CAMPBELL'S Co 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW This Management's Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements in "Part I - Item 1. Financial Statements," and our Form 10-K for the year ended July 31, 2022, including but not limited to "Part I - Item 1A. Risk Factors" and "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." Executive Summary Unless otherwise stated, the terms "we," "us," "our" and the "company" refer to Campbell Soup Company and its consolidated subsidiaries. We are a manufacturer and marketer of high-quality, branded food and beverage products. We operate in a highly competitive industry and experience competition in all of our categories. On May 30, 2023, we sold our Emerald nuts business for $40 million, subject to certain post-closing adjustments. The results of the business through the date of sale are reflected within the Snacks reportable segment. See Note 17 to the Consolidated Financial Statements for additional information. Business Trends We have been actively monitoring the impact of the dynamic macroeconomic environment, including input cost inflation, the conflict between Russia and Ukraine and the COVID-19 pandemic, on all aspects of our business. We anticipate that 2023 will continue to be a dynamic macroeconomic environment and we expect elevated levels of input cost inflation to persist throughout 2023. 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. While we as a North American focused company have no direct exposure to Russia and Ukraine, we have experienced volatility in costs due, in part, to the negative impact of the Russia-Ukraine conflict on the global economy. To date, the conflict between Russia and Ukraine has not had any material impact on our business, financial condition or results of operations. There still remains uncertainty around the COVID-19 pandemic. The ultimate impact depends on the severity and duration of the pandemic, including the emergence and spread of new COVID-19 variants and resurgences, the continued availability and effectiveness of vaccines and actions taken by government authorities and other third parties in response to the pandemic. We will continue to evaluate the extent to which the COVID-19 pandemic impacts our business, consolidated results of operations and financial condition. Net periodic pension and postretirement benefit income excluding any actuarial losses or gains is estimated to be approximately $45 million lower in 2023. 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. Summary of Results This Summary of Results provides significant highlights from the discussion and analysis that follows. • Net sales increased 5% in the quarter to $2.229 billion. Favorable inflation-driven net price realization was partially offset by expected volume/mix declines, which were driven by lapping prior year retailer inventory rebuild as well as lower volume consumption due to elasticities. • Gross profit, as a percent of sales, was 30.0% in 2023 compared to 31.2% in the prior-year quarter. The decrease was primarily due to unfavorable volume/mix, with favorable net price realization and supply chain productivity improvements more than offsetting higher cost inflation and other supply chain costs. • Earnings per share were $.53 in 2023, compared to $.62 a year ago. The current quarter included expenses of $.15 per share and the prior-year quarter included expenses of $.08 per share from items impacting comparability as discussed below. 24 Net Earnings attributable to Campbell Soup Company The following items impacted the comparability of net earnings and net earnings per share: • We implemented several cost savings initiatives in recent years. In the third quarter of 2023, we recorded Restructuring charges of $6 million and implementation costs and other related costs of $13 million in Administrative expenses, $12 million in Cost of products sold and $2 million in Research and development expenses (aggregate impact of $24 million after tax, or $.08 per share) related to these initiatives. Year-to-date in 2023, we recorded Restructuring charges of $15 million and implementation costs and other related costs of $21 million in Administrative expenses, $12 million in Cost of products sold and $2 million in Research and development expenses (aggregate impact of $37 million after tax, or $.12 per share) related to these initiatives. In the third quarter of 2022, we recorded implementation costs and other related costs of $5 million in Administrative expenses and $1 million in Cost of products sold (aggregate impact of $5 million after tax, or $.02 per share) related to these initiatives. Year-to-date in 2022, we recorded implementation costs and other related costs of $10 million in Administrative expenses and $5 million in Cost of products sold (aggregate impact of $12 million after tax, or $.04 per share) related to these initiatives. See Note 6 to the Consolidated Financial Statements and "Restructuring Charges and Cost Savings Initiatives" for