caret-down

Campbell Reports Second-Quarter Results

  • Net Sales Decreased 1 Percent, Organic Sales Decreased 2 Percent
  • Campbell Records Pre-Tax Non-Cash Impairment Charges of $212 Million,
    or $0.58 Per Share, Related to Campbell Fresh Segment
  • Earnings Before Interest and Taxes (EBIT) Decreased 50 Percent,
    Adjusted EBIT Decreased 1 Percent
  • Earnings Per Share (EPS) Decreased 61 Percent to $0.33, Adjusted EPS
    Increased 5 Percent to $0.91 Reflecting Lower Adjusted Tax Rate
  • Campbell Reaffirms Fiscal 2017 Guidance
  • Campbell Increases Cost Savings Program Target from $300 Million by
    Fiscal 2018 to $450 Million by Fiscal 2020

CAMDEN, N.J.–(BUSINESS WIRE)–Feb. 17, 2017–
Campbell Soup Company (NYSE:CPB) today reported its
second-quarter results for fiscal 2017.

     
Three Months Ended Six Months Ended
($ in millions, except per share) Jan. 29, 2017   Jan. 31, 2016   % Change Jan. 29, 2017   Jan. 31, 2016   % Change
Net Sales
As Reported (GAAP) $2,171 $2,201 (1)% $4,373 $4,404 (1)%
Organic (2)% (1)%
Earnings Before Interest and Taxes
As Reported (GAAP) $205 $414 (50)% $662 $729 (9)%
Adjusted $417 $423 (1)% $905 $902 -%
Diluted Earnings Per Share
As Reported (GAAP) $0.33 $0.85 (61)% $1.27 $1.47 (14)%
Adjusted $0.91 $0.87 5% $1.92 $1.82 5%
 

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,
“I am not satisfied with our sales performance this quarter. Declines
were most prominent in Campbell Fresh driven by a market share decline
and weather-related issues in carrots, capacity constraints from the Bolthouse
Farms Protein PLUS
 recall last June, and Garden Fresh Gourmet.
Although V8 shelf-stable beverages declined, I am
encouraged by the positive momentum in our core U.S. soup, simple meals
and Pepperidge Farm snacks businesses. U.S. soup sales increased in the
quarter, driven by our ready-to-serve varieties, such as Chunky and
new Well Yes!, which performed above expectations.

“C-Fresh performance was below our expectations. The new C-Fresh
management team has conducted an extensive review of the business and
has determined the recovery will take longer to execute than we
originally planned. As a result, we no longer expect C-Fresh to grow
this fiscal year. Despite these challenges, we remain confident in the
growth potential of the packaged fresh category. C-Fresh continues to be
an important strategic business for Campbell to meet growing consumer
demand for fresh foods and interest in health and well-being.

“We continued to over-deliver on our cost savings initiative, and now
expect to achieve our target a year ahead of schedule. We have increased
our savings target from $300 million by the end of fiscal 2018 to $450
million by the end of fiscal 2020. Looking ahead, we expect to improve
our sales performance in the back half and are maintaining our guidance
for the fiscal year.”

Items Impacting Comparability

The company reported earnings of $0.33 per share in the quarter. 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
reporting unit as operating performance was well below expectations and
the new leadership team of the Campbell Fresh division initiated a
strategic review. This performance and review led to a revised outlook
for future sales, earnings and cash flow. The current quarter results
reflect a pre-tax non-cash impairment charge of $147 million, or $0.45
per share, to reduce the carrying value of the intangible assets of the
Bolthouse Farms carrot and carrot ingredients reporting unit. The
current quarter results also reflect a pre-tax non-cash impairment
charge of $65 million, or $0.13 per share, to reduce the carrying value
of the intangible assets of the Garden Fresh reporting unit. The
prior-year quarter included pre-tax charges related to cost savings
initiatives of $16 million, or $0.03 per share, and a pre-tax gain
related to a pension benefit mark-to-market adjustment of $7 million, or
$0.01 per share. Excluding items impacting comparability in both
periods, adjusted EPS increased 5 percent to $0.91 per share, compared
with $0.87 per share in the year-ago quarter. A detailed reconciliation
of the reported (GAAP) financial information to the adjusted information
is included at the end of this news release.

Second-Quarter Results

Sales decreased 1 percent to $2.171 billion driven by the decline in
organic sales, partially offset by the favorable impact of currency
translation. Organic sales decreased 2 percent driven by lower volume
and higher promotional spending.

