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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For The Quarterly Period Ended | | | | Commission File Number |
October 30, 2022 | | | | 1-3822 |
CAMPBELL SOUP COMPANY | | | | | |
New Jersey | 21-0419870 |
State of Incorporation | I.R.S. Employer Identification No. |
1 Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices
Telephone Number: (856) 342-4800
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol | | Name of Each Exchange on Which Registered |
Capital Stock, par value $.0375 | | CPB | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☑ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
There were 299,467,564 shares of capital stock outstanding as of December 1, 2022.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CAMPBELL SOUP COMPANY
Consolidated Statements of Earnings
(unaudited)
(millions, except per share amounts)
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| Three Months Ended | | |
| October 30, 2022 | | October 31, 2021 | | | | |
Net sales | $ | 2,575 | | | $ | 2,236 | | | | | |
Costs and expenses | | | | | | | |
Cost of products sold | 1,741 | | | 1,514 | | | | | |
Marketing and selling expenses | 201 | | | 170 | | | | | |
Administrative expenses | 158 | | | 156 | | | | | |
Research and development expenses | 21 | | | 21 | | | | | |
Other expenses / (income) | 18 | | | (1) | | | | | |
Restructuring charges | — | | | — | | | | | |
Total costs and expenses | 2,139 | | | 1,860 | | | | | |
Earnings before interest and taxes | 436 | | | 376 | | | | | |
Interest expense | 47 | | | 47 | | | | | |
Interest income | 1 | | | — | | | | | |
Earnings before taxes | 390 | | | 329 | | | | | |
Taxes on earnings | 93 | | | 68 | | | | | |
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Net earnings | 297 | | | 261 | | | | | |
Less: Net earnings (loss) attributable to noncontrolling interests | — | | | — | | | | | |
Net earnings attributable to Campbell Soup Company | $ | 297 | | | $ | 261 | | | | | |
Per Share — Basic | | | | | | | |
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Net earnings attributable to Campbell Soup Company | $ | .99 | | | $ | .86 | | | | | |
Weighted average shares outstanding — basic | 299 | | | 302 | | | | | |
Per Share — Assuming Dilution | | | | | | | |
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Net earnings attributable to Campbell Soup Company | $ | .99 | | | $ | .86 | | | | | |
Weighted average shares outstanding — assuming dilution | 301 | | | 303 | | | | | |
See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| October 30, 2022 | | October 31, 2021 |
| Pre-tax amount | | Tax benefit (expense) | | After-tax amount | | Pre-tax amount | | Tax benefit (expense) | | After-tax amount |
Net earnings (loss) | | | | | $ | 297 | | | | | | | $ | 261 | |
Other comprehensive income (loss): | | | | | | | | | | | |
Foreign currency translation: | | | | | | | | | | | |
Foreign currency translation adjustments | $ | (8) | | | $ | — | | | (8) | | | $ | — | | | $ | — | | | — | |
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Cash-flow hedges: | | | | | | | | | | | |
Unrealized gains (losses) arising during the period | 7 | | | (2) | | | 5 | | | 3 | | | (1) | | | 2 | |
Reclassification adjustment for losses (gains) included in net earnings | (4) | | | 1 | | | (3) | | | — | | | — | | | — | |
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Other comprehensive income (loss) | $ | (5) | | | $ | (1) | | | (6) | | | $ | 3 | | | $ | (1) | | | 2 | |
Total comprehensive income (loss) | | | | | $ | 291 | | | | | | | $ | 263 | |
Total comprehensive income (loss) attributable to noncontrolling interests | | | | | — | | | | | | | — | |
Total comprehensive income (loss) attributable to Campbell Soup Company | | | | | $ | 291 | | | | | | | $ | 263 | |
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See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts) | | | | | | | | | | | |
| October 30, 2022 | | July 31, 2022 |
Current assets | | | |
Cash and cash equivalents | $ | 130 | | | $ | 109 | |
Accounts receivable, net | 733 | | | 541 | |
Inventories | 1,361 | | | 1,246 | |
Other current assets | 80 | | | 67 | |
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Total current assets | 2,304 | | | 1,963 | |
Plant assets, net of depreciation | 2,312 | | | 2,343 | |
Goodwill | 3,973 | | | 3,979 | |
Other intangible assets, net of amortization | 3,187 | | | 3,198 | |
Other assets | 401 | | | 409 | |
