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Item 2. Management’s Discussion and Analysis

2022-03-09 compared with 2021-12-08 · 190 added, 84 removed, 206 unchanged (57% of the section changed)

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We have been actively monitoring the impact of the COVID-19 pandemic on all aspects of our business.

During the first quarter of 2022, we continued to experience elevated demand for our retail products, but net sales were lower than in the first quarter of 2021 due to cycling the retailer inventory recovery in the prior-year quarter and the impact of supply constraints which held back our ability to meet persistent elevated demand.

We anticipate that 2022 will continue to be a dynamic macroeconomic environment and we expect elevated levels of input cost inflation and a constrained labor market to persist throughout the remainder of 2022.

We anticipate that these headwinds will be partially mitigated by pricing actions that have either taken effect or are expected to take effect in the remaining part of the fiscal year, supply chain productivity improvements and cost saving initiatives, but we do not expect such benefits will fully offset the incremental costs in 2022.

Although we expect the impacts of the COVID-19 pandemic on our business to moderate in the second quarter and beyond there still remains uncertainty around the pandemic.

The ultimate impact depends on the severity and duration of the pandemic, including the emergence and spread of COVID-19 variants, the continued availability and effectiveness of vaccines and actions taken by government authorities, including the recent U.S.

vaccine mandate, and other third parties in response to the pandemic.

During the second quarter of 2022, we continued to experience strong demand for our retail products, but net sales were lower than in the second quarter of 2021 due to the impact of supply constraints, primarily related to labor, which held back our ability to meet demand.

We anticipate that 2022 will continue to be a dynamic macroeconomic environment and we expect elevated levels of input cost inflation to persist throughout 2022.

We anticipate that these headwinds will be partially mitigated by improving labor conditions through the remainder of 2022, pricing actions in response to inflation that will be fully reflected in the third quarter, supply chain productivity improvements and cost savings initiatives.

Although we expect the impacts of the COVID-19 pandemic on our business to continue to moderate in the third quarter and beyond, there still remains uncertainty around the pandemic and especially its effect on labor.

The ultimate impact depends on the severity and duration of the pandemic, including the emergence and spread of COVID-19 variants and resurgences, the continued availability and effectiveness of vaccines and actions taken by government authorities and other third parties in response to the pandemic.

We will continue to evaluate the extent to which the COVID-19 pandemic will impact our business, consolidated results of operations and financial condition.

While we as a North American focused company have no direct exposure to Russia and Ukraine, we are monitoring any broader economic impact from the current crisis, especially on commodities.

Summary of Results

This Summary of Results provides significant highlights from the discussion and analysis that follows.

• Net sales decreased 4% in 2022 to $2,236 million due to volume declines and increased promotional spending, partially offset by favorable price and sales allowances.

Volumes declined as a result of cycling retailer inventory recovery in the prior-year quarter and supply pressures.

Promotional spending increased due in part to moderated levels in the prior-year quarter.

Net sales increased 2% in 2022 from $2,183 million in 2020, including a 2-point impact from divestitures.

• Net sales decreased 3% in 2022 to $2,209 million due to volume declines and the impact from the divestiture of the Plum baby food and snacks business, partially offset by favorable price and sales allowances and decreased promotional spending.

Volumes declined as a result of industry-wide labor and supply challenges.

On a two-year basis, net sales increased 2% in 2022 from $2,162 million in 2020, including a 1-point impact from divestitures.

• Gross profit, as a percent of sales, decreased to 30.3% in 2022 from 34.4% in the prior-year quarter.

The decrease was primarily due to higher cost inflation, higher levels of promotional spending and unfavorable product mix, partially offset by the benefits of recent pricing actions and supply chain productivity improvements.

The decrease was primarily due to higher cost inflation and other supply chain costs, and unfavorable volume/mix largely due to reduced operating leverage, partially offset by the benefit of pricing actions, supply chain productivity improvements, lower levels of promotional spending and cost savings initiatives.

• Earnings per share from continuing operations were $.70 in 2022, compared to $.80 a year ago.

