CPB

CAMPBELL SOUP CO

Consumer Defensive | Large Cap

$0.90

EPS Forecast

$2,781

Revenue Forecast

Announcing earnings for the quarter ending 2024-10-31 soon
EX-99.1 2 exhibit991-q22020.htm EX-99.1 Document

Exhibit 99.1
campbelllogoearningsa0.gif

FOR IMMEDIATE RELEASE
INVESTOR CONTACT:MEDIA CONTACT:
Ken GosnellThomas Hushen
(856) 342-6081(856) 342-5227
ken_gosnell@campbells.comthomas_hushen@campbells.com

CAMPBELL REPORTS SECOND-QUARTER RESULTS

Campbell Raises Fiscal 2020 Adjusted Earnings Per Share (EPS) Guidance Range to $2.55 - $2.60
Net Sales were Comparable to Prior Year; Organic Net Sales Increased 1%
EPS from Continuing Operations of $0.56 Decreased 3% Primarily Reflecting Loss on Extinguishment of Debt; Adjusted EPS of $0.72 Increased 11%
Significant Reduction in Debt Levels Compared to Prior Year Following Successful Completion of Previously Announced Divestiture Plan

CAMDEN, N.J., Mar. 4, 2020—Campbell Soup Company (NYSE:CPB) today reported its second-quarter results for fiscal 2020.
Continuing OperationsThree Months EndedSix Months Ended
($ in millions, except per share)
Jan. 26, 2020Jan. 27, 2019
% Change
Jan. 26, 2020Jan. 27, 2019
% Change
Net Sales
As Reported (GAAP)$2,162  $2,172  —%  $4,345  $4,374  (1)% 
Organic
1%  —%  
Earnings Before Interest and Taxes (EBIT)
As Reported (GAAP)$350  $325  8%  $667  $651  2%  
Adjusted$364  $349  4%  $756  $720  5%  
Diluted Earnings Per Share
As Reported (GAAP)$0.56  $0.58  (3)% $1.12  $1.18  (5)% 
Adjusted $0.72  $0.65  11%  $1.51  $1.36  11%  

Note: A detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information is included at the end of this news release.

CEO Comments
Mark Clouse, Campbell’s President and CEO, stated, “I am pleased that we delivered another high-quality quarter with organic sales, and adjusted gross margin, EBIT and earnings, growing in-line with or above our expectations. Additionally, I am very pleased with our successful deleveraging in the quarter, resulting in a much-improved leverage ratio. Given the momentum of the business and lower adjusted interest expense




from our debt reduction, we are able to make important incremental investments in the business in the second half while increasing adjusted EPS guidance for the year.”

Items Impacting Comparability for Continuing Operations
The table below presents a summary of items impacting comparability in each period. A detailed reconciliation of the reported (GAAP) financial information to the adjusted information is included at the end of this news release.
Diluted Earnings Per Share
Three Months EndedSix Months Ended
Jan. 26, 2020Jan. 27, 2019Jan. 26, 2020Jan. 27, 2019
As Reported (GAAP)$0.56  $0.58  $1.12  $1.18  
Restructuring charges, implementation costs and other related costs associated with cost savings initiatives$0.06  $0.06  $0.09  $0.17  
Loss on extinguishment of debt$0.19  —  $0.19  —  
Tax (benefit) / loss on sale of European chips business$(0.06) —  $0.14  —  
Pension settlement gains$(0.03) —  $(0.03) —  
Nonrecurring tax expense related to U.S. Tax Reform —  $0.01  —  $0.01  
Adjusted$0.72$0.65$1.51$1.36


Second-Quarter Results from Continuing Operations
Net sales were comparable to the prior year. Organic net sales, which exclude the impact from the sale of the European chips business, increased 1% from the prior year driven by gains in Snacks.

Gross margin increased from 32.5% to 34.3%. Excluding items impacting comparability, adjusted gross margin increased 150 basis points to 34.4% driven primarily by productivity improvements, the benefits from cost savings initiatives and favorable product mix, offset partly by cost inflation.

Marketing and selling expenses increased 7% to $237 million driven primarily by increased investments in advertising and consumer promotion expenses. Administrative expenses
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increased 1% to $148 million. Excluding items impacting comparability, adjusted administrative expenses decreased 1%, primarily reflecting the benefits of cost savings initiatives.

Other income was $22 million as compared to $8 million in the prior year. Excluding items impacting comparability, adjusted other income was $11 million compared to $8 million in the prior year. The year-over-year change in adjusted other income primarily reflects higher pension and postretirement benefit income.

As reported EBIT increased 8% to $350 million. Excluding items impacting comparability, adjusted EBIT increased 4% to $364 million as improved gross margin performance was offset partly by increased marketing investment.

Net interest expense was $146 million compared to $91 million in the prior year reflecting a loss on the extinguishment of debt. Excluding items impacting comparability in the current year, adjusted net interest expense decreased 22% from the prior year to $71 million reflecting lower levels of debt. The tax rate was 16.2% as compared to 24.8% in the prior year. Excluding items impacting comparability, the adjusted tax rate increased 90 basis points to 24.9%.

The company reported EPS of $0.56 reflecting a loss on the extinguishment of debt. Excluding items impacting comparability, adjusted EPS increased 11% to $0.72 per share, reflecting the lower adjusted net interest expense and increase in adjusted EBIT.

First-Half Results from Continuing Operations
Net sales decreased 1% reflecting a 1-point negative impact from the sale of the European chips business. Organic net sales were comparable to the prior year.

As reported EBIT increased 2% to $667 million. Excluding items impacting comparability, adjusted EBIT increased 5% to $756 million reflecting benefits of cost savings initiatives and supply chain productivity improvements and favorable product mix, offset partly by cost inflation and increased marketing investment.

Net interest expense was $226 million compared to $181 million in the prior year reflecting a loss on the extinguishment of debt. Excluding items impacting comparability in the current year, adjusted net interest expense decreased 17% from the prior year to $151 million reflecting lower
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levels of debt. The tax rate decreased from 24.3% to 22.9%. Excluding items impacting comparability, the adjusted tax rate increased 60 basis points from 23.9% to 24.5%.

The company reported EPS of $1.12 per share. Excluding items impacting comparability, adjusted EPS increased 11% to $1.51 per share reflecting the increase in adjusted EBIT and lower adjusted net interest expense.