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Total assets | $ | 12,177 | | | $ | 11,892 | |
Current liabilities | | | |
Short-term borrowings | $ | 858 | | | $ | 814 | |
Payable to suppliers and others | 1,447 | | | 1,334 | |
Accrued liabilities | 534 | | | 621 | |
Dividends payable | 112 | | | 114 | |
Accrued income taxes | 82 | | | 3 | |
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Total current liabilities | 3,033 | | | 2,886 | |
Long-term debt | 3,994 | | | 3,996 | |
Deferred taxes | 1,078 | | | 1,074 | |
Other liabilities | 603 | | | 603 | |
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Total liabilities | 8,708 | | | 8,559 | |
Commitments and contingencies | | | |
Campbell Soup Company shareholders' equity | | | |
Preferred stock; authorized 40 shares; none issued | — | | | — | |
Capital stock, $.0375 par value; authorized 560 shares; issued 323 shares | 12 | | | 12 | |
Additional paid-in capital | 375 | | | 415 | |
Earnings retained in the business | 4,224 | | | 4,040 | |
Capital stock in treasury, at cost | (1,140) | | | (1,138) | |
Accumulated other comprehensive income (loss) | (4) | | | 2 | |
Total Campbell Soup Company shareholders' equity | 3,467 | | | 3,331 | |
Noncontrolling interests | 2 | | | 2 | |
Total equity | 3,469 | | | 3,333 | |
Total liabilities and equity | $ | 12,177 | | | $ | 11,892 | |
See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
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| Three Months Ended |
| October 30, 2022 | | October 31, 2021 |
Cash flows from operating activities: | | | |
Net earnings | $ | 297 | | | $ | 261 | |
Adjustments to reconcile net earnings to operating cash flow | | | |
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Stock-based compensation | 15 | | | 14 | |
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Pension and postretirement benefit expense (income) | 11 | | | (9) | |
Depreciation and amortization | 91 | | | 83 | |
Deferred income taxes | 3 | | | 20 | |
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Other | 25 | | | 22 | |
Changes in working capital | | | |
Accounts receivable | (198) | | | (137) | |
Inventories | (118) | | | (40) | |
Other current assets | (10) | | | (5) | |
Accounts payable and accrued liabilities | 123 | | | 87 | |
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Other | (12) | | | (8) | |
Net cash provided by operating activities | 227 | | | 288 | |
Cash flows from investing activities: | | | |
Purchases of plant assets | (77) | | | (69) | |
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Purchases of route businesses | (1) | | | — | |
Sales of route businesses | — | | | 1 | |
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Net cash used in investing activities | (78) | | | (68) | |
Cash flows from financing activities: | | | |
Short-term borrowings, including commercial paper | 557 | | | 371 | |
Short-term repayments, including commercial paper | (512) | | | (395) | |
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Dividends paid | (115) | | | (116) | |
Treasury stock purchases | (41) | | | (63) | |
Treasury stock issuances | 2 | | | 1 | |
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Payments related to tax withholding for stock-based compensation | (18) | | | (17) | |
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Other | — | | | (1) | |
Net cash used in financing activities | (127) | | | (220) | |
Effect of exchange rate changes on cash | (1) | | | — | |
Net change in cash and cash equivalents | 21 | | | — | |
Cash and cash equivalents — beginning of period | 109 | | | 69 | |
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Cash and cash equivalents — end of period | $ | 130 | | | $ | 69 | |
See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Statements of Equity
(unaudited)
(millions, except per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Campbell Soup Company Shareholders’ Equity | | | | |
| Capital Stock | | Additional Paid-in Capital | | Earnings Retained in the Business | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | |
| Issued | | In Treasury | | | | | | Total Equity |
| Shares | | Amount | | Shares | | Amount | | | | | |
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Balance at August 1, 2021 | 323 | | | $ | 12 | | | (21) | | | $ | (1,021) | | | $ | 414 | | | $ | 3,742 | | | $ | 5 | | | $ | 2 | | | $ | 3,154 | |
Net earnings (loss) | | | | | | | | | | | 261 | | | | | — | | | 261 | |
