Campbell's - 10-Q quarterly report FY

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
May 2, 2004		1-3822

(CAMPBELL SOUP COMPANY LOGO)


New Jersey		21-0419870
State of Incorporation		I.R.S. Employer Identification No.

Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices

Telephone Number: (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 [ ] .

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b - 2 of the Securities Exchange Act of 1934).

Yes [X] No [ ] .

There were 410,487,750 shares of Capital Stock outstanding as of June 3, 2004.

TABLE OF CONTENTS


PART I
	ITEM 1. FINANCIAL INFORMATION
		Statements of Earnings
		Balance Sheets
		Statements of Cash Flows
		Statements of Shareowners’ Equity (Deficit)
		Notes to Consolidated Financial Statements
	ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
LETTER AGREEMENT BETWEEN COMPANY & MARK A. SARVARY
CERTIFICATION OF DOUGLAS R. CONANT
CERTIFICATION OF ROBERT A. SCHIFFNER
CERTIFICATION OF DOUGLAS R. CONANT, SECTION 1350
CERTIFICATION OF ROBERT A. SCHIFFNER, SECTION 1350

PART I.

ITEM 1. FINANCIAL INFORMATION

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Earnings

(unaudited)
(millions, except per share amounts)


	Three Months Ended					Nine Months Ended
	May 2,			April 27,		May 2,			April 27,
	2004			2003		2004			2003
Net sales	$	1,667		$	1,600	$	5,676		$	5,223

Costs and expenses
Cost of products sold		995			920		3,315			2,947
Marketing and selling expenses		278			264		911			867
Administrative expenses		141			143		400			379
Research and development expenses		23			23		65			63
Other expenses / (income)		(13	)		15		(1	)		17

Total costs and expenses		1,424			1,365		4,690			4,273

Earnings before interest and taxes		243			235		986			950
Interest, net		40			45		125			136

Earnings before taxes		203			190		861			814
Taxes on earnings		61			61		273			262

Earnings before cumulative effect of accounting change		142			129		588			552
Cumulative effect of change in accounting principle		—			—		—			(31	)

Net earnings	$	142		$	129	$	588		$	521

Per share - basic
Earnings before cumulative effect of accounting change	$	.35		$	.31	$	1.43		$	1.34
Cumulative effect of change in accounting principle		—			—		—			(.08	)

Net earnings	$	.35		$	.31	$	1.43		$	1.26

Dividends	$	.1575		$	.1575	$	.4725		$	.4725

Weighted average shares outstanding - basic		411			411		411			411

Per share - assuming dilution
Earnings before cumulative effect of accounting change	$	.34		$	.31	$	1.43		$	1.34
Cumulative effect of change in accounting principle		—			—		—			(.08	)

Net earnings	$	.34		$	.31	$	1.43		$	1.26

Weighted average shares outstanding - assuming dilution		413			411		412			411

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED

Balance Sheets

(unaudited)
(millions, except per share amounts)


	May 2,			August 3,
	2004			2003
Current assets
Cash and cash equivalents	$	28		$	32
Accounts receivable		481			413
Inventories		686			709
Other current assets		145			136

Total current assets		1,340			1,290

Plant assets, net of depreciation		1,834			1,843
Goodwill		1,908			1,803
Other intangible assets, net of amortization		1,088			1,018
Other assets		273			251

Total assets	$	6,443		$	6,205

Current liabilities
Notes payable	$	769		$	1,279
Payable to suppliers and others		501			620
Accrued liabilities		551			602
Dividend payable		65			65
Accrued income taxes		301			217

Total current liabilities		2,187			2,783

Long-term debt		2,543			2,249
Nonpension postretirement benefits		301			304
Other liabilities, including deferred income taxes of $262 and $245		536			482

Total liabilities		5,567			5,818

Shareowners’ equity
Preferred stock; authorized 40 shares; none issued		—			—
Capital stock, $.0375 par value; authorized 560 shares; issued 542 shares		20			20
Additional paid-in capital		263			298
Earnings retained in the business		5,648			5,254
Capital stock in treasury, at cost		(4,839	)		(4,869	)
Accumulated other comprehensive loss		(216	)		(316	)

Total shareowners’ equity		876			387

Total liabilities and shareowners’ equity	$	6,443		$	6,205

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Cash Flows

(unaudited)
(millions)


	Nine Months Ended
	May 2,			April 27,
	2004			2003
Cash flows from operating activities:
Net earnings	$	588		$	521
Non-cash charges to net earnings
Cumulative effect of accounting change		—			31
Depreciation and amortization		195			180
Deferred income taxes		16			(1	)
Other, net		67			41
Changes in working capital
Accounts receivable		(51	)		(24	)
Inventories		40			61
Prepaid assets		(8	)		(1	)
Accounts payable and accrued liabilities		(125	)		(26	)
Pension fund contributions		(54	)		(4	)
Other		(92	)		(72	)

Net cash provided by operating activities		576			706

Cash flows from investing activities:
Purchases of plant assets		(142	)		(158	)
Sales of plant assets		10			10
Businesses acquired		(9	)		(176	)
Sales of businesses		—			6
Other, net		—			(4	)

Net cash used in investing activities		(141	)		(322	)

Cash flows from financing activities:
Long-term borrowings		301			400
Net short-term repayments		(534	)		(589	)
Dividends paid		(194	)		(194	)
Treasury stock purchases		(38	)		(13	)
Treasury stock issuances		20			15

Net cash used in financing activities		(445	)		(381	)

Effect of exchange rate changes on cash		6			3

Net change in cash and cash equivalents		(4	)		6
Cash and cash equivalents - beginning of period		32			21

Cash and cash equivalents - end of period	$	28		$	27

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Shareowners’ Equity (Deficit)

(unaudited)
(millions, except per share amounts)


	Capital Stock
	Issued				In Treasury						Additional			Earnings Retained			Accumulated Other			Total
											Paid-in			in the			Comprehensive			Shareowners’
	Shares		Amount		Shares			Amount			Capital			Business			Income (Loss)			Equity (Deficit)
Balance at July 28, 2002		542	$	20		(132	)	$	(4,891	)	$	320		$	4,918		$	(481	)	$	(114	)

Comprehensive income (loss)
Net earnings															521						521
Foreign currency translation adjustments																		133			133
Cash-flow hedges, net of tax																		(1	)		(1	)

Other comprehensive income																		132			132

Total comprehensive income																					653

Dividends ($.4725 per share)															(194	)					(194	)
Treasury stock purchased						(1	)		(13	)											(13	)
Treasury stock issued under management incentive and stock option plans						1			44			(24	)								20

Balance at April 27, 2003		542	$	20		(132	)	$	(4,860	)	$	296		$	5,245		$	(349	)	$	352

Balance at August 3, 2003		542	$	20		(132	)	$	(4,869	)	$	298		$	5,254		$	(316	)	$	387

Comprehensive income (loss)
Net earnings															588						588
Foreign currency translation adjustments																		100			100
Cash-flow hedges, net of tax																		3			3
Minimum pension liability, net of tax																		(3	)		(3	)

Other comprehensive income																		100			100

Total comprehensive income																					688

Dividends ($.4725 per share)															(194	)					(194	)
Treasury stock purchased						(1	)		(38	)											(38	)
Treasury stock issued under management incentive and stock option plans						1			68			(35	)								33

Balance at May 2, 2004		542	$	20		(132	)	$	(4,839	)	$	263		$	5,648		$	(216	)	$	876

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED

Notes to Consolidated Financial Statements
(unaudited)
(dollars in millions, except per share amounts)

(a)		Basis of Presentation / Accounting Policies The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. All such adjustments are of a normal recurring nature. The accounting policies used in preparing these financial statements are consistent with those applied in the Annual Report on Form 10-K for the year ended August 3, 2003, except as discussed below. Certain reclassifications were made to the prior year amounts to conform with current presentation. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year.

