What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-06-08 compared with 2022-03-09 · 123 added, 124 removed, 272 unchanged (48% of the section changed)

13 unchanged sentences

Business Trends

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

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 have been actively monitoring the impact of the dynamic macroeconomic environment, including the COVID-19 pandemic, the conflict between Russia and Ukraine and inflation, on all aspects of our business.

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

We anticipate that these headwinds will be partially mitigated by inflation-driven pricing actions, supply chain productivity improvements and cost savings initiatives.

There still remains uncertainty around the COVID-19 pandemic.

The ultimate impact depends on the severity and duration of the pandemic, including the emergence and spread of new 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.

While we as a North American focused company have no direct exposure to Russia and Ukraine, we have experienced shortages in materials and increased costs for transportation, energy and raw materials due in part to the negative impact of the Russia-Ukraine conflict on the global economy.

To date, the conflict between Russia and Ukraine has not had any material impact on our business, financial condition or results of operations.

Summary of Results

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

• 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.

• Net sales increased 7% in the quarter to $2,130 million due to inflation-driven pricing and sales allowances, partially offset by volume declines and the impact from the divestiture of the Plum baby food and snacks business.

Volumes declined driven by select supply constraints and price elasticities, partially offset by retailer inventory rebuild.

• Gross profit, as a percent of sales, decreased to 31.2% in 2022 from 31.7% in the prior-year quarter.

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.

The decrease was primarily due to higher cost inflation and other supply chain costs as well as unfavorable volume/mix largely due to reduced operating leverage, partially offset by inflation-driven pricing actions, supply chain productivity improvements and cost savings initiatives.

• Earnings per share from continuing operations were $.62 in 2022, compared to $.54 a year ago.

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.

The current quarter included expenses of $.08 per share and the prior-year quarter included gains of $.03 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 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.

In the third quarter of 2022, we recorded implementation costs and other related costs of $5 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.

Year-to-date in 2022, we recorded implementation costs and other related costs of $10 million in Administrative expenses and $5 million in Cost of products sold (aggregate impact of $12 million after tax, or $.04 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.

In the third quarter of 2021, we recorded Restructuring charges of $2 million and implementation costs and other related costs of $11 million in Administrative expenses and $2 million in Cost of products sold (aggregate impact of $11 million after tax, or $.04 per share) related to these initiatives.

Year-to-date in 2021, we recorded Restructuring charges of $21 million and implementation costs and other related costs of $21 million in Administrative expenses and $1 million in Cost of products sold (aggregate impact of $32 million after tax, or $.10 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 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).

• In the third quarter of 2022, we recognized actuarial losses in Other expenses / (income) of $16 million ($12 million after tax, or $.04 per share).

Year-to-date in 2022, we recognized actuarial losses in Other expenses / (income) of $12 million ($9 million after tax, or $.03 per share).

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

Year-to-date in 2021, we recognized actuarial gains in Other expenses / (income) of $38 million ($29 million after tax, or $.10 per share).

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

The actuarial gains and losses 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 third quarter of 2022, we recorded a loss in Interest expense of $4 million ($3 million after tax, or $.01 per share) on the extinguishment of debt;

• In the third quarter of 2022, we recognized losses in Cost of products sold of $5 million ($4 million after tax, or $.01 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 $8 million ($6 million after tax, or $.02 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.

In the third quarter of 2021, we recognized gains in Cost of products sold of $22 million ($17 million after tax, or $.06 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 $39 million ($30 million after tax, or $.10 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.

• Year-to-date in 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).

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Three Months Ended

January 30, 2022 January 31, 2021

May 1, 2022 May 2, 2021

(Millions, except per share amounts) Earnings

Earnings from continuing operations attributable to Campbell Soup Company $ 188 $ .62 $ 166 $ .54

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

Loss from discontinued operations $ — $ — $ ( 6 ) $ ( .02 )

Net earnings attributable to Campbell Soup Company $ 188 $ .62 $ 160 $ .52

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Restructuring charges, implementation costs and other related costs $ (5) $ (.02) $ (11) $ (.04)

Pension actuarial gains 8 .03 23 .08

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

Deferred tax charge — — (19) (.06)

Pension actuarial gains (losses) (12) (.04) 3 .01

Loss on debt extinguishment (3) (.01) — —

Commodity mark-to-market gains (losses) (4) (.01) 17 .06

Impact of items on Earnings from continuing operations $ (24) $ (.08) $ 9 $ .03

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

Six Months Ended

January 30, 2022 January 31, 2021

Nine Months Ended

May 1, 2022 May 2, 2021

(Millions, except per share amounts) Earnings

Earnings from continuing operations attributable to Campbell Soup Company $ 661 $ 2.18 $ 720 $ 2.36

