- Campbell Reaffirms Fiscal 2019
Guidance
- Net Sales Increased 24 Percent
Reflecting Impact of Recently Completed Acquisitions; Organic Sales
Comparable to the Prior Year
- Earnings Per Share (EPS) Loss of $0.20
Reflecting Impairment Charges Related to Campbell Fresh Segment;
Adjusted EPS of $0.77
Campbell Soup Company (NYSE:CPB) today reported its
second-quarter results for fiscal 2019.
Three Months
Ended
Six Months
Ended
($ in millions, except per share)
Jan.
27,
2019
Jan.
28,
2018
%
Change
Jan.
27,
2019
Jan.
28,
2018
%
Change
Net Sales As Reported (GAAP)
$2,713 $2,180 24%
$5,407
$4,341 25% Organic - % (2)% Earnings Before Interest and Taxes
(EBIT) As Reported (GAAP)
$19* $243 n/m
$369 $655
(44)% Adjusted
$399 $402 (1)%
$811 $819 (1)% Diluted
Earnings Per Share As Reported (GAAP)
($0.20)* $0.95 n/m
$0.45 $1.85 n/m Adjusted
$0.77 $1.00 (23)%
$1.57 $1.91 (18)% n/m – not meaningful * The current
quarter included pre-tax impairment charges of $346 million, or
$0.88 per share, related to the Campbell Fresh segment. 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
Mark Clouse, Campbell’s President and CEO stated, “I am pleased
that, for the second consecutive quarter, we delivered sales and
earnings performance in line with our expectations, enabling us to
reaffirm our full-year guidance for fiscal 2019.
“During the quarter, we continued to make progress against key
strategic initiatives. Our efforts to stabilize our core business,
integrate Snyder’s-Lance, deliver our cost savings agenda and focus
and optimize the portfolio are all on track. Over time, these
actions will enable us to increase investments in our core
businesses while significantly reducing debt and creating
meaningful value for shareholders. While we have made steady
progress, there is much more work to be done to fully unlock the
potential of our business.
“Since joining the team and immersing myself in Campbell’s
business, I am confident in the plans in place to address our
near-in challenges and opportunities, with the commitment to set a
clear strategic roadmap for the future. I am excited by the
opportunities to build upon the company’s solid foundation of
iconic brands, talented employees, engaged customers and loyal
consumers. It is upon these strengths that we will continue to
create a compelling plan that delivers profitable and sustainable
growth, supported by a reenergized culture focused on
accountability, performance and consumer-driven marketing and
innovation.”
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 Six Months Ended
Jan. 27,
2019
Jan. 28,
2018
Jan. 27,
2019
Jan. 28,
2018
As Reported (GAAP)
($0.20 ) $0.95
$0.45 $1.85
Impairment charges related to the Campbell Fresh segment
$0.88 $0.25
$0.91 $0.25
Restructuring charges, implementation
costs and other
related costs associated with cost savings
initiatives
$0.06
$0.15
$0.18
$0.19
Costs associated with planned divestitures
$0.03 -
$0.03 - Transaction costs related to the acquisition
of Snyder’s-Lance, Inc.
- $0.06
- $0.06
Pension and postretirement benefit mark-to-market adjustments
- -
- ($0.03 ) Nonrecurring net tax benefit
related to U.S. Tax Reform
$0.01 ($0.41 )
$0.01 ($0.41 ) Adjusted
$0.77* $1.00
$1.57* $1.91
* Numbers do not add due to rounding.
Second-Quarter Results
Sales increased 24 percent to $2.7 billion reflecting a 26-point
benefit from the recent acquisitions of Snyder’s-Lance and Pacific
Foods. Organic sales, which exclude the negative impact of currency
translation, were comparable to the prior year as gains in Global
Biscuits and Snacks were offset by declines in Campbell Fresh and
Meals and Beverages. Sales in the quarter benefited by
approximately 50 basis points from the change in revenue
recognition adopted in fiscal 2019, which impacts the timing of
expense related to promotional programs. The annual impact is not
expected to be material.
Gross margin decreased from 35.1 percent to 26.3 percent.
Excluding items impacting comparability, adjusted gross margin
decreased 4.3 percentage points to 30.9 percent, including a
200-basis-point dilutive mix 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 investment, offset partly by productivity improvements
and the benefits from cost savings initiatives. The increase in
supply chain costs was driven primarily by higher warehousing and
transportation costs, the majority of which were principally
one-time in nature.
