Campbell Soup Company (CPB)

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Campbell Soup Company (CPB)

F4Q2010 Earnings Call Transcript

September 3, 2010 10:00 am ET


Jennifer Driscoll – VP, IR

Doug Conant – President and CEO

Craig Owens – SVP, CFO and Chief Administrative Officer


Eric Katzman – Deutsche Bank

Andrew Lazar – Barclays Capital

Alexia Howard – Sanford Bernstein

Chris Growe – Stifel Nicolaus

Bryan Spillane – Bank of America-Merrill Lynch

David Palmer – UBS

Vincent Andrews – Morgan Stanley

Ed Aaron – RBC Capital Markets

Diane Geissler – Credit Agricole Securities

Akshay Jagdale – KeyBanc Capital Markets

Robert Moskow – Credit Suisse

Terry Bivens – JP Morgan

David Driscoll – Citi Investments


Good day, ladies and gentlemen and welcome to the Campbell Soup fourth quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). And as a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Jennifer Driscoll, Vice President, Investor Relations. Please begin.

Jennifer Driscoll

Thank you, Mary. Good morning, everyone. Welcome to the Campbell Soup Company's fourth quarter earnings webcast. We appreciate you joining us in advance of a holiday weekend. With me here in New Jersey today are Doug Conant, our President and CEO; Craig Owens, Senior Vice President and CFO, as well as Chief Administrative Officer; and Anthony DiSilvestro, Senior Vice President of Finance.

Doug and Craig each will provide you with their perspectives on our performance for the quarter and the fiscal year, as well as our expectations for fiscal 2011. Following their remarks, we will take questions from analysts and investors.

As usual, we have created slides to accompany our presentation. You will find the slides posted on our website this morning at Please keep in mind that as usual, our call is open to members of the media who are participating in listen-only mode.

As a reminder, our presentation today includes certain forward-looking statements that reflect the company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates, which could be inaccurate and which inherently are subject to risks and uncertainties, all of which are listed in our slides. You can refer to that slide or to our most recent 10-K and other 8-K filings for a list of the factors that could cause our actual results to vary materially from those anticipated or expressed in any forward-looking statements that we make on our call.

Consistent with our previous disclosures, the results presented today all have been adjusted for items impacting comparability. There were no additional items impacting comparability of our results in the fourth quarter of 2010, they are all in prior periods. We will present organic sales results today, which do exclude the impacts of currency and M&A activity, as we believe this is a better indicator of our ongoing business performance. We will also present segment operating earnings adjusted for the items impacting comparability.

Since our presentation includes certain non-GAAP measures as defined by the SEC rules, we have provided a reconciliation of these measures to the most directly comparable GAAP measures as an appendix to the slides accompanying the presentation. These slides, including the appendix can be found on our website as well.

And with that, I give you our President and CEO, Doug Conant.

Doug Conant

Thank you, Jennifer, and good morning, everyone. Thanks to all of you on the phone and the webcast for joining our fiscal 2010 earnings conference call. I would like to share a few comments on our performance in the fourth quarter and the fiscal year, and our plans for fiscal 2011. Then, I will turn the call over to Craig for a more detailed discussion.

Our net earnings per share increased 10% for the fourth quarter to $0.33, including a favorable tax rate and the impact of our share repurchase program. Our healthy beverages business led the way, posting significant sales growth in the fourth quarter. Our quarter's results brought us to an increase in net earnings per share for the fiscal year of 12%. In a challenging environment, we delivered strong earnings growth, overcoming softer-than-expected sales to finish slightly above the high end of our earnings range and well above our long-term target.

I am pleased with how well we managed our margins this year. I am also pleased with our cash flow performance including more than $1 billion in cash flow from operations this year, despite an extraordinarily high contribution to our pension fund. We delivered those results, while continuing to invest for long-term growth, including spending on our IT infrastructure, wellness and nutrition innovation, and our work in emerging markets.

In a year when sales growth was difficult for the entire food industry and short of our own expectations, we benefited from a great deal of hard work on cost and expense initiatives across the organization. Improved productivity, favorable currency, and our share repurchase program all contributed to our EPS growth this year.

That having been said, we recognized that growing the top line is the key challenge for us and for the food industry as a whole in order to deliver quality earnings growth in a sustainable way. As we enter our fiscal year 2011, I am confident that we have the programs and plans in place to address this challenge.

Leaning into our businesses in healthy beverages and baked snacks, we will offer a full slate of innovation, including V8 V-Fusion plus Tea; upgrades to the company's largest baked snacks brand; Goldfish, which is the largest children's snack cracker in the world; and Arnott's shapes; new varieties and a re-launch of Chunk cookies for Pepperidge Farm and line extensions for Arnott's Vita-Weat just to name a few of our renovation efforts.

Our healthy beverages and baked snacks brands will also be supported by stepped-up marketing. In this regard, we will be leveraging advertising campaigns that have already shown positive results, such as our Numbers campaign on V8 healthy beverages. We are funding the increased marketing with our expense reduction initiatives, such as our improved indirect procurement effort.

In addition, we will significantly strengthen our competitiveness in simple meals. The primary initiative in our soup business this year is to fire up condensed soup. This initiative will benefit both cooking soups, which are part of our broader meal-makers portfolio, and our eating soups. We will also improve the competitiveness of our ready-to-serve soups through more consistent promotional activity commencing this fall.

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