- Earnings Per Share (EPS) from Continuing Operations of $0.56
Decreased 7% Primarily Reflecting Charges Associated with Sale of
the European Chips Business; Adjusted EPS of $0.78 Increased
10%
- Net Sales and Organic Sales Decreased 1%
- Campbell Updates Fiscal 2020 Net Sales Guidance Reflecting Sale
of European Chips Business; Organic Sales, Adjusted EBIT and
Adjusted EPS Outlook Remains Unchanged
Campbell Soup Company (NYSE:CPB) today reported its
first-quarter results for fiscal 2020.
Three
Months Ended
Continuing Operations ($ in
millions, except per share)
Oct. 27,
2019
Oct. 28,
2018
%
Change
Net Sales
As Reported (GAAP)
$2,183
$2,202
(1)%
Organic
(1)%
Earnings Before Interest and Taxes
(EBIT)
As Reported (GAAP)
$317
$326
(3)%
Adjusted
$392
$371
6%
Diluted Earnings Per Share
As Reported (GAAP)
$0.56
$0.60
(7)%
Adjusted
$0.78
$0.71
10%
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, “Our
performance to start the new fiscal year was largely in-line with
our expectations and builds upon the solid foundation we set in
fiscal 2019. I was especially pleased that our in-market
consumption grew more than 1% in measured channels. Additionally,
we grew soup share for the first time in 10 quarters, one of the
early signs of progress in our three-year journey to revitalize
this business. Strong in-market consumption on U.S. soup was offset
by the timing of shipments related to the Thanksgiving holiday. In
Snacks, we delivered another quarter of strong marketplace
performance with 8 of 9 power brands growing or holding share,
while we continued to make steady progress integrating the business
and delivering cost synergies.”
Items Impacting Comparability for Continuing
Operations
The table below presents a summary of items impacting
comparability in each period. A detailed reconciliation of the
reported (GAAP) financial information to the adjusted information
is included at the end of this news release.
Diluted Earnings per
Share
Three Months Ended
Oct. 27, 2019
Oct. 28, 2018
As Reported (GAAP)
$0.56
$0.60
Restructuring charges, implementation
costs and other related costs associated with cost savings
initiatives
$0.03
$0.11
Charges associated with sale of European
chips business
$0.20
-
Adjusted
$0.78*
$0.71
*Numbers do not add due to rounding.
First-Quarter Results from Continuing Operations
Reported and organic sales decreased 1% driven by declines in
Meals & Beverages offset partly by gains in Snacks.
Gross margin increased from 33.0% to 33.8%. Excluding items
impacting comparability in the prior year, adjusted gross margin
increased 0.3 percentage points driven primarily by productivity
improvements, the benefits from cost savings initiatives, and the
benefit of recent pricing actions, offset partly by cost inflation
and higher promotional spending.
Marketing and selling expenses decreased 2% to $206 million.
Excluding items impacting comparability in the prior year, adjusted
marketing and selling expenses decreased 1% as increased
investments in advertising and consumer promotion expenses were
more than offset by the benefits of cost savings initiatives.
Administrative expenses decreased 9% to $134 million. Excluding
items impacting comparability, adjusted administrative expenses
decreased 7%, reflecting the benefits of cost savings
initiatives.
Other expenses were $56 million. Excluding items impacting
comparability in the current year, adjusted other income was $8
million compared to $0 in the prior-year period. The year-over-year
change in adjusted other income reflects lower losses on
investments and higher pension and postretirement benefit
income.
As reported EBIT decreased 3% to $317 million. Excluding items
impacting comparability, adjusted EBIT increased 6% to $392 million
as sales declines were more than offset by lower adjusted
administrative expenses, higher adjusted other income and improved
gross margin performance.
Net interest expense was $80 million compared to $90 million in
the prior year reflecting lower levels of debt. The tax rate was
28.7% as compared to 23.7% in the prior year. Excluding items
impacting comparability, the adjusted tax rate increased 0.2
percentage points to 24.0%.
The company reported EPS of $0.56. Excluding items impacting
comparability, adjusted EPS increased 10% to $0.78 per share,
reflecting the increase in adjusted EBIT and lower interest
expense.