		The company accounts for stock option grants and restricted stock awards in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, no compensation expense has been recognized for stock options since all options granted had an exercise price equal to the market value of the underlying stock on the grant date. Restricted stock awards are expensed. The following table illustrates the effect on net earnings and earnings per share if the company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123 to stock-based employee compensation.


	Three Months Ended						Nine Months Ended
	May 2, 2004			Apr. 27, 2003			May 2, 2004			Apr. 27, 2003
Net earnings, as reported	$	142		$	129		$	588		$	521
Add: Stock-based employee compensation expense included in reported net earnings, net of related tax effects ¹		4			3			9			11
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(11	)		(10	)		(30	)		(30	)

Pro forma net earnings	$	135		$	122		$	567		$	502

Earnings per share:
Basic-as reported	$	.35		$	.31		$	1.43		$	1.26

Basic-pro forma	$	.33		$	.30		$	1.38		$	1.22

Diluted-as reported	$	.34		$	.31		$	1.43		$	1.26

Diluted-pro forma	$	.33		$	.30		$	1.38		$	1.22

¹ Represents restricted stock expense.

(b)		Cumulative Effect of Accounting Change The company adopted SFAS No. 142 “Goodwill and Other Intangible Assets” as of July 29, 2002 and recognized a non-cash charge of $31 (net of $17 tax benefit), or $.08 per share, as a cumulative effect of accounting change. This charge related to impaired goodwill associated with the Stockpot business, a food service business included in the North America Soup and Away From Home segment.

(c)		Acquisitions In the first quarter 2004, the company acquired certain chocolate biscuit brands for approximately $9 from George Weston Foods Limited in Australia. These brands are included in the Biscuits and Confectionery segment.

		In the first quarter 2003, the company acquired two businesses for cash consideration of approximately $170 and assumed debt of approximately $20. The company acquired Snack Foods Limited, a leader in the Australian salty snack category, and Erin Foods, the number two dry soup manufacturer in Ireland. Snack Foods Limited is included in the Biscuits and Confectionery segment. Erin Foods is included in the International Soup and Sauces segment. The businesses have annual sales of approximately $160.

(d)		New Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB 51.” This Interpretation addresses consolidation by business enterprises of certain variable interest entities (VIEs). The Interpretation as amended is effective immediately for all enterprises with interests in VIEs created after January 31, 2003. In December 2003, the FASB issued a revised version of FIN 46 (FIN 46R), which clarified the provisions of FIN 46 by addressing implementation issues. FIN 46R must be applied to all entities subject to the Interpretation as of the first interim quarter ending after March 15, 2004. The company has investments of approximately $150 as of May 2, 2004 consisting of limited partnership interests in affordable housing partnership funds. The company’s ownership ranges from approximately 12% to 19%. The company evaluated the nature of these investments, which were in existence before January 31, 2003, against the provisions of the guidance and determined that such investments do not need to be consolidated in the financial statements. The company will continue to monitor modifications to the Interpretation.

		In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or “mezzanine” equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the statement of financial position. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. The guidance in SFAS No. 150 is generally effective for all financial instruments

		entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this standard did not impact the financial statements.

		In December 2003, the FASB issued a revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” which requires additional disclosures for benefit plans. The standard requires quarterly disclosure of the various components of pension expense and expanded annual disclosures, such as describing the types of plan assets, investment strategy, and measurement dates. Interim disclosures required under SFAS No. 132 are included in Note (l). Annual disclosures will be provided in the 2004 Form 10-K.

		On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The company sponsors medical programs for certain of its U.S. retirees and expects that this legislation will reduce the costs for some of these programs. The company is continuing to evaluate the impact of the legislation since guidance from various governmental and regulatory agencies concerning the requirements that must be met to obtain these cost reductions is still pending. In April 2004, the FASB issued Staff Position (FSP) No. FAS 106 - 2 to address the accounting and disclosure requirements related to the Act. The FSP is effective for interim or annual periods beginning after June 15, 2004. The expected effects of the Act will be factored into the company’s fiscal 2004 year-end measurement of postretirement medical obligations and related expense calculation for fiscal 2005.

(e)		Goodwill and Intangible Assets The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:


	May 2, 2004					August 3, 2003
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Intangible assets subject to amortization¹:
Trademarks	$	6	$	(3	)	$	6	$	(2	)
Other		17		(7	)		16		(7	)

Total	$	23	$	(10	)	$	22	$	(9	)

Intangible assets not subject to amortization:
Trademarks	$	1,045				$	975
Pension		28					28
Other		2					2

Total	$	1,075				$	1,005

Amortization related to these assets was approximately $1 for the nine month periods ended May 2, 2004 and April 27, 2003. The estimated aggregated amortization expense for each of the five succeeding fiscal years is less than $2 per year. Asset useful lives range from five to thirty-four years.

Changes in the carrying amount for goodwill for the period ended May 2, 2004 are as follows:


	North America		North America
	Soup and		Sauces and		Biscuits and		International
	Away From Home		Beverages		Confectionery		Soup and Sauces		Total
Balance at August 3, 2003	$	298	$	365	$	524	$	616	$	1,803
Foreign currency translation adjustment		2		—		56		47		105

Balance at May 2, 2004	$	300	$	365	$	580	$	663	$	1,908

(f)		Comprehensive Income Total comprehensive income comprises net earnings, net foreign currency translation adjustments, minimum pension liability adjustments, and net unrealized gains (losses) on cash-flow hedges.

		Total comprehensive income for the three months ended May 2, 2004 and April 27, 2003, was $78 and $175, respectively. Total comprehensive income for the nine months ended May 2, 2004 and April 27, 2003, was $688 and $653, respectively.

The components of Accumulated other comprehensive loss, as reflected in the Statements of Shareowners’ Equity (Deficit), consisted of the following:


	May 2,			April 27,
	2004			2003
Foreign currency translation adjustments	$	(1	)	$	(142	)
Cash-flow hedges, net of tax		(2	)		1
Minimum pension liability, net of tax¹		(213	)		(208	)

Total Accumulated other comprehensive loss	$	(216	)	$	(349	)

¹ Includes a tax benefit of $121 as of May 2, 2004 and $119 as of April 27, 2003.

(g)		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 include the incremental effect of stock options, except when such effect would be antidilutive. Stock options to purchase 18 million and 28 million shares of capital stock for the three-month periods ended May 2, 2004 and April 27, 2003, respectively, and 26 million and 28 million shares of capital stock for the nine-month periods ended May 2, 2004 and April 27, 2003, respectively, were not included in the calculation of diluted earnings per share because the exercise price of the stock options exceeded the average market price of the capital stock and therefore, the effect would be antidilutive.

(h)		Segment Information Campbell Soup Company, together with its consolidated subsidiaries, is a global manufacturer and marketer of high quality, branded convenience food products. The company operates in four segments: North America Soup and Away From Home, North America Sauces and Beverages, Biscuits and Confectionery, and International Soup and Sauces.

