Camden / NJ. (csc) Campbell Soup Company reported its results for the second quarter of fiscal 2014. U.S. Simple Meals sales rose seven percent; earnings increased twelve percent. Including the acquisition of Kelsen Group, Global Baking and Snacking sales were up 14 percent; earnings increased 19 percent. U.S. Beverages sales declined three percent; earnings decreased 16 percent.

The company reported earnings from continuing operations for the quarter ended Jan. 26, 2014, of 235 million USD or 0,74 USD per share, compared with earnings of 171 million USD or 0,54 USD per share, in the prior year. In the second quarter of fiscal 2014, the company and its joint venture partner Swire Pacific Limited agreed to restructure manufacturing and streamline operations for its soup business in China. The company recorded pre-tax restructuring charges of 13 million USD (5 million USD after tax or 0,02 USD per share in earnings from continuing operations attributable to Campbell Soup Company) related to this initiative. Excluding items impacting comparability in both periods, adjusted earnings from continuing operations increased 19 percent to 240 million USD compared with 201 million USD in the prior year´s quarter and adjusted earnings per share from continuing operations increased 19 percent to 0,76 USD compared with 0,64 USD in the year-ago 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 remain focused on strengthening our core business and expanding into higher-growth spaces as we reshape our portfolio to improve Campbell´s long-term growth trajectory. We made progress on both fronts in the second quarter after a slow start to the year. In the quarter, we delivered six percent reported net sales growth and 15 percent adjusted Ebit growth, driven by our core business and the Kelsen Group acquisition. We also closed on the divestiture of our European simple meals business. Finally, we maintained our steadfast focus on driving productivity and managing costs».

«Our improved performance included seven percent growth in U.S. Simple Meals, driven largely by an increase of five percent in U.S. Soup sales reflecting strong holiday shipments and increased retailer inventory levels, as well as gains from our new ‘Campbell´s´ dinner sauces and ‘Prego´ white sauces. In Global Baking and Snacking, Pepperidge Farm continued to deliver growth in ‘Goldfish´ crackers, cookies and fresh bakery. Kelsen Group, which we acquired to expand our snacks business in developing markets, performed well in China and Hong Kong during their important holiday season. Indonesia continued to post double-digit sales growth. Bolthouse Farms also drove solid growth with double-digit sales increases in premium refrigerated beverages and salad dressings».

Morrison continued, «We still face some challenges in U.S. Beverages and Australia, but we have taken steps to strengthen these businesses. In January, we transitioned «V8» single-serve products to a new national distribution network that will focus on driving growth in immediate consumption channels over time. In Australia, we brought in new leadership for Asia Pacific, developed a more focused plan for our core biscuit business and implemented initiatives to reduce costs».

Morrison concluded, «While I am encouraged by our second-quarter results, our team recognizes that our full-year guidance demands that we continue to deliver improved performance in the second half. We expect our U.S. Soup business to benefit from eight new soups that were launched last month, including our first Latin-inspired cooking soups. We anticipate a stronger second half from Pepperidge Farm, particularly in the ‘Goldfish´ franchise. We expect continued strong performance from Bolthouse Farms, which will launch an exciting suite of innovative new beverages and salad dressings this spring. We expect a more meaningful contribution from Plum Organics as the products impacted by the voluntary recall in November return to shelf. We also plan to improve profitability as we continue to focus on reducing costs and driving efficiency in our supply chain. We remain focused on executing against our aggressive but realistic plans to drive growth in the back half and deliver our full-year guidance».

Campbell Reiterates Fiscal 2014 Guidance for Continuing Operations

The company confirmed its fiscal 2014 guidance. Campbell expects continuing operations to grow sales by four to five percent, adjusted Ebit to grow by four to six percent and adjusted EPS to grow by two to four percent or 2,53 USD to 2,58 USD per share. Fiscal 2014 guidance includes the benefits of a 53rd week, acquisitions, the estimated impact of currency translation and the impact of presenting revenue on a net basis in connection with the company´s new business model in Mexico.

