caret-down

Campbell Reports First-Quarter Results

  • Campbell Reaffirms Fiscal 2019 Guidance
  • Net Sales Increased 25 Percent Reflecting Impact of Recently Completed
    Acquisitions; Organic Sales Decreased 3 Percent
  • Earnings Per Share (EPS) of $0.64; Adjusted EPS of $0.79

CAMDEN, N.J.–(BUSINESS WIRE)–Nov. 20, 2018–
Campbell Soup Company (NYSE:CPB) today reported its first-quarter
results for fiscal 2019.

Three Months Ended

($ in millions, except per share)

Oct. 28, 2018

Oct. 29, 2017

% Change

Net Sales

As Reported (GAAP)

$2,694

$2,161 25%
Organic (3)%

Earnings Before Interest and Taxes (EBIT)

As Reported (GAAP) $350 $412 (15)%
Adjusted $410 $417 (2)%

Diluted Earnings Per Share

As Reported (GAAP) $0.64 $0.91 (30)%
Adjusted $0.79 $0.92 (14)%

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

Keith McLoughlin, Campbell’s interim President and CEO stated, “We are
on track with our plans and are encouraged by the progress we are making
against the significant actions we announced on August 30th
to simplify, focus and optimize our portfolio. Through considerable
cross-functional efforts in October, we were able to overcome the supply
chain challenges that we faced early in the quarter and deliver results
that enabled us to reaffirm our fiscal 2019 guidance.

“As we focus Campbell on our Snacks and Meals and Beverages businesses
in our core North American market, we are driving increased operating
discipline across the company. During the quarter we started to see
improved trends in U.S. soup, a return to sales growth in our V8
business, and continued solid performance in Campbell Snacks.
Additionally, we are delivering targeted cost savings and synergies, as
well as driving higher cash flow through improvements in working
capital. In line with the key priorities of our strategic review, we
also launched the processes to divest Campbell International and
Campbell Fresh, both of which have garnered strong interest from a range
of potential buyers.

“We continue to expect fiscal 2019 to be a transition year as we fully
operationalize our plans to turn around Campbell. We remain focused on
executing our strategic initiatives and confident that our go-forward
plan will drive long-term organic growth and profitability that
maximizes value for all shareholders.”

Items Impacting Comparability

The table below presents a summary of items impacting comparability in
each period. A detailed reconciliation of the reported (GAAP) financial
information to the adjusted information is included at the end of this
news release.

Diluted Earnings per Share
Three Months Ended
Oct. 28, 2018 Oct. 29, 2017
As Reported (GAAP) $0.64 $0.91
Impairment charge related to U.S. refrigerated soup plant assets $0.04

Restructuring charges, implementation costs and other related
costs associated with cost savings initiatives

$0.12

$0.04

Pension and postretirement benefit mark-to-market adjustments ($0.03)
Adjusted $0.79* $0.92

*Numbers do not add due to rounding.

First-Quarter Results

Sales increased 25 percent to $2.7 billion reflecting a 29-point benefit
from the recent acquisitions of Snyder’s-Lance and Pacific Foods.
Organic sales declined 3 percent driven primarily by higher promotional
spending, including a 1-point negative impact from the adoption of new
accounting guidance for revenue recognition, as well as lower volume. In
the first quarter of fiscal 2019, Campbell adopted new accounting
guidance for revenue recognition which impacts the timing of expense
related to promotional programs. The impact from the adoption of this
guidance is not expected to be material on an annual basis.

Gross margin decreased from 36.2 percent to 30.6 percent. Excluding
items impacting comparability, adjusted gross margin decreased 4.9
percentage points to 31.6 percent, including a 190-basis-point negative
impact from the recent acquisitions. The remaining decline in adjusted
gross margin was driven primarily by cost inflation and higher supply
chain costs, as well as higher promotional spending including the impact
from the change in revenue recognition, offset partly by productivity
improvements and the benefits from cost savings initiatives. The
increase in supply chain costs was driven primarily by higher than
expected distribution costs associated with the start-up of a new
distribution facility in Findlay, Ohio, operated by a third-party
logistics service provider.

Marketing and selling expenses increased 13 percent to $248 million
reflecting a 28-point increase from the inclusion of the recent
acquisitions. Excluding items impacting comparability in the current
year and the impact of the recent acquisitions, adjusted marketing and
selling expenses decreased driven primarily by lower advertising and
consumer promotion expenses within Meals and Beverages. Administrative
expenses increased 18 percent to $176 million reflecting a 15-point
increase from the inclusion of the recent acquisitions. Excluding items
impacting comparability and the impact of the recent acquisitions,
adjusted administrative expenses increased slightly, reflecting costs
associated with the proxy contest in the current year.

Other expenses were $4 million in the current quarter as compared to
other income of $29 million in the prior-year quarter. Excluding items
impacting comparability in the prior year, other expenses increased
driven primarily by amortization of intangible assets associated with
recent acquisitions.

As reported EBIT decreased 15 percent to $350 million. Excluding items
impacting comparability, adjusted EBIT of $410 million decreased 2
percent inclusive of a negative 4-point impact from the change in
revenue recognition. The remaining change in adjusted EBIT reflects
incremental earnings from recent acquisitions, offset partly by declines
in the base business.

Net interest expense was $93 million compared to $30 million in the
prior year reflecting higher levels of debt associated with the recent
acquisitions and higher average interest rates on the debt portfolio.
The tax rate was 24.5 percent as compared to 28.0 percent in the prior
year. Excluding items impacting comparability, the adjusted tax rate
decreased 3.9 percentage points to 24.3 percent due primarily to the
lower U.S. federal tax rate, offset partly by the favorable settlement
of certain U.S. state tax matters in the prior-year quarter.

The company reported EPS of $0.64. Excluding items impacting
comparability, adjusted EPS decreased 14 percent to $0.79 per share
reflecting adjusted EBIT declines on the base business, inclusive of a
negative $0.04 per share impact from the change in revenue recognition,
offset partly by a lower adjusted tax rate. In aggregate, the
acquisitions of Snyder’s-Lance and Pacific Foods were neutral to
adjusted EPS in the quarter.

Cash flow from operations increased to $231 million from $188 million a
year ago primarily due to lower working capital requirements and lower
payments on hedging activities, offset partly by lower cash earnings. In
line with the company’s commitment to returning value to shareholders,
during the first quarter of fiscal 2019, the company paid $107 million
of cash dividends, or the equivalent of $0.35 per share, to common stock
shareholders.

Campbell Reaffirms Fiscal 2019 Guidance

Following first-quarter results, Campbell continues to expect full-year
performance to be consistent with guidance provided on Aug. 30, 2018. As
previously announced, given the strategy to pursue divestitures, the
company has provided an outlook for fiscal 2019 based on the company’s
existing portfolio of businesses, as well as on a pro forma basis
assuming the planned divestitures are completed as of the beginning of
fiscal 2019. This fiscal 2019 guidance and pro forma, as shown in the
table below, include the impact of the Snyder’s-Lance and Pacific Foods
acquisitions and assumes the impact from currency translation will be
nominal.

($ in millions, except per share)

2018
Results

2019 Guidance
Pre-Divestitures

2019 Pro Forma
Assuming Divestitures

Net Sales $8,685 $9,975 to $10,100 $7,925 to $8,050

Incremental Net Sales from Snyder’s-Lance and Pacific Foods

$1,500 to $1,550

$1,500 to $1,550

Adjusted EBIT $1,408* $1,370 to $1,410 $1,230 to $1,270
Adjusted EPS $2.87* $2.45 to $2.53 $2.40 to $2.50
* Adjusted – refer to the detailed reconciliation of the reported
(GAAP) financial information to the adjusted financial information
at the end of this news release.
Note: A non-GAAP reconciliation is not provided for 2019 guidance or
2019 pro forma 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 business
results. The pro forma scenario is provided for illustrative
purposes to provide approximate impact of potential divestitures as
if they occurred at the beginning of fiscal 2019 and is based on the
use of estimated sales proceeds.

