UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 1, 2009		Commission File Number 1-3822

New Jersey State of Incorporation		21-0419870 I.R.S. Employer Identification 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.

Yes þ No o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes o No þ

There were 353,414,904 shares of Capital Stock outstanding as of March 6, 2009.

 

 

PART I.

ITEM 1. FINANCIAL INFORMATION

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Earnings

(unaudited)
(millions, except per share amounts)

		Three Months Ended								Six Months Ended
		February 1,				January 27,				February 1,				January 27,
		2009				2008				2009				2008
Net sales		$	2,122			$	2,218			$	4,372			$	4,403
Costs and expenses
Cost of products sold			1,285				1,329				2,664				2,622
Marketing and selling expenses			315				319				622				615
Administrative expenses			138				141				278				282
Research and development expenses			27				25				56				52
Other (income) / expense			2				4				(2	)			4
Total costs and expenses			1,767				1,818				3,618				3,575
Earnings before interest and taxes			355				400				754				828
Interest, net			25				42				57				84
Earnings before taxes			330				358				697				744
Taxes on earnings			101				98				208				216
Earnings from continuing operations			229				260				489				528
Earnings from discontinued operations			4				14				4				16
Net earnings		$	233			$	274			$	493			$	544
Per share — basic
Earnings from continuing operations		$	.65			$	.69			$	1.37			$	1.40
Earnings from discontinued operations			.01				.04				.01				.04
Net earnings		$	.66			$	.73			$	1.38			$	1.44
Dividends		$	.25			$	.22			$	.50			$	.44
Weighted average shares outstanding — basic			355				377				356				378
Per share — assuming dilution
Earnings from continuing operations		$	.63			$	.67			$	1.34			$	1.36
Earnings from discontinued operations			.01				.04				.01				.04
Net earnings		$	.64			$	.71			$	1.35			$	1.41
Weighted average shares outstanding — assuming dilution			362				386				364				387

See Notes to Consolidated Financial Statements.

The sum of the individual per share amounts does not equal net earnings per share due to rounding.

CAMPBELL SOUP COMPANY CONSOLIDATED

Balance Sheets

(unaudited)
(millions, except per share amounts)

		February 1,				August 3,
		2009				2008
Current assets
Cash and cash equivalents		$	80			$	81
Accounts receivable			658				570
Inventories			751				829
Other current assets			149				172
Current assets held for sale			—				41
Total current assets			1,638				1,693
Plant assets, net of depreciation			1,760				1,939
Goodwill			1,646				1,998
Other intangible assets, net of amortization			543				605
Other assets			324				211
Non-current assets held for sale			—				28
Total assets		$	5,911			$	6,474
Current liabilities
Notes payable		$	754			$	982
Payable to suppliers and others			504				655
Accrued liabilities			499				655
Dividend payable			90				81
Accrued income taxes			18				9
Current liabilities held for sale			—				21
Total current liabilities			1,865				2,403
Long-term debt			1,957				1,633
Other liabilities, including deferred income taxes of $381 and $354			1,052				1,119
Non-current liabilities held for sale			—				1
Total liabilities			4,874				5,156
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			303				337
Earnings retained in the business			8,221				7,909
Capital stock in treasury, at cost			(6,972	)			(6,812	)
Accumulated other comprehensive loss			(535	)			(136	)
Total shareowners’ equity			1,037				1,318
Total liabilities and shareowners’ equity		$	5,911			$	6,474

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Cash Flows

(unaudited)
(millions)