Cash flow from operations decreased to $182 million from $231
million a year ago primarily related to incentive compensation.
During the first quarter of fiscal 2020, the company paid $107
million of cash dividends, or the equivalent of $0.35 per share, to
common stock shareholders.
Campbell Updates Fiscal 2020 Net Sales Guidance
On Oct. 11, 2019, Campbell completed the sale of the European
chips business. The results of this business up through the time of
sale have been reported as continuing operations within the Snacks
segment. As a result, the outlook for fiscal 2020 has been updated
to reflect a 2-point negative impact on net sales for the remainder
of the year. Fiscal 2020 comprises 53 weeks, one additional week
compared to fiscal 2019. The benefit of the 53rd week, consistent
with the prior fiscal 2020 guidance, is estimated to be worth 2
points of net sales, adjusted EBIT and adjusted EPS. The outlook
for organic net sales remains unchanged, as it excludes the
negative impact from the sale of the European chips business, along
with the estimated contribution of the 53rd week. Expected net
proceeds of approximately $3 billion from the divestitures of
Campbell Fresh, Campbell International and the European chips
business are being used to reduce debt. This guidance takes into
account the expected impact of the paydown on the company’s
interest expense in fiscal 2020.
As a result, the fiscal 2020 outlook for organic net sales,
adjusted EBIT and adjusted EPS for continuing operations, as shown
in the table below, remains unchanged from guidance provided on
Aug. 30, 2019.
Continuing Operations
2019
Results
Previous
2020
Guidance
Impact from
Sale of European
Chips Business
Updated
2020
Guidance
($ in millions, except per share)
Net Sales
$8,107
+1 to +3%
-2%
-1 to +1%
Organic Net Sales
No Impact
-1 to +1%
Adjusted EBIT
$1,266*
+2 to +4%
No Impact
+2 to +4%
Adjusted EPS
$2.30*
+9 to +11%
$2.50 to $2.55
No Impact
+9 to +11%
$2.50 to $2.55
* 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 2020 guidance as certain amounts 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.
Cost Savings Program from Continuing Operations
In the first quarter of fiscal 2020, Campbell achieved $45
million in savings under its multi-year cost savings program,
inclusive of Snyder’s-Lance synergies, bringing total
program-to-date savings to $605 million. As previously announced,
the company expects to deliver cumulative annualized savings of
$850 million by the end of fiscal 2022.
Segment Operating Review
An analysis of net sales and operating earnings by reportable
segment follows:
Three
Months Ended Oct. 27, 2019
($ in millions)
Meals & Beverages
Snacks
Total
Net Sales, as Reported
$1,194
$989
$2,183
Volume and Mix
(2)%
3%
-%
Price and Sales Allowances
1%
-%
1%
Promotional Spending
(2)%
(1)%
(1)%
Organic Net Sales
(3)%
2%
(1)%*
Currency
-%
-%
-%
% Change vs. Prior Year
(3)%
2%
(1)%
Segment Operating Earnings
$282
$125
% Change vs. Prior Year
(3)%
-%
* Numbers do not add due to rounding.
Note: A detailed reconciliation of the
reported (GAAP) net sales to organic net sales is included at the
end of this news release.
Meals & Beverages
Sales decreased 3% to $1.2 billion driven primarily by the
timing of U.S. soup shipments, as well as declines in foodservice,
offset partly by gains in Prego pasta sauces. Sales of U.S. soup
decreased 3% with shipments lagging in-market consumption by 2
points, which were negatively impacted by movements in retailer
inventory levels in both broth and condensed soups related to the
timing of the Thanksgiving holiday. Sales of ready-to-serve soups
were comparable to the prior year.
Segment operating earnings decreased 3% to $282 million. The
decrease was driven primarily by cost inflation and sales declines
offset partly by the benefits of cost savings initiatives and
supply chain productivity programs.
Snacks
Sales increased 2% to $1.0 billion driven primarily by gains in
Goldfish crackers, fresh bakery products, and Pepperidge Farm
cookies, as well as gains in Cape Cod and Kettle Brand potato
chips, offset partly by declines in the partner brands within the
Snyder’s-Lance portfolio as we continue our planned prioritization
of select partners to reduce complexity and improve execution.
Segment operating earnings of $125 million were comparable to
the prior year as the benefits of cost savings initiatives and
supply chain productivity programs were offset by cost inflation
and increased marketing support.
Corporate
Corporate expenses included charges related to the sale of the
European chips business of $64 million and costs related to cost
savings initiatives of $8 million. Corporate expenses in the first
quarter of fiscal 2019 included costs related to cost savings
initiatives of $27 million. The remaining decrease in expenses
primarily reflects gains on open commodity contracts, lower losses
on investments, lapping costs in the prior year related to the 2019
proxy contest, and higher pension and postretirement benefit
income.
Discontinued Operations
The results for Campbell Fresh and Campbell International are
reported as discontinued operations. The company completed the
divestiture of the Campbell Fresh segment in fiscal 2019 and the
divestiture of Kelsen Group on Sept. 23, 2019. The company expects
to close the sale of Arnott’s and certain of Campbell’s
international operations in the second quarter of fiscal 2020. The
company reported a loss from discontinued operations for fiscal
2020 of $0.01 per share compared to a gain of $0.05 per share in
the prior year. Excluding items impacting comparability, the
adjusted earnings from discontinued operations were $0.08 per share
compared to $0.09 per share in the prior year.
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 (703) 639-1316.
The access code is 9954878. Access to a live webcast of the call
with accompanying slides, as well as a replay of the call, will be
available at investor.campbellsoupcompany.com. A recording of the
call will also be available until midnight on Dec. 18, 2019, at +1
(404) 537-3406. The access code for the replay is 9954878.
Reportable Segments
Campbell Soup Company earnings results are reported as
follows:
Meals & Beverages includes the
retail and foodservice 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 Foods
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 baby food and
snacks; V8 juices and beverages; and, Campbell’s tomato juice.
Snacks includes Pepperidge Farm
cookies, crackers, fresh bakery and frozen products in U.S. retail,
including Milano cookies and Goldfish crackers, as well as Snyder’s
of Hanover pretzels, Lance sandwich crackers, Cape Cod and Kettle
Brand potato chips, Late July snacks, Snack Factory Pretzel Crisps,
Pop Secret popcorn, Emerald nuts, and other snacking products in
the U.S. and Canada. Beginning in fiscal 2020, the segment also
includes the retail business in Latin America. Prior to fiscal
2020, the business in Latin America was managed as part of the
Meals & Beverages segment. Prior-period segment results have
been adjusted retrospectively to reflect this change. On Oct. 11,
2019, Campbell completed the sale of the European chips business.
The results for the European chips business up through the time of
sale are included as part of the Snacks segment.
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 FTSE4Good Index. 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 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 its strategy, including growing sales in snacks and
maintaining its market share position in soup; (2) the impact of
strong competitive responses to the company’s efforts to leverage
its brand power with product innovation, promotional programs and
new advertising; (3) the risks associated with trade and consumer
acceptance of product improvements, shelving initiatives, new
products and pricing and promotional strategies; (4) the company’s
ability to complete and to realize the projected benefits of
planned divestitures and other business portfolio changes; (5) the
company’s indebtedness and ability to pay such indebtedness; (6)
the ability to realize projected cost savings and benefits from
cost savings initiatives and the integration of recent
acquisitions; (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) changes in
consumer demand for the company’s products and favorable perception
of the company’s brands; (10) changing inventory management
practices by certain of the company’s key customers; (11) 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; (12)
product quality and safety issues, including recalls and product
liabilities; (13) the costs, disruption and diversion of
management’s attention associated with activist investors; (14) the
uncertainties of litigation and regulatory actions against the
company; (15) 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; (16) a material
failure in or breach of the company’s information technology
systems; (17) impairment to goodwill or other intangible assets;
(18) the company’s ability to protect its intellectual property
rights; (19) increased liabilities and costs related to the
company’s defined benefit pension plans; (20) the company’s ability
to attract and retain key talent; (21) changes in currency exchange
rates, tax rates, interest rates, debt and equity markets,
inflation rates, economic conditions, law, regulation and other
external factors; (22) 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 (23) other
factors described in the company’s most recent Form 10-K and
subsequent Securities and Exchange Commission filings. The company
disclaims any obligation or intent to update the forward-looking
statements in order to reflect events or circumstances after the
date of this release.
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF
EARNINGS (unaudited)
(millions, except per share
amounts)
Three Months Ended
October 27, 2019
October 28, 2018
Net sales
$
2,183
$
2,202
Costs and expenses
Cost of products sold
1,445
1,476
Marketing and selling expenses
206
211
Administrative expenses
134
148
Research and development expenses
22
23
Other expenses / (income)
56
—
Restructuring charges
3
18
Total costs and expenses
1,866
1,876
Earnings before interest and taxes
317
326
Interest, net
80
90
Earnings before taxes
237
236
Taxes on earnings
68
56
Earnings from continuing operations
169
180
Earnings (loss) from discontinued
operations
(3)
14
Net earnings
166
194
Net loss attributable to noncontrolling
interests
—
—
Net earnings attributable to Campbell Soup
Company
$
166
$
194
Per share - basic
Earnings from continuing operations
attributable to Campbell Soup Company
$
.56
$
.60
Earnings (loss) from discontinued
operations
(.01)
.05
Net earnings attributable to Campbell Soup
Company*
$
.55
$
.64
Dividends
$
.35
$
.35
Weighted average shares outstanding -
basic
301
301
Per share - assuming dilution
Earnings from continuing operations
attributable to Campbell Soup Company
$
.56
$
.60
Earnings (loss) from discontinued
operations
(.01)
.05
Net earnings attributable to Campbell Soup
Company*
$
.55
$
.64
Weighted average shares outstanding -
assuming dilution
303
302
*The sum of individual per share amounts
may not add due to rounding.
CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL
SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share
amounts)
Three Months Ended
October 27, 2019
October 28, 2018
Percent
Change
Sales
Contributions:
Meals & Beverages
$
1,194
$
1,229
(3)%
Snacks
989
973
2%
Total sales
$
2,183
$
2,202
(1)%
Earnings
Contributions:
Meals & Beverages
$
282
$
290
(3)%
Snacks
125
125
—%
Total operating earnings
407
415
(2)%
Corporate
(87)
(71)
Restructuring charges
(3)
(18)
Earnings before interest and taxes
317
326
(3)%
Interest, net
80
90
Taxes on earnings
68
56
Earnings from continuing operations
169
180
Earnings (loss) from discontinued
operations
(3)
14
Net earnings
166
194
(14)%
Net loss attributable to noncontrolling
interests
—
—
Net earnings attributable to Campbell Soup
Company
$
166
$
194
(14)%
Per share - assuming dilution
Earnings from continuing operations
attributable to Campbell Soup Company
$
.56
$
.60
Earnings (loss) from discontinued
operations
(.01)
.05
Net earnings attributable to Campbell Soup
Company*
$
.55
$
.64
(14)%
*The sum of individual per share amounts
may not add due to rounding.
Beginning in fiscal 2020, the business in Latin America is
managed as part of the Snacks segment. In fiscal 2019, the business
in Latin America was managed as part of the Meals & Beverages
segment.
On June 16, 2019, the company sold its Bolthouse Farms business.
In the third quarter of fiscal 2019, the company also sold its
refrigerated soup plant and its Garden Fresh Gourmet business.
Beginning in the third quarter of fiscal 2019, the results of these
businesses were reported as discontinued operations. The businesses
were historically included in the Campbell Fresh segment. A portion
of the U.S. refrigerated soup business was retained and is reported
as part of foodservice in Meals & Beverages.
On September 23, 2019, the company sold the Kelsen Group; and on
August 1, 2019, the company signed a definitive agreement for the
sale of its Arnott's business and certain other international
operations. Beginning in the fourth quarter of fiscal 2019, the
results of these businesses were reported as discontinued
operations. The businesses were historically included in the Snacks
segment.
Prior periods have been adjusted retrospectively to reflect
these changes.
CAMPBELL SOUP COMPANY
CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited)
(millions)
October 27, 2019
October 28, 2018
Current assets
$
1,738
$
1,843
Current assets of discontinued
operations
315
678
Plant assets, net
2,352
2,437
Intangible assets, net
7,371
7,467
Other assets
390
191
Noncurrent assets of discontinued
operations
944
1,971
Total assets
$
13,110
$
14,587
Current liabilities
$
3,252
$
3,029
Current liabilities of discontinued
operations
183
633
Long-term debt
6,706
7,994
Other liabilities
1,679
1,454
Noncurrent liabilities of discontinued
operations
41
62
Total equity
1,249
1,415
Total liabilities and equity
$
13,110
$
14,587
Total debt*
$
8,344
$
9,846
Total cash and cash equivalents*
$
176
$
205
*Includes discontinued operations.
On August 1, 2019, the company signed a definitive agreement for
the sale of its Arnott's business and certain other international
operations. The assets and liabilities of these businesses were
reported as assets and liabilities of discontinued operations as of
October 27, 2019, and October 28, 2018.
On September 23, 2019, the company sold the Kelsen Group. On
June 16, 2019, the company sold its Bolthouse Farms business. In
the third quarter of fiscal 2019, the company also sold its
refrigerated soup plant and its Garden Fresh Gourmet business. The
assets and liabilities of these businesses were reported as assets
and liabilities of discontinued operations as of October 28,
2018.
CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited)
(millions)
Three Months Ended
October 27, 2019
October 28, 2018
Cash flows from operating activities:
Net earnings
$
166
$
194
Adjustments to reconcile net earnings to
operating cash flow
Impairment charges
—
14
Restructuring charges
3
19
Stock-based compensation
14
14
Pension and postretirement benefit
income
(18)
(15)
Depreciation and amortization
81
122
Deferred income taxes
(9)
17
Losses on sales of businesses
104
—
Other
28
12
Changes in working capital, net of
divestitures
Accounts receivable
(174)
(223)
Inventories
(37)
(33)
Prepaid assets
6
(10)
Accounts payable and accrued
liabilities
32
130
Other
(14)
(10)
Net cash provided by operating
activities
182
231
Cash flows from investing activities:
Purchases of plant assets
(98)
(111)
Purchases of route businesses
(3)
(20)
Sales of route businesses
2
21
Sales of businesses, net of cash
divested
368
—
Other
—
10
Net cash provided by (used in) investing
activities
269
(100)
Cash flows from financing activities:
Short-term borrowings
2,508
1,710
Short-term repayments
(2,447)
(1,745)
Long-term repayments
(399)
—
Dividends paid
(107)
(107)
Treasury stock issuances
1
—
Payments related to tax withholding for
stock-based compensation
(9)
(5)
Payments of debt issuance costs
—
(1)
Net cash used in financing activities
(453)
(148)
Effect of exchange rate changes on
cash
(1)
(4)
Net change in cash and cash
equivalents
(3)
(21)
Cash and cash equivalents — beginning of
period
31
49
Cash balance of discontinued operations —
beginning of period
148
177
Cash balance of discontinued operations —
end of period
(115)
(120)
Cash and cash equivalents — end of
period
$
61
$
85
Reconciliation of GAAP to Non-GAAP Financial
Measures First Quarter Ended October 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. Beginning in the third
quarter of fiscal 2019, the results of the Campbell Fresh segment
were reported as discontinued operations. Beginning in the fourth
quarter of fiscal 2019, the results of the Kelsen Group, Arnott's
and certain other international operations (Campbell
International), which represented the former international biscuits
and snacks operating segment, are reported as discontinued
operations. On October 11, 2019, the company sold its European
chips business. The results of the business through the date of
sale are reflected in continuing operations within the Snacks
segment.
Organic Net Sales
Organic net sales are net sales excluding the impact of
currency, acquisitions, divestitures, and the additional week in
fiscal 2020. Management believes that excluding these items, which
are not part of the ongoing business, improves the comparability of
year-to-year results. A reconciliation of net sales as reported to
organic net sales follows.
Three Months Ended
October 27, 2019
October 28, 2018
% Change
(millions)
Net Sales,
as
Reported
Impact of
Currency
Organic Net
Sales
Net Sales,
as
Reported
Net Sales,
as
Reported
Organic Net
Sales
Meals & Beverages
$
1,194
$
2
$
1,196
$
1,229
(3)%
(3)%
Snacks
989
1
990
973
2%
2%
Total Net Sales
$
2,183
$
3
$
2,186
$
2,202
(1)%
(1)%
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:
Continuing Operations
(1)
The company has implemented several cost
savings initiatives in recent years.
In the first quarter of fiscal 2020, the
company recorded Restructuring charges of $3 million and
implementation costs and other related costs of $8 million in
Administrative expenses (aggregate impact of $8 million after tax,
or $.03 per share) related to these initiatives. In the first
quarter of fiscal 2019, the company recorded Restructuring charges
of $18 million and implementation costs and other related costs of
$13 million in Administrative expenses, $12 million in Cost of
products sold, and $2 million in Marketing and selling expenses
(aggregate impact of $34 million after tax, or $.11 per share)
related to these initiatives. For the year ended July 28, 2019, the
company recorded Restructuring charges of $31 million and
implementation costs and other related costs of $62 million in
Administrative expenses, $18 million in Cost of products sold, $7
million in Marketing and selling expenses, and $3 million in
Research and development expenses (aggregate impact of $92 million
after tax, or $.30 per share) related to these initiatives.
(2)
In the first quarter of fiscal 2020, the
company recorded a loss in Other expenses / (income) of $64 million
($60 million after tax, or $.20 per share) on the sale of its
European chips business.
(3)
For the year ended July 28, 2019, the
company recognized a pre-tax pension settlement charge in Other
expenses / (income) of $28 million ($22 million after tax, or $.07
per share) associated with a U.S. pension plan. The settlement
resulted from the level of lump sum distributions from the plan's
assets in 2019.
(4)
For the year ended July 28, 2019, the
company performed an assessment on the assets within the European
chips business and recorded a non-cash impairment charge of $16
million ($13 million after tax, or $.04 per share) on intangible
assets in Other expenses / (income).
(5)
In fiscal 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. For the year ended July 28,
2019, the company recorded a tax charge of $2 million ($.01 per
share) related to a transition tax on unremitted foreign
earnings.
(6)
For the year ended July 28, 2019, the
company incurred losses of $122 million in Other expenses /
(income) ($93 million after tax, or $.31 per share) associated with
mark-to-market adjustments for defined benefit pension and
postretirement plans.
Discontinued Operations
(1)
In the first quarter of fiscal 2019, the
company recorded a charge of $1 million pre tax and after tax
related to the cost savings initiatives.
(2)
In the first quarter of fiscal 2020, the
company incurred charges of $51 million ($27 million after tax, or
$.09 per share) associated with the sale of the Kelsen Group and
the planned divestiture of the Arnott's business and certain other
international operations.
For the year ended July 28, 2019, the
company incurred pre-tax expenses of $32 million associated with
the sale process of the businesses in Campbell Fresh, including
transaction costs. In addition, the company recorded tax expense of
$29 million as deferred tax assets on Bolthouse Farms were not
realizable. The aggregate impact was $51 million after tax, or $.17
per share. For the year ended July 28, 2019, the company also
incurred costs of $12 million ($10 million after tax, or $.03 per
share) associated with the planned divestiture of Campbell
International. The total aggregate impact was $61 million after
tax, or $.20 per share.
(4)
In the first quarter of fiscal 2019, the
company recorded a non-cash impairment charge of $14 million ($11
million after tax, or $.04 per share) on its U.S. refrigerated soup
plant assets.
In the second quarter of fiscal 2019,
interim impairment assessments were performed on the intangible and
tangible assets within Campbell Fresh, which included Garden Fresh
Gourmet, Bolthouse Farms carrot and carrot ingredients, and
Bolthouse Farms refrigerated beverages and salad dressings, as the
company continued 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 ($264 million after tax, or
$.88 per share).
In the fourth quarter of fiscal 2019, as
part of the company's annual review of intangible assets, the
company recognized an impairment charge of $7 million on a
trademark and $10 million on goodwill in Kelsen due to a lower
long-term outlook for sales and the pending sale of the business.
The aggregate impact was $17 million ($12 million after tax, or
$.04 per share).
For the year ended July 28, 2019, the
total non-cash impairment charges recorded were $377 million ($287
million after tax, or $.95 per share).
(6)
For the year ended July 28, 2019, the
company incurred losses of $12 million ($9 million after tax, or
$.03 per share) associated with mark-to-market adjustments for
defined pension plans.
The following tables reconcile financial information, presented
in accordance with GAAP, to financial information excluding certain
items:
Three Months Ended
October 27, 2019
October 28, 2018
(millions, except per share amounts)
As
reported
Adjustments(a)
Adjusted
As
reported
Adjustments(a)
Adjusted
Adjusted
Percent
Change
Gross margin
$
738
$
—
$
738
$
726
$
12
$
738
—%
Gross margin percentage
33.8%
33.8%
33.0%
33.5%
Marketing and selling expenses
$
206
$
—
$
206
$
211
$
(2)
$
209
Administrative expenses
$
134
$
(8)
$
126
$
148
$
(13)
$
135
Other expenses / (income)
$
56
$
(64)
$
(8)
$
—
$
—
$
—
Restructuring charges
$
3
$
(3)
$
—
$
18
$
(18)
$
—
Earnings before interest and taxes
$
317
$
75
$
392
$
326
$
45
$
371
6%
Interest, net
80
—
80
90
—
90
Earnings before taxes
$
237
$
75
$
312
$
236
$
45
$
281
Taxes
68
7
75
56
11
67
Effective income tax rate
28.7%
24.0%
23.7%
23.8%
Earnings from continuing operations
$
169
$
68
$
237
$
180
$
34
$
214
11%
Earnings (loss) from discontinued
operations
(3)
27
24
14
12
26
(8)%
Net earnings attributable to Campbell Soup
Company
$
166
$
95
$
261
$
194
$
46
$
240
9%
Diluted earnings per share - continuing
operations attributable to Campbell Soup Company
$
.56
$
.22
$
.78
$
.60
$
.11
$
.71
10%
Diluted earnings (loss) per share -
discontinued operations
(.01)
.09
.08
.05
.04
.09
(11)%
Diluted net earnings per share
attributable to Campbell Soup Company*
$
.55
$
.31
$
.86
$
.64
$
.15
$
.79
9%
(a)See following tables for additional
information.
* The sum of individual per share amounts
may not add due to rounding.
Three Months Ended
October 27, 2019
(millions, except per share amounts)
Restructuring
charges,
implementation
costs and other
related costs
(1)
Charges
associated
with
divestitures
(2)
Adjustments
Administrative expenses
$
(8)
$
—
$
(8)
Other expenses / (income)
—
(64)
(64)
Restructuring charges
(3)
—
(3)
Earnings before interest and taxes
$
11
$
64
$
75
Interest, net
—
—
—
Earnings before taxes
$
11
$
64
$
75
Taxes
3
4
7
Earnings from continuing operations
$
8
$
60
$
68
Earnings from discontinued operations
—
27
27
Net earnings attributable to Campbell Soup
Company
$
8
$
87
$
95
Diluted earnings per share - continuing
operations attributable to Campbell Soup Company*
$
.03
$
.20
$
.22
Diluted earnings per share - discontinued
operations
—
.09
.09
Diluted net earnings per share
attributable to Campbell Soup Company*
$
.03
$
.29
$
.31
* The sum of individual per share amounts
may not add due to rounding.
Three Months Ended
October 28, 2018
(millions, except per share amounts)
Restructuring
charges,
implementation
costs and other
related costs
(1)
Impairment
charges
(4)
Adjustments
Gross margin
$
12
$
—
$
12
Marketing and selling expenses
(2)
—
(2)
Administrative expenses
(13)
—
(13)
Restructuring charges
(18)
—
(18)
Earnings before interest and taxes
$
45
$
—
$
45
Interest, net
—
—
—
Earnings before taxes
$
45
$
—
$
45
Taxes
11
—
11
Earnings from continuing operations
$
34
$
—
$
34
Earnings from discontinued operations
1
11
12
Net earnings attributable to Campbell Soup
Company
$
35
$
11
$
46
Diluted earnings per share - continuing
operations attributable to Campbell Soup Company
$
.11
$
—
$
.11
Diluted earnings per share - discontinued
operations
—
.04
.04
Diluted net earnings per share
attributable to Campbell Soup Company*
$
.12
$
.04
$
.15
*The sum of individual per share amounts
may not add due to rounding.
(millions, except per share
amounts)
Year Ended
July 28, 2019
Gross margin, as reported
$
2,693
Add: Restructuring charges, implementation
costs and other related costs (1)
18
Adjusted Gross margin
$
2,711
Adjusted Gross margin
percentage
33.4%
Earnings before interest and taxes, as
reported
$
979
Add: Restructuring charges, implementation
costs and other related costs (1)
121
Add: Pension settlement (3)
28
Add: Impairment charges (4)
16
Add: Pension and postretirement benefit
mark-to-market adjustments (6)
122
Adjusted Earnings before interest and
taxes
$
1,266
Interest, net, as reported
$
354
Adjusted Earnings before taxes
$
912
Taxes on earnings, as reported
$
151
Add: Tax benefit from restructuring
charges, implementation costs and other related costs (1)
29
Add: Tax benefit from pension settlement
(3)
6
Add: Tax benefit from impairment charges
(4)
3
Deduct: Tax expense from tax reform
(5)
(2)
Add: Tax benefit from pension and
postretirement benefit mark-to-market adjustments (6)
29
Adjusted Taxes on earnings
$
216
Adjusted effective income tax
rate
23.7%
Earnings from continuing operations, as
reported
$
474
Add: Net adjustment from restructuring
charges, implementation costs and other related costs (1)
92
Add: Net adjustment from pension
settlement (3)
22
Add: Net adjustment from impairment
charges (4)
13
Add: Net adjustment from tax reform
(5)
2
Add: Net adjustment from total pension and
postretirement benefit mark-to-market adjustments (6)
93
Adjusted Earnings from continuing
operations
$
696
Loss from discontinued operations, as
reported
$
(263)
Add: Net adjustment from charges
associated with divestitures (2)
61
Add: Net adjustment from impairment
charges (4)
287
Add: Net adjustment from total pension
benefit mark-to-market adjustments (6)
9
Adjusted Earnings from discontinued
operations
$
94
Adjusted Net earnings attributable to
Campbell Soup Company
$
790
Diluted earnings per share - continuing
operations attributable to Campbell Soup Company, as
reported
$
1.57
Add: Net adjustment from restructuring
charges, implementation costs and other related costs (1)
.30
Add: Net adjustment from pension
settlement (3)
.07
Add: Net adjustment from impairment
charges (4)
.04
Add: Net adjustment from tax reform
(5)
.01
Add: Net adjustment from total pension and
postretirement benefit mark-to-market adjustments (6)
.31
Adjusted Diluted earnings per share -
continuing operations attributable to Campbell Soup Company
$
2.30
Diluted loss per share - discontinued
operations, as reported
$
(.87)
Add: Net adjustment from charges
associated with divestitures (2)
.20
Add: Net adjustment from impairment
charges (4)
.95
Add: Net adjustment from total pension
benefit mark-to-market adjustments (6)
.03
Adjusted Diluted earnings per share -
discontinued operations
$
.31
Diluted net earnings per share
attributable to Campbell Soup Company, as reported
$
.70
Add: Net adjustment from restructuring
charges, implementation costs and other related costs (1)
.30
Add: Net adjustment from charges
associated with divestitures (2)
.20
Add: Net adjustment from pension
settlement (3)
.07
Add: Net adjustment from impairment
charges (4)
.99
Add: Net adjustment from tax reform
(5)
.01
Add: Net adjustment from total pension and
postretirement benefit mark-to-market adjustments (6)
.34
Adjusted Diluted net earnings per share
attributable to Campbell Soup Company*
$
2.62
*The sum of individual per share amounts
may not add due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191204005170/en/
INVESTOR CONTACT: Ken Gosnell (856)
342-6081 ken_gosnell@campbells.com
MEDIA CONTACT: Thomas Hushen (856)
342-5227 thomas_hushen@campbells.com
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