SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934
Campbell PlaceCamden, New Jersey 08103-1799Principal 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.
There were 410,200,129 shares of Capital Stock outstanding as of June 6, 2002.
TABLE OF CONTENTS
ITEM 1
PART I. FINANCIAL INFORMATION
CAMPBELL SOUP COMPANY CONSOLIDATED
Statements of Earnings
(unaudited)(millions, except per share amounts)
See Notes to Financial Statements
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Balance Sheets
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Statements of Cash Flows
(unaudited)(millions)
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Statements of Shareowners’ Equity
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Notes to Financial Statements
(unaudited)(dollars in millions, except per share amounts)
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have been allocated between the two segments based on various measures, for example, budgeted production hours for fixed assets and depreciation.
April 28, 2002
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ITEM 2.
CAMPBELL SOUP COMPANY CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION" -->
MANAGEMENT’S DISCUSSION AND ANALYSIS OFRESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Overview
The company reported net earnings of $96 million for the quarter ended April 28, 2002 compared to $122 million in the comparable quarter a year ago. Diluted earnings per share declined to $.23 from $.30. Diluted earnings per share, excluding costs associated with the previously announced Australian manufacturing reconfiguration, were $.24. (All per share amounts included in Management’s Discussion and Analysis are presented on a diluted basis.) The lower earnings were a result of planned increases in infrastructure and marketing investments across major businesses, partially offset by lower interest expense.
For the nine months ended April 28, 2002, net earnings were $470 million compared to $597 million in the comparable period a year ago. Diluted earnings per share declined to $1.14 ($1.17 excluding the Australian manufacturing reconfiguration) from $1.42 in fiscal 2001. Excluding the impact of the Australian manufacturing reconfiguration, net earnings were $480 million, a decline of 20% versus the nine months ended April 29, 2001. Lower earnings were primarily a result of planned increases in marketing investments across the portfolio and increased administrative expenses in line with the company’s transformation plan announced in July 2001.
Certain reclassifications were made to the financial statements to comply with new accounting standards. In the fourth quarter of fiscal 2001, the company adopted the Emerging Issues Task Force (EITF) consensus on Issue No. 00-10 “Accounting for Shipping and Handling Fees and Costs.” In the first quarter ended October 28, 2001, the company adopted EITF Issue No. 00-14 “Accounting for Certain Sales Incentives” and Issue No. 00-25 “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products,” as codified by Issue No. 01-9 “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products.” Under these Issues, the EITF concluded that certain consumer and trade sales promotion expenses, such as coupon redemption costs, cooperative advertising programs, new product introduction fees, feature price discounts and in-store display incentives, should be classified as a reduction of sales rather than as marketing expenses. The adoption of these issues resulted in the following reclassifications to the three and nine month periods ended April 29, 2001: Net sales were reduced by $168 million and $567 million, respectively; Cost of products sold was increased by $45 million and $150 million, respectively; and Marketing and selling expenses were reduced by $213 million and $717 million, respectively. As reclassifications, these changes had no impact on net earnings.
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Beginning in fiscal 2002, the company changed its organizational structure such that operations are managed and reported in four segments: North America Soup and Away From Home, North America Sauces and Beverages, Biscuits and Confectionery, and International Soup and Sauces. Comparative periods have been restated to conform to the current year presentation. For a description of the segments, refer to note (e) to the Consolidated Financial Statements.
THIRD QUARTER
Sales
Sales in the quarter increased 8% to $1.37 billion from $1.27 billion last year. The net change in sales was due to a 7% increase from the European acquisition (which closed in the fourth quarter of fiscal 2001) and a 1% increase from higher selling prices. Base volume and mix were flat. Wet soup shipments compared to one year ago were up 2% in the U.S. and down 3% in international, resulting in flat worldwide shipments.
An analysis of net sales by segment follows:
The 1% sales increase in North America Soup and Away From Home was primarily due to a 1% increase in volume/mix. U.S. wet soup shipments increased 2%. Condensed soup volume declined 3%, while ready-to-serve soup shipments increased 9%. The ready-to-serve volume growth was driven by improvements on Campbell’s Select and new varieties of Campbell’s Chunky. Swanson broth shipments were down 3% versus the prior year due to lower promotional spending and increased competitive promotion. Away From Home sales increased over the prior year led by solid soup sales performance in both chain accounts and in traditional foodservice outlets. Canada reported sales growth by all businesses, particularly soup.
