Campbell Soup Company
Q4 2012 Earnings Call Transcript

Published: 4 Sep 2012

[Operator:]

Good day, ladies and gentlemen, and welcome to the Campbell's Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host for today, Ms. Jennifer Driscoll, Vice President of Investor Relations. Ma'am, you may begin.

[Jennifer Driscoll:]

Thank you, operator. Good morning, everyone. Welcome to the Fourth Quarter Earnings Call and webcast for Campbell Soup Company. With me here in New Jersey today are Denise Morrison, President and Chief Executive Officer; Craig Owens, Senior Vice President, CFO and Chief Administrative Officer; and Anthony DiSilvestro, Senior Vice President of Finance; as well as Stephanie Varnum, new Senior Manager in IR. Denise will kick us off today with a strategic update and highlights of our results for the fourth quarter. Craig will offer his take on the quarter, the fiscal year, and our expectations for fiscal 2013. Then after we take your questions, Denise will make a few closing remarks. As usual, we have created slides to accompany our earnings presentation today. You'll find the slides posted on our website this morning at investor.campbellsoupcompany.com. Please keep in mind that our call is open to members of the media, who are participating in listen-only mode. As a reminder, our presentation today includes forward-looking statements, which 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 are subject to inherent risks. Please refer to Slide 3 in the presentation or to the company's most recent Form 10-K and subsequent SEC filings for a list of the factors that could cause our actual results to vary materially from those anticipated in any forward-looking statements. Since our presentation today includes non-GAAP measures as defined by SEC rules, we've provided a reconciliation of those measures to the most directly comparable GAAP measures in an appendix to the slides accompanying our presentation. These slides, along with our earnings release and other selected quarterly financials, can be found on our website as well. And with that, now let me turn the call over to Denise.

[Denise M. Morrison:]

Good morning. Thanks for joining Campbell's Fourth Quarter Earnings Call. 1 year into our strategic transition, we have planted the seeds to return Campbell to sustainable, profitable net sales growth. As we stated at our recent Analyst Day, our transition is taking us longer than we anticipated. However, we are starting to see some green shoots that indicate the direction of Campbell is changing. We declared 2012 as a year of investment. Over the last year, we've made significant investments in brand building, innovation and external development. We've also upgraded talent in key positions and changed our organization structure to build capabilities in innovation, marketing excellence, digital and external development. We are working diligently to evolve our culture and to leverage our high employee engagement for higher performance. This takes time, and we will not rest until we have hit our stride. This morning, I'll offer my perspective about our progress as we execute our 3 growth strategies

[B. Craig Owens:]

Thank you, Denise. Good morning. I'll spend a few minutes reviewing our fourth quarter results and segment highlights, followed by a recap of our fiscal year results. And I'll conclude with our fiscal 2013 guidance. For the quarter, we reported net sales of $1.6 billion comparable to a year ago. Excluding the unfavorable impact of currency, organic net sales increased by 3%. On August 6, we completed the acquisition of Bolthouse Farms for $1.55 billion, subject to customary purchase price adjustments. In the fourth quarter, we recorded pre-tax transaction cost of $5 million or $0.01 per share related to the acquisition. Excluding that impact, as well as the restructuring charges recorded in the fourth quarter of fiscal 2011, adjusted EBIT decreased by 10% to $208 million, primarily due to the decline in the gross margin percentage and higher marketing expenses, partly offset by an increase in sales volume. Adjusted earnings per share were $0.41 this quarter, a 5% decline as compared with the fourth quarter of 2011. The decline reflected lower EBIT, partially offset by the benefits for lower tax rate and fewer shares outstanding. In the fourth quarter, our reported net sales were comparable to the prior year. A 3-point gain in organic sales was offset by a 3-point decline from currency translation as the Australian dollar, the euro and the Canadian dollar have all weakened. As you can see on Slide #18, the growth in organic sales reflected volume, mix and pricing contributions of 6 points, partly offset by the negative impact of increased promotional spending of 3 points. All of our reporting segments had positive volume and mix. We also enjoyed the benefit of inflation-driven pricing actions, the majority of which came from 2 segments

[Jennifer Driscoll:]

Thanks, Craig. At this time, we will conduct the Q&A session. [Operator Instructions]

[Operator:]

[Operator Instructions] Our first question comes from David Driscoll from Citi Investments.