Cash flows from operations were $663 million compared to $846 million in the prior year due primarily to changes in accrued liabilities, including incentive compensation and interest. Total debt was $5.8 billion compared to $9.5 billion in the prior year primarily due to successful deleveraging in the quarter following the completion of the company’s previously announced divestiture plan. The company reduced net debt from continuing operations by $3.3 billion to $5.8 billion compared to the prior year, resulting in a net debt to trailing twelve-month adjusted EBITDA* of 3.5x. In line with the company’s commitment to returning value to shareholders, during the first half of fiscal 2020, the company paid $213 million of cash dividends reflecting the quarterly dividend rate of $0.35 per share.

Campbell Raises Fiscal 2020 Adjusted EPS Guidance
Campbell now expects adjusted EPS to be in the range of $2.55 to $2.60 per share, reflecting lower adjusted net interest expense due to reduced debt and EBIT momentum through the first half, which will be partly offset by incremental investments in the business in the second half of the year. Campbell continues to expect full-year reported and organic net sales, as well as adjusted EBIT, to be consistent with guidance provided on Dec. 04, 2019.

Fiscal 2020 comprises 53 weeks, one additional week compared to fiscal 2019. The benefit of the 53rd week, consistent with the prior fiscal 2020 guidance, is estimated to be worth two points of net sales, adjusted EBIT and adjusted EPS. The outlook for organic net sales excludes the negative impact from the sale of the European chips business along with the estimated contribution of the 53rd week.
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Continuing Operations2019
Results
Previous
2020
Guidance
Updated
2020
Guidance
($ in millions, except per share)
Net Sales$8,107  -1 to +1%-1 to +1%
     Organic Net Sales-1 to +1%-1 to +1%
Adjusted EBIT$1,266*  +2 to +4%+2 to +4%
Adjusted EPS$2.30*  +9 to +11%
$2.50 to $2.55
+11 to +13%
$2.55 to $2.60

* Adjusted - refer to the detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information at the end of this news release.
Note: A non-GAAP reconciliation is not provided for 2020 guidance as certain amounts are not estimable, such as pension and postretirement mark-to-market adjustments, and these items are not considered to reflect the company's ongoing business results.

Cost Savings Program from Continuing Operations
In the second quarter of fiscal 2020, Campbell achieved $45 million in savings under its multi-year cost savings program, inclusive of Snyder’s-Lance synergies, bringing total program-to-date savings to $650 million. Year-to-date savings of $90 million through the first half of fiscal 2020 are pacing on schedule. As previously announced, the company expects to deliver cumulative annualized savings of $850 million by the end of fiscal 2022.

Segment Operating Review
An analysis of net sales and operating earnings by reportable segment follows:
Three Months Ended Jan. 26, 2020
($ in millions)
Meals & BeveragesSnacksTotal
Net Sales, as Reported$1,224  $938  $2,162  
Volume and Mix—%  2%  1%  
Price and Sales Allowances2%  —%  1%  
Promotional Spending(2)% —%  (1)% 
Organic Net Sales—%  2%  1%  
Currency—%  —%  —%  
Divestiture—%  (3)% (1)% 
% Change vs. Prior Year—%  (1)% —%  
Segment Operating Earnings$242  $136  
% Change vs. Prior Year(4)% 3%  
Note: A detailed reconciliation of the reported (GAAP) net sales to organic net sales is included at the end of this news release.

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Six Months Ended Jan. 26, 2020
($ in millions)
Meals & BeveragesSnacksTotal
Net Sales, as Reported$2,418  $1,927  $4,345  
Volume and Mix(1)% 2%  —%  
Price and Sales Allowances2%  —%  1%  
Promotional Spending(2)% —%  (1)% 
Organic Net Sales(1)% 2%  —%  
Currency—%  —%  —%  
Divestiture—%  (2)% (1)% 
% Change vs. Prior Year(1)% —%  (1)% 
Segment Operating Earnings$524  $261  
% Change vs. Prior Year(3)% 2%  
Note: A detailed reconciliation of the reported (GAAP) net sales to organic net sales is included at the end of this news release.

Meals & Beverages
Net sales in the quarter were comparable to prior year driven primarily by gains in Prego pasta sauces and U.S. soup, partly offset by declines in beverages. Net sales of U.S. soup increased 1% with gains in condensed soups and broth, offset partly by declines in ready-to-serve soups.

Segment operating earnings decreased 4% to $242 million. The decrease was driven primarily by increased marketing investment and higher administrative costs offset partly by improved gross margin performance.

Snacks
Net sales in the quarter decreased 1%. Excluding the impact from the sale of the European chips business, net sales increased 2% driven primarily by gains in Goldfish crackers and Pepperidge Farm cookies, as well as gains in Kettle Brand and Cape Cod potato chips, offset partly by declines in fresh bakery products and the partner brands within the Snyder’s-Lance portfolio as the company continues its planned prioritization of select partners to reduce complexity and improve execution.

Segment operating earnings increased 3% to $136 million. The increase was primarily due to improved gross margin performance offset partly by increased marketing investment.

Corporate
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Corporate expenses in the second quarter of fiscal 2020 included costs related to cost savings initiatives of $18 million and pension settlement gains of $11 million. Corporate expenses in the second quarter of fiscal 2019 included costs related to cost savings initiatives of $22 million. The remaining decrease in expenses primarily reflects lower administrative costs and higher pension and postretirement benefit income.

Discontinued Operations
The results for Campbell Fresh and Campbell International are reported as discontinued operations. The company completed the divestiture of the Campbell Fresh segment in fiscal 2019, the divestiture of Kelsen Group on Sept. 23, 2019, and the divestiture of Arnott’s and certain of Campbell’s international operations on Dec. 23, 2019. The company reported a gain from discontinued operations in the second quarter of fiscal 2020 of $3.41 per share compared to a loss of $0.78 per share in the prior year. Excluding items impacting comparability, the adjusted earnings from discontinued operations were $0.04 per share compared to $0.12 per share in the prior year.

Conference Call and Webcast
Campbell will host a conference call to discuss these results today at 8:30 a.m. Eastern Time. To join, dial +1 (703) 639-1316. The access code is 4580305. Access to a live webcast of the call with accompanying slides, as well as a replay of the call, will be available at investor.campbellsoupcompany.com. A recording of the call will also be available until midnight on March 18, 2020, at +1 (404) 537-3406. The access code for the replay is 4580305.

Reportable Segments
Campbell Soup Company earnings results are reported as follows:

Meals & Beverages includes the retail and foodservice businesses in the U.S. and Canada. The segment includes the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; Plum baby food and snacks; V8 juices and beverages; and, Campbell’s tomato juice.

