caret-down

Campbell Reports Third-Quarter Results

  • Sales Decreased 4 Percent, Organic Sales Decreased 1 Percent
  • Adjusted Earnings Before Interest and Taxes (EBIT) Decreased 2 Percent
  • Adjusted EPS from Continuing Operations of $0.62 Was Comparable to
    Prior Year
  • Gross Margin Percentage Increased Compared to Prior Year
  • Company Narrows Fiscal 2015 Guidance Ranges: Sales at Lower End of
    Existing Range, Adjusted EBIT and Adjusted EPS at Favorable End of
    Existing Range

CAMDEN, N.J.–(BUSINESS WIRE)–May 22, 2015–
Campbell Soup Company (NYSE:CPB) today reported its results for
the third quarter of fiscal 2015.

       

Continuing Operations

Three Months Ended

Nine Months Ended

($ in millions, except per share)

               

 

May 3,
2015

Apr. 27,
2014

%
Change

May 3,
2015

Apr. 27,
2014

%
Change

Net Sales

As Reported (GAAP) $1,900 $1,970 (4)% $6,389 $6,416 -%
Organic (1)% 1%

Earnings Before Interest and Taxes

As Reported (GAAP) $287 $292 (2)% $967 $958 1%
Adjusted $305 $310 (2)% $985 $1,022 (4)%

Diluted Earnings Per Share

As Reported (GAAP) $0.58 $0.58 $1.98 $1.90 4%
Adjusted $0.62 $0.62 $2.02 $2.04 (1)%
 
Note: A detailed reconciliation of the reported financial
information to the adjusted financial information is included at the
end of this news release.
 

Denise Morrison, Campbell’s President and Chief Executive Officer, said,
“In the third quarter, gross margin improved and adjusted EBIT and EPS
were better than expected. Sales declined, primarily due to unfavorable
currency and the impact of retailer inventory movements on our U.S. soup
business.

“Our focus on gross margin performance began to pay dividends, as we
expanded margins in a challenging environment. In addition to our
productivity improvements and moderating inflation, we achieved net
price realization by reducing promotional spending and taking pricing
actions on the core businesses. We also made progress in addressing many
of the supply chain issues we faced in the first half. Most importantly,
several of our businesses delivered strong operating earnings, including
the Bolthouse and Foodservice segment. I am especially satisfied with
the top- and bottom-line results of our Global Baking and Snacking
segment.

“In the quarter, we also made progress against our strategic enterprise
redesign, including our cost reduction initiative. We believe that a
strategy that focuses on driving growth, aggressively reducing costs and
reinvesting a portion of the savings in the areas of our business with
the greatest growth potential is the best way to create shareholder
value over time.”

Third-Quarter Results from Continuing Operations

Sales decreased 4 percent to $1.9 billion, primarily due to the negative
impact of currency translation. Organic sales decreased 1 percent with
lower volume, partly offset by lower promotional spending and higher
selling prices.

Gross margin increased from 34.3 percent to 35.9 percent. Excluding
items impacting comparability in the prior year, gross margin improved
0.7 percentage points. The increase in adjusted gross margin was due to
productivity improvements, lower promotional spending and higher selling
prices, partly offset by cost inflation and other supply chain costs.

Marketing and selling expenses decreased 2 percent to $213 million,
primarily driven by the impact of currency translation and lower
marketing overhead expenses, partly offset by increased advertising and
consumer promotion expenses. Administrative expenses increased 5 percent
to $141 million. Excluding $9 million of costs related to the
implementation of the new organizational structure and cost reduction
initiatives, adjusted administrative expenses decreased 1 percent to
$132 million.

Adjusted EBIT decreased 2 percent to $305 million, reflecting the
unfavorable impact of currency translation and higher marketing expenses
on a constant currency basis, partly offset by a higher gross margin
percentage.

Net interest expense decreased $2 million to $28 million, reflecting
lower levels of debt. The tax rate decreased 0.5 percentage points to
29.7 percent. Excluding items impacting comparability, the adjusted tax
rate decreased 0.4 percentage points to 30.3 percent.

Nine-Month Results from Continuing Operations

Sales of $6.389 billion were comparable to the prior year with volume
gains and higher selling prices offset by the negative impact of
currency translation and higher promotional spending. Organic sales
increased 1 percent.

Adjusted EBIT decreased 4 percent to $985 million, reflecting a lower
gross margin percentage and the unfavorable impact of currency
translation, partly offset by the benefit of volume gains and lower
marketing and administrative expenses.

Net interest expense decreased $11 million to $78 million, reflecting
lower levels of debt. The tax rate decreased 2.1 percentage points to
29.9 percent. Excluding items impacting comparability, the adjusted tax
rate decreased 1.2 percentage points to 30.1 percent. The decrease was
primarily due to the favorable resolution of an intercompany pricing
agreement between the U.S. and Canada.

Fiscal 2015 Guidance for Continuing Operations

Campbell now expects a year-over-year change in sales closer to the
lower end of the previously announced range of -1 to +1 percent; a
change in adjusted EBIT closer to the favorable end of the previously
announced range of -7 to -5 percent; and a change in adjusted EPS closer
to the favorable end of the previously announced range of -5 to -3
percent or $2.32 to $2.38 per share. This guidance includes an estimated
2-point negative impact from currency translation and is based on an
adjusted 52-week 2014 base.

