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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended April 28, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission File Number: 1-3822
CAMPBELL SOUP COMPANY
(Exact name of registrant as specified in its charter)
| | | | | |
New Jersey | 21-0419870 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1 Campbell Place
Camden, New Jersey 08103-1799
(Address of principal executive offices) (Zip Code)
(856) 342-4800
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Capital Stock, par value $.0375 | | CPB | | New York Stock Exchange |
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 (§232.405 of this chapter) 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 298,553,885 shares of capital stock outstanding as of May 30, 2024.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CAMPBELL SOUP COMPANY
Consolidated Statements of Earnings
(unaudited)
(millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 |
Net sales | $ | 2,369 | | | $ | 2,229 | | | $ | 7,343 | | | $ | 7,289 | |
Costs and expenses | | | | | | | |
Cost of products sold | 1,637 | | | 1,561 | | | 5,047 | | | 5,028 | |
Marketing and selling expenses | 206 | | | 194 | | | 645 | | | 612 | |
Administrative expenses | 208 | | | 167 | | | 555 | | | 487 | |
Research and development expenses | 27 | | | 24 | | | 76 | | | 66 | |
Other expenses / (income) | 30 | | | 23 | | | 80 | | | 41 | |
Restructuring charges | 13 | | | 6 | | | 17 | | | 15 | |
Total costs and expenses | 2,121 | | | 1,975 | | | 6,420 | | | 6,249 | |
Earnings before interest and taxes | 248 | | | 254 | | | 923 | | | 1,040 | |
Interest expense | 70 | | | 47 | | | 165 | | | 139 | |
Interest income | 4 | | | 1 | | | 5 | | | 2 | |
Earnings before taxes | 182 | | | 208 | | | 763 | | | 903 | |
Taxes on earnings | 49 | | | 48 | | | 193 | | | 214 | |
| | | | | | | |
| | | | | | | |
Net earnings | 133 | | | 160 | | | 570 | | | 689 | |
Less: Net earnings (loss) attributable to noncontrolling interests | — | | | — | | | — | | | — | |
Net earnings attributable to Campbell Soup Company | $ | 133 | | | $ | 160 | | | $ | 570 | | | $ | 689 | |
Per Share — Basic | | | | | | | |
| | | | | | | |
| | | | | | | |
Net earnings attributable to Campbell Soup Company | $ | .45 | | | $ | .54 | | | $ | 1.91 | | | $ | 2.30 | |
Weighted average shares outstanding — basic | 298 | | | 299 | | | 298 | | | 299 | |
Per Share — Assuming Dilution | | | | | | | |
| | | | | | | |
| | | | | | | |
Net earnings attributable to Campbell Soup Company | $ | .44 | | | $ | .53 | | | $ | 1.91 | | | $ | 2.29 | |
Weighted average shares outstanding — assuming dilution | 300 | | | 301 | | | 299 | | | 301 | |
See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| April 28, 2024 | | April 30, 2023 |
| Pre-tax amount | | Tax benefit (expense) | | After-tax amount | | Pre-tax amount | | Tax benefit (expense) | | After-tax amount |
Net earnings (loss) | | | | | $ | 133 | | | | | | | $ | 160 | |
Other comprehensive income (loss): | | | | | | | | | | | |
Foreign currency translation: | | | | | | | | | | | |
Foreign currency translation adjustments | $ | (3) | | | $ | — | | | (3) | | | $ | (2) | | | $ | — | | | (2) | |
| | | | | | | | | | | |
Cash-flow hedges: | | | | | | | | | | | |
Unrealized gains (losses) arising during the period | 13 | | | (2) | | | 11 | | | 2 | | | (1) | | | 1 | |
Reclassification adjustment for losses (gains) included in net earnings | — | | | — | | | — | | | (2) | | | 1 | | | (1) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other comprehensive income (loss) | $ | 10 | | | $ | (2) | | | 8 | | | $ | (2) | | | $ | — | | | (2) | |
Total comprehensive income (loss) | | | | | $ | 141 | | | | | | | $ | 158 | |
Total comprehensive income (loss) attributable to noncontrolling interests | | | | | — | | | | | | | — | |
Total comprehensive income (loss) attributable to Campbell Soup Company | | | | | $ | 141 | | | | | | | $ | 158 | |
| | | | | | | | | | | |
| Nine Months Ended |
| April 28, 2024 | | April 30, 2023 |
| Pre-tax amount | | Tax benefit (expense) | | After-tax amount | | Pre-tax amount | | Tax benefit (expense) | | After-tax amount |
Net earnings (loss) | | | | | $ | 570 | | | | | | | $ | 689 | |
Other comprehensive income (loss): | | | | | | | | | | | |
Foreign currency translation: | | | | | | | | | | | |
Foreign currency translation adjustments | $ | (6) | | | $ | — | | | (6) | | | $ | (7) | | | $ | — | | | (7) | |
Cash-flow hedges: | | | | | | | | | | | |
Unrealized gains (losses) arising during the period | (7) | | | 2 | | | (5) | | | 7 | | | (2) | | | 5 | |
Reclassification adjustment for losses (gains) included in net earnings | (1) | | | — | | | (1) | | | (8) | | | 2 | | | (6) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other comprehensive income (loss) | $ | (14) | | | $ | 2 | | | (12) | | | $ | (8) | | | $ | — | | | (8) | |
Total comprehensive income (loss) | | | | | $ | 558 | | | | | | | $ | 681 | |
Total comprehensive income (loss) attributable to noncontrolling interests | | | | | — | | | | | | | — | |
Total comprehensive income (loss) attributable to Campbell Soup Company | | | | | $ | 558 | | | | | | | $ | 681 | |
See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts) | | | | | | | | | | | |
| April 28, 2024 | | July 30, 2023 |
Current assets | | | |
Cash and cash equivalents | $ | 107 | | | $ | 189 | |
Accounts receivable, net | 648 | | | 529 | |
Inventories | 1,300 | | | 1,291 | |
Other current assets | 84 | | | 52 | |
| | | |
Total current assets | 2,139 | | | 2,061 | |
Plant assets, net of depreciation | 2,621 | | | 2,398 | |
Goodwill | 5,072 | | | 3,965 | |
Other intangible assets, net of amortization | 4,875 | | | 3,142 | |
Other assets | 536 | | | 492 | |
| | | |
Total assets | $ | 15,243 | | | $ | 12,058 | |
Current liabilities | | | |
Short-term borrowings | $ | 1,427 | | | $ | 191 | |
Accounts payable | 1,330 | | | 1,306 | |
Accrued liabilities | 584 | | | 592 | |
Dividends payable | 114 | | | 113 | |
Accrued income taxes | 2 | | | 20 | |
| | | |
Total current liabilities | 3,457 | | | 2,222 | |
Long-term debt | 5,752 | | | 4,498 | |
Deferred taxes | 1,491 | | | 1,067 | |
Other liabilities | 628 | | | 608 | |
| | | |
Total liabilities | 11,328 | | | 8,395 | |
Commitments and contingencies | | | |
Campbell Soup Company shareholders' equity | | | |
Preferred stock; authorized 40 shares; none issued | — | | | — | |
Capital stock, $.0375 par value; authorized 560 shares; issued 323 shares | 12 | | | 12 | |
Additional paid-in capital | 421 | | | 420 | |
Earnings retained in the business | 4,685 | | | 4,451 | |
Capital stock in treasury, at cost | (1,190) | | | (1,219) | |
Accumulated other comprehensive income (loss) | (15) | | | (3) | |
Total Campbell Soup Company shareholders' equity | 3,913 | | | 3,661 | |
Noncontrolling interests | 2 | | | 2 | |
Total equity | 3,915 | | | 3,663 | |
Total liabilities and equity | $ | 15,243 | | | $ | 12,058 | |
See accompanying Notes to Consolidated Financial Statements.
CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
| | | | | | | | | | | |
| Nine Months Ended |
| April 28, 2024 | | April 30, 2023 |
Cash flows from operating activities: | | | |
Net earnings | $ | 570 | | | $ | 689 | |
Adjustments to reconcile net earnings to operating cash flow | | | |
| | | |
Restructuring charges | 17 | | | 15 | |
Stock-based compensation | 80 | | | 48 | |
| | | |
Amortization of inventory fair value adjustment from acquisition | 17 | | | — | |
Pension and postretirement benefit expense | 5 | | | 20 | |
Depreciation and amortization | 298 | | | 284 | |
Deferred income taxes | 13 | | | (2) | |
| | | |
| | | |
| | | |
Other | 103 | | | 78 | |
Changes in working capital, net of acquisition | | | |
Accounts receivable | (33) | | | 1 | |
Inventories | 102 | | | (40) | |
Other current assets | (28) | | | (8) | |
Accounts payable and accrued liabilities | (180) | | | (123) | |
| | | |
| | | |
Other | (67) | | | (44) | |
Net cash provided by operating activities | 897 | | | 918 | |
Cash flows from investing activities: | | | |
Purchases of plant assets | (376) | | | (257) | |
| | | |
Purchases of route businesses | (28) | | | (13) | |
Sales of route businesses | 33 | | | — | |
Business acquired, net of cash acquired | (2,617) | | | — | |
| | | |
Other | 1 | | | 1 | |
Net cash used in investing activities | (2,987) | | | (269) | |
Cash flows from financing activities: | | | |
Short-term borrowings, including commercial paper and delayed draw term loan | 4,616 | | | 2,479 | |
Short-term repayments, including commercial paper and delayed draw term loan | (4,556) | | | (2,473) | |
Long-term borrowings | 2,496 | | | 500 | |
Long-term repayments | (100) | | | (566) | |
| | | |
Dividends paid | (334) | | | (336) | |
Treasury stock purchases | (46) | | | (141) | |
Treasury stock issuances | — | | | 22 | |
| | | |
| | | |
Payments related to tax withholding for stock-based compensation | (46) | | | (19) | |
| | | |
| | | |
Payments of debt issuance costs | (22) | | | — | |
Other | — | | | (1) | |
Net cash provided by (used in) financing activities | 2,008 | | | (535) | |
Effect of exchange rate changes on cash | — | | | — | |
Net change in cash and cash equivalents | (82) | | | 114 | |
Cash and cash equivalents — beginning of period | 189 | | | 109 | |
| | | |
Cash and cash equivalents — end of period | $ | 107 | | | $ | 223 | |
See accompanying Notes to Consolidated Financial Statements.