[David Driscoll:]

Wanted to ask a little bit about the organic revenue growth within your F '13 guidance. So I believe that Bolthouse -- Craig, I think you said that it will add 10 points of revenue growth such that organic revenue would be just 0% to 2% within your guidance range. Given that Campbell's is accelerating the new product introductions with -- I think you actually went from 47 to 50 on the slides, so you're now showing 50 new products planned for F '13, and that Campbell's will realize price increases in F '13, partially because of the inflationary pressures. Why is organic revenue growth so low? Why isn't it going to be something a lot better than 0% to 2%?

[B. Craig Owens:]

Well, David, I think we continue to see some headwinds from the consumer environment. As we've also said, we're going to lower our advertising spend in the U.S. Soup business. While we think that has good payback to it, it will have a negative impact on our sales number in U.S. Soup for the year. And it's -- I would point out that we are anticipating an improvement versus our prior year organic sales with all of that in.

[David Driscoll:]

Maybe just one follow-up on that then. Can you quantify the fourth quarter buy-in on condensed soup? I believe there's a 5% price increase in the fourth quarter for condensed and that the retailers bought in ahead of that, hence, the significant growth in condensed. Will that -- I assume that, that negatively hits volumes in 1Q '13, but can you give us some quantification of what the magnitude you expect to happen in the first quarter?

[B. Craig Owens:]

It is very difficult to precisely quantify. I think, though, one thing that's important, it's not so much the impact of the buy-in prior to price increase as it is that we had pretty significant consumer promotion activity going on at the end of the quarter, which caused some increase in inventories in-store. We expect to see that sell-through. But you're right, there could be a little bit of overhang into Q1.

[Denise M. Morrison:]

Yes, I mean, the -- what we saw was a normal situation around our price increase, and actually coming into our F '13, a reasonable inventory level.

[Operator:]

Our next question comes from Thilo Wrede.

[Thilo Wrede:]

Denise, excluding Bolthouse, you've grown or you intend to grow EPS this year by 1% to 2%, which is obviously quite a bit away from the 5% to 7% long-term target. How quickly do you think can you get to that long-term target? And what needs to happen for you to get there?

[Denise M. Morrison:]

We recognize that the EPS will represent an improvement in trend on the base business but won't get us all the way there. We're not really disclosing a time frame that we will get there, but we're just giving guidance for the entire business inclusive of Bolthouse Farms.

[Thilo Wrede:]

Then maybe asked differently, at the Analyst Day and today, again, you've reiterated that the growth rate that you're looking at for 2013 isn't quite what you expected last year. How much worse is the growth rate for this year than what you expected when you put out your strategic plan last year?

[Jennifer Driscoll:]

I think, Thilo, we talked about a return to our long-term targets, which is 3% to 4% sales, 4% to 5% EBIT and 5% to 7% EPS.

[Denise M. Morrison:]

Right. And I think that the delivery this year was in line with the guidance that we gave in July 2011.

[Operator:]

Our next question comes from Priya Ohri-Gupta.

[Priya Ohri-Gupta:]

Just a quick point of clarification. What sort of cash contribution do you expect to make towards your pensions this year?

[B. Craig Owens:]

Yes. We expect that to total about $85 million on a consolidated basis.

[Priya Ohri-Gupta:]

Okay, great. And any expectations around the possibility of refinancing your December maturity? Or should we continue to see that paid down?

[B. Craig Owens:]

I think you can assume we'll pay that down.

[Operator:]

Our next question comes from Andrew Lazar from Barclays.