Second-Quarter Results from Continuing Operations

For the second quarter, sales from continuing operations increased six percent to 2’281 million USD. Organic sales increased by three percent. The increase in sales for the quarter reflected the following factors:

Acquisitions added five percent

Volume and mix added two percent

Price and sales allowances added two percent

Increased promotional spending subtracted one percent

Currency subtracted two percent

Second-Quarter Financial Details – Global Baking and Snacking only

Sales for Global Baking and Snacking were 639 million USD for the second quarter, an increase of 14 percent from a year ago. The acquisition of Kelsen Group contributed 92 million USD to sales growth. The increase in sales reflected the following factors:

The acquisition of Kelsen Group added 16 percent

Volume and mix added one percent

Price and sales allowances added three percent

Increased promotional spending subtracted two percent

Currency subtracted four percent

Further details of sales results included the following:

• Sales of Pepperidge Farm products increased, driven by higher selling prices and volume gains, partially offset by increased promotional spending.
  • Sales of fresh bakery products increased versus the prior year, driven by volume gains in bread and stuffing.
  • In cookies and crackers, sales increases were driven by gains in «Goldfish» snack crackers and «Pepperidge Farm» cookies, partly offset by declines in adult cracker varieties.
  • Sales at Arnott´s decreased primarily due to the negative impact of currency and sales declines in Australia, which were partially offset by strong gains in Indonesia.

Operating earnings for the quarter were 88 million USD, an increase of 19 percent over the prior year. Operating earnings increased primarily driven by the acquisition of Kelsen Group, higher selling prices and productivity improvements, partly offset by cost inflation and higher promotional spending. The operating earnings increase reflects Kelsen Group´s operating results and growth in Pepperidge Farm, partly offset by lower earnings in Arnott´s.

For the first half, sales increased ten percent to 1’248 million USD. The acquisition of Kelsen Group contributed 144 million USD to sales growth. A breakdown of the change in sales follows:

The acquisition of Kelsen Group added 13 percent

Price and sales allowances added three percent

Increased promotional spending subtracted two percent

Currency subtracted four percent

Operating earnings in the first half were 166 million USDcompared with 159 million USD in the year-ago period, an increase of four percent. The increase in operating earnings was primarily driven by higher selling prices, productivity improvements and the acquisition of Kelsen Group, partially offset by cost inflation and higher promotional spending. The operating earnings increase reflected Kelsen Group´s operating results and growth in Pepperidge Farm, partly offset by lower earnings in Arnott´s and the unfavorable impact of currency.

Unallocated Corporate Expenses

Unallocated corporate expenses for the quarter were 33 million USD compared with 80 million USD a year ago. The prior-year quarter included 40 million USD of restructuring-related costs. The balance of the decrease for the current quarter was primarily due to lower incentive compensation costs. Unallocated corporate expenses for the first half were 69 million USD compared with 146 million USD in the prior year. The current year included two million USD of restructuring-related costs and a nine million USD loss on foreign exchange forward contracts related to the sale of the European simple meals business. The prior year included 61 million USD of restructuring-related costs and ten million USD of transaction costs related to the Bolthouse Farms acquisition. The balance of the decrease for the first half was primarily due to lower incentive compensation costs and gains on foreign exchange transactions and open commodity hedges.

Results from Discontinued Operations

The company completed the divestiture of its European simple meals business to CVC Capital Partners on Oct. 28, 2013. Results for the European simple meals business are reported as discontinued operations. In the second quarter, the company recognized a net gain of 90 million USD after tax or 0,28 USD per share, from the sale of the European simple meals business. For the first half, net earnings from discontinued operations were 81 million USD or 0,26 USD per share.

Combined Continuing and Discontinued Operations

Combining results of continuing and discontinued operations for the second quarter, the company reported net earnings of 325 million USD compared with 190 million USD in the prior year. Net earnings per share were 1,03 USD compared with 0,60 USD in the prior year. For the first half, the company reported net earnings of 497 million USD compared with 435 million USD in the prior year. Net earnings per share were 1,57 USD compared with 1,38 USD in the prior year.

