Good day, ladies and gentlemen and welcome to the Campbell Soup Fourth Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions]. As a reminder this conference call is being recorded. I will now turn the call over to your host, Ken Gosnell. Please go ahead.

Thank you, Stephanie. Good morning, everyone. Welcome to the fourth quarter earnings call for Campbell Soup's fiscal 2015. With me here in New Jersey are Denise Morrison, President and CEO; Anthony DiSilvestro, CFO; and Blake MacMinn, Senior Manager of Investor Relations. As usual we've created slides to accompany our earnings presentation. You will find the slides posted on our website this morning at investor.campbellsoupcompany.com. The call is open to the media who participate in a listen-only mode. Today, we'll make forward-looking statements, which reflect our current expectations. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risks. Please refer to our slide two or our SEC filings for a list of the factors that could cause our actual results to vary materially from those anticipated in forward-looking statements. Now I'd like to remind you about items impacting comparability. As we said in this morning's news release in the fourth quarter the company incurred charges associated with its initiatives to implement a new enterprise design that better aligns with our strategies to reduce cost and to streamline organizational structure. The company recorded pretax restructuring charges of $93 million related to the program and pretax charges of $13 million and administrative expenses related to the implementation of these initiatives. The aggregate after tax impact of the restructuring charges and implementation cost was $0.21 per share. Last year, in the fourth quarter of fiscal 2014 we recorded $21 million of pretax restructuring charges and restructuring related cost. We also recorded an additional $4 million of pretax settlement charges associated with the U.S. Pension plan. The aggregate after tax impact of these items was $0.06 per share. Also as a reminder fiscal 2015 included 53 weeks, with the extra week falling in the fourth quarter. The extra week was worth an estimated $129 million in net sales, $37 million in EBIT and $0.08 in EPS. The adjusted results exclude the impact of the additional week in the prior year. Our comparisons of the full year 2015 with 2014 will exclude previously announced items. Because we use non-GAAP measures we have provided a reconciliation of these measures to the most directly comparable GAAP measures, which is included in our appendix. Lastly, please mark your calendars for our planned fiscal 2016 earnings dates. We plan to release first quarter earnings on November 24 which will include the new segments and pension and post-retirement benefit accounting changes with the re-casted prior year Q1 data. Shortly after we release our 10-Q, we will release the remaining re-casted financials. The next three earnings dates are February 25, May 20 and September 1, 2016. With that, let me turn the call over to Denise.

Thank you Ken and good morning everyone. Welcome to our fourth quarter earnings call. This morning I will offer my perspective on our performance, provide a progress report on several major strategic actions we initiated in 2015, including our redesigned enterprise structure and cost savings effort and share my outlook and areas of focus for fiscal 2016. At our Investor Day in July, I described how the food industry is in a period of revolutionary change, which presents both challenges and opportunities for Campbell. The changes in the industry are being driven by several seismic shifts; new global economic realities in the U.S. and abroad; major demographic changes and the redefinition of the American family; profound changes in consumer preferences for food, with greater focus on health and wellbeing, and the impact of digital technologies on marketing, shopping and the growing demand for greater transparency about food. The convergence and acceleration of these shifts are reshaping the consumer and retailer landscape. Combined with the prevailing industry dynamics of consolidation and cost cutting these shifts are placing increased pressure on traditional center store categories and mainstream food companies. With this as context, I'll focus my remarks this morning on our performance for fiscal 2015, review the important strategic actions we initiated during the year and highlight our key drivers for fiscal 2016. First I'll briefly comment on our fourth quarter results. I'm pleased that we finished fiscal 2015 inline with our revised expectations. Sales in the fourth quarter reflected the tough consumer operating environment with organic sales increasing 1%. Three of our five segments grew organic sales in the quarter. More importantly, we made significant progress in our internal actions to address our supply chain issues related to shipping capacity and customer service. We've also made substantial strides to improve our…