The current quarter and prior-year quarter included expenses of $.03 per share and gains of $.01 per share, respectively, from items impacting comparability as discussed below.

The current quarter included gains of $.01 per share and the prior-year quarter included expenses of $.01 per share from items impacting comparability as discussed below.

Net Earnings attributable to Campbell Soup Company

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• We implemented several cost savings initiatives in recent years.

In the first quarter of 2022, we recorded implementation costs and other related costs of $2 million in Administrative expenses and $2 million in Cost of products sold (aggregate impact of $3 million after tax, or $.01 per share) related to these initiatives.

In the first quarter of 2021, we recorded Restructuring charges of $1 million and implementation costs and other related costs of $4 million in Administrative expenses and $1 million in Cost of products sold (aggregate impact of $5 million after tax, or $.02 per share) related to these initiatives.

In the second quarter of 2022, we recorded implementation costs and other related costs of $3 million in Administrative expenses and $2 million in Cost of products sold (aggregate impact of $4 million after tax, or $.01 per share) related to these initiatives.

Year-to-date in 2022, we recorded implementation costs and other related costs of $5 million in Administrative expenses and $4 million in Cost of products sold (aggregate impact of $7 million after tax, or $.02 per share) related to these initiatives.

In the second quarter of 2021, we recorded Restructuring charges of $18 million and implementation costs and other related costs of $6 million in Administrative expenses, and a reduction to Cost of products sold of $2 million (aggregate impact of $16 million after tax, or $.05 per share) related to these initiatives.

Year-to-date in 2021, we recorded Restructuring charges of $19 million and implementation costs and other related costs of $10 million in Administrative expenses, and a reduction to Cost of products sold of $1 million (aggregate impact of $21 million after tax, or $.07 per share) related to these initiatives.

See Note 6 to the Consolidated Financial Statements and "Restructuring Charges and Cost Savings Initiatives" for additional information;

• In the first quarter of 2022, we recognized actuarial losses in Other expenses / (income) of $6 million ($5 million after tax, or $.02 per share).

In the first quarter of 2021, we recognized actuarial gains in Other expenses / (income) of $4 million ($3 million after tax, or $.01 per share).

The actuarial gains and losses related to the remeasurements of a U.S.

and a Canadian pension plan.

• In the second quarter of 2022, we recognized actuarial gains in Other expenses / (income) of $10 million ($8 million after tax, or $.03 per share).

Year-to-date in 2022, we recognized actuarial gains in Other expenses / (income) of $4 million ($3 million after tax, or $.01 per share).

In the second quarter of 2021, we recognized actuarial gains in Other expenses / (income) of $30 million ($23 million after tax, or $.08 per share).

Year-to-date in 2021, we recognized actuarial gains in Other expenses / (income) of $34 million ($26 million after tax, or $.09 per share).

The actuarial gains related to the remeasurements of U.S.

and Canadian pension plans.

These interim remeasurements were each due to lump sum distributions that exceeded or are expected to exceed service and interest costs resulting in settlement accounting for the plans;

• In the first quarter of 2022, we recognized losses in Cost of products sold of $3 million ($2 million after tax, or $.01 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

In the first quarter of 2021, we recognized gains in Cost of products sold of $6 million ($5 million after tax, or $.02 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

• Year-to-date in 2022, we recognized losses in Cost of products sold of $3 million ($2 million after tax, or $.01 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

In the second quarter of 2021, we recognized gains in Cost of products sold of $11 million ($8 million after tax, or $.03 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

Year-to-date in 2021, we recognized gains in Cost of products sold of $17 million ($13 million after tax, or $.04 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges;

• In the second quarter of 2021, we recorded a $19 million ($.06 per share) deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance, Inc.

(Snyder's-Lance).

