What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-09-22 compared with 2021-09-23 · 293 added, 419 removed, 339 unchanged (68% of the section changed)

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We operate in a highly competitive industry and experience competition in all of our categories.

In 2021 we continued to adapt and evolve in a dynamic environment as we advanced our strategic plan.

In the first part of the fiscal year, as the COVID-19 pandemic reached its peak in many areas across North America, we experienced significantly higher sales for our retail products in both our Meals & Beverages and Snacks segments, especially in retail chains and large grocery supermarkets.

This result was attributable to elevated retail demand, as consumers significantly increased their food purchases for at-home consumption, which more than offset the declines in our foodservice business during the same period.

We also saw elevated repeat purchase rates and new buyers of our products, especially in our soup business.

During the second half of 2021, we experienced lower sales in both our Meals & Beverages and Snacks segments as we began to cycle the demand surge that accompanied the onset of the COVID-19 pandemic, amidst intense market volatility and labor challenges.

We also navigated the executional pressures of a significant transformation agenda, primarily in our Snacks division.

As we begin to transition out of the COVID-19 environment, we expect that inflation and a constrained labor market will continue to be headwinds but we expect to partially mitigate these headwinds with a pricing strategy and planned productivity and cost saving programs that will allow us to deliver on our strategic initiatives.

Business Divestitures

In 2019, we sold our U.S.

refrigerated soup business, our Garden Fresh Gourmet business and our Bolthouse Farms business.

Beginning in the third quarter of 2019, we have reflected the results of operations of these businesses as discontinued operations in the Consolidated Statements of Earnings for all periods presented.

These businesses were historically included in the Campbell Fresh reportable segment.

We completed the sale of our Kelsen business on September 23, 2019.

On December 23, 2019, we completed the sale of our Arnott’s business and certain other international operations, including the simple meals and shelf-stable beverages businesses in Australia and Asia Pacific (the Arnott's and other international operations).

Beginning in the fourth quarter of 2019, we have reflected the results of operations of the Kelsen business and the Arnott’s and other international operations (collectively referred to as Campbell International) as discontinued operations in the Consolidated Statements of Earnings for all periods presented.

These businesses were historically included in the Snacks reportable segment.

In addition, on October 11, 2019, we completed the sale of our European chips business.

The results of the European chips business through the date of sale were reflected in continuing operations within the Snacks reportable segment.

In the fourth quarter of 2021, we completed the sale of our Plum baby food and snacks business.

The results of the Plum baby food and snacks business through the date of sale were reflected in continuing operations within the Meals & Beverages reportable segment.

See Notes 3 and 6 to the Consolidated Financial Statements for additional information on these divestitures and reportable segments.

Our strategy is to accelerate profitable growth by focusing on our core brands in two divisions within North America while delivering on the promise of our purpose - C onnecting people through food they love .

In 2022, we delivered solid full-year results while advancing our strategic plan in a volatile macroeconomic environment.

During 2022, we navigated through a challenging environment marked by supply chain pressures, particularly around labor and high inflation.

We enhanced and accelerated our recruiting efforts and hiring and onboarding processes, which improved our ability to meet sustained consumer demand.

Our improved supply chain execution combined with inflation-driven pricing, continued supply chain productivity improvements and cost savings initiatives partially mitigated ongoing inflationary pressures experienced in 2022.

We expect that inflation will continue to be a headwind in 2023.

In addition, we expect a pre-tax headwind of approximately $35 million in 2023 related to lower net periodic pension and postretirement benefit income.

Our strategy is to unlock our full growth potential by focusing on our core brands in two divisions within North America while delivering on the promise of our purpose - C onnecting people through food they love .

Our strategic plan is based on four pillars:

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and deliver on the promise of our purpose all as further discussed below.

We plan to continue our focus on building a winning team and culture by advancing our next generation work model, prioritizing our inclusion and diversity strategy and investing in strategic capabilities and digitization that support our core brands in North America.

We plan to continue our focus on building a winning team and culture by investing in our employee experience and improving employee engagement, prioritizing our inclusion and diversity strategy and investing in strategic capabilities and digitization that support our core brands in North America.

In addition, we plan to continue to deliver on the promise of our purpose with consumer transparency initiatives, progress on our sustainability goals and strengthening our connection to the communities in which we operate.

We believe that we can accelerate our profitable growth model by continuing to grow market share and drive integrated business planning programming throughout the company.

We expect to grow market share through the development of more consumer-oriented product quality, marketing and innovation plans and prioritizing growth channels and retailers within our defined portfolio roles.

We believe that we can accelerate our profitable growth model by growing market share and driving integrated business planning programming throughout the company.

We expect to grow market share through the development of more consumer-

oriented product quality, marketing and innovation plans and prioritizing growth channels and retailers within our defined portfolio roles.

In addition, we expect to continue to focus on accelerating the growth of our Snacks brands while also sustaining the growth in U.S.

soup and our other core brands.

We expect that changes in consumer behavior driven by the COVID-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels.

We expect that changes in consumer behavior driven by the COVID-19 pandemic will continue to support ongoing elevated consumer demand for food at home, relative to pre-pandemic levels.

We plan to capitalize on this opportunity by addressing evolving consumer needs through our unique and differentiated portfolio.

We also expect to fuel investments and margins by mitigating the effects of inflation through pricing and cost productivity initiatives.

We implemented price increases beginning in 2022 and continue to pursue our multi-year cost savings initiatives with targeted annualized cost savings of $850 million for continuing operations by the end of 2022, which includes $295 million in synergies and run-rate cost savings from our acquisition of Snyder's-Lance, Inc.

(Snyder's-Lance).

We also expect to fuel investments and margins by continuing to focus on mitigating the effects of inflation.

We implemented price increases beginning in 2022 and continue to pursue our multi-year cost savings initiatives with targeted annualized cost savings of $1 billion for continuing operations by the end of 2025, with $850 million in synergies and run-rate cost savings achieved through 2022.

See "Restructuring Charges and Cost Savings Initiatives" for additional information on these initiatives.

In addition, we have initiated the process to drive operational excellence by transforming our supply chain capabilities to enhance ways of working to build a more resilient and agile supply chain to serve our evolving business needs while maximizing efficiency.

Business Trends

Our businesses are being influenced by a variety of trends that we anticipate will continue in the future, including:

cost inflation;

changing consumer preferences;

a competitive and dynamic retail environment;

and cost inflation.

and a competitive and dynamic retail environment.

Our strategy is designed, in part, to capture growing consumer preferences for snacking and convenience.

For example, we believe that consumers are changing their eating habits by increasing the type and frequency of snacks they consume and are continuing quick-scratch cooking and in-home eating behaviors that were driven by the COVID-19 pandemic.

For example, we believe that consumers are changing their eating habits by increasing the type and frequency of snacks they consume and are continuing in-home eating behaviors that were driven by the COVID-19 pandemic.

Retailers continue to use their buying power and negotiating strength to seek increased promotional programs funded by their suppliers and more favorable terms, including customized products funded by their suppliers.

Any consolidations among retailers would continue to create large and sophisticated customers that may further this trend.

Retailers also continue to grow and promote store brands that compete with branded products, while other challenger brands drive innovation and engagement that threatens our market share.

The spread of the COVID-19 pandemic in North America has led to shifts in the growth of the retail channels in which we sell our products.

Our products are largely concentrated in the traditional retail grocery trade, which prior to the pandemic, had experienced slower growth than other retail channels, such as dollar stores, drug stores, club stores and e-commerce retailers.

The COVID-19 pandemic has shifted growth back to the traditional grocery trade.

Although there is significant uncertainty as to how the retail channels will perform in the future, we anticipate that the growth of e-commerce, including omnichannel click and collect models, as well as alternative retail channels, such as club and dollar stores, to continue.

We have continued to monitor the impact of the COVID-19 pandemic on all aspects of our business.

Throughout the first half of 2021, we experienced an increased demand for our retail products, as consumers significantly increased their food purchases for at-home consumption.

In response to increased demand, we took steps, including modifying production schedules and temporarily adjusting product mix, to increase our production capacity to meet the increased demand for our retail products.

This demand moderated in the second half of 2021, when we lapped the initial surge in demand at the beginning of the pandemic.

We anticipate that 2022 will continue to be a dynamic macroeconomic environment, and expect input cost inflation to be significantly higher than 2021.

Pricing actions and supply chain productivity initiatives introduced at the end of 2021 will mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in 2022.

There still remains uncertainty around the COVID-19 pandemic and 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 and other third parties in response to the pandemic.

Retailers also continue to grow and promote store brands that compete with branded products, especially on price.

Throughout 2022 we experienced elevated demand for our retail products versus pre-pandemic levels, but volumes were lower than fiscal 2021.

In the first half of the year we experienced lower net sales due primarily to supply constraints based on materials availability and in the second half of the year, although supply significantly improved volumes declined due to inflation-driven pricing actions.

We anticipate that demand related to at-home food consumption will remain elevated through 2023.

We also anticipate that 2023 will continue to be a dynamic macroeconomic environment, and expect input cost inflation to continue.

We will continue to take actions to mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in 2023.

Based on benefit obligations and plan assets as of July 31, 2022, net periodic pension and postretirement benefit income excluding any actuarial losses or gains is estimated to be approximately $35 million lower in 2023, subject to the impact of interim remeasurements.

