UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 

For the Quarterly Period Ended January 30, 2011		Commission File Number 1-3822

CAMPBELL SOUP COMPANY

New Jersey		21-0419870
State of Incorporation		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. þ Yes o No

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that that the registrant was required to submit and post such files). þ Yes o No

     Indicate by check mark 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 þ No

There were 320,229,427 shares of capital stock outstanding as of March 3, 2011.

 

 

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 30,				January 31,				January 30,				January 31,
		2011				2010				2011				2010
Net sales		$	2,127			$	2,153			$	4,299			$	4,356
Costs and expenses
Cost of products sold			1,289				1,282				2,567				2,562
Marketing and selling expenses			291				301				568				585
Administrative expenses			154				149				294				282
Research and development expenses			31				28				62				57
Other expenses / (income)			3				2				5				1
Total costs and expenses			1,768				1,762				3,496				3,487
Earnings before interest and taxes			359				391				803				869
Interest expense			34				27				66				55
Interest income			3				1				5				2
Earnings before taxes			328				365				742				816
Taxes on earnings			89				106				224				253
Net earnings		$	239			$	259			$	518			$	563
Per share — basic
Net earnings		$	.72			$	.74			$	1.54			$	1.62
Dividends		$	.29			$	.275			$	.565			$	.525
Weighted average shares outstanding — basic			330				341				332				342
Per share — assuming dilution
Net earnings		$	.71			$	.74			$	1.53			$	1.61
Weighted average shares outstanding — assuming dilution			332				344				335				345

See accompanying Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY

Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts)

		January 30,				August 1,
		2011				2010
Current assets
Cash and cash equivalents		$	325			$	254
Accounts receivable			712				512
Inventories			703				724
Other current assets			174				197
Total current assets			1,914				1,687
Plant assets, net of depreciation			2,018				2,051
Goodwill			2,015				1,919
Other intangible assets, net of amortization			520				509
Other assets			113				110
Total assets		$	6,580			$	6,276
Current liabilities
Short-term borrowings		$	1,184			$	835
Payable to suppliers and others			538				545
Accrued liabilities			573				560
Dividend payable			97				95
Accrued income taxes			23				30
Total current liabilities			2,415				2,065
Long-term debt			1,937				1,945
Deferred taxes			347				258
Other liabilities			989				1,079
Total liabilities			5,688				5,347
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			316				341
Earnings retained in the business			9,087				8,760
Capital stock in treasury, at cost			(7,939	)			(7,459	)
Accumulated other comprehensive loss			(595	)			(736	)
Total Campbell Soup Company shareowners’ equity			889				926
Noncontrolling interest			3				3
Total equity			892				929
Total liabilities and equity		$	6,580			$	6,276

See accompanying Notes to Consolidated Financial Statements.

CAMPBELL SOUP COMPANY

Consolidated Statements of Cash Flows
(unaudited)
(millions)

		Six Months Ended
		January 30,				January 31,
		2011				2010
Cash flows from operating activities:
Net earnings		$	518			$	563
Adjustments to reconcile net earnings to operating cash flow
Stock-based compensation			46				45
Depreciation and amortization			129				122
Deferred income taxes			77				58
Other, net			54				46
Changes in working capital
Accounts receivable			(186	)			(147	)
Inventories			32				126
Prepaid assets			9				—
Accounts payable and accrued liabilities			(39	)			(31	)
Pension fund contributions			(135	)			(272	)
Receipts from hedging activities			1				7
Other			(23	)			(21	)
Net cash provided by operating activities			483				496
Cash flows from investing activities:
Purchases of plant assets			(74	)			(103	)
Sales of plant assets			9				5
Other, net			—				2
Net cash used in investing activities			(65	)			(96	)
Cash flows from financing activities:
Net short-term borrowings			351				8
Dividends paid			(188	)			(175	)
Treasury stock purchases			(573	)			(213	)
Treasury stock issuances			38				36
Excess tax benefits on stock-based compensation			6				4
Net cash used in financing activities			(366	)			(340	)
Effect of exchange rate changes on cash			19				2
Net change in cash and cash equivalents			71				62
Cash and cash equivalents — beginning of period			254				51
Cash and cash equivalents — end of period		$	325			$	113

