Good day, ladies and gentlemen, and welcome to the Campbell Soup's First Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions). As a reminder, this conference call is being recorded. I will now turn the conference over to your host, Jennifer Driscoll, Vice President – Investor Relations. Please begin.

Thank you, Mary. Good morning, everyone. Welcome to the Campbell Soup Company's First Quarter Earnings webcast. With me here in New Jersey today are Doug Conant, the President and CEO of Campbell; Craig Owens, Senior Vice President, CFO and Chief Administrative Officer; and Anthony DiSilvestro, Senior Vice President of Finance. Doug and Craig will provide their perspectives on our performance for the quarter as well as our expectations for the full fiscal year. Following their remarks, we'll take questions from analysts and investors. As usual, we've created slides to accompany our presentation. 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 certain forward-looking statements that reflect the Company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates, which could be inaccurate and which inherently are subject to risks and uncertainties. Please refer to slide three in the presentation or to our 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 or expressed in any forward-looking statements. Our presentation today includes certain non-GAAP measures as defined by SEC rules, so we've provided a reconciliation of these measures to the most directly comparable GAAP measures as an appendix to the slides that accompany our presentation. These slides, including the appendix, can be found on our website. Now, I give you our President and CEO, Doug Conant.

Thank you, Jennifer, and good morning. Happy Thanksgiving. This morning we reported earnings per share of $0.82. This result was consistent with the estimate we gave on November 10 when we adjusted our annual guidance. At our Analyst Day last summer and in our Annual Report we gave a consumer view of our entire portfolio. We divided it into healthy beverages, baked snacks, and simple meals. We further divided simple meals into meal makers and meals. Within that framework, we delivered a strong performance in healthy beverages this quarter. We also delivered solid results at Pepperidge Farm, which comprises over half of our baked snacks business. In addition, sales of condensed cooking soup, the largest component of meal makers, rose this quarter. Growth in these businesses supported a 1 point quarterly gain in volume mix, an important improvement compared with minus 4 points in last year's first quarter. With that as background, today I'll give you some perspective on the performance of our largest simple meals business, U.S. Soup. Then I'll focus on the softness in the ready-to-serve soups and condensed eating soups, since they are the primary drivers behind the recent guidance change. I'll also highlight the actions we're taking to improve our soup performance over the balance of the year. As we discussed earlier in our earlier release, in the first quarter to improve our soup volume performance we stepped up our promotional profile, launched an umbrella advertising campaign, and improved our in-store merchandising. We saw pockets of strength, most notably our condensed cooking soups and our Healthy Request soup varieties, both of which delivered sales and volume increases in the quarter. However, our promotions did not deliver the planned volume increases in our ready-to-serve soups or our condensed eating soups. The backdrop for the limited market response…

Good morning. I'll take a few minutes to walk you through the first quarter results and segment highlights and then, I will follow with some comments on our fiscal 2011 earnings guidance. For the quarter, we reported net sales of $2.172 billion, down 1% versus the first quarter of 2010. Excluding the favorable impact of currency translation, organic net sales decreased 2%, primarily due to lower sales in our U.S. Soup, Sauces and Beverages segments, where we significantly increased promotional spending. EBIT of $444 million for the quarter was down 7% versus a year ago, primarily due to the increased promotional spending partially offset by productivity improvements in excess of cost inflation and by favorable mix. The quarter's EPS declined 6% to $0.82. For perspective, we were lapping a very strong quarter a year ago in which adjusted EPS grew 14%. In the first quarter, we reported net sales decline including a decline of three points attributable to the impact of increased promotional spending, primarily in North America. This was partially offset by a one point increase from volume increase and a one point increase from currency translation. Organic net sales decreased 2%. Our gross margin on slide 10 declined 70 basis points to 41.2% in the current quarter from 41.9% in the first quarter of 2010. The change was primarily due to increased promotional spending, partially offset by productivity gains in excess of inflation and by favorable mix. Despite increased advertising and consumer promotion spending, marketing and selling expenses decreased 2% to $277 million. The decline was primarily due to lower selling expenses, as we have reorganized our sales teams in the U.S. to improve effectiveness and efficiency. We also realized cost savings in marketing overhead for the period. Administrative expenses increased $7 million to $140 million. Three factors…

Thanks, Craig. At this time Mary, we're going to conduct our Q&A session. I'd like to request that our callers limit themselves to a single question, so that we may respond to more people who have questions in the queue. However, we would like you to stay on the line while we answer your questions, just in case clarifications are needed.

Thank you. (Operator Instructions) Our first question comes from Vincent Andrews from Morgan Stanley.

Hello, Vincent.

I am sorry our first question comes from Andrew Lazar from Barclays Capital.

Hello, Andrew.

Good morning. Doug, when you arrived at Campbell, some ten years ago or so, you took certainly a fresh look at the business, fresh eyes and you made some tough decisions, rebased the earnings level to increase your investments in R&D and marketing and lot of those investments really did pay off and you saw much better soup growth and a much better track record there in the years that followed. I'm curious if you were to take a similar look at the business today and it's a little bit harder admittedly, but with fresh eyes almost as if you were again an incoming CEO, and I realize Denise, will of course have her say on all of this in due course. But if you were an incoming CEO, what would be the two or three key things that you would point out today to investment community that might give us some perspective on it?

You want that answer in 25 words or less, Andrew.

Maybe the one or two key things then.

Sure. The first thing I had observe is, what a great category, and what a great leadership position we have. We are in nine out of 10 households in the United States. In U.S. Soup, we have on average anywhere from 8 to 10 cans in the pantry. We are incredibly relevant to today's consumer. So, we have a high penetration and we have a real presence in the fabric of American families in the U.S. Soup business. Our challenge, I think is to deal with some paradigm shifting going on where our consumers are rethinking the way they purchase their food and beverage products. If I was to look at it, I'd say clearly the increased promotional activity that was accelerated by some of the competition just hasn't helped the category. My experience is, when we innovated the category benefits and we win. When we innovated at earlier in my tenure with the first microwavable soups, Soup at Hand was the product of the year in the food industry and the category grew. When we innovated with iQ Maximizer under Shelf, the category grew. When we innovated and ready-to-serve soups with the whole new fresh look at our Select Harvest franchise target at women, Select Harvest was the product of the year in the food industry and the category grew. I think our challenge is, that we didn't have adequate innovation to attract consumers in a compelling way to the category this year and price alone is just not enough. The other thing I think we need to do is get back to a better balance between our promotional spending and our brand building activity. We are competing with a lot of simple meal alternatives we have to have a meaningful presence there. We're in the pantry, we've got to get out of the pantry and we have to increase usage. We're not going to do that through price promotion that puts more in the pantry, we've got to pull it out. So, I think the focus on brand building and relevant innovation are the two keys for the U.S. Soup business. That having been said, I feel great about the platforms we built in our healthy beverage portfolio and our baked snacks portfolio as I shared in July. We arguably have the best performance in the world in baked snacks over the last five years, and we have great innovation there. We arguably have the best performance in healthy beverages in the last five years, and particularly in vegetable-based beverages. We have great innovation there. So, we've got to innovate and brand build in soup the way we have in the past and the way we're doing in the other categories, and that in 25 words or less is the challenge – or more…

That sounds fine. I appreciate the perspective and I guess, maybe some had perhaps expected hopefully that some of the restage on condensed this year and some other things you're doing would have been maybe enough of a step up although not where you ultimately wanted to get to, but had a bit of a better soup performance coming into this year?

Yeah, interestingly Andrew, it’s too early to call on the condensed soup relaunch. We had terrific response on half of our portfolio in condensed cooking soups. Where we got hurt was in condensed eating soups with aggressive price competition from other players, price competition that I honestly believe is not sustainable and we just chose not to compete at that level, and we will slog through that over the next quarter or two.

Thanks, Doug. I appreciate this.

Okay. Mary, our next question please.

Our next question comes from Vincent Andrews from Morgan Stanley.

Hi, Vince. I am glad we got you here.

I know. I am sorry about the phone difficulties. I guess my one question would be –

You are going to blame the phone?

Doug, you talked about eight to ten cans being in the pantry. If you look back over time, is that eight to ten a consistent number that’s been in there or is that number going up or down and is there risk that that number is going to go from eight to ten to six to eight or four to six?