The decrease in 2023 is due to increases in discount rates used to determine the benefit obligations and a decline in the market value of plan assets.

Business Divestitures

We completed the sale of our Kelsen business on September 23, 2019.

These businesses were historically included in the Snacks reportable segment.

In addition, on October 11, 2019, we completed the sale of our European chips business.

The results of the European chips business through the date of sale were reflected in continuing operations within the Snacks reportable segment.

In the fourth quarter of 2021, we completed the sale of our Plum baby food and snacks business.

The results of the Plum baby food and snacks business through the date of sale were reflected in continuing operations within the Meals & Beverages reportable segment.

See Notes 3 and 6 to the Consolidated Financial Statements for additional information on these divestitures and reportable segments.

Summary of Results

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

There were 53 weeks in 2020.

There were 52 weeks in 2022 and 2021.

• Net sales decreased 2% in 2021 to $8,476 million.

The impact of the 53 rd week in 2020 was approximately 2 points.

There were 53 weeks in 2020.

• Net sales increased 1% in 2022 to $8.562 billion as inflation-driven pricing and sales allowances were partially offset by volume declines, the impact from the divestiture of the Plum baby food and snack business and increased

promotional spending.

Volumes declined primarily due to supply constraints driven by labor and materials availability and price elasticities.

• Gross profit, as a percent of sales, decreased to 30.7% in 2022 from 33.2% a year ago.

The decrease was primarily due to higher cost inflation and other supply chain costs, as well as unfavorable product mix, partially offset by the benefits from supply chain productivity improvements, lower levels of promotional spending, mark-to-market gains on outstanding commodity hedges in the current year and the benefits of cost savings initiatives.

• Interest expense decreased to $210 million in 2021 from $345 million a year ago.

The prior year included a loss of $75 million related to extinguishment of debt.

After adjusting for this item, interest expense declined primarily due to lower levels of debt.

The decrease was primarily due to higher cost inflation, mark-to-market adjustments on outstanding undesignated commodity hedges and unfavorable volume/mix, partially offset by inflation-driven pricing actions and supply chain productivity improvements.

• Earnings per share from continuing operations were $2.51 in 2022, compared to $3.30 a year ago.

The current year included gains of $.32 and the prior year included expenses of $1.01 per share from items impacting comparability as discussed below.

• Loss per share from discontinued operations was $.02 in 2021, compared to Earnings per share of $3.41 a year ago.

The prior year included gains of $3.29 from items impacting comparability as discussed below.

The current year included expenses of $.34 and the prior year included gains of $.45 per share from items impacting comparability as discussed below.

Net Earnings attributable to Campbell Soup Company - 2022 Compared with 2021

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Continuing Operations

• In 2021, we recognized gains of $165 million in Other expenses / (income) ($126 million after tax, $.41 per share) associated with mark-to-market adjustments for defined benefit pension and postretirement plans.

In 2020, we recognized losses of $121 million in Other expenses / (income) ($92 million after tax, $.30 per share) associated with mark-to-market adjustments for defined benefit pension and postretirement plans;

• In 2021, we recognized pension settlement gains in Other expenses / (income) of $38 million ($29 million after tax, or $.10 per share).

In 2020, we recognized pension settlement charges in Other expenses / (income) of $43 million ($33 million after tax, or $.11 per share).

The settlements were associated with U.S.

and Canadian pension plans and resulted from the level of lump sum distributions from the plans' assets;

• In 2022, we recognized actuarial losses on our pension and postretirement plans in Other expenses / (income) of $44 million ($33 million after tax, or $.11 per share).

In 2021, we recognized actuarial gains in Other expenses / (income) of $203 million ($155 million after tax, or $.51 per share);

• In 2022, we recognized losses in Cost of products sold of $59 million ($44 million after tax, or $.15 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

In 2021, we recognized gains in Cost of products sold of $50 million ($38 million after tax, or $.12 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges;

• We implemented several cost savings initiatives in recent years.

In 2022, we recorded Restructuring charges of $5 million and implementation costs and other related costs of $20 million in Administrative expenses, $5 million in Cost of products sold and $1 million in Marketing and selling expenses (aggregate impact of $24 million after tax, or $.08 per share) related to these initiatives.

In 2020, we recorded Restructuring charges of $9 million and implementation costs and other related costs of $48 million in Administrative expenses, $9 million in Cost of products sold, $2 million in Marketing and selling expenses, and $1 million in Research and development expenses (aggregate impact of $52 million after tax, or $.17 per share) related to these initiatives.

In 2021, we recorded Restructuring charges of $21 million and implementation costs and other related costs of $28 million in Administrative expenses, $3 million in Cost of products sold and $1 million in Marketing and selling expenses (aggregate impact of $40 million after tax, or $.13 per share) related to these initiatives.

See Note 7 to the Consolidated Financial Statements and "Restructuring Charges and Cost Savings Initiatives" for additional information;

• In 2021, we recorded a loss in Other expenses / (income) of $11 million (and a gain of $3 million after tax, or $.01 per share) on the sale of our Plum baby food and snacks business.

In 2020, we recorded a loss in Other expenses / (income) of $64 million ($37 million after tax, or $.12 per share) on the sale of our European chips business;

• 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;

• On April 26, 2020, we entered into an agreement to sell our limited partnership interest in Acre Venture Partners, L.P.

The transaction closed on May 8, 2020.

In the third quarter of 2020, we recorded a loss in Other expenses / (income) of $45 million ($35 million after tax, or $.12 per share) as a result of the pending sale.

See Note 14 to the Consolidated Financial Statements for additional information;

• In 2022, we recorded a loss in Interest expense of $4 million ($3 million after tax, or $.01 per share) on the extinguishment of debt;

Discontinued Operations

• In 2020, we recognized net gains of $1,039 million ($1,000 million after tax, or $3.29 per share) associated with the sale of Campbell International.

• In 2021, we recorded a loss in Other expenses / (income) of $11 million (and a gain of $3 million after tax, or $.01 per share) on the sale of our Plum baby food and snacks business;

• 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).

The items impacting comparability are summarized below:

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Earnings from continuing operations attributable to Campbell Soup Company $ 757 $ 2.51 $ 1,008 $ 3.30

Earnings (loss) from discontinued operations $ (6) $ (.02) $ 1,036 $ 3.41

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

Net earnings attributable to Campbell Soup Company (1)

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Continuing operations:

Pension and postretirement benefit mark-to-market adjustments $ 126 $ .41 $ (92) $ (.30)

Pension settlement gains (charges) 29 .10 (33) (.11)

Pension and postretirement actuarial gains (losses) $ (33) $ (.11) $ 155 $ .51

Commodity mark-to-market gains (losses) (44) (.15) 38 .12

Restructuring charges, implementation costs and other related costs (24) (.08) (40) (.13)

Gains (charges) associated with divestitures 3 .01 (37) (.12)

Deferred tax charge (19) (.06) — —

Investment losses — — (35) (.12)

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

Gain associated with divestiture — — 3 .01

Deferred tax charge — — (19) (.06)

Impact of items on Earnings from continuing operations (1)

$ (104) $ (.34) $ 137 $ .45

Discontinued operations:

Gains associated with divestitures $ — $ — $ 1,000 $ 3.29

Impact of items on Earnings (loss) from discontinued operations $ — $ — $ 1,000 $ 3.29

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

Earnings from continuing operations were $1,008 million ($3.30 per share) in 2021, compared to $592 million ($1.95 per share) in 2020.

After adjusting for items impacting comparability, earnings from continuing operations increased reflecting lower marketing and selling expenses, lower interest expense and higher other income, partially offset by a lower gross profit performance and the decline in sales.

The additional week contributed approximately $.04 per share to Earnings from continuing operations in 2020.

Current year earnings included $50 million ($38 million after tax, or $.12 per share) of mark-to-market gains on outstanding commodity hedges.

Earnings from continuing operations were $757 million ($2.51 per share) in 2022, compared to $1.008 billion ($3.30 per share) in 2021.

After adjusting for items impacting comparability, earnings from continuing operations decreased reflecting lower gross profit, lower other income and higher administrative expenses, mostly 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.

See "Discontinued Operations" for additional information.

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Continuing Operations

• In 2019, we recognized losses of $122 million in Other expenses / (income) ($93 million after tax, or $.31 per share) associated with mark-to-market adjustments for defined benefit pension and postretirement plans;

• In 2019, we recognized a pension settlement charge in Other expenses / (income) of $28 million ($22 million after tax, or $.07 per share) associated with a U.S.

pension plan.

The settlement resulted from the level of lump sum distributions from the plan's assets;

• In 2020, we recognized actuarial losses on our pension and postretirement plans in Other expenses / (income) of $164 million ($125 million after tax, or $.41 per share);

• In 2020, we recognized gains in Cost of products sold of $2 million ($2 million after tax, or $.01 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges;

• In 2020, we recorded Restructuring charges of $9 million and implementation costs and other related costs of $48 million in Administrative expenses, $9 million in Cost of products sold, $2 million in Marketing and selling expenses and $1 million in Research and development expenses (aggregate impact of $52 million after tax, or $.17 per share) related to the cost savings initiatives discussed above.

See Note 7 to the Consolidated Financial Statements and "Restructuring Charges and Cost Savings Initiatives" for additional information;

• In 2019, we recorded a tax charge of $2 million ($.01 per share) related to a transition tax on unremitted foreign earnings under the enactment of the Tax Cuts and Jobs Act (the Act);

• In the fourth quarter of 2019, we performed an assessment on the assets within the European chips business and recorded a non-cash impairment charge of $16 million ($13 million after tax, or $.04 per share) on intangible assets in Other expenses / (income).

