The J. M. Smucker Company Annual Report 2018

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FY2018 Annual Report · The J. M. Smucker Company

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One Strawberry Lane
Orrville, Ohio 44667

330-682-3000
jmsmucker.com

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2018 ANNUAL REPORT

WHY WE
ARE WHO WE ARE

A culture of doing the right things and

doing things right …

Of dotting the i’s and crossing the t’s …

A culture of growth — individual and as a company.

A result of living our Basic Beliefs …

Our Commitment to Each Other, to our consumers,

and to our customers.

As we look to the future of unlimited possibilities,

we recognize the principles that are instrumental

to our success:

A culture deeply rooted in our Basic Beliefs,

guideposts for decisions at every level;

A culture that encourages commitment to each other,

clear communication and collaboration;

A culture of appreciation;

A family-sense of sharing in a job well done;

Where every person makes a difference.

MARKET SHARE
DOG SNACKS

33%

YEAR-OVER-YEAR
NET SALES GROWTH

11%

YEAR-OVER-YEAR
NET SALES GROWTH

11%

YEAR-OVER-YEAR
NET SALES GROWTH

MARKET SHARE
PEANUT
BUTTER

Strong
Portfolio
of Brands

Our portfolio is well-positioned
in great categories and is balanced
with iconic, market-leading brands
and emerging, on-trend brands to
meet shifting consumer needs in
an increasingly dynamic retail
marketplace.

MARKET SHARE
AT-HOME
COFFEE

MARKET SHARE
FRUIT SPREADS

15%

YEAR-OVER-YEAR
NET SALES GROWTH

2018 ANNUAL REPORT 1
2018 ANNUAL REPORT 1

A Commitment
to Growth in the
Pet Category

As the largest center-of-store grocery category,
pet food and snacks is a $32 billion industry in the
U.S. and growing. With our recent acquisition of
Ainsworth Pet Nutrition LLC, we are increasing
our presence in the premium segment and
bolstering our total pet portfolio.

A Strategy Focused
on Our Consumers

We have a deep understanding of consumer needs, a pulse on emerging trends, and
an obsession with delighting our consumers. In a digitally powered, omnichannel
world, this means delivering meaningful products and experiences, inspired design,
and relevant communication at every touchpoint. This consumer centricity powers
the growth of our portfolio of iconic brands and high-growth emerging brands, and
guides innovation and acquisition of new brands.

2 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 3

Dear Shareholders and Friends,

Since our founding more than 120 years ago, The J.M. Smucker Company has been
helping bring families together to share memorable meals and moments. Guided by Our
Vision to engage, delight, and inspire consumers through trusted food and beverage
brands that bring joy throughout their lives, Smucker has continued to grow with a
balanced portfolio of leading and emerging on-trend brands.

As the food industry continues to face unprecedented
change, Smucker is evolving to meet shifting consumer
preferences and behaviors. This past year experienced
pricing pressure from retailers, strong competition from
private-label and niche brands, a continued shift toward
e-commerce purchases, and input cost inflation. However,
our ability to adapt has long been a hallmark of our
Company, and we remain confident the actions we are
taking to align our portfolio for growth are positioning us
to deliver long-term shareholder value.

STRATEGIC ROADMAP
We believe the key to outperforming the industry in
challenging times is remaining focused on a strategic
roadmap with clear plans outlined and a strong team
in place to execute. We are encouraged by the progress
being made against the four pillars of our strategic
roadmap — innovation, investments, cost savings, and
acquisitions — all of which continue to position us to
deliver on our three key financial priorities of driving
topline growth, achieving significant cost savings, and
delivering earnings per share growth.

FINANCIAL HIGHLIGHTS
The J. M. Smucker Company

YEAR ENDED APRIL 30,

(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)

Net sales

NET INCOME AND NET INCOME PER COMMON SHARE

Net income

Net income per common share — assuming dilution

ADJUSTED INCOME AND EARNINGS PER SHARE (A)

Adjusted income

Adjusted earnings per share — assuming dilution

COMMON SHARES OUTSTANDING AT YEAR END

NUMBER OF EMPLOYEES

2018

$ 7,357.1

$1,338.6

$ 11.78

$ 904.6

$ 7.96

113.6

7,000

2017

$7,392.3

$ 592.3

$ 5.10

$ 895.9

$ 7.72

113.4

7,140

(A) We use non-GAAP financial measures to evaluate our performance. Refer to “Non-GAAP Financial Measures” in the “Management’s Discussion and Analysis”

section for a reconciliation to the comparable GAAP financial measure.

The values of today’s consumers underpin our strategy.
Sharpening our focus on innovative product platforms
to deliver more of what consumers want is a priority,
along with continuing to build e-commerce capabilities.
Finally, we are strategically acquiring and divesting
brands to increase our participation in categories with
the most growth potential.

• Net sales growth for key leading brands such as

Smucker’s®, Jif®, and Milk-Bone®;

• Achieved a targeted $140 million in incremental
synergies and cost savings for the fiscal year; and

• A return of more than $350 million to our shareholders
in the form of dividends, while reducing total debt by
nearly $570 million.

This commitment to our strategic roadmap is yielding
results. Highlights include:
• An increase in diluted earnings per share to $11.78,

which included a substantial nonrecurring benefit from
U.S. income tax reform. Adjusted earnings per share
was $7.96;

• Free cash flow of $896 million; an increase of $30 million;
• Delivery of nearly $500 million, or 7 percent of fiscal

year 2018 net sales, from sales of new products
introduced in the past three years;

• On-trend brand growth with Smucker’s® Uncrustables®,
Nature’s Recipe®, Dunkin’ Donuts® and Café Bustelo®
as each experienced double-digit sales growth;

STRENGTH OF LEADING BRANDS AND SEGMENTS
Our brands can be found in 92 percent of U.S. households,
and we hold market leadership positions through
Smucker’s fruit spreads, Jif peanut butter, Folgers ®
coffee, and Milk-Bone dog snacks. Our leading brands
are critical to fueling future growth and investments for
the Company, and we know that driving growth from these
well-established brands generates strong returns. Beyond
individual brands, a significant element of our strategy
centers on strengthening the Company’s portfolio with a
particular focus on the coffee, pet, and snacking categories.

4 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 5

Coffee remains a highly attractive category with retail sales
for the overall at-home coffee market growing at a 3 percent
compound annual growth rate during the past five years,
primarily driven by the premium and one-cup segments.
Our Folgers, Dunkin’ Donuts and Café Bustelo brands
hold a market-leading 26 percent share of the category. Still,
we have a significant opportunity to expand that leadership,
as only 38 percent of our coffee sales are in the premium
and one-cup segments that account for 66 percent of
category sales. We are shifting the balance of our portfolio
toward these areas.

For our U.S. Consumer Foods business, a key area of
focus is growing our snack portfolio. Our Smucker’s
Uncrustables, Jif, and Sahale Snacks ® brands will play
a key role in this evolution, as we expect to double the
size of the Company’s $330 million snacking portfolio
during the next five years.

Pet food and snacks has now become the largest center-
of-store category in the U.S. food and beverage market,
generating $32 billion in annual retail sales across all
channels. The fiscal year 2019 acquisition of Ainsworth
Pet Nutrition reinforces our commitment to the category
and will build on our already strong position following
the acquisition of Big Heart Pet Brands three years ago.
In particular, Rachael Ray® Nutrish® is a high-growth
premium brand that has been integral in driving the
trend toward the premium dog food category in grocery
and mass channels. We believe there are distribution
expansion opportunities and growth prospects in mass
premium cat food and pet snacks.

As we expand into fast-growing categories, we have also
demonstrated throughout our history a willingness to
divest businesses that are no longer consistent with our
strategic direction. This has driven our decision to divest
the U.S. baking business, including the Pillsbury™, Martha
White®, Hungry Jack®, White Lily®, and Jim Dandy®
brands. In Canada, we will continue to participate in the
baking category as it remains a key part of our portfolio in
that market.

INNOVATING TO ALIGN WITH CONSUMER TRENDS
Our innovation pipeline aligns well with shifting consumer
trends. In coffee, we recently introduced 1850™ as a new
premium coffee brand that will be the basis for a range
of 1850 products. Inspired by the 170-year heritage of
the Folgers brand which originated in San Francisco
during the Gold Rush, 1850 tells an authentic story that
resonates with premium coffee consumers of all ages.

In snacks, we recently introduced a new platform under
the Jif brand — Jif Power Ups™ — wholesome snacks that
meet the desires of both kids and parents. And in pet
snacks, Pup-Peroni® jerky bites, new varieties of Milk-Bone
treats, and Milos Kitchen® premium dog treats were
introduced with real meat as the number one ingredient
to expand our presence in the growing natural meat
snacks segment.

INVESTING IN CAPABILITIES
The relentless pace of digital innovation is fundamentally
changing the way consumers shop. In response, we
recently completed an organizational restructure with

6 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 7

OUR
PURPOSE

Helping to bring families together
to share memorable meals and moments.

We have always defined success by more than financial
performance. We believe how we do things is as important
as what we do. Our Purpose aims to articulate why we are in
business and the impact we aspire to have on society.

Being together with the ones we love isn’t just a pleasant way
to spend time — it’s vital to a healthy, happy, fulfilling life. In
fact, the more family and friends spend time with each other,
the richer their lives become.

We believe we can help strengthen families through the
memorable meals and moments they share, and we can help
make every day a little more special by nurturing the bonds
that bring people together, as well as people and their pets
closer together.

And the stronger families are today, the stronger our society
will be tomorrow.

Quite simply, life tastes better together.

A key component of that effort is a new K-Cup® agreement
with Keurig Green Mountain. New contract terms provide
improved economics, increased distribution, and
additional SKUs, which should result in margins consistent
with our other coffee business. Our U.S. K-Cup® business
net sales grew 11 percent in fiscal year 2018, aided in
part by this new agreement.

Additionally, our recently introduced Right Spend
zero-based budgeting initiative strengthens cost
discipline throughout the organization and will save
as much as $50 million over the next two years. We
also are realizing substantial annual earnings benefit
from tax reform.

LOOKING AHEAD
We are pleased with execution to date against our strategic
roadmap and our organization’s clear focus on both short-
and long-term priorities. We are confident this approach
will drive strong, long-term returns for all our stakeholders.
Even in a challenging and evolving environment, we are
well-positioned for success in great categories. We have
a strong mix of leading, iconic brands and emerging,
on-trend brands that allows us to meet the diverse needs
of our consumers.

We would like to thank our more than 7,000 employees for
their efforts this past year and for their ongoing commitment
to Smucker. It is their diligence and commitment that
enable us to offer brands that consumers love and trust.
We are confident we have the right team in place across our
businesses to deliver long-term growth and shareholder
value. And we thank you, our shareholders, for your
continued support and confidence in our Company.

Tim Smucker

Richard Smucker

Mark Smucker

June 18, 2018

a significant commitment to marketing and digital
innovation, especially e-commerce. With more than
2 percent of sales coming from e-commerce today, we
have ample opportunity for growth. Our expectation is
that e-commerce will account for 5 percent of total net
company sales by fiscal year 2020 as digital capabilities
enable us to be more agile and responsive to consumer
needs. Additional supply chain flexibility and development
of channel-exclusive offers are expected to improve our
current e-commerce margins.

Progress toward this goal is already evident. In fiscal year
2018, our total e-commerce sales increased 71 percent,
with pet and coffee e-commerce sales up 64 percent and
154 percent, respectively. We believe both categories are
well-suited for a subscription model. In fact, 20 percent of
Natural Balance® brand sales were generated through the
e-commerce channel. As we continue to build e-commerce
capabilities, the Company is investing heavily in data
analytics to enhance decision-making in key areas such
as site-specific search engine optimization, impulse
purchasing, and pricing strategies. We anticipate another
year of strong e-commerce growth in fiscal year 2019.

Marketing our brands was another important area of
investment this past fiscal year. As an example, our
introduction of the Nature’s Recipe brand into grocery
and mass channels this year represented the largest
marketing campaign in Smucker history. Its effectiveness
was underscored by a 33 percent increase in sales, even
as additional premium offerings entered the channel.
Notably, incremental marketing investments are planned
in fiscal year 2019 for 1850, Jif, and Smucker’s Uncrustables.

We also continue to invest in manufacturing capacity
where we see potential for significant volume growth.
Construction of our new Smucker’s Uncrustables
manufacturing facility in Longmont, Colorado, is
on track for completion in calendar year 2020. Net sales
for Smucker’s Uncrustables surpassed $250 million in
fiscal year 2018, and we expect the business to reach
$500 million in annual net sales over the next five years.

SYNERGY AND COST SAVINGS
Executing against our strategic roadmap while maintaining
earnings growth relies on cost management to support
innovation and investment activities. During fiscal year
2018, we achieved a targeted $140 million in incremental
synergies and cost savings. This achievement keeps us
on track to meet a goal of $450 million in cost savings by
fiscal year 2020.

8 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 9

™

LEADING A
$10 BILLION MARKET

U.S. Retail Coffee

Led by our iconic and emerging brands — Folgers, Dunkin’ Donuts, Café Bustelo,
and the recently launched 1850 — Smucker remains the leader in the U.S. at-home
retail coffee category. We offer products across a variety of price points while
participating in all key segments of at-home coffee, including mainstream roast
and ground, one-cup, premium, instant, and ready-to-drink.

10 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 11

U.S. Retail Coffee
Segment Performance

Iconic Brands and Innovative New Platforms Fuel American Coffee Consumers
America’s love affair with coffee shows no signs of slowing, and Smucker is innovating and building on
our already market-leading coffee portfolio to meet consumer demand.

FISCAL YEAR 2018 PERFORMANCE

KEY ACHIEVEMENTS

Segment Net Sales
in billions

We are accelerating
efforts to shift our
portfolio to better
align with consumer
preferences.

Segment Profit
in millions

Investments in brand
building and marketing
are positioning our
coffee portfolio for
the long term.

$2.2

$2.1

’16

’17

’18

$722.6

$682.4

$614.5

’16

’17

’18

• Added largest investment in coffee with the

recent launch of the innovative 1850 platform,
serving as the basis for a range of new 1850
products to drive growth for years to come.

• Continued to lead the mainstream and instant
market segments with a 54 percent share and
27 percent share, respectively.

• Maintained Dunkin’ Donuts momentum, reaching
$550 million in annual net sales and growing
10 percent in U.S. Retail Coffee.

• Increased sales of Café Bustelo by 9 percent,
thanks to an ever-increasing consumer base
drawn to its authentic heritage and Latin roots.

• Expanded K-Cup® distribution under terms of new
agreement with Keurig Green Mountain, resulting
in sales increases across all K-Cup® brands.

MARKET LEADERSHIP AND OPPORTUNITY

Smucker leads the U.S. Retail Coffee Market with a 26 percent dollar share through a commanding position in the
mainstream and instant segments. Looking ahead, we have a strong opportunity to pursue an even larger share
of the increasingly popular one-cup and premium segments, which account for two-thirds of category sales.

Smucker Coffee Market Share

54%
Mainstream

27%
Instant

15%
One-cup

15%
Premium

Total At-Home Coffee Category

42% ONE-CUP
25% MAINSTREAM
24% PREMIUM
9% INSTANT

PRODUCT INNOVATION

MARKETING AND PROMOTION

1850
This new premium
coffee platform is
inspired by the Folgers’
heritage, resonating with
both core consumers
and millennials.

Dunkin’ Donuts
Canister
Offering an easy-to-
use, larger size for
loyal consumers.

Folgers Simply
Gourmet®
New premium offering
for value-conscious
consumers includes
a variety of flavors —
vanilla, cinnamon,
chocolate, caramel,
and raspberry.

A full media campaign is telling the story of
1850, highlighting 170 years of rich Folgers
heritage dating back to its origins in San
Francisco during the California Gold Rush.

E-COMMERCE

Café Bustelo
100% Colombian
K-Cup® Pods
Convenient K-Cup®
offering meets
the demand of
consumers seeking
medium-roast 100%
Colombian coffee in
less than one minute.

Our online coffee sales increased
154 percent in fiscal year 2018, and
the category has strong potential for
a subscription sales model.

12 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 13

MEETING THE SNACKING
AND MEALTIME NEEDS
OF TODAY’S CONSUMERS

U.S. Retail Consumer Foods

Whether it’s a mealtime get-together around the table or grabbing a quick snack
on the way to practice, our iconic brands — Jif and Smucker’s — coupled with
emerging, on-trend brands like Santa Cruz Organic®, Sahale Snacks, Numi®, and
truRoots® are providing convenient, on-the-go, low-prep, tastier, and nutritious
options that meet the unique needs of today’s consumers. Smucker participates
in multiple center-of-store categories with respected brands of fruit spreads, nut
butters, shortening and oils, natural and organic beverages, organic grains, and
fruit and snack mixes.

14 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 15

U.S. Retail Consumer Foods
Segment Performance

Aligning Trusted and Emerging Brands With Consumer Trends

Through a combination of iconic brands loved by consumers and emerging, on-trend brands — particularly
in low-prep, convenient snacking — Smucker is driving balanced growth in our Consumer Foods segment.

FISCAL YEAR 2018 PERFORMANCE

KEY ACHIEVEMENTS

Segment Net Sales
in billions

Growth in peanut
butter and handheld
snacks helped offset
decreased sales in
baking and oils.

Segment Profit
in millions

Increased profitability
reflects solid brand
management and
improved operations.

$2.3

$2.1

$2.0

’16

’17

’18

$467.5 $458.2

$477.2

’16

’17

’18

• Through our Jif and Smucker’s brands, we

continued to lead in the peanut butter and
spreads categories, where peanut butter and
jelly remains the #1 sandwich among kids.

• Recently launched Jif Power Ups platform,
serving as the basis for a number of new
products in the years to come.

• Invested heavily in snacking in anticipation of
doubling our $330 million snacking portfolio
over the next five years.

• Grew Smucker’s Uncrustables net sales

by 15 percent in fiscal year 2018.

• Exceeded $350 million in net sales in our

natural and organic portfolio, thanks in large
part to the success of natural peanut butter,
organic peanut butter, natural fruit spreads,
and natural juices.

MARKET LEADERSHIP
Iconic Brands Driving Long-term Growth

MARKET SHARE
IN FRUIT SPREADS

MARKET SHARE
IN PEANUT BUTTER

MARKET SHARE IN
ORGANIC PEANUT BUTTER

MARKET SHARE IN
NATURAL SHELF-STABLE JUICE

OPPORTUNITY FOR GROWTH
Focused on Snacking

91%Consumers snack multiple times

throughout the day, half of all
eating occasions.1

1Hartman Group’s Future of Snacking 2016 report.

16 THE J. M. SMUCKER COMPANY

$27 BILLION

Annual Sales
Snacks still reign supreme among Americans,
creating a perfect opportunity for our
Sahale Snacks brand.

PRODUCT INNOVATION

MARKETING AND PROMOTION

Jif Power Ups
Smucker’s new snacking
platform, including bars
and creamy clusters,
provides a wholesome and
delicious snack to meet
the needs of both parents
and children. Jif Power
Ups come in a variety of
flavors including Chocolate
Flavored with Peanut Butter
Bars and Strawberry
Creamy Clusters.

Jif Poppers™
Peanut butter-coated
popcorn has been
created with the
millennial snacker
in mind.

R.W. Knudsen Family®
Organic Beet Juice
Our newest flavor of organic
juice for the consumer who
values organic and non-
GMO verified products.

New Varieties
of Sahale Snacks
Greater variety for this on-trend
brand, including new flavors
Banana Rum and Tangerine
Vanilla, provides more options
for consumers craving a
convenient, healthy snack.

An integrated national multimedia campaign
for Jif Power Ups snacks showcases the healthy
ingredients that parents demand, while
satisfying kids’ desire for great taste.

SNACKING INVESTMENT

Construction of a new Smucker’s Uncrustables
manufacturing facility in Longmont, Colorado,
is on track for completion by calendar year 2020.
The $340 million investment is expected to add as
many as 500 jobs to the surrounding communities.

2018 ANNUAL REPORT 17

FULFILLING THE NEEDS
OF PETS AND THOSE
WHO LOVE THEM

U.S. Retail Pet Foods

In the $32 billion pet foods and snacks category, we are making significant investments
to meet consumer demand for snacks and premium products made with simple
ingredients. In fiscal year 2019, Smucker acquired Ainsworth Pet Nutrition, the
maker of Rachael Ray Nutrish and DAD’S ™ brands, enhancing our position in
the pet category alongside an already strong portfolio that includes Meow Mix®,
Milk-Bone, Natural Balance, Nature’s Recipe, and Kibbles ‘n Bits®.

18 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 19

U.S. Retail Pet Foods
Segment Performance

Reinforcing Our Commitment to the Pet Category

Three years ago, we entered the growing pet food and snacks category with the acquisition of Big Heart
Pet Brands, and we further demonstrated our commitment to this category with our recent acquisition
of Ainsworth Pet Nutrition.

FISCAL YEAR 2018 PERFORMANCE

KEY ACHIEVEMENTS

Segment Net Sales
in billions

Investments in Nature’s
Recipe, Rachael Ray
Nutrish and dog snack
innovation will drive
topline growth.

Segment Profit
in millions

Topline growth in key
segments, combined with the
scale and efficiencies from
the Ainsworth acquisition,
should lead to segment
profit growth.

$2.3

$2.1

$2.2

’16

’17

’18

$493.9 $481.0

$441.3

’16

’17

’18

• Maintained the #1 market share position in
dog snacks, the #2 position in dry cat food,
and a strong presence in premium pet food.

• Completed acquisition of Ainsworth
Pet Nutrition in fiscal year 2019 and
began integration.

• Increased presence in the premium pet segment
through Rachael Ray Nutrish, complementing
the success of Nature’s Recipe with the Rachael
Ray Nutrish’s wholesome, natural positioning
and authentic recipe-focused formulations.

• Strengthened dog food position in the mass
channel, which drove an 8 percent increase
for our dog food brands in fiscal year 2018
sales, driven by 33 percent growth for
Nature’s Recipe.

A PORTFOLIO MEETING DIVERSE PET PARENT NEEDS

Super Premium

Premium

Mainstream

Value

Snacks

• Natural Balance

• Nature’s Recipe
• Rachael Ray Nutrish

• Meow Mix
• Kibbles ‘n Bits

• Gravy Train®
• 9Lives®
• DAD’S

• Milk-Bone
• Rachael Ray Nutrish
• Pup-Peroni
• Canine Carry Outs®
• Milo’s Kitchen

OPPORTUNITY FOR GROWTH
Category Overview

$32 BILLION
U.S. market

60%+
American households
are pet families

#1
U.S. center-of-store
category
2%
CAGR over the
past 5 years

20 THE J. M. SMUCKER COMPANY

U.S. RETAIL PET FOODS SEGMENT

33% PET SNACKS
30% MAINSTREAM CAT FOOD
23% MAINSTREAM DOG FOOD
14% PREMIUM PET FOOD

PRODUCT INNOVATION

MARKETING AND PROMOTION

Rachael Ray Nutrish
Tasty Real Meat Treats
The newest addition to
the Smucker portfolio has
introduced its natural meat
dog snacks, serving as a
favorite among dog owners.

Milk-Bone Grain
Free Snacks
An iconic brand
meets consumers’
desire for more
variety in pet
snacking options.

Meow Mix
Single-serve, wet
cat food provides a
convenient option
for cat lovers.

Milo’s Kitchen
Real Meat Snacks
Dog treats that
provide real meat
for a snack option.

The Nature’s Recipe’s “Fuel the Wag”
campaign joined select Residence Inn® by
Marriott® locations across the country to
offer a “VI-Pup” premium experience in
2018, complete with welcome bags of dog
food and travel essentials at check-in, along
with local pet-friendly activities.

E-COMMERCE

Natural Balance
L.I.D. Products
A high-protein, high-
quality offering in
the super premium
pet food segment.

Sales increased 64 percent during fiscal
year 2018, underscoring the potential
of subscription sales for pet food.

2018 ANNUAL REPORT 21

LEVERAGING BRANDS IN
ADJACENT MARKETS

International and Away From Home

International and Away From Home businesses include domestic sales outside
U.S. retail channels and foreign sales, primarily in Canada, Mexico, and the
Caribbean. We are also a preferred supplier of food and beverages to North
American foodservice operators, including casual and fine dining establishments,
schools and universities, hospitals, and business and industry customers.

22 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 23

International and Away From Home
Segment Performance

Iconic Brands Drive Momentum in International and Away From Home Market
Away From Home saw a 3 percent increase in net sales, driven largely by the Smucker’s brand and
Smucker’s Uncrustables. Sales also benefited from the launch of Jif back into the Canadian market.

FISCAL YEAR 2018 PERFORMANCE

KEY ACHIEVEMENTS

Segment Net Sales
in billions

Sales increased from
$1,062 million to
$1,094 million in
fiscal year 2018.

Segment Profit
in millions

Increased profitability
reflected continued
efforts to refine our
focus on key growth
categories.

$1.1

’16

’17

’18

$179.0 $185.1

$194.2

’16

’17

’18

• Increased sales $32.4 million, driven in
large part by significant growth in Away
From Home and International.

• Outperformed year-one sales targets for the

launch of the Jif brand in the Canadian market
to meet consumer demand.

• Experienced double-digit growth of the

Smucker’s Uncrustables brand as an Away
From Home snack that consumers of all
ages can enjoy.

