What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-09-19 compared with 2023-09-21 · 422 added, 239 removed, 1233 unchanged (35% of the section changed)

12 unchanged sentences

Segment Information

Restructuring Charges and Cost Savings Initiatives

Restructuring Charges, Cost Savings Initiatives and Other Optimization Initiatives

Earnings per Share

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Commitments and Contingencies

Supp lier Fi n ance Program Obligations

Supplemental Financial Statement Data

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Taxes on earnings 190 270 218

Earnings from continuing operations 858 757 1,008

Loss from discontinued operations — — ( 6 )

Net earnings 567 858 757

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Per Share — Basic

Earnings from continuing operations attributable to Campbell Soup Company $ 2.87 $ 2.51 $ 3.33

Loss from discontinued operations — — ( .02 )

Net earnings attributable to Campbell Soup Company $ 1.90 $ 2.87 $ 2.51

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Per Share — Assuming Dilution

Earnings from continuing operations attributable to Campbell Soup Company $ 2.85 $ 2.51 $ 3.30

Loss from discontinued operations — — ( .02 )

Net earnings attributable to Campbell Soup Company

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Weighted average shares outstanding — assuming dilution 300 301 302

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

See accompanying Notes to Consolidated Financial Statements.

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(millions, except per share amounts)

2023 July 31,

July 28, 2024 July 30, 2023

Current assets

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Adjustments to reconcile net earnings to operating cash flow

Impairment charges 129 — —

Restructuring charges 38 16 5

Stock-based compensation 99 63 59

Amortization of inventory fair value adjustment from acquisition 17 — —

Pension and postretirement benefit expense (income) 39 ( 22 ) ( 7 )

1 unchanged sentence

Deferred income taxes ( 47 ) ( 5 ) 21

Net loss on sales of businesses 13 — 11

Net loss on sale of business — 13 —

Loss on extinguishment of debt — — 4

Other 138 100 88

Changes in working capital, net of divestitures

Changes in working capital, net of acquisition and divestiture

Accounts receivable ( 16 ) ( 1 ) 48

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Sales of route businesses 34 1 2

Sales of businesses 41 — 101

Business acquired, net of cash acquired ( 2,617 ) — —

Sale of business — 41 —

Net cash used in investing activities ( 3,128 ) ( 340 ) ( 230 )

Cash flows from financing activities:

Short-term borrowings, including commercial paper 3,677 1,173 320

Short-term repayments, including commercial paper ( 3,749 ) ( 997 ) ( 580 )

Short-term borrowings, including commercial paper and delayed draw term loan 5,622 3,677 1,173

Short-term repayments, including commercial paper and delayed draw term loan ( 5,576 ) ( 3,749 ) ( 997 )

Long-term borrowings 2,496 500 —

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Payments related to extinguishment of debt — — ( 453 )

Net cash used in financing activities ( 723 ) ( 910 ) ( 1,669 )

Payments of debt issuance costs ( 23 ) — —

Net cash provided by (used in) financing activities 1,863 ( 723 ) ( 910 )

Effect of exchange rate changes on cash ( 1 ) — ( 1 )

Net change in cash and cash equivalents ( 81 ) 80 40

Cash and cash equivalents — beginning of period (including discontinued operations) 109 69 859

Less cash and cash equivalents discontinued operations - end of period — — —

Cash and cash equivalents — beginning of period 189 109 69

Cash and cash equivalents — end of period $ 108 $ 189 $ 109

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Treasury stock purchased ( 4 ) ( 167 ) ( 167 )

Treasury stock issued under management incentive and stock option plans 1 38 20 ( 6 ) 52

Balance at August 1, 2021

Treasury stock issued under stock-based compensation plans 1 50 1 ( 8 ) 43

Balance at July 31, 2022

323 12 ( 24 ) ( 1,138 ) 415 4,040 2 2 3,333

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Treasury stock purchased ( 3 ) ( 142 ) ( 142 )

Treasury stock issued under management incentive and stock option plans 1 50 1 ( 8 ) 43

Treasury stock issued under stock-based compensation plans 2 61 5 — 66

Balance at July 30, 2023

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( 449 ) ( 449 )

Replacement share-based awards issued in connection with Sovos Brands, Inc.

acquisition (1)

Treasury stock purchased ( 2 ) ( 67 ) ( 67 )

Treasury stock issued under management incentive and stock option plans 2 61 5 — 66

Treasury stock issued under stock-based compensation plans 2 79 ( 25 ) — 54

Balance at July 28, 2024

323 $ 12 ( 25 ) $ ( 1,207 ) $ 437 $ 4,569 $ ( 17 ) $ 2 $ 3,796

(1) See Note 3 for additional information.

See accompanying Notes to Consolidated Financial Statements.

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There were 52 weeks in 2024, 2023, and 2022.

Discontinued Operations — We present discontinued operations when there is a disposal of a component or a group of components that in our judgment represents a strategic shift that will have a major effect on our operations and financial results.

We aggregate the results of operations for discontinued operations into a single line item in the Consolidated Statements of Earnings for all periods presented.

General corporate overhead is not allocated to discontinued operations.

See Note 3 for additional information.

There will be 53 weeks in 2025.

Use of Estimates — Generally accepted accounting principles require management to make estimates and assumptions that affect assets, liabilities, revenues and expenses.

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Revenue Recognition — Our revenues primarily consist of the sale of food and beverage products through our own sales force and/or third-party brokers and distribution partners.

Revenues are recognized when our performance obligation has been satisfied and control of the product passes to our customers, which typically occurs when products are delivered or accepted by customers in accordance with terms of agreements.

Revenues are recognized when our performance obligation has been satisfied and control of the product passes to our customers, which typically occurs when products are delivered.

Shipping and handling costs incurred to deliver the product are recorded within Cost of products sold.

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

Fair value is determined using a relief from royalty valuation method based on discounted cash flow analyses that include

significant management assumptions such as revenue growth rates, weighted average costs of capital and assumed royalty rates.

Fair value is determined using a relief from royalty valuation method based on discounted cash flow analyses that include significant management assumptions such as revenue growth rates, weighted average costs of capital and assumed royalty rates.

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

Intangible assets with definite lives are amortized over their estimated useful lives and 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 the carrying amount of the asset is recoverable.

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

See Note 6 for more information.

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Cash flows from derivative contracts are included in Net cash provided by operating activities.

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 $ 258 million at July 30, 2023, and $ 262 million at July 31, 2022.

Advertising Production Costs — Advertising production costs are expensed in the period that the advertisement first takes place or when a decision is made not to use an advertisement.

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Recently Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued guidance on accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The guidance is effective for fiscal years beginning after December 15, 2019.

Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively.

Early adoption is permitted.

We adopted the guidance on a prospective basis in the first quarter of 2021.

The adoption did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued guidance that changes the disclosure requirements related to defined benefit pension and postretirement plans.

The guidance is effective for fiscal years ending after December 15, 2020.

The guidance is to be applied on a retrospective basis.

We adopted the guidance in 2021.

The adoption did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued guidance on simplifying the accounting for income taxes.

In December 2019, the Financial Accounting Standards Board (FASB) issued guidance on simplifying the accounting for income taxes.

The guidance removes certain exceptions to the general principles of accounting for income taxes and also improves consistent application of accounting by clarifying or amending existing guidance.

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The adoption did not have a material impact on our consolidated financial statements.

Discontinued Operations

We completed the sale of our Kelsen business on September 23, 2019, and the sale of our Arnott’s business 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.

Under the terms of the sale of the Arnott's and certain other international operations, we entered into a long-term licensing arrangement for the exclusive rights to certain Campbell brands in certain non-U.S.

We provided certain transition services to support the divested businesses.

Other Divestitures

See Note 19 for additional information.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued guidance to improve reportable segment disclosures, 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.

