Question: What does the Gross Profit Margin for JM Smucker in 2022 indicate about its efficiency in managing production and procurement costs relative to revenue generation?

The Gross Profit Margin for JM Smucker in 2022 was 33.8%, compared to 39.2% in 2021. This decline was primarily due to higher costs driven by inflationary pressures across commodities, packaging, transportation, and manufacturing. The unfavorable impact of unsaleable inventory and estimated customer returns related to the Jif peanut butter recall also contributed significantly to the gross profit reduction. Additionally, increased operating inefficiencies amidst supply chain challenges exacerbated the situation

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.
|    |                                                 |                      |         |      |      |                      |         |      |    |
|---:|:------------------------------------------------|:---------------------|:--------|:-----|:-----|:---------------------|:--------|:-----|:---|
|  1 |                                                 | Year Ended April 30, |         |      |      |                      |         |      |    |
|  2 |                                                 | 2022                 |         | 2021 |      | % Increase(Decrease) |         |      |    |
|  3 | Net sales                                       | $                    | 7,998.9 |      |      | $                    | 8,002.7 | -    | %  |
|  4 | Gross profit                                    | $                    | 2,700.7 |      |      | $                    | 3,138.7 | (14) |    |
|  5 | % of net sales                                  | 33.8                 | %       |      | 39.2 | %                    |         |      |    |
|  6 | Operating income                                | $                    | 1,023.8 |      |      | $                    | 1,386.8 | (26) |    |
|  7 | % of net sales                                  | 12.8                 | %       |      | 17.3 | %                    |         |      |    |
|  8 | Net income:                                     |                      |         |      |      |                      |         |      |    |
|  9 | Net income                                      | $                    | 631.7   |      |      | $                    | 876.3   | (28) |    |
| 10 | Net income per common share – assuming dilution | $                    | 5.83    |      |      | $                    | 7.79    | (25) |    |
| 11 | Adjusted gross profit (A)                       | $                    | 2,744.6 |      |      | $                    | 3,048.5 | (10) |    |
| 12 | % of net sales                                  | 34.3                 | %       |      | 38.1 | %                    |         |      |    |
| 13 | Adjusted operating income (A)                   | $                    | 1,440.1 |      |      | $                    | 1,528.8 | (6)  |    |
| 14 | % of net sales                                  | 18.0                 | %       |      | 19.1 | %                    |         |      |    |
| 15 | Adjusted income: (A)                            |                      |         |      |      |                      |         |      |    |
| 16 | Income                                          | $                    | 962.2   |      |      | $                    | 1,025.0 | (6)  |    |
| 17 | Earnings per share – assuming dilution          | $                    | 8.88    |      |      | $                    | 9.12    | (3)  |    |
(A)We use non-GAAP financial measures to evaluate our performance. Refer to "Non-GAAP Financial Measures" in this discussion and analysis for a reconciliation to the comparable generally accepted accounting principles ("GAAP") financial measure.

Net Sales
|    |                                                                    |                      |         |      |         |                     |         |        |    |       |    |    |
|---:|:-------------------------------------------------------------------|:---------------------|:--------|:-----|:--------|:--------------------|:--------|:-------|:---|:------|:---|:---|
|  1 |                                                                    | Year Ended April 30, |         |      |         |                     |         |        |    |       |    |    |
|  2 |                                                                    | 2022                 |         | 2021 |         | Increase (Decrease) |         | %      |    |       |    |    |
|  3 | Net sales                                                          | $                    | 7,998.9 |      |         | $                   | 8,002.7 |        | $  | (3.8) | -  | %  |
|  4 | Crisco divestiture                                                 | -                    |         |      | (198.9) |                     |         | 198.9  |    | 2     |    |    |
|  5 | Natural Balance divestiture                                        | -                    |         |      | (156.7) |                     |         | 156.7  |    | 2     |    |    |
|  6 | Private label dry pet food divestiture                             | -                    |         |      | (40.7)  |                     |         | 40.7   |    | 1     |    |    |
|  7 | Natural beverage and grains divestiture                            | -                    |         |      | (35.5)  |                     |         | 35.5   |    | -     |    |    |
|  8 | Foreign currency exchange                                          | (17.1)               |         |      | -       |                     |         | (17.1) |    | -     |    |    |
|  9 | Net sales excluding divestitures and foreign currency exchange (A) | $                    | 7,981.8 |      |         | $                   | 7,570.9 |        | $  | 410.9 | 5  | %  |
Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.

  	Year Ended April 30,

  	2022		2021		% Increase(Decrease)

Net sales	$	7,998.9 			$	8,002.7 			- 	%

Gross profit	$	2,700.7 			$	3,138.7 			(14)

% of net sales	33.8 	%		39.2 	%

Operating income	$	1,023.8 			$	1,386.8 			(26)

% of net sales	12.8 	%		17.3 	%

Net income:

Net income	$	631.7 			$	876.3 			(28)

Net income per common share – assuming dilution	$	5.83 			$	7.79 			(25)

Adjusted gross profit (A)	$	2,744.6 			$	3,048.5 			(10)

% of net sales	34.3 	%		38.1 	%

Adjusted operating income (A)	$	1,440.1 			$	1,528.8 			(6)

% of net sales	18.0 	%		19.1 	%

Adjusted income: (A)

Income	$	962.2 			$	1,025.0 			(6)

Earnings per share – assuming dilution	$	8.88 			$	9.12 			(3)

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

Net Sales

	Year Ended April 30,

 	2022		2021		Increase  (Decrease)		  %

Net sales	$	7,998.9 			$	8,002.7 			$	(3.8)			- 	%

Crisco divestiture	- 			(198.9)			198.9 			2

Natural Balance divestiture	- 			(156.7)			156.7 			2

Private label dry pet food divestiture	- 			(40.7)			40.7 			1

Natural beverage and grains divestiture	- 			(35.5)			35.5 			-

Foreign currency exchange	(17.1)			- 			(17.1)			-

Net sales excluding divestitures and foreign currency exchange (A)	$	7,981.8 			$	7,570.9 			$	410.9 			5 	%

Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28


Question: How does the Net Profit Margin for 2022 reflect JM Smucker’s ability to convert revenue into actual profit, considering the impact of divestitures and recalls?

The Net Profit Margin for JM Smucker in 2022 was 7.9%, a decrease from 10.9% in 2021. This reduction reflects the compounded effects of increased costs, including commodity inflation and higher operating expenses. Additionally, the Jif peanut butter recall resulted in financial losses, including unsaleable inventory and customer refunds. The company's divestitures, which reduced revenue, and increased impairment charges on intangible assets, further strained profitability. Despite these challenges, JM Smucker leveraged pricing adjustments and partial insurance recoveries to mitigate some losses, although they were insufficient to maintain previous levels of profitability.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.
|    |                                                 |                      |         |      |      |                      |         |      |    |
|---:|:------------------------------------------------|:---------------------|:--------|:-----|:-----|:---------------------|:--------|:-----|:---|
|  1 |                                                 | Year Ended April 30, |         |      |      |                      |         |      |    |
|  2 |                                                 | 2022                 |         | 2021 |      | % Increase(Decrease) |         |      |    |
|  3 | Net sales                                       | $                    | 7,998.9 |      |      | $                    | 8,002.7 | -    | %  |
|  4 | Gross profit                                    | $                    | 2,700.7 |      |      | $                    | 3,138.7 | (14) |    |
|  5 | % of net sales                                  | 33.8                 | %       |      | 39.2 | %                    |         |      |    |
|  6 | Operating income                                | $                    | 1,023.8 |      |      | $                    | 1,386.8 | (26) |    |
|  7 | % of net sales                                  | 12.8                 | %       |      | 17.3 | %                    |         |      |    |
|  8 | Net income:                                     |                      |         |      |      |                      |         |      |    |
|  9 | Net income                                      | $                    | 631.7   |      |      | $                    | 876.3   | (28) |    |
| 10 | Net income per common share – assuming dilution | $                    | 5.83    |      |      | $                    | 7.79    | (25) |    |
| 11 | Adjusted gross profit (A)                       | $                    | 2,744.6 |      |      | $                    | 3,048.5 | (10) |    |
| 12 | % of net sales                                  | 34.3                 | %       |      | 38.1 | %                    |         |      |    |
| 13 | Adjusted operating income (A)                   | $                    | 1,440.1 |      |      | $                    | 1,528.8 | (6)  |    |
| 14 | % of net sales                                  | 18.0                 | %       |      | 19.1 | %                    |         |      |    |
| 15 | Adjusted income: (A)                            |                      |         |      |      |                      |         |      |    |
| 16 | Income                                          | $                    | 962.2   |      |      | $                    | 1,025.0 | (6)  |    |
| 17 | Earnings per share – assuming dilution          | $                    | 8.88    |      |      | $                    | 9.12    | (3)  |    |
(A)We use non-GAAP financial measures to evaluate our performance. Refer to "Non-GAAP Financial Measures" in this discussion and analysis for a reconciliation to the comparable generally accepted accounting principles ("GAAP") financial measure.

