# CAMPBELL'S Co (CPB) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CAMPBELL'S Co's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/16732/000001673221000103/cpb-20210801.htm
Accession: 0000016732-21-000103
Filing date: 2021-09-23
Report date: 2021-08-01
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CPB/
All MD&A years: /company/CPB/mda/
Next year: /company/CPB/mda/fy2022/ (FY 2022)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements presented in "Financial Statements and Supplementary Data," as well as the information contained in "Risk Factors."

Unless otherwise stated, the terms "we," "us," "our" and the "company" refer to Campbell Soup Company and its consolidated subsidiaries.

Executive Summary

We are a manufacturer and marketer of high-quality, branded food and beverage products. We operate in a highly competitive industry and experience competition in all of our categories.

In 2021 we continued to adapt and evolve in a dynamic environment as we advanced our strategic plan. In the first part of the fiscal year, as the COVID-19 pandemic reached its peak in many areas across North America, we experienced significantly higher sales for our retail products in both our Meals & Beverages and Snacks segments, especially in retail chains and large grocery supermarkets. This result was attributable to elevated retail demand, as consumers significantly increased their food purchases for at-home consumption, which more than offset the declines in our foodservice business during the same period. We also saw elevated repeat purchase rates and new buyers of our products, especially in our soup business. During the second half of 2021, we experienced lower sales in both our Meals & Beverages and Snacks segments as we began to cycle the demand surge that accompanied the onset of the COVID-19 pandemic, amidst intense market volatility and labor challenges. We also navigated the executional pressures of a significant transformation agenda, primarily in our Snacks division. As we begin to transition out of the COVID-19 environment, we expect that inflation and a constrained labor market will continue to be headwinds but we expect to partially mitigate these headwinds with a pricing strategy and planned productivity and cost saving programs that will allow us to deliver on our strategic initiatives.

Business Divestitures

In 2019, we sold our U.S. refrigerated soup business, our Garden Fresh Gourmet business and our Bolthouse Farms business. Beginning in the third quarter of 2019, we have reflected the results of operations of these businesses as discontinued operations in the Consolidated Statements of Earnings for all periods presented. These businesses were historically included in the Campbell Fresh reportable segment.

We completed the sale of our Kelsen business on September 23, 2019. On December 23, 2019, we completed the sale of our Arnott’s business and certain other international operations, including the simple meals and shelf-stable beverages businesses in Australia and Asia Pacific (the Arnott's and other international operations). Beginning in the fourth quarter of 2019, we have reflected the results of operations of the Kelsen business and the Arnott’s and other international operations (collectively referred to as Campbell International) as discontinued operations in the Consolidated Statements of Earnings for all periods presented. These businesses were historically included in the Snacks reportable segment. In addition, on October 11, 2019, we completed the sale of our European chips business. The results of the European chips business through the date of sale were reflected in continuing operations within the Snacks reportable segment.

In the fourth quarter of 2021, we completed the sale of our Plum baby food and snacks business. The results of the Plum baby food and snacks business through the date of sale were reflected in continuing operations within the Meals & Beverages reportable segment.

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

Strategy

Our strategy is to accelerate profitable growth by focusing on our core brands in two divisions within North America while delivering on the promise of our purpose - Connecting people through food they love. Our strategic plan is based on four pillars:

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build a winning team and culture; accelerate profitable growth; fuel investments and margins with targeted cost savings; and deliver on the promise of our purpose all as further discussed below.

We plan to continue our focus on building a winning team and culture by advancing our next generation work model, prioritizing our inclusion and diversity strategy and investing in strategic capabilities and digitization that support our core brands in North America. In addition, we plan to continue to deliver on the promise of our purpose with consumer transparency initiatives, progress on our sustainability goals and strengthening our connection to the communities in which we operate.

We believe that we can accelerate our profitable growth model by continuing to grow market share and drive integrated business planning programming throughout the company. We expect to grow market share through the development of more consumer-oriented product quality, marketing and innovation plans and prioritizing growth channels and retailers within our defined portfolio roles. In addition, we expect to continue to focus on accelerating the growth of our Snacks brands while also sustaining the growth in U.S. soup and our other core brands. We expect that changes in consumer behavior driven by the COVID-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels. We plan to capitalize on this opportunity by addressing evolving consumer needs through our unique and differentiated portfolio.

We also expect to fuel investments and margins by mitigating the effects of inflation through pricing and cost productivity initiatives. We implemented price increases beginning in 2022 and continue to pursue our multi-year cost savings initiatives with targeted annualized cost savings of $850 million for continuing operations by the end of 2022, which includes $295 million in synergies and run-rate cost savings from our acquisition of Snyder's-Lance, Inc. (Snyder's-Lance). See "Restructuring Charges and Cost Savings Initiatives" for additional information on these initiatives. In addition, we have initiated the process to drive operational excellence by transforming our supply chain capabilities to enhance ways of working to build a more resilient and agile supply chain to serve our evolving business needs while maximizing efficiency.

Business Trends

Our businesses are being influenced by a variety of trends that we anticipate will continue in the future, including: changing consumer preferences; a competitive and dynamic retail environment; and cost inflation.

Our strategy is designed, in part, to capture growing consumer preferences for snacking and convenience. For example, we believe that consumers are changing their eating habits by increasing the type and frequency of snacks they consume and are continuing quick-scratch cooking and in-home eating behaviors that were driven by the COVID-19 pandemic.

Retailers continue to use their buying power and negotiating strength to seek increased promotional programs funded by their suppliers and more favorable terms, including customized products funded by their suppliers. Any consolidations among retailers would continue to create large and sophisticated customers that may further this trend. Retailers also continue to grow and promote store brands that compete with branded products, while other challenger brands drive innovation and engagement that threatens our market share.

The spread of the COVID-19 pandemic in North America has led to shifts in the growth of the retail channels in which we sell our products. Our products are largely concentrated in the traditional retail grocery trade, which prior to the pandemic, had experienced slower growth than other retail channels, such as dollar stores, drug stores, club stores and e-commerce retailers. The COVID-19 pandemic has shifted growth back to the traditional grocery trade. Although there is significant uncertainty as to how the retail channels will perform in the future, we anticipate that the growth of e-commerce, including omnichannel click and collect models, as well as alternative retail channels, such as club and dollar stores, to continue.

We have continued to monitor the impact of the COVID-19 pandemic on all aspects of our business. Throughout the first half of 2021, we experienced an increased demand for our retail products, as consumers significantly increased their food purchases for at-home consumption. In response to increased demand, we took steps, including modifying production schedules and temporarily adjusting product mix, to increase our production capacity to meet the increased demand for our retail products. This demand moderated in the second half of 2021, when we lapped the initial surge in demand at the beginning of the pandemic. We anticipate that 2022 will continue to be a dynamic macroeconomic environment, and expect input cost inflation to be significantly higher than 2021. Pricing actions and supply chain productivity initiatives introduced at the end of 2021 will mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in 2022. There still remains uncertainty around the COVID-19 pandemic and the ultimate impact depends on the severity and duration of the pandemic, including the emergence and spread of COVID-19 variants, the continued availability and effectiveness of vaccines and actions taken by government authorities and other third parties in response to the pandemic.

Summary of Results

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

There were 53 weeks in 2020. There were 52 weeks in 2021 and 2019.

•Net sales decreased 2% in 2021 to $8,476 million. The impact of the 53rd week in 2020 was approximately 2 points.

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•Gross profit, as a percent of sales, decreased to 33.2% in 2021 from 34.5% a year ago. The decrease was primarily due to higher cost inflation and other supply chain costs, as well as unfavorable product mix, partially offset by the benefits from supply chain productivity improvements, lower levels of promotional spending, mark-to-market gains on outstanding commodity hedges in the current year and the benefits of cost savings initiatives.

