CASE 4?4 Analysis of Investing Activities

Campbell Soup

a.Compute Campbell Soup?s working capital at the end of Year 11.

b.Campbell Soup reports net receivables totaling over $527 million.To whom has it extended credit and how much bad debt reserve is provided against these receivables? What percentage of total receivables is considered uncollectible?

c.What cost flow assumption does Campbell Soup use for inventories? What is its inventory write-down policy?

d.The inventory turnover ratio (cost of goods sold/average inventory) is a measure of inventory management efficiency and effectiveness.Compute the inventory turnover ratio for Campbell Soup and comment on ways that it might improve the ratio.

e.How much is the LIFO reserve for Campbell Soup? What are the total tax benefits realized by Campbell Soup as of the end of fiscal Year 11 because it chose the LIFO inventory cost flow assumption (assume a 35% tax rate)?

f.What would Campbell Soup?s pretax income have been in Year 11 if it had chosen FIFO?

g.What percentage of total assets is Campbell Soup?s investment in plant assets? What depreciation method does it use for fixed assets? What percentage of historical cost is the accumulated depreciation amount associated with these assets? What can the percentage depreciated calculation reveal to an analyst about fixed assets?

h.Campbell Soup reports intangible assets totaling about $436 million at the end of Year 11. What major transaction(s) gave rise to this amount?

CHECK (d) Inventory turnover, 5.37

(f) $672.4 mil.

\fSupplemental Schedule of Sales and Earnings (million dollars) Year II Year 10 Year 9 Sales Earnings Sales Earnings Sales Earnings 1 Contributions by division Campbell North America Campbell U.5.A. $3,911.8 $632.7 $3,932.7 $370.8 $3,666.9 $242.3 Campbell Canada 352.0 35.3 384.0 25.6 313.4 23.8 4,263.8 668.0 4,316.7 396.4 3,980.3 266.1 Campbell Biscuit and Bakery Pepperidge Farm 569.0 73.6 582.0 57.0 548.4 53.6 International Biscuit 219.4 17.6 195.3 8.9 178.0 11.7 788.4 91.2 777.3 65.9 726.4 65.3 Campbell International 1,222.9 39.4 1,189.8 (168.6) ,030.3 (117.8 Interdivision (71.0) (78.0) (64.9) Total sales $6,204.1 $6,205.8 $5,672.1 Total operating earnings 798.6 293.7 213.6 Unallocated corporate expenses (41.1) (16.5) (31.3 Interest, net (90.2) (94.0) (55.8 Foreign currency translation adjustments . 1 (3.8) (20.0 Taxes on earnings (265.9) (175.0) (93.4) Not earnings $401.5 $4.4 $13.1 Net earnings per share $.3.16 $.03 $.10 Contributions by division in Year 10 include the effects of divestitures, restructuring and unusual charges of $339.1 million as follows: Campbell U.S.A. $121.8 million, Campbell Canada $6 6 million, Pepperidge Farm $11.0 million, International Biscuit $143 million, and Campbell International $185.4 million. Contributions by division in Year 9 include the effects of restructuring and unusual charges of $343 0 million as follows Campbell U.SA. $183.1 million, Campbell Canada $6.0 million, Pepperidge Farm $71 million, International Biscuit 19.5 million, and Campbell International $1373 million.Consolidated Statements of Earnings (millions) Year 11 Year 10 Year 9 13 NET SALES $6,204.1 $6,205.8 $5,672.1 Costs and expenses 14 Cost of products sold 4,095.5 4,258.2 4,001.6 15 Marketing and selling expenses 956.2 980.5 818.8 16 Administrative expenses 306.7 290.7 252.1 Research and development expenses 56.3 53.7 47.7 18 Interest expense (Note 3) 116.2 111.6 94,1 19 Interest income (26.0) (17.6) (38.3 20 Foreign exchange losses, net (Note 4) .8 3.3 19.3 21 Other expense (Note 5) 26.2 14.7 32.4 22 Divestitures, restructuring and unusual charges (Note 6) 339.1 343.0 22A Total costs and expenses $5,531.9 $6,034.2 $5,570.7 23 Earnings before equity in earnings of affiliates and minority interests $ 672.2 $ 171.6 $ 101.4 24 Equity in earnings of affiliates 2.4 13.5 10.4 25 Minority interests (7.2) (5.7) (5.3 26 Earnings before taxes 667.4 179.4 106. 27 Taxes on earnings (Note 9) 265.9 175.0 93.4 28 Net earnings $ 401.5 4.4 $ 13.1 29 Not earnings per share (Note 22) S 3.16 S .10 30 Weighted average shares outstanding 127.0 129.6 129.3