Net Sales
|    |                                                                    |                      |         |      |         |                     |         |        |    |       |    |    |
|---:|:-------------------------------------------------------------------|:---------------------|:--------|:-----|:--------|:--------------------|:--------|:-------|:---|:------|:---|:---|
|  1 |                                                                    | Year Ended April 30, |         |      |         |                     |         |        |    |       |    |    |
|  2 |                                                                    | 2022                 |         | 2021 |         | Increase (Decrease) |         | %      |    |       |    |    |
|  3 | Net sales                                                          | $                    | 7,998.9 |      |         | $                   | 8,002.7 |        | $  | (3.8) | -  | %  |
|  4 | Crisco divestiture                                                 | -                    |         |      | (198.9) |                     |         | 198.9  |    | 2     |    |    |
|  5 | Natural Balance divestiture                                        | -                    |         |      | (156.7) |                     |         | 156.7  |    | 2     |    |    |
|  6 | Private label dry pet food divestiture                             | -                    |         |      | (40.7)  |                     |         | 40.7   |    | 1     |    |    |
|  7 | Natural beverage and grains divestiture                            | -                    |         |      | (35.5)  |                     |         | 35.5   |    | -     |    |    |
|  8 | Foreign currency exchange                                          | (17.1)               |         |      | -       |                     |         | (17.1) |    | -     |    |    |
|  9 | Net sales excluding divestitures and foreign currency exchange (A) | $                    | 7,981.8 |      |         | $                   | 7,570.9 |        | $  | 410.9 | 5  | %  |
Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.

  	Year Ended April 30,

  	2022		2021		% Increase(Decrease)

Net sales	$	7,998.9 			$	8,002.7 			- 	%

Gross profit	$	2,700.7 			$	3,138.7 			(14)

% of net sales	33.8 	%		39.2 	%

Operating income	$	1,023.8 			$	1,386.8 			(26)

% of net sales	12.8 	%		17.3 	%

Net income:

Net income	$	631.7 			$	876.3 			(28)

Net income per common share – assuming dilution	$	5.83 			$	7.79 			(25)

Adjusted gross profit (A)	$	2,744.6 			$	3,048.5 			(10)

% of net sales	34.3 	%		38.1 	%

Adjusted operating income (A)	$	1,440.1 			$	1,528.8 			(6)

% of net sales	18.0 	%		19.1 	%

Adjusted income: (A)

Income	$	962.2 			$	1,025.0 			(6)

Earnings per share – assuming dilution	$	8.88 			$	9.12 			(3)

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

Net Sales

	Year Ended April 30,

 	2022		2021		Increase  (Decrease)		  %

Net sales	$	7,998.9 			$	8,002.7 			$	(3.8)			- 	%

Crisco divestiture	- 			(198.9)			198.9 			2

Natural Balance divestiture	- 			(156.7)			156.7 			2

Private label dry pet food divestiture	- 			(40.7)			40.7 			1

Natural beverage and grains divestiture	- 			(35.5)			35.5 			-

Foreign currency exchange	(17.1)			- 			(17.1)			-

Net sales excluding divestitures and foreign currency exchange (A)	$	7,981.8 			$	7,570.9 			$	410.9 			5 	%

Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28


Question: What insights does the trend in Operating Profit Margin over fiscal years 2020, 2021, and 2022 provide about J.M. Smucker's operational efficiency and cost control?

The Operating Profit Margin declined from 17.3% in 2021 to 12.8% in 2022, continuing a downward trend over the past three years. This decline is primarily attributed to rising input and logistic costs, which were further exacerbated by supply chain disruptions. The impairment of the Rachael Ray Nutrish brand added to operating costs, reducing overall margin. The company's efforts to adjust pricing and manage costs were unable to fully counteract these pressures, signaling challenges in operational efficiency and cost control during a turbulent year.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.
|    |                                                 |                      |         |      |      |                      |         |      |    |
|---:|:------------------------------------------------|:---------------------|:--------|:-----|:-----|:---------------------|:--------|:-----|:---|
|  1 |                                                 | Year Ended April 30, |         |      |      |                      |         |      |    |
|  2 |                                                 | 2022                 |         | 2021 |      | % Increase(Decrease) |         |      |    |
|  3 | Net sales                                       | $                    | 7,998.9 |      |      | $                    | 8,002.7 | -    | %  |
|  4 | Gross profit                                    | $                    | 2,700.7 |      |      | $                    | 3,138.7 | (14) |    |
|  5 | % of net sales                                  | 33.8                 | %       |      | 39.2 | %                    |         |      |    |
|  6 | Operating income                                | $                    | 1,023.8 |      |      | $                    | 1,386.8 | (26) |    |
|  7 | % of net sales                                  | 12.8                 | %       |      | 17.3 | %                    |         |      |    |
|  8 | Net income:                                     |                      |         |      |      |                      |         |      |    |
|  9 | Net income                                      | $                    | 631.7   |      |      | $                    | 876.3   | (28) |    |
| 10 | Net income per common share – assuming dilution | $                    | 5.83    |      |      | $                    | 7.79    | (25) |    |
| 11 | Adjusted gross profit (A)                       | $                    | 2,744.6 |      |      | $                    | 3,048.5 | (10) |    |
| 12 | % of net sales                                  | 34.3                 | %       |      | 38.1 | %                    |         |      |    |
| 13 | Adjusted operating income (A)                   | $                    | 1,440.1 |      |      | $                    | 1,528.8 | (6)  |    |
| 14 | % of net sales                                  | 18.0                 | %       |      | 19.1 | %                    |         |      |    |
| 15 | Adjusted income: (A)                            |                      |         |      |      |                      |         |      |    |
| 16 | Income                                          | $                    | 962.2   |      |      | $                    | 1,025.0 | (6)  |    |
| 17 | Earnings per share – assuming dilution          | $                    | 8.88    |      |      | $                    | 9.12    | (3)  |    |
(A)We use non-GAAP financial measures to evaluate our performance. Refer to "Non-GAAP Financial Measures" in this discussion and analysis for a reconciliation to the comparable generally accepted accounting principles ("GAAP") financial measure.

Net Sales
|    |                                                                    |                      |         |      |         |                     |         |        |    |       |    |    |
|---:|:-------------------------------------------------------------------|:---------------------|:--------|:-----|:--------|:--------------------|:--------|:-------|:---|:------|:---|:---|
|  1 |                                                                    | Year Ended April 30, |         |      |         |                     |         |        |    |       |    |    |
|  2 |                                                                    | 2022                 |         | 2021 |         | Increase (Decrease) |         | %      |    |       |    |    |
|  3 | Net sales                                                          | $                    | 7,998.9 |      |         | $                   | 8,002.7 |        | $  | (3.8) | -  | %  |
|  4 | Crisco divestiture                                                 | -                    |         |      | (198.9) |                     |         | 198.9  |    | 2     |    |    |
|  5 | Natural Balance divestiture                                        | -                    |         |      | (156.7) |                     |         | 156.7  |    | 2     |    |    |
|  6 | Private label dry pet food divestiture                             | -                    |         |      | (40.7)  |                     |         | 40.7   |    | 1     |    |    |
|  7 | Natural beverage and grains divestiture                            | -                    |         |      | (35.5)  |                     |         | 35.5   |    | -     |    |    |
|  8 | Foreign currency exchange                                          | (17.1)               |         |      | -       |                     |         | (17.1) |    | -     |    |    |
|  9 | Net sales excluding divestitures and foreign currency exchange (A) | $                    | 7,981.8 |      |         | $                   | 7,570.9 |        | $  | 410.9 | 5  | %  |
Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.

  	Year Ended April 30,

  	2022		2021		% Increase(Decrease)

Net sales	$	7,998.9 			$	8,002.7 			- 	%

Gross profit	$	2,700.7 			$	3,138.7 			(14)

% of net sales	33.8 	%		39.2 	%

Operating income	$	1,023.8 			$	1,386.8 			(26)

% of net sales	12.8 	%		17.3 	%

Net income:

Net income	$	631.7 			$	876.3 			(28)

Net income per common share – assuming dilution	$	5.83 			$	7.79 			(25)

Adjusted gross profit (A)	$	2,744.6 			$	3,048.5 			(10)

% of net sales	34.3 	%		38.1 	%

Adjusted operating income (A)	$	1,440.1 			$	1,528.8 			(6)

% of net sales	18.0 	%		19.1 	%

Adjusted income: (A)

Income	$	962.2 			$	1,025.0 			(6)

Earnings per share – assuming dilution	$	8.88 			$	9.12 			(3)

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

Net Sales

	Year Ended April 30,

 	2022		2021		Increase  (Decrease)		  %

Net sales	$	7,998.9 			$	8,002.7 			$	(3.8)			- 	%

Crisco divestiture	- 			(198.9)			198.9 			2

Natural Balance divestiture	- 			(156.7)			156.7 			2

Private label dry pet food divestiture	- 			(40.7)			40.7 			1

Natural beverage and grains divestiture	- 			(35.5)			35.5 			-

Foreign currency exchange	(17.1)			- 			(17.1)			-

Net sales excluding divestitures and foreign currency exchange (A)	$	7,981.8 			$	7,570.9 			$	410.9 			5 	%

Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28


Question: What does the variation in Return on Assets (ROA) from 2021 to 2022 reveal about JM Smucker's effectiveness in utilizing its asset base to generate income?

