(Source: Business Wire)
Campbell Soup Company (NYSE:CPB) today reported net earnings for the quarter ended Aug. 2, 2009 of $69 million, or $0.20 per share, compared with $89 million, or $0.24 per share, in the year-ago period. The current quarter's reported net earnings included adjustments related to commodity hedging and a non-cash impairment charge related to certain European trademarks. Excluding all items impacting comparability in both periods, adjusted net earnings rose 11 percent to $107 million compared with $96 million in the prior year's quarter, and adjusted net earnings per share grew by 15 percent to $0.30 in the current quarter compared with $0.26 in the year-ago quarter. Reflecting a stronger U.S. dollar, adjusted net earnings per share for the quarter were negatively impacted by $0.02 due to currency translation.
Douglas R. Conant, Campbell's President and Chief Executive Officer, said, "We completed the year with a solid fourth quarter and delivered a strong year of earnings growth. We were able to overcome currency headwinds and other macroeconomic challenges to achieve adjusted earnings per share growth within our long-term target of between 5 and 7 percent. We successfully introduced innovative new products, including Select Harvest' soups and Swanson' stock, and delivered strong sales growth across our entire U.S. soup portfolio and sauces businesses. We delivered an outstanding year in our Asia Pacific business, produced a very solid year in Pepperidge Farm and continued to advance our plans in the emerging markets of Russia and China. We also improved our gross margins through a combination of pricing actions and productivity improvements and generated more than $1 billion in cash flow from operations."
Conant concluded, "Over the last seven years, we have achieved consistent and sustainable business performance while improving our prospects for the future through investments in products, infrastructure and our geographic footprint. We have strong plans in place for the upcoming year and a broad slate of innovation across our portfolio of leading brands, especially in our U.S. soup business."
Fiscal 2010 Guidance Consistent with Long-term Growth Targets
Campbell provided guidance for fiscal 2010 adjusted net earnings per share growth of between 5 and 7 percent from the fiscal 2009 adjusted base of $2.22. The company expects a rise in net sales of 3 to 4 percent and an increase in adjusted earnings before interest and taxes of 5 to 6 percent. This guidance is consistent with Campbell's long-term growth targets. The company anticipates benefits from its ongoing efforts to drive product innovation and expand margins through reduced costs and increased productivity, offset in part by the negative impact of an estimated $0.06 per share in increased pension expense.
Fourth-Quarter Financial Results
In the fourth quarter of fiscal 2009, as a result of an annual review of intangible assets, the company recorded a non-cash impairment charge of $67 million ($47 million after tax or $0.13 per share) related to certain European trademarks. The current and prior quarter's net earnings included additional items that impacted comparability. These items are summarized below:
Fourth Quarter 2009 2008 (millions, except per share amounts) Earnings EPS Earnings EPS Net earnings, as reported $ 69 $ 0.20 $ 89 $ 0.24 Continuing Operations Earnings from continuing operations, as reported $ 69 $ 0.20 $ 89 $ 0.24 Net adjustment on commodity hedges (9 ) (0.03 ) - - Adjustment for non-cash impairment charge on intangible assets 47 0.13 - - Adjustment for restructuring charges and related costs - - 7 0.02 Adjusted earnings from continuing operations $ 107 $ 0.30 $ 96 $ 0.26 Discontinued Operations Earnings from discontinued operations, as reported $ - $ - $ - $ - Adjusted net earnings $ 107 $ 0.30 $ 96 $ 0.26 -------------------------------------------------------------------------------
A detailed reconciliation of the adjusted fiscal 2009 and 2008 financial information to the reported information is attached to this news release.
For the fourth quarter, which included 13 weeks compared with 14 weeks in the year-ago quarter, sales decreased 11 percent to $1.528 billion. The change in sales for the quarter reflects the following factors:
Volume and mix subtracted 2 percent
Price and sales allowances added 5 percent
Increased promotional spending subtracted 1 percent
Currency subtracted 4 percent
Divestitures and acquisitions subtracted 2 percent
One less week subtracted 7 percent
Additional Fourth-Quarter Financial Details
The company's gross margin for the fourth quarter was 41.6 percent compared with 38.7 percent in the prior year's quarter. The current quarter included a favorable net adjustment of $14 million related to commodity hedging. The prior year's period included $7 million of costs related to the company's initiatives to improve operational efficiency and long-term profitability. After adjusting for these items, the gross margin percentage for the fourth quarter was 40.6 percent, compared with 39.1 percent in the prior-year quarter. The increase in gross margin percentage was primarily due to pricing and productivity improvements in excess of cost inflation.
