CAMDEN, N.J.–(BUSINESS WIRE)–Feb. 17, 2006–Campbell Soup
Company (NYSE: CPB) today reported net earnings increased to $254
million in the second quarter ended January 29, 2006 from $235 million
in the prior year. Diluted earnings per share for the quarter were
$.61, compared with $.57 in the year-ago period. Beginning in fiscal
year 2006, the company adopted a new accounting standard (SFAS 123R)
that requires all stock-based compensation to be expensed. Had all
stock-based compensation been expensed in the year-ago quarter, net
earnings would have been $227 million and diluted earnings per share
would have been $.55. After factoring in this item, earnings per share
for the second quarter increased 11 percent.
For the second quarter, net sales rose 3 percent to $2,281
million, reflecting the following factors:
-- Volume and mix added 1 percent
-- Price and sales allowances added 4 percent
-- Currency subtracted 2 percent
The tax rate for the second quarter of fiscal year 2006 was 29.4
percent versus 31.7 percent in the prior-year quarter. The lower rate
for the quarter was the result of the resolution of the 1996-1999
federal income tax audit.
Net sales were $4,391 million for the first half of fiscal year
2006, an increase of 2 percent compared with the year-ago period,
reflecting the following factors:
-- Volume and mix subtracted 1 percent
-- Price and sales allowances added 3 percent
For the first half of fiscal year 2006, the company reported net
earnings of $556 million versus $465 million a year earlier and
earnings per share of $1.34 versus $1.13 in the year-ago period.
The comparability of net earnings and earnings per share for the
first six months was impacted by the following items:
-- During the first quarter, the company recorded a non-cash tax
benefit resulting from the favorable resolution of a U.S. tax
contingency related to transactions involving government
securities in a prior period. The aggregate non-cash impact of
the settlement on net earnings was $60 million, or $.14 per
share.
-- During the first quarter, the company finalized its plan to
repatriate earnings from non-U.S. subsidiaries under the
provisions of the American Jobs Creation Act, and as a result,
recorded incremental tax expense of $8 million, or $.02 per
share.
-- During the first quarter, the company changed the method of
accounting for certain U.S. inventories from the LIFO method
to the average cost method. The impact of the change for the
first six months of fiscal year 2006 was reflected as a $13
million pre-tax gain. The impact on net earnings was $8
million, or $.02 per share.
-- For the first six months of the prior year, earnings would
have been $14 million or $.03 per share lower, had all
stock-based compensation been expensed.
After factoring in these items for the first six months, adjusted
net earnings would be $496 million compared to $451 million in the
prior year, and adjusted earnings per share would be $1.20 compared to
$1.09 in the prior year, an increase of 10 percent.
Cash flow from operations for the first half of fiscal year 2006
was $649 million versus $500 million in the year-ago period, an
increase of 30 percent. In addition, the company repurchased 4.2
million shares at a cost of $127 million in the first half of fiscal
year 2006 to offset the impact of dilution from shares issued under
stock compensation plans and as part of the strategic repurchase plan
announced in November 2005.
Douglas R. Conant, Campbell’s President and Chief Executive
Officer, said, “Our solid performance this quarter was consistent with
our expectations. Our top-line growth was driven by strong increases
across our U.S. soup business. Both our condensed portfolio and broth
delivered good growth, while our ready-to-serve soups showed
significant improvement following a weak first quarter.
“For the first six months, we are pleased with our earnings
performance. We continued to improve our profit margins through
pricing and productivity, which more than offset cost inflation, and
enabled us to drive strong earnings growth in a challenging
environment.”
Conant continued, “From a strategic perspective, we continue to
focus on long-term growth initiatives, including premium soups. One
example is ‘Campbell’s Select Gold Label’ soup in aseptic packaging,
which we introduced in the U.S. this year and is off to a promising
start. From an international perspective, we are not satisfied with
our business performance – especially in Europe, most notably the
U.K., where we face an increasingly challenging competitive
environment.”
Excluding the items previously noted that impact comparability,
the company confirmed its fiscal 2006 guidance for earnings per share
to increase between 5 and 7 percent from the adjusted fiscal year 2005
base of $1.64, which reflects the impact of expensing all stock-based
compensation.
Summary of Fiscal 2006 Second Quarter Results By Segment
U.S. Soup, Sauces and Beverages
Sales for U.S. Soup, Sauces and Beverages were $1,018 million, a 6
percent increase compared with a year ago. Operating earnings
increased to $242 million from $216 million in the year-ago quarter.
Prior year earnings would have been $1 million lower had all
stock-based compensation been expensed. Earnings increased due to
higher prices and improved productivity, partially offset by cost
inflation.
A breakdown of the change in sales follows:
-- Volume and mix subtracted 1 percent
-- Price and sales allowances added 6 percent
-- Decreased promotional spending added 1 percent
U.S. soup sales for the quarter increased 7 percent, with
condensed soup sales up 6 percent, ready-to-serve soup sales up 9
percent, and broth sales up 6 percent. For the first six months of
fiscal year 2006, U.S. soup sales were up 1 percent, with condensed
sales up 4 percent, ready-to-serve sales down 5 percent, and broth
sales up 8 percent.
Further details of sales results for the quarter include the
following:
-- "Campbell's" condensed eating soups achieved solid sales
growth in the quarter due to pricing, effective advertising,
and continued growth of kid's varieties. "Campbell's"
condensed cooking soup sales grew from pricing, strong sales
performance throughout the important holiday season, and
increased advertising. The condensed soup business continued
to benefit from an increase in gravity-feed shelving systems,
which are now installed in 14,700 stores compared to 11,000 at
this time last year.
-- Sales of ready-to-serve soups increased strongly in the second
quarter, primarily due to pricing. "Campbell's Select" soup
sales increased, driven by the introduction of
restaurant-style "Campbell's Select Gold Label" soups.
"Campbell's Chunky" soups also showed sales growth, benefiting
from advertising and promotion linked to the NFL. Sales of
ready-to-serve soups were adversely impacted by the
discontinuation of "Campbell's Kitchen Classics" soups.
-- The convenience soup platform achieved double digit growth
with "Campbell's Chunky" and "Campbell's Select" soups in
microwaveable bowls and "Campbell's Soup at Hand" sippable
soups all performing well. The introduction of "Campbell's"
Chicken Noodle, Tomato, and Vegetable soups in microwaveable
bowls also added to sales growth.
-- "Swanson" broth sales grew, driven by consumer preference for
aseptically-packaged broth and strong holiday merchandising
activity.
Highlights of this segment's other businesses include:
-- "V8" vegetable juice recorded a double-digit sales increase as
the brand benefited from increased distribution in non-grocery
channels and the growth of single-serve varieties. A new
beverage, "V8 V-Fusion," a 100 percent juice beverage that
provides a full serving of vegetables plus a full serving of
fruit, was launched during the quarter and received strong
trade acceptance.
-- "Prego" pasta sauce sales increased due to pricing and
improved marketing effectiveness.
-- "Pace" Mexican sauce sales also increased.
-- "Campbell's Chunky" chili sales declined due to difficult
comparisons against the introductory marketing activity a year
ago, although "Campbell's Chunky" chili in microwaveable bowls
performed well.
For the first half of fiscal 2006, sales increased 2 percent to
$1,988 million. Operating earnings increased to $530 million from $491
million in the year-ago period. Earnings in the prior-year period
would have been $2 million lower had all stock-based compensation been
expensed. Earnings for the first half of this year included an $8
million benefit from a change in the method of accounting for
inventory. Earnings increased due to higher prices and productivity
gains, partially offset by inflation and lower volume.
Baking and Snacking
Sales for Baking and Snacking were $429 million, a 1 percent
decrease compared with a year ago. Operating earnings declined to $40
million from $47 million in the year-ago quarter. Prior-year earnings
would have been $2 million lower had all stock-based compensation been
expensed. Earnings were impacted by declines in the biscuit business
in Indonesia due to a more challenging economic environment, as well
as declines in the Snackfoods business in Australia due to a
significant increase in competitive activity.
A breakdown of the change in sales follows:
-- Volume and mix subtracted 1 percent
-- Price and sales allowances added 2 percent
-- Increased promotional spending subtracted 1 percent
-- Currency subtracted 1 percent
Further details of sales results include the following:
-- Pepperidge Farm bakery sales grew in the quarter driven by
whole grain breads, muffins, and bagels, as well as strong
demand for stuffing during the holidays.