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 January 29, 2023 | 323 | | | $ | 12 | | | (24) | | | $ | (1,144) | | | $ | 391 | | | $ | 4,344 | | | $ | (4) | | | $ | 2 | | | $ | 3,601 | |
Net earnings (loss) | | | | | | | | | | | 160 | | | | | — | | | 160 | |
| | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | (2) | | | — | | | (2) | |
Dividends ($.37 per share) | | | | | | | | | | | (112) | | | | | | | (112) | |
Treasury stock purchased | | | | | (2) | | | (75) | | | | | | | | | | | (75) | |
Treasury stock issued under stock-based compensation plans | | | | | 1 | | | — | | | 16 | | | — | | | | | | | 16 | |
Balance at April 30, 2023 | 323 | | | $ | 12 | | | (25) | | | $ | (1,219) | | | $ | 407 | | | $ | 4,392 | | | $ | (6) | | | $ | 2 | | | $ | 3,588 | |
| | | | | | | | | | | | | | | | | |
Balance at July 31, 2022 | 323 | | | $ | 12 | | | (24) | | | $ | (1,138) | | | $ | 415 | | | $ | 4,040 | | | $ | 2 | | | $ | 2 | | | $ | 3,333 | |
Net earnings (loss) | | | | | | | | | | | 689 | | | | | — | | | 689 | |
| | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | (8) | | | — | | | (8) | |
Dividends ($1.11 per share) | | | | | | | | | | | (337) | | | | | | | (337) | |
Treasury stock purchased | | | | | (3) | | | (141) | | | | | | | | | | | (141) | |
Treasury stock issued under stock-based compensation plans | | | | | 2 | | | 60 | | | (8) | | | — | | | | | | | 52 | |
Balance at April 30, 2023 | 323 | | | $ | 12 | | | (25) | | | $ | (1,219) | | | $ | 407 | | | $ | 4,392 | | | $ | (6) | | | $ | 2 | | | $ | 3,588 | |
| | | | | | | | | | | | | | | | | |
Balance at January 28, 2024 | 323 | | | $ | 12 | | | (25) | | | $ | (1,212) | | | $ | 407 | | | $ | 4,665 | | | $ | (23) | | | $ | 2 | | | $ | 3,851 | |
Net earnings (loss) | | | | | | | | | | | 133 | | | | | — | | | 133 | |
Other comprehensive income (loss) | | | | | | | | | | | | | 8 | | | — | | | 8 | |
Dividends ($.37 per share) | | | | | | | | | | | (113) | | | | | | | (113) | |
Replacement share-based awards issued in connection with Sovos Brands, Inc. acquisition(1) | | | | | | | | | 42 | | | | | | | | | 42 | |
Treasury stock purchased | | | | | — | | | (17) | | | | | | | | | | | (17) | |
Treasury stock issued under stock-based compensation plans | | | | | — | | | 39 | | | (28) | | | — | | | | | | | 11 | |
Balance at April 28, 2024 | 323 | | | $ | 12 | | | (25) | | | $ | (1,190) | | | $ | 421 | | | $ | 4,685 | | | $ | (15) | | | $ | 2 | | | $ | 3,915 | |
| | | | | | | | | | | | | | | | | |
Balance at July 30, 2023 | 323 | | | $ | 12 | | | (25) | | | $ | (1,219) | | | $ | 420 | | | $ | 4,451 | | | $ | (3) | | | $ | 2 | | | $ | 3,663 | |
Net earnings (loss) | | | | | | | | | | | 570 | | | | | — | | | 570 | |
Other comprehensive income (loss) | | | | | | | | | | | | | (12) | | | — | | | (12) | |
Dividends ($1.11 per share) | | | | | | | | | | | (336) | | | | | | | (336) | |
Replacement share-based awards issued in connection with Sovos Brands, Inc. acquisition(1) | | | | | | | | | 42 | | | | | | | | | 42 | |
Treasury stock purchased | | | | | (1) | | | (46) | | | | | | | | | | | (46) | |
Treasury stock issued under stock-based compensation plans | | | | | 1 | | | 75 | | | (41) | | | — | | | | | | | 34 | |
Balance at April 28, 2024 | 323 | | | $ | 12 | | | (25) | | | $ | (1,190) | | | $ | 421 | | | $ | 4,685 | | | $ | (15) | | | $ | 2 | | | $ | 3,915 | |
(1) See Note 3 for additional information.
