(Dollars and shares in millions, unless otherwise noted, except per share data)
Company Background
Inspired by more than 120 years of business success and five generations of
family leadership, The J. M. Smucker Company makes food that people and pets
love. The Company's portfolio of 40+ brands, which are found in nearly 90
percent of U.S. homes and countless away from home dining locations, include
iconic products consumers have always loved such as Folgers, Jif, and Milk-Bone,
plus new favorites like Café Bustelo, Smucker's Uncrustables, and Rachael Ray
Nutrish. Over the past two decades, the Company has grown by thoughtfully
acquiring leading and emerging brands, while ensuring the business has a
positive impact on its 7,000+ employees, the communities it is a part of, and
the planet.
We have three reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee,
and U.S. Retail Consumer Foods. Effective during the first quarter of 2021, the
presentation of International and Away From Home represents a combination of all
other operating segments that are not individually reportable. As a result of
leadership changes, these operating segments are being managed and reported
separately and no longer represent a reportable segment for segment reporting
purposes. Segment results for prior periods have not been modified, as the
combination of these operating segments represents the previously reported
International and Away From Home reportable segment.
The U.S. retail market segments in total comprised 88 percent of net sales in
2021 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
sold primarily to food retailers, club stores, discount and dollar stores, food
wholesalers, 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 124 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 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.

Our strategic growth objectives include increasing net sales by 2 percent and
operating income excluding non-GAAP adjustments ("adjusted operating income") by
5 percent 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 achieve an average increase of 8 percent 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; divestiture, acquisition, integration, and
restructuring costs ("special project costs"); gains and losses related to the
sale of a business; unallocated gains and losses on commodity and foreign
currency exchange derivative activities ("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. Due to the unknown and potentially
prolonged impact of COVID-19, we may experience difficulties or be delayed in
achieving our long-term strategies; however, we continue to evaluate the effects
from COVID-19 on our long-term growth objectives.
Net sales has increased at a compound annual growth rate of 1 percent over the
past five years, while adjusted operating income and adjusted earnings per share
have increased at a rate of 1 percent and 4 percent, respectively, over the same
period. These increases were 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 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
                                       21

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through the payment of dividends and share repurchases. Our deployment strategy also includes a significant focus on debt repayment.



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 and
$269.2 in 2021 and 2020, respectively, primarily included in the U.S. Retail
Consumer Foods segment. We received net proceeds from the divestiture of $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 is 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 and $222.8 in 2021 and 2020, respectively,
included in the U.S. Retail Pet Foods segment. We received net proceeds from the
divestiture of $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 is included in other operating expense
(income) - net within the Statement of Consolidated Income.
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 2021, state governments reopened their economies, while adhering to new
guidelines and enhanced safety measures, such as social distancing and face mask
protocols. While there has been a general downward trend in U.S. cases in
calendar year 2021, consumers continue to stay at home more frequently as a
precaution, and as a result, at-home food consumption and demand remains
elevated. We anticipate these changes in consumer behavior to continue into
2022, dependent upon continued vaccine availability and effectiveness, as well
as the impact of additional strains of the virus.

We commenced a phased approach to reopen our corporate headquarters in Orrville,
Ohio, with increased safety protocols. However, occupancy levels remain low as
the majority of our office-based employees continue to work remotely where
possible, and we continue to monitor the latest public health and government
guidance related to COVID-19. We have crisis management teams at all of our
facilities, which are monitoring the evolving situation and implementing risk
mitigation actions as necessary. To date, there has been minimal disruption in
our supply chain network, including the supply of our ingredients, packaging, or
other sourced materials, although it is possible that more significant
disruptions could occur if the COVID-19 pandemic continues to impact markets
around the world, including the impact of e-commerce pressures on freight
charges and potential shipping delays due to supply and demand imbalances. We
also continue to work closely with our customers and external business partners,
taking additional actions to ensure safety and business continuity and maximize
product availability. We have increased production at all of our facilities and
expanded the availability of appointments at distribution centers. All of our
production operations remain open, and none have experienced significant
disruptions or labor reductions related to COVID-19. Furthermore, we have
implemented measures to manage order volumes to ensure a consistent supply
across our retail partners during this period of high demand.

During 2021, we continued to experience an increase in orders, primarily across
our U.S. Retail Coffee and U.S. Retail Consumer Foods segments, in response to
the increased consumer demand for our products related to the elevated at-home
consumption. It is anticipated that the increase in consumer demand will
continue, to a lesser extent, through the beginning of 2022. A decline in
products sold in away from home channels has also been experienced as a result
of COVID-19, which has negatively impacted our net sales in our Away From Home
operating segment, and we expect COVID-19 will continue to adversely affect our
net sales while government-mandated safety measures are in place and consumers
continue to stay at home as a precaution. However, as states have reopened their
economies during 2021, our net sales for the away from home channels improved
compared to the initial months of the pandemic. This trend could reverse during
2022 if cases rise and governments impose additional safety measures that
further impact away from home consumption, which is partially dependent upon
continued vaccine availability and effectiveness. 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; continued
vaccine availability and effectiveness; and the macroeconomic environment. We
will continue to evaluate the nature and extent to which COVID-19 will impact
our business, supply chain, 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,
2021 and 2020. For the comparisons of the years ended April 30, 2020 and 2019,
see the Management's Discussion and Analysis of Financial Condition and Results
of Operations in Part II, Item 7 of our 2020 Annual Report on Form 10-K.
                                                              Year Ended April 30,
                                                                                   % Increase
                                                      2021            2020         (Decrease)
Net sales                                         $ 8,002.7       $ 7,801.0               3  %
Gross profit                                      $ 3,138.7       $ 3,002.0               5
% of net sales                                         39.2  %         38.5  %
Operating income                                  $ 1,386.8       $ 1,223.1              13
% of net sales                                         17.3  %         15.7  %
Net income:
Net income                                        $   876.3       $   779.5              12

