1 ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number January 30, 1994 1-3822 Campbell Soup Company New Jersey 21-0419870 State of Incorporation I.R.S. Employer Identification No. Campbell Place Camden, New Jersey 08103-1799 Principal Executive Offices Telephone Number: (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 250,864,926 shares of Capital Stock outstanding as of March 1, 1994. This Form 10-Q consists of a total of 12 pages. ============================================================================= -1- 2 PART I. FINANCIAL INFORMATION CAMPBELL SOUP COMPANY CONSOLIDATED Statements Of Earnings ---------------------- (unaudited) (million dollars except per share amounts) Three Months Ended Six Months Ended ------------------- ------------------ January January January January 30, 1994 31, 1993 30, 1994 31, 1993 -------- -------- -------- -------- Net sales $1,894 $1,789 $3,657 $3,484 -------------------------------------------------------------------------- Costs and expenses Cost of products sold 1,104 1,082 2,162 2,136 Marketing and selling expenses 350 315 670 601 Administrative expenses 79 74 152 143 Research and development expenses 18 17 36 33 Other expense 13 (2) 27 8 Divestiture and restructuring charges - 353 - 353 -------------------------------------------------------------------------- Total costs and expenses 1,564 1,839 3,047 3,274 -------------------------------------------------------------------------- Earnings before interest and taxes 330 (50) 610 210 Interest, net 14 20 32 40 -------------------------------------------------------------------------- Earnings before taxes 316 (70) 578 170 Taxes on earnings 113 51 209 139 -------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes 203 (121) 369 31 Cumulative effect of accounting changes - - - (249) -------------------------------------------------------------------------- Net earnings $ 203 $ (121) $ 369 $ (218) ========================================================================== Per share Earnings before cumulative effect of accounting changes $.81 $(.48) $1.47 $.12 Cumulative effect of accounting changes - - - (.99) -------------------------------------------------------------------------- Net earnings $.81 $(.48) $1.47 $(.87) ========================================================================== Dividends $.28 $.22 $.53 $.415 ========================================================================== Weighted average shares outstanding 251 252 251 252 ========================================================================== See Notes To Financial Statements -2- 3 CAMPBELL SOUP COMPANY CONSOLIDATED Balance Sheets -------------- (unaudited) (million dollars) January August 30, 1994 1, 1993 ------- ------- Current assets Cash and cash equivalents $ 61 $ 63 Other temporary investments, at cost which approximates market 14 7 Accounts receivable 759 646 Inventories 788 804 Prepaid expenses 151 166 -------------------------------------------------------------------------- Total current assets 1,773 1,686 -------------------------------------------------------------------------- Plant assets, net of depreciation 2,305 2,264 Intangible assets, net of amortization 605 596 Other assets 342 352 -------------------------------------------------------------------------- Total assets $5,025 $4,898 ========================================================================== Current liabilities Notes payable $ 540 $ 669 Payable to suppliers and others 399 510 Accrued liabilities 500 499 Dividend payable 71 64 Accrued income taxes 117 109 -------------------------------------------------------------------------- Total current liabilities 1,627 1,851 -------------------------------------------------------------------------- Long-term debt 562 462 Nonpension postretirement benefits 386 370 Other liabilities, including deferred income taxes of $175 and $169 524 511 -------------------------------------------------------------------------- Total liabilities 3,099 3,194 -------------------------------------------------------------------------- Shareowners' equity Preferred stock; authorized 40 shares; none issued - - Capital stock, $.075 par value; authorized 280 shares; issued 271 shares 20 20 Capital surplus 155 149 Earnings retained in the business 2,238 2,002 Capital stock in treasury, at cost (463) (428) Cumulative translation adjustments (24) (39) -------------------------------------------------------------------------- Total shareowners' equity 1,926 1,704 -------------------------------------------------------------------------- Total liabilities and shareowners' equity $5,025 $4,898 ========================================================================== See Notes to Financial Statements -3- 4 CAMPBELL SOUP COMPANY CONSOLIDATED Statements of Cash Flows ------------------------- (unaudited) (million dollars) Six Months Ended ---------------- January January 30, 1994 31, 1993 -------- -------- Cash flows from operating activities: Net earnings $369 $(218) Non-cash charges: Cumulative effect of accounting changes - 249 Divestiture and restructuring charges - 353 Depreciation and amortization 125 113 Deferred taxes 4 (54) Other 29 11 Net change in accounts receivable (114) (242) Net change in inventories 15 (70) Net change in other current assets and liabilities (93) (6) -------------------------------------------------------------------------- Net cash provided by operating activities 335 136 -------------------------------------------------------------------------- Cash flows from investing activities: Purchases of plant assets (176) (113) Sales of plant assets 15 10 Businesses acquired (8) (137) Sales of businesses 15 - Net change in other assets 14 28 Net change in other temporary investments (8) (1) -------------------------------------------------------------------------- Net cash used in investing activities (148) (213) -------------------------------------------------------------------------- Cash flows from financing activities: Issuance of long-term debt 100 1 Reductions in long-term debt (101) (118) Net change in borrowings with less than three-month maturities (4) 232 Other short-term borrowings (25) (15) Dividends paid (126) (98) Treasury stock purchased (41) - Treasury stock issued 8 29 -------------------------------------------------------------------------- Net cash provided by (used in) financing activities (189) 31 -------------------------------------------------------------------------- Effect of exchange rate changes on cash - - -------------------------------------------------------------------------- Net change in cash and cash equivalents (2) (46) Cash and cash equivalents - beginning of period 63 112 -------------------------------------------------------------------------- Cash and cash equivalents - end of period $ 61 $ 66 ========================================================================== See Notes to Financial Statements -4- 5 CAMPBELL SOUP COMPANY CONSOLIDATED Statements of Changes in Shareowners' Equity -------------------------------------------- (unaudited) (million dollars) Earnings Capital Retained Stock Cumulative Total Preferred Capital Capital in the in Translation Shareowners' Stock Stock Surplus Business Treasury Adjustments Equity --------- ------- ------- -------- -------- ----------- ------------ Balance at August 2, 1992 $ - $20 $116 $2,224 $(402) $69 $2,027 Net earnings 41 41 Cash dividends ($.415 per share) (104) (104) Treasury stock purchased - Treasury stock issued under Management incentive and Stock option plans 20 15 35 Translation adjustments (92) (92) --------------------------------------------------------------------------------------------------------------------- Balance at January 31, 1993 $ - $20 $136 $2,161 $(387) $(23) $1,907 ===================================================================================================================== Balance at August 1, 1993 $ - $20 $149 $2,002 $(428) $(39) $1,704 Net earnings 369 369 Cash dividends ($.53 per share) (133) (133) Treasury stock purchased (41) (41) Treasury stock issued under Management incentive and Stock option plans 6 6 12 Translation adjustments 15 15 --------------------------------------------------------------------------------------------------------------------- Balance at January 30, 1994 $ - $20 $155 $2,238 $(463) $(24) $1,926 ===================================================================================================================== -5- 6 Changes in Number of Shares (unaudited) -------------------------------------- (thousands of shares) --------------------------------------------------------------------------------------------------------------------- In Issued Outstanding Treasury ------ ----------- -------- Balance at August 2, 1992 271,245 251,168 20,077 Treasury stock purchased Treasury stock issued under Management incentive and Stock option plans 1,154 (1,154) --------------------------------------------------------------------------------------------------------------------- Balance at January 31, 1993 271,245 252,322 18,923 ===================================================================================================================== Balance at August 1, 1993 271,245 251,706 19,539 Treasury stock purchased (1,139) 1,139 Treasury stock issued under Management incentive and Stock option plans 284 (284) --------------------------------------------------------------------------------------------------------------------- Balance at January 30, 1994 271,245 250,851 20,394 ===================================================================================================================== See Notes to Financial Statements -6- 7 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 January August 30, 1994 1, 1993 -------- ------- Raw materials, containers and supplies $ 377 $342 Finished products 490 538 - ----------------------------------------------------------------------------- 867 880 Less - Adjustment of certain inventories to LIFO basis 79 76 - ----------------------------------------------------------------------------- $ 788 $804 ============================================================================= (d) In February 1993, Campbell increased its ownership in Arnotts Limited from a minority interest to 58%. Beginning in the third quarter of fiscal 1993, Arnotts' results have been consolidated. Prior to this time, Campbell's investment in Arnotts was accounted for by the equity method. Minority interest is classified as Other Expense in the Statement of Earnings. (e) Certain reclassifications of prior years' data have been made to improve comparability. -7- 