<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
JANUARY 30, 2000 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: (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 422,502,096 SHARES OF CAPITAL STOCK OUTSTANDING AS
OF MARCH 7, 2000.
<PAGE> 2
PART I. FINANCIAL INFORMATION
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF EARNINGS
(unaudited)
(millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
JANUARY January JANUARY January
30, 2000 31, 1999 30, 2000 31, 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $1,916 $1,832 $3,684 $3,636
------ ------ ------ ------
Costs and expenses
Cost of products sold 848 856 1,657 1,686
Marketing and selling expenses 464 511 892 931
Administrative expenses 87 74 170 152
Research and development expenses 15 17 31 33
Other expenses 29 3 50 16
------ ------ ------ ------
Total costs and expenses 1,443 1,461 2,800 2,818
------ ------ ------ ------
Earnings before interest and taxes 473 371 884 818
Interest, net 50 42 96 86
------ ------ ------ ------
Earnings before taxes 423 329 788 732
Taxes on earnings 142 110 272 249
------ ------ ------ ------
Net earnings $ 281 $ 219 $ 516 $ 483
====== ====== ====== ======
Per share - basic
Net earnings $ .66 $ .49 $ 1.21 $ 1.08
====== ====== ====== ======
Dividends $ .225 $ .225 $ .450 $ .435
====== ====== ====== ======
Weighted average shares outstanding - basic 427 444 428 446
====== ====== ====== ======
Per share - assuming dilution
Net earnings $ .65 $ .49 $ 1.19 $ 1.07
====== ====== ====== ======
Weighted average shares outstanding - assuming dilution 431 449 432 451
====== ====== ====== ======
See Notes to Financial Statements
</TABLE>
2
<PAGE> 3
CAMPBELL SOUP COMPANY CONSOLIDATED
BALANCE SHEETS
(unaudited)
(millions, except per share amounts)
<TABLE>
<CAPTION>
JANUARY August
30, 2000 1, 1999
-------- -------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 92 $ 6
Accounts receivable 638 541
Inventories 583 615
Other current assets 126 132
------- -------
Total current assets 1,439 1,294
------- -------
Plant assets, net of depreciation 1,678 1,726
Intangible assets, net of amortization 1,844 1,910
Other assets 603 592
------- -------
Total assets $ 5,564 $ 5,522
======= =======
Current liabilities
Notes payable $ 1,874 $ 1,987
Payable to suppliers and others 446 511
Accrued liabilities 484 415
Dividend payable 96 97
Accrued income taxes 249 136
------- -------
Total current liabilities 3,149 3,146
------- -------
Long-term debt 1,336 1,330
Nonpension postretirement benefits 384 394
Other liabilities, including deferred
income taxes of $260 and $263 430 417
------- -------
Total liabilities 5,299 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 326 382
Earnings retained in the business 4,365 4,041
Capital stock in treasury, at cost (4,266) (4,058)
Accumulated other comprehensive income (180) (150)
------- -------
Total shareowners' equity 265 235
------- -------
Total liabilities and shareowners' equity $ 5,564 $ 5,522
======= =======
See Notes to Financial Statements
</TABLE>
3
<PAGE> 4
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(millions)
<TABLE>
<CAPTION>
Six Months Ended
JANUARY January
30, 2000 31, 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 516 $ 483
Non-cash charges to net earnings
Depreciation and amortization 123 123
Deferred taxes 1 (3)
Other, net 10 (1)
Changes in working capital
Accounts receivable (97) (47)
Inventories 30 (62)
Other current assets and liabilities 143 (104)
----- -----
Net cash provided by operating activities 726 389
----- -----
Cash flows from investing activities:
Purchases of plant assets (73) (126)
Sales of plant assets 3 8
Businesses acquired - (105)
Other, net (7) (8)
----- -----
Net cash used in investing activities (77) (231)
----- -----
Cash flows from financing activities:
Long-term borrowings - 325
Repayments of long-term borrowings (5) (2)
Short-term borrowings 483 737
Repayments of short-term borrowings (584) (588)
Dividends paid (194) (188)
Treasury stock purchases (283) (489)
Treasury stock issuances 16 64
----- -----
Net cash used in financing activities (567) (141)
----- -----
Effect of exchange rate changes on cash 4 (3)
----- -----
Net change in cash and cash equivalents 86 14
Cash and cash equivalents - beginning of period 6 16
----- -----
Cash and cash equivalents - end of period $ 92 $ 30
===== =====
See Notes to Financial Statements
</TABLE>
4