		Six Months Ended
		February 1,				January 27,
		2009				2008
Cash flows from operating activities:
Net earnings		$	493			$	544
Adjustments to reconcile net earnings to operating cash flow
Stock-based compensation			44				39
Resolution of tax matters (Note j)			—				(13	)
Depreciation and amortization			133				138
Deferred income taxes			53				21
Other, net			24				37
Changes in working capital
Accounts receivable			(144	)			(241	)
Inventories			23				3
Prepaid assets			22				18
Accounts payable and accrued liabilities			(169	)			(50	)
Pension fund contributions			(4	)			(38	)
Payments for hedging activities			(47	)			(4	)
Other			(10	)			(12	)
Net cash provided by operating activities			418				442
Cash flows from investing activities:
Purchases of plant assets			(98	)			(90	)
Sales of plant assets			—				2
Sale of business, net of cash divested (Note b)			38				—
Other, net			(2	)			2
Net cash used in investing activities			(62	)			(86	)
Cash flows from financing activities:
Net short-term borrowings			47				60
Long-term borrowings (repayments)			300				(40	)
Repayments of notes payable			(300	)			—
Dividends paid			(171	)			(162	)
Treasury stock purchases			(295	)			(203	)
Treasury stock issuances			69				19
Excess tax benefits on stock-based compensation			17				4
Other, net			(4	)			—
Net cash used in financing activities			(337	)			(322	)
Effect of exchange rate changes on cash			(20	)			8
Net change in cash and cash equivalents			(1	)			42
Cash and cash equivalents — beginning of period			81				71
Cash balance of discontinued operations — end of period			—				(18	)
Cash and cash equivalents — end of period		$	80			$	95

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Shareowners’ Equity

(unaudited)
(millions, except per share amounts)

																						Earnings				Accumulated
		Capital Stock																Additional				Retained				Other				Total
		Issued								In Treasury								Paid-in				in the				Comprehensive				Shareowners’
		Shares				Amount				Shares				Amount				Capital				Business				Income (Loss)				Equity
Balance at July 29, 2007			542			$	20				(163	)		$	(6,015	)		$	331			$	7,082			$	(123	)		$	1,295
Comprehensive income (loss)
Net earnings																							544								544
Foreign currency translation adjustments, net of tax																											71				71
Cash-flow hedges, net of tax																											8				8
Pension and postretirement benefits, net of tax																											3				3
Other comprehensive income																											82				82
Total comprehensive income																															626
Impact of adoption of FIN 48 (Note j)																							(6	)							(6	)
Dividends ($.44 per share)																							(169	)							(169	)
Treasury stock purchased											(6	)			(203	)															(203	)
Treasury stock issued under management incentive and stock option plans											2				46				6												52
Balance at January 27, 2008			542			$	20				(167	)		$	(6,172	)		$	337			$	7,451			$	(41	)		$	1,595
Balance at August 3, 2008			542			$	20				(186	)		$	(6,812	)		$	337			$	7,909			$	(136	)		$	1,318
Comprehensive income (loss)
Net earnings																							493								493
Foreign currency translation adjustments, net of tax																											(409	)			(409	)
Cash-flow hedges, net of tax																											(13	)			(13	)
Pension and postretirement benefits, net of tax																											23				23
Other comprehensive loss																											(399	)			(399	)
Total comprehensive income																															94
Dividends ($.50 per share)																							(181	)							(181	)
Treasury stock purchased											(9	)			(295	)															(295	)
Treasury stock issued under management incentive and stock option plans											4				135				(34	)											101
Balance at February 1, 2009			542			$	20				(191	)		$	(6,972	)		$	303			$	8,221			$	(535	)		$	1,037

See Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY CONSOLIDATED
Notes to Consolidated Financial Statements

(unaudited)
(dollars in millions, except per share amounts)

(a)		Basis of Presentation / Accounting Policies
		The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. All such adjustments are of a normal recurring nature. The accounting policies used in preparing these financial statements are consistent with those applied in the Annual Report on Form 10-K for the year ended August 3, 2008, except for the adoption of Statement of Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements” and SFAS No. 159 “The Fair Value Option for Financial Assets and Liabilities — Including an amendment of FASB Statement No. 115.” See Notes (c) and (n) for additional information. Certain reclassifications were made to the prior year amounts to conform with the current year presentation. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. There were 53 weeks in 2008. There will be 52 weeks in 2009.
(b)		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 2008 consolidated statements of earnings. The company used approximately $600 of the net proceeds to purchase company stock.
		The company recognized a $4 tax benefit in Earnings from discontinued operations during the three-month period ended February 1, 2009. The benefit was a result of an adjustment to the tax liability associated with the sale of the Godiva Chocolatier business.
		Results of discontinued operations were as follows:

		Three Months Ended								Six Months Ended
		February 1,				January 27,				February 1,				January 27,
		2009				2008				2009				2008
Net sales		$	—			$	189			$	—			$	303
Earnings from operations before taxes		$	—			$	33			$	—			$	36
Taxes on earnings — operations			—				(14	)			—				(15	)
Costs associated with the sale			—				(9	)			—				(9	)
Tax benefit from sale of business			4				4				4				4
Earnings from discontinued operations		$	4			$	14			$	4			$	16

		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 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) in 2008. See also Note (l). The terms of the agreement require the company to provide a loan facility to the buyer of AUD $10, or approximately USD $6. The facility can be drawn down in AUD $5 increments, six months and nine months after the closing date. In November 2008, the buyer borrowed AUD $5 under the facility. Borrowings under the facility are to be repaid five years after the closing date. The company will also provide transition services for approximately one year.
		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 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 had annual net sales of approximately $70. The assets and liabilities of this business were reflected as assets and liabilities held for sale in the consolidated balance sheet as of August 3, 2008 and are comprised of the following:

Accounts receivable		$	32
Inventories			8
Prepaids			1
Current assets		$	41
Plant assets, net of depreciation		$	13
Goodwill and intangible assets			15
Non-current assets		$	28
Accounts payable		$	18
Accrued liabilities			3
Current liabilities		$	21
Deferred income taxes		$	1
Non-current liabilities		$	1

(c)		Recent Accounting Pronouncements
		In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157 “Fair Value Measurements,” which provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 establishes a definition of fair value, provides a framework for measuring fair value and expands the disclosure requirements about fair value measurements. This standard 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, FASB Staff Position (FSP) No. FAS 157-2 was issued, which delayed by a year the effective date for certain nonfinancial assets and liabilities. The

		company adopted SFAS No. 157 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. See Note (n) for additional information. The company is currently evaluating the impact of SFAS No. 157 as it relates to nonfinancial assets and liabilities.
		In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Liabilities — Including an amendment of FASB Statement No. 115.” SFAS No. 159 allows companies to choose, at specific election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. The company adopted SFAS No. 159 at the beginning of fiscal 2009. The company elected not to adopt the fair value option under SFAS No. 159 for eligible financial assets and liabilities.
		In December 2007, the FASB issued SFAS No. 141 (revised 2007) “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. This Statement applies to business combinations for which the acquisition date is after the beginning of the first annual reporting period beginning after December 15, 2008. Earlier adoption is not permitted. The company is currently evaluating the impact of SFAS No. 141 as revised.
		In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51.” SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be recorded as equity in the consolidated financial statements. This Statement also requires that consolidated net income shall be adjusted to include the net income attributed to the noncontrolling interest. Disclosure on the face of the income statement of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest is required. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. Earlier adoption is not permitted. The company is currently evaluating the impact of SFAS No. 160.
		In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133,” which enhances the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) the location and amounts of derivative instruments in an entity’s financial statements, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance in SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The company is currently evaluating the impact of SFAS No. 161.