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Other comprehensive income (loss) | | | | | | | | | | | | | 2 | | | — | | | 2 | |
Dividends ($.37 per share) | | | | | | | | | | | (113) | | | | | | | (113) | |
Treasury stock purchased | | | | | (1) | | | (63) | | | | | | | | | | | (63) | |
Treasury stock issued under management incentive and stock option plans | | | | | 1 | | | 46 | | | (42) | | | (8) | | | | | | | (4) | |
Balance at October 31, 2021 | 323 | | | $ | 12 | | | (21) | | | $ | (1,038) | | | $ | 372 | | | $ | 3,882 | | | $ | 7 | | | $ | 2 | | | $ | 3,237 | |
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Balance at July 31, 2022 | 323 | | | $ | 12 | | | (24) | | | $ | (1,138) | | | $ | 415 | | | $ | 4,040 | | | $ | 2 | | | $ | 2 | | | $ | 3,333 | |
Net earnings (loss) | | | | | | | | | | | 297 | | | | | — | | | 297 | |
Other comprehensive income (loss) | | | | | | | | | | | | | (6) | | | — | | | (6) | |
Dividends ($.37 per share) | | | | | | | | | | | (113) | | | | | | | (113) | |
Treasury stock purchased | | | | | (1) | | | (41) | | | | | | | | | | | (41) | |
Treasury stock issued under management incentive and stock option plans | | | | | 1 | | | 39 | | | (40) | | | — | | | | | | | (1) | |
Balance at October 30, 2022 | 323 | | | $ | 12 | | | (24) | | | $ | (1,140) | | | $ | 375 | | | $ | 4,224 | | | $ | (4) | | | $ | 2 | | | $ | 3,469 | |
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See accompanying Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Significant Accounting Policies
In this Form 10-Q, unless otherwise stated, the terms "we," "us," "our" and the "company" refer to Campbell Soup Company and its consolidated subsidiaries.
The financial statements reflect all adjustments which are, in our opinion, necessary for a fair statement of the results of operations, financial position and cash flows for the indicated periods. The accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our Annual Report on Form 10-K for the year ended July 31, 2022.
The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. Our fiscal year ends on the Sunday nearest July 31, which is July 30, 2023.
2. Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In September 2022, the Financial Accounting Standards Board (FASB) issued guidance that enhances the transparency of supplier finance programs by requiring disclosure of the key terms of these programs and a related rollforward of these obligations to understand the effect on working capital, liquidity and cash flows. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods in those fiscal years, except for the rollforward requirement, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our disclosures.
3. Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) consisted of the following:
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(Millions) | | Foreign Currency Translation Adjustments(1) | | Cash-Flow Hedges(2) | | Pension and Postretirement Benefit Plan Adjustments(3) | | Total Accumulated Comprehensive Income (Loss) |
Balance at August 1, 2021 | | $ | 6 | | | $ | (4) | | | $ | 3 | | | $ | 5 | |
Other comprehensive income (loss) before reclassifications | | — | | | 2 | | | — | | | 2 | |
Losses (gains) reclassified from accumulated other comprehensive income (loss) | | — | | | — | | | — | | | — | |
Net current-period other comprehensive income (loss) | | — | | | 2 | | | — | | | 2 | |
Balance at October 31, 2021 | | $ | 6 | | | $ | (2) | | | $ | 3 | | | $ | 7 | |
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Balance at July 31, 2022 | | $ | — | | | $ | — | | | $ | 2 | | | $ | 2 | |
Other comprehensive income (loss) before reclassifications | | (8) | | | 5 | | | — | | | (3) | |
Losses (gains) reclassified from accumulated other comprehensive income (loss) | | — | | | (3) | | | — | | | (3) | |
Net current-period other comprehensive income (loss) | | (8) | | | 2 | | | — | | | (6) | |
Balance at October 30, 2022 | | $ | (8) | | | $ | 2 | | | $ | 2 | | | $ | (4) | |
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(1)Included no tax as of October 30, 2022, July 31, 2022, October 31, 2021 and August 1, 2021.
(2)Included tax expense of $1 million as of October 30, 2022, no tax as of July 31, 2022 and October 31, 2021, and a tax benefit of $1 million as of August 1, 2021.
(3)Included tax expense of $1 million as of October 30, 2022, July 31, 2022, October 31, 2021, and August 1, 2021.
Amounts related to noncontrolling interests were not material.