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																				Earnings				Accumulated
		Issued								In Treasury								Additional				Retained				Other
																		Paid-in				in the				Comprehensive				Noncontrolling				Total
		Shares				Amount				Shares				Amount				Capital				Business				Income (Loss)				Interest				Equity
Balance at August 2, 2009			542			$	20				(199	)		$	(7,194	)		$	332			$	8,288			$	(718	)		$	3			$	731
Comprehensive income (loss)
Net earnings																							563								—				563
Foreign currency translation adjustments, net of tax																											35				—				35
Cash-flow hedges, net of tax																											6								6
Pension and postretirement benefits, net of tax																											22								22
Other comprehensive income (loss)																											63				—				63
Total comprehensive income (loss)																																			626
Dividends ($.525 per share)																							(183	)											(183	)
Treasury stock purchased											(7	)			(213	)																			(213	)
Treasury stock issued under management incentive and stock option plans											3				86				(21	)															65
Balance at January 31, 2010			542			$	20				(203	)		$	(7,321	)		$	311			$	8,668			$	(655	)		$	3			$	1,026
Balance at August 1, 2010			542			$	20				(206	)		$	(7,459	)		$	341			$	8,760			$	(736	)		$	3			$	929
Comprehensive income (loss)
Net earnings																							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

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 August 1, 2010. 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 June 2009, the Financial Accounting Standards Board (FASB) issued authoritative guidance that changed the consolidation model for variable interest entities (VIE). The revised guidance requires an enterprise to qualitatively assess the determination of the primary beneficiary, or consolidator of a VIE, based on whether the entity has the power to direct matters that most significantly impact the activities of the VIE, and has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The revised guidance also amended the consideration of kick-out rights in determining if an entity is a VIE and requires an ongoing reconsideration of the primary beneficiary. It also amends the events that trigger a reassessment of whether an entity is a VIE. The provisions were effective for the first quarter of fiscal 2011. The adoption of the guidance did not have a material impact on the company’s consolidated financial statements.

     In January 2010, the 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 roll forward information must be provided by the company for the first quarter of fiscal 2012, as the provision is effective for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years.

     In 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 adoption is not expected to have a material impact on the company’s consolidated financial statements.

3. Comprehensive Income (Loss)

     Total comprehensive income (loss) 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 30, 2011 and January 31, 2010 was $257 and $236, respectively. Total comprehensive income for the six-month periods ended January 30, 2011 and January 31, 2010 was $659 and $626, respectively.

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

		January 30,				August 1,
		2011				2010
Foreign currency translation adjustments, net of tax (1)		$	251			$	132
Cash-flow hedges, net of tax (2)			(16	)			(18	)
Unamortized pension and postretirement benefits, net of tax (3):
Net actuarial loss			(835	)			(856	)
Prior service (cost)/credit			5				6
Total Accumulated other comprehensive loss		$	(595	)		$	(736	)

Notes to Consolidated Financial Statements — (Continued)

4. Goodwill and Intangible Assets

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

										International
		U.S. Soup,				Baking				Soup, Sauces				North
		Sauces and				and				and				America
		Beverages				Snacking				Beverages				Foodservice				Total
Balance at August 1, 2010		$	434			$	754			$	585			$	146			$	1,919
Foreign currency translation adjustment			—				72				24				—				96
Balance at January 30, 2011		$	434			$	826			$	609			$	146			$	2,015

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

		January 30,				August 1,
		2011				2010
Intangible Assets:
Non-amortizable intangible assets		$	507			$	496
Amortizable intangible assets			21				21
			528				517
Accumulated amortization			(8	)			(8	)
Total net intangible assets		$	520			$	509

     Non-amortizable intangible assets consist of trademarks, which mainly include Pace, Royco, Liebig, Blå Band, 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 30, 2011, and January 31, 2010. The estimated aggregated amortization expense for each of the five succeeding fiscal years is less than $1 per year. Asset useful lives range from 10 to 20 years.

5. Business and Geographic Segment Information

     Campbell Soup Company, together with its consolidated subsidiaries, is a global manufacturer and marketer of high-quality, branded convenience food products. The company has eight operating segments based on product type and geographic location 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 represents the U.S. retail business, including the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth, stocks and canned poultry; Prego pasta sauce; Pace Mexican sauce; Campbell’s canned pasta, gravies, and beans; V8 juices and beverages; and Campbell’s tomato juice.