The ROA for JM Smucker showed a decline in 2022, driven by a sharp reduction in net income while asset levels remained relatively constant. This decline reflects the company’s reduced efficiency in leveraging its assets to generate returns. The strain caused by higher costs, operational inefficiencies, and the financial implications of the Jif recall significantly impacted the company's ability to optimize its asset utilization.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.
|    |                                                 |                      |         |      |      |                      |         |      |    |
|---:|:------------------------------------------------|:---------------------|:--------|:-----|:-----|:---------------------|:--------|:-----|:---|
|  1 |                                                 | Year Ended April 30, |         |      |      |                      |         |      |    |
|  2 |                                                 | 2022                 |         | 2021 |      | % Increase(Decrease) |         |      |    |
|  3 | Net sales                                       | $                    | 7,998.9 |      |      | $                    | 8,002.7 | -    | %  |
|  4 | Gross profit                                    | $                    | 2,700.7 |      |      | $                    | 3,138.7 | (14) |    |
|  5 | % of net sales                                  | 33.8                 | %       |      | 39.2 | %                    |         |      |    |
|  6 | Operating income                                | $                    | 1,023.8 |      |      | $                    | 1,386.8 | (26) |    |
|  7 | % of net sales                                  | 12.8                 | %       |      | 17.3 | %                    |         |      |    |
|  8 | Net income:                                     |                      |         |      |      |                      |         |      |    |
|  9 | Net income                                      | $                    | 631.7   |      |      | $                    | 876.3   | (28) |    |
| 10 | Net income per common share – assuming dilution | $                    | 5.83    |      |      | $                    | 7.79    | (25) |    |
| 11 | Adjusted gross profit (A)                       | $                    | 2,744.6 |      |      | $                    | 3,048.5 | (10) |    |
| 12 | % of net sales                                  | 34.3                 | %       |      | 38.1 | %                    |         |      |    |
| 13 | Adjusted operating income (A)                   | $                    | 1,440.1 |      |      | $                    | 1,528.8 | (6)  |    |
| 14 | % of net sales                                  | 18.0                 | %       |      | 19.1 | %                    |         |      |    |
| 15 | Adjusted income: (A)                            |                      |         |      |      |                      |         |      |    |
| 16 | Income                                          | $                    | 962.2   |      |      | $                    | 1,025.0 | (6)  |    |
| 17 | Earnings per share – assuming dilution          | $                    | 8.88    |      |      | $                    | 9.12    | (3)  |    |
(A)We use non-GAAP financial measures to evaluate our performance. Refer to "Non-GAAP Financial Measures" in this discussion and analysis for a reconciliation to the comparable generally accepted accounting principles ("GAAP") financial measure.

Net Sales
|    |                                                                    |                      |         |      |         |                     |         |        |    |       |    |    |
|---:|:-------------------------------------------------------------------|:---------------------|:--------|:-----|:--------|:--------------------|:--------|:-------|:---|:------|:---|:---|
|  1 |                                                                    | Year Ended April 30, |         |      |         |                     |         |        |    |       |    |    |
|  2 |                                                                    | 2022                 |         | 2021 |         | Increase (Decrease) |         | %      |    |       |    |    |
|  3 | Net sales                                                          | $                    | 7,998.9 |      |         | $                   | 8,002.7 |        | $  | (3.8) | -  | %  |
|  4 | Crisco divestiture                                                 | -                    |         |      | (198.9) |                     |         | 198.9  |    | 2     |    |    |
|  5 | Natural Balance divestiture                                        | -                    |         |      | (156.7) |                     |         | 156.7  |    | 2     |    |    |
|  6 | Private label dry pet food divestiture                             | -                    |         |      | (40.7)  |                     |         | 40.7   |    | 1     |    |    |
|  7 | Natural beverage and grains divestiture                            | -                    |         |      | (35.5)  |                     |         | 35.5   |    | -     |    |    |
|  8 | Foreign currency exchange                                          | (17.1)               |         |      | -       |                     |         | (17.1) |    | -     |    |    |
|  9 | Net sales excluding divestitures and foreign currency exchange (A) | $                    | 7,981.8 |      |         | $                   | 7,570.9 |        | $  | 410.9 | 5  | %  |
Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 28:
Results of Operations

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for the years ended April 30, 2022 and 2021. For the comparisons of the years ended April 30, 2021 and 2020, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K.

  	Year Ended April 30,

  	2022		2021		% Increase(Decrease)

Net sales	$	7,998.9 			$	8,002.7 			- 	%

Gross profit	$	2,700.7 			$	3,138.7 			(14)

% of net sales	33.8 	%		39.2 	%

Operating income	$	1,023.8 			$	1,386.8 			(26)

% of net sales	12.8 	%		17.3 	%

Net income:

Net income	$	631.7 			$	876.3 			(28)

Net income per common share – assuming dilution	$	5.83 			$	7.79 			(25)

Adjusted gross profit (A)	$	2,744.6 			$	3,048.5 			(10)

% of net sales	34.3 	%		38.1 	%

Adjusted operating income (A)	$	1,440.1 			$	1,528.8 			(6)

% of net sales	18.0 	%		19.1 	%

Adjusted income: (A)

Income	$	962.2 			$	1,025.0 			(6)

Earnings per share – assuming dilution	$	8.88 			$	9.12 			(3)

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

Net Sales

	Year Ended April 30,

 	2022		2021		Increase  (Decrease)		  %

Net sales	$	7,998.9 			$	8,002.7 			$	(3.8)			- 	%

Crisco divestiture	- 			(198.9)			198.9 			2

Natural Balance divestiture	- 			(156.7)			156.7 			2

Private label dry pet food divestiture	- 			(40.7)			40.7 			1

Natural beverage and grains divestiture	- 			(35.5)			35.5 			-

Foreign currency exchange	(17.1)			- 			(17.1)			-

Net sales excluding divestitures and foreign currency exchange (A)	$	7,981.8 			$	7,570.9 			$	410.9 			5 	%

Amounts may not add due to rounding.
(A)Net sales excluding divestitures and foreign currency exchange is a non-GAAP financial measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis.
Net sales in 2022 was comparable to the prior year, which includes $431.8 of noncomparable net sales in the prior year related to divestitures. Net sales excluding divestitures and foreign currency exchange increased $410.9, or 5 percent, which was primarily due to higher net price realization across each of our U.S. Retail segments and for International and Away From Home, reflecting list price increases during 2022.
28


Question: How does the change in Gross Profit Margin in 2022 reflect the impact of inflation and fluctuating commodity prices on JM Smucker's profitability?

The decline in Gross Profit Margin from 39.2% to 33.8% in 2022 illustrates the significant impact of inflation on the company's cost structure. Rising costs for green coffee, oils, protein meals, and packaging materials, combined with elevated logistics expenses, eroded profitability. Pricing adjustments helped mitigate these effects but were insufficient to fully counteract the cost pressures. The impact of the Jif recall further compounded the challenges, highlighting the difficulty of maintaining margins during periods of high volatility.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 29:
Operating Income

The following table presents the components of operating income as a percentage of net sales. |    |                                                          |                      |    |      |       |    |
|---:|:---------------------------------------------------------|:---------------------|:---|:-----|:------|:---|
|  1 |                                                          | Year Ended April 30, |    |      |       |    |
|  2 |                                                          | 2022                 |    | 2021 |       |    |
|  3 | Gross profit                                             | 33.8                 | %  |      | 39.2  | %  |
|  4 | Selling, distribution, and administrative expenses:      |                      |    |      |       |    |
|  5 | Marketing                                                | 3.5                  | %  |      | 3.9   | %  |
|  6 | Advertising                                              | 2.2                  |    |      | 2.8   |    |
|  7 | Selling                                                  | 2.8                  |    |      | 3.0   |    |
|  8 | Distribution                                             | 3.6                  |    |      | 3.4   |    |
|  9 | General and administrative                               | 5.0                  |    |      | 5.9   |    |
| 10 | Total selling, distribution, and administrative expenses | 17.0                 | %  |      | 19.0  | %  |
| 11 | Amortization                                             | 2.8                  |    |      | 2.9   |    |
| 13 | Other intangible assets impairment charges               | 1.9                  |    |      | -     |    |
| 14 | Other special project costs                              | 0.1                  |    |      | 0.3   |    |
| 15 | Other operating expense (income) – net                   | (0.8)                |    |      | (0.4) |    |
| 16 | Operating income                                         | 12.8                 | %  |      | 17.3  | %  |
Amounts may not add due to rounding.
Gross profit decreased $438.0, or 14 percent, in 2022, reflecting higher costs, primarily driven by increased commodity and ingredient, transportation, packaging, and manufacturing costs, the noncomparable impact related to divestitures, the unfavorable impact of unsaleable inventory and estimated customer returns related to the Jif peanut butter recall, and unfavorable volume/mix, partially offset by higher net pricing.
Operating income decreased $363.0, or 26 percent, primarily reflecting the decrease in gross profit and a $150.4 intangible asset impairment charge in 2022 related to the Rachael Ray Nutrish brand, partially offset by a $162.8 decrease in selling, distribution, and administrative ("SD&A") expenses, primarily driven by lower marketing spend and incentive compensation expense. Further offsetting the decrease in operating income is a $36.7 increase in net other operating income, primarily reflecting an anticipated insurance recovery of $49.8, net of the deductible, related to the Jif peanut butter recall that mostly offsets the unfavorable impact of unsaleable inventory, estimated customer returns, and consumer refunds, as discussed in Note 15: Contingencies.
Our non-GAAP adjustments include amortization expense and impairment charges related to intangible assets, special project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other one-time items that do not directly reflect ongoing operating results. Refer to "Non-GAAP Financial Measures" in this discussion and analysis for additional information. Gross profit excluding non-GAAP adjustments ("adjusted gross profit") decreased $303.9, or 10 percent, in 2022, reflecting the exclusion of the change in net cumulative unallocated derivative gains and losses and special project costs, as compared to GAAP gross profit. Adjusted operating income decreased $88.7, or 6 percent, as compared to the prior year, further reflecting the exclusion of the impairment charge and net pre-tax gain on divestitures.

