Administrative expenses increased $12 million to $294 million, primarily due to higher pension and benefit costs, costs associated with the new headquarters facility, information systems related costs and currency, partly offset by lower compensation expenses.
EBIT was $803million compared with $869 million in the prior year. EBIT decreased 8 percent primarily due to increased promotional spending and cost inflation, partly offset by productivity gains and favorable mix.
Cash flow from operations was $483 million compared with $496 million in the year-ago period. The current-year cash flow reflected higher working capital requirements and lower earnings, mostly offset by the benefit of lower pension contributions.
Year to date, Campbell repurchased 16 million shares for $573 million.
Sales for U.S. soup, sauces and beverages were $1.022 billion for the second quarter, a decrease of 4 percent compared to a year ago. The change in sales reflected the following factors:
- Volume and mix subtracted 1 percent;
- Increased promotional spending subtracted 3 percent
U.S. Soup sales for the quarter decreased 4 percent reflecting higher levels of promotional spending which did not deliver the anticipated volume gains. Soup sales were also negatively impacted by movements in customer inventory levels.
Sales of "Campbell's" condensed soups decreased 7 percent reflecting declines in both cooking and eating varieties. Sales of eating varieties continued to be negatively impacted by promotional discounting in the ready-to-serve segment.
Sales of ready-to-serve soups decreased 4 percent primarily due to declines in microwavable soups. Sales of ready-to-serve canned soups were comparable to a year ago as volume gains, principally double-digit growth in "Campbell's Chunky" soups, were offset by increased promotional spending.
Broth sales increased 7 percent due to strong holiday performance.
Beverage sales decreased 1 percent for the quarter due to the impact of higher promotional spending partly offset by volume gains.
"V8" vegetable juice sales declined due to increased competitive activity, while sales of both "V8 V-Fusion" juice and "V8 Splash" juice drinks increased.
Sales of "Prego" pasta sauce and "Pace" Mexican sauce both declined due to increased competitive activity. "Pace" Mexican sauce was particularly challenged by private label distribution gains.
Operating earnings were $220 million compared with $259 million in the prior-year period. The decrease in operating earnings was primarily due to increased promotional spending and cost inflation, partly offset by productivity improvements.
For the first half, U.S. soup, sauces and beverages sales decreased 4 percent to $2.125 billion. A breakdown of the change in sales follows:
- Price and sales allowances subtracted 1 percent;
- Increased promotional spending subtracted 3 percent.
For the first half, U.S. soup sales declined 5 percent due to a 9 percent decrease in ready-to-serve soups and a 4 percent decrease in condensed soups, while sales of broth increased 2 percent. Beverage sales increased 5 percent due to strong volume-driven growth of "V8 V-Fusion" juice and "V8 Splash" juice drinks.
Operating earnings were $515 million compared with $590 million in the year-ago period. The decrease in operating earnings was due to increased promotional spending and cost inflation, partly offset by productivity improvements.
Sales for baking and snacking were $526 million in the second quarter, an increase of 8 percent from a year ago. A breakdown of the change in sales follows:
- Volume and mix added 4 percent;
- Price and sales allowances added 2 percent;
- Increased promotional spending subtracted 1 percent;
- Currency added 3 percent.
Sales at Pepperidge Farm increased, reflecting volume gains and improved price realization.
North American foodservice sales were $158 million for the second quarter, a decrease of 1 percent compared with a year ago. A breakdown of the change in sales follows:
- Volume and mix subtracted 3 percent;
- Price and sales allowances added 1 percent;
- Currency added 1 percent;
- Operating earnings increased to $21 million compared with $17 million in the prior period.