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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
AUGUST 3, 1997 1-3822
CAMPBELL SOUP COMPANY
NEW JERSEY 21-0419870
STATE OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION NO.
CAMPBELL PLACE
CAMDEN, NEW JERSEY 08103-1799
PRINCIPAL EXECUTIVE OFFICES
TELEPHONE NUMBER: (609) 342-4800
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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CAPITAL STOCK, PAR VALUE $.0375 NEW YORK STOCK EXCHANGE
PHILADELPHIA STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO .
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INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT
TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K
OR ANY AMENDMENT TO THIS FORM 10-K. [X]
AS OF SEPTEMBER 22, 1997, THE AGGREGATE MARKET VALUE OF CAPITAL
STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $12,857,264,941. THERE WERE
457,530,587 SHARES OF CAPITAL STOCK OUTSTANDING AS OF SEPTEMBER 22, 1997.
PORTIONS OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED
OCTOBER 10, 1997, FOR THE ANNUAL MEETING OF SHAREOWNERS TO BE HELD ON NOVEMBER
20, 1997, ARE INCORPORATED BY REFERENCE INTO PART III. PORTIONS OF THE ANNUAL
REPORT TO SHAREOWNERS FOR THE FISCAL YEAR ENDED AUGUST 3, 1997 ARE INCORPORATED
BY REFERENCE INTO PARTS I AND II.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Campbell Soup Company, together with its consolidated subsidiaries, is a global
manufacturer and marketer of high quality, branded convenience food products.
Campbell was incorporated as a business corporation under the laws of New Jersey
on November 23, 1922; however, through predecessor organizations, it traces its
heritage in the food business back to 1869. In September 1997, the company
announced its intention to spin off certain specialty foods businesses to its
shareowners as an independent publicly-held company. The new company will
include Swanson frozen foods, Vlasic pickles, and certain European and Argentine
businesses, including Swift-Armour Sociedad Anomina Argentina.
During 1997, the company acquired Erasco GmbH, Germany's leading soup company.
The company also divested its Marie's dressing business in the United States and
Beeck-Feinkost, GmbH, a German chilled foods business. As part of its ongoing
review of all vertically integrated operations, the company sold its beef
ranches in Argentina and is in the process of divesting its poultry operations
in the United States. In September 1997, the company agreed to finance a
proposal by Arnotts Limited to acquire its outstanding ordinary shares held by
minority shareowners. It is expected that this transaction will increase the
company's ownership of Arnotts to 100%.
The company considers itself to be engaged in a single industry segment, the
manufacture of prepared convenience foods. The company operates in three core
divisions: Soup and Sauces, Biscuits and Confectionery, and Foodservice. Soup
and Sauces includes the worldwide soup businesses, Prego Spaghetti sauce,
Franco-American pasta, Pace Mexican foods, Swanson broths, and the V8 beverage
business. Biscuits and Confectionery includes the Pepperidge Farm, Godiva,
Arnotts Limited, and Delacre businesses. Foodservice consists of products
distributed to the food service and home meal replacement markets and includes
Campbell's Restaurant Soups, Pace Tabletop picante and Campbell's Specialty
Kitchens entrees. Businesses comprising a fourth division consist of Swanson
frozen foods, Vlasic pickles, and other specialty foods businesses. See also
"Management's Discussion and Analysis of Results of Operations and of Financial
Condition" at pages 29 to 34 of the company's 1997 Annual Report to Shareowners
for the fiscal year ended August 3, 1997 ("1997 Annual Report"), which is
incorporated herein by reference.
INGREDIENTS
Most ingredients required for the manufacture of the company's food products are
purchased from others, except for mushrooms and beef. Swift-Armour Sociedad
Anomina Argentina, an Argentine corporation and a wholly-owned subsidiary, has
been the principal supplier of cooked beef to the company.
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In general, satisfactory sources of supply of ingredients are available.
Ingredient inventories are at a peak during the late fall and decline during the
winter and spring. Since many ingredients of suitable quality are available in
sufficient quantities only at certain seasons, the company makes heavy purchases
of such ingredients during their respective seasons. As a result of factors not
within the company's control, the prices of ingredients fluctuate significantly
from time to time.
CUSTOMERS
In the United States, sales solicitation activities are conducted by the
company's own sales force and through broker and distributor arrangements. The
company's products are generally resold to consumers in retail stores,
restaurants and other food service establishments. No material part of the
business is dependent upon a single customer. Shipments are made promptly by the
company after receipt and acceptance of orders.
TRADEMARKS AND TECHNOLOGY
The company markets its food products globally under a number of significant
trademarks. The company considers such trademarks, taken as a whole, to be of
material importance to its business and, consequently, aggressively seeks to
protect its rights in them.
Although the company owns a number of valuable patents, its business is not
dependent upon any single patent or any group of related patents.
COMPETITION
The company experiences vigorous competition for sales of its principal products
in its major markets, both within the United States and abroad, from numerous
competitors of varying sizes. The principal areas of competition are quality,
price, advertising, promotion and service.
WORKING CAPITAL
For information relating to the company's cash and other working capital items,
see pages 29 through 34 of the company's 1997 Annual Report in the section
entitled "Management's Discussion and Analysis of Results of Operations and
Financial Condition", which are incorporated herein by reference.
RESEARCH AND DEVELOPMENT
During the last three fiscal years, the company's expenditures on research
activities relating to new products and the improvement of existing products
were approximately $77 million in 1997, $84 million in 1996 and $88 million in
1995.
EMPLOYEES
At August 3, 1997, there were approximately 37,000 persons employed by the
company.
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FOREIGN OPERATIONS
For information with respect to the revenue, operating profitability and
identifiable assets attributable to the company's foreign operations, see page
39 of the 1997 Annual Report in the section of the Notes to Consolidated
Financial Statements entitled "Geographic Area Information", which is
incorporated herein by reference.
FINANCIAL INFORMATION
For information with respect to revenue, operating profitability and
identifiable assets attributable to the company's only industry segment, see
page 39 of the 1997 Annual Report in the section of the Notes to Consolidated
Financial Statements entitled "Geographic Area Information", which is
incorporated herein by reference.
RECENT DEVELOPMENTS
The information presented on pages 33 and 34 of the 1997 Annual Report in the
section entitled, "Management's Discussion and Analysis of Results of Operations
and Financial Condition" is incorporated herein by reference.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
From time to time, the company makes oral and written statements that may
constitute "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the SEC in its rules,
regulations and releases. The company desires to take advantage of the "safe
harbor" provisions in the Act for forward-looking statements made from time to
time, including, but not limited to, the forward-looking statements made in the
1997 Annual Report, including the President and Chief Executive Officer's Letter
to Shareowners (pages 1 and 2), the Chairman's Letter (page 3) and Management's
Discussion and Analysis (pages 29 to 34) and other statements made in this Form
10-K and in other filings with the SEC.
The company cautions readers that any such forward-looking statements made by or
on behalf of the company are based on management's current expectations and
beliefs but are not guarantees of future performance. Actual results could
differ materially from those expressed or implied in the forward-looking
statements. Among the factors that could impact the company's ability to achieve
its strategic growth plan goals are:
- the impact of strong competitive response to the company's efforts to
leverage its brand power with product innovation and new advertising;
- the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer
acceptance;
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- the continuation of the company's successful record of integrating
acquisitions into its existing operations and the availability of new
acquisition and alliance opportunities that build shareowner wealth;
- the company's ability to achieve the gains in productivity and
improvements in capacity utilization that it anticipates from its
cost productivity (including low cost business systems),
consolidation and restructuring program;
- the company's ability to achieve the forecasted savings related to
the restructuring program discussed in Management's Discussion and
Analysis;
- the company's ability to achieve sales and earnings forecasts, which
are based on assumptions about sales volume;
- the company's ability to find buyers to purchase underperforming
businesses at prices considered appropriate to complete the
divestitures in 1998;
- the market risks associated with financial instruments which may be
subject to unforeseen economic changes, such as currency exchange
rates, inflation rates and recessionary trends;
- the receipt of a ruling from the Internal Revenue Service that the
spinoff of certain non-core specialty foods businesses will be a tax
free transaction to United States shareowners, various regulatory
approvals and final approval from the company's Board of Directors;
- the approval by a majority of Arnotts Limited's shareholders
(excluding the company and its subsidiaries) holding 75% of shares
voted and approval of the Supreme Court of New South Wales of the
proposal to finance the Arnotts Limited purchase of the minority
shareholders' ownership interest; and
- the impact of unforeseen economic and political changes in
international markets where the company competes such as currency
exchange rates, inflation rates, recession, foreign ownership
restrictions and other external factors over which the company has no
control.
ITEM 2. PROPERTIES
Manufacturing facilities of the company in the United States include six thermal
processing plants located in California, Michigan, North Carolina, Ohio and
Texas. Other of the company's convenience foods are also manufactured in the
United States at various plant locations.
Outside the United States, the company has manufacturing and distribution
facilities in Argentina, Australia, Belgium, Brazil, Canada, Chile, England,
France, Germany, Hong Kong, Indonesia, Japan, Malaysia, Mexico, the Netherlands,
New Zealand, Papua New Guinea, Scotland and other locations.
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The company's operations also include can-making facilities, mushroom farms and
tomato paste, pasta and spice processing facilities.
The company also operates retail confectionery shops in the United States,
Canada, Europe and Japan; retail bakery thrift stores in the United States; a
mail order facility; and other plants and facilities at various locations in the
United States and abroad. Management believes that the company's manufacturing
and processing plants are well maintained and are generally adequate to support
the current operations of the business.
ITEM 3. LEGAL PROCEEDINGS
In management's opinion, there are no pending claims or litigation, including
those proceedings specifically discussed below, the outcome of which would have
a material adverse effect on the consolidated financial position or results of
operations of the company.
As previously reported, in October 1995, the United States of America filed a
complaint against Campbell at the request of the Environmental Protection Agency
("EPA") in the United States Court for the Eastern District of California for
alleged violations of the Clean Air Act relating to the company's can-making
operations at its Sacramento, CA facility. In August 1997, the United States of
America, at the request of the EPA, filed a second complaint in the same
jurisdiction for alleged violations of the Clean Air Act also relating to the
company's can-making operations at its Sacramento, CA facility. Both suits seek
monetary and injunctive relief. Campbell is disputing these alleged violations.
In addition, as previously reported, Campbell received a complaint from the EPA
in December 1996, relating to waste water discharge from the company's
can-making operation at its Sacramento, CA facility. Campbell has completed
corrective action, and the EPA is proceeding administratively to resolve this
matter.
The company has also been named as a potentially responsible party in a number
of proceedings brought under the Comprehensive Environmental Response,
Compensation and Liability Act, commonly known as Superfund. Although the impact
of these proceedings cannot be predicted at this time due to the large number of
other potentially responsible parties and the speculative nature of clean-up
cost estimates, the ultimate disposition is not expected to have a material
effect on the company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF CAMPBELL
The following list of executive officers as of October 2, 1997, is included
herein as an item in Part I of this Form 10-K:
EXECUTIVE OFFICERS OF CAMPBELL
<TABLE>
<CAPTION>
Date First
Elected
Name Present Title Age Officer
- ---- ------------- --- -------
<S> <C> <C> <C>
Dale F. Morrison.................President and Chief Executive Officer. 48 1995
Basil L. Anderson................Executive Vice President 52 1996
and Chief Financial Officer.
Robert F. Bernstock..............Executive Vice President. 46 1990
President - Specialty Foods.
John M. Coleman..................Senior Vice President - Law and 47 1989
Public Affairs.
James R. Kirk....................Senior Vice President. 55 1983
President - Campbell Research and
Development and Quality Assurance.
Robert Subin.....................Senior Vice President - Global Sourcing 59 1988
and Engineering.
F. Martin Thrasher...............Senior Vice President. 46 1992
President - International Grocery
Europe/Canada.
David L. Albright................Vice President. 50 1992
President - Pepperidge Farm.
Ronald E. Elmquist...............Vice President. 51 1994
President - Global Foodservice.
Mark M. Leckie...................Vice President. 44 1997
President - U.S. Grocery.
Gerald S. Lord...................Vice President - Controller. 51 1993
Edward F. Walsh..................Vice President - Human Resources. 56 1993
</TABLE>
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Each of the above-named officers has been employed by the company in an
executive or managerial capacity for at least five years, except Basil L.
Anderson, Ronald E. Elmquist, Mark M. Leckie, Dale F. Morrison and Edward F.
Walsh. Basil L. Anderson served as Chief Financial Officer (1992-1996),
Worldwide Treasurer (1987-1991) and U.S. Treasurer (1985-1987) of Scott Paper
Company prior to joining Campbell in 1996. Ronald E. Elmquist served as Chairman
and Chief Executive Officer of White Swan, Inc. for more than five years prior
to joining Campbell in 1994. Mark M. Leckie served as Executive Vice President
and General Manager of the Post Division (1993-1997), Vice President-General
Foods U.S.A. and Assoc. General Manager, Post (1993) and Vice President -
Marketing, Grocery Products (1991-1993) of Kraft, Inc. prior to joining Campbell
in 1997. Dale F. Morrison served as President, Frito Lay North (1994-1995), Vice
President Marketing and Sales, Frito Lay Central Division (1993-1994) and headed
PepsiCo, Inc. businesses in the United Kingdom (1990-1993) prior to joining
Campbell in 1995. Prior to joining Campbell in 1992, Edward F. Walsh served as
Senior Vice President - Administration of Nutri-System, Inc. (1990-1992).
There is no family relationship among any of the company's executive officers or
between any such officer and any director of Campbell. Executive officers of
Campbell are elected at the November 1997 meeting of the Board of Directors.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREOWNER MATTERS
Campbell's Capital Stock is listed and principally traded on the New York Stock
Exchange. Campbell's Capital Stock is also listed and traded on the Philadelphia
Stock Exchange, The International Stock Exchange of the United Kingdom and the
Republic of Ireland Limited and the Swiss Exchange. On September 22, 1997, there
were 34,655 holders of record of Campbell's Capital Stock. The market price and
dividend information with respect to Campbell's Capital Stock are set forth on
page 46 of the 1997 Annual Report in the section of the Notes to Consolidated
Financial Statements entitled "Quarterly Data (unaudited)" which is incorporated
herein by reference. Future dividends will be dependent upon future earnings,
financial requirements and other factors.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by this Item is set forth on pages 48 and 49 of the
1997 Annual Report in the section entitled "Eleven-Year Review - Consolidated"
which is incorporated herein by reference. Such information should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of the
company included in Item 8 of this Report.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information presented on pages 29 through 34 of the 1997 Annual Report in
the section entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information presented on pages 32 and 33 of the 1997 Annual Report in the
section entitled "Management's Discussion and Analysis of Results of Operations
and Financial Condition" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS
The information presented on pages 35 through 47 of the 1997 Annual Report is
incorporated herein by reference. With the exception of the aforementioned
information and the information incorporated by reference in Items 1, 5, 6 and
7, the 1997 Annual Report is not deemed to be filed as part of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Directors and Executive
Officers Stock Ownership Reports" set forth on pages 1 through 4 and page 24 of
Campbell's Notice of Annual Meeting and Proxy Statement dated October 10, 1997
(the "1997 Proxy Statement") are incorporated herein by reference.
The information required by this Item relating to the executive officers of
Campbell is set forth in Part I of this Report on pages 6 through 8 under the
heading "Executive Officers of Campbell".
ITEM 11. EXECUTIVE COMPENSATION
The information set forth on pages 10 through 18 of the 1997 Proxy Statement in
the section entitled "Compensation of Executive Officers" is incorporated herein
by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth at pages 5, 6, 23 and 24 of
the 1997 Proxy Statement in the sections entitled "Security Ownership of
Directors and Executive Officers" and "Security Ownership of Certain Beneficial
Owners" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
Consolidated Statements of Earnings for 1997, 1996 and 1995
Consolidated Balance Sheets as of August 3, 1997 and July 28, 1996
Consolidated Statements of Cash Flows for 1997, 1996 and 1995
Consolidated Statements of Shareowners' Equity for 1997, 1996 and
1995
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
Report of Independent Accountants
The foregoing Financial Statements are incorporated into Part II,
Item 8 of this Report by reference to pages 35 through 47 of the 1997
Annual Report.
2. Financial Statement Schedules
None.
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3. Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C>
3(a) Campbell's Restated Certificate of Incorporation as amended through
February 24, 1997, was filed with the Securities and Exchange
Commission ("SEC") with Campbell's Form 10-Q for the quarterly
period ended January 26, 1997, and is incorporated herein by
reference.
3(b) Campbell's By-Laws, effective as of July 15, 1997.
4 There is no instrument with respect to long-term debt of the company
that involves indebtedness or securities authorized thereunder
exceeding 10 percent of the total assets of the company and its
subsidiaries on a consolidated basis. The company agrees to file a
copy of any instrument or agreement defining the rights of holders
of long-term debt of the company upon request of the SEC.
9 Major Stockholders' Voting Trust Agreement dated June 2, 1990, as
amended, was filed with the SEC by the Trustees of the Major
Stockholders' Voting Trust as Exhibit A to Schedule 13D dated June
5, 1990, and is incorporated herein by reference.
10(a) Campbell Soup Company 1984 Long-Term Incentive Plan, as amended on
February 22, 1996, was filed with the SEC with Campbell's Form 10-K
for the fiscal year ended July 28, 1996, and is incorporated herein
by reference.*
10(b) Campbell Soup Company 1994 Long-Term Incentive Plan as amended on
February 22, 1996, was filed with the SEC with Campbell's Form 10-K
for the fiscal year ended July 28, 1996, and is incorporated herein
by reference.*
10(c) Campbell Soup Company Management Worldwide Incentive Plan, as
amended on November 17, 1994, was filed with the SEC with Campbell's
1994 Proxy Statement and is incorporated herein by reference.*
10(d) Mid-Career Hire Pension Program, as amended on February 22, 1996,
was filed with the SEC with Campbell's Form 10-K for the fiscal year
ended July 28, 1996, and is incorporated herein by reference.*
10(e) Personal Choice, A Flexible Reimbursement Program for Campbell Soup
Company Executives, effective August 1, 1994, was filed with the SEC
with Campbell's Form 10-K for the fiscal year ended July 30, 1995,
and is incorporated herein by reference.*
10(f) Supplemental Savings Plan, as amended on May 25, 1995, was filed
with the SEC with Campbell's Form 10-K for the fiscal year ended
July 30, 1995, and is incorporated herein by reference.*
</TABLE>
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3. Exhibits (Cont'd.)
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<S> <C>
10(g) Salary Deferral Plan, effective January 1, 1996, was filed with
the SEC with Campbell's Form S-8 on February 6, 1996, and is
incorporated herein by reference.*
10(h) Severance Protection Agreement dated May 18, 1990, with John M.
Coleman, Senior Vice President - Law and Public Affairs, was filed
with the SEC with Campbell's Form 10-K for the fiscal year ended
August 2, 1992, and is incorporated herein by reference. Agreements
with eleven (11) other Executive Officers are in all material
respects the same as that with Mr. John M. Coleman.*
10(i) Supplemental pension arrangement for David W. Johnson, Chairman, was
filed with the SEC in Campbell's 1997 Proxy Statement, on page 17
under the heading "Pension Plans", and is incorporated herein by
reference.* 13 Pages 29 through 49 of Campbell's 1997 Annual Report
to Shareowners for the fiscal year ended August 3, 1997.
13 Pages 29 through 49 of the Campbell's Annual Report to Shareowners for
the fiscal year ended August 3, 1997.
21 Subsidiaries of Campbell.
23 Consent of Independent Accountants.
24(a) Power of Attorney.
24(b) Certified copy of the resolution of Campbell's Board of Directors
authorizing signatures pursuant to a power of attorney.
27 Financial Data Schedule (not considered to be filed).
</TABLE>
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* A management contract, compensatory plan or arrangement required to be filed
by Item 14(c) of this Report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by Campbell during the fourth
quarter of fiscal 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Campbell has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: October 22, 1997
CAMPBELL SOUP COMPANY
By: /s/ Basil L. Anderson
-------------------------
Basil L. Anderson
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Campbell and in the
capacity and on the date indicated.
Date: October 22, 1997
/s/ Basil L Anderson /s/ Gerald S. Lord
-------------------- ------------------
Basil L. Anderson Gerald S. Lord
Executive Vice President Vice President - Controller
and Chief Financial Officer
<TABLE>
<S> <C> <C>
David W. Johnson Chairman and Director }
Dale F. Morrison President, Chief Executive }
Officer and Director
Alva A. App Director }
Edmund M. Carpenter Director }
Bennett Dorrance Director }
Thomas W. Field, Jr. Director }
Kent B. Foster Director }
Harvey Golub Director } By: /s/ John M. Coleman
David K. P. Li Director } -------------------------
Philip E. Lippincott Director } John M. Coleman
Mary Alice Malone Director } Senior Vice President -
Charles H. Mott Director } Law and Public Affairs
George M. Sherman Director }
Donald M. Stewart Director }
George Strawbridge, Jr. Director }
Charlotte C. Weber Director }
</TABLE>
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INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Document
- --------
<S> <C>
3(a) Campbell's Restated Certificate of Incorporation as amended through
February 24, 1997 was filed with the Securities and Exchange
Commission ("SEC") with Campbell's Form 10-Q for the quarterly period
ended January 26, 1997, and is incorporated herein by reference.
3(b) Campbell's By-Laws, effective as of June 15, 1997.
4 There is no instrument with respect to long-term debt of the company
that involves indebtedness or securities authorized thereunder
exceeding 10 percent of the total assets of the company and its
subsidiaries on a consolidated basis. The company agrees to file a
copy of any instrument or agreement defining the rights of holders of
long-term debt of the company upon request of the SEC.
9 Major Stockholders' Voting Trust Agreement dated June 2, 1990, as
amended, was filed with the SEC by the Trustees of the Major
Stockholders' Voting Trust as Exhibit A to Schedule 13D dated June 5,
1990, and is incorporated herein by reference.
10(a) Campbell Soup Company 1984 Long-Term Incentive Plan, as amended on
February 22, 1996, was filed with the SEC with Campbell's Form 10-K
for the fiscal year ended July 28, 1996, and is incorporated herein
by reference.
10(b) Campbell Soup Company 1994 Long-Term Incentive Plan as amended on
February 22, 1996 was filed with the SEC with Campbell's Form 10-K
for the fiscal year ended July 28, 1996, and is incorporated herein
by reference.
10(c) Campbell Soup Company Management Worldwide Incentive Plan, as amended
on November 17, 1994, was filed with the SEC with Campbell's 1994
Proxy Statement, and is incorporated herein by reference.
10(d) Mid-Career Hire Pension Program, as amended on February 22, 1996, was
filed with the SEC with Campbell's Form 10-K for the fiscal year
ended July 28, 1996, and is incorporated herein by reference.
10(e) Personal Choice, A Financial Reimbursement Program for Campbell Soup
Company Executives, effective August 1, 1994, was filed with the SEC
with Campbell's Form 10-K for the fiscal year ended July 30, 1995,
and is incorporated herein by reference.
</TABLE>
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INDEX OF EXHIBITS (cont'd.)
<TABLE>
<CAPTION>
Document
- --------
<S> <C>
10(f) Supplemental Savings Plan, as amended on May 25, 1995 was filed with
the SEC with Campbell's Form 10-K for the fiscal year ended July 30,
1995 and is incorporated herein by reference.
10(g) Salary Deferral Plan, effective January 1, 1996, was filed with the
SEC with Campbell's Form S-8 on February 6, 1996, and is incorporated
herein by reference.
10(h) Severance Protection Agreement dated May 18, 1990, with John M.
Coleman, Senior Vice President - Law and Public Affairs, was filed
with the SEC with Campbell's Form 10-K for the fiscal year ended
August 2, 1992, and is incorporated herein by reference. Agreements
with eleven (11) other Executive Officers are in all material
respects the same as that with Mr. John M. Coleman.
10(i) Supplemental pension arrangement for David W. Johnson, Chairman, was
filed with the SEC in Campbell's 1997 Proxy Statement, on page 17
under the heading "Pension Plan", and is incorporated herein by
reference.
13 Pages 29 through 49 of the company's Annual Report to Shareowners for
the fiscal year ended August 3, 1997.
21 Subsidiaries (Direct and Indirect) of Campbell.
23 Consent of Independent Accountants.
24(a) Power of Attorney.
24(b) Certified copy of the resolution of Campbell's Board of Directors
authorizing signatures pursuant to a power of attorney.
27 Financial Data Schedule (not considered to be filed).
</TABLE>
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EXHIBIT 3(b)
CAMPBELL SOUP COMPANY
----------------------
BY-LAWS
----------------------
EFFECTIVE JULY 15, 1997
<PAGE> 2
CAMPBELL SOUP COMPANY
BY-LAWS
----------------------
ARTICLE I.
Stockholders
Section 1. The annual meeting of the stockholders of the Corporation shall
be held at the principal office of the Corporation in New Jersey, or at such
other place, within or without New Jersey, as may from time to time be
designated by the Board of Directors and stated in the notice of the meeting, on
the third Thursday in November in each year (or if said day be a legal holiday,
then on the next succeeding day, not earlier than the following Tuesday, not a
legal holiday), at such time as may be fixed by the Board of Directors, for the
purpose of electing directors of the Corporation, and for the transaction of
such other business as may properly be brought before the meeting.
Section 2. Special meetings of the stockholders shall be held at the
principal office of the Corporation in New Jersey, or at such other place,
within or without New Jersey, as may from time to time be designated by the
Board of Directors and stated in the notice of the meeting, upon the call of the
Chairman of the Board or of the President, or upon the call of a majority of the
members of the Board of Directors, and shall be called upon the written request
of stockholders of record holding a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote at such meeting.
Section 3. Notice of the time and place of every meeting of stockholders
shall be delivered personally or mailed at least ten but not more than sixty
calendar days before the meeting to each stockholder of record entitled to vote
at the meeting.