Interest Expense

Net interest expense decreased $16.2, or 9 percent, in 2022, primarily as a result of reduced debt outstanding as compared to the prior year. For additional information, see "Capital Resources" in this discussion and analysis.

Income Taxes

Income taxes decreased $83.5, or 28 percent, in 2022, as compared to the prior year. The effective income tax rate of 25.1 percent for 2022 varied from the U.S. statutory income tax rate of 21.0 percent primarily due to state income taxes, including an unfavorable one-time deferred tax impact of an internal legal entity simplification in the third quarter of 2022 to support multiple work locations for office-based employees and our continued strategic activities. The effective income tax rate of 25.2 percent for 2021 varied from the U.S. statutory income tax rate of 21.0 percent primarily due to the impact of state income taxes, as well as additional net income tax expense related to the divestitures of the Crisco and Natural Balance businesses. We anticipate a full-year effective income tax rate for 2023 to be approximately 24.2 percent. For additional information, refer to Note 13: Income Taxes.
29

J M SMUCKER Co 10-K form for the fiscal year ended 2022-04-30, page 29:
Operating Income

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

  	Year Ended April 30,

  	2022		2021

Gross profit	33.8 	%		39.2 	%

Selling, distribution, and administrative expenses:

Marketing	3.5 	%		3.9 	%

Advertising	2.2 			2.8

Selling	2.8 			3.0

Distribution	3.6 			3.4

General and administrative	5.0 			5.9

Total selling, distribution, and administrative expenses	17.0 	%		19.0 	%

Amortization	2.8 			2.9

Other intangible assets impairment charges	1.9 			-

Other special project costs	0.1 			0.3

Other operating expense (income) – net	(0.8)			(0.4)

Operating income	12.8 	%		17.3 	%

Amounts may not add due to rounding.
Gross profit decreased $438.0, or 14 percent, in 2022, reflecting higher costs, primarily driven by increased commodity and ingredient, transportation, packaging, and manufacturing costs, the noncomparable impact related to divestitures, the unfavorable impact of unsaleable inventory and estimated customer returns related to the Jif peanut butter recall, and unfavorable volume/mix, partially offset by higher net pricing.
Operating income decreased $363.0, or 26 percent, primarily reflecting the decrease in gross profit and a $150.4 intangible asset impairment charge in 2022 related to the Rachael Ray Nutrish brand, partially offset by a $162.8 decrease in selling, distribution, and administrative ("SD&A") expenses, primarily driven by lower marketing spend and incentive compensation expense. Further offsetting the decrease in operating income is a $36.7 increase in net other operating income, primarily reflecting an anticipated insurance recovery of $49.8, net of the deductible, related to the Jif peanut butter recall that mostly offsets the unfavorable impact of unsaleable inventory, estimated customer returns, and consumer refunds, as discussed in Note 15: Contingencies.
Our non-GAAP adjustments include amortization expense and impairment charges related to intangible assets, special project costs, gains and losses on divestitures, the change in net cumulative unallocated derivative gains and losses, and other one-time items that do not directly reflect ongoing operating results. Refer to "Non-GAAP Financial Measures" in this discussion and analysis for additional information. Gross profit excluding non-GAAP adjustments ("adjusted gross profit") decreased $303.9, or 10 percent, in 2022, reflecting the exclusion of the change in net cumulative unallocated derivative gains and losses and special project costs, as compared to GAAP gross profit. Adjusted operating income decreased $88.7, or 6 percent, as compared to the prior year, further reflecting the exclusion of the impairment charge and net pre-tax gain on divestitures.

Interest Expense

Net interest expense decreased $16.2, or 9 percent, in 2022, primarily as a result of reduced debt outstanding as compared to the prior year. For additional information, see "Capital Resources" in this discussion and analysis.

Income Taxes

Income taxes decreased $83.5, or 28 percent, in 2022, as compared to the prior year. The effective income tax rate of 25.1 percent for 2022 varied from the U.S. statutory income tax rate of 21.0 percent primarily due to state income taxes, including an unfavorable one-time deferred tax impact of an internal legal entity simplification in the third quarter of 2022 to support multiple work locations for office-based employees and our continued strategic activities. The effective income tax rate of 25.2 percent for 2021 varied from the U.S. statutory income tax rate of 21.0 percent primarily due to the impact of state income taxes, as well as additional net income tax expense related to the divestitures of the Crisco and Natural Balance businesses. We anticipate a full-year effective income tax rate for 2023 to be approximately 24.2 percent. For additional information, refer to Note 13: Income Taxes.
29


Question: What does the change in gross profit margin for Discover Financial Services in 2023 compared to the previous year indicate about its profitability?

Analysis of Gross Profit and Gross Profit Margin: 2022 vs. 2023

Gross profit is defined here as the sum of net interest income (after provision for credit losses) and total other income. This measure represents the company's revenue after covering direct costs, such as interest expenses and credit loss provisions, but before accounting for operating expenses.

Gross Profit Calculations
For 2023:

Net Interest Income (after provision for credit losses): $7,081 million
Total Other Income: $2,761 million
Gross Profit: $7,081 million + $2,761 million = $9,842 million
For 2022:

Net Interest Income (after provision for credit losses): $8,640 million
Total Other Income: $2,294 million
Gross Profit: $8,640 million + $2,294 million = $10,934 million
Total Revenue Calculations
For 2023:

Total Interest Income: $17,845 million
Total Other Income: $2,761 million
Total Revenue: $17,845 million + $2,761 million = $20,606 million
For 2022:

Total Interest Income: $12,864 million
Total Other Income: $2,294 million
Total Revenue: $12,864 million + $2,294 million = $15,158 million
Gross Profit Margin
The gross profit margin is calculated as:

Gross Profit Margin=( Gross Profit/Total Revenue )×100
For 2023:
Gross Profit Margin=(9,842/20,606 )×100≈47.8%
For 2022:
Gross Profit Margin=(10,934/15,158 )×100≈72.1%
Analysis and Interpretation
The gross profit margin experienced a significant decline from 72.1% in 2022 to 47.8% in 2023, indicating a notable reduction in profitability. This drop suggests the company faced challenges in maintaining its cost-efficiency or revenue growth. Possible factors contributing to this decline include:

-Higher interest expenses
-Increased provisions for credit losses
-Operational inefficiencies

The substantial margin decrease raises concerns about the company's financial stability and efficiency. Further investigation into these trends is recommended to identify specific drivers and determine strategies to address declining profitability.

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-


Question: How efficiently is NVIDIA utilizing its assets and managing its inventory and receivables in 2024 compared to 2023?

In 2024, NVIDIA demonstrated improved efficiency in utilizing its assets and managing its inventory and receivables compared to 2023. The key efficiency metrics indicate the following trends:

1. Inventory Turnover Ratio: Increased from 2.23 in 2023 to 3.18 in 2024, showing that NVIDIA is turning over its inventory more frequently, which is a positive sign of inventory management efficiency.

2. Days Sales of Inventory (DSI): Decreased from 164.0 days in 2023 to 114.6 days in 2024, indicating that the company is selling its inventory faster.

3. Receivables Turnover Ratio: Increased from 3.90 in 2023 to 8.81 in 2024, suggesting that NVIDIA is collecting its receivables more efficiently.

4. Days Sales Outstanding (DSO): Increased from 51.8 days in 2023 to 59.9 days in 2024, indicating a slight delay in collecting receivables, which may need attention.

5. Payables Turnover Ratio: Increased from 5.97 in 2023 to 8.54 in 2024, showing that the company is paying its suppliers more quickly.

6. Days Payable Outstanding (DPO): Increased from 37.5 days in 2023 to 59.2 days in 2024, indicating that NVIDIA is taking longer to pay its suppliers, which can be a strategic move to manage cash flow.

7. Asset Turnover Ratio: Increased from 0.50 in 2023 to 1.14 in 2024, reflecting better utilization of total assets to generate sales.

8. Fixed Asset Turnover Ratio: Increased from 6.99 in 2023 to 15.78 in 2024, indicating more efficient use of fixed assets to generate revenue.

9. Net Working Capital Turnover Ratio: Increased from 1.63 in 2023 to 1.81 in 2024, showing improved efficiency in using working capital to generate sales.

