Fourth-Quarter Sales Increased 7 Percent; Organic Sales Decreased 2 Percent
Fourth-Quarter Adjusted EPS from Continuing Operations Increased 14 Percent to $0.49
Full-Year Adjusted EBIT Increased 4 Percent
Full-Year Adjusted EPS from Continuing Operations Increased 2 Percent to $2.53
Fourth-Quarter and Full-Year Results Reflected the Benefit of One Additional Week in Fiscal 2014
Campbell Provides Fiscal 2015 Guidance
CAMDEN, N.J.–(BUSINESS WIRE)–Sep. 8, 2014– Campbell Soup Company (NYSE:CPB) today reported its fourth-quarter and full-year results for fiscal 2014.
Fourth-Quarter Overview
The company reported earnings from continuing operations for the quarter ended Aug. 3, 2014, of $137 million, or $0.43 per share, compared with earnings of $117 million, or $0.37 per share, in the prior year. In the fourth quarter of fiscal 2014, Campbell implemented initiatives to improve supply chain efficiency in Australia and reduce overhead across the organization. The company recorded pre-tax restructuring charges of $20 million ($14 million after tax or $0.04 per share) related to these initiatives. In addition, the company incurred pre-tax restructuring-related costs of $1 million associated with previously-announced initiatives. The company also recognized an additional pre-tax pension settlement charge of $4 million ($3 million after tax or $0.01 per share) associated with a U.S. pension plan. Excluding items impacting comparability in both periods, adjusted earnings from continuing operations increased 14 percent to $155 million, compared with $136 million in the prior-year quarter, and adjusted earnings per share from continuing operations increased 14 percent to $0.49, compared with $0.43 in the year-ago quarter. The quarter benefited from an additional week in fiscal 2014, which contributed an estimated $25 million to earnings from continuing operations and $0.08 to earnings per share from continuing operations. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.
Denise Morrison, Campbell’s President and Chief Executive Officer, said, “Our fiscal 2014 results were in line with our most recent guidance, including increases in net sales, adjusted EBIT and adjusted EPS.
“We continued to make progress in reshaping Campbell, although we recognize that it is taking longer than originally anticipated. The Kelsen Group acquisition expanded our baked snacks business to China and Hong Kong. Bolthouse Farms achieved strong top-line growth as we increased distribution and invested in advertising and consumer programs to build brand equity. We divested our European simple meals business to focus on faster-growing markets. This year, we made several strategic investments, funded in part by reduced overhead costs. We believe that the diversification of our portfolio and responsible cost management will change our growth trajectory over time.”
Morrison concluded, “Looking ahead, we plan to deliver modest growth in fiscal 2015, despite a consumer environment that is likely to remain challenging. As we announced at our July 21 Investor Day, we expect fiscal 2015 growth to be below our long-term targets for sales and earnings. We intend to make meaningful improvements in our core businesses and drive innovation across the company with the launch of more than 200 new products. We plan to deliver sales growth in U.S. Simple Meals, including U.S. Soup, and in Pepperidge Farm, by optimizing all the drivers of demand. We will execute our turnaround plans to strengthen U.S. Beverages and expect to stabilize sales in Australia, where we took further action in the fourth quarter to improve productivity. We are counting on continued growth in Bolthouse Farms, Kelsen Group and Plum, which have added more than $1 billion in sales in faster-growing categories. As always, we will be relentless in managing our costs and margins to improve profit performance. We’re confident that Campbell is on the right path, and we are committed to executing our strategy to deliver sustainable, profitable net sales growth.”
Fiscal 2015 Guidance for Continuing Operations
As shown in the table below, from the adjusted 52-week 2014 base, the company expects continuing operations to grow sales by 1 to 2 percent, adjusted EBIT to grow by 0 to 2 percent and adjusted EPS to grow by 0 to 2 percent, or $2.45 to $2.50 per share.
Continuing Operations
53rd Week
Fourth-Quarter Sales from Continuing Operations
For the fourth quarter, sales from continuing operations increased 7 percent to $1.852 billion. Organic sales decreased 2 percent. A breakdown of the change in sales follows:
Fourth-Quarter Financial Details – Continuing Operations
Full-Year Results from Continuing Operations
Earnings from continuing operations for the fiscal year were $737 million, or $2.33 per share, compared with earnings of $689 million, or $2.17 per share, in the prior year. Excluding items impacting comparability in both periods, adjusted earnings from continuing operations increased 2 percent to $800 million, compared with $786 million in the prior year, and adjusted earnings per share from continuing operations increased 2 percent to $2.53, compared with $2.48 in the year-ago period. As with the current quarter, the fiscal year benefited from the additional week, which contributed an estimated $25 million to earnings from continuing operations and $0.08 to earnings per share from continuing operations.
