1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number October 29, 1995 1-3822 [CAMPBELL SOUP COMPANY LOGO] NEW JERSEY 21-0419870 State of Incorporation I.R.S. Employer Identification No. CAMPBELL PLACE CAMDEN, NEW JERSEY 08103-1799 Principal Executive Offices TELEPHONE NUMBER: (609) 342-4800 INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO . ----- ------ THERE WERE 249,138,416 SHARES OF CAPITAL STOCK OUTSTANDING AS OF DECEMBER 1, 1995. THIS FORM 10-Q CONSISTS OF A TOTAL OF 21 PAGES. AN INDEX TO EXHIBITS IS ON PAGE 12. ================================================================================ -1-
2 PART I. FINANCIAL INFORMATION CAMPBELL SOUP COMPANY CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (million dollars except per share amounts) <TABLE> <CAPTION> Three Months Ended ---------------------------- OCTOBER October* 29, 1995 30, 1994 -------- -------- <S> <C> <C> Net sales $1,990 $1,856 - ------------------------------------------------------------------------------------------------------------- Costs and expenses Cost of products sold 1,143 1,085 Marketing and selling expenses 358 332 Administrative expenses 83 80 Research and development expenses 20 18 Other expense 24 18 - ------------------------------------------------------------------------------------------------------------- Total costs and expenses 1,628 1,533 - ------------------------------------------------------------------------------------------------------------- Earnings before interest and taxes 362 323 Interest, net 35 25 - ------------------------------------------------------------------------------------------------------------- Earnings before taxes 327 298 Taxes on earnings 108 101 - ------------------------------------------------------------------------------------------------------------- Net earnings $ 219 $ 197 ============================================================================================================= Per share Net earnings $.88 $.79 ============================================================================================================= Dividends $.31 $.28 ============================================================================================================= Weighted average shares outstanding 249 249 ============================================================================================================= </TABLE> See Notes To Financial Statements *Reclassified to conform to this year's presentation -2-
3 CAMPBELL SOUP COMPANY CONSOLIDATED BALANCE SHEETS (unaudited) (million dollars) <TABLE> <CAPTION> OCTOBER July 29, 1995 30, 1995 -------- -------- <S> <C> <C> Current assets Cash and cash equivalents $ 69 $ 53 Accounts receivable 855 631 Inventories 900 755 Prepaid expenses 145 142 - ------------------------------------------------------------------------------------------------------------- Total current assets 1,969 1,581 - ------------------------------------------------------------------------------------------------------------- Plant assets, net of depreciation 2,595 2,584 Intangible assets, net of amortization 1,808 1,715 Other assets 431 435 - ------------------------------------------------------------------------------------------------------------- Total assets $6,803 $6,315 ============================================================================================================= Current liabilities Notes payable $1,083 $ 865 Payable to suppliers and others 578 556 Accrued liabilities 590 545 Dividend payable 77 78 Accrued income taxes 186 120 - ------------------------------------------------------------------------------------------------------------- Total current liabilities 2,514 2,164 - ------------------------------------------------------------------------------------------------------------- Long-term debt 852 857 Nonpension postretirement benefits 447 434 Other liabilities, including deferred income taxes of $241 and $235 406 392 - ------------------------------------------------------------------------------------------------------------- Total liabilities 4,219 3,847 - ------------------------------------------------------------------------------------------------------------- Shareowners' equity Preferred stock; authorized 40 shares; none issued - - Capital stock, $.075 par value; authorized 280 shares; issued 271 shares 20 20 Capital surplus 171 165 Earnings retained in the business 2,897 2,755 Capital stock in treasury, at cost (581) (550) Cumulative translation adjustments 77 78 - ------------------------------------------------------------------------------------------------------------- Total shareowners' equity 2,584 2,468 - ------------------------------------------------------------------------------------------------------------- Total liabilities and shareowners' equity $6,803 $6,315 ============================================================================================================= </TABLE> See Notes to Financial Statements -3-
