What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-09-21 compared with 2022-09-22 · 205 added, 252 removed, 380 unchanged (55% of the section changed)

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

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.

In 2023 we delivered strong growth against all of our key financial metrics, exceeding our initial expectations and advancing many of our key strategic initiatives.

During 2023, we navigated through a challenging environment marked by continued supply chain pressures, particularly around high input cost inflation.

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 2023.

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 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 plan to continue our focus on building a winning team and culture by driving organizational engagement, belonging and effectiveness through our new employee value proposition:

Make history with Campbell’ s, and modernizing our facilities.

In 2023, we announced the consolidation of our Snacks offices in Charlotte, North Carolina and Norwalk, Connecticut into Camden, New Jersey and a $50 million investment in the Camden campus.

We expect a single headquarters will accelerate our plan to build a winning team and culture by investing in our campus and our people.

In addition, we plan to continue to deliver on the promise of our purpose with continued 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 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.

We expect to expand into new market segments through retail execution, marketing and innovation.

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 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 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.

We also expect to fuel investments and margins by continuing to focus on effective revenue management, transforming our supply chain into a competitive advantage, and finding innovative ways to enhance our products and processes to unlock cost efficiencies and savings across the enterprise.

We 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 $890 million in cost savings achieved through 2023.

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

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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.

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

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, 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.

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.

Throughout 2022 and continuing into 2023, our industry has been impacted by supply chain disruptions, commodity cost volatility, labor market issues, input cost inflation, and other global macroeconomic challenges.

Throughout 2023, we have experienced some moderation in input cost inflation, and we expect modest pressures of input cost inflation to continue into 2024.

We anticipate continued supply chain productivity and previously implemented pricing actions to mitigate some of the inflationary pressures, and expect such benefits to largely offset the incremental costs in 2024.

We will continue to evaluate the evolving macroeconomic environment to take action to mitigate the impact on our business, consolidated results of operations and financial condition.

We will also be lapping 2023 price increases, and anticipate that favorable net price realization will represent a reduced contribution to sales in 2024.

Recent Developments

On August 7, 2023, we entered into an agreement to acquire Sovos Brands, Inc.

(Sovos Brands) for $23.00 per share in cash, representing a total enterprise value of approximately $2.7 billion.

The closing of the transaction is subject to customary closing conditions and termination rights, including the approval of Sovos Brands’ shareholders and regulatory approvals.

We plan to finance the acquisition through the issuance of new debt.

For additional information on this pending acquisition, see our Form 8-K filed with the U.S.

Securities and Exchange Commission on August 7, 2023, and Note 19 to the Consolidated Financial Statements.

Summary of Results

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There were 52 weeks in 2023, 2022 and 2021.

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

• Net sales increased 9% in 2023 to $9.357 billion with the benefit of favorable inflation-driven net price realization more than offsetting unfavorable volume/mix.

• Gross profit, as a percent of sales, increased to 31.2% in 2023 from 30.7% a year ago.

The increase was primarily due to favorable net price realization, supply chain productivity improvements and mark-to-market adjustments on outstanding undesignated commodity hedges, partially offset by higher cost inflation and other supply chain costs as well as unfavorable volume/mix.

• Earnings per share were $2.85 in 2023, compared to $2.51 a year ago.

The current year included expenses of $.15 per share and the prior year included expenses of $.34 per share from items impacting comparability as discussed below.

Net Earnings attributable to Campbell Soup Company - 2023 Compared with 2022

The following items impacted the comparability of net earnings and net earnings per share:

Continuing Operations

• 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 2023, we recognized actuarial gains on our pension and postretirement plans in Other expenses / (income) of $15 million ($11 million after tax, or $.04 per share).

