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EX-31.A - EXHIBIT 31.A - CAMPBELL SOUP COcpb-1112015xexb31a.htm
EX-31.B - EXHIBIT 31.B - CAMPBELL SOUP COcpb-1112015xexb31b.htm







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 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 310,030,539 shares of capital stock outstanding as of December 4, 2015.
 


1






TABLE OF CONTENTS



2






PART I

Item 1. Financial Information
CAMPBELL SOUP COMPANY
Consolidated Statements of Earnings
(unaudited)
(millions, except per share amounts)
 
 
Three Months Ended
 
November 1,
2015
 
November 2,
2014
Net sales
$
2,203

 
$
2,255

Costs and expenses
 
 
 
Cost of products sold
1,448

 
1,460

Marketing and selling expenses
226

 
243

Administrative expenses
156

 
131

Research and development expenses
32

 
28

Other expenses / (income)
5

 
4

Restructuring charges
21

 

Total costs and expenses
1,888

 
1,866

Earnings before interest and taxes
315

 
389

Interest expense
29

 
26

Interest income
1

 
1

Earnings before taxes
287

 
364

Taxes on earnings
93

 
116

Net earnings
194

 
248

Less: Net earnings (loss) attributable to noncontrolling interests

 

Net earnings attributable to Campbell Soup Company
$
194

 
$
248

Per Share — Basic
 
 
 
Net earnings attributable to Campbell Soup Company
$
.63

 
$
.79

Dividends
$
.312

 
$
.312

Weighted average shares outstanding — basic
310

 
314

Per Share — Assuming Dilution
 
 
 
Net earnings attributable to Campbell Soup Company
$
.62

 
$
.78

Weighted average shares outstanding — assuming dilution
312

 
316

See accompanying Notes to Consolidated Financial Statements.



3






CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions)
 
Three Months Ended
 
November 1, 2015
 
November 2, 2014
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
194

 
 
 
 
 
$
248

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(26
)
 
$
1

 
(25
)
 
$
(81
)
 
$

 
(81
)
Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(8
)
 
3

 
(5
)
 
(1
)
 

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

 
(2
)
 
1

 

 
1

Other comprehensive income (loss)
$
(36
)
 
$
4

 
(32
)
 
$
(81
)
 
$

 
(81
)
Total comprehensive income (loss)
 
 
 
 
$
162

 
 
 
 
 
$
167

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 

 
 
 
 
 

Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
162

 
 
 
 
 
$
167

 
 
 
 
 
 
 
 
 
 
 
 
See accompanying Notes to Consolidated Financial Statements.

4






CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts)
 
November 1,
2015
 
August 2,
2015
Current assets
 
 
 
Cash and cash equivalents
$
263

 
$
253

Accounts receivable, net
829

 
647

Inventories
1,049

 
995

Other current assets
196

 
198

Total current assets
2,337

 
2,093

Plant assets, net of depreciation
2,340

 
2,347

Goodwill
2,331

 
2,344

Other intangible assets, net of amortization
1,200

 
1,205

Other assets
96

 
101

Total assets
$
8,304

 
$
8,090

Current liabilities
 
 
 
Short-term borrowings
$
1,545

 
$
1,543

Payable to suppliers and others
567

 
544

Accrued liabilities
569

 
589

Dividend payable
100

 
101

Accrued income taxes
123

 
29

Total current liabilities
2,904

 
2,806

Long-term debt
2,551

 
2,552

Deferred taxes
462

 
505

Other liabilities
977

 
850

Total liabilities
6,894

 
6,713

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
309

 
339

Earnings retained in the business
1,850

 
1,754

Capital stock in treasury, at cost
(557
)
 
(556
)
Accumulated other comprehensive loss
(200
)
 
(168
)
Total Campbell Soup Company shareholders' equity
1,414

 
1,381

Noncontrolling interests
(4
)
 
(4
)
Total equity
1,410

 
1,377

Total liabilities and equity
$
8,304

 
$
8,090

See accompanying Notes to Consolidated Financial Statements.


5






CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
 
Three Months Ended
 
November 1,
2015
 
November 2,
2014
Cash flows from operating activities:
 
 
 
Net earnings
$
194

 
$
248

Adjustments to reconcile net earnings to operating cash flow
 
 
 
Restructuring charges
21

 

Stock-based compensation
13

 
13

Pension and postretirement benefit expense / (income)
133

 
(6
)
Depreciation and amortization
74

 
75

Deferred income taxes
(35
)
 
9

Other, net
(1
)
 
1

Changes in working capital
 
 
 
Accounts receivable
(184
)
 
(175
)
Inventories
(56
)
 
(95
)
Prepaid assets
(6
)
 
(5
)
Accounts payable and accrued liabilities
72

 
132

Pension fund contributions
(1
)
 
(1
)
Receipts from hedging activities
3

 
1

Other
(9
)
 
(9
)
Net cash provided by operating activities
218

 
188

Cash flows from investing activities:
 
 
 
Purchases of plant assets
(71
)
 