Section 4. The holders of record of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders. If there be no such quorum present, the holders of
a majority of such shares so present or represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until such
quorum shall have been obtained, when any business may be transacted which might
have been transacted at the meeting as first convened, had there been a quorum.
Once a quorum is established, the stockholders present in person or by proxy may
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
<PAGE> 3
Section 5. The Board of Directors shall in advance of each meeting of
stockholders appoint one or more inspectors of election, to act unless the
performance of the inspector's function shall be unanimously waived by the
stockholders present in person or represented by proxy at such meeting. Each
inspector, before entering upon the discharge of his duties, shall first take
and subscribe an oath or affirmation to execute the duties of inspector as
prescribed by law at such meeting with strict impartiality and according to the
best of his ability. The inspector or inspectors shall take charge of the polls
and shall make a certificate of the results of the vote taken. No director or
candidate for the office of director shall be appointed as such inspector.
Section 6. All meetings of the stockholders shall be presided over by the
Chairman of the Board, or if he shall not be present, by the Vice Chairman of
the Board. If neither the Chairman of the Board nor the Vice Chairman of the
Board shall be present, such meeting shall be presided over by the President. If
none of the Chairman of the Board, the Vice Chairman of the Board and the
President shall be present, such meeting shall be presided over by a Vice
President, or if none shall be present, then by a Chairman to be elected by the
holders of a majority of the shares present or represented at the meeting.
The Secretary of the Corporation, or if he is not present, an Assistant
Secretary of the Corporation, if present, shall act as secretary of the meeting.
If neither the Secretary nor an Assistant Secretary is present, then the
Chairman shall appoint a Secretary of the meeting.
Section 7. The Board of Directors shall fix in advance a date, not
exceeding sixty nor less than ten calendar days preceding the date of any
meeting of the stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of stock shall go into effect, as a record date for the determination
of the stockholders entitled to notice of and to vote at any such meeting, or
entitled to receive payment of any such dividend, or any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of stock, and in such case only stockholders of record on the date so
fixed shall be entitled to such notice of and to vote at such meeting, or to
receive payment of such dividend, or allotment of rights, or exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
2
<PAGE> 4
ARTICLE II.
Directors
Section 1. The business and property of the Corporation shall be managed
and controlled by a board of sixteen directors. This number may be changed from
time to time by amendment of these By-Laws, but the term of office of no
director shall be shortened after his or her election by reduction in the number
of directors.
Upon election each director shall be the holder of at least two hundred
shares of the Corporation's capital stock. Within one year of election, each
director shall be the holder of at least two thousand shares of capital stock
and within three years of election shall be the holder of at least six thousand
shares of capital stock. In the event the number of shares of capital stock is
increased at any time after January 28, 1993, by a stock split, stock dividend,
or by any other extraordinary distribution of shares, the above share ownership
requirements shall be proportionately adjusted. The director, upon ceasing to
hold the required number of shares, shall cease to be a director.
The directors shall hold office until the next annual meeting of the
stockholders and until their successors are elected and shall have qualified.
Section 2. Regular meetings of the Board of Directors shall be held at
such times and at such places as may from time to time be fixed by resolution of
the Board of Directors. Special meetings of the Board of Directors may be held
at any time upon call of the Chairman of the Board or of the Vice Chairman of
the Board or of the President or of three directors. Oral, telegraphic or
written notice of the time and place of a special meeting shall be duly served
on, or given or sent or mailed to, each director not less than two calendar days
before the meeting. An organizational meeting of the Board of Directors shall be
held, of which no notice shall be necessary, as soon as convenient after the
annual meeting of the stockholders. Notice need not be given of regular meetings
of the Board of Directors held at the times fixed by resolution of the Board of
Directors. Meetings may be held at any time without notice if all of the
directors are present or if those not present waive notice of the meeting in
writing.
Section 3. Six members of the Board of Directors shall constitute a quorum
for the transaction of business. If at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of the directors present
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained, when any
business may be transacted which might have been transacted at the meeting as
first convened, had there been a quorum.
3
<PAGE> 5
Section 4. Any vacancy occurring among the directors may be filled by the
affirmative vote of a majority of the remaining members of the Board of
Directors at the time in office; provided that in case of an increase in the
number of directors pursuant to an amendment to these By-Laws made by the
stockholders, the stockholders may fill the vacancy or vacancies so created at
the meeting at which such amendment is effected or may authorize the Board of
Directors to fill such vacancy or vacancies.
Section 5. The Board of Directors, by an affirmative vote of a majority of
the members of the Board of Directors at the time in office, may appoint an
Executive Committee to consist of such directors as the Board of Directors may
from time to time determine. The Executive Committee shall have and may
exercise, when the Board of Directors is not in session, all of the powers
vested in the Board of Directors, except as otherwise provided by law. The Board
of Directors shall have the power at any time to fill vacancies in, to change
the membership of, or to dissolve, the Executive Committee. The Executive
Committee may make rules for the conduct of its business and may appoint such
committees and assistants as it shall from time to time deem necessary, unless
the Board of Directors shall otherwise provide. A majority of the members of the
Executive Committee at the time in office shall constitute a quorum for the
transaction of business. A record shall be kept of all proceedings of the
Executive Committee which shall be submitted to the Board of Directors at or
before the next succeeding meeting of the Board of Directors.
Section 6. The Board of Directors may appoint one or more other
committees, to consist of such number of the directors and to have such powers
as the Board of Directors may from time to time determine. The Board of
Directors shall have power at any time to fill vacancies in, to change the
membership of, or to dissolve, any such committee. A majority of any such
committee may determine its action and fix the time and place of its meetings,
unless the Board of Directors shall otherwise provide.
Section 7. In addition to reimbursement of reasonable expenses incurred in
attending meetings or otherwise in connection with his or her attention to the
affairs of the Corporation, each director as such, as Chairman or Vice Chairman
of the Board and as a member of the Executive Committee or of any other
committee of the Board of Directors, shall be entitled to receive such
remuneration as may be fixed from time to time by the Board of Directors, in the
form either of fees for attendance at meetings of the Board of Directors and
committees thereof or annual retainers, or both; but no director who receives a
salary or other remuneration as an employee of the Corporation or any subsidiary
thereof shall receive any additional remuneration as a director or member of any
committee of the Board of Directors.
4
<PAGE> 6
ARTICLE III.
Officers
Section 1. The Board of Directors, at its organizational meeting or as
soon as may be after the election of directors held in each year, shall elect
one of its number Chairman of the Board and one of its number President, and
shall also elect a Secretary and a Treasurer, and from time to time may elect or
appoint one of its number Vice Chairman of the Board, one or more Vice
Presidents, a Controller, and such Assistant Secretaries, Assistant Treasurers
and other officers, agents and employees as it may deem proper.
More than one office may be held by the same person.
Section 2. The term of office of all officers shall be until the next
organizational meeting of the Board of Directors or until their respective
successors are elected and have qualified, but any officer may be removed from
office at any time by the affirmative vote of a majority of the members of the
Board of Directors at the time in office.
Any other employee of the Corporation, whether appointed by the Board of
Directors or otherwise, may be removed at any time by the Board of Directors or
by any committee or officer or employee upon whom such power of removal may be
conferred by the By-Laws or by the Board of Directors.
The Board of Directors shall have power to fill for the unexpired term any
vacancy which shall occur in any office by reason of death, resignation, removal
or otherwise.
Section 3. The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors and shall perform such other duties
as shall from time to time be prescribed by the Board of Directors.
The Vice Chairman of the Board shall in the absence of the Chairman of the
Board preside at all meetings of the stockholders and of the Board of Directors
and shall perform such other duties as shall from time to time be prescribed by
the Board of Directors or the Chairman of the Board.
The President shall be the Chief Executive Officer of the Corporation and
shall perform such duties as are usually performed by that officer; he shall, in
the absence of the Chairman and Vice Chairman of the Board, preside at all
meetings of the stockholders and of the Board of Directors; and shall perform
such other duties as shall from time to time be prescribed by the Board of
Directors.
The other officers of the Corporation shall have such powers and shall
perform such duties as generally pertain to their offices respectively, as well
as such powers and duties as shall from time to time be conferred by the Board
of Directors.
5
<PAGE> 7
Article IV.
Indemnification of Directors and Others
Section 1. The Corporation shall indemnify to the full extent from time to
time permitted by law any present, former or future director, officer, or
employee ("Corporate Agent") made, or threatened to be made, a party to, or a
witness or other participant in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative,
legislative, investigative, or of any other kind, including by or in the right
of the Corporation ("Proceeding"), by reason of the fact that such person is or
was a Corporate Agent of the Corporation or any subsidiary of the Corporation
or, while serving as a Corporate Agent of the Corporation or any subsidiary of
the Corporation, serves or served another enterprise (including, without
limitation, any sole proprietorship, association, corporation, partnership,
joint venture or trust), whether or not for profit, at the request of the
Corporation as a director, officer, employee or agent thereof (including service
with respect to any employee benefit plan of the Corporation or any subsidiary
of the Corporation), against expenses (including attorneys' fees), judgments,
fines, penalties, excise taxes and amounts paid in settlement, actually and
reasonably incurred by such person in connection with such Proceeding or any
appeal therein. No indemnification pursuant to this Article IV shall be required
with respect to any settlement or other nonadjudicated disposition of any
threatened or pending Proceeding unless the Corporation has given its prior
consent to such settlement or other disposition.
Section 2. Expenses incurred in connection with a Proceeding shall be paid
by the Corporation for any Corporate Agent of the Corporation in advance of the
final disposition of such Proceeding promptly upon receipt of an undertaking by
or on behalf of such person to repay such amount unless it shall ultimately be
determined that such person is entitled to be indemnified by the Corporation.
Such an undertaking shall not, however, be required of a nonparty witness.
Section 3. The foregoing indemnification and advancement of expenses shall
not be deemed exclusive of any other rights to which any person indemnified may
be entitled.
Section 4. The rights provided to any person by this Article IV shall be
enforceable against the Corporation by such person, who shall be presumed to
have relied upon it in serving or continuing to serve as a Corporate Agent. No
elimination of or amendment to this Article IV shall deprive any person of
rights hereunder arising out of alleged or actual occurrences, acts or failures
to act occurring prior to such elimination or amendment. The rights provided to
any person by this Article IV shall inure to the benefit of such person's legal
representative and shall be applicable to Proceedings commenced or continuing
after the adoption of this Article IV, whether arising from acts or omissions
occurring before or after such adoption.
6
<PAGE> 8
Section 5. The Corporation's Board of Directors may from time to time
delegate
(i) to a Committee of the Board of Directors of the Corporation or to
independent legal counsel the authority to determine whether a Director or
officer of the Corporation, and
(ii) to one or more officers of the Corporation the authority to determine
whether an employee of the Corporation or any subsidiary, other than a
Director or officer of the Corporation,
is entitled to indemnification or advancement of expenses pursuant to, and in
accordance with, applicable law and this Article IV, subject to such conditions
and limitations as the Board of Directors may prescribe.
ARTICLE V.
Fiscal Year
The fiscal year shall begin in each calendar year on the Monday following the
Sunday which is nearest to July 31, and shall end on the Sunday which is nearest
to July 31 of the following year.
ARTICLE VI.
Corporate Seal
The Board of Directors shall provide a suitable seal, bearing the name of the
Corporation, which seal shall be in the charge of the Secretary; provided that
the use of a facsimile of such seal is hereby authorized.
ARTICLE VII.
Amendment
The Board of Directors shall have the power to make, amend and repeal the
By-Laws of the Corporation by a vote of a majority of the members of the Board
of Directors at the time in office at any regular or special meeting of the
Board of Directors. The stockholders, by a majority of the votes cast at a
meeting of the stockholders, may adopt, alter, amend or repeal the By-Laws,
whether made by the Board of Directors or otherwise.
7
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
OVERVIEW -- Campbell achieved record net sales for the
year ended August 3, 1997. Net earnings and earnings per share declined 11% and
6%, respectively, due to the effects of the special charge recorded in the first
quarter. Before the special charge, net earnings increased 9% and earnings per
share increased 15%.
1997 was a 53-week year compared to 52 weeks in 1996 and 1995. All share and
per-share data reflect the two-for-one stock split in February 1997.
SALES -- Sales in 1997 increased 4% to $7.96 billion from $7.68 billion last
year. The growth was due to a 3% increase from volume and new products, 2% from
higher selling prices, 2% from acquisitions, offset by a 3% decline due to
divestitures. In 1996, sales increased 6% as follows: 1% volume, 3% higher
selling prices, 3% acquisitions, offset by a 1% decline due to divestitures.
Overall, net sales from ongoing businesses increased 7% in 1997 and 1996.
An analysis of net sales by division follows:
<TABLE>
<CAPTION>
% Change
1997 1996 1995 1997/ 1996/
(millions) 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Soup and Sauces $ 4,156 $ 3,742 $ 3,415 11 10
Biscuits and
Confectionery 1,546 1,459 1,348 6 8
Foodservice 459 418 345 10 21
Other 1,904 2,149 2,204 (11) (3)
Interdivision (101) (90) (62) -- --
- --------------------------------------------------------------------------------------------
$ 7,964 $ 7,678 $ 7,250 4 6
============================================================================================
</TABLE>
In 1997, Soup and Sauces sales were up significantly due to continued strong
worldwide wet soup unit volume growth. This was especially evident in the U.S.
which posted its third straight year of volume growth led by Campbell's
condensed Chicken Noodle, Tomato and Cream of Mushroom soups, the new Joseph A.
Campbell premium soups in glass jars and Swanson broths. International volume
and market share gains were achieved in all countries, and in Germany, we
acquired Erasco, the leading branded soup company.
New products such as V8 Splash and Franco-American Superiore all-family pastas
also contributed to the sales growth.
In 1996, wet soup volume increases were driven by Campbell's condensed Chicken
Noodle soup which was reformulated with 33% more meat, Chunky ready-to-serve
soups and Swanson broths. Australia and Canada also experienced strong volume
growth. Pace Foods, completing its first full fiscal year, and strong demand for
Prego spaghetti sauce also contributed to the sales increase.
Biscuits and Confectionery posted a 6% increase in sales compared to 1996. This
increase was led by Pepperidge Farm Goldfish crackers, Milano cookies and Swirl
breads. Godiva contributed double-digit sales growth through strong retail sales
in the U.S. and continued expansion in Japan. Arnotts Limited sales were flat
compared to the prior year due to an extortion incident in Australia that
resulted in a product recall in the second half of 1997 and a 56-week year in
1996 which resulted from aligning Arnotts' and Campbell's fiscal year reporting.
In 1996, Pepperidge Farm Goldfish crackers and frozen garlic breads and Godiva
delivered double-digit volume growth.
Foodservice sales increase in 1997 was driven by strong soup sales in the U.S.
food service channels and new frozen restaurant soups, Prego frozen entrees and
Pace Mexican sauces, as well as solid gains in Canada.
In 1996, Foodservice delivered solid volume gains led by chicken pot pies for
the away-from-home market.
During 1997 the company continued its portfolio reconfiguration and divested
several non-strategic businesses, including Marie's salad dressings and
Beeck-Feinkost chilled German salads. These divestitures and the impact of the
1996 divestitures led to the decline in sales in Other.
In 1996, sales in Other were impacted by declining beef sales in Europe and
divestitures, including Mrs. Paul's frozen seafood business and Groko B.V., a
Dutch frozen vegetable processor.
GROSS MARGIN -- Gross margin, defined as net sales less cost of products sold,
increased by $344 million in 1997 and $320 million in 1996 compared to prior
years. As a percent of sales, gross margin was 45.9% in 1997, 43.2% and 41.3% in
1996 and 1995, respectively. The 2.7 point improvement in 1997 is the largest
gain in the last five years. The increases in 1997 and 1996 were
29
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
due principally to continued productivity gains in manufacturing facilities and
higher selling prices.
MARKETING AND SELLING EXPENSES -- Marketing and selling expenses as a percent of
sales were 20.5% in 1997, 19.5% and 18.9% in 1996 and 1995, respectively.
Advertising expense increased 17% versus 1996 driven by a 30% increase in
worldwide wet soup advertising behind new products and innovations such as
Joseph A. Campbell premium soups in glass jars and Swanson broths in resealable
containers. Double-digit increases in advertising also drove strong volume gains
for Pepperidge Farm Goldfish crackers and Milano cookies in 1997.
In 1996, advertising expense increased 15% as a result of heavy advertising for
Pace Foods, Pepperidge Farm Goldfish and Chunky ready-to-serve soups.
GENERAL AND ADMINISTRATIVE EXPENSES -- Administrative expenses declined as a
percent of sales to 4.0% from 4.5% in 1996. The decrease is attributable to
streamlining of operations associated with the restructuring program recorded in
the first quarter and favorable employee benefits experience. Administrative
expenses as a percent of sales were unchanged for 1996 versus 1995.
Research and development declined 8.3% primarily due to headcount reductions
associated with the restructuring program. In 1996, research and development
decreased 4.5% due to a reduction of new product development activities from the
prior year.
Other expenses increased significantly in 1997 due to the effect of the
appreciation in Campbell's share price on the company's long-term incentive plan
obligations. In 1996, the increase was due to higher amortization of intangibles
primarily associated with the Pace Foods acquisition and effects of the increase
in Campbell's share price on the long-term incentive compensation plan
obligations. The 1996 increase is net of a gain on the sale of the Mrs. Paul's
frozen seafood business which was largely offset by the cost of re-engineering
the frozen food manufacturing facilities and selling organization.
OPERATING EARNINGS -- Division earnings in 1997 were down 3% due to the first
quarter pre-tax restructuring charge of $216 million compared with a 14%
increase last year. Before the special charge, operating earnings increased 13%
in 1997.
An analysis of operating earnings by division follows:
<TABLE>
<CAPTION>
% Change
1997 1996 1995 1997/ 1996/
(millions) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Soup and Sauces $ 1,012 $ 978 $ 863 3 13
Biscuits and
Confectionery 154 183 164 (16) 12
Foodservice 62 55 40 11 38
Other 99 150 135 (34) 11
- --------------------------------------------------------------------------------
1,327 1,366 1,202 (3) 14
- --------------------------------------------------------------------------------
Corporate (61) (49) (55)
- --------------------------------------------------------------------------------
$ 1,266 $ 1,317 $ 1,147
================================================================================
</TABLE>
Contribution to earnings by division includes the effect of a first quarter 1997
pre-tax restructuring charge of $216 million as follows: Soup and Sauces $118
million, Biscuits and Confectionery $53 million and Other $45 million.
Soup and Sauces earnings, excluding the special charge, were up 16% in 1997 led
by sales volume increases in Campbell's condensed soup icons: Chicken Noodle,
Tomato and Cream of Mushroom. New product introductions, the Erasco acquisition
and continued benefits from manufacturing efficiencies also contributed to the
earnings growth.
In 1996, Pace Foods, completing its first full fiscal year, and the Homepride
acquisition in the United Kingdom contributed significantly to the earnings
increase.
Biscuits and Confectionery earnings, excluding the special charge, increased 13%
led by double-digit growth at Pepperidge Farm and Godiva. Pepperidge Farm's
Goldfish crackers continued their outstanding performance and Godiva posted
record earnings as a result of its strong U.S. and Japanese retail businesses.
In 1996, Goldfish and Godiva led the way to 12% earnings growth.
Foodservice earnings in 1997 increased 11%. This increase was attributable to
strong soup sales in traditional U.S. food service channels and Pace Mexican
sauces. In 1996, earnings increases were driven by volume gains from chicken pot
pies for the away-from-home market.
Earnings in Other, excluding the special charge, declined 4% as a result of the
company's continued efforts to reconfigure its business portfolio and the
divestiture of several non-strategic businesses. In 1996, earnings were up 11%
led by strong volume gains in Vlasic pickles.
30
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NON-OPERATING ITEMS -- Interest expense in 1997 increased 32.5% primarily due to
financing costs associated with the company's share repurchase program. In 1996,
interest expense increased 9.6% due principally to financing costs associated
with acquisitions and share repurchases.
The effective tax rate for 1997 was 35.6% compared to 33% last year. Before the
special charge, the effective tax rate was 34%. In 1996, the effective tax rate
remained unchanged at 33% compared to 1995.
SPECIAL CHARGE -- On September 4, 1996 the company's Board of Directors approved
a special charge of $216 million ($160 million after-tax or $.34 per share) to
cover the costs of a restructuring program. The restructuring program is
designed to improve operational efficiency by reconfiguring or closing various
plants, reducing administrative and operational staff functions and divesting
non-strategic, under-performing businesses with sales of approximately $275
million. The program includes the elimination of approximately 2,100
administrative and operational positions from the company's worldwide workforce.
The restructuring charge includes approximately $113 million in cash charges
primarily related to severance and employee benefits, substantially all of which
is expected to be paid by the end of the first quarter of 1998. The balance of
the charge relates to non-cash charges for estimated losses on the disposition
of assets and business divestitures. The restructuring program is expected to
generate approximately $200 million in savings in 1997 and 1998 from reductions
in employee salaries and benefits, plant overhead, depreciation and
amortization. The expected cash outflows will not adversely affect the company's
liquidity. See Note 3 of the Consolidated Financial Statements for the
components of the restructuring liability and the related activity.
LIQUIDITY AND CAPITAL RESOURCES
Strong cash flows from operations, a strong balance sheet and interest coverage
demonstrate the company's continued superior financial strength.
Cash flows from operations provided $1.2 billion in 1997, consistent with 1996.
Over the last three years, operating cash flows totaled approximately $3.6
billion.
This strong cash generating capability provides the company substantial
financial flexibility in meeting operating and investing objectives and in
executing the company's ongoing share repurchase program.
Capital expenditures were $331 million in 1997, a decline of $85 million from
the prior year. The decrease is primarily attributable to the completion of the
Arnotts Huntingwood manufacturing facility. Capital expenditures are projected
to be $375 million in 1998.
Acquisitions in 1997 totaled $228 million and included the Erasco Group of
companies, Germany's leading soup brand. In addition, Arnotts acquired the
assets of Kettle Chip Company, a Sydney, Australia based potato chip concern.
These acquisitions were funded through cash generated from operations and short
and long-term borrowings.
Long-term borrowings increased $409 million due to the issuance of $300 million
6.9% fixed rate ten-year notes due in 2007, $150 million 5.76% fixed rate
three-year notes due in 2000 and $74 million 5.75% fixed rate three-year notes
due in 2001. Also, $100 million of 9% notes due in 1998 were reclassified to
short-term borrowings. The proceeds of these notes were used to finance the
company's share repurchase program and to repay short-term borrowings.
Short-term borrowings increased $641 million primarily to finance the company's
share repurchase program.
The company has ample financial resources, including unused lines of credit
totaling approximately $3.1 billion and has ready access to financial markets
around the world. The pre-tax interest coverage ratio before the special charge
was 8.4 for 1997 compared to 9.7 for 1996. The decline was attributable to the
increase in borrowings associated with the company's share repurchase program.
In 1997, the company filed a shelf registration with the Securities and Exchange
Commission for the issuance of debt securities not to exceed $1 billion. As of
August 3, 1997, $700 million remained unissued.
Dividend payments increased $12 million or 4% to $350 million in 1997, compared
to $338 million in 1996. Dividends declared in 1997 totaled $.750 per share, up
from $.673 per share in 1996. The 1997 fourth quarter rate was $.1925.
31
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Capital stock repurchases totaled 40 million shares at a cost of approximately
$1.7 billion during 1997, compared to repurchases of 8 million shares at a cost
of $244 million in the same period for 1996. In fiscal 1997, the company's Board
of Directors approved a three-year $2.5 billion share repurchase program. The
program included a "Dutch Auction" share buyback which resulted in the
repurchase of 27 million shares at a cost of approximately $1.1 billion. The
"Dutch Auction" was completed in the first quarter.
Total assets declined 3% to $6.5 billion primarily due to asset writedowns
associated with the restructuring charge, business divestitures and the impact
of foreign currency translation on the company's operations in Europe and
Australia.
Total liabilities increased $1.1 billion or 30% primarily due to increased
borrowings and the restructuring charge recorded in the first quarter of 1997.
INFLATION
Inflation during recent years has not had a significant effect on the company.
The company mitigates the effects of inflation by aggressively pursuing an
ongoing cost-improvement effort which includes capital investments in more
efficient plant and equipment and low cost business systems.
MARKET RISK SENSITIVITY
The company uses financial instruments, including fixed and variable rate debt,
as well as swap, forward and option contracts to finance its operations and to
hedge interest rate, currency and certain equity-linked compensation liability
exposures. The swap, forward and option contracts are entered into for periods
consistent with related underlying exposures and do not constitute positions
independent of those exposures. The company does not enter into contracts for
speculative purposes, nor is it a party to any leveraged instrument.
The information below summarizes the company's market risks associated with debt
obligations and other significant financial instruments outstanding as of August
3, 1997. Fair values included herein have been determined based on quoted market
prices. The information presented below should be read in conjunction with Note
15 and Note 17 to the Consolidated Financial Statements.
For debt obligations, the table presents principal cash flows and related
interest rates by fiscal year of maturity. Capital lease obligations and
miscellaneous notes payable which mature in 1998 are not included in the table.
Variable interest rates disclosed represent the weighted average rates of the
portfolio at the period end. For interest rate swaps, the table presents
notional amounts and related interest rates by fiscal year of maturity. For
these swaps, the variable rates presented are the average forward rates for the
term of each contract.