The 1% sales decrease in North America Sauces and Beverages was primarily due to volume declines. The base Prego sauce business was soft due to aggressive competitive promotions. Prego pasta bake sauce, introduced in the fourth quarter last year, contributed to a volume increase.Franco-American volume declined double-digits as a result of competitive trade programs, while Pace Mexican sauces and V8 vegetable juice reported volume growth in response to advertising and consumer promotion. V8 Splash juice beverages continued to decline.
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Biscuits and Confectionery reported a 5% increase in sales due to a 3% increase in volume, a 2% increase from higher selling prices and decreased trade and consumer coupon redemption expenses. Sales were up in all businesses. Pepperidge Farm reported solid volume gains due to product innovation in the cookie and cracker business with the introduction of Dessert Bliss cookies andGoldfish sandwich crackers, as well as strong sales of Milano cookies. Arnotts reported volume gains driven by the new line of rice-based snack products introduced under the Rix label, and new premiumEmporio biscuits. Godiva’s sales increased in the quarter due to new global store openings and strong comparable store sales in Japan. Godiva’s North America comparable store sales continued to track below last year, a trend which began following the events of September 11th.
The significant increase in sales in International Soup and Sauces was due primarily to the European acquisition in the fourth quarter fiscal 2001, which resulted in a 64% increase. The base business declined 5%, or 3% excluding the negative impact of currency. The base business performance was due to sales softness in the United Kingdom soup and sauces business.
Gross Margin
Gross margin, defined as net sales less cost of products sold, increased $30 million in the quarter as compared to last year. As a percent of sales, gross margin was 43% compared to 44% last year. The percentage decline was due mainly to the continuing mix shift in U.S. soup towards ready-to-serve products, the cost of quality improvements across a number of products, and costs associated with the Australian manufacturing reconfiguration.
Marketing and Selling Expenses
Marketing and selling expenses increased from $208 million in fiscal 2001 to $246 million in fiscal 2002. As a percent of sales, Marketing and selling expenses increased to 18% from 16% in the prior year. The increase is primarily due to the impact of the European acquisition, higher marketing investments in U.S. soups and sauces, and selling infrastructure investments.
Administrative Expenses
As a percent of sales, administrative expenses increased from 6% to 7% compared to last year, due to infrastructure investments.
Operating Earnings
Segment operating earnings decreased 15% for the third quarter versus the prior year. As a percent of sales, operating earnings declined from approximately 21% in fiscal 2001 to 16% in fiscal 2002, reflecting the decline in gross margin as a percent of sales and increased marketing and selling costs.
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An analysis of operating earnings by reportable segment follows:
Earnings from North America Soup and Away From Home declined 18% due primarily to planned increases in marketing and infrastructure investments and costs of quality improvements.
The 22% decline in operating earnings in North America Sauces and Beverages was primarily due to an increase in total marketing support, principally on Pregopasta bake sauce, Pace and V8 vegetable juices, and lower shipments.
Earnings from Biscuits and Confectionery declined 7% as reported, and increased 5% excluding costs associated with the Australian manufacturing reconfiguration. The increase excluding the Australian manufacturing reconfiguration costs was due to the sales volume growth across the businesses, offset partially by lower same store sales at Godiva.
The 36% increase in earnings from International Soup and Sauces was driven by the European acquisition. The European dry soup and sauces business, acquired in the fourth quarter fiscal 2001, is meeting expectations despite some initially weak marketplace performance. Excluding the impact of the acquisition and currency, operating earnings declined significantly, reflecting lower sales in the United Kingdom soup and sauces business, increased marketing investment across the portfolio, and increases in infrastructure investments.
Non-Operating Items
Net interest expense was $44 million compared to $52 million last year. Higher interest expense from higher debt levels due to the European acquisition completed in the fourth quarter fiscal 2001 was more than offset by lower short-term rates.
The effective tax rate was 34.2% compared to 34.1% last year.