Net income per common share - assuming dilution $ 7.79 $ 6.84

              14
Adjusted gross profit (A)                         $ 3,048.5       $ 2,982.4               2
% of net sales                                         38.1  %         38.2 

%


Adjusted operating income (A)                     $ 1,528.8       $ 1,508.7               1
% of net sales                                         19.1  %         19.3  %
Adjusted income: (A)
Income                                            $ 1,025.0       $   999.1               3
Earnings per share - assuming dilution            $    9.12       $    8.76               4


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

Net Sales


                                                                                    Year Ended April 30,
                                                                                                    Increase
                                                                2021               2020             (Decrease)             %
Net sales                                                   $ 8,002.7          $ 7,801.0          $     201.7                3  %
Crisco divestiture                                                  -             (112.4)               112.4                1
Natural Balance divestiture                                         -              (53.6)                53.6                1
Foreign currency exchange                                        (7.7)                 -                 (7.7)               -

Net sales excluding divestitures and foreign currency exchange (A)

$ 7,995.0          $ 7,635.0          $     360.0                5  %


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 2021 increased $201.7, or 3 percent, which includes $166.0 of
noncomparable net sales in the prior year related to the Crisco and Natural
Balance divestitures. Net sales excluding divestitures and foreign currency
exchange increased $360.0, or 5 percent, driven by favorable volume/mix across
all of our retail businesses, supported by increased at-home consumption for the
U.S. Retail Coffee and U.S. Retail Consumer Foods segments. The retail business
growth was partially offset by unfavorable volume/mix for the Away From Home
operating segment.
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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,


                                                                                    2021                2020
Gross profit                                                                          39.2  %             38.5  %
Selling, distribution, and administrative expenses:
Marketing                                                                              3.9  %              3.9  %
Advertising                                                                            2.8                 2.5
Selling                                                                                3.0                 3.2
Distribution                                                                           3.4                 3.6
General and administrative                                                             5.9                 5.8
Total selling, distribution, and administrative expenses                              19.0  %             18.9  %
Amortization                                                                           2.9                 3.0

Other intangible assets impairment charges                                               -                 0.7
Other special project costs                                                            0.3                 0.2
Other operating expense (income) - net                                                (0.4)                  -
Operating income                                                                      17.3  %             15.7  %

Amounts may not add due to rounding.



Gross profit increased $136.7, or 5 percent, in 2021, driven by increased
contribution from volume/mix and a net benefit from price and costs, including a
favorable change in derivative gains and losses as compared to the prior year,
partially offset by the noncomparable impact related to the Crisco and Natural
Balance divestitures.

Operating income increased $163.7, or 13 percent, primarily reflecting the increase in gross profit, a $52.4 intangible asset impairment charge in the prior year, and a $25.3 net pre-tax gain related to the divestitures of the Crisco and Natural Balance businesses, partially offset by a $48.8 increase in selling, distribution, and administrative ("SD&A") expenses.



Our non-GAAP adjustments include amortization expense and impairment charges
related to intangible assets; special project costs; gains and losses related to
the sale of a business; 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") increased $66.1, or 2 percent, in 2021, reflecting the exclusion of
unallocated derivative gains, as compared to GAAP gross profit. Adjusted
operating income increased $20.1, or 1 percent, as compared to the prior year,
further reflecting the exclusion of impairment charges and the net pre-tax gain
on divestitures.

Interest Expense
Net interest expense decreased $12.1, or 6 percent, in 2021, 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.
Other Income (Expense) - Net
Net other expense increased $30.6 in 2021, primarily reflecting pension
settlement charges of $35.5, which includes the aggregate $29.6 pre-tax
settlement charges recognized during 2021 related to the purchase of a group
annuity contract to transfer our Canadian defined benefit pension plan
obligations to an insurance company. For further information, refer to Note 9:
Pensions and Other Postretirement Benefits.
Income Taxes
Income taxes increased $48.4, or 20 percent, in 2021, as compared to the prior
year. The effective tax rate of 25.2 percent for 2021 varied from the U.S.
statutory 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 during the third quarter of 2021.
The effective tax rate of 24.1 percent for 2020 varied from the U.S. statutory
tax rate of 21.0 percent primarily due to the impact of state income taxes. We
anticipate a full-year effective tax rate for 2022 to be approximately 24.0
percent. For additional information, refer to Note 14: Income Taxes.


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Restructuring Activities
A restructuring program was approved by the Board during the third quarter of
2021 associated with opportunities identified to reduce our overall cost
structure and optimize our organizational design, inclusive of stranded overhead
associated with recent divestitures of the Crisco and Natural Balance
businesses. For additional information related to these divestitures, see Note
4: Divestitures. During the fourth quarter of 2021, we substantially completed
an organizational redesign related to our corporate headquarters and announced
plans to close our Suffolk, Virginia, production facility by the end of 2022, as
a result of a new strategic partnership for the production of our Away From Home
liquid coffee. While the entire scope of the program cannot be quantified at
this time, we expect to incur approximately $85.0 in costs associated with the
restructuring activities approved to date. Approximately half of these costs are
expected to be accelerated depreciation and other transition and termination
costs associated with our cost reduction and margin management initiatives,
while the remainder represents employee-related costs. We anticipate the
activities associated with this restructuring program will be completed by the
end of 2023, with over half of the costs expected to be incurred by the end of
2022. We have incurred total cumulative restructuring costs of $24.1, which were
all incurred during the second half of 2021. For further information, refer to
Note 3: 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 2021 annual spend, are green coffee, peanuts, protein
meals, oils and fats, 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, 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 peanuts has been impacted by the recent
decrease in crop supply.

