Edgar Filing: CAMPBELL SOUP CO

CPB-1.29.2012-10Q

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 January 29, 2012	Commission File Number 1-3822

CAMPBELL SOUP COMPANY



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

_____________________________________________________

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. R 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 the registrant was required to submit and post such files). R Yes o No

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.



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes R No

There were 316,471,418 shares of capital stock outstanding as of February 29, 2012.

TABLE OF CONTENTS



PART I
	Item 1. FINANCIAL INFORMATION	3
	Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
	Item 4. CONTROLS AND PROCEDURES	31
PART II
	Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32
	Item 6. EXHIBITS	33
SIGNATURES		34
INDEX TO EXHIBITS		35

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
	January 29, 2012			January 30, 2011		January 29, 2012			January 30, 2011
Net sales	$	2,112		$	2,127	$	4,273		$	4,299
Costs and expenses
Cost of products sold	1,301			1,289		2,608			2,567
Marketing and selling expenses	297			291		558			568
Administrative expenses	152			154		297			294
Research and development expenses	29			31		59			62
Other expenses / (income)	1			3		1			5
Restructuring charges	3			—		5			—
Total costs and expenses	1,783			1,768		3,528			3,496
Earnings before interest and taxes	329			359		745			803
Interest expense	28			34		58			66
Interest income	2			3		4			5
Earnings before taxes	303			328		691			742
Taxes on earnings	102			89		227			224
Net earnings	201			239		464			518
Less: Net earnings (loss) attributable to noncontrolling interests	(4		)	—		(6		)	—
Net earnings attributable to Campbell Soup Company	$	205		$	239	$	470		$	518
Per Share — Basic
Net earnings attributable to Campbell Soup Company	$	.64		$	.72	$	1.46		$	1.54
Dividends	$	.29		$	.29	$	.58		$	.565
Weighted average shares outstanding — basic	318			330		319			332
Per Share — Assuming Dilution
Net earnings attributable to Campbell Soup Company	$	.64		$	.71	$	1.45		$	1.53
Weighted average shares outstanding — assuming dilution	320			332		321			335

See accompanying Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY

Consolidated Balance Sheets

(unaudited)

(millions, except per share amounts)



	January 29, 2012			July 31, 2011
Current assets
Cash and cash equivalents	$	322		$	484
Accounts receivable	683			560
Inventories	746			767
Other current assets	167			152
Total current assets	1,918			1,963
Plant assets, net of depreciation	2,047			2,103
Goodwill	2,058			2,133
Other intangible assets, net of amortization	511			527
Other assets	131			136
Total assets	$	6,665		$	6,862
Current liabilities
Short-term borrowings	$	870		$	657
Payable to suppliers and others	551			585
Accrued liabilities	598			619
Dividend payable	93			95
Accrued income taxes	40			33
Total current liabilities	2,152			1,989
Long-term debt	2,008			2,427
Deferred taxes	425			367
Other liabilities	883			983
Total liabilities	5,468			5,766
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	332			331
Earnings retained in the business	9,466			9,185
Capital stock in treasury, at cost	(8,138		)	(8,021		)
Accumulated other comprehensive loss	(485		)	(427		)
Total Campbell Soup Company shareowners’ equity	1,195			1,088
Noncontrolling interests	2			8
Total equity	1,197			1,096
Total liabilities and equity	$	6,665		$	6,862

See accompanying Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY

Consolidated Statements of Cash Flows

(unaudited)

(millions)



	Six Months Ended
	January 29, 2012			January 30, 2011
Cash flows from operating activities:
Net earnings	$	464		$	518
Adjustments to reconcile net earnings to operating cash flow
Restructuring charges	5			—
Stock-based compensation	45			46
Depreciation and amortization	124			129
Deferred income taxes	46			77
Other, net	60			54
Changes in working capital
Accounts receivable	(140		)	(186		)
Inventories	6			32
Prepaid assets	—			9
Accounts payable and accrued liabilities	(45		)	(39		)
Pension fund contributions	(63		)	(135		)
Receipts from (payments of) hedging activities	(3		)	1
Other	(21		)	(23		)
Net cash provided by operating activities	478			483
Cash flows from investing activities:
Purchases of plant assets	(97		)	(74		)
Sales of plant assets	1			9
Other, net	1			—
Net cash used in investing activities	(95		)	(65		)
Cash flows from financing activities:
Net short-term borrowings (repayments)	(191		)	351
Dividends paid	(188		)	(188		)
Treasury stock purchases	(173		)	(573		)
Treasury stock issuances	23			38
Excess tax benefits on stock-based compensation	—			6
Net cash used in financing activities	(529		)	(366		)
Effect of exchange rate changes on cash	(16		)	19
Net change in cash and cash equivalents	(162		)	71
Cash and cash equivalents — beginning of period	484			254
Cash and cash equivalents — end of period	$	322		$	325

See accompanying Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY

Consolidated Statements of Equity

(unaudited)

(millions, except per share amounts)