<PAGE> 5
CAMPBELL SOUP COMPANY CONSOLIDATED
STATEMENTS OF SHAREOWNERS' EQUITY
(unaudited)
(millions, except per share amounts)
<TABLE>
<CAPTION>
Capital stock
--------------------------------------- Earnings Accumulated
Issued In treasury 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 483 483
Foreign currency translation
adjustments (6) (6)
Dividends ($.435 per share) (193) (193)
Treasury stock purchased (9) (489) (489)
Treasury stock issued under
management incentive and
stock option plans 2 31 (9) 22
--- ---- ----- --------- ------ -------- ------- ------
Balance at January 31, 1999 542 $ 20 (101) $ (3,541) $ 386 $ 3,996 $ (170) $ 691
=== ==== ===== ========= ====== ======== ======= ======
BALANCE AT AUGUST 1, 1999 542 $ 20 (113) $ (4,058) $ 382 $ 4,041 $ (150) $ 235
COMPREHENSIVE INCOME
NET EARNINGS 516 516
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS (30) (30)
DIVIDENDS ($.450 PER SHARE) (192) (192)
TREASURY STOCK PURCHASED (7) (283) (283)
TREASURY STOCK ISSUED UNDER
MANAGEMENT INCENTIVE AND
STOCK OPTION PLANS 2 75 (56) 19
--- ---- ----- --------- ------ -------- ------- ------
BALANCE AT JANUARY 30, 2000 542 $ 20 (118) $ (4,266) $ 326 $ 4,365 $ (180) $ 265
=== ==== ===== ========= ====== ======== ======= ======
See Notes to Financial Statements
</TABLE>
5
<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
In 1999, 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 January 30, 2000 and January 31, 1999, 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.
6
<PAGE> 7
A summary of restructuring reserves at January 30, 2000, and related
activity 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 1, 1999 $ 19 38 3 $ 60
SPENDING $ (3) (17) (2) $(22)
BALANCE AT ------ ---- --- -----
JANUARY 30, 2000 $ 16 21 1 $ 38
====== ==== === =====
</TABLE>
The reserve balances as of August 1, 1999 also include amounts related
to a fiscal 1998 program. The program was substantially completed by
the second quarter fiscal 2000.
(d) Earnings Per Share
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 and six month
periods ended January 30, 2000, the weighted average shares outstanding
assuming dilution also includes the incremental effect of approximately
two 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.
7
<PAGE> 8
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
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.
8
<PAGE> 9
The following tables present information about the company's reportable
segments.
JANUARY 30, 2000
<TABLE>
<CAPTION>
Corporate
Soup and Biscuits and Away From and
THREE MONTHS ENDED Sauces Confectionery Home Other(1) Eliminations(2) Total
------ ------------- ---- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,361 419 143 9 (16) $1,916
Earnings before
interest and taxes $ 406 78 16 1 (28) $ 473
Depreciation and
amortization $ 31 21 4 - 5 $ 61
Capital expenditures $ 22 11 3 - 1 $ 37
</TABLE>
<TABLE>
<CAPTION>
Corporate
Soup and Biscuits and Away From and
SIX MONTHS ENDED Sauces Confectionery Home Other(1) Eliminations(2) Total
------ ------------- ---- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,625 793 278 22 (34) $3,684
Earnings before
interest and taxes $ 763 136 31 2 (48) $ 884
Depreciation and
amortization $ 63 41 8 - 11 $ 123
Capital expenditures $ 43 23 3 - 4 $ 73
Segment assets $3,026 1,428 372 41 697 $5,564
</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
income taxes and prepaid pension assets.
9
<PAGE> 10
JANUARY 31, 1999
<TABLE>
<CAPTION>
Corporate
Soup and Biscuits and Away From and
THREE MONTHS ENDED Sauces Confectionery Home Other(1) Eliminations(2) Total
------ ------------- ---- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,278 407 135 36 (24) $1,832
Earnings before
interest and taxes $ 290 71 17 4 (11) $ 371
Depreciation and
amortization $ 33 21 3 2 5 $ 64
Capital expenditures $ 53 14 - 6 6 $ 79
</TABLE>
<TABLE>
<CAPTION>
Corporate
Soup and Biscuits and Away From and
SIX MONTHS ENDED Sauces Confectionery Home Other(1) Eliminations(2) Total
------ ------------- ---- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,567 769 262 75 (37) $3,636
Earnings before
interest and taxes $ 680 129 33 7 (31) $ 818
Depreciation and
amortization $ 64 41 6 4 8 $ 123
Capital expenditures $ 80 27 - 9 10 $ 126
Segment assets $3,210 1,466 318 172 708 $5,874
</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
income taxes and prepaid pension assets.
