caret-down

Campbell Reports Second-Quarter Results

  • Net Sales Comparable to Prior Year, Organic Sales Decreased 2 Percent
  • Earnings Before Interest and Taxes (EBIT) Increased 19 Percent;
    Adjusted EBIT Decreased 4 Percent
  • Earnings Per Share (EPS) of $0.95; Adjusted EPS Increased 10 Percent
    to $1.00
  • Campbell Increases Cost Savings Program Target from $450 Million to
    $500 Million by Fiscal 2020
  • Campbell Revises Fiscal 2018 Guidance

CAMDEN, N.J.–(BUSINESS WIRE)–Feb. 16, 2018–
Campbell Soup Company (NYSE:CPB) today reported its
second-quarter results for fiscal 2018.

         

Three Months Ended

Six Months Ended

($ in millions, except per share)

               

 

Jan. 28,
2018

Jan. 29,
2017

%
Change

Jan. 28,
2018

Jan. 29,
2017

%
Change

Net Sales

As Reported (GAAP) $2,180 $2,171 -% $4,341 $4,373 (1)%
Organic (2)% (2)%

Earnings Before Interest and Taxes

As Reported (GAAP) $243 $205 19% $655 $662 (1)%
Adjusted $402 $417 (4)% $819 $905 (10)%

Diluted Earnings Per Share

As Reported (GAAP) $0.95 $0.33 n/m $1.85 $1.27 46%
Adjusted $1.00 $0.91 10% $1.91 $1.92 (1)%
 
n/m – not meaningful
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 disappointing quarter, driven by continued challenges in
U.S. soup and Campbell Fresh. The decline in organic sales was largely
due to the performance of Americas Simple Meals and Beverages, where
U.S. soup sales decreased by 7 percent based on the key customer issue
we discussed last quarter. We are making progress with this customer and
expect sales declines in soup to moderate in the second half.

“Campbell Fresh did not meet expectations. Sales did not recover as
anticipated due in part to headwinds in the super premium juice
category. Looking ahead to the spring, we expect our beverage innovation
plans to drive improved beverage performance in the second half. We are
committed to returning this business to profitable growth.

“Bright spots in the quarter included the sales performance of Global
Biscuits and Snacks, particularly Pepperidge Farm and Kelsen, as well as
our multi-year cost savings initiative. We have identified additional
savings opportunities and are increasing our savings target to $500
million by the end of fiscal 2020.

Morrison concluded, “Despite challenges, we have made significant
progress toward our long-term strategy to transform Campbell’s
portfolio. In the quarter, we completed the acquisition of Pacific Foods
to bolster our presence in the organic soup and broth market and
announced plans to acquire Snyder’s-Lance, which will greatly expand our
snacking business. These acquisitions will provide Campbell with greater
access to faster-growing categories and channels, and I am confident
will help deliver improved performance.”

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     Six Months Ended

Jan. 28,
2018

   

Jan. 29,
2017

Jan. 28,
2018

   

Jan. 29,
2017

As Reported (GAAP) $0.95 $0.33 $1.85 $1.27
 

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

$0.15

$0.19

$0.02

 

Transaction costs related to the pending acquisition of
Snyder’s-Lance, Inc.

$0.06 $0.06
 
Impairment charges related to the Campbell Fresh segment** $0.25 $0.58 $0.25 $0.58
 
Pension and postretirement benefit mark-to-market adjustments ($0.03) $0.04
 
Nonrecurring net tax benefit related to U.S. Tax Reform*** ($0.41) ($0.41)
Adjusted $1.00 $0.91 $1.91 $1.92*
 
* Numbers do not add due to rounding.
** The current quarter included a pre-tax non-cash impairment charge
of $75 million to write-off the goodwill of the Bolthouse Farms
carrot and carrot ingredients reporting unit.
*** Represents the earnings per share impact from a net tax benefit
of $124 million resulting from the Tax Cuts and Jobs Act enacted in
December 2017. This net tax benefit includes the estimated impact of
the revaluation of U.S. net deferred tax liabilities based on the
new lower corporate income tax rate, partly offset by the
unfavorable impact of a repatriation tax.
 

