- Campbell Reaffirms Fiscal 2019
Guidance
- Net Sales Increased 25 Percent
Reflecting Impact of Recently Completed Acquisitions; Organic Sales
Decreased 3 Percent
- Earnings Per Share (EPS) of $0.64;
Adjusted EPS of $0.79
Campbell Soup Company (NYSE:CPB) today reported its
first-quarter results for fiscal 2019.
Three Months
Ended
($ in millions, except per share)
Oct. 28,
2018
Oct. 29,
2017
%
Change
Net Sales
As Reported (GAAP)
$2,694
$2,161 25% Organic (3)%
Earnings Before Interest and Taxes
(EBIT)
As Reported (GAAP)
$350 $412 (15)% Adjusted
$410 $417
(2)%
Diluted Earnings Per Share
As Reported (GAAP)
$0.64 $0.91 (30)% Adjusted
$0.79
$0.92 (14)%
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
Keith McLoughlin, Campbell’s interim President and CEO stated,
“We are on track with our plans and are encouraged by the progress
we are making against the significant actions we announced on
August 30th to simplify, focus and optimize our portfolio. Through
considerable cross-functional efforts in October, we were able to
overcome the supply chain challenges that we faced early in the
quarter and deliver results that enabled us to reaffirm our fiscal
2019 guidance.
“As we focus Campbell on our Snacks and Meals and Beverages
businesses in our core North American market, we are driving
increased operating discipline across the company. During the
quarter we started to see improved trends in U.S. soup, a
return to sales growth in our V8 business,
and continued solid performance in Campbell Snacks.
Additionally, we are delivering targeted cost savings and
synergies, as well as driving higher cash flow through improvements
in working capital. In line with the key priorities of our
strategic review, we also launched the processes to divest Campbell
International and Campbell Fresh, both of which have garnered
strong interest from a range of potential buyers.
“We continue to expect fiscal 2019 to be a transition year as we
fully operationalize our plans to turn around Campbell. We remain
focused on executing our strategic initiatives and confident that
our go-forward plan will drive long-term organic growth and
profitability that maximizes value for all shareholders.”
Items Impacting Comparability
The table below presents a summary of items impacting
comparability in each period. A detailed reconciliation of the
reported (GAAP) financial information to the adjusted information
is included at the end of this news release.
Diluted Earnings per Share Three
Months Ended Oct. 28, 2018 Oct. 29,
2017 As Reported (GAAP)
$0.64 $0.91 Impairment
charge related to U.S. refrigerated soup plant assets
$0.04
-
Restructuring charges, implementation
costs and other related costs associated with cost savings
initiatives
$0.12
$0.04
Pension and postretirement benefit mark-to-market
adjustments
- ($0.03) Adjusted
$0.79*
$0.92
*Numbers do not add due to rounding.
First-Quarter Results
Sales increased 25 percent to $2.7 billion reflecting a 29-point
benefit from the recent acquisitions of Snyder’s-Lance and Pacific
Foods. Organic sales declined 3 percent driven primarily by higher
promotional spending, including a 1-point negative impact from the
adoption of new accounting guidance for revenue recognition, as
well as lower volume. In the first quarter of fiscal 2019, Campbell
adopted new accounting guidance for revenue recognition which
impacts the timing of expense related to promotional programs. The
impact from the adoption of this guidance is not expected to be
material on an annual basis.
Gross margin decreased from 36.2 percent to 30.6 percent.
Excluding items impacting comparability, adjusted gross margin
decreased 4.9 percentage points to 31.6 percent, including a
190-basis-point negative impact from the recent acquisitions. The
remaining decline in adjusted gross margin was driven primarily by
cost inflation and higher supply chain costs, as well as higher
promotional spending including the impact from the change in
revenue recognition, offset partly by productivity improvements and
the benefits from cost savings initiatives. The increase in supply
chain costs was driven primarily by higher than expected
distribution costs associated with the start-up of a new
distribution facility in Findlay, Ohio, operated by a third-party
logistics service provider.
Marketing and selling expenses increased 13 percent to $248
million reflecting a 28-point increase from the inclusion of the
recent acquisitions. Excluding items impacting comparability in the
current year and the impact of the recent acquisitions, adjusted
marketing and selling expenses decreased driven primarily by lower
advertising and consumer promotion expenses within Meals and
Beverages. Administrative expenses increased 18 percent to $176
million reflecting a 15-point increase from the inclusion of the
recent acquisitions. Excluding items impacting comparability and
the impact of the recent acquisitions, adjusted administrative
expenses increased slightly, reflecting costs associated with the
proxy contest in the current year.
