CPB-4.28.2013-10Q






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
April 28, 2013
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 313,144,813 shares of capital stock outstanding as of May 30, 2013.






TABLE OF CONTENTS

 
 
 
 
 
 
 
 







PART I


ITEM 1. FINANCIAL INFORMATION
CAMPBELL SOUP COMPANY
Consolidated Statements of Earnings
(unaudited)
(millions, except per share amounts)
 
 
Three Months Ended
 
Nine Months Ended
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
Net sales
$
2,094

 
$
1,821

 
$
6,763

 
$
6,094

Costs and expenses
 
 
 
 
 
 
 
Cost of products sold
1,346

 
1,115

 
4,331

 
3,723

Marketing and selling expenses
262

 
256

 
813

 
814

Administrative expenses
172

 
144

 
506

 
441

Research and development expenses
37

 
32

 
100

 
91

Other expenses / (income)
4

 
6

 
24

 
7

Restructuring charges
1

 
4

 
31

 
9

Total costs and expenses
1,822

 
1,557

 
5,805

 
5,085

Earnings before interest and taxes
272

 
264

 
958

 
1,009

Interest expense
33

 
29

 
102

 
87

Interest income
2

 
2

 
7

 
6

Earnings before taxes
241

 
237

 
863

 
928

Taxes on earnings
62

 
62

 
254

 
289

Net earnings
179

 
175

 
609

 
639

Less: Net earnings (loss) attributable to noncontrolling interests
(2
)
 
(2
)
 
(7
)
 
(8
)
Net earnings attributable to Campbell Soup Company
$
181

 
$
177

 
$
616

 
$
647

Per Share — Basic
 
 
 
 
 
 
 
Net earnings attributable to Campbell Soup Company
$
.58

 
$
.56

 
$
1.96

 
$
2.03

Dividends
$
—

 
$
.29

 
$
.87

 
$
.87

Weighted average shares outstanding — basic
314

 
316

 
314

 
318

Per Share — Assuming Dilution
 
 
 
 
 
 
 
Net earnings attributable to Campbell Soup Company
$
.57

 
$
.55

 
$
1.94

 
$
2.01

Weighted average shares outstanding — assuming dilution
317

 
318

 
317

 
320

See accompanying Notes to Consolidated Financial Statements.





3





CAMPBELL SOUP COMPANY
Consolidated Statements of Comprehensive Income
(unaudited)
(millions)
 
Three Months Ended
 
April 28, 2013
 
April 29, 2012
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
179

 
 
 
 
 
$
175

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(32
)
 
$
5

 
(27
)
 
$
(16
)
 
$
5

 
(11
)
Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(5
)
 
2

 
(3
)
 
3

 
(1
)
 
2

Reclassification adjustment for (gains) losses included in net earnings
—

 
—

 
—

 
(6
)
 
2

 
(4
)
Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during the period
1

 
—

 
1

 
(1
)
 
—

 
(1
)
Reclassification of prior service credit included in net earnings
—

 
—

 
—

 
—

 
—

 
—

Reclassification of net actuarial loss included in net earnings
31

 
(11
)
 
20

 
21

 
(7
)
 
14

Other comprehensive income (loss)
$
(5
)
 
$
(4
)
 
$
(9
)
 
$
1

 
$
(1
)
 
$
—

Total comprehensive income (loss)
 
 
 
 
170

 
 
 
 
 
175

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 
(2
)
 
 
 
 
 
(2
)
Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
172

 
 
 
 
 
$
177

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
April 28, 2013
 
April 29, 2012
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
 
Pre-tax amount
 
Tax (expense) benefit
 
After-tax amount
Net earnings
 
 
 
 
$
609

 
 
 
 
 
$
639

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
6

 
$
1

 
7

 
$
(96
)
 
$
(12
)
 
(108
)
Cash-flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) arising during period
(1
)
 
—

 
(1
)
 
7

 
(2
)
 
5

Reclassification adjustment for (gains) losses included in net earnings
1

 
—

 
1

 
2

 
—

 
2

Pension and other postretirement benefits:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during the period
1

 
—

 
1

 
6

 
(2
)
 
4

Reclassification of prior service credit included in net earnings
(2
)
 
—

 
(2
)
 
(1
)
 
—

 
(1
)
Reclassification of net actuarial loss included in net earnings
93

 
(32
)
 
61

 
62

 
(22
)
 
40

Other comprehensive income (loss)
$
98

 
$
(31
)
 
$
67

 
$
(20
)
 
$
(38
)
 
$
(58
)
Total comprehensive income (loss)
 
 
 
 
$
676

 
 
 
 
 
$
581

Total comprehensive income (loss) attributable to noncontrolling interests
 
 
 
 
(7
)
 
 
 
 
 
(8
)
Total comprehensive income (loss) attributable to Campbell Soup Company
 
 
 
 
$
683

 
 
 
 
 
$
589

See accompanying Notes to Consolidated Financial Statements.

4

CAMPBELL SOUP COMPANY
Consolidated Balance Sheets
(unaudited)
(millions, except per share amounts)
 
April 28,
2013
 
July 29,
2012
Current assets
 
 
 
Cash and cash equivalents
$
453

 
$
335

Accounts receivable, net
674

 
553

Inventories
888

 
714

Other current assets
162

 
169

Total current assets
2,177

 
1,771

Plant assets, net of depreciation
2,356

 
2,127

Goodwill
2,711

 
2,013

Other intangible assets, net of amortization
1,075

 
496

Other assets
134

 
123

Total assets
$
8,453

 
$
6,530

Current liabilities
 
 
 
Short-term borrowings
$
1,309

 
$
786

Payable to suppliers and others
590

 
571

Accrued liabilities
676

 
598

Dividend payable
8

 
93

Accrued income taxes
21

 
22

Total current liabilities
2,604

 
2,070

Long-term debt
2,944

 
2,004

Deferred taxes
478

 
298

Other liabilities
1,114

 
1,260

Total liabilities
7,140

 
5,632

Commitments and contingencies

 

Campbell Soup Company shareowners’ equity
 
 
 
Preferred stock; authorized 40 shares; none issued
—

 
—

Capital stock, $.0375 par value; authorized 560 shares; issued 323 shares as of April 28, 2013 and 542 as of July 29, 2012
12

 
20

Additional paid-in capital
357

 
329

Earnings retained in the business
2,022

 
9,584

Capital stock in treasury, at cost
(365
)
 
(8,259
)
Accumulated other comprehensive loss
(709
)
 
(776
)
Total Campbell Soup Company shareowners’ equity
1,317

 
898

Noncontrolling interests
(4
)
 
—

Total equity
1,313

 
898

Total liabilities and equity
$
8,453

 
$
6,530

See accompanying Notes to Consolidated Financial Statements.


5





CAMPBELL SOUP COMPANY
Consolidated Statements of Cash Flows
(unaudited)
(millions)
 
Nine Months Ended
 
April 28,
2013
 
April 29,
2012
Cash flows from operating activities:
 
 
 
Net earnings
$
609

 
$
639

Adjustments to reconcile net earnings to operating cash flow
 
 
 
Restructuring charges
31

 
9

Stock-based compensation
82

 
62

Depreciation and amortization
318

 
189

Deferred income taxes
(10
)
 
64

Other, net
114

 
94

Changes in working capital
 
 
 
Accounts receivable
(40
)
 
(23
)
Inventories
(52
)
 
80

Prepaid assets
1

 
—

Accounts payable and accrued liabilities
(82
)
 
(140
)
Pension fund contributions
(83
)
 
(68
)
Receipts from hedging activities
20

 
11

Other
(44
)
 
(79
)
Net cash provided by operating activities
864

 
838

Cash flows from investing activities:
 
 
 
Purchases of plant assets
(205
)
 
(173
)
Sales of plant assets
4

 
1

Business acquired, net of cash acquired
(1,558
)
 