Second-Quarter Results

Sales of $2.180 billion were comparable to the prior year as a 1-point
benefit from the acquisition of Pacific Foods and a 1-point favorable
impact of currency translation were offset by a 2-percent decline in
organic sales driven primarily by lower volumes.

Gross margin decreased from 37.4 percent to 35.1 percent. Excluding
items impacting comparability in the current year, adjusted gross margin
decreased 2.2 percentage points to 35.2 percent. The decrease in
adjusted gross margin was driven primarily 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 $228 million
primarily due to lower advertising and consumer promotion expenses, as
well as the benefits from cost savings initiatives, partly offset by
investments in e-commerce. Administrative expenses increased 17 percent
to $165 million. Excluding items impacting comparability in the current
year, adjusted administrative expenses decreased 1 percent.

Other expenses were $70 million in the current quarter as compared to
$201 million in the prior-year quarter. Excluding items impacting
comparability, adjusted other income increased from $11 million to $29
million primarily due to gains on investments and higher pension and
postretirement benefit income.

EBIT increased 19 percent to $243 million. Excluding items impacting
comparability, adjusted EBIT decreased 4 percent to $402 million
primarily reflecting a lower adjusted gross margin percentage, partly
offset by an increase in adjusted other income and lower marketing and
selling expenses.

Net interest expense increased 14 percent to $32 million reflecting
higher average interest rates on the debt portfolio and higher levels of
debt. The Tax Cuts and Jobs Act, enacted in December 2017, will have a
favorable impact on both the reported and adjusted effective rates in
fiscal 2018. In the current-year quarter, the tax rate decreased from
42.9 percent to a negative 35.1 percent reflecting the one-time
favorable net tax benefit recorded as part of the Act. Excluding items
impacting comparability, the adjusted tax rate decreased 8.9 percentage
points from 27.8 percent to 18.9 percent primarily due to the ongoing
benefit of the lower U.S. federal tax rate. Campbell now expects a
full-year adjusted effective tax rate of approximately 26 percent.

EPS was $0.95 per share in the quarter compared to $0.33 per share in
the prior year. Excluding items impacting comparability, adjusted EPS
increased 10 percent to $1.00 per share, primarily due to a lower
adjusted tax rate, partly offset by declines in adjusted EBIT.

First-Half Results

Sales decreased 1 percent to $4.341 billion driven by a 2-percent
decline in organic sales, partly offset by a 1-point benefit from the
acquisition of Pacific Foods and a 1-point favorable impact of currency
translation. Declines in organic sales were driven primarily by lower
volumes.

EBIT decreased 1 percent to $655 million. Excluding items impacting
comparability, adjusted EBIT decreased 10 percent to $819 million
reflecting a lower adjusted gross margin percentage, lower sales and
higher adjusted administrative expenses, partly offset by lower
marketing and selling expenses and an increase in adjusted other income.

Net interest expense increased 11 percent to $62 million reflecting
higher average interest rates on the debt portfolio. The tax rate
decreased from 35.1 percent to 5.6 percent. Excluding items impacting
comparability, the adjusted tax rate decreased 6.4 percentage points
from 30.2 percent to 23.8 percent, primarily due to the lower U.S.
federal tax rate.

The company reported EPS of $1.85. Excluding items impacting
comparability, adjusted EPS decreased 1 percent to $1.91 per share,
compared with $1.92 per share a year ago.

Cash flow from operations decreased to $660 million from $667 million a
year ago, primarily due to higher net payments of hedging activities,
partly offset by improvements in working capital.

Cost Savings Program

In the second quarter of fiscal 2018, Campbell achieved $20 million in
savings under its multi-year cost savings program, bringing total
program-to-date savings to $365 million. Based on the success of the
program to date and the identification of additional savings
opportunities, Campbell has increased the annualized savings target from
$450 million to $500 million by the end of fiscal 2020.

Fiscal 2018 Guidance

Based on the company’s current outlook for fiscal 2018, including the
impact of the Pacific Foods acquisition and the Tax Cuts and Jobs Act,
Campbell has revised its fiscal 2018 guidance. As shown in the table
below, sales are now expected to change by -1 to +1 percent, adjusted
EBIT to decline by -7 to -5 percent, and adjusted EPS to increase by +2
to +4 percent, or $3.10 to $3.17 per share. This guidance assumes the
impact from currency translation will be nominal.

