caret-down

Campbell Reports First-Quarter Results

  • Net Sales and Organic Sales Decreased 2 Percent
  • Earnings Before Interest and Taxes (EBIT) Decreased 10 Percent;
    Adjusted EBIT Decreased 14 Percent
  • Earnings Per Share (EPS) Decreased 3 Percent to $0.91; Adjusted EPS
    Decreased 8 Percent to $0.92, reflecting the benefit of a lower
    adjusted tax rate
  • Campbell Updates Fiscal 2018 Guidance

CAMDEN, N.J.–(BUSINESS WIRE)–Nov. 21, 2017–
Campbell Soup Company (NYSE:CPB) today reported its first-quarter
results for fiscal 2018.

   

Three Months Ended

($ in millions, except per share)

       

 

Oct. 29, 2017

Oct. 30, 2016

% Change

Net Sales

As Reported (GAAP) $2,161 $2,202 (2)%
Organic (2)%

Earnings Before Interest and Taxes

As Reported (GAAP) $412 $457 (10)%
Adjusted $417 $486 (14)%

Diluted Earnings Per Share

As Reported (GAAP) $0.91 $0.94 (3)%
Adjusted $0.92 $1.00 (8)%
 
Note: A detailed reconciliation of the reported (GAAP) financial
information to the adjusted financial information is included at the
end of this news release.
 

CEO Comments

Denise Morrison, Campbell’s President and Chief Executive Officer, said,
“This was a difficult quarter, particularly for our U.S. soup business.
The operating environment remains volatile with a rapidly evolving
retailer landscape and competitive activity pressuring the top line. Our
bottom line performance was negatively impacted by a lower adjusted
gross margin rate due in part to cost inflation, higher carrot costs and
escalating transportation and logistics costs following the hurricane
season.

“The two percent decline in organic sales was largely due to the
performance of our Americas Simple Meals and Beverages division, where
U.S. soup sales declined by 9 percent. Consumer takeaway decreased 2
percent in U.S. soup while significantly lower retailer inventory
accounted for the remaining decline. The sales decline was the result of
one key customer’s different promotional approach to the soup category
for fiscal 2018, as we described last quarter. Importantly, our soup
program was well received in most of our other key customers, where
consumer takeaway of our soup was up slightly.

“In Global Biscuits and Snacks, we continued to drive momentum with
increased sales and operating earnings. Pepperidge Farm delivered
another quarter of solid performance in the snacks business behind Goldfish
crackers and a cookie portfolio rejuvenated by the launch of the Farmhouse
brand and restaging of our American Classic Collection.

“Campbell Fresh sales were comparable to a year ago. We are encouraged
that sales of products in our CPG portfolio increased for the second
consecutive quarter behind Garden Fresh Gourmet and Bolthouse Farms
salad dressing. Our carrot sales were negatively impacted by unfavorable
weather, which led to customer allocations. The C-Fresh team is managing
this situation while maintaining its focus on carrot quality and
returning the beverage products to growth.”

Morrison concluded, “In this challenging climate, we are focused on
sharpening our plans for the remainder of the year while continuing to
position Campbell for growth through investments to differentiate our
brands, drive innovation and accelerate our e-commerce capabilities.”

Items Impacting Comparability

Items impacting comparability in the quarter are as follows:

  • The current quarter included pre-tax pension and postretirement
    mark-to-market gains of $14 million, or $0.03 per share, as compared
    to pre-tax pension and postretirement mark-to-market losses of $20
    million, or $0.04 per share, in the prior-year quarter.
  • The current quarter included pre-tax charges related to cost savings
    initiatives of $19 million, or $0.04 per share, as compared to $9
    million, or $0.02 per share, in the prior-year quarter.

A detailed reconciliation of the reported (GAAP) financial information
to the adjusted information is included at the end of this news release.

Change in Presentation of Net Periodic Pension Cost and Net
Postretirement Benefit Cost

In the first quarter of fiscal 2018, Campbell adopted new accounting
guidance that changes the presentation of net periodic pension cost and
net periodic postretirement benefit cost. Under the new guidance, the
service cost component of net periodic benefit cost is classified in the
same line item as other compensation costs of employees. All other
components of net periodic benefit cost are classified in other expenses
/ (income). Certain amounts in the prior year were reclassified to
conform to the current-year presentation. The reclassifications did not
impact EBIT.