	Campbell Soup Company Shareowners’ Equity
	Capital Stock								Additional Paid-in Capital			Earnings Retained in the Business			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests
	Issued			In Treasury
	Shares	Amount		Shares		Amount															Total Equity
Balance at August 1, 2010	542	$	20	(206	)	$	(7,459	)	$	341		$	8,760		$	(736	)	$	3		$	929
Comprehensive income (loss)
Net earnings (loss)												518						—			518
Foreign currency translation adjustments, net of tax															119			—			119
Cash-flow hedges, net of tax															2						2
Pension and postretirement benefits, net of tax															20						20
Other comprehensive income (loss)															141			—			141
Total comprehensive income (loss)																					659
Dividends ($.565 per share)												(191		)							(191		)
Treasury stock purchased				(16	)	(573		)													(573		)
Treasury stock issued under management incentive and stock option plans				3		93			(25		)										68
Balance at January 30, 2011	542	$	20	(219	)	$	(7,939	)	$	316		$	9,087		$	(595	)	$	3		$	892
Balance at July 31, 2011	542	$	20	(222	)	$	(8,021	)	$	331		$	9,185		$	(427	)	$	8		$	1,096
Comprehensive income (loss)
Net earnings (loss)												470						(6		)	464
Foreign currency translation adjustments, net of tax															(97		)	—			(97		)
Cash-flow hedges, net of tax															9						9
Pension and postretirement benefits, net of tax															30						30
Other comprehensive income (loss)															(58		)	—			(58		)
Total comprehensive income (loss)																					406
Dividends ($.58 per share)												(189		)							(189		)
Treasury stock purchased				(5	)	(173		)													(173		)
Treasury stock issued under management incentive and stock option plans				2		56			1												57
Balance at January 29, 2012	542	$	20	(225	)	$	(8,138	)	$	332		$	9,466		$	(485	)	$	2		$	1,197

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

(unaudited)

(currency in millions, except per share amounts)


1.	Basis of Presentation and Significant 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 July 31, 2011. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year.


2.	Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued additional authoritative guidance related to fair value measurements and disclosures. The guidance requires a roll forward, separately presenting information about purchases, sales, issuances and settlements on a gross basis, rather than net, of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The company adopted the guidance in the first quarter of 2012. The adoption did not have a material impact on the consolidated financial statements.

In November 2010, the FASB issued additional authoritative guidance clarifying the required disclosures of supplementary pro forma information for business combinations. The guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.

In December 2010, the FASB issued additional authoritative guidance on accounting for goodwill. The guidance clarifies the impairment test for reporting units with zero or negative carrying amounts. The guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2011. The company does not expect the adoption to have a material impact on the company’s consolidated financial statements.

In May 2011, the FASB issued further additional authoritative guidance related to fair value measurements and disclosures. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between accounting principles generally accepted in the United States (U.S. GAAP) and International Financial Reporting Standards (IFRS). The guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2011. The company is currently assessing the impact of the guidance.

In June 2011, the FASB issued authoritative guidance requiring entities to present net income and other comprehensive income (OCI) in one continuous statement or two separate, but consecutive, statements of net income and comprehensive income. The option to present items of OCI in the statement of changes in equity has been eliminated. In December 2011, the FASB issued an amendment to defer indefinitely a requirement in the June 2011 standard that called for reclassification adjustments from accumulated other comprehensive income to be measured and presented by income statement line item in net income and also in OCI. The new requirements are effective for annual reporting periods beginning after December 15, 2011 and for interim reporting periods within those years. The company does not expect the adoption to have a material impact on the company’s consolidated financial statements.

In September 2011, the FASB issued revised guidance intended to simplify how an entity tests goodwill for impairment. The amendments will allow an entity first to assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity will no longer be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The company does not expect the adoption to have a material impact on the company’s consolidated financial statements.

In December 2011, the FASB issued guidance related to disclosures about offsetting (netting) of assets and liabilities in the statement of financial position. The guidance requires entities to disclose gross information and net information about both instruments and transactions that are offset in the statement of financial position, and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope includes financial instruments and derivative instruments. The disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Disclosures required under the guidance shall be provided for all comparative periods presented. The company is currently assessing the impact of the guidance.


3.	Comprehensive Income

Total comprehensive income is comprised of net earnings, net foreign currency translation adjustments, net unamortized pension and postretirement benefits adjustments, and net unrealized gains and losses on cash-flow hedges. Total comprehensive

income for the three-month periods ended January 29, 2012 and January 30, 2011 was $182 and $257, respectively. Total comprehensive income for the six-month periods ended January 29, 2012 and January 30, 2011 was $406 and $659.

The components of Accumulated other comprehensive income (loss) consisted of the following:



	January 29, 2012			July 31, 2011
Foreign currency translation adjustments, net of tax (1)	$	299		$	396
Cash-flow hedges, net of tax (2)	(11		)	(20		)
Unamortized pension and postretirement benefits, net of tax (3):
Net actuarial loss	(778		)	(809		)
Prior service credit	5			6
Total Accumulated other comprehensive loss	$	(485	)	$	(427	)

_______________________________________


(1)	Includes a tax expense of $21 as of January 29, 2012, and $4 as of July 31, 2011. The amount related to noncontrolling interests was not material.


(2)	Includes a tax benefit of $8 as of January 29, 2012, and $11 as of July 31, 2011.


(3)	Includes a tax benefit of $442 as of January 29, 2012, and $459 as of July 31, 2011.


4.	Goodwill and Intangible Assets

The following table shows the changes in the carrying amount of goodwill by business segment:



	U.S. Simple Meals		Global Baking and Snacking			International Simple Meals and Beverages			U.S. Beverages		North America Foodservice		Total
Balance at July 31, 2011	$	322	$	914		$	639		$	112	$	146	$	2,133
Foreign currency translation adjustment	—		(28		)	(47		)	—		—		(75		)
Balance at January 29, 2012	$	322	$	886		$	592		$	112	$	146	$	2,058

The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:



	January 29, 2012			July 31, 2011
Intangible Assets:
Non-amortizable intangible assets	$	499		$	515
Amortizable intangible assets	21			21
	520			536
Accumulated amortization	(9		)	(9		)
Total net intangible assets	$	511		$	527

Non-amortizable intangible assets consist of trademarks, which mainly include Pace, Royco, Liebig, Blå Bland, and Touch of Taste.

Amortizable intangible assets consist substantially of process technology and customer intangibles. Amortization related to these assets was less than $1 for the six-month periods ended January 29, 2012, and January 30, 2011. 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.


5.	Business and Geographic Segment Information

The company reports the results of operations in the following reportable segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and North America Foodservice. The company has

eleven operating segments based on product type and geographic location and has aggregated the operating segments into the appropriate reportable segment based on similar economic characteristics; products; production processes; types or classes of customers; distribution methods; and regulatory environment. The segments are discussed in greater detail below.

The U.S. Simple Meals segment aggregates the following operating segments: U.S. Soup and U.S. Sauces. The U.S. Soup retail business includes the following products: Campbell’s condensed and ready-to-serve soups; and Swanson broth and stocks. The U.S. Sauces retail business includes the following products: Prego pasta sauce; Pace Mexican sauce; Swanson canned poultry; and Campbell’s canned gravies, pasta and beans.

The Global Baking and Snacking segment aggregates the following operating segments: Pepperidge Farm cookies, crackers, bakery and frozen products in U.S. retail; and Arnott’s biscuits in Australia and Asia Pacific.

The International Simple Meals and Beverages segment aggregates the simple meals and beverages operating segments outside of the United States, including Europe, Latin America, Asia Pacific, China and the retail business in Canada.

The U.S. Beverages segment represents the U.S. retail beverages business, including the following products: V8 juices and beverages; and Campbell’s tomato juice.

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.

The company’s accounting policies for measuring segment assets and earnings before interest and taxes are substantially consistent with those described in the company’s 2011 Annual Report on Form 10-K. The company evaluates segment performance before interest, taxes, and costs associated with restructuring activities. Beginning in 2012, 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. The manufacturing, warehousing, distribution and selling activities of the company’s U.S. retail business are operated as an integrated platform in order to maximize efficiency and productivity. As a result, assets and capital expenditures of the U.S. Simple Meals and U.S. Beverages segments are not discretely maintained. Depreciation expense associated with the integrated operations, however, is allocated to the U.S. Simple Meals and U.S. Beverages segments based on production hours. 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.



	Three Months Ended				Six Months Ended
	January 29, 2012		January 30, 2011		January 29, 2012		January 30, 2011
Net sales
U.S. Simple Meals	$	824	$	842	$	1,698	$	1,740
Global Baking and Snacking	526		526		1,094		1,070
International Simple Meals and Beverages	402		421		761		793
U.S. Beverages	187		180		385		385
North America Foodservice	173		158		335		311
Total	$	2,112	$	2,127	$	4,273	$	4,299



	Three Months Ended						Six Months Ended
	January 29, 2012			January 30, 2011			January 29, 2012			January 30, 2011
Earnings before interest and taxes
U.S. Simple Meals	$	174		$	177		$	434		$	417
Global Baking and Snacking	71			81			159			181
International Simple Meals and Beverages	58			69			101			120
U.S. Beverages	34			43			64			98
North America Foodservice	28			21			55			44
Corporate(1)	(33		)	(32		)	(63		)	(57		)
Restructuring charges(2)	(3		)	—			(5		)	—
Total	$	329		$	359		$	745		$	803

_______________________________________


(1)	Represents unallocated corporate expenses.


(2)	See Note 6 for additional information.

The company’s global net sales based on product categories are as follows:



	Three Months Ended				Six Months Ended
	January 29, 2012		January 30, 2011		January 29, 2012		January 30, 2011
Net Sales
Simple Meals	$	1,323	$	1,335	$	2,633	$	2,666
Baked Snacks	557		566		1,159		1,154
Beverages	232		226		481		479
Total	$	2,112	$	2,127	$	4,273	$	4,299

Simple Meals include condensed and ready-to-serve soups, broths and sauces. Baked Snacks include cookies, crackers, biscuits, and other baked products.


6.	Restructuring Charges

On June 28, 2011, the company announced a series of initiatives to improve supply chain efficiency and reduce overhead costs across the organization to help fund plans to drive the growth of the business. The company also announced its intent to exit the Russian market. The company expects to eliminate approximately 750 positions in connection with these initiatives. Details of the plans include:

•

In Australia, the company will invest in a new system to automate packing operations at its biscuit plant in Virginia. This investment will occur through the second quarter of 2013 and will result in the elimination of approximately 190 positions. Further, the company improved asset utilization in the U.S. by shifting production of ready-to-serve soups from Paris, Texas, to other facilities in 2012. In addition, the manufacturing facility in Marshall, Michigan, was closed in 2011, and manufacturing of Campbell’s Soup at Hand microwavable products was consolidated at the Maxton, North Carolina, plant in 2012.