     The 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 Soup, Sauces and Beverages segment aggregates the soup, sauce and beverage operating segments outside of the United States, including Europe, Latin America, the Asia Pacific region 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 2010 Annual Report on Form 10-K. The company evaluates segment performance before interest and taxes. North America Foodservice products are principally produced by the tangible assets of the company’s other segments, except

Notes to Consolidated Financial Statements — (Continued)

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 30,				January 31,				January 30,				January 31,
		2011				2010				2011				2010
Net sales
U.S. Soup, Sauces and Beverages		$	1,022			$	1,068			$	2,125			$	2,208
Baking and Snacking			526				489				1,070				1,019
International Soup, Sauces and Beverages			421				437				793				811
North America Foodservice			158				159				311				318
Total		$	2,127			$	2,153			$	4,299			$	4,356

		Three Months Ended								Six Months Ended
		January 30,				January 31,				January 30,				January 31,
		2011				2010				2011				2010
Earnings before interest and taxes
U.S. Soup, Sauces and Beverages		$	220			$	259			$	515			$	590
Baking and Snacking			81				73				181				173
International Soup, Sauces and Beverages			69				74				120				118
North America Foodservice			21				17				44				43
Corporate(1)			(32	)			(32	)			(57	)			(55	)
Total		$	359			$	391			$	803			$	869

     Additional product information is provided below for net sales.

		Three Months Ended								Six Months Ended
		January 30,				January 31,				January 30,				January 31,
		2011				2010				2011				2010
Net sales
Simple Meals		$	1,335			$	1,397			$	2,666			$	2,796
Baked Snacks			566				530				1,154				1,102
Beverages			226				226				479				458
Total		$	2,127			$	2,153			$	4,299			$	4,356

						Fiscal Year Ended
		August 1,				August 2,				August 3,
		2010				2009				2008
Net sales
Simple Meals		$	4,594			$	4,674			$	4,815
Baked Snacks			2,129				1,995				2,200
Beverages			953				917				983
Total		$	7,676			$	7,586			$	7,998

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

6. Earnings per Share

     In June 2008, the FASB issued accounting guidance related to the calculation of earnings per share. The guidance provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Prior to fiscal 2011, the company granted share-based payment awards with non-forfeitable rights to dividends or dividend equivalents. 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.

Notes to Consolidated Financial Statements — (Continued)

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

		Three Months Ended								Six Months Ended
		January 30,				January 31,				January 30,				January 31,
		2011				2010				2011				2010
Net earnings		$	239			$	259			$	518			$	563
Less: net earnings allocated to participating securities			(3	)			(5	)			(6	)			(8	)
Net earnings available to common shareowners		$	236			$	254			$	512			$	555
Weighted average shares outstanding — basic			330				341				332				342
Effect of dilutive securities: stock options			2				3				3				3
Weighted average shares outstanding — diluted			332				344				335				345
Net earnings per common share:
Basic		$	.72			$	.74			$	1.54			$	1.62
Diluted		$	.71			$	.74			$	1.53			$	1.61

     There were no antidilutive stock options for the three-month periods ended January 30, 2011 and January 31, 2010 and the six-month period ended January 30, 2011. Stock options to purchase approximately 1 million shares of capital stock for the six-month period ended January 31, 2010 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, would be antidilutive.

7. Noncontrolling Interest

     The company owns a 70% controlling interest in a Malaysian manufacturing company. The noncontrolling interest in this entity is included in Total equity in the Consolidated Balance Sheets. The earnings attributable to the noncontrolling interest were less than $1 for the three- and six-month periods ended January 30, 2011, and January 31, 2010, and were included in Other expenses/(income) in the Consolidated Statements of Earnings.

     The company owns a 60% interest in a joint venture formed 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 fiscal quarter. The company’s investment in the joint venture as of January 31, 2011 was $10.

8. 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
		Jan. 30,				Jan. 31,				Jan. 30,				Jan. 31,				Jan. 30,				Jan. 31,				Jan. 30,				Jan. 31,
		2011				2010				2011				2010				2011				2010				2011				2010
Service cost		$	15			$	13			$	1			$	1			$	29			$	27			$	2			$	2
Interest cost			31				31				5				5				61				61				9				10
Expected return on plan assets			(45	)			(42	)			—				—				(89	)			(85	)			—				—
Amortization of prior service cost/(credit)			—				—				(1	)			—				—				1				(1	)			—
Recognized net actuarial loss			17				12				2				—				35				24				4				—
Net periodic benefit expense		$	18			$	14			$	7			$	6			$	36			$	28			$	14			$	12

     A contribution of $100 was made to U.S. pension plans and contributions of $35 were made to non-U.S. pension plans during the six-month period ended January 30, 2011. Additional contributions to U.S. pension plans are not expected this fiscal year. Contributions to non-U.S. pension plans are expected to be approximately $9 during the remainder of the fiscal year.