Change in Reportable Segments

Beginning in fiscal 2018, the business in Latin America is managed as
part of the Global Biscuits and Snacks segment. Prior to fiscal 2018,
the business in Latin America was managed as part of the Americas Simple
Meals and Beverages segment. Prior-period segment results have been
adjusted retrospectively to reflect this change.

First-Quarter Results

Sales decreased 2 percent to $2.161 billion driven by a 2 percent
decline in organic sales, reflecting lower volume.

Gross margin decreased from 38.6 percent to 36.2 percent. Excluding
items impacting comparability in the current year, adjusted gross margin
decreased 2.1 percentage points to 36.5 percent. The decrease in
adjusted gross margin was primarily driven by cost inflation and higher
supply chain costs, as well as unfavorable mix, partly offset by
productivity improvements and the benefits from cost savings initiatives.

Marketing and selling expenses decreased 5 percent to $219 million
primarily due to lower advertising and consumer promotion expenses, as
well as the benefits from cost savings initiatives. Administrative
expenses increased 19 percent to $149 million. Excluding items impacting
comparability, adjusted administrative expenses increased 17 percent
primarily due to an increase in information technology costs, costs
associated with the pending acquisition of Pacific Foods of Oregon, the
impact of inflation, and investments in long-term innovation.

Other income was $29 million in the current quarter as compared to other
expenses of $11 million in the prior-year quarter. Excluding the impact
of pension and postretirement mark-to-market adjustments, adjusted other
income increased to $15 million from $9 million a year ago primarily due
to higher pension and postretirement benefit income, partly offset by
losses on investments.

EBIT decreased 10 percent to $412 million. Excluding items impacting
comparability, adjusted EBIT decreased 14 percent to $417 million,
reflecting a lower adjusted gross margin, lower sales and higher
adjusted administrative expenses, partly offset by lower marketing and
selling expenses.

Net interest expense increased 7 percent to $30 million reflecting
higher average interest rates on the debt portfolio. The tax rate was
28.0 percent as compared to 31.9 percent in the prior year. Excluding
items impacting comparability, the adjusted tax rate decreased 3.9
percentage points to 28.2 percent driven by the favorable settlement of
certain U.S. state tax matters.

EPS decreased 3 percent to $0.91 per share. Excluding items impacting
comparability, adjusted EPS decreased 8 percent to $0.92 per share,
reflecting declines in adjusted EBIT, partly offset by a lower adjusted
tax rate and the benefit of share repurchases.

Cash flow from operations decreased to $188 million from $221 million a
year ago primarily due to higher payments on hedging activities and
higher working capital requirements, partly offset by higher cash
earnings.

Fiscal 2018 Guidance

For the full fiscal year, Campbell still expects the year-over-year
change in net sales to be -2 to 0 percent. Campbell has lowered its
earnings outlook and now expects adjusted EBIT to change by -4 to -2
percent (previously -1 to 1 percent) and adjusted EPS to change by -3 to
-1 percent (previously 0 to 2 percent), or $2.95 to $3.02 per share. The
change in guidance for adjusted EBIT and adjusted EPS is due primarily
to Campbell’s gross margin performance in the first-quarter and revised
outlook for the balance of the fiscal year. This guidance assumes the
impact from currency translation will be nominal. A non-GAAP
reconciliation is not provided for 2018 guidance since certain items are
not estimable, such as pension and postretirement mark-to-market
adjustments, and these items are not considered to reflect the company’s
ongoing operating results.

Segment Operating Review

An analysis of net sales and operating earnings by reportable segment
follows:

 

Three Months Ended Oct. 29, 2017

($ in millions)
 
   

Americas
Simple Meals
and Beverages

   

Global Biscuits
and Snacks

   

Campbell
Fresh

   

Total

Net Sales, as Reported $1,218 $709 $234 $2,161

 

 

 

 

Volume and Mix (5)% 2% (1)% (2)%
Promotional Spending -% -% 1% -%
Organic Net Sales (5)% 2% -% (2)%
Currency -% 1% -% -%
% Change vs. Prior Year (5)% 3% -% (2)%
Segment Operating Earnings $328 $120 $(6)
% Change vs. Prior Year (14)% 4% n/m
 
n/m – not meaningful
Note: A detailed reconciliation of the reported (GAAP) net sales to
organic net sales is included at the end of this news release.
 

Americas Simple Meals and Beverages

Sales decreased 5 percent to $1.218 billion driven primarily by declines
in soup and V8 beverages, partly offset by gains in Prego
pasta sauces. Sales of U.S. soup decreased 9 percent driven by declines
in condensed soups, broth and ready-to-serve soups, reflecting a 7-point
decrease due to a lower seasonal inventory build compared to a year ago.
As previously announced, Campbell has not been able to reach an
agreement with a key customer on a promotional approach for soup in
fiscal 2018.

Segment operating earnings decreased 14 percent to $328 million. The
decrease was primarily driven by lower sales volume and a lower gross
margin percentage, partly offset by lower marketing and selling expenses.

Global Biscuits and Snacks

Sales increased 3 percent to $709 million. Excluding the favorable
impact of currency translation, segment sales increased 2 percent
primarily driven by gains in Pepperidge Farm snacks, reflecting growth
in Goldfish crackers and Pepperidge Farm cookies.

Segment operating earnings increased 4 percent to $120 million. The
increase was primarily driven by higher sales volume.

Campbell Fresh

Sales in the quarter were comparable to the prior year at $234 million
as sales gains in carrot ingredients, Garden Fresh Gourmet and Bolthouse
Farms
salad dressings were offset by declines in carrots. Sales of Bolthouse
Farms
refrigerated beverages were comparable to the prior year.

Segment operating earnings in the quarter decreased from $1 million to a
loss of $6 million, reflecting a lower gross margin percentage driven
primarily by higher carrot costs.

Corporate

Corporate in the first quarter of fiscal 2018 included pension and
postretirement mark-to-market gains of $14 million and charges related
to cost savings initiatives of $17 million. Corporate in the first
quarter of fiscal 2017 included pension and postretirement
mark-to-market losses of $20 million and charges related to cost savings
initiatives of $8 million. The remaining increase in expenses primarily
reflects losses on investments, higher administrative expenses and
losses on open commodity hedges as compared to gains in the year-ago
quarter, partly offset by higher pension and postretirement benefit
income.

Conference Call

Campbell will host a conference call to discuss these results today at
8:30 a.m. Eastern Time. To join in the U.S., dial (833) 659-8619. To
join outside of the U.S., dial +1 (703) 639-1316. The access code is
6692642. Access to a live webcast of the call with accompanying slides,
as well as a replay of the call, will be available at investor.campbellsoupcompany.com.
A recording of the call will also be available until midnight on Dec. 5,
2017, at +1 (404) 537-3406. The access code for the replay is 6692642.

Reportable Segments

Campbell Soup Company earnings results are reported for the following
segments:

Americas Simple Meals and Beverages includes the retail and food
service businesses in the U.S. and Canada. The segment includes the
following products: Campbell’s condensed and ready-to-serve
soups; Swanson broth and stocks; Prego pasta sauces; Pace
Mexican sauces; Campbell’s gravies, pasta, beans and dinner
sauces; Swanson canned poultry; Plum food and snacks; V8
juices and beverages; and Campbell’s tomato juice.

Global Biscuits and Snacks includes Pepperidge Farm
cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s
biscuits in Australia and Asia Pacific; and Kelsen cookies globally. The
segment also includes the simple meals and shelf-stable beverages
business in Australia, Latin America and Asia Pacific.

Campbell Fresh includes Bolthouse Farms fresh carrots,
carrot ingredients, refrigerated beverages and refrigerated salad
dressings; Garden Fresh Gourmet salsa, hummus, dips and tortilla
chips; and the U.S. refrigerated soup business.

About Campbell Soup Company

Campbell (NYSE:CPB) is driven and inspired by our Purpose, “Real food
that matters for life’s moments.” We make a range of high-quality soups
and simple meals, beverages, snacks and packaged fresh foods. For
generations, people have trusted Campbell to provide authentic,
flavorful and readily available foods and beverages that connect them to
each other, to warm memories and to what’s important today. Led by our
iconic Campbell’s brand, our portfolio includes Pepperidge
Farm, Bolthouse Farms, Arnott’s, V8, Swanson, Pace, Prego, Plum, Royal
Dansk, Kjeldsens
and Garden Fresh Gourmet. Founded in 1869,
Campbell has a heritage of giving back and acting as a good steward of
the planet’s natural resources. The company is a member of the Standard
& Poor’s 500 and the Dow Jones Sustainability Indexes. For more
information, visit www.campbellsoupcompany.com
or follow company news on Twitter via @CampbellSoupCo.
To learn more about how we make our food and the choices behind the
ingredients we use, visit www.whatsinmyfood.com.