•

The company streamlined its salaried workforce by approximately 510 positions around the world, including approximately 130 positions at its world headquarters in Camden, New Jersey. These actions were substantially completed in 2011. As part of this initiative, the company outsourced a larger portion of its U.S. retail merchandising activities to its current retail sales agent, Acosta Sales and Marketing, and eliminated approximately 190 positions. The company expects that this action will enhance merchandising effectiveness and coverage for its U.S. customers.


•	In connection with exiting the Russian market, the company has eliminated approximately 50 positions. The exit process commenced in 2011 and will be substantially completed in 2012.

In the second quarter of 2012, the company recorded a restructuring charge of $3 ($2 after tax or $.01 per share) related to these initiatives, resulting in a year-to-date charge of $5 ($3 after tax or $.01 per share). In the fourth quarter of 2011, the company recorded a restructuring charge of $63 ($41 after tax or $.12 per share). A summary of the pre-tax charges and remaining costs associated with the initiatives is as follows:



	Total Program		Recognized as of January 29, 2012			Remaining Costs to be Recognized
Severance pay and benefits	$	42	$	(39	)	$	3
Asset impairment/accelerated depreciation	23		(23		)	—
Other exit costs	10		(6		)	4
Total	$	75	$	(68	)	$	7

Of the aggregate $75 of pre-tax costs, the company expects approximately $50 will be cash expenditures, the majority of which will be spent in 2012. In addition, the company expects to invest approximately $40 in capital expenditures in connection with the actions. The initiatives are expected to be completed by the end of 2013.

A summary of the restructuring activity and related reserves associated with these initiatives at January 29, 2012 is as follows:



			Six Months Ended January 29, 2012
	Accrued Balance at July 31, 2011		Charges		Cash Payments			Foreign Currency Translation Adjustment			Accrued Balance at January 29, 2012
Severance pay and benefits	$	35	$	2	$	(15	)	$	(1	)	$	21
Asset impairment/accelerated depreciation	—		1
Other exit costs	4		2		(2		)	—			4
Total	$	39	$	5	$	(17	)	$	(1	)	$	25

A summary of restructuring charges incurred to date associated with each segment is as follows:



	U.S. Simple Meals		Global Baking and Snacking		International Simple Meals and Beverages		U.S. Beverages		North America Foodservice		Corporate		Total
Severance pay and benefits	$	10	$	13	$	10	$	3	$	1	$	2	$	39
Asset impairment/accelerated depreciation	20		—		3		—		—		—		23
Other exit costs	1		—		1		—		—		4		6
	$	31	$	13	$	14	$	3	$	1	$	6	$	68

The company expects to incur additional pre-tax costs of approximately $7 by segment as follows: U.S. Simple Meals $2, Global Baking and Snacking $2, and International Simple Meals and Beverages $3. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.


7.	Earnings per Share

The accounting guidance for earnings per share 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 computation of basic and diluted earnings per share attributable to common shareowners is as follows:



	Three Months Ended						Six Months Ended
	January 29, 2012			January 30, 2011			January 29, 2012			January 30, 2011
Net earnings attributable to Campbell Soup Company	$	205		$	239		$	470		$	518
Less: net earnings allocated to participating securities	(1		)	(3		)	(3		)	(6		)
Net earnings available to Campbell Soup Company common shareowners	$	204		$	236		$	467		$	512

Weighted average shares outstanding — basic	318			330			319			332
Effect of dilutive securities: stock options and other share-based payment awards	2			2			2			3
Weighted average shares outstanding — diluted	320			332			321			335

Net earnings attributable to Campbell Soup Company per common share:
Basic	$	.64		$	.72		$	1.46		$	1.54
Diluted	$	.64		$	.71		$	1.45		$	1.53

There were no antidilutive stock options for the three-month and six-month periods ended January 29, 2012 and January 30, 2011.


8.	Noncontrolling Interests

The noncontrolling interest’s share in the net loss was included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings.

The company owns a 70% controlling interest in a Malaysian food products manufacturing company. The earnings attributable to the noncontrolling interest have historically been less than $1 annually and were previously included in Other expense/(income) in the Consolidated Statements of Earnings. Beginning in the third quarter of 2011, the earnings attributable to the noncontrolling interest were included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings. The earnings were not material for the six-month period ended January 29, 2012.

The noncontrolling interests in these entities were included in Total equity in the Consolidated Balance Sheets and Consolidated Statements of Equity.


9.	Pension and Postretirement Benefits

The company sponsors certain defined benefit pension plans and postretirement benefit plans for employees. Components of benefit expense were as follows:



	Three Months Ended												Six Months Ended
	Pension						Postretirement						Pension						Postretirement
	January 29, 2012			January 30, 2011			January 29, 2012			January 30, 2011			January 29, 2012			January 30, 2011			January 29, 2012			January 30, 2011
Service cost	$	13		$	15		$	1		$	1		$	27		$	29		$	2		$	2
Interest cost	30			31			5			5			61			61			9			9
Expected return on plan assets	(44		)	(45		)	—			—			(89		)	(89		)	—			—
Amortization of prior service credit	—			—			(1		)	(1		)	—			—			(1		)	(1		)
Recognized net actuarial loss	19			17			2			2			37			35			4			4
Net periodic benefit expense	$	18		$	18		$	7		$	7		$	36		$	36		$	14		$	14

A contribution of $55 was made to U.S. pension plans and contributions of $8 were made to non-U.S. pension plans during the six-month period ended January 29, 2012. Additional contributions to U.S. pension plans are not expected this year. Contributions to non-U.S. pension plans are expected to be approximately $6 during the remainder of the year.