MARKET LEADERSHIP

Smucker Foods of Canada holds #1 share positions
across 6 categories, including flour, pickles and
relish, fruit spreads, canned milk, shortening, and
ice cream toppings. These brands represent
approximately 50% of net sales in Canada.

OPPORTUNITY FOR GROWTH
Segment growth opportunities continue through a strategic focus on broadening products offered
in the markets we serve across our three key growth categories: coffee, pet, and snacking.

Coffee machine innovations should
drive future growth in liquid
coffee. The1850 brand also will
be introduced in the Away From
Home market to meet demand
for more premium offerings.

With big plans on the horizon
for innovations in pet snacks,
confidence in the growth potential
of pet foods is strong.

The addition of new customers
and increased sales from current
customers, especially in portion-
control products, is driving
growth. Snacking continues to
be a major trend, with Smucker’s
Uncrustables and Sahale Snacks
both gaining popularity in the
Away From Home market.

PRODUCT INNOVATION

MARKETING AND PROMOTION

Robin Hood® Just
Enough Cookies
A smaller batch of this
delicious treat for value-
conscious consumers.

Jif Crunchy
Peanut butter with
a crunchy texture
and fresh-roasted
peanut taste.

The Jif brand recently launched into the Canadian
marketplace with premium positioning and
robust marketing and trade support. The brand
quickly rose to the #2 share position and will be
a growth platform for our Canadian business
moving forward.

Smucker’s Natural Jam
New to our Away From Home
portion-control offerings are
Smucker’s Natural Jam packets
delivering on brand quality in a
convenient on-the-go package.

Folgers K-Cup®
A one-cup serving
option from this
iconic brand.

Excellence Compact
Excellence Compact delivers
a variety of specialty coffee
beverages by way of our
proprietary Select Brew liquid
coffee system and enables
us to enter channels and
locations such as offices and
restaurants through its sleek
and modern design.

Robin Hood’s “The Magic’s in the Making”
television advertisement aired during episodes
of The Great Canadian Baking Show, with
Smucker baking products also integrated
into the broadcast and digital elements of
the popular CBC reality series.

E-COMMERCE

We are building capabilities
in this dynamic and
fast-growing sales channel
in the Canadian market.

24 THE J. M. SMUCKER COMPANY

2018 ANNUAL REPORT 25

Sustainability at Smucker

CREATING A BETTER TOMORROW BY FOCUSING ON

• Preserving our culture;
• Ensuring our long-term Economic viability;
• Driving positive Environmental impact; and
• Being Socially responsible.

Sustainability is a core component of our corporate strategy at Smucker. We are proud to
advance our business goals without sacrificing our respect for the environment and support
for the communities we serve. Over the past year, we have made progress in areas such as
responsible sourcing, sustainable agriculture, environmental responsibility, and community
impact. Here are some of our achievements:

10%
Total retail coffee purchased from
certified sources

5%
Reduction in water use intensity
against 2014 baseline

16,000+
Smallholder farmer beneficiaries
through work with the Better
Coffee Harvest Project and
Hanns R. Neumann Foundation

100%
Direct palm oil purchases from
responsible and certified sustainable
sources

675
Hectares of quinoa-growing land
certified to NOP-USDA production
and organic standards

92%
Total waste diverted from landfills

7%
Reduction in greenhouse gas
emissions intensity against
2014 baseline

9
LEED®-certified facilities

4 MILLION
Pounds of Smucker product donated
to food banks across the country in
fiscal year 2018

17.3 MILLION
Dog and cat meals donated to
Rescue® Bank in fiscal year 2018

Please view our 2018 Corporate Responsibility Report at corporateresponsibility.jmsmucker.com.

26 THE J. M. SMUCKER COMPANY

2018 FINANCIAL REVIEW

The J. M. Smucker Company

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
The following table presents selected financial data for each of the five years in the period ended April 30, 2018. The selected financial data should
be read in conjunction with the “Results of Operations” and “Liquidity and Capital Resources” sections of “Management’s Discussion and Analysis”
and the consolidated financial statements and notes thereto.

(Dollars and shares in millions, except per share data)
Statements of Income:

Net sales
Gross profit

% of net sales
Operating income
% of net sales

Net income

Financial Position:

Cash and cash equivalents
Total assets
Total debt
Total shareholders’ equity

Liquidity:

Net cash provided by operating activities
Additions to property, plant, and equipment

Free cash flow (A)

Quarterly dividends paid
Purchase of treasury shares
EBITDA (as adjusted) (A)

Share Data:

Weighted-average shares outstanding
Weighted-average shares outstanding – assuming dilution
Dividends declared per common share

Earnings per Common Share:

Net income
Net income – assuming dilution
Other Non-GAAP Measures: (A)

Adjusted gross profit
% of net sales

Adjusted operating income

% of net sales

Adjusted income and earnings per share:

2018

2017

2016

2015

2014

Year Ended April 30,

$ 7,357.1
$ 2,836.1

$ 7,392.3
$ 2,835.3

$ 7,811.2
$ 2,967.8

$ 5,692.7
$ 1,968.7

38.5%

38.4%

38.0%

$ 1,036.1

$ 1,031.5

$ 1,145.3

14.1%

14.0%

14.7%

$ 1,338.6

592.3

688.7

34.6%

772.0

13.6%

344.9

$ 5,610.6
$ 2,031.0

36.2%

$ 919.0

16.4%

$ 565.2

$
192.6
15,301.2
4,832.0
7,891.1

$ 1,218.0
321.9
896.1
350.3
7.0
1,625.1

113.6
113.6
3.12

11.79
11.78

$
166.8
15,639.7
5,398.5
6,850.2

$ 1,059.0
192.4
866.6
339.3
437.6
1,593.7

116.0
116.1
3.00

5.11
5.10

$
109.8
15,984.1
5,430.0
7,008.5

$ 1,461.0
201.4
1,259.6
316.6
441.1
1,579.1

119.4
119.5
2.68

5.77
5.76

$
125.6
16,806.3
6,170.9
7,086.9

739.1
247.7
491.4
254.0
24.3
871.3

103.7
103.7
2.56

3.33
3.33

$ 153.5
9,041.4
2,216.3
5,029.6

$ 863.3
279.5
583.8
238.0
508.5
1,185.5

104.3
104.3
2.32

5.42
5.42

$ 2,802.7

$ 2,868.2

$ 2,968.0

$ 1,999.4

$ 2,035.1

38.1%

38.8%

38.0%

35.1%

36.3%

$ 1,431.8

$ 1,481.8

$ 1,489.8

970.2

$ 1,047.6

19.5%

20.0%

19.1%

17.0%

18.7%

Adjusted income
Adjusted earnings per share – assuming dilution

$
$

904.6
7.96

$
$

895.9
7.72

$
$

931.3
7.79

$
$

475.6
4.59

$ 650.8
6.24
$

(A) We use non-GAAP financial measures to evaluate our performance. Refer to “Non-GAAP Financial Measures” in the “Management’s Discussion and Analysis”

section for a reconciliation to the comparable GAAP financial measure.

2018 ANNUAL REPORT 27

SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
The J. M. Smucker Company

The following is a summary of unaudited quarterly results of operations for the years ended April 30, 2018 and 2017.

(Dollars in millions, except per share data)

Quarter Ended

Net Sales Gross Profit Net Income

Net Income per
Common Share

Net Income per
Common Share –
Assuming Dilution

2018

2017

July 31, 2017
October 31, 2017
January 31, 2018
April 30, 2018

July 31, 2016
October 31, 2016
January 31, 2017
April 30, 2017

$1,748.9
1,923.6
1,903.3
1,781.3

$1,815.8
1,913.9
1,878.8
1,783.8

$662.1
755.0
728.5
690.5

$722.7
742.9
722.9
646.8

$126.8
194.6
831.3
185.9

$170.0
177.3
134.6
110.4

$1.12
1.71
7.32
1.64

$1.46
1.52
1.16
0.96

$1.12
1.71
7.32
1.64

$1.46
1.52
1.16
0.96

Annual net income per common share may not equal the sum of the individual quarters due to differences in the average number of shares
outstanding during the respective periods, primarily due to share repurchases.

STOCK PRICE DATA

Our common shares are listed on the New York Stock Exchange – ticker symbol SJM. The table below presents the high and low market
prices for the shares and the quarterly dividends declared. There were approximately 319,849 shareholders of record as of June 12, 2018,
of which approximately 39,362 were registered holders of common shares.

2018

2017

Quarter Ended

July 31, 2017
October 31, 2017
January 31, 2018
April 30, 2018

July 31, 2016
October 31, 2016
January 31, 2017
April 30, 2017

High

$134.12
123.83
132.76
133.38

$154.97
157.31
136.13
143.68

Low

Dividends

$114.31
101.82
99.57
113.16

$125.67
128.75
122.05
125.77

$0.78
0.78
0.78
0.78

$0.75
0.75
0.75
0.75

28 THE J. M. SMUCKER COMPANY

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
SHAREHOLDER RETURN
The J. M. Smucker Company

The J. M. Smucker Company

S&P Packaged Foods & Meats
S&P 500

2013

$100.00
100.00
100.00

2014

$ 95.71
110.04
120.44

2015

$117.56
126.53
136.07

2016

$131.72
147.44
137.71

2017

$134.25
155.95
162.39

2018

$124.10
133.61
183.93

April 30,

The above graph compares the cumulative total shareholder return for the five years ended April 30, 2018, for our common shares, the S&P
Packaged Foods & Meats Index, and the S&P 500 Index. These figures assume all dividends are reinvested when received and are based on
$100 invested in our common shares and the referenced index funds on April 30, 2013.

Copyright © 2018 Standard & Poor’s, a division of S&P Global. All rights reserved.
www.researchdatagroup.com/standards-poors/

2018 ANNUAL REPORT 29

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

(Dollars and shares in millions, unless otherwise noted, except per
share data)

COMPANY BACKGROUND
For more than 120 years, The J. M. Smucker Company
(“Company,” “we,” “us,” or “our”) headquartered in Orrville,
Ohio, has brought families together to share memorable meals and
moments. Guided by a vision to engage, delight, and inspire
consumers through trusted food and beverage brands that bring joy
throughout their lives, the Company has grown to be a well-
respected North American marketer and manufacturer with a
balanced portfolio of leading and emerging, on-trend brands. In
consumer foods and beverages, our brands include Smucker’s®,
Folgers®, Jif ®, Dunkin’ Donuts®, Crisco®, Café Bustelo®,
R.W. Knudsen Family®, Sahale Snacks®, Smucker’s Uncrustables®,
Robin Hood®, and Bick’s®. In pet food and pet snacks, our brands
include Rachael Ray® Nutrish®, Meow Mix®, Milk-Bone®,
Kibbles ’n Bits®, Natural Balance®, and Nature’s Recipe®.

We have four reportable segments: U.S. Retail Coffee, U.S. Retail
Consumer Foods, U.S. Retail Pet Foods, and International and
Away From Home. The U.S. retail market segments in total
comprised approximately 85 percent of net sales in 2018 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, food wholesalers, club stores, pet specialty stores,
discount and dollar stores, drug stores, military commissaries,
mass merchandisers, natural foods stores and distributors, and
online retailers. The products included in the International and
Away From Home segment are distributed domestically and in
foreign countries through retail channels and foodservice
distributors and operators (e.g., restaurants, lodging, schools and
universities, health care operators).

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 121 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 long-term growth objectives are to increase net sales
by 3 percent and earnings per share, measured on a non-GAAP

basis, by 8 percent annually on average. 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.

Net sales has increased at a compound annual growth rate of
5 percent over the past five years, driven by the acquisition of
Big Heart Pet Brands (“Big Heart”) in 2015, while income per
diluted share excluding non-GAAP adjustments (“adjusted
earnings per share”) has increased at a rate of 6 percent over the
same period. Our non-GAAP adjustments include amortization
expense and impairment charges related to intangible assets,
integration and restructuring costs, unallocated gains and losses on
commodity and foreign currency exchange derivatives, and,
beginning in 2018, certain one-time tax adjustments. Refer to
“Non-GAAP Financial Measures” in this discussion and analysis
for further information.

During the fourth quarter of 2018, we announced a definitive
agreement to acquire the stock of Ainsworth Pet Nutrition, LLC
(“Ainsworth”). On May 14, 2018, we completed the all-cash
transaction, which was funded by debt and valued at $1.9 billion.
Ainsworth is a leading producer, distributor, and marketer of
premium pet food and pet snacks, predominantly within the U.S.
Approximately two-thirds of Ainsworth’s sales are generated by its
Rachael Ray Nutrish brand, which is driving significant growth in
the premium pet food category. We anticipate the acquired business
to contribute net sales of approximately $800.0 in 2019. Annual
cost synergies of approximately $55.0 are expected to be fully
realized within three years after the closing, with approximately
$25.0 anticipated in 2019.

Net cash provided by operating activities has increased at a
compound annual growth rate of 7 percent over the past five years.
Our cash deployment strategy is to balance reinvesting in our
business through acquisitions and capital expenditures with
returning cash to our shareholders through the payment of
dividends and share repurchases. Our strategy also includes a
significant focus on debt repayment as a result of the additional
debt we incurred to finance the Ainsworth acquisition subsequent
to year-end.

RESULTS OF OPERATIONS
All comparisons presented in this discussion and analysis are to the
corresponding period of the prior year, unless otherwise noted. On
December 31, 2015, we sold our U.S. canned milk brands and
operations to Eagle Family Foods Group LLC, a subsidiary of
funds affiliated with Kelso & Company. The transaction included
canned milk products that were primarily sold in U.S. retail and
foodservice channels with annual net sales of approximately
$200.0. 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 $193.7, which
were net of transaction costs and a working capital adjustment, and
recognized a pre-tax gain of $25.3.

30 THE J. M. SMUCKER COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

Net sales
Gross profit

% of net sales
Operating income
% of net sales

Net income:
Net income
Net income per common share – assuming dilution

Adjusted gross profit (A)
% of net sales

Adjusted operating income (A)

% of net sales
Adjusted income: (A)

Year Ended April 30,

2018
$7,357.1
$2,836.1

38.5%

$1,036.1

14.1%

$1,338.6
$ 11.78
$2,802.7

2017
$7,392.3
$2,835.3

2016
$7,811.2
$2,967.8

38.4%

38.0%

$1,031.5

$1,145.3

14.0%

14.7%

$ 592.3
5.10
$
$2,868.2

$ 688.7
5.76
$
$2,968.0

38.1%

38.8%

38.0%

$1,431.8

$1,481.8

$1,489.8

19.5%

20.0%

19.1%

Income
Earnings per share – assuming dilution

$ 904.6
7.96
$

$ 895.9
7.72
$

$ 931.3
7.79
$

2018
% Increase
(Decrease)

2017
% Increase
(Decrease)

— %
—

—

126
131
(2)

(3)

1
3

(5)%
(4)

(10)

(14)
(11)
(3)

(1)

(4)
(1)

(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.

Summary of 2018
Net sales were flat in 2018, reflecting declines within the U.S.
Retail Consumer Foods and U.S. Retail Coffee segments, offset by
gains in the U.S. Retail Pet Food and International and Away From
Home segments. The overall net sales change was driven by
unfavorable volume/mix, which was mostly offset by the impacts
of higher net price realization and favorable foreign currency
exchange in the current year. Operating income was flat, as lower
special project costs and selling, distribution, and administrative
(“SD&A”) expenses were mostly offset by a $43.7 increase in
noncash impairment charges related to intangible assets. Net
income per diluted share increased $6.68, reflecting a provisional
nonrecurring income tax benefit of $765.8 related to U.S. tax
reform legislation, which was enacted during the third quarter of
2018, and a decrease in weighted-average common shares
outstanding as a result of our share repurchase activities during the
fourth quarter of 2017.

Operating income excluding non-GAAP adjustments (“adjusted
operating income”) decreased 3 percent in 2018. Adjusted earnings
per share increased 3 percent, with the primary differences from
the change in GAAP results being the exclusion of the impacts of
our one-time tax adjustments, a favorable change in the impact of
unallocated derivative gains and losses as compared to the prior
year, and lower special project costs. The impairment charges in
2018 and 2017 were also excluded from our non-GAAP results.

Summary of 2017
Net sales decreased 5 percent in 2017, driven by the non-
comparable impact from the U.S. canned milk business, which
was divested during the third quarter of 2016, as well as lower net

price realization and unfavorable volume/mix in 2017. Operating
income decreased 10 percent, primarily due to the impact of
noncash impairment charges of $133.2 recognized during 2017 and
the net sales decline. Additionally, 2016 results benefited from the
recognition of a $25.3 pre-tax gain on the divestiture of the U.S.
canned milk business and the related profits prior to the divestiture.
SD&A expenses and Big Heart integration costs were lower in
2017 as compared to 2016. Net income per diluted share decreased
11 percent in 2017 and reflects the benefit of a decrease in
weighted-average common shares outstanding as a result of our
share repurchase activities during the fourth quarters of 2017 and
2016. However, this benefit was more than offset by the impact of
an increase in the effective tax rate in 2017 as compared to the
prior year.

Adjusted operating income and adjusted earnings per share both
decreased 1 percent in 2017 and excluded the impact of the
impairment charges and the reduction in integration costs.

Net Sales
2018 Compared to 2017
Net sales were flat in 2018, reflecting a 1 percentage point impact
from unfavorable volume/mix, which was offset by the impact of
higher net pricing and favorable foreign currency exchange. The
unfavorable volume/mix was driven by declines in the oils and
baking categories, which were partially offset by gains in pet food.
Net price realization contributed 1 percentage point to net sales, as
higher net pricing for peanut butter, the Smucker’s brand, and oils
was partially offset by lower net pricing for pet food and pet
snacks.

2018 ANNUAL REPORT 31

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

2017 Compared to 2016

Year Ended April 30,

2017
$7,392.3
—

2016
$7,811.2
(153.5)

Increase

(Decrease)
$(418.9)
153.5

%
(5)%
2

3.8

—

3.8 —

$7,396.1

$7,657.7

$(261.6)

(3)%

Net sales

Divestiture
Foreign currency
exchange
Net sales excluding
divestiture and
foreign currency
exchange (A)

Amounts may not add due to rounding.

(A) Net sales excluding divestiture and foreign currency exchange is a non-
GAAP 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 excluding divestiture and
foreign currency exchange in the table above excludes the impact of
the U.S. canned milk business, which was divested on December 31,
2015, and foreign currency exchange.

Net sales decreased $418.9, or 5 percent, in 2017, partially due to
the impact of the divested U.S. canned milk business. Excluding
the non-comparable divested business and foreign currency
exchange, net sales decreased 3 percent, driven by the U.S. Retail
Coffee segment, specifically the Folgers brand, and the U.S. Retail
Pet Foods segment. The decline reflected lower net price
realization and unfavorable volume/mix, which contributed
somewhat equally to lower net sales.

Operating Income
The following table presents the components of operating income
as a percentage of net sales.

Year Ended April 30,

2018
38.5% 38.4%

2017

2016
38.0%

3.2%
2.6
3.3
3.2
6.3

3.4%
2.3
3.4
3.3
6.5

18.6% 18.8%
2.8
2.0

2.8
—

0.4
0.6

1.8
1.0

3.5%
2.2
4.0
2.9
6.7

19.3%
2.7
—

—
1.7

—

(0.1)
14.1% 14.0%

(0.4)
14.7%

Gross profit
Selling, distribution, and

administrative expenses:

Marketing
Advertising
Selling
Distribution
General and administrative

Total selling, distribution, and
administrative expenses

Amortization
Goodwill impairment charge
Other intangible assets impairment

charges

Other special project costs
Other operating expense

(income) – net

Operating income

Amounts may not add due to rounding.

32 THE J. M. SMUCKER COMPANY

2018 Compared to 2017
Gross profit was flat in 2018, as the impact of unfavorable volume/
mix was offset by the favorable impact of higher pricing and
slightly lower costs. Gross profit excluding non-GAAP
adjustments (“adjusted gross profit”) decreased $65.5, or 2 percent,
with the primary difference from the change in GAAP results being
the exclusion of a $64.5 favorable change in the impact of
unallocated derivative gains and losses as compared to the prior
year.

SD&A expenses decreased $19.9, or 1 percent, primarily due to the
benefits from our cost savings initiatives and lower selling
expense, which more than offset an increase in advertising
expense, driven by the U.S. Retail Pet Foods segment. Special
project costs decreased $33.3, primarily due to a reduction in
Big Heart integration costs.

Operating income was flat, reflecting a $43.7 increase in noncash
impairment charges, driven by the U.S. Retail Pet Foods segment.
Adjusted operating income decreased $50.0, or 3 percent. The
primary differences from the change in GAAP results were the
exclusion of the favorable change in the impact of unallocated
derivative gains and losses as compared to the prior year and the
impacts of impairment charges and special project costs.

2017 Compared to 2016
Gross profit decreased $132.5, or 4 percent, in 2017, primarily
reflecting unfavorable volume/mix and the loss of U.S. canned
milk profits. The impact of lower net price realization was offset
by a reduction in commodity and manufacturing overhead costs
and incremental synergy realization related to the Big Heart
acquisition. Adjusted gross profit decreased $99.8, or 3 percent,
and excluded a $39.2 unfavorable change in the impact of
unallocated derivative gains and losses as compared to 2016.

SD&A expenses decreased $119.6, or 8 percent, primarily driven
by incremental synergy realization. Additionally, Big Heart
integration costs decreased by $81.1, or 56 percent.

Operating income decreased $113.8, or 10 percent, reflecting
noncash impairment charges of $133.2 related to certain indefinite-
lived trademarks, primarily within the U.S. Retail Pet Foods
segment. Additionally, 2016 results benefited from the recognition
of the $25.3 gain related to the divestiture of the U.S. canned milk
business. Adjusted operating income decreased $8.0, or 1 percent,
with the primary differences from GAAP results being the
exclusion of the impairment charges, integration costs, and the
unfavorable change in the impact of unallocated derivative gains
and losses as compared to 2016.

Interest Expense and Other Income
2018 Compared to 2017
Net interest expense increased $11.0 in 2018, primarily due to
financing fees we incurred in 2018 in connection with the
Ainsworth acquisition. For additional information, see Note 8:
Debt and Financing Arrangements.

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

An $11.0 unfavorable change in net other income (expense) was
primarily due to an increase in foreign currency exchange loss in
2018 and a favorable legal settlement in 2017.

2017 Compared to 2016
Net interest expense decreased $8.0 in 2017, primarily due to a
lower outstanding balance on the $1.8 billion term loan due
March 23, 2020, in 2017 as compared to 2016.

Income Taxes
On December 22, 2017, the U.S. government enacted “An Act to
Provide for Reconciliation Pursuant to Titles II and V of the
Concurrent Resolution on the Budget for Fiscal Year 2018”
(the “Act”), which reduces the U.S. federal statutory corporate tax
rate from 35.0 percent to 21.0 percent effective January 1, 2018,
broadens the U.S. federal income tax base, requires companies to
pay a one-time repatriation tax on earnings of certain foreign
subsidiaries that were previously tax deferred (“transition tax”),
and creates new taxes on certain foreign-sourced earnings. Having
an April 30 fiscal year-end, the lower corporate income tax rate is
administratively phased in, resulting in a blended U.S. federal
statutory tax rate of approximately 30.4 percent for our fiscal year
ended April 30, 2018.

The U.S. Securities and Exchange Commission (“SEC”) and
Financial Accounting Standards Board (“FASB”) have issued rules
to allow a measurement period of up to 12 months following the
enactment of the Act for registrants to finalize their accounting for
the related income tax effects. The income tax benefit of $477.6 for
2018 reflects a provisional net benefit of $765.8 related to our one-
time adjustments resulting directly from the Act, partially offset by
additional income tax expense related to the Pet Foods reporting
unit goodwill impairment charge. Income tax expense was $286.1
for 2017. Within our calculations of the income tax effects of the
Act, we used assumptions and estimates that may change as a
result of future guidance and interpretation from the Internal
Revenue Service (“IRS”), the SEC, the FASB, and various taxing
jurisdictions. All of these potential legislative and interpretive
actions could result in adjustments to any of the provisional
estimates when the accounting for the income tax effects of the Act
is completed, which we expect to be no later than the third quarter
of 2019. For further information on the Act’s impact on our
consolidated financial statements, refer to Note 13: Income Taxes.

We anticipate that the effective tax rate in 2019 and in future years
will be favorably impacted by the lower federal statutory corporate
tax rate of 21.0 percent, offset to some extent by the base
broadening changes, such as the elimination of the domestic
manufacturing deduction. Furthermore, U.S. state jurisdictions
have started, and are expected to continue, taking legislative
actions to conform or decouple from the Act, either in its entirety
or with respect to specific provisions. We are also evaluating the
impact of the Ainsworth acquisition on our future consolidated
effective tax rate.

Income taxes decreased 1 percent in 2017, due to a decrease in
income before income taxes, mostly offset by the impact of a
higher effective tax rate in 2017 of 32.6 percent. The 2016

effective tax rate of 29.6 percent was impacted by the recognition
of a $50.5 noncash deferred tax benefit related to the integration of
Big Heart into the Company, partially offset by the impact of
higher deferred state income tax expense, which was a result of
state tax law changes.

Integration Activities
We incurred total cumulative costs of $271.9 related to the
integration of Big Heart, including $26.6 during 2018, which
primarily consisted of employee-related costs, outside service and
consulting costs, and other costs related to the acquisition. We have
fully realized our goal of $200.0 in annual synergies.