4 CAMPBELL SOUP COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (million dollars) <TABLE> <CAPTION> Three Months Ended ----------------------------- OCTOBER October 29, 1995 30, 1994 -------- --------- <S> <C> <C> Cash flows from operating activities: Net earnings $219 $197 Non-cash charges to net earnings Depreciation and amortization 78 63 Deferred taxes 6 - Other, net 26 24 Changes in working capital Accounts receivable (226) (188) Inventories (147) (94) Other current assets and liabilities 134 88 - ------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 90 90 - ------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Purchases of plant assets (79) (60) Sales of plant assets 6 3 Businesses acquired (107) (177) Sales of businesses - 3 Net change in other assets and liabilities (6) 4 - ------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (186) (227) - ------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Long-term borrowings - 3 Repayments of long-term borrowings (5) (4) Short-term borrowings 322 221 Repayments of short-term borrowings (104) (17) Dividends paid (77) (70) Treasury stock purchased (40) - Treasury stock issued 11 5 - ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 107 138 - ------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash 5 5 - ------------------------------------------------------------------------------------------------------------------ Net change in cash and cash equivalents 16 6 Cash and cash equivalents - beginning of period 53 96 - ------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents - end of period $ 69 $102 ================================================================================================================== </TABLE> See Notes to Financial Statements -4-
5 CAMPBELL SOUP COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (unaudited) (million dollars) <TABLE> <CAPTION> Earnings Capital Retained Stock Cumulative Total Preferred Capital Capital in the in Translation Shareowners' Stock Stock Surplus Business Treasury Adjustments Equity --------- ------- ------- ------------ --------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> Balance at July 31, 1994 $ - $20 $155 $2,359 $(559) $14 $1,989 Net earnings 197 197 Cash dividends ($.28 per share) (70) (70) Treasury stock purchased (1) (1) Treasury stock issued under Management incentive and Stock option plans 4 5 9 Translation adjustments 31 31 - ---------------------------------------------------------------------------------------------------------------------------- Balance at October 30, 1994 $ - $20 $159 $2,486 $(555) $45 $2,155 ============================================================================================================================ BALANCE AT JULY 30, 1995 $ - $20 $165 $2,755 $(550) $78 $2,468 NET EARNINGS 219 219 CASH DIVIDENDS ($.31 PER SHARE) (77) (77) TREASURY STOCK PURCHASED (38) (38) TREASURY STOCK ISSUED UNDER MANAGEMENT INCENTIVE AND STOCK OPTION PLANS 6 7 13 TRANSLATION ADJUSTMENTS (1) (1) - ----------------------------------------------------------------------------------------------------------------------------- BALANCE AT OCTOBER 29, 1995 $ - $20 $171 $2,897 $(581) $77 $2,584 ============================================================================================================================= <CAPTION> CHANGES IN NUMBER OF SHARES (UNAUDITED) --------------------------------------- (THOUSANDS OF SHARES) - ----------------------------------------------------------------------------------------------------------------------------- Issued Outstanding In Treasury ------ ----------- ------------ <S> <C> <C> <C> Balance at July 31, 1994 271,245 248,319 22,926 Treasury stock purchased (12) 12 Treasury stock issued under Management incentive and Stock option plans 197 (197) - ----------------------------------------------------------------------------------------------------------------------------- Balance at October 30, 1994 271,245 248,504 22,741 ============================================================================================================================= BALANCE AT JULY 30, 1995 271,245 249,231 22,014 TREASURY STOCK PURCHASED (833) 833 TREASURY STOCK ISSUED UNDER MANAGEMENT INCENTIVE AND STOCK OPTION PLANS 540 (540) - ----------------------------------------------------------------------------------------------------------------------------- BALANCE AT OCTOBER 29, 1995 271,245 248,938 22,307 ============================================================================================================================= </TABLE> See Notes to Financial Statements -5-