In December 2023, the FASB issued guidance to improve income tax disclosures by requiring disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

The guidance is effective for annual periods beginning after December 15, 2024.

The guidance should be applied on a prospective basis with the option to apply the standard retrospectively.

Early adoption is permitted.

We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

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

(Sovos Brands) for $ 23.00 per share.

On March 12, 2024 , we completed the acquisition.

Sovos Brands' portfolio includes a variety of pasta sauces, dry pasta, soups, frozen entrées, frozen pizza and yogurts, all of which are sold in North America under the brand names Rao’s, Michael Angelo’s and noosa .

Total purchase consideration was $ 2.899 billion, which was determined as follows:

Cash consideration paid to Sovos Brands shareholders (1)

Cash paid for share-based awards (2)

Cash consideration paid directly to shareholders $ 2,339

Cash paid for transaction costs of Sovos Brands 32

Repayment of Sovos Brands existing indebtedness and accrued interest 486

Total cash consideration $ 2,857

Fair value of replacement share-based awards (3)

Total consideration $ 2,899

___________________________________________

(1) Consideration paid to Sovos Brands shareholders which reflects $ 23.00 per share.

(2) Represents cash paid to equity award holders of Sovos Brands restricted stock and restricted stock unit awards attributable to pre-combination service.

This excludes $3 million of cash paid that was recognized as expense.

(3) We issued replacement equity awards in settlement of certain Sovos Brands equity awards that did not become vested in connection with the acquisition.

The portion of fair value of the replacement awards attributable to pre-combination service was $ 42 million and is included in the purchase consideration.

We recognized $ 26 million of expense related to accelerated vesting of certain replacement awards.

The cash portion of the acquisition was funded through a Delayed Draw Term Loan Credit Agreement (the 2024 DDTL Credit Agreement) of $ 2 billion and cash on hand.

See Note 13 for additional information.

The table below presents the fair value that was allocated to acquired assets and assumed liabilities:

(Millions) Estimated Fair Value

Accounts receivable 96

Inventories 130

Other current assets 5

Plant assets 100

Other intangible assets 1,776

Other assets 16

Total assets acquired $ 2,363

Accounts payable $ 96

Accrued liabilities 56

Accrued income taxes 1

Long-term debt 9

Deferred taxes 407

Other liabilities 11

Total liabilities assumed $ 580

Net assets acquired $ 1,783

Goodwill 1,116

Total consideration $ 2,899

The excess of the purchase price over the estimated fair values of identifiable net assets was recorded as $ 1.116 billion of goodwill.

The goodwill is not deductible for tax purposes.

The goodwill was primarily attributable to future growth opportunities, anticipated synergies, and intangible assets that did not qualify for separate recognition.

The goodwill is included in the Meals & Beverages segment.

The purchase price allocation of Sovos Brands is preliminary and is subject to the finalization of certain items, including valuations and tax balances, which will be completed within the allowable measurement period.

The identifiable intangible assets of Sovos Brands consist of:

(Millions) Type Life in Years Value

Trademarks Non-amortizable Indefinite $ 1,470

Trademarks Amortizable 20 76

Customer relationships Amortizable 20 to 30 230

Total identifiable intangible assets $ 1,776

The fair value of trademarks is determined using a relief from royalty valuation method based on discounted cash flow analyses that include significant management assumptions such as revenue growth rates, weighted average costs of capital and assumed royalty rates.

As of July 28, 2024, Sovos Brands amortizable intangible assets had a weighted-average remaining useful life of 27 years.

We incurred transaction costs and integration costs, including costs to achieve synergies, of $ 128 million associated with the Sovos Brands acquisition in 2024.

Approximately $ 35 million represented transaction costs, including outside advisory costs, recorded in Other expenses / (income).

In addition, we recognized $ 2 million in Interest expense related to financing fees associated with the 2024 DDTL Credit Agreement.

Integration costs included expenses associated with accelerated vesting of replacement awards, severance and retention bonuses, amortization of the acquisition date fair value adjustment to inventories and other costs.

Integration costs recognized in 2024 included the following:

• $ 18 million in Costs of products sold, $ 17 million of which related to the amortization of the acquisition date fair value adjustment to inventories;

• $ 3 million of Marketing and selling expenses;

• $ 47 million of Administrative expenses;

• $ 2 million of Research and development expenses;

• $ 21 million of Restructuring charges to achieve synergies.

See Note 8 for additional information.

For the period March 12, 2024 through July 28, 2024, the Sovos Brands acquisition contributed $ 423 million to Net sales and a loss of $ 84 million to Net earnings, including the effect of transaction and integration costs and interest expense on the debt to finance the acquisition.

The following unaudited summary information is presented on a consolidated pro forma basis as if the Sovos Brands acquisition had occurred on August 1, 2022:

(Millions) 2024 2023

Net sales $ 10,354 $ 10,316

Net earnings attributable to Campbell Soup Company $ 592 $ 677

The pro forma results are not necessarily indicative of the combined results had the Sovos Brands acquisition been completed on August 1, 2022, nor are they indicative of future combined results.

The pro forma amounts include adjustments to interest expense for financing the acquisition, to amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and plant assets, and related tax effects.

The pro forma results include adjustments to reflect amortization of the acquisition date fair value adjustment to inventories, expenses related to accelerated vesting of replacement awards and severance and retention bonuses as of August 1, 2022.

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

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In connection with the sale, we provided certain transition services to support the business.

The business had net sales of $ 51 million in 2023, $ 66 million in 2022, and $ 75 million in 2021.

The business had net sales of $ 51 million in 2023 and $ 66 million in 2022.

Earnings were not material in the periods.

The results of the business through the date of sale were reflected within the Snacks reportable segment.

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

The purchase agreement contained customary representations, warranties, indemnifications and other obligations between us and the buyer.

In addition, we agreed to indemnify the buyer for certain claims against the Plum baby food and snacks business alleging the presence of heavy metals in the products manufactured or sold on or prior to May 2, 2021, that were pending at the time of closing of the transaction or were asserted within two years thereafter.

We recognized a pre-tax loss of $ 11 million and an after-tax gain on the sale of $ 3 million.

The business had net sales of $ 68 million in 2021.

Earnings were not material.

The results of the business through the date of sale were reflected within the Meals & Beverages reportable segment.

Accumulated Other Comprehensive Income (Loss)

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Net current-period other comprehensive income (loss) ( 6 ) 4 ( 1 ) ( 3 )

Balance at August 1, 2021

Balance at July 31, 2022

$ — $ — $ 2 $ 2

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_____________________________________

(1) Included no tax as of July 30, 2023, July 31, 2022, August 1, 2021, and August 2, 2020.

(2) Included a tax benefit of $ 1 million as of July 30, 2023, no tax as of July 31, 2022, and a tax benefit of $ 1 million as of August 1, 2021 and August 2, 2020.

(3) Included tax expense of $ 1 million as of as of July 30, 2023, July 31, 2022 and August 1, 2021, and $ 2 million as of August 2, 2020.

(1) Included no tax as of July 28, 2024, July 30, 2023, July 31, 2022, and August 1, 2021.

(2) Included a tax benefit of $ 2 million as of July 28, 2024, and $ 1 million as of July 30, 2023, no tax as of July 31, 2022, and a tax benefit of $ 1 million as of August 1, 2021.

(3) Included tax expense of $ 1 million as of July 28, 2024, July 30, 2023, July 31, 2022, and August 1, 2021.

Amounts related to noncontrolling interests were not material.

