Campbell Profits Fall in Q4

Campbell provided guidance for fiscal 2010 adjusted net earnings per share growth of between 5 and 7 percent from the fiscal 2009 adjusted base of $2.22. The company expects a rise in net sales of 3 to 4 percent and an increase in adjusted earnings before interest and taxes of 5 to 6 percent.

14 Sep 2009 --- Campbell Soup Company has reported net earnings for the quarter ended Aug. 2, 2009 of $69 million, or $0.20 per share, compared with $89 million, or $0.24 per share, in the year-ago period. The current quarter's reported net earnings included adjustments related to commodity hedging and a non-cash impairment charge related to certain European trademarks. Excluding all items impacting comparability in both periods, adjusted net earnings rose 11 percent to $107 million compared with $96 million in the prior year's quarter, and adjusted net earnings per share grew by 15 percent to $0.30 in the current quarter compared with $0.26 in the year-ago quarter. Reflecting a stronger U.S. dollar, adjusted net earnings per share for the quarter were negatively impacted by $0.02 due to currency translation.

Douglas R. Conant, Campbell's President and Chief Executive Officer, said, "We completed the year with a solid fourth quarter and delivered a strong year of earnings growth. We were able to overcome currency headwinds and other macroeconomic challenges to achieve adjusted earnings per share growth within our long-term target of between 5 and 7 percent. We successfully introduced innovative new products, including 'Select Harvest' soups and 'Swanson' stock, and delivered strong sales growth across our entire U.S. soup portfolio and sauces businesses. We delivered an outstanding year in our Asia Pacific business, produced a very solid year in Pepperidge Farm and continued to advance our plans in the emerging markets of Russia and China. We also improved our gross margins through a combination of pricing actions and productivity improvements and generated more than $1 billion in cash flow from operations."

Conant concluded, "Over the last seven years, we have achieved consistent and sustainable business performance while improving our prospects for the future through investments in products, infrastructure and our geographic footprint. We have strong plans in place for the upcoming year and a broad slate of innovation across our portfolio of leading brands, especially in our U.S. soup business."

Campbell provided guidance for fiscal 2010 adjusted net earnings per share growth of between 5 and 7 percent from the fiscal 2009 adjusted base of $2.22. The company expects a rise in net sales of 3 to 4 percent and an increase in adjusted earnings before interest and taxes of 5 to 6 percent. This guidance is consistent with Campbell's long-term growth targets. The company anticipates benefits from its ongoing efforts to drive product innovation and expand margins through reduced costs and increased productivity, offset in part by the negative impact of an estimated $0.06 per share in increased pension expense.

In the fourth quarter of fiscal 2009, as a result of an annual review of intangible assets, the company recorded a non-cash impairment charge of $67 million ($47 million after tax or $0.13 per share) related to certain European trademarks. The current and prior quarter's net earnings included additional items that impacted comparability. These items are summarized below:

Fourth-quarter sales for U.S. Soup, Sauces and Beverages were $650 million, a decrease of 3 percent. The change in sales reflects the following factors:
0Volume and mix subtracted 1 percent
• Price and sales allowances added 5 percent
• One less week subtracted 7 percent

On a reported basis, U.S. soup sales for the quarter increased 1 percent. Excluding the impact of one less week and the acquisition of "Wolfgang Puck" soups, broths and stocks, U.S. soup sales increased 7 percent, driven by the following:

• Sales of "Campbell's" condensed soups increased 4 percent fueled by significant growth in cooking varieties and growth in eating varieties. Sales of cooking varieties benefitted from an increase of meals prepared at home.
• Sales of ready-to-serve soups increased 14 percent, due to gains in "Campbell's Select Harvest" soups, "Campbell's V8" premium soups and "Campbell's Chunky" soups.
• Sales of broth rose 7 percent, reflecting the successful introduction of "Swanson" stock and the continued growth of aseptic broth varieties.
• Sales, principally of ready-to-serve soups and broth, benefitted from a reduction in new item introductory costs, as the year-ago period reflected costs associated with the launches of "Campbell's Select Harvest" soups and "Swanson" cooking stock.

Further details of the sales results of this segment's other businesses include:
• Beverage sales decreased due to one less week and declines in "V8" vegetable juice, reflecting higher promotional spending, which was partially offset by gains in "V8 V-Fusion" juice.
• Sales of "Prego" pasta sauces experienced double-digit growth.
• "Pace" Mexican sauces sales declined slightly, as the impact of one less week was mostly offset by higher sales volumes.

Fourth-quarter operating earnings for the segment totaled $148 million compared with $124 million in the prior-year period. The increase in operating earnings was primarily due to lower marketing expense and an improved gross margin percentage, as pricing and productivity improvements exceeded cost inflation, partly offset by the impact of one less week.

For fiscal 2009, U.S. Soup, Sauces and Beverages sales increased 3 percent to $3.784 billion. A breakdown of the change in sales follows:
• Volume and mix subtracted 2 percent
• Price and sales allowances added 8 percent
• Increased promotional spending subtracted 2 percent
• One less week subtracted 1 percent

For the year, on a reported basis, U.S. soup sales increased 5 percent. Excluding the impact of one less week and the acquisition of "Wolfgang Puck" soups, broths and stocks, U.S. soup sales increased 5 percent, driven by the following:
• Sales of "Campbell's" condensed soup increased 6 percent, fueled by double-digit growth in cooking varieties and growth in eating varieties.
• Sales of ready-to-serve soup rose 4 percent driven by the successful launches of "Campbell's Select Harvest" soups and "Campbell's V8" premium soups, partly offset by lower sales of "Campbell's Chunky" varieties.    Broth sales increased 8 percent, due to the growth of aseptic broth and the successful introduction of "Swanson" cooking stock.
• Operating earnings increased to $927 million compared with $891 million in the year-ago period, primarily due to pricing net of increased promotional spending, and productivity improvements, which more than offset cost inflation and lower volumes.

