CAMPBELL'S Co 10-Q

Item 1. Financial Statements CAMPBELL SOUP COMPANY Consolidated Statements of Earnings (unaudited) (millions, except per share amounts) Three Months Ended October 29, 2023 October 30, 2022 Net sales $ 2,518 $ 2,575 Costs and expenses Cost of products sold 1,730 1,741 Marketing and selling expenses 222 201 Administrative expenses 158 158 Research and development expenses 24 21 Other expenses / (income) 24 18 Restructuring charges 2 — Total costs and expenses 2,160 2,139 Earnings before interest and taxes 358 436 Interest expense 49 47 Interest income 1 1 Earnings before taxes 310 390 Taxes on earnings 76 93 Net earnings 234 297 Less: Net earnings (loss) attributable to noncontrolling interests — — Net earnings attributable to Campbell Soup Company $ 234 $ 297 Per Share — Basic Net earnings attributable to Campbell Soup Company $ .79 $ .99 Weighted average shares outstanding — basic 298 299 Per Share — Assuming Dilution Net earnings attributable to Campbell Soup Company $ .78 $ .99 Weighted average shares outstanding — assuming dilution 299 301 See accompanying Notes to Consolidated Financial Statements. 3 CAMPBELL SOUP COMPANY Consolidated Statements of Comprehensive Income (unaudited) (millions) Three Months Ended October 29, 2023 October 30, 2022 Pre-tax amount Tax benefit (expense) After-tax amount Pre-tax amount Tax benefit (expense) After-tax amount Net earnings (loss) $ 234 $ 297 Other comprehensive income (loss): Foreign currency translation: Foreign currency translation adjustments $ ( 9 ) $ — ( 9 ) $ ( 8 ) $ — ( 8 ) Cash-flow hedges: Unrealized gains (losses) arising during the period 8 ( 2 ) 6 7 ( 2 ) 5 Reclassification adjustment for losses (gains) included in net earnings — — — ( 4 ) 1 ( 3 ) Other comprehensive income (loss) $ ( 1 ) $ ( 2 ) ( 3 ) $ ( 5 ) $ ( 1 ) ( 6 ) Total comprehensive income (loss) $ 231 $ 291 Total comprehensive income (loss) attributable to noncontrolling interests — — Total comprehensive income (loss) attributable to Campbell Soup Company $ 231 $ 291 See accompanying Notes to Consolidated Financial Statements. 4 CAMPBELL SOUP COMPANY Consolidated Balance Sheets (unaudited) (millions, except per share amounts) October 29, 2023 July 30, 2023 Current assets Cash and cash equivalents $ 91 $ 189 Accounts receivable, net 726 529 Inventories 1,340 1,291 Other current assets 82 52 Total current assets 2,239 2,061 Plant assets, net of depreciation 2,429 2,398 Goodwill 3,960 3,965 Other intangible assets, net of amortization 3,125 3,142 Other assets 504 492 Total assets $ 12,257 $ 12,058 Current liabilities Short-term borrowings $ 206 $ 191 Accounts payable 1,368 1,306 Accrued liabilities 541 592 Dividends payable 113 113 Accrued income taxes 82 20 Total current liabilities 2,310 2,222 Long-term debt 4,500 4,498 Deferred taxes 1,076 1,067 Other liabilities 614 608 Total liabilities 8,500 8,395 Commitments and contingencies Campbell Soup Company shareholders' equity Preferred stock; authorized 40 shares; none issued — — Capital stock, $ .0375 par value; authorized 560 shares; issued 323 shares 12 12 Additional paid-in capital 388 420 Earnings retained in the business 4,573 4,451 Capital stock in treasury, at cost ( 1,212 ) ( 1,219 ) Accumulated other comprehensive income (loss) ( 6 ) ( 3 ) Total Campbell Soup Company shareholders' equity 3,755 3,661 Noncontrolling interests 2 2 Total equity 3,757 3,663 Total liabilities and equity $ 12,257 $ 12,058 See accompanying Notes to Consolidated Financial Statements. 5 CAMPBELL SOUP COMPANY Consolidated Statements of Cash Flows (unaudited) (millions) Three Months Ended October 29, 2023 October 30, 2022 Cash flows from operating activities: Net earnings $ 234 $ 297 Adjustments to reconcile net earnings to operating cash flow Stock-based compensation 17 15 Pension and postretirement benefit expense (income) 1 11 Depreciation and amortization 96 91 Deferred income taxes 7 3 Other 31 25 Changes in working capital Accounts receivable ( 207 ) ( 198 ) Inventories ( 52 ) ( 118 ) Other current assets ( 29 ) ( 10 ) Accounts payable and accrued liabilities 82 123 Other ( 6 ) ( 12 ) Net cash provided by operating activities 174 227 Cash flows from investing activities: Purchases of plant assets ( 143 ) ( 77 ) Purchases of route businesses ( 4 ) ( 1 ) Sales of route businesses 10 — Net cash used in investing activities ( 137 ) ( 78 ) Cash flows from financing activities: Short-term borrowings, including commercial paper 1,103 557 Short-term repayments, including commercial paper ( 1,081 ) ( 512 ) Dividends paid ( 114 ) ( 115 ) Treasury stock purchases ( 28 ) ( 41 ) Treasury stock issuances — 2 Payments related to tax withholding for stock-based compensation ( 14 ) ( 18 ) Other ( 1 ) — Net cash used in financing activities ( 135 ) ( 127 ) Effect of exchange rate changes on cash — ( 1 ) Net change in cash and cash equivalents ( 98 ) 21 Cash and cash equivalents — beginning of period 189 109 Cash and cash equivalents — end of period $ 91 $ 130 See accompanying Notes to Consolidated Financial Statements. 6 CAMPBELL SOUP COMPANY Consolidated Statements of Equity (unaudited) (millions, except per share amounts) Campbell Soup Company Shareholders’ Equity Capital Stock Additional Paid-in Capital Earnings Retained in the Business Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests Issued In Treasury Total Equity Shares Amount Shares Amount Balance at July 31, 2022 323 $ 12 ( 24 ) $ ( 1,138 ) $ 415 $ 4,040 $ 2 $ 2 $ 3,333 Net earnings (loss) 297 — 297 Other comprehensive income (loss) ( 6 ) — ( 6 ) Dividends ($ .37 per share) ( 113 ) ( 113 ) Treasury stock purchased ( 1 ) ( 41 ) ( 41 ) Treasury stock issued under management incentive and stock option plans 1 39 ( 40 ) — ( 1 ) Balance at October 30, 2022 323 $ 12 ( 24 ) $ ( 1,140 ) $ 375 $ 4,224 $ ( 4 ) $ 2 $ 3,469 Balance at July 30, 2023 323 $ 12 ( 25 ) $ ( 1,219 ) $ 420 $ 4,451 $ ( 3 ) $ 2 $ 3,663 Net earnings (loss) 234 — 234 Other comprehensive income (loss) ( 3 ) — ( 3 ) Dividends ($ .37 per share) ( 112 ) ( 112 ) Treasury stock purchased ( 1 ) ( 28 ) ( 28 ) Treasury stock issued under management incentive and stock option plans 1 35 ( 32 ) — 3 Balance at October 29, 2023 323 $ 12 ( 25 ) $ ( 1,212 ) $ 388 $ 4,573 $ ( 6 ) $ 2 $ 3,757 See accompanying Notes to Consolidated Financial Statements. 