Fitch Affirms Campbell's IDRs at 'A/F1'; Outlook Stable

Fitch Ratings has affirmed the credit ratings of Campbell Soup Company (Campbell's) as follows:

--Long-term Issuer Default Rating (IDR) at 'A';

--Senior unsecured debt at 'A';

--Senior unsecured credit facility at 'A';

--Short-term IDR at 'F1';

--Commercial paper (CP) at 'F1'.

The Rating Outlook is Stable. Campbell's total debt was $2.6 billion at its fiscal 2009 year ended Aug. 2, 2009. Campbell's ratings and Outlook are based on its significant cash flow generation, modest leverage, and the continuation of its conservative financial strategy. Campbell's overall profitability as measured by operating EBITDA margins is among the best in the packaged food industry. The company has maintained its operating EBITDA margins in the 20% range despite back to back years of elevated input cost inflation for ingredients, energy and packaging of 7%-8% in fiscal 2008 and 8% in fiscal 2009. The company implemented higher pricing and ongoing supply chain initiatives to offset inflation; however, the price increases negatively affected volume. Campbell's expects moderate inflation of 1%-3% in fiscal 2010, which should lead to sales growth driven by positive volume.

The ratings also incorporate Campbell's leading position in the high margin soup category and the strength of its branded product portfolio, which focuses on simple meals, baked snacks and healthy beverages. The ratings consider the mature and highly competitive nature of the soup category, which requires a steady stream of innovation. The company has ongoing initiatives to lower sodium without sacrificing the taste profile of its products. Campbell's, as well as other branded packaged food companies, have benefited from the shift toward eating more meals at home as consumers are more cost conscious during the weak economic environment. Fitch expects this trend to continue in the near-term while unemployment remains high.

The company generated $1.2 billion of cash flow from operations in fiscal 2009, up from approximately $1 billion in 2008 excluding taxes related to the Godiva divestiture. Cash flow from operations has averaged nearly $1 billion annually over the past four years. Free cash flow after capital expenditures and dividends in 2009 was $471 million, which was utilized primarily for share purchases. Campbell's has approximately $800 million remaining on its $1.2 billion three-year share repurchase plan authorization through the end of fiscal 2011. Fitch anticipates that the share repurchases will be executed fairly evenly over the remaining two years, in the absence of acquisitions. Free cash flow is expected to remain positive in fiscal 2010, however, it will be reduced by the company's $260 million contributions to its U.S. pension plans completed in the first fiscal quarter of 2010, and $18 million of contributions expected for the Non-U.S. pension plans. Leverage may weaken slightly with the pension contributions and share repurchases. However, there is still flexibility within the rating category to pursue the company's modest-sized bolt-on acquisition strategy. Acquisitions are likely to be within the company's core categories of simple meals, baked snacks and healthy beverages.

Campbell's $1.5 billion of liquidity on Aug. 2, 2009 is derived from $51 million in cash and cash equivalents, as well as $1.5 billion available on its revolving credit facility expiring in September 2011. The credit facility, which supports its commercial paper program, was unused on Aug. 2, 2009 except for $27 million of standby letters of credit. Campbell's had $350 million of CP at its fiscal year end. CP is likely to be higher at the end of the fiscal first quarter ended October 2009 due to seasonal inventory build. The company does not have financial covenants in its bank facility or bond indentures. However, both contain standard restrictions on secured debt. Campbell's next significant long-term debt maturity is $700 million 6.75% notes due Feb. 15, 2011.

Campbell's leverage has remained stable for the past two years and its coverage has improved with lower interest rates. For the 2009 fiscal year ended Aug. 2, 2009, total debt-to-operating EBITDA was 1.6 times (x), Funds from Operations adjusted leverage was 2.2x and operating EBITDA-to-gross interest expense was 14.2x. The free cash flow margin was 6.2%.

Additional information is available at ' www.fitchratings.com'.

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