The items impacting comparability are summarized below:

Three Months Ended

October 31, 2021 November 1, 2020

January 30, 2022 January 31, 2021

(Millions, except per share amounts) Earnings

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Restructuring charges, implementation costs and other related costs $ (4) $ (.01) $ (16) $ (.05)

Pension actuarial gains (losses) (5) (.02) 3 .01

Commodity mark-to-market gains (losses) (2) (.01) 5 .02

Pension actuarial gains 8 .03 23 .08

Commodity mark-to-market gains — — 8 .03

Deferred tax charge — — (19) (.06)

Impact of items on Earnings from continuing operations (1)

$ 4 $ .01 $ (4) $ (.01)

Six Months Ended

January 30, 2022 January 31, 2021

(Millions, except per share amounts) Earnings

Earnings from continuing operations attributable to Campbell Soup Company $ 473 $ 1.56 $ 554 $ 1.82

Earnings (loss) from discontinued operations $ — $ — $ — $ —

Net earnings attributable to Campbell Soup Company $ 473 $ 1.56 $ 554 $ 1.82

Continuing operations:

Restructuring charges, implementation costs and other related costs $ (7) $ (.02) $ (21) $ (.07)

Pension actuarial gains 3 .01 26 .09

Commodity mark-to-market gains (losses) (2) (.01) 13 .04

Deferred tax charge — — (19) (.06)

Impact of items on Earnings from continuing operations $ (6) $ (.02) $ (1) $ —

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Earnings from continuing operations were $212 million ($ .70 per share) in the current quarter, compared to $245 million ($ .80 per share) in the year-ago quarter.

After adjusting for items impacting comparability, earnings from continuing operations decreased reflecting a lower gross profit performance, sales volume declines and higher administrative expenses, partially offset by lower marketing and selling expenses and a lower effective tax rate.

FIRST-QUARTER DISCUSSION AND ANALYSIS

After adjusting for items impacting comparability, earnings from continuing operations decreased reflecting sales volume declines and a lower gross profit performance, partially offset by lower marketing and selling expenses, lower interest expense and a lower effective tax rate.

Earnings per share benefited from a reduction in the weighted average diluted shares outstanding.

Earnings from continuing operations were $473 million ($ 1.56 per share) in the six-month period this year, compared to $554 million ($ 1.82 per share) in the year-ago period.

After adjusting for items impacting comparability, earnings from continuing operations decreased reflecting sales volume declines, a lower gross profit performance and lower other income, partially offset by lower marketing and selling expenses, lower interest expense and a lower effective tax rate.

Earnings per share benefited from a reduction in the weighted average diluted shares outstanding.

SECOND-QUARTER DISCUSSION AND ANALYSIS

An analysis of net sales by reportable segment follows:

Three Months Ended

(Millions) October 31, 2021 November 1, 2020 % Change

(Millions) January 30, 2022 January 31, 2021 % Change

Meals & Beverages $ 1,275 $ 1,318 (3)

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Excluding the impact from the divestiture of the Plum baby food and snacks business, sales decreased primarily due to declines across U.S.

retail products, including V8 beverages, Prego pasta sauces and U.S.

soup, as well as in Canada.

Volume decreased primarily due to cycling the retailer inventory recovery in the prior-year quarter and due to supply pressures.

Promotional spending increased relative to moderated levels in the prior-year quarter, partly offsetting the impact of recent price increases.

retail products, including U.S.

soup and Campbell's pasta, as

well as in Canada, partially offset by gains in foodservice.

Volume decreased primarily due to supply constraints driven by labor and materials availability.

Favorable price and sales allowances were partially offset by increased promotional spending relative to moderated levels in the prior-year quarter.

Sales of U.S.

soup decreased 2%, cycling a 21% increase in the first quarter of the prior year, due to volume declines in ready-to-serve soups and condensed soups, partially offset by gains in broth.

In Snacks, sales decreased 1% as volume declines and increased promotional spending relative to moderated levels in the prior-year quarter were partly offset by favorable price and sales allowances.

Declines in partner brands, in Pop Secret popcorn due to elevated demand in the prior-year quarter and in Late July snacks due to supply pressures were partially offset by gains in Goldfish crackers and Pepperidge Farm cookies.

Partner brands consist of third-party branded products that we sell.

Sales of our power brands increased 3%.

soup decreased 1%, cycling a 10% increase in the second quarter of the prior year, due to declines in condensed soups, partially offset by gains in ready-to-serve soups and broth.