Marketing and selling expenses increased 16 percent to $264
million reflecting a 22-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
marketing overhead and selling expenses, including the benefits
from cost savings initiatives. Administrative expenses increased 9
percent to $180 million. Excluding items impacting comparability,
adjusted administrative expenses increased 15 percent to $160
million primarily due to the inclusion of the recent
acquisitions.
Other expenses were $226 million as compared to $70 million in
the prior year. Excluding items impacting comparability, other
income decreased from $29 million in the prior year to $5 million
reflecting amortization of intangible assets associated with recent
acquisitions and lower gains on investments.
As reported EBIT was $19 million. Excluding items impacting
comparability, adjusted EBIT decreased 1 percent to $399 million
driven by declines in the base business, offset mostly by
incremental earnings from our recent acquisitions. The change in
revenue recognition had a favorable 3-point impact in the
quarter.
Net interest expense was $92 million compared to $32 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 19.2 percent as compared to a negative
35.1 percent in the prior year. Excluding items impacting
comparability, the adjusted tax rate increased 5.2 percentage
points from 18.9 percent to 24.1 percent. The adjusted tax rate in
the prior-year quarter benefited from a year-to-date true-up to
reflect the lower U.S. federal tax rate as part of the Tax Cuts and
Jobs Act enacted in December 2017.
The company reported a loss of $0.20 per share. Excluding items
impacting comparability, adjusted EPS decreased 23 percent to $0.77
per share reflecting EBIT declines in the base business, a higher
adjusted tax rate, and the expected dilutive impact from the
acquisitions of Snyder’s-Lance and Pacific Foods. The change in
revenue recognition had a favorable $0.03 per share impact in the
quarter.
First-Half Results
Sales increased 25 percent to $5.4 billion reflecting a 27-point
benefit from the recent acquisitions of Snyder’s-Lance and Pacific
Foods. Organic sales declined 2 percent.
As reported EBIT decreased 44 percent to $369 million. Excluding
items impacting comparability, adjusted EBIT decreased 1 percent to
$811 million reflecting declines in the base business offset mostly
by incremental earnings from recent acquisitions.
Net interest expense was $185 million compared to $62 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 increased from 5.6 percent to 26.6 percent.
Excluding items impacting comparability, the adjusted tax rate
increased 0.5 percentage points from 23.8 percent to 24.3
percent.
The company reported EPS of $0.45. Excluding items impacting
comparability, adjusted EPS decreased 18 percent to $1.57 per share
primarily reflecting adjusted EBIT declines in the base
business.
Cash flow from operations increased to $846 million from $660
million a year ago reflecting significant improvements from the
company’s working capital management efforts and wrapping payments
last year on hedges associated with an anticipated debt issuance,
offset partly by lower cash earnings. In line with the company’s
commitment to returning value to shareholders, during the first
half of fiscal 2019, the company paid $212 million of cash
dividends reflecting the quarterly dividend rate of $0.35 per
share.
Campbell Reaffirms Fiscal 2019 Guidance
Following second-quarter results, Campbell continues to expect
full-year performance to be consistent with guidance provided on
Aug. 30, 2018. As previously announced, given the strategy to
pursue divestitures, the company has provided an outlook for fiscal
2019 based on the company’s existing portfolio of businesses, as
well as on a pro forma basis assuming the planned divestitures are
completed as of the beginning of fiscal 2019. This fiscal 2019
guidance and pro forma, as shown in the table below, include the
impact of the Snyder’s-Lance and Pacific Foods acquisitions and an
estimated 1 percentage-point negative impact from currency
translation.
($ in millions, except
per share)
2018
Results
2019 Guidance
Pre-Divestitures
2019 Pro Forma
Assuming 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 second quarter of fiscal 2019, Campbell achieved $50
million in savings under its multi-year cost savings program,
inclusive of Snyder’s-Lance synergies, bringing total
program-to-date savings to $550 million. Year-to-date savings of
$95 million through the first half of fiscal 2019 are pacing
slightly ahead of schedule, helping to offset other cost pressures.
As previously announced, the company expects to deliver cumulative
annualized savings of $945 million by the end of fiscal 2022.
