Campbell Reports First Quarter Results

The current quarter’s reported net earnings included charges associated with previously announced restructuring initiatives and the impact of an unrealized loss on the company’s commodity hedging activities.

25/11/08 Campbell Soup Company reported net earnings for the quarter ended November 2, 2008 of $260 million, or $0.71 per share, compared to $270 million, or $0.70 per share, in the prior year. The current quarter’s reported net earnings included charges associated with previously announced restructuring initiatives and the impact of an unrealized loss on the company’s commodity hedging activities. Excluding all items impacting comparability, adjusted net earnings were $281 million and adjusted net earnings per share were $0.77 in the current quarter, an increase of 10 percent.

For the first quarter, sales increased 3 percent to $2.250 billion. Sales growth for the quarter reflects the following factors:

* Volume and mix added 1 percent
* Price and sales allowances added 7 percent
* Increased promotional spending subtracted 2 percent
* Currency subtracted 1 percent
* Divestitures subtracted 2 percent

Douglas R. Conant, Campbell's President and Chief Executive Officer, said, “We are off to a good start to the year. Our product innovations and marketing efforts have resulted in strong top-line performance across our U.S. soup portfolio. This was especially evident in our condensed soup and broth businesses, both of which had double-digit gains in the quarter. We also are encouraged by the successful launch and early results of our new ‘Campbell’s Select Harvest’ and ‘Campbell’s’ ‘V8’ ready-to-serve soups.

“Beyond U.S. soup, we had strong performance in our U.S. sauces business, although the growth of our U.S. beverage business slowed compared to the rapid growth of the last several quarters. Pepperidge Farm again delivered strong sales performance with ‘Goldfish’ and Baked Naturals snack crackers. Arnott’s achieved significant growth in its savory crackers business, and our European branded soup performance was solid. In emerging markets, we continued to invest in our businesses in Russia and China as we prepared to expand our operations in both countries.”

Conant concluded, “We are pleased with our performance in today’s challenging and uncertain economic environment. Campbell’s product portfolio is well positioned in both good and tough economic times. As consumers continue to seek value, they can choose a variety of Campbell’s products to help them provide wholesome, affordable food.”

Fiscal 2009 Guidance

In September 2008, Campbell stated that for fiscal 2009 it expected to deliver sales growth, excluding the negative impact of one less week in the fiscal year and divestitures, in excess of its long-term target range of between 3 and 4 percent; adjusted 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; and growth in adjusted net earnings per share of between 5 and 7 percent from the fiscal 2008 adjusted base of $2.09.

Approximately 25 to 30 percent of Campbell’s sales and earnings come from non-U.S. operations. On a currency neutral basis, Campbell expects to deliver its previously announced targets. Notwithstanding the fact that the company is making efforts to improve future performance, at quarter-end rates of exchange, the company’s fiscal 2009 sales, EBIT and EPS growth rates each would be negatively impacted by approximately 5 percentage points as a result of currency translation.

First Quarter Financial Details

* Gross margin was 38.7 percent compared to 40.8 percent a year ago. The current year includes a $26 million unrealized loss on commodity hedges and $7 million of costs related to initiatives to improve operational efficiency and long-term profitability. After adjusting for these items, gross margin for the quarter was 40.2 percent. The decline in gross margin was primarily due to cost inflation in excess of pricing.
* Marketing and selling expenses increased to $307 million due to higher advertising, mainly in the U.S. soup business, where the company launched two new ready-to-serve soups, “Campbell’s Select Harvest” and “Campbell’s” “V8.” Campbell also launched new “Swanson” cooking stock and introduced new advertising for “Campbell’s” condensed soups.
* Net debt, or total debt minus cash and cash equivalents, was $2.693 billion compared to $2.737 billion a year ago, a decrease of $44 million.
* Average diluted shares outstanding declined to 365 million from 388 million primarily due to repurchases utilizing net proceeds from the divestiture of the Godiva business and Campbell’s strategic share repurchase programs.
* During the quarter, Campbell repurchased 3 million shares for $114 million under its June 2008 strategic share repurchase program and the company’s ongoing practice of buying back shares sufficient to offset shares issued under incentive compensation plans.