Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Capital Stock, par value $.0375
CPB
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
There were 301,655,347 shares of capital stock outstanding as of November 25, 2019.
Capital stock, $.0375 par value; authorized 560 shares; issued 323 shares
12
12
Additional paid-in capital
356
372
Earnings retained in the business
2,050
1,993
Capital stock in treasury, at cost
(1,053)
(1,076)
Accumulated other comprehensive loss
(126)
(198)
Total Campbell Soup Company shareholders' equity
1,239
1,103
Noncontrolling interests
10
9
Total equity
1,249
1,112
Total liabilities and equity
$
13,110
$
13,148
See accompanying Notes to Consolidated Financial Statements.
5
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 and cash equivalents discontinued operations — beginning of period
148
177
Cash and cash equivalents discontinued operations — end of period
(115)
(120)
Cash and cash equivalents — end of period
$
61
$
85
See accompanying Notes to Consolidated Financial Statements.
6
CAMPBELL SOUP COMPANY
Consolidated Statements of Equity
(unaudited)
(millions, except per share amounts)
Campbell Soup Company Shareholders’ Equity
Capital Stock
Additional Paid-in Capital
Earnings Retained in the Business
Accumulated Other Comprehensive Income (Loss)
Noncontrolling Interests
Issued
In Treasury
Total Equity
Shares
Amount
Shares
Amount
Balance at July 29, 2018
323
$
12
(22)
$
(1,103)
$
349
$
2,224
$
(118)
$
9
$
1,373
Cumulative effect of changes in accounting principle:
Revenue(1)
(8)
(8)
Stranded tax effects(1)
(9)
9
—
Net earnings (loss)
194
—
194
Other comprehensive income (loss)
(47)
—
(47)
Dividends ($.35 per share)
(106)
(106)
Treasury stock purchased
—
—
—
Treasury stock issued under management incentive and stock option plans
—
19
(10)
9
Balance at October 28, 2018
323
$
12
(22)
$
(1,084)
$
339
$
2,295
$
(156)
$
9
$
1,415
Balance at July 28, 2019
323
$
12
(22)
$
(1,076)
$
372
$
1,993
$
(198)
$
9
$
1,112
Net earnings (loss)
166
—
166
Other comprehensive income (loss)
72
1
73
Dividends ($.35 per share)
(108)
(108)
Treasury stock purchased
—
—
—
Treasury stock issued under management incentive and stock option plans
1
23
(16)
(1)
6
Balance at October 27, 2019
323
$
12
(21)
$
(1,053)
$
356
$
2,050
$
(126)
$
10
$
1,249
(1)See Note 2 for additional detail.
See accompanying Notes to Consolidated Financial Statements.
7
Notes to Consolidated Financial Statements
(unaudited)
(currency in millions, except per share amounts)
1. Basis of Presentation and Significant Accounting Policies
In this Form 10-Q, unless otherwise stated, the terms "we," "us," "our" and the "company" refer to Campbell Soup Company and its consolidated subsidiaries.
The consolidated financial statements include our accounts and entities in which we maintain a controlling financial interest and a variable interest entity (VIE) for which we are the primary beneficiary. Intercompany transactions are eliminated in consolidation. See Note 3 for a discussion of Discontinued Operations.
The financial statements reflect all adjustments which are, in our opinion, necessary for a fair statement of the results of operations, financial position, and cash flows for the indicated periods. The accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our Annual Report on Form 10-K for the year ended July 28, 2019, except as described below and in Note 2.
The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. Our fiscal year ends on the Sunday nearest July 31, which is August 2, 2020. There will be 53 weeks in 2020. There were 52 weeks in 2019.
Leases — At the beginning of the first quarter of 2020, we adopted new guidance onaccounting for leases.We determine if an agreement is or contains a lease at inception by evaluating if an identified asset exists that we control for a period of time. When a lease exists, we record a right-of-use (ROU) asset and a corresponding lease liability on our Consolidated Balance Sheet. ROU assets represent our right to use an underlying asset for the lease term and the corresponding liabilities represent an obligation to make lease payments during the term. We have elected not to record leases with a term of 12 months or less on our Consolidated Balance Sheet.
ROU assets are recorded on our Consolidated Balance Sheet at lease commencement based on the present value of the corresponding liabilities and are adjusted for any prepayments, lease incentives received, or initial direct costs incurred. To calculate the present value of our lease liabilities, we use a country-specific collateralized incremental borrowing rate based on the lease term at commencement. The measurement of our ROU assets and liabilities includes all fixed payments and any variable payments based on an index or rate.
Our leases generally include options to extend or terminate use of the underlying assets. These options are included in the lease term used to determine ROU assets and corresponding liabilities when we are reasonably certain we will exercise.
Our lease arrangements typically include non-lease components, such as common area maintenance and labor. We account for each lease and any non-lease components associated with that lease as a single lease component for all underlying asset classes with the exception of certain production assets. Accordingly, all costs associated with a lease contract are disclosed as lease costs. This includes any variable payments that are not dependent on an index or a rate and which are expensed as incurred.
Operating leases expense is recognized on a straight-line basis over the lease term with the expense recorded in Cost of products sold, Marketing and selling expenses, or Administrative expenses depending on the nature of the leased item.
For finance leases, the amortization of ROU lease assets is recognized on a straight-line basis over the shorter of the estimated useful life of the underlying asset or the lease term in Cost of products sold, Marketing and selling expenses, or Administrative expenses depending on the nature of the leased item. Interest expense on finance lease obligations is recorded over the lease term and is recorded in Interest expense (based on a front-loaded interest expense pattern).
All operating lease cash payments and interest on finance leases are recorded within Net cash provided by operating activities and all finance lease principal payments are recorded within Net cash used in financing activities in our Consolidated Statements of Cash Flows.
See Notes 2 and 11 for additional information.
2. Recent Accounting Pronouncements
Recently Adopted
In May 2014, the Financial Accounting Standards Board (FASB) issued revised guidance on the recognition of revenue from contracts with customers. We adopted the guidance in the first quarter of 2019, effective on July 30, 2018, using the modified retrospective method and recorded a cumulative effect adjustment of $8, net of tax, to decrease the opening balance of Earnings retained in the business, an increase of $10 to Accrued liabilities, an increase of $1 to Accounts payable, a decrease of $2 to Deferred taxes and an increase of $1 to Other assets.
8
In February 2016, the FASB issued guidance that amends accounting for leases. Under the new guidance, a lessee will recognize most leases on the balance sheet but will recognize expenses similar to current lease accounting. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. In July 2018, the FASB issued an adoption approach that allows entities to apply the new guidance and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. We adopted the new guidance at the beginning of 2020 using this transition method. We elected to apply a package of practical expedients, which allowed us to not reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs. Adoption of the new guidance resulted in the recognition of operating lease ROU assets of $259 and operating lease liabilities of $254, with the difference between the assets and liabilities primarily due to below market assets, deferred rent and prepaid rent. In addition, we derecognized $20 of an asset and liability associated with a build-to-suit lease arrangement. The adoption did not have a material impact on consolidated net earnings or cash flows. See Note 11 for additional information.
In February 2018, the FASB issued guidance that provides entities an option to reclassify the stranded tax effects of the Tax Cuts and Jobs Act of 2017 on items within accumulated other comprehensive income to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. We adopted the guidance in the first quarter of 2019, effective on July 30, 2018, and elected not to reclassify prior periods. The adoption resulted in a cumulative effect adjustment of $9 to decrease the opening balance of Earnings retained in the business and a corresponding net decrease to the components of Accumulated other comprehensive income (loss). See Note 4 for additional information.
In August 2017, the FASB issued guidance that amends hedge accounting. Under the new guidance, more hedging strategies will be eligible for hedge accounting and the application of hedge accounting is simplified. The new guidance amends presentation and disclosure requirements, and how effectiveness is assessed. In October 2018, the FASB issued guidance which permits an entity to designate the overnight index swap rate based on the Secured Overnight Financing Rate Fed Funds as a benchmark interest rate in a hedge accounting relationship. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. We adopted the new guidance at the beginning of the first quarter of 2020. The adoption did not have a material impact on our consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued guidance that changes the disclosure requirements related to defined benefit pension and postretirement plans. The guidance is effective for fiscal years beginning after December 15, 2020. The guidance is to be applied on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our disclosures.
In August 2018, the FASB issued guidance that eliminates, adds, and modifies certain disclosure requirements for fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted. Certain disclosures in the guidance must be applied on a retrospective basis, while others must be applied on a prospective basis. We are currently evaluating the impact that the new guidance will have on our disclosures.
In August 2018, the FASB issued guidance on accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
9
3. Divestitures
Discontinued Operations
On February 25, 2019, we sold our U.S. refrigerated soup business, and on April 25, 2019, we sold our Garden Fresh Gourmet business. Proceeds were approximately $55, subject to customary purchase price adjustments. On June 16, 2019, we sold our Bolthouse Farms business. Proceeds were approximately $500, subject to customary purchase price adjustments. Beginning in the third quarter of 2019, we have reflected the results of these businesses as discontinued operations in the Consolidated Statements of Earnings for all periods presented. These businesses were historically included in the Campbell Fresh reportable segment.
We completed the sale of our Kelsen business on September 23, 2019, for $322, subject to customary purchase price adjustments. We also signed a definitive agreement on August 1, 2019, for the sale of our Arnott’s business and certain other international operations, including the simple meals and shelf-stable beverages businesses in Australia and Asia Pacific (the Arnott's and other international operations), for $2,200, subject to customary purchase price adjustments. We expect to complete the sale in the second quarter of 2020. Beginning in the fourth quarter of 2019, we have reflected the results of operations of the Kelsen business and the Arnott’s and other international operations (collectively referred to as Campbell International) as discontinued operations in the Consolidated Statements of Earnings for all periods presented. These businesses were historically included in the Snacks reportable segment.
Results of discontinued operations were as follows:
Three Months Ended
Campbell International
Campbell Fresh
October 27, 2019
October 28, 2018
October 28, 2018
Net sales
$
223
$
266
$
226
Impairment charges
$
—
$
—
$
14
Earnings (loss) before taxes from operations
$
37
$
35
$
(12)
Taxes on earnings (loss) from operations
13
10
(3)
Loss on sale of business / costs associated with selling the businesses
(51)
(1)
(1)
Tax benefit on loss of sale / costs associated with selling the businesses
(24)
—
—
Earnings (loss) from discontinued operations
$
(3)
$
24
$
(10)
In the first quarter of 2019, we recorded an impairment charge of $14 on the U.S. refrigerated soup plant assets in Campbell Fresh.
We provide certain transition services to support the divested businesses.
The assets and liabilities of the Arnott's and other international operations have been reflected as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of October 27, 2019. The assets and liabilities of Campbell International have been reflected as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of July 28, 2019. The assets and liabilities were as follows:
