caret-down

Campbell Reports Second-Quarter Results

  • Sales Decreased 1 Percent, Organic Sales Comparable to Prior Year
  • Adjusted Earnings Before Interest and Taxes (EBIT) Increased 26 Percent
  • Adjusted Earnings Per Share (EPS) of $0.87 Increased 23 Percent
  • As Reported EBIT Increased 23 Percent, As Reported EPS of $0.85
    Increased 20 Percent

CAMDEN, N.J.–(BUSINESS WIRE)–Feb. 25, 2016–
Campbell Soup Company (NYSE:CPB) today reported its
second-quarter results for fiscal 2016.

       

Three Months Ended

Six Months Ended

($ in millions, except per share)

Jan. 31, 2016

   

Feb. 1, 2015

   

% Change

Jan. 31, 2016

   

Feb. 1, 2015

   

% Change

Net Sales

As Reported (GAAP) $2,201 $2,234 (1)% $4,404 $4,489 (2)%
Organic – % -%

Earnings Before Interest and Taxes

As Reported (GAAP) $414 $337 23% $729 $726 -%
Adjusted $423 $337 26% $902 $726 24%

Diluted Earnings Per Share

As Reported (GAAP) $0.85 $0.71 20% $1.47 $1.50 (2)%
Adjusted $0.87 $0.71 23% $1.82 $1.50 21%
 

Note: A detailed reconciliation of the reported 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,
“We’re pleased with our results this quarter, especially our strong
profit performance across all three segments. The highlight of the
quarter was our continued gross margin expansion, which reflects
improvements in productivity, net price realization and improved supply
chain execution. Our three-year cost savings program is also performing
better than anticipated, and we have raised our 2018 target to $300
million.

“Organic sales for the quarter were comparable to prior year, a bit
below our expectation. While our Global Biscuits and Snacks division
stands out for delivering both organic sales growth and strong profit
growth in the quarter, we’re making investments in all the divisions
toward our objective of accelerating sales growth over time.

“Over the last 12 months, we’ve implemented significant changes to the
company, including aligning our enterprise structure with our strategy,
creating clear portfolio roles for our divisions and undertaking our
major cost savings initiative. I feel very good about the progress we’ve
made, however, we are aware that we have more work to do. We’re now
better positioned to execute our strategies and to invest in the areas
of our business that hold the greatest potential.”

Second-Quarter Results

Sales decreased 1 percent to $2.201 billion driven by lower volume and
the adverse impact of currency translation, partly offset by higher
selling prices, the benefit from the acquisition of Garden Fresh Gourmet
and lower promotional spending. Organic sales were comparable to the
prior year with gains in Global Biscuits and Snacks offset by declines
in Americas Simple Meals and Beverages.

Gross margin increased from 33.3 percent to 37.2 percent. Excluding
items impacting comparability in the current year, adjusted gross margin
improved 4 percentage points. The increase in adjusted gross margin was
primarily driven by productivity improvements, higher selling prices,
lower promotional spending and improved supply chain performance.

Marketing and selling expenses decreased 7 percent to $223 million.
Excluding items impacting comparability in the current year, adjusted
marketing and selling expenses decreased 5 percent to $226 million
primarily due to the benefits from cost savings initiatives, partly
offset by higher advertising and consumer promotion expenses.
Administrative expenses increased 8 percent to $146 million. Excluding
items impacting comparability in the current year, adjusted
administrative expenses increased 6 percent to $143 million primarily
due to higher incentive compensation costs compared to the prior year,
partly offset by the benefits from cost savings initiatives.

EBIT increased 23 percent to $414 million. Excluding items impacting
comparability in the current year, adjusted EBIT increased 26 percent to
$423 million reflecting a higher adjusted gross margin percentage and
the benefits from cost savings initiatives, partly offset by higher
incentive compensation costs, the adverse impact of currency translation
and volume declines.