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
conditions.
Excluding the impact of derivative gains and losses, our overall commodity costs
in 2021 were higher than in 2020, primarily due to higher costs for green coffee
and peanuts.
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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. Effective during the first quarter of 2021, the
presentation of International and Away From Home represents a combination of all
other operating segments that are not individually reportable. As a result of
leadership changes, these operating segments are being managed and reported
separately and no longer represent a reportable segment for segment reporting
purposes. Segment results for prior periods have not been modified, as the
combination of these operating segments represents the previously reported
International and Away From Home reportable segment.

The U.S. Retail Pet Foods segment primarily includes 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 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,
                                       2021            2020         % Increase (Decrease)
Net sales:
U.S. Retail Pet Foods              $ 2,844.5       $ 2,869.5                         (1) %
U.S. Retail Coffee                   2,374.6         2,149.5                         10
U.S. Retail Consumer Foods           1,835.7         1,731.7                

6


International and Away From Home       947.9         1,050.3                        (10)
Segment profit:
U.S. Retail Pet Foods              $   487.0       $   552.7                        (12) %
U.S. Retail Coffee                     769.1           691.0                         11
U.S. Retail Consumer Foods             472.5           389.7                         21
International and Away From Home       124.1           173.4                        (28)
Segment profit margin:
U.S. Retail Pet Foods                   17.1  %         19.3  %
U.S. Retail Coffee                      32.4            32.1
U.S. Retail Consumer Foods              25.7            22.5
International and Away From Home        13.1            16.5



U.S. Retail Pet Foods

The U.S. Retail Pet Foods segment net sales decreased $25.0 in 2021, inclusive
of the impact of $53.6 of noncomparable net sales in the prior year related to
the divested Natural Balance business. Excluding the noncomparable impact of the
divested business, net sales increased $28.6, or 1 percent, primarily due to
favorable volume/mix, partially offset by lower net price realization. The
favorable volume/mix contributed 2 percentage points to net sales, primarily
reflecting growth for dog snacks and cat food, driven by Milk-Bone and
Pup-Peroni dog snacks, as well as 9Lives and Meow Mix cat food, partially offset
by declines for dog food, driven by Nature's Recipe and Kibbles 'n Bits. Lower
net price realization reduced net sales by 1 percentage point, primarily
reflecting increased trade spend. Segment profit decreased $65.7, driven by
lower net pricing, increased marketing expense, and a recovery in the prior year
from a legal settlement related to a supplier issue.

U.S. Retail Coffee



The U.S. Retail Coffee segment net sales increased $225.1 in 2021, reflecting
favorable volume/mix, which contributed 11 percentage points to net sales,
related to growth for the Dunkin', Café Bustelo, and Folgers brands. The
favorable volume/mix primarily reflects elevated at-home coffee consumption. Net
price realization reduced net sales by 1 percentage point. Segment profit
increased $78.1, primarily due to the favorable volume/mix, partially offset by
increased marketing expense.
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U.S. Retail Consumer Foods

The U.S. Retail Consumer Foods segment net sales increased $104.0 in 2021,
inclusive of the impact of $101.2 of noncomparable net sales in the prior year
related to the divested Crisco business. Excluding the noncomparable impact of
the divested business, net sales increased $205.2, or 13 percent, primarily due
to favorable volume/mix, which contributed 8 percentage points to net sales,
reflecting growth for the Smucker's brand, inclusive of Uncrustables frozen
sandwiches and fruit spreads, and Jif peanut butter. The favorable volume/mix
primarily reflects elevated at-home consumption and continued growth of our
Uncrustables brand. Higher net pricing increased net sales by 4 percentage
points, primarily driven by the impact of a peanut butter list price increase
taken on the Jif brand during the second quarter of 2021. Segment profit
increased $82.8, reflecting the favorable impact of higher net pricing, the
increased contribution from volume/mix, and the lapping of a write-off of
equipment related to the discontinuation of Jif Power Ups® during the prior
year, partially offset by the noncomparable segment profit in the prior year
related to the divested Crisco business and increased marketing expense.
International and Away From Home

International and Away From Home net sales decreased $102.4 in 2021, including
the noncomparable impact of $11.2 of net sales in the prior year related to the
divested Crisco business. Excluding the noncomparable impact of the divested
business, net sales decreased $91.2, primarily reflecting a 21 percent decline
for the Away From Home operating segment, partially offset by net sales growth
of 4 percent for the International operating segment. Unfavorable volume/mix for
the combined businesses reduced net sales by 10 percentage points, primarily
driven by coffee, portion control, and sweetener products in away from home
channels. These declines were partially offset by gains for Uncrustables frozen
sandwiches in away from home channels and dog snacks and cat food in the
International operating segment. Foreign currency exchange had a $7.7 favorable
impact on net sales. Segment profit decreased $49.3, primarily reflecting the
unfavorable volume/mix and higher input costs, partially offset by lower SD&A
expenses.

