Third-Quarter Adjusted Net Earnings per Share Declined 2 Percent to $0.56
CAMDEN, N.J.–(BUSINESS WIRE)–May. 21, 2012– Campbell Soup Company (NYSE:CPB) today reported its results for the third quarter of fiscal 2012.
Third-Quarter Overview
Net earnings for the quarter ended April 29, 2012, were $177 million, or $0.55 per share, compared with $187 million, or $0.57 per share, in the prior year. The current quarter’s reported net earnings included charges associated with a restructuring program announced in June 2011. Excluding items impacting comparability, adjusted net earnings decreased 4 percent to $180 million, and adjusted net earnings per share decreased 2 percent to $0.56 in the current quarter. A detailed reconciliation of adjusted financial information to the reported information is included at the end of this news release.
Denise Morrison, Campbell’s President and Chief Executive Officer, said, “We continued to advance our strategies to stabilize and then profitably grow North America soup and simple meals, expand our international presence and continue to drive growth in healthy beverages and baked snacks.
“Although overall sales trends are improving, we are not satisfied with our performance this quarter. As planned, we focused our marketing efforts on increasing advertising and consumer promotion. We executed well in some businesses, delivering solid sales growth in U.S. Beverages, Pepperidge Farm and Canada. We did not execute as well in others.”
Morrison concluded, “We remain committed to our three growth strategies. At Campbell, we are building a business for the long term through innovation, brand building and expansion into higher growth segments that connect with today’s consumers. We have made solid progress reinvigorating our innovation pipeline, and customers have responded favorably to the new products we have planned for next year. With continued focus on our strategies, we plan to deliver sustainable profitable net sales growth that will create value for shareholders.”
Fiscal 2012 Guidance
As previously announced, Campbell expects net sales growth to be between 0 and 2 percent, a decline in adjusted EBIT of between (9) and (7) percent and a decline in adjusted EPS of between (7) and (5) percent, putting adjusted EPS in the range of $2.35 to $2.42, from the 2011 adjusted base of $2.54. Management expects to achieve this guidance range, with sales and adjusted EBIT near the lower end of the range and adjusted EPS, benefiting from a favorable tax rate, near the upper end of the range.
Third-Quarter Results
For the third quarter, sales were $1.821 billion, comparable to a year ago. The sales were impacted by the following factors:
Third-Quarter Financial Details
Nine-Month Results
Net earnings for the first nine months were $647 million, or $2.01 per share, compared with $705 million, or $2.11 per share, in the year-ago period. Excluding items impacting comparability in the current-year period, adjusted net earnings declined 7 percent to $653 million and adjusted net earnings per share declined 4 percent to $2.03.
For the first nine months of fiscal 2012, sales were $6.094 billion, comparable to the year-ago period. The sales were impacted by the following factors:
Nine-Month Financial Details
Summary of Fiscal 2012 Third-Quarter and Nine-Month Results by Segment
U.S. Simple Meals
Sales for U.S. Simple Meals were $567 million for the third quarter, a decrease of 2 percent compared to the year-ago period. A breakdown of the change in sales follows:
U.S. Soup sales declined 3 percent compared to the year-ago quarter.
U.S. Sauces sales were comparable to the year-ago quarter. Sales of “Prego” pasta sauce rose 3 percent driven by strong volume gains benefiting from increased advertising support and new items. Sales of “Pace” Mexican sauces were comparable to the prior year’s quarter.
U.S. Simple Meals operating earnings were $120 million compared with $139 million in the prior-year period, a decrease of 14 percent. The decline in operating earnings reflected lower volumes, cost inflation, and increased advertising and consumer promotion expenses, partly offset by higher selling prices and productivity improvements.
For the first nine months, sales for U.S. Simple Meals decreased 2 percent to $2.265 billion. A breakdown of the change in sales follows:
U.S. Soup sales declined 3 percent due to a 9-percent decrease in ready-to-serve soups and a 1-percent decrease in condensed soups. Sales of broth increased 3 percent.