—

Other, net
(15
)
 
6

Net cash used in investing activities
(1,774
)
 
(166
)
Cash flows from financing activities:
 
 
 
Net short-term borrowings (repayments)
613

 
(302
)
Long-term borrowings
1,250

 
—

Repayments of notes payable
(400
)
 
—

Dividends paid
(366
)
 
(281
)
Treasury stock purchases
(139
)
 
(272
)
Treasury stock issuances
78

 
94

Excess tax benefits on stock-based compensation
9

 
6

Contribution from noncontrolling interest
3

 
—

Other, net
(17
)
 
—

Net cash provided by (used in) financing activities
1,031

 
(755
)
Effect of exchange rate changes on cash
(3
)
 
(18
)
Net change in cash and cash equivalents
118

 
(101
)
Cash and cash equivalents — beginning of period
335

 
484

Cash and cash equivalents — end of period
$
453

 
$
383

See accompanying Notes to Consolidated Financial Statements.



6





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
 
 
 
 
 
Total
Equity
  
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at July 31, 2011
542

 
$
20

 
(222
)
 
$
(8,021
)
 
$
331

 
$
9,185

 
$
(427
)
 
$
8

 
$
1,096

Net earnings (loss)

 

 

 

 

 
647

 

 
(8
)
 
639

Other comprehensive income (loss)

 

 

 

 

 

 
(58
)
 
—

 
(58
)
Dividends ($.87 per share)

 

 

 

 

 
(282
)
 

 

 
(282
)
Treasury stock purchased

 

 
(8
)
 
(272
)
 

 

 

 

 
(272
)
Treasury stock issued under management incentive and stock option plans
 
 
 
 
4

 
149

 
—

 
 
 
 
 
 
 
149

Balance at April 29, 2012
542

 
$
20

 
(226
)
 
$
(8,144
)
 
$
331

 
$
9,550

 
$
(485
)
 
$
—

 
$
1,272

Balance at July 29, 2012
542

 
$
20

 
(230
)
 
$
(8,259
)
 
$
329

 
$
9,584

 
$
(776
)
 
$
—

 
$
898

Contribution from noncontrolling interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3

 
3

Net earnings (loss)

 

 

 

 

 
616

 

 
(7
)
 
609

Other comprehensive income (loss)

 

 

 

 

 

 
67

 
—

 
67

Dividends ($.87 per share)

 

 

 

 

 
(279
)
 

 

 
(279
)
Treasury stock purchased

 

 
(4
)
 
(139
)
 

 

 

 

 
(139
)
Treasury stock retired
(219
)
 
(8
)
 
219

 
7,907

 
 
 
(7,899
)
 
 
 
 
 
—

Treasury stock issued under management incentive and stock option plans


 


 
4

 
126

 
28

 


 


 

 
154

Balance at April 28, 2013
323

 
$
12

 
(11
)
 
$
(365
)
 
$
357

 
$
2,022

 
$
(709
)
 
$
(4
)
 
$
1,313

See accompanying Notes to Consolidated Financial Statements.