We expect to incur approximately $50.0 in one-time costs related
to the Ainsworth acquisition, of which the majority are expected to
be cash charges. Approximately two-thirds of these one-time costs
are expected to be recognized in 2019.

Restructuring Activities
An organization optimization program was approved by the Board
of Directors (the “Board”) during the fourth quarter of 2016. Under
this program, we identified opportunities to reduce costs and
optimize the organization. Related projects include an
organizational redesign and the optimization of our manufacturing
footprint. In addition, the program was recently expanded to
include the restructuring of our geographic footprint, which
includes the centralization of our pet food and pet snacks business,
as well as certain International non-manufacturing functions, to our
corporate headquarters in Orrville, Ohio, furthering collaboration
and enhanced agility, while improving cost efficiency. As a result,
we plan to close the San Francisco and Burbank, California, offices
by the end of 2019, and our international offices in China and
Mexico during the first half of 2019. The majority of these costs
are expected to be incurred through the end of 2019.

During 2017, we exited two leased facilities in Livermore,
California, and consolidated all ancient grains and pasta production
into our facility in Chico, California. During 2018, we consolidated
all of our coffee produced at our Harahan, Louisiana, facility into
one of our facilities in New Orleans, Louisiana, and this portion of
the optimization program is nearly complete. To date, the
organization optimization program has resulted in total headcount
reductions of approximately 275 full-time positions. We do not
anticipate significant headcount reductions associated with the
expansion of the program.

Upon completion of this program, total restructuring costs are
expected to be approximately $75.0, of which the majority
represents employee-related costs, while the remainder primarily
consists of site preparation, equipment relocation, and production
start-up costs at the impacted facilities. We have incurred total
cumulative restructuring costs of $42.6, of which $22.7 was
incurred during 2018. We achieved approximately $50.0 of annual
cost reductions related to our organization optimization program,
mainly during 2018, and have invested these savings in our
businesses. For further information, refer to Note 3: Integration
and Restructuring Costs.

2018 ANNUAL REPORT 33

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

Cost Management Program
In addition to our organization optimization program, we
announced a separate cost management program during 2017,
which is comprised of various cost reduction initiatives, including
SKU rationalization, revenue growth management, and our Right
Spend zero-based budgeting initiative. We expect to realize
approximately $200.0 of cost reductions annually by the end of
2020 as a result of these initiatives.

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.

In 2018, our overall commodity costs were slightly higher than
in 2017, primarily due to higher costs for green coffee and oils.

Commodities Overview
The raw materials we use are primarily commodities, agricultural-
based products, and packaging materials. The most significant of
these materials, based on 2018 annual spend, are green coffee,
peanuts, oils and fats, protein meals, and plastic containers. Green
coffee, certain oils, and certain protein meals 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, oils and fats, and protein meals 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 soybean and canola.
The price of peanuts, oils, and protein meals 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 addition, the price of oils has been impacted by
demand from the biofuels industry.

Segment Results
We have four reportable segments: U.S. Retail Coffee, U.S. Retail
Consumer Foods, U.S. Retail Pet Foods, and International and
Away From Home. During 2018, we added International and Away
From Home as a reportable segment because a single segment
manager was named to oversee the entire operating segment. Prior
year segment results have not been modified, as the new reportable
segment represents the previously reported combination of the
International and Away From Home strategic business areas, which
were previously managed separately and not individually
significant.

The U.S. Retail Coffee segment primarily includes the domestic
sales of Folgers, Dunkin’ Donuts, and Café Bustelo branded coffee;
the U.S. Retail Consumer Foods segment primarily includes
domestic sales of Jif, Smucker’s, Crisco, and Pillsbury® branded
products; and the U.S. Retail Pet Foods segment primarily includes
domestic sales of Meow Mix, Milk-Bone, Natural Balance,
Kibbles ’n Bits, 9Lives®, Pup-Peroni®, and Nature’s Recipe
branded products. The International and Away From Home
segment is comprised of 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).

Year Ended April 30,

2018

2017

2016

2018
% Increase
(Decrease)

2017
% Increase
(Decrease)

$2,092.2
2,000.8
2,169.3
1,094.8

$ 614.5
477.2
441.3
194.2

29.4%
23.9
20.3
17.7

$ 2,108.6
2,085.4
2,135.9
1,062.4

$ 682.4
458.2
481.0
185.1

32.4%
22.0
22.5
17.4

$ 2,239.2
2,269.7
2,250.4
1,051.9

$ 722.6
467.5
493.9
179.0

32.3%
20.6
21.9
17.0

(1)%
(4)
2
3

(10)%
4
(8)
5

(6)%
(8)
(5)
1

(6)%
(2)
(3)
3

Net sales:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home

Segment profit:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home

Segment profit margin:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home

34 THE J. M. SMUCKER COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

U.S. Retail Coffee
The U.S. Retail Coffee segment net sales decreased $16.4 in 2018.
Unfavorable volume/mix and lower net price realization each
reduced net sales by less than 1 percentage point. Unfavorable
volume/mix for the Folgers brand was mostly offset by gains for
Dunkin’ Donuts K-Cup® pods and the Café Bustelo brand. Lower
net price realization was also driven by the Folgers brand.
Although 2018 results include a full-year benefit of a list price
increase implemented in January 2017, the benefit was more than
offset by increased promotional spending in the current year.
Segment profit decreased $67.9, primarily due to the unfavorable
impacts of volume/mix, higher green coffee costs, and lower net
pricing, which were partially offset by improvements in K-Cup®
pod profitability. The improved profitability resulted from new
contract terms with Keurig Green Mountain, which became
effective at the end of the second quarter of 2018. During 2019, we
expect to realize the full-year benefits of lower green coffee costs
and K-Cup® pod cost savings as compared to 2018.

The U.S. Retail Coffee segment net sales decreased $130.6 in
2017, primarily due to lower net price realization, which was
mainly attributed to the net impact of pricing actions taken in 2016
and 2017, and unfavorable volume/mix, which reduced net sales
by 3 percentage points. The unfavorable volume/mix was driven
by the Folgers brand and was partially offset by favorable volume/
mix for the Café Bustelo and Dunkin’ Donuts brands. Segment
profit decreased $40.2, primarily due to the unfavorable volume/
mix, as well as the impact of lower net price realization, which was
partially offset by lower commodity and manufacturing overhead
costs and incremental synergy realization.

U.S. Retail Consumer Foods
The U.S. Retail Consumer Foods segment net sales decreased
$84.6 in 2018. Volume/mix reduced net sales by 8 percentage
points, primarily driven by the Crisco, Pillsbury, and Jif brands.
Net price realization contributed 4 percentage points to net sales,
primarily related to the Jif, Smucker’s, and Crisco brands. Segment
profit increased $19.0, as the net favorable impact of higher prices
and higher costs, as well as reduced marketing expense, were
partially offset by the unfavorable impact of volume/mix.

The U.S. Retail Consumer Foods segment net sales decreased
$184.3 in 2017, primarily reflecting noncomparable net sales of
$138.9 in 2016 related to the divested U.S. canned milk business.
Excluding the impact of the divestiture, net sales decreased
2 percent, which was entirely driven by unfavorable volume/mix,
primarily related to Smucker’s fruit spreads and the Jif and
truRoots® brands, partially offset by growth in Smucker’s
Uncrustables frozen sandwiches. Segment profit decreased $9.3;
however, excluding the $25.3 gain related to the U.S. canned milk
divestiture and canned milk profits in 2016, segment profit
increased 10 percent, as lower manufacturing overhead costs and
incremental synergy realization more than offset an increase in
marketing expense.

U.S. Retail Pet Foods
The U.S. Retail Pet Foods segment net sales increased $33.4 in
2018. Favorable volume/mix, primarily driven by the Nature’s
Recipe and Meow Mix brands, increased net sales by 2 percentage
points. We expanded distribution of the Nature’s Recipe brand into
grocery and mass merchandise outlets during the third quarter of
2017. The impact of volume/mix was partially offset by lower net
price realization, which reduced net sales by 1 percentage point,
driven by the Meow Mix brand. Segment profit decreased $39.7,
primarily due to the unfavorable impacts of lower prices and
higher costs and increased advertising expense, mainly related to
the Nature’s Recipe and Natural Balance brands. Although not
reflected in segment profit, impairment charges of $176.9 were
recognized in 2018 related to the goodwill of the Pet Foods
reporting unit and certain indefinite-lived trademarks within the
U.S. Retail Pet Foods segment.

The U.S. Retail Pet Foods segment net sales decreased $114.5 in
2017, primarily due to unfavorable volume/mix, which reduced net
sales by 3 percentage points. This was driven by the
Kibbles’n Bits, Meow Mix, Natural Balance, and 9Lives brands.
Net price realization was also lower, driven by the Natural Balance
and Milk-Bone brands. Segment profit decreased $12.9, as the
impact of unfavorable volume/mix, lower net price realization, and
higher distribution costs more than offset the impact of lower
commodity costs, incremental synergy realization, and a decrease
in marketing expense. Although not reflected in segment profit,
impairment charges of $128.5 were recognized in 2017 related to
certain indefinite-lived trademarks within the U.S. Retail Pet Foods
segment.

International and Away From Home
The International and Away From Home segment net sales
increased $32.4 in 2018, reflecting favorable volume/mix, which
increased net sales by 2 percentage points, driven by the Jif
and Smucker’s brands. In addition, foreign currency exchange
contributed $14.0 to net sales. Segment profit increased $9.1,
primarily due to the contributions from favorable volume/mix,
foreign currency exchange, and reduced marketing expense.

International and Away From Home net sales increased $10.5 in
2017, as favorable volume/mix, which contributed 4 percentage
points of growth to net sales, more than offset the impacts of lower
net price realization and $14.6 of noncomparable net sales in the
prior year related to the divested U.S. canned milk business.
Segment profit increased $6.1, primarily due to favorable volume/
mix, incremental synergy realization, and a $3.8 pre-tax gain on
the sale of our equity interest in Guilin Seamild Biologic
Technology Development Co., Ltd. (“Seamild”), which more than
offset the unfavorable net impact of lower prices and lower costs,
and the loss of profits from the divested canned milk business.

2018 ANNUAL REPORT 35

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

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 increased to $192.6 at April 30, 2018, compared to
$166.8 at April 30, 2017.

Within the U.S. Retail Coffee and U.S. Retail Consumer Foods
segments, we generally expect a significant use of cash to fund
working capital requirements during the first half of each fiscal
year, primarily due to the buildup of inventories to support the Fall
Bake and Holiday period, the additional increase of coffee
inventory in advance of the Atlantic hurricane season, and seasonal
fruit procurement. In these businesses, we expect cash provided by
operations in the second half of the fiscal year to significantly
exceed the amount in the first half of the year, upon completion of
the Fall Bake and Holiday period. However, the impact of
seasonality on our overall working capital requirements is partially
reduced by the U.S. Retail Pet Foods segment, which does not
experience significant seasonality. Cash provided by operating
activities in the second half of 2018 was $783.4, compared to
$434.6 provided through the first half of 2018.

The following table presents selected cash flow information.

Net cash provided by (used for)

operating activities

Net cash provided by (used for)

investing activities

Net cash provided by (used for)

financing activities

Net cash provided by (used for)

operating activities

Additions to property, plant,

and equipment
Free cash flow (A)

Year Ended April 30,

2018

2017

2016

$1,218.0

$1,059.0

$ 1,461.0

(277.6)

(189.7)

21.7

(922.0)

(806.1)

(1,498.9)

$1,218.0

$1,059.0

$ 1,461.0

(321.9)

(192.4)

(201.4)

$ 896.1

$ 866.6

$ 1,259.6

(A) Free cash flow is a non-GAAP measure used by management to

evaluate the amount of cash available for debt repayment, dividend
distribution, acquisition opportunities, share repurchases, and other
corporate purposes.

Cash provided by operating activities increased $159.0 in 2018
mainly due to a decrease in working capital during 2018, as
compared to an increase in the prior year. The working capital
change was driven by inventory, accrued liabilities, and trade
receivables. Net income adjusted for noncash items was also
higher in 2018, partially driven by the reduction in the U.S. federal
statutory corporate tax rate in 2018, which resulted from the Act.

Cash provided by operating activities decreased $402.0 in 2017
as a result of a significant decrease in working capital in the prior
year, while working capital at the end of the current year was
comparable to beginning of the year levels. The decrease in

36 THE J. M. SMUCKER COMPANY

working capital in 2016 was driven by a reduction in inventory
levels, which resulted from a working capital reduction initiative,
and the timing of tax payments, including the realization of a
$49.6 one-time tax refund in the first quarter of the prior year.

Cash used for investing activities in 2018 consisted primarily
of $321.9 in capital expenditures, partially offset by a $30.9
reduction in our derivative cash margin account balances. Cash
used for investing activities in 2017 consisted primarily of $192.4
in capital expenditures and a $38.4 increase in our derivative cash
margin account balances, partially offset by $40.6 in proceeds from
the sale of our investment in Seamild. The increase in capital
expenditures in 2018 was driven by the construction of our new
manufacturing facility in Longmont, Colorado, as further described
below, and product innovation. In 2016, cash provided by investing
activities consisted primarily of $193.7 in proceeds from the
divestiture of the U.S. canned milk business and a $34.8 reduction
in our derivative cash margin account balances, mostly offset by
$201.4 in capital expenditures.

Cash used for financing activities in 2018 consisted primarily of
$1,050.3 in long-term debt repayments, dividend payments
of $350.3, and a $310.0 decrease in short-term borrowings during
2018, which were partially offset by $799.6 in long-term debt
proceeds. For additional information on our new borrowings and
debt repayments, see “Capital Resources” in this discussion and
analysis. In 2017, cash used for financing activities consisted
primarily of the purchase of treasury shares for $437.6, mainly
representing the repurchase of 3.0 million common shares
available under the Board’s authorizations, dividend payments of
$339.3, and long-term debt repayments of $200.0, partially offset
by a $170.0 increase in short-term borrowings during the year. In
2016, cash used for financing activities consisted primarily of
$800.0 in long-term debt repayments, the purchase of treasury
shares for $441.1, mainly representing the repurchase of
3.4 million common shares available under the Board’s
authorizations, and dividend payments of $316.6.

We, like other food manufacturers, are from time to time subject to
legal proceedings arising in the ordinary course of business that
could have a material adverse effect on our financial position,
results of operations, or cash flows. In particular, we are currently
a defendant in Council for Education and Research on Toxics v.
Brad Barry LLC, et al., which alleges that we, in addition to nearly
eighty other defendants who manufacture, package, distribute, or
sell coffee, failed to provide warnings for our coffee products of
exposure to the chemical acrylamide as required under California
Health and Safety Code Section 25249.5, the California Safe
Drinking Water and Toxic Enforcement Act of 1986, better known
as “Proposition 65.” As part of a joint defense group organized to
defend against the lawsuit, we dispute these claims. Acrylamide is
not added to coffee, but is present in all coffee in small amounts
(measured in parts per billion) as a byproduct of the coffee bean
roasting process. The outcome and the financial impact of the case,
if any, cannot be predicted at this time. Accordingly, no loss
contingency has been recorded for this matter as of April 30, 2018,
as the likelihood of loss is not considered probable or estimable.

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

However, if we are required to pay significant statutory penalties
or to add warning labels to any of our products or place warnings
in certain locations where our products are sold as a result of
Proposition 65, our business and financial results could be
adversely impacted, and sales of those products could suffer not
only in those locations but elsewhere. For additional information,
see Note 15: Contingencies.

Capital Resources
The following table presents our capital structure.

April 30,

2018

2017

Current portion of long-term debt
Short-term borrowings
Long-term debt, less current portion
Total debt
Shareholders’ equity
Total capital

— $

144.0
4,688.0
$ 4,832.0
7,891.1
$12,723.1

499.0
454.0
4,445.5
$ 5,398.5
6,850.2
$12,248.7

On April 27, 2018, we entered into a senior unsecured delayed-
draw Term Loan Credit Agreement (“Term Loan”) with a syndicate
of banks and an available commitment amount of $1.5 billion.
Borrowings under the Term Loan bear interest on the prevailing
U.S. Prime Rate or London Interbank Offered Rate (“LIBOR”),
based on our election, and is payable either on a quarterly basis or
at the end of the borrowing term. The Term Loan does not require
scheduled amortization payments. Voluntary prepayments are
permitted without premium or penalty. As of April 30, 2018, no
balance was drawn on the Term Loan. The full amount of the Term
Loan was drawn on May 14, 2018, at an interest rate of
3.04 percent, to partially finance the Ainsworth acquisition. The
Term Loan matures on May 14, 2021.

In December 2017, we completed an offering of $800.0 in Senior
Notes due December 6, 2019, and December 15, 2027. The net
proceeds from the offering were used to prepay the $500.0 in
principal amount of the Senior Notes due March 15, 2018. In
addition, we prepaid, in full, the remaining outstanding balance of
the $1.8 billion term loan due March 23, 2020.

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,
2018, we had $144.0 of short-term borrowings outstanding, all of
which were issued under our commercial paper program, at a
weighted-average interest rate of 2.20 percent. On May 14, 2018,
we issued $400.0 of commercial paper at a weighted-average
interest rate of 2.27 percent to partially finance the Ainsworth
acquisition.

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.

During 2018, we did not repurchase any common shares under a
repurchase plan authorized by the Board. At April 30, 2018,
approximately 3.6 million common shares remain available for
repurchase pursuant to the Board’s authorizations. There is no
guarantee as to the exact number of shares that may be repurchased
or when such purchases may occur.

In June 2017, we began construction of a Smucker’s Uncrustables
frozen sandwich manufacturing facility in Longmont, Colorado.
The new facility will help meet growing demand for Smucker’s
Uncrustables frozen sandwiches and will complement our existing
facility in Scottsville, Kentucky. The Longmont facility will be
constructed in two phases, with a total potential investment
of $340.0. Phase 1 includes up to an initial $210.0 investment to
construct and equip the new facility, with an opportunity to invest
an additional $130.0 for phase 2 expansion, dependent on product
demand. Production is expected to begin at the new facility during
2020.

The following table presents certain cash requirements related
to 2019 investing and financing activities based on our current
expectations. Although no principal payments are required on our
debt obligations in 2019, we may utilize a portion of cash provided
by operations for debt repayment. Additionally, in 2020, a portion
of our Senior Notes will mature, and $800.0 in principal payments
will be required that year.

Capital expenditures
Dividend payments – based on current rates and

common shares outstanding

Interest payments – includes indebtedness related

to Ainsworth

Projection
Year Ending
April 30, 2019

$360.0

350.0

220.0

On March 5, 2018, the U.S. Federal Trade Commission announced
an administrative complaint challenging the proposed transaction
to acquire the Wesson® oil brand from Conagra Brands, Inc.
(“Conagra”). As a result, we mutually determined with Conagra to
terminate the definitive agreement to acquire the Wesson brand.

2018 ANNUAL REPORT 37

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

Absent any additional material acquisitions or other significant
investments, we believe that cash on hand, combined with cash
provided by operations and borrowings available under our
commercial paper program and revolving credit facility, will be
sufficient to meet our cash requirements for the next 12 months,
including capital expenditures, the payment of quarterly dividends,
interest payments on debt outstanding, and share repurchases.

As of April 30, 2018, total cash and cash equivalents of $177.5 was
held by our international subsidiaries. We recorded a provisional
one-time transition tax of $26.1 in 2018 on the undistributed
earnings of certain foreign subsidiaries that were previously
deferred from U.S. income taxes, as required by the Act. This tax
liability is expected to be paid over an eight-year period, which
began in 2018. As of April 30, 2018, the undistributed earnings of
our foreign subsidiaries continue to be permanently reinvested, and
we do not intend to repatriate any of the amounts to meet our cash
requirements. For further information, refer to Note 13: Income
Taxes.

NON-GAAP FINANCIAL MEASURES
We use non-GAAP financial measures including: net sales
excluding divestiture and foreign currency exchange; adjusted
gross profit, operating income, income, and 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 the adjusted earnings per share and free cash
flow measures as components for measuring performance for
incentive compensation purposes.

Non-GAAP measures exclude certain items affecting
comparability, that can significantly affect the year-over-year
assessment of operating results, which include amortization
expense and impairment charges related to intangible assets,
integration and restructuring costs (“special project costs”), and
unallocated gains and losses on commodity and foreign currency
exchange derivatives (“unallocated derivative gains and losses”).
The special project costs in the following table relate to specific
integration and restructuring projects, and the unallocated
derivative gains and losses reflect the changes in fair value of our
commodity and foreign currency exchange contracts. During 2018,
we expanded our non-GAAP measures to also exclude certain one-
time tax adjustments. These adjustments include the provisional
effect of the one-time items associated with the Act, which
includes certain adjustments related to the U.S. deferred tax assets
and liabilities remeasurement and the transition tax. Also included
in these one-time tax adjustments is the permanent tax difference
related to the goodwill impairment charge that was recorded during
2018. For further details on these adjustments, refer to Note 13:
Income Taxes, and Note 7: Goodwill and Other Intangible Assets.
We believe that excluding these one-time tax adjustments in our
non-GAAP measures provides comparability across the periods
presented and better reflects the benefit of a lower blended U.S.
statutory tax rate on our current year earnings as a result of the Act.

These non-GAAP financial measures are not intended to replace
the presentation of financial results in accordance with U.S.
generally accepted accounting principles (“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.

38 THE J. M. SMUCKER COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

The following table reconciles certain non-GAAP financial measures to the comparable GAAP financial measure. See page 32 for a
reconciliation of net sales adjusted for certain noncomparable items to the comparable GAAP financial measure.

2018

2017

2016

2015

2014

Year Ended April 30,

Gross profit reconciliation:

Gross profit
Unallocated derivative losses (gains)
Cost of products sold – special project costs
Adjusted gross profit

Operating income reconciliation:

Operating income
Amortization
Goodwill impairment charge
Other intangible assets impairment charges
Unallocated derivative losses (gains)
Cost of products sold – special project costs
Other special project costs
Adjusted operating income

Net income reconciliation:

Net income
Income tax expense (benefit)
Amortization
Goodwill impairment charge
Other intangible assets impairment charges
Unallocated derivative losses (gains)
Cost of products sold – special project costs
Other special project costs
Adjusted income before income taxes
Income taxes, as adjusted (A)
Adjusted income
Weighted-average shares – assuming dilution
Adjusted earnings per share – assuming dilution

EBITDA (as adjusted) reconciliation:

Net income
Income tax expense (benefit)
Interest expense – net
Depreciation
Amortization
Goodwill impairment charge
Other intangible assets impairment charges
EBITDA (as adjusted)

Free cash flow reconciliation:

Net cash provided by (used for) operating activities
Additions to property, plant, and equipment
Free cash flow

$2,836.1
(37.3)
3.9
$2,802.7

$1,036.1
206.8
145.0
31.9
(37.3)
3.9
45.4
$1,431.8

$1,338.6
(477.6)
206.8
145.0
31.9
(37.3)
3.9
45.4
$1,256.7
352.1
$ 904.6
113.6
7.96

$1,338.6
(477.6)
174.1
206.3
206.8
145.0
31.9
$1,625.1

$1,218.0
(321.9)
$ 896.1

$2,835.3
27.2
5.7
$2,868.2

$1,031.5
207.3
—
133.2
27.2
5.7
76.9
$1,481.8

$ 592.3
286.1
207.3
—
133.2
27.2
5.7
76.9
$1,328.7
432.8
$ 895.9
116.1
7.72

$ 592.3
286.1
163.1
211.7
207.3
—
133.2
$1,593.7

$2,967.8
(12.0)
12.2
$2,968.0

$1,145.3
208.4
—
—
(12.0)
12.2
135.9
$1,489.8

$ 688.7
289.2
208.4
—
—
(12.0)
12.2
135.9
$1,322.4
391.1
$ 931.3
119.5
7.79

$ 688.7
289.2
171.1
221.7
208.4
—
—
$1,579.1

$1,968.7
24.5
6.2
$1,999.4

$ 772.0
109.7
—
1.2
24.5
6.2
56.6
$ 970.2

$ 344.9
178.1
109.7
—
1.2
24.5
6.2
56.6
$ 721.2
245.6
$ 475.6
103.7
4.59

$ 344.9
178.1
79.9
157.5
109.7
—
1.2
$ 871.3

$2,031.0
(5.3)
9.4
$2,035.1

$ 919.0
98.9
—
—
(5.3)
9.4
25.6
$1,047.6

$ 565.2
284.5
98.9
—
—
(5.3)
9.4
25.6
$ 978.3
327.5
$ 650.8
104.3
6.24

$ 565.2
284.5
79.4
157.5
98.9
—
—
$1,185.5

$1,059.0
(192.4)
$ 866.6

$1,461.0
(201.4)
$1,259.6

$ 739.1
(247.7)
$ 491.4

$ 863.3
(279.5)
$ 583.8

(A) Income taxes, as adjusted, is based upon our GAAP effective tax rate and reflects the impact of items excluded from GAAP net income to derive
adjusted income. Income taxes, as adjusted also reflects the exclusion of certain one-time tax adjustments during 2018.

2018 ANNUAL REPORT 39

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

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, 2018.