• In 2020, we recorded a loss in Other expenses / (income) of $64 million ($37 million after tax, or $.12 per share) on the sale of our European chips business;

• On April 26, 2020, we entered into an agreement to sell our limited partnership interest in Acre Venture Partners, L.P.

The transaction closed on May 8, 2020.

In the third quarter of 2020, we recorded a loss in Other expenses / (income) of $45 million ($35 million after tax, or $.12 per share) as a result of the pending sale.

See Note 14 to the Consolidated Financial Statements for additional information;

• In 2020, we recorded a loss in Interest expense of $75 million ($57 million after tax, or $.19 per share) on the extinguishment of debt.

Discontinued Operations

• In 2019, we incurred pre-tax expenses of $32 million associated with the sale process of Campbell Fresh, including transaction costs.

In addition, we recorded tax expense of $29 million as deferred tax assets on Bolthouse Farms were not realizable.

The aggregate impact was $51 million after tax, or $.17 per share.

In 2019, we also incurred costs of $12 million ($10 million after tax, or $.03 per share) associated with the planned divestiture of Campbell International.

The total aggregate impact was $61 million after tax, or $.20 per share;

• In 2019, we recognized losses of $12 million ($9 million after tax, or $.03 per share) associated with mark-to-market adjustments for defined benefit pension plans;

• In the fourth quarter of 2019, as part of our annual review of intangible assets, we recognized a non-cash impairment charge of $7 million on a trademark and $10 million on goodwill in Kelsen due to a lower long-term outlook for sales and the pending sale of the business.

The aggregate impact was $17 million ($12 million after tax, or $.04 per share).

In the second quarter of 2019, interim impairment assessments were performed on the intangible and tangible assets within Campbell Fresh, which included Garden Fresh Gourmet, Bolthouse Farms carrot and carrot ingredients and Bolthouse Farms refrigerated beverages and salad dressings, as we continued to pursue the divestiture of these businesses.

We revised our future outlook for earnings and cash flows for each of these businesses as the divestiture process progressed.

We recorded non-cash impairment charges of $104 million on the tangible assets and $73 million on the intangible assets of Bolthouse Farms carrot and carrot ingredients;

$96 million on the intangible assets and $9 million on the tangible assets of Bolthouse Farms refrigerated beverages and salad dressings;

and $62 million on the intangible assets and $2 million on the tangible assets of Garden Fresh Gourmet.

The aggregate impact of the impairment charges was $346 million ($264 million after tax, or $.87 per share).

In the first quarter of 2019, we recorded a non-cash impairment charge of $14 million ($11 million after tax, or $.04 per share) on our U.S.

refrigerated soup plant assets.

In 2019, total non-cash impairment charges recorded were $377 million ($287 million after tax, or $.95 per share).

• In 2020, we recognized net gains of $1.039 billion ($1 billion after tax, or $3.29 per share) associated with the sale of Campbell International.

The items impacting comparability are summarized below:

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Continuing operations:

Pension and postretirement benefit mark-to-market adjustments $ (92) $ (.30) $ (93) $ (.31)

Pension settlement charges (33) (.11) (22) (.07)

Pension and postretirement actuarial gains (losses) $ 155 $ .51 $ (125) $ (.41)

Commodity mark-to-market gains 38 .12 2 .01

Restructuring charges, implementation costs and other related costs (40) (.13) (52) (.17)

Charges associated with divestiture (37) (.12) — —

Gains (charges) associated with divestitures 3 .01 (37) (.12)

Deferred tax charge (19) (.06) — —

Investment losses — — (35) (.12)

Loss on debt extinguishment — — (57) (.19)

Tax reform — — (2) (.01)

Impairment charges — — (13) (.04)

Impact of items on Earnings from continuing operations $ 137 $ .45 $ (304) $ (1.00)

$ (306) $ (1.01) $ (222) $ (.74)

Discontinued operations:

Gains (charges) associated with divestitures $ 1,000 $ 3.29 $ (61) $ (.20)

Pension benefit mark-to-market adjustments — — (9) (.03)

Impairment charges — — (287) (.95)

Gains associated with divestitures $ — $ — $ 1,000 $ 3.29

Impact of items on Earnings (loss) from discontinued operations

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

Earnings from continuing operations were $592 million ($1.95 per share) in 2020, compared to $474 million ($1.57 per share) in 2019.

After adjusting for items impacting comparability, earnings increased reflecting sales volume gains, including the benefit of the additional week, an improved gross profit performance and lower interest expense, partially offset by increased marketing investment.

Earnings from continuing operations were $1.008 billion ($3.30 per share) in 2021, compared to $592 million ($1.95 per share) in 2020.

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

The additional week contributed approximately $.04 per share to Earnings from continuing operations in 2020.

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Snacks 3,955 3,855 3,944 3 (2)

Corporate — — 1 — n/m

$ 8,562 $ 8,476 $ 8,691 1 (2)

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n/m - Not meaningful.

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

2021 versus 2020 Meals & Beverages (2)

2022 versus 2021

Meals & Beverages (2)

Volume and mix (6)% (6)% (6)%

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Decreased/(increased) promotional spending (1)

Estimated impact of 53 rd week

(2)% (2)% (2)%

2020 versus 2019 Meals & Beverages (2)

2021 versus 2020

Meals & Beverages Snacks (2)

Volume and mix (2)% (1)% (2)%

3 unchanged sentences

(3)% (2)% (2)%

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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 2022, Meals & Beverages sales were comparable with prior year.

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

soup and foodservice, partially offset by declines in V8 beverages.

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.

Sales of U.S.

soup increased 3%, due to increases in ready-to-serve soups, condensed soups and broth.

In 2021, Meals & Beverages sales decreased 3%.

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soup decreased 1% due to declines in condensed soups and ready-to-serve soups, partially offset by gains in broth.

In 2020, Meals & Beverages sales increased 9%.

Excluding the benefit of the 53 rd week, sales increased primarily due to gains in the U.S.

retail business driven by U.S.

soup, Prego pasta sauces and V8 beverages, as well as gains in Canada, partially offset by declines in foodservice.

Volume and mix increased in the retail business driven by COVID-19, with increased demand of food purchases for at-home consumption in the second half of 2020.

The foodservice business was negatively impacted by shifts in consumer behavior and continued COVID-19 related restrictions, as well as the loss of a refrigerated soup contract.

Including a 2-point benefit from the additional week, sales of U.S.

soup increased 14% due to gains in condensed soups, ready-to-serve soups and broth.

In 2022, Snacks sales increased 3% driven by sales of our power brands which increased 7%.

Sales increased due to increases in cookies and crackers, primarily Goldfish crackers, and in salty snacks, primarily Snyder’s of Hanover pretzels and Kettle Brand potato chips which more than offset declines in Late July snacks, partially offset by declines in non-core businesses.

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

Volumes declined driven by supply constraints due to labor and materials availability and price elasticities .

In 2021, Snacks sales decreased 2%.

Excluding the impact of the 53 rd week and the divestiture of the European chips business, sales were comparable driven by volume declines mostly offset by lower levels of promotional spending as well as favorable price and sales allowances.

Declines in Lance sandwich crackers and partner brands were mostly offset by gains in salty snacks, including Late July snacks and Snack Factory pretzel crisps, and in Goldfish crackers.

Excluding the impact of the 53 rd week and the divestiture of the European chips business, sales were comparable driven by volume declines mostly offset by lower levels of promotional spending.

Declines in partner brands and Lance sandwich crackers were mostly offset by gains in salty snacks, including Late July snacks and Snyder's of Hanover pretzels, and in Goldfish crackers.

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

In 2020, Snacks sales increased 5%.

Excluding the impact of the European chips divestiture and the benefit of the 53 rd week, sales increased driven by volume gains reflecting increased demand of food purchases for at-home consumption in the second half of 2020, as well as base business performance.

The sales increases reflect gains in Goldfish crackers, Pepperidge Farm cookies and fresh bakery products, as well as Kettle Brand and Cape Cod potato chips, Late July snacks and Snyder's of Hanover pretzels.

Gross profit, defined as Net sales less Cost of products sold, decreased by $188 million in 2021 from 2020 and increased by $306 million in 2020 from 2019.

Gross profit, defined as Net sales less Cost of products sold, decreased by $184 million in 2022 from 2021 and decreased by $188 million in 2021 from 2020.

As a percent of sales, gross profit was 30.7% in 2022, 33.2% in 2021 and 34.5% in 2020.

The 1.3 percentage-point decrease and the 1.3 percentage-point increase in gross profit percentage in 2021 and 2020, respectively, were due to the following factors:

The 250 basis-point decrease and the 130 basis-point decrease in gross profit margin in 2022 and 2021, respectively, were due to the following factors:

Margin Impact

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

Mix (0.2) 0.7

Price and sales allowances (0.1) 0.3

Lower restructuring-related costs 0.1 0.1

Volume/mix (2)

Lower/(higher) level of promotional spending (50) 80

Productivity improvements 130 150

Price and sales allowances 610 (10)

Lower restructuring-related costs — 10

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(1) 2021 includes an estimated positive margin impact of a 0.6 benefit from the change in mark-to-market adjustments on outstanding commodity hedges and 0.5 from the benefit of cost savings initiatives, which were more than offset by cost inflation and other factors.

