-----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, U1PDys9t/eDV7RdFi9DIPx4Y7pEvC5lcS2F0k7m7HcF9r0ZXauEa9aR2ABuniY+I ThQ+NnFzSw0OPCp/38skkQ== 0000893220-97-001690.txt : 19971024 0000893220-97-001690.hdr.sgml : 19971024 ACCESSION NUMBER: 0000893220-97-001690 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970803 FILED AS OF DATE: 19971023 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMPBELL SOUP CO CENTRAL INDEX KEY: 0000016732 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [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: 97699618 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 FORM 10-K CAMPBELL SOUP COMPANY 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 AUGUST 3, 1997 1-3822 CAMPBELL SOUP COMPANY NEW JERSEY 21-0419870 STATE OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. CAMPBELL PLACE CAMDEN, NEW JERSEY 08103-1799 PRINCIPAL EXECUTIVE OFFICES TELEPHONE NUMBER: (609) 342-4800 -------------------- 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 22, 1997, THE AGGREGATE MARKET VALUE OF CAPITAL STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $12,857,264,941. THERE WERE 457,530,587 SHARES OF CAPITAL STOCK OUTSTANDING AS OF SEPTEMBER 22, 1997. PORTIONS OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED OCTOBER 10, 1997, FOR THE ANNUAL MEETING OF SHAREOWNERS TO BE HELD ON NOVEMBER 20, 1997, ARE INCORPORATED BY REFERENCE INTO PART III. PORTIONS OF THE ANNUAL REPORT TO SHAREOWNERS FOR THE FISCAL YEAR ENDED AUGUST 3, 1997 ARE INCORPORATED BY REFERENCE INTO PARTS I AND II. ================================================================================ 2 PART I ITEM 1. BUSINESS THE COMPANY Campbell Soup 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. In September 1997, the company announced its intention to spin off certain specialty foods businesses to its shareowners as an independent publicly-held company. The new company will include Swanson frozen foods, Vlasic pickles, and certain European and Argentine businesses, including Swift-Armour Sociedad Anomina Argentina. During 1997, the company acquired Erasco GmbH, Germany's leading soup company. The company also divested its Marie's dressing business in the United States and Beeck-Feinkost, GmbH, a German chilled foods business. As part of its ongoing review of all vertically integrated operations, the company sold its beef ranches in Argentina and is in the process of divesting its poultry operations in the United States. In September 1997, the company agreed to finance a proposal by Arnotts Limited to acquire its outstanding ordinary shares held by minority shareowners. It is expected that this transaction will increase the company's ownership of Arnotts to 100%. The company considers itself to be engaged in a single industry segment, the manufacture of prepared convenience foods. The company operates in three core divisions: Soup and Sauces, Biscuits and Confectionery, and Foodservice. Soup and Sauces includes the worldwide soup businesses, Prego Spaghetti sauce, Franco-American pasta, Pace Mexican foods, Swanson broths, and the V8 beverage business. Biscuits and Confectionery includes the Pepperidge Farm, Godiva, Arnotts Limited, and Delacre businesses. Foodservice consists of products distributed to the food service and home meal replacement markets and includes Campbell's Restaurant Soups, Pace Tabletop picante and Campbell's Specialty Kitchens entrees. Businesses comprising a fourth division consist of Swanson frozen foods, Vlasic pickles, and other specialty foods businesses. See also "Management's Discussion and Analysis of Results of Operations and of Financial Condition" at pages 29 to 34 of the company's 1997 Annual Report to Shareowners for the fiscal year ended August 3, 1997 ("1997 Annual Report"), which is incorporated herein by reference. INGREDIENTS Most ingredients required for the manufacture of the company's food products are purchased from others, except for mushrooms and beef. Swift-Armour Sociedad Anomina Argentina, an Argentine corporation and a wholly-owned subsidiary, has been the principal supplier of cooked beef to the company. -2- 3 In general, satisfactory sources of supply of ingredients are available. 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 heavy purchases of such ingredients during their respective seasons. As a result of factors not within the company's control, the prices of ingredients fluctuate significantly from time to time. 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 business is dependent upon a single customer. Shipments are made promptly by the company after receipt and acceptance of orders. TRADEMARKS AND TECHNOLOGY The company markets its food products globally under a number of significant trademarks. The company considers such trademarks, taken as a whole, to be of material importance to its business and, consequently, aggressively seeks to protect its rights in them. Although the company owns a number of valuable patents, its business is not 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 29 through 34 of the company's 1997 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 $77 million in 1997, $84 million in 1996 and $88 million in 1995. EMPLOYEES At August 3, 1997, there were approximately 37,000 persons employed by the company. -3- 4 FOREIGN OPERATIONS For information with respect to the revenue, operating profitability and identifiable assets attributable to the company's foreign operations, see page 39 of the 1997 Annual Report in the section of the Notes to Consolidated Financial Statements entitled "Geographic Area 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 only industry segment, see page 39 of the 1997 Annual Report in the section of the Notes to Consolidated Financial Statements entitled "Geographic Area Information", which is incorporated herein by reference. RECENT DEVELOPMENTS The information presented on pages 33 and 34 of the 1997 Annual Report in the section entitled, "Management's Discussion and Analysis of Results of Operations and Financial Condition" is incorporated herein by reference. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS From time to time, the company makes oral and written statements that may constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "Act") or by the SEC in its rules, regulations and releases. The company desires to take advantage of the "safe harbor" provisions in the Act for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements made in the 1997 Annual Report, including the President and Chief Executive Officer's Letter to Shareowners (pages 1 and 2), the Chairman's Letter (page 3) and Management's Discussion and Analysis (pages 29 to 34) and other statements made in this Form 10-K and in other filings with the SEC. The company cautions readers that any such forward-looking statements made by or on behalf of the company are based on management's current expectations and beliefs but are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could impact the company's ability to achieve its strategic growth plan goals are: - the impact of strong competitive response to the company's efforts to leverage its brand power with product innovation and new advertising; - the inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance; -4- 5 - the continuation of the company's successful record of integrating acquisitions into its existing operations and the availability of new acquisition and alliance opportunities that build shareowner wealth; - the company's ability to achieve the gains in productivity and improvements in capacity utilization that it anticipates from its cost productivity (including low cost business systems), consolidation and restructuring program; - the company's ability to achieve the forecasted savings related to the restructuring program discussed in Management's Discussion and Analysis; - the company's ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume; - the company's ability to find buyers to purchase underperforming businesses at prices considered appropriate to complete the divestitures in 1998; - the market risks associated with financial instruments which may be subject to unforeseen economic changes, such as currency exchange rates, inflation rates and recessionary trends; - the receipt of a ruling from the Internal Revenue Service that the spinoff of certain non-core specialty foods businesses will be a tax free transaction to United States shareowners, various regulatory approvals and final approval from the company's Board of Directors; - the approval by a majority of Arnotts Limited's shareholders (excluding the company and its subsidiaries) holding 75% of shares voted and approval of the Supreme Court of New South Wales of the proposal to finance the Arnotts Limited purchase of the minority shareholders' ownership interest; 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. ITEM 2. PROPERTIES Manufacturing facilities of the company in the United States include six thermal processing plants located in California, Michigan, North Carolina, Ohio and Texas. Other of the company's convenience foods are also manufactured in the United States at various plant locations. Outside the United States, the company has manufacturing and distribution facilities in Argentina, Australia, Belgium, Brazil, Canada, Chile, England, France, Germany, Hong Kong, Indonesia, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Papua New Guinea, Scotland and other locations. -5- 6 The company's operations also include can-making facilities, mushroom farms and tomato paste, pasta and spice processing facilities. The company also operates retail confectionery shops in the United States, Canada, Europe and Japan; retail bakery thrift stores in the United States; a mail order facility; and other plants and facilities 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 business. ITEM 3. LEGAL PROCEEDINGS In management's opinion, there are no pending claims or litigation, including those proceedings specifically discussed below, the outcome of which would have a material adverse effect on the consolidated financial position or results of operations of the company. As previously reported, in October 1995, the United States of America filed a complaint against Campbell at the request of the Environmental Protection Agency ("EPA") in the United States Court for the Eastern District of California for alleged violations of the Clean Air Act relating to the company's can-making operations at its Sacramento, CA facility. In August 1997, the United States of America, at the request of the EPA, filed a second complaint in the same jurisdiction for alleged violations of the Clean Air Act also relating to the company's can-making operations at its Sacramento, CA facility. Both suits seek monetary and injunctive relief. Campbell is disputing these alleged violations. In addition, as previously reported, Campbell received a complaint from the EPA in December 1996, relating to waste water discharge from the company's can-making operation at its Sacramento, CA facility. Campbell has completed corrective action, and the EPA is proceeding administratively to resolve this matter. The company has also been named as a potentially responsible party in a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund. Although the impact of these proceedings cannot be predicted at this time due to the large number of other potentially responsible parties and the speculative nature of clean-up cost estimates, the ultimate disposition is not expected to have a material effect on the company's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -6- 7 EXECUTIVE OFFICERS OF CAMPBELL The following list of executive officers as of October 2, 1997, is included herein as an item in Part I of this Form 10-K: EXECUTIVE OFFICERS OF CAMPBELL
Date First Elected Name Present Title Age Officer - ---- ------------- --- ------- Dale F. Morrison.................President and Chief Executive Officer. 48 1995 Basil L. Anderson................Executive Vice President 52 1996 and Chief Financial Officer. Robert F. Bernstock..............Executive Vice President. 46 1990 President - Specialty Foods. John M. Coleman..................Senior Vice President - Law and 47 1989 Public Affairs. James R. Kirk....................Senior Vice President. 55 1983 President - Campbell Research and Development and Quality Assurance. Robert Subin.....................Senior Vice President - Global Sourcing 59 1988 and Engineering. F. Martin Thrasher...............Senior Vice President. 46 1992 President - International Grocery Europe/Canada. David L. Albright................Vice President. 50 1992 President - Pepperidge Farm. Ronald E. Elmquist...............Vice President. 51 1994 President - Global Foodservice. Mark M. Leckie...................Vice President. 44 1997 President - U.S. Grocery. Gerald S. Lord...................Vice President - Controller. 51 1993 Edward F. Walsh..................Vice President - Human Resources. 56 1993
-7- 8 Each of the above-named officers has been employed by the company in an executive or managerial capacity for at least five years, except Basil L. Anderson, Ronald E. Elmquist, Mark M. Leckie, Dale F. Morrison and Edward F. Walsh. Basil L. Anderson served as Chief Financial Officer (1992-1996), Worldwide Treasurer (1987-1991) and U.S. Treasurer (1985-1987) of Scott Paper Company prior to joining Campbell in 1996. Ronald E. Elmquist served as Chairman and Chief Executive Officer of White Swan, Inc. for more than five years prior to joining Campbell in 1994. Mark M. Leckie served as Executive Vice President and General Manager of the Post Division (1993-1997), Vice President-General Foods U.S.A. and Assoc. General Manager, Post (1993) and Vice President - Marketing, Grocery Products (1991-1993) of Kraft, Inc. prior to joining Campbell in 1997. Dale F. Morrison served as President, Frito Lay North (1994-1995), Vice President Marketing and Sales, Frito Lay Central Division (1993-1994) and headed PepsiCo, Inc. businesses in the United Kingdom (1990-1993) prior to joining Campbell in 1995. Prior to joining Campbell in 1992, Edward F. Walsh served as Senior Vice President - Administration of Nutri-System, Inc. (1990-1992). 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 1997 meeting of the Board of Directors. PART II ITEM 5. MARKET FOR THE 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 22, 1997, there were 34,655 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 46 of the 1997 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 pages 48 and 49 of the 1997 Annual Report in the section entitled "Eleven-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. -8- 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information presented on pages 29 through 34 of the 1997 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 32 and 33 of the 1997 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 35 through 47 of the 1997 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 and 7, the 1997 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 24 of Campbell's Notice of Annual Meeting and Proxy Statement dated October 10, 1997 (the "1997 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 through 8 under the heading "Executive Officers of Campbell". ITEM 11. EXECUTIVE COMPENSATION The information set forth on pages 10 through 18 of the 1997 Proxy Statement in the section entitled "Compensation of Executive Officers" is incorporated herein by reference. -9- 10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth at pages 5, 6, 23 and 24 of the 1997 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) 1. Financial Statements Consolidated Statements of Earnings for 1997, 1996 and 1995 Consolidated Balance Sheets as of August 3, 1997 and July 28, 1996 Consolidated Statements of Cash Flows for 1997, 1996 and 1995 Consolidated Statements of Shareowners' Equity for 1997, 1996 and 1995 Summary of Significant Accounting Policies 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 35 through 47 of the 1997 Annual Report. 2. Financial Statement Schedules None. -10- 11 3. Exhibits
NO. DESCRIPTION - --- ----------- 3(a) 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(b) Campbell's By-Laws, effective as of July 15, 1997. 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 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(b) Campbell Soup Company 1994 Long-Term Incentive Plan 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(c) Campbell Soup Company Management Worldwide Incentive Plan, as amended on November 17, 1994, was filed with the SEC with Campbell's 1994 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) Personal Choice, A Flexible Reimbursement Program for Campbell Soup Company Executives, effective August 1, 1994, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended July 30, 1995, and is incorporated herein by reference.* 10(f) Supplemental Savings Plan, as amended on May 25, 1995, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended July 30, 1995, and is incorporated herein by reference.*
-11- 12 3. Exhibits (Cont'd.)