 
($ in millions, except per share)                    

 

2017
Results

Revised
2018 Guidance
Before Pacific
Foods

and Tax Reform

Pacific
Foods
Acquisition

U.S.
Tax
Reform

Revised
2018
Guidance

 
Net Sales $7,890 -2 to 0% +1 pt -1 to +1%
 
Adjusted EBIT $1,492*

-6 to -4%
(Previously -4 to -2%)

-1 pt

-7 to -5%

 
Adjusted EPS $3.04*

-5 to -3%
(Previously -3 to -1%)

-$0.05 +$0.25

+2 to +4%
$3.10 to $3.17

 

* 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 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 Jan. 28, 2018

($ in millions)

 
   

Americas
Simple Meals
and Beverages

   

Global Biscuits
and Snacks

   

Campbell
Fresh

      Total
Net Sales, as Reported $1,196 $726 $257 $2,180*

 

 

 

 

Volume and Mix (4)% -% -% (2)%
Price and Sales Allowances -% 2% -% -%
Promotional Spending -% 1% (1)% -%
Organic Net Sales (4)% 3% (1)% (2)%
Currency -% 1% -% 1%
Acquisition 2% -% -% 1%
% Change vs. Prior Year (2)% 4% (1)% -%
Segment Operating Earnings $282 $139 $(11)
% Change vs. Prior Year (9)% 1% n/m
 
n/m – not meaningful
* Includes Corporate
Note: A detailed reconciliation of the reported (GAAP) net sales to
organic net sales is included at the end of this news release.
 

Six Months Ended Jan. 28, 2018

($ in millions)

 
   

Americas
Simple Meals
and Beverages

   

Global Biscuits
and Snacks

   

Campbell
Fresh

      Total
Net Sales, as Reported $2,414 $1,435 $491 $4,341**

 

 

 

 

Volume and Mix (5)% 1% (1)% (2)%
Price and Sales Allowances -% 1% -% -%
Promotional Spending -% -% -% -%
Organic Net Sales (5)% 2% (1)% (2)%
Currency -% 1% -% 1%
Acquisition 1% -% -% 1%
% Change vs. Prior Year (3)%* 4%* (1)% (1)%*
Segment Operating Earnings $610 $259 $(17)
% Change vs. Prior Year (12)% 3% n/m
 
n/m – not meaningful
* Numbers do not add due to rounding.
** Includes Corporate
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 in the quarter decreased 2 percent to $1.196 billion. Organic
sales decreased 4 percent driven primarily by declines in U.S. soup and V8
Beverages, partly offset by gains in the retail business in Canada.
Excluding the benefit from the acquisition of Pacific Foods, sales of
U.S. soup decreased 7 percent driven by declines in ready-to-serve and
condensed soups, while sales of broth were comparable to the prior year.
The sales decline in U.S. soup was primarily the result of the
previously disclosed key customer issue.

Segment operating earnings decreased 9 percent to $282 million driven
primarily by a lower gross margin percentage and lower sales volume,
partly offset by lower marketing and selling expenses.

Global Biscuits and Snacks

Sales in the quarter increased 4 percent to $726 million. Excluding the
favorable impact of currency translation, organic sales increased 3
percent driven primarily by gains in Pepperidge Farm snacks, reflecting
growth in Goldfish crackers and in cookies, as well as gains of
Kelsen cookies in China. Excluding the favorable impact of currency
translation, sales of Arnott’s biscuits were comparable to the prior
year.

Segment operating earnings increased 1 percent to $139 million.
Excluding the favorable impact of currency translation, operating
earnings were comparable to the prior year with lower advertising and
consumer promotion expenses offset by a lower gross margin percentage.

Campbell Fresh

Sales in the quarter decreased 1 percent to $257 million driven
primarily by sales declines in Bolthouse Farms refrigerated
beverages.

Segment operating earnings declined from a loss of $3 million to a loss
of $11 million, reflecting a lower gross margin percentage driven
primarily by an increase in supply chain costs as well as higher carrot
costs.