(62
)
Sales of plant assets
2

 
6

Other, net
1

 
(8
)
Net cash used in investing activities
(68
)
 
(64
)
Cash flows from financing activities:
 
 
 
Net short-term borrowings
(11
)
 
352

Repayments of notes payable

 
(300
)
Dividends paid
(100
)
 
(101
)
Treasury stock purchases
(32
)
 
(73
)
Treasury stock issuances
1

 
6

Excess tax benefits on stock-based compensation
6

 
5

Net cash used in financing activities
(136
)
 
(111
)
Effect of exchange rate changes on cash
(4
)
 
(6
)
Net change in cash and cash equivalents
10

 
7

Cash and cash equivalents — beginning of period
253

 
232

Cash and cash equivalents — end of period
$
263

 
$
239

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 August 3, 2014
323

 
12

 
(10
)
 
(356
)
 
330

 
1,483

 
145

 
(12
)
 
1,602

Net earnings (loss)

 

 

 

 

 
248

 

 

 
248

Other comprehensive income (loss)

 

 

 

 

 

 
(81
)
 

 
(81
)
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

 
1,631

 
64

 
(12
)
 
1,603

Balance at August 2, 2015
323

 
12

 
(13
)
 
(556
)
 
339

 
1,754

 
(168
)
 
(4
)
 
1,377

Net earnings (loss)

 

 

 

 

 
194

 

 

 
194

Other comprehensive income (loss)

 

 

 

 

 

 
(32
)
 

 
(32
)
Dividends ($.312 per share)

 

 

 

 

 
(98
)
 

 

 
(98
)
Treasury stock purchased

 

 
(1
)
 
(32
)
 

 

 

 

 
(32
)
Treasury stock issued under management incentive and stock option plans


 


 
1

 
31

 
(30
)
 


 


 

 
1

Balance at November 1, 2015
323

 
$
12

 
(13
)
 
$
(557
)
 
$
309

 
$
1,850

 
$
(200
)
 
$
(4
)
 
$
1,410

See accompanying Notes to Consolidated Financial Statements.

7






Notes to Consolidated Financial Statements
(unaudited)
(currency in millions, except per share amounts)
1.
Basis of Presentation and Significant Accounting Policies
In this Form 10-Q, unless otherwise stated, the terms “we,” “us,” “our” and the “company” refer to Campbell Soup Company and its consolidated subsidiaries.
The 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 we used in preparing these financial statements are substantially consistent with those we applied in our Annual Report on Form 10-K for the year ended August 2, 2015 with the exception of the changes in accounting policy related to our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets as described below. As of the beginning of 2016, we are managing our operations under a new structure and have modified our segment reporting accordingly. Certain amounts in prior-year financial statements were reclassified to conform to the current-year presentation. 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.
In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets. Historically, actuarial gains and losses associated with benefit obligations were recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and were amortized into earnings over the remaining service life of participants to the extent that the amounts were in excess of a corridor. Under the new policy, actuarial gains and losses will be recognized immediately in our Consolidated Statements of Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required. In addition, we will no longer use a market-related value of plan assets, which is an average value, to determine the expected return on assets but rather will use the fair value of plan assets. We believe the new policies will provide greater transparency to ongoing operating results and better reflect the impact of current market conditions on the obligations and assets.
The changes in policy were applied retrospectively to all periods presented. As of August 4, 2014, the cumulative effect of these changes on the opening balance sheet was a $715 decrease to Earnings retained in the business, a decrease of $2 to Inventories, a $714 reduction to Accumulated other comprehensive loss, and an increase of $1 to Other current assets.
We recognized mark-to-market losses of $128 ($80 after tax, or $.26 per share) in the first quarter of 2016 as certain U.S. plans were remeasured. The remeasurement was required due to a high level of lump sum payments to certain vested plan participants arising primarily out of a limited-time offer to accept a single lump sum in lieu of future annuity payments. No remeasurement was required in the first quarter of 2015.
The impacts of the changes in policy to the consolidated financial statements are summarized below:
 
 
Three months ended November 1, 2015
 
Three months ended November 2, 2014
Consolidated Statements of Earnings
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Cost of products sold
 
$
1,412

 
$
36

 
$
1,448

 
$
1,472

 
$
(12
)
 
$
1,460

Marketing and selling expenses
 
216

 
10

 
226

 
247

 
(4
)
 
243

Administrative expenses
 
149

 
7

 
156

 
135

 
(4
)
 
131

Research and development expenses
 
29

 
3

 
32

 
29

 
(1
)
 
28

Earnings before interest and taxes
 
371

 
(56
)
 
315

 
368

 
21

 
389

Earnings before taxes
 
343

 
(56
)
 
287

 
343

 
21

 
364

Taxes on earnings
 
110

 
(17
)
 
93

 
109

 
7

 
116

Net earnings
 
233

 
(39
)
 
194

 
234

 
14

 
248

Net earnings attributable to Campbell Soup Company
 
$
233

 
$
(39
)
 
$
194

 
$
234

 
$
14

 
$
248

Earnings per share — Basic (1)
 
