Campbell Reports First-Quarter Results Raises Full-Year Guidance: Expects Adjusted Net Earnings Per Share Growth of 9 to 11 Percent
CAMDEN, N.J., Nov. 23, 2009-Campbell Soup Company (NYSE: CPB) today reported its fiscal 2010 first-quarter results.
•Adjusted Net Earnings Per Share Increased 14 Percent to $0.87 •Significant Gross Margin Improvement Driven by Increased Productivity •Solid Earnings Performance Across All Segments •Sales Declined 2 Percent; U.S. Soup Sales Declined 3 Percent Following 12 Percent Gain a Year Ago Net earnings for the quarter ended Nov. 1, 2009 were $304 million, or $0.87 per share, compared to $260 million, or $0.70 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 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 for both the first quarter and full year of fiscal 2009.
Douglas R. Conant, Campbell's President and Chief Executive Officer, said, "We feel good about our performance in the first quarter as we delivered solid earnings growth across all of our key businesses. We're 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 12 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're 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."
Conant concluded, "While it is early in the fiscal year, we're 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 4 to 5 percent and adjusted earnings before interest and taxes (EBIT) growth of 6 to 7 percent, up from its original guidance of 3 to 4 percent for sales and 5 to 6 percent for EBIT. The company now expects to deliver adjusted EPS growth of 9 to 11 percent from the fiscal 2009 adjusted base of $2.21, up from its original estimate of 5 to 7 percent. This guidance includes the impact of currency translation, which at quarter-end rates of exchange would be favorable by 3 to 4 percentage points.
•Gross margin was 41.9 percent compared with 38.7 percent a year ago. The prior year included $26 million of unrealized losses on commodity hedges and $7 million 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 compared with $307 million 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 from $140 million, reflecting cost reduction efforts and lower incentive compensation costs, partly offset by higher pension expense. •Earnings before interest and taxes (EBIT) were $478 million compared with $399 million in the prior-year quarter. Excluding items impacting comparability, adjusted EBIT in the prior-year quarter was $432 million. Adjusted EBIT increased 11 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 compared with a use of $15 million in the year-ago period. The current year cash flow reflected a $260 million contribution to Campbell's U.S. pension plan, largely offset by improvements in working capital. •During the quarter, Campbell repurchased 3 million shares for $94 million 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.