[Andrew Lazar:]

You had mentioned, I think, some positive consumption or take-away in condensed, even when you exclude the inventory adjustments that you discussed. So while it's a small quarter overall, I'm just trying to get a sense if you can glean anything in the data that you have. I guess that makes you either incrementally more or less comfortable that the pricing you're taking in condensed can be done with kind of manageable impacts on volume.

[Denise M. Morrison:]

We -- Andrew, first of all, we have seen some positive consumption across Soup, particularly on condensed soup, and that's encouraging. We do feel that the price increase that we took will result in a reasonable increase in the retail price on the shelf to the consumer. However, we are planning for some volume impact due to that price increase. So that we're expecting that there'll be some pros and cons as we go into next year.

[Andrew Lazar:]

Got it. And then with condensed in the quarter up as much as it was, I guess I would've thought the mix impact would have benefited gross margins in the U.S. Simple Meals segment more than it did. Was there something else offsetting that, in that segment, that you can clarify?

[B. Craig Owens:]

Yes. You're probably seeing a little bit of the promotional spending associated with the retailer activity.

[Operator:]

Our next question comes from Jason English from Goldman Sachs.

[Jason English:]

Sticking on the topic of promotions in Soup, I imagine a lot of your merchandising plans for the early part of the soup season are locked and loaded now. With that said, any expectation of recovering some of the loss merchandising support you ceded to your competitor last year?

[Denise M. Morrison:]

Well, as you know, a couple of years ago, we had engaged in some pretty deep discounting in the category that we walked away from last year in an effort to spend more and invest more in brand building. We believe going into this season, we will have spending against an optimized driver of demand, which is inclusive of promotions and advertising and consumer promotions. So we think that we're working this season in a much more balanced way.

[Jason English:]

So Denise, should I interpret that to mean sort of comparable levels to last year? That last year is sort of the new base to look at?

[Denise M. Morrison:]

Yes, yes, that's correct.

[Jason English:]

And real quick on innovation. Can you update us -- you said successful acceptance by retailer. In terms of net distribution, have you been able to secure some of the net distribution gain in Soup? Or has it been primarily a swap for other items?

[Denise M. Morrison:]

Yes. It's still early days, Jason, but we are on track with our new products broadly. And our -- the retailers have accepted the products and it's been very positive. So we expect that, that momentum will continue, and the proof is what will the consumer do. So we'll be given an early read on that next quarter.

[B. Craig Owens:]

So it will be a distribution gain, but it's too early to quantify.

[Operator:]

Our next question comes from Eric Katzman from Deutsche Bank.

[Eric R. Katzman:]

I guess my question maybe to Craig on the outlook in terms of the EBIT growth versus the EPS growth. How much of a -- I think you said there's some headwind from interest expense on Bolthouse. And then you've also got -- which way, on an operating basis, is the tax rate swinging? And then, is there any kind of net benefit of the shares year-to-year? I'm just trying to kind of judge the difference between the 4 to 6 versus the 3 to 5 because it would seem that, that might be more of a gap.

[B. Craig Owens:]

Right. The -- so the tax rate might be slightly negative. The bigger impact is interest and also the cessation of our share repurchase program.

[Eric R. Katzman:]

Okay. But Craig, are you following me to the extent that, okay, tax rate is slightly negative. Interest expense is a clear negative. You're not going to have the benefit of the shares, so why wouldn't the difference between EBIT and EPS growth be, let's say, more negative?

[B. Craig Owens:]

So there is a carryover benefit on shares, so we stopped the share repurchase program. But because we bought throughout the year in F '12, there's a carryover benefit in the share count, and that's a -- that's a slight positive, and that's partially offsetting the interest expense.

[Eric R. Katzman:]

Okay. All right. And then, I'm sorry, if I could just follow up real quickly on Arnott's. I think you said that Australia continued to be challenged, but that was offset by, I guess, some export business to -- whether it was Indonesia or Malaysia or someplace. But why shouldn't we still be pretty worried about Australia and Arnott's, given how profitable that business is?