$
.75

 
$
(.13
)
 
$
.63

 
$
.75

 
$
.04

 
$
.79

Earnings per share — Diluted
 
$
.75

 
$
(.13
)
 
$
.62

 
$
.74

 
$
.04

 
$
.78

________________________________________________________ 
(1) The sum of the individual per share amounts may not add due to rounding

8






 
 
Three months ended November 1, 2015
 
Three months ended November 2, 2014
Consolidated Statements of Comprehensive Income
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
$
(26
)
 
$

 
$
(26
)
 
$
(83
)
 
$
2

 
$
(81
)
Pension and other postretirement benefits
 
 
 
 
 
 
 
 
 
 
 

Net actuarial gain (loss) arising during the period
 
(136
)
 
136

 

 
4

 
(4
)
 

Reclassification of net actuarial loss included in net earnings
 
77

 
(77
)
 

 
24

 
(24
)
 

Tax benefit / (expense)
 
$
22

 
$
(22
)
 
$

 
$
(10
)
 
$
10

 
$

 
 
November 1, 2015
 
August 2, 2015
Consolidated Balance Sheets
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Inventories
 
$
1,044

 
$
5

 
$
1,049

 
$
993

 
$
2

 
$
995

Other current assets
 
198

 
(2
)
 
196

 
199

 
(1
)
 
198

Accrued income taxes
 
119

 
4

 
123

 
29

 

 
29

Earnings retained in the business
 
2,629

 
(779
)
 
1,850

 
2,494

 
(740
)
 
1,754

Accumulated other comprehensive (loss) income
 
$
(978
)
 
778

 
$
(200
)
 
$
(909
)
 
741

 
$
(168
)
 
 
Three months ended November 1, 2015
 
Three months ended November 2, 2014
Consolidated Statements of Cash Flows
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Cash flow from operating activities:
 
 
 
 
 
 
 
 
 
 
 

Net earnings
 
$
233

 
$
(39
)
 
$
194

 
$
234

 
$
14

 
$
248

Pension and postretirement benefit expense / (income)
 

 
133

 
133

 

 
(6
)
 
(6
)
Deferred income taxes
 
(14
)
 
(21
)
 
(35
)
 
2

 
7

 
9

Other, net
 
73

 
(74
)
 
(1
)
 
19

 
(18
)
 
1

Inventories
 
(53
)
 
(3
)
 
(56
)
 
(98
)
 
3

 
(95
)
Accounts payable and accrued liabilities
 
$
68

 
$
4

 
$
72

 
$
132

 

 
$
132

Net cash provided by operating activities
 
$
218

 
$

 
$
218

 
$
188

 
$

 
$
188

2.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (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 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. In July 2015, the FASB decided to delay the effective date of the new revenue guidance by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Entities will be permitted to adopt the new revenue standard early, but not before the original effective date. The guidance permits the use of either a full retrospective or modified retrospective transition method. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements, as well as which transition method we will use.
In April 2015, the FASB issued guidance that requires debt issuance costs to be presented in the balance sheet as a reduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The guidance must be applied on a retrospective basis and is effective for fiscal years beginning after December 15, 2015, and interim periods within those years. Early adoption is permitted. We do not expect the adoption to have a material impact on our consolidated financial statements.
In April 2015, the FASB issued guidance to clarify the accounting for fees paid by a customer in a cloud computing arrangement. The guidance is effective for fiscal years beginning on or after December 15, 2015, and interim periods within those years. Early

9






adoption is permitted. The new guidance should be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
In September 2015, the FASB issued guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments for business combinations. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The guidance is effective for fiscal years beginning on or after December 15, 2015, and interim periods within those years and should be applied prospectively to measurement period adjustments that occur after the effective date. We will prospectively apply the guidance to applicable transactions.
In November 2015, the FASB issued guidance that amends the balance sheet classification of deferred taxes. The new guidance requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. Previous guidance required deferred tax liabilities and assets to be separated into current and noncurrent amounts on the balance sheet. The guidance is effective for fiscal years beginning on or after December 15, 2016, and interim periods within those years. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
3.
Acquisitions
On June 29, 2015, we completed the acquisition of the assets of Garden Fresh Gourmet for $232. Garden Fresh Gourmet is a provider of refrigerated salsa in North America, and it also produces hummus, dips and tortilla chips. It is included in the Campbell Fresh segment.
The purchase price allocation is preliminary and is subject to the finalization of appraisals, which will be completed in 2016.
For the three-month period ended November 1, 2015, Garden Fresh Gourmet contributed $26 to Net sales. Its contribution to Net earnings was not material.
The following unaudited summary information is presented on a consolidated pro forma basis as if the Garden Fresh Gourmet acquisition had occurred on July 29, 2013:
 
 
Three Months Ended
 
 
November 2, 2014
Net sales
 
$
2,280

Net earnings attributable to Campbell Soup Company
 
$
249

Net earnings per share attributable to Campbell Soup Company - assuming dilution
 
$
.79

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 Garden Fresh Gourmet acquisition been completed on July 29, 2013, nor are they indicative of future combined results.