10.	Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings, excluding the current portion of long-term debt, approximate fair value. The fair value of long-term debt, including the current portion of long-term debt in Short-term borrowings, was $2,678 at January 29, 2012 and $2,603 at July 31, 2011. The carrying value was $2,417 at January 29, 2012 and $2,427 at July 31, 2011. The fair value of long-term debt is based on quoted market prices or pricing models using current market rates.

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. In order to manage these exposures, the company follows established risk management policies and procedures, including the use of derivative contracts such as swaps, forwards and commodity futures and option contracts. 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 both instruments that qualify and that do not qualify for hedge accounting treatment.

The company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. The company minimizes the counterparty credit risk on these transactions by dealing only with leading, credit-worthy financial institutions having long-term credit ratings of “A” or better. In addition, the contracts are distributed among several financial institutions, thus minimizing credit-risk concentration. The company does not have credit-risk-related contingent features in its derivative instruments as of January 29, 2012.

Foreign Currency Exchange Risk

The company is exposed to foreign currency exchange risk related to its international operations, including non-functional currency intercompany debt and net investments in subsidiaries. The company is also exposed to foreign exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. Principal currencies hedged include the Australian dollar, Canadian dollar, euro, Swedish krona, New Zealand dollar, British pound and Japanese yen. The company utilizes foreign exchange forward purchase and sale contracts as well as cross-currency swaps to hedge these exposures. The contracts are either designated as cash-flow hedging instruments or are undesignated. The company typically hedges portions of its forecasted foreign currency transaction exposure with foreign exchange forward contracts for up to 18 months. To hedge currency exposures related to intercompany debt, cross-currency swap contracts are entered into for periods consistent with the underlying debt. As of January 29, 2012, cross-currency swap contracts mature in 2012 through 2015. The

notional amount of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was $251 at January 29, 2012 and $287 at July 31, 2011. The effective portion of the changes in fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the Consolidated Statements of Earnings on the same line item and the same period in which the underlying hedge transaction affects earnings. The notional amount of foreign exchange forward and cross-currency swap contracts that are not designated as accounting hedges was $838 and $861 at January 29, 2012 and July 31, 2011, respectively.

Interest Rate Risk

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. Receive fixed rate/pay variable rate interest rate swaps are accounted for as fair-value hedges. The notional amount of outstanding fair-value interest rate swaps totaled $500 at January 29, 2012 and at July 31, 2011. These swaps mature in 2013 through 2014.

Commodity Price Risk

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 options contracts to reduce the volatility of price fluctuations of diesel fuel, wheat, soybean oil, aluminum, and natural gas, which impact the cost of raw materials. Commodity futures and option contracts are typically accounted for as cash-flow hedges or are not designated as accounting hedges. The company enters into commodity futures and option contracts to hedge a portion of commodity requirements for periods typically up to 12 months. The notional amount of commodity contracts accounted for as cash-flow hedges was $1 at January 29, 2012 and $6 at July 31, 2011. The notional amount of commodity contracts that are not designated as accounting hedges was $61 at January 29, 2012 and $81 at July 31, 2011.

Equity Price Risk

The company hedges 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 Vanguard International Stock Index. Under these contracts, the company pays variable interest rates and receives from the counterparty either the total return of the Standard & Poor’s 500 Index, the total return on company capital stock, or the total return of the iShares MSCI EAFE Index, which is expected to approximate the total return of the Vanguard International Stock Index. These contracts were not designated as hedges for accounting purposes and are typically entered into for periods not exceeding 12 months. The notional amounts of the contracts as of January 29, 2012 and July 31, 2011 were $68 and $71, respectively.

The following table summarizes the fair value of derivative instruments recorded in the Consolidated Balance Sheets as of January 29, 2012, and July 31, 2011:



	Balance Sheet Classification	January 29, 2012		July 31, 2011
Asset Derivatives
Derivatives designated as hedges:
Foreign exchange forward contracts	Other current assets	$	1	$	—
Interest rate swaps	Other current assets	10		—
Interest rate swaps	Other assets	13		33
Total derivatives designated as hedges		$	24	$	33
Derivatives not designated as hedges:
Foreign exchange forward contracts	Other current assets	$	2	$	—
Commodity derivative contracts	Other current assets	1		3
Deferred compensation derivative contracts	Other current assets	1		—
Cross-currency swap contracts	Other current assets	9		—
Cross-currency swap contracts	Other assets	9		1
Total derivatives not designated as hedges		$	22	$	4
Total asset derivatives		$	46	$	37



	Balance Sheet Classification	January 29, 2012		July 31, 2011
Liability Derivatives
Derivatives designated as hedges:
Foreign exchange forward contracts	Accrued liabilities	$	1	$	7
Cross-currency swap contracts	Accrued liabilities	—		8
Cross-currency swap contracts	Other liabilities	26		30
Total derivatives designated as hedges		$	27	$	45
Derivatives not designated as hedges:
Foreign exchange forward contracts	Accrued liabilities	$	—	$	2
Commodity derivative contracts	Accrued liabilities	3		2
Cross-currency swap contracts	Accrued liabilities	10		17
Deferred compensation derivative contracts	Accrued liabilities	3		3
Cross-currency swap contracts	Other liabilities	58		74
Total derivatives not designated as hedges		$	74	$	98
Total liability derivatives		$	101	$	143

