<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
OCTOBER 31, 1999 1-3822
[CAMPBELL SOUP 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: (856) 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 426,424,376 SHARES OF CAPITAL STOCK OUTSTANDING AS OF
DECEMBER 1, 1999.
- --------------------------------------------------------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
-----------------------------
CAMPBELL SOUP COMPANY CONSOLIDATED
----------------------------------
STATEMENTS OF EARNINGS
----------------------
(unaudited)
(millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
OCTOBER November
31, 1999 1, 1998
-------- -------
<S> <C> <C>
Net sales $1,768 $1,804
------ ------
Costs and expenses
Cost of products sold 809 830
Marketing and selling expenses 428 420
Administrative expenses 83 78
Research and development expenses 16 16
Other expenses 21 13
------ ------
Total costs and expenses 1,357 1,357
------ ------
Earnings before interest and taxes 411 447
Interest, net 46 44
------ ------
Earnings before taxes 365 403
Taxes on earnings 130 139
------ ------
Net earnings $ 235 $ 264
====== ======
Per share - basic
Net earnings $ .55 $ .59
====== ======
Dividends $ .225 $ .210
====== ======
Weighted average shares outstanding - basic 429 448
====== ======
Per share - assuming dilution
Net earnings $ .54 $ .58
====== ======
Weighted average shares outstanding - assuming dilution 433 454
====== ======
See Notes to Financial Statements
</TABLE>
<PAGE> 3
CAMPBELL SOUP COMPANY CONSOLIDATED
----------------------------------
BALANCE SHEETS
--------------
(unaudited)
(millions)
<TABLE>
<CAPTION>
OCTOBER August
31, 1999 1, 1999
-------- -------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 34 $ 6
Accounts receivable 683 541
Inventories 690 615
Other current assets 140 132
------- -------
Total current assets 1,547 1,294
------- -------
Plant assets, net of depreciation 1,713 1,726
Intangible assets, net of amortization 1,888 1,910
Other assets 594 592
------- -------
Total assets $ 5,742 $ 5,522
======= =======
Current liabilities
Notes payable $ 2,031 $ 1,987
Payable to suppliers and others 495 511
Accrued liabilities 514 415
Dividend payable 96 97
Accrued income taxes 237 136
------- -------
Total current liabilities 3,373 3,146
------- -------
Long-term debt 1,328 1,330
Nonpension postretirement benefits 390 394
Other liabilities, including deferred
income taxes of $263 and $263 423 417
------- -------
Total liabilities 5,514 5,287
------- -------
Shareowners' equity
Preferred stock; authorized 40 shares;
none issued - -
Capital stock, $.0375 par value; authorized
560 shares; issued 542 shares 20 20
Capital surplus 339 382
Earnings retained in the business 4,180 4,041
Capital stock in treasury, at cost (4,156) (4,058)
Accumulated other comprehensive income (155) (150)
------- -------
Total shareowners' equity 228 235
------- -------
Total liabilities and shareowners' equity $ 5,742 $ 5,522
======= =======
See Notes to Financial Statements
</TABLE>
<PAGE> 4
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF CASH FLOWS
------------------------
(unaudited)
(millions)
<TABLE>
<CAPTION>
Three Months Ended
------------------
OCTOBER November
31, 1999 1, 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 235 $ 264
Non-cash charges to net earnings
Depreciation and amortization 62 59
Deferred taxes (1) (3)
Other, net 1 16
Changes in working capital
Accounts receivable (142) (160)
Inventories (73) (97)
Other current assets and liabilities 179 102
------ ------
Net cash provided by operating activities 261 181
------ ------
Cash flows from investing activities:
Purchases of plant assets (36) (47)
Sales of plant assets 1 8
Businesses acquired - (105)
Other, net (1) (4)
------ ------
Net cash used in investing activities (36) (148)
------ ------
Cash flows from financing activities:
Long-term borrowings - 324
Repayments of long-term borrowings (3) (1)
Short-term borrowings 282 457
Repayments of short-term borrowings (239) (551)