Overall, NVIDIA has shown significant improvements in most efficiency metrics, indicating better management of its resources and enhanced operational efficiency in 2024 compared to 2023. However, the increase in DSO suggests that the company may need to focus on improving its receivables collection process.

Item 15. Exhibit and Financial Statement Schedules

NVIDIA CORP 10-K form for the fiscal year ended 2024-01-28, page 50:
NVIDIA Corporation and Subsidiaries

Consolidated Statements of Income

(In millions, except per share data)

	Year Ended

	Jan 28, 2024		Jan 29, 2023		Jan 30, 2022

Revenue	$	60,922 			$	26,974 			$	26,914

Cost of revenue	16,621 			11,618 			9,439

Gross profit	44,301 			15,356 			17,475

Operating expenses

Research and development	8,675 			7,339 			5,268

Sales, general and administrative	2,654 			2,440 			2,166

Acquisition termination cost	- 			1,353 			-

Total operating expenses	11,329 			11,132 			7,434

Operating income	32,972 			4,224 			10,041

Interest income	866 			267 			29

Interest expense	(257)			(262)			(236)

Other, net	237 			(48)			107

Other income (expense), net	846 			(43)			(100)

Income before income tax	33,818 			4,181 			9,941

Income tax expense (benefit)	4,058 			(187)			189

Net income	$	29,760 			$	4,368 			$	9,752

Net income per share:

Basic	$	12.05 			$	1.76 			$	3.91

Diluted	$	11.93 			$	1.74 			$	3.85

Weighted average shares used in per share computation:

Basic	2,469 			2,487 			2,496

Diluted	2,494 			2,507 			2,535

See accompanying notes to the consolidated financial statements.
50

, NVIDIA CORP 10-K form for the fiscal year ended 2024-01-28, page 52:
NVIDIA Corporation and Subsidiaries

Consolidated Balance Sheets

(In millions, except par value)

 	Jan 28, 2024		Jan 29, 2023

Assets

Current assets:

Cash and cash equivalents	$	7,280 			$	3,389

Marketable securities	18,704 			9,907

Accounts receivable, net	9,999 			3,827

Inventories	5,282 			5,159

Prepaid expenses and other current assets	3,080 			791

Total current assets	44,345 			23,073

Property and equipment, net	3,914 			3,807

Operating lease assets	1,346 			1,038

Goodwill	4,430 			4,372

Intangible assets, net	1,112 			1,676

Deferred income tax assets	6,081 			3,396

Other assets	4,500 			3,820

Total assets	$	65,728 			$	41,182

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable	$	2,699 			$	1,193

Accrued and other current liabilities	6,682 			4,120

Short-term debt	1,250 			1,250

Total current liabilities	10,631 			6,563

Long-term debt	8,459 			9,703

Long-term operating lease liabilities 	1,119 			902

Other long-term liabilities	2,541 			1,913

Total liabilities	22,750 			19,081

Commitments and contingencies - see Note 13

Shareholders' equity:

Preferred stock, $0.001 par value; 2 shares authorized; none issued	- 			-

Common stock, $0.001 par value; 8,000 shares authorized; 2,464 shares issued and outstanding as of January 28, 2024; 2,466 shares issued and outstanding as of January 29, 2023	2 			2

Additional paid-in capital	13,132 			11,971

 Accumulated other comprehensive income (loss)	27 			(43)

Retained earnings	29,817 			10,171

Total shareholders' equity	42,978 			22,101

Total liabilities and shareholders' equity	$	65,728 			$	41,182

See accompanying notes to the consolidated financial statements.
52

NVIDIA Corporation and Subsidiaries

Consolidated Statements of Income

(In millions, except per share data)

	Year Ended

	Jan 28, 2024		Jan 29, 2023		Jan 30, 2022

Revenue	$	60,922 			$	26,974 			$	26,914

Cost of revenue	16,621 			11,618 			9,439

Gross profit	44,301 			15,356 			17,475

Operating expenses

Research and development	8,675 			7,339 			5,268

Sales, general and administrative	2,654 			2,440 			2,166

Acquisition termination cost	- 			1,353 			-

Total operating expenses	11,329 			11,132 			7,434

Operating income	32,972 			4,224 			10,041

Interest income	866 			267 			29

Interest expense	(257)			(262)			(236)

Other, net	237 			(48)			107

Other income (expense), net	846 			(43)			(100)

Income before income tax	33,818 			4,181 			9,941

Income tax expense (benefit)	4,058 			(187)			189

Net income	$	29,760 			$	4,368 			$	9,752

Net income per share:

Basic	$	12.05 			$	1.76 			$	3.91

Diluted	$	11.93 			$	1.74 			$	3.85

Weighted average shares used in per share computation:

Basic	2,469 			2,487 			2,496

Diluted	2,494 			2,507 			2,535

See accompanying notes to the consolidated financial statements.
50

,
NVIDIA Corporation and Subsidiaries

Consolidated Balance Sheets

(In millions, except par value)

 	Jan 28, 2024		Jan 29, 2023

Assets

Current assets:

Cash and cash equivalents	$	7,280 			$	3,389

Marketable securities	18,704 			9,907

Accounts receivable, net	9,999 			3,827

Inventories	5,282 			5,159

Prepaid expenses and other current assets	3,080 			791

Total current assets	44,345 			23,073

Property and equipment, net	3,914 			3,807

Operating lease assets	1,346 			1,038

Goodwill	4,430 			4,372

Intangible assets, net	1,112 			1,676

Deferred income tax assets	6,081 			3,396

Other assets	4,500 			3,820

Total assets	$	65,728 			$	41,182

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable	$	2,699 			$	1,193

Accrued and other current liabilities	6,682 			4,120

Short-term debt	1,250 			1,250

Total current liabilities	10,631 			6,563

Long-term debt	8,459 			9,703

Long-term operating lease liabilities 	1,119 			902

Other long-term liabilities	2,541 			1,913

Total liabilities	22,750 			19,081

Commitments and contingencies - see Note 13

Shareholders' equity:

Preferred stock, $0.001 par value; 2 shares authorized; none issued	- 			-

Common stock, $0.001 par value; 8,000 shares authorized; 2,464 shares issued and outstanding as of January 28, 2024; 2,466 shares issued and outstanding as of January 29, 2023	2 			2

Additional paid-in capital	13,132 			11,971

 Accumulated other comprehensive income (loss)	27 			(43)

Retained earnings	29,817 			10,171

Total shareholders' equity	42,978 			22,101

Total liabilities and shareholders' equity	$	65,728 			$	41,182

See accompanying notes to the consolidated financial statements.
52


Question: How has Nike's working capital changed from 2017 to 2018, and what does this indicate about its operational efficiency?

To calculate Nike's working capital and its change over the past year:

Formula:
Working Capital = Current Assets - Current Liabilities

Data from the document:

Current Assets (2018) = $15,134 million
Current Liabilities (2018) = $6,040 million
Current Assets (2017) = $16,061 million
Current Liabilities (2017) = $5,474 million
Calculation:
2018 Working Capital = 15,134 - 6,040 = $9,094 million
2017 Working Capital = 16,061 - 5,474 = $10,587 million
Change in Working Capital = 9,094 - 10,587 = -$1,493 million

Implications:
Nike's working capital decreased by $1,493 million from 2017 to 2018. This reduction may reflect tighter management of current assets and liabilities, improved operational efficiency, or a strategic shift in liquidity.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 46:

NIKE, Inc. Consolidated Balance Sheets

 	 	May 31,

(In millions)	 	2018	 	2017

ASSETS

Current assets:

Cash and equivalents	 	$	4,249		 	$	3,808

Short-term investments	 	996		 	2,371

Accounts receivable, net	 	3,498		 	3,677

Inventories	 	5,261		 	5,055

Prepaid expenses and other current assets	 	1,130		 	1,150

Total current assets	 	15,134		 	16,061

Property, plant and equipment, net	 	4,454		 	3,989

Identifiable intangible assets, net	 	285		 	283

Goodwill	 	154		 	139

Deferred income taxes and other assets	 	2,509		 	2,787

TOTAL ASSETS	 	$	22,536		 	$	23,259

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt	 	$	6		 	$	6

Notes payable	 	336		 	325

Accounts payable	 	2,279		 	2,048

Accrued liabilities	 	3,269		 	3,011

Income taxes payable	 	150		 	84

Total current liabilities	 	6,040		 	5,474

Long-term debt	 	3,468		 	3,471

Deferred income taxes and other liabilities	 	3,216		 	1,907

Commitments and contingencies (Note 15)

Redeemable preferred stock	 	-		 	-

Shareholders' equity:

Common stock at stated value:

Class A convertible - 329 and 329 shares outstanding	 	-		 	-

Class B - 1,272 and 1,314 shares outstanding	 	3		 	3

Capital in excess of stated value	 	6,384		 	5,710

Accumulated other comprehensive loss	 	(92	)	 	(213	)

Retained earnings	 	3,517		 	6,907

Total shareholders' equity	 	9,812		 	12,407

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	 	$	22,536		 	$	23,259

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

46


Question: What has been the trend in Nike's Capital Expenditure (CapEx) from 2016 to 2018, and what do the financial statements suggest about the reasons behind this trend?