NO. DESCRIPTION --- ----------- 10(g) Salary Deferral Plan, effective January 1, 1996, was filed with the SEC with Campbell's Form S-8 on February 6, 1996, and is incorporated herein by reference.* 10(h) Severance Protection Agreement dated May 18, 1990, with John M. Coleman, Senior Vice President - Law and Public Affairs, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended August 2, 1992, and is incorporated herein by reference. Agreements with eleven (11) other Executive Officers are in all material respects the same as that with Mr. John M. Coleman.* 10(i) Supplemental pension arrangement for David W. Johnson, Chairman, was filed with the SEC in Campbell's 1997 Proxy Statement, on page 17 under the heading "Pension Plans", and is incorporated herein by reference.* 13 Pages 29 through 49 of Campbell's 1997 Annual Report to Shareowners for the fiscal year ended August 3, 1997. 13 Pages 29 through 49 of the Campbell's Annual Report to Shareowners for the fiscal year ended August 3, 1997. 21 Subsidiaries 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).
- ------------------ * A management contract, compensatory plan or arrangement required to be filed by Item 14(c) of this Report. (b) Reports on Form 8-K There were no reports on Form 8-K filed by Campbell during the fourth quarter of fiscal 1997. -12- 13 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 22, 1997 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 22, 1997 /s/ Basil L Anderson /s/ Gerald S. Lord -------------------- ------------------ Basil L. Anderson Gerald S. Lord Executive Vice President Vice President - Controller and Chief Financial Officer David W. Johnson Chairman and Director } Dale F. Morrison 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 } By: /s/ John M. Coleman David K. P. Li Director } ------------------------- Philip E. Lippincott Director } John M. Coleman Mary Alice Malone Director } Senior Vice President - Charles H. Mott Director } Law and Public Affairs George M. Sherman Director } Donald M. Stewart Director } George Strawbridge, Jr. Director } Charlotte C. Weber Director }
-13- 14 INDEX OF EXHIBITS
Document - -------- 3(a) 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(b) Campbell's By-Laws, effective as of June 15, 1997. 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 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(b) Campbell Soup Company 1994 Long-Term Incentive Plan 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(c) Campbell Soup Company Management Worldwide Incentive Plan, as amended on November 17, 1994, was filed with the SEC with Campbell's 1994 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) Personal Choice, A Financial Reimbursement Program for Campbell Soup Company Executives, effective August 1, 1994, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended July 30, 1995, and is incorporated herein by reference.
I-1 15 INDEX OF EXHIBITS (cont'd.)
Document - -------- 10(f) Supplemental Savings Plan, as amended on May 25, 1995 was filed with the SEC with Campbell's Form 10-K for the fiscal year ended July 30, 1995 and is incorporated herein by reference. 10(g) Salary Deferral Plan, effective January 1, 1996, was filed with the SEC with Campbell's Form S-8 on February 6, 1996, and is incorporated herein by reference. 10(h) Severance Protection Agreement dated May 18, 1990, with John M. Coleman, Senior Vice President - Law and Public Affairs, was filed with the SEC with Campbell's Form 10-K for the fiscal year ended August 2, 1992, and is incorporated herein by reference. Agreements with eleven (11) other Executive Officers are in all material respects the same as that with Mr. John M. Coleman. 10(i) Supplemental pension arrangement for David W. Johnson, Chairman, was filed with the SEC in Campbell's 1997 Proxy Statement, on page 17 under the heading "Pension Plan", and is incorporated herein by reference. 13 Pages 29 through 49 of the company's Annual Report to Shareowners for the fiscal year ended August 3, 1997. 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).
I-2 EX-3.(B) 2 CAMPBELL SOUP COMPANY BY-LAWS 1 EXHIBIT 3(b) CAMPBELL SOUP COMPANY ---------------------- BY-LAWS ---------------------- EFFECTIVE JULY 15, 1997 2 CAMPBELL SOUP COMPANY BY-LAWS ---------------------- ARTICLE I. Stockholders Section 1. The annual meeting of the stockholders of the Corporation shall be held at the principal office of the Corporation in New Jersey, or at such other place, within or without New Jersey, as may from time to time be designated by the Board of Directors and stated in the notice of the meeting, on the third Thursday in November in each year (or if said day be a legal holiday, then on the next succeeding day, not earlier than the following Tuesday, not a legal holiday), at such time as may be fixed by the Board of Directors, for the purpose of electing directors of the Corporation, and for the transaction of such other business as may properly be brought before the meeting. Section 2. Special meetings of the stockholders shall be held at the principal office of the Corporation in New Jersey, or at such other place, within or without New Jersey, as may from time to time be designated by the Board of Directors and stated in the notice of the meeting, upon the call of the Chairman of the Board or of the President, or upon the call of a majority of the members of the Board of Directors, and shall be called upon the written request of stockholders of record holding a majority of the capital stock of the Corporation issued and outstanding and entitled to vote at such meeting. Section 3. Notice of the time and place of every meeting of stockholders shall be delivered personally or mailed at least ten but not more than sixty calendar days before the meeting to each stockholder of record entitled to vote at the meeting. Section 4. The holders of record of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders. If there be no such quorum present, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without notice other than announcement at the meeting, until such quorum shall have been obtained, when any business may be transacted which might have been transacted at the meeting as first convened, had there been a quorum. Once a quorum is established, the stockholders present in person or by proxy may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 3 Section 5. The Board of Directors shall in advance of each meeting of stockholders appoint one or more inspectors of election, to act unless the performance of the inspector's function shall be unanimously waived by the stockholders present in person or represented by proxy at such meeting. Each inspector, before entering upon the discharge of his duties, shall first take and subscribe an oath or affirmation to execute the duties of inspector as prescribed by law at such meeting with strict impartiality and according to the best of his ability. The inspector or inspectors shall take charge of the polls and shall make a certificate of the results of the vote taken. No director or candidate for the office of director shall be appointed as such inspector. Section 6. All meetings of the stockholders shall be presided over by the Chairman of the Board, or if he shall not be present, by the Vice Chairman of the Board. If neither the Chairman of the Board nor the Vice Chairman of the Board shall be present, such meeting shall be presided over by the President. If none of the Chairman of the Board, the Vice Chairman of the Board and the President shall be present, such meeting shall be presided over by a Vice President, or if none shall be present, then by a Chairman to be elected by the holders of a majority of the shares present or represented at the meeting. The Secretary of the Corporation, or if he is not present, an Assistant Secretary of the Corporation, if present, shall act as secretary of the meeting. If neither the Secretary nor an Assistant Secretary is present, then the Chairman shall appoint a Secretary of the meeting. Section 7. The Board of Directors shall fix in advance a date, not exceeding sixty nor less than ten calendar days preceding the date of any meeting of the stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of stock, and in such case only stockholders of record on the date so fixed shall be entitled to such notice of and to vote at such meeting, or to receive payment of such dividend, or allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. 2 4 ARTICLE II. Directors Section 1. The business and property of the Corporation shall be managed and controlled by a board of sixteen directors. This number may be changed from time to time by amendment of these By-Laws, but the term of office of no director shall be shortened after his or her election by reduction in the number of directors. Upon election each director shall be the holder of at least two hundred shares of the Corporation's capital stock. Within one year of election, each director shall be the holder of at least two thousand shares of capital stock and within three years of election shall be the holder of at least six thousand shares of capital stock. In the event the number of shares of capital stock is increased at any time after January 28, 1993, by a stock split, stock dividend, or by any other extraordinary distribution of shares, the above share ownership requirements shall be proportionately adjusted. The director, upon ceasing to hold the required number of shares, shall cease to be a director. The directors shall hold office until the next annual meeting of the stockholders and until their successors are elected and shall have qualified. Section 2. Regular meetings of the Board of Directors shall be held at such times and at such places as may from time to time be fixed by resolution of the Board of Directors. Special meetings of the Board of Directors may be held at any time upon call of the Chairman of the Board or of the Vice Chairman of the Board or of the President or of three directors. Oral, telegraphic or written notice of the time and place of a special meeting shall be duly served on, or given or sent or mailed to, each director not less than two calendar days before the meeting. An organizational meeting of the Board of Directors shall be held, of which no notice shall be necessary, as soon as convenient after the annual meeting of the stockholders. Notice need not be given of regular meetings of the Board of Directors held at the times fixed by resolution of the Board of Directors. Meetings may be held at any time without notice if all of the directors are present or if those not present waive notice of the meeting in writing. Section 3. Six members of the Board of Directors shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall have been obtained, when any business may be transacted which might have been transacted at the meeting as first convened, had there been a quorum. 3 5 Section 4. Any vacancy occurring among the directors may be filled by the affirmative vote of a majority of the remaining members of the Board of Directors at the time in office; provided that in case of an increase in the number of directors pursuant to an amendment to these By-Laws made by the stockholders, the stockholders may fill the vacancy or vacancies so created at the meeting at which such amendment is effected or may authorize the Board of Directors to fill such vacancy or vacancies. Section 5. The Board of Directors, by an affirmative vote of a majority of the members of the Board of Directors at the time in office, may appoint an Executive Committee to consist of such directors as the Board of Directors may from time to time determine. The Executive Committee shall have and may exercise, when the Board of Directors is not in session, all of the powers vested in the Board of Directors, except as otherwise provided by law. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Executive Committee. The Executive Committee may make rules for the conduct of its business and may appoint such committees and assistants as it shall from time to time deem necessary, unless the Board of Directors shall otherwise provide. A majority of the members of the Executive Committee at the time in office shall constitute a quorum for the transaction of business. A record shall be kept of all proceedings of the Executive Committee which shall be submitted to the Board of Directors at or before the next succeeding meeting of the Board of Directors. Section 6. The Board of Directors may appoint one or more other committees, to consist of such number of the directors and to have such powers as the Board of Directors may from time to time determine. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, any such committee. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. Section 7. In addition to reimbursement of reasonable expenses incurred in attending meetings or otherwise in connection with his or her attention to the affairs of the Corporation, each director as such, as Chairman or Vice Chairman of the Board and as a member of the Executive Committee or of any other committee of the Board of Directors, shall be entitled to receive such remuneration as may be fixed from time to time by the Board of Directors, in the form either of fees for attendance at meetings of the Board of Directors and committees thereof or annual retainers, or both; but no director who receives a salary or other remuneration as an employee of the Corporation or any subsidiary thereof shall receive any additional remuneration as a director or member of any committee of the Board of Directors. 4 6 ARTICLE III. Officers Section 1. The Board of Directors, at its organizational meeting or as soon as may be after the election of directors held in each year, shall elect one of its number Chairman of the Board and one of its number President, and shall also elect a Secretary and a Treasurer, and from time to time may elect or appoint one of its number Vice Chairman of the Board, one or more Vice Presidents, a Controller, and such Assistant Secretaries, Assistant Treasurers and other officers, agents and employees as it may deem proper. More than one office may be held by the same person. Section 2. The term of office of all officers shall be until the next organizational meeting of the Board of Directors or until their respective successors are elected and have qualified, but any officer may be removed from office at any time by the affirmative vote of a majority of the members of the Board of Directors at the time in office. Any other employee of the Corporation, whether appointed by the Board of Directors or otherwise, may be removed at any time by the Board of Directors or by any committee or officer or employee upon whom such power of removal may be conferred by the By-Laws or by the Board of Directors. The Board of Directors shall have power to fill for the unexpired term any vacancy which shall occur in any office by reason of death, resignation, removal or otherwise. Section 3. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors and shall perform such other duties as shall from time to time be prescribed by the Board of Directors. The Vice Chairman of the Board shall in the absence of the Chairman of the Board preside at all meetings of the stockholders and of the Board of Directors and shall perform such other duties as shall from time to time be prescribed by the Board of Directors or the Chairman of the Board. The President shall be the Chief Executive Officer of the Corporation and shall perform such duties as are usually performed by that officer; he shall, in the absence of the Chairman and Vice Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors; and shall perform such other duties as shall from time to time be prescribed by the Board of Directors. The other officers of the Corporation shall have such powers and shall perform such duties as generally pertain to their offices respectively, as well as such powers and duties as shall from time to time be conferred by the Board of Directors. 5 7 Article IV. Indemnification of Directors and Others Section 1. The Corporation shall indemnify to the full extent from time to time permitted by law any present, former or future director, officer, or employee ("Corporate Agent") made, or threatened to be made, a party to, or a witness or other participant in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative, legislative, investigative, or of any other kind, including by or in the right of the Corporation ("Proceeding"), by reason of the fact that such person is or was a Corporate Agent of the Corporation or any subsidiary of the Corporation or, while serving as a Corporate Agent of the Corporation or any subsidiary of the Corporation, serves or served another enterprise (including, without limitation, any sole proprietorship, association, corporation, partnership, joint venture or trust), whether or not for profit, at the request of the Corporation as a director, officer, employee or agent thereof (including service with respect to any employee benefit plan of the Corporation or any subsidiary of the Corporation), against expenses (including attorneys' fees), judgments, fines, penalties, excise taxes and amounts paid in settlement, actually and reasonably incurred by such person in connection with such Proceeding or any appeal therein. No indemnification pursuant to this Article IV shall be required with respect to any settlement or other nonadjudicated disposition of any threatened or pending Proceeding unless the Corporation has given its prior consent to such settlement or other disposition. Section 2. Expenses incurred in connection with a Proceeding shall be paid by the Corporation for any Corporate Agent of the Corporation in advance of the final disposition of such Proceeding promptly upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation. Such an undertaking shall not, however, be required of a nonparty witness. Section 3. The foregoing indemnification and advancement of expenses shall not be deemed exclusive of any other rights to which any person indemnified may be entitled. Section 4. The rights provided to any person by this Article IV shall be enforceable against the Corporation by such person, who shall be presumed to have relied upon it in serving or continuing to serve as a Corporate Agent. No elimination of or amendment to this Article IV shall deprive any person of rights hereunder arising out of alleged or actual occurrences, acts or failures to act occurring prior to such elimination or amendment. The rights provided to any person by this Article IV shall inure to the benefit of such person's legal representative and shall be applicable to Proceedings commenced or continuing after the adoption of this Article IV, whether arising from acts or omissions occurring before or after such adoption. 6 8 Section 5. The Corporation's Board of Directors may from time to time delegate (i) to a Committee of the Board of Directors of the Corporation or to independent legal counsel the authority to determine whether a Director or officer of the Corporation, and (ii) to one or more officers of the Corporation the authority to determine whether an employee of the Corporation or any subsidiary, other than a Director or officer of the Corporation, is entitled to indemnification or advancement of expenses pursuant to, and in accordance with, applicable law and this Article IV, subject to such conditions and limitations as the Board of Directors may prescribe. ARTICLE V. Fiscal Year The fiscal year shall begin in each calendar year on the Monday following the Sunday which is nearest to July 31, and shall end on the Sunday which is nearest to July 31 of the following year. ARTICLE VI. Corporate Seal The Board of Directors shall provide a suitable seal, bearing the name of the Corporation, which seal shall be in the charge of the Secretary; provided that the use of a facsimile of such seal is hereby authorized. ARTICLE VII. Amendment The Board of Directors shall have the power to make, amend and repeal the By-Laws of the Corporation by a vote of a majority of the members of the Board of Directors at the time in office at any regular or special meeting of the Board of Directors. The stockholders, by a majority of the votes cast at a meeting of the stockholders, may adopt, alter, amend or repeal the By-Laws, whether made by the Board of Directors or otherwise. 7 EX-13 3 MANAGEMENT'S DISCUSSION AND ANALYSIS 1 EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS OVERVIEW -- Campbell achieved record net sales for the year ended August 3, 1997. Net earnings and earnings per share declined 11% and 6%, respectively, due to the effects of the special charge recorded in the first quarter. Before the special charge, net earnings increased 9% and earnings per share increased 15%. 1997 was a 53-week year compared to 52 weeks in 1996 and 1995. All share and per-share data reflect the two-for-one stock split in February 1997. SALES -- Sales in 1997 increased 4% to $7.96 billion from $7.68 billion last year. The growth was due to a 3% increase from volume and new products, 2% from higher selling prices, 2% from acquisitions, offset by a 3% decline due to divestitures. In 1996, sales increased 6% as follows: 1% volume, 3% higher selling prices, 3% acquisitions, offset by a 1% decline due to divestitures. Overall, net sales from ongoing businesses increased 7% in 1997 and 1996. An analysis of net sales by division follows:
% Change 1997 1996 1995 1997/ 1996/ (millions) 1996 1995 - -------------------------------------------------------------------------------------------- Soup and Sauces $ 4,156 $ 3,742 $ 3,415 11 10 Biscuits and Confectionery 1,546 1,459 1,348 6 8 Foodservice 459 418 345 10 21 Other 1,904 2,149 2,204 (11) (3) Interdivision (101) (90) (62) -- -- - -------------------------------------------------------------------------------------------- $ 7,964 $ 7,678 $ 7,250 4 6 ============================================================================================
In 1997, Soup and Sauces sales were up significantly due to continued strong worldwide wet soup unit volume growth. This was especially evident in the U.S. which posted its third straight year of volume growth led by Campbell's condensed Chicken Noodle, Tomato and Cream of Mushroom soups, the new Joseph A. Campbell premium soups in glass jars and Swanson broths. International volume and market share gains were achieved in all countries, and in Germany, we acquired Erasco, the leading branded soup company. New products such as V8 Splash and Franco-American Superiore all-family pastas also contributed to the sales growth. In 1996, wet soup volume increases were driven by Campbell's condensed Chicken Noodle soup which was reformulated with 33% more meat, Chunky ready-to-serve soups and Swanson broths. Australia and Canada also experienced strong volume growth. Pace Foods, completing its first full fiscal year, and strong demand for Prego spaghetti sauce also contributed to the sales increase. Biscuits and Confectionery posted a 6% increase in sales compared to 1996. This increase was led by Pepperidge Farm Goldfish crackers, Milano cookies and Swirl breads. Godiva contributed double-digit sales growth through strong retail sales in the U.S. and continued expansion in Japan. Arnotts Limited sales were flat compared to the prior year due to an extortion incident in Australia that resulted in a product recall in the second half of 1997 and a 56-week year in 1996 which resulted from aligning Arnotts' and Campbell's fiscal year reporting. In 1996, Pepperidge Farm Goldfish crackers and frozen garlic breads and Godiva delivered double-digit volume growth. Foodservice sales increase in 1997 was driven by strong soup sales in the U.S. food service channels and new frozen restaurant soups, Prego frozen entrees and Pace Mexican sauces, as well as solid gains in Canada. In 1996, Foodservice delivered solid volume gains led by chicken pot pies for the away-from-home market. During 1997 the company continued its portfolio reconfiguration and divested several non-strategic businesses, including Marie's salad dressings and Beeck-Feinkost chilled German salads. These divestitures and the impact of the 1996 divestitures led to the decline in sales in Other. In 1996, sales in Other were impacted by declining beef sales in Europe and divestitures, including Mrs. Paul's frozen seafood business and Groko B.V., a Dutch frozen vegetable processor. GROSS MARGIN -- Gross margin, defined as net sales less cost of products sold, increased by $344 million in 1997 and $320 million in 1996 compared to prior years. As a percent of sales, gross margin was 45.9% in 1997, 43.2% and 41.3% in 1996 and 1995, respectively. The 2.7 point improvement in 1997 is the largest gain in the last five years. The increases in 1997 and 1996 were 29 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION due principally to continued productivity gains in manufacturing facilities and higher selling prices. MARKETING AND SELLING EXPENSES -- Marketing and selling expenses as a percent of sales were 20.5% in 1997, 19.5% and 18.9% in 1996 and 1995, respectively. Advertising expense increased 17% versus 1996 driven by a 30% increase in worldwide wet soup advertising behind new products and innovations such as Joseph A. Campbell premium soups in glass jars and Swanson broths in resealable containers. Double-digit increases in advertising also drove strong volume gains for Pepperidge Farm Goldfish crackers and Milano cookies in 1997. In 1996, advertising expense increased 15% as a result of heavy advertising for Pace Foods, Pepperidge Farm Goldfish and Chunky ready-to-serve soups. GENERAL AND ADMINISTRATIVE EXPENSES -- Administrative expenses declined as a percent of sales to 4.0% from 4.5% in 1996. The decrease is attributable to streamlining of operations associated with the restructuring program recorded in the first quarter and favorable employee benefits experience. Administrative expenses as a percent of sales were unchanged for 1996 versus 1995. Research and development declined 8.3% primarily due to headcount reductions associated with the restructuring program. In 1996, research and development decreased 4.5% due to a reduction of new product development activities from the prior year. Other expenses increased significantly in 1997 due to the effect of the appreciation in Campbell's share price on the company's long-term incentive plan obligations. In 1996, the increase was due to higher amortization of intangibles primarily associated with the Pace Foods acquisition and effects of the increase in Campbell's share price on the long-term incentive compensation plan obligations. The 1996 increase is net of a gain on the sale of the Mrs. Paul's frozen seafood business which was largely offset by the cost of re-engineering the frozen food manufacturing facilities and selling organization. OPERATING EARNINGS -- Division earnings in 1997 were down 3% due to the first quarter pre-tax restructuring charge of $216 million compared with a 14% increase last year. Before the special charge, operating earnings increased 13% in 1997. An analysis of operating earnings by division follows:
% Change 1997 1996 1995 1997/ 1996/ (millions) 1996 1995 - -------------------------------------------------------------------------------- Soup and Sauces $ 1,012 $ 978 $ 863 3 13 Biscuits and Confectionery 154 183 164 (16) 12 Foodservice 62 55 40 11 38 Other 99 150 135 (34) 11 - -------------------------------------------------------------------------------- 1,327 1,366 1,202 (3) 14 - -------------------------------------------------------------------------------- Corporate (61) (49) (55) - -------------------------------------------------------------------------------- $ 1,266 $ 1,317 $ 1,147 ================================================================================
Contribution to earnings by division includes the effect of a first quarter 1997 pre-tax restructuring charge of $216 million as follows: Soup and Sauces $118 million, Biscuits and Confectionery $53 million and Other $45 million. Soup and Sauces earnings, excluding the special charge, were up 16% in 1997 led by sales volume increases in Campbell's condensed soup icons: Chicken Noodle, Tomato and Cream of Mushroom. New product introductions, the Erasco acquisition and continued benefits from manufacturing efficiencies also contributed to the earnings growth. In 1996, Pace Foods, completing its first full fiscal year, and the Homepride acquisition in the United Kingdom contributed significantly to the earnings increase. Biscuits and Confectionery earnings, excluding the special charge, increased 13% led by double-digit growth at Pepperidge Farm and Godiva. Pepperidge Farm's Goldfish crackers continued their outstanding performance and Godiva posted record earnings as a result of its strong U.S. and Japanese retail businesses. In 1996, Goldfish and Godiva led the way to 12% earnings growth. Foodservice earnings in 1997 increased 11%. This increase was attributable to strong soup sales in traditional U.S. food service channels and Pace Mexican sauces. In 1996, earnings increases were driven by volume gains from chicken pot pies for the away-from-home market. Earnings in Other, excluding the special charge, declined 4% as a result of the company's continued efforts to reconfigure its business portfolio and the divestiture of several non-strategic businesses. In 1996, earnings were up 11% led by strong volume gains in Vlasic pickles. 30 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NON-OPERATING ITEMS -- Interest expense in 1997 increased 32.5% primarily due to financing costs associated with the company's share repurchase program. In 1996, interest expense increased 9.6% due principally to financing costs associated with acquisitions and share repurchases. The effective tax rate for 1997 was 35.6% compared to 33% last year. Before the special charge, the effective tax rate was 34%. In 1996, the effective tax rate remained unchanged at 33% compared to 1995. SPECIAL CHARGE -- On September 4, 1996 the company's Board of Directors approved a special charge of $216 million ($160 million after-tax or $.34 per share) to cover the costs of a restructuring program. The restructuring program is designed to improve operational efficiency by reconfiguring or closing various plants, reducing administrative and operational staff functions and divesting non-strategic, under-performing businesses with sales of approximately $275 million. The program includes the elimination of approximately 2,100 administrative and operational positions from the company's worldwide workforce. The restructuring charge includes approximately $113 million in cash charges primarily related to severance and employee benefits, substantially all of which is expected to be paid by the end of the first quarter of 1998. The balance of the charge relates to non-cash charges for estimated losses on the disposition of assets and business divestitures. The restructuring program is expected to generate approximately $200 million in savings in 1997 and 1998 from reductions in employee salaries and benefits, plant overhead, depreciation and amortization. The expected cash outflows will not adversely affect the company's liquidity. See Note 3 of the Consolidated Financial Statements for the components of the restructuring liability and the related activity. LIQUIDITY AND CAPITAL RESOURCES Strong cash flows from operations, a strong balance sheet and interest coverage demonstrate the company's continued superior financial strength. Cash flows from operations provided $1.2 billion in 1997, consistent with 1996. Over the last three years, operating cash flows totaled approximately $3.6 billion. This strong cash generating capability provides the company substantial financial flexibility in meeting operating and investing objectives and in executing the company's ongoing share repurchase program. Capital expenditures were $331 million in 1997, a decline of $85 million from the prior year. The decrease is primarily attributable to the completion of the Arnotts Huntingwood manufacturing facility. Capital expenditures are projected to be $375 million in 1998. Acquisitions in 1997 totaled $228 million and included the Erasco Group of companies, Germany's leading soup brand. In addition, Arnotts acquired the assets of Kettle Chip Company, a Sydney, Australia based potato chip concern. These acquisitions were funded through cash generated from operations and short and long-term borrowings. Long-term borrowings increased $409 million due to the issuance of $300 million 6.9% fixed rate ten-year notes due in 2007, $150 million 5.76% fixed rate three-year notes due in 2000 and $74 million 5.75% fixed rate three-year notes due in 2001. Also, $100 million of 9% notes due in 1998 were reclassified to short-term borrowings. The proceeds of these notes were used to finance the company's share repurchase program and to repay short-term borrowings. Short-term borrowings increased $641 million primarily to finance the company's share repurchase program. The company has ample financial resources, including unused lines of credit totaling approximately $3.1 billion and has ready access to financial markets around the world. The pre-tax interest coverage ratio before the special charge was 8.4 for 1997 compared to 9.7 for 1996. The decline was attributable to the increase in borrowings associated with the company's share repurchase program. In 1997, the company filed a shelf registration with the Securities and Exchange Commission for the issuance of debt securities not to exceed $1 billion. As of August 3, 1997, $700 million remained unissued. Dividend payments increased $12 million or 4% to $350 million in 1997, compared to $338 million in 1996. Dividends declared in 1997 totaled $.750 per share, up from $.673 per share in 1996. The 1997 fourth quarter rate was $.1925. 31 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Capital stock repurchases totaled 40 million shares at a cost of approximately $1.7 billion during 1997, compared to repurchases of 8 million shares at a cost of $244 million in the same period for 1996. In fiscal 1997, the company's Board of Directors approved a three-year $2.5 billion share repurchase program. The program included a "Dutch Auction" share buyback which resulted in the repurchase of 27 million shares at a cost of approximately $1.1 billion. The "Dutch Auction" was completed in the first quarter. Total assets declined 3% to $6.5 billion primarily due to asset writedowns associated with the restructuring charge, business divestitures and the impact of foreign currency translation on the company's operations in Europe and Australia. Total liabilities increased $1.1 billion or 30% primarily due to increased borrowings and the restructuring charge recorded in the first quarter of 1997. INFLATION Inflation during recent years has not had a significant effect on the company. The company mitigates the effects of inflation by aggressively pursuing an ongoing cost-improvement effort which includes capital investments in more efficient plant and equipment and low cost business systems. MARKET RISK SENSITIVITY The company uses financial instruments, including fixed and variable rate debt, as well as swap, forward and option contracts to finance its operations and to hedge interest rate, currency and certain equity-linked compensation liability exposures. The swap, forward and option contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The company does not enter into contracts for speculative purposes, nor is it a party to any leveraged instrument. The information below summarizes the company's market risks associated with debt obligations and other significant financial instruments outstanding as of August 3, 1997. Fair values included herein have been determined based on quoted market prices. The information presented below should be read in conjunction with Note 15 and Note 17 to the Consolidated Financial Statements. For debt obligations, the table presents principal cash flows and related interest rates by fiscal year of maturity. Capital lease obligations and miscellaneous notes payable which mature in 1998 are not included in the table. Variable interest rates disclosed represent the weighted average rates of the portfolio at the period end. For interest rate swaps, the table presents notional amounts and related interest rates by fiscal year of maturity. For these swaps, the variable rates presented are the average forward rates for the term of each contract. EXPECTED FISCAL YEAR OF MATURITY (US$ equivalents in millions)
Debt 1998 1999 2000 2001 There-after Total Fair Value - --------------------------------------------------------------------------------------------------------------------------- Fixed rate $ 100 $ 200 $ 153 $ 174* $ 606** $ 1,233 $ 1,287 Average interest rate 9.00% 5.50% 5.76% 7.42% 7.34% - --------------------------------------------------------------------------------------------------------------------------- Variable rate $ 1,382 $ 1,382 $ 1,382 Average interest rate 5.57% 5.57% - --------------------------------------------------------------------------------------------------------------------------- Interest Rate Swaps: Variable to fixed $ 100(A) $ 100 $ (5) Average pay rate 8.24% 8.24% Average receive rate 5.96% 5.96% - --------------------------------------------------------------------------------------------------------------------------- Fixed to variable $ 150(B) $ 150 $ 1 Average pay rate 5.24% 5.24% Average receive rate 5.76% 5.76% - ---------------------------------------------------------------------------------------------------------------------------