10






4.
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 2, 2015
 
$
(166
)
 
$
(5
)
 
$
3

 
$
(168
)
Other comprehensive income (loss) before reclassifications
 
(25
)
 
(5
)
 

 
(30
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
(2
)
 

 
(2
)
Net current-period other comprehensive income (loss)
 
(25
)
 
(7
)
 

 
(32
)
Balance at November 1, 2015
 
$
(191
)
 
$
(12
)
 
$
3

 
$
(200
)
_____________________________________
(1) 
Included a tax expense of $5 as of November 1, 2015, and $6 as of August 2, 2015.
(2) 
Included a tax benefit of $8 as of November 1, 2015, and $5 as of August 2, 2015.
(3) 
Included a tax expense of $1 as of November 1, 2015 and August 2, 2015.
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 1, 2015
 
November 2, 2014
 
Location of (Gain) Loss Recognized in Earnings
(Gains) losses on cash flow hedges:
 
 
 
 
 
 
Foreign exchange forward contracts
 
$
(2
)
 
$

 
Cost of products sold
Foreign exchange forward contracts
 
(1
)
 

 
Other expenses / (income)
Forward starting interest rate swaps
 
1

 
1

 
Interest expense
Total before tax
 
(2
)
 
1

 
 
Tax expense (benefit)
 

 

 
 
(Gain) loss, net of tax
 
$
(2
)
 
$
1

 
 

5.
Goodwill and Intangible Assets
Goodwill
The following table shows the changes in the carrying amount of goodwill by business segment:
 
Americas    
Simple
Meals and Beverages
 
Global
Biscuits
and
Snacks
 
Campbell Fresh
 
Total    
Balance at August 2, 2015
$
775

 
$
732

 
$
837

 
$
2,344

Foreign currency translation adjustment

 
(13
)
 

 
(13
)
Balance at November 1, 2015
$
775

 
$
719

 
$
837

 
$
2,331



11






Intangible Assets
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 1,
2015
 
August 2,
2015
Amortizable intangible assets
 
 
 
 
Customer relationships
 
$
222

 
$
222

Technology
 
40

 
40

Other
 
35

 
35

Total gross amortizable intangible assets
 
$
297

 
$
297

Accumulated amortization
 
(57
)
 
(52
)
Total net amortizable intangible assets
 
$
240

 
$
245

Non-amortizable intangible assets
 
 
 
 
Trademarks
 
960

 
960

Total net intangible assets
 
$
1,200

 
$
1,205

Non-amortizable intangible assets consist of trademarks, which include Bolthouse Farms, Pace, Plum, Kjeldsens, Garden Fresh Gourmet and Royal Dansk. Other amortizable intangible assets consist of recipes, patents, trademarks and distributor relationships.
Amortization of intangible assets was $5 and $4 for the three month periods ended November 1, 2015 and November 2, 2014, respectively. Amortization expense for the next 5 years is estimated to be $20 in the fiscal periods 2016 and 2017, and $15 in 2018 through 2020. Asset useful lives range from 5 to 20 years.
6.
Business and Geographic Segment Information
Through the fourth quarter of 2015, we reported 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. As of the beginning of 2016, we are managing our businesses in three divisions focused mainly on product categories. The new divisions, which represent our operating and reportable segments, are as follows:
Americas Simple Meals and Beverages segment includes the retail and food service channel businesses in the U.S., Canada and Latin America. The 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; Plum food and snacks; V8 juices and beverages; and Campbell’s tomato juice.
Global Biscuits and Snacks segment includes Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and Kelsen cookies globally. The segment also includes the simple meals and shelf-stable beverages business in Australia and Asia Pacific.
Campbell Fresh includes Bolthouse Farms fresh carrots, carrot ingredients, refrigerated beverages and refrigerated salad dressings; Garden Fresh Gourmet salsa, hummus, dips and tortilla chips, which was acquired in June 2015; and the U.S. refrigerated soup business.
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 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. In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets as discussed in Note 1. In 2016, we also modified our method of allocating pension and postretirement benefit costs to segments. Through 2015, we included all components of benefit expense in measuring segment performance. In 2016, only service cost is allocated to segments. All other components of expense, including interest cost, expected return on assets, and recognized actuarial gains and losses are reflected in Corporate and not included in segment operating results. Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.
Segment results have been adjusted retrospectively to reflect these revisions.