Long-term debt obligations, including current portion (A)
Interest payments (B)
Operating lease obligations (C)
Purchase obligations (D)
Other liabilities (E)
Total

Total

2019

2020–2021

2022–2023

$4,700.0

$ —

$ 800.0

$1,150.0

1,770.6

208.1

1,376.0

288.3
$8,343.0

163.5

42.8

1,163.8

22.1
$1,392.2

307.1

70.8

181.4

38.3
$1,397.6

236.6

59.0

21.5

24.9
$1,492.0

2024 and
beyond

$2,750.0

1,063.4

35.5

9.3

203.0
$4,061.2

(A) Excludes the impact of offering discounts, make-whole payments, and debt issuance costs.

(B) Includes interest payments on our long-term debt.

(D) Includes agreements that are enforceable and legally bind us to purchase goods or services, including certain obligations related to normal, ongoing

purchase obligations in which we have guaranteed payment to ensure availability of raw materials, packaging supplies, and co-pack arrangements. We
expect to receive consideration for these purchase obligations in the form of materials and services. These purchase obligations do not represent the
entire anticipated purchases in the future, but represent only those items for which we are contractually obligated.

(E) Mainly consists of projected commitments associated with our defined benefit pension and other postretirement benefit plans. The liability for

unrecognized tax benefits and tax-related net interest of $36.4 under FASB Accounting Standards Codification 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.

40 THE J. M. SMUCKER COMPANY

recognized as a change in estimate in a subsequent period. During
2018, 2017, and 2016, subsequent period adjustments
approximated 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 35 percent of net sales in 2018. The
possibility exists that reported results could be different if factors
such as the level and success of the promotional programs or other
conditions differ from expectations.

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.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

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 is $129.1 and $227.3 at
April 30, 2018 and 2017, respectively. The decrease in the future
tax benefit from the prior year reflects the reduction in the federal
income tax rate from the enactment of U.S. comprehensive tax
reform legislation. 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 carry-
forwards or the projected operating results indicate that realization
is not likely, a valuation allowance would have been provided.

As of April 30, 2018, the undistributed earnings of our foreign
subsidiaries, primarily in Canada, continue to be indefinitely
reinvested.

Long-Lived Assets: Long-lived assets, other than goodwill and
other indefinite-lived intangible assets, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net
undiscounted cash flows estimated to be generated by such assets.
If such assets are considered to be impaired, the impairment to be
recognized is the amount by which the carrying amount of the
assets exceeds the estimated fair value of the assets. However,
determining fair value is subject to estimates of both cash flows
and discount rates, and different estimates could yield different
results. There are no events or changes in circumstances of which
we are aware that indicate the carrying value of our long-lived
assets may not be recoverable at April 30, 2018.

Goodwill and Other Indefinite-Lived Intangible Assets:
A significant portion of our assets is goodwill and other intangible
assets, the majority of which are not amortized but are reviewed at
least annually for impairment and more often if indicators of
impairment exist. At April 30, 2018, the carrying value of goodwill
and other intangible assets totaled $11.9 billion, compared to total
assets of $15.3 billion and total shareholders’ equity of
$7.9 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, 2018, goodwill totaled $5.9 billion. Goodwill is
substantially concentrated within the U.S. Retail Coffee, U.S.
Retail Pet Foods, and U.S. Retail Consumer Foods segments.
During 2018, we recognized goodwill impairment charges of
$145.0 related to the goodwill of the Pet Foods reporting unit,
which was a result of the evaluation performed during the year.
As of April 30, 2018, the estimated fair value of each of our seven
reporting units was substantially in excess of its carrying value,
with the exception of the Pet Foods reporting unit, for which its
fair value exceeded its carrying value by less than 1 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 value may not be recoverable. 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, 2018, other indefinite-lived intangible assets totaled
$2.9 billion. Trademarks that represent our leading brands
comprise more than 90 percent of the total carrying value of other
indefinite-lived intangible assets. As of April 30, 2018, each of
these leading brand trademarks had an estimated fair value
substantially in excess of its carrying value, with the exception of
the indefinite-lived trademarks within the U.S. Retail Pet Foods
segment. During 2018, we recognized impairment charges of $31.9
related to certain indefinite-lived trademarks within the U.S. Retail
Pet Foods segment, to the extent that the carrying value exceeded
the estimated fair value.

2018 ANNUAL REPORT 41

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

The goodwill and indefinite-lived trademarks within the U.S.
Retail Pet Foods segment remain susceptible to future impairment
charges as the carrying values approximate estimated fair values at
April 30, 2018. In addition, any meaningful adverse change to our
near or long-term projections or macro-economic conditions could
result in future impairment charges.

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.

During 2017, we changed the approach utilized to estimate the
service and interest cost components of net periodic benefit cost
for our defined benefit pension and other postretirement benefit
plans. Historically, we estimated the service and interest cost
components using a single weighted-average discount rate derived
from the yield curve used to measure the benefit obligation at the
beginning of the period. As of April 30, 2017, we utilized a spot
rate approach 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. This approach does not affect the
measurement of the total benefit obligations, and has been
accounted for as a change in estimate that is effected by a change
in accounting principle. As such, we accounted for this change in
methodology on a prospective basis beginning May 1, 2017.

For 2019 expense recognition, we will continue to use a spot rate
methodology, determined using the method described above. This
methodology will result in weighted-average discount rates for the
U.S. defined benefit pension plans of 4.17 percent to determine
benefit obligation, 4.29 percent to determine service cost, and
3.87 percent to determine interest cost, and a rate of compensation
increase of 3.59 percent. For the Canadian defined benefit pension
plans, it will result in weighted-average discount rates of
3.57 percent to determine benefit obligation, 3.64 percent to
determine service cost, and 3.23 percent to determine interest cost.
In addition, we anticipate using an expected rate of return on plan
assets of 5.66 percent and 5.25 percent for the U.S. and Canadian
defined benefit pension plans, respectively.

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, foreign
currency exchange rates, and commodity prices.

Interest Rate Risk: The fair value of our cash and cash
equivalents at April 30, 2018, 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.

We utilize derivative instruments to manage changes in the fair
value and cash flows of our debt. Interest rate contracts mitigate
the risk associated with the underlying hedged item. At the
inception of the contract, the instrument is evaluated and
documented for 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 derivative are
equal to changes in the fair value of the underlying debt and have
no net impact on earnings.

In June 2017, we entered into a treasury lock, with a notional value
of $300.0, to manage our exposure to interest rate volatility
associated with anticipated debt financing in 2018. This interest
rate contract was designated as a cash flow hedge. In December
2017, concurrent with the pricing of the Senior Notes due
December 15, 2027, we terminated the treasury lock prior to
maturity. The termination resulted in a gain of $2.7, which was
deferred and included as a component of accumulated other
comprehensive income (loss) and is being amortized as a reduction
to interest expense over the life of the debt.

In 2015, we terminated the interest rate swap on the 3.50 percent
Senior Notes due October 15, 2021, which was designated as a fair
value hedge, and used to hedge against the changes in fair value of
the debt. As a result of the early termination, we received $58.1 in
cash, which included $4.6 of accrued and prepaid interest and a
$53.5 benefit that is deferred as a component of the carrying value
of the long-term debt and is being recognized ratably as a
reduction to interest expense over the remaining life of the related
debt. At April 30, 2018, the remaining benefit of $28.5 was
recorded as an increase in the long-term debt balance.

42 THE J. M. SMUCKER COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

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, 2018, would increase the fair
value of our long-term debt by $333.2.

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, 2018, 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 in
Canada, 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 the cost of products sold. Based on our hedged
foreign currency positions as of April 30, 2018, 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 6 percent of net sales during 2018.
Thus, certain revenues and expenses have been, and are expected
to be, subject to the effect of foreign currency fluctuations, and
these fluctuations may have an impact on operating results.

Commodity Price Risk: We use certain raw materials and other
commodities that are subject to price volatility caused by supply
and demand conditions, political and economic variables, weather,
investor speculation, and other unpredictable factors. To manage
the volatility related to anticipated commodity purchases, we use
derivatives with maturities of generally less than one year. We do
not qualify commodity derivatives for hedge accounting treatment.
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.

High
Low
Average

Year Ended April 30,

2018
$36.0
17.0
26.8

2017
$40.8
13.2
26.5

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 its derivatives would generally be offset by
an increase or decrease in the estimated fair value of the
underlying exposures.

2018 ANNUAL REPORT 43

MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company

FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report 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” in our Annual Report on Form 10-K, as
well as the following:

• our ability to successfully integrate the acquired Ainsworth
business in a timely and cost-effective manner and retain key
suppliers, customers, and employees;

• our ability to achieve synergies and cost savings related to the
Ainsworth acquisition in the amounts and within the time
frames currently anticipated;

• our ability to achieve cost savings related to our organization
optimization and cost management programs in the amounts and
within the time frames currently anticipated;

• our ability to generate sufficient cash flow to meet our cash
deleveraging objectives;

• volatility of commodity, energy, and other input costs;

• risks associated with derivative and purchasing strategies we
employ to manage commodity pricing risks;

• the availability of reliable transportation on acceptable terms;

• our ability to implement and realize the full benefit of price
changes, and the impact of the timing of the price changes to
profits and cash flow in a particular period;

• the success and cost of marketing and sales programs and
strategies intended to promote growth in our businesses,
including product innovation;

• general competitive activity in the market, including
competitors’ pricing practices and promotional spending levels;

• the impact of food security concerns involving either our
products or our competitors’ products;

• the impact of accidents, extreme weather, and natural disasters;

• the concentration of certain of our businesses with key
customers and suppliers, including single-source suppliers of
certain key raw materials and finished goods, and our ability to
manage and maintain key relationships;

• the timing and amount of capital expenditures and share
repurchases;

• impairments in the carrying value of goodwill, other intangible
assets, or other long-lived assets or changes in useful lives of
other intangible assets;

• the impact of new or changes to existing governmental laws and
regulations and their application;

• the outcome of tax examinations, changes in tax laws, and other
tax matters;

• foreign currency 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. 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.

44 THE J. M. SMUCKER COMPANY

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
The J. M. Smucker Company

Shareholders
The J. M. Smucker Company

Management is responsible for establishing and maintaining adequate accounting and internal control systems over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as
amended. Our internal control system is designed to provide reasonable assurance that we have the ability to record, process,
summarize, and report reliable financial information on a timely basis.

Our management, with the participation of the principal financial officer and principal executive officer, assessed the
effectiveness of the internal control over financial reporting as of April 30, 2018. In making this assessment, we used the
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 Framework) (“the COSO criteria”).

Based on our assessment of internal control over financial reporting under the COSO criteria, we concluded the internal
control over financial reporting was effective as of April 30, 2018.

Ernst & Young LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over
financial reporting as of April 30, 2018, and their report thereon is included on page 46 of this report.

Mark T. Smucker
President and
Chief Executive Officer

Mark R. Belgya
Vice Chair and
Chief Financial Officer

2018 ANNUAL REPORT 45

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The J. M. Smucker Company

Board of Directors and Shareholders
The J. M. Smucker Company

Opinion on Internal Control Over Financial Reporting
We have audited The J. M. Smucker Company’s internal control over financial reporting as of April 30, 2018, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (“the COSO criteria”). In our opinion, The J. M. Smucker Company (the
“Company”) maintained, in all material aspects, effective internal control over financial reporting as of April 30, 2018, based
on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of April 30, 2018 and 2017, and the related statements of
consolidated income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period
ended April 30, 2018, and the related notes and our report dated June 18, 2018, expressed an unqualified opinion thereon.

Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Akron, Ohio
June 18, 2018

46 THE J. M. SMUCKER COMPANY

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Board of Directors and Shareholders
The J. M. Smucker Company

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The J. M. Smucker Company (the “Company”) as of
April 30, 2018 and 2017, and the related statements of consolidated income, comprehensive income, shareholders’ equity,
and cash flows for each of the three years in the period ended April 30, 2018, and the related notes (collectively referred to as
the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at April 30, 2018 and 2017, and the results of its operations and its cash flows
for each of the three years in the period ended April 30, 2018, in conformity with U.S. generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of April 30, 2018, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework), and our report dated June 18, 2018, expressed an unqualified opinion thereon.

Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 1955.

Akron, Ohio
June 18, 2018

2018 ANNUAL REPORT 47

REPORT OF MANAGEMENT ON RESPONSIBILITY
FOR FINANCIAL REPORTING
The J. M. Smucker Company

Shareholders
The J. M. Smucker Company

Management of The J. M. Smucker Company is responsible for the preparation, integrity, accuracy, and consistency of the
consolidated financial statements and the related financial information in this report. Such information has been prepared in
accordance with U.S. generally accepted accounting principles and is based on our best estimates and judgments.

We maintain systems of internal accounting controls supported by formal policies and procedures that are communicated
throughout the Company. There is a program of audits performed by our internal audit staff designed to evaluate the
adequacy of and adherence to these controls, policies, and procedures.

Ernst & Young LLP, an independent registered public accounting firm, has audited our financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Management has made all financial
records and related data available to Ernst & Young LLP during its audit.

Our audit committee, comprised of three independent non-employee members of the Board of Directors, meets regularly with
the independent registered public accounting firm and management to review the work of the internal audit staff and the
work, audit scope, timing arrangements, and fees of the independent registered public accounting firm. The audit committee
also regularly satisfies itself as to the adequacy of controls, systems, and financial records. The director of the internal audit
department is required to report directly to the audit committee as to internal audit matters.

It is our best judgment that our policies and procedures, our program of internal and independent audits, and the oversight
activity of the audit committee work together to provide reasonable assurance that our operations are conducted according to
law and in compliance with the high standards of business ethics and conduct to which we subscribe.

Mark T. Smucker
President and
Chief Executive Officer

Mark R. Belgya
Vice Chair and
Chief Financial Officer

48 THE J. M. SMUCKER COMPANY

STATEMENTS OF CONSOLIDATED INCOME
The J. M. Smucker Company

(Dollars in millions, except per share data)

Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative expenses
Amortization
Goodwill impairment charge
Other intangible assets impairment charges
Other special project costs (A)
Other operating expense (income) – net
Operating Income
Interest expense – net
Other income (expense) – net
Income Before Income Taxes
Income tax expense (benefit)
Net Income

Earnings per common share:

Net Income
Net Income – Assuming Dilution

Dividends Declared per Common Share

2018
$7,357.1
4,521.0
2,836.1
1,370.8
206.8
145.0
31.9
45.4
0.1
1,036.1
(174.1)
(1.0)
861.0
(477.6)
$1,338.6

$ 11.79
$ 11.78
3.12
$

Year Ended April 30,

2017
$7,392.3
4,557.0
2,835.3
1,390.7
207.3
—
133.2
76.9
(4.3)
1,031.5
(163.1)
10.0
878.4
286.1
$ 592.3

$
$
$

5.11
5.10
3.00

2016
$7,811.2
4,843.4
2,967.8
1,510.3
208.4
—
—
135.9
(32.1)
1,145.3
(171.1)
3.7
977.9
289.2
$ 688.7

$
$
$

5.77
5.76
2.68

(A) Other special project costs includes integration and restructuring costs. For more information, see Note 3: Integration and Restructuring Costs.

See notes to consolidated financial statements.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
The J. M. Smucker Company

(Dollars in millions)
Net income
Other comprehensive income (loss):

Foreign currency translation adjustments
Cash flow hedging derivative activity, net of tax
Pension and other postretirement benefit plans activity, net of tax
Available-for-sale securities activity, net of tax

Total Other Comprehensive Income (Loss)

Comprehensive Income

See notes to consolidated financial statements.

Year Ended April 30,

2018
$1,338.6

2017
$ 592.3

2016
$ 688.7

26.6
2.0
14.3
(1.2)
41.7

(29.9)
0.4
34.1
0.4
5.0

(10.8)
0.4
(28.5)
0.3
(38.6)

$1,380.3

$ 597.3

$ 650.1

2018 ANNUAL REPORT 49

CONSOLIDATED BALANCE SHEETS
The J. M. Smucker Company

ASSETS

(Dollars in millions)
Current Assets
Cash and cash equivalents
Trade receivables, less allowance for doubtful accounts
Inventories:

Finished products
Raw materials
Total Inventory
Other current assets
Total Current Assets
Property, Plant, and Equipment
Land and land improvements
Buildings and fixtures
Machinery and equipment
Construction in progress
Gross Property, Plant, and Equipment
Accumulated depreciation
Total Property, Plant, and Equipment
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
Total Other Noncurrent Assets

Total Assets

See notes to consolidated financial statements.

April 30,

2018

2017

192.6
385.6

166.8
438.7

542.1
312.3
854.4
122.4
1,555.0

120.1
812.6
2,111.5
212.1
3,256.3
(1,527.2)
1,729.1

5,942.2
5,916.5
158.4
12,017.1

$15,301.2

562.4
343.3
905.7
130.6
1,641.8

115.6
766.2
1,983.0
116.9
2,981.7
(1,364.2)
1,617.5

6,077.1
6,149.9
153.4
12,380.4

$15,639.7

50 THE J. M. SMUCKER COMPANY

CONSOLIDATED BALANCE SHEETS
The J. M. Smucker Company

LIABILITIES AND SHAREHOLDERS’ EQUITY

(Dollars in millions)
Current Liabilities
Accounts payable
Accrued compensation
Accrued trade marketing and merchandising
Dividends payable
Current portion of long-term debt
Short-term borrowings
Other current liabilities
Total Current Liabilities
Noncurrent Liabilities
Long-term debt, less current portion
Defined benefit pensions
Other postretirement benefits
Deferred income taxes
Other noncurrent liabilities
Total Noncurrent Liabilities
Total Liabilities
Shareholders’ Equity
Serial preferred shares – no par value:
Authorized – 6,000,000 shares; outstanding – none
Common shares – no par value:
Authorized – 300,000,000 shares; outstanding – 113,572,840 at April 30, 2018, and 113,439,553 at
April 30, 2017 (net of 32,924,890 and 33,058,177 treasury shares, respectively), at stated value
Additional capital
Retained income
Accumulated other comprehensive income (loss)
Total Shareholders’ Equity

April 30,

2018

512.1
79.8
101.6
88.6
—
144.0
107.7
1,033.8

4,688.0
144.1
61.9
1,377.2
105.1
6,376.3
7,410.1

2017

477.2
88.2
106.0
85.1
499.0
454.0
123.1
1,832.6

4,445.5
189.8
66.6
2,167.0
88.0
6,956.9
8,789.5

—

28.9
5,739.7
2,239.2
(116.7)
7,891.1

28.4
5,724.7
1,240.5
(143.4)
6,850.2

Total Liabilities and Shareholders’ Equity

$15,301.2

$15,639.7

See notes to consolidated financial statements.

2018 ANNUAL REPORT 51

STATEMENTS OF CONSOLIDATED CASH FLOWS
The J. M. Smucker Company

Year Ended April 30,

2018

2017

2016

$ 1,338.6

$ 592.3

$ 688.7

206.3
206.8
145.0
31.9
15.4
—
(803.4)
6.6
3.7
(39.6)

54.7
54.0
(5.3)
19.0
20.5
(28.7)
(7.5)
1,218.0

—
—
(321.9)
—
—
13.4
30.9
(277.6)

(310.0)
799.6
(1,050.3)
(350.3)
(7.0)
(4.0)
(922.0)
7.4
25.8
166.8
$ 192.6

211.7
207.3
—
133.2
22.0
—
(79.4)
4.4
0.4
(28.7)

8.9
(10.4)
8.9
2.1
(39.8)
7.9
18.2
1,059.0

—
—
(192.4)
—
40.6
0.5
(38.4)
(189.7)

170.0
—
(200.0)
(339.3)
(437.6)
0.8
(806.1)
(6.2)
57.0
109.8
$ 166.8

221.7
208.4
—
—
34.6
(25.3)
(95.2)
5.6
(2.2)
(8.6)

(21.9)
240.1
14.6
46.1
2.4
146.9
5.1
1,461.0

7.9
(16.0)
(201.4)
193.7
—
4.0
33.5
21.7

58.0
—
(800.0)
(316.6)
(441.1)
0.8
(1,498.9)
0.4
(15.8)
125.6
$ 109.8

(Dollars in millions)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by (used for) operations:

Depreciation
Amortization
Goodwill impairment charge
Other intangible assets impairment charges
Share-based compensation expense
Gain on divestiture
Deferred income tax expense (benefit)
Loss on disposal of assets – net
Other noncash adjustments – net
Defined benefit pension contributions
Changes in assets and liabilities, net of effect from businesses acquired:

Trade receivables
Inventories
Other current assets
Accounts payable
Accrued liabilities
Income and other taxes

Other – net

Net Cash Provided by (Used for) Operating Activities
Investing Activities
Businesses acquired, net of cash acquired
Equity investment in affiliate
Additions to property, plant, and equipment
Proceeds from divestiture
Proceeds from sale of investment
Proceeds from disposal of property, plant, and equipment
Other – net
Net Cash Provided by (Used for) Investing Activities
Financing Activities
Short-term borrowings (repayments) – net
Proceeds from long-term debt
Repayments of long-term debt
Quarterly dividends paid
Purchase of treasury shares
Other – net
Net Cash Provided by (Used for) Financing Activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and Cash Equivalents at End of Year

( ) Denotes use of cash

See notes to consolidated financial statements.

52 THE J. M. SMUCKER COMPANY

STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY
The J. M. Smucker Company

(Dollars in millions)
Balance at May 1, 2015
Net income
Other comprehensive income (loss)
Comprehensive Income
Purchase of treasury shares
Stock plans (includes tax
benefit of $2.7)
Cash dividends declared
Other
Balance at April 30, 2016
Net income
Other comprehensive income (loss)
Comprehensive Income
Purchase of treasury shares
Stock plans
Cash dividends declared
Other
Balance at April 30, 2017
Net income
Other comprehensive income (loss)
Comprehensive Income
Purchase of treasury shares
Stock plans
Cash dividends declared
Reclassification of stranded tax effects (A)
Other
Balance at April 30, 2018

Common
Shares
Outstanding
119,577,333

Common
Shares
$29.9

Additional
Capital
$6,007.7

Amount
Due from
ESOP
Trust
$(0.1)

Accumulated
Other
Comprehensive
Income (Loss)
$(109.8)

Retained
Income
$1,159.2
688.7

(3,451,591)

(0.9)

(177.9)

(262.3)

181,152

0.1

30.7

116,306,894

29.1

(0.4)
5,860.1

(3,147,659)
280,318

(0.8)
0.1

(163.6)
28.1

113,439,553

28.4

0.1
5,724.7

(54,535)
187,822

—
—

(5.8)
21.3

(317.9)

1,267.7
592.3

(273.2)

(346.5)
0.2
1,240.5
1,338.6

(1.2)

(353.7)
15.0

(38.6)

(148.4)

5.0

0.1
—

—

(143.4)

41.7

(15.0)

113,572,840

0.5
$28.9

(0.5)
$5,739.7

$2,239.2

$ —

$(116.7)

Total
Shareholders’

Equity

$7,086.9
688.7
(38.6)
650.1
(441.1)

30.8
(317.9)
(0.3)
7,008.5
592.3
5.0
597.3
(437.6)
28.2
(346.5)
0.3
6,850.2
1,338.6
41.7
1,380.3
(7.0)
21.3
(353.7)
—
—
$7,891.1

(A) During the fourth quarter of 2018, we elected to early adopt ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220)

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allowed us to reclassify the stranded income tax effects
resulting from the Act from accumulated other comprehensive income (loss) to retained earnings. For additional information, see Recently Issued
Accounting Standards in Note 1: Accounting Policies, and Note 13: Income Taxes.

See notes to consolidated financial statements.

2018 ANNUAL REPORT 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

(Dollars and shares in millions, unless otherwise noted, except per share data)

NOTE 1

ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include the accounts of the Company, its wholly-owned
subsidiaries, and its majority-owned investments, if any. Intercompany transactions and accounts are eliminated in consolidation.

Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires that we make certain estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Significant estimates in these consolidated financial statements include: estimates of future cash flows
associated with assets, potential asset impairments, useful lives and residual values of long-lived assets used in determining depreciation
and amortization, net realizable value of inventories, accruals for trade marketing and merchandising programs, income taxes, and the
determination of discount and other assumptions for defined benefit pension and other postretirement benefit expenses. Actual results could
differ from these estimates.

Cash and Cash Equivalents: We consider all short-term, highly-liquid investments with a maturity of three months or less when
purchased to be cash equivalents.

Revenue Recognition: We recognize revenue when all of the following criteria have been met: a valid customer order with a
determinable price has been received; title and risk of loss have transferred to the customer; there is no further significant obligation to
assist in the resale of the product; and collectibility is reasonably assured. Our products are shipped with FOB destination terms, with the
exception of certain export customers and those customers who elect to pick up.

Trade marketing and merchandising program costs are classified as a reduction of sales. A provision for estimated returns and allowances is
recognized as a reduction of sales at the time revenue is recognized.

Trade Marketing and Merchandising Programs: In order to support our products, various promotional activities are conducted
through retail trade, distributors, or directly with consumers, including in-store display and product placement programs, feature price
discounts, coupons, and other similar activities. 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 trade, 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 2018, 2017, and 2016,
subsequent period adjustments approximated less than 2 percent of both consolidated pre-tax income and cash provided by operating
activities. Total promotional expenditures, including amounts classified as a reduction of sales, represented 35 percent, 33 percent, and
31 percent of net sales in 2018, 2017, and 2016, respectively. The possibility exists that reported results could be different if factors such as
the level and success of the promotional programs or other conditions differ from expectations.