7 Notes to Consolidated Financial Statements (unaudited) 1. Basis of Presentation and Significant Accounting Policies In this Form 10-Q, unless otherwise stated, the terms "we," "us," "our" and the "company" refer to Campbell Soup Company and its consolidated subsidiaries. The financial statements reflect all adjustments which are, in our opinion, necessary for a fair statement of the results of operations, financial position and cash flows for the indicated periods. The accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our Annual Report on Form 10-K for the year ended July 30, 2023. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. Our fiscal year ends on the Sunday nearest July 31, which is July 28, 2024. 2. Recent Accounting Pronouncements In September 2022, the Financial Accounting Standards Board (FASB) issued guidance that enhances the transparency of supplier finance programs by requiring disclosure of the key terms of these programs and a related rollforward of these obligations to understand the effect on working capital, liquidity and cash flows. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods in those fiscal years, except for the rollforward requirement, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We adopted the guidance in the fourth quarter of 2023, with the exception of the rollforward information. The adoption did not have a material impact on our consolidated financial statements. See Note 16 for additional information. In November 2023, the FASB issued guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment and contains other disclosure requirements. The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements. 3. Accumulated Other Comprehensive Income (Loss) The components of Accumulated other comprehensive income (loss) consisted of the following: (Millions) Foreign Currency Translation Adjustments (1) Cash-Flow Hedges (2) Pension and Postretirement Benefit Plan Adjustments (3) Total Accumulated Comprehensive Income (Loss) Balance at July 31, 2022 $ — $ — $ 2 $ 2 Other comprehensive income (loss) before reclassifications ( 8 ) 5 — ( 3 ) Losses (gains) reclassified from accumulated other comprehensive income (loss) — ( 3 ) — ( 3 ) Net current-period other comprehensive income (loss) ( 8 ) 2 — ( 6 ) Balance at October 30, 2022 $ ( 8 ) $ 2 $ 2 $ ( 4 ) Balance at July 30, 2023 $ ( 1 ) $ ( 4 ) $ 2 $ ( 3 ) Other comprehensive income (loss) before reclassifications ( 9 ) 6 — ( 3 ) Losses (gains) reclassified from accumulated other comprehensive income (loss) — — — — Net current-period other comprehensive income (loss) ( 9 ) 6 — ( 3 ) Balance at October 29, 2023 $ ( 10 ) $ 2 $ 2 $ ( 6 ) 8 _____________________________________ (1) Included no tax as of October 29, 2023, July 30, 2023, October 30, 2022 and July 31, 2022. (2) Included tax expense of $ 1 million as of October 29, 2023, a tax benefit of $ 1 million as of July 30, 2023, tax expense of $ 1 million as of October 30, 2022 and no tax as of July 31, 2022. (3) Included tax expense of $ 1 million as of October 29, 2023, July 30, 2023, October 30, 2022 and July 31, 2022. Amounts related to noncontrolling interests were not material. The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following: Three Months Ended (Millions) October 29, 2023 October 30, 2022 Location of Loss (Gain) Recognized in Earnings Losses (gains) on cash-flow hedges: Commodity contracts $ — $ ( 3 ) Cost of products sold Foreign exchange forward contracts — ( 1 ) Cost of products sold Total before tax — ( 4 ) Tax expense (benefit) — 1 Loss (gain), net of tax $ — $ ( 3 ) 4. Goodwill and Intangible Assets Goodwill The following table shows the changes in the carrying amount of goodwill: (Millions) Meals & Beverages Snacks Total Net balance at July 30, 2023 $ 990 $ 2,975 $ 3,965 Foreign currency translation adjustment ( 5 ) — ( 5 ) Net balance at October 29, 2023 $ 985 $ 2,975 $ 3,960 Intangible Assets The following table summarizes balance sheet information for intangible assets, excluding goodwill: October 29, 2023 July 30, 2023 (Millions) Cost Accumulated Amortization Net Cost Accumulated Amortization Net Amortizable intangible assets Customer relationships $ 830 $ ( 246 ) $ 584 $ 830 $ ( 229 ) $ 601 Indefinite-lived trademarks Snyder's of Hanover $ 620 $ 620 Lance 350 350 Kettle Brand 318 318 Pace 292 292 Pacific Foods 280 280 Cape Cod 187 187 Various other Snacks (1) 494 494 Total indefinite-lived trademarks $ 2,541 $ 2,541 Total net intangible assets $ 3,125 $ 3,142 ____________________________________ (1) Associated with the acquisition of Snyder's-Lance, Inc. (Snyder's-Lance). Amortization expense was $ 17 million for the three-month period ended October 29, 2023, and $ 11 million for the three-month period ended October 30, 2022. The increase in amortization expense in 2024 includes $ 7 million of accelerated amortization expense on customer relationships beginning in the fourth quarter of 2023 due to the loss of certain contract 9 manufacturing customers. As of October 29, 2023, amortizable intangible assets had a weighted-average remaining useful life of 15 years. Amortization expense is estimated to be approximately $ 68 million in 2024, $ 59 million in 2025 and $ 34 million per year for the following three years. As of our 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 Pacific Foods and certain other Snacks trademarks. The estimates of future cash flows used in determining the fair value of goodwill and intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance and economic conditions. 