Segment Operating Review

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

 

Three Months Ended May 3, 2015

($ in millions)
 
 

U.S. Simple
Meals

 

Global
Baking and
Snacking

 

International
Simple Meals
and Beverages

 

U.S.
Beverages

 

Bolthouse
and
Foodservice

  Total
Net Sales, as Reported $630 $555 $175 $187 $353 $1,900
 
Volume and Mix (9%) 1% 5% (4%) (3%) (3%)
Price and Sales Allowances 2% 2% 1% -% -% 1%
Promotional Spending 1% 2% -% 2% 2% 1%
Organic Net Sales (6%) 5% 6% (2%) (1%) (1%)
Currency -% (7%) (12%) -% -% (3%)
% Change vs. Prior Year (6%) (2%) (6%) (2%) (1%) (4%)
Segment Operating Earnings $147 $80 $27 $34 $31
% Change vs. Prior Year (16%) 18% -% 17% 35%
 
Note: A detailed reconciliation of the reported net sales to organic
net sales is included at the end of this news release.
 

Nine Months Ended May 3, 2015

($ in millions)
 
 

U.S. Simple
Meals

 

Global
Baking and
Snacking

 

International
Simple Meals
and Beverages

 

U.S.
Beverages

 

Bolthouse
and
Foodservice

  Total
Net Sales, as Reported $2,425 $1,822 $558 $524 $1,060 $6,389
 
Volume and Mix -% 4% 3% (3%) 1% 1%
Price and Sales Allowances -% 1% 1% 1% -% 1%
Promotional Spending -% (1%) (1%) (1%) 1% (1%)
Organic Net Sales -% 4% 3% (3%) 2% 1%
Currency -% (4%) (8%) -% -% (2%)
Net Accounting -% -% (1%) -% -% -%
% Change vs. Prior Year -% 1%* (6%) (3%) 1%* -%*
Segment Operating Earnings $559 $277 $69 $80 $79
% Change vs. Prior Year (7%) 18% (19%) (5%) (10%)
 
* Numbers do not add due to rounding
Note: A detailed reconciliation of the reported net sales to organic
net sales is included at the end of this news release.
 

U.S. Simple Meals

Sales decreased 6 percent in the quarter to $630 million. U.S. soup
sales decreased 10 percent driven by volume declines, partly offset by
lower promotional spending and higher selling prices. The volume
declines were primarily driven by movements in retailer inventory
levels. Sales decreased 4 percent in Campbell’s condensed soups,
18 percent in ready-to-serve soups and 13 percent in broth. Sales of
other simple meals rose 2 percent in the quarter, driven by growth in Prego
pasta sauces and Plum, partly offset by declines in Pace
Mexican sauces.

Segment operating earnings decreased 16 percent to $147 million. Lower
operating earnings reflected volume declines and a lower gross margin
percentage, partly offset by lower marketing expenses.

Global Baking and Snacking

Sales decreased 2 percent in the quarter to $555 million including 7
points of pressure from currency translation. Excluding the negative
impact of currency translation, Arnott’s sales increased driven by gains
in Australia and Indonesia. Sales of Pepperidge Farm products
increased as sales gains in fresh bakery products, crackers and cookies
were partly offset by sales declines in frozen products.

Segment operating earnings increased 18 percent to $80 million. Higher
operating earnings reflected a higher gross margin percentage, volume
gains and lower administrative expenses, partly offset by higher
marketing expenses and the negative impact of currency translation.

International Simple Meals and Beverages

Sales declined 6 percent in the quarter to $175 million. Excluding the
12-point negative impact of currency translation, sales gains in the
Asia Pacific region and Canada were partly offset by declines in Latin
America.

Segment operating earnings of $27 million were comparable to the prior
year as volume gains, which generated double-digit earnings growth, were
offset by the negative impact of currency translation.

U.S. Beverages

Sales decreased 2 percent in the quarter to $187 million. Declines in V8
V-Fusion
beverages were partly offset by gains in V8 Splash
beverages.

Segment operating earnings increased 17 percent to $34 million,
primarily due to lower marketing expenses.

Bolthouse and Foodservice

Sales decreased 1 percent in the quarter to $353 million, reflecting
volume declines in Bolthouse Farms carrots and natural
ingredients.

Segment operating earnings increased 35 percent to $31 million,
reflecting a higher gross margin percentage in the Bolthouse Farms refrigerated
beverages and salad dressings operating segment.

Restructuring Initiatives

In the third quarter of fiscal 2015, the company incurred charges
associated with its recently-announced initiatives to implement a new
enterprise design that better aligns with its strategy, to reduce costs
and to streamline its organizational structure. The company commenced a
voluntary employee separation program and recorded pre-tax restructuring
charges of $9 million related to the program for severance and
benefits-related costs. The company also recorded pre-tax charges of $9
million in Unallocated corporate expenses related to the implementation
of these initiatives. The aggregate after-tax impact of the
restructuring charges and implementation costs was $11 million, or $.04
per share.

Unallocated Corporate Expenses

Unallocated corporate expenses for the quarter were $23 million compared
to $29 million a year ago. The current quarter included $9 million of
costs related to the implementation of the new organizational structure
and cost reduction initiatives. The prior-year quarter included a
pension settlement charge of $18 million associated with a U.S. pension
plan.