7





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. 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 29, 2012. 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 2011, the Financial Accounting Standards Board (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 a requirement in the June 2011 standard that called for reclassification adjustments from accumulated other comprehensive income (AOCI) to be measured and presented by income statement line item in net income and also in OCI. The requirements are effective for annual reporting periods beginning after December 15, 2011, and for interim reporting periods within those years. The company adopted the guidance in the first quarter of 2013. The adoption impacted the presentation of financial statements but did not have a material impact on the company’s consolidated financial statements.
In February 2013, the FASB finalized the requirements related to reclassification adjustments from AOCI. The new standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of AOCI. If a component is not required to be reclassified to net income in its entirety, the guidance requires a cross-reference to other disclosures that provide additional information. The company adopted the guidance in the third quarter of 2013. The adoption resulted in additional disclosures but did not 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. In January 2013, the FASB issued an amendment to the guidance to limit the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are offset in the financial statements or subject to an enforceable master netting arrangement or similar arrangement. The disclosures are required for fiscal years and interim periods within those years beginning on or after January 1, 2013. Disclosures required under the guidance will be provided for all comparative periods presented. The adoption will impact disclosures but will not have a material impact on the company’s consolidated financial statements.
In July 2012, the FASB issued revised guidance intended to simplify how an entity tests indefinite-lived intangible assets for impairment. The amendments will allow an entity first to assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity will no longer be required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative test 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 indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The company does not expect the adoption to have a material impact on the company’s consolidated financial statements.
In February 2013, the FASB issued guidance for the recognition, measurement, and disclosure of certain obligations resulting from joint and several liability arrangements for which the total amount is fixed. Such obligations may include debt arrangements, legal settlements, and other contractual arrangements. The guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2013 and should be applied retrospectively to all prior periods presented for those obligations within scope that existed as of the beginning of the fiscal year of adoption. Early adoption is permitted. The company is currently evaluating the new guidance.
In March 2013, the FASB issued guidance on the accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The guidance is effective prospectively for fiscal years and interim periods within those fiscal years beginning after December 15, 2013. Early adoption is permitted. The company will prospectively apply the guidance to applicable transactions.

8





3.
Acquisition
On August 6, 2012, the company completed the acquisition of BF Bolthouse Holdco LLC (Bolthouse Farms) from a fund managed by Madison Dearborn Partners, LLC, a private equity firm, for $1,550 in cash, subject to customary purchase price adjustments. On August 6, 2012, the preliminary purchase price adjustments resulted in an increase in the purchase price of $20. In the third quarter, the purchase price adjustments were finalized and reduced to $11. The company funded the acquisition through a combination of short- and long-term borrowings.
The acquisition of Bolthouse Farms provides the company with a new growth platform. Bolthouse Farms is a vertically integrated food and beverage company focused on developing, manufacturing and marketing fresh carrots and proprietary, high value-added natural, healthy products. Bolthouse Farms is one of the market leaders in super-premium refrigerated beverages in the U.S. and Canada and expands the company's beverage portfolio. Bolthouse Farms' leading U.S. and Canadian market position in fresh carrots anchors its business and provides significant cash flow. In addition, Bolthouse Farms' prominent position in the high-growth packaged fresh category offers opportunities for expansion into adjacent segments that respond directly to significant consumer trends.
The company incurred transactions costs of $10 ($7 after tax) in the first quarter of 2013 and $5 ($3 after tax) during the fourth quarter of 2012. The costs were recorded in Other expenses/(income).
The acquisition of Bolthouse Farms contributed $205 to Net sales and resulted in an increase of $6 to Net earnings for the three months ended April 28, 2013, and contributed $571 to Net sales and resulted in an increase of $8 to Net earnings from August 6, 2012 through April 28, 2013. Net earnings reflect the transaction costs incurred in 2013, additional interest expense on the debt issued to finance the purchase, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets, plant assets, and related tax effects.
The following unaudited summary information is presented on a consolidated pro forma basis as if the acquisition had occurred on August 1, 2011.
 
Three Months Ended
 
Nine Months Ended
 
April 28, 2013
 
April 29, 2012
 
April 28, 2013
 
April 29, 2012
Net sales
$
2,094

 
$
2,013

 
$
6,776

 
$
6,618

Net earnings attributable to Campbell Soup Company
$
181

 
$
167

 
$
616

 
$
628

Earnings per share attributable to Campbell Soup Company
$
0.57

 
$
0.53

 
$
1.94

 
$
1.95

The pro forma amounts include transaction costs, additional interest expense on the debt issued to finance the purchase, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets, plant assets, and related tax effects. The pro forma results are not necessarily indicative of the combined results had the acquisition been completed at August 1, 2011, nor are they indicative of future combined results.

