Net Earnings Per Share Increased 16 PercentCAMDEN, N.J., Feb 22, 2010 (BUSINESS WIRE) — Campbell Soup Company (NYSE: CPB) today reported its fiscal 2010 second-quarter results.
Second-Quarter Summary
Net earnings for the quarter ended Jan. 31, 2010 were $259 million compared with $233 million in the prior year, an increase of 11 percent. Net earnings per share were $0.74 in the current quarter compared with $0.64 in the prior period, an increase of 16 percent.
Douglas R. Conant, Campbell’s President and CEO, said, “In the quarter, we delivered good earnings growth driven mainly by overall strong cost management, productivity gains and favorable currency. In particular, our Baking and Snacking and International Soup, Sauces and Beverages segments improved their earnings performance.
“In U.S. Soup, Sauces and Beverages, earnings declined due to lower sales, particularly in ready-to-serve soup. Our condensed soup business, especially cooking varieties, and our broth business both delivered solid performance and remained well positioned in this economic environment. In the ready-to-serve business, our lower promotional spending and intense competitive activity in the broader simple meals category impacted our results. We have plans in place to drive improved performance in ready-to-serve soup in the second half.”
Conant concluded, “Looking ahead, we remain on track to deliver good bottom-line growth for the year supported by continued cost management and productivity gains. Based on our results through the first half and our plans for the remainder of the year, last week we reiterated our full-year guidance for adjusted net earnings per share growth and adjusted earnings growth before interest and taxes, despite more modest assumptions for sales growth.”
Fiscal 2010 Guidance
As announced last week, Campbell maintained its full-year guidance for adjusted earnings growth before interest and taxes (EBIT) of 6 to 7 percent and adjusted net earnings per share growth of 9 to 11 percent from the fiscal 2009 adjusted base of $2.21. The company revised its fiscal 2010 guidance for sales growth to 2.5 to 3.5 percent from the prior range of 4 to 5 percent.
This guidance includes the anticipated impact of currency translation. At quarter-end rates of exchange, the full-year impact of currency would be favorable by 3 to 4 percentage points.
Items impacting comparability and a detailed reconciliation of the adjusted fiscal 2009 financial information to the reported information are included at the end of this news release.
Second-Quarter Results
For the second quarter, sales increased 1 percent to $2.153 billion. The increase in sales reflected the following factors:
Second-Quarter Financial Details
First-Half Results
Net earnings for the first half were $563 million, or $1.61 per share, compared with $493 million, or $1.34 per share, in the year-ago period. Excluding items impacting comparability in the prior period, adjusted net earnings per share increased by 14 percent.
For the first half of fiscal 2010, sales were $4.356 billion, comparable to the year-ago period. Sales for the periodreflected the following factors:
First-Half Financial Details
Summary of Fiscal 2010 Second-Quarter and First-Half Results by Segment
U.S. Soup, Sauces and Beverages
Sales for U.S. Soup, Sauces and Beverages were $1.068 billion for the second quarter, a decrease of 5 percent compared to a year ago. The change in sales reflected the following factors:
U.S. soup sales for the quarter decreased 8 percent.
Sales results of this segment’s other businesses included:
Operating earnings were $259 million compared with $270 million in the prior-year period. The decrease in operating earnings was due to lower sales, partly offset by lower marketing expenses.
For the first half, U.S. Soup, Sauces and Beverages sales decreased 5 percent to $2.208 billion. A breakdown of the change in sales follows:
For the first half, U.S. soup sales declined 5 percent due to a 13-percent decrease in ready-to-serve soups, while sales of both condensed soup and broth were comparable with the prior year.
Operating earnings were $590 million compared with $584 million in the year-ago period. The increase in operating earnings was due to lower marketing expenses and an improvement in gross margin percentage, partially offset by lower sales.
Baking and Snacking
Sales for Baking and Snacking were $489 million in the second quarter, an increase of 11 percent from a year ago. A breakdown of the change in sales follows:
Further details of sales results included the following:
Operating earnings were $73 million compared with $53 million in the prior-year period. The prior-year quarter included $2 million in costs related to a restructuring program. The increase in operating earnings was due to the favorable impact of currency and margin growth in both Pepperidge Farm and Arnott’s.