10
<PAGE> 11
(f) Inventories
JANUARY August
30, 2000 1, 1999
-------- -------
Raw materials, containers and supplies $212 $207
Finished products 371 408
---- ----
$583 $615
==== ====
Approximately 64% 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 January 30, 2000 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 January 30, 2000, the company would have provided the
counterparty with approximately six million shares of its capital
stock.
11
<PAGE> 12
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 $281 million for the quarter ended January
30, 2000 compared to $219 million in the comparable quarter a year ago. Diluted
earnings per share increased to $.65 from $.49 a year ago. Net sales increased
5% to $1.92 billion from $1.83 billion. The increase in sales and earnings was
primarily driven by the rebound in U.S. soup shipments from the prior year. In
January 1999, the company initiated certain modifications in its supply chain
operation that resulted in lower shipments during that quarter.
For the six months ended January 30, 2000, net sales increased 1%. Excluding
currency and divestitures, sales from ongoing businesses increased 3%. Net
earnings and diluted earnings per share increased 7% and 11%, respectively.
SECOND QUARTER
SALES
Sales in the quarter increased 5% to $1.92 billion from $1.83 billion last year.
The change in sales was due to a 5% increase from volume and mix, a 2% increase
from higher selling prices, offset by 1% decline due to divestitures and 1%
decline due to currency.
An analysis of net sales by segment follows:
<TABLE>
<CAPTION>
(millions) 2000 1999 % CHANGE
---------- ---- ---- --------
<S> <C> <C> <C>
Soup and Sauces $1,361 $1,278 6%
Biscuits and Confectionery 419 407 3%
Away From Home 143 135 6%
------ ------ --
Subtotal 1,923 1,820 6%
Other 9 36
Intersegment (16) (24)
------ ------ --
Total $1,916 $1,832 5%
====== ======
</TABLE>
12
<PAGE> 13
The sales increase in Soup and Sauces was due to a worldwide wet soup volume
increase of 9%. U.S. wet soup shipments increased 12% over the prior period. The
comparison to the prior period is impacted by the initiatives implemented in
January 1999 that resulted in lower shipments in that period. During the
quarter, ready-to-serve soups delivered solid volume gains, led by Swanson
broths and new products that were introduced nationally earlier in the year,
such as Campbell's ready-to-serve Tomato soup in a resealable plastic container
and Campbell's Soup-To-Go! In addition, Campbell's Chunky soups posted solid
gains, as did Campbell's Simply Home soups.
International soup volume increased 1% primarily due to volume gains in France,
Germany and Australia offset by lower shipments in Canada and the United
Kingdom.
Sales of prepared foods improved versus last year. Sales of Prego increased due
to the introduction of new products and packaging. In the United Kingdom,
Homepride cooking sauces contributed to the positive change in sales.
Franco-American volumes were down versus last year due to continued intense
competition in the category.
The increase in sales reported by Biscuits and Confectionery compared to last
year was primarily due to continued growth in Godiva Chocolatier and the core
cracker business at Arnotts. Pepperidge Farm sales declined due to continued
competitive pressure in the cheese cracker category.
Away From Home reported an increase of 6% versus the comparable quarter a year
ago driven by double-digit growth in soup sales in traditional food service
outlets.
The decline in Other is due to the divestiture of Fresh Start Bakeries, Inc. in
May 1999.
GROSS MARGIN
Gross margin, defined as net sales less cost of products sold, increased $92
million in the quarter. As a percent of sales, gross margin was 55.7% compared
to 53.3% last year. The improvement in margin percentage was principally due to
stronger unit volume in the U.S., higher selling prices, and productivity
programs.
MARKETING AND SELLING EXPENSES
Marketing and selling expenses as a percent of sales declined to 24% from 28%
last year. The decrease is attributable to a shift in the timing of certain
programs and reductions in programs to match marketplace performance.
ADMINISTRATIVE EXPENSES
Administrative expenses were relatively flat as a percent of sales compared to
last year.
OTHER EXPENSES
Other expenses increased as compared to last year primarily due to higher
incentive compensation costs.
13
<PAGE> 14
OPERATING EARNINGS
Segment operating earnings increased 32% for the second quarter versus the prior
year.