U.S. Simple Meals operating earnings were $554 million in the first nine months compared with $556 million in the year-ago period. The slight decrease in operating earnings reflected lower earnings in U.S. Sauces, mostly offset by earnings gains in U.S. Soup. For the segment, lower volumes and cost inflation were mostly offset by higher selling prices, productivity improvements and lower promotional spending.
Global Baking and Snacking
Sales for Global Baking and Snacking were $543 million for the third quarter, an increase of 3 percent from a year ago. A breakdown of the change in sales follows:
Further details of sales results included the following:
Operating earnings for the quarter were $73 million compared with $82 million in the prior year. The 11-percent decline was primarily due to cost inflation and increased promotional spending, partly offset by higher selling prices and productivity improvements.
For the first nine months, sales increased 3 percent to $1.637 billion. A breakdown of the change in sales follows:
Operating earnings decreased 12 percent to $232 million compared with $263 million in the year-ago period, primarily due to cost inflation, increased promotional spending and higher advertising, partly offset by higher selling prices and productivity improvements.
International Simple Meals and Beverages
Sales for International Simple Meals and Beverages were $349 million for the third quarter, a decrease of 1 percent. The change in sales reflected the following factors:
Excluding the impact of currency, higher sales in Canada, Europe and Latin America were partly offset by lower sales in the Asia Pacific region.
Operating earnings were $37 million compared with $41 million in the year-ago period. The decrease in operating earnings was primarily due to lower earnings in the Asia Pacific region.
For the first nine months, sales decreased 3 percent to $1.110 billion. A breakdown of the change in sales follows:
The sales decline reflected lower sales in Europe and Canada, partly offset by gains in the Asia Pacific region.
Operating earnings fell to $138 million compared with $161 million in the year-ago period. The decrease in operating earnings was primarily due to lower earnings in the Asia Pacific region and increased costs associated with the company’s market expansion in China.
U.S. Beverages
Sales for U.S. Beverages were $208 million for the third quarter, an increase of 5 percent compared with the year-ago period. A breakdown of the change in sales follows:
Sales gains, which continued to outpace category growth, were driven by double-digit growth in “V8 Splash” beverages and gains in “V8 V-Fusion” beverages. Sales of “V8 V-Fusion” beverages benefited from a range of new products, including Smoothies, Sparkling and Energy drinks, as well as higher promotional support.
Operating earnings for the quarter were $45 million compared with $54 million in the year-ago period. The decrease in earnings was primarily due to the impact of cost inflation, increased promotional spending and higher advertising, partly offset by volume gains.
For the first nine months, sales increased 2 percent to $593 million. A breakdown of the change in sales follows:
Sales of both “V8 Splash” beverages and “V8 V-Fusion” beverages increased, while sales of “V8” vegetable juice declined.
Operating earnings declined to $109 million from $152 million, primarily due to cost inflation, increased promotional spending and higher advertising expense, partly offset by productivity improvements.
North America Foodservice
Sales for North America Foodservice were $154 million for the third quarter, comparable to the prior year. A breakdown of the change in sales follows:
Volume-driven sales gains in fresh chilled soup sold at retail were offset by declines in frozen and canned soup.
Operating earnings decreased $2 million to $20 million due to the decline in gross margin percentage.
For the first nine months, sales increased 5 percent to $489 million. A breakdown of the change in sales follows:
Operating earnings were $75 million compared with $66 million in the year-ago period, an increase of 14 percent. The increase in operating earnings was primarily driven by higher selling prices, productivity improvements and volume gains, partially offset by cost inflation.
Unallocated Corporate Expenses
Unallocated corporate expenses were $27 million compared with $31 million a year ago. Unallocated expenses for the first nine months were $90 million versus $88 million in the prior year.
Non-GAAP Financial Information
A detailed reconciliation of the adjusted financial information to the reported financial information is included at the end of this news release.