In Snacks, sales decreased 3% while sales of our power brands increased 1%.

Snacks sales decreased due to declines in non-core businesses and in certain salty snacks, primarily Late July snacks, partially offset by gains in Goldfish crackers.

Volume declines, driven by significant supply constraints due to labor, were partly offset by favorable price and sales allowances and decreased promotional spending.

Gross profit, defined as Net sales less Cost of products sold, decreased by $114 million in 2022 from 2021.

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Cost inflation, supply chain costs and other factors (1)

Volume/mix (2)

Higher restructuring-related costs (20)

Lower level of promotional spending 90

Productivity improvements 140

Price and sales allowances 390

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(1) Includes an estimated positive margin impact of 30 basis points from the benefit of cost savings initiatives, which was more than offset by cost inflation and other factors, including a 50 basis-point impact from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

(2) Includes the impact of operating leverage.

Marketing and Selling Expenses

Marketing and selling expenses as a percent of sales were 8.9% in 2022 compared to 10.2% in 2021.

Marketing and selling expenses decreased 15% in 2022 from 2021.

The decrease was primarily due to lower advertising and consumer promotion expense (approximately 16 points).

The decrease in advertising and consumer promotion expense was due in part to supply constraints.

Administrative Expenses

Administrative expenses as a percent of sales were 6.7% in 2022 compared to 6.9% in 2021.

Administrative expenses decreased 7% in 2022 from 2021.

The decrease was primarily due to increased benefits from cost savings initiatives (approximately 4 points) and lower benefit-related costs (approximately 3 points).

Other Expenses / (Income)

Other income was $19 million in 2022 compared to other income of $45 million in 2021.

Other income in 2022 included pension actuarial gains of $10 million.

Other income in 2021 included pension actuarial gains of $30 million.

Excluding these amounts, the remaining decrease in other income was primarily due to income from transition services fees in the prior year.

Operating Earnings

Segment operating earnings decreased 17% in 2022 from 2021.

An analysis of operating earnings by segment follows:

Three Months Ended

(Millions) January 30, 2022 January 31, 2021 % Change

Meals & Beverages $ 213 $ 262 (19)

Snacks 121 140 (14)

Corporate income (expense) (11) 17

Restructuring charges (1)

Earnings before interest and taxes $ 323 $ 401

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(1) See Note 6 to the Consolidated Financial Statements for additional information on restructuring charges.

Operating earnings from Meals & Beverages decreased 19%.

The decrease was primarily due to sales volume declines and a lower gross profit performance, partially offset by lower marketing and selling expenses.

Gross profit performance was impacted by higher cost inflation and other supply chain costs, unfavorable volume/mix, which was largely due to reduced operating leverage, as well as higher levels of promotional spending, partially offset by the benefit of pricing actions and supply chain productivity improvements.

Operating earnings from Snacks decreased 14%.

The decrease was driven by sales volume declines and higher administrative expenses, partially offset by lower marketing and selling expenses.

Increased pricing and lower promotional spending combined with the results of supply chain productivity improvements and cost savings initiatives largely offset cost inflation, higher other supply chain costs and unfavorable volume/mix, which was largely due to reduced operating leverage.

Corporate expense in 2022 included pension actuarial gains of $10 million and costs of $5 million related to costs savings initiatives.

Corporate income in 2021 included pension actuarial gains of $30 million, unrealized mark-to-market gains on outstanding undesignated commodity hedges of $11 million and costs of $4 million related to cost savings initiatives.

Interest Expense

Interest expense decreased to $46 million in 2022 from $55 million in 2021, primarily due to lower levels of debt.

Taxes on Earnings

The effective tax rate was 23.5% in 2022 and 29.4% in 2021.

The decrease in the effective tax rate was primarily due to a $19 million deferred tax charge recognized in the second quarter of 2021 in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance.

