes in weather patterns around the globe and an increase in the frequency and severity of extreme weather and natural disasters. In the event that climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as green coffee, peanuts, protein meals, oils and fats, grains, sweeteners, and fruit. We may also be subjected to decreased availability or less favorable pricing for water or energy as a result of such change, which could impact our manufacturing and distribution operations. In addition, natural disasters and extreme weather conditions may disrupt the productivity of our facilities or the operation of our supply chain, which could increase our insurance or other operating costs or require us to make additional, unplanned capital expenditures. Specifically, in 2022, Hurricane Ida caused our coffee manufacturing facilities in New Orleans, Louisiana, to be temporarily shut down,
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and in 2021, unforeseen weather events in Texas, Oklahoma, and Kansas temporarily shut down our pet manufacturing facilities in Kansas. Although we consider these to be uncommon events and we were able to effectively minimize any disruptions through our business continuity planning efforts, extreme weather could disrupt our production in the future, adversely affecting our ability to meet customer deadlines and supply demands.

Additionally, there is an increased focus by foreign, federal, state, and local regulatory and legislative bodies regarding environmental policies relating to climate change, regulating greenhouse gas emissions, energy policies, and sustainability, including single-use plastics. Increased energy or compliance costs and expenses due to the impacts of climate change and additional legal or regulatory requirements regarding climate change designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment could be costly and may cause disruptions in, or an increase in the costs associated with, our manufacturing and distribution facilities, as well as increase supply chain costs. Moreover, compliance with any such legal or regulatory requirements may require us to make significant changes to our business operations, strategy, and reporting, which will likely require substantial time, attention, and costs.

Finally, we might fail to effectively address increased attention from the media, shareholders, activists, and other stakeholders on climate change and related environmental sustainability matters. Such failure, or the perception that we have failed to act responsibly with respect to such matters or to effectively respond to new or additional regulatory requirements regarding climate change, whether or not valid, could result in adverse publicity and negatively affect our business and reputation. In addition, from time to time we establish and publicly announce goals and commitments, including goals to reduce our impact on the environment. Our ability to achieve any stated goal, target, or objective is subject to numerous factors and conditions, many of which are outside of our control, including evolving regulatory requirements and the availability of suppliers that can meet our sustainability and other standards. If we fail to achieve, are perceived to have failed, or are delayed in achieving these goals and commitments, it could negatively affect consumer preference for our products or investor confidence in our stock, as well as expose us to government enforcement actions and private litigation.

The effects and costs of climate change and legal, regulatory, or market initiatives to address climate change could have a negative impact on our business, financial condition, and results of operations.
General Risk Factors
We may be unable to grow market share of our products.

We operate in the competitive food industry whose growth potential is positively correlated to population growth. Our success depends in part on our ability to grow our brands faster than the population in general. We consider our ability to build and sustain the equity of our brands critical to our market share growth. If we do not succeed in these efforts, our market share growth may slow, which could have a material impact on our results of operations. 
If our information technology systems fail to perform adequately or we are unable to protect such information technology systems against data corruption, cyber-based attacks, or network security breaches, our operations could be disrupted, and we may suffer financial damage or loss because of lost or misappropriated information.
We rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic information, and the importance of such networks and systems has increased due to many of our employees working remotely as a result of the COVID-19 pandemic. In particular, we depend on our information technology infrastructure to effectively manage our business data, supply chain, logistics, finance, and other business processes and for digital marketing activities and electronic communications between Company personnel and our customers and suppliers. If we do not allocate and effectively manage the resources necessary to build, sustain, and protect an appropriate technology infrastructure, or we do not effectively implement system upgrades, our business or financial results could be negatively impacted. We are regularly the target of attempted cyber and other security threats. Therefore, we continuously monitor and update our information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of unauthorized access, misuse, computer viruses, phishing attacks, malware, ransomware, social engineering, password theft, physical breaches, and other events that could have a security impact. We invest in industry standard security technology to protect our data and business processes against the risk of data security breaches and cyber-based attacks. We believe our security technology tools and processes provide adequate measures of protection against security breaches and in reducing cybersecurity risks. Nevertheless, despite continued vigilance in these areas, security breaches or system failures of our infrastructure, whether due to attacks by hackers, employee error, or other causes, can create system disruptions, shutdowns, transaction errors, or unauthorized disclosure of confidential information. If we are unable to prevent such breaches or failures, our operations could be disrupted, or we may suffer financial damage or loss because of lost or misappropriated information. In addition, the
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cost to remediate any damages to our information technology systems suffered as a result of a cyber-based attack could be significant.
Further, we have outsourced several information technology support services and administrative functions, including benefit plan administration and other functions, to third-party service providers, and may outsource other functions in the future to achieve cost savings and efficiencies. In addition, certain of our processes rely on third-party cloud computing services. If the service providers to which we outsource these functions do not perform effectively, we may not be able to achieve the expected benefits and may have to incur additional costs to correct errors made by such service providers. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, inaccurate financial reporting, the loss of or damage to intellectual property through security breach, the loss of sensitive data through security breach, or otherwise.

The conflict between Russia and Ukraine and the related disruptions to the global economy could adversely affect our business, financial condition, or results of operations.

The global economy has been negatively impacted by the recent conflict between Russia and Ukraine. Governments in the United States, United Kingdom, and European Union have imposed sanctions on certain products, industry sectors, and parties in Russia. Although we do not have any operations in Russia or Ukraine, we have experienced and may continue to experience shortages in materials and increased costs for transportation, energy, and raw materials due in part to the negative impact of the conflict on the global economy. If the conflict continues for an extended period of time, it could result in cyberattacks, supply chain disruptions, lower consumer demand, changes in foreign exchange rates, and other impacts, which may adversely affect our business, financial condition, or results of operations.
Item 1B.    Unresolved Staff Comments.
None.