-- Sales of Pepperidge Farm cookies and crackers increased in the
quarter. Sales gains by "Pepperidge Farm Goldfish" snack
crackers were partially offset by declines in "Milano" and
Mini cookies. "Pepperidge Farm Whims," a line of poppable
snacks introduced at the beginning of the fiscal year, has not
performed up to expectations.
-- Pepperidge Farm frozen bakery sales increased slightly, driven
by pastries, garlic toast, and the introduction of new artisan
breads.
-- Arnott's sales declined, primarily due to currency and weak
private label sales, which more than offset sales gains in the
branded biscuit business.
For the first half of fiscal 2006, sales increased 1 percent to
$887 million. Operating earnings declined to $90 million from $93
million in the year-ago period. Earnings in the year-ago period would
have been $4 million lower had all stock-based compensation been
expensed. Earnings for the first half of this year included a $5
million benefit from a change in the method of accounting for
inventory. Earnings were impacted primarily due to declines in the
biscuit business in Indonesia.
International Soup and Sauces
Sales for International Soup and Sauces were $483 million, a 4
percent decline compared with the second quarter of fiscal 2005.
Operating earnings increased to $81 million from $70 million in the
year-ago quarter. Prior year earnings would have been $1 million lower
had all stock-based compensation been expensed. Earnings increased
primarily due to the strong market performance in Canada and lower
marketing spending in Europe, partially offset by currency.
A breakdown of the change in sales follows:
-- Volume and mix added 1 percent
-- Currency subtracted 5 percent
Further details of sales results include the following:
-- Sales in Europe decreased, primarily due to currency. Higher
volumes of aseptically packaged soup and instant dry soups in
France and aseptically packaged soup in Belgium were offset by
weakness in the U.K. business.
-- In Canada, sales grew double digits, driven by strong
performances in ready-to-serve soup, including "Campbell's
Soup at Hand," which was introduced this fiscal year, and by
the favorable impact of currency.
For the first half of fiscal 2006, sales decreased 2 percent to
$903 million. Operating earnings increased to $136 million from $125
million in the year-ago period. Earnings in the year-ago period would
have been $2 million lower had all stock-based compensation been
expensed. Earnings increased primarily due to the strong market
performance in Canada and lower marketing spending in Europe,
partially offset by the unfavorable impact of currency.
Other
The balance of the portfolio includes the Godiva Chocolatier
business worldwide and the Away From Home business in the U.S. and
Canada.
Sales increased 6 percent to $351 million compared with the same
period a year ago. Operating earnings declined to $69 million from $72
million in the year-ago quarter. Prior-year earnings would have been
$2 million lower had all stock-based compensation been expensed. The
earnings decline was primarily due to higher expenses and the
unfavorable impact of currency at Godiva, which offset gains in the
Away From Home business.
A breakdown of the change in sales follows:
-- Volume and mix added 5 percent
-- Price and sales allowances added 2 percent
-- Currency subtracted 1 percent
Further details include the following:
-- Godiva Chocolatier sales rose as a result of strong retail and
direct sales channel performance in North America.
-- Away From Home sales grew significantly due to the continued
growth of refrigerated soups sold in grocery deli departments
and strong frozen soup sales to business and industry.
For the first half of fiscal 2006, sales increased 9 percent to
$613 million. Operating earnings increased to $95 million from $94
million in the year-ago period. Earnings in the year-ago period would
have been $3 million lower had all stock-based compensation been
expensed. Earnings increased primarily due to sales growth in the Away
From Home business, partially offset by increased expenses and the
unfavorable impact of currency at Godiva.
Non-GAAP Financial Information
A reconciliation of the adjusted fiscal 2006 and 2005 financial
information to the reported information is attached to this release
and can also be found on the company’s website at
www.thecampbellscompany.com in the “Investor Center” section.
Conference Call
The company will host a conference call to discuss these results
on February 17 at 10:00 a.m. Eastern Standard Time. U.S. participants
may access the call at 1-888-455-9639 and non-U.S. participants at
1-210-234-0002. Participants should call at least five minutes prior
to the starting time. The passcode is “Campbell Soup” and the
conference leader is Len Griehs. The call will also be broadcast live
over the Internet at www.thecampbellscompany.com and can be accessed
by clicking on the “Webcast” banner. A recording of the call will be
available approximately two hours after it is completed through
midnight February 24, 2006 at 1-800-294-3091 or 1-402-220-9769.