Net interest expense increased $2 million to $27 million reflecting
higher average interest rates on the debt portfolio. The tax rate
increased 2.7 percentage points to 31.5 percent. Excluding items
impacting comparability in the current year, the adjusted tax rate
increased 2.8 percentage points to 31.6 percent primarily due to lapping
the favorable resolution of an intercompany pricing agreement between
the U.S. and Canada in the prior year.

First-Half Results

Sales decreased 2 percent to $4.404 billion driven by the adverse impact
of currency translation and lower volume, partly offset by higher
selling prices, the benefit from the acquisition of Garden Fresh Gourmet
and lower promotional spending. Organic sales were comparable to the
prior year with gains in Global Biscuits and Snacks offset by declines
in Americas Simple Meals and Beverages and Campbell Fresh.

EBIT of $729 million was comparable to the prior year. The first-half
results were negatively impacted by mark-to-market losses associated
with the interim remeasurement of certain U.S. pension plans as well as
charges incurred related to cost savings initiatives. Excluding items
impacting comparability in the current year, adjusted EBIT increased 24
percent to $902 million reflecting a higher adjusted gross margin
percentage, the benefits from cost savings initiatives and lower
advertising and consumer promotion expenses, partly offset by the
adverse impact of currency translation, higher incentive compensation
costs and volume declines.

Net interest expense increased $5 million to $55 million reflecting
higher average interest rates on the debt portfolio. The tax rate
increased 1.4 percentage points to 31.9 percent. Excluding items
impacting comparability in the current year, the adjusted tax rate
increased 2.4 percentage points to 32.9 percent.

Cash flow from operations increased to $727 million from $584 million a
year ago, primarily due to higher cash earnings and lower working
capital requirements.

Fiscal 2016 Guidance

As previously announced and shown in the table below, Campbell expects a
year-over-year change of -1 to 0 percent in sales; +10 to +13 percent in
adjusted EBIT; and +9 to +12 percent in adjusted EPS, or $2.88 to $2.96
per share. This guidance includes an estimated 2 percentage-point
negative impact from currency translation, as well as the impact of the
Garden Fresh Gourmet acquisition.

               

 

 

 

($ in millions, except per share)

Fiscal

2015

Results

Estimated

Currency

Translation

Impact

Garden

Fresh

Gourmet

Acquisition

2016

Guidance

 
Net Sales $8,082 -2 pts +1 pt -1 to 0%
 
Adjusted EBIT* $1,316 -2 pts +1 pt +10 to +13%
 
Adjusted EPS* $2.65 -2 pts
-$0.06
˗ +9 to +12%
$2.88 to $2.96
 
*Adjusted – see non-GAAP reconciliation.
 
 

Segment Operating Review

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

 

Three Months Ended Jan. 31, 2016

($ in millions)
 
   

Americas

Simple Meals

and Beverages

   

Global Biscuits

and Snacks

   

Campbell

Fresh

    Total
Net Sales, as Reported $1,237 $682 $282 $2,201

 

Volume and Mix (4)% -% -% (2)%
Price and Sales Allowances 2% 1% -% 1%
Promotional Spending 1% 1% -% 1%
Organic Net Sales (1)% 2% -% -%
Currency (2)% (5)% -% (2)%
Acquisitions -% -% 10% 1%
% Change vs. Prior Year (3)% (3)% 10% (1)%

Segment Operating Earnings

$290 $141 $21
% Change vs. Prior Year 22% 23% 62%
 

Note: A detailed reconciliation of the reported net sales to
organic net sales is included at the end of this news release.

