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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
November 2, 2014
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 313,342,678 shares of capital stock outstanding as of December 5, 2014.









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
 
November 2,
2014
 
October 27,
2013
Net sales
$
2,255

 
$
2,165

Costs and expenses
 
 
 
Cost of products sold
1,472

 
1,388

Marketing and selling expenses
247

 
261

Administrative expenses
135

 
148

Research and development expenses
29

 
31

Other expenses / (income)
4

 
11

Restructuring charges

 
21

Total costs and expenses
1,887

 
1,860

Earnings before interest and taxes
368

 
305

Interest expense
26

 
31

Interest income
1

 
1

Earnings before taxes
343

 
275

Taxes on earnings
109

 
95

Earnings from continuing operations
234

 
180

Loss from discontinued operations

 
(9
)
Net earnings
234

 
171

Less: Net earnings (loss) attributable to noncontrolling interests

 
(1
)
Net earnings attributable to Campbell Soup Company
$
234

 
$
172

Per Share — Basic
 
 
 
Earnings from continuing operations attributable to Campbell Soup Company
$
.75

 
$
.58

Loss from discontinued operations

 
(.03
)
Net earnings attributable to Campbell Soup Company
$
.75

 
$
.55

Dividends
$
.312

 
$
.312

Weighted average shares outstanding — basic
314

 
314

Per Share — Assuming Dilution
 
 
 
Earnings from continuing operations attributable to Campbell Soup Company
$
.74

 
$
.57

Loss from discontinued operations

 
(.03
)
Net earnings attributable to Campbell Soup Company
$
.74

 
$
.54

Weighted average shares outstanding — assuming dilution
316

 
317

See accompanying Notes to Consolidated Financial Statements.



3






CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions)
 
Three Months Ended
 
November 2, 2014
 
October 27, 2013
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
234

 
 
 
 
 
$
171

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(83
)
 
$

 
(83
)
 
$
48

 
$
(2
)
 
46

Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(1
)
 

 
(1
)
 
(3
)
 
1

 
(2
)
Reclassification adjustment for (gains) losses included in net earnings
1

 

 
1

 

 

 

Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during the period
4

 
(1
)
 
3

 

 

 

Reclassification of net actuarial loss included in net earnings
24

 
(9
)
 
15

 
22

 
(8
)
 
14

Other comprehensive income (loss)
$
(55
)
 
$
(10
)
 
(65
)
 
$
67

 
$
(9
)
 
58

Total comprehensive income (loss)
 
 
 
 
$
169

 
 
 
 
 
$
229

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 

 
 
 
 
 
(2
)
Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
169

 
 
 
 
 
$
231


See accompanying Notes to Consolidated Financial Statements.

4






CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts)
 
November 2,
2014
 
August 3,
2014
Current assets
 
 
 
Cash and cash equivalents
$
239

 
$
232

Accounts receivable, net
840

 
670

Inventories
1,105

 
1,016

Other current assets
174

 
182

Total current assets
2,358

 
2,100

Plant assets, net of depreciation
2,286

 
2,318

Goodwill
2,379

 
2,433

Other intangible assets, net of amortization
1,160

 
1,175

Other assets
114

 
87

Total assets
$
8,297

 
$
8,113

Current liabilities
 
 
 
Short-term borrowings
$
1,828

 
$
1,771

Payable to suppliers and others
597

 
527

Accrued liabilities
524

 
553

Dividend payable
101

 
101

Accrued income taxes
118

 
37

Total current liabilities
3,168

 
2,989

Long-term debt
2,244

 
2,244

Deferred taxes
560

 
548

Other liabilities
719

 
729

Total liabilities
6,691

 
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
301

 
330

Earnings retained in the business
2,332

 
2,198

Capital stock in treasury, at cost
(393
)
 
(356
)
Accumulated other comprehensive loss
(634
)
 
(569
)
Total Campbell Soup Company shareholders' equity
1,618

 
1,615

Noncontrolling interests
(12
)
 
(12
)
Total equity
1,606

 
1,603

Total liabilities and equity
$
8,297

 
$
8,113

See accompanying Notes to Consolidated Financial Statements.