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 $334.3 at April 30, 2021, compared
to $391.1 at April 30, 2020.

The following table presents selected cash flow information.


                                                           Year Ended April 

30,


                                                           2021            

2020


Net cash provided by (used for) operating activities   $   1,565.0      $ 1,254.8
Net cash provided by (used for) investing activities         311.1         (271.5)
Net cash provided by (used for) financing activities      (1,943.9)        (688.7)

Net cash provided by (used for) operating activities $ 1,565.0 $ 1,254.8 Additions to property, plant, and equipment

                 (306.7)        (269.3)
Free cash flow (A)                                     $   1,258.3      $   985.5


(A)Free cash flow is a non-GAAP financial measure used by management to evaluate
the amount of cash available for debt repayment, dividend distribution,
acquisition opportunities, share repurchases, and other corporate purposes.
The $310.2 increase in cash provided by operating activities in 2021 was
primarily driven by a favorable benefit from lapping the settlement of interest
rate contracts for $239.8 during 2020. In addition, net income adjusted for
noncash items was higher in the current year. The cash required to fund working
capital decreased compared to the prior year, primarily related to lower
payments for accounts payable driven by working capital initiatives, inclusive
of a supplier financing program entered into during the second half of 2020, and
an increase in cash from trade receivables due to the timing of sales and
payments, which was mostly offset by increased inventory levels reflecting the
lapping of increased consumer demand in the fourth quarter of 2020.
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Cash provided by investing activities in 2021 primarily consisted of net
proceeds 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. Cash used for investing
activities in 2020 primarily consisted of $269.3 in capital expenditures.
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 a net decrease in short-term borrowings of $166.4. Cash used for
financing activities in 2020 consisted primarily of long-term debt repayments of
$900.0, dividend payments of $396.8, and a $185.8 net decrease in short-term
borrowings, partially offset by $798.2 in long-term debt proceeds.

Supplier Financing Program
As part of ongoing efforts to maximize working capital, we work with our
suppliers to optimize our terms and conditions, which includes the extension of
payment terms. Payment terms with our suppliers, which we deem to be
commercially reasonable, generally range from 0 to 120 days. During the second
half of 2020, we entered into an agreement with a third-party administrator to
provide an accounts payable tracking system and facilitate a supplier financing
program which allows participating suppliers the ability to monitor and
voluntarily elect to sell our payment obligations to a designated third-party
financial institution. Participating suppliers can sell one or more of our
payment obligations at their sole discretion, and our rights and obligations to
our suppliers are not impacted. We have no economic interest in a supplier's
decision to enter into these agreements. Our obligations to our suppliers,
including amounts due and scheduled payment terms, are not impacted by our
suppliers' decisions to sell amounts under these arrangements. As of April 30,
2021 and 2020, $304.2 and $157.5 of our outstanding payment obligations,
respectively, were elected and sold to a financial institution by participating
suppliers. During 2021 and 2020, we paid $663.5 and $31.8, 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 the remaining 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, 2021. 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 nine pending putative class action lawsuits filed in
federal courts in California, Florida, Illinois,
Missouri, Texas, Washington, and Washington D.C. The plaintiffs in those actions
assert claims arising under various state
laws for false advertising, consumer protection, deceptive and unfair trade
practices, and similar 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. Five of the lawsuits have
been transferred to the United States District
Court for the Western District of Missouri for coordinated pre-trial
proceedings. Similar claims have been asserted against
certain retailers of our Folgers coffee products, and indemnity claims have been
asserted by such retailers against us. Various
other potential plaintiffs have threatened to assert similar claims against us.

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, 2021, and the
likelihood of loss is not considered probable or
                                       28

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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 16: Contingencies.

Capital Resources
The following table presents our capital structure.
                                                April 30,
                                           2021            2020

Current portion of long-term debt $ 1,152.9 $ - Short-term borrowings

                        82.0           248.0
Long-term debt, less current portion      3,516.8         5,373.3
Total debt                             $  4,751.7      $  5,621.3
Shareholders' equity                      8,124.8         8,190.9
Total capital                          $ 12,876.5      $ 13,812.2


During the third quarter of 2021, we prepaid, in full, the remaining outstanding
balance of the $1.5 billion Term Loan Credit Agreement ("Term Loan") that was
entered into in April 2018 to partially finance the Ainsworth acquisition, as
discussed in Note 2: Acquisition. During 2021 and 2020, we prepaid $700.0 and
$100.0 on the Term Loan, respectively.

We have available a $1.8 billion unsecured revolving credit facility with a
group of 11 banks that matures in September 2022. Additionally, we participate
in a commercial paper program under which we can issue short-term, unsecured
commercial paper not to exceed $1.8 billion at any time. The commercial paper
program is backed by our revolving credit facility and reduces what we can
borrow under the revolving credit facility by the amount of commercial paper
outstanding. Commercial paper will be used as a continuing source of short-term
financing for general corporate purposes. As of April 30, 2021, we had $82.0 of
short-term borrowings outstanding, all of which were issued under our commercial
paper program, at a weighted-average interest rate of 0.17 percent.
We are in compliance with all of our debt covenants. For additional information
on our long-term debt, sources of liquidity, and debt covenants, see Note 8:
Debt and Financing Arrangements.
On October 22, 2020, the Board authorized the repurchase of up to 5.0 million
common shares, in addition to the 3.6 million common shares that remained
available for repurchase pursuant to prior authorizations of the Board, for a
total of 8.6 million common shares available for repurchase. Under the
repurchase program, a total of 5.8 million common shares were repurchased for
$671.9 during 2021. Included in the total repurchases during the third quarter
of 2021 were 2.0 million common shares repurchased under a 10b5-1 plan entered
into on December 30, 2020. At April 30, 2021, approximately 2.8 million common
shares remain available for repurchase pursuant to the Board's authorizations.
We did not repurchase any common shares under a repurchase plan authorized by
the Board during 2020.
The following table presents certain cash requirements related to 2022 investing
and financing activities based on our current expectations.
                                                                                    Projection
                                                                                   Year Ending
                                                                                  April 30, 2022
Principal payments - excludes the impact of potential debt refinancing          $       1,150.0
Dividend payments - based on current rates and common shares outstanding                  390.0
Capital expenditures                                                                      380.0
Interest payments                                                                         153.4