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Item 2.     Properties.
The table below lists all of our manufacturing and processing facilities at April 30, 2022. All of our properties are maintained and updated on a regular basis, and we continue to make investments for expansion and safety and technological improvements. We believe that the capacity at our existing facilities will be sufficient to sustain current operations and the anticipated near-term growth of our businesses.
We own all of the properties listed below, except as noted. Additionally, our principal distribution centers in the U.S. include one that we own and six that we lease. We also lease our principal distribution center in Canada. Our distribution facilities are in good condition, and we believe that they have sufficient capacity to meet our distribution needs in the near future. We lease seven sales and administrative offices in the U.S. and one in Canada. Our corporate headquarters is located in Orrville, Ohio, and our Canadian headquarters is located in Markham, Ontario.
LocationsProducts Produced/Processed/Stored  Primary Reportable Segment
Bloomsburg, PennsylvaniaWet dog and cat food and dry dog and cat foodU.S. Retail Pet Foods
Buffalo, New YorkDog snacksU.S. Retail Pet Foods
Decatur, AlabamaDry dog and cat foodU.S. Retail Pet Foods
Grandview, WashingtonFruitU.S. Retail Consumer Foods
Lawrence, KansasDry dog foodU.S. Retail Pet Foods
Lexington, KentuckyPeanut butterU.S. Retail Consumer Foods
Longmont, ColoradoFrozen sandwichesU.S. Retail Consumer Foods
McCalla, Alabama (A)
Frozen sandwichesU.S. Retail Consumer Foods
Meadville, PennsylvaniaDry dog and cat foodU.S. Retail Pet Foods
Memphis, Tennessee Peanut butter and fruit spreadsU.S. Retail Consumer Foods
New Bethlehem, PennsylvaniaPeanut butter and combination peanut butter and jelly productsU.S. Retail Consumer Foods
New Orleans, Louisiana (four facilities) (B)
CoffeeU.S. Retail Coffee
Orrville, OhioFruit spreads, toppings, and syrupsU.S. Retail Consumer Foods
Oxnard, CaliforniaFruitU.S. Retail Consumer Foods
Ripon, Wisconsin (C)
Fruit spreads, toppings, syrups, and condimentsU.S. Retail Consumer Foods
Scottsville, KentuckyFrozen sandwichesU.S. Retail Consumer Foods
Seattle, Washington (B)
Nut mix productsU.S. Retail Consumer Foods
Sherbrooke, QuebecCanned milk
Other (E)
Suffolk, Virginia (D)
Liquid coffee
Other (E)
Topeka, KansasDry dog and cat food and dog and cat snacksU.S. Retail Pet Foods
(A)Our new facility in McCalla will help meet growing demand for Smucker’s Uncrustables frozen sandwiches and will complement our existing facilities in Longmont and Scottsville. Production is expected to begin at the McCalla facility during calendar year 2025.
(B)We lease our coffee silo facility in New Orleans and our facilities in Seattle.
(C)We plan to close our Ripon, Wisconsin, production facility by the end of calendar year 2022, as previously announced.
(D)The Suffolk liquid coffee plant stopped production at the end of calendar year 2021 and is expected to close in early 2023.
(E)Represents the combined International and Away From Home operating segments.
Item 3.    Legal Proceedings.
The information required for this Item is incorporated herein by reference to Note 15: Contingencies in Part II, Item 8 in this Annual Report on Form 10-K.
Item 4.    Mine Safety Disclosures.
Not applicable.
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PART II
Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common shares are listed on the New York Stock Exchange – ticker symbol SJM. There were 382,938 shareholders of record as of June 9, 2022, of which 32,914 were registered holders of common shares.
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 fourth quarter of 2022, 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:
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
February 1, 2022 - February 28, 20221,291 $135.32 — 7,811,472 
March 1, 2022 - March 31, 20222,000,000 131.23 2,000,000 5,811,472 
April 1, 2022 - April 30, 2022408 137.33 — 5,811,472 
Total2,001,699 $131.23 2,000,000 5,811,472 
(a)    Shares in this column include shares repurchased from stock plan recipients in lieu of cash payments.
(c)    During the fourth quarter of 2022, we repurchased 2.0 million common shares under our repurchase program, as discussed in Note 16: Common Shares in Part II, Item 8 in this Annual Report on Form 10-K.
(d)    As of April 30, 2022, there were approximately 5.8 million common shares remaining available for repurchase pursuant to the Board’s authorizations.
Comparison of Cumulative Total Return: The following graph compares the cumulative total shareholder return for the five years ended April 30, 2022, for our common shares, the Standard & Poor’s (“S&P”) Packaged Foods & Meats Index, and the S&P 500 Index. These figures assume all dividends are reinvested when received and are based on $100.00 invested in our common shares and the referenced index funds on April 30, 2017.
sjm-20220430_g1.jpg
  April 30,
  201720182019202020212022
The J. M. Smucker Company$100.00 $92.44 $102.41 $98.99 $116.39 $125.28 
S&P Packaged Foods & Meats100.00 85.68 94.66 99.48 116.98 131.64 
S&P 500100.00 113.27 128.55 129.66 189.28 189.68 
Copyright© 2022 Standard & Poor’s, a division of S&P Global. All rights reserved.
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Item 6.     [Reserved]
Item 7.     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 Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide an understanding of our results of operations, financial condition, and cash flows by focusing on changes in certain key measures from year-to-year, and should be read in conjunction with our consolidated financial statements and the accompanying notes presented in Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in Item 1A. “Risk Factors” of this Annual Report on Form 10-K.
Company Background
Each generation of consumers leaves their mark on culture by establishing new expectations for food and the companies that make it. At the J. M. Smucker Company, it is our privilege to be at the heart of this dynamic with a diverse portfolio that appeals to each generation of people and pets and is found in nearly 90 percent of U.S. homes and countless restaurants, including iconic brands consumers have always loved such as Folgers, Jif, and Milk-Bone and new favorites like Café Bustelo, Smucker’s Uncrustables, and Rachael Ray Nutrish. By continuing to immerse ourselves in consumer preferences and acting responsibly, we will continue growing our business and the positive impact we have on society.
We have three reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods. The U.S. retail market segments in total comprised 87 percent of net sales in 2022 and represent a major portion of our strategic focus – the sale of branded food and beverage products with leadership positions to consumers through retail outlets in North America. In the U.S. retail market segments, our products are primarily sold to food retailers, club stores, discount and dollar stores, online retailers, pet specialty stores, natural foods stores and distributors, drug stores, military commissaries, and mass merchandisers. International and Away From Home includes the sale of products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., health care operators, restaurants, lodging, hospitality, offices, K-12, colleges and universities, and convenience stores).
Strategic Overview
We remain rooted in our Basic Beliefs of Quality, People, Ethics, Growth, and Independence established by our founder and namesake, Jerome Smucker, more than a century ago. Today, these Basic Beliefs are the core of our unique corporate culture and serve as a foundation for decision-making and actions. We have been led by five generations of family leadership, having had only six chief executive officers in 125 years. This continuity of management and thought extends to the broader leadership team that embodies the values and embraces the business practices that have contributed to our consistent growth.