EXPECTED FISCAL YEAR OF MATURITY
(US$ equivalents in millions)
<TABLE>
<CAPTION>
Debt 1998 1999 2000 2001 There-after Total Fair Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $ 100 $ 200 $ 153 $ 174* $ 606** $ 1,233 $ 1,287
Average interest rate 9.00% 5.50% 5.76% 7.42% 7.34%
- ---------------------------------------------------------------------------------------------------------------------------
Variable rate $ 1,382 $ 1,382 $ 1,382
Average interest rate 5.57% 5.57%
- ---------------------------------------------------------------------------------------------------------------------------
Interest Rate Swaps:
Variable to fixed $ 100(A) $ 100 $ (5)
Average pay rate 8.24% 8.24%
Average receive rate 5.96% 5.96%
- ---------------------------------------------------------------------------------------------------------------------------
Fixed to variable $ 150(B) $ 150 $ 1
Average pay rate 5.24% 5.24%
Average receive rate 5.76% 5.76%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* $50 callable in 1998 (A) Hedges commercial paper borrowings
** $100 callable in 2001 (B) Hedges 5.76% notes due 2000
32
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The company also has swap agreements with financial institutions which cover
both interest rate and foreign currency exposures. The notional amounts of these
swaps, which expire in 1998, were $210 million and the cost to settle the swaps
was $2 million at August 3, 1997.
The table below provides information as of August 3, 1997 about the company's
forward currency exchange contracts related to debt management and certain sale
and purchase commitments denominated in foreign currencies. The table presents
the contractual amount and the related weighted average contract exchange rates
for significant currency contracts outstanding as of August 3, 1997. All
contracts expire in 1998.
FORWARD EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Average
Contract Contractual
(US$ equivalents in millions) Amount Exchange Rate
- ----------------------------------------------------------
<S> <C> <C>
Receive BEF/Pay DM $50 20.65
Receive BEF/Pay US$ $40 35.68
Receive DM/Pay US$ $37 1.83
Receive US$/Pay CAD $26 1.38
Receive GBP/Pay US$ $21 1.65
Receive US$/Pay A$ $15 .74
Receive US$/Pay JPY $15 114.11
- ----------------------------------------------------------
</TABLE>
The company has an additional $59 million in a number of smaller contracts to
purchase or sell various other currencies, principally European, as of August 3,
1997.
The aggregate cost to settle all contracts, which is not material to any
individual contract, was $5 million as of August 3, 1997. Total forward exchange
contracts outstanding as of July 28, 1996 were $133 million.
The company has swap contracts outstanding as of August 3, 1997 which hedge a
portion of exposures relating to certain employee compensation liabilities
linked to the total return of Standard & Poor's 500 Index or to the total return
of the company's Capital stock. Under these contracts, the company pays variable
interest rates and receives from the counterparty either the Standard & Poor's
500 Index total return or the total return on company Capital stock. The
notional value of the contract which includes the return on the Standard &
Poor's 500 Index is $16 million. The average forward interest rate applicable to
this contract is 5.95% at August 3, 1997. The notional value of the contracts
which include the total return on company Capital stock is $58 million. The
average forward interest rate applicable to these contracts is 6.08% at August
3, 1997. The contracts expire in 1998. The net gain recognized as an adjustment
to the carrying value at August 3, 1997 was $9 million.
The company's utilization of financial instruments in managing market risk
exposures described above is consistent with the prior year other than the swap
contracts related to equity-linked employee compensation expenses.
RECENT DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128) -- "Earnings per
Share." The standard requires new earnings per share calculations and dual
presentation of "basic" and "diluted" earnings per share. The company will adopt
SFAS 128 in the second quarter of 1998. Basic earnings per share will
approximate earnings per share as currently reported and diluted earnings per
share will give effect to the issuance of stock options. The adoption of SFAS
128 is not expected to have a material effect on the company's earnings per
share.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income." This statement establishes
standards for the reporting and display of comprehensive income in a full set of
general purpose financial statements. The provisions of the statement are
effective for fiscal years beginning after December 15, 1997.
In September 1997, the company announced its intention to spin off certain
specialty foods businesses to its shareowners as an independent publicly-held
company. The new company will include Swanson frozen foods, Vlasic pickles, and
certain European and Argentine businesses. The company expects to complete the
spinoff in 1998, subject to various regulatory approvals, the receipt of a
ruling from the Internal Revenue Service that the spinoff will be a tax-free
transaction to shareowners, and final approval from the company's Board of
Directors.
Also in September 1997, the company agreed to finance a proposal by Arnotts
Limited to acquire its outstanding ordinary shares held by minority
shareholders. It is expected that this transaction will
33
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
increase the company's ownership of Arnotts to 100%. The estimated financing is
approximately $300 million and Arnotts expects to complete the transaction in
the second quarter of 1998.
FORWARD-LOOKING INFORMATION
From time to time, in written reports, including the 1997 Annual Report, and
oral statements, we discuss our expectations regarding future performance of the
company. These "forward-looking statements" are based on currently available
competitive, financial and economic data and our operating plans. They are also
inherently uncertain, and investors must recognize that actual results could
differ materially from those expressed or implied in the forward-looking
statements. In addition, as discussed in Management's Discussion and Analysis:
- - The forecasted savings related to the company's restructuring program assumes
that facilities are vacated and employees are terminated within the time
frames used to develop the estimates.
- - Our ability to complete the divestiture of under-performing businesses in 1998
depends on our ability to find buyers to purchase these businesses at prices
we consider appropriate.
- - The market risks associated with financial instruments may vary due to the
impact of unforeseen economic changes, such as currency exchange rates,
inflation rates and recessionary trends.
- - The spinoff of certain specialty foods businesses is subject to receipt of a
ruling from the Internal Revenue Service that the spinoff will be a tax-free
transaction to shareowners, various regulatory approvals and final approval
from the company's Board of Directors.
- - The proposal to finance Arnotts Limited's purchase of the minority
shareholders' ownership interest is subject to the company's receipt of
Australia's Foreign Investment Review Board approval, approval by a majority
of Arnotts' shareholders (excluding the company and its subsidiaries) holding
75% of shares voted and approval of the Supreme Court of New South Wales.
34
<PAGE> 7
CONSOLIDATED STATEMENTS OF EARNINGS
(millions, except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995
53 weeks 52 weeks 52 weeks
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $7,964 $7,678 $7,250
- --------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 4,305 4,363 4,255
Marketing and selling expenses 1,636 1,499 1,371
Administrative expenses 324 343 326
Research and development expenses 77 84 88
Other expense (Note 4) 140 72 63
Restructuring charge (Note 3) 216 -- --
- --------------------------------------------------------------------------------
Total costs and expenses 6,698 6,361 6,103
- --------------------------------------------------------------------------------
EARNINGS BEFORE INTEREST AND TAXES 1,266 1,317 1,147
Interest expense (Note 5) 167 126 115
Interest income 8 6 10
- --------------------------------------------------------------------------------
Earnings before taxes 1,107 1,197 1,042
Taxes on earnings (Note 8) 394 395 344
- --------------------------------------------------------------------------------
NET EARNINGS $ 713 $ 802 $ 698
================================================================================
EARNINGS PER SHARE (NOTE 18) $ 1.51 $ 1.61 $ 1.40
================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 472 498 498
================================================================================
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes on pages
39 to 46 are an integral part of the financial statements.
35
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
(millions)
<TABLE>
<CAPTION>
AUGUST 3, 1997 July 28,1996
- --------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 26 $ 34
Accounts receivable (Note 9) 633 618
Inventories (Note 10) 762 739
Other current assets (Note 11) 162 227
- --------------------------------------------------------------------------------
Total current assets 1,583 1,618
- --------------------------------------------------------------------------------
Plant assets, net of depreciation (Note 12) 2,560 2,681
Intangible assets, net of amortization (Note 13) 1,793 1,808
Other assets (Note 14) 523 525
- --------------------------------------------------------------------------------
Total assets $ 6,459 $ 6,632
================================================================================
CURRENT LIABILITIES
Notes payable (Note 15) $ 1,506 $ 865
Payable to suppliers and others 608 568
Accrued liabilities 642 593
Dividend payable 88 86
Accrued income taxes 137 117
- --------------------------------------------------------------------------------
Total current liabilities 2,981 2,229
- --------------------------------------------------------------------------------
LONG-TERM DEBT (NOTE 15) 1,153 744
NONPENSION POSTRETIREMENT BENEFITS (NOTE 7) 442 452
OTHER LIABILITIES (NOTE 16) 463 465
- --------------------------------------------------------------------------------
Total liabilities 5,039 3,890
- --------------------------------------------------------------------------------
SHAREOWNERS' EQUITY (NOTE 18)
Preferred stock; authorized 40 shares; none issued -- --
Capital stock, $.0375 par value; authorized
560 shares; issued 542 shares 20 20
Capital surplus 338 228
Earnings retained in the business 3,571 3,211
Capital stock in treasury, 84 shares in 1997
and 48 shares in 1996, at cost (2,459) (779)
Cumulative translation adjustments (50) 62
- --------------------------------------------------------------------------------
Total shareowners' equity 1,420 2,742
- --------------------------------------------------------------------------------
Total liabilities and shareowners' equity $ 6,459 $ 6,632
================================================================================
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes on pages
39 to 46 are an integral part of the financial statements.
36
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 713 $ 802 $ 698
Non-cash charges to net earnings
Restructuring charge 216 -- --
Depreciation and amortization 328 326 294
Deferred income taxes (24) 32 40
Other, net 96 58 48
Changes in working capital
Accounts receivable (26) (1) (18)
Inventories (31) (27) 63
Other current assets and liabilities (85) 23 60
- -----------------------------------------------------------------------------------------
Net cash provided by operating activities 1,187 1,213 1,185
- -----------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchases of plant assets (331) (416) (391)
Sales of plant assets 49 33 21
Businesses acquired (228) (186) (1,255)
Sales of businesses 207 80 12
Other, net 5 (120) (45)
- -----------------------------------------------------------------------------------------
Net cash used in investing activities (298) (609) (1,658)
- -----------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Long-term borrowings 524 230 312
Repayments of long-term borrowings (21) (43) (29)
Short-term borrowings 1,306 268 1,087
Repayments of short-term borrowings (779) (568) (662)
Dividends paid (350) (338) (295)
Treasury stock purchases (1,696) (244) (24)
Treasury stock issued 106 64 37
- -----------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (910) (631) 426
- -----------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 13 8 4
- -----------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (8) (19) (43)
Cash and cash equivalents at beginning of year 34 53 96
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26 $ 34 $ 53
=========================================================================================
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes on pages
39 to 46 are an integral part of the financial statements.
37
<PAGE> 10
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
(millions, except per share amounts)
<TABLE>
<CAPTION>
Capital Stock
--------------------------------------- Earnings
Issued In Treasury retained Cumulative Total
------------------ ---------------- Capital in the translation shareowners'
Shares Amount Shares Amount surplus business adjustments equity
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994 542 $ 20 (46) $(559) $155 $2,359 $14 $1,989
Net earnings 698 698
Dividends ($.605 per share) (302) (302)
Treasury stock purchased (1) (24) (24)
Treasury stock issued under
Management incentive and
Stock option plans 3 33 10 43
Translation adjustments 64 64
- --------------------------------------------------------------------------------------------------------------
Balance at July 30, 1995 542 20 (44) (550) 165 2,755 78 2,468
- --------------------------------------------------------------------------------------------------------------
Net earnings 802 802
Dividends ($.673 per share) (346) (346)
Treasury stock purchased (8) (244) (244)
Treasury stock issued under
Management incentive and
Stock option plans 4 15 63 78
Translation adjustments (16) (16)
- --------------------------------------------------------------------------------------------------------------
Balance at July 28, 1996 542 20 (48) (779) 228 3,211 62 2,742
- --------------------------------------------------------------------------------------------------------------
Net earnings 713 713
Dividends ($.750 per share) (353) (353)
Treasury stock purchased (40) (1,696) (1,696)
Treasury stock issued under
Management incentive and
Stock option plans 4 16 110 126
Translation adjustments (112) (112)
- --------------------------------------------------------------------------------------------------------------
Balance at August 3, 1997 542 $ 20 (84) $(2,459) $338 $3,571 $(50) $1,420
==============================================================================================================
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes on pages
39 to 46 are an integral part of the financial statements.
38
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation -- The consolidated
financial statements include the accounts of the company and its majority-owned
subsidiaries. Significant intercompany transactions are eliminated in
consolidation. Investments of 20% or more in affiliates are accounted for by the
equity method.
FISCAL YEAR -- The company's fiscal year ends on the Sunday nearest July 31.
There were 53 weeks in fiscal 1997 and 52 weeks in fiscal 1996 and 1995.
CASH AND CASH EQUIVALENTS -- All highly liquid debt instruments purchased with a
maturity of three months or less are classified as cash equivalents.
INVENTORIES -- Substantially all domestic inventories are priced at the lower of
cost or market, with cost determined by the last-in, first-out (LIFO) method.
Other inventories are priced at the lower of average cost or market.
PLANT ASSETS -- Plant assets are stated at historical cost. Alterations and
major overhauls which extend the lives or increase the capacity of plant assets
are capitalized. The amounts for property disposals are removed from plant asset
and accumulated depreciation accounts and any resultant gain or loss is included
in earnings. Ordinary repairs and maintenance are charged to operating costs.
DEPRECIATION -- Depreciation provided in Costs and expenses is calculated using
the straight-line method. Buildings and machinery and equipment are depreciated
over periods not exceeding 45 years and 15 years, respectively. Accelerated
methods of depreciation are used for income tax purposes in certain
jurisdictions.