Cost Savings Program

In the first quarter of fiscal 2019, Campbell achieved $45 million in
savings under its multi-year cost savings program, inclusive of
Snyder’s-Lance synergies, bringing total program-to-date savings to $500
million. As previously announced, the company expects to deliver
cumulative annualized savings of $945 million by the end of fiscal 2022.

Segment Operating Review

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

Three Months Ended Oct. 28, 2018

($ in millions)

Meals and
Beverages*

Global
Biscuits
and Snacks*

Campbell
Fresh

Total
Net Sales, as Reported $1,244 $1,218 $232 $2,694

Volume and Mix (2)% (1)% (1)% (1)%
Price and Sales Allowances -% 1% -% -%
Promotional Spending (3)% (1)% -% (2)%
Organic Net Sales (5)% (1)% (1)% (3)%
Currency -% (2)% -% (1)%
Acquisitions 6% 81% -% 29%
% Change vs. Prior Year -% 77% (1)% 25%
Segment Operating Earnings $294 $154 ($3)
% Change vs. Prior Year (11)% 32% n/m
n/m – not meaningful
* Numbers do not add due to rounding.
Note: A detailed reconciliation of the reported (GAAP) net sales to
organic net sales is included at the end of this news release.

Meals and Beverages

Sales of $1.2 billion were comparable to the prior year. Organic sales
decreased 5 percent driven primarily by declines in U.S. soup, Prego
pasta sauces and Canada, offset partly by gains in beverages. Excluding
the benefit from the acquisition of Pacific Foods and the impact from
the change in revenue recognition, sales of U.S. soup decreased 6
percent driven by declines in ready-to-serve soups and condensed soups,
offset partly by gains in broth. The sales decline in U.S. soup was
driven primarily by continued competitive pressure across the market and
increased promotional spending.

Segment operating earnings decreased 11 percent to $294 million. The
decrease was driven primarily by a lower gross margin percentage offset
partly by lower advertising expenses. The lower gross margin performance
reflects the impact of higher levels of cost inflation, increased
promotional spending including the change in revenue recognition, and
higher distribution costs associated with the start-up of a new
distribution facility in Findlay, Ohio, operated by a third-party
logistics service provider.

Global Biscuits and Snacks

Sales in the quarter increased 77 percent to $1.2 billion. Excluding the
benefit from the acquisition of Snyder’s-Lance and the negative impact
of currency translation, organic sales decreased 1 percent driven
primarily by declines in Kelsen cookies in the U.S. Sales of Goldfish
crackers increased slightly. As expected, sales of Goldfish
crackers were negatively impacted by the voluntary product recall in
July 2018.

Segment operating earnings increased 32 percent to $154 million,
reflecting a 45-point benefit from the acquisition of Snyder’s-Lance.
Excluding the impact of the acquisition, segment operating earnings
declined due primarily to a lower gross margin percentage reflecting
higher levels of cost inflation.

Campbell Fresh

Sales in the quarter decreased 1 percent to $232 million driven by
declines in refrigerated soup, as well as declines in Garden Fresh
Gourmet and Bolthouse Farms refrigerated beverages, offset partly
by gains in carrots.

Segment operating loss was $3 million compared to a loss of $6 million
in the prior year. The $3 million year-over-year improvement reflects
improved operational efficiency on beverages offset partly by the
decline in refrigerated soup volume.

Corporate

Corporate in the first quarter of fiscal 2019 included charges related
to cost savings initiatives of $27 million and a non-cash impairment
charge of $14 million related to U.S. refrigerated soup plant assets.
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. The remaining increase in
expenses primarily reflects lower pension and postretirement benefit
income as well as costs associated with the proxy contest in the current
year.