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NINE MONTHS
Sales for the nine months increased 7% to $4.91 billion from $4.61 billion last year. The change in net sales was attributed to a 6% increase from the European acquisition (which closed in the fourth quarter of fiscal 2001), a 2% increase from volume/mix, a 1% increase from higher selling prices, offset by a 1% decrease due to higher trade promotion and consumer coupon redemption expenses and a 1% decline due to currency. Wet soup shipments were even with the same period last year in the U.S., and up 2% in the international business, resulting in a 1% increase worldwide.
An analysis of net sales by reportable segment follows:
North America Soup and Away From Home reported flat sales with the prior year. Volume/mix contributed to an increase of 2%, which was offset by an increase in trade promotion and consumer coupon redemption expenses. Shipments of condensed products declined 6%, while shipments of ready-to-serve products increased 9%, driven by double-digit volume gains in Campbell’s Chunky andCampbell’s Select. The ready-to-serve performance was driven by increased marketing and product improvements. Swanson broth shipments increased 3% over the prior year. The introduction of Campbell’s Supper Bakes in the fourth quarter of fiscal 2001 also contributed to segment volume growth in the first nine months. Away From Home sales were approximately even with last year, while Canada reported volume gains.
North America Sauces and Beverages reported a 2% increase in sales due to a 3% increase in volume/mix, a 1% increase from higher selling prices and the impact of currency, offset by a 2% decrease due to increased trade promotion and consumer coupon redemption expenses. The volume increase was driven by Pregopasta bake sauce, introduced in the fourth quarter fiscal 2001, Pace Mexican sauces and V8 vegetable juice. V8 Splash juice beverages and Franco-Americancanned pasta continued to show weak performance compared to last year.
Biscuits and Confectionery reported a 3% increase in sales due to a 3% increase in volume/mix, a 1% increase from higher selling prices, offset by a 1% decrease due to
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currency. Pepperidge Farm reported sales increases across its portfolio. New product introductions such as Dessert Bliss cookies andGoldfish sandwich crackers contributed to the growth. Arnotts also contributed to the increase in sales driven by new product entries such as Emporio biscuits and Rix rice-based snack products. Godiva sales increased slightly over the prior year, despite same store sales declines in North America in the aftermath of September 11.
The 58% increase in International Soup and Sauces sales was due primarily to the European acquisition which was completed in the fourth quarter of fiscal 2001. The base business net sales declined 2% as compared to last year due to sales softness in the United Kingdom soup and sauces business offset by growth in Liebig soups in France, in Australian soup and broth, and soup and sauces in Belgium.
Gross margin, defined as net sales less cost of products sold, increased $32 million year-to-date. As a percent of sales, gross margin was 43.8% compared to 46% last year. The decline was due mainly to the following: increased trade promotional spending and consumer coupon redemption expenses which are classified as deductions from sales; the continued mix shift in U.S. soup towards ready-to-serve products; the cost of quality improvements across a number of products; and costs associated with the Australian manufacturing reconfiguration.
Marketing and selling expenses increased from $686 million in fiscal 2001 to $837 million in fiscal 2002. The increase is due to higher advertising investments across the portfolio, particularly in U.S. soup and sauces, and the impact of the European acquisition. As a percent of sales, Marketing and selling expenses increased to approximately 17% from 15% last year.
Administrative expenses increased by approximately 22% primarily due to costs associated with the previously announced infrastructure enhancements and the impact of the European acquisition.
Other Expenses
Other expenses increased 27% versus last year primarily due to increased amortization expense related to the European acquisition.
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Segment operating earnings decreased 16% versus the prior year. As a percent of sales, operating earnings declined from approximately 25% in fiscal 2001 to 19% in fiscal 2002, reflecting the decline in gross margin as a percent of sales, increased advertising costs, and increased administrative expenses. An analysis of operating earnings by segment follows:
The 19% decrease in earnings from North America Soup and Away From Home was due to planned increases in trade, consumer promotion, and advertising expenses and costs of quality improvements. The focus of promotion and advertising investments was on ready-to-serve products, including Campbell’s Chunky andCampbell’s Select, and the new Campbell’s Supper Bakes.
The primary reason for the 23% decline in operating earnings in North America Sauces and Beverages was an increase in total marketing support, principally onPrego pasta bake sauce, Pace and V8 vegetable juices. These investments were partially offset by higher shipments of these products.