Our strategic vision is to engage, delight, and inspire consumers by building brands they love and leading in growing categories. This vision is our long-term direction that guides business priorities and aligns our organization. We will continue to drive balanced, long-term growth by advancing on the following executional priorities:

Drive Commercial Excellence | Deliver best-in-class go-to-market execution and commercial delivery;
Streamline our Cost Infrastructure | Focus on profitability and cost discipline;
Reshape our Portfolio | Optimize our portfolio to meet the evolving needs of consumers; and
Unleash our Organization to Win | Inspire, enable, and empower our employees while improving diversity at every level.

Our strategic growth objectives include net sales increasing by a low-single digit percentage and operating income excluding non-GAAP adjustments (“adjusted operating income”) increasing by a mid-single digit percentage on average over the long-term. Related to income per diluted share excluding non-GAAP adjustments (“adjusted earnings per share”), our strategic growth objective is to increase by a high-single digit percentage over the long-term. We expect organic growth, including new products, to drive much of our top-line growth, while the contribution from acquisitions will vary from year to year. Our non-GAAP adjustments include amortization expense and impairment charges related to intangible assets, certain divestiture, acquisition, integration, and restructuring costs (“special project costs”), gains and losses on divestitures, the net change in cumulative unallocated gains and losses on commodity and foreign currency exchange derivative activities (“change in net cumulative unallocated derivative gains and losses”), and other one-time items that do not directly reflect ongoing operating
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results. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information. Due to the unknown and potentially prolonged impact of COVID-19, as well as the challenged supply network and increased labor shortages, we may experience difficulties or be delayed in achieving our long-term strategies; however, we continue to evaluate the effects on our long-term growth objectives.
Over the past five years, net sales and adjusted earnings per share increased at a compound annual growth rate of 2 percent and 3 percent, respectively, while adjusted operating income decreased at a rate of 1 percent. These changes were primarily driven by increased at-home consumption for the U.S. Retail Coffee and U.S. Retail Consumer Foods segments and the Ainsworth acquisition in 2019, partially offset by the reduction in net sales from the divestitures of the private label dry pet food and natural beverage and grains businesses in 2022, Crisco and Natural Balance businesses in 2021, and the U.S. baking business in 2019. Net cash provided by operating activities has increased at a compound annual growth rate of 1 percent over the past five years. Our cash deployment strategy is to balance reinvesting in our business through acquisitions and capital expenditures with returning cash to our shareholders through the payment of dividends and share repurchases. Our deployment strategy also includes a significant focus on debt repayment.

Divestitures
On January 31, 2022, we sold the natural beverage and grains businesses to Nexus. The transaction included products sold under the R.W. Knudsen and TruRoots brands, inclusive of certain trademarks, a licensing agreement for Santa Cruz Organic beverages, dedicated manufacturing and distribution facilities in Chico, California, and Havre de Grace, Maryland, and approximately 150 employees who supported the natural beverage and grains businesses. The transaction did not include Santa Cruz Organic nut butters, fruit spreads, syrups, or applesauce. Under our ownership, the businesses generated net sales of $106.7 and $143.4 in 2022 and 2021, respectively, primarily included in the U.S. Retail Consumer Foods segment. Net proceeds from the divestiture were $97.1, which were inclusive of a preliminary working capital adjustment and cash transaction costs, and will be finalized during the first quarter of 2023. Upon completion of this transaction, we recognized a pre-tax gain of $26.7 during 2022, which was included in other operating expense (income) – net within the Statement of Consolidated Income.
On December 1, 2021, we sold the private label dry pet food business to Diamond Pet Foods. The transaction included dry pet food products sold under private label brands, a dedicated manufacturing facility located in Frontenac, Kansas, and approximately 220 employees who supported the private label dry pet food business. The transaction did not include any branded products or our private label wet pet food business. Under our ownership, the business generated net sales of $62.3 and $94.0 in 2022 and 2021, respectively, included in the U.S. Retail Pet Foods segment. Final net proceeds from the divestiture were $32.9, which were net of cash transaction costs. Upon completion of this transaction, we recognized a pre-tax loss of $17.1 during 2022, which was included in other operating expense (income) – net within the Statement of Consolidated Income.
On January 29, 2021, we sold the Natural Balance premium pet food business to Nexus. The transaction included pet food products sold under the Natural Balance brand, certain trademarks and licensing agreements, and select employees who supported the Natural Balance business. Under our ownership, the business generated net sales of $156.7 in 2021, included in the U.S. Retail Pet Foods segment. Final net proceeds from the divestiture were $33.8, which were net of cash transaction costs and included a working capital adjustment. Upon completion of the transaction, we recognized a pre-tax loss of $89.5 during 2021, which was included in other operating expense (income) – net within the Statement of Consolidated Income.

On December 1, 2020, we sold the Crisco oils and shortening business to B&G Foods. The transaction included oils and shortening products sold under the Crisco brand, primarily in the U.S. and Canada, certain trademarks and licensing agreements, dedicated manufacturing and warehouse facilities located in Cincinnati, Ohio, and approximately 160 employees who supported the Crisco business. Under our ownership, the business generated net sales of $198.9 in 2021, primarily included in the U.S. Retail Consumer Foods segment. Final net proceeds from the divestiture were $530.2, which were net of cash transaction costs and included a working capital adjustment. Upon completion of the transaction, we recognized a pre-tax gain of $114.8 during 2021, which was included in other operating expense (income) – net within the Statement of Consolidated Income.
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COVID-19
The 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 calendar year 2021, state governments reopened their economies, while adhering to new guidelines and enhanced safety measures, such as social distancing, face mask protocols, and vaccination requirements. However, there was a significant number of U.S. cases in late calendar year 2021 and early calendar year 2022, and as a result, consumers stayed at home more frequently as a precaution, causing the demand related to at-home food consumption to remain elevated, though the impact is of a lesser extent as compared to the prior year. While we continue to benefit from elevated consumption, the supply chain network remains challenged due to the increased demand and supply pressures, as well as COVID-19 cases and increasing labor shortages, which continue to negatively impact our business and overall industry. We anticipate this consumer behavior and at-home food consumption may continue, to some extent, through calendar year 2022, dependent on government guidance regarding risk mitigation measures, vaccination rates and effectiveness, and the impact of additional COVID-19 variants.
In September 2021, the U.S. President issued an executive order applicable to federal contractors and employers with 100 or more employees. As a result, we announced a vaccination mandate that required all employees to be vaccinated or have received an approved medical or religious exemption as early as December 2021, and no later than March 2022, dependent upon location. We fully implemented the mandate for salaried employees in December 2021, prior to the U.S. Supreme Court’s ruling in January 2022 to block the federal mandate. However, we lifted the mandate that required hourly employees to be vaccinated by March 2022 to support business continuity across our operations.
Furthermore, we have reopened our corporate headquarters in Orrville, Ohio, with appropriate safety protocols, and as a result, occupancy levels have gradually increased during 2022 while our office-based employees transition to a hybrid work schedule. We continue to monitor the latest public health and government guidance related to COVID-19 and will adjust our approach and safety protocols, as needed. We have crisis management teams at all our facilities, which continue to monitor their respective locations and implement additional risk mitigation actions, as necessary. All our production operations remain open, and none have experienced significant disruptions or labor reductions related to COVID-19.