Segment Operating Review
An analysis of net sales and operating earnings by reportable
segment follows:
Three Months
Ended Jan. 27, 2019
($ in millions)
Meals and
Beverages
Global Biscuits
and Snacks
Campbell
Fresh
Total* Net Sales, as Reported $1,230 $1,243
$239 $2,713**
Volume and Mix -% 3% (7)% -% Price and Sales Allowances -% 1% -% -%
Promotional Spending (1)% (1)% -% (1)% Organic Net Sales (1)% 3%
(7)% -% Currency (1)% (2)% -% (1)% Acquisitions 3% 75% -% 26% %
Change vs. Prior Year 1% 76% (7)% 24% Segment Operating
Earnings $255 $185 ($14) % Change vs. Prior Year (10)% 35% n/m
n/m – not meaningful * Numbers do not add due to rounding.
** Includes Corporate Note: A detailed reconciliation of the
reported (GAAP) net sales to organic net sales is included at the
end of this news release.
Six Months Ended
Jan. 27, 2019
($ in millions)
Meals and
Beverages
Global Biscuits
and Snacks*
Campbell
Fresh
Total* Net Sales, as Reported $2,474 $2,461
$471 $5,407**
Volume and Mix (1)% 1% (4)% (1)% Price and Sales Allowances -% 1%
-% -% Promotional Spending (2)% (1)% -% (1)% Organic Net Sales (3)%
1% (4)% (2)% Currency -% (2)% -% (1)% Acquisitions 4% 78% -% 27% %
Change vs. Prior Year 1% 76% (4)% 25% Segment Operating
Earnings $549 $339 ($17) % Change vs. Prior Year (11)% 33% -%
* Numbers do not add due to rounding. ** Includes Corporate
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 in the quarter increased 1 percent to $1.230 billion.
Organic sales decreased 1 percent reflecting mixed results, as
increases in beverages behind consumption gains in V8 vegetable
juice and V8 Energy were more than offset by declines in Plum,
Canada and Prego pasta sauces. Excluding the benefit from the
acquisition of Pacific Foods, sales of U.S. soup were comparable to
the prior year with gains in ready-to-serve soups and broth, offset
by declines in condensed soups.
Segment operating earnings decreased 10 percent to $255 million.
The decrease was driven primarily by higher levels of cost
inflation and higher warehousing and transportation costs, which
began to moderate in January, as well as higher promotional
spending, offset partly by lower marketing and selling
expenses.
Global Biscuits and Snacks
Sales in the quarter increased 76 percent to $1.243 billion.
Excluding the benefit from the acquisition of Snyder’s-Lance and
the negative impact of currency translation, organic sales
increased 3 percent. This performance reflects continued growth in
Pepperidge Farm, driven by solid consumption gains in Pepperidge
Farm fresh bakery products and Goldfish crackers, as well as growth
in Arnott’s biscuits, fueled by innovation. Sales of Pepperidge
Farm have now grown in 17 consecutive quarters.
Segment operating earnings increased 35 percent to $185 million,
reflecting a 34-point benefit from the acquisition of
Snyder’s-Lance. Excluding the impact of the acquisition, segment
operating earnings increased slightly driven primarily by volume
gains, offset partly by higher levels of cost inflation.
Campbell Fresh
Overall performance for the Campbell Fresh segment was
consistent with expectations. Sales in the quarter decreased 7
percent to $239 million driven by expected declines in refrigerated
soup, reflecting the previously announced plans of certain major
private label customers to insource production in 2019, as well as
declines in Bolthouse Farms refrigerated beverages and Garden Fresh
Gourmet, offset partly by gains in carrots.
Segment operating loss was $14 million compared to a loss of $11
million in the prior year. The $3 million year-over-year decrease
was primarily due to the decline in refrigerated soup volume,
offset partly by improved operational efficiency in the Bolthouse
Farms business.
Corporate
Corporate in the second quarter of fiscal 2019 included non-cash
impairment charges of $346 million related to the Campbell Fresh
segment, charges related to cost savings initiatives of $22
million, and costs associated with planned divestitures of $10
million. Corporate in the second quarter of fiscal 2018 included a
non-cash impairment charge of $75 million related to the Campbell
Fresh segment, charges related to cost savings initiatives of $27
million, and acquisition transaction costs of $24 million. The
remaining increase in expenses primarily reflects the wrapping of
gains on investments in the prior-year quarter and higher
administrative expenses.