5






CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
 
Three Months Ended
 
November 2,
2014
 
October 27,
2013
Cash flows from operating activities:
 
 
 
Net earnings
$
234

 
$
171

Adjustments to reconcile net earnings to operating cash flow
 
 
 
Restructuring charges

 
21

Stock-based compensation
13

 
21

Depreciation and amortization
75

 
74

Deferred income taxes
2

 
43

Other, net
19

 
27

Changes in working capital
 
 
 
Accounts receivable
(175
)
 
(186
)
Inventories
(98
)
 
(110
)
Prepaid assets
(5
)
 
(25
)
Accounts payable and accrued liabilities
132

 
77

Pension fund contributions
(1
)
 
(40
)
Receipts from (payments of) hedging activities
1

 
(23
)
Other
(9
)
 
(12
)
Net cash provided by operating activities
188

 
38

Cash flows from investing activities:
 
 
 
Purchases of plant assets
(62
)
 
(52
)
Sales of plant assets
6

 

Business acquired, net of cash acquired

 
(329
)
Other, net
(8
)
 

Net cash used in investing activities
(64
)
 
(381
)
Cash flows from financing activities:
 
 
 
Net short-term borrowings
352

 
641

Repayments of notes payable
(300
)
 
(300
)
Dividends paid
(101
)
 
(97
)
Treasury stock purchases
(73
)
 
(2
)
Treasury stock issuances
6

 
4

Excess tax benefits on stock-based compensation
5

 
10

Contributions from noncontrolling interest

 
5

Net cash provided by (used in) financing activities
(111
)
 
261

Effect of exchange rate changes on cash
(6
)
 

Net change in cash and cash equivalents
7

 
(82
)
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

 
(14
)
Cash and cash equivalents continuing operations — end of period
$
239

 
$
305

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)

 

 

 

 

 
172

 

 
(1
)
 
171

Other comprehensive income (loss)

 

 

 

 

 

 
59

 
(1
)
 
58

Dividends ($.312 per share)

 

 

 

 

 
(97
)
 

 

 
(97
)
Treasury stock purchased

 

 

 
(2
)
 

 

 

 

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

 
61

 
(61
)
 
 
 
 
 
 
 

Balance at October 27, 2013
323

 
$
12

 
(9
)
 
$
(305
)
 
$
301

 
$
1,847

 
$
(506
)
 
$
(4
)
 
$
1,345

Balance at August 3, 2014
323

 
$
12

 
(10
)
 
$
(356
)
 
$
330

 
$
2,198

 
$
(569
)
 
$
(12
)
 
$
1,603

Net earnings (loss)

 

 

 

 

 
234

 

 

 
234

Other comprehensive income (loss)

 

 

 

 

 

 
(65
)
 

 
(65
)
Dividends ($.312 per share)

 

 

 

 

 
(100
)
 

 

 
(100
)
Treasury stock purchased

 

 
(2
)
 
(73
)
 

 

 

 

 
(73
)
Treasury stock issued under management incentive and stock option plans


 


 
2

 
36

 
(29
)
 


 


 

 
7

Balance at November 2, 2014
323

 
$
12

 
(10
)
 
$
(393
)
 
$
301

 
$
2,332

 
$
(634
)
 
$
(12
)
 
$
1,606

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 those obligations within scope 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 redefining discontinued operations, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. 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. We are currently evaluating the new guidance.
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 85 countries around the world. Its primary brands include Kjeldsens and Royal Dansk.
For the three-month period ended October 27, 2013, the Kelsen acquisition contributed $52 to Net sales and had no impact on Net earnings.

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:
 
 
Three Months Ended
 
 
October 27, 2013
Net sales
 
$
2,169

Earnings from continuing operations attributable to Campbell Soup Company
 
$
182

Earnings per share from continuing operations attributable to Campbell Soup Company
 
$
.57

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, 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
 
 
October 27, 2013
Net sales
 
$
137

 
 
 
Earnings before taxes
 
$
9

Taxes on earnings
 
(18
)
Earnings (loss) from discontinued operations
 
$
(9
)
In the first quarter of 2014, earnings before taxes included approximately $6 of costs associated with the sale of the business. Taxes on earnings included incremental expense of $14 representing taxes on the difference between the book value and tax basis of the business as a result of a reorganization of the capital and ownership structure that occurred during the first quarter of 2014.