•Interest expense decreased to $210 million in 2021 from $345 million a year ago. The prior year included a loss of $75 million related to extinguishment of debt. After adjusting for this item, interest expense declined primarily due to lower levels of debt.

•Earnings per share from continuing operations were $3.30 in 2021, compared to $1.95 a year ago. The current year included gains of $.32 and the prior year included expenses of $1.01 per share from items impacting comparability as discussed below.

•Loss per share from discontinued operations was $.02 in 2021, compared to Earnings per share of $3.41 a year ago. The prior year included gains of $3.29 from items impacting comparability as discussed below.

Net Earnings attributable to Campbell Soup Company - 2021 Compared with 2020

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

Continuing Operations

•In 2021, we recognized gains of $165 million in Other expenses / (income) ($126 million after tax, $.41 per share) associated with mark-to-market adjustments for defined benefit pension and postretirement plans. In 2020, we recognized losses of $121 million in Other expenses / (income) ($92 million after tax, $.30 per share) associated with mark-to-market adjustments for defined benefit pension and postretirement plans;

•In 2021, we recognized pension settlement gains in Other expenses / (income) of $38 million ($29 million after tax, or $.10 per share). In 2020, we recognized pension settlement charges in Other expenses / (income) of $43 million ($33 million after tax, or $.11 per share). The settlements were associated with U.S. and Canadian pension plans and resulted from the level of lump sum distributions from the plans' assets;

•We implemented several cost savings initiatives in recent years. In 2021, we recorded Restructuring charges of $21 million and implementation costs and other related costs of $28 million in Administrative expenses, $3 million in Cost of products sold and $1 million in Marketing and selling expenses (aggregate impact of $40 million after tax, or $.13 per share) related to these initiatives. In 2020, we recorded Restructuring charges of $9 million and implementation costs and other related costs of $48 million in Administrative expenses, $9 million in Cost of products sold, $2 million in Marketing and selling expenses, and $1 million in Research and development expenses (aggregate impact of $52 million after tax, or $.17 per share) related to these initiatives. See Note 7 to the Consolidated Financial Statements and "Restructuring Charges and Cost Savings Initiatives" for additional information;

•In 2021, we recorded a loss in Other expenses / (income) of $11 million (and a gain of $3 million after tax, or $.01 per share) on the sale of our Plum baby food and snacks business. In 2020, we recorded a loss in Other expenses / (income) of $64 million ($37 million after tax, or $.12 per share) on the sale of our European chips business;

•In 2021, we recorded a $19 million ($.06 per share) deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance;

•On April 26, 2020, we entered into an agreement to sell our limited partnership interest in Acre Venture Partners, L.P. (Acre). The transaction closed on May 8, 2020. In the third quarter of 2020, we recorded a loss in Other expenses / (income) of $45 million ($35 million after tax, or $.12 per share) as a result of the pending sale. See Note 14 to the Consolidated Financial Statements for additional information; and

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

Discontinued Operations

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

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The items impacting comparability are summarized below:

[[GREPCENT_TABLE]]
[["","2021","","2020"],["(Millions, except per share amounts)","Earnings Impact","","EPS Impact","","Earnings Impact","","EPS Impact"],["Earnings from continuing operations attributable to Campbell Soup Company","$","1,008","","","$","3.30","","","$","592","","","$","1.95"],["Earnings (loss) from discontinued operations","$","(6)","","","$","(.02)","","","$","1,036","","","$","3.41"],["Net earnings attributable to Campbell Soup Company(1)","$","1,002","","","$","3.29","","","$","1,628","","","$","5.36"],["Continuing operations:"],["Pension and postretirement benefit mark-to-market adjustments","$","126","","","$",".41","","","$","(92)","","","$","(.30)"],["Pension settlement gains (charges)","29","","",".10","","","(33)","","","(.11)"],["Restructuring charges, implementation costs and other related costs","(40)","","","(.13)","","","(52)","","","(.17)"],["Gains (charges) associated with divestitures","3","","",".01","","","(37)","","","(.12)"],["Deferred tax charge","(19)","","","(.06)","","","\u2014","","","\u2014"],["Investment losses","\u2014","","","\u2014","","","(35)","","","(.12)"],["Loss on debt extinguishment","\u2014","","","\u2014","","","(57)","","","(.19)"],["Impact of items on Earnings from continuing operations(1)","$","99","","","$",".32","","","$","(306)","","","$","(1.01)"],["Discontinued operations:"],["Gains associated with divestitures","$","\u2014","","","$","\u2014","","","$","1,000","","","$","3.29"],["Impact of items on Earnings (loss) from discontinued operations","$","\u2014","","","$","\u2014","","","$","1,000","","","$","3.29"]]
[[/GREPCENT_TABLE]]

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

Earnings from continuing operations were $1,008 million ($3.30 per share) in 2021, compared to $592 million ($1.95 per share) in 2020. After adjusting for items impacting comparability, earnings from continuing operations increased reflecting lower marketing and selling expenses, lower interest expense and higher other income, partially offset by a lower gross profit performance and the decline in sales. The additional week contributed approximately $.04 per share to Earnings from continuing operations in 2020. Current year earnings included $50 million ($38 million after tax, or $.12 per share) of mark-to-market gains on outstanding commodity hedges.

See "Discontinued Operations" for additional information.

Net Earnings attributable to Campbell Soup Company - 2020 Compared with 2019

In addition to the 2020 items that impacted comparability of Net earnings discussed above, the following items impacted the comparability of net earnings and net earnings per share:

Continuing Operations

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

•In 2019, we recognized a pension settlement charge in Other expenses / (income) of $28 million ($22 million after tax, or $.07 per share) associated with a U.S. pension plan. The settlement resulted from the level of lump sum distributions from the plan's assets;

•In 2019, we recorded Restructuring charges of $31 million and implementation costs and other related costs of $62 million in Administrative expenses, $18 million in Cost of products sold, $7 million in Marketing and selling expenses, and $3 million in Research and development expenses (aggregate impact of $92 million after tax, or $.30 per share) related to the cost savings initiatives discussed above. See Note 7 to the Consolidated Financial Statements and "Restructuring Charges and Cost Savings Initiatives" for additional information;

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

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

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Discontinued Operations

•In 2019, we incurred pre-tax expenses of $32 million associated with the sale process of Campbell Fresh, including transaction costs. In addition, we recorded tax expense of $29 million as deferred tax assets on Bolthouse Farms were not realizable. The aggregate impact was $51 million after tax, or $.17 per share. In 2019, we also incurred costs of $12 million ($10 million after tax, or $.03 per share) associated with the planned divestiture of Campbell International. The total aggregate impact was $61 million after tax, or $.20 per share;

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

•In the fourth quarter of 2019, as part of our annual review of intangible assets, we recognized a non-cash impairment charge of $7 million on a trademark and $10 million on goodwill in Kelsen due to a lower long-term outlook for sales and the pending sale of the business. The aggregate impact was $17 million ($12 million after tax, or $.04 per share).

In the second quarter of 2019, interim impairment assessments were performed on the intangible and tangible assets within Campbell Fresh, which included Garden Fresh Gourmet, Bolthouse Farms carrot and carrot ingredients and Bolthouse Farms refrigerated beverages and salad dressings, as we continued to pursue the divestiture of these businesses. We revised our future outlook for earnings and cash flows for each of these businesses as the divestiture process progressed. We recorded non-cash impairment charges of $104 million on the tangible assets and $73 million on the intangible assets of Bolthouse Farms carrot and carrot ingredients; $96 million on the intangible assets and $9 million on the tangible assets of Bolthouse Farms refrigerated beverages and salad dressings; and $62 million on the intangible assets and $2 million on the tangible assets of Garden Fresh Gourmet. The aggregate impact of the impairment charges was $346 million ($264 million after tax, or $.87 per share).