Nike's Capital Expenditure (CapEx) trend over the years is as follows:

2018: $1,028 million
2017: $1,105 million
2016: $1,143 million
Interpretation:
The data reflects a gradual decrease in CapEx from 2016 to 2018. According to the financial statements, this trend suggests that Nike is optimizing its investments in property, plant, and equipment. It also reflects a potential shift in strategic focus towards digital capabilities and NIKE Direct stores, as stated in their investment plans

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 47:

NIKE, Inc. Consolidated Statements of Cash Flows

 	 	Year Ended May 31,

(In millions)	 	2018	 	2017	 	2016

Cash provided by operations:

Net income	 	$	1,933		 	$	4,240		 	$	3,760

Adjustments to reconcile net income to net cash provided by operations:

Depreciation	 	747		 	706		 	649

Deferred income taxes	 	647		 	(273	)	 	(80	)

Stock-based compensation	 	218		 	215		 	236

Amortization and other	 	27		 	10		 	13

Net foreign currency adjustments	 	(99	)	 	(117	)	 	98

Changes in certain working capital components and other assets and liabilities:

Decrease (increase) in accounts receivable	 	187		 	(426	)	 	60

(Increase) in inventories	 	(255	)	 	(231	)	 	(590	)

Decrease (increase) in prepaid expenses and other current and non-current assets	 	35		 	(120	)	 	(161	)

Increase (decrease) in accounts payable, accrued liabilities and other current and non-current liabilities	 	1,515		 	(158	)	 	(586	)

Cash provided by operations	 	4,955		 	3,846		 	3,399

Cash provided (used) by investing activities:

Purchases of short-term investments	 	(4,783	)	 	(5,928	)	 	(5,367	)

Maturities of short-term investments	 	3,613		 	3,623		 	2,924

Sales of short-term investments	 	2,496		 	2,423		 	2,386

Investments in reverse repurchase agreements	 	-		 	-		 	150

Additions to property, plant and equipment	 	(1,028	)	 	(1,105	)	 	(1,143	)

Disposals of property, plant and equipment	 	3		 	13		 	10

Other investing activities	 	(25	)	 	(34	)	 	6

Cash provided (used) by investing activities	 	276		 	(1,008	)	 	(1,034	)

Cash used by financing activities:

Net proceeds from long-term debt issuance	 	-		 	1,482		 	981

Long-term debt payments, including current portion	 	(6	)	 	(44	)	 	(106	)

Increase (decrease) in notes payable	 	13		 	327		 	(67	)

Payments on capital lease and other financing obligations	 	(23	)	 	(17	)	 	(7	)

Proceeds from exercise of stock options and other stock issuances	 	733		 	489		 	507

Repurchase of common stock	 	(4,254	)	 	(3,223	)	 	(3,238	)

Dividends - common and preferred	 	(1,243	)	 	(1,133	)	 	(1,022	)

Tax payments for net share settlement of equity awards	 	(55	)	 	(29	)	 	(22	)

Cash used by financing activities	 	(4,835	)	 	(2,148	)	 	(2,974	)

Effect of exchange rate changes on cash and equivalents	 	45		 	(20	)	 	(105	)

Net increase (decrease) in cash and equivalents	 	441		 	670		 	(714	)

Cash and equivalents, beginning of year	 	3,808		 	3,138		 	3,852

CASH AND EQUIVALENTS, END OF YEAR	 	$	4,249		 	$	3,808		 	$	3,138

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Interest, net of capitalized interest	 	$	125		 	$	98		 	$	70

Income taxes	 	529		 	703		 	748

Non-cash additions to property, plant and equipment	 	294		 	266		 	252

Dividends declared and not paid	 	320		 	300		 	271

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

47


Question: How did Nike's long-term debt structure in 2018 compare to 2017, and what does this indicate about the company's liquidity and financial strategy?

2018 Long-Term Debt Structure

May 1, 2023: $500 million at 2.25%
November 1, 2026: $1,000 million at 2.38%
May 1, 2043: $500 million at 3.63%
November 1, 2045: $1,000 million at 3.88%
November 1, 2046: $500 million at 3.38%
The total long-term debt for 2018 was $3,468 million.

2017 Long-Term Debt Structure
Debt structure and amounts were consistent with 2018, with a total of $3,471 million in long-term debt outstanding, reflecting minor changes due to adjustments in debt issuance costs or other accounting treatments.

Comparison and Liquidity Impact
The debt structure for both years indicates that Nike maintained stable long-term debt levels, with the majority of repayments scheduled far in the future (2023 and beyond). This structure minimizes near-term repayment pressures, ensuring strong liquidity and flexibility to invest in strategic initiatives. Nike's ample cash reserves further support this stable liquidity position.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 59:

NOTE 8 - Long-Term Debt

Long-term debt, net of unamortized premiums, discounts and debt issuance costs, comprises the following:

 	 	 	 	 	 	 	 	Book Value Outstandingas of May 31,

Scheduled Maturity (Dollars and Yen in millions)	 	OriginalPrincipal	 	InterestRate	 	InterestPayments	 	2018	 	2017

Corporate Bond Payables:(1)(2)

May 1, 2023	 	$	500		 	2.25	%	 	Semi-Annually	 	$	498		 	$	497

November 1, 2026	 	$	1,000		 	2.38	%	 	Semi-Annually	 	994		 	993

May 1, 2043	 	$	500		 	3.63	%	 	Semi-Annually	 	495		 	495

November 1, 2045	 	$	1,000		 	3.88	%	 	Semi-Annually	 	982		 	981

November 1, 2046	 	$	500		 	3.38	%	 	Semi-Annually	 	490		 	490

Japanese Yen Notes:(3)

August 20, 2001 through November 20, 2020	 	¥	9,000		 	2.60	%	 	Quarterly	 	10		 	14

August 20, 2001 through November 20, 2020	 	¥	4,000		 	2.00	%	 	Quarterly	 	5		 	7

Total	 	 	 	 	 	 	 	3,474		 	3,477

Less current maturities	 	 		 	 		 	 	 	6		 	6

TOTAL LONG-TERM DEBT	 	 	 	 	 	 	 	$	3,468		 	$	3,471

(1)	These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.

(2)	The bonds are redeemable at the Company's option up to three months prior to the scheduled maturity date for the bonds maturing in 2023 and 2026, and up to six months prior to the scheduled maturity date for the bonds maturing in 2043, 2045 and 2046, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Within three and six months to scheduled maturity, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.

(3)	NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period August 20, 2001 through November 20, 2020.

The scheduled maturity of Long-term debt in each of the years ending May 31, 2019 through 2023 are $6 million, $6 million, $3 million, $0 million and $500 million, respectively, at face value.
The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of Long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company's Long-term debt, including the current portion, was approximately $3,294 million at May 31, 2018 and $3,401 million at May 31, 2017.

NOTE 9 - Income Taxes

Income before income taxes is as follows:

 	 	Year Ended May 31,

(In millions)	 	2018	 	2017	 	2016

Income before income taxes:

United States	 	$	744		 	$	1,240		 	$	956

Foreign	 	3,581		 	3,646		 	3,667

TOTAL INCOME BEFORE INCOME TAXES	 	$	4,325		 	$	4,886		 	$	4,623

59


Question: How has Nike's dividend payout ratio changed from 2017 to 2018, and what does it reflect about its dividend policy?

Based on Nike's 2018 financial statements:

2018 Dividend Payout Ratio:

Dividend per Share (2018): $0.78
Earnings per Share (EPS, 2018): $1.17
Payout Ratio (2018): ($0.78 / $1.17) × 100 ≈ 66.67%
2017 Dividend Payout Ratio:

Dividend per Share (2017): $0.70
Earnings per Share (EPS, 2017): $2.51
Payout Ratio (2017): ($0.70 / $2.51) × 100 ≈ 27.89%
Comparison and Interpretation:
Nike’s dividend payout ratio increased significantly from 27.89% in 2017 to 66.67% in 2018. This substantial rise reflects a strategic shift to distribute a larger portion of earnings to shareholders, despite the decline in net income in 2018. This increase highlights Nike's commitment to returning value to shareholders while maintaining financial flexibility

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 44:

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44


Question: How did cash paid for interest by Nike Inc. in 2018 compare to 2017, and what does this suggest about Nike's borrowing costs?