Conference Call and Webcast

Campbell will host a conference call to discuss these results today at
10:00 a.m. Eastern Time. To join, dial +1 (409) 350-3941. The access
code is 9379198. 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. 4,
2018, at +1 (404) 537-3406. The access code for the replay is 9379198.

Reportable Segments

Campbell Soup Company earnings results are reported as follows:

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; Pacific broth, soups, non-dairy beverages and
other simple meals; 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. Beginning in fiscal
2019, the segment also includes the simple meals and shelf-stable
beverages business in Latin America. Prior to fiscal 2019, the business
in Latin America was managed as part of the Global Biscuits and Snacks
segment. Prior-period segment results have been adjusted retrospectively
to reflect this change.

Global Biscuits and Snacks includes the U.S. snacks portfolio
consisting of Pepperidge Farm cookies, crackers, bakery and frozen
products in U.S. retail, and Snyder’s-Lance pretzels, sandwich crackers,
potato chips, tortilla chips and other snacking products. The segment
also includes Arnott’s biscuits in Australia and Asia Pacific, Kelsen
cookies globally, and the simple meals and shelf-stable beverages
business in Australia 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.” For generations, people have trusted
Campbell to provide authentic, flavorful and affordable snacks, soups
and simple meals, and beverages. 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 and 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 any statements made regarding
sales, EBIT and EPS guidance, 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) the company’s ability to execute
on and realize the expected benefits from the actions it intends to take
as a result of its recent strategy and portfolio review, (2) the ability
to differentiate its products and protect its category leading
positions, especially in soup; (3) the ability to complete and to
realize the projected benefits of planned divestitures and other
business portfolio changes; (4) the ability to realize the projected
benefits, including cost synergies, from the recent acquisitions of
Snyder’s-Lance and Pacific Foods; (5) the ability to realize projected
cost savings and benefits from its efficiency and/or restructuring
initiatives; (6) the company’s indebtedness and ability to pay such
indebtedness; (7) disruptions to the company’s supply chain, including
fluctuations in the supply of and inflation in energy and raw and
packaging materials cost; (8) 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; (9) the impact of strong competitive responses to the
company’s efforts to leverage its brand power with product innovation,
promotional programs and new advertising; (10) the risks associated with
trade and consumer acceptance of product improvements, shelving
initiatives, new products and pricing and promotional strategies; (11)
changes in consumer demand for the company’s products and favorable
perception of the company’s brands; (12) changing inventory management
practices by certain of the company’s key customers; (13) a changing
customer landscape, with value and e-commerce retailers expanding their
market presence, while certain of the company’s key customers maintain
significance to the company’s business; (14) product quality and safety
issues, including recalls and product liabilities; (15) the costs,
disruption and diversion of management’s attention associated with
campaigns commenced by activist investors; (16) the uncertainties of
litigation and regulatory actions against the company; (17) 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; (18) the impact of non-U.S. operations, including trade
restrictions, public corruption and compliance with foreign laws and
regulations; (19) impairment to goodwill or other intangible assets;
(20) the company’s ability to protect its intellectual property rights;
(21) increased liabilities and costs related to the company’s defined
benefit pension plans; (22) a material failure in or breach of the
company’s information technology systems; (23) the company’s ability to
attract and retain key talent; (24) changes in currency exchange rates,
tax rates, interest rates, debt and equity markets, inflation rates,
economic conditions, law, regulation and other external factors; (25)
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 (26) 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 28, 2018 October 29, 2017
Net sales $ 2,694 $ 2,161
Costs and expenses
Cost of products sold 1,870 1,378
Marketing and selling expenses 248 219
Administrative expenses 176 149
Research and development expenses 27 30
Other expenses / (income) 4 (29 )
Restructuring charges 19 2
Total costs and expenses 2,344 1,749
Earnings before interest and taxes 350 412
Interest, net 93 30
Earnings before taxes 257 382
Taxes on earnings 63 107
Net earnings 194 275
Net loss attributable to noncontrolling interests
Net earnings attributable to Campbell Soup Company $ 194 $ 275
Per share – basic
Net earnings attributable to Campbell Soup Company $ .64 $ .91
Dividends $ .35 $ .35
Weighted average shares outstanding – basic 301 301
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .64 $ .91
Weighted average shares outstanding – assuming dilution 302 302

