Campbell Sales Up 7 Percent in Q2

18/02/08 Campbell Soup Company has reported net earnings for the quarter ended January 27, 2008 of $274 million or $0.71 per share compared to $285 million or $0.72 per share in the year-ago period.

Excluding items impacting comparability, adjusted net earnings were $266 million compared to $270 million in the prior year's quarter and adjusted net earnings per share were $0.69 in the current quarter compared to $0.68 in the year-ago period.

A detailed reconciliation of the adjusted fiscal 2008 and 2007 financial information to the reported information is attached to this release.

As a result of the previously announced pending sale of the Godiva business to Yildiz Holding A.S., the results of the Godiva business are now reported as discontinued operations for all periods.

Earnings from continuing operations for the quarter were $260 million compared to $257 million in the prior year. Earnings per share from continuing operations for the current quarter were $0.67 compared to earnings per share of $0.65 in the year-ago period.

The current quarter's earnings from continuing operations included a $13 million tax benefit, or $0.03 per share, from the favorable resolution of a state tax matter. The prior period's earnings included a $14 million after-tax gain, or $0.04 per share, from the sale of an idle Pepperidge Farm facility. Excluding these items in both years, earnings from continuing operations in the second quarter were $247 million compared to $243 million in the year-ago period. Adjusted earnings per share from continuing operations were $0.64 compared to $0.62 in the prior-year period, an increase of 3 percent.

Earnings from discontinued operations for the quarter were $14 million compared to $28 million in the prior-year period. The current quarter included $5 million, or $0.01 per share, of costs related to the pending Godiva divestiture. The prior year's quarter included a $1 million increase to the gain related to the sale of the company's U.K. and Ireland businesses.

The current quarter's net earnings per share of $0.71 included a $0.03 tax benefit from the resolution of the state tax matter and $0.01 of costs related to the pending Godiva divestiture. The prior period's net earnings per share of $0.72 included a $0.04 gain from the sale of the Pepperidge Farm facility. Excluding these items impacting comparability, adjusted net earnings per share in the second quarter were $0.69 compared to $0.68 a year ago.

For the second quarter, sales increased 7 percent to $2.218 billion. Sales growth for the quarter reflects the following factors:
• Volume and mix added 3 percent
• Price and sales allowances added 1 percent
• Currency added 3 percent

Net earnings for the first half of fiscal 2008 were $544 million or $1.41 per share compared to $576 million or $1.44 per share in the year-ago period. Excluding items impacting comparability, adjusted net earnings were $536 million compared to $539 million in the year-ago period. Adjusted net earnings per share were $1.39 in the current period compared to $1.35 in the prior period, an increase of 3 percent.

For the first half of fiscal 2008, earnings from continuing operations were $528 million versus $524 million a year earlier. Earnings per share from continuing operations were $1.36 compared to $1.31 a year ago.

The current year included the $13 million gain from the resolution of the state tax matter, and the prior year included the $14 million after-tax gain from the sale of the Pepperidge Farm facility. Excluding these items in both years, earnings from continuing operations for the first six months were $515 million compared to $510 million and earnings per share from continuing operations were $1.33 compared to $1.28 a year ago, an increase of 4 percent.

Earnings from discontinued operations for the six months were $16 million versus $52 million a year ago. The current year included $5 million after tax, or $0.01 per share, of costs related to the pending Godiva divestiture. The prior year included a $23 million after-tax, or $0.06 per share, gain from the sale of the company's U.K. and Ireland businesses.

The current year's net earnings per share of $1.41 included a $0.03 tax benefit from the resolution of the state tax matter and $0.01 of costs related to the pending Godiva divestiture. The prior period's net earnings per share of $1.44 included a $0.04 gain from the sale of the Pepperidge Farm facility and a $0.06 gain from the sale of the U.K. and Ireland businesses. Excluding these items impacting comparability, adjusted net earnings per share in the six months were $1.39 compared to $1.35 a year ago, an increase of 3 percent.

For the first half of fiscal 2008, net sales were $4.403 billion, an increase of 7 percent. Sales growth for the first half reflects the following factors:
• Volume and mix added 4 percent
• Price and sales allowances added 1 percent
• Increased promotional spending subtracted 1 percent
• Currency added 3 percent

Douglas R. Conant, Campbell's President and Chief Executive Officer, said, "Through the first half of the year we have delivered strong sales growth across many of our businesses. Despite the difficult operating environment, we also have delivered solid earnings performance from continuing operations, while maintaining marketing support for our key brands.

"In the quarter, our U.S. soup business rebounded from a slow start to the year, driven by the performance of ready-to-serve soups and broths. Across our soup portfolio, lower sodium soups continued to perform well. Our beverage business continued its outstanding performance, with double-digit sales growth. Pepperidge Farm delivered strong sales and earnings growth in spite of significant commodity cost increases."

Conant continued, "Like many companies in the food industry, Campbell has faced unprecedented commodity and energy cost increases this year. The significant increase in these costs negatively impacted the company's gross margin during the first six months of the year. We are taking the necessary steps to restore margin through a combination of price increases and ongoing productivity improvements."

Conant concluded, "Once we complete the divestiture of the Godiva business, Campbell will be an even more focused food company and be better able to leverage our competitive advantages in our three strategic growth areas of simple meals, anchored by soup; baked snacks, anchored by biscuits; and healthful beverages, anchored by vegetable-based beverages. With this sharpened focus, Campbell will be well positioned for future growth."

Consistent with its previous guidance, Campbell expects its fiscal 2008 adjusted net earnings per share to increase between 5 and 7 percent from the fiscal 2007 adjusted base of $1.95. Campbell will provide further guidance following the completion of the Godiva divestiture.