Corporate

Corporate in the second quarter of fiscal 2018 included charges related
to cost savings initiatives of $27 million, transaction costs of $24
million related to the pending acquisition of Snyder’s-Lance and a
non-cash impairment charge of $75 million related to the Bolthouse Farms
carrot and carrot ingredients reporting unit. Corporate in the second
quarter of fiscal 2017 included non-cash impairment charges of $212
million related to the Campbell Fresh segment. The remaining decrease in
expenses primarily reflects gains on investments and higher pension and
postretirement income.

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; Pacific soups, broth,
stocks, non-dairy beverages and 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.

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.

Conference Call

Campbell will host a conference call to discuss these results today at
9:30 a.m. Eastern Time. To join, dial +1 (703) 639-1316. The access code
is 6692659. 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 Mar. 2,
2018, at +1 (404) 537-3406. The access code for the replay is 6692659.

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, Garden Fresh Gourmet
and Pacific Foods.
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) the conditions to the completion of the
Snyder’s-Lance acquisition by the company, including obtaining
Snyder’s-Lance shareholder approval, may not be satisfied; (11)
long-term financing for the Snyder’s-Lance acquisition may not be
available on favorable terms, or at all; (12) closing of the
Snyder’s-Lance acquisition may not occur or may be delayed, either as a
result of litigation related to the acquisition or otherwise; (13) the
company may be unable to achieve the anticipated benefits of the
Snyder’s-Lance acquisition; (14) completing the Snyder’s-Lance
acquisition may distract the company’s management from other important
matters; (15) disruptions to the company’s supply chain, including
fluctuations in the supply of and inflation in energy and raw and
packaging materials cost; (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
January 28, 2018     January 29, 2017
Net sales $ 2,180   $ 2,171  
Costs and expenses
Cost of products sold 1,414 1,360
Marketing and selling expenses 228 240
Administrative expenses 165 141
Research and development expenses 27 25
Other expenses / (income) 70 201
Restructuring charges   33     (1 )
Total costs and expenses   1,937     1,966  
Earnings before interest and taxes 243 205
Interest, net   32     28  
Earnings before taxes 211 177
Taxes on earnings   (74 )   76  
Net earnings 285 101
Net loss attributable to noncontrolling interests        
Net earnings attributable to Campbell Soup Company $ 285   $ 101  
Per share – basic
Net earnings attributable to Campbell Soup Company $ .95   $ .33  
Dividends $ .35   $ .35  
Weighted average shares outstanding – basic   301     306  
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .95   $ .33  
Weighted average shares outstanding – assuming dilution   301     309  
 
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 STATEMENTS OF EARNINGS (unaudited)

(millions, except per share amounts)

 
    Six Months Ended
January 28, 2018     January 29, 2017
Net sales $ 4,341 $ 4,373
Costs and expenses
Cost of products sold 2,792 2,711
Marketing and selling expenses 447 470
Administrative expenses 314 266
Research and development expenses 57 52
Other expenses / (income) 41 212
Restructuring charges   35  
Total costs and expenses   3,686   3,711
Earnings before interest and taxes 655 662
Interest, net   62   56
Earnings before taxes 593 606
Taxes on earnings   33   213
Net earnings 560 393
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 560 $ 393
Per share – basic
Net earnings attributable to Campbell Soup Company $ 1.86 $ 1.28
Dividends $ .70 $ .70
Weighted average shares outstanding – basic   301   307
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ 1.85 $ 1.27
Weighted average shares outstanding – assuming dilution   302   309
 
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    
January 28, 2018     January 29, 2017

Percent
Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 1,196 $ 1,215 (2)%
Global Biscuits and Snacks 726 696 4%
Campbell Fresh 257 260 (1)%
Corporate   1       n/m
Total sales $ 2,180   $ 2,171   —%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 282 $ 311 (9)%
Global Biscuits and Snacks 139 137 1%
Campbell Fresh   (11 )   (3 ) n/m
Total operating earnings 410 445 (8)%
Corporate (134 ) (241 )
Restructuring charges   (33 )   1  
Earnings before interest and taxes 243 205 19%
Interest, net 32 28
Taxes on earnings   (74 )   76  
Net earnings 285 101 n/m
Net loss attributable to noncontrolling interests        
Net earnings attributable to Campbell Soup Company $ 285   $ 101   n/m
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .95   $ .33   n/m
 
