Good day, ladies and gentlemen, and welcome to Campbell’s Fourth Quarter and Full Year Fiscal 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, today’s conference call is being recorded. I would now like to turn the conference call over to Ken Gosnell, Vice President, Finance Strategy and Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Welcome to Campbell’s fourth quarter and full year fiscal 2019 earnings call. As usual, we’ve created slides to accompany our earnings presentation. You will find these slides posted on our website this morning at investor.campbellsoupcompany.com. This call is open to the media who’ll participate in a listen-only mode. Turning to slide two. Today, we will make forward-looking statements, which reflect our current expectations. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to slide two or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in forward-looking statements. Because we use non-GAAP measures, we have provided a reconciliation of these measures to the most directly comparable GAAP measure, which is included in the appendix of this presentation. Additionally, concurrently with the filling of our 10-K in few weeks, we plan to file an 8-K which will recast historical quarterly and full year unaudited financial information, reflecting the discontinued operations as well as certain non-GAAP financial measures reconciled to the GAAP presentation. On slide three, you can see the agenda we will cover today. With us on the call today are Mark Clouse, Campbell’s President and CEO; and Anthony DiSilvestro, Chief Financial Officer. Mark will share his thoughts on our performance in the quarter, our progress in fiscal 2019 against our strategic initiatives and provide his perspective on our outlook for fiscal '20. Then, Anthony will walk through the financial details, as well as our guidance for fiscal 2020. With that, let me turn the call over to Mark.

Thanks, Ken. Good morning, everyone, and thanks for joining us today. This morning, I will make high level comments about our combined results for ease of comparison to our most recently provided sales and earnings guidance. Anthony will bridge the various components of our results, including both continuing and discontinued operations, given the sale of Campbell Fresh and the pending divestitures of the Campbell International businesses. I’m pleased to say that in the fourth quarter, we continued to do what we said we would. This quarter showed meaningful improvement in our performance sequentially and versus a year ago, across many measures. Additionally, Q4 completes a fiscal year where we’ve made material progress on our strategic plan across the business. First and foremost, it starts with our performance. We are delivering results that are aligned with or exceeding our expectations, which is a critical first step in our journey to sustainable, profitable growth. We have demonstrated improved operating discipline, and this marks the fourth consecutive quarter this year that we have met or exceeded our own financial goals. It also marks the first quarter we delivered topline, gross margin and EPS growth in the year. Definitely a great way to finish. Second, we are well on our way to completing the divestitures of the noncore businesses we identified last year. Shutting the underperforming fresh businesses that added complexity to the portfolio and working toward closing on the two transactions related to Campbell International, both of which are expected to close in the first half of fiscal '20. This will do two critical things: it will improve our balance sheet and better focus the business. In total, we expect net proceeds of approximately $3 billion from these transactions, which will be used to significantly reduce our debt. Finally, we’ve also developed a…

Thanks, Mark. Before getting into the details, I’ll make a few comments on our performance in the quarter. Overall, we had a good quarter with results exceeding our expectations. We are pleased with improving trends and our gross margin performance as we benefited from costs and productivity savings as well as from net price realization. Our cost savings program continued good progress as we achieved $45 million in savings in the quarter from continuing operations, bringing the year-to-date total to $165 million and the program-to-date total to $560 million. We are pleased with the progress on our divestiture program, having recently announced agreement to sell the Campbell International businesses. Completing the divestiture program will enable us to focus on our core North America market. And with anticipated proceeds of approximately $3 billion, we will significantly reduce our debt level. Lastly, as we announced this morning, we are providing our 2020 guidance for continuing operations. As we discussed at our Investor Day in June, we expect stable performance in 2020 as we make the investments necessary to achieve long-term growth. I’ll now review our detailed results. In my discussion, I’ll focus primarily on the results for continuing operations. However, as we did last quarter, we will provide combined results, consistent with the basis of our previous guidance. In this case, we will combine the results of continuing operations and the results of Campbell International. I’ll start with continuing operations. For the fourth quarter, net sales on an as reported basis increased 2% to approximately $1.8 billion. Organic sales also increased 2% with gains in Snacks, as well as in Meals & Beverages. Adjusted EBIT of $252 million increased 1% as sales gains and gross margin improvement were partly offset by higher marketing and selling expenses. Adjusted EPS from continuing operations increased…

Thanks, Anthony. We’ll be happy to take your questions. Candice, let’s open the lines and take our first question.

Thank you. [Operator Instructions] And our first question comes from Andrew Lazar from Barclays. Your line is now open.