The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following:
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| | | | Three Months Ended | | |
(Millions) | | | | | | October 30, 2022 | | October 31, 2021 | | Location of Loss (Gain) Recognized in Earnings |
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Losses (gains) on cash-flow hedges: | | | | | | | | | | |
Commodity contracts | | | | | | $ | (3) | | | $ | (1) | | | Cost of products sold |
Foreign exchange forward contracts | | | | | | (1) | | | 1 | | | Cost of products sold |
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Total before tax | | | | | | (4) | | | — | | | |
Tax expense (benefit) | | | | | | 1 | | | — | | | |
Loss (gain), net of tax | | | | | | $ | (3) | | | $ | — | | | |
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4. Goodwill and Intangible Assets
Goodwill
The following table shows the changes in the carrying amount of goodwill:
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(Millions) | Meals & Beverages | | Snacks | | Total |
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Net balance at July 31, 2022 | $ | 993 | | | $ | 2,986 | | | $ | 3,979 | |
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Foreign currency translation adjustment | (6) | | | — | | | (6) | |
Net balance at October 30, 2022 | $ | 987 | | | $ | 2,986 | | | $ | 3,973 | |
Intangible Assets
The following table summarizes balance sheet information for intangible assets, excluding goodwill:
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(Millions) | | Cost | | Accumulated Amortization | | Net | | Cost | | Accumulated Amortization | | Net |
Amortizable intangible assets | | | | | | | | | | | | |
Customer relationships | | $ | 830 | | | $ | (192) | | | $ | 638 | | | $ | 830 | | | $ | (181) | | | $ | 649 | |
Non-amortizable intangible assets | | | | | | | | | | | | |
Snyder's of Hanover | | | | | | $ | 620 | | | | | | | $ | 620 | |
Lance | | | | | | 350 | | | | | | | 350 | |
Kettle Brand | | | | | | 318 | | | | | | | 318 | |
Pace | | | | | | 292 | | | | | | | 292 | |
Pacific Foods | | | | | | 280 | | | | | | | 280 | |
Various other Snacks(1) | | | | | | 689 | | | | | | | 689 | |
Total trademarks | | | | | | $ | 2,549 | | | | | | | $ | 2,549 | |
Total net intangible assets | | | | | | $ | 3,187 | | | | | | | $ | 3,198 | |
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(1)Associated with the acquisition of Snyder's-Lance, Inc. (Snyder's-Lance).
Amortization of intangible assets was $11 million for both the three-month periods ended October 30, 2022 and October 31, 2021. As of October 30, 2022, amortizable intangible assets had a weighted-average remaining useful life of 16 years. Amortization expense for the next 5 years is estimated to be approximately $41 million per year.
As of our 2022 annual impairment testing, indefinite-lived trademarks with 10% or less of excess coverage of fair value over carrying value had an aggregate carrying value of $434 million and included Pacific Foods and certain other Snacks trademarks.
The estimates of future cash flows used in determining the fair value of goodwill and intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as
changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance and economic conditions.
5. Segment Information
Our reportable segments are as follows:
•Meals & Beverages, which consists of our soup, simple meals and beverages products in retail and foodservice in the U.S. and Canada. The segment includes the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; V8 juices and beverages; and Campbell’s tomato juice. The segment also includes snacking products in foodservice and Canada; and
•Snacks, which consists of Pepperidge Farm cookies*, crackers, fresh bakery and frozen products, including Goldfish crackers*, Snyder’s of Hanover pretzels*, Lance sandwich crackers*, Cape Cod potato chips*, Kettle Brand potato chips*, Late July snacks*, Snack Factory pretzel crisps*, Pop Secret popcorn, Emerald nuts, 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.
We evaluate segment performance before interest, taxes and costs associated with restructuring activities and impairment charges. Unrealized gains and losses on outstanding undesignated commodity hedging activities are excluded from segment operating earnings and are recorded in Corporate as these open positions represent hedges of future purchases. Upon closing of the contracts, the realized gain or loss is transferred to segment operating earnings, which allows the segments to reflect the economic effects of the hedge without exposure to quarterly volatility of unrealized gains and losses. Only the service cost component of pension and postretirement expense is allocated to segments. All other components of expense, including interest cost, expected return on assets, amortization of prior service credits and recognized actuarial gains and losses are reflected in Corporate and not included in segment operating results. Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.