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Camden / NJ. (csc) Campbell Soup Company reported its results for the second quarter of fiscal 2013. President and Chief Executive Officer Denise Morrison: «Our Global Baking and Snacking business has benefited from innovation in both core brands and new products, plus increased distribution and merchandising. Gains in snack crackers, cookies and fresh bakery products drove sales and earnings at Pepperidge Farm. Arnott´s sales increased with solid performance in Australia and Indonesia».

Second-Quarter Overview

• Reported Sales Increased ten Percent; Organic Sales Increased one Percent
• Adjusted Earnings Before Interest and Taxes (Ebit) Increased five Percent, one Percent *Excluding the Acquisition of Bolthouse Farms
• U.S. Simple Meals Sales Rose one Percent; Earnings Increased ten Percent
• Global Baking and Snacking Sales Were Up seven Percent; Earnings Increased four Percent
• U.S. Beverages Sales Declined three Percent; Earnings Increased nine Percent
• Campbell Recorded Charges Related To the Announced Restructuring Program in Mexico

Net earnings for the quarter ended Jan. 27, 2013, were 190 million USD or 0,60 USD per share, compared with 205 million USD or 0,64 USD per share, in the prior year. The current and prior years´ reported net earnings included charges associated with restructuring programs. Excluding restructuring and restructuring-related charges, adjusted net earnings increased six percent to 220 million USD, compared with 207 million USD in the prior year´s quarter and adjusted net earnings per share increased nine percent to 0,70 USD compared with 0,64 USD in the year-ago quarter. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.

Denise Morrison: «We are pleased with our performance in the quarter. Within U.S. Simple Meals, we saw growth in U.S. Soup as consumers responded to our efforts in brand building and innovation, both in our core business and in new products. While we reduced overall advertising spending, we were able to maintain competitive levels and to increase advertising support for new innovation. Our work to improve taste adventure and deliver more effective and efficient marketing and promotion resulted in increased consumption in this important business».

Morrison continued, «Our Global Baking and Snacking business has benefitted from innovation in both core brands and new products, plus increased distribution and merchandising. Gains in snack crackers, cookies and fresh bakery products drove sales and earnings at Pepperidge Farm. Arnott´s sales increased with solid performance in Australia and Indonesia».

«Our newly acquired Bolthouse Farms business delivered solid results in the fresh carrots, beverages and salad dressings categories, driven by innovation and increased distribution. The Bolthouse Farms integration is also progressing well».

Morrison concluded, «Despite weakness in our U.S. Beverages and North America Foodservice businesses, our first half business results were positive. Although profits in U.S. Beverages improved, we have more work to do to drive the top line and continue to stabilize profit in a sluggish shelf-stable juice category. Halfway through our fiscal year, we are making progress against our plans to return Campbell to sustainable, profitable net sales growth».

Campbell Confirms Fiscal 2013 Guidance

The company confirmed its previous fiscal 2013 guidance. Campbell expects to grow sales between ten and twelve percent, adjusted Ebit between four and six percent and adjusted EPS between three and five percent. The company expects adjusted EPS to be between 2,51 USD and 2,57 USD. 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 USD to sales and add 0,05 USD to 0,07 USD to adjusted EPS, including the impact of the suspension of Campbell´s strategic share repurchase program.

Restructuring Program

On Feb. 14, 2013, Campbell announced that it has entered into commercial arrangements with Grupo Jumex and Conservas La Costeña that will expand the company´s access to manufacturing and distribution capabilities in Mexico. These providers will produce and distribute Campbell´s beverages, soups, broths and sauces throughout the Mexican market. As a result of these agreements, Campbell will close its plant in Villagrán, Mexico and eliminate approximately 260 positions. In the second quarter of fiscal 2013, Campbell recorded a restructuring charge of six million USD (4 million USD after tax or 0,01 USD per share) related to this initiative.

