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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
____________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended
February 1, 2015
Commission File Number
1-3822

CAMPBELL SOUP COMPANY 

New Jersey
21-0419870
State of Incorporation
I.R.S. Employer Identification No.

1 Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices

Telephone Number: (856) 342-4800
__________________________________________________

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. R Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted 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 and post such files). R Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller  reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes R No

There were 311,790,489 shares of capital stock outstanding as of March 6, 2015.









TABLE OF CONTENTS

PART I
 
 
Item 1. Financial Information
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
Item 4. Controls and Procedures
PART II
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 6. Exhibits
SIGNATURES
INDEX TO EXHIBITS


2






PART I

Item 1. Financial Information
CAMPBELL SOUP COMPANY
Consolidated Statements of Earnings
(unaudited)
(millions, except per share amounts)
 
 
Three Months Ended
 
Six Months Ended
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
Net sales
$
2,234

 
$
2,281

 
$
4,489

 
$
4,446

Costs and expenses
 
 
 
 
 
 
 
Cost of products sold
1,506

 
1,467

 
2,978

 
2,855

Marketing and selling expenses
242

 
268

 
489

 
529

Administrative expenses
140

 
142

 
275

 
290

Research and development expenses
27

 
27

 
56

 
58

Other expenses / (income)
7

 
3

 
11

 
14

Restructuring charges

 
13

 

 
34

Total costs and expenses
1,922

 
1,920

 
3,809

 
3,780

Earnings before interest and taxes
312

 
361

 
680

 
666

Interest expense
26

 
29

 
52

 
60

Interest income
1

 

 
2

 
1

Earnings before taxes
287

 
332

 
630

 
607

Taxes on earnings
80

 
104

 
189

 
199

Earnings from continuing operations
207

 
228

 
441

 
408

Earnings from discontinued operations

 
90

 

 
81

Net earnings
207

 
318

 
441

 
489

Less: Net earnings (loss) attributable to noncontrolling interests

 
(7
)
 

 
(8
)
Net earnings attributable to Campbell Soup Company
$
207

 
$
325

 
$
441

 
$
497

Per Share — Basic
 
 
 
 
 
 
 
Earnings from continuing operations attributable to Campbell Soup Company
$
.66

 
$
.75

 
$
1.41

 
$
1.32

Earnings from discontinued operations

 
.29

 

 
.26

Net earnings attributable to Campbell Soup Company
$
.66

 
$
1.04

 
$
1.41

 
$
1.58

Dividends
$
.312

 
$
.312

 
$
.624

 
$
.624

Weighted average shares outstanding — basic
313

 
314

 
313

 
314

Per Share — Assuming Dilution
 
 
 
 
 
 
 
Earnings from continuing operations attributable to Campbell Soup Company
$
.66

 
$
.74

 
$
1.40

 
$
1.32

Earnings from discontinued operations

 
.28

 

 
.26

Net earnings attributable to Campbell Soup Company
$
.66

 
$
1.03

 
$
1.40

 
$
1.57

Weighted average shares outstanding — assuming dilution
314

 
316

 
314

 
316

The sum of the individual per share amounts may not add due to rounding.
See accompanying Notes to Consolidated Financial Statements.

3






CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions)
 
Three Months Ended
 
February 1, 2015
 
January 26, 2014
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
207

 
 
 
 
 
$
318

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(167
)
 
$
1

 
(166
)
 
$
(117
)
 
$
1

 
(116
)
Reclassification of currency translation adjustments realized upon disposal of business

 

 

 
(22
)
 
3

 
(19
)
Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(32
)
 
13

 
(19
)
 
4

 
(1
)
 
3

Reclassification adjustment for (gains) losses included in net earnings

 

 

 

 

 

Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during the period
13

 
(5
)
 
8

 
8

 
(2
)
 
6

Reclassification of prior service credit included in net earnings
(1
)
 

 
(1
)
 
(1
)
 

 
(1
)
Reclassification of net actuarial loss included in net earnings
24

 
(7
)
 
17

 
25

 
(8
)
 
17

Other comprehensive income (loss)
$
(163
)
 
$
2

 
(161
)
 
$
(103
)
 
$
(7
)
 
(110
)
Total comprehensive income (loss)
 
 
 
 
$
46

 
 
 
 
 
$
208

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 

 
 
 
 
 
(7
)
Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
46

 
 
 
 
 
$
215

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
February 1, 2015
 
January 26, 2014
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
441

 
 
 
 
 
$
489

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(250
)
 
$
1

 
(249
)
 
$
(69
)
 
$
(1
)
 
(70
)
Reclassification of currency translation adjustments realized upon disposal of business

 

 

 
(22
)
 
3

 
(19
)
Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during period
(33
)
 
13

 
(20
)
 
1

 

 
1

Reclassification adjustment for (gains) losses included in net earnings
1

 

 
1

 

 

 

Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during the period
17

 
(6
)
 
11

 
8

 
(2
)
 
6

Reclassification of prior service credit included in net earnings
(1
)
 

 
(1
)
 
(1
)
 

 
(1
)
Reclassification of net actuarial loss included in net earnings
48

 
(16
)
 
32

 
47

 
(16
)
 
31

Other comprehensive income (loss)
$
(218
)
 
$
(8
)
 
(226
)
 
$
(36
)
 
$
(16
)
 
(52
)
Total comprehensive income (loss)
 
 
 
 
$
215

 
 
 
 
 
$
437

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 

 
 
 
 
 
(9
)
Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
215

 
 
 
 
 
$
446

See accompanying Notes to Consolidated Financial Statements.

4






CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts)
 
February 1,
2015
 
August 3,
2014
Current assets
 
 
 
Cash and cash equivalents
$
201

 
$
232

Accounts receivable, net
794

 
670

Inventories
916

 
1,016

Other current assets
179

 
182

Total current assets
2,090

 
2,100

Plant assets, net of depreciation
2,257

 
2,318

Goodwill
2,271

 
2,433

Other intangible assets, net of amortization
1,139

 
1,175

Other assets
146

 
87

Total assets
$
7,903

 
$
8,113

Current liabilities
 
 
 
Short-term borrowings
$
1,640

 
$
1,771

Payable to suppliers and others
510

 
527

Accrued liabilities
541

 
553

Dividend payable
100

 
101

Accrued income taxes
59

 
37

Total current liabilities
2,850

 
2,989

Long-term debt
2,253

 
2,244

Deferred taxes
547

 
548

Other liabilities
739

 
729

Total liabilities
6,389

 
6,510

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
316

 
330

Earnings retained in the business
2,441

 
2,198

Capital stock in treasury, at cost
(448
)
 
(356
)
Accumulated other comprehensive loss
(795
)
 
(569
)
Total Campbell Soup Company shareholders' equity
1,526

 
1,615

Noncontrolling interests
(12
)
 
(12
)
Total equity
1,514

 
1,603

Total liabilities and equity
$
7,903

 
$
8,113

See accompanying Notes to Consolidated Financial Statements.


5






CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
 
Six Months Ended
 
February 1,
2015
 
January 26,
2014
Cash flows from operating activities:
 
 
 
Net earnings
$
441

 
$
489

Adjustments to reconcile net earnings to operating cash flow
 
 
 
Restructuring charges

 
34

Stock-based compensation
31

 
37

Depreciation and amortization
149

 
148

Deferred income taxes
1

 
13

Gain on sale of business

 
(141
)
Other, net
46

 
44

Changes in working capital
 
 
 
Accounts receivable
(125
)
 
(177
)
Inventories
71

 
65

Prepaid assets
(3
)
 
(17
)
Accounts payable and accrued liabilities
(16
)
 
(42
)
Pension fund contributions
(2
)
 
(44
)
Receipts from (payments of) hedging activities
9

 
(22
)
Other
(18
)
 
(24
)
Net cash provided by operating activities
584

 
363

Cash flows from investing activities:
 
 
 
Purchases of plant assets
(143
)
 
(127
)
Sales of plant assets
8

 
20

Business acquired, net of cash acquired

 
(329
)
Sale of business, net of cash divested

 
534

Other, net
(8
)
 
(1
)
Net cash provided by (used in) investing activities
(143
)
 
97

Cash flows from financing activities:
 
 
 
Net short-term borrowings (repayments)
171

 
(4
)
Repayments of notes payable
(300
)
 
(300
)
Dividends paid
(199
)
 
(195
)
Treasury stock purchases
(133
)
 
(76
)
Treasury stock issuances
8

 
7

Excess tax benefits on stock-based compensation
5

 
10

Contribution from noncontrolling interest

 
5

Net cash used in financing activities
(448
)
 
(553
)
Effect of exchange rate changes on cash
(24
)
 
(15
)
Net change in cash and cash equivalents
(31
)
 
(108
)
Cash and cash equivalents continuing operations — beginning of period
232

 
333

Cash and cash equivalents discontinued operations — beginning of period

 
68

Cash and cash equivalents discontinued operations — end of period

 

Cash and cash equivalents continuing operations — end of period
$
201

 
$
293

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 28, 2013
323

 
$
12

 
(11
)
 
$
(364
)
 
$
362

 
$
1,772

 
$
(565
)
 
$
(7
)
 
$
1,210

Contribution from noncontrolling interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5

 
5

Net earnings (loss)

 

 

 

 

 
497

 

 
(8
)
 
489

Other comprehensive income (loss)

 

 

 

 

 

 
(51
)
 
(1
)
 
(52
)
Dividends ($.624 per share)

 

 

 

 

 
(196
)
 

 

 
(196
)
Treasury stock purchased

 

 
(2
)
 
(76
)
 

 

 

 

 
(76
)
Treasury stock issued under management incentive and stock option plans
 
 
 
 
2

 
66

 
(47
)
 
 
 
 
 
 
 
19

Balance at January 26, 2014
323

 
$
12

 
(11
)
 
$
(374
)
 
$
315

 
$
2,073

 
$
(616
)
 
$
(11
)
 
$
1,399

Balance at August 3, 2014
323

 
$
12

 
(10
)
 
$
(356
)
 
$
330

 
$
2,198

 
$
(569
)
 
$
(12
)
 
$
1,603

Net earnings (loss)

 

 

 

 

 
441

 

 

 
441

Other comprehensive income (loss)

 

 

 

 

 

 
(226
)
 

 
(226
)
Dividends ($.624 per share)

 

 

 

 

 
(198
)
 

 

 
(198
)
Treasury stock purchased

 

 
(3
)
 
(133
)
 

 

 

 

 
(133
)
Treasury stock issued under management incentive and stock option plans


 


 
2

 
41

 
(14
)
 


 


 

 
27

Balance at February 1, 2015
323

 
$
12

 
(11
)
 
$
(448
)
 
$
316

 
$
2,441

 
$
(795
)
 
$
(12
)
 
$
1,514

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" and "our" refer to Campbell Soup Company and its consolidated subsidiaries.
The financial statements reflect all adjustments which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. The accounting policies used in preparing these financial statements are substantially consistent with those applied in our Annual Report on Form 10-K for the year ended August 3, 2014. 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. There were 53 weeks in 2014. There will be 52 weeks in 2015.
2.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued guidance for the recognition, measurement and disclosure of certain obligations resulting from joint and several liability arrangements for which the total amount is fixed. Such obligations may include debt arrangements, legal settlements, and other contractual arrangements. The guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and should be applied retrospectively to all prior periods presented for applicable obligations that existed as of the beginning of the fiscal year of adoption. We adopted the guidance in the first quarter of 2015. The adoption did not have an impact on our consolidated financial statements.
In March 2013, the FASB issued guidance on the accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The guidance was effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We adopted the guidance in the first quarter of 2015. The adoption did not have an impact on our consolidated financial statements.
In July 2013, the FASB issued guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance requires the netting of unrecognized tax benefits (UTBs) against a deferred tax asset for a loss or other carryforward that would apply in settlement of uncertain tax positions. Under the new standard, UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. The guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and should be applied prospectively to all UTBs that exist at the effective date. We adopted the guidance prospectively in the first quarter of 2015. The adoption did not have a material impact on our consolidated financial statements.
In April 2014, the FASB issued revised guidance that modifies the criteria for determining which disposals can be presented as discontinued operations and requires additional disclosures. The guidance is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted. We will prospectively apply the guidance to applicable transactions.
In May 2014, the FASB issued revised guidance on the recognition of revenue from contracts with customers. The guidance is designed to create greater comparability for financial statement users across industries and jurisdictions. The guidance also requires enhanced disclosures. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. The guidance permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
3.
Acquisitions
On August 8, 2013, we completed the acquisition of Kelsen Group A/S (Kelsen). The final all-cash purchase price was $331. Kelsen is a producer of quality baked snacks that are sold in approximately 85 countries around the world. Its primary brands include Kjeldsens and Royal Dansk.
For the three-month period ended January 26, 2014, the Kelsen acquisition contributed $92 to Net sales and $11 to Net earnings. The acquisition also contributed $144 to Net sales and $11 to Net earnings from August 8, 2013 to January 26, 2014.