9






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
 
(83
)
 
(1
)
 
3

 
(81
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
1

 
15

 
16

Net current-period other comprehensive income (loss)
 
(83
)
 

 
18

 
(65
)
Balance at November 2, 2014
 
$
54

 
$
(3
)
 
$
(685
)
 
$
(634
)
_____________________________________
(1) 
Included a tax expense of $7 as of November 2, 2014 and August 3, 2014.
(2) 
Included a tax benefit of $1 as of November 2, 2014 and August 3, 2014.
(3) 
Included a tax benefit of $395 as of November 2, 2014 and $405 as of August 3, 2014.
Amounts related to noncontrolling interests were not material.
The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following:
 
 
Three Months Ended
 
 
Details about Accumulated Other Comprehensive Income (Loss) Components
 
November 2, 2014
 
October 27, 2013
 
Location of (Gain) Loss Recognized in Earnings
(Gains) losses on cash flow hedges:
 
 
 
 
 
 
Foreign exchange forward contracts
 
$

 
$
(1
)
 
Cost of products sold
Forward starting interest rate swaps
 
1

 
1

 
Interest expense
Total before tax
 
1

 

 
 
Tax expense (benefit)
 

 

 
 
(Gain) loss, net of tax
 
$
1

 
$

 
 
 
 
 
 
 
 
 
Pension and postretirement benefit adjustments:
 
 
 
 
 
 
Net actuarial losses
 
$
24

 
$
22

 
(1) 
Tax expense (benefit)
 
(9
)
 
(8
)
 
 
(Gain) loss, net of tax
 
$
15

 
$
14

 
 
_____________________________________
(1) 
Included in the components of net periodic benefit costs (see Note 11 for additional details).
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

 
(50
)
 
(4
)
 

 

 
(54
)
Balance at November 2, 2014
$
450

 
$
868

 
$
111

 
$
112

 
$
838

 
$
2,379



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
 
November 2,
2014
 
August 3,
2014
Amortizable intangible assets
 
 
 
 
Customer relationships
 
$
177

 
$
178

Technology
 
40

 
40

Other
 
35

 
35

Total gross amortizable intangible assets
 
$
252

 
$
253

Accumulated amortization
 
(39
)
 
(35
)
Total net amortizable intangible assets
 
$
213

 
$
218

Non-amortizable intangible assets
 
 
 
 
Trademarks
 
947

 
957

Total net intangible assets
 
$
1,160

 
$
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 $4 for the three-month periods ended November 2, 2014 and October 27, 2013. Amortization expense for the following 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
 
 
November 2,
2014
 
October 27,
2013
Net sales
 
 
 
 
U.S. Simple Meals
 
$
928

 
$
860

Global Baking and Snacking
 
627

 
609

International Simple Meals and Beverages
 
189

 
193

U.S. Beverages
 
168

 
173

Bolthouse and Foodservice
 
343

 
330

Total
 
$
2,255

 
$
2,165

 
 
Three Months Ended
 
 
November 2,
2014
 
October 27,
2013
Earnings before interest and taxes
 
 
 
 
U.S. Simple Meals
 
$
242

 
$
211

Global Baking and Snacking
 
90

 
78

International Simple Meals and Beverages
 
16

 
20

U.S. Beverages
 
26

 
24

Bolthouse and Foodservice
 
22

 
29

Corporate(1)
 
(28
)
 
(36
)
Restructuring charges(2)
 

 
(21
)
Total
 
$
368

 
$
305

_______________________________________
(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 three-month period ended October 27, 2013.
(2) 
See Note 8 for additional information.
Our global net sales based on product categories are as follows:
 
 
Three Months Ended
 
 
November 2,
2014
 
October 27,
2013
Net sales
 
 
 