 
 

Six Months Ended Jan. 31, 2016

($ in millions)
 

Americas

Simple Meals

and Beverages

Global Biscuits

and Snacks

Campbell

Fresh

Total
Net Sales, as Reported $2,539 $1,334 $531 $4,404

 

Volume and Mix (4)% -% (1)% (2)%
Price and Sales Allowances 2% 1% -% 1%
Promotional Spending 1% 1% -% 1%
Organic Net Sales (1)% 2% (1)% -%
Currency (2)% (6)% -% (3)%
Acquisitions -% -% 10% 1%
% Change vs. Prior Year (3)% (4)% 9% (2)%
Segment Operating Earnings $653 $255 $39
% Change vs. Prior Year 20% 20% 77%
 

Note: A detailed reconciliation of the reported net sales to
organic net sales is included at the end of this news release.

 

Americas Simple Meals and Beverages

Sales decreased 3 percent in the quarter to $1.237 billion. Excluding
the negative impact of currency translation, segment sales decreased 1
percent. U.S. soup sales decreased 4 percent driven by declines in
ready-to-serve soups, partly offset by gains in broth and condensed
soup. Sales of U.S. beverages decreased primarily due to declines in V8
V-Fusion
beverages. Sales of other U.S. simple meals increased
driven by gains in Plum, Prego pasta sauces and Pace
Mexican sauces. Excluding the negative impact of currency translation,
sales in Canada decreased driven by declines in soup.

Segment operating earnings increased 22 percent to $290 million. The
increase was primarily driven by a higher gross margin percentage,
benefiting from increased net price realization, productivity
improvements and improved supply chain performance compared to the
prior-year quarter.

Global Biscuits and Snacks

Sales decreased 3 percent in the quarter to $682 million. Excluding the
negative impact of currency translation, segment sales increased 2
percent. Sales of Pepperidge Farm products increased with gains in fresh
bakery, frozen products and cookies. In Asia Pacific, excluding the
negative impact of currency translation, Arnott’s sales gains in
Australia from Tim Tam biscuits were partly offset by declines in
Indonesia.

Segment operating earnings increased 23 percent to $141 million. The
increase was primarily driven by a higher gross margin percentage,
benefiting from increased net price realization and productivity
improvements, partly offset by the negative impact of currency
translation and higher marketing expense.

Campbell Fresh

Sales increased 10 percent in the quarter to $282 million. Excluding the
impact from the acquisition of Garden Fresh Gourmet, segment sales were
comparable to the prior year reflecting gains in Bolthouse Farms
premium refrigerated beverages and salad dressings offset by declines in
carrot ingredients.

Segment operating earnings increased 62 percent to $21 million,
resulting in a 2 percentage-point increase in operating margin. The
increase in operating earnings was primarily driven by a higher gross
margin percentage, benefiting from improved supply chain performance,
productivity improvements and the favorable mix impact from growth in
higher-margin refrigerated beverages.

Unallocated Corporate Expenses

Unallocated corporate expenses for the quarter were $29 million compared
to $28 million in the prior year. The current 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 current 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
8:30 a.m. Eastern Standard Time. To join, dial +1 (703) 639-1316. The
conference ID is 1668326. Access to a live webcast of the call with
accompanying slides, as well as a replay of the call, is available at investor.campbellsoupcompany.com.
A recording of the call will also be available until midnight on Mar.
10, 2016, at +1 (703) 925-2533. The access code for the replay is
1668326.

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 2016, 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 organizational change effectively; (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; (5) the
risks associated with trade and consumer acceptance of the company’s
initiatives, including its trade and promotional programs; (6) the
practices, including changes to inventory practices, and increased
significance of certain of the company’s key trade customers; (7) the
impact of fluctuations in the supply or costs of energy and raw and
packaging materials; (8) the impact of portfolio changes; (9) the
uncertainties of litigation; (10) the impact of changes in currency
exchange rates, tax rates, interest rates, debt and equity markets,
inflation rates, economic conditions and other external factors; (11)
the impact of unforeseen business disruptions in one or more of the
company’s markets due to political instability, civil disobedience,
armed hostilities, natural disasters or other calamities; and (12) 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 31, 2016     February 1, 2015
Net sales $ 2,201 $ 2,234
Costs and expenses
Cost of products sold 1,382 1,491
Marketing and selling expenses 223 239
Administrative expenses 146 135
Research and development expenses 23 25
Other expenses 4 7
Restructuring charges   9  
Total costs and expenses   1,787   1,897
Earnings before interest and taxes 414 337
Interest, net   27   25
Earnings before taxes 387 312
Taxes on earnings   122   90
Net earnings 265 222
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 265 $ 222
Per share – basic
Net earnings attributable to Campbell Soup Company $ .85 $ .71
Dividends $ .312 $ .312
Weighted average shares outstanding – basic   310   313
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .85 $ .71
Weighted average shares outstanding – assuming dilution   312   314
 