8






The following unaudited summary information is presented on a consolidated pro forma basis as if the Kelsen acquisition had occurred on July 30, 2012:
 
 
Six Months Ended
 
 
January 26, 2014
Net sales
 
$
4,450

Earnings from continuing operations attributable to Campbell Soup Company
 
$
417

Earnings per share from continuing operations attributable to Campbell Soup Company
 
$
1.32

The pro forma amounts include additional interest expense on the debt issued to finance the purchase, 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 are not necessarily indicative of the combined results had the Kelsen acquisition been completed on July 30, 2012, nor are they indicative of future combined results.
4.
Discontinued Operations
On October 28, 2013, subsequent to the end of the first quarter of 2014, we completed the sale of our European simple meals business to Soppa Investments S.à r.l., an affiliate of CVC Capital Partners. The all-cash preliminary sale price was €400, or $548, and was subject to certain post-closing adjustments, which resulted in a $14 reduction of proceeds. We recognized a pre-tax gain of $141 ($72 after tax or $.23 per share) in 2014. We used the proceeds from the sale to pay taxes on the sale, to reduce debt and for other general corporate purposes.
We have reflected the results of the European simple meals business as discontinued operations in the Consolidated Statements of Earnings.
Results of discontinued operations were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
January 26, 2014
 
January 26, 2014
Net sales
 
$

 
$
137

Gain on sale of the European simple meals business
 
$
147

 
$
141

Earnings from operations, before taxes
 

 
14

Earnings before taxes
 
$
147

 
$
155

Taxes on earnings
 
(57
)
 
(74
)
Earnings from discontinued operations
 
$
90

 
$
81

5.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) consisted of the following:
 
 
Foreign Currency Translation Adjustments(1)
 
Gains (Losses) on Cash Flow Hedges(2)
 
Pension and Postretirement Benefit Plan Adjustments(3)
 
Total Accumulated Comprehensive Income (Loss)
Balance at August 3, 2014
 
$
137

 
$
(3
)
 
$
(703
)
 
$
(569
)
Other comprehensive income (loss) before reclassifications
 
(249
)
 
(20
)
 
11

 
(258
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
1

 
31

 
32

Net current-period other comprehensive income (loss)
 
(249
)
 
(19
)
 
42

 
(226
)
Balance at February 1, 2015
 
$
(112
)
 
$
(22
)
 
$
(661
)
 
$
(795
)
_____________________________________
(1) 
Included a tax expense of $6 as of February 1, 2015 and $7 as of August 3, 2014.
(2) 
Included a tax benefit of $14 as of February 1, 2015 and $1 as of August 3, 2014.
(3) 
Included a tax benefit of $383 as of February 1, 2015 and $405 as of August 3, 2014.
Amounts related to noncontrolling interests were not material.

9






The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following:
 
 
Three Months Ended
 
Six Months Ended
 
 
Details about Accumulated Other Comprehensive Income (Loss) Components
 
February 1, 2015
 
January 26, 2014
 
February 1, 2015
 
January 26, 2014
 
Location of (Gain) Loss Recognized in Earnings
(Gains) losses on cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
$

 
$

 
$

 
$
(1
)
 
Cost of products sold
Foreign exchange forward contracts
 
(1
)
 
(1
)
 
(1
)
 
(1
)
 
Other expenses / (income)
Forward starting interest rate swaps
 
1

 
1

 
2

 
2

 
Interest expense
Total before tax
 

 

 
1

 

 
 
Tax expense (benefit)
 

 

 

 

 
 
(Gain) loss, net of tax
 
$

 
$

 
$
1

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Pension and postretirement benefit adjustments:
 
 
 
 
 
 
 
 
 
 
Prior service credit
 
$
(1
)
 
$
(1
)
 
$
(1
)
 
$
(1
)
 
(1) 
Net actuarial losses
 
24

 
25

 
48

 
47

 
(1) 
Total before tax
 
23

 
24

 
47

 
46

 
 
Tax expense (benefit)
 
(7
)
 
(8
)
 
(16
)
 
(16
)
 
 
(Gain) loss, net of tax
 
$
16

 
$
16

 
$
31

 
$
30

 
 
_____________________________________
(1) 
In 2014, net actuarial losses of $2 were recognized in Earnings (loss) from discontinued operations as a result of the sale of the European simple meals business. Excluding the net actuarial losses related to the sale of the business in 2014, these items are included in the components of net periodic benefit costs (see Note 11 for additional details).
In 2014, a pre-tax loss of $22 ($19 after tax) on foreign currency translation adjustments was also reclassified from Accumulated other comprehensive income. The loss was related to the divestiture of the European simple meals business and was included in Earnings (loss) from discontinued operations.
6.
Goodwill and Intangible Assets
The following table shows the changes in the carrying amount of goodwill by business segment:
 
U.S.    
Simple
Meals
 
Global
Baking
and
Snacking
 
International
Simple Meals
and
Beverages
 
U.S.
Beverages
 
Bolthouse and Foodservice
 
Total    
Balance at August 3, 2014
$
450

 
$
918

 
$
115

 
$
112

 
$
838

 
$
2,433

Foreign currency translation adjustments

 
(145
)
 
(17
)
 

 

 
(162
)
Balance at February 1, 2015
$
450

 
$
773

 
$
98

 
$
112

 
$
838

 
$
2,271



10






The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:
Intangible Assets
 
February 1,
2015
 
August 3,
2014
Amortizable intangible assets
 
 
 
 
Customer relationships
 
$
174

 
$
178

Technology
 
40

 
40

Other
 
35

 
35

Total gross amortizable intangible assets
 
$
249

 
$
253

Accumulated amortization
 
(43
)
 
(35
)
Total net amortizable intangible assets
 
$
206

 
$
218

Non-amortizable intangible assets
 
 
 
 
Trademarks
 
933

 
957

Total net intangible assets
 
$
1,139

 
$
1,175

Non-amortizable intangible assets consist of trademarks, which include Bolthouse Farms, Pace, Plum Organics, Kjeldsens and Royal Dansk. Other amortizable intangible assets consist of recipes, patents, trademarks and distributor relationships.
Amortization of intangible assets of continuing operations was $9 for the six-month periods ended February 1, 2015 and January 26, 2014. Amortization expense for the next 5 years is estimated to be $17 in each of the fiscal periods 2015 through 2017, and $13 in 2018 and 2019. Asset useful lives range from 5 to 20 years.
7.
Business and Geographic Segment Information
We manage operations through 10 operating segments based on product type and geographic location and have aggregated the operating segments into the appropriate reportable segment based on similar economic characteristics; products; production processes; types or classes of customers; distribution methods; and regulatory environment. The reportable segments are discussed in greater detail below.
The U.S. Simple Meals segment includes the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; and Plum Organics food and snacks.
The Global Baking and Snacking segment aggregates the following operating segments: Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and as of August 8, 2013, Kelsen cookies globally.
The International Simple Meals and Beverages segment aggregates the following operating segments: the retail business in Canada and the simple meals and beverages business in Asia Pacific, Latin America, and China.
The U.S. Beverages segment represents the U.S. retail beverages business, including the following products: V8 juices and beverages; and Campbell’s tomato juice.
Bolthouse and Foodservice comprises the Bolthouse Farms carrot products operating segment, including fresh carrots, juice concentrate and fiber; the Bolthouse Farms super-premium refrigerated beverages and refrigerated salad dressings operating segment; and the North America Foodservice operating segment. The North America Foodservice operating segment represents the distribution of products such as soup, specialty entrées, beverage products, other prepared foods and Pepperidge Farm products through various food service channels in the U.S. and Canada. None of these operating segments meets the criteria for aggregation nor the thresholds for separate disclosure.
We evaluate segment performance before interest, taxes and costs associated with restructuring activities. Unrealized gains and losses on commodity hedging activities are excluded from segment operating earnings and are recorded in Corporate expenses 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. Certain manufacturing, warehousing and distribution activities of the segments are integrated in order to maximize efficiency and productivity. As a result, asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.

11






 
 
Three Months Ended
 
Six Months Ended
 
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
Net sales
 
 
 
 
 
 
 
 
U.S. Simple Meals
 
$
867

 
$
894

 
$
1,795

 
$
1,754

Global Baking and Snacking
 
640

 
639

 
1,267

 
1,248

International Simple Meals and Beverages
 
194

 
213

 
383

 
406

U.S. Beverages
 
169

 
176

 
337

 
349

Bolthouse and Foodservice
 
364

 
359

 
707

 
689

Total
 
$
2,234

 
$
2,281

 
$
4,489

 
$
4,446

 
 
Three Months Ended
 
Six Months Ended
 
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
Earnings before interest and taxes
 
 
 
 
 
 
 
 
U.S. Simple Meals
 
$
170

 
$
214

 
$
412

 
$
425

Global Baking and Snacking
 
107

 
88

 
197

 
166

International Simple Meals and Beverages
 
26

 
38

 
42

 
58

U.S. Beverages
 
20

 
31

 
46

 
55

Bolthouse and Foodservice
 
26

 
36

 
48

 
65

Corporate(1)
 
(37
)
 
(33
)
 
(65
)
 
(69
)
Restructuring charges(2)
 

 
(13
)
 

 
(34
)
Total
 
$
312

 
$
361

 
$
680

 
$
666

_______________________________________
(1) 
Represents unallocated corporate expenses. Restructuring-related costs of $2 and a loss of $9 on foreign exchange forward contracts related to the sale of the European simple meals business were included in the six-month period ended January 26, 2014.
(2) 
See Note 8 for additional information.
Our global net sales based on product categories are as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
Net sales
 
 
 
 
 
 
 
 
Simple Meals
 
$
1,290

 
$
1,329

 
$
2,601

 
$
2,563

Baked Snacks
 
669

 
670

 
1,332

 
1,315

Beverages
 
275

 
282

 
556

 
568

Total
 
$
2,234

 
$
2,281

 
$
4,489

 
$
4,446

Simple Meals include condensed and ready-to-serve soups, broths, sauces, carrot products, refrigerated salad dressings and Plum foods and snacks. Baked Snacks include cookies, crackers, biscuits and other baked products.
8.
Restructuring Charges
2014 Initiatives
In 2014, we implemented initiatives to reduce overhead across the organization, restructure manufacturing and streamline operations for our soup and broth business in China and improve supply chain efficiency in Australia. Details of the 2014 initiatives include:
We streamlined our salaried workforce in North America and our workforce in the Asia Pacific region. Approximately 250 positions were eliminated.