		The North America Soup and Away From Home segment comprises the retail soup and Away From Home business in the U.S. and Canada. The U.S. retail business includes the Campbell’s brand condensed and ready-to-serve soups and Swanson broths. The segment includes the company’s total business in Canada, which comprises the Habitant andCampbell’s soups, Prego pasta sauce and V8 juices. The Away From Home operations represent the distribution of products such as Campbell’ssoups, Campbell’s specialty entrees, beverage products, other prepared foods and Pepperidge Farm products through various food service channels in North America. The North America Sauces and Beverages segment includes U.S. retail sales for Prego pasta sauces, Pace Mexican sauces,Franco-American canned pastas and gravies, V8 vegetable juices, V8 Splashjuice beverages, Campbell’s tomato juice, as well as the total of all businesses in Mexico and other Latin American and Caribbean countries. The Biscuits and Confectionery segment includes all retail sales ofPepperidge Farm cookies,

		crackers, breads and frozen products in the United States, Arnott’s biscuits and crackers in Australia and Asia Pacific, Arnott’s Snackfoods salty snacks in Australia, and Godiva chocolates worldwide. The International Soup and Sauces segment comprises operations outside of North America, includingErasco and Heisse Tasse soups in Germany, Liebig and Royco soups andLesieur sauces in France, Campbell’s and Batchelors soups, Oxo stock cubes and Homepride sauces in the United Kingdom, Devos Lemmensmayonnaise and cold sauces and Campbell’s and Royco soups in Belgium, Blå Band soups and sauces in Sweden, and McDonnells and Erin soups in Ireland. In Asia Pacific, operations include Campbell’s soups and stock and Swanson broths across the region.

		Accounting policies for measuring segment assets and earnings before interest and taxes are substantially consistent with those described in the company’s 2003 Annual Report on Form 10-K. The company evaluates segment performance before interest and taxes. The North America Soup and Away From Home and North America Sauces and Beverages segments operate under an integrated supply chain organization, sharing substantially all manufacturing, warehouse, distribution and sales activities. Accordingly, assets have been allocated between the two segments based on various measures, for example, budgeted production hours for fixed assets and depreciation.

May 2, 2004


			Earnings			Depreciation
			Before Interest			and		Capital
Nine Months Ended	Net Sales		and Taxes			Amortization		Expenditures
North America Soup and Away From Home	$	578	$	113		$	16	$	20
North America Sauces and Beverages		301		66			8		10
Biscuits and Confectionery		481		37			24		21
International Soup and Sauces		307		38			12		11
Corporate and Eliminations¹		—		(11	)		8		4

Total	$	1,667	$	243		$	68	$	66


			Earnings			Depreciation
			Before Interest			and		Capital		Segment
Nine Months Ended	Net Sales		and Taxes			Amortization		Expenditures		Assets
North America Soup and Away From Home	$	2,277	$	554		$	47	$	44	$	1,221
North America Sauces and Beverages		952		216			25		21		1,211
Biscuits and Confectionery		1,522		173			70		49		1,762
International Soup and Sauces		925		112			32		19		1,919
Corporate and Eliminations¹		—		(69	)		21		9		330

Total	$	5,676	$	986		$	195	$	142	$	6,443

April 27, 2003


			Earnings			Depreciation
			Before Interest			and		Capital
Nine Months Ended	Net Sales		and Taxes			Amortization		Expenditures
North America Soup and Away From Home	$	600	$	147		$	17	$	15
North America Sauces and Beverages		295		59			9		10
Biscuits and Confectionery		434		38			24		31
International Soup and Sauces		271		37			8		5
Corporate and Eliminations¹		—		(46	)		11		4

Total	$	1,600	$	235		$	69	$	65


			Earnings			Depreciation
			Before Interest			and		Capital		Segment
Nine Months Ended	Net Sales		and Taxes			Amortization		Expenditures		Assets
North America Soup and Away From Home	$	2,170	$	561		$	46	$	38	$	1,193
North America Sauces and Beverages		920		220			25		24		1,206
Biscuits and Confectionery		1,330		167			63		72		1,606
International Soup and Sauces		803		97			24		14		1,776
Corporate and Eliminations¹		—		(95	)		22		10		334

Total	$	5,223	$	950		$	180	$	158	$	6,115

¹ Represents unallocated corporate expenses and unallocated assets, including corporate offices, deferred income taxes and investments.

(i)

Inventories


	May 2, 2004		August 3, 2003
Raw materials, containers and supplies	$	214	$	264
Finished products		472		445

	$	686	$	709

		Approximately 55% of inventory in 2004 and 57% in 2003 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 May 2, 2004 and August 3, 2003.

(j)		Notes Payable and Long-Term Debt On September 15, 2003, the company issued $300 ten-year 4.875% fixed-rate notes. The proceeds were used to repay commercial paper borrowings and for other general corporate purposes. In connection with this issuance, the company entered into ten-year interest rate swaps that convert $200 of the fixed-rate debt to variable.

(k)		Accounting for Derivative Instruments The company utilizes certain derivative financial instruments to enhance its ability to manage risks which exist as part of ongoing business operations, including interest rate, foreign currency, commodity and certain equity-linked employee compensation exposures. Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The company does not enter into contracts for speculative purposes, nor is it a party to any leveraged derivative instrument.

		All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered into, the company designates the derivative as (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair-value hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash-flow hedge), (3) a foreign-currency fair-value or cash-flow hedge (foreign-currency hedge), or (4) a hedge of a net investment in a foreign operation. Some derivatives may also be considered natural hedging instruments (changes in fair value are recognized to act as economic offsets to changes in fair value of the underlying hedged item and do not qualify for hedge accounting under SFAS No. 133).

		Interest Rate Swaps The company finances a portion of its operations through debt instruments primarily consisting of commercial paper, notes, debentures and bank loans. The company periodically utilizes interest rate swap agreements, including forward-

		starting swaps, to minimize worldwide financing costs and to achieve a targeted ratio of variable versus fixed-rate debt.

		Variable-to-fixed interest rate swaps are accounted for as cash-flow hedges. Consequently, the effective portion of unrealized gains (losses) is deferred as a component of Accumulated other comprehensive income (loss) and is recognized in earnings at the time the hedged item affects earnings. The amounts paid or received on the hedge are recognized as adjustments to interest expense. Cash-flow interest rate swaps with a notional value of $300 matured in October 2003.

		Fixed-to-variable interest rate swaps are accounted for as fair-value hedges. Gains and losses on these instruments are recorded in earnings as adjustments to interest expense, offsetting gains and losses on the hedged item. The notional amounts of all outstanding fair-value interest rate swaps at May 2, 2004 totaled $825 with a maximum maturity date of October 2013. The fair value of such instruments was $(1) as of May 2, 2004.

		Foreign Currency Contracts The company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries, including subsidiary financing transactions. The company utilizes foreign currency forward purchase and sale contracts, options and cross-currency swaps in order to manage the volatility associated with foreign currency purchases and certain intercompany transactions in the normal course of business.

		Qualifying foreign exchange forward and cross-currency swap contracts are accounted for as cash-flow hedges when the hedged item is a forecasted transaction, or when future cash flows related to a recognized asset or liability are expected to be received or paid. The effective portion of the changes in fair value on these instruments is recorded in Accumulated other comprehensive income (loss) and is reclassified into the Statements of Earnings on the same line item and in the same period or periods in which the hedged transaction affects earnings. The assessment of effectiveness for contracts is based on changes in the spot rates. The fair value of these instruments was $(137) at May 2, 2004.

		Qualifying foreign exchange forward contracts are accounted for as fair-value hedges when the hedged item is a recognized asset, liability or firm commitment. The fair value of such contracts was not material at May 2, 2004.