CAMPBELL SOUP COMPANY

CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS
(unaudited)

(millions, except per share amounts)

Three Months Ended
October 28, 2018 October 29, 2017

Percent
Change

Sales

Contributions:
Meals and Beverages $ 1,244 $ 1,239 —%
Global Biscuits and Snacks 1,218 688 77%
Campbell Fresh 232 234 (1)%
Total sales $ 2,694 $ 2,161 25%

Earnings

Contributions:
Meals and Beverages $ 294 $ 331 (11)%
Global Biscuits and Snacks 154 117 32%
Campbell Fresh (3 ) (6 ) n/m
Total operating earnings 445 442 1%
Corporate (76 ) (28 )
Restructuring charges (19 ) (2 )
Earnings before interest and taxes 350 412 (15)%
Interest, net 93 30
Taxes on earnings 63 107
Net earnings 194 275 (29)%
Net loss attributable to noncontrolling interests
Net earnings attributable to Campbell Soup Company $ 194 $ 275 (29)%
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .64 $ .91 (30)%

n/m – not meaningful

Beginning in fiscal 2019, the business in Latin America is managed as
part of the Meals and Beverages segment. In fiscal 2018, the business in
Latin America was managed as part of the Global Biscuits and Snacks
segment. Segment results have been adjusted retrospectively to reflect
this change.

CAMPBELL SOUP COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(millions)

October 28, 2018 October 29, 2017
Current assets $ 2,521 $ 1,996
Plant assets, net 3,162 2,417
Intangible assets, net 8,680 3,198
Other assets 224 135
Total assets $ 14,587 $ 7,746
Current liabilities $ 3,662 $ 2,583
Long-term debt 8,001 2,269
Other liabilities 1,509 1,205
Total equity 1,415 1,689
Total liabilities and equity $ 14,587 $ 7,746
Total debt $ 9,846 $ 3,461
Cash and cash equivalents $ 205 $ 163

CAMPBELL SOUP COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(millions)

Three Months Ended
October 28, 2018 October 29, 2017
Cash flows from operating activities:
Net earnings $ 194 $ 275
Adjustments to reconcile net earnings to operating cash flow
Impairment charges 14
Restructuring charges 19 2
Stock-based compensation 14 14
Pension and postretirement benefit income (15 ) (16 )
Depreciation and amortization 122 82
Deferred income taxes 17 41
Other, net 12 6
Changes in working capital
Accounts receivable (223 ) (167 )
Inventories (33 ) (105 )
Prepaid assets (10 ) 16
Accounts payable and accrued liabilities 130 84
Net receipts from (payments of) hedging activities 1 (33 )
Other (11 ) (11 )
Net cash provided by operating activities 231 188
Cash flows from investing activities:
Purchases of plant assets (111 ) (58 )
Purchases of route businesses (20 )
Sales of route businesses 21
Other, net 10 (5 )
Net cash used in investing activities (100 ) (63 )
Cash flows from financing activities:
Short-term borrowings 1,710 2,056
Short-term repayments (1,745 ) (2,116 )
Dividends paid (107 ) (111 )
Treasury stock purchases (86 )
Payments related to tax withholding for stock-based compensation (5 ) (22 )
Payments of debt issuance costs (1 )
Net cash used in financing activities (148 ) (279 )
Effect of exchange rate changes on cash (4 ) (2 )
Net change in cash and cash equivalents (21 ) (156 )
Cash and cash equivalents — beginning of period 226 319
Cash and cash equivalents — end of period $ 205 $ 163