Gross margin increased from 37.2 percent to 38.0 percent. Excluding
items impacting comparability in the prior year, adjusted gross margin
improved 0.7 percentage points. The increase in adjusted gross margin
was primarily driven by productivity improvements and the benefits from
cost savings initiatives, partly offset by higher supply chain costs and
inflation, as well as higher promotional spending. The adjusted gross
margin increase reflects the continued gross margin expansion in
Americas Simple Meals and Beverages. The increase in supply chain costs
was primarily driven by higher carrot costs in the quarter due to the
adverse impact on crop yields of heavy rains in December and January.

Marketing and selling expenses increased 6 percent to $237 million.
Excluding items impacting comparability in the prior year, adjusted
marketing and selling expenses increased 5 percent primarily due to
higher advertising and consumer promotion expenses. Administrative
expenses decreased 5 percent to $139 million. Excluding items impacting
comparability in the prior year, adjusted administrative expenses
decreased 3 percent primarily due to lower incentive compensation costs
compared to the prior year, partly offset by higher benefit-related
costs and investments in long-term innovation.

EBIT decreased 50 percent to $205 million, principally driven by the
impairment charges in the current-year quarter. Excluding items
impacting comparability, adjusted EBIT decreased 1 percent to $417
million reflecting lower sales and higher marketing and selling
expenses, partly offset by a higher adjusted gross margin percentage.

Net interest expense increased 4 percent to $28 million reflecting
higher average interest rates on the debt portfolio, partly offset by
lower levels of debt. The tax rate increased to 42.9 percent as compared
with a tax rate of 31.5 percent in the prior year. Excluding items
impacting comparability, the adjusted tax rate decreased 3.8 percentage
points to 27.8 percent as the timing of tax expense on an adjusted basis
was favorably impacted by the goodwill impairment. The outlook for the
full-year adjusted tax rate remains unchanged and is expected to be
approximately 32 percent.

First-Half Results

Sales decreased 1 percent to $4.373 billion driven by a 1 percent
decline in organic sales, partly offset by the favorable impact of
currency translation.

EBIT decreased 9 percent to $662 million. Excluding items impacting
comparability, adjusted EBIT was comparable to the prior year at $905
million reflecting a higher adjusted gross margin percentage and lower
administrative expenses, offset by higher marketing and selling expenses
and volume declines.

Net interest expense increased 2 percent to $56 million reflecting
higher average interest rates on the debt portfolio, partly offset by
lower levels of debt. The tax rate increased 3.2 percentage points to
35.1 percent. Excluding items impacting comparability, the adjusted tax
rate decreased 2.7 percentage points to 30.2 percent.

Cash flow from operations decreased to $667 million from $754 million a
year ago primarily due to changes in accrued liabilities, principally
accrued taxes and accrued incentive compensation.

Cost Savings Program

In fiscal 2015, Campbell launched a comprehensive reorganization and
multi-year cost savings initiatives with targeted annualized cost
savings of $300 million by fiscal 2018. Campbell now expects to achieve
$300 million in cost savings by the end of fiscal 2017, a year earlier
than anticipated. Based on the success of the program to date and the
identification of additional savings opportunities, the savings target
is being increased from $300 million by the end of fiscal 2018 to $450
million by the end of fiscal 2020.

Fiscal 2017 Guidance

Campbell continues to expect sales to increase by 0 to 1 percent,
adjusted EBIT to increase by 1 to 4 percent, and adjusted EPS to
increase by 2 to 5 percent, or $3.00 to $3.09 per share. This guidance
assumes the impact from currency translation will be nominal. A non-GAAP
reconciliation is not provided for 2017 guidance since certain items are
not estimable, such as pension and postretirement mark-to-market
adjustments, and these items are not considered to be part of the
company’s ongoing business results.

Segment Operating Review

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

 

Three Months Ended Jan. 29, 2017

($ in millions)
       

Americas
Simple Meals
and Beverages

Global Biscuits
and Snacks

Campbell
Fresh

Total
Net Sales, as Reported $1,231 $680 $260 $2,171

 

 

 

 

Volume and Mix -% -% (8)% (1)%
Promotional Spending (1)% (1)% -% (1)%
Organic Net Sales (1)% (1)% (8)% (2)%
Currency -% 1% -% -%
% Change vs. Prior Year -%* -% (8)% (1)%*
Segment Operating Earnings $313 $135 $(3)
% Change vs. Prior Year 8% (4)% 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.
 