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Commodity contracts $ — $ ( 3 ) $ ( 14 ) Cost of products sold

Foreign exchange forward contracts ( 8 ) 1 6 Cost of products sold

Foreign exchange forward contracts — — 1 Other expenses / (income)

Foreign exchange contracts ( 3 ) ( 8 ) 1 Cost of products sold

Forward starting interest rate swaps 2 1 1 Interest expense

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(Millions) Meals & Beverages

Net balance at August 1, 2021

Net balance at July 31, 2022

$ 993 $ 2,986 $ 3,979

Amounts reclassified due to segment change (1)

Divestiture (1)

— ( 11 ) ( 11 )

Foreign currency translation adjustment ( 3 ) — ( 3 )

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$ 990 $ 2,975 $ 3,965

Divestiture (2)

Acquisition (2)

1,116 — 1,116

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_____________________________________

(1) See Note 6 for additional information.

(1) See Note 4 for additional information on the sale of the Emerald nuts business.

(2) See Note 3 for additional information on the acquisition of Sovos Brands.

Intangible Assets

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Customer relationships (1)

$ 1,060 $ ( 300 ) $ 760 $ 830 $ ( 229 ) $ 601

Definite-lived trademarks (1)

76 ( 2 ) 74 — — —

Total amortizable intangible assets $ 1,136 $ ( 302 ) $ 834 $ 830 $ ( 229 ) $ 601

Indefinite-lived trademarks

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_____________________________________

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

(Snyder's-Lance).

(2) An $ 8 million trademark was divested with the sale of the Emerald nuts business in 2023.

(1) As part of the Sovos Brands acquisition, we acquired the Rao's indefinite-lived trademark of $ 1.47 billion, customer relationships of $ 230 million and definite-lived trademarks of $ 76 million.

See Note 3 for additional information.

(2) Associated with the acquisition of Snyder's-Lance, Inc.

(Snyder's-Lance) and includes the Pop Secret and Allied brands trademarks.

Amortization expense was $ 73 million for 2024, $ 48 million for 2023 and $ 41 million for 2022.

The increase in amortization expense in 2023 was a result of $ 7 million of accelerated amortization expense on customer relationships in the fourth quarter due to the loss of certain contract manufacturing customers.

Amortization expense in 2024 and 2023 included accelerated amortization expense of $ 27 million and $ 7 million, respectively, on customer relationships which began in the fourth quarter of 2023 due to the loss of certain contract manufacturing customers.

As of July 28, 2024, amortizable intangible assets had a weighted-average remaining useful life of 19 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 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.

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.

Amortization expense is estimated to be approximately $ 71 million in 2025 and $ 46 million per year for the following four years.

In the fourth quarter of 2024, we recognized an impairment charge of $ 53 million on certain salty snacks and cookie trademarks within our Snacks segment, including Tom’s , Jays , Kruncher’s , O-Ke-Doke , Stella D’oro and Archway , collectively referred to as our "Allied brands." In 2024, sales and operating performance were below expectations due in part to competitive pressure and reduced margins.

In the fourth quarter of 2024, based on recent performance, we reevaluated the position of the

Allied brands within our portfolio and lowered our near-term and long-term outlook for future sales and operating performance.

As of July 28, 2024, the carrying value of the Allied brands trademark was $ 43 million.

In the fourth quarter of 2024, we performed an assessment on the assets in our Pop Secret popcorn business within our Snacks segment as sales and operating performance were below expectations due in part to competitive pressure and reduced margins, and as we pursued divesting the business.

As a result of these factors, in the fourth quarter of 2024, we reduced our long-term outlook for the business and recognized an impairment charge of $ 76 million on the trademark.

As of July 28, 2024, the carrying value of the trademark was $ 28 million.

The sale of the business was completed on August 26, 2024.

The impairment charges were recorded in Other expenses / (income) in the Consolidated Statement of Earnings.

The $ 1.47 billion carrying value of the Rao's trademark associated with the Sovos Brands acquisition approximates fair value.

Excluding the carrying value of the Rao's trademark and the Pop Secret trademark, as of the 2024 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 $ 1.293 billion and included the Snyder's of Hanover , Pace , 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, assumed royalty rates, economic conditions, market conditions and cost of capital.

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

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V8 juices and beverages;

and Campbell’s tomato juice.

Campbell’s tomato juice;

and as of March 12, 2024, Rao's pasta sauces, dry pasta, frozen entrées, frozen pizza and soups;

Michael Angelo's frozen entrées and pasta sauces;

and noosa yogurts.

The segment also includes snacking products in foodservice and Canada;

The segment included the results of our Plum baby food and snacks business, which was sold on May 3, 2021;

• 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.

• 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*, 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.

Beginning in 2022, the foodservice and Canadian business formerly included in our Snacks segment is now managed as part of the Meals & Beverages segment.

Segment results have been adjusted retrospectively to reflect this change.

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.

The segment included the results of our Emerald nuts business, which was sold on May 30, 2023, and our Pop Secret popcorn business, which was sold on August 26, 2024.

We evaluate segment performance before interest, taxes and costs associated with restructuring activities, cost savings and optimization initiatives, impairment charges and corporate expenses.

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.

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Our largest customer, Wal-Mart Stores, Inc.

and its affiliates, accounted for approximately 22 % of consolidated net sales in 2023 and 2022 and 21 % in 2021.

and its affiliates, accounted for approximately 22 % of consolidated net sales in 2024, 2023, and 2022.

Both of our reportable segments sold products to Wal-Mart Stores, Inc.

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Pension and postretirement actuarial gains and losses are included in Corporate.

There were actuarial gains of $ 15 million in 2023, losses of $ 44 million in 2022, and gains of $ 203 million in 2021.

Costs related to the cost savings initiatives were $ 50 million, $ 26 million and $ 32 million in 2023, 2022 and 2021, respectively.

Unrealized mark-to-market adjustments on outstanding undesignated commodity hedges were gains of $ 21 million in 2023, losses of $ 59 million in 2022, and gains of $ 50 million in 2021.

Accelerated amortization expense related to customer relationship intangible assets was $ 7 million in 2023.

There were actuarial losses of $ 33 million in 2024, gains of $ 15 million in 2023, and losses of $ 44 million in 2022.

Costs related to the cost savings and optimization initiatives were $ 92 million, $ 50 million and $ 26 million in 2024, 2023 and 2022, respectively.

Unrealized mark-to-market adjustments on outstanding undesignated commodity hedges were losses of $ 22 million in 2024, gains of $ 21 million in 2023, and losses of $ 59 million in 2022.

Accelerated amortization expense related to customer relationship intangible assets was $ 27 million and $ 7 million in 2024 and 2023, respectively.

Costs associated with the acquisition of Sovos Brands were $ 105 million and $ 5 million in 2024 and 2023, respectively.

Intangible asset impairment charges were $ 129 million in 2024.

Costs of $ 3 million related to a cybersecurity incident were included in 2024.

Litigation expenses related to the Plum baby food and snacks business, which was divested on May, 3, 2021, and certain other litigation matters were $ 5 million and were included in 2024.

A loss of $ 13 million on the sale of our Emerald nuts business was included in 2023.

Transaction costs of $ 5 million associated with the pending acquisition of Sovos Brands, Inc.

(Sovos Brands) was included in 2023.

A loss of $ 11 million on the sale of our Plum baby food and snacks business was included in 2021.

(2) See Note 8 for additional information.

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Soup includes various soup, broths and stock products.

Snacks include cookies, pretzels, crackers, popcorn, nuts, potato chips, tortilla chips and other salty snacks and baked products.

Other simple meals include sauces, gravies, pasta, beans, canned poultry and Plum products through May 3, 2021, when the business was sold.

Snacks include cookies, pretzels, crackers, popcorn, potato chips, tortilla chips and other salty snacks and baked products.

Other simple meals include sauces, yogurts, pasta, frozen entrées, canned poultry, frozen pizza, gravies and beans.

Beverages include V8 juices and beverages, Campbell’s tomato juice and Pacific Foods non-dairy beverages.

We are a North American focused company with over 90 % of our net sales and long-lived assets related to our U.S.

Restructuring Charges and Cost Savings Initiatives

Restructuring Charges, Cost Savings Initiatives and Other Optimization 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.