additional information; • In the third quarter of 2023, we recognized actuarial losses in Other expenses / (income) of $17 million ($13 million after tax, or $.04 per share). Year-to-date in 2023, we recognized actuarial losses in Other expenses / (income) of $26 million ($20 million after tax, or $.07 per share). In the third quarter of 2022, we recognized actuarial losses in Other expenses / (income) of $16 million ($12 million after tax, or $.04 per share). Year-to-date in 2022, we recognized actuarial losses in Other expenses / (income) of $12 million ($9 million after tax, or $.03 per share). The actuarial losses related to interim remeasurements of certain pension plans due to lump sum distributions that exceeded or are expected to exceed service and interest costs resulting in settlement accounting for the plans; • In the third quarter of 2023, we recognized losses in Cost of products sold of $9 million ($7 million after tax, or $.02 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges. Year-to-date in 2023, we recognized losses in Cost of products sold of $9 million ($7 million after tax, or $.02 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges. In the third quarter of 2022, we recognized losses in Cost of products sold of $5 million ($4 million after tax, or $.01 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges. Year-to-date in 2022, we recognized losses in Cost of products sold of $8 million ($6 million after tax, or $.02 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges; and • In the third quarter of 2022, we recorded a loss in Interest expense of $4 million ($3 million after tax, or $.01 per share) on the extinguishment of debt. The items impacting comparability are summarized below: Three Months Ended April 30, 2023 May 1, 2022 (Millions, except per share amounts) Earnings Impact EPS Impact Earnings Impact EPS Impact Net earnings attributable to Campbell Soup Company $ 160 $ .53 $ 188 $ .62 Restructuring charges, implementation costs and other related costs $ (24) $ (.08) $ (5) $ (.02) Pension actuarial losses (13) (.04) (12) (.04) Commodity mark-to-market losses (7) (.02) (4) (.01) Loss on debt extinguishment — — (3) (.01) Impact of items on Net earnings (1) $ (44) $ (.15) $ (24) $ (.08) __________________________________________ (1) Sum of the individual amounts may not add due to rounding. 25 Nine Months Ended April 30, 2023 May 1, 2022 (Millions, except per share amounts) Earnings Impact EPS Impact Earnings Impact EPS Impact Net earnings attributable to Campbell Soup Company $ 689 $ 2.29 $ 661 $ 2.18 Restructuring charges, implementation costs and other related costs $ (37) $ (.12) $ (12) $ (.04) Pension actuarial losses (20) (.07) (9) (.03) Commodity mark-to-market losses (7) (.02) (6) (.02) Loss on debt extinguishment — — (3) (.01) Impact of items on Net earnings $ (64) $ (.21) $ (30) $ (.10) Net earnings attributable to Campbell Soup Company were $160 million ($.53 per share) in the current quarter, compared to $188 million ($.62 per share) in the year-ago quarter. After adjusting for items impacting comparability, earnings decreased reflecting higher other expenses and a higher effective tax rate as higher gross profit more than offset higher administrative expenses and higher marketing and selling expenses. Other expenses increased as net periodic pension and postretirement benefit income excluding any actuarial losses was $12 million ($9 million after tax, or $.03 per share) lower in 2023. Net earnings attributable to Campbell Soup Company were $689 million ($2.29 per share) in the nine-month period this year, compared to $661 million ($2.18 per share) in the year-ago period. After adjusting for items impacting comparability, earnings increased reflecting an improved gross profit, partially offset by higher marketing and selling expenses, higher other expenses, higher administrative expenses and a higher effective tax rate. Earnings per share benefited from a reduction in the weighted average diluted shares outstanding. Net periodic pension and postretirement benefit income excluding any actuarial losses was $37 million ($28 million after tax, or $.09 per share) lower in 2023. THIRD-QUARTER DISCUSSION AND ANALYSIS Sales An analysis of net sales by reportable segment follows: Three Months Ended (Millions) April 30, 2023 May 1, 2022 % Change Meals & Beverages $ 1,108 $ 1,131 (2) Snacks 1,121 999 12 $ 2,229 $ 2,130 5 An analysis of percent change of net sales by reportable segment follows: Meals & Beverages (2) Snacks Total Volume and mix (11)% (3)% (7)% Net price realization (1) 9 15 12 Currency (1) — — (2)% 12% 5% __________________________________________ (1) Includes revenue reductions from trade promotion and consumer coupon redemption programs. (2) Sum of the individual amounts does not add due to rounding. In Meals & Beverages, sales decreased 2% primarily due to declines in U.S. soup and the impact of currency, partially offset by gains in foodservice. The price driven in-market growth was more