Good morning, everybody. And Anthony, all the best going forward, thanks for your help over the years. Just, two quick things. One would be, Mark, I realize fiscal '20 is not yet the year where you have everything firing in terms of reframing the soup category. Perhaps you could run through maybe just sort of top two or three things in that core soup business that we should be focused on really in order to monitor the progress as we go through sort of the coming soup season. Maybe those key benchmarks or metrics that we can sort of focus on, again to monitor the progress. And then, just second, as we think through the relationship between inflation and productivity and such, it seems like you’re looking for, I would assume a productivity and maybe some incremental pricing to about help offset what you expect inflation to be. Is it right to think that that leaves the cost and synergy savings really as the -- what’s -- what you have as flexibility to reinvest behind the business this coming year, kind of that $140 million bucket and such? Thanks so much.

Yes. Thanks, Andrew. Well, let me start with the soup question first. And maybe, it’ll be helpful to give a little bit of context on what we’re seeing in the marketplace right now, and then how that kind of bleeds into the 2020 assumptions. So, on the positive side, a couple of things that we’re finding are very helpful. And it was great to see -- albeit the summer and the fourth quarter, it was great to see growth on soup. It’s the first time in quite a number of years that we’ve been able to drive growth on the business. And I think, if you look under what’s really driving that, I think, there’s three things. The first is, the power of partnering again with our retailers to really collaborate with them on creating a vision and direction for the category and for the business. And I think, in many ways that is translating into a far better performance and market better merchandising, better reflection of our innovation that we do have, and a good understanding of the right merchandising and pricing combination. I think, the other thing that’s been very effective has been the almost relaunch of Well Yes! behind the convenience platform. In the fourth quarter that business was up 34% and added 0.3 of a share point. And so, although we’re light on innovation, as we’ve said in the past, I think, the things that we are doing are working well. And so, I would expect those positive drivers to carry forward into the 2020 season with the addition of a couple meaningful adds to that. So, our marketing and the strength of both the investment levels, as well as the quality of that communication, I’m very excited about, as well as the investment and quality,…

Andrew, thanks for the comment. I think the way to think about it is, on our $140 million of cost savings, think of about half of that going into costs and the other half going into marketing and SG&A. So, within gross margin, that combination of cost savings and productivity savings should be ahead of inflation. So, it gives us some slight improvement in gross margin percentage. And then, that will provide the fuel to reinvest back into the marketing line as we go into 2020.

Yes. I just would say, Andrew, as you think about that though, one of the things we’ve tried to do in this plan is, there’s a little bit in my mind, I would say, flexibility that we want relative to pricing and making sure that our price gaps remain within the targets that we want them. So, I think we’ve -- as you’ll note from how we’ve laid out guidance, we stopped short of guiding directly to gross margin because I do think we want a little bit of that flexibility. But, I think, the general balance of investment, as it relates to inflation and productivity, as Anthony laid out, is right. All I would say is, I want to leave us a little bit of flexibility where that investment might land, depending on how we see the environment unfold. Does that make sense?

Thanks so much. It does, really appreciate the color.

Thank you. And our next question comes from Ken Goldman from JP Morgan. Your line is now open.

Hi. Thank you. And, Anthony, best of luck from me as well. Thanks for all of your help over the years. Mark, on slide 13, I think it is, you highlighted, I think 17% of the snacking business being non-core, and sort of broke out how you think about classifying some of those assets. History might suggest that when companies do this, sometimes the signal is that some of these businesses are being considered for divestiture. So, I wasn’t sure if that’s what you were implying by breaking it out and emphasizing it in this way. But, I kind of wanted to just get a little bit more color on what you were -- on the messaging from that slide.

Yes. Thanks, Ken. I think, the point of it was I do think it’s more about the 11%, which is the partner and allied brands. I know everybody’s familiar in general with what those are, but we haven’t talked a lot about it. And I think, as we’ve gone through it, we’ve now spent a year or so running it. We recognize the importance of that business. But, I also would say, there is a tremendous amount of complexity that’s inherent with that. If you think about the addition, as I said in my comments of almost 2,000 SKUs that we’re trying to manage, what I would tell you is there some really good parts of that business and there’s some other parts that are very low margin, adds a lot of complexity. And I think as we go forward and we really want to get this business set for the future, we’re going to balance that. So, focus on the parts of it that we really see is enhancing that efficiency and scale as it was originally set up to do. And there’s probably some parts of that that we’ll rationalize going forward. And I know, a lot of times as we reconcile the growth rate on Snacks, for example, in this particular quarter, our power brands on Snyder’s-Lance grew 3% in market, while the total Snyder’s-Lance business was up about 1.5% or so. And that difference I think is important just to understand that going forward, as I would expect that to continue going forward. The balance of the non-core businesses, which are primarily our Emerald nuts business and our Pop Secret business, are actually -- been pretty stable contributors. And right now, we’ll always kind of review the portfolio and look at the longer term desire to have the optimal mix. I think, right now, we’re feeling pretty good with that base business as we move forward, and we’ll continue to look at it. But more importantly for us I think and this messaging was really about understanding the partner and allied brands a little better.