12






Together with our joint venture partner Swire Pacific Limited, we agreed to restructure manufacturing and streamline operations for our soup and broth business in China. As a result, certain assets were impaired, and approximately 100 positions were eliminated.
In Australia, we implemented an initiative to improve supply chain efficiency by relocating production from our biscuit plant in Marleston to Huntingwood. The relocation will continue through the second quarter of 2016 and will result in the elimination of approximately 90 positions.
We implemented an initiative to reduce overhead across the organization by eliminating approximately 85 positions. The actions will be completed in 2015.
In 2014, we recorded a restructuring charge of $54 ($33 after tax or $.10 per share in earnings from continuing operations attributable to Campbell Soup Company) related to the 2014 initiatives. Of the amounts recorded in 2014, $33 ($18 after tax or $.06 per share in earnings from continuing operations attributable to Campbell Soup Company) was recorded in the six-month period ended January 26, 2014. A summary of the pre-tax costs and remaining costs associated with the 2014 initiatives is as follows:
 
Total
Program
 
Recognized
as of
February 1, 2015
 
Remaining
Costs to be
Recognized
Severance pay and benefits
$
42

 
$
(41
)
 
$
1

Asset impairment
12

 
(12
)
 

Other exit costs
2

 
(1
)
 
1

Total
$
56

 
$
(54
)
 
$
2

Of the aggregate $56 of pre-tax costs, approximately $43 represent cash expenditures. In addition, we expect to invest approximately $6 in capital expenditures, primarily to relocate biscuit production and packaging capabilities, of which approximately $1 has been invested as of February 1, 2015. We expect the remaining aspects of the 2014 initiatives to be completed through 2016.
A summary of the restructuring activity and related reserves associated with the 2014 initiatives at February 1, 2015 is as follows:
 
 
 
 
Six Months Ended
February 1, 2015
 
 
 
 
Accrued Balance at August 3, 2014
 
Charges
 
Cash
Payments
 
Foreign Currency Translation Adjustment
 
Accrued
Balance at
February 1, 2015
Severance pay and benefits
 
$
28

 
$

 
$
(13
)
 
$
(2
)
 
$
13

A summary of restructuring charges incurred to date associated with segments is as follows:
 
U.S.
Simple
Meals
 
Global Baking and Snacking
 
International Simple Meals and Beverages
 
U.S.
Beverages
 
Bolthouse and Foodservice
 
Corporate
 
Total
Severance pay and benefits
$
7

 
$
23

 
$
6

 
$
2

 
$
2

 
$
1

 
$
41

Asset impairment
1

 

 
11

 

 

 

 
12

Other exit costs

 

 
1

 

 

 

 
1

 
$
8

 
$
23

 
$
18

 
$
2

 
$
2

 
$
1

 
$
54

We expect to recognize additional pre-tax costs of approximately $2 by segment as follows: U.S. Simple Meals - $1 and Global Baking and Snacking - $1. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
2013 Initiatives
In 2013, we implemented initiatives to improve supply chain efficiency, expand access to manufacturing and distribution capabilities and reduce costs. Details of the 2013 initiatives include:
We implemented initiatives to improve our U.S. supply chain cost structure and increase asset utilization across our U.S. thermal plant network, including closing our Sacramento, California, thermal plant, which produced soups, sauces and beverages. The closure resulted in the elimination of approximately 700 full-time positions and was completed in phases. Most of the positions were eliminated in 2013 and operations ceased in August 2013. We shifted the majority of

13






Sacramento's soup, sauce and beverage production to our thermal plants in Maxton, North Carolina; Napoleon, Ohio; and Paris, Texas. We also closed our South Plainfield, New Jersey, spice plant, which resulted in the elimination of 27 positions. We consolidated spice production at our Milwaukee, Wisconsin, plant in 2013.
In Mexico, we entered into commercial arrangements with third-party providers to expand access to manufacturing and distribution capabilities. The third-party providers produce and distribute our beverages, soups, broths and sauces throughout the Mexican market. As a result of these agreements, we closed our plant in Villagrán, Mexico, and eliminated approximately 260 positions in the first quarter of 2014.
We implemented an initiative to improve our Pepperidge Farm bakery supply chain cost structure by closing our plant in Aiken, South Carolina. The plant was closed in May 2014. We shifted the majority of Aiken's bread production to our bakery plant in Lakeland, Florida. Approximately 110 positions were eliminated as a result of the plant closure.
We streamlined our salaried workforce in U.S. Simple Meals, North America Foodservice and U.S. Beverages by approximately 70 positions. This action was substantially completed in August 2013.
In 2014, we recorded a restructuring charge of $1 related to the 2013 initiatives. In addition, approximately $3 of costs related to the 2013 initiatives were recorded in Cost of products sold, representing other exit costs. The aggregate after-tax impact of restructuring charges and related costs recorded in 2014 was $3, or $.01 per share. Of the amounts recorded in 2014, a restructuring charge of $1 was recorded in the six-month period ended January 26, 2014, and approximately $2 of costs related to these initiatives were recorded in Cost of products sold, representing other exit costs. The aggregate after-tax impact of restructuring charges and related costs recorded in the six-month period ended January 26, 2014 was $2, or $.01 per share. In 2013, we recorded a restructuring charge of $51. In addition, approximately $91 of costs related to these initiatives were recorded in 2013 in Cost of products sold, representing accelerated depreciation and other exit costs. The aggregate after-tax impact of restructuring charges and related costs recorded in 2013 was $90, or $.28 per share. A summary of the pre-tax costs and remaining costs associated with the 2013 initiatives is as follows:
 
Total
Program
 
Recognized
as of
February 1, 2015
 
Remaining
Costs to be
Recognized
Severance pay and benefits
$
35

 
$
(35
)
 
$

Accelerated depreciation/asset impairment
99

 
(99
)
 

Other exit costs
14

 
(12
)
 
2

Total
$
148

 
$
(146
)
 
$
2

Of the aggregate $148 of pre-tax costs, approximately $46 represent cash expenditures. In addition, we expect to invest approximately $31 in capital expenditures, primarily to relocate and refurbish a beverage filling and packaging line, and relocate bread production, of which approximately $29 has been invested as of February 1, 2015. We expect the remaining aspects of the 2013 initiatives to be completed in 2015.
A summary of the restructuring activity and related reserves associated with the 2013 initiatives at February 1, 2015 is as follows:
 
 
 
 
Six Months Ended
February 1, 2015
 
 
 
 
Accrued Balance at August 3, 2014
 
Charges
 
Cash
Payments
 
Accrued
Balance at
February 1, 2015
Severance pay and benefits
 
$
3

 
$

 
$
(2
)
 
$
1

A summary of restructuring charges and related costs incurred to date associated with segments is as follows:
 
U.S.
Simple
Meals
 
Global Baking and Snacking
 
International Simple Meals and Beverages
 
U.S.
Beverages
 
Bolthouse and Foodservice
 
Total
Severance pay and benefits
$
19

 
$
2

 
$
5

 
$
7

 
$
2

 
$
35

Accelerated depreciation/asset impairment
64

 
10

 
3

 
22

 

 
99

Other exit costs
7

 
2

 
1

 
2

 

 
12

 
$
90

 
$
14

 
$
9

 
$
31

 
$
2

 
$
146

We expect to recognize additional pre-tax costs of approximately $2 in the Global Baking and Snacking segment. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.

14






9.
Earnings per Share
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. There were no antidilutive stock options for the three-month and six-month periods ended February 1, 2015 and January 26, 2014.
10.
Noncontrolling Interests
We own a 60% controlling interest in a joint venture formed with Swire Pacific Limited to support the development of our soup and broth business in China. The joint venture began operations on January 31, 2011. In the three-month period ended January 26, 2014, together with our joint venture partner, we agreed to restructure manufacturing and streamline operations for our soup and broth business in China. The after-tax restructuring charge attributable to the noncontrolling interest was $5. See also Note 8.
We also own a 70% controlling interest in a Malaysian food products manufacturing company.
The noncontrolling interests' share in the net earnings (loss) was included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings. The noncontrolling interests in these entities were included in Total equity in the Consolidated Balance Sheets and Consolidated Statements of Equity.
11.
Pension and Postretirement Benefits
We sponsor certain defined benefit pension plans and postretirement benefit plans for employees. Components of benefit expense were as follows:
 
Three Months Ended
 
Six Months Ended
 
Pension
 
Postretirement
 
Pension
 
Postretirement
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
Service cost
$
7

 
$
10

 
$
1

 
$

 
$
14

 
$
21

 
$
1

 
$
1

Interest cost
26

 
29

 
4

 
5

 
53

 
58

 
8

 
9

Expected return on plan assets
(43
)
 
(44
)
 

 

 
(87
)
 
(89
)
 

 

Amortization of prior service credit

 

 
(1
)
 
(1
)
 

 

 
(1
)
 
(1
)
Recognized net actuarial loss
21

 
19

 
3

 
4

 
42

 
38

 
6

 
7

Net periodic benefit expense
$
11

 
$
14

 
$
7

 
$
8

 
$
22

 
$
28

 
$
14

 
$
16

No contributions are expected to be made to U.S. pension plans in 2015. Contributions to non-U.S. pension plans during the six-month period ended February 1, 2015 were $2. Contributions to non-U.S. pension plans during the remainder of the year are expected to be approximately $2.
12.
Financial Instruments
The principal market risks to which we are exposed are changes in foreign currency exchange rates, interest rates, and commodity prices. In addition, we are exposed to equity price changes related to certain deferred compensation obligations. In order to manage these exposures, we follow established risk management policies and procedures, including the use of derivative contracts such as swaps, options, forwards and commodity futures. These derivative contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments. Our derivative programs include instruments that qualify and others that do not qualify for hedge accounting treatment.
Concentration of Credit Risk
We are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate counterparty credit risk, we enter into contracts only with carefully selected, leading, credit-worthy financial institutions, and distribute contracts among several financial institutions to reduce the concentration of credit risk. We do not have credit-risk-related contingent features in our derivative instruments as of February 1, 2015. During 2014, our largest customer accounted for approximately 19% of consolidated net sales. We closely monitor credit risk associated with counterparties and customers.

15






Foreign Currency Exchange Risk
We are exposed to foreign currency exchange risk related to our international operations, including non-functional currency intercompany debt and net investments in subsidiaries. We are also exposed to foreign exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. Principal currencies hedged include the Canadian dollar, Australian dollar and U.S. dollar. We utilize foreign exchange forward purchase and sale contracts, as well as cross-currency swaps, to hedge these exposures. The contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge portions of our forecasted foreign currency transaction exposure with foreign exchange forward contracts for periods typically up to 18 months. To hedge currency exposures related to intercompany debt, foreign exchange forward purchase and sale contracts, as well as cross-currency swap contracts, are entered into for periods consistent with the underlying debt. As of February 1, 2015, cross-currency swap contracts mature between 6 and 30 months. The notional amount of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was $45 at February 1, 2015 and $58 at August 3, 2014. The effective portion of the changes in fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the Consolidated Statements of Earnings on the same line item and the same period in which the underlying hedged transaction affects earnings. The notional amount of foreign exchange forward and cross-currency swap contracts that are not designated as accounting hedges was $419 and $561 at February 1, 2015 and August 3, 2014, respectively.
Interest Rate Risk
We manage our exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines. Receive fixed rate/pay variable rate interest rate swaps are accounted for as fair-value hedges. We manage our exposure to interest rate volatility on future debt issuances by entering into forward starting interest rate swaps to lock in the rate on the interest payments related to anticipated debt issuances. These pay fixed rate/receive variable rate forward starting interest rate swaps are accounted for as cash-flow hedges. The effective portion of the changes in fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the Consolidated Statements of Earnings over the life of the debt. The notional amount of outstanding forward starting interest rate swaps totaled $550 at February 1, 2015, of which $250 relates to an anticipated issuance in 2015 and $300 relates to an anticipated issuance in 2018. The notional amount of outstanding forward starting interest rate swaps totaled $250 at August 3, 2014.
Commodity Price Risk
We principally use a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of diesel fuel, wheat, soybean oil, natural gas, aluminum, dairy, cocoa and corn, which impact the cost of raw materials. Commodity futures, options, and swap contracts are either accounted for as cash-flow hedges or are not designated as accounting hedges. We hedge a portion of commodity requirements for periods typically up to 18 months. There were no commodity contracts accounted for as cash-flow hedges as of February 1, 2015 or August 3, 2014. The notional amount of commodity contracts not designated as accounting hedges was $101 at February 1, 2015 and $146 at August 3, 2014.
Equity Price Risk
We enter into swap contracts which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of our capital stock, the total return of the Vanguard Institutional Index, and the total return of the Vanguard Total International Stock Index. Under these contracts,we pay variable interest rates and receive from the counterparty either the total return on our capital stock; the total return of the Standard & Poor's 500 Index, which is expected to approximate the total return of the Vanguard Institutional Index; or the total return of the iShares MSCI EAFE Index, which is expected to approximate the total return of the Vanguard Total International Stock Index. These contracts were not designated as hedges for accounting purposes and are entered into for periods typically not exceeding 12 months. The notional amounts of the contracts were $56 as of February 1, 2015 and August 3, 2014.