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS ------------------------------------------------------------- AND FINANCIAL CONDITION ----------------------- CAMPBELL SOUP COMPANY --------------------- Results of Operations - --------------------- Overview - -------- Campbell had record sales and earnings for its second quarter and first six months ended January 30, 1994. Earnings per share increased to a quarterly record of 81 cents, compared to a loss of 48 cents in the second quarter last year, which included restructuring charges of $1.19. Net earnings rose to $203 million from a loss of $121 million a year ago. Net sales for the quarter were $1.89 billion, up 6% from the comparable period last year. In the second quarter, the worldwide Biscuit and Bakery business continued to make excellent progress and International recorded strong earnings improvement with soup volume outside the U.S. up 4%. U.S. businesses posted slight earnings gains, recovering from a difficult first quarter. Net earnings for the six months were $369 million, or $1.47 per share, compared to a loss of 87 cents per share last year, which included restructuring and one-time charges for accounting changes totaling $2.18 per share. Net earnings increased 12% before these special charges. Sales for the six months increased 5% to $3.66 billion, versus $3.48 billion for the comparable period last year. Results by Division - ------------------- SECOND QUARTER - -------------- U.S.A. - U.S. sales for the second quarter of $1.16 billion were up slightly and operating earnings increased to $249 million from $72 million last year. Operating earnings increased 1% before 1993 restructuring charges. Soup shipments to the trade declined 3% from last year's second quarter because of heavy promotional activity last year. Consumer purchases of Campbell's soups rose 2%, supported by the new advertising campaign, "Never Underestimate the Power of Soup." -8- 9 Major sales gains were achieved by "Swanson" traditional frozen dinners, "Great Starts" breakfasts, and ready-to-serve soups. Food service sales continued to grow at a rapid pace highlighted by the introduction of new products for quick-service restaurants. Biscuit and Bakery - Biscuit and Bakery second quarter sales rose 48% to $318 million, primarily due to Campbell's 1993 acquisition of majority ownership in Arnotts Limited. Operating earnings increased to $43 million from $18 million last year. Before 1993 restructuring charges, operating earnings increased 84% with Arnotts the major contributor to the improvement. "Pepperidge Farm" sales rose slightly from last year's comparable period. Sales of new frozen garlic breads contributed strongly to sales and earnings. "Delacre" sales were down slightly, reflecting the lingering effects of recession in Europe. Earnings improved substantially due to restructuring of the business. International - International businesses consisting of soups, grocery, frozen, confectionery and specialty foods in Canada, Mexico, Argentina, Europe and Asia, reported a sales decrease of 3%, but an increase of 1% before currency fluctuations. International operating earnings rose to $49 million from a loss of $130 million for the comparable period last year. 1993 results included restructuring charges of $173 million. Excluding restructuring charges and currency fluctuations, operating earnings rose 20%. Campbell's United Kingdom businesses turned in another record earnings performance, due to volume growth in the soup and grocery businesses, continued margin improvement in frozen foods, and the acquisition last April of the "Fray Bentos" meat product business. Solid earnings gains also came from Canada, Australia and Campbell's confectionery businesses. "Godiva" chocolates had a very successful holiday season. SIX MONTHS - ---------- U.S.A. - U.S. sales for the six months of $2.23 billion decreased 1%. Operating earnings were $471 million, a 2% decline excluding the effects of 1993 restructuring charges. Soup shipments to the trade declined 5% versus a very strong prior year. Sales of "Swanson" traditional frozen dinners and food service products were particularly strong during the period. -9- 10 Biscuit and Bakery - Biscuit and Bakery sales for the six months rose to $647 million, a 48% increase, largely due to the acquisition of Arnotts. Operating earnings increased to $81 million from $38 million. Excluding 1993 restructuring charges, operating earnings increased 90%, primarily as a result of the acquisition of Arnotts. Delacre delivered solid sales gains and substantial improvements in earnings. International - International sales for the six months declined 2% to $813 million, but increased 5% before currency fluctuations. Solid gains were contributed by Mexico, "Godiva," and the grocery business in the United Kingdom. Operating earnings increased to $78 million, a 24% increase excluding 1993 restructuring charges. Earnings improvements occurred throughout most businesses but were particularly strong in the United Kingdom, Canada, Argentina and the confectionery businesses. Statements of Earnings - ---------------------- Net sales increased 6% for the second quarter and 5% for the six months versus the same periods in the prior year. Acquisitions accounted for all of this increase as sales of other businesses were even with last year. Strong sales gains in frozen, confectionery and U.K. businesses were offset by a slight decline in domestic soup sales to the trade. Gross margins improved 2.1 percentage points to 41.7% in the second quarter, and 2.2 percentage points to 40.9% for the six-month period. These increases resulted from continued stability in commodity costs, higher selling prices and manufacturing improvements. Marketing and selling expenses were up 11.1% and 11.5% for the second quarter and the six months, respectively, compared to the prior year. During the six-month period, major marketing activities were initiated including the new soup advertising campaign, "Never Underestimate the Power of Soup," which is designed to increase per capita consumption. The increase in Other expense results principally from minority interest associated with Arnotts. Interest expense continues to be favorable to the prior year due to the retirement of higher rate long-term debt as well as the low interest rate environment. In the second quarter of 1993, divestiture and restructuring charges were recorded to cover the costs of plant consolidations, including the closing of frozen food plants in Salisbury, Md. and Philadelphia, Pa. and the sale of non-strategic businesses. The effective tax rates for the second quarter and the six months were 35.9% and 36.1%, respectively. The Company continues to benefit from tax planning strategies. -10- 11 Liquidity and Capital Resources - ------------------------------- Campbell's cash flows from operating activities are highly seasonal. As a result of earnings improvements and focused control of working capital, the Company generated cash of $335 million from operations in 1994, up $199 million from 1993. The seasonal increase in accounts receivable was $114 million in 1994, compared to an increase of $242 million in 1993, primarily as a result of the timing of sales promotions and currency fluctuations. Tighter inventory control provided $15 million of cash in 1994 in contrast to a $70 million use of cash in 1993. Capital expenditures were $176 million in 1994, up $63 million over the prior year, due to a high level of previously approved cost savings projects including restructuring programs announced in the second quarter of 1993. Capital expenditures are projected to reach $420 million in 1994. The Company acquired the Australian mushroom business, "Dandy Mushrooms," for $8 million during the first six months of 1994. In the same period for 1993, the Company made a tender offer for the outstanding shares of Arnotts Limited; by the close of business for the second quarter, shares totaling $127 million had been acquired. Additional shares of Arnotts Limited totaling $100 million were acquired in the third quarter of 1993, bringing the total cost of shares of Arnotts Limited acquired in fiscal 1993 to $227 million, representing a 58% ownership position. During the first quarter, the Company retired $100 million of 9.125% notes and issued $100 million of notes bearing an interest rate of 5.625% with a maturity in 2003. Short-term debt decreased by $29 million in 1994 and increased $217 million in 1993. As a result of increases in the dividend rate, year-to-date dividend payments increased $28 million to $126 million in 1994, compared to $98 million for the first six months of 1993. The Company repurchased 1.1 million shares of common stock for the treasury at a cost of $41 million in the first quarter of 1994, whereas there were no repurchases in the same period for 1993. -11- 12 PART II ITEM 1. LEGAL PROCEEDINGS As previously reported, 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. The Company has 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. Campbell's Annual Meeting of Shareowners was held on November 18, 1993. c. The matters voted upon and the results of the vote are as follows: Election of Directors Number of Shares ---------------------- Name For Withheld ---------------------- ----------- -------- Alva A. App 231,198,139 297,306 Robert A. Beck 231,189,090 306,355 Edmund M. Carpenter 231,191,073 304,372 Bennett Dorrance 231,211,286 284,159 John T. Dorrance, III 231,209,264 286,181 Thomas W. Field, Jr. 231,217,802 277,643 David W. Johnson 231,200,082 295,363 Philip E. Lippincott 231,184,137 311,308 Mary Alice Malone 231,205,592 289,853 Charles H. Mott 231,212,550 282,895 Ralph A. Pfeiffer, Jr. 231,133,062 362,383 Donald M. Stewart 230,888,383 607,062 George Strawbridge, Jr. 231,203,221 292,224 Robert J. Vlasic 224,653,482 6,841,963 Charlotte C. Weber 231,207,707 287,738 Broker For Against Abstentions Non-Votes ----------- ------------ ----------- --------- Ratification of Independent Accountants 230,674,622 365,816 455,007 N/A Shareowner Proposal Concerning Former Government Employees 4,082,156 216,484,807 1,815,550 9,112,932 -12- 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits -------- 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. 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. 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 10, 1994 By: /s/ John M. Coleman -------------------------------- John M. Coleman, Senior Vice President - Law and Public Affairs Date: March 10, 1994 By: /s/ Frank E. Weise, III -------------------------------- Frank E. Weise, III Senior Vice President - Finance and Chief Financial Officer -13-