Dividends paid (97) (95)
Treasury stock purchases (155) (215)
Treasury stock issuances 12 54
------ ------
Net cash used in financing activities (200) (27)
------ ------
Effect of exchange rate changes on cash 3 (3)
------ ------
Net change in cash and cash equivalents 28 3
Cash and cash equivalents - beginning of period 6 16
------ ------
Cash and cash equivalents - end of period $ 34 $ 19
====== ======
</TABLE>
See Notes to Financial Statements
<PAGE> 5
CAMPBELL SOUP COMPANY CONSOLIDATED
----------------------------------
STATEMENTS OF SHAREOWNERS' EQUITY
---------------------------------
(unaudited)
(millions, except per share amounts)
<TABLE>
<CAPTION>
Capital stock
-------------
Issued In treasury Earnings Accumulated
------ ----------- retained other Total
Capital in the comprehensive shareowners'
Shares Amount Shares Amount surplus business income equity
------ ------ ------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at August 2, 1998 542 $ 20 (94) $(3,083) $ 395 $ 3,706 $ (164) $ 874
Comprehensive income
Net earnings 264 264
Foreign currency translation adjustments 8 8
Dividends ($.210 per share) (94) (94)
Treasury stock purchased (4) (215) (215)
Treasury stock issued under
management incentive and
stock option plans 1 16 (1) 15
--- ---- ----- -------- ----- ------- ------- -----
Balance at November 1, 1998 542 $ 20 (97) $(3,282) $ 394 $ 3,876 $ (156) $ 852
=== ==== ===== ======== ===== ======= ======= =====
BALANCE AT AUGUST 1, 1999 542 $ 20 (113) $(4,058) $ 382 $ 4,041 $ (150) $ 235
COMPREHENSIVE INCOME
NET EARNINGS 235 235
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (5) (5)
DIVIDENDS ($.225 PER SHARE) (96) (96)
TREASURY STOCK PURCHASED (3) (155) (155)
TREASURY STOCK ISSUED UNDER
MANAGEMENT INCENTIVE AND
STOCK OPTION PLANS 1 57 (43) 14
--- ---- ----- -------- ----- ------- ------- -----
BALANCE AT OCTOBER 31, 1999 542 $ 20 (115) $(4,156) $ 339 $ 4,180 $ (155) $ 228
=== ==== ===== ======== ===== ======= ======= =====
See Notes to Financial Statements
</TABLE>
<PAGE> 6
CAMPBELL SOUP COMPANY CONSOLIDATED
----------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
(dollars in millions, except per share amounts)
(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. Certain reclassifications were made to the prior year
amounts to conform with current presentation.
(b) Comprehensive Income
As of August 3, 1998, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," issued in June 1997. SFAS 130 establishes a standard for
reporting comprehensive income, which is comprised of net income and
"other" comprehensive income items, in the financial statements.
"Other" comprehensive income includes items recorded in shareowners'
equity that are not the result of transactions with shareowners, such
as foreign currency translation adjustments.
As of October 31, 1999 and November 1, 1998, accumulated other
comprehensive income, as reflected in the statements of shareowners'
equity, represents the cumulative translation adjustment.
(c) Restructuring Program
A restructuring charge of $41 ($30 after tax or $.07 per share) was
recorded in the fourth quarter fiscal 1999 to cover the costs of a
restructuring and divestiture program approved in July 1999 by the
company's Board of Directors. This charge relates to the streamlining
of certain North American and European production and administrative
facilities and the anticipated cost of a divestiture of a non-strategic
business with annual sales of approximately $25.
The restructuring charge includes approximately $20 in cash charges
primarily related to severance and employee benefit costs. The balance
of the restructuring charge includes non-cash charges related to the
disposition of plant assets and the divestiture. The company expects to
complete the restructuring and divestiture program in fiscal 2000. The
expected net cash outflows will not have a material impact on the
company's liquidity. From this program, the company expects to realize
annual pre-tax savings of approximately $21.
