Document







UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
_______________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended
May 1, 2016
Commission File Number
1-3822

CAMPBELL SOUP COMPANY 
New Jersey
21-0419870
State of Incorporation
I.R.S. Employer Identification No.

1 Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices

Telephone Number: (856) 342-4800


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. o Yes þ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes þ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller  reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

There were 308,647,031 shares of capital stock outstanding as of June 1, 2016.
 






TABLE OF CONTENTS

 
 
 
 
 
 
 
 


2





PART I

Item 1. Financial Information
CAMPBELL SOUP COMPANY
Consolidated Statements of Earnings
(unaudited)
(millions, except per share amounts)
 
 
Three Months Ended
 
Nine Months Ended
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
Net sales
$
1,870

 
$
1,900

 
$
6,274

 
$
6,389

Costs and expenses
 
 
 
 
 
 
 
Cost of products sold
1,210

 
1,218

 
4,040

 
4,169

Marketing and selling expenses
228

 
213

 
677

 
695

Administrative expenses
154

 
142

 
456

 
408

Research and development expenses
31

 
30

 
86

 
83

Other expenses / (income)
(23
)
 
3

 
(14
)
 
14

Restructuring charges
2

 
9

 
32

 
9

Total costs and expenses
1,602

 
1,615

 
5,277

 
5,378

Earnings before interest and taxes
268

 
285

 
997

 
1,011

Interest expense
29

 
29

 
86

 
81

Interest income
1

 
1

 
3

 
3

Earnings before taxes
240

 
257

 
914

 
933

Taxes on earnings
55

 
78

 
270

 
284

Net earnings
185

 
179

 
644

 
649

Less: Net earnings (loss) attributable to noncontrolling interests
—

 
—

 
—

 
—

Net earnings attributable to Campbell Soup Company
$
185

 
$
179

 
$
644

 
$
649

Per Share — Basic
 
 
 
 
 
 
 
Net earnings attributable to Campbell Soup Company
$
.60

 
$
.58

 
$
2.08

 
$
2.07

Dividends
$
.312

 
$
.312

 
$
.936

 
$
.936

Weighted average shares outstanding — basic
309

 
311

 
309

 
313

Per Share — Assuming Dilution
 
 
 
 
 
 
 
Net earnings attributable to Campbell Soup Company
$
.59

 
$
.57

 
$
2.07

 
$
2.07

Weighted average shares outstanding — assuming dilution
311

 
312

 
311

 
314

See accompanying Notes to Consolidated Financial Statements.



3





CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions)
 
Three Months Ended
 
May 1, 2016
 
May 3, 2015
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
185

 
 
 
 
 
$
179

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
101

 
$
(1
)
 
100

 
$
9

 
$
—

 
9

Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(25
)
 
7

 
(18
)
 
12

 
(5
)
 
7

Reclassification adjustment for (gains) losses included in net earnings
(3
)
 
1

 
(2
)
 
(1
)
 
—

 
(1
)
Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Reclassification of prior service credit included in net earnings
(1
)
 
—

 
(1
)
 
(1
)
 
—

 
(1
)
Other comprehensive income (loss)
$
72

 
$
7

 
79

 
$
19

 
$
(5
)
 
14

Total comprehensive income (loss)
 
 
 
 
$
264

 
 
 
 
 
$
193

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 
—

 
 
 
 
 
—

Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
264

 
 
 
 
 
$
193

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
May 1, 2016
 
May 3, 2015
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
644

 
 
 
 
 
$
649

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
58

 
$
—

 
58

 
$
(229
)
 
$
1

 
(228
)
Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during period
(35
)
 
11

 
(24
)
 
(21
)
 
8

 
(13
)
Reclassification adjustment for (gains) losses included in net earnings
(9
)
 
3

 
(6
)
 
—

 
—

 
—

Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Reclassification of prior service credit included in net earnings
(2
)
 
—

 
(2
)
 
(2
)
 
—

 
(2
)
Other comprehensive income (loss)
$
12

 
$
14

 
26

 
$
(252
)
 
$
9

 
(243
)
Total comprehensive income (loss)
 
 
 
 
$
670

 
 
 
 
 
$
406

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 
2

 
 
 
 
 
—

Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
668

 
 
 
 
 
$
406

See accompanying Notes to Consolidated Financial Statements.

4





CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts)
 
May 1,
2016
 
August 2,
2015
Current assets
 
 
 
Cash and cash equivalents
$
383

 
$
253

Accounts receivable, net
648

 
647

Inventories
829

 
995

Other current assets
182

 
198

Total current assets
2,042

 
2,093

Plant assets, net of depreciation
2,371

 
2,347

Goodwill
2,377

 
2,344

Other intangible assets, net of amortization
1,197

 
1,205

Other assets ($28 and $0 attributable to variable interest entity)
94

 
101

Total assets
$
8,081

 
$
8,090

Current liabilities
 
 
 
Short-term borrowings
$
1,134

 
$
1,543

Payable to suppliers and others
487

 
544

Accrued liabilities
602

 
589

Dividend payable
100

 
101

Accrued income taxes
54

 
29

Total current liabilities
2,377

 
2,806

Long-term debt
2,552

 
2,552

Deferred taxes
485

 
505

Other liabilities
993

 
850

Total liabilities
6,407

 
6,713

Commitments and contingencies

 

Campbell Soup Company shareholders' equity
 
 
 
Preferred stock; authorized 40 shares; none issued
—

 
—

Capital stock, $.0375 par value; authorized 560 shares; issued 323 shares
12

 
12

Additional paid-in capital
342

 
339

Earnings retained in the business
2,105

 
1,754

Capital stock in treasury, at cost
(639
)
 
(556
)
Accumulated other comprehensive loss
(144
)
 
(168
)
Total Campbell Soup Company shareholders' equity
1,676

 
1,381

Noncontrolling interests
(2
)
 
(4
)
Total equity
1,674

 
1,377

Total liabilities and equity
$
8,081

 
$
8,090

See accompanying Notes to Consolidated Financial Statements.