		The company also enters into certain foreign exchange forward and variable-to-variable cross-currency swap contracts that are not designated as accounting hedges. These instruments are primarily intended to reduce volatility of certain intercompany financing transactions. Gains and losses on derivatives not designated as accounting hedges are typically recorded in Other expenses, as an offset to gains (losses) on the underlying transaction. The fair value of such contracts was $(3) at May 2, 2004. Foreign exchange forward contracts typically have maturities of less than eighteen months. Cross-currency contracts mature in

		2005 through 2007. Principal currencies include the Australian dollar, British pound, Canadian dollar, euro, Japanese yen and Swedish krona.

		As of May 2, 2004, the accumulated derivative net loss in other comprehensive income for cash-flow hedges, including the foreign exchange forward and cross-currency contracts, forward starting swap contracts, and treasury lock agreements was $2, net of tax. At April 27, 2003, the accumulated derivative net gain in other comprehensive income was $1, net of tax. Reclassifications from Accumulated other comprehensive income (loss) into the Statements of Earnings during the quarter ended May 2, 2004 were not material. Reclassifications during the remainder of fiscal year 2004 are not expected to be material. There were no discontinued cash-flow hedges during the quarter. At May 2, 2004, the maximum maturity date of any cash-flow hedge was approximately 10 years.

		Other Contracts The company is exposed to equity price changes related to certain employee compensation obligations. Swap contracts are utilized to hedge exposures relating to certain employee compensation obligations linked to the total return of the Standard & Poor’s 500 Index and the total return of the company’s capital stock. The company pays a variable interest rate and receives the equity returns under these instruments. The notional value of the equity swap contracts, which mature in 2004, was $37 at May 2, 2004. These instruments are not designated as accounting hedges. Gains and losses are recorded in the Statements of Earnings. The net liability recorded under these contracts at May 2, 2004 was approximately $1.

		Other disclosures related to hedge ineffectiveness and gains (losses) excluded from the assessment of hedge effectiveness have been omitted due to the insignificance of these amounts.

(l)		Components of Net Periodic Benefit Cost:


	Pension						Postretirement
Three Months Ended	May 2, 2004			Apr. 27, 2003			May 2, 2004			Apr. 27, 2003
Service cost	$	12		$	11		$	1		$	1
Interest cost		28			28			6			5
Expected return on plan assets		(38	)		(38	)		—			—
Amortization of prior service cost		2			1			(3	)		(2	)
Recognized net actuarial loss		6			4			1			—

Net periodic benefit expense	$	10		$	6		$	5		$	4


	Pension						Postretirement
Nine Months Ended	May 2, 2004			Apr. 27, 2003			May 2, 2004			Apr. 27, 2003
Service cost	$	37		$	34		$	3		$	3
Interest cost		84			83			17			16
Expected return on plan assets		(113	)		(114	)		—			—
Amortization of prior service cost		6			4			(7	)		(8	)
Recognized net actuarial loss		16			11			3			—

Net periodic benefit expense	$	30		$	18		$	16		$	11

		In the first quarter 2004, the company made a $50 voluntary contribution to a U.S. pension plan. Additional contributions to the U.S. pension plans are not expected this fiscal year. Contributions of $4 were made to the international plans as of May 2, 2004.

(m)		Contingencies 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 L.L.C., 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 hold the company liable in an amount necessary to satisfy all unpaid claims against Vlasic (which VFB estimates in the amended complaint to be $200), plus unspecified exemplary and punitive damages. While the ultimate disposition of complex litigation is inherently difficult to assess, the company believes the action is without merit and is defending the case vigorously.

		The company received an Examination Report from the Internal Revenue Service on December 23, 2002, which included a challenge to the treatment of gains and interest deductions claimed in the company’s fiscal 1995 federal income tax return, relating to transactions involving government securities. If the proposed adjustment were upheld, it would require the company to pay a net amount of approximately $100 in taxes, accumulated interest to December 23, 2002, and penalties. Interest will continue to accrue until the matter is resolved. The

		company believes these transactions were properly reported on its federal income tax return in accordance with applicable tax laws and regulations in effect during the period involved and is challenging these adjustments vigorously. While the outcome of proceedings of this type cannot be predicted with certainty, the company believes that the ultimate outcome of this matter will not have a material impact on the consolidated financial condition or results of operation of the company.

(n)		Guarantees In November 2002, FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” was issued. FIN 45 clarifies the requirements relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The initial recognition and measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.

		The company guarantees approximately 1,200 bank loans made to Pepperidge Farm independent sales distributors by third party financial institutions for the purchase of distribution routes. The maximum potential amount of future payments the company could be required to make under the guarantees is approximately $88. The company’s guarantees are indirectly secured by the distribution routes. The company does not believe it is probable that it will be required to make guarantee payments as a result of defaults on the bank loans guaranteed. Prior to the adoption of FIN 45, no amounts were recognized on the Consolidated Balance Sheets related to these guarantees. The amounts recognized as of May 2, 2004 and April 27, 2003 are not material.

(o)		Supplemental Cash Flow Information Other cash used in operating activities for the nine month periods is comprised of the following:


	May 2, 2004			April 27, 2003
Net Payments on Derivatives	$	(56	)	$	(29	)
Benefit Related Payments		(38	)		(36	)
Other		2			(7	)

	$	(92	)	$	(72	)

ITEM 2.

CAMPBELL SOUP COMPANY CONSOLIDATED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Results of Operations

Overview

The company reported net earnings of $142 million for the third quarter ended May 2, 2004 versus $129 million in the comparable quarter a year ago. Earnings per share were $.34, compared to $.31 a year ago. (All earnings per share amounts included in Management’s Discussion and Analysis are presented on a diluted basis.) The current year net earnings included a $10 million gain (net of $6 million in taxes) or $.02 per share from a settlement of a class action lawsuit involving ingredient suppliers. The gain was recorded in Other expenses/(income). Current year earnings were favorably impacted by lower interest expense, a lower tax rate and favorable currency translation.

For the nine months ended May 2, 2004, net earnings were $588 million, compared to $552 million a year ago before the cumulative effect of accounting change. Earnings per share were $1.43 compared to $1.34 a year ago before the cumulative effect of accounting change. The current year results include the gain from the settlement of the lawsuit previously noted. The remaining increase over the prior year is due to higher sales, lower interest expense and the favorable impact of currency, partially offset by a decrease in gross margin as a percentage of sales.

In connection with the adoption of Statement of Financial Accounting Standards (SFAS) No. 142 in fiscal 2003, the company recognized a non-cash charge of $31 million (net of a $17 million tax benefit) or $.08 per share, as a cumulative effect of accounting change. This charge related to impaired goodwill associated with the Stockpot business, a food service business acquired in August 1998.

In the fourth quarter of fiscal 2003, certain stock-based incentive compensation expenses were reclassified from Other expenses to reflect the costs by function on various lines of the Statements of Earnings. The prior period has been reclassified to conform to the current presentation.

THIRD QUARTER

Sales

Net sales in the quarter increased 4% to $1.7 billion from $1.6 billion last year. The growth was attributed to a 1% decrease from volume and mix, a 1% increase from higher

selling prices, a 1% decrease due to higher revenue reductions from trade promotion and consumer coupon redemption programs and a 5% increase due to currency.