5. Segment Information Our reportable segments are as follows: • Meals & Beverages, which consists of our soup, simple meals and beverages products in retail and foodservice in the U.S. and Canada. The segment includes the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; V8 juices and beverages; and Campbell’s tomato juice. The segment also includes snacking products in foodservice and Canada; and • Snacks, which consists of Pepperidge Farm cookies*, crackers, fresh bakery and frozen products, including Goldfish crackers*, Snyder’s of Hanover pretzels*, Lance sandwich crackers*, Cape Cod potato chips*, Kettle Brand potato chips*, Late July snacks*, Snack Factory pretzel crisps*, Pop Secret popcorn, and other snacking products in retail in the U.S. We refer to the * brands as our "power brands." The segment also includes the retail business in Latin America. The segment included the results of our Emerald nuts business, which was sold on May 30, 2023. We evaluate segment performance before interest, taxes and costs associated with restructuring activities and impairment charges. Unrealized gains and losses on outstanding undesignated commodity hedging activities are excluded from segment operating earnings and are recorded in Corporate as these open positions represent hedges of future purchases. Upon closing of the contracts, the realized gain or loss is transferred to segment operating earnings, which allows the segments to reflect the economic effects of the hedge without exposure to quarterly volatility of unrealized gains and losses. Only the service cost component of pension and postretirement expense is allocated to segments. All other components of expense, including interest cost, expected return on assets, amortization of prior service credits and recognized actuarial gains and losses are reflected in Corporate and not included in segment operating results. Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance. Three Months Ended (Millions) October 29, 2023 October 30, 2022 Net sales Meals & Beverages $ 1,404 $ 1,455 Snacks 1,114 1,120 Total $ 2,518 $ 2,575 Three Months Ended (Millions) October 29, 2023 October 30, 2022 Earnings before interest and taxes Meals & Beverages $ 287 $ 331 Snacks 161 153 Corporate income (expense) (1) ( 88 ) ( 48 ) Restructuring charges (2) ( 2 ) — Total $ 358 $ 436 _______________________________________ (1) Represents unallocated items. Costs related to the cost savings initiatives were $ 11 million and $ 3 million in the three-month periods ended October 29, 2023, and October 30, 2022, respectively. Unrealized mark-to-market adjustments on outstanding undesignated commodity hedges were losses of $ 15 million and gains of $ 5 million in the three-month periods 10 ended October 29, 2023, and October 30, 2022, respectively. Accelerated amortization expense related to customer relationship intangible assets was $ 7 million in the three-month period ended October 29, 2023. Costs of $ 9 million associated with the pending acquisition of Sovos Brands, Inc. (Sovos Brands) were included in the three-month period ended October 29, 2023. Costs of $ 3 million related to a cybersecurity incident were included in the three-month period ended October 29, 2023. Litigation expenses related to the Plum baby food and snacks business of $ 2 million were included in the three-month period ended October 29, 2023. There was a pension actuarial loss of $ 15 million in the three-month period ended October 30, 2022. (2) See Note 6 for additional information. Our net sales based on product categories are as follows: Three Months Ended (Millions) October 29, 2023 October 30, 2022 Net sales Soup $ 860 $ 893 Snacks 1,173 1,173 Other simple meals 302 315 Beverages 183 194 Total $ 2,518 $ 2,575 Soup includes various soup, broths and stock products. Snacks include cookies, pretzels, crackers, popcorn, potato chips, tortilla chips and other salty snacks and baked products. Other simple meals include sauces, gravies, pasta, beans and canned poultry. Beverages include V8 juices and beverages, Campbell’s tomato juice and Pacific Foods non-dairy beverages. 6. 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 (Millions) October 29, 2023 October 30, 2022 Recognized as of October 29, 2023 Restructuring charges $ 2 $ — $ 282 Administrative expenses 5 3 388 Cost of products sold 3 — 105 Marketing and selling expenses 2 — 21 Research and development expenses 1 — 8 Total pre-tax charges $ 13 $ 3 $ 804 11 A summary of the pre-tax costs associated with the initiatives is as follows: (Millions) Recognized as of October 29, 2023 Severance pay and benefits $ 242 Asset impairment/accelerated depreciation 111 Implementation costs and other related costs 451 Total $ 804 The total estimated pre-tax costs for actions that have been identified are approximately $ 885 million to $ 905 million and we expect to incur substantially all of 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 $ 135 million in asset impairment and accelerated depreciation; and approximately $ 505 million to $ 520 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 $ 885 million to $ 905 million of pre-tax costs identified to date, we expect approximately $ 710 million to $ 730 million will be cash expenditures. In addition, we expect to invest approximately $ 620 million in capital expenditures, of which we invested $ 482 million as of October 29, 2023. We expect to invest in substantially all of the capital expenditures through 2025. 