Campbell Fourth-Quarter Sales Increase 7 Percent; Organic Sales Decrease 2 Percent

10 Sep 2014 --- Campbell Soup Company has 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.”

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:
• Acquisitions added 3 percent
• Increased promotional spending subtracted 2 percent
• Currency subtracted 1 percent
• The 53rd week added 7 percent

Fourth-Quarter Financial Details – Continuing Operations
• Gross margin was 34.1 percent, compared with 36.2 percent a year ago. Excluding items impacting comparability in both periods, adjusted gross margin for the quarter was 34.3 percent, compared with 36.7 percent a year ago. The decline was primarily attributable to increased supply chain costs, cost inflation and higher promotional spending, partly offset by productivity improvements.
• Marketing and selling expenses decreased 1 percent to $189 million. The decrease was primarily due to lower advertising and consumer promotion expenses, lower selling expenses and the impact of currency, partly offset by the impact of acquisitions.
• Administrative expenses decreased $46 million to $149 million, primarily due to lower incentive compensation costs and cost savings from restructuring initiatives.
• EBIT was $234 million, compared with $178 million in the prior-year quarter. Excluding items impacting comparability in both periods, adjusted EBIT increased 25 percent to $259 million. The increase was primarily due to lower administrative expenses and the benefit of the additional week, partly offset by a lower gross margin percentage.
• The tax rate in the quarter was 33.8 percent, compared with 22.3 percent in the year-ago quarter. Excluding items impacting comparability in both periods, the current quarter’s adjusted tax rate was 33.2 percent, compared with 24.7 percent in the year-ago quarter. The prior-year rate for the quarter benefited from lower taxes on foreign earnings.

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.