Cash Flow from Operations

Cash flow from operations for the first nine months was $971 million
compared to $763 million a year ago, primarily due to lower working
capital requirements, taxes paid in 2014 on the divestiture of the
European simple meals business and lower pension contributions in 2015.

Non-GAAP Financial Information

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

Conference Call

Campbell will host a conference call to discuss these results today at
8:30 a.m. Eastern Daylight Time. To join, dial +1 (703) 639-1316. The
conference ID is 1654351. 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 Jun. 5,
2015, at +1 (703) 925-2533. The access code for the replay is 1654351.

About Campbell Soup Company

Campbell (NYSE:CPB) is driven and inspired by our Purpose, “Real food
that matters for life’s moments.” The company makes a range of products
from high-quality soups and simple meals to snacks and healthy
beverages. 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 its iconic Campbell’s brand, the company’s portfolio
includes Pepperidge Farm, Goldfish, Bolthouse Farms,
V8, Swanson, Prego, Pace, Plum Organics,
Arnott’s, Tim Tam, Royal Dansk and Kjeldsens.
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.

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 2015, 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
May 3, 2015   April 27, 2014
Net sales $ 1,900 $ 1,970
Costs and expenses
Cost of products sold 1,218 1,294
Marketing and selling expenses 213 217
Administrative expenses 141 134
Research and development expenses 29 30
Other expenses 3 2
Restructuring charges   9   1
Total costs and expenses   1,613   1,678
Earnings before interest and taxes 287 292
Interest, net   28   30
Earnings before taxes 259 262
Taxes on earnings   77   79
Earnings from continuing operations 182 183
Earnings from discontinued operations    
Net earnings 182 183
Net loss attributable to noncontrolling interests     1
Net earnings attributable to Campbell Soup Company $ 182 $ 184
Per share – basic
Earnings from continuing operations attributable to Campbell Soup
Company
$ .59 $ .59
Earnings from discontinued operations    
Net earnings attributable to Campbell Soup Company $ .59 $ .59
Dividends $ .312 $ .312
Weighted average shares outstanding – basic   311   314
Per share – assuming dilution
Earnings from continuing operations attributable to Campbell Soup
Company
$ .58 $ .58
Earnings from discontinued operations    
Net earnings attributable to Campbell Soup Company $ .58 $ .58
Weighted average shares outstanding – assuming dilution   312   316
 
In the third quarter of fiscal 2015, the company incurred charges
associated with its recently-announced initiatives to implement a
new enterprise design that better aligns with its strategy, to
reduce costs and to streamline its organizational structure. The
company commenced a voluntary employee separation program and
recorded pre-tax restructuring charges of $9 related to the program
for severance and benefits-related costs. The company also incurred
pre-tax charges of $9 recorded in Administrative expenses related to
the implementation of the initiatives. The aggregate after-tax
impact of restructuring charges and implementation costs was $11, or
$.04 per share, on earnings from continuing operations.
 
In the third quarter of fiscal 2014, the company recognized a
pre-tax pension settlement charge in Cost of products sold of $18
($11 after tax, or $.03 per share, in earnings from continuing
operations) associated with a U.S. pension plan. The settlement
resulted from the level of lump sum distributions from the plan’s
assets in 2014, primarily due to the closure of the facility in
Sacramento, California.
 
 

CAMPBELL SOUP COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

(millions, except per share amounts)

 
  NINE MONTHS ENDED
May 3, 2015   April 27, 2014
Net sales $ 6,389 $ 6,416
Costs and expenses
Cost of products sold 4,196 4,149
Marketing and selling expenses 702 746
Administrative expenses 416 424
Research and development expenses 85 88
Other expenses 14 16
Restructuring charges   9   35
Total costs and expenses   5,422   5,458
Earnings before interest and taxes 967 958
Interest, net   78   89
Earnings before taxes 889 869
Taxes on earnings   266   278
Earnings from continuing operations 623 591
Earnings from discontinued operations     81
Net earnings 623 672
Net loss attributable to noncontrolling interests     9
Net earnings attributable to Campbell Soup Company $ 623 $ 681
Per share – basic
Earnings from continuing operations attributable to Campbell Soup
Company
$ 1.99 $ 1.91
Earnings from discontinued operations     .26
Net earnings attributable to Campbell Soup Company $ 1.99 $ 2.17
Dividends $ .936 $ .936
Weighted average shares outstanding – basic   313   314
Per share – assuming dilution
Earnings from continuing operations attributable to Campbell Soup
Company
$ 1.98 $ 1.90
Earnings from discontinued operations     .26
Net earnings attributable to Campbell Soup Company $ 1.98 $ 2.16
Weighted average shares outstanding – assuming dilution   314   316
 
In the third quarter of fiscal 2015, the company incurred charges
associated with its recently-announced initiatives to implement a
new enterprise design that better aligns with its strategy, to
reduce costs and to streamline its organizational structure. The
company commenced a voluntary employee separation program and
recorded pre-tax restructuring charges of $9 related to the program
for severance and benefits-related costs. The company also incurred
pre-tax charges of $9 recorded in Administrative expenses related to
the implementation of the initiatives. The aggregate after-tax
impact of restructuring charges and implementation costs was $11, or
$.04 per share, on earnings from continuing operations.
 
