金寶湯 (CPB) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the fourth quarter 2008 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 be given at that time.

(OPERATOR INSTRUCTIONS).

As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr.

Len Griehs, Vice President Investor Relations.

Sir, you may begin.

Good morning.

And welcome to Campbell Soup Company fourth quarter fiscal 2008 conference call.

Before we begin, I would be remiss if I did not take a moment to reflect and remember those who perished seven years ago today in the terrorist attacks in New York, Washington and aboard United flight 93.

For many of us, that day will always bring back sad memories.

Innocent people fell victim to senseless hate.

For those who died, we keep this memory, for those who lost loved ones and friends we mourn.

May those of us who remain cherish every day and always appreciate those who are special to us.

Our agenda for this morning's call will be as follows.

Anthony DiSilvestro, Vice President and Controller, will discuss financial results for the fourth quarter and fiscal year, and will comment on our outlook for fiscal 2009.

Doug Conant, President and Chief Executive Officer, will join Anthony for the question-and-answer session to follow.

Our financial results, press release and supplemental schedule were issued earlier this morning.

These are also posted on our website.

Our call this morning will last approximately one hour.

It will be available for replay approximately two hours after the call is complete, and last through midnight, September 18th.

The replay number is 1-888-266-2081 or 1-703-925-2533.

And use access code 1276968.

You may also listen to a replay by logging on our website, www.CampbellSoupCompany.com and clicking on the Webcast banner.

As a matter of policy, our conference calls are open to all interested investors and members of the media.

This discussion contains certain forward-looking statements that reflect the Company's expected future business and financial performance.

These forward-looking statements rely on a number of assumptions and estimates that could be inaccurate and which are subject to risks and uncertainties.

These uncertainties may cause our actual results to vary materially from those expressed or implied in our forward-looking statements.

These include statements concerning the impact of marketing investments and strategies, share repurchases, pricing, new product introductions and innovations, cost savings initiatives, quality improvements, portfolio strategies including divestitures, impact on sales, earnings and margins, and other factors described in the Company's most recent 10-K and as updated from time to time by the Company in subsequent filings with the Securities and Exchange Commission.

Actual results could vary materially from those anticipated or expressed in any forward-looking statement made by the Company.

This discussion includes certain non-GAAP measures as defined by SEC rules.

We have provided a reconciliation of those measures to the most directly comparable measures which is available on our investor website.

Again, at www.CampbellSoupcompany.com.

Before we begin our discussion of results, Doug Conant, who is joining us from Sidney, Australia, where he is visiting and reviewing our Asia-Pacific business, will have a few opening remarks.

Doug, over to you.

Thank you, Len and good morning everyone.

Well, it certainly has been quite a year.

In fact, in my 33 year career, I cannot recall a more challenging environment in the food industry, particularly with the unprecedented cost inflation.

Against that back drop, I'm very pleased to report that we delivered a very strong fourth quarter, particularly in our US Soup business.

And leveraging the strong fourth quarter performance I'm especially pleased to announce that for the seventh straight year, we met or exceeded our financial goals.

During the year, the sale of Godiva Chocolatier business and our snack foods business in Australia, with the sale of those businesses, we further focused our portfolio around three core categories, simple meals, baked snacks and healthy beverages.

These three categories are all large and growing and they delivered on both the top and bottom line.

Our strategy to trade consumers up to higher levels of satisfaction, starting on wellness, quality and convenience is continuing to drive our US Soup business.

As we announced in July, we launched new Campbell's Select Harvest ready-to-serve soups in fiscal 2009 and the product now is on shelves with new advertising hitting the air just last week.

Both Canada and Australia, our soup businesses are showing good growth.

In Europe, our branded wet soup business is once again growing and we've realigned our portfolio in that geography as well as our management team to provide a sharper focus on driving profitable growth in the years ahead.

Meanwhile our emerging markets efforts in China and Russia are also doing well.

Building on our success in fiscal 2008, we plan to expand our efforts in both countries, consistent with our discussions at our meeting in July.

Moving on to baked snacks, Pepperidge Farm delivered yet another outstanding year in its core businesses of bakery, cookies, and crackers.

Premium whole grain bed continues to be in high consumer demand and our consistent record of innovation is providing many opportunities to continue to grow our presence in this fast-growing category.

Meanwhile, Goldfish crackers and the Pepperidge Farm cookie business continued to deliver very solid results.

Arnott's in Asia-Pacific also had an especially strong year in its core biscuit business.

As I step back and look at fiscal 2009, I'm optimistic about our ability to continue delivering winning results for the following seven reasons.

We continue to have momentum in US soup.

We've grown sales of US soup for six consecutive years including stemming a long-term decline in condensed soup.

Number two, we've consistently led our categories to innovation on the critical front of wellness, especially with our sodium reduction efforts in US soup, where we've created nearly a $600 million at retail, which alone is larger than our next largest branded competitor and is growing significantly faster.

Number three, we built strong growth propositions in baked snacks with our Pepperidge Farms and Arnott's brands and in healthy beverages, with our V8 brand.

Number four, we focused our portfolio on businesses that will provide the best opportunity to drive profitable growth in a sustainable and enduring way.

Number five, we advanced our emerging market efforts in Russia and China in a quality way and reshaped our European business profile.

Number six, we're nearing the completion of the SAP resource planning system in North America and we're beginning to leverage the significant capabilities and efficiency improvements that we are confident it will bring in the years ahead.

And finally, number seven, we built a leadership team characterized by world class competence in our chosen areas of focus, and by world class employee engagement across the board.

This team is built to compete in our core categories and is built to win.

Bottom line, I believe we have the portfolio, the growth prospects and the organization capacity to continue to drive quality growth in the years ahead.

As we enter fiscal 2009, we are absolutely focused on continuing our winning efforts.

