Earnings persistence Recasting and Adjusting General Adiusting Procedures All earnings components must be considered When a component is excluded from the period when reported, then 1. Shift it(net of tax) to the operating results of one or more prior periods, or 2. Spread (average)it over earnings for the period under analysis Note: Only spread items over prior earnings when they cannot be identified with specific periods
General Adjusting Procedures All earnings components must be considered When a component is excluded from the period when reported, then 1. Shift it (net of tax) to the operating results of one or more prior periods, or 2. Spread (average) it over earnings for the period under analysis Note: Only spread items over prior earnings when they cannot be identified with specific periods Earnings Persistence Recasting and Adjusting
Earnings persistence Recasting and Adjusting Specific (Ty pical) Adjusting Procedures Assign extraordinary and unusual items(net of tax) to applicable years Tax benefit of carryforwards normally moved to the loss year Costs or benefits from lawsuit settlements moved to relevant prior years Gains and losses from disposals of discontinued operations usually relate to operating results of several prior years Changes in accounting principles or estimates yield adjustments to all years under analysis to a comparable basis-redistribute"cumulative effect to the relevant prioryears Normally include items that increase or decrease equity
Specific (Typical) Adjusting Procedures • Assign extraordinary and unusual items (net of tax) to applicable years • Tax benefit of carryforwards normally moved to the loss year • Costs or benefits from lawsuit settlements moved to relevant prior years • Gains and losses from disposals of discontinued operations usually relate to operating results of several prior years • Changes in accounting principles or estimates yield adjustments to all years under analysis to a comparable basis—redistribute “cumulative effect” to the relevant prior years • Normally include items that increase or decrease equity Earnings Persistence Recasting and Adjusting
Earnings persistence Recasting and Adjusting Campbell Soup Company Adjusted Income Statements(s mil.) Year 11 Year 10 Year 9 Year 8 Year 7 year 6 Total Net income as reported$401.5$44$13.1$274.1$2473$2232$1,1636 Divestitures, restructuring unusual charges 339.1343.0 40.6 Tax effect of divestitures, restructuring, etc (139)(64.7)(139) Gain on sale of businesses (Yr 8)and sale of subsid iary (Yr 7), net of tax (3.1)(9.7) Loss on sale of exercise equipment subsidiary ANC transaction 4.5 LIFO liquidation gain 17)(28)(1.4) Cumulative effect of change in acctg for taxes (325) Adjusted net income$401.5$329.6$291.4$263.5$232.0$221.8 Total net income for the period $1,1636 Average earnings for the period $1939
Earnings Persistence Recasting and Adjusting Campbell Soup Company Adjusted Income Statements ($ mil.) Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Total Net income as reported $401.5 $ 4.4 $ 13.1 $ 274.1 $ 247.3 $223.2 $ 1,163.6 Divestitures, restructuring & unusual charges 339.1 343.0 40.6 Tax effect of divestitures, restructuring, etc. (13.9) (64.7) (13.9) Gain on sale of businesses (Yr 8) and sale of subsidiary (Yr 7), net of tax (3.1) (9.7) Loss on sale of exercise equipment subsidiary 1.7 ANC transaction (4.5) LIFO liquidation gain (1.7) (2.8) (1.4) Cumulative effect of change in acctg for taxes (32.5) Adjusted net income $ 401.5 $329.6 $291.4 $ 263.5 $ 232.0 $221.8 Total net income for the period $ 1,163.6 Average earnings for the period $ 193.9