During 2022, we experienced increased disruption in our supply chain network, including the supply of certain ingredients, packaging, and other sourced materials, which has resulted in higher than expected inflation, including escalating transportation and other supply chain costs. We expect that these inflationary cost increases will continue, but we expect they will be partially mitigated by pricing actions implemented in 2022 and those that we plan to implement in 2023. It is possible that more significant disruptions could occur if the COVID-19 pandemic continues to impact markets around the world, including the impact of e-commerce pressures on freight charges and potential shipping delays due to supply and demand imbalances, as well as labor shortages. We also continue to work closely with our customers and external business partners, taking additional actions to ensure safety and business continuity, and maximize product availability. We have maintained production at all our facilities and availability of appointments at distribution centers. Furthermore, we have implemented measures to manage order volumes to ensure a consistent supply across our retail partners during this period of high demand. However, to the extent that high demand levels or the current supply chain environment continues to disrupt order fulfillment, we may experience volume loss and elevated penalties.
During 2022, customer order levels remain elevated, primarily across our U.S. Retail Consumer Foods and U.S. Retail Coffee segments, in response to the increased consumer demand for our products related to the elevated at-home consumption. Further, as states have reopened their economies during 2022, our net sales for the away from home channels have continued to improve compared to the initial months of the pandemic. This trend could moderate during the remainder of calendar year 2022 if cases rise and governments impose additional safety measures that further impact away from home consumption, which is partially dependent upon vaccination rates and effectiveness, as well as the impact of additional COVID-19 variants. Overall, the impact of COVID-19 remains uncertain and ultimately depends on the length and severity of the pandemic, inclusive of the introduction of new strains of the virus; the federal, state, and local government actions taken in response; vaccination rates and effectiveness; the impact of vaccination requirements; and the macroeconomic environment. We will continue to evaluate the nature and extent to which COVID-19 will impact our business, supply chain, including labor availability and attrition, consolidated results of operations, financial condition, and liquidity.
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Results of Operations
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.
  Year Ended April 30,
  20222021% Increase
(Decrease)
Net sales$7,998.9 $8,002.7 — %
Gross profit$2,700.7 $3,138.7 (14)
% of net sales33.8 %39.2 %
Operating income$1,023.8 $1,386.8 (26)
% of net sales12.8 %17.3 %
Net income:
Net income$631.7 $876.3 (28)
Net income per common share – assuming dilution$5.83 $7.79 (25)
Adjusted gross profit (A)
$2,744.6 $3,048.5 (10)
% of net sales34.3 %38.1 %
Adjusted operating income (A)
$1,440.1 $1,528.8 (6)
% of net sales18.0 %19.1 %
Adjusted income: (A)
Income$962.2 $1,025.0 (6)
Earnings per share – assuming dilution$8.88 $9.12 (3)
(A)We use non-GAAP financial measures to evaluate our performance. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for a reconciliation to the comparable generally accepted accounting principles (“GAAP”) financial measure.

Net Sales
Year Ended April 30,
 20222021Increase  
(Decrease)
  %    
Net sales$7,998.9 $8,002.7 $(3.8)— %
Crisco divestiture
— (198.9)198.9 
Natural Balance divestiture
— (156.7)156.7 
Private label dry pet food divestiture— (40.7)40.7 
Natural beverage and grains divestiture— (35.5)35.5 — 
Foreign currency exchange
(17.1)— (17.1)— 
Net sales excluding divestitures and foreign currency exchange (A)
$7,981.8 $7,570.9 $410.9 %
Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.

Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
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Operating Income
The following table presents the components of operating income as a percentage of net sales.
  Year Ended April 30,
  20222021
Gross profit33.8 %39.2 %
Selling, distribution, and administrative expenses:
Marketing3.5 %3.9 %
Advertising2.2 2.8 
Selling2.8 3.0 
Distribution3.6 3.4 
General and administrative5.0 5.9 
Total selling, distribution, and administrative expenses
17.0 %19.0 %
Amortization2.8 2.9 
Other intangible assets impairment charges
1.9 — 
Other special project costs0.1 0.3 
Other operating expense (income) – net(0.8)(0.4)
Operating income
12.8 %17.3 %
Amounts may not add due to rounding.

Gross profit decreased $438.0, or 14 percent, in 2022, reflecting higher costs, primarily driven by increased commodity and ingredient, transportation, packaging, and manufacturing costs, the noncomparable impact related to divestitures, the unfavorable impact of unsaleable inventory and estimated customer returns related to the Jif peanut butter recall, and unfavorable volume/mix, partially offset by higher net pricing.

Operating income decreased $363.0, or 26 percent, primarily reflecting the decrease in gross profit and a $150.4 intangible asset impairment charge in 2022 related to the Rachael Ray Nutrish brand, partially offset by a $162.8 decrease in selling, distribution, and administrative (“SD&A”) expenses, primarily driven by lower marketing spend and incentive compensation expense. Further offsetting the decrease in operating income is a $36.7 increase in net other operating income, primarily reflecting an anticipated insurance recovery of $49.8, net of the deductible, related to the Jif peanut butter recall that mostly offsets the unfavorable impact of unsaleable inventory, estimated customer returns, and consumer refunds, as discussed in Note 15: Contingencies.