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Snacks includes Pepperidge Farm cookies, crackers, fresh bakery and frozen products in U.S. retail, including Milano cookies and Goldfish crackers, as well as Snyder’s of Hanover pretzels, Lance sandwich crackers, Cape Cod and Kettle Brand potato chips, Late July snacks, Snack Factory Pretzel Crisps, Pop Secret popcorn, Emerald nuts, and other snacking products in the U.S. and Canada. Beginning in fiscal 2020, the segment also includes the retail business in Latin America. Prior to fiscal 2020, the business in Latin America was managed as part of the Meals & Beverages segment. Prior-period segment results have been adjusted retrospectively to reflect this change. On Oct. 11, 2019, Campbell completed the sale of the European chips business. The results for the European chips business up through the time of sale are included as part of the Snacks segment.

About Campbell Soup Company
Campbell (NYSE:CPB) is driven and inspired by our purpose, "Real food that matters for life's moments." For generations, people have trusted Campbell to provide authentic, flavorful and affordable snacks, soups and simple meals, and beverages. Founded in 1869, Campbell has a heritage of giving back and acting as a good steward of the planet's natural resources. The company is a member of the Standard and Poor's 500 and the FTSE4Good Index.
For more information, visit www.campbellsoupcompany.com or follow company news on Twitter via @CampbellSoupCo.

Forward-Looking Statements
This release contains “forward-looking statements” that reflect the company’s current expectations about the impact of its future plans and performance on the company’s business or financial results. These forward-looking statements, including any statements made regarding sales, EBIT and EPS guidance, rely on a number of assumptions and estimates that could be inaccurate and which are subject to risks and uncertainties. The factors that could cause the company’s actual results to vary materially from those anticipated or expressed in any forward-looking statement include: (1) the company’s ability to execute on and realize the expected benefits from its strategy, including growing sales in snacks and maintaining its market share position in soup; (2) the impact of strong competitive responses to the company’s efforts to leverage its brand power with product innovation, promotional programs and new advertising; (3) the risks associated with trade and consumer acceptance of product improvements, shelving initiatives, new products and pricing and promotional strategies; (4) the company’s indebtedness
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and ability to pay such indebtedness; (5) the ability to realize projected cost savings and benefits from cost savings initiatives and the integration of recent acquisitions; (6) disruptions to the company’s supply chain and/or operations, including from the recent coronavirus outbreak as well as fluctuations in the supply of and inflation in energy and raw and packaging materials cost; (7) the company’s ability to manage changes to its organizational structure and/or business processes, including selling, distribution, manufacturing and information management systems or processes; (8) changes in consumer demand for the company’s products and favorable perception of the company’s brands; (9) changing inventory management practices by certain of the company’s key customers; (10) a changing customer landscape, with value and e-commerce retailers expanding their market presence, while certain of the company’s key customers maintain significance to the company’s business; (11) product quality and safety issues, including recalls and product liabilities; (12) the possible disruption to the independent contractor distribution models used by certain of the company’s businesses, including as a result of litigation or regulatory actions affecting their independent contractor classification; (13) the uncertainties of litigation and regulatory actions against the company; (14) the costs, disruption and diversion of management’s attention associated with activist investors; (15) a material failure in or breach of the company’s information technology systems; (16) impairment to goodwill or other intangible assets; (17) the company’s ability to protect its intellectual property rights; (18) increased liabilities and costs related to the company’s defined benefit pension plans; (19) the company’s ability to attract and retain key talent; (20) changes in currency exchange rates, tax rates, interest rates, debt and equity markets, inflation rates, economic conditions, law, regulation and other external factors; (21) unforeseen business disruptions in one or more of the company’s markets due to political instability, civil disobedience, terrorism, armed hostilities, extreme weather conditions, natural disasters, pandemics or other calamities; and (22) other factors described in the company’s most recent Form 10-K and subsequent Securities and Exchange Commission filings. The company disclaims any obligation or intent to update the forward-looking statements in order to reflect events or circumstances after the date of this release.
#
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CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(millions, except per share amounts)

 Three Months Ended
 January 26, 2020January 27, 2019
Net sales$2,162  $2,172  
Costs and expenses
Cost of products sold1,420  1,466  
Marketing and selling expenses237  221  
Administrative expenses148  146  
Research and development expenses22  20  
Other expenses / (income)(22) (8) 
Restructuring charges  
Total costs and expenses1,812  1,847  
Earnings before interest and taxes350  325  
Interest, net146  91  
Earnings before taxes204  234  
Taxes on earnings33  58  
Earnings from continuing operations171  176  
Earnings (loss) from discontinued operations1,037  (235) 
Net earnings (loss)1,208  (59) 
Net loss attributable to noncontrolling interests—  —  
Net earnings (loss) attributable to Campbell Soup Company$1,208  $(59) 
Per share - basic
Earnings from continuing operations attributable to Campbell Soup Company$.57  $.58  
Earnings (loss) from discontinued operations3.43  (.78) 
Net earnings (loss) attributable to Campbell Soup Company$4.00  $(.20) 
Dividends$.35  $.35  
Weighted average shares outstanding - basic302  301  
Per share - assuming dilution
Earnings from continuing operations attributable to Campbell Soup Company$.56  $.58  
Earnings (loss) from discontinued operations3.41  (.78) 
Net earnings (loss) attributable to Campbell Soup Company$3.97  $(.20) 
Weighted average shares outstanding - assuming dilution304  302  
















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CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(millions, except per share amounts)

 Six Months Ended
 January 26, 2020January 27, 2019
Net sales$4,345  $4,374  
Costs and expenses
Cost of products sold2,865  2,942  
Marketing and selling expenses443  432  
Administrative expenses282  294  
Research and development expenses44  43  
Other expenses / (income)34  (8) 
Restructuring charges10  20  
Total costs and expenses3,678  3,723  
Earnings before interest and taxes667  651  
Interest, net226  181  
Earnings before taxes441  470  
Taxes on earnings101  114  
Earnings from continuing operations340  356  
Earnings (loss) from discontinued operations1,034  (221) 
Net earnings1,374  135  
Net loss attributable to noncontrolling interests—  —  
Net earnings attributable to Campbell Soup Company$1,374  $135  
Per share - basic
Earnings from continuing operations attributable to Campbell Soup Company$1.13  $1.18  
Earnings (loss) from discontinued operations3.44  (.73) 
Net earnings attributable to Campbell Soup Company*$4.56  $.45  
Dividends$.70  $.70  
Weighted average shares outstanding - basic301  301  
Per share - assuming dilution
Earnings from continuing operations attributable to Campbell Soup Company$1.12  $1.18  
Earnings (loss) from discontinued operations3.41  (.73) 
Net earnings attributable to Campbell Soup Company$4.53  $.45  
Weighted average shares outstanding - assuming dilution303  302  
*The sum of individual per share amounts may not add due to rounding.
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CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)

