Campbell second quarter earnings rise 8%

17/02/06 Campbell Soup Company has reported a net earnings increase to $254 million in the second quarter ended January 29, 2006 from $235 million in the prior year. Diluted earnings per share for the quarter were $.61, compared with $.57 in the year-ago period. Beginning in fiscal year 2006, the company adopted a new accounting standard (SFAS 123R) that requires all stock-based compensation to be expensed. Had all stock-based compensation been expensed in the year-ago quarter, net earnings would have been $227 million and diluted earnings per share would have been $.55. After factoring in this item, earnings per share for the second quarter increased 11 percent.

For the first half of fiscal year 2006, the company reported net earnings of $556 million versus $465 million a year earlier and earnings per share of $1.34 versus $1.13 in the year-ago period.

During the first quarter, the company recorded a non-cash tax benefit resulting from the favorable resolution of a U.S. tax contingency related to transactions involving government securities in a prior period. The aggregate non-cash impact of the settlement on net earnings was $60 million, or $.14 per share.

Cash flow from operations for the first half of fiscal year 2006 was $649 million versus $500 million in the year-ago period, an increase of 30 percent. In addition, the company repurchased 4.2 million shares at a cost of $127 million in the first half of fiscal year 2006 to offset the impact of dilution from shares issued under stock compensation plans and as part of the strategic repurchase plan announced in November 2005.

Douglas R. Conant, Campbell's President and Chief Executive Officer, said, "Our solid performance this quarter was consistent with our expectations. Our top-line growth was driven by strong increases across our U.S. soup business. Both our condensed portfolio and broth delivered good growth, while our ready-to-serve soups showed significant improvement following a weak first quarter.
"For the first six months, we are pleased with our earnings performance. We continued to improve our profit margins through pricing and productivity, which more than offset cost inflation, and enabled us to drive strong earnings growth in a challenging environment."

Conant continued, "From a strategic perspective, we continue to focus on long-term growth initiatives, including premium soups. One example is 'Campbell's Select Gold Label' soup in aseptic packaging, which we introduced in the U.S. this year and is off to a promising start. From an international perspective, we are not satisfied with our business performance – especially in Europe, most notably the U.K., where we face an increasingly challenging competitive environment."

Excluding the items previously noted that impact comparability, the company confirmed its fiscal 2006 guidance for earnings per share to increase between 5 and 7 percent from the adjusted fiscal year 2005 base of $1.64, which reflects the impact of expensing all stock-based compensation.