Thanks Denise and good morning. Before reviewing our results and guidance I wanted to give you my perspective on our performance and future outlook. We finished the year with a solid quarter. I am very pleased with our gross margin performance in the fourth quarter, which improved by 180 basis points, benefiting from our price realization and productivity efforts. The improved gross margin and earlier than expected cost reductions drove 5% gains in both adjusted EBIT and the EPS for the quarter, despite a two point negative impact from currency translation. We made very good progress against our three year $215 million cost savings target, delivering about $85 million of savings in fiscal 2015. For the full year we delivered results within our recent guidance ranges with EPS of $2.46 at the top end of the range. Looking ahead to 2016 our guidance, when you exclude the impact of currency translation and the Garden Fresh Gourmet acquisition is within our new long-term targets. Now I will review our results in more detail. For the fourth quarter net sales on an as-reported basis declined 9% to $1.7 billion, primarily due to the impact of one less week and the negative impact of currency translation. Excluding those factors and our recent acquisition of Garden Fresh Gourmet organic net sales increased 1% in the quarter as we benefited from higher selling prices. Adjusted EBIT increased 5% to $234 million driven by a higher gross margin percentage, partly offset by higher incentive compensation expenses and a two point negative impact from currency translation. Adjusted EPS also increased by 5% to $0.43. For the full year reported net sales declined 2% with organic sales gaining 1% led by the strong performance of our Global Baking and Snacking segment. Adjusted EBIT declined 2% to $1.2 billion,…

Thanks Anthony. We will now start our Q&A session. Since we have limited time out of fairness to other callers if you could please ask only one question at a time. Thanks.

Thank you. [Operator Instructions]. Our first question comes from Robert Moskow with Credit Suisse Securities. Your line is open.

Hi, thank you. The gross margin expansion obviously was much higher than what we all expected, and I don’t know, have you given any specific guidance for what kind of expansion you expect in fiscal ‘16? And also was there any help in the quarter resulting from kind of like the mismatch of incremental costs that you took on in first and second quarter, Anthony? I remember there were some noise there related to some inefficiencies for extra cost that needed to be spread out over multiple quarters. Did that influence the fourth quarter expansion at all?

So Rob, I will comment on the fourth quarter and then I will come back to 2016. The fourth quarter comp is fairly clean. The only thing that gave us some advantage this year relative to last year is the timing of the mark-to-market adjustment on our commodity hedges. So we had a little bit of favorability this year relative to last year. So a small portion of that 180 basis points is that, and the rest is improvement in the operating performance of the business. In terms of 2016, as I said in my remarks, we expect to see a modest improvement in our gross margin percentage and I think the way to think about it there is a number of positives and a number of negatives. On the positive side our annual cost productivity program where we target 3% of cost, obviously that’s the most significant benefit. We expect to see continued benefit on net price realization, mostly from the pricing actions that we’ve taken in the back half of this year. We do expect to see some margin improvement from improved supply chain performance year-on-year, given the challenges that we have in the first half of last year. On the negative side, three things to mention. One is cost inflation which we expect to be about 2% to 3% and that includes the negative impact of currency on the input cost of a number of our international businesses, but also includes some negative mix and lastly the cost of some quality improvements we are making in some of our -- both our products and packaging.

Okay, I’ll let it go, thanks.

Our next question comes from John Baumgartner with Wells Fargo. Your line is open.

Thanks good morning. Denise wanted to ask about Global Baking and Snacking and the volume pressure there. Maybe if you could address in a bit more detail some of that pressure in Asia, particularly I guess Kjeldsens in China. And then in the U.S. cookie business and the softness here, it seems that Pepperidge pricing really began to outpace the category over the past few months. Are you seeing some elasticity impact there and how are you seeing that for fiscal ‘16?

Yeah, let me start first with our core business in the United States and in Australia we are pleased with the share in consumption of Goldfish crackers and in particular Milano, although we did experience in the quarter some softness in cookies. That was pretty much as expected, because we -- in the biscuit business in the United States, particularly in the quarter, we did not promote as heavily as last year because the promotions were not as productive as we would have expected. So that was pretty deliberate. But we expect moderate growth in the United States on our biscuit business. In the Australian business we are really happy with the year that we had there. That has been a pretty remarkable turnaround. We were challenged in Australia for a couple of years and they have now posted really outstanding results and it’s been really on the fundamentals, better advertising, more innovation, more brand building, more digital. So we believe that the building blocks they put in place there are very sustainable. We had a great year in Indonesia with double-digit growth but we did have a slow fourth quarter and all you have to do is pick up a newspaper to see what’s going on in Asia these days. But we’re watching that very careful and we believe -- look we have lot of runway in Indonesia to expand our distribution points but we are going to be very responsible about that business in '16. And then the Kjeldsens business, this is a very small quarter for Kjeldsens. The sales are skewed in China largely towards Chinese New Year. But that said, we did have some inventory overhang from Chinese New Year this year and we're working through that right now. And that hit us predominantly in the fourth quarter.

