First-Quarter Sales Decreased 2 Percent
Organic Sales Decreased 4 Percent
Adjusted Earnings Before Interest and Taxes (EBIT) Decreased 20 Percent
Adjusted EPS from Continuing Operations Decreased 21 Percent to $0.66
Company Lowers Fiscal 2014 Sales, Adjusted EBIT and Adjusted EPS Guidance: Sets New Adjusted EPS Range of $2.53 to $2.58
CAMDEN, N.J.–(BUSINESS WIRE)–Nov. 19, 2013– Campbell Soup Company (NYSE:CPB) today reported its results for the first quarter of fiscal 2014.
First-Quarter Results Negatively Impacted by Several Factors
Denise Morrison, Campbell’s President and Chief Executive Officer, said, “I’m disappointed in Campbell’s first-quarter performance. We are confident in our plans to improve our performance in the remaining three quarters. Given our slow start to the year, we are lowering our fiscal 2014 guidance.
“While we anticipated a challenging first quarter, the impact from retailer inventory movements was greater than anticipated and accounted for more than half of the decline in organic sales. This was most acute in U.S. Soup, where retailer inventory movements lowered sales by approximately 4 percent, or two-thirds of the decline versus prior year. Significant shifts in our program timing and execution also pressured results, especially in U.S. Soup.
“As we stated in August, this year’s late Thanksgiving holiday is pushing shipments into the second quarter. We expect holiday timing to have a positive impact on our second-quarter results. The second quarter is off to a solid start, as we are seeing stronger shipments of soup, broth and stuffing.”
Morrison continued, “Another significant factor impacting our performance was our decision to front-load marketing spending in the first quarter to support new products in U.S. soup and simple meals and to invest in marketing our ‘Bolthouse Farms’ brand. Specifically, total advertising and consumer promotion expense increased 14 percent versus prior year.
“We continued to face challenges in U.S. Beverages and Australia, and we are implementing plans to improve the performance of these businesses. North America Foodservice performed as expected.
“I’m encouraged by the international expansion of our Global Baking and Snacking business with the acquisition of Kelsen Group, as well as the solid performance of Pepperidge Farm and strong growth in emerging markets.”
Morrison concluded, “Looking ahead, we have plans to drive meaningful growth across the business. We have a robust marketing program in the second and third quarters at the height of the soup season. We are accelerating innovation by moving up the launch of eight new soups. We expect strong performance from both Pepperidge Farm and Bolthouse Farms as we launch a stream of new products throughout the remainder of the year. Additionally, we will continue to take steps to increase productivity and reduce costs and reinvest these cost savings to drive growth. It will be a tougher road than we originally anticipated, but we believe the actions we are taking will strengthen our performance. We continue to believe that we are taking the right strategic steps to reshape Campbell and change our future growth trajectory.”
Results from Continuing Operations
The company reported earnings from continuing operations for the quarter ended Oct. 27, 2013, of $181 million, or $0.57 per share, compared with earnings of $232 million, or $0.73 per share, in the prior year. Fiscal 2014 results from continuing operations were negatively impacted by restructuring and restructuring-related costs and by tax expenses and foreign currency hedging costs associated with the divestiture of the company’s European simple meals business. Excluding items impacting comparability in both periods, adjusted earnings from continuing operations decreased 21 percent to $209 million compared with $266 million in the prior year’s quarter, and adjusted earnings per share from continuing operations decreased 21 percent to $0.66 compared with $0.84 in the year-ago quarter. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.
On Nov. 8, 2013, the company voluntarily recalled a range of Plum Organics pouch products. In the first quarter, the company recognized costs associated with the recall of $16 million, $11 million after tax, or $0.03 per share, in earnings from continuing operations.
For the first quarter, sales from continuing operations decreased 2 percent to $2.165 billion. Organic sales decreased by 4 percent. The organic sales performance was negatively impacted by movements in retailer inventory levels across several of the company’s businesses. The decrease in sales for the quarter reflected the following factors:
*Numbers do not add due to rounding
First-Quarter Financial Details – Continuing Operations
Campbell Lowers Fiscal 2014 Guidance for Continuing Operations
In recognition of the sales and profit performance versus expectation in the first quarter, but with confidence in the company’s ability to deliver considerably stronger results in the balance of the year, Campbell has lowered its fiscal 2014 guidance. In fiscal 2014, Campbell now expects continuing operations to grow sales by 4 to 5 percent, adjusted EBIT to grow by 4 to 6 percent and adjusted EPS to grow by 2 to 4 percent, or $2.53 to $2.58 per share. Fiscal 2014 guidance includes the benefits of a 53rd week and acquisitions, the estimated impact of currency translation and the impact of presenting revenue on a net basis in connection with the company’s new business model in Mexico.
Summary of Fiscal 2014 First-Quarter Results by Segment
U.S. Simple Meals
Sales for U.S. Simple Meals were $860 million for the first quarter, a decrease of 4 percent compared with the year-ago period. A breakdown of the change in sales follows:
U.S. Soup sales decreased 6 percent compared to the year-ago quarter. Across the U.S. Soup portfolio, sales were negatively impacted by movements in retailer inventory levels, which in aggregate reduced sales by approximately 4 percent.
Sales of U.S. Sauces increased 4 percent versus the prior-year quarter driven by the acquisition of Plum Organics. Excluding the acquisition, sales decreased by 4 percent.
U.S. Simple Meals operating earnings decreased 23 percent to $211 million. Operating earnings decreased primarily due to lower volumes, higher advertising expenses, expenses related to the Plum Organics recall and increased promotional spending, partly offset by productivity improvements and higher selling prices.
Global Baking and Snacking
Sales for Global Baking and Snacking were $609 million for the first quarter, an increase of 6 percent from a year ago. The acquisition of Kelsen Group contributed $52 million to sales growth. The increase in sales reflected the following factors:
Further details of sales results included the following:
Operating earnings for the quarter were $78 million, a decrease of 8 percent over the prior year. Operating earnings decreased primarily due to cost inflation and increased promotional spending, partly offset by higher selling prices. The operating earnings decline reflected lower earnings in Arnott’s and the unfavorable impact of currency, partly offset by gains in Pepperidge Farm.
International Simple Meals and Beverages
Sales for International Simple Meals and Beverages were $193 million for the first quarter, a decrease of 13 percent from a year ago. The sales decrease reflected the following factors:
Excluding the impact of currency and the net accounting impact associated with implementing the new business model in Mexico, sales decreased in Canada, Latin America and the Asia Pacific region.
Operating earnings were $20 million, a decrease of 39 percent. The decrease in operating earnings was primarily due to lower volumes, lower selling prices and increased promotional spending.
U.S. Beverages
Sales for U.S. Beverages were $173 million for the first quarter, a decrease of 8 percent compared to the year-ago period. A breakdown of the change in sales follows:
The decrease in sales was primarily due to declines in “V8 V-Fusion” beverages. Sales of “V8” vegetable juice and “V8 Splash” beverages also declined.
Operating earnings for the quarter were $24 million compared with $30 million in the prior year. The decrease in operating earnings was primarily due to lower volumes.
Bolthouse and Foodservice
Sales for Bolthouse and Foodservice were $330 million for the first quarter, an increase of 2 percent compared with a year ago. A breakdown of the change in sales follows:
Excluding the additional week from Bolthouse Farms, segment sales decreased 2 percent. North America Foodservice had volume declines in frozen soup, reflecting the loss of a major restaurant customer last year, while Bolthouse Farms sales were comparable to year ago as sales growth in premium refrigerated beverages and salad dressings were offset by declines in juice concentrates.
Operating earnings decreased by $5 million to $29 million. The decrease in operating earnings was primarily due to cost inflation and increased advertising for Bolthouse Farms, partly offset by sales associated with the extra week.