Other expenses were $4 million in the current quarter as
compared to other income of $29 million in the prior-year quarter.
Excluding items impacting comparability in the prior year, other
expenses increased driven primarily by amortization of intangible
assets associated with recent acquisitions.
As reported EBIT decreased 15 percent to $350 million. Excluding
items impacting comparability, adjusted EBIT of $410 million
decreased 2 percent inclusive of a negative 4-point impact from the
change in revenue recognition. The remaining change in adjusted
EBIT reflects incremental earnings from recent acquisitions, offset
partly by declines in the base business.
Net interest expense was $93 million compared to $30 million in
the prior year reflecting higher levels of debt associated with the
recent acquisitions and higher average interest rates on the debt
portfolio. The tax rate was 24.5 percent as compared to 28.0
percent in the prior year. Excluding items impacting comparability,
the adjusted tax rate decreased 3.9 percentage points to 24.3
percent due primarily to the lower U.S. federal tax rate, offset
partly by the favorable settlement of certain U.S. state tax
matters in the prior-year quarter.
The company reported EPS of $0.64. Excluding items impacting
comparability, adjusted EPS decreased 14 percent to $0.79 per share
reflecting adjusted EBIT declines on the base business, inclusive
of a negative $0.04 per share impact from the change in revenue
recognition, offset partly by a lower adjusted tax rate. In
aggregate, the acquisitions of Snyder’s-Lance and Pacific Foods
were neutral to adjusted EPS in the quarter.
Cash flow from operations increased to $231 million from $188
million a year ago primarily due to lower working capital
requirements and lower payments on hedging activities, offset
partly by lower cash earnings. In line with the company’s
commitment to returning value to shareholders, during the first
quarter of fiscal 2019, the company paid $107 million of cash
dividends, or the equivalent of $0.35 per share, to common stock
shareholders.
Campbell Reaffirms Fiscal 2019 Guidance
Following first-quarter results, Campbell continues to expect
full-year performance to be consistent with guidance provided on
Aug. 30, 2018. As previously announced, given the strategy to
pursue divestitures, the company has provided an outlook for fiscal
2019 based on the company’s existing portfolio of businesses, as
well as on a pro forma basis assuming the planned divestitures are
completed as of the beginning of fiscal 2019. This fiscal 2019
guidance and pro forma, as shown in the table below, include the
impact of the Snyder’s-Lance and Pacific Foods acquisitions and
assumes the impact from currency translation will be nominal.
($ in millions,
except per share)
2018Results
2019 Guidance
Pre-Divestitures
2019 Pro FormaAssuming
Divestitures
Net Sales $8,685 $9,975 to $10,100 $7,925 to $8,050
Incremental Net Sales from Snyder’s-Lance
and Pacific Foods
$1,500 to $1,550
$1,500 to $1,550
Adjusted EBIT $1,408* $1,370 to $1,410 $1,230 to $1,270
Adjusted EPS $2.87* $2.45 to $2.53 $2.40 to $2.50
* Adjusted – refer to the detailed reconciliation of the
reported (GAAP) financial information to the adjusted financial
information at the end of this news release. Note: A non-GAAP
reconciliation is not provided for 2019 guidance or 2019 pro forma
since certain items are not estimable, such as pension and
postretirement mark-to-market adjustments, and these items are not
considered to reflect the company's ongoing business results. The
pro forma scenario is provided for illustrative purposes to provide
approximate impact of potential divestitures as if they occurred at
the beginning of fiscal 2019 and is based on the use of estimated
sales proceeds.
Cost Savings Program
In the first quarter of fiscal 2019, Campbell achieved $45
million in savings under its multi-year cost savings program,
inclusive of Snyder’s-Lance synergies, bringing total
program-to-date savings to $500 million. As previously announced,
the company expects to deliver cumulative annualized savings of
$945 million by the end of fiscal 2022.