Second-Quarter Results

For the second quarter, sales increased ten percent to 2,333 billion USD. The increase in sales for the quarter reflected the following factors:

• The acquisition of Bolthouse Farms added nine percent
• Price and sales allowances added two percent
• Increased promotional spending subtracted one percent

Second-Quarter Financial Details

• Gross margin was 35,1 percent compared with 38,4 percent a year ago. Excluding restructuring-related charges, adjusted gross margin in the current quarter was 36,8 percent. The decline in gross margin was mostly attributable to the acquisition of Bolthouse Farms, which operates with a lower gross margin structure.
• Marketing and selling expenses were 297 million USD, comparable to the prior year. Lower advertising and consumer promotion expenses, primarily in the U.S. Soup business, were offset by higher spending to support the company´s innovation efforts, higher selling expenses and the impact of the addition of Bolthouse Farms expenses.
• Administrative expenses increased 20 million USD to 172 million USD, primarily due to the acquisition of Bolthouse Farms, as well as higher compensation and benefit costs, including pension expenses.
• Ebit was 301 million USD compared with 329 million USD in the prior-year quarter. Excluding restructuring and restructuring-related charges, adjusted Ebit increased five percent to 349 million USD. Excluding Bolthouse Farms´ operating results, adjusted Ebit increased one percent, primarily driven by lower marketing expenses, partly offset by higher selling expenses and R+D costs.
• Net interest expenses increased five million USD to 31 million USD, reflecting a higher debt level due to the acquisition of Bolthouse Farms, partially offset by lower interest rates.
• The tax rate in the quarter was 30,7 percent compared with 33,7 percent in the prior year. Excluding restructuring and restructuring-related charges, the current quarter´s adjusted tax rate was 31,8 percent. The decrease was primarily due to lower taxes on foreign earnings in the current year.
• Adjusted net earnings for the quarter increased six percent to 220 million USD. Adjusted net earnings per share were 0,70 USD in the current quarter compared with net earnings per share of 0,64 USD in the prior-year quarter, an increase of nine percent. Earnings per share benefited from fewer shares outstanding, reflecting the impact of the company´s share repurchase program in the prior year.

First-Half Results

Net earnings for the first half were 435 million USD or 1,38 USD per share, compared with 470 million USD or 1,45 USD per share, in the year-ago period. Excluding restructuring, restructuring-related charges and acquisition transaction costs, adjusted net earnings increased five percent to 499 million USD. Reflecting the benefit of fewer shares outstanding, adjusted net earnings per share increased eight percent to 1,58 USD.

For the first half of fiscal 2013, sales were 4,669 billion USD, an increase of nine percent from the year-ago period. The change in sales for the period reflected the following factors:

• The acquisition of Bolthouse Farms added nine percent
• Price and sales allowances added two percent
• Increased promotional spending subtracted one percent

First-Half Financial Details

• Gross margin was 36,1 percent compared with 39,0 percent a year ago. Excluding restructuring-related charges, adjusted gross margin in the first half was 37,4 percent. The decline in gross margin was primarily attributable to the acquisition of Bolthouse Farms.
• Marketing and selling expenses decreased one percent to 551 million USD compared with 558 million USD in the prior year. The decline was primarily due to lower marketing expenses, principally reductions in advertising and consumer promotion expenses, partly offset by the impact of the addition of Bolthouse Farms expenses and higher selling expenses.
• Administrative expenses increased 37 million USD to 334 million USD, primarily due to the acquisition of Bolthouse Farms as well as higher compensation and benefit costs, including pension expenses.
• Ebit was 686 million USD compared with 745 million USD in the prior year. Excluding restructuring, restructuring-related charges and acquisition transaction costs, adjusted Ebit increased five percent to 787 million USD. Excluding Bolthouse Farms´ operating results, adjusted Ebit increased one percent, primarily driven by lower marketing expenses, partially offset by higher selling and administrative expenses.
• Adjusted net earnings for the first half increased five percent to 499 million USD, as the impact of higher interest expenses was offset by a lower tax rate. Adjusted net earnings per share were 1,58 USD in the first half compared with net earnings per share of 1,46 USD in the prior year, an increase of eight percent. Earnings per share benefited from fewer shares outstanding.
• Cash flow from operations was 499 million USD compared with 478 million USD in the prior year.
• Net debt rose to 4,019 billion USD, an increase of 1,463 billion USD, primarily due to funding the 1,570 billion USD purchase of Bolthouse Farms.