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

CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS
(unaudited)

(millions, except per share amounts)

 
    Six Months Ended    
January 28, 2018     January 29, 2017

Percent
Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 2,414 $ 2,493 (3)%
Global Biscuits and Snacks 1,435 1,386 4%
Campbell Fresh 491 494 (1)%
Corporate   1       n/m
Total sales $ 4,341   $ 4,373   (1)%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 610 $ 691 (12)%
Global Biscuits and Snacks 259 252 3%
Campbell Fresh   (17 )   (2 ) n/m
Total operating earnings 852 941 (9)%
Corporate (162 ) (279 )
Restructuring charges   (35 )    
Earnings before interest and taxes 655 662 (1)%
Interest, net 62 56
Taxes on earnings   33     213  
Net earnings 560 393 42%
Net loss attributable to noncontrolling interests        
Net earnings attributable to Campbell Soup Company $ 560   $ 393   42%
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ 1.85   $ 1.27   46%
 
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)

 
    January 28, 2018     January 29, 2017
Current assets $ 1,928 $ 1,896
Plant assets, net 2,518 2,375
Intangible assets, net 3,744 3,179
Other assets   146   120
Total assets $ 8,336 $ 7,570
Current liabilities $ 3,012 $ 2,436
Long-term debt 2,247 2,293
Other liabilities 1,128 1,362
Total equity   1,949   1,479
Total liabilities and equity $ 8,336 $ 7,570
Total debt $ 3,906 $ 3,478
Cash and cash equivalents $ 196 $ 309
 
 
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(millions)
 
Six Months Ended
January 28, 2018   January 29, 2017
Cash flows from operating activities:
Net earnings $ 560 $ 393
Adjustments to reconcile net earnings to operating cash flow
Impairment charges 75 212
Restructuring charges 35
Stock-based compensation 32 32
Noncurrent income taxes 52
Pension and postretirement benefit income (32 ) (23 )
Depreciation and amortization 161 154
Deferred income taxes (106 )
Other, net 18 6
Changes in working capital
Accounts receivable (113 ) (95 )
Inventories 84 117
Prepaid assets (25 ) (9 )
Accounts payable and accrued liabilities (10 ) (100 )
Net receipts from (payments of) hedging activities (31 ) 1
Other (40 ) (21 )
Net cash provided by operating activities 660   667  
Cash flows from investing activities:
Purchases of plant assets (132 ) (119 )
Business acquired, net of cash acquired (682 )
Other, net (11 ) (13 )
Net cash used in investing activities (825 ) (132 )
Cash flows from financing activities:
Net short-term borrowings 379 2
Long-term repayments (16 ) (61 )
Dividends paid (216 ) (207 )
Treasury stock purchases (86 ) (234 )
Treasury stock issuances 2
Payments related to tax withholding for stock-based compensation (23 ) (20 )
Net cash provided by (used in) financing activities 38   (518 )
Effect of exchange rate changes on cash 4   (4 )
Net change in cash and cash equivalents (123 ) 13
Cash and cash equivalents — beginning of period 319   296  
Cash and cash equivalents — end of period $ 196   $ 309  
 
 

Reconciliation of GAAP to Non-GAAP Financial Measures

Second Quarter Ended January 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
  January 28, 2018  

January 29,
2017

  % Change
(millions)

Net Sales,
as
Reported

 

Impact of
Currency

 

Impact of
Acquisition

 

Organic
Net Sales

Net Sales,
as
Reported

Net Sales,
as
Reported

 

Organic
Net Sales

Americas Simple Meals and Beverages $ 1,196   $ (6 )   $ (28 )   $ 1,162 $ 1,215 (2)%   (4)%
Global Biscuits and Snacks 726 (10 ) 716 696 4% 3%
Campbell Fresh 257 257 260 (1)% (1)%
Corporate 1             1     n/m   n/m
Total Net Sales $ 2,180     $ (16 )   $ (28 )   $ 2,136   $ 2,171   —%   (2)%
 
 
Six Months Ended
January 28, 2018 January 29, 2017 % Change
(millions)

Net Sales,
as
Reported

 

Impact of
Currency

 

Impact of
Acquisition

 

Organic
Net Sales

Net Sales,
as
Reported

Net Sales,
as
Reported

 