In fiscal 2014, the company implemented initiatives to streamline
its salaried workforce in North America and its workforce in the
Asia Pacific region; restructure manufacturing and streamline
operations for its soup and broth business in China; improve supply
chain efficiency in Australia; and reduce overhead across the
organization. In fiscal 2014, the company recorded pre-tax
restructuring charges of $34 ($19 after tax, or $.06 per share, in
earnings from continuing operations attributable to Campbell Soup
Company) related to the initiatives.
 
In fiscal 2013, the company implemented initiatives to improve its
U.S. supply chain cost structure and increase asset utilization
across its U.S. thermal plant network; expand access to
manufacturing and distribution capabilities in Mexico; improve its
Pepperidge Farm bakery supply chain cost structure; and reduce
overhead in North America. In fiscal 2014, the company recorded
pre-tax restructuring charges of $1 and restructuring-related costs
of $2 in Cost of products sold (aggregate impact of $2 after tax, or
$.01 per share, on earnings from continuing operations) related to
the initiatives.
 
In the third quarter of fiscal 2014, the company recognized a
pre-tax pension settlement charge in Cost of products sold of $18
($11 after tax, or $.03 per share, in earnings from continuing
operations) associated with a U.S. pension plan. The settlement
resulted from the level of lump sum distributions from the plan’s
assets in 2014, primarily due to the closure of the facility in
Sacramento, California.
 
On October 28, 2013, the company completed the sale of its simple
meals business in Europe. The results of the business were reported
as discontinued operations. In fiscal 2014, the company recorded a
loss of $9 ($6 after tax, or $.02 per share) on foreign exchange
forward contracts used to hedge the proceeds from the sale of the
European simple meals business. The loss was included in Other
expenses in earnings from continuing operations. In addition, the
company recorded tax expense of $7 ($.02 per share) in earnings from
continuing operations associated with the sale of the business. In
fiscal 2014, the company recognized an after-tax gain of $72 ($.23
per share) in earnings from discontinued operations.
 
 

CAMPBELL SOUP COMPANY

CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS
(unaudited)

(millions, except per share amounts)

 
  THREE MONTHS ENDED  
May 3, 2015   April 27, 2014

Percent
Change

Sales

Contributions:
U.S. Simple Meals $ 630 $ 672 (6 )%
Global Baking and Snacking 555 564 (2 )%
International Simple Meals and Beverages 175 186 (6 )%
U.S. Beverages 187 190 (2 )%
Bolthouse and Foodservice   353   358 (1 )%
Total sales $ 1,900 $ 1,970 (4 )%

Earnings

Contributions:
U.S. Simple Meals $ 147 $ 175 (16 )%
Global Baking and Snacking 80 68 18 %
International Simple Meals and Beverages 27 27 %
U.S. Beverages 34 29 17 %
Bolthouse and Foodservice   31   23 35 %
Total operating earnings 319 322 (1 )%
Unallocated corporate expenses 23 29
Restructuring charges   9   1
Earnings before interest and taxes 287 292 (2 )%
Interest, net 28 30
Taxes on earnings   77   79
Earnings from continuing operations 182 183
Earnings from discontinued operations    
Net earnings 182 183 (1 )%
Net loss attributable to noncontrolling interests     1
Net earnings attributable to Campbell Soup Company $ 182 $ 184 (1 )%
Per share – assuming dilution
Earnings from continuing operations attributable to Campbell Soup
Company
$ .58 $ .58
Earnings from discontinued operations    
Net earnings attributable to Campbell Soup Company $ .58 $ .58 %
 
In the third quarter of fiscal 2015, the company incurred charges
associated with its recently-announced initiatives to implement a
new enterprise design that better aligns with its strategy, to
reduce costs and to streamline its organizational structure. The
company commenced a voluntary employee separation program and
recorded pre-tax restructuring charges of $9 related to the program
for severance and benefits-related costs. The company also incurred
pre-tax charges of $9 recorded in Unallocated corporate expenses
related to the implementation of the initiatives. The aggregate
after-tax impact of restructuring charges and implementation costs
was $11, or $.04 per share, on earnings from continuing operations.
 
In the third quarter of fiscal 2014, the company recognized a
pre-tax pension settlement charge in Unallocated corporate expenses
of $18 ($11 after tax, or $.03 per share, in earnings from
continuing operations) associated with a U.S. pension plan. The
settlement resulted from the level of lump sum distributions from
the plan’s assets in 2014, primarily due to the closure of the
facility in Sacramento, California.
 
 

CAMPBELL SOUP COMPANY

CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS
(unaudited)

(millions, except per share amounts)

 
  NINE MONTHS ENDED  
May 3, 2015   April 27, 2014

Percent
Change

Sales

Contributions:
U.S. Simple Meals $ 2,425 $ 2,426 %
Global Baking and Snacking 1,822 1,812 1 %
International Simple Meals and Beverages 558 592 (6 )%
U.S. Beverages 524 539 (3 )%
Bolthouse and Foodservice   1,060   1,047 1 %
Total sales $ 6,389 $ 6,416 %