See accompanying Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
(unaudited)
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 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 30, 2023.
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 July 28, 2024.
2. Recent Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board (FASB) issued guidance that enhances the transparency of supplier finance programs by requiring disclosure of the key terms of these programs and a related rollforward of these obligations to understand the effect on working capital, liquidity and cash flows. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods in those fiscal years, except for the rollforward requirement, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We adopted the guidance in the fourth quarter of 2023, with the exception of the rollforward information. The adoption did not have a material impact on our consolidated financial statements. See Note 17 for additional information.
In November 2023, the FASB issued guidance to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment and contains other disclosure requirements. The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
In December 2023, the FASB issued guidance to improve income tax disclosures by requiring disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
3.Acquisition
On August 7, 2023, we entered into a merger agreement to acquire Sovos Brands, Inc. (Sovos Brands) for $23.00 per share. On March 12, 2024, we completed the acquisition. Sovos Brands' portfolio includes a variety of pasta sauces, dry pasta, soups, frozen entrées, frozen pizza and yogurts, all of which are sold in North America under the brand names Rao’s, Michael Angelo’s and noosa. Total purchase consideration was $2.899 billion, which was determined as follows:
| | | | | | | | | | | |
(Millions) | | | |
Cash consideration paid to Sovos Brands shareholders(1) | | | $ | 2,307 |
Cash paid for share-based awards(2) | | | 32 |
Cash consideration paid directly to shareholders | | | $ | 2,339 |
Cash paid for transaction costs of Sovos Brands | | | 32 |
Repayment of Sovos Brands existing indebtedness and accrued interest | | | 486 |
Total cash consideration | | | $ | 2,857 |
Fair value of replacement share-based awards(3) | | | 42 |
Total consideration | | | $ | 2,899 |
___________________________________________(1) Consideration paid to Sovos Brands shareholders which reflects $23.00 per share.
(2) Represents cash paid to equity award holders of Sovos Brands restricted stock and restricted stock unit awards attributable to pre-combination service. This excludes $3 million of cash paid that was recognized as expense.
(3) We issued replacement equity awards in settlement of certain Sovos Brands equity awards that did not become vested in connection with the acquisition. The portion of fair value of the replacement awards attributable to pre-combination service was $42 million and is included in the purchase consideration. We recognized $26 million of expense related to accelerated vesting of certain replacement awards.
The cash portion of the acquisition was funded through a Delayed Draw Term Loan Credit Agreement (the 2024 DDTL Credit Agreement) of $2 billion and cash on hand. See Note 11 for additional information.
The table below presents the fair value that was allocated to acquired assets and assumed liabilities:
| | | | | | | | | | |
(Millions) | | Estimated Fair Value | | |
Cash | | $ | 240 | | | |
Accounts receivable | | 96 | | | |
Inventories | | 130 | | | |
Other current assets | | 5 | | | |
Plant assets | | 102 | | | |
| | | | |
Other intangible assets | | 1,785 | | | |
Other assets | | 16 | | | |
Total assets acquired | | $ | 2,374 | | |
Accounts payable | | $ | 96 | | | |
Accrued liabilities | | 56 | | | |
Accrued income taxes | | 1 | | | |
Long-term debt | | 9 | | | |
Deferred taxes | | 412 | | | |
Other liabilities | | 11 | | | |
Total liabilities assumed | | $ | 585 | | | |
Net assets acquired | | $ | 1,789 | | | |
Goodwill | | 1,110 | | | |
Total consideration | | $ | 2,899 | | | |
The excess of the purchase price over the estimated fair values of identifiable net assets was recorded as $1.11 billion of goodwill. The goodwill is not deductible for tax purposes. The goodwill was primarily attributable to future growth opportunities, anticipated synergies, and intangible assets that did not qualify for separate recognition. The goodwill is included in the Meals & Beverages segment.
The purchase price allocation of Sovos Brands is preliminary and is subject to the finalization of certain items, including valuations and tax balances, which will be completed within the allowable measurement period.
The identifiable intangible assets of Sovos Brands consist of:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions) | | Type | | Life in Years | | Value | | |
Trademarks | | Non-amortizable | | Indefinite | | $ | 1,470 | | | |
Trademarks | | Amortizable | | 20 | | 83 | | | |
Customer relationships | | Amortizable | | 20 | to | 30 | | 232 | | | |
Total identifiable intangible assets | | | | | | | | $ | 1,785 | | | |
As of April 28, 2024, Sovos Brands amortizable intangible assets had a weighted-average remaining useful life of 27 years.
