Second-Quarter Results

For the second quarter, sales increased 10 percent to $2.333 billion. The increase in sales for the quarter reflected the following factors:
  • The acquisition of Bolthouse Farms added 9 percent
  • Price and sales allowances added 2 percent
  • Increased promotional spending subtracted 1 percent

Second-Quarter Financial Details
  • Gross margin was 35.1 percent compared with 38.4 percent a year ago. Excluding restructuring-related charges, adjusted gross margin in the current quarter was 36.8 percent. The decline in gross margin was mostly attributable to the acquisition of Bolthouse Farms, which operates with a lower gross margin structure.
  • Marketing and selling expenses were $297 million, comparable to the prior year. Lower advertising and consumer promotion expenses, primarily in the U.S. Soup business, were offset by higher spending to support the company’s innovation efforts, higher selling expenses and the impact of the addition of Bolthouse Farms expenses.
  • Administrative expenses increased $20 million to $172 million, primarily due to the acquisition of Bolthouse Farms, as well as higher compensation and benefit costs, including pension expenses.
  • EBIT was $301 million compared with $329 million in the prior-year quarter. Excluding restructuring and restructuring-related charges, adjusted EBIT increased 5 percent to $349 million. Excluding Bolthouse Farms’ operating results, adjusted EBIT increased 1 percent, primarily driven by lower marketing expenses, partly offset by higher selling expenses and R&D costs.
  • Net interest expenses increased $5 million to $31 million, reflecting a higher debt level due to the acquisition of Bolthouse Farms, partially offset by lower interest rates.
  • The tax rate in the quarter was 30.7 percent compared with 33.7 percent in the prior year. Excluding restructuring and restructuring-related charges, the current quarter’s adjusted tax rate was 31.8 percent. The decrease was primarily due to lower taxes on foreign earnings in the current year.
  • Adjusted net earnings for the quarter increased 6 percent to $220 million. Adjusted net earnings per share were $0.70 in the current quarter compared with net earnings per share of $0.64 in the prior-year quarter, an increase of 9 percent. Earnings per share benefitted from fewer shares outstanding, reflecting the impact of the company’s share repurchase program in the prior year.

First-Half Results

Net earnings for the first half were $435 million, or $1.38 per share, compared with $470 million, or $1.45 per share, in the year-ago period. Excluding restructuring, restructuring-related charges and acquisition transaction costs, adjusted net earnings increased 5 percent to $499 million. Reflecting the benefit of fewer shares outstanding, adjusted net earnings per share increased 8 percent to $1.58.

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