INTANGIBLES -- Intangible assets consist principally of excess purchase price
over net assets of businesses acquired and trademarks. Intangibles are amortized
on a straight-line basis over periods not exceeding 40 years.
ASSET VALUATION -- The company periodically reviews the recoverability of plant
assets and intangibles based principally on an analysis of cash flows.
PENSION AND RETIREE BENEFIT PLANS -- Costs are accrued over employees' careers
based on plan benefit formulas.
INCOME TAXES -- Deferred taxes are provided in accordance with Statement of
Financial Accounting Standards (SFAS) No.109.
USE OF ESTIMATES -- Generally accepted accounting principles require management
to make estimates and assumptions that affect assets and liabilities, contingent
assets and liabilities, and revenues and expenses. Actual results could differ
from those estimates.
RECLASSIFICATIONS -- Certain amounts in the prior years' financial statements
and footnotes have been reclassified to conform to the current year
presentation.
2. GEOGRAPHIC AREA INFORMATION
The company is predominantly engaged in the manufacture and sale of prepared
convenience foods. The following presents information about operations in
different geographic areas:
<TABLE>
<CAPTION>
Net sales 1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 5,495 $ 5,332 $ 5,012
Europe 1,201 1,122 1,143
Australia 613 614 521
Other countries 795 733 658
Adjustments and eliminations (140) (123) (84)
- ------------------------------------------------------------------------
Consolidated $ 7,964 $ 7,678 $ 7,250
========================================================================
Earnings before taxes 1997 1996 1995
- ------------------------------------------------------------------------
United States $ 1,155 $ 1,123 $ 957
Europe 50 71 74
Australia 26 76 81
Other countries 96 96 90
Unallocated corporate expenses (61) (49) (55)
- ------------------------------------------------------------------------
Earnings before interest and taxes 1,266 1,317 1,147
Interest, net (159) (120) (105)
- ------------------------------------------------------------------------
Consolidated $ 1,107 $ 1,197 $ 1,042
========================================================================
Identifiable assets 1997 1996 1995
- ------------------------------------------------------------------------
United States $ 3,913 $ 4,144 $ 4,171
Europe 860 817 814
Australia 919 980 773
Other countries 767 691 557
- ------------------------------------------------------------------------
Consolidated $ 6,459 $ 6,632 $ 6,315
========================================================================
</TABLE>
Transfers between geographic areas are recorded at cost plus markup or at
market. Identifiable assets are those assets, including goodwill, which are
identified with the operations in each geographic region. The 1997 restructuring
charge of $216 is allocated to geographic areas as follows: United States --
$169, Europe -- $12, Australia -- $33 and Other -- $2.
39
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
3. RESTRUCTURING PROGRAM
A special charge of $216 ($160 after tax or $.34 per share) was recorded in the
first quarter of 1997 to cover the costs of a restructuring program. The
restructuring program is designed to improve operational efficiency by closing
various plants, reducing approximately 2,100 administrative and operational
positions from the worldwide workforce and divesting non-strategic businesses
with sales of approximately $275.
The restructuring charge includes approximately $113 in cash charges primarily
related to severance and employee benefit costs, substantially all of which will
be paid by the end of the first quarter of 1998. The balance of the
restructuring charge relates to non-cash charges for the write down of plant
assets and estimated losses on the disposition of plant assets and business
divestitures. The company plans to substantially complete the program in the
first quarter of 1998.
Since the program was approved, certain modifications were made to the
components which resulted in revision to the 1997 activity. The overall expected
cost of the restructuring program has not changed and there have been no
material adjustments to the liability. A summary of the original reserves and
activity through August 3, 1997 follows:
<TABLE>
<CAPTION>
Original August
Reserves Activity 3, 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Loss on asset dispositions
and divestitures $108 $ (35) $ 73
Severance and benefits 93 (58) 35
Other 15 (7) 8
- -----------------------------------------------------------------
Total $216 $(100) $116
=================================================================
</TABLE>
4. OTHER EXPENSE
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Stock price related
incentive programs $80 $31 $20
Amortization of intangible
and other assets 54 52 34
Minority interests 7 17 17
Other, net (1) (28) (8)
- ---------------------------------------------------------------
$140 $72 $63
=================================================================
</TABLE>
5. INTEREST EXPENSE
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $178 $137 $123
Less: Interest capitalized 11 11 8
- ---------------------------------------------------------------
$167 $126 $115
===============================================================
</TABLE>
6. ACQUISITIONS
During 1997, 1996 and 1995, the company made several acquisitions. These
acquisitions were accounted for as purchase transactions, and operations of the
acquired companies are included in the financial statements from the dates the
acquisitions were consummated. The allocation of the purchase price to assets
acquired and liabilities assumed was based upon fair value estimates as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Working capital $ 4 $ 4 $ 19
Fixed assets 53 16 93
Intangibles 159 152 1,150
Other assets 19 -- 4
Other liabilities (7) -- (25)
Minority interests -- 14 14
- ---------------------------------------------------------------
$228 $186 $1,255
===============================================================
</TABLE>
During 1997, the company acquired the Erasco Group of companies, Germany's
leading soup company. In addition, Arnotts Limited ("Arnotts") acquired the
assets of Kettle Chip Company located in Sydney, Australia.
The Erasco acquisition was consummated in October 1996. Based on unaudited data,
net sales for 1997 and 1996 would have increased $29 and $201, respectively, and
net earnings would have increased $5 in 1996 had the acquisition occurred at the
beginning of fiscal 1996. Pro forma financial information for the other
acquisitions would not have a material effect on the company's net sales,
earnings, and earnings per share in 1997 and 1996.
During 1996, the company acquired the Homepride sauce business, United Kingdom's
leading cooking sauce brand, and the Cheong Chan soup and sauce business in
Asia. The company also increased its share ownership in Arnotts to 70%.
During 1995, the company acquired Pace Foods, the world's leading producer and
marketer of Mexican sauces; Fresh Start Bakeries, a food service baking
40
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
concern with operations in the U.S., Europe and South America;
Stratford-upon-Avon Foods, a canned fruit and vegetable company in England; and
Greenfield Foods, a U.S. baking operation specializing in low-fat cakes and
cookies. The company also acquired additional shares in Arnotts boosting its
share ownership to 65%.
7. PENSION PLANS AND RETIREMENT BENEFITS
PENSION PLANS -- Substantially all of the company's U.S. and certain non-U.S.
employees are covered by noncontributory defined benefit pension plans. Plan
benefits are generally based on years of service and employees' compensation
during the last years of employment. Benefits are paid from funds previously
provided to trustees and insurance companies or are paid directly by the company
from general funds. Actuarial assumptions and provisions for funded plans are
reviewed regularly by the company and its independent actuaries to ensure that
plan assets will be adequate to provide pension benefits. Plan assets consist
primarily of investments in equities, fixed income securities, real estate and
money market funds.
Pension expense included the following:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned during the year $ 32 $ 33 $ 29
Interest cost 97 93 90
Net amortization and deferrals 317 44 59
Less: Return on plan assets 433 152 158
- ---------------------------------------------------------------
13 18 20
Other pension expense 10 9 10
- ---------------------------------------------------------------
Consolidated pension expense $ 23 $ 27 $ 30
===============================================================
</TABLE>
Weighted average rates for principal actuarial assumptions were:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.70% 8.00% 7.75%
Long-term rate of
compensation increase 5.00% 5.00% 5.00%
Long-term rate of
return on plan assets 9.70% 9.50% 9.25%
==================================================================
</TABLE>
The funded status of the plans was as follows:
<TABLE>
<CAPTION>
AUGUST 3, July 28,
1997 1996
<S> <C> <C>
- ---------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $(1,105) $(1,054)
Non-vested (43) (43)
- ---------------------------------------------------------------------
Accumulated benefit obligation (1,148) (1,097)
Effect of projected future salary increases (130) (132)
- ---------------------------------------------------------------------
Projected benefit obligation (1,278) (1,229)
Plan assets at market value 1,675 1,353
- ---------------------------------------------------------------------
Plan assets in excess of
projected benefit obligation 397 124
Unrecognized net (gain) or loss (92) 180
Unrecognized prior service cost 70 76
Unrecognized net assets at transition (38) (48)
- ---------------------------------------------------------------------
Prepaid pension expense $ 337 $ 332
=====================================================================
</TABLE>
Pension coverage for employees of certain non-U.S. subsidiaries is provided to
the extent determined appropriate through their respective plans. Obligations
under such plans are systematically provided for by depositing funds with trusts
or under insurance contracts. The assets and obligations of these plans are not
material.
SAVINGS PLANS -- The company sponsors employee savings plans which cover
substantially all U.S. employees. After one year of continuous service, the
company generally matches 50% of employee contributions up to 5% of
compensation. In 1997, 1996 and 1995, the company increased its contribution to
60% because earnings goals were achieved. Amounts charged to Costs and expenses
were $17 in 1997, $15 in 1996 and $14 in 1995.
RETIREE BENEFITS -- The company provides postretirement benefits including
health care and life insurance to substantially all retired U.S. employees and
their dependents. Employees who have 10 years of service after the age of 45 and
retire from the company are eligible to participate in the postretirement
benefit plans.
Postretirement benefit expense included the following:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned during the year $12 $17 $18
Interest cost 21 24 34
Net amortization and deferrals (17) (3) --
- --------------------------------------------------------------
Postretirement benefit expense $16 $38 $52
==============================================================
</TABLE>
41
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
<TABLE>
<CAPTION>
AUGUST 3, July 28,
1997 1996
- -----------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees $194 $172
Fully eligible active plan participants 47 48
Other active plan participants 60 61
- -----------------------------------------------------------------
Accumulated benefit obligation 301 281
Unrecognized prior service cost 20 24
Unrecognized net gain 140 166
- -----------------------------------------------------------------
Accrued postretirement benefit liability $461 $471
=================================================================
</TABLE>
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.75% in 1997 and 8.00% in 1996. The assumed healthcare cost
trend rate used to measure the accumulated postretirement benefit obligation was
6.5%, declining to 4.5% over a period of 5 years and continuing at 4.5%
thereafter. A one-percentage-point change in the assumed healthcare cost trend
rate would have changed the 1997 accumulated postretirement benefit obligation
by $32 and postretirement benefit expense by $5.
Obligations related to non-U.S. postretirement benefit plans are not significant
since these benefits are generally provided through government-sponsored plans.
The current portion of nonpension postretirement benefits included in Accrued
liabilities was $19 at August 3, 1997 and July 28, 1996.
8. TAXES ON EARNINGS
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Income taxes:
Currently payable
Federal $ 352 $ 275 $ 208
State 35 36 28
Non-U.S. 31 52 68
- --------------------------------------------------------------
418 363 304
- --------------------------------------------------------------
Deferred
Federal (33) 22 33
State 3 4 5
Non-U.S. 6 6 2
- --------------------------------------------------------------
(24) 32 40
- --------------------------------------------------------------
$ 394 $ 395 $ 344
==============================================================
Earnings before income taxes:
United States $ 968 $ 986 $ 840
Non-U.S. 139 211 202
- --------------------------------------------------------------
$1,107 $1,197 $1,042
==============================================================
</TABLE>
The following is a reconciliation of effective income tax rates with the U.S.
Federal statutory income tax rate:
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes
(net of Federal tax benefit) 2.2 2.2 2.1
Nondeductible divestiture and
restructuring charges 1.6 -- --
Non-U.S. earnings taxed at other
than Federal statutory rate (.8) (.8) (.2)
Tax loss carryforwards (.4) (1.9) (3.0)
Other (2.0) (1.5) (.9)
- ----------------------------------------------------------------
Effective income tax rate 35.6% 33.0% 33.0%
==============================================================
</TABLE>
Deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
AUGUST 3, July 28,
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Depreciation $185 $198
Pensions 110 112
Other 167 148
- --------------------------------------------------------------
Deferred tax liabilities 462 458
- --------------------------------------------------------------
Benefits and compensation 224 196
Restructuring accruals 41 --
Tax loss carryforwards 35 49
Other 50 64
- --------------------------------------------------------------
Gross deferred tax assets 350 309
Deferred tax asset valuation allowance (35) (49)
- --------------------------------------------------------------
Net deferred tax assets 315 260
- --------------------------------------------------------------
Net deferred tax liability $147 $198
==============================================================
</TABLE>
For income tax purposes, subsidiaries of the company have tax loss carryforwards
of approximately $85 of which $3 relate to periods prior to acquisition of the
subsidiaries by the company. Of these carryforwards, $54 expire through 2009 and
$31 may be carried forward indefinitely. The current statutory tax rates in
these countries range from 31% to 57%.
Income taxes have not been accrued on undistributed earnings of non-U.S.
subsidiaries of $451 which are invested in operating assets and are not expected
to be remitted. If remitted, tax credits are available to substantially reduce
any additional taxes.