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

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

The items impacting comparability are summarized below:

[[GREPCENT_TABLE]]
[["","2020","","2019"],["(Millions, except per share amounts)","Earnings Impact","","EPS Impact","","Earnings Impact","","EPS Impact"],["Earnings from continuing operations attributable to Campbell Soup Company","$","592","","","$","1.95","","","$","474","","","$","1.57"],["Earnings (loss) from discontinued operations","$","1,036","","","$","3.41","","","$","(263)","","","$","(.87)"],["Net earnings attributable to Campbell Soup Company","$","1,628","","","$","5.36","","","$","211","","","$",".70"],["Continuing operations:"],["Pension and postretirement benefit mark-to-market adjustments","$","(92)","","","$","(.30)","","","$","(93)","","","$","(.31)"],["Pension settlement charges","(33)","","","(.11)","","","(22)","","","(.07)"],["Restructuring charges, implementation costs and other related costs","(52)","","","(.17)","","","(92)","","","(.30)"],["Charges associated with divestiture","(37)","","","(.12)","","","\u2014","","","\u2014"],["Investment losses","(35)","","","(.12)","","","\u2014","","","\u2014"],["Loss on debt extinguishment","(57)","","","(.19)","","","\u2014","","","\u2014"],["Tax reform","\u2014","","","\u2014","","","(2)","","","(.01)"],["Impairment charges","\u2014","","","\u2014","","","(13)","","","(.04)"],["Impact of items on Earnings from continuing operations(1)","$","(306)","","","$","(1.01)","","","$","(222)","","","$","(.74)"],["Discontinued operations:"],["Gains (charges) associated with divestitures","$","1,000","","","$","3.29","","","$","(61)","","","$","(.20)"],["Pension benefit mark-to-market adjustments","\u2014","","","\u2014","","","(9)","","","(.03)"],["Impairment charges","\u2014","","","\u2014","","","(287)","","","(.95)"],["Impact of items on Earnings (loss) from discontinued operations","$","1,000","","","$","3.29","","","$","(357)","","","$","(1.18)"]]
[[/GREPCENT_TABLE]]

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

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Earnings from continuing operations were $592 million ($1.95 per share) in 2020, compared to $474 million ($1.57 per share) in 2019. After adjusting for items impacting comparability, earnings increased reflecting sales volume gains, including the benefit of the additional week, an improved gross profit performance and lower interest expense, partially offset by increased marketing investment. The additional week contributed approximately $.04 per share to Earnings from continuing operations in 2020.

See "Discontinued Operations" for additional information.

DISCUSSION AND ANALYSIS

Sales

An analysis of net sales by reportable segment follows:

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["(Millions)","2021","","2020","","2019","","2021/2020","","2020/2019"],["Meals & Beverages","$","4,532","","","$","4,646","","","$","4,252","","","(2)","","9"],["Snacks","3,944","","","4,045","","","3,854","","","(2)","","5"],["Corporate","\u2014","","","\u2014","","","1","","","\u2014","","n/m"],["","$","8,476","","","$","8,691","","","$","8,107","","","(2)","","7"]]
[[/GREPCENT_TABLE]]

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n/m - Not meaningful.

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

[[GREPCENT_TABLE]]
[["2021 versus 2020","Meals & Beverages(2)","","Snacks(2)","","","","Total(2)"],["Volume and mix","(2)%","","(2)%","","","","(2)%"],["Price and sales allowances","\u2014","","1","","","","\u2014"],["Decreased/(increased) promotional spending(1)","1","","1","","","","1"],["Divestiture","\u2014","","(1)","","","","\u2014"],["Estimated impact of 53rd week","(2)","","(2)","","","","(2)"],["","(2)%","","(2)%","","","","(2)%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["2020 versus 2019","Meals & Beverages(2)","","Snacks","","","","Total"],["Volume and mix","8%","","6%","","","","7%"],["Price and sales allowances","1","","\u2014","","","","\u2014"],["Decreased/(increased) promotional spending(1)","(1)","","\u2014","","","","(1)"],["Divestiture","\u2014","","(3)","","","","(1)"],["Estimated impact of 53rd week","2","","2","","","","2"],["","9%","","5%","","","","7%"]]
[[/GREPCENT_TABLE]]

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

(2)Sum of the individual amounts does not add due to rounding.

In 2021, Meals & Beverages sales decreased 2%. Excluding the impact of the 53rd week, sales decreased primarily due to declines in foodservice, partially offset by gains in V8 beverages. Foodservice sales were negatively impacted by shifts in consumer behavior and continued COVID-19 related restrictions. Including a 1-point impact from the additional week, sales of U.S. soup decreased 1% due to declines in condensed soups and ready-to-serve soups, partially offset by gains in broth.

In 2020, Meals & Beverages sales increased 9%. Excluding the benefit of the 53rd week, sales increased primarily due to gains in the U.S. retail business driven by U.S. soup, Prego pasta sauces and V8 beverages, as well as gains in Canada, partially offset by declines in foodservice. Volume and mix increased in the retail business driven by COVID-19, with increased demand of food purchases for at-home consumption in the second half of 2020. The foodservice business was negatively impacted by shifts in consumer behavior and continued COVID-19 related restrictions, as well as the loss of a refrigerated soup contract. Including a 2-point benefit from the additional week, sales of U.S. soup increased 14% due to gains in condensed soups, ready-to-serve soups and broth.

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In 2021, Snacks sales decreased 2%. Excluding the impact of the 53rd week and the divestiture of the European chips business, sales were comparable driven by volume declines mostly offset by lower levels of promotional spending as well as favorable price and sales allowances. Declines in Lance sandwich crackers and partner brands were mostly offset by gains in salty snacks, including Late July snacks and Snack Factory pretzel crisps, and in Goldfish crackers. Partner brands consist of third-party branded products that we sell.

In 2020, Snacks sales increased 5%. Excluding the impact of the European chips divestiture and the benefit of the 53rd week, sales increased driven by volume gains reflecting increased demand of food purchases for at-home consumption in the second half of 2020, as well as base business performance. The sales increases reflect gains in Goldfish crackers, Pepperidge Farm cookies and fresh bakery products, as well as Kettle Brand and Cape Cod potato chips, Late July snacks and Snyder's of Hanover pretzels.

Gross Profit

Gross profit, defined as Net sales less Cost of products sold, decreased by $188 million in 2021 from 2020 and increased by $306 million in 2020 from 2019. As a percent of sales, gross profit was 33.2% in 2021, 34.5% in 2020 and 33.2% in 2019.

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

[[GREPCENT_TABLE]]
[["","Margin Impact"],["","2021","","2020"],["Cost inflation, supply chain costs and other factors(1)","(3.4)","","(0.8)"],["Mix","(0.2)","","0.7"],["Price and sales allowances","(0.1)","","0.3"],["Lower restructuring-related costs","0.1","","0.1"],["Lower/(higher) level of promotional spending","0.8","","(0.4)"],["Productivity improvements","1.5","","1.4"],["","(1.3)%","","1.3%"]]
[[/GREPCENT_TABLE]]

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(1)2021 includes an estimated positive margin impact of a 0.6 benefit from the change in mark-to-market adjustments on outstanding commodity hedges and 0.5 from the benefit of cost savings initiatives, which were more than offset by cost inflation and other factors. 2020 includes an estimated positive margin impact of 1.3 from the benefit of cost savings initiatives and operating leverage, which was more than offset by cost inflation and other factors, including the impact of COVID-19.