SIX-MONTH DISCUSSION AND ANALYSIS

An analysis of net sales by reportable segment follows:

Six Months Ended

(Millions) January 30, 2022 January 31, 2021 % Change

Meals & Beverages $ 2,541 $ 2,681 (5)

Snacks 1,904 1,938 (2)

$ 4,445 $ 4,619 (4)

An analysis of percent change of net sales by reportable segment follows:

Meals & Beverages (2)

Volume and mix (7)% (8)% (7)%

Price and sales allowances 5 5 5

Decreased / (increased) promotional spending (1)

Divestiture (2) — (1)

(5)% (2)% (4)%

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(1) Represents revenue reductions from trade promotion and consumer coupon redemption programs.

(2) Sum of the individual amounts does not add due to rounding.

On a two-year basis, net sales increased 2% in 2022 from $4,345 million in 2020, including a 1-point impact from divestitures.

In Meals & Beverages, sales decreased 5% from 2021.

Excluding the impact from the divestiture of the Plum baby food and snacks business, sales decreased primarily due to declines across U.S.

retail products, including V8 beverages, U.S.

soup and Prego pasta sauces, as well as in Canada, partially offset by gains in foodservice.

Volume decreased primarily due to supply constraints driven by labor and materials availability.

Favorable price and sales allowances were partially offset by increased promotional spending relative to moderated levels in the prior year.

Sales of U.S.

soup decreased 1%, cycling a 15% increase in the prior year, due to declines in condensed soups and ready-to-serve soups, partially offset by gains in broth.

In Snacks, sales decreased 2% from 2021 while sales of our power brands increased 2%.

Snacks sales decreased due to declines in certain salty snacks, primarily Late July snacks and Pop Secret popcorn, and in non-core businesses, partially offset by gains in Goldfish crackers.

Volume declines, driven by significant supply constraints due to labor, were partially offset by favorable price and sales allowances and decreased promotional spending.

Gross profit, defined as Net sales less Cost of products sold, decreased by $205 million in 2022 from 2021.

As a percent of sales, gross profit was 31.3% in 2022 and 34.6% in 2021.

The 330 basis-point decrease in gross profit margin was due to the following factors:

Margin Impact

Cost inflation, supply chain costs and other factors (1)

Volume/mix (2)

Higher level of promotional spending (20)

Higher restructuring-related costs (10)

Productivity improvements 120

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(2) Includes the impact of operating leverage.

Marketing and Selling Expenses

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Administrative expenses increased 1% in 2022 from 2021.

The increase was primarily due to expenses related to the settlement of certain legal claims (approximately 11 points) and higher general administrative costs (approximately 4 points), partially offset by increased benefits from cost savings initiatives (approximately 4 points).

The increase was primarily due to expenses related to the settlement of certain legal claims (approximately 5 points), partially offset by increased benefits from cost savings initiatives (approximately 4 points).

Other Expenses / (Income)

Other income was $20 million in 2022 compared to other income of $63 million in 2021.

Other income in 2022 included pension actuarial losses of $6 million.

Other income in 2021 included pension actuarial gains of $4 million.

Other income included pension actuarial gains of $4 million in 2022 and pension actuarial gains of $34 million in 2021.

Excluding these amounts, the remaining decrease in other income was primarily due to income from transition services fees in the prior year.

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An analysis of operating earnings by segment follows:

Three Months Ended

(Millions) October 31, 2021 November 1, 2020 % Change

Six Months Ended

(Millions) January 30, 2022 January 31, 2021 % Change

Meals & Beverages $ 493 $ 599 (18)

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Operating earnings from Meals & Beverages decreased 18%.

The decrease was primarily due to lower gross profit performance and sales volume declines, partially offset by lower marketing and selling expenses.

Gross profit performance was impacted by higher cost inflation, higher levels of promotional spending, higher other supply chain costs and unfavorable product mix, partially offset by the benefits of recent pricing actions and supply chain productivity improvements.

The decrease was primarily due to sales volume declines and a lower gross profit performance, partially offset by lower marketing and selling expenses.

Gross profit performance was impacted by higher cost inflation, higher levels of promotional spending, higher other supply chain costs and unfavorable volume/mix largely due to reduced operating leverage, partially offset by the benefit of pricing actions and supply chain productivity improvements.