Our non-GAAP adjustments include amortization expense and impairment charges related to intangible assets, special project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other one-time items that do not directly reflect ongoing operating results. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information. Gross profit excluding non-GAAP adjustments (“adjusted gross profit”) decreased $303.9, or 10 percent, in 2022, reflecting the exclusion of the change in net cumulative unallocated derivative gains and losses and special project costs, as compared to GAAP gross profit. Adjusted operating income decreased $88.7, or 6 percent, as compared to the prior year, further reflecting the exclusion of the impairment charge and net pre-tax gain on divestitures.

Interest Expense
Net interest expense decreased $16.2, or 9 percent, in 2022, primarily as a result of reduced debt outstanding as compared to the prior year. For additional information, see “Capital Resources” in this discussion and analysis.
Income Taxes
Income taxes decreased $83.5, or 28 percent, in 2022, as compared to the prior year. The effective income tax rate of 25.1 percent for 2022 varied from the U.S. statutory income tax rate of 21.0 percent primarily due to state income taxes, including an unfavorable one-time deferred tax impact of an internal legal entity simplification in the third quarter of 2022 to support multiple work locations for office-based employees and our continued strategic activities. The effective income tax rate of 25.2 percent for 2021 varied from the U.S. statutory income tax rate of 21.0 percent primarily due to the impact of state income taxes, as well as additional net income tax expense related to the divestitures of the Crisco and Natural Balance businesses. We anticipate a full-year effective income tax rate for 2023 to be approximately 24.2 percent. For additional information, refer to Note 13: Income Taxes.
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Restructuring Activities
A restructuring program was approved by the Board during 2021, associated with opportunities identified to reduce our overall cost structure, optimize our organizational design, and support our portfolio reshape. This is inclusive of certain restructuring costs associated with the divestitures of the Crisco, Natural Balance, private label dry pet food, and natural beverage and grains businesses. For additional information related to the divestitures, see Note 3: Divestitures.

During 2021, we substantially completed an organizational redesign related to our corporate headquarters and announced plans to close our Suffolk, Virginia, facility as a result of a new strategic partnership for the production of our liquid coffee products. During 2022, we completed the transition of production to JDE Peet’s, as anticipated. Furthermore, the restructuring program was expanded during the third quarter of 2022 to include certain costs associated with the recent divestitures of the private label dry pet food and natural beverage and grains businesses, as well as the recently announced plans to close our Ripon, Wisconsin, production facility by the end of calendar year 2022 to further optimize operations for our Consumer Foods business. We expect to incur costs of approximately $70.0 associated with the restructuring activities planned to date. More than half of these costs are expected to be other transition and termination costs associated with our cost reduction and margin management initiatives, inclusive of accelerated depreciation, while the remainder represents employee-related costs. We anticipate the planned activities associated with this restructuring program will be completed by the end of 2023, with the majority of the costs expected to be incurred in the first half of 2023. We have incurred total cumulative restructuring costs of $52.6, of which $28.5 and $24.1 were incurred during 2022 and 2021, respectively. For further information, refer to Note 2: Integration and Restructuring Costs.
Commodities Overview
The raw materials we use in each of our segments are primarily commodities, agricultural-based products, and packaging materials. The most significant of these materials, based on 2022 annual spend, are green coffee, peanuts, protein meals, grains, and plastic containers. Green coffee, corn, certain meals, oils, and grains are traded on active regulated exchanges, and the price of these commodities fluctuates based on market conditions. Derivative instruments, including futures and options, are used to minimize the impact of price volatility for these commodities.

We source green coffee from more than 20 coffee-producing countries. Its price is subject to high volatility due to factors such as weather, global supply and demand, plant disease, investor speculation, and political and economic conditions in the source countries.

We source peanuts, protein meals, and oils and fats mainly from North America. We are one of the largest procurers of peanuts in the U.S. and frequently enter into long-term purchase contracts for various periods of time to mitigate the risk of a shortage of this commodity. The oils we purchase are mainly peanut and soybean. The price of peanuts, protein meals, and oils are driven primarily by weather, which impacts crop sizes and yield, as well as global demand, especially from large importing countries such as China and India. In particular, the supply chain for protein meals, fats, corn products, and green coffee has been significantly disrupted by the COVID-19 pandemic, and therefore, the price for these commodities has increased and may continue to increase due to such disruptions. Furthermore, the price of grains and oils and fat-based products has been impacted by the recent conflict between Russia and Ukraine.

We frequently enter into long-term contracts to purchase plastic containers, which are sourced mainly from within the U.S. Plastic resin is made from petrochemical feedstock and natural gas feedstock, and the price can be influenced by feedstock, energy, and crude oil prices as well as global economic and geopolitical conditions.
Excluding the impact of derivative gains and losses, our overall commodity costs in 2022 were higher than in 2021, primarily due to higher costs for green coffee, protein meals, oils and fats, and grains.
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Segment Results
We have three reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods. The presentation of International and Away From Home represents a combination of all other operating segments that are not individually reportable.

The U.S. Retail Pet Foods segment primarily includes the domestic sales of Rachael Ray Nutrish, Meow Mix, Milk-Bone, 9Lives, Kibbles ’n Bits, Pup-Peroni, and Nature’s Recipe branded products; the U.S. Retail Coffee segment primarily includes the domestic sales of Folgers, Dunkin’, and Café Bustelo branded coffee; and the U.S. Retail Consumer Foods segment primarily includes the domestic sales of Smucker’s and Jif branded products. International and Away From Home includes the sale of products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., health care operators, restaurants, lodging, hospitality, offices, K-12, colleges and universities, and convenience stores).
  Year Ended April 30,
  20222021% Increase (Decrease)
Net sales:
U.S. Retail Pet Foods$2,764.3 $2,844.5 (3)%
U.S. Retail Coffee2,497.3 2,374.6 
U.S. Retail Consumer Foods1,707.2 1,835.7 (7)
International and Away From Home1,030.1 947.9 
Segment profit:
U.S. Retail Pet Foods$395.9 $487.0 (19)%
U.S. Retail Coffee736.7 769.1 (4)
U.S. Retail Consumer Foods424.2 472.5 (10)
International and Away From Home142.0 124.1 14 
Segment profit margin:
U.S. Retail Pet Foods14.3 %17.1 %
U.S. Retail Coffee29.5 32.4 
U.S. Retail Consumer Foods24.8 25.7 
International and Away From Home13.8 13.1  