Marketing and Selling Expenses

Marketing and selling expenses as a percent of sales were 9.6% in 2021, 10.9% in 2020 and 10.4% in 2019. Marketing and selling expenses decreased 14% in 2021 from 2020. The decrease was primarily due to lower advertising and consumer promotion expense (approximately 7 percentage points); increased benefits from cost savings initiatives (approximately 2 percentage points); lower incentive compensation (approximately 2 percentage points); lower selling expenses (approximately 1 percentage point) and lower costs related to marketing overhead (approximately 1 percentage point). The decrease in advertising and consumer promotion expense was primarily due to elevated levels in the prior year.

Marketing and selling expenses increased 12% in 2020 from 2019. The increase was primarily due to higher advertising and consumer promotion expense (approximately 14 percentage points); higher selling expenses (approximately 2 percentage points); higher incentive compensation (approximately 1 percentage point); and higher costs related to marketing overhead (approximately 1 percentage point), partially offset by increased benefits from cost savings initiatives (approximately 5 percentage points) and lower costs associated with cost savings initiatives (approximately 1 percentage point). The increase in advertising and consumer promotion expense was primarily in Meals & Beverages due to increased support of U.S. soup, and in Snacks due to increased support of key brands.

Administrative Expenses

Administrative expenses as a percent of sales were 7.1% in 2021, 7.2% in 2020 and 7.5% in 2019. Administrative expenses decreased 4% in 2021 from 2020. The decrease was primarily due to lower incentive compensation (approximately 4 percentage points); lower costs associated with cost savings initiatives (approximately 3 percentage points); increased benefits from cost savings initiatives (approximately 2 percentage points) and higher charitable contributions in the prior year (approximately 2 percentage points), partially offset by higher information technology costs (approximately 4 percentage points); higher inflation and other factors (approximately 2 percentage points) and higher benefit-related costs (approximately 1 percentage point).

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Administrative expenses increased 2% in 2020 from 2019. The increase was primarily due to higher incentive compensation (approximately 4 percentage points); higher information technology costs (approximately 3 percentage points); higher inflation and general administrative costs (approximately 3 percentage points) and increases in charitable contributions (approximately 2 percentage points), partially offset by increased benefits from cost savings initiatives (approximately 8 percentage points) and lower costs associated with cost savings initiatives (approximately 2 percentage points).

Other Expenses / (Income)

Other income in 2021 included the following:

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

•$27 million of income from transition services fees;

•$42 million of amortization of intangible assets; and

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

Other expenses in 2020 included the following:

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

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

•$45 million loss on Acre;

•$43 million of amortization of intangible assets; and

•$10 million of income from transition services fees.

Other expenses in 2019 included the following:

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

•$48 million of amortization of intangible assets; and

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

Operating Earnings

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

An analysis of operating earnings by segment follows:

[[GREPCENT_TABLE]]
[["","","","","","","","","% Change"],["(Millions)","","2021","","2020","","2019","","2021/2020","","2020/2019"],["Meals & Beverages","","$","899","","","$","983","","","$","895","","","(9)","","10"],["Snacks","","537","","","551","","","522","","","(3)","","6"],["","","1,436","","","1,534","","","1,417","","","(6)","","8"],["Corporate income (expense)","","130","","","(418)","","","(407)"],["Restructuring charges(1)","","(21)","","","(9)","","","(31)"],["Earnings before interest and taxes","","$","1,545","","","$","1,107","","","$","979"]]
[[/GREPCENT_TABLE]]

__________________________________________

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

Operating earnings from Meals & Beverages decreased 9% in 2021 versus 2020. The decrease was primarily due to lower gross profit performance and sales declines, partially offset by lower marketing and selling expenses and administrative expenses. Gross profit performance was impacted by higher cost inflation and other supply chain costs, as well as unfavorable product mix, partially offset by the benefits of supply chain productivity improvements and lower levels of promotional activity.

Operating earnings from Meals & Beverages increased 10% in 2020 versus 2019. The increase was primarily due to sales gains, including the benefit of the additional week, and improved gross profit performance, partially offset by increased marketing support and higher administrative expenses. Gross profit performance was impacted by the benefits of supply chain productivity improvements and cost savings initiatives, as well as improved operating leverage and favorable product mix, partially offset by higher cost inflation and other supply chain costs, including COVID-19 related costs incurred in the second half of 2020.

24

Operating earnings from Snacks decreased 3% in 2021 versus 2020. The decrease was primarily due to lower gross profit performance and sales declines, partially offset by lower marketing and selling expenses. Gross profit performance was impacted by higher cost inflation and other supply chain costs, partially offset by the benefits of supply chain productivity improvements and cost savings initiatives as well as lower levels of promotional spending.

Operating earnings from Snacks increased 6% in 2020 versus 2019. The increase primarily due to sales gains, including the benefit of the additional week, improved gross profit performance, partially offset by increased marketing support. Gross profit performance was impacted by the benefits of supply chain productivity improvements and cost savings initiatives, as well as favorable product mix and improved operating leverage, partially offset by higher cost inflation and other supply chain costs, including COVID-19 related costs incurred in the second half of 2020.

Corporate income in 2021 included the following:

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

•pension settlement gains of $38 million;

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

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

Corporate expense in 2020 included the following:

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

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

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

•a loss of $45 million on Acre; and

•pension settlement charges of $43 million.

Corporate expense in 2019 included the following:

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

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

•a pension settlement charge of $28 million; and

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

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

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

Interest Expense

Interest expense decreased to $210 million in 2021 from $345 million in 2020. The decrease in interest expense was due to a loss on extinguishment of debt of $75 million in the prior year and lower levels of debt.

Interest expense decreased to $345 million in 2020 from $356 million in 2019. The decrease in interest expense was due to lower levels of debt and lower average interest rates on the debt portfolio, partially offset by a loss on extinguishment of debt of $75 million.

Taxes on Earnings

The effective tax rate was 24.6% in 2021, 22.7% in 2020 and 24.2% in 2019.

The increase in the effective tax rate in 2021 from 2020 was primarily due to a $19 million deferred tax charge recognized in the second quarter of 2021 in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance and a $27 million tax benefit on the $64 million loss on the sale of the European chips business in the prior year.

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

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

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

25

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

Net sales increased 5% to $8,476 million in 2021 from $8,107 million in 2019. An analysis of net sales by reportable segment follows:

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["(Millions)","2021","","","","2019","","2021/2019","","Impact of Divestitures"],["Meals & Beverages","$","4,532","","","","","$","4,252","","","7","","(1)"],["Snacks","3,944","","","","","3,854","","","2","","(3)"],["Corporate","\u2014","","","","","1","","","n/m","","n/m"],["","$","8,476","","","","","$","8,107","","","5","","(2)"]]
[[/GREPCENT_TABLE]]

__________________________________________

n/m - Not meaningful.