Okay. Thank you for that. That’s helpful. And then, some of the efforts that you are making this year require a little bit of a buy-in, for lack of a better word, from your customers, right? Whether it comes to some on-shelf changes for where you’d like condensed to be placed or certain changes in RTS. And at the same time, I think by your own admission, there is a decent innovation slate coming, but most of it or the bigger one is coming next year. So, can you update us on sort of how your relationship is with those customers right now, and with all of those changes, and I guess I could mention sort of lifting some promotional prices as well? Right now, is everything going sort of swimmingly and as you expected or is there a little bit of pushback right now in the process?

I think, overall, it’s -- I would say it’s going very well. And in fact, I think, in many ways, is a little harder to quantify this as you get into the journey. But, the reality is, I think, in many ways, we’ve been absent from the dialogue strategically with our customers on the vision in the future for these businesses. And I think, as we’re getting back to the table, really rolling up our sleeves and starting to see investment come and a focus in a very different way, the receptiveness to work together has been very, very positive. And I think, a lot of times we’ve talked about the challenges in soup as a category. But remember, the significance of how big this category is and what it represents for center of store for most of the retailer universe, it’s critical that there is a vision and a plan for this. And so, as you look -- again, I get it, a summer quarter, but as you look at a quarter like Q4 where you see overall positive response, not just in our business, but also improvement in the overall category, it goes a long ways to keep people interested and engaged. Now, I will say, I think, as perhaps as appropriate, I think, a lot of the retail universe wants to see the results as I think all of us in the effectiveness of some of the programs and the plans we’re doing. But, as far as where we are in the journey right now and where we’ve come from, I really could not be more pleased with the receptiveness and the collaboration of our retail partners.

Thank you. And our next question comes from Bryan Spillane from Bank of America. Your line is now open.

Hey. Good morning, everybody. And all the best from me as well, Anthony. Thank you. So, I guess, first question, just -- Anthony, if you could just give us or let us know, net leverage on a pro forma basis. So, like once the proceeds are put to work, I’m getting around 3 times. Is that right?

Yes. Obviously, our target remains 3 times debt to EBITDA but we won’t quite get there with the current proceeds. We need a little more time with the base business generating positive cash flow. But, we will make a meaningful reduction when we get the proceeds in.

Okay. And then, I guess, Mark, as we’re thinking about that, you’re going to get closer to that target. How do you think about ongoing sort of returning cash to shareholders? Just the thoughts about dividend increases, or share repurchases, just how you kind of think about that going forward?

Yes. I mean, I think, as we get to more stable footing, we will continue to look at the best deployment of capital. And again, I think, all of those are areas that we will continue to explore and make sure that we’re trying to optimize value, while also -- again, I’ve said this before, although I think it will come in a very different context, perhaps than where we’ve been in the immediate past, but I do think there are going to likely be some opportunities for some tuck-in M&A as well. And as we go forward, we’ll begin to frame that in a little bit more clarity. But, I do think, I’d stop short to say right now what the priorities are. But, of course, our focus is going to be on maximizing shareholder value. And we’ll continue to look at all those options, and working with the Board to find the plans going forward. But certainly, it is good. And I think in many ways, as I think about '19, as we complete the year, I think one of the strongest elements of that -- of this year has been that we have taken a lot of that uncertainty for the business off the table. And so, whether that is the balance sheet, whether that is a much more diverse portfolio as it relates to International and the Fresh business, I think the good news for us is, our core business now and the predictability of it, relative to the variables that we’re controlling, I feel really good about that. And I think that I hope that will also be a strong statement for investors as well, as you’re thinking about how to view our business going forward. And although we’ve got some important proof points in '20 to deliver, taking some of that downside off the table, I think is a very good progress for us in a year that saw a lot of moving parts.

