Campbell Soup Fiscal 2013 Q1 Net Earnings Up 7.5%

Denise Morrison, Campbell’s President and Chief Executive Officer, said, “We are encouraged by our performance in the first quarter and feel good about the progress we’ve made in executing our three growth strategies.

26 Nov 2012 --- Net earnings for the quarter ended Oct. 28, 2012, were $245 million, or $0.78 per share, compared with $265 million, or $0.82 per share, in the prior year. The current quarter’s reported net earnings included transaction costs associated with the acquisition of Bolthouse Farms, as well as charges associated with the Sept. 2012 restructuring program. Excluding these items impacting comparability, adjusted net earnings increased 5 percent to $279 million, and adjusted net earnings per share increased 7 percent to $0.88 in the current quarter. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.

Denise Morrison, Campbell’s President and Chief Executive Officer, said, “We are encouraged by our performance in the first quarter and feel good about the progress we’ve made in executing our three growth strategies.

“In our largest business, U.S. Simple Meals, we generated sales growth both in U.S. Soup and in U.S. Sauces, driven by innovation in our base business and by new product introductions. Our recently acquired Bolthouse Farms business performed very well in the quarter, and we remain excited about the growth platform it provides Campbell in the packaged fresh foods category. We delivered continued solid performance at Pepperidge Farm in the crackers business, while our bakery business declined in the quarter. Our Asia Pacific business delivered good results, driven by improved performance in Australia and strong sales growth in Malaysia and Indonesia. In U.S. Beverages, our core business in original ‘V8’ vegetable juice and ‘V8 V-Fusion’ beverages continued to be challenged by slackening consumer demand.”

Morrison concluded, “Overall, our fiscal year 2013 is off to a solid start. We remain focused on returning our company to sustainable, profitable net sales growth. We know we have more work to do to change Campbell’s growth trajectory and achieve our long-term targets on our base business.”

Campbell Confirms Fiscal 2013 Guidance

The company confirmed its previous fiscal 2013 guidance. Campbell expects to grow sales between 10 and 12 percent, adjusted EBIT between 4 and 6 percent and adjusted EPS between 3 and 5 percent. The company expects adjusted EPS to be between $2.51 and $2.57. This guidance includes the estimated impact of the Bolthouse Farms business and excludes the impact of acquisition transaction costs and restructuring charges. In fiscal 2013, Campbell expects Bolthouse Farms to contribute approximately $750 million to sales and add $0.05 to $0.07 to adjusted EPS, including the impact of the suspension of Campbell’s strategic share repurchase program.

Restructuring Program

On Sept. 27, 2012, Campbell announced a program to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network. This initiative includes plans to close the company’s South Plainfield spice plant by March 2013 and its Sacramento plant by July 2013. In the aggregate, the company expects to incur pre-tax costs of approximately $115 million, most of which will be incurred in fiscal 2013. In the first quarter, Campbell recorded pre-tax costs of $43 million, $27 million after tax or $0.09 per share, related to these initiatives.

First-Quarter Results

For the first quarter, sales increased 8 percent to $2.336 billion. The increase in sales for the quarter reflected the following factors:

- The acquisition of Bolthouse Farms added 8 percent
- Price and sales allowances added 2 percent
- Increased promotional spending subtracted 1 percent
- Currency subtracted 1 percent

First-Quarter Financial Details

- Gross margin was 37.0 percent compared with 39.5 percent a year ago. Excluding items impacting comparability, adjusted gross margin in the current quarter was 37.9 percent. The decline in gross margin was primarily attributable to the acquisition of Bolthouse Farms, which operates with a lower gross margin structure.
- Marketing and selling expenses decreased 3 percent to $254 million compared with $261 million in the prior year. Consistent with the company’s plans, the decline was primarily due to reductions in advertising and consumer promotion expenses in the U.S. Soup business, partly offset by the impact of the addition of Bolthouse Farms expenses.
- Administrative expenses increased $17 million to $162 million, primarily due to the acquisition of Bolthouse Farms and higher compensation and benefit costs, including pension expenses.
- EBIT was $385 million compared with $416 million in the prior-year quarter. Excluding items impacting comparability, adjusted EBIT increased 5 percent to $438 million. Excluding the impact of the Bolthouse Farms acquisition, adjusted EBIT increased 2 percent, primarily driven by lower advertising and consumer promotion expense in the U.S. Soup business, partly offset by higher administrative expenses.
- The tax rate in the quarter was 31.0 percent compared with 32.2 percent in the prior year. Excluding items impacting comparability, the adjusted tax rate was 31.6 percent. The decrease reflected the favorable settlement of a U.S. state tax matter.
- Net interest expense increased $5 million to $33 million, reflecting a higher debt level due to the acquisition of Bolthouse Farms, partially offset by lower rates on the company’s debt.
- Adjusted net earnings for the quarter increased 5 percent to $279 million. Adjusted net earnings per share were $0.88 in the current quarter compared with net earnings per share of $0.82 in the prior-year quarter, an increase of 7 percent. Earnings per share benefitted from fewer shares outstanding, reflecting the impact of the company’s share repurchase program in prior quarters.
- Cash flow from operations was $81 million compared with $73 million in the prior year.
- Net debt rose to $4.086 billion, an increase of $1.382 billion, primarily due to funding the $1.570 billion purchase of Bolthouse Farms.