[Anthony P. DiSilvestro:]

Just one clarification. We have businesses in both Malaysia and Indonesia. We have production facilities in both those places so -- and both those businesses did well.

[Eric R. Katzman:]

Okay. Okay.

[Denise M. Morrison:]

I think -- I just came back from Australia and had extensive meetings with the team and the customers there. And I think the consumer environment is still challenged. The consumers' savings rate is probably one of the highest it's ever been, and there is some concern over that. However, the team has recognized that this is an environment that we have to play in probably for a while. And so the joint business plans that we've been able to work with in the marketplace are very encouraging. And so we -- during F '12, we actually continued to invest in brand building and the innovation pipeline, so we believe that we have strong plans going into 2013 that, hopefully, adjust to the situation.

[Eric R. Katzman:]

Is that one of the reasons -- is Arnott's in Australia one of the reasons why you're being a little bit more cautious on the guidance, including sales, which I think was one of Dave Driscoll's questions?

[Denise M. Morrison:]

I think that's part of it. I think the other is we've been pretty conservative on our estimates for our new product innovation. The consumer will let us know if we can be more exuberant.

[Operator:]

Our next question comes from Chris Growe from Stifel, Nicolaus.

[Christopher Growe:]

I just wanted to ask you a question in relation to marketing and the 3% increase that we saw for the year. I just wanted to confirm -- we've talked about this in previous quarters. But that, obviously, was up pretty nicely for Soup but just down -- and was it down in all other divisions from there? I'm just trying to understand kind of the magnitude of the shift that occurred across the divisions.

[B. Craig Owens:]

Yes. So Chris, the primary increases would have been against our sauce business, against our adult cracker business within Pepperidge Farm and against our beverage business in North America. Those would have been the sources of most significant increases. There would've been increases in some of our emerging marketing businesses, too. But those are pretty small relative to the total.

[Christopher Growe:]

And then just to understand, then, for fiscal '13, that increase then -- I'm sorry, that I think you said a slight decline from marketing. Is that -- was that just the U.S. Soup or was that for the overall company?

[B. Craig Owens:]

The decline -- well, it will be a decline for the overall company that is driven by a decline in U.S. Soup primarily.

[Denise M. Morrison:]

For the overall company, though, our total marketing, which will be advertising, consumer and trade promotion, will be about average with the industry.

[Christopher Growe:]

Okay. That's helpful. If I could just ask a follow-up then. In relation to -- just to be clear on the new product shipments, where there -- there were some in the fourth quarter. I'm just curious if that was an incremental benefit year-over-year to the revenue growth in Q4?

[Anthony P. DiSilvestro:]

Yes, but not very materially.

[Denise M. Morrison:]

Yes. A small amount shipped for some shelf stuff with retailers that did their planogramming in the fourth quarter.

[Christopher Growe:]

Okay. So most of that will come really then Q1, which we're in now.

[Denise M. Morrison:]

Correct.

[Operator:]

Our next question comes from Ed Aaron from RBC Capital Markets.

[Edward Aaron:]

Just wanted to ask a question on condensed. There's -- there have been some issues, I think, with excess capacity on the private label side in that business. And I'm just wondering, when you think about that in the context of price increases that you're taking for this year, are you at all concerned that the price gaps in that part of the business are going to widen in fiscal '13?

[Denise M. Morrison:]

I think that we will always watch price gaps versus private label and competition. Private label in the Soup business has traditionally been about 10 points below the average, so we're not expecting that this would be a huge factor.

[Edward Aaron:]

And just one quick clarification. I think you said in your prepared remarks that Bolthouse is going to drive most of the EBIT growth in fiscal '13. But I think, just doing kind of some math on it, it looks like Bolthouse should drive more than all of the EBIT growth. So I'm just trying to make sure that I'm understanding that correctly.

[B. Craig Owens:]

If you look at the base business implied in the guidance, it's about flat at EBIT, slightly up but pretty close to flat.

[Edward Aaron:]

Okay. Maybe I'll follow up on that, but I'll take it off line.