An analysis of net sales by reportable segment follows:


	(millions)
	2004		2003		% Change
North America Soup and Away From Home	$	578	$	600		(4	)%
North America Sauces and Beverages		301		295		2
Biscuits and Confectionery		481		434		11
International Soup and Sauces		307		271		13

	$	1,667	$	1,600		4	%

The 4% decrease in sales from North America Soup and Away From Home was due to a 4% decrease from volume and mix, a 3% increase from improved price realization, a 4% decrease attributable to higher revenue reductions from trade promotion and consumer coupon redemption programs, and a 1% increase from currency. In the U.S., ready-to-serve soup sales decreased 13% for the quarter on shipment declines of 9%. This performance follows a strong first half and compares with a strong year-ago quarter. The M’m! M’m! Good! To Go convenience platform, including Campbell’s Select and Chunky soups in microwaveable bowls and Campbell’s Soup at Hand, continues to perform well. Condensed soup sales and shipments declined 6%. Broth sales declined 7%, as 1% shipment growth was more than offset by increased promotional spending. Away From Home reported an increase in sales due to higher sales of refrigerated soup. The Canadian business reported a sales volume decline.

North America Sauces and Beverages reported a 2% increase in sales due to lower revenue reductions from trade promotion and consumer coupon redemption programs. Volume and mix were flat. V8 vegetable juice and Campbell’s tomato juice reported strong sales gains accompanied by improved sales of Pace Mexican sauces and Prego pasta sauces. The increases were partially offset by declines in Franco-American canned pasta and gravies and Swanson canned poultry sales.

Biscuits and Confectionery reported an 11% increase in sales due to a 2% increase from volume and mix, a 1% increase from higher price realization, a 1% decrease due to higher revenue reductions from trade promotion and consumer coupon redemption programs and a 9% increase from currency. The favorable currency impact principally reflects the strengthening of the Australian dollar. Pepperidge Farm sales increased slightly as growth in cookie and fresh bakery sales were partially offset by lower sales of frozen products and competitive pressures in cheese crackers. Arnott’s reported a sales increase from gains in biscuit products and the introduction of new chocolate products. Godiva Chocolatier’s worldwide sales also increased.

International Soup and Sauces reported an increase in sales of 13%. The sales increase was due to a 14% increase from the favorable impact of currency and a 1% increase due to lower revenue reductions from trade promotion and consumer coupon redemption programs, offset by a 2% decline from volume and mix. In Europe, branded sales increased compared to the year-ago quarter, offsetting declines in sales of private label products. Liebig soups in France andBatchelors soup and Oxo stock cubes in the United Kingdom contributed to the increase in sales. Sales of Homepride sauces in the United Kingdom and both branded and non-branded products in Germany declined. In Asia Pacific, sales increased driven by Campbell’s broth and V8 beverages.

Gross Margin

Gross margin, defined as net sales less cost of products sold, decreased $8 million. As a percent of sales, gross margin decreased from 42.5% in 2003 to 40.3% in 2004. The percentage decrease was primarily due to costs associated with quality and packaging improvements (approximately 0.9 percentage points), higher promotional spending (approximately 0.7 percentage points), product mix and currency (approximately 0.7 percentage points), and the impact of inflation and other factors (approximately 2.6 percentage points) partially offset by higher selling prices (approximately 0.8 percentage points) and productivity improvements (approximately 1.9 percentage points).

Marketing and Selling Expenses

Marketing and selling expenses increased 5% in 2004 as a result of the impact of currency translation. As a percent of sales, Marketing and selling expenses were 17% in both 2004 and 2003.

Administrative Expenses

Administrative expenses decreased by $2 million, or 1%, primarily due to lower costs associated with ongoing litigation and a decrease in bad debt expense compared to the prior year.

Operating Earnings

Segment operating earnings decreased 10% from the prior year.

An analysis of operating earnings by reportable segment follows:


	(millions)
	2004			2003			% Change
North America Soup and Away From Home	$	113		$	147			(23	)%
North America Sauces and Beverages		66			59			12
Biscuits and Confectionery		37			38			(3	)
International Soup and Sauces		38			37			3

Subtotal		254			281			(10	)
Corporate		(11	)		(46	)

	$	243		$	235			3	%

Earnings from North America Soup and Away From Home decreased 23% primarily due to lower sales and increased promotional spending.

Earnings from North America Sauces and Beverages increased 12% due to improved sales mix and lower administrative expenses.

Earnings from Biscuits and Confectionery decreased 3% due to increased promotional spending in the Australian Snackfoods business, partially offset by the favorable impact of currency (approximately 8 percentage points).

Earnings from International Soup and Sauces increased 3% as the favorable impact of currency (approximately 14 percentage points) was offset by increased advertising spending in Europe.

Corporate expenses decreased to $11 million from $46 million primarily due to the gain from the company’s share of a settlement from a class action lawsuit involving ingredient suppliers, lower expenses related to the carrying value of the company’s investment in affordable housing, lower expenses from currency hedging related to the financing of international activities and lower legal expenses.

Nonoperating Items

Interest expense decreased to $40 million from $45 million in the prior year, primarily due to lower levels of debt.

The effective tax rate for the quarter was 30.0% for 2004 and 32.1% for 2003. The lower tax rate this year was due to a reduction in the fiscal 2003 tax liability following the filing of the fiscal 2003 U.S. tax return and the favorable resolution of certain state income tax audits.

NINE MONTHS

Sales

Net sales for the nine months increased 9% to $5.7 billion from $5.2 billion last year. The change was attributed to a 2% increase from volume and mix, a 2% increase from higher selling prices, and a 5% increase due to currency.

An analysis of net sales by reportable segment follows:


	(millions)
	2004		2003		% Change
North America Soup and Away From Home	$	2,277	$	2,170		5	%
North America Sauces and Beverages		952		920		3
Biscuits and Confectionery		1,522		1,330		14
International Soup and Sauces		925		803		15

	$	5,676	$	5,223		9	%

North America Soup and Away From Home sales increased 5% due to a 1% increase from volume and mix, a 3% increase from higher price realization, a 1% decrease attributable to higher revenue reductions from trade promotion and consumer coupon redemption programs, and a 2% increase from currency. In the U.S., ready-to-serve soup sales increased 10% as shipments increased 7%. Condensed soup sales were down 2% reflecting shipment declines of 5%, partially offset by higher prices. Broth sales increased 8% reflecting shipment growth of 6%. The ready-to-serve increase was driven by the strong performance of the new M’m! M’m! Good! To Go convenience platform including Campbell’s Select and Chunkysoups in microwaveable bowls, which were introduced this year, and Campbell’s Soup at Hand. Away From Home reported increased sales as sales of refrigerated soups and the favorable impact of currency were partially offset by declines in entrees. The Canadian business reported a sales increase versus prior year due to currency.

North America Sauces and Beverages reported a 3% increase in sales due to a 2% increase from volume and mix and a 1% increase due to lower revenue reductions from trade promotion and consumer coupon redemption programs. The sales increase was primarily due to the performance of beverages, with V8 vegetable juice reporting strong sales gains. V8 Splash Smoothies, introduced in the second-half of last year, and Campbell’s tomato juice also contributed to the sales growth. Pace Mexican sauce sales increased over the year-ago period on distribution gains. Prego pasta sauces experienced a decline in sales, attributable in part to weakness in the dry pasta category.Franco-American canned pasta and gravies and Swanson canned poultry sales declined.