* $50 callable in 1998 (A) Hedges commercial paper borrowings ** $100 callable in 2001 (B) Hedges 5.76% notes due 2000 32 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The company also has swap agreements with financial institutions which cover both interest rate and foreign currency exposures. The notional amounts of these swaps, which expire in 1998, were $210 million and the cost to settle the swaps was $2 million at August 3, 1997. The table below provides information as of August 3, 1997 about the company's forward currency exchange contracts related to debt management and certain sale and purchase commitments denominated in foreign currencies. The table presents the contractual amount and the related weighted average contract exchange rates for significant currency contracts outstanding as of August 3, 1997. All contracts expire in 1998. FORWARD EXCHANGE CONTRACTS
Average Contract Contractual (US$ equivalents in millions) Amount Exchange Rate - ---------------------------------------------------------- Receive BEF/Pay DM $50 20.65 Receive BEF/Pay US$ $40 35.68 Receive DM/Pay US$ $37 1.83 Receive US$/Pay CAD $26 1.38 Receive GBP/Pay US$ $21 1.65 Receive US$/Pay A$ $15 .74 Receive US$/Pay JPY $15 114.11 - ----------------------------------------------------------
The company has an additional $59 million in a number of smaller contracts to purchase or sell various other currencies, principally European, as of August 3, 1997. The aggregate cost to settle all contracts, which is not material to any individual contract, was $5 million as of August 3, 1997. Total forward exchange contracts outstanding as of July 28, 1996 were $133 million. The company has swap contracts outstanding as of August 3, 1997 which hedge a portion of exposures relating to certain employee compensation liabilities linked to the total return of 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 which includes the return on the Standard & Poor's 500 Index is $16 million. The average forward interest rate applicable to this contract is 5.95% at August 3, 1997. The notional value of the contracts which include the total return on company Capital stock is $58 million. The average forward interest rate applicable to these contracts is 6.08% at August 3, 1997. The contracts expire in 1998. The net gain recognized as an adjustment to the carrying value at August 3, 1997 was $9 million. The company's utilization of financial instruments in managing market risk exposures described above is consistent with the prior year other than the swap contracts related to equity-linked employee compensation expenses. RECENT DEVELOPMENTS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128) -- "Earnings per Share." The standard requires new earnings per share calculations and dual presentation of "basic" and "diluted" earnings per share. The company will adopt SFAS 128 in the second quarter of 1998. Basic earnings per share will approximate earnings per share as currently reported and diluted earnings per share will give effect to the issuance of stock options. The adoption of SFAS 128 is not expected to have a material effect on the company's earnings per share. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." This statement establishes standards for the reporting and display of comprehensive income in a full set of general purpose financial statements. The provisions of the statement are effective for fiscal years beginning after December 15, 1997. In September 1997, the company announced its intention to spin off certain specialty foods businesses to its shareowners as an independent publicly-held company. The new company will include Swanson frozen foods, Vlasic pickles, and certain European and Argentine businesses. The company expects to complete the spinoff in 1998, subject to various regulatory approvals, the receipt of a ruling from the Internal Revenue Service that the spinoff will be a tax-free transaction to shareowners, and final approval from the company's Board of Directors. Also in September 1997, the company agreed to finance a proposal by Arnotts Limited to acquire its outstanding ordinary shares held by minority shareholders. It is expected that this transaction will 33 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION increase the company's ownership of Arnotts to 100%. The estimated financing is approximately $300 million and Arnotts expects to complete the transaction in the second quarter of 1998. FORWARD-LOOKING INFORMATION From time to time, in written reports, including the 1997 Annual Report, and oral statements, we discuss our expectations regarding future performance of the company. These "forward-looking statements" are based on currently available competitive, financial and economic data and our operating plans. They are also inherently uncertain, and investors must recognize that actual results could differ materially from those expressed or implied in the forward-looking statements. In addition, as discussed in Management's Discussion and Analysis: - - The forecasted savings related to the company's restructuring program assumes that facilities are vacated and employees are terminated within the time frames used to develop the estimates. - - Our ability to complete the divestiture of under-performing businesses in 1998 depends on our ability to find buyers to purchase these businesses at prices we consider appropriate. - - The market risks associated with financial instruments may vary due to the impact of unforeseen economic changes, such as currency exchange rates, inflation rates and recessionary trends. - - The spinoff of certain specialty foods businesses is subject to receipt of a ruling from the Internal Revenue Service that the spinoff will be a tax-free transaction to shareowners, various regulatory approvals and final approval from the company's Board of Directors. - - The proposal to finance Arnotts Limited's purchase of the minority shareholders' ownership interest is subject to the company's receipt of Australia's Foreign Investment Review Board approval, approval by a majority of Arnotts' shareholders (excluding the company and its subsidiaries) holding 75% of shares voted and approval of the Supreme Court of New South Wales. 34 7 CONSOLIDATED STATEMENTS OF EARNINGS (millions, except per share amounts)
1997 1996 1995 53 weeks 52 weeks 52 weeks - -------------------------------------------------------------------------------- NET SALES $7,964 $7,678 $7,250 - -------------------------------------------------------------------------------- Costs and expenses Cost of products sold 4,305 4,363 4,255 Marketing and selling expenses 1,636 1,499 1,371 Administrative expenses 324 343 326 Research and development expenses 77 84 88 Other expense (Note 4) 140 72 63 Restructuring charge (Note 3) 216 -- -- - -------------------------------------------------------------------------------- Total costs and expenses 6,698 6,361 6,103 - -------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES 1,266 1,317 1,147 Interest expense (Note 5) 167 126 115 Interest income 8 6 10 - -------------------------------------------------------------------------------- Earnings before taxes 1,107 1,197 1,042 Taxes on earnings (Note 8) 394 395 344 - -------------------------------------------------------------------------------- NET EARNINGS $ 713 $ 802 $ 698 ================================================================================ EARNINGS PER SHARE (NOTE 18) $ 1.51 $ 1.61 $ 1.40 ================================================================================ WEIGHTED AVERAGE SHARES OUTSTANDING 472 498 498 ================================================================================
The accompanying Summary of Significant Accounting Policies and Notes on pages 39 to 46 are an integral part of the financial statements. 35 8 CONSOLIDATED BALANCE SHEETS (millions)
AUGUST 3, 1997 July 28,1996 - -------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 26 $ 34 Accounts receivable (Note 9) 633 618 Inventories (Note 10) 762 739 Other current assets (Note 11) 162 227 - -------------------------------------------------------------------------------- Total current assets 1,583 1,618 - -------------------------------------------------------------------------------- Plant assets, net of depreciation (Note 12) 2,560 2,681 Intangible assets, net of amortization (Note 13) 1,793 1,808 Other assets (Note 14) 523 525 - -------------------------------------------------------------------------------- Total assets $ 6,459 $ 6,632 ================================================================================ CURRENT LIABILITIES Notes payable (Note 15) $ 1,506 $ 865 Payable to suppliers and others 608 568 Accrued liabilities 642 593 Dividend payable 88 86 Accrued income taxes 137 117 - -------------------------------------------------------------------------------- Total current liabilities 2,981 2,229 - -------------------------------------------------------------------------------- LONG-TERM DEBT (NOTE 15) 1,153 744 NONPENSION POSTRETIREMENT BENEFITS (NOTE 7) 442 452 OTHER LIABILITIES (NOTE 16) 463 465 - -------------------------------------------------------------------------------- Total liabilities 5,039 3,890 - -------------------------------------------------------------------------------- SHAREOWNERS' EQUITY (NOTE 18) Preferred stock; authorized 40 shares; none issued -- -- Capital stock, $.0375 par value; authorized 560 shares; issued 542 shares 20 20 Capital surplus 338 228 Earnings retained in the business 3,571 3,211 Capital stock in treasury, 84 shares in 1997 and 48 shares in 1996, at cost (2,459) (779) Cumulative translation adjustments (50) 62 - -------------------------------------------------------------------------------- Total shareowners' equity 1,420 2,742 - -------------------------------------------------------------------------------- Total liabilities and shareowners' equity $ 6,459 $ 6,632 ================================================================================
The accompanying Summary of Significant Accounting Policies and Notes on pages 39 to 46 are an integral part of the financial statements. 36 9 CONSOLIDATED STATEMENTS OF CASH FLOWS (millions)
1997 1996 1995 - ----------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net earnings $ 713 $ 802 $ 698 Non-cash charges to net earnings Restructuring charge 216 -- -- Depreciation and amortization 328 326 294 Deferred income taxes (24) 32 40 Other, net 96 58 48 Changes in working capital Accounts receivable (26) (1) (18) Inventories (31) (27) 63 Other current assets and liabilities (85) 23 60 - ----------------------------------------------------------------------------------------- Net cash provided by operating activities 1,187 1,213 1,185 - ----------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Purchases of plant assets (331) (416) (391) Sales of plant assets 49 33 21 Businesses acquired (228) (186) (1,255) Sales of businesses 207 80 12 Other, net 5 (120) (45) - ----------------------------------------------------------------------------------------- Net cash used in investing activities (298) (609) (1,658) - ----------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Long-term borrowings 524 230 312 Repayments of long-term borrowings (21) (43) (29) Short-term borrowings 1,306 268 1,087 Repayments of short-term borrowings (779) (568) (662) Dividends paid (350) (338) (295) Treasury stock purchases (1,696) (244) (24) Treasury stock issued 106 64 37 - ----------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (910) (631) 426 - ----------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 13 8 4 - ----------------------------------------------------------------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (8) (19) (43) Cash and cash equivalents at beginning of year 34 53 96 - ----------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26 $ 34 $ 53 =========================================================================================
The accompanying Summary of Significant Accounting Policies and Notes on pages 39 to 46 are an integral part of the financial statements. 37 10 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY (millions, except per share amounts)