U.S. Retail Pet Foods

The U.S. Retail Pet Foods segment net sales decreased $80.2 in 2022, inclusive of the impact of $197.4 of noncomparable net sales in the prior year related to the divested Natural Balance and private label dry pet food businesses. Excluding the noncomparable impact of the divested businesses, net sales increased $117.2, or 4 percent. Higher net price realization across the portfolio increased net sales by 5 percentage points, primarily reflecting list price increases across the portfolio, partially offset by increased trade spend. Unfavorable volume/mix decreased net sales by 1 percentage point, primarily driven by declines for dog food, partially offset by growth for cat food and dog snacks. Segment profit decreased $91.1, primarily reflecting higher commodity and ingredient, transportation, and manufacturing costs and the unfavorable volume/mix, partially offset by the higher net pricing and lower marketing expense.

U.S. Retail Coffee

The U.S. Retail Coffee segment net sales increased $122.7 in 2022. Net price realization contributed 6 percentage points to net sales, primarily reflecting list price increases across the portfolio. Unfavorable volume/mix decreased net sales by 1 percentage point, primarily driven by the Folgers brand, partially offset by the Dunkin’ and Café Bustelo brands. Segment profit decreased $32.4, reflecting higher commodity costs and the unfavorable volume/mix, partially offset by higher net pricing.
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U.S. Retail Consumer Foods

The U.S. Retail Consumer Foods segment net sales decreased $128.5 in 2022, inclusive of the impact of $211.8 of noncomparable net sales in the prior year related to the divested Crisco and natural beverage and grains businesses. Excluding the noncomparable impact of the divested businesses, net sales increased $83.3, or 5 percent. Higher net price realization contributed 4 percentage points to net sales, primarily driven by Smucker’s Uncrustables frozen sandwiches and Smucker’s fruit spreads, including the unfavorable impact of estimated customer returns related to the Jif peanut butter recall. Volume/mix increased net sales by 1 percentage point, reflecting increases for Smucker’s Uncrustables frozen sandwiches and Jif peanut butter, partially offset by a decline for Smucker’s fruit spreads. Segment profit decreased $48.3, reflecting the noncomparable segment profit in the prior year related to the divested businesses. Comparable segment profit growth from the higher net pricing, lower marketing spend, and favorable volume/mix was partially offset by higher commodity and ingredient, manufacturing, packaging, and transportation costs. Segment profit also reflects the unfavorable impact of unsaleable inventory and estimated customer returns, as well as other associated costs related to the Jif peanut butter recall, which were mostly offset by the anticipated insurance recovery, net of the deductible.
International and Away From Home

International and Away From Home net sales increased $82.2 in 2022, including the noncomparable impact of $22.6 of net sales in the prior year related to the divested Crisco and natural beverage and grains businesses. Excluding the noncomparable impact of the divested businesses and foreign currency exchange, net sales increased $87.7, or 9 percent, primarily reflecting a 23 percent increase for the Away From Home operating segment, partially offset by a 2 percent decrease for the International operating segment. Favorable volume/mix for the combined businesses contributed 6 percentage points to net sales, primarily driven by increases for portion control and coffee products in the away from home channels, partially offset by a decrease for baking mixes and ingredients in the International operating segment. Net price realization contributed a 3 percentage point increase to net sales for the combined businesses, primarily driven by increases for coffee products in the away from home channels and fruit spread products in the International operating segment. Segment profit increased $17.9, primarily reflecting higher net pricing, favorable volume/mix, and the favorable foreign currency exchange impact, partially offset by increased commodity costs and the noncomparable segment profit in the prior year related to the divested businesses.

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. Total cash and cash equivalents decreased to $169.9 at April 30, 2022, compared to $334.3 at April 30, 2021.