Forward-Looking Statements
This release contains “forward-looking statements” which reflect
the company’s current expectations about its future plans and
performance, including statements concerning the impact of marketing
investments and strategies, pricing, new product introductions and
innovation, cost-saving initiatives and quality improvement on sales,
earnings and margins. These forward-looking statements rely on a
number of assumptions and estimates which could be inaccurate and
which are subject to risks and uncertainties. Actual results could
vary materially from those anticipated or expressed in any
forward-looking statement made by the company. Please refer to the
company’s most recent Form 10-K and subsequent filings for a further
discussion of these risks and uncertainties. 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.
Reporting Segments
Beginning in fiscal year 2005, Campbell Soup Company earnings
results are reported for the following segments:
U.S. Soup, Sauces and Beverages, which includes the following
retail businesses: “Campbell’s” brand condensed and ready-to-serve
soups, “Swanson” broth and canned poultry businesses, “Prego” pasta
sauce, “Pace” Mexican sauce, “Campbell’s Chunky” chili, “Campbell’s”
canned pasta, gravies and beans, “Campbell’s Supper Bakes” meal kits,
“V8” vegetable juices, “V8 Splash” juice beverages, and “Campbell’s”
tomato juice.
Baking and Snacking, which includes the following businesses:
“Pepperidge Farm” cookies, crackers, breads and frozen products in
U.S. retail, “Arnott’s” biscuits in Australia and Asia Pacific, and
“Arnott’s” salty snacks in Australia.
International Soup and Sauces, which includes the soup, sauce and
beverage businesses outside of the United States, including Canada,
Europe, Mexico, Latin America, and the Asia Pacific region.
Other, which includes the Godiva Chocolatier business worldwide
and the Away From Home business in the U.S. and Canada.
About Campbell Soup Company
Campbell Soup Company is a global manufacturer and marketer of
high quality simple meals, including soup, baked snacks,
vegetable-based beverages, and premium chocolate products.
Founded in 1869, the company has a portfolio of more than 20
market-leading brands, including “Campbell’s,” “Pepperidge Farm,”
“Arnott’s,” “V8,” and “Godiva.” For more information on the company,
visit Campbell’s website at www.thecampbellscompany.com.
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF EARNINGS (unaudited)
(millions, except per share amounts)
THREE MONTHS ENDED
------------------
January 29, January 30,
2006 2005
--------------- --------------
Net sales $ 2,281 $ 2,223
--------------- --------------
Costs and expenses
Cost of products sold 1,334 1,321
Marketing and selling expenses 364 362
Administrative expenses 156 129
Research and development
expenses 24 24
Other income - (2)
--------------- --------------
Total costs and expenses 1,878 1,834
--------------- --------------
Earnings before interest and taxes 403 389
Interest, net 43 45
--------------- --------------
Earnings before taxes 360 344
Taxes on earnings 106 109
--------------- --------------
Net earnings $ 254 $ 235
=============== ==============
Per share - basic
Net earnings $ .62 $ .57
=============== ==============
Dividends $ .18 $ .17
=============== ==============
Weighted average shares outstanding -
basic 408 409
=============== ==============
Per share - assuming dilution
Net earnings $ .61 $ .57
=============== ==============
Weighted average shares outstanding
- assuming dilution 414 414
=============== ==============
The company adopted SFAS 123R in the first quarter of fiscal 2006
which requires that all stock-based awards be expensed. Had
compensation expense been recognized in fiscal 2005 for all
stock-based awards, an additional pre-tax expense of $12 would have
been recognized. Net earnings would have been $227 and diluted
earnings per share would have been $.55. The 2005 pre-tax incremental
compensation expense would have been recognized as follows on the
Consolidated Statements of Earnings: Cost of products sold - $1;
Marketing and selling - $3; Administrative - $7; and Research and
development - $1.