Restructuring Programs
In the first quarter of fiscal 2014, the company recorded restructuring charges of $20 million, $13 million after tax, or $0.04 per share, associated with initiatives to streamline its salaried workforce in North America and the Asia Pacific region. The company expects these actions to deliver annualized cost savings of approximately $40 million.
The company also recorded in the first quarter of fiscal 2014 restructuring charges of $1 million and restructuring-related costs of $2 million in unallocated corporate expenses for an aggregate impact of $3 million, $2 million after tax, or $0.01 per share, associated with fiscal 2013 initiatives. In the first quarter of fiscal 2013, the company recorded restructuring charges of $22 million and restructuring-related costs of $21 million in unallocated corporate expenses associated with the fiscal 2013 initiatives, an aggregate impact of $43 million, $27 million after tax, or $0.09 per share.
Unallocated Corporate Expenses
Unallocated corporate expenses for the quarter were $36 million compared with $66 million a year ago. The current quarter included $2 million of restructuring-related costs and a $9 million unrealized loss on foreign exchange forward contracts related to the sale of the European simple meals business. The prior-year quarter included $21 million of restructuring-related costs and $10 million of transaction costs related to the Bolthouse Farms acquisition. The balance of the decrease for the current quarter was primarily due to gains on foreign exchange transactions and on open commodity hedges.
Results from Discontinued Operations
The company completed the divestiture of its European simple meals business to CVC Capital Partners on Oct. 28, 2013, subsequent to the end of the first quarter. Results for the European simple meals business are reported as discontinued operations. The loss from discontinued operations for the first quarter was $9 million, or $0.03 per share, compared with earnings of $13 million, or $0.04 per share, in the prior year. The change in earnings was primarily due to costs associated with the divestiture, including additional tax expense related to the difference between the tax and book basis of the business. In the second quarter, the company anticipates recognizing a net gain of approximately $75 million after tax, or $0.24 per share, from the sale of the European simple meals business.
Combined Continuing and Discontinued Operations
Combining results of continuing and discontinued operations, the company reported net earnings of $172 million compared with $245 million in the prior year. Net earnings per share were $0.54 compared to $0.78 in the prior year.
Non-GAAP Financial Information
A detailed reconciliation of the reported financial information to the adjusted financial information is included at the end of this news release.
Conference Call
Campbell will host a conference call to discuss these results on Nov. 19, 2013, at 8:30 a.m. Eastern Standard Time. Participants may access the call at +1 (703) 639-1328. The conference ID is 1625872. Participants should call at least ten minutes prior to the starting time. The call will also be broadcast live over the Internet at investor.campbellsoupcompany.com and can be accessed by clicking on the “Webcast-Live” button. A recording of the call will be available approximately two hours after it is completed through midnight on Dec. 3, 2013, at +1 (703) 925-2533. The access code is 1625872. A recording of the call can also be accessed online by visiting investor.campbellsoupcompany.com and clicking on the “News & Events” button, followed by the “Webcasts & Presentations” button. To download the new Campbell investor relations app, which offers access to SEC documents, news releases, audiocasts and more, please visit the Apple App store to download on your iPhone or iPad, or Google Play for your Android mobile device.
Reporting Segments
Campbell Soup Company earnings results are reported for the following segments:
U.S. Simple Meals includes the following products: “Campbell’s” condensed and ready-to-serve soups, “Swanson” broth and stocks, “Prego” pasta sauces, “Pace” Mexican sauces, “Swanson” canned poultry, “Campbell’s” canned pasta, gravies, and beans, and “Plum Organics” food and snacks.
Global Baking and Snacking aggregates the following: “Pepperidge Farm” cookies, crackers, breads and frozen products in U.S. retail; “Arnott’s” biscuits in Australia and Asia Pacific; and “Kjeldsens” and “Royal Dansk” cookies in Asia, the U.S., Europe, the Middle East, South America and Africa.
International Simple Meals and Beverages aggregates the retail business in Canada with the rest of the international business in Asia Pacific, Latin America and China.
U.S. Beverages includes the following products: “V8” vegetable juices, “V8 V-Fusion” juices and juice beverages, “V8 Splash” juice beverages and “Campbell’s” tomato juice.
Bolthouse and Foodservice includes the Bolthouse Farms and North America Foodservice businesses. Bolthouse Farms consists of the following products: super-premium refrigerated beverages, refrigerated salad dressings and carrot products, including fresh carrots, juice concentrate and fiber. North America Foodservice encompasses the distribution of products such as soup, specialty entrees, beverage products, other prepared foods and “Pepperidge Farm” products through various food service channels in the United States and Canada.
About Campbell Soup Company
Campbell Soup Company is a manufacturer and marketer of high-quality foods and simple meals, including soup and sauces, snacks and healthy beverages. Founded in 1869, the company has a portfolio of market-leading brands, including “Campbell’s,” “Pepperidge Farm,” “Arnott’s,” “V8,” “Bolthouse Farms,” “Plum Organics” and “Kjeldsens.” Through its corporate social responsibility program, the company strives to make a positive impact in the workplace, in the marketplace and in the communities in which it operates. Campbell is a member of the Standard & Poor’s 500 and the Dow Jones Sustainability Indexes. For more information, visit www.campbellsoupcompany.com or follow company news on Twitter via @CampbellSoupCo.
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, particularly its predictions about future sales, EBIT and EPS in fiscal 2014. 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 impact of changes in consumer demand for the company’s products and consumer response to marketing and promotional programs; (3) the risks associated with trade and consumer acceptance of the company’s initiatives, including new and improved products; (4) the company’s ability to realize projected cost savings and benefits; (5) the company’s ability to manage changes to its business processes; (6) the practices, including changes to inventory practices, and increased significance of certain of the company’s key trade customers; (7) the impact of fluctuations in the supply or costs of energy and raw and packaging materials; (8) the impact of portfolio changes, including the Bolthouse Farms, Plum Organics and Kelsen Group acquisitions and the European simple meals divestiture; (9) the uncertainties of litigation; (10) the impact of changes in currency exchange rates, tax rates, interest rates, debt and equity markets, inflation rates, economic conditions and other external factors; (11) 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 (12) 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.
In fiscal 2014, the company recorded pre-tax restructuring charges of $20 ($13 after tax or $.04 per share in earnings from continuing operations) associated with initiatives to streamline its salaried workforce in North America and in the Asia Pacific region.
In fiscal 2013, the company implemented initiatives to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network; expand access to manufacturing and distribution capabilities in Mexico; improve its Pepperidge Farm bakery supply chain cost structure; and reduce overhead in North America. In the first quarter of fiscal 2014, the company recorded pre-tax restructuring charges of $1 and restructuring-related costs of $2 in Cost of products sold (aggregate impact of $2 after tax or $.01 per share on earnings from continuing operations) related to the initiatives. In the first quarter of fiscal 2013, the company recorded pre-tax restructuring charges of $22 and restructuring-related costs of $21 in Cost of products sold (aggregate impact of $27 after tax or $.09 per share on earnings from continuing operations).
On October 28, 2013, the company announced that it completed the sale of its simple meals business in Europe. The results of the business are reported as discontinued operations. In the first quarter of fiscal 2014, the company recorded an unrealized loss of $9 ($6 after tax or $.02 per share) on foreign exchange forward contracts used to hedge the proceeds from the sale of the European simple meals business. The loss was included in Other expenses in earnings from continuing operations. In addition, the company recorded tax expense of $7 ($.02 per share) in earnings from continuing operations associated with the sale of the business.
In fiscal 2013, the company recorded pre-tax transaction costs of $10 ($7 after tax or $.02 per share) associated with the acquisition of Bolthouse Farms, which closed on August 6, 2012. The costs were included in Other expenses in earnings from continuing operations.