Earnings

Contributions:
U.S. Simple Meals $ 559 $ 600 (7 )%
Global Baking and Snacking 277 234 18 %
International Simple Meals and Beverages 69 85 (19 )%
U.S. Beverages 80 84 (5 )%
Bolthouse and Foodservice   79   88 (10 )%
Total operating earnings 1,064 1,091 (2 )%
Unallocated corporate expenses 88 98
Restructuring charges   9   35
Earnings before interest and taxes 967 958 1 %
Interest, net 78 89
Taxes on earnings   266   278
Earnings from continuing operations 623 591
Earnings from discontinued operations     81
Net earnings 623 672 (7 )%
Net loss attributable to noncontrolling interests     9
Net earnings attributable to Campbell Soup Company $ 623 $ 681 (9 )%
Per share – assuming dilution
Earnings from continuing operations attributable to Campbell Soup
Company
$ 1.98 $ 1.90
Earnings from discontinued operations     .26
Net earnings attributable to Campbell Soup Company $ 1.98 $ 2.16 (8 )%
 
In the third quarter of fiscal 2015, the company incurred charges
associated with its recently-announced initiatives to implement a
new enterprise design that better aligns with its strategy, to
reduce costs and to streamline its organizational structure. The
company commenced a voluntary employee separation program and
recorded pre-tax restructuring charges of $9 related to the program
for severance and benefits-related costs. The company also incurred
pre-tax charges of $9 recorded in Unallocated corporate expenses
related to the implementation of the initiatives. The aggregate
after-tax impact of restructuring charges and implementation costs
was $11, or $.04 per share, on earnings from continuing operations.
 
In fiscal 2014, the company implemented initiatives to streamline
its salaried workforce in North America and its workforce in the
Asia Pacific region; restructure manufacturing and streamline
operations for its soup and broth business in China; improve supply
chain efficiency in Australia; and reduce overhead across the
organization. In fiscal 2014, the company recorded pre-tax
restructuring charges of $34 ($19 after tax, or $.06 per share, in
earnings from continuing operations attributable to Campbell Soup
Company) related to the initiatives.
 
In fiscal 2013, the company implemented initiatives to improve its
U.S. supply chain cost structure and increase asset utilization
across its U.S. thermal plant network; expand access to
manufacturing and distribution capabilities in Mexico; improve its
Pepperidge Farm bakery supply chain cost structure; and reduce
overhead in North America. In fiscal 2014, the company recorded
pre-tax restructuring charges of $1 and restructuring-related costs
of $2 in Unallocated corporate expenses (aggregate impact of $2
after tax, or $.01 per share, on earnings from continuing
operations) related to the initiatives.
 
In the third quarter of fiscal 2014, the company recognized a
pre-tax pension settlement charge in Unallocated corporate expenses
of $18 ($11 after tax, or $.03 per share, in earnings from
continuing operations) associated with a U.S. pension plan. The
settlement resulted from the level of lump sum distributions from
the plan’s assets in 2014, primarily due to the closure of the
facility in Sacramento, California.
 
On October 28, 2013, the company completed the sale of its simple
meals business in Europe. The results of the business were reported
as discontinued operations. In fiscal 2014, the company recorded a
loss of $9 ($6 after tax, or $.02 per share) on foreign exchange
forward contracts used to hedge the proceeds from the sale of the
European simple meals business. The loss was included in Unallocated
corporate expenses in earnings from continuing operations. In
addition, the company recorded tax expense of $7 ($.02 per share) in
earnings from continuing operations associated with the sale of the
business. In fiscal 2014, the company recognized an after-tax gain
of $72 ($.23 per share) in earnings from discontinued operations.
 
 
CAMPBELL SOUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(millions)
   
May 3, 2015 April 27, 2014
Current assets $ 1,902 $ 1,947
Plant assets, net 2,292 2,263
Intangible assets, net 3,414 3,616
Other assets 151 138
Total assets $ 7,759 $ 7,964
Current liabilities $ 2,323 $ 2,817
Long-term debt 2,553 2,247
Other liabilities 1,298 1,309
Total equity 1,585 1,591
Total liabilities and equity $ 7,759 $ 7,964
Total debt $ 3,785 $ 3,909
Cash and cash equivalents $ 230 $ 222
 
 
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(millions)
 
NINE MONTHS ENDED
May 3, 2015   April 27, 2014
Cash flows from operating activities:
Net earnings $ 623 $ 672
Adjustments to reconcile net earnings to operating cash flow
Restructuring charges 9 35
Stock-based compensation 46 46
Depreciation and amortization 223 222
Deferred income taxes 12 20
Gain on sale of business (141 )
Other, net 69 90
Changes in working capital
Accounts receivable 19 (55 )
Inventories 108 104
Prepaid assets 11 (25 )
Accounts payable and accrued liabilities (112 ) (110 )
Pension fund contributions (3 ) (45 )
Receipts from (payments of) hedging activities 11 (6 )
Other (45 ) (44 )
Net cash provided by operating activities 971   763  
Cash flows from investing activities:
Purchases of plant assets (242 ) (198 )
Sales of plant assets 9 19
Business acquired, net of cash acquired (329 )
Sale of business, net of cash divested 520
Other, net (7 ) (1 )
Net cash provided by (used in) investing activities (240 ) 11  
Cash flows from financing activities:
Net short-term borrowings (233 ) (303 )
Long-term borrowings 300
Repayments of notes payable (300 ) (300 )
Dividends paid (297 ) (293 )
Treasury stock purchases (192 ) (76 )
Treasury stock issuances 9 14
Excess tax benefits on stock-based compensation 5 11
Contribution from noncontrolling interest 5
Other, net (3 )  
Net cash used in financing activities (711 ) (942 )
Effect of exchange rate changes on cash (22 ) (11 )
Net change in cash and cash equivalents (2 ) (179 )
Cash and cash equivalents continuing operations — beginning of period 232 333
Cash and cash equivalents discontinued operations — beginning of
period
68
Cash and cash equivalents discontinued operations — end of period    
Cash and cash equivalents continuing operations — end of period $ 230   $ 222  
 
 

Reconciliation of GAAP to Non-GAAP Financial Measures

Third Quarter Ended May 3, 2015

 
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

 
Organic net sales exclude the impact of acquisitions, currency and
presenting revenue on a net basis in connection with a new business
model in Mexico in fiscal 2014. The company believes that organic
net sales improves the comparability of year-to-year results. A
reconciliation of net sales as reported to organic net sales follows.
 