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

[[GREPCENT_TABLE]]
[["","2021","","2019"],["(Millions, except per share amounts)","Earnings Impact","","EPS Impact","","Earnings Impact","","EPS Impact"],["Earnings from continuing operations attributable to Campbell Soup Company","$","1,008","","","$","3.30","","","$","474","","","$","1.57"],["Continuing operations:"],["Pension and postretirement benefit mark-to-market adjustments","$","126","","","$",".41","","","$","(93)","","","$","(.31)"],["Pension settlement gains (charges)","29","","",".10","","","(22)","","","(.07)"],["Restructuring charges, implementation costs and other related costs","(40)","","","(.13)","","","(92)","","","(.30)"],["Gains associated with divestiture","3","","",".01","","","\u2014","","","\u2014"],["Deferred tax charge","(19)","","","(.06)","","","\u2014","","","\u2014"],["Tax reform","\u2014","","","\u2014","","","(2)","","","(.01)"],["Impairment charges","\u2014","","","\u2014","","","(13)","","","(.04)"],["Impact of items on Earnings from continuing operations(1)","$","99","","","$",".32","","","$","(222)","","","$","(.74)"]]
[[/GREPCENT_TABLE]]

__________________________________________

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

Restructuring Charges and Cost Savings Initiatives

Multi-year Cost Savings Initiatives and Snyder's-Lance Cost Transformation Program and Integration

Beginning in fiscal 2015, we implemented initiatives to reduce costs and to streamline our organizational structure.

In recent years, we expanded these initiatives by further optimizing our supply chain and manufacturing networks, including closing our manufacturing facility in Toronto, Ontario, as well as our information technology infrastructure.

On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to the acquisition, Snyder's-Lance launched a cost transformation program following a comprehensive review of its operations with the goal of significantly improving its financial performance. We continue to implement this program. In addition, we have identified opportunities for additional cost synergies as we integrate Snyder's-Lance.

26

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

[[GREPCENT_TABLE]]
[["(Millions, except per share amounts)","2021","","2020","","2019","","Recognized as of August 1, 2021"],["Restructuring charges","$","21","","","$","9","","","$","31","","","$","259"],["Administrative expenses","28","","","48","","","62","","","339"],["Cost of products sold","3","","","9","","","18","","","79"],["Marketing and selling expenses","1","","","2","","","7","","","13"],["Research and development expenses","\u2014","","","1","","","3","","","4"],["Total pre-tax charges","$","53","","","$","69","","","$","121","","","$","694"],["Aggregate after-tax impact","$","40","","","$","52","","","$","92"],["Per share impact","$",".13","","","$",".17","","","$",".30"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["(Millions)","Recognized as of August 1, 2021"],["Severance pay and benefits","$","222"],["Asset impairment/accelerated depreciation","82"],["Implementation costs and other related costs","390"],["Total","$","694"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["(Millions)","Recognized as of August 1, 2021"],["Severance pay and benefits","$","19"],["Implementation costs and other related costs","4"],["Total","$","23"]]
[[/GREPCENT_TABLE]]

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

The total estimated pre-tax costs for actions associated with continuing operations are approximately $710 million to $730 million. This estimate will be updated as costs continue to be developed. The majority of the remaining costs will be incurred in 2022.

We expect the costs for actions associated with continuing operations to consist of the following: approximately $220 million to $225 million in severance pay and benefits; approximately $85 million in asset impairment and accelerated depreciation; and approximately $405 million to $420 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 31%; Snacks - approximately 45%; and Corporate - approximately 24%.

Of the aggregate $710 million to $730 million of pre-tax costs associated with continuing operations, we expect approximately $610 million to $630 million will be cash expenditures. In addition, we expect to invest approximately $435 million in capital expenditures through 2022, of which we invested $401 million as of August 1, 2021. The capital expenditures primarily relate to a U.S. warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, transition of production of the Toronto manufacturing facility to our U.S. thermal plants, optimization of information technology infrastructure and applications and optimization of the Snyder’s-Lance warehouse and distribution network.

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

27

We expect the initiatives for actions associated with continuing operations, once all phases are implemented, to generate annual ongoing savings of approximately $850 million by the end of 2022. The annual pre-tax savings associated with continuing operations generated were as follows:

[[GREPCENT_TABLE]]
[["(Millions)","2021","","2020","","2019","","2018","","2017","","2016","","2015"],["Total pre-tax savings","$","805","","","$","725","","","$","560","","","$","395","","","$","325","","","$","215","","","$","85"]]
[[/GREPCENT_TABLE]]

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

Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs in Earnings from continuing operations associated with segments is as follows:

[[GREPCENT_TABLE]]
[["(Millions)","2021","","Costs Incurred to Date"],["Meals & Beverages","$","3","","","$","223"],["Snacks","48","","","299"],["Corporate","2","","","172"],["Total","$","53","","","$","694"]]
[[/GREPCENT_TABLE]]

See Note 7 to the Consolidated Financial Statements for additional information.

Discontinued Operations

On February 25, 2019, we sold our U.S. refrigerated soup business, and on April 25, 2019, we sold our Garden Fresh Gourmet business. Proceeds were $55 million. On June 16, 2019, we sold our Bolthouse Farms business. Proceeds were $500 million. Beginning in the third quarter of 2019, we have reflected the results of these businesses as discontinued operations in the Consolidated Statements of Earnings for all periods presented. These businesses were historically included in the Campbell Fresh reportable segment.

We completed the sale of our Kelsen business on September 23, 2019, for $322 million. We also completed the sale of the Arnott’s and other international operations on December 23, 2019, for $2,286 million. The purchase price was subject to certain post-closing adjustments, which resulted in $4 million of additional proceeds in the third quarter of 2020. Beginning in the fourth quarter of 2019, we have reflected the results of operations of the Kelsen business and the Arnott’s and other international operations, or Campbell International, as discontinued operations in the Consolidated Statements of Earnings for all periods presented. These businesses were historically included in the Snacks reportable segment.

Results of discontinued operations were as follows:

[[GREPCENT_TABLE]]
[["","","","","Campbell International","","","","Campbell Fresh"],["(Millions)","","","","2020","","2019","","","","2019"],["Net sales","","","","$","359","","","$","1,046","","","","","$","756"],["Impairment charges","","","","$","\u2014","","","$","17","","","","","$","360"],["Earnings (loss) before taxes from operations","","","","$","53","","","$","120","","","","","$","(359)"],["Taxes on earnings (loss) from operations","","","","17","","","41","","","","","(78)"],["Gain (loss) on sales of businesses / costs associated with selling the businesses","","","","1,039","","","(12)","","","","","(32)"],["Tax expense (benefit) on sales / costs associated with selling the businesses","","","","39","","","(2)","","","","","19"],["Earnings (loss) from discontinued operations","","","","$","1,036","","","$","69","","","","","$","(332)"]]
[[/GREPCENT_TABLE]]

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

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

The sale of the Arnott's and other international operations resulted in a substantial capital gain for tax purposes. We were able to utilize capital losses in 2020, which were offset with valuation allowances as of July 28, 2019, to offset the capital gain.

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

28

In 2019, we recorded non-cash impairment charges of $360 million ($275 million after tax, or $.91 per share) on the reporting units in Campbell Fresh. See "Significant Accounting Estimates" for additional information.

LIQUIDITY AND CAPITAL RESOURCES

We expect foreseeable liquidity and capital resource requirements to be met through anticipated cash flows from operations; long-term borrowings; short-term borrowings, which may include commercial paper; credit facilities; and cash and cash equivalents. We believe that our sources of financing will be adequate to meet our future requirements.

We generated cash flows from operations of $1,035 million in 2021, compared to $1,396 million in 2020. The decline in 2021 was primarily due to changes in working capital, mostly from a significant increase in accounts payable in the prior year and lower accrued liabilities in the current year.

We generated cash flows from operations of $1,396 million in 2020, compared to $1,398 million in 2019. The decline in 2020 was primarily due changes in working capital, mostly offset by higher cash earnings and lower other cash payments.