Well, it’s roughly steady, but I'd say, if I had to – our measurement in this area is not – it's hard to measure but if I were to say anything, there's been a tick up in this period and over the last 12 months and so it's not an issue per se of people putting our soup in the pantry. Our challenge is getting it out of the pantry, which is why we chose not to be as competitive as we could have been in our promotional spending. We believe in the long-term benefit of brand building and we're going to focus on that as we go forward.

Do you think that there's any risk that the amount of spending that you need to put in place in order to get the soup out of the cupboard is in excess of what you're sort of modeling today?

Well, we've got to rethink that given the environment as it's changing, but I think there was some good work done by someone from your crowd that talk about our share of spending and I think that we've got a commanding presence there. I think we can find our way through that, but we clearly have to have better balance between our trade spend and our consumer spend.

Okay. Thank you very much. I will pass it along.

Okay. Thanks, Vincent. Next question please.

Our next question comes from Eric Katzman from Deutsche Bank.

Hi, Eric.

Hi. Good morning, everybody. Happy holidays. I guess the question and maybe a bit of a follow up on Andrew's earlier point, in terms of the innovation success, I guess Doug I agree with you that it isn't necessarily always our focus, but you have been quite strong in biscuits and beverages, whereas the innovation in soup of late has lagged and obviously hurt the category. In fact it seems like the category decline actually accelerated in the last quarter versus the trailing 52-week data that you gave before. In any case the question is, is the nature of the categories in biscuits and beverages that it’s more of an impulse purchase and that that’s making the innovation there easier or more successful versus the soup, which is just I guess inherently less impulse oriented or less convenient oriented and that’s the challenge?

A couple things, Eric. First of all, I think the reason you see the deterioration in category performance is not necessarily due to innovation. It’s simply due to some very aggressive price promotion and sales deflation. I think on a volume basis it's holding up just fine but nonetheless, the sales dollars are down. I believe every category has its own rhythm and we focused heavily on renovation here within our U.S. Soup portfolio this year. We were very focused on getting our product quality up, our sodium levels down. As you know, we have front-of-pack labeling coming in the next few years, and we wanted to make sure that our portfolio was very prepared for front-of-pack labeling in a very positive way. We’ve done that, but what I meant was we did a lot of renovation and not a lot of innovation. Now other peers have also talked about that and there is a recognition in today’s environment you need to create more excitement in your category. We just didn’t do that in soup this year but I would go back to – we have done it in prior years, and we have done it in other categories. So our challenge now is to rethink how we compete and take a fresh look as Andrew talked about, given the reality that the consumer is changing their shoppings behavior and we've got to come up with creative solutions here because some of the ways we've approached it in the past are not necessarily working as we would have expected.

Thank you for that. But as a follow-up to that, do you see that as being a either SG&A or capital expenditure as pretty high cost. When again to Andrew's point, when you came in a decade or so ago, the Company had basically starved itself and literally, you had to upgrade the cooking methodology for condensed. So, are we talking about given the change in the consumer need to really – I don't know aggressively rework the ingredients or how you cook it, I'm no expert, but just kind of how should we think about that?

Eric, I personally believe, we've got to take a fresh look. So, I don't want to close off any options, but that having been said, we have a very clear line of sight to how we can improve the processing of our soup. We've talked about it before in terms of our common soup platform and we have a line of sight to how we can. It may require some investments, which we haven't defined fully yet, but where we can deliver soup at a higher quality and a lower cost. So, we have a whole body of work going on there. But in terms of innovation, we have the capacity and we have the funds necessary to step up our game in innovation in soup. There is nothing that we can't match corporately, but we do have to rethink that and we have to keep an open mind and we're going to do that as we go through this year. I think as we get deeper into the second quarter and move towards CAGNY, we'll be a little more clear on that.

Okay, I will pass it on.

Thanks, Eric. Next question please.

Our next question comes from Alexia Howard from Sanford Bernstein.

Good morning, everyone. Hi, just sticking with the innovation theme here. I'm curious about the V8 soup platform. It feels as though it went through its rebranding after Select Gold transitioning to V8 soup, but it's been left with relatively few SKUs in there. I don't think much marketing has gone behind that brand, maybe there is still the limitations that you can't really put bits into it there is not much garnish in there. Could you just give us some idea about whether there are - could there be major expansion plans in that area and if so what holds you back?