 
Simple Meals
 
$
1,311

 
$
1,234

Baked Snacks
 
663

 
645

Beverages
 
281

 
286

Total
 
$
2,255

 
$
2,165

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 occur 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, $20 ($13 after tax or $.04 per share) was recorded in the first quarter. A summary of the pre-tax costs and remaining costs associated with the initiatives is as follows:
 
Total
Program
 
Recognized
as of
November 2, 2014
 
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, we expect approximately $43 will be cash expenditures. In addition, we expect to invest approximately $7 in capital expenditures, primarily to relocate biscuit production and packaging capabilities, of which approximately $2 has been invested as of November 2, 2014. The remaining aspects of the 2014 initiatives are expected to be completed through 2016.
A summary of the restructuring activity and related reserves associated with the 2014 initiatives at November 2, 2014 is as follows:
 
 
 
 
Three Months Ended
November 2, 2014
 
 
 
 
 
 
 
 
 
 
Accrued Balance at August 3, 2014
 
Charges
 
Cash
Payments
 
Foreign Currency Translation Adjustment
 
Accrued
Balance at
November 2, 2014
Severance pay and benefits
 
$
28

 
$

 
$
(6
)
 
$
(1
)
 
$
21

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 thermal plant in Sacramento, California, 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 spice plant in South Plainfield, New Jersey, 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 first quarter, and approximately $2 of costs related to these initiatives were recorded in the first quarter in Cost of products sold, representing other exit costs. The aggregate after-tax impact of restructuring charges and related costs recorded in the first quarter of 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 initiatives is as follows:
 
Total
Program
 
Recognized
as of
November 2, 2014
 
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 are 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 $28 has been invested as of November 2, 2014. The remaining aspects of the 2013 initiatives are expected to be completed in 2015.
A summary of the restructuring activity and related reserves associated with the 2013 initiatives at November 2, 2014 is as follows:
 
 
 
 
Three Months Ended
November 2, 2014
 
 
 
 
 
 
 
 
 
 
Accrued Balance at August 3, 2014
 
Charges
 
Cash
Payments
 
Accrued
Balance at
November 2, 2014
Severance pay and benefits
 
$
3

 
$

 
$
(1
)
 
$
2

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 periods ended November 2, 2014 and October 27, 2013.
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.
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
 
Pension
 
Postretirement
 
November 2,
2014
 
October 27,
2013
 
November 2,
2014
 
October 27,
2013
Service cost
$
7

 
$
11

 
$

 
$
1

Interest cost
27

 
29

 
4

 
4

Expected return on plan assets
(44
)
 
(45
)
 

 

Recognized net actuarial loss
21

 
19

 
3

 
3

Net periodic benefit expense
$
11

 
$
14

 
$
7

 
$
8

No contributions are expected to be made to U.S. pension plans in 2015. Contributions to non-U.S. pension plans during the three-month period ended November 2, 2014 were $1. Contributions to non-U.S. pension plans during the remainder of the year are expected to be approximately $3.
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 both instruments that qualify and 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 only enter into contracts 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 November 2, 2014. During 2014, our largest customer accounted for approximately 19% of consolidated net sales. We closely monitor credit risk associated with counterparties and customers.
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

15






sale contracts, as well as cross-currency swap contracts, are entered into for periods consistent with the underlying debt. As of November 2, 2014, cross-currency swap contracts mature between 9 and 33 months. The notional amount of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was $50 at November 2, 2014 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 $570 and $561 at November 2, 2014 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 $450 at November 2, 2014, of which $250 relates to an anticipated issuance in 2015 and $200 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 November 2, 2014 or August 3, 2014. The notional amount of commodity contracts not designated as accounting hedges was $120 at November 2, 2014 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 as of November 2, 2014 and August 3, 2014 were $55 and $56, respectively.