Six Months Ended Jan. 29, 2017

($ in millions)
 

Americas
Simple Meals
and Beverages

 

Global Biscuits
and Snacks

 

Campbell
Fresh

  Total
Net Sales, as Reported $2,528 $1,351 $494 $4,373

 

 

 

 

Volume and Mix -% 1% (7)% (1)%
Promotional Spending (1)% (1)% -% (1)%
Organic Net Sales (1)% -% (7)% (1)%*
Currency -% 2% -% 1%
% Change vs. Prior Year -%* 1%* (7)% (1)%*
Segment Operating Earnings $696 $247 $(2)
% Change vs. Prior Year 7% (3)% 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.
 

Americas Simple Meals and Beverages

Sales in the quarter were comparable to the prior year at $1.231
billion. Excluding the favorable impact of currency translation, segment
sales decreased 1 percent driven by declines in V8 beverages,
partly offset by gains in soup, Prego pasta sauces and Plum
products. Sales of U.S. soup increased 1 percent driven by gains in
ready-to-serve soups, mostly offset by declines in broth and condensed
soups.

Segment operating earnings increased 8 percent to $313 million. The
increase was driven by a higher gross margin percentage, partly offset
by increased advertising and consumer promotion expenses.

Global Biscuits and Snacks

Sales in the quarter were comparable to the prior year at $680 million.
Excluding the favorable impact of currency translation, segment sales
decreased 1 percent primarily driven by declines in Kelsen, primarily in
the U.S., and Arnott’s biscuits, partly offset by gains in
Pepperidge Farm. Pepperidge Farm sales increased due to gains in Goldfish
crackers and Pepperidge Farm cookies, partly offset by
declines in fresh bakery and frozen products.

Segment operating earnings decreased 4 percent to $135 million. The
decrease was primarily driven by a lower gross margin percentage.

Campbell Fresh

Sales in the quarter decreased 8 percent to $260 million driven by lower
sales of carrots, Bolthouse Farms refrigerated beverages, and
Garden Fresh Gourmet, partly offset by gains in refrigerated soup.

Segment operating earnings decreased from $21 million to a loss of $3
million reflecting increased carrot costs due to the adverse impact on
crop yields of heavy rains in December and January, as well as the cost
impact of lower beverage operating efficiency and lower sales.

Unallocated Corporate Expenses

Unallocated corporate expenses for the quarter were $241 million
compared to $29 million in the prior year. The current-year quarter
included the pre-tax non-cash impairment charges of $212 million related
to the Campbell Fresh segment. The prior-year quarter included $7
million of pre-tax charges associated with Campbell’s initiatives to
implement a new enterprise design, to reduce costs and to streamline its
organizational structure. The prior-year quarter also included a $7
million pre-tax gain related to a pension benefit mark-to-market
adjustment.

Conference Call

Campbell will host a conference call to discuss these results today at
9:00 a.m. Eastern Time. To join, dial +1 (703) 639-1316. The conference
ID is 40985838. 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 March
3, 2017, at +1 (404) 537-3406. The access code for the replay is
40985838.