Absent any material acquisitions or other significant investments, we believe
that cash on hand, combined with cash provided by operations, borrowings
available under our commercial paper program and revolving credit facility, and
access to capital markets, will be sufficient to meet our cash requirements for
the next 12 months, including the payment of quarterly dividends, principal and
interest payments on debt outstanding, and capital expenditures. However, as a
result of COVID-19, 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,
which could affect our financial condition or our ability to fund operations or
future investment opportunities.

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During 2021, we returned $100.0 of foreign cash to the U.S. from Canada. The
repatriation was subject to $5.0 of foreign withholding taxes, while U.S.
federal and state income taxes were not significant. As of April 30, 2021, we
have re-evaluated our global cash needs and determined that a portion of our
undistributed earnings, primarily in Canada, are no longer permanently
reinvested, resulting in the recognition of an immaterial deferred tax
liability.

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 related to the sale of a
business; unallocated derivative gains and losses; and other one-time items that
do not directly reflect ongoing operating results. Additionally, 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 tax rate, certain
exclusions from non-GAAP results, such as the permanent tax impacts associated
with the Crisco and Natural Balance divestitures, 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 23 for a reconciliation of net sales adjusted for certain noncomparable
items to the comparable GAAP financial measure.
                                                           Year Ended April 

30,


                                                           2021            

2020


Gross profit reconciliation:
Gross profit                                           $   3,138.7      $ 

3,002.0


Unallocated derivative losses (gains)                        (93.6)         

(19.6)


Cost of products sold - special project costs                  3.4          

-


Adjusted gross profit                                  $   3,048.5      $ 

2,982.4


Operating income reconciliation:
Operating income                                       $   1,386.8      $ 1,223.1
Amortization                                                 233.0          236.3

Other intangible assets impairment charges                     3.8          

52.4


Gain on divestitures - net                                   (25.3)         

-


Unallocated derivative losses (gains)                        (93.6)         

(19.6)


Cost of products sold - special project costs                  3.4              -
Other special project costs                                   20.7           16.5
Adjusted operating income                              $   1,528.8      $ 1,508.7
Net income reconciliation:
Net income                                             $     876.3      $   779.5
Income tax expense (benefit)                                 295.6          247.2
Amortization                                                 233.0          236.3

Other intangible assets impairment charges                     3.8          

52.4


Gain on divestitures - net                                   (25.3)         

-


Unallocated derivative losses (gains)                        (93.6)         

(19.6)


Cost of products sold - special project costs                  3.4          

-


Other special project costs                                   20.7          

16.5


Other one-time items:
Pension plan termination settlement charges (A)               29.6          

-


Adjusted income before income taxes                    $   1,343.5      $ 1,312.3
Income taxes, as adjusted                                    318.5          313.2
Adjusted income                                        $   1,025.0      $   999.1
Weighted-average shares - assuming dilution                  112.4          

114.0

Adjusted earnings per share - assuming dilution $ 9.12 $

8.76


EBITDA (as adjusted) reconciliation:
Net income                                             $     876.3      $   779.5
Income tax expense (benefit)                                 295.6          247.2
Interest expense - net                                       177.1          189.2
Depreciation                                                 219.5          210.2
Amortization                                                 233.0          236.3

Other intangible assets impairment charges                     3.8          

52.4


EBITDA (as adjusted)                                   $   1,805.3      $ 

1,714.8


Free cash flow reconciliation:
Net cash provided by (used for) operating activities   $   1,565.0      $ 1,254.8
Additions to property, plant, and equipment                 (306.7)        (269.3)
Free cash flow                                         $   1,258.3      $   985.5

(A) Represents the nonrecurring pre-tax settlement charges of $29.6 related to the purchase of a group annuity contract to transfer our Canadian defined benefit pension plan obligation to an insurance company. For additional information, see Note 9: Pensions and Other Postretirement Benefits.


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OFF-BALANCE SHEET ARRANGEMENTS
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.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations by fiscal year at
April 30, 2021.
                                                                                                                        2027 and
                                            Total               2022             2023-2024          2025-2026            beyond
Long-term debt obligations, including
current portion (A)                      $ 4,700.0          $ 1,150.0

$ - $ 1,000.0 $ 2,550.0 Interest payments (B)

                      1,715.7              153.4               256.6              221.6            1,084.1
Operating lease obligations (C)              162.2               44.2                70.1               40.0                7.9
Purchase obligations (D)                   2,179.5            1,752.2               282.6               96.1               48.6
Other liabilities (E)                        347.9               31.3                49.9               28.9              237.8
Total                                    $ 9,105.3          $ 3,131.1          $    659.2          $ 1,386.6          $ 3,928.4


