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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________________ 
FORM 10-Q
___________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: October 31, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-5111
 ___________________________________________________
The J. M. Smucker Company
(Exact name of registrant as specified in its charter)
___________________________________________________ 
Ohio
 
34-0538550
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
One Strawberry Lane
 
 
 
 
Orrville,
Ohio
 
44667-0280
(Address of principal executive offices)
 
(Zip code)
 
 
 
                                                                           Registrant’s telephone number, including area code:
(330)
682-3000
 
 
 
 
N/A    
           (Former name, former address and former fiscal year, if changed since last report)
 
 
 
 
 
 
       Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
 
                             Title of each class
Trading symbol
Name of each exchange on which registered
Common shares, no par value
SJM
New York Stock Exchange
 ___________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
Accelerated filer
 

 
 
 
 
Non-accelerated filer
 

Smaller reporting company
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  ý
The Company had 114,056,389 common shares outstanding on November 15, 2019.

 
 
 

Table of Contents

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

1


Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
 
Three Months Ended October 31,
 
Six Months Ended October 31,
Dollars in millions, except per share data
2019
 
2018
 
2019
 
2018
Net sales
$
1,957.8

 
$
2,021.5

 
$
3,736.7

 
$
3,924.0

Cost of products sold
1,203.8

 
1,250.2

 
2,283.1

 
2,474.5

Gross Profit
754.0

 
771.3

 
1,453.6

 
1,449.5

Selling, distribution, and administrative expenses
361.5

 
382.4

 
742.0

 
765.7

Amortization
58.8

 
59.7

 
117.6

 
120.2

Other special project costs (A)
3.3

 
25.4

 
6.6

 
33.1

Other operating expense (income) – net
0.6

 
(26.7
)
 

 
(26.9
)
Operating Income
329.8

 
330.5

 
587.4

 
557.4

Interest expense – net
(49.1
)
 
(53.6
)
 
(98.5
)
 
(107.2
)
Other income (expense) – net
(1.6
)
 
(7.5
)
 
(3.1
)
 
(7.7
)
Income Before Income Taxes
279.1

 
269.4

 
485.8

 
442.5

Income tax expense
67.9

 
80.9

 
120.0

 
121.0

Net Income
$
211.2

 
$
188.5

 
$
365.8

 
$
321.5

Earnings per common share:
 
 
 
 
 
 
 
Net Income
$
1.85

 
$
1.66

 
$
3.21

 
$
2.83

Net Income – Assuming Dilution
$
1.85

 
$
1.66

 
$
3.21

 
$
2.83

 
(A)
Other special project costs includes integration and restructuring costs. For more information, see Note 4: Integration and Restructuring Costs.
See notes to unaudited condensed consolidated financial statements.


THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended October 31,
 
Six Months Ended October 31,
Dollars in millions
2019
 
2018
 
2019
 
2018
Net income
$
211.2

 
$
188.5

 
$
365.8

 
$
321.5

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments
0.6

 
(5.6
)
 
5.1

 
(11.7
)
Cash flow hedging derivative activity, net of tax
(33.8
)
 
6.1

 
(74.6
)
 
8.2

Pension and other postretirement benefit plans activity, net of tax
1.4

 
1.6

 
2.5

 
3.2

Available-for-sale securities activity, net of tax
0.1

 
0.3

 
0.4

 
0.6

Total Other Comprehensive Income (Loss)
(31.7
)
 
2.4

 
(66.6
)
 
0.3

Comprehensive Income
$
179.5

 
$
190.9

 
$
299.2

 
$
321.8

See notes to unaudited condensed consolidated financial statements.