Biscuits and Confectionery reported a 14% increase in sales due to a 2% increase from the acquisition of Snack Foods Limited in Australia, a 3% increase from volume and mix, a 2% increase from higher price realization and an 8% increase from currency, partially offset by a 1% decrease due to higher revenue reductions from trade promotion and consumer coupon redemption programs. The favorable currency impact was attributable primarily to the strengthening of the Australian dollar. Pepperidge Farm contributed to the sales increase as a result of growth in cookies, crackers and fresh bread partially offset by a decline in frozen products. Arnott’s reported a sales increase primarily due to growth in biscuits. Godiva Chocolatier’s worldwide sales increased due to improving same store sales trends in North America and continued growth in the Asia Pacific region.

International Soup and Sauces reported an increase in sales of 15%. The favorable impact of currency accounted for a 14% increase, volume and mix added 2%, offset by a 1% decrease due to the divestiture of a private label business in the United Kingdom. The increase in volume and mix was driven primarily by sales gains in Belgium, France and Australia.

Gross Margin

Gross margin, defined as net sales less cost of products sold, increased $85 million. As a percent of sales, gross margin decreased from 43.6% in 2003 to 41.6% in 2004. The percentage decrease was primarily due to costs associated with quality and packaging improvements (approximately 1.0 percentage points), adverse product mix and currency (approximately 0.8 percentage points), higher pension expense and the impact of acquisitions (approximately 0.3 percentage points), and the impact of inflation and other factors (approximately 2.6 percentage points) partially offset by higher selling prices (approximately 0.9 percentage points) and productivity improvements (approximately 1.8 percentage points).

Marketing and Selling Expenses

Marketing and selling expenses increased 5% in 2004 primarily as a result of the impact of currency translation. As a percent of sales, Marketing and selling expenses were 16% in 2004 and 17% in 2003.

Administrative Expenses

Administrative expenses increased by $21 million, or 6%, primarily due to the impact of currency translation (approximately 5 percentage points) and expenses related to employee benefit costs.

Operating Earnings

Segment operating earnings increased 1% from the prior year.

An analysis of operating earnings by reportable segment follows:


	(millions)
	2004			2003			% Change
North America Soup and Away From Home	$	554		$	561			(1	)%
North America Sauces and Beverages		216			220			(2	)
Biscuits and Confectionery		173			167			4
International Soup and Sauces		112			97			15

Subtotal		1,055			1,045			1
Corporate		(69	)		(95	)

	$	986		$	950			4	%

Earnings from North America Soup and Away From Home decreased 1% as increased sales were offset by higher costs of packaging and ingredients, costs associated with quality improvements and product mix changes.

Earnings from North America Sauces and Beverages decreased 2% as increased sales were offset by higher costs of packaging and ingredients, costs associated with quality improvements, and higher marketing and selling expenses.

Earnings from Biscuits and Confectionery increased 4% due to the favorable impact of currency (approximately 8 percentage points) partially offset by increased promotional spending in the Australian Snackfoods business.

Earnings from International Soup and Sauces increased 15% primarily due to the impact of currency (approximately 15 percentage points).

Corporate expenses decreased to $69 million from $95 million primarily due to the gain from the company’s share of a class action settlement involving ingredient suppliers, lower expenses related to the carrying value of the company’s investment in affordable housing and lower expenses from currency hedging related to financing of international activities.

Nonoperating Items

Interest expense decreased to $125 million from $136 million in the prior year, primarily due to lower levels of debt.

The effective tax rate for the nine months was 31.7% for 2004 and 32.2% for 2003. The effective tax rate for the 2003 year was 32.2%. The lower tax rate this year was due to a lower tax liability following the filing of the fiscal 2003 U.S. tax return and the favorable resolution of certain state income tax audits.

Liquidity and Capital Resources

The company generated cash from operations of $576 million compared to $706 million last year. This reduction in cash flow reflects a $50 million voluntary contribution to a U.S. pension plan, a higher increase in working capital than a year ago primarily due to a decrease in accrued liabilities, and cash settlements of currency hedging contracts related to the financing of foreign operations. These factors were partially offset by increased earnings.

Capital expenditures were $142 million compared to $158 million a year ago. Capital expenditures are expected to be approximately $290 million in fiscal 2004 compared to $283 million in fiscal 2003, with the increase driven by currency.

Businesses acquired, as presented in the Statements of Cash Flows, reflect the acquisitions of Snack Foods Limited and Erin Foods in Ireland in the first quarter of 2003 and the acquisition of certain brands from George Weston Foods Limited in Australia in the first quarter of 2004.

The company repurchased 700,000 shares in the quarter ended May 2, 2004 at the cost of $19 million. The company repurchased 1,410,000 shares in the nine month period ended May 2, 2004 at a cost of $38 million. The company repurchased 432,000 shares in the quarter ended April 27, 2003 at a cost of $9 million. The company repurchased 552,000 shares in the nine month period ended April 27, 2003 at a cost of $13 million. The company expects to repurchase sufficient shares over time to offset the impact of dilution from shares issued under the company’s stock compensation plans. See “Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities” for more information.

In September 2003, the company issued $300 million ten-year 4.875% fixed-rate notes. The proceeds were used to repay commercial paper borrowings and for other general corporate purposes. While planning for the issuance of these notes, the company entered into treasury lock agreements with a notional value of $100 million that effectively fixed a portion of the interest rate on the debt prior to issuance. These agreements were settled at a minimal gain upon issuance of the notes, which will be amortized over the life of the notes. In connection with this issuance, the company entered into ten-year interest rate swaps that convert $200 million of the fixed-rate debt to variable.

In September 2003, the company also entered into $100 million five-year interest rate swaps that convert a portion of the 5.875% fixed-rate notes due October 2008 to variable.

At May 2, 2004, the company had approximately $769 million of notes payable due within one year and $36 million of standby letters of credit issued on behalf of the company. The company maintains $1.8 billion of committed revolving credit facilities, which remain unused at May 2, 2004, except for the $36 million of standby letters of credit issued on behalf of the company. In September 2003, the company entered into a $900 million committed 364-day revolving credit facility, which replaced an existing $900 million 364-day facility that matured in September 2003. The 364-day revolving

credit facility contains a one-year term-out feature. The company also has a $900 million revolving credit facility that matures in September 2006. The credit facilities support the company’s commercial paper program. The company is in compliance with the covenants contained in its revolving credit facilities and debt securities.

Shareowners’ equity includes a minimum liability, net of tax, of $213 million in 2004 and $208 million in 2003, principally related to a U.S. pension plan. Following stock market declines in July 2002, and continuing through 2003, the fair value of assets included in certain pension funds fell below the accumulated benefit obligation. As required under accounting principles generally accepted in the United States, the company recognized the additional minimum liability and reclassified an existing pension asset to equity. Pension expense is expected to increase in 2004 compared to 2003 primarily due to a lower discount rate and a reduction in the estimated return on plan assets. As previously noted, the company made a $50 million voluntary contribution to a U.S. pension plan in 2004. Additional contributions to the U.S. pension plans are not expected this fiscal year.

The company guarantees approximately 1,200 bank loans to Pepperidge Farm independent sales distributors by third party financial institutions used to purchase distribution routes. The maximum potential amount of the future payments the company could be required to make under the guarantees is approximately $88 million. The company’s guarantees are indirectly secured by the distribution routes. The company does not believe that it is probable that it will be required to make guarantee payments as a result of defaults on the bank loans guaranteed. See also Note (n) to the Consolidated Financial Statements for information on guarantees.