In 2022, we recognized actuarial losses in Other expenses / (income) of $44 million ($33 million after tax, or $.11 per share);

• In 2023, we recognized gains in Cost of products sold of $21 million ($16 million after tax, or $.05 per share) associated with unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

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;

• 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 2023, we recorded Restructuring charges of $16 million and implementation costs and other related costs of $24 million in Administrative expenses, $18 million in Cost of products sold, $5 million in Marketing and selling expenses and $3 million in Research and development expenses (aggregate impact of $50 million after tax, or $.17 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 2023, we recorded a pre- and after-tax loss in Other expenses / (income) of $13 million ($.04 per share) on the sale of our Emerald nuts business, which was sold on May 30, 2023;

• In 2023, we recorded accelerated amortization expense in Other expenses / (income) of $7 million ($5 million after tax, or $.02 per share) related to customer relationship intangible assets due to the loss of certain contract manufacturing customers;

• In the first quarter of 2024, we announced our intent to acquire Sovos Brands.

In 2023, we incurred transaction costs in Other expenses / (income) of $5 million ($4 million after tax, or $.01 per share) associated with the pending acquisition, which we expect to close by the end of December 2023;

• 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.

• 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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Impact Earnings

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

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

Net earnings attributable to Campbell Soup Company $ 858 $ 2.85 $ 757 $ 2.51

$ 757 $ 2.51 $ 1,002 $ 3.29

Continuing operations:

Pension and postretirement actuarial gains (losses) $ 11 $ .04 $ (33) $ (.11)

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Restructuring charges, implementation costs and other related costs (50) (.17) (24) (.08)

Charges associated with divestiture (13) (.04) — —

Accelerated amortization (5) (.02) — —

Transaction costs (4) (.01) — —

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)

Impact of items on Net earnings (1)

$ (45) $ (.15) $ (104) $ (.34)

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

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.

Net earnings attributable to Campbell Soup Company were $858 million ($2.85 per share) in 2023, compared to $757 million ($2.51 per share) in 2022.

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.

See "Discontinued Operations" for additional information.

Net periodic pension and postretirement benefit income excluding any actuarial gains or losses was $44 million ($33 million after tax, or $.11 per share) lower in 2023.

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

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Continuing Operations

• 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 2021, we recognized actuarial gains on our pension and postretirement plans in Other expenses / (income) of $203 million ($155 million after tax, or $.51 per share);

• 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;

• 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.

• 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 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 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 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.

• 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

Net earnings attributable to Campbell Soup Company (1)

$ 1,002 $ 3.29 $ 1,628 $ 5.36

Continuing operations:

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

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

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)

Discontinued operations:

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

Impact of items on Earnings (loss) from discontinued operations

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

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

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.

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

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

See "Discontinued Operations" for additional information.

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Meals & Beverages (1)

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

Price and sales allowances 8 8 8

Decreased/(increased) promotional spending (1)

Volume/mix (5)% (2)% (4)%

Net price realization (1)

Currency (1) — —

2022 versus 2021

Meals & Beverages Snacks (2)

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

Price and sales allowances — — —

Decreased/(increased) promotional spending (1)

Estimated impact of 53 rd week

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

Volume/mix (6)% (6)% (6)%

Net price realization (1)

__________________________________________

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

(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 2023, Meals & Beverages sales increased 7% 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 lower volume/mix.

Sales of U.S.

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

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

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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.

Favorable inflation-driven net price realization was partially offset by lower volume/mix, which 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%.

Excluding the impact of the 53 rd week, sales decreased primarily due to declines in foodservice, partially offset by gains in V8 beverages.

Foodservice sales were negatively impacted by shifts in consumer behavior and continued COVID-19 related restrictions.

Including a 1-point impact from the additional week, sales of U.S.

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

In 2023, Snacks sales increased 13% driven by sales of our power brands which increased 17%.

Sales increased due to increases in cookies and crackers, primarily Goldfish crackers and Lance sandwich crackers, and in salty snacks, primarily Snyder’s of Hanover pretzels and Kettle Brand and Cape Cod potato chips.

Sales benefited from favorable net price realization.

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.

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.

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.

Favorable inflation-driven net price realization was partly offset by a decline in volume/mix.

Volume/mix declined driven by supply constraints due to labor and materials availability and price elasticities .