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF EARNINGS (unaudited)
(millions, except per share amounts)
SIX MONTHS ENDED
----------------
January 29, January 30,
2006 2005
--------------- --------------
Net sales $ 4,391 $ 4,314
--------------- --------------
Costs and expenses
Cost of products sold 2,562 2,566
Marketing and selling expenses 684 676
Administrative expenses 294 258
Research and development expenses 48 44
Other income (1) -
--------------- --------------
Total costs and expenses 3,587 3,544
--------------- --------------
Earnings before interest and taxes 804 770
Interest, net 69 89
--------------- --------------
Earnings before taxes 735 681
Taxes on earnings 179 216
--------------- --------------
Net earnings $ 556 $ 465
=============== ==============
Per share - basic
Net earnings $ 1.36 $ 1.14
=============== ==============
Dividends $ .36 $ .34
=============== ==============
Weighted average shares outstanding -
basic 409 409
=============== ==============
Per share - assuming dilution
Net earnings $ 1.34 $ 1.13
=============== ==============
Weighted average shares outstanding
- assuming dilution 414 413
=============== ==============
The company adopted SFAS 123R in the first quarter of fiscal 2006
which requires that all stock-based awards be expensed. Had
compensation expense been recognized in fiscal 2005 for all
stock-based awards, an additional pre-tax expense of $22 would have
been recognized. Net earnings would have been $451 and diluted
earnings per share would have been $1.09. The 2005 pre-tax
incremental compensation expense would have been recognized as
follows on the Consolidated Statements of Earnings: Cost of products
sold - $2; Marketing and selling - $6; Administrative - $12; and
Research and development - $2.
In the first quarter of fiscal 2006, the company changed the method
of accounting for certain U.S. inventories from the LIFO method to
the average cost method. The impact of the change was reflected as a
one-time non-cash pre-tax benefit of $13 ($8 after tax or $.02 per
share).
In the first quarter of fiscal 2006, the company recorded a non-cash
tax benefit of $47 resulting from the favorable resolution of a U.S.
tax contingency related to a prior period. In addition, the company
reduced interest expense and accrued interest payable by $21 and
adjusted deferred tax expense by $8 ($13 after tax). The aggregate
non-cash impact of the settlement on net earnings was $60, or $.14
per share.
In the first quarter of fiscal 2006, an incremental tax expense of $8
(or $.02 per share) was recorded related to repatriated earnings from
non-U.S. subsidiaries under the provision of the American Jobs
Creation Act.
CAMPBELL SOUP COMPANY CONSOLIDATED
SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
THREE MONTHS ENDED
------------------
January 29, January 30, Percent
Sales 2006 2005 Change
----- ----------- ----------- -------
Contributions:
U.S. Soup, Sauces and Beverages $ 1,018 $ 956 6%
Baking and Snacking 429 433 -1%
International Soup and Sauces 483 502 -4%
Other 351 332 6%
----------- -----------
Total sales $ 2,281 $ 2,223 3%
=========== ===========
Earnings
--------
Contributions:
U.S. Soup, Sauces and Beverages $ 242 $ 216 12%
Baking and Snacking 40 47 -15%
International Soup and Sauces 81 70 16%
Other 69 72 -4%
----------- -----------
Total operating earnings 432 405 7%
Unallocated corporate expenses (29) (16)
----------- -----------
Earnings before interest and taxes 403 389 4%
Interest, net (43) (45)
Taxes on earnings (106) (109)
----------- -----------
Net earnings $ 254 $ 235 8%
=========== ===========
Net earnings per share - assuming
dilution $ .61 $ .57 7%
=========== ===========
The company adopted SFAS 123R in the first quarter of fiscal 2006
which requires that all stock-based awards be expensed. Had
compensation expense been recognized in fiscal 2005 for all
stock-based awards, an additional pre-tax expense of $12 would have
been recognized. Net earnings would have been $227 and diluted
earnings per share would have been $.55. The 2005 pre-tax incremental
compensation expense would have been recognized as follows: U.S.
Soup, Sauces and Beverages - $1; Baking and Snacking - $2;
International Soup and Sauces - $1; Other - $2; and Unallocated
Corporate - $6.
