CAMPBELL SOUP : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) (2024)

OVERVIEW

This Management's Discussion and Analysis of Financial Condition and Results ofOperations is provided as a supplement to, and should be read in conjunctionwith, the Consolidated Financial Statements and the Notes to the ConsolidatedFinancial Statements in "Part I - Item 1. Financial Statements," and our Form10-K for the year ended August 2, 2020, including but not limited to "Part I -Item 1A. Risk Factors" and "Part II - Item 7. Management's Discussion andAnalysis of Financial Condition and Results of Operations."Executive SummaryUnless otherwise stated, the terms "we," "us," "our" and the "company" refer toCampbell Soup Company and its consolidated subsidiaries.We are a manufacturer and marketer of high-quality, branded food and beverageproducts. We operate in a highly competitive industry and experience competitionin all of our categories.We completed the sale of our Kelsen business on September 23, 2019. On December23, 2019, we completed the sale of our Arnott's business and certain otherinternational operations, including the simple meals and shelf-stable beveragesbusinesses in Australia and Asia Pacific (the Arnott's and other internationaloperations). We have reflected the results of operations of the Kelsen businessand the Arnott's and other international operations (collectively referred to asCampbell International) as discontinued operations in the ConsolidatedStatements of Earnings. These businesses were historically included in theSnacks reportable segment. In addition, on October 11, 2019, we completed thesale of our European chips business. The results of the European chips businessthrough the date of sale were reflected in continuing operations within theSnacks reportable segment. See Notes 3 and 6 to the Consolidated FinancialStatements for additional information on these divestitures and reportablesegments.Impact of COVID-19We have been actively monitoring the impact of COVID-19 on all aspects of ourbusiness. During the first quarter of 2021, we continued to experience highersales for our retail products in both our Meals & Beverages and Snacks segments,especially in retail chains and large grocery supermarkets. This result isattributable to a change in retail demand, as consumers have significantlyincreased their current food purchases for at-home consumption, which has morethan offset the declines in our foodservice products. We are also benefitingfrom favorable product mix. We expect that these trends will continue throughour second quarter of 2021 in response to the continued spread of COVID-19.However, the recent higher sales trends of our retail products may lessen orreverse in the coming months if customers or consumers alter their purchasinghabits.With the current increased demand for our retail products, we have made changesin our supply chain network to increase overall production, including modifyingproduction schedules and temporarily adjusting product mix. In addition, we havealso adjusted the timing of some of our promotional spending. In the quarter, wecontinued to experience higher costs in certain areas such as employeecompensation costs, as well as costs associated with health screenings,temperature checks and enhanced cleaning and sanitation protocols to protect ouremployees and product quality standards, which may continue or increase. All ofour production operations currently remain open and none have experiencedsignificant disruptions or labor reductions related to COVID-19. We arebenefiting overall from increased product demand as we leverage our supply chainassets. There has been limited disruption to our supply chain network to date,including supply of our ingredients, packaging or other sourced materials.However, we continue to monitor the potential impact of the COVID-19 pandemic,and we cannot predict the ultimate impact on our suppliers, distributors ormanufacturers. In addition, we were, and may continue to be, unable to fulfillall orders we receive from our customers.The impact of COVID-19 remains uncertain and ultimately will be dictated by thelength and severity of the pandemic; the federal, state and local governmentactions taken in response; the macroeconomic environment; and the availabilityand widespread distribution and use of a safe and effective vaccine. We willcontinue to evaluate the extent to which COVID-19 will impact our business,consolidated results of operations and financial condition.Summary of ResultsThis Summary of Results provides significant highlights from the discussion andanalysis that follows.•Net sales increased 7% in 2021 to $2,340 million, due to gains in Meals &Beverages and Snacks, partially offset by the impact of the divestiture of theEuropean chips business. As a result of COVID-19, net sales accelerated acrossour portfolio in the first quarter of 2021 with increased demand of foodpurchases for at-home consumption.•Gross profit, as a percent of sales, increased to 34.7% in 2021 from 33.8% ayear ago. The increase was primarily due to lower levels of promotional spendingand favorable product mix, offset partly by higher net supply chain costs asproductivity improvements and improved operating leverage were more than offsetby cost inflation, other supply chain costs and COVID-19 related costs. 25--------------------------------------------------------------------------------•Interest expense decreased to $55 million in 2021 from $80 million in 2020,primarily due to lower levels of debt.•Earnings from continuing operations per share were $1.02 in 2021, compared to$.56 a year ago. The current and prior year included expenses of $.01 and $.22per share, respectively, from items impacting comparability as discussed below.Net Earnings attributable to Campbell Soup CompanyThe following items impacted the comparability of net earnings and net earningsper share:Continuing Operations•We implemented several cost savings initiatives in recent years. In the firstquarter of 2021, we recorded a pre-tax restructuring charge of $1 million andimplementation costs and other related costs of $4 million in Administrativeexpenses and $1 million in Cost of products sold (aggregate impact of $5 millionafter tax, or $.02 per share) related to these initiatives. In the first quarterof 2020, we recorded a pre-tax restructuring charge of $3 million andimplementation costs and other related costs of $8 million in Administrativeexpenses (aggregate impact of $8 million after tax, or $.03 per share) relatedto these initiatives. See Note 7 to the Consolidated Financial Statements and"Restructuring Charges and Cost Savings Initiatives" for additional information;•In the first quarter of 2021, we recognized pre-tax pension settlement gains inOther expenses / (income) of $4 million ($3 million after tax, or $.01 pershare) associated with U.S. and Canadian pension plans. The settlements resultedfrom the level of lump sum distributions from the plans' assets; and•In the first quarter of 2020, we recorded a loss in Other expenses / (income)of $64 million ($60 million after tax, or $.20 per share) on the sale of ourEuropean chips business.Discontinued Operations•In the first quarter of 2020, we incurred pre-tax charges of $51 million ($27million after tax, or $.09 per share) associated with the sale of the Kelsenbusiness and the planned divestiture of the Arnott's and other internationaloperations.The items impacting comparability are summarized below: Three Months Ended November 1, 2020 October 27, 2019 Earnings EPS Earnings EPS(Millions, except per share amounts) Impact Impact Impact Impact

Earnings from continuing operations attributable toCampbell Soup Company

$ 309 $ 1.02 $ 169 $ .56Earnings (loss) from discontinued operations $ - $ - $ (3) $ (.01)Net earnings attributable to Campbell Soup Company $ 309 $ 1.02 $ 166 $ .55Continuing operations:Restructuring charges, implementation costs and otherrelated costs $ (5) $ (.02) $ (8) $ (.03)Pension settlement gains 3 .01 - -Charges associated with divestiture - - (60) (.20)Impact of items on Earnings from continuingoperations(1) $ (2) $ (.01) $ (68) $ (.22)Discontinued operations:Charges associated with divestitures $ - $ - $ (27) $ (.09)

Impact of items on Earnings (loss) from discontinuedoperations

 $ - $ - $ (27) $ (.09)

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(1)Sum of the individual amounts may not add due to rounding.Earnings from continuing operations were $309 million ($1.02 per share) in 2021,compared to $169 million ($.56 per share) in 2020. After adjusting for itemsimpacting comparability, earnings from continuing operations increasedreflecting sales volume gains, an improved gross profit performance and lowerinterest expense, partially offset by increased administrative expenses.See "Discontinued Operations" for additional information. 26--------------------------------------------------------------------------------DISCUSSION AND ANALYSISSalesAn analysis of net sales by reportable segment follows: Three Months Ended November 1, October 27,(Millions) 2020 2019 % ChangeMeals & Beverages $ 1,342 $ 1,194 12Snacks 998 989 1 $ 2,340 $ 2,183 7

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

 Meals & Beverages(2) Snacks(2) TotalVolume and mix 11% 1% 6%Price and sales allowances - - -(Increased) / decreased promotional spending(1) 2 2 2Divestitures - (3) (1) 12% 1% 7%