2020 includes an estimated positive margin impact of 1.3 from the benefit of cost savings initiatives and operating leverage, which was more than offset by cost inflation and other factors, including the impact of COVID-19.

(1) 2022 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 130 basis-point impact from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

2021 includes an estimated positive margin impact of a 60 basis-point benefit from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges and 50 basis points from the benefit of cost savings initiatives, which were more than offset by cost inflation and other factors.

(2) Includes the impact of operating leverage.

Marketing and Selling Expenses

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Marketing and selling expenses decreased 10% in 2022 from 2021.

The decrease was primarily due to lower advertising and consumer promotion expense (approximately 7 percentage points);

increased benefits from cost savings initiatives (approximately 2 percentage points);

lower incentive compensation (approximately 2 percentage points);

lower selling expenses (approximately 1 percentage point) and lower costs related to marketing overhead (approximately 1 percentage point).

The decrease in advertising and consumer promotion expense was primarily due to elevated levels in the prior year.

Marketing and selling expenses increased 12% in 2020 from 2019.

The increase was primarily due to higher advertising and consumer promotion expense (approximately 14 percentage points);

higher selling expenses (approximately 2 percentage points);

higher incentive compensation (approximately 1 percentage point);

and higher costs related to marketing overhead (approximately 1 percentage point), partially offset by increased benefits from cost savings initiatives (approximately 5 percentage points) and lower costs associated with cost savings initiatives (approximately 1 percentage point).

The increase in advertising and consumer promotion expense was primarily in Meals & Beverages due to increased support of U.S.

soup, and in Snacks due to increased support of key brands.

The decrease was primarily due to lower advertising and consumer promotion expense (approximately 10 points).

The reduction in advertising and consumer promotion expense was primarily due to supply constraints.

Marketing and selling expenses decreased 14% in 2021 from 2020.

The decrease was primarily due to lower advertising and consumer promotion expense (approximately 7 points);

increased benefits from cost savings initiatives (approximately 2 points);

lower incentive compensation (approximately 2 points);

lower selling expenses (approximately 1 point) and lower costs related to marketing overhead (approximately 1 point).

The decrease in advertising and consumer promotion expense was primarily due to elevated levels in 2020.

Administrative Expenses

Administrative expenses as a percent of sales were 7.2% in 2022, 7.1% in 2021 and 7.2% in 2020.

Administrative expenses decreased 4% in 2021 from 2020.

The decrease was primarily due to lower incentive compensation (approximately 4 percentage points);

lower costs associated with cost savings initiatives (approximately 3 percentage points);

increased benefits from cost savings initiatives (approximately 2 percentage points) and higher charitable contributions in the prior year (approximately 2 percentage points), partially offset by higher information technology costs (approximately 4 percentage points);

higher inflation and other factors (approximately 2 percentage points) and higher benefit-related costs (approximately 1 percentage point).

Administrative expenses increased 3% in 2022 from 2021.

The increase was primarily due to higher incentive compensation (approximately 4 percentage points);

higher information technology costs (approximately 3 percentage points);

higher inflation and general administrative costs (approximately 3 percentage points) and increases in charitable contributions (approximately 2 percentage points), partially offset by increased benefits from cost savings initiatives (approximately 8 percentage points) and lower costs associated with cost savings initiatives (approximately 2 percentage points).

The increase was primarily due to expenses related to the settlement of certain legal claims (approximately 3 points) and higher general administrative costs (approximately 3 points), partially offset by increased benefits from cost savings initiatives (approximately 3 points).

Administrative expenses decreased 4% in 2021 from 2020.

The decrease was primarily due to lower incentive compensation (approximately 4 points);

lower costs associated with cost savings initiatives (approximately 3 points);

increased benefits from cost savings initiatives (approximately 2 points) and higher charitable contributions in 2020 (approximately 2 points), partially offset by higher information technology costs (approximately 4 points);

higher inflation and other factors (approximately 2 points) and higher benefit-related costs (approximately 1 point).

Other Expenses / (Income)

Other expenses in 2022 included the following:

• $41 million of amortization of intangible assets;

• $23 million of net periodic benefit income, including pension and postretirement actuarial losses of $44 million.

Other income in 2021 included the following:

• $285 million of net periodic benefit income, including gains of $165 million on pension and postretirement benefit mark-to-market adjustments and pension settlement gains of $38 million;

• $285 million of net periodic benefit income, including pension and postretirement actuarial gains of $203 million;

• $27 million of income from transition services fees;

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Other expenses in 2020 included the following:

• $73 million of net periodic benefit expense, including losses of $121 million on pension and postretirement benefit mark-to-market adjustments and pension settlement charges of $43 million;

• $73 million of net periodic benefit expense, including pension and postretirement actuarial losses of $164 million;

• $64 million loss on the sale of the European chips business;

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• $10 million of income from transition services fees.

Other expenses in 2019 included the following:

• $71 million of net periodic benefit expense, including losses of $122 million on pension and postretirement benefit mark-to-market adjustments and a pension settlement charge of $28 million;

• $48 million of amortization of intangible assets;

• $16 million non-cash impairment charge related to the European chips business.

Operating Earnings

Segment operating earnings decreased 6% in 2021 from 2020 and increased 8% in 2020 from 2019.

Segment operating earnings decreased 3% in 2022 from 2021 and decreased 6% in 2021 from 2020.

An analysis of operating earnings by segment follows:

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Restructuring charges (1)

(21) (9) (31)

Earnings before interest and taxes $ 1,163 $ 1,545 $ 1,107

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Operating earnings from Meals & Beverages decreased 5% in 2022 versus 2021.

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

Gross profit performance was impacted by higher cost inflation and other supply chain costs, as well as unfavorable product mix, partially offset by the benefits of supply chain productivity improvements and lower levels of promotional activity.

Operating earnings from Meals & Beverages increased 10% in 2020 versus 2019.

The increase was primarily due to sales gains, including the benefit of the additional week, and improved gross profit performance, partially offset by increased marketing support and higher administrative expenses.

Gross profit performance was impacted by the benefits of supply chain productivity improvements and cost savings initiatives, as well as improved operating leverage and favorable product mix, partially offset by higher cost inflation and other supply chain costs, including COVID-19 related costs incurred in the second half of 2020.

Operating earnings from Snacks decreased 3% in 2021 versus 2020.

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

Gross profit performance was impacted by higher cost inflation and other supply chain costs, partially offset by the benefits of supply chain productivity improvements and cost savings initiatives as well as lower levels of promotional spending.

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

Gross profit margin declined driven by higher cost inflation and other supply chain costs as well as higher levels of promotional spending and unfavorable volume/mix, partially offset by the impact of pricing actions and supply chain productivity improvements.

Operating earnings from Meals & Beverages decreased 9% in 2021 versus 2020.

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

Gross profit performance was impacted by higher cost inflation and other supply chain costs, as well as unfavorable volume/mix, partially offset by supply chain productivity improvements and lower levels of promotional activity.

Operating earnings from Snacks increased 1% in 2022 versus 2021.

The increase primarily due to sales gains, including the benefit of the additional week, improved gross profit performance, partially offset by increased marketing support.

Gross profit performance was impacted by the benefits of supply chain productivity improvements and cost savings initiatives, as well as favorable product mix and improved operating leverage, partially offset by higher cost inflation and other supply chain costs, including COVID-19 related costs incurred in the second half of 2020.

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

Operating earnings from Snacks decreased 2% in 2021 versus 2020.

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

Corporate expense in 2022 included the following:

• $59 million of unrealized mark-to-market losses on outstanding undesignated commodity hedges;

• $44 million of pension and postretirement actuarial losses;

• costs of $26 million related to cost savings initiatives.

Corporate income in 2021 included the following:

• $165 million of gains on pension and postretirement benefit mark-to-market adjustments;

• pension settlement gains of $38 million;

• $203 million of pension and postretirement actuarial gains;

• $50 million of unrealized mark-to-market gains on outstanding undesignated commodity hedges;

• costs of $32 million related to the cost savings initiatives;

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Corporate expense in 2020 included the following:

• $121 million of losses on pension and postretirement benefit mark-to-market adjustments;

• $164 million of pension and postretirement actuarial losses;

• a loss of $64 million from the sale of the European chips business;

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• a loss of $45 million on Acre;

• pension settlement charges of $43 million.

Corporate expense in 2019 included the following:

• $122 million of losses on pension and postretirement benefit mark-to-market adjustments;

• costs of $90 million related to the cost savings initiatives;

• a pension settlement charge of $28 million;

• non-cash impairment charge of $16 million related to the European chips business.

Excluding these amounts, the remaining change from 2020 to 2021 was primarily due to $ 50 million of mark-to-market gains on outstanding commodity hedges in the current year.

Excluding these amounts, the remaining decrease in costs in 2020 from 2019 was primarily due to higher other income and lower administrative expenses.

• $2 million of unrealized mark-to-market gains on outstanding undesignated commodity hedges.

Interest Expense

Interest expense decreased to $189 million in 2022 from $210 million in 2021.

The decrease in interest expense was due to a loss on extinguishment of debt of $75 million in the prior year and lower levels of debt.

The decrease in interest expense was primarily due to lower levels of debt, partially offset by a loss on extinguishment of debt of $4 million in 2022.