16






The following table summarizes the fair value of derivative instruments on a gross basis as recorded in the Consolidated Balance Sheets as of February 1, 2015 and August 3, 2014:
 
Balance Sheet Classification
 
February 1,
2015
 
August 3,
2014
Asset Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Other current assets
 
$
3

 
$
1

Forward starting interest rate swaps
Other current assets
 

 
11

Total derivatives designated as hedges
 
 
$
3

 
$
12

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Other current assets
 
$

 
$
2

Cross-currency swap contracts
Other current assets
 
4

 

Deferred compensation derivative contracts
Other current assets
 
1

 

Foreign exchange forward contracts
Other current assets
 
10

 
1

Cross-currency swap contracts
Other assets
 
36

 

Total derivatives not designated as hedges
 
 
$
51

 
$
3

Total asset derivatives
 
 
$
54

 
$
15

 
Balance Sheet Classification
 
February 1,
2015
 
August 3,
2014
Liability Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Accrued liabilities
 
$

 
$
1

Forward starting interest rate swaps
Accrued liabilities
 
15

 

Forward starting interest rate swaps
Other liabilities
 
23

 

Total derivatives designated as hedges
 
 
$
38

 
$
1

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Accrued liabilities
 
$
20

 
$
10

Cross-currency swap contracts
Accrued liabilities
 

 
1

Deferred compensation derivative contracts
Accrued liabilities
 
1

 
3

Foreign exchange forward contracts
Accrued liabilities
 
2

 
2

Commodity derivative contracts
Other liabilities
 

 
1

Cross-currency swap contracts
Other liabilities
 

 
5

Total derivatives not designated as hedges
 
 
$
23

 
$
22

Total liability derivatives
 
 
$
61

 
$
23

We do not offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. However, if we were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in the Consolidated Balance Sheets as of February 1, 2015 and August 3, 2014 would be adjusted as detailed in the following table:
 
 
February 1, 2015
 
August 3, 2014
Derivative Instrument
 
Gross Amounts Presented in the Consolidated Balance Sheet
 
Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements
 
Net Amount
 
Gross Amounts Presented in the Consolidated Balance Sheet
 
Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements
 
Net Amount
Total asset derivatives
 
$
54

 
$
(40
)
 
$
14

 
$
15

 
$
(4
)
 
$
11

 
 
 
 
 
 

 
 
 
 
 

Total liability derivatives
 
$
61

 
$
(40
)
 
$
21

 
$
23

 
$
(4
)
 
$
19


17






We do not offset fair value amounts recognized for exchange-traded commodity derivative instruments and cash margin accounts executed with the same counterparty that are subject to enforceable netting agreements. We are required to maintain cash margin accounts in connection with funding the settlement of open positions. At February 1, 2015 and August 3, 2014, a cash margin account balance of $24 and $14, respectively, was included in Other current assets in the Consolidated Balance Sheets.
The following tables show the effect of our derivative instruments designated as cash-flow hedges for the three- and six-month periods ended February 1, 2015, and January 26, 2014, in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:
  
 
 
Total
Cash-Flow Hedge
OCI Activity
Derivatives Designated as Cash-Flow Hedges
 
 
February 1,
2015
 
January 26,
2014
Three Months Ended
 
 
 
 
 
OCI derivative gain (loss) at beginning of quarter
 
 
$
(4
)
 
$
5

Effective portion of changes in fair value recognized in OCI:
 
 
 
 
 
Foreign exchange forward contracts
 
 
10

 
2

Forward starting interest rate swaps
 
 
(42
)
 
2

Amount of (gain) loss reclassified from OCI to earnings:
Location in Earnings
 
 
 
 
Foreign exchange forward contracts
Other expenses / (income)
 
(1
)
 
(1
)
Forward starting interest rate swaps
Interest expense
 
1

 
1

OCI derivative gain (loss) at end of quarter
 
 
$
(36
)
 
$
9

 
 
 
 
 
 
Six Months Ended
 
 
 
 
 
OCI derivative gain (loss) at beginning of year
 
 
$
(4
)
 
$
8

Effective portion of changes in fair value recognized in OCI:
 
 
 
 
 
Foreign exchange forward contracts
 
 
13

 
3

Forward starting interest rate swaps
 
 
(46
)
 
(2
)
Amount of (gain) loss reclassified from OCI to earnings:
Location in Earnings
 
 
 
 
Foreign exchange forward contracts
Cost of products sold
 

 
(1
)
Foreign exchange forward contracts
Other expenses / (income)
 
(1
)
 
(1
)
Forward starting interest rate swaps
Interest expense
 
2

 
2

OCI derivative gain (loss) at end of quarter
 
 
$
(36
)
 
$
9

Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a gain of $7. The ineffective portion and amount excluded from effectiveness testing were not material.
The following table shows the effect of our derivative instruments designated as fair-value hedges in the Consolidated Statements of Earnings:
 
 
 
 
Amount of
Gain (Loss)
Recognized in Earnings
on Derivatives
 
Amount of
Gain (Loss)
Recognized in Earnings
on Hedged Item
Derivatives Designated as Fair-Value Hedges
 
Location of Gain (Loss)
Recognized in Earnings
 
February 1,
2015
 
January 26,
2014
 
February 1,
2015
 
January 26,
2014
Three Months Ended
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest expense
 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest expense
 
$

 
$
(1
)
 
$

 
$
1


18






The following table shows the effects of our derivative instruments not designated as hedges in the Consolidated Statements of Earnings:
 
 
 
 
Amount of
Gain (Loss)
Recognized in Earnings
on Derivatives
Derivatives not Designated as Hedges
 
Location of Gain (Loss)
Recognized in Earnings
 
Three Months Ended
 
Six Months Ended
 
 
February 1, 2015
 
January 26, 2014
 
February 1, 2015
 
January 26, 2014
Foreign exchange forward contracts
 
Cost of products sold
 
$
(1
)
 
$
3

 
$

 
$
5

Foreign exchange forward contracts
 
Other expenses/income
 

 
2

 

 
(12
)
Commodity derivative contracts
 
Cost of products sold
 
(13
)
 
2

 
(18
)
 

Cross-currency swap contracts
 
Other expenses/income
 
38

 
24

 
52

 
21

Deferred compensation derivative contracts
 
Administrative expenses
 
1

 

 
3

 
(1
)
Total
 
 
 
$
25

 
$
31

 
$
37

 
$
13

13.
Fair Value Measurements
Financial assets and liabilities are categorized based on the following fair value hierarchy:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with observable market data.
Level 3: Unobservable inputs, which are based on our estimates of assumptions that market participants would use in pricing the asset or liability.
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When available, we use unadjusted quoted market prices to measure the fair value and classify such items as Level 1. If quoted market prices are not available, we base fair value upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Included in the fair value of derivative instruments is an adjustment for credit and nonperformance risk.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents our financial assets and liabilities that are measured at fair value on a recurring basis as of February 1, 2015, and August 3, 2014, consistent with the fair value hierarchy:
 
Fair Value
as of
February 1,
2015
 
Fair Value Measurements at
February 1, 2015 Using
Fair Value Hierarchy
 
Fair Value
as of
August 3,
2014
 
Fair Value Measurements at
August 3, 2014 Using
Fair Value Hierarchy
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward starting interest rate swaps(1)
$

 
$

 
$

 
$

 
$
11

 
$

 
$
11

 
$

Foreign exchange forward contracts(2)
13

 

 
13

 

 
2

 

 
2

 

Commodity derivative contracts(3)

 

 

 

 
2

 
1

 
1

 

Cross-currency swap contracts(4)
40

 

 
40

 

 

 

 

 

Deferred compensation derivative contracts(5)
1

 

 
1

 

 

 

 

 

Total assets at fair value
$
54

 
$

 
$
54

 
$

 
$
15

 
$
1

 
$
14

 
$



19






 
Fair Value
as of
February 1,
2015
 
Fair Value Measurements at
February 1, 2015 Using
Fair Value Hierarchy
 
Fair Value
as of
August 3,
2014
 
Fair Value Measurements at
August 3, 2014 Using
Fair Value Hierarchy
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward starting interest rate swaps(1)
$
38

 
$

 
$
38

 
$

 
$

 
$

 
$

 
$

Foreign exchange forward contracts(2)
2

 

 
2

 

 
3

 

 
3

 

Commodity derivative contracts(3)
20

 
20

 

 

 
11

 
11

 

 

Cross-currency swap contracts(4)

 

 

 

 
6

 

 
6

 

Deferred compensation derivative contracts(5)
1

 

 
1

 

 
3

 

 
3

 

Deferred compensation obligation(6)
131

 
131

 

 

 
123

 
123

 

 

Total liabilities at fair value
$
192

 
$
151

 
$
41

 
$

 
$
146

 
$
134

 
$
12

 
$

___________________________________ 
(1) 
Based on LIBOR swap rates.
(2) 
Based on observable market transactions of spot currency rates and forward rates.
(3) 
Based on quoted futures exchanges and on observable prices of futures and options transactions in the marketplace.
(4) 
Based on observable local benchmarks for currency and interest rates.
(5) 
Based on LIBOR and equity index swap rates.
(6) 
Based on the fair value of the participants’ investments.

Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings, excluding the current portion of long-term debt, approximate fair value.
Cash equivalents of $42 at February 1, 2015 and $46 at August 3, 2014 represent fair value as these highly liquid investments have an original maturity of three months or less. Fair value of cash equivalents is based on Level 2 inputs.
The fair value of long-term debt, including the current portion of long-term debt in Short-term borrowings, was $2,397 at February 1, 2015 and $2,647 at August 3, 2014. The carrying value was $2,263 at February 1, 2015 and $2,544 at August 3, 2014. The fair value of long-term debt is principally estimated using Level 2 inputs based on quoted market prices or pricing models using current market rates.
14.
Share Repurchases
In June 2011, our Board of Directors authorized the purchase of up to $1,000 of our stock. This program has no expiration date. In addition to this publicly announced program, we also repurchase shares to offset the impact of dilution from shares issued under our stock compensation plans.
During the six-month period ended February 1, 2015, we repurchased 3 million shares at a cost of $133. Of this amount, $100 was used to repurchase shares pursuant to our June 2011 publicly announced share repurchase program. Approximately $650 remained available under this program as of February 1, 2015. During the six-month period ended January 26, 2014, we repurchased 2 million shares at a cost of $76 to offset the impact of dilution from shares issued under our stock compensation plans.
15.
Stock-based Compensation
We provide compensation benefits by issuing unrestricted stock, restricted stock and restricted stock units (including time-lapse restricted stock units, EPS performance restricted stock units, total shareholder return (TSR) performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units). In 2015, we issued time-lapse

20






restricted stock units, EPS performance restricted stock units, TSR performance restricted stock units and special performance restricted stock units. We did not issue strategic performance restricted stock units in 2015. In previous years, we also issued stock options and stock appreciation rights.
Total pre-tax stock-based compensation expense recognized in Earnings from continuing operations was $18 and $15 for the three-month periods ended February 1, 2015, and January 26, 2014, respectively. Tax-related benefits of $6 were also recognized for the three-month periods ended February 1, 2015, and January 26, 2014. Total pre-tax stock-based compensation expense recognized in Earnings from continuing operations was $31 and $36 for the six-month periods ended February 1, 2015, and January 26, 2014, respectively. The pre-tax stock-based compensation expense recognized in Earnings from discontinued operations was $1 for the six-month period ended January 26, 2014. Tax-related benefits of $11 and $14 were also recognized for the six-month periods ended February 1, 2015, and January 26, 2014, respectively. Cash received from the exercise of stock options was $8 and $7 for the six-month periods ended February 1, 2015, and January 26, 2014, respectively, and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows.
The following table summarizes stock option activity as of February 1, 2015:
 
Options
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
 
(Options in
thousands)
 
 
 
(In years)
 
 
Outstanding at August 3, 2014
408

 
$
28.33

 
 
 
 
Granted

 
$

 
 
 
 
Exercised
(300
)
 
$
27.78

 
 
 
 
Terminated
(3
)
 
$
26.36

 
 
 
 
Outstanding at February 1, 2015
105

 
$
29.91

 
0.9
 
$
2

Exercisable at February 1, 2015
105

 
$
29.91

 
0.9
 
$
2

The total intrinsic value of options exercised during the six-month periods ended February 1, 2015, and January 26, 2014, was $5 and $4, respectively. As of January 2009, compensation related to stock options was fully expensed. We measured the fair value of stock options using the Black-Scholes option pricing model.
The following table summarizes time-lapse restricted stock units, EPS performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units as of February 1, 2015:
 
Units
 
Weighted-
Average
Grant-Date
Fair Value
 
(Restricted stock
units in thousands)
 
 
Nonvested at August 3, 2014
2,994

 
$
37.69

Granted
1,059

 
$
42.35

Vested
(1,245
)
 
$
35.56

Forfeited
(384
)
 
$
36.10

Nonvested at February 1, 2015
2,424

 
$
41.08

The fair value of time-lapse restricted stock units, EPS performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units is determined based on the quoted price of our stock at the date of grant. Time-lapse restricted stock units are expensed on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which are expensed on an accelerated basis. EPS performance restricted stock units are expensed on a graded-vesting basis, except for awards issued to retirement-eligible participants, which are expensed on an accelerated basis. There were 252 thousand EPS performance target grants outstanding at February 1, 2015 with a weighted-average grant-date fair value of $40.72. Strategic performance restricted stock units are expensed on a straight-line basis over the service period. Awards of the strategic performance restricted stock units are earned based upon the achievement of two key metrics, net sales and EPS growth, compared to strategic plan objectives during a two-year period for grants in 2013 and during a three-year period for grants in 2014. There were 384 thousand strategic performance target grants outstanding at February 1, 2015 with a grant-date fair value of $41.21. The actual number of EPS performance restricted stock units and strategic performance restricted stock units issued at the vesting date could range from either 0% or 100% and 0% to 200%, respectively, of the initial grant, depending on actual performance achieved. Expense is estimated based on the number of awards expected to vest.

21






In 2015, we issued special performance restricted stock units for which vesting is contingent upon meeting various financial goals and performance milestones to support innovation and growth initiatives. These awards vest over a period of 2 years and are included in the table above. The actual number of special performance awards issued at the vesting date could range from 0% to 150%. There were 184 thousand special performance restricted stock units outstanding at February 1, 2015 with a grant-date fair value of $42.22.
As of February 1, 2015, total remaining unearned compensation related to nonvested time-lapse restricted stock units, EPS performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units was $50, which will be amortized over the weighted-average remaining service period of 1.7 years. The fair value of restricted stock units vested during the six-month periods ended February 1, 2015, and January 26, 2014, was $53 and $104, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the six-month period ended January 26, 2014 was $39.76.
The following table summarizes TSR performance restricted stock units as of February 1, 2015:
 
Units
 
Weighted-
Average
Grant-Date
Fair Value
 
(Restricted stock
units in thousands)
 
 
Nonvested at August 3, 2014
861

 
$
38.15

Granted
874

 
$
43.39

Vested

 
$

Forfeited
(41
)
 
$
40.02

Nonvested at February 1, 2015
1,694

 
$
40.81

We estimated the fair value of TSR performance restricted stock units at the grant date using a Monte Carlo simulation. Assumptions used in the Monte Carlo simulation were as follows:
 
 
2015
 
2014
Risk-free interest rate
 
0.97%
 
0.60%
Expected dividend yield
 
2.91%
 
2.98%
Expected volatility
 
16.20%
 
15.76%
Expected term
 
3 years
 
3 years
Compensation expense is recognized on a straight-line basis over the service period. As of February 1, 2015, total remaining unearned compensation related to TSR performance restricted stock units was $39, which will be amortized over the weighted-average remaining service period of 2.3 years. There were no restricted stock units granted during 2012. The grant-date fair value of the TSR performance restricted stock units granted during 2014 was $36.26.
The excess tax benefits on the exercise of stock options and vested restricted stock presented as cash flows from financing activities for the six-month periods ended February 1, 2015, and January 26, 2014 were $5 and $10, respectively.
16.
Inventories
 
February 1,
2015
 
August 3,
2014
Raw materials, containers and supplies
$
410

 
$
399

Finished products
506

 
617

Total inventories
$
916

 
$
1,016


22






17.
Supplemental Cash Flow Information
Other cash used in operating activities for the six-month periods was comprised of the following:
 
February 1,
2015
 
January 26,
2014
Benefit related payments
$
(16
)
 
$
(21
)
Other
(2
)
 
(3
)
Total
$
(18
)
 
$
(24
)
18.
Voluntary Product Recall
On November 8, 2013, we voluntarily recalled a range of Plum products packaged in resealable pouches after discovering a manufacturing defect that may cause spoilage in some pouches. In the three-month period ended October 27, 2013, we recognized costs of $16 ($11 after tax or $.03 per share) associated with the recall, including estimates for customer returns and consumer rebates, costs associated with returned product and the disposal and write-off of inventory.

23






Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Description of the Company
Unless otherwise stated, the terms "we," "us" and "our" refer to Campbell Soup Company and its consolidated subsidiaries.
We are a manufacturer and marketer of high-quality, branded convenience food products. We report the results of our 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.
On August 8, 2013, we completed the acquisition of Kelsen. The final all-cash purchase price was $331 million. See Note 3 to the Consolidated Financial Statements for additional information.
On October 28, 2013, subsequent to the end of the first quarter of 2014, we completed the sale of our European simple meals business to Soppa Investments S.à r.l., an affiliate of CVC Capital Partners. The all-cash preliminary sale price was €400 million, or $548 million, and was subject to certain post-closing adjustments, which resulted in a $14 million reduction of proceeds. We have reflected the results of the European simple meals business as discontinued operations in the Consolidated Statements of Earnings. See Note 4 to the Consolidated Financial Statements for additional information.
On January 29, 2015, we announced plans to implement a new enterprise design focused mainly on product categories. Under the new design, our businesses will be organized in the following three new divisions: Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Packaged Fresh. We also announced the presidents leading these new divisions, effective February 1, 2015. In the coming months, specific plans for the new organizational design will be developed.
We are also pursuing initiatives to reduce our costs and to streamline our organizational structure. We do not expect significant savings from these initiatives in 2015.
Executive Summary
This Executive Summary provides significant highlights from the discussion and analysis that follows.
Net sales decreased 2% in the current quarter to $2.234 billion, due to the impact of currency.
Gross profit, as a percent of sales, decreased to 32.6% from 35.7% in the year-ago quarter. The decrease in gross margin was due to cost inflation, higher supply chain costs and higher promotional spending, partly offset by productivity improvements.
Marketing and selling expenses decreased 10% to $242 million in the current quarter, primarily due to lower advertising and consumer promotion expenses.
The effective tax rate decreased to 27.9% in the current quarter from 31.3% in the year-ago quarter, primarily due to the favorable resolution of an intercompany pricing agreement between the U.S. and Canada.
Earnings per share from continuing operations were $.66 for the current quarter compared to $.74 in the year-ago quarter. The year-ago quarter included expenses of $.02 per share 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 2014, we implemented initiatives to streamline our salaried workforce in North America and our workforce in the Asia Pacific region; restructure manufacturing and streamline operations for our soup and broth business in China; improve supply chain efficiency in Australia; and reduce overhead across the organization. In the second quarter of 2014, we recorded a pre-tax restructuring charge of $13 million ($5 million after tax or $.02 per share) related to the 2014 initiatives. The year-to-date 2014 impact was $33 million ($18 million after tax or $.06 per share) related to the 2014 initiatives;
In 2013, we implemented initiatives to improve our U.S. supply chain cost structure and increase asset utilization across our U.S. thermal plant network; expand access to manufacturing and distribution capabilities in Mexico; improve our Pepperidge Farm bakery supply chain cost structure; and reduce overhead in North America. In the first quarter of 2014, we 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) related to the 2013 initiatives; and
On October 28, 2013, we completed the sale of our simple meals business in Europe. In the first quarter of 2014, we recorded a 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, we recorded tax expense of $7 million ($.02 per share) associated with the sale of the business.

24






The items impacting comparability are summarized below:
 
Three Months Ended
 
February 1, 2015
 
January 26, 2014
(Millions, except per share amounts)
Earnings
Impact
 
EPS
Impact
 
Earnings
Impact
 
EPS
Impact
Earnings from continuing operations attributable to Campbell Soup Company
$
207

 
$
.66

 
$
235

 
$
.74

 
 
 
 
 
 
 
 
Restructuring charges and related costs
$

 
$

 
$
(5
)
 
$
(.02
)
 
Six Months Ended
 
February 1, 2015
 
January 26, 2014
(Millions, except per share amounts)
Earnings
Impact
 
EPS
Impact
 
Earnings
Impact
 
EPS
Impact
Earnings from continuing operations attributable to Campbell Soup Company
$
441

 
$
1.40

 
$
416

 
$
1.32

 
 
 
 
 
 
 
 
Restructuring charges and related costs
$

 
$

 
$
(20
)
 
$
(.06
)
Loss on foreign exchange forward contracts

 

 
(6
)
 
(.02
)
Tax expense associated with sale of business

 

 
(7
)
 
(.02
)
Impact of items on earnings from continuing operations
$

 
$

 
$
(33
)
 
$
(.10
)
Earnings from continuing operations were $207 million ($.66 per share) in the current quarter, compared to $235 million ($.74 per share) in the year-ago quarter. After adjusting for items impacting comparability, earnings decreased primarily due to a lower gross margin percentage and the impact of currency translation, partially offset by lower marketing expenses and a lower effective tax rate.
Earnings from continuing operations were $441 million ($1.40 per share) in the six-month period ended February 1, 2015, compared to $416 million ($1.32 per share) in the year-ago period. After adjusting for items impacting comparability, earnings decreased primarily due to a lower gross margin percentage and the impact of currency translation, partially offset by an increase in sales, lower marketing expenses, a lower effective tax rate and lower interest expense.
We sold our European simple meals business on October 28, 2013. See "Discontinued Operations" for additional information.
SECOND-QUARTER DISCUSSION AND ANALYSIS
Sales
An analysis of net sales by reportable segment follows:
 
Three Months Ended
 
 
(Millions)
February 1, 2015
 
January 26, 2014
 
% Change
U.S. Simple Meals
$
867

 
$
894

 
(3)%
Global Baking and Snacking
640

 
639

 
International Simple Meals and Beverages
194

 
213

 
(9)
U.S. Beverages
169

 
176

 
(4)
Bolthouse and Foodservice
364

 
359

 
1
 
$
2,234

 
$
2,281

 
(2)%

25






An analysis of percent change of net sales by reportable segment follows:
 
