-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A6V/K/WggnmM+auCRBCZetljxqG0RckYzKa9vjhX4vZpmliriUHyp2o8v/MYe1Ej xeu1o8n7hGhNplbM7BCJ+A== /in/edgar/work/0000893220-00-001156/0000893220-00-001156.txt : 20001020 0000893220-00-001156.hdr.sgml : 20001020 ACCESSION NUMBER: 0000893220-00-001156 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000730 FILED AS OF DATE: 20001019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMPBELL SOUP CO CENTRAL INDEX KEY: 0000016732 STANDARD INDUSTRIAL CLASSIFICATION: [2000 ] IRS NUMBER: 210419870 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0729 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-03822 FILM NUMBER: 742587 BUSINESS ADDRESS: STREET 1: CAMPBELL PL CITY: CAMDEN STATE: NJ ZIP: 08103 BUSINESS PHONE: 6093424800 MAIL ADDRESS: STREET 1: CAMPBELL PL CITY: CAMDEN STATE: NJ ZIP: 08103 10-K405 1 w41477e10-k405.txt FORM 10-K405 CAMPBELL SOUP CO. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER JULY 30, 2000 1-3822
[Campbell Soup Co. 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 -------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED CAPITAL STOCK, PAR VALUE $.0375 NEW YORK STOCK EXCHANGE PHILADELPHIA STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [x] AS OF SEPTEMBER 19, 2000, THE AGGREGATE MARKET VALUE OF CAPITAL STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $10,383,450,073. THERE WERE 420,595,446 SHARES OF CAPITAL STOCK OUTSTANDING AS OF SEPTEMBER 19, 2000. PORTIONS OF THE ANNUAL REPORT TO SHAREOWNERS FOR THE FISCAL YEAR ENDED JULY 30, 2000 ARE INCORPORATED BY REFERENCE INTO PARTS I AND II. PORTIONS OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED OCTOBER 10, 2000, FOR THE ANNUAL MEETING OF SHAREOWNERS TO BE HELD ON NOVEMBER 17, 2000, ARE INCORPORATED BY REFERENCE INTO PART III. 2 PART I ITEM 1. BUSINESS THE COMPANY Campbell Soup Company ("Campbell" or the "company"), together with its consolidated subsidiaries, is a global manufacturer and marketer of high quality, branded convenience food products. Campbell was incorporated as a business corporation under the laws of New Jersey on November 23, 1922; however, through predecessor organizations, it traces its heritage in the food business back to 1869. The company operates in three business segments: Soup and Sauces, Biscuits and Confectionery, and Away From Home. The Soup and Sauces segment includes the worldwide soup businesses, Prego spaghetti sauce, Franco-American pastas and gravies, Pace Mexican foods, Swanson broths and canned poultry, Homepride sauces in the United Kingdom and the V8 and V8 Splash beverage business. The Biscuits and Confectionery segment includes the Pepperidge Farm, Godiva and Arnotts Limited businesses. The Away From Home segment represents products, including Campbell's soups, Pace Tabletop picante and Campbell's Specialty Kitchens entrees, which are distributed to the food service and home meal replacement markets. See also "Management's Discussion and Analysis of Results of Operations and Financial Condition" at pages 28 to 33 of the Company's 2000 Annual Report to Shareowners for the fiscal year ended July 30, 2000 ("2000 Annual Report"), which is incorporated herein by reference. Additional financial information about the company's business segments is incorporated by reference from the section of the Notes to Consolidated Financial Statements entitled "Business and Geographic Segment Information" from pages 39 to 41 of the 2000 Annual Report. During 2000, the company divested its MacFarms of Hawaii macadamia nut business. INGREDIENTS The ingredients required for the manufacture of the company's food products are purchased from various suppliers. As a result of the company's portfolio reconfiguration program, the company sold or spun off certain of its ingredient and container operations and entered into various supply agreements covering those purchases. The company does not anticipate any material restrictions on availability or shortages of ingredients that would have a significant impact on the company's businesses. While all such ingredients are available from numerous independent suppliers, raw materials are subject to fluctuations in price attributable to a number of factors, including changes in crop size, cattle cycles, government-sponsored agricultural programs and weather conditions during the growing and harvesting seasons. Ingredient inventories are at a peak during the late fall and decline during the winter and spring. Since many ingredients of suitable quality are available in sufficient quantities only at certain seasons, the company makes commitments for the purchase of such ingredients during their respective seasons. CUSTOMERS In the United States, sales solicitation activities are conducted by the company's own sales force and through broker and distributor arrangements. The company's products are generally resold to consumers in retail stores, restaurants and other food service establishments. No material part of the 2 3 business is dependent upon a single customer. Shipments are made promptly by the company after receipt and acceptance of orders. TRADEMARKS AND TECHNOLOGY Trademarks are considered to be of material importance to the company's business. Principal trademarks include "Campbell's", "Erasco", "Liebig", "Pepperidge Farm", "V8", "V8 Splash", "Pace", "Prego", "Swanson", "Franco-American", "Homepride", "Arnott's" and "Godiva". These trademarks are of significant importance to the company and its subsidiaries within their markets. The company's rights in these trademarks endure for as long as they are used or registered. Although the company owns a number of valuable patents, it does not regard any segment of its business as being dependent upon any single patent or any group of related patents. COMPETITION The company experiences vigorous competition for sales of its principal products in its major markets, both within the United States and abroad, from numerous competitors of varying sizes. The principal areas of competition are quality, price, advertising, promotion and service. WORKING CAPITAL For information relating to the company's cash and other working capital items, see pages 28 through 33 of the company's 2000 Annual Report in the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition", which are incorporated herein by reference. RESEARCH AND DEVELOPMENT During the last three fiscal years, the company's expenditures on research activities relating to new products and the improvement of existing products were approximately $64 million in 2000, $66 million in 1999 and $71 million in 1998. EMPLOYEES At July 30, 2000, there were approximately 22,000 persons employed by the company. FOREIGN OPERATIONS For information with respect to the revenue, operating profitability and identifiable assets attributable to the company's foreign operations, see pages 39 to 41 of the 2000 Annual Report in the section of the Notes to Consolidated Financial Statements entitled "Business and Geographic Segment Information", which is incorporated herein by reference. FINANCIAL INFORMATION For information with respect to revenue, operating profitability and identifiable assets attributable to the company's business segments, see pages 39 to 41 of the 2000 Annual Report in the section of the Notes to Consolidated Financial Statements entitled "Business and Geographic Segment Information", which is incorporated herein by reference. 3 4 RECENT DEVELOPMENTS The information presented on pages 32 to 33 of the 2000 Annual Report in the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" is incorporated herein by reference. FORWARD-LOOKING STATEMENTS From time to time, the company makes oral and written statements which 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" and similar expressions. These statements reflect the company's current plans and expectations and are based on information currently available to it. They rely on a number of assumptions and estimates which could be inaccurate and which are subject to risks and uncertainties. Campbell 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 2000 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 impact of strong competitive response to the company's efforts to leverage its brand power with product innovation, promotional programs and new advertising; - the inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance; - the company's ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume and product mix; - the availability of new acquisition and alliance opportunities that build shareowner wealth; - the company's ability to achieve its cost savings objectives, including the projected outcome of supply chain management programs; - the difficulty of predicting the pattern of inventory movements by the company's trade customers; and - the impact of unforeseen economic and political changes in international markets where the company competes such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which the company has no control. This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact the company's outlook. 4 5 ITEM 2. PROPERTIES The company's principal executive offices and main research facilities are company-owned and located in Camden, New Jersey. The following table sets forth the company's principal manufacturing facilities: PRINCIPAL MANUFACTURING FACILITIES
INSIDE THE U.S. OUTSIDE THE U.S. CALIFORNIA OHIO AUSTRALIA GERMANY - - Dixon - Napoleon - Burwood - Lubeck - - Sacramento - Wauseon - Huntingwood - Gerwisch - - Stockton - Willard - Marleston INDONESIA CONNECTICUT PENNSYLVANIA - Shepparton - Jawa Barat - - Norwalk - Denver - Virginia MALAYSIA FLORIDA - Downingtown BELGIUM - Selangor Darul Ehsan - - Lakeland - Reading - Puurs MEXICO ILLINOIS SOUTH CAROLINA CANADA - Villagran - - Downers Grove - Aiken - Listowel - Guasave MICHIGAN TEXAS - Toronto PAPUA NEW GUINEA - - Marshall - Paris UNITED KINGDOM - Gordons NEW JERSEY UTAH - King's Lynn - Malahang Lae - - South Plainfield - Richmond FRANCE NORTH CAROLINA WASHINGTON - LePontet - - Maxton - Woodinville WISCONSIN - Milwaukee
The company also operates retail confectionery shops in the United States, Canada, Europe and Japan; retail bakery thrift stores in the United States; and other plants, facilities and offices at various locations in the United States and abroad. Management believes that the company's manufacturing and processing plants are well maintained and are generally adequate to support the current operations of the businesses. ITEM 3. 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 results of operations, financial position or cash flows of the company. As previously reported, ten purported class action lawsuits were commenced against Campbell Soup Company and certain of its officers in the United States District Court for the District of New Jersey. The lawsuits were subsequently consolidated, and an amended consolidated complaint was filed alleging, among other things, that Campbell and certain of its officers misrepresented the company's 5 6 financial condition between September 8, 1997 and January 8, 1999, by failing to disclose alleged shipping and revenue recognition practices in connection with the sale of certain company products at the end of the company's fiscal quarters in violation of Section 10 (b) and 20 (a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The actions seek compensation and other damages, and costs and expenses associated with the litigation. Campbell believes the action is without merit and intends to defend the case vigorously. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE COMPANY The following list of executive officers as of October 1, 2000, is included as an item in Part I of this Form 10-K:
DATE FIRST NAME PRESENT TITLE AGE ELECTED OFFICER ---- ------------- --- --------------- David W. Johnson President and Chief Executive Officer 68 2000 Basil L. Anderson Executive Vice President and Chief Financial Officer 55 1996 Ellen Oran Kaden Senior Vice President - Law and 49 1998 Government Affairs F. Martin Thrasher Senior Vice President 49 1992 President - Campbell North America David L. Albright Vice President 53 1992 President - Pepperidge Farm Jerry S. Buckley Vice President - Public Affairs 45 1997 Andrew K. Hughson Vice President 45 1997 President - U.S. Soup and Sauces Gerald S. Lord Vice President - Controller 54 1993
6 7 R. David C. Macnair Vice President - Global Research and Development 46 1998 Craig W. Rydin Vice President 48 1997 President - Away From Home
Each of the above-named officers has been employed by the company in an executive or managerial capacity for at least five years, except David W. Johnson, Basil L. Anderson, Ellen Oran Kaden and Andrew K. Hughson. David W. Johnson previously served as Chairman (1993-1999) and Chief Executive Officer (1990-1997) of Campbell Soup Company. Basil L. Anderson served as Chief Financial Officer (1992-1996) of Scott Paper Company prior to joining Campbell in 1996. Ellen Oran Kaden served as Executive Vice President, General Counsel and Secretary (1994-1998) and Senior Vice President, General Counsel and Secretary (1993-1994) of CBS Inc. prior to joining Campbell in 1998. Andrew K. Hughson served as General Manager, Kellogg France, Belgium and the Netherlands (1994-1996) and Assistant to the Chairman, Kellogg Company, Global Marketing (1993-1994) prior to joining Campbell in 1996. There is no family relationship among any of the company's executive officers or between any such officer and any director of Campbell. Executive officers of Campbell are elected at the November 2000 meeting of the Board of Directors. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREOWNER MATTERS Campbell's capital stock is listed and principally traded on the New York Stock Exchange. Campbell's capital stock is also listed and traded on the Philadelphia Stock Exchange, The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited and the Swiss Exchange. On September 19, 2000, there were 36,672 holders of record of Campbell's capital stock. The market price and dividend information with respect to Campbell's capital stock are set forth on page 47 of the 2000 Annual Report in the section of the Notes to Consolidated Financial Statements entitled "Quarterly Data (unaudited)" which is incorporated herein by reference. Future dividends will be dependent upon future earnings, financial requirements and other factors. ITEM 6. SELECTED FINANCIAL DATA The information called for by this Item is set forth on page 49 of the 2000 Annual Report in the section entitled "Seven-Year Review - Consolidated" which is incorporated herein by reference. Such information should be read in conjunction with the Consolidated Financial Statements and Notes thereto of the company included in Item 8 of this Report. 7 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information presented on pages 28 through 33 of the 2000 Annual Report in the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information presented on pages 31 and 32 of the 2000 Annual Report in the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS The information presented on pages 34 through 48 of the 2000 Annual Report is incorporated herein by reference. With the exception of the aforementioned information and the information incorporated by reference in Items 1, 5, 6, 7, and 7A, the 2000 Annual Report is not deemed to be filed as part of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The sections entitled "Election of Directors" and "Directors and Executive Officers Stock Ownership Reports" set forth on pages 1 through 4 and page 30 of Campbell's Notice of Annual Meeting and Proxy Statement dated October 10, 2000 (the "2000 Proxy Statement") are incorporated herein by reference. The information required by this Item relating to the executive officers of Campbell is set forth in Part I of this Report on pages 6 and 7 under the heading "Executive Officers of the Company." ITEM 11. EXECUTIVE COMPENSATION The information set forth on pages 14 through 24 of the 2000 Proxy Statement in the section entitled "Compensation of Executive Officers" is incorporated herein by reference. 8 9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth at pages 5 through 7 of the 2000 Proxy Statement in the sections entitled "Security Ownership of Directors and Executive Officers" and "Security Ownership of Certain Beneficial Owners" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. FINANCIAL STATEMENTS - Consolidated Statements of Earnings for 2000, 1999 and 1998 - Consolidated Balance Sheets as of July 30, 2000 and August 1, 1999 - Consolidated Statements of Cash Flows for 2000, 1999 and 1998 - Consolidated Statements of Shareowners' Equity for 2000, 1999 and 1998 - Notes to Consolidated Financial Statements - Report of Independent Accountants - The foregoing Financial Statements are incorporated into Part II, Item 8 of this Report by reference to pages 34 through 48 of the 2000 Annual Report. 2. FINANCIAL STATEMENT SCHEDULES None. 3. EXHIBITS 3 (i) Campbell's Restated Certificate of Incorporation as amended through February 24, 1997, was filed with the Securities and Exchange Commission ("SEC") with Campbell's Form 10-Q for the quarterly period ended January 26, 1997, and is incorporated herein by reference. 9 10 3 (ii) Campbell's By-Laws, effective as of March 23, 2000, were filed with the SEC with Campbell's Form 10-Q for the quarterly period ended April 30, 2000, and are incorporated herein by reference. 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 SEC. 9 Major Stockholders' Voting Trust Agreement dated June 2, 1990, as amended, was filed with the SEC by the Trustees of the Major Stockholders' Voting Trust as Exhibit A to Schedule 13D dated June 5, 1990, and is incorporated herein by reference. 10(a) Campbell Soup Company 1984 Long-Term Incentive Plan, as amended on March 30, 1998, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended August 2, 1998, and is incorporated herein by reference. 10(b) Campbell Soup Company 1994 Long-Term Incentive Plan as amended on November 18, 1999, was filed with the SEC with Campbell's 1999 Proxy Statement and is incorporated herein by reference. 10(c) Campbell Soup Company Management Worldwide Incentive Plan, as amended on November 18, 1999, was filed with the SEC with Campbell's 1999 Proxy Statement and is incorporated herein by reference. 10(d) Mid-Career Hire Pension Program, as amended on February 22, 1996, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended July 28, 1996, and is incorporated herein by reference. 10(e) Deferred Compensation Plan, effective November 18, 1999. 10(f) Severance Protection Agreement dated April 1, 1998, with Ellen Oran Kaden, Senior Vice President - Law and Government Affairs, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended August 2, 1998, and is incorporated herein by reference. Agreements with seven (7) other executive officers are in all material respects the same as that with Ms. Kaden. 10(g) Agreement between the company and David W. Johnson dated May 23, 2000, was filed with the SEC with Campbell's Form 10-Q for the quarterly period ended April 30, 2000, and is incorporated herein by reference. 10(h) Supplemental pension arrangement for David W. Johnson, Chairman, President and Chief Executive Officer, was filed with the SEC in Campbell's 1996 Proxy 10 11 Statement, on page 18 under the heading "Pension Plans", and is incorporated herein by reference. 10(i) Agreement between the company and Dale F. Morrison dated April 20, 2000, was filed with the SEC with Campbell's Form 10-Q for the quarterly period ended April 30, 2000, and is incorporated herein by reference. 13 Pages 28 through 49 of Campbell's 2000 Annual Report to Shareowners for the fiscal year ended July 30, 2000. 21 Subsidiaries (Direct and Indirect) of the company. 23 Consent of Independent Accountants. 24(a) Power of Attorney. 24(b) Certified copy of the resolution of Campbell's Board of Directors authorizing signatures pursuant to a power of attorney. 27 Financial Data Schedule (not considered to be filed). (b) Reports on Form 8-K The company filed a report on Form 8-K on September 13, 2000 with information pursuant to Item 5 (Other Events) pertaining to an announcement of the company's results for fiscal 2000 and comments on analysts' expectations for the first quarter of fiscal 2001 and the outlook for earnings per share for the full year. The report also indicated under Item 7 that a copy of the related press release was attached as an exhibit to the report. 11 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Campbell has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: October 18, 2000 CAMPBELL SOUP COMPANY By: /s/ Basil L. Anderson --------------------- Basil L. Anderson Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Campbell and in the capacity and on the date indicated. Date: October 18, 2000 /s/ Basil L. Anderson /s/ Gerald S. Lord --------------------- ------------------ Basil L. Anderson Gerald S. Lord Executive Vice President Vice President - Controller and Chief Financial Officer Philip E. Lippincott Chairman and Director } David W. Johnson President, Chief Executive } Officer and Director Alva A. App Director } Edmund M. Carpenter Director } Bennett Dorrance Director } Thomas W. Field, Jr. Director } Kent B. Foster Director } Harvey Golub Director } David K. P. Li Director } By: /s/ Ellen Oran Kaden -------------------- Mary Alice D. Malone Director } Ellen Oran Kaden Charles H. Mott Director } Senior Vice President - Charles R. Perrin Director } Law and Government Affairs George M. Sherman Director } Donald M. Stewart Director } George Strawbridge, Jr. Director } Charlotte C. Weber Director }
12 13 INDEX OF EXHIBITS Document 3(i) Campbell's Restated Certificate of Incorporation as amended through February 24, 1997 was filed with the Securities and Exchange Commission ("SEC") with Campbell's Form 10-Q for the quarterly period ended January 26, 1997, and is incorporated herein by reference. 3(ii) Campbell's By-Laws, effective as of March 23, 2000, were filed with the SEC with Campbell's Form 10-Q for the quarterly period ended April 30, 2000, and are incorporated herein by reference. 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 SEC. 9 Major Stockholders' Voting Trust Agreement dated June 2, 1990, as amended, was filed with the SEC by the Trustees of the Major Stockholders' Voting Trust as Exhibit A to Schedule 13D dated June 5, 1990, and is incorporated herein by reference. 10(a) Campbell Soup Company 1984 Long-Term Incentive Plan, as amended on March 30, 1998, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended August 2, 1998, and is incorporated herein by reference. 10(b) Campbell Soup Company 1994 Long-Term Incentive Plan as amended on November 18, 1999, was filed with the SEC with Campbell's 1999 Proxy Statement and is incorporated herein by reference. 10(c) Campbell Soup Company Management Worldwide Incentive Plan, as amended on November 18, 1999, was filed with the SEC with Campbell's 1999 Proxy Statement and is incorporated herein by reference. 10(d) Mid-Career Hire Pension Program, as amended on February 22, 1996, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended July 28, 1996, and is incorporated herein by reference. 10(e) Deferred Compensation Plan, effective November 18, 1999. 13 14 10(f) Severance Protection Agreement dated April 1, 1998, with Ellen Oran Kaden, Senior Vice President - Law and Government Affairs, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended August 2, 1998, and is incorporated herein by reference. Agreements with seven (7) other executive officers are in all material respects the same as that with Ms. Kaden. 10(g) Agreement between the company and David W. Johnson dated May 23, 2000, was filed with the SEC with Campbell's Form 10-Q for the quarterly period ended April 30, 2000, and is incorporated herein by reference. 10(h) Supplemental pension arrangement for David W. Johnson, Chairman, President and Chief Executive Officer, was filed with the SEC in Campbell's 1996 Proxy Statement, on page 18 under the heading "Pension Plans", and is incorporated herein by reference. 10(i) Agreement between the company and Dale F. Morrison dated April 20, 2000, was filed with the SEC with Campbell's Form 10-Q for the quarterly period ended April 30, 2000, and is incorporated herein by reference. 13 Pages 28 through 49 of Campbell's 2000 Annual Report to Shareowners for the fiscal year ended July 30, 2000. 21 Subsidiaries (Direct and Indirect) of Campbell. 23 Consent of Independent Accountants. 24(a) Power of Attorney. 24(b) Certified copy of the resolution of Campbell's Board of Directors authorizing signatures pursuant to a power of attorney. 27 Financial Data Schedule (not considered to be filed). 14 EX-10.(E) 2 w41477ex10-e.txt DEFERRED COMPENSATION PLAN, EFFECTIVE 11/18/1999 1 EXHIBIT 10 (E) - -------------------------------------------------------------------------------- CAMPBELL SOUP COMPANY ------------ DEFERRED COMPENSATION PLAN ------------ Effective: November 18, 1999 - -------------------------------------------------------------------------------- 2 CAMPBELL SOUP COMPANY DEFERRED COMPENSATION PLAN TABLE OF CONTENTS
ARTICLE PAGE - ------- ---- I. Definitions.................................................................................. 1 II. Eligibility and Participation................................................................ 4 III. Contributions................................................................................ 4 IV. Vesting and Forfeitures...................................................................... 6 V. Investment Accounts and Distributions........................................................ 6 VI. Administrative Procedures.................................................................... 6 VII. Claims Procedure............................................................................. 7 VIII. Funding...................................................................................... 8 IX. Amendment and Termination.................................................................... 8 X. Change in Control............................................................................ 8 XI. Miscellaneous................................................................................ 12
3 CAMPBELL SOUP COMPANY DEFERRED COMPENSATION PLAN The Deferred Compensation Plan for Eligible Executives of Campbell Soup Company ("Plan") is designed to provide an additional method of planning for retirement and other significant saving needs. The Plan is intended to be an "unfunded" plan maintained for the purpose of providing deferred compensation to a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974. This Plan replaces and supersedes the Campbell Soup Company Salary Deferral Plan and the Campbell Soup Company Supplemental Savings Plan. ARTICLE I DEFINITIONS Unless the context otherwise requires, the following words and phrases as used herein shall have the following meanings: Section 1.1 "ACCOUNT BALANCE" means the total amount credited to the bookkeeping Investment Accounts in which Contributions are maintained for a Participant, including earnings thereon. Section 1.2 "ANNUAL INCENTIVE COMPENSATION" means any Employer annual incentive program which the Plan Administrator has approved as authorized for deferral under the Plan, including the Campbell Soup Company Management Worldwide Incentive Plan. Section 1.3 "BENEFICIARY" means the person that the Participant designates to receive any unpaid portion of the Participant's Account Balance should the Participant's death occur before the Participant receives the entire Account Balance. If the Participant does not designate a beneficiary, his Beneficiary shall be his spouse if he is married at the time of his death, or his estate if he is unmarried at the time of his death. Section 1.4 "BOARD OF DIRECTORS" means the board of directors of Campbell Soup Company. Section 1.5 "CAMPBELL STOCK" means Capital Stock of Campbell Soup Company. Section 1.6 "CAMPBELL STOCK INVESTMENT ACCOUNT" means an account in which deferred amounts are valued as if they were invested in the Campbell Stock unit fund maintained by Fidelity for the Savings Plan. Section 1.7 "CODE" means the Internal Revenue Code of 1986, as amended. -1- 4 Section 1.8 "COMMITTEE" means the Compensation and Organization Committee of the Board or a subcommittee thereof. All members of the Committee shall be "Outside Directors," as defined or interpreted for purposes of Section 162(m) of the Code, and "Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934 Act"). Section 1.9 "COMPENSATION" means, for purposes of the Plan, an Eligible Executive's Salary, LTPP award, Annual Incentive Compensation, Stock Option Gains and Director's Fees. Section 1.10 "CONTRIBUTIONS" mean amounts deferred under the Plan pursuant to Article III and allocated to a Participant's Account Balance. No money or other assets will actually be contributed to such Account Balance. Section 1.11 "DIRECTOR" means a member of the Board of Directors. Section 1.12 "DIRECTOR'S FEES" means retainers, meeting attendance fees and any other remuneration received by a Director. Section 1.13 "EFFECTIVE DATE" means November 18, 1999. Section 1.14 "EMPLOYEE" means an individual who is employed by the Employer. Section 1.15 "EMPLOYER" means the Campbell Soup Company and any subsidiary designated by the Vice President-Human Resources. Section 1.16 "ELIGIBLE EXECUTIVE" means an Employee who is classified as "exempt" under the Fair Labor Standards Act of 1938, as amended, and whose salary grade is at least 28 and whose annual base salary equals or exceeds the amount set forth in Code section 414(q) defining a highly compensated employee ($85,000 in 2000). Eligible Executive also means a non-employee Director. Section 1.17 "INVESTMENT ACCOUNT" means an accounting record, maintained for each Participant, valued in accordance with the performance of the investment choice in which the deferred amounts are allocated. No funds are actually contributed to an Investment Account. The Plan Administrator shall determine which Investment Accounts are offered. Section 1.18 "LTPP" means any Employer long-term incentive plan, including the Campbell Soup Company 1994 Long-Term Incentive Plan. Section 1.19 "OPTION" means either a nonqualified stock option or an incentive stock option to purchase Campbell Stock. Section 1.20 "PARTICIPANT" means an Eligible Executive who elects to participate in the Plan. -2- 5 Section 1.21 "PLAN" means this Deferred Compensation Plan, as may be amended from time to time. Section 1.22 "PLAN ADMINISTRATOR" means the Vice President - Human Resources of Campbell Soup Company or any person or entity designated by the Vice President - Human Resources. Section 1.23 "PLAN YEAR" means the 12-month period beginning January 1 and ending December 31. Section 1.24 "SALARY" For purposes of Salary Deferral only, Salary means all amounts that are treated as wages for Federal income tax withholding under section 3401(a) of the Code for the Plan Year plus amounts that would be paid to the Employee during the year but for the Employee's election under a cash or deferred arrangement described in section 401(k) of the Code or a cafeteria plan described in section 125 of the Code. Notwithstanding the preceding sentence, Salary shall not include: (a) Stock Option Gains, (b) contributions by the Employer to this or any other plan or plans for the benefit of its employees, except as otherwise expressly provided in this Plan, or (c) amounts identified by the Employer as expense allowances or reimbursements regardless of whether such amounts are treated as wages under the Code. Section 1.25 "SALARY DEFERRAL" means the provision whereby an Eligible Executive can defer Salary in accordance with Section 3.1. Section 1.26 "SAVINGS PLAN" means the Campbell Soup Company Savings Plus Plan for Salaried Employees. Section 1.28 "STOCK OPTION GAINS" means the amount by which the market price of Campbell Stock exceeds the exercise price for an Option on the date of exercise of the Option. Section 1.27 "SUPPLEMENTAL SAVINGS" means the provision described in Section 3.2. -3- 6 ARTICLE II ELIGIBILITY AND PARTICIPATION Section 2.1 ELIGIBILITY. Each Eligible Executive may elect to defer all or a portion of Compensation in accordance with the Plan. Section 2.2 EXECUTIVES OUTSIDE THE UNITED STATES. Notwithstanding any other provisions of the Plan to the contrary, an Eligible Executive who is subject to tax outside of the United States is not eligible to participate in any feature of the Plan unless his or her participation has been approved in advance by the Plan Administrator. Section 2.3 PARTICIPATION. Any Eligible Executive who elects to participate in the Plan shall become a Participant in the Plan immediately upon enrolling as a Participant by the method required by the Plan Administrator. An individual shall remain a Participant under the Plan until all amounts credited to the Participant's Account Balance have been distributed to the Participant or the Participant's Beneficiary. ARTICLE III CONTRIBUTIONS Section 3.1 SALARY DEFERRAL. An Eligible Executive may elect to defer up to 50% of his or her Salary and to have the Employer make a contribution of that amount to his or her Account Balance. Section 3.2 SUPPLEMENTAL SAVINGS. On behalf of a Participant who contributes to the Savings Plan the required amount as set by the Plan Administrator, the Employer shall contribute to his or her Account Balance in each Plan Year an amount equal to the difference between 1) the Matching Company Contributions (as defined in the Savings Plan) that would have been made to the Savings Plan on behalf of the Participant using the Participant's total Salary and Annual Incentive Compensation award, without regard to any amounts deferred under this Plan, and without regard to the annual dollar limit under Code section 401(a)(17) (as adjusted from time to time), and 2) the actual Matching Company Contributions made to the Savings Plan. The benefit so calculated shall be credited to the Participant's Account Balance. No benefit shall accrue during any period of time when a Participant is not an active participant in the Savings Plan. Section 3.3 ANNUAL INCENTIVE COMPENSATION DEFERRAL. On behalf of a Participant who participates in a Annual Incentive Compensation plan, the Employer shall contribute to his or her Account Balance an amount equal to that portion of a Annual Incentive Compensation award that the Participant has elected to defer under the Plan. -4- 7 Section 3.4 LTPP DEFERRAL. On behalf of a Participant who participates in the LTPP, the Employer shall contribute to his or her Account Balance an amount equal to that portion of an eligible LTPP award that the Participant has elected to defer under the Plan. Section 3.5 STOCK OPTION GAIN DEFERRAL. (a) Participants eligible to participate in the Plan may elect to defer receipt of the gain that would otherwise be due upon exercise of an Option. Options subject to deferral shall have been awarded to the Participant more than seven years prior to the date of the election to defer. The election to defer must be made (i) in the calendar year prior to the calendar year in which the Option will be exercised and a minimum of six months prior to the exercise of an Option; and (ii) no later than six months prior to the last date on which the Option can be exercised by the Participant. (b) In order to defer gain from the exercise of an Option, a Participant must use Campbell Stock that has been owned for more than six months to pay the exercise price of the Options. Options can be exercised on any date that is at least 180 days after the election to defer has been made. (c) Each Option deferral election must specify the (i) Option grant date(s) and number of shares to be exercised; and (ii) deferral period. The period of deferral begins with the date of exercise. In order to be able to defer Stock Option Gains, the Option must be exercised while the Participant is actively employed. On behalf of a Participant who participates in Stock Option Gains deferral, the Employer shall contribute option gain shares to the Campbell Stock Investment Account. Option gain shares must remain in Campbell Stock Investment Account and cannot be reallocated at any time. Section 3.6 DIRECTOR COMPENSATION DEFERRAL. (a) Any non-employee Director may, by delivering a written election to the Plan Administrator on or before December 31 of any calendar year, elect to defer receipt of all or a specified part (in 10% increments) of his or her cash or Campbell Stock compensation during the calendar year following such election and succeeding calendar years. Non-employee Directors may also elect to defer Stock Option Gains in accordance with Section 3.5. (b) Any person who shall become a non-employee Director during any calendar year, and who was not a non-employee Director on the preceding December 31, may, before his or her term begins, elect to defer receipt of all or a specified part of his or her cash and Campbell Stock compensation during the balance of such calendar year and for succeeding calendar years. (c) Any such election shall be in writing and shall be delivered to the Plan Administrator. Campbell Stock compensation can only be deferred into the Campbell Stock Investment Account. Cash compensation may be deferred into any of the Investment Accounts. (d) A non-employee Director's election to defer receipt of compensation shall continue until the date on which such director ceases to be a Director of the Company or until he or she terminates such election by written notice delivered to the Plan Administrator. Any such -5- 8 notice terminating an election to defer compensation shall be effective as of the end of the calendar year in which such notice of termination is delivered. ARTICLE IV VESTING AND FORFEITURES Participants are fully vested in all amounts credited to their Account Balances, except as set forth below regarding Supplemental Savings and except for any vesting requirements related to LTPP awards. Contributions of Supplemental Savings vest shall in accordance with the following schedule:
Completed Years of Service Vested Percentage -------------------------------- ----------------- (as defined in the Savings Plan) 1 20% 2 40% 3 60% 4 80% 5 100%
ARTICLE V INVESTMENT ACCOUNTS AND DISTRIBUTIONS Section 5.1 INVESTMENT ACCOUNTS. The Plan Administrator shall designate the Investment Accounts that will be available to Participants under the Plan. The Plan Administrator shall also designate how often and what procedures must be followed to reallocate amounts in the Investment Accounts. Section 5.2 DISTRIBUTIONS. The Plan Administrator shall establish written procedures providing Participants with instructions and requirements regarding distributions from the Plan. ARTICLE VI ADMINISTRATIVE PROCEDURES Section 6.1 GENERAL. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall establish procedures and rules regarding the timing of deferral elections, the time period for deferral (which shall not be less than two years) the forms of distribution, the maximum number of annual installment payments, the Investment Accounts for valuing Account Balances, reallocation of Account Balances among Investment Accounts, statements of Account -6- 9 Balances, the time and manner of payment of Account Balances, and other administrative items for this Plan. Section 6.2 PLAN INTERPRETATION. The Plan Administrator shall have the authority and responsibility to interpret and construe the Plan and to decide all questions arising thereunder, including without limitation, questions of eligibility for participation, eligibility for Contributions, the amount of Account Balances, and the timing of the distribution thereof, and shall have the authority to deviate from the literal terms of the Plan to the extent the Plan Administrator shall determine to be necessary or appropriate to operate the Plan in compliance with the provisions of applicable law. Section 6.3 RESPONSIBILITIES AND REPORTS. The Plan Administrator may pursuant to a written instruction name other persons to carry out specific responsibilities. The Plan Administrator shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports that are furnished by any accountant, controller, counsel, or other person who is employed or engaged for such purposes. ARTICLE VII CLAIMS PROCEDURE Section 7.1 DENIAL OF CLAIM FOR BENEFITS. Any denial by the Plan Administrator of any claim for benefits under the Plan by a Participant or Beneficiary shall be stated in writing by the Plan Administrator and delivered or mailed to the Participant or Beneficiary. The Plan Administrator shall furnish the claimant with notice of the decision not later than 90 days after receipt of the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render the final decision. The notice of the Plan Administrator's decision shall be written in a manner calculated to be understood by the claimant and shall include (i) the specific reasons for the denial, including, where appropriate, references to the Plan, (ii) any additional information necessary to perfect the claim with an explanation of why the information is necessary, and (iii) an explanation of the procedure for perfecting the claim. Section 7.2 APPEAL OF DENIAL. The claimant shall have 60 days after receipt of written notification of denial of his or her claim in which to file a written appeal with the Plan Administrator. As a part of any such appeal, the claimant may submit issues and comments in writing and shall, on request, be afforded an opportunity to review any documents pertinent to the perfection of his or her claim. The Plan Administrator shall render a written decision on the claimant's appeal ordinarily within 60 days of receipt of notice thereof but, in no case, later than 120 days. -7- 10 ARTICLE VIII FUNDING Section 8.1 FUNDING. The Employer shall not segregate or hold separately from its general assets any amounts credited to the Account Balances for Participants, and shall be under no obligation whatsoever to fund in advance any amounts under the Plan, including Contributions and earnings thereon. Section 8.2 INSOLVENCY. In the event that the Employer becomes insolvent, all Participants and Beneficiaries shall be treated as general, unsecured creditors of the Employer with respect to any amounts credited to the Account Balances. ARTICLE IX AMENDMENT AND TERMINATION Section 9.1 The Employer reserves the right to amend or terminate the Plan at any time by action of the Vice President-Human Resources. Notwithstanding the foregoing, no such amendment or termination shall reduce any Participant's Account Balance as of the date of such amendment or termination. Upon a complete termination of the Plan, all vested amounts credited to Participants' Account Balances may be immediately distributed or may be paid out in accordance with Participant's deferral elections at the discretion of the Plan Administrator. ARTICLE X CHANGE IN CONTROL Section 10.1 PROVISIONS. Notwithstanding anything contained in the Plan to the contrary, the provisions of this Article X shall govern and supersede any inconsistent terms or provisions of the Plan. Section 10.2 DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan "Change in Control" shall mean any of the following events: (a) The acquisition in one or more transactions by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding voting securities (the "Voting Securities"), provided, however, that for purposes of this Section 10.2(a), the Voting Securities acquired directly from the Company by any Person shall be excluded from the determination of such Person's Beneficial Ownership of Voting Securities (but such Voting Securities shall be included in the calculation -8- 11 of the total number of Voting Securities then outstanding); or (b) The individuals who, as of January 25, 1990, were members of the Board (the "Incumbent Board"), cease for any reason to constitute at least two-thirds of the Board; provided, however, that if the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board; or (c) Approval by stockholders of the Company of (1) a merger or consolidation involving the Company if the stockholders of the Company, immediately before such merger or consolidation, do not own, directly or indirectly immediately following such merger or consolidation, more than eighty percent (80%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the Voting Securities immediately before such merger or consolidation or (2) a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company; or (d) Acceptance of stockholders of the Company of shares in a share exchange if the stockholders of the Company, immediately before such share exchange, do not own, directly or indirectly immediately following such share exchange, more than eighty percent (80%) of the combined voting power of the outstanding voting securities of the corporation resulting from such share exchange in substantially the same proportion as their ownership of the Voting Securities outstanding immediately before such share exchange. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because twenty-five percent (25%) or more of the then outstanding Voting Securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries, (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition, (iii) any "Grandfathered Dorrance Family Stockholder" (as hereinafter defined) or (iv) any Person who has acquired such Voting Securities directly from any Grandfathered Dorrance Family Stockholder but only if such Person has executed an agreement which is approved by two-thirds of the Board and pursuant to which such Person has agreed that he (or they) will not increase his (or their) Beneficial Ownership (directly or indirectly) to 30% or more of the outstanding Voting Securities (the "Standstill Agreement") and only for the period during which the Standstill Agreement is effective and fully honored by such Person. For purposes of this Section, "Grandfathered Dorrance Family Stockholder" shall mean at any time a "Dorrance Family Stockholder" (as hereinafter defined) who or which is at the time in question the Beneficial Owner solely of (v) Voting Securities Beneficially Owned by such individual on January 25, 1990, (w) Voting Securities acquired directly from the Company, (x) Voting Securities acquired directly from another Grandfathered Dorrance Family Stockholder, (y) Voting Securities which are also Beneficially Owned by other Grandfathered Dorrance Family Stockholders at the time in question, and (z) Voting Securities acquired after January 25, 1990 -9- 12 other than directly from the Company or from another Grandfathered Dorrance Family Stockholder by any "Dorrance Grandchild" (as hereinafter defined) provided that the aggregate amount of Voting Securities so acquired by each such Dorrance Grandchild shall not exceed five percent (5%) of the Voting Securities outstanding at the time of such acquisition. A "Dorrance Family Stockholder" who or which is at the time in question the Beneficial Owner of Voting Securities which are not specified in clauses (v), (w), (x), (y) and (z) of the immediately preceding sentence shall not be a Grandfathered Dorrance Family Stockholder at the time in question. For purposes of this Section, "Dorrance Family Stockholders" shall mean individuals who are descendants of the late Dr. John T. Dorrance, Sr. and/or the spouses, fiduciaries and foundations of such descendants. A "Dorrance Grandchild" means as to each particular grandchild of the late Dr. John T. Dorrance, Sr., all of the following taken collectively: such grandchild, such grandchild's descendants and/or the spouses, fiduciaries and foundations of such grandchild and such grandchild's descendants. Moreover, notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. Section 10.3 DEFINITION OF "TERMINATION FOLLOWING A CHANGE IN CONTROL." For purposes of the Plan, "Termination Following a Change in Control" means a termination of employment: (a) initiated by the employer of the Participant, or (b) initiated by the Participant following one or more of the following events: (i) an assignment to the Participant of any duties materially inconsistent with, or a reduction or change by his or her employer in the nature or scope of the authority, duties or responsibilities of the Participant from those assigned to or held by the Participant immediately prior to the Change in Control; (ii) any removal of the participant from the positions held immediately prior to the Change in control, except in connection with promotions to positions of greater responsibility and prestige; -10- 13 (iii) any reduction by his or her employer in the Participant's compensation as in effect immediately prior to the Change in Control or as the same may be increased thereafter; (iv) revocation or any modification of any employee benefit plan, or any action taken pursuant to the terms of any such plan, that materially reduces the opportunity of the Participant to receive benefits under any such plan; (v) a transfer or relocation of the site of employment of the Participant immediately preceding the Change in Control, without the Participant's express written consent, to a location more than fifty (50) miles distant therefrom, or that is otherwise an unacceptable commuting distance from the Participant's principal residence at the date of the Change in Control; or (vi) a requirement that the Participant undertake business travel to an extent substantially greater than the Participant's business travel obligation immediately prior to the Change in Control. Section 10.4 ACCRUED BENEFIT. (a) Upon a Change in Control, the Campbell Stock Investment Account shall be converted into cash in an amount equal to the greater of (1) the highest price per share of the Campbell's Stock (a "Share") paid to holders of the Shares in any transaction (or series of transactions) constituting or resulting in a Change in Control or (2) the highest fair market value per Share during the ninety (90) day period ending on the date of a Change in Control multiplied by the number of units of Company Stock credited to an Executive's Account Balance under the Plan. (b) Upon an Executive's Termination Following a Change in Control within two (2) years after a Change in Control, the Company shall, within thirty (30) days, pay to the Executive a lump sum cash payment equal to the lump sum of his Account Balance as of the date of his termination of employment regardless of the Executive's previous distribution election. (c) Immediately upon a Change in Control, regardless of whether a non-employee Director's services as a member of the Board of Directors cease, he or she shall receive any amounts credited to his or her deferred Account Balance to the date of the Change in Control in one lump sum payment. -11- 14 Section 10.5 AMENDMENT OR TERMINATION. (a) This Article X shall not be amended or terminated at any time if any such amendment or termination would adversely affect the rights of any Participants under the Plan. (b) For a period of two (2) years following a Change in Control, the Plan shall not be terminated or amended in any way that would adversely affect the rights of the Participants, nor shall the manner in which the Plan is administered be changed in a way that adversely affects the Executive's right to existing or future Company provided benefits or contributions provided hereunder. Furthermore, the Plan may not be merged or consolidated with any other program during said two-year period. (c) Any amendment or termination of the Plan prior to a Change in Control and which (1) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with or in anticipation of a Change in Control, shall be null and void and shall have no effect whatsoever. ARTICLE XI MISCELLANEOUS Section 11.1 NO EMPLOYMENT CONTRACT. The establishment or existence of the Plan shall not confer upon any individual the right to be continued as an employee or Director. The Employer expressly reserves the right to discharge any employee whenever in its judgment its best interests so require. Section 11.2 NON-ALIENATION. No amounts payable under the Plan shall be subject in any manner to anticipation, assignment, or voluntary or involuntary alienation. Section 11.3 GOVERNING LAW. The Plan shall be governed by and construed in accordance with the laws of the State of New Jersey to the extent not preempted by federal law. Section 11.4 WITHHOLDING. The Employer shall withhold from any benefits payable under the Plan all federal, state and local income taxes or other taxes required to be withheld pursuant to applicable law. Section 11.5 INCAPACITY. If the Plan Administrator, in its sole discretion, deems a Participant or Beneficiary who is eligible to receive any payment hereunder to be incompetent to receive the same by reason of illness or any infirmity or incapacity of any kind, the Plan Administrator may direct the Employer to apply such payment directly for the benefit of such person, or to make payment to any person selected by the Plan Administrator to disburse the same for the benefit of the Participant or Beneficiary. Payments made pursuant to this Section shall operate as a discharge, to the extent thereof, of all liabilities of the Employer, the Plan Administrator and the Plan to the person for whose benefit the payments are made. -12- 15 Section 11.6 CONSTRUCTION OF TERMS. For purposes of the Plan, the singular shall include the plural, and vice versa and the masculine shall include the feminine. Section 11.7 BINDING UPON SUCCESSORS. The liabilities under the Plan shall be binding upon any successor, assign or purchaser of the Employer or any purchaser of substantially all of the assets of the Employer. Section 11.8 TRUST ARRANGEMENT. All benefits under the Plan represent an unsecured promise to pay by the Employer. The Plan shall be unfunded and the benefits hereunder shall be paid only from the general assets of the Employer resulting in the Executives having no greater rights than the Employer's other general creditors. Nothing herein shall prevent or prohibit the Employer from establishing a trust or other arrangement for the purpose of providing for the payment of the benefits payable under the Plan. -13- EX-13 3 w41477ex13.txt PAGES 28-49 OF CAMPBELL'S 2000 ANNUAL REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS OVERVIEW Net earnings were $714 million, or $1.65 per share, for 2000. (All earnings per share amounts included in Management's Discussion and Analysis are presented on a diluted basis.) Comparisons to 1999 earnings are impacted by a fourth quarter pre-tax restructuring charge of $36 million, net of a $5 million reversal of a 1998 charge ($27 million after tax or $.06 per share). In addition, the results for 1999 included certain fourth quarter non-recurring costs of $22 million ($15 million after tax or $.03 per share). The non-recurring costs were related to the restructuring program, unusual costs of terminated acquisition studies and expenses associated with certain supply chain initiatives. Excluding the impact of the restructuring charge, net earnings declined 6% and earnings per share declined 2%. Excluding both the restructuring and non-recurring costs, earnings per share declined 4%. The earnings performance was largely driven by a 3% decline in shipments of U.S. soups. SALES Sales in 2000 declined 2% to $6.27 billion from $6.42 billion. The decline was attributed to a 2% decrease due to volume and mix, 1% due to currency, 1% due to divestitures, offset by a 2% increase in selling prices. Sales in 1999 decreased 4% as follows: 6% decrease due to divestitures, 1% due to currency, offset by a 2% increase from higher selling prices and 1% growth from acquisitions. An analysis of net sales by segment follows:
% Change 2000/ 1999/ (millions) 2000 1999 1998 1999 1998 - --------------------------------------------------------------------------- Soup and Sauces $4,306 $4,423 $4,427 (3) - Biscuits and Confectionery 1,462 1,430 1,522 2 (6) Away From Home 533 507 453 5 12 Other 28 126 343 (78) (63) Intersegment (62) (62) (49) - --------------------------------------------------------------------------- $6,267 $6,424 $6,696 (2) (4) ===========================================================================
The 3% decline in sales from Soup and Sauces versus 1999 was primarily due to a 2% decrease in worldwide wet soup volume, driven by a 4.5% decline in U.S. soup consumption. International shipments declined 1%, primarily due to underperformance in the United Kingdom and Canada, offset by growth in Australia, Germany, and France. Total beverage sales declined due to a consumption decline for V8 Splash. Sales of U.S. sauces and prepared foods declined over the prior year. In 1999, sales from Soup and Sauces remained flat versus 1998. Sales were impacted by a 4% decline in worldwide wet soup volume driven by an 8% decline in U.S. wet soup volume resulting from the elimination of quarter-end promotions. This decline was partially offset by strong consumer demand for ready to serve Chunky soups and Swanson broths. International soup volume increased 7%, primarily due to the fiscal 1998 acquisition of Liebig in France. Beverages, driven by V8 Splash, continued to deliver strong sales growth in 1999. U.S. sauces and prepared food sales were down versus 1998. Sales from Biscuits and Confectionery increased 2% compared to 1999 primarily due to the performance of the core cracker business of Arnotts in Australia and Godiva Chocolatier, offsetting softness of Pepperidge Farm bakery products. Godiva recorded double-digit sales growth, due in part to new store openings. In 1999, Biscuits and Confectionery reported a decline in sales compared to 1998 primarily due to the divestiture of Delacre in June 1998. Excluding the impact of divestitures and currency, sales increased 6% led by Godiva Chocolatier with expansion of new retail outlets in North America, Japan, and Europe. Arnotts in Australia reported sales growth due to increased sales of higher value products. Sales grew 5% in Away From Home compared to 1999 behind growth in the core soup business through the expansion of Campbell's branded soup in university cafeterias, convenience stores and other outlets. Away From Home reported a 12% increase in sales in 1999 due in part to the acquisition of the Stockpot premium refrigerated soup brand in the first quarter of 1999. The decline in sales from Other in 2000 was due to the divestiture of Fresh Start Bakeries, Inc. in May 1999 and MacFarms in April 2000. The decline in sales from Other in 1999 was attributed to the full-year impact of the 1998 portfolio reconfiguration and the partial impact of the divestiture of Fresh Start Bakeries, Inc. In 1998, the company divested several non-strategic businesses, including Continental Sweets, a European confectionery and distribution business, Melbourne Mushrooms, an Australian mushroom business, and Spring Valley, an Australian beverage business. GROSS MARGIN Gross margin, defined as net sales less cost of products sold, decreased by $15 million in 2000 due to lower sales. As a percent of sales, gross margin was 53.6% in 2000, 52.5% in 1999, and 51.7% in 1998. The improvements in gross margin percentage in 2000 and 1999 were due principally to higher selling prices, cost savings generated from global procurement initiatives and continued productivity gains in manufacturing facilities, which offset the adverse mix impact resulting from declines in U.S. wet soup volume. 28 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION MARKETING AND SELLING EXPENSES Marketing and selling expenses as a percent of sales were 25.9% in 2000, 25.4% in 1999, and 22.7% in 1998. The increase in 2000 was primarily due to incremental selling costs associated with new stores in the Godiva Chocolatier business. The increase in 1999 was driven by consumer and trade promotion for V8 Splash, Chunky soup and Pepperidge Farm products and the growth in retail stores in the Godiva business. GENERAL AND ADMINISTRATIVE EXPENSES Administrative expenses as a percent of sales increased to 5.1% from 4.7% in 1999. The increase was primarily due to higher compensation costs and costs associated with the Away From Home infrastructure. In 1999, administrative expenses increased as a percent of sales to 4.7% from 4.5% in 1998. The increase was primarily due to investments in information systems, including costs associated with addressing the Year 2000 issue. Research and development expenses as a percent of sales remained unchanged. Other expenses increased as compared to the prior year primarily due to higher incentive compensation costs. In 1999, other expenses remained flat with 1998 as a result of higher amortization expense offset by lower incentive compensation costs and a non-recurring gain on a divestiture recorded in 1998. OPERATING EARNINGS Segment operating earnings were relatively unchanged in 2000 as compared to the prior year. Excluding the 1999 net restructuring charge, segment earnings declined 3%. Segment operating earnings in 1999 increased 5% compared to 1998. Excluding the 1999 and 1998 restructuring charges of $36 million and $262 million, respectively, segment operating earnings decreased 10% in 1999. An analysis of operating earnings by segment follows:
% Change 2000/ 1999/ (millions) 2000 1999(1) 1998(2) 1999 1998 - -------------------------------------------------------------------------------- Soup and Sauces $1,081 $1,082 $1,109 - (2) Biscuits and Confectionery 213 215 206 (1) 4 Away From Home 53 57 53 (7) 8 Other - (5) (85) - -------------------------------------------------------------------------------- 1,347 1,349 1,283 - 5 Corporate (82) (79) (35) - -------------------------------------------------------------------------------- $1,265 $1,270 $1,248 ================================================================================ (1) Contributions to earnings by segment included the effect of a fourth quarter 1999 pre-tax restructuring charge of $36, net of a $5 reversal of a prior period restructuring charge, as follows: Soup and Sauces - $22, Biscuits and Confectionery - $1, and Other - $13. (2) Contributions to earnings by segment included the effect of a third quarter 1998 pre-tax restructuring charge of $262 as follows: Soup and Sauces - $135, Biscuits and Confectionery - $25, Away From Home - $4, and Other - $98.
Earnings from Soup and Sauces declined 2% in 2000, excluding the 1999 net restructuring charge, due primarily to the decline in U.S. wet soup sales, combined with the declines in Pace, Franco-American, and beverages. Earnings from Soup and Sauces, excluding the restructuring charges, were down 11% in 1999, due to lower U.S. condensed soup shipments, increased marketing spending behind new business development, and weakness in sauces and prepared food categories. In 2000, earnings from Biscuits and Confectionery declined 1% primarily due to increased marketing costs behind the Pepperidge Farm Goldfish brand, offset by an increase in earnings from Arnotts and Godiva. In 1999, earnings from Biscuits and Confectionery, excluding the restructuring charges, were down 6% primarily due to increased marketing spending at Pepperidge Farm driven by the competitive environment in the cheese cracker category. Earnings from Away From Home declined 7% in 2000 due to higher costs associated with the new Stockpot manufacturing facility and increased investment in growth initiatives. In 1999, earnings from Away From Home remained flat versus 1998, excluding the restructuring charges. The increase in sales was offset by costs associated with supply chain initiatives and the expansion of Campbell branded products beyond traditional markets. Earnings from Other, excluding the 1999 net restructuring charge, declined in 2000 due to the divestitures of Fresh Start Bakeries, Inc. in May 1999 and MacFarms in April 2000. Earnings from Other, excluding the restructuring charges, declined 38% in 1999 due to the divestitures of several non-strategic businesses in 1998. Corporate expenses increased in 2000 due to an increase in compensation costs. The increase in corporate expenses in 1999 was primarily attributed to increases in unallocated general and administrative costs, including costs associated with addressing the Year 2000 issue and other information system investments, and the costs of terminated acquisition studies. In 1998, corporate expenses were partially offset by a gain from a divestiture. NON-OPERATING ITEMS Interest expense increased 8% in 2000 due to an increase in interest rates during the period, primarily on commercial paper. Interest expense declined 3% in 1999 primarily due to lower interest rates compared to 1998. The effective tax rate was 33.7% in 2000. The rate was favorably impacted by a lower effective rate on foreign earnings, primarily driven by a reduction in the Australian 29 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION statutory rate. The 1999 effective tax rate was 34% compared to 35.8% in 1998. Excluding the restructuring charges, the effective tax rate was 33.7% in 1999 and 34% in 1998. The 1999 rate was favorably impacted by a federal tax refund recorded during the year. DISCONTINUED OPERATIONS On March 30, 1998, the company completed the spin-off of its Specialty Foods segment to its shareowners as an independent publicly-traded company (Vlasic Foods International Inc.). Accordingly, the company reported the net operating results and net assets as a discontinued operation. The 1998 loss from discontinued operations included eight months of operations, a third quarter 1998 restructuring charge of $22 million ($.05 per share) and spin-off costs of $38 million ($.08 per share). The restructuring program was designed to improve operational efficiency by closing certain U.S. and European administrative offices and production facilities. The spin-off costs primarily consisted of taxes and legal and advisory services incurred in connection with the transaction. Earnings from discontinued operations, before restructuring charges and spin-off costs, were $42 million in 1998. See Note 3 to the Consolidated Financial Statements for further discussion of discontinued operations. RESTRUCTURING CHARGES A restructuring charge included in earnings from continuing operations of $41 million ($30 million after tax or $.07 per share) was recorded in the fourth quarter 1999 to cover the costs of a restructuring and divestiture program approved in July 1999 by the company's Board of Directors. This charge related to the streamlining of certain North American and European production and administrative facilities and the anticipated cost of a divestiture of a non-strategic business with annual sales of approximately $25 million. The restructuring charge included approximately $20 million in cash charges primarily related to severance and employee benefit costs. The remaining balance included non-cash charges related to the disposition of plant assets and the divestiture. The company substantially completed the restructuring and divestiture program in 2000. A $5 million ($3 million after tax or $.01 per share) reversal of the 1998 restructuring charge was also recorded in the fourth quarter of 1999. The reversal reflected the net impact of changes in estimates and modifications to the original program. The initial charge for the third quarter 1998 program was $262 million ($193 million after tax or $.42 per share). This program was designed to improve operational efficiency by rationalizing certain U.S., European and Australian production and administrative facilities and divesting non-strategic businesses. This program was completed by the second quarter 2000. See Note 6 to the Consolidated Financial Statements for further discussion of the programs. LIQUIDITY AND CAPITAL RESOURCES Strong cash flows from operations, a strong balance sheet and interest coverage demonstrate the company's financial strength. CASH FLOWS FROM OPERATIONS provided $1.2 billion in 2000, compared to $954 million in 1999. The increase was primarily due to improvements in working capital. Over the last three years, operating cash flows totaled approximately $3 billion. This strong cash generating capability provides the company with substantial financial flexibility in meeting operating and investing objectives and in executing the company's ongoing share repurchase program. CAPITAL EXPENDITURES were $200 million in 2000, representing a decrease of $97 million over 1999. Capital expenditures are projected to be approximately $230 million in 2001. SALE OF BUSINESSES represents the divestiture of MacFarms in 2000 and Fresh Start Bakeries, Inc. in 1999. LONG-TERM BORROWINGS in 1999 represented the issuance of $300 million 4.75% notes due October 31, 2003. The proceeds of these notes were used primarily to repay short-term borrowings. There were no new long-term borrowings in 2000. The company has $600 million available under a shelf registration as of July 30, 2000. SHORT-TERM BORROWINGS decreased over 1999 primarily due to the increase in cash flows from operations. The company has financial resources available, including unconditional lines of credit totaling approximately $1.8 billion, and has ready access to financial markets around the world. The pre-tax interest coverage ratio was 6.2 for 2000 compared to 6.9 for 1999, before the net restructuring charge. DIVIDEND PAYMENTS decreased $2 million or 1% to $384 million in 2000, compared to $386 million in 1999 due to lower shares outstanding as a result of the share repurchase program. Dividends declared in 2000 totaled $.90 per share, up from $.885 per share in 1999. The 2000 fourth quarter rate was $.225 per share. CAPITAL STOCK REPURCHASES totaled 10.7 million shares at a cost of $394 million during 2000, compared to repurchases of 21.8 million shares at a cost of $1 billion in 1999. The company's Board of Directors approved a three-year $2 billion share repurchase program in 1998. By repurchasing shares, the company expects to utilize existing cash and debt capacity to lower its cost of capital and increase returns to shareowners. The company's long-term strategy is to repurchase approximately 2% of its outstanding shares annually. 30 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION TOTAL ASSETS declined 6% to $5.2 billion primarily due to a decrease in accounts receivable, inventory, plant assets and intangible assets. TOTAL LIABILITIES decreased to $5.1 billion, versus $5.3 billion in 1999 principally due to lower debt levels. TOTAL SHAREOWNERS' EQUITY on a book basis declined from $235 million in 1999 to $137 million in 2000 primarily due to the share repurchases. INFLATION Inflation during recent years has not had a significant effect on the company. The company mitigates the effects of inflation by aggressively pursuing cost productivity initiatives, including global procurement strategies, and managing capital investments in its manufacturing and administrative facilities. MARKET RISK SENSITIVITY The principal market risks to which the company is exposed are changes in interest rates and foreign currency exchange rates. In addition, the company is exposed to equity price changes related to certain employee compensation obligations. The company manages its exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps in order to maintain its variable-to-total debt ratio within targeted guidelines. International operations, which account for approximately 25% of 2000 net sales, are concentrated principally in Germany, France, the United Kingdom, Canada and Australia. The company manages its foreign currency exposures by borrowing in various foreign currencies and utilizing cross-currency swaps and forward contracts. Swaps and forward contracts 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 and does not use leveraged instruments. The company principally uses a combination of purchase orders and various short and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. On occasion, the company may also enter into commodity future contracts, as considered appropriate, to reduce the volatility of price fluctuations for commodities such as corn, soybean meal and cocoa. At July 30, 2000 and August 1, 1999 the notional values and unrealized gains or losses on commodity contracts held by the company were not material. The information below summarizes the company's market risks associated with debt obligations and other significant financial instruments as of July 30, 2000. Fair values included herein have been determined based on quoted market prices. The information presented below should be read in conjunction with Notes 18 and 20 to the Consolidated Financial Statements. The table below presents principal cash flows and related interest rates by fiscal year of maturity for debt obligations. Variable interest rates disclosed represent the weighted average rates of the portfolio at the period end. The company also had certain interest rate swaps outstanding at August 1, 1999, which matured in 2000. With these instruments, $100 million of commercial paper borrowings was converted to fixed (8.24%) and $150 million of fixed-rate debt (5.76%) was converted to variable. The fair value of the swaps was $2 million at August 1, 1999. EXPECTED FISCAL YEAR OF MATURITY (US$ equivalents in millions)
There- Fair 2001 2002 2003 2004 2005 after Total Value - ---------------------------------------------------------------------------------------------------------------- DEBT Fixed rate $119 $5 $300 $401(1) $1 $511 $1,337 $1,330 Weighted average interest rate 7.06% 5.71% 6.15% 4.97% 9.0% 7.70% 6.47% - ---------------------------------------------------------------------------------------------------------------- Variable rate $1,754 $1,754 $1,754 Weighted average interest rate 6.57% 6.57% - ---------------------------------------------------------------------------------------------------------------- (1) $100 million callable in 2001 As of August 1, 1999, fixed-rate debt of approximately $1.5 billion with an average interest rate of 6.36% and variable-rate debt of approximately $1.8 billion with an average interest rate of 5.09% was outstanding.