5





CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
 
Nine Months Ended
 
May 1,
2016
 
May 3,
2015
Cash flows from operating activities:
 
 
 
Net earnings
$
644

 
$
649

Adjustments to reconcile net earnings to operating cash flow
 
 
 
Restructuring charges
32

 
9

Stock-based compensation
50

 
46

Pension and postretirement benefit expense
167

 
9

Depreciation and amortization
228

 
223

Deferred income taxes
4

 
28

Other, net
2

 
15

Changes in working capital
 
 
 
Accounts receivable
5

 
19

Inventories
172

 
109

Prepaid assets
7

 
11

Accounts payable and accrued liabilities
(87
)
 
(110
)
Receipts from hedging activities
5

 
11

Other
(46
)
 
(48
)
Net cash provided by operating activities
1,183

 
971

Cash flows from investing activities:
 
 
 
Purchases of plant assets
(225
)
 
(242
)
Sales of plant assets
5

 
9

Other, net
(14
)
 
(7
)
Net cash used in investing activities
(234
)
 
(240
)
Cash flows from financing activities:
 
 
 
Net short-term repayments
(425
)
 
(233
)
Long-term borrowings
—

 
300

Repayments of notes payable
—

 
(300
)
Dividends paid
(294
)
 
(297
)
Treasury stock purchases
(118
)
 
(192
)
Treasury stock issuances
2

 
9

Excess tax benefits on stock-based compensation
7

 
5

Other, net
—

 
(3
)
Net cash used in financing activities
(828
)
 
(711
)
Effect of exchange rate changes on cash
9

 
(22
)
Net change in cash and cash equivalents
130

 
(2
)
Cash and cash equivalents — beginning of period
253

 
232

Cash and cash equivalents — end of period
$
383

 
$
230

See accompanying Notes to Consolidated Financial Statements.

6





CAMPBELL SOUP COMPANY
Consolidated Statements of Equity
(unaudited)
(millions, except per share amounts)
 
Campbell Soup Company Shareholders’ Equity
 
 
 
 
 
Capital Stock
 
Additional Paid-in
Capital
 
Earnings Retained in the
Business
 
Accumulated Other Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
 
 
Issued
 
In Treasury
 
 
 
 
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at August 3, 2014
323

 
$
12

 
(10
)
 
$
(356
)
 
$
330

 
$
1,483

 
$
145

 
$
(12
)
 
$
1,602

Net earnings (loss)

 

 

 

 

 
649

 

 
—

 
649

Other comprehensive income (loss)

 

 

 

 

 

 
(243
)
 
—

 
(243
)
Dividends ($.936 per share)

 

 

 

 

 
(295
)
 

 

 
(295
)
Treasury stock purchased

 

 
(4
)
 
(192
)
 

 

 

 

 
(192
)
Treasury stock issued under management incentive and stock option plans
 
 
 
 
2

 
41

 
1

 
 
 
 
 
 
 
42

Balance at May 3, 2015
323

 
$
12

 
(12
)
 
$
(507
)
 
$
331

 
$
1,837

 
$
(98
)
 
$
(12
)
 
$
1,563

Balance at August 2, 2015
323

 
$
12

 
(13
)
 
$
(556
)
 
$
339

 
$
1,754

 
$
(168
)
 
$
(4
)
 
$
1,377

Net earnings (loss)

 

 

 

 

 
644

 

 
—

 
644

Other comprehensive income (loss)

 

 

 

 

 

 
24

 
2

 
26

Dividends ($.936 per share)

 

 

 

 

 
(293
)
 

 

 
(293
)
Treasury stock purchased

 

 
(2
)
 
(118
)
 

 

 

 

 
(118
)
Treasury stock issued under management incentive and stock option plans


 


 
1

 
35

 
3

 


 


 

 
38

Balance at May 1, 2016
323

 
$
12

 
(14
)
 
$
(639
)
 
$
342

 
$
2,105

 
$
(144
)
 
$
(2
)
 
$
1,674

See accompanying Notes to Consolidated Financial Statements.