Shipping and Handling Costs: Transportation costs included in cost of products sold relate to the costs incurred to ship our products.
Distribution costs are included in selling, distribution, and administrative (“SD&A”) expenses and relate to the warehousing costs incurred
to store our products. Total distribution costs recorded within SD&A were $245.4, $252.9, and $236.1 in 2018, 2017, and 2016,
respectively.

Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $194.2, $169.8, and $170.3 in 2018, 2017,
and 2016, respectively.

Research and Development Costs: Research and development (“R&D”) costs are expensed as incurred and are included in SD&A in
the Statements of Consolidated Income. R&D costs include expenditures for new product and manufacturing process innovation, which are
comprised primarily of internal salaries and wages, consulting, and other supplies attributable to time spent on R&D activities. Other costs
include the depreciation and maintenance of research facilities. Total R&D expense was $56.0, $58.1, and $58.8 in 2018, 2017, and
2016, respectively.

Share-Based Payments: Share-based compensation expense, excluding stock options, is recognized on a straight-line basis over the
requisite service period, which includes a one-year performance period plus the defined forfeiture period, which is typically four years of
service or the attainment of a defined age and years of service. Compensation expense related to stock options is recognized ratably over

54 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

the service period for each vesting tranche from the grant date through the end of the requisite service period if it is probable that the
performance criteria will be met. The stock options vest over a period of one to three years, dependent on continued service of the option
holder, as well as the achievement of the performance objectives established on the grant date.

The following table summarizes amounts related to share-based payments.

Share-based compensation expense included in SD&A
Share-based compensation expense (benefit) included in other special project costs
Total share-based compensation expense

Related income tax benefit

Year Ended April 30,

2018
$13.7
1.7
$15.4

$ 4.6

2017
$22.3

(0.3) (A)

$22.0

$ 7.2

2016
$26.3
8.3
$34.6

$10.2

(A) During 2017, we concluded that a portion of the performance objectives were unachievable, and therefore reversed the life-to-date compensation cost

recognized. For additional information, see Note 12: Share-Based Payments.

As of April 30, 2018, total unrecognized share-based compensation cost related to nonvested share-based awards was $42.6. The weighted-
average period over which this amount is expected to be recognized is 3.4 years.

Prior to adoption of Accounting Standards Update (“ASU”) 2016-09, Stock Compensation (Topic 718) Improvements to Employee Share-
Based Payment Accounting, realized excess tax benefits were presented in the Statements of Consolidated Cash Flows as a financing
activity and were credited to additional capital in the Consolidated Balance Sheets. Realized shortfall tax benefits, amounts which are less
than those previously recognized in earnings, were first offset against the cumulative balance of excess tax benefits, if any, and then
charged directly to income tax expense. Upon adoption of ASU 2016-09, realized excess tax benefits are presented in the Statements of
Consolidated Cash Flows as an operating activity and are recognized within income taxes in the Statements of Consolidated Income. For
2018, 2017, and 2016, the excess tax benefits realized upon exercise or vesting of share-based compensation were $1.5, $3.3, and $2.7,
respectively. For further discussion on share-based compensation expense, see Note 12: Share-Based Payments.

Defined Contribution Plans: We offer employee savings plans for domestic and Canadian employees. Our contributions under these
plans are based on a specified percentage of employee contributions. Charges to operations for these plans in 2018, 2017, and 2016 were
$36.3, $31.9, and $25.9, respectively. For information on our defined benefit plans, see Note 9: Pensions and Other Postretirement Benefits.

Income Taxes: We account for income taxes using the liability method. Accordingly, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in the applicable tax rate is recognized in income or expense in the period that the change is enacted. A valuation allowance is
established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A tax benefit is recognized when
it is more likely than not to be sustained.

We account for the financial statement recognition and measurement criteria of a tax position taken or expected to be taken in a tax return
under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. ASC 740 also
provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. In accordance
with the requirements of ASC 740, uncertain tax positions have been classified in the Consolidated Balance Sheets as noncurrent, except
to the extent payment is expected within one year. We recognize net interest and penalties related to unrecognized tax benefits in income
tax expense.

On December 22, 2017, the U.S. government enacted “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent
Resolution on the Budget for Fiscal Year 2018” (the “Act”), which is commonly referred to as “The Tax Cuts and Jobs Act.” The Act
provides for comprehensive tax legislation that reduces the U.S. federal statutory corporate tax rate from 35.0 percent to 21.0 percent
effective January 1, 2018, broadens the U.S. federal income tax base, requires companies to pay a one-time repatriation tax on earnings of
certain foreign subsidiaries that were previously tax deferred, and introduces new taxes on certain foreign-sourced earnings. The
provisional effect of the rate reduction and other pronouncements of the Act on our deferred tax asset and liability, and current and
noncurrent tax payable balances have been accounted for in our 2018 financial statements, in accordance with recently issued
ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which allows a measurement period of
up to one year after the enactment date to finalize our initial accounting for the impacts of the Act. For additional information, see Note 13:
Income Taxes.

2018 ANNUAL REPORT 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Trade Receivables: In the normal course of business, we extend credit to customers. Trade receivables, less allowances, reflects the net
realizable value of receivables and approximates fair value. We evaluate our trade receivables and establish an allowance for doubtful
accounts based on a combination of factors. When aware that a specific customer has been impacted by circumstances such as bankruptcy
filings or deterioration in the customer’s operating results or financial position, potentially making it unable to meet its financial
obligations, we record a specific reserve for bad debt to reduce the related receivable to the amount we reasonably believe is collectible. We
also record reserves for bad debt for all other customers based on a variety of factors, including the length of time the receivables are past
due, historical collection experience, and an evaluation of current and projected economic conditions at the balance sheet date. Trade
receivables are charged off against the allowance after we determine that the potential for recovery is remote. At April 30, 2018 and 2017,
the allowance for doubtful accounts was $1.1 and $1.6, respectively. We believe there is no concentration of risk with any single customer
whose failure or nonperformance would materially affect results other than as discussed in Note 5: Reportable Segments.

Inventories: Inventories are stated at the lower of cost or market, with market being defined as net realizable value, less costs to sell. Cost
for all inventories is determined using the first-in, first-out method applied on a consistent basis.

The cost of finished products and work-in-process inventory includes materials, direct labor, and overhead. Work-in-process is included in
finished products in the Consolidated Balance Sheets and was $80.9 and $72.2 at April 30, 2018 and 2017, respectively.

Derivative Financial Instruments: We account for derivative instruments in accordance with FASB ASC 815, Derivatives and
Hedging, which requires all derivative instruments to be recognized in the financial statements and measured at fair value, regardless of the
purpose or intent for holding them.

We do not qualify commodity derivatives or instruments used to manage foreign currency exchange exposures for hedge accounting
treatment and, as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the
assessments required to achieve hedge accounting for derivative positions, we believe all of our derivatives are economic hedges of our risk
exposure. The exposures hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that
over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated
fair value of the underlying exposures.

We utilize derivative instruments to manage changes in the fair value and cash flows of our debt. Interest rate contracts mitigate the risk
associated with the underlying hedged item. At the inception of the contract, the instrument is evaluated and documented for 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.

Property, Plant, and Equipment: Property, plant, and equipment is recognized at cost and is depreciated on a straight-line basis over
the estimated useful life of the asset (3 to 20 years for machinery and equipment, 1 to 7 years for capitalized software costs, and
5 to 40 years for buildings, fixtures, and improvements).

We lease certain land, buildings, and equipment for varying periods of time, with renewal options. Rent expense in 2018, 2017, and 2016
totaled $95.2, $101.0, and $92.5, respectively. As of April 30, 2018, our minimum operating lease obligations were as follows: $42.8 in
2019, $37.5 in 2020, $33.3 in 2021, $29.9 in 2022, and $29.1 in 2023.

In accordance with FASB ASC 360, Property, Plant, and Equipment, long-lived assets, other than goodwill and other indefinite-lived
intangible assets, are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted
cash flows we estimate to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the
amount by which the carrying amount of the assets exceeds their estimated fair value. Assets to be disposed of by sale are recognized as
held for sale at the lower of carrying value or fair value less costs to sell.

Goodwill and Other Intangible Assets: Goodwill is the excess of the purchase price paid over the estimated fair value of the net
assets of a business acquired. In accordance with FASB ASC 350, Intangibles – Goodwill and Other, goodwill and other indefinite-lived
intangible assets are not amortized but are reviewed at least annually for impairment. We conduct our annual test for impairment of
goodwill and other indefinite-lived intangible assets as of February 1 of each year. As of the current year annual impairment test date, we
had seven reporting units. A discounted cash flow valuation technique was utilized to estimate the fair value of our reporting units and
indefinite-lived intangible assets. We also used a market-based approach to estimate the fair value of our reporting units. The discount rates

56 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

utilized in the cash flow analyses were developed using a weighted-average cost of capital methodology. In addition to the annual test, we
test for impairment if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit or an
indefinite-lived intangible asset below its carrying amount. Finite-lived intangible assets are amortized on a straight-line basis over their
estimated useful lives, which are evaluated on an annual basis. For additional information, see Note 7: Goodwill and Other Intangible
Assets.

Marketable Securities and Other Investments: We maintain funds for the payment of benefits associated with nonqualified
retirement plans. These funds include investments considered to be available-for-sale marketable securities. At April 30, 2018 and 2017,
the fair value of these investments was $45.8 and $47.3, respectively, and was included in other noncurrent assets in the Consolidated
Balance Sheets. Included in accumulated other comprehensive income (loss) at April 30, 2018 and 2017, were unrealized pre-tax gains of
$4.7 and $6.3, respectively.

Equity Method Investments: Investments in common stock of entities other than our consolidated subsidiaries are accounted for under
the equity method in accordance with FASB ASC 323, Investments – Equity Method and Joint Ventures. Under the equity method, the
initial investment is recorded at cost and the investment is subsequently adjusted for its proportionate share of earnings or losses, including
consideration of basis differences resulting from the difference between the initial carrying amount of the investment and the underlying
equity in net assets. The difference between the carrying amount of the investment and the underlying equity in net assets is primarily
attributable to goodwill and other intangible assets.

During 2017, we sold our 25 percent equity interest in Guilin Seamild Biologic Technology Development Co., Ltd. (“Seamild”), a
privately-owned manufacturer and marketer of oats products in China. We received proceeds from the sale of $40.6, net of transaction
costs, and recognized a pre-tax gain of $3.8 during 2017. The initial investment in Seamild was in 2012 for $35.9 and was included in other
noncurrent assets in the Consolidated Balance Sheets. The investment in Seamild did not have a material impact on International and Away
From Home or the consolidated financial statements for the year ended April 30, 2017.

Additionally, we have a 20 percent equity interest in Mountain Country Foods, LLC, and a 44 percent equity interest in Numi, Inc. The
carrying amount of these investments is included in other noncurrent assets in the Consolidated Balance Sheets. The investments did not
have a material impact on the consolidated financial statements or the respective reportable segment to which they relate for the years
ended April 30, 2018 and 2017.

Foreign Currency Translation: Assets and liabilities of foreign subsidiaries are translated using the exchange rates in effect at the
balance sheet dates, while income and expenses are translated using average rates throughout the periods. Translation adjustments are
reported as a component of shareholders’ equity in accumulated other comprehensive income (loss). Included in accumulated other
comprehensive income (loss) at April 30, 2018 and 2017, were foreign currency losses of $16.4 and $43.0, respectively.

Recently Issued Accounting Standards: In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant
to SEC Staff Accounting Bulletin No. 118, which amends FASB ASC 740 to add the Securities and Exchange Commission’s (“SEC”)
guidance in Staff Accounting Bulletin (“SAB”) 118 concerning the application of U.S. GAAP when preparing the initial accounting for the
income tax effects of the Act, which was enacted on December 22, 2017. SAB 118 addresses the specific situation in which the initial
accounting for certain income tax effects of the Act will not be complete at the time that financial statements are issued covering the
reporting period that includes the enactment date, specifically allowing a measurement period of up to one year after the enactment date to
finalize our initial accounting for the impacts of the Act. For additional information, see Note 13: Income Taxes.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification of the income tax effects of the
enactment of the Act on items that are stranded in accumulated other comprehensive income to retained earnings. This standard also
requires certain disclosures about stranded tax effects. This ASU, however, does not change the underlying guidance that requires that the
effect of a change in tax laws or rates be included in income from continuing operations. ASU 2018-02 is effective for us on May 1, 2019,
but we have elected to early adopt as of February 1, 2018, as permitted, so that the tax effects of items within accumulated other
comprehensive income are reflected at the appropriate tax rate. Early adoption of this ASU had an overall immaterial impact on our
financial statements and disclosures. For additional information, see Note 13: Income Taxes.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging
Activities, which simplifies the application of hedge accounting and enables companies to better portray the economics of their risk
management activities in their financial statements. ASU 2017-12 is effective for us on May 1, 2019, but we have elected to early adopt
during the second quarter of 2018, as permitted. Early adoption of this ASU had an overall immaterial impact on our financial statements
and disclosures. For additional information, see Note 10: Derivative Financial Instruments.

2018 ANNUAL REPORT 57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715) Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires the service cost component of the net periodic pension
cost to be presented separately from the other components of the net periodic pension cost in the income statement. Additionally, only the
service cost component of the net periodic pension cost will be eligible for capitalization. ASU 2017-07 will be effective for us on May 1,
2018. The change in presentation of service cost must be applied retrospectively, while the capitalization of service cost must be applied on
a prospective basis. We do not anticipate that the adoption of this ASU will have a material impact on our financial statements and
disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill
Impairment, which eliminates Step 2 from the goodwill impairment test and requires an impairment charge to be recorded based on the
excess of a reporting unit’s carrying value over its fair value. ASU 2017-04 is effective for us on May 1, 2020, but we have elected to early
adopt on a prospective basis during 2018, as permitted.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory, which
requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer
occurs rather than deferring such recognition until the asset is sold to an outside party. ASU 2016-16 is effective for us on May 1, 2018, and
it will require adoption on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the
beginning of the period of adoption. We do not anticipate that the adoption of this ASU will have a material impact on our financial
statements and disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash
Payments, which will make changes to how certain cash receipts and cash payments are presented and classified in the statement of cash
flows. ASU 2016-15 will be effective for us on May 1, 2018, 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 the presentation of our financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require lessees to recognize a right-of-use asset and lease
liability for all leases with terms of more than 12 months. ASU 2016-02 will be effective for us on May 1, 2019, with the option to early
adopt at any time prior to the effective date. It requires a modified retrospective application for leases existing at, or entered into after, the
beginning of the earliest comparative period presented and may exclude any leases that expired before the date of initial application.
However, the FASB has recently proposed guidance that would allow adoption of the standard as of the effective date without restating
prior periods. We are currently compiling an inventory of our lease arrangements in order to determine the impact the new guidance will
have on our financial statements and disclosures. We have selected new lease accounting software in preparation for the standard’s
additional reporting requirements and will begin implementation during the first quarter of 2019. Based on our assessment to date, we
expect that the adoption of ASU 2016-02 will result in a significant increase in lease-related assets and liabilities recognized in our
Consolidated Balance Sheets, but we are unable to quantify the impact at this time.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the new guidance
is that an entity must recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. It requires additional disclosures to enable
users to understand the nature, amount, timing, and uncertainty of revenue and cash flows relating to customer contracts. ASU 2014-09
requires either full retrospective application to each prior reporting period presented or modified retrospective application with the
cumulative effect of initially applying the standard recognized at the date of adoption. In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which extends the standard’s effective date by one year.
As a result of this issuance, the standard will be effective for us on May 1, 2018. Our implementation of the standard is complete, with the
exception of evaluating the newly acquired Ainsworth Pet Nutrition, LLC (“Ainsworth”) business. With the involvement of a cross-
functional team, we performed a detailed review of the new guidance as compared to our current policies to identify any potential
accounting differences. We then reviewed contracts from each of our significant revenue streams to determine the validity of our initial
conclusions. We have not identified any accounting changes that will materially impact our financial statements, and therefore we intend to
utilize the modified retrospective transition method.

Risks and Uncertainties: The raw materials we use are primarily commodities, agricultural-based products, and packaging materials.
The principal packaging materials we use are plastic, glass, metal cans, caps, carton board, and corrugate. Green coffee, peanuts, oils and
fats, protein meals, sweeteners, grains, fruit, and other ingredients are obtained from various suppliers. The availability, quality, and cost of
many of these commodities have fluctuated, and may continue to fluctuate over time. Green coffee is sourced solely from foreign countries,
and its supply and price are 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. Raw materials are generally available from numerous sources,
although we have elected to source certain plastic packaging materials and finished goods, such as our Pup-Peroni® dog snacks, from

58 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

single sources of supply pursuant to long-term contracts. While availability may vary from year to year, we believe that we will continue to
be able to obtain adequate supplies and that alternatives to single-sourced materials are available. We have not historically encountered
significant shortages of key raw materials. We consider our relationships with key material suppliers to be in good standing.

We have consolidated our production capacity for certain products, including substantially all of our coffee, Milk-Bone® dog snacks, fruit
spreads, toppings, syrups, and Uncrustables® frozen sandwiches, into single manufacturing sites. Although steps are taken at all of our
manufacturing sites to reduce the likelihood of a production disruption, an interruption at a single manufacturing site would result in a
reduction or elimination of the availability of some of our products for a period of time.

Of our total employees, 28 percent are covered by union contracts at 10 manufacturing locations. The contracts vary in term, with one
contract expiring in 2019, representing less than 1 percent of our total employees.

We insure our business and assets in each country against insurable risks, to the extent that we deem appropriate, based upon an analysis of
the relative risks and costs.

NOTE 2

ACQUISITIONS

During the fourth quarter of 2018, we announced a definitive agreement to acquire the stock of Ainsworth. On May 14, 2018, we
completed the all-cash transaction, valued at $1.9 billion, which was funded with a new $1.5 billion bank term loan and $400.0 in
borrowings under our commercial paper program. For additional information on the financing associated with this transaction, refer to
Note 8: Debt and Financing Arrangements.

Ainsworth is a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S.
Approximately two-thirds of Ainsworth’s sales are generated by the Rachael Ray® Nutrish® brand, which is driving significant growth in
the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks.
Ainsworth was a privately-held company headquartered in Meadville, Pennsylvania. In addition to its headquarters, the transaction includes
two manufacturing facilities owned by Ainsworth, which are located in Meadville, Pennsylvania, and Frontenac, Kansas, and a leased
distribution facility in Greenville, Pennsylvania.

We expect to incur approximately $50.0 in one-time costs related to the acquisition, of which the majority are expected to be cash charges.
The one-time costs will consist primarily of employee-related costs, outside service and consulting costs, and other costs directly related to
the acquisition. Approximately two-thirds of these one-time costs are expected to be recognized by the end of 2019.

The purchase price will be preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair
values at the date of acquisition and is subject to change as we complete our analysis of their fair values during the measurement period not
to exceed one year as permitted under FASB ASC 805, Business Combinations. Due to the transaction closing subsequent to 2018, we will
complete and disclose the preliminary purchase price allocation during the first quarter of 2019; however, we anticipate the majority of the
purchase price will be allocated to goodwill and other intangible assets. The acquisition will be included within the U.S. Retail Pet Foods
reportable segment and Pet Foods reporting unit.

On March 5, 2018, the U.S. Federal Trade Commission announced an administrative complaint challenging the proposed transaction to
acquire the Wesson® oil brand from Conagra Brands, Inc. (“Conagra”). As a result, we mutually determined with Conagra to terminate the
definitive agreement to acquire the Wesson brand.

NOTE 3

INTEGRATION AND RESTRUCTURING COSTS

Integration and restructuring costs primarily consist of employee-related costs, outside service and consulting costs, and other 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 costs include professional fees, information systems costs, and other miscellaneous expenditures
associated with the integration or restructuring activities, which are expensed as incurred. These one-time costs are not allocated to segment
profit, and the majority of these costs are reported in other special project costs in the Statements of Consolidated Income. The obligation
related to employee separation costs is included in other current liabilities in the Consolidated Balance Sheets.

2018 ANNUAL REPORT 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Integration Costs: As of April 30, 2018, all integration activities related to the acquisition of Big Heart Pet Brands (“Big Heart”) were
considered complete. The following table summarizes the one-time costs incurred in relation to the Big Heart acquisition.

Employee-related costs
Outside service and consulting costs
Other costs
Total one-time costs

2018
$ 8.5
11.6
6.5
$26.6

2017
$16.3
33.9
13.9
$64.1

2016
$ 52.4
56.0
36.8
$145.2

Total Costs
Incurred to Date
at April 30, 2018
$ 90.6
117.6
63.7
$271.9

Noncash charges of $2.6, $3.2, and $18.9 were included in the total one-time costs incurred in 2018, 2017, and 2016, respectively. Noncash
charges included in total one-time costs incurred to date were $30.4, which primarily consisted of share-based compensation and
accelerated depreciation. The obligation related to severance costs and retention bonuses was $0.1 and $5.3 at April 30, 2018 and 2017,
respectively.

Restructuring Costs: An organization optimization program was approved by the Board of Directors (the “Board”) during the fourth
quarter of 2016. Under this program, we identified opportunities to reduce costs and optimize the organization. Related projects include an
organizational redesign and the optimization of our manufacturing footprint. In addition, the program was recently expanded to include the
restructuring of our geographic footprint, which includes the centralization of our pet food and pet snacks business, as well as certain
International non-manufacturing functions, to our corporate headquarters in Orrville, Ohio, furthering collaboration and enhanced agility,
while improving cost efficiency. As a result, we plan to close the San Francisco and Burbank, California, offices by the end of 2019, and
our international offices in China and Mexico during the first half of 2019. The majority of these costs are expected to be incurred through
the end of 2019.

During 2017, we exited two leased facilities in Livermore, California, and consolidated all ancient grains and pasta production into our
facility in Chico, California. During 2018, we consolidated all of our coffee produced at our Harahan, Louisiana, facility into one of our
facilities in New Orleans, Louisiana, and this portion of the optimization program is nearly complete. To date, the organization optimization
program has resulted in total headcount reductions of approximately 275 full-time positions. We do not anticipate significant headcount
reductions associated with the expansion of the program.

The following table summarizes our one-time costs incurred in relation to the organization optimization program.

Employee-related costs
Outside service and consulting costs
Other costs
Total one-time costs

2018
$10.1
0.4
12.2
$22.7

2017
$12.4
1.8
4.4
$18.6

2016
$1.3
—
—
$1.3

Total Costs
Incurred to Date
at April 30, 2018
$23.8
2.2
16.6
$42.6

Noncash charges of $9.8 and $2.1 were included in the one-time costs incurred during 2018 and 2017, respectively, and we did not incur
any noncash charges during 2016. Noncash charges included in total one-time costs incurred to date were $11.9, and primarily consisted of
accelerated depreciation. The obligation related to severance costs and retention bonuses was $0.3 and $3.3 at April 30, 2018 and 2017,
respectively.

60 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

NOTE 4

DIVESTITURE

On December 31, 2015, we sold our U.S. canned milk brands and operations to Eagle Family Foods Group LLC, a subsidiary of funds
affiliated with Kelso & Company. The transaction included canned milk products that were primarily sold in U.S. retail and foodservice
channels under the Eagle Brand® and Magnolia® brands, along with other branded and private label trade names, with annual net sales of
approximately $200.0. Our manufacturing facilities in El Paso, Texas, and Seneca, Missouri, were included in the transaction, but our
canned milk business in Canada was excluded from the divestiture.

The operating results for this business were primarily included in the U.S. Retail Consumer Foods segment prior to the sale on
December 31, 2015. We received proceeds from the divestiture of $193.7, which were net of transaction costs and a working capital
adjustment. Upon completion of the transaction, we recognized a pre-tax gain of $25.3 in 2016.

NOTE 5

REPORTABLE SEGMENTS

We operate in one industry: the manufacturing and marketing of food and beverage products. We have four reportable segments: U.S.
Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Away From Home, previously referred to as
International and Foodservice. During 2018, we added International and Away From Home as a reportable segment because a single
segment manager was named to oversee the entire operating segment. Prior year segment results have not been modified, as the new
reportable segment represents the previously reported combination of the International and Away From Home strategic business areas,
which were previously managed separately and not individually significant.

The U.S. Retail Coffee segment primarily includes the domestic sales of Folgers®, Dunkin’ Donuts®, and Café Bustelo® branded coffee; the
U.S. Retail Consumer Foods segment primarily includes domestic sales of Jif ®, Smucker’s®, Crisco®, and Pillsbury® branded products; and
the U.S. Retail Pet Foods segment primarily includes domestic sales of Meow Mix®, Milk-Bone, Natural Balance®, Kibbles ’n Bits®,
9Lives®, Pup-Peroni, and Nature’s Recipe® branded products. The International and Away From Home segment is comprised of 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.

Consistent with prior periods, 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.