For the first half, sales increased 7 percent to $1.019 billion. A breakdown in the change in sales follows:
Operating earnings were $173 million compared with $136 million in the year-ago period. The prior-year period included $2 million in costs related to a restructuring program. The increase in operating earnings was due to the favorable impact of currency and margin growth in both Pepperidge Farm and Arnott’s.
International Soup, Sauces and Beverages
Sales for International Soup, Sauces and Beverages were $437 million for the second quarter, an increase of 12 percent compared with a year ago. The change in sales reflected the following factors:
Operating earnings were $74 million compared with $50 million in the year-ago period. The increase in operating earnings was primarily due to margin growth in Europe and the favorable impact of currency.
For the first half, sales increased 5 percent to $811 million. A breakdown of the change in sales follows:
Excluding the impact of currency and divestitures, gains in Asia Pacific offset a decline in Europe.
Operating earnings were $118 million compared with $88 million in the year-ago period. The increase in operating earnings was primarily driven by the favorable impact of currency and growth in Europe.
North America Foodservice
Sales were $159 million for the second quarter, a decrease of 2 percent compared with a year ago. A breakdown of the change in sales follows:
Sales declined primarily due to continued weakness in the food service sector.
Operating earnings were $17 million compared with $10 million in the prior period. The prior-year quarter included $6 million in costs related to a restructuring program.
For the first half, sales were $318 million compared with $326 million in the year-ago period. A breakdown of the change in sales follows:
Operating earnings were $43 million compared with $21 million in the prior period. The prior-year period included $13 million in costsrelated to a restructuring program. The remaining increase in operating earnings was primarily due to an improved gross margin percentage, reflecting productivity improvements, including benefits of closing the company’s Listowel, Ontario, Canada plant, and lower administrative costs.
Unallocated Corporate Expenses
Unallocated corporate expenses increased to $32 million in the current quarter from $28 million a year ago. The increase was primarily due to higher employee benefit costs. Unallocated expenses for the first half were $55 million versus $75 million in the prior year. The decrease was due to $26 million of unrealized losses on commodity hedges included in the prior year, partly offset by higher employee benefit costs.
Non-GAAP Financial Information
A reconciliation of the adjusted fiscal 2009 financial information to the reported financial information is attached to this release.
Conference Call
The company will host a conference call to discuss these results on February 22, 2010 at 10:00 a.m. Eastern Standard Time. U.S. participants may access the call at 1-866-814-8470 and non-U.S. participants at 1-703-639-1369. Participants should call at least five minutes prior to the starting time. The passcode is “Campbell Soup” and the conference leader is Jennifer Driscoll. The call will also be broadcast live over the Internet at www.thecampbellscompany.com and can be accessed by clicking on the “Shareholder Event / Webcast” banner. A recording of the call will be available approximately two hours after it is completed through midnight March 8, 2010 at 1-888-266-2081 or 1-703-925-2533. The access code is 1435500.
Reporting Segments
Campbell Soup Company earnings results are reported for the following segments:
U.S. Soup, Sauces and Beverages includes the following retail businesses: “Campbell’s” brand condensed and ready-to-serve soups, “Swanson” broth, stock and canned poultry businesses, “Prego” pasta sauce, “Pace” Mexican sauce, “Campbell’s” canned pasta, gravies and beans, “V8” vegetable juices, “V8 V-Fusion” juices,“V8 Splash” juice beverages, “Campbell’s” tomato juice, and“Wolfgang Puck” soups, stocks and broths.
Baking and Snacking includes the following businesses: “Pepperidge Farm” cookies, crackers, breads and frozen products in U.S. retail, “Arnott’s” biscuits in Australia and Asia Pacific.
International Soup, Sauces and Beverages includes the soup, sauce and beverage businesses outside of the United States, including Europe, Mexico, Latin America, the Asia Pacific region,as well asthe emerging markets of Russia and China,and the retail business in Canada.
North America Foodservice includes the Away FromHome business in the U.S. and Canada.