Well, there is nothing really holding us back. There is some technology where we can't get full pieces of vegetables and meat into the product, given the constraints of the technology and the DA regulatory requirements. But, basically U.S. consumers like big chunks of meat and vegetables in their soups, which this technology doesn't lend itself to. Now in France, Belgium and several other countries where we compete the dominant form is that a septic package that we sell the V8 soups in and in those countries that is a preferred way to eat soup. We're positioned now to bring that technology to this country and as we get further along with the evolution of the technology and can put bigger pieces of garnish through I think we're going to have an opportunity there. The important thing for us was to be the first mover in this country, in this technology in soup and to be in a position to advance for this as soon as the technology evolved far enough. I think there's opportunity there. It won't change the fundamental trend in the category, but it's a good niche opportunity and over time it could become bigger. I think if you view it more broadly too we still feel like there's some opportunity in premium soup. It may not be all in the septic form, but we think we've got some opportunities out there in premium soup. We've got in our food service business we're having some success with volume growth at the premium end of the category and we think there may be some other ideas out there around the premium end of the category that would go after that same consumer user case.

Great. Thank you very much. I will pass it on.

Okay. And thanks. Our next question please.

Our next question comes from David Palmer from UBS.

Thanks. Question on the Healthy Request on your mix of your soups. You say in the release, the Healthy Request varieties had a 9% sales gain across condensed and ready-to-serve. My question is what is the mix of Healthy Request of each of the categories ready-to-serve and condensed? How rapidly do you anticipate this mix evolving? Separately, I guess relatedly, do you believe sodium concerns are becoming even more of an overarching demand driver for soup lately or perhaps this is just a result of you converting your soups and the pastings of your soup's to Healthy Request? Thanks.

Sure, David and I appreciate the question. I can't breakout for you Healthy Request by segment. What I can say is it's had a positive impact across all the segments. I think we’ve addressed the sodium issue in a very satisfactory way at this point for today and also for tomorrow as we prepare for front-of-pack labeling. We are always going to have to be alert to dealing with that issue but by and large we think we have addressed it. I think the challenge for us now is to create some taste adventure and leverage some of our other benefits as we continue to manage the sodium profile. We’re not as concerned with it today as were before. We had to position our portfolio to be in the right place when we get to front-of-pack labeling and we’ve done that. We’ve taken care of the long term and now we got to focus on innovation in near term, which goes beyond just the elimination of negatives and starts to celebrate the wonderful positives that we can do with soup. I think that is going to be our focus on innovation. Healthy Request by the way is a good example. If we have a clear and compelling platform that the consumer understands they buy soup in a can, and they buy it at (inaudible) rate. Same thing’s true with our cooking soups. So we’re not necessarily constrained by the can. If we have the right proposition, we can grow that business and our challenge on our base business is to find that right proposition while we push off into some new areas.

I guess what I’m getting out on that whole thing is, if this is being done the right way in your mind, as that mix increases so might the stability and then ultimately the growth of the category, however…

Absolutely, that will happen, and by the way we sell it at a higher price with a better margin and it's getting increasingly more important in our portfolio. So it tells us we’re on the right path. Not only that, but we have actually lowered the sodium further on those Healthy Request varieties and the consumer along with improved flavor technology, the consumer is buying the proposition. In the fullness of time, I think we’re well positioned there.

Thanks, Doug.

Thanks, David. Our next question please.

Our next question comes from Terry Bivens from JPMorgan.

Doug, let me come at it slightly a different way here. You guys have had some pretty good innovation over the years, but if you look at innovation like say microwavables, it seems in a bad, in a weak economy to have really kind hurt you. I know the takeaway there, you and I've talked about it, hasn’t been good. General Mills, they are pretty smart marketers, ditto Sam Reed's group. I guess my question and I hear this a lot from folks is, is the answer that we simply have to wait for the economy to turn that soup is just innately going to struggle during a downturn? I mean that’s my worry.

It’s a well-founded worry, Terry. By the way, whoever else is on the phone I would appreciate if the next question could go to Craig Owens.

We've got to keep you on the spot until you retire.