Three Months Ended
  May 3, 2015   April 27, 2014   % Change
    Net Sales, Net Sales,  
Net Sales, as Impact of Organic Net as as Organic
(millions) Reported   Currency   Sales Reported Reported   Net Sales
U.S. Simple Meals $ 630 $ $ 630 $ 672 (6)% (6)%
Global Baking and Snacking 555 37 592 564 (2)% 5%
International Simple Meals and Beverages 175 22 197 186 (6)% 6%
U.S. Beverages 187 187 190 (2)% (2)%
Bolthouse and Foodservice 353   1   354 358 (1)%   (1)%
Total Net Sales $ 1,900   $ 60   $ 1,960 $ 1,970 (4)%   (1)%
 
 
Year-to-date
  May 3, 2015   April 27, 2014   % Change
Net Sales,       Impact of   Organic Net Sales, Net Sales,  
as Impact of Impact of Net Net as as Organic
(millions) Reported   Currency   Acquisitions   Accounting   Sales Reported Reported   Net Sales
U.S. Simple Meals $ 2,425 $ $ $ $ 2,425 $ 2,426 —% —%
Global Baking and Snacking 1,822 68 (7 ) 1,883 1,812 1% 4%
International Simple Meals and Beverages 558 46 4 608 592 (6)% 3%
U.S. Beverages 524 524 539 (3)% (3)%
Bolthouse and Foodservice 1,060   4         1,064 1,047 1%   2%
Total Net Sales $ 6,389   $ 118   $ (7 )   $ 4   $ 6,504 $ 6,416 —%   1%
 
     

Items Impacting Gross Margin and Earnings

 
The company believes that financial information excluding certain
transactions 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 the third quarter of fiscal 2015, the company incurred charges
associated with its recently-announced initiatives to implement a
new enterprise design that better aligns with its strategy, to
reduce costs and to streamline its organizational structure. The
company commenced a voluntary employee separation program and
recorded pre-tax restructuring charges of $9 million related to
the program for severance and benefits-related costs. The company
also incurred pre-tax charges of $9 million recorded in
Administrative expenses related to the implementation of the
initiatives. The aggregate after-tax impact of restructuring
charges and implementation costs was $11 million, or $.04 per
share, on earnings from continuing operations.

 
In fiscal 2014, the company implemented initiatives to streamline
its salaried workforce in North America and its workforce in the
Asia Pacific region; restructure manufacturing and streamline
operations for its soup and broth business in China; improve supply
chain efficiency in Australia; and reduce overhead across the
organization. The year-to-date 2014 impact was pre-tax restructuring
charges of $34 million ($19 million after tax, or $.06 per share, in
earnings from continuing operations attributable to Campbell Soup
Company). For the year ended August 3, 2014, the company recorded
pre-tax restructuring charges of $54 million ($33 million after tax,
or $.10 per share, in earnings from continuing operations
attributable to Campbell Soup Company).
 
In fiscal 2013, the company implemented initiatives to improve its
U.S. supply chain cost structure and increase asset utilization
across its U.S. thermal plant network; expand access to
manufacturing and distribution capabilities in Mexico; improve its
Pepperidge Farm bakery supply chain cost structure; and reduce
overhead in North America. The year-to-date 2014 impact was pre-tax
restructuring charges of $1 million and restructuring-related costs
of $2 million in Cost of products sold (aggregate impact of $2
million after tax, or $.01 per share, on earnings from continuing
operations). For the year ended August 3, 2014, the company recorded
pre-tax restructuring charges of $1 million and
restructuring-related costs of $3 million in Cost of products sold
(aggregate impact of $3 million after tax, or $.01 per share, on
earnings from continuing operations).
 

(2)

In fiscal 2014, the company recognized pension settlement charges
associated with a U.S. pension plan. The settlements resulted from
the level of lump sum distributions from the plan’s assets in
2014, primarily due to the closure of the facility in Sacramento,
California. In the third quarter of fiscal 2014, the company
recognized a pre-tax pension settlement charge in Cost of products
sold of $18 million ($11 million after tax, or $.03 per share, in
earnings from continuing operations). In fiscal 2014, the company
recognized pre-tax pension settlement charges in Cost of products
sold of $22 million ($14 million after tax, or $.04 per share, in
earnings from continuing operations).

 

(3)

On October 28, 2013, the company completed the sale of its simple
meals business in Europe. The results of the business were
reported as discontinued operations. In fiscal 2014, the company
recorded a loss of $9 million ($6 million after tax, or $.02 per
share) on foreign exchange forward contracts used to hedge the
proceeds from the sale of the European simple meals business. The
loss was included in earnings from continuing operations. In
addition, the company recorded tax expense of $7 million ($.02 per
share) in earnings from continuing operations associated with the
sale. In fiscal 2014, the company recognized an after-tax gain of
$72 million ($.23 per share) in earnings from discontinued
operations.