Segment Operating Review
An analysis of net sales and operating earnings by reportable
segment follows:
Three Months
Ended Oct. 28, 2018
($ in millions)
Meals andBeverages*
GlobalBiscuitsand
Snacks*
Campbell Fresh
Total Net Sales, as Reported $1,244 $1,218
$232 $2,694
Volume and Mix (2)% (1)% (1)% (1)% Price and Sales Allowances -% 1%
-% -% Promotional Spending (3)% (1)% -% (2)% Organic Net Sales (5)%
(1)% (1)% (3)% Currency -% (2)% -% (1)% Acquisitions 6% 81% -% 29%
% Change vs. Prior Year -% 77% (1)% 25% Segment Operating Earnings
$294 $154 ($3) % Change vs. Prior Year (11)% 32% 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.
Meals and Beverages
Sales of $1.2 billion were comparable to the prior year. Organic
sales decreased 5 percent driven primarily by declines in U.S.
soup, Prego pasta sauces and Canada, offset partly by gains in
beverages. Excluding the benefit from the acquisition of Pacific
Foods and the impact from the change in revenue recognition, sales
of U.S. soup decreased 6 percent driven by declines in
ready-to-serve soups and condensed soups, offset partly by gains in
broth. The sales decline in U.S. soup was driven primarily by
continued competitive pressure across the market and increased
promotional spending.
Segment operating earnings decreased 11 percent to $294 million.
The decrease was driven primarily by a lower gross margin
percentage offset partly by lower advertising expenses. The lower
gross margin performance reflects the impact of higher levels of
cost inflation, increased promotional spending including the change
in revenue recognition, and higher distribution costs associated
with the start-up of a new distribution facility in Findlay, Ohio,
operated by a third-party logistics service provider.
Global Biscuits and Snacks
Sales in the quarter increased 77 percent to $1.2 billion.
Excluding the benefit from the acquisition of Snyder’s-Lance and
the negative impact of currency translation, organic sales
decreased 1 percent driven primarily by declines in Kelsen cookies
in the U.S. Sales of Goldfish crackers increased slightly. As
expected, sales of Goldfish crackers were negatively impacted by
the voluntary product recall in July 2018.
Segment operating earnings increased 32 percent to $154 million,
reflecting a 45-point benefit from the acquisition of
Snyder’s-Lance. Excluding the impact of the acquisition, segment
operating earnings declined due primarily to a lower gross margin
percentage reflecting higher levels of cost inflation.
Campbell Fresh
Sales in the quarter decreased 1 percent to $232 million driven
by declines in refrigerated soup, as well as declines in Garden
Fresh Gourmet and Bolthouse Farms refrigerated beverages, offset
partly by gains in carrots.
Segment operating loss was $3 million compared to a loss of $6
million in the prior year. The $3 million year-over-year
improvement reflects improved operational efficiency on beverages
offset partly by the decline in refrigerated soup volume.
Corporate
Corporate in the first quarter of fiscal 2019 included charges
related to cost savings initiatives of $27 million and a non-cash
impairment charge of $14 million related to U.S. refrigerated soup
plant assets. Corporate in the first quarter of fiscal 2018
included pension and postretirement mark-to-market gains of $14
million and charges related to cost savings initiatives of $17
million. The remaining increase in expenses primarily reflects
lower pension and postretirement benefit income as well as costs
associated with the proxy contest in the current year.
Conference Call and Webcast
Campbell will host a conference call to discuss these results
today at 10:00 a.m. Eastern Time. To join, dial +1 (409) 350-3941.
The access code is 9379198. 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 Dec. 4, 2018, at +1
(404) 537-3406. The access code for the replay is 9379198.
Reportable Segments
Campbell Soup Company earnings results are reported as
follows:
Meals and Beverages includes the
retail and food service businesses in the U.S. and Canada. The
segment includes the following products: Campbell’s condensed and
ready-to-serve soups; Swanson broth and stocks; Pacific broth,
soups, non-dairy beverages and other simple meals; Prego pasta
sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and
dinner sauces; Swanson canned poultry; Plum food and snacks; V8
juices and beverages; and, Campbell’s tomato juice. Beginning in
fiscal 2019, the segment also includes the simple meals and
shelf-stable beverages business in Latin America. Prior to fiscal
2019, the business in Latin America was managed as part of the
Global Biscuits and Snacks segment. Prior-period segment results
have been adjusted retrospectively to reflect this change.