Operating earnings from Snacks decreased 9%.

The decrease was driven by higher administrative expenses due to the settlement of certain legal claims and a slightly lower gross profit performance, partially offset by lower marketing and selling expenses.

Gross profit performance was impacted by higher cost inflation, unfavorable product mix and higher levels of promotional spending, largely offset by the benefits of recent pricing actions, supply chain productivity improvements and cost savings initiatives as well as lower other supply chain costs.

Corporate expense in 2022 included pension actuarial losses of $6 million, costs of $4 million related to costs savings initiatives and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $3 million.

Corporate expense in 2021 included costs of $5 million related to cost savings initiatives, pension actuarial gains of $4 million and unrealized mark-to-market gains on outstanding undesignated commodity hedges of $6 million.

The decrease was primarily due to sales volume declines and higher administrative expenses due to the settlement of certain legal claims, partially offset by lower marketing and selling expenses.

Corporate expense in 2022 included costs of $9 million related to costs savings initiatives, unrealized mark-to-market losses on outstanding undesignated commodity hedges of $3 million and pension actuarial gains of $4 million.

Corporate income in 2021 included pension actuarial gains of $34 million, unrealized mark-to-market gains on outstanding undesignated commodity hedges of $17 million and costs of $9 million related to cost savings initiatives.

Interest Expense

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The effective tax rate was 21.9% in 2022 and 26.4% in 2021.

The decrease in the effective tax rate was primarily due to the favorable resolution of several tax matters in 2022.

Restructuring Charges and Cost Savings Initiatives

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Beginning in fiscal 2015, we implemented initiatives to reduce costs and to streamline our organizational structure.

Over the years, we expanded these initiatives by further optimizing our supply chain and manufacturing networks, including closing our manufacturing facility in Toronto, Ontario, as well as our information technology infrastructure.

On March 26, 2018, we completed the acquisition of Snyder's-Lance, Inc.

(Snyder's-Lance).

Over the years, we expanded these initiatives by continuing to optimize our supply chain and manufacturing networks, including closing our manufacturing facility in Toronto, Ontario, as well as our information technology infrastructure.

On March 26, 2018, we completed the acquisition of Snyder's-Lance.

Prior to the acquisition, Snyder's-Lance launched a cost transformation program following a comprehensive review of its operations with the goal of significantly improving its financial performance.

We continued to implement this program and identified opportunities for additional cost synergies as we integrated Snyder's-Lance.

In 2022, we expanded these initiatives as we continue to pursue cost savings by further optimizing our supply chain and manufacturing network and through effective cost management.

Cost estimates for these expanded initiatives, as well as timing for certain activities, are continuing to be developed.

A summary of charges recorded in Earnings from continuing operations related to these initiatives is as follows:

Three Months Ended

Three Months Ended Six Months Ended

(Millions, except per share amounts)

October 31, 2021 November 1, 2020 Recognized as of October 31, 2021

January 30, 2022 January 31, 2021 January 30, 2022 January 31, 2021 Recognized as of January 30, 2022

Restructuring charges $ — $ 18 $ — $ 19 $ 259

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A summary of the pre-tax costs in Earnings from continuing operations associated with these initiatives is as follows:

(Millions) Recognized as of October 31, 2021

(Millions) Recognized as of January 30, 2022

Severance pay and benefits

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Implementation costs and other related costs

The total estimated pre-tax costs for actions associated with continuing operations are approximately $ 715 million to $ 730 million.

The majority of the remaining costs will be incurred in 2022.

We expect the costs for actions associated with continuing operations to consist of the following:

The total estimated pre-tax costs for actions associated with continuing operations that have been identified are approximately $715 million to $725 million and we expect to incur the costs through 2022.

These estimates will be updated as the expanded initiatives are developed.

We expect the costs for actions associated with continuing operations that have been identified to date to consist of the following:

approximately $225 million in severance pay and benefits;

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and Corporate - approximately 24%.