Interest expense decreased to $210 million in 2021 from $345 million in 2020.

The decrease in interest expense was due to lower levels of debt and lower average interest rates on the debt portfolio, partially offset by a loss on extinguishment of debt of $75 million.

The decrease in interest expense was due to a loss on extinguishment of debt of $75 million in 2020 and lower levels of debt.

Taxes on Earnings

The effective tax rate was 22.4% in 2022, 24.6% in 2021 and 22.7% in 2020.

The increase in the effective tax rate in 2021 from 2020 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 and a $27 million tax benefit on the $64 million loss on the sale of the European chips business in the prior year.

The decrease in the effective rate in 2020 from 2019 was primarily due to the tax benefit on the sale of the European chips business.

Two-Year Comparison of Results from Continuing Operations - 2021 versus 2019

With the continued impact from the COVID-19 pandemic in 2021, we experienced significantly higher sales of our retail products in both our Meals & Beverages and Snacks segments as consumers increased food purchases for at-home consumption.

For additional context on our net sales performance and earnings from continuing operations performance,

including items impacting comparability as previously discussed, see below for comparison of our current results to 2019, before the pandemic.

Net sales increased 5% to $8,476 million in 2021 from $8,107 million in 2019.

An analysis of net sales by reportable segment follows:

(Millions) 2021 2019 2021/2019 Impact of Divestitures

Meals & Beverages $ 4,532 $ 4,252 7 (1)

Snacks 3,944 3,854 2 (3)

Corporate — 1 n/m n/m

$ 8,476 $ 8,107 5 (2)

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n/m - Not meaningful.

Earnings from continuing operations and the items impacting comparability are summarized below:

(Millions, except per share amounts) Earnings

Impact Earnings

Earnings from continuing operations attributable to Campbell Soup Company $ 1,008 $ 3.30 $ 474 $ 1.57

Continuing operations:

Pension and postretirement benefit mark-to-market adjustments $ 126 $ .41 $ (93) $ (.31)

Pension settlement gains (charges) 29 .10 (22) (.07)

Restructuring charges, implementation costs and other related costs (40) (.13) (92) (.30)

Gains associated with divestiture 3 .01 — —

Deferred tax charge (19) (.06) — —

Tax reform — — (2) (.01)

Impairment charges — — (13) (.04)

Impact of items on Earnings from continuing operations (1)

$ 99 $ .32 $ (222) $ (.74)

__________________________________________

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

The decrease in the effective tax rate in 2022 from 2021 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 and state income tax law changes.

The increase in the effective rate in 2021 from 2020 was primarily due to the $19 million deferred tax charge recognized in the second quarter of 2021 and a $27 million tax benefit on the $64 million loss on the sale of the European chips business in 2020.

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.

In recent 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.

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 continue to implement this program.

In addition, we have identified opportunities for additional cost synergies as we integrate Snyder's-Lance.

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:

(Millions, except per share amounts)

2021 2020 2019 Recognized as of August 1, 2021

2022 2021 2020 Recognized as of July 31, 2022

Restructuring charges $ 5 $ 21 $ 9 $ 264

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

(Millions) Recognized as of

August 1, 2021

(Millions) Recognized as of July 31, 2022

Severance pay and benefits

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Implementation costs and other related costs

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

(Millions) Recognized as of August 1, 2021

Severance pay and benefits

Implementation costs and other related costs

As of April 28, 2019, we incurred substantially all of the costs for actions associated with discontinued operations.

All of the costs were cash expenditures.

The total estimated pre-tax costs for actions associated with continuing operations are approximately $710 million to $730 million.

This estimate will be updated as costs continue to be developed.

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:

approximately $220 million to $225 million in severance pay and benefits;

The total estimated pre-tax costs for actions associated with continuing operations that have been identified to date are approximately $735 million to $740 million and we expect to incur the costs through 2023.

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 $230 million in severance pay and benefits;

approximately $85 million in asset impairment and accelerated depreciation;

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and Corporate - approximately 25%.

Of the aggregate $710 million to $730 million of pre-tax costs associated with continuing operations, we expect approximately $610 million to $630 million will be cash expenditures.

In addition, we expect to invest approximately $435 million in capital expenditures through 2022, of which we invested $401 million as of August 1, 2021.

Of the aggregate $735 million to $740 million of pre-tax costs associated with continuing operations identified to date, we expect approximately $635 million to $640 million will be cash expenditures.

In addition, we expect to invest approximately $445 million in capital expenditures through 2023, of which we invested $440 million as of July 31, 2022.

The capital expenditures primarily relate to a U.S.

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We expect to fund the costs through cash flows from operations and short-term borrowings.

We expect the initiatives for actions associated with continuing operations, once all phases are implemented, to generate annual ongoing savings of approximately $850 million by the end of 2022.

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

(Millions) 2021 2020 2019 2018 2017 2016 2015

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

The initiatives for actions associated with discontinued operations generated pre-tax savings of over $90 million in 2019.

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

As of July 31, 2022, we have generated total program-to-date pre-tax savings of $850 million.

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

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Discontinued Operations

On February 25, 2019, we sold our U.S.

refrigerated soup business, and on April 25, 2019, we sold our Garden Fresh Gourmet business.

Proceeds were $55 million.

On June 16, 2019, we sold our Bolthouse Farms business.

Proceeds were $500 million.

Beginning in the third quarter of 2019, we have reflected the results of these businesses as discontinued operations in the Consolidated Statements of Earnings for all periods presented.

These businesses were historically included in the Campbell Fresh reportable segment.

We completed the sale of our Kelsen business on September 23, 2019, for $322 million.

We also completed the sale of the Arnott’s and other international operations on December 23, 2019, for $2,286 million.

We also completed the sale of the Arnott’s and other international operations on December 23, 2019, for $2.286 billion.

The purchase price was subject to certain post-closing adjustments, which resulted in $4 million of additional proceeds in the third quarter of 2020.

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Results of discontinued operations were as follows:

Campbell International Campbell Fresh

(Millions) 2020

Net sales $ 359

Impairment charges $ — $ 17 $ 360

Earnings (loss) before taxes from operations $ 53 $ 120 $ (359)

Taxes on earnings (loss) from operations 17 41 (78)

Gain (loss) on sales of businesses / costs associated with selling the businesses 1,039 (12) (32)

Tax expense (benefit) on sales / costs associated with selling the businesses 39 (2) 19

Earnings (loss) from discontinued operations $ 1,036 $ 69 $ (332)

In the third quarter of 2021, we recognized a $6 million Loss from discontinued operations due to tax expense from return-to-provision adjustments related to the sale of Campbell International.

In 2020, Campbell International sales and earnings from operations decreased reflecting the sales of the businesses.

Earnings before taxes from operations $ 53

Taxes on earnings from operations 17

Gain on sales of businesses / costs associated with selling the businesses 1,039

Tax expense on sales / costs associated with selling the businesses 39

Earnings from discontinued operations $ 1,036

In addition, in the third quarter of 2021, we recognized a $6 million loss due to tax expense from return-to-provision adjustments related to the sale of Campbell International.

The sale of the Arnott's and other international operations resulted in a substantial capital gain for tax purposes.

We were able to utilize capital losses in 2020, which were offset with valuation allowances as of July 28, 2019, to offset the capital gain.

In the fourth quarter of 2019, as part of our annual review of intangible assets, we recognized an impairment charge of $7 million on a trademark and $10 million on goodwill in Kelsen due to a lower long-term outlook for sales and the pending sale of the business.

In 2019, we recorded non-cash impairment charges of $360 million ($275 million after tax, or $.91 per share) on the reporting units in Campbell Fresh.

See "Significant Accounting Estimates" for additional information.

LIQUIDITY AND CAPITAL RESOURCES

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We believe that our sources of financing will be adequate to meet our future requirements.

We generated cash flows from operations of $1,035 million in 2021, compared to $1,396 million in 2020.

The decline in 2021 was primarily due to changes in working capital, mostly from a significant increase in accounts payable in the prior year and lower accrued liabilities in the current year.

We generated cash flows from operations of $1,396 million in 2020, compared to $1,398 million in 2019.

The decline in 2020 was primarily due changes in working capital, mostly offset by higher cash earnings and lower other cash payments.

We generated cash flows from operations of $1.181 billion in 2022, compared to $1.035 billion in 2021.

The increase in 2022 was primarily due to changes in working capital, partially offset by lower cash earnings.

We generated cash flows from operations of $1.035 billion in 2021, compared to $1.396 billion in 2020.

The decline in 2021 was primarily due changes in working capital, mostly from a significant increase in accounts payable in the prior year and lower accrued liabilities in the current year.

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 $119 million as of August 1, 2021, and $690 million as of August 2, 2020.

Total debt maturing within one year was $48 million as of August 1, 2021, and $1,202 million as of August 2, 2020.

We had negative working capital of $923 million as of July 31, 2022, and $119 million as of August 1, 2021.

Total debt maturing within one year was $814 million as of July 31, 2022, and $48 million as of August 1, 2021.

Capital expenditures were $242 million in 2022, $275 million in 2021 and $299 million in 2020.

Capital expenditures in 2021 were lower than 2020 due to capital expenditures associated with discontinued operations in 2020.

Capital expenditures in 2020 were lower than 2019 reflecting delays in certain projects impacted by the spread of the COVID-19 pandemic.

Capital expenditures are expected to total approximately $325 million in 2023.