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. A summary of the restructuring activity and related reserves at October 29, 2023, is as follows: (Millions) Severance Pay and Benefits Implementation Costs and Other Related Costs (3) Asset Impairment/Accelerated Depreciation Total Charges Accrued balance at July 30, 2023 (1) $ 13 2024 charges 2 6 5 $ 13 2024 cash payments ( 2 ) Accrued balance at October 29, 2023 (2) $ 13 __________________________________ (1) Includes $ 7 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet. (2) Includes $ 5 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet. (3) Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses, Cost of products sold, Marketing and selling expenses and Research and development expenses in the Consolidated Statements of Earnings. 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: October 29, 2023 (Millions) Three Months Ended Costs Incurred to Date Meals & Beverages $ 4 $ 255 Snacks 6 351 Corporate 3 198 Total $ 13 $ 804 7. Earnings per Share (EPS) For the periods presented in the Consolidated Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution include the incremental effect of stock options and other share-based payment awards, except when such effect would be antidilutive. The earnings per share calculation for the three-month period ended October 29, 2023, excludes less than 1 million stock options that would have been antidilutive. 12 The earnings per share calculation for the three-month period ended October 30, 2022, excludes approximately 1 million stock options that would have been antidilutive. 8. Pension and Postretirement Benefits Components of net periodic benefit expense (income) were as follows: Three Months Ended Pension Postretirement (Millions) October 29, 2023 October 30, 2022 October 29, 2023 October 30, 2022 Service cost $ 3 $ 4 $ — $ — Interest cost 16 17 2 2 Expected return on plan assets ( 20 ) ( 27 ) — — Actuarial losses (gains) — 15 — — Net periodic benefit expense (income) $ ( 1 ) $ 9 $ 2 $ 2 The actuarial loss for the three-month period ended October 30, 2022 resulted from the remeasurement of a U.S. pension plan due to lump sum distributions that were expected to exceed service and interest costs resulting in settlement accounting for this plan. The actuarial loss recognized for the three-month period ended October 30, 2022 was primarily due to losses on plan assets, partially offset by increases in discount rates used to determine the benefit obligation. 9. Leases The components of lease costs were as follows: Three Months Ended (Millions) October 29, 2023 October 30, 2022 Operating lease cost $ 24 $ 20 Finance lease - amortization of right-of-use (ROU) assets 4 4 Short-term lease cost 19 17 Variable lease cost (1) 53 50 Total $ 100 $ 91 __________________________________________ (1) Includes labor and other overhead in our service contracts with embedded leases. The following tables summarize the lease amounts recorded in the Consolidated Balance Sheets: Operating Leases (Millions) Balance Sheet Classification October 29, 2023 July 30, 2023 ROU assets, net Other assets $ 288 $ 275 Lease liabilities (current) Accrued liabilities $ 72 $ 70 Lease liabilities (noncurrent) Other liabilities $ 220 $ 208 Finance Leases (Millions) Balance Sheet Classification October 29, 2023 July 30, 2023 ROU assets, net Plant assets, net of depreciation $ 26 $ 27 Lease liabilities (current) Short-term borrowings $ 12 $ 13 Lease liabilities (noncurrent) Long-term debt $ 16 $ 15 13 The following table summarizes cash flow and other information related to leases: Three Months Ended (Millions) October 29, 2023 October 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 23 $ 20 Financing cash flows from finance leases $ 4 $ 4 ROU assets obtained in exchange for lease obligations: Operating leases $ 36 $ 15 Finance leases $ 3 $ — 10. Short-term Borrowings and Long-term Debt On October 10, 2023 , we entered into a delayed single draw term loan credit agreement (the 2024 DDTL Credit Agreement) totaling up to $ 2 billion scheduled to mature on October 8, 2024 . Loans under the 2024 DDTL Credit Agreement bear interest at the rates specified in the 2024 DDTL Credit Agreement, which vary based on the type of loan and certain other conditions. The 2024 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 2024 DDTL Credit Agreement) of not less than 3.25:1.00 , and events of default for credit facilities of this type. The proceeds of the loans under the 2024 DDTL Credit Agreement can only be used in connection with the acquisition of Sovos Brands. The 2024 DDTL Credit Agreement remained unused at October 29, 2023. 11. Financial Instruments The principal market risks to which we are exposed are changes in foreign currency exchange rates, interest rates and commodity prices. In addition, we are exposed to price changes related to certain deferred compensation obligations. In order to manage these exposures, we follow established risk management policies and procedures, including the use of derivative contracts such as swaps, rate locks, options, forwards and commodity futures. We enter into these derivative contracts for periods consistent with the related underlying exposures, and the contracts do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments. Our derivative programs include instruments that qualify for hedge accounting treatment and instruments that are not designated as accounting hedges. Concentration of Credit Risk We are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate counterparty credit risk, we enter into contracts only with carefully selected, leading, credit-worthy financial