2


Table of Contents

THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Dollars in millions

October 31, 2019
 
April 30, 2019
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
48.8

 
$
101.3

Trade receivables, less allowance for doubtful accounts
522.4

 
503.8

Inventories:
 
 
 
Finished products
667.3

 
590.8

Raw materials
346.0

 
319.5

Total Inventory
1,013.3

 
910.3

Other current assets
74.7

 
109.8

Total Current Assets
1,659.2

 
1,625.2

Property, Plant, and Equipment
 
 
 
Land and land improvements
123.4

 
122.1

Buildings and fixtures
953.2

 
903.2

Machinery and equipment
2,354.4

 
2,185.0

Construction in progress
171.6

 
321.8

Gross Property, Plant, and Equipment
3,602.6

 
3,532.1

Accumulated depreciation
(1,687.1
)
 
(1,619.7
)
Total Property, Plant, and Equipment
1,915.5

 
1,912.4

Other Noncurrent Assets
 
 
 
Operating lease right-of-use assets
153.2

 

Goodwill
6,313.6

 
6,310.9

Other intangible assets – net
6,602.7

 
6,718.8

Other noncurrent assets
146.8

 
144.0

Total Other Noncurrent Assets
13,216.3

 
13,173.7

Total Assets
$
16,791.0

 
$
16,711.3

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
 
 
 
Accounts payable
$
521.8

 
$
591.0

Accrued trade marketing and merchandising
214.2

 
142.7

Current portion of long-term debt
799.5

 
798.5

Short-term borrowings
327.9

 
426.0

Current operating lease liabilities

44.4

 

Other current liabilities
402.3

 
383.3

Total Current Liabilities
2,310.1

 
2,341.5

Noncurrent Liabilities
 
 
 
Long-term debt, less current portion
4,584.5

 
4,686.3

Deferred income taxes
1,377.6

 
1,398.6

Noncurrent operating lease liabilities
116.2

 

Other noncurrent liabilities
307.3

 
314.4

Total Noncurrent Liabilities
6,385.6

 
6,399.3

Total Liabilities
8,695.7

 
8,740.8

Shareholders’ Equity
 
 
 
Common shares
29.0

 
28.9

Additional capital
5,781.7

 
5,755.8

Retained income
2,533.0

 
2,367.6

Accumulated other comprehensive income (loss)
(248.4
)
 
(181.8
)
Total Shareholders’ Equity
8,095.3

 
7,970.5

Total Liabilities and Shareholders’ Equity
$
16,791.0

 
$
16,711.3

See notes to unaudited condensed consolidated financial statements.

3


Table of Contents

THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
 
Six Months Ended October 31,
Dollars in millions
2019
 
2018
Operating Activities
 
 
 
Net income
$
365.8

 
$
321.5

Adjustments to reconcile net income to net cash provided by (used for) operations:
 
 
 
Depreciation
103.4

 
102.9

Amortization
117.6

 
120.2

Share-based compensation expense
13.7

 
10.5

Gain on divestiture

 
(26.6
)
Other noncash adjustments – net
6.6

 
3.0

Changes in assets and liabilities, net of effect from acquisition and divestiture:
 
 
 
Trade receivables
(18.2
)
 
(111.2
)
Inventories
(102.0
)
 
(60.4
)
Other current assets
13.3

 
17.6

Accounts payable
(41.3
)
 
15.2

Accrued liabilities
25.7

 
60.4

Income and other taxes
(32.6
)
 
18.5

Other – net
(6.5
)
 
(25.7
)
Net Cash Provided by (Used for) Operating Activities
445.5

 
445.9

Investing Activities
 
 
 
Business acquired, net of cash acquired

 
(1,903.0
)
Additions to property, plant, and equipment
(136.4
)
 
(179.1
)
Proceeds from divestiture

 
372.1

Other – net
32.2

 
(8.9
)
Net Cash Provided by (Used for) Investing Activities
(104.2
)
 
(1,718.9
)
Financing Activities
 
 
 
Short-term borrowings (repayments) – net
(102.9
)
 
246.0

Proceeds from long-term debt

 
1,500.0

Repayments of long-term debt
(100.0
)
 
(300.0
)
Quarterly dividends paid
(196.6
)
 
(184.9
)
Purchase of treasury shares
(3.5
)
 
(5.0
)
Proceeds from stock option exercises
7.0

 

Other – net
0.8

 
0.1

Net Cash Provided by (Used for) Financing Activities
(395.2
)
 
1,256.2

Effect of exchange rate changes on cash
1.4

 
(4.6
)
Net increase (decrease) in cash and cash equivalents
(52.5
)
 
(21.4
)
Cash and cash equivalents at beginning of period
101.3

 
192.6

Cash and Cash Equivalents at End of Period
$
48.8

 
$
171.2

( ) Denotes use of cash
See notes to unaudited condensed consolidated financial statements.