12






 
 
Three Months Ended
 
 
November 1, 2015
 
November 2, 2014
Net sales
 
 
 
 
Americas Simple Meals and Beverages
 
$
1,302

 
$
1,333

Global Biscuits and Snacks
 
652

 
691

Campbell Fresh
 
249

 
231

Total
 
$
2,203

 
$
2,255

 
 
Three Months Ended
 
 
November 1, 2015
 
November 2, 2014
Earnings before interest and taxes
 
 
 
 
Americas Simple Meals and Beverages
 
$
363

 
$
305

Global Biscuits and Snacks
 
114

 
98

Campbell Fresh
 
18

 
9

Corporate(1)
 
(159
)
 
(23
)
Restructuring charges(2)
 
(21
)
 

Total
 
$
315

 
$
389

_______________________________________
(1) 
Represents unallocated items. Costs of $128 related to pension and postretirement mark-to-market adjustments (see Note 1 for additional information) and costs of $15 related to the implementation of our new organizational structure and cost savings initiatives (see Note 7 for additional information) were included in the three-month period ended November 1, 2015.
(2) 
See Note 7 for additional information.
Our global net sales based on product categories are as follows:
 
 
Three Months Ended
 
 
November 1, 2015
 
November 2, 2014
Net sales
 
 
 
 
Simple Meals
 
$
1,293

 
$
1,311

Baked Snacks
 
634

 
663

Beverages
 
276

 
281

Total
 
$
2,203

 
$
2,255

Simple Meals include condensed and ready-to-serve soups, broths, sauces, carrot products, refrigerated salad dressings, refrigerated salsa, hummus, dips and Plum foods and snacks. Baked Snacks include cookies, crackers, biscuits and other baked products.
7.
Restructuring Charges and Cost Savings Initiatives
2015 Initiatives
On January 29, 2015, we announced plans to implement a new enterprise design focused mainly on product categories. Under the new design, which we fully implemented at the beginning of 2016, our businesses are organized in the following divisions: Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.
In support of the new enterprise design, we designed and implemented a new Integrated Global Services (IGS) organization to deliver shared services across the company. IGS, which became effective at the beginning of 2016, is expected to reduce costs while increasing our efficiency and effectiveness. We are also pursuing other initiatives to reduce costs and increase effectiveness, such as streamlining our organizational structure and adopting zero-based budgeting over time.
As part of these initiatives, we commenced a voluntary employee separation program available to certain U.S.-based salaried employees nearing retirement who met age, length-of-service and business unit/function criteria. A total of 471 employees elected the program. The electing employees remained with us through July 31, 2015, with some remaining beyond July 31. We also implemented an initiative to reduce overhead across the organization by eliminating approximately 230 positions. In the first

13






quarter of 2016, we recorded a restructuring charge of $21. In 2015, we recorded a restructuring charge of $102 related to these initiatives.
In the first quarter of 2016, we also incurred charges of $15 recorded in Administrative expenses related to the implementation of the new organizational structure and cost savings initiatives. In 2015,we incurred charges of $22 recorded in Administrative expenses related to the these initiatives.
The aggregate after-tax impact of restructuring charges, implementation costs and other related costs recorded in the first quarter of 2016 was $23, or $.07 per share. The aggregate after-tax impact of restructuring charges and implementation and other costs recorded in 2015 was $78, or $.25 per share. A summary of the pre-tax costs associated with the 2015 initiatives is as follows:
 
Recognized
as of
November 1, 2015
Severance pay and benefits
$
115

Implementation costs and other related costs
45

Total
$
160

The total estimated pre-tax costs for the 2015 initiatives are approximately $250 to $325. We expect to incur these costs through 2018.
We expect the costs to consist of approximately $150 to $165 in severance pay and benefits, and approximately $100 to $160 in implementation costs and other related costs.We expect the total pre-tax costs related to the 2015 initiatives will be associated with segments as follows: Americas Simple Meals and Beverages - approximately 32%; Global Biscuits and Snacks - approximately 31%; Campbell Fresh - approximately 3%; and Corporate - approximately 34%.
A summary of the restructuring activity and related reserves associated with the 2015 initiatives at November 1, 2015, is as follows:
 
Severance Pay and Benefits
 
Other Restructuring Costs
 
Implementation Costs and Other Related Costs(3)
 
Total Charges
Accrued balance at August 2, 2015(1)
$
85

 
$
8

 
 
 
 
2016 charges
21

 

 
15

 
$
36

2016 cash payments
(9
)
 
(8
)
 
 
 
 
Accrued balance at November 1, 2015(2)
$
97

 
$

 
 
 
 
______________________________________
(1) 
Includes $45 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
(2) 
Includes $39 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
(3)  
Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses in the Consolidated Statements of Earnings.
Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs incurred to date associated with segments is as follows:
 
Americas Simple Meals and Beverages
 
Global Biscuits and Snacks
 
Campbell Fresh
 
Corporate
 
Total
Severance pay and benefits
$
57

 
$
53

 
$
1

 
$
4

 
$
115

Implementation costs and other related costs
7

 
5

 

 
33

 
45

 
$
64

 
$
58

 
$
1

 
$
37

 
$
160

8.
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. The earnings per share calculation for the three-month period ended November 1, 2015 excludes 711 thousand stock options that would have been antidilutive. There were no antidilutive stock options for the three-month period ended November 2, 2014.