We incurred transaction costs and integration costs, including costs to achieve synergies, of $95 million and $114 million associated with the Sovos Brands acquisition in the three- and nine-month periods ended April 28, 2024, respectively. Approximately $16 million in the three-month period and $35 million in the nine-month period represented transaction costs, including outside advisory costs, recorded in Other expenses / (income). In the three-month period ended April 28, 2024, we recognized $2 million in Interest expense related to financing fees associated with the 2024 DDTL Credit Agreement. Integration costs included expenses associated with accelerated vesting of replacement awards, severance and retention bonuses, amortization of the acquisition date fair value adjustment to inventories and other costs. Integration costs recognized in the three-month period ended April 28, 2024 included the following:
•$18 million in Costs of products sold, $17 million of which related to the amortization of the acquisition date fair value adjustment to inventories;
•$2 million of Marketing and selling expenses;
•$39 million of Administrative expenses;
•$2 million of Research and development expenses; and
•$16 million of Restructuring charges to achieve synergies. See Note 7 for additional information.
For the period March 12, 2024 through April 28, 2024, the Sovos Brands acquisition contributed $166 million to Net sales and a loss of $75 million to Net earnings, including the effect of transaction and integration costs and interest expense on the debt to finance the acquisition.
The following unaudited summary information is presented on a consolidated pro forma basis as if the Sovos Brands acquisition had occurred on August 1, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(Millions) | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 |
| | | | | | | | |
Net sales | | $ | 2,510 | | | $ | 2,472 | | | $ | 8,061 | | | $ | 8,023 | |
Net earnings attributable to Campbell Soup Company | | $ | 184 | | | $ | 141 | | | $ | 595 | | | $ | 532 | |
| | | | | | | | |
| | | | | | | | |
The pro forma results are not necessarily indicative of the combined results had the Sovos Brands acquisition been completed on August 1, 2022, nor are they indicative of future combined results. The pro forma amounts include adjustments to interest expense for financing the acquisition, to amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and plant assets, and related tax effects. The pro forma results include adjustments to reflect amortization of the acquisition date fair value adjustment to inventories, expenses related to accelerated vesting of replacement awards and severance and retention bonuses as of August 1, 2022.
4. Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions) | | Foreign Currency Translation Adjustments(1) | | Cash-Flow Hedges(2) | | Pension and Postretirement Benefit Plan Adjustments(3) | | Total Accumulated Comprehensive Income (Loss) |
Balance at July 31, 2022 | | $ | — | | | $ | — | | | $ | 2 | | | $ | 2 | |
Other comprehensive income (loss) before reclassifications | | (7) | | | 5 | | | — | | | (2) | |
Losses (gains) reclassified from accumulated other comprehensive income (loss) | | — | | | (6) | | | — | | | (6) | |
Net current-period other comprehensive income (loss) | | (7) | | | (1) | | | — | | | (8) | |
Balance at April 30, 2023 | | $ | (7) | | | $ | (1) | | | $ | 2 | | | $ | (6) | |
| | | | | | | | |
Balance at July 30, 2023 | | $ | (1) | | | $ | (4) | | | $ | 2 | | | $ | (3) | |
Other comprehensive income (loss) before reclassifications | | (6) | | | (5) | | | — | | | (11) | |
Losses (gains) reclassified from accumulated other comprehensive income (loss) | | — | | | (1) | | | — | | | (1) | |
Net current-period other comprehensive income (loss) | | (6) | | | (6) | | | — | | | (12) | |
Balance at April 28, 2024 | | $ | (7) | | | $ | (10) | | | $ | 2 | | | $ | (15) | |
_____________________________________
(1)Included no tax as of April 28, 2024, July 30, 2023, April 30, 2023 and July 31, 2022.
(2)Included a tax benefit of $3 million as of April 28, 2024 and $1 million as of July 30, 2023, and no tax as of April 30, 2023 and July 31, 2022.
(3)Included tax expense of $1 million as of April 28, 2024, July 30, 2023, April 30, 2023 and July 31, 2022.
Amounts related to noncontrolling interests were not material.
The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
(Millions) | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 | | Location of Loss (Gain) Recognized in Earnings |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Losses (gains) on cash-flow hedges: | | | | | | | | | | |
Commodity contracts | | $ | — | | | $ | — | | | $ | — | | | $ | (3) | | | Cost of products sold |
Foreign exchange contracts | | — | | | (2) | | | (2) | | | (6) | | | Cost of products sold |
| | | | | | | | | | |
| | | | | | | | | | |
Forward starting interest rate swaps | | — | | | — | | | 1 | | | 1 | | | Interest expense |
Total before tax | | — | | | (2) | | | (1) | | | (8) | | | |
Tax expense (benefit) | | — | | | 1 | | | — | | | 2 | | | |
Loss (gain), net of tax | | $ | — | | | $ | (1) | | | $ | (1) | | | $ | (6) | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
5. Goodwill and Intangible Assets
Goodwill
The following table shows the changes in the carrying amount of goodwill:
| | | | | | | | | | | | | | | | | |
(Millions) | Meals & Beverages | | Snacks | | Total |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Net balance at July 30, 2023 | $ | 990 | | | $ | 2,975 | | | $ | 3,965 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Acquisition(1) | 1,110 | | | — | | | 1,110 | |
Foreign currency translation adjustment | (3) | | | — | | | (3) | |
Net balance at April 28, 2024 | $ | 2,097 | | | $ | 2,975 | | | $ | 5,072 | |
____________________________________(1)On March 12, 2024, we acquired Sovos Brands. See Note 3 for additional information.