Global Biscuits and Snacks includes
the U.S. snacks portfolio consisting of Pepperidge Farm cookies,
crackers, bakery and frozen products in U.S. retail, and
Snyder’s-Lance pretzels, sandwich crackers, potato chips, tortilla
chips and other snacking products. The segment also includes
Arnott’s biscuits in Australia and Asia Pacific, Kelsen cookies
globally, and the simple meals and shelf-stable beverages business
in Australia and Asia Pacific.
Campbell Fresh includes Bolthouse
Farms fresh carrots, carrot ingredients, refrigerated beverages and
refrigerated salad dressings; Garden Fresh Gourmet salsa, hummus,
dips and tortilla chips; and, the U.S. refrigerated soup
business.
About Campbell Soup Company
Campbell (NYSE:CPB) is driven and inspired by our Purpose, "Real
food that matters for life's moments." For generations, people have
trusted Campbell to provide authentic, flavorful and affordable
snacks, soups and simple meals, and beverages. 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 and 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 any statements
made regarding sales, EBIT and EPS guidance, 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 execute on and realize the expected
benefits from the actions it intends to take as a result of its
recent strategy and portfolio review, (2) the ability to
differentiate its products and protect its category leading
positions, especially in soup; (3) the ability to complete and to
realize the projected benefits of planned divestitures and other
business portfolio changes; (4) the ability to realize the
projected benefits, including cost synergies, from the recent
acquisitions of Snyder’s-Lance and Pacific Foods; (5) the ability
to realize projected cost savings and benefits from its efficiency
and/or restructuring initiatives; (6) the company’s indebtedness
and ability to pay such indebtedness; (7) disruptions to the
company’s supply chain, including fluctuations in the supply of and
inflation in energy and raw and packaging materials cost; (8) the
company’s ability to manage changes to its organizational structure
and/or business processes, including selling, distribution,
manufacturing and information management systems or processes; (9)
the impact of strong competitive responses to the company’s efforts
to leverage its brand power with product innovation, promotional
programs and new advertising; (10) the risks associated with trade
and consumer acceptance of product improvements, shelving
initiatives, new products and pricing and promotional strategies;
(11) changes in consumer demand for the company’s products and
favorable perception of the company’s brands; (12) changing
inventory management practices by certain of the company’s key
customers; (13) a changing customer landscape, with value and
e-commerce retailers expanding their market presence, while certain
of the company’s key customers maintain significance to the
company’s business; (14) product quality and safety issues,
including recalls and product liabilities; (15) the costs,
disruption and diversion of management’s attention associated with
campaigns commenced by activist investors; (16) the uncertainties
of litigation and regulatory actions against the company; (17) the
possible disruption to the independent contractor distribution
models used by certain of the company’s businesses, including as a
result of litigation or regulatory actions affecting their
independent contractor classification; (18) the impact of non-U.S.
operations, including trade restrictions, public corruption and
compliance with foreign laws and regulations; (19) impairment to
goodwill or other intangible assets; (20) the company’s ability to
protect its intellectual property rights; (21) increased
liabilities and costs related to the company’s defined benefit
pension plans; (22) a material failure in or breach of the
company’s information technology systems; (23) the company’s
ability to attract and retain key talent; (24) changes in currency
exchange rates, tax rates, interest rates, debt and equity markets,
inflation rates, economic conditions, law, regulation and other
external factors; (25) unforeseen business disruptions in one or
more of the company’s markets due to political instability, civil
disobedience, terrorism, armed hostilities, extreme weather
conditions, natural disasters or other calamities; and (26) other
factors described in the company’s most recent Form 10-K and
subsequent Securities and Exchange Commission filings. The company
disclaims any obligation or intent to update the forward-looking
statements in order to reflect events or circumstances after the
date of this release.