Earnings from Biscuits and Confectionery declined 15% as reported, 8% excluding costs associated with the Australian manufacturing reconfiguration, and 7% excluding the impact of currency and the reconfiguration costs. The decline was attributed to increased marketing support across all businesses and a decline in same store sales and earnings at Godiva, partially offset by higher shipments at Pepperidge Farm and Arnotts.
The 49% increase in earnings from International Soup and Sauces was driven by the European acquisition. The European dry soup and sauces business, acquired in the fourth quarter fiscal 2001, is meeting expectations despite some initially weak marketplace performance. Excluding the impact of the acquisition, operating earnings declined significantly, reflecting lower sales in the United Kingdom soup and sauces business and planned increases in marketing support and infrastructure investments.
Corporate expenses increased $16 million due principally to higher compensation expenses.
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Non-operating Items
Net interest expense decreased to $142 million from $153 million in the prior year. Higher interest expense due to increased debt levels following the fourth quarter fiscal 2001 European acquisition was more than offset by lower short-term rates.
The effective tax rate was 34.2% for both fiscal 2002 and 2001.
Restructuring Programs
A restructuring charge of $10 million ($7 million after tax) was recorded in the fourth quarter fiscal 2001 for severance costs associated with the reconfiguration of the manufacturing network of Arnotts in Australia. Costs of approximately $13 million ($9 million after tax) were recorded in the nine months ended April 28, 2002 as Cost of products sold, representing primarily accelerated depreciation on assets to be taken out of service. This program is designed to drive greater manufacturing efficiency and will result in the closure of the Melbourne plant. The company expects to incur additional pre-tax costs of approximately $6 — $10 million over the next two fiscal quarters for accelerated depreciation, employee benefit costs and other one-time expenses related to this program. In the second quarter ended January 27, 2002, the company recorded an additional $1 million restructuring charge related to planned severance activities. The expected net cash outflows related to this program will not have a material impact on the company’s liquidity. As a result of this reconfiguration, the company expects annual pre-tax cost savings of approximately $10 million, beginning in fiscal 2003. Approximately 550 jobs will be eliminated due to the plant closure.
Liquidity and Capital Resources
The company generated cash from operations of $829 million compared to $934 million last year. This performance reflects lower net income, resulting from planned increases in marketing and infrastructure investments.
Capital expenditures were $112 million, an increase from $103 million last year. Capital expenditures are expected to be approximately $280 million in fiscal 2002 due to planned process improvements, product quality enhancements, the Australian plant reconfiguration, and the initiation of the construction of the new Pepperidge Farm bakery in Connecticut.
Acquisition spending, as presented on the Statements of Cash Flows, represents a purchase price adjustment related to the May 2001 European acquisition.
The company did not purchase shares in fiscal 2002 since the strategic share repurchase plan was suspended in 2001. During the nine months ended April 29, 2001, the company purchased approximately 14 million shares.
In September 2001, the company issued $300 million seven-year 5.875% fixed-rate notes. The proceeds were used to repay short-term borrowings. While planning for the issuance of these notes, the company entered into interest rate swaps with a notional value of approximately $138 million that effectively fixed a portion of the interest rate on
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the debt prior to issuance. These contracts were settled at a loss of approximately $4 million upon issuance of the notes. This loss is being amortized over the life of the notes. In conjunction with the issuance of these notes, the company also entered into a $75 million seven-year interest rate swap that converts the fixed-rate debt to variable.
In October 2001, the company issued $300 million two-year variable-rate notes. The proceeds were also used to repay short-term borrowings. In connection with this issuance, the company entered into a $300 million two-year interest rate swap that converts the variable-rate debt to fixed.
On November 23, 2001, the company redeemed $100 million 5.625% notes due in fiscal 2003. The notes were callable at par. This redemption was financed with lower rate commercial paper.
On December 11, 2001, the company issued an additional $200 million of its existing 6.75% fixed rate notes due February 2011, originally issued in February 2001. These additional notes were priced at a premium to reflect market conditions. The proceeds were used to repay short-term borrowings.
In January 2002, the company repaid $300 million of variable-rate notes due December 2003. The notes were repaid with lower cost short-term borrowings.
On March 19, 2002, the company issued $300 million five-year 5.50% fixed rate notes. The proceeds were used to repay $228 million variable-rate notes due in December 2003 and short-term borrowings. In connection with this issuance, the company entered into a five-year interest rate swap that converts $100 million of the fixed-rate debt to variable.
In September 2001, the company entered into $1.8 billion in committed revolving credit facilities, comprised of a $900 million 364-day revolving credit facility, which replaced an existing facility that matured in September 2001, and a $900 million 5-year revolving credit facility that replaced a facility scheduled to mature in October 2002. These agreements support the company’s commercial paper program.
The company believes that foreseeable liquidity and capital resource requirements are expected to be met through anticipated cash flows from operations, management of working capital, and borrowings supported by existing committed credit facilities, including commercial paper. The company believes that its sources of financing are adequate to meet its liquidity and capital resource requirements. The cost and terms of any future financing arrangement depend on the market conditions and the company’s financial position at that time.
The following table represents significant long-term cash obligations:
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(U.S. $ equivalents in millions)
At April 28, 2002, the company had $1,164 million of notes payable due within one year and $42 million of standby letters of credit issued on behalf of the company, which are supported by $1.8 billion of committed revolving credit facilities. The company is in compliance with the covenants contained in its revolving credit facilities and debt securities.
The company enters into other commitments, such as operating lease commitments, surety bonds, and long-term purchase arrangements, in the ordinary course of business. Operating leases are primarily entered into for warehouse and office facilities, retail store space, and certain equipment. Purchase commitments relate to the procurement of ingredients, supplies, machinery and equipment and services. These commitments are not expected to have a material impact on liquidity.
The company guarantees approximately $71 million of bank loans to Pepperidge Farm independent sales distributors which are secured by their distribution routes purchased from the company.
Critical Accounting Policies/Estimates
On December 12, 2001, the Securities and Exchange Commission issued Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies.” Critical accounting policies are those that involve subjective or complex judgments, often as a result of the need to make estimates. In response to the release, management reviewed the company’s accounting principles. The following areas all require the use of judgments and estimates: the valuation of long-lived assets, deferred income taxes, pension and postretirement benefits, marketing accruals, and inventories. Estimates in each of these areas are based on historical experience and various assumptions that the company believes are appropriate. Actual results may differ from these estimates. The company’s accounting practices are discussed in more detail in the Annual Report on Form 10-K for fiscal 2001. Additional information with respect to the valuation of long-lived assets is discussed under the New Accounting Pronouncements section.
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New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141 “Business Combinations” and Statement No. 142 “Goodwill and Other Intangible Assets.” In addition to requiring that all business combinations be accounted for under the purchase method, Statement No. 141 requires intangible assets that meet certain criteria to be recognized as assets apart from goodwill. The provisions of Statement No. 142 indicate that goodwill and indefinite life intangible assets should no longer be amortized but rather be tested for impairment annually. Intangible assets with a finite life shall continue to be amortized over the estimated useful life. Statement No. 141 is effective for business combinations initiated after June 30, 2001. Statement No. 142 is effective for fiscal years beginning after December 15, 2001. The elimination of amortization is to be applied on a prospective basis and prior periods are not to be restated. However, the impact of amortization of goodwill and indefinite life intangible assets is to be disclosed for prior periods.
The company is currently evaluating the impact of the new standards. The total after-tax amortization expense related to goodwill and other intangible assets was approximately $43 million for the nine month period ended April 28, 2002 and $28 million for the nine month period ended April 29, 2001. The company will adopt Statement No. 142 in the first quarter fiscal 2003.
In June 2001, the FASB issued Statement No. 143 “Accounting for Asset Retirement Obligations.” This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement is effective for fiscal years beginning after June 15, 2002. The company is currently evaluating the impact of this Statement.
In August 2001, the FASB issued Statement No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business. The provisions of this Statement are effective for fiscal years beginning after December 15, 2001. The company is currently evaluating the impact of this Statement.
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Recent Developments
On May 15, 2002, the company issued a press release announcing results for the third quarter fiscal 2002 and commented on the outlook for earnings per share for the full year. In that release, the company maintained its previous earnings estimates of approximately $1.30 per share for fiscal 2002 (excluding the impact of the Australian reconfiguration).
On June 4, 2002, the company announced that its Australian subsidiary, Arnott’s Biscuits Holdings Pty Ltd (“Arnott’s”), had agreed to make a cash offer of $2.00 per share (Australian) for all of the shares of Snack Foods Limited, a leader in the Australian salty snack category. Under the terms of the offer, Snack Foods Limited’s shareholders will also receive a dividend of 2.5 cents (Australian) per share, previously paid in October, from Snack Foods Limited. The acquisition will be in the form of an all-cash tender offer, and the total consideration of the shares would be approximately $255 million (Australian), or approximately $145 million (U.S.). Arnott’s offer will be subject to a number of conditions, including the tender of at least 90% of the outstanding shares in the offer and the approval of Australian antitrust and foreign investment authorities.
On June 7, 2002, the company filed a $1 billion shelf registration statement with the Securities and Exchange Commission to use for future offerings of debt securities. When the registration statement is declared effective, the company may issue debt securities from time to time, depending on market conditions. The company intends to use the proceeds to repay short-term debt, to reduce or retire other indebtedness or for other general corporate purposes.
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:
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This discussion of uncertainties is by no means exhaustive, but is designed to highlight important factors that may impact the company’s outlook.
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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 2001. There have been no significant changes in the company’s portfolio of financial instruments or market risk exposures from the fiscal 2001 year-end except that the company entered into various interest rate swap instruments in connection with long-term refinancing. See note (h) of the Notes to Financial Statements and the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Results of Operations for an additional discussion of these interest rate swap contracts.
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PART II
ITEM 1. LEGAL PROCEEDINGS
As previously reported, ten purported class action lawsuits were commenced against the company and certain of its officers in the United States District Court for the District of New Jersey. The lawsuits were subsequently consolidated, and an amended consolidated complaint was filed alleging, among other things, that the company and certain of its officers misrepresented the company’s financial condition between September 8, 1997 and January 8, 1999, 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 Section 10 (b) and 20 (a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The actions seek compensation and other damages, and costs and expenses associated with the litigation. The company believes the action is without merit and intends to defend the case vigorously.
As also previously reported, the United States Environmental Protection Agency (the “EPA”) sent the company a special notice letter dated September 28, 2000 relating to the Puente Valley Operable Unit of the San Gabriel Valley Superfund Sites, Los Angeles County, California (the “Superfund Site”) for property located at 125 N. Orange Avenue, Industry, California, advising that the EPA considers the company to be a potentially responsible party due to the alleged release or threatened release of hazardous substances, and therefore, potentially responsible for the costs incurred in connection with contamination at the Superfund Site. Although the impact of this proceeding cannot be predicted at this time due to the large number of other potentially responsible parties and the uncertainty involved in estimating the cost of clean-up, 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.
As also previously reported, on March 30, 1998, the company effected a spinoff of several of its non-core businesses to Vlasic Foods International Inc. (“VFI”). VFI and several of its affiliates (collectively, “Vlasic”) commenced cases under Chapter 11 of the Bankruptcy Code on January 29, 2001 in the United States Bankruptcy Court for the District of Delaware. Vlasic’s Second Amended Joint Plan of Distribution under Chapter 11 (the “Plan”) was confirmed by an order of the Bankruptcy Court dated November 16, 2001, and became effective on or about November 29, 2001. The Plan provides for the assignment of various causes of action allegedly belonging to the Vlasic estates, including claims against the company allegedly arising from the spinoff, to VFB LLC, a limited liability company (“VFB”) whose membership interests are to be distributed under the Plan to Vlasic’s general unsecured creditors.
On February 19, 2002, VFB commenced a lawsuit against the company and several of its subsidiaries in the United States District Court for the District of Delaware alleging, among other things, fraudulent conveyance, illegal dividends and breaches of fiduciary duty by Vlasic directors alleged to be under the company’s control. The lawsuit seeks to
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hold the company liable in an amount necessary to satisfy all unpaid claims against Vlasic (which VFB estimates in the complaint to be $250,000,000), plus unspecified exemplary and punitive damages. The company believes the action is without merit and intends to defend the case vigorously.
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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.
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INDEX TO EXHIBITS
Exhibit
None.
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