Forward-Looking Statements

This release contains “forward-looking statements” that reflect the
company’s current expectations about the impact of its future plans and
performance on the company’s business or financial results. These
forward-looking statements, including the statements made regarding
sales, EBIT and EPS guidance for fiscal 2018, rely on a number of
assumptions and estimates that could be inaccurate and which are subject
to risks and uncertainties. The factors that could cause the company’s
actual results to vary materially from those anticipated or expressed in
any forward-looking statement include (1) changes in consumer demand for
the company’s products and favorable perception of the company’s brands;
(2) the risks associated with trade and consumer acceptance of product
improvements, shelving initiatives, new products and pricing and
promotional strategies; (3) the impact of strong competitive responses
to the company’s efforts to leverage its brand power with product
innovation, promotional programs and new advertising; (4) changing
inventory management practices by certain of the company’s key
customers; (5) a changing customer landscape, with value and e-commerce
retailers expanding their market presence, while certain of the
company’s key customers continue to increase their significance to the
company’s business; (6) the company’s ability to realize projected cost
savings and benefits from its efficiency and/or restructuring
initiatives; (7) the company’s ability to manage changes to its
organizational structure and/or business processes, including selling,
distribution, manufacturing and information management systems or
processes; (8) product quality and safety issues, including recalls and
product liabilities; (9) the ability to complete and to realize the
projected benefits of acquisitions, divestitures and other business
portfolio changes; (10) disruptions to the company’s supply chain,
including fluctuations in the supply of and inflation in energy and raw
and packaging materials cost; (11) the uncertainties of litigation and
regulatory actions against the company; (12) the possible disruption to
the independent contractor distribution models used by certain of the
company’s businesses, including as a result of litigation or regulatory
actions affecting their independent contractor classification; (13) the
impact of non-U.S. operations, including trade restrictions, public
corruption and compliance with foreign laws and regulations; (14)
impairment to goodwill or other intangible assets; (15) the company’s
ability to protect its intellectual property rights; (16) increased
liabilities and costs related to the company’s defined benefit pension
plans; (17) a material failure in or breach of the company’s information
technology systems; (18) the company’s ability to attract and retain key
talent; (19) changes in currency exchange rates, tax rates, interest
rates, debt and equity markets, inflation rates, economic conditions,
law, regulation and other external factors; (20) unforeseen business
disruptions in one or more of the company’s markets due to political
instability, civil disobedience, terrorism, armed hostilities, extreme
weather conditions, natural disasters or other calamities; and (21)
other factors described in the company’s most recent Form 10-K and
subsequent Securities and Exchange Commission filings. The company
disclaims any obligation or intent to update the forward-looking
statements in order to reflect events or circumstances after the date of
this release.

 
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(millions, except per share amounts)
 
Three Months Ended
October 29, 2017   October 30, 2016
Net sales $ 2,161   $ 2,202
Costs and expenses
Cost of products sold 1,378 1,351
Marketing and selling expenses 219 230
Administrative expenses 149 125
Research and development expenses 30 27
Other expenses / (income) (29 ) 11
Restructuring charges 2   1
Total costs and expenses 1,749   1,745
Earnings before interest and taxes 412 457
Interest, net 30   28
Earnings before taxes 382 429
Taxes on earnings 107   137
Net earnings 275 292
Net loss attributable to noncontrolling interests  
Net earnings attributable to Campbell Soup Company $ 275   $ 292
Per share – basic
Net earnings attributable to Campbell Soup Company $ .91   $ .95
Dividends $ .35   $ .35
Weighted average shares outstanding – basic 301   308
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .91   $ .94
Weighted average shares outstanding – assuming dilution 302   310
 
The company adopted new accounting guidance on the presentation of
net periodic pension cost and net periodic postretirement benefit
cost in the first quarter of fiscal 2018. Certain amounts in the
prior year were reclassified to conform to the current-year
presentation.
 