 Three Months Ended 
 January 26, 2020January 27, 2019Percent
Change
Sales
Contributions:
Meals & Beverages$1,224  $1,222  —%  
Snacks938  949  (1)% 
Corporate—   n/m  
Total sales$2,162  $2,172  —%  
Earnings
Contributions:
Meals & Beverages$242  $253  (4)% 
Snacks136  132  3%  
Total operating earnings378  385  (2)% 
Corporate(21) (58) 
Restructuring charges(7) (2) 
Earnings before interest and taxes350  325  8%  
Interest, net146  91  
Taxes on earnings33  58  
Earnings from continuing operations171  176  
Earnings (loss) from discontinued operations1,037  (235) 
Net earnings (loss)1,208  (59) n/m  
Net loss attributable to noncontrolling interests—  —  
Net earnings (loss) attributable to Campbell Soup Company$1,208  $(59) n/m  
Per share - assuming dilution
Earnings from continuing operations attributable to Campbell Soup Company$.56  $.58  
Earnings (loss) from discontinued operations3.41  (.78) 
Net earnings (loss) attributable to Campbell Soup Company$3.97  $(.20) n/m  
n/m - not meaningful

Beginning in fiscal 2020, the business in Latin America is managed as part of the Snacks segment. In fiscal 2019, the business in Latin America was managed as part of the Meals & Beverages segment.

On June 16, 2019, the company sold its Bolthouse Farms business. In the third quarter of fiscal 2019, the company also sold its refrigerated soup plant and its Garden Fresh Gourmet business. Beginning in the third quarter of fiscal 2019, the results of these businesses were reported as discontinued operations. The businesses were historically included in the Campbell Fresh segment. A portion of the U.S. refrigerated soup business was retained and is reported as part of foodservice in Meals & Beverages.

On September 23, 2019, the company sold the Kelsen Group; and on December 23, 2019, the company sold its Arnott's business and certain other international operations. Beginning in the fourth quarter of fiscal 2019, the results of these businesses were reported as discontinued operations. The businesses were historically included in the Snacks segment.
Prior periods have been adjusted retrospectively to reflect these changes.
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CAMPBELL SOUP COMPANY
CONSOLIDATED SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)

 Six Months Ended 
 January 26, 2020January 27, 2019Percent
Change
Sales
Contributions:
Meals & Beverages$2,418  $2,451  (1)% 
Snacks1,927  1,922  —%  
Corporate—   n/m  
Total sales$4,345  $4,374  (1)% 
Earnings
Contributions:
Meals & Beverages$524  543  (3)% 
Snacks261  257  2%  
Total operating earnings785  800  (2)% 
Corporate(108) (129) 
Restructuring charges(10) (20) 
Earnings before interest and taxes667  651  2%  
Interest, net226  181  
Taxes on earnings101  114  
Earnings from continuing operations340  356  
Earnings (loss) from discontinued operations1,034  (221) 
Net earnings1,374  135  n/m  
Net loss attributable to noncontrolling interests—  —  
Net earnings attributable to Campbell Soup Company$1,374  $135  n/m  
Per share - assuming dilution
Earnings from continuing operations attributable to Campbell Soup Company$1.12  $1.18  
Earnings (loss) from discontinued operations3.41  (.73) 
Net earnings attributable to Campbell Soup Company$4.53  $.45  n/m  
n/m - not meaningful

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CAMPBELL SOUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(millions)
 
January 26, 2020January 27, 2019
Current assets$1,556  $1,605  
Current assets of discontinued operations—  690  
Plant assets, net2,336  2,431  
Intangible assets, net7,361  7,487  
Other assets401  187  
Noncurrent assets of discontinued operations—  1,705  
Total assets$11,654  $14,105  
Current liabilities$2,536  $2,671  
Current liabilities of discontinued operations—  628  
Long-term debt4,919  7,996  
Other liabilities1,700  1,471  
Noncurrent liabilities of discontinued operations—  61  
Total equity2,499  1,278  
Total liabilities and equity$11,654  $14,105  
Total debt*$5,821  $9,457  
Total cash and cash equivalents*$58  $203  
*Includes discontinued operations.

On December 23, 2019, the company sold its Arnott's business and certain other international operations. On September 23, 2019, the company sold the Kelsen Group. On June 16, 2019, the company sold its Bolthouse Farms business. In the third quarter of fiscal 2019, the company also sold its refrigerated soup plant and its Garden Fresh Gourmet business. The assets and liabilities of these businesses are reported as assets and liabilities of discontinued operations as of January 27, 2019.

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CAMPBELL SOUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(millions)
Six Months Ended
 January 26, 2020January 27, 2019
Cash flows from operating activities:
Net earnings$1,374  $135  
Adjustments to reconcile net earnings to operating cash flow
Impairment charges—  360  
Restructuring charges10  21  
Stock-based compensation33  31  
Pension and postretirement benefit income(47) (29) 
Depreciation and amortization162  241  
Deferred income taxes32  (40) 
Net gain on sales of businesses(972) —  
Loss on extinguishment of debt75  —  
Other53  18  
Changes in working capital, net of acquisition and divestitures
Accounts receivable(112) (150) 
Inventories73  122  
Prepaid assets11  (2) 
Accounts payable and accrued liabilities(9) 170  
Other(20) (31) 
Net cash provided by operating activities663  846  
Cash flows from investing activities:
Purchases of plant assets(167) (198) 
Purchases of route businesses(6) (23) 
Sales of route businesses 25  
Business acquired, net of cash acquired—  (18) 
Sales of businesses, net of cash divested2,533  —  
Other 11  
Net cash provided by (used in) investing activities2,368  (203) 
Cash flows from financing activities:
Short-term borrowings3,680  2,831  
Short-term repayments(4,350) (3,274) 
Long-term repayments(499) —  
Dividends paid(213) (212) 
Treasury stock issuances —  
Payments related to tax withholding for stock-based compensation(9) (7) 
Payments related to extinguishment of debt(1,765) —  
Payments of debt issuance costs—  (1) 
Net cash used in financing activities(3,152) (663) 
Effect of exchange rate changes on cash—  (3) 
Net change in cash and cash equivalents(121) (23) 
Cash and cash equivalents — beginning of period31  49  
Cash balance of discontinued operations — beginning of period148  177  
Cash balance of discontinued operations — end of period—  (157) 
Cash and cash equivalents — end of period$58  $46  