Perfect, thank you Denise.

Our next question comes from Chris Growe with Stifel. Your line is open.

Hi thank you. Good morning.

Hi Chris.

Hi, just a quick question if I could then. I just wanted a sense of the degree of promotional spending and what you expected to do across the year. I know every business is different and I'm sure broadly you have expectations for each business. But is there an overall outcome [ph] that's going to come from promotional spending may be related to that advertising, not sure I heard that, what you expect advertising spending for the year? Thank you.

Yeah, we are continuing to manage our trade promotions to maximize our profitable volume. We're maintaining a focus on competitive activity in both our customer programs and in our consumer response. And we are, as noted, looking for opportunities to improve our trade spending not only for ourselves to get a better return but also for our customers to get a better return. And so there is no real strategy to cut back but they're definitely is improved analytics and revenue management. So we have a much more productive trade spend. In total, our advertising consumer and trade was about 24% of sales which we try and aim for about 24% to 25% as a rule.

Our next question comes from Jason English with Goldman Sachs. Your line is open.

Hey, good morning folks.

Good morning

First a quick housekeeping question. Can you guys quantifying what the 2015 EPS base is going to look like post the re-casting related to pension accounting?

Sure I can do that. I think the way to think about it in 2015, the amortization within our pension expense is going to be about $100 million pretax. And that's a good proxy for the impact of the accounting change when we through a bunch of pluses and minuses. I think a couple of additional points on this, these plans have been close to new hires for a couple of years now. They're very well-funded. We ended the year at 97% to 98% in terms of funded status. And we don't expect to make any contributions to our U.S. plans in 2016.

Thank you. That's helpful. And you mentioned ZBB focused on two cost categories. Can you specify what categories those are?

Yeah, we did our pilot program on our non-working marketing and also on the consulting.

And on marketing, it's -- you're focusing on more productivity there? It's down around 17% from your fiscal '10 high. How much further can you go, and as you try to some of balance and walk the line of containing promotions and I think it's encouraging to see that promotions actually being a positive contributor to sales, can you do both at the same time. Can you continue to hold the line of marketing and find efficiencies there, while at the same time pulling back or find the efficiencies on trade spend? Or is it a either/or type situation as you think about the forward?

I think that we look at the marketing mix as the three elements of advertising consumer and trade. And of course that mix is going to vary by business in terms of what degree we spend. But we do have some shifts going on. As Anthony alluded to we are making a conscious effort to reduce our non-working marketing where it's not a productive spend. The second is within advertising, we are shifting more dollars out of conventional TV and more into digital. And that spend has been shifting overtime but will be up to 40% going forward. And then we try again for ACT to stay in the range of about 24% to 25% of sales and that's remained pretty constant over the last couple of years.

Thank you very much. I appreciate the color and I'll pass it on.

Our next question comes from David Palmer with RBC. Your line is open.

Hi David.

David, if your line is on mute can you please unmute it? We'll move onto our next question. Our next question comes from Ken Goldman with JPMorgan. Your line is open.

Hey, Ken.

Hi, good morning. Real quick one, regarding U.S. Simple Meals, and forgive me if you mentioned this, but you talked about positive movements in the retailer inventory levels. Can you elaborate a bit on how much that helped and what happened that your customers, I guess loaded up a bit on purchases versus the prior year?

Yeah, I think it's more about how we came into the quarter. If you recall the third quarter I think our sales were down 10% while our consumption was only down one. So we came into the quarter with inventory levels down. We ended the quarter and the year with retail inventories about where they were a year ago. So in the fourth quarter while our consumption was plus 1%, our organic sales were plus about 5%. So we had about four points of lift from that shift in inventory.

Thanks and a quick one if I can, in terms of U.S. cookies your two main competitors have made some DSD investments there. Can you talk about whether you think those investment have affected your business at all negatively, and whether you might want to add to your capability there to match what some of your peers have done?

I can't comment really on competition investments. But I can say that we continue to be very supportive of our independent distributor network. They are a large part of our business model and we'll continue to build the business alongside of them.

Thanks very much.

Our next question comes from Matthew Grainger with Morgan Stanley. Your line is open.

Hi, good morning everyone.

Hi, Matt.

Good morning.