14






9.
Pension and Postretirement Benefits
We sponsor certain defined benefit pension and postretirement benefit plans for employees. In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets. Historically, actuarial gains and losses associated with benefit obligations were recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and were amortized into earnings over the remaining service life of participants to the extent that the amounts were in excess of a corridor. Under the new policy, gains and losses will be recognized immediately in our Consolidated Statements of Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required. In addition, we will no longer use a market-related value of plan assets, which is an average value, to determine the expected return on assets but rather will use the fair value of plan assets. We believe the new policies will provide greater transparency to ongoing operating results and better reflect the impact of current market conditions on the obligations and assets.
The changes in policy were applied retrospectively to all periods presented. See Note 1 for additional information on the change in accounting method.
Components of net benefit expense (income) were as follows:
 
Three Months Ended
 
Pension
 
Postretirement
 
November 1,
2015
 
November 2,
2014
 
November 1,
2015
 
November 2,
2014
Service cost
$
7

 
$
7

 
$

 
$

Interest cost
25

 
27

 
4

 
4

Expected return on plan assets
(39
)
 
(44
)
 

 

Recognized net actuarial loss
136

 

 

 

Net periodic benefit expense (income)
$
129

 
$
(10
)
 
$
4

 
$
4

The recognized net actuarial loss in the first quarter of 2016 resulted from the remeasurement of certain U.S. plans. The remeasurement was required due to a high level of lump sum payments to certain vested plan participants arising primarily out of a limited-time offer to accept a single lump sum in lieu of future annuity payments. No remeasurement was required in the first quarter of 2015.
No contributions are expected to be made to U.S. pension plans in 2016. Contributions to non-U.S. pension plans during the three-month period ended November 1, 2015 were $1. We expect contributions to non-U.S. pension plans during the remainder of the year to be approximately $3.
10.
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. We enter into these derivative contracts for periods consistent with the related underlying exposures, and the contracts 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 November 1, 2015. During 2015, our largest customer accounted for approximately 20% 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, we enter into foreign exchange forward

15






purchase and sale contracts, as well as cross-currency swap contracts, for periods consistent with the underlying debt. As of November 1, 2015, cross-currency swap contracts mature between 9 and 21 months. The notional amount of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was $51 at November 1, 2015, and $53 at August 2, 2015. 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 $452 and $480 at November 1, 2015, and August 2, 2015, 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 the 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 $300 at November 1, 2015 and August 2, 2015, which relates to an anticipated debt issuance in 2018.
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, aluminum, natural gas, cocoa, butter, corn and cheese, which impact the cost of raw materials. Commodity futures, options, and swap contracts are either designated as cash-flow hedging instruments or are undesignated. 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 1, 2015, or August 2, 2015. The notional amount of commodity contracts not designated as accounting hedges was $95 at November 1, 2015, and August 2, 2015.
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. We enter into these contracts for periods typically not exceeding 12 months. The notional amounts of the contracts as of November 1, 2015, and August 2, 2015, were $48 and $49, 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 1, 2015, and August 2, 2015:
 
Balance Sheet Classification
 
November 1,
2015
 
August 2,
2015
Asset Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Other current assets
 
$
2

 
$
3

Total derivatives designated as hedges
 
 
$
2

 
$
3

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Other current assets
 
$
2

 
$
1

Cross-currency swap contracts
Other current assets
 
18

 
18

Deferred compensation derivative contracts
Other current assets
 
1

 
1

Foreign exchange forward contracts
Other current assets
 
5

 
9

Cross-currency swap contracts
Other assets
 
22

 
22

Total derivatives not designated as hedges
 
 
$
48

 
$
51

Total asset derivatives
 
 
$
50

 
$
54

 
Balance Sheet Classification
 
November 1,
2015
 
August 2,
2015
Liability Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Forward starting interest rate swaps
Other liabilities
 
$
16

 
$
8

Total derivatives designated as hedges
 
 
$
16

 
$
8

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Accrued liabilities
 
$
9

 
$
10

Foreign exchange forward contracts
Accrued liabilities
 
1

 
2

Total derivatives not designated as hedges
 
 
$
10

 
$
12

Total liability derivatives
 
 
$
26

 
$
20

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 1, 2015, and August 2, 2015, would be adjusted as detailed in the following table:
 
 
November 1, 2015
 
August 2, 2015
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
 
$
50

 
$
(20
)
 
$
30

 
$
54

 
$
(13
)
 
$
41

Total liability derivatives
 
$
26

 
$
(20
)
 
$
6

 
$
20

 
$
(13
)
 
$
7

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 1, 2015, and August 2, 2015, a cash margin account balance of $12 was included in Other current assets in the Consolidated Balance Sheets.

17






The following tables show the effect of our derivative instruments designated as cash-flow hedges for the three months ended November 1, 2015, and November 2, 2014, in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:
Derivatives Designated as Cash-Flow Hedges
 
 
Total
Cash-Flow
Hedge
OCI Activity
Three Months Ended
 
 
November 1,
2015
 
November 2,
2014
OCI derivative gain (loss) at beginning of year
 
 
$
(10
)
 
$
(4
)
Effective portion of changes in fair value recognized in OCI:
 
 
 
 
 
Foreign exchange forward contracts
 
 

 
3

Forward starting interest rate swaps
 
 
(8
)
 
(4
)
Amount of (gain) loss reclassified from OCI to earnings:
Location in Earnings
 
 
 
 
Foreign exchange forward contracts
Cost of products sold
 
(2
)
 

Foreign exchange forward contracts
Other expenses / (income)
 
(1
)
 

Forward starting interest rate swaps
Interest expense
 
1

 
1

OCI derivative gain (loss) at end of quarter
 
 
$
(20
)
 
$
(4
)
Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a gain of $5. The ineffective portion and amount excluded from effectiveness testing were not material.
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 1, 2015
 
November 2, 2014
Foreign exchange forward contracts
 
Cost of products sold
 
$

 
$
1

Cross-currency swap contracts
 
Other expenses / (income)
 

 
14

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

 
2

Total
 
 
 
$
(2
)
 
$
12


11.
Fair Value Measurements
We categorize financial assets and liabilities 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.

18






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 1, 2015, and August 2, 2015, consistent with the fair value hierarchy:
 
Fair Value
as of
November 1,
2015
 
Fair Value Measurements at
November 1, 2015 Using
Fair Value Hierarchy
 
Fair Value
as of
August 2,
2015
 
Fair Value Measurements at
August 2, 2015 Using
Fair Value Hierarchy
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts(2)
$
7

 
$

 
$
7

 
$

 
$
12

 
$

 
$
12

 
$

Commodity derivative contracts(3)
2

 
2

 

 

 
1

 
1

 

 

Cross-currency swap contracts(4)
40

 

 
40

 

 
40

 

 
40

 

Deferred compensation derivative contracts(5)
1

 

 
1

 

 
1

 

 
1

 

Total assets at fair value
$
50

 
$
2

 
$
48

 
$

 
$
54

 
$
1

 
$
53

 
$

 
Fair Value
as of
November 1,
2015
 
Fair Value Measurements at
November 1, 2015 Using
Fair Value Hierarchy
 
Fair Value
as of
August 2,
2015
 
Fair Value Measurements at
August 2, 2015 Using
Fair Value Hierarchy
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward starting interest rate swaps(1)
$
16

 
$

 
$
16

 
$

 
$
8

 
$

 
$
8

 
$

Foreign exchange forward contracts(2)
1

 

 
1

 

 
2

 

 
2

 

Commodity derivative contracts(3)
9

 
8

 
1

 

 
10

 
10

 

 

Deferred compensation obligation(6)
126

 
126

 

 

 
120

 
120

 

 

Total liabilities at fair value
$
152

 
$
134

 
$
18

 
$

 
$
140

 
$
130

 
$
10

 
$

___________________________________ 
(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 $35 at November 1, 2015, and $39 at August 2, 2015, 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 $2,611 at November 1, 2015, and $2,623 at August 2, 2015. The carrying value was $2,551 at November 1, 2015, and $2,552 at August 2,

19






2015. 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.
12.
Share Repurchases
In June 2011, the Board 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 purchase shares to offset the impact of dilution from shares issued under our stock compensation plans.
During the three months ended November 1, 2015, we repurchased approximately 1 million shares at a cost of $32. Of this amount, $25 was used to repurchase shares pursuant to our June 2011 publicly announced share repurchase program. Approximately $525 remained available under this program as of November 1, 2015. During the three months ended November 2, 2014, we repurchased approximately 2 million shares at a cost of $73.
13.
Stock-based Compensation
We provide compensation benefits by issuing stock options, 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 2016, we issued stock options, time-lapse restricted stock units, EPS performance restricted stock units and TSR performance restricted stock units. We did not issue strategic performance restricted stock units or special performance restricted stock units in 2016.
Total pre-tax stock-based compensation expense recognized in the Consolidated Statement of Earnings was $13 for the three-month periods ended November 1, 2015, and November 2, 2014. Tax-related benefits of $5 were also recognized for the three-month periods ended November 1, 2015, and November 2, 2014. Cash received from the exercise of stock options was $1 and $6 for the three-month periods ended November 1, 2015, and November 2, 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 November 1, 2015:
 
Options
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
 
(Options in
thousands)
 
 
 
(In years)
 
 
Outstanding at August 2, 2015
74

 
$
29.91

 
 
 
 
Granted
711

 
$
50.21

 
 
 
 
Exercised
(21
)
 
$
29.91

 
 
 
 
Terminated

 
$

 
 
 
 
Outstanding at November 1, 2015
764

 
$
48.79

 
9.2
 
$
2

Exercisable at November 1, 2015
53

 
$
29.91

 
0.2
 
$
1

The total intrinsic value of options exercised during the three-month period ended November 1, 2015 was not material. During the three-month period ended November 2, 2014, the total intrinsic value of options exercised was $4. As of November 1, 2015, total remaining unearned compensation related to unvested stock options was $4, which will be amortized over the weighted-average remaining service period of 1.7 years. We measure the fair value of stock options using the Black-Scholes option pricing model. The expected term of options granted was based on the weighted average time of vesting and the end of the contractual term. We utilized this simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.
The following weighted-average assumptions were used for grants in 2016:
 