Reconciliation of GAAP to Non-GAAP Financial Measures
First
Quarter Ended October 28, 2018

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 and
acquisitions. Management believes that excluding these items, which are
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 28, 2018

October 29,
2017

% Change
(millions)

Net Sales,
as
Reported

Impact of
Currency

Impact of
Acquisitions

Organic
Net Sales

Net Sales,
as
Reported

Net Sales,
as
Reported

Organic
Net Sales

Meals and Beverages $ 1,244 $ 5 $ (69 ) $ 1,180 $ 1,239 —% (5)%
Global Biscuits and Snacks 1,218 17 (554 ) 681 688 77% (1)%
Campbell Fresh 232 232 234 (1)% (1)%
Total Net Sales $ 2,694 $ 22 $ (623 ) $ 2,093 $ 2,161 25% (3)%

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 fiscal 2015, the company implemented 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 January 2018, as
part of the expanded initiatives, the company authorized additional
costs to improve the operational efficiency of its thermal supply
chain network in North America by closing its manufacturing facility
in Toronto, Ontario, and to optimize its information technology
infrastructure by migrating certain applications to the latest cloud
technology platform. In August 2018, the company announced that it
will continue to streamline its organization, expand its zero-based
budgeting efforts and optimize its manufacturing network. Beginning
in fiscal 2019, the company included costs associated with the
Snyder’s-Lance cost transformation program and integration with
these initiatives.
In the first quarter of fiscal 2019, the company recorded
Restructuring charges of $19 million and implementation costs and
other related costs of $13 million in Administrative expenses, $12
million in Cost of products sold, and $2 million in Marketing and
selling expenses (aggregate impact of $35 million after tax, or $.12
per share) related to these initiatives. 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. For the year ended July 29,
2018, the company recorded Restructuring charges of $49 million and
implementation costs and other related costs of $88 million in
Administrative expenses, $45 million in Cost of products sold, and
$3 million in Marketing and selling expenses (aggregate impact of
$136 million after tax, or $.45 per share) related to these
initiatives.
(2) In the first quarter of fiscal 2019, the company recorded a non-cash
impairment charge of $14 million in Cost of products sold ($11
million after tax, or $.04 per share) on its U.S. refrigerated soup
plant assets.
(3) 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. For the year ended
July 29, 2018, the company incurred gains of $136 million in Other
expenses / (income) ($103 million after tax, or $.34 per share)
associated with mark-to-market and curtailment adjustments for
defined benefit pension and postretirement plans.
(4) In the second quarter of fiscal 2018, the company announced its
intent to acquire Snyder’s-Lance, Inc. and on March 26, 2018, the
acquisition closed. For the year ended July 29, 2018, the company
incurred transaction costs of $53 million recorded in Other expenses
/ (income), $42 million in Cost of products sold associated with an
acquisition fair value adjustment for inventory, and recorded a gain
in Interest expense of $18 million on treasury rate lock contracts
used to hedge the planned financing of the acquisition. The company
also incurred integration costs in association with its cost savings
initiatives, of which $13 million was recorded in Restructuring
charges and $12 million in Administrative expenses. The aggregate
impact was $102 million, $73 million after tax, or $.24 per share.
(5) In fiscal 2018, the company reflected the impact on taxes of the
enactment of the Tax Cuts and Jobs Act that was signed into law in
December 2017. For the year ended July 29, 2018, the company
recorded a tax benefit of $179 million due to the remeasurement of
deferred tax assets and liabilities, and a tax charge of $53 million
related to the transition tax on unremitted foreign earnings. The
net impact was a tax benefit of $126 million ($.42 per share).
(6) In the fourth quarter of fiscal 2018, the company performed an
impairment assessment on the Plum trademark. In fiscal 2018, sales
and operating performance were well below expectations due in part
to competitive pressure and reduced margins. In the fourth quarter
of fiscal 2018, as part of a strategic review initiated by a new
leadership team and based on recent performance, the company lowered
its long-term outlook for future sales. The company recorded a
non-cash impairment charge of $54 million ($41 million after tax, or
$.14 per share) in Other expenses / (income).
In the third quarter of fiscal 2018, the company performed interim
impairment assessments within Campbell Fresh on the deli reporting
unit, which includes Garden Fresh Gourmet and the U.S. refrigerated
soup business, and the Bolthouse Farms refrigerated beverages and
salad dressings reporting unit. Within the deli unit, the company
revised its long-term outlook due to the anticipated loss of
refrigerated soup business with certain private label customers, as
well as the recent performance of the business. In addition, the
operating performance of the Bolthouse Farms refrigerated beverages
and salad dressing reporting unit was below expectations. The
company revised its long-term outlook for future earnings and cash
flows for each of these reporting units. The company recorded a
non-cash impairment charge of $11 million on the tangible assets and
$94 million on the intangible assets ($80 million after tax, or $.27
per share) of the deli reporting unit, and a non-cash impairment
charge of $514 million ($417 million after tax, or $1.39 per share)
related to the intangible assets of the Bolthouse Farms refrigerated
beverages and salad dressings reporting unit. The aggregate impact
of the impairment charges was $619 million, of which $11 million was
recorded in Cost of products sold and $608 million in Other expenses
/ (income), ($497 million after tax, or $1.65 per share).
In the second quarter of fiscal 2018, the company performed an
interim impairment assessment on the intangible assets of the
Bolthouse Farms carrot and carrot ingredients reporting unit as
operating performance was below expectations. The company revised
its outlook for future earnings and cash flows and recorded a
non-cash impairment charge of $75 million in Other expenses /
(income) ($74 million after tax, or $.25 per share).
For the year ended July 29, 2018, the total non-cash impairment
charges recorded were $748 million, of which $11 million was
recorded in Cost of products sold and $737 million in Other expenses
/ (income), ($612 million after tax, or $2.03 per share).
(7) For the year ended July 29, 2018, the company recorded a loss of $22
million in Other expenses / (income) ($15 million after tax, or $.05
per share) from a settlement of a legal claim.