institutions, and distribute contracts among several financial institutions to reduce the concentration of credit risk. We did not have credit risk-related contingent features in our derivative instruments as of October 29, 2023, or July 30, 2023. We are also exposed to credit risk from our customers. During 2023, our largest customer accounted for approximately 22 % of consolidated net sales. Our five largest customers accounted for approximately 47 % of our consolidated net sales in 2023. We closely monitor credit risk associated with counterpartie s and customers. Foreign Currency Exchange Risk 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 contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge portions of our forecasted foreign currency transaction exposure with foreign exchange forward contracts for periods typically up to 18 months. The notional amount of foreign exchange forward contracts accounted for as cash-flow hedges was $ 83 million as of October 29, 2023, and $ 125 million as of July 30, 2023. Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows. For derivatives that are designated and qualify as hedging instruments, the initial fair value of hedge components excluded from the assessment of effectiveness is recognized in earnings under a systematic and rational method over the life of the hedging instrument and is presented in the same statement of earnings line item as the earnings effect of the hedged item. Any difference between the change in the fair value of the hedge components excluded from the assessment of effectiveness and the amounts recognized in earnings is recorded as a component of other comprehensive 14 income (loss). The notional amount of foreign exchange forward contracts that are not designated as accounting hedges was $ 17 million as of October 29, 2023, and $ 15 million as of July 30, 2023. Interest Rate Risk We manage our exposure to changes in interest rates by optimizin g the use of variable-rate and fixed-rate debt. From time to time, we may use interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines. We manage our exposure to interest volatility on future debt issuances by entering into forward starting interest rate swaps or treasury lock contracts to hedge the rate on the interest payments related to the anticipated debt issuance. The forward starting interest rate swaps or treasury lock contracts are either designated as cash-flow hedging instruments or are undesignated. Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), and reclassified into Interest expense over the life of the debt. The change in fair value on undesignated instruments is recorded in Interest expense. The notional amount of forward starting interest rate swaps accounted for as cash-flow hedges was $ 525 million as of October 29, 2023. These forward starting interest rate swaps related to an anticipated debt issuance and mature in January 2025. There were no forward starting interest rate swaps or treasury lock contracts outstanding as of July 30, 2023. Since October 29, 2023, we have entered into additional forward starting interest rate swaps accounted for as cash-flow hedges with a notional value of $ 450 million. Commodity Price Risk We principally use a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, diesel fuel, natural gas, soybean oil, aluminum, cocoa, corn, soybean meal and butter. Commodity futures, options and swap contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge a portion of commodity requirements for periods typically up to 18 months. There were no commodity contracts designated as cash-flow hedges as of October 29, 2023, or July 30, 2023. The notional amount of commodity contracts not designated as accounting hedges was $ 197 million as of October 29, 2023, and $ 194 million as of July 30, 2023. The change in fair value on undesignated instruments is recorded in Cost of products sold. We have a supply contract under which prices for certain raw materials are established based on anticipated volume requirements over a twelve-month period. Certain prices under the contract are based in part on certain component parts of the raw materials that are in excess of our needs or not required for our operations, thereby creating an embedded derivative requiring bifurcation. We net settle amounts due under the contract with our counterparty. The notional amount was $ 18 million as of October 29, 2023, and $ 47 million as of July 30, 2023. The change in fair value on the embedded derivative is recorded in Cost of products sold. Deferred Compensation Obligation Price Risk We enter into swap contracts which hedge a portion of exposures relating to the total return of certain deferred compensation obligations. These contracts are not designated as hedges for accounting purposes. Unrealized gains (losses) and settlements are included in Administrative expenses in the Consolidated Statements of Earnings. We enter into these contracts for periods typically not exceeding 12 months. The notional amounts of the contracts were $ 42 million as of October 29, 2023, and July 30, 2023. 