than offset by an expected decline in volume/mix driven by lapping prior year retailer inventory rebuild as well as lower volume consumption due to elasticities and increased competitive pressure. The retailer inventory impact was most pronounced in U.S. soup, which had a sales decline of 11% in comparison to relatively flat in-market performance. In Snacks, sales increased 12% driven by sales of our power brands, which increased 16%. Sales increased due to increases in cookies and crackers, primarily Goldfish crackers and Lance sandwich crackers, and in salty snacks, primarily Kettle Brand 26 potato chips, Snack Factory pretzel crisps, Cape Cod potato chips and Snyder’s of Hanover pretzels. Sales benefited from favorable net price realization, partially offset by modest volume/mix declines. Gross Profit Gross profit, defined as Net sales less Cost of products sold, increased by $3 million in 2023 from 2022. As a percent of sales, gross profit was 30.0% in 2023 and 31.2% in 2022. The 120 basis-point decrease in gross profit margin was due to the following factors: Margin Impact Cost inflation, supply chain costs and other factors (1) (1,090) Volume/mix (2) (180) Higher restructuring-related costs (50) Net price realization 880 Productivity improvements 320 (120) __________________________________________ (1) Includes a 10 basis-point impact from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges. Includes the impact of a 50 basis-point benefit in 2022 from the settlement of an insurance claim. (2) Includes the impact of operating leverage. Marketing and Selling Expenses Marketing and selling expenses as a percent of sales were 8.7% in 2023 compared to 8.8% in 2022. Marketing and selling expenses increased 3% in 2023 from 2022. The increase was primarily due to higher selling expenses (approximately 5 points), partially offset by increased benefits from cost savings initiatives (approximately 3 points). Advertising and consumer promotion expense declined slightly. Administrative Expenses Administrative expenses as a percent of sales were 7.5% in 2023 compared to 7.1% in 2022. Administrative expenses increased 11% in 2023 from 2022. The increase was primarily due to higher costs associated with cost savings initiatives (approximately 5 points), higher general administrative costs and inflation (approximately 5 points), higher incentive compensation (approximately 2 points) and higher benefit-related costs (approximately 2 points), partially offset by lower expenses related to the settlement of certain legal claims (approximately 3 points). Other Expenses / (Income) Other expenses were $23 million in 2023 compared to other expenses of $10 million in 2022. Other expenses / (income) in 2023 included pension actuarial losses of $17 million. Other expenses in 2022 included pension actuarial losses of $16 million. Excluding these amounts, the remaining change was primarily due to lower net periodic pension and postretirement benefit income in the current year. Operating Earnings Segment operating earnings increased 4% in 2023 from 2022. An analysis of operating earnings by segment follows: Three Months Ended (Millions) April 30, 2023 May 1, 2022 % Change Meals & Beverages $ 182 $ 220 (17) Snacks 179 127 41 361 347 4 Corporate income (expense) (101) (53) Restructuring charges (1) (6) — Earnings before interest and taxes $ 254 $ 294 __________________________________________ (1) See Note 6 to the Consolidated Financial Statements for additional information on restructuring charges. Operating earnings from Meals & Beverages decreased 17%. The decrease was primarily due to lower gross profit with part of the decline due to lapping an insurance settlement in the prior year. Gross profit margin decreased due to unfavorable 27 volume/mix, with favorable net price realization and supply chain productivity improvements largely offsetting higher cost inflation and other supply chain costs. Operating earnings from Snacks increased 41%. The increase was primarily due to higher gross profit, partially offset by slightly higher marketing and selling expenses. Gross profit margin increased due to favorable net price realization and supply chain productivity improvements more than offsetting higher cost inflation and other supply chain costs as well as unfavorable volume/mix. Corporate expense in 2023 included costs of $27 million related to costs savings initiatives, pension actuarial losses of $17 million and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $9 million. Corporate expense in 2022 included pension actuarial losses of $16 million, costs of $6 million related to cost savings initiatives and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $5 million. Excluding these amounts, the remaining increase was primarily due to lower net periodic pension and postretirement benefit income in the current year and higher administrative expenses. Interest Expense Interest expense of $47 million in 2023 decreased from $51 million in 2022. The decline was primarily