Beginning in 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.

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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 2022, we expanded these initiatives as we continued 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 recorded in the Consolidated Statements of Earnings related to these initiatives is as follows:

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Implementation costs and other related costs

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 that have been identified to date to consist of the following:

approximately $ 245 million to $ 250 million in severance pay and benefits;

approximately $ 140 million in asset impairment and accelerated depreciation;

and approximately $ 500 million to $ 515 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 $ 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 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.

Of the aggregate $ 895 million pre-tax costs incurred to date, approximately $ 720 million were cash expenditures.

In addition, we invested $ 543 million in capital expenditures as of July 28, 2024.

The capital expenditures primarily related to a U.S.

warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, optimization of production within our Meals & Beverages 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 July 28, 2024, is as follows:

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Total Charges

Accrued balance at August 1, 2021 (1)

Accrued balance at July 31, 2022

13 26 24 3 $ 66

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Total $ 104 $ 895

In addition, in the second quarter of 2021, we recorded a $ 19 million deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance.

As of July 28, 2024, we have substantially completed the multi-year cost saving initiatives and Snyder's-Lance cost transformation program and integration.

Certain phases that have not been fully implemented will be incorporated into the new cost savings initiatives described below.

Sovos Brands Integration Initiatives

On March 12, 2024, we completed the acquisition of Sovos Brands.

See Note 3 for additional information.

We have identified opportunities for cost synergies as we integrate Sovos Brands.

In 2024, we recorded Restructuring charges of $ 21 million related to initiatives to achieve the synergies.

The charges incurred in 2024 were associated with the Meals & Beverages segment.

A summary of the restructuring activity and related reserves associated with the Sovos Brands integration at July 28, 2024, is as follows:

(Millions) Severance Pay and Benefits

2024 charges $ 21

2024 cash payments ( 3 )

Accrued balance at July 28, 2024 (1)

__________________________________

(1) Includes $ 5 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.

Beginning in 2025, the initiatives to achieve synergies will be incorporated into the new cost savings initiatives described below.

2025 Cost Savings Initiatives

On September 10, 2024, we announced plans to implement new cost savings initiatives beginning in 2025, including initiatives to further optimize our supply chain and manufacturing network, optimization of our information technology infrastructure and targeted cost management.

We also identified additional opportunities for cost synergies as we integrate Sovos Brands.

As mentioned above, we substantially completed our existing multi-year cost savings initiatives and Snyder's-Lance cost transformation program and integration.

Certain initiatives from that program have been incorporated into our new cost savings initiatives.

Cost estimates for these new initiatives, as well as timing for certain activities, are continuing to be developed.

The total estimated pre-tax costs for actions that have been identified to date are approximately $ 180 million and we expect to incur substantially all of the costs through 2028.

These estimates will be updated as the detailed plans are developed.

We expect the costs for the actions that have been identified to date to consist of the following:

approximately $ 25 million in severance pay and benefits;

approximately $ 45 million in asset impairment and accelerated depreciation;

and approximately $ 110 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 80 %;

Snacks - approximately 5 % and Corporate - approximately 15 %.

Of the aggregate $ 180 million of pre-tax costs identified to date, we expect approximately $ 135 million will be cash expenditures.

In addition, we expect to invest approximately $ 235 million in capital expenditures.

Other Optimization Initiatives

In the second quarter of 2024, we began implementation of a new initiative to improve the effectiveness of our Snacks direct-store-delivery route-to-market network.

Pursuant to this initiative we will purchase certain Pepperidge Farm and Snyder's-Lance routes where there are opportunities to unlock greater scale in select markets, combine them and sell the combined routes to independent contractor distributors.

We expect to execute this program in a staggered rollout and to incur expenses of up to approximately $ 115 million through 2029.

In 2024, we incurred $ 5 million in Marketing and selling expenses related to this initiative.

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 2023 excludes less than 1 million stock options that would have been antidilutive.

The earnings per share calculation for 2022 and 2021 excludes approximately 1 million stock options that would have been antidilutive.

The earnings per share calculation for 2024 and 2023 excludes less than 1 million stock options that would have been antidilutive.

The earnings per share calculation for 2022 excludes approximately 1 million stock options that would have been antidilutive.

Pension and Postretirement Benefits

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All collective bargaining units adopted this amendment by December 31, 2011.

In June 2023, we settled $ 245 million of our pension benefit obligations associated with approximately 6,000 retired participants currently receiving benefits within our U.S.

In June 2023, we settled $ 245 million of our pension benefit obligations associated with approximately 6,000 retired participants that were receiving benefits within our U.S.

defined benefit pension plans.

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The components of net periodic benefit expense (income) other than the service cost component are included in Other expenses / (income) in the Consolidated Statements of Earnings.

The pension actuarial losses recognized in 2024 were primarily due to decreases in discount rates used to determine the benefit obligation and plan experience, partially offset by 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 and the gain from the annuity settlement, partially offset by losses on plan assets and plan experience.

The pension 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 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.

The postretirement actuarial gains recognized in 2023 and 2022 were primarily due to increases in discount rates used to determine the benefit obligation.

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Amounts recognized in Accumulated other comprehensive income (loss) consist of:

(Millions) Pension Postretirement

2023 2022 2023 2022

(Millions) Postretirement

Prior service credit (cost) $ 3 $ 3

The change in amounts recognized in Accumulated other comprehensive income (loss) associated with postretirement benefits was due to amortization in 2023 and 2022.

The following table provides information for pension plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets:

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Pension Plan Assets

The fundamental goal underlying the investment policy is to ensure that the assets of the plans are invested in a prudent manner to meet the obligations of the plans as these obligations come due.

The primary investment objectives include providing a total return which will promote the goal of benefit security by attaining an appropriate ratio of plan assets to plan obligations, to provide for real asset growth while also tracking plan obligations, to diversify investments across and within asset classes, to reduce the impact of losses in single investments, and to follow investment practices that comply with applicable laws and regulations.

The primary policy objectives will be met by investing assets to achieve a reasonable tradeoff between return and risk relative to plan obligations.

This includes investing a portion of the assets in funds selected in part to hedge the interest rate sensitivity to plan obligations.

The fundamental goal underlying the investment policy is to ensure that the assets of the plans are invested in a prudent manner to earn a rate of return over time to meet the obligations of the plans as these obligations come due.

The primary investment objectives include providing a total return which will promote the goal of benefit security by attaining an appropriate ratio of plan assets to plan obligations, to provide for real asset growth while also tracking plan obligations, to diversify investments across and within asset classes, to reduce volatility of pension assets relative to pension liabilities, and to follow investment practices that comply with applicable laws and regulations.

The primary policy objectives will be met by investing assets to achieve a reasonable tradeoff between return and risk relative to plan obligations, including investing a portion of the assets in funds selected in part to hedge the interest rate sensitivity to plan obligations.

The portfolio includes investments in the following asset classes:

fixed income, equity, real estate and alternatives.

Fixed income will provide a moderate expected return and partially hedge the exposure to interest rate risk of the plans’ obligations.

Fixed income investments provide a moderate expected return and hedge the exposure to interest rate risk of the plans’ obligations.

Equities are used for their high expected return.

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The interaction between plan assets and benefit obligations is periodically studied to assist in the establishment of strategic asset allocation targets.

A key element of our investment strategy is to reduce our funded status risk in part through appropriate asset allocation within our plan assets.

The investment policy permits variances from the targets within certain parameters.

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Other items to reconcile to fair value

( 18 ) ( 32 )

Total pension plan assets at fair value

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Short-term investments — Investments include cash and cash equivalents, and various short-term debt instruments and short-term investment funds.

Institutional short-term investment vehicles valued daily are classified as Level 1 at cost which

approximates market value.

Institutional short-term investment vehicles valued daily are classified as Level 1 at cost which approximates market value.