		In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The company is currently evaluating the impact of SFAS No. 162.
		In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP EITF 03-6-1 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. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. 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 provisions of FSP EITF 03-6-1. The company is currently evaluating the impact of FSP EITF 03-6-1.
		In December 2008, the FASB issued FSP FAS 132(R)-1 “Employers’ Disclosures about Postretirement Benefit Plan Assets,” which provides additional guidance on employers’ disclosures about the plan assets of defined benefit pension or other postretirement plans. The disclosures required by FSP FAS 132(R)-1 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 FSP shall be provided for fiscal years ending after December 15, 2009. The company is currently evaluating the impact of FSP FAS 132(R)-1.
(d)		Stock-based Compensation
		The company provides compensation benefits by issuing unrestricted stock, restricted stock and restricted stock units (including EPS performance restricted stock/units and total shareowner return (TSR) performance restricted stock/units). In previous fiscal years, the company also issued stock options and stock appreciation rights to provide compensation benefits.
		Total pre-tax stock-based compensation recognized in Earnings from continuing operations was $19 for the three-month periods ended February 1, 2009 and January 27, 2008. Tax related benefits of $7 were also recognized for the three-month periods ended February 1, 2009 and January 27, 2008. Total pre-tax stock-based compensation recognized in Earnings from continuing operations was $44 and $37 for the six-month periods ended February 1, 2009 and January 27, 2008, respectively. Tax related benefits of $16 and $14 were also recognized for the six-month periods ended February 1, 2009 and January 27, 2008, respectively. Stock-based compensation associated with discontinued operations was $1 after tax for the three-month and six-month periods ended January 27, 2008. Cash received

		from the exercise of stock options was $69 and $19 for the six-month periods ended February 1, 2009 and January 27, 2008, respectively, and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows.
		The following table summarizes stock option activity as of February 1, 2009:

										Weighted-Average				Aggregate
						Weighted-Average				Remaining				Intrinsic
(options in thousands)		Options				Exercise Price				Contractual Life				Value
Outstanding at August 3, 2008			20,705			$	27.42
Granted			—				—
Exercised			(2,597	)		$	26.86
Terminated			(77	)		$	47.60
Outstanding at February 1, 2009			18,031			$	27.41				3.8			$	61
Exercisable at February 1, 2009			18,031			$	27.41				3.8			$	61

		The total intrinsic value of options exercised during the six-month periods ended February 1, 2009, and January 27, 2008 was $30 and $8, respectively. As of February 1, 2009, compensation related to stock options was fully expensed. The company measured the fair value of stock options using the Black-Scholes option pricing model.
		The following table summarizes time-lapse restricted stock/units and EPS performance restricted stock/units as of February 1, 2009:

						Weighted-Average
						Grant-Date
(restricted stock/units in thousands)		Shares/Units				Fair Value
Nonvested at August 3, 2008			2,331			$	34.30
Granted			1,154			$	39.79
Vested			(1,028	)		$	34.15
Forfeited			(83	)		$	36.64
Nonvested at February 1, 2009			2,374			$	36.94

		The fair value of time-lapse restricted stock/units and EPS performance restricted stock/units is determined based on the number of shares granted and the quoted price of the company’s stock at the date of grant. Time-lapse restricted stock/units granted in fiscal 2005 are expensed on a graded-vesting basis. Time-lapse restricted stock/units granted in fiscal 2006 to fiscal 2009 are expensed on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which are expensed on an accelerated basis. EPS restricted stock/units are expensed on a graded-vesting basis, except for awards issued to retirement-eligible participants, which are expensed on an accelerated basis.
		As of February 1, 2009, total remaining unearned compensation related to nonvested time-lapse restricted stock/units and EPS performance restricted stock/units was $56, which will be amortized over the weighted-average remaining service period of 1.9 years. The fair

		value of restricted stock/units vested during the six-month periods ended February 1, 2009 and January 27, 2008 was $39 and $34, respectively. The weighted-average grant-date fair value of the restricted stock/units granted during the six-month period ended January 27, 2008 was $36.90.
		The following table summarizes TSR performance restricted stock/units as of February 1, 2009:

						Weighted-Average
						Grant-Date
(restricted stock/units in thousands)		Shares/Units				Fair Value
Nonvested at August 3, 2008			3,549			$	30.09
Granted			1,158			$	47.20
Vested			(1,184	)		$	29.01
Forfeited			(97	)		$	35.89
Nonvested at February 1, 2009			3,426			$	36.08

		The fair value of TSR performance restricted stock/units is estimated at the grant date using a Monte Carlo simulation. Expense is recognized on a straight-line basis over the service period. As of February 1, 2009, total remaining unearned compensation related to TSR performance restricted stock/units was $71, which will be amortized over the weighted-average remaining service period of 2.2 years. During the six-month period ended February 1, 2009, recipients of TSR performance restricted stock/units earned 125% of their initial grants based upon the company’s total shareowner return ranking in a performance peer group during a three-year period ended July 31, 2008. As a result, approximately 280,000 additional shares were awarded. The total fair value of TSR performance restricted stock/units vested during the six-month period ended February 1, 2009 was $57. The grant-date fair value of TSR performance restricted stock/units granted during the six-month period ended January 27, 2008 was $34.64.
(e)		Goodwill and Intangible Assets
		The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:

		February 1, 2009								August 3, 2008
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Intangible assets subject to amortization1:
Other		$	11			$	(7	)		$	12			$	(7	)
Intangible assets not subject to amortization:
Trademarks		$	539							$	600

Changes in the carrying amount for goodwill for the period ended February 1, 2009 are as follows:

		U.S. Soup,								International				North
		Sauces and				Baking and				Soup, Sauces				America
		Beverages				Snacking				and Beverages				Foodservice				Total
Balance at August 3, 2008		$	434			$	744			$	674			$	146			$	1,998
Foreign currency translation adjustment			—				(232	)			(120	)			—				(352	)
Balance at February 1, 2009		$	434			$	512			$	554			$	146			$	1,646

(f)		Comprehensive Income
		Total comprehensive income comprises net earnings, net foreign currency translation adjustments, adjustments to net unrealized gains (losses) on cash-flow hedges and adjustments to net unamortized pension and postretirement benefits.
		Total comprehensive income for the three-month periods ended February 1, 2009 and January 27, 2008, was $206 and $265, respectively. Total comprehensive income for the six-month periods ended February 1, 2009 and January 27, 2008, was $94 and $626, respectively.
		The components of Accumulated other comprehensive loss consisted of the following:

		February 1,				August 3,
		2009				2008
Foreign currency translation adjustments, net of tax1		$	(168	)		$	241
Cash-flow hedges, net of tax2			(8	)			5
Unamortized pension and postretirement benefits, net of tax:3
Net actuarial loss			(355	)			(376	)
Prior service cost			(4	)			(6	)
Total Accumulated other comprehensive loss		$	(535	)		$	(136	)

(g)		Earnings Per Share
		For the periods presented in the Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution include the incremental effect of stock options and restricted stock programs, except when such effect would be antidilutive. Stock options to purchase 1.6 million and 1 million shares of capital stock for the three-month and six-month periods ended February 1, 2009, respectively, and stock options to purchase 1 million shares of capital stock for both the three-month and six-month periods ended January 27, 2008 were not included in the calculation of diluted earnings per share because the exercise price of the stock options exceeded the average market price of the capital stock and therefore, the effect would be antidilutive.
(h)		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 includes the following retail businesses: 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 juice and juice drinks; Campbell’s tomato juice; and Wolfgang Puck soups, stocks, and broths.
		The Baking and Snacking segment includes the following businesses: Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and Arnott’s salty snacks in Australia.
		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 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 the company’s 2008 Annual Report on Form 10-K. The company evaluates segment performance before interest and taxes. Beginning in fiscal 2009, unrealized gains and losses on commodity hedging activities are excluded from segment operating earnings and are recorded in Corporate expenses as these open positions represent hedges of future purchases. Upon closing of the contracts, the realized gain or loss is transferred to segment operating earnings, which allows the segments to reflect the economic effects of the hedge without exposure to quarterly volatility of unrealized gains and losses. In prior periods, unrealized gains and losses on commodity hedging activities were not material. 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. Accordingly, with the exception of a refrigerated soup facility, plant assets are not allocated to the North America Foodservice operations. Depreciation, however, is allocated to North America Foodservice based on production hours.

February 1, 2009

		Three Months Ended								Six Months Ended
						Earnings								Earnings
						Before Interest								Before Interest
		Net Sales				and Taxes2				Net Sales				and Taxes2
U.S. Soup, Sauces and Beverages		$	1,128			$	270			$	2,326			$	584
Baking and Snacking			440				53				949				136
International Soup, Sauces and Beverages			391				50				771				88
North America Foodservice			163				10				326				21
Corporate 1			—				(28	)			—				(75	)
Total		$	2,122			$	355			$	4,372			$	754

January 27, 2008

		Three Months Ended								Six Months Ended
						Earnings								Earnings
						Before Interest								Before Interest
		Net Sales				and Taxes				Net Sales				and Taxes
U.S. Soup, Sauces and Beverages		$	1,093			$	286			$	2,190			$	595
Baking and Snacking			491				68				1,023				140
International Soup, Sauces and Beverages			458				61				848				112
North America Foodservice			176				20				342				44
Corporate 1			—				(35	)			—				(63	)
Total		$	2,218			$	400			$	4,403			$	828

(i)

Inventories

		February 1, 2009				August 3, 2008
Raw materials, containers and supplies		$	279			$	313
Finished products			472				516
		$	751			$	829

(j)		Taxes on Earnings
		The company adopted the provisions of the FASB Interpretation No. 48 (FIN 48) “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” as of July 30, 2007 (the beginning of fiscal 2008). Upon adoption, the company recognized a cumulative-effect adjustment of $6 as an increase in the liability for unrecognized tax benefits, including interest and penalties, and a reduction in retained earnings.
		During the three-month period ended November 2, 2008, the balance of unrecognized tax benefits, including interest and penalties, and tax expense were reduced by $12 following the finalization of U.S. federal and state tax audits. Fiscal 2007 and thereafter remain open to U.S. federal audits.
		In the three-month period ended January 27, 2008, the company finalized a favorable state tax agreement that resulted in a $13 benefit.
(k)		Accounting for Derivative Instruments
		The company utilizes certain derivative financial instruments to enhance its ability to manage risk including interest rate, foreign currency, commodity and certain equity-linked deferred compensation exposures that exist as part of ongoing business operations. A description of the company’s use of derivative instruments is included in the Annual Report on Form 10-K for the year ended August 3, 2008.
		Interest Rate Swaps
		The notional amount of outstanding fair-value interest rate swaps at February 1, 2009 totaled $500 with a maximum maturity date of October 2013. The fair value of such instruments was a gain of $43 as of February 1, 2009.
		In June 2008, the company entered into two forward starting interest rate swap contracts with a combined notional value of $200 to hedge an anticipated debt offering in fiscal 2009. These swaps were settled as of November 2, 2008, at a loss of $13. In January 2009, the company issued $300 ten-year 4.50% notes. The loss on the swap contracts will be amortized over the life of the debt as additional interest expense.
		Foreign Currency Contracts
		The fair value of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was a gain of $11 at February 1, 2009. The notional amount was $314 at February 1, 2009.

The company also enters into certain foreign exchange forward and variable-to-variable cross-currency swap contracts that are not designated as accounting hedges. These instruments are primarily intended to reduce volatility of certain intercompany financing transactions. The fair value of these instruments was a gain of $81 at February 1, 2009. The notional amount was $627 at February 1, 2009.

Foreign exchange forward contracts typically have maturities of less than eighteen months. Cross-currency swap contracts mature in 2009 through August 2013. Principal currencies include the Canadian dollar, euro, Australian dollar, Swedish krona, New Zealand dollar, British pound and Japanese yen.

Commodities

The company enters into certain commodity futures contracts to reduce volatility of price fluctuations for commodities such as natural gas, soybean oil, corn, wheat, aluminum, soybean meal, heating oil and cocoa. Commodity futures contracts are typically accounted for as cash-flow hedges or are not designated as accounting hedges. The notional amount of commodity futures contracts was $105 at February 1, 2009 and the fair value was a loss of $35. The company recorded a loss of $26 in the Statements of Earnings related to the fair value of open contracts for the six-month period ended February 1, 2009.

As of February 1, 2009, the accumulated derivative net loss in other comprehensive loss for cash-flow hedges, including the foreign exchange forward and cross-currency contracts, commodity futures contracts, forward starting swap contracts, and treasury lock agreements was $8, net of tax. As of August 3, 2008, the accumulated derivative net gain in other comprehensive income was $5, net of tax. Reclassifications from Accumulated other comprehensive income (loss) into the Statements of Earnings during the quarter ended February 1, 2009 were not material. Reclassifications during the remainder of 2009 are not expected to be material. At February 1, 2009, the maximum maturity date of any cash-flow hedge was August 2013.

(l)		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 ($102 after tax or $.27 per share). The charge consisted of a net loss of $120 ($64 after tax) on the sale of certain Australian salty snack food brands and assets, $45 ($31 after tax) of employee severance and benefit costs, including the estimated impact of curtailment and other pension charges, and $10 ($7 after tax) of property, plant and equipment impairment charges. In addition, approximately $7 ($5 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, or $.28 per share. In the first and second quarters of 2009, the company recorded approximately $15 ($10 after tax or $.03 per share) of costs related to these initiatives in Cost of products sold. Approximately $13 of the costs represented accelerated depreciation on property, plant and equipment and approximately $2 related to other exit costs. The company expects to incur additional pre-tax costs of approximately $23,

consisting of the following: approximately $13 in employee severance and benefit costs, including the estimated impact of curtailment and other pension charges; approximately $4 in accelerated depreciation of property, plant and equipment; and approximately $6 in other exit costs. Of the aggregate $220 of pre-tax costs for the total program, the company expects approximately $50 will be cash expenditures, the majority of which will be spent in 2009.

A summary of the pre-tax costs is as follows:

										Recognized				Remaining
		Total				Change in				as of				Costs to be
		Program				Estimate1				February 1, 2009				Recognized
Severance pay and benefits		$	62			$	(4	)		$	(45	)		$	13
Asset impairment/accelerated depreciation			158				(4	)			(150	)			4
Other exit costs			10				(2	)			(2	)			6
Total		$	230			$	(10	)		$	(197	)		$	23

Details of the components of the program are as follows:

In the third quarter of 2008, as part of the previously discussed 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. See also Note (b).

In April 2008, as part of the previously discussed initiatives, the company announced plans to close the Listowel, Ontario, Canada food plant. The Listowel facility produces primarily frozen products, including soup, entrees, and Pepperidge Farm products, as well as ramen noodles. The facility employed approximately 500 people. The company plans to operate the facility through April 2009 and transition production to its network of North American contract manufacturers and to its Downingtown, Pennsylvania plant. As a result, the company recorded $20 ($14 after tax) of employee severance and benefit costs, including the estimated impact of curtailment and other pension charges, and $7 ($5 after tax) in accelerated depreciation of property, plant and equipment in 2008. In the first and second quarters of 2009, the company recorded $12 ($8 after tax) in accelerated depreciation of property, plant and equipment and $1 of other exit costs. The company expects to incur approximately $13 in additional employee severance and benefit costs, approximately $4 in accelerated depreciation of property, plant and equipment, and approximately $3 in other exit costs.

In April 2008, as part of the previously discussed 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 ($7 after tax) of property, plant and equipment impairment charges and $8 ($6 after tax) in employee severance and benefit costs in 2008. In the second quarter of 2009, the company recorded $1 in accelerated depreciation of property, plant and equipment and $1 of other exit costs. The company expects to incur an additional $3 in other exit costs.

As part of the previously discussed initiatives, the company is streamlining its management structure and eliminating certain overhead costs. These actions began in the fourth quarter of 2008 and will be substantially completed in 2009. In connection with this action, the company recorded $17 ($11 after tax) in employee severance and benefit costs in 2008.

A summary of restructuring activity and related reserves at February 1, 2009 is as follows:

														Foreign
		Accrued												Currency				Accrued
		Balance at				2009				Cash				Translation				Balance at
		August 3, 2008				Charge				Payments				Adjustment				February 1, 2009
Severance pay and benefits		$	37				—				(12	)			(8	)		$	17
Asset impairment/accelerated depreciation			—				13												—
Other exit costs			—				2												—
		$	37			$	15											$	17

A summary of total charges by reportable segment is as follows:

		U.S. Soup,								International				North
		Sauces and				Baking and				Soup, Sauces				America
		Beverages				Snacking				and Beverages				Foodservice				Total
Severance pay and benefits		$	—			$	14			$	9			$	22			$	45
Asset impairment/accelerated depreciation			—				131				—				19				150
Other exit costs			—				1				—				1				2
		$	—			$	146			$	9			$	42			$	197

		The company expects to incur additional pre-tax costs of approximately $23 by segment as follows: Baking and Snacking — $3 and North America Foodservice — $20. The total pre-tax costs of $220 expected to be incurred by segment is as follows: Baking and Snacking — $149, International Soup, Sauces and Beverages — $9 and North America Foodservice — $62.
(m)		Pension and Postretirement Medical Benefits
		The company sponsors certain defined benefit plans and postretirement medical benefit plans for employees. Components of benefit expense were as follows:

		Pension								Postretirement
		February 1,				January 27,				February 1,				January 27,
Three Months Ended		2009				2008				2009				2008
Service cost		$	12			$	12			$	1			$	1
Interest cost			30				30				6				6
Expected return on plan assets			(41	)			(42	)			—				—
Amortization of prior service cost			—				1				—				—
Recognized net actuarial loss			5				4				—				—
Curtailment loss			—				2				—				—
Special termination benefits			—				4				—				—
Net periodic benefit expense		$	6			$	11			$	7			$	7

		Pension								Postretirement
		February 1,				January 27,				February 1,				January 27,
Six Months Ended		2009				2008				2009				2008
Service cost		$	23			$	24			$	2			$	2
Interest cost			61				59				11				11
Expected return on plan assets			(82	)			(84	)			—				—
Amortization of prior service cost			1				1				—				—
Recognized net actuarial loss			9				10				—				—
Curtailment loss			—				2				—				—
Special termination benefits			—				4				—				—
Net periodic benefit expense		$	12			$	16			$	13			$	13

The curtailment loss and special termination benefits related to the sale of the Godiva Chocolatier business and were included in discontinued operations.

Contributions to the U.S. pension plans are not required this fiscal year. Contributions of $4 were made to the non-U.S. plans as of February 1, 2009. Contributions to non-U.S. plans are expected to be $5 during the remainder of the fiscal year.

(n)		Fair Value Measurements
		In the first quarter of fiscal 2009, the company adopted SFAS No. 157 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements.
		SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels are as follows:

	•		Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
	•		Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with observable market data.
	•		Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The adoption of SFAS No. 157 did not have a material impact on the consolidated financial statements.

The financial assets and liabilities subject to fair value measurements are as follows:

		Fair Value				Fair Value Measurements at 2/1/09
		as of				Using Fair Value Hierarchy
		2/1/09				Level 1				Level 2				Level 3
Assets:
Interest rate swaps1		$	43			$	—			$	43			$	—
Foreign currency forward contracts2			8				—				8				—
Cross-currency swap contracts3			99				—				99				—
Deferred compensation derivatives5			1				—				1				—
Total		$	151			$	—			$	151			$	—
Liabilities:
Commodity derivatives4		$	35			$	35			$	—			$	—
Foreign currency forward contracts2			2				—				2				—
Cross-currency swap contracts3			13				—				13				—
Deferred compensation obligation6			148				74				74				—
Total		$	198			$	109			$	89			$	—

(o)		Supplemental Cash Flow Information
		Other cash used in operating activities for the six-month periods is comprised of the following:

		February 1, 2009				January 27, 2008
Benefit related payments		$	(19	)		$	(17	)
Other			9				5
		$	(10	)		$	(12	)