Fourth-quarter sales for Baking and Snacking were $466 million, a decrease of 13 percent from a year ago. A breakdown of the change in sales follows:
• Volume and mix subtracted 1 percent
• Price and sales allowances added 4 percent
• Increased promotional spending subtracted 2 percent
• Currency subtracted 6 percent
• Divestitures and acquisitions subtracted 1 percent
• One less week subtracted 7 percent

Further details of sales results include the following:
• Pepperidge Farm sales declined due to one less week and a decline in the bakery business, partially offset by growth in the cookies and crackers business, driven by continued consumer demand for "Goldfish" snack crackers.
• In Australia, sales declined due to the impact of currency, one less week, divestitures and the discontinuation of private label and industrial chocolate businesses associated with the closing of a plant, partially offset by growth in the core Arnott's branded business. The biscuit business in Indonesia achieved significant sales growth.

Fourth-quarter operating earnings decreased to $69 million compared with $72 million a year ago. The decrease in operating earnings was due to the negative impact of currency, one less week and lower earnings in Arnott's, partially offset by increased earnings in Pepperidge Farm.

For fiscal 2009, sales in this segment decreased by 10 percent to $1.846 billion. A breakdown of the change in sales follows:
• Volume and mix subtracted 1 percent
• Price and sales allowances added 7 percent
• Increased promotional spending subtracted 2 percent
• Currency subtracted 6 percent
• Divestitures and acquisitions subtracted 6 percent
• One less week subtracted 2 percent

Operating earnings were $262 million compared with $120 million in the year-ago period. The current year included $3 million in costs related to initiatives to improve operational efficiency and long-term profitability compared with $144 million in such costs in the prior year. Excluding these items, operating earnings increased, as earnings growth in Pepperidge Farm and Arnott's was mostly offset by the negative impact of currency and one less week.

Fourth-quarter sales for International Soup, Sauces and Beverages were $289 million, a decrease of 20 percent compared to a year ago. The change in sales reflects the following factors:
• Volume and mix subtracted 1 percent
• Price and sales allowances added 7 percent
• Increased promotional spending subtracted 1 percent
• Currency subtracted 11 percent
• Divestitures subtracted 7 percent
• One less week subtracted 7 percent

Further details of sales results include the following:
• Sales in Europe declined primarily due to divestitures, the impact of currency and one less week. Excluding these items, sales increased slightly, as gains in the Belgium business were partly offset by lower sales in Germany.
• In Canada, sales decreased due to the impact of currency and one less week. Excluding these items, sales increased by double digits, primarily due to gains in the soup business.
• Sales in the Asia Pacific region decreased due to the impact of currency and one less week, partially offset by gains in Malaysia.

The segment had a fourth-quarter operating loss of $48 million, compared with operating earnings of $27 million in the year-ago period. The current year included an impairment charge of $67 million related to certain European trademarks. The prior year included $3 million in costs associated with restructuring initiatives. Excluding these items, operating earnings declined, primarily due to the impact of currency, the impact of one less week and costs associated with establishing businesses in Russia and China, partially offset by gains in Canada.

For fiscal 2009, sales decreased 16 percent to $1.357 billion. A breakdown of the change in sales follows:
• Volume and mix subtracted 3 percent
• Price and sales allowances added 5 percent
• Increased promotional spending subtracted 1 percent
• Currency subtracted 11 percent
• Divestitures subtracted 4 percent
• One less week subtracted 2 percent

Operating earnings decreased to $69 million from $179 million in the year-ago period. The current year included an impairment charge of $67 million related to certain European trademarks. The prior year included $9 million of restructuring charges. Excluding these items, operating earnings declined, primarily due to the impact of currency and costs associated with establishing businesses in Russia and China.

Fourth-quarter sales were $123 million, a decrease of 16 percent. A breakdown of the change in sales follows:
• Volume and mix subtracted 8 percent
• Price and sales allowances added 5 percent
• Increased promotional spending subtracted 4 percent
• Currency subtracted 2 percent
• One less week subtracted 7 percent

Operating earnings were $0 in both the current and prior-year quarter. The prior- year quarter included $7 million of costs related to initiatives to improve operational efficiency and long-term profitability. Excluding these items, operating earnings declined due to lower volumes as the foodservice sector continued to be negatively impacted by the economy.

For fiscal 2009, sales decreased 9 percent to $599 million. A breakdown of the change in sales follows:
• Volume and mix subtracted 8 percent
• Price and sales allowances added 6 percent
• Increased promotional spending subtracted 3 percent
• Currency subtracted 2 percent
• One less week subtracted 2 percent

Operating earnings decreased to $34 million from $40 million in the prior-year period. Costs related to initiatives to improve operational efficiency and long-term profitability totaled $19 million in the current year compared with $29 million in the prior period. Excluding these items, earnings decreased reflecting the reduction in sales.