Summary of Fiscal 2013 Second-Quarter and First-Half Results by Segment

U.S. Simple Meals

Sales for U.S. Simple Meals were 833 million USD for the second quarter, an increase of one percent compared with the year-ago period. A breakdown of the change in sales follows:

• Volume and mix subtracted one percent
• Price and sales allowances added two percent

U.S. Soup sales increased one percent compared to the year-ago quarter. Sales were negatively impacted by a decline in retailer inventory levels.

• Sales of «Campbell´s» condensed soups increased one percent, driven by gains in eating varieties. Sales of cooking varieties were comparable to the year-ago quarter.
• Sales of ready-to-serve soups increased eight percent, primarily driven by double-digit volume gains in «Campbell´s Chunky» canned soups and the benefit of new items across the portfolio, slightly offset by declines in microwavable soups.
• Broth sales decreased twelve percent, primarily due to declines in canned broth, reflecting earlier holiday shipments in the prior quarter.

Sales of U.S. Sauces were comparable to the prior-year quarter as lower sales in «Prego» pasta sauce and «Chunky» chili were offset by gains in «Swanson» canned poultry, «Campbell´s» canned pasta, «Pace» Mexican sauce and new «Campbell´s» Skillet Sauces.

U.S. Simple Meals operating earnings increased ten percent to 191 million USD, compared with 174 million USD in the prior-year period. Benefits from higher selling prices, productivity improvements and lower marketing expenses were partly offset by volume declines and cost inflation. The increase in operating earnings was driven by earnings gains in U.S. Soup, partly offset by a decline in U.S. Sauces.

For the first half, sales for U.S. Simple Meals increased two percent to 1,729 billion USD, driven by higher selling prices.

U.S. Soup sales rose two percent primarily driven by a 6-percent increase in ready-to-serve soups. Sales of condensed soups were comparable to the prior year, while sales of broth decreased one percent.

U.S. Simple Meals operating earnings were 465 million USD in the first half compared with 434 million USD in the year-ago period, an increase of seven percent. Productivity savings, lower marketing expenses and higher selling prices net of related volume impacts were partly offset by cost inflation. The increase in operating earnings was driven by gains in U.S. Soup, partly offset by a decline in U.S. Sauces.

Global Baking and Snacking

Sales for Global Baking and Snacking were 561 million USD for the second quarter, an increase of seven percent from a year ago. The change in sales reflected the following factors:

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

Further details of sales results included the following:

• Sales of «Pepperidge Farm» products increased, primarily driven by volume gains, partially offset by increased promotional spending.
  • In cookies and crackers, sales increases were driven by strong gains in «Goldfish» snack crackers and the national launch of «Jingos!» adult savoury crackers, as well as improved performance in cookies, which benefited from a successful holiday period.
  • Sales of fresh bakery products increased versus the prior year, driven by volume gains across most of the portfolio.
• Excluding the favourable impact of currency, sales at Arnott´s increased, driven by growth in Australia and excellent gains in Indonesia. Sales growth in Australia was driven across all categories: savoury crackers, chocolate cookies and sweet varieties.

Operating earnings for the quarter were 74 million USD compared with 71 million USD in the prior year. Volume gains and productivity improvements were partly offset by increased promotional spending and cost inflation. The increase in operating earnings was driven by growth in Pepperidge Farm, partly offset by lower earnings in Arnott´s.

For the first half, sales increased four percent to 1,135 billion USD. A breakdown of the change in sales follows:

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

Operating earnings in the first half were 159 million USD, comparable to the prior year, reflecting growth in Pepperidge Farm offset by lower earnings in Arnott´s.

International Simple Meals and Beverages

Sales for International Simple Meals and Beverages were 405 million USD for the second quarter, an increase of one percent from a year ago. Organic sales were comparable to the prior-year quarter.

U.S. Beverages

Sales for U.S. Beverages were 182 million USD for the second quarter, a decrease of three percent compared to the year-ago period, due to declines from volume and mix.

Bolthouse and Foodservice

Sales were 352 million USD for the second quarter, with the acquisition of Bolthouse Farms contributing 195 million USD. Sales in North America Foodservice declined ten percent compared with a year ago.

Unallocated Corporate Expenses

Unallocated corporate expenses for the quarter were 77 million USD compared with 33 million USD a year ago. The current quarter included 40 million USD of restructuring-related costs. Unallocated corporate expenses for the first half were 140 million USD compared with 63 million USD in the prior year. The current year included 61 million USD of restructuring-related costs and ten million USD of transaction costs related to the Bolthouse Farms acquisition.

Camden / NJ. (csc) Campbell Soup Company reported its results for the second quarter of fiscal 2012. In short: Sales decreased one percent to 2’112 million USD. Earnings declined in U.S. Simple Meals, Global Baking and Snacking and International Simple Meals and Beverages. U.S. Beverages Sales increased four percent, while earnings declined. Strong performance in North America Foodservice. Fiscal 2012 guidance reiterated.

Global Baking and Snacking

Baking and Snacking aggregates the following: «Pepperidge Farm» cookies, crackers, breads and frozen products in U.S. retail; and «Arnott´s» biscuits in Australia and Asia Pacific. Sales for Global Baking and Snacking were 526 million USD for Q2/2012, comparable to the prior-year quarter. Sales were impacted by the following factors:

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

Further details of sales results included the following:

• Sales of «Pepperidge Farm» products increased slightly as the benefit of higher selling prices was mostly offset by lower volumes.
  • In cookies and crackers, sales increased as double-digit growth in «Goldfish» snack crackers was partly offset by declines in cookies.
  • Bakery sales declined slightly.
• Excluding the favourable impact of currency, sales at Arnott´s declined primarily due to the impact of increased promotional spending and lower volumes, partly offset by higher selling prices. The volume performance continued to be negatively impacted by an increase in promoted and non-promoted price points at retail and a weak consumer environment.

Operating earnings for the quarter were 71 million USD compared with 81 million USD in the prior year. The twelve-percent decline was primarily due to cost inflation and increased promotional spending, partly offset by higher selling prices.

For the first half, sales increased two percent to 1’094 billion USD. A breakdown of the change in sales follows:

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

Operating earnings in the first half decreased twelve percent to 159 million USD compared with 181 million USD in the year-ago period, primarily due to cost inflation, increased promotional spending and lower volumes, partly offset by higher selling prices and productivity improvements.

North America Foodservice

North America Foodservice represents the distribution of products such as soup, specialty entrees, beverage products, other prepared foods and «Pepperidge Farm» products through various food service channels in the United States and Canada. Sales were 173 million USD for the second quarter, an increase of nine percent compared with a year ago. A breakdown of the change in sales follows:

• Volume and mix added seven percent
• Price and sales allowances added two percent
• Sales increased primarily due to volume-driven gains in fresh chilled soup sold at retail.

Operating earnings increased 33 percent to 28 million USD from 21 million USD. The increase in operating earnings was primarily driven by volume gains, higher selling prices and productivity improvements, partly offset by cost inflation.

For the first half, sales increased eight percent to 335 million USD. A breakdown of the change in sales follows:

• Volume and mix added five percent
• Price and sales allowances added three percent

Operating earnings were 55 million USD compared with 44 million USD in the year-ago period. The increase in operating earnings was primarily driven by higher selling prices, volume gains and productivity improvements, partly offset by cost inflation.

Fiscal 2012 Guidance

The company confirmed its previous fiscal 2012 guidance. Campbell expects net sales growth to be between zero and two percent, a decline in adjusted Ebit of between minus nine and minus seven percent and a decline in adjusted EPS of between minus seven and minus five percent, putting adjusted EPS in the range of 2,35 USD to 2,42 USD, from the 2011 adjusted base of 2,54 USD.