Okay. And if I can, just one last quick one, are there any stranded costs related to the divestitures that you’ll be absorbing this year that might go away next year?

Yes. And I think, we talked about this last quarter. There’s about $20 million with each business, both Campbell Fresh and Campbell International. I think, the way to think about it is that that becomes part of our addressable spend on the core, against which our cost savings program that’s going to address and get after.

Or said another way, Bryan, we contemplated to a certain degree those stranded costs as we went through the organizational redesign and restructure that we just rolled out a month ago. So, the progress to get there, but we certainly had visibility to that and thought about that and some of the design work we’ve been doing.

All right. Thanks for that. Have a great Labor Day.

Yes, you too, Bryan. Thanks.

Thank you. And our next question comes from Jason English from Goldman Sachs.

Hey. Good morning, folks. And Anthony, congrats on a great career at Campbell, and good luck on the next chapter. I’ve got a couple of questions. First, real quick, a housekeeping, kind of picking up where Mr. Spillane led us on the leverage. Can you give us your expectations for cash from operations in fiscal '20 and your best estimate of where you’re going to land from a leverage perspective by year-end?

So, a couple of comments to make on cash. We had a fantastic year this year on cash from operations and free cash flow. But, as you think about going forward, we don’t expect to be at the same level we are today. And first of all, two reasons. One is, Campbell Fresh was a positive cash flow generator; Campbell International was a positive cash flow generator. We won’t have those in the portfolio going forward. We had great progress on working capital this year. And so, although we expect to continue to reduce our working capital, probably not at the same pace that we did this year. So, that being said, we do expect to continue to generate significant positive cash from operations. That’s one of the attributes of this business. But, I don’t think we’re going to give you an exact number on that one. And in terms of the leverage ratio, I think, we’ll be meaningfully below 4 times debt-to-EBITDA by the end of 2020.

Yes. And is the unwillingness to kind of frame the cash flow a factor of just too many moving pieces right now? I guess, I’m a little confused on why the lack of clarity on that.

Yes. I mean, we’re still working through it, in terms of finalizing our 2020 expectations for cash flow. So, we just need to work through it ourselves first and foremost.

Okay. And the next question, coming back to soup. The last couple of years have been a bit anomalous just in terms of the cadence to your soup build because of the promotional support at retail, and historically, you’ve been much heavier shipping in the first quarter perhaps for soup season. With the improved relationships with retailers and the slightly more aggressive stance, should we expect this to be a more normalized year?

Yes. I think so, Jason. We’re watching closely. I mean, one of the things we are realizing though is that -- and even if you look at this last quarter, we’ve been kind of I would say running a bit in front of consumption with our net sales and our shipments. And part of that is a little bit of what we’re lapping from a year ago. But, it is also a little bit of the recognition that as we strengthen our merchandising programs, the inventory levels that retailers are needing to support that is a little bit higher than it might have been historically. But, I do expect as we get into '20 to have a more normalized year on that, you’ll always see a bit of inventory that’s going to build in front of the season just because of the step-up in display and merchandising. But, I do think, as we kind of manage through the year, I don’t think you’ll see quite the volatility up and down as we did in '19.

Thank you. And our next question comes from Chris Growe from Stifel. Your line is now open.

Hi. Good morning. And Anthony my best wishes to you as well. And thanks much for all your help over the years. I just wanted to ask a quick question if I could on Meals & Beverages. It’s a business that is stabilizing and you had a good fourth quarter performance, and that comes amidst, it seemed like little incremental spending this year. You talked about some of the factors that led to the better performance. But, I want to get a sense of -- given the success you’re seeing already and your desire to spend more aggressively in fiscal '20, do you expect that to really take a step forward in fiscal '20? And if I can relate to that, how much spending -- you talked about $70 million, if I recall, or so, at the Investor Day, does that -- all of that come through in fiscal '20 or is that going to spread over the future?