Intangible Assets
The following table summarizes balance sheet information for intangible assets, excluding goodwill:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | April 28, 2024 | | July 30, 2023 | |
(Millions) | | Cost | | Accumulated Amortization | | Net | | Cost | | Accumulated Amortization | | Net | |
Amortizable intangible assets | | | | | | | | | | | | | |
Customer relationships | | $ | 1,062 | | | $ | (281) | | | $ | 781 | | | $ | 830 | | | $ | (229) | | | $ | 601 | | |
Definite-lived trademarks | | 83 | | — | | | 83 | | | — | | | — | | | — | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total amortizable intangible assets | | $ | 1,145 | | | $ | (281) | | | $ | 864 | | | $ | 830 | | | $ | (229) | | | $ | 601 | | |
Indefinite-lived trademarks | | | | | | | | | | | | | |
Rao's | | | | | | $ | 1,470 | | | | | | | $ | — | | |
Snyder's of Hanover | | | | | | 620 | | | | | | | 620 | | |
Lance | | | | | | 350 | | | | | | | 350 | | |
Kettle Brand | | | | | | 318 | | | | | | | 318 | | |
Pace | | | | | | 292 | | | | | | | 292 | | |
Pacific Foods | | | | | | 280 | | | | | | | 280 | | |
Cape Cod | | | | | | 187 | | | | | | | 187 | | |
Various other Snacks(1) | | | | | | 494 | | | | | | | 494 | | |
Total indefinite-lived trademarks | | | | | | $ | 4,011 | | | | | | | $ | 2,541 | | |
Total net intangible assets | | | | | | $ | 4,875 | | | | | | | $ | 3,142 | | |
____________________________________
(1)Associated with the acquisition of Snyder's-Lance, Inc. (Snyder's-Lance).
As part of the Sovos Brands acquisition, we acquired the Rao's indefinite-lived trademark of $1.47 billion, customer relationship intangible assets of $232 million and definite-lived trademarks of $83 million. See Note 3 for additional information.
Amortization expense was $52 million for the nine-month period ended April 28, 2024, and $31 million for the nine-month period ended April 30, 2023. Amortization expense in 2024 included $20 million of accelerated amortization expense on customer relationships, which began in the fourth quarter of 2023 due to the loss of certain contract manufacturing customers. As of April 28, 2024, amortizable intangible assets had a weighted-average remaining useful life of 19 years. Amortization expense is estimated to be approximately $73 million in 2024, $72 million in 2025 and $46 million per year for the following three years.
As of our 2023 annual impairment testing, indefinite-lived trademarks with approximately 10% or less of excess coverage of fair value over carrying value had an aggregate carrying value of $434 million and included Pacific Foods and certain other Snacks trademarks. The indefinite-lived trademark related to the Sovos Brands acquisition has been recorded at fair value.
The estimates of future cash flows used in determining the fair value of goodwill and intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance and economic conditions.
6. Segment Information
Our reportable segments are as follows:
•Meals & Beverages, which consists of our soup, simple meals and beverages products in retail and foodservice 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 and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; V8 juices and beverages; Campbell’s tomato juice; and as of March 12, 2024, Rao's pasta sauces, dry pasta, frozen entrées, frozen pizza and soups; Michael Angelo's frozen entrées and pasta sauces; and noosa yogurts. The segment also includes snacking products in foodservice and Canada; and
•Snacks, which consists of Pepperidge Farm cookies*, crackers, fresh bakery and frozen products, including Goldfish crackers*, Snyder’s of Hanover pretzels*, Lance sandwich crackers*, Cape Cod potato chips*, Kettle Brand potato chips*, Late July snacks*, Snack Factory pretzel crisps*, Pop Secret popcorn, and other snacking products in retail in the U.S. We refer to the * brands as our "power brands." The segment also includes the retail business in Latin America. The segment included the results of our Emerald nuts business, which was sold on May 30, 2023.
