Adjusted Net Earnings Per Share Were $0.65
CAMDEN, N.J.–(BUSINESS WIRE)–Feb. 23, 2009– Campbell Soup Company (NYSE:CPB) today reported net earnings for the quarter ended February 1, 2009 of $233 million, or $0.64 per share, compared to $274 million, or $0.71 per share, in the prior year. The fiscal 2009 reported net earnings included charges associated with previously announced restructuring initiatives, the impact of unrealized losses on the company’s commodity hedging activities and a tax adjustment related to the divestiture of the Godiva business. Excluding all items impacting comparability, adjusted net earnings were $234 million in the current quarter compared to adjusted net earnings of $266 million in the prior year’s quarter. Adjusted net earnings per share were $0.65 in the current quarter compared to adjusted net earnings per share of $0.69 in the prior year’s quarter. Reflecting strengthening of the U.S. dollar, adjusted net earnings per share for the quarter were negatively impacted by $0.04 due to currency translation.
The items impacting comparability of net earnings are summarized below:
Second Quarter
(millions, except per share amounts)
Continuing Operations
*
Discontinued Operations
A detailed reconciliation of the adjusted fiscal 2009 and 2008 financial information to the reported information is attached to this release.
For the second quarter, sales declined 4 percent to $2.122 billion. The decline in sales reflects the following factors:
Douglas R. Conant, Campbell’s President and Chief Executive Officer, said, “For the first half, we delivered strong sales growth in our key value-oriented businesses, including U.S. soup and sauces. U.S. soup sales increased 8 percent with growth in all formats: condensed, ready-to-serve and broth. As planned, we invested in our U.S. soup portfolio and supported three major new product introductions. Beyond soup, other parts of our portfolio, such as beverages and premium breads, continued to grow but at slower rates during these difficult economic times. Overall, the categories in which we compete are growing, and our businesses are performing well within those categories.
“In the second quarter, we maintained momentum in our U.S. soup business, building on very strong sales in the first quarter. Our product innovations in ready-to-serve soups and effective marketing of our condensed portfolio have resonated with consumers as they eat more meals at home. We remain encouraged by the successful launches of ‘Campbell’s Select Harvest’ and ‘Campbell’s’ ‘V8’ ready-to-serve soups and ‘Swanson’ stock. ‘Prego’ and ‘Pace’ sauces also benefited from consumers eating more meals at home.”
Conant continued, “Overall, we are pleased with our performance in the quarter, especially considering that currency negatively impacted results and major retailers significantly reduced inventory levels. While these inventory reductions have impacted our U.S. soup, sauces and beverages businesses, encouragingly consumer takeaway has outpaced sales growth. Campbell’s portfolio continues to provide great value, quality and convenience, and consumer response to our products remained strong.
“As expected, our adjusted gross margin trend performance improved on a quarter-to-quarter basis, and we expect that to continue for the balance of the fiscal year.”
Conant concluded, “Campbell remains well positioned during this economic downturn due to the focused and value-oriented nature of our portfolio, the relative vitality of the categories in which we compete and our position within those categories. Despite broad economic challenges, we are optimistic about the second half of the year.”
Fiscal 2009 Guidance
On a currency-neutral basis, the company now expects to deliver sales growth, excluding the negative impact of one less week in the fiscal year and divestitures, within its long-term target range of between 3 and 4 percent; adjusted earnings before interest and taxes (EBIT) growth slightly below its long-term growth target of between 5 and 6 percent, reflecting the impact of one less week, higher marketing spending and increased investment spending in Russia and China. Campbell expects growth in adjusted net earnings per share to be at the high end of the 5 to 7 percent range, reflecting improved margin outlook and favorable interest costs, from the fiscal 2008 adjusted base of $2.09.
At quarter-end rates of exchange, the company’s fiscal 2009 sales, EBIT and EPS growth rates would be negatively impacted by approximately 5 percentage points as a result of currency translation.
First Half Results
The current and prior period’s net earnings included items that impacted comparability. These items are summarized below:
Six Months
Net earnings for the first half were $493 million, or $1.35 per share, compared to $544 million, or $1.41 per share, in the year-ago period. Excluding items impacting comparability, adjusted net earnings were $515 million compared to $536 million in the year-ago period. Adjusted net earnings per share were $1.41 in the current period compared to $1.39 in the prior period, an increase of 1 percent. Adjusted net earnings per share growth benefited from a decline in average diluted shares outstanding due to repurchases utilizing the net proceeds from the Godiva divestiture and Campbell’s strategic share repurchase programs. In the first half of 2009, adjusted net earnings per share were negatively impacted by $0.05 due to currency translation.
For the first half of fiscal 2009, sales were $4.372 billion, a decrease of 1 percent. The change in sales for the period reflects the following factors:
Second Quarter Financial Details
First Half Financial Details
Summary of Fiscal 2009 Second Quarter and First Half Results by Segment
U.S. Soup, Sauces and Beverages
Sales for U.S. Soup, Sauces and Beverages were $1.128 billion, an increase of 3 percent compared to a year ago. The change in sales reflects the following factors:
U.S. soup sales, especially condensed varieties, were negatively impacted by significant reductions in retailer inventory levels. Total soup sales for the quarter increased 4 percent, driven by the following:
Further details of the sales results of this segment’s other businesses include:
Operating earnings were $270 million compared to $286 million in the prior-year period. The decrease in operating earnings was due to costs, including advertising associated with the introduction of new products in the U.S. soup business, partially offset by increased sales.
