- 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 $450 Million by Fiscal
2020
Campbell Soup Company (NYSE:CPB) today reported its
second-quarter results for fiscal 2017.
Three Months Ended
Six Months Ended ($ 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)
AmericasSimple Mealsand
Beverages
Global Biscuitsand
Snacks
CampbellFresh
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)
AmericasSimple Mealsand
Beverages
Global Biscuitsand
Snacks
CampbellFresh
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
PercentChange
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
PercentChange
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
MeasuresSecond 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 ofCurrency
OrganicNet Sales
Net Sales,as Reported
Net Sales,as Reported
OrganicNet 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 ofCurrency
OrganicNet Sales
Net Sales,as Reported
Net Sales,as Reported
OrganicNet 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)
Asreported
Adjustments(a) Adjusted
Asreported
Adjustments(a) Adjusted
AdjustedPercentChange
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 andother 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)
Asreported
Adjustments(a) Adjusted
Asreported
Adjustments(a) Adjusted
AdjustedPercentChange
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)
Restructuringcharges,implementationcosts
and otherrelated costs(2)
Impairmentcharges(3)
Adjustments
Mark-to-market(1)
Restructuringcharges,implementationcosts
and otherrelated 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
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170217005068/en/
Campbell Soup CompanyINVESTOR
CONTACT:Ken Gosnell,
856-342-6081ken_gosnell@campbellsoup.comorMEDIA CONTACT:Carla Burigatto,
856-342-3737carla_burigatto@campbellsoup.com
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