I am sorry. That is a concern, because we have a lot of pantry inventory. People are shopping the pantry. There is less incentive to go out and buy more soup, and we do have to navigate through that paradigm. There is no evidence that we can't navigate through it, other than we had a tough quarter where there was extraordinary price competition that we chose not to match. So, we're going to have to see how this plays out. Terry, we can manage through this. We've been down this road, not quite the same way before when I started our soup business was I wanted to say about $1.700 billion in sales, and yes, it’s been tough, but up until it’s over pushing $2.2 billion now and with good ROIC and good margins and we'll find our way through it. We do have to step into the innovation, work through brand building. It’s not easy, but if anybody can do it, we can do it.

Okay. Thanks very much, Doug. I will pass it along.

Thanks, Terry. Next question please.

Our next question comes from Chris Growe from Stifel Nicolaus.

Hi, good morning.

Good morning, Chris.

Hi, Chris.

Doug, we are not going to let you off that easy. My question for you is just in relation to trade promotion and maybe there's two parts to it, maybe one. My point is just that, you made some pretty clear comments. You're looking for price realization now in the second half of the year. Is that based on a change in your input cost outlook or it's simply just a change in the way you want to attack kind of the advertising versus promotional balance?

Well, it’s a little of both. This is a question Craig can weigh in on, but I will start the answer. Clearly, the promotional track is not helping the category and I guarantee you it is not helping the other competitors. I believe when you heard the TreeHouse earnings announcement, they weren’t too excited about soup margins either. So, I expect we are going to navigate through this thing and the category will pursue a more rational approach to pricing and margin management. I got to tell you, if it doesn’t we are going to find the right balance, but we will have to continue to compete because we're in this for the long-term. So, we're going to have to play this quarter-by-quarter and manage it smartly. I expect it will be more rational in the second half than it's been in the first half. There will be pressure on margins. We are expecting input costs to go up and I expect everyone's going to have to find the way through this. Craig would you?

Just to expand a little bit on the inflation piece of the question. We would expect input cost, commodity cost to be somewhat higher in the second half, not hugely so. In our overall inflation profile for the full year it will not be a lot different than it was in the quarter which was plus 3%. We'd expect to be in the 2% to 3% range on total cost of goods inflation for the quarter, but with a higher contribution from input cost in the second half and a somewhat stronger enabler program and other cost savings in the second half. We do however, recognize just as everybody sees, that the general trend in commodity cost is upward and we think it's important that we stay up with that and prepare ourselves not only the second half this year, but for next year. So that is part of what's driving our thinking around price realization.

We've worked hard to responsibly build food quality margins here top quartile in the (S&T) Food Group and with the good return on invested capital. We're going to work hard to maintain that. But we also have to compete and that's the balance we're going to work through over the next three quarters.

I just want to make sure I was clear, on this better balance between trade and advertising is that accomplished by reducing advertising in the second half of the year. I guess I already thought you were balanced on those two items?

Well, we were more balanced until the first quarter, and in the first quarter our trade spending was up as you can tell, although it didn't go up as much as some of the competitions' trade spending went up. I expect the trade spending part of that will come back to us in the second half.

Okay. Thank you.

Our next question please.

Our next question comes from Dianne Geissler from Credit Agricole Securities.

Good morning.

Good morning Diane.

I apologize in advance if you have already covered this, I may have missed it. Could you just comment on, what were the volume trends in U.S. Soup versus takeaway?

I do not recall that we commented on the volume trends. They are better than the consumer takeaway numbers. I do not want to get into precedent setting here. But they were better than the dollar takeaway.

Okay. Is that a concern for you as you head into the second quarter and then into the back half of the year that may be you have a little bit of inventory build?

Not particularly, I wish we had a problem with inventory build that means our sales would have been higher. Our volume was still down for the quarter in soup, I believe I am looking at, so our volume was still down, but not modestly. We came into the year focusing on delivering better volume trends and we did improve the trend line there. But in my opinion it's very manageable at this point.

In the quarter most of the sales decline Doug mentioned, U.S. Soup sales down 5%, most of that is driven by the increased promotional spending and related to inventories, we have not seen any material change in retailer inventory level.

I was thinking pantry, but we do have visibility to - we manage many of the retailer's inventory levels and we have not seen any change there.