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 2017, 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
manage changes to its organizational structure and/or business
processes; (2) the company’s ability to realize projected cost savings
and benefits from its efficiency programs; (3) the impact of strong
competitive responses to the company’s efforts to leverage its brand
power in the market; (4) the impact of changes in consumer demand for
the company’s products and favorable perception of the company’s brands;
(5) the impact of product quality and safety issues, including recalls
and product liabilities; (6) the risks associated with trade and
consumer acceptance of the company’s initiatives, including its trade
and promotional programs; (7) the practices, including changes to
inventory practices, and increased significance of certain of the
company’s key trade customers; (8) the impact of disruptions to the
company’s supply chain, including fluctuations in the supply or costs of
energy and raw and packaging materials; (9) the impact of non-U.S.
operations, including trade restrictions, public corruption and
compliance with foreign laws and regulations; (10) the impact of
business portfolio changes; (11) the uncertainties of litigation and
regulatory actions against the company; (12) disruption to the
independent contractor distribution models used by certain of the
company’s businesses, including the results of litigation or regulatory
actions that could affect their independent contractor classification;
(13) the company’s ability to protect its intellectual property rights;
(14) the impact of an impairment to goodwill or other intangible assets;
(15) the impact of increased liabilities and costs related to the
company’s defined benefit pension plans; (16) the impact of a material
failure in or breach of the company’s information technology systems;
(17) the company’s ability to attract and retain key talent; (18) the
impact of changes in currency exchange rates, tax rates, interest rates,
debt and equity markets, inflation rates, economic conditions, law,
regulation and other external factors; (19) the impact of unforeseen
business disruptions in one or more of the company’s markets due to
political instability, civil disobedience, terrorism, armed hostilities,
natural disasters or other calamities; and (20) 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 29, 2017   January 31, 2016
Net sales $ 2,171   $ 2,201
Costs and expenses
Cost of products sold 1,346 1,382
Marketing and selling expenses 237 223
Administrative expenses 139 146
Research and development expenses 25 23
Other expenses / (income) 220 4
Restructuring charges (1 ) 9
Total costs and expenses 1,966   1,787
Earnings before interest and taxes 205 414
Interest, net 28   27
Earnings before taxes 177 387
Taxes on earnings 76   122
Net earnings 101 265
Net loss attributable to noncontrolling interests  
Net earnings attributable to Campbell Soup Company $ 101   $ 265
Per share – basic
Net earnings attributable to Campbell Soup Company $ .33   $ .85
Dividends $ .35   $ .312
Weighted average shares outstanding – basic 306   310
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .33   $ .85
Weighted average shares outstanding – assuming dilution 309   312
 
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(millions, except per share amounts)
 
Six Months Ended
January 29, 2017   January 31, 2016
Net sales $ 4,373   $ 4,404
Costs and expenses
Cost of products sold 2,707 2,830
Marketing and selling expenses 465 449
Administrative expenses 262 302
Research and development expenses 51 55
Other expenses / (income) 226 9
Restructuring charges   30
Total costs and expenses 3,711   3,675
Earnings before interest and taxes 662 729
Interest, net 56   55
Earnings before taxes 606 674
Taxes on earnings 213   215
Net earnings 393 459
Net loss attributable to noncontrolling interests  
Net earnings attributable to Campbell Soup Company $ 393   $ 459
Per share – basic
Net earnings attributable to Campbell Soup Company $ 1.28   $ 1.48
Dividends $ .70   $ .624
Weighted average shares outstanding – basic 307   310
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ 1.27   $ 1.47
Weighted average shares outstanding – assuming dilution 309   312
   
CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
 
Three Months Ended
January 29, 2017   January 31, 2016

Percent
Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 1,231 $ 1,237 —%
Global Biscuits and Snacks 680 682 —%
Campbell Fresh 260   282   (8)%
Total sales $ 2,171   $ 2,201   (1)%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 313 $ 290 8%
Global Biscuits and Snacks 135 141 (4)%
Campbell Fresh (3 ) 21   NM
Total operating earnings 445 452 (2)%
Unallocated corporate expenses 241 29
Restructuring charges (1 ) 9  
Earnings before interest and taxes 205 414 (50)%
Interest, net 28 27
Taxes on earnings 76   122  
Net earnings 101 265 (62)%
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 101   $ 265   (62)%
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .33   $ .85   (61)%
   
CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
 
Six Months Ended
January 29, 2017   January 31, 2016

Percent
Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 2,528 $ 2,539 —%
Global Biscuits and Snacks 1,351 1,334 1%
Campbell Fresh 494   531   (7)%
Total sales $ 4,373   $ 4,404   (1)%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 696 $ 653 7%
Global Biscuits and Snacks 247 255 (3)%
Campbell Fresh (2 ) 39   NM
Total operating earnings 941 947 (1)%
Unallocated corporate expenses 279 188
Restructuring charges   30  
Earnings before interest and taxes 662 729 (9)%
Interest, net 56 55
Taxes on earnings 213   215  
Net earnings 393 459 (14)%
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 393   $ 459   (14)%
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ 1.27   $ 1.47   (14)%
   
CAMPBELL SOUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(millions)
 
January 29, 2017 January 31, 2016
Current assets $ 1,896 $ 2,132
Plant assets, net 2,375 2,340
Intangible assets, net 3,179 3,511
Other assets 120   84
Total assets $ 7,570   $ 8,067
Current liabilities $ 2,436 $ 2,566
Long-term debt 2,293 2,539
Other liabilities 1,362 1,438
Total equity 1,479   1,524
Total liabilities and equity $ 7,570   $ 8,067
Total debt $ 3,478   $ 3,832
Cash and cash equivalents $ 309   $ 306
 

Certain amounts in the prior year were reclassified to conform to the
current-year presentation.