For the fiscal year, sales from continuing operations increased 3 percent to $8.268 billion. Organic sales declined 1 percent. A breakdown of the change in sales for the fiscal year is as follows:
Full-Year Financial Details – Continuing Operations
Summary of Fiscal 2014 Fourth-Quarter and Full-Year Results by Segment
U.S. Simple Meals
Sales for U.S. Simple Meals were $518 million for the fourth quarter, a 5 percent increase from a year ago. A breakdown of the change in sales follows:
U.S. Soup sales decreased 3 percent compared to the year-ago quarter. Declines in U.S. Soup sales included a 7 point decrease driven by movement in retailer inventory levels, particularly on condensed cooking soups and broth due to the later timing of the Easter holiday in the current year, offset by a 7 point increase from the benefit of the additional week. Including the benefit of the 53rd week and the offsetting inventory reductions, further details of the sales results include the following:
Sales of other simple meals increased 19 percent compared to the year-ago quarter, with the acquisition of Plum contributing 8 points of growth. Excluding the benefit of the acquisition and the additional week, sales increased 2 percent primarily driven by gains in “Campbell’s” dinner sauces and “Prego” pasta sauces.
U.S. Simple Meals operating earnings for the fourth quarter increased 4 percent to $114 million. The increase was primarily due to the additional week and lower administrative and marketing expenses, partly offset by the decline in U.S. Soup sales and a lower gross margin percentage.
For the fiscal year, sales for U.S. Simple Meals increased 3 percent to $2.944 billion. A breakdown of the change in sales follows:
U.S. Soup sales decreased 1 percent due to a decline of 5 percent in ready-to-serve soups and a decline of 1 percent in condensed soups, partly offset by a 9 percent gain in broth.
Sales of other simple meals increased 15 percent, including a 9 point contribution from the acquisition of Plum and gains in “Prego” pasta sauces and “Campbell’s” dinner sauces.
U.S. Simple Meals operating earnings were $714 million in the fiscal year, compared with $731 million in the year-ago period, a decrease of 2 percent. A lower gross margin percentage and expenses related to the November 2013 Plum recall were partly offset by lower administrative expenses, lower marketing expenses and the benefit of the additional week.
Global Baking and Snacking
Sales for Global Baking and Snacking were $628 million for the fourth quarter, an increase of 10 percent from a year ago. The acquisition of Kelsen Group contributed $32 million to sales. The increase in sales reflected the following factors:
Further details of sales results excluding the benefit of the additional week included the following:
Operating earnings for the quarter were $98 million, an increase of 17 percent over the year-ago period. The increase was primarily driven by lower administrative expenses and the benefit of the additional week, partly offset by a lower gross margin percentage. The increase reflected growth in Pepperidge Farm and the addition of Kelsen Group’s operating results. Earnings in Arnott’s were comparable to the prior-year quarter.
For the fiscal year, sales increased 7 percent to $2.440 billion. The acquisition of Kelsen Group contributed $193 million to sales growth. A breakdown of the change in sales follows:
Sales declines at Arnott’s in Australia were partly offset by sales growth in Pepperidge Farm and Indonesia.
Operating earnings in the fiscal year were $332 million, compared with $316 million in the prior year, an increase of 5 percent. The increase was primarily driven by lower administrative expenses, the acquisition of Kelsen Group, lower marketing expenses and the benefit of the additional week, partly offset by a lower gross margin percentage and the unfavorable impact of currency. The increase included growth in Pepperidge Farm and the addition of Kelsen Group’s operating results, partly offset by lower earnings in Arnott’s.
International Simple Meals and Beverages
Sales for International Simple Meals and Beverages were $188 million for the fourth quarter, an increase of 1 percent from a year ago. The sales increase reflected the following factors:
Further details of sales results, excluding the benefit of the additional week, included the following:
Operating earnings for the quarter were $21 million, compared with $14 million in the year-ago period. The increase in operating earnings was primarily due to a higher gross margin percentage and the benefit of the additional week.
For the fiscal year, sales were $780 million, a decrease of 10 percent. Sales were impacted by the following factors:
Sales declined in Latin America, Canada and the Asia Pacific region.
Operating earnings in the fiscal year were $106 million, compared with $108 million a year ago, a decrease of 2 percent. The decrease was primarily driven by volume declines and the unfavorable impact of currency, partly offset by lower administrative expenses, a higher gross margin percentage and lower selling expenses.
U.S. Beverages
Sales for U.S. Beverages were $184 million for the fourth quarter, an increase of 6 percent from a year ago. Sales were impacted by the following factors:
Excluding the additional week, declines in “V8 V-Fusion” beverages were partly offset by gains in “V8 Splash” beverages and “V8” vegetable juice.
Operating earnings for the quarter were $43 million, compared with $20 million in the year-ago period. The increase was primarily driven by lower administrative, selling and marketing expenses and the benefit of the additional week.
For the fiscal year, sales were $723 million, a decrease of 3 percent. A breakdown of the change in sales follows:
*Numbers do not add due to rounding
Operating earnings in the fiscal year increased 6 percent to $127 million, primarily driven by lower administrative and marketing expenses, partly offset by a lower gross margin percentage and volume declines.