 
CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
   
Three Months Ended
October 29, 2017   October 30, 2016

Percent
Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 1,218 $ 1,278 (5)%
Global Biscuits and Snacks 709 690 3%
Campbell Fresh 234   234   —%
Total sales $ 2,161   $ 2,202   (2)%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 328 $ 380 (14)%
Global Biscuits and Snacks 120 115 4%
Campbell Fresh (6 ) 1   n/m
Total operating earnings 442 496 (11)%
Corporate (28 ) (38 )
Restructuring charges (2 ) (1 )
Earnings before interest and taxes 412 457 (10)%
Interest, net 30 28
Taxes on earnings 107   137  
Net earnings 275 292 (6)%
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 275   $ 292   (6)%
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .91   $ .94   (3)%
 
n/m – not meaningful
 
Beginning in fiscal 2018, the business in Latin America is managed
as part of the Global Biscuits and Snacks segment. Prior to fiscal
2018, the business in Latin America was managed as part of the
Americas Simple Meals and Beverages segment. Segment results have
been adjusted retrospectively to reflect this change.
 
 
CAMPBELL SOUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(millions)
   
October 29, 2017 October 30, 2016
Current assets $ 1,996 $ 2,146
Plant assets, net 2,417 2,380
Intangible assets, net 3,198 3,404
Other assets 135   109
Total assets $ 7,746   $ 8,039
Current liabilities $ 2,583 $ 2,760
Long-term debt 2,269 2,298
Other liabilities 1,205 1,383
Total equity 1,689   1,598
Total liabilities and equity $ 7,746   $ 8,039
Total debt $ 3,461   $ 3,588
Cash and cash equivalents $ 163   $ 290
 
 
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(millions)
 
Three Months Ended
October 29, 2017   October 30, 2016
Cash flows from operating activities:
Net earnings $ 275 $ 292
Adjustments to reconcile net earnings to operating cash flow
Restructuring charges 2 1
Stock-based compensation 14 14
Pension and postretirement benefit income (16 ) (11 )
Depreciation and amortization 82 77
Deferred income taxes 41 19
Other, net 6 (2 )
Changes in working capital
Accounts receivable (167 ) (218 )
Inventories (105 ) (27 )
Prepaid assets 16 (6 )
Accounts payable and accrued liabilities 84 96
Net payments from hedging activities (33 ) (2 )
Other (11 ) (12 )
Net cash provided by operating activities 188   221  
Cash flows from investing activities:
Purchases of plant assets (58 ) (48 )
Other, net (5 ) (4 )
Net cash used in investing activities (63 ) (52 )
Cash flows from financing activities:
Net short-term borrowings (repayments) (60 ) 86
Long-term repayments (27 )
Dividends paid (111 ) (100 )
Treasury stock purchases (86 ) (112 )
Payments related to tax withholding for stock-based compensation (22 ) (20 )
Net cash used in financing activities (279 ) (173 )
Effect of exchange rate changes on cash (2 ) (2 )
Net change in cash and cash equivalents (156 ) (6 )
Cash and cash equivalents — beginning of period 319   296  
Cash and cash equivalents — end of period $ 163   $ 290  
 
 

Reconciliation of GAAP to Non-GAAP Financial Measures

First Quarter Ended October 29, 2017

 
Campbell Soup Company uses certain non-GAAP financial measures as
defined by the Securities and Exchange Commission in certain
communications. These non-GAAP financial measures are measures of
performance not defined by accounting principles generally accepted
in the United States and should be considered in addition to, not in
lieu of, GAAP reported measures. Management believes that also
presenting certain non-GAAP financial measures provides additional
information to facilitate comparison of the company’s historical
operating results and trends in its underlying operating results,
and provides transparency on how the company evaluates its business.
Management uses these non-GAAP financial measures in making
financial, operating and planning decisions and in evaluating the
company’s performance.
 

Organic Net Sales

 
Organic net sales are net sales excluding the impact of currency.
Management believes that excluding this item, which is not part of
the ongoing business, improves the comparability of year-to-year
results. A reconciliation of net sales as reported to organic net
sales follows.
 
Three Months Ended
  October 29, 2017   October 30, 2016   % Change
(millions)

Net Sales,
as Reported

 

Impact of
Currency

 

Organic
Net Sales

Net Sales,
as Reported

Net Sales,
as Reported

 

Organic
Net Sales

Americas Simple Meals and Beverages $ 1,218   $ (6 )   $ 1,212 $ 1,278 (5)%   (5)%
Global Biscuits and Snacks 709 (5 ) 704 690 3% 2%
Campbell Fresh 234         234   234   —%   —%
Total Net Sales $ 2,161     $ (11 )   $ 2,150   $ 2,202   (2)%   (2)%
 

Items Impacting Earnings

 
The company believes that financial information excluding certain
items that are not considered to reflect the ongoing operating
results, such as those listed below, improves the comparability of
year-to-year results. Consequently, the company believes that
investors may be able to better understand its results excluding
these items.
 