16






The following table summarizes the fair value of derivative instruments on a gross basis as recorded in the Consolidated Balance Sheets as of November 2, 2014 and August 3, 2014:
 
Balance Sheet Classification
 
November 2,
2014
 
August 3,
2014
Asset Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Other current assets
 
$
2

 
$
1

Forward starting interest rate swaps
Other current assets
 
3

 
11

Forward starting interest rate swaps
Other assets
 
2

 

Total derivatives designated as hedges
 
 
$
7

 
$
12

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Other current assets
 
$
1

 
$
2

Cross-currency swap contracts
Other current assets
 
1

 

Deferred compensation derivative contracts
Other current assets
 
1

 

Foreign exchange forward contracts
Other current assets
 
1

 
1

Cross-currency swap contracts
Other assets
 
7

 

Total derivatives not designated as hedges
 
 
$
11

 
$
3

Total asset derivatives
 
 
$
18

 
$
15

 
Balance Sheet Classification
 
November 2,
2014
 
August 3,
2014
Liability Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Accrued liabilities
 
$

 
$
1

Total derivatives designated as hedges
 
 
$

 
$
1

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Accrued liabilities
 
$
13

 
$
10

Cross-currency swap contracts
Accrued liabilities
 

 
1

Deferred compensation derivative contracts
Accrued liabilities
 

 
3

Foreign exchange forward contracts
Accrued liabilities
 
3

 
2

Commodity derivative contracts
Other liabilities
 

 
1

Cross-currency swap contracts
Other liabilities
 

 
5

Total derivatives not designated as hedges
 
 
$
16

 
$
22

Total liability derivatives
 
 
$
16

 
$
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 November 2, 2014 and August 3, 2014 would be adjusted as detailed in the following table:
 
 
November 2, 2014
 
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
 
$
18

 
$
(1
)
 
$
17

 
$
15

 
$
(4
)
 
$
11

 
 
 
 
 
 

 
 
 
 
 

Total liability derivatives
 
$
16

 
$
(1
)
 
$
15

 
$
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 November 2, 2014 and August 3, 2014, a cash margin account balance of $17 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-month periods ended November 2, 2014, and October 27, 2013, in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:
  
 
 
Total
Cash-Flow Hedge
OCI Activity
Derivatives Designated as Cash-Flow Hedges
 
 
November 2,
2014
 
October 27,
2013
Three 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
 
 
3

 
1

Forward starting interest rate swaps
 
 
(4
)
 
(4
)
Amount of (gain) loss reclassified from OCI to earnings:
Location in Earnings
 
 
 
 
Foreign exchange forward contracts
Cost of products sold
 

 
(1
)
Forward starting interest rate swaps
Interest expense
 
1

 
1

OCI derivative gain (loss) at end of quarter
 
 
$
(4
)
 
$
5

Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a loss of $1. 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
 
November 2,
2014
 
October 27,
2013
 
November 2,
2014
 
October 27,
2013
Three Months Ended
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest expense
 
$

 
$
(1
)
 
$

 
$
1

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
 
 
November 2, 2014
 
October 27, 2013
Foreign exchange forward contracts
 
Cost of products sold
 
$
1

 
$
2

Foreign exchange forward contracts
 
Other expenses/income
 

 
(14
)
Cross-currency swap contracts
 
Other expenses/income
 
14

 
(3
)
Commodity derivative contracts
 
Cost of products sold
 
(5
)
 
(2
)
Deferred compensation derivative contracts
 
Administrative expenses
 
2

 
(1
)
Total
 
 
 
$
12

 
$
(18
)

18






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 valued 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 November 2, 2014, and August 3, 2014, consistent with the fair value hierarchy:
 
 
Fair Value
as of
November 2,
2014
 
Fair Value Measurements at
November 2, 2014 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)
$
5

 
$

 
$
5

 
$

 
$
11

 
$

 
$
11

 
$

Foreign exchange forward contracts(2)
3

 

 
3

 

 
2

 

 
2

 

Commodity derivative contracts(3)
1

 

 
1

 

 
2

 
1

 
1

 

Deferred compensation derivative contracts(4)
1

 

 
1

 

 

 

 

 

Cross-currency swap contracts(5)
8

 

 
8

 

 

 

 

 