Capital expenditures in 2021 included the implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, chip capacity expansion projects, a Milano cookie capacity expansion project, and a Goldfish cracker capacity expansion project.

Capital expenditures in 2020 included the implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, a Milano cookie capacity expansion project, chip capacity expansion projects, and a Goldfish cracker capacity expansion project.

Capital expenditures in 2019 included a U.S.

warehouse optimization project, replacement of a Pepperidge Farm refrigeration system, transition of production of the Toronto manufacturing facility to our U.S.

thermal plants, a Snyder's-Lance regional distribution center, a Milano cookie capacity expansion project, and a Goldfish cracker capacity expansion project.

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

Capital expenditures in 2022 included improvement of the quality and cost structure of the Snyder's-Lance manufacturing network, the continued 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 2021 included the continued implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, chip capacity expansion projects, a Milano cookie capacity expansion project and a Goldfish cracker capacity expansion project.

Capital expenditures in 2020 included implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, a Milano cookie capacity expansion project, chip capacity expansion projects and a Goldfish cracker capacity expansion project.

In Snacks, we have a direct-store-delivery distribution model that uses independent contractor distributors.

In order to maintain and expand this model, we routinely purchase and sell routes.

The purchase and sale proceeds of the routes are reflected in investing activities.

On February 25, 2019, we sold our U.S.

refrigerated soup business, and on April 25, 2019, we sold our Garden Fresh Gourmet business.

Proceeds were $55 million.

On June 16, 2019, we sold our Bolthouse Farms business.

Proceeds were $500 million.

We completed the sale of our Kelsen business on September 23, 2019, for $322 million.

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In addition, on October 11, 2019, we completed the sale of our European chips business for £63 million, or $77 million.

We completed the sale of the Arnott’s and other international operations on December 23, 2019, for $2,286 million.

We completed the sale of the Arnott’s and other international operations on December 23, 2019, for $2.286 billion.

The purchase price was subject to certain post-closing adjustments, which resulted in $4 million of additional proceeds in the third quarter of 2020.

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On January 22, 2020, we completed the redemption of all $500 million outstanding aggregate principal amount of our 4.25% Senior Notes due 2021.

On January 24, 2020, we settled tender offers to purchase $1,200 million in aggregate principal amount of certain unsecured debt, comprising $329 million of 3.30% Senior Notes due 2021, $634 million of 3.65% Senior Notes due 2023, and $237 million of 3.80% Senior Notes due 2043.

On January 24, 2020, we settled tender offers to purchase $1.2 billion in aggregate principal amount of certain unsecured debt, comprising $329 million of 3.30% Senior Notes due 2021, $634 million of 3.65% Senior Notes due 2023, and $237 million of 3.80% Senior Notes due 2043.

Except for the $237 million of 3.80% Senior Notes due 2043, the Senior Notes settled under the tender offer were issued in connection with our acquisition of Snyder’s-Lance.

The consideration for the redemption and the tender offers was $1,765 million, including $65 million of premium.

We recognized a loss of $75 million (including $65 million of premium, fees and other costs paid with the tender offers and unamortized debt issuance costs), which was recorded in Interest expense in the Consolidated Statement of Earnings.

The consideration for the redemption and the tender offers was $1.765 billion, including $65 million of premium.

We recognized a loss of $75 million (including $65 million

of premium, fees and other costs paid with the tender offers and unamortized debt issuance costs), which was recorded in Interest expense in the Consolidated Statement of Earnings.

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

The net divestiture proceeds remaining after these debt reduction activities were used to reduce commercial paper borrowings.

On May 3, 2021, we completed the sale of our Plum baby food and snacks business for $101 million, subject to certain post-closing adjustments.

On May 3, 2021, we completed the sale of our Plum baby food and snacks business for $101 million.

Dividend payments were $451 million in 2022, $439 million in 2021 and $426 million in 2020.

Annual dividends declared were $1.46 per share in 2021, and $1.40 per share in 2020 and in 2019.

Annual dividends declared were $1.48 per share in 2022, $1.46 per share in 2021 and $1.40 per share in 2020.

The 2022 fourth quarter dividend was $.37 per share.

We suspended our share repurchases as of the second quarter of 2018.

In June 2021, the Board authorized a new 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.

The declaration of dividends is subject to the discretion of our Board and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board deems relevant to its analysis and decision making.

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.

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

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

We repurchased approximately 1 million shares at a cost of $36 million in 2021 under the June 2021 program.

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

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

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 replaces the suspended $1,500 million share repurchase program, which has been cancelled.

In 2022, we repurchased 3.8 million shares at a cost of $167 million.

Of this amount, $42 million was used to repurchase shares pursuant to our June 2021 program and $125 million was used to repurchase share pursuant to our September 2021 program.

As of July 31, 2022, approximately $172 million remained available under the June 2021 program and approximately $375 million remained under the September 2021 program.

In 2021, we repurchased approximately 1 million shares at a cost of $36 million.

See Note 16 to the Consolidated Financial Statements and "Market for Registrant's Capital Stock, Related Shareholder Matters and Issuer Purchases of Equity Securities" for additional information.

On April 24, 2020, we issued senior unsecured notes in an aggregate principal amount of $1,000 million, consisting of $500 million aggregate principal amount of notes bearing interest at a fixed rate of 2.375% per annum, due April 24, 2030, and $500 million aggregate principal amount of notes bearing interest at a fixed rate of 3.125% per annum, due April 24, 2050.

On May 1, 2020, we used $300 million of the net proceeds to repay $300 million of borrowings outstanding under a revolving credit facility.

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.

In March 2021, we repaid our 3.30% $321 million notes and floating rate $400 million notes, and in May 2021, we repaid our 8.875% $200 million notes.

The repayments were funded with available cash and commercial paper issuances.

In August 2019, we repaid and terminated the AUD $335 million, or $227 million, balance outstanding under our single-draw syndicated facility.

The repayment was funded through the issuance of commercial paper.

As of August 1, 2021, we had $48 million of short-term borrowings due within one year, of which $37 million was comprised of commercial paper borrowings.

As of August 1, 2021, we issued $36 million of standby letters of credit.

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

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

On April 24, 2020, we issued senior unsecured notes in an aggregate principal amount of $1 billion, consisting of $500 million aggregate principal amount of notes bearing interest at a fixed rate of 2.375% per annum, due April 24, 2030, and $500 million aggregate principal amount of notes bearing interest at a fixed rate of 3.125% per annum, due April 24, 2050.

On May 1, 2020, we used $300 million of the net proceeds to repay $300 million of borrowings outstanding under a revolving credit facility.

As of July 31, 2022, we had $814 million of short-term borrowings due within one year, of which $235 million was comprised of commercial paper borrowings.

As of July 31, 2022, we issued $32 million of standby letters of credit.

On November 2, 2020, we entered into a committed revolving credit facility totaling $1.85 billion scheduled to mature on November 2, 2023.

On September 27, 2021, we replaced the facility with a new $1.85 billion committed revolving facility that matures on September 27, 2026.

This facility remained unused at July 31, 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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Contractual Obligations

The following table summarizes our obligations and commitments to make future payments under certain contractual obligations as of August 1, 2021.

For additional information on debt, see Note 12 to the Consolidated Financial Statements.

We have short- and long-term material cash requirements related to our contractual obligations that arise in the normal course of business.

In addition to principal and interest payments on our outstanding debt obligations, our contractual obligations primarily consist of purchase commitments, lease payments and pension and postretirement benefits.

See Note 12 to the Consolidated Financial Statements for a summary of our principal payments for short-term borrowings and long-term debt obligations as of July 31, 2022.

Interest payments for short-term borrowings and long-term debt as of July 31, 2022 are approximately as follows:

$165 million in 2023;

$290 million in 2024 through 2025;

$220 million in 2026 through 2027;

and $1.2 billion from 2028 through maturity.

Purchase commitments represent purchase orders and long-term purchase arrangements related to the procurement of ingredients, supplies, machinery, equipment and services.

These commitments are not expected to have a material impact on liquidity.

Other long-term liabilities primarily represent payments related to deferred compensation obligations.

For additional information on other long-term liabilities, see Note 19 to the Consolidated Financial Statements.

Contractual Payments Due by Fiscal Year

(Millions) Total 2022 2023-2024 2025-2026 Thereafter

Debt obligations (1)

$ 5,096 $ 48 $ 1,030 $ 1,155 $ 2,863

Interest payments (2)

2,056 184 318 245 1,309

Derivative payments (3)

Operating leases (4)

255 59 87 46 63

Purchase commitments

1,335 1,079 190 66 —

Other long-term payments (5)

142 — 64 30 48

Total $ 8,887 $ 1,373 $ 1,689 $ 1,542 $ 4,283

_______________________________________

(1) Excludes unamortized net discount/premium on debt issuances and debt issuance costs.

For additional information on debt obligations, see Note 12 to the Consolidated Financial Statements.

(2) Includes interest payments on long-term debt and finance leases.

(3) Represents payments of foreign exchange forward contracts.

(4) For additional information on operating leases, see Note 10 to the Consolidated Financial Statements.

(5) Represents other long-term liabilities, excluding unrecognized tax benefits, postretirement benefits and payments related to pension plans.

For additional information on pension and postretirement benefits, see Note 9 to the Consolidated Financial Statements.

For additional information on unrecognized tax benefits, see Note 11 to the Consolidated Financial Statements.