 
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(millions)
 
Six Months Ended
January 29, 2017   January 31, 2016
Cash flows from operating activities:
Net earnings $ 393 $ 459
Adjustments to reconcile net earnings to operating cash flow
Impairment charges 212
Restructuring charges 30
Stock-based compensation 32 34
Pension and postretirement benefit expense (income) (23 ) 109
Depreciation and amortization 154 152
Deferred income taxes (14 )
Other, net 6 4
Changes in working capital
Accounts receivable (95 ) (130 )
Inventories 117 133
Prepaid assets (9 ) (2 )
Accounts payable and accrued liabilities (100 ) (3 )
Receipts from hedging activities 1
Other (21 ) (18 )
Net cash provided by operating activities 667   754  
Cash flows from investing activities:
Purchases of plant assets (119 ) (153 )
Sales of plant assets 4
Other, net (13 ) 10  
Net cash used in investing activities (132 ) (139 )
Cash flows from financing activities:
Net short-term borrowings (repayments) 2 (252 )
Long-term repayments (61 )
Dividends paid (207 ) (197 )
Treasury stock purchases (234 ) (86 )
Treasury stock issuances 2 2
Payments related to tax withholding for stock-based compensation (20 ) (20 )
Net cash used in financing activities (518 ) (553 )
Effect of exchange rate changes on cash (4 ) (9 )
Net change in cash and cash equivalents 13 53
Cash and cash equivalents — beginning of period 296   253  
Cash and cash equivalents — end of period $ 309   $ 306  
 

The company adopted new accounting guidance for stock-based compensation
in the first quarter of 2017. Certain amounts in the prior year were
reclassified to conform to the current-year presentation.

Reconciliation of GAAP to Non-GAAP Financial Measures
Second
Quarter Ended January 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
  January 29, 2017   January 31, 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 $ 1,231   $ (3 )   $ 1,228 $ 1,237 —%   (1)%
Global Biscuits and Snacks 680 (8 ) 672 682 —% (1)%
Campbell Fresh 260         260   282   (8)%   (8)%
Total Net Sales $ 2,171     $ (11 )   $ 2,160   $ 2,201   (1)%   (2)%
Six Months Ended
  January 29, 2017   January 31, 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 $ 2,528   $ (3 )   $ 2,525 $ 2,539 —%   (1)%
Global Biscuits and Snacks 1,351 (21 ) 1,330 1,334 1% —%
Campbell Fresh 494         494   531   (7)%   (7)%
Total Net Sales $ 4,373     $ (24 )   $ 4,349   $ 4,404   (1)%   (1)%
 

Items Impacting Gross Margin, Costs and
Expenses, and Earnings

The company believes that financial information excluding certain items
that are not considered to be part of the ongoing business, 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 gross margin, costs and expenses, and
earnings:

 
(1) In the first quarter of fiscal 2017, the company incurred losses of
$20 million in Costs and expenses ($13 million after tax, or $.04
per share) associated with mark-to-market adjustments for defined
benefit pension and postretirement plans. In the second quarter of
fiscal 2016, the company incurred a gain of $7 million in Costs and
expenses ($4 million after tax, or $.01 per share) associated with
mark-to-market adjustments for defined benefit pension and
postretirement plans. In the six-month period of fiscal 2016, the
company incurred losses of $121 million in Costs and expenses ($76
million after tax, or $.24 per share) associated with mark-to-market
adjustments for defined benefit pension and postretirement plans.
For the year ended July 31, 2016, the company incurred losses of
$313 million in Costs and expenses ($200 million after tax, or $.64
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 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.
 
In the second quarter of fiscal 2016, the company recorded
Restructuring charges of $12 million and implementation costs and
other related costs of $7 million in Administrative expenses related
to the fiscal 2015 initiatives. In the second quarter of fiscal
2016, the company also recorded a reduction to Restructuring charges
of $3 million related to the fiscal 2014 initiative to improve
supply chain efficiency in Australia. The aggregate after-tax impact
of Restructuring charges, implementation costs and other related
costs was $10 million, or $.03 per share. In the six-month period of
fiscal 2016, the company recorded Restructuring charges of $33
million and implementation costs and other related costs of $22
million recorded in Administrative expenses related to the fiscal
2015 initiatives. The company also recorded a reduction to
Restructuring charges of $3 million related to the fiscal 2014
initiative to improve supply chain efficiency in Australia. The
aggregate after-tax impact of Restructuring charges, implementation
costs and other related costs was $33 million, or $.11 per share.
 