15 The following table summarizes the fair value of derivative instruments on a gross basis as recorded in the Consolidated Balance Sheets as of October 29, 2023, and July 30, 2023: (Millions) Balance Sheet Classification October 29, 2023 July 30, 2023 Asset Derivatives Derivatives designated as hedges: Foreign exchange forward contracts Other current assets $ 3 $ — Forward starting interest rate swaps Other assets 3 — Total derivatives designated as hedges $ 6 $ — Derivatives not designated as hedges: Commodity contracts Other current assets $ 8 $ 15 Deferred compensation contracts Other current assets — 4 Commodity contracts Other assets — 1 Total derivatives not designated as hedges $ 8 $ 20 Total asset derivatives $ 14 $ 20 (Millions) Balance Sheet Classification October 29, 2023 July 30, 2023 Liability Derivatives Derivatives designated as hedges: Foreign exchange forward contracts Accrued liabilities $ — $ 1 Total derivatives designated as hedges $ — $ 1 Derivatives not designated as hedges: Commodity contracts Accrued liabilities $ 12 $ 5 Deferred compensation contracts Accrued liabilities 1 — Total derivatives not designated as hedges $ 13 $ 5 Total liability derivatives $ 13 $ 6 We do not offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. However, if we were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in the Consolidated Balance Sheets as of October 29, 2023, and July 30, 2023, would be adjusted as detailed in the following table: October 29, 2023 July 30, 2023 (Millions) Gross Amounts Presented in the Consolidated Balance Sheet Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements Net Amount Gross Amounts Presented in the Consolidated Balance Sheet Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements Net Amount Total asset derivatives $ 14 $ ( 4 ) $ 10 $ 20 $ ( 5 ) $ 15 Total liability derivatives $ 13 $ ( 4 ) $ 9 $ 6 $ ( 5 ) $ 1 We are required to maintain cash margin accounts in connection with funding the settlement of open positions for exchange-traded commodity derivative instruments. Cash margin asset balances of $ 18 million at October 29, 2023, and $ 2 million at July 30, 2023, were included in Other current assets in the Consolidated Balance Sheets. 16 The following table shows the effect of our derivative instruments designated as cash-flow hedges for the three-month periods ended October 29, 2023, and October 30, 2022, in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings: Total Cash-Flow Hedge OCI Activity (Millions) October 29, 2023 October 30, 2022 Three Months Ended OCI derivative gain (loss) at beginning of quarter $ ( 5 ) $ — Effective portion of changes in fair value recognized in OCI: Foreign exchange forward contracts 5 7 Forward starting interest rate swaps 3 — Amount of loss (gain) reclassified from OCI to earnings: Location in Earnings Commodity contracts Cost of products sold — ( 3 ) Foreign exchange forward contracts Cost of products sold — ( 1 ) OCI derivative gain (loss) at end of quarter $ 3 $ 3 Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a gain of $ 3 million. The following table shows the total amounts of line items presented in the Consolidated Statements of Earnings for the three-month periods ended October 29, 2023, and October 30, 2022, in which the effects of derivative instruments designated as cash-flow hedges are recorded and the total effect of hedge activity on these line items are as follows: Three Months Ended October 29, 2023 October 30, 2022 (Millions) Cost of products sold Cost of products sold Consolidated Statements of Earnings: $ 1,730 $ 1,741 Loss (gain) on cash-flow hedges: Amount of loss (gain) reclassified from OCI to earnings $ — $ ( 4 ) The amount excluded from effectiveness testing recognized in each line item of earnings using an amortization approach was not material in all periods presented. The following table shows the effects of our derivative instruments not designated as hedges in the Consolidated Statements of Earnings: Location of Loss (Gain) Recognized in Earnings Three Months Ended (Millions) October 29, 2023 October 30, 2022 Foreign exchange forward contracts Cost of products sold $ ( 1 ) $ ( 1 ) Commodity contracts Cost of products sold 12 ( 12 ) Deferred compensation contracts Administrative expenses 4 2 Total loss (gain) $ 15 $ ( 11 ) 12. Fair Value Measurements We categorize financial assets and liabilities based on the following fair value hierarchy: • Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with observable market data. • Level 3: Unobservable inputs, which are valued based on our estimates of assumptions that market participants would use in pricing the asset or liability. 17 Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When available, we use unadjusted quoted market prices to measure the fair value and classify such items as Level 1. If quoted market prices are not available, we base fair value upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Included in the fair value of derivative instruments is an adjustment for credit and nonperformance risk. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present our financial assets and liabilities that are measured at fair value on a recurring basis as of October 29, 2023, and July 30, 2023, consistent with the fair value hierarchy: Fair Value as of October 29, 2023 Fair Value Measurements at October 29, 2023 Using Fair Value Hierarchy Fair Value as of July 30, 2023 Fair Value Measurements at July 30, 2023 Using Fair Value Hierarchy (Millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Foreign exchange forward contracts (1) $ 3 $ — $ 3 $ — $ — $ — $ — $ — Commodity derivative contracts (2) 8 2 4 2 16 11 3 2 Deferred compensation derivative contracts (3) — — — — 4 — 4 — Deferred compensation investments (4) 1 1 — — 1 1 — — Forward starting interest rate swaps (5) 3 — 3 — — — — — Total assets at fair value $ 15 $ 3 $ 10 $ 2 $ 21 $ 12 $ 7 $ 2 Fair Value as of October 29, 2023 Fair Value Measurements at October 29, 2023 Using Fair Value Hierarchy Fair Value as of July 30, 2023 Fair Value Measurements at July 30, 2023 Using Fair Value Hierarchy (Millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Liabilities Foreign exchange forward contracts (1) $ — $ — $ — $ — $ 1 $ — $ 1 $ — Commodity derivative contracts (2) 12 11 1 — 5 3 2 — Deferred compensation derivative contracts (3) 1 — 1 — — — — — Deferred compensation obligation (4) 92 92 — — 91 91 — — Total liabilities at fair value $ 105 $ 103 $ 2 $ — $ 97 $ 94 $ 3 $ — ___________________________________ (1) Based on observable market transactions of spot currency rates and forward rates. (2) Level 1 and 2 are based on quoted futures exchanges and on observable prices of futures and options transactions in the marketplace. Level 3 is based on unobservable inputs in which there is little or no market data, which requires management’s own assumptions within an internally developed model. (3) Based on index swap rates. 