The following table presents selected cash flow information.
  Year Ended April 30,
  20222021
Net cash provided by (used for) operating activities
$1,136.3 $1,565.0 
Net cash provided by (used for) investing activities
(355.5)311.1 
Net cash provided by (used for) financing activities
(944.5)(1,943.9)
Net cash provided by (used for) operating activities
$1,136.3 $1,565.0 
Additions to property, plant, and equipment
(417.5)(306.7)
Free cash flow (A)
$718.8 $1,258.3 
(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 $428.7 decrease in cash provided by operating activities in 2022 was primarily driven by greater working capital requirements in 2022, as well as lower net income adjusted for noncash items in the current year. The increase in cash required to fund working capital, as compared to the prior year, was primarily attributable to timing of payments for accounts payable, changes in accrued incentive compensation and marketing, and an increase in inventory levels compared to the prior year, primarily driven by the recent input cost inflation.
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Cash used for investing activities in 2022 consisted primarily of $417.5 in capital expenditures, primarily driven by investments in Smucker’s Uncrustables frozen sandwiches to support the new manufacturing and distribution facilities in McCalla, Alabama, and capacity expansion in Longmont, Colorado, as well as plant maintenance across our facilities. An increase of $65.4 in our derivative cash margin account balances also contributed to the use of cash in 2022. These decreases were partially offset by net proceeds received from the divested private label dry pet food and natural beverage and grains businesses of $130.0. Cash provided by investing activities in 2021 primarily consisted of net proceeds received from the divestitures of the Crisco and Natural Balance businesses of $564.0 and a decrease of $54.0 in our derivative cash margin account balances, partially offset by $306.7 in capital expenditures, which primarily reflected capacity expansion at our Longmont facility, as well as plant maintenance across our facilities.
Cash used for financing activities in 2022 consisted primarily of long-term debt repayments of $1,157.0, dividend payments of $418.1, and purchase of treasury shares of $270.4, partially offset by $797.6 in long-term debt proceeds and a net increase in short-term borrowings of $97.6. Cash used for financing activities in 2021 consisted primarily of long-term debt repayments of $700.0, purchase of treasury shares of $678.4, dividend payments of $403.2, and net short-term debt repayments of $166.4.
Supplier Financing Program
As part of ongoing efforts to maximize working capital, we work with our suppliers to optimize our terms and conditions, which includes the extension of payment terms. Payment terms with our suppliers, which we deem to be commercially reasonable, range from 0 to 180 days. During 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 rights and 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 April 30, 2022 and 2021, $314.3 and $304.2 of our outstanding payment obligations, respectively, were elected and sold to a financial institution by participating suppliers. During 2022 and 2021, we paid $1,042.9 and $663.5, respectively, 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, the significant majority of which were settled and paid during 2019 and 2020. 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 April 30, 2022. Based on the information known to date, with the exception of the matters discussed below, we do not believe the final outcome of these proceedings would 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 Council for Education and Research on Toxics (“CERT”) v. Brad Barry LLC, et al., which alleges that we, in addition to nearly eighty other defendants (collectively the “Defendants”) who manufacture, package, distribute, or sell packaged coffee, failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under Proposition 65. CERT sought equitable relief, including warnings to consumers, as well as civil penalties in the amount of the statutory maximum of $2,500 per day per violation of Proposition 65. In addition, CERT asserted that every consumed cup of coffee, absent a compliant warning, was equivalent to a violation under Proposition 65. In June 2019, the state agency responsible for administering the Proposition 65 program, the California Office of Environmental Health Hazard Assessment (“OEHHA”), approved a regulation clarifying that cancer warnings are not required for coffee under Proposition 65, and in August 2020, the trial court granted the Defendants’ motion for summary judgment based on the regulation. CERT appealed the ruling in November 2020 to the California Court of Appeals for the Second Appellate District, which is currently pending.
We are also defendants in a series of putative class action lawsuits that were originally filed in federal courts in California, Florida, Illinois, Missouri, New York, Texas, Washington, and Washington D.C. but have been transferred to the United States District Court for the Western District of Missouri for coordinated pre-trial proceedings. The plaintiffs assert claims arising under various state laws for false advertising, consumer protection, deceptive and unfair trade practices, and similar
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statutes. Their claims are premised on allegations that we have misrepresented the number of servings that can be made from various canisters of Folgers coffee on the packaging for those products.
The outcome and the financial impact of these cases, if any, cannot be predicted at this time. Accordingly, no loss contingency has been recorded for these matters as of April 30, 2022, and the likelihood of loss is not considered probable or estimable. However, if we are required to pay significant damages, our business and financial results could be adversely impacted, and sales of those products could suffer not only in these locations but elsewhere. For additional information, see Note 15: Contingencies.
Product Recall
Subsequent to April 30, 2022, we initiated a voluntary recall of select Jif peanut butter products produced at our Lexington, Kentucky, facility and sold primarily in the U.S., due to potential salmonella contamination. At that time, we also suspended the manufacturing of Jif peanut butter products at the Lexington facility. No other products produced at our other facilities were affected by this recall. As a result, and in accordance with U.S. GAAP, we recorded reserves of $52.3 in our consolidated financial statements as of April 30, 2022, within our U.S. Retail Consumer Foods segment, which was inclusive of unsaleable inventory as of April 30, 2022, as well as estimated customer returns and consumer refunds related to net sales in 2022. We anticipate these costs will be recovered by insurance, and as a result, an insurance receivable of $49.8, net of the deductible, was also recorded as of April 30, 2022.

On June 10, 2022, we announced our plans to resume manufacturing Jif peanut butter products at our Lexington facility. Further, our Memphis, Tennessee, facility was not affected by the recall and has continued to manufacture Jif peanut butter products. However, we temporarily paused shipments from the Memphis facility to eliminate confusion while customers cleared their shelves of potentially impacted products manufactured at the Lexington facility. We will resume shipping from both the Lexington and Memphis facilities and are partnering with retailers to restock Jif peanut butter products as soon as possible. Based on progress to date, we believe this matter will be substantially resolved during the first quarter of 2023. Based on our best estimates, we anticipate an unfavorable pre-tax impact of approximately $125.0 in 2023, net of the remaining anticipated insurance recoveries, primarily related to the estimated impact of manufacturing downtime, customer returns and penalties, and unsaleable inventory, as well as other recall related costs. The recall will primarily impact our U.S. Retail Consumer Foods segment. Our ultimate loss from the Jif peanut butter recall could differ materially from these estimates, primarily dependent upon the magnitude of lost sales resulting from the unavailability of products for a longer period of time than anticipated, as well as any resulting adverse consumer reaction, including the loss of perceived value and any shift in consumer preferences.
Capital Resources
The following table presents our capital structure.
  April 30,
  20222021
Current portion of long-term debt
$— $1,152.9 
Short-term borrowings
180.0 82.0 
Long-term debt, less current portion4,310.6 3,516.8 
Total debt$4,490.6 $4,751.7 
Shareholders’ equity8,140.1 8,124.8 
Total capital$12,630.7 $12,876.5 
During the second quarter of 2022, we completed an offering of $800.0 in Senior Notes due March 15, 2032, and September 15, 2041. The Senior Notes included $7.2 of capitalized debt issuance costs and $2.4 of offering discounts, and which are amortized to interest expense over the life of the debt. The net proceeds from the offering were primarily used to repay $750.0 in principal of the Senior Notes due October 15, 2021. Furthermore, during the first quarter of 2022, we prepaid $400.0 in principal of the Senior Notes due March 15, 2022, and as a result, we recognized a net loss on extinguishment of $6.9, which primarily consisted of a make-whole payment and was included in other income (expense) – net in the Statement of Consolidated Income.
We have available a $2.0 billion unsecured revolving credit facility with a group of 11 banks that matures in August 2026. Additionally, we participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $2.0 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
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paper is used as a continuing source of short-term financing for general corporate purposes. As of April 30, 2022, we had $180.0 of short-term borrowings outstanding, all of which were issued under our commercial paper program, at a weighted-average interest rate of 0.65 percent.
We are in compliance with all our debt covenants as of April 30, 2022, and expect to be for the next 12 months. For additional information on our long-term debt, sources of liquidity, and debt covenants, see Note 7: Debt and Financing Arrangements.
During 2022, we repurchased 2.0 million common shares under a repurchase plan authorized by the Board for $262.5. At April 30, 2022, approximately 5.8 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. During 2021, we repurchased 5.8 million common shares under a repurchase plan authorized by the Board for $671.9.
In November 2021, we announced plans to invest $1.1 billion to build a new manufacturing facility and distribution center in McCalla, Alabama, dedicated to production of Smucker’s Uncrustables frozen sandwiches. Construction of this facility began in the third quarter of 2022, with production expected to begin in calendar year 2025. The project demonstrates our commitment to meet increasing demand for this highly successful product and deliver on our strategy to focus on brands with the most significant growth opportunities. Construction of the facility and production will occur in three phases over multiple years and will result in the creation of up to 750 jobs. Financial investments and job creation will align with each of the three phases.
The following table presents certain cash requirements related to 2023 investing and financing activities based on our current expectations. Although no principal payments are required on our debt obligations in 2023, we may utilize a portion of our cash for debt repayment.
Projection
Year Ending
April 30, 2023
Dividend payments – based on current rates and common shares outstanding$421.6 
Capital expenditures550.0 
Interest payments147.2 
Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations, borrowings available under our revolving credit facility and commercial paper program, and access to capital markets, will be sufficient to meet our cash requirements for the next 12 months, including the payment of quarterly dividends, principal and interest payments on debt outstanding, and capital expenditures. However, as a result of the current economic environment, we may experience an increase in the cost or the difficulty to obtain debt or equity financing, or to refinance our debt in the future. We continue to evaluate these risks, which could affect our financial condition or our ability to fund operations or future investment opportunities.
As of April 30, 2022, total cash and cash equivalents of $46.2 was held by our foreign subsidiaries, primarily in Canada. We did not repatriate foreign cash to the U.S. during 2022.
Material Cash Requirements
The following table summarizes our material cash requirements by fiscal year at April 30, 2022.
Total20232024-20252026-20272028 and
beyond
Long-term debt obligations, including current portion (A)
$4,350.0 $— $1,000.0 $— $3,350.0 
Interest payments (B)
1,982.8 147.2 294.3 224.3 1,317.0 
Purchase obligations (C)
2,787.6 2,309.4 297.3 119.7 61.2 
Total$9,120.4 $2,456.6 $1,591.6 $344.0 $4,728.2 
(A)Long-term debt obligations, including current portion, excludes the impact of offering discounts, make-whole payments, and debt issuance costs.
(B)Interest payments consists of the interest payments for our fixed-rate Senior Notes.
(C)Purchase obligations includes agreements that are enforceable and legally bind us to purchase goods or services, which primarily consist of obligations related to normal, ongoing purchase obligations in which we have guaranteed payment to ensure availability of
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raw materials. We expect to receive consideration for these purchase obligations in the form of materials and services. These purchase obligations do not represent all future purchases expected but represent only those items for which we are contractually obligated. Amounts included in the table above represent our current best estimate of payments due. Actual cash payments may vary due to the variable pricing components of certain purchase obligations.
Our other cash requirements at April 30, 2022, primarily included operating and finance lease obligations, which consist of the minimum rental commitments under non-cancelable operating and finance leases. As of April 30, 2022, we had total undiscounted minimum lease payments of $121.4 and $4.0 related to our operating and finance leases, respectively. For additional information, see Note 11: Leases.
In addition, we have other liabilities which consisted primarily of projected commitments associated with our defined benefit pension and other postretirement benefit plans, as disclosed in Note 8: Pensions and Other Postretirement Benefits, including expected contributions of $80.0 in 2023 to our qualified defined benefit pension plans. The total liability for our unrecognized tax benefits and tax-related net interest at April 30, 2022, was $7.4 under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes; however, we are unable to reasonably estimate the timing of cash settlements with the respective taxing authorities. For additional information, see Note 13: Income Taxes.
As of April 30, 2022, 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.