An analysis of operating earnings by segment follows:
<TABLE>
<CAPTION>
(millions) 2000 1999 % CHANGE
- ---------- ---- ----- --------
<S> <C> <C> <C>
Soup and Sauces $ 406 $ 290 40%
Biscuits and Confectionery 78 71 10%
Away From Home 16 17 (6)%
----- ----- -----
Subtotal 500 378 32%
Other 1 4
----- ----- -----
501 382
Corporate (28) (11)
----- ----- -----
Total $ 473 $ 371 27%
===== =====
</TABLE>
Earnings from Soup and Sauces increased 40% due to higher U.S. wet soup sales
and lower marketing and selling spending. The ready-to-serve category showed
continued growth behind Campbell's Chunky. Prego, Pace and Franco-American pasta
also contributed to the earnings growth.
Earnings from Biscuits and Confectionery increased 10% to $78 million. The
increase was due to strong performance by Godiva Chocolatier and the increase in
sales at Arnotts. Pepperidge Farm results continued to be adversely impacted by
competition in the cheese cracker business.
Away From Home earnings were relatively flat versus last year.
NON-OPERATING ITEMS
Net interest expense was $50 million versus $42 million in the prior year due to
higher debt levels.
The effective tax rate was 33.6% compared to 33.4% last year.
SIX MONTHS
SALES
Sales for the six months increased 1% to $3.68 billion from $3.64 billion last
year. The change in sales was due to a 1% increase from volume and mix, a 2%
increase from higher selling prices, offset by a 2% decline from divestitures.
14
<PAGE> 15
An analysis of net sales by segment follows:
<TABLE>
<CAPTION>
(millions) 2000 1999 % CHANGE
- ---------- ---- ---- --------
<S> <C> <C> <C>
Soup and Sauces $ 2,625 $ 2,567 2%
Biscuits and Confectionery 793 769 3%
Away From Home 278 262 6%
------- ------- ---
Subtotal 3,696 3,598 3%
Other 22 75
Intersegment (34) (37)
------- ------- ---
Total $ 3,684 $ 3,636 1%
======= =======
</TABLE>
The sales increase reported by Soup and Sauces was due to a 2% increase in
worldwide wet soup volume, driven primarily by the second quarter U.S. soup
shipment recovery. Outside the U.S., wet soup sales in Germany, France, and
Australia contributed to this growth. Beverage sales were flat versus last year,
while Pace and Franco-American experienced declines in sales.
Biscuits and Confectionery reported a 3% increase versus 1999 due to continued
gains in the Godiva business and the Arnotts biscuit business. Pepperidge Farm
sales declined due to continued competitive pressure in the cheese cracker
category.
Away From Home reported a sales increase of 6% due to a 9% increase in soup
volume.
The decline in Other is due to the divestiture of Fresh Start Bakeries, Inc. in
May 1999.
GROSS MARGIN
Gross margin, defined as net sales less cost of products sold, increased $77
million year-to-date. As a percent of sales, gross margin was 55% compared to
53.6% last year. The improvement in margin percentage was principally due to
product mix with stronger volume in the U.S., selling price increases, and cost
savings programs.
MARKETING AND SELLING EXPENSE
Marketing and selling expenses as a percent of sales decreased to 24% from 26%
last year. The decrease is attributable to a shift in the timing of certain
programs and reductions in programs to match marketplace performance.
15
<PAGE> 16
ADMINISTRATIVE EXPENSES
Administrative expenses were relatively flat as a percent of sales compared to
last year.
OTHER EXPENSES
Other expenses increased as compared to last year primarily due to increases in
incentive compensation costs.
OPERATING EARNINGS
Segment operating earnings increased 10% versus the prior year.
An analysis of operating earnings by segment follows:
<TABLE>
<CAPTION>
(millions) 2000 1999 % CHANGE
- ---------- ---- ---- --------
<S> <C> <C> <C>
Soup and Sauces $ 763 $ 680 12%
Biscuits and Confectionery 136 129 5%
Away From Home 31 33 (6)%
----- ----- -----
Subtotal 930 842 10%
Other 2 7
----- ----- -----
932 849
Corporate (48) (31)
----- ----- -----
Total $ 884 $ 818 8%
===== =====
</TABLE>
The increase in earnings from Soup and Sauces is primarily due to the recovery
in U.S. soup shipments from last year and improved earnings performance by
Prego, Pace and Franco-American. Erasco and Liebig also contributed to operating
margin gains.
Biscuits and Confectionery reported an increase in earnings driven by Godiva
Chocolatier and Arnotts. Earnings from Pepperidge Farm remained flat.
Earnings from Away From Home declined due to increases in investments behind
growth initiatives and costs associated with the new Stockpot facility.
Earnings from Other declined due to the divestiture of Fresh Start Bakeries,
Inc. in May 1999.
16
<PAGE> 17
NON-OPERATING ITEMS
Net interest expense increased to $96 million from $86 million in the prior year
due to the higher debt levels.
The effective tax rate was 34.5% compared to 34.0% last year.
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.
LIQUIDITY AND CAPITAL RESOURCES
The company generated cash from operations of $726 million compared to $389
million last year. This increase is primarily due to higher earnings and
improvement in working capital management.
Capital expenditures were $73 million, a decrease from $126 million last year.
The company continues to aggressively manage its capital outlays and expects
total expenditures to approximate $270 million in fiscal 2000.
In the first six months, the company repurchased 6.9 million shares versus 9.3
million last year. By repurchasing shares, the company expects to utilize
existing cash and debt capacity to lower its cost of capital and increase
returns to shareowners. The company's long-term strategy is to repurchase
approximately two percent of its outstanding shares annually.
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. See
Note (g) of the Notes to Financial Statements for further discussion of the
contract.
17
<PAGE> 18
YEAR 2000
The company recognized the material nature of the business issues related to the
computer processing of dates into and beyond the Year 2000 and effected a
readiness plan that was divided into three major phases: Business Systems
Inventory and Assessment, Remediation and Replacement, and Testing. Management
believes the company has completed all of the activities within its control to
ensure that the company's systems are Year 2000 compliant. The company has not
experienced any disruption or material adverse impacts in its operations,
business systems or supply chain as a result of the Year 2000 date transition.
The company is not aware that any of its major business partners have
experienced significant Year 2000 issues. However, the company has developed
contingency plans to mitigate any remaining Year 2000-related risks.
The aggregate cost of the company's Year 2000 efforts was approximately $42
million. These costs, except for capital costs of approximately $3 million, were
expensed as incurred and funded through operating cash flows. The company
incurred Year 2000-related costs of approximately $23 million in fiscal 1999 and
$5 million in fiscal 2000. No significant future expenses are expected to be
incurred.
An analysis of costs incurred is as follows:
<TABLE>
<CAPTION>
(millions)
<S> <C>
External consulting $23
Hardware/software upgrades 13
Other 6
---
Total $42
===
</TABLE>
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.
18
<PAGE> 19
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
- - 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 any remaining
Year 2000-related risks.
This discussion of uncertainties is by no means exhaustive but is designed to
highlight important factors that may impact the company's outlook.
19
<PAGE> 20
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.
20
<PAGE> 21
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.
As of March 9, 2000, ten lawsuits had been commenced since January 2000 against
Campbell Soup Company and certain of its officers in the United States District
Court for the District of New Jersey, on behalf of persons who allegedly
purchased the company's stock between November 18, 1997 and January 8, 1999.
Specifically, the actions allege, among other things, that during this period,
Campbell and certain of its officers misrepresented the company's financial
condition by failing to disclose alleged shipping and revenue recognition
practices in connection with the sale of certain company products at the end of
the company's fiscal quarters in violation of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated
thereunder. The actions seek compensatory and other damages, and costs and
expenses associated with the litigation. Campbell believes the complaints are
without merit and intends to defend the actions vigorously.
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
second quarter of fiscal 2000.
21
<PAGE> 22
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: March 15, 2000 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
22
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
27 Financial Data Schedule.
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-30-2000
<PERIOD-START> AUG-02-1999
<PERIOD-END> JAN-30-2000
<CASH> 92
<SECURITIES> 0
<RECEIVABLES> 684
<ALLOWANCES> 46
<INVENTORY> 583
<CURRENT-ASSETS> 1,439
<PP&E> 3,247
<DEPRECIATION> 1,569
<TOTAL-ASSETS> 5,564
<CURRENT-LIABILITIES> 3,149
<BONDS> 1,336
0
0
<COMMON> 20
<OTHER-SE> 245
<TOTAL-LIABILITY-AND-EQUITY> 5,564
<SALES> 3,684
<TOTAL-REVENUES> 3,684
<CGS> 1,657
<TOTAL-COSTS> 1,657
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 788
<INCOME-TAX> 272
<INCOME-CONTINUING> 516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516
<EPS-BASIC> $1.21
<EPS-DILUTED> $1.19
</TABLE>