In fiscal 2016, the company changed the method of accounting for the
recognition of actuarial gains and losses for defined benefit pension
and postretirement plans and the calculation of expected return on
pension plan assets. These changes in accounting policy have been
retrospectively applied to all periods presented. The company excludes
the impact of the mark-to-market adjustments resulting from these
accounting changes in evaluating performance. In the second quarter of
fiscal 2016, the company incurred a pre-tax gain of $7 in Costs and
expenses ($4 after tax, or $.01 per share) due to mark-to-market
adjustments.

In fiscal 2015, the company implemented a new enterprise design and
initiatives to reduce costs and to streamline its organizational
structure. In the second quarter of fiscal 2016, the company recorded
pre-tax restructuring charges of $12 related to these initiatives. The
company also incurred pre-tax charges of $7 recorded in Administrative
expenses related to these initiatives. In the second quarter of fiscal
2016, the company also recorded a reduction to pre-tax restructuring
charges of $3 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, or $.03 per share.

 

CAMPBELL SOUP COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

(millions, except per share amounts)

 
 
    Six Months Ended
January 31, 2016     February 1, 2015
Net sales $ 4,404 $ 4,489
Costs and expenses
Cost of products sold 2,830 2,951
Marketing and selling expenses 449 482
Administrative expenses 302 266
Research and development expenses 55 53
Other expenses 9 11
Restructuring charges   30  
Total costs and expenses   3,675   3,763
Earnings before interest and taxes 729 726
Interest, net   55   50
Earnings before taxes 674 676
Taxes on earnings   215   206
Net earnings 459 470
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 459 $ 470
Per share – basic
Net earnings attributable to Campbell Soup Company $ 1.48 $ 1.50
Dividends $ .624 $ .624
Weighted average shares outstanding – basic   310   313
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ 1.47 $ 1.50
Weighted average shares outstanding – assuming dilution   312   314
 

In fiscal 2016, the company changed the method of accounting for the
recognition of actuarial gains and losses for defined benefit pension
and postretirement plans and the calculation of expected return on
pension plan assets. These changes in accounting policy have been
retrospectively applied to all periods presented. The company excludes
the impact of the mark-to-market adjustments resulting from these
accounting changes in evaluating performance. In fiscal 2016, the
company incurred pre-tax charges of $121 in Costs and expenses ($76
after tax, or $.24 per share) due to mark-to-market adjustments.

In fiscal 2015, the company implemented a new enterprise design and
initiatives to reduce costs and to streamline its organizational
structure. In fiscal 2016, the company recorded pre-tax restructuring
charges of $33 related to these initiatives. The company also incurred
pre-tax charges of $22 recorded in Administrative expenses related to
these initiatives. In the second quarter of fiscal 2016, the company
also recorded a reduction to pre-tax restructuring charges of $3 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, or $.11 per share.