6 CAMPBELL SOUP COMPANY CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (unaudited) (millions) (a) The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the indicated periods. All such adjustments are of a normal recurring nature. (b) Net earnings per share are based on the weighted average shares outstanding during the applicable periods. The potential dilution from the exercise of stock options is not material. (c) Inventories <TABLE> <CAPTION> OCTOBER July 29, 1995 30, 1995 -------- -------- <S> <C> <C> Raw materials, containers and supplies $367 $317 Finished products 600 505 --------------------------------------------------------------------------- 967 822 Less - Adjustment of certain inventories to LIFO basis 67 67 --------------------------------------------------------------------------- $900 $755 =========================================================================== </TABLE> (d) Divestiture and Restructuring Program On January 28, 1993, the company's Board of Directors approved a divestiture and restructuring program which specifically identified six manufacturing plants to be closed and fourteen businesses to be sold. At the time of the Board's approval, charges of $353 ($300 after tax or $1.19 per share) were recorded for the estimated loss on disposition of plant assets, cost of closing each plant and loss on each business divestiture. During the first quarter of 1996, two businesses were sold. A summary of the original reserve and charges through October 29, 1995 is as follows: <TABLE> Original Balance BALANCE Reserves Charges 7/30/95 Charges 10/29/95 --------- ------- ------- ------- -------- <S> <C> <C> <C> <C> <C> Loss on disposal of assets $275 $(197) $78 $(1) $77 Severance and benefits 52 (47) 5 (2) 3 Other 26 (13) 13 - 13 - -------------------------------------------------------------------------------------------------------------- Total $353 $(257) $96 $(3) $93 ============================================================================================================== Current $153 $96 $93 Non-current 200 - - - -------------------------------------------------------------------------------------------------------------- Total $353 $96 $93 ============================================================================================================== </TABLE> -6-
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CAMPBELL SOUP COMPANY RESULTS OF OPERATIONS OVERVIEW Campbell achieved record sales and earnings for the first quarter ended October 29, 1995. Net sales of $1.99 billion were up 7% over the $1.86 billion for the similar period last year. Earnings per share increased 11% to 88 cents, up from 79 cents last year. Net earnings were $219 million, up 11% from $197 million last year. International Grocery and Bakery & Confectionery divisions led the first quarter percentage gains. In the U.S.A. division, meal enhancement businesses enjoyed strong growth and Pace Mexican sauces achieved broad distribution in the Northeast. RESULTS BY DIVISION U.S.A. - U.S. sales for the quarter were $1.20 billion, up 6% over $1.12 billion for the comparable period last year with the Pace and Fresh Start acquisitions driving growth. Operating earnings climbed 11% to $288 million. Soup volume increased 2% led by the traditional "Red & White" condensed varieties, particularly chicken noodle. Strong volume gains were also achieved by "Franco-American" pasta with its new shapes for kids; by spaghetti sauces, reflecting the U.S. introduction of the "Barilla" brand from Italy; and by "Vlasic" pickles where the popularity of the "Sandwich Stackers" style remains vibrant. Frozen foods volume declined, reflecting marketplace conditions. New chicken pot pies for Kentucky Fried Chicken outlets and new frozen soups helped to catapult food service business into high growth. BAKERY & CONFECTIONERY - Bakery & Confectionery sales increased 6% to $435 million from $410 million in the first quarter of last year. Earnings increased 15% to $53 million from $46 million last year, with Pepperidge Farm, Delacre and Godiva all posting exceptional gains. Cost reduction programs at Pepperidge Farm and Delacre helped expand margins. Pepperidge Farm's new fat-free cookies and brownies, using technology derived from the Greenfield acquisition, together with new marketing initiatives behind "Goldfish" crackers are driving volume gains. Pepperidge Farm frozen garlic breads continue robust growth. The division consists of "Pepperidge Farm" in the U.S., "Arnott's" in Australia, "Delacre" in Europe, "Godiva" worldwide and the confectionery business in Europe. -7-