4


Table of Contents

THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY
(Unaudited)
Dollars in millions
Common
Shares Outstanding
 
Common Shares
 
Additional Capital
 
Retained Income
 
Accumulated Other Comprehensive Income (Loss)
 
Total Shareholders’ Equity
Balance at May 1, 2019
113,742,296

 
$
28.9

 
$
5,755.8

 
$
2,367.6

 
$
(181.8
)
 
$
7,970.5

Net income


 


 


 
154.6

 


 
154.6

Other comprehensive income (loss)

 

 

 

 
(34.9
)
 
(34.9
)
Comprehensive income


 


 


 


 


 
119.7

Purchase of treasury shares
(22,793
)
 

 
(2.7
)
 
(0.2
)
 


 
(2.9
)
Stock plans
330,289

 
0.1

 
20.4

 


 


 
20.5

Cash dividends declared, $0.88 per common share


 


 


 
(100.1
)
 


 
(100.1
)
Other


 


 


 

 


 

Balance at July 31, 2019
114,049,792

 
$
29.0

 
$
5,773.5

 
$
2,421.9

 
$
(216.7
)
 
$
8,007.7

Net income


 


 


 
211.2

 


 
211.2

Other comprehensive income (loss)

 

 

 

 
(31.7
)
 
(31.7
)
Comprehensive income


 


 


 


 


 
179.5

Purchase of treasury shares
(4,930
)
 

 
(0.6
)
 

 


 
(0.6
)
Stock plans
14,882

 

 
8.8

 


 


 
8.8

Cash dividends declared, $0.88 per common share


 


 


 
(100.1
)
 


 
(100.1
)
Other


 


 


 

 


 

Balance at October 31, 2019
114,059,744

 
$
29.0

 
$
5,781.7

 
$
2,533.0

 
$
(248.4
)
 
$
8,095.3

Dollars in millions
Common Shares Outstanding
 
Common Shares
 
Additional Capital
 
Retained Income
 
Accumulated Other Comprehensive Income (Loss)
 
Total Shareholders’ Equity
Balance at May 1, 2018
113,572,840

 
$
28.9

 
$
5,739.7

 
$
2,239.2

 
$
(116.7
)
 
$
7,891.1

Net income


 


 


 
133.0

 


 
133.0

Other comprehensive income (loss)

 

 

 

 
(2.1
)
 
(2.1
)
Comprehensive income


 


 


 


 


 
130.9

Purchase of treasury shares
(43,913
)
 

 
(4.6
)
 
(0.1
)
 


 
(4.7
)
Stock plans
243,521

 

 
10.0

 


 


 
10.0

Cash dividends declared, $0.85 per common share


 


 


 
(96.5
)
 


 
(96.5
)
Other


 


 


 

 


 

Balance at July 31, 2018
113,772,448

 
$
28.9

 
$
5,745.1

 
$
2,275.6

 
$
(118.8
)
 
$
7,930.8

Net income


 


 


 
188.5

 


 
188.5

Other comprehensive income (loss)

 

 

 

 
2.4

 
2.4

Comprehensive income


 


 


 


 


 
190.9

Purchase of treasury shares
(2,485
)
 

 
(0.3
)
 

 


 
(0.3
)
Stock plans
(9,883
)
 

 
5.1

 


 


 
5.1

Cash dividends declared, $0.85 per common share


 


 


 
(96.5
)
 


 
(96.5
)
Other


 

 


 

 


 

Balance at October 31, 2018
113,760,080

 
$
28.9

 
$
5,749.9

 
$
2,367.6

 
$
(116.4
)
 
$
8,030.0

See notes to unaudited condensed consolidated financial statements.