7





Notes to Consolidated Financial Statements
(unaudited)
(currency in millions, except per share amounts)
1.
Basis of Presentation and Significant Accounting Policies
In this Form 10-Q, unless otherwise stated, the terms “we,” “us,” “our” and the “company” refer to Campbell Soup Company and its consolidated subsidiaries.
The consolidated financial statements include our accounts and entities in which we maintain a controlling financial interest and a variable interest entity (VIE) for which we are the primary beneficiary. Intercompany transactions are eliminated in consolidation.
The financial statements reflect all adjustments which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. The accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our Annual Report on Form 10-K for the year ended August 2, 2015, with the exception of the changes in accounting policy related to our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets as described below. As of the beginning of 2016, we are managing our operations under a new structure and have modified our segment reporting accordingly. Certain amounts in prior-year financial statements were reclassified to conform to the current-year presentation. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. Our fiscal year ends on the Sunday nearest July 31.
In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets. Historically, actuarial gains and losses associated with benefit obligations were recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and were amortized into earnings over the remaining service life of participants to the extent that the amounts were in excess of a corridor. Under the new policy, actuarial gains and losses will be recognized immediately in our Consolidated Statements of Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required. In addition, we no longer use a market-related value of plan assets, which is an average value, to determine the expected return on assets but rather will use the fair value of plan assets. We believe the new policies will provide greater transparency to ongoing operating results and better reflect the impact of current market conditions on the obligations and assets.
The changes in policy were applied retrospectively to all periods presented. As of August 4, 2014, the cumulative effect of these changes on the opening balance sheet was a $715 decrease to Earnings retained in the business, a decrease of $2 to Inventories, a $714 reduction to Accumulated other comprehensive loss, and an increase of $1 to Other current assets.
In 2016 and 2015, we recognized mark-to-market losses as certain U.S. plans were remeasured. In 2016, the remeasurements were required due to a high level of lump sum payments to certain vested plan participants arising primarily out of a limited-time offer to accept a single lump sum in lieu of future annuity payments. In the third quarter of 2016, we recognized mark-to-market losses of $54 ($34 after tax, or $.11 per share). Year-to-date, we recognized mark-to-market losses of $175 ($110 after tax, or $.35 per share). In 2015, the remeasurements were required due to the impact of a voluntary employee separation program. In the third quarter and year-to-date period of 2015, we recognized losses of $26 ($16 after tax, or $.05 per share).

8





The impacts of the changes in policy to the consolidated financial statements are summarized below:
 
 
Three months ended May 1, 2016
 
Three months ended May 3, 2015
Consolidated Statements of Earnings
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Cost of products sold
 
$
1,195

 
$
15

 
$
1,210

 
$
1,218

 
$
—

 
$
1,218

Marketing and selling expenses
 
223

 
5

 
228

 
213

 
—

 
213

Administrative expenses
 
151

 
3

 
154

 
141

 
1

 
142

Research and development expenses
 
30

 
1

 
31

 
29

 
1

 
30

Earnings before interest and taxes
 
292

 
(24
)
 
268

 
287

 
(2
)
 
285

Earnings before taxes
 
264

 
(24
)
 
240

 
259

 
(2
)
 
257

Taxes on earnings
 
63

 
(8
)
 
55

 
77

 
1

 
78

Net earnings
 
201

 
(16
)
 
185

 
182

 
(3
)
 
179

Net earnings attributable to Campbell Soup Company
 
$
201

 
$
(16
)
 
$
185

 
$
182

 
$
(3
)
 
$
179

Earnings per share — Basic
 
$
.65

 
$
(.05
)
 
$
.60

 
$
.59

 
$
(.01
)
 
$
.58

Earnings per share — Diluted (1)
 
$
.65

 
$
(.05
)
 
$
.59

 
$
.58

 
$
(.01
)
 
$
.57

 
 
Nine months ended May 1, 2016
 
Nine months ended May 3, 2015
Consolidated Statements of Earnings
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Cost of products sold
 
$
4,011

 
$
29

 
$
4,040

 
$
4,196

 
$
(27
)
 
$
4,169

Marketing and selling expenses
 
672

 
5

 
677

 
702

 
(7
)
 
695

Administrative expenses
 
454

 
2

 
456

 
416

 
(8
)
 
408

Research and development expenses
 
85

 
1

 
86

 
85

 
(2
)
 
83

Earnings before interest and taxes
 
1,034

 
(37
)
 
997

 
967

 
44

 
1,011

Earnings before taxes
 
951

 
(37
)
 
914

 
889

 
44

 
933

Taxes on earnings
 
281

 
(11
)
 
270

 
266

 
18

 
284

Net earnings
 
670

 
(26
)
 
644

 
623

 
26

 
649

Net earnings attributable to Campbell Soup Company
 
$
670

 
$
(26
)
 
$
644

 
$
623

 
$
26

 
$
649

Earnings per share - Basic (1)
 
$
2.17

 
$
(.08
)
 
$
2.08

 
$
1.99

 
$
.08

 
$
2.07

Earnings per share - Diluted (1)
 
$
2.15

 
$
(.08
)
 
$
2.07

 
$
1.98

 
$
.08

 
$
2.07

________________________________________________________ 
(1) The sum of the individual per share amounts may not add due to rounding.
 