2018 ANNUAL REPORT 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Net sales:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home

Total net sales
Segment profit:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home

Total segment profit

Amortization
Goodwill impairment charge
Other intangible assets impairment charges
Interest expense – net
Unallocated derivative gains (losses)
Cost of products sold – special project costs (A)
Other special project costs (A)
Corporate administrative expenses
Other income (expense) – net

Income before income taxes

Assets:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home
Unallocated (B)

Total assets

Depreciation, amortization, and impairment charges:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home
Unallocated (C)

Total depreciation, amortization, and impairment charges

Additions to property, plant, and equipment:

U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Away From Home

Total additions to property, plant, and equipment

Year Ended April 30,

2018

2017

2016

$ 2,092.2
2,000.8
2,169.3
1,094.8
$ 7,357.1

$ 2,108.6
2,085.4
2,135.9
1,062.4
$ 7,392.3

$ 2,239.2
2,269.7
2,250.4
1,051.9
$ 7,811.2

614.5
477.2
441.3
194.2
$ 1,727.2
(206.8)
(145.0)
(31.9)
(174.1)
37.3
(3.9)
(45.4)
(295.4)
(1.0)
861.0

682.4
458.2
481.0
185.1
$ 1,806.7
(207.3)
—
(133.2)
(163.1)
(27.2)
(5.7)
(76.9)
(324.9)
10.0
878.4

722.6
467.5
493.9
179.0
$ 1,863.0
(208.4)
—
—
(171.1)
12.0
(12.2)
(135.9)
(373.2)
3.7
977.9

$ 4,815.4
3,217.5
5,932.3
1,043.9
292.1
$15,301.2

96.6
80.2
314.8
57.8
40.6

590.0

89.4
168.9
34.3
29.3
321.9

$ 4,909.9
3,157.2
6,232.9
1,053.4
286.3
$15,639.7

95.7
73.2
280.8
61.9
40.6

552.2

40.9
49.7
70.5
31.3
192.4

$ 5,002.0
3,288.5
6,321.6
1,168.6
203.4
$15,984.1

104.0
60.7
164.9
66.2
34.3

430.1

51.4
90.3
11.9
47.8
201.4

(A) Special project costs include integration and restructuring costs. For more information, see Note 3: Integration and Restructuring Costs.

(B) Primarily represents unallocated cash and cash equivalents and corporate-held investments.

62 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The following table presents certain geographical information.

Net sales:

United States
International:

Canada
All other international

Total international

Total net sales
Assets:

United States
International:

Canada
All other international

Total international

Total assets
Long-lived assets (excluding goodwill and other intangible assets):

United States
International:

Canada
All other international

Total international

Total long-lived assets (excluding goodwill and other intangible assets)

The following table presents product category sales as a percentage of consolidated net sales.

Coffee
Dog food
Pet snacks
Peanut butter
Cat food
Fruit spreads
Shortening and oils
Baking mixes and frostings
Frozen handheld
Flour and baking ingredients
Juices and beverages
Portion control
Canned milk
Other
Total product sales

Year Ended April 30,

2018

2017

2016

$ 6,786.5

$ 6,865.1

$ 7,300.8

431.8
138.8
$
570.6
$ 7,357.1

414.3
112.9
$
527.2
$ 7,392.3

416.0
94.4
$
510.4
$ 7,811.2

$14,828.2

$15,214.3

$15,501.1

428.7
44.3
$
473.0
$15,301.2

380.9
44.5
$
425.4
$15,639.7

396.2
86.8
$
483.0
$15,984.1

$ 1,869.8

$ 1,757.1

$ 1,773.9

17.4
0.3
$
17.7
$ 1,887.5

13.4
0.4
$
13.8
$ 1,770.9

10.7
40.6
$
51.3
$ 1,825.2

Year Ended April 30,

2018

2017

2016

34%
11
10
10
9
5
4
3
3
2
2
2
1
4
100%

34%
10
10
10
9
5
4
3
3
2
2
2
1
5
100%

34%
10
10
9
9
4
4
3
3
2
2
2
3
5
100%

Sales to Walmart Inc. and subsidiaries amounted to 31 percent of net sales in 2018, and 30 percent of net sales in both 2017 and 2016.
These sales are primarily included in our U.S. retail market segments. No other customer exceeded 10 percent of net sales for any year.
Trade receivables at April 30, 2018 and 2017, included amounts due from Walmart Inc. and subsidiaries of $123.1 and $138.2, respectively.

2018 ANNUAL REPORT 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

NOTE 6

EARNINGS PER SHARE

The following table sets forth the computation of net income per common share and net income per common share – assuming dilution
under the two-class method.

Net income

Less: Net income allocated to participating securities

Net income allocated to common stockholders

Weighted-average common shares outstanding

Add: Dilutive effect of stock options

Weighted-average common shares outstanding – assuming dilution

Net income per common share

Net income per common share – assuming dilution

2018
$1,338.6

6.8

$1,331.8

113.0

—

113.0

$ 11.79

$ 11.78

Year Ended April 30,

2017
$592.3

2.8

$589.5

115.5

0.1

115.6

$ 5.11

$ 5.10

2016
$688.7

3.0

$685.7

118.9

0.1

119.0

$ 5.77

$ 5.76

NOTE 7

GOODWILL AND OTHER INTANGIBLE ASSETS

A summary of changes in goodwill by reportable segment is as follows:

Balance at May 1, 2016

Other (A)

Balance at April 30, 2017
Impairment charges (B)
Other (A)

Balance at April 30, 2018

U.S. Retail
Coffee
$2,090.9
—
$2,090.9
—

—

U.S. Retail
Consumer
Foods
$1,600.9
(1.9)
$1,599.0
—

1.4

U.S. Retail
Pet Foods
$1,969.5
—
$1,969.5
(145.0)

—

$2,090.9

$1,600.4

$1,824.5

International
and Away
From Home
$429.8
(12.1)
$417.7
—

8.7

$426.4

Total

$6,091.1
(14.0)
$6,077.1
(145.0)

10.1

$5,942.2

(A) The amounts classified as other represent foreign currency exchange adjustments.

(B) There have been no goodwill impairment charges recognized in prior periods.

64 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The following table summarizes our other intangible assets and related accumulated amortization and impairment charges, including
foreign currency exchange adjustments.

April 30, 2018

Accumulated
Amortization/
Impairment
Charges/
Foreign
Currency
Exchange

April 30, 2017

Accumulated
Amortization/
Impairment
Charges/
Foreign
Currency
Exchange

Net

Acquisition
Cost

$ 959.3
114.4
145.0
$1,218.7

$2,560.8
54.1
411.4
$3,026.3

$3,520.1
168.5
556.4
$4,245.0

$ 802.1
101.4
112.7
$1,016.2

$2,718.0
67.1
443.7
$3,228.8

Acquisition
Cost

$3,520.1
168.5
556.4
$4,245.0

$3,078.1
$7,323.1

$ 187.9
$1,406.6

$2,890.2
$5,916.5

$3,078.1
$7,323.1

$ 157.0
$1,173.2

$2,921.1
$6,149.9

Finite-lived intangible assets subject to amortization:

Customer and contractual relationships
Patents and technology
Trademarks

Total intangible assets subject to amortization
Indefinite-lived intangible assets not subject to
amortization:
Trademarks

Total other intangible assets

Amortization expense for finite-lived intangible assets was $204.8, $205.9, and $204.7 in 2018, 2017, and 2016, respectively. The
weighted-average useful lives of the customer and contractual relationships, patents and technology, and trademarks are 23 years, 14 years,
and 16 years, respectively. The weighted-average useful life of total finite-lived intangible assets is 22 years. Based on the carrying amount
of intangible assets subject to amortization at April 30, 2018, the estimated amortization expense is $205.1 for 2019, $200.4 for 2020,
$198.8 for 2021, $193.4 for 2022, and $186.0 for 2023.

We review goodwill and other indefinite-lived intangible assets at least annually on February 1 for impairment and more often if indicators
of impairment exist.

During the third quarter of 2018, we completed our annual long-range planning process, which resulted in a decline in forecasted net sales
for the U.S. Retail Pet Foods segment. As a result of the decreased projections, as well as the narrow differences between estimated fair
value and carrying value, we performed an interim impairment analysis on the goodwill of the Pet Foods reporting unit and the indefinite-
lived trademarks included within the U.S. Retail Pet Foods segment, which was prior to the annual impairment review performed as of
February 1, 2018. We recognized total impairment charges of $176.9, of which $145.0 and $31.9 related to the goodwill of the Pet Foods
reporting unit and certain indefinite-lived trademarks within the U.S. Retail Pet Foods segment, respectively, to the extent the carrying
values exceeded the estimated fair values. These charges were included as a noncash charge in our Statement of Consolidated Income.
Furthermore, we early adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment,
in connection with the interim impairment analysis. As a result, we did not perform Step 2 of the goodwill impairment test for the goodwill
of the Pet Foods reporting unit and recorded the impairment charge based on the excess of the reporting unit’s carrying value over its fair
value. For further details, refer to Note 1: Accounting Policies.

As of February 1, 2018, we completed the annual impairment review, in which goodwill impairment was tested at the reporting unit level
for our seven reporting units. As part of our annual evaluation, we did not recognize any other impairment charges related to our goodwill
and indefinite-lived trademarks. The estimated fair value of each reporting unit and material indefinite-lived intangible asset was
substantially in excess of its carrying value as of the annual test date, with the exception of the Pet Foods reporting unit and all indefinite-
lived trademarks within the U.S. Retail Pet Foods segment. Additional sensitivity analyses were 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. Both scenarios independently yielded an estimated fair value for the Pet Foods reporting unit below
carrying value.

During 2017, we recognized total impairment charges of $133.2 primarily related to certain indefinite-lived trademarks within the U.S.
Retail Pet Foods segment and did not recognize any impairment charges related to goodwill.

The goodwill and indefinite-lived trademarks within the U.S. Retail Pet Foods segment remain susceptible to future impairment charges, as
the carrying values approximate estimated fair values at April 30, 2018. In addition, any meaningful adverse change to our near or long-
term projections or macro-economic conditions could result in future impairment charges.

2018 ANNUAL REPORT 65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

NOTE 8

DEBT AND FINANCING ARRANGEMENTS

Long-term debt consists of the following:

1.75% Senior Notes due March 15, 2018
2.20% Senior Notes due December 6, 2019
2.50% Senior Notes due March 15, 2020
3.50% Senior Notes due October 15, 2021
3.00% Senior Notes due March 15, 2022
3.50% Senior Notes due March 15, 2025
3.38% Senior Notes due December 15, 2027
4.25% Senior Notes due March 15, 2035
4.38% Senior Notes due March 15, 2045
Term Loan Credit Agreement due March 23, 2020
Total long-term debt
Current portion of long-term debt
Total long-term debt, less current portion

April 30, 2018

April 30, 2017

Principal
Outstanding
—
300.0
500.0
750.0
400.0
1,000.0
500.0
650.0
600.0
—
$4,700.0
—
$4,700.0

Carrying
Amount (A)
—
298.6
497.8
775.6
397.3
994.4
495.8
643.1
585.4
—
$4,688.0
—
$4,688.0

Principal
Outstanding
$ 500.0
—
500.0
750.0
400.0
1,000.0
—
650.0
600.0
550.0
$4,950.0
500.0
$4,450.0

Carrying
Amount (A)
$ 499.0
—
496.6
782.6
396.6
993.6
—
642.6
584.9
548.6
$4,944.5
499.0
$4,445.5

(A) Represents the carrying amount included in the Consolidated Balance Sheets, which includes the impact of terminated interest rate contracts, offering

discounts, and capitalized debt issuance costs.

On April 27, 2018, we entered into a senior unsecured delayed-draw Term Loan Credit Agreement (“Term Loan”) with a syndicate of banks
and an available commitment amount of $1.5 billion. Borrowings under the Term Loan bear interest on the prevailing U.S. Prime Rate or
London Interbank Offered Rate (“LIBOR”), based on our election, and is payable either on a quarterly basis or at the end of the borrowing
term. The Term Loan does not require scheduled amortization payments. Voluntary prepayments are permitted without premium or penalty.
As of April 30, 2018, no balance was drawn on the Term Loan. The full amount of the Term Loan was drawn on May 14, 2018, at an
interest rate of 3.04 percent, to partially finance the Ainsworth acquisition, as discussed in Note 2: Acquisitions. The Term Loan matures on
May 14, 2021. We have incurred total capitalized debt issuance costs of $2.8, of which $0.8 was incurred during 2018, and will be
amortized to interest expense over the time period for which the debt is outstanding.

Prior to entering into the new Term Loan, we entered into a commitment letter for a $1.9 billion 364-day senior unsecured Bridge Term
Loan Credit Facility that provided committed financing for the Ainsworth acquisition. This commitment letter was terminated upon entry
into the Term Loan on April 27, 2018. Financing fees were included in interest expense – net on the Statement of Consolidated Income at
April 30, 2018.

In December 2017, we completed an offering of $800.0 in Senior Notes due December 6, 2019, and December 15, 2027. The Senior Notes
included $6.1 of capitalized debt issuance costs and offering discounts to be amortized to interest expense over the time for which the debt
is outstanding. The net proceeds from the offering were used to prepay the $500.0 in principal amount of the Senior Notes due March 15,
2018. In addition, we prepaid, in full, the remaining outstanding balance of the $1.8 billion term loan due March 23, 2020. As a result of
prepaying both the Senior Notes due March 15, 2018, and the term loan due March 23, 2020, we recognized debt costs of $1.7, which
primarily consisted of the write-off of capitalized debt issuance costs, and were included in interest expense. Concurrent with the pricing of
the Senior Notes due December 15, 2027, we terminated the treasury lock, entered into in June 2017, prior to maturity, resulting in a gain
of $2.7, which was deferred and included as a component of accumulated other comprehensive income (loss) and is being amortized as a
reduction to interest expense over the life of the debt. For additional information on the treasury lock, see Note 10: Derivative Financial
Instruments.

All of our Senior Notes outstanding at April 30, 2018, are unsecured, and interest is paid semiannually, with no required scheduled
principal payments until maturity. We may prepay all or part of the Senior Notes at 100 percent of the principal amount thereof, together
with the accrued and unpaid interest, and any applicable make-whole amount.

66 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

In September 2017, we entered into an unsecured revolving credit facility with a group of 11 banks, which provides for a revolving credit
line of $1.8 billion and matures in September 2022. Additionally, we terminated the previous $1.5 billion credit facility. The new revolving
credit facility included $4.1 of capitalized debt issuance costs, which are being amortized to interest expense over the time period for which
the revolving credit facility is effective. Borrowings under the revolving credit facility bear interest on the prevailing U.S. Prime Rate,
LIBOR, or Canadian Dealer Offered Rate, based on our election. Interest is payable either on a quarterly basis or at the end of the
borrowing term. We did not have a balance outstanding under the current and previous revolving credit facilities at both April 30, 2018 and
2017. As a result of the termination of the previous $1.5 billion credit facility, and because there are no subsidiary guarantors of the new
$1.8 billion credit facility, the guarantees provided by the Company’s subsidiaries, J. M. Smucker LLC and The Folgers Coffee Company
(the “subsidiary guarantors”), related to the obligations under the term loan due March 23, 2020, and all of our outstanding Senior Notes
were released. For additional information, see Note 16: Guarantor and Non-Guarantor Financial Information.

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, which was increased from the previous limit of $1.0 billion in conjunction with entering into the new unsecured revolving
credit facility in September 2017. 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, 2018 and 2017, we had $144.0 and $454.0 of short-term
borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of
2.20 percent and 1.15 percent, respectively. On May 14, 2018, we issued $400.0 of commercial paper at a weighted-average interest rate of
2.27 percent to partially finance the Ainsworth acquisition, as discussed in Note 2: Acquisitions.

Interest paid totaled $158.9, $162.2, and $167.3 in 2018, 2017, and 2016, respectively. This differs from interest expense due to the
amortization of debt issuance costs and discounts, timing of interest payments, effect of interest rate contracts, other debt fees, and
capitalized interest.

Our debt instruments contain certain financial covenant restrictions, including a leverage ratio, which was amended in connection with the
execution of the new Term Loan, and an interest coverage ratio. We are in compliance with all covenants.

NOTE 9

PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We have defined benefit pension plans covering certain U.S. and Canadian employees. Pension benefits are based on the employee’s years
of service and compensation levels. Our plans are funded in conformity with the funding requirements of applicable government
regulations.

In addition to providing pension benefits, we sponsor several unfunded postretirement plans that provide health care and life insurance
benefits to certain retired U.S. and Canadian employees. These plans are contributory, with retiree contributions adjusted periodically, and
contain other cost-sharing features, such as deductibles and coinsurance. Covered employees generally are eligible for these benefits when
they reach age 55 and have attained 10 years of credited service.

2018 ANNUAL REPORT 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The following table summarizes the components of net periodic benefit cost and the change in accumulated other comprehensive income
(loss) related to the defined benefit pension and other postretirement plans.

Defined Benefit Pension Plans

Other Postretirement Benefits

Year Ended April 30,
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Curtailment loss (gain)
Settlement loss (gain)
Net periodic benefit cost

Other changes in plan assets and benefit liabilities recognized in
accumulated other comprehensive income (loss) before income taxes:

Prior service credit (cost) arising during the year
Net actuarial gain (loss) arising during the year
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Curtailment loss (gain)
Settlement loss (gain)
Foreign currency translation

Net change for year

Weighted-average assumptions used in determining net periodic
benefit costs:
U.S. plans:

Discount rate used to determine benefit obligation
Discount rate used to determine service cost
Discount rate used to determine interest cost
Expected return on plan assets
Rate of compensation increase

Canadian plans:

2018
$ 5.2
21.6
(28.8)
0.9
11.5
—
2.3
$ 12.7

$ —
3.5
0.9
11.5
—
2.3
(1.8)
$ 16.4

2017
$ 12.7
25.3
(29.3)
1.1
13.8
—
(0.7)
$ 22.9

$ 2.1
1.5
1.1
13.8
28.8
(0.7)
2.5
$ 49.1

2016
$ 17.8
27.7
(32.9)
0.7
10.9
(6.5)
—
$ 17.7

$ (5.3)
(43.3)
0.7
10.9
(6.5)
—
0.8
$(42.7)

2018
$ 2.0
2.1
—
(1.4)
(0.3)
—
—
$ 2.4

$(0.2)
5.5
(1.4)
(0.3)
—
—
(0.1)
$ 3.5

2017
$ 2.3
2.6
—
(1.5)
(0.2)
—
—
$ 3.2

$ 3.0
2.3
(1.5)
(0.2)
0.1
—
—
$ 3.7

3.95% 3.85%
4.20
3.38
6.27
3.78

3.85
3.85
6.27
3.96

3.22% 3.60%
3.39
2.60
5.00
3.00

3.60
3.60
5.25
3.00

4.06% 3.86% 3.80%
4.06
4.06
6.58
4.06

3.80
3.80
—
—

4.06
3.24
—
—

3.51% 3.19% 3.50%
3.51
3.51
5.65
3.00

3.70
2.58
—
—

3.50
3.50
—
—

2016
$ 2.3
2.8
—
(1.1)
(0.3)
(0.3)
—
$ 3.4

$ —
—
(1.1)
(0.3)
(0.3)
—
—
$(1.7)

4.04%
4.04
4.04
—
—

3.50%
3.50
3.50
—
—

We amortize gains and losses for our postretirement plans over the average expected future period of vested service. For plans that consist
of less than 5 percent of participants that are active, average life expectancy is used instead of the average expected useful service period.

68 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

We use a measurement date of April 30 to determine defined benefit pension and other postretirement benefit plans’ assets and benefit
obligations. The following table sets forth the combined status of the plans as recognized in the Consolidated Balance Sheets.

April 30,
Change in benefit obligation:

Benefit obligation at beginning of year

Service cost
Interest cost
Amendments
Actuarial loss (gain)
Benefits paid
Foreign currency translation adjustments
Curtailment
Settlement

Benefit obligation at end of year

Change in plan assets:

Fair value of plan assets at beginning of year

Actual return on plan assets
Company contributions
Benefits paid
Settlement
Foreign currency translation adjustments

Fair value of plan assets at end of year

Funded status of the plans

Defined benefit pensions
Other noncurrent assets
Accrued compensation
Other postretirement benefits
Net benefit liability

Defined Benefit Pension Plans

Other Postretirement Benefits

2018

2017

2018

2017

$ 677.3
5.2
21.6
—
(10.8)
(36.0)
5.8
—
(23.4)
$ 639.7

$ 489.2
21.5
39.6
(36.0)
(23.4)
6.1
$ 497.0

$(142.7)

$(144.1)
9.5
(8.1)
—
$(142.7)

$ 745.9
12.7
25.3
—
6.7
(43.8)
(7.8)
(30.9)
(30.8)
$ 677.3

$ 505.6
37.4
28.7
(43.8)
(30.8)
(7.9)
$ 489.2

$(188.1)

$(189.8)
5.7
(4.0)
—
$(188.1)

$ 70.7
2.0
2.1
0.2
(5.5)
(4.3)
0.7
—
—
$ 65.9

$ —
—
4.3
(4.3)
—
—
$ —

$(65.9)

$ —
—
(4.0)
(61.9)
$(65.9)

$ 75.9
2.3
2.6
(3.0)
(2.3)
(3.9)
(0.8)
(0.1)
—
$ 70.7

$ —
—
3.9
(3.9)
—
—
$ —

$(70.7)

$ —
—
(4.1)
(66.6)
$(70.7)

During 2018, we made additional contributions to the defined benefit pension plans of $20.0, which was funded by the current year tax
savings that resulted from the tax legislation that was enacted during the third quarter of 2018. For further details on the tax legislation
changes, refer to Note 13: Income Taxes.

The following table summarizes amounts recognized in accumulated other comprehensive income (loss) in the Consolidated Balance
Sheets, before income taxes.

2018
April 30,
$(150.9)
Net actuarial gain (loss)
(4.7)
Prior service credit (cost)
Total recognized in accumulated other comprehensive income (loss) $(155.6)

2017
$(166.4)
(5.6)
$(172.0)

2018
$ 13.6
9.1
$ 22.7

2017
$ 8.5
10.7
$ 19.2

Defined Benefit Pension Plans

Other Postretirement Benefits

During 2019, we expect to recognize amortization of net actuarial losses and prior service credit of $7.7 and $0.4, respectively, in net
periodic benefit cost.

During 2017, we announced our plans to harmonize our retirement benefits and freeze our non-union U.S. defined benefit pension plans by
December 31, 2017. The amendments resulted in an immaterial net settlement loss and a decrease in accumulated other comprehensive
income (loss) of $25.2 during 2017. As a result of the plan changes, we realized savings in 2018 and expect to realize additional savings in
the future.

2018 ANNUAL REPORT 69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

As of April 30, 2017, we changed the approach utilized to estimate the service and interest cost components of net periodic benefit cost for
our defined benefit pension and other postretirement benefit plans. Historically, we estimated the service and interest cost components
using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the
period. As of April 30, 2017, we utilized a spot rate approach 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. This
approach does not affect the measurement of the total benefit obligations, and has been accounted for as a change in estimate that is
effected by a change in accounting principle. As such, we accounted for this change in methodology on a prospective basis beginning
May 1, 2017, which resulted in a benefit of approximately $4.3 in 2018.

The following table sets forth the weighted-average assumptions used in determining the benefit obligations.

April 30,
U.S. plans:

Discount rate
Rate of compensation increase

Canadian plans:
Discount rate
Rate of compensation increase

Defined Benefit Pension Plans

Other Postretirement Benefits

2018

2017

2018

2017

4.17%
3.59

3.57%
3.00

3.95%
4.15

3.22%
3.00

4.13%
—

3.55%
—

3.86%
—

3.16%
—

For 2019, the assumed health care trend rates are 6.8 percent and 4.5 percent for the U.S. and Canadian plans, respectively. The rate for
participants under age 65 is assumed to decrease to 5.0 percent in calendar 2026 for the U.S. plan and remain at 4.5 percent for the
Canadian plan. The health care cost trend rate assumption impacts the amount of the other postretirement benefits obligation and periodic
other postretirement benefits cost reported. A one percentage point annual change in the assumed health care cost trend rate would have the
following effect as of April 30, 2018:

Effect on total service and interest cost components
Effect on benefit obligation

One Percentage Point

Increase
$ —
1.0

Decrease
$ 0.1
1.1

The following table sets forth selective information pertaining to our Canadian pension and other postretirement benefit plans, which is
included in the consolidated information presented on pages 68 and 69.

Defined Benefit Pension Plans

2018
$87.6
96.4
$ 8.8

$ 0.2
2.4
(5.0)
0.8
$ (1.6)

$ 0.9
(6.8)
1.5
6.0

2017
$89.8
94.8
$ 5.0

$ 0.3
3.2
(4.7)
1.1
$ (0.1)

$ 3.1
(6.6)
10.2
(7.9)

Other Postretirement Benefits
2018
$ 7.3
—
$(7.3)

2017
$ 9.4
—
$(9.4)

$ —
0.3
—
—
$ 0.3

$ 0.5
(0.5)
—
—

$ —
0.3
—
—
$ 0.3

$ 0.5
(0.5)
—
—

Year Ended April 30,
Benefit obligation at end of year
Fair value of plan assets at end of year
Funded status of the plans

Components of net periodic benefit cost:

Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss (gain)

Net periodic benefit cost (credit)

Changes in plan assets:

Company contributions
Benefits paid
Actual return on plan assets
Foreign currency translation

70 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The following table sets forth additional information related to our defined benefit pension plans.

Accumulated benefit obligation for all pension plans
Plans with an accumulated benefit obligation in excess of plan assets:

Accumulated benefit obligation
Fair value of plan assets

Plans with a projected benefit obligation in excess of plan assets:

Projected benefit obligation
Fair value of plan assets

April 30,

2018
$627.9

$541.3
400.6

$552.9
400.6

2017
$659.6

$570.6
394.4

$588.2
394.4

We employ a total return on investment approach for the defined benefit pension plans’ assets. A mix of equity, fixed-income, and
alternative investments is used to maximize the long-term rate of return on assets for the level of risk. In determining the expected long-
term rate of return on the defined benefit pension plans’ assets, we consider the historical rates of return, the nature of investments, the asset
allocation, and expectations of future investment strategies. The actual rate of return was 5.4 percent and 8.3 percent for the years ended
April 30, 2018 and 2017, respectively, which excludes administrative and investment expenses.