Current assets are less than current liabilities as a result of our level of current maturities of long-term debt and short-term borrowings and our focus to lower core working capital requirements. We had negative working capital of $119 million as of August 1, 2021, and $690 million as of August 2, 2020. Total debt maturing within one year was $48 million as of August 1, 2021, and $1,202 million as of August 2, 2020.

Capital expenditures were $275 million in 2021, $299 million in 2020 and $384 million in 2019. Capital expenditures in 2021 were lower than 2020 due to capital expenditures associated with discontinued operations in 2020. Capital expenditures in 2020 were lower than 2019 reflecting delays in certain projects impacted by the spread of the COVID-19 pandemic. Capital expenditures are expected to total approximately $330 million in 2022. Capital expenditures in 2021 included the implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, chip capacity expansion projects, a Milano cookie capacity expansion project, and a Goldfish cracker capacity expansion project. Capital expenditures in 2020 included the implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, a Milano cookie capacity expansion project, chip capacity expansion projects, and a Goldfish cracker capacity expansion project. Capital expenditures in 2019 included a U.S. warehouse optimization project, replacement of a Pepperidge Farm refrigeration system, transition of production of the Toronto manufacturing facility to our U.S. thermal plants, a Snyder's-Lance regional distribution center, a Milano cookie capacity expansion project, and a Goldfish cracker capacity expansion project.

Pepperidge Farm and Snyder’s-Lance have a direct-store-delivery distribution model that uses independent contractor distributors. In order to maintain and expand this model, we routinely purchase and sell routes. The purchase and sale proceeds of the routes are reflected in investing activities.

On February 25, 2019, we sold our U.S. refrigerated soup business, and on April 25, 2019, we sold our Garden Fresh Gourmet business. Proceeds were $55 million. On June 16, 2019, we sold our Bolthouse Farms business. Proceeds were $500 million.

We completed the sale of our Kelsen business on September 23, 2019, for $322 million. On September 30, 2019, we repaid $399 million of our senior unsecured term loan facility using net proceeds from the Kelsen sale and the issuance of commercial paper. In addition, on October 11, 2019, we completed the sale of our European chips business for £63 million, or $77 million.

We completed the sale of the Arnott’s and other international operations on December 23, 2019, for $2,286 million. The purchase price was subject to certain post-closing adjustments, which resulted in $4 million of additional proceeds in the third quarter of 2020. We used the net proceeds from the sale to reduce our debt through a series of actions. On December 31, 2019, we repaid the $100 million outstanding balance on our senior unsecured term loan facility. On January 22, 2020, we completed the redemption of all $500 million outstanding aggregate principal amount of our 4.25% Senior Notes due 2021. On January 24, 2020, we settled tender offers to purchase $1,200 million in aggregate principal amount of certain unsecured debt, comprising $329 million of 3.30% Senior Notes due 2021, $634 million of 3.65% Senior Notes due 2023, and $237 million of 3.80% Senior Notes due 2043. Except for the $237 million of 3.80% Senior Notes due 2043, the Senior Notes settled under the tender offer were issued in connection with our acquisition of Snyder’s-Lance. The consideration for the redemption and the tender offers was $1,765 million, including $65 million of premium. We recognized a loss of $75 million (including $65 million of premium, fees and other costs paid with the tender offers and unamortized debt issuance costs), which was recorded in Interest expense in the Consolidated Statement of Earnings. In addition, we paid accrued and unpaid interest on the purchased notes through the dates of settlement. The net divestiture proceeds remaining after these debt reduction activities were used to reduce commercial paper borrowings.

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

Dividend payments were $439 million in 2021, $426 million in 2020 and $423 million in 2019. Annual dividends declared were $1.46 per share in 2021, and $1.40 per share in 2020 and in 2019. The 2021 fourth quarter dividend was $.37 per share.

29

We suspended our share repurchases as of the second quarter of 2018. In June 2021, the Board authorized a new anti-dilutive share repurchase program of up to $250 million (June 2021 program) to offset the impact of dilution from shares issued under our stock compensation programs. The June 2021 program has no expiration date, but it may be suspended or discontinued at any time. Repurchases under the anti-dilutive program may be made in open-market or privately negotiated transactions. We repurchased approximately 1 million shares at a cost of $36 million in 2021 under the June 2021 program. In September 2021, the Board approved a new strategic share repurchase program of up to $500 million (September 2021 program). The September 2021 program has no expiration date, but may be suspended or discontinued at any time. Repurchases under the September 2021 program may be made in open-market or privately negotiated transactions. The September 2021 program replaces the suspended $1,500 million share repurchase program, which has been cancelled. See Note 16 to the Consolidated Financial Statements and "Market for Registrant's Capital Stock, Related Shareholder Matters and Issuer Purchases of Equity Securities" for additional information.

On April 24, 2020, we issued senior unsecured notes in an aggregate principal amount of $1,000 million, consisting of $500 million aggregate principal amount of notes bearing interest at a fixed rate of 2.375% per annum, due April 24, 2030, and $500 million aggregate principal amount of notes bearing interest at a fixed rate of 3.125% per annum, due April 24, 2050. On May 1, 2020, we used $300 million of the net proceeds to repay $300 million of borrowings outstanding under a revolving credit facility.

In March 2021, we repaid our 3.30% $321 million notes and floating rate $400 million notes, and in May 2021, we repaid our 8.875% $200 million notes. The repayments were funded with available cash and commercial paper issuances.

In August 2019, we repaid and terminated the AUD $335 million, or $227 million, balance outstanding under our single-draw syndicated facility. The repayment was funded through the issuance of commercial paper.

As of August 1, 2021, we had $48 million of short-term borrowings due within one year, of which $37 million was comprised of commercial paper borrowings. As of August 1, 2021, we issued $36 million of standby letters of credit. On November 2, 2020, we entered into a committed revolving credit facility totaling $1,850 million that matures on November 2, 2023. This facility remained unused at August 1, 2021, except for $1 million of standby letters of credit that we issued under it. 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. The facility supports our commercial paper program and other general corporate purposes. We expect to continue to access the commercial paper markets, bank credit lines and utilize cash flows from operations to support our short-term liquidity requirements.

We are in compliance with the covenants contained in our credit facilities and debt securities.

In September 2020, we filed a registration statement with the Securities and Exchange Commission that registered an indeterminate amount of debt securities. Under the registration statement we may issue debt securities from time to time, depending on market conditions.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Contractual Obligations

The following table summarizes our obligations and commitments to make future payments under certain contractual obligations as of August 1, 2021. For additional information on debt, see Note 12 to the Consolidated Financial Statements. Purchase commitments represent purchase orders and long-term purchase arrangements related to the procurement of ingredients, supplies, machinery, equipment and services. These commitments are not expected to have a material impact on liquidity. Other long-term liabilities primarily represent payments related to deferred compensation obligations. For additional information on other long-term liabilities, see Note 19 to the Consolidated Financial Statements.

[[GREPCENT_TABLE]]
[["","Contractual Payments Due by Fiscal Year"],["(Millions)","Total","","2022","","2023-2024","","2025-2026","","Thereafter"],["Debt obligations(1)","$","5,096","","","$","48","","","$","1,030","","","$","1,155","","","$","2,863"],["Interest payments(2)","2,056","","","184","","","318","","","245","","","1,309"],["Derivative payments(3)","3","","","3","","","\u2014","","","\u2014","","","\u2014"],["Operating leases(4)","255","","","59","","","87","","","46","","","63"],["Purchase commitments","1,335","","","1,079","","","190","","","66","","","\u2014"],["Other long-term payments(5)","142","","","\u2014","","","64","","","30","","","48"],["Total","$","8,887","","","$","1,373","","","$","1,689","","","$","1,542","","","$","4,283"]]
[[/GREPCENT_TABLE]]

30

_______________________________________

(1)Excludes unamortized net discount/premium on debt issuances and debt issuance costs. For additional information on debt obligations, see Note 12 to the Consolidated Financial Statements.

