Campbell: Reports First-Quarter Results

Camden / NJ. (csc) Campbell Soup Company reported its fiscal 2010 first-quarter results. The highlights:

• Adjusted net earnings per share increased 14 percent to 0,87 USD
• Significant gross margin improvement driven by increased productivity
• Solid earnings performance across all segments
• Sales declined two percent; U.S. Soup Sales Declined three percent following twelve percent gain a year ago

Net earnings for the quarter ended November 01, 2009 were 304 million USD or 0,87 USD per share, compared to 260 million USD or 0,70 USD per share in the prior year. Excluding items impacting comparability from the prior year, net earnings per share increased 14 percent in the current quarter from adjusted net earnings per share of 0,76 USD in the prior period. The items impacting comparability and a detailed reconciliation of the adjusted fiscal 2009 financial information to the reported information are included at the end of this news release.

In the first quarter of fiscal 2010, Campbell adopted and retrospectively applied new accounting guidance related to the calculation of earnings per share. The retrospective application of these provisions resulted in a reduction of previously reported diluted net earnings per share of 0,01 USD for both the first quarter and full year of fiscal 2009.

Douglas R. Conant, Campbell´s President and Chief Executive Officer: «We feel good about our performance in the first quarter as we delivered solid earnings growth across all of our key businesses. We are especially pleased with the significant improvement in our gross margin, driven by increased productivity in our supply chain. Our U.S. Soup business faced difficult top-line comparisons with last year´s first quarter when sales increased twelve percent. In this year´s first quarter, we built momentum in the latter part of the quarter when, as planned, we significantly stepped up our marketing and merchandising programs. Looking ahead, we are optimistic about our U.S. Soup business, led by the renovated ‘Campbell´s Chunky’ line, innovations in our condensed portfolio and our ‘Swanson’ broth business. While it is early in the fiscal year, we are raising our guidance based on our results in the quarter and our outlook for the remainder of the year, including currency».

Campbell Raises Fiscal 2010 Guidance

Campbell now expects fiscal 2010 sales growth of four to five percent and adjusted earnings before interest and taxes (EBIT) growth of six to seven percent, up from its original guidance of three to four percent for sales and five to six percent for EBIT. The company now expects to deliver adjusted EPS growth of nine to eleven percent from the fiscal 2009 adjusted base of 2,21 USD, up from its original estimate of five to seven percent. This guidance includes the impact of currency translation, which at quarter-end rates of exchange would be favorable by three to four percentage points.

First-Quarter Results

For the first quarter, sales decreased two percent to 2,2 billion USD. The change in sales for the quarter reflected the following factors:

• Volume and mix subtracted four percent
• Price and sales allowances added two percent
• Increased promotional spending subtracted one percent
• Currency added one percent

First-Quarter Financial Details

• Gross margin was 41,9 percent compared with 38,7 percent a year ago. The prior year included 26 million USD of unrealized losses on commodity hedges and seven million USD of costs related to initiatives to improve operational efficiency and long-term profitability. After adjusting for these items, gross margin in the year-ago quarter was 40,2 percent. The increase in gross margin was primarily due to productivity improvements and pricing, net of promotional spending, in excess of cost inflation.
• Marketing and selling expenses decreased to 284 million USD compared with 307 million USD in the prior year, which included significant advertising costs associated with major soup initiatives. Lower advertising costs also reflected a reduction in media rates and a shift to trade promotion.
• Administrative expenses decreased to 133 million USD from 140 million USD, reflecting cost reduction efforts and lower incentive compensation costs, partly offset by higher pension expense.
• Earnings before interest and taxes (EBIT) were 478 million USD compared with 399 million USD in the prior-year quarter. Excluding items impacting comparability, adjusted EBIT in the prior-year quarter was 432 million USD. Adjusted EBIT increased eleven percent primarily due to improved gross margin performance and lower marketing expense, partly offset by lower sales.
• Cash flow from operations was a use of 36 million USD compared with a use of 15 million USD in the year-ago period. The current year cash flow reflected a 260 million USD contribution to Campbell´s U.S. pension plan, largely offset by improvements in working capital.
• During the quarter, Campbell repurchased three million shares for 94 million USD under its June 2008 strategic share repurchase program and the company´s ongoing practice of buying back shares sufficient to offset those issued under incentive compensation plans.

Baking and Snacking – Summary of Q1/2010 Results

Sales for Baking and Snacking were 530 million USD in the first quarter, an increase of four percent from a year ago. A breakdown of the change in sales follows:

• Volume and mix added one percent
• Price and sales allowances added two percent
• Increased promotional spending subtracted three percent
• Currency added three percent
• Acquisitions added one percent

Further details of sales results included the following:

• Pepperidge Farm sales were flat, as gains in the bakery business were offset by declines in the cookies and crackers business.
  • In the bakery business, sales increased due to the acquisition of Ecce Panis Inc., mostly offset by increased promotional spending.
  • In the cookies and crackers business, sales decreased as declines in cookies were mostly offset by the continued solid growth of «Goldfish» snack crackers.
• In Australia, sales increased due to the favorable impact of currency and significant growth in Arnott´s, led by higher sales of «Tim Tam» biscuits.

Operating earnings were 100 million USD compared with 83 million USD in the prior-year period. The increase in operating earnings was fueled by margin-driven growth in both Arnott´s and Pepperidge Farm and the favorable impact of currency.

Info: «Campbell Reports First-Quarter Results – Raises Full-Year Guidance – Expects Adjusted Net Earnings Per Share Growth of 9 to 11 Percent» (press release).