A $5 ($3 after tax or $.01 per share) reversal of the third quarter
fiscal 1998 restructuring charge was also recorded in the fourth
quarter fiscal 1999. The reversal reflects the net impact of changes in
estimates and modifications to the original program. Two manufacturing
facilities scheduled for closure in fiscal 1999 were not taken out of
service due to changes in business and economic conditions subsequent
to the original charge, while additional asset rationalization and
plant reconfiguration strategies were implemented which resulted in
incremental headcount reductions. The initial charge for the third
quarter fiscal 1998 program was $262 ($193 after tax or $.42 per
share). This program was designed to improve operational efficiency by
rationalizing certain U.S., European and Australian production and
administrative facilities and divesting non-strategic businesses.
Remaining spending under the program, which is primarily associated
with employee benefit costs, is expected to be completed by the second
quarter fiscal 2000.
6
<PAGE> 7
A summary of restructuring reserves at October 31, 1999 and related
activity described above is as follows:
<TABLE>
<CAPTION>
Losses on Asset Dispositions Severance and Other Exit
and Divestitures Benefits Costs Total
---------------- -------- ----- -----
<S> <C> <C> <C> <C>
Balance at
August 2, 1998 $ 151 32 10 $ 193
Spending (132) (28) (9) (169)
Modifications and
changes in
estimates (21) 16 - (5)
1999 Provision 21 18 2 41
---- ---- ---- ----
Balance at
August 1, 1999 $ 19 38 3 $ 60
SPENDING (1) (9) (1) (11)
---- ---- ---- ----
BALANCE AT
OCTOBER 31, 1999 $ 18 29 2 $ 49
==== ==== ==== ====
</TABLE>
(d) Earnings Per Share
The company adopted the provisions of SFAS No. 128, "Earnings per
Share"("EPS") as of the second quarter fiscal 1998. 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. For
the three month period ended October 31, 1999, the weighted average shares
outstanding assuming dilution also includes the incremental effect of
approximately one million shares under the forward stock purchase
contract. See Note (g) for a description of the contract.
(e) Segment Information
The company operates in three business segments: Soup and Sauces, Biscuits
and Confectionery, and Away From Home. 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 pastas and gravies,
Swanson broths, and V8 and V8 Splash beverages. The Biscuits and
Confectionery segment includes the Godiva Chocolatier, Pepperidge Farm,
and the Arnotts Limited businesses. Away From Home represents products,
including Campbell's soups and Campbell's Specialty Kitchen entrees, which
are distributed to the food service and home meal replacement markets.
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 company's
fiscal 1999 Annual Report on Form 10-K. The company evaluates segment
performance based on earnings before interest and taxes, excluding certain
non-recurring charges. Away From Home products are principally produced by
the tangible assets of the company's other segments except for the
Stockpot premium refrigerated soups, which are
7
<PAGE> 8
produced in a separate facility. Accordingly, with the exception of the
designated Stockpot facility, tangible assets have not been allocated to the
Away From Home segment. For products produced by the assets of other segments,
depreciation and amortization are allocated to Away From Home based on budgeted
production hours. Transfers between segments are recorded at cost plus mark-up
or at market.
OCTOBER 31, 1999
<TABLE>
<CAPTION>
AWAY CORPORATE
SOUP AND BISCUITS AND FROM AND
SAUCES CONFECTIONERY HOME OTHER(1) ELIMINATIONS(2) Total
------ ------------- ---- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ 1,263 374 135 13 (17) $ 1,768
EARNINGS BEFORE
INTEREST AND TAXES $ 358 58 14 1 (20) $ 411
DEPRECIATION AND
AMORTIZATION $ 32 20 4 - 6 $ 62
CAPITAL EXPENDITURES $ 21 11 1 - 3 $ 36
SEGMENT ASSETS $ 3,137 1,491 378 42 694 $ 5,742
</TABLE>
November 1, 1998
<TABLE>
<CAPTION>
Away Corporate
Soup and Biscuits and From and
Sauces Confectionery Home Other(1) Eliminations(2) Total
------ ------------- ---- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 1,289 362 126 40 (13) $ 1,804
Earnings before
interest and taxes $ 390 58 16 3 (20) $ 447
Depreciation and
amortization $ 31 20 3 2 3 $ 59
Capital expenditures $ 27 13 - 3 4 $ 47
Segment assets $ 3,304 1,492 320 186 693 $ 5,995
</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 assets.
8
<PAGE> 9
(f) Inventories
<TABLE>
<CAPTION>
OCTOBER 31, August 1,
1999 1999
---- ----
<S> <C> <C>
Raw materials, containers and supplies $244 $207
Finished products 446 408
---- ----
$690 $615
==== ====
</TABLE>
Approximately 65% of inventory in fiscal 2000 and 70% in fiscal 1999 is
accounted for on the last in, first out (LIFO) method of determining cost.
If the first in, first out inventory valuation method had been used
exclusively, inventories would not differ materially from the amounts
reported at October 31, 1999 and August 1, 1999.
(g) Forward Stock Purchase Program
In October 1998, the company entered into a forward stock purchase
contract to partially hedge the company's equity exposure from its stock
option program. The contract, which matures in fiscal 2004, allows the
company to repurchase approximately 11 million shares at an average price
of approximately $47 per share. The company may elect to settle the
contract on a net share basis in lieu of physical settlement. The contract
permits early settlement and may be renewed for an additional five-year
term.
If the forward purchase contract had been settled on a net share basis as
of October 31, 1999, the company would have provided the counterparty with
approximately 570,000 shares of its capital stock.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
CAMPBELL SOUP COMPANY
---------------------
RESULTS OF CONTINUING OPERATIONS
- --------------------------------
OVERVIEW
- --------
The company reported net earnings of $235 million for the first quarter ended
October 31, 1999 versus $264 million in the comparable quarter a year ago,
reflecting the decision last January to eliminate inefficient quarter-end
promotions for U.S. retail customers. Diluted earnings per share decreased 7% to
$.54 per share from $.58. Net sales declined 2% as compared to last year
primarily due to the impact of divestitures.
SALES
- -----
Net sales declined 2% to $1.77 billion from $1.80 billion last year. The
variance was due primarily to the impact of divestitures since volume and mix
fluctuations offset higher selling prices during the quarter.
An analysis of net sales by segment follows:
<TABLE>
<CAPTION>
(millions) 2000 1999 % CHANGE
- ---------- ---- ---- --------
<S> <C> <C> <C>
Soup and Sauces $ 1,263 $ 1,289 (2)
Biscuits and Confectionery 374 362 3
Away From Home 135 126 7
------- ------- ---
Subtotal 1,772 1,777 -
Other 13 40
Intersegment (17) (13)
------- ------- ---
$ 1,768 $ 1,804 (2)
======= ======= ===
</TABLE>
The decline in Soup and Sauces was due to a worldwide wet soup volume decline of
6%. U.S. wet soup volume declined 6% due to the elimination of quarter-end
promotions. This decline was partially offset by the beverage business with
continued strong demand for V8 Splash. Sales of U.S. sauces and prepared foods
declined from the prior year due to increased competition against
Franco-American products and a shift in the timing of promotional programs for
Pace products.
International soup volume declined 2% mainly due to the performance of Canada
and the UK. The Canadian business was adversely affected by the timing of trade
promotions in fiscal 2000 versus the prior year. Australia experienced strong
volume gains in both ready to serve and condensed soup.
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<PAGE> 11
The increase in sales reported by Biscuits and Confectionery compared to the
first quarter fiscal 1999 was primarily due to double-digit growth in Godiva
Chocolatier. Arnotts also reported modest growth, due in part to the
strengthening of the Australian dollar. Pepperidge Farm sales were impacted by a
decline in Goldfish.
Away From Home reported an increase of 7% versus the comparable quarter a year
ago with strong sales of core products. New kettle merchandisers, self-serve
kettles containing high quality Campbell branded soups, continued to build
volume.
GROSS MARGIN
- ------------
Gross margin, defined as net sales less cost of products sold, declined $15
million in the quarter. As a percent of sales, gross margin was relatively flat
at approximately 54%.
MARKETING AND SELLING EXPENSES
- ------------------------------
Marketing and selling expenses as a percent of sales increased to 24% from 23%
last year. The increase is principally due to higher selling expenses from the
growth in retail stores in the Godiva business.
ADMINISTRATIVE EXPENSES
- -----------------------
Administrative expenses were relatively flat as a percent of sales compared to
last year.
OPERATING EARNINGS
- ------------------
Segment operating earnings declined 7% for the first quarter versus the prior
year.
11
<PAGE> 12
An analysis of operating earnings by segment follows:
<TABLE>
<CAPTION>
(millions) 2000 1999 % CHANGE
- ---------- ---- ----- --------
<S> <C> <C> <C>
Soup and Sauces $ 358 $ 390 (8)
Biscuits and Confectionery 58 58 -
Away From Home 14 16 (13)
---- ---- ----
Subtotal 430 464 (7)
Other 1 3
---- ---- ----
431 467 (8)
Corporate (20) (20)
---- ---- ----
$ 411 $ 447 (8)
==== ==== ====
</TABLE>
Earnings from Soup and Sauces declined 8% due to lower U.S. wet soup sales,
increased investments in new business development, and weakness in the sauces
and prepared food categories.
Earnings from Biscuits and Confectionery remained flat at $58 million. Arnotts
delivered strong earnings from an increase in sales. However, Godiva Chocolatier
earnings declined due to the investment in new store openings, and earnings from
Pepperidge Farm were adversely impacted by intense competition in the cheese
cracker business.
Away From Home reported an earnings decline of $2 million to $14 million.
Earnings were negatively impacted by the start up of a new Stockpot facility and
continued costs associated with the integration of the Stockpot business, which
was acquired in fiscal 1999.
NON-OPERATING ITEMS
- -------------------
Interest expense increased slightly to $46 million from $44 million in the prior
year due to higher debt levels.
The effective tax rate increased to 35.6% compared to 34.5% last year, due to
the increasing concentration of earnings from U.S. businesses.
12
<PAGE> 13
RESTRUCTURING CHARGE
- --------------------
A restructuring charge of $41 million ($30 million after tax or $.07 per share)
was recorded in the fourth quarter fiscal 1999 to cover the costs of a
restructuring and divestiture program approved in July 1999 by the company's
Board of Directors. This charge relates to the streamlining of certain North
American and European production and administrative facilities and the
anticipated cost of a divestiture of a non-strategic business with annual sales
of approximately $25 million.
The restructuring includes approximately $20 million in cash charges primarily
related to severance and employee benefit costs. The balance of the
restructuring charge includes non-cash charges related to the disposition of
plant assets and the divestiture. The company expects to complete the
restructuring and divestiture program in fiscal 2000. The expected net cash
outflows will not have a material impact on the company's liquidity. From this
program the company expects to realize annual pre-tax savings of approximately
$21 million.
See Note (c) to the Consolidated Financial Statements for further discussion.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The company generated cash from operations of $261 million compared to $181
million last year. This increase is principally due to improved working capital
versus prior year.
Capital expenditures were $36 million, a decrease from $47 million last year.
The company continues to aggressively manage its capital outlays and expects
total expenditures to approximate $300 million in fiscal 2000.
The company repurchased 3.6 million shares in the quarter versus 4.2 million
last year.
13
<PAGE> 14
YEAR 2000
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 computer systems failures or miscalculations, commonly referred to as
the Year 2000 ("Y2K") issue. The Y2K issue can arise at any point in the
company's supply, manufacturing, processing, distribution and financial chains.
Incomplete or untimely resolution of the Y2K issue by the company, key
suppliers, customers and other parties could have a material adverse effect on
the company's results of operations, financial condition and cash flows.
To address the Y2K issue, the company established a Worldwide Year 2000 Business
Action Council, led by an Executive Steering Committee of the company's senior
management, including representatives of each of the company's business segments
and corporate functions, to oversee and regularly review the status of the
readiness plan discussed below. In addition, the company established a Worldwide
Project Office responsible for the day-to-day oversight and coordination of the
Y2K remediation, replacement and testing of business systems. This project
office reports to the company's Chief Information Officer.
The company's plan for addressing the Y2K issue was divided into three major
phases: Business Systems Inventory and Assessment, Remediation and Replacement,
and Testing.
- - Business Systems Inventory and Assessment - The internal inventory portion
of this phase, which commenced in 1997, was designed to identify internal
business systems that were susceptible to system failure or processing
errors as a result of the Y2K issue. This phase is complete. Approximately
700 worldwide information technology (IT) business systems were inventoried
and approximately 200 were Y2K compliant and 500 were identified as
non-compliant. It was determined that approximately 400 of the non-compliant
systems required remediation and the remaining 100 systems would be retired
or replaced. In addition, the company has completed the inventory and
assessment of its non-information technology (Non-IT) systems. The
remediation and replacement of these systems, which include manufacturing
production lines and equipment, elevators, heating, ventilation and air
conditioning systems and water treatment systems, is included in the
remediation and replacement plan discussed below. As part of this phase,
significant service providers, vendors, suppliers, customers and
governmental entities that are believed to be critical to business
operations after January 1, 2000, were identified and steps were undertaken
to ascertain their stage of Y2K readiness through questionnaires,
interviews, on-site visits and other available means.
- - Remediation and Replacement - The company developed a remediation and
replacement plan for all affected systems including IT and Non-IT systems.
The company's plan established priorities for remediation or replacement.
The business systems considered most critical to ongoing operations were
given the highest priority. The company prioritized its business systems
into "Mission Critical" and "All Other." "Mission Critical" systems are
defined as business systems such as Business Planning and Control Process,
Sales Order Billing and Warehouse Management systems, that, if shut down or
interrupted,
14
<PAGE> 15
could have a material adverse effect on the company's results of operations,
financial condition and cash flows. "All Other" systems are defined as
business systems such as Data Warehouse and Job Bidding systems that, if
shut down or interrupted, may have an adverse impact on the company.
Internal and external resources were used to execute the plan. Remediation
and replacement of "Mission Critical" systems and "All Other" systems were
substantially completed on schedule by the fourth quarter 1999.
- - Testing - Testing was performed in conjunction with remediation and
replacement. The company's efforts in this phase include testing by users
and confirmation by appropriate local and Y2K project management that the
remediated or replaced systems are Y2K compliant. The company has
substantially completed testing and all systems have been returned to
production.
Because the company's Y2K compliance is dependent upon key third parties also
being Y2K compliant on a timely basis, there can be no guarantee that the
company's efforts will prevent a material adverse impact on its results of
operations, financial condition and cash flows. The possible consequences to the
company or its business partners not being fully Y2K compliant include temporary
plant closings, delays in the delivery of finished products, delays in the
receipt of key ingredients, containers and packaging supplies, invoice and
collection errors and inventory and supply obsolescence. These consequences
could have a material adverse effect on the company's results of operations,
financial condition and cash flows if the company is unable to conduct its
business in the ordinary course as a result of the Y2K issue. The company
believes that its readiness program, including the contingency plans discussed
below, should significantly reduce the adverse effect any such disruptions may
have.
The company has developed contingency plans to mitigate the potential
disruptions that may result from the Y2K issue. These plans include identifying
and securing alternate suppliers of ingredients, containers, packaging materials
and utilities, adjusting manufacturing facility production, shutdown and
start-up schedules, stockpiling of finished product inventories and certain
other measures considered appropriate by management. These contingency plans,
and the related cost estimates, will be continually monitored and refined as
additional information becomes available.
The company currently estimates that the aggregate cost of its Y2K efforts will
be approximately $44 million, of which $39 million has been incurred to date.
These costs, except for capital costs of approximately $3 million, are being
expensed as incurred and are being funded through operating cash flows. The
company incurred Y2K costs of approximately $23 million in fiscal 1999 and
expects to incur Y2K costs of approximately $7 million in fiscal 2000.
15
<PAGE> 16
<TABLE>
<CAPTION>
(millions)
- ----------
Current Cost Costs Estimated Costs
Components Estimates Incurred to Complete
- ---------- --------- -------- -----------
<S> <C> <C> <C>
External Consulting $ 23 (21) $ 2
Hardware/Software Upgrades 13 (12) 1
Other 8 (6) 2
---------- --------- ---------
$ 44 (39) $ 5
========== ========= =========
</TABLE>
The company believes that such costs will not have a material impact on the
company's results of operations, financial condition or cash flows.