CAMPBELL SOUP COMPANY CONSOLIDATED
SUPPLEMENTAL SCHEDULE OF SALES AND EARNINGS (unaudited)
(millions, except per share amounts)
SIX MONTHS ENDED
------------------
January 29, January 30, Percent
Sales 2006 2005 Change
----- ----------- ----------- -------
Contributions:
U.S. Soup, Sauces and Beverages $ 1,988 $ 1,950 2%
Baking and Snacking 887 882 1%
International Soup and Sauces 903 918 -2%
Other 613 564 9%
----------- -----------
Total sales $ 4,391 $ 4,314 2%
=========== ===========
Earnings
--------
Contributions:
U.S. Soup, Sauces and Beverages $ 530 $ 491 8%
Baking and Snacking 90 93 -3%
International Soup and Sauces 136 125 9%
Other 95 94 1%
----------- -----------
Total operating earnings 851 803 6%
Unallocated corporate expenses (47) (33)
----------- -----------
Earnings before interest and taxes 804 770 4%
Interest, net (69) (89)
Taxes on earnings (179) (216)
----------- -----------
Net earnings $ 556 $ 465 20%
=========== ===========
Net earnings per share - assuming
dilution $ 1.34 $ 1.13 19%
=========== ===========
The company adopted SFAS 123R in the first quarter of fiscal 2006
which requires that all stock-based awards be expensed. Had
compensation expense been recognized in fiscal 2005 for all
stock-based awards, an additional pre-tax expense of $22 would have
been recognized. Net earnings would have been $451 and diluted
earnings per share would have been $1.09. The 2005 pre-tax
incremental compensation expense would have been recognized as
follows: U.S. Soup, Sauces and Beverages - $2; Baking and Snacking -
$4; International Soup and Sauces - $2; Other - $3; and Unallocated
Corporate - $11.
In the first quarter of fiscal 2006, the company changed the method
of accounting for certain U.S. inventories from the LIFO method to
the average cost method. The impact of the change was reflected as a
one-time non-cash pre-tax benefit of $13 ($8 after tax or $.02 per
share). The pre-tax benefit is reflected as follows: U.S. Soup,
Sauces and Beverages - $8 and Baking and Snacking - $5.
In the first quarter of fiscal 2006, the company recorded a non-cash
tax benefit of $47 resulting from the favorable resolution of a U.S.
tax contingency related to a prior period. In addition, the company
reduced interest expense and accrued interest payable by $21 and
adjusted deferred tax expense by $8 ($13 after tax). The aggregate
non-cash impact of the settlement on net earnings was $60, or $.14
per share.
In the first quarter of fiscal 2006, an incremental tax expense of $8
(or $.02 per share) was recorded related to repatriated earnings from
non-U.S. subsidiaries under the provision of the American Jobs
Creation Act.
CAMPBELL SOUP COMPANY CONSOLIDATED
BALANCE SHEETS (unaudited)
(millions)
January 29, January 30,
2006 2005
----------- -----------
Current assets $ 1,914 $ 1,664
Plant assets, net 1,940 1,917
Intangible assets, net 3,011 3,156
Other assets 281 327
----------- -----------
Total assets $ 7,146 $ 7,064
=========== ===========
Current liabilities $ 2,303 $ 2,209
Long-term debt 2,219 2,552
Nonpension postretirement benefits 277 292
Other liabilities 726 672
Shareowners' equity 1,621 1,339
----------- -----------
Total liabilities and shareowners'
equity $ 7,146 $ 7,064
=========== ===========
Total debt $ 2,906 $ 3,128
=========== ===========
Cash and cash equivalents $ 267 $ 51
=========== ===========
Reconciliation of GAAP and Non-GAAP Financial Measures
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.
The impact of changes in accounting methods and certain tax
matters on financial information are as follows:
(1) In the first quarter of fiscal 2006, the company changed the
method of determining the cost of certain U.S. inventories
from the LIFO method to the average cost method. As a result,
the company recorded a $13 million pre-tax, $8 million after
tax, benefit from the change in accounting method. Prior
periods were not restated since the impact on previously
issued financial statements was not considered material.
(2) In the first quarter of fiscal 2006, the company adopted SFAS
123R which requires that all stock-based compensation be
expensed based on the fair value of the awards. In fiscal
2005, the company did not recognize compensation expense for
stock options under previous accounting guidelines. This
adjustment reflects the pro forma impact had all stock-based
awards been expensed.
(3) In the first quarter of fiscal 2006, the company recorded a
non-cash tax benefit of $47 million resulting from the
favorable resolution of a U.S. tax contingency related to a
prior period. In addition, the company reduced interest
expense and accrued interest payable by $21 million and
adjusted deferred tax expense by $8 million ($13 million
after tax). The aggregate non-cash impact of the settlement
on net earnings was $60 million, or $.14 per share.
(4) In the first quarter of fiscal 2006, the company recorded
incremental tax expense of $8 million associated with the
repatriation of earnings under the American Jobs Creation Act.