For the first half, U.S. Soup, Sauces and Beverages sales increased 6 percent to $2.326 billion. A breakdown of the change in sales follows:
For the first half, soup sales increased 8 percent:
Operating earnings were $584 million compared to $595 million in the year-ago period. The decrease in operating earnings was due to an inflation-driven decline in gross margin percentage and higher levels of marketing for new product launches, partially offset by higher sales.
Baking and Snacking
Sales for Baking and Snacking were $440 million, a decrease of 10 percent from a year ago. A breakdown of the change in sales follows:
Further details of sales results include the following:
Operating earnings were $53 million compared with $68 million in the prior-year period. The decrease in operating earnings was due to a decline in Pepperidge Farm and the unfavorable impact of currency, partially offset by significant growth in Arnott’s. The current quarter included $2 million in accelerated depreciation and other exit costs related to the previously announced restructuring initiative.
For the first half, sales decreased 7 percent to $949 million. A breakdown in the change in sales follows:
Operating earnings were $136 million compared to $140 million in the year-ago period. The decrease in operating earnings was due to the unfavorable impact of currency. Excluding currency, significant growth in Arnott’s was partly offset by a decline in Pepperidge Farm. The current period included $2 million in accelerated depreciation and other exit costs related to the previously announced restructuring initiative.
International Soup, Sauces and Beverages
Sales for International Soup, Sauces and Beverages were $391 million, a decrease of 15 percent compared to a year ago. The change in sales reflects the following factors:
Excluding the unfavorable impact of currency, further details of sales results include the following:
Operating earnings decreased to $50 million from $61 million a year ago due to the impact of currency. Excluding the impact of currency, operating earnings increased in Europe, reflecting the benefit of cost savings initiatives, and in Canada, primarily offset by the cost to establish businesses in Russia and China.
For the first half, sales decreased 9 percent to $771 million. A breakdown of the change in sales follows:
Excluding the impact of currency and divestitures, sales increased due to gains in Asia Pacific and Canada, partially offset by a decline in Europe.
Operating earnings were $88 million compared to $112 million in the year-ago period. The decrease in operating earnings was due to the cost to establish businesses in Russia and China and the unfavorable impact of currency, partially offset by gains in Europe and Asia Pacific.
North America Foodservice
Sales were $163 million, a decrease of 7 percent compared to a year ago. A breakdown of the change in sales follows:
Sales were significantly impacted by weakness in the food service sector.
Operating earnings were $10 million compared to $20 million in the prior period. The current quarter included $6 million in accelerated depreciation and other exit costs related to the previously announced restructuring initiative. The remaining decline in operating earnings was primarily due to lower volumes.
For the first half, sales were $326 million compared to $342 million in the year-ago period. A breakdown of the change in sales follows:
Operating earnings were $21 million compared to $44 million in the prior period. The current period included $13 million in accelerated depreciation and other exit costs related to the previously announced restructuring initiative. The remaining decline in operating earnings was primarily due to lower volumes.
Unallocated Corporate Expenses
Unallocated corporate expenses decreased from $35 million a year ago to $28 million in the current quarter. The decrease was primarily due to lower expenses associated with the company’s North American SAP implementation. For the first half, unallocated corporate expenses increased from $63 million to $75 million. The increase was due to $26 million of unrealized losses on commodity hedging included in the current year, partially offset by lower expenses related to the North American SAP implementation. During the second quarter, there was no change in the aggregate unrealized losses on commodity hedging activities. In the prior year, unrealized gains and losses on commodity hedging activities were not material.
Non-GAAP Financial Information
A reconciliation of the adjusted fiscal 2009 and 2008 financial information to the reported financial information is attached to this release and can also be found on the company’s website at www.campbellsoupcompany.com in the “Investor Center” section.
Conference Call
The company will host a conference call to discuss these results on February 23, 2009 at 10:00 a.m. Eastern Standard Time. U.S. participants may access the call at 1-866-847-7860 and non-U.S. participants at 1-703-639-1427. 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.campbellsoupcompany.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 2, 2009 at 1-888-266-2081 or 1-703-925-2533. The access code is 1331351.
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 and canned poultry businesses, “Prego” pasta sauce, “Pace” Mexican sauce, “Campbell’s Chunky” chili, “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, and “Arnott’s” salty snacks in Australia.
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 as the emerging markets of Russia and China, and the retail business in Canada.
North America Foodservice includes 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 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 its future plans and performance, including statements concerning the impact of marketing investments and strategies, pricing, share repurchase, new product introductions and innovation, cost-saving initiatives, quality improvements, inflation, commodity hedging, currency translation and portfolio strategies, including divestitures, 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.
THREE MONTHS ENDED
Weighted average shares outstanding – basic
Weighted average shares outstanding – assuming dilution
SIX MONTHS ENDED
Sales
Earnings
Reconciliation of GAAP and Non-GAAP Financial MeasuresSecond Quarter Ended February 1, 2009
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 February 1, 2009 and January 27, 2008, 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:
February 1, 2009
January 27, 2008
$
754
1,957
2,711
(80
)
2,631
Items Impacting Gross Margin and Net 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 net earnings:
The tables below reconcile financial information, presented in accordance with GAAP, to financial information excluding certain transactions:
*The sum of the individual per share amounts does not equal due to rounding.
* The sum of the individual per share amounts does not equal due to rounding.
Source: Campbell Soup Company
Campbell Soup CompanyLeonard F. Griehs (Analysts), 856-342-6428Anthony Sanzio (Media), 856-968-4390
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