Denise, I just wanted to touch on the -- come back to the outlook for U.S. beverages in 2016, it sounds like you are still cautious, definitely from a sales perspective. But is it possible that we could begin to see some improvement in margin or profit growth? And as you think about the growth profile of that business, given how persistent volume declines have been, do you think there may be an opportunity to perhaps take a more profit maximizing approach, perhaps focus a little bit more on pricing realization?

We are doing both and obviously the category itself has been under a lot of pressure based on the consumer and so what we've been really focused on is how do we broaden our line and better deliver on the things that consumers are looking for in vegetable juices and we believe that vegetable juices have an advantage based on the consumer trends. We learned a lot from Bolthouse and actually our V8 veggie blends reflect a broadening of vegetable based beverages based on consumer preferences for those particular flavor profiles and we think that that is really taking the business in the right direction. That said we still have some leaky bucket in our V8 V-Fusion that we're dealing with. Our V8 SPLASH and V8 Plus Energy are doing really well and our immediate consumption has now posted the second quarter of growth. So we've got some good signs on the growth curve, but more things working than not. But we're still are cautious about declaring victory yet. The other thing we're working on is a mastering complexity project in our supply chain which we believe will have a really positive impact on our profit going forward. But that is a longer term play.

Okay, thanks and then just to come back to some of the more on trend new products like V8 Veggie blends. Is that something, maybe not initially but something that you feel can be rolled out in a more of a margin neutral way given sort of the added quality components of it?

The brand -- Veggie Blends is showing some really good trial and repeat, and we believe we do have to invest marketing to drive the trial because the repeats are so strong. Building a new product today is heavy lifting and so making sure that we breakthrough and we are supporting the brands we put out there is an important idea.

Sure. Okay, thanks Denise.

Our next question comes from Bryan Spillane with Bank of America. Your line is open.

Hey, good morning everyone.

Hello, Bryan.

Hey, Bryan.

Just a quick question about just the cost inflation assumption for 2016, can you just give us some color around where the inflation pressure is, especially most more recently you’ve seen some commodity movements that would presumably be more favorable and also just to what degree your inflation assumption for 2016 reflects some incremental cost related to the like ingredient changes?

Sure, I can you give you a little more color on that. So overall, like I said earlier the cost inflation of about 2% to 3%. If you parse that apart and look at the core ingredients and packaging and energy component it’s about 1%. And within that the key drivers will be about five categories, vegetables, flavors, sweeteners, chocolates and we have a significant increase in -- as a result of the avian flu, in both eggs and pasta. In eggs we’re looking at inflation rates of close to 50% in fiscal ’16. So those are the key drivers of the 1%. Then on top of that there’s a couple of other items. So first would be and I alluded to it, the FX impact of input cost on our Canadian business and the Australian business is fairly significant. And then the other couple of pieces, one would be wage raise within the supply chain and also benefits both healthcare and pension. And in terms of the commodities, because you mentioned some of the prices coming down, we're locked in to about 75% of our commodities for fiscal ’16.

Okay, great. That’s very helpful and have a great Labor Day Weekend everyone.

Thank you, you too.

Our next question comes from Jonathan Fini with Asos Research [ph]. Your line is open.

Hi, Jon.

Hi, how are you? Good morning. One question I had. I wanted to get more detail about the -- you mentioned retailer inventories particularly within Simple Meals. Any kind of detail you can give us about how sustainable those are, particularly in broth where sales are particularly strong, what kind of went on and maybe more detail by channel? I know you discussed it a little bit but are there any particular retailers who are moving inventories around in a way that affected profit this quarter? Thanks.

No, other than the comment I made earlier that we came in to the quarter with inventory below last year. I mean it’s kind of a rocky road. We started the year and ended the year about the same place, right which isn't a lot of retail inventories. The issue that we saw all throughout the year was the quarterly volatility starting with the first quarter with the timing of the holidays change because we had one less week in the fiscal year and then some timing in the third quarter where we pulled back quite a bit on some of our promotional activity in soup and that led to some reduction in retailer inventories. That corrected in the fourth quarter and I’ll say again we ended the year at relatively low levels comparable to a year ago and I don't -- can't think of any particular anomaly within that Jonathan.

The drivers are really that inventory movement is largely a function of promotional activity and as we’re noting the activity is not consistent quarter-to-quarter and inventory changes are largely individual customer decisions. So those are three other points that round out that discussion.