Before I conclude and turn it over to Anthony, I do want to mention the appointment in late August of Craig Owens as Senior Vice President, Chief Financial Officer and Chief Administrative Officer, to be effective October 6th, 2008.

Craig succeeds my good friend and most respected partner, Bob Schiffner, who stepped out as CFO August 1st of 2008.

Craig brings a wealth of general management and senior financial expertise to Campbell for more than 25 years in the food and beverage industry.

After coming to know Craig during the search process, I am quite confident he will be an outstanding addition to our senior management team.

I believe his experience will complement our strong and dedicated teams in finance, also in supply chain and IT.

He comes from two strong and successful corporate cultures Delhaize and Coca-Cola, and brings a competitive spirit and an understanding of the dynamics of the global marketplace.

Craig will be joining us on our first quarter conference call.

On that note, I'll be happy to turn things over to Anthony.

Take it away, Anthony.

Good morning.

Before I begin my review, I would like to make a few comments regarding the basis of presentation of our results.

The current year had 53 weeks, compared to 52 weeks in fiscal 2007.

I will highlight the impact of the 53rd week on net sales for both the quarter and the full year.

As a reminder, in March, 2008, we completed the divestiture of the Godiva business.

The results of this business are reported as Discontinued Operations in the income statement for all periods presented.

In April, we announced a series of initiatives to improve our operational efficiency and long-term profitability.

Including selling certain salty snack food brands and assets in Australia, closing certain production facilities in Canada and Australia, and streamlining our management structure.

As a result of these initiatives, Campbell expect to incur aggregate pretax costs and charges of approximately $230 million, primarily through fiscal 2009.

During the fourth quarter, we recognized pretax costs of $10 million related to these initiatives.

We recorded $3 million in restructuring charges and $7 million of associated costs related to accelerated depreciation in cost of products sold.

The aggregate after tax impact was $7 million or $0.02 per share.

For the full year, we recognized pretax costs of $182 million associated with these initiatives, of which $175 million is included in restructuring charges and $7 million in costs of products sold.

The aggregate after tax impact was $107 million or $0.28 per share.

Our results in the current and prior year included several items that impacted comparability, which I will discuss.

Our reported net earnings in the quarter were $89 million, compared to $61 million a year ago, and reported net earnings per share were $0.24 in the current quarter compared to $0.16 per share a year ago.

Adjusted net earnings per share in the quarter were $0.26 compared to adjusted net earnings per share in the fourth quarter a year ago of $0.14.

Adjusted net earnings per share for the year were $2.09, compared to $1.95 for the prior year.

Our review will begin with a discussion of results from continuing operations while highlighting items impacting comparability.

I'll then review the results of Discontinued Operations, also highlighting those items impacting comparability.

Finally, I will discuss reported net earnings per share and our adjusted net earnings per share which exclude all items impacting comparability.

Let's begin our review of continuing operations for the fourth quarter.

Net sales for the quarter increased 13% to $1.715 billion.

The change in sales breaks down as follows.

Volume and mix subtracted 1%, price and sales allowances added 5%, increased promotional spending subtracted 1%, currency added 4%, divestitures subtracted 2%, and the 53rd week added 8%.

Gross margin for the quarter was $664 million, compared to $594 million in the prior year.

Gross margin percentage for the quarter was 38.7%, compared to 39.1% a year ago.

The decline in gross margin percentage is primarily due to escalating cost inflation, which was only partially offset by higher selling prices and productivity gains.

Marketing and selling expenses increased slightly from $261 million, to $263 million, as the impact of lower advertising in US Soups, Sauces and Beverages and Pepperidge Farm was more than offset by the impact of currency and higher selling expenses.

The prior year quarter included contra-seasonal advertising expenses, primarily in US soups.

Administrative expenses decreased to $168 million, from $170 million as the impact of currency was more than offset by lower incentive compensation costs and lower expenses related to the SAP implementation in North America.

Research and development expenses decreased $2 million to $33 million.

Related to our previously announced initiatives, we incurred restructuring charges of $3 million during the quarter, associated with the streamlining of our management structure.

Other expenses of $9 million compares to income of $12 million in the prior year.

The current quarter included $6 million of impairment charges associated with certain international trademarks and the pending sale of the sauce and mayonnaise business comprised of products sold under the Lesieur brand in France.

The fourth quarter 2007 results included a $10 million gain from a settlement in lieu of condemnation related to a refrigerated soup facility in Washington State, and a $3 million gain from the sale of our business in Papua New Guinea.

Earnings before interest and taxes were $188 million compared to $140 million in last year's fourth quarter.

Excluding the cost of $10 million related to the initiatives to improve our operational efficiency and long-term profitability, EBIT in the quarter was $198 million as compared to $140 million, an increase of 41%.

Net interest expense was $38 million, flat with the prior year quarter.

The tax rate in the fourth quarter was 40.7%, compared to 43.1% in the prior year's quarter.

Excluding the rate impact of charges related to the restructuring initiative, the tax rate in the fourth quarter was 40.0%.

Earnings from continuing operations for the quarter were $89 million, or $0.24 per share, compared to $58 million or $0.15 per share in the year-ago quarter.

The current year included costs of $7 million or $0.02 per share related to the initiatives to improve our operational efficiency and long-term profitability.

After factoring this item into the reported results, adjusted earnings from Continuing Operations in the current quarter were $96 million, compared to $58 million a year ago.

Adjusted earnings per share would have been $0.26, as compared to $0.15 in the year-ago quarter.

Earnings from discontinued operations in the fourth quarter of 2007 were $3 million, or $0.01 per share.

This included an $8 million gain related to the favorable resolution of tax audits in the UK, and finalization of the gain on the sale of the UK and Ireland businesses.

Excluding this gain, adjusted loss from discontinued operations was $5 million or $0.01 per share, reflecting the seasonality of the Godiva business.

Net earnings per share, which includes both continuing and discontinued operations were $0.24 per share for the quarter, compared to $0.16 per share a year ago.