Conference Call
Campbell will host a conference call to discuss these results on May 21, 2012, at 10:00 a.m. Eastern Daylight Time. U.S. participants may access the call at 1-866-802-4364 and non-U.S. participants at 1-703-639-1325. Participants should call at least ten minutes prior to the starting time. The passcode is “Campbell Soup” and the conference leader is Jennifer Driscoll. The call will also be broadcast live over the Internet at investor.campbellsoupcompany.com and can be accessed by clicking on the “News & Events” button. A recording of the call will be available approximately two hours after it is completed through midnight June 4, 2012, at 1-888-266-2081 or 1-703-925-2533. The access code is 1577795.
Reporting Segments
Campbell Soup Company earnings results are reported for the following segments:
U.S. Simple Meals aggregates the U.S. Soup and U.S. Sauces businesses. The U.S. Soup business includes the following products: “Campbell’s” condensed and ready-to-serve soups, and “Swanson” broth and stocks. The U.S. Sauces business includes “Prego” pasta sauce, “Pace” Mexican sauce, “Swanson” canned poultry, “Campbell’s” canned pasta, gravies, and beans.
Baking and Snacking aggregates the following: “Pepperidge Farm” cookies, crackers, breads and frozen products in U.S. retail; and “Arnott’s” biscuits in Australia and Asia Pacific.
International Simple Meals and Beverages aggregates the following: soup, sauce and beverage products outside of the United States, including Europe, Latin America, Asia Pacific, China and the retail business in Canada.
U.S. Beverages represents the following products: “V8” vegetable juices, “V8 V-Fusion” juices and juice beverages, “V8 Splash” juice beverages, and “Campbell’s” tomato juice.
North America Foodservice represents 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 global manufacturer and marketer of high-quality foods and simple meals, including soup and sauces, 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.” 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 https://www.campbellsoup.com.
Forward-Looking Statements
This release contains “forward-looking statements” that reflect the company’s current expectations about the impact of its future plans and performance on sales, earnings, and margins. These forward-looking statements rely on a number of assumptions and estimates that could be inaccurate and which are subject to risks and uncertainties. The factors that could cause the company’s actual results to vary materially from those anticipated or expressed in any forward-looking statement include (1) the impact of strong competitive responses to the company’s efforts to leverage its brand power in the market; (2) the risks associated with trade and consumer acceptance of the company’s initiatives; (3) the company’s ability to realize projected cost savings and benefits; (4) the company’s ability to manage changes to its business processes; (5) the increased significance of certain of the company’s key trade customers; (6) the impact of fluctuations in the supply or costs of energy and raw and packaging materials; (7) the impact of 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.
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In fiscal 2012, the company recorded pre-tax restructuring charges of $4 ($3 after tax or $.01 per share) associated with the initiatives announced in June 2011 to improve supply chain efficiency, reduce overhead costs across the organization, and exit the Russian market.
In fiscal 2012, the company recorded pre-tax restructuring charges of $9 ($6 after tax or $.02 per share) associated with the initiatives announced in June 2011 to improve supply chain efficiency, reduce overhead costs across the organization, and exit the Russian market.
Percent
Change
Sales
Earnings
Reconciliation of GAAP and Non-GAAP Financial Measures
Third Quarter Ended April 29, 2012
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.
Organic Net Sales
The company believes that organic net sales, which exclude the impact of currency, are a better indicator of the company’s ongoing business performance. A reconciliation of net sales as reported and organic net sales follows.
Items Impacting 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 earnings results if these transactions are excluded.
The following items impacted earnings:
The tables below reconcile financial information, presented in accordance with GAAP, to financial information excluding certain transactions:
Source: Campbell Soup Company
Campbell Soup CompanyAnthony Sanzio (Media)856-968-4390[email protected]orJennifer Driscoll (Analysts/Investors)856-342-6081[email protected]
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