The following tables summarize the major asset classes for the U.S. and Canadian defined benefit pension plans and the levels within the
fair value hierarchy for those assets measured at fair value.

Cash and cash equivalents (A)
Equity securities:

U.S. (B)
International (C)

Fixed-income securities:

Bonds (D)
Fixed income (E)

Other types of investments (F)
Total financial assets measured at fair value
Total financial assets measured at net asset value (G)
Total plan assets

Cash and cash equivalents (A)
Equity securities:

U.S. (B)
International (C)

Fixed-income securities:

Bonds (D)
Fixed income (E)

Other types of investments (F)
Total financial assets measured at fair value
Total financial assets measured at net asset value (G)
Total plan assets

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

3.7

Significant
Observable
Inputs
(Level 2)

$ —

Significant
Unobservable
Inputs
(Level 3)

Plan Assets at
April 30, 2018

$ —

3.7

94.8

73.2

231.8

53.0

—
$456.5

1.9

9.7

—

16.8
$28.4

—

3.2
$3.2

96.7

82.9

231.8

53.0

20.0
$488.1
8.9

$497.0

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

2.7

128.9

81.4

168.5

71.9

6.7
$460.1

Significant
Observable
Inputs
(Level 2)

$ —

Significant
Unobservable
Inputs
(Level 3)

Plan Assets at
April 30, 2017

$ —

2.7

1.9

10.5

—

4.5
$16.9

—

2.4
$2.4

130.8

91.9

168.5

71.9

13.6
$479.4
9.8

$489.2

2018 ANNUAL REPORT 71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

(A) This category includes money market holdings with maturities of three months or less and are classified as Level 1 assets. Based on the short-term nature

of these assets, carrying value approximates fair value.

(B) This category is invested in a diversified portfolio of common stocks and index funds that primarily invest in U.S. stocks with broad market

capitalization ranges similar to those found in the S&P 500 Index and/or the various Russell Indices and are traded on active exchanges. The Level 1
assets are valued using quoted market prices for identical securities in active markets. The Level 2 asset is comprised of a pooled fund that consists of
equity securities traded on active exchanges.

(C) This category is invested primarily in common stocks and other equity securities traded on active exchanges of foreign issuers located outside the U.S.
The fund invests primarily in developed countries, but may also invest in emerging markets. The Level 1 assets are valued using quoted market prices
for identical securities in active markets. The Level 2 asset is comprised of a pooled fund that consists of equity securities traded on active exchanges.

(D) This category is primarily comprised of bond funds, which seek to duplicate the return characteristics of high-quality U.S. and foreign corporate bonds
with a duration range of 10 to 13 years. In 2018, this category is further comprised of various U.S. Treasury Separate Trading of Registered Interest and
Principal (“STRIP”) holdings, with wide-ranging maturity dates. The Level 1 assets are valued using quoted market prices for identical securities in
active markets.

(E) This category is comprised of fixed-income funds that invest primarily in government-related bonds of non-U.S. issuers and include investments in the

Canadian, as well as emerging, markets. The Level 1 assets are valued using quoted market prices for identical securities in active markets.

(F) This category is comprised of a real estate fund whereby the underlying investments are contained in the Canadian market and a private limited

investment partnership in 2017, and in 2018, this category also included a common collective trust fund investing in direct commercial property funds.
In 2017, the category included a dynamic asset allocation mutual fund, which was comprised of U.S. and global equities and fixed-income securities
inclusive of derivatives within the asset mix. The dynamic asset allocation mutual fund was classified as a Level 1 asset, whereby the assets are valued
using quoted market prices for identical securities in active markets. The real estate fund and the collective trust fund investing in direct commercial
property are classified as a Level 2 asset, whereby the underlying securities are valued utilizing quoted market prices for identical securities in active
markets and based on the quoted market prices of the underlying investments in the common collective trust, respectively. The private investment
limited partnership is classified as a Level 3 asset. The investments in the partnership are valued at estimated fair value based on audited financial
statements received from the general partner. The private investment limited partnership cannot be redeemed, and the return of principal is based on the
liquidation of the underlying assets.

(G) This category is comprised of a private equity fund that consists primarily of limited partnership interests in corporate finance and venture capital funds.
The fair value estimate of the private equity fund is based on the underlying funds’ net asset values further as a practical expedient equivalent to the
Company’s defined benefit plan’s ownership interest in partners’ capital, whereby a proportionate share of the net assets is attributed and further
corroborated by our review. The private equity fund is non-redeemable, and the return of principal is based on the liquidation of the underlying assets. In
accordance with ASU 2015-07, the private equity fund is removed from the total financial assets measured at fair value and disclosed separately.

The following table presents a rollforward of activity for Level 3 assets.

Balance at May 1,

Actual return on plan assets still held at reporting date

Balance at April 30,

2018
$2.4
0.8
$3.2

2017
$ 3.2
(0.8)
$ 2.4

Our current investment policy is to invest 50 percent of assets in both equity securities and fixed-income securities. Included in equity
securities were 317,552 of our common shares at April 30, 2018. The total market value of these shares was $36.2 at April 30, 2018. We
paid dividends of $1.0 on these shares during 2018.

We expect to contribute approximately $20.0 to the defined benefit pension plans in 2019. We expect the following payments to be made
from the defined benefit pension and other postretirement benefit plans: $54.8 in 2019, $48.0 in 2020, $47.5 in 2021, $47.4 in 2022,
$51.7 in 2023, and $238.8 in 2024 through 2028.

Multi-Employer Pension Plan: We participate in one multi-employer pension plan, the Bakery and Confectionery Union and Industry
International Pension Fund (“Bakery and Confectionery Union Fund”) (52-6118572), which provides defined benefits to certain union
employees. During 2018 and 2017, a total of $2.0 and $1.9 was contributed to the plan, respectively, and we anticipate contributions of
$2.2 in 2019.

The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans.
For instance, the assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
participating employers, and if a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to the
withdrawing employer may be the responsibility of the remaining participating employers. Additionally, if we stop participating in the
multi-employer pension plan, we may be required to pay the plan an amount based on our allocable share of the underfunded status of the
plan, referred to as a withdrawal liability.

72 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The Pension Protection Act of 2006 ranks the funded status of multi-employer pension plans depending upon a plan’s current and projected
funding. A plan is in the Red Zone (Critical) if it has a current funded percentage less than 65 percent. A plan is in the Yellow Zone
(Endangered) if it has a current funded percentage of less than 80 percent or projects a credit balance deficit within seven years. A plan is in
the Green Zone (Healthy) if it has a current funded percentage greater than 80 percent and does not have a projected credit balance deficit
within seven years. The zone status is based on the plan’s year-end, not our fiscal year-end. The zone status is based on information that we
received from the plan and is certified by the plan’s actuary. During calendar year 2017, the Bakery and Confectionery Union Fund was in
Red Zone status, as the current funding status was 54.7 percent. A funding improvement plan, or rehabilitation plan, has been implemented.

NOTE 10

DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the
volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable
instrument types we may enter into and establish controls to limit our market risk exposure.

During 2018, we early adopted ASU 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging
Activities, which did not have a material impact on our condensed consolidated financial statements and disclosures. For additional
information, see Recently Issued Accounting Standards in Note 1: Accounting Policies.

Commodity Price Management: We enter into commodity derivatives to manage the price volatility and reduce the variability of
future cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, edible oils, corn, wheat, and
soybean meal. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas.
Our derivative instruments generally have maturities of less than one year.

We do not qualify commodity derivatives for hedge accounting treatment and, as a result, the derivative gains and losses are immediately
recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we
believe all of our commodity derivatives are economic hedges of our risk exposure.

The commodities hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that over
time, any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated fair
value of the underlying exposures.

Foreign Currency Exchange Rate Hedging: We utilize foreign currency derivatives to manage the effect of foreign currency
exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts
generally have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for
hedge accounting treatment.

Interest Rate Hedging: We utilize derivative instruments to manage changes in the fair value of our debt. Interest rate contracts mitigate
the risk associated with the underlying hedged item. At the inception of the contract, the instrument is evaluated and documented for 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 derivative are
equal to changes in the fair value of the underlying debt and have no impact on earnings.

In June 2017, we entered into a treasury lock, with a notional value of $300.0, to manage our exposure to interest rate volatility associated
with anticipated debt financing in 2018. This interest rate contract was designated as a cash flow hedge. In December 2017, concurrent with
the pricing of the Senior Notes due December 15, 2027, we terminated the treasury lock prior to maturity. The termination resulted in a
gain of $2.7, which was deferred and included as a component of accumulated other comprehensive income (loss) and is being amortized
as a reduction to interest expense over the life of the debt.

In 2015, we terminated the interest rate swap on the 3.50 percent Senior Notes due October 15, 2021, which was designated as a fair value
hedge and used to hedge against the changes in the fair value of the debt. As a result of the early termination, we received $58.1 in cash,
which included $4.6 of accrued and prepaid interest. The gain on termination was recorded as an increase in the long-term debt balance and
is being recognized over the remaining life of the underlying debt as a reduction of interest expense. To date, we have recognized $25.0, of
which $7.8, $7.6, and $7.4 were recognized in 2018, 2017, and 2016, respectively. The remaining gain will be recognized as follows: $8.0
in 2019, $8.1 in 2020, $8.4 in 2021, and $4.0 in 2022.

2018 ANNUAL REPORT 73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The following tables set forth the gross fair value amounts of derivative instruments recognized in the Consolidated Balance Sheets.

Derivatives not designated as hedging instruments:

Commodity contracts
Foreign currency exchange contracts

Total derivative instruments

Derivatives not designated as hedging instruments:

Commodity contracts
Foreign currency exchange contracts

Total derivative instruments

April 30, 2018

Other
Current
Assets

Other
Current
Liabilities

Other
Noncurrent
Assets

Other
Noncurrent
Liabilities

$14.8
2.2
$17.0

Other
Current
Assets

$ 5.2
3.2
$ 8.4

$ 6.8
0.7
$ 7.5

$0.4
—
$0.4

April 30, 2017

$0.2
—
$0.2

Other
Current
Liabilities

Other
Noncurrent
Assets

Other
Noncurrent
Liabilities

$21.2
0.1
$21.3

$ —
—
$ —

We have elected to not offset fair value amounts recognized for our exchange-traded derivative instruments and our cash margin accounts
executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to maintain cash margin
accounts in connection with funding the settlement of our open positions. At April 30, 2018 and 2017, we maintained cash margin account
balances of $10.9 and $41.8, respectively, included in other current assets in the Consolidated Balance Sheets. The change in the cash
margin account balances is included in other – net, investing activities in the Statements of Consolidated Cash Flows. In the event of
default and immediate net settlement of all of our open positions with individual counterparties, all of our derivative liabilities would be
fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our individual
counterparties.

Interest expense – net, as presented in the Statements of Consolidated Income, was $174.1, $163.1, and $171.1 in 2018, 2017, and 2016,
respectively. Within interest expense, we recognized $0.5 in net pre-tax losses related to terminated interest rate contracts during 2018 and
$0.6 during both 2017 and 2016. Included as a component of accumulated other comprehensive income (loss) at April 30, 2018 and 2017,
were deferred net pre-tax losses of $3.8 and $7.0, respectively, related to the terminated interest rate contracts. The related net tax benefit
recognized in accumulated other comprehensive income (loss) was $0.9 and $2.6 at April 30, 2018 and 2017, respectively. Approximately
$0.4 of the net pre-tax loss will be recognized over the next 12 months related to the terminated interest rate contracts.

The following table presents the net gains and losses recognized in cost of products sold on derivatives not designated as hedging
instruments.

Gains (losses) on commodity contracts
Gains (losses) on foreign currency exchange contracts
Total gains (losses) recognized in costs of products sold

Year Ended April 30,

2018
$ 6.5
(5.9)
$ 0.6

2017
$(45.2)
9.8
$(35.4)

2016
$(31.6)
2.0
$(29.6)

Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of
segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated
derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any
mark-to-market volatility. The following table presents the activity in unallocated derivative gains and losses.

Net gains (losses) on mark-to-market valuation of unallocated derivative positions
Less: Net gains (losses) on derivative positions reclassified to segment operating profit
Unallocated derivative gains (losses)

Year Ended April 30,

2018
$ 0.6
(36.7)
$ 37.3

2017
$(35.4)
(8.2)
$(27.2)

2016
$(29.6)
(41.6)
$ 12.0

74 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The net cumulative unallocated derivative gains and losses at April 30, 2018 and 2017, were gains of $1.7 and losses of $35.6, respectively.

The following table presents the gross contract notional value of outstanding derivative contracts.

Commodity contracts
Foreign currency exchange contracts

Year Ended April 30,

2018
$658.0
122.1

2017
$704.9
195.4

NOTE 11

OTHER FINANCIAL INSTRUMENTS AND FAIR VALUE
MEASUREMENTS

Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of
cash investments, short-term borrowings, and trade receivables. The carrying value of these financial instruments approximates fair value.
Our remaining financial instruments, with the exception of long-term debt, are recognized at estimated fair value in the Consolidated
Balance Sheets.

The following table provides information on the carrying amounts and fair values of our financial instruments.

Marketable securities and other investments
Derivative financial instruments – net
Long-term debt

April 30, 2018

April 30, 2017

Carrying
Amount
45.8
9.7
(4,688.0)

Fair Value
45.8
$
9.7
(4,579.8)

Carrying
Amount
47.3
(12.9)
(4,944.5)

Fair Value
47.3
$
(12.9)
(5,023.8)

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Valuation techniques are based on observable and unobservable inputs. Observable inputs
reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.

The following tables summarize the fair values and the levels within the fair value hierarchy in which the fair value measurements fall for
our financial instruments.

Marketable securities and other investments: (A)

Equity mutual funds
Municipal obligations
Money market funds

Derivative financial instruments: (B)

Commodity contracts – net
Foreign currency exchange contracts – net

Long-term debt (C)
Total financial instruments measured at fair value

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair Value at
April 30, 2018

9.3
—
0.4

7.2
0.1
(4,579.8)

$(4,562.8)

$ —
36.1
—

1.0
1.4
—

$38.5

$ —
—
—

—
—
—

$ —

9.3
36.1
0.4

8.2
1.5
(4,579.8)

$(4,524.3)

2018 ANNUAL REPORT 75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair Value at
April 30, 2017

Marketable securities and other investments: (A)

Equity mutual funds
Municipal obligations
Money market funds

Derivative financial instruments: (B)

Commodity contracts – net
Foreign currency exchange contracts – net

Long-term debt (C)
Total financial instruments measured at fair value

1.1
—
11.5

(15.8)
0.3
(4,473.2)

$(4,476.1)

$ —
34.7
—

(0.2)
2.8
(550.6)

$(513.3)

$ —
—
—

—
—
—

$ —

1.1
34.7
11.5

(16.0)
3.1
(5,023.8)

$(4,989.4)

(A) Marketable securities and other investments consist of funds maintained for the payment of benefits associated with nonqualified retirement plans. The
funds include equity securities listed in active markets, municipal obligations valued by a third party using valuation techniques that utilize inputs that
are derived principally from or corroborated by observable market data, and money market funds with maturities of three months or less. Based on the
short-term nature of these money market funds, carrying value approximates fair value. As of April 30, 2018, our municipal obligations are scheduled to
mature as follows: $1.4 in 2019, $1.7 in 2020, $4.9 in 2021, $1.0 in 2022, and the remaining $27.1 in 2023 and beyond. For additional information, see
Marketable Securities and Other Investments in Note 1: Accounting Policies.

(B) Level 1 commodity and foreign currency exchange derivatives are valued using quoted market prices for identical instruments in active markets. Level 2
commodity and foreign currency exchange derivatives are valued using quoted prices for similar assets or liabilities in active markets. For additional
information, see Note 10: Derivative Financial Instruments.

(C) Long-term debt is comprised of public Senior Notes classified as Level 1. In 2017, the previous term loan that was due March 23, 2020 is classified as
Level 2. The public Senior Notes are traded in an active secondary market and valued using quoted prices. The value of the term loan was based on the
net present value of each interest and principal payment calculated, utilizing an interest rate derived from an estimated yield curve obtained from
independent pricing sources for similar types of term loan borrowing arrangements. For additional information, see Note 8: Debt and Financing
Arrangements.

Furthermore, we recognized impairment charges of $176.9 during 2018, of which $145.0 and $31.9 related to the goodwill of the Pet Foods
reporting unit and certain indefinite-lived trademarks within the U.S. Retail Pet Foods segment, respectively. During 2017, we recognized
impairment charges of $133.2, which was related to the impairment of certain indefinite-lived trademarks in the U.S. Retail Pet Foods
segment. These adjustments were included as noncash charges in our Statements of Consolidated Income. We utilized Level 3 inputs based
on management’s best estimates and assumptions to estimate the fair value of the reporting unit and indefinite-lived trademarks. For
additional information, see Goodwill and Other Intangible Assets in Note 1: Accounting Policies, and
Note 7: Goodwill and Other Intangible Assets.

NOTE 12

SHARE-BASED PAYMENTS

We provide for equity-based incentives to be awarded to key employees and non-employee directors. Currently, these incentives consist of
restricted shares, restricted stock units (which may also be referred to as deferred stock units), performance units, and stock options. These
awards are administered primarily through the 2010 Equity and Incentive Compensation Plan initially approved by our shareholders in
August 2010 and re-approved in August 2015. Awards under this plan may be in the form of stock options, stock appreciation rights,
restricted shares, restricted stock units, performance shares, performance units, incentive awards, and other share-based awards. Awards
under this plan may be granted to our non-employee directors, consultants, officers, and other employees. Deferred stock units granted to
non-employee directors vest immediately and, along with dividends credited on those deferred stock units, are paid out in the form of
common shares upon termination of service as a non-employee director. At April 30, 2018, there were 5,174,159 shares available for future
issuance under this plan.

Under the 2010 Equity and Incentive Compensation Plan, we have the option to settle share-based awards by issuing common shares
from treasury, issuing new Company common shares, or issuing a combination of common shares from treasury and new Company
common shares.

76 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Stock Options: Under the 2010 Equity and Incentive Compensation Plan, we granted no stock options during both 2018 and 2017, and
370,000 stock options during 2016. The options vest over a period of one to three years dependent on the continued service of the option
holder, as well as the achievement of performance objectives established on the grant date. The exercise price of all stock options granted is
equal to the market value of the shares on the date of grant. All stock options granted during 2016 have a contractual term of 10 years.

The fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing model with the following
weighted-average assumptions for stock options granted in 2016:

Expected volatility (%)
Dividend Yield (%)
Risk-free interest rate (%)
Expected life of stock option (years)

2016
20.7%
2.3%
1.9%
5.9

Expected volatility was calculated in accordance with the provisions of FASB ASC 718, Compensation – Stock Compensation, based on
consideration of both historical and implied volatilities. The expected life of a stock option represents the period from the grant date
through the expected exercise date of the option. This was calculated using a simplified method whereby the midpoint between the vesting
date and the end of the contractual term is utilized to compute the expected term.

The following table is a summary of our stock option activity.

Outstanding at May 1, 2017

Exercised
Cancelled

Outstanding at April 30, 2018
Exercisable at April 30, 2018

Number of
Stock Options
915,000
35,002
56,666
823,332
270,006

Weighted-Average
Exercise Price
$113.07
111.86
111.86
$113.20
$113.22

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the
option. The total intrinsic value for stock options outstanding and exercisable at April 30, 2018, was $1.6 and $0.5, respectively, both with
an average remaining contractual term of 7.0 years. The total intrinsic value of stock options exercised during 2018 and 2016 was $0.6 and
$0.1, respectively. During 2017, there were no stock options exercised. The closing market price of our common stock on the last trading
day of 2018 was $114.08 per share. The stock options granted during 2016 have a weighted-average grant date fair value of $18.67 per
option.

For stock options granted, compensation cost will be recognized ratably over the service period for each vesting tranche from the grant
date through the end of the requisite service period to the extent the performance objectives are likely to be achieved. During 2017, we
concluded that a portion of the performance objectives were unachievable, and therefore reversed the life-to-date compensation cost
recognized. For the year ended April 30, 2017, the compensation net benefit for stock option awards totaled $1.0, and compensation cost
totaled $0.4 and $8.1 for the years ended April 30, 2018, and 2016, respectively, which was included in other special project costs in the
Statements of Consolidated Income. The tax expense related to the stock option net benefit was $0.4 for 2017, and the tax benefit related to
the stock option expense was $0.1 and $3.0 for 2018 and 2016, respectively. At April 30, 2018, we had no unrecognized compensation cost
related to stock options.

Cash received from stock option exercises for the years ended April 30, 2018 and 2016, was $3.9 and $0.1, respectively. We received no
cash from stock option exercises for the year ended April 30, 2017.

2018 ANNUAL REPORT 77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Other Equity Awards: The following table is a summary of our restricted shares, deferred stock units, and performance units.

Outstanding at May 1, 2017

Granted
Converted
Vested
Forfeited

Outstanding at April 30, 2018

Restricted Shares
and Deferred
Stock Units
573,405
136,127
73,701
(161,581)
(79,294)
542,358

Weighted-
Average
Grant Date
Fair Value
$115.88
126.80
126.80
106.04
120.27
$122.39

Performance
Units
73,701
84,051
(73,701)
—
—
84,051

Weighted-

Average
Conversion Date
Fair Value
$126.80
103.86
126.80
—
—
$103.86

The weighted-average grant date fair value of equity awards other than stock options that vested in 2018, 2017, and 2016 was $17.1, $24.6,
and $18.7, respectively. The vesting date fair value of equity awards other than stock options that vested in 2018, 2017, and 2016 was
$20.7, $32.7, and $24.4, respectively. The weighted-average grant date fair value of restricted shares and deferred stock units is the average
of the high and the low share price on the date of grant. The weighted-average conversion date fair value of performance units is the
average of the high and the low share price on the date of conversion to restricted shares. The following table summarizes the weighted-
average fair values of the equity awards granted.

Year Ended April 30,
2018
2017
2016

Restricted Shares
and Deferred
Stock Units
136,127
180,997
97,922

Weighted-
Average
Grant Date
Fair Value
$126.80
133.92
113.57

Performance
Units
84,051
73,701
121,936

Weighted-

Average
Conversion Date
Fair Value
$103.86
126.80
132.46

The performance units column represents the number of restricted shares received by certain executive officers, subsequent to year-end,
upon conversion of the performance units earned during the year. Restricted shares and deferred stock units generally vest four years from
the date of grant or upon the attainment of a defined age and years of service, subject to certain retention requirements.

NOTE 13

INCOME TAXES

Income before income taxes is as follows:

Domestic
Foreign
Income before income taxes

2018
$828.6
32.4
$861.0

Year Ended April 30,

2017
$836.8
41.6
$878.4

2016
$959.3
18.6
$977.9

On December 22, 2017, the U.S. government enacted “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent
Resolution on the Budget for Fiscal Year 2018” (the “Act”), which is commonly referred to as “The Tax Cuts and Jobs Act.” The Act
provides for comprehensive tax legislation that reduces the U.S. federal statutory corporate tax rate from 35.0 percent to 21.0 percent
effective January 1, 2018, broadens the U.S. federal income tax base, requires companies to pay a one-time repatriation tax on earnings of
certain foreign subsidiaries that were previously tax deferred (“transition tax”), and creates new taxes on certain foreign-sourced earnings
as part of a new territorial tax regime. As we have an April 30 fiscal year-end, the lower corporate income tax rate is administratively
phased in, resulting in a blended U.S. federal statutory tax rate of approximately 30.4 percent for our fiscal year ended April 30, 2018, and
21.0 percent for our fiscal years thereafter.

In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,
which amends the FASB ASC 740, Income Taxes, to add the SEC guidance in SAB 118 concerning the application of U.S. GAAP when
accounting for the income tax effects of the Act for the reporting period that includes the enactment date. ASU 2018-05 recognizes that a
registrant’s review of certain income tax effects of the Act may be incomplete at the time financial statements are issued for the reporting

78 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

period that includes the enactment date, including interim periods therein. Specifically, ASU 2018-05 allows a company to report
provisional estimates in the reporting period that includes the enactment date if the company does not have the necessary information
available, prepared, or fully analyzed for certain income tax effects of the Act. The provisional estimates would be adjusted during a
measurement period not to exceed 12 months from the enactment date of the Act, at which time the accounting for the income tax effects of
the Act is required to be completed. For additional information on ASU 2018-05, see Recently Issued Accounting Standards in Note 1:
Accounting Policies.

During the third quarter of 2018, we recorded a net provisional benefit of $765.8, which included the revaluation of net deferred tax
liabilities at the reduced federal income tax rate offset in part by the estimated impact of the one-time transition tax. In addition to the
estimates further described below, we also used assumptions and estimates that may change as a result of future guidance and interpretation
from the Internal Revenue Service (“IRS”), the SEC, the FASB, and various taxing jurisdictions. All of these potential legislative and
interpretive actions could result in adjustment to our provisional estimates when the accounting for the income tax effects of the Act is
completed. During the fourth quarter of 2018, there were no adjustments to the recorded provisional amount.