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

Loss from discontinued operations $ — $ — $ (6) $ (.02)

Net earnings attributable to Campbell Soup Company $ 661 $ 2.18 $ 714 $ 2.34

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Restructuring charges, implementation costs and other related costs $ (12) $ (.04) $ (32) $ (.10)

Pension actuarial gains 3 .01 26 .09

Pension actuarial gains (losses) (9) (.03) 29 .10

Loss on debt extinguishment (3) (.01) — —

Commodity mark-to-market gains (losses) (6) (.02) 30 .10

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$ (30) $ (.10) $ 8 $ .03

__________________________________________

(1) Sum of the individual amounts may not add due to rounding.

Earnings from continuing operations were $188 million ($ .62 per share) in the current quarter, compared to $166 million ($ .54 per share) in the year-ago quarter.

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.

After adjusting for items impacting comparability, earnings from continuing operations increased reflecting an improved gross profit performance, lower marketing and selling expenses and lower interest expense, partially offset by sales volume declines and lower other income.

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 from continuing operations were $661 million ($ 2.18 per share) in the nine-month period this year, compared to $720 million ($ 2.36 per share) in the year-ago period.

After adjusting for items impacting comparability, earnings from continuing operations decreased reflecting sales volume declines, lower other income and higher administrative expenses, partially offset by lower marketing and selling expenses, an improved gross profit performance, 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

THIRD-QUARTER DISCUSSION AND ANALYSIS

An analysis of net sales by reportable segment follows:

Three Months Ended

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

(Millions) May 1, 2022 May 2, 2021 % Change

Meals & Beverages $ 1,131 $ 1,062 6

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

Meals & Beverages (2)

Meals & Beverages Snacks (2)

Volume and mix (3)% (3)% (3)%

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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.

In Meals & Beverages, sales decreased 3%.

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 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.

In Meals & Beverages, sales increased 6%.

Excluding the impact from the divestiture of the Plum baby food and snacks business, sales increased primarily due to increases in U.S.

soup, foodservice and Prego pasta sauces, partially offset by declines in Canada.

Inflation-driven pricing and sales allowances were partially offset by increased promotional spending.

Volume decreased primarily due to supply constraints driven by labor and materials availability and price elasticities, partially offset by retailer inventory rebuild.

Sales of U.S.

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.

soup increased 15% due to increases in condensed soups and ready-to-serve soups, while broth was comparable to prior year.

In Snacks, sales increased 8% while sales of our power brands increased 13%.

Snacks sales increased due to increases in salty snacks, primarily Snyder’s of Hanover pretzels and Kettle Brand potato chips, as well as in cookies and crackers, primarily Goldfish crackers.

Inflation-driven pricing and sales allowances and decreased promotional spending were partly offset by volume declines.

Volumes declined driven by supply constraints based on materials availability and price elasticities, partially offset by retailer inventory rebuild.

Gross profit, defined as Net sales less Cost of products sold, increased by $37 million in 2022 from 2021.

As a percent of sales, gross profit was 31.2% in 2022 and 31.7% in 2021.

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Volume/mix (2)

Higher restructuring-related costs (20)

Lower level of promotional spending 10

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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.

(1) Includes an estimated positive margin impact of 100 basis points related to the weather event in the prior year and 20 basis points from the benefit of cost savings initiatives, which were more than offset by cost inflation and other factors, including a 140 basis-point impact from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

(2) Includes the impact of operating leverage.

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The decrease was primarily due to lower advertising and consumer promotion expense (approximately 8 points).

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

The reduction in advertising and consumer promotion expense was due in part to the pacing of supply recovery in the current quarter and some on-going materials availability issues.

Administrative Expenses

1 unchanged sentence

Administrative expenses decreased 1% 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).

The decrease was primarily due to lower costs associated with cost savings initiatives (approximately 4 points), partially offset by expenses related to the settlement of certain legal claims (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 expenses was $10 million in 2022 compared to other income of $23 million in 2021.

Other expenses in 2022 included pension actuarial losses of $16 million.

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

1 unchanged sentence

Operating Earnings

Segment operating earnings decreased 17% in 2022 from 2021.

Segment operating earnings increased 20% in 2022 from 2021.