The company believes that foreseeable liquidity, including the resolution of the contingencies described in Note (m) to the Consolidated Financial Statements, and capital resource requirements are expected to be met through anticipated cash flows from operations, management of working capital, long-term borrowings under its shelf registration, and short-term borrowings, including commercial paper. The company believes that its sources of financing are adequate to meet its future liquidity and capital resource requirements. The cost and terms of any future financing arrangements depend on the market conditions and the company’s financial position at that time.

Significant Accounting Estimates

The consolidated financial statements of the company are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. The significant accounting policies of the company are described in Note 1 to the Consolidated Financial Statements and the significant accounting estimates are described in Management’s Discussion and Analysis included in the 2003 Annual Report on Form 10-K. The impact of new accounting standards is discussed in the following section. There have been no other changes in the company’s accounting policies in the current period that had a material impact on the company’s consolidated financial condition or results of operation.

Recently Issued Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB 51.” This Interpretation addresses consolidation by business enterprises of certain variable interest entities (VIEs). The Interpretation as amended is effective immediately for all enterprises with interests in VIEs created after January 31, 2003. In December 2003, the FASB issued a revised version of FIN 46 (FIN 46R), which clarified the provisions of FIN 46 by addressing implementation issues. FIN 46R must be applied to all entities subject to the Interpretation as of the first interim quarter ending after March 15, 2004. The company has investments of approximately $150 million as of May 2, 2004 consisting of limited partnership interests in affordable housing partnership funds. The company’s ownership ranges from approximately 12% to 19%. The company evaluated the nature of these investments, which were in existence before January 31, 2003, against the provisions of the guidance and determined that such investments do not need to be consolidated in the financial statements. The company will continue to monitor modifications to the Interpretation.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or “mezzanine” equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the statement of financial position. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. The guidance in SFAS No. 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this standard did not impact the financial statements.

In December 2003, the FASB issued a revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” which requires additional disclosures for benefit plans. The standard requires quarterly disclosure of the various components of pension expense and expanded annual disclosures, such as describing the types of plan assets, investment strategy, and measurement dates. The required interim disclosures are included in Note (l) to the Consolidated Financial Statements. Annual disclosures will be provided in the 2004 Form 10-K.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The company sponsors medical programs for certain of its U.S. retirees and expects that this legislation will reduce the costs for some of these programs. The company is continuing to evaluate the impact of the legislation since guidance from various governmental and regulatory agencies concerning the requirements that must be met to obtain these cost reductions is still pending. In April 2004, the FASB issued Staff Position (FSP) No. FAS 106 - 2 to address the accounting and disclosure requirements

related to the Act. The FSP is effective for interim or annual periods beginning after June 15, 2004. The expected effects of the Act will be factored into the company’s fiscal 2004 year-end measurement of postretirement medical obligations and related expense calculation for fiscal 2005.

Recent Developments

On May 24, 2004, the company announced results for the third quarter 2004 and commented on the outlook for earnings per share for the full year. In that announcement, the company provided a full fiscal 2004 earnings estimate of approximately $1.60 per share, which includes $.02 per share related to the aforementioned litigation settlement. This compares to the 2003 reported amount of $1.52 before the cumulative effect of the accounting change. For the fourth quarter of 2004, the company expects diluted earnings per share to be approximately $.17.

Forward-Looking Statements

This quarterly report contains certain statements that reflect the company’s current expectations regarding future results of operations, economic performance, financial condition and achievements of the company. The company tries, wherever possible, to identify these forward-looking statements by using words such as “anticipate,” “believe,” “estimate,” “expect,” “will” and similar expressions. One can also identify them by the fact that they do not relate strictly to historical or current facts. 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 regarding future events and estimates which could be inaccurate and which are inherently subject to risks and uncertainties.

The company wishes to caution the reader that the following important factors and those important factors described in other Securities and Exchange Commission filings of the company, or in the company’s 2003 Annual Report, 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 company’s ability to achieve the goals of its “transformation plan”;

	•		the impact of strong competitive response to the company’s efforts to leverage its brand power with product innovation, promotional programs and new advertising, and of changes in consumer demand for the company’s products;

	•		the risks in the marketplace associated with trade and consumer acceptance of product improvements, shelving initiatives and new product introductions;

	•		the company’s ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume and product mix and the impact of increased marketing investments;

	•		the company’s ability to realize forecasted cost savings;

	•		the company’s ability to successfully manage changes to its business processes, including selling, distribution, production capacity and the integration of acquisitions;

	•		the increased significance of certain of the company’s key trade customers;

	•		the difficulty of predicting the pattern of inventory movements by the company’s trade customers and of predicting changes in the policies of its customers, such as changes in customer inventory levels and access to shelf space;

	•		the impact of fluctuations in the supply and cost of raw materials;

	•		the impact of unforeseen economic changes in currency exchange rates, tax rates, interest rates, equity markets, inflation rates, recession and other external factors over which the company has no control, including the possibility of increased pension expense and contributions resulting from lower interest rates and declines in stock market returns; and

	•		the impact of unforeseen business disruptions in one or more of the company’s markets due to political instability, civil disobedience, armed hostilities or other calamities.

This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact the company’s outlook. The company disclaims any obligation or intent to update any forward-looking statements made by the company in order to reflect new information, events or circumstances after the date they are made.

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 2003 Annual Report on Form 10-K. There have been no significant changes in the company’s portfolio of financial instruments or market risk exposures from the fiscal 2003 year-end except as follows:

In August 2003, the company entered into a pay variable CAD/receive variable USD swap with a notional value of $53 million. The company also entered into two pay fixed CAD/receive fixed USD swaps with notional values of $61 million each.

In August 2003, a pay fixed SEK/receive fixed USD swap with a notional value of $31 million matured. The company entered into a pay variable SEK/receive variable USD swap with a notional value of $18 million which matures in 2005.

In October 2003, the company entered into a pay variable GBP/receive variable USD swap with a notional value of $125 million to replace a portion of a foreign exchange forward contract that matured.

In December 2003, the company entered into a pay fixed GBP/receive fixed USD swap with a notional value of $30 million to replace a portion of a foreign exchange forward contract that matured.

In January 2004, the company entered into two pay variable EUR/receive variable USD swaps with notional values of $32 million and $137 million. Both swaps replaced foreign exchange forward contracts that matured.

In February 2004, the company entered into a pay fixed GBP/receive fixed USD swap with a notional value of $40 million to replace a foreign exchange forward contract that matured.

In April 2004, the company entered into a $50 million interest rate swap that converted a portion of the 6.9% fixed rate notes due October 2006 to variable.

On May 11, 2004 the company entered into a $50 million interest rate swap that converted a portion of the 6.9% fixed rate notes due October 2006 to variable.

In addition, see the Liquidity and Capital Resources discussion in Part I, Item 2 for information on the interest rate swap activity in fiscal 2004.

ITEM 4. CONTROLS AND PROCEDURES

a.		Evaluation of Disclosure Controls and Procedures

		The company, under the supervision and with the participation of its management, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of May 2, 2004 (the “Evaluation Date”). Based on such evaluation, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer have concluded that, as of the Evaluation Date, the company’s disclosure controls and procedures are effective, and are reasonably designed to ensure that all material information relating to the company (including its consolidated subsidiaries) required to be included in the company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

b.		Changes in Internal Controls

		During the quarter ended May 2, 2004, there were no changes in the company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

As 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 L.L.C., 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 hold the company liable in an amount necessary to satisfy all unpaid claims against Vlasic (which VFB estimates in the amended complaint to be $200 million), plus unspecified exemplary and punitive damages. While the ultimate disposition of complex litigation is inherently difficult to assess, the company believes the action is without merit and is defending the case vigorously.