Bolthouse and Foodservice
Sales for Bolthouse and Foodservice increased 11 percent for the quarter to $334 million. The sales increase reflected the following factors:
Excluding the benefit of the 53rd week, sales rose 3 percent driven by double-digit sales gains in Bolthouse Farms premium refrigerated beverages and salad dressings, partly offset by declines in North America Foodservice.
Operating earnings for the quarter were $29 million, a 16 percent increase over the year-ago period. The increase was primarily due to lower administrative expenses and the benefit of the additional week, partly offset by a lower gross margin percentage and higher marketing expenses.
For the fiscal year, sales increased 5 percent to $1.381 billion. The sales increase reflected the following factors:
Sales growth from Bolthouse Farms was partly offset by sales declines in North America Foodservice.
Operating earnings for the fiscal year were $117 million, compared with $116 million in the prior year, an increase of 1 percent. The increase was primarily due to lower administrative expenses, the increase in sales and the benefit of the 53rd week, partly offset by a lower gross margin percentage and increased marketing investment for Bolthouse Farms.
Unallocated Corporate Expenses
Unallocated corporate expenses for the quarter were $51 million, compared with $55 million a year ago. The current quarter included additional pension settlement charges of $4 million associated with a U.S. pension plan and $1 million of restructuring-related costs. The prior-year quarter included $10 million of restructuring-related costs. The balance of the change for the current quarter was primarily due to losses on open commodity hedges, mostly offset by lower incentive compensation costs. Unallocated corporate expenses for the fiscal year were $149 million, compared with $260 million in the prior year. The current year included pension settlement charges of $22 million associated with a U.S. pension plan, a $9 million loss on foreign exchange forward contracts related to the sale of the European simple meals business and $3 million of restructuring-related costs. The prior year included $91 million of restructuring-related costs and $10 million of transaction costs related to the Bolthouse Farms acquisition. The balance of the decrease for the fiscal year was primarily due to lower incentive compensation costs and gains on foreign exchange transactions.
Results from Discontinued Operations
The company completed the divestiture of its European simple meals business to CVC Capital Partners on Oct. 28, 2013. Results for the European simple meals business are reported as discontinued operations. For the fiscal year, earnings from discontinued operations were $81 million, or $0.26 per share. Excluding the impact of the gain on the sale of the European business, earnings from discontinued operations were $9 million, or $0.03 per share.
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.
Acquisition Dates
The company’s fiscal 2013 and fiscal 2014 results from continuing operations reflect the following acquisitions: Bolthouse Farms on Aug. 6, 2012; Plum on June 13, 2013; and Kelsen Group on Aug. 8, 2013.
Conference Call
Campbell will host a conference call to discuss these results on Sept. 8, 2014, at 8:30 a.m. Eastern Daylight Time. Participants may access the call at +1 (703) 639-1316. The conference ID is 1642451. 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 Sept. 22, 2014, at +1 (703) 925-2533. The access code is 1642451. 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, “Campbell’s” gravies, pasta, beans and dinner sauces, “Swanson” canned poultry and “Plum Organics” food and snacks.
Global Baking and Snacking aggregates the following: Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and Kelsen cookies globally.
International Simple Meals and Beverages aggregates the retail business in Canada and the simple meals and beverages business in Asia Pacific, Latin America and China.
U.S. Beverages includes the following products: “V8” juices and beverages and “Campbell’s” tomato juice.
Bolthouse and Foodservice comprises Bolthouse Farms carrot products, including fresh carrots, juice concentrate and fiber; Bolthouse Farms super-premium refrigerated beverages and refrigerated salad dressings; and the North America Foodservice business. The North America Foodservice business 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 (NYSE: CPB) makes real food that matters for life’s moments, from high-quality soups and simple meals to snacks and healthy beverages. For generations, people have trusted Campbell to provide authentic, flavorful and readily available foods and beverages that connect them to each other, to warm memories and to what’s important today. Led by its iconic “Campbell’s” brand, the company’s portfolio includes “Pepperidge Farm”, “Goldfish”, “Bolthouse Farms”, “V8”, “Swanson”, “Prego”, “Pace”, “Plum Organics”, “Arnott’s”, “Tim Tam”, “Royal Dansk” and “Kjeldsens”. Founded in 1869, Campbell has a heritage of giving back and acting as a good steward of the planet’s natural resources. The company 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 the company’s business or financial results, including its 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 impact of changes in consumer demand for the company’s products; (3) the risks associated with trade and consumer acceptance of the company’s initiatives; (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 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; (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.
PercentChange
Sales
Earnings
Reconciliation of GAAP to Non-GAAP Financial Measures
Fiscal Year Ended August 3, 2014
Organic Net Sales
July 28,2013
Net Sales,asreported
Impact ofCurrency
Impact ofAcquisitions
Impact ofNetAccounting
EstimatedImpact of53rd Week
OrganicNetSales
Net Sales,asReported
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:
Adjusted Base for Fiscal 2015 Guidance
Source: Campbell Soup Company
Campbell Soup CompanyCarla Burigatto (Media)856-342-3737[email protected]orJennifer Driscoll (Analysts/Investors)856-342-6081[email protected]