Okay, terrific. Thank you for the commentary.

Thank you (inaudible) heading on to that. Next question please.

Our next question comes from Akshay Jagdale from KeyBanc.

Good morning. Thanks for taking the question. I wanted to focus on the soup performance relative to simple meals you have not talked about that too much. Can you just update on how you think you are doing relative to simple meals, if you are losing share there? You talked about trying to improve the velocity in terms of number of soups you are selling every year. But I am trying to figure out whether that is a problem relative to simple meals or it is just a problem within the category itself?

Well, I do not have a good data for simple meals that is comparable to the data we are sharing with you. But overall what I can say is, last year as we went into the season we saw very aggressive pricing in other simple meals that we believe affected our volume performance. We started to address that and actually made great headway through August, September. What we see this year is, I mean since October we see the other simple meal activity heating up on our price basis, as is indicated by all the food company's earnings announcements. It's a dog fight again in terms of price competitiveness within the category. I do not have data from other simple meals at this point to talk to you about the outlook for the season. We will have a better feeling for that as we go through the second quarter. But there is no evidence that things have abated there.

Okay. The way I read the progression of things in soups, I just wanted to know if I am reading it correctly. Last year or few months ago you were talking about prices being the issue and bringing down the price points within soup. That seems to being done now. Now you are talking about holding back on that a bit. What is going to be the next trigger? You also today talked a little bit about the possibility of increasing the total dollar spent on marketing, including promotions, but if this does not work, which is if the industry, if the soup industry is not as rational in the back half as you expect it may be, what is the next thing that you think will need to change here for things to get better?

We are always trying to find the right balance between price and value addition. We call it total preferred value here, the sum of the benefits for the price offered. Every year it is a bit of a poker game and what we learned in the first quarter is that price competition per se does not necessarily help the category, and I expect the category over time will become a little more rational, and we will see more brand building and we will see a moderated level of price competition. I do not believe we are not intending to suggest anywhere that total spending will go up in the second half. We expect our trade promotion spending to come down, and we expect to maintain that pretty good solid brand building profile. We expect to start to bring more innovation to the category. We think that is a better model for the category and meets consumer needs in a more complete way but we have to see how the game is played by other simple meals and by soup. What I can tell you is we will find our way through this. We have performed and we will again.

Okay, thanks. I’ll pass it along.

Thanks, Akshay. Next question please.

Our next question comes from Robert Moskow from Credit Suisse.

Hey Doug, I want to know if you remembered several years ago when you did rebase margins and then margins started tipping positive, I think you said something about operating margins of 17% to 18% was an appropriate range for the Company. Fiscal '10 ended up at around 17.7%. Do I have my numbers right and do you think that that ended up being the right level of margins for the Company or do they need to go lower than that?

You have exactly the right numbers. You did your homework, Rob. Very good. We have a new reality that we are competing with today. Back when we talked about this, I do not know, it could be several years ago, we had some competitors that were pushing 20% to 24% kind of EBIT margin levels. In today's environment – and I thought 17% to 18% for a market leader with our category, our portfolio, 17% to 18% felt about right. We think that is about right, but we have to manage through it, given today's new reality where the competitive fray is intense. As you see, all of our peer group is under margin pressure. So we are going to have to feel our way through it, but you have the right margins. It is 17.7% and our goal is to be between 17% and 18% top quartile in a sustainable way. We have climbed that hill and we are there now. We are going to try and maintain it, but we are going to have to see what happens competitively.

Thank you.

Thanks, Rob. Next question please.

Our next question comes from Robert Dickerson from Consumer Edge Research.

Yeah. I just had a question around the balance sheet and cash flow. Obviously, the top line were weak. There is a lot of competition in the category soup, but I have a feeling I have kind of asked this question before, but you still have a pretty solid balance sheet. Your free cash flow yield stood around 7%. I am just curious, at what point would you expect a little bit more activity in buying back shares or allocating the free cash flow that you are generating to – just try to spur growth, and I am not sure if you are trying to save it to put back into more CapEx or what. If you could just comment on that little bit.