Of the aggregate $ 715 million to $ 730 million of pre-tax costs associated with continuing operations, we expect approximately $ 615 million to $ 630 million will be cash expenditures.

In addition, we expect to invest approximately $ 450 million in capital expenditures through 2022, of which we invested $ 415 million as of October 31, 2021.

The capital expenditures primarily relate to improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, a U.S.

warehouse optimization project, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, transition of production of the Toronto manufacturing facility to our U.S.

Of the aggregate $715 million to $725 million of pre-tax costs associated with continuing operations identified to date, we expect approximately $615 million to $625 million will be cash expenditures.

In addition, we expect to invest approximately $445 million in capital expenditures through 2022, of which we invested $427 million as of January 30, 2022.

The capital expenditures primarily relate to a U.S.

warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, transition of production of the Toronto manufacturing facility to our U.S.

thermal plants, optimization of information technology infrastructure and applications, and optimization of the Snyder’s-Lance warehouse and distribution network.

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We expect the initiatives for actions associated with continuing operations, once all phases are implemented, to generate annual ongoing savings of approximately $1,000 million by the end of 2025.

In the three-month period ended October 31, 2021, we generated an additional $15 million of pre-tax savings.

The annual pre-tax savings associated with continuing operations generated were as follows:

(Millions) August 1, 2021 August 2, 2020 July 28, 2019 July 29, 2018 July 30, 2017 July 31, 2016 August 2, 2015

Total pre-tax savings $ 805 $ 725 $ 560 $ 395 $ 325 $ 215 $ 85

As of January 30, 2022, we have generated total program-to-date pre-tax savings of $835 million.

Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges.

A summary of the pre-tax costs in Earnings from continuing operations associated with segments is as follows:

October 31, 2021

(Millions) Three Months Ended Costs Incurred to Date

January 30, 2022

(Millions) Three Months Ended Six Months Ended Costs Incurred to Date

Meals & Beverages $ 1 $ 2 $ 225

Snacks 4 7 306

Corporate — — 172

Total $ 5 $ 9 $ 703

Through April 28, 2019, we incurred pre-tax charges of $ 23 million in Earnings from discontinued operations consisting of $ 19 million of severance pay and benefits and $ 4 million of implementation costs and other related costs.

All of the costs were cash expenditures.

Expanded Initiatives in 2022

We continue to pursue cost savings initiatives by further optimizing our supply chain and manufacturing network and through effective cost management.

We are pursuing additional initiatives that will generate incremental annual ongoing savings of approximately $150 million by the end of 2025.

With these expanded initiatives, we expect to generate cumulative annual pre-tax savings of approximately $1 billion by the end of 2025.

Cost estimates will be updated as the expanded initiatives are developed.

In addition, in the second quarter of 2021, we recorded a $19 million deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance.

LIQUIDITY AND CAPITAL RESOURCES

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We generated cash flows from operations of $766 million in 2022, compared to $611 million in 2021.

The increase in 2022 was primarily due to changes in working capital, principally accounts payable and accrued liabilities, partially offset by lower cash earnings.

The increase in 2022 was primarily due to changes in working capital, principally accounts payable and accounts receivable, partially offset by lower cash earnings.

Current assets are less than current liabilities as a result of our level of current maturities of long-term debt and short-term borrowings and our focus to lower core working capital requirements.

We had negative working capital of $462 million as of October 31, 2021, and $119 million as of August 1, 2021.

Total debt maturing within one year was $480 million as of October - 31, 2021, and $48 million as of August 1, 2021.

We had negative working capital of $342 million as of January 30, 2022, and $119 million as of August 1, 2021.

Total debt maturing within one year was $464 million as of January 30, 2022, and $48 million as of August 1, 2021.

Capital expenditures were $129 million in 2022 and $132 million in 2021.

Capital expenditures are expected to total approximately $275 million in 2022.

Capital expenditures in the first half of 2022 included improvement of the quality and cost structure of the Snyder's-Lance manufacturing network, the implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, and cookie and cracker capacity expansion for our Snacks business.

Pepperidge Farm and Snyder’s-Lance have a direct-store-delivery distribution model that uses independent contractor distributors.