18 (4) Based on the fair value of the participants’ investments. (5) Based on SOFR swap rates. The following table summarizes the changes in fair value of Level 3 assets and liabilities for the three-month periods ended October 29, 2023, and October 30, 2022: Three Months Ended (Millions) October 29, 2023 October 30, 2022 Fair value at beginning of year $ 2 $ 4 Gains (losses) 2 ( 1 ) Settlements ( 2 ) ( 1 ) Fair value at end of quarter $ 2 $ 2 Fair Value of Financial Instruments The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value. There were no cash equivalents at October 29, 2023 or July 30, 2023. The fair value of short- and long-term debt was $ 4.108 billion at October 29, 2023, and $ 4.293 billion at July 30, 2023. The carrying value was $ 4.706 billion at October 29, 2023, and $ 4.689 billion at July 30, 2023. The fair value of long-term debt is principally estimated using Level 2 inputs based on quoted market prices or pricing models using current market rates. 13. Share Repurchases 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 June 2021 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. During the three-month period ended October 29, 2023, we repurchased 679 thousand shares at a cost of $ 28 million pursuant to our June 2021 program. As of October 29, 2023, approximately $ 76 million remained available under the June 2021 program and approximately $ 301 million remained available under the September 2021 program. During the three-month period ended October 30, 2022, we repurchased 859 thousand shares at a cost of $ 41 million. 14. Stock-based Compensation We provide compensation benefits by issuing stock options, unrestricted stock and restricted stock units (including time-lapse restricted stock units, EPS performance restricted stock units, total shareholder return (TSR) performance restricted stock units and free cash flow (FCF) performance restricted stock units). In 2024, we issued time-lapse restricted stock units, unrestricted stock, TSR performance restricted stock units and EPS performance restricted stock units. We last issued stock options and FCF performance restricted stock units in 2019. In determining stock-based compensation expense, we estimate forfeitures expected to occur. Total pre-tax stock-based compensation expense and tax-related benefits recognized in the Consolidated Statements of Earnings were as follows: Three Months Ended (Millions) October 29, 2023 October 30, 2022 Total pre-tax stock-based compensation expense $ 17 $ 15 Tax-related benefits $ 2 $ 3 19 The following table summarizes stock option activity as of October 29, 2023: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life Aggregate Intrinsic Value (In thousands) (In years) (Millions) Outstanding at July 30, 2023 833 $ 44.77 Granted — $ — Exercised — $ — Terminated — $ — Outstanding at October 29, 2023 833 $ 44.77 4.0 $ 2 Exercisable at October 29, 2023 833 $ 44.77 4.0 $ 2 The total intrinsic value of options exercised during the three-month period ended October 30, 2022 was not material. We measured the fair value of stock options using the Black-Scholes option pricing model. We expensed stock options on a straight-line basis over the vesting period, except for awards issued to retirement eligible participants, which we expensed on an accelerated basis. As of January 2022, compensation related to stock options was fully expensed. The following table summarizes time-lapse restricted stock units and EPS performance restricted stock units as of October 29, 2023: Units Weighted-Average Grant-Date Fair Value (In thousands) Nonvested at July 30, 2023 2,274 $ 45.39 Granted 1,492 $ 41.09 Vested ( 714 ) $ 45.39 Forfeited ( 44 ) $ 44.77 Nonvested at October 29, 2023 3,008 $ 43.26 We determine the fair value of time-lapse restricted stock units based on the quoted price of our stock at the date of grant. We expense time-lapse restricted stock units on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. Since 2022, we have granted EPS performance restricted stock units that will be earned upon the achievement of our adjusted EPS compound annual growth rate goal, measured over a three-year period. The actual number of EPS performance restricted stock units issued at the vesting date could range from 0 % to 200 % of the initial grant depending on actual performance achieved. The fair value of EPS performance restricted stock units is based upon the quoted price of our stock at the date of grant. We expense EPS performance restricted stock units on a straight-line basis over the service period, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. We estimate expense based on the number of awards expected to vest. There were 936 thousand EPS performance target grants outstanding at October 29, 2023, with a weighted-average grant-date fair value of $ 42.99 . As of October 29, 2023, total remaining unearned compensation related to nonvested time-lapse restricted stock units and EPS performance restricted stock units was $ 83 million, which will be amortized over the weighted-average remaining service period of 1.9 years. The fair value of restricted stock units vested during the three-month periods ended October 29, 2023, and October 30, 2022, was $ 30 million and $ 34 million, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the three-month period ended October 30, 2022 was $ 47.12 . 