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

Three Months Ended
October 28, 2018 October 29, 2017
(millions, except per share amounts)

As
reported

Adjustments(a) Adjusted

As
reported

Adjustments(a) Adjusted

Adjusted
Percent
Change

Gross margin $ 824 $ 26 $ 850 $ 783 $ 5 $ 788 8%
Gross margin percentage 30.6 % 31.6 % 36.2 % 36.5 %
Marketing and selling expenses $ 248 $ (2 ) $ 246 $ 219 $ $ 219
Administrative expenses $ 176 $ (13 ) $ 163 $ 149 $ (12 ) $ 137
Other expenses / (income) $ 4 $ $ 4 $ (29 ) $ 14 $ (15 )
Restructuring charges $ 19 $ (19 ) $ $ 2 $ (2 ) $
Earnings before interest and taxes $ 350 $ 60 $ 410 $ 412 $ 5 $ 417 (2)%
Interest, net 93 93 30 30
Earnings before taxes $ 257 $ 60 $ 317 $ 382 $ 5 $ 387
Taxes 63 14 77 107 2 109
Effective income tax rate 24.5 % 24.3 % 28.0 % 28.2 %
Net earnings attributable to Campbell Soup Company $ 194 $ 46 $ 240 $ 275 $ 3 $ 278 (14)%
Diluted net earnings per share attributable to Campbell Soup Company $ .64 $ .15 $ .79 $ .91 $ .01 $ .92 (14)%
(a)See following table for additional information.
Three Months Ended
October 28, 2018 October 29, 2017
(millions, except per share amounts)

Restructuring
charges,
implementation
costs
and other

related costs
(1)

Impairment
charge
(2)