 
Three months ended May 1, 2016
 
Three months ended May 3, 2015
Consolidated Statements of Comprehensive Income
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
$
101

 
$
—

 
$
101

 
$
12

 
$
(3
)
 
$
9

Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 

Net actuarial gain (loss) arising during the period
 
(68
)
 
68

 
—

 
(4
)
 
4

 
—

Reclassification of net actuarial loss included in net earnings
 
35

 
(35
)
 
—

 
24

 
(24
)
 
—

Tax benefit / (expense)
 
$
12

 
$
(12
)
 
$
—

 
$
(7
)
 
$
7

 
$
—


9





 
 
Nine months ended May 1, 2016
 
Nine months ended May 3, 2015
Consolidated Statements of Comprehensive Income
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Foreign currency translation:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
$
58

 
$
—

 
$
58

 
$
(238
)
 
$
9

 
$
(229
)
Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during the period
 
(181
)
 
181

 
—

 
13

 
(13
)
 
—

Reclassification of net actuarial loss included in net earnings
 
144

 
(144
)
 
—

 
72

 
(72
)
 
—

Tax benefit / (expense)
 
$
14

 
$
(14
)
 
$
—

 
$
(29
)
 
$
29

 
$
—

 
 
May 1, 2016
 
August 2, 2015
Consolidated Balance Sheets
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Inventories
 
$
827

 
$
2

 
$
829

 
$
993

 
$
2

 
$
995

Other current assets
 
183

 
(1
)
 
182

 
199

 
(1
)
 
198

Accrued income taxes
 
51

 
3

 
54

 
29

 
—

 
29

Earnings retained in the business
 
2,871

 
(766
)
 
2,105

 
2,494

 
(740
)
 
1,754

Accumulated other comprehensive (loss) income
 
$
(908
)
 
$
764

 
$
(144
)
 
$
(909
)
 
$
741

 
$
(168
)
 
 
Nine months ended May 1, 2016
 
Nine months ended May 3, 2015
Consolidated Statements of Cash Flows
 
Prior Accounting Principles
 
Effect of Accounting Change
 
As Reported
 
Previously Reported
 
Effect of Accounting Change
 
Recast
Cash flow from operating activities:
 
 
 
 
 
 
 
 
 
 
 

Net earnings
 
$
670

 
$
(26
)
 
$
644

 
$
623

 
$
26

 
$
649

Pension and postretirement benefit expense / (income)
 
—

 
167

 
167

 
—

 
9

 
9

Deferred income taxes
 
18

 
(14
)
 
4

 
12

 
16

 
28

Other, net
 
132

 
(130
)
 
2

 
69

 
(54
)
 
15

Inventories
 
172

 
—

 
172

 
108

 
1

 
109

Accounts payable and accrued liabilities
 
(90
)
 
3

 
(87
)
 
(112
)
 
2

 
(110
)
Net cash provided by operating activities
 
$
1,183

 
$
—

 
$
1,183

 
$
971

 
$
—

 
$
971

2.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued revised guidance on the recognition of revenue from contracts with customers. The guidance is designed to create greater comparability for financial statement users across industries and jurisdictions. The guidance also requires enhanced disclosures. The guidance was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. In July 2015, the FASB decided to delay the effective date of the new revenue guidance by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Entities will be permitted to adopt the new revenue standard early, but not before the original effective date. The guidance permits the use of either a full retrospective or modified retrospective transition method. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements, as well as which transition method we will use.
In April 2015, the FASB issued guidance that requires debt issuance costs to be presented in the balance sheet as a reduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The guidance must be applied on a retrospective basis and is effective for fiscal years beginning after December 15, 2015, and interim periods within those years. Early adoption is permitted. We do not expect the adoption to have a material impact on our consolidated financial statements.
In April 2015, the FASB issued guidance to clarify the accounting for fees paid by a customer in a cloud computing arrangement. The guidance is effective for fiscal years beginning on or after December 15, 2015, and interim periods within those years. Early

10





adoption is permitted. The new guidance should be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. We will adopt the guidance prospectively. We do not expect the adoption to have a material impact on our consolidated financial statements.
In September 2015, the FASB issued guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments for business combinations. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The guidance is effective for fiscal years beginning on or after December 15, 2015, and interim periods within those years and should be applied prospectively to measurement period adjustments that occur after the effective date. We will prospectively apply the guidance to applicable transactions.
In November 2015, the FASB issued guidance that amends the balance sheet classification of deferred taxes. The new guidance requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. Previous guidance required deferred tax liabilities and assets to be separated into current and noncurrent amounts on the balance sheet. The guidance is effective for fiscal years beginning on or after December 15, 2016, and interim periods within those years. Early adoption is permitted as of the beginning of an interim or annual reporting period. As of May 1, 2016, the balance of current deferred tax assets was $104. We will adopt the guidance as of July 31, 2016.
In January 2016, the FASB issued guidance that amends the recognition and measurement of financial instruments. The changes primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, equity investments in unconsolidated entities that are not accounted for under the equity method will generally be measured at fair value through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The guidance is effective for fiscal years beginning on or after December 15, 2017, and interim periods within those years. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
In February 2016, the FASB issued guidance that amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities for most leases but will recognize expenses similar to current lease accounting. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
In March 2016, the FASB issued guidance that amends accounting for share-based payments, including the accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.
3.
Acquisitions
On June 29, 2015, we completed the acquisition of the assets of Garden Fresh Gourmet for $232. Garden Fresh Gourmet is a provider of refrigerated salsa, hummus, dips and tortilla chips. It is included in the Campbell Fresh segment.
For the three- and nine-month periods ended May 1, 2016, Garden Fresh Gourmet contributed $25 and $76, respectively, to Net sales. Its contribution to Net earnings was not material.
The following unaudited summary information is presented on a consolidated pro forma basis as if the Garden Fresh Gourmet acquisition had occurred on July 29, 2013:
 
Three Months Ended
 
Nine Months Ended
 
May 3, 2015
 
May 3, 2015
Net sales
$
1,925

 
$
6,462

Net earnings attributable to Campbell Soup Company
$
180

 
$
651

Net earnings per share attributable to Campbell Soup Company - assuming dilution
$
.58

 
$
2.07

The pro forma amounts include additional interest expense on the debt issued to finance the purchase, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and plant assets, and related tax effects. The pro forma results are not necessarily indicative of the combined results had the Garden Fresh Gourmet acquisition been completed on July 29, 2013, nor are they indicative of future combined results.