Excluding the items previously mentioned that impact comparability, adjusted net earnings per share in the fourth quarter were $0.26, compared to $0.14 in the year-ago quarter, an increase of 86%.

Fiscal 2008 full year results.

Now, let's turn to full year results from Continuing Operations.

Net sales for the year increased 8% to $7.998 billion.

The change in sales breaks down as follows.

Volume and mix added 2%, price and sales allowances added 2%.

Increased promotional spending subtracted 1%.

Currency added 4%.

Divestitures subtracted 1%, and the 53rd week added 2%.

Gross margin for the year was $3.171 billion, compared to $3.001 billion last year.

Gross margin percentage for the year decreased to 39.6% from 40.6% a year ago.

The decline was primarily due to escalating cost inflation, partially offset by higher selling prices and productivity gains.

Marketing and selling expenses increased from $1.106 billion to $1.162 billion, primarily due to the impact of currency and higher advertising expenses.

Administrative expenses increased from $571 million to $608 million.

The prior year reflects non-cash benefit of $20 million from the reversal of legal reserves due to favorable results in litigation.

The remaining increase is primarily due to the impact of currency.

Research and development expenses increased $4 million to $115 million, primarily due to the impact of currency.

Restructuring charges of $175 million included $120 million related to the loss in the sale of certain salty snack brands and assets in Australia, $38 million for plant closures, and $17 million related to the streamlining of the Company's management structure.

As already mentioned, an additional $7 million of accelerated depreciation was recorded in cost of products sold.

Total cost in the fiscal year related to the initiatives were $182 million.

Other expenses of $13 million compared to income of $30 million in the prior year.

The current year included $6 million of impairment charges associated with certain international trademarks, and the pending sale of the sauce and mayonnaise business in France.

The prior year included a $23 million gain on a sale of an idle Pepperidge Farm manufacturing facility, a $10 million gain from a settlement in lieu of condemnation of the refrigerated Soup facility in Washington State and a $3 million gain from the sale of our business in Papua New Guinea.

Earnings before interest and taxes were $1.098 billion compared to $1.243 billion in the prior year.

The current year included $182 million of charges related to the initiatives to improve our operational efficiency and long-term profitability.

The prior year included the $20 million gain from the reversal of legal reserves and the $23 million gain from the sale of the Pepperidge Farm facility.

Excluding these items, earnings before interest and taxes were $1.280 billion compared to $1.2 billion in the prior year, an increase of 7%.

Before discussing interest and taxes, it is important to note that in the third quarter of fiscal 2007, the Company recorded a benefit resulting from the favorable settlement of a bilateral advanced pricing agreement, or APA among the Company, the United States and Canada related to royalties.

In connection with this settlement, the Company recorded a tax benefit of $22 million and reduced net interest expense by $4 million or $3 million after tax.

The aggregate impact on earnings from continuing operations was $25 million, or $0.06 per share.

Net interest expense was $159 million versus $144 million in the prior year.

Excluding the impact of the APA settlement, interest expense in the prior year would have been $148 million.

The remaining increase is primarily due to a reduction in interest expense in 2007, related to the favorable settlement of the US federal income tax audit, and lower levels of capitalized interest.

The tax rate for the year was 28.5%, compared to 27.9% in the prior year.

The current year rate reflects the $13 million tax benefit from the favorable resolution of a state tax matter.

The current year also includes the rate impact from the initiatives to improve our operational efficiency and long-term profitability.

Excluding these items, the current year tax rate, 31.8%.

The prior year included a tax benefit from the APA settlement and rate impacts from the reversal of legal reserves and the sale of the idle Pepperidge Farm facility.

Excluding these impacts, the prior year rate would have been 29.7% which benefited from the reversal of tax reserves related to the favorable resolution of the 2002 to 2004 US federal income tax audit.

Earnings from continuing operations for the year were $671 million, or $1.76 per share, compared to $792 million or $2 per share last year.

The current year included the $13 million or $0.03 per share tax benefit from the federal resolution of a state tax matter and $107 million or $0.28 per share in charges related to the initiatives to improve our operational efficiency and long-term profitability.

The prior year included a $13 million or $0.03 per share gain from the reversal of legal reserves.

The aggregate favorable impact of $25 million, or $0.06 per share from the APA settlement, and a $14 million or $0.04 per share gain from the sale of the Pepperidge Farm facility.

Excluding these items, adjusted earnings from continuing operations were $765 million, versus $740 million in the prior year, and adjusted earnings per share from Continuing Operations would have been $2.01 per share, versus $1.87 per share in the prior year, an increase of 7%.

The growth in adjusted earnings per share from continuing operations reflects the decline in diluted shares outstanding, primarily due to the Company's strategic share repurchase program as well as repurchases utilizing net proceeds from the divestitures of Godiva and the UK and Ireland businesses.

Earnings from discontinued operations were $494 million, or $1.30 per share, versus $62 million or $0.16 per share a year ago.

The current year included a $462 million gain or $1.21 per share on the sale of Godiva.

The prior year included a $31 million gain or $0.08 per share related to the sale of the UK and Ireland businesses and the resolution of prior year tax audits in the UK.

Excluding these items, adjusted earnings from discontinued operations were $32 million or $0.08 per share, versus $31 million or $0.08 per share in the prior year.

Combining continuing and discontinued operations, net earnings per share for the year were $3.06 per share, compared to $2.16 per share last year.

Excluding the items previously mentioned that impact comparability, adjusted net earnings per share were $2.09, compared to $1.95 per share a year ago, an increase of 7%.

Now, let's turn to reporting segments for both the fourth quarter and full year.

US Soup, Sauces and Beverages.

Sales for the fourth quarter rose 12% to $673 million from $601 million in the year-ago quarter.

Here is the breakdown of the change in sales.

Price and sales allowances added 5%.

Increased promotional spending subtracted 1%.