Gross profit, defined as Net sales less Cost of products sold, increased by $290 million in 2023 from 2022 and decreased by $184 million in 2022 from 2021.

As a percent of sales, gross profit was 31.2% in 2023, 30.7% in 2022 and 33.2% in 2021.

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:

The 50 basis-point increase and the 250 basis-point decrease in gross profit margin in 2023 and 2022, respectively, were due to the following factors:

Margin Impact

Net price realization 950 540

Productivity improvements 300 130

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

(1,040) (810)

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

Higher restructuring-related costs (10) —

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(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.

(1) 2023 includes an estimated positive margin impact of a 90 basis-point benefit from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges and 10 basis points from the benefit of cost savings initiatives, which were more than offset by cost inflation and other factors.

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 negative impact from the change in unrealized mark-to-market adjustments on outstanding undesignated commodity hedges.

(2) Includes the impact of operating leverage.

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Marketing and selling expenses as a percent of sales were 8.7% in 2023, 8.6% in 2022 and 9.6% in 2021.

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.

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

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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

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Administrative expenses increased 6% in 2023 from 2022.

The increase was primarily due to higher general administrative costs and inflation (approximately 8 points) and higher incentive compensation (approximately 2 points), partially offset by lower expenses related to the settlement of certain legal claims (approximately 4 points).

Administrative expenses in 2023 included $14 million of litigation expenses related to the Plum baby food and snacks business, which we divested in May 2021.

Administrative expenses increased 3% in 2022 from 2021.

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 2023 included the following:

• $48 million of amortization of intangible assets, including accelerated amortization of $7 million;

• a loss of $13 million on the sale of the Emerald nuts business;

• $5 million of transaction costs associated with the pending acquisition of Sovos Brands;

• $35 million of net periodic benefit income, including pension and postretirement actuarial gains of $15 million.

Other expenses in 2022 included the following:

• $41 million of amortization of intangible assets;

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• $42 million of amortization of intangible assets;

• $11 million loss on the sale of the Plum baby food and snacks business.

Other expenses in 2020 included the following:

• $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;

• $45 million loss on Acre;

• $43 million of amortization of intangible assets;

• $10 million of income from transition services fees.

• a loss of $11 million on the sale of the Plum baby food and snacks business.

Operating Earnings

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

Segment operating earnings increased 10% in 2023 from 2022 and decreased 3% in 2022 from 2021.

An analysis of operating earnings by segment follows:

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Restructuring charges (1)

(16) (5) (21)

Earnings before interest and taxes $ 1,312 $ 1,163 $ 1,545

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(1) See Note 7 to the Consolidated Financial Statements for additional information on restructuring charges.

Operating earnings from Meals & Beverages increased 2% in 2023 versus 2022.

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 Meals & Beverages decreased 5% in 2022 versus 2021.

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.

Gross profit margin declined driven by higher cost inflation and other supply chain costs as well as unfavorable volume/mix, partially offset by favorable net price realization and supply chain productivity improvements.

Operating earnings from Snacks increased 24% in 2023 versus 2022.

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.

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 productivity improvements, partially offset by higher cost inflation and other supply chain costs as well as unfavorable volume/mix.

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

The increase 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.

Corporate expense in 2023 included the following:

• costs of $50 million related to cost savings initiatives;

• a loss of $13 million from the sale of the Emerald nuts business;

• $7 million of accelerated amortization expense;

• $5 million of transaction costs associated with the pending acquisition of Sovos Brands;

• $21 million of unrealized mark-to-market gains on outstanding undesignated commodity hedges;

• $15 million of pension and postretirement actuarial gains.

Corporate expense in 2022 included the following:

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

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• a loss of $11 million from the sale of the Plum baby food and snacks business.

Corporate expense in 2020 included the following:

• $164 million of pension and postretirement actuarial losses;

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

• costs of $60 million related to the cost savings initiatives;

• a loss of $45 million on Acre;

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

Excluding these amounts, the remaining change in 2023 from 2022 was primarily due to lower net periodic pension and postretirement benefit income in the current year and higher administrative expenses, including litigation expenses related to the Plum baby food and snacks business.