31 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The company is exposed to foreign currency exchange risk related to its international operations, including net investments in subsidiaries and subsidiary debt which is denominated in currencies other than the functional currency of those businesses. The table below summarizes the cross-currency swaps outstanding as of July 30, 2000 which hedge these exposures. The notional amounts of each currency and the related weighted average forward interest rates are presented in the Cross-Currency Swaps table. CROSS-CURRENCY SWAPS (US$ equivalents in millions)
Interest Notional Expiration Rate Value - ---------------------------------------------------------------- Pay fixed DM 5.71% Receive fixed US$ 2001 7.56% $107 - ---------------------------------------------------------------- Pay variable FrF 5.40% Receive variable US$ 2003 7.38% $110 - ---------------------------------------------------------------- The aggregate fair value of the contracts was $22 million as of July 30, 2000. The notional amount and fair value of cross-currency contracts outstanding at August 1, 1999 were $333 million and $3 million, respectively. These contracts, except for the variable French Franc contract included in the table above, expired in 2000.
The company is also exposed to foreign exchange risk as a result of transactions in currencies other than the functional currency of particular subsidiaries. The company utilizes foreign currency forward purchase and sale contracts in order to hedge these exposures. The table below summarizes the foreign currency forward contracts outstanding with the weighted average contract exchange rates as of July 30, 2000. FORWARD EXCHANGE CONTRACTS (US$ equivalents in millions)
Average Contract Contractual Amount Exchange Rate - ------------------------------------------------------ Receive CAD/Pay US$ $145 1.47 Receive EUR/Pay US$ $ 63 0.94 Receive EUR/Pay GBP $ 15 0.61 Receive BEF/Pay JPY $ 3 2.61 Receive CHF/Pay US$ $ 3 1.65 - ------------------------------------------------------ The company has an additional $7 million in a number of smaller contracts to purchase or sell various other currencies, principally Australian, as of July 30, 2000. The aggregate fair value of the contracts, which is not material to any individual contract, was $(3) million as of July 30, 2000. Total forward exchange contracts outstanding as of August 1, 1999 were $177 million.
The company has swap contracts outstanding as of July 30, 2000 which hedge a portion of exposures relating to certain employee compensation liabilities linked to the total return of the Standard & Poor's 500 Index or to the total return of the company's capital stock. Under these contracts, the company pays variable interest rates and receives from the counterparty either the Standard & Poor's 500 Index total return or the total return on company capital stock. The notional value of the contract that includes the return on the Standard & Poor's 500 Index was $29 million at July 30, 2000 and $26 million at August 1, 1999. The average forward interest rate applicable to this contract, which expires in 2001, is 6.96% at July 30, 2000. The notional value of the contract that includes the total return on company capital stock was $50 million at July 30, 2000 and $76 million at August 1, 1999. The forward interest rate applicable to this contract, which expires in 2003, is 7.06% at July 30, 2000. The net cost to settle these contracts was $25 million at July 30, 2000. Gains and losses on the contracts are recognized as adjustments to the carrying value of the underlying obligations. The company's utilization of financial instruments in managing market risk exposures described above is consistent with the prior year. Changes in the portfolio of financial instruments are a function of the results of operations and market effects and the company's acquisition and divestiture activities. RECENT DEVELOPMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS No. 138, is effective for fiscal years beginning after June 15, 2000. The standard requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income, based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. The company is required to adopt this statement in the first quarter of 2001. The cumulative effect of adoption will not be material. The impact of SFAS No. 133 on the company's future results will be dependent upon the fair values of the company's derivatives and related financial instruments and could result in increased volatility. In March 2000, the Emerging Issues Task Force (EITF) released Issue 00-07, "Application of EITF Issue No. 96-13, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,' to Equity Derivative Transactions That Contain Certain Provisions That Require Cash Settlement If Certain Events Outside the Control of the Issuer Occur." The EITF reached a consensus that equity derivative contracts that include any provision that could require net cash settlement can no longer be accounted for as equity. Such contracts are initially recorded at fair value and must be accounted for as an asset or 32 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION liability with subsequent changes in the fair value of the derivative included in earnings. Similarly the EITF reached a consensus that equity derivative contracts with any provisions that could require physical settlement by a cash payment to the counterparty in exchange for the issuer's shares can no longer be accounted for as permanent equity. Instead, the contracts should be classified as temporary or mezzanine equity. Both of these conclusions do not allow for an evaluation of the likelihood that otherwise unlikely or remote events would trigger cash settlement. In September 2000, the EITF reached a consensus clarifying instances when it is appropriate to classify such contracts in shareowners' equity in Issue 00-19 "Determination of Whether Share Settlement is within the Control of the Company for Purposes of Applying Issue No. 96-13, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock'." The company has a forward stock purchase contract outstanding that is accounted for as permanent equity. See Note 21 to the Consolidated Financial Statements. The company is evaluating the impact of the EITF Issues and possible amendments to contract provisions with the counterparty. The EITF concluded that the consensus should be applied to new contracts entered into after the date of the final consensus and to existing contracts that remain outstanding on June 30, 2001. The ultimate resolution and impact of the accounting for the contract will be dependent upon the results of the review of contract provisions with the counterparty and fluctuations in the company's share price. In May 2000, the EITF issued a consensus on Issue 00-14 "Accounting for Certain Sales Incentives." The EITF concluded that certain consumer and trade sales promotion expenses should be classified as a reduction of sales rather than as marketing expenses. In September 2000, the EITF reached a final consensus in Issue 00-10 on "Accounting for Shipping and Handling Costs" that such costs cannot be reported as a reduction of revenue. The company currently classifies certain shipping and handling costs as a reduction of sales. The company is currently evaluating the impact of these Issues, which are expected to become effective in the fourth quarter 2001. Upon adoption, prior period amounts will be restated to conform with the new requirements. As reclassifications, these changes will not have a material effect on the company's financial position or earnings. On September 7, 2000, the company issued a press release announcing results for fiscal 2000 and commented on analysts' expectations for the first quarter of fiscal 2001 and the outlook for earnings per share for the full year. FORWARD-LOOKING STATEMENTS This 2000 Annual Report contains certain statements, which reflect the company's current expectations regarding future results of operations, economic performance, financial condition and achievements of the company. The company has tried, wherever possible, to identify these forward-looking statements by using words such as "anticipate," "believe," "estimate," "expect" and similar expressions. These statements reflect the company's current plans and expectations and are based on information currently available to it. They rely on a number of assumptions and estimates which could be inaccurate and which are subject to risks and uncertainties. The company wishes to caution the reader that the following important factors and those important factors described elsewhere in the commentary, or in other Securities and Exchange Commission filings of the company, could affect the company's actual results and could cause such results to vary materially from those expressed in any forward-looking statements made by, or on behalf of, the company: - the impact of strong competitive response to the company's efforts to leverage its brand power with product innovation, promotional programs and new advertising; - the inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance; - the company's ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume and product mix; - the availability of new acquisition and alliance opportunities that build shareowner wealth; - the company's ability to achieve its cost savings objectives, including the projected outcome of supply chain management programs; - the difficulty of predicting the pattern of inventory movements by the company's trade customers; and - the impact of unforeseen economic and political changes in international markets where the company competes such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which the company has no control. This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact the company's outlook. 33 7 CONSOLIDATED STATEMENTS OF EARNINGS (millions, except per share amounts)
2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- NET SALES $6,267 $6,424 $6,696 - ---------------------------------------------------------------------------------------------------------------------- Costs and expenses Cost of products sold 2,908 3,050 3,233 Marketing and selling expenses 1,622 1,634 1,518 Administrative expenses 319 304 300 Research and development expenses 64 66 71 Other expenses (Note 7) 89 64 64 Restructuring charges (Note 6) - 36 262 - ---------------------------------------------------------------------------------------------------------------------- Total costs and expenses 5,002 5,154 5,448 - ---------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES 1,265 1,270 1,248 Interest expense (Note 8) 198 184 189 Interest income 10 11 14 - ---------------------------------------------------------------------------------------------------------------------- Earnings before taxes 1,077 1,097 1,073 Taxes on earnings (Note 11) 363 373 384 - ---------------------------------------------------------------------------------------------------------------------- EARNINGS FROM CONTINUING OPERATIONS 714 724 689 LOSS FROM DISCONTINUED OPERATIONS (NOTE 3) - - (18) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (NOTE 4) - - (11) - ---------------------------------------------------------------------------------------------------------------------- NET EARNINGS $ 714 $ 724 $ 660 ====================================================================================================================== PER SHARE - BASIC Earnings from continuing operations $ 1.68 $ 1.64 $ 1.52 Loss from discontinued operations - - (.04) Cumulative effect of change in accounting principle - - (.02) - ---------------------------------------------------------------------------------------------------------------------- NET EARNINGS $ 1.68 $ 1.64 $ 1.46 ====================================================================================================================== Weighted average shares outstanding - basic 425 441 454 ====================================================================================================================== PER SHARE - ASSUMING DILUTION Earnings from continuing operations $ 1.65 $ 1.63 $ 1.50 Loss from discontinued operations - - (.04) Cumulative effect of change in accounting principle - - (.02) - ---------------------------------------------------------------------------------------------------------------------- NET EARNINGS $ 1.65 $ 1.63 $ 1.44 ====================================================================================================================== Weighted average shares outstanding - assuming dilution 432 445 460 ====================================================================================================================== See accompanying Notes to Consolidated Financial Statements.
34 8 CONSOLIDATED BALANCE SHEETS (millions, except per share amounts)
JULY 30, 2000 August 1, 1999 - --------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 27 $ 6 Accounts receivable (Note 12) 443 541 Inventories (Note 13) 571 615 Other current assets (Note 14) 127 132 - --------------------------------------------------------------------------------------------------------------------- Total current assets 1,168 1,294 - --------------------------------------------------------------------------------------------------------------------- PLANT ASSETS, NET OF DEPRECIATION (NOTE 15) 1,644 1,726 INTANGIBLE ASSETS, NET OF AMORTIZATION (NOTE 16) 1,767 1,910 OTHER ASSETS (NOTE 17) 617 592 - --------------------------------------------------------------------------------------------------------------------- Total assets $ 5,196 $ 5,522 ===================================================================================================================== CURRENT LIABILITIES Notes payable (Note 18) $ 1,873 $ 1,987 Payable to suppliers and others 509 511 Accrued liabilities 360 415 Dividend payable 95 97 Accrued income taxes 195 136 - --------------------------------------------------------------------------------------------------------------------- Total current liabilities 3,032 3,146 - --------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT (NOTE 18) 1,218 1,330 NONPENSION POSTRETIREMENT BENEFITS (NOTE 10) 364 394 OTHER LIABILITIES (NOTE 19) 445 417 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 5,059 5,287 - --------------------------------------------------------------------------------------------------------------------- SHAREOWNERS' EQUITY (NOTE 21) Preferred stock; authorized 40 shares; none issued - - Capital stock, $.0375 par value; authorized 560 shares; issued 542 shares 20 20 Capital surplus 344 382 Earnings retained in the business 4,373 4,041 Capital stock in treasury, 121 shares in 2000 and 113 shares in 1999, at cost (4,373) (4,058) Accumulated other comprehensive income (227) (150) - --------------------------------------------------------------------------------------------------------------------- Total shareowners' equity 137 235 - --------------------------------------------------------------------------------------------------------------------- Total liabilities and shareowners' equity $ 5,196 $ 5,522 ===================================================================================================================== See accompanying Notes to Consolidated Financial Statements.
35 9 CONSOLIDATED STATEMENTS OF CASH FLOWS (millions)
2000 1999 1998 - -------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Earnings from continuing operations $ 714 $ 724 $ 678 Non-cash charges to net earnings Cumulative effect of accounting change - - 11 Restructuring charges - 36 262 Depreciation and amortization 251 255 261 Deferred taxes 17 78 (21) Other, net 20 5 53 Changes in working capital Accounts receivable 90 108 (159) Inventories 23 (58) (29) Other current assets and liabilities 50 (194) (116) - -------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,165 954 940 - -------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of plant assets (200) (297) (256) Sales of plant assets 7 9 148 Businesses acquired - (105) (478) Sales of businesses 11 103 200 Other, net (22) (32) (5) - -------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (204) (322) (391) - -------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings - 323 305 Repayments of long-term borrowings (7) (8) (36) Short-term borrowings 1,028 1,537 1,847 Repayments of short-term borrowings (1,206) (1,111) (2,187) Dividends paid (384) (386) (367) Treasury stock purchases (394) (1,026) (669) Treasury stock issuances 20 35 64 - -------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (943) (636) (1,043) - -------------------------------------------------------------------------------------- NET CASH PROVIDED BY DISCONTINUED OPERATIONS - - 511 - -------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 3 (6) (18) - -------------------------------------------------------------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 21 (10) (1) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 6 16 17 - -------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 27 $ 6 $ 16 ====================================================================================== See accompanying Notes to Consolidated Financial Statements.
36 10 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY (millions, except per share amounts)
Capital Stock -------------------------------------- Earnings Accumulated Total Issued In Treasury Retained Other Com- Share- ---------------- ----------------- Capital in the prehensive owners' Shares Amount Shares Amount Surplus Business Income Equity - ---------------------------------------------------------------------------------------------------------------------------- Balance at August 3, 1997 542 $20 (84) $(2,459) $338 $3,571 $ (50) $1,420 - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net earnings 660 660 Foreign currency translation adjustments (114) (114) Dividends ($.823 per share) (375) (375) Treasury stock purchased (13) (669) (669) Treasury stock issued under management incentive and stock option plans 3 45 57 102 Spin-off of Specialty Foods segment (150) (150) - ---------------------------------------------------------------------------------------------------------------------------- Balance at August 2, 1998 542 20 (94) (3,083) 395 3,706 (164) 874 - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net earnings 724 724 Foreign currency translation adjustments 14 14 Dividends ($.885 per share) (389) (389) Treasury stock purchased (22) (1,026) (1,026) Treasury stock issued under management incentive and stock option plans 3 51 (13) 38 - ---------------------------------------------------------------------------------------------------------------------------- Balance at August 1, 1999 542 20 (113) (4,058) 382 4,041 (150) 235 - ---------------------------------------------------------------------------------------------------------------------------- COMPREHENSIVE INCOME NET EARNINGS 714 714 FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (77) (77) DIVIDENDS ($.90 PER SHARE) (382) (382) TREASURY STOCK PURCHASED (11) (394) (394) TREASURY STOCK ISSUED UNDER MANAGEMENT INCENTIVE AND STOCK OPTION PLANS 3 79 (38) 41 - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT JULY 30, 2000 542 $20 (121) $(4,373) $344 $4,373 $(227) $ 137 ============================================================================================================================ See accompanying Notes to Consolidated Financial Statements.
37 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION - The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. Significant intercompany transactions are eliminated in consolidation. Investments of 20% or more in affiliates are accounted for by the equity method. FISCAL YEAR - The company's fiscal year ends on the Sunday nearest July 31. There were 52 weeks in 2000, 1999 and 1998. CASH AND CASH EQUIVALENTS - All highly liquid debt instruments purchased with a maturity of three months or less are classified as cash equivalents. INVENTORIES - Substantially all domestic inventories are priced at the lower of cost or market, with cost determined by the last in, first out (LIFO) method. Other inventories are priced at the lower of average cost or market. PLANT ASSETS - Plant assets are stated at historical cost. Alterations and major overhauls, which extend the lives or increase the capacity of plant assets, are capitalized. The amounts for property disposals are removed from plant asset and accumulated depreciation accounts and any resultant gain or loss is included in earnings. Ordinary repairs and maintenance are charged to operating costs. DEPRECIATION - Depreciation provided in Costs and expenses is calculated using the straight-line method. Buildings and machinery and equipment are depreciated over periods not exceeding 45 years and 15 years, respectively. Accelerated methods of depreciation are used for income tax purposes in certain jurisdictions. INTANGIBLE ASSETS - Intangible assets consist principally of excess purchase price over net assets of businesses acquired and trademarks. Intangibles are amortized on a straight-line basis over periods not exceeding 40 years. ASSET VALUATION - The company periodically reviews the recoverability of plant assets and intangibles based principally on an analysis of undiscounted cash flows. DERIVATIVE FINANCIAL INSTRUMENTS - The company uses derivative financial instruments primarily for purposes of hedging exposures to fluctuations in interest rates, foreign currency exchange rates and equity-linked employee benefit obligations. The differential to be paid or received on interest rate swaps is recognized as an adjustment to interest expense. Gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and ultimately recognized in earnings. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions are deferred and are recognized in earnings or as adjustments of carrying amounts when the hedged transaction occurs. USE OF ESTIMATES - Generally accepted accounting principles require management to make estimates and assumptions that affect assets and liabilities, contingent assets and liabilities, and revenues and expenses. Actual results could differ from those estimates. RECLASSIFICATIONS - Prior year financial statements and footnotes have been reclassified to conform to the current year presentation. NEW ACCOUNTING STANDARDS - In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS No. 138, is effective for fiscal years beginning after June 15, 2000. The standard requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income, based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. The company is required to adopt this statement in the first quarter of 2001. The cumulative effect of adoption will not be material. The impact of SFAS No. 133 on the company's future results will be dependent upon the fair values of the company's derivatives and related financial instruments and could result in increased volatility. In March 2000, the Emerging Issues Task Force (EITF) released Issue 00-07, "Application of EITF Issue No. 96-13, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,' to Equity Derivative Transactions That Contain Certain Provisions That Require Cash Settlement If Certain Events Outside the Control of the Issuer Occur." The EITF reached a consensus that equity derivative contracts that include any provision that could require net cash settlement can no longer be accounted for as equity. Such contracts are initially recorded at fair value and must be accounted for as an asset or liability with subsequent changes in the fair value of the derivative included in earnings. Similarly the EITF reached a consensus that equity derivative contracts with any provisions that could require physical settlement by a cash payment to the counterparty in exchange for the issuer's shares can no longer be accounted for as permanent equity. Instead, the contracts should be classified as temporary or mezzanine equity. Both of these conclusions do not allow for an evaluation of the likelihood that otherwise unlikely or remote events would trigger cash settlement. 38 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) In September 2000, the EITF reached a consensus clarifying instances when it is appropriate to classify such contracts in shareowners' equity in Issue 00-19 "Determination of Whether Share Settlement is within the Control of the Company for Purposes of Applying Issue No. 96-13, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock'." The company has a forward stock purchase contract outstanding that is accounted for as permanent equity. See Note 21. The company is evaluating the impact of the EITF Issues and possible amendments to contract provisions with the counterparty. The EITF concluded that the consensus should be applied to new contracts entered into after the date of the final consensus and to existing contracts that remain outstanding on June 30, 2001. The ultimate resolution and impact of the accounting for the contract will be dependent upon the results of the review of contract provisions with the counterparty and fluctuations in the company's share price. In May 2000, the EITF issued a consensus on Issue 00-14 "Accounting for Certain Sales Incentives." The EITF concluded that certain consumer and trade sales promotion expenses should be classified as a reduction of sales rather than as marketing expenses. In September 2000, the EITF reached a final consensus in Issue 00-10 on "Accounting for Shipping and Handling Costs" that such costs cannot be reported as a reduction of revenue. The company currently classifies certain shipping and handling costs as a reduction of sales. The company is currently evaluating the impact of these Issues, which are expected to become effective in the fourth quarter 2001. Upon adoption, prior period amounts will be restated to conform with the new requirements. As reclassifications, these changes will not have a material effect on the company's financial position or earnings. 2. COMPREHENSIVE INCOME In 1999, the company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," issued in June 1997. SFAS No. 130 establishes a standard for reporting of comprehensive income, which is comprised of net income and other comprehensive income items, in the financial statements. Other comprehensive income includes items recorded in shareowners' equity that are not the result of transactions with shareowners, such as foreign currency translation adjustments. As of July 30, 2000 and August 1, 1999, accumulated other comprehensive income, as reflected in the statements of shareowners' equity, represents the cumulative translation adjustment. 3. DISCONTINUED OPERATIONS Effective March 30, 1998, the company spun off its Specialty Foods segment to its shareowners as an independent publicly traded company. The spin-off qualified as a tax-free distribution to U.S. shareholders. Shareowners of record as of March 9, 1998 received one share of common stock of the new company, Vlasic Foods International Inc. (Vlasic), for every ten shares of Campbell Soup Company capital stock. Results of discontinued operations for the eight-month period ended March 29, 1998 were as follows: - --------------------------------------------------------------------------------- Net sales $809 ================================================================================= Earnings before taxes $ 41 Taxes on earnings 21 - --------------------------------------------------------------------------------- Earnings from operations 20 Spin-off costs 38 - --------------------------------------------------------------------------------- Loss from discontinued operations $(18) =================================================================================
4. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE In 1998, the company adopted the provisions of the Emerging Issues Task Force consensus ruling on Issue 97-13, "Accounting for Costs Incurred in Connection with a Consulting Contract that Combines Business Process Reengineering and Information Technology Transformation." The unamortized balance of previously capitalized business process reengineering costs was written off as a cumulative effect of change in accounting principle of $11 or $.02 per share, net of an income tax benefit of approximately $7. 5. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION The company operates in three business segments: Soup and Sauces, Biscuits and Confectionery and Away From Home. The segments are managed as strategic units due to their distinct manufacturing processes, marketing strategies and distribution channels. The Soup and Sauces segment includes the worldwide soup businesses, Prego spaghetti sauces, Pace Mexican sauces, Franco-American pastas and gravies, Swanson broths, and V8 and V8 Splash beverages. The Biscuits and Confectionery segment includes the Godiva Chocolatier, Pepperidge Farm and Arnotts businesses. The Delacre business, which was divested in June 1998, was also included in this segment. Away From Home represents the distribution of products, including Campbell's soups and Campbell's Specialty Kitchen entrees, to the food service and home meal replacement markets. Accounting policies for measuring segment assets and earnings before interest and taxes are substantially consistent with those described in the summary of significant accounting policies included in Note 1. The company 39 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) evaluates segment performance based on earnings before interest and taxes, excluding certain non-recurring charges. Away From Home products are principally produced by the tangible assets of the company's other segments, except for the Stockpot premium refrigerated soups, which are produced in a separate facility, and certain frozen products which are produced under contract manufacturing agreements. Accordingly, with the exception of the designated Stockpot facility, plant assets have not been allocated to the Away From Home segment. Depreciation and amortization are allocated to Away From Home based on budgeted production hours. Transfers between segments are recorded at cost plus mark-up or at market. Information about operations by business segment is as follows: BUSINESS SEGMENTS
BISCUITS & AWAY CORPORATE SOUP & CONFEC- FROM & ELIMI- 2000 SAUCES TIONERY HOME OTHER(1) NATIONS(2) TOTAL - ------------------------------------------------------------------------------- NET SALES $4,306 1,462 533 28 (62) $6,267 EARNINGS BEFORE INTEREST AND TAXES $1,081 213 53 - (82) $1,265 DEPRECIATION AND AMORTIZATION $ 126 83 16 1 25 $ 251 CAPITAL EXPENDITURES $ 119 64 4 - 13 $ 200 SEGMENT ASSETS $2,750 1,364 371 7 704 $5,196 - -------------------------------------------------------------------------------
Biscuits & Away Corporate Soup & Confec- From & Elimi- 1999 Sauces tionery Home Other(1) nations(2) Total - --------------------------------------------------------------------------------- Net sales $4,423 1,430 507 126 (62) $6,424 Earnings before interest and taxes(3) $1,082 215 57 (5) (79) $1,270 Depreciation and amortization $ 128 84 13 9 21 $ 255 Capital expenditures $ 164 70 32 10 21 $ 297 Segment assets $2,975 1,461 349 38 699 $5,522 - ---------------------------------------------------------------------------------
Biscuits & Away Corporate Soup & Confec- From & Elimi- 1998 Sauces tionery Home Other(1) nations(2) Total - --------------------------------------------------------------------------------- Net sales $4,427 1,522 453 343 (49) $6,696 Earnings before interest and taxes(4) $1,109 206 53 (85) (35) $1,248 Depreciation and amortization $ 132 86 11 15 17 $ 261 Capital expenditures $ 135 87 - 14 20 $ 256 Segment assets $3,105 1,402 202 208 716 $5,633 - ---------------------------------------------------------------------------------
(1) Represents financial information of certain prepared convenience food businesses not categorized as reportable segments. (2) Represents elimination of intersegment sales, unallocated corporate expenses and unallocated assets, including corporate offices, deferred income taxes and prepaid pension assets. (3) Contributions to earnings before interest and taxes by segment included the effects of a fourth quarter 1999 restructuring charge of $36, net of a $5 reversal of a prior period restructuring charge, as follows: Soup and Sauces - $22, Biscuits and Confectionery - $1, and Other - $13. (4) Contributions to earnings before interest and taxes by segment included the effects of a third quarter 1998 restructuring charge of $262 as follows: Soup and Sauces - $135, Biscuits and Confectionery - $25, Away From Home - $4, and Other - $98. GEOGRAPHIC AREA INFORMATION Information about operations in different geographic areas is as follows:
2000 1999 1998 - -------------------------------------------------------------------------------- Net sales United States $4,668 $4,804 $4,850 Europe 568 630 859 Australia/Asia Pacific 637 616 627 Other countries 467 438 417 Adjustments and eliminations (73) (64) (57) - -------------------------------------------------------------------------------- Consolidated $6,267 $6,424 $6,696 ================================================================================
2000 1999 1998 - -------------------------------------------------------------------------------- Earnings before interest and taxes United States $1,112 $1,163 $1,124 Europe 60 45 36 Australia/Asia Pacific 89 63 50 Other countries 86 78 73 - -------------------------------------------------------------------------------- Segment earnings before interest and taxes 1,347 1,349 1,283 Unallocated corporate expenses (82) (79) (35) - -------------------------------------------------------------------------------- Consolidated $1,265 $1,270 $1,248 ================================================================================
40 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) GEOGRAPHIC AREA INFORMATION (CONTINUED)
2000 1999 1998 - -------------------------------------------------------------------------------- Identifiable assets United States $2,616 $2,742 $2,820 Europe 533 614 679 Australia/Asia Pacific 852 991 925 Other countries 491 476 493 Corporate 704 699 716 - -------------------------------------------------------------------------------- Consolidated $5,196 $5,522 $5,633 ================================================================================
Transfers between geographic areas are recorded at cost plus markup or at market. Identifiable assets are those assets, including goodwill, which are identified with the operations in each geographic region. The 1999 net restructuring charge of $36 is allocated to geographic regions as follows: United States - $10, Europe - $14, and Australia/Asia Pacific - $12. The 1998 restructuring charge of $262 is allocated to geographic regions as follows: United States - $200, Europe - $36, Australia/Asia Pacific - $21, and Other - $5. 6. RESTRUCTURING PROGRAM A restructuring charge included in earnings from continuing operations of $41 ($30 after tax or $.07 per share) was recorded in the fourth quarter 1999 to cover the costs of a restructuring and divestiture program approved in July 1999 by the company's Board of Directors. This charge related to the streamlining of certain North American and European production and administrative facilities and the anticipated cost of a divestiture of a non-strategic business with annual sales of approximately $25. The restructuring charge included approximately $20 in cash charges primarily related to severance and employee benefit costs. The remaining balance included non-cash charges related to the disposition of plant assets and the divestiture. The restructuring and divestiture program was substantially completed in 2000. A $5 ($3 after tax or $.01 per share) reversal of the 1998 restructuring charge was also recorded in the fourth quarter 1999. The reversal reflected the net impact of changes in estimates and modifications to the original program. Two manufacturing facilities scheduled for closure in 1999 were not taken out of service due to changes in business and economic conditions subsequent to the original charge, while additional asset rationalization and plant recon- figuration strategies were implemented which resulted in incremental headcount reductions. The initial charge for the third quarter 1998 program was $262 ($193 after tax or $.42 per share). This program was designed to improve operational efficiency by rationalizing certain U.S., European and Australian production and administrative facilities and divesting non-strategic businesses. This program was completed by the second quarter 2000. A summary of restructuring reserves at July 30, 2000, and related activity described above is as follows:
Balance at BALANCE AT August 1, JULY 30, 1999 Spending 2000 - -------------------------------------------------------------------------------- Losses on asset dispositions and divestitures $19 (19) $ - Severance and benefits 38 (27) 11 Other exit costs 3 (3) - - -------------------------------------------------------------------------------- Total $60 (49) $11 ================================================================================
7. OTHER EXPENSES
2000 1999 1998 - -------------------------------------------------------------------------------- Stock price related incentive programs $ 26 $ 15 $ 27 Amortization of intangible and other assets 55 58 53 Minority interests 1 1 6 Other, net 7 (10) (22) - -------------------------------------------------------------------------------- $ 89 $ 64 $ 64 ================================================================================
8. INTEREST EXPENSE
2000 1999 1998 - -------------------------------------------------------------------------------- Interest expense $204 $190 $194 Less: Interest capitalized 6 6 5 - -------------------------------------------------------------------------------- $198 $184 $189 ================================================================================
9. ACQUISITIONS In the first quarter of 1999, the company acquired the Stockpot premium refrigerated soup business, which is predominantly a U.S. food service business, for $105. During 1998, the company acquired the Liebig soup business in France for approximately $180. Also, in 1998 Arnotts purchased the remaining outstanding ordinary shares held by its minority shareholders for an aggregate purchase price of approximately $290. Prior to the transaction, the company owned approximately 70% of Arnotts. Acquisitions were accounted for using the purchase method of accounting and accordingly, results of operations of the acquired companies are included in the consolidated financial statements from the dates the acquisitions were consummated. Proforma financial information of the acquisitions would not have had a material effect on net sales, net earnings or earnings per share for 1999 and 1998. 41 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) The allocation of the purchase price to assets acquired and liabilities assumed was based upon fair value estimates as follows:
1999 1998 - -------------------------------------------------------------------------------- Working capital $ 1 $ 32 Fixed assets 5 19 Intangibles 105 360 Other liabilities (6) - Minority interests - 67 - -------------------------------------------------------------------------------- $105 $478 ================================================================================
10. PENSION AND POSTRETIREMENT BENEFITS PENSION BENEFITS - Substantially all of the company's U.S. and certain non-U.S. employees are covered by noncontributory defined benefit pension plans. In 1999, the company implemented significant amendments to certain U.S. plans. Under a new formula, retirement benefits are determined based on percentage of annual pay and age. To minimize the impact of converting to the new formula, service and earnings credit will continue to accrue for active employees participating in the plans under the formula prior to the amendments through the year 2014. Employees will receive the benefit from either the new or old formula, whichever is higher. Benefits become vested upon the completion of five years of service. Benefits are paid from funds previously provided to trustees and insurance companies or are paid directly by the company from general funds. Plan assets consist primarily of investments in equities, fixed income securities, and real estate. Pension coverage for employees of certain non-U.S. subsidiaries are provided to the extent determined appropriate through their respective plans. Obligations under such plans are systematically provided for by depositing funds with trusts or under insurance contracts. The assets and obligations of these plans are not material. POSTRETIREMENT BENEFITS - The company provides postretirement benefits including healthcare and life insurance to substantially all retired U.S. employees and their dependents. In 1999, changes were made to the postretirement benefits offered to certain U.S. employees. Participants who were not receiving postretirement benefits as of May 1, 1999 will no longer be eligible to receive such benefits in the future, but the company will provide access to healthcare coverage for non-eligible future retirees on a group basis. Costs will be paid by the participants. To preserve the economic benefits for employees close to retirement, participants who were at least age 55 and had at least 10 years of continuous service remain eligible for postretirement benefits. Components of net periodic benefit cost:
Pension ---------------------------------- 2000 1999 1998 - -------------------------------------------------------------------------------- Service cost $ 37 $ 29 $ 31 Interest cost 103 91 94 Expected return on plan assets (150) (142) (135) Amortization of net transition obligation (3) (3) (3) Amortization of prior service cost 5 5 5 Recognized net actuarial (gain) loss 6 5 4 Curtailment 1 - - - -------------------------------------------------------------------------------- Net periodic pension income $ (1) $ (15) $ (4) ================================================================================
Postretirement -------------------------------- 2000 1999 1998 - -------------------------------------------------------------------------------- Service cost $ 5 $ 10 $ 11 Interest cost 18 19 22 Amortization of prior service cost (11) (6) (4) Amortization of net (gain) loss (12) (9) (11) Settlement (3) - - - -------------------------------------------------------------------------------- Net periodic postretirement (income) expense $ (3) $ 14 $ 18 ================================================================================
Change in benefit obligation:
Pension Postretirement -------------------- -------------------- 2000 1999 2000 1999 - -------------------------------------------------------------------------------- Obligation at beginning of year $1,405 $1,332 $246 $313 Service cost 37 29 5 10 Interest cost 103 91 18 19 Plan amendments 7 3 (14) (33) Actuarial (gain) loss (7) 62 35 (38) Special termination benefits - 6 - - Settlement - - (2) - Curtailment (2) - - - Benefits paid (116) (119) (28) (25) Foreign currency adjustment 1 1 - - - -------------------------------------------------------------------------------- Benefit obligation at end of year $1,428 $1,405 $260 $246 ================================================================================
42 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) Change in the fair value of pension plan assets:
2000 1999 - -------------------------------------------------------------------------------- Fair value at beginning of year $1,740 $1,674 Actual return on plan assets 218 177 Employer contributions 2 2 Benefits paid (112) (115) Foreign currency adjustment (2) 2 - -------------------------------------------------------------------------------- Fair value at end of year $1,846 $1,740 ================================================================================
Funded status as recognized in the Consolidated Balance Sheet:
Pension Postretirement ---------------- ----------------- 2000 1999 2000 1999 - -------------------------------------------------------------------------------- Funded status at end of year $418 $335 $(260) $(246) Unrecognized prior service cost 60 61 (44) (43) Unrecognized (gain) loss (94) (14) (79) (124) Unrecognized net transition obligation (1) (4) - - - -------------------------------------------------------------------------------- Net amount recognized $383 $378 $(383) $(413) ================================================================================
The current portion of nonpension postretirement benefits included in Accrued liabilities was $19 at July 30, 2000 and August 1, 1999. Weighted-average assumptions at end of year:
Pension ------------------------------------ 2000 1999 1998 - -------------------------------------------------------------------------------- Discount rate for benefit obligation 7.75% 7.50% 7.00% Expected return on plan assets 10.50% 10.50% 10.25% Rate of compensation increases 4.50% 4.50% 4.50% - --------------------------------------------------------------------------------
The discount rate used to determine the accumulated postretirement benefit obligation was 7.75% in 2000 and 7.50% in 1999. The assumed healthcare cost trend rate used to measure the accumulated postretirement benefit obligation was 5%, declining to 4.50% in 2001 and continuing at 4.50% thereafter. A one percentage point change in assumed health care costs would have the following effects on 2000 reported amounts:
% Increase % Decrease - -------------------------------------------------------------------------------- Effect on service and interest cost $ 2 $ (2) Effect on the 2000 accumulated benefit obligation $16 $(17) - --------------------------------------------------------------------------------
Obligations related to non-U.S. postretirement benefit plans are not significant since these benefits are generally provided through government-sponsored plans. SAVINGS PLAN - The company sponsors employee savings plans which cover substantially all U.S. employees. After one year of continuous service, the company generally matches 50% of employee contributions up to 5% of compensation. Amounts charged to Costs and expenses were $10 in 2000, $11 in 1999, and $13 in 1998. 11. TAXES ON EARNINGS The provision for income taxes on earnings from continuing operations consists of the following:
2000 1999 1998 - -------------------------------------------------------------------------------- Income taxes: Currently payable Federal $ 246 $ 231 $ 311 State 30 31 44 Non-U.S 70 33 50 - -------------------------------------------------------------------------------- 346 295 405 - -------------------------------------------------------------------------------- Deferred Federal 36 64 (1) State (4) 2 (7) Non-U.S (15) 12 (13) - -------------------------------------------------------------------------------- 17 78 (21) - -------------------------------------------------------------------------------- $ 363 $ 373 $ 384 ================================================================================ Earnings from continuing operations before income taxes: United States $ 880 $ 954 $ 980 Non-U.S 197 143 93 - -------------------------------------------------------------------------------- $1,077 $1,097 $1,073 ================================================================================
43 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) The following is a reconciliation of the effective income tax rate on continuing operations with the U.S. federal statutory income tax rate:
2000 1999 1998 - -------------------------------------------------------------------------------- Federal statutory income tax rate 35.0% 35.0% 35.0% State income taxes (net of federal tax benefit) 1.5 1.9 2.0 Nondeductible divestiture and restructuring charges - 0.3 1.8 Non-U.S. earnings taxed at other than federal statutory rate (1.0) (0.6) (0.4) Tax loss carryforwards (0.3) (0.3) (0.8) Other (1.5) (2.3) (1.8) - -------------------------------------------------------------------------------- Effective income tax rate 33.7% 34.0% 35.8% ================================================================================
Deferred tax liabilities and assets are comprised of the following:
2000 1999 - -------------------------------------------------------------------------------- Depreciation $170 $176 Pensions 118 122 Other 195 179 - -------------------------------------------------------------------------------- Deferred tax liabilities 483 477 - -------------------------------------------------------------------------------- Benefits and compensation 200 209 Restructuring accruals 4 31 Tax loss carryforwards 17 17 Other 74 50 - -------------------------------------------------------------------------------- Gross deferred tax assets 295 307 Deferred tax asset valuation allowance (17) (17) - -------------------------------------------------------------------------------- Net deferred tax assets 278 290 - -------------------------------------------------------------------------------- Net deferred tax liability $205 $187 ================================================================================
On July 30, 2000, subsidiaries of the company have tax loss carryforwards of approximately $38. Of these carryforwards, $19 expire through 2005 and $19 may be carried forward indefinitely. The current statutory tax rates in these countries range from 28% to 46%. Income taxes have not been provided on undistributed earnings of non-U.S. subsidiaries of approximately $556, which are deemed to be permanently invested. If remitted, tax credits are available to substantially offset any resulting tax liability. 12. ACCOUNTS RECEIVABLE
2000 1999 - -------------------------------------------------------------------------------- Customers $424 $507 Allowances for cash discounts and bad debts (19) (18) - -------------------------------------------------------------------------------- 405 489 Other 38 52 - -------------------------------------------------------------------------------- $443 $541 ================================================================================
13. INVENTORIES
2000 1999 - -------------------------------------------------------------------------------- Raw materials, containers and supplies $213 $207 Finished products 358 408 - -------------------------------------------------------------------------------- $571 $615 ================================================================================
Approximately 62% of inventory in 2000 and 70% in 1999 is accounted for on the last in, first out 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 July 30, 2000 and August 1, 1999. 14. OTHER CURRENT ASSETS
2000 1999 - -------------------------------------------------------------------------------- Prepaid pensions $ 18 $ 18 Deferred taxes 80 76 Other 29 38 - -------------------------------------------------------------------------------- $127 $132 ================================================================================
15. PLANT ASSETS
2000 1999 - -------------------------------------------------------------------------------- Land $ 43 $ 50 Buildings 808 798 Machinery and equipment 2,283 2,185 Projects in progress 162 184 - -------------------------------------------------------------------------------- 3,296 3,217 Accumulated depreciation (1,652) (1,491) - -------------------------------------------------------------------------------- $ 1,644 $ 1,726 ================================================================================
Depreciation expense provided in Costs and expenses was $196 in 2000, $197 in 1999 and $208 in 1998. Approximately $70 of capital expenditures are required to complete projects in progress at July 30, 2000. 16. INTANGIBLE ASSETS
2000 1999 - -------------------------------------------------------------------------------- Purchase price in excess of net assets of businesses acquired (goodwill) $1,603 $1,697 Trademarks 423 429 Other intangibles 4 4 - -------------------------------------------------------------------------------- 2,030 2,130 Accumulated amortization (263) (220) - -------------------------------------------------------------------------------- $1,767 $1,910 ================================================================================
17. OTHER ASSETS
2000 1999 - -------------------------------------------------------------------------------- Prepaid pensions $365 $360 Investments 234 211 Other 18 21 - -------------------------------------------------------------------------------- $617 $592 ================================================================================
44 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) 18. NOTES PAYABLE AND LONG-TERM DEBT Notes payable consists of the following:
2000 1999 - -------------------------------------------------------------------------------- Commercial paper $1,738 $1,778 Current portion of Long-term Debt 119 157 Variable-rate bank borrowings 16 52 - -------------------------------------------------------------------------------- $1,873 $1,987 ================================================================================
Commercial paper had a weighted average interest rate of 6.62% and 5.11% at July 30, 2000 and August 1, 1999, respectively. The current portion of Long-term Debt had a weighted average interest rate of 7.06% and 5.74% at July 30, 2000 and August 1, 1999, respectively. The company has total short-term lines of credit of $1,800 at July 30, 2000. These lines of credit remain unused at July 30, 2000 and include a $1,500 facility which supports commercial paper borrowings. These lines of credit are unconditional for a period of one to two years. Long-term debt consists of the following:
Fiscal Year Type Maturity Rate 2000 1999 - -------------------------------------------------------------------------------- Notes 2001 5.75%-8.58% $ - $ 115 Notes 2003 6.15% 300 300 Notes 2004(1) 4.75%-5.63% 400 400 Notes 2007 6.90% 300 300 Debentures 2021 8.88% 200 200 Other 2002-2010 3.00%-9.00% 18 15 - -------------------------------------------------------------------------------- $1,218 $1,330 ================================================================================ (1) $100 callable in 2001
The fair value of the company's long-term debt including the current portion of long-term debt in Notes payable was $1,330 at July 30, 2000, and $1,512 at August 1, 1999. The company's credit facilities include $600 remaining as of July 30, 2000 under a shelf registration statement filed with the Securities and Exchange Commission. Principal amounts of long-term debt mature as follows: 2001 - $119 (in current liabilities); 2002 - $5; 2003 - $300; 2004 - $401; 2005 - $1 and beyond - - $511. 19. OTHER LIABILITIES
2000 1999 - -------------------------------------------------------------------------------- Deferred taxes $285 $263 Deferred compensation 129 131 Postemployment benefits 11 11 Other 20 12 - -------------------------------------------------------------------------------- $445 $417 ================================================================================
20. FINANCIAL INSTRUMENTS The company utilizes certain derivative financial instruments to enhance its ability to manage risk, including interest rate, foreign currency and certain equity-linked employee compensation exposures which exist as part of ongoing business operations. The company does not enter into contracts for speculative purposes, nor is it a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines. 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 to minimize worldwide financing costs and to achieve a desired proportion of variable versus fixed-rate debt. The amounts paid or received on swaps related to debt are recognized as an adjustment to interest expense. There were no interest rate swaps outstanding at July 30, 2000. The notional amounts of interest rate swaps were $250 at August 1, 1999. The swaps had a fair value of $2 at August 1, 1999. The company utilizes foreign currency exchange contracts, including swap and forward contracts, to hedge foreign currency exposures. Foreign exchange gains and losses on derivative financial instruments are recognized and offset foreign exchange gains and losses on the underlying exposures. A mix of equity, intercompany debt and local currency borrowing is used to finance foreign operations. Gains and losses, both realized and unrealized, on financial instruments that hedge the company's investments in foreign operations are recognized in Accumulated other comprehensive income in Shareowners' Equity. 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 equity swap contracts have maturities in 2001 and 2003. At July 30, 2000, the notional principal amount of the contracts was $79, and the net cost to settle the contracts was $25. Gains or losses are recognized as adjustments to the carrying value of the underlying obligations. The company also has cross-currency swap agreements with financial institutions to hedge certain European currency exposures. The notional amounts of these swaps were $217 at July 30, 2000 and $333 at August 1, 1999. The swaps mature as follows: $107 in 2001, and $110 in 2003. The fair value of the swaps was $22 at July 30, 2000. 45 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts) At July 30, 2000, the company also had contracts to purchase or sell approximately $236 in foreign currency versus $177 at August 1, 1999. The contracts are primarily for European and Australian currencies and have maturities through 2001. The fair value of the contracts was $(3) at July 30, 2000. The company is exposed to credit loss in the event of nonperformance by the counterparties in swap and forward contracts. The company minimizes its credit risk on these transactions by only dealing with leading, credit-worthy financial institutions having long-term credit ratings of "A" or better and, therefore, does not anticipate nonperformance. In addition, the contracts are distributed among several financial institutions, thus minimizing credit risk concentration. The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and short-term debt approximate fair value. The fair values of long-term debt, as indicated in Note 18, and derivative financial instruments are generally based on quoted market prices. 21. SHAREOWNERS' EQUITY The company has authorized 560 million shares of Capital Stock of $.0375 par value and 40 million shares of Preferred Stock, issuable in one or more classes, with or without par as may be authorized by the Board of Directors. No Preferred Stock has been issued. In October 1998, the company entered into a forward stock purchase contract to partially hedge the company's equity exposure from its stock option program. The contract, which matures in fiscal 2004, provides that the company repurchase approximately 11 million shares at an average price of approximately $47 per share. The company may elect to settle the contract on a net share basis in lieu of physical settlement. The contract permits early settlement and may be extended for an additional five-year term. If the forward purchase contract had been settled on a net share basis as of July 30, 2000, the company would have provided the counterparty with approximately nine million shares of its capital stock. The company sponsors a long-term incentive compensation plan. Under the plan, restricted stock and options may be granted to certain officers and key employees of the company. The plan provides for awards up to an aggregate of 25 million shares of capital stock. Options are granted at a price not less than the fair value of the shares on the date of grant and expire not later than ten years after the date of grant. Options vest over a three-year period. The company accounts for the stock option grants and restricted stock awards in accordance with Accounting Principles Board Opinion No. 25 and related Interpretations. Accordingly, no compensation expense has been recognized in the Statements of Earnings for the options. In 1997, the company adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Had the company recorded compensation expense for the fair value of options granted consistent with SFAS No. 123, earnings from continuing operations would have been reduced by approximately $20, $22 and $15 in 2000, 1999 and 1998, respectively. Earnings per share from continuing operations, both basic and assuming dilution, would have been reduced by $.03, $.04 and $.02 in 2000, 1999 and 1998, respectively. The weighted average fair value of options granted in 2000, 1999 and 1998 were estimated as $7.94, $11.49 and $13.59, respectively. The fair value of each option grant at grant date is estimated using the Black-Scholes option pricing model. The following weighted average assumptions were used for grants in 2000, 1999 and 1998:
2000 1999 1998 - -------------------------------------------------------------------------------- Risk-free interest rate 6.3% 6.2% 5.5% Expected life 6 YEARS 6 Years 6 Years Expected volatility 29% 24% 20% Expected dividend yield 3.0% 2.0% 1.4% - --------------------------------------------------------------------------------
Restricted shares granted are as follows:
(shares in thousands) 2000 1999 1998 - -------------------------------------------------------------------------------- Restricted Shares Granted 573 1,804 127 ================================================================================
Information about stock options and related activity is as follows:
WEIGHTED Weighted Weighted AVERAGE Average Average (options in EXERCISE Exercise Exercise thousands) 2000 PRICE 1999 Price 1998 Price - ----------------------------------------------------------------------------------- Beginning of year 19,880 $32.37 18,366 $28.72 20,066 $26.94 Granted 6,105 29.84 3,890 42.79 2,303 54.38 Exercised (1,350) 17.81 (2,122) 17.75 (3,272) 17.99 Terminated (611) 45.40 (254) 45.61 (2,212) 33.04 Spin-off related modifications(1) - - - - 1,481 - - ----------------------------------------------------------------------------------- End of year 24,024 $32.16 19,880 $32.37 18,366 $28.72 - ----------------------------------------------------------------------------------- Exercisable at end of year 14,850 14,019 13,123 =================================================================================== (1) When the Specialty Foods segment was spun off, the number and exercise price of options outstanding were adjusted to preserve the economic value of the options that existed prior to the spin-off.