As of July 31, 2022, purchase commitments totaled approximately $1.535 billion.

Approximately $1.27 billion of these purchase commitments will be settled in the ordinary course of business in the next 12 months and the balance of $265 million from 2024 through 2027.

See Note 10 to the Consolidated Financial Statements for a summary of our lease obligations as of July 31, 2022.

As of July 31, 2022, we recognized a pension liability of $120 million and a postretirement benefit obligation of $172 million.

As of July 31, 2022, we also recognized a pension asset of $ 146 million based on the funded status of certain plans.

See Note 9 to the Consolidated Financial Statements and "Significant Accounting Estimates" for further discussion of our pension and postretirement benefit obligations.

Off-Balance Sheet Arrangements and Other Commitments

We guarantee approximately 4,800 bank loans made to independent contractor distributors by third-party financial institutions for the purchase of distribution routes.

The maximum potential amount of the future payments under existing guarantees we could be required to make is $488 million as of August 1, 2021.

The maximum potential amount of the future payments under existing guarantees we could be required to make is $ 500 million as of July 31, 2022.

Our guarantees are indirectly secured by the distribution routes.

We do not expect that we will be required to make material guarantee payments as a result of defaults on the bank loans guaranteed.

We are exposed to the impact of inflation on our cost of products sold.

We use a number of strategies to mitigate the effects of cost inflation including increasing prices, commodity hedging and pursuing cost productivity initiatives.

We experienced higher inflation in 2021, and expect to experience increased inflation in 2022.

These obligations and commitments impact our liquidity and capital resource needs.

We expect foreseeable liquidity and capital resource requirements to be met through anticipated cash flows from operations;

long-term borrowings;

short-term borrowings, which may include commercial paper;

credit facilities;

and cash and cash equivalents.

We believe that our sources of financing will be adequate to meet our future requirements.

MARKET RISK SENSITIVITY

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In addition, we are exposed to equity price changes related to certain deferred compensation obligations.

We manage our exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines.

We manage our foreign currency exposures by utilizing foreign exchange forward contracts.

We enter into foreign exchange forward contracts for periods consistent with related underlying exposures, and the contracts do not constitute positions independent of those exposures.

We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments.

We manage our exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and we may utilize interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines.

We principally use a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products.

We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, soybean oil, diesel fuel, natural gas, aluminum, cocoa, soybean meal, corn and butter.

The information below summarizes our market risks associated with debt obligations and other significant financial instruments as of August 1, 2021.

We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, diesel fuel, natural gas, soybean oil, aluminum, cocoa, corn, soybean meal and butter.

We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments.

The information below summarizes our market risks associated with significant financial instruments as of July 31, 2022.

Fair values included herein have been determined based on quoted market prices or pricing models using current market rates.

The information presented below should be read in conjunction with Notes 12, 13 and 15 to the Consolidated Financial Statements.

The following table presents principal cash flows and related interest rates by fiscal year of maturity for debt obligations.

Interest rates disclosed on variable-rate debt represent the weighted-average rates at August 1, 2021.

Expected Fiscal Year of Maturity Fair Value

(Millions) 2022 2023 2024 2025 2026 Thereafter Total

$ 11 $ 1,025 $ 5 $ 1,152 $ 3 $ 2,863 $ 5,059 $ 5,576

Weighted-average interest rate 0.89 % 3.12 % 0.79 % 3.77 % 0.56 % 3.80 % 3.65 %

Variable rate

$ 37 $ — $ — $ — $ — $ — $ 37 $ 37

Weighted-average interest rate 0.22 % — % — % — % — % — % 0.22 %

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(1) Expected maturities exclude unamortized net discount/premium on debt issuances and debt issuance costs.

As of August 2, 2020, fixed-rate debt of approximately $5,560 million with an average interest rate of 3.83% and variable-rate debt of approximately $680 million with an average interest rate of 1.42% were outstanding.

We are exposed to foreign exchange risk, primarily the Canadian dollar, related to third-party transactions and intercompany transactions.

We are exposed to foreign currency exchange risk, primarily the Canadian dollar, related to third-party transactions and intercompany transactions.

We utilize foreign exchange forward purchase and sale contracts to hedge these exposures.

The notional amounts of the contracts as of August 1, 2021, and August 2, 2020, were $147 million and $183 million, respectively.

The aggregate fair value of all contracts was a loss of $2 million as of August 1, 2021, and a loss of $1 million as of August 2, 2020.

A hypothetical 10% fluctuation in exchange rates would impact the fair value of our outstanding foreign exchange contracts by $17 million as of August 1, 2021, and $20 million as of August 2, 2020, which would generally be offset by inverse changes on the underlying hedged items.

The notional amounts of the contracts as of July 31, 2022, and August 1, 2021, were $153 million and $147 million, respectively.

The aggregate fair value of all contracts was a gain of $2 million as of July 31, 2022, and a loss of $2 million as of August 1, 2021.

A hypothetical 10% fluctuation in exchange rates would impact the fair value of our outstanding foreign exchange contracts by $17 million as of July 31, 2022, and as of August 1, 2021, which would generally be offset by inverse changes on the underlying hedged items.

As of July 31, 2022, we had outstanding variable-rate debt of $235 million with an average interest rate of 2.63%.

As of August 1, 2021, we had outstanding variable-rate debt of $37 million with an average interest rate of 0.22%.

A hypothetical

100-basis-point increase in average interest rates applied to our variable-rate debt balances throughout 2022 and 2021 would have increased annual interest expense in those years by approximately $1 million and $3 million, respectively.

As of July 31, 2022, we had outstanding fixed-rate debt of $4.609 billion with a weighted average interest rate of 3.76%.

As of August 1, 2021, we had outstanding fixed-rate debt of $5.059 billion with an average interest rate of 3.65%.

The fair value of fixed-rate debt was $4.402 billion as of July 31, 2022 and $5.576 billion as of August 1, 2021.

As of July 31, 2022, and August 1, 2021, a hypothetical 100-basis-point increase in interest rates would decrease the fair value of our fixed rate debt by approximately $274 million and $399 million, respectively, while a hypothetical 100-basis-point decrease in interest rates would increase the fair value of our fixed rate debt by approximately $318 million and $463 million, respectively.

The impact of market interest rate fluctuations on our long-term debt does not affect our results of operations or financial position.

We enter into commodity futures, options and swap contracts, and a supply contract under which prices for certain raw materials are established based on anticipated volume requirements to reduce the volatility of price fluctuations for commodities.

As of August 1, 2021, the total notional amount of the contracts was $246 million, and the aggregate fair value of these contracts was a gain of $53 million.

As of August 2, 2020, the total notional amount of these contracts was $171 million, and the aggregate fair value of these contracts was a loss of $2 million.

A hypothetical 10% fluctuation in commodity prices would impact the fair value of our outstanding commodity contracts by $30 million as of August 1, 2021, and $17 million as of August 2, 2020, which would generally be offset by inverse changes on the underlying hedged items.

We enter into swap contracts which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of our capital stock, the total return of the Vanguard Institutional Index Institutional Plus Shares, and the total return of the Vanguard Total International Stock Index.

Under these contracts, we pay variable interest rates and receive from the counterparty either:

the total return on our capital stock;

the total return of the Standard & Poor's 500 Index, which is expected to approximate the total return of the Vanguard Institutional Index Institutional Plus Shares;

or the total return of the iShares MSCI EAFE Index, which is expected to approximate the total return of the Vanguard Total International Stock Index.

As of June 2021, we no longer hedge our exposure linked to the total return of our capital stock.

The notional amount of the contracts was $ 29 million as of August 1, 2021, and $ 22 million as of August 2, 2020.

The fair value of these contracts was a gain of $3 million as of August 1, 2021, and a gain of $4 million as of August 2, 2020 A hypothetical 10% fluctuation in equity price changes would impact the fair value of our outstanding swap contracts by $3 million as of August 1, 2021, and August 2, 2020, which would generally be offset by inverse changes on the underlying hedged items.

Our utilization of financial instruments in managing market risk exposures described above is consistent with the prior year.

Changes in the portfolio of financial instruments are a function of the results of operations, debt repayment and debt issuances, market effects on debt and foreign currency, and our acquisition and divestiture activities.

As of July 31, 2022, the total notional amount of the contracts was $296 million, and the aggregate fair value of these contracts was a loss of $7 million.

As of August 1, 2021, the total notional amount of these contracts was $246 million, and the aggregate fair value of these contracts was a gain of $53 million.

A hypothetical 10% fluctuation in commodity prices would impact the fair value of our outstanding commodity contracts by approximately $30 million as of July 31, 2022, and as of August 1, 2021, which would generally be offset by inverse changes on the underlying hedged items.

We enter into swap contracts which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of the Vanguard Extended Market Index Plus Fund, the Vanguard Institutional Index Institutional Plus Fund, the Vanguard Short-Term Bond Index Fund and the Vanguard Total International Stock Index Fund.

Prior to 2022, we had entered into swap contracts which hedged a portion of exposures linked to the total return of our capital stock.

As of July 31, 2022, and August 1, 2021, we no longer hedge our exposure linked to the total return of our capital stock.

The notional amount of the contracts was $ 50 million as of July 31, 2022, and $ 29 million as of August 1, 2021.

The fair value of these contracts was a loss of $4 million as of July 31, 2022, and a gain of $3 million as of August 1, 2021.