[Operator:]

Our next question comes from Bryan Spillane from Bank of America.

[Bryan D. Spillane:]

Craig, just wanted to get a little bit more color on your outlook for cost of goods inflation for this year. And I think, going back to what you said in July, it looks like the range is the same, but I just want to make sure. Has anything really changed in terms of the cost inflation outlook you're using today versus what you said in July?

[B. Craig Owens:]

So the F '13 outlook for input materials, packaging and energy is around 3%, and the total inflation assumption for cost of sales is around 4% for F '13.

[Bryan D. Spillane:]

And the difference between the 3% and the 4% is you've got some higher like pension expense and health care costs. Is that it?

[B. Craig Owens:]

Precisely.

[Bryan D. Spillane:]

Okay. And then are you still -- if I remembered it correctly, you were expecting, net of productivity, the inflation would be closer to 0% to 2%. Is that still the case?

[B. Craig Owens:]

Yes.

[Bryan D. Spillane:]

Okay. And then just in terms of the way it phases, anything that we should think about in terms of first half versus second half?

[B. Craig Owens:]

No, I don't think so. I mean, we'll keep updating you through the year, but there's no significant difference, I don't think, as we look across the year.

[Bryan D. Spillane:]

Okay. And just finally, how much of it is locked in for the year versus might be subject to volatility?

[B. Craig Owens:]

We tend to average being out about 6 months. We may be a little bit longer than that right now, given the way that the commodity markets have moved, but you should think of us, generally, as being about 6 months out.

[Bryan D. Spillane:]

Okay. And if I could just sneak one in on -- in the same theme. Just all of the pricing -- you've priced fully to all of your inflation expectation, like there's not incremental pricing action you'd need at this point.

[B. Craig Owens:]

Well, I -- we're not going to announce future pricing activity at this point. But yes, what we said at Analyst Day, and what is still true, is that between the pricing we have already announced in the Soup business and the productivity savings that we're expecting, we're pretty well covering off the cost inflation.

[Operator:]

Our next question comes from Jonathan Feeney from Janney Capital Markets.

[Jonathan P. Feeney:]

I wanted to follow up a little bit with Craig. You said it was difficult to quantify the retailer inventory on what you mentioned, some impact on the Soup, Sauces and Beverages volume. How much visibility do you have into that inventory? And like, I mean, is it -- do you expect those levels to grow significantly with a lot of this new product activity in the coming quarter?

[B. Craig Owens:]

The thing that's difficult about it, Jonathan, is that there's a tremendous seasonality to our inventory movements anyway. So the fourth quarter always sees an inventory decline in total versus the third quarter. And what we saw this year was that both the starting point a little bit lower than the previous year, ending point a little bit higher, but all in the context of decreasing inventories. In the first quarter, we almost always see an inventory increase. And so trying to quantify what the net impact of that will be is just difficult on big inventory numbers. If we look at the warehouse inventory levels that we have visibility to, they were very normal for the fourth quarter. The in-store inventory was somewhat higher than normal at the end of the fourth quarter because of the promotional activity that we've talked about, and that's what created a pretty big swing in a pretty small quarter.

[Operator:]

Our next question comes from Alexia Howard from Sanford Bernstein.

[Alexia Howard:]

Okay. So operating earnings, if I'm looking at Page 31, I think it is, on the slide deck, it looks as though outside of U.S. Simple Meals and Foodservice, you've obviously had a big decline in operating earnings across some of these segments here in fiscal '12. And I think a lot of that was due to competitive dynamics and cost pressures and so on. For those segments where we have seen a major decline, are we through the worst here? Where are the bright spots in terms of what could get a lot better in fiscal '13? And where are things still very tough from a profit growth perspective?

[Denise M. Morrison:]

Yes. For example, in the beverage business, next year, we'll have a combination of both price and productivity improvements that will lead to an improved EBIT situation there. We also are expecting some lower commodity costs and some stronger enablers that will kick in about the middle of the year. But we have plans on most of the businesses to work the EBIT line.