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

(3)Represents payments of foreign exchange forward contracts.

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

(5)Represents other long-term liabilities, excluding unrecognized tax benefits, postretirement benefits and payments related to pension plans. For additional information on pension and postretirement benefits, see Note 9 to the Consolidated Financial Statements. For additional information on unrecognized tax benefits, see Note 11 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements and Other Commitments

We guarantee approximately 4,900 bank loans made to independent contractor distributors by third-party financial institutions for the purchase of distribution routes. The maximum potential amount of the future payments under existing guarantees we could be required to make is $488 million as of August 1, 2021. Our guarantees are indirectly secured by the distribution routes. We do not expect that we will be required to make material guarantee payments as a result of defaults on the bank loans guaranteed.

INFLATION

We are exposed to the impact of inflation on our cost of products sold. We use a number of strategies to mitigate the effects of cost inflation including increasing prices, commodity hedging and pursuing cost productivity initiatives. We experienced higher inflation in 2021, and expect to experience increased inflation in 2022. Pricing actions and supply chain productivity initiatives introduced at the end of 2021 will mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in 2022.

MARKET RISK SENSITIVITY

The principal market risks to which we are exposed are changes in foreign currency exchange rates, interest rates and commodity prices. In addition, we are exposed to equity price changes related to certain deferred compensation obligations. We manage our exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines. We manage our foreign currency exposures by utilizing foreign exchange forward contracts. We enter into foreign exchange forward contracts for periods consistent with related underlying exposures, and the contracts do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments.

We principally use a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, soybean oil, diesel fuel, natural gas, aluminum, cocoa, soybean meal, corn and butter.

The information below summarizes our market risks associated with debt obligations and other significant financial instruments as of August 1, 2021. Fair values included herein have been determined based on quoted market prices or pricing models using current market rates. The information presented below should be read in conjunction with Notes 12, 13 and 15 to the Consolidated Financial Statements.

The following table presents principal cash flows and related interest rates by fiscal year of maturity for debt obligations. Interest rates disclosed on variable-rate debt represent the weighted-average rates at August 1, 2021.

[[GREPCENT_TABLE]]
[["","Expected Fiscal Year of Maturity","","","","Fair Value"],["(Millions)","2022","","2023","","2024","","2025","","2026","","Thereafter","","Total"],["Debt(1)"],["Fixed rate","$","11","","","$","1,025","","","$","5","","","$","1,152","","","$","3","","","$","2,863","","","$","5,059","","","$","5,576"],["Weighted-average interest rate","0.89","%","","3.12","%","","0.79","%","","3.77","%","","0.56","%","","3.80","%","","3.65","%"],["Variable rate","$","37","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","37","","","$","37"],["Weighted-average interest rate","0.22","%","","\u2014","%","","\u2014","%","","\u2014","%","","\u2014","%","","\u2014","%","","0.22","%"]]
[[/GREPCENT_TABLE]]

_______________________________________

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

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

31

We are exposed to foreign exchange risk, primarily the Canadian dollar, related to third-party transactions and intercompany transactions. We utilize foreign exchange forward purchase and sale contracts to hedge these exposures. The notional amounts of the contracts as of August 1, 2021, and August 2, 2020, were $147 million and $183 million, respectively. The aggregate fair value of all contracts was a loss of $2 million as of August 1, 2021, and a loss of $1 million as of August 2, 2020. A hypothetical 10% fluctuation in exchange rates would impact the fair value of our outstanding foreign exchange contracts by $17 million as of August 1, 2021, and $20 million as of August 2, 2020, which would generally be offset by inverse changes on the underlying hedged items.

We enter into commodity futures, options and swap contracts, and a supply contract under which prices for certain raw materials are established based on anticipated volume requirements to reduce the volatility of price fluctuations for commodities. As of August 1, 2021, the total notional amount of the contracts was $246 million, and the aggregate fair value of these contracts was a gain of $53 million. As of August 2, 2020, the total notional amount of these contracts was $171 million, and the aggregate fair value of these contracts was a loss of $2 million. A hypothetical 10% fluctuation in commodity prices would impact the fair value of our outstanding commodity contracts by $30 million as of August 1, 2021, and $17 million as of August 2, 2020, which would generally be offset by inverse changes on the underlying hedged items.

We enter into swap contracts which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of our capital stock, the total return of the Vanguard Institutional Index Institutional Plus Shares, and the total return of the Vanguard Total International Stock Index. Under these contracts, we pay variable interest rates and receive from the counterparty either: the total return on our capital stock; the total return of the Standard & Poor's 500 Index, which is expected to approximate the total return of the Vanguard Institutional Index Institutional Plus Shares; or the total return of the iShares MSCI EAFE Index, which is expected to approximate the total return of the Vanguard Total International Stock Index. As of June 2021, we no longer hedge our exposure linked to the total return of our capital stock. The notional amount of the contracts was $29 million as of August 1, 2021, and $22 million as of August 2, 2020. The fair value of these contracts was a gain of $3 million as of August 1, 2021, and a gain of $4 million as of August 2, 2020 A hypothetical 10% fluctuation in equity price changes would impact the fair value of our outstanding swap contracts by $3 million as of August 1, 2021, and August 2, 2020, which would generally be offset by inverse changes on the underlying hedged items.

Our utilization of financial instruments in managing market risk exposures described above is consistent with the prior year. Changes in the portfolio of financial instruments are a function of the results of operations, debt repayment and debt issuances, market effects on debt and foreign currency, and our acquisition and divestiture activities.

SIGNIFICANT ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. See Note 1 to the Consolidated Financial Statements for a discussion of significant accounting policies. The following areas all require the use of subjective or complex judgments, estimates and assumptions:

Trade and consumer promotion programs — We offer various sales incentive programs to customers and consumers, such as feature price discounts, in-store display incentives, cooperative advertising programs, new product introduction fees, and coupons. The mix between these forms of variable consideration, which are classified as reductions in revenue and recognized upon sale, and advertising or other marketing activities, which are classified as marketing and selling expenses, fluctuates between periods based on our overall marketing plans. The measurement and recognition of the costs for trade and consumer promotion programs involves the use of judgment related to performance and redemption estimates. Estimates are made based on historical experience and other factors, including expected volume. Typically, programs that are offered have a very short duration. Historically, the difference between actual experience compared to estimated redemptions and performance has not been significant to the quarterly or annual financial statements. Differences between estimates and actual costs are recognized as a change in estimate in a subsequent period. However, actual expenses may differ if the level of redemption rates and performance were to vary from estimates.

Valuation of long-lived assets — Fixed assets and amortizable intangible assets are reviewed for impairment as events or changes in circumstances occur indicating that the carrying value of the asset may not be recoverable. Undiscounted cash flow analyses are used to determine if impairment exists. If impairment is determined to exist, the loss is calculated based on estimated fair value.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but rather are tested at least annually for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable. Goodwill is tested for impairment at the reporting unit level. A reporting unit represents an operating segment or a component of an operating segment. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is

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more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We may elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment test. Fair value is determined based on discounted cash flow analyses. The discounted estimates of future cash flows include significant management assumptions such as revenue growth rates, operating margins, weighted average costs of capital, and future economic and market conditions. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired and an impairment charge will be recorded to reduce the reporting unit to fair value.