Interest Paid 2018: $125 million
Interest Paid 2017: $98 million

Formula:
Percentage Change in Interest Paid = ((Interest Paid 2018 - Interest Paid 2017) / Interest Paid 2017) × 100

Calculation:
Percentage Change = ((125 - 98) / 98) × 100
Percentage Change = (27 / 98) × 100 ≈ 27.55%

Answer:
Cash paid for interest increased by approximately 27.55% from 2017 to 2018. This suggests that borrowing costs may have risen due to higher outstanding debt or increased interest rates during the period. Additionally, this could reflect the full-year impact of long-term debt issued in 2017, which increased total interest obligations.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 47:

NIKE, Inc. Consolidated Statements of Cash Flows

 	 	Year Ended May 31,

(In millions)	 	2018	 	2017	 	2016

Cash provided by operations:

Net income	 	$	1,933		 	$	4,240		 	$	3,760

Adjustments to reconcile net income to net cash provided by operations:

Depreciation	 	747		 	706		 	649

Deferred income taxes	 	647		 	(273	)	 	(80	)

Stock-based compensation	 	218		 	215		 	236

Amortization and other	 	27		 	10		 	13

Net foreign currency adjustments	 	(99	)	 	(117	)	 	98

Changes in certain working capital components and other assets and liabilities:

Decrease (increase) in accounts receivable	 	187		 	(426	)	 	60

(Increase) in inventories	 	(255	)	 	(231	)	 	(590	)

Decrease (increase) in prepaid expenses and other current and non-current assets	 	35		 	(120	)	 	(161	)

Increase (decrease) in accounts payable, accrued liabilities and other current and non-current liabilities	 	1,515		 	(158	)	 	(586	)

Cash provided by operations	 	4,955		 	3,846		 	3,399

Cash provided (used) by investing activities:

Purchases of short-term investments	 	(4,783	)	 	(5,928	)	 	(5,367	)

Maturities of short-term investments	 	3,613		 	3,623		 	2,924

Sales of short-term investments	 	2,496		 	2,423		 	2,386

Investments in reverse repurchase agreements	 	-		 	-		 	150

Additions to property, plant and equipment	 	(1,028	)	 	(1,105	)	 	(1,143	)

Disposals of property, plant and equipment	 	3		 	13		 	10

Other investing activities	 	(25	)	 	(34	)	 	6

Cash provided (used) by investing activities	 	276		 	(1,008	)	 	(1,034	)

Cash used by financing activities:

Net proceeds from long-term debt issuance	 	-		 	1,482		 	981

Long-term debt payments, including current portion	 	(6	)	 	(44	)	 	(106	)

Increase (decrease) in notes payable	 	13		 	327		 	(67	)

Payments on capital lease and other financing obligations	 	(23	)	 	(17	)	 	(7	)

Proceeds from exercise of stock options and other stock issuances	 	733		 	489		 	507

Repurchase of common stock	 	(4,254	)	 	(3,223	)	 	(3,238	)

Dividends - common and preferred	 	(1,243	)	 	(1,133	)	 	(1,022	)

Tax payments for net share settlement of equity awards	 	(55	)	 	(29	)	 	(22	)

Cash used by financing activities	 	(4,835	)	 	(2,148	)	 	(2,974	)

Effect of exchange rate changes on cash and equivalents	 	45		 	(20	)	 	(105	)

Net increase (decrease) in cash and equivalents	 	441		 	670		 	(714	)

Cash and equivalents, beginning of year	 	3,808		 	3,138		 	3,852

CASH AND EQUIVALENTS, END OF YEAR	 	$	4,249		 	$	3,808		 	$	3,138

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Interest, net of capitalized interest	 	$	125		 	$	98		 	$	70

Income taxes	 	529		 	703		 	748

Non-cash additions to property, plant and equipment	 	294		 	266		 	252

Dividends declared and not paid	 	320		 	300		 	271

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

47


Question: How did Nike Inc.'s repurchase of Class B common stock in 2018 compare to 2017, and what does this indicate about Nike Inc.'s share buyback strategy?

Repurchase of Class B Common Stock 2018: $4,013 million
Repurchase of Class B Common Stock 2017: $3,060 million

Formula:
Percentage Change in Repurchase = ((Repurchase 2018 - Repurchase 2017) / Repurchase 2017) × 100

Calculation:
Percentage Change = ((4,013 - 3,060) / 3,060) × 100
Percentage Change = (953 / 3,060) × 100 ≈ 31.14%

Answer:
The repurchase of Class B common stock increased by approximately 31.14% from 2017 to 2018. This indicates that Nike significantly accelerated its share buyback strategy in 2018, reflecting a stronger commitment to returning value to shareholders. It may also signal confidence in the company’s financial performance and future prospects, or it could have been used to offset dilution from stock-based compensation.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 48:

NIKE, Inc. Consolidated Statements of Shareholders' Equity

 	 	Common Stock	 	Capital inExcessof StatedValue	 	AccumulatedOtherComprehensiveIncome	 	RetainedEarnings	 	Total

 	 	Class A	 	Class B

(In millions, except per share data)	 	Shares	 	Amount	 	Shares	 	Amount

Balance at May 31, 2015	 	355		 	$	-		 	1,357		 	$	3		 	$	4,165		 	$	1,246		 	$	7,293		 	$	12,707

Stock options exercised	 	 	 	 	 	22		 	 	 	680		 	 	 	 	 	680

Conversion to Class B Common Stock	 	(2	)	 	-		 	2		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(55	)	 	 	 	(148	)	 	 	 	(3,090	)	 	(3,238	)

Dividends on common stock ($0.62 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,053	)	 	(1,053	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	3		 	 	 	105		 	 	 	(11	)	 	94

Stock-based compensation	 	 	 	 	 	 	 	 	 	236		 	 	 	 	 	236

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	3,760		 	3,760

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(928	)	 	 	 	(928	)

Balance at May 31, 2016	 	353		 	$	-		 	1,329		 	$	3		 	$	5,038		 	$	318		 	$	6,899		 	$	12,258

Stock options exercised	 	 	 	 	 	17		 	 	 	525		 	 	 	 	 	525

Conversion to Class B Common Stock	 	(24	)	 	-		 	24		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(60	)	 	 	 	(189	)	 	 	 	(3,060	)	 	(3,249	)

Dividends on common stock ($0.70 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,159	)	 	(1,159	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	121		 	 	 	(13	)	 	108

Stock-based compensation	 	 	 	 	 	 	 	 	 	215		 	 	 	 	 	215

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	4,240		 	4,240

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(531	)	 	 	 	(531	)

Balance at May 31, 2017	 	329		 	$	-		 	1,314		 	$	3		 	$	5,710		 	$	(213	)	 	$	6,907		 	$	12,407

Stock options exercised	 	 	 	 	 	24		 	 	 	600		 	 	 	 	 	600

Conversion to Class B Common Stock	 	-		 	-		 	-		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(70	)	 	 	 	(254	)	 	 	 	(4,013	)	 	(4,267	)

Dividends on common stock ($0.78 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,265	)	 	(1,265	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	110		 	 	 	(28	)	 	82

Stock-based compensation	 	 	 	 	 	 	 	 	 	218		 	 	 	 	 	218

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	1,933		 	1,933

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	104		 	 	 	104

Reclassifications to retained earnings in accordance with ASU 2018-02	 	 	 	 	 	 	 	 	 	 	 	17		 	(17	)	 	-

Balance at May 31, 2018	 	329		 	$	-		 	1,272		 	$	3		 	$	6,384		 	$	(92	)	 	$	3,517		 	$	9,812

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

48


Question: How did the marketing expenses for American Express and Discover Financial Services change from 2021 to 2023, and what does this indicate about their marketing strategies?

American Express's marketing expenses were relatively stable, with $5,291 million in 2021, $5,458 million in 2022, and $5,213 million in 2023. This stability suggests a consistent investment in marketing efforts to maintain or grow their market presence. In contrast, Discover Financial Services' marketing and business development expenses increased from $810 million in 2021 to $1,035 million in 2022, and to $1,164 million in 2023. This upward trend indicates a more aggressive marketing strategy, with increasing investments to potentially expand their customer base or enhance brand recognition. The comparison shows that while American Express maintained a steady marketing expenditure, Discover Financial Services significantly ramped up its marketing investments, reflecting different strategic approaches to market growth and customer acquisition.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA;Item 8.    Financial Statements and Supplementary Data

AMERICAN EXPRESS CO 10-K form for the fiscal year ended 2023-12-31, page 94:
CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31 (Millions, except per share amounts)		2023		2022		2021

Revenues

Non-interest revenues

Discount revenue		$	33,416 			$	30,739 			$	24,563

Net card fees		7,255 			6,070 			5,195

Service fees and other revenue		5,005 			4,521 			3,316

Processed revenue		1,705 			1,637 			1,556

Total non-interest revenues		47,381 			42,967 			34,630

Interest income

Interest on loans		17,697 			11,967 			8,850

Interest and dividends on investment securities		128 			96 			83

Deposits with banks and other		2,158 			595 			100

Total interest income		19,983 			12,658 			9,033

Interest expense

Deposits		4,865 			1,527 			458

Long-term debt and other		1,984 			1,236 			825

Total interest expense		6,849 			2,763 			1,283

Net interest income		13,134 			9,895 			7,750

Total revenues net of interest expense		60,515 			52,862 			42,380

Provisions for credit losses

Card Member receivables		880 			627 			(73)

Card Member loans		3,839 			1,514 			(1,155)

Other		204 			41 			(191)

Total provisions for credit losses		4,923 			2,182 			(1,419)

Total revenues net of interest expense after provisions for credit losses		55,592 			50,680 			43,799

Expenses

Card Member rewards		15,367 			14,002 			11,007

Business development		5,657 			4,943 			3,762

Card Member services		3,968 			2,959 			1,993

Marketing		5,213 			5,458 			5,291

Salaries and employee benefits		8,067 			7,252 			6,240

Other, net		6,807 			6,481 			4,817

Total expenses		45,079 			41,095 			33,110

Pretax income		10,513 			9,585 			10,689

Income tax provision		2,139 			2,071 			2,629

Net income		$	8,374 			$	7,514 			$	8,060

Earnings per Common Share - (Note 21)(a)

Basic		$	11.23 			$	9.86 			$	10.04

Diluted		$	11.21 			$	9.85 			$	10.02

Average common shares outstanding for earnings per common share:

Basic		 			751 			789

Diluted		 			752 			790

(a)Represents net income less (i) earnings allocated to participating share awards of $64 million, $57 million and $56 million for the years ended December 31, 2023, 2022 and 2021, respectively, (ii) dividends on preferred shares of $58 million, $57 million and $71 million for the years ended December 31, 2023, 2022 and 2021, respectively, and (iii) equity-related adjustments of $16 million related to the redemption of preferred shares for the year ended December 31, 2021.