     In fiscal 2010, the company amended its U.S. pension plans. Employees hired or rehired on or after January 1, 2011 and who are not covered by collective bargaining agreements will not be eligible to participate in the plans.

Notes to Consolidated Financial Statements — (Continued)

     In fiscal 2010, the postretirement medical program was also amended to discontinue retiree medical accounts for employees not covered by collective bargaining agreements and who are not at least age 50 with at least 10 years of service as of December 31, 2010.

9. 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 $2,775 at January 30, 2011 and $2,829 at August 1, 2010. The fair value of long-term debt was 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 strategies that both qualify and 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 30, 2011.

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 30, 2011, cross-currency swap contracts mature in 2011 through 2015. The notional amount of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was $265 at January 30, 2011 and $261 at August 1, 2010. 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 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 $706 and $757 at January 30, 2011 and August 1, 2010, 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 30, 2011 and at August 1, 2010. These swaps mature in fiscal 2013 through fiscal 2014.

Notes to Consolidated Financial Statements — (Continued)

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, natural gas, soybean oil, aluminum, sugar, cocoa, and corn, 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. Commodity futures and option contracts are typically entered into to hedge a portion of commodity requirements for periods up to 18 months. The notional amount of commodity contracts accounted for as cash-flow hedges was $9 at January 30, 2011 and $7 at August 1, 2010. The notional amount of commodity contracts that are not designated as accounting hedges was $45 at January 30, 2011 and $43 at August 1, 2010.

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 Puritan Fund or, beginning in January 2011, 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, the total return of the Puritan Fund or the total return of the iShares MSCI EAFE Index Fund, which is expected to approximate the total return of the Vanguard International Stock Index. The contracts related to the Puritan Fund matured in January 2011. The contracts are not designated as hedges for accounting purposes and are typically entered into for periods not exceeding 12 months. The notional amount of the contracts outstanding was $73 as of January 30, 2011 and $75 as of August 1, 2010.

     The following table summarizes the fair value of derivative instruments recorded in the Consolidated Balance Sheets as of January 30, 2011, and August 1, 2010:

				January 30,				August 1,
		Balance Sheet Classification		2011				2010
Asset Derivatives
Derivatives designated as hedges:
Foreign exchange forward contracts		Other current assets		$	—			$	1
Commodity contracts		Other current assets			1				1
Cross-currency swap contracts		Other assets			—				3
Interest rate swaps		Other assets			39				46
Total derivatives designated as hedges				$	40			$	51
Derivatives not designated as hedges:
Foreign exchange forward contracts		Other current assets		$	—			$	1
Commodity contracts		Other current assets			9				3
Cross-currency swap contracts		Other current assets			9				13
Cross-currency swap contracts		Other assets			—				1
Total derivatives not designated as hedges				$	18			$	18
Total asset derivatives				$	58			$	69

Notes to Consolidated Financial Statements — (Continued)

				January 30,				August 1,
		Balance Sheet Classification		2011				2010
Liability Derivatives
Derivatives designated as hedges:
Foreign exchange forward contracts		Accrued liabilities		$	3			$	1
Commodity contracts		Accrued liabilities			—				1
Cross-currency swap contracts		Other liabilities			28				24
Total derivatives designated as hedges				$	31			$	26
Derivatives not designated as hedges:
Foreign exchange forward contracts		Accrued liabilities		$	1			$	1
Commodity contracts		Accrued liabilities			1				—
Cross-currency swap contracts		Accrued liabilities			2				—
Deferred compensation contracts		Accrued liabilities			1				2
Cross-currency swap contracts		Other liabilities			46				14
Total derivatives not designated as hedges				$	51			$	17
Total liability derivatives				$	82			$	43

     The derivative assets and liabilities are presented on a gross basis in the table. Certain derivative asset and liability balances, including cash collateral, are offset in the balance sheet when a legally enforceable right of offset exists.