Interest Expense

Interest expense decreased to $188 million in 2023 from $189 million in 2022.

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.

The decrease in interest expense was primarily due to a loss on extinguishment of debt of $4 million in 2022, partially offset by higher average interest rates on the debt portfolio.

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 2020 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.

Taxes on Earnings

The effective tax rate was 23.9% in 2023, 22.4% in 2022 and 24.6% in 2021.

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.

The increase in the effective tax rate in 2023 from 2022 was primarily due to the favorable impact of state income tax law changes in 2022.

The decrease in the effective 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.

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, 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, as well as our information technology infrastructure.

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

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

A summary of charges recorded in the Consolidated Statements of Earnings related to these initiatives is as follows:

(Millions, except per share amounts)

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Per share impact $ .17 $ .08 $ .13

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

A summary of the pre-tax costs associated with these initiatives is as follows:

(Millions) Recognized as of July 30, 2023

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Implementation costs and other related costs

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.

The total estimated pre-tax costs for actions that have been identified are approximately $885 million to $905 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 associated with continuing operations that have been identified to date to consist of the following:

approximately $230 million in severance pay and benefits;

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;

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and Corporate - approximately 25%.

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.

Of the aggregate $885 million to $905 million of pre-tax costs identified to date, we expect approximately $705 million to $725 million will be cash expenditures.

In addition, we expect to invest approximately $620 million in capital expenditures through 2025, of which we invested $467 million as of July 30, 2023.

The capital expenditures primarily relate to a U.S.

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

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

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 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.

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 July 30, 2023, we have generated total program-to-date pre-tax savings of $890 million.

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

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

A summary of the pre-tax costs associated with segments is as follows:

(Millions) 2023 Costs Incurred to Date

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Discontinued Operations

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 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.

B eginning 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, or 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.

Results of discontinued operations were as follows:

(Millions) 2020

Net sales $ 359

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.

We completed the sale of our Kelsen business on September 23, 2019, and the sale of the Arnott’s and certain other international operations on December 23, 2019.

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 these businesses.

LIQUIDITY AND CAPITAL RESOURCES

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We generated cash flows from operations of $1.143 billion in 2023, compared to $1.181 billion in 2022.

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

The decline in 2023 was primarily due to changes in working capital, partially offset by higher cash earnings.

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

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 $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.

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

Current assets are less than current liabilities, which include debt maturing in one year, as we focus on lowering core working capital requirements.

We had negative working capital of $161 million as of July 30, 2023, and $923 million as of July 31, 2022.

Total debt maturing within one year was $191 million as of July 30, 2023, and $814 million as of July 31, 2022.

As part of our focus to lower core working capital requirements, we have worked with our suppliers to optimize our terms and conditions, including the extension of payment terms.

Our current payment terms with our suppliers, which we deem to be commercially reasonable, generally range from 0 to 120 days.

We also maintain agreements with third-party administrators that allow participating suppliers to track payment obligations from us, and, at the sole discretion of the supplier, sell those payment obligations to participating financial institutions.

Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

Supplier participation in these agreements is voluntary.

We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions.

We have not pledged assets as security or provided any guarantees in connection with these arrangements.

The payment of these obligations is included in cash provided by operating activities in the Consolidated Statements of Cash Flows.

Amounts outstanding under these programs, which are included in Accounts payable on the Consolidated Balance Sheets, were $258 million at July 30, 2023, and $262 million at July 31, 2022.

Capital expenditures were $370 million in 2023, $242 million in 2022 and $275 million in 2021.

Capital expenditures are expected to total approximately $440 million in 2024.

Capital expenditures in 2023 included chip and cracker capacity expansion for our Snacks business and a new manufacturing line for our Meals & Beverages business.

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.

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

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

On September 30, 2019, we repaid $399 million of our senior unsecured term loan facility using net proceeds from the Kelsen sale and the issuance of commercial paper.

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 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.

We used the net proceeds from the sale to reduce our debt through a series of actions.

