- 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 $0.62 Was Comparable to Prior Year
- Gross Margin Percentage Increased
Compared to Prior Year
- Company Narrows Fiscal 2015 Guidance
Ranges: Sales at Lower End of Existing Range, Adjusted EBIT and
Adjusted EPS at Favorable End of Existing Range
Campbell Soup Company (NYSE:CPB) today reported its
results for the third quarter of fiscal 2015.
Continuing Operations
Three Months
Ended
Nine Months
Ended
($ 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. SimpleMeals
GlobalBaking
andSnacking
InternationalSimple
Mealsand Beverages
U.S.Beverages
BolthouseandFoodservice
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. SimpleMeals
GlobalBaking
andSnacking
InternationalSimple
Mealsand Beverages
U.S.Beverages
BolthouseandFoodservice
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
PercentChange
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
PercentChange
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
PercentChange
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
PercentChange
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
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150522005291/en/
Campbell Soup CompanyINVESTOR
CONTACT:Jennifer Driscoll,
856-342-6081jennifer_driscoll@campbellsoup.comorMEDIA CONTACT:Carla Burigatto,
856-342-3737carla_burigatto@campbellsoup.com
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