 
 
The following tables reconcile financial information, presented in
accordance with GAAP, to financial information excluding certain
transactions:
 
   
Three Months Ended
(millions, except per share amounts) May 3, 2015   April 27, 2014

Percent
Change

Gross margin, as reported $ 682 $ 676
Add: Pension settlement charge (2)       18  
Adjusted Gross margin $ 682   $ 694   (2)%
Adjusted Gross margin percentage 35.9 % 35.2 %
Earnings before interest and taxes, as reported $ 287 $ 292
Add: Restructuring charges and implementation costs (1) 18
Add: Pension settlement charge (2)       18  
Adjusted Earnings before interest and taxes $ 305   $ 310   (2)%
Interest, net, as reported $ 28   $ 30  
Adjusted Earnings before taxes $ 277   $ 280  
Taxes on earnings, as reported $ 77 $ 79
Add: Tax benefit from restructuring charges and implementation costs
(1)
7
Add: Tax benefit from pension settlement charge (2)     $ 7  
Adjusted Taxes on earnings $ 84   $ 86  
Adjusted effective income tax rate 30.3 % 30.7 %
Earnings from continuing operations, as reported $ 182 $ 183
Deduct: Net loss from noncontrolling interests       (1 )
Earnings from continuing operations attributable to Campbell Soup
Company, as reported
$ 182 $ 184
Add: Net adjustment from restructuring charges and implementation
costs (1)
11
Add: Net adjustment from pension settlement charge (2)       11  
Adjusted Earnings from continuing operations attributable to
Campbell Soup Company
$ 193   $ 195   (1)%
Diluted earnings per share – continuing operations attributable
to Campbell Soup Company, as reported
$ .58 $ .58
Add: Net adjustment from restructuring charges and implementation
costs (1)
.04
Add: Net adjustment from pension settlement charge (2)       .03  
Adjusted Diluted earnings per share – continuing operations
attributable to Campbell Soup Company*
$ .62   $ .62   —%
*The sum of the individual per share amounts may not add due to
rounding.
 
   
Year-to-Date
(millions, except per share amounts) May 3, 2015   April 27, 2014

Percent
Change

Gross margin, as reported $ 2,193 $ 2,267
Add: Restructuring-related costs (1) 2
Add: Pension settlement charge (2)       18  
Adjusted Gross margin $ 2,193   $ 2,287   (4)%
Adjusted Gross margin percentage 34.3 % 35.6 %
Earnings before interest and taxes, as reported $ 967 $ 958
Add: Restructuring charges and related costs/implementation costs (1) 18 37
Add: Pension settlement charge (2) 18
Add: Loss on foreign exchange forward contracts (3)       9  
Adjusted Earnings before interest and taxes $ 985   $ 1,022   (4)%
Interest, net, as reported $ 78   $ 89  
Adjusted Earnings before taxes $ 907   $ 933  
Taxes on earnings, as reported $ 266 $ 278
Add: Tax benefit from restructuring charges and related
costs/implementation costs (1)
7 11
Add: Tax benefit from pension settlement charge (2) 7
Add: Tax benefit from loss on foreign exchange forward contracts (3) 3
Deduct: Tax expense associated with sale of European business (3)       (7 )
Adjusted Taxes on earnings $ 273   $ 292  
Adjusted effective income tax rate 30.1 % 31.3 %
Earnings from continuing operations, as reported $ 623 $ 591
Deduct: Net loss from noncontrolling interests       (9 )
Earnings from continuing operations attributable to Campbell Soup
Company, as reported
$ 623 $ 600
Add: Net adjustment from restructuring charges and related
costs/implementation costs (1)
11 26
Deduct: Restructuring charges attributable to noncontrolling
interest (1)
(5 )
Add: Net adjustment from pension settlement charge (2) 11
Add: Net adjustment from loss on foreign exchange forward contracts
(3)
6
Add: Tax expense associated with sale of European business (3)       7  
Adjusted Earnings from continuing operations attributable to
Campbell Soup Company
$ 634   $ 645   (2)%
Earnings from discontinued operations, as reported $ $ 81
Deduct: Gain on sale of European business (3)       (72 )
Adjusted Earnings from discontinued operations $   $ 9  
Adjusted Net earnings attributable to Campbell Soup Company $ 634   $ 654   (3)%
Diluted earnings per share – continuing operations attributable
to Campbell Soup Company, as reported
$ 1.98 $ 1.90
Add: Net adjustment from restructuring charges and related
costs/implementation costs attributable to Campbell Soup Company (1)
.04 .07
Add: Net adjustment from pension settlement charge (2) .03
Add: Net adjustment from loss on foreign exchange forward contracts
(3)
.02
Add: Tax expense associated with sale of European business (3)       .02  
Adjusted Diluted earnings per share – continuing operations
attributable to Campbell Soup Company
$ 2.02   $ 2.04   (1)%
Diluted earnings per share – discontinued operations, as reported $ $ .26
Deduct: Gain on sale of European business (3)       (.23 )
Adjusted Diluted earnings per share – discontinued operations $   $ .03  
Diluted net earnings per share attributable to Campbell Soup
Company, as reported
$ 1.98 $ 2.16
Add: Net adjustment from restructuring charges and related
costs/implementation costs attributable to Campbell Soup Company (1)
.04 .07
Add: Net adjustment from pension settlement charge (2) .03
Add: Net adjustment from loss on foreign exchange forward contracts
(3)
.02
Add: Tax expense associated with sale of European business (3) .02
Deduct: Gain on sale of European business (3)       (.23 )
Adjusted Diluted net earnings per share attributable to Campbell
Soup Company
$ 2.02   $ 2.07   (2)%
 
 

Year Ended

(millions, except per share amounts) August 3, 2014
Gross margin, as reported $ 2,898
Add: Restructuring-related costs (1) 3
Add: Pension settlement charges (2)   22  
Adjusted Gross margin $ 2,923  
Adjusted Gross margin percentage 35.4 %
Earnings before interest and taxes, as reported $ 1,192
Add: Restructuring charges and related costs (1) 58
Add: Pension settlement charges (2) 22
Add: Loss on foreign exchange forward contracts (3)   9  
Adjusted Earnings before interest and taxes $ 1,281  
Interest, net, as reported $ 119  
Adjusted Earnings before taxes $ 1,162  
Taxes on earnings, as reported $ 347
Add: Tax benefit from restructuring charges and related costs (1) 17
Add: Tax benefit from pension settlement charges (2) 8
Add: Tax benefit from loss on foreign exchange forward contracts (3) 3
Deduct: Tax expense associated with sale of European business (3)   (7 )
Adjusted Taxes on earnings $ 368  
Adjusted effective income tax rate 31.7 %
Earnings from continuing operations, as reported $ 726
Deduct: Net loss from noncontrolling interests   (11 )
Earnings from continuing operations attributable to Campbell Soup
Company, as reported
$ 737
Add: Net adjustment from restructuring charges and related costs (1) 41
Deduct: Restructuring charges attributable to noncontrolling
interest (1)
(5 )
Add: Net adjustment from pension settlement charges (2) 14
Add: Net adjustment from loss on foreign exchange forward contracts
(3)
6
Add: Tax expense associated with sale of European business (3)   7  
Adjusted Earnings from continuing operations attributable to
Campbell Soup Company
$ 800  
Earnings from discontinued operations, as reported $ 81
Deduct: Gain on sale of European business (3)   (72 )
Adjusted Earnings from discontinued operations $ 9  
Adjusted Net earnings attributable to Campbell Soup Company $ 809  
Diluted earnings per share – continuing operations attributable
to Campbell Soup Company, as reported
$ 2.33
Add: Net adjustment from restructuring charges and related costs
attributable to Campbell Soup Company (1)
.11
Add: Net adjustment from pension settlement charges (2) .04
Add: Net adjustment from loss on foreign exchange forward contracts
(3)
.02
Add: Tax expense associated with sale of European business (3)   .02  
Adjusted Diluted earnings per share – continuing operations
attributable to Campbell Soup Company*
$ 2.53  
Diluted earnings per share – discontinued operations, as reported $ .26
Deduct: Gain on sale of European business (3)   (.23 )
Adjusted Diluted earnings per share – discontinued operations $ .03  
Diluted net earnings per share attributable to Campbell Soup
Company, as reported
$ 2.59
Add: Net adjustment from restructuring charges and related costs
attributable to Campbell Soup Company (1)
.11
Add: Net adjustment from pension settlement charges (2) .04
Add: Net adjustment from loss on foreign exchange forward contracts
(3)
.02
Add: Tax expense associated with sale of European business (3) .02
Deduct: Gain on sale of European business (3)   (.23 )
Adjusted Diluted net earnings per share attributable to Campbell
Soup Company*
$ 2.56  
*The sum of the individual per share amounts may not add due to
rounding.
 
 

Adjusted Base for Fiscal 2015 Guidance

The company believes that financial information excluding certain
transactions that are not considered to be part of the ongoing
business improves the comparability of year-to-year results. The
previous tables reconcile financial information, presented in
accordance with GAAP, to financial information excluding certain
items. Fiscal 2014 included 53 weeks. Consequently, the company
believes that investors may be able to better understand its fiscal
2015 performance excluding certain transactions and the estimated
impact of the 53rd week. In establishing guidance for fiscal 2015,
the adjusted fiscal 2014 results are revised to exclude the
estimated impact of the 53rd week below:
 
 
Year Ended
(millions, except per share amounts) August 3, 2014
Net sales, as reported $ 8,268
Deduct: Impact of 53rd week   (129 )
Adjusted Net sales base $ 8,139  
 
Adjusted Earnings before interest and taxes $ 1,281
Deduct: Impact of 53rd week   (37 )
Adjusted Earnings before interest and taxes base $ 1,244  
 
Adjusted Earnings from continuing operations attributable to
Campbell Soup Company
$ 800
Deduct: Impact of 53rd week   (25 )
Adjusted Earnings from continuing operations attributable to
Campbell Soup Company base
$ 775  
 
Adjusted Diluted earnings per share – continuing operations
attributable to Campbell Soup Company
$ 2.53
Deduct: Impact of 53rd week   (.08 )
Adjusted Diluted earnings per share – continuing operations
attributable to Campbell Soup Company base

$

2.45

 
 

Source: Campbell Soup Company

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