 

CAMPBELL SOUP COMPANY

CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS
(unaudited)

(millions, except per share amounts)

 
 
    Three Months Ended    
January 31, 2016     February 1, 2015 Percent

Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 1,237 $ 1,278 (3 )%
Global Biscuits and Snacks 682 700 (3 )%
Campbell Fresh   282   256 10 %
Total sales $ 2,201 $ 2,234 (1 )%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 290 $ 237 22 %
Global Biscuits and Snacks 141 115 23 %
Campbell Fresh   21   13 62 %
Total operating earnings 452 365 24 %
Unallocated corporate expenses 29 28
Restructuring charges   9  
Earnings before interest and taxes 414 337 23 %
Interest, net 27 25
Taxes on earnings   122   90
Net earnings 265 222 19 %
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 265 $ 222 19 %
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ .85 $ .71 20 %
 

In fiscal 2016, the company modified its segment reporting as a result
of changes in the management of the business. In addition, the company
changed the method of accounting for the recognition of actuarial gains
and losses for defined benefit pension and postretirement plans and the
calculation of expected return on pension plan assets. In fiscal 2016,
the company also modified its method of allocating pension and
postretirement benefit costs to reportable segments. Through fiscal
2015, the company included all components of benefit expense in
measuring segment performance. In fiscal 2016, service cost is allocated
to segments. All other components of expense, including interest cost,
expected return on assets, and recognized actuarial gains and losses,
are reflected in Unallocated corporate expenses and not included in
segment operating results. The changes in segment reporting and
accounting policies have been retrospectively applied to all periods
presented.

In the second quarter of fiscal 2016, the company incurred a pre-tax
gain of $7 in Unallocated corporate expenses ($4 after tax, or $.01 per
share) due to mark-to-market adjustments.

In fiscal 2015, the company implemented a new enterprise design and
initiatives to reduce costs and to streamline its organizational
structure. In the second quarter of fiscal 2016, the company recorded
pre-tax restructuring charges of $12 related to these initiatives. The
company also incurred pre-tax charges of $7 recorded in Unallocated
corporate expenses related to these initiatives. In the second quarter
of fiscal 2016, the company also recorded a reduction to pre-tax
restructuring charges of $3 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, or $.03 per share.

 

CAMPBELL SOUP COMPANY

CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS
(unaudited)

(millions, except per share amounts)

 
 
    Six Months Ended    
January 31, 2016     February 1, 2015 Percent

Change

Sales

Contributions:
Americas Simple Meals and Beverages $ 2,539 $ 2,611 (3 )%
Global Biscuits and Snacks 1,334 1,391 (4 )%
Campbell Fresh   531   487 9 %
Total sales $ 4,404 $ 4,489 (2 )%

Earnings

Contributions:
Americas Simple Meals and Beverages $ 653 $ 542 20 %
Global Biscuits and Snacks 255 213 20 %
Campbell Fresh   39   22 77 %
Total operating earnings 947 777 22 %
Unallocated corporate expenses 188 51
Restructuring charges   30  
Earnings before interest and taxes 729 726 %
Interest, net 55 50
Taxes on earnings   215   206
Net earnings 459 470 (2 )%
Net loss attributable to noncontrolling interests    
Net earnings attributable to Campbell Soup Company $ 459 $ 470 (2 )%
Per share – assuming dilution
Net earnings attributable to Campbell Soup Company $ 1.47 $ 1.50 (2 )%
 

In fiscal 2016, the company modified its segment reporting as a result
of changes in the management of the business. In addition, the company
changed the method of accounting for the recognition of actuarial gains
and losses for defined benefit pension and postretirement plans and the
calculation of expected return on pension plan assets. In fiscal 2016,
the company also modified its method of allocating pension and
postretirement benefit costs to reportable segments. Through fiscal
2015, the company included all components of benefit expense in
measuring segment performance. In fiscal 2016, service cost is allocated
to segments. All other components of expense, including interest cost,
expected return on assets, and recognized actuarial gains and losses,
are reflected in Unallocated corporate expenses and not included in
segment operating results. The changes in segment reporting and
accounting policies have been retrospectively applied to all periods
presented.

In fiscal 2016, the company incurred pre-tax charges of $121 in
Unallocated corporate expenses ($76 after tax, or $.24 per share) due to
mark-to-market adjustments.