See Notes to Consolidated Financial Statements.

94

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31 (Millions, except per share amounts)		2023		2022		2021

Revenues

Non-interest revenues

Discount revenue		$	33,416 			$	30,739 			$	24,563

Net card fees		7,255 			6,070 			5,195

Service fees and other revenue		5,005 			4,521 			3,316

Processed revenue		1,705 			1,637 			1,556

Total non-interest revenues		47,381 			42,967 			34,630

Interest income

Interest on loans		17,697 			11,967 			8,850

Interest and dividends on investment securities		128 			96 			83

Deposits with banks and other		2,158 			595 			100

Total interest income		19,983 			12,658 			9,033

Interest expense

Deposits		4,865 			1,527 			458

Long-term debt and other		1,984 			1,236 			825

Total interest expense		6,849 			2,763 			1,283

Net interest income		13,134 			9,895 			7,750

Total revenues net of interest expense		60,515 			52,862 			42,380

Provisions for credit losses

Card Member receivables		880 			627 			(73)

Card Member loans		3,839 			1,514 			(1,155)

Other		204 			41 			(191)

Total provisions for credit losses		4,923 			2,182 			(1,419)

Total revenues net of interest expense after provisions for credit losses		55,592 			50,680 			43,799

Expenses

Card Member rewards		15,367 			14,002 			11,007

Business development		5,657 			4,943 			3,762

Card Member services		3,968 			2,959 			1,993

Marketing		5,213 			5,458 			5,291

Salaries and employee benefits		8,067 			7,252 			6,240

Other, net		6,807 			6,481 			4,817

Total expenses		45,079 			41,095 			33,110

Pretax income		10,513 			9,585 			10,689

Income tax provision		2,139 			2,071 			2,629

Net income		$	8,374 			$	7,514 			$	8,060

Earnings per Common Share - (Note 21)(a)

Basic		$	11.23 			$	9.86 			$	10.04

Diluted		$	11.21 			$	9.85 			$	10.02

Average common shares outstanding for earnings per common share:

Basic		 			751 			789

Diluted		 			752 			790

(a)Represents net income less (i) earnings allocated to participating share awards of $64 million, $57 million and $56 million for the years ended December 31, 2023, 2022 and 2021, respectively, (ii) dividends on preferred shares of $58 million, $57 million and $71 million for the years ended December 31, 2023, 2022 and 2021, respectively, and (iii) equity-related adjustments of $16 million related to the redemption of preferred shares for the year ended December 31, 2021.

See Notes to Consolidated Financial Statements.

94

,
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-


Question: Analyze the net unrealized gains or losses on investment securities for American Express and Discover Financial Services in 2023. How do these gains or losses affect their comprehensive income?

In 2023, American Express reported net unrealized gains on debt securities of $50 million, contributing positively to their other comprehensive income. This indicates that the value of their investment securities increased, enhancing their overall financial position. Discover Financial Services, on the other hand, reported net unrealized gains on available-for-sale investment securities of $99 million in 2023. This also positively impacted their other comprehensive income, reflecting an increase in the value of their investment portfolio. Both companies experienced positive net unrealized gains on investment securities, which contributed to higher comprehensive income and improved their financial health.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA;Item 8.    Financial Statements and Supplementary Data

AMERICAN EXPRESS CO 10-K form for the fiscal year ended 2023-12-31, page 95:
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|    |                                                                      |      |       |      |       |      |       |       |    |       |
|---:|:---------------------------------------------------------------------|:-----|:------|:-----|:------|:-----|:------|:------|:---|:------|
|  1 | Year Ended December 31 (Millions)                                    | 2023 |       | 2022 |       | 2021 |       |       |    |       |
|  2 | Net income                                                           | $    | 8,374 |      |       | $    | 7,514 |       | $  | 8,060 |
|  3 | Other comprehensive income (loss):                                   |      |       |      |       |      |       |       |    |       |
|  4 | Net unrealized debt securities gains (losses), net of tax            |      |       |      | (87)  |      |       | (42)  |    |       |
|  5 | Foreign currency translation adjustments, net of hedges and tax      |      |       |      | (230) |      |       | (163) |    |       |
|  6 | Net unrealized pension and other postretirement benefits, net of tax | 37   |       |      | 52    |      |       | 155   |    |       |
|  7 | Other comprehensive income (loss)                                    | 138  |       |      | (265) |      |       | (50)  |    |       |
|  8 | Comprehensive income                                                 | $    | 8,512 |      |       | $    | 7,249 |       | $  | 8,010 |

See Notes to Consolidated Financial Statements.

95

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 87:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Comprehensive Income

(dollars in millions)
|    |                                                                                |                                  |       |      |       |      |       |       |    |       |
|---:|:----------------------------------------------------------------------------------|:---------------------------------|:------|:-----|:------|:-----|:------|:------|:---|:------|
|  1 |                                                                                | For the Years Ended December 31, |       |      |       |      |       |       |    |       |
|  2 |                                                                                | 2023                             |       | 2022 |       | 2021 |       |       |    |       |
|  3 | Net income                                                                        | $                                | 2,940 |      |       | $    | 4,374 |       | $  | 5,422 |
|  4 | Other comprehensive income (loss), net of tax                                     |                                  |       |      |       |      |       |       |    |       |
|  5 | Unrealized gains (losses) on available-for-sale investment securities, net of tax | 99                               |       |      | (250) |      |       | (170) |    |       |
|  6 | Unrealized gains (losses) on cash flow hedges, net of tax                         | 6                                |       |      | (5)   |      |       | 3     |    |       |
|  7 | Unrealized pension and post-retirement plan gains, net of tax                     | 9                                |       |      | 10    |      |       | 28    |    |       |
|  8 | Other comprehensive income (loss)                                                 | 114                              |       |      | (245) |      |       | (139) |    |       |
|  9 | Comprehensive income                                                              | $                                | 3,054 |      |       | $    | 4,129 |       | $  | 5,283 |

See Notes to the Consolidated Financial Statements.

-87-

AMERICAN EXPRESS CO 10-K form for the fiscal year ended 2023-12-31, page 95:
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31 (Millions)		2023		2022		2021

Net income		$	8,374 			$	7,514 			$	8,060

Other comprehensive income (loss):

Net unrealized debt securities gains (losses), net of tax		 			(87)			(42)

Foreign currency translation adjustments, net of hedges and tax		 			(230)			(163)

Net unrealized pension and other postretirement benefits, net of tax		37 			52 			155

Other comprehensive income (loss)		138 			(265)			(50)

Comprehensive income		$	8,512 			$	7,249 			$	8,010

See Notes to Consolidated Financial Statements.

95

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 87:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Comprehensive Income

(dollars in millions)

 	For the Years Ended December 31,

 	2023		2022		2021

Net income	$	2,940 			$	4,374 			$	5,422

Other comprehensive income (loss), net of tax

Unrealized gains (losses) on available-for-sale investment securities, net of tax	99 			(250)			(170)

Unrealized gains (losses) on cash flow hedges, net of tax	6 			(5)			3

Unrealized pension and post-retirement plan gains, net of tax	9 			10 			28

Other comprehensive income (loss)	114 			(245)			(139)

Comprehensive income	$	3,054 			$	4,129 			$	5,283

See Notes to the Consolidated Financial Statements.

-87-

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31 (Millions)		2023		2022		2021

Net income		$	8,374 			$	7,514 			$	8,060

Other comprehensive income (loss):

Net unrealized debt securities gains (losses), net of tax		 			(87)			(42)

Foreign currency translation adjustments, net of hedges and tax		 			(230)			(163)

Net unrealized pension and other postretirement benefits, net of tax		37 			52 			155

Other comprehensive income (loss)		138 			(265)			(50)

Comprehensive income		$	8,512 			$	7,249 			$	8,010

See Notes to Consolidated Financial Statements.

95

,
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Comprehensive Income

(dollars in millions)

 	For the Years Ended December 31,

 	2023		2022		2021

Net income	$	2,940 			$	4,374 			$	5,422

Other comprehensive income (loss), net of tax

Unrealized gains (losses) on available-for-sale investment securities, net of tax	99 			(250)			(170)

Unrealized gains (losses) on cash flow hedges, net of tax	6 			(5)			3

Unrealized pension and post-retirement plan gains, net of tax	9 			10 			28

Other comprehensive income (loss)	114 			(245)			(139)

Comprehensive income	$	3,054 			$	4,129 			$	5,283

See Notes to the Consolidated Financial Statements.

-87-