Yes. So, a couple of things just to ground back on the numbers. So, the $70 million we talked about was the soup investment. Overall, if you include the Snacks business and the broader Meals & Beverage business, it’s a bigger number. What we said was about a half -- about half of our cost savings target over the next couple of years is what we’ve carved out, if you will, as the investment dollars we’re planning. I do think you’ll see that a bit more frontloaded in 2020 as we talked about it, which is a little bit of why I think the calibration of a more neutral year is expected. On Meals & Beverage, I do think there continues to be some puts and takes. We are encouraged by the support that we’re seeing across the businesses. But, we do have some work, as we’ve said, to make sure that we’re doing the right things to set up the portfolio for the future, while getting that investment in place. And again, I do think an important aspect of this will be the contribution from innovation, which really is more of a '21 factor. I also think we’re trying to be a bit pragmatic in how we’re positioning expectations as we validate some of the work that we’re doing. And I think the good news is, if we’re successful, more comprehensively on many of these things, I do think you’ll see an improvement in that Meals & Beverage business as we go forward. And, I think, we will continue to update milestones along the way. But, certainly, seeing the performance on soup, seeing improvement in Prego and Pace, although V8 is still showing declines, I would tell you that the primary driver of that decline is Splash as we work through how we want to position that business for the future, which is including some rationalization on distribution and really trying to get that to a business that we think is the appropriate, manageable level, while we then pivot on support for the more plant-based messaging that we see on the core V8 business, as well as the V8 plus, which is energy and hydration, and our single-serve can business. So, again, I think, we’ve got really clear roadmaps now for these businesses. And I certainly hope that we continue to perform well. But, I do think, I want to be a bit balanced as we go forward until we validate some of this effort and some of the work. Does that make sense, Chris?

Yes, absolutely does. Yes. That makes a lot of sense. That was good color. And that’s what I was looking for. Thank you. I have just one other quick one behind that if I could, which is, there was a comment about over-delivering on the value capture. You also said, the integration was on track. Are you getting savings more quickly or more savings? So, just trying to get my head around what over-delivering means there?

Yes. I think, it’s really savings more quickly. So, I think we’ve been able to execute on a few initiatives ahead of Pace. I don’t think, it’s truly incremental to the program. But, I do think, -- we’re obviously continuing to keep that pressure on as we go into '20 to continue to try to move initiatives as fast as we can, as we want to unlock that and that’s the fuel for the investment that we need on the business. We’re pleased that we’re getting to it sooner. But, I would not say that we’re seeing it as truly incremental savings for the overall program.

Okay. That’s good color too. Thanks so much for your time. And have a great weekend. Thank you.

Thanks, Chris.

Thank you. And our last question comes from the line of Robert Moskow from Credit Suisse. Your line is now open.

Hi. Thanks. And best wishes to you, Anthony. Just a couple of clarifying things, Mark. The price adjustments that you’re making in soup, it sounds like there is several things. There are some deep discounts you want to walk away from, but then you’re -- are you also saying that there is going to be some items where you want to reduce price, to become more competitive? And then, secondly, on soup, can you give us a little more specifics on the quality improvements that you want to make and where you think there’s quality gaps versus competition?

Yes, great question. So, your depiction of the pricing is exactly right. So, to give you a little bit more color on that, I do think, especially as you look at our Chunky business, I would say we in the absence of some of the support in marketing, I think some of the promoted price points that we’ve seen are more aggressive than what I would say is appropriate and sustainable. I mean, one of the things that as I’ve said before that’s quite powerful about Chunky is the quality of that product and its ability to really be -- to beat essentially any of the other ready-to-eat soups, on a quality perspective. And so, when we’re dealing it so deep on price, I just don’t think that’s the right platform. Now, what we will try to do is balance a little bit of that with some frequency and then, of course, a much more robust marketing program around it. And I think though and as we’ve all seen this before, I also don’t want to overset those expectations, as I know there will be some perhaps short-term impact of that as we move off it. But, it’s absolutely the right thing to do to create the margin stability and really the positioning of the brand going forward. Conversely, I think if you look at broth where we’re seeing the greatest amount of competition, I think there, although I would not say we want to get deeper on promoted price points, I do think our frequency has opportunity to increase as we make sure that those price gaps, especially in critical parts of the season are more competitive. And so, I think on both the broth business and selectively on condensed where we still see a little bit of outlier…

It’s very helpful. And before I let you go here, you mentioned some flanker products in RTS and condensed that lost distribution. Is that new since the Analyst Day or was that already contemplated when we met?

It was already contemplated. But, I do think, as we start to try to help everybody see the detail of the soup results, because we’re all obviously going to be watching it very closely. What I’m really trying to do is make sure we’re really crystal clear on what the puts and takes are, and to a certain degree why are our expectations what they are. I do think, there are some elements within that distribution that again I do expect it to mitigate. And of course once we get the innovation going, that’s going to be a big help. But, I do think, there are some things within both of those businesses that I would expect to see, especially in the first half of the year.

Thank you. And that concludes our question-and-answer session. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone, have a great day.