And the 53rd week added 8%.

Now, let's touch on a few highlights for the fourth quarter.

On a reported basis, US Soup sales increased 15% with condensed up 14%, ready-to-serve up 13%, and broth up 21%.

Excluding the benefit of the 53rd week, US Soup sales increased 6%.

Condensed Soup sales increased 6%, ready-to-serve Soup sales increased 5% and broth sales increased 13%.

Sales of condensed Soups increased with gains in both eating and cooking varieties.

Ready-to-serve Soup sales increased due to solid gains in Campbell's Chunky Soups in both cans and microwavable bowls.

Swanson Broth continued its strong record of sales increases.

During the fourth quarter, the Company completed the purchase of the Wolfgang Puck Soup and Broth businesses.

Beverage sales increased primarily driven by the impact of the 53rd week and continued growth of V8 V-Fusion.

Prego Pasta Sauces increased, primarily due to the 53rd week while Pace Mexican Salsas increased due to the 53rd week and the benefit of recently launched specialty salsas.

Operating earnings increased 48% to $124 million from $84 million in the year ago quarter, primarily due to higher pricing, productivity improvements, lower marketing expense, and a benefit of the 53rd week, partially offset by the impact of cost inflation.

Now, let's turn to the full year results for this segment.

Sales of $3.674 billion rose 5% from $3.495 billion a year ago.

The change in sales breaks down as follows.

Volume and mix added 3%.

Price and sales allowances added 2%.

Increased promotional spending subtracted 1% and the 53rd week added 1%.

On a reported basis, US soup sales increased 2% for the year.

Excluding the benefit of the 53rd week, US Soup sales increased 1%, with condensed flat, ready-to-serve up 1%, and broth up 11%.

Gains in condensed cooking varieties were offset by declines in eating varieties.

Gains in Chunky and select cans were partially offset by a decline in the convenience platform.

The entire Soup portfolio continues to benefit from the success of our lower sodium products.

Swanson Broth sales increased double digits, driven by continued growth of aseptically packaged varieties.

Excluding the impact of the 53rd week, beverage sales increased double digits.

Primarily driven by consumer demand for healthy beverages.

Gains were realized on V8 vegetable juice, V8 V-Fusion and V8 Splash.

Beverage sales benefited from the new distribution agreement in fiscal 2008 with the Coca-Cola Company and Coca-Cola Enterprises, Inc.

to distribute Campbell's single serve refrigerated beverages in North America.

Sales of Prego Pasta Sauces and Pace Mexican Sauces increased.

Operating earnings were $891 million, versus $861 million reported a year ago.

The operating earnings increase was primarily due to higher sales volume, productivity savings, and higher price realization.

Partially offset by cost inflation.

Baking and Snacking.

Sales for the fourth quarter increased 13% to $533 million, from $471 million in the year-ago quarter.

The change in sales for the quarter breaks down as follows.

Volume and mix added 1%.

Price and sales allowances added 8%.

Increased promotional spending subtracted 3%.

Currency added 5%.

Divestitures subtracted 6%.

And the 53rd week added 8%.

Pepperidge Farm sales increased double-digit, primarily by growth in both cookies and crackers and bakery businesses, and the benefit of the 53rd week.

Excluding the benefit of the 53rd week, cookies and crackers achieved strong sales growth, driven by higher consumer demand for Goldfish crackers, the launch of Baked Naturals, an adult savory snack cracker, and growth in cookies.

Bakery sales increased double digits, driven by gains in whole grain varieties and sandwich rolls.

Arnott's sales increased, primarily due to the favorable impact of currency, the benefit of the 53rd week and biscuit growth, partially offset by the divestiture of certain salty snack brands.

Operating earnings increased 47% to $72 million from $49 million.

The increase is due to higher earnings in Arnott's, the benefit of the 53rd week, and the favorable impact of currency.

Sales for the year increased 11% to $2.058 billion, from $1.85 billion a year ago.

The change in sales for the year breaks down as follows.

Volume and mix added 2%.

Price and sales allowances added 6%.

Increased promotional spending subtracted 1%.

Currency added 5%.

Divestitures subtracted 3% and the 53rd week added 2%.

Let's look at a few highlights for the year.

Pepperidge Farm sales increased, primarily driven by growth in all businesses, cookies and crackers, bakery and frozen.

Cookies and crackers posted strong sales gains, due to the continued growth of Goldfish, the launch of Baked Naturals and growth in distinctive cookie varieties.

Bakery sales increased, driven by gains in whole grain varieties and sandwich rolls.

Arnott's sales increased, due to the favorable impact of currency, biscuit growth and the benefit of a 53rd week, partially offset by the divestitures of certain salty snack brands in Australia and our biscuit business in Papua New Guinea.

Operating earnings were $120 million versus $238 million a year ago.

The current year included $144 million in restructuring charges, related to the previously discussed initiatives.

Fiscal 2007 earnings included a $23 million gain from the sale of the Pepperidge Farm facility.

Excluding these items, the remaining increase in operating earnings was due to earnings growth in Arnott's biscuit business, the favorable impact of currency, and gains in Pepperidge Farms.

International soups, Sauces and Beverages.

Sales for the quarter rose 17% to $362 million, from $310 million.

The change in sales for the quarter breaks down as follows.

Volume and mix subtracted 3%, price and sales allowances added 1%.

Currency added 11%.

And the 53rd week added 8%.

In Europe, sales increased due to the benefit of the 53rd week, the favorable impact of currency, and gains in Belgium which are partially offset by declines in France and in Germany where we exited the private label business.

In the Asia-Pacific region, sales increased due to the benefit of the 53rd week, the favorable impact of currency, and growth in the Australian soup business.

In Canada, sales increased due to the benefit of the 53rd week, and the favorable impact of currency.

Operating earnings increased to $27 million from $18 million a year ago.

The current quarter included $3 million of restructuring charges.

