Business context and reporting period
Campbell Soup Company’s Form 10-K covers the fiscal year ended August 1, 2021 (52 weeks), compared with fiscal 2020 (53 weeks) and fiscal 2019 (52 weeks). It is an annual report, not a standalone fourth-quarter filing; the filing text does not provide a clear standalone Q4 financial summary. The continuing business comprised Meals & Beverages and Snacks. Campbell sold its Plum baby food and snacks business on May 3, 2021, for $101 million, subject to post-closing adjustments.
Key financial results
| Metric | FY2021 | FY2020 | Change or context |
|---|---|---|---|
| Net sales | $8.476 billion | $8.691 billion | Down 2%; the extra week in 2020 accounted for about 2 percentage points |
| Gross margin | 33.2% | 34.5% | Down 1.3 percentage points |
| Earnings from continuing operations | $1.008 billion | $592 million | Diluted EPS: $3.30 vs. $1.95 |
| Net earnings | $1.002 billion | $1.628 billion | FY2020 included $1.039 billion in gains on divestitures |
| Operating cash flow | $1.035 billion | $1.396 billion | Decrease primarily reflected working-capital movements |
| Interest expense | $210 million | $345 million | FY2020 included a $75 million debt-extinguishment loss; debt was also lower |
Cost inflation and other supply-chain costs, along with unfavorable mix, weighed on gross margin; productivity, cost savings, lower promotions, and commodity-hedge gains provided offsets. Marketing and selling expense declined 14%, to $817 million, and administrative expense declined 4%, to $598 million. The effective tax rate was 24.6%, versus 22.7%.
Segments: Meals & Beverages sales fell 2% to $4.532 billion, and segment operating earnings fell 9% to $899 million. Snacks sales fell 2% to $3.944 billion, and operating earnings fell 3% to $537 million. Sales in both segments faced the comparison with the prior-year extra week and pandemic-related demand changes.
Balance sheet, debt, and liquidity
At August 1, 2021, cash and cash equivalents were $69 million, total debt carrying value was approximately $5.058 billion, and negative working capital was $119 million, improved from negative $690 million a year earlier. Debt maturing within one year was $48 million, down from $1.202 billion. A committed $1.850 billion revolving credit facility, maturing in November 2023, was essentially unused. The company reported compliance with its debt covenants and said expected operating cash flows, borrowings, credit facilities, and cash were adequate to meet foreseeable requirements.
Capital expenditures were $275 million, and dividends paid were $439 million. The annual dividend declared increased to $1.46 per share from $1.40. The company repaid $921 million of long-term debt during the year. Total contractual payments disclosed were $8.887 billion, including $5.096 billion of debt obligations and $2.056 billion of interest payments.
Material changes, outlook, and risks
- Demand and sales: Elevated at-home food purchases supported retail demand early in the year; sales moderated in the second half as the company cycled the pandemic-driven surge. Foodservice remained affected by changing consumer behavior and COVID-19 restrictions.
- Inflation and execution: Management expected input-cost inflation and supply pressures to remain significant in 2022, and stated pricing and productivity actions would not fully offset incremental costs. Labor availability, transportation expense, and supply-chain disruption were also identified as headwinds.
- Plans: The company targeted $850 million in annualized cost savings from continuing operations by the end of 2022, including $295 million of Snyder’s-Lance synergies and run-rate savings. It had generated $805 million of annual pre-tax savings by FY2021. Management expected approximately $330 million of FY2022 capital expenditures.
- Unusual earnings items: FY2021 included $165 million of pension and postretirement mark-to-market gains, $38 million of pension settlement gains, and $50 million of mark-to-market gains on outstanding commodity hedges. FY2020 included the $1.039 billion divestiture gain, as well as the $75 million debt-extinguishment loss and other comparability items. Reported EPS should therefore be considered alongside these items.
- Contingencies and other exposures: Plum-sale terms include indemnification for certain claims alleging heavy metals in products made or sold before closing. Campbell also disclosed securities litigation, without a reasonably estimable loss amount, and guarantees on approximately 4,900 distributor route loans with a maximum potential exposure of $488 million; management did not expect material guarantee payments. Other key risks include brand and product safety, customer concentration, private-label competition, cyber threats, pension liabilities, and potential impairment of goodwill or trademarks.
The company reported effective internal controls; the independent auditor issued unqualified opinions on the financial statements and internal controls. The auditor identified impairment testing of certain indefinite-lived trademarks as a critical audit matter. Management’s outlook is subject to forward-looking risks and is not a quantified sales or earnings forecast.
Important facts for investors to verify
- Compare full-year results with a 52-week basis, accounting for FY2020’s extra week and the pandemic-driven demand surge.
- Assess whether price increases, productivity savings, and supply-chain investments can offset the inflation and labor costs management expected in 2022.
- Track progress toward the $850 million cost-savings target, including remaining implementation costs and planned capital investment.
- Review debt maturities, cash generation, and liquidity alongside planned dividends and the September 2021 authorization for up to $500 million of strategic share repurchases.
- Monitor the Plum indemnification exposure, securities litigation, customer concentration, and trademark impairment assumptions.