9





The acquired assets and assumed liabilities include the following:
 
 
August 6, 2012
Cash
 
$
3

Accounts receivable
 
74

Inventories
 
122

Other current assets
 
8

Plant assets
 
335

Goodwill
 
691

Other intangible assets
 
580

Other assets
 
8

Short-term debt
 
(1
)
Accounts payable
 
(59
)
Accrued liabilities
 
(34
)
Long-term debt
 
(1
)
Deferred income taxes
 
(150
)
Other liabilities
 
(15
)
Total of assets acquired and liabilities assumed
 
$
1,561

The purchase price allocation is preliminary and is subject to the finalization of tax balances, which will be completed in the fourth quarter of 2013.
The excess of the purchase price over the estimated fair values of the identifiable assets was recorded as $691 of goodwill. Of this amount, $284 is expected to be deductible for tax purposes. The goodwill was primarily attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. The goodwill is included in the Bolthouse and Foodservice segment.
The fair value of intangible assets is as follows:
 
 
Type
 
Life
 
Value
Trademarks
 
Non-amortizable
 
Indefinite
 
$
383

Customer relationships
 
Amortizable
 
20 years
 
132

Distributor relationship
 
Amortizable
 
7 years
 
2

Technology and patents
 
Amortizable
 
9
to
17 years
 
43

Formula and recipes
 
Amortizable
 
5 years
 
20

     Total identifiable assets
 
 
 
 
 
 
 
$
580


10





4.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) consisted of the following:
 
 
Foreign Currency Translation Adjustment (1)
 
Gains (Losses) on Cash Flow Hedges (2)
 
Pension and Postretirement Benefit Plan Adjustments (3)
 
Total Accumulated Comprehensive Income (Loss)
Balance at July 29, 2012
 
$
261

 
$
(10
)
 
$
(1,027
)
 
$
(776
)
Other comprehensive income (loss) before reclassifications
 
7

 
(1
)
 
1

 
7

Amounts reclassified from accumulated other comprehensive income
 
—

 
1

 
59

 
60

Net current-period other comprehensive income
 
7

 
—

 
60

 
67

Balance at April 28, 2013
 
$
268

 
$
(10
)
 
$
(967
)
 
$
(709
)
_______________________________________
(1)
Included a tax expense of $11 as of April 28, 2013, and $12 as of July 29, 2012. The amount related to noncontrolling interests was not material.

(2)
Included a tax benefit of $6 as of April 28, 2013, and July 29, 2012.

(3)
Included a tax benefit of $549 as of April 28, 2013, and $581 as of July 29, 2012.

The amounts reclassified from Accumulated other comprehensive income (loss) consisted of the following:
 
 
Three Months Ended
 
Nine Months Ended
 
 
Details about Accumulated Other Comprehensive Income Components
 
April 28, 2013
 
April 29, 2012
 
April 28, 2013
 
April 29, 2012
 
Location of (Gain) Loss Recognized in Earnings
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
 
(Gains) losses on cash flow hedges
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
$
(1
)
 
$
(6
)
 
$
(2
)
 
$
—

 
Cost of products sold
Forward starting interest rate swaps
 
1

 
—

 
3

 
2

 
Interest expense
Total before tax
 
—

 
(6
)
 
1

 
2

 
 
Tax expense (benefit)
 
—

 
2

 
—

 
—

 
 
(Gain) loss, net of tax
 
$
—

 
$
(4
)
 
$
1

 
$
2

 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of pension and postretirement benefit adjustments
 
 
 
 
 
 
 
 
 
 
Prior service credits
 
$
—

 
$
—

 
$
(2
)
 
$
(1
)
 
(1)
Net actuarial losses
 
31

 
21

 
93

 
62

 
(1)
Total before tax
 
31

 
21

 
91

 
61

 
 
Tax expense (benefit)
 
(11
)
 
(7
)
 
(32
)
 
(22
)
 
 
(Gain) loss, net of tax
 
$
20

 
$
14

 
$
59

 
$
39

 
 
_____________________________________
(1)
These items are included in the components of net periodic benefit costs (see Note 10 for additional details).