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Reconciliation of GAAP to Non-GAAP Financial Measures
Second Quarter Ended January 26, 2020
Campbell Soup Company uses certain non-GAAP financial measures as defined by the Securities and Exchange Commission in certain communications. These non-GAAP financial measures are measures of performance not defined by accounting principles generally accepted in the United States and should be considered in addition to, not in lieu of, GAAP reported measures. Management believes that also presenting certain non-GAAP financial measures provides additional information to facilitate comparison of the company's historical operating results and trends in its underlying operating results, and provides transparency on how the company evaluates its business. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the company's performance. Beginning in the third quarter of fiscal 2019, the results of the Campbell Fresh segment were reported as discontinued operations. Beginning in the fourth quarter of fiscal 2019, the results of the Kelsen Group, Arnott's and certain other international operations (Campbell International), which represented the former international biscuits and snacks operating segment, are reported as discontinued operations. On October 11, 2019, the company sold its European chips business. The results of the business through the date of sale are reflected in continuing operations within the Snacks segment.
Organic Net Sales
Organic net sales are net sales excluding the impact of currency, acquisitions, divestitures, and the additional week in fiscal 2020. Management believes that excluding these items, which are not part of the ongoing business, improves the comparability of year-to-year results. A reconciliation of net sales as reported to organic net sales follows.
Three Months Ended
January 26, 2020January 27, 2019% Change
(millions)Net Sales,
as
Reported
Impact of CurrencyOrganic Net SalesNet Sales,
as
Reported
Impact of DivestitureOrganic Net SalesNet Sales,
as
Reported
Organic Net Sales
Meals & Beverages$1,224  $(1) $1,223  $1,222  $—  $1,222  —%  —%  
Snacks938  —  938  949  (32) 917  (1)% 2%  
Corporate—  —  —   —   n/m  n/m  
Total Net Sales$2,162  $(1) $2,161  $2,172  $(32) $2,140  —%  1%  

Six Months Ended
January 26, 2020January 27, 2019% Change
(millions)Net Sales,
as
Reported
Impact of CurrencyOrganic Net SalesNet Sales,
as
Reported
Impact of DivestitureOrganic Net SalesNet Sales,
as
Reported
Organic Net Sales
Meals & Beverages$2,418  $ $2,419  $2,451  $—  $2,451  (1)% (1)% 
Snacks1,927   1,928  1,922  (32) 1,890  —%  2%  
Corporate—  —  —   —   n/m  n/m  
Total Net Sales$4,345  $ $4,347  $4,374  $(32) $4,342  (1)% —%  
n/m - not meaningful
Items Impacting Earnings
Management believes that financial information excluding certain items that are not considered to reflect the ongoing operating results, such as those listed below, improves the comparability of year-to-year results. Consequently, management believes that investors may be able to better understand its results excluding these items.

The following items impacted earnings:
Continuing Operations
(1)The company has implemented several cost savings initiatives in recent years.
In the second quarter of fiscal 2020, the company recorded Restructuring charges of $7 million and implementation costs and other related costs of $13 million in Administrative expenses, $2 million in Cost of products sold, $2 million in Marketing and selling expenses, and $1 million in Research and development expenses (aggregate impact of $19 million after tax, or $.06 per share) related to these initiatives. In the six-month period of fiscal 2020, the company
16


recorded Restructuring charges of $10 million and implementation costs and other related costs of $21 million in Administrative expenses, $2 million in Cost of products sold, $2 million in Marketing and selling expenses, and $1 million in Research and development expenses (aggregate impact of $27 million after tax, or $.09 per share) related to these initiatives. Of these amounts, $2 million related to accelerated depreciation. In the second quarter of fiscal 2019, the company recorded Restructuring charges of $2 million and implementation costs and other related costs of $10 million in Administrative expenses, $9 million in Cost of products sold, $2 million in Marketing and selling expenses, and $1 million in Research and development expenses (aggregate impact of $18 million after tax, or $.06 per share) related to these initiatives. In the six-month period of fiscal 2019, the company recorded Restructuring charges of $20 million and implementation costs and other related costs of $23 million in Administrative expenses, $21 million in Cost of products sold, $4 million in Marketing and selling expenses, and $1 million in Research and development expenses (aggregate impact of $52 million after tax, or $.17 per share). Of these amounts, $21 million related to accelerated depreciation. For the year ended July 28, 2019, the company recorded Restructuring charges of $31 million and implementation costs and other related costs of $62 million in Administrative expenses, $18 million in Cost of products sold, $7 million in Marketing and selling expenses, and $3 million in Research and development expenses (aggregate impact of $92 million after tax, or $.30 per share) related to these initiatives. Of these amounts, $18 million related to accelerated depreciation.
(2)In the second quarter of fiscal 2020, the company recorded a loss in Interest expense of $75 million ($57 million after tax, or $.19 per share) on the extinguishment of debt.
(3)In the second quarter of fiscal 2020, the company recognized a pre-tax pension settlement gain in Other expenses / (income) of $11 million ($8 million after tax, or $.03 per share) associated with U.S. and Canadian pension plans. For the year ended July 28, 2019, the company recognized a pre-tax pension settlement charge in Other expenses / (income) of $28 million ($22 million after tax, or $.07 per share) associated with a U.S. pension plan. The settlements resulted from the level of lump sum distributions from the plans' assets.
(4)In the second quarter of fiscal 2020, the company recorded a tax benefit of $19 million ($.06 per share) on the sale of its European chips business. In the six-month period of fiscal 2020, the company recorded a loss in Other expenses / (income) of $64 million ($41 million after tax, or $.14 per share) on the sale of its European chips business.
(5)In fiscal 2019, the company reflected the impact on taxes of the enactment of the Tax Cuts and Jobs Act that was signed into law in December 2017. In the second quarter of fiscal 2019, the company recorded a tax charge of $2 million ($.01 per share) related to a transition tax on unremitted foreign earnings.
(6)For the year ended July 28, 2019, the company performed an assessment on the assets within the European chips business and recorded a non-cash impairment charge of $16 million ($13 million after tax, or $.04 per share) on intangible assets in Other expenses / (income).
(7)For the year ended July 28, 2019, the company incurred losses of $122 million in Other expenses / (income) ($93 million after tax, or $.31 per share) associated with mark-to-market adjustments for defined benefit pension and postretirement plans.
Discontinued Operations
(1)In the six-month period of fiscal 2019, the company recorded a charge of $1 million pre tax and after tax related to the cost savings initiatives.
(4)In the second quarter of fiscal 2020, the company recognized gains of $1.087 billion associated with the sale of the Arnott's business and certain other international operations. In addition, the company recorded tax expense of $4 million associated with the sale of the Kelsen Group. The aggregate impact was $1.025 billion after tax, or $3.37 per share. In the six-month period of fiscal 2020, the company recognized net gains of $1.036 billion ($998 million after tax, or $3.29 per share) associated with the sale of its Campbell International businesses. In the second quarter of fiscal 2019, the company incurred costs of $10 million ($8 million after tax, or $.03 per share) associated with the planned divestitures of its Campbell Fresh and Campbell International businesses. In the six-month period of fiscal 2019, the company incurred costs of $12 million ($9 million after tax, or $.03 per share) associated with the planned divestitures of its Campbell Fresh and Campbell International businesses.
For the year ended July 28, 2019, the company incurred pre-tax expenses of $32 million associated with the sale process of the businesses in Campbell Fresh, including transaction costs. In addition, the company recorded tax expense of $29 million as deferred tax assets on Bolthouse Farms were not realizable. The aggregate impact was $51 million after tax, or $.17 per share. For the year ended July 28, 2019, the company also incurred costs of $12 million
17