[Operator:]

Our next question comes from Rob Moskow from Credit Suisse.

[Robert Moskow:]

2 questions. One is, I don't know if you answered why retailers were promoting condensed during the summer. I mean, it was the hottest summer in history. And then secondly, getting back to Ed Aaron's question, the math I had on Bolthouse was that operating profit was running at about $92 million on an adjusted basis. I have assumed maybe $100 million of a contribution for fiscal '13. And if I do it that way, I get core EBIT down like 2% to 4%. And I just wondered if that has anything to do with the mix shift away from Soup in fiscal '13 as you lower advertising and you probably have a sales decline.

[B. Craig Owens:]

Yes. So, well, first, with respect to promotional activity, I think it's back-to-school promotional activity that we're seeing, which is, in some cases, getting earlier in the year than it has been. But I think that's the answer to that one. With respect to Bolthouse, you have to recognize that versus the historical numbers that you've seen for Bolthouse, there is asset write-up as part of purchase accounting that will lead to higher depreciation that they've had historically. There's both an accounting change and some retention bonus kind of activity that we have in the compensation expense related to Bolthouse. And then there are certain items that are related to Bolthouse that actually fall into the Campbell P&L as part of the integration of Bolthouse. So I think all of those things are leading you to over-impute operating earnings to Bolthouse. The reality is that the base business EBIT organic growth is around flat.

[Robert Moskow:]

Okay. And as far as like maybe Soup being down a little bit, does that have more of an adverse effect on profit being down? Or is it about the same? If sales of Soup were down one, maybe profit for the overall business would be down one?

[Anthony P. DiSilvestro:]

Well, Soup contribution, particularly in condensed, is higher. It's -- I think it's pretty well understood, it's higher than the company total. But I -- you're looking at some fairly small movements here. I don't think -- if you come back and think about it margin, right, we've said gross margins would be pretty comparable on the base business to prior year, and, really, the same thing is true at operating profit, too.

[Robert Moskow:]

Okay. Last question. Craig, higher grain costs, are those going to influence your Pepperidge Farm and Arnott business at all? Or is it all in the guidance?

[B. Craig Owens:]

Well, it's in the guidance. I mean, they do influence it, of course. There is pressure more at Pepperidge than at Arnott's, given the 2 fairly distinct grain markets that we're talking about. But it is anticipated in the guidance that we would have pressure at Pepperidge.

[Operator:]

Our next question comes from Matthew Grainger from Morgan Stanley.

[Matthew C. Grainger:]

Just a follow-up on Soup. I just wanted to get a better sense of how you're currently thinking about the scale of the various new ready-to-serve products being shipped in fiscal '13. For items like Go! Soups and Gourmet Bisques, are your goals to reach, I guess, a similar level of ACV to what we saw for Slow Kettle in 2012? And one quick follow-up. With respect to slotting fees, can you give us a sense of whether you incurred anything material in the fourth quarter and whether we should expect a more significant impact here to be concentrated in Q1 or Q2?

[Denise M. Morrison:]

Yes. We had planned for Slow Kettle to reach a lower ACV distribution than it actually did achieve. And we're planning for our new Go! Soups, Bisques and Skillet Sauces to reach an average amount of ACV distribution that we have seen in the past. And so far, that seems to be the case.

[B. Craig Owens:]

Yes. So slotting fees for this year's fourth quarter were up about $6 million versus prior year same quarter. And you should not expect a significant difference in Q1 related to slotting fees.

[Operator:]

Our next question comes from David Palmer from UBS.

[David Palmer:]

2 quick follow-ups on other questions. On the marketing spend, going to be a little bit lower year-over-year for fiscal '13. One might have assumed that new product news would necessitate and even respond to higher levels of advertising. Is Campbell thinking about shifting some ad weight away from imagery ads, such as the "Amazing what soup can do" ads, that are more general and product -- and category broad in terms of its support levels and towards more awareness new product launch type ads? Is that some of the thinking?

