Campbell Profits Hit on UK Sale Costs
During the fourth quarter of fiscal 2006, the company reached agreement for the sale of its U.K. and Irish businesses. The operating results for these businesses are reflected as discontinued operations.
13/09/06 Campbell Soup Co. reported Monday that its profit fell 54 percent in its fourth quarter, largely because of expenses related to the sale of its British business. The world's biggest soupmaker said it earned $44 million, or 11 cents a share, in the three months ended July 30, down from $96 million, or 23 cents a share, a year ago.
During the fourth quarter of fiscal 2006, the company reached agreement for the sale of its U.K. and Irish businesses. The operating results for these businesses are reflected as discontinued operations. The company recorded $61 million, or $.15 per share, of expenses in discontinued operations related to the divestiture of these businesses. These expenses included $7 million ($5 million after-tax) of costs associated with the sale and $56 million in tax expense representing taxes on the difference between the book value and tax basis of the assets.
In the fourth quarter of fiscal 2006, the company recorded in continuing operations a non-cash tax benefit of $14 million, or $.03 per share, from the anticipated use of higher levels of foreign tax credits, which can be utilized as a result of the sale of the company's U.K. and Irish businesses.
In the fourth quarter of fiscal 2006, a $4 million, or $.01 per share, charge was recorded associated with the repatriation of earnings from non-U.S. subsidiaries under the provisions of the American Jobs Creation Act (AJCA).
Beginning in fiscal 2006, the company adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment" (SFAS 123R). Under SFAS 123R, compensation expense is now recognized for all stock-based awards, including stock options. Had all awards in fiscal 2005 been expensed, the pro forma impact on the year-ago fourth quarter would result in a $7 million reduction in net earnings and a $.02 reduction in earnings per share, resulting in net earnings of $89 million and earnings per share of $.21.
After factoring these items into the reported results, earnings per share for the fourth quarter of fiscal 2006 would have been $.23 compared to an adjusted result of $.21 in the year-ago period, an increase of 10 percent. For fiscal 2006, the company reported earnings per share of $1.85 compared to $1.71 recorded in the year-ago period. Factors impacting comparability of earnings in the fiscal year include the following:
Douglas R. Conant, Campbell's President and Chief Executive Officer, said, "We are very pleased with our performance in the fourth quarter. We exceeded our expectations for earnings while we also significantly increased spending on advertising in our U.S. businesses. In addition, we achieved successful distribution of our new lower sodium soups in the U.S.
"For the year, our overall results were outstanding, consistent with our commitment to deliver quality growth. Our top-line growth from continuing operations of 4 percent was at the upper end of our target range, and our earnings per share growth of 12 percent, on an adjusted basis, were well above our target. We continue to position our business for sustainable sales and earnings growth."