The following items impacted earnings:
 
(1) In the first quarter of fiscal 2018, the company incurred gains of
$14 million in Other expenses / (income) ($9 million after tax, or
$.03 per share) associated with mark-to-market adjustments for
defined benefit pension and postretirement plans. In the first
quarter of fiscal 2017, the company incurred losses of $20 million
in Other expenses / (income) ($13 million after tax, or $.04 per
share) associated with mark-to-market adjustments for defined
benefit pension and postretirement plans. For the year ended July
30, 2017, the company incurred gains of $178 million in Other
expenses / (income) ($116 million after tax, or $.38 per share)
associated with mark-to-market adjustments for defined benefit
pension and postretirement plans.
 
(2) In fiscal 2015, the company implemented a new enterprise design and
initiatives to reduce costs and to streamline its organizational
structure. In fiscal 2017, the company expanded these cost savings
initiatives by further optimizing its supply chain network,
primarily in North America, continuing to evolve its operating model
to drive efficiencies, and more fully integrating its recent
acquisitions. In the first quarter of fiscal 2018, the company
recorded Restructuring charges of $2 million and implementation
costs and other related costs of $12 million in Administrative
expenses and $5 million in Cost of products sold (aggregate impact
of $12 million after tax, or $.04 per share) related to these
initiatives. In the first quarter of fiscal 2017, the company
recorded Restructuring charges of $1 million and implementation
costs and other related costs of $8 million in Administrative
expenses (aggregate impact of $6 million after tax, or $.02 per
share) related to these initiatives. For the year ended July 30,
2017, the company recorded Restructuring charges of $18 million and
implementation costs and other related costs of $36 million in
Administrative expenses and $4 million in Cost of products sold
(aggregate impact of $37 million after tax, or $.12 per share)
related to these initiatives.
 
(3) In the second quarter of fiscal 2017, the company performed an
interim impairment assessment on the intangible assets of the
Bolthouse Farms carrot and carrot ingredients reporting unit and the
Garden Fresh Gourmet reporting unit as operating performance was
well below expectations and a new leadership team of the Campbell
Fresh division initiated a strategic review which led to a revised
outlook for future sales, earnings, and cash flow. The company
recorded a non-cash impairment charge of $147 million ($139 million
after tax, or $.45 per share) related to intangible assets of the
Bolthouse Farms carrot and carrot ingredients reporting unit and a
non-cash impairment charge of $65 million ($41 million after tax, or
$.13 per share) related to the intangible assets of the Garden Fresh
Gourmet reporting unit (aggregate pre-tax impact of $212 million,
$180 million after tax, or $.59 per share). The charges were
included in Other expenses / (income).
 
(4) For the year ended July 30, 2017, the company recorded a tax benefit
of $52 million in Taxes on earnings primarily related to the sale of
intercompany notes receivable to a financial institution, which
resulted in the recognition of foreign exchange losses on the notes
for tax purposes. In addition, the company recorded a $6 million
reduction to interest expense ($4 million after tax) related to
premiums and fees received on the sale of the notes. The aggregate
impact was $56 million after tax, or $.18 per share.
   

The following tables reconcile financial information, presented in
accordance with GAAP, to financial information excluding certain
items:

 
Three Months Ended
October 29, 2017   October 30, 2016
(millions, except per share amounts) As reported   Adjustments(a)   Adjusted As reported   Adjustments(a)   Adjusted

Adjusted
Percent
Change

Gross margin $ 783 $ 5 $ 788 $ 851 $ $ 851 (7)%
Gross margin percentage 36.2 % 36.5 % 38.6 % 38.6 %
Marketing and selling expenses 219 219 230 230
Administrative expenses 149 (12 ) 137 125 (8 ) 117
Research and development expenses 30 30 27 27
Other expenses / (income) (29 ) 14 (15 ) 11 (20 ) (9 )
Restructuring charges 2   (2 )   1   (1 )  
Earnings before interest and taxes $ 412   $ 5   $ 417   $ 457   $ 29   $ 486   (14)%
Interest, net 30     30   28     28  
Earnings before taxes $ 382   $ 5   $ 387   $ 429   $ 29   $ 458  
Taxes 107 2 109 137 10 147
Effective income tax rate 28.0 %   28.2 % 31.9 %   32.1 %
Net earnings attributable to Campbell Soup Company $ 275   $ 3   $ 278   $ 292   $ 19   $ 311   (11)%
Diluted net earnings per share attributable to Campbell Soup Company $ .91   $ .01   $ .92   $ .94   $ .06   $ 1.00   (8)%
(a)See following table for additional information.
 