[Denise M. Morrison:]

Yes. Well, our marketing expense will be down modestly versus this year. And our A&C expense will be down due to reduced spending on our U.S. Soup, but we will be more than competitive in our share of voice on that business. For our new products, the marketing support will vary, but it will have a mix of TV, print, digital and promotional vehicles, each at competitive levels. And that's how we have planned the year. If they tend to take off in a bigger way, we will subsequently increase the investment.

[Anthony P. DiSilvestro:]

Overall spending on new product support will be up, David, so the decrease is related to the base.

[David Palmer:]

And then just also a follow-up on the timing of the shelving of your various new products. Are you fully distributed now for what you think you're going to have out there, not just the new packaging like the Go! Soups but also the repackaging of your Light soups? I mean, are you where you think you'll be in a few months' time? Are you pretty much re-shelved at this point?

[Denise M. Morrison:]

Most of the items have really just started shipping. We've shipped some in the fourth quarter and some in -- have been shipping in August. So it usually takes about 3 to 4 weeks to get through the system to be totally on shelf before we actually start the marketing around them.

[Jennifer Driscoll:]

And with respect to Select Harvest and 100% Natural, that's going to take place over a period of time, [indiscernible] October and November.

[Denise M. Morrison:]

Right. That will be a flow-through, exactly.

[Operator:]

Our next question comes from Erin Lash from Morningstar.

[Erin Swanson Lash:]

I was just curious. Obviously, cash flow continues to be very solid and, while you still are well focused, appears to be paying down the debt related to the Bolthouse acquisition. I just wanted to get a sense for your appetite for additional acquisitions going forward, either in your core category or expanding your platforms further in international markets.

[B. Craig Owens:]

So I think we said both at Analyst Day and also when we did the call on Bolthouse that while we're suspending our share repurchase, we're not suspending our activities to continue to look for good, value-accretive acquisition targets or partnership opportunities or JV opportunities where they make sense. We do feel like we've still got some capacity within our balance sheet, and so we continue to try to advance our strategies by looking for those kinds of opportunities. Now having said that, they're few and far between out there, and we're very rigorous in the way that we evaluate them. But we have not -- we haven't stopped looking.

[Erin Swanson Lash:]

Can I ask one follow-up? With regards to your comment that they're few and far between, is that because the premiums that sellers are looking for are too high? Or is that just the potential for -- or the potential quality companies that are out there is small in and of itself?

[B. Craig Owens:]

Well, I think it's both things interacting with each other, right? There, just numerically, there are not a lot of good quality properties. And consequently, when one does come to market, it tend -- there tends to be pretty strong competition for it.

[Denise M. Morrison:]

And we're very disciplined about the way we're going at this.

[Operator:]

Our next question comes from Akshay Jagdale from KeyBanc.

[Akshay S. Jagdale:]

Denise, you mentioned new products. You're being -- I interpret what you said as being conservative in terms of what you're modeling for new product contribution to sales growth. Can you give us a sense of what you are expecting, and so we can judge whether it's conservative or not?

[Denise M. Morrison:]

It's early days, and again, we just started shipping. So as the year unfolds, we'll have an early read in quarter 1. And then in quarter 2, we should have a much better read on the consumer acceptance of these products and the consumption resulting from that. So I'd rather wait until that point in time than speculate.

[Jennifer Driscoll:]

Okay. With that, we will conclude our Q&A session, and we'll move over to Denise for the wrap-up.

[Denise M. Morrison:]

Thank you for your questions. And we'd like to leave you with 4 key takeaways from today's call

[Jennifer Driscoll:]

Thanks for joining us for Campbell's Fourth Quarter Earnings webcast. Replays are going to be available in approximately 2 hours by dialing 1 [phone] or 1 [phone], with the passcode of 21752010. If you are a reporter and have follow-up questions, please call Anthony Sanzio at [phone]. Investors and analysts may call me, Jennifer Driscoll, at [phone]. With that, we will conclude today's program, and you may now disconnect.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect at this time.