due to a loss on extinguishment of debt of $4 million in the prior-year quarter. Taxes on Earnings The effective tax rate was 23.1% in 2023 and 23.0% in 2022. NINE-MONTH DISCUSSION AND ANALYSIS Sales An analysis of net sales by reportable segment follows: Nine Months Ended (Millions) April 30, 2023 May 1, 2022 % Change Meals & Beverages $ 3,971 $ 3,672 8 Snacks 3,318 2,903 14 $ 7,289 $ 6,575 11 An analysis of percent change of net sales by reportable segment follows: Meals & Beverages Snacks Total Volume and mix (5)% (1)% (3)% Net price realization (1) 14 15 14 Currency (1) — — 8% 14% 11% __________________________________________ (1) Includes revenue reductions from trade promotion and consumer coupon redemption programs. In Meals & Beverages, sales increased 8% primarily due to increases in U.S. retail products, including U.S. soup and Prego pasta sauces, as well as gains in foodservice. Favorable net price realization was partially offset by volume/mix declines. Sales of U.S. soup increased 4% primarily due to increases in ready-to-serve soups and broth. In Snacks, sales increased 14% driven by sales of our power brands, which increased 19%. Sales increased due to increases in cookies and crackers, primarily Goldfish crackers, Lance sandwich crackers and Pepperidge Farm cookies, and in salty snacks, primarily Snyder’s of Hanover pretzels, Kettle Brand and Cape Cod potato chips and Snack Factory pretzel crisps. Sales benefited from favorable net price realization. Gross Profit Gross profit, defined as Net sales less Cost of products sold, increased by $205 million in 2023 from 2022. As a percent of sales, gross profit was 31.0% in 2023 and 31.3% in 2022. 28 The 30 basis-point decrease in gross profit margin was due to the following factors: Margin Impact Cost inflation, supply chain costs and other factors (1) (1,150) Volume/mix (2) (160) Higher restructuring-related costs (10) Net price realization 1,020 Productivity improvements 270 (30) __________________________________________ (1) Includes an estimated positive margin impact of 10 basis points from the benefit of cost savings initiatives, which was more than offset by cost inflation and other factors. (2) Includes the impact of operating leverage. Marketing and Selling Expenses Marketing and selling expenses as a percent of sales were 8.4% in 2023 and 2022. Marketing and selling expenses increased 10% in 2023 from 2022. The increase was primarily due to higher advertising and consumer promotion expense (approximately 7 points) and higher selling expenses (approximately 6 points), partially offset by increased benefits from cost savings initiatives (approximately 3 points). The increase in advertising and consumer promotion expense was due in part to moderated levels in the prior year from supply constraints. Administrative Expenses Administrative expenses as a percent of sales were 6.7% in 2023 compared to 6.9% in 2022. Administrative expenses increased 7% in 2023 from 2022. The increase was primarily due to higher general administrative costs and inflation (approximately 7 points), higher costs associated with cost savings initiatives (approximately 2 points) and higher incentive compensation (approximately 2 points), partially offset by lower expenses related to the settlement of certain legal claims (approximately 5 points). Other Expenses / (Income) Other expenses were $41 million in 2023 compared to other income of $10 million in 2022. Other expenses in 2023 included pension actuarial losses of $26 million. Other income in 2022 included pension actuarial losses of $12 million. Excluding these amounts, the remaining change was primarily due to lower net periodic pension and postretirement benefit income in the current year. Operating Earnings Segment operating earnings increased 14% in 2023 from 2022. An analysis of operating earnings by segment follows: Nine Months Ended (Millions) April 30, 2023 May 1, 2022 % Change Meals & Beverages $ 762 $ 713 7 Snacks 482 376 28 1,244 1,089 14 Corporate income (expense) (189) (96) Restructuring charges (1) (15) — Earnings before interest and taxes $ 1,040 $ 993 __________________________________________ (1) See Note 6 to the Consolidated Financial Statements for additional information on restructuring charges. Operating earnings from Meals & Beverages increased 7%. The increase was primarily due to higher gross profit, partially offset by higher marketing and selling expenses. Gross profit margin decreased due to unfavorable volume/mix, with favorable net price realization and supply chain productivity improvements more than offsetting higher cost inflation and other supply chain costs. Operating earnings from Snacks increased 28%. The increase was primarily due to higher gross profit, partially offset by higher marketing and selling expenses. Gross profit margin increased due to favorable net price realization and supply chain 29 productivity improvements, partially offset by higher cost inflation and other supply chain costs as well as unfavorable