11





4.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) consisted of the following:
 
 
Foreign Currency Translation Adjustments(1)
 
Gains (Losses) on Cash Flow Hedges(2)
 
Pension and Postretirement Benefit Adjustments(3)
 
Total Accumulated Comprehensive Income (Loss)
Balance at August 2, 2015
 
$
(166
)
 
$
(5
)
 
$
3

 
$
(168
)
Other comprehensive income (loss) before reclassifications
 
56

 
(24
)
 
—

 
32

Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
(6
)
 
(2
)
 
(8
)
Net current-period other comprehensive income (loss)
 
56

 
(30
)
 
(2
)
 
24

Balance at May 1, 2016
 
$
(110
)
 
$
(35
)
 
$
1

 
$
(144
)
_____________________________________
(1) 
Included a tax expense of $6 as of May 1, 2016, and August 2, 2015.
(2) 
Included a tax benefit of $19 as of May 1, 2016, and $5 as of August 2, 2015.
(3) 
Included a tax expense of $1 as of May 1, 2016, and August 2, 2015.
Amounts related to noncontrolling interests were not material.
The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following:
 
 
Three Months Ended
 
Nine Months Ended
 
 
Details about Accumulated Other Comprehensive Income (Loss) Components
 
May 1, 2016
 
May 3, 2015
 
May 1, 2016
 
May 3, 2015
 
Location of (Gain) Loss Recognized in Earnings
(Gains) losses on cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
$
(4
)
 
$
(2
)
 
$
(10
)
 
$
(2
)
 
Cost of products sold
Foreign exchange forward contracts
 
—

 
—

 
(2
)
 
(1
)
 
Other expenses / (income)
Forward starting interest rate swaps
 
1

 
1

 
3

 
3

 
Interest expense
Total before tax
 
(3
)
 
(1
)
 
(9
)
 
—

 
 
Tax expense (benefit)
 
1

 
—

 
3

 
—

 
 
(Gain) loss, net of tax
 
$
(2
)
 
$
(1
)
 
$
(6
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Pension and postretirement benefit adjustments:
 
 
 
 
 
 
 
 
 
 
Prior service credit
 
$
(1
)
 
$
(1
)
 
$
(2
)
 
$
(2
)
 
(1) 
Tax expense (benefit)
 
—

 
—

 
—

 
—

 
 
(Gain) loss, net of tax
 
$
(1
)
 
$
(1
)
 
$
(2
)
 
$
(2
)
 
 
_____________________________________
(1) 
This is included in the components of net periodic benefit costs (see Note 9 for additional details).
5.
Goodwill and Intangible Assets
Goodwill
The following table shows the changes in the carrying amount of goodwill by business segment:
 
Americas    
Simple
Meals and Beverages
 
Global
Biscuits
and
Snacks
 
Campbell Fresh
 
Total    
Balance at August 2, 2015
$
775

 
$
732

 
$
837

 
$
2,344

Foreign currency translation adjustment
4

 
29

 
—

 
33

Balance at May 1, 2016
$
779

 
$
761

 
$
837

 
$
2,377


12





Intangible Assets
The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:
Intangible Assets
 
May 1,
2016
 
August 2,
2015
Amortizable intangible assets
 
 
 
 
Customer relationships
 
$
223

 
$
222

Technology
 
40

 
40

Other
 
35

 
35

Total gross amortizable intangible assets
 
$
298

 
$
297

Accumulated amortization
 
(67
)
 
(52
)
Total net amortizable intangible assets
 
$
231

 
$
245

Non-amortizable intangible assets
 
 
 
 
Trademarks
 
966

 
960

Total net intangible assets
 
$
1,197

 
$
1,205

Non-amortizable intangible assets consist of trademarks, which include Bolthouse Farms, Pace, Plum, Kjeldsens, Garden Fresh Gourmet and Royal Dansk. Other amortizable intangible assets consist of recipes, patents, trademarks and distributor relationships.
Amortization of intangible assets was $15 and $13 for the nine-month periods ended May 1, 2016, and May 3, 2015, respectively. Amortization expense for the next 5 years is estimated to be $20 in the fiscal periods 2016 and 2017, and $15 in 2018 through 2020. Asset useful lives range from 5 to 20 years.
6.
Business and Geographic Segment Information
Through the fourth quarter of 2015, we reported the results of our operations in the following reportable segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and Bolthouse and Foodservice. As of the beginning of 2016, we are managing our businesses in three divisions focused mainly on product categories. The new divisions, which represent our operating and reportable segments, are as follows:
•
Americas Simple Meals and Beverages segment includes the retail and food service channel businesses in the U.S., Canada and Latin America. The segment includes the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; Plum food and snacks; V8 juices and beverages; and Campbell’s tomato juice.
•
Global Biscuits and Snacks segment includes Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and Kelsen cookies globally. The segment also includes the simple meals and shelf-stable beverages business in Australia and Asia Pacific.
•
Campbell Fresh includes Bolthouse Farms fresh carrots, carrot ingredients, refrigerated beverages and refrigerated salad dressings; Garden Fresh Gourmet salsa, hummus, dips and tortilla chips, which was acquired in June 2015; and the U.S. refrigerated soup business.
We evaluate segment performance before interest, taxes and costs associated with restructuring activities. Unrealized gains and losses on commodity hedging activities are excluded from segment operating earnings and are recorded in Corporate as these open positions represent hedges of future purchases. Upon closing of the contracts, the realized gain or loss is transferred to segment operating earnings, which allows the segments to reflect the economic effects of the hedge without exposure to quarterly volatility of unrealized gains and losses. In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets as discussed in Note 1. In 2016, we also modified our method of allocating pension and postretirement benefit costs to segments. Through 2015, we included all components of benefit expense in measuring segment performance. In 2016, only service cost is allocated to segments. All other components of expense, including interest cost, expected return on assets, and recognized actuarial gains and losses, are reflected in Corporate and not included in segment operating results. Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.
Segment results have been adjusted retrospectively to reflect these revisions.

13





 
 
Three Months Ended
 
Nine Months Ended
 
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
Net sales
 
 
 
 
 
 
 
 
Americas Simple Meals and Beverages
 
$
999

 
$
1,030

 
$
3,538

 
$
3,641

Global Biscuits and Snacks
 
608

 
623

 
1,942

 
2,014

Campbell Fresh
 
263

 
247

 
794

 
734

Total
 
$
1,870

 
$
1,900

 
$
6,274

 
$
6,389

 
 
Three Months Ended
 
Nine Months Ended
 
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
Earnings before interest and taxes
 
 
 
 
 
 
 
 
Americas Simple Meals and Beverages
 
$
225

 
$
223

 
$
878

 
$
765

Global Biscuits and Snacks
 
86

 
93

 
341

 
306

Campbell Fresh
 
13

 
18

 
52

 
40

Corporate(1)
 
(54
)
 
(40
)
 
(242
)
 
(91
)
Restructuring charges(2)
 
(2
)
 
(9
)
 
(32
)
 
(9
)
Total
 
$
268

 
$
285

 
$
997

 
$
1,011

_______________________________________
(1) 
Represents unallocated items. Costs of $54 and $175 related to pension mark-to-market adjustments (see Note 1 for additional information) and costs of $13 and $35 related to the implementation of our new organizational structure and cost savings initiatives (see Note 7 for additional information) were included in the three- and nine-month periods ended May 1, 2016, respectively. A gain of $25 from a settlement of a claim related to the Kelsen acquisition was also included in the three- and nine-month periods ended May 1, 2016. Costs of $26 related to pension and postretirement mark-to-market adjustments (see Note 1 for additional information) and costs of $9 related to the implementation of our new organizational structure and cost savings initiatives (see Note 7 for additional information) were included in the three- and nine-month periods ended May 3, 2015.
(2) 
See Note 7 for additional information.
Our global net sales based on product categories are as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
Net sales
 
 
 
 
 
 
 
 
Soup
 
$
575

 
$
602

 
$
2,253

 
$
2,361

Baked snacks
 
584

 
587

 
1,886

 
1,919

Other simple meals
 
424

 
409

 
1,300

 
1,251

Beverages
 
287

 
302

 
835

 
858

Total
 
$
1,870

 
$
1,900

 
$
6,274

 
$
6,389

Soup includes various soup, broths and stock products. Baked snacks include cookies, crackers, biscuits and other baked products. Other simple meals include sauces, carrot products, refrigerated salad dressings, refrigerated salsa, hummus, dips and Plum foods and snacks.
7.
Restructuring Charges and Cost Savings Initiatives
2015 Initiatives
On January 29, 2015, we announced plans to implement a new enterprise design focused mainly on product categories. Under the new design, which we fully implemented at the beginning of 2016, our businesses are organized in the following divisions: Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.
In support of the new enterprise design, we designed and implemented a new Integrated Global Services (IGS) organization to deliver shared services across the company. IGS, which became effective at the beginning of 2016, is expected to reduce costs

14





while increasing our efficiency and effectiveness. We also streamlined our organizational structure. We are pursuing other initiatives to reduce costs and increase effectiveness, such as adopting zero-based budgeting over time.
As part of these initiatives, we commenced a voluntary employee separation program available to certain U.S.-based salaried employees nearing retirement who met age, length-of-service and business unit/function criteria. A total of 471 employees elected the program. The electing employees remained with us through at least July 31, 2015, with some remaining beyond July 31. We also implemented an initiative to reduce overhead across the organization by eliminating approximately 245 positions. In the three- and nine-month periods ended May 1, 2016, we recorded a restructuring charge of $2 and $35, respectively, related to these initiatives. In 2015, we recorded a restructuring charge of $102 related to these initiatives. Of the amounts recorded in 2015, $9 was recorded in the nine-month period ended May 3, 2015.
In the three- and nine-month periods ended May 1, 2016, we also incurred charges of $13 and $35, respectively, recorded in Administrative expenses related to the implementation of the new organizational structure and cost savings initiatives. In 2015, we incurred charges of $22 recorded in Administrative expenses related to the these initiatives. Of the amounts recorded in 2015, $9 was recorded in the nine-month period ended May 3, 2015.
In the three- and nine-month periods ended May 1, 2016, the aggregate after-tax impact of restructuring charges, implementation costs and other related costs recorded was $9, or $.03 per share, and $44, or $.14 per share, respectively. In the three- and nine-month periods ended May 3, 2015, the aggregate after-tax impact of restructuring charges and implementation costs was $11, or $.04 per share. The aggregate after-tax impact of restructuring charges and implementation and other costs recorded in 2015 was $78, or $.25 per share. A summary of the pre-tax costs associated with the 2015 initiatives is as follows:
 