In fiscal 2015, the company implemented a new enterprise design and
initiatives to reduce costs and to streamline its organizational
structure. In fiscal 2016, the company recorded pre-tax restructuring
charges of $33 related to these initiatives. The company also incurred
pre-tax charges of $22 recorded in Unallocated corporate expenses
related to these initiatives. In the second quarter of fiscal 2016, the
company also recorded a reduction to pre-tax restructuring charges of $3
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, or $.11 per share.

 

CAMPBELL SOUP COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(millions)

 
 
    January 31, 2016     February 1, 2015
Current assets $ 2,132 $ 2,087
Plant assets, net 2,340 2,257
Intangible assets, net 3,511 3,410
Other assets   96   146
Total assets $ 8,079 $ 7,900
Current liabilities $ 2,566 $ 2,850
Long-term debt 2,551 2,253
Other liabilities 1,438 1,286
Total equity   1,524   1,511
Total liabilities and equity $ 8,079 $ 7,900
Total debt $ 3,844 $ 3,893
Cash and cash equivalents $ 306 $ 201
 

In fiscal 2016, the company changed the method of accounting for the
recognition of actuarial gains and losses for defined benefit pension
and postretirement plans and the calculation of expected return on
pension plan assets. These changes in accounting policy have been
retrospectively applied to all periods presented.

 

CAMPBELL SOUP COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(millions)

 
 
    Six Months Ended
January 31, 2016     February 1, 2015
Cash flows from operating activities:
Net earnings $ 459 $ 470
Adjustments to reconcile net earnings to operating cash flow
Restructuring charges 30
Stock-based compensation 34 31
Pension and postretirement benefit expense (income) 109 (12 )
Depreciation and amortization 152 149
Deferred income taxes (14 ) 18
Other, net 4 10
Changes in working capital
Accounts receivable (130 ) (125 )
Inventories 133 73
Prepaid assets (2 ) (3 )
Accounts payable and accrued liabilities (30 ) (16 )
Receipts from hedging activities 9
Other   (18 )   (20 )
Net cash provided by operating activities   727     584  
Cash flows from investing activities:
Purchases of plant assets (153 ) (143 )
Sales of plant assets 4 8
Other, net   10     (8 )
Net cash used in investing activities   (139 )   (143 )
Cash flows from financing activities:
Net short-term borrowings (repayments) (252 ) 171
Repayments of notes payable (300 )
Dividends paid (197 ) (199 )
Treasury stock purchases (86 ) (133 )
Treasury stock issuances 2 8
Excess tax benefits on stock-based compensation   7     5  
Net cash used in financing activities   (526 )   (448 )
Effect of exchange rate changes on cash   (9 )   (24 )
Net change in cash and cash equivalents 53 (31 )
Cash and cash equivalents — beginning of period   253     232  
Cash and cash equivalents — end of period $ 306   $ 201  
 
In fiscal 2016, the company changed the method of accounting for the
recognition of actuarial gains and losses for defined benefit
pension and postretirement plans and the calculation of expected
return on pension plan assets. These changes in accounting policy
have been retrospectively applied to all periods presented.
 
 

Reconciliation of GAAP to Non-GAAP Financial Measures

Second Quarter Ended January 31, 2016

 
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.
 

Organic Net Sales

 
The company believes that organic net sales, which exclude the
impact of currency and acquisitions, improves the comparability of
year-to-year results. A reconciliation of net sales as reported to
organic net sales follows.
 