volume/mix. Corporate expense in 2023 included costs of $35 million related to costs savings initiatives, pension actuarial losses of $26 million and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $9 million. Corporate expense in 2022 included costs of $15 million related to cost savings initiatives, pension actuarial losses of $12 million and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $8 million. Excluding these amounts, the remaining increase was primarily due to lower net periodic pension and postretirement benefit income in the current year and higher administrative expenses. Interest Expense Interest expense of $139 million in 2023 decreased from $144 million in 2022 primarily due to a loss on extinguishment of debt of $4 million in the prior year. Taxes on Earnings The effective tax rate was 23.7% in 2023 and 22.2% in 2022. The increase in the effective tax rate was primarily due to the benefit from the favorable resolution of several tax matters and state tax law changes in 2022. Restructuring Charges and Cost Savings Initiatives Multi-year Cost Savings Initiatives and Snyder's-Lance Cost Transformation Program and Integration Continuing Operations Beginning in fiscal 2015, we implemented initiatives to reduce costs and to streamline our organizational structure. Over the years, we expanded these initiatives by continuing to optimize our supply chain and manufacturing networks, as well as our information technology infrastructure. On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to the acquisition, Snyder's-Lance launched a cost transformation program following a comprehensive review of its operations with the goal of significantly improving its financial performance. We continued to implement this program and identified opportunities for additional cost synergies as we integrated Snyder's-Lance. In 2022, we expanded these initiatives as we continue to pursue cost savings by further optimizing our supply chain and manufacturing network and through effective cost management. In the second quarter of 2023, we announced plans to consolidate our Snacks offices in Charlotte, North Carolina, and Norwalk, Connecticut, into our headquarters in Camden, New Jersey. Cost estimates for these expanded initiatives, as well as timing for certain activities, are continuing to be developed. A summary of the pre-tax charges recognized in the Consolidated Statements of Earnings related to these initiatives is as follows: Three Months Ended Nine Months Ended (Millions, except per share amounts) April 30, 2023 May 1, 2022 April 30, 2023 May 1, 2022 Recognized as of April 30, 2023 Restructuring charges $ 6 $ — $ 15 $ — $ 279 Administrative expenses 13 5 21 10 380 Cost of products sold 12 1 12 5 96 Marketing and selling expenses — — — — 14 Research and development expenses 2 — 2 — 6 Total pre-tax charges $ 33 $ 6 $ 50 $ 15 $ 775 Aggregate after-tax impact $ 24 $ 5 $ 37 $ 12 Per share impact $ .08 $ .02 $ .12 $ .04 30 A summary of the pre-tax costs associated with these initiatives is as follows: (Millions) Recognized as of April 30, 2023 Severance pay and benefits $ 239 Asset impairment/accelerated depreciation 99 Implementation costs and other related costs 437 Total $ 775 The total estimated pre-tax costs for actions that have been identified are approximately $880 million to $900 million and we expect to incur the costs through 2025. These estimates will be updated as the expanded initiatives are developed. We expect the costs for actions that have been identified to date to consist of the following: approximately $245 million to $250 million in severance pay and benefits; approximately $140 million in asset impairment and accelerated depreciation; and approximately $495 million to $510 million in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Meals & Beverages - approximately 32%; Snacks - approximately 43%; and Corporate - approximately 25%. Of the aggregate $880 million to $900 million of pre-tax costs identified to date, we expect approximately $700 million to $720 million will be cash expenditures. In addition, we expect to invest approximately $620 million in capital expenditures through 2025, of which we invested $455 million as of April 30, 2023. The capital expenditures primarily relate to optimization of production within our Meals & Beverages manufacturing network, a U.S. warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, optimization of information technology infrastructure and applications, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, enhancements to our headquarters in Camden, New Jersey, and optimization of the Snyder’s-Lance warehouse and distribution network. We expect to fund the costs through cash flows from operations and short-term borrowings. We expect the initiatives, once all phases are implemented, to generate annual ongoing savings of approximately $1 billion by the end of 2025. As of April 30, 2023, we have generated total program-to-date pre-tax savings of $880 million. Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs associated with segments is as follows: April 30, 2023 (Millions) Three Months Ended Nine Months Ended Costs Incurred to Date Meals & Beverages $ 19 $ 19 $ 244 Snacks 9 19 340 Corporate 5 12 191 Total $ 33 $ 50 $ 775 LIQUIDITY AND CAPITAL RESOURCES 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. We generated cash flows from operations of $918 million in 2023, compared to $1.101 billion in 2022. The decline in 2023 was primarily due to changes in working capital, partially offset by higher cash earnings. Current assets are less than current liabilities as a result of our level of debt maturing within one year and our focus to lower core working capital requirements. We had negative working capital of $184 million as of April 30, 2023, and $923 million as of July 31, 2022. Total debt maturing within one year was $263 million as of April 30, 2023, and $814 million as of July 31, 2022. Capital expenditures were $257 million in 2023 and $179 million in 2022. Capital expenditures are expected to total approximately $360 million in 2023. Capital expenditures in the first nine months of 2023 included chip and cracker capacity expansion for our Snacks business and a new manufacturing line for our Meals & Beverages business. 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. 31 Dividend payments were $336 million in 2023 and $340 million in 2022. The regular quarterly dividend paid on our capital stock was $.37 per share in both the third quarter of 2023 and 2022. On March 1, 2023, the Board of Directors declared a regular quarterly dividend of $.37 per share payable on May 1, 2023 to shareholders of record at the close of business on April 6, 2023. On May 23, 2023, the Board of Directors declared a regular quarterly dividend of $.37 per share payable on July 31, 2023 to shareholders of record at the close of business on July 6, 2023. 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. 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. We repurchased 2.692 million shares at a cost of $141 million in 2023. Of this amount, $67 million was used to repurchase shares pursuant to our June 2021 program and $74 million was used to repurchase shares pursuant to our September 2021 program. As of April 30, 2023, approximately $104 million remained available under the June 2021 program and approximately $301 million remained available under the September 2021 program. We repurchased approximately 2.7 million shares at a cost of $116 million in 2022. See Note 13 to the Consolidated Financial Statements and “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information. On November 15, 2022, we entered into a delayed draw term loan credit agreement (the DDTL Credit Agreement) totaling up to $500 million scheduled to mature on November 15, 2025. Loans under the DDTL Credit Agreement bear interest at the rates specified in the DDTL Credit Agreement, which vary based on the type of loan and certain other conditions. The DDTL Credit Agreement contains customary representations and warranties, affirmative and negative 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 DDTL Credit Agreement) of not less than 3.25:1.00, and events of default for credit facilities of this type. We borrowed $500 million under the DDTL Credit Agreement on March 13, 2023, and used the proceeds and cash on hand to repay the 3.65% $566 million Notes that matured on March 15, 2023. 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. As of April 30, 2023, we had $263 million of short-term borrowings due within one year, $249 million of which was comprised of commercial paper borrowings. As of April 30, 2023, we issued $29 million of standby letters of credit. On September 27, 2021, we entered into a committed revolving credit facility totaling $1.85 billion scheduled to mature on September 27, 2026. The facility remained unused at April 30, 2023, 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. Loans under this facility bear interest at the rates specified in the facility, which vary based on the type of loan and certain other customary conditions. The facility supports our commercial paper program and other general corporate purposes. We expect to continue to access the commercial paper markets, bank credit lines and utilize cash flows from operations to support our short-term liquidity requirements. On April 4, 2023, we entered into an amendment to our existing revolving credit facility to replace remaining LIBOR-based benchmark rates applicable to borrowings under the revolving credit facility with SOFR-based benchmark rates, in advance of the cessation of LIBOR occurring on June 30, 2023. We are in compliance with the covenants contained in our credit facilities and debt securities. In September 2020, we filed a registration statement with the Securities and Exchange Commission that registered an indeterminate amount of debt securities. Under the registration statement, we may issue debt securities from time to time, depending on market