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Campbell Soup Refer to the annual report of Campbell Soup Company in Appendix A. a Compute Campbell Soup's working capital at the end of Year 11. b. Campbell Soup reports net receivables totaling over $527 million To whom has it extended credit and how much bad debt reserve is provided against these receivables? What percentage of total receivables is considered uncollectible? c. What cost flow assumption does Campbell Soup use for inventories? What is its inventory write-down policy? d The inventory turnover ratio (cost of goods sold average inventory) is a measure of inventory management efficiency and effectiveness. Compute the inventory turnover ratio for Campbell Soup and comment on ways that it might improve the ratio. e. How much is the LIFO reserve for Campbell Soup? What are the total tax benefits realized by Campbell Soup as of the end of fiscal Year 11 because it chose the LIFO inventory cost flow assumption (assume a 35% tax rate)? . What would Campbell Soup's pretax income have been in Year 11 if it had chosen FIFO? 5. What percentage of total assets is Campbell Soup's investment in plant assets? What depreciation method does it use for fixed assets? What percentage of historical cost is the accumulated depreciation amount associated with these assets? What can the percentage depreciated calculation reveal to an analyst about fixed assets? h Campbell Soup reports intangible assets totaling about $436 million at the end of Year 11. What major transaction(3) gave rise to this amount? Financial Statement Campbell Soup Page A47 Year 10 Year 9 Sales Earnings Sales Earnings Supplemental Schedule of Sales and Earnings (million dollars) Year 11 Sales Earnings Contributions by division Campbell North America Campbell U.S.A. $3,911.8 $632.7 Campbell Canada 352.0 35.3 4,263.8 668.0 $3,932.7 384.0 4,316.7 $370.8 25.6 $3,666.9 313.4 3,980.3 $2423 23.8 396.4 266.1 Campbell Biscuit and Bakery Pepperidge Farm International Biscuit 73.6 582.0 569.0 219.4 57.0 8.9 548.4 178.0 53.6 11.7 17.6 1953 788.4 91.2 777.3 65.9 726.4 65.3 Campbell International 1,222.9 39.4 1,189.8 (168.6) 1,030.3 (117.8) Interdivision (71.0) (78.0) (64.9) Total sales $6,204.1 $6,205.8 $5,672.1 Total operating earnings Unallocated corporate expenses Interest, net Foreign currency translation adjustments Taxes on earnings 798.6 (41.1) (90.2) .1 (265.9) 293.7 (16.5) (94.0) (3.8) (175.0) 213.6 (31.3) (55.8) (20.0) (93.4) Not earnings $401.5 $4.4 $13.1 Not earnings per share $3.16 $.03 $.10 Contributions by division in Year 10 include the effects of divestitures, restructuring and unusual charges of $339.1 million as follows: Campbell U.S.A. $121.8 million, Campbell Canada $6.6 million, Pepperidge Farm $11.0 million, International Biscuit $143 million, and Campbell International $185.1 million. Contributions by division in Year 9 include the effects of restructuring and unusual charges of $343.0 million as follows: Campbell U.S.A. $183.1 million, Campbell Canada 56.0 million, Pepperidge Farm $7.1 million, International Biscuit $9.5 million, and Campbell International $1373 million Consolidated Statements of Earnings Page A52 (millions) Year 11 Year 10 Year 9 13 NET SALES $6,204.1 $6,205.8 $5,672.1 15 16 17 18 Costs and expenses Cost of products sold Marketing and selling expenses Administrative expenses Research and development expenses Interest expense (Note 3) Interest income Foreign exchange losses, net (Note 4) Other expense (Note 5) Divestitures, restructuring and unusual charges (Note 6) 4,095.5 956.2 306.7 56.3 116.2 (26.0) .8 26.2 4,258,2 980.5 290.7 53.7 111.6 (17.6) 3.3 14.7 339.1 4,001.6 818.8 252.1 47.7 94.1 (38.3) 19.3 32.4 343.0 19 20 21 22A Total costs and expenses $5,531.9 $6,034.2 $5,570.7 $ 672.2 $ 101.4 23 Earnings before equity in earnings of affiliates and minority interests 24 Equity in earnings of affiliates 25 Minority interests 2.4 (7.2) $ 171.6 13.5 (5.7) 10.4 (5.3) 667.4 26 Earnings before taxes Taxes on earnings (Note 9) 179.4 175.0 106.5 93.4 265.9 28 Net earnings $ 401.5 $ 4.4 $ 13.1 29 Not earnings per share (Note 22) $ 3.16 S .03 $ .10 30 Weighted average shares outstanding 127.0 129.6 129.3 CONSOLIDATED BALANCE SHEETS Page A53 (million dollars) July 28, Year 11 July 29, Year 10 31 32 Current Assets Cash and cash equivalents (Note 12) Other temporary investments, at cost which approximates market Accounts receivable (Note 13) Inventories (Note 14) Prepaid expenses (Note 15) Total current assets $178.9 12.8 527.4 706.7 92.7 1,518.5 $80.7 22.5 624.5 819.8 118.0 35 36 1,665.5 34 35 Inventories (Note 14) Prepaid expenses (Note 15) Total current assets 706.7 92.7 819.8 118.0 36 1,518.5 1,665.5 37 Plant assets, not of depreciation (Note 16) 38 Intangible assets, net of amortization (Note 17) 39 Other assets (Note 18) 1,790.4 435.5 404.6 1,7177 383.4 349.0 Total assets $4,149.0 $4,115.6 Current Liabilities 40 Notes payable (Note 19) Payable to suppliers and others 42 Accrued liabilities (Note 20) Dividend payable Accrued income taxes Total current liabilities 46 Long-term dobt (Note 19) 47 Other liabilities, principally deterred income taxes (Note 21) $282.2 482.4 408.7 37.0 67.7 $202.3 525.2 491.9 323 46.4 1,278.0 1,298.1 772.6 805.8 305.0 319.9 20.3 50 51 Shareowners' Equity (Note 22) 48 Preferred stock; authorized 40,000,000 shares: none issued 49 Capital stock, $.15 par value; authorized 140,000,000 shares; issued 135,622,676 shares Capital surplus 107.3 Earnings retained in the business 1,912.6 52 Capital stock in treasury, 8,618,911 shares in Year 11 and 6,353,697 shares in Year 10, at cost (270.4) 53 Cumulative translation adjustments (Note 4) 23.6 Total shareowners' equity 1,793.4 55 Total liabilities and shareowners' equity $4,149.0 20.3 61.9 1,653.3 (1072) 63.5 1,691.8 $4,115.6 CONSOLIDATED STATEMENTS OF CASH FLOWS Page A54 (million dollars) Year 11 Year 10 Year 9 56 $401.5 $4.4 $13.1 208.6 57 58 59 60 61 62 63 Cash Flows from Operating Activities Net earnings To reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Divestitures and restructuring provisions Deferred taxes Other, net (Increase) decrease in accounts receivable (Increase) decrease in inventories Net change in other current assets and liabilities Net cash provided by operating activities 35.5 63.2 17.1 48.7 30.6 200.9 339.1 3.9 18.6 (60.4) 10.7 (68.8) 192.3 343.0 (67.8) 37.3 (46.8) (113.2) (6) 357.3 64 805.2 448.4 65 66 67 Cash Flows from Investing Activities Purchases of plant assets Sales of plant assets Businesses acquired (361.1) 43.2 (180.1) (387.6) 34.9 (41.6) (284.1) 39.8 (135.8) 71 Net cash used in investing activities (478.7) (387.5) (473.2) Cash Flows from Financing Activities 72 Long-term borrowings 73 Repayments of long-term borrowings 174 Increase (decrease) in borrowings with less than three month maturities 75 Other short-term borrowings 76 Repayments of other short-term borrowings Dividends paid 78 Treasury stock purchases 79 Treasury stock issued 80 Other, net 81 Net cash provided by (used in) financing activities 82 Effect of exchange rate changes on cash 83 Net increase (decrease) in cash and cash equivalents 84 Cash and cash equivalents at beginning of year 85 Cash and cash equivalents at end of year 77 402.8 (129.9) (137.9) 117.3 (206.4) (137.5) (175.6) 47.7 (.1) (219.6) (8.7) 98.2 80.7 12.6 (22.5) (2.7) 153.7 (89.8) (124.3) (41.1) 12.4 (.1) (101.8) 126.5 (53.6) 108.2 227.1 (1923) (86.7) (8.1) 18.5 23.5 163.1 .7 (12.1) (40.2) 120.9 35.1 85.8 $178.9 $80.7 $120.9 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY Page A55 (million dollars) Preferred Stock Capital Stock $20.3 Capital Surplus $42.3 Earnings Retained in the Business $1,879.1 13.1 Capital Stock Cumulative in Translation Treasuryl Adjustments $(75.2) $28.5 Total Shareowners Equity $1,895.0 13.1 (116.4) (8.1) (116.4) (8.1) 8.5 12.6 (26.4) 21.1 (26.4) 1,778.3 4.4 20.3 50.8 1,775.8 (70.7) 2.1 4.4 (126.9) (41.1) (126.9) (41.1) 86 Balance at July 31, Year 8 Net earnings Cash dividends ($.90 per share) Treasury stock purchased Treasury stock issued under Management incentive and Stock option plans Translation adjustments 87 Balance at July 30, Year 9 Net earnings Cash dividends ($.98 per share) Treasury stock purchased Treasury stock issued under Management incentive and Stock option plans Translation adjustments Balance at July 29, Year 10 88 Net earnings 89 Cash dividends ($1.12 per share! 90 Treasury stock purchased 91 Treasury stock issued under Management incentive and Stock option plans 92 Translation adjustments 93 Sale of foreign operations 94 Balance at July 28, Year 11 11.1 4.6 61.4 15.7 61.4 1,691.8 401.5 20.3 61.9 1,653.3 401.5 (1072) 63.5 (142.2) (175.6) (142.2) (175.6) 45.4 12.4 (29.9) (10.0) $23.6 57.8 (29.9) (10.0) $1,793.4 $20.3 $107.3 $1,912.6 S(270.4) 95 Changes in Number of Shares (tousands of shares) Issued Out- standing 129.038.6 In Treasury 6.584.1 Balance at July 31, Year 8 135.622.7 Year 11 Year 10 Year 9 Net sales United States $4,495.6 $4,527.2 $4,233.4 Europe 1,149.1 1,101.4 983.7 Other foreign countries 656.0 673.6 542.9 Adjustment and elimination (96.6) (96.4) (87.9) Consolidated $6,204.1 S6,205.8 $5,6721 Earnings (loss) before taxes United States $694.8 $427.8 $294.5 Europe 48.8 (178.7) (21.3) Other foreign countries 55.0 44.6 (59.6) 798.6 293.7 213.6 Unallocated corporate expenses (41.1) (16.5) (313) Interest, net (90.2) (94.0) (558) Foreign currency translation adjustment (3.8) (20.0) Consolidated $667.4 $179.4 $106.5 Identifiable assets United States $2,693.4 $2,535.0 $2,460.5 Europe 711.3 942.2 886.9 Other foreign countries 744.3 638.4 584.7 Consolidated $4,149.0 $4,115.6 $3,932.1 ansfers between geographic areas are recorded at cost plus markup or at market. Identifiable assets are all assets identified with erations in each geographic area. Interest Expense Year 9 Year 11 Year 101 $136.9 $121.9 $97.6 98 Interest expense 99 Less interest expense capitalized 100 20.7 10.3 3.5 $94.1 $116.2 $111.6 Page A57 1 Foreign Currency Translation ctuations in foreign exchange rates resulted in decreases in net earnings of $.3 in Year 11, $3.2 in Year 10 and 9.1 in Year 9. The balances in the Cumulative translation adjustments account are the following: Year 111 Year 101 Year 9 Europe Canada Australia Other $ 5.6 3.8 13.4 .8 $23.6 $43.2 3.6 16.1 $(3.5) (2.5) 7.3 8 so $63.5 $ 2.1 During Year 9, the Company made several acquisitions at a cost of $137.9, including a soup and pickle manufacturing business in Canada. The cost of the acquisitions was allocated as follows: 109 Working capital Fixed assets Intangibles, principally goodwill Long-term liabilities and other $ 39.9 34.6 65.5 (2.1) $137.9 These acquisition were accounted for as purchase transactions, and operations of the acquired companies are included in the financial statements from the dates the acquisitions were recorded. Proforma results of operations have not been presented as they would not vary materially from the reported amounts and would not be indicative of results Page A58 anticipated following acquisition due to significant changes made to acquired companies' operations. 110 Pension Plans and Retirement Benefits Pension Plans. Substantially all of the employees of the Company and its domestic and Canadian subsidiaries are covered by noncontributory defined benefit pension plans. Plan benefits are generally based on years of service and employees' compensation during the last years of employment. Benefits are paid from funds previously provided to trustees and insurance companies or are paid directly by the Company or its subsidiaries. Actuarial assumptions and plan provisions are reviewed regularly by the Company and its independent actuaries to ensure that plan assets will be adequate to provide pension and survivor benefits. Plan assets consist primarily of shares of or units in common stock, fixed income, real estate and money market funds. Pension expense included the following: Year 11 Year 10 Year 9 $ 22.1 $ 19.3 $ 17.2 For Domestic and Canadian trusteed plans 111 Service cost-benefits earned during the year 112 Interest cost on projected benefit obligation 113 Actual return on plan assets 114 Net amortization and deferral 69.0 63.3 58.8 (73.4) (27.1) (113.8) 6.3 57.8 24.0 7.4 (38.2) 17.3 6.4 20.0 6.8 115 Other pension expense 116 Consolidated pension expense Principal actuarial assumptions used in the United States were: $ 31.4 $ 23.7 $ 26.8 8.75% 9.00% 9.00% Measurements of projected benefit obligation, Discount rate 118 Long-term rate of compensation increase 119 Long-term rate of return on plan assets The funded status of the plans was as follows: 5.75% 5.50% 5.00% 9.00% 9.00% 9.00% Settings 120 July 28, Year 11 July 29, Year 10 (714.4) (659.4) (827.7) 857.7 (101.0) (760.4) 773.9 30.0 122.9 54.9 13.5 86.3 55.9 (39.5) (35.3) Accumulated benefit obligation Effect of projected future salary increases (113.3) Projected benefit obligation Plan assets at market value Plan assets in excess of projected benefit obligation Unrecognized net loss Unrecognized prior service cost Unrecognized net assets at transition Prepaid pension expense $ 172.5 $116.2 Pension coverage for employees of the Company's foreign subsidiaries, other than Canada, and other supplemental pension benefits of the Company are provided to the extent determined appropriate through their respective plans. Obligations under such plans are systematically provided for by depositing funds with trusts or under insurance contracts. The assets and obligations of these plans are not material. Savings Plans. The Company sponsors employee savings plans which cover substantially all domestic employees. After one year of continuous service the Company matches 50% of employee contributions up to five percent of compensation within certain limits. In fiscal Year 12, the Company will increase its contribution by up to 20% if certain earnings' goals are achieved. Amounts charged to costs and expenses were $10.0 in Year 11, $10.6 in Year 10, and $10.7 in Year 9. Retiree Benefits. The Company and its domestic subsidiaries provide certain health care and life insurance benefits to substantially all retired employees and their dependents. The cost of these retiree health and life insurance benefits are expensed as claims are paid and amounted to $15.3 in Year 11, $12.6 in Year 10, and $11.0 in Year 9. Substantially all retirees of foreign subsidiaries are provided health care benefits by government sponsored plans. The cost of life insurance provided to retirees of certain foreign subsidiaries is not significant. 121 Taxes on Earnings Page A59 The provision for income taxes consists of the following: Year 11 Year 10 Year 9 $185.8 23.4 21 2 $132.4 20.8 17.9 $118.8 20.9 21.5 1612 230.4 171.1 Currently payable 122 Federal 123 State 124 Foreign 124A Deferred 125 Federal 126 State 127 Foreign 127A 1273 21.9 7.5 6.1 35.5 1.2 2.6 .1 3.9 $175.0 (49.3) (8.0) (10.5) (67.8) $265.9 $ 93.4 The deferred income taxes result from temporary differences between financial statement earnings and taxable earnings as follows: Year 9 Year 111 Year 101 $ 5.9 $ 18.6 13.6 11.7 $11.9 8.3 (3.3) (4.8) (3.4) 128 Depreciation 129 Pensions 130 Prefunded employee benefits 131 Accruals not currently deductible for tax purposes 132 Divestitures, restructuring and unusual charges 133 Other (11.4) (5.8) (5.3) Settings 29.3 1.4 (11.1) (4.7) $ 3.9 (782) (1.1) S(678) $35,5

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