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(1)Represents revenue reductions from trade and consumer coupon redemptionprograms.(2)Sum of the individual amounts does not add due to rounding.In Meals & Beverages, sales increased 12% primarily due to gains across U.S.retail products, including gains in U.S. soup, inclusive of Pacific Foods soupsand broths, Prego pasta sauces, V8 beverages, Campbell's pasta and Pace Mexicansauces, as well as gains in Canada, partially offset by declines in foodservice.Volume increased in U.S. retail and Canada driven by COVID-19, with increaseddemand of food purchases for at-home consumption in the first quarter of 2021.Foodservice sales were negatively impacted by shifts in consumer behavior andcontinued COVID-19 related restrictions. Sales of U.S. soup increased 21% due toretailers rebuilding inventory for the upcoming soup season, in-market gains incondensed soups and broth and moderated promotional spending.In Snacks, sales increased 1%. Excluding the impact of the European chipsdivestiture, sales increased driven by lower levels of promotional spending andvolume gains reflecting increased demand of food purchases for at-homeconsumption, as well as base business performance. The sales increase reflectsgains in fresh bakery products, Late July snacks, Pop Secret popcorn, PepperidgeFarm cookies and Snack Factory Pretzel Crisps, as well as Kettle Brand potatochips, partially offset by declines in Lance sandwich crackers. Sales ofGoldfish crackers were relatively flat in the quarter as increased demand forfamily size products was offset by reduced away-from-home consumption.Gross ProfitGross profit, defined as Net sales less Cost of products sold, increased by $75million in 2021 from 2020. As a percent of sales, gross profit was 34.7% in 2021and 33.8% in 2020.The 0.9 percentage-point increase in gross profit percentage was due to thefollowing factors: Margin 

Impact

 Productivity improvements 1.5 Lower level of promotional spending 1.3 Mix 0.3 Higher restructuring-related costs (0.1) Price and sales allowances (0.1) Cost inflation, supply chain costs and other factors(1) (2.0) 0.9%

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(1)Includes an estimated positive margin impact of 0.7 from the benefit ofoperating leverage and cost savings initiatives, which was more than offset bycost inflation and other factors, including the impact of COVID-19.

 27--------------------------------------------------------------------------------Marketing and Selling ExpensesMarketing and selling expenses as a percent of sales were 8.9% in 2021 comparedto 9.4% in 2020. Marketing and selling expenses increased 1% in 2021 from 2020.The increase was primarily due to higher advertising and consumer promotionexpenses (approximately 7 percentage points), partially offset by increasedbenefits from cost savings initiatives (approximately 3 percentage points);lower costs related to marketing overhead (approximately 1 percentage point) andlower selling expenses (approximately 1 percentage point). The increase inadvertising and consumer promotion expenses was primarily in Meals & Beveragesdue to increased support of U.S. soup.Administrative ExpensesAdministrative expenses as a percent of sales were 6.0% in 2021 compared to 6.1%in 2020. Administrative expenses increased 5% in 2021 from 2020. The increasewas primarily due to higher benefit costs (approximately 5 percentage points);higher general administrative costs and inflation (approximately 4 percentagepoints) and higher stock-based compensation (approximately 2 percentage points),partially offset by increased benefits from cost savings initiatives(approximately 3 percentage points) and lower costs associated with cost savingsinitiatives (approximately 3 percentage points).Other Expenses / (Income)Other income was $18 million in 2021 compared to other expenses of $56 millionin 2020. Other income in 2021 included pension settlement gains of $4 millionassociated with U.S. and Canadian pension plans. Other expenses in 2020 includeda loss of $64 million on the sale of our European chips business.Operating EarningsSegment operating earnings increased 16% in 2021 from 2020.An analysis of operating earnings by segment follows: 

Three Months Ended

 November 1, October 27,(Millions) 2020 2019 % ChangeMeals & Beverages $ 333 $ 282 18Snacks 139 125 11 472 407 16Corporate (10) (87)Restructuring charges(1) (1) (3)Earnings before interest and taxes $ 461 $ 317