Adjustments

Restructuring
charges,
implementation
costs
and other

related costs
(1)

Mark-to-
market
(3)

Adjustments
Gross margin $ 12 $ 14 $ 26 $ 5 $ $ 5
Marketing and selling expenses (2 ) (2 )
Administrative expenses (13 ) (13 ) (12 ) (12 )
Other expenses / (income) 14 14
Restructuring charges (19 ) (19 ) (2 ) (2 )
Earnings before interest and taxes $ 46 $ 14 $ 60 $ 19 $ (14 ) $ 5
Interest, net
Earnings before taxes $ 46 $ 14 $ 60 $ 19 $ (14 ) $ 5
Taxes 11 3 14 7 (5 ) 2
Net earnings attributable to Campbell Soup Company $ 35 $ 11 $ 46 $ 12 $ (9 ) $ 3
Diluted net earnings per share attributable to Campbell Soup Company* $ .12 $ .04 $ .15 $ .04 $ (.03 ) $ .01
*The sum of individual per share amounts may not add due to rounding.
Year Ended
(millions, except per share amounts) July 29, 2018
Gross margin $ 2,816
Add: Restructuring charges, implementation costs and other related
costs (1)
45
Add: Transaction and integration costs (4) 42
Add: Impairment charges (6) 11
Adjusted Gross margin $ 2,914
Adjusted Gross margin percentage 33.6 %
Earnings before interest and taxes, as reported $ 469
Add: Restructuring charges, implementation costs and other related
costs (1)
185
Deduct: Total pension and postretirement benefit mark-to-market and
curtailment adjustments (3)
(136 )
Add: Transaction and integration costs (4) 120
Add: Impairment charges (6) 748
Add: Claim settlement (7) 22
Adjusted Earnings before interest and taxes $ 1,408
Interest, net, as reported $ 197
Add: Transaction and integration costs (4) 18
Adjusted Interest, net $ 215
Adjusted Earnings before taxes $ 1,193
Taxes on earnings, as reported $ 11
Add: Tax benefit from restructuring charges, implementation costs
and other related costs (1)
49
Deduct: Tax expense from total pension and postretirement benefit
mark-to-market and curtailment adjustments (3)
(33 )
Add: Tax benefit from transaction and integration costs (4) 29
Add: Tax benefit from tax reform (5) 126
Add: Tax benefit from impairment charges (6) 136
Add: Tax benefit from claim settlement (7) 7
Adjusted Taxes on earnings $ 325
Adjusted effective income tax rate 27.2 %
Net earnings attributable to Campbell Soup Company, as reported $ 261
Add: Net adjustment from restructuring charges, implementation costs
and other related costs (1)
136
Deduct: Net adjustment from total pension and postretirement benefit
mark-to-market and curtailment adjustments (3)
(103 )
Add: Net adjustment from transaction and integration costs (4) 73
Deduct: Net adjustment from tax reform (5) (126 )
Add: Net adjustment from impairment charges (6) 612
Add: Net adjustment from claim settlement (7) 15
Adjusted Net earnings attributable to Campbell Soup Company $ 868
Diluted net earnings per share attributable to Campbell Soup
Company, as reported
$ .86
Add: Net adjustment from restructuring charges, implementation costs
and other related costs (1)
.45
Deduct: Net adjustment from total pension and postretirement benefit
mark-to-market and curtailment adjustments (3)
(.34 )
Add: Net adjustment from transaction and integration costs (4) .24
Deduct: Net adjustment from tax reform (5) (.42 )
Add: Net adjustment from impairment charges (6) 2.03
Add: Net adjustment from claim settlement (7) .05
Adjusted Diluted net earnings per share attributable to Campbell
Soup Company
$ 2.87

Source: Campbell Soup Company

INVESTOR CONTACT:
Ken Gosnell
(856)
342-6081
[email protected]

MEDIA CONTACT:
Thomas Hushen
(856)
342-5227
[email protected]