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.
“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.”
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.
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.
For the first quarter, sales increased 8 percent to $2.336 billion. The increase in sales for the quarter reflected the following factors:
Sales for U.S. Simple Meals were $896 million for the first quarter, an increase of 3 percent compared with the year-ago period. A breakdown of the change in sales follows:
U.S. Soup sales increased 2 percent compared to the year-ago quarter.
U.S. Sauces sales increased 4 percent compared to the year-ago quarter. The growth was primarily driven by strong gains in “Prego” pasta sauces, the launch of “Campbell’s” Skillet Sauces and growth in “Pace” Mexican sauces. Sales of gravy declined.
Sales for Global Baking and Snacking were $574 million for the first quarter, an increase of 1 percent from a year ago. The change in sales reflected the following factors:
Further details of sales results included the following:
Operating earnings for the quarter were $85 million compared with $88 million in the prior year, reflecting lower earnings in Arnott’s and Pepperidge Farm. Both businesses were negatively impacted by increased promotional spending.
Sales for International Simple Meals and Beverages were $354 million for the first quarter, a decrease of 1 percent. Organic sales increased 2 percent. The change in sales reflected the following factors:
Excluding the impact of currency, higher sales in the Asia Pacific region, Latin America and Canada were partially offset by declines in Europe.
Operating earnings were $47 million compared with $43 million in the year-ago period. The increase in operating earnings was primarily driven by higher organic sales and an increase in gross margin percentage.
Sales for U.S. Beverages were $189 million for the first quarter, a decrease of 5 percent compared to the year-ago period. A breakdown of the change in sales follows:
The decrease in sales was due to declines in “V8” vegetable juice and “V8 V-Fusion” beverages, partially offset by an increase in “V8 Splash” beverages.
Operating earnings for the quarter were $30 million, comparable to the prior year. The impact of lower volume was offset by lower advertising and consumer promotion expenses.
The balance of the portfolio includes the Bolthouse Farms business, which was acquired on Aug. 6, 2012, and the North America Foodservice business.
Sales were $323 million for the first quarter, with the acquisition of Bolthouse Farms contributing $171 million. Organic sales in North America Foodservice declined 6 percent compared with a year ago. A breakdown of the change in organic sales follows:
North America Foodservice sales decreased primarily due to declines in frozen and canned soup sales, partially offset by volume-driven gains in fresh chilled soup sold at retail.
Operating earnings increased by $7 million to $34 million driven by the acquisition of Bolthouse Farms, partially offset by lower earnings in North America Foodservice.
Unallocated corporate expenses for the quarter were $63 million compared with $30 million a year ago. The current quarter included $21 million of restructuring-related costs and $10 million of transaction costs related to the Bolthouse Farms acquisition.
A detailed reconciliation of the reported financial information to the adjusted financial information is included at the end of this news release.
Campbell Soup Company earnings results are reported for the following segments:
In fiscal 2013, the company recorded pre-tax transaction costs of $10 ($7 after tax or $.02 per share) associated with the acquisition of Bolthouse Farms, which closed on August 6, 2012. The costs are included in Other expenses.
In fiscal 2013, the company recorded pre-tax restructuring charges of $22 and restructuring-related costs of $21 in Cost of products sold (aggregate impact of $27 after tax or $.09 per share) associated with the initiatives announced in September 2012 to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network.
In fiscal 2013, the company recorded pre-tax transaction costs of $10 ($7 after tax or $.02 per share) associated with the acquisition of Bolthouse Farms, which closed on August 6, 2012. The costs are included in Unallocated corporate expenses.
In fiscal 2013, the company recorded pre-tax restructuring charges of $22 and restructuring-related costs of $21 in Unallocated corporate expenses (aggregate impact of $27 after tax or $.09 per share) associated with the initiatives announced in September 2012 to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network.
Campbell Soup Company uses certain non-GAAP financial measures as defined by the Securities and Exchange Commission in certain communications. These non-GAAP financial measures are measures of performance not defined by accounting principles generally accepted in the United States and should be considered in addition to, not in lieu of, GAAP reported measures.
The company believes that net debt is a non-GAAP measure that provides additional meaningful comparisons between the company’s financial position at October 28, 2012 and October 30, 2011, and also a useful perspective on the financial condition of the business. Interest income earned on cash and cash equivalents partially offsets interest expense on debt. Cash and cash equivalents are available to repay outstanding debt upon maturity.
The table below summarizes information on total debt and cash and cash equivalents:
The company believes that organic net sales, which exclude the impact of acquisitions and currency, improves the comparability of year-to-year results. A reconciliation of net sales as reported to organic net sales follows.
The company believes that financial information excluding certain transactions that are not considered to be part of the ongoing business improves the comparability of year-to-year results. Consequently, the company believes that investors may be able to better understand its gross margin and earnings results excluding these transactions.
The following items impacted gross margin and/or earnings:
The tables below reconcile financial information, presented in accordance with GAAP, to financial information excluding certain transactions: