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Campbell Soup Company 10-K 2010
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Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
 
 
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
 
     
   
For the Fiscal Year Ended
August 1, 2010
  Commission File Number
1-3822
 
 
     
New Jersey   21-0419870
State of Incorporation   I.R.S. Employer Identification No.
 
1 Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices
Telephone Number: (856) 342-4800
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
     
Title of Each Class
 
Name of Each Exchange on Which Registered
 
Capital Stock, par value $.0375   New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act: None
 
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  þ Yes     o No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  o Yes     þ No
 
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.  þ Yes     o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that that the registrant was required to submit and post such files).  þ Yes     o 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.  þ
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes     þ No
 
As of January 29, 2010 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of capital stock held by non-affiliates of the registrant was approximately $6,473,498,636. There were 335,995,511 shares of capital stock outstanding as of September 15, 2010.
 
Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareowners to be held on November 18, 2010, are incorporated by reference into Part III.
 


 

 
 
             
        Page
 
      Business   1
      Risk Factors   3
      Unresolved Staff Comments   6
      Properties   7
      Legal Proceedings   7
      Removed and Reserved   8
      Executive Officers of the Company   8
 
PART II
      Market for Registrant’s Capital Stock, Related Shareowner Matters and Issuer Purchases of Equity Securities   9
      Selected Financial Data   11
      Management’s Discussion and Analysis of Results of Operations and Financial Condition   12
      Quantitative and Qualitative Disclosures about Market Risk   33
      Financial Statements and Supplementary Data   34
      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   77
      Controls and Procedures   77
      Other Information   77
 
PART III
      Directors, Executive Officers and Corporate Governance   77
      Executive Compensation   78
      Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters   78
      Certain Relationships and Related Transactions, and Director Independence   78
      Principal Accounting Fees and Services   78
 
PART IV
      Exhibits and Financial Statement Schedules   78
        Signatures   81


Table of Contents

 
PART I
 
Item 1.   Business
 
The Company
 
Campbell Soup Company (“Campbell” or the “company”), together with its consolidated subsidiaries, is a global manufacturer and marketer of high-quality, branded convenience food products. Campbell was incorporated as a business corporation under the laws of New Jersey on November 23, 1922; however, through predecessor organizations, it traces its heritage in the food business back to 1869. The company’s principal executive offices are in Camden, New Jersey 08103-1799.
 
The company’s operations are organized and reported in the following segments: U.S. Soup, Sauces and Beverages; Baking and Snacking; International Soup, Sauces and Beverages; and North America Foodservice. The segments are discussed in greater detail below.
 
 
The U.S. Soup, Sauces and Beverages segment comprises the U.S. retail business, including the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth, stocks and canned poultry; Prego pasta sauce; Pace Mexican sauce; Campbell’s canned pasta, gravies, and beans; V8 vegetable juices; V8 V-Fusion juices and beverages; V8 Splash juice drinks; and Campbell’s tomato juice.
 
 
The Baking and Snacking segment includes the following businesses: Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; and Arnott’s biscuits in Australia and Asia Pacific. As previously disclosed in May 2008, the company completed the divestiture of certain salty snack food brands and assets in Australia, which were historically included in this segment.
 
 
The International Soup, Sauces and Beverages segment includes the soup, sauce and beverage businesses outside of the United States, including Europe, Latin America, the Asia Pacific region, as well as the emerging markets of Russia and China, and the retail business in Canada. The segment’s operations include Erasco and Heisse Tasse soups in Germany, Liebig and Royco soups in France, Devos Lemmens mayonnaise and cold sauces and Campbell’s and Royco soups in Belgium, and Blå Band soups and sauces in Sweden. In Asia Pacific, operations include Campbell’s soup and stock, Swanson broths, V8 beverages and Prego pasta sauce. In Canada, operations include Habitant and Campbell’s soups, Prego pasta sauce, Pace Mexican sauce, V8 beverages and certain Pepperidge Farm products. The French sauce and mayonnaise business, which was marketed under the Lesieur brand and divested on September 29, 2008, was historically included in this segment.
 
 
The North America Foodservice segment includes the company’s Away From Home operations, which represent the distribution of products such as soup, specialty entrees, beverage products, other prepared foods and Pepperidge Farm products through various food service channels in the United States and Canada.
 
Ingredients and Packaging
 
The ingredients and packaging required for the manufacture of the company’s food products are purchased from various suppliers. These items are subject to fluctuations in price attributable to a number of factors, including changes in crop size, cattle cycles, product scarcity, demand for raw materials, energy costs, government-sponsored agricultural programs, import and export requirements and weather conditions (including the potential effects of climate change) during the growing and harvesting seasons. To help reduce some of this price volatility, the company uses a combination of purchase orders, short- and long-term contracts and various commodity risk management tools for most of its ingredients and packaging. Ingredient inventories are at a peak during the late fall


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and decline during the winter and spring. Since many ingredients of suitable quality are available in sufficient quantities only at certain seasons, the company makes commitments for the purchase of such ingredients during their respective seasons. At this time, the company does not anticipate any material restrictions on availability or shortages of ingredients or packaging that would have a significant impact on the company’s businesses. For information on the impact of inflation on the company, see “Management’s Discussion and Analysis of Results of Operations and Financial Condition.”
 
 
In most of the company’s markets, sales activities are conducted by the company’s own sales force and through broker and distributor arrangements. In the United States, Canada and Latin America, the company’s products are generally resold to consumers in retail food chains, mass discounters, mass merchandisers, club stores, convenience stores, drug stores, dollar stores and other retail, commercial and non-commercial establishments. In Europe, the company’s products are generally resold to consumers in retail food chains, mass discounters, mass merchandisers, club stores, convenience stores and other retail, commercial and non-commercial establishments. In the Asia Pacific region, the company’s products are generally resold to consumers through retail food chains, convenience stores and other retail, commercial and non-commercial establishments. The company makes shipments promptly after receipt and acceptance of orders.
 
The company’s largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 18% of the company’s consolidated net sales in fiscal 2010 and fiscal 2009, and 16% in fiscal 2008. All of the company’s segments sold products to Wal-Mart Stores, Inc. or its affiliates. No other customer accounted for 10% or more of the company’s consolidated net sales.
 
 
As of September 15, 2010, the company owned over 4,100 trademark registrations and applications in over 160 countries and believes that its trademarks are of material importance to its business. Although the laws vary by jurisdiction, trademarks generally are valid as long as they are in use and/or their registrations are properly maintained and have not been found to have become generic. Trademark registrations generally can be renewed indefinitely as long as the trademarks are in use. The company believes that its principal brands, including Campbell’s, Erasco, Liebig, Pepperidge Farm, Goldfish, V8, Pace, Prego, Swanson, and Arnott’s, are protected by trademark law in the major markets where they are used. In addition, some of the company’s products are sold under brands that have been licensed from third parties.
 
Although the company owns a number of valuable patents, it does not regard any segment of its business as being dependent upon any single patent or group of related patents. In addition, the company owns copyrights, both registered and unregistered, and proprietary trade secrets, technology, know-how processes, and other intellectual property rights that are not registered.
 
 
The company experiences worldwide competition in all of its principal products. This competition arises from numerous competitors of varying sizes, including producers of generic and private label products, as well as from manufacturers of other branded food products, which compete for trade merchandising support and consumer dollars. As such, the number of competitors cannot be reliably estimated. The principal areas of competition are brand recognition, quality, price, advertising, promotion, convenience and service.
 
 
For information relating to the company’s cash and working capital items, see “Management’s Discussion and Analysis of Results of Operations and Financial Condition.”


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During fiscal 2010, the company’s aggregate capital expenditures were $315 million. The company expects to spend approximately $300 million for capital projects in fiscal 2011. Major fiscal 2011 capital projects include continued enhancement of the company’s corporate headquarters in Camden, New Jersey, an upgrade to the company’s research and development capabilities and the upgrade of certain manufacturing equipment at various facilities in the U.S.
 
 
During the last three fiscal years, the company’s expenditures on research activities relating to new products and the improvement and maintenance of existing products for continuing operations were $123 million in 2010, $114 million in 2009, and $115 million in 2008. The increase from 2009 to 2010 was primarily due to an increase in compensation and benefit costs, costs associated with an initiative to simplify the soup-making process in North America, and the impact of currency. The decrease from 2008 to 2009 was primarily due to the impact of currency. The company conducts this research primarily at its headquarters in Camden, New Jersey, although important research is undertaken at various other locations inside and outside the United States.
 
 
The company has requirements for the operation and design of its facilities that meet or exceed applicable environmental rules and regulations. Of the company’s $315 million in capital expenditures made during fiscal 2010, approximately $10 million was for compliance with environmental laws and regulations in the United States. The company further estimates that approximately $7 million of the capital expenditures anticipated during fiscal 2011 will be for compliance with United States environmental laws and regulations. The company believes that continued compliance with existing environmental laws and regulations will not have a material effect on capital expenditures, earnings or the competitive position of the company.
 
 
Demand for the company’s products is somewhat seasonal, with the fall and winter months usually accounting for the highest sales volume due primarily to demand for the company’s soup products. Demand for the company’s sauce, beverage, baking and snacking products, however, is generally evenly distributed throughout the year.
 
Employees
 
On August 1, 2010, there were approximately 18,400 employees of the company.
 
 
For information with respect to revenue, operating profitability and identifiable assets attributable to the company’s business segments and geographic areas, see Note 6 to the Consolidated Financial Statements.
 
 
The company’s primary corporate website can be found at www.campbellsoupcompany.com. The company makes available free of charge at this website (under the “Investor Center — Financial Information — SEC Filings” caption) all of its reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, including its annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These reports are made available on the website as soon as reasonably practicable after their filing with, or furnishing to, the Securities and Exchange Commission.
 
Item 1A.   Risk Factors
 
In addition to the factors discussed elsewhere in this Report, the following risks and uncertainties could materially adversely affect the company’s business, financial condition and results of operations. Additional risks


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and uncertainties not presently known to the company or that the company currently deems immaterial also may impair the company’s business operations and financial condition.
 
 
The company operates in the highly competitive food industry and experiences worldwide competition in all of its principal products. The principal areas of competition are brand recognition, quality, price, advertising, promotion, convenience and service. A number of the company’s primary competitors have substantial financial, marketing and other resources. A strong competitive response from one or more of these competitors to the company’s marketplace efforts, or a consumer shift towards private label offerings, could result in the company reducing pricing, increasing marketing or other expenditures, and/or losing market share.
 
 
Customer and consumer demand for the company’s products may be impacted by recession or other economic downturns in the United States or other nations. Similarly, disruptions in financial and credit markets may impact the company’s ability to manage normal commercial relationships with its customers, suppliers and creditors. In addition, changes in any one of the following factors in the United States or other nations, whether due to recession, financial and credit market disruptions or other reasons, could impact the company: tax rates, interest rates or equity markets.
 
Increased regulation could adversely affect the company’s business or financial results
 
The manufacture and marketing of food products is extensively regulated. The primary areas of regulation include the processing, packaging, storage, distribution, advertising, labeling, quality and safety of the company’s food products, as well as the health and safety of the company’s employees and the protection of the environment. In the United States, the company is subject to regulation by various government agencies, including the Food and Drug Administration, the U.S. Department of Agriculture, the Federal Trade Commission, the Occupational Safety and Health Administration and the Environmental Protection Agency, as well as various state and local agencies. The company is also regulated by similar agencies outside the United States and by voluntary organizations, such as the National Advertising Division and the Children’s Food and Beverage Advertising Initiative of the Council of Better Business Bureaus. Changes in regulatory requirements (such as proposed requirements designed to enhance food safety or restrict food marketing), or evolving interpretations of existing regulatory requirements, may result in increased compliance cost, capital expenditures and other financial obligations that could adversely affect the company’s business or financial results.
 
 
The company holds assets and incurs liabilities, earns revenue, and pays expenses in a variety of currencies other than the U.S. dollar, primarily the Australian dollar, Canadian dollar, and the euro. The company’s consolidated financial statements are presented in U.S. dollars, and therefore the company must translate its assets, liabilities, revenue, and expenses into U.S. dollars for external reporting purposes. As a result, changes in the value of the U.S. dollar may materially and negatively affect the value of these items in the company’s consolidated financial statements, even if their value has not changed in their original currency.
 
 
The raw and packaging materials used in the company’s business include tomato paste, grains, beef, poultry, vegetables, steel, glass, paper and resin. Many of these materials are subject to price fluctuations from a number of factors, including product scarcity, demand for raw materials, commodity market speculation, energy costs, currency fluctuations, weather conditions (including the potential effects of climate change), import and export requirements and changes in government-sponsored agricultural programs. To the extent any of these factors result


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in an increase in raw and packaging material prices, the company may not be able to offset such increases through productivity or price increases or through its commodity hedging activity.
 
 
The company’s results are dependent on successful marketplace initiatives and acceptance by consumers of the company’s products. The company’s product introductions and product improvements, along with its other marketplace initiatives, are designed to capitalize on customer or consumer trends. In order to remain successful, the company must anticipate and react to these trends and develop new products or processes to address them. While the company devotes significant resources to meeting this goal, the company may not be successful in developing new products or processes, or its new products or processes may not be accepted by customers or consumers.
 
 
The company sponsors a number of defined benefit pension plans for employees in the United States and various foreign locations. The major defined benefit pension plans are funded with trust assets invested in a globally diversified portfolio of securities and other investments. Changes in regulatory requirements or the market value of plan assets, investment returns, interest rates and mortality rates may affect the funded status of the company’s defined benefit pension plans and cause volatility in the net periodic benefit cost, future funding requirements of the plans and the funded status as recorded on the balance sheet. A significant increase in the company’s obligations or future funding requirements could have a material adverse effect on the financial results of the company.
 
 
The retail grocery trade continues to consolidate. These consolidations have produced large, sophisticated customers with increased buying power and negotiating strength who may seek lower prices or increased promotional programs funded by their suppliers. These customers may also in the future use more of their shelf space, currently used for the company’s products, for their private label products. If the company is unable to use its scale, marketing expertise, product innovation and category leadership positions to respond to these customer initiatives, the company’s business or financial results could be negatively impacted. In addition, the disruption of sales to any of the company’s large customers for an extended period of time could adversely affect the company’s business or financial results.
 
 
Each year the company engages in several billion dollars of transactions with its customers and vendors. Because the amount of dollars involved is so significant, the company’s information technology resources must provide connections among its marketing, sales, manufacturing, logistics, customer service, and accounting functions. If the company does not allocate and effectively manage the resources necessary to build and sustain an appropriate technology infrastructure and to maintain the related computerized and manual control processes, the company’s business or financial results could be negatively impacted.
 
 
The company’s success is partly dependent upon properly executing, and realizing cost savings or other benefits from, its ongoing supply chain, information technology and other initiatives. These initiatives are primarily designed to make the company more efficient in the manufacture and distribution of its products, which is necessary in the company’s highly competitive industry. These initiatives are often complex, and a failure to implement them properly may, in addition to not meeting projected cost savings or benefits, result in an interruption to the company’s sales, manufacturing, logistics, customer service or accounting functions.


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Damage or disruption to the company’s suppliers or to the company’s manufacturing or distribution capabilities due to weather, natural disaster, fire, terrorism, pandemic, strikes, or other reasons could impair the company’s ability to manufacture and/or sell its products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, could adversely affect the company’s business or financial results.
 
The company may be adversely impacted by the failure to execute acquisitions and divestitures successfully
 
From time to time, the company undertakes acquisitions or divestitures. The success of any such acquisition or divestiture depends, in part, upon the company’s ability to identify suitable buyers or sellers, negotiate favorable contractual terms and, in many cases, obtain governmental approval. For acquisitions, success is also dependent upon efficiently integrating the acquired business into the company’s existing operations, successfully managing new risks associated with the acquired business and achieving expected returns and other benefits. Acquisitions outside the United States may present unique challenges or increase the company’s exposure to risks associated with foreign operations, including foreign currency risks and the risks of complying with foreign regulations. Finally, for acquisitions, the company may incur substantial additional indebtedness, which could adversely impact its credit rating. In cases where acquisitions or divestitures are not successfully implemented or completed, the company’s business or financial results could be negatively impacted.
 
 
The company is a global manufacturer and marketer of high-quality, branded convenience food products. Because of its global reach, the company’s performance may be impacted negatively by politically motivated factors, such as unfavorable changes in tariffs or export and import restrictions, in the nations where it does business. The company may also be impacted by political instability, civil disobedience, armed hostilities and terrorist acts in the nations where it does business.
 
 
The company may need to recall some of its products if they become adulterated or if they are mislabeled. The company may also be liable if the consumption of any of its products causes injury. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory and lost sales due to the unavailability of product for a period of time. The company could also suffer losses from a significant product liability judgment against it. A significant product recall or product liability case could also result in adverse publicity, damage to the company’s reputation and a loss of consumer confidence in the company’s products. In addition, the company’s results could be adversely affected if consumers lose confidence in the safety and quality of the company’s products, ingredients or packaging, even in the absence of a recall or a product liability case. Adverse publicity about the company’s products, whether or not valid, may discourage consumers from buying the company’s products.
 
Item 1B.   Unresolved Staff Comments
 
None.


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Item 2.   Properties
 
The company’s principal executive offices and main research facilities are company-owned and located in Camden, New Jersey. The following table sets forth the company’s principal manufacturing facilities and the business segment that primarily uses each of the facilities:
 
 
               
Inside the U.S.
          Outside the U.S.    
               
California
•   Dixon (SSB)
•   Sacramento (SSB)
•   Stockton (SSB)

Connecticut
•   Bloomfield (BS)

Florida
•   Lakeland (BS)

Illinois
•   Downers Grove (BS)

Michigan
•   Marshall (SSB)

New Jersey
•   South Plainfield (SSB)
•   East Brunswick (BS)

North Carolina
•   Maxton (SSB)
  Ohio
•   Napoleon (SSB/NAFS/ISSB)
•   Willard (BS)

Pennsylvania
•   Denver (BS)
•   Downingtown (BS/NAFS)

South Carolina
•   Aiken (BS)

Texas
•   Paris (SSB/ISSB)

Utah
•   Richmond (BS)

Washington
•   Everett (NAFS)

Wisconsin
•   Milwaukee (SSB)
    Australia
•   Huntingwood (BS)
•   Marleston (BS)
•   Shepparton (ISSB)
•   Virginia (BS)

Belgium
•   Puurs (ISSB)

Canada
•   Toronto (ISSB/NAFS)

France
•   LePontet (ISSB)

Germany
•   Luebeck (ISSB)
  Indonesia
•   Jawa Barat (BS)

Malaysia
•   Selangor Darul Ehsan (ISSB)

Mexico
•   Villagran (ISSB)

Netherlands
•   Utrecht (ISSB)

Sweden
•   Kristianstadt (ISSB)
           
         
SSB — U.S. Soup, Sauces and Beverages
BS — Baking and Snacking
ISSB — International Soup, Sauces and Beverages
NAFS — North America Foodservice
         
 
Each of the foregoing manufacturing facilities is company-owned, except that the Selangor Darul Ehsan, Malaysia, facility, and the East Brunswick, New Jersey, facility are leased. The Utrecht, Netherlands, facility is subject to a ground lease. The company has proposed the transfer of ownership of the Utrecht, Netherlands, facility to a third party in fiscal 2011 as part of a contract manufacturing arrangement. The company also operates retail bakery thrift stores in the United States and other plants, facilities and offices at various locations in the United States and abroad, including additional executive offices in Norwalk, Connecticut, Puurs, Belgium, and North Strathfield, Australia. The Wauseon, Ohio, facility was closed and sold in fiscal 2010, and the Guasave, Mexico, facility was closed in fiscal 2010.
 
Management believes that the company’s manufacturing and processing plants are well maintained and are generally adequate to support the current operations of the businesses.
 
Item 3.   Legal Proceedings
 
None.


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Item 4.   Removed and Reserved
 
 
The following list of executive officers, effective as of October 1, 2010, is included as an item in Part III of this Form 10-K:
 
                     
            Year First
            Appointed
            Executive
Name
 
Title
 
Age
 
Officer
 
Mark R. Alexander
  Senior Vice President     46       2009  
Irene Chang Britt
  Senior Vice President     47       2010  
Patrick J. Callaghan
  Vice President     59       2007  
Douglas R. Conant
  President and Chief Executive Officer     59       2001  
Sean M. Connolly
  Senior Vice President     45       2008  
Anthony P. DiSilvestro
  Senior Vice President — Finance     51       2004  
Ellen Oran Kaden
  Senior Vice President — Law and Government Affairs     59       1998  
Denise M. Morrison
  Executive Vice President and Chief Operating Officer     56       2003  
B. Craig Owens
  Senior Vice President — Chief Financial Officer and Chief Administrative Officer     56       2008  
Nancy A. Reardon
  Senior Vice President     58       2004  
David R. White
  Senior Vice President     55       2004  
 
Irene Chang Britt served as Senior Vice President and General Manager of Kraft Foods’ Post cereal division prior to joining the company in 2005. B. Craig Owens served as Executive Vice President and Chief Financial Officer of the Delhaize Group prior to joining the company in 2008. The company has employed Mark R. Alexander, Patrick J. Callaghan, Douglas R. Conant, Sean M. Connolly, Anthony P. DiSilvestro, Ellen Oran Kaden, Denise M. Morrison, Nancy A. Reardon, and David R. White in an executive or managerial capacity for at least five years.
 
There is no family relationship among any of the company’s executive officers or between any such officer and any director that is first cousin or closer. All of the executive officers were elected at the November 2009 meeting of the Board of Directors, other than Irene Chang Britt who was elected at the September 2010 meeting.


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Item 5.   Market for Registrant’s Capital Stock, Related Shareowner Matters and Issuer Purchases of Equity Securities
 
 
The company’s capital stock is listed and principally traded on the New York Stock Exchange. The company’s capital stock is also listed on the SWX Swiss Exchange, although the company’s request to delist its capital stock from the SWX Swiss Exchange has been approved effective December 7, 2010. On September 15, 2010, there were 26,190 holders of record of the company’s capital stock. Market price and dividend information with respect to the company’s capital stock are set forth in Note 20 to the Consolidated Financial Statements. Future dividends will be dependent upon future earnings, financial requirements and other factors.
 
 
The following graph compares the cumulative total shareowner return (TSR) on the company’s stock with the cumulative total return of the Standard & Poor’s Packaged Foods Index (the “S&P Packaged Foods Group”) and the Standard & Poor’s 500 Stock Index (the “S&P 500”). The graph assumes that $100 was invested on July 29, 2005, in each of company stock, the S&P Packaged Foods Group and the S&P 500, and that all dividends were reinvested. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on July 30, 2010.
 
(PERFORMANCE CHART)
 
* Stock appreciation plus dividend reinvestment.
 
                                                             
      2005     2006     2007     2008     2009     2010
Campbell
      100         122         127         124         111         133  
S&P 500
      100         106         123         108         87         99  
S&P Packaged Foods Group
      100         101         115         119         109         127  
                                                             


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                      Approximate
 
                      Dollar Value of
 
                Total Number of
    Shares that may yet
 
                Shares Purchased
    be Purchased
 
    Total Number
    Average
    as Part of Publicly
    Under the Plans or
 
    of Shares
    Price Paid
    Announced Plans or
    Programs
 
Period
  Purchased(1)     Per Share(2)     Programs(3)     ($ in Millions)(3)  
 
5/3/10 — 5/31/10
    750,679 (4)   $ 35.60 (4)     337,500     $ 605  
6/1/10 — 6/30/10
    1,756,664 (5)   $ 36.60 (5)     716,250     $ 579  
7/1/10 — 8/1/10
    1,816,620 (6)   $ 36.03 (6)     821,181     $ 550  
                                 
Total
    4,323,963     $ 36.18       1,874,931     $ 550  
 
 
(1) Includes (i) 2,441,069 shares repurchased in open-market transactions to offset the dilutive impact to existing shareowners of issuances under the company’s stock compensation plans, and (ii) 7,963 shares owned and tendered by employees to satisfy tax withholding obligations on the vesting of restricted shares. Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the company’s shares on the date of vesting.
 
(2) Average price paid per share is calculated on a settlement basis and excludes commission.
 
(3) During the fourth quarter of fiscal 2010, the company had one publicly announced share repurchase program. Under this program, which was announced on June 30, 2008, the company’s Board of Directors authorized the purchase of up to $1.2 billion of company stock through the end of fiscal 2011. In addition to the publicly announced share repurchase program, the company will continue to purchase shares, under separate authorization, as part of its practice of buying back shares sufficient to offset shares issued under incentive compensation plans.
 
(4) Includes (i) 412,500 shares repurchased in open-market transactions at an average price of $35.60 to offset the dilutive impact to existing shareowners of issuances under the company’s stock compensation plans, and (ii) 679 shares owned and tendered by employees at an average price per share of $35.36 to satisfy tax withholding requirements on the vesting of restricted shares.
 
(5) Includes (i) 1,037,750 shares repurchased in open-market transactions at an average price of $36.62 to offset the dilutive impact to existing shareowners of issuances under the company’s stock compensation plans, and (ii) 2,664 shares owned and tendered by employees at an average price per share of $36.16 to satisfy tax withholding requirements on the vesting of restricted shares.
 
(6) Includes (i) 990,819 shares repurchased in open-market transactions at an average price of $36.01 to offset the dilutive impact to existing shareowners of issuances under the company’s stock compensation plans, and (ii) 4,620 shares owned and tendered by employees at an average price per share of $35.81 to satisfy tax withholding requirements on the vesting of restricted shares.


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Item 6.   Selected Financial Data
 
FIVE-YEAR REVIEW — CONSOLIDATED
 
                                         
Fiscal Year
  2010(1)   2009(2)   2008(3)   2007(4)   2006(5)
    (Millions, except per share amounts)
 
Summary of Operations
                                       
Net sales
  $ 7,676     $ 7,586     $ 7,998     $ 7,385     $ 6,894  
Earnings before interest and taxes
    1,348       1,185       1,098       1,243       1,097  
Earnings before taxes
    1,242       1,079       939       1,099       947  
Earnings from continuing operations
    844       732       671       792       720  
Earnings from discontinued operations
          4       494       62       46  
Net earnings
    844       736       1,165       854       766  
Financial Position
                                       
Plant assets — net
  $ 2,051     $ 1,977     $ 1,939     $ 2,042     $ 1,954  
Total assets
    6,276       6,056       6,474       6,445       7,745  
Total debt
    2,780       2,624       2,615       2,669       3,213  
Total equity
    929       731       1,321       1,298       1,770  
Per Share Data
                                       
Earnings from continuing operations — basic
  $ 2.44     $ 2.05     $ 1.77     $ 2.02     $ 1.75  
Earnings from continuing operations — assuming dilution
    2.42       2.03       1.75       1.99       1.73  
Net earnings — basic
    2.44       2.06       3.06       2.18       1.86  
Net earnings — assuming dilution
    2.42       2.05       3.03       2.14       1.84  
Dividends declared
    1.075       1.00       0.88       0.80       0.72  
Other Statistics
                                       
Capital expenditures
  $ 315     $ 345     $ 298     $ 334     $ 309  
Weighted average shares outstanding
    340       352       373       386       407  
Weighted average shares outstanding — assuming dilution
    343       354       377       392       411  
 
 
In the first quarter of fiscal 2010, the company adopted and retrospectively applied new accounting guidance related to a noncontrolling interest in a subsidiary. The guidance requires a noncontrolling interest in a subsidiary to be classified as a separate component of total equity.
 
In the first quarter of fiscal 2010, the company adopted and retrospectively applied new accounting guidance related to the calculation of earnings per share. The retrospective application of the provision resulted in the following reductions to basic and diluted earnings per share:
 
                                                                 
    2009   2008   2007   2006
    Basic   Diluted   Basic   Diluted   Basic   Diluted   Basic   Diluted
 
Continuing operations
  $ (.03 )   $ (.01 )   $ (.03 )   $ (.01 )   $ (.03 )   $ (.01 )   $ (.02 )   $ (.01 )
Net earnings
  $ (.03 )   $ (.01 )   $ (.06 )   $ (.03 )   $ (.03 )   $ (.02 )   $ (.02 )   $ (.01 )
 
(All per share amounts below are on a diluted basis)
 
The 2008 fiscal year consisted of fifty-three weeks. All other periods had fifty-two weeks.
 
(1) The 2010 earnings from continuing operations were impacted by the following: a restructuring charge of $8 ($.02 per share) for pension benefit costs associated with the 2008 initiatives to improve operational efficiency and long-term profitability and $10 ($.03 per share) to reduce deferred tax assets as a result of the U.S. health care legislation enacted in March 2010.
 
(2) The 2009 earnings from continuing operations were impacted by the following: an impairment charge of $47 ($.13 per share) related to certain European trademarks and $15 ($.04 per share) of restructuring-related costs associated with the 2008 initiatives to improve operational efficiency and long-term profitability. The 2009


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results of discontinued operations represented a $4 ($.01 per share) tax benefit related to the sale of the Godiva Chocolatier business.
 
(3) The 2008 earnings from continuing operations were impacted by the following: a $107 ($.28 per share) restructuring charge and related costs associated with initiatives to improve operational efficiency and long-term profitability and a $13 ($.03 per share) benefit from the favorable resolution of a tax contingency. The 2008 results of discontinued operations included a $462 ($1.20 per share) gain from the sale of the Godiva Chocolatier business.
 
(4) The 2007 earnings from continuing operations were impacted by the following: a $13 ($.03 per share) benefit from the reversal of legal reserves due to favorable results in litigation; a $25 ($.06 per share) benefit from a tax settlement of bilateral advance pricing agreements; and a $14 ($.04 per share) gain from the sale of an idle manufacturing facility. The 2007 results of discontinued operations included a $24 ($.06 per share) gain from the sale of the businesses in the United Kingdom and Ireland and a $7 ($.02 per share) tax benefit from the resolution of audits in the United Kingdom. On July 29, 2007, the company adopted a new standard for accounting for defined benefit pension and other postretirement plans. As a result, total assets were reduced by $294, shareowners’ equity was reduced by $230, and total liabilities were reduced by $64.
 
(5) The 2006 earnings from continuing operations were impacted by the following: a $60 ($.14 per share) benefit from the favorable resolution of a U.S. tax contingency; an $8 ($.02 per share) benefit from a change in inventory accounting method; incremental tax expense of $13 ($.03 per share) associated with the repatriation of non-U.S. earnings under the American Jobs Creation Act; and a $14 ($.03 per share) tax benefit related to higher levels of foreign tax credits, which could be utilized as a result of the sale of the businesses in the United Kingdom and Ireland. The 2006 results of discontinued operations included $56 of deferred tax expense due to book/tax basis differences and $5 of after-tax costs associated with the sale of the businesses (aggregate impact of $.15 per share).
 
Five-Year Review should be read in conjunction with the Notes to Consolidated Financial Statements.
 
Item 7.   Management’s Discussion and Analysis of Results of Operations and Financial Condition
 
Overview
 
 
Campbell Soup Company is a global manufacturer and marketer of high-quality, branded convenience food products. The company is organized and reports in the following segments: U.S. Soup, Sauces and Beverages; Baking and Snacking; International Soup, Sauces and Beverages; and North America Foodservice. See Note 6 to the Consolidated Financial Statements for additional information on segments.
 
 
The company’s strategies for driving consistent and sustainable sales and earnings growth for long-term total shareowner value are:
 
1. grow its icon brands within simple meals, baked snacks and healthy beverages;
 
2. deliver higher levels of consumer satisfaction through superior innovation focused on wellness while providing good value, quality and convenience;
 
3. make its products more broadly available and relevant in existing and new markets, consumer segments and eating occasions;
 
4. strengthen its business through outside partnerships and acquisitions;
 
5. increase margins by improving price realization and company-wide total cost management;
 
6. improve overall organizational excellence, diversity and engagement; and
 
7. advance a powerful commitment to sustainability and corporate social responsibility.


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Grow the company’s icon brands within simple meals, baked snacks and healthy beverages.  Campbell’s overarching business strategy is to drive profitable growth by focusing on three large and growing categories — simple meals, baked snacks, and healthy beverages — in geographies where it has strong brands, leading share positions and regional scale. Most of the company’s sales currently are attributable to the United States, Australia, Canada, France, Germany and Belgium. Its major brands in these categories and geographies include Campbell’s, Swanson, Pace, Prego, Liebig, Erasco, Pepperidge Farm, Arnott’s, and V8. The company intends to enhance the growth of its healthy beverages and baked snacks portfolio of businesses through increased innovation and marketing support. The company also expects to grow its simple meal businesses by increasing its focus on meal-makers, which are ingredients and components used to make a meal, such as broth, sauces and cooking soups, while continuing investments behind its condensed eating and ready-to-serve soups.
 
Deliver higher levels of consumer satisfaction through superior innovation focused on wellness while providing good value, quality and convenience.  Consumers are seeking and will continue to seek products with a strong value-orientation and with health and wellness benefits. Campbell is pursuing initiatives designed to address these consumer trends and to drive strong levels of consumer satisfaction. For example, in fiscal 2011, building on the success of the V8 V-Fusion juice offerings, the company will introduce a number of new V8 V-Fusion Plus Tea products. In the baked snacks category, the company plans to continue upgrading the health credentials of its cracker (or savory biscuit) offerings. Responding to the consumer’s value-oriented focus, Campbell’s condensed soups will be relaunched with a new contemporary packaging design and an upgrade to the company’s gravity-fed shelving system. In the ready-to-serve soup portfolio, a number of the company’s offerings in the United States, Canada, Germany, France, Belgium and Australia will be enhanced. Finally, all of the company’s Campbell’s-branded U.S. soups will benefit from a unified advertising campaign focusing on the taste and nutritional attributes of the company’s soup products.
 
Make the company’s products more broadly available and relevant in existing and new markets, consumer segments and eating occasions.  Campbell will pursue strategies designed to expand the availability and relevance of its products in existing and new markets, including new consumer segments and eating occasions. Campbell will continue to develop its businesses in the emerging markets of Russia and China. In addition, to capitalize on the global trend of more in-home meal preparation by consumers, the company will focus consumers on its extensive portfolio of meal-maker offerings, such as broths, sauces and cooking soups.
 
Strengthen the company’s business through outside partnerships and acquisitions.  Campbell continues to explore opportunities to accelerate sales and earnings growth through value-creating external development in its core and adjacent categories.
 
Increase margins by improving price realization and company-wide total cost management.  Over the long term, the company is committed to increasing margins though a combination of pricing and cost management efforts. In fiscal 2010, with the assistance of a number of successful supply chain initiatives, costs per unit declined. Campbell will continue these efforts in fiscal 2011 by leveraging its new SAP enterprise-resource planning system and by simplifying the soup-making process in its North American manufacturing network. The company also will pursue efficiency initiatives in its selling and administrative costs.
 
Improve overall organizational excellence, diversity and engagement.  Campbell is committed to building a world-class organization that is diverse, inclusive and engaged. In order to attract, develop and retain the best talent, the company focuses on manager quality, employee engagement, leadership behavior, employee affinity groups, workplace flexibility and employee wellness. As part of these efforts, the company recently opened a new 80,000-square foot employee center at its world headquarters in Camden, New Jersey.
 
Advance a powerful commitment to sustainability and corporate social responsibility (CSR).  The company’s commitment to sustainability and corporate social responsibility is centered around four key pillars: environmental performance, community outreach, workplace excellence, and the nutrition and wellness attributes of the company’s products. The company has established long-term destination goals against each of these four pillars and developed strategies to attain these goals. The goals and strategies are described in the company’s 2010 CSR report.


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Executive Summary
 
This Executive Summary provides significant highlights from the discussion and analysis that follows.
 
  •  Net sales increased 1% in 2010 to $7.676 billion.
 
  •  Gross profit, as a percent of sales, increased to 41.0% from 39.9% a year ago, reflecting cost savings from productivity initiatives.
 
  •  Net earnings per share in 2010 were $2.42 compared to $2.05. The current year included $.05 per share of expense from items that impacted comparability. The prior year included net expense of $.16 per share from items that impacted comparability, as discussed below.
 
  •  For 2010, cash from operations decreased from $1.166 billion a year ago to $1.057 billion.
 
  •  Pension fund contributions were $284 million in 2010 compared to $13 million in 2009.
 
Earnings from Continuing and Discontinued Operations — 2010 Compared with 2009
 
The following items impacted the comparability of net earnings and net earnings per share:
 
Continuing Operations
 
  •  In the third quarter of fiscal 2010, the company recorded deferred tax expense of $10 million, or $.03 per share, to reduce deferred tax assets as a result of the U.S. health care legislation enacted in March 2010. The law changed the tax treatment of subsidies to companies that provide prescription drug benefits to retirees;
 
  •  In the third quarter of fiscal 2010, the company recorded a restructuring charge of $12 million ($8 million after tax or $.02 per share) for pension benefit costs related to the previously announced initiatives to improve operational efficiency and long-term profitability. In fiscal 2009, the company recorded pre-tax restructuring-related costs of $22 million ($15 million after tax or $.04 per share) in Cost of products sold associated with the previously announced initiatives. See Note 7 to the Consolidated Financial Statements and “Restructuring Charges” for additional information; and
 
  •  In the fourth quarter of fiscal 2009, as part of the company’s annual review of intangible assets, an impairment charge of $67 million ($47 million after tax or $.13 per share) was recorded in Other expense/(income) related to certain European trademarks, primarily in Germany and the Nordic region, used in the International Soup, Sauces and Beverages segment. See Note 5 to the Consolidated Financial Statements for additional information.
 
Discontinued Operations
 
  •  In the second quarter of fiscal 2009, the company recorded a $4 million tax benefit ($.01 per share) related to the sale of the Godiva Chocolatier business.


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The items impacting comparability are summarized below:
 
                                 
    2010     2009  
    Earnings
    EPS
    Earnings
    EPS
 
    Impact     Impact     Impact     Impact  
    (Millions, except per share amounts)  
 
Earnings from continuing operations
  $ 844     $ 2.42     $ 732     $ 2.03  
                                 
Earnings from discontinued operations
  $     $     $ 4     $ .01  
                                 
Net earnings(1)
  $ 844     $ 2.42     $ 736     $ 2.05  
                                 
Continuing operations:
                               
Deferred tax expense from U.S. health care legislation
  $ (10 )   $ (.03 )   $     $  
Restructuring charges and related costs
    (8 )     (.02 )     (15 )     (.04 )
Impairment charge
                (47 )     (.13 )
Discontinued operations:
                               
Tax benefit from the sale of Godiva Chocolatier business
  $     $     $ 4     $ .01  
                                 
Impact of significant items on net earnings
  $ (18 )   $ (.05 )   $ (58 )   $ (.16 )
                                 
 
 
(1) The sum of the individual per share amounts does not equal due to rounding.
 
Earnings from continuing operations were $844 million in 2010 ($2.42 per share) and $732 million ($2.03 per share) in 2009. After adjusting for the items impacting comparability, Earnings from continuing operations increased primarily due to improved gross margin performance and the impact of currency, partially offset by lower sales volume. Earnings per share from continuing operations benefited from a reduction in the weighted average diluted shares outstanding, which was primarily due to share repurchases under the company’s strategic share repurchase program.
 
Earnings from discontinued operations of $4 million in 2009 represented an adjustment to the tax liability associated with the sale of the Godiva Chocolatier business.
 
Earnings from Continuing and Discontinued Operations — 2009 Compared with 2008
 
Net earnings were $736 million in 2009 ($2.05 per share) and $1,165 million ($3.03 per share) in 2008.
 
In addition to the 2009 items that impacted comparability of net earnings and net earnings per share, the following items also impacted comparability:
 
Continuing Operations
 
  •  In fiscal 2008, the company recorded a pre-tax restructuring charge of $175 million ($102 million after tax or $.27 per share) and $7 million ($5 million after tax or $.01 per share) of accelerated depreciation in Cost of products sold. The aggregate impact was $182 million ($107 million after tax or $.28 per share) related to the initiatives. See Note 7 to the Consolidated Financial Statements and “Restructuring Charges” for additional information; and
 
  •  In the second quarter of fiscal 2008, the company recognized a non-cash tax benefit of $13 million ($.03 per share) from the favorable resolution of a state tax contingency in the United States.
 
Discontinued Operations
 
  •  In 2008, the company recognized a pre-tax gain of $698 million ($462 million after tax or $1.20 per share) from the sale of the Godiva Chocolatier business.


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The items impacting comparability are summarized below:
 
                                 
    2009     2008  
    Earnings
    EPS
    Earnings
    EPS
 
    Impact     Impact     Impact     Impact  
    (Millions, except per share amounts)  
 
Earnings from continuing operations
  $ 732     $ 2.03     $ 671     $ 1.75  
                                 
Earnings from discontinued operations
  $ 4     $ .01     $ 494     $ 1.28  
                                 
Net earnings(1)
  $ 736     $ 2.05     $ 1,165     $ 3.03  
                                 
Continuing operations:
                               
Impairment charge
  $ (47 )   $ (.13 )   $     $  
Restructuring charges and related costs
    (15 )     (.04 )     (107 )     (.28 )
Benefit from resolution of state tax contingency
                13       .03  
Discontinued operations:
                               
Tax benefit from the sale of Godiva Chocolatier business
  $ 4     $ .01     $     $  
Gain on sale of Godiva Chocolatier business
                462       1.20  
                                 
Impact of significant items on net earnings(1)
  $ (58 )   $ (.16 )   $ 368     $ .96  
                                 
 
 
(1) The sum of the individual per share amounts does not equal due to rounding.
 
Earnings from continuing operations were $732 million in 2009 ($2.03 per share) and $671 million ($1.75 per share) in 2008. After adjusting for the items impacting comparability, Earnings from continuing operations increased primarily due to lower interest expense, lower marketing and selling expenses, partially offset by the negative impact of currency translation. Earnings per share from continuing operations benefited from a reduction in the weighted average diluted shares outstanding. The reduction was primarily due to share repurchases utilizing the net proceeds from the divestiture of the Godiva Chocolatier business and the company’s strategic share repurchase programs. Earnings per share from continuing operations were negatively impacted by $.09 from currency translation in 2009.
 
Earnings from discontinued operations of $4 million in 2009 represented an adjustment to the tax liability associated with the sale of the Godiva Chocolatier business. Earnings from discontinued operations were $494 million in 2008 and included the $462 million gain from the sale of the Godiva Chocolatier business. Earnings per share from discontinued operations were $.01 in 2009 and $1.28 in 2008. The operations of Godiva contributed to earnings of $.08 per share in 2008.
 
 
There were 52 weeks in fiscal 2010 and 2009, and 53 weeks in fiscal 2008.
 
In June 2008, the Financial Accounting Standards Board (FASB) issued accounting guidance related to the calculation of earnings per share. The guidance provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The company adopted and retrospectively applied the new guidance in the first quarter of 2010. The retrospective application of the provision resulted in the following reductions to basic and diluted earnings per share for fiscal 2009 and fiscal 2008:
 
                                 
    2009   2008
    Basic   Diluted   Basic   Diluted
 
Continuing operations
  $ (.03 )   $ (.01 )   $ (.03 )   $ (.01 )
Net earnings
  $ (.03 )   $ (.01 )   $ (.06 )   $ (.03 )


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See Note 9 to the Consolidated Financial Statements for additional information.
 
In May 2009, the company acquired Ecce Panis, Inc., an artisan bread maker, for $66 million. The business is included in the Baking and Snacking segment. See Note 8 to the Consolidated Financial Statements for additional information.
 
In June 2008, the company acquired the Wolfgang Puck soup business for approximately $10 million. The company also entered into a master licensing agreement with Wolfgang Puck Worldwide, Inc. for the use of the Wolfgang Puck brand on soup, stock, and broth products in North America retail locations. This business is included in the U.S. Soup, Sauces and Beverages segment. See Note 8 to the Consolidated Financial Statements for additional information.
 
In July 2008, the company entered into an agreement to sell its sauce and mayonnaise business comprised of products sold under the Lesieur brand in France. The business had annual net sales of approximately $70 million. The sale was completed on September 29, 2008 and generated $36 million of proceeds. The purchase price was subject to working capital and other post-closing adjustments, which resulted in an additional $6 million of proceeds. See Note 3 to the Consolidated Financial Statements for additional information.
 
In the third quarter of 2008, the company entered into an agreement to sell certain Australian salty snack food brands and assets. The transaction, which was completed on May 12, 2008, included salty snack brands such as Cheezels, Thins, Tasty Jacks, French Fries, and Kettle Chips, certain other assets and the assumption of liabilities. Proceeds of the sale were nominal. The business had annual net sales of approximately $150 million. This transaction is included in the restructuring initiatives described in Note 7.
 
In March 2008, the company completed the sale of its Godiva Chocolatier business for $850 million, pursuant to a Sale and Purchase Agreement dated December 20, 2007. The purchase price was subject to certain post-closing adjustments, which resulted in an additional $20 million of proceeds. The company has reflected the results of this business as discontinued operations in the consolidated statements of earnings. The company used approximately $600 million of the net proceeds to purchase company stock. See Note 3 to the Consolidated Financial Statements for additional information.
 
Discussion and Analysis
 
Sales
 
An analysis of net sales by reportable segment follows:
 
                                         
                      % Change  
    2010     2009     2008     2010/2009     2009/2008  
          (Millions)              
 
U.S. Soup, Sauces and Beverages
  $ 3,700     $ 3,784     $ 3,674       (2 )     3  
Baking and Snacking
    1,975       1,846       2,058       7       (10 )
International Soup, Sauces and Beverages
    1,423       1,357       1,610       5       (16 )
North America Foodservice
    578       599       656       (4 )     (9 )
                                         
    $ 7,676     $ 7,586     $ 7,998       1       (5 )
                                         


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An analysis of percent change of net sales by reportable segment follows:
 
                                         
                International
             
    U.S. Soup,
    Baking
    Soup,
    North
       
    Sauces and
    and
    Sauces
    America
       
    Beverages     Snacking     Beverages     Foodservice     Total  
 
2010/2009
                                       
Volume and Mix
    (1 )%     2 %     (1 )%     (5 )%     (1 )%
Price and Sales Allowances
    1       1       2       1       1  
Increased Promotional Spending(1)
    (2 )     (3 )     (2 )     (1 )     (2 )
Divestitures/Acquisitions
          1       (1 )            
Currency
          6       7       1       3  
                                         
      (2 )%     7 %     5 %     (4 )%     1 %
                                         
 
                                         
                International
             
    U.S. Soup,
    Baking
    Soup,
    North
       
    Sauces and
    and
    Sauces and
    America
       
    Beverages     Snacking     Beverages     Foodservice     Total  
 
2009/2008
                                       
Volume and Mix
    (2 )%     (1 )%     (3 )%     (8 )%     (2 )%
Price and Sales Allowances
    8       7       5       6       7  
Increased Promotional Spending(1)
    (2 )     (2 )     (1 )     (3 )     (2 )
Impact of 53rd week
    (1 )     (2 )     (2 )     (2 )     (2 )
Divestitures/Acquisitions
          (6 )     (4 )           (2 )
Currency
          (6 )     (11 )     (2 )     (4 )
                                         
      3 %     (10 )%     (16 )%     (9 )%     (5 )%
                                         
 
 
(1) Represents revenue reductions from trade promotion and consumer coupon redemption programs.
 
In 2010, U.S. Soup, Sauces and Beverages sales decreased 2%. U.S. soup sales decreased 4%, due to the following:
 
  •  Sales of Campbell’s condensed soups declined 2%, as declines in eating varieties were partially offset by gains in cooking varieties.
 
  •  Sales of ready-to-serve soups decreased 9% with declines in both canned and microwavable varieties.
 
  •  Broth sales increased 3% reflecting benefits from growth of in-home eating occasions and consumer demand for 100% natural product offerings.
 
Within the U.S. Soup, Sauces and Beverages segment, beverage sales increased 4% in 2010 primarily due to higher sales of V8 V-Fusion vegetable and fruit juice and gains in V8 Splash juice drinks, partly offset by lower sales of V8 vegetable juice. V8 V-Fusion vegetable and fruit juice sales increased double digits due to increased advertising and new item launches. Prego pasta sauce sales increased, reflecting growth of Prego Heart Smart varieties, while Pace Mexican sauce sales declined.
 
In 2009, U.S. Soup, Sauces and Beverages sales increased 3%. U.S. soup sales increased 5% as ready-to-serve soup sales increased 4%, condensed soup sales increased 5% and broth sales increased 9%. The ready-to-serve soup sales increase was primarily due to the successful launches of Campbell’s Select Harvest soups and Campbell’s V8 soups, partially offset by declines in Campbell’s Chunky soups. Within ready-to-serve, sales declined in the convenience platform, which includes soups in microwavable bowls and cups. In condensed, sales increased with growth in cooking and in eating varieties. The increase in broth sales was due to growth in aseptic varieties and the introduction of Swanson stock products. The Wolfgang Puck soup, stock and broth business acquired in June 2008 contributed modestly to U.S. soup sales growth. Beverage sales decreased due to declines in V8 vegetable juice,


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partially offset by gains in V8 V-Fusion vegetable and fruit juice. Prego pasta sauce sales increased double digits and sales of Pace Mexican sauces increased reflecting growth of in-home eating occasions.
 
In 2010, Baking and Snacking sales increased 7% primarily due to currency. Pepperidge Farm sales were comparable to a year ago, as the additional sales from the acquisition of Ecce Panis, Inc. and volume gains were offset by increased promotional spending. Arnott’s sales increased due to currency and growth in Tim Tam chocolate biscuits and Shapes savory crackers.
 
In 2009, Baking and Snacking sales decreased 10%. Pepperidge Farm achieved sales growth with gains in the cookies and crackers business, reflecting significant growth in Goldfish snack crackers. Arnott’s sales declined due to the divestiture of certain salty snack food brands in May 2008, the unfavorable impact of currency and the impact of one less week in 2009. Excluding these items, Arnott’s sales increased due to growth in savory and chocolate biscuit products and growth in Indonesia.
 
In 2010, International Soup, Sauces and Beverages sales increased 5% primarily due to currency, partly offset by the divestiture of the company’s French sauce and mayonnaise business in September 2008. In Europe, sales declined, reflecting lower sales in Germany and the impact of the divestiture, partly offset by the impact of currency. In Asia Pacific, sales increased due to currency and volume-driven gains in Japan, Australia and Malaysia. In Canada, sales increased due to currency, partially offset by lower sales volume of ready-to-serve soups.
 
In 2009, International Soup, Sauces and Beverages sales declined 16%. In Europe, sales declined due to the divestiture of the French sauce and mayonnaise business, the impact of currency, one less week in 2009, and lower sales in Germany. In the Asia Pacific region, sales declined due to the impact of currency and one less week in 2009, partially offset by gains in Malaysia and in the Australian soup business. In Canada, sales decreased due to currency and one less week in 2009, partially offset by gains in the soup business.
 
In 2010, North America Foodservice sales declined 4% primarily due to continued weakness in the food service sector.
 
In 2009, North America Foodservice sales declined 9% primarily due to weakness in the food service sector and the unfavorable impact of currency.
 
 
Gross profit, defined as Net sales less Cost of products sold, increased by $122 million in 2010 from 2009 and decreased by $143 million in 2009 from 2008. As a percent of sales, gross profit was 41.0% in 2010, 39.9% in 2009, and 39.6% in 2008. The percentage point increase in 2010 was due to higher selling prices (approximately 0.8 percentage point), productivity improvements (approximately 2.1 percentage points), costs in the prior year related to the initiatives to improve operational efficiency and long-term profitability (approximately 0.3 percentage point), and mix (0.1 percentage point), partially offset by a higher level of promotional spending (approximately 1.2 percentage points) and the impact of cost inflation and other factors (approximately 1 percentage point). The percentage point increase in 2009 was due to higher selling prices (approximately 4.4 percentage points), productivity improvements (approximately 1.8 percentage points) and mix (0.4 percentage point), partially offset by a higher level of promotional spending (approximately 1.1 percentage points) and the impact of cost inflation and other factors (approximately 5.2 percentage points).
 
 
Marketing and selling expenses as a percent of sales were 13.8% in 2010, 14.2% in 2009, and 14.5% in 2008. Marketing and selling expenses decreased 2% in 2010 from 2009. The decrease was primarily due to lower advertising and consumer promotion costs (approximately 3 percentage points) and lower marketing expenses (approximately 1 percentage point), partially offset by the impact of currency (approximately 2 percentage points). The lower advertising expenses in the current year reflected a reduction in media rates and a shift to trade promotion in many of the businesses. Marketing and selling expenses decreased 7% in 2009 from 2008. The decrease was primarily due to the impact of currency (approximately 3 percentage points), lower marketing expenses (approximately 2 percentage points), and lower selling expenses (approximately 2 percentage points). In 2009, while


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advertising expenses increased in U.S. soup to support the launch of new products, marketing expenses were reduced in other businesses to fund increased promotional activity.
 
 
Administrative expenses as a percent of sales were 7.9% in 2010, 7.8% in 2009, and 7.6% in 2008. Administrative expenses increased by 2% in 2010 from 2009, primarily due to the impact of currency (approximately 2 percentage points), an increase in compensation and benefit costs, including pension expense (approximately 2 percentage points), partially offset by the company’s cost management efforts and other factors (approximately 2 percentage points). Administrative expenses declined 3% in 2009 from 2008 due primarily to the impact of currency.
 
 
Research and development expenses increased $9 million or 8% in 2010 from 2009. The increase was primarily due to an increase in compensation and benefit costs (approximately 4 percentage points), costs associated with an initiative to simplify the soup-making process in North America (approximately 2 percentage points), and the impact of currency (approximately 2 percentage points). Research and development expenses decreased $1 million or 1% in 2009 from 2008. The decrease was primarily due to the impact of currency (approximately 3 percentage points), partially offset by an increase in wages and other costs (approximately 2 percentage points).
 
 
Other expense in 2009 included a $67 million impairment charge associated with certain European trademarks primarily used in Germany and the Nordic region. The charge was recorded as a result of the company’s annual review of intangible assets and was reflected in the International Soup, Sauces and Beverages segment. See also Note 5 to the Consolidated Financial Statements.
 
Other expense in 2008 included $6 million of impairment charges associated with certain trademarks used in the International Soup, Sauces and Beverages segment and the pending sale of the sauce and mayonnaise business comprised of products sold under the Lesieur brand in France. See also Note 3 to the Consolidated Financial Statements.
 
Operating Earnings
 
Segment operating earnings increased 14% in 2010 from 2009 and increased 5% in 2009 from 2008. The 2010 results included $12 million of restructuring charges. The 2009 results included $22 million of restructuring-related costs and a $67 million impairment charge. The 2008 results included $182 million of restructuring charges and related costs.
 
An analysis of operating earnings by reportable segment follows:
 
                                         
                      % Change  
    2010(1)     2009(2)     2008(3)     2010/2009     2009/2008  
          (Millions)                    
 
U.S. Soup, Sauces and Beverages
  $ 943     $ 927     $ 891       2       4  
Baking and Snacking
    322       262       120       23       118  
International Soup, Sauces and Beverages
    161       69       179       133       (61 )
North America Foodservice
    43       34       40       26       (15 )
                                         
      1,469       1,292       1,230       14       5  
Unallocated corporate expenses
    (121 )     (107 )     (132 )                
                                         
    $ 1,348     $ 1,185     $ 1,098                  
                                         


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(1) Operating earnings for the North America Foodservice segment included $12 million of restructuring charges. See Note 7 for additional information on restructuring charges.
 
(2) Operating earnings by segment included restructuring-related costs of $3 million in Baking and Snacking and $19 million in North America Foodservice. See Note 7 for additional information. The International Soup, Sauces and Beverages segment included a $67 million impairment charge on certain European trademarks. See Note 5 for additional information.
 
(3) Operating earnings by segment included the effect of a 2008 restructuring charge and related costs of $182 million as follows: Baking and Snacking — $144 million; International Soup, Sauces and Beverages — $9 million; and North America Foodservice — $29 million. See Note 7 for additional information.
 
Earnings from U.S. Soup, Sauces and Beverages increased 2% in 2010 versus 2009 primarily due to an improvement in gross margin percentage and lower advertising expenses, partially offset by lower sales.
 
Earnings from U.S. Soup, Sauces, and Beverages increased 4% in 2009 from 2008 primarily due to pricing, net of increased promotional spending, and productivity improvements, which more than offset cost inflation and lower sales volume.
 
Earnings from Baking and Snacking increased 23% in 2010 versus 2009. The prior year included $3 million in restructuring-related costs. The increase in operating earnings was due to the impact of currency and earnings growth in Pepperidge Farm and Arnott’s.
 
Earnings from Baking and Snacking increased from $120 million in 2008 to $262 million in 2009. Earnings in 2009 included $3 million in accelerated depreciation and other exit costs and earnings in 2008 included $144 million of restructuring charges related to the initiatives to improve operational efficiency and long-term profitability. Excluding these items, operating earnings growth in Pepperidge Farm and Arnott’s was mostly offset by the negative impact of currency and one less week.
 
Earnings from International Soup, Sauces and Beverages increased to $161 million from $69 million in 2009. Earnings in 2009 included a $67 million impairment charge on certain European trademarks, primarily in Germany and the Nordic region. Excluding the impairment charge, the increase in operating earnings was primarily due to the impact of currency and growth in the businesses in Europe as well as Asia Pacific, partially offset by declines in Canada.
 
Earnings from International Soup, Sauces and Beverages decreased from $179 million in 2008 to $69 million in 2009. Earnings in 2009 included a $67 million impairment charge on certain European trademarks, primarily in Germany and the Nordic region. Earnings in 2008 included $9 million of restructuring charges related to the initiatives to improve operational efficiency and long-term profitability. Excluding these items, operating earnings declined, primarily due to the impact of currency and costs associated with establishing businesses in Russia and China.
 
Earnings from North America Foodservice increased to $43 million in 2010 from $34 million in 2009. The current year included $12 million in restructuring charges, and the prior year included $19 million in restructuring-related costs. Excluding these items, earnings increased slightly due to cost reduction efforts.
 
Earnings from North America Foodservice decreased 15% in 2009 from 2008. Earnings in 2009 included $19 million in restructuring-related costs and earnings in 2008 included $29 million of restructuring charges and costs associated with the initiatives to improve operational efficiency and long-term profitability. Excluding these items, earnings decreased reflecting the reduction in sales.
 
Unallocated corporate expenses increased from $107 million in 2009 to $121 million in 2010. The increase was primarily due to foreign exchange gains recorded in the prior year and higher equity-related benefit costs in the current year.
 
Unallocated corporate expenses decreased $25 million from $132 million in 2008 to $107 million in 2009. The decrease was primarily due to lower expenses associated with the company’s North American SAP implementation.


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Interest expense increased to $112 million in 2010 from $110 million in 2009 primarily due to an increase in fixed-rate debt and higher average debt levels, partially offset by lower average short-term rates. Interest income increased to $6 million in 2010 from $4 million in 2009 primarily due to higher levels of cash and cash equivalents.
 
Interest expense decreased to $110 million in 2009 from $167 million in 2008 primarily due to lower interest rates. Interest income declined to $4 million in 2009 from $8 million in 2008 primarily due to lower levels of cash and cash equivalents.
 
 
The effective tax rate was 32.0% in 2010, 32.2% in 2009, and 28.5% in 2008. The following factors impacted the comparability of the tax rate in 2010 versus 2009:
 
  •  In 2010, the company recognized deferred tax expense of $10 million as a result of the enactment of U.S. health care legislation in March 2010. The law changed the tax treatment of subsidies to companies that provide prescription drug benefits to retirees. The company recorded the adjustment to reduce the value of the deferred tax asset associated with the subsidy.
 
  •  In 2009, the company recognized an $11 million benefit following the finalization of tax audits.
 
The effective rate decreased in 2010 from 2009 reflecting additional tax expense associated with the repatriation of foreign earnings in the prior year.
 
The following factors impacted the 2008 tax rate:
 
  •  In 2008, the company recognized a tax benefit of $75 million on the $182 million pre-tax restructuring charge and related costs.
 
  •  In 2008, the company recognized a $13 million benefit from the resolution of a state tax contingency.
 
The effective rate increased in 2009 from 2008 reflecting additional tax expense associated with the repatriation of foreign earnings. The 2008 effective rate reflects a benefit for tax rate changes in foreign jurisdictions.
 
Restructuring Charges
 
On April 28, 2008, the company announced a series of initiatives to improve operational efficiency and long-term profitability, including selling certain salty snack food brands and assets in Australia, closing certain production facilities in Australia and Canada, and streamlining the company’s management structure. As a result of these initiatives, in 2008, the company recorded a restructuring charge of $175 million ($102 million after tax or $.27 per share). The charge consisted of a net loss of $120 million ($64 million after tax) on the sale of certain Australian salty snack food brands and assets, $45 million ($31 million after tax) of employee severance and benefit costs, including the estimated impact of curtailment and other pension charges, and $10 million ($7 million after tax) of property, plant and equipment impairment charges. In addition, approximately $7 million ($5 million after tax or $.01 per share) of costs related to these initiatives were recorded in Cost of products sold, primarily representing accelerated depreciation on property, plant and equipment. The aggregate after-tax impact of restructuring charges and related costs in 2008 was $107 million, or $.28 per share.
 
In 2009, the company recorded approximately $22 million ($15 million after tax or $.04 per share) of costs related to the 2008 initiatives in Cost of products sold. Approximately $17 million ($12 million after tax) of the costs represented accelerated depreciation on property, plant and equipment; approximately $4 million ($2 million after tax) related to other exit costs; and approximately $1 million related to employee severance and benefit costs, including other pension charges.
 
In 2010, the company recorded a restructuring charge of $12 million ($8 million after tax or $.02 per share) for pension benefit costs, which represented the final costs associated with the 2008 initiatives.


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Details of the components of the initiatives are as follows:
 
In the third quarter of 2008, as part of the initiatives, the company entered into an agreement to sell certain Australian salty snack food brands and assets. The transaction was completed on May 12, 2008. Proceeds of the sale were nominal. In connection with this transaction, the company recognized a net loss of $120 million ($64 million after tax) in 2008. The terms of the agreement required the company to provide a loan facility to the buyer of AUD $10 million, or approximately USD $9 million. The facility was drawn down in AUD $5 million increments in 2009. Borrowings under the facility are to be repaid five years after the closing date. See also Note 3 to the Consolidated Financial Statements for additional information.
 
In April 2008, as part of the initiatives, the company announced plans to close the Listowel, Ontario, Canada food plant. The Listowel facility produced primarily frozen products, including soup, entrees, and Pepperidge Farm products, as well as ramen noodles. The facility employed approximately 500 people. The company closed the facility in April 2009. Production was transitioned to its network of North American contract manufacturers and to its Downingtown, Pennsylvania plant. The company recorded $20 million ($14 million after tax) of employee severance and benefit costs, including the estimated impact of curtailment and other pension charges, and $7 million ($5 million after tax) in accelerated depreciation of property, plant and equipment in 2008. In 2009, the company recorded $1 million of employee severance and benefit costs, including other pension charges, $16 million ($11 million after tax) in accelerated depreciation of property, plant and equipment and $2 million ($1 million after tax) of other exit costs. In 2010, the company recorded $12 million ($8 million after tax) for pension benefit costs, which represented the final costs associated with the initiatives.
 
In April 2008, as part of the initiatives, the company also announced plans to discontinue the private label biscuit and industrial chocolate production at its Miranda, Australia facility. The company closed the Miranda facility, which employed approximately 150 people, in the second quarter of 2009. In connection with this action, the company recorded $10 million ($7 million after tax) of property, plant and equipment impairment charges and $8 million ($6 million after tax) in employee severance and benefit costs in 2008. In 2009, the company recorded $1 million in accelerated depreciation of property, plant and equipment and $2 million ($1 million after tax) of other exit costs.
 
As part of the 2008 initiatives, the company streamlined its management structure and eliminated certain overhead costs. These actions began in the fourth quarter of 2008 and were substantially completed in 2009. In connection with this action, the company recorded $17 million ($11 million after tax) in employee severance and benefit costs in 2008.
 
In aggregate, the company incurred pre-tax costs of approximately $216 million in 2008 through 2010 by segment as follows: Baking and Snacking — $147 million, International Soup, Sauces and Beverages — $9 million and North America Foodservice — $60 million.
 
See Note 7 to the Consolidated Financial Statements for additional information.
 
Discontinued Operations
 
On March 18, 2008, the company completed the sale of its Godiva Chocolatier business for $850 million, pursuant to a Stock Purchase Agreement dated December 20, 2007. The purchase price was subject to working capital and other post-closing adjustments, which resulted in an additional $20 million of proceeds. The company has reflected the results of this business as discontinued operations in the consolidated statements of earnings. The company used $600 million of the net proceeds from the sale to purchase company stock. In fiscal 2008, the company recognized a pre-tax gain of $698 million ($462 million after tax or $1.20 per share) on the sale. In fiscal 2009, the company recognized a $4 million tax benefit as a result of an adjustment to the tax liability associated with the sale.


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Results of the operations of the Godiva Chocolatier business are summarized below:
 
                 
    2009     2008  
    (Millions)  
 
Net sales
  $   —     $ 393  
                 
Earnings from operations before taxes
  $     $ 49  
Taxes on earnings — operations
          (17 )
Gain on sale
          698  
Tax impact from sale of business
    4       (236 )
                 
Earnings from discontinued operations
  $ 4     $ 494  
                 
 
 
The company expects that foreseeable liquidity and capital resource requirements, including cash outflows to repurchase shares, pay dividends and fund pension plan contributions, will be met through anticipated cash flows from operations; long-term borrowings under its shelf registration statement; short-term borrowings, including commercial paper; and cash and cash equivalents. Over the last three years, operating cash flows totaled approximately $3 billion. This cash generating capability provides the company with substantial financial flexibility in meeting its operating and investing needs. The company expects that its sources of financing are adequate to meet its future liquidity and capital resource requirements. The cost and terms of any future financing arrangements may be negatively impacted by capital and credit market disruptions and will depend on the market conditions and the company’s financial position at the time.
 
The company generated cash from operations of $1.057 billion in 2010, compared to $1.166 billion last year. The decline was primarily due to a $260 million contribution to a U.S. pension plan in 2010, partially offset by improvements in working capital requirements.
 
Net cash flows from operating activities provided $1.166 billion in 2009, compared to $766 million in 2008. The increase was due to higher cash earnings and lower tax payments. In 2008, net cash flows from operations included tax payments associated with the divestiture of Godiva.
 
Capital expenditures were $315 million in 2010, $345 million in 2009, and $298 million in 2008. Capital expenditures are expected to total approximately $300 million in 2011. Capital expenditures in 2010 included expansion and enhancements of the company’s corporate headquarters (approximately $36 million), expansion of Arnott’s production capacity (approximately $21 million), the ongoing implementation of SAP in Australia and New Zealand (approximately $15 million) and expansion of Pepperidge Farm’s production capacity (approximately $14 million). Capital expenditures in 2009 included expansion of the U.S. beverage production capacity (approximately $54 million) and expansion and enhancements of the company’s corporate headquarters (approximately $20 million). Capital expenditures in 2008 included investments to expand the Pepperidge Farm bakery production capacity, implement the SAP enterprise-resource planning system in North America, expand the U.S. beverage production capacity, and expand the warehouse at the Maxton, North Carolina facility.
 
Business acquired, as presented in the Statements of Cash Flows, represented the acquisition of the Ecce Panis, Inc. business in the fourth quarter of 2009 and the Wolfgang Puck soup business in the fourth quarter of 2008.
 
Net cash provided by investing activities in 2009 included $38 million of proceeds from the sale of the sauce and mayonnaise business in France, net of cash divested. Net cash provided by investing activities in 2008 included $828 million of proceeds from the sale of the Godiva Chocolatier business and certain Australian salty snack food brands and assets, net of cash divested.
 
Long-term borrowings in 2010 included the issuance in July of $400 million of 3.05% notes that mature in July 2017. Long-term borrowings in 2009 included the issuance in January of $300 million of 4.5% notes that mature in February 2019 and the issuance in July of $300 million of 3.375% notes that mature in August 2014. The net proceeds from these issuances were used for the repayment of commercial paper borrowings and for other general corporate purposes. There were no new long-term borrowings in 2008.


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Dividend payments were $365 million in 2010, $350 million in 2009, and $329 million in 2008. Annual dividends declared in 2010 were $1.075 per share, $1.00 per share in 2009, and $.88 per share in 2008. The 2010 fourth quarter rate was $.275 per share.
 
Excluding shares owned and tendered by employees to satisfy tax withholding requirements on the vesting of restricted shares and for stock option exercises, the company repurchased 14 million shares at a cost of $472 million during 2010. Approximately 7 million of the shares repurchased in 2010 were repurchased pursuant to the company’s June 2008 publicly announced share repurchase program. Under this program, the company’s Board of Directors authorized the purchase of up to $1.2 billion of company stock through the end of fiscal 2011. Approximately $550 million remained available under the June 2008 repurchase program as of August 1, 2010. In addition to the June 2008 publicly announced share repurchase program, the company also purchased shares to offset the impact of dilution from shares issued under the company’s stock compensation plans. The company expects to continue this practice in the future. See “Market for Registrant’s Capital Stock, Related Shareowner Matters and Issuer Purchases of Equity Securities” for more information.
 
Excluding shares owned and tendered by employees to satisfy tax withholding requirements on the vesting of restricted shares, the company repurchased 17 million shares at a cost of $527 million during 2009. Approximately 13 million of the shares repurchased in 2009 were repurchased pursuant to the company’s June 2008 publicly announced share repurchase program. In addition to the June 2008 publicly announced share repurchase program, the company also purchased shares to offset the impact of dilution from shares issued under the company’s stock compensation plans.
 
Excluding shares owned and tendered by employees to satisfy tax withholding requirements on the vesting of restricted shares, the company repurchased 26 million shares at a cost of $903 million during 2008. During fiscal 2008, the company purchased shares pursuant to two publicly announced share repurchase programs. Under the first program, which was announced on November 21, 2005, the company’s Board of Directors authorized the purchase of up to $600 million of company stock through the end of fiscal 2008. The November 2005 program was completed during the third quarter of fiscal 2008. Under the second program, which was announced on March 18, 2008, the company’s Board of Directors authorized using approximately $600 million of the net proceeds from the sale of the Godiva Chocolatier business to purchase company stock. The March 2008 program was completed during the fourth quarter of fiscal 2008. In addition to the publicly announced share repurchase programs, the company also purchased shares to offset the impact of dilution from shares issued under the company’s stock compensation plans. Of the 2008 repurchases, approximately 23 million shares at a cost of $800 million were made pursuant to publicly announced share repurchase programs. The remaining shares were repurchased to offset the impact of dilution from shares issued under the company’s stock compensation plans.
 
At August 1, 2010, the company had $835 million of short-term borrowings due within one year and $25 million of standby letters of credit issued on behalf of the company. The company had a $1.5 billion committed revolving credit facility maturing in September 2011, which was unused at August 1, 2010, except for $25 million of standby letters of credit. In September 2010, the company entered into a $975 million committed 364-day revolving credit facility that contains a one-year term-out feature. The company also entered into a $975 million revolving credit facility that matures in September 2013. These facilities replaced the existing $1.5 billion revolving credit facility. These agreements support the company’s commercial paper programs.
 
In November 2008, the company filed a registration statement with the Securities and Exchange Commission that registered an indeterminate amount of debt securities. Under the registration statement, the company may issue debt securities, depending on market conditions.
 
The company is in compliance with the covenants contained in its revolving credit facilities and debt securities.
 
 
 
The following table summarizes the company’s obligations and commitments to make future payments under certain contractual obligations. For additional information on debt, see Note 13 to the Consolidated Financial


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Statements. Operating leases are primarily entered into for warehouse and office facilities and certain equipment. Purchase commitments represent purchase orders and long-term purchase arrangements related to the procurement of ingredients, supplies, machinery, equipment and services. These commitments are not expected to have a material impact on liquidity. Other long-term liabilities primarily represent payments related to deferred compensation obligations. For additional information on other long-term liabilities, see Note 19 to the Consolidated Financial Statements.
 
                                         
    Contractual Payments Due by Fiscal Year  
                2012 -
    2014 -
       
    Total     2011     2013     2015     Thereafter  
                (Millions)              
 
Debt obligations(1)
  $ 2,734     $ 832     $ 402     $ 600     $ 900  
Interest payments(2)
    552       114       164       100       174  
Purchase commitments
    920       539       164       65       152  
Operating leases
    186       43       63       38       42  
Derivative and forward payments(3)
    74       19       29       26        
Other long-term liabilities(4)
    160       18       32       22       88  
                                         
Total long-term cash obligations
  $ 4,626     $ 1,565     $ 854     $ 851     $ 1,356  
                                         
 
 
(1) Excludes unamortized net discount/premium on debt issuances, unamortized gain on a terminated interest rate swap and amounts related to interest rate swaps designated as fair-value hedges. For additional information on debt obligations, see Note 13 to the Consolidated Financial Statements.
 
(2) Interest payments for short-term borrowings and long-term debt are calculated as follows. For short-term borrowings, interest is based on par values and rates of contractually obligated issuances at fiscal year end. For long-term debt, interest is based on principal amounts and fixed coupon rates at fiscal year end.
 
(3) Represents payments of cross-currency swaps, forward exchange contracts, and deferred compensation hedges.
 
(4) Represents other long-term liabilities, excluding unrecognized tax benefits, postretirement benefits, payments related to pension plans and unvested stock-based compensation. For additional information on pension and postretirement benefits, see Note 11 to the Consolidated Financial Statements.
 
 
The company guarantees approximately 1,900 bank loans to Pepperidge Farm independent sales distributors by third party financial institutions used to purchase distribution routes. The maximum potential amount of the future payments the company could be required to make under the guarantees is $161 million. The company’s guarantees are indirectly secured by the distribution routes. The company does not believe that it is probable that it will be required to make guarantee payments as a result of defaults on the bank loans guaranteed. In connection with the sale of certain Australian salty snack food brands and assets, the company agreed to provide a loan facility to the buyer of AUD $10 million, or approximately USD $9 million. The facility was drawn down in AUD $5 million increments in 2009. Borrowings under the facility are to be repaid five years after the closing date. See also Note 18 to the Consolidated Financial Statements for information on off-balance sheet arrangements.
 
 
In fiscal 2008 and 2009, inflation, on average, had been significantly higher than in the years preceding 2008, and was primarily reflected in Cost of products sold. In 2010, inflation was not as significant. The company uses a number of strategies to mitigate the effects of cost inflation. These strategies include increasing prices, pursuing cost productivity initiatives such as global procurement strategies, commodity hedging and making capital investments that improve the efficiency of operations.


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Market Risk Sensitivity
 
The principal market risks to which the company is exposed are changes in foreign currency exchange rates, interest rates and commodity prices. In addition, the company is exposed to equity price changes related to certain deferred compensation obligations. The company manages its exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps in order to maintain its variable-to-total debt ratio within targeted guidelines. International operations, which accounted for approximately 29% of 2010 net sales, are concentrated principally in Australia, Canada, France, Germany and Belgium. The company manages its foreign currency exposures by borrowing in various foreign currencies and utilizing cross-currency swaps and forward contracts. Swaps and forward contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The company does not enter into contracts for speculative purposes and does not use leveraged instruments.
 
The company principally uses a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. The company also enters into commodity futures and option contracts to reduce the volatility of price fluctuations of diesel fuel, wheat, natural gas, soybean oil, aluminum, sugar, cocoa, and corn, which impact the cost of raw materials.
 
The information below summarizes the company’s market risks associated with debt obligations and other significant financial instruments as of August 1, 2010. Fair values included herein have been determined based on quoted market prices or pricing models using current market rates. The information presented below should be read in conjunction with Notes 13 through 15 to the Consolidated Financial Statements.
 
The table below presents principal cash flows and related interest rates by fiscal year of maturity for debt obligations. Interest rates disclosed on variable-rate debt maturing in 2010 represent the weighted-average rates at the period end. Notional amounts and related interest rates of interest rate swaps are presented by fiscal year of maturity. For the swaps, variable rates are the weighted-average forward rates for the term of each contract.
 
                                                                 
   
Expected Fiscal Year of Maturity
             
    2011     2012     2013     2014     2015     Thereafter     Total     Fair Value  
                      (Millions)                    
Debt(1)
                                                               
Fixed rate
  $ 702     $ 2     $ 400     $ 300     $ 300     $ 900     $ 2,604     $ 2,829  
Weighted-average interest rate
    6.74 %     3.29 %     5.00 %     4.88 %     3.38 %     4.83 %     5.21 %        
                                                                 
Variable rate
  $ 130 (2)                                           $ 130     $ 130  
Weighted-average interest rate
    1.47 %                                             1.47 %        
                                                                 
Interest Rate Swaps
                                                               
Fixed to variable
                  $ 300 (3)   $ 200 (4)                   $ 500     $ 46  
Average pay rate
                    1.32 %     1.46 %                     1.38 %        
Average receive rate
                    5.00 %     4.88 %                     4.95 %        
 
 
(1) Excludes unamortized net premium/discount on debt issuances, unamortized gain on a terminated interest rate swap, and amounts related to interest rate swaps designated as fair-value hedges.
 
(2) Represents $96 million of USD borrowings and $34 million equivalent of borrowings in other currencies.
 
(3) Swaps $300 million of 5.00% notes due in 2013.
 
(4) Swaps $200 million of 4.875% notes due in 2014.
 
As of August 2, 2009, fixed-rate debt of approximately $2.2 billion with an average interest rate of 5.50% and variable-rate debt of approximately $374 million with an average interest rate of 0.58% were outstanding. As of August 2, 2009, the company had swapped $500 million of fixed-rate debt to variable. The average rate to be


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received on these swaps was 4.95% and the average rate paid was estimated to be 2.81% over the remaining life of the swaps.
 
The company is exposed to foreign exchange risk related to its international operations, including non-functional currency intercompany debt and net investments in subsidiaries. The following table summarizes the cross-currency swaps outstanding as of August 1, 2010, which hedge such exposures. The notional amount of each currency and the related weighted-average forward interest rate are presented in the Cross-Currency Swaps table.
 
Cross-Currency Swaps
 
                                 
    Fiscal Year of
    Interest
    Notional
    Fair
 
    Expiration     Rate     Value     Value  
                (Millions)  
 
Pay variable EUR
    2011       2.60 %   $ 69     $ 1  
Receive variable USD
            2.16 %                
 
 
Pay variable EUR
    2011       2.25 %   $ 69     $ 12  
Receive variable USD
            1.63 %                
 
 
Pay fixed EUR
    2012       4.33 %   $ 102     $ 3  
Receive fixed USD
            5.11 %                
 
 
Pay variable CAD
    2012       1.83 %   $ 82     $  
Receive variable USD
            0.88 %                
 
 
Pay variable CAD
    2012       1.85 %   $ 37     $ (5 )
Receive variable USD
            0.84 %                
 
 
Pay variable EUR
    2013       1.93 %   $ 21     $ 1  
Receive variable USD
            1.64 %                
 
 
Pay variable AUD
    2013       5.88 %   $ 133     $ (4 )
Receive variable USD
            1.58 %                
 
 
Pay variable EUR
    2013       1.90 %   $ 41     $ (1 )
Receive variable USD
            1.75 %                
 
 
Pay fixed CAD
    2014       6.24 %   $ 60     $ (24 )
Receive fixed USD
            5.66 %                
 
 
Pay variable AUD
    2015       6.35 %   $ 133     $ (4 )
Receive variable USD
            2.50 %                
 
 
Total
                  $ 747     $ (21 )
                                 
 
The cross-currency swap contracts outstanding at August 2, 2009 represented one pay fixed SEK/receive fixed USD swap with a notional value of $32 million, two pay fixed CAD/receive fixed USD swaps with notional values totaling $141 million, one pay variable CAD/receive variable USD swap with a notional value of $37 million, one pay fixed EUR/receive fixed USD swap with a notional value totaling $102 million, three pay variable EUR/receive variable USD swaps with notional values totaling $158 million and two pay variable AUD/receive variable USD swaps with notional values totaling $249 million. The aggregate notional value of these swap contracts was $719 million as of August 2, 2009, and the aggregate fair value of these swap contracts was a loss of $35 million as of August 2, 2009.
 
The company is also exposed to foreign exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries, including subsidiary debt. The company utilizes foreign exchange forward purchase and sale contracts to hedge these exposures. The following table summarizes the foreign exchange forward contracts outstanding and the related weighted-average contract exchange rates as of August 1, 2010.


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        Average Contractual
        Exchange Rate
    Contract
  (Currency Paid/
    Amount   Currency Received)
    (Millions)    
 
Receive USD/Pay CAD
  $ 137       1.03  
Receive CAD/Pay USD
  $ 45       0.97  
Receive AUD/Pay NZD
  $ 25       1.23  
Receive EUR/Pay SEK
  $ 20       9.46  
Receive USD/Pay AUD
  $ 20       1.15  
Receive GBP/Pay AUD
  $ 10       1.76  
 
The company had an additional $14 million in a number of smaller contracts to purchase or sell various other currencies, such as the Australian dollar, euro, and Japanese yen, as of August 1, 2010. The aggregate fair value of all contracts was not material as of August 1, 2010. The total forward exchange contracts outstanding as of August 2, 2009 were $405 million with a fair value loss of $10 million.
 
The company enters into commodity futures and options contracts to reduce the volatility of price fluctuations for commodities. The notional value of these contracts was $50 million and the aggregate fair value of these contracts was a gain of $3 million as of August 1, 2010. The total notional value of these contracts was $51 million and the aggregate fair value was not material as of August 2, 2009.
 
The company had swap contracts outstanding as of August 1, 2010, which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of the Standard & Poor’s 500 Index, the total return of the company’s capital stock and the total return of the Puritan Fund. Under these contracts, the company pays variable interest rates and receives from the counterparty either the Standard & Poor’s 500 Index total return, the Puritan Fund total return, or the total return on company capital stock. The notional value of the contract that is linked to the return on the Standard & Poor’s 500 Index was $12 million at August 1, 2010 and $8 million at August 2, 2009. The average forward interest rate applicable to the contract, which expires in 2011, was 0.84% at August 1, 2010. The notional value of the contract that is linked to the return on the Puritan Fund was $9 million at August 1, 2010 and $6 million at August 2, 2009. The average forward interest rate applicable to the contract, which expires in 2011, was 1.39% at August 1, 2010. The notional value of the contract that is linked to the total return on company capital stock was $54 million at August 1, 2010 and $34 million at August 2, 2009. The average forward interest rate applicable to this contract, which expires in 2011, was 1.25% at August 1, 2010. The fair value of these contracts was a $2 million loss at August 1, 2010 and a $4 million gain at August 2, 2009.
 
The company’s utilization of financial instruments in managing market risk exposures described above is consistent with the prior year. Changes in the portfolio of financial instruments are a function of the results of operations, debt repayment and debt issuances, market effects on debt and foreign currency, and the company’s acquisition and divestiture activities.
 
Significant Accounting Estimates
 
The consolidated financial statements of the company are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. See Note 1 to the Consolidated Financial Statements for a discussion of significant accounting policies. The following areas all require the use of subjective or complex judgments, estimates and assumptions:
 
Trade and consumer promotion programs — The company offers various sales incentive programs to customers and consumers, such as cooperative advertising programs, feature price discounts, in-store display incentives and coupons. The recognition of the costs for these programs, which are classified as a reduction of revenue, involves the use of judgment related to performance and redemption estimates. Estimates are made based


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on historical experience and other factors. Actual expenses may differ if the level of redemption rates and performance vary from estimates.
 
Valuation of long-lived assets — Fixed assets and amortizable intangible assets are reviewed for impairment as events or changes in circumstances occur indicating that the carrying value of the asset may not be recoverable. Undiscounted cash flow analyses are used to determine if an impairment exists. If an impairment is determined to exist, the loss is calculated based on estimated fair value.
 
Goodwill and indefinite-lived intangible assets are tested at least annually for impairment, or as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable.
 
Goodwill impairment testing first requires a comparison of the fair value of each reporting unit to the carrying value. Fair value is determined based on discounted cash flow analyses. The discounted estimates of future cash flows include significant management assumptions such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired. The amount of the impairment is the difference between the carrying value of the goodwill and the “implied” fair value, which is calculated as if the reporting unit had just been acquired and accounted for as a business combination. As of August 1, 2010, the carrying value of goodwill was $1.919 billion. The company has not recognized any impairment of goodwill as a result of annual testing, which began in 2003. As of the 2010 measurement, the fair value of each reporting unit exceeded the carrying value by at least 80%. Holding all other assumptions used in the 2010 measurement constant, a 100-basis-point increase in the weighted average cost of capital would not result in the carrying value of any reporting unit to be in excess of the fair value.
 
Indefinite-lived intangible assets are tested for impairment by comparing the fair value of the asset to the carrying value. Fair value is determined based on discounted cash flow analyses that include significant management assumptions such as revenue growth rates, operating margins, weighted average cost of capital, and assumed royalty rates. If the fair value is less than the carrying value, the asset is reduced to fair value. As of August 1, 2010, the carrying value of trademarks was $496 million. Holding all other assumptions used in the 2010 measurement constant, a 100-basis-point increase in the weighted average cost of capital would reduce the fair value of trademarks and result in an impairment charge of approximately $13 million. In 2009, as part of the company’s annual review of intangible assets, an impairment charge of $67 million was recognized related to certain European trademarks, primarily in Germany and the Nordic region, used in the International Soup, Sauces and Beverages segment. The trademarks were determined to be impaired as a result of a decrease in the fair value of the brands, resulting from reduced expectations for discounted cash flows in comparison to prior year. The reduction was due in part to a deterioration in market conditions and an increase in the weighted average cost of capital. See Note 5 to the Consolidated Financial Statements for additional information on goodwill and intangible assets.
 
The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions, and cost of capital. Assumptions used in these forecasts are consistent with internal planning. However, inherent in estimating the future cash flows are uncertainties beyond the company’s control, such as capital markets. The actual cash flows could differ from management’s estimates due to changes in business conditions, operating performance, and economic conditions.
 
Pension and postretirement benefits — The company provides certain pension and postretirement benefits to employees and retirees. Determining the cost associated with such benefits is dependent on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, turnover rates and health care trend rates. Independent actuaries, in accordance with accounting principles generally accepted in the United States, perform the required calculations to determine expense. Actual results that differ from the actuarial assumptions are generally accumulated and amortized over future periods.
 
The discount rate is established as of the company’s fiscal year-end measurement date. In establishing the discount rate, the company reviews published market indices of high-quality debt securities, adjusted as appropriate for duration. In addition, independent actuaries apply high-quality bond yield curves to the expected benefit


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payments of the plans. The expected return on plan assets is a long-term assumption based upon historical experience and expected future performance, considering the company’s current and projected investment mix. This estimate is based on an estimate of future inflation, long-term projected real returns for each asset class, and a premium for active management. Within any given fiscal period, significant differences may arise between the actual return and the expected return on plan assets. The value of plan assets, used in the calculation of pension expense, is determined on a calculated method that recognizes 20% of the difference between the actual fair value of assets and the expected calculated method. Gains and losses resulting from differences between actual experience and the assumptions are determined at each measurement date. If the net gain or loss exceeds 10% of the greater of plan assets or liabilities, a portion is amortized into earnings in the following year.
 
Net periodic pension and postretirement expense was $92 million in 2010, $53 million in 2009, and $54 million in 2008. The 2010 expense included $12 million of pension settlement costs related to the closure of a plant in Canada. The 2008 expense included $2 million of special termination benefits and curtailment costs related to the Godiva divestiture, which was recorded in discontinued operations. The 2008 expense also included $4 million of special termination and curtailment costs related to the restructuring initiatives. Significant weighted-average assumptions as of the end of the year are as follows:
 
                         
    2010   2009   2008
 
Pension
                       
Discount rate for benefit obligations
    5.46 %     6.00 %     6.87 %
Expected return on plan assets
    8.15 %     8.13 %     8.60 %
Postretirement
                       
Discount rate for obligations
    5.25 %     6.00 %     7.00 %
Initial health care trend rate
    8.25 %     8.25 %     9.00 %
Ultimate health care trend rate
    4.50 %     4.50 %     4.50 %
 
Estimated sensitivities to annual net periodic pension cost are as follows: a 50 basis point reduction in the discount rate would increase expense by approximately $12 million; a 50 basis point reduction in the estimated return on assets assumption would increase expense by approximately $10 million. A one percentage point increase in assumed health care costs would increase postretirement service and interest cost by approximately $1 million.
 
Net periodic pension and postretirement expense is expected to increase to approximately $100 million in 2011 primarily due to a reduction in the discount rate for benefit obligations and increased amortization of unrecognized losses.
 
Given the adverse impact of declining financial markets on the funding levels of the plans, the company contributed $260 million to a U.S. plan in 2010. The company made a voluntary contribution of $70 million in 2008 to a U.S. plan. Contributions to international plans were $24 million in 2010, $13 million in 2009, and $8 million in 2008. The company contributed $100 million to U.S. plans in the first quarter of 2011. Additional contributions to U.S. plans are not expected in 2011. Contributions to non-U.S. plans are expected to be approximately $43 million in 2011.
 
See also Note 11 to the Consolidated Financial Statements for additional information on pension and postretirement expenses.
 
Income taxes — The effective tax rate reflects statutory tax rates, tax planning opportunities available in the various jurisdictions in which the company operates and management’s estimate of the ultimate outcome of various tax audits and issues. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. Income taxes are recorded based on amounts refundable or payable in the current year and include the effect of deferred taxes. Deferred tax assets and liabilities are recognized for the future impact of differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be realized.


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At the beginning of fiscal 2008, the company adopted revised accounting guidance related to accounting for uncertainty in income taxes. Upon adoption, the company recognized a cumulative-effect adjustment of $6 million as an increase in the liability for unrecognized tax benefits, including interest and penalties, and a reduction in retained earnings. Prior to the adoption, tax reserves were established to reflect the probable outcome of known tax contingencies. As of August 1, 2010, the liability for unrecognized tax benefits, including interest and penalties, was $45 million.
 
See also Notes 1 and 12 to the Consolidated Financial Statements for further discussion on income taxes.
 
Recent Accounting Pronouncements
 
In addition to the guidance related to the calculation of earnings per share described in “Basis of Presentation” and in Note 9 to the Consolidated Financial Statements, recent accounting pronouncements are as follows:
 
In December 2007, the FASB issued authoritative guidance which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It requires a noncontrolling interest in a subsidiary, which was formerly known as minority interest, to be classified as a separate component of total equity in the consolidated financial statements. The company retrospectively adopted the new noncontrolling interest guidance in the first quarter of fiscal 2010. The adoption did not have a material impact on the financial statements. See Note 10 to the Consolidated Financial Statements for additional information.
 
In January 2010, the FASB issued additional authoritative guidance related to fair value measurements and disclosures. The guidance requires disclosure of details of significant transfers in and out of Level 1 and Level 2 fair value measurements. Level 1 fair value measurements are based on unadjusted quoted market prices. Level 2 fair value measurements are based on significant inputs, other than Level 1, that are observable for the asset/liability through corroboration with observable market data. The guidance also clarifies the existing disclosure requirements for the level of disaggregation of fair value measurements and the disclosures on inputs and valuation techniques. The company adopted these provisions in the third quarter of fiscal 2010. The adoption did not have a material impact on the consolidated financial statements. In addition, the guidance requires a gross presentation of the activity within the Level 3 roll forward, separately presenting information about purchases, sales, issuances and settlements. The roll forward information must be provided by the company for the first quarter of fiscal 2012, as the provision is effective for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years.
 
In June 2009, the FASB issued authoritative guidance that changed the consolidation model for variable interest entities. The provisions are effective for the first quarter of fiscal 2011. The adoption is not expected to have a material impact on the company’s consolidated financial statements.
 
See also Note 2 to the Consolidated Financial Statements for further discussion on new accounting standards.
 
 
This Report contains “forward-looking” statements that reflect the company’s current expectations regarding future results of operations, economic performance, financial condition and achievements of the company. The company tries, wherever possible, to identify these forward-looking statements by using words such as “anticipate,” “believe,” “estimate,” “expect,” “will” and similar expressions. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements reflect the company’s current plans and expectations and are based on information currently available to it. They rely on a number of assumptions regarding future events and estimates which could be inaccurate and which are inherently subject to risks and uncertainties.
 
The company wishes to caution the reader that the following important factors and those important factors described in Part 1, Item 1A and elsewhere in the commentary, or in the Securities and Exchange Commission


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filings of the company, could affect the company’s actual results and could cause such results to vary materially from those expressed in any forward-looking statements made by, or on behalf of, the company:
 
  •  the impact of strong competitive response to the company’s efforts to leverage its brand power with product innovation, promotional programs and new advertising, and of changes in consumer demand for the company’s products;
 
  •  the risks in the marketplace associated with trade and consumer acceptance of product improvements, shelving initiatives, new product introductions, and pricing and promotional strategies;
 
  •  the company’s ability to achieve sales and earnings guidance, which is based on assumptions about sales volume, product mix, the development and success of new products, the impact of marketing and pricing actions, product costs and currency;
 
  •  the company’s ability to realize projected cost savings and benefits;
 
  •  the company’s ability to successfully manage changes to its business processes, including selling, distribution, manufacturing, information management systems and the integration of acquisitions;
 
  •  the increased significance of certain of the company’s key trade customers;
 
  •  the impact of inventory management practices by the company’s trade customers;
 
  •  the impact of fluctuations in the supply and inflation in energy, raw and packaging materials cost;
 
  •  the impact associated with portfolio changes and completion of acquisitions and divestitures;
 
  •  the uncertainties of litigation described from time to time in the company’s Securities and Exchange Commission filings;
 
  •  the impact of changes in currency exchange rates, tax rates, interest rates, debt and equity markets, inflation rates, economic conditions and other external factors; and
 
  •  the impact of unforeseen business disruptions in one or more of the company’s markets due to political instability, civil disobedience, armed hostilities, natural disasters or other calamities.
 
This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact the company’s outlook. The company disclaims any obligation or intent to update forward-looking statements made by the company in order to reflect new information, events or circumstances after the date they are made.
 
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk
 
The information presented in the section entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Market Risk Sensitivity” is incorporated herein by reference.


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Item 8.   Financial Statements and Supplementary Data
 
CAMPBELL SOUP COMPANY
 
Consolidated Statements of Earnings
 
                         
    2010
    2009
    2008
 
    52 Weeks     52 Weeks     53 Weeks  
    (Millions, except per share amounts)  
 
Net Sales
  $ 7,676     $ 7,586     $ 7,998  
                         
Costs and expenses
                       
Cost of products sold
    4,526       4,558       4,827  
Marketing and selling expenses
    1,058       1,077       1,162  
Administrative expenses
    605       591       608  
Research and development expenses
    123       114       115  
Other expenses / (income)
    4       61       13  
Restructuring charges
    12             175  
                         
Total costs and expenses
    6,328       6,401       6,900  
                         
Earnings Before Interest and Taxes
    1,348       1,185       1,098  
Interest expense
    112       110       167  
Interest income
    6       4       8  
                         
Earnings before taxes
    1,242       1,079       939  
Taxes on earnings
    398       347       268  
                         
Earnings from continuing operations
    844       732       671  
Earnings from discontinued operations
          4       494  
                         
Net Earnings
  $ 844     $ 736     $ 1,165  
                         
Per Share — Basic
                       
Earnings from continuing operations
  $ 2.44     $ 2.05     $ 1.77  
Earnings from discontinued operations
          .01       1.30  
                         
Net Earnings
  $ 2.44     $ 2.06     $ 3.06  
                         
Weighted average shares outstanding — basic
    340       352       373  
                         
Per Share — Assuming Dilution
                       
Earnings from continuing operations
  $ 2.42     $ 2.03     $ 1.75  
Earnings from discontinued operations
          .01       1.28  
                         
Net Earnings
  $ 2.42     $ 2.05     $ 3.03  
                         
Weighted average shares outstanding — assuming dilution
    343       354       377  
                         
 
The sum of individual per share amounts does not equal due to rounding.
 
See accompanying Notes to Consolidated Financial Statements.


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CAMPBELL SOUP COMPANY
 
Consolidated Balance Sheets
 
                 
    August 1,
    August 2,
 
    2010     2009  
    (Millions, except per share amounts)  
 
Current Assets
               
Cash and cash equivalents
  $ 254     $ 51  
Accounts receivable
    512       528  
Inventories
    724       824  
Other current assets
    197       148  
                 
Total current assets
    1,687       1,551  
                 
Plant Assets, Net of Depreciation
    2,051       1,977  
Goodwill
    1,919       1,901  
Other Intangible Assets, Net of Amortization
    509       522  
Other Assets
    110       105  
                 
Total assets
  $ 6,276     $ 6,056  
                 
Current Liabilities
               
Short-term borrowings
  $ 835     $ 378  
Payable to suppliers and others
    545       569  
Accrued liabilities
    560       579  
Dividend payable
    95       88  
Accrued income taxes
    30       14  
                 
Total current liabilities
    2,065       1,628  
                 
Long-Term Debt
    1,945       2,246  
Deferred Taxes
    258       237  
Other Liabilities
    1,079       1,214  
                 
Total liabilities
    5,347       5,325  
                 
Campbell Soup Company Shareowners’ Equity
               
Preferred stock; authorized 40 shares; none issued
           
Capital stock, $.0375 par value; authorized 560 shares; issued 542 shares
    20       20  
Additional paid-in capital
    341       332  
Earnings retained in the business
    8,760       8,288  
Capital stock in treasury, at cost
    (7,459 )     (7,194 )
Accumulated other comprehensive loss
    (736 )     (718 )
                 
Total Campbell Soup Company shareowners’ equity
    926       728  
Noncontrolling interest
    3       3  
                 
Total equity
    929       731  
                 
Total liabilities and equity
  $ 6,276     $ 6,056  
                 
 
See accompanying Notes to Consolidated Financial Statements.


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CAMPBELL SOUP COMPANY
 
Consolidated Statements of Cash Flows
 
                         
    2010     2009     2008  
    (Millions)  
 
Cash Flows from Operating Activities:
                       
Net earnings
  $ 844     $ 736     $ 1,165  
Adjustments to reconcile net earnings to operating cash flow
                       
Impairment charge
          67        
Restructuring charges
    12             175  
Stock-based compensation
    88       84       88  
Depreciation and amortization
    251       264       294  
Deferred income taxes
    54       144       29  
Gain on sale of business
                (698 )
Other, net
    99       57       46  
Changes in working capital
                       
Accounts receivable
    21       27       (53 )
Inventories
    105       (14 )     (91 )
Prepaid assets
    (9 )     28       (22 )
Accounts payable and accrued liabilities
    (34 )     (125 )     23  
Pension fund contributions
    (284 )     (13 )     (78 )
Payments for hedging activities
    (20 )     (44 )     (65 )
Other
    (70 )     (45 )     (47 )
                         
Net Cash Provided by Operating Activities
    1,057       1,166       766  
                         
Cash Flows from Investing Activities:
                       
Purchases of plant assets
    (315 )     (345 )     (298 )
Sales of plant assets
    13       1       3  
Businesses acquired
          (66 )     (9 )
Sale of businesses, net of cash divested
          38       828  
Other, net
    2       (6 )     7  
                         
Net Cash Provided by (Used in) Investing Activities
    (300 )     (378 )     531  
                         
Cash Flows from Financing Activities:
                       
Net short-term borrowings (repayments)
    (265 )     (320 )     58  
Long-term borrowings (repayments)
    400       600       (181 )
Repayments of notes payable
          (300 )      
Dividends paid
    (365 )     (350 )     (329 )
Treasury stock purchases
    (472 )     (527 )     (903 )
Treasury stock issuances
    139       72       47  
Excess tax benefits on stock-based compensation
    11       18       8  
Other, net
    (4 )     (7 )      
                         
Net Cash Used in Financing Activities
    (556 )     (814 )     (1,300 )
                         
Effect of Exchange Rate Changes on Cash
    2       (4 )     13  
                         
Net Change in Cash and Cash Equivalents
    203       (30 )     10  
Cash and Cash Equivalents — beginning of period
    51       81       71  
                         
Cash and Cash Equivalents — end of period
  $ 254     $ 51     $ 81  
                         
 
See accompanying Notes to Consolidated Financial Statements.


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CAMPBELL SOUP COMPANY
 
Consolidated Statements of Equity
 
                                                                         
    Campbell Soup Company Shareowners’ Equity              
                                  Earnings
    Accumulated
             
    Capital Stock     Additional
    Retained
    Other
             
    Issued     In Treasury     Paid-in
    in
    Comprehensive
    Noncontrolling
    Total
 
    Shares     Amount     Shares     Amount     Capital     the Business     Income (Loss)     Interest     Equity  
    (Millions, except per share amounts)  
 
Balance at July 29, 2007
    542     $ 20       (163 )   $ (6,015 )   $ 331     $ 7,082     $ (123 )   $ 3     $ 1,298  
                                                                         
Comprehensive income (loss)
                                                                       
Net earnings
                                            1,165                     1,165  
Foreign currency translation adjustments, net of tax
                                                    112             112  
Cash-flow hedges, net of tax
                                                    11               11  
Pension and postretirement benefits, net of tax
                                                    (136 )             (136 )
                                                                         
Other comprehensive income (loss)
                                                    (13 )           (13 )
                                                                         
Total comprehensive income (loss)
                                                                    1,152  
                                                                         
Impact of adoption of accounting for uncertainty in income taxes
                                            (6 )                     (6 )
Dividends ($.88 per share)
                                            (332 )                     (332 )
Treasury stock purchased
                    (26 )     (903 )                                     (903 )
Treasury stock issued under management incentive and stock option plans
                    3       106       6                               112  
                                                                         
Balance at August 3, 2008
    542       20       (186 )     (6,812 )     337       7,909       (136 )     3       1,321  
                                                                         
Comprehensive income (loss)
                                                                       
Net earnings
                                            736                     736  
Foreign currency translation adjustments, net of tax
                                                    (148 )           (148 )
Cash-flow hedges, net of tax
                                                    (25 )             (25 )
Pension and postretirement benefits, net of tax
                                                    (409 )             (409 )
                                                                         
Other comprehensive income (loss)
                                                    (582 )           (582 )
                                                                         
Total comprehensive income (loss)
                                                                    154  
                                                                         
Dividends ($1.00 per share)
                                            (357 )                     (357 )
Treasury stock purchased
                    (17 )     (527 )                                     (527 )
Treasury stock issued under management incentive and stock option plans
                    4       145       (5 )                             140  
                                                                         
Balance at August 2, 2009
    542       20       (199 )     (7,194 )     332       8,288       (718 )     3       731  
                                                                         
Comprehensive income (loss)
                                                                       
Net earnings
                                            844                     844  
Foreign currency translation adjustments, net of tax
                                                    39             39  
Cash-flow hedges, net of tax
                                                    2               2  
Pension and postretirement benefits, net of tax
                                                    (59 )             (59 )
                                                                         
Other comprehensive income (loss)
                                                    (18 )           (18 )
                                                                         
Total comprehensive income (loss)
                                                                    826  
                                                                         
Dividends ($1.075 per share)
                                            (372 )                     (372 )
Treasury stock purchased
                    (14 )     (472 )                                     (472 )
Treasury stock issued under management incentive and stock option plans
                    7       207       9                               216  
                                                                         
Balance at August 1, 2010
    542     $ 20       (206 )   $ (7,459 )   $ 341     $ 8,760     $ (736 )   $ 3     $ 929  
                                                                         
 
See accompanying Notes to Consolidated Financial Statements.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(currency in millions, except per share amounts)
 
1.   Summary of Significant Accounting Policies
 
Basis of Presentation — The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. Intercompany transactions are eliminated in consolidation. Certain amounts in prior-year financial statements were reclassified to conform to the current-year presentation. The company’s fiscal year ends on the Sunday nearest July 31. There were 52 weeks in 2010 and 2009, and 53 weeks in 2008.
 
On March 18, 2008, the company completed the sale of its Godiva Chocolatier business for $850, pursuant to a Sale and Purchase Agreement dated December 20, 2007. The company has reflected the results of this business as discontinued operations in the consolidated statements of earnings. See Note 3 for additional information on the sale.
 
Revenue Recognition — Revenues are recognized when the earnings process is complete. This occurs when products are shipped in accordance with terms of agreements, title and risk of loss transfer to customers, collection is probable and pricing is fixed or determinable. Revenues are recognized net of provisions for returns, discounts and allowances. Certain sales promotion expenses, such as coupon redemption costs, cooperative advertising programs, new product introduction fees, feature price discounts and in-store display incentives, are classified as a reduction of sales.
 
Cash and Cash Equivalents — All highly liquid debt instruments purchased with a maturity of three months or less are classified as cash equivalents.
 
Inventories — All inventories are valued at the lower of average cost or market.
 
Property, Plant and Equipment — Property, plant and equipment are recorded at historical cost and are depreciated over estimated useful lives using the straight-line method. Buildings and machinery and equipment are depreciated over periods not exceeding 45 years and 20 years, respectively. Assets are evaluated for impairment when conditions indicate that the carrying value may not be recoverable. Such conditions include significant adverse changes in business climate or a plan of disposal.
 
Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but rather are tested at least annually for impairment. Goodwill and indefinite-lived intangible assets are also tested for impairment as events or changes in circumstances occur indicating that the carrying value may not be recoverable. Intangible assets with finite lives are amortized over the estimated useful life and reviewed for impairment. Goodwill impairment testing first requires a comparison of the fair value of each reporting unit to the carrying value. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired. The amount of the impairment is the difference between the carrying value of goodwill and the “implied” fair value, which is calculated as if the reporting unit had just been acquired and accounted for as a business combination. Impairment testing for indefinite-lived intangible assets requires a comparison between the fair value and carrying value of the asset. If carrying value exceeds the fair value, the asset is reduced to fair value. Fair values are primarily determined using discounted cash flow analyses. See Note 5 for information on goodwill and other intangible assets.
 
Derivative Financial Instruments — The company uses derivative financial instruments primarily for purposes of hedging exposures to fluctuations in foreign currency exchange rates, interest rates, commodities and equity-linked employee benefit obligations. These derivative contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The company does not enter into derivative contracts for speculative purposes and does not use leveraged instruments. The company’s derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.
 
All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered into, the company designates the derivative as a hedge of the fair value of a recognized asset or liability or a firm commitment (fair-value hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash-flow hedge), or a hedge of a net investment in a foreign operation. Some derivatives may also be considered natural hedging instruments (changes in fair value act as


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
economic offsets to changes in fair value of the underlying hedged item) and are not designated for hedge accounting.
 
Changes in the fair value of a fair-value hedge, along with the gain or loss on the underlying hedged asset or liability (including losses or gains on firm commitments), are recorded in current-period earnings. The effective portion of gains and losses on cash-flow hedges are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows. If a derivative is used as a hedge of a net investment in a foreign operation, its changes in fair value, to the extent effective as a hedge, are recorded in other comprehensive income (loss). Any ineffective portion of designated hedges is recognized in current-period earnings. Changes in the fair value of derivatives that are not designated for hedge accounting are recognized in current-period earnings.
 
Cash flows from derivative contracts are included in Net cash provided by operating activities.
 
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.
 
Income Taxes — Deferred tax assets and liabilities are recognized for the future impact of differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
 
2.   Recent Accounting Pronouncements
 
In December 2007, the Financial Accounting Standards Board (FASB) issued authoritative guidance which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It requires a noncontrolling interest in a subsidiary, which was formerly known as minority interest, to be classified as a separate component of total equity in the consolidated financial statements. The company retrospectively adopted the new noncontrolling interest guidance in the first quarter of fiscal 2010. The adoption did not have a material impact on the financial statements. See Note 10 for additional information.
 
In December 2007, the FASB issued authoritative guidance for business combinations, which establishes the principles and requirements for how an acquirer recognizes the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date with limited exceptions. The guidance requires acquisition-related transaction costs to be expensed as incurred rather than capitalized as a component of the business combination. The provisions as revised were effective as of the first quarter of fiscal 2010 and will be applied to any business combinations entered into thereafter.
 
In September 2006, the FASB issued authoritative guidance for fair value measurements, which establishes a definition of fair value, provides a framework for measuring fair value and expands the disclosure requirements about fair value measurements. This guidance does not require any new fair value measurements but rather applies to all other accounting pronouncements that require or permit fair value measurements. In February 2008, the FASB issued authoritative guidance which delayed by a year the effective date for certain nonfinancial assets and liabilities. The company adopted the provisions of the guidance for financial assets and liabilities in the first quarter of fiscal 2009. The adoption did not have a material impact on the consolidated financial statements. The company adopted the remaining provisions in the first quarter of fiscal 2010 for nonfinancial assets and liabilities, including goodwill and intangible assets. The adoption likewise did not have a material impact on the consolidated financial statements. See Note 15 for additional information.
 
In January 2010, the FASB issued additional authoritative guidance related to fair value measurements and disclosures. The guidance requires disclosure of details of significant transfers in and out of Level 1 and Level 2 fair value measurements. Level 1 fair value measurements are based on unadjusted quoted market prices. Level 2 fair


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
value measurements are based on significant inputs, other than Level 1, that are observable for the asset/liability through corroboration with observable market data. The guidance also clarifies the existing disclosure requirements for the level of disaggregation of fair value measurements and the disclosures on inputs and valuation techniques. The company adopted these provisions in the third quarter of fiscal 2010. The adoption did not have a material impact on the consolidated financial statements. In addition, the guidance requires a gross presentation of the activity within the Level 3 roll forward, separately presenting information about purchases, sales, issuances and settlements. The roll forward information must be provided by the company for the first quarter of fiscal 2012, as the provision is effective for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years.
 
In June 2008, the FASB issued authoritative guidance related to the calculation of earnings per share. The guidance provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the new provisions. The company adopted the guidance in the first quarter of fiscal 2010. Prior periods have been restated. See Note 9 for additional information.
 
In June 2009, the FASB Accounting Standards Codification (Codification) was issued to become the source of authoritative U.S. generally accepted accounting principles (GAAP) to be applied by nongovernmental entities and supersede all then-existing non-Securities and Exchange Commission (SEC) accounting and reporting standards. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other nongrandfathered non-SEC accounting literature not included in the Codification became nonauthoritative. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The company adopted the provisions in the first quarter of fiscal 2010. The adoption did not impact the company’s consolidated financial statements.
 
In December 2008, the FASB issued additional authoritative guidance related to employers’ disclosures about the plan assets of defined benefit pension or other postretirement plans. The required disclosures include a description of how investment allocation decisions are made, major categories of plan assets, valuation techniques used to measure the fair value of plan assets, the impact of measurements using significant unobservable inputs and concentrations of risk within plan assets. The disclosures about plan assets required by this additional guidance must be provided for fiscal years ending after December 15, 2009. The company adopted the provisions in fiscal 2010. See Note 11 for additional information.
 
In June 2009, the FASB issued authoritative guidance that changed the consolidation model for variable interest entities. The provisions are effective for the first quarter of fiscal 2011. The adoption is not expected to have a material impact on the company’s consolidated financial statements.
 
3.   Divestitures
 
Discontinued Operations
 
On March 18, 2008, the company completed the sale of its Godiva Chocolatier business for $850. The purchase price was subject to certain post-closing adjustments, which resulted in an additional $20 of proceeds. The company has reflected the results of this business as discontinued operations in the consolidated statements of earnings. The company used approximately $600 of the net proceeds to purchase company stock. The 2008 results included a $462 after-tax gain, or $1.20 per share, on the Godiva Chocolatier sale. The company recognized a $4 benefit in 2009 as a result of an adjustment to the tax liability associated with the sale.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Results of the Godiva Chocolatier business were as follows:
 
                 
    2009     2008  
 
Net sales
  $   —     $ 393  
                 
Earnings from operations before taxes
  $     $ 49  
Taxes on earnings — operations
          (17 )
Gain on sale
          698  
Tax impact from sale of business
    4       (236 )
                 
Earnings from discontinued operations
  $ 4     $ 494  
                 
 
Other Divestitures
 
In the third quarter of 2008, the company entered into an agreement to sell certain Australian salty snack food brands and assets. The transaction, which was completed on May 12, 2008, included the following salty snack brands: Cheezels, Thins, Tasty Jacks, French Fries, and Kettle Chips, certain other assets and the assumption of liabilities. Proceeds of the sale were nominal. The business was historically included in the Baking and Snacking segment and had annual net sales of approximately $150. In connection with this transaction, the company recognized a pre-tax loss of $120 ($64 after tax or $.17 per share). This charge was included in the Restructuring charges on the Statements of Earnings in 2008. See also Note 7. The terms of the agreement required the company to provide a loan facility to the buyer of AUD $10, or approximately USD $9. The facility was drawn down in AUD $5 increments in 2009. Borrowings under the facility are to be repaid five years after the closing date.
 
In July 2008, the company entered into an agreement to sell its sauce and mayonnaise business comprised of products sold under the Lesieur brand in France. The company recorded a pre-tax impairment charge of $2 to adjust the net assets to estimated realizable value in 2008. The sale was completed on September 29, 2008 and resulted in $36 of proceeds. The purchase price was subject to working capital and other post-closing adjustments, which resulted in an additional $6 of proceeds. The business was historically included in the International Soup, Sauces and Beverages segment and had annual net sales of approximately $70.
 
The company has provided certain indemnifications in connection with the divestitures. As of August 1, 2010, known exposures related to such matters are not material.
 
4.   Comprehensive Income
 
Total comprehensive income is comprised of net earnings, net foreign currency translation adjustments, pension and postretirement benefit adjustments (see Note 11), and net unrealized gains and losses on cash-flow hedges (see Note 14). Total comprehensive income for the twelve months ended August 1, 2010, August 2, 2009, and August 3, 2008 was $826, $154, and $1,152, respectively.
 
The components of Accumulated other comprehensive income (loss), as reflected in the Statements of Equity, consisted of the following:
 
                 
    2010     2009  
 
Foreign currency translation adjustments, net of tax(1)
  $ 132     $ 93  
Cash-flow hedges, net of tax(2)
    (18 )     (20 )
Unamortized pension and postretirement benefits, net of tax(3):
               
Net actuarial loss
    (856 )     (787 )
Prior service (cost)/credit
    6       (4 )
                 
Total Accumulated other comprehensive loss
  $ (736 )   $ (718 )
                 
 
 
(1) Includes a tax benefit of $1 in 2010 and a tax expense of $7 in 2009.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
 
(2) Includes a tax benefit of $10 in 2010 and $11 in 2009.
 
(3) Includes a tax benefit of $489 in 2010 and $442 in 2009.
 
5.   Goodwill and Intangible Assets
 
The following table shows the changes in the carrying amount of goodwill by business segment:
 
                                         
    U.S.
          International
    North
       
    Soup, Sauces
    Baking and
    Soup, Sauces
    America
       
    and Beverages     Snacking     and Beverages     Foodservice     Total  
 
Balance at August 3, 2008
  $ 434     $ 744     $ 674     $ 146     $ 1,998  
Acquisition(1)
          30                   30  
Foreign currency translation adjustment
          (74 )     (53 )           (127 )
                                         
Balance at August 2, 2009
  $ 434     $ 700     $ 621     $ 146     $ 1,901  
                                         
Foreign currency translation adjustment
          54       (36 )           18  
                                         
Balance at August 1, 2010
  $ 434     $ 754     $ 585     $ 146     $ 1,919  
                                         
 
 
(1) In May 2009, the company acquired Ecce Panis, Inc. for $66. See Note 8 for additional information.
 
The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:
 
                 
    2010     2009  
 
Intangible Assets:
               
Non-amortizable intangible assets
  $ 496     $ 508  
Amortizable intangible assets
    21       21  
                 
      517       529  
Accumulated amortization
    (8 )     (7 )
                 
Total net intangible assets
  $ 509     $ 522  
                 
 
Non-amortizable intangible assets consist of trademarks. Amortizable intangible assets consist substantially of process technology and customer intangibles.
 
Amortization was less than $1 in 2010, 2009, and 2008. The estimated aggregated amortization expense for each of the five succeeding fiscal years is less than $1 per year. Asset useful lives range from ten to twenty years.
 
In 2009, as part of the company’s annual review of intangible assets, an impairment charge of $67 was recognized related to certain European trademarks, primarily in Germany and the Nordic region, used in the International Soup, Sauces and Beverages segment. The trademarks were determined to be impaired as a result of a decrease in the fair value of the brands, resulting from reduced expectations for discounted cash flows in comparison to prior year. The reduction was due in part to a deterioration in market conditions and an increase in the weighted average cost of capital.
 
In May 2009, the company acquired Ecce Panis, Inc. Intangible assets from the acquisition totaled $16. See Note 8 for additional information.
 
In 2008, the company recognized an impairment charge of $4 related to the performance of certain trademarks used in the International Soup, Sauces and Beverages segment.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
6.   Business and Geographic Segment Information
 
Campbell Soup Company, together with its consolidated subsidiaries, is a global manufacturer and marketer of high-quality, branded convenience food products. The company manages and reports the results of operations in the following segments: U.S. Soup, Sauces and Beverages, Baking and Snacking, International Soup, Sauces and Beverages, and North America Foodservice.
 
The U.S. Soup, Sauces and Beverages segment comprises the U.S. retail business, including the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth, stocks and canned poultry; Prego pasta sauce; Pace Mexican sauce; Campbell’s canned pasta, gravies, and beans; V8 vegetable juices; V8 V-Fusion juices and beverages; V8 Splash juice drinks; and Campbell’s tomato juice.
 
The Baking and Snacking segment includes the following businesses: Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; and Arnott’s biscuits in Australia and Asia Pacific. In May 2008, the company sold certain salty snack food brands and assets in Australia, which historically were included in this segment. See Note 3 for information on the sale.
 
The International Soup, Sauces and Beverages segment includes the soup, sauce and beverage businesses outside of the United States, including Europe, Latin America, the Asia Pacific region, as well as the emerging markets of Russia and China and the retail business in Canada. See Note 3 for information on the sale of the sauce and mayonnaise business comprised of products sold under the Lesieur brand in France. This business was historically included in this segment.
 
The North America Foodservice segment represents the distribution of products such as soup, specialty entrees, beverage products, other prepared foods and Pepperidge Farm products through various food service channels in the United States and Canada.
 
Accounting policies for measuring segment assets and earnings before interest and taxes are substantially consistent with those described in Note 1. The company evaluates segment performance before interest and taxes. North America Foodservice products are principally produced by the tangible assets of the company’s other segments, except for refrigerated soups, which are produced in a separate facility, and certain other products, which are produced under contract manufacturing agreements. Tangible assets of the company’s other segments are not allocated to the North America Foodservice operations. Depreciation, however, is allocated to North America Foodservice based on production hours.
 
The company’s largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 18% of consolidated net sales in 2010 and 2009, and 16% in 2008. All of the company’s segments sold products to Wal-Mart Stores, Inc. or its affiliates.
 
Business Segments
 
                         
    2010     2009     2008  
 
Net sales
                       
U.S. Soup, Sauces and Beverages
  $ 3,700     $ 3,784     $ 3,674  
Baking and Snacking
    1,975       1,846       2,058  
International Soup, Sauces and Beverages
    1,423       1,357       1,610  
North America Foodservice
    578       599       656  
                         
Total
  $ 7,676     $ 7,586     $ 7,998  
                         
 


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
                         
    2010(2)     2009(3)     2008(4)  
 
Earnings before interest and taxes
                       
U.S. Soup, Sauces and Beverages
  $ 943     $ 927     $ 891  
Baking and Snacking
    322       262       120  
International Soup, Sauces and Beverages
    161       69       179  
North America Foodservice
    43       34       40  
Corporate(1)
    (121 )     (107 )     (132 )
                         
Total
  $ 1,348     $ 1,185     $ 1,098  
                         
 
                         
    2010     2009     2008  
 
Depreciation and Amortization
                       
U.S. Soup, Sauces and Beverages
  $ 107     $ 101     $ 94  
Baking and Snacking
    75       71       81  
International Soup, Sauces and Beverages
    35       41       47  
North America Foodservice
    13       28       27  
Corporate(1)
    21       23       28  
Discontinued Operations
                17  
                         
Total
  $ 251     $ 264     $ 294  
                         
 
                         
    2010     2009     2008  
 
Capital Expenditures
                       
U.S. Soup, Sauces and Beverages
  $ 139     $ 177     $ 132  
Baking and Snacking
    81       58       65  
International Soup, Sauces and Beverages
    26       34       46  
North America Foodservice
    3       17       7  
Corporate(1)
    66       59       33  
Discontinued Operations
                15  
                         
Total
  $ 315     $ 345     $ 298  
                         
 
                         
    2010     2009     2008  
 
Segment Assets
                       
U.S. Soup, Sauces and Beverages
  $ 2,146     $ 2,168     $ 2,039  
Baking and Snacking
    1,710       1,628       1,704  
International Soup, Sauces and Beverages
    1,396       1,474       1,800  
North America Foodservice
    360       377       386  
Corporate(1)
    664       409       545  
                         
Total
  $ 6,276     $ 6,056     $ 6,474  
                         
 
 
(1) Represents unallocated corporate expenses and unallocated assets, including corporate offices, deferred income taxes and prepaid pension assets.
 
(2) Earnings before interest and taxes of the North America Foodservice segment included a $12 restructuring charge. See Note 7 for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
 
(3) Earnings before interest and taxes by segment included restructuring-related costs of $3 in Baking and Snacking and $19 in North America Foodservice. See Note 7 for additional information. Earnings before interest and taxes of the International Soup, Sauces and Beverages segment included a $67 impairment charge on certain European trademarks. See Note 5 for additional information.
 
(4) Earnings before interest and taxes by segment included the effect of a 2008 restructuring charge and related costs of $182 as follows: Baking and Snacking — $144, International Soup, Sauces and Beverages — $9, and North America Foodservice — $29. See Note 7 for additional information.
 
Geographic Area Information
 
Information about operations in different geographic areas is as follows:
 
                         
    2010     2009     2008  
 
Net sales
                       
United States
  $ 5,436     $ 5,548     $ 5,448  
Europe
    601       608       770  
Australia/Asia Pacific
    978       816       1,074  
Other countries
    661       614       706  
                         
Total
  $ 7,676     $ 7,586     $ 7,998  
                         
 
                         
    2010(2)     2009(3)     2008(4)  
 
Earnings before interest and taxes
                       
United States
  $ 1,160     $ 1,118     $ 1,080  
Europe
    38       (36 )     42  
Australia/Asia Pacific
    155       105       (17 )
Other countries
    116       105       125  
                         
Segment earnings before interest and taxes
    1,469       1,292       1,230  
Corporate(1)
    (121 )     (107 )     (132 )
                         
Total
  $ 1,348     $ 1,185     $ 1,098