Excluding these items, the remaining increase was due to growth in Canada, the favorable impact of currency, and the benefit of the 53rd week.

Partially offset by impairment charges on certain trademark and cost to launch products in Russia and China.

Sales for the year increased 15% to $1.61 billion, from $1.402 billion a year ago.

The change in sales for the year breaks down as follows.

Volume and mix added 2%.

Currency added 11%.

And the 53rd week added 2%.

In Europe, sales increased due to the favorable impact of currency, the benefit of the 53rd week, and volume driven gains in Belgium, partially offset by a decline in Germany.

In the Asia-Pacific region, sales increased due to the favorable impact of currency, growth in the Australian soup business, and the benefit of the 53rd week.

In Canada, sales increased primarily due to the favorable impact of currency, the benefit of the 53rd week, and growth in Soup and Beverages.

Operating earnings increased to $179 million, from $168 million a year ago.

The fiscal 2008 earnings included $9 million of restructuring charges.

Excluding these items, the remaining increase was due to the favorable impact of currency and growth in Canada and Australia Soups, partially offset by costs to launch products in Russia and China and impairment charges on certain trademarks.

North America food service.

Sales for the quarter increased 7% to $147 million, from $138 million in the year-ago period.

The change in sales breaks down as follows.

Volume and mix subtracted 6%.

Price and sales allowances added 4%.

Currency added 1%, and the 53rd week added 8%.

Excluding the impact of the 53rd week, sales declined primarily due to declines in refrigerated soups, partially offset by gains in frozen and canned soups.

Operating earnings decreased from $17 million to zero.

The current quarter included $7 million of costs related to improving operational efficiencies and long-term profitability.

The prior year included a $10 million gain related to the settlement in lieu of condemnation on our refrigerated soup facility in Washington State.

For the year, sales grew 3%, to $656 million from $638 million.

The change in sales for the year breaks down as follows.

Volume and mix subtracted 2%, price and sales allowances added 2%, increased promotional spending subtracted 1%.

Currency added 2%.

The 53rd week added 2%.

Excluding the benefit of this 53rd week in currency, sales declined, reflecting the weakness in the food service sector.

Operating earnings decreased to $40 million from $78 million in the prior year.

The current year included $29 million of restructuring charges and related costs to improve our operational efficiency and long-term profitability.

The prior year included a $10 million gain related to the settlement in lieu of condemnation on our refrigerated Soup facility, partially offset by relocation and startup costs associated with the replacement facility.

The current year earnings were also adversely impacted by cost inflation, partially offset by higher selling prices and productivity gains.

That completes my discussion of operating segments.

For the full year, unallocated corporate expenses increased from $102 million in 2007, to $132 million in 2008.

The increase was primarily due to the prior year $20 million benefit from the reversal of legal reserves, a prior year gain on the sale of the Papua New Guinea business, and a current year impairment loss on the pending sale of the sauce and mayonnaise business in France.

Now, let's turn to cash flow and the balance sheet.

Cash flow from operations for the year was $766 million, compared to $674 million a year ago.

The increase is primarily due to a reduction in payments to settle foreign currency hedging transactions and lower investments in working capital.

Partially offset by tax payments, primarily associated with the divestiture of Godiva.

Capital expenditures were $298 million, as compared to $334 million in fiscal 2007.

We expect capital expenditures in fiscal 2009 to be approximately $400 million.

The increase in spending in fiscal 2009 is due to the previously announced expansion and enhancement of the Company's corporate headquarters and expansion of the Company's beverage production capacity.

A significant portion of expansion of the headquarters facilities has been delayed to fiscal 2009.

During the 2008 fiscal year, we repurchased 26 million shares at a total cost of $903 million.

We completed a three year, 600 million share repurchase program and we used $600 million of the net proceeds of the sale of Godiva to repurchase shares.

Additionally, we repurchased shares under our ongoing practice to offset the issuance of shares under our incentive compensation plan.

With the completion during the year of our previous strategic repurchase plan, the Board authorized a new program to purchase up to $1.2 billion of shares over the next three years.

Total debt was $2.615 billion, compared to $2.669 billion in the prior year.

Cash, and cash equivalents were $81 million, as compared to $71 million in 2007.

Net debt, which deducts cash and cash equivalents from total debt was $2.534 billion, versus $2.598 billion.

This concludes my discussion of the year.

Before I close, I'll make a few comments about our expectations for fiscal 2009.

We expect sales, excluding the negative impact of one less week in the fiscal year and our recent divestitures, to grow in excess of our long-term target rate of 3 to 4%.

Our pricing actions across our portfolio will contribute to this growth.

On the cost side, we continue to face significant rates of inflation across ingredients, packaging items and energy.

In fiscal 2008, we experienced inflation of approximately 7 to 8% on these items.

For fiscal 2009, we are forecasting this rate to increase to 9 to 10%.

Factoring in pricing as well as our ongoing productivity savings programs, we expect our gross margin percentage to remain relatively flat for the year with improvements more in the back half of the year.

We anticipate our EBIT growth rate, excluding items impacting comparability, to be slightly below our long-term target growth rate of 5 to 6%, reflecting the impact of one less week, marketing spending behind our higher levels of innovation in the US, and increased investment spending in the emerging markets of Russia and China.

Consistent with our long-term target EPS growth rate, we expect adjusted net earnings per share to grow between 5 and 7% from the adjusted base of $2.09.

This EPS growth reflects the benefit of utilizing our cash flow, including the net proceeds of the Godiva sale to repurchase shares.

That concludes my review of our results, and I will now turn it back to Len for questions.

Okay.

Devin, would you start the polling process and I will just ask one favor.

Due to time constraints, if you could just have one question and follow-up so we can get as many callers as we can on here.

Thank you.

Devin?

Thank you.

(OPERATOR INSTRUCTIONS) .

Our first question comes from Eric Katzman of Deutsche

Hi, Eric.