PercentChange
Sales
Earnings
In fiscal 2013, the company implemented initiatives to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network; expand access to manufacturing and distribution capabilities in Mexico; improve its Pepperidge Farm bakery supply chain cost structure; and reduce overhead in North America. In the first quarter of fiscal 2014, the company recorded pre-tax restructuring charges of $1 and restructuring-related costs of $2 in Unallocated corporate expenses (aggregate impact of $2 after tax or $.01 per share on earnings from continuing operations) related to the initiatives. In the first quarter of fiscal 2013, the company recorded pre-tax restructuring charges of $22 and restructuring-related costs of $21 in Unallocated corporate expenses (aggregate impact of $27 after tax or $.09 per share on earnings from continuing operations).
On October 28, 2013, the company announced that it completed the sale of its simple meals business in Europe. The results of the business are reported as discontinued operations. In the first quarter of fiscal 2014, the company recorded an unrealized loss of $9 ($6 after tax or $.02 per share) on foreign exchange forward contracts used to hedge the proceeds from the sale of the European simple meals business. The loss was included in Unallocated corporate expenses in earnings from continuing operations. In addition, the company recorded tax expense of $7 ($.02 per share) in earnings from continuing operations associated with the sale of the business.
In fiscal 2013, the company recorded pre-tax transaction costs of $10 ($7 after tax or $.02 per share) associated with the acquisition of Bolthouse Farms, which closed on August 6, 2012. The costs were included in Unallocated corporate expenses in earnings from continuing operations.
On October 28, 2013, the company announced that it completed the sale of its European simple meals business. The assets and liabilities of the business were reported as assets and liabilities held for sale as of October 27, 2013.
Reconciliation of GAAP to Non-GAAP Financial MeasuresFirst Quarter Ended October 27, 2013
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.
Net Debt
The company believes that net debt is a non-GAAP measure that provides additional meaningful comparisons between the company’s financial position at October 27, 2013 and October 28, 2012, and also a useful perspective on the financial condition of the business. Interest income earned on cash and cash equivalents partially offsets interest expense on debt. Cash and cash equivalents are available to repay outstanding debt upon maturity.
The table below summarizes information on total debt and cash and cash equivalents:
Organic Net Sales
Organic net sales exclude the impact of acquisitions, currency and presenting revenue on a net basis in connection with a new business model in Mexico in fiscal 2014. The company believes that organic net sales improves the comparability of year-to-year results. A reconciliation of net sales as reported to organic net sales follows.
Items Impacting Gross Margin and Earnings
The company believes that financial information excluding certain transactions that are 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 excluding these transactions.
The following items impacted gross margin and/or earnings:
In fiscal 2013, the company implemented initiatives to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network; expand access to manufacturing and distribution capabilities in Mexico; improve its Pepperidge Farm bakery supply chain cost structure; and reduce overhead in North America. In the first quarter of fiscal 2014, the company recorded pre-tax restructuring charges of $1 million and restructuring-related costs of $2 million in Cost of products sold (aggregate impact of $2 million after tax or $.01 per share on earnings from continuing operations) related to the initiatives. In the first quarter of fiscal 2013, the company recorded pre-tax restructuring charges of $22 million and restructuring-related costs of $21 million in Cost of products sold (aggregate impact of $27 million after tax or $.09 per share on earnings from continuing operations). The aggregate impact of the restructuring initiatives on fiscal 2013 was pre-tax restructuring charges of $51 million and restructuring-related costs of $91 million in Cost of products sold (aggregate impact of $90 million after tax or $.28 per share on earnings from continuing operations).
The following tables reconcile financial information, presented in accordance with GAAP, to financial information excluding certain transactions:
Source: Campbell Soup Company
Campbell Soup CompanyCarla Burigatto (Media)856-342-3737[email protected]orJennifer Driscoll (Analysts/Investors)856-342-6081[email protected]
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