conditions. SIGNIFICANT ACCOUNTING ESTIMATES We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended July 31, 2022 (2022 Annual Report on Form 10-K). The accounting policies we used in preparing these financial 32 statements are substantially consistent with those we applied in our 2022 Annual Report on Form 10-K. Our significant accounting estimates are described in Management’s Discussion and Analysis included in the 2022 Annual Report on Form 10‑K. RECENT ACCOUNTING PRONOUNCEMENTS See Note 2 to the Consolidated Financial Statements for information on recent accounting pronouncements. FORWARD LOOKING STATEMENTS This Report contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current expectations regarding our future results of operations, economic performance, financial condition and achievements. These forward-looking statements can be identified by words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "pursue," "strategy," "target," "will" and similar expressions. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts, and may reflect anticipated cost savings or implementation of our strategic plan. These statements reflect our current plans and expectations and are based on information currently available to us. They rely on several assumptions regarding future events and estimates which could be inaccurate and which are inherently subject to risks and uncertainties. We wish to caution the reader that the following important factors and those important factors described in our other Securities and Exchange Commission filings, or in our 2022 Annual Report on Form 10-K, could affect our actual results and could cause such results to vary materially from those expressed in any forward-looking statements made by, or on behalf of, us: • the risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation; • the impacts of, and associated responses to the COVID-19 pandemic on our business, suppliers, customers, consumers and employees; • our ability to execute on and realize the expected benefits from our strategy, including growing sales in snacks and growing/maintaining our market share position in soup; • the impact of strong competitive responses to our efforts to leverage brand power with product innovation, promotional programs and new advertising; • the risks associated with trade and consumer acceptance of product improvements, shelving initiatives, new products and pricing and promotional strategies; • our ability to realize projected cost savings and benefits from cost savings initiatives and the integration of recent acquisitions; • disruptions in or inefficiencies to our supply chain and/or operations; • risks related to the effectiveness of our hedging activities and our ability to respond to volatility in commodity prices; • our ability to manage changes to our organizational structure and/or business processes, including selling, distribution, manufacturing and information management systems or processes; • changes in consumer demand for our products and favorable perception of our brands; • changing inventory management practices by certain of our key customers; • a changing customer landscape, with value and e-commerce retailers expanding their market presence, while certain of our key customers maintain significance to our business; • product quality and safety issues, including recalls and product liabilities; • the possible disruption to the independent contractor distribution models used by certain of our businesses, including as a result of litigation or regulatory actions affecting their independent contractor classification; • the uncertainties of litigation and regulatory actions against us; • the costs, disruption and diversion of management's attention associated with activist investors; • a disruption, failure or security breach of our or our vendors' information technology systems, including ransomware attacks; • impairment to goodwill or other intangible assets; • our ability to protect our intellectual property rights; • increased liabilities and costs related to our defined benefit pension plans; 33 • our ability to attract and retain key talent; • goals and initiatives related to, and the impacts of, climate change, including from weather-related events; • negative changes and volatility in financial and credit markets, deteriorating economic conditions and other external factors, including changes in laws and regulations; and • 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. We disclaim any obligation or intent to update forward-looking statements made by us in order to reflect new information, events or circumstances after the date they are made. Item 3. Quantitative and Qualitative Disclosure About Market Risk For information regarding our exposure to certain market risk, see Item 7A, Quantitative and Qualitative Disclosure About Market Risk, in the 2022 Annual Report on Form 10-K. There have been no significant changes in our portfolio of financial instruments or market risk exposures from the 2022 year-end.