Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CPB > SEC Filings for CPB > Form 10-Q on 4-Jun-2014All Recent SEC Filings

Show all filings for CAMPBELL SOUP CO

Form 10-Q for CAMPBELL SOUP CO


4-Jun-2014

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Description of the Company
Campbell Soup Company is a manufacturer and marketer of high-quality, branded convenience food products.
On August 8, 2013, the company completed the acquisition of Kelsen for $331 million. Kelsen is a producer of quality baked snacks that are sold in 85 countries around the world. Its primary brands include Kjeldsens and Royal Dansk. Kelsen has established distribution networks in markets in Asia, the U.S., Europe, the Middle East, South America and Africa.
On October 28, 2013, the company completed the sale of its European simple meals business to Soppa Investments S. r.l., an affiliate of CVC Capital Partners, for approximately 400 million, or $548 million. The purchase price was subject to certain post-closing adjustments, which resulted in a $14 million reduction of proceeds. The company used the proceeds from the sale to pay taxes on the sale, reduce debt and for other general corporate purposes. The company has reflected the results of the European simple meals business as discontinued operations in the Consolidated Statements of Earnings for all periods presented. The European simple meals business was historically included in the International Simple Meals and Beverages segment. The assets and liabilities of the European simple meals business have been reflected in assets and liabilities held for sale in the Consolidated Balance Sheet as of July 28, 2013. See Note 4 to the Consolidated Financial Statements for additional information. The company reports the results of operations in the following reportable segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and Bolthouse and Foodservice. Executive Summary
This Executive Summary provides significant highlights from the discussion and analysis that follows.
Net sales of $1.97 billion in the quarter ended April 27, 2014 were comparable to the prior-year quarter.

Gross profit, as a percent of sales, decreased to 34.3% in the quarter ended April 27, 2014 from 36.0% in the year-ago quarter. The decrease was primarily due to to higher promotional spending, increased supply chain costs, cost inflation, a pension settlement charge and the impact of acquisitions, partly offset by productivity improvements, a reduction in restructuring-related costs and higher selling prices.

Marketing and selling expenses decreased 11% to $217 million primarily due to lower advertising and consumer promotion expenses and the negative impact of currency. In U.S. Soup and Pepperidge Farm, a portion of advertising and consumer promotion funds was redeployed to support trade promotional activities.

Administrative expenses decreased 18% in the quarter ended April 27, 2014 to $134 million from $164 million in the year-ago quarter. The decline was primarily due to lower incentive compensation costs, lower pension and health care expenses and cost savings from restructuring initiatives, partially offset by the impact of acquisitions.

Earnings per share from continuing operations for the quarter ended April 27, 2014 were $.58, compared to $.53 in the year-ago quarter. The current and year-ago quarter included expenses of $.03 and $.04 per share, respectively, from items impacting comparability as discussed below.

Earnings from continuing operations attributable to Campbell Soup Company The following items impacted the comparability of earnings and earnings per share:
In the quarter ended April 27, 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) 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;

In the quarter ended January 26, 2014, the company and its joint venture partner Swire Pacific Limited agreed to restructure manufacturing and streamline operations for its soup and broth business in China. The company recorded a pre-tax restructuring charge of $14 million ($6 million after tax or $.02 per share) year to date related to this initiative;

In the quarter ended October 27, 2013, the company streamlined its salaried workforce in North America and its workforce in the Asia Pacific region. The company recorded a pre-tax restructuring charge of $20 million ($13 million after tax or $.04 per share) associated with the initiative;

On October 28, 2013, the company announced that it completed the sale of its simple meals business in Europe. In the quarter ended October 27, 2013, the company recorded an unrealized 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 Other expenses. In addition, the company recorded tax expense of $7 million ($.02 per share) associated with the sale of the business;
In 2013, the company implemented several 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 costs in North America. In the nine-month period ended April 27, 2014, the company recorded a pre-tax restructuring charge 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). In the quarter ended April 28, 2013, the company recorded a pre-tax restructuring charge of $1 million and restructuring-related costs of $20 million in Cost of products sold (aggregate impact of $14 million after tax or $.04 per share). In the nine-month period ended April 28, 2013, the company recorded a pre-tax restructuring charge of $31 million and restructuring-related costs of $81 million in Cost of products sold (aggregate impact of $71 million after tax or $.22 per share); and

In the quarter ended October 28, 2012, the company incurred transaction costs of $10 million ($7 million after tax or $.02 per share) associated with the acquisition of Bolthouse Farms, which closed on August 6, 2012. The costs were included in Other expenses.

The items impacting comparability of earnings from continuing operations are summarized below:

                                                               Three Months Ended
                                                   April 27, 2014              April 28, 2013
                                                Earnings        EPS         Earnings        EPS
(Millions, except per share amounts)             Impact        Impact        Impact        Impact
Earnings from continuing operations
attributable to Campbell Soup Company         $      184     $    .58     $      169     $    .53

Restructuring charges and related costs       $        -     $      -     $      (14 )   $   (.04 )
Pension settlement charge                            (11 )       (.03 )            -            -
Impact of items on earnings from continuing
operations                                    $      (11 )   $   (.03 )   $      (14 )   $   (.04 )

                                                                Nine Months Ended
                                                   April 27, 2014              April 28, 2013
                                                Earnings        EPS         Earnings        EPS
(Millions, except per share amounts)             Impact        Impact        Impact        Impact
Earnings from continuing operations
attributable to Campbell Soup Company         $      600     $   1.90     $      572     $   1.80

Restructuring charges and related costs       $      (21 )   $   (.07 )   $      (71 )   $   (.22 )
Pension settlement charge                            (11 )       (.03 )            -            -
Loss on foreign exchange forward contracts            (6 )       (.02 )            -            -
Tax expense associated with sale of business          (7 )       (.02 )            -            -
Acquisition transaction costs                          -            -             (7 )       (.02 )
Impact of items on earnings from continuing
operations(1)                                 $      (45 )   $   (.14 )   $      (78 )   $   (.25 )


____________________________________


(1) The sum of the individual per share amounts may not add due to rounding.

Earnings from continuing operations were $184 million in the quarter ended April 27, 2014, compared to $169 million in the year-ago quarter. After adjusting for items impacting comparability, earnings increased primarily due to lower administrative expenses and lower marketing expenses, partly offset by a lower gross margin percentage, which reflected the impact of higher promotional spending, and a higher effective tax rate.
Earnings from continuing operations were $600 million in the nine-month period ended April 27, 2014, compared to $572 million in the year-ago period. After adjusting for items impacting comparability, earnings decreased primarily due to the decline in gross margin percentage, including the impact of the Plum recall, and the negative impact of currency, partly offset by an increase in sales, a reduction in administrative expenses and lower marketing expenses.


Net earnings (loss) attributable to noncontrolling interests The company owns a 60% controlling interest in a joint venture formed with Swire Pacific Limited to support the development of the company's soup and broth business in China. The joint venture began operations on January 31, 2011. The noncontrolling interest's share in the net loss was included in Net earnings
(loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings. In the quarter ended January 26, 2014, the company and its joint venture partner agreed to restructure manufacturing and streamline operations for its soup and broth business in China. The after-tax restructuring charge attributable to the noncontrolling interest was $5 million. The company also owns a 70% controlling interest in a Malaysian food products manufacturing company. The noncontrolling interest's share in the net earnings was included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings and was not material in the current or year-ago period.

THIRD-QUARTER DISCUSSION AND ANALYSIS
Sales
An analysis of net sales by reportable segment follows:
                                                       Three Months Ended
(Millions)                                     April 27, 2014       April 28, 2013      % Change
U.S. Simple Meals                            $        672         $            627         7%
Global Baking and Snacking                            564                      568         (1)
International Simple Meals and Beverages              186                      225        (17)
U.S. Beverages                                        190                      198         (4)
Bolthouse and Foodservice                             358                      344          4
                                             $      1,970         $          1,962         -%

An analysis of percent change of net sales by reportable segment follows:

                                    Global    International
                          U.S.      Baking    Simple Meals                 Bolthouse
                         Simple      and           and          U.S.          and
                         Meals     Snacking     Beverages     Beverages   Foodservice   Total(3)
Volume and Mix             4%         3%          (6)%          (4)%          5%           2%
Price and Sales
Allowances                 2          2             -             -            1           2
Increased Promotional
Spending(1)               (3)        (5)           (1)            -           (2)         (3)
Currency                   -         (4)           (7)            -            -          (2)
Net Accounting(2)          -          -            (3)            -            -           -
Acquisitions               4          3             -             -            -           2
                           7%        (1)%         (17)%         (4)%          4%           -%


__________________________________________


(1) Represents revenue reductions from trade promotion and consumer coupon redemption programs.

(2) In 2014, revenue in Mexico is presented on a net accounting basis in connection with a new business model under which the cost of certain services provided by the company's suppliers is netted against revenue.

(3) Sum of the individual amounts does not add due to rounding.

In U.S. Simple Meals, sales increased 7%. U.S. Soup sales were comparable to the year-ago quarter in which sales increased 14%. The U.S. Soup sales performance was negatively impacted by increased promotional spending. The U.S. Soup sales performance was better than retail consumer takeaway, based on IRI Total U.S. Multi-Outlet data. Further details of U.S. Soup include:
Sales of Campbell's condensed soups decreased 3%, with sales declines in eating varieties partly offset by gains in cooking varieties. Lower volumes and increased promotional spending were partly offset by higher selling prices.

Sales of ready-to-serve soups decreased 1%, due to declines in canned and microwavable soup varieties.

Broth sales increased 14%, due to double-digit volume gains in aseptic broth.

Sales of other simple meals increased 25%. The acquisition of Plum contributed $24 million to sales, or 14 points of growth. Excluding the acquisition, sales increased 11%, primarily due to gains in Prego pasta sauces, which benefited from the launch of


Alfredo sauces; Campbell's dinner sauces, which benefited from the introduction in 2014 of Campbell's Slow Cooker sauces; and Pace Mexican sauces. In Global Baking and Snacking, sales decreased 1%. The acquisition of Kelsen contributed $17 million to sales, or 3 points of growth. Pepperidge Farm sales performance was negatively impacted by increased promotional spending, partly offset by volume gains. In Pepperidge Farm, promotional spending was increased to remain competitive. Within Pepperidge Farm, sales of frozen products decreased, driven by volume declines. Sales of cookies declined. Cracker sales were comparable to the prior year as gains in Goldfish snack crackers were offset by declines in adult cracker varieties. Sales of fresh bakery products increased, due to volume gains in bread and rolls. In Arnott's, sales decreased due to the negative impact of currency and declines in Australia from savory and sweet varieties, partially offset by strong gains in Indonesia. The company increased trade spending to remain competitive in a difficult retail environment in Australia.
In International Simple Meals and Beverages, sales decreased 17%. In Latin America, sales declined due to lower volumes, the impact of presenting revenue on a net basis and lower selling prices in Mexico. In the Asia Pacific region, sales decreased primarily due to declines in Australia, the negative impact of currency and declines in Japan, partly offset by gains in Malaysia. In Canada, sales decreased due to the negative impact of currency and declines in beverages, partly offset by gains in snacks and soup.
In U.S. Beverages, sales decreased 4%, primarily due to declines in V8 V-Fusion and V8 Splash beverages, partly offset by gains in V8 vegetable juice. Within the V8 V-Fusion portfolio, V8 V-Fusion + Energy beverages experienced significant growth.
In Bolthouse and Foodservice, sales increased 4%. Bolthouse sales increased 6%, primarily driven by double-digit gains in premium refrigerated beverages and salad dressings. In North America Foodservice, sales were comparable with the prior-year quarter as gains in traditional foodservice were offset by the negative impact of currency. The company increased trade spending in Bolthouse to remain competitive.
Gross Profit
Gross profit, defined as Net sales less Cost of products sold, decreased by $30 million in the quarter ended April 27, 2014. As a percent of sales, gross profit decreased from 36.0% in the year-ago quarter to 34.3% in the current quarter. The 1.7-percentage-point decrease in gross margin percentage in the quarter ended April 27, 2014 was due to the following factors:

Margin
Impact
Cost inflation, supply chain costs and other factors (2.3)%
Higher level of promotional spending                 (1.8)
Pension settlement charge(1)                         (0.9)
Impact of acquisitions                               (0.6)
Productivity improvements                             1.8
Reduction in restructuring-related costs              1.0
Higher selling prices                                 0.9
Mix                                                   0.2
                                                     (1.7)%


__________________________________________


(1) See Note 11 to the Consolidated Financial Statements for additional information on the pension settlement charge.

Marketing and Selling Expenses
Marketing and selling expenses as a percent of sales were 11.0% in the quarter ended April 27, 2014 and 12.5% in the year-ago quarter. Marketing and selling expenses were $217 million in the current quarter, compared to $245 million in the year-ago quarter, a decrease of 11%. The decrease was primarily driven by lower advertising and consumer promotion expenses (approximately 8 percentage points) and the impact of currency (approximately 2 percentage points). In U.S. Soup and Pepperidge Farm, a portion of advertising and consumer promotion funds was redeployed to support trade promotional activities. Administrative Expenses
Administrative expenses as a percent of sales were 6.8% in the quarter ended April 27, 2014 and 8.4% in the year-ago quarter. Administrative expenses decreased by 18% in the current quarter from the year-ago quarter, primarily due to lower incentive compensation costs (approximately 13 percentage points); lower pension and other benefit expenses (approximately 4 percentage points); and cost savings from restructuring initiatives (approximately 4 percentage points), partly offset by the impact of acquisitions (approximately 3 percentage points).


Operating Earnings
Segment operating earnings increased 2% in the quarter ended April 27, 2014 from
the year-ago quarter.
An analysis of operating earnings by segment follows:
                                                  Three Months Ended
(Millions)                                April 27, 2014      April 28, 2013    % Change
U.S. Simple Meals                        $         175       $          156       12%
Global Baking and Snacking                          68                   73       (7)
International Simple Meals and Beverages            27                   28       (4)
U.S. Beverages                                      29                   33       (12)
Bolthouse and Foodservice                           23                   27       (15)
                                                   322                  317        2%
Unallocated corporate expenses                     (29 )                (59 )
Restructuring charges(1)                            (1 )                 (1 )
Earnings before interest and taxes       $         292       $          257


__________________________________________


(1) See Note 8 to the Consolidated Financial Statements for additional information on restructuring charges.

Earnings from U.S. Simple Meals increased 12%. The increase was primarily due to lower marketing expenses and administrative expenses, partly offset by a lower gross margin percentage.
Earnings from Global Baking and Snacking decreased 7%. The decrease was primarily driven by higher promotional spending and cost inflation, partly offset by productivity improvements, higher selling prices and lower advertising expenses. The decrease reflected Kelsen's off-season operating results, lower earnings in Arnott's and the unfavorable impact of currency, partly offset by growth in Pepperidge Farm.
Earnings from International Simple Meals and Beverages decreased 4%. The decrease in operating earnings was primarily due to lower sales volumes, partly offset by lower administrative and selling expenses.
Earnings from U.S. Beverages decreased 12%, primarily driven by cost inflation, increased supply chain costs and higher marketing expenses, partially offset by lower administrative expenses and productivity improvements. Earnings from Bolthouse and Foodservice decreased 15%. The decrease was primarily due to cost inflation and increased promotional spending and advertising at Bolthouse Farms, partly offset by higher volumes and lower administrative expenses.
Unallocated corporate expenses included a pension settlement charge of $18 million in the current period 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. Unallocated corporate expenses included restructuring-related costs of $20 million in the quarter ended April 28, 2013. The remaining decline in the current quarter was primarily due to gains on open commodity hedges and and lower incentive compensation costs.
Interest Expense
Interest expense decreased to $31 million in the quarter ended April 27, 2014 from $33 million in the year-ago quarter, reflecting lower levels of debt. Taxes on Earnings
The effective tax rate was 30.2% in the quarter ended April 27, 2014, compared to 26.1% in the year-ago quarter. The current-year quarter included a tax benefit of $7 million on an $18 million pension settlement charge associated with a U.S. pension plan. The prior-year quarter included a tax benefit of $7 million on $21 million of restructuring charges and related costs. The prior-year rate benefited from lower taxes on foreign earnings and the favorable settlement of certain state tax matters in 2013.


NINE-MONTH DISCUSSION AND ANALYSIS
Sales
An analysis of net sales by reportable segment follows:
                                                        Nine Months Ended
(Millions)                                     April 27, 2014       April 28, 2013      % Change
U.S. Simple Meals                            $       2,426        $          2,356         3%
Global Baking and Snacking                           1,812                   1,703          6
International Simple Meals and Beverages               592                     682        (13)
U.S. Beverages                                         539                     569         (5)
Bolthouse and Foodservice                            1,047                   1,019          3
                                             $       6,416        $          6,329         1%

An analysis of percent change of net sales by reportable segment follows:

                                    Global    International
                          U.S.      Baking    Simple Meals                 Bolthouse
                         Simple      and           and          U.S.          and
                         Meals     Snacking     Beverages     Beverages   Foodservice   Total(3)
Volume and Mix             1%         1%          (2)%          (5)%          2%           -%
Price and Sales
Allowances                 2          3            (2)            -            1           2
Increased Promotional
Spending(1)               (2)        (3)            -             -           (1)         (2)
Currency                   -         (4)           (7)            -            -          (2)
Net Accounting(2)          -          -            (2)            -            -           -
Acquisitions               2          9             -             -            1           4
                           3%         6%          (13)%         (5)%          3%           1%


__________________________________________


(1) Represents revenue reductions from trade promotion and consumer coupon redemption programs.

(2) In 2014, revenue in Mexico is presented on a net accounting basis in connection with a new business model under which the cost of certain services provided by the company's suppliers is netted against revenue.

(3) Sum of the individual amounts does not add due to rounding.

In U.S. Simple Meals, sales increased 3%. U.S. Soup sales decreased 1%. Further details of U.S. Soup include:
Sales of Campbell's condensed soups decreased 2%, with declines in eating varieties partially offset by gains in cooking varieties.

Sales of ready-to-serve soups decreased 4%, primarily due to declines in canned, microwavable and aseptic soup varieties.

Broth sales increased 11%, primarily driven by double-digit volume gains in aseptic broth as well as growth in canned broth.

Sales of other simple meals increased 14%, primarily due to the acquisition of Plum, which contributed $56 million to sales, or 10 points of growth. Excluding the acquisition, sales increased 4%, primarily due to gains in Prego pasta sauces, which benefited from the launch of Alfredo sauces; and Campbell's dinner sauces, which benefited from the introduction in 2014 of Campbell's Slow Cooker sauces, partially offset by declines in Campbell's canned gravy and pasta products.
In Global Baking and Snacking, sales increased 6%. The acquisition of Kelsen contributed $161 million to sales, or 9 points of growth. Pepperidge Farm sales increased due to growth in fresh bakery and cracker products, partially offset by declines in frozen products. In fresh bakery, sales increased due to gains in sandwich bread and rolls. Sales of Pepperidge Farm crackers increased due to gains in Goldfish snack crackers, mostly offset by declines in adult cracker varieties. In Arnott's, sales decreased primarily due to the negative impact of currency and sales declines in Australia in savory and chocolate varieties, partially offset by strong gains in Indonesia. The company increased trade spending in Australia and Pepperidge Farm to remain competitive. In International Simple Meals and Beverages, sales decreased 13%. In Canada, sales decreased due to the negative impact of currency and declines in beverages and soup, partly offset by sales gains in snacks. In Latin America, sales declined due to the impact of presenting revenue on a net basis and lower selling prices in Mexico. In the Asia Pacific region, sales decreased primarily due to the negative impact of currency and declines in Australia, primarily in soup, partially offset by gains in Malaysia.


In U.S. Beverages, sales decreased 5%, primarily due to declines in V8 V-Fusion beverages. Sales of V8 vegetable juice and V8 Splash beverages also declined. U.S. Beverages continues to be under pressure from category weakness in shelf-stable juices, as well as from competition from specialty beverages and packaged fresh juices.
In Bolthouse and Foodservice, sales increased 3%, due in part to the additional . . .

  Add CPB to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CPB - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.