You are right, we do have a strong balance sheet. We have got terrific cash flow. We have always said that the best investment in our business is one that we can put into organic growth. As Doug commented, we have got terrific margins. We have got terrific return on invested capital. So anything that we can do to leverage core businesses and reinvest in those businesses, some examples over the last couple of years would be investment in additional Goldfish capacity in our Pepperidge Farm, additional capacity in our Arnott’s business in Australia. All of those kinds of investments have terrific return on them. As we move down from investment in core business, we have said that we would like to be and are more attentive to opportunities around potential acquisitions of businesses that we think could value accretive. It is not a very target rich environment. You have not seen us act going one since the relatively small acquisition of Ecce Panis, but that would still be a place that we would be looking. We have had an active share repurchase program, as you know, probably most of you know, we have been working against a $1.2 billion program that the Board approved in 2008, with a three year timeframe around it. We have a continuing program of neutralizing compensation-based equity issues. Then the final thing we think about is around dividend. You saw us just announce a dividend increase coming out of this last Board meeting of 5%. So, we are in agreement with you about the strength of the balance sheet and we look at and the strength of our cash flows and that sort of order of priorities is we think about where we have got opportunities and how best to deploy that cash.

Okay, great. Thanks a lot.

Thanks. Next question please.

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

Good morning. Just a question on where you think retailers stand in terms of their view of the category. I had the perception that, last year, maybe the promoted price points in soup were not where they should have been or could have been. But also that there was some feedback that as the leader in the category that Campbell's needed to spend more on advertising and get more people - pull more people into the category. So, you came to the market with a plan, where you have got umbrella advertising and you have got lower price points and more competitive price points than you had a year before and yet we end up in this situation where the decision was made to promote even more. So, is there just a disconnect between the way you are looking at the category versus the way that retailers are looking at it?

All I can say is we are lined up with the retailers for a very strong profile over the next quarter or two and I think it is going to settle in, in a more positive place. But our brand building did not start until September 7 and that is when the advertising started and we are just getting moving up on the advertising front. We believe it is going to take time to establish that brand building profile with the umbrella campaign and we are going to see it through. The trade promotion in the first quarter was the wild card. We did not get the lifts we would normally have expected and we have to go back to the drawing board on that. Part of the issue was that competitive activity was even more intense and we have to sort to that as well. I guess my point is, without talking about getting into the competitive details, we believe we can find our way through. We have the margin structure. We have the capabilities to compete in that category. We are just going to have to feel our way through. We obviously have to lead the category to higher ground and we intend to do that over the next three quarters, but we are going to have to feel our way through it. I do not think there is any fundamental disconnect between us and the retailer. There is a lot made of sort of the push and shove between manufacturers and retailers. Right now, I think what you are seeing across the whole food industry is that it is a really difficult environment. You are seeing negative same-store sales out of probably most retailers you are seeing down spending across all categories in the grocery store both dollars and units have been down over the last several periods. I think we are all looking for ways to sort of reinvigorate the consumer and my feeling is being a little bit distinct from the direct contact with the retailer, but we are all looking for ways to get the consumer moving again.

I guess I just have the perception that you responded to some of the – Campbell's responded to some of the observations that were done in peer reviews or in category reviews and what you've done is basically undermined by the level of promotion that was allowed to occur in October and I guess that is the part that I am having trouble with…?

I think the challenge is we have got to play the hand we have and we are going to continue the brand building which we know takes time. The other lesson learned I would say is that renovation was insufficient to drive short-term sales performance. We were making changes and we are evolving our U.S. condensed soup portfolio to be well-positioned when we get to front-of-pack labeling in the next two years to get our health profile right. We have done all that, but we had insufficient innovation on top of that to get consumer interest. So, we have got to step up the innovation, while we continue to do all this renovation work and we will do that. We will profile more of that when we get to CAGNY.

Okay, thank you.

Next question please.

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

Thanks for taking the question. Good morning. I am just trying to better understand the cadence of the numbers that you moved through the year here. You talked about expectations for improved performance in the back half, but I am wondering why you might not start to see some of the improvement in Q2. Getting back to last year, you saw some improvement the quarter after you course corrected, so to speak, after you had a weak quarter. You had such an easy comp in the second quarter, I am trying to understand why the improvement might not come a little bit sooner than you seem to be expecting. As a quick follow-up to that, what gives you confidence that you can get better price realization in the back half of the year when you think about the current competitive environment?