Three Months Ended
October 29, 2017   October 30, 2016
(millions, except per share amounts) Mark-to-market

(1)

 

Restructuring
charges,
implementation
costs
and other

related costs
(2)

  Adjustments Mark-to-market

(1)

 

Restructuring
charges,
implementation
costs
and other

related costs
(2)

  Adjustments
Gross margin $ $ 5 $ 5 $ $ $
Marketing and selling expenses
Administrative expenses (12 ) (12 ) (8 ) (8 )
Research and development expenses
Other expenses / (income) 14 14 (20 ) (20 )
Restructuring charges   (2 ) (2 )   (1 ) (1 )
Earnings before interest and taxes $ (14 ) $ 19   $ 5   $ 20   $ 9   $ 29  
Interest, net            
Earnings before taxes $ (14 ) $ 19   $ 5   $ 20   $ 9   $ 29  
Taxes (5 ) 7   2   7   3   10  
Net earnings attributable to Campbell Soup Company $ (9 ) $ 12   $ 3   $ 13   $ 6   $ 19  
Diluted net earnings per share attributable to Campbell Soup Company $ (.03 ) $ .04   $ .01   $ .04   $ .02   $ .06  
 
Year Ended
(millions, except per share amounts) July 30, 2017
Gross margin, as recast* $ 2,925
Add: Restructuring charges, implementation costs and other related
costs (2)
4  
Adjusted Gross margin $ 2,929  
Adjusted Gross margin percentage 37.1 %
Earnings before interest and taxes, as reported $ 1,400
Deduct: Total pension and postretirement benefit mark-to-market
adjustments (1)
(178 )
Add: Restructuring charges, implementation costs and other related
costs (2)
58
Add: Impairment charges (3) 212  
Adjusted Earnings before interest and taxes $ 1,492  
Interest, net, as reported $ 107
Add: Sale of notes (4) 6  
Adjusted Interest, net $ 113  
Adjusted Earnings before taxes $ 1,379  
Taxes on earnings, as reported $ 406
Deduct: Tax expense from total pension and postretirement benefit
mark-to-market adjustments (1)
(62 )
Add: Tax benefit from restructuring charges, implementation costs
and other related costs (2)
21
Add: Tax benefit from impairment charges (3) 32
Add: Tax benefit from sale of notes (4) 50  
Adjusted Taxes on earnings $ 447  
Adjusted effective income tax rate 32.4 %
Net earnings attributable to Campbell Soup Company, as reported $ 887
Deduct: Net adjustment from total pension and postretirement benefit
mark-to-market adjustments (1)
(116 )
Add: Net adjustment from restructuring charges, implementation costs
and other related costs (2)
37
Add: Net adjustment from impairment charges (3) 180
Deduct: Net adjustment from sale of notes (4) (56 )
Adjusted Net earnings attributable to Campbell Soup Company $ 932  
Diluted net earnings per share attributable to Campbell Soup
Company, as reported
$ 2.89
Deduct: Net adjustment from total pension and postretirement benefit
mark-to-market adjustments (1)
(.38 )
Add: Net adjustment from restructuring charges, implementation costs
and other related costs (2)
.12
Add: Net adjustment from impairment charges (3) .59
Deduct: Net adjustment from sale of notes (4) (.18 )
Adjusted Diluted net earnings per share attributable to Campbell
Soup Company
$ 3.04  
*Reflects the impact of the adoption of new accounting guidance on
the presentation of net periodic pension cost and net periodic
postretirement benefit cost in the first quarter of fiscal 2018.

Source: Campbell Soup Company

Campbell Soup Company
INVESTOR CONTACT:
Ken
Gosnell, 856-342-6081
[email protected]
or
MEDIA
CONTACT:
Thomas Hushen, 856-342-5227
[email protected]