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| | Three Months Ended | | |
(Millions) | | October 30, 2022 | | October 31, 2021 | | | | |
Net sales | | | | | | | | |
Meals & Beverages | | $ | 1,455 | | | $ | 1,266 | | | | | |
Snacks | | 1,120 | | | 970 | | | | | |
Total | | $ | 2,575 | | | $ | 2,236 | | | | | |
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| | Three Months Ended | | |
(Millions) | | October 30, 2022 | | October 31, 2021 | | | | |
Earnings before interest and taxes | | | | | | | | |
Meals & Beverages | | $ | 331 | | | $ | 280 | | | | | |
Snacks | | 153 | | | 128 | | | | | |
Corporate income (expense)(1) | | (48) | | | (32) | | | | | |
Restructuring charges(2) | | — | | | — | | | | | |
Total | | $ | 436 | | | $ | 376 | | | | | |
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(1)Represents unallocated items. There were pension actuarial losses of $15 million and $6 million in the three-month periods ended October 30, 2022, and October 31, 2021, respectively. Costs related to the cost savings initiatives were $3 million and $4 million in the three-month periods ended October 30, 2022, and October 31, 2021, respectively. Unrealized mark-to-market adjustments on outstanding undesignated commodity hedges were gains of $5 million and losses of $3 million in the three-month periods ended October 30, 2022, and October 31, 2021, respectively.
(2)See Note 6 for additional information.
Our net sales based on product categories are as follows:
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| | Three Months Ended | | |
(Millions) | | October 30, 2022 | | October 31, 2021 | | | | |
Net sales | | | | | | | | |
Soup | | $ | 893 | | | $ | 797 | | | | | |
Snacks | | 1,173 | | | 1,003 | | | | | |
Other simple meals | | 315 | | | 264 | | | | | |
Beverages | | 194 | | | 172 | | | | | |
Total | | $ | 2,575 | | | $ | 2,236 | | | | | |
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 and canned poultry. Beverages include V8 juices and beverages, Campbell’s tomato juice and Pacific Foods non-dairy beverages.
6. Restructuring Charges and Cost Savings Initiatives
Multi-year Cost Savings Initiatives and Snyder's-Lance Cost Transformation Program and Integration
Continuing Operations
Beginning in fiscal 2015, we implemented initiatives to reduce costs and to streamline our organizational structure.
Over the years, we expanded these initiatives by continuing to optimize our supply chain and manufacturing networks, as well as our information technology infrastructure.
On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to the acquisition, Snyder's-Lance launched a cost transformation program following a comprehensive review of its operations with the goal of significantly improving its financial performance. We continued to implement this program and identified opportunities for additional cost synergies as we integrated Snyder's-Lance.
In 2022, we expanded these initiatives as we continue to pursue cost savings by further optimizing our supply chain and manufacturing network and through effective cost management. Cost estimates for these expanded initiatives, as well as timing for certain activities, are continuing to be developed.
A summary of the pre-tax charges recognized in the Consolidated Statements of Earnings related to these initiatives is as follows:
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
(Millions) | October 30, 2022 | | October 31, 2021 | | | | | | Recognized as of October 30, 2022 |
Restructuring charges | $ | — | | | $ | — | | | | | | | $ | 264 | |
Administrative expenses | 3 | | | 2 | | | | | | | 362 | |
Cost of products sold | — | | | 2 | | | | | | | 84 | |
Marketing and selling expenses | — | | | — | | | | | | | 14 | |
Research and development expenses | — | | | — | | | | | | | 4 | |
Total pre-tax charges | $ | 3 | | | $ | 4 | | | | | | | $ | 728 | |
A summary of the pre-tax costs associated with the initiatives is as follows: | | | | | |
(Millions) | Recognized as of October 30, 2022 |
Severance pay and benefits | $ | 227 | |
Asset impairment/accelerated depreciation | 82 | |
Implementation costs and other related costs | 419 | |
Total | $ | 728 | |
The total estimated pre-tax costs for actions that have been identified are approximately $735 million to $740 million and we expect to incur the costs through 2023. 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 $230 million in severance pay and benefits; approximately $85 million in asset impairment and accelerated depreciation; and approximately
$420 million to $425 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 30%; Snacks - approximately 44%; and Corporate - approximately 26%.
Of the aggregate $735 million to $740 million of pre-tax costs identified to date, we expect approximately $635 million to $640 million will be cash expenditures. In addition, we expect to invest approximately $450 million in capital expenditures, of which we invested $440 million as of October 30, 2022. We expect to invest in substantially all of the capital expenditures through 2023. The capital expenditures primarily relate to a U.S. warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, transition of production within our Meals & Beverages manufacturing network, optimization of information technology infrastructure and applications and optimization of the Snyder’s-Lance warehouse and distribution network.
A summary of the restructuring activity and related reserves at October 30, 2022, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions) | | Severance Pay and Benefits | | | | | | Implementation Costs and Other Related Costs(1) | | | | | | Total Charges |
Accrued balance at July 31, 2022 | | $ | 7 | | | | | | | | | | | | | |
2023 charges | | — | | | | | | | 3 | | | | | | | $ | 3 | |
2023 cash payments | | (2) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Accrued balance at October 30, 2022 | | $ | 5 | | | | | | | | | | | | | |
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(1)Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses in the Consolidated Statements of Earnings.
Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs associated with segments is as follows:
| | | | | | | | | | | | | |
| October 30, 2022 |
(Millions) | Three Months Ended | | | | Costs Incurred to Date |
Meals & Beverages | $ | — | | | | | $ | 225 | |
Snacks | — | | | | | 321 | |
Corporate | 3 | | | | | 182 | |
Total | $ | 3 | | | | | $ | 728 | |
7. Earnings per Share (EPS)
For the periods presented in the Consolidated Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution include the incremental effect of stock options and other share-based payment awards, except when such effect would be antidilutive. The earnings per share calculation for the three-month periods ended October 30, 2022, and October 31, 2021, excludes approximately 1 million stock options that would have been antidilutive.
8. Pension and Postretirement Benefits
Components of net benefit expense (income) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
| Pension | | Postretirement | | | | | | | |
(Millions) | October 30, 2022 | | October 31, 2021 | | October 30, 2022 | | October 31, 2021 | | | | | | | | | | | | | | | | |
Service cost | $ | 4 | | | $ | 4 | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | |
Interest cost | 17 | | | 10 | | | 2 | | | 1 | | | | | | | | | | | | | | | | | |
Expected return on plan assets | (27) | | | (30) | | | — | | | — | | | | | | | | | | | | | | | | | |
Amortization of prior service cost | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Actuarial losses | 15 | | | 6 | | | — | | | — | | | | | | | | | | | | | | | | | |
Net periodic benefit expense (income) | $ | 9 | | | $ | (10) | | | $ | 2 | | | $ | 1 | | | | | | | | | | | | | | | | | |
The actuarial losses resulted from the remeasurement of a U.S. pension plan for the three-month period ended
October 30, 2022 and a U.S. and a Canadian pension plan for the three-month period ended October 31, 2021. These remeasurements were each due to lump sum distributions that exceeded or are expected to exceed service and interest costs resulting in settlement accounting for the plans. The actuarial losses recognized for the three-month periods ended October 30, 2022, and October 31, 2021, were primarily due to losses on plan assets, partially offset by increases in discount rates used to determine the benefit obligation.
9. Leases
The components of lease costs were as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
(Millions) | | October 30, 2022 | | October 31, 2021 | | | | |
Operating lease cost | | $ | 20 | | | $ | 19 | | | | | |
Finance lease - amortization of right-of-use (ROU) assets | | 4 | | | 4 | | | | | |
| | | | | | | | |
Short-term lease cost | | 17 | | | 13 | | | | | |
Variable lease cost(1) | | 50 | | | 52 | | | | | |
| | | | | | | | |
Total | | $ | 91 | | | $ | 88 | | | | | |
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(1)Includes labor and other overhead in our service contracts with embedded leases.
The following tables summarize the lease amounts recorded in the Consolidated Balance Sheets: | | | | | | | | | | | | | | | | | | | | |
| | Operating Leases |
(Millions) | | Balance Sheet Classification | | October 30, 2022 | | July 31, 2022 |
ROU assets, net | | Other assets | | $ | 235 | | | $ | 239 | |
Lease liabilities (current) | | Accrued liabilities | | $ | 59 | | | $ | 62 | |
Lease liabilities (noncurrent) | | Other liabilities | | $ | 176 | | | $ | 177 | |
| | | | | | |
| | Finance Leases |
(Millions) | | Balance Sheet Classification | | October 30, 2022 | | July 31, 2022 |
ROU assets, net | | Plant assets, net of depreciation | | $ | 24 | | | $ | 28 | |
Lease liabilities (current) | | Short-term borrowings | | $ | 13 | | | $ | 14 | |
Lease liabilities (noncurrent) | | Long-term debt | | $ | 13 | | | $ | 16 | |
| | | | | | |
The following table summarizes cash flow and other information related to leases: | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
(Millions) | | October 30, 2022 | | October 31, 2021 | | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
Operating cash flows from operating leases | | $ | 20 | | | $ | 19 | | | |
| | | | | | |
Financing cash flows from finance leases | | $ | 4 | | | $ | 4 | | | |
| | | | | | |
ROU assets obtained in exchange for lease obligations: | | | | | | |
Operating leases | | $ | 15 | | | $ | 14 | | | |
Finance leases | | $ | |