Good questions. Obviously we are giving you – trying to give you a feel for our quarterly flow of business, but we do not give quarterly guidance. We could do better in the second quarter. These are unusual times as reported by the entire peer group, and we are feeling our way through it. We have enough evidence to suggest that we can do better on the price realization front in the back half. We now know in today’s environment what is working from a trade promotion perspective and what is not and that has changed a bit since even a year ago. So I think we believe we can refine our trade promotion plans in an intelligent way, deal with today’s reality, and be more effective and more efficient in the back half. I think to add, if you think about where the big months are in the soup season, we have made customer commitments that run through the back end of the first quarter and well into the second quarter, which is sort of heart of the increase in sales on a seasonal basis. So we have got pretty good visibility where we will be promotionally there. If you remember last year the change in the formula a little bit came between again second quarter and third quarter, not between first and second.

Fair enough. Thank you.

Thanks Ed. Next question please.

Our next question comes from Eric Serotta from Wells Fargo.

Thanks for taking the question and happy holidays. Just looking at your comments in terms of the back half of the year, for the first half of the year obviously you are promoting heavily and you plan to for the second quarter, and were not seeing the lifts that you liked. What gives you I guess the confidence that in the second half as you pull back on some of that promotional activity, tilt the portfolio more towards – tilt the marketing mix more towards advertising, and actually take promoted price points up that you are going to see a positive volume and sales improvements?

Eric, I would just say, we have some insights into what is working right now and what is not, and we see pockets where we clearly overspent and did not get the return. So, there are some low-fruit opportunities. We are also working with our retailers who are also looking to bring more profitability into the category. It is informed judgment that we can do better, but we have to wait and see.

I think the other point is looking at the portfolio beyond soups, we are expecting improved top line performance in some of our other segments.

That is a great point because we do have very robust plans in baked snacks and healthy beverages. Also our meal maker business with condensed cooking soup is doing very well and our Healthy Request soups doing well. So, we are dealing with a relatively small part of our earnings pool that is the issue for us and clearly it is important. But we believe we have enough buoyancy in the rest of the portfolio that we can navigate this.

Quick follow-up question on innovation, it came up several times the importance of innovation and your innovation not being enough this year. I am wondering is there something about the soup category that you feel you kind of capped out on the innovation potential. You had the big moves in sodium reduction, I am sure there is more of that to come. But could you perhaps preview a bit for us what you are in talk about at CAGNY, give us some sort of framework to think of the innovation that is coming in the soup category?

What I would share with you and we will cover more of this at CAGNY is that we do have ideas in the pipeline that have been well developed and we are preparing to move to market. Typically in food there are five benefit areas, you have taste, nutrition, convenience, variety and value. We have really leaned in hard on nutrition and convenience as two key foundational areas that needed to be attended to with the soup business over the last decade and we have put ourselves in a solid position there. Now we have to lean a little bit harder on the taste, variety and value dimensions and we have ideas there. So, those will be coming with us to CAGNY.

Okay, I will pass it on. Thanks.

Thank you Eric.

And we will take our final question.

Our final question comes from Judy Hong from Goldman Sachs.

Ah, thanks. Good morning.

Good morning Judy.

Doug, I know that the innovation and brand building obviously are important to grow the category. But do you think perhaps maybe your underestimating the price issue in the category. What I mean by that is last year you basically got hurt because you had a lot of competition from Simple Meals. This year you got hurt, because the competition really stepped up more aggressively and granted it is only one month's data, but you look at Progressive's performance in the last month, their volume was up 40% plus. So, I am just wondering as you had look at the category and sort of take a fresher look at what you need to do brand building, innovation and everything else, you kind of also have to look at sort of the price points and adjust that part of the equation?

Absolutely. We are in a battle every day. We compete for it. The 40% plus is a big number. But the incremental shift of cases, competition shipped in October was only 2% of our U.S. shipped volume for the first quarter. You talk about big numbers on small basis with virtually no returns. We can manage our way through this, Judy.

Okay. Okay, thanks.

Okay and operator, we'll conclude our call with that.

Ladies and gentlemen, this does conclude today's program. You may now disconnect and have a wonderful day.