Marketing and selling expenses decreased by $54 million to $209 million, reflecting lower marketing expenses, the impact of one less week and the impact of currency. The reduction in marketing expenses was primarily due to lower expenditures in the U.S. beverage business and Pepperidge Farm, as the company shifted funds to promotional programs to strengthen the value proposition in these premium segments.
Administrative expenses increased to $184 million from $168 million, primarily due to higher incentive compensation costs, partially offset by the impact of currency.
Excluding items impacting comparability, earnings before interest and taxes were unchanged at $198 million for both the current and prior-year quarter. Currency translation adversely impacted growth in earnings before interest and taxes by 6 percentage points. Growth in earnings before interest and taxes was also negatively impacted by one less week in the quarter compared with a year ago. Excluding the impact of currency and one less week in the quarter, earnings before interest and taxes increased primarily due to lower marketing expenses and improved gross margin performance.
Net interest expense declined to $23 million compared with $38 million in the prior-year quarter due to a significant decline in the company's short-term borrowing rates.
Full Year Financial Results
The current and prior year's net earnings included items that impacted comparability. These items are summarized below:
Twelve Months 2009 2008 (millions, except per share amounts) Earnings EPS Earnings EPS Net earnings, as reported $ 736 $ 2.06 $ 1,165 $ 3.06 Continuing Operations Earnings from continuing operations, as reported $ 732 $ 2.04 $ 671 $ 1.76 Adjustment for non-cash impairment charge on intangible assets 47 0.13 - - Adjustment for restructuring charges and related costs 15 0.04 107 0.28 Benefit from resolution of a state tax contingency - - (13 ) (0.03 ) Adjusted earnings from continuing operations $ 794 $ 2.22 * $ 765 $ 2.01 Discontinued Operations Earnings from discontinued operations, as reported $ 4 $ 0.01 $ 494 $ 1.30 Adjustment for gain on sale of Godiva Chocolatier - - (462 ) (1.21 ) Adjustment to taxes on gain on sale of Godiva Chocolatier (4 ) (0.01 ) - - Adjusted earnings from discontinued operations $ - $ - $ 32 $ 0.08 * Adjusted net earnings $ 794 $ 2.22 $ 797 $ 2.09 * Does not add due to rounding. -------------------------------------------------------------------------------
Net earnings for fiscal 2009 were $736 million, or $2.06 per share, compared with $1.165 billion, or $3.06 per share, in the prior fiscal year.
Excluding items impacting comparability, adjusted net earnings were $794 million for fiscal 2009 compared with $797 million in the prior fiscal year. Adjusted net earnings per share were $2.22 for the current fiscal year, an increase of 6 percent, compared with $2.09 for the prior fiscal year. Currency translation negatively impacted adjusted net earnings by $0.09 per share.
For fiscal 2009, which had one less week than fiscal 2008, net sales were $7.586 billion, a decrease of 5 percent. The change in sales for the year reflects the following factors:
Volume and mix subtracted 2 percent
Price and sales allowances added 7 percent
Increased promotional spending subtracted 2 percent
Currency subtracted 4 percent
Divestitures and acquisitions subtracted 2 percent
One less week subtracted 2 percent
Additional Full Year Financial Details
The company's gross margin for fiscal 2009 was 39.9 percent compared with 39.6 percent a year ago. The current year included $22 million of costs related to initiatives to improve operational efficiency and long-term profitability. The prior year included $7 million of costs related to these initiatives. After adjusting for these items, the company's gross margin percentage increased to 40.2 percent from 39.7 percent. The increase was primarily due to higher selling prices and productivity improvements, partially offset by cost inflation.
Marketing and selling expenses decreased by $85 million to $1.077 billion, primarily due to the impact of currency, lower marketing expenses and lower selling expenses. While advertising increased in the U.S. Soup business, the company reduced marketing expenses in other businesses to fund increased promotional activity.
Administrative expenses decreased $17 million to $591 million, primarily due to the impact of currency.
Excluding items impacting comparability, earnings before interest and taxes were $1.274 billion compared with $1.280 billion in the prior year. Currency translation adversely impacted growth in earnings before interest and taxes by 4 percentage points.
In fiscal 2009, Campbell repurchased 17 million shares for $527 million under its June 2008 strategic share repurchase program and the company's ongoing practice of buying shares sufficient to offset shares issued under incentive compensation plans.
Cash flow from operations for fiscal 2009 was $1.166 billion compared with $766 million in the prior period. The prior-year cash flow reflects the negative impact of approximately $230 million of taxes paid in connection with the sale of the Godiva business.
Summary of Fiscal 2009 Fourth-Quarter Results by Segment
U.S. Soup, Sauces and Beverages
Fourth-quarter sales for U.S. Soup, Sauces and Beverages were $650 million, a decrease of 3 percent. The change in sales reflects the following factors:
Volume and mix subtracted 1 percent
Price and sales allowances added 5 percent
One less week subtracted 7 percent
On a reported basis, U.S. soup sales for the quarter increased 1 percent. Excluding the impact of one less week and the acquisition of "Wolfgang Puck" soups, broths and stocks, U.S. soup sales increased 7 percent, driven by the following:
Sales of "Campbell's" condensed soups increased 4 percent fueled by significant growth in cooking varieties and growth in eating varieties. Sales of cooking varieties benefitted from an increase of meals prepared at home.
Sales of ready-to-serve soups increased 14 percent, due to gains in "Campbell's Select Harvest" soups, "Campbell's V8" premium soups and "Campbell's Chunky" soups.
Sales of broth rose 7 percent, reflecting the successful introduction of "Swanson" stock and the continued growth of aseptic broth varieties.
Sales, principally of ready-to-serve soups and broth, benefitted from a reduction in new item introductory costs, as the year-ago period reflected costs associated with the launches of "Campbell's Select Harvest" soups and "Swanson" cooking stock.
Further details of the sales results of this segment's other businesses include:
Beverage sales decreased due to one less week and declines in "V8" vegetable juice, reflecting higher promotional spending, which was partially offset by gains in "V8 V-Fusion" juice.
Sales of "Prego" pasta sauces experienced double-digit growth.
"Pace" Mexican sauces sales declined slightly, as the impact of one less week was mostly offset by higher sales volumes.
Fourth-quarter operating earnings for the segment totaled $148 million compared with $124 million in the prior-year period. The increase in operating earnings was primarily due to lower marketing expense and an improved gross margin percentage, as pricing and productivity improvements exceeded cost inflation, partly offset by the impact of one less week.
For fiscal 2009, U.S. Soup, Sauces and Beverages sales increased 3 percent to $3.784 billion. A breakdown of the change in sales follows:
Volume and mix subtracted 2 percent
Price and sales allowances added 8 percent
Increased promotional spending subtracted 2 percent
One less week subtracted 1 percent
For the year, on a reported basis, U.S. soup sales increased 5 percent. Excluding the impact of one less week and the acquisition of "Wolfgang Puck" soups, broths and stocks, U.S. soup sales increased 5 percent, driven by the following:
Sales of "Campbell's" condensed soup increased 6 percent, fueled by double-digit growth in cooking varieties and growth in eating varieties.
Sales of ready-to-serve soup rose 4 percent driven by the successful launches of "Campbell's Select Harvest" soups and "Campbell's V8" premium soups, partly offset by lower sales of "Campbell's Chunky" varieties.
Broth sales increased 8 percent, due to the growth of aseptic broth and the successful introduction of "Swanson" cooking stock.
Operating earnings increased to $927 million compared with $891 million in the year-ago period, primarily due to pricing net of increased promotional spending, and productivity improvements, which more than offset cost inflation and lower volumes.
Baking and Snacking
Fourth-quarter sales for Baking and Snacking were $466 million, a decrease of 13 percent from a year ago. A breakdown of the change in sales follows:
Volume and mix subtracted 1 percent
Price and sales allowances added 4 percent
Increased promotional spending subtracted 2 percent
Currency subtracted 6 percent
Divestitures and acquisitions subtracted 1 percent
One less week subtracted 7 percent
Further details of sales results include the following:
Pepperidge Farm sales declined due to one less week and a decline in the bakery business, partially offset by growth in the cookies and crackers business, driven by continued consumer demand for "Goldfish" snack crackers.
In Australia, sales declined due to the impact of currency, one less week, divestitures and the discontinuation of private label and industrial chocolate businesses associated with the closing of a plant, partially offset by growth in the core Arnott's branded business. The biscuit business in Indonesia achieved significant sales growth.
Fourth-quarter operating earnings decreased to $69 million compared with $72 million a year ago. The decrease in operating earnings was due to the negative impact of currency, one less week and lower earnings in Arnott's, partially offset by increased earnings in Pepperidge Farm.
For fiscal 2009, sales in this segment decreased by 10 percent to $1.846 billion. A breakdown of the change in sales follows:
Volume and mix subtracted 1 percent
Price and sales allowances added 7 percent
Increased promotional spending subtracted 2 percent
Currency subtracted 6 percent
Divestitures and acquisitions subtracted 6 percent
One less week subtracted 2 percent
Operating earnings were $262 million compared with $120 million in the year-ago period. The current year included $3 million in costs related to initiatives to improve operational efficiency and long-term profitability compared with $144 million in such costs in the prior year. Excluding these items, operating earnings increased, as earnings growth in Pepperidge Farm and Arnott's was mostly offset by the negative impact of currency and one less week.