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(1)See Note 7 to the Consolidated Financial Statements for additionalinformation on restructuring charges.Operating earnings from Meals & Beverages increased 18%. The increase wasprimarily due to sales volume gains and improved gross profit performance,partially offset by increased marketing investment. Gross profit performance wasimpacted by lower levels of promotional spending and favorable product mix, asproductivity improvements and improved operating leverage were offset by higherother supply chain costs, cost inflation and COVID-19 related costs.Operating earnings from Snacks increased 11%. The increase was primarily due tolower selling expenses, lower marketing support and sales volume gains,partially offset by increased administrative expenses. Gross profit performancewas consistent with the prior year as lower levels of promotional spending wereoffset by higher net supply chain costs as productivity improvements, costsavings initiatives and improved operating leverage were more than offset bycost inflation and COVID-19 related costs.Corporate in 2021 included pension settlement gains of $4 million associatedwith U.S. and Canadian pension plans and costs of $5 million related to costssavings initiatives. Corporate in 2020 included a loss of $64 million from thesale of the European chips business and costs of $8 million related to costsavings initiatives. Excluding these amounts, the remaining decrease in expensesprimarily reflects losses on investments in 2020.Interest ExpenseInterest expense decreased to $55 million in 2021 from $80 million in 2020,primarily due to lower levels of debt.Taxes on EarningsThe effective tax rate was 23.9% in 2021 and 28.7% in 2020. The higher effectivetax rate in 2020 was primarily due to the tax benefit of $4 million werecognized on a $64 million loss on the sale of the European chips business. 28--------------------------------------------------------------------------------Restructuring Charges and Cost Savings InitiativesMulti-year Cost Savings Initiatives and Snyder's-Lance Cost TransformationProgram and IntegrationBeginning in fiscal 2015, we implemented initiatives to reduce costs and tostreamline our organizational structure.In recent years, we expanded these initiatives by further optimizing our supplychain and manufacturing networks, including closing our manufacturing facilityin Toronto, Ontario, as well as our information technology infrastructure.On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to theacquisition, Snyder's-Lance launched a cost transformation program following acomprehensive review of its operations with the goal of significantly improvingits financial performance. We continue to implement this program. In addition,we have identified opportunities for additional cost synergies as we integrateSnyder's-Lance.Cost estimates, as well as timing for certain activities, are continuing to bedeveloped.A summary of the pre-tax charges recorded in Earnings from continuing operationsrelated to these initiatives is as follows: Three Months 

Ended

 November 1, October 27, Recognized as of(Millions, except per share amounts) 2020 2019 November 1, 2020Restructuring charges $ 1 $ 3 $ 239Administrative expenses 4 8 315Cost of products sold 1 - 77Marketing and selling expenses - - 12Research and development expenses - - 4Total pre-tax charges $ 6 $ 11 $ 647Aggregate after-tax impact $ 5 $ 8Per share impact $ .02 $ .03A summary of the pre-tax costs in Earnings (loss) from discontinued operationsassociated with these initiatives is as follows:(Millions) Recognized as of November 1, 2020Severance pay and benefits $ 

19

Implementation costs and other related costs 4Total $ 23As of April 28, 2019, we incurred substantially all of the costs for actionsassociated with discontinued operations. All of the costs were cashexpenditures.A summary of the pre-tax costs in Earnings from continuing operations associatedwith these initiatives is as follows:(Millions) Recognized as of November 1, 2020Severance pay and benefits $ 