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(millions, except per share amounts)
Three Months Ended October
28, 2018 October 29, 2017 Net sales
$
2,694 $ 2,161 Costs and expenses Cost of
products sold
1,870 1,378 Marketing and selling expenses
248 219 Administrative expenses
176 149 Research and
development expenses
27 30 Other expenses / (income)
4 (29 ) Restructuring charges
19 2
Total costs and expenses
2,344 1,749 Earnings
before interest and taxes
350 412 Interest, net
93
30 Earnings before taxes
257 382 Taxes on
earnings
63 107 Net earnings
194 275
Net loss attributable to noncontrolling interests
— —
Net earnings attributable to Campbell Soup Company
$
194 $ 275 Per share - basic Net earnings
attributable to Campbell Soup Company
$ .64 $
.91 Dividends
$ .35 $ .35
Weighted average shares outstanding - basic
301 301
Per share - assuming dilution Net earnings attributable to
Campbell Soup Company
$ .64 $ .91
Weighted average shares outstanding - assuming dilution
302
302
CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF
SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
Three Months Ended
October 28, 2018 October 29, 2017
PercentChange
Sales
Contributions: Meals and Beverages
$ 1,244 $ 1,239 —%
Global Biscuits and Snacks
1,218 688 77% Campbell Fresh
232 234 (1)% Total sales
$ 2,694
$ 2,161 25%
Earnings
Contributions: Meals and Beverages
$ 294 $ 331 (11)%
Global Biscuits and Snacks
154 117 32% Campbell Fresh
(3 ) (6 ) n/m Total operating earnings
445 442
1% Corporate
(76 ) (28 ) Restructuring charges
(19 ) (2 ) Earnings before interest and taxes
350 412 (15)% Interest, net
93 30 Taxes on earnings
63 107 Net earnings
194 275 (29)% Net
loss attributable to noncontrolling interests
— —
Net earnings attributable to Campbell Soup Company
$
194 $ 275 (29)% Per share - assuming dilution
Net earnings attributable to Campbell Soup Company
$
.64 $ .91 (30)%
n/m - not meaningful
Beginning in fiscal 2019, the business in Latin America is
managed as part of the Meals and Beverages segment. In fiscal 2018,
the business in Latin America was managed as part of the Global
Biscuits and Snacks segment. Segment results have been adjusted
retrospectively to reflect this change.
CAMPBELL SOUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(millions)
October 28, 2018
October 29, 2017 Current assets
$ 2,521 $ 1,996 Plant
assets, net
3,162 2,417 Intangible assets, net
8,680
3,198 Other assets
224 135 Total assets
$
14,587 $ 7,746 Current liabilities
$
3,662 $ 2,583 Long-term debt
8,001 2,269 Other
liabilities
1,509 1,205 Total equity
1,415
1,689 Total liabilities and equity
$ 14,587 $
7,746 Total debt
$ 9,846 $ 3,461 Cash and cash
equivalents
$ 205 $ 163
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(millions)
Three Months Ended October
28, 2018 October 29, 2017 Cash flows from
operating activities: Net earnings
$ 194 $ 275
Adjustments to reconcile net earnings to operating cash flow
Impairment charges
14 — Restructuring charges
19 2
Stock-based compensation
14 14 Pension and postretirement
benefit income
(15 ) (16 ) Depreciation and
amortization
122 82 Deferred income taxes
17 41
Other, net
12 6 Changes in working capital Accounts
receivable
(223 ) (167 ) Inventories
(33
) (105 ) Prepaid assets
(10 ) 16 Accounts
payable and accrued liabilities
130 84 Net receipts from
(payments of) hedging activities
1 (33 ) Other
(11
) (11 ) Net cash provided by operating activities
231
188 Cash flows from investing activities: Purchases
of plant assets
(111 ) (58 ) Purchases of route
businesses
(20 ) — Sales of route businesses
21 — Other, net
10 (5 ) Net cash used in
investing activities
(100 ) (63 ) Cash flows from
financing activities: Short-term borrowings
1,710 2,056
Short-term repayments
(1,745 ) (2,116 ) Dividends
paid
(107 ) (111 ) Treasury stock purchases
—
(86 ) Payments related to tax withholding for stock-based
compensation
(5 ) (22 ) Payments of debt issuance
costs
(1 ) — Net cash used in financing
activities
(148 ) (279 ) Effect of exchange rate
changes on cash
(4 ) (2 ) Net change in cash and cash
equivalents
(21 ) (156 ) Cash and cash equivalents —
beginning of period
226 319 Cash and cash
equivalents — end of period
$ 205 $ 163
Reconciliation of GAAP to Non-GAAP Financial
MeasuresFirst Quarter Ended October 28, 2018
Campbell Soup Company uses certain non-GAAP financial measures
as defined by the Securities and Exchange Commission in certain
communications. These non-GAAP financial measures are measures of
performance not defined by accounting principles generally accepted
in the United States and should be considered in addition to, not
in lieu of, GAAP reported measures. Management believes that also
presenting certain non-GAAP financial measures provides additional
information to facilitate comparison of the company's historical
operating results and trends in its underlying operating results,
and provides transparency on how the company evaluates its
business. Management uses these non-GAAP financial measures in
making financial, operating and planning decisions and in
evaluating the company's performance.