We evaluate segment performance before interest, taxes and costs associated with restructuring activities, cost savings and optimization initiatives, impairment charges and corporate expenses. Unrealized gains and losses on outstanding undesignated commodity hedging activities are excluded from segment operating earnings and are recorded in Corporate as these open positions represent hedges of future purchases. Upon closing of the contracts, the realized gain or loss is transferred to segment operating earnings, which allows the segments to reflect the economic effects of the hedge without exposure to quarterly volatility of unrealized gains and losses. Only the service cost component of pension and postretirement expense is allocated to segments. All other components of expense, including interest cost, expected return on assets, amortization of prior service credits and recognized actuarial gains and losses are reflected in Corporate and not included in segment operating results. Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(Millions) | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 |
Net sales | | | | | | | | |
Meals & Beverages | | $ | 1,272 | | | $ | 1,108 | | | $ | 4,058 | | | $ | 3,971 | |
Snacks | | 1,097 | | | 1,121 | | | 3,285 | | | 3,318 | |
Total | | $ | 2,369 | | | $ | 2,229 | | | $ | 7,343 | | | $ | 7,289 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(Millions) | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 |
Earnings before interest and taxes | | | | | | | | |
Meals & Beverages | | $ | 229 | | | $ | 182 | | | $ | 763 | | | $ | 762 | |
Snacks | | 167 | | | 179 | | | 489 | | | 482 | |
Corporate income (expense)(1) | | (135) | | | (101) | | | (312) | | | (189) | |
Restructuring charges(2) | | (13) | | | (6) | | | (17) | | | (15) | |
Total | | $ | 248 | | | $ | 254 | | | $ | 923 | | | $ | 1,040 | |
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(1)Represents unallocated items. Costs related to cost savings and optimization initiatives were $23 million and $68 million in the three- and nine-month periods ended April 28, 2024, and $27 million and $35 million in the three- and nine-month periods ended April 30, 2023, respectively. Unrealized mark-to-market adjustments on outstanding undesignated commodity hedges were gains of $13 million and $5 million in the three- and nine-month periods ended April 28, 2024, and losses of $9 million in the three- and nine-month periods ended April 30, 2023, respectively. Accelerated amortization expense related to customer relationship intangible assets was $6 million and $20 million in the three- and nine-month periods ended April 28, 2024, respectively. Costs of $77 million and $96 million associated with the acquisition of Sovos Brands were included in the three- and nine-month periods ended April 28, 2024, respectively. Litigation expenses related to the Plum baby food and snacks business, which was divested on May 3, 2021, were $3 million and were included in the nine-month period ended April 28, 2024. Costs of $3 million related to a cybersecurity incident were included in the nine-month period ended April 28, 2024. There were pension actuarial losses of $17 million and $26 million in the three- and nine-month periods ended April 30, 2023, respectively.
(2)See Note 7 for additional information.
Our net sales based on product categories are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(Millions) | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 |
Net sales | | | | | | | | |
Soup | | $ | 577 | | | $ | 571 | | | $ | 2,278 | | | $ | 2,316 | |
Snacks | | 1,152 | | | 1,169 | | | 3,452 | | | 3,463 | |
Other simple meals | | 458 | | | 291 | | | 1,077 | | | 927 | |
Beverages | | 182 | | | 198 | | | 536 | | | 583 | |
Total | | $ | 2,369 | | | $ | 2,229 | | | $ | 7,343 | | | $ | 7,289 | |
Soup includes various soup, broths and stock products. Snacks include cookies, pretzels, crackers, popcorn, potato chips, tortilla chips and other salty snacks and baked products. Other simple meals include sauces, yogurts, pasta, frozen entrées, canned poultry, frozen pizza, gravies and beans. Beverages include V8 juices and beverages, Campbell’s tomato juice and Pacific Foods non-dairy beverages.
7. Restructuring Charges, Cost Savings Initiatives and Other Optimization Initiatives
Multi-year Cost Savings Initiatives and Snyder's-Lance Cost Transformation Program and Integration
Continuing Operations
Beginning in fiscal 2015, we implemented initiatives to reduce costs and to streamline our organizational structure.
Over the years, we expanded these initiatives by continuing to optimize our supply chain and manufacturing networks, as well as our information technology infrastructure.
On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to the acquisition, Snyder's-Lance launched a cost transformation program following a comprehensive review of its operations with the goal of significantly improving its financial performance. We continued to implement this program and identified opportunities for additional cost synergies as we integrated Snyder's-Lance.
In 2022, we expanded these initiatives as we continue to pursue cost savings by further optimizing our supply chain and manufacturing network and through effective cost management. In the second quarter of 2023, we announced plans to consolidate our Snacks offices in Charlotte, North Carolina, and Norwalk, Connecticut, into our headquarters in Camden, New Jersey. Cost estimates for these expanded initiatives, as well as timing for certain activities, are continuing to be developed.
A summary of the pre-tax charges recognized in the Consolidated Statements of Earnings related to these initiatives is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | |
(Millions) | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 | | Recognized as of April 28, 2024 |
Restructuring charges | $ | (3) | | | $ | 6 | | | $ | 1 | | | $ | 15 | | | $ | 281 | |
Administrative expenses | 13 | | | 13 | | | 47 | | | 21 | | | 430 | |
Cost of products sold | 3 | | | 12 | | | 9 | | | 12 | | | 111 | |
Marketing and selling expenses | 1 | | | — | | | 4 | | | — | | | 23 | |
Research and development expenses | 1 | | | 2 | | | 3 | | | 2 | | | 10 | |
Total pre-tax charges | $ | 15 | | | $ | 33 | | | $ | 64 | | | $ | 50 | | | $ | 855 | |
A summary of the pre-tax costs associated with the initiatives is as follows: | | | | | |
(Millions) | Recognized as of April 28, 2024 |
Severance pay and benefits | $ | 241 | |
Asset impairment/accelerated depreciation | 124 | |
Implementation costs and other related costs | 490 | |
Total | $ | 855 | |
The total estimated pre-tax costs for actions that have been identified are approximately $905 million to $930 million and we expect to incur substantially all of the costs through 2025. These estimates will be updated as the expanded initiatives are developed.