11





5.
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
 
Bolthouse and Foodservice
 
Total    
Balance at July 29, 2012
$
322

 
$
872

 
$
561

 
$
112

 
$
146

 
$
2,013

Acquisition
—

 
—

 
—

 
—

 
691

 
691

Foreign currency translation adjustment
—

 
(16
)
 
23

 
—

 
—

 
7

Balance at April 28, 2013
$
322

 
$
856

 
$
584

 
$
112

 
$
837

 
$
2,711

The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:
 
April 28,
2013
 
July 29,
2012
Intangible Assets:
 
 
 
Non-amortizable intangible assets
$
878

 
$
485

Amortizable intangible assets
212

 
21

 
1,090

 
506

Accumulated amortization
(15
)
 
(10
)
Total net intangible assets
$
1,075

 
$
496

Non-amortizable intangible assets consist of trademarks, which include Bolthouse Farms, Pace, Royco, Liebig, Blå Band and Touch of Taste.
Amortizable intangible assets consist substantially of customer relationships, process technology and formulas and recipes. Amortization related to these assets was $11 and $1 for the nine-month periods ended April 28, 2013 and April 29, 2012, respectively. The estimated aggregated amortization expense for 2013 and for each of the four succeeding years is approximately $15 per year. Asset useful lives range from 5 to 20 years.
6.
Business and Geographic Segment Information
The company manages operations through 13 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 reportable 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 sauces; Pace Mexican sauces; Campbell’s canned gravies, pasta and beans; and Swanson canned poultry.
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 operating segments outside of the U.S., including Europe, the retail business in Canada, and the businesses in Asia Pacific, Latin America and China.
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.
Bolthouse and Foodservice comprises the Bolthouse Farms carrot products operating segment, including fresh carrots, juice concentrate and fiber; the Bolthouse Farms super-premium refrigerated beverages and refrigerated salad dressings operating segment; and the North America Foodservice operating segment. The North America Foodservice operating segment represents the distribution of products such as soup, specialty entrées, beverage products, other prepared foods and Pepperidge Farm products through various food service channels in the U.S. and Canada. None of these operating segments meets the criteria for aggregation nor the thresholds for separate disclosure.  
The company evaluates segment performance before interest, taxes and costs associated with restructuring activities. Unrealized gains and losses on commodity hedging activities are excluded from segment operating earnings and are recorded in

12





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. Certain manufacturing, warehousing and distribution activities of the segments are integrated in order to maximize efficiency and productivity. As a result, asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.
 
 
Three Months Ended
 
Nine Months Ended
 
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
Net sales
 
 
 
 
 
 
 
 
U.S. Simple Meals
 
$
627

 
$
567

 
$
2,356

 
$
2,265

Global Baking and Snacking
 
568

 
543

 
1,703

 
1,637

International Simple Meals and Beverages
 
357

 
349

 
1,116

 
1,110

U.S. Beverages
 
198

 
208

 
569

 
593

Bolthouse and Foodservice
 
344

 
154

 
1,019

 
489

Total
 
$
2,094

 
$
1,821

 
$
6,763

 
$
6,094


 
 
Three Months Ended
 
Nine Months Ended
 
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
Earnings before interest and taxes
 
 
 
 
 
 
 
 
U.S. Simple Meals
 
$
156

 
$
120

 
$
621

 
$
554

Global Baking and Snacking
 
73

 
73

 
232

 
232

International Simple Meals and Beverages
 
40

 
37

 
141

 
138

U.S. Beverages
 
33

 
45

 
100

 
109

Bolthouse and Foodservice
 
27

 
20

 
91

 
75

Corporate(1)
 
(56
)
 
(27
)
 
(196
)
 
(90
)
Restructuring charges(2)
 
(1
)
 
(4
)
 
(31
)
 
(9
)
Total
 
$
272

 
$
264

 
$
958

 
$
1,009

_______________________________________
(1)
Represents unallocated corporate expenses. Restructuring-related costs of $20 and $81 were included in unallocated corporate expenses for the three- and nine-month periods ended April 28, 2013, respectively. In addition, unallocated corporate expenses included $10 of acquisition costs in the nine-month period ended April 28, 2013.
(2)
See Note 7 for additional information.