                           
Three Months Ended
January 31, 2016 February 1, 2015 % 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

Americas Simple Meals and Beverages $ 1,237 $ 22 $ $ 1,259 $ 1,278 (3 )% (1 )%
Global Biscuits and Snacks 682 33 715 700 (3 )% 2 %
Campbell Fresh   282             (25 )       257   256 10 %     %
Total Net Sales $ 2,201     $ 55     $ (25 )     $ 2,231 $ 2,234 (1 )%     %
 
 
Six Months Ended
January 31, 2016 February 1, 2015 % 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

Americas Simple Meals and Beverages $ 2,539 $ 44 $ $ 2,583 $ 2,611 (3 )% (1 )%
Global Biscuits and Snacks 1,334 87 1,421 1,391 (4 )% 2 %
Campbell Fresh   531             (51 )       480   487 9 %     (1 )%
Total Net Sales $ 4,404     $ 131     $ (51 )     $ 4,484 $ 4,489 (2 )%     %
 

Items Impacting Gross Margin and Earnings

The company believes that financial information excluding certain items
that are not considered to be part of the ongoing business improves the
comparability of year-to-year results. Consequently, the company
believes that investors may be able to better understand its gross
margin and earnings results excluding these transactions.

The following items impacted gross margin and/or earnings:

 
(1) In fiscal 2016, the company changed the method of accounting for the
recognition of actuarial gains and losses for defined benefit
pension and postretirement plans and the calculation of expected
return on pension plan assets. Historically, actuarial gains and
losses associated with benefit obligations were recognized in
Accumulated other comprehensive loss in the Consolidated Balance
Sheets and were amortized into earnings over the remaining service
life of participants to the extent that the amounts were in excess
of a corridor. Under the new policy, actuarial gains and losses will
be recognized immediately in the Consolidated Statements of Earnings
as of the measurement date, which is typically the end of the fiscal
year, or more frequently if an interim remeasurement is required. In
addition, the company will no longer use a market-related value of
plan assets, which is an average value, to determine the expected
return on assets but rather will use the fair value of plan assets.
The company excludes the impact of the mark-to-market adjustments
resulting from these accounting changes in evaluating performance.
These changes in accounting policy have been retrospectively applied
to all periods presented. In the second quarter of fiscal 2016, the
company incurred a pre-tax gain of $7 million in Costs and expenses
($4 million after tax, or $.01 per share) due to mark-to-market
adjustments. Year-to-date, the company incurred pre-tax charges of
$121 million in Costs and expenses ($76 million after tax, or $.24
per share) due to mark-to-market adjustments. For the year ended
August 2, 2015, the company incurred pre-tax charges of $138 million
in Costs and expenses ($87 million after tax, or $.28 per share) due
to mark-to-market adjustments.
 
(2) In fiscal 2015, the company implemented a new enterprise design and
initiatives to reduce costs and to streamline its organizational
structure. In the second quarter of fiscal 2016, the company
recorded pre-tax restructuring charges of $12 million related to
these initiatives. The company also incurred pre-tax charges of $7
million recorded in Administrative expenses related to these
initiatives. In the second quarter of fiscal 2016, the company also
recorded a reduction to pre-tax 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. Year-to-date, the company
recorded pre-tax restructuring charges of $33 million related to the
fiscal 2015 initiatives. The company also incurred pre-tax charges
of $22 million recorded in Administrative expenses related to these
initiatives. The company also recorded a reduction to pre-tax
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 August 2, 2015, the company recorded pre-tax
restructuring charges of $102 million related to the fiscal 2015
initiatives. The company also incurred pre-tax charges of $22
million recorded in Administrative expenses related to these
initiatives. The aggregate after-tax impact of restructuring charges
and implementation costs was $78 million, or $.25 per share.
 
