Campbell Reports Fourth-Quarter and Full-Year Results

Camden / NJ. (csc) Campbell Soup Company reported its fourth-quarter and full-year results for fiscal 2019. Mark Clouse, Campbell’s President and CEO, stated, «Our strong fourth-quarter results culminated a year of steady, positive performance for Campbell. We delivered consistent results and met or exceeded expectations for four consecutive quarters this year. We made significant progress against our 2019 strategic initiatives, namely: improving our in-market performance; overdelivering our cost savings programs; strengthening our relationships with key retailers; focusing the portfolio on our two core businesses in North America; and, completing the divestiture of Campbell Fresh and announcing the divestiture of Campbell International. We have created a solid foundation to build upon in fiscal 2020.»

Presentation of Results

On July 12, 2019, the company announced that it entered into an agreement to sell the Kelsen Group and on August 2, 2019, that it entered into an agreement to sell Arnott’s and certain of Campbell’s International operations. These transactions are expected to close in the first half of fiscal 2020. This portfolio of businesses referred to as Campbell International, which was previously included in the Global Biscuits and Snacks segment, is now reported as discontinued operations along with Campbell Fresh. Effective as of the fourth quarter of fiscal 2019, Campbell is reporting operating results in two segments: Meals + Beverages; and Snacks. A detailed description of the segments is included at the end of this news release.

The following table is a summary of the fourth-quarter and full-year results for sales, earnings before interest and taxes (Ebit) and EPS from continuing operations and EPS for total company. For ease of comparison to the company’s most recent fiscal 2019 sales and earnings guidance, the company has also provided results for sales, Ebit and EPS from continuing operations and the results of Campbell International that this quarter the company is referring to as Combined Results. Total Company Results listed below include continuing and discontinued operations. Prior-year results have been adjusted to conform to the current-year presentation.

Three Months Ended

Twelve Months Ended

(USD in millions, except per share)

2019-07-28

2018-07-29

Change

2019-07-28

2018-07-29

Change

Continuing Operations

Net Sales as Reported (GAAP)

USD 1,780

USD 1,745

2%

USD 8,107

USD 6,615

23%

Organic

2%

-%

.

Ebit as Reported (GAAP)

USD 83

USD 252

(67)%

USD 979

USD 1,010

(3)%

Adjusted Ebit

USD 252

USD 250

1%

USD 1,266

USD 1,252

1%

.

Diluted Earnings Per Share:

As Reported (GAAP)

($0.02)

USD 0.42

n/m

USD 1.57

USD 2.40

(35)%

Adjusted EPS

USD 0.42

USD 0.37

14%

USD 2.30

USD 2.51

(8)%

.

Combined Results (Continuing Operations and Campbell International)

Combined Net Sales

USD 2,024

USD 1,992

2%

USD 9,153

USD 7,735

18%

.

Adjusted Combined Ebit

USD 288

USD 282

2%

USD 1,422

USD 1,433

(1)%

.

Adjusted Combined Diluted EPS

USD 0.50

USD 0.44

14%

USD 2.63

USD 2.90

(9)%

.

Total Company Results

Diluted Net Earnings Per Share:

As Reported (GAAP)

($0.03)

USD 0.31

n/m

USD 0.70

USD 0.86

(19)%

Adjusted Net EPS

USD 0.49

USD 0.25

96%

USD 2.62

USD 2.87

(9)%

.

Fourth-Quarter Results from Continuing Operations

Sales increased 2 percent to USD 1.8 billion driven by gains in Snacks, as well as Meals + Beverages.

Gross margin increased from 31.4 percent to 34.0 percent. Excluding items impacting comparability, adjusted gross margin increased 0.6 percentage points to 33.7 percent. The increase in adjusted gross margin was driven primarily by supply chain productivity improvements, the benefits from cost savings initiatives and the favorable impact from lapping costs associated with the July 2018 voluntary recall of Flavor Blasted Goldfish crackers, partly offset by cost inflation.

Marketing and selling expenses increased 10 percent to USD 195 million driven primarily by increased marketing investment on Snacks and higher incentive compensation, partly offset by benefits of cost savings initiatives. Administrative expenses increased 4 percent to USD 166 million. Excluding items impacting comparability, adjusted administrative expenses increased 5 percent to USD 139 million primarily due to higher incentive compensation expense, partly offset by the benefits from cost savings initiatives.

Other expenses were USD 128 million as compared to income of USD 66 million in the prior year. Excluding items impacting comparability, other income increased from USD 3 million in the prior year to USD 10 million.

As reported Ebit was USD 83 million. Excluding items impacting comparability, adjusted Ebit increased 1 percent to USD 252 million as sales gains and gross margin improvement were partly offset by higher marketing and selling expenses.

Net interest expense was USD 84 million compared to USD 89 million in the prior year. Tax expense decreased from USD 37 million in the prior year to USD 4 million. Excluding items impacting comparability, the adjusted tax rate decreased 4.2 percentage points from 29.8 percent to 25.6 percent reflecting a lower U.S. federal tax rate.

The company reported a loss from continuing operations of USD 0.02 per share. Excluding items impacting comparability, adjusted EPS from continuing operations increased 14 percent to USD 0.42 per share primarily reflecting a lower adjusted tax rate.

Full-Year Results from Continuing Operations

Sales increased 23 percent to USD 8.1 billion reflecting the benefit from the acquisitions of Snyder’s-Lance and Pacific Foods. Organic sales were comparable to the prior year.

As reported Ebit decreased 3 percent to USD 979 million. Excluding items impacting comparability, adjusted Ebit increased 1 percent to USD 1.266 billion reflecting incremental earnings from the acquisitions mostly offset by declines in the base business.

The company reported EPS from continuing operations of USD 1.57 per share. Excluding items impacting comparability, adjusted EPS from continuing operations decreased 8 percent to USD 2.30 per share reflecting higher adjusted net interest expense, partly offset by a lower adjusted tax rate.

Cash Flow Results

Cash flow from operations increased to USD 1.4 billion from USD 1.3 billion a year ago due primarily to significant improvements from the company’s working capital management efforts. In line with the company’s commitment to returning value to shareholders, the company paid USD 423 million of cash dividends in fiscal 2019 reflecting the quarterly dividend rate of USD 0.35 per share.

Fiscal 2020 Guidance for Continuing Operations

As shown in the table below, the company expects net sales to grow by 1 to 3 percent, adjusted Ebit to grow by 2 to 4 percent and adjusted EPS to grow by 9 to 11 percent. Fiscal 2020 comprises 53 weeks, one additional week compared to fiscal 2019. The benefit of the 53rd week is included in the fiscal 2020 guidance and is estimated to be worth 2 points of net sales, adjusted Ebit and adjusted EPS. Expected net proceeds of approximately USD 3 billion from the divestitures of Campbell Fresh and Campbell International are being used to reduce debt. This guidance takes into account the impact of the paydown on the company’s interest expense in fiscal 2020.

(USD in millions, except per share)			2019 Results		2020 Guidance
Net Sales			USD 8,107		plus 1 to 3 percent
Adjusted Ebit			USD 1,266		plus 2 to 4 percent
Adjusted EPS			USD 2.30		plus 9 to 11 percent or USD 2.50 to USD 2.55

.

Cost Savings Program from Continuing Operations

In the fourth quarter of fiscal 2019, Campbell achieved USD 45 million in savings under its multi-year cost savings program, inclusive of Snyder’s-Lance synergies, bringing total program-to-date savings to USD 560 million. Total fiscal 2019 savings of USD 165 million were ahead of expectations, helping to offset other cost pressures. As previously announced, Campbell is targeting cumulative annualized savings of USD 850 million by the end of fiscal 2022.

Corporate

Corporate in the fourth quarter of fiscal 2019 included pension and postretirement mark-to-market losses of USD 122 million, charges related to cost savings initiatives of USD 22 million, and a non-cash impairment charge of USD 16 million related to the European chips business. Corporate in the fourth quarter of fiscal 2018 included pension and postretirement mark-to-market gains of USD 117 million, non-cash impairment charges of USD 54 million related to the Plum trademark, charges related to cost savings initiatives of USD 46 million, and transaction and integration costs of USD 11 million related to the acquisition of Snyder’s-Lance.

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 on June 16, 2019. As stated above, the company expects to close the Campbell International transactions in the first half of fiscal 2020. The company reported a loss from discontinued operations for fiscal 2019 of USD 0.87 per share compared to a loss of USD 1.53 per share in the prior year. Excluding items impacting comparability, the adjusted earnings from discontinued operations were USD 0.31 per share compared to USD 0.36 per share in the prior year.