U.S.
Simple
Meals
 
Global
Baking
and
Snacking (2)
 
International
Simple Meals
and
Beverages
 
U.S.
Beverages
 
Bolthouse and Foodservice
 
Total
Volume and Mix
(2)%
 
4%
 
—%
 
(2)%
 
2%
 
1%
Price and Sales Allowances
 
2
 
 
1
 
 
1
Increased Promotional Spending(1)
(1)
 
(2)
 
(2)
 
(3)
 
 
(2)
Currency
 
(3)
 
(7)
 
 
(1)
 
(2)
 
(3)%
 
—%
 
(9)%
 
(4)%
 
1%
 
(2)%
__________________________________________
(1)
Represents revenue reductions from trade promotion and consumer coupon redemption programs.
(2) 
Sum of the individual amounts does not add due to rounding.
In U.S. Simple Meals, sales decreased 3%. Following a strong first quarter, U.S. soup sales decreased 6%, primarily due to movements in retailer inventory levels. The first quarter benefited from a strong seasonal sell-in and later timing of the quarter end relative to the Thanksgiving holiday. Further details of U.S. soup include:
Sales of Campbell’s condensed soups decreased 11%, with declines in both eating and cooking varieties.
Sales of ready-to-serve soups were comparable to prior year.
Broth sales decreased 4%, primarily due to declines in canned broth, partially offset by gains in aseptically-packaged broth.
Sales of other simple meals increased 6%, driven by growth in Plum, Prego pasta sauces and Campbell's dinner sauces.
In Global Baking and Snacking, sales were comparable to the prior year. Sales of Pepperidge Farm products increased as volume gains were partly offset by higher promotional spending to remain competitive. Within Pepperidge Farm, sales gains in crackers, fresh bakery products and cookies were partly offset by sales declines in frozen products and stuffing. Sales of Arnott's products increased as volume gains in Indonesia and Australia, as well as higher selling prices, were partly offset by the impact of currency and higher promotional spending. Kelsen sales decreased primarily due to the timing of the quarter in relation to the Chinese New Year.
In International Simple Meals and Beverages, sales decreased 9%, primarily due to the impact of currency. Excluding the impact of currency, sales declined in Latin America and the Asia Pacific region while sales in Canada were comparable to the prior year.
In U.S. Beverages, sales decreased 4%, primarily due to declines in V8 V-Fusion beverages, partly offset by gains in V8 Splash beverages. Promotional spending increased due in part to new product introduction costs.
In Bolthouse and Foodservice, sales increased 1%. The increase was due to gains in Bolthouse premium refrigerated beverages and salad dressings and North America Foodservice, partially offset by declines in Bolthouse carrots, juice concentrate and fiber.
Gross Profit
Gross profit, defined as Net sales less Cost of products sold, decreased by $86 million in 2015 from 2014. As a percent of sales, gross profit decreased from 35.7% in 2014 to 32.6% in 2015. The 3.1-percentage-point decrease in gross margin percentage in 2015 was due to the following factors:
 
 
Margin Impact
Cost inflation, supply chain costs and other factors
 
(3.6)%
Higher level of promotional spending
 
(1.0)
Mix
 
(0.2)
Higher selling prices
 
0.4
Productivity improvements
 
1.3
 
 
(3.1)%

Cost inflation, supply chain costs and other factors had a negative impact of 3.6 percentage points and were the key factors in the decline in gross profit as a percent of sales. Costs were negatively impacted by inflation in ingredients and packaging materials, higher manufacturing costs and higher transportation costs. Increases in meats, tomatoes, dairy, steel cans, chocolate and losses

26






on open commodity hedges contributed to cost inflation, which had the largest negative impact. In North America, manufacturing costs were higher due in part to increased use of co-manufacturers to meet demand and an equipment outage in one of our plants. We also incurred higher transportation costs to improve customer service. In addition, the current-year margin reflected the adverse impact of currency movements on input costs in our international businesses.
Marketing and Selling Expenses
Marketing and selling expenses as a percent of sales were 10.8% in 2015 and 11.7% in 2014. Marketing and selling expenses were $242 million in 2015 compared to $268 million in 2014, a decrease of 10%. The decrease was primarily due to to lower advertising and consumer promotion expenses (approximately 8 percentage points) and the impact of currency translation (approximately 2 percentage points). In the current year, we had lower advertising expenses primarily in U.S. Simple Meals and Pepperidge Farm.
Administrative Expenses
Administrative expenses as a percent of sales were 6.3% in 2015 and 6.2% in 2014. Administrative expenses decreased 1% in 2015 from 2014, primarily due to lower pension and other benefit expenses (approximately 2 percentage points); cost savings from restructuring initiatives (approximately 1 percentage point) and the impact of currency translation (approximately 1 percentage point), partially offset by higher long-term incentive compensation costs (approximately 4 percentage points).
Operating Earnings
Segment operating earnings decreased 14% in 2015 from 2014.
An analysis of operating earnings by segment follows:
 
 
Three Months Ended
 
 
(Millions)
 
February 1, 2015
 
January 26, 2014
 
% Change
U.S. Simple Meals
 
$
170

 
$
214

 
(21)%
Global Baking and Snacking
 
107

 
88

 
22
International Simple Meals and Beverages
 
26

 
38

 
(32)
U.S. Beverages
 
20

 
31

 
(35)
Bolthouse and Foodservice
 
26

 
36

 
(28)
 
 
349

 
407

 
(14)%
Unallocated corporate expenses
 
(37
)
 
(33
)
 
 
Restructuring charges(1)
 

 
(13
)
 
 
Earnings before interest and taxes
 
$
312

 
$
361

 
 
__________________________________________
(1)
See Note 8 to the Consolidated Financial Statements for additional information on restructuring charges.
Earnings from U.S. Simple Meals decreased 21%, primarily due to cost inflation and higher supply chain costs, as well as sales declines, partly offset by productivity improvements and lower marketing expenses.
Earnings from Global Baking and Snacking increased 22%, primarily due to sales volume gains, higher selling prices, lower marketing expenses and productivity improvements, partially offset by increased promotional spending, cost inflation and the impact of currency translation.
Earnings from International Simple Meals and Beverages decreased 32%, primarily due to cost inflation, the adverse impact of currency movements on input costs and the impact of currency translation.
Earnings from U.S. Beverages decreased 35%, primarily due to increased promotional spending, cost inflation and higher supply chain costs, and lower sales volume, partially offset by productivity improvements.
Earnings from Bolthouse and Foodservice decreased 28%, due to a lower gross margin percentage, including the impact of higher carrot costs attributable in part to adverse weather, and higher administrative expenses as the prior year benefited from a reduction in long-term incentive compensation costs.
Interest Expense
Interest expense decreased to $26 million in 2015 from $29 million in 2014, reflecting lower levels of debt.

27






Taxes on Earnings
The effective tax rate was 27.9% in 2015, compared to 31.3% in 2014. The prior-year quarter included a tax benefit of $3 million on $13 million of restructuring charges. The remaining decrease was primarily due to the favorable resolution of an intercompany pricing agreement between the U.S. and Canada.
SIX-MONTH DISCUSSION AND ANALYSIS
Sales
An analysis of net sales by reportable segment follows:
 
Six Months Ended
 
 
(Millions)
February 1, 2015
 
January 26, 2014
 
% Change
U.S. Simple Meals
$
1,795

 
$
1,754

 
2%
Global Baking and Snacking
1,267

 
1,248

 
2
International Simple Meals and Beverages
383

 
406

 
(6)
U.S. Beverages
337

 
349

 
(3)
Bolthouse and Foodservice
707

 
689

 
3
 
$
4,489

 
$
4,446

 
1%
An analysis of percent change of net sales by reportable segment follows:
 
U.S.
Simple
Meals
 
Global
Baking
and
Snacking
 
International
Simple Meals
and
Beverages
 
U.S.
Beverages
 
Bolthouse and Foodservice
 
Total
Volume and Mix
2%
 
5%
 
2%
 
(2)%
 
3%
 
3%
Price and Sales Allowances
 
1
 
 
1
 
 
Increased Promotional Spending(1)
 
(3)
 
(1)
 
(2)
 
 
(1)
Currency
 
(2)
 
(6)
 
 
 
(1)
Net Accounting(2)
 
 
(1)
 
 
 
Acquisitions
 
1
 
 
 
 
 
2%
 
2%
 
(6)%
 
(3)%
 
3%
 
1%
__________________________________________
(1) 
Represents revenue reductions from trade promotion and consumer coupon redemption programs.
(2) 
Beginning 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.
In U.S. Simple Meals, sales increased 2%. U.S. soup sales were comparable to the year-ago period. Further details of U.S. soup include:
Sales of Campbell’s condensed soups decreased 3%, with declines in both eating and cooking varieties.
Sales of ready-to-serve soups were comparable to the year-ago period as lower volume was offset by lower promotional spending.
Broth sales increased 7% due to gains in aseptically-packaged broth, partially offset by declines in canned broth.
Sales of other simple meals increased 10%, primarily due to growth in Plum, Prego pasta sauces and Campbell's dinner sauces.
In Global Baking and Snacking, sales increased 2%. Sales of Arnott's products increased as volume gains in Australia and Indonesia, as well as higher selling prices, were partly offset by the impact of currency and higher promotional spending. Pepperidge Farm sales were comparable to the prior year as volume gains were offset by higher promotional spending to remain competitive. Within Pepperidge Farm, sales gains in fresh bakery products and cookies were offset by declines in frozen products. The acquisition of Kelsen on August 8, 2013, early in 2014, also contributed to the sales growth.
In International Simple Meals and Beverages, sales decreased 6%, primarily due to the impact of currency. Excluding the impact of currency, gains in Canada and the Asia Pacific region were partly offset by declines in Latin America. Excluding the impact of currency, sales increased in Canada due to new product launches and higher levels of promotional activity. Sales declined in Latin America due in part to the impact of presenting revenue on a net basis.

28






In U.S. Beverages, sales decreased 3%, primarily due to declines in V8 V-Fusion beverages and V8 vegetable juice, partly offset by gains in V8 Splash beverages.
In Bolthouse and Foodservice, sales increased 3% due to an increase in Bolthouse premium refrigerated beverages and salad dressings and in North America Foodservice, partially offset by declines in Bolthouse carrots.
Gross Profit
Gross profit, defined as Net sales less Cost of products sold, decreased by $80 million in 2015. As a percent of sales, gross profit decreased from 35.8% in 2014 to 33.7% in 2015. The 2.1-percentage-point decrease in gross margin percentage in 2015 was due to the following factors:
 
Margin
Impact
Cost inflation, supply chain costs and other factors
(3.6)%
Higher level of promotional spending
(0.7)
Mix
0.1
Higher selling prices
0.3
Impact of Plum recall / Kelsen purchase accounting in 2014
0.5
Productivity improvements
1.3
 
(2.1)%

Cost inflation, supply chain costs and other factors had a negative impact of 3.6 percentage points and were the key factors in the decline in gross profit as a percent of sales. Costs were negatively impacted by inflation in ingredients and packaging materials, higher transportation costs and higher manufacturing costs. Increases in meats, tomatoes, dairy, steel cans, chocolate and losses on open commodity hedges contributed to cost inflation, which had the largest negative impact. In North America, to meet significant volume demand early in the year and to improve customer service, our supply chain costs increased as we incurred higher transportation costs, ran production in our manufacturing facilities on more weekends, and increased our use of co-manufacturers. In addition, the current-year margin reflected the adverse impact of currency movements on input costs in our international businesses.
Marketing and Selling Expenses
Marketing and selling expenses as a percent of sales were 10.9% in 2015 and 11.9% in 2014. Marketing and selling expenses were $489 million in 2015, compared to $529 million in 2014, a decrease of 8%. The decrease was primarily due to lower advertising and consumer promotion expenses (approximately 6 percentage points) and the impact of currency translation (approximately 2 percentage points). In the current year, we had lower advertising expenses in U.S. Simple Meals, U.S. Beverages and Pepperidge Farm.
Administrative Expenses
Administrative expenses as a percent of sales were 6.1% in 2015 and 6.5% in 2014. Administrative expenses decreased by 5% in 2015 from 2014, primarily due to cost savings from restructuring initiatives (approximately 2 percentage points); lower pension and other benefit expenses (approximately 1 percentage point); and the impact of currency translation (approximately 1 percentage point).
Operating Earnings
Segment operating earnings decreased 3% in 2015 from 2014.