8 INTERNATIONAL GROCERY - The International Grocery Division reported sales of $381 million, a 12% increase over last year. Two acquisitions--Stratford-upon-Avon Foods, a leading food service supplier, and Homepride, the number-one brand of cooking sauces--added volume as well as operating synergies in the United Kingdom. Soup sales in Asia, Australia, Germany and Japan all grew at double-digits, and the company's businesses in Argentina were up sharply. Operating earnings rose 14% to $36 million, with Argentina and Canada leading the strong growth. Earnings in Mexico were down $4 million, reflecting the economic difficulties there. International Grocery consists of soup, grocery and frozen businesses in Argentina, Asia, Australia, Canada, Europe and Mexico. STATEMENTS OF EARNINGS Net sales increased 7% over the prior year, driven principally by acquisitions and a 2% increase in worldwide soup volume based on strength in U.S. condensed soup and double-digit volume growth in Australia, Asia, Germany and Japan. Gross margins improved 1.1 percentage points to 42.6% compared to the first quarter of the prior year. Gross margin improvements resulted primarily from higher selling prices and manufacturing efficiencies. Marketing and selling expenses increased 8%, compared to the first quarter of the prior year, reflecting the acquisition of Pace Foods which has an aggressive advertising strategy. Overall, these expenses remained relatively flat at 18% of sales. Administrative expenses also remained flat as a percent of sales. The increase in interest expense results primarily from financing costs associated with acquisitions. The effective tax rate was 33.0% compared to 33.9% in the first quarter of fiscal 1995. The company expects its effective tax rate for the full fiscal 1996 year to approximate the first quarter rate due to tax planning strategies, including utilization of tax loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES For the second year in a row, the company generated $90 million of cash from operations in the first quarter. Continued tight management of working capital and increased earnings have turned the company from a traditional net user of cash in the first quarter into a generator of cash from operating activities. Capital expenditures were $79 million in 1996, an increase of $19 million from the prior year, due primarily to construction of the new Huntingwood manufacturing facility by Arnotts in Australia. Capital expenditures are projected to be between $400 and $450 million in 1996. -8-
9 The company acquired the "Homepride" sauce business, Britain's leading cooking sauce brand, and increased its Arnotts share ownership to 67%. Short-term borrowings increased by $218 million in 1996 to finance acquisitions and seasonal inventories. The company repurchased 833,000 shares of common stock for the treasury at a cost of $38 million, compared to minimal repurchases in 1995. -9-
10 PART II ITEM 1. LEGAL PROCEEDINGS In management's opinion, there are no pending claims or litigation, the outcome of which would have a material effect on the consolidated financial position of the company. In October 1995, the United States of America filed a complaint against Campbell at the request of the Environmental Protection Agency in the United States District Court for the Eastern District of California relating to certain air emission permits at the company's Sacramento, CA facility. The suit seeks monetary and injunctive relief for alleged violations of the Clean Air Act claiming that the Sacramento Metropolitan Air Quality Management District, the responsible state agency, allowed plant modifications without the appropriate permits and pollution control equipment. Campbell is disputing the alleged violations. The company has also been named as a potentially responsible party in a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund. The ultimate impact of these proceedings cannot be predicted at this time due to the large number of other potentially responsible parties, and the speculative nature of clean-up cost estimates, but it is not expected to be material either individually or in the aggregate. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits -------- No. --- 3(ii) Campbell Soup Company's By-Laws, effective September 1, 1995 4 There is no instrument with respect to long-term debt of the company that involves indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the company and its subsidiaries on a consolidated basis. The company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the company upon request of the Securities and Exchange Commission. 27 Financial Data Schedule b. Reports on Form 8-K ------------------- There were no reports on Form 8-K filed by Campbell during the quarter for which this report is filed. -10-
11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMPBELL SOUP COMPANY Date: December 11, 1995 By:/s/JOHN M. COLEMAN -------------------------------------- John M. Coleman, Senior Vice President - Law and Public Affairs Date: December 11, 1995 By:/s/LEO J. GREANEY -------------------------------------- Leo J. Greaney Vice President - Controller (Chief Accounting Officer) -11-
12 INDEX TO EXHIBITS <TABLE> <CAPTION> Exhibit Number Page - -------------- ---- <S> <C> <C> 3(ii) Campbell Soup Company's By-Laws, effective 13-20 September 1, 1995 27 Financial Data Schedule 21 </TABLE> -12-