Recognized
as of
May 1, 2016
Severance pay and benefits
$
128

Implementation costs and other related costs
66

Total
$
194

The total estimated pre-tax costs for the 2015 initiatives are approximately $250 to $325. We expect to incur these costs through 2018.
We expect the costs to consist of approximately $150 to $165 in severance pay and benefits, and approximately $100 to $160 in implementation costs and other related costs.We expect the total pre-tax costs related to the 2015 initiatives will be associated with segments as follows: Americas Simple Meals and Beverages - approximately 31%; Global Biscuits and Snacks - approximately 35%; Campbell Fresh - approximately 3%; and Corporate - approximately 31%.
A summary of the restructuring activity and related reserves associated with the 2015 initiatives at May 1, 2016, is as follows:
 
Severance Pay and Benefits
 
Other Restructuring Costs
 
Implementation Costs and Other Related Costs(3)
 
Total Charges
Accrued balance at August 2, 2015(1)
$
85

 
$
8

 
 
 
 
2016 charges
34

 
1

 
35

 
$
70

2016 cash payments
(31
)
 
(9
)
 
 
 
 
Accrued balance at May 1, 2016(2)
$
88

 
$
—

 
 
 
 
______________________________________
(1) 
Includes $45 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
(2) 
Includes $37 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.
(3)  
Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses in the Consolidated Statements of Earnings.

15





Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs associated with segments is as follows:
 
May 1, 2016
 
Three Months Ended
 
Nine Months Ended
 
Costs Incurred to Date
Americas Simple Meals and Beverages
$
1

 
$
17

 
$
71

Global Biscuits and Snacks
3

 
23

 
67

Campbell Fresh
—

 
—

 
1

Corporate
11

 
30

 
55

Total
$
15

 
$
70

 
$
194

2014 Initiatives
In the nine-month period ended May 1, 2016, we recorded a reduction to restructuring charges of $3 ($2 after tax, or $.01 per share) related to the fiscal 2014 initiative to improve supply chain efficiency in Australia. As of January 31, 2016, we incurred substantially all of the costs related to the 2014 initiatives.
A summary of the pre-tax costs associated with the 2014 initiatives is as follows:
 
Total Program(1)
 
Change in Estimate
 
Recognized as of May 1, 2016
Severance pay and benefits
$
41

 
$
(3
)
 
$
38

Asset impairment
12

 
—

 
12

Other exit costs
1

 
—

 
1

Total
$
54

 
$
(3
)
 
$
51

______________________________________
(1) 
Recognized as of August 2, 2015.
8.
Earnings per Share
For the periods presented in the Consolidated Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution include the incremental effect of stock options and other share-based payment awards, except when such effect would be antidilutive. There were no antidilutive stock options for the three-month period ended May 1, 2016. The earnings per share calculation for the nine-month period ended May 1, 2016, excludes 474 thousand stock options that would have been antidilutive. There were no antidilutive stock options for the three- and nine-month periods ended May 3, 2015.
9.
Pension and Postretirement Benefits
We sponsor certain defined benefit pension and postretirement plans for employees. In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets. Historically, actuarial gains and losses associated with benefit obligations were recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and were amortized into earnings over the remaining service life of participants to the extent that the amounts were in excess of a corridor. Under the new policy, gains and losses will be recognized immediately in our Consolidated Statements of Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required. In addition, we no longer use a market-related value of plan assets, which is an average value, to determine the expected return on assets but rather will use the fair value of plan assets. We believe the new policies will provide greater transparency to ongoing operating results and better reflect the impact of current market conditions on the obligations and assets.
The changes in policy were applied retrospectively to all periods presented. See Note 1 for additional information on the change in accounting method.