29






An analysis of operating earnings by segment follows:
 
Six Months Ended
 
 
(Millions)
February 1, 2015
 
January 26, 2014
 
% Change
U.S. Simple Meals
$
412

 
$
425

 
(3)%
Global Baking and Snacking
197

 
166

 
19
International Simple Meals and Beverages
42

 
58

 
(28)
U.S. Beverages
46

 
55

 
(16)
Bolthouse and Foodservice
48

 
65

 
(26)
 
745

 
769

 
(3)%
Unallocated corporate expenses
(65
)
 
(69
)
 
 
Restructuring charges(1)

 
(34
)
 
 
Earnings before interest and taxes
$
680

 
$
666

 
 
__________________________________________
(1) 
See Note 8 to the Consolidated Financial Statements for additional information on restructuring charges.
Earnings from U.S. Simple Meals decreased 3%. The decrease was due to cost inflation and higher supply chain costs, partially offset by productivity improvements, lower marketing and administrative expenses, sales gains and the benefit of lapping the Plum recall in the prior year.
Earnings from Global Baking and Snacking increased 19%, with 5 points due to lapping the negative impact of purchase accounting in the prior year in connection with the acquisition of Kelsen. The remaining increase was primarily due to sales volume gains, productivity improvements, higher selling prices and lower marketing expenses, partially offset by increased promotional spending, cost inflation and the impact of currency translation.
Earnings from International Simple Meals and Beverages decreased 28%, primarily due to cost inflation, the adverse impact of currency movements on input costs, an increase in marketing expenses and the impact of currency translation, partly offset by sales volume gains and productivity improvements.
Earnings from U.S. Beverages decreased 16%, primarily due to a lower gross margin percentage and volume declines, partially offset by a reduction in marketing expenses.
Earnings from Bolthouse and Foodservice decreased 26%, primarily due to a lower gross margin percentage, partly offset by sales volume gains and reduced advertising in Bolthouse. The lower gross margin percentage reflected higher carrot costs due in part to adverse weather.
Unallocated corporate expenses decreased $4 million in 2015. Unallocated corporate expenses in 2014 included a $9 million loss on foreign exchange forward contracts related to the sale of the European simple meals business and restructuring-related costs of $2 million. The current year included higher losses on open commodity hedges, partially offset by lower long-term incentive compensation costs.
Interest Expense
Interest expense decreased to $52 million in 2015 from $60 million in 2014, reflecting lower levels of debt.
Taxes on Earnings
The effective tax rate was 30.0% in 2015, compared to 32.8% in 2014. In 2014, we recognized tax expense of $7 million associated with the sale of the European simple meals business and a tax benefit of $11 million on $36 million of restructuring charges and restructuring-related costs. The remaining decrease was primarily due to the favorable resolution of an intercompany pricing agreement between the U.S. and Canada.
Restructuring Charges
2014 Initiatives
In 2014, we implemented initiatives to reduce overhead across the organization, restructure manufacturing and streamline operations for our soup and broth business in China and improve supply chain efficiency in Australia. Details of the 2014 initiatives include:
We streamlined our salaried workforce in North America and our workforce in the Asia Pacific region. Approximately 250 positions were eliminated.

30






Together with our joint venture partner Swire Pacific Limited, we agreed to restructure manufacturing and streamline operations for our soup and broth business in China. As a result, certain assets were impaired, and approximately 100 positions were eliminated.
In Australia, we implemented an initiative to improve supply chain efficiency by relocating production from our biscuit plant in Marleston to Huntingwood. The relocation will continue through the second quarter of 2016 and will result in the elimination of approximately 90 positions.
We implemented an initiative to reduce overhead across the organization by eliminating approximately 85 positions. The actions will be completed in 2015.
In 2014, we recorded a restructuring charge of $54 million ($33 million after tax or $.10 per share in earnings from continuing operations attributable to Campbell Soup Company) related to the 2014 initiatives. Of the amounts recorded in 2014, $33 million ($18 million after tax or $.06 per share in earnings from continuing operations attributable to Campbell Soup Company) was recorded in the six-month period ended January 26, 2014.
A summary of the pre-tax costs and remaining costs associated with the 2014 initiatives is as follows:
(Millions)
Total
Program
 
Recognized
as of
February 1, 2015
 
Remaining
Costs to be
Recognized
Severance pay and benefits
$
42

 
$
(41
)
 
$
1

Asset impairment
12

 
(12
)
 

Other exit costs
2

 
(1
)
 
1

Total
$
56

 
$
(54
)
 
$
2

Of the aggregate $56 million of pre-tax costs, approximately $43 million represent cash expenditures. In addition, we expect to invest approximately $6 million in capital expenditures, primarily to relocate biscuit production and packaging capabilities, of which approximately $1 million has been invested as of February 1, 2015. We expect the remaining aspects of the 2014 initiatives to be completed through 2016. The remaining cash outflows related to these restructuring initiatives are not expected to have a material adverse impact on our liquidity.
The 2014 initiatives are expected to generate pre-tax savings of approximately $56 million in 2015, and once fully implemented, annual ongoing savings of approximately $65 million beginning in 2016. In 2014, pre-tax savings were $26 million.
The total pre-tax costs of $56 million associated with each segment are expected to be as follows: U.S. Simple Meals - $9 million; Global Baking and Snacking - $24 million; International Simple Meals and Beverages - $18 million; U.S. Beverages - $2 million; Bolthouse and Foodservice - $2 million; and Corporate - $1 million. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
2013 Initiatives
In 2013, we implemented initiatives to improve supply chain efficiency, expand access to manufacturing and distribution capabilities and reduce costs. Details of the 2013 initiatives include:
We implemented initiatives to improve our U.S. supply chain cost structure and increase asset utilization across our U.S. thermal plant network, including closing our Sacramento, California, thermal plant, which produced soups, sauces and beverages. The closure resulted in the elimination of approximately 700 full-time positions and was completed in phases. Most of the positions were eliminated in 2013 and operations ceased in August 2013. We shifted the majority of Sacramento's soup, sauce and beverage production to our thermal plants in Maxton, North Carolina; Napoleon, Ohio; and Paris, Texas. We also closed our South Plainfield, New Jersey, spice plant, which resulted in the elimination of 27 positions. We consolidated spice production at our Milwaukee, Wisconsin, plant in 2013.
In Mexico, we entered into commercial arrangements with third-party providers to expand access to manufacturing and distribution capabilities. The third-party providers produce and distribute our beverages, soups, broths and sauces throughout the Mexican market. As a result of these agreements, we closed our plant in Villagrán, Mexico, and eliminated approximately 260 positions in the first quarter of 2014.
We implemented an initiative to improve our Pepperidge Farm bakery supply chain cost structure by closing our plant in Aiken, South Carolina. The plant was closed in May 2014. We shifted the majority of Aiken's bread production to our bakery plant in Lakeland, Florida. Approximately 110 positions were eliminated as a result of the plant closure.
We streamlined our salaried workforce in U.S. Simple Meals, North America Foodservice and U.S. Beverages by approximately 70 positions. This action was substantially completed in August 2013.
In 2014, we recorded a restructuring charge of $1 million related to the 2013 initiatives. In addition, approximately $3 million of costs related to the 2013 initiatives were recorded in Cost of products sold, representing other exit costs. The aggregate after-

31






tax impact of restructuring charges and related costs recorded in 2014 was $3 million, or $.01 per share. Of the amounts recorded in 2014, a restructuring charge of $1 million was recorded in the six-month period ended January 26, 2014, and approximately $2 million of costs related to these initiatives were recorded in Cost of products sold, representing other exit costs. The aggregate after-tax impact of restructuring charges and related costs recorded in the six-month period ended January 26, 2014 was $2 million, or $.01 per share. In 2013, we recorded a restructuring charge of $51 million. In addition, approximately $91 million of costs related to these initiatives were recorded in 2013 in Cost of products sold, representing accelerated depreciation and other exit costs. The aggregate after-tax impact of restructuring charges and related costs recorded in 2013 was $90 million, or $.28 per share.
A summary of the pre-tax costs and remaining costs associated with the 2013 initiatives is as follows:
(Millions)
Total
Program
 
Recognized
as of
February 1, 2015
 
Remaining
Costs to be
Recognized
Severance pay and benefits
$
35

 
$
(35
)
 
$

Accelerated depreciation/asset impairment
99

 
(99
)
 

Other exit costs
14

 
(12
)
 
2

Total
$
148

 
$
(146
)
 
$
2

Of the aggregate $148 million of pre-tax costs, approximately $46 million represent cash expenditures. In addition, we expect to invest approximately $31 million in capital expenditures, primarily to relocate and refurbish a beverage filling and packaging line, and relocate bread production, of which approximately $29 million has been invested as of February 1, 2015. We expect the remaining aspects of the 2013 initiatives to be completed in 2015. The remaining cash outflows related to these restructuring initiatives are not expected to have a material adverse impact on our liquidity.
The 2013 initiatives, once fully implemented, are expected to generate annual ongoing pre-tax savings of approximately $40 million beginning in 2015, with 2014 savings of approximately $30 million.
The total pre-tax costs of $148 million associated with segments are expected to be as follows: U.S. Simple Meals - $90 million; Global Baking and Snacking - $16 million; International Simple Meals and Beverages - $9 million; U.S. Beverages - $31 million; and Bolthouse and Foodservice - $2 million. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
Potential Future Initiatives
On January 29, 2015, we announced plans to implement a new enterprise design organized in three new divisions focused mainly on product categories. We are also proceeding with initiatives to reduce costs and to streamline our organizational structure and may take additional restructuring actions in the future as a result.
Discontinued Operations
On October 28, 2013, we completed the sale of our European simple meals business to Soppa Investments S.à r.l., an affiliate of CVC Capital Partners. The all-cash preliminary sale price was €400 million, or $548 million, and was subject to certain post-closing adjustments, which resulted in a $14 million reduction of proceeds. We recognized a pre-tax gain of $141 million ($72 million after tax or $.23 per share) in 2014.
We have reflected the results of the European simple meals business as discontinued operations in the Consolidated Statements of Earnings.
Results of discontinued operations were as follows:
 
Three Months Ended
 
Six Months Ended
(Millions)
January 26, 2014
 
January 26, 2014
Net sales
$

 
$
137

Gain on sale of the European simple meals business
$
147

 
$
141

Earnings from operations, before taxes

 
14

Earnings before taxes
$
147

 
$
155

Taxes on earnings
(57
)
 
(74
)
Earnings from discontinued operations
$
90

 
$
81

See also Note 4 to the Consolidated Financial Statements for additional information.