 

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

                       
Three Months Ended      
January 31, 2016

February 1,

2015

 
(millions, except per share amounts)

As

reported

Mark-to-

market (1)

Other (2) Adjusted

As

reported

Adjusted

Percent

Change

Gross margin $ 819 $ 2 $ $ 821 $ 743 10 %
Gross margin percentage 37.3 % 33.3 %
Marketing and selling expenses 223 3 226 239
Administrative expenses 146 4 (7 ) 143 135
Research and development expenses 23 2 25 25
Other expenses 4 4 7
Restructuring charges   9       (9 )        
Earnings before interest and taxes $ 414 $ (7 ) $ 16   $ 423   $ 337   26 %
Interest, net   27           27     25  
Earnings before taxes $ 387 $ (7 ) $ 16   $ 396   $ 312  
Taxes 122 (3 ) 6 125 90
Effective income tax rate                   31.6 %   28.8 %
Net earnings attributable to Campbell Soup Company $ 265 $ (4 ) $ 10   $ 271   $ 222   22 %
Diluted net earnings per share attributable to Campbell Soup Company $ .85 $ (.01 ) $ .03   $ .87   $ .71   23 %
 
 
Six Months Ended      
January 31, 2016

February 1,

2015

 
(millions, except per share amounts)

As

reported

Mark-to-

market (1)

Other (2) Adjusted As reported

Adjusted

Percent

Change

Gross margin $ 1,574 $ 81 $ $ 1,655 $ 1,538 8 %
Gross margin percentage 37.6 % 34.3 %
Marketing and selling expenses 449 (17 ) 432 482
Administrative expenses 302 (17 ) (22 ) 263 266
Research and development expenses 55 (6 ) 49 53
Other expenses 9 9 11
Restructuring charges   30       (30 )        
Earnings before interest and taxes $ 729 $ 121   $ 52   $ 902   $ 726   24 %
Interest, net   55           55     50  
Earnings before taxes $ 674 $ 121   $ 52   $ 847   $ 676  
Taxes 215 45 19 279 206
Effective income tax rate                   32.9 %   30.5 %
Net earnings attributable to Campbell Soup Company $ 459 $ 76   $ 33   $ 568   $ 470   21 %
Diluted net earnings per share attributable to Campbell Soup Company $ 1.47 $ .24   $ .11   $ 1.82   $ 1.50   21 %
 
   
Year Ended
(millions, except per share amounts) August 2, 2015
Gross margin, as reported $ 2,782
Add: Pension and postretirement benefit mark-to-market adjustments
(1)
  80  
Adjusted Gross margin $ 2,862  
Adjusted Gross margin percentage 35.4 %
Earnings before interest and taxes, as reported $ 1,054
Add: Total pension and postretirement benefit mark-to-market
adjustments (1)
138
Add: Restructuring charges and implementation costs (2)   124  
Adjusted Earnings before interest and taxes $ 1,316  
Interest, net, as reported $ 105  
Adjusted Earnings before taxes $ 1,211  
Taxes on earnings, as reported $ 283
Add: Tax benefit from total pension and postretirement benefit
mark-to-market adjustments (1)
51
Add: Tax benefit from restructuring charges and implementation costs
(2)
  46  
Adjusted Taxes on earnings $ 380  
Adjusted effective income tax rate 31.4 %
Net earnings attributable to Campbell Soup Company, as reported $ 666
Add: Net adjustment from total pension and postretirement benefit
mark-to-market adjustments (1)
87
Add: Net adjustment from restructuring charges and implementation
costs (2)
  78  
Adjusted Net earnings attributable to Campbell Soup Company $ 831  
Diluted net earnings per share attributable to Campbell Soup
Company, as reported
$ 2.13
Add: Net adjustment from total pension and postretirement benefit
mark-to-market adjustments (1)
.28
Add: Net adjustment from restructuring charges and implementation
costs (2)
  .25  
Adjusted Diluted net earnings per share attributable to Campbell
Soup Company*
$ 2.65  
*The sum of the individual per share amounts may not add due to
rounding.
 

Source: Campbell Soup Company

Campbell Soup Company
INVESTOR CONTACT:
Ken
Gosnell, 856-342-6081
ken_gosnell@campbellsoup.com
or
MEDIA
CONTACT:
Carla Burigatto, 856-342-3737
carla_burigatto@campbellsoup.com