Hi, good morning, thanks for your comments, Len, earlier.

I guess my question has to do with the Doug, if can you hear this, the broad strength in the portfolio, albeit in the seasonally small period, what does that say about the category?

I know you've been reluctant to kind of give numbers on the category, but it seems like Progresso is doing well, you're doing well, are you seeing moves from the consumer back to soup as a relatively inexpensive meal?

Just talk a little bit about that dynamic, please.

I'd be happy to, Eric.

Anecdotally, we're seeing traction for the category and for our business.

But I must say, a lot of it is driven by the innovation we're bringing to the category.

We have ramped up our gravity fed shelving program and our numbers are up versus last year in condensed, ready-to-serve and convenience segments.

We have ramped up our new product profile with Select Harvest and the launch of V8 aseptically packaged soups.

So there's a lot of activity that's starting to drive increased interest as well.

So it's hard to tease out how much is a natural flow into the category as consumers look for value and how much is in response to the initiatives we put out.

But overall, I do think -- I'm cautiously optimistic that the category is well-positioned in the store.

Okay.

I'll pass it on for the sake of time.

Thank you.

Thank you,.

Next question, Devon.

Yes, sir.

Next question comes from Jonathan Feeney of Wachovia.

Good morning, Jonathan.

Hey, good morning.

Thank you.

Just one question I had on next year's guidance.

I'm trying to figure out what kind of pricing versus volume you're assuming.

You're talking about above trend sales growth and I think we all know there's some inflationary factors there.

I'm sorry if you mentioned it already.

How much are you planning for on the pricing side and should volume actually accelerate?

On the pricing side, we're driving off a principle that pricing and productivity needs to offset the cost increase.

And we don't get into specific forecasting on pricing and volume.

But that principle will be in play in fiscal year 2009.

And we're determined to make sure that we do a better job of protecting our margins this year than we did last year.

I guess to adjust the sort of volume question, are you seeing any unusual behavior or improved performance out of the store brand competition as consumers might seek value?

No, we're not.

Good, thank you very much.

Just one follow-up from Anthony.

Just to add to Doug's comments.

In terms of fiscal '09, as I mentioned we expect gross margin percentage to be flat.

However, we do expect on a dollar basis, the combination of pricing and enablers to exceed cost inflation.

Okay.

That makes sense.

Next question, Devon.

Thank you.

Our next question comes from David Palmer of UBS.

Good morning, David.

Good morning, Len.

Guys, could you provide any detail on your projected productivity savings in fiscal '09, either dollar numbers.

I know you are talking around it around gross margins but is there a step change that's going on this year or is that maybe -- do you think it's maybe further out with regard to your incremental savings?

And furthermore, could you give any sense of how much of a step change there may be this year in reinvestment in those start-up markets?

Okay.

Anthony will take the cost one and then I'll ask Doug to talk about the market.

Looking forward to fiscal '09, we do expect to see a modest increase in the level of productivity savings to be in the range of 140 to $150 million.

Thank you.

And as far as the investment in emerging markets, David, we are -- this year we're roughly -- this past year we roughly spent about $0.05 a share in those markets.

In fiscal 2009 we expect to double that investment to roughly $0.10 a share and we're doing that while still delivering our expected range of 5 to 7%.

Thank you.

Okay.

Next question, Devon.

Next question comes from Judy Hong of Goldman Sachs.

Hey, Judy.

Hey, good morning everyone.

Just a question on in terms of, first, the input cost outlook for fiscal '09.

You talked about 9 to 10%.

Can you tell us how much of that is covered or hedged at this point so we sort of get the view on how much visibility you have on that number.

And then secondly, Doug, in terms of how the recent commodity pullback sort of impacts your ability to take further pricing in '09 and whether you're seeing or hearing any pushback from retailers in your ability to continue to take pricing going forward.

Okay.

I'll ask Anthony to take the first part of that and then Doug can follow up.

Okay.

Depending on the commodity that we're looking at, our hedge position ranges somewhere between 50 and 100% and probably averages somewhere in the middle.

And just to expand on this 9 to 10% inflation in '09, we are seeing escalating rates in number of items, including items such as beef and corn and vegetables and tomato paste, those two are impacted by fertilizer cost as well as gas cost to process them and we're also seeing escalating rates of inflation on a number of packaging materials such as cans, glass and resins.

Yeah.

And Judy, I believe most of the peer companies are also seeing on average higher inflation for the coming year than they saw last year.

And, so, as are the customers with their own brands.

So right now we see a market that is trying to price -- leverage pricing and productivity to cover cost and I expect that's going to continue this year.

I don't see any -- I have not seen any change in the behavior of our customers in this regard.

Okay.

And are there any price increases that you've announced recently that will come through in the next month or couple of months?

We have taken prices up in some areas in our Campbell USA operation.

Recently, given the cost pressure and that should be -- they should be working their way through the system during the first half of this year.

Okay.

Thank you.

Okay.

Next question, Devon.

Next question comes from Eric Serotta of Merrill Lynch.

Hey, Eric.

Good morning, guys.

Quick question on new product shipments in the fiscal fourth quarter.

Was that -- was the change in new product shipments material on a year on year basis?

I know you usually ship kind of late July at the tail end of the quarter.

Okay, I'll ask Anthony to take that one.

The number of new items that we shipped this year was a little bit higher than last year.

But in terms of sales dollars it wasn't meaningful.

Okay.

And were there --

Eric, also in terms of the inventory levels with our customers, it wasn't meaningful either.

It was very comparable to prior year.

Okay.

And with -- it seems that your primary competitor in ready-to-serve took pricing later in the season than you did.

My understanding is they only implemented it fairly recently.

Do you expect to see sort of a different pattern in terms of year-over-year share performance versus your competitor in ready-to-serve this year, given that you've put your pricing into the market earlier?

Well, we're in unchartered waters here in terms of the way the pricing has materialized and the competitiveness of the category.

Every year we go in, expecting to be very competitive on the share front.

I would say we expect to be more competitive than we have been on the share front but I wouldn't want to -- I wouldn't forecast, given that we really don't talk about it, because we're prohibited to, given our relationship with certain customers.

Okay.

And just finally, do you think that the RTS category is strong enough that even if you don't see significant share gains this year, that you could put up some decent growth through your new products and the like?

We know the category will respond to innovation.

And we're putting our best foot forward on innovation this year through Campbell's Select Harvest, with meaningful spending and also with our V8 Soup line and significant attention to Chunky.

So we expect the ready-to-serve category to be very vital as well as condensed.

And broth.

Okay.

Thanks.

We'll hope for some cold weather to further help you.

We'll go for that.

Okay.

Devon, next question.

Next question comes from Robert Moskow of Credit Suisse.

Hi, Rob.

Hi.

Thank you.

Can I ask you to focus a little bit on beverage, the sales growth in the quarter was positive but it seems to be growing at a slower rate than during the course of the year.

What do you -- you had a great growth rate, thanks to the relationship with CCE.

What are your expectations for this year and why do you think the growth rate kind of slowed a little bit in the fourth?

Rob, we had a couple things going on in the fourth quarter.

First of all, we're lapping some huge numbers from prior year.

So we anticipated some degree of slowdown, given the numbers we were lapping.

The second issue is that we basically didn't have enough capacity to ship V8 -- we had more demand for V8 V-Fusion than we had capacity and we pulled back our spending in the fourth quarter as we were trying to build inventories and meet the needs of the market.

So we were lapping big numbers.

We pulled back the consumer spending.

And we shipped what we could but we couldn't ship to meet the demand.

We are bringing more beverage capacity online and so I think as we bring the capacity online, restore the spending, and continue to build out on the Coca-Cola, Coca-Cola enterprises alliance, that we should be back on trend with that as we go through this year.

So we're cautiously optimistic that we're going to resume the kind of strong growth we had in the first half of the year.

So it could be double-digit growth?

I don't think we want to forecast what we're expecting but I think growth is I think as we said.

Okay.

Thank you.

Okay.

Next question, Devon.

Next question comes from Christine McCracken of Cleveland Research.

Hey, Christine.

Good morning.

Just want to ask on -- we've seen a lot of data on food inflation in both Russia and China.

And I'm wondering if you could give us a sense if that's good or bad.

You know, typically when we see a tradedown here in the US to less expensive meals, it benefits your Soup business but I'm wondering if you're seeing any impact in either of those markets.

Right now, we have good value propositions in each market.

And we're seeing very solid trial numbers and repeat numbers from both markets, based on the offerings at the price points we have and the marketing propositions we have.

So there's no evidence that there is an inflation effect on our proposition.

Have you been forced to take the same type of pricing there?

Can you talk about kind of your cost as you enter those markets?

We are -- we're pricing to maintain our margins there, just as we are here.

And also, it's important to know in the -- in both Russia and China, the important consideration is the fact that salaries are rising faster than food prices.

So the emerging middle class is able to afford to handle the food prices.

All right.

Thanks.

next question, Devon.

Next question comes from Chris Growe of Stifel Nicolaus.

Yes, good morning.

Good morning, Chris.

Hi, guys.

I just wanted to clarify a point you made earlier about pricing.

You said you made some price increases I think you said Campbell US.

That was not soup I presume in terms of incremental pricing, that was the other elements of the category.

It was broadly speaking, it was across the Campbell portfolio.

And it included some Soup items.

Okay.

And then I guess related to that, you've taken up your expectation for cost inflation in '09.

I guess you've gotten some incremental pricing here in the U.S.

it sounded like.

So do you think your pricing today will cover your costs as you know it today, including the cost savings coming through?

Well, we have a lot of confidence in our ability to manage our way through this and hit our earnings targets with good spending.

So I think the guidance we're providing today would suggest that we have sufficient pricing to cover costs.

Okay.

And I just wanted to ask a question on international, and if you would regard this as a disappointing quarter, given that underlying sales were down and I guess to what extent do you think you need maybe acquisitions there, maybe more marketing dollars or something to kind of spur the growth in international overall for you.

Actually, I feel very good about international.

I wouldn't read into the quarter.

We've had a lot of puts and takes for the quarter but if I look at the year, you know, for the first time in a long time, we've got our European Soup business growing again.

Both a top line and a bottom line.

As we peeled out the UK and Ireland and really focused on our core Soup businesses in Continental Europe, we've started to deliver better results.

I feel the same way about Asia-Pacific where we had a very good year on Arnott's in biscuits, but also delivered excellent growth in Campbell soups and then I feel the same way about Canada and Mexico as well, where we delivered good top and bottom line growth.

So overall, I feel like we have a more solid portfolio here.

We've stripped out the parts of the portfolio that were dragging us -- holding us back and we're always diligently looking for opportunities to add to the portfolio and if we see one, we will.

But we're going to be very careful on that front.

We've now got a portfolio that we think we can manage and drive for profitable growth.

Okay.

Thank you.

Next question.

Next question comes from Vincent Andrews of Morgan Stanley.

Thank you, everyone.

If I could just maybe follow up a little bit on the international which is just that foreign exchange added 4% to your sales this year and with the dollar strengthening and who knows where it's going to go from here but how are you thinking about the dollar on a go forward basis and what's baked into the algorithm for the next year for the dollar.

Our outlook for the dollar is to be relatively stable for where it's been of late and not a big move either way but certainly obviously that could change and we'll have to watch it very closely.

Okay.

Thank you.

Thanks.

Okay.

Next question, Devon.

Our next question comes from Ed Roesch of Soleil Securities.

Hey, Ed.

Hey, good morning.

Thanks for taking the question.

I just wanted to look at Pepperidge Farm, focus on that for a second.