($10 million after tax, or $.03 per share) associated with the planned divestiture of Campbell International. The total aggregate impact was $61 million after tax, or $.20 per share.
(6) In the second quarter of fiscal 2019, interim impairment assessments were performed on the intangible and tangible assets within Campbell Fresh, which included Garden Fresh Gourmet, Bolthouse Farms carrot and carrot ingredients, and Bolthouse Farms refrigerated beverages and salad dressings, as the company continued to pursue the divestiture of these businesses. The company revised its future outlook for earnings and cash flows for each of these businesses as the divestiture process progressed. The company recorded non-cash impairment charges of $104 million on the tangible assets and $73 million on the intangible assets of Bolthouse Farms carrot and carrot ingredients; $96 million on the intangible assets and $9 million on the tangible assets of Bolthouse Farms refrigerated beverages and salad dressings; and $62 million on the intangible assets and $2 million on the tangible assets of Garden Fresh Gourmet. The aggregate impact of the impairment charges was $346 million ($264 million after tax, or $.87 per share).
In the first quarter of fiscal 2019, the company recorded a non-cash impairment charge of $14 million ($11 million after tax, or $.04 per share) on its U.S. refrigerated soup plant assets.
In the six-month period of fiscal 2019, the total non-cash impairment charges recorded were $360 million ($275 million after tax, or $.91 per share).
In the fourth quarter of fiscal 2019, as part of the company's annual review of intangible assets, the company recognized an impairment charge of $7 million on a trademark and $10 million on goodwill in Kelsen due to a lower long-term outlook for sales and the pending sale of the business. The aggregate impact was $17 million ($12 million after tax, or $.04 per share).
For the year ended July 28, 2019, the total non-cash impairment charges recorded were $377 million ($287 million after tax, or $.95 per share).
(7) For the year ended July 28, 2019, the company incurred losses of $12 million ($9 million after tax, or $.03 per share) associated with mark-to-market adjustments for defined pension plans.
18


The following tables reconcile financial information, presented in accordance with GAAP, to financial information excluding certain items:
Three Months Ended
 January 26, 2020January 27, 2019
(millions, except per share amounts)As reported 
Adjustments(a)
AdjustedAs reported
Adjustments(a)
AdjustedAdjusted Percent Change
Gross margin$742   $ $744  $706  $ $715  4%  
Gross margin percentage34.3 %34.4 %32.5 %32.9 %
Marketing and selling expenses237  (2) 235  221  (2) 219  
Administrative expenses148  (13) 135  146  (10) 136  
Research and development expenses22  (1) 21  20  (1) 19  
Other expenses / (income)(22) 11  (11) (8) —  (8) 
Restructuring charges (7) —   (2) —  
Earnings before interest and taxes$350  $14  $364  $325  $24  $349  4%  
Interest, net146  (75) 71  91  —  91  
Earnings before taxes$204  $89  $293  $234  $24  $258  
Taxes33  40  73  58   62  
Effective income tax rate16.2 %24.9 %24.8 %24.0 %
Earnings from continuing operations$171  $49  $220  $176  $20  $196  12%  
Earnings (loss) from discontinued operations1,037  (1,025) 12  (235) 272  37  (68)% 
Net earnings (loss) attributable to Campbell Soup Company$1,208  $(976) $232  $(59) $292  $233  —%  
Diluted earnings per share - continuing operations attributable to Campbell Soup Company$.56  $.16  $.72  $.58  $.07  $.65  11%  
Diluted earnings (loss) per share - discontinued operations3.41  (3.37) .04  (.78) .90  .12  (67)% 
Diluted net earnings (loss) per share attributable to Campbell Soup Company$3.97  $(3.21) $.76  $(.20) $.97  $.77  (1)% 
(a)See following tables for additional information.


19


Three Months Ended
 January 26, 2020
(millions, except per share amounts)Restructuring charges, implementation costs and other related costs
(1)
Loss on
extinguishment
 of debt
(2)
Pension
settlement
(3)
Divestitures
(4)
Adjustments
Gross margin$ $—  $—  $—  $ 
Marketing and selling expenses(2) —  —  —  (2) 
Administrative expenses(13) —  —  —  (13) 
Research and development expenses(1) —  —  —  (1) 
Other expenses / (income)—  —  11  —  11  
Restructuring charges(7) —  —  —  (7) 
Earnings before interest and taxes$25  $—  $(11) $—  $14  
Interest, net—  (75) —  —  (75) 
Earnings before taxes$25  $75  $(11) $—  $89  
Taxes 18  (3) 19  40  
Earnings from continuing operations$19  $57  $(8) $(19) $49  
Earnings from discontinued operations—  —  —  (1,025) (1,025) 
Net earnings attributable to Campbell Soup Company$19  $57  $(8) $(1,044) $(976) 
Diluted earnings per share - continuing operations attributable to Campbell Soup Company$.06  $.19  $(.03) $(.06) $.16  
Diluted earnings per share - discontinued operations—  —  —  (3.37) (3.37) 
Diluted net earnings per share attributable to Campbell Soup Company$.06  $.19  $(.03) $(3.43) $(3.21) 