Organic Net Sales
Organic net sales are net sales excluding the impact of currency
and acquisitions. Management believes that excluding these items,
which are not part of the ongoing business, improves the
comparability of year-to-year results. A reconciliation of net
sales as reported to organic net sales follows.
Three Months Ended October
28, 2018
October 29,2017
% Change (millions)
Net
Sales,asReported
Impact ofCurrency
Impact ofAcquisitions
OrganicNet Sales
Net
Sales,asReported
Net
Sales,asReported
OrganicNet Sales
Meals and Beverages $ 1,244 $ 5
$ (69 ) $ 1,180 $ 1,239 —% (5)%
Global Biscuits and Snacks 1,218 17
(554 ) 681 688 77% (1)%
Campbell Fresh
232 — — 232
234 (1)% (1)%
Total Net Sales $ 2,694
$ 22 $ (623 )
$ 2,093 $ 2,161 25% (3)%
Items Impacting Earnings
The company believes that financial information excluding
certain items that are not considered to reflect the ongoing
operating results, such as those listed below, improves the
comparability of year-to-year results. Consequently, the company
believes that investors may be able to better understand its
results excluding these items.
The following items impacted earnings:
(1) In fiscal 2015, the company implemented initiatives to
reduce costs and to streamline its organizational structure. In
fiscal 2017, the company expanded these cost savings initiatives by
further optimizing its supply chain network, primarily in North
America, continuing to evolve its operating model to drive
efficiencies, and more fully integrating its recent acquisitions.
In January 2018, as part of the expanded initiatives, the company
authorized additional costs to improve the operational efficiency
of its thermal supply chain network in North America by closing its
manufacturing facility in Toronto, Ontario, and to optimize its
information technology infrastructure by migrating certain
applications to the latest cloud technology platform. In August
2018, the company announced that it will continue to streamline its
organization, expand its zero-based budgeting efforts and optimize
its manufacturing network. Beginning in fiscal 2019, the company
included costs associated with the Snyder's-Lance cost
transformation program and integration with these initiatives.
In the first quarter of fiscal 2019, the company recorded
Restructuring charges of $19 million and implementation costs and
other related costs of $13 million in Administrative expenses, $12
million in Cost of products sold, and $2 million in Marketing and
selling expenses (aggregate impact of $35 million after tax, or
$.12 per share) related to these initiatives. In the first quarter
of fiscal 2018, the company recorded Restructuring charges of $2
million and implementation costs and other related costs of $12
million in Administrative expenses and $5 million in Cost of
products sold (aggregate impact of $12 million after tax, or $.04
per share) related to these initiatives. For the year ended July
29, 2018, the company recorded Restructuring charges of $49 million
and implementation costs and other related costs of $88 million in
Administrative expenses, $45 million in Cost of products sold, and
$3 million in Marketing and selling expenses (aggregate impact of
$136 million after tax, or $.45 per share) related to these
initiatives. (2) In the first quarter of fiscal 2019, the
company recorded a non-cash impairment charge of $14 million in
Cost of products sold ($11 million after tax, or $.04 per share) on
its U.S. refrigerated soup plant assets. (3) In the first
quarter of fiscal 2018, the company incurred gains of $14 million
in Other expenses / (income) ($9 million after tax, or $.03 per
share) associated with mark-to-market adjustments for defined
benefit pension and postretirement plans. For the year ended July
29, 2018, the company incurred gains of $136 million in Other
expenses / (income) ($103 million after tax, or $.34 per share)
associated with mark-to-market and curtailment adjustments for
defined benefit pension and postretirement plans. (4) In the
second quarter of fiscal 2018, the company announced its intent to
acquire Snyder's-Lance, Inc. and on March 26, 2018, the acquisition
closed. For the year ended July 29, 2018, the company incurred
transaction costs of $53 million recorded in Other expenses /
(income), $42 million in Cost of products sold associated with an
acquisition fair value adjustment for inventory, and recorded a
gain in Interest expense of $18 million on treasury rate lock
contracts used to hedge the planned financing of the acquisition.
The company also incurred integration costs in association with its
cost savings initiatives, of which $13 million was recorded in
Restructuring charges and $12 million in Administrative expenses.