NON-GAAP FINANCIAL MEASURES
We use non-GAAP financial measures including: net sales excluding divestitures and foreign currency exchange, adjusted gross profit, adjusted operating income, adjusted income, adjusted earnings per share, earnings before interest, taxes, depreciation, amortization, and impairment charges related to intangible assets (“EBITDA (as adjusted)”), 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.

Non-GAAP financial measures exclude certain items affecting comparability that can significantly affect the year-over-year assessment of operating results, which include amortization expense and impairment charges related to intangible assets, special project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other one-time items that do not directly reflect ongoing operating results. Income taxes, as adjusted is calculated using an adjusted effective income tax rate that is applied to adjusted income before income taxes and reflects the exclusion of the previously discussed items, as well as any adjustments for one-time tax related activities, when they occur. While this adjusted effective income tax rate does not generally differ materially from our GAAP effective income tax rate, certain exclusions from non-GAAP results, such as the one-time deferred state tax impact of the internal legal entity simplification during 2022, 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.
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The following table reconciles certain non-GAAP financial measures to the comparable GAAP financial measure. See page 28 for a reconciliation of net sales adjusted for certain noncomparable items to the comparable GAAP financial measure.
  Year Ended April 30,
  20222021
Gross profit reconciliation:
Gross profit$2,700.7 $3,138.7 
Change in net cumulative unallocated derivative gains and losses23.4 (93.6)
Cost of products sold – special project costs (A)
20.5 3.4 
Adjusted gross profit $2,744.6 $3,048.5 
% of net sales34.3 %38.1 %
Operating income reconciliation:
Operating income$1,023.8 $1,386.8 
Amortization223.6 233.0 
Other intangible assets impairment charges150.4 3.8 
Gain on divestitures – net(9.6)(25.3)
Change in net cumulative unallocated derivative gains and losses23.4 (93.6)
Cost of products sold – special project costs (A)
20.5 3.4 
Other special project costs (A)
8.0 20.7 
Adjusted operating income
$1,440.1 $1,528.8 
% of net sales18.0 %19.1 %
Net income reconciliation:
Net income$631.7 $876.3 
Income tax expense212.1 295.6 
Amortization223.6 233.0 
Other intangible assets impairment charges150.4 3.8 
Gain on divestitures – net(9.6)(25.3)
Change in net cumulative unallocated derivative gains and losses23.4 (93.6)
Cost of products sold – special project costs (A)
20.5 3.4 
Other special project costs (A)
8.0 20.7 
Other one-time items:
Pension plan termination settlement charges (B)
— 29.6 
Adjusted income before income taxes
$1,260.1 $1,343.5 
Income taxes, as adjusted297.9 318.5 
Adjusted income$962.2 $1,025.0 
Weighted-average shares – assuming dilution108.4 112.4 
Adjusted earnings per share – assuming dilution
$8.88 $9.12 
EBITDA (as adjusted) reconciliation:
Net income$631.7 $876.3 
Income tax expense212.1 295.6 
Interest expense – net160.9 177.1 
Depreciation235.5