5


Table of Contents

THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, unless otherwise noted, except per share data)
Note 1: Basis of Presentation
The unaudited interim condensed consolidated financial statements of The J. M. Smucker Company (“Company,” “we,” “us,” or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included.
Operating results for the six months ended October 31, 2019, are not necessarily indicative of the results that may be expected for the year ending April 30, 2020. For further information, reference is made to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended April 30, 2019.
Note 2: Recently Issued Accounting Standards

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

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

In August 2018, the U.S. Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, to eliminate or modify certain disclosure rules that are redundant, outdated, or duplicative of U.S. GAAP or other regulatory requirements. This rule was effective on November 5, 2018, and as a result, we adopted a portion of the amendments during 2019. This rule also amended the disclosure requirements related to the analysis of shareholders’ equity, which was expanded to the interim financial statements and was effective for us on May 1, 2019. While the new shareholders’ equity disclosure requirements impacted our interim financial statements beginning May 1, 2019, the amendments in this rule did not have a material impact on our other financial statements and disclosures.
In February 2016, in an effort to increase transparency and comparability among organizations, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and lease liability for all leases with a term of more than 12 months. We adopted the requirements of ASU 2016-02 and all related amendments on May 1, 2019, utilizing an optional transition method that allows for a cumulative-effect adjustment in the period of adoption with no restatement of prior periods. This transition method also does not require new lease disclosures for periods prior to the effective date. We elected certain practical expedients available under the guidance, including a package of practical expedients which allowed us to not reassess prior conclusions related to existing contracts containing leases, lease classification, and initial direct costs.
Adoption of ASU 2016-02 on May 1, 2019, resulted in the recognition of operating lease right-of-use assets and lease liabilities of $159.2 and $166.6, respectively, in the Condensed Consolidated Balance Sheet. The difference between the additional lease assets and lease liabilities was primarily due to an existing deferred rent balance that was reclassified to the operating lease liability. The new standard did not materially impact our Condensed Statement of Consolidated Income or Condensed Statement of Consolidated Cash Flows. The additional disclosures required are presented within Note 12: Leases.

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Table of Contents

Note 3: Acquisition
On May 14, 2018, we acquired the stock of Ainsworth Pet Nutrition, LLC (“Ainsworth”), a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S., in an all-cash transaction valued at $1.9 billion. The transaction was funded with a bank term loan and borrowings under our commercial paper program of approximately $1.5 billion and $400.0, respectively. For additional information on the financing associated with this transaction, refer to Note 8: Debt and Financing Arrangements.
During 2019, the final purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices, and other estimates made by management. The purchase price allocation included total intangible assets of $1.3 billion. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired and, as a result, the excess was allocated to goodwill. As a result of the acquisition, we recognized total goodwill of $617.8 within the U.S. Retail Pet Foods segment, which represented the value we expected to achieve through the implementation of operational synergies and growth opportunities as a result of integrating Ainsworth into our U.S. Retail Pet Foods segment. Of the total goodwill, $446.0 was deductible for income tax purposes at the acquisition date, of which $400.7 remains deductible at October 31, 2019.
The carrying values of the goodwill and indefinite-lived intangible assets within the U.S. Retail Pet Foods segment were $2.4 billion and $1.5 billion, respectively, as of October 31, 2019. The goodwill and indefinite-lived trademarks within the U.S. Retail Pet Foods segment, inclusive of the recently acquired Ainsworth business, remain susceptible to future impairment charges due to the narrow differences between fair value and carrying value. Any significant adverse change in our near or long-term projections or macroeconomic conditions would result in future impairment charges.
Note 4: Integration and Restructuring Costs
Integration and restructuring costs primarily consist of employee-related costs and other transition and termination costs related to certain acquisition or restructuring activities. Employee-related costs include severance, retention bonuses, and relocation costs. Severance costs and retention bonuses are recognized over the estimated future service period of the affected employees, and relocation costs are expensed as incurred. Other transition and termination costs include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. These integration and restructuring costs are not allocated to segment profit and are reported in other special project costs in the Condensed Statements of Consolidated Income. The obligation related to employee separation costs is included in other current liabilities in the Condensed Consolidated Balance Sheets.
Integration Costs: Total integration costs related to the acquisition of Ainsworth are anticipated to be approximately $50.0, the majority of which are expected to be cash charges. Of the total anticipated integration costs, we expect approximately one-third to be employee-related costs. All remaining integration costs are expected to be incurred by the end of 2020.
The following table summarizes our integration costs incurred related to the Ainsworth acquisition.
 