An analysis of operating earnings by segment follows:

Three Months Ended

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

(Millions) May 1, 2022 May 2, 2021 % Change

Meals & Beverages $ 220 $ 186 18

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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.

Operating earnings from Meals & Beverages increased 18%.

The increase was primarily due to improved gross profit performance, partially offset by sales volume declines.

Gross profit performance reflected mitigation of on-going inflation with pricing actions, lower other supply chain costs and supply chain productivity improvements, partially offset by unfavorable volume/mix, which was largely due to reduced operating leverage, as well as higher levels of promotional spending.

These results also reflect lower base operating earnings in the prior-year third quarter.

Operating earnings from Snacks increased 25%.

The increase was primarily due to improved gross profit performance and lower marketing and selling expenses, partially offset by higher administrative expenses.

Gross profit performance reflected mitigation of on-going inflation with pricing actions combined with the results of supply chain productivity improvements, execution improvements and cost savings initiatives, partially offset by some remaining elevated supply chain costs.

These results also reflect lower base operating earnings in the prior-year third quarter.

Corporate expense in 2022 included pension actuarial losses of $16 million, costs of $6 million related to costs savings initiatives, and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $5 million.

Corporate expense in 2021 included costs of $13 million related to cost savings initiatives, pension actuarial gains of $4 million and unrealized mark-to-market gains on outstanding undesignated commodity hedges of $22 million.

Interest Expense

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

Interest expense decreased to $51 million in 2022 from $53 million in 2021, primarily due to lower levels of debt, partially offset by a loss on extinguishment of debt of $4 million in the current quarter.

Taxes on Earnings

The effective tax rate was 23.0% in 2022 and 24.2% 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

The decrease in the effective tax rate was primarily due to state tax law changes in the prior year.

NINE-MONTH DISCUSSION AND ANALYSIS

An analysis of net sales by reportable segment follows:

Six Months Ended

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

Nine Months Ended

(Millions) May 1, 2022 May 2, 2021 % Change

Meals & Beverages $ 3,672 $ 3,743 (2)

8 unchanged sentences

__________________________________________

(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.

In Meals & Beverages, sales decreased 2%.

Excluding the impact from the divestiture of the Plum baby food and snacks business, sales were comparable to the prior year as increases in U.S.

soup were offset by declines in Canada.

Inflation-driven pricing and sales allowances were partially offset by increased promotional spending relative to moderated levels in the prior year.

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.

soup increased 2%, due to increases in ready-to-serve soups, broth and condensed soups.

In Snacks, sales increased 2% while sales of our power brands increased 6%.

Snacks sales increased due to increases in cookies and crackers, primarily Goldfish crackers, partially offset by declines in non-core businesses.

Sales of salty snacks increased slightly with increases in Snyder’s of Hanover pretzels mostly offset by declines in Late July snacks.

Inflation-driven pricing and sales allowances and decreased promotional spending were partly offset by volume declines.

Volumes declined driven by supply constraints due to labor and materials availability and price elasticities, partially offset by retailer inventory rebuild .

Gross profit, defined as Net sales less Cost of products sold, decreased by $168 million in 2022 from 2021.

14 unchanged sentences

Marketing and selling expenses decreased 14% in 2022 from 2021.

The decrease was primarily due to lower advertising and consumer promotion expense (approximately 15 points) and lower selling expenses (approximately 2 points).

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

The decrease was primarily due to lower advertising and consumer promotion expense (approximately 13 points).

The reduction in advertising and consumer promotion expense was due in part to the pacing of supply recovery in the current year and some on-going materials availability issues.

Administrative Expenses

Administrative expenses as a percent of sales were 6.9% in 2022 compared to 6.8% in 2021.

Administrative expenses increased 1% in 2022 from 2021.

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).

Administrative expenses were comparable in 2022 with 2021.

The change was primarily due to expenses related to the settlement of certain legal claims (approximately 4 points), partially offset by increased benefits from cost savings initiatives (approximately 3 points).

Other Expenses / (Income)

Other income was $10 million in 2022 compared to other income of $86 million in 2021.

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

Other income included pension actuarial losses of $12 million in 2022 and pension actuarial gains of $38 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.

2 unchanged sentences

An analysis of operating earnings by segment follows:

Six Months Ended

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

Nine Months Ended

(Millions) May 1, 2022 May 2, 2021 % Change

Meals & Beverages $ 713 $ 785 (9)

Snacks 376 377 —

1,089 1,162 (6)

Corporate income (expense) (96) (7)

4 unchanged sentences

Operating earnings from Meals & Beverages decreased 9%.