The company’s global net sales based on product categories are as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
Net sales
 
 
 
 
 
 
 
 
Simple Meals
 
$
1,171

 
$
985

 
$
4,042

 
$
3,618

Baked Snacks
 
602

 
576

 
1,806

 
1,735

Beverages
 
321

 
260

 
915

 
741

Total
 
$
2,094

 
$
1,821

 
$
6,763

 
$
6,094

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

13





7.
Restructuring Charges
2013 Initiatives
In the second and third quarters of 2013, the company recorded restructuring charges of $7 ($5 after tax or $.02 per share) associated with commercial arrangements with third-party providers to expand the company's access to manufacturing and distribution capabilities in Mexico. The third-party providers will produce and distribute the company's beverages, soups, broths and sauces throughout the Mexican market. As a result of these agreements, the company will close its plant in Villagrán, Mexico, in 2014 and eliminate approximately 260 positions. The charge consisted of $3 related to pension benefits (See Note 10), $1 related to employee severance and benefit costs, and $3 related to asset impairment. The company expects to incur an additional $1 of accelerated depreciation and $1 of other exit costs related to this initiative. Of the aggregate $9 of pre-tax costs, the company expects approximately $4 will be cash expenditures. These charges are associated with the International Simple Meals and Beverages segment. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
In the first quarter of 2013, the company announced several initiatives to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network. The company expects to eliminate approximately 727 positions in connection with the initiatives, which include the following:
•
The company will close its thermal plant in Sacramento, California, which produces soups, sauces and beverages. The closure will result in the elimination of approximately 700 full-time positions and will be completed in phases, with plans to cease operations in July 2013. The company plans to shift the majority of Sacramento's soup, sauce and beverage production to its thermal plants in Maxton, North Carolina; Napoleon, Ohio; and Paris, Texas.
•
The company will also close its spice plant in South Plainfield, New Jersey, which will result in the elimination of 27 positions. The company will consolidate spice production at its Milwaukee, Wisconsin, plant in 2013.
In the nine-month period ended April 28, 2013, the company recorded a restructuring charge of $24 related to these initiatives. In addition, approximately $81 of costs related to these initiatives were recorded in Cost of products sold, representing accelerated depreciation and other exit costs. The aggregate after-tax impact of restructuring charges and related costs was $66, or $.21 per share. A summary of the pre-tax costs and remaining costs associated with the U.S. supply chain initiatives is as follows:
 
Total
Program
 
Recognized
as of
April 28, 2013
 
Remaining
Costs to be
Recognized
Severance pay and benefits
$
22

 
$
(22
)
 
$
—

Accelerated depreciation
86

 
(80
)
 
6

Other exit costs
12

 
(3
)
 
9

Total
$
120

 
$
(105
)
 
$
15

In the third quarter, the company increased the estimate of the total anticipated pre-tax costs to approximately $120 from $115, primarily due to increases in expected asset charges related to property, plant and equipment, partially offset by lower severance pay and benefits, and other exit costs. Of the aggregate $120 of pre-tax costs, the company expects approximately $32 will be cash expenditures. In addition, the company expects to invest approximately $27 in capital expenditures, primarily to relocate and refurbish a beverage filling and packaging line.
A summary of the restructuring activity and related reserves associated with these U.S. supply chain initiatives at April 28, 2013 is as follows:
 
 
 
 
Nine Months Ended
 
 
 
 
 
April 28, 2013
 
 
 
Accrued
Balance at
 
 
 
                      Cash
 
Accrued
Balance at
 
 
July 29, 2012
 
Charges
 
Payments
 
April 28, 2013
Severance pay and benefits
 
$