Conference Call and Webcast
Campbell will host a conference call to discuss these results
today at 8:30 a.m. Eastern Time. To join, dial +1 (409) 350-3941.
The access code is 7291448. 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 Mar. 13, 2019, at +1
(404) 537-3406. The access code for the replay is 7291448.
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
January 27, 2019
January 28, 2018
Net sales
$ 2,713 $ 2,180 Costs and
expenses Cost of products sold
1,999 1,414 Marketing and
selling expenses
264 228 Administrative expenses
180
165 Research and development expenses
23 27 Other expenses /
(income)
226 70 Restructuring charges
2
33 Total costs and expenses
2,694
1,937 Earnings before interest and taxes
19 243 Interest, net
92 32
Earnings (loss) before taxes
(73 ) 211 Taxes
on earnings
(14 ) (74 ) Net earnings
(loss)
(59 ) 285 Net loss attributable to
noncontrolling interests
— — Net
earnings (loss) attributable to Campbell Soup Company
$
(59 ) $ 285 Per share - basic Net earnings
(loss) attributable to Campbell Soup Company
$ (.20
) $ .95 Dividends
$ .35 $ .35
Weighted average shares outstanding - basic
301 301 Per share - assuming dilution
Net earnings attributable to Campbell Soup Company
$
(.20 ) $ .95 Weighted average shares
outstanding - assuming dilution
301 301
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(millions, except per share amounts)
Six Months Ended January 27, 2019
January 28, 2018 Net sales
$ 5,407 $ 4,341 Costs and
expenses Cost of products sold
3,869 2,792 Marketing and
selling expenses
512 447 Administrative expenses
356
314 Research and development expenses
50 57 Other expenses /
(income)
230 41 Restructuring charges
21
35 Total costs and expenses
5,038 3,686
Earnings before interest and taxes
369 655 Interest, net
185 62 Earnings before taxes
184 593
Taxes on earnings
49 33 Net earnings
135 560 Net loss attributable to noncontrolling interests
— — Net earnings attributable to Campbell Soup
Company
$ 135 $ 560 Per share - basic Net earnings
attributable to Campbell Soup Company
$ .45 $ 1.86
Dividends
$ .70 $ .70 Weighted average shares
outstanding - basic
301 301 Per share -
assuming dilution Net earnings attributable to Campbell Soup
Company
$ .45 $ 1.85 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 January 27, 2019
January 28, 2018 Percent
Change
Sales
Contributions: Meals and Beverages
$ 1,230 $ 1,214 1
% Global Biscuits and Snacks
1,243 708 76 % Campbell Fresh
239 257 (7 )% Corporate
1 1
— % Total sales
$ 2,713 $ 2,180
24 %
Earnings
Contributions: Meals and Beverages
$ 255 $ 284 (10 )%
Global Biscuits and Snacks
185 137 35 % Campbell Fresh
(14 ) (11 ) n/m Total operating
earnings
426 410 4 % Corporate
(405 ) (134 )
Restructuring charges
(2 ) (33 )
Earnings before interest and taxes
19 243 (92 )% Interest,
net
92 32 Taxes on earnings
(14 )
(74 ) Net earnings (loss)
(59 ) 285 n/m Net
loss attributable to noncontrolling interests
—
— Net earnings (loss) attributable to Campbell
Soup Company
$ (59 ) $ 285 n/m Per
share - assuming dilution Net earnings attributable to Campbell
Soup Company
$ (.20 ) $ .95 n/m
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
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF
SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
Six Months Ended January 27, 2019
January 28, 2018 Percent
Change
Sales
Contributions: Meals and Beverages
$ 2,474 $ 2,453 1
% Global Biscuits and Snacks
2,461 1,396 76 % Campbell Fresh
471 491 (4 )% Corporate
1 1
— % Total sales
$ 5,407 $ 4,341
25 %
Earnings
Contributions: Meals and Beverages
$ 549 $ 615 (11 )%
Global Biscuits and Snacks
339 254 33 % Campbell Fresh
(17 ) (17 ) — % Total operating
earnings
871 852 2 % Corporate
(481 ) (162 )
Restructuring charges
(21 ) (35 )
Earnings before interest and taxes
369 655 (44 )% Interest,
net
185 62 Taxes on earnings
49
33 Net earnings
135 560 (76 )% Net loss attributable
to noncontrolling interests
— —
Net earnings attributable to Campbell Soup Company
$
135 $ 560 (76 )% Per share - assuming dilution
Net earnings attributable to Campbell Soup Company
$
.45 $ 1.85 (76 )% 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)
January 27, 2019 January 28, 2018 Current
assets
$ 2,295 $ 1,928 Plant assets, net
3,036
2,518 Intangible assets, net
8,473 3,744 Other assets
220 146 Total assets
$ 14,024 $ 8,336
Current liabilities
$ 3,299 $ 3,012 Long-term debt
8,003 2,247 Other liabilities
1,444 1,128 Total
equity
1,278 1,949 Total liabilities and
equity
$ 14,024 $ 8,336 Total debt
$
9,457 $ 3,906 Cash and cash equivalents
$ 203
$ 196
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(millions)
Six Months Ended January 27,
2019 January 28, 2018 Cash flows from operating
activities: Net earnings
$ 135 $ 560 Adjustments to
reconcile net earnings to operating cash flow Impairment charges
360 75 Restructuring charges
21 35 Stock-based
compensation
31 32 Noncurrent income taxes
— 52
Pension and postretirement benefit income
(29 ) (32 )
Depreciation and amortization
241 161 Deferred income taxes
(40 ) (106 ) Other, net
18 18 Changes in
working capital, net of acquisition Accounts receivable
(150
) (113 ) Inventories
122 84 Prepaid assets
(2
) (25 ) Accounts payable and accrued liabilities
170
(10 ) Net payments of hedging activities
(5 ) (31 )
Other
(26 ) (40 ) Net cash provided by
operating activities
846 660
Cash flows from investing activities: Purchases of plant assets
(198 ) (132 ) Purchases of route businesses
(23 ) — Sales of route businesses
25 —
Businesses acquired, net of cash acquired
(18 ) (682
) Other, net
11 (11 ) Net cash used in
investing activities
(203 ) (825 ) Cash
flows from financing activities: Short-term borrowings
2,831
5,052 Short-term repayments
(3,274 ) (4,673 )
Long-term repayments
— (16 ) Dividends paid
(212
) (216 ) Treasury stock purchases
— (86 ) Payments
related to tax withholding for stock-based compensation
(7
) (23 ) Payments of debt issuance costs
(1
) — Net cash provided by (used in) financing
activities
(663 ) 38 Effect of
exchange rate changes on cash
(3 ) 4
Net change in cash and cash equivalents
(23 )
(123 ) Cash and cash equivalents — beginning of period
226 319 Cash and cash equivalents — end
of period
$ 203 $ 196
Reconciliation of GAAP to Non-GAAP Financial
MeasuresSecond Quarter Ended January 27, 2019
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 January 27,
2019
January 28,
2018
% Change (millions)
Net Sales,
as
Reported
Impact of
Currency
Impact of
Acquisitions
Organic
Net Sales
Net Sales,
as
Reported
Net Sales,
as
Reported
Organic
Net Sales
Meals and Beverages $ 1,230 $ 7
$ (31 ) $ 1,206 $ 1,214 1 % (1
)%
Global Biscuits and Snacks 1,243 15
(529 ) 729 708 76 % 3 %
Campbell Fresh
239 — — 239 257 (7 )% (7 )%
Corporate 1 —
— 1
1 — % — %
Total Net Sales $
2,713 $ 22
$ (560 ) $ 2,175 $
2,180 24 % — %
Six Months Ended
January 27, 2019
January 28,
2018
% Change (millions)
Net Sales,
as
Reported
Impact of
Currency
Impact of
Acquisitions
Organic
Net Sales
Net Sales,
as
Reported
Net Sales,
as
Reported
Organic
Net Sales
Meals and Beverages $ 2,474 $ 12
$ (100 ) $ 2,386 $ 2,453 1 % (3
)%
Global Biscuits and Snacks 2,461 32
(1,083 ) 1,410 1,396 76 % 1 %
Campbell
Fresh 471 — — 471 491 (4 )% (4 )%
Corporate 1 —
— 1
1 — % — %
Total Net Sales $
5,407 $ 44
$ (1,183 ) $ 4,268
$ 4,341 25 % (2 )%
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. In fiscal 2019, the
company began to include costs associated with the Snyder's-Lance
cost transformation program and integration with these initiatives.
In the second quarter of fiscal 2019, the company recorded
Restructuring charges of $2 million and implementation costs and
other related costs of $10 million in Administrative expenses, $9
million in Cost of products sold, $2 million in Marketing and
selling expenses, and $1 million in Research and development
expenses (aggregate impact of $18 million after tax, or $.06 per
share) related to these initiatives. In the six-month period of
fiscal 2019, the company recorded Restructuring charges of $21
million and implementation costs and other related costs of $23
million in Administrative expenses, $21 million in Cost of products
sold, $4 million in Marketing and selling expenses, and $1 million
in Research and development expenses (aggregate impact of $53
million after tax, or $.18 per share) related to these initiatives.
In the second quarter of fiscal 2018, the company recorded
Restructuring charges of $33 million and implementation costs and
other related costs of $26 million in Administrative expenses and
$1 million in Cost of products sold (aggregate impact of $46
million after tax, or $.15 per share) related to these initiatives.
In the six-month period of fiscal 2018, the company recorded
Restructuring charges of $35 million and implementation costs and
other related costs of $38 million in Administrative expenses and
$6 million in Cost of products sold (aggregate impact of $58
million after tax, or $.19 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
second quarter of fiscal 2019, interim impairment assessments were
performed on the intangible and tangible assets within Campbell
Fresh, which includes Garden Fresh Gourmet, Bolthouse Farms carrot
and carrot ingredients, and Bolthouse Farms refrigerated beverages
and salad dressings, as the company continues to pursue the
divestiture of these businesses. The company revised its future
outlook for earnings and cash flows for each of these businesses as
the divestiture process progressed. The company recorded
non-cash impairment charges of $104 million on the tangible assets
and $73 million on the intangible assets of Bolthouse Farms carrot
and carrot ingredients; $96 million on the intangible assets and $9
million on the tangible assets of Bolthouse Farms refrigerated
beverages and salad dressings; and $62 million on the intangible
assets and $2 million on the tangible assets of Garden Fresh
Gourmet. The aggregate impact of the impairment charges was $346
million, of which $115 million was recorded in Cost of products
sold and $231 in Other expenses / (income), ($264 million after
tax, or $.88 per share). 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. For the six-month period
of fiscal 2019, the total non-cash impairment charges recorded were
$360 million, of which $129 million was recorded in Cost of
products sold and $231 million in Other expenses / (income), ($275
million after tax, or $.91 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). 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 performance of the
business. In addition, the operating performance of the Bolthouse
Farms refrigerated beverages and salad dressings 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 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). 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. (3) In the first quarter of fiscal 2019,
the company announced its intent to divest its Campbell
International and Campbell Fresh businesses. In the second quarter
of fiscal 2019, the company incurred costs of $10 million recorded
in Administrative expenses ($8 million after tax, or $.03 per
share) associated with the planned divestitures. In the six-month
period of fiscal 2019, the company incurred costs of $12 million
recorded in Administrative expenses ($9 million after tax, or $.03
per share) associated with the planned divestitures.
(4)
In fiscal 2018 and 2019, the company reflected the impact of taxes
on the enactment of the Tax Cuts and Jobs Act that was signed into
law in December 2017. In the second quarter of fiscal 2019, the
company recorded a tax charge of $2 million ($.01 per share)
related to a transition tax on unremitted foreign earnings. In the
second quarter of fiscal 2018, the company recorded a tax benefit
of $183 million due to the remeasurement of deferred tax assets and
liabilities, and a tax charge of $59 million related to a
transition tax on unremitted foreign earnings. The net impact was a
tax benefit of $124 million ($.41 per share). 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). (5) In the six-month period
of fiscal 2018, the company incurred gains of $14 million in Other
expenses / (income) ($10 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. (6) 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.
In the second quarter of fiscal 2018, the company incurred
transaction costs of $24 million recorded in Other expenses /
(income) ($19 million after tax, or $.06 per share). 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. (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 January
27, 2019 January 28, 2018 (millions,
except per share amounts)
As
reported
Adjustments(a)
Adjusted
As
reported
Adjustments(a)
Adjusted
Adjusted
Percent
Change
Gross margin
$ 714 $ 124 $
838 $ 766 $ 1 $ 767 9 % Gross margin percentage
26.3
% 30.9 % 35.1 % 35.2 % Marketing and selling
expenses
264 (2 ) 262 228 — 228
Administrative expenses
180 (20 ) 160
165 (26 ) 139 Research and development expenses
23 (1
) 22 27 — 27 Other expenses / (income)
226
(231 ) (5 ) 70 (99 ) (29 )
Restructuring charges
2 (2
) — 33 (33 )
— Earnings before interest and taxes
$
19 $ 380 $ 399
$ 243 $ 159 $ 402 (1 )% Interest, net
92 — 92
32 — 32 Earnings
(loss) before taxes
$ (73 ) $
380 $ 307 $ 211 $ 159
$ 370 Taxes
(14 ) 88 74
(74 ) 144 70 Effective income tax rate
19.2 %
24.1 % (35.1 )%
18.9 % Net earnings (loss) attributable
to Campbell Soup Company
$ (59 ) $
292 $ 233 $ 285 $ 15
$ 300 (22 )% Diluted net earnings per share
attributable to Campbell Soup Company
$ (.20 )
$ .97 $ .77 $ .95
$ .05 $ 1.00 (23 )% (a)See following tables for
additional information.
Three Months
Ended January 27, 2019 (millions, except per share
amounts)
Restructuring
charges,
implementation
costs and other
related costs
(1)
Impairment
charges
(2)
Costs
associated
with planned
divestitures
(3)
Tax
reform
(4)
Adjustments Gross margin
$ 9
$ 115 $ — $ — $
124 Marketing and selling expenses
(2 )
— — — (2 ) Administrative
expenses
(10 ) — (10 ) —
(20 ) Research and development expenses
(1
) — — — (1 ) Other
expenses / (income)
— (231 ) — —
(231 ) Restructuring charges
(2
) — —
— (2 ) Earnings before interest
and taxes
$ 24 $ 346
$ 10 $ — $
380 Interest, net
—
— — —
— Earnings before taxes
$ 24
$ 346 $ 10
$ — $ 380 Taxes
6 82 2
(2 ) 88 Net earnings
attributable to Campbell Soup Company
$ 18
$ 264 $ 8 $
2 $ 292 Diluted net earnings per
share attributable to Campbell Soup Company*
$ .06
$ .88 $ .03
$ .01 $ .97 *The sum of
individual per share amounts may not add due to rounding.
Three Months Ended January 28, 2018 (millions,
except per share amounts)
Restructuring
charges,
implementation
costs and other
related costs
(1)
Impairment
charges
(2)
Tax
reform
(4)
Transaction
costs
(6)
Adjustments Gross margin $ 1 $ — $ — $ — $ 1 Administrative
expenses (26 ) — — — (26 ) Other expenses / (income) — (75 ) — (24
) (99 ) Restructuring charges (33 ) — —
— (33 ) Earnings before interest and
taxes $ 60 $ 75 $ — $ 24 $ 159
Interest, net — — —
— — Earnings before taxes $ 60 $
75 $ — $ 24 $ 159 Taxes 14
1 124 5 144
Net earnings attributable to Campbell Soup Company $ 46
$ 74 $ (124 ) $ 19 $ 15 Diluted net
earnings per share attributable to Campbell Soup Company $ .15
$ .25 $ (.41 ) $ .06 $ .05
Six Months Ended
January 27, 2019 January 28, 2018 (millions, except
per share amounts)
As
reported
Adjustments(a)
Adjusted
As
reported
Adjustments(a) Adjusted
Adjusted
Percent
Change
Gross margin
$ 1,538 $ 150 $
1,688 $ 1,549 $ 6 $ 1,555 9 % Gross margin percentage
28.4 % 31.2 % 35.7 % 35.8 % Marketing
and selling expenses
512 (4 ) 508 447 —
447 Administrative expenses
356 (35 )
321 314 (38 ) 276 Research and development expenses
50 (1 ) 49 57 — 57 Other expenses /
(income)
230 (231 ) (1 ) 41 (85
) (44 ) Restructuring charges
21
(21 ) — 35
(35 ) — Earnings before interest and taxes
$
369 $ 442 $ 811
$ 655 $ 164 $ 819 (1 )% Interest, net
185 — 185
62 — 62 Earnings
before taxes
$ 184 $ 442
$ 626 $ 593 $ 164 $ 757
Taxes
49 103 152 33 147 180 Effective income
tax rate
26.6 %
24.3 % 5.6 % 23.8
% Net earnings attributable to Campbell Soup Company
$
135 $ 339 $ 474
$ 560 $ 17 $ 577 (18 )% Diluted net
earnings per share attributable to Campbell Soup Company
$
.45 $ 1.12 $ 1.57
$ 1.85 $ .06 $ 1.91 (18 )% (a)See
following tables for additional information.
Six
Months Ended January 27, 2019 (millions, except per
share amounts)
Restructuring
charges,
implementation
costs and other
related costs
(1)
Impairment
charges
(2)
Costs
associated
with planned
divestitures
(3)
Tax
reform
(4)
Adjustments Gross margin
$ 21 $
129 $ — $ — $ 150
Marketing and selling expenses
(4 ) — —
— (4 ) Administrative expenses
(23
) — (12 ) — (35 )
Research and development expenses
(1 ) —
— — (1 ) Other expenses / (income)
— (231 ) — — (231
) Restructuring charges
(21 )
— — —
(21 ) Earnings before interest and taxes
$ 70 $ 360 $
12 $ — $ 442
Interest, net
— —
— — —
Earnings before taxes
$ 70 $
360 $ 12 $ —
$ 442 Taxes
17
85 3 (2
) 103 Net earnings attributable to
Campbell Soup Company
$ 53 $ 275
$ 9 $ 2 $
339 Diluted net earnings per share attributable to
Campbell Soup Company*
$ .18 $
.91 $ .03 $ .01
$ 1.12 *The sum of individual per share
amounts may not add due to rounding.
Six Months Ended January 28, 2018 (millions, except
per share amounts)
Restructuring
charges,
implementation
costs and other
related costs
(1)
Impairment
charges
(2)
Tax
reform
(4)
Mark-to-
market
(5)
Transaction
costs
(6)
Adjustments Gross margin $ 6 $ — $ — $ — $ — $ 6
Administrative expenses (38 ) — — — — (38 ) Other expenses /
(income) — (75 ) — 14 (24 ) (85 ) Restructuring charges (35
) — — — —
(35 ) Earnings before interest and taxes $ 79 $ 75
$ — $ (14 ) $ 24 $ 164 Interest, net
— — — —
— — Earnings before taxes $ 79 $
75 $ — $ (14 ) $ 24 $ 164 Taxes
21 1 124 (4 ) 5
147 Net earnings attributable to Campbell Soup
Company $ 58 $ 74 $ (124 ) $ (10 ) $ 19 $ 17
Diluted net earnings per share attributable to Campbell Soup
Company $ .19 $ .25 $ (.41 ) $ (.03 ) $ .06 $
.06
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: Impairment charges
(2)
11 Add: Transaction and integration costs (6)
42 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 Add: Impairment charges (2)
748 Deduct: Total pension and postretirement benefit
mark-to-market and curtailment adjustments (5)
(136 )
Add: Transaction and integration costs (6)
120 Add: Claim
settlement (7)
22 Adjusted Earnings before
interest and taxes $ 1,408 Interest,
net, as reported $ 197 Add: Transaction and
integration costs (6)
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
Add: Tax benefit from impairment charges (2)
136 Add: Tax
benefit from tax reform (4)
126 Deduct: Tax expense from
total pension and postretirement benefit mark-to-market and
curtailment adjustments (5)
(33 ) Add: Tax benefit
from transaction and integration costs (6)
29 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 Add: Net adjustment from impairment charges (2)
612 Deduct: Net adjustment from tax reform (4)
(126
) Deduct: Net adjustment from total pension and
postretirement benefit mark-to-market and curtailment adjustments
(5)
(103 ) Add: Net adjustment from transaction and
integration costs (6)
73 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 Add: Net adjustment from
impairment charges (2)
2.03 Deduct: Net adjustment from tax
reform (4)
(.42 ) Deduct: Net adjustment from total
pension and postretirement benefit mark-to-market and curtailment
adjustments (5)
(.34 ) Add: Net adjustment from
transaction and integration costs (6)
.24 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/20190227005151/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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