It would seem that maybe pricing is going to be the bigger driver of top line growth in fiscal '09.

Is that a fair assessment or can you touch on some of the volume drivers or maybe some new products that will drive that.

Thank you.

We expect solid growth again from Pepperidge Farm.

We've had four straight years of very solid growth.

But we are in unchartered waters on pricing.

We basically on many of our bakery items had to take the price up five times this past year.

Anywhere from three to five times.

And, you know, we don't know how long the category can manage, sustain this kind of pricing.

Right now our expectations are we're going to have good volume growth, that pricing will complement that growth.

There's no evidence that suggests that won't happen.

We are getting into unchartered waters on price.

We expect a solid year with good volume and mix impact and added impact from pricing.

Okay.

And to follow up, some of the drivers of the volume would continue to be 100-calorie.

We continue to do very well on whole grain breads and we have some initiatives there to strengthen our whole grain propositions.

There are initiatives and increased spending against Goldfish which is doing quite well and a national expansion of baked naturals, our cracker business, and our cracker business.

And some solid blocking and tackling in cookies.

So we've got a good, solid innovation platform across all three key areas.

Thank you, Doug, that was very helpful.

Devon, how many more questions do we have in queue.

We have three, sir.

All right.

We'll take those and then we're going to have to stop.

Our next question comes from Terry Bivens of JPMorgan.

Hey, Terry.

Good morning, everyone.

Hi, Terry.

Question for you, Doug.

If you looked at what you guys reported versus what we see in Nielsen, the implication is double-digit growth in unmeasured channels.

Is there anything you're doing differently in Wal-Mart versus the regular grocery chain that might help us look at that?

Well, unmeasured channels goes well beyond Wal-Mart.

It includes a lot of club activity and other.

I don't comment on specific customer behavior.

I would say that we have some solid strategies that have been consistently working in unmeasured channels, which is why our net sales have historically tracked well ahead of what you've within able to track in terms of consumer take-away and while our inventory levels have remained the same with our customers.

So we've got good, solid plans working there and I really don't want to get into how we're driving the business.

Okay.

And a quick follow, if I might.

Obviously General Mills has put their foot in the broth category and as you look at the first half you guys had a very good first quarter, extremely good second quarter.

Are you worried about how the broth business is going to evolve as we move into winter?

Not at all.

It's a great growth category for us.

We're ready to deal with any and all competitors.

We expect a very strong year in broth and stock this year, so I'm not at all concerned about it.

But we -- our presence will be felt in that category this year.

Okay.

Thanks very much.

Okay.

Next question, Devon.

Next question comes from Mitchell Pinheiro of Janney, Montgomery Scott.

Regarding emerging markets, does the current, antagonistic political environment in Russia change your thinking about how you invest in that market and in light of the -- you mentioned about $0.10 a share of sort of costs for FY '09 in emerging markets, has there been any change in your posture that these emerging markets will begin to contribute maybe in that three to five-year time period?

First part of the question, related to the political climate change, as we went into this market we were prepared for this.

We weren't expecting the base to go forever.

We had our eyes wide open here.

And our business proposition we believe is going to work in this time and in more turbulent times.

I believe that at least on a consumer products front, there is big demand for these products and the companies that are able to deliver them faster, better and more completely than the others will win.

So we have a lot of confidence in our ability to service the Russian market in this climate.

I think if we were in the oil and gas or mining business, we might have -- or forestry business, we might have a little more concern.

But not in the Soup business.

So we're confident there.

The second half of the question, help me, Mitch.

So, you spent about a nickel in '08 in emerging markets.

Now a dime in '09.

Does that change how you're thinking about when these markets contribute to earnings?

Well, we continue to operate with this three to five outlook but you better believe we're looking to make it more impactful sooner but we're just ramping up year one in these markets and we've had a lot of learning and we're going to implement learning in year two and we'll see.

We've seen nothing that would say that we shouldn't be able to turn the corner in these markets in three to five years.

Okay.

Thank you.

Okay.

Last question, Devon.

Thank you.

Our final question comes from David Palmer of UBS.

Hey, guys.

Follow-up question here.

I guess this is kind of a general question about how you're thinking strategically about growth.

It seems like in food and restaurants, the companies that have strong brands that also participate in categories or in price tiers that kind of screen value are doing really well.

McDonald's dollar menu might be an example.

You might think like Kraft mac and cheese might be another example.

You have condensed.

Theoretically, with your big advertising budget, one of the biggest brands in grocery, you should be able to use that as a weapon.

I know people have kind of touched on this but is that -- are you guys thinking that way?

On the other side of the coin in terms of the tradedown risk, you had a rough year in microwavable, any strategy to kind of shore that up from what presumably would be tradedown risk?

Thanks.

Well, David, I don't know how you snuck on with that extra question.

Nice job.

But in terms of condensed, we clearly recognize there's a value proposition there and we're going to exploit it.

We're exploiting it in two ways.

One, directly with the consumer but also partnering with our customers who are hungry to exploit value-driven categories and they see the value that condensed soup can bring in this environment.

So a lot of this is partnering with our customers, in addition to the consumer proposition.

So we see the value opportunity and we're going to make the most of it.

In the ready-to-serve category, it's interesting.

And we haven't cracked the code on this completely.

What we do know is when we emphasize our canned ready-to-serve products, our microwave bowls and cups tend to do a little less well.

When we emphasize microwave our canned products don't do as well.

We've got a more enlightened business proposition here where we're going to be building bulk in a targeted way.

But we have to work our way through that.

I am not concerned about the net performance of our -- sales in Soup.

We'll manage the mix in a way that's for us and in terms of mixed management, if we sell more condensed Soup and more canned ready-to-serve Soup, we'll be fine.

And we'll manage our way through it.

Thanks.

Okay.

Thank you everyone for joining us today.

Devon, we can end the call.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the program.

You may all disconnect.

Thank you and have a nice day.