Capital Stock --------------------------------------- Earnings Issued In Treasury retained Cumulative Total ------------------ ---------------- Capital in the translation shareowners' Shares Amount Shares Amount surplus business adjustments equity - -------------------------------------------------------------------------------------------------------------- Balance at July 31, 1994 542 $ 20 (46) $(559) $155 $2,359 $14 $1,989 Net earnings 698 698 Dividends ($.605 per share) (302) (302) Treasury stock purchased (1) (24) (24) Treasury stock issued under Management incentive and Stock option plans 3 33 10 43 Translation adjustments 64 64 - -------------------------------------------------------------------------------------------------------------- Balance at July 30, 1995 542 20 (44) (550) 165 2,755 78 2,468 - -------------------------------------------------------------------------------------------------------------- Net earnings 802 802 Dividends ($.673 per share) (346) (346) Treasury stock purchased (8) (244) (244) Treasury stock issued under Management incentive and Stock option plans 4 15 63 78 Translation adjustments (16) (16) - -------------------------------------------------------------------------------------------------------------- Balance at July 28, 1996 542 20 (48) (779) 228 3,211 62 2,742 - -------------------------------------------------------------------------------------------------------------- Net earnings 713 713 Dividends ($.750 per share) (353) (353) Treasury stock purchased (40) (1,696) (1,696) Treasury stock issued under Management incentive and Stock option plans 4 16 110 126 Translation adjustments (112) (112) - -------------------------------------------------------------------------------------------------------------- Balance at August 3, 1997 542 $ 20 (84) $(2,459) $338 $3,571 $(50) $1,420 ==============================================================================================================
The accompanying Summary of Significant Accounting Policies and Notes on pages 39 to 46 are an integral part of the financial statements. 38 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) 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 53 weeks in fiscal 1997 and 52 weeks in fiscal 1996 and 1995. 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. INTANGIBLES -- 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 cash flows. PENSION AND RETIREE BENEFIT PLANS -- Costs are accrued over employees' careers based on plan benefit formulas. INCOME TAXES -- Deferred taxes are provided in accordance with Statement of Financial Accounting Standards (SFAS) No.109. 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 -- Certain amounts in the prior years' financial statements and footnotes have been reclassified to conform to the current year presentation. 2. GEOGRAPHIC AREA INFORMATION The company is predominantly engaged in the manufacture and sale of prepared convenience foods. The following presents information about operations in different geographic areas:
Net sales 1997 1996 1995 - ------------------------------------------------------------------------ United States $ 5,495 $ 5,332 $ 5,012 Europe 1,201 1,122 1,143 Australia 613 614 521 Other countries 795 733 658 Adjustments and eliminations (140) (123) (84) - ------------------------------------------------------------------------ Consolidated $ 7,964 $ 7,678 $ 7,250 ======================================================================== Earnings before taxes 1997 1996 1995 - ------------------------------------------------------------------------ United States $ 1,155 $ 1,123 $ 957 Europe 50 71 74 Australia 26 76 81 Other countries 96 96 90 Unallocated corporate expenses (61) (49) (55) - ------------------------------------------------------------------------ Earnings before interest and taxes 1,266 1,317 1,147 Interest, net (159) (120) (105) - ------------------------------------------------------------------------ Consolidated $ 1,107 $ 1,197 $ 1,042 ======================================================================== Identifiable assets 1997 1996 1995 - ------------------------------------------------------------------------ United States $ 3,913 $ 4,144 $ 4,171 Europe 860 817 814 Australia 919 980 773 Other countries 767 691 557 - ------------------------------------------------------------------------ Consolidated $ 6,459 $ 6,632 $ 6,315 ========================================================================
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 1997 restructuring charge of $216 is allocated to geographic areas as follows: United States -- $169, Europe -- $12, Australia -- $33 and Other -- $2. 39 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) 3. RESTRUCTURING PROGRAM A special charge of $216 ($160 after tax or $.34 per share) was recorded in the first quarter of 1997 to cover the costs of a restructuring program. The restructuring program is designed to improve operational efficiency by closing various plants, reducing approximately 2,100 administrative and operational positions from the worldwide workforce and divesting non-strategic businesses with sales of approximately $275. The restructuring charge includes approximately $113 in cash charges primarily related to severance and employee benefit costs, substantially all of which will be paid by the end of the first quarter of 1998. The balance of the restructuring charge relates to non-cash charges for the write down of plant assets and estimated losses on the disposition of plant assets and business divestitures. The company plans to substantially complete the program in the first quarter of 1998. Since the program was approved, certain modifications were made to the components which resulted in revision to the 1997 activity. The overall expected cost of the restructuring program has not changed and there have been no material adjustments to the liability. A summary of the original reserves and activity through August 3, 1997 follows:
Original August Reserves Activity 3, 1997 - ----------------------------------------------------------------- Loss on asset dispositions and divestitures $108 $ (35) $ 73 Severance and benefits 93 (58) 35 Other 15 (7) 8 - ----------------------------------------------------------------- Total $216 $(100) $116 =================================================================
4. OTHER EXPENSE
1997 1996 1995 - --------------------------------------------------------------- Stock price related incentive programs $80 $31 $20 Amortization of intangible and other assets 54 52 34 Minority interests 7 17 17 Other, net (1) (28) (8) - --------------------------------------------------------------- $140 $72 $63 =================================================================
5. INTEREST EXPENSE
1997 1996 1995 - --------------------------------------------------------------- Interest expense $178 $137 $123 Less: Interest capitalized 11 11 8 - --------------------------------------------------------------- $167 $126 $115 ===============================================================
6. ACQUISITIONS During 1997, 1996 and 1995, the company made several acquisitions. These acquisitions were accounted for as purchase transactions, and operations of the acquired companies are included in the financial statements from the dates the acquisitions were consummated. The allocation of the purchase price to assets acquired and liabilities assumed was based upon fair value estimates as follows:
1997 1996 1995 - --------------------------------------------------------------- Working capital $ 4 $ 4 $ 19 Fixed assets 53 16 93 Intangibles 159 152 1,150 Other assets 19 -- 4 Other liabilities (7) -- (25) Minority interests -- 14 14 - --------------------------------------------------------------- $228 $186 $1,255 ===============================================================
During 1997, the company acquired the Erasco Group of companies, Germany's leading soup company. In addition, Arnotts Limited ("Arnotts") acquired the assets of Kettle Chip Company located in Sydney, Australia. The Erasco acquisition was consummated in October 1996. Based on unaudited data, net sales for 1997 and 1996 would have increased $29 and $201, respectively, and net earnings would have increased $5 in 1996 had the acquisition occurred at the beginning of fiscal 1996. Pro forma financial information for the other acquisitions would not have a material effect on the company's net sales, earnings, and earnings per share in 1997 and 1996. During 1996, the company acquired the Homepride sauce business, United Kingdom's leading cooking sauce brand, and the Cheong Chan soup and sauce business in Asia. The company also increased its share ownership in Arnotts to 70%. During 1995, the company acquired Pace Foods, the world's leading producer and marketer of Mexican sauces; Fresh Start Bakeries, a food service baking 40 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) concern with operations in the U.S., Europe and South America; Stratford-upon-Avon Foods, a canned fruit and vegetable company in England; and Greenfield Foods, a U.S. baking operation specializing in low-fat cakes and cookies. The company also acquired additional shares in Arnotts boosting its share ownership to 65%. 7. PENSION PLANS AND RETIREMENT BENEFITS PENSION PLANS -- Substantially all of the company's U.S. and certain non-U.S. employees are covered by noncontributory defined benefit pension plans. Plan benefits are generally based on years of service and employees' compensation during the last years of employment. Benefits are paid from funds previously provided to trustees and insurance companies or are paid directly by the company from general funds. Actuarial assumptions and provisions for funded plans are reviewed regularly by the company and its independent actuaries to ensure that plan assets will be adequate to provide pension benefits. Plan assets consist primarily of investments in equities, fixed income securities, real estate and money market funds. Pension expense included the following:
1997 1996 1995 - --------------------------------------------------------------- Benefits earned during the year $ 32 $ 33 $ 29 Interest cost 97 93 90 Net amortization and deferrals 317 44 59 Less: Return on plan assets 433 152 158 - --------------------------------------------------------------- 13 18 20 Other pension expense 10 9 10 - --------------------------------------------------------------- Consolidated pension expense $ 23 $ 27 $ 30 ===============================================================
Weighted average rates for principal actuarial assumptions were:
1997 1996 1995 - ------------------------------------------------------------------ Discount rate 7.70% 8.00% 7.75% Long-term rate of compensation increase 5.00% 5.00% 5.00% Long-term rate of return on plan assets 9.70% 9.50% 9.25% ==================================================================
The funded status of the plans was as follows:
AUGUST 3, July 28, 1997 1996 - --------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested $(1,105) $(1,054) Non-vested (43) (43) - --------------------------------------------------------------------- Accumulated benefit obligation (1,148) (1,097) Effect of projected future salary increases (130) (132) - --------------------------------------------------------------------- Projected benefit obligation (1,278) (1,229) Plan assets at market value 1,675 1,353 - --------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 397 124 Unrecognized net (gain) or loss (92) 180 Unrecognized prior service cost 70 76 Unrecognized net assets at transition (38) (48) - --------------------------------------------------------------------- Prepaid pension expense $ 337 $ 332 =====================================================================
Pension coverage for employees of certain non-U.S. subsidiaries is 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. SAVINGS PLANS -- 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. In 1997, 1996 and 1995, the company increased its contribution to 60% because earnings goals were achieved. Amounts charged to Costs and expenses were $17 in 1997, $15 in 1996 and $14 in 1995. RETIREE BENEFITS -- The company provides postretirement benefits including health care and life insurance to substantially all retired U.S. employees and their dependents. Employees who have 10 years of service after the age of 45 and retire from the company are eligible to participate in the postretirement benefit plans. Postretirement benefit expense included the following:
1997 1996 1995 - -------------------------------------------------------------- Benefits earned during the year $12 $17 $18 Interest cost 21 24 34 Net amortization and deferrals (17) (3) -- - -------------------------------------------------------------- Postretirement benefit expense $16 $38 $52 ==============================================================
41 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars)
AUGUST 3, July 28, 1997 1996 - ----------------------------------------------------------------- Actuarial present value of benefit obligations: Retirees $194 $172 Fully eligible active plan participants 47 48 Other active plan participants 60 61 - ----------------------------------------------------------------- Accumulated benefit obligation 301 281 Unrecognized prior service cost 20 24 Unrecognized net gain 140 166 - ----------------------------------------------------------------- Accrued postretirement benefit liability $461 $471 =================================================================