On December 31, 2019, we repaid the $100 million outstanding balance on our senior unsecured term loan facility.

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 $1.2 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 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.

On May 30, 2023, we completed the sale of our Emerald nuts business for $41 million.

Dividend payments were $447 million in 2023, $451 million in 2022 and $439 million in 2021.

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

Annual dividends declared were $1.48 per share in both 2023 and 2022 and $1.46 per share in 2021.

The 2023 fourth quarter dividend was $.37 per share.

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As of July 30, 2023, approximately $104 million remained available under the June 2021 program and approximately $301 million remained under the September 2021 program.

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

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

See Note 15 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 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.

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

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 30, 2023, we had $191 million of short-term borrowings due within one year, of which $178 million was comprised of commercial paper borrowings.

As of July 30, 2023, we issued $29 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.

On September 27, 2021, we entered into a committed revolving credit facility totaling $1.85 billion scheduled to mature on September 27, 2026.

This facility remained unused at July 30, 2023, except for $1 million of standby letters of credit that we issued under it.

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

On 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.

In August 2023, 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.

We intend to finance the pending Sovos Brands acquisition with the issuance of new debt.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

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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 30, 2023.

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

Interest payments primarily for short-term borrowings and long-term debt as of July 30, 2023 are approximately as follows:

$188 million in 2024;

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and $1.129 billion from 2029 through maturity.

Interest payments are based on principal amounts and coupons or contractual rates at fiscal year end.

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

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See Note 10 to the Consolidated Financial Statements for a summary of our lease obligations as of July 30, 2023.

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.

As of July 30, 2023, we have a pension liability of $105 million and a postretirement benefit obligation of $153 million.

As of July 30, 2023, we also have a pension asset of $ 164 million based on the funded status of certain plans.

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

Off-Balance Sheet Arrangements and Other Commitments

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The information presented below should be read in conjunction with Notes 12, 13 and 14 to the Consolidated Financial Statements.

We are exposed to foreign currency 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 intercompany transactions and third-party transactions.

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

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.

The notional amounts of the contracts as of July 30, 2023, and July 31, 2022, were $140 million and $153 million, respectively.

The aggregate fair value of all contracts was a loss of $1 million as of July 30, 2023, and a gain of $2 million as of July 31, 2022.

A hypothetical 10% fluctuation in exchange rates would impact the fair value of our outstanding foreign exchange contracts by approximately $17 million as of July 30, 2023, and July 31, 2022, which would generally be offset by inverse changes on the underlying hedged items.

As of July 30, 2023, we had outstanding variable-rate debt of $678 million with an average interest rate of 6.18%.

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 variable-rate debt of $235 million with an average interest rate of 2.63%.

A hypothetical 100-basis-point increase in average interest rates applied to our variable-rate debt balances throughout 2023 and 2022 would have increased annual interest expense in those years by approximately $4 million and $1 million, respectively.

As of July 30, 2023, we had outstanding fixed-rate debt of $4.041 billion with a weighted average interest rate of 3.79%.

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.

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

The fair value of fixed-rate debt was $3.615 billion as of July 30, 2023 and $4.402 billion as of July 31, 2022.

As of July 30, 2023, and July 31, 2022, a hypothetical 100-basis-point increase in interest rates would decrease the fair value of our fixed-rate debt by approximately $221 million and $274 million, respectively, while a hypothetical 100-basis-point decrease in interest rates would increase the fair value of our fixed-rate debt by approximately $256 million and $318 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 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

As of July 30, 2023, the total notional amount of the contracts was $241 million, and the aggregate fair value of these contracts was a gain of $11 million.

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

A hypothetical 10% fluctuation in commodity prices would impact the fair value of our outstanding commodity contracts by approximately $25 million as of July 30, 2023, and $30 million as of July 31, 2022, 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 the total return of certain deferred compensation obligations.

The notional amount of the contracts was $ 42 million as of July 30, 2023, and $ 50 million as of July 31, 2022.

The fair value of these contracts was a gain of $4 million as of July 30, 2023, and a loss of $4 million as of July 31, 2022.