     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 30, 2011 and January 31, 2010, on 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 30, 2011, and January 31, 2010				2011				2010
OCI derivative gain/(loss) at beginning of quarter				$	(27	)		$	(30	)
Effective portion of changes in fair value recognized in OCI:
Foreign exchange forward contracts					—				1
Forward starting interest rate swaps					—				(1	)
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			—				8
Forward starting interest rate swaps		Interest expense			—				1
OCI derivative gain/(loss) at end of quarter				$	(25	)		$	(22	)

Notes to Consolidated Financial Statements — (Continued)

Derivatives Designated as Cash-Flow Hedges

				Total
				Cash-Flow
				Hedge
				OCI Activity
Six Months Ended January 30, 2011, and January 31, 2010				2011				2010
OCI derivative gain/(loss) at beginning of year				$	(28	)		$	(31	)
Effective portion of changes in fair value recognized in OCI:
Foreign exchange forward contracts					(3	)			(1	)
Cross-currency swap contracts					—				2
Forward starting interest rate swaps					—				(2	)
Commodity contracts					3				(1	)
Amount of (gain) or loss reclassified from OCI to earnings:		Location in Earnings
Foreign exchange forward contracts		Other expenses/income			—				(1	)
Foreign exchange forward contracts		Cost of products sold			2				10
Forward starting interest rate swaps		Interest expense			1				1
Commodity contracts		Cost of products sold			—				1
OCI derivative gain/(loss) at end of quarter				$	(25	)		$	(22	)

     The amount expected to be reclassified from other comprehensive income into earnings within the next 12 months is a loss of $3. 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 on the Consolidated Statements of Earnings:

				Amount of								Amount of
				Gain or (Loss)								Gain or (Loss)
				Recognized in Earnings								Recognized in Earnings
				on Derivatives								on Hedged Item
Derivatives Designated		Location of Gain or (Loss)		January 30,				January 31,				January 30,				January 31,
as Fair-Value Hedges		Recognized in Earnings		2011				2010				2011				2010
Three Months Ended
Interest rate swaps		Interest expense		$	(8	)		$	1			$	8			$	(1	)
Six Months Ended
Interest rate swaps		Interest expense		$	(7	)		$	5			$	7			$	(5	)

     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
				Three Months Ended								Six Months Ended
		Location of Gain or (Loss)		January 30,				January 31,				January 30,				January 31,
Derivatives not Designated as Hedges		Recognized in Earnings		2011				2010				2011				2010
Foreign exchange forward contracts		Other expenses/income		$	(1	)		$	(1	)		$	(1	)		$	(4	)
Foreign exchange forward contracts		Cost of products sold			(1	)			—				(1	)			—
Cross-currency swap contracts		Other expenses/income			(1	)			14				(39	)			(10	)
Commodity contracts		Cost of products sold			8				(2	)			9				(3	)
Deferred compensation contracts		Administrative expenses			—				2				2				4
Total				$	5			$	13			$	(30	)		$	(13	)

Notes to Consolidated Financial Statements — (Continued)

10. 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 30, 2011, and August 1, 2010, consistent with the fair value hierarchy:

		Fair Value				Fair Value Measurements at												Fair Value				Fair Value Measurements at
		as of				January 30, 2011 Using												as of				August 1, 2010 Using
		January 30,				Fair Value Hierarchy												August 1,				Fair Value Hierarchy
		2011				Level 1				Level 2				Level 3				2010				Level 1				Level 2				Level 3
Assets
Interest rate swaps(1)		$	39			$	—			$	39			$	—			$	46			$	—			$	46			$	—
Foreign exchange forward contracts(2)			—				—				—				—				2				—				2				—
Cross-currency swap contracts(3)			9				—				9				—				17				—				17				—
Commodity derivatives(5)			10				10				—				—				4				4				—				—
Total assets at fair value		$	58			$	10			$	48			$	—			$	69			$	4			$	65			$	—

		Fair Value				Fair Value Measurements at												Fair Value				Fair Value Measurements at
		as of				January 30, 2011 Using												as of				August 1, 2010 Using
		January 30,				Fair Value Hierarchy												August 1,				Fair Value Hierarchy
		2011				Level 1				Level 2				Level 3				2010				Level 1				Level 2				Level 3
Liabilities
Foreign exchange forward contracts(2)		$	4			$	—			$	4			$	—			$	2			$	—			$	2			$	—
Cross-currency swap contracts(3)			76				—				76				—				38				—				38				—
Deferred compensation derivatives(4)			1				—				1				—				2				—				2				—
Commodity derivatives(5)			1				1				—				—				1				1				—				—
Deferred compensation obligation(6)			160				100				60				—				149				95				54				—
Total liabilities at fair value		$	242			$	101			$	141			$	—			$	192			$	96			$	96			$	—