Discontinued Operation, Tax Effect of Gain (Loss) from Disposal of Discontinued Operation

  
  
Results of discontinued operations were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
| (Millions) |  |  |  | 2020 |  |  |
| Net sales |  |  |  | $ | 359  |  |  |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
| Earnings before taxes from operations |  |  |  | $ | 53  |  |  |  |
| Taxes on earnings from operations |  |  |  | 17  |  |  |  |
| Gain on sales of businesses / costs associated with selling the businesses |  |  |  | 1,039  |  |  |  |
| Tax expense on sales / costs associated with selling the businesses |  |  |  | 39  |  |  |  |
| Earnings from discontinued operations |  |  |  | $ | 1,036  |  |  |  |

In addition, in the third quarter of 2021, we recognized a $6 million loss due to tax expense from return-to-provision adjustments related to the sale of Campbell International.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.Under the terms of the sale of the Arnott's and other international operations, we entered into a long-term licensing arrangement for the exclusive rights to certain Campbell brands in certain non-U.S. markets. We provided certain transition services to support the divested businesses.The significant operating non-cash items, capital expenditures and sale proceeds of discontinued operations were as follows:

|  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |
| (Millions) |  |  |  | 2020 |
| Cash flows from discontinued operating activities: |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
| Net gain on sales of discontinued operations businesses |  |  |  | $ | (1,039) |  |
|  |  |  |  |  |
| Cash flows from discontinued investing activities: |  |  |  |  |
| Capital expenditures |  |  |  | $ | 30  |  |
| Sales of discontinued operations businesses, net of cash divested |  |  |  | 2,466  |  |

Other DivestituresOn October 11, 2019, we completed the sale of our European chips business for £63 million, or $77 million. The pre-tax loss recognized in the first quarter of 2020 on the sale was $64 million, which included the impact of allocated goodwill and foreign currency translation adjustments. For tax purposes, we were able to use the capital loss on this sale to offset a portion of the capital gain from the sale of the Arnott's and other international operations. The after-tax loss was $37 million. The European chips business had net sales of $25 million in 2020. Earnings from the business were not material. The results of the European chips business through the date of sale were reflected in continuing operations within the Snacks reportable segment.On May 3, 2021, we completed the sale of our Plum baby food and snacks business for $101 million. The purchase agreement contained customary representations, warranties, indemnifications and other obligations between us and the buyer. In addition, we have agreed to indemnify the buyer for certain claims against the Plum baby food and snacks business alleging the presence of heavy metals in the products manufactured or sold on or prior to May 2, 2021, that were pending at the time of closing of the transaction or are asserted within two years thereafter. We recognized a pre-tax loss of $11 million and an after-tax gain on the sale of $3 million. The business had net sales of $68 million in 2021 and $104 million in 2020. Earnings were not material in the periods. The results of the business through the date of sale were reflected in continuing operations within the Meals & Beverages reportable segment.44 