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 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.

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

Operating earnings from Snacks were comparable to the prior year.

Lower marketing and selling expenses and improved profit performance were offset by sales volume declines and higher administrative expenses due to the settlement of certain legal claims.

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

Corporate expense in 2022 included costs of $15 million related to costs savings initiatives, pension actuarial losses of $12 million and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $8 million.

Corporate expense in 2021 included costs of $22 million related to cost savings initiatives, pension actuarial gains of $38 million and unrealized mark-to-market gains on outstanding undesignated commodity hedges of $39 million.

Interest Expense

Interest expense decreased to $93 million in 2022 from $110 million in 2021 primarily due to lower levels of debt.

Interest expense decreased to $144 million in 2022 from $163 million in 2021 primarily due to lower levels of debt, partially offset by a loss on extinguishment of debt of $4 million in the third quarter of 2022.

Taxes on Earnings

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

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(Millions, except per share amounts)

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

May 1, 2022 May 2, 2021 May 1, 2022 May 2, 2021 Recognized as of May 1, 2022

Restructuring charges $ — $ 2 $ — $ 21 $ 259

7 unchanged sentences

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

(Millions) Recognized as of January 30, 2022

(Millions) Recognized as of May 1, 2022

Severance pay and benefits

1 unchanged sentence

Implementation costs and other related costs

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.

The total estimated pre-tax costs for actions associated with continuing operations that have been identified are approximately $725 million to $735 million and we expect to incur substantially all of the costs through 2022.

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

8 unchanged sentences

Of the aggregate $725 million to $735 million of pre-tax costs associated with continuing operations identified to date, we expect approximately $625 million to $635 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.

In addition, we expect to invest approximately $440 million in capital expenditures, of which we invested $433 million as of May 1, 2022.

We expect to invest in substantially all of the capital expenditures through 2022.

The capital expenditures primarily relate to a U.S.

3 unchanged sentences

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.

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

As of May 1, 2022, we have generated total program-to-date pre-tax savings of $840 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:

January 30, 2022

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

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

Meals & Beverages $ — $ 2 $ 225

11 unchanged sentences

We generated cash flows from operations of $1,101 million in 2022, compared to $881 million in 2021.

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

The increase in 2022 was primarily due to changes in working capital, 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 $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.

We had negative working capital of $847 million as of May 1, 2022, and $119 million as of August 1, 2021.

Total debt maturing within one year was $750 million as of May 1, 2022, and $48 million as of August 1, 2021.

Capital expenditures were $179 million in 2022 and $190 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.

Capital expenditures in the first nine months 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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The purchase and sale proceeds of the routes are reflected in investing activities.

On March 4, 2022, we completed the redemption of all $450 million outstanding aggregate principal amount of our 2.50% Senior Notes due August 2, 2022.

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

We recognized a loss of $4 million (including the $3 million of premium and other costs), which was recorded in Interest expense in the Consolidated Statement of Earnings.

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.

Dividend payments were $340 million in 2022 and $327 million in 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.

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

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.

On May 24, 2022, the Board of Directors declared a regular quarterly dividend of $.37 per share payable on August 1, 2022 to shareholders of record at the close of business on July 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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Repurchases under the anti-dilutive program may be made in open-market or privately negotiated transactions.

In September 2021, the Board approved a new strategic share repurchase program of up to $500 million (September 2021 program).

In September 2021, the Board approved a strategic share repurchase program of up to $500 million (September 2021 program).

The September 2021 program has no expiration date, but it may be suspended or discontinued at any time.

Repurchases under the September 2021 program may be made in open-market or privately negotiated transactions.

The September 2021 program replaced the prior $1,500 million program, which our Board approved in March 2017 and has been cancelled.

We repurchased approximately 2.7 million shares at a cost of $116 million in 2022.

Of this amount, $41 million was used to repurchase shares pursuant to our June 2021 program and $75 million was used to repurchase shares pursuant to our 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.

As of May 1, 2022, approximately $173 million remained available under the June 2021 program and approximately $425 million remained available under the September 2021 program.

See Note 13 to the Consolidated Financial Statements and “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information.

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.

As of May 1, 2022, we had $750 million of short-term borrowings due within one year, $170 million of which was comprised of commercial paper borrowings.

As of May 1, 2022, we issued $32 million of standby letters of credit.

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 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 remained unused at May 1, 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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• 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 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.

• unforeseen business disruptions or other impacts due to political instability, civil disobedience, terrorism, armed hostilities (including the ongoing conflict 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