215

Asset impairment/accelerated depreciation 

67

Implementation costs and other related costs 365Total $ 647The total estimated pre-tax costs for actions associated with continuingoperations that have been identified are approximately $700 million to $730million. This estimate will be updated as costs for the expanded initiatives aredeveloped.We expect the costs for actions associated with continuing operations that havebeen identified to date to consist of the following: approximately $220 millionto $225 million in severance pay and benefits; approximately $90 million inasset impairment and accelerated depreciation; and approximately $390 million to$415 million in implementation costs and other related costs. We expect thesepre-tax costs to be associated with our segments as follows: Meals & Beverages -approximately 32%; Snacks - approximately 44%; and Corporate - approximately24%.Of the aggregate $700 million to $730 million of pre-tax costs associated withcontinuing operations identified to date, we expect approximately $595 millionto $625 million will be cash expenditures. In addition, we expect to investapproximately $455 million in capital expenditures through 2022, of which weinvested $351 million as of November 1, 2020. The capital 29--------------------------------------------------------------------------------expenditures primarily relate to a U.S. warehouse optimization project,improvement of quality, safety and cost structure across the Snyder's-Lancemanufacturing network, implementation of an SAP enterprise-resource planningsystem for Snyder's-Lance, optimization of information technology infrastructureand applications, transition of production of the Toronto manufacturing facilityto our U.S. thermal plants, insourcing of manufacturing for certain simple mealproducts, and optimization of the Snyder's-Lance warehouse and distributionnetwork.We expect to incur the costs for the actions associated with continuingoperations that have been identified to date through 2022 and to fund the coststhrough cash flows from operations and short-term borrowings.We expect the initiatives for actions associated with continuing operations thathave been identified to date to generate pre-tax savings of approximately $800million to $810 million in 2021, and once all phases are implemented, togenerate annual ongoing savings of approximately $850 million by the end of2022. In the three-month period ended November 1, 2020, we generated anadditional $15 million of pre-tax savings. The annual pre-tax savings associatedwith continuing operations generated were as follows: Year Ended August 2,(Millions) 2020 July 28, 2019 July 29, 2018 July 30, 2017 July 31, 2016 August 2, 2015Total pre-tax savings $ 725 $ 560 $ 395 $ 325 $ 215 $ 85The initiatives for actions associated with discontinued operations generatedpre-tax savings of over $90 million in 2019 and $60 million in 2018.Segment operating results do not include restructuring charges, implementationcosts and other related costs because we evaluate segment performance excludingsuch charges. A summary of the pre-tax costs in Earnings from continuingoperations associated with segments is as follows: November 1, 2020 Three Months(Millions) Ended Costs Incurred to DateMeals & Beverages $ - $ 220Snacks 5 256Corporate 1 171Total $ 6 $ 647See Note 7 to the Consolidated Financial Statements for additional information.Discontinued OperationsWe completed the sale of our Kelsen business on September 23, 2019, for $322million. We also completed the Arnott's and other international operations onDecember 23, 2019, for $2,286 million. The purchase price was subject to certainpost-closing adjustments, which resulted in $4 million of additional proceeds inthe third quarter of 2020. Beginning in the fourth quarter of 2019, we havereflected the results of operations of the Kelsen business and the Arnott's andother international operations, or Campbell International, as discontinuedoperations in the Consolidated Statements of Earnings for all periods presented.These businesses were historically included in the Snacks reportable segment.Results of Campbell International were as follows: Three Months Ended October 27,(Millions) 2019Net sales $ 223Earnings before taxes from operations $ 37Taxes on earnings from operations 13

Loss on sale of business / costs associated with selling the businesses

 (51)