The following tables show the effect of the company’s derivative instruments designated as cash-flow hedges for the three- and six-month periods ended January 29, 2012 and January 30, 2011, in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:

Derivatives Designated as Cash-Flow Hedges



		Total Cash-Flow Hedge OCI Activity
Three Months Ended January 29, 2012, and January 30, 2011		2012			2011
OCI derivative gain/(loss) at beginning of quarter		$	(22	)	$	(27	)
Effective portion of changes in fair value recognized in OCI:
Foreign exchange forward contracts		(2		)	—
Commodity contracts		—			3
Amount of (gain) or loss reclassified from OCI to earnings:	Location in Earnings
Foreign exchange forward contracts	Other expenses/income	(1		)	(1		)
Foreign exchange forward contracts	Cost of products sold	5			—
Forward starting interest rate swaps	Interest expense	1			—
OCI derivative gain/(loss) at end of quarter		$	(19	)	$	(25	)



		Total Cash-Flow Hedge OCI Activity
Six Months Ended January 29, 2012, and January 30, 2011		2012			2011
OCI derivative gain/(loss) at beginning of year		$	(31	)	$	(28	)
Effective portion of changes in fair value recognized in OCI:
Foreign exchange forward contracts		5			(3		)
Cross-currency swap contracts		(1		)	—
Commodity contracts		—			3
Amount of (gain) or loss reclassified from OCI to earnings:	Location in Earnings
Foreign exchange forward contracts	Cost of products sold	6			2
Forward starting interest rate swaps	Interest expense	2			1
OCI derivative gain/(loss) at end of quarter		$	(19	)	$	(25	)

Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is not material. The ineffective portion and amount excluded from effectiveness testing were not material.

The following tables show the effect of the company’s derivative instruments designated as fair-value hedges in the Consolidated Statements of Earnings:



		Amount of Gain or (Loss) Recognized in Earnings on Derivatives						Amount of Gain or (Loss) Recognized in Earnings on Hedged Item
Derivatives Designated as Fair-Value Hedges	Location of Gain or (Loss) Recognized in Earnings	January 29, 2012			January 30, 2011			January 29, 2012		January 30, 2011
Three Months Ended
Interest rate swaps	Interest expense	$	(5	)	$	(8	)	$	5	$	8
Six Months Ended
Interest rate swaps	Interest expense	$	(10	)	$	(7	)	$	10	$	7

The following table shows the effects of the company’s derivative instruments not designated as hedges in the Consolidated Statements of Earnings:



		Amount of Gain or (Loss) Recognized in Earnings on Derivatives
	Location of Gain or(Loss) Recognized in Earnings	Three Months Ended						Six Months Ended
Derivatives not Designated as Hedges	Location of Gain or(Loss) Recognized in Earnings	January 29, 2012			January 30, 2011			January 29, 2012			January 30, 2011
Foreign exchange forward contracts	Other expenses/income	$	1		$	(1	)	$	1		$	(1	)
Foreign exchange forward contracts	Cost of products sold	3			(1		)	4			(1		)
Cross-currency swap contracts	Other expenses/income	16			(1		)	39			(39		)
Commodity derivative contracts	Cost of products sold	(2		)	8			(7		)	9
Deferred compensation derivative contracts	Administrative expenses	(2		)	—			(1		)	2
Total		$	16		$	5		$	36		$	(30	)


11.	Fair Value Measurements

The company is required to categorize financial assets and liabilities based on the following fair value hierarchy:


•	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.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When available, the company uses unadjusted quoted market prices to measure the fair value and classifies such items as Level 1. If quoted market prices are not available, the company bases fair value upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates.

The following table presents the company’s financial assets and liabilities that are measured at fair value on a recurring basis as of January 29, 2012, and July 31, 2011, consistent with the fair value hierarchy:



	Fair Value as of January 29, 2012		Fair Value Measurements at January 29, 2012 Using Fair Value Hierarchy						Fair Value as of July 31, 2011		Fair Value Measurements at July 31, 2011 Using Fair Value Hierarchy
	Fair Value as of January 29, 2012		Level 1		Level 2		Level 3		Fair Value as of July 31, 2011		Level 1		Level 2		Level 3
Assets
Interest rate swaps(1)	$	23	$	—	$	23	$	—	$	33	$	—	$	33	$	—
Foreign exchange forward contracts(2)	3		—		3		—		—		—		—		—
Cross-currency swap contracts(3)	18		—		18		—		1		—		1		—
Deferred compensation derivative contracts(4)	1		—		1		—		—		—		—		—
Commodity derivative contracts(5)	1		1		—		—		3		3		—		—
Total assets at fair value	$	46	$	1	$	45	$	—	$	37	$	3	$	34	$	—



	Fair Value as of January 29, 2012		Fair Value Measurements at January 29, 2012 Using Fair Value Hierarchy						Fair Value as of July 31, 2011		Fair Value Measurements at July 31, 2011 Using Fair Value Hierarchy
	Fair Value as of January 29, 2012		Level 1		Level 2		Level 3		Fair Value as of July 31, 2011		Level 1		Level 2		Level 3
Liabilities
Foreign exchange forward contracts(2)	$	1	$	—	$	1	$	—	$	9	$	—	$	9	$	—
Cross-currency swap contracts(3)	94		—		94		—		129		—		129		—
Deferred compensation derivative contracts(4)	3		—		3		—		3		—		3		—
Commodity derivative contracts(5)	3		3		—		—		2		2		—		—
Deferred compensation obligation(6)	153		101		52		—		144		97		47		—
Total liabilities at fair value	$	254	$	104	$	150	$	—	$	287	$	99	$	188	$	—

_______________________


(1)	Based on LIBOR swap rates.


(2)	Based on observable market transactions of spot currency rates and forward rates.


(3)	Based on observable local benchmarks for currency and interest rates.


(4)	Based on LIBOR and equity index swap rates.


(5)	Based on quoted futures exchanges.


(6)	Based on the fair value of the participants’ investments.


12.	Share Repurchase Programs

In June 2011, the Board authorized the purchase of up to $1,000 of company stock. This program has no expiration date. In addition to this publicly announced program, the company repurchases shares to offset the impact of dilution from shares issued under the company’s stock compensation plans.

During the six-month period ended January 29, 2012, the company repurchased 5 million shares at a cost of $173. Of this amount, $115 was used to repurchase shares pursuant to the company’s June 2011 publicly announced share repurchase program. Approximately $885 remains available under this program as of January 29, 2012.

During the six-month period ended January 30, 2011, the company repurchased 16 million shares at a cost of $573. Of this amount, $456 was used to repurchase shares pursuant to the company’s June 2008 publicly announced share repurchase program, which was completed in the fourth quarter of 2011.


13.	Stock-based Compensation

The company provides compensation benefits by issuing unrestricted stock, restricted stock and restricted stock units (including time-lapse restricted stock units, EPS performance restricted stock units, total shareowner return (TSR) performance restricted stock units and strategic performance restricted stock units). In fiscal 2012, the company issued time-lapse restricted stock units, EPS performance restricted stock units and, for the first time, strategic performance restricted stock units. The company did not issue TSR performance restricted stock units in fiscal 2012. Awards of the strategic performance restricted stock units will be earned based upon the achievement of two key metrics, net sales and EPS growth, compared to strategic plan objectives during a two-year period. A recipient of strategic performance restricted stock units may earn a total award ranging from 0% to 200% of the initial grant. In previous fiscal years, the company also issued stock options and stock appreciation rights.

Total pre-tax stock-based compensation expense recognized in the Consolidated Statements of Earnings was $23 and $25 for the three-month periods ended January 29, 2012, and January 30, 2011, respectively. Tax-related benefits of $9 were also recognized for each of the three-month periods ended January 29, 2012, and January 30, 2011. Total pre-tax stock-based compensation expense recognized in the Consolidated Statements of Earnings was $45 and $46 for the six-month periods ended January 29, 2012, and January 30, 2011, respectively. Tax-related benefits of $17 were also recognized for each of the six-month periods ended January 29, 2012, and January 30, 2011. Cash received from the exercise of stock options was $23

and $38 for the six-month periods ended January 29, 2012, and January 30, 2011, 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 January 29, 2012:



	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Options in thousands)				(In years)
Outstanding at July 31, 2011	8,706		$	26.23
Granted	—		$	—
Exercised	(845	)	$	27.30
Terminated	(70	)	$	26.63
Outstanding at January 29, 2012	7,791		$	26.11	1.9	$	41
Exercisable at January 29, 2012	7,791		$	26.11	1.9	$	41

The total intrinsic value of options exercised during the six-month periods ended January 29, 2012, and January 30, 2011, was $4 and $14, respectively. As of January 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, EPS performance restricted stock units and strategic performance restricted stock units as of January 29, 2012:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at July 31, 2011	2,710		$	35.11
Granted	2,611		$	32.38
Vested	(1,133	)	$	35.80
Forfeited	(156	)	$	33.39
Nonvested at January 29, 2012	4,032		$	33.21

The fair value of time-lapse restricted stock units, EPS performance restricted stock units, and strategic performance restricted stock units is determined based on the quoted price of the company’s stock at the date of grant. Time-lapse restricted stock units 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 performance 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. There were approximately 300 thousand EPS performance target grants outstanding at January 29, 2012 with a weighted-average grant-date fair value of $33.56. Strategic performance restricted stock units are expensed on a straight-line basis over the service period. There were approximately 1.32 million strategic performance target grants outstanding at January 29, 2012 with a grant-date fair value of $32.37. The actual number of EPS performance restricted stock units and strategic performance restricted stock units issued at the vesting date could range from 0% to 100% and 0% to 200%, respectively, of the initial grant, depending on actual performance achieved. Expense is estimated based on the number of awards expected to vest.

On July 1, 2011, the company issued approximately 400 thousand special retention time-lapse restricted stock units to certain executives to support successful execution of the company’s shift in strategic direction and leadership transition. These awards vest over a two-year period and are included in the table above. The grant-date fair value was $34.65.

