Campbell Soup Company — FY2023 Form 10-K
Reporting period: 52 weeks ended July 30, 2023; comparable fiscal years also contained 52 weeks. This is an annual report, not a standalone 2023 fourth-quarter filing. Campbell makes and markets branded foods and beverages through Meals & Beverages and Snacks.
Key financial results
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $9.357 billion | $8.562 billion | +9% |
| Gross profit margin | 31.2% | 30.7% | +0.5 percentage points |
| Earnings before interest and taxes | $1.312 billion | $1.163 billion | +13% |
| Net earnings attributable to Campbell | $858 million | $757 million | +13% |
| Diluted EPS | $2.85 | $2.51 | +14% |
| Cash from operations | $1.143 billion | $1.181 billion | −3% |
| Capital expenditures | $370 million | $242 million | +$128 million |
| Interest expense | $188 million | $189 million | −$1 million |
Segments and drivers
- Meals & Beverages: Sales of $4.907 billion, up 7%; segment operating earnings of $894 million, up 2%. Pricing more than offset lower volume/mix.
- Snacks: Sales of $4.450 billion, up 13%; segment operating earnings of $640 million, up 24%. Power-brand sales rose 17%.
- Consolidated sales growth reflected 13% favorable net price realization, partly offset by a 4% unfavorable volume/mix impact. Gross margin improved as pricing and productivity more than offset inflation and supply-chain costs.
Balance sheet, cash flow and capital
- At July 30, 2023, cash was $189 million; current assets were $2.061 billion and current liabilities $2.222 billion, resulting in negative working capital of $161 million, improved from negative $923 million a year earlier.
- Short-term borrowings were $191 million, down from $814 million; long-term debt was $4.498 billion. Total debt carrying value was approximately $4.689 billion, versus $4.810 billion in 2022. The company reported compliance with debt covenants and an unused $1.85 billion revolving facility.
- Operating cash flow declined primarily because of working-capital changes. Dividends paid were $447 million; share repurchases were $142 million.
- Supplier-finance program obligations included in accounts payable were $258 million, compared with $262 million in 2022. The company also guaranteed up to $496 million of distributor route-purchase loans; it did not expect material payments.
Material changes, outlook and notable items
- Management said it exceeded its initial FY2023 expectations. For FY2024, it expects modestly elevated input-cost inflation to persist, with pricing and supply-chain productivity expected to largely offset incremental costs. Pricing is expected to contribute less to sales as prior-year increases are lapped. The filing does not provide specific FY2024 revenue or EPS guidance.
- Campbell targets approximately $1 billion of annual cost savings by the end of 2025 and reported $890 million achieved through FY2023. Identified initiative costs are estimated at $885 million–$905 million through 2025, including approximately $705 million–$725 million in cash expenditures; additional related capital investment is estimated at $620 million through 2025.
- FY2024 capital expenditures are expected to be approximately $440 million. FY2023 capital expenditures were $370 million.
- On August 7, 2023, after fiscal year-end, Campbell agreed to acquire Sovos Brands for $23 per share in cash, representing approximately $2.7 billion enterprise value. Campbell planned to finance the purchase with new debt. Closing was subject to shareholder and regulatory approvals; the agreement included potential termination and delay costs.
- FY2023 comparability items included $50 million after tax of restructuring and implementation costs, a $13 million Emerald nuts sale loss, $5 million of Sovos transaction costs, $5 million after-tax accelerated amortization, and favorable pension and commodity mark-to-market effects. Management reported adjusted earnings increased, but the filing’s adjusted figures should be distinguished from GAAP results.
- At the end of the fourth quarter, the company identified unauthorized activity on certain IT systems. It reported limited operational impact and no material effect on results or financial condition.
Principal risks and contingencies
- Persistent input-cost, labor and supply-chain pressures; inability to recover costs through pricing without volume loss; and consumer movement to private-label or lower-priced products.
- High customer concentration: Walmart and affiliates represented about 22% of sales; the five largest customers represented about 47%.
- Pending Sovos acquisition risks include approvals, shareholder litigation, financing costs, integration challenges and uncertain synergies.
- Food safety, labeling and product-liability claims; litigation involving the independent-contractor distributor model; cybersecurity threats; climate and weather effects on agricultural inputs; and possible impairment of goodwill or trademarks.
- Goodwill was $3.965 billion and indefinite-lived trademarks were $2.541 billion. Management reported that reporting-unit fair values exceeded carrying values, but certain trademarks had limited headroom; impairment testing was identified as a critical audit matter.
- The filing states that pending legal matters are not expected, based on information then known, to materially adversely affect consolidated results or financial condition, while acknowledging outcomes and potential losses can be difficult to estimate.
Most important facts for investors to verify
- Whether FY2024 pricing, productivity and cost savings offset inflation while maintaining sales volumes and margins.
- Actual cash costs, timing and realized savings from the multi-year restructuring and cost-savings program.
- Final Sovos acquisition terms, financing, closing status, added leverage and realized synergies.
- Debt maturities, borrowing costs and liquidity after the acquisition; also the trend in working capital and supplier-finance balances.
- Sales and earnings momentum by segment, especially Snacks growth and the volume response to pricing.
- Developments in cybersecurity, distributor-model litigation, product claims and trademark impairment headroom.
Controls and audit: Management and the independent auditor concluded internal control over financial reporting was effective as of July 30, 2023. The auditor issued an unqualified opinion on the financial statements.