Tax benefit on loss of sale / costs associated with selling the businesses

 (24)Earnings (loss) from discontinued operations $ (3) 30

--------------------------------------------------------------------------------LIQUIDITY AND CAPITAL RESOURCESWe expect foreseeable liquidity and capital resource requirements to be metthrough anticipated cash flows from operations; long-term borrowings; short-termborrowings, which may include commercial paper; credit facilities; and cash andcash equivalents. We believe that our sources of financing will be adequate tomeet our future requirements.We generated cash flows from operations of $180 million in 2021, compared to$182 million in 2020. The decline in 2021 was primarily due to changes inworking capital, primarily accounts payable and accrued liabilities, partiallyoffset by higher cash earnings.Current assets are less than current liabilities as a result of our level ofcurrent maturities of long-term debt and short-term borrowings and our focus tolower core working capital requirements. We had negative working capital of $443million as of November 1, 2020, and $690 million as of August 2, 2020. Totaldebt maturing within one year was $1,084 million as of November 1, 2020, and$1,202 million as of August 2, 2020.Capital expenditures were $74 million in 2021 and $98 million in 2020. Thedecline was due to capital expenditures associated with discontinued operationsin 2020. Capital expenditures are expected to total approximately $350 millionin 2021. Capital expenditures in the first quarter of 2021 included theimplementation of an SAP enterprise-resource planning system for Snyder's-Lance,chip capacity expansion projects, a Goldfish cracker capacity expansion project,and a Milano cookie capacity expansion project.Pepperidge Farm and Snyder's-Lance have a direct-store-delivery distributionmodel that uses independent contractor distributors. In order to maintain andexpand this model, we routinely purchase and sell routes. The purchase and saleproceeds of the routes are reflected in investing activities.We completed the sale of our Kelsen business on September 23, 2019, for $322million. On September 30, 2019, we repaid $399 million of our senior unsecuredterm loan facility using net proceeds from the Kelsen sale and the issuance ofcommercial paper. In addition, on October 11, 2019, we completed the sale of ourEuropean chips business for £63 million, or $77 million.Dividend payments were $108 million in 2021 and $107 million in 2020. Theregular quarterly dividend paid on our capital stock was $0.35 per share in eachof 2021 and 2020. On December 9, 2020, the Board of Directors approved anincrease in the regular quarterly dividend from $0.35 per share to $0.37 pershare, or 6%. They then declared a regular quarterly dividend of $0.37 per sharepayable on February 1, 2021 to shareholders of record at the close of businesson January 9, 2021.We suspended our share repurchases as of the second quarter of 2018. See Note 13to the Consolidated Financial Statements for additional information.In August 2019, we repaid and terminated the AUD $335 million, or $227 million,balance outstanding under our single-draw syndicated facility. The repayment wasfunded through the issuance of commercial paper.As of November 1, 2020, we had $1,084 million of short-term borrowings duewithin one year, of which $160 million was comprised of commercial paperborrowings. As of November 1, 2020, we issued $38 million of standby letters ofcredit. We had a committed revolving credit facility totaling $1,850 millionscheduled to mature on December 9, 2021. The facility remained unused atNovember 1, 2020, except for $1 million of standby letters of credit that weissued under it. On November 2, 2020, we replaced the current facility with anew $1,850 million committed revolving facility that matures on November 2,2023. The new facility contains customary covenants, including a financialcovenant with respect to a minimum consolidated interest coverage ratio ofconsolidated adjusted EBITDA to consolidated interest expense (as each isdefined 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 underthis facility will bear interest at the rates specified in the facility, whichvary based on the type of loan and certain other customary conditions. Thefacility supports our commercial paper program and other general corporatepurposes. We expect to continue to access the commercial paper markets, bankcredit lines and utilize cash flows from operations to support our short-termliquidity requirements.We are in compliance with the covenants contained in our credit facilities anddebt securities.In September 2020, we filed a registration statement with the Securities andExchange Commission that registered an indeterminate amount of debt securities.Under the registration statement, we may issue debt securities from time totime, depending on market conditions. 31--------------------------------------------------------------------------------SIGNIFICANT ACCOUNTING ESTIMATESWe prepare our consolidated financial statements in conformity with accountingprinciples generally accepted in the United States. The preparation of thesefinancial statements requires the use of estimates, judgments and assumptionsthat affect the reported amounts of assets and liabilities at the date of thefinancial statements and reported amounts of revenues and expenses during theperiods presented. Actual results could differ from those estimates andassumptions. Our significant accounting policies are described in Note 1 to theConsolidated Financial Statements in the Annual Report on Form 10-K for the yearended August 2, 2020 (2020 Annual Report on Form 10-K). The accounting policieswe used in preparing these financial statements are substantially consistentwith those we applied in our 2020 Annual Report on Form 10-K. Our significantaccounting estimates are described in Management's Discussion and Analysisincluded in the 2020 Annual Report on Form 10­K.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 2 to the Consolidated Financial Statements for information on recentaccounting pronouncements.FORWARD LOOKING STATEMENTSThis Report contains "forward-looking" statements within the meaning of thePrivate Securities Litigation Reform Act of 1995. These forward-lookingstatements reflect our current expectations regarding our future results ofoperations, economic performance, financial condition and achievements. Theseforward-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-lookingstatements by the fact that they do not relate strictly to historical or currentfacts, and may reflect anticipated cost savings or implementation of ourstrategic plan. These statements reflect our current plans and expectations andare based on information currently available to us. They rely on severalassumptions regarding future events and estimates which could be inaccurate andwhich are inherently subject to risks and uncertainties.We wish to caution the reader that the following important factors and thoseimportant factors described in our other Securities and Exchange Commissionfilings, or in our 2020 Annual Report on Form 10-K, could affect our actualresults and could cause such results to vary materially from those expressed inany forward-looking statements made by, or on behalf of, us:•our ability to execute on and realize the expected benefits from our strategy,including growing sales in snacks and maintaining our market share position insoup;•the impact of strong competitive responses to our efforts to leverage brandpower with product innovation, promotional programs and new advertising;•the risks associated with trade and consumer acceptance of productimprovements, shelving initiatives, new products and pricing and promotionalstrategies;•our indebtedness and ability to pay such indebtedness;•impacts of, and associated responses to the COVID-19 pandemic on our business,suppliers, customers, consumers and employees;•our ability to realize projected cost savings and benefits from cost savingsinitiatives and the integration of recent acquisitions;•disruptions in or inefficiencies to our supply chain and/or operationsincluding the impacts of the COVID-19 pandemic, as well as fluctuations in thesupply of and inflation in energy and raw and packaging materials cost;•our ability to manage changes to our organizational structure and/or businessprocesses, including selling, distribution, manufacturing and informationmanagement systems or processes;•changes in consumer demand for our products and favorable perception of ourbrands;•changing inventory management practices by certain of our key customers;•a changing customer landscape, with value and e-commerce retailers expandingtheir market presence, while certain of our key customers maintain significanceto our business;•product quality and safety issues, including recalls and product liabilities;•the possible disruption to the independent contractor distribution models usedby certain of our businesses, including as a result of litigation or regulatoryactions affecting their independent contractor classification;•the uncertainties of litigation and regulatory actions against us;•the costs, disruption and diversion of management's attention associated withactivist investors; 32