The discount rate used to determine the accumulated postretirement benefit obligation was 7.75% in 1997 and 8.00% in 1996. The assumed healthcare cost trend rate used to measure the accumulated postretirement benefit obligation was 6.5%, declining to 4.5% over a period of 5 years and continuing at 4.5% thereafter. A one-percentage-point change in the assumed healthcare cost trend rate would have changed the 1997 accumulated postretirement benefit obligation by $32 and postretirement benefit expense by $5. Obligations related to non-U.S. postretirement benefit plans are not significant since these benefits are generally provided through government-sponsored plans. The current portion of nonpension postretirement benefits included in Accrued liabilities was $19 at August 3, 1997 and July 28, 1996. 8. TAXES ON EARNINGS The provision for income taxes consists of the following:
1997 1996 1995 - -------------------------------------------------------------- Income taxes: Currently payable Federal $ 352 $ 275 $ 208 State 35 36 28 Non-U.S. 31 52 68 - -------------------------------------------------------------- 418 363 304 - -------------------------------------------------------------- Deferred Federal (33) 22 33 State 3 4 5 Non-U.S. 6 6 2 - -------------------------------------------------------------- (24) 32 40 - -------------------------------------------------------------- $ 394 $ 395 $ 344 ============================================================== Earnings before income taxes: United States $ 968 $ 986 $ 840 Non-U.S. 139 211 202 - -------------------------------------------------------------- $1,107 $1,197 $1,042 ==============================================================
The following is a reconciliation of effective income tax rates with the U.S. Federal statutory income tax rate:
1997 1996 1995 - ---------------------------------------------------------------- Federal statutory income tax rate 35.0% 35.0% 35.0% State income taxes (net of Federal tax benefit) 2.2 2.2 2.1 Nondeductible divestiture and restructuring charges 1.6 -- -- Non-U.S. earnings taxed at other than Federal statutory rate (.8) (.8) (.2) Tax loss carryforwards (.4) (1.9) (3.0) Other (2.0) (1.5) (.9) - ---------------------------------------------------------------- Effective income tax rate 35.6% 33.0% 33.0% ==============================================================
Deferred tax liabilities and assets are comprised of the following:
AUGUST 3, July 28, 1997 1996 - -------------------------------------------------------------- Depreciation $185 $198 Pensions 110 112 Other 167 148 - -------------------------------------------------------------- Deferred tax liabilities 462 458 - -------------------------------------------------------------- Benefits and compensation 224 196 Restructuring accruals 41 -- Tax loss carryforwards 35 49 Other 50 64 - -------------------------------------------------------------- Gross deferred tax assets 350 309 Deferred tax asset valuation allowance (35) (49) - -------------------------------------------------------------- Net deferred tax assets 315 260 - -------------------------------------------------------------- Net deferred tax liability $147 $198 ==============================================================
For income tax purposes, subsidiaries of the company have tax loss carryforwards of approximately $85 of which $3 relate to periods prior to acquisition of the subsidiaries by the company. Of these carryforwards, $54 expire through 2009 and $31 may be carried forward indefinitely. The current statutory tax rates in these countries range from 31% to 57%. Income taxes have not been accrued on undistributed earnings of non-U.S. subsidiaries of $451 which are invested in operating assets and are not expected to be remitted. If remitted, tax credits are available to substantially reduce any additional taxes. 42 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) 9. ACCOUNTS RECEIVABLE
1997 1996 - -------------------------------------------------------------- Customers $598 $579 Allowances for cash discounts and bad debts (23) (24) - -------------------------------------------------------------- 575 555 Other 58 63 - -------------------------------------------------------------- $633 $618 ==============================================================
10. INVENTORIES
1997 1996 - -------------------------------------------------------------- Raw materials, containers and supplies $300 $323 Finished products 471 461 - -------------------------------------------------------------- 771 784 Less: Adjustment to LIFO basis 9 45 - -------------------------------------------------------------- $762 $739 ==============================================================
Inventories for which the LIFO method of determining cost is used represented approximately 64% of consolidated inventories in 1997 and 63% in 1996. 11. OTHER CURRENT ASSETS
1997 1996 - -------------------------------------------------------------- Prepaid pensions $ 25 $ 23 Notes receivable -- 73 Deferred taxes 104 76 Other 33 55 - -------------------------------------------------------------- $162 $227 ==============================================================
12. PLANT ASSETS
1997 1996 - -------------------------------------------------------------- Land $ 85 $ 99 Buildings 1,164 1,180 Machinery and equipment 2,964 2,879 Projects in progress 214 332 - -------------------------------------------------------------- 4,427 4,490 Accumulated depreciation (1,867) (1,809) - -------------------------------------------------------------- $2,560 $2,681 ==============================================================
Depreciation provided in Costs and expenses was $274 in 1997 and 1996 and $261 in 1995. Approximately $106 of capital expenditures are required to complete projects in progress at August 3, 1997. 13. INTANGIBLE ASSETS
1997 1996 - -------------------------------------------------------------- Purchase price in excess of net assets of businesses acquired (goodwill) $1,478 $1,407 Trademarks 429 448 Other intangibles 41 84 - -------------------------------------------------------------- 1,948 1,939 Accumulated amortization (155) (131) - -------------------------------------------------------------- $1,793 $1,808 ==============================================================
14. OTHER ASSETS
1997 1996 - -------------------------------------------------------------- Prepaid pensions $312 $309 Investments 188 170 Other 23 46 - -------------------------------------------------------------- $523 $525 ==============================================================
15. NOTES PAYABLE AND LONG-TERM DEBT Notes payable consists of the following:
1997 1996 - -------------------------------------------------------------- Commercial paper $1,382 $549 9.00% Notes 100 -- 7.75% Notes -- 300 Other 24 16 - -------------------------------------------------------------- $1,506 $865 ==============================================================
Long-term debt consists of the following:
Fiscal Year Type Maturity Rate 1997 1996 - -------------------------------------------------------------- Notes 1998 9.00% -- $100 Notes 1999 5.50% $ 200 200 Notes 2000 5.76% 150 -- Notes 2001* 5.75%-8.75% 174 100 Notes 2004** 5.63% 100 100 Notes 2007 6.90% 300 -- Debentures 2021 8.88% 200 200 Notes 1999-2010 6.40%-9.00% 9 16 Capital lease obligations Various Various 20 28 - -------------------------------------------------------------- $1,153 $744 ==============================================================
* $50 callable in 1998 ** callable in 2001 43 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) The fair value of the company's long-term debt including the current portion of long-term debt in Notes payable was $1,307 at August 3, 1997 and $1,099 at July 28, 1996. The amount of unused lines of credit at August 3, 1997 approximates $3,100, of which $2,500 are unconditional for a period of one to five years. In 1997, the company filed a shelf registration statement with the Securities and Exchange Commission for the issuance of debt securities at an aggregate initial offering price not to exceed $1,000; as of August 3, 1997, $700 remained unissued. Principal amounts of long-term debt mature as follows: 1998-$104 (in current liabilities); 1999 - $204; 2000 - $157; 2001 - $178; 2002 - $4 and beyond - $606. Future minimum capital lease payments are $39, including implicit interest of $16. 16. OTHER LIABILITIES
1997 1996 - -------------------------------------------------------------------------------- Deferred taxes $251 $274 Minority interests 83 90 Deferred compensation 66 27 Postemployment benefits 18 18 Other 45 56 - -------------------------------------------------------------------------------- $463 $465 ================================================================================
17. FINANCIAL INSTRUMENTS The company utilizes 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 its 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 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 hedges related to debt are recognized as an adjustment to interest expense. The notional amounts of interest rate swaps were $250 at August 3, 1997 and $100 at July 28, 1996. The cost to settle the swaps was $4 at August 3, 1997. The company utilizes foreign currency exchange contracts, including swap and forward contracts, to hedge existing 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 the Cumulative translation adjustments account in Shareowners' Equity. Swap contracts are entered into to hedge exposures relating to certain employee compensation expenses linked to the total return of the Standard & Poor's 500 Index or to the total return of the company's Capital stock. The equity swap contracts mature in 1998. At August 3, 1997, the notional principal amount of the contracts was $74, and the net gain to settle the contracts was $9. Gains or losses are recognized as adjustments to the carrying value of the underlying obligations. The company also has swap agreements with financial institutions which cover both foreign currency and interest rates. The notional amounts of these swaps were $210 at August 3, 1997 and $125 at July 28, 1996. These agreements hedge currency exposures arising from strategies which replaced certain local currency borrowings with lower cost U.S. dollar financing. The cost to settle the swaps was $2 at August 3, 1997. At August 3, 1997, the company also had contracts to purchase or sell approximately $263 in foreign currency versus $133 at July 28, 1996. The contracts are primarily for Canadian and European currencies and have maturities through 1998. 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 non-performance. In addition, the contracts are distributed among several financial institutions, thus minimizing credit risk concentration. 44 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable, and short-term debt approximate fair value. The fair value of long-term debt, as indicated in Note 15, and derivative financial instruments, is based on quoted market prices. 18. SHAREOWNERS' EQUITY On February 11, 1997 the company's Board of Directors authorized a two-for-one stock split effective for shareowners of record on February 24, 1997. The number of authorized shares was increased to 560 million from 280 million. All references to the number of shares reflect the stock split. Preferred stock is issuable in one or more classes, with or without par as may be authorized by the Board of Directors. 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 Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based Compensation." Had the fair value based accounting provisions of SFAS 123 been adopted, the effect on earnings and earnings per share in 1997 and 1996 would not be significant. As of August 3, 1997, 13.7 million shares were available for grant under the long-term incentive plan. Restricted shares granted are as follows:
(thousands of shares) 1997 1996 1995 - -------------------------------------------------------------------------------- Restricted Shares Granted 804 84 966 ================================================================================
Information about stock options and related activity is as follows:
Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise (options in thousands) 1997 Price 1996 Price 1995 Price - -------------------------------------------------------------------------------- Stock Option Plans Beginning of year 22,098 $22.53 19,312 $15.20 19,830 $12.63 Granted 2,644 48.02 6,594 34.63 2,752 24.60 Exercised (3,428) 16.10 (3,428) 14.13 (2,996) 11.68 Terminated (1,248) 24.45 (380) 20.32 (274) 19.82 - -------------------------------------------------------------------------------- End of year 20,066 $26.94 22,098 $22.53 19,312 $15.20 ================================================================================ Exercisable at end of year 13,040 12,782 13,722 ================================================================================ (options in thousands) Options Outstanding Exercisable Options - -------------------------------------------------------------------------------- Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Contractual Exercise Exercise Prices Shares Life Price Shares Price - -------------------------------------------------------------------------------- $ 7.59-$14.95 3,671 2.81 $13.07 3,671 $13.07 $17.69-$34.84 13,765 7.37 $26.60 9,369 $20.31 $38.06-$48.31 2,630 9.90 $48.10 -- -- - -------------------------------------------------------------------------------- 20,066 13,040 ================================================================================
All net earnings per share data is based on the weighted average shares outstanding during the applicable periods. The potential dilution from the exercise of stock options is not material. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS 128) -- "Earnings per Share." The standard requires new earnings per share calculations and dual presentation of "basic" and "diluted" earnings per share. The company will adopt SFAS 128 in the second quarter of 1998. Basic earnings per share will approximate earnings per share as currently reported and diluted earnings per share will give effect to the issuance of stock options. The adoption of SFAS 128 is not expected to have a material effect on the company's earnings per share. 45 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (million dollars) 19. STATEMENTS OF CASH FLOWS
1997 1996 1995 - -------------------------------------------------------------------------------- Interest paid, net of amounts capitalized $167 $127 $102 Interest received $ 8 $ 6 $ 10 Income taxes paid $392 $353 $290
20. QUARTERLY DATA (UNAUDITED)
1997 First Second Third Fourth - -------------------------------------------------------------------------------- Net sales $2,052 $2,317 $1,870 $1,725 Cost of products sold 1,112 1,227 1,030 936 Net earnings 88 276 157 192 Per share Net earnings .17 .58 .34 .42 Dividends .1725 .1925 .1925 .1925 Market price High 42.13 42.44 49.50 52.81 Low 32.00 39.38 40.31 45.00 1996 First Second Third Fourth - -------------------------------------------------------------------------------- Net sales $1,990 $2,217 $1,831 $1,640 Cost of products sold 1,143 1,245 1,061 914 Net earnings 219 258 145 180 Per share Net earnings .44 .52 .29 .36 Dividends .155 .1725 .1725 .1725 Market price High 26.94 31.25 33.69 35.38 Low 22.13 25.44 28.00 29.75
21. SUBSEQUENT EVENTS In September 1997, the company announced its intention to spin off certain specialty foods business to its shareowners as an independent publicly-held company. The new company will include Swanson frozen foods, Vlasic pickles, and certain European and Argentine businesses. The company expects to complete the spinoff in 1998, subject to various regulatory approvals, the receipt of a ruling from the Internal Revenue Service that the spinoff will be a tax-free transaction to shareowners and final approval from the company's Board of Directors. Also in September 1997, the company agreed to finance a proposal by Arnotts to acquire its outstanding shares held by minority shareholders. It is expected that this transaction would increase the company's ownership of Arnotts to 100%. The estimated financing is approximately $300 and Arnotts expects to complete the transaction in the second quarter of 1998. 46 19 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 Price Waterhouse 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/ Dale F. Morrison /s/ Basil L. Anderson /s/ Gerald S. Lord Dale F. Morrison Basil L. Anderson Gerald S. Lord President and Chief Executive Vice President Vice President Executive Officer and Chief Financial Officer -- Controller September 8, 1997 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 August 3, 1997 and July 28, 1996, and the results of their operations and their cash flows for each of the three years in the period ended August 3, 1997, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 the opinion expressed above. Price Waterhouse LLP Thirty South Seventeenth Street, Philadelphia, Pennsylvania 19103 September 8, 1997 47 20 ELEVEN-YEAR REVIEW - CONSOLIDATED (millions, except per share amounts)
Fiscal Year 1997(a) 1996 1995 1994 - -------------------------------------------------------------------------------- Summary of Operations Net sales $7,964 $7,678 $7,250 $6,664 Earnings before interest and taxes 1,266 1,317 1,147 1,027 Earnings before taxes 1,107 1,197 1,042 963 Earnings before cumulative effect of accounting changes 713 802 698 630 Net earnings 713 802 698 630 Percent of sales 9.0% 10.4% 9.6% 9.4% Return on average shareowners' equity 34.3% 30.8% 31.3% 34.1% Cash margin (f) 22.8% 21.6% 20.1% 19.6% Financial Position Operating working capital (g) $ 357 $ 382 $ 456 $ 599 Plant assets - net 2,560 2,681 2,584 2,401 Total assets 6,459 6,632 6,315 4,992 Total debt 2,659 1,609 1,722 994 Shareowners' equity 1,420 2,742 2,468 1,989 Per Share Data Earnings before cumulative effect of accounting changes $ 1.51 $ 1.61 $ 1.40 $ 1.26 Net earnings 1.51 1.61 1.40 1.26 Dividends declared .75 .67 .61 .55 Shareowners' equity 3.01 5.51 4.96 3.97 Other Statistics Salaries, wages, pensions, etc. $1,566 $1,592 $1,611 $1,460 Capital expenditures 331 416 391 421 Number of shareowners (in thousands) 49 43 43 43 Weighted average shares outstanding 472 498 498 501 ================================================================================
(a) 1997 includes pre-tax restructuring charge of $216 million; $160 million after taxes or $.34 per share. (b) 1993 includes pre-tax divestiture and restructuring charges of $353 million; $300 million after taxes or $.60 per share. 1993 also includes the cumulative effect of changes in accounting of $249 million or $.50 per share. (c) 1990 includes pre-tax divestiture and restructuring charges of $339 million; $302 million after taxes or $.58 per share. (d) 1989 includes pre-tax restructuring charges of $343 million; $261 million after taxes or $.51 per share. (e) 1988 includes pre-tax restructuring charges of $49 million; $29 million after taxes or $.06 per share. 1988 also includes the cumulative effect of a change in accounting for income taxes of $32 million or $.07 per share. (f) Cash margin equals earnings before interest and taxes plus translation, depreciation, amortization, minority interest expense and divestiture and restructuring charges divided by net sales. (g) Operating working capital equals current assets minus current liabilities (excluding notes receivable, notes payable, dividend payable and divestiture and restructuring reserves). 48 21
Fiscal Year 1993(b) 1992 1991 1990(c) 1989(d) 1988(e) 1987 - ----------------------------------------------------------------------------------------------------------------------- Summary of Operations Net sales $6,577 $6,263 $6,204 $6,206 $5,672 $4,869 $4,490 Earnings before interest and taxes 594 886 758 273 162 409 440 Earnings before taxes 520 799 667 179 107 389 418 Earnings before cumulative effect of accounting changes 257 491 402 4 13 242 247 Net earnings 8 491 402 4 13 274 247 Percent of sales .1% 7.8% 6.5% .1% .2% 5.6% 5.5% Return on average shareowners' equity .4% 25.7% 23.0% .3% .7% 15.1% 15.1% Cash margin (f) 18.7% 17.6% 15.6% 13.2% 12.8% 13.3% 13.2% Financial Position Operating working capital (g) $ 614 $ 586 $ 660 $ 819 $ 799 $ 660 $ 838 Plant assets - net 2,265 1,966 1,790 1,718 1,541 1,509 1,349 Total assets 4,898 4,354 4,149 4,116 3,932 3,610 3,097 Total debt 1,131 987 1,055 1,008 901 540 474 Shareowners' equity 1,704 2,028 1,793 1,692 1,778 1,895 1,736 Per Share Data Earnings before cumulative effect of accounting changes $ .51 $ .97 $ .79 $ .01 $ .03 $ .47 $ .48 Net earnings .02 .97 .79 .01 .03 .53 .48 Dividends declared .46 .36 .28 .25 .23 .20 .18 Shareowners' equity 3.38 4.02 3.53 3.27 3.43 3.66 3.34 Other Statistics Salaries, wages, pensions, etc. $1,371 $1,400 $1,401 $1,423 $1,334 $1,223 $1,137 Capital expenditures 371 362 371 397 302 262 328 Number of shareowners (in thousands) 43 41 38 43 44 43 41 Weighted average shares outstanding 504 504 508 518 518 518 520 =======================================================================================================================
49 EX-21 4 CAMPBELL SOUP COMPANY SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES OF CAMPBELL
NAME OF SUBSIDIARY AND NAME JURISDICTION OF UNDER WHICH IT DOES BUSINESS INCORPORATION - ---------------------------- ------------- Arnotts Limited Australia Campbell Finance Corp. Delaware Campbell Investment Company Delaware Campbell Sales Company New Jersey Campbell Soup Company Ltd--Les Soupes Campbell Ltee Canada Campbell's Australasia Pty. Limited Australia Campbell's de Mexico, S.A. de C. V. Mexico Campbell's Fresh, Inc. Ohio Campbell's U.K. Limited England Erasco GmbH Germany Fresh Start Bakeries, Inc. Delaware Godiva Chocolatier, Inc. New Jersey Joseph Campbell Company New Jersey N.V. Biscuits Delacre S.A. Belgium Campbell Foods Belgium N.V. Belgium N.V. Godiva Belgium S.A. Belgium Pepperidge Farm, Incorporated Connecticut Sanwa Foods, Inc. California Societe Francaise des Biscuits Delacre S.A. France Swift-Armour Sociedad Anonima Argentina Argentina Vlasic Foods, Inc. Michigan
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. As of August 3, 1997, Campbell owned 70% of the outstanding shares of Arnotts Limited. I-3 EX-23 5 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. 333-22803, 33-59797, 33-39032, 33-14009, 33-56899 and 333-00729) of Campbell Soup Company of our report dated September 8, 1997 appearing on page 47 of Campbell's 1997 Annual Report to Shareowners which is incorporated by reference in this Annual Report on Form 10-K. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 October 21, 1997 I-4 EX-24 6 POWER OF ATTORNEY 1 EXHIBIT 24(a) POWER OF ATTORNEY FORM 10-K ANNUAL REPORT FOR FISCAL 1997 KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS JOHN M. COLEMAN AND JOHN J. FUREY, EACH OF THEM, UNTIL DECEMBER 31, 1997, 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 AUGUST 3, 1997, 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 25, 1997 --------- ------------------------------ /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/ DALE F. MORRISON - ------------------------ ------------------------------ BENNETT DORRANCE DALE F. MORRISON /S/ THOMAS W. FIELD, JR. /S/ CHARLES H. MOTT - ------------------------ ------------------------------ THOMAS W. FIELD, JR. CHARLES H. MOTT /S/ KENT B. FOSTER /S/ GEORGE M. SHERMAN - ------------------------ ------------------------------ KENT B. FOSTER GEORGE M. SHERMAN /S/ HARVEY GOLUB /S/ DONALD M. STEWART - ------------------------ ------------------------------ HARVEY GOLUB DONALD M. STEWART /S/ DAVID W. JOHNSON /S/ GEORGE STRAWBRIDGE, JR. - ------------------------ ------------------------------ DAVID W. JOHNSON GEORGE STRAWBRIDGE /S/ DAVID K. P. LI /S/ CHARLOTTE C. WEBER - ------------------------ ------------------------------ DAVID K. P. LI CHARLOTTE C. WEBER
I-5 2 EXHIBIT 24(b) CAMPBELL SOUP COMPANY CERTIFICATION I, THE UNDERSIGNED 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 25, 1997, 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 22ND DAY OF OCTOBER, 1997. /S/ DIANE M. WEHR ----------------------------------- ASSISTANT CORPORATE SECRETARY I-6 3 EXHIBIT 24(b) (CONT'D) CAMPBELL SOUP COMPANY BOARD OF DIRECTORS RESOLUTION SEPTEMBER 25, 1997 * * * FORM 10-K ANNUAL REPORT RESOLVED, THAT THE FORM 10-K ANNUAL REPORT FOR FISCAL 1997 OF CAMPBELL SOUP COMPANY IN THE FORM PRESENTED TO THIS MEETING, IS HEREBY APPROVED. FURTHER RESOLVED, THAT THE PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE SENIOR VICE PRESIDENT - LAW AND PUBLIC 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 1997 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, 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 JOHN M. COLEMAN 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 1997 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. I-7 EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000,000 YEAR AUG-03-1997 JUL-29-1996 AUG-03-1997 26 0 655 22 762 1,583 4,427 1,867 6,459 2,981 1,153 0 0 20 1,400 6,459 7,964 7,964 4,305 4,305 1,713 1 167 1,107 394 713 0 0 0 713 1.51 1.51
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