Three Months Ended
 January 27, 2019
(millions, except per share amounts)Restructuring charges, implementation costs and other related costs
(1)
Divestitures
(4)
Tax reform
(5)
Impairment charges
(6)
Adjustments
Gross margin$ $—  $—  $—  $ 
Marketing and selling expenses(2) —  —  —  (2) 
Administrative expenses(10) —  —  —  (10) 
Research and development expenses(1) —  —  —  (1) 
Restructuring charges(2) —  —  —  (2) 
Earnings before interest and taxes$24  $—  $—  $—  $24  
Interest, net—  —  —  —  —  
Earnings before taxes$24  $—  $—  $—  $24  
Taxes —  (2) —   
Earnings from continuing operations$18  $—  $ $—  $20  
Earnings from discontinued operations—   —  264  272  
Net earnings attributable to Campbell Soup Company$18  $ $ $264  $292  
Diluted earnings per share - continuing operations attributable to Campbell Soup Company$.06  $—  $.01  $—  $.07  
Diluted earnings per share - discontinued operations—  .03  —  .87  .90  
Diluted net earnings per share attributable to Campbell Soup Company$.06  $.03  $.01  $.87  $.97  


20


Six Months Ended
 January 26, 2020January 27, 2019
(millions, except per share amounts)As reported 
Adjustments(a)
AdjustedAs reported
Adjustments(a)
AdjustedAdjusted Percent Change
Gross margin$1,480   $ $1,482  $1,432  $21  $1,453  2%  
Gross margin percentage34.1 %34.1 %32.7 %33.2 %
Marketing and selling expenses443  (2) 441  432  (4) 428  
Administrative expenses282  (21) 261  294  (23) 271  
Research and development expenses44  (1) 43  43  (1) 42  
Other expenses / (income)34  (53) (19) (8) —  (8) 
Restructuring charges10  (10) —  20  (20) —  
Earnings before interest and taxes$667  $89  $756  $651  $69  $720  5%  
Interest, net226  (75) 151  181  —  181  
Earnings before taxes$441  $164  $605  $470  $69  $539  
Taxes101  47  148  114  15  129  
Effective income tax rate22.9 %24.5 %24.3 %23.9 %
Earnings from continuing operations$340  $117  $457  $356  $54  $410  11%  
Earnings (loss) from discontinued operations1,034  (998) 36  (221) 285  64  (44)% 
Net earnings attributable to Campbell Soup Company$1,374  $(881) $493  $135  $339  $474  4%  
Diluted earnings per share - continuing operations attributable to Campbell Soup Company$1.12  $.39  $1.51  $1.18  $.18  $1.36  11%  
Diluted earnings (loss) per share - discontinued operations3.41  (3.29) .12  (.73) .94  .21  (43)% 
Diluted net earnings per share attributable to Campbell Soup Company*$4.53  $(2.91) $1.63  $.45  $1.12  $1.57  4%  
(a)See following tables for additional information.
*The sum of individual per share amounts may not add due to rounding.

21


Six Months Ended
 January 26, 2020
(millions, except per share amounts)Restructuring charges, implementation costs and other related costs
(1)
Loss on
extinguishment
 of debt
(2)
Pension
settlement
(3)
Divestitures
(4)
Adjustments
Gross margin$ $—  $—  $—  $ 
Marketing and selling expenses(2) —  —  —  (2) 
Administrative expenses(21) —  —  —  (21) 
Research and development expenses(1) —  —  —  (1) 
Other expenses / (income)—  —  11  (64) (53) 
Restructuring charges(10) —  —  —  (10) 
Earnings before interest and taxes$36  $—  $(11) $64  $89  
Interest, net—  (75) —  —  (75) 
Earnings before taxes$36  $75  $(11) $64  $164  
Taxes 18  (3) 23  47  
Earnings from continuing operations$27  $57  $(8) $41  $117  
Earnings from discontinued operations—  —  —  (998) (998) 
Net earnings attributable to Campbell Soup Company$27  $57  $(8) $(957) $(881) 
Diluted earnings per share - continuing operations attributable to Campbell Soup Company$.09  $.19  $(.03) $.14  $.39  
Diluted earnings per share - discontinued operations—  —  —  (3.29) (3.29) 
Diluted net earnings per share attributable to Campbell Soup Company*$.09  $.19  $(.03) $(3.16) $(2.91) 
*The sum of individual per share amounts may not add due to rounding.

Six Months Ended
 January 27, 2019
(millions, except per share amounts)Restructuring charges, implementation costs and other related costs
(1)
Divestitures
(4)
Tax reform
(5)
Impairment charges
(6)
Adjustments
Gross margin$21  $—  $—  $—  $21  
Marketing and selling expenses(4) —  —  —  (4) 
Administrative expenses(23) —  —  —  (23) 
Research and development expenses(1) —  —  —  (1) 
Restructuring charges(20) —  —  —  (20) 
Earnings before interest and taxes$69  $—  $—  $—  $69  
Interest, net—  —  —  —  —  
Earnings before taxes$69  $—  $—  $—  $69  
Taxes17  —  (2) —  15  
Earnings from continuing operations$52  $—  $ $—  $54  
Earnings from discontinued operations  —  275  285  
Net earnings attributable to Campbell Soup Company$53  $ $ $275  $339  
Diluted earnings per share - continuing operations attributable to Campbell Soup Company$.17  $—  $.01  $—  $.18  
Diluted earnings per share - discontinued operations—  .03  —  .91  .94  
Diluted net earnings per share attributable to Campbell Soup Company*$.18  $.03  $.01  $.91  $1.12  
*The sum of individual per share amounts may not add due to rounding.