A hypothetical 10% fluctuation in equity price changes would impact the fair value of our outstanding swap contracts by $5 million as of July 31, 2022, and $3 million as of August 1, 2021, which would generally be offset by inverse changes on the underlying hedged items.

SIGNIFICANT ACCOUNTING ESTIMATES

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However, actual expenses may differ if the level of redemption rates and performance were to vary from estimates.

Accrued trade and consumer promotion liabilities as of July 31, 2022 and August 1, 2021 were $141 million and $121 million, respectively.

Valuation of long-lived assets — Fixed assets and amortizable intangible assets are reviewed for impairment as events or changes in circumstances occur indicating that the carrying value of the asset may not be recoverable.

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If impairment is determined to exist, the loss is calculated based on estimated fair value.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but rather are tested at least annually for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but rather are tested at least annually in the fourth quarter for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable.

Goodwill is tested for impairment at the reporting unit level.

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Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test.

The qualitative evaluation is an assessment of factors to determine whether it is

more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the

fair value of a reporting unit is less than its carrying amount, including goodwill.

We may elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment test.

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The discounted estimates of future cash flows include significant management assumptions such as revenue growth rates, operating margins, weighted average costs of capital and future economic and market conditions.

If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired and an impairment charge will be recorded to reduce the reporting unit to fair value.

If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired.

An impairment charge is recognized for the amount by which the carrying value of the reporting unit exceeds fair value, limited to the amount of goodwill in the reporting unit.

Indefinite-lived intangible assets are tested for impairment by comparing the fair value of the asset to the carrying value.

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If the carrying value exceeds fair value, an impairment charge will be recorded to reduce the asset to fair value.

2021 Assessments

Continuing Operations

As of August 1, 2021, the carrying value of goodwill was $3,981 million.

Based on our assessments, all of our reporting units fair values significantly exceeded their carrying values.

As of August 1, 2021, the carrying value of indefinite-lived trademarks was $2,549 million as detailed below:

(Millions) Various Other Snyder's-Lance Snyder's of Hanover Lance Pace Pacific Foods

Carrying value $ 1,007 $ 620 $ 350 $ 292 $ 280

Holding all other assumptions constant, changes in the assumptions below would reduce fair value of these trademarks and result in impairment charges of approximately:

(Millions) Various Other Snyder's-Lance Snyder's of Hanover Lance Pace Pacific Foods

As of July 31, 2022, the carrying value of goodwill was $3.979 billion.

Based on our assessments, all of our reporting units had fair values that significantly exceeded carrying values.

As of July 31, 2022, the carrying value of indefinite-lived trademarks was $2.549 billion as detailed below:

Snyder's of Hanover $ 620

Kettle Brand 318

Pacific Foods 280

Various other Snacks (1)

Total $ 2,549

_____________________________________

(1) Associated with the acquisition of Snyder's-Lance.

As of the 2022 impairment testing, indefinite-lived trademarks with 10% or less of excess coverage of fair value over carrying value had an aggregate carrying value of $ 434 million and included Pacific Foods and certain other Snacks trademarks.

Although assumptions are generally interdependent and do not change in isolation, sensitivities to changes are provided below.

Holding all other assumptions in our 2022 impairment testing constant, changes in the assumptions below would reduce fair value of trademarks and result in impairment charges of approximately:

(Millions) Snyder's of Hanover Lance Kettle Brand Pace Pacific Foods Various Other Snacks

1% increase in the weighted-average cost of capital $ — $ — $ (15) $ — $ (30) $ (25)

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1% decrease in royalty rate $ — $ — $ (5) $ — $ (30) $ (60)

While the 1% changes in assumptions would not result in impairment charges on certain trademarks as indicated above, some changes would substantially reduce the excess coverage of fair value over carrying value to less than 10% for the Pace, Pacific Foods, and Lance trademarks.

The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating performance, assumed royalty rates, economic conditions, market conditions and cost of capital.

While the 1% changes in assumptions would not result in impairment charges on certain trademarks as indicated above, some changes would reduce the excess coverage of fair value over carrying value to less than 10% for the Lance and Pace trademarks.

The estimates of future cash flows used in impairment testing are made at a point in time, involve considerable management judgment, and are based upon assumptions about expected future operating performance, assumed royalty rates, economic conditions, market conditions and cost of capital.

Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets.

The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance and economic conditions.

If assumptions are not achieved or market conditions decline, potential additional impairment charges could result.

If assumptions are not achieved or market conditions decline, potential impairment charges could result.

We will continue to monitor the valuation of our long-lived assets.

2019 Impairment charges

Discontinued Operations

In the first quarter of 2019, we recorded an impairment charge of $14 million on the U.S.

refrigerated soup plant assets.

On August 30, 2018, we announced plans to pursue the divestiture of our international biscuits and snacks operating segment and the Campbell Fresh operating segment.

As we continued to pursue the divestiture of these businesses and as we received initial indications of value, in the second quarter of 2019, we performed interim impairment assessments on the intangible and tangible assets within Campbell Fresh, which included Garden Fresh Gourmet, Bolthouse Farms carrot and carrot ingredients, and Bolthouse Farms refrigerated beverages and salad dressings.

As a result, we revised our future outlook for earnings and cash flows for each of these businesses.

Within Bolthouse Farms carrot and carrot ingredients, we recorded impairment charges of $18 million on the trademark, and $159 million on the plant assets and amortizable intangible assets.

Within Bolthouse Farms refrigerated beverages and salad dressings, we recorded impairment charges of $74 million on the trademark, and $31 million on the plant assets and amortizable intangible assets.

On Garden Fresh Gourmet, we recorded impairment charges of $23 million on the trademark and $39 million on customer relationships, which eliminated the carrying value of these assets, and $2 million on plant assets.

On July 12, 2019, we signed a definitive agreement for the sale of our Kelsen business.

We sold the business on September 23, 2019.

See Note 3 to the Consolidated Financial Statements for additional information on discontinued operations.

Continuing Operations

In the fourth quarter of 2019, we performed an assessment on the assets within our European chips business and recorded an impairment charge of $16 million on intangible assets.

This business was included in the Snacks segment and reporting unit.

See also Note 5 to the Consolidated Financial Statements for additional information on goodwill and intangible assets.

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Independent actuaries, in accordance with accounting principles generally accepted in the United States, perform the required calculations to determine expense.

The discount rate is established as of our fiscal year-end measurement date.

Actuarial gains and losses are recognized immediately in Other expenses / (income) in the Consolidated Statements of

Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required.

We use the fair value of plan assets to calculate the expected return on plan assets.

In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration.

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Gains and losses resulting from differences between actual experience and the assumptions are determined at each measurement date.

Net periodic pension and postretirement expense (income) was $(267) million in 2021, $93 million in 2020 and $103 million in 2019.

As of July 31, 2022, we recognized a pension liability of $120 million and a postretirement benefit obligation of $172 million.

As of July 31, 2022, we also recognized a pension asset of $146 million based on the funded status of certain plans.

Net periodic pension and postretirement benefit expense (income) and actuarial losses (gains) included within net periodic pension and benefit expense (income) were as follows:

(Millions) 2022 2021 2020

Total net periodic pension and postretirement benefit expense (income)

$ (7) $ (267) $ 93

Actuarial losses (gains)

$ 44 $ (203) $ 164

The actuarial losses recognized in 2022 were primarily due to losses on plan assets, partially offset by increases in discount rates used to determine the benefit obligation.

The actuarial gains recognized in 2021 were primarily due to higher than anticipated investment gains on plan assets and increases in discount rates used to determine the benefit obligation.

The actuarial losses recognized in 2020 were primarily due to decreases in discount rates used to determine the benefit obligation, partially offset by higher than anticipated investment gains on plan assets.

The decrease in 2023 is due to increases in discount rates used to determine the benefit obligations and a decline in the market value of plan assets.

Significant weighted-average assumptions as of the end of the year were as follows:

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Discount rate for obligations 4.48 % 2.37% 2.15%

Initial health care trend rate 6.25% 6.25% 6.25%

Ultimate health care trend rate 4.50% 4.50% 4.50%

Estimated sensitivities to annual net periodic pension and postretirement cost are as follows:

a 50-basis-point decline in the discount rate would result in income of approximately $10 million and would result in an immediate loss recognition of approximately $113 million.

Based on benefit obligations and plan assets as of July 31, 2022, estimated sensitivities to 2023 annual net periodic pension and postretirement cost are as follows:

• a 50-basis-point increase in the discount rate would result in expense of approximately $6 million and would result in an immediate actuarial gain recognition of approximately $69 million;

• a 50-basis-point decline in the discount rate would result in income of approximately $6 million and would result in an immediate actuarial loss recognition of approximately $76 million;

• a 50-basis-point reduction in the estimated return on assets assumption would result in expense of approximately $8 million.

Contributions to pension plans were $2 million in 2021 and 2020, and $5 million in 2019.

There were no contributions to pension plans in 2022, and $2 million in 2021 and 2020.

Contributions to pension plans are not expected to be material in 2023.

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Income taxes are recorded based on amounts refundable or payable in the current year and include the effect of deferred taxes.

Deferred tax assets and liabilities are recognized for the future impact of differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are recognized for the future impact of differences between the financial statement carrying amounts of assets and

liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.

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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 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-K

Item 7. Management’s Discussion and Analysis