The table below reconciles financial information, presented in
accordance with GAAP, to financial information excluding the impact of
changes in accounting methods and certain tax matters:
Second Quarter %
---------------------------
Jan. 29, 2006 Jan. 30, 2005 Change
------------- ------------- ------
Earnings before interest and taxes,
as reported $ 403 $ 389
Deduct: Impact had all stock-
based awards been expensed under
SFAS 123R (2) - (12)
------------- -------------
Adjusted Earnings before interest
and taxes $ 403 $ 377 7%
------------- -------------
Interest, net, as reported $ 43 $ 45
------------- -------------
Adjusted Earnings before taxes $ 360 $ 332 8%
------------- -------------
Taxes on earnings, as reported $ 106 $ 109
Deduct: Tax impact had all
stock-based awards been expensed
under SFAS 123R (2) - (4)
------------- -------------
Adjusted Taxes on earnings $ 106 $ 105
------------- -------------
Adjusted effective income tax rate 29.4% 31.6%
Net earnings, as reported $ 254 $ 235
Deduct: Impact had all stock-
based awards been expensed under
SFAS 123R (2) - (8)
------------- -------------
Adjusted Net earnings $ 254 $ 227 12%
============= =============
Earnings per share, as reported $ 0.61 $ 0.57
Deduct: Impact had all stock-
based awards been expensed under
SFAS 123R (2) - (0.02)
------------- -------------
Adjusted Earnings per share $ 0.61 $ 0.55 11%
============= =============
Year-to-Date %
-----------------------------
Jan. 29, 2006 Jan. 30, 2005 Change
-------------- -------------- ------
Earnings before interest and
taxes, as reported $ 804 $ 770
Deduct: Impact of change in
inventory accounting method
(1) (13) -
Deduct: Impact had all stock-
based awards been expensed
under SFAS 123R (2) - (22)
-------------- --------------
Adjusted Earnings before interest
and taxes $ 791 $ 748 6%
-------------- --------------
Interest, net, as reported $ 69 $ 89
Add: Reduction in interest
expense related to the
favorable resolution of
tax contingency (3) 21 -
-------------- --------------
Adjusted Interest, net $ 90 $ 89
-------------- --------------
Adjusted Earnings before taxes $ 701 $ 659 6%
-------------- --------------
Taxes on earnings, as reported $ 179 $ 216
Deduct: Tax impact of change
in inventory accounting method
(1) (5) -
Deduct: Tax impact had all
stock-based awards been
expensed under SFAS 123R (2) - (8)
Add: Adjustment to tax expense
related to the favorable
resolution of tax contingency
(3) 39 -
Deduct: Incremental tax
recorded for earnings to be
repatriated under the American
Jobs Creation Act (4) (8) -
-------------- --------------
Adjusted Taxes on earnings $ 205 $ 208
-------------- --------------
Adjusted effective income tax
rate 29.2% 31.6%
Net earnings, as reported $ 556 $ 465
Deduct: Impact of change in
inventory accounting method
(1) (8) -
Deduct: Impact had all stock-
based awards been expensed
under SFAS 123R (2) - (14)
Deduct: Net adjustment to
taxes and interest expense
related to the favorable
resolution of tax contingency
(3) (60) -
Add: Incremental tax recorded
for earnings to be repatriated
under the American Jobs
Creation Act (4) 8 -
-------------- --------------
Adjusted Net earnings $ 496 $ 451 10%
============== ==============
Earnings per share, as reported $ 1.34 $ 1.13
Deduct: Impact of change in
inventory accounting method
(1) (0.02) -
Deduct: Impact had all stock-
based awards been expensed
under SFAS 123R (2) - (0.03)
Deduct: Net adjustment to
taxes and interest expense
related to the favorable
resolution of tax contingency
(3) (0.14) -
Add: Incremental tax recorded
for earnings to be repatriated
under the American Jobs
Creation Act (4) 0.02 -
-------------- --------------
Adjusted Earnings per share* $ 1.20 $ 1.09 10%
============== ==============
* The sum of the individual per share amounts does not equal net
earnings per share due to rounding.
The company believes that financial information excluding certain
changes in accounting methods and certain other 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 earnings
results if these transactions are excluded from the results.
CONTACT: Campbell Soup Company
Jerry S. Buckley (Media)
(856) 342-6007
or
Leonard F. Griehs (Analysts)
(856) 342-6428
SOURCE: Campbell Soup Company