Three Months Ended October 31,
 
Six Months Ended October 31,
 
Total Costs Incurred to Date at October 31, 2019
 
2019
 
2018
 
2019
 
2018
 
Employee-related costs
$
0.6

 
$
6.9

 
$
1.4

 
$
7.8

 
$
16.9

Other transition and termination costs
2.7

 
7.3

 
5.2

 
8.4

 
21.8

Total integration costs
$
3.3

 
$
14.2

 
$
6.6

 
$
16.2

 
$
38.7

Noncash charges of $0.2 and $1.0 were included in the integration costs incurred during the three months ended October 31, 2019 and 2018, respectively, and $0.4 and $1.8 during the six months ended October 31, 2019 and 2018, respectively. Cumulative noncash charges incurred to date were $4.5 and primarily consisted of accelerated depreciation. The obligation related to severance costs and retention bonuses was $0.3 and $1.6 at October 31, 2019, and April 30, 2019, respectively.
Restructuring Costs: We completed the restructuring activities associated with our organization optimization program as of April 30, 2019, and as a result, we did not incur any related costs during the three and six months ended October 31, 2019. We incurred restructuring costs of $11.2 and $16.9 during the three and six months ended October 31, 2018, respectively, primarily consisting of employee-related costs. Total restructuring costs of $74.6 were incurred related to the program, which included $48.7 and $25.9 of employee-related costs and other transition and termination costs, respectively. Noncash charges included in the total restructuring costs were $15.2, of which $0.9 and $1.0 were incurred during the three and six months

7


Table of Contents

ended October 31, 2018, respectively. Noncash charges primarily consisted of accelerated depreciation. The obligation related to severance costs and retention bonuses was $0.1 and $0.8 at October 31, 2019, and April 30, 2019, respectively.
Note 5: Divestiture
On August 31, 2018, we sold our U.S. baking business to Brynwood Partners VII L.P. and Brynwood Partners VIII L.P., subsidiaries of Brynwood Partners, an unrelated party. The transaction included products that were primarily sold in U.S. retail channels under the Pillsbury®, Martha White®, Hungry Jack®, White Lily®, and Jim Dandy® brands, along with all relevant trademarks and licensing agreements, and our manufacturing facility in Toledo, Ohio. This business generated net sales of approximately $370.0 in 2018. The transaction did not include our baking business in Canada.
The operating results for this business were primarily included in the U.S. Retail Consumer Foods segment prior to the sale. We received proceeds from the divestiture of $369.5, which were net of cash transaction costs and included a working capital adjustment. We recognized a pre-tax gain of $27.7 related to this transaction, of which $26.6 was recognized during the second quarter of 2019 and was included in other operating expense (income) – net within the Condensed Statement of Consolidated Income.
Note 6: Reportable Segments
We operate in one industry: the manufacturing and marketing of food and beverage products. We have four reportable segments: U.S. Retail Pet Foods, U.S. Retail Coffee, U.S. Retail Consumer Foods, and International and Away From Home.
The U.S. Retail Pet Foods segment primarily includes the domestic sales of Rachael RayTM Nutrish®, Meow Mix®, Milk-Bone®, Natural Balance®, Kibbles ’n Bits®, 9Lives®, Nature’s Recipe®, and Pup-Peroni® branded products; the U.S. Retail Coffee segment primarily includes the domestic sales of Folgers®, Dunkin’ Donuts®, and Café Bustelo® branded coffee; and the U.S. Retail Consumer Foods segment primarily includes the domestic sales of Smucker’s®, Jif®, and Crisco® branded products. The International and Away From Home segment comprises products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., restaurants, lodging, schools and universities, health care operators).
Segment profit represents net sales, less direct and allocable operating expenses, and is consistent with the way in which we manage our segments. However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment profit set forth below, as segment profit excludes certain expenses such as corporate administrative expenses, unallocated gains and losses on commodity and foreign currency exchange derivative activities, as well as amortization expense and impairment charges related to intangible assets.
Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. We would expect that any gain or loss in the estimated fair value of the derivatives would generally be offset by a change in the estimated fair value of the underlying exposures.