A hypothetical 10% fluctuation in equity price changes would impact the fair value of our outstanding swap contracts by $5 million as of July 30, 2023, and July 31, 2022, which would generally be offset by inverse changes on the underlying hedged items.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States.

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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.

Accrued trade and consumer promotion liabilities as of July 30, 2023 and July 31, 2022 were $156 million and $141 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.

Undiscounted cash flow analyses are used to determine if impairment exists.

Undiscounted cash flow analyses are used to determine if the carrying amount of the asset is recoverable.

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 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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(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.

As of the 2023 annual impairment testing, indefinite-lived trademarks with approximately 10% or less of excess coverage of fair value over carrying value had an aggregate carrying value of $ 434 million and included the 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 2023 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

(Millions) Pacific Foods Various other Snacks

1% increase in the weighted-average cost of capital $ 20 $ 25

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1% decrease in royalty rate $ 20 $ 50

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.

While the 1% changes in assumptions would not result in impairment charges on our other trademarks, some changes would reduce the excess coverage of fair value over carrying value to less than 10% for the Snyder's of Hanover , Kettle Brand , Cape Cod 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.

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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 impairment charges could result.

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

If our assumptions change or market conditions decline, potential impairment charges could result.

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.

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.

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.

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

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.

As of July 30, 2023, we have a pension liability of $105 million and a postretirement benefit obligation of $153 million.

As of July 30, 2023, we also have a pension asset of $ 164 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:

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$ (15) $ 44 $ (203)

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 pension actuarial gains recognized in 2023 were primarily due to increases in discount rates used to determine the benefit obligation, partially offset by losses on plan assets and plan experience.

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

The pension 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.

Excluding actuarial gains and losses, net periodic pension and postretirement benefit income was $44 million lower in 2023 compared to 2022.

Based on benefit obligations and plan assets as of July 30, 2023, net periodic pension and postretirement benefit income excluding any actuarial losses or gains is estimated to be approximately $13 million lower in 2024, 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.

The decrease in 2024 is primarily due to a lower market value of plan assets.

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

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• a 50-basis-point reduction in the estimated return on assets assumption would result in expense of approximately $5 million.

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.

Contributions to pension plans were not material in 2023, 2022 and 2021 and are not expected to be material in 2024.

See also Note 9 to the Consolidated Financial Statements for additional information on pension and postretirement benefits.

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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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We wish to caution the reader that the following important factors and those important factors described in Part 1, Item 1A and elsewhere in this Report, or in our other Securities and Exchange Commission filings, 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:

• impacts of, and associated responses to the COVID-19 pandemic on our business, suppliers, customers, consumers and employees;

• the conditions to the completion of the Sovos Brands transaction, including obtaining Sovos Brands' shareholder approval, may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected, on the anticipated schedule, or at all;

• financing for the Sovos Brands transaction may not be obtained on favorable terms, or at all;

• closing of the Sovos Brands transaction may not occur or be delayed, either as a result of litigation related to the transaction or otherwise or result in significant costs of defense, indemnification and liability;

• the risk that the cost savings and any other synergies from the Sovos Brands transaction may not be fully realized or may take longer or cost more to be realized than expected, including that the Sovos Brands transaction may not be accretive within the expected timeframe or the extent anticipated;

• completing the Sovos Brands transaction may distract our management from other important matters;

• the risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation;

• 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;

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• 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 including the impacts of the COVID-19 pandemic;

• the risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation;

• disruptions in or inefficiencies to our supply chain and/or operations, including reliance on key supplier relationships;

• risks related to the effectiveness of our hedging activities and our ability to respond to volatility in commodity prices;

• the impacts of, and associated responses to, the COVID-19 pandemic on our business, suppliers, customers, consumers and employees;

• our ability to manage changes to our organizational structure and/or business processes, including selling, distribution, manufacturing and information management systems or processes;

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

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

• unforeseen business disruptions or other impacts due to political instability, civil disobedience, terrorism, geopolitical conflicts (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