RECENT DEVELOPMENTS
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued and is expected
to be effective for fiscal years beginning after June 15, 2000. The standard
requires that all derivative instruments be recorded on the balance sheet at
fair value. Changes in the fair value of derivatives are recorded in earnings or
other comprehensive income, based on whether the instrument is designated as
part of a hedge transaction and, if so, the type of hedge transaction. The
company is currently assessing the impact of the adoption on the company's
financial statements. Based on the company's current portfolio, it is not
expected that adoption of this statement will have a material effect on the
company's results of operations, financial condition or cash flows.
16
<PAGE> 17
FORWARD-LOOKING STATEMENTS
This quarterly report contains certain statements, which reflect the company's
current expectations regarding future results of operations, economic
performance, financial condition and achievements of the company. The company
has tried, wherever possible, to identify these forward-looking statements by
using words such as "anticipate," "believe," "estimate," "expect" and similar
expressions. These statements reflect the company's current plans and
expectations and are based on information currently available to it. They rely
on a number of assumptions and estimates which could be inaccurate and which are
subject to risks and uncertainties.
The company wishes to caution the reader that the following important factors
and those important factors described elsewhere in the commentary, or in other
Securities and Exchange Commission filings of the company, could affect the
company's actual results and could cause such results to vary materially from
those expressed in any forward-looking statements made by, or on behalf of, the
company:
- - the impact of strong competitive response to the company's efforts to
leverage its brand power with product innovation, promotional programs and
new advertising;
- - the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer acceptance;
- - the company's ability to achieve sales and earnings forecasts, which are
based on assumptions about sales volume and product mix;
- - 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 its cost savings objectives, including the
projected outcome of supply chain management programs;
- - the difficulty of predicting the pattern of inventory movements by the
company's trade customers;
- - 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; and
17
<PAGE> 18
- - the ability of the company and its key service providers, vendors,
suppliers, customers and governmental entities to replace, modify or upgrade
computer systems in ways that adequately address the Y2K issue. Specific
factors that might cause actual results to vary materially from the results
anticipated include the ability to identify and correct all relevant
computer codes and embedded chips, unanticipated difficulties or delays in
the implementation of the company's remediation plans and the ability of
third parties to adequately address their own Y2K issues.
This discussion of uncertainties is by no means exhaustive but is designed to
highlight important factors that may impact the company's outlook.
18
<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
For information regarding the company's exposure to certain market risks, see
Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the
Annual Report on Form 10-K for Fiscal 1999. There have been no significant
changes in the company's portfolio of financial instruments or market risk
exposures which have occurred since year-end.
19
<PAGE> 20
PART II
ITEM 1. LEGAL PROCEEDINGS
In management's opinion, there are no pending claims or litigation, the outcome
of which would have a material effect on the consolidated results of operations,
financial position or cash flows of the company. The company has 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 consolidated results of
operations, financial position, or cash flows of the company.
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.
b. Reports on Form 8-K
There were no reports on Form 8-K filed by the company during the
first quarter of fiscal 2000.
20
<PAGE> 21
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: December 14, 1999 By: /s/ Basil Anderson
------------------------
Basil Anderson
Executive Vice President and
Chief Financial Officer
By: /s/ Ellen Oran Kaden
------------------------
Ellen Oran Kaden
Senior Vice President -
Law and Government Affairs
21
<PAGE> 22
INDEX TO EXHIBITS
Exhibit Number
- --------------
27 Financial Data Schedule.
22
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-30-2000
<PERIOD-START> AUG-02-1999
<PERIOD-END> OCT-31-1999
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 724
<ALLOWANCES> 41
<INVENTORY> 690
<CURRENT-ASSETS> 1,547
<PP&E> 3,247
<DEPRECIATION> 1,534
<TOTAL-ASSETS> 5,742
<CURRENT-LIABILITIES> 3,373
<BONDS> 1,328
0
0
<COMMON> 20
<OTHER-SE> 208
<TOTAL-LIABILITY-AND-EQUITY> 5,742
<SALES> 1,768
<TOTAL-REVENUES> 1,768
<CGS> 809
<TOTAL-COSTS> 809
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 365
<INCOME-TAX> 130
<INCOME-CONTINUING> 235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235
<EPS-BASIC> $.55
<EPS-DILUTED> $.54
</TABLE>