42
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
9. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Customers $598 $579
Allowances for
cash discounts and bad debts (23) (24)
- --------------------------------------------------------------
575 555
Other 58 63
- --------------------------------------------------------------
$633 $618
==============================================================
</TABLE>
10. INVENTORIES
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Raw materials, containers and supplies $300 $323
Finished products 471 461
- --------------------------------------------------------------
771 784
Less: Adjustment to LIFO basis 9 45
- --------------------------------------------------------------
$762 $739
==============================================================
</TABLE>
Inventories for which the LIFO method of determining cost is used represented
approximately 64% of consolidated inventories in 1997 and 63% in 1996.
11. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Prepaid pensions $ 25 $ 23
Notes receivable -- 73
Deferred taxes 104 76
Other 33 55
- --------------------------------------------------------------
$162 $227
==============================================================
</TABLE>
12. PLANT ASSETS
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Land $ 85 $ 99
Buildings 1,164 1,180
Machinery and equipment 2,964 2,879
Projects in progress 214 332
- --------------------------------------------------------------
4,427 4,490
Accumulated depreciation (1,867) (1,809)
- --------------------------------------------------------------
$2,560 $2,681
==============================================================
</TABLE>
Depreciation provided in Costs and expenses was $274 in 1997 and 1996 and $261
in 1995. Approximately $106 of capital expenditures are required to complete
projects in progress at August 3, 1997.
13. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Purchase price in excess of net
assets of businesses acquired (goodwill) $1,478 $1,407
Trademarks 429 448
Other intangibles 41 84
- --------------------------------------------------------------
1,948 1,939
Accumulated amortization (155) (131)
- --------------------------------------------------------------
$1,793 $1,808
==============================================================
</TABLE>
14. OTHER ASSETS
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Prepaid pensions $312 $309
Investments 188 170
Other 23 46
- --------------------------------------------------------------
$523 $525
==============================================================
</TABLE>
15. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consists of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Commercial paper $1,382 $549
9.00% Notes 100 --
7.75% Notes -- 300
Other 24 16
- --------------------------------------------------------------
$1,506 $865
==============================================================
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Fiscal Year
Type Maturity Rate 1997 1996
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes 1998 9.00% -- $100
Notes 1999 5.50% $ 200 200
Notes 2000 5.76% 150 --
Notes 2001* 5.75%-8.75% 174 100
Notes 2004** 5.63% 100 100
Notes 2007 6.90% 300 --
Debentures 2021 8.88% 200 200
Notes 1999-2010 6.40%-9.00% 9 16
Capital lease
obligations Various Various 20 28
- --------------------------------------------------------------
$1,153 $744
==============================================================
</TABLE>
* $50 callable in 1998
** callable in 2001
43
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
The fair value of the company's long-term debt including the current portion of
long-term debt in Notes payable was $1,307 at August 3, 1997 and $1,099 at July
28, 1996.
The amount of unused lines of credit at August 3, 1997 approximates $3,100, of
which $2,500 are unconditional for a period of one to five years.
In 1997, the company filed a shelf registration statement with the Securities
and Exchange Commission for the issuance of debt securities at an aggregate
initial offering price not to exceed $1,000; as of August 3, 1997, $700 remained
unissued.
Principal amounts of long-term debt mature as follows: 1998-$104 (in current
liabilities); 1999 - $204; 2000 - $157; 2001 - $178; 2002 - $4 and beyond -
$606.
Future minimum capital lease payments are $39, including implicit interest of
$16.
16. OTHER LIABILITIES
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred taxes $251 $274
Minority interests 83 90
Deferred compensation 66 27
Postemployment benefits 18 18
Other 45 56
- --------------------------------------------------------------------------------
$463 $465
================================================================================
</TABLE>
17. FINANCIAL INSTRUMENTS
The company utilizes derivative financial instruments to enhance its ability to
manage risk, including interest rate, foreign currency and certain equity-linked
employee compensation exposures which exist as part of its ongoing business
operations. The company does not enter into contracts for speculative purposes,
nor is it a party to any leveraged derivative instrument. The use of derivative
financial instruments is monitored through regular communication with senior
management and the utilization of written guidelines.
The company finances a portion of its operations through debt instruments
primarily consisting of commercial paper, notes, debentures and bank loans. The
company utilizes interest rate swap agreements to minimize worldwide financing
costs and to achieve a desired proportion of variable versus fixed rate debt.
The amounts paid or received on hedges related to debt are recognized as an
adjustment to interest expense. The notional amounts of interest rate swaps were
$250 at August 3, 1997 and $100 at July 28, 1996. The cost to settle the swaps
was $4 at August 3, 1997.
The company utilizes foreign currency exchange contracts, including swap and
forward contracts, to hedge existing foreign currency exposures. Foreign
exchange gains and losses on derivative financial instruments are recognized and
offset foreign exchange gains and losses on the underlying exposures.
A mix of equity, intercompany debt and local currency borrowing is used to
finance foreign operations. Gains and losses, both realized and unrealized, on
financial instruments that hedge the company's investments in foreign operations
are recognized in the Cumulative translation adjustments account in Shareowners'
Equity.
Swap contracts are entered into to hedge exposures relating to certain employee
compensation expenses linked to the total return of the Standard & Poor's 500
Index or to the total return of the company's Capital stock. The equity swap
contracts mature in 1998. At August 3, 1997, the notional principal amount of
the contracts was $74, and the net gain to settle the contracts was $9. Gains or
losses are recognized as adjustments to the carrying value of the underlying
obligations.
The company also has swap agreements with financial institutions which cover
both foreign currency and interest rates. The notional amounts of these swaps
were $210 at August 3, 1997 and $125 at July 28, 1996. These agreements hedge
currency exposures arising from strategies which replaced certain local currency
borrowings with lower cost U.S. dollar financing. The cost to settle the swaps
was $2 at August 3, 1997.
At August 3, 1997, the company also had contracts to purchase or sell
approximately $263 in foreign currency versus $133 at July 28, 1996. The
contracts are primarily for Canadian and European currencies and have maturities
through 1998.
The company is exposed to credit loss in the event of nonperformance by the
counterparties in swap and forward contracts. The company minimizes its credit
risk on these transactions by only dealing with leading, credit-worthy financial
institutions having long-term credit ratings of "A" or better and, therefore,
does not anticipate non-performance. In addition, the contracts are distributed
among several financial institutions, thus minimizing credit risk concentration.
44
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
The carrying values of cash and cash equivalents, accounts and notes receivable,
accounts payable, and short-term debt approximate fair value. The fair value of
long-term debt, as indicated in Note 15, and derivative financial instruments,
is based on quoted market prices.
18. SHAREOWNERS' EQUITY
On February 11, 1997 the company's Board of Directors authorized a two-for-one
stock split effective for shareowners of record on February 24, 1997. The number
of authorized shares was increased to 560 million from 280 million. All
references to the number of shares reflect the stock split. Preferred stock is
issuable in one or more classes, with or without par as may be authorized by the
Board of Directors.
The company sponsors a long-term incentive compensation plan. Under the plan,
restricted stock and options may be granted to certain officers and key
employees of the company. The plan provides for awards up to an aggregate of 25
million shares of Capital stock. Options are granted at a price not less than
the fair value of the shares on the date of grant and expire not later than ten
years after the date of grant. Options vest over a three-year period.
The company accounts for the stock option grants and restricted stock awards in
accordance with Accounting Principles Board Opinion No. 25 and related
Interpretations. Accordingly, no compensation expense has been recognized in the
Statements of Earnings for the options. In 1997, the company adopted the
disclosure provisions of Statement of Financial Accounting Standards No. 123
(SFAS 123) "Accounting for Stock-Based Compensation." Had the fair value based
accounting provisions of SFAS 123 been adopted, the effect on earnings and
earnings per share in 1997 and 1996 would not be significant.
As of August 3, 1997, 13.7 million shares were available for grant under the
long-term incentive plan. Restricted shares granted are as follows:
<TABLE>
<CAPTION>
(thousands of shares) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Restricted Shares
Granted 804 84 966
================================================================================
</TABLE>
Information about stock options and related activity is as follows:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(options in thousands) 1997 Price 1996 Price 1995 Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock Option Plans
Beginning of year 22,098 $22.53 19,312 $15.20 19,830 $12.63
Granted 2,644 48.02 6,594 34.63 2,752 24.60
Exercised (3,428) 16.10 (3,428) 14.13 (2,996) 11.68
Terminated (1,248) 24.45 (380) 20.32 (274) 19.82
- --------------------------------------------------------------------------------
End of year 20,066 $26.94 22,098 $22.53 19,312 $15.20
================================================================================
Exercisable
at end of year 13,040 12,782 13,722
================================================================================
<CAPTION>
(options in thousands) Options Outstanding Exercisable Options
- --------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Price Shares Price
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 7.59-$14.95 3,671 2.81 $13.07 3,671 $13.07
$17.69-$34.84 13,765 7.37 $26.60 9,369 $20.31
$38.06-$48.31 2,630 9.90 $48.10 -- --
- --------------------------------------------------------------------------------
20,066 13,040
================================================================================
</TABLE>
All net earnings per share data is based on the weighted average shares
outstanding during the applicable periods. The potential dilution from the
exercise of stock options is not material.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128) -- "Earnings per Share." The
standard requires new earnings per share calculations and dual presentation of
"basic" and "diluted" earnings per share. The company will adopt SFAS 128 in the
second quarter of 1998. Basic earnings per share will approximate earnings per
share as currently reported and diluted earnings per share will give effect to
the issuance of stock options. The adoption of SFAS 128 is not expected to have
a material effect on the company's earnings per share.
45
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
19. STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid, net of
amounts capitalized $167 $127 $102
Interest received $ 8 $ 6 $ 10
Income taxes paid $392 $353 $290
</TABLE>
20. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1997
First Second Third Fourth
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $2,052 $2,317 $1,870 $1,725
Cost of products sold 1,112 1,227 1,030 936
Net earnings 88 276 157 192
Per share
Net earnings .17 .58 .34 .42
Dividends .1725 .1925 .1925 .1925
Market price
High 42.13 42.44 49.50 52.81
Low 32.00 39.38 40.31 45.00
<CAPTION>
1996
First Second Third Fourth
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,990 $2,217 $1,831 $1,640
Cost of products sold 1,143 1,245 1,061 914
Net earnings 219 258 145 180
Per share
Net earnings .44 .52 .29 .36
Dividends .155 .1725 .1725 .1725
Market price
High 26.94 31.25 33.69 35.38
Low 22.13 25.44 28.00 29.75
</TABLE>
21. SUBSEQUENT EVENTS
In September 1997, the company announced its intention to spin off certain
specialty foods business to its shareowners as an independent publicly-held
company. The new company will include Swanson frozen foods, Vlasic pickles, and
certain European and Argentine businesses. The company expects to complete the
spinoff in 1998, subject to various regulatory approvals, the receipt of a
ruling from the Internal Revenue Service that the spinoff will be a tax-free
transaction to shareowners and final approval from the company's Board of
Directors.
Also in September 1997, the company agreed to finance a proposal by Arnotts to
acquire its outstanding shares held by minority shareholders. It is expected
that this transaction would increase the company's ownership of Arnotts to 100%.
The estimated financing is approximately $300 and Arnotts expects to complete
the transaction in the second quarter of 1998.
46
<PAGE> 19
REPORT OF MANAGEMENT
The accompanying financial statements have been prepared by the management of
the company in conformity with generally accepted accounting principles to
reflect the financial position of the company and its operating results.
Financial information appearing throughout this Annual Report is consistent with
that in the financial statements. Management is responsible for the information
and representations in such financial statements, including the estimates and
judgments required for their preparation.
In order to meet its responsibility, management maintains a system of internal
controls designed to assure that assets are safeguarded and that financial
records properly reflect all transactions. The company also maintains a
worldwide auditing function to periodically evaluate the adequacy and
effectiveness of such internal controls, as well as the company's administrative
procedures and reporting practices. The company believes that its long-standing
emphasis on the highest standards of conduct and business ethics, set forth in
extensive written policy statements, serves to reinforce its system of internal
accounting controls.
The report of Price Waterhouse LLP, the company's independent accountants,
covering their audit of the financial statements, is included in this Annual
Report. Their independent audit of the company's financial statements includes a
review of the system of internal accounting controls to the extent they consider
necessary to evaluate the system as required by generally accepted auditing
standards.
The company's internal auditors report directly to the Audit Committee of the
Board of Directors, which is composed entirely of Directors who are not officers
or employees of the company. The Audit Committee meets periodically with the
internal auditors, other management personnel, and the independent accountants.
The independent accountants and the internal auditors have had, and continue to
have, direct access to the Audit Committee without the presence of other
management personnel, and have been directed to discuss the results of their
audit work and any matters they believe should be brought to the Committee's
attention.