As of January 29, 2012, total remaining unearned compensation related to nonvested time-lapse restricted stock units, EPS performance restricted stock units and strategic performance restricted stock units was $91, which will be amortized over the weighted-average remaining service period of 1.7 years. The fair value of restricted stock units vested during the six-month periods ended January 29, 2012, and January 30, 2011, was $37 and $39, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the six-month period ended January 30, 2011, was $36.08.

The following table summarizes TSR performance restricted stock units as of January 29, 2012:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at July 31, 2011	3,431		$	40.78
Granted	—		$	—
Vested	—		$	—
Forfeited	(1,258	)	$	45.62
Nonvested at January 29, 2012	2,173		$	37.98

The company estimated the fair value of TSR performance restricted stock units at the grant date using a Monte Carlo simulation. Assumptions used in the 2011 Monte Carlo simulation were as follows:



	2011
Risk-free interest rate	0.59	%
Expected dividend yield	3.00	%
Expected volatility	23.71	%
Expected term	3	yrs.

Compensation expense is recognized on a straight-line basis over the service period. As of January 29, 2012, total remaining unearned compensation related to TSR performance restricted stock units was $32, which will be amortized over the weighted-average remaining service period of 1.4 years. In the first quarter of 2012, recipients of TSR performance restricted stock units earned 0% of the initial grants based upon the company’s TSR ranking in a performance peer group during a three-year period ended July 29, 2011. The total fair value of TSR performance restricted stock units vested during the six-month period ended January 30, 2011, was $38. The grant-date fair value of TSR performance restricted stock units granted during the six-month period ended January 30, 2011, was $43.18. There were no TSR performance restricted stock units granted during the six-month period ended January 29, 2012.

Prior to fiscal 2009, employees could elect to defer all types of restricted stock awards. These awards were classified as liabilities because of the possibility that they may be settled in cash. The fair value is adjusted quarterly. As of January 2011 these awards were fully vested. Total cash paid to settle the liabilities during the six-month period ended January 30, 2011, was not material.

The excess tax benefits on the exercise of stock options and vested restricted stock presented as cash flows from financing activities were not material for the six-month period ended January 29, 2012 and were $6 for the six-month period ended January 30, 2011.


14.	Inventories



	January 29, 2012		July 31, 2011
Raw materials, containers and supplies	$	297	$	261
Finished products	449		506
	$	746	$	767

15. Supplemental Cash Flow Information

Other cash used in operating activities for the six-month periods was comprised of the following:



	January 29, 2012			January 30, 2011
Benefit related payments	$	(20	)	$	(15	)
Other	(1		)	(8		)
	$	(21	)	$	(23	)

Item 2.

CAMPBELL SOUP COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Description of the Company

Campbell Soup Company is a global manufacturer and marketer of high-quality, branded convenience food products. The company reports the results of operations in the following reportable segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and North America Foodservice.

Executive Summary

This Executive Summary provides significant highlights from the discussion and analysis that follows.


•	Net sales decreased 1% in the quarter to $2.112 billion.


•	Gross profit, as a percent of sales, decreased to 38.4% in the current quarter from 39.4% a year ago.


•	Net earnings per share for the quarter were $.64, a decline of 10% from a year ago.

Net earnings attributable to Campbell Soup Company

Net earnings and net earnings per share were impacted by restructuring charges in 2012. In 2011, the company announced a series of initiatives to improve supply chain efficiency and reduce overhead costs across the organization to help fund plans to drive the growth of the business. The company also announced its intent to close its office in Moscow and exit the Russian market. In the second quarter of 2012, the company recorded pre-tax restructuring charges of $3 million ($2 million after tax or $.01 per share) related to the initiatives. The year-to-date impact was $5 million ($3 million after tax or $.01 per share).

Net earnings were $205 million ($.64 per share) in the quarter ended January 29, 2012 compared to $239 million ($.71 per share) in the year-ago quarter. The decline in net earnings and earnings per share was primarily due to cost inflation, lower sales volumes and a higher effective tax rate, partially offset by higher selling prices and productivity improvements. Earnings per share 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 programs.

Net earnings were $470 million ($1.45 per share) for the six months ended January 29, 2012, compared to $518 million ($1.53 per share) for the year-ago period. The decline was primarily due to cost inflation, lower sales volumes and a higher effective tax rate, partly offset by higher selling prices and productivity improvements. Earnings per share 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 programs.

Net earnings (loss) attributable to noncontrolling interests

The company owns a 60% controlling interest in a joint venture formed with Swire Pacific Limited to support the development of the company’s business in China. The joint venture began operations on January 31, 2011, the beginning of the third quarter of 2011. The noncontrolling interest’s share in the net loss was included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings.

The company also owns a 70% controlling interest in a Malaysian food products manufacturing company. Historically, the earnings attributable to the noncontrolling interest were less than $1 million annually and were previously included in Other expenses/(income) in the Consolidated Statements of Earnings. Beginning in the third quarter of 2011, the earnings attributable to the noncontrolling interest were included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings. The earnings were not material for the six-month period ended January 29, 2012.

SECOND-QUARTER DISCUSSION AND ANALYSIS

Sales

An analysis of net sales by reportable segment follows:



	2012		2011		% Change
	(Millions)
U.S. Simple Meals	$	824	$	842	(2	)%
Global Baking and Snacking	526		526		—
International Simple Meals and Beverages	402		421		(5	)
U.S. Beverages	187		180		4
North America Foodservice	173<