2016
Risk-free interest rate
1.68%
Expected dividend yield
2.46%
Expected volatility
18.35%
Expected term
6 years

20






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 1, 2015:
 
Units
 
Weighted-
Average
Grant-Date
Fair Value
 
(Restricted stock
units in thousands)
 
 
Nonvested at August 2, 2015
2,410

 
$
41.40

Granted
659

 
$
49.94

Vested
(791
)
 
$
39.30

Forfeited
(118
)
 
$
42.46

Nonvested at November 1, 2015
2,160

 
$
44.72

We determine 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 based on the quoted price of our stock at the date of grant. We expense time-lapse restricted stock units on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. We expense EPS performance restricted stock units on a graded-vesting basis, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. There were 211 thousand EPS performance target grants outstanding at November 1, 2015, with a weighted-average grant-date fair value of $45.32. We expense strategic performance restricted stock units 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- or three-year period. There were 346 thousand strategic performance target grants outstanding at November 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. We estimate expense 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% to 150%. There were 126 thousand special performance restricted stock units outstanding at November 1, 2015, with a grant-date fair value of $42.22.
As of November 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 $52, which will be amortized over the weighted-average remaining service period of 1.9 years. The fair value of restricted stock units vested during the three-month periods ended November 1, 2015, and November 2, 2014, was $40 and $52, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the three months ended November 2, 2014 was $42.24.
The following table summarizes TSR performance restricted stock units as of November 1, 2015:
 
Units
 
Weighted-
Average
Grant-Date
Fair Value
 
(Restricted stock
units in thousands)
 
 
Nonvested at August 2, 2015
1,579

 
$
40.75

Granted
682

 
$
62.44

Vested
(438
)
 
$
39.76

Forfeited
(70
)
 
$
43.71

Nonvested at November 1, 2015
1,753

 
$
49.31


21






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:
 
2016
 
2015
Risk-free interest rate
0.92%
 
0.97%
Expected dividend yield
2.46%
 
2.91%
Expected volatility
17.25%
 
16.20%
Expected term
3 years
 
3 years
We recognize compensation expense on a straight-line basis over the service period. As of November 1, 2015, total remaining unearned compensation related to TSR performance restricted stock units was $54, which will be amortized over the weighted-average remaining service period of 2.5 years. The fair value of TSR performance restricted stock units vested during the three-month period ended November 1, 2015 was $22. There were no TSR performance restricted stock units scheduled to vest in the three-month period ended November 2, 2014. The grant-date fair value of the TSR performance restricted stock units granted during 2015 was $43.39.
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 1, 2015 and November 2, 2014 were $6 and $5, respectively.
14.
Inventories
 
November 1,
2015
 
August 2,
2015
   Raw materials, containers and supplies
$
445

 
$
427

   Finished products
604

 
568

 
$
1,049

 
$
995


22






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,” “our” and the “company” refer to Campbell Soup Company and its consolidated subsidiaries.
We are a manufacturer and marketer of high-quality, branded convenience food products. Through the fourth quarter of 2015, we reported 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. As of the beginning of 2016, we are managing our businesses in three divisions focused mainly on product categories. The new divisions, which represent our operating and reportable segments, are as follows:
Americas Simple Meals and Beverages segment includes the retail and food service channel businesses in the U.S., Canada and Latin America. The 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; Plum food and snacks; V8 juices and beverages; and Campbell’s tomato juice.
Global Biscuits and Snacks segment includes Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and Kelsen cookies globally. The segment also includes the simple meals and shelf-stable beverages business in Australia and Asia Pacific.
Campbell Fresh includes Bolthouse Farms fresh carrots, carrot ingredients, refrigerated beverages and refrigerated salad dressings; Garden Fresh Gourmet salsa, hummus, dips and tortilla chips, which was acquired in June 2015; and the U.S. refrigerated soup business.
In 2016, we also modified our method of allocating pension and postretirement benefit costs to our segments. Through 2015, we included all components of benefit expense in measuring segment performance. In 2016, only service cost is allocated to segments. All other components of expense, including interest cost, expected return on assets, and recognized actuarial gains and losses, are reflected in Corporate and not included in segment operating results.
In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets. Historically, actuarial gains and losses associated with benefit obligations were recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and were amortized into earnings over the remaining service life of participants to the extent that the amounts were in excess of a corridor. Under the new policy, actuarial gains and losses will be recognized immediately in our Consolidated Statements of Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required. In addition, we will no longer use a market-related value of plan assets, which is an average value, to determine the expected return on assets but rather will use the fair value of plan assets. We believe the new policies will provide greater transparency to ongoing operating results and better reflect the impact of current market conditions on the obligations and assets. See Note 1 to the Consolidated Financial Statements for additional information.
On June 29, 2015, we completed the acquisition of the assets of Garden Fresh Gourmet for $232 million. Garden Fresh Gourmet is a provider of refrigerated salsa in North America, and it also produces hummus, dips and tortilla chips. See Note 3 to the Consolidated Financial Statements for additional information.
Executive Summary