<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
FEBRUARY 1, 1998 1-3822
[Campbell Soup Company Logo]
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
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 .
THERE WERE 454,133,575 SHARES OF CAPITAL STOCK OUTSTANDING
AS OF FEBRUARY 9, 1998.
-1-
<PAGE> 2
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF EARNINGS
(unaudited)
(millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
FEBRUARY January FEBRUARY January
1, 1998 26, 1997 1, 1998 26, 1997
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,342 $ 2,317 $ 4,462 $ 4,369
- --------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 1,177 1,227 2,281 2,339
Marketing and selling expenses 518 486 944 882
Administrative expenses 93 93 188 176
Research and development expenses 18 19 38 37
Other expense 18 29 42 67
Restructuring charge - - - 216
- -------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,824 1,854 3,493 3,717
- -------------------------------------------------------------------------------------------------------------------
Earnings before interest and taxes 518 463 969 652
Interest, net 44 45 87 74
- -------------------------------------------------------------------------------------------------------------------
Earnings before taxes 474 418 882 578
Taxes on earnings 163 142 304 214
- -------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change
in accounting principle 311 276 578 364
Cumulative effect of change in accounting principle 11 - 11 -
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ 300 $ 276 $ 567 $ 364
===================================================================================================================
Per share - basic
Earnings before cumulative effect of change
in accounting principle $ .68 $ .59 $ 1.26 $ .76
Cumulative effect of change in accounting principle .02 - .02 -
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ .66 $ .59 $ 1.24 $ .76
===================================================================================================================
Dividends $ .210 $ .193 $ .403 $ .365
===================================================================================================================
Weighted average shares outstanding - basic 457 467 457 482
===================================================================================================================
Per share - assuming dilution
Earnings before cumulative effect of change
in accounting principle $ .67 $ .58 $ 1.25 $ .75
Cumulative effect of change in accounting principle .02 - .02 -
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ .65 $ .58 $ 1.23 $ .75
===================================================================================================================
Weighted average shares outstanding - assuming dilution 462 473 463 487
===================================================================================================================
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 3
CAMPBELL SOUP COMPANY CONSOLIDATED
BALANCE SHEETS
(millions)
<TABLE>
<CAPTION>
FEBRUARY August
1, 1998 3, 1997
--------- ---------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 99 $ 26
Accounts receivable 910 633
Inventories 722 762
Other current assets 174 162
- --------------------------------------------------------------------------------
Total current assets 1,905 1,583
- --------------------------------------------------------------------------------
Plant assets, net of depreciation 2,449 2,560
Intangible assets, net of amortization 2,124 1,793
Other assets 529 523
- --------------------------------------------------------------------------------
Total assets $ 7,007 $ 6,459
================================================================================
Current liabilities
Notes payable $ 2,112 $ 1,506
Payable to suppliers and others 522 608
Accrued liabilities 607 642
Dividend payable -- 88
Accrued income taxes 197 137
- --------------------------------------------------------------------------------
Total current liabilities 3,438 2,981
- --------------------------------------------------------------------------------
Long-term debt 1,263 1,153
Nonpension postretirement benefits 441 442
Other liabilities, including deferred
income taxes of $254 and $251 381 463
- --------------------------------------------------------------------------------
Total liabilities 5,523 5,039
- --------------------------------------------------------------------------------
Shareowners' equity
Preferred stock; authorized 40 shares;
none issued -- --
Capital stock, $.0375 par value; authorized
560 shares; issued 542 shares 20 20
Capital surplus 370 338
Earnings retained in the business 3,955 3,571
Capital stock in treasury, at cost (2,749) (2,459)
Cumulative translation adjustments (112) (50)
- --------------------------------------------------------------------------------
Total shareowners' equity 1,484 1,420
- --------------------------------------------------------------------------------
Total liabilities and shareowners' equity $ 7,007 $ 6,459
================================================================================
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 4
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(millions)
<TABLE>
<CAPTION>
Six Months Ended
----------------
FEBRUARY January
1, 1998 26, 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 567 $ 364
Non-cash charges to net earnings
Cumulative effect of accounting change 11 --
Restructuring charge -- 216
Depreciation and amortization 156 160
Deferred taxes 8 (64)
Other, net 21 65
Changes in working capital
Accounts receivable (273) (289)
Inventories 39 74
Other current assets and liabilities (61) 51