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Dividend payments were $228 million in 2022 and $215 million in 2021.

The regular quarterly dividend paid on our capital stock was $.37 per share in the first quarter of 2022 and $.35 per share in the first quarter of 2021.

The regular quarterly dividend paid on our capital stock was $.37 per share in the second quarter of 2022 and $.35 per share in the second quarter of 2021.

On December 1, 2021, the Board of Directors declared a regular quarterly dividend of $.37 per share payable on January 31, 2022 to shareholders of record at the close of business on January 6, 2022.

On March 2, 2022, the Board of Directors declared a regular quarterly dividend of $.37 per share payable on May 2, 2022 to shareholders of record at the close of business on April 7, 2022.

In June 2021, the Board authorized an anti-dilutive share repurchase program of up to $250 million (June 2021 program) to offset the impact of dilution from shares issued under our stock compensation programs.

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Of this amount, $40 million was used to repurchase shares pursuant to our June 2021 program and $25 million was used to repurchase shares pursuant to our September 2021 program.

As of October 31, 2021, approximately $176 million remained available under the June 2021 program and approximately $475 million remained available under the September 2021 program.

As of January 30, 2022, approximately $174 million remained available under the June 2021 program and approximately $475 million remained available under the September 2021 program.

See Note 12 to the Consolidated Financial Statements and “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information.

As of October 31, 2021, we had $480 million of short-term borrowings due within one year, $15 million of which was comprised of commercial paper borrowings.

As of October 31, 2021, we issued $32 million of standby letters of credit.

As of January 30, 2022, we had $464 million of short-term borrowings due within one year, none of which was comprised of commercial paper borrowings.

As of January 30, 2022, we issued $32 million of standby letters of credit.

On November 2, 2020, we entered into a committed revolving credit facility totaling $1,850 million scheduled to mature on November 2, 2023.

On September 27, 2021, we replaced the current facility with a new $1,850 million committed revolving facility that matures on September 27, 2026.

The facility remained unused at October 31, 2021, except for $1 million of standby letters of credit that we issued under it.

On September 27, 2021, we replaced the facility with a new $1,850 million committed revolving facility that matures on September 27, 2026.

The facility remained unused at January 30, 2022, except for $1 million of standby letters of credit that we

issued under it.

The facility contains customary covenants, including a financial covenant with respect to a minimum consolidated interest coverage ratio of consolidated adjusted EBITDA to consolidated interest expense (as each is defined in the credit facility) of not less than 3.25:1.00, measured quarterly, and customary events of default for credit facilities of this type.

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We expect to continue to access the commercial paper markets, bank credit lines and utilize cash flows from operations to support our short-term liquidity requirements.

On February 2, 2022, we issued a notice of redemption to holders of our 2.50% Notes due August 2, 2022 (the Notes) for the redemption of all $450 million outstanding aggregate principal amount of the Notes.

The redemption date for the Notes was March 4, 2022.

The consideration for the redemption was $453 million, including $3 million of premium.

In addition, we paid accrued and unpaid interest on the redeemed notes through the date of settlement.

We used a combination of cash on hand and short-term debt to fund the redemption.

We are in compliance with the covenants contained in our credit facilities and debt securities.

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• the costs, disruption and diversion of management's attention associated with activist investors;

• a material failure in or breach of our or our vendors' information technology systems;

• a disruption, failure or security breach of our or our vendors' information technology systems, including ransomware attacks;

• impairment to goodwill or other intangible assets;

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• negative changes and volatility in financial and credit markets, deteriorating economic conditions and other external factors, including changes in laws and regulations;

• unforeseen business disruptions in one or more of our markets due to political instability, civil disobedience, terrorism, armed hostilities, extreme weather conditions, natural disasters, other pandemics or other calamities.

• unforeseen business disruptions or other impacts due to political instability, civil disobedience, terrorism, armed hostilities (including the recent outbreak of hostilities between Russia and Ukraine), extreme weather conditions, natural disasters, other pandemics or other calamities.

This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact our outlook.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis