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Campbell Soup Q4 loss $0.26 per share

Staff Writer |
Campbell Soup Company reported its fourth-quarter and full-year results for fiscal 2016 and announced a 12 percent increase in its quarterly dividend.

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Campbell Soup reported a loss of $0.26 per share in the fourth quarter. The current quarter results reflect a pre-tax non-cash impairment charge of $141 million, or $0.41 per share, to reduce the carrying value of the intangible assets of the Bolthouse Farms carrot and carrot ingredients reporting unit.

The current quarter also included pre-tax pension and postretirement mark-to-market losses of $138 million, or $0.29 per share, and pre-tax charges related to cost savings initiatives of $11 million, or $0.02 per share.

The prior-year quarter included pre-tax pension and postretirement mark-to-market losses of $110 million, or $0.22 per share, and pre-tax charges related to the implementation of the new organizational structure and cost savings initiatives of $106 million, or $0.21 per share.

Excluding items impacting comparability in both periods, adjusted EPS decreased 6 percent to $0.46 per share, compared with $0.49 per share in the year-ago quarter. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.

Sales of $1.687 billion were comparable to prior year as the benefit from the acquisition of Garden Fresh Gourmet was offset by the decline in organic sales and the adverse impact of currency translation.

Organic sales decreased 1 percent primarily driven by

Campbell Fresh, reflecting declines in carrots and carrot ingredients, as well as the impact from the voluntary recall announced on June 22 of Bolthouse Farms Protein PLUS drinks. The estimated negative impact on net sales in the fourth quarter related to the recall and related production outages was approximately one percentage point.

Gross margin decreased from 33.2 percent to 32.4 percent. Excluding items impacting comparability, adjusted gross margin decreased 0.9 points.

The decrease in adjusted gross margin was primarily driven by increased promotional spending, inflation, the impact of the Bolthouse Farms recall and related production outages, as well as higher carrot costs, partly offset by productivity improvements.

Marketing and selling expenses increased 14 percent to $216 million. Excluding items impacting comparability, adjusted marketing and selling expenses increased 14 percent to $196 million primarily due to higher advertising and consumer promotion expenses.

Administrative expenses decreased 4 percent to $185 million. Excluding items impacting comparability, adjusted administrative expenses decreased 19 percent to $128 million primarily due to lower incentive compensation costs and the benefits from cost savings initiatives.

As reported EBIT was a loss of $37 million, reflecting the non-cash impairment charge, pension and postretirement mark-to-market losses and charges associated with cost savings initiatives as previously mentioned.

Excluding items impacting comparability, adjusted EBIT decreased 2 percent to $253 million reflecting higher advertising and consumer promotion expenses and a lower adjusted gross margin percentage, partly offset by lower administrative expenses.

Net interest expense increased $1 million to $28 million reflecting higher average interest rates on the debt portfolio, partly offset by lower levels of debt.

The tax rate increased to 24.6 percent as compared with a tax rate of 6.3 percent in the prior year. Excluding items impacting comparability, the adjusted tax rate increased 2.3 percentage points to 36.4 percent. The increase in the adjusted tax rate reflects a $13 million correction for deferred taxes, most of which related to the third quarter of fiscal 2016. This was partly offset by the geographic mix of earnings.

Full-year results

Sales decreased 1 percent to $7.961 billion driven by the adverse impact of currency translation and a decline in organic sales, partly offset by the benefit from the acquisition of Garden Fresh Gourmet. Organic sales decreased 1 percent driven by lower volume, partly offset by higher selling prices.

EBIT decreased 9 percent to $960 million. Excluding items impacting comparability, adjusted EBIT increased 11 percent to $1.467 billion reflecting a higher adjusted gross margin percentage and the benefits from cost savings initiatives, partly offset by the adverse impact of currency translation, higher incentive compensation costs, and volume declines.

Net interest expense increased $6 million to $111 million reflecting higher average interest rates on the debt portfolio, partly offset by lower levels of debt. The tax rate increased 3.9 percentage points to 33.7 percent.

Excluding items impacting comparability, the adjusted tax rate increased 1.2 percentage points to 32.6 percent. This increase was primarily due to lapping the favorable resolution of an intercompany pricing agreement between the U.S. and Canada in the prior year.

Cash flow from operations increased to $1.463 billion from $1.182 billion a year ago primarily due to higher cash earnings and lower working capital requirements.

The board has approved an increase in its quarterly dividend from $0.312 per share to $0.35 per share, an increase of 12 percent. The quarterly dividend is payable Oct. 31, 2016, to shareholders of record at the close of business Oct. 12, 2016.

Campbell expects sales to increase by 0 to 1 percent, adjusted EBIT to increase by 1 to 4 percent, and adjusted EPS to increase by 2 to 5 percent, or $3.00 to $3.09 per share. This guidance assumes the impact from currency translation will be nominal.


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