For the year ended July 31, 2016, the company recorded Restructuring
charges of $35 million and implementation costs and other related
costs of $47 million in Administrative expenses related to the
fiscal 2015 initiatives. The company also recorded a reduction to
Restructuring charges of $4 million related to the fiscal 2014
initiatives. The aggregate after-tax impact of Restructuring
charges, implementation costs and other related costs was $49
million, or $.16 per share.
 
(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 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
reporting unit (aggregate impact of $180 million after tax, or $.58
per share). The charges are included in Other expenses / (income).
 
For the year ended July 31, 2016, as part of the annual review of
intangible assets, the company recorded a non-cash impairment charge
of $141 million in Other expenses / (income) ($127 million after
tax, or $.41 per share) related to the intangible assets of the
Bolthouse Farms carrot and carrot ingredients reporting unit.
 
(4) For the year ended July 31, 2016, the company recorded a gain of $25
million in Other expenses / (income) ($.08 per share) from a
settlement of a claim related to the Kelsen acquisition.
 

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

   
Three Months Ended
January 29, 2017   January 31, 2016
(millions, except per share amounts)

As
reported

  Adjustments(a)   Adjusted

As
reported

  Adjustments(a)   Adjusted

Adjusted
Percent
Change

Gross margin $ 825 $ $ 825 $ 819 $ 2 $ 821 —%
Gross margin percentage 38.0 % 38.0 % 37.2 % 37.3 %
Marketing and selling expenses 237 237 223 3 226
Administrative expenses 139 139 146 (3 ) 143
Research and development expenses 25 25 23 2 25
Other expenses / (income) 220 (212 ) 8 4 4
Restructuring charges (1 )   (1 ) 9   (9 )  
Earnings before interest and taxes $ 205   $ 212   $ 417   $ 414   $ 9   $ 423   (1)%
Interest, net 28     28   27     27  
Earnings before taxes $ 177   $ 212   $ 389   $ 387   $ 9   $ 396  
Taxes 76 32 108 122 3 125
Effective income tax rate 42.9 %   27.8 % 31.5 %   31.6 %
Net earnings attributable to Campbell Soup Company $ 101   $ 180   $ 281   $ 265   $ 6   $ 271   4%
Diluted net earnings per share attributable to Campbell Soup Company $ .33   $ .58   $ .91   $ .85   $ .02   $ .87   5%
(a)See following table for additional information.
 
Three Months Ended
January 29, 2017   January 31, 2016
(millions, except per share amounts) Impairment charges

(3)

Mark-to-market

(1)

 

Restructuring charges,
implementation costs and
other
related costs

(2)

  Adjustments
Gross margin $ $ 2 $ $ 2
Marketing and selling expenses 3 3
Administrative expenses 4 (7 ) (3 )
Research and development expenses 2 2
Other expenses / (income) (212 )
Restructuring charges     (9 ) (9 )
Earnings before interest and taxes $ 212   $ (7 ) $ 16   $ 9  
Interest, net        
Earnings before taxes $ 212   $ (7 ) $ 16   $ 9  
Taxes 32   (3 ) 6   3  
Net earnings attributable to Campbell Soup Company $ 180   $ (4 ) $ 10   $ 6  
Diluted net earnings per share attributable to Campbell Soup Company $ .58   $ (.01 ) $ .03   $ .02  
   
Six Months Ended
January 29, 2017   January 31, 2016
(millions, except per share amounts)

As
reported

  Adjustments(a)   Adjusted

As
reported

  Adjustments(a)   Adjusted

Adjusted
Percent
Change

Gross margin $ 1,666 $ 20 $ 1,686 $ 1,574 $ 81 $ 1,655 2%
Gross margin percentage 38.1 % 38.6 % 35.7 % 37.6 %
Marketing and selling expenses 465 465 449 (17 ) 432
Administrative expenses 262 (11 ) 251 302 (39 ) 263
Research and development expenses 51 51 55 (6 ) 49
Other expenses / (income) 226 (212 ) 14 9 9
Restructuring charges       30   (30 )  
Earnings before interest and taxes $ 662   $ 243   $ 905   $ 729   $ 173   $ 902   —%
Interest, net 56     56   55     55  
Earnings before taxes $ 606   $ 243   $ 849   $ 674   $ 173   $ 847  
Taxes 213 43 256 215 64 279
Effective income tax rate 35.1 %   30.2 % 31.9 %   32.9 %
Net earnings attributable to Campbell Soup Company $ 393   $ 200   $ 593   $ 459   $ 109   $ 568   4%
Diluted net earnings per share attributable to Campbell Soup Company $ 1.27   $ .65   $ 1.92   $ 1.47   $ .35   $ 1.82   5%
(a)See following table for additional information.
 
Six Months Ended
January 29, 2017   January 31, 2016
(millions, except per share amounts)

Mark-to-
market
(1)

 

Restructuring
charges,
implementation
costs
and other

related costs
(2)

 

Impairment
charges
(3)

  Adjustments

Mark-to-
market
(1)

 

Restructuring
charges,
implementation
costs
and other

related costs
(2)

  Adjustments
Gross margin $ 20 $ $ $ 20 $ 81 $ $ 81
Marketing and selling expenses (17 ) (17 )
Administrative expenses (11 ) (11 ) (17 ) (22 ) (39 )
Research and development expenses (6 ) (6 )
Other expenses / (income) (212 ) (212 )
Restructuring charges           (30 ) (30 )
Earnings before interest and taxes $ 20   $ 11   $ 212   $ 243   $ 121   $ 52   $ 173  
Interest, net     $          
Earnings before taxes $ 20   $ 11   $ 212   $ 243   $ 121   $ 52   $ 173  
Taxes 7   4   32   43   45   19   64  
Net earnings attributable to Campbell Soup Company $ 13   $ 7   $ 180   $ 200   $ 76   $ 33   $ 109  
Diluted net earnings per share attributable to Campbell Soup Company* $ .04   $ .02   $ .58   $ .65   $ .24   $ .11   $ .35  
*The sum of individual per share amounts may not add due to rounding.
 
Year Ended
(millions, except per share amounts) July 31, 2016
Gross margin, as reported $ 2,780
Add: Pension and postretirement benefit mark-to-market adjustments
(1)
176  
Adjusted Gross margin $ 2,956  
Adjusted Gross margin percentage 37.1 %
Earnings before interest and taxes, as reported $ 960
Add: Total pension and postretirement benefit mark-to-market
adjustments (1)
313
Add: Restructuring charges, implementation costs and other related
costs (2)
78
Add: Impairment charges (3) 141
Deduct: Claim settlement (4) (25 )
Adjusted Earnings before interest and taxes $ 1,467  
Interest, net, as reported $ 111  
Adjusted Earnings before taxes $ 1,356  
Taxes on earnings, as reported $ 286
Add: Tax benefit from total pension and postretirement benefit
mark-to-market adjustments (1)
113
Add: Tax benefit from restructuring charges, implementation costs
and other related costs (2)
29
Add: Tax benefit from impairment charges (3) 14  
Adjusted Taxes on earnings $ 442  
Adjusted effective income tax rate 32.6 %
Net earnings attributable to Campbell Soup Company, as reported $ 563
Add: Net adjustment from total pension and postretirement benefit
mark-to-market adjustments (1)
200
Add: Net adjustment from restructuring charges, implementation costs
and other related costs (2)
49
Add: Net adjustment from impairment charges (3) 127
Deduct: Claim settlement (4) (25 )
Adjusted Net earnings attributable to Campbell Soup Company $ 914  
Diluted net earnings per share attributable to Campbell Soup
Company, as reported
$ 1.81
Add: Net adjustment from total pension and postretirement benefit
mark-to-market adjustments (1)
.64
Add: Net adjustment from restructuring charges, implementation costs
and other related costs (2)
.16
Add: Net adjustment from impairment charges (3) .41
Deduct: Claim Settlement (4) (.08 )
Adjusted Diluted net earnings per share attributable to Campbell
Soup Company
$ 2.94  

Source: Campbell Soup Company

Campbell Soup Company
INVESTOR CONTACT:
Ken
Gosnell, 856-342-6081
[email protected]
or
MEDIA
CONTACT:
Carla Burigatto, 856-342-3737
[email protected]