- ---------------------------------------------------------------------------------------------
Net cash provided by operating activities 468 577
- ---------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of plant assets (113) (133)
Sales of plant assets 14 21
Businesses acquired (478) (238)
Sales of businesses 21 73
Other, net (5) (19)
- ---------------------------------------------------------------------------------------------
Net cash used in investing activities (561) (296)
- ---------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term borrowings 370 300
Repayments of long-term borrowings (16) (4)
Short-term borrowings 1,066 1,019
Repayments of short-term borrowings (716) (196)
Dividends paid (272) (175)
Treasury stock purchased (304) (1,235)
Treasury stock issued 49 20
- ---------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities 177 (271)
- ---------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (11) (13)
- ---------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 73 (3)
Cash and cash equivalents - beginning of period 26 34
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 99 $ 31
=============================================================================================
</TABLE>
See Notes to Financial Statements
-4-
<PAGE> 5
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF SHAREOWNERS' EQUITY
(unaudited)
(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 28, 1996 542 $20 (48) $(779) $228 $3,211 $62 $2,742
Net earnings 364 364
Dividends ($.365 per share) (175) (175)
Treasury stock purchased (31) (1,235) (1,235)
Treasury stock issued under
Management incentive and
Stock option plans 1 (7) 39 32
Translation adjustments (40) (40)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at January 26, 1997 542 $20 (78) $(2,021) $267 $3,400 $22 $1,688
===================================================================================================================================
BALANCE AT AUGUST 3, 1997 542 $20 (84) $(2,459) $338 $3,571 $(50) $1,420
NET EARNINGS 567 567
DIVIDENDS ($.403 PER SHARE) (183) (183)
TREASURY STOCK PURCHASED (6) (304) (304)
TREASURY STOCK ISSUED UNDER
MANAGEMENT INCENTIVE AND
STOCK OPTION PLANS 2 14 32 46
TRANSLATION ADJUSTMENTS (62) (62)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 1, 1998 542 $20 (88) $(2,749) $370 $3,955 $(112) $1,484
===================================================================================================================================
</TABLE>
See Notes to Financial Statements
-5-
<PAGE> 6
CAMPBELL SOUP COMPANY CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(millions)
(a) The financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results
for the indicated periods. All such adjustments are of a normal
recurring nature.
(b) Cumulative Effect of Change In Accounting Principle
In the second quarter of fiscal 1998, the company adopted the
provisions of the Emerging Issues Task Force (EITF) consensus ruling on
Issue 97-13, "Accounting for Costs Incurred in Connection with a
Consulting Contract that Combines Business Process Reengineering and
Information Technology Transformation." The EITF, a sub-committee of
the Financial Accounting Standards Board, reached a consensus that
costs of business process reengineering activities that are part of a
systems development project are to be expensed as incurred.
Furthermore, the consensus ruling stipulates that the unamortized
balance of such previously capitalized business process reengineering
costs are to be written off as a cumulative effect of accounting change
as of the beginning of the quarter which includes November 20, 1997.
The company previously capitalized certain consulting costs related to
the purchase and implementation of software for internal use. The
cumulative effect of this change in accounting principle is $11 million
or $.02 per share, net of an income tax benefit of approximately $7
million.
(c) Earnings Per Share
The company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("FAS 128") as of the second
quarter fiscal 1998. FAS 128 revised the standards for computation and
presentation of earnings per share ("EPS"), requiring the presentation
of both basic EPS and EPS assuming dilution. Basic EPS is based on the
weighted average shares outstanding during the applicable period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock. Prior periods have been restated to
conform with the provisions of FAS 128.
For the periods presented in the Statements of Earnings, the
calculations of basic EPS and EPS assuming dilution vary in that the
weighted average shares outstanding assuming dilution includes the
incremental effect of stock options.
-6-
<PAGE> 7
(d) Acquisitions
In December 1997, the company acquired the Liebig soup business in
France for approximately $180 million. Aggregate annual sales are
approximately $75 million. Also in December, Arnotts Limited purchased
the remaining outstanding ordinary shares held by its minority
shareholders for an aggregate purchase price of approximately $290
million. Prior to the transaction, the company owned approximately 70%
of Arnotts Limited. The acquisitions have been recorded using the
purchase method of accounting, and accordingly, results of their
operations have been included in the company's consolidated financial
statements since the effective dates of the respective acquisitions.
The aggregate excess of the purchase price over the fair value of the
net identifiable assets of $360 million has been recorded as goodwill
and will be amortized over 40 years. The allocations of the purchase
price of the acquisitions is preliminary and may be modified as
additional financial information is available.
(e) Segment Information
The company operates in four business segments: Soup and Sauces,
Biscuits and Confectionery, Foodservice, and Specialty Foods. The
segments are managed as strategic units due to their distinct
manufacturing processes, marketing strategies and distribution
channels. The Soup and Sauces segment includes the worldwide soup
businesses, Prego spaghetti sauces, Pace Mexican sauces,
Franco-American pasta, Swanson broths, and V8 beverages. The Biscuits
and Confectionery segment includes the Godiva Chocolatier, Pepperidge
Farm, Arnotts Limited and Delacre businesses. Foodservice represents
the distribution of products, including Campbell's Soups and Campbell's
Specialty Kitchen entrees to the food service and meal replacement
markets. The Specialty Foods segment is comprised of Swanson frozen
foods, Vlasic pickles and certain European and Argentine specialty
foods businesses. On September 9, 1997, the company announced its
intention to spin off the Specialty Foods segment.
Accounting policies for measuring segment assets and earnings before
interest and taxes are substantially consistent with those described in
the summary of significant accounting policies included in the fiscal
1997 Annual Report. The company evaluates segment performance based on
earnings before interest and taxes, excluding certain non-recurring
charges. Foodservice products are principally produced by the tangible
assets of the company's other segments. Accordingly, tangible assets
have not been allocated to the Foodservice segment. Depreciation and
amortization is allocated to Foodservice based on budgeted production
hours. Transfers between segments are recorded at cost plus mark-up or
at market.
-7-
<PAGE> 8
FEBRUARY 1, 1998
<TABLE>
<CAPTION>
Corporate
Soup and Biscuits and Food- Specialty and
Sauces Confectionery service Foods Other(1) Eliminations(2) Total
-------- ------------- ------- ----- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
Net sales $1,386 428 119 344 98 (33) $2,342
Earnings before Interest
and Taxes $ 396 76 16 34 4 (8) $ 518
Depreciation and
Amortization $ 30 22 2 12 5 5 $ 76
Capital Expenditures $ 25 14 -- 12 3 4 $ 58
SIX MONTHS ENDED
Net sales $2,601 837 225 665 201 (67) $4,462
Earnings before Interest
and Taxes $ 766 135 31 60 6 (29) $ 969
Depreciation and
Amortization $ 66 44 4 23 9 10 $ 156
Capital Expenditures $ 45 30 -- 23 8 7 $ 113
Segment Assets $3,294 1,725 100 930 382 576 $7,007
</TABLE>
- ----------
(1)Represents financial information of certain prepared convenience food
businesses not categorized as reportable segments.
(2)Represents elimination of intersegment sales, unallocated corporate expenses
and unallocated assets, including corporate offices, deferred taxes and pension
accounts.
-8-
<PAGE> 9
JANUARY 26, 1997
<TABLE>
<CAPTION>
Corporate
Soup and Biscuits and Food- Specialty and
Sauces Confectionery service Foods Other(1) Eliminations(2) Total
-------- -------------- ------- --------- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
Net sales $1,301 425 118 353 143 (23) $2,317
Earnings before Interest
and Taxes $ 359 69 18 32 2 (17) $ 463
Depreciation and
Amortization $ 33 23 2 10 8 5 $ 81
Capital Expenditures $ 16 20 -- 19 4 5 $ 64
SIX MONTHS ENDED
Net sales $2,407 826 223 684 279 (50) $4,369
Earnings before Interest
and Taxes(3) $ 557 68 32 46 (12) (39) $ 652
Depreciation and
Amortization $ 65 45 4 20 16 10 $ 160
Capital Expenditures $ 33 45 -- 35 7 13 $ 133
Segment Assets(4) $2,966 1,523 78 888 439 565 $6,459
</TABLE>
- ----------
(1)Represents financial information of certain prepared convenience food
businesses not categorized as reportable segments.
(2)Represents elimination of intersegment sales, unallocated corporate expenses
and unallocated assets, including corporate offices, deferred taxes and pension
accounts.
(3)Contributions to earnings before interest and taxes by segment include the
effects of a first quarter fiscal 1997 restructuring charge of $216 as follows:
Soup and Sauces - $134, Biscuits and Confectionery - $53, Specialty Foods - $13
and Other - $16.
(4)Segment assets reported as of the fiscal year ended August 3, 1997.
-9-
<PAGE> 10
(f) Inventories
<TABLE>
<CAPTION>
FEBRUARY August
1, 1998 3, 1997
------- -------
<S> <C> <C>
Raw materials, containers and supplies $273 $300
Finished products 455 471
- --------------------------------------------------------------------------------
728 771
Less - Adjustment of certain inventories
To LIFO basis 6 9
- --------------------------------------------------------------------------------
$722 $762
================================================================================
</TABLE>
(g) Notes Payable and Long-Term Debt
In December 1997, the company partially financed the purchase of the
remaining outstanding minority shares in Arnotts Limited with a
one-year $260 million bank borrowing bearing interest at 5.1%.
In December 1997, the company issued $300 million of notes due December
1, 2002 bearing interest at 6.15%. The issuance was the second draw
down on the company's $1 billion Shelf Registration filed with the
Securities and Exchange Commission in fiscal 1997. Four hundred million
dollars remain available for issuance under the Shelf Registration.
Also in December 1997, a wholly owned subsidiary of the company entered
into a three-year borrowing arrangement with an investor group for
approximately $100 million. Principal payments are made monthly under
the terms of the arrangement.
(h) Subsequent Events
On February 18, 1998, the company announced that it received a
favorable ruling from the Internal Revenue Service that the previously
announced plan to spin off the Specialty Foods segment qualifies as a
tax-free transaction to U.S. shareowners. Subject to approval of the
company's Board of Directors and various regulatory agencies, the
spinoff is expected to be completed in the third quarter of fiscal
1998. The new company, which includes Swanson frozen foods, Vlasic
pickles, and certain European and Argentine specialty foods businesses,
will be named Vlasic Foods International Inc.
-10-
<PAGE> 11
In February 1998, the company entered into a revolving credit facility
which provides for aggregate funding of $750 million. The company
expects to draw down $500 million under the terms of the facility in
March 1998. In connection with the spinoff of the Specialty Foods
segment, the revolving credit facility and the outstanding debt
obligation will be assigned to the new company, Vlasic Foods
International Inc.
In February 1998, the company reached an agreement in principle to sell
the assets of its can-making operations at four of its North American
thermal manufacturing plants for approximately $125 million and enter
into a long-term supply agreement with the buyer. The transaction is
expected to be completed in fiscal 1998.
On February 18, 1998, the company announced that it expects to record a
special charge in the third quarter of fiscal 1998 to cover the costs
associated with its strategic growth plan. The special charge is
expected to include one-time costs related to the spinoff of Vlasic
Foods International Inc. and other cost and productivity initiatives
that are currently under review.
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
CAMPBELL SOUP COMPANY
RESULTS OF OPERATIONS
OVERVIEW
Campbell achieved record sales and earnings for the second quarter ended
February 1, 1998. Comparability in net earnings and earnings per share with the
second quarter last year were impacted by the adoption of a one-time accounting
change. On November 20, 1997, the Emerging Issues Task Force (EITF) released
Issue 97-13, "Accounting for Costs Incurred in Connection with a Consulting
Contract that Combines Business Process Reengineering and Information Technology
Transformation." The impact of this required accounting change was $11 million
after-tax or $.02 per share. In addition, the company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share", which requires the
computation and presentation of basic and diluted earnings per share. Excluding
the accounting change, net earnings increased 12% and basic and diluted earnings
per share increased 15% and 16%, respectively, versus last year.
Also in the quarter, the following transactions were completed:
- The company acquired the Liebig soup business in France from
Danone S.A. for approximately $180 million;
- Arnotts Limited repurchased the outstanding ordinary shares
held by minority shareholders for approximately $290 million.
As a result of the repurchase, Campbell's ownership of Arnotts
increased to 100%; and
- The company issued $300 million 6.15% notes due December 1,
2002.
Comparability of net earnings and earnings per share for the six months ended
February 1, 1998 were impacted by the cumulative effect of adopting EITF 97-13
in the second quarter of fiscal 1998 and the first quarter fiscal 1997 special
charge of $216 million ($160 million after-tax or $.32 per share) to cover the
costs of a restructuring program. Excluding these charges, net earnings
increased 10% and basic and diluted earnings per share increased 16% versus the
prior year.
-12-
<PAGE> 13
SECOND QUARTER
SALES
Sales in the quarter increased 1% to $2.34 billion from $2.32 billion last year.
The growth was due to a 2% increase from volume and product mix, 2% from higher
selling prices, 1% from acquisitions, offset by a 4% decline due to currency and
divestitures.
An analysis of net sales by segment follows:
<TABLE>
<CAPTION>
(millions) 1998 1997 % CHANGE
- ---------- -------- -------- --------
<S> <C> <C> <C>
Soup and Sauces $ 1,386 $ 1,301 7%
Biscuits and Confectionery 428 425 1
Foodservice 119 118 1
- ----------------------------------------------------------------------------
Subtotal 1,933 1,844 5
Specialty Foods 344 353 (3)
Other 98 143 (31)
Interdivision (33) (23) --
- ----------------------------------------------------------------------------
$ 2,342 $ 2,317 1%
============================================================================
</TABLE>
Soup and Sauces sales were up significantly due to worldwide wet soup volume
growth of 7%. Strong volume gains were achieved in Canada, Germany and Japan.
France, due to the acquisition of Liebig, also contributed to the volume gains.
U.S. soup unit volume increase was led by Campbell's ready-to-serve soups,
including Home Cookin', Joseph A. Campbell premium soups in glass jars and
Chunky soups. In beverages, V8 Splash continues to deliver outstanding results.
Biscuits and Confectionery posted a moderate increase in sales compared to
second quarter fiscal 1997. This performance was adversely impacted by currency
movement, particularly the weakness of the Australian dollar against the U.S.
dollar. Excluding the impact of currency, sales increased 8%. The increase was
led by Pepperidge Farm Goldfish crackers, Milano and Chocolate Chunk cookies and
Swirl breads. Godiva Chocolatier, boosted by excellent holiday season and
Valentine's Day sales, delivered double-digit sales growth.
-13-
<PAGE> 14
The increase in Foodservice sales was principally driven by wet soup volume
gains offset by volume declines in the club store channel.
Specialty Foods reported increases in sales of Swanson frozen foods which were
more than offset by declines in Vlasic pickle sales and competitive difficulties
in the German specialty foods distribution business.
GROSS MARGIN
Gross margin, defined as net sales less cost of products sold, increased $75
million in the quarter. As a percent of sales, gross margin was 49.7% compared
to 47.1% last year. The improvement was primarily due to continued productivity
gains in manufacturing facilities.
MARKETING AND SELLING EXPENSES
Marketing and selling expenses as a percent of sales increased to 22% from 21%
last year. The increase is attributable to a 7% increase in worldwide
advertising spending including double-digit increases in U.S. wet soup, Pace
Mexican Sauces, Erasco and Arnotts Limited.
ADMINISTRATIVE EXPENSES
Administrative expenses as a percent of sales remained flat with the prior year
at 4%.
Research and development expenses as a percent of sales were consistent with
last year at 1%.
Other expenses declined as compared to last year due primarily to reduced
minority interest expense and lower expenses associated with the company's
long-term incentive plan obligations.
OPERATING EARNINGS
Segment operating earnings increased 10% for the second quarter versus the prior
year. Excluding the impact of currency, operating earnings in core segments
increased 10% compared to last year.
An analysis of operating earnings by segment follows:
-14-
<PAGE> 15
<TABLE>
<CAPTION>
(millions) 1998 1997 % CHANGE
-------------------------- ----- ----- --------
<S> <C> <C> <C>
Soup and Sauces $ 396 $ 359 10%
Biscuits and Confectionery 76 69 10
Foodservice 16 18 (11)
- ----------------------------------------------------------------------------
Subtotal 488 446 9
Specialty Foods 34 32 6
Other 4 2 100
- ----------------------------------------------------------------------------
$ 526 $ 480 10
Corporate (8) (17)
- ----------------------------------------------------------------------------
$ 518 $ 463
============================================================================
</TABLE>
Soup and Sauces earnings increased due to sales and volume growth in Campbell's
ready-to-serve soups including Home Cookin', Joseph A. Campbell and Chunky
soups. In addition, strong earnings were delivered by our core business in
Mexico and newly acquired business in France. In addition, V8 Splash and
Franco-American pastas posted strong earnings results.
Biscuits and Confectionery earnings increase was primarily led by Godiva
Chocolatier's outstanding holiday season and Valentine's Day sales growth and
cost productivity gains in the Delacre biscuit business in Europe.
Foodservice earnings decline was attributable to volume declines in non-soup
products.
Specialty Foods earnings increase was due to increased sales of Swanson frozen
foods and manufacturing productivity gains in the U.S. plants offset by cattle
supply issues in Argentina.
NON-OPERATING ITEMS
Interest expense was flat versus prior year.
The effective tax rate was 34.5% compared to 33.9% in fiscal 1997.
SIX MONTHS
-15-
<PAGE> 16
SALES
Sales for the six months increased 2% to $4.46 billion from $4.37 billion last
year. The growth was due to a 3% increase in volume and product mix, 2% from
higher selling prices, 1% from acquisitions offset by a 4% decline due to
currency and divestitures.
An analysis of net sales by segment follows:
<TABLE>
<CAPTION>
(millions) 1998 1997 % CHANGE
---------------- ------- ------- --------
<S> <C> <C> <C>
Soup and Sauces $ 2,601 $ 2,407 8%
Biscuits and Confectionery 837 826 1
Foodservice 225 223 1
----------------------------------------------------------------------------
Subtotal 3,663 3,456 6
Specialty Foods 665 684 (3)
Other 201 279 (28)
Interdivision (67) (50) --
----------------------------------------------------------------------------
$ 4,462 $ 4,369 2%
============================================================================
</TABLE>
Soup and Sauces sales were led by worldwide wet soup volume growth of 7%. Volume
gains were achieved in Canada, Germany, Mexico, Japan and France. U.S. soup
volume gains were led by Campbell's ready-to-serve soups including Home Cookin',
Joseph A. Campbell and Chunky soups. In addition, Swanson broths and V8 Splash
continued their momentum.
Biscuits and Confectionery reported a moderate sales increase compared to the
prior year. The performance was adversely impacted by currency movement,
particularly the weakness of the Australian dollar against the U.S. dollar.
Excluding the impact of currency, sales increased 7% year-to-date. The increase
was driven by Pepperidge Farm Goldfish crackers, Milano cookies and Swirl
breads. In addition, Godiva reported double-digit growth due to their excellent
holiday season and Valentine's Day sales.
Foodservice sales were relatively flat due to the volume increases in wet soup
offset by declines in the club store channel.
-16-
<PAGE> 17
Specialty Foods reported increases in Swanson frozen foods' sales which were
more than offset by declines in Vlasic pickle sales and competitive difficulties
in the German specialty foods distribution business.
GROSS MARGIN
Gross margin increased $151 million year-to-date. As a percent of sales, gross
margin was 48.9% compared to 46.5% last year. The improvement was primarily due
to continued productivity gains in manufacturing facilities.
MARKETING AND SELLING EXPENSES
Marketing and selling expenses as a percent of sales increased to 21% from 20%
last year. The increase is attributable to a 12% increase in worldwide
advertising spending including double-digit increases in U.S. wet soup, Prego
spaghetti sauces, V8 beverages, Pepperidge Farm Goldfish crackers and Milano
cookies and Erasco.
ADMINISTRATIVE EXPENSES
Administrative expenses as a percent of sales remained flat with the prior year
at 4%.
Research and development expenses as a percent of sales were consistent with the
prior year at 1%.
Other expenses declined compared to last year primarily due to reduced minority
interest expense and lower expenses associated with the company's long-term
incentive plans.
OPERATING EARNINGS
The increase in segment operating earnings from the prior year is due in part to
the first quarter fiscal 1997 special charge of $216 million. Excluding the
special charge, operating earnings increased 10% versus the prior year.
An analysis of operating earnings by segment follows:
-17-
<PAGE> 18
<TABLE>
<CAPTION>
(millions) 1998 1997
-------------- ----- -----
<S> <C> <C>
Soup and Sauces $ 766 $ 557
Biscuits and Confectionery 135 68
Foodservice 31 32
- -----------------------------------------------------------------
Subtotal 932 657
Specialty Foods 60 46
Other 6 (12)
- -----------------------------------------------------------------
998 691
Corporate (29) (39)
- -----------------------------------------------------------------
$ 969 $ 652
=================================================================
</TABLE>
Contributions to earnings by segment included the effect of a first quarter
fiscal 1997 restructuring charge as follows: Soup and Sauces $134 million,
Biscuits and Confectionery $53 million, Specialty Foods $13 million and Other
$16 million.
Soup and Sauces earnings, excluding the special charge, were up 11% due to sales
growth in Campbell's ready-to-serve soups including Home Cookin', Joseph A.
Campbell and Chunky soups. In addition, Swanson broths and our core businesses
in the United Kingdom, Germany and Mexico reported strong earnings.
Franco-American pastas and gravies also delivered strong financial performance.
Biscuits and Confectionery earnings, excluding the special charge, increased 12%
led by excellent earnings growth at Pepperidge Farm and Godiva. Pepperidge
Farm's Swirl and frozen breads delivered strong earnings performance and Godiva
posted record earnings as a result of outstanding holiday season and Valentine's
Day sales volume growth.
Foodservice earnings, excluding the special charge, were down 4% due to lower
sales of non-soup products.
Specialty Foods earnings, excluding the special charge, were up 2% due to
increased sales of Swanson frozen foods and manufacturing efficiencies in the
U.S. plants offset by cattle supply issues in Argentina and the competitive
difficulties in the German specialty foods distribution business.
-18-
<PAGE> 19
NON-OPERATING ITEMS
Comparability in interest expense is primarily impacted by the financing costs
associated with the company's $2.5 billion share repurchase program that
commenced in October 1996 with the "Dutch Auction" tender offer.
The effective tax rate was 34.5% compared to 37% last year. Excluding the
special charge, the effective tax rate was 34% for the six months ended January
26, 1997.
SPECIAL CHARGE
A special charge of $216 million ($160 million after-tax or $.32 per share) was
recorded in the first quarter of fiscal 1997 to cover the costs of a
restructuring program. The restructuring program was designed to improve
operational efficiency by reconfiguring or closing various plants, reducing
administrative and operational staff functions and divesting non-strategic,
under-performing businesses. The program was substantially completed in the
first quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The company generated cash from operations of $468 million compared to $577
million last year. This decrease is principally due to changes in working
capital, including spending on the restructuring program and a reduction in
accrued liabilities due to timing of trade marketing and consumer promotions
versus the prior year.
Capital expenditures were $113 million, a decline from $133 million last year.
The company continues to aggressively manage its capital outlays and expects
total expenditures to approximate $375 million in fiscal 1998.
During the year, the company acquired the Liebig soup business in France for
approximately $180 million and the outstanding ordinary shares held by Arnotts
Limited's minority shareholders for approximately $290 million.
In the first six months, the company repurchased approximately 5.7 million
shares versus 30.9 million shares last year.
In December 1997, the company issued $300 million 6.15% notes due December 1,
2002. This issuance was the second draw down on the company's $1 billion shelf
registration. Four hundred million dollars remain available under the Shelf
Registration. In addition, the company entered into a three-year debt borrowing
arrangement for approximately $100 million. Principal payments are remitted
monthly in accordance with the terms of the arrangement.
-19-
<PAGE> 20
In February 1998, the company entered into a revolving credit facility which
provides for aggregate funding of $750 million. The company expects to draw down
$500 million under the terms of the facility in March 1998. In connection with
the spinoff of the Specialty Foods segment, as discussed in Footnote (h) to the
consolidated financial statements, the revolving credit facility and the
outstanding debt obligation will be assigned to the new company, Vlasic Foods
International Inc. The company intends to use the net proceeds to repay
short-term debt.
OTHER MATTERS
Historically, certain computer programs were written using two digits rather
than four to define the applicable year. Accordingly, the company's software may
recognize a date using "00" as 1900 rather than the year 2000, which could
result in major systems failures or miscalculations, commonly referred to as the
Year 2000 issue.
The company has performed an assessment of major information technology systems
and expects that all necessary modifications and/or replacements will be
completed in a timely manner to ensure that systems are Year 2000 compliant.
Based on current estimates, the costs of addressing this issue are not expected
to have a material adverse effect on the company's financial position, results
of operations or cash flows. The potential impact of the Year 2000 issue on
significant customers, vendors and suppliers cannot be reasonably estimated at
this time.
RECENT DEVELOPMENTS
On February 18, 1998, the company announced that it received a favorable ruling
from the Internal Revenue Service that the previously announced plan to spin off
the Specialty Foods segment qualifies as a tax-free transaction to U.S.
shareowners. Subject to approvals of the company's Board of Directors and
various regulatory agencies, the spinoff is expected to be completed in the
third quarter of fiscal 1998. The new company, which includes Swanson frozen
foods, Vlasic pickles, and certain European and Argentine specialty foods
businesses, will be named Vlasic Foods International Inc.
In February 1998, the company reached an agreement in principle to sell the
assets of its can-making operations at four of its North American thermal
manufacturing plants for approximately $125 million and enter into a long-term
supply agreement with the buyer. The transaction is expected to be completed in
fiscal 1998.
On February 18, 1998, the company announced that it expects to record a special
charge in the third quarter of fiscal 1998 to cover the costs associated with
its strategic growth plan. The special charge is expected to include one-time
costs related to the spinoff of Vlasic Foods International Inc. and other cost
and productivity initiatives that are currently under review.
-20-
<PAGE> 21
In June 1997, the FASB issued Statement of Financial Accounting Standards
No.130, "Reporting Comprehensive Income." This statement establishes standards
for the reporting and display of comprehensive income. The provisions of the
statement are effective for fiscal years beginning after December 15, 1997.
FORWARD LOOKING INFORMATION
From time to time, in written reports, including the fiscal 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
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 the Management's Discussion and
Analysis:
- The completion of the company's divestiture program in fiscal
1998 depends on our ability to find buyers to purchase these
businesses at prices we consider appropriate.
- The agreement in principle to sell the can-making assets is
contingent upon negotiation and completion of definitive
agreements.
- The recording of a special charge in the third quarter of
fiscal 1998 is subject to approval by the company's Board
of Directors.
-21-
<PAGE> 22
PART II
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in the legal proceedings as reported in
Campbell's Form 10-Q for the quarter ended November 2, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. Campbell's Annual Meeting of Shareowners was held on November
20, 1997.
c. The matters voted upon and the results of the vote are as
follows:
Election of Directors
<TABLE>
<CAPTION>
Number of Shares
----------------
Name For Withheld
<S> <C> <C>
Alva A. App 412,414,173 1,065,716
Edmund M. Carpenter 412,456,950 1,022,939
Bennett Dorrance 412,447,459 1,032,430
Thomas W. Field, Jr. 412,455,731 1,024,158
Kent B. Foster 412,379,052 1,100,837
Harvey Golub 412,427,620 1,052,269
David W. Johnson 412,406,340 1,073,549
David K. P. Li 412,421,894 1,057,995
Philip E. Lippincott 412,418,854 1,061,035
Mary Alice Malone 412,427,168 1,052,721
Dale F. Morrison 412,453,660 1,026,229
Charles H. Mott 412,438,855 1,041,034
George M. Sherman 412,445,066 1,034,823
Donald M. Stewart 409,735,732 3,744,157
George Strawbridge, Jr. 412,435,942 1,043,947
Charlotte C. Weber 412,425,852 1,054,037
</TABLE>
-22-
<PAGE> 23
Ratification of Appointment of Accountants
<TABLE>
<CAPTION>
Broker
For Against Abstentions Non-Votes
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Ratification of Appointment
of Accountants 411,899,171 346,954 1,233,764 -0-
</TABLE>
Shareowner Proposal Concerning Proxy Format
<TABLE>
<CAPTION>
Broker
For Against Abstentions Non-Votes
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Shareowner Proposal Concerning
Proxy Format 22,707,464 356,449,245 11,392,994 22,930,186
</TABLE>
ITEM 5. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements which are based
on management's current views and assumptions regarding future events
and financial performance. These statements are qualified by reference
to the section "Cautionary Statement on Forward-Looking Statements" in
Item 1 of the registrant's Annual Report on Form 10-K for the fiscal
year ended August 3, 1997. See Item 1 for a description of important
factors that could impact the company's strategic growth plan goals and
cause actual results to differ materially from those expressed or
implied in the forward-looking statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
No.
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 Securities and Exchange Commission.
27 Financial Data Schedule.
-23-
<PAGE> 24
b. Reports on Form 8-K
There were no reports on Form 8-K filed by Campbell during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMPBELL SOUP COMPANY
Date: February 25, 1998 By: /s/ BASIL ANDERSON
-------------------------------
Basil Anderson
Executive Vice President and
Chief Financial Officer
-24-
<PAGE> 25
INDEX TO EXHIBITS
Exhibit Number
27 Financial Data Schedule.
-25-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-02-1998
<PERIOD-START> AUG-04-1997
<PERIOD-END> FEB-01-1998
<CASH> 99
<SECURITIES> 0
<RECEIVABLES> 970
<ALLOWANCES> 60
<INVENTORY> 722
<CURRENT-ASSETS> 1,905
<PP&E> 4,411
<DEPRECIATION> 1,962
<TOTAL-ASSETS> 7,007
<CURRENT-LIABILITIES> 3,438
<BONDS> 1,263
0
0
<COMMON> 20
<OTHER-SE> 1,464
<TOTAL-LIABILITY-AND-EQUITY> 7,007
<SALES> 4,462
<TOTAL-REVENUES> 4,462
<CGS> 2,281
<TOTAL-COSTS> 2,281
<OTHER-EXPENSES> 986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 882
<INCOME-TAX> 304
<INCOME-CONTINUING> 578
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 11
<NET-INCOME> 567
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.23
</TABLE>