Total assets at fair value
$
18

 
$

 
$
18

 
$

 
$
15

 
$
1

 
$
14

 
$



19






 
Fair Value
as of
November 2,
2014
 
Fair Value Measurements at
November 2, 2014 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts(2)
$
3

 
$

 
$
3

 
$

 
$
3

 
$

 
$
3

 
$

Cross-currency swap contracts(5)

 

 

 

 
6

 

 
6

 

Commodity derivative contracts(3)
13

 
13

 

 

 
11

 
11

 

 

Deferred compensation derivative contracts(4)

 

 

 

 
3

 

 
3

 

Deferred compensation obligation(6)
129

 
129

 

 

 
123

 
123

 

 

Total liabilities at fair value
$
145

 
$
142

 
$
3

 
$

 
$
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 LIBOR and equity index swap rates.
(5) 
Based on observable local benchmarks for currency and interest 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 $38 at November 2, 2014 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 $2,335 at November 2, 2014 and $2,647 at August 3, 2014. The carrying value was $2,255 at November 2, 2014 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 three-month period ended November 2, 2014, we repurchased 2 million shares at a cost of $73. Of this amount, $50 was used to repurchase shares pursuant to our June 2011 publicly announced share repurchase program. Approximately $700 remained available under this program as of November 2, 2014. During the three-month period ended October 27, 2013, we repurchased 43 thousand shares at a cost of $2 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 restricted stock units, EPS performance restricted stock units, TSR performance restricted stock units and special performance

20






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 $13 and $21 for the three-month periods ended November 2, 2014, and October 27, 2013, respectively. Tax-related benefits of $5 and $8 were also recognized for the three-month periods ended November 2, 2014, and October 27, 2013, respectively. Cash received from the exercise of stock options was $6 and $4 for the three-month periods ended November 2, 2014, and October 27, 2013, 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 November 2, 2014:
 
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
(215
)
 
$
26.88

 
 
 
 
Terminated
(3
)
 
$
26.36

 
 
 
 
Outstanding at November 2, 2014
190

 
$
29.95

 
0.8
 
$
3

Exercisable at November 2, 2014
190

 
$
29.95

 
0.8
 
$
3

The total intrinsic value of options exercised during the three-month periods ended November 2, 2014, and October 27, 2013, was $4 and $2, 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 November 2, 2014:
 
Units
 
Weighted-
Average
Grant-Date
Fair Value
 
(Restricted stock
units in thousands)
 
 
Nonvested at August 3, 2014
2,994

 
$
37.69

Granted
1,024

 
$
42.24

Vested
(1,219
)
 
$
35.53

Forfeited
(345
)
 
$
35.47

Nonvested at November 2, 2014
2,454

 
$
40.98

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 November 2, 2014 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 390 thousand strategic performance target grants outstanding at November 2, 2014 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.
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%

21






to 150%. There were 184 thousand special performance restricted stock units outstanding at November 2, 2014 with a grant-date fair value of $42.22.
As of November 2, 2014, 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 $63, which will be amortized over the weighted-average remaining service period of 1.8 years. The fair value of restricted stock units vested during the three-month periods ended November 2, 2014, and October 27, 2013, was $52 and $103, respectively. The weighted-average grant-date fair value of the restricted stock units granted during three-month period ended October 27, 2013 was $39.72.
The following table summarizes TSR performance restricted stock units as of November 2, 2014:
 
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
(16
)
 
$
38.49

Nonvested at November 2, 2014
1,719

 
$
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 November 2, 2014, total remaining unearned compensation related to TSR performance restricted stock units was $44, which will be amortized over the weighted-average remaining service period of 2.5 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 three-month periods ended November 2, 2014 and October 27, 2013 were $5 and $10, respectively.
16.
Inventories
 
November 2,
2014
 
August 3,
2014
Raw materials, containers and supplies
$
453

 
$
399

Finished products
652

 
617

Total inventories
$
1,105

 
$
1,016

17.
Supplemental Cash Flow Information
Other cash used in operating activities for the three-month periods was comprised of the following:
 
November 2, 2014
 
October 27, 2013