Short-term debt instruments are classified at Level 2 and are valued based on bid quotations and recent trade data for identical or similar obligations.

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Fair value at July 30, 2023

$ 2 $ 11 $ 13

Actual return on plan assets — ( 1 ) ( 1 )

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(Millions) Real Estate Hedge Funds Total

Fair value at August 1, 2021

Fair value at July 31, 2022

$ 2 $ 11 $ 13

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Fair value at July 30, 2023

$ 2 $ 11 $ 13

Estimated future benefit payments are as follows:

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employees and provide a matching contribution of 100 % of employee contributions up to 4 % of eligible compensation.

In addition, for employees not eligible to participate in defined benefit plans that we sponsor, we provide a contribution equal to 3 % of eligible compensation regardless of their participation in the 401(k) Retirement Plan.

Amounts charged to Costs and expenses were $ 73 million in 2023, $ 69 million in 2022 and $ 64 million in 2021.

In addition, for employees not eligible to participate in defined benefit plans that we sponsor, we provide a contribution equal to 3 % of eligible

compensation regardless of their participation in the 401(k) Retirement Plan.

Amounts charged to Costs and expenses were $ 73 million in both 2024 and 2023, and $ 69 million in 2022.

We lease warehouse and distribution facilities, office space, manufacturing facilities, equipment and vehicles, primarily through operating leases.

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Operating lease cost (1)

$ 101 $ 86 $ 79

Finance lease - amortization of ROU assets 22 16 17

Finance lease - interest on lease liabilities 2 — —

Short-term lease cost 66 64 56

Variable lease cost 217 207 202

Sublease income

Total $ 408 $ 373 $ 354

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(1) Includes labor and other overhead included in our service contracts with embedded leases.

(1) 2024 excludes costs associated with the cost savings initiatives described in Note 8.

The following table summarizes the lease amounts recorded in the Consolidated Balance Sheets:

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Weighted-average lease terms and discount rates were as follows:

July 30, 2023 July 31, 2022

Operating Finance Operating Finance

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Future minimum lease payments are as follows:

July 30, 2023

(Millions) Operating Finance

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Operating cash flows from operating leases $ 95 $ 84

Operating cash flows from finance leases $ 2 $ —

Financing cash flows from finance leases $ 20 $ 17

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Finance leases

ROU assets obtained with business acquired:

Operating leases $ 15 $ —

Finance leases $ 13 $ —

Taxes on Earnings

The provision for income taxes on earnings from continuing operations consists of the following:

The provision for income taxes on earnings consists of the following:

(Millions) 2024 2023 2022

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( 1 ) 1 ( 2 )

( 47 ) ( 5 ) 21

$ 190 $ 270 $ 218

(Millions) 2024 2023 2022

Earnings from continuing operations before income taxes:

Earnings before income taxes:

United States $ 735 $ 1,105 $ 948

$ 757 $ 1,128 $ 975

The following is a reconciliation of the effective income tax rate on continuing operations to the U.S.

The following is a reconciliation of the effective income tax rate to the U.S.

federal statutory income tax rate:

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( 0.1 ) 0.1 ( 1.0 )

Divestiture impact on deferred taxes — — ( 0.9 )

Legal entity reorganization — — 1.4

Capital loss on the sale of the Plum baby food and snacks business

Capital loss valuation allowance on the sale of the Plum baby food and snacks business — — 1.3

Nondeductible executive compensation (1)

Other ( 0.4 ) ( 0.5 ) ( 1.0 )

Effective income tax rate 25.1 % 23.9 % 22.4 %

In the second quarter of 2021, we recorded a $ 19 million deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance.

__________________________________________

(1) The increase in 2024 is associated with the acquisition of Sovos Brands.

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law.

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Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the Consolidated Statements of Equity.

We do not expect the provisions of the IRA to have a material impact on our consolidated financial statements.

The provisions of the IRA did not have a material impact on our consolidated financial statements.

Deferred tax liabilities and assets are comprised of the following:

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subsidiaries had capital loss carryforwards of approximately $ 123 million, all of which were offset by valuation allowances.

Of these capital loss carryforwards, $ 349 million expire in 2024, $ 77 million expire in 2026, and $ 48 million may be carried forward indefinitely.

Of these capital loss carryforwards, $ 77 million expire in 2026, and $ 46 million may be carried forward indefinitely.

The net change in the deferred tax asset valuation allowance in 2024 was a decrease of $ 100 million.

The decrease was primarily due to the expiration of capital loss carryforwards in 2024.

The net change in the deferred tax asset valuation allowance in 2023 was a decrease of $ 2 million.

The decrease was primarily due to state tax loss carryforwards.

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The decrease was primarily due to the liquidation of an inactive subsidiary.

The net change in the deferred tax asset valuation allowance in 2021 was an increase of $ 20 million.

The increase was primarily due to the sale of the Plum baby food and snacks business.

As of July 30, 2023, other deferred tax assets included $ 12 million of state tax credit carryforwards related to various states that expire in 2025.

As of July 30, 2023, other deferred tax assets included $ 12 million of state tax credit carryforwards.

As of July 30, 2023, and July 31, 2022, deferred tax asset valuation allowances have been established to offset the state tax credit carryforwards.

As of July 30, 2023, deferred tax asset valuation allowances had been established to offset the state tax credit carryforwards.

As of July 28, 2024, the state tax credit carryforwards have expired.

As of July 28, 2024, we had approximately $ 11 million of undistributed earnings of foreign subsidiaries which are deemed to be permanently reinvested and for which we have not recognized a deferred tax liability.

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Balance at end of year $ 17 $ 15 $ 14

The increase of unrecognized tax benefits was primarily due current-year tax positions.

The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $ 12 million as of July 30, 2023, and July 31, 2022, and $ 18 million as of August 1, 2021.

The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $ 14 million as of July 28, 2024, and $ 12 million as of July 30, 2023, and July 31, 2022.

The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes.

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Commercial paper $ 250 $ 178

Notes 1,150 —

Finance leases 25 13

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As of July 28, 2024, we issued $ 28 million of standby letters of credit.

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

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

The facility contains customary covenants, including a financial covenant with respect to a minimum consolidated interest coverage ratio of consolidated adjusted EBITDA to consolidated interest expense (as each is defined in the credit facility) of not less than 3.25:1.00, measured quarterly, and customary events of default for credit facilities of this type .

Loans under this facility will bear interest at the rates specified in the facility, which vary based on the type of loan and certain other customary conditions.

On April 16, 2024, we terminated our existing revolving credit facility dated September 27, 2021 (as amended on April 4, 2023).

On April 16, 2024, we entered into a Five-Year Credit Agreement for an unsecured, senior revolving credit

facility (the 2024 Revolving Credit Facility Agreement) in an aggregate principal amount equal to $ 1.85 billion with a maturity date of April 16, 2029 , or such later date as extended pursuant to the terms set forth in the 2024 Revolving Credit Facility Agreement.

The 2024 Revolving Credit Facility Agreement remained unused at July 28, 2024, except for $ 1 million of standby letters of credit that we issued under it.

We may increase the 2024 Revolving Credit Facility Agreement commitments up to an additional $ 500 million, subject to the satisfaction of certain conditions.

Loans under the 2024 Revolving Credit Facility Agreement will bear interest at the rates specified in the 2024 Revolving Credit Facility Agreement, which vary based on the type of loan and certain other conditions.

The 2024 Revolving Credit Facility Agreement facility contains customary covenants, including a financial covenant with respect to a minimum consolidated interest coverage ratio of consolidated adjusted EBITDA to consolidated interest expense of not less than 3.25:1.00, and customary events of default for credit facilities of this type .

The facility supports our commercial paper program and other general corporate purposes.

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 have $ 1.15 billion aggregate principal amount of senior notes maturing in March 2025 that we expect to repay and/or refinance using available sources, which may include cash on hand, accessing the capital markets, commercial paper and/or revolving credit facility.

