1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number January 28, 1996 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 249,413,136 SHARES OF CAPITAL STOCK OUTSTANDING AS OF MARCH 1, 1996. THIS FORM 10-Q CONSISTS OF A TOTAL OF 22 PAGES, INCLUDING EXHIBITS. AN INDEX TO EXHIBITS IS ON PAGE 13. ================================================================================ -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 Six Months Ended ----------------------- ------------------------- JANUARY January* JANUARY January* 28, 1996 29, 1995 28, 1996 29, 1995 -------- -------- -------- --------- <S> <C> <C> <C> <C> Net sales $2,217 $2,031 $4,207 $3,887 ----------------------------------------------------------------------------------------------------------------------------- Costs and expenses Cost of products sold 1,247 1,174 2,390 2,259 Marketing and selling expenses 438 381 797 713 Administrative expenses 76 81 157 160 Research and development expenses 21 23 41 42 Other expense 20 10 45 27 ----------------------------------------------------------------------------------------------------------------------------- Total costs and expenses 1,802 1,669 3,430 3,201 ----------------------------------------------------------------------------------------------------------------------------- Earnings before interest and taxes 415 362 777 686 Interest, net 31 14 66 40 ----------------------------------------------------------------------------------------------------------------------------- Earnings before taxes 384 348 711 646 Taxes on earnings 126 117 235 218 ----------------------------------------------------------------------------------------------------------------------------- Net earnings $ 258 $ 231 $ 476 $ 428 ============================================================================================================================= Per share Net earnings $ 1.03 $ .93 $ 1.91 $ 1.72 ============================================================================================================================= Dividends $ .35 $ .31 $ .66 $ .59 ============================================================================================================================= Weighted average shares outstanding 249 249 249 249 ============================================================================================================================= </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> JANUARY July 28, 1996 30, 1995 -------- -------- <S> <C> <C> Current assets Cash and cash equivalents $ 56 $ 53 Accounts receivable 806 631 Inventories 743 755 Prepaid expenses 147 142 ----------------------------------------------------------------------------------------------- Total current assets 1,752 1,581 ----------------------------------------------------------------------------------------------- Plant assets, net of depreciation 2,577 2,584 Intangible assets, net of amortization 1,798 1,715 Other assets 449 435 ----------------------------------------------------------------------------------------------- Total assets $ 6,576 $ 6,315 =============================================================================================== Current liabilities Notes payable $ 575 $ 865 Payable to suppliers and others 497 556 Accrued liabilities 612 545 Dividend payable 87 78 Accrued income taxes 170 120 ----------------------------------------------------------------------------------------------- Total current liabilities 1,941 2,164 ----------------------------------------------------------------------------------------------- Long-term debt 1,050 857 Nonpension postretirement benefits 454 434 Other liabilities, including deferred income taxes of $239 and $235 398 392 ----------------------------------------------------------------------------------------------- Total liabilities 3,843 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 197 165 Earnings retained in the business 3,068 2,755 Capital stock in treasury, at cost (577) (550) Cumulative translation adjustments 25 78 ----------------------------------------------------------------------------------------------- Total shareowners' equity 2,733 2,468 ----------------------------------------------------------------------------------------------- Total liabilities and shareowners' equity $ 6,576 $ 6,315 =============================================================================================== </TABLE> See Notes to Financial Statements -3-
4 CAMPBELL SOUP COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (million dollars) <TABLE> <CAPTION> Six Months Ended ------------------------------------ JANUARY January 28, 1996 29, 1995 -------- -------- <S> <C> <C> Cash flows from operating activities: Net earnings $476 $428 Non-cash charges to net earnings Depreciation and amortization 159 143 Deferred taxes 4 4 Other, net 49 41 Changes in working capital Accounts receivable (195) (194) Inventories (8) 58 Other current assets and liabilities 41 (5) ------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 526 475 ------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Purchases of plant assets (165) (137) Sales of plant assets 7 16 Businesses acquired (142) (194) Sales of businesses 45 5 Net change in other assets and liabilities (5) 5 ------------------------------------------------------------------------------------------------------ Net cash used in investing activities (260) (305) ------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Long-term borrowings 221 3 Repayments of long-term borrowings (27) (17) Short-term borrowings 58 (70) Repayments of short-term borrowings (347) 63 Dividends paid (155) (140) Treasury stock purchased (40) - Treasury stock issued 34 15 ------------------------------------------------------------------------------------------------------ Net cash used in financing activities (256) (146) ------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash (7) (6) ------------------------------------------------------------------------------------------------------ Net change in cash and cash equivalents 3 18 Cash and cash equivalents - beginning of period 53 96 ------------------------------------------------------------------------------------------------------ Cash and cash equivalents - end of period $ 56 $114 ====================================================================================================== </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 $1,989 Net earnings 428 428 Cash dividends ($.59 per share) (147) (147) Treasury stock purchased (1) (1) Treasury stock issued under Management incentive and Stock option plans 6 16 22 Translation adjustments 25 25 --------------------------------------------------------------------------------------------------------------------------------- Balance at January 29, 1995 $ - $20 $161 $2,640 $(544) $39 $2,316 ================================================================================================================================= BALANCE AT JULY 30, 1995 $ - $20 $165 $2,755 $(550) $78 $2,468 NET EARNINGS 476 476 CASH DIVIDENDS ($.66 PER SHARE) (163) (163) TREASURY STOCK PURCHASED (38) (38) TREASURY STOCK ISSUED UNDER MANAGEMENT INCENTIVE AND STOCK OPTION PLANS 32 11 43 TRANSLATION ADJUSTMENTS (53) (53) --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 28, 1996 $ - $20 $197 $3,068 $(577) $25 $2,733 ================================================================================================================================= </TABLE> Changes in Number of Shares (unaudited) (thousands of shares) <TABLE> <CAPTION> --------------------------------------------------------------------------------------------------------------------------------- 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 596 (596) --------------------------------------------------------------------------------------------------------------------------------- Balance at January 29, 1995 271,245 248,903 22,342 ================================================================================================================================= 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 1,281 (1,281) --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 28, 1996 271,245 249,679 21,566 ================================================================================================================================= </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 areof a normal recurring nature. (b) Net earnings per share are based on the weighted averageshares outstanding during the applicable periods. The potential dilution from the exercise of stock options is not material. (c) Inventories <TABLE> <CAPTION> JANUARY July 28, 1996 30, 1995 -------- -------- <S> <C> <C> Raw materials, containers and supplies $321 $317 Finished products 493 505 ------------------------------------------------------------------------------------------- 814 822 Less - Adjustment of certain inventories to LIFO basis 71 67 ------------------------------------------------------------------------------------------- $743 $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 second quarter of 1996, one business was sold. Based on current estimates, existing reserves are adequate to cover expected losses on the remaining businesses to be sold and finalizing other activities. The company plans to complete the program in 1996. A summary of the original reserves and activity through January 28, 1996 follows: <TABLE> <CAPTION> Original Balance BALANCE Reserves Activity 7/30/95 Activity 1/28/96 --------- -------- ------- -------- -------- <S> <C> <C> <C> <C> <C> Loss on disposal of assets $275 $(197) $78 $(1) $77 Severance and other 78 (60) 18 (3) 15 ------------------------------------------------------------------------------------------------ Total $353 $(257) $96 $(4) $92 ================================================================================================ Current $153 $96 $92 Non-current 200 - - ------------------------------------------------------------------------------------------------ Total $353 $96 $92 ================================================================================================ </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 second quarter and first six months ended January 28, 1996. Net sales for the quarter were $2.22 billion, up 9% from the comparable period last year. Earnings per share increased 11% to a quarterly record of $1.03, up from 93 cents in the second quarter last year. Net earnings rose 12% to $258 million from $231 million a year ago. Sales for the six months increased 8% to $4.21 billion, versus$3.89 billion for the comparable period last year. Earnings per share for the six months increased 11% to $1.91, and net earnings increased 11% to $476 million. RESULTS BY DIVISION SECOND QUARTER U.S.A. - U.S. sales for the quarter were $1.36 billion, up 11%over $1.22 billion last year. Operating earnings climbed 18% to$320 million. Soup volume increased 4.5% led by Red & White chicken noodle and"Home Cookin'" ready-to-serve. Strong volume performances were also achieved by "Prego" and "Barilla" brand spaghetti sauces, "Swanson Hungry-Man" dinners,"Swanson" pot pies and "Franco-American" canned pastas. Food Service also achieved substantial volume gains led by frozen soups and chicken pot pies for the away-from-home market. BAKERY & CONFECTIONERY - Bakery & Confectionery sales increased 6% to $466 million from $438 million in the second quarter last year. Operating earnings increased 7% to $67 million from $63 million a year ago. New "Pepperidge Farm" fat-free cookies and brownies gained wide consumer acceptance. "Goldfish" crackers and frozen garlic breads continued to achieve strong double-digit growth. Continental Sweets experienced an earnings decline mostly attributable to economic difficulties in Europe. Arnotts' earnings were flat due to volume declines. Godiva Chocolatier had record holiday season results. This division consists of Pepperidge Farm in the U.S., Arnotts in Australia, Delacre in Europe, Godiva worldwide and the confectionery business in Europe. -7-
8 INTERNATIONAL GROCERY - The International Grocery Division reported sales of $412 million in the second quarter, a 7% increase over last year's $386 million. Operating earnings rose 6% to $42 million, despite heavy marketing expenditures to expand geographies and distribution. Soup volume outside the United States grew 14% during the quarter, with strong gains from the United Kingdom, Hong Kong, Canada and Japan and from the recent introduction of "Red & White" labeled soup into Belgium. Sales also benefited from the acquisitions of "Homepride" cooking sauces in the United Kingdom in August, and the Cheong Chan soup and sauce business in Southeast Asia in December. Earnings in Mexico improved from the last quarter, but were down $1.5 million versus last year due to the economic difficulties there. International Grocery consists of soup, grocery and frozen businesses in Argentina, Asia, Canada, Europe and Mexico. SIX MONTHS U.S.A. - U.S. sales for the six months were $2.56 billion versus $2.35 billion last year. Operating earnings increased 14% to $608 million. Soup volume increased 3.2% led by Red & White chicken noodle,"Home Cookin'" ready-to-serve and Chunky soup. Other strong sales gains came from "Prego" and "Barilla" spaghetti sauces, "Franco-American" canned pastas and Food Service chicken pot pies for the away-from-home market. Frozen foods volume declined, reflecting marketplace conditions. BAKERY & CONFECTIONERY - Bakery & Confectionery sales grew 6% to $901 million from $848 million in the first six months. Operating earnings increased 10% to $120 million. Volume gains were led by new "Pepperidge Farm" fat-free cookies and brownies, "Goldfish" crackers and garlic breads. Arnotts' earnings were flat due to volume declines. Lamy Lutti, a confectionery business in Europe, experienced an earnings decline due to economic difficulties in France. Godiva Chocolatier had record holiday season results. INTERNATIONAL GROCERY - International Grocery reported sales of $794 million in the first six months, a 9% increase over last year. Operating earnings rose 9% to $79 million. Soup volume outside the U.S. was up 9% in the first half of the fiscal year with strong gains from the United Kingdom and Asia. Sales also benefited from the acquisition of "Homepride" cooking sauces in the United Kingdom. -8-
9 STATEMENTS OF EARNINGS Net sales increased 9% for the second quarter and 8% for the six months, compared to the same periods last year. These gains were driven principally by acquisitions and worldwide soup volume gains of 7% in the second quarter and 5% in the first half. Volume gains were particularly strong in Asia, U.K. and Japan with double-digit increases. Gross margins improved 1.6 percentage points to 43.8% in the second quarter and 1.3 percentage points to 43.2% for the six-month period. Gross margin improvements resulted primarily from higher selling prices and manufacturing efficiencies. Marketing and selling expenses increased 15.0% for the second quarter and 12% for the six-month period, over the same periods a year ago. Acquisitions and increased advertising spending, especially for soups, "Franco-American" pasta and Pepperidge Farm "Goldfish" crackers, were the principal reason for the increases. Administrative expenses as a percent of sales decreased .6 percentage points to 3.4% in the second quarter and .4 percentage points to 3.7% for the first six months, reflecting administrative efficiencies. Other expense is up in both the quarter and six-month periods due to amortization of intangibles associated with the recent acquisitions. The increase in interest expense is due to financing costs associated with acquisitions. The effective tax rate for the first six months was 33.0% compared to 33.7% for last year. The company expects its effective tax rate for the full fiscal year 1996 to remain approximately at this level due to tax planning strategies, including utilization of tax loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES Strong net earnings improvement drove cash from operations to $526 million in the first six months of 1996, up $51 million from 1995. Capital expenditures were $165 million in 1996, an increase of $28 million from the prior year, due primarily to construction of a new Arnotts' manufacturing facility in Huntingwood, New South Wales, Australia. Capital expenditures are projected to be between $400 and $450 million in 1996. During the year, the company acquired the "Homepride" sauce business, United Kingdom's leading cooking sauce brand, and the Cheong Chan soup and sauce business in Asia. The company also completed the purchase of a 50% interest in the Indonesian biscuit and snack manufacturer, PT Helios Arnott's Indonesia, and increased its Arnotts share ownership to 67%. The company divested Campbell's Groko B.V., a Dutch frozen vegetable processor. Long-term debt increased by $194 million in 1996. During the quarter, the company issued $200 million, 5.5% fixed-rate three-year notes due January 1999. The proceeds were used to repay short-term debt which decreased $289 million this year. 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 There have been no material developments in the legal proceedings as reported in Campbell's Form 10-Q for the quarter ended October 29, 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. Campbell's Annual Meeting of Shareowners was held on November 16, 1995. c. The matters voted upon and the results of the vote are as follows: Election of Directors <TABLE> <CAPTION> ========================================================================= Number of Shares ------------------------------ Name For Withheld ------------------------------------------------------------------------- <S> <C> <C> Alva A. App 197,982,644 26,457,840 Edmund M. Carpenter 197,994,514 26,445,970 Bennett Dorrance 197,997,179 26,443,305 Thomas W. Field, Jr. 197,991,934 26,448,550 David W. Johnson 197,967,598 26,472,886 David K. P. Li 197,982,512 26,457,972 Philip E. Lippincott 197,963,239 26,477,245 Mary Alice Malone 197,964,185 26,476,299 Charles H. Mott 197,996,448 26,444,036 Ralph A. Pfeiffer, Jr. 197,967,966 26,472,518 George M. Sherman 197,940,836 26,499,648 Donald M. Stewart 197,984,004 26,456,480 George Strawbridge, Jr. 197,961,924 26,478,560 Robert J. Vlasic 192,218,622 32,221,862 Charlotte C. Weber 197,961,034 26,479,450 ========================================================================= </TABLE> -10-
11 <TABLE> <CAPTION> ========================================================================================================================= Broker For Against Abstentions Non-Votes ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Approval of Amendment of Campbell Soup Company 1994 Long-Term Incentive Plan Regarding Director Compensation 168,613,338 55,166,811 660,335 -0- Ratification of Appointment of Auditors 223,911,159 257,997 271,328 -0- Shareowner Proposal Regarding Term Limits for Directors 2,862,722 212,246,954 1,228,116 8,102,692 ========================================================================================================================= </TABLE> ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits No. 3(ii) Campbell Soup Company's By-Laws, effective November 16, 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. -11-
12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMPBELL SOUP COMPANY Date: March 8, 1996 By: /s/JOHN M. COLEMAN ----------------------------------- John M. Coleman, Senior Vice President Law and Public Affairs Date: March 8, 1996 By: /s/LEO J. GREANEY ----------------------------------- Leo J. Greaney Vice President - Controller (Chief Accounting Officer) -12-
13 INDEX TO EXHIBITS <TABLE> <CAPTION> Exhibit Number Page - -------------- ---- <S> <C> <C> 3(ii) Campbell Soup Company's By-Laws, effective November 16, 1995 14-21 27 Financial Data Schedule 22 </TABLE> -13-