Organic
Net Sales

Americas Simple Meals and Beverages $ 2,414 $ (12 ) $ (28 ) $ 2,374 $ 2,493 (3)% (5)%
Global Biscuits and Snacks 1,435 (15 ) 1,420 1,386 4% 2%
Campbell Fresh 491 491 494 (1)% (1)%
Corporate 1             1     n/m   n/m
Total Net Sales $ 4,341     $ (27 )   $ (28 )   $ 4,286   $ 4,373   (1)%   (2)%

n/m – not meaningful

 

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 six-month period of fiscal 2018, the company incurred gains
of $14 million in Other expenses / (income) ($10 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 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 the second quarter of fiscal 2018, the company recorded
Restructuring charges of $33 million and implementation costs and
other related costs of $26 million in Administrative expenses and $1
million in Cost of products sold (aggregate impact of $46 million
after tax, or $.15 per share) related to these initiatives. In the
six-month period of fiscal 2018, the company recorded Restructuring
charges of $35 million and implementation costs and other related
costs of $38 million in Administrative expenses and $6 million in
Cost of products sold (aggregate impact of $58 million after tax, or
$.19 per share) related to these initiatives. In the six-month
period of fiscal 2017, the company recorded implementation costs and
other related costs of $11 million in Administrative expenses ($7
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 2018, the company announced its
intent to acquire Snyder’s-Lance, Inc. The company incurred
transaction costs of $24 million in Other expenses / (income) ($19
million after tax, or $.06 per share) associated with the
acquisition, which the company expects to close in the third quarter
of fiscal 2018.
 
(4) In the second quarter of fiscal 2018, the company recorded a tax
benefit of $124 million in Taxes on earnings ($.41 per share)
related to the enactment of the Tax Cuts and Jobs Act that was
signed into law in December 2017.
 
(5) 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. Based on recent
performance, the company revised its outlook for future earnings and
cash flows. The company recorded a non-cash impairment charge of $75
million in Other expenses / (income) ($74 million after tax, or $.25
per share).
 
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 the 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 $.58 per share). For the year
ended July 30, 2017, the aggregate impact was $.59 per share. The
charges were included in Other expenses / (income).
 
(6) 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
January 28, 2018   January 29, 2017
(millions, except per share amounts)

As
reported

  Adjustments(a)   Adjusted

As
reported

  Adjustments(a)   Adjusted

Adjusted
Percent
Change

Gross margin $ 766 $ 1 $ 767 $ 811 $ $ 811 (5)%
Gross margin percentage 35.1 % 35.2 % 37.4 % 37.4 %
Administrative expenses $ 165 $ (26 ) $ 139 $ 141 $ $ 141
Other expenses / (income) $ 70 $ (99 ) $ (29 ) $ 201 $ (212 ) $ (11 )
Restructuring charges $ 33 $ (33 ) $ $ (1 ) $ $ (1 )
Earnings before interest and taxes $ 243   $ 159   $ 402   $ 205   $ 212   $ 417   (4)%
Interest, net 32     32   28     28  
Earnings before taxes $ 211   $ 159   $ 370   $ 177   $ 212   $ 389  
Taxes (74 ) 144 70 76 32 108
Effective income tax rate (35.1 )%   18.9 % 42.9 %   27.8 %
Net earnings attributable to Campbell Soup Company $ 285   $ 15   $ 300   $ 101   $ 180   $ 281   7%
Diluted net earnings per share attributable to Campbell Soup Company $ .95   $ .05   $ 1.00   $ .33   $ .58   $ .91   10%
(a)See following table for additional information.
 