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•a material failure in or breach of our or our vendors' information technologysystems;•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;•changes in currency exchange rates, tax rates, interest rates, debt and equitymarkets, inflation rates, economic conditions, law, regulation and otherexternal factors; and•unforeseen business disruptions in one or more of our markets due to politicalinstability, civil disobedience, terrorism, armed hostilities, extreme weatherconditions, natural disasters or other calamities.This discussion of uncertainties is by no means exhaustive but is designed tohighlight important factors that may impact our outlook. We disclaim anyobligation or intent to update forward-looking statements made by us in order toreflect new information, events or circ*mstances after the date they are made.Item 3. Quantitative and Qualitative Disclosure About Market RiskFor information regarding our exposure to certain market risk, see Item 7A,Quantitative and Qualitative Disclosure About Market Risk, in the 2020 AnnualReport on Form 10-K. There have been no significant changes in our portfolio offinancial instruments or market risk exposures from the 2020 year-end.Item 4. Controls and Proceduresa.Evaluation of Disclosure Controls and ProcedureWe, under the supervision and with the participation of our management,including the President and Chief Executive Officer and the Executive VicePresident and Chief Financial Officer, have evaluated the effectiveness of ourdisclosure controls and procedures (as such term is defined in Rules 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as ofNovember 1, 2020 (Evaluation Date). Based on such evaluation, the President andChief Executive Officer and the Executive Vice President and Chief FinancialOfficer have concluded that, as of the Evaluation Date, our disclosure controlsand procedures are effective.b.Changes in Internal ControlThere were no changes in our internal control over financial reporting (as suchterm is defined in Rules 13a-15(f) and 15d-15(f) under the Securities ExchangeAct of 1934, as amended) that materially affected, or are likely to materiallyaffect, such internal control over financial reporting during the quarter endedNovember 1, 2020.

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