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

2021 Assessments

Continuing Operations

As of August 1, 2021, the carrying value of goodwill was $3,981 million. Based on our assessments, all of our reporting units fair values significantly exceeded their carrying values.

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

[[GREPCENT_TABLE]]
[["(Millions)","","Various Other Snyder's-Lance","","Snyder's of Hanover","","Lance","","Pace","","Pacific Foods"],["Carrying value","","$","1,007","","","$","620","","","$","350","","","$","292","","","$","280"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["(Millions)","","Various Other Snyder's-Lance","","Snyder's of Hanover","","Lance","","Pace","","Pacific Foods"],["1% increase in the weighted-average cost of capital","","$","10","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["1% reduction in revenue growth","","$","20","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["1% decrease in royalty rate","","$","55","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

While the 1% changes in assumptions would not result in impairment charges on certain trademarks as indicated above, some changes would substantially reduce the excess coverage of fair value over carrying value to less than 10% for the Pace, Pacific Foods, and Lance trademarks. The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating performance, assumed royalty rates, economic conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance, and economic conditions.

If assumptions are not achieved or market conditions decline, potential additional impairment charges could result. We will continue to monitor the valuation of our long-lived assets.

2019 Impairment charges

Discontinued Operations

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

On August 30, 2018, we announced plans to pursue the divestiture of our international biscuits and snacks operating segment and the Campbell Fresh operating segment. As we continued to pursue the divestiture of these businesses and as we received initial indications of value, in the second quarter of 2019, we performed interim impairment assessments on the intangible and tangible assets within Campbell Fresh, which included Garden Fresh Gourmet, Bolthouse Farms carrot and carrot ingredients, and Bolthouse Farms refrigerated beverages and salad dressings. As a result, we revised our future outlook for earnings and cash flows for each of these businesses.

Within Bolthouse Farms carrot and carrot ingredients, we recorded impairment charges of $18 million on the trademark, and $159 million on the plant assets and amortizable intangible assets. Within Bolthouse Farms refrigerated beverages and salad dressings, we recorded impairment charges of $74 million on the trademark, and $31 million on the plant assets and amortizable intangible assets. On Garden Fresh Gourmet, we recorded impairment charges of $23 million on the trademark and $39 million on customer relationships, which eliminated the carrying value of these assets, and $2 million on plant assets.

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In the fourth quarter of 2019, as part of our annual review of intangible assets, we recognized an impairment charge of $7 million on a trademark and $10 million on goodwill in Kelsen due to a lower long-term outlook for sales and the pending sale of the business. On July 12, 2019, we signed a definitive agreement for the sale of our Kelsen business. We sold the business on September 23, 2019.

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

Continuing Operations

In the fourth quarter of 2019, we performed an assessment on the assets within our European chips business and recorded an impairment charge of $16 million on intangible assets. This business was included in the Snacks segment and reporting unit.

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

Pension and postretirement benefits — We provide certain pension and postretirement benefits to employees and retirees. Determining the cost associated with such benefits is dependent on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, turnover rates and health care trend rates. Independent actuaries, in accordance with accounting principles generally accepted in the United States, perform the required calculations to determine expense.

The discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration. In addition, independent actuaries apply high-quality bond yield curves to the expected benefit payments of the plans. We use a full yield curve approach to estimate service cost and interest cost by applying the specific spot rates along the yield curve used to determine the benefit obligation of the relevant projected cash flows.

The expected return on plan assets is a long-term assumption based upon historical experience and expected future performance, considering our current and projected investment mix. This estimate is based on an estimate of future inflation, long-term projected real returns for each asset class, and a premium for active management. Within any given fiscal period, significant differences may arise between the actual return and the expected return on plan assets. Gains and losses resulting from differences between actual experience and the assumptions are determined at each measurement date.

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

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

[[GREPCENT_TABLE]]
[["","2021","","2020","","2019"],["Pension"],["Discount rate for benefit obligations","2.69%","","2.47%","","3.46%"],["Expected return on plan assets","5.82%","","6.01%","","6.85%"],["Postretirement"],["Discount rate for obligations","2.37%","","2.15%","","3.28%"],["Initial health care trend rate","6.25%","","6.25%","","6.25%"],["Ultimate health care trend rate","4.50%","","4.50%","","4.50%"]]
[[/GREPCENT_TABLE]]

Estimated sensitivities to annual net periodic pension and postretirement cost are as follows: a 50-basis-point decline in the discount rate would result in income of approximately $10 million and would result in an immediate loss recognition of approximately $113 million. A 50-basis-point reduction in the estimated return on assets assumption would result in expense of approximately $12 million.

Contributions to pension plans were $2 million in 2021 and 2020, and $5 million in 2019. Contributions to pension plans are not expected to be material in 2022.

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

Income taxes — The effective tax rate reflects statutory tax rates, tax planning opportunities available in the various jurisdictions in which we operate and management’s estimate of the ultimate outcome of various tax audits and issues. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. Income taxes are recorded based on amounts refundable or payable in the current year and include the effect of deferred taxes. Deferred tax assets and liabilities are recognized for the future impact of differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be realized.

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See also Notes 1 and 11 to the Consolidated Financial Statements for further discussion on income taxes.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to the Consolidated Financial Statements for information on recent accounting pronouncements.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This Report contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current expectations regarding our future results of operations, economic performance, financial condition and achievements. These forward-looking statements can be identified by words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "pursue," "strategy," "target," "will" and similar expressions. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts, and may reflect anticipated cost savings or implementation of our strategic plan. These statements reflect our current plans and expectations and are based on information currently available to us. They rely on several assumptions regarding future events and estimates which could be inaccurate and which are inherently subject to risks and uncertainties.

We wish to caution the reader that the following important factors and those important factors described in Part 1, Item 1A and elsewhere in this Report, or in our other Securities and Exchange Commission filings, could affect our actual results and could cause such results to vary materially from those expressed in any forward-looking statements made by, or on behalf of, us:

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

•our ability to execute on and realize the expected benefits from our strategy, including growing sales in snacks and growing/maintaining our market share position in soup;

•the impact of strong competitive responses to our efforts to leverage brand power with product innovation, promotional programs and new advertising;

•the risks associated with trade and consumer acceptance of product improvements, shelving initiatives, new products and pricing and promotional strategies;

•our ability to realize projected cost savings and benefits from cost savings initiatives and the integration of recent acquisitions;

•disruptions in or inefficiencies to our supply chain and/or operations including the impacts of the COVID-19 pandemic;

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

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

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

•changes in consumer demand for our products and favorable perception of our brands;

•changing inventory management practices by certain of our key customers;

•a changing customer landscape, with value and e-commerce retailers expanding their market presence, while certain of our key customers maintain significance to our business;

•product quality and safety issues, including recalls and product liabilities;

•the possible disruption to the independent contractor distribution models used by certain of our businesses, including as a result of litigation or regulatory actions affecting their independent contractor classification;

•the uncertainties of litigation and regulatory actions against us;

•the costs, disruption and diversion of management's attention associated with activist investors;

•a material failure in or breach of our or our vendors' information technology systems;

•impairment to goodwill or other intangible assets;

•our ability to protect our intellectual property rights;

•increased liabilities and costs related to our defined benefit pension plans;

•our ability to attract and retain key talent;

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•goals and initiatives related to, and the impacts of, climate change, including from weather-related events;

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

•unforeseen business disruptions in one or more of our markets due to political instability, civil disobedience, terrorism, armed hostilities, extreme weather conditions, natural disasters, other pandemics or other calamities.

This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact our outlook. We disclaim any obligation or intent to update forward-looking statements made by us in order to reflect new information, events or circumstances after the date they are made.