Long-term debt consists of the following:

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3.30 % Notes due March 19, 2025

Variable-rate term loan due November 15, 2025

5.30 % Notes due March 20, 2026

5.20 % Notes due March 19, 2027

4.15 % Notes due March 15, 2028

5.20 % Notes due March 21, 2029

2.375 % Notes due April 24, 2030

5.40 % Notes due March 21, 2034

3.80 % Notes due August 2, 2042

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

Principal amounts of long-term debt mature as follows:

Principal amounts of long-term debt, including finance lease obligations, maturing over the next five years are as follows:

Thereafter $ 2,877

Debt Extinguishments

On October 10, 2023 , we entered into 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 could only be used in connection with the acquisition of

Sovos Brands and the payment of fees and expenses incurred in connection therewith.

On March 12, 2024, we borrowed $ 2 billion under the 2024 DDTL Credit Agreement and used the proceeds in order to fund the acquisition of Sovos Brands, along with the fees and expenses incurred in connection therewith.

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.

On March 19, 2024, pursuant to the registration statement, we issued senior unsecured notes of $ 2.5 billion, consisting of:

• $ 400 million aggregate principal amount of notes bearing interest at a fixed rate of 5.30 % per annum, due March 20, 2026 , with interest payable semi-annually on each of March 20 and September 20 commencing September 20, 2024;

• $ 500 million aggregate principal amount of notes bearing interest at a fixed rate of 5.20 % per annum, due March 19, 2027 , with interest payable semi-annually on each of March 19 and September 19 commencing September 19, 2024;

• $ 600 million aggregate principal amount of notes bearing interest at a fixed rate of 5.20 % per annum, due March 21, 2029 , with interest payable semi-annually on each of March 21 and September 21 commencing September 21, 2024;

• $ 1 billion aggregate principal amount of notes bearing interest at a fixed rate of 5.40 % per annum, due March 21, 2034 , with interest payable semi-annually on each of March 21 and September 21 commencing September 21, 2024.

The notes contain customary covenants and events of default.

If a change of control triggering event occurs, we will be required to offer to purchase the notes at a purchase price equal to 101 % of the principal amount plus accrued and unpaid interest, if any, to the purchase date.

We used the net proceeds from the sale of the notes to repay the $ 2 billion of outstanding borrowings under the 2024 DDTL Credit Agreement used to fund the Sovos Brands acquisition, including fees and expenses in connection therewith, and the remainder of the net proceeds to repay commercial paper.

On November 15, 2022, we entered into a delayed draw term loan credit agreement (the 2022 DDTL Credit Agreement) totaling up to $ 500 million scheduled to mature on November 15, 2025.

Loans under the 2022 DDTL Credit Agreement bear interest at the rates specified in the 2022 DDTL Credit Agreement, which vary based on the type of loan and certain other conditions.

The 2022 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 2022 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 2022 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 April 5, 2024, we repaid $ 100 million of the $ 500 million outstanding under the 2022 DDTL Credit Agreement.

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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We used a combination of cash on hand and short-term debt to fund the redemption.

Debt Repayments

In March 2023, we repaid our 3.65 % $ 566 million Notes.

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

Debt Issuances

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 .

Financial Instruments

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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.

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

We utilize foreign exchange forward purchase and sale contracts and option 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 $ 125 million as of

July 30, 2023, and $ 140 million as of July 31, 2022.

The notional amount of foreign exchange forward contracts accounted for as cash-flow hedges was $ 108 million as of July 28, 2024, 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.

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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 income (loss).

The notional amount of foreign exchange forward contracts that are not designated as accounting hedges was $ 15 million as of July 30, 2023, and $ 13 million as of July 31, 2022.

The notional amount of foreign exchange forward contracts and option contracts that are not designated as accounting hedges was $ 189 million as of July 28, 2024, and $ 15 million as of July 30, 2023.

Interest Rate Risk

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

There were no interest rate swaps outstanding as of July 30, 2023, or July 31, 2022.

We manage our exposure to changes in interest rates by optimizing 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 issued.

The change in fair value on undesignated instruments is recorded in Interest expense.

We settled forward starting interest rate swaps with a notional value of $ 1.1 billion in March 2024 at a loss of $ 11 million.

The $ 11 million loss on these instruments was recorded in other comprehensive income (loss) and will be recognized as additional interest expense over the 10-year, 5-year, and 3-year lives of the debt issued in March 2024.

There were no forward starting interest rate swaps or treasury lock contracts outstanding as of July 28, 2024 and July 30, 2023.

Subsequent to July 28, 2024, we entered into forward starting interest rate swaps accounted for as cash-flow hedges with a notional value of $ 450 million related to an anticipated debt issuance.

The forward starting interest rate swaps mature in January 2025.

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.

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

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 July 30, 2023.

The notional amount of commodity contracts designated as cash-flow hedges was $ 3 million as of July 31, 2022.

There were no commodity contracts designated as cash-flow hedges as of July 28, 2024 or July 30, 2023.

The notional amount of commodity contracts not designated as accounting hedges was $ 200 million as of July 28, 2024, and $ 194 million as of July 30, 2023.

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Derivatives designated as hedges:

Commodity contracts Other current assets $ — $ 3

Foreign exchange forward contracts Other current assets — 2

Foreign exchange contracts Other current assets $ 2 $ —

Total derivatives designated as hedges $ 2 $ —

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Derivatives designated as hedges:

Foreign exchange forward contracts Accrued liabilities $ 1 $ —

Foreign exchange contracts Accrued liabilities $ — $ 1

Total derivatives designated as hedges $ — $ 1

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Commodity contracts Accrued liabilities $ 16 $ 5

Deferred compensation contracts Accrued liabilities — 4

Total derivatives not designated as hedges $ 16 $ 5

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We are required to maintain cash margin accounts in connection with funding the settlement of open positions for exchange-traded commodity derivative instruments.

A cash margin asset balance of $ 2 million at July 30, 2023, and $ 8 million at July 31, 2022, were included in Other current assets in the Consolidated Balance Sheets.

The following tables show the effect of our derivative instruments designated as cash-flow hedges for the years ended July 30, 2023, July 31, 2022, and August 1, 2021 in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:

Cash margin asset balances of $ 2 million at July 28, 2024 and July 30, 2023 were included in Other current assets in the Consolidated Balance Sheets.

The following tables show the effect of our derivative instruments designated as cash-flow hedges for the years ended July 28, 2024, July 30, 2023, and July 31, 2022 in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:

Total Cash-Flow Hedge

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Commodity contracts — — 13

Foreign exchange forward contracts 5 4 ( 9 )

Foreign exchange contracts 6 5 4

Forward starting interest rate swaps ( 11 ) — —

Amount of loss (gain) reclassified from OCI to earnings:

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Commodity contracts Cost of products sold — ( 3 ) ( 14 )

Foreign exchange forward contracts Cost of products sold ( 8 ) 1 6

Foreign exchange forward contracts Other expenses / (income) — — 1

Foreign exchange contracts Cost of products sold ( 3 ) ( 8 ) 1

Forward starting interest rate swaps Interest expense 2 1 1

OCI derivative gain (loss) at end of year $ ( 11 ) $ ( 5 ) $ —

Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a loss of $ 2 million.

Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a loss of less than $ 1 million.

The following table shows the total amounts of line items presented in the Consolidated Statements of Earnings for the years ended 2024, 2023, and 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:

2024 2023 2022

(Millions) Cost of products sold Interest expense Cost of products sold Interest expense Cost of products sold Other expenses / (income) Interest expense

(Millions) Cost of products sold Interest expense Cost of products sold Interest expense Cost of products sold Interest expense

Consolidated Statements of Earnings:

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Recognized in Earnings 2024 2023 2022

Foreign exchange forward contracts Cost of products sold $ — $ — $ 2

Foreign exchange contracts Cost of products sold $ ( 1 ) $ — $ —

Commodity contracts Cost of products sold 14 ( 27 ) 8

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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.