The aggregate impact was $102 million, $73 million after tax, or
$.24 per share. (5) In fiscal 2018, the company reflected
the impact on taxes of the enactment of the Tax Cuts and Jobs Act
that was signed into law in December 2017. For the year ended July
29, 2018, the company recorded a tax benefit of $179 million due to
the remeasurement of deferred tax assets and liabilities, and a tax
charge of $53 million related to the transition tax on unremitted
foreign earnings. The net impact was a tax benefit of $126 million
($.42 per share). (6) In the fourth quarter of fiscal 2018,
the company performed an impairment assessment on the Plum
trademark. In fiscal 2018, sales and operating performance were
well below expectations due in part to competitive pressure and
reduced margins. In the fourth quarter of fiscal 2018, as part of a
strategic review initiated by a new leadership team and based on
recent performance, the company lowered its long-term outlook for
future sales. The company recorded a non-cash impairment charge of
$54 million ($41 million after tax, or $.14 per share) in Other
expenses / (income). In the third quarter of fiscal 2018,
the company performed interim impairment assessments within
Campbell Fresh on the deli reporting unit, which includes Garden
Fresh Gourmet and the U.S. refrigerated soup business, and the
Bolthouse Farms refrigerated beverages and salad dressings
reporting unit. Within the deli unit, the company revised its
long-term outlook due to the anticipated loss of refrigerated soup
business with certain private label customers, as well as the
recent performance of the business. In addition, the operating
performance of the Bolthouse Farms refrigerated beverages and salad
dressing reporting unit was below expectations. The company revised
its long-term outlook for future earnings and cash flows for each
of these reporting units. The company recorded a non-cash
impairment charge of $11 million on the tangible assets and $94
million on the intangible assets ($80 million after tax, or $.27
per share) of the deli reporting unit, and a non-cash impairment
charge of $514 million ($417 million after tax, or $1.39 per share)
related to the intangible assets of the Bolthouse Farms
refrigerated beverages and salad dressings reporting unit. The
aggregate impact of the impairment charges was $619 million, of
which $11 million was recorded in Cost of products sold and $608
million in Other expenses / (income), ($497 million after tax, or
$1.65 per share). In the second quarter of fiscal 2018, the
company performed an interim impairment assessment on the
intangible assets of the Bolthouse Farms carrot and carrot
ingredients reporting unit as operating performance was below
expectations. The company revised its outlook for future earnings
and cash flows and recorded a non-cash impairment charge of $75
million in Other expenses / (income) ($74 million after tax, or
$.25 per share). For the year ended July 29, 2018, the total
non-cash impairment charges recorded were $748 million, of which
$11 million was recorded in Cost of products sold and $737 million
in Other expenses / (income), ($612 million after tax, or $2.03 per
share). (7) For the year ended July 29, 2018, the company
recorded a loss of $22 million in Other expenses / (income) ($15
million after tax, or $.05 per share) from a settlement of a legal
claim.
The following tables reconcile financial information, presented
in accordance with GAAP, to financial information excluding certain
items:
Three Months Ended
October 28, 2018 October 29, 2017
(millions, except per share amounts)
Asreported
Adjustments(a)
Adjusted
Asreported
Adjustments(a)
Adjusted
AdjustedPercentChange
Gross margin
$ 824 $ 26 $
850 $ 783 $ 5 $ 788 8% Gross margin percentage
30.6
% 31.6 % 36.2 % 36.5 % Marketing and selling
expenses
$ 248 $ (2 ) $
246 $ 219 $ — $ 219 Administrative expenses
$
176 $ (13 ) $ 163 $ 149 $
(12 ) $ 137 Other expenses / (income)
$ 4 $
— $ 4 $ (29 ) $ 14 $ (15 ) Restructuring
charges
$ 19 $ (19 ) $
— $ 2 $ (2 ) $ — Earnings before interest and taxes
$
350 $ 60 $ 410
$ 412 $ 5 $ 417 (2)% Interest, net
93 — 93 30 —
30 Earnings before taxes
$ 257
$ 60 $ 317 $ 382 $
5 $ 387 Taxes
63 14 77 107 2 109
Effective income tax rate
24.5 % 24.3
% 28.0 % 28.2 % Net earnings attributable to Campbell
Soup Company
$ 194 $ 46
$ 240 $ 275 $ 3 $ 278
(14)% Diluted net earnings per share attributable to Campbell Soup
Company
$ .64 $ .15
$ .79 $ .91 $ .01 $ .92
(14)% (a)See following table for additional information.