32






LIQUIDITY AND CAPITAL RESOURCES
We expect that foreseeable liquidity and capital resource requirements will be met through anticipated cash flows from operations; long-term borrowings; short-term borrowings, including commercial paper; and cash and cash equivalents. We believe that our sources of financing will be adequate to meet our future requirements.
We generated cash from operations of $584 million in 2015, compared to $363 million in 2014. The increase was primarily due to taxes paid in 2014 on the divestiture of the European simple meals business, and lower working capital requirements and pension contributions in 2015.
Capital expenditures were $143 million in 2015, compared to $127 million in 2014. To date, capital expenditures in 2015 included a cracker capacity expansion at Pepperidge Farm (approximately $15 million); an ongoing Bolthouse Farms warehouse capacity expansion project (approximately $11 million); the ongoing initiative to simplify the soup-making process in North America (also known as the soup common platform initiative) (approximately $11 million); a Bolthouse Farms beverage and salad dressing capacity expansion project (approximately $7 million); continued enhancement of our corporate headquarters (approximately $7 million); biscuit capacity expansion in Indonesia (approximately $5 million); and aseptic broth capacity (approximately $3 million). We expect capital expenditures to total approximately $400 million in 2015.
On August 8, 2013, we completed the acquisition of Kelsen. The final all-cash purchase price was $331 million, which we funded through the issuance of commercial paper.
Dividend payments were $199 million in 2015 and $195 million in 2014.
We repurchased approximately 3 million shares at a cost of $133 million in 2015 and approximately 2 million shares at a cost of $76 million in 2014. In June 2011, our Board of Directors authorized the purchase of up to $1 billion of our stock. Of the amount spent in 2015, $100 million was used to repurchase shares pursuant to our June 2011 publicly announced share repurchase program. Approximately $650 million remained available to repurchase shares under our June 2011 repurchase program as of February 1, 2015. The program has no expiration date. We also expect to continue our longstanding practice, under separate authorization, of purchasing shares sufficient to offset shares issued under our incentive compensation plans. See “Unregistered Sales of Equity Securities and Use of Proceeds" for more information.
At February 1, 2015, we had $1.64 billion of short-term borrowings due within one year, of which $1.6 billion was comprised of commercial paper borrowings. As of February 1, 2015, we issued $43 million of standby letters of credit. We have a committed revolving credit facility totaling $2.2 billion, which matures in December 2018. This facility remained unused at February 1, 2015, except for $3 million of standby letters of credit that we issued under it. This revolving credit facility supports our commercial paper programs and is available for other general corporate purposes. We may also increase the commitment under the credit facility up to an additional $500 million, upon the agreement of either existing lenders or of additional banks not currently parties to the existing credit agreements.
In September 2014, we filed a registration statement with the Securities and Exchange Commission that registered an indeterminate amount of debt securities. Under the registration statement, we may issue debt securities, depending on market conditions.
We are in compliance with the covenants contained in our revolving credit facilities and debt securities.
SIGNIFICANT ACCOUNTING ESTIMATES
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements in the 2014 Annual Report on Form 10-K. The significant accounting estimates are described in Management’s Discussion and Analysis included in the 2014 Annual Report on Form 10‑K.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 to the Consolidated Financial Statements for information on recent accounting pronouncements.
FORWARD-LOOKING STATEMENTS
This quarterly report contains “forward-looking” statements that reflect our current expectations regarding our future results of operations, economic performance, financial condition and achievements. We try, wherever possible, to identify these forward-looking statements by using words such as “anticipate,” “believe,” “estimate,” “expect,” “will” and similar expressions. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements reflect our current plans and expectations and are based on information currently available to us. They rely on a number of assumptions regarding future events and estimates which could be inaccurate and which are inherently subject to risks and uncertainties.

33






We wish to caution the reader that the following important factors and those important factors described in our other Securities and Exchange Commission filings, or in our 2014 Annual Report on Form 10-K, could affect our actual results and could cause such results to vary materially from those expressed in any forward-looking statements made by, or on behalf of, us:
the impact of strong competitive response to our efforts to leverage our brand power with product innovation, promotional programs and new advertising;
the impact of changes in consumer demand for our products;
the risks in the marketplace associated with trade and consumer acceptance of product improvements, shelving initiatives, new products, and pricing and promotional strategies;
our ability to achieve sales and earnings guidance, which is based on assumptions about sales volume, product mix, the development and success of new products, the impact of marketing, promotional and pricing actions, product costs and currency;
our ability to realize projected cost savings and benefits from our efficiency and/or restructuring initiatives;
our ability to successfully manage changes to our organizational structure and/or to our business processes, including our selling, distribution, manufacturing and information management systems or processes;
the practices and increased significance of certain of our key customers;
the impact of new or changing inventory management practices by our customers;
the impact of fluctuations in the supply of and inflation in energy, raw and packaging materials cost;
the impact of completing and integrating acquisitions, divestitures and other portfolio changes;
the uncertainties of litigation described from time to time in our Securities and Exchange Commission filings;
the impact of changes in currency exchange rates, tax rates, interest rates, debt and equity markets, inflation rates, economic conditions and other external factors; and
the impact of unforeseen business disruptions in one or more of our markets due to political instability, civil disobedience, armed hostilities, natural disasters or other calamities.
This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact our outlook. We disclaim any obligation or intent to update forward-looking statements made by us in order to reflect new information, events or circumstances after the date they are made.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For information regarding our exposure to certain market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the 2014 Annual Report on Form 10-K. There have been no significant changes in our portfolio of financial instruments or market risk exposures from the 2014 year-end.
Item 4. Controls and Procedures
a.
Evaluation of Disclosure Controls and Procedures
We, under the supervision and with the participation of our management, including the President and Chief Executive Officer and the Senior Vice President — Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of February 1, 2015 (Evaluation Date). Based on such evaluation, the President and Chief Executive Officer and the Senior Vice President — Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.
b.
Changes in Internal Controls
As previously disclosed, during the third quarter of 2014, we amended an existing agreement with a third-party service organization to allow for their provision of additional accounting services, including account reconciliations and cost accounting, for a number of our North American plants and distribution centers. In the second quarter of 2015, we continued the transition of these services to the third-party service organization, with the full transition expected to be completed by the end of 2015. This ongoing transition continues to materially affect our internal control over financial reporting. Except for the foregoing, there were no changes in our internal control over financial reporting that materially affected, or were likely to materially affect, such control over financial reporting during the quarter ended February 1, 2015.

34






PART II
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
Period
Total Number
of Shares
Purchased (1)
 
Average
Price Paid
Per Share (2)
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs (3)
 
Approximate
Dollar Value of
Shares that may yet
be Purchased
Under the Plans or
Programs
($ in Millions) (3)
11/3/14 - 11/30/14

 

 

 
$700
12/1/14 - 12/31/14
780,000

(4) 
$43.85
(4) 
715,000

 
$669
1/1/15 - 2/1/15
572,000

(5) 
$45.19
(5) 
422,000

 
$650
Total
1,352,000

 
$44.42
 
1,137,000

 
$650
____________________________________ 
(1) 
Includes 215,000 shares repurchased in open-market transactions to offset the dilutive impact to existing shareholders of issuances under stock compensation plans.
(2) 
Average price paid per share is calculated on a settlement basis and excludes commission.
(3) 
During the second quarter of 2015, we had a publicly announced strategic share repurchase program. Under this program, which was announced on June 23, 2011, our Board of Directors authorized the purchase of up to $1 billion of our stock. The program has no expiration date. We also expect to continue our longstanding practice, under separate authorization, of purchasing shares sufficient to offset shares issued under our incentive compensation plans.
(4) 
Includes 65,000 shares repurchased in open-market transactions at an average price of $43.85 to offset the dilutive impact to existing shareholders of issuances under stock compensation plans.
(5) 
Includes 150,000 shares repurchased in open-market transactions at an average price of $45.01 to offset the dilutive impact to existing shareholders of issuances under stock compensation plans.

35






Item 6.
Exhibits
10(a)*
Letter Agreement, dated July 22, 2014, between the company and Jeff Dunn.
 
 
10(b)
2005 Long-Term Incentive Plan Time-Lapsed Restricted Stock Unit Agreement, dated as of August 1, 2014, between the company and Jeff Dunn.
 
 
10(c)*
2005 Long-Term Incentive Plan Performance Restricted Stock Unit Agreement, dated as of October 1, 2014, between the company and Jeff Dunn.
 
 
10(d)*
2005 Long-Term Incentive Plan Performance Restricted Stock Unit Agreement, dated as of October 1, 2014, between the company and Jeff Dunn.
 
 
10(e)
Wm. Bolthouse Farms, Inc. Salaried & Hourly Administrative Performance-Based Incentive Plan.
 
 
10(f)
Wm. Bolthouse Farms, Inc. Deferred Compensation Plan, effective as of August 1, 2010.
 
 
10(g)
Form of 2005 Long-Term Incentive Plan Time-Lapsed Restricted Stock Unit Agreement, which is applicable to the February 1, 2015 restricted stock unit grants to each of Mark R. Alexander, Luca Mignini and Michael P. Senackerib, was filed with the Commission on a Form 8-K (File number 1-3822) on February 2, 2015, and is incorporated herein by reference.
 
 
31(a)
Certification of Denise M. Morrison pursuant to Rule 13a-14(a).
 
 
31(b)
Certification of Anthony P. DiSilvestro pursuant to Rule 13a-14(a).
 
 
32(a)
Certification of Denise M. Morrison pursuant to 18 U.S.C. Section 1350.
 
 
32(b)
Certification of Anthony P. DiSilvestro pursuant to 18 U.S.C. Section 1350.
 
 
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Schema Document
 
 
101.CAL
XBRL Calculation Linkbase Document
 
 
101.DEF
XBRL Definition Linkbase Document
 
 
101.LAB
XBRL Label Linkbase Document
 
 
101.PRE
XBRL Presentation Linkbase Document
*Portions of this document have been omitted and filed separately with the Commission pursuant to a confidential treatment request under 17 C.F.R. 240.24b-2.


36






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 11, 2015
 
 
 
CAMPBELL SOUP COMPANY
 
 
 
 
By:
/s/ Anthony P. DiSilvestro
 
 
Anthony P. DiSilvestro
 
 
Senior Vice President — Chief Financial Officer
 
 
 
 
 
 
 
By:
/s/ Faith R. Greenfield
 
 
Faith R. Greenfield
 
 
Vice President — Legal and Acting General Counsel


37






INDEX TO EXHIBITS
10(a)*
Letter Agreement, dated July 22, 2014, between the company and Jeff Dunn.
 
 
10(b)
2005 Long-Term Incentive Plan Time-Lapsed Restricted Stock Unit Agreement, dated as of August 1, 2014, between the company and Jeff Dunn.
 
 
10(c)*
2005 Long-Term Incentive Plan Performance Restricted Stock Unit Agreement, dated as of October 1, 2014, between the company and Jeff Dunn.
 
 
10(d)*
2005 Long-Term Incentive Plan Performance Restricted Stock Unit Agreement, dated as of October 1, 2014, between the company and Jeff Dunn.
 
 
10(e)
Wm. Bolthouse Farms, Inc. Salaried & Hourly Administrative Performance-Based Incentive Plan.
 
 
10(f)
Wm. Bolthouse Farms, Inc. Deferred Compensation Plan, effective as of August 1, 2010.
 
 
10(g)
Form of 2005 Long-Term Incentive Plan Time-Lapsed Restricted Stock Unit Agreement, which is applicable to the February 1, 2015 restricted stock unit grants to each of Mark R. Alexander, Luca Mignini and Michael P. Senackerib, was filed with the Commission on a Form 8-K (File number 1-3822) on February 2, 2015, and is incorporated herein by reference.
 
 
31(a)
Certification of Denise M. Morrison pursuant to Rule 13a-14(a).
 
 
31(b)
Certification of Anthony P. DiSilvestro pursuant to Rule 13a-14(a).
 
 
32(a)
Certification of Denise M. Morrison pursuant to 18 U.S.C. Section 1350.
 
 
32(b)
Certification of Anthony P. DiSilvestro pursuant to 18 U.S.C. Section 1350.
 
 
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Schema Document
 
 
101.CAL
XBRL Calculation Linkbase Document
 
 
101.DEF
XBRL Definition Linkbase Document
 
 
101.LAB
XBRL Label Linkbase Document
 
 
101.PRE
XBRL Presentation Linkbase Document
*Portions of this document have been omitted and filed separately with the Commission pursuant to a confidential treatment request under 17 C.F.R. 240.24b-2.


38