46 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share amounts)
(options in thousands) Stock Options Outstanding Exercisable Options - -------------------------------------------------------------------------------- Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Contractual Exercise Exercise Prices Shares Life Price Shares Price - -------------------------------------------------------------------------------- $13.74-$22.60 6,158 2.6 $18.28 6,158 $18.28 $23.18-$31.91 10,366 8.0 $30.49 4,430 $31.70 $32.03-$44.41 5,528 7.6 $42.97 3,026 $43.55 $44.61-$56.50 1,972 6.9 $54.06 1,236 $54.11 - -------------------------------------------------------------------------------- 24,024 14,850 ================================================================================
The company adopted the provisions of SFAS No. 128, "Earnings per Share," as of the second quarter 1998. SFAS No. 128 revised the standards for computation and presentation of earnings per share ("EPS"), requiring the presentation of both basic EPS and EPS assuming dilution. Basic EPS is calculated using the weighted average shares outstanding during the applicable period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the periods presented in the Consolidated Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution includes the incremental effect of stock options, except when such effect would be antidilutive. In 2000 and 1999, the weighted average shares outstanding assuming dilution also includes the incremental effect of approximately four million and two hundred thousand shares, respectively, under the forward stock purchase contract. 22. CONTINGENCIES The company is a party to lawsuits and claims arising out of the normal course of business. In management's opinion, there are no pending claims or litigation, the outcome of which would have a material effect on the consolidated results of operations, financial position or cash flows of the company. 23. STATEMENTS OF CASH FLOWS
2000 1999 1998 - -------------------------------------------------------------------------------- Interest paid, net of amounts capitalized $199 $181 $187 Interest received $ 10 $ 11 $ 15 Income taxes paid $253 $300 $370 - --------------------------------------------------------------------------------
24. QUARTERLY DATA (UNAUDITED)
2000 FIRST SECOND THIRD FOURTH - -------------------------------------------------------------------------------- NET SALES $1,768 $1,916 $1,394 $1,189 COST OF PRODUCT SOLD 809 848 664 587 NET EARNINGS 235 281 139 59 PER SHARE - BASIC NET EARNINGS 0.55 0.66 0.33 0.14 DIVIDENDS 0.225 0.225 0.225 0.225 PER SHARE - ASSUMING DILUTION NET EARNINGS 0.54 0.65 0.32 0.14 MARKET PRICE HIGH $45.88 $47.00 $35.38 $33.31 LOW $38.00 $29.25 $25.44 $25.44 ================================================================================
1999 First Second Third Fourth - -------------------------------------------------------------------------------- Net sales $1,804 $1,832 $1,492 $1,296 Cost of products sold 830 856 730 634 Net earnings 264 219 162 79 Per share - basic Net earnings 0.59 0.49 0.37 0.18 Dividends 0.210 0.225 0.225 0.225 Per share - assuming dilution Net earnings 0.58 0.49 0.37 0.18 Market price High $59.94 $59.19 $46.94 $46.50 Low $46.69 $43.38 $38.06 $39.38 ================================================================================
47 21 REPORT OF MANAGEMENT The accompanying financial statements have been prepared by the management of the company in conformity with generally accepted accounting principles to reflect the financial position of the company and its operating results. Financial information appearing throughout this Annual Report is consistent with that in the financial statements. Management is responsible for the information and representations in such financial statements, including the estimates and judgments required for their preparation. In order to meet its responsibility, management maintains a system of internal controls designed to assure that assets are safeguarded and that financial records properly reflect all transactions. The company also maintains a worldwide auditing function to periodically evaluate the adequacy and effectiveness of such internal controls, as well as the company's administrative procedures and reporting practices. The company believes that its long-standing emphasis on the highest standards of conduct and business ethics, set forth in extensive written policy statements, serves to reinforce its system of internal accounting controls. The report of PricewaterhouseCoopers LLP, the company's independent accountants, covering their audit of the financial statements, is included in this Annual Report. Their independent audit of the company's financial statements includes a review of the system of internal accounting controls to the extent they consider necessary to evaluate the system as required by generally accepted auditing standards. The company's internal auditors report directly to the Audit Committee of the Board of Directors, which is composed entirely of Directors who are not officers or employees of the company. The Audit Committee meets periodically with the internal auditors, other management personnel, and the independent accountants. The independent accountants and the internal auditors have had, and continue to have, direct access to the Audit Committee without the presence of other management personnel, and have been directed to discuss the results of their audit work and any matters they believe should be brought to the Committee's attention. /s/ David W. Johnson David W. Johnson President and Chief Executive Officer /s/ Basil L. Anderson Basil L. Anderson Executive Vice President and Chief Financial Officer /s/ Gerald S. Lord Gerald S. Lord Vice President - Controller September 6, 2000 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareowners and Directors of Campbell Soup Company In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareowners' equity and cash flows present fairly, in all material respects, the financial position of Campbell Soup Company and its subsidiaries at July 30, 2000 and August 1, 1999, and the results of their operations and their cash flows for each of the three years in the period ended July 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers, LLP Philadelphia, Pennsylvania September 6, 2000 48 22 SEVEN-YEAR REVIEW - CONSOLIDATED (millions, except per share amounts)
Fiscal Year 2000 1999(1) 1998(2) 1997(3) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Net sales $6,267 $6,424 $6,696 $6,614 $6,324 $5,881 $5,495 Earnings before interest and taxes 1,265 1,270 1,248 1,149 1,191 1,039 947 Earnings before taxes 1,077 1,097 1,073 991 1,072 936 884 Earnings from continuing operations 714 724 689 634 718 627 578 Earnings (loss) from discontinued operations - - (18) 79 84 71 52 Net earnings 714 724 660 713 802 698 630 Cash margin(4) 24.2% 23.7% 22.6% 21.8% 23.5% 22.3% 21.6% FINANCIAL POSITION Net assets of discontinued operations $ - $ - $ - $ 632 $ 659 $ 697 $ 615 Plant assets - net 1,644 1,726 1,723 2,044 2,179 2,093 1,938 Total assets 5,196 5,522 5,633 6,196 6,368 6,088 4,752 Total debt 3,091 3,317 2,570 2,657 1,606 1,719 981 Shareowners' equity 137 235 874 1,420 2,742 2,468 1,989 PER SHARE DATA Earnings from continuing operations - basic $ 1.68 $ 1.64 $ 1.52 $ 1.34 $ 1.44 $ 1.26 $ 1.15 Earnings from continuing operations - assuming dilution 1.65 1.63 1.50 1.33 1.43 1.25 1.14 Net earnings - basic 1.68 1.64 1.46 1.51 1.61 1.40 1.26 Net earnings - assuming dilution 1.65 1.63 1.44 1.49 1.59 1.39 1.24 Dividends declared 0.90 0.885 0.823 0.75 0.67 0.61 0.55 OTHER STATISTICS Capital expenditures $ 200 $ 297 $ 256 $ 252 $ 357 $ 340 $ 354 Number of shareowners (in thousands) 51 51 51 49 43 43 43 Weighted average shares outstanding 425 441 454 472 498 498 501 Weighted average shares outstanding - assuming dilution 432 445 460 478 503 503 507 ================================================================================================================================== (1) 1999 earnings from continuing operations include a net pre-tax restructuring charge of $36; $27 after tax or $.06 per share (basic and assuming dilution). Earnings from continuing operations also include the effect of certain non-recurring costs of $22; $15 after tax or $.03 per share (basic and assuming dilution). (2) 1998 earnings from continuing operations include a pre-tax restructuring charge of $262; $193 after tax or $.42 per share (basic and assuming dilution). Earnings from continuing operations also include a gain on divestiture of $14; $9 after tax or $.02 per share (basic and assuming dilution). Net earnings include the cumulative effect of a change in accounting for business process reengineering costs of $11 or $.02 per share (basic and assuming dilution). (3) 1997 earnings from continuing operations include a pre-tax restructuring charge of $204; $152 after tax or $.31 per share (basic and assuming dilution). (4) Cash margin equals earnings before interest and taxes plus depreciation, amortization and minority interest expense divided by net sales. The company spun off its Specialty Foods segment in 1998 and accounted for it as a discontinued operation. (See Note 3 to the Consolidated Financial Statements). All information has been reclassified accordingly. All shares and per share data reflect a 1997 two-for-one stock split.
49 EX-21 4 w41477ex21.txt SUBSIDIARIES (DIRECT & INDIRECT) OF CAMPBELL 1 EXHIBIT 21 SUBSIDIARIES OF CAMPBELL
NAME OF SUBSIDIARY AND NAME UNDER WHICH IT DOES BUSINESS JURISDICTION OF INCORPORATION ---------------------------- ----------------------------- Arnotts Limited Australia Campbell Finance Corp. Delaware Campbell Foods Belgium N.V. Belgium Campbell Foodservice Company Pennsylvania Campbell Investment Company Delaware Campbell Sales Company New Jersey Campbell Soup Company Ltd -- Les Soupes Campbell Ltee Canada Campbell Soup Supply Company L.L.C. Delaware Campbell's Australasia Pty. Limited Australia Campbell's de Mexico, S.A. de C. V. Mexico Campbell's U.K. Limited England CSC Brands LP Delaware Erasco GmbH Germany Godiva Brands, Inc. Delaware Godiva Chocolatier, Inc. New Jersey Joseph Campbell Company New Jersey Liebig S.A.S. France Pepperidge Farm, Incorporated Connecticut PF Brands, Inc. Delaware Stockpot Inc. Washington
The foregoing does not constitute a complete list of all subsidiaries of the registrant. The subsidiaries which have been omitted do not, in the aggregate, (i) represent more than 10% of the assets of Campbell and its consolidated subsidiaries, (ii) contribute more than 10% of the total sales and revenues of Campbell and its consolidated subsidiaries or (iii) contribute more than 10% of the income before taxes and extraordinary items of Campbell and its consolidated subsidiaries. EX-23 5 w41477ex23.txt CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-11497) and Form S-8 (Nos. 333-38520, 333-22803, 333-00729, 33-59797, 33-56899, 33-39032 and 33-14009) of Campbell Soup Company of our report dated September 6, 2000 relating to the financial statements, which appears in the Annual Report to Shareowners, which is incorporated in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 18, 2000 EX-24.(A) 6 w41477ex24-a.txt POWER OF ATTORNEY 1 EXHIBIT 24 (a) POWER OF ATTORNEY FORM 10-K ANNUAL REPORT FOR FISCAL 2000 KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ellen O. Kaden and John J. Furey, each of them, until December 31, 2000, their true and lawful attorneys-in-fact and agents, with full power of substitution and revocation, for them and in their name, place and stead, in any and all capacities, to sign Campbell Soup Company's Form 10-K Annual Report to the Securities and Exchange Commission for the fiscal year ended July 30, 2000, and any amendments thereto, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof. CAMPBELL SOUP COMPANY
Signature Dated as of September 28, 2000 --------- ------------------------------ /s/Alva A. App /s/Philip E. Lippincott -------------------------------- ----------------------------- Alva A. App Philip E. Lippincott /s/Edmund M. Carpenter /s/Mary Alice Malone -------------------------------- ----------------------------- Edmund M. Carpenter Mary Alice Malone /s/Bennett Dorrance /s/Charles H. Mott -------------------------------- ----------------------------- Bennett Dorrance Charles H. Mott /s/Thomas W. Field, Jr. /s/Charles R. Perrin -------------------------------- ----------------------------- Thomas W. Field, Jr. Charles R. Perrin /s/Kent B. Foster /s/George M. Sherman -------------------------------- ----------------------------- Kent B. Foster George M. Sherman /s/Harvey Golub /s/George Strawbridge, Jr. -------------------------------- ----------------------------- Harvey Golub George Strawbridge /s/David W. Johnson /s/Donald M. Stewart -------------------------------- ----------------------------- David W. Johnson Donald M. Stewart /s/David K. P. Li /s/Charlotte C. Weber -------------------------------- ----------------------------- David K. P. Li Charlotte C. Weber
EX-24.(B) 7 w41477ex24-b.txt CERTIFIED COPY OF RESOLUTION AUTHORIZING SIGNATURE 1 EXHIBIT 24 (b) CAMPBELL SOUP COMPANY CERTIFICATION I, the undersigned Assistant Corporate Secretary of Campbell Soup Company, a New Jersey corporation, certify that the attached document, entitled "FORM 10-K ANNUAL REPORT" is a true copy of a resolution adopted by the Board of Directors of Campbell Soup Company on September 28, 2000, at a meeting throughout which a quorum was present, and that the same is still in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of Campbell Soup Company this 18th day of October, 2000. /s/ Tricia L. Emmerman ----------------------- Assistant Corporate Secretary 2 EXHIBIT 24 (b) (CONT'D.) CAMPBELL SOUP COMPANY BOARD OF DIRECTORS RESOLUTION SEPTEMBER 28, 2000 * * * FORM 10-K ANNUAL REPORT RESOLVED, that the Form 10-K Annual Report for fiscal 2000 of Campbell Soup Company in the form presented to this meeting, is hereby approved. FURTHER RESOLVED, that the Senior Vice President - Law and Government Affairs, the Executive Vice President and Chief Financial Officer and the Vice President - Controller of Campbell Soup Company are authorized to execute the Form 10-K Annual Report for fiscal 2000 approved by this resolution and to cause such Form 10-K to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, with such modifications as may be required by the Commission or as may be desirable in the opinion of such officers. FURTHER RESOLVED, that each of the directors and the President and Chief Executive Officer of Campbell Soup Company are each hereby authorized to execute in their respective capacities, a Power of Attorney in favor of Ellen O. Kaden and John J. Furey designating each of them as the true and lawful attorneys-in-fact and agents of the signatory with full power and authority to execute and to cause to be filed with the Securities and Exchange Commission the Form 10-K Annual Report for fiscal 2000 with all exhibits and other documents in connection therewith as such attorneys-in-fact, or either one of them, may deem necessary or desirable; and to do and perform each and every act and thing necessary or desirable to be done in and about the premises as fully to all intents and purposes as such officers and directors could do themselves. EX-27 8 w41477ex27.txt FINANCIAL DATA SCHEDULE
5 1,000,000 12-MOS JUL-30-2000 AUG-02-1999 JUL-30-2000 27 0 462 19 571 1,168 3,296 1,652 5,196 3,032 1,218 0 0 20 117 5,196 6,267 6,267 2,908 2,908 89 0 198 1,077 363 714 0 0 0 714 1.68 1.65
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