8


Table of Contents

 
Three Months Ended October 31,
 
Six Months Ended October 31,
 
2019
 
2018
 
2019
 
2018
Net sales:
 
 
 
 
 
 
 
U.S. Retail Pet Foods
$
709.9

 
$
728.1

 
$
1,379.8

 
$
1,399.3

U.S. Retail Coffee
543.4

 
544.9

 
1,009.1

 
1,034.4

U.S. Retail Consumer Foods
426.1

 
461.9

 
828.3

 
945.2

International and Away From Home
278.4

 
286.6

 
519.5

 
545.1

Total net sales
$
1,957.8

 
$
2,021.5

 
$
3,736.7

 
$
3,924.0

Segment profit:
 
 
 
 
 
 
 
U.S. Retail Pet Foods
$
137.0

 
$
123.9

 
$
257.1

 
$
224.3

U.S. Retail Coffee
182.5

 
174.3

 
311.4

 
322.1

U.S. Retail Consumer Foods
91.4

 
134.3

 
172.4

 
231.6

International and Away From Home
50.4

 
56.7

 
82.7

 
100.1

Total segment profit
$
461.3

 
$
489.2

 
$
823.6

 
$
878.1

Amortization
(58.8
)
 
(59.7
)
 
(117.6
)
 
(120.2
)
Interest expense – net
(49.1
)
 
(53.6
)
 
(98.5
)
 
(107.2
)
Unallocated derivative gains (losses)
0.9

 
(0.1
)
 
29.9

 
(22.1
)
Other special project costs (A)
(3.3
)
 
(25.4
)
 
(6.6
)
 
(33.1
)
Corporate administrative expenses
(70.3
)
 
(73.5
)
 
(141.9
)
 
(145.3
)
Other income (expense) – net
(1.6
)
 
(7.5
)
 
(3.1
)
 
(7.7
)
Income before income taxes
$
279.1

 
$
269.4

 
$
485.8

 
$
442.5


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

The following table presents certain geographical information.
 
Three Months Ended October 31,
 
Six Months Ended October 31,
 
2019
 
2018
 
2019
 
2018
Net sales:
 
 
 
 
 
 
 
United States
$
1,815.9

 
$
1,873.2

 
$
3,473.5

 
$
3,645.5

International:
 
 
 
 
 
 
 
Canada
$
113.4

 
$
114.3

 
$
210.2

 
$
212.5

All other international
28.5

 
34.0

 
53.0

 
66.0

Total international
$
141.9

 
$
148.3

 
$
263.2

 
$
278.5

Total net sales
$
1,957.8

 
$
2,021.5

 
$
3,736.7

 
$
3,924.0



The following table presents product category information.
 
Three Months Ended October 31,
 
Six Months Ended October 31,
 
 
 
2019
 
2018
 
2019
 
2018
 
Primary Reportable Segment (A)
Coffee
$
627.1

 
$
635.5

 
$
1,173.8

 
$
1,213.8

 
U.S. Retail Coffee
Dog food
302.6

 
334.9

 
598.2

 
643.4

 
U.S. Retail Pet Foods
Cat food
213.8

 
207.3

 
409.7

 
396.3

 
U.S. Retail Pet Foods
Pet snacks
210.0

 
201.9

 
403.2

 
389.7

 
U.S. Retail Pet Foods
Peanut butter
175.4

 
186.9

 
353.3

 
386.1

 
U.S. Retail Consumer Foods
Fruit spreads
86.5

 
83.0

 
175.7

 
168.6

 
U.S. Retail Consumer Foods
Frozen handheld
93.4

 
78.7

 
164.9

 
143.2

 
U.S. Retail Consumer Foods
Shortening and oils
71.8

 
79.3

 
123.3

 
132.2

 
U.S. Retail Consumer Foods
Portion control
42.5

 
41.6

 
81.9

 
82.5

 
International and Away From Home
Juices and beverages
32.4

 
33.9

 
63.6

 
66.1

 
U.S. Ret