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.

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(Millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Foreign exchange forward contracts (1)

Foreign exchange contracts (1)

$ 2 $ — $ 2 $ — $ — $ — $ — $ —

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(Millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Foreign exchange forward contracts (1)

Foreign exchange contracts (1)

$ — $ — $ — $ — $ 1 $ — $ 1 $ —

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16 1 15 — 5 3 2 —

Deferred compensation derivative contracts (3)

— — — — 4 — 4 —

Deferred compensation obligation (4)

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Fair value at end of year $ 5 $ 2

Items Measured at Fair Value on a Nonrecurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required to measure certain items at fair value on a nonrecurring basis.

In the fourth quarter of 2024, we recognized impairment charges on certain trademarks in our Snacks segment.

See also Note 6 for additional information on the impairment charges.

Fair value was determined based on unobservable Level 3 inputs.

The fair value of trademarks was determined based on discounted cash flow analysis that involves significant management assumptions such as expected revenue growth rates, assumed royalty rates and weighted-average costs of capital.

The following table presents fair value measurements of the trademarks:

(Millions) Impairment Charges Fair Value

Pop Secret $ 76 $ 28

Allied brands $ 53 $ 43

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 July 30, 2023, and $ 27 million at July 31, 2022.

There were $ 25 million of cash equivalents at July 28, 2024, and none at July 30, 2023.

Cash equivalents represent fair value as these highly liquid investments have an original maturity of three months or less.

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

In 2023, we repurchased 2.698 million shares at a cost of $ 142 million.

Of this amount, $ 68 million was used to repurchase shares pursuant to our June 2021 program and $ 74 million was used to repurchase share pursuant to our September 2021 program.

In 2024, we repurchased 1.56 million shares at a cost of $ 67 million pursuant to our June 2021 program.

As of July 28, 2024, approximately $ 37 million remained available under the June 2021 program and approximately $ 301 million remained under the September 2021 program.

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

In September 2024, the Board authorized a new anti-dilutive share repurchase program of up to $ 250 million (September 2024 program) to offset the impact of dilution from shares issued under our stock compensation programs.

The September 2024 program has no expiration date, but it may be discontinued at any time.

Repurchases under the September 2024 program may be made in open-market or privately negotiated transactions.

Stock-based Compensation

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In 2015, shareholders approved the 2015 Long-Term Incentive Plan, which authorized the issuance of 13 million shares.

Approximately 6 million of these shares were shares that were currently available under the 2005 plan and were incorporated into the 2015 Plan upon approval by shareholders.

Approximately 6 million of these shares were shares that were currently available under the 2005 plan and were incorporated into the 2015 Plan upon approval by

shareholders.

In 2022, shareholders approved the 2022 Long-Term Incentive Plan, which authorized the issuance of 12 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock/units (including performance restricted stock) and performance units.

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Under the program, awards of TSR performance restricted stock/units will be earned by comparing our total shareholder return during a three-year period to the respective total shareholder returns of companies in a performance peer group.

Based upon our ranking in the performance peer group after the relevant three-year performance period, a recipient

of TSR performance restricted stock/units may earn a total award ranging from 0 % to 200 % of the initial grant.

Based upon our ranking in the performance peer group after the relevant three-year performance period, a recipient of TSR performance restricted stock/units may earn a total award ranging from 0 % to 200 % of the initial grant.

Awards of EPS performance restricted stock/units granted beginning in 2022 will be earned upon the achievement of our adjusted EPS compound annual growth rate goal (EPS CAGR performance restricted stock/units), measured over a three-year period.

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We last issued FCF performance restricted stock units in 2019, EPS performance restricted stock units in 2018, strategic performance restricted stock units in 2014 and special performance restricted units in 2015.

In connection with the Sovos Brands acquisition, we issued 1.721 million time-lapse restricted stock units (Replacement units) in exchange for certain Sovos Brands restricted stock units and performance restricted stock units.

The Replacement units are subject to the same terms and conditions of the original Sovos Brands restricted stock units and performance restricted stock units.

Certain Replacement units were subject to accelerated vesting.

The Replacement units have a total fair value of $ 74 million based on the quoted price of our stock on the acquisition date.

The portion of Replacement units attributed to pre-combination service was $ 42 million, which was accounted for as part of consideration transferred and was recorded in Additional Paid-in Capital in our Consolidated Statements of Equity.

See Note 3 for additional information.

The portion of the Replacement units attributable to post-combination service will be recognized as stock-based compensation expense over the remaining vesting period.

Also in connection with the Sovos Brands acquisition in 2024, our adjusted EPS compound annual growth rate goals for the EPS CAGR performance restricted stock units granted in 2024, 2023 and 2022 were revised to equitably adjust for the impact of completed acquisitions and divestitures that were not contemplated at the time of approval of the original targets.

In determining stock-based compensation expense, we estimate forfeitures expected to occur.

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Total pre-tax stock-based compensation expense (1)

$ 99 $ 63 $ 59

Tax-related benefits $ 13 $ 12 $ 10

_______________________________________

(1) Includes $ 26 million of expense related to accelerated vesting of certain Replacement units in 2024.

The following table summarizes stock option activity as of July 28, 2024:

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Outstanding at July 30, 2023

1,297 $ 46.04

Granted — $ —

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779 $ 45.33 3.2 $ 4

The total intrinsic value of options exercised during 2023 and 2022 was $ 3 million and $ 1 million, respectively.

The total intrinsic value of options exercised during 2021 was not material.

The total intrinsic value of options exercised during 2024, 2023 and 2022 was $ 1 million, $ 3 million and $ 1 million, respectively.

We measured the fair value of stock options using the Black-Scholes option pricing model.

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Granted 1,790 $ 41.57

Replacement units granted in connection with Sovos Brands acquisition 1,721 $ 43.01

Vested ( 2,275 ) $ 43.89

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3,300 $ 43.24

We determine the fair value of time-lapse restricted stock units, EPS CAGR performance restricted stock units, FCF performance restricted stock units and EPS performance restricted stock units based on the quoted price of our stock at the date of grant.

We expense time-lapse restricted stock units and EPS CAGR performance 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.

We determine the fair value of time-lapse restricted stock units, EPS CAGR performance restricted stock units and FCF performance restricted stock units based on the quoted price of our stock at the date of grant.

There were 873 thousand EPS CAGR performance target grants outstanding at July 28, 2024, with a weighted-average grant-date fair value of $ 42.99 .

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As of October 31, 2021, there were no FCF performance target grants outstanding.

We expensed EPS performance restricted stock units on a graded vesting basis, expect for awards issued to retirement-eligible participants, which we expensed on an accelerated basis.

As of November 1, 2020, there were no EPS performance target grants outstanding.

The actual number of EPS CAGR performance restricted stock units, FCF performance restricted stock units and EPS performance restricted stock units, that vest will depend on actual performance achieved.

The actual number of EPS CAGR performance restricted stock units and FCF performance restricted stock units that vest will depend on actual performance achieved.

We estimate expense based on the number of awards expected to vest.

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In the first quarter of 2022, recipients of FCF performance restricted stock units earned 167 % of the initial grants based upon the average of actual performance achieved during a three-year period ended August 1, 2021.

As a result, approximately 158 thousand additional shares were awarded.

approximately 158 thousand additional shares were awarded.

The fair value of restricted stock units vested during 2024, 2023 and 2022 was $ 97 million, $ 37 million and $ 50 million, respectively.

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Nonvested at July 30, 2023

1,153 $ 55.63

Granted 387 $ 44.18

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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 July 30, 2023, total remaining unearned compensation related to TSR performance restricted stock units was $ 13 million, which will be amortized over the weighted-average

remaining service period of 1.6 years.