 
Three Months Ended
January 28, 2018   January 29, 2017
(millions, except per share amounts)

Restructuring
charges,
implementation
costs
and other

related costs
(2)

 

Transaction
costs
(3)

 

Tax
reform
(4)

 

Impairment
charges
(5)

 

Adjustments

Impairment
charges
(5)

Gross margin $ 1 $ $ $ $ 1 $
Administrative expenses (26 ) (26 )
Other expenses / (income) (24 ) (75 ) (99 ) (212 )
Restructuring charges (33 )       (33 )  
Earnings before interest and taxes $ 60   $ 24   $   $ 75   $ 159   $ 212  
Interest, net            
Earnings before taxes $ 60   $ 24   $   $ 75   $ 159   $ 212  
Taxes 14   5   124   1   144   32  
Net earnings attributable to Campbell Soup Company $ 46   $ 19   $ (124 ) $ 74   $ 15   $ 180  
Diluted net earnings per share attributable to Campbell Soup Company $ .15   $ .06   $ (.41 ) $ .25   $ .05   $ .58  
 
         
Six Months Ended
January 28, 2018     January 29, 2017
(millions, except per share amounts)

As
reported

    Adjustments(a)     Adjusted

As
reported

    Adjustments(a)     Adjusted

Adjusted
Percent
Change

Gross margin $ 1,549 $ 6 $ 1,555 $ 1,662 $ $ 1,662 (6)%
Gross margin percentage 35.7 % 35.8 % 38.0 % 38.0 %
Administrative expenses $ 314 $ (38 ) $ 276 $ 266 $ (11 ) $ 255
Other expenses / (income) $ 41 $ (85 ) $ (44 ) $ 212 $ (232 ) $ (20 )
Restructuring charges $ 35 $ (35 ) $ $

$

$
Earnings before interest and taxes $ 655   $ 164   $ 819   $ 662   $ 243   $ 905   (10)%
Interest, net 62     62   56     56  
Earnings before taxes $ 593   $ 164   $ 757   $ 606   $ 243   $ 849  
Taxes 33 147 180 213 43 256
Effective income tax rate 5.6 %   23.8 % 35.1 %   30.2 %
Net earnings attributable to Campbell Soup Company $ 560   $ 17   $ 577   $ 393   $ 200   $ 593   (3)%
Diluted net earnings per share attributable to Campbell Soup Company $ 1.85   $ .06   $ 1.91   $ 1.27   $ .65   $ 1.92   (1)%
(a)See following tables for additional information.
 
     
Six Months Ended
January 28, 2018
(millions, except per share amounts)

Mark-to-
market
(1)

 

   

Restructuring
charges,
implementation
costs
and other

related costs
(2)

   

Transaction
costs
(3)

   

Tax
reform
(4)

   

Impairment
charges
(5)

 

    Adjustments
Gross margin $ $ 6 $ $ $ $ 6
Administrative expenses (38 ) (38 )
Other expenses / (income) 14 (24 ) (75 ) (85 )
Restructuring charges   (35 )       (35 )
Earnings before interest and taxes $ (14 ) $ 79   $ 24   $   $ 75   $ 164  
Interest, net            
Earnings before taxes $ (14 ) $ 79   $ 24   $   $ 75   $ 164  
Taxes (4 ) 21   5   124   1   147  
Net earnings attributable to Campbell Soup Company $ (10 ) $ 58   $ 19   $ (124 ) $ 74   $ 17  
Diluted net earnings per share attributable to Campbell Soup Company $ (.03 ) $ .19   $ .06   $ (.41 ) $ .25   $ .06  
 
     
Six Months Ended
January 29, 2017
(millions, except per share amounts)

Mark-to-
market
(1)

   

Restructuring
charges,
implementation
costs
and other

related costs
(2)

   

Impairment
charges
(5)

    Adjustments
Gross margin $ $ $ $
Administrative expenses (11 ) (11 )
Other expenses / (income) (20 )   (212 ) (232 )
Earnings before interest and taxes $ 20   $ 11   $ 212   $ 243  
Interest, net        
Earnings before taxes $ 20   $ 11   $ 212   $ 243  
Taxes 7   4   32   43  
Net earnings attributable to Campbell Soup Company $ 13   $ 7   $ 180   $ 200  
Diluted net earnings per share attributable to Campbell Soup Company* $ .04   $ .02   $ .58   $ .65  
*The sum of individual per share amounts may not add due to rounding.
 
   
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 (5)   212  
Adjusted Earnings before interest and taxes $ 1,492  
Interest, net, as reported $ 107
Add: Sale of notes (6)   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 (5) 32
Add: Tax benefit from sale of notes (6)   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 (5) 180
Deduct: Net adjustment from sale of notes (6)  

(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 (5) .59
Deduct: Net adjustment from sale of notes (6)  

(.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]