/s/ Dale F. Morrison /s/ Basil L. Anderson /s/ Gerald S. Lord
Dale F. Morrison Basil L. Anderson Gerald S. Lord
President and Chief Executive Vice President Vice President
Executive Officer and Chief Financial Officer -- Controller
September 8, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and Directors of Campbell Soup Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, shareowners' equity and cash flows present
fairly, in all material respects, the financial position of Campbell Soup
Company and its subsidiaries at August 3, 1997 and July 28, 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended August 3, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Thirty South Seventeenth Street, Philadelphia, Pennsylvania 19103
September 8, 1997
47
<PAGE> 20
ELEVEN-YEAR REVIEW - CONSOLIDATED
(millions, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year 1997(a) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations
Net sales $7,964 $7,678 $7,250 $6,664
Earnings before interest and taxes 1,266 1,317 1,147 1,027
Earnings before taxes 1,107 1,197 1,042 963
Earnings before cumulative effect of
accounting changes 713 802 698 630
Net earnings 713 802 698 630
Percent of sales 9.0% 10.4% 9.6% 9.4%
Return on average shareowners' equity 34.3% 30.8% 31.3% 34.1%
Cash margin (f) 22.8% 21.6% 20.1% 19.6%
Financial Position
Operating working capital (g) $ 357 $ 382 $ 456 $ 599
Plant assets - net 2,560 2,681 2,584 2,401
Total assets 6,459 6,632 6,315 4,992
Total debt 2,659 1,609 1,722 994
Shareowners' equity 1,420 2,742 2,468 1,989
Per Share Data
Earnings before cumulative effect of
accounting changes $ 1.51 $ 1.61 $ 1.40 $ 1.26
Net earnings 1.51 1.61 1.40 1.26
Dividends declared .75 .67 .61 .55
Shareowners' equity 3.01 5.51 4.96 3.97
Other Statistics
Salaries, wages, pensions, etc. $1,566 $1,592 $1,611 $1,460
Capital expenditures 331 416 391 421
Number of shareowners (in thousands) 49 43 43 43
Weighted average shares outstanding 472 498 498 501
================================================================================
</TABLE>
(a) 1997 includes pre-tax restructuring charge of $216 million; $160 million
after taxes or $.34 per share.
(b) 1993 includes pre-tax divestiture and restructuring charges of $353 million;
$300 million after taxes or $.60 per share. 1993 also includes the
cumulative effect of changes in accounting of $249 million or $.50 per
share.
(c) 1990 includes pre-tax divestiture and restructuring charges of $339 million;
$302 million after taxes or $.58 per share.
(d) 1989 includes pre-tax restructuring charges of $343 million; $261 million
after taxes or $.51 per share.
(e) 1988 includes pre-tax restructuring charges of $49 million; $29 million
after taxes or $.06 per share. 1988 also includes the cumulative effect of a
change in accounting for income taxes of $32 million or $.07 per share.
(f) Cash margin equals earnings before interest and taxes plus translation,
depreciation, amortization, minority interest expense and divestiture and
restructuring charges divided by net sales.
(g) Operating working capital equals current assets minus current liabilities
(excluding notes receivable, notes payable, dividend payable and divestiture
and restructuring reserves).
48
<PAGE> 21
<TABLE>
<CAPTION>
Fiscal Year 1993(b) 1992 1991 1990(c) 1989(d) 1988(e) 1987
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $6,577 $6,263 $6,204 $6,206 $5,672 $4,869 $4,490
Earnings before interest and taxes 594 886 758 273 162 409 440
Earnings before taxes 520 799 667 179 107 389 418
Earnings before cumulative effect of
accounting changes 257 491 402 4 13 242 247
Net earnings 8 491 402 4 13 274 247
Percent of sales .1% 7.8% 6.5% .1% .2% 5.6% 5.5%
Return on average shareowners' equity .4% 25.7% 23.0% .3% .7% 15.1% 15.1%
Cash margin (f) 18.7% 17.6% 15.6% 13.2% 12.8% 13.3% 13.2%
Financial Position
Operating working capital (g) $ 614 $ 586 $ 660 $ 819 $ 799 $ 660 $ 838
Plant assets - net 2,265 1,966 1,790 1,718 1,541 1,509 1,349
Total assets 4,898 4,354 4,149 4,116 3,932 3,610 3,097
Total debt 1,131 987 1,055 1,008 901 540 474
Shareowners' equity 1,704 2,028 1,793 1,692 1,778 1,895 1,736
Per Share Data
Earnings before cumulative effect of
accounting changes $ .51 $ .97 $ .79 $ .01 $ .03 $ .47 $ .48
Net earnings .02 .97 .79 .01 .03 .53 .48
Dividends declared .46 .36 .28 .25 .23 .20 .18
Shareowners' equity 3.38 4.02 3.53 3.27 3.43 3.66 3.34
Other Statistics
Salaries, wages, pensions, etc. $1,371 $1,400 $1,401 $1,423 $1,334 $1,223 $1,137
Capital expenditures 371 362 371 397 302 262 328
Number of shareowners (in thousands) 43 41 38 43 44 43 41
Weighted average shares outstanding 504 504 508 518 518 518 520
=======================================================================================================================
</TABLE>
49
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CAMPBELL
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY AND NAME JURISDICTION OF
UNDER WHICH IT DOES BUSINESS INCORPORATION
- ---------------------------- -------------
<S> <C>
Arnotts Limited Australia
Campbell Finance Corp. Delaware
Campbell Investment Company Delaware
Campbell Sales Company New Jersey
Campbell Soup Company Ltd--Les Soupes Campbell Ltee Canada
Campbell's Australasia Pty. Limited Australia
Campbell's de Mexico, S.A. de C. V. Mexico
Campbell's Fresh, Inc. Ohio
Campbell's U.K. Limited England
Erasco GmbH Germany
Fresh Start Bakeries, Inc. Delaware
Godiva Chocolatier, Inc. New Jersey
Joseph Campbell Company New Jersey
N.V. Biscuits Delacre S.A. Belgium
Campbell Foods Belgium N.V. Belgium
N.V. Godiva Belgium S.A. Belgium
Pepperidge Farm, Incorporated Connecticut
Sanwa Foods, Inc. California
Societe Francaise des Biscuits Delacre S.A. France
Swift-Armour Sociedad Anonima Argentina Argentina
Vlasic Foods, Inc. Michigan
</TABLE>
The foregoing does not constitute a complete list of all subsidiaries of the
registrant. The subsidiaries which have been omitted do not, in the aggregate,
(i) represent more than 10% of the assets of Campbell and its consolidated
subsidiaries, (ii) contribute more than 10% of the total sales and revenues of
Campbell and its consolidated subsidiaries or (iii) contribute more than 10% of
the income before taxes and extraordinary items of Campbell and its consolidated
subsidiaries. As of August 3, 1997, Campbell owned 70% of the outstanding shares
of Arnotts Limited.
I-3
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 333-11497 ) and Form S-8 (Nos. 333-22803, 33-59797,
33-39032, 33-14009, 33-56899 and 333-00729) of Campbell Soup Company of our
report dated September 8, 1997 appearing on page 47 of Campbell's 1997 Annual
Report to Shareowners which is incorporated by reference in this Annual Report
on Form 10-K.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
October 21, 1997
I-4
<PAGE> 1
EXHIBIT 24(a)
POWER OF ATTORNEY
FORM 10-K ANNUAL REPORT FOR FISCAL 1997
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW
CONSTITUTES AND APPOINTS JOHN M. COLEMAN AND JOHN J. FUREY, EACH OF THEM, UNTIL
DECEMBER 31, 1997, THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND REVOCATION, FOR THEM AND IN THEIR NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN CAMPBELL SOUP COMPANY'S FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR
ENDED AUGUST 3, 1997, AND ANY AMENDMENTS THERETO, AND TO FILE THE SAME WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS HE
OR SHE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT
SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
CAMPBELL SOUP COMPANY
<TABLE>
<CAPTION>
SIGNATURE DATED AS OF SEPTEMBER 25, 1997
--------- ------------------------------
<S> <C>
/S/ ALVA A. APP /S/ PHILIP E. LIPPINCOTT
- ------------------------ ------------------------------
ALVA A. APP PHILIP E. LIPPINCOTT
/S/ EDMUND M. CARPENTER /S/ MARY ALICE MALONE
- ------------------------ ------------------------------
EDMUND M. CARPENTER MARY ALICE MALONE
/S/ BENNETT DORRANCE /S/ DALE F. MORRISON
- ------------------------ ------------------------------
BENNETT DORRANCE DALE F. MORRISON
/S/ THOMAS W. FIELD, JR. /S/ CHARLES H. MOTT
- ------------------------ ------------------------------
THOMAS W. FIELD, JR. CHARLES H. MOTT
/S/ KENT B. FOSTER /S/ GEORGE M. SHERMAN
- ------------------------ ------------------------------
KENT B. FOSTER GEORGE M. SHERMAN
/S/ HARVEY GOLUB /S/ DONALD M. STEWART
- ------------------------ ------------------------------
HARVEY GOLUB DONALD M. STEWART
/S/ DAVID W. JOHNSON /S/ GEORGE STRAWBRIDGE, JR.
- ------------------------ ------------------------------
DAVID W. JOHNSON GEORGE STRAWBRIDGE
/S/ DAVID K. P. LI /S/ CHARLOTTE C. WEBER
- ------------------------ ------------------------------
DAVID K. P. LI CHARLOTTE C. WEBER
</TABLE>
I-5
<PAGE> 2
EXHIBIT 24(b)
CAMPBELL SOUP COMPANY
CERTIFICATION
I, THE UNDERSIGNED CORPORATE SECRETARY OF CAMPBELL SOUP COMPANY, A
NEW JERSEY CORPORATION, CERTIFY THAT THE ATTACHED DOCUMENT, ENTITLED
"FORM 10-K ANNUAL REPORT"
IS A TRUE COPY OF A RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF CAMPBELL
SOUP COMPANY ON SEPTEMBER 25, 1997, AT A MEETING THROUGHOUT WHICH A QUORUM WAS
PRESENT, AND THAT THE SAME IS STILL IN FULL FORCE AND EFFECT.
IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND AND AFFIXED THE SEAL
OF CAMPBELL SOUP COMPANY THIS 22ND DAY OF OCTOBER, 1997.
/S/ DIANE M. WEHR
-----------------------------------
ASSISTANT CORPORATE SECRETARY
I-6
<PAGE> 3
EXHIBIT 24(b)
(CONT'D)
CAMPBELL SOUP COMPANY
BOARD OF DIRECTORS RESOLUTION
SEPTEMBER 25, 1997
* * *
FORM 10-K ANNUAL REPORT
RESOLVED, THAT THE FORM 10-K ANNUAL REPORT FOR FISCAL 1997 OF CAMPBELL SOUP
COMPANY IN THE FORM PRESENTED TO THIS MEETING, IS HEREBY APPROVED.
FURTHER RESOLVED, THAT THE PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE SENIOR
VICE PRESIDENT - LAW AND PUBLIC AFFAIRS, THE EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER AND THE VICE PRESIDENT CONTROLLER OF CAMPBELL SOUP COMPANY ARE
AUTHORIZED TO EXECUTE THE FORM 10-K ANNUAL REPORT FOR FISCAL 1997 APPROVED BY
THIS RESOLUTION AND TO CAUSE SUCH FORM 10-K TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, WITH SUCH
MODIFICATIONS AS MAY BE REQUIRED BY THE COMMISSION OR AS MAY BE DESIRABLE IN THE
OPINION OF SUCH OFFICERS.
FURTHER RESOLVED, THAT EACH OF THE DIRECTORS, THE PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF CAMPBELL SOUP COMPANY ARE EACH HEREBY AUTHORIZED TO EXECUTE
IN THEIR RESPECTIVE CAPACITIES, A POWER OF ATTORNEY IN FAVOR OF JOHN M. COLEMAN
AND JOHN J. FUREY DESIGNATING EACH OF THEM AS THE TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS OF THE SIGNATORY WITH FULL POWER AND AUTHORITY TO
EXECUTE AND TO CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION THE
FORM 10-K ANNUAL REPORT FOR FISCAL 1997 WITH ALL EXHIBITS AND OTHER DOCUMENTS IN
CONNECTION THEREWITH AS SUCH ATTORNEYS-IN-FACT, OR EITHER ONE OF THEM, MAY DEEM
NECESSARY OR DESIRABLE; AND TO DO AND PERFORM EACH AND EVERY ACT AND THING
NECESSARY OR DESIRABLE TO BE DONE IN AND ABOUT THE PREMISES AS FULLY TO ALL
INTENTS AND PURPOSES AS SUCH OFFICERS AND DIRECTORS COULD DO THEMSELVES.
I-7
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-03-1997
<PERIOD-START> JUL-29-1996
<PERIOD-END> AUG-03-1997
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 655
<ALLOWANCES> 22
<INVENTORY> 762
<CURRENT-ASSETS> 1,583
<PP&E> 4,427
<DEPRECIATION> 1,867
<TOTAL-ASSETS> 6,459
<CURRENT-LIABILITIES> 2,981
<BONDS> 1,153
0
0
<COMMON> 20
<OTHER-SE> 1,400
<TOTAL-LIABILITY-AND-EQUITY> 6,459
<SALES> 7,964
<TOTAL-REVENUES> 7,964
<CGS> 4,305
<TOTAL-COSTS> 4,305
<OTHER-EXPENSES> 1,713
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 1,107
<INCOME-TAX> 394
<INCOME-CONTINUING> 713
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 713
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
</TABLE>