As of July 28, 2024, total remaining unearned compensation related to TSR performance restricted stock units was $ 12 million, which will be amortized over the weighted-average remaining service period of 1.6 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.

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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.

Disposition valuations are

also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

On March 20, 2024, the United States Department of Justice (DOJ), on behalf of the U.S.

Environmental Protection Agency, and National Education Law Center, on behalf of Environment America and Lake Erie Waterkeeper, filed lawsuits in the United States District Court for the Northern District of Ohio - Western Division concerning alleged violations of the Clean Water Act relating to alleged contaminant discharges from our Napoleon, Ohio wastewater treatment facility in excess of the facility's Clean Water Act permit limits.

We have and are continuing to take actions to remediate the exceedances and are in settlement discussions with the DOJ and the private environmental groups.

While we cannot predict with certainty the amount of any civil penalty or the timing of the resolution of this matter, we do not expect that the ultimate costs to resolve this matter will have a material adverse effect on our financial condition, results of operations, or cash flows.

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.

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Liabilities recognized based on known exposures related to such matters were not material at July 28, 2024, and July 30, 2023.

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.

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 $ 243 million at July 28, 2024, and $ 258 million at July 30, 2023.

Supplemental Financial Statement Data

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$ 73 $ 48 $ 41

Net periodic benefit income other than the service cost ( 35 ) ( 23 ) ( 285 )

Loss on sales of businesses (2)

Transaction costs (3)

Net periodic benefit expense (income) other than the service cost 26 ( 35 ) ( 23 )

Impairment of intangible assets (2)

Loss on sale of business (3)

Costs associated with acquisition (4)

Transition services fees ( 2 ) ( 1 ) —

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____________________________________

(1) In 2023, we recognized accelerated amortization expense of $ 7 million related to customer relationship intangible assets.

(1) Includes accelerated amortization expense related to customer relationship intangible assets of $ 27 million and $ 7 million in 2024 and 2023, respectively.

(2) See Note 6 for additional information.

(3) In 2023, we recognized a loss of $ 13 million on the sale of our Emerald nuts business.

In 2021, we recognized a loss of $ 11 million on the sale of our Plum baby food and snacks business.

See Note 4 for additional information.

(3) In 2023, we recognized transaction costs of $ 5 million related to the pending acquisition of Sovos Brands.

(4) Related to the acquisition of Sovos Brands.

See Note 3 for additional information.

(5) Included in Marketing and selling expenses.

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Income taxes paid $ 252 $ 268 $ 196

Non-cash Investing Activities

Accrued and unpaid capital expenditures $ 109 $ 122 $ 95

Subsequent Event

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 (i) the absence of any injunction or other order issued by a court of competent jurisdiction in the United States or applicable law or legal prohibition in the United States that prohibits or makes illegal the consummation of the merger, (ii) the approval of Sovos Brands' shareholders holding at least a majority of the outstanding shares of Sovos Brands common stock entitled to vote on the adoption of the merger agreement and (iii) the expiration or termination of any waiting period (and any extension thereof) applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

There are also several pending lawsuits filed by purported shareholders of Sovos Brands seeking, among other things, to enjoin the acquisition.

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 August 26, 2024, we sold our Pop Secret popcorn business for $ 75 million, subject to certain post-closing adjustments.

We expect to recognize a pre-tax loss on the sale of approximately $ 25 million as the carrying value of the disposal group will include allocated goodwill.

In connection with the sale, we will provide certain transition services to support the business.

The business had net sales of $ 119 million in 2024, $ 133 million in 2023 and $ 125 million in 2022.

Earnings were not material in the periods.

The results of the business were reflected within the Snacks reportable segment.

Management’s Report on Internal Control Over Financial Reporting

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of July 30, 2023.

Management has excluded Sovos Brands, Inc.

(Sovos Brands) from its assessment of internal control over financial reporting as of July 28, 2024 because it was acquired by the Company in a purchase business combination during 2024.

Total assets and total net sales of Sovos Brands excluded from management's assessment of internal control over financial reporting represent approximately 2% and 4%, respectively, of the related consolidated financial statement amounts as of and for the year ended July 28, 2024.

This exclusion is in accordance with the guidelines established by the Securities and Exchange Commission.

Except as noted above, the Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of July 28, 2024.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013) .

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Sovos Brands, Inc.

("Sovos Brands") from its assessment of internal control over financial reporting as of July 28, 2024 because it was acquired by the Company in a purchase business combination during 2024.

We have also excluded Sovos Brands from our audit of internal control over financial reporting.

Total assets and total net sales of Sovos Brands excluded from management's assessment and our audit of internal control over financial reporting represent approximately 2% and 4%, respectively, of the related consolidated financial statement amounts as of and for the year ended July 28, 2024.

Definition and Limitations of Internal Control over Financial Reporting

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Indefinite-Lived Intangible Assets Impairment Test for Certain Trademarks

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

The principal considerations for our determination that performing procedures relating to the indefinite-lived intangible assets impairment test for certain trademarks is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of certain trademarks, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the weighted average costs of capital and assumed royalty rates for the Snyder's of Hanover, Lance, Kettle Brand, Pacific Foods, and Cape Cod trademarks, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the weighted average costs of capital for the Snyder's of Hanover and Pacific Foods trademarks and the assumed royalty rates for the Snyder's of Hanover , Pacific Foods , Lance , Kettle Brand, and Cape Cod trademarks;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible assets impairment test for trademarks.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of certain trademarks, (ii) evaluating the appropriateness of the relief from royalty valuation method, (iii) testing the completeness and accuracy of underlying data used in the relief from royalty valuation method, and (iv) evaluating the reasonableness of the significant assumptions used by management related to the weighted average costs of capital and assumed royalty rates for the Snyder's of Hanover, Lance, Kettle Brand, Pacific Foods, and Cape Cod trademarks.

Evaluating management’s assumption related to the assumed royalty rates involved evaluating whether the assumption used by management was reasonable considering (i) the current and past profitability of certain trademarks, (ii) the consistency with external market and industry data, and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of certain trademarks;

(ii) evaluating the appropriateness of the relief from royalty valuation method;

(iii) testing the completeness and accuracy of underlying data used in the relief from royalty valuation method;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to the weighted average costs of capital for the Snyder's of Hanover and Pacific Foods trademarks and the assumed royalty rates for the Snyder's of Hanover , Pacific Foods , Lance , Kettle Brand , and Cape Cod trademarks.

(ii) the consistency with external market and industry data;

and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the relief from royalty valuation method and the reasonableness of the weighted average costs of capital and assumed royalty rate assumptions.

Acquisition of Sovos Brands – Valuation of the Rao’s Trademark

As described in Note 3 to the consolidated financial statements, on March 12, 2024, the Company acquired Sovos Brands for total purchase consideration of $2.899 billion.

Of the acquired intangible assets, $1.470 billion was recorded for the Rao’s trademark.

Fair value of the Rao’s trademark was determined using a relief from royalty valuation method.

Significant management assumptions used in determining the fair value include the revenue growth rates, weighted average cost of capital and assumed royalty rate.

The principal considerations for our determination that performing procedures relating to the valuation of the Rao’s trademark acquired in the acquisition of Sovos Brands is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Rao’s trademark acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, weighted average cost of capital, and assumed royalty rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to acquisition accounting, including controls over management’s valuation of the Rao's trademark acquired.

These procedures also included, among others (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of the Rao’s trademark acquired;

(iii) evaluating the appropriateness of the relief from royalty valuation method;

(iv) testing the completeness and accuracy of the underlying data used in the relief from royalty valuation method;

and (v) evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rates, weighted average cost of capital, and assumed royalty rate.

Evaluating management’s assumptions related to the revenue growth rates and assumed royalty rate involved considering (i) the current and past performance of the Rao’s trademark;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

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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 8. Financial Statements and Supplementary Data