Three Months Ended October 28,
2018 October 29, 2017 (millions, except
per share amounts)
Restructuringcharges,implementationcosts
and otherrelated costs(1)
Impairmentcharge(2)
Adjustments
Restructuringcharges,implementationcosts
and otherrelated costs(1)
Mark-to-market(3)
Adjustments Gross margin
$ 12
$ 14 $ 26 $ 5 $ — $ 5 Marketing and
selling expenses
(2 ) — (2 ) — —
— Administrative expenses
(13 ) — (13
) (12 ) — (12 ) Other expenses / (income)
— —
— — 14 14 Restructuring charges
(19 ) —
(19 ) (2 ) — (2 ) Earnings before
interest and taxes
$ 46 $ 14
$ 60 $ 19 $ (14 ) $ 5
Interest, net
— — — —
— — Earnings before taxes
$ 46
$ 14 $ 60 $ 19
$ (14 ) $ 5 Taxes
11 3
14 7 (5 ) 2 Net earnings attributable
to Campbell Soup Company
$ 35 $
11 $ 46 $ 12 $ (9 ) $ 3
Diluted net earnings per share attributable to Campbell Soup
Company*
$ .12 $ .04
$ .15 $ .04 $ (.03 ) $ .01 *The
sum of individual per share amounts may not add due to rounding.
Year Ended (millions, except per share
amounts)
July 29, 2018 Gross margin $
2,816 Add: Restructuring charges, implementation costs and
other related costs (1)
45 Add: Transaction and integration
costs (4)
42 Add: Impairment charges (6)
11
Adjusted Gross margin $ 2,914
Adjusted Gross margin percentage 33.6 %
Earnings before interest and taxes, as reported $
469 Add: Restructuring charges, implementation costs and
other related costs (1)
185 Deduct: Total pension and
postretirement benefit mark-to-market and curtailment adjustments
(3)
(136 ) Add: Transaction and integration costs (4)
120 Add: Impairment charges (6)
748 Add: Claim
settlement (7)
22 Adjusted Earnings before
interest and taxes $ 1,408 Interest,
net, as reported $ 197 Add: Transaction and
integration costs (4)
18 Adjusted Interest,
net $ 215 Adjusted Earnings before
taxes $ 1,193 Taxes on earnings, as
reported $ 11 Add: Tax benefit from restructuring
charges, implementation costs and other related costs (1)
49
Deduct: Tax expense from total pension and postretirement benefit
mark-to-market and curtailment adjustments (3)
(33 )
Add: Tax benefit from transaction and integration costs (4)
29 Add: Tax benefit from tax reform (5)
126 Add: Tax
benefit from impairment charges (6)
136 Add: Tax benefit
from claim settlement (7)
7 Adjusted Taxes on
earnings $ 325 Adjusted effective
income tax rate 27.2 % Net earnings
attributable to Campbell Soup Company, as reported $
261 Add: Net adjustment from restructuring charges,
implementation costs and other related costs (1)
136 Deduct:
Net adjustment from total pension and postretirement benefit
mark-to-market and curtailment adjustments (3)
(103 )
Add: Net adjustment from transaction and integration costs (4)
73 Deduct: Net adjustment from tax reform (5)
(126
) Add: Net adjustment from impairment charges (6)
612
Add: Net adjustment from claim settlement (7)
15
Adjusted Net earnings attributable to Campbell Soup Company
$ 868 Diluted net earnings per share
attributable to Campbell Soup Company, as reported $
.86 Add: Net adjustment from restructuring charges,
implementation costs and other related costs (1)
.45 Deduct:
Net adjustment from total pension and postretirement benefit
mark-to-market and curtailment adjustments (3)
(.34 )
Add: Net adjustment from transaction and integration costs (4)
.24 Deduct: Net adjustment from tax reform (5)
(.42
) Add: Net adjustment from impairment charges (6)
2.03 Add: Net adjustment from claim settlement (7)
.05 Adjusted Diluted net earnings per share
attributable to Campbell Soup Company $ 2.87
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181120005086/en/
INVESTOR CONTACT:Ken Gosnell(856)
342-6081ken_gosnell@campbellsoup.com
MEDIA CONTACT:Thomas Hushen(856)
342-5227thomas_hushen@campbellsoup.com
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