About Campbell Soup Company
Campbell Soup Company is a global manufacturer and marketer of high-quality foods and simple meals, including soup, baked snacks, and healthy beverages. Founded in 1869, the company has a portfolio of market-leading brands, including “Campbell’s,” “Pepperidge Farm,” “Arnott’s,” and “V8.” For more information on the company, visit Campbell’s website at www.campbellsoup.com.
Forward-Looking Statements
This release contains “forward-looking statements” that reflect the company’s current expectations about the impact of its future plans and performance on sales, earnings, and margins. These forward-looking statements rely on a number of assumptions and estimates that could be inaccurate and which are subject to risks and uncertainties. The factors that could cause the company’s actual results to vary materially from those anticipated or expressed in any forward-looking statement include (1) the impact of strong competitive responses to the company’s efforts to leverage its brand power in the market; (2) the risks associated with trade and consumer acceptance of the company’s initiatives; (3) the company’s ability to realize projected cost savings and benefits; (4) the company’s ability to manage changes to its business processes; (5) the increased significance of certain of the company’s key trade customers; (6) the impact of fluctuations in the supply or costs of energy and raw and packaging materials; (7) the risks associated with portfolio changes; (8) the uncertainties of litigation; (9) the impact of changes in currency exchange rates, tax rates, interest rates, debt and equity markets, inflation rates, economic conditions and other external factors; (10) the impact of unforeseen business disruptions in one or more of the company’s markets due to political instability, civil disobedience, armed hostilities, natural disasters or other calamities; and (11) other factors described in the company’s most recent Form 10-K and subsequent Securities and Exchange Commission filings. The company disclaims any obligation or intent to update the forward-looking statements in order to reflect events or circumstances after the date of this release.
Weighted average shares outstanding
– assuming dilution
SIX MONTHS ENDED
THREE MONTHS ENDED
Sales
Earnings
Reconciliation of GAAP and Non-GAAP Financial Measures
Second Quarter Ended January 31, 2010
Campbell Soup Company uses certain non-GAAP financial measures as defined by the Securities and Exchange Commission in certain communications. These non-GAAP financial measures are measures of performance not defined by accounting principles generally accepted in the United States and should be considered in addition to, not in lieu of, GAAP reported measures.
Items Impacting Gross Margin and Earnings
The company believes that financial information excluding certain transactions not considered to be part of the ongoing business improves the comparability of year-to-year results. Consequently, the company believes that investors may be able to better understand its gross margin and earnings results if these transactions are excluded.
The following items impacted gross margin and/or earnings:
(1) In the first quarter of 2009, the company recognized in cost of products sold $26 million ($16 million after tax or $0.04 per share) of unrealized losses on the fair value of open commodity contracts. The aggregate full year fiscal 2009 impact from unrealized gains and losses on open commodity hedges was not material. During the first six months of fiscal 2010, unrealized gains and losses on commodity hedging were not material.
(2) In fiscal 2008, the company announced initiatives to improve operational efficiency and long-term profitability, including selling certain salty snack food brands and assets in Australia, closing certain production facilities in Australia and Canada, and streamlining the company’s management structure. In the second quarter of fiscal 2009, the company recorded expenses of $8 million ($5 million after tax or $0.01 per share) in cost of products sold related to these initiatives. The aggregate fiscal 2009 year-to-date impact was $15 million ($10 million after tax or $0.03 per share). For the full year ended August 2, 2009, the expense recorded in cost of products sold related to these initiatives was $22 million ($15 million after tax or $0.04 per share).
(3) In the second quarter of fiscal 2009, the company recorded a $4 million tax benefit ($0.01 per share) in discontinued operations related to the sale of the Godiva Chocolatier business.
(4) In the fourth quarter of fiscal 2009, as part of the company’s annual review of intangible assets, a non-cash impairment charge of $67 million ($47 million after tax or $0.13 per share) was recorded in Other expenses/(income) related to certain European trademarks, primarily in Germany and the Nordic region, used in the International Soup, Sauces and Beverages segment.
There were no items in fiscal 2010 that impacted comparability.
The tables below reconcile financial information, presented in accordance with GAAP, to financial information excluding certain transactions:
Second Quarter
SOURCE: Campbell Soup Company
Campbell Soup CompanyAnthony Sanzio (Media)856-968-4390orJennifer Driscoll (Analysts)856-342-6081