(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)Operating lease obligations consists of the minimum rental commitments under
non-cancelable operating leases.
(D)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 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.
(E)Other liabilities consists primarily of projected commitments associated with
our defined benefit pension and other postretirement benefit plans, as well as
$4.5 related to financing lease obligations. The liability for unrecognized tax
benefits and tax-related net interest of $11.9 under the Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income
Taxes, is excluded, since we are unable to reasonably estimate the timing of
cash settlements with the respective taxing authorities.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES



The preparation of financial statements in conformity with U.S. GAAP requires
that we make estimates and assumptions that in certain circumstances affect
amounts reported in the accompanying consolidated financial statements. In
preparing these financial statements, we have made our best estimates and
judgments of certain amounts included in the financial statements, giving due
consideration to materiality. We do not believe there is a great likelihood that
materially different amounts would be reported under different conditions or
using different assumptions related to the accounting policies described below.
However, application of these accounting policies involves the exercise of
judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
Trade Marketing and Merchandising Programs: In order to support our products,
various promotional activities are conducted through retail, distributors, or
directly with consumers, including in-store display and product placement
programs, price discounts, coupons, and other similar activities. The costs of
these programs are classified as a reduction of sales. We regularly review and
revise, when we deem necessary, estimates of costs for these promotional
programs based on estimates of what will be redeemed by retail, distributors, or
consumers. These estimates are made using various techniques, including
historical data on performance of similar promotional programs. Differences
between estimated expenditures and actual performance are recognized as a change
in estimate in a subsequent period. During 2021, 2020, and 2019, subsequent
period adjustments were less than 2 percent of both consolidated pre-tax income
and cash provided by operating activities. These promotional expenditures,
including amounts classified as a reduction of sales, represented 39 percent of
net sales in 2021.

Income Taxes: We account for income taxes using the liability method. In the
ordinary course of business, we are exposed to uncertainties related to tax
filing positions and periodically assess the technical merits of these tax
positions for all tax years that remain subject to examination, based upon the
latest information available. For material uncertain tax positions, we have
recognized a liability for unrecognized tax benefits, including any applicable
interest and penalty charges.
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We routinely evaluate the likelihood of realizing the benefit of our deferred
tax assets and may record a valuation allowance if, based on all available
evidence, we determine that it is more likely than not that all or some portion
of such assets will not be realized. Valuation allowances related to deferred
tax assets can be affected by changes in tax laws, statutory tax rates, and
projected future taxable income levels. Changes in estimated realization of
deferred tax assets would result in an adjustment to income in the period in
which that determination is made, unless such changes are determined to be an
adjustment to goodwill within the allowable measurement period under the
acquisition method of accounting.
The future tax benefit arising from the net deductible temporary differences and
tax carryforwards was $229.6 and $244.8 at April 30, 2021 and 2020,
respectively. In evaluating our ability to recover our deferred tax assets
within the jurisdiction from which they arise, we consider all available
positive and negative evidence, including scheduled reversals of deferred tax
liabilities, projected future taxable income, tax planning strategies, and
results of operations. For those jurisdictions where the expiration date of tax
carryforwards or the projected operating results indicate that realization is
not likely, a valuation allowance would have been provided.

As of April 30, 2021, the Company has re-evaluated its global cash needs and
determined that a portion of the undistributed foreign earnings, primarily in
Canada, are no longer permanently reinvested.
Goodwill and Other Indefinite-Lived Intangible Assets: 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, 2021,
the carrying value of goodwill and other intangible assets totaled $12.1
billion, compared to total assets of $16.3 billion and total shareholders'
equity of $8.1 billion. If the carrying value of these assets exceeds the
current estimated fair value, the asset is considered impaired, and this would
result in a noncash charge to earnings. Any such impairment charge would reduce
earnings and 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.
To test for goodwill impairment, we estimate the fair value of each of our
reporting units using both a discounted cash flow valuation technique and a
market-based approach. The impairment test incorporates estimates of future cash
flows; allocations of certain assets, liabilities, and cash flows among
reporting units; future growth rates; terminal value amounts; and the applicable
weighted-average cost of capital used to discount those estimated cash flows.
The estimates and projections used in the calculation of fair value are
consistent with our current and long-range plans, including anticipated changes
in market conditions, industry trends, growth rates, and planned capital
expenditures. Changes in forecasted operations and other estimates and
assumptions could impact the assessment of impairment in the future.
At April 30, 2021, goodwill totaled $6.0 billion. Goodwill is substantially
concentrated within the U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S.
Retail Consumer Foods segments. During 2021, no goodwill impairment was
recognized as a result of the evaluations performed throughout the year. The
estimated fair value of each of our reporting units for which there is a
goodwill balance was substantially in excess of its carrying value as of the
annual test date, with the exception of the Pet Foods reporting unit, for which
its fair value exceeded its carrying value by approximately 6 percent. A
sensitivity analysis was performed for the Pet Foods reporting unit, assuming a
hypothetical 50-basis-point decrease in the expected long-term growth rate or a
hypothetical 50-basis-point increase in the weighted-average cost of capital,
and both scenarios independently yielded an estimated fair value for the Pet
Foods reporting unit below carrying value.
Other indefinite-lived intangible assets, consisting entirely of trademarks, are
also tested for impairment at least annually and more often if events or changes
in circumstances indicate their carrying values may be below their fair values.
To test these assets for impairment, we estimate the fair value of each asset
based on a discounted cash flow model using various inputs, including projected
revenues, an assumed royalty rate, and a discount rate. Changes in these
estimates and assumptions could impact the assessment of impairment in the
future.
At April 30, 2021, other indefinite-lived intangible assets totaled $2.9
billion. Trademarks that represent our leading brands comprise approximately 90
percent of the total carrying value of other indefinite-lived intangible assets.
As of April 30, 2021, the estimated fair value was substantially in excess of
the carrying value for the majority of these leading brand trademarks, and in
all instances, the estimated fair value exceeded the carrying value by greater
than 10 percent, with the exception of the Rachael Ray Nutrish brand within the
U.S. Retail Pet Foods segment.
                                       33