20 The following table summarizes TSR performance restricted stock units as of October 29, 2023: Units Weighted-Average Grant-Date Fair Value (In thousands) Nonvested at July 30, 2023 948 $ 51.81 Granted 387 $ 44.18 Vested ( 289 ) $ 54.93 Forfeited ( 110 ) $ 54.35 Nonvested at October 29, 2023 936 $ 47.40 We estimated the fair value of TSR performance restricted stock units at the grant date using a Monte Carlo simulation. Assumptions used in the Monte Carlo simulation were as follows: 2024 2023 Risk-free interest rate 4.84 % 4.29 % Expected dividend yield 3.54 % 3.09 % Expected volatility 22.16 % 26.40 % Expected term 3 years 3 years We recognize compensation expense on a straight-line basis over the service period, except for awards issued to retirement eligible participants, which we expense on an accelerated basis. As of October 29, 2023, total remaining unearned compensation related to TSR performance restricted stock units was $ 24 million, which will be amortized over the weighted-average remaining service period of 2.0 years. In the first quarter of 2024, recipients of TSR performance restricted stock units earned 75 % of the initial grants based upon our TSR ranking in a performance peer group during a three-year period ended July 28, 2023. In the first quarter of 2023, recipients of TSR performance restricted stock units earned 100 % of the initial grants based upon our TSR ranking in a performance peer group during a three-year period ended July 29, 2022. The fair value of TSR performance restricted stock units vested during the three-month periods ended October 29, 2023, and October 30, 2022, was $ 12 million and $ 21 million, respectively. The weighted-average grant-date fair value of the TSR performance restricted stock units granted during the three-month period ended October 30, 2022, was $ 53.74 . The tax benefits on the exercise of stock options in the three-month period ended October 30, 2022 were not material. Cash received from the exercise of stock options was $ 2 million for the three-month period ended October 30, 2022, and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows. 15. Commitments and Contingencies Regulatory and Litigation Matters We are involved in various pending or threatened legal or regulatory proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with our actual experiences in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to us that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. We establish liabilities for litigation and regulatory loss contingencies when information related to the loss contingencies shows both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated as of October 29, 2023. While the potential future charges could be material in a particular quarter or 21 annual period, based on information currently known by us, we do not believe any such charges are likely to have a material adverse effect on our consolidated results of operations or financial condition. Other Contingencies We have provided certain indemnifications in connection with divestitures, contracts and other transactions. Certain indemnifications have finite expiration dates. Liabilities recognized based on known exposures related to such matters were not material at October 29, 2023. 16. Supplier Finance Program Obligations To manage our cash flow and related liquidity, we work 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 $ 277 million at October 29, 2023, and $ 258 million at July 30, 2023. 17. Supplemental Financial Statement Data (Millions) October 29, 2023 July 30, 2023 Balance Sheets Inventories Raw materials, containers and supplies $ 493 $ 372 Finished products 847 919 $ 1,340 $ 1,291 Three Months Ended (Millions) October 29, 2023 October 30, 2022 Statements of Earnings Other expenses / (income) Amortization of intangible assets (1) $ 17 $ 11 Net periodic benefit expense (income) other than the service cost ( 2 ) 7 Costs associated with pending acquisition (2) 9 — Transition services fees ( 2 ) — Other 2 — $ 24 $ 18 _______________________________________ (1) Includes accelerated amortization expense of $ 7 million related to customer relationship intangible assets in the three-month period ended October 29, 2023. (2) Related to the pending acquisition of Sovos Brands. See Note 18 for additional information. 22 18. Pending Acquisition On August 7, 2023 , we entered into a merger agreement to acquire Sovos Brands for $ 23.00 per share in cash, representing a total enterprise value of approximately $ 2.7 billion. The closing of the Sovos Brands acquisition is subject to certain customary mutual conditions, including among other things the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act). If any condition to the acquisition is not satisfied or waived, the completion of the acquisition could be significantly delayed or not occur at all. On October 23, 2023, we and Sovos Brands each received a request for additional information (the Second Request) from the U.S. Federal Trade Commission (the FTC) in connection with the FTC’s review of the transaction contemplated by the merger agreement. Issuance of the Second Request extends the waiting period under the HSR Act until 30 days after both we and Sovos Brands substantially comply with the Second Request, unless the waiting period is extended voluntarily by the parties or terminated earlier by the FTC. We now expect that the merger will close in calendar 2024, and we will continue to engage with the FTC on its review with the objective of closing the transaction in mid-calendar 2024. 23