22


(millions, except per share amounts)Year Ended July 28, 2019
Gross margin, as reported$2,693  
Add: Restructuring charges, implementation costs and other related costs (1)18  
Adjusted Gross margin$2,711  
Adjusted Gross margin percentage33.4 %
Earnings before interest and taxes, as reported$979  
Add: Restructuring charges, implementation costs and other related costs (1)121  
Add: Pension settlement (3)28  
Add: Impairment charges (6)16  
Add: Pension and postretirement benefit mark-to-market adjustments (7)122  
Adjusted Earnings before interest and taxes$1,266  
Interest, net, as reported$354  
Adjusted Earnings before taxes$912  
Taxes on earnings, as reported$151  
Add: Tax benefit from restructuring charges, implementation costs and other related costs (1)29  
Add: Tax benefit from pension settlement (3) 
Deduct: Tax expense from tax reform (5)(2) 
Add: Tax benefit from impairment charges (6) 
Add: Tax benefit from pension and postretirement benefit mark-to-market adjustments (7)29  
Adjusted Taxes on earnings$216  
Adjusted effective income tax rate23.7 %
Earnings from continuing operations, as reported$474  
Add: Net adjustment from restructuring charges, implementation costs and other related costs (1)92  
Add: Net adjustment from pension settlement (3)22  
Add: Net adjustment from tax reform (5) 
Add: Net adjustment from impairment charges (6)13  
Add: Net adjustment from total pension and postretirement benefit mark-to-market adjustments (7)93  
Adjusted Earnings from continuing operations$696  
Loss from discontinued operations, as reported$(263) 
Add: Net adjustment from divestitures (4)61  
Add: Net adjustment from impairment charges (6)287  
Add: Net adjustment from total pension benefit mark-to-market adjustments (7) 
Adjusted Earnings from discontinued operations$94  
Adjusted Net earnings attributable to Campbell Soup Company$790  
Diluted earnings per share - continuing operations attributable to Campbell Soup Company, as reported$1.57  
Add: Net adjustment from restructuring charges, implementation costs and other related costs (1).30  
Add: Net adjustment from pension settlement (3).07  
Add: Net adjustment from tax reform (5).01  
Add: Net adjustment from impairment charges (6).04  
Add: Net adjustment from total pension and postretirement benefit mark-to-market adjustments (7).31  
Adjusted Diluted earnings per share - continuing operations attributable to Campbell Soup Company$2.30  
Diluted loss per share - discontinued operations, as reported$(.87) 
Add: Net adjustment from divestitures (4).20  
Add: Net adjustment from impairment charges (6).95  
Add: Net adjustment from total pension benefit mark-to-market adjustments (7).03  
Adjusted Diluted earnings per share - discontinued operations$.31  
23


(millions, except per share amounts)Year Ended July 28, 2019
Diluted net earnings per share attributable to Campbell Soup Company, as reported$.70  
Add: Net adjustment from restructuring charges, implementation costs and other related costs (1).30  
Add: Net adjustment from pension settlement (3).07  
Add: Net adjustment from divestitures (4).20  
Add: Net adjustment from tax reform (5).01  
Add: Net adjustment from impairment charges (6).99  
Add: Net adjustment from total pension and postretirement benefit mark-to-market adjustments (7).34  
Adjusted Diluted net earnings per share attributable to Campbell Soup Company*$2.62  
*The sum of individual per share amounts may not add due to rounding.

Net Debt
Management believes that net debt from continuing operations is a non-GAAP measure that provides additional comparisons between the company's financial position at January 26, 2020, and January 27, 2019, and also a useful perspective on the financial condition of the business. Cash and cash equivalents are available to repay outstanding debt upon maturity.
(millions)January 26, 2020January 27, 2019
Short-term borrowings$902  $1,177  
Long-term debt4,919  7,996  
Total debt - continuing operations$5,821  $9,173  
Less: Cash and cash equivalents(58) (46) 
Net debt - continuing operations$5,763  $9,127  


24


Net Debt to Adjusted EBITDA
Net debt to adjusted EBITDA is net debt divided by adjusted earnings before interest, taxes, depreciation, and amortization. Management believes that net debt to adjusted EBITDA is a useful metric to evaluate the company's financial leverage. Net debt to adjusted EBITDA is not a financial measure under GAAP and may not be defined and calculated by other companies in the same manner.
(a)(b)(c)= (a)-(b)+(c)
Twelve Months EndedSix Months EndedSix Months EndedTrailing Twelve Months
July 28,
2019
January 27,
2019
January 26,
2020
January 26,
2020
Earnings from continuing operations, as reported$474  $356  $340  $458  
Add: Restructuring charges, implementation costs and other related costs (1)92  52  27  67  
Add: Loss on extinguishment of debt (2)—  —  57  57  
Add (Deduct): Pension settlement (3)22  —  (8) 14  
Add: Divestitures (4)—  —  41  41  
Add: Tax reform (5)  —  —  
Add: Impairment charges (6)13  —  —  13  
Add: Pension and postretirement benefit mark-to-market (7)93  —  —  93  
Adjusted Earnings from continuing operations$696  $410  $457  $743  
Taxes on earnings, as reported$151  $114  $101  $138  
Add: Restructuring charges, implementation costs and other related costs (1)29  17   21  
Add: Loss on extinguishment of debt (2)—  —  18  18  
Add (Deduct): Pension settlement (3) —  (3)  
Add: Divestitures (4)—  —  23  23  
Deduct: Tax reform (5)(2) (2) —  —  
Add: Impairment charges (6) —  —   
Add: Pension and postretirement benefit mark-to-market (7)29  —  —  29  
Adjusted Taxes on earnings$216  $129  $148  $235  
Interest, net, as reported$354  $181  $226  $399  
Deduct: Loss on extinguishment of debt (2)—  —  (75) (75) 
Adjusted Interest, net$354  $181  $151  $324  
Earnings before interest and taxes, as reported$979  $651  $667  $995  
Add: Restructuring charges, implementation costs and other related costs (1)121  69  36  88  
Add (Deduct): Pension settlement (3)28  —  (11) 17  
Add: Divestitures (4)—  —  64  64  
Add: Impairment charges (6)16  —  —  16  
Add: Pension and postretirement benefit mark-to-market (7)122  —  —  122  
Adjusted Earnings before interest and taxes$1,266  $720  $756  $1,302  
Depreciation and amortization, as reported$446  $241  $162  $367  
Add (Deduct): Restructuring charges, implementation costs and other related costs (1)(18) (21) (2)  
Deduct: Depreciation and amortization, discontinued operations(83) (54) —  (29) 
Adjusted Depreciation and amortization from continuing operations$345  $166  $160  $339  
Adjusted Earnings before interest, taxes, depreciation and amortization$1,611  $886  $916  $1,641  
January 26, 2020
Net debt$5,763  
Net debt to Adjusted EBITDA3.5  

25