Great, well. Thanks so much.

Our next question comes from David Driscoll with Citi. Your line is open.

Hi, David.

Thank you. Good morning. Denise, I wanted to ask a little bit about this new segment America Simple Meals and Beverages, and just really to ask about the margin opportunity that’s there for the segment, and I want to say something that I feel like that there’s been almost a basic philosophical shift here, such that the focus moves from what I perceive in the past as just kind of a maniacal focus on volumes to a very different business focus for that segment, now just going for profit. So number one, am I right -- am I overstating kind of the philosophical shift and can you give us some dimensions on the margin opportunity, and I'm not too concerned about the timeline, this is not a fiscal ’16 question, I really want to understand big picture where it’s going?

Yes, I think, expecting that business to grow moderately at the top line and expand margins is a more balanced approach to the portfolio in terms of expecting these categories to do what they can do. And that doesn’t mean that we won’t have pockets of growth. For example the Plum business resides in that category in to -- in that division. And we expect robust growth from Plum. We also are not taking our foot off the gas on innovation but we're being a lot more selective about the innovation we put into the market, because we're in a different place. And couple of years ago we didn't have a pipeline. And so what happened as a result are some little ideas got out into the marketplace. Today we have built the pipeline and we could be more choiceful about the larger ideas, where we know we're going to get an impact from. And so I think this is a much more responsible way to run this business. And we believe that we can deliver better value for our shareholders with this approach.

But is there any way to kind of put a kind a guideline to this margin expansion. I mean I'm trying to get a sense of just is this 10-20 basis points a year or is this something that has a bigger potential than that?

I would say let me put it at this way, I think there is an opportunity overtime to grow the profit in that division above the company target.

Yes, and it has been eroded for the past couple of years. So by -- getting into our cost structure and getting into the discipline of zero-based budgeting we're going to be able to do this in a very surgical way, so that it sticks in a sustainable way.

I really appreciate the comments. Thank you so much.

Our final question comes from Diane Geissler with CLSA. Your line is open.

Hi Diane.

Good morning.

Good morning.

I wanted to ask about the soup category. So we're heading into the start of the soup season here. It seems just anecdotally the category is a little promotional. I'm sure it's probably promotional every fall, because it is the high season. Could you talk a little bit about what you're seeing on shelf and from the retailers in terms of the levels of support they're looking for? And is there any divergence from what you've seen around this time kind of every year?

It's early days in the season. Right now where we're focused on is making sure that our shelf space is intact and the products are merchandized correctly on shelf. We have new products that are being cut in like the K cups and organic soup, making sure that that's sufficiently placed. Our Campbell sales team is working with customers on a robust promotion schedule and not -- but pretty consistent with what we had in prior years. So at this point in time I don't see anything unusual. I don't know Anthony if you have anything to add?

No, nothing.

And the K cups, how will you account for those? Are those -- what do you consider those condensed or…?

We actually believe they will be largely incremental to the category because it is an incremental usage occasion, going after soup as a snack. We believe that there is a great overlap between our Campbell soup users and Keurig users. And our research has confirmed that. We are shelving it in the coffee aisle, in about 70% of the retail environment. And that's basically because we believe that people who are interested in buying K cups will see this as a real positive in terms of expanding the usage of their dispensers into new categories and new usage occasions. We have two pack sizes, one designed to drive trial which we situating in the soup aisle and then the -- that’s a two count pack, and then a six count pack in the coffee aisle. So we're pretty excited about it. It's going to be different, but we believe that the space has really been a game changer for coffee and we expect some good things from it.

The segment classification is the good question. And I'd have to think about that and what we'll do when we get to the first quarter I'll make sure I highlight which segment we put that in.

Okay. And how many flavors are in the K cups?

I think right now it's just two.

Yes, two.

Okay, great. Thank you.

You're welcome.

And that does conclude the Q&A session. I'll turn the call back over to management for closing remarks.

Thank everyone for joining our fourth quarter call and webcast. A full replay will be available about two hours after this call. You can go online or if you are calling 188-266-2081 the access code is 1660929. You have until September 17 at which point we move our earnings call straight into the website, investor.campbellsoupcompany.com. Just click on recent webcast and presentations. If you have any further questions please call me, Ken at 856-342-6081. If you are a reporter with questions please call Carla Burigatto, our Director of External Communications, 856-342-3737. This concludes today's call. Thanks.