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The carrying values of the goodwill and indefinite-lived intangible assets
within the U.S. Retail Pet Foods segment were
$2.4 billion and $1.4 billion, respectively, as of April 30, 2021. These
intangible assets remain 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
recent impairment charges and the acquisition of Ainsworth in 2019. Any
significant adverse change in our near- or long-term projections or
macroeconomic conditions could result in future impairment charges which could
be material.
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, 2021, any
significant sustained adverse change in consumer purchasing behaviors,
government restrictions, financial results, or macroeconomic conditions could
result in future impairment, specifically as it relates to the Away From Home
reporting unit, which has experienced a significant decline in demand as a
result of COVID-19. As of April 30, 2021, the goodwill related to the Away From
Home reporting unit represented approximately 60 percent of the goodwill within
International and Away From Home. For additional information, see Note 7:
Goodwill and Other Intangible Assets.
Pension and Other Postretirement Benefit Plans: To determine the ultimate
obligation under our defined benefit pension and other postretirement benefit
plans, we must estimate the future cost of benefits and attribute that cost to
the time period during which each covered employee works. Various actuarial
assumptions must be made in order to predict and measure costs and obligations
many years prior to the settlement date, the most significant being the interest
rates used to discount the obligations of the plans, the long-term rates of
return on the plans' assets, mortality assumptions, assumed pay increases, and
the health care cost trend rates. We, along with third-party actuaries and
investment managers, review all of these assumptions on an ongoing basis to
ensure that the most reasonable information available is being considered.
We utilize a spot rate methodology for the estimation of service and interest
cost for our plans by applying specific spot rates along the yield curve to the
relevant projected cash flows to provide a better estimate of service and
interest costs. For 2022 expense recognition, we will use weighted-average
discount rates for the U.S. defined benefit pension plans of 3.13 percent to
determine benefit obligation, 3.53 percent to determine service cost, and 2.40
percent to determine interest cost, and a rate of compensation increase of 3.55
percent. For the Canadian defined benefit pension plans, we will use
weighted-average discount rates of 2.15 percent to determine benefit obligation
and 1.95 percent to determine interest cost. In addition, we anticipate using an
expected rate of return on plan assets of 4.59 percent and 1.70 percent for the
U.S. and Canadian defined benefit pension plans, respectively.
FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report on Form 10-K contain
forward-looking statements within the meaning of federal securities laws. The
forward-looking statements may include statements concerning our current
expectations, estimates, assumptions, and beliefs concerning future events,
conditions, plans, and strategies that are not historical fact. Any statement
that is not historical in nature is a forward-looking statement and may be
identified by the use of words and phrases such as "expect," "anticipate,"
"believe," "intend," "will," "plan," and similar phrases.

Federal securities laws provide a safe harbor for forward-looking statements to
encourage companies to provide prospective information. We are providing this
cautionary statement in connection with the safe harbor provisions. Readers are
cautioned not to place undue reliance on any forward-looking statements, as such
statements are by nature subject to risks, uncertainties, and other factors,
many of which are outside of our control and could cause actual results to
differ materially from such statements and from our historical results and
experience. These risks and uncertainties include, but are not limited to, those
set forth under the caption "Risk Factors" of this Annual Report on Form 10-K,
as well as the following:

•the impact of the COVID-19 pandemic on our business, industry, suppliers,
customers, consumers, employees, and communities, particularly with respect to
our Away From Home business;
•disruptions or inefficiencies in our operations or supply chain, including any
impact of the COVID-19 pandemic;
•our ability to achieve cost savings related to our restructuring and cost
management programs in the amounts and within the time frames currently
anticipated;
•our ability to generate sufficient cash flow to continue operating under our
capital deployment model, including capital expenditures, debt repayment,
dividend payments, and share repurchases;
•volatility of commodity, energy, and other input costs;
•risks associated with derivative and purchasing strategies we employ to manage
commodity pricing and interest rate risks;
                                       34

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•the availability of reliable transportation on acceptable terms, including any
impact of the COVID-19 pandemic;
•our ability to implement and realize the full benefit of price changes, and the
impact of the timing of the price changes to profits and cash flow in a
particular period;
•the success and cost of marketing and sales programs and strategies intended to
promote growth in our businesses, including product innovation;
•general competitive activity in the market, including competitors' pricing
practices and promotional spending levels;
•the impact of food security concerns involving either our products or our
competitors' products;
•the impact of accidents, extreme weather, natural disasters, and pandemics
(such as COVID-19);
•the concentration of certain of our businesses with key customers and
suppliers, including single-source suppliers of certain key raw materials and
finished goods, and our ability to manage and maintain key relationships;
•impairments in the carrying value of goodwill, other intangible assets, or
other long-lived assets or changes in the useful lives of other intangible
assets or other long-lived assets;
•the impact of new or changes to existing governmental laws and regulations and
their application, including tariffs;
•the outcome of tax examinations, changes in tax laws, and other tax matters;
•foreign currency exchange rate and interest rate fluctuations; and
•risks related to other factors described under "Risk Factors" in other reports
and statements we have filed with the SEC.
Readers are cautioned not to unduly rely on such forward-looking statements,
which speak only as of the date made, when evaluating the information presented
in this Annual Report on Form 10-K. We do not undertake any obligation to update
or revise these forward-looking statements to reflect new events or
circumstances subsequent to the filing of this Annual Report on Form 10-K.
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.
DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISK

The following discussions about our market risk disclosures involve
forward-looking statements. Actual results could differ from those projected in
the forward-looking statements. We are exposed to market risk related to changes
in interest rates, commodity prices, and foreign currency exchange rates.
Interest Rate Risk: The fair value of our cash and cash equivalents at April 30,
2021, approximates carrying value. We are exposed to interest rate risk with
regard to existing debt consisting of fixed- and variable-rate maturities. Our
interest rate exposure primarily includes U.S. Treasury rates, LIBOR, and
commercial paper rates in the U.S. The Financial Conduct Authority in the United
Kingdom has stated that it will not require banks to submit LIBOR beyond
calendar year 2021. We do not anticipate a significant impact to our financial
position as a result of this action given our current mix of fixed- and
variable-rate debt.
We utilize derivative instruments to manage interest rate risk associated with
anticipated debt transactions, as well as to manage changes in the fair value of
our long-term debt. At the inception of an interest rate contract, the
instrument is evaluated and documented for qualifying hedge accounting
treatment. If the contract is designated as a cash flow hedge, the
mark-to-market gains or losses on the contract are deferred and included as a
component of accumulated other comprehensive income (loss), and reclassified to
interest expense in the period during which the hedged transaction affects
earnings. If the contract is designated as a fair value hedge, the contract is
recognized at fair value on the balance sheet, and changes in the fair value are
recognized in interest expense. Generally, changes in the fair value of the
contract are equal to changes in the fair value of the underlying debt and have
no net impact on earnings.
In 2020, we terminated interest rate contracts concurrent with the pricing of
the Senior Notes due March 15, 2030, and March 15, 2050. They were designated as
cash flow hedges and were used to manage our exposure to interest rate
volatility associated with the anticipated debt financing. The termination
resulted in a pre-tax loss of $239.8, which was deferred and included as a
component of accumulated other comprehensive income (loss) and is being
amortized as interest expense over the life of the debt.
In 2015, we terminated the interest rate swap on the Senior Notes due October
15, 2021, which was designated as a fair value hedge and used to hedge against
the changes in the fair value of the debt. As a result of the early termination,
we received $58.1 in cash, which included $4.6 of accrued and prepaid interest
and a $53.5 benefit that was deferred as a component of the carrying value of
the long-term debt and is being recognized ratably as a reduction to interest
expense over the life of the debt. At April 30, 2021, the remaining benefit of
$4.0 was recorded as an increase in the long-term debt balance.
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In measuring interest rate risk by the amount of net change in the fair value of
our financial liabilities, a hypothetical
100-basis-point decrease in interest rates at April 30, 2021, would increase the
fair value of our long-term debt by $386.0.
Commodity Price Risk: We use certain raw materials and other commodities that
are subject to price volatility caused by supply and demand conditions,
political and economic variables, weather, investor speculation, and other
unpredictable factors. To manage the volatility related to anticipated commodity
purchases, we use derivatives with maturities of generally less than one year.
We do not qualify commodity derivatives for hedge accounting treatment. As a
result, the gains and losses on all commodity derivatives are immediately
recognized in cost of products sold.
The following sensitivity analysis presents our potential loss of fair value
resulting from a hypothetical 10 percent change in market prices related to
commodities.
                Year Ended April 30,
                  2021               2020
High      $      47.5              $ 37.8
Low              11.7                14.5
Average          29.0                26.9


The estimated fair value was determined using quoted market prices and was based
on our net derivative position by commodity for the previous four quarters. The
calculations are not intended to represent actual losses in fair value that we
expect to incur. In practice, as markets move, we actively manage our risk and
adjust hedging strategies as appropriate. The commodities hedged have a high
inverse correlation to price changes of the derivative instrument; thus, we
would expect that any gain or loss in the estimated fair value of these
derivatives would generally be offset by an increase or decrease in the
estimated fair value of the underlying exposures.
Foreign Currency Exchange Risk: We have operations outside the U.S. with foreign
currency denominated assets and liabilities, primarily denominated in Canadian
currency. Because we have foreign currency denominated assets and liabilities,
financial exposure may result, primarily from the timing of transactions and the
movement of exchange rates. The foreign currency balance sheet exposures as of
April 30, 2021, are not expected to result in a significant impact on future
earnings or
cash flows.
We utilize foreign currency derivatives to manage the effect of foreign currency
exchange fluctuations on future cash payments primarily related to purchases of
certain raw materials and finished goods. The contracts generally have
maturities of less than one year. We do not qualify instruments used to manage
foreign currency exchange exposures for hedge accounting treatment. Therefore,
the change in value of these instruments is immediately recognized in cost of
products sold. Based on our hedged foreign currency positions as of April 30,
2021, a hypothetical 10 percent change in exchange rates would not materially
impact the fair value.
Revenues from customers outside the U.S., subject to foreign currency exchange,
represented 5 percent of net sales during 2021. Thus, certain revenues and
expenses have been, and are expected to be, subject to the effect of foreign
currency fluctuations, and these fluctuations may have an impact on operating
results.
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