16





Components of net benefit expense (income) were as follows:
 
Three Months Ended
 
Nine Months Ended
 
Pension
 
Postretirement
 
Pension
 
Postretirement
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
 
May 1,
2016
 
May 3,
2015
Service cost
$
6

 
$
8

 
$
—

 
$
1

 
$
20

 
$
22

 
$
1

 
$
2

Interest cost
24

 
26

 
4

 
3

 
74

 
79

 
12

 
11

Expected return on plan assets
(36
)
 
(43
)
 
—

 
—

 
(111
)
 
(130
)
 
—

 
—

Amortization of prior service costs
(1
)
 
(1
)
 
—

 
—

 
(1
)
 
(1
)
 
(1
)
 
(1
)
Recognized net actuarial (gain)/loss
61

 
5

 
—

 
22

 
173

 
5

 
—

 
22

Curtailment loss
—

 
1

 
—

 
6

 
—

 
1

 
—

 
6

Net periodic benefit expense (income)
$
54

 
$
(4
)
 
$
4

 
$
32

 
$
155

 
$
(24
)
 
$
12

 
$
40

The recognized net actuarial loss in 2016 resulted from the quarterly remeasurement of certain U.S. plans. The remeasurement was required due to a high level of lump sum payments to certain vested plan participants arising primarily out of a limited-time offer to accept a single lump sum in lieu of future annuity payments. The curtailment loss and recognized net actuarial loss in 2015 were related to a voluntary employee separation program. The curtailment loss was included in Restructuring charges. See also Note 7.
We do not expect contributions to pension plans to be material in 2016.
10.
Financial Instruments
The principal market risks to which we are exposed are changes in foreign currency exchange rates, interest rates, and commodity prices. In addition, we are exposed to equity price changes related to certain deferred compensation obligations. In order to manage these exposures, we follow established risk management policies and procedures, including the use of derivative contracts such as swaps, options, forwards and commodity futures. We enter into these derivative contracts for periods consistent with the related underlying exposures, and the contracts do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments. Our derivative programs include instruments that qualify and others that do not qualify for hedge accounting treatment.
Concentration of Credit Risk
We are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate counterparty credit risk, we enter into contracts only with carefully selected, leading, credit-worthy financial institutions, and distribute contracts among several financial institutions to reduce the concentration of credit risk. We do not have credit-risk-related contingent features in our derivative instruments as of May 1, 2016.
We are also exposed to credit risk from our customers. During 2015, our largest customer accounted for approximately 20% of consolidated net sales.
We closely monitor credit risk associated with counterparties and customers.

17





Foreign Currency Exchange Risk
We are exposed to foreign currency exchange risk related to our international operations, including non-functional currency intercompany debt and net investments in subsidiaries. We are also exposed to foreign exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. Principal currencies hedged include the Canadian dollar, Australian dollar and U.S. dollar. We utilize foreign exchange forward purchase and sale contracts, as well as cross-currency swaps, to hedge these exposures. The contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge portions of our forecasted foreign currency transaction exposure with foreign exchange forward contracts for periods typically up to 18 months. To hedge currency exposures related to intercompany debt, we enter into foreign exchange forward purchase and sale contracts, as well as cross-currency swap contracts, for periods consistent with the underlying debt. As of May 1, 2016, all existing cross-currency swap contracts will be settled by year end. The notional amount of foreign exchange forward contracts accounted for as cash-flow hedges was $71 at May 1, 2016, and $53 at August 2, 2015. The effective portion of the changes in fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the Consolidated Statements of Earnings on the same line item and the same period in which the underlying hedged transaction affects earnings. The notional amount of foreign exchange forward and cross-currency swap contracts that are not designated as accounting hedges was $464 and $480 at May 1, 2016, and August 2, 2015, respectively.
Interest Rate Risk
We manage our exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines. Receive fixed rate/pay variable rate interest rate swaps are accounted for as fair-value hedges. We manage our exposure to interest rate volatility on future debt issuances by entering into forward starting interest rate swaps to lock in the rate on the interest payments related to the anticipated debt issuances. These pay fixed rate/receive variable rate forward starting interest rate swaps are accounted for as cash-flow hedges. The effective portion of the changes in fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the Consolidated Statements of Earnings over the life of the debt. The notional amount of outstanding forward starting interest rate swaps totaled $300 at May 1, 2016, and August 2, 2015, which relates to an anticipated debt issuance in 2018.
Commodity Price Risk
We principally use a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, diesel fuel, soybean oil, natural gas, aluminum, cocoa, butter, corn and cheese, which impact the cost of raw materials. Commodity futures, options, and swap contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge a portion of commodity requirements for periods typically up to 18 months. There were no commodity contracts accounted for as cash-flow hedges as of May 1, 2016, or August 2, 2015. The notional amount of commodity contracts not designated as accounting hedges was $93 at May 1, 2016, and $95 at August 2, 2015.
Equity Price Risk
We enter into swap contracts which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of our capital stock, the total return of the Vanguard Institutional Index, and the total return of the Vanguard Total International Stock Index. Under these contracts, we pay variable interest rates and receive from the counterparty either the total return on our capital stock; the total return of the Standard & Poor's 500 Index, which is expected to approximate the total return of the Vanguard Institutional Index; or the total return of the iShares MSCI EAFE Index, which is expected to approximate the total return of the Vanguard Total International Stock Index. These contracts were not designated as hedges for accounting purposes. We enter into these contracts for periods typically not exceeding 12 months. The notional amount of the contracts as of May 1, 2016, and August 2, 2015, was $42 and $49, respectively.

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The following table summarizes the fair value of derivative instruments on a gross basis as recorded in the Consolidated Balance Sheets as of May 1, 2016, and August 2, 2015:
 
Balance Sheet Classification
 
May 1,
2016
 
August 2,
2015
Asset Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Other current assets
 
$
—

 
$
3

Total derivatives designated as hedges
 
 
$
—

 
$
3

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Other current assets
 
$
6

 
$
1

Cross-currency swap contracts
Other current a