Accordingly, our income tax provision as of April 30, 2018, reflects the current year impacts of the Act and the following provisional
estimates of our adjustments resulting directly from the enactment of the Act based on information available, prepared, or analyzed to date
in reasonable detail.

(Provisional amounts recorded)
Net impact on U.S. deferred tax assets and liabilities
Transition tax
Net impact of adjustments

Year Ended April 30, 2018
$(791.9)
26.1
$(765.8)

The provisional net benefit amount of $765.8 from the adjustments is included as a component of income tax expense (benefit) in the
Statement of Consolidated Income.

Deferred tax assets and liabilities: We remeasured our existing U.S. deferred tax assets and liabilities based on the rates at which they
are expected to reverse in the future. The provisional amount recorded related to the remeasurement of our deferred tax balance is a benefit
of $791.9. We determined that the calculation cannot be completed until all of the underlying timing differences are finalized. Furthermore,
we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these
balances or potentially give rise to new or additional deferred tax amounts. We anticipate completing the accounting for the reduced federal
tax rate on our deferred tax balances, with any further adjustments to the provisional amount to be reported as a component of income tax
expense (benefit).

Foreign tax effects: The transition tax is based on our total post-1986 foreign earnings and profits, which were previously deferred from
U.S. income taxes and the related available foreign tax credits. We recorded a provisional income tax expense of $26.1 for the transition tax
for our foreign subsidiaries, and determined that the transition tax is provisional because numerous components of the computation are
estimated as of April 30, 2018. Consistent with provisions allowed in the Act, the $26.1 estimated transition tax liability is expected to be
paid over an eight-year period, which began in 2018. The remaining amount of the estimated transition tax liability is included in other
noncurrent liabilities in the Consolidated Balance Sheet. We anticipate concluding the analysis of accumulated foreign earnings and profits
and related foreign taxes paid on an entity-by-entity basis and completing the accounting for the transition tax in the third quarter of 2019,
with any further adjustments to the provisional amount to be reported as a component of income tax expense (benefit).

Deferred income taxes have not been provided on approximately $226.0 of temporary differences related to investments in foreign
subsidiaries since these amounts are considered to be permanently reinvested. It is not practical to estimate the amount of additional taxes
that might be payable on these basis differences because of the multiple methods by which these differences could reverse.

While the Act generally transitions the U.S. tax system to a territorial regime, it also introduces a new requirement to tax certain income
from foreign operations, known as Global Intangible Low Taxed Income (“GILTI”), effective for us beginning in 2019. Under U.S. GAAP,
we are allowed to make an accounting policy election and record the taxes related to GILTI as either a period cost as incurred or consider
such amounts into the measurement of deferred taxes. Due to the complexity of the new GILTI rules and limited guidance issued by the
IRS, we are evaluating and have not yet computed a reasonable estimate of the impact of this provision, and therefore, have not made an
accounting policy decision regarding this item.

2018 ANNUAL REPORT 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

During the fourth quarter of 2018, we elected to early adopt ASU 2018-02, Income Statement – Reporting Comprehensive Income
(Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allowed us to reclassify $15.0
of stranded income tax effects resulting from the Act from accumulated other comprehensive income (loss) to retained earnings. This
reclassification consists of deferred taxes originally recorded in accumulated other comprehensive income (loss) at rates that exceed the
newly enacted federal corporate tax rate. For additional information, see Recently Issued Accounting Standards in Note 1: Accounting
Policies.

The components of the provision for income taxes are as follows:

Year Ended April 30,

2018

2017

2016

Current:
Federal
Foreign
State and local

Deferred:
Federal
Foreign
State and local

Total income tax expense (benefit)

$ 277.9
7.9
40.0

(802.3)
0.5
(1.6)
$(477.6)

$325.1
11.0
29.4

(78.3)
1.6
(2.7)
$286.1

A reconciliation of the statutory federal income tax rate and the effective income tax rate is as follows:

(Percent of Pre-tax Income)

Statutory federal income tax rate

Tax reform – net impact on U.S. deferred tax assets and liabilities (provisional)
Tax reform – transition tax (provisional)
Goodwill impairment
State and local income taxes
Domestic manufacturing deduction
Deferred tax benefit from integration
Other items – net

Effective income tax rate
Income taxes paid

2018
30.4 %
(92.0)
3.0
5.5
1.9
(3.0)
—
(1.3)
(55.5)%

Year Ended April 30,

2017
35.0%
—
—
—
2.1
(3.7)
—
(0.8)
32.6%

$336.8

$367.2

$290.5

The effective tax rate of 29.6 percent in 2016 includes the recognition in the fourth quarter of a $50.5 noncash deferred tax benefit related
to the integration of Big Heart into the Company.

We are a voluntary participant in the Compliance Assurance Process (“CAP”) program offered by the IRS and are currently under a CAP
examination for the tax year ended April 30, 2018. Through the contemporaneous exchange of information with the IRS, this program is
designed to identify and resolve tax positions with the IRS prior to the filing of a tax return, which allows us to remain current with our IRS
examinations. The IRS has completed the CAP examinations for the tax years ended April 30, 2015, 2016, and 2017. The tax years prior to
2015 are no longer subject to U.S. federal tax examination. With limited exceptions, we are no longer subject to examination for state and
local jurisdictions for the tax years prior to 2014 and for the tax years prior to 2011 for foreign jurisdictions.

80 THE J. M. SMUCKER COMPANY

$342.5
4.8
37.1

(32.1)
1.3
(64.4)
$289.2

2016
35.0%
—
—
—
2.5
(3.5)
(5.2)
0.8
29.6%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting. Significant components of our deferred tax assets and liabilities are
as follows:

Deferred tax liabilities:

Intangible assets
Property, plant, and equipment
Other

Total deferred tax liabilities

Deferred tax assets:

Post-employment and other employee benefits
Tax credit and loss carryforwards
Intangible assets
Inventory
Property, plant, and equipment
Other

Total deferred tax assets
Valuation allowance
Total deferred tax assets, less allowance
Net deferred tax liability

April 30,

2018

2017

$1,393.6
98.5
14.2
$1,506.3

75.5
0.2
18.8
5.9
6.4
25.2
$ 132.0
(2.9)
$ 129.1
$1,377.2

$2,248.0
129.8
16.5
$2,394.3

$ 146.3
1.8
25.4
10.5
3.1
43.8
$ 230.9
(3.6)
$ 227.3
$2,167.0

As described previously, our 2018 U.S. deferred assets and liabilities have been remeasured, on a provisional basis, for the reduced federal
income tax rates of the Act.

We evaluate the realizability of deferred tax assets for each of the jurisdictions in which we operate. The total valuation allowance
decreased by a net amount of $0.7 during the year.

Our unrecognized tax benefits were $32.3, $40.4, and $46.3, of which $21.5, $23.1, and $32.6 would affect the effective tax rate, if
recognized, as of April 30, 2018, 2017, and 2016, respectively. Our accrual for tax-related net interest and penalties totaled $4.0, $4.1, and
$3.8 as of April 30, 2018, 2017, and 2016, respectively. Interest charged to earnings totaled $0.1, $0.3, and $0.6 during 2018, 2017, and
2016, respectively.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $9.5, primarily as
a result of the expiration of statute of limitation periods.

A reconciliation of our unrecognized tax benefits is as follows:

Balance at May 1,
Increases:

Current year tax positions
Prior year tax positions
Acquired businesses

Decreases:

Prior year tax positions
Settlement with tax authorities
Expiration of statute of limitations periods

Balance at April 30,

2018
$40.4

1.1
0.5
—

—
3.0
6.7
$32.3

2017
$46.3

0.7
1.2
—

0.9
1.1
5.8
$40.4

2016
$45.0

3.3
0.2
3.3

0.9
2.5
2.1
$46.3

2018 ANNUAL REPORT 81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

NOTE 14

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss), including the reclassification adjustments for items that are
reclassified from accumulated other comprehensive income (loss) to net income, are shown below.

Balance at May 1, 2015

Reclassification adjustments
Current period credit (charge)
Income tax benefit (expense)

Balance at April 30, 2016

Reclassification adjustments
Current period credit (charge)
Income tax benefit (expense)

Balance at April 30, 2017

Reclassification adjustments
Current period credit (charge)
Income tax benefit (expense)
Reclassification of stranded tax effects (C)

Balance at April 30, 2018

Foreign
Currency
Translation
Adjustment
$ (2.3)
—
(10.8)
—
$(13.1)
—
(29.9)
—
$(43.0)
—
26.6
—
—
$(16.4)

Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
$(5.2)
0.6
—
(0.2)
$(4.8)
0.6
—
(0.2)
$(4.4)
0.5
2.7
(1.2)
(0.5)
$(2.9)

Pension
and Other
Postretirement
Liabilities (B)
$(105.6)
10.2
(54.6)
15.9
$(134.1)
13.2
39.6
(18.7)
$(100.0)
10.7
9.2
(5.6)
(15.3)
$(101.0)

Unrealized
Gain (Loss) on
Available-for-Sale
Securities
$ 3.3
—
0.4
(0.1)
$ 3.6
—
0.6
(0.2)
$ 4.0
—
(1.7)
0.5
0.8
$ 3.6

Accumulated
Other
Comprehensive
Income (Loss)

$(109.8)
10.8
(65.0)
15.6
$(148.4)
13.8
10.3
(19.1)
$(143.4)
11.2
36.8
(6.3)
(15.0)
$(116.7)

(A) The reclassification from accumulated other comprehensive income (loss) to interest expense was related to terminated interest rate contracts. The 2018

credit relates to the gain on the interest rate contract terminated in December 2017. For additional information, see Note 10: Derivative Financial
Instruments.

(B) Amortization of net losses was reclassified from accumulated other comprehensive income (loss) to SD&A.

(C) During the fourth quarter of 2018, we elected to early adopt ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220)

82 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

NOTE 15

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. We cannot predict with certainty
the ultimate results of these proceedings or reasonably determine a range of potential loss. Our policy is to accrue losses for contingent
liabilities when such liabilities are probable and amounts can be reasonably estimated. Based on the information known to date, with the
exception of the matter discussed below, we do not believe the final outcome of these proceedings could have a material adverse effect on
our financial position, results of operations, or cash flows.

On May 9, 2011, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed a lawsuit in the Superior Court of
the State of California, County of Los Angeles, against us and additional defendants who manufacture, package, distribute, or sell packaged
coffee. The lawsuit is Council for Education and Research on Toxics v. Brad Barry LLC, et al., and was a tag along to a 2010 lawsuit
against companies selling “ready-to-drink” coffee based on the same claims. Both cases have since been consolidated and now include
nearly eighty defendants, which constitute the great majority of the coffee industry in California. The Plaintiff alleges that we and the other
defendants failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under California Health
and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as
“Proposition 65.” The Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil
penalties in the amount of the statutory maximum of $2,500.00 per day per violation of Proposition 65. The Plaintiff asserts that every
consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

As part of a joint defense group organized to defend against the lawsuit, we dispute the claims of the Plaintiff. Acrylamide is not added to
coffee, but is present in all coffee in small amounts (measured in parts per billion) as a byproduct of the coffee bean roasting process. We
have asserted multiple affirmative defenses. Trial of the first phase of the case commenced on September 8, 2014, and was limited to three
affirmative defenses shared by all defendants. On September 1, 2015, the trial court issued a final ruling adverse to the defendants on all
Phase 1 defenses. Trial of the second phase of the case commenced in the fall of calendar year 2017. On March 28, 2018, the trial court
issued a proposed ruling adverse to the defendants on the Phase 2 defense, our last remaining defense to liability. The trial court finalized
and affirmed its Phase 2 ruling on May 7, 2018 and, therefore, the trial will proceed to the third phase regarding remedies issues.

At this stage of the proceedings, prior to a trial on remedies issues, we are unable to predict or reasonably estimate the potential loss or
effect on our operations. Accordingly, no loss contingency has been recorded for this matter as of April 30, 2018, as the likelihood of loss is
not considered probable or estimable. The trial court has discretion to impose zero penalties against us or to impose significant statutory
penalties. Significant labeling or warning requirements that could potentially be imposed by the trial court may increase our costs and
adversely affect sales of our coffee products, as well as involve substantial expense and operational disruption, which could have a material
adverse impact on our financial position, results of operations, or cash flows. Furthermore, a future appellate court decision could reverse
the trial court rulings. The outcome and the financial impact of settlement, or the trial or appellate court rulings of the case, if any, cannot
be predicted at this time.

2018 ANNUAL REPORT 83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

NOTE 16

GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION

In September 2017, we terminated the revolving credit facility that was entered into in September 2013, and as a result, the guarantees
provided by the subsidiary guarantors were released. In addition, the subsidiary guarantors are not guarantors under the new $1.8 billion
revolving credit facility entered into in September 2017. As a result, the guarantees of the subsidiary guarantors, in respect to the
obligations under the term loan due March 23, 2020, and all of our outstanding Senior Notes, were released in accordance with the terms of
the amended term loan agreement for the term loan due March 23, 2020, and the indentures governing such notes, as applicable. As the
Senior Notes were not guaranteed as of April 30, 2018, the condensed consolidating financial statements are not provided for the subsidiary
guarantors. For additional information, see Note 8: Debt and Financing Arrangements.

NOTE 17

COMMON SHARES

Voting: The Amended Articles of Incorporation (“Articles”) provide that each holder of a common share outstanding is entitled to one vote
on each matter submitted to a vote of the shareholders, except for the following specific matters:
• any matter that relates to or would result in the dissolution or liquidation of the Company;
• the adoption of any amendment to the Articles or Amended Regulations, or the adoption of amended Articles, other than the adoption
of any amendment or amended Articles that increases the number of votes to which holders of our common shares are entitled or
expands the matters to which time-phased voting applies;
• any proposal or other action to be taken by our shareholders relating to the Rights Agreement, dated as of May 20, 2009, between the
Company and Computershare Trust Company, N.A., or any successor plan;
• any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other
similar plan, arrangement, or agreement;
• the adoption of any agreement or plan of or for the merger, consolidation, or majority share acquisition of us or any of our
subsidiaries with or into any other person, whether domestic or foreign, corporate or noncorporate, or the authorization of the lease,
sale, exchange, transfer, or other disposition of all, or substantially all, of our assets;
• any matter submitted to our shareholders pursuant to Article Fifth (which relates to procedures applicable to certain business
combinations) or Article Seventh (which relates to procedures applicable to certain proposed acquisitions of specified percentages of
our outstanding common shares) of the Articles, as they may be further amended, or any issuance of our common shares for which
shareholder approval is required by applicable stock exchange rules; and
• any matter relating to the issuance of our common shares or the repurchase of our common shares that the Board determines is
required or appropriate to be submitted to our shareholders under the Ohio Revised Code or applicable stock exchange rules.

On the matters listed above, common shares are entitled to 10 votes per share if they meet the requirements set forth in the Articles.
Common shares which would be entitled to 10 votes per share must meet one of the following criteria:

• common shares for which there has not been a change in beneficial ownership in the past four years; or
• common shares received through our various equity plans that have not been sold or otherwise transferred.

In the event of a change in beneficial ownership, the new owner of that common share will be entitled to only one vote with respect to that
share on all matters until four years pass without a further change in beneficial ownership of the share.

Shareholders’ Rights Plan: Pursuant to a Shareholders’ Rights Plan adopted by the Board on May 20, 2009, one share purchase right is
associated with each of our outstanding common shares.

Under the plan, the rights will initially trade together with our common shares and will not be exercisable. In the absence of further action
by the directors, the rights generally will become exercisable and allow the holder to acquire our common shares at a discounted price if a
person or group acquires 10 percent or more of our outstanding common shares. Rights held by persons who exceed the applicable
threshold will be void. Shares held by members of the Smucker family are not subject to the threshold. If exercisable, each right entitles the
shareholder to buy one common share at a discounted price. Under certain circumstances, the rights will entitle the holder to buy shares in
an acquiring entity at a discounted price.

84 THE J. M. SMUCKER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company

The plan also includes an exchange option. In general, if the rights become exercisable, the directors may, at their option, effect an
exchange of part or all of the rights, other than rights that have become void, for common shares. Under this option, we would issue
one common share for each right, in each case subject to adjustment in certain circumstances.

The directors may, at their option, redeem all rights for $0.001 per right, generally at any time prior to the rights becoming exercisable. The
rights will expire June 3, 2019, unless earlier redeemed, exchanged, or amended by the directors.

In connection with the Big Heart acquisition, we and the rights agent entered into an amendment to the plan providing that neither the
approval, execution, delivery, or performance of the merger agreement or the shareholders’ agreement entered into in connection with the
transaction will in any way give rise to any provision of the plan becoming effective, and that none of Blue Holdings I, L.P., the controlling
stockholder of Blue Acquisition Group, Inc., or any of its affiliates will be deemed to be an acquiring person for purposes of the plan.

During 2017, we and the rights agent entered into another amendment to the plan to amend the definition of beneficial ownership to
provide that, among other things and subject to certain exceptions, a person will not be deemed the beneficial owner of, or to beneficially
own, the first 10 percent of then-outstanding common shares of the Company that would otherwise be deemed to be beneficially owned by
such person, together with all its affiliates and associates, if such person is entitled to file, and files, a statement on Schedule 13G pursuant
to Rule 13d-1(b) or Rule 14d-1(c) under the Securities and Exchange Act of 1934, as amended.

Repurchase Programs: During 2018, we did not repurchase any common shares under a repurchase plan authorized by the Board.

On February 22, 2017, we entered into a 10b5-1 trading plan (the “Plan”) to facilitate the repurchase of up to 3.0 million common shares
under the Board’s authorizations. Purchases under the Plan commenced on February 27, 2017, and concluded on March 27, 2017, and were
transacted by a broker based upon the guidelines and parameters of the Plan. During 2017, we repurchased 3.0 million common shares
under the Plan for $418.1.

At April 30, 2018, approximately 3.6 million common shares were remaining available for repurchase pursuant to the Board’s
authorizations.

2018 ANNUAL REPORT 85

DIRECTORS AND EXECUTIVE OFFICERS
The J. M. Smucker Company

DIRECTORS

Kathryn W. DindoA
Retired Vice President and
Chief Risk Officer
FirstEnergy Corp.
Akron, Ohio

Kirk L. PerryE
President, Brand Solutions
Google Inc.
Mountain View, California

Mark T. Smucker
President and Chief Executive Officer
The J. M. Smucker Company

Paul J. DolanE
Chairman and Chief Executive Officer
Cleveland Indians
Cleveland, Ohio

Sandra PianaltoA
Retired President and
Chief Executive Officer
Federal Reserve Bank of Cleveland
Cleveland, Ohio

Jay L. HendersonA
Retired Vice Chairman, Client Service
PricewaterhouseCoopers LLP
Chicago, Illinois

Nancy Lopez RussellG
Founder
Nancy Lopez Golf Company
Palm City, Florida

Elizabeth Valk LongE
Retired Executive Vice President
Time Inc.
New York, New York

Alex ShumateG
Managing Partner, North America
Squire Patton Boggs (US) LLP
Columbus, Ohio

Richard K. Smucker
Executive Chairman
The J. M. Smucker Company

Timothy P. Smucker
Chairman Emeritus
The J. M. Smucker Company

Dawn C. WilloughbyG
Executive Vice President and
Chief Operating Officer
The Clorox Company
Oakland, California

Gary A. OateyE, G
Executive Chairman
Oatey Co.
Cleveland, Ohio

A Audit Committee Member; E Executive Compensation Committee Member; G Nominating, Governance, and Corporate Responsibility
Committee Member

EXECUTIVE OFFICERS

Richard K. Smucker
Executive Chairman

Barry C. Dunaway*
President, Pet Food and Pet Snacks

David J. Lemmon*
President, Canada, International, and U.S.
Away From Home

Mark T. Smucker
President and Chief Executive Officer

Tina R. Floyd
Senior Vice President and General
Manager, Consumer Foods

Jill R. Penrose
Senior Vice President, Human Resources
and Corporate Communications

Mark R. Belgya
Vice Chair and Chief Financial Officer

Jeannette L. Knudsen
Senior Vice President, General Counsel
and Secretary

Joseph Stanziano
Senior Vice President and General
Manager, Coffee

* Effective June 25, 2018, Mr. Lemmon will assume the position of President, Pet Food and Pet Snacks, and Mr. Dunaway will assume the
position of Executive Advisor, Pet, until his retirement on July 31, 2018.

86 THE J. M. SMUCKER COMPANY

OUR LOCATIONS
The J. M. Smucker Company

CORPORATE OFFICE

Orrville, Ohio

DOMESTIC MANUFACTURING LOCATIONS

Bloomsburg, Pennsylvania
Buffalo, New York
Chico, California
Cincinnati, Ohio
Decatur, Alabama
Grandview, Washington
Havre de Grace, Maryland

Lawrence, Kansas
Lexington, Kentucky
Memphis, Tennessee
New Bethlehem, Pennsylvania
New Orleans, Louisiana (3)
Orrville, Ohio
Oxnard, California

Ripon, Wisconsin
Scottsville, Kentucky
Seattle, Washington
Suffolk, Virginia
Toledo, Ohio
Topeka, Kansas

INTERNATIONAL MANUFACTURING LOCATION

Sherbrooke, Quebec, Canada

2018 ANNUAL REPORT 87

SHAREHOLDER INFORMATION
The J. M. Smucker Company

CORPORATE OFFICE
The J. M. Smucker Company
One Strawberry Lane
Orrville, Ohio 44667
Telephone: (330) 682-3000

STOCK LISTING
Our common shares are listed on the New York Stock Exchange —
ticker symbol SJM.

CORPORATE WEBSITE
To learn more about The J. M. Smucker Company,
visit jmsmucker.com.

ANNUAL MEETING
The annual meeting will be held at 11:00 a.m. Eastern Time,
August 15, 2018, at the Ritz-Carlton, 1515 West Third Street,
Cleveland, Ohio 44113.

CORPORATE NEWS AND REPORTS
Corporate news releases, annual reports, and Securities and
Exchange Commission filings, including Forms 10-K, 10-Q, and
8-K, are available free of charge on our website,
jmsmucker.com/investor-relations. They are also available
without cost to shareholders who submit a written request to:
The J. M. Smucker Company
Attention: Corporate Secretary
One Strawberry Lane
Orrville, Ohio 44667

CERTIFICATIONS
Our Chief Executive Officer has certified to the New York Stock
Exchange that he is not aware of any violation by the Company of
the New York Stock Exchange’s corporate governance listing
standards. We have also filed with the Securities and Exchange
Commission certain certifications relating to the quality of our
public disclosures. These certifications are filed as exhibits to our
Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS
This Annual Report includes certain forward-looking statements
that are based on current expectations and are subject to a number
of risks and uncertainties. Please reference “Forward-Looking
Statements” in the “Management’s Discussion and Analysis”
section.

INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
Akron, Ohio

88 THE J. M. SMUCKER COMPANY

DIVIDENDS
Our Board of Directors typically declares a cash dividend each
quarter. Dividends are generally payable on the first business day
of March, June, September, and December. The record date is
approximately two weeks before the payment date. Our dividend
disbursement agent is Computershare Investor Services, LLC.

SHAREHOLDER SERVICES
Our transfer agent and registrar, Computershare Investor Services,
LLC, is responsible for assisting registered shareholders with a
variety of matters, including:

• Shareholder investment program (CIPSM)
– Direct purchase of our common shares
– Dividend reinvestment
– Automatic monthly cash investments
• Book-entry share ownership
• Share transfer matters (including name changes, gifting, and
inheritances)
• Direct deposit of dividend payments
• Nonreceipt of dividend checks
• Lost share certificates
• Changes of address
• Online shareholder account access
• Form 1099 income inquiries (including requests for duplicate
copies)

Shareholders may contact Shareholder Services at the corporate
offices regarding other shareholder inquiries.

TRANSFER AGENT AND REGISTRAR
Computershare
P.O. Box 505000
Louisville, KY 40233
Telephone: (800) 456-1169
Telephone outside U.S., Canada, and Puerto Rico:
(312) 360-5254
Website: computershare.com/investor

The J. M. Smucker Company, or its subsidiaries, is the owner of all
trademarks, except for the following, which are used under license:
PillsburyTM is a trademark of the Pillsbury Company, LLC;
Carnation® is a trademark of Société des Produits Nestlé S.A.;
Dunkin’ Donuts® is a trademark of DD IP Holder, LLC; K-Cup® is
a trademark of Keurig Green Mountain, Inc; and Rachael Ray® is a
trademark of Ray Marks Co., LLC.

MARKET SHARE
DOG SNACKS

11%

YEAR-OVER-YEAR
NET SALES GROWTH

Strong
Portfolio
of Brands

WHY WE
ARE WHO WE ARE

A culture of doing the right things and

doing things right …

Of dotting the i’s and crossing the t’s …

A culture of growth — individual and as a company.

A result of living our Basic Beliefs …

Our Commitment to Each Other, to our consumers,

and to our customers.

As we look to the future of unlimited possibilities,

we recognize the principles that are instrumental

to our success:

A culture deeply rooted in our Basic Beliefs,

guideposts for decisions at every level;

A culture that encourages commitment to each other,

clear communication and collaboration;

A culture of appreciation;

A family-sense of sharing in a job well done;

Where every person makes a difference.

One Strawberry Lane
Orrville, Ohio 44667

330-682-3000
jmsmucker.com

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2018 ANNUAL REPORT