We expect the costs for actions that have been identified to date to consist of the following: approximately $250 million to $255 million in severance pay and benefits; approximately $140 million in asset impairment and accelerated depreciation; and approximately $515 million to $535 million in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Meals & Beverages - approximately 33%; Snacks - approximately 43%; and Corporate - approximately 24%.
Of the aggregate $905 million to $930 million of pre-tax costs identified to date, we expect approximately $725 million to $750 million will be cash expenditures. In addition, we expect to invest approximately $705 million in capital expenditures, of which we invested $508 million as of April 28, 2024. We expect to invest in substantially all of the capital expenditures through 2025. The capital expenditures primarily relate to optimization of production within our Meals & Beverages manufacturing network, a U.S. warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, optimization of information technology infrastructure and applications, enhancements to our headquarters in Camden, New Jersey, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, and optimization of the Snyder’s-Lance warehouse and distribution network.
A summary of the restructuring activity and related reserves at April 28, 2024, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions) | | Severance Pay and Benefits | | | | | | Implementation Costs and Other Related Costs(3) | | Asset Impairment/Accelerated Depreciation | | Other Non-Cash Exit Costs(4) | | Total Charges |
Accrued balance at July 30, 2023(1) | | $ | 13 | | | | | | | | | | | | | |
2024 charges | | 1 | | | | | | | 27 | | | 18 | | | 18 | | | $ | 64 | |
2024 cash payments | | (7) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Accrued balance at April 28, 2024(2) | | $ | 7 | | | | | | | | | | | | | |
__________________________________
(1)Includes $7 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
(2)Includes $4 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
(3)Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses, Cost of products sold, Marketing and selling expenses and Research and development expenses in the Consolidated Statements of Earnings.
(4)Includes non-cash costs that are not reflected in the restructuring reserve in the Consolidated Balance Sheet.
Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs associated with segments is as follows:
| | | | | | | | | | | | | | | | | |
| April 28, 2024 |
(Millions) | Three Months Ended | | Nine Months Ended | | Costs Incurred to Date |
Meals & Beverages | $ | 7 | | | $ | 16 | | | $ | 267 | |
Snacks | — | | | 30 | | | 375 | |
Corporate | 8 | | | 18 | | | 213 | |
Total | $ | 15 | | | $ | 64 | | | $ | 855 | |
Other Optimization Initiatives
In the second quarter of 2024, we began implementation of a new initiative to improve the effectiveness of our Snacks direct-store-delivery route-to-market network. Pursuant to this initiative we will purchase certain Pepperidge Farm and Snyder's-Lance routes where there are opportunities to unlock greater scale in select markets, combine them and sell the combined routes to independent contractor distributors. We expect to execute this program in a staggered rollout and to incur expenses of up to approximately $115 million through 2029. In the three-month period ended April 28, 2024, we incurred $5 million in Marketing and selling expenses related to this initiative.
Sovos Brands Integration Initiatives
On March 12, 2024, we completed the acquisition of Sovos Brands. See Note 3 for additional information. We have identified opportunities for cost synergies as we integrate Sovos Brands. Cost estimates to achieve the synergies are continuing to be developed. The total expected pre-tax costs and timing of when we expect to incur those costs, as well as the expected future cash expenditures, will be updated as detailed plans are developed. We expect the pre-tax costs to be associated primarily with the Meals & Beverages segment.
In the three-month period ended April 28, 2024, we recorded Restructuring charges of $16 million related to initiatives to achieve the synergies.
A summary of the restructuring activity and related reserves associated with the Sovos Brands integration at April 28, 2024, is as follows:
| | | | | | | | | |
(Millions) | Severance Pay and Benefits | | | | |
2024 charges | $ | 16 | | | | | |
2024 cash payments | — | | | | | |
Accrued balance at April 28, 2024(1) | $ | 16 | | | | | |
__________________________________
(1)Includes $5 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
Segment operating results do not include restructuring charges, nor implementation and integration costs, because we evaluate segment performance excluding such charges. The costs incurred in the three-month period ended April 28, 2024 were associated with the Meals & Beverages segment.
8. Earnings per Share (EPS)
For the periods presented in the Consolidated Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution include the incremental effect of stock options and other share-based payment awards, except when such effect would be antidilutive. The earnings per share calculation for the three- and nine-month periods ended April 28, 2024 and April 30, 2023, excludes less than 1 million stock options that would have been antidilutive.
9. Pension and Postretirement Benefits
Components of net periodic benefit expense (income) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | |
| Pension | | Postretirement | | Pension | | Postretirement | | | |
(Millions) | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 | | April 28, 2024 | | April 30, 2023 | | | | | | | | |
Service cost | $ | 4 | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 10 | | | $ | 10 | | | $ | — | | | $ | — | | | | | | | | | |
Interest cost | 16 | | | 19 | | | |