As also previously reported, the company received an Examination Report from the Internal Revenue Service on December 23, 2002, which included a challenge to the treatment of gains and interest deductions claimed in the company’s fiscal 1995 federal income tax return, relating to transactions involving government securities. If the proposed adjustment were upheld, it would require the company to pay a net amount of approximately $100 million in taxes, accumulated interest to December 23, 2002, and penalties. Interest will continue to accrue until the matter is resolved. The company believes these transactions were properly reported on its federal income tax return in accordance with applicable tax laws and regulations in effect during the period involved and is challenging these adjustments vigorously. While the outcome of proceedings of this type cannot be predicted with certainty, the company believes that the ultimate outcome of this matter will not have a material impact on the consolidated financial condition or results of operation of the company.

As also previously reported, the company began discussions in April 2003 with the New Jersey Department of Environmental Protection (“NJDEP”) regarding certain air emissions from the company’s South Plainfield, New Jersey flavoring and spice mix plant. On April 22, 2004, the company entered into an Administrative Consent Order (“ACO”) with the NJDEP to settle these alleged violations. Under the ACO, the company agreed to (i) modify existing process equipment and to install additional air emission control equipment by July 31, 2004, all at a cost of approximately $1.5 million,

(ii) pay a $300 thousand penalty, (iii) pay $100 thousand for a supplemental environmental project, and (iv) pay approximately $185 thousand in outstanding air emission fees. These amounts are in addition to the approximately $285 thousand in evaluation costs incurred by the company. The ACO does not constitute an admission of liability by the company.

As also previously reported, in July 2003, the company began discussions with the Wisconsin Department of Natural Resources (“WDNR”) regarding certain air emissions from the company’s Milwaukee, Wisconsin flavoring and spice mix plant. These emissions may exceed limits established pursuant to the Wisconsin Clean Air Act Program. The discussions are likely to result in the company installing air emission control equipment on an agreed upon schedule. The WDNR may require additional expenditures, which cannot be determined at this time. As of May 2, 2004, the company incurred costs of approximately $222 thousand related to the evaluation of this issue, and the company expects to spend up to $700 thousand (exclusive of any other amounts) on the installation of required air emissions control equipment. The company does not expect that the cost of installing the emission control equipment or any other expenditures required by the WDNR will have a material impact on the consolidated financial condition or results of operation of the company.

As also previously reported, on July 15, 2003, Pepperidge Farm, Incorporated, an indirect wholly-owned subsidiary of the company, made a submission to the United States Environmental Protection Agency (“EPA”) relating to its use and replacement of certain appliances containing ozone-depleting refrigerants. The submission was made pursuant to the terms of the Ozone-Depleting Substance Emission Reduction Bakery Partnership Agreement (the “EPA Agreement”) entered into by and between Pepperidge Farm and the EPA. Pepperidge Farm executed the EPA Agreement in April 2002 as part of a voluntary EPA-sponsored program relating to the reduction of ozone-depleting refrigerants used in the bakery industry. As a result of the EPA Agreement, as of May 2, 2004, Pepperidge Farm has incurred costs of approximately $4 million relating to the evaluation and replacement of certain of its refrigerant appliances. If the submission is approved by the EPA, in addition to the expenditures previously made, Pepperidge Farm will be required to (i) pay a penalty in the amount of approximately $370 thousand, and (ii) replace certain additional refrigerant appliances, which Pepperidge Farm expects to cost approximately $750 thousand. In December 2003, in anticipation of the EPA’s approval of the submission, Pepperidge Farm began replacing the additional refrigerant appliances. The company does not expect that the cost of complying with the EPA Agreement will have a material impact on the consolidated financial condition or results of operation of the company.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Issuer Purchases of Equity Securities

Total Number of

Maximum Number

Shares Purchased

of Shares that May

Total Number

Average

as Part of Publicly

Yet Be Purchased

of Shares

Price Paid

Announced Plans

Under the Plans

Period

Purchased⁽¹⁾

Per Share⁽²⁾

or Programs

2/2/04 - 2/29/04

160,100

⁽³⁾

27.30

⁽³⁾

3/1/04 - 3/31/04

235,335

⁽⁴⁾

27.40

⁽⁴⁾

4/1/04 - 5/2/04

450,453

⁽⁵⁾

27.21

⁽⁵⁾


⁽¹⁾		The company repurchases shares of capital stock to offset the dilutive impact to existing shareowners of issuances under the company’s stock compensation plans. The company also repurchases shares of capital stock that are owned and tendered by employees to satisfy tax withholding obligations on the vesting of restricted shares. All share repurchases were made in open-market transactions, except for the shares owned and tendered by employees to satisfy tax withholding obligations (which were purchased at the closing price of the company’s shares on the date of tender). None of these transactions were made pursuant to a publicly announced repurchase plan or program.

⁽²⁾		Average price paid per share is calculated on a settlement basis and excludes commission.

⁽³⁾		Includes 100 shares owned and tendered by employees at an average price per share of $27.07 to satisfy tax withholding requirements on the vesting of restricted shares.

⁽⁴⁾		Includes 10,335 shares owned and tendered by employees at an average price per share of $26.43 to satisfy tax withholding requirements on the vesting of restricted shares.

⁽⁵⁾		Includes 135,453 shares owned and tendered by employees at an average price per share of $27.27 to satisfy tax withholding requirements on the vesting of restricted shares.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

	a.		Exhibits

			10(a) Letter Agreement between the company and Mark A. Sarvary, effective as of February 9, 2004, regarding severance arrangements.

			31(i) Certification of Douglas R. Conant pursuant to Rule 13a-14(a).

			31(ii) Certification of Robert A. Schiffner pursuant to Rule 13a-14(a).

			32(i) Certification of Douglas R. Conant pursuant to 18 U.S.C. Section 1350.

			32(ii) Certification of Robert A. Schiffner pursuant to 18 U.S.C. Section 1350.

	b.		Reports on Form 8-K

			On February 12, 2004, the company furnished a report on Form 8-K providing a copy of the press release dated that day updating the company’s earnings per share estimate for the fiscal 2004 second quarter and maintaining its earnings guidance for the full fiscal year 2004.

			On February 12, 2004, the company furnished a report on Form 8-K providing a copy of the press release dated that day announcing a new organizational structure for the company’s North American businesses.

			On February 23, 2004, the company furnished a report on Form 8-K providing a copy of the press release dated that day announcing financial results for the quarter ended February 1, 2004.

			On March 26, 2004, the company furnished a report on Form 8-K providing a copy of the press release dated that day announcing the appointment of two of its senior financial executives to new positions.

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: June 15, 2004	By:	/s/ Robert A. Schiffner

		Robert A. Schiffner
		Senior Vice President and
		Chief Financial Officer

	By:	/s/ Ellen Oran Kaden

		Ellen Oran Kaden
		Senior Vice President –
		Law and Government Affairs

INDEX TO EXHIBITS

Exhibits


10(a)		Letter Agreement between the company and Mark A. Sarvary, effective as of February 9, 2004, regarding severance arrangements.

31(i)		Certification of Douglas R. Conant pursuant to Rule 13a-14(a).

31(ii)		Certification of Robert A. Schiffner pursuant to Rule 13a-14(a).

32(i)		Certification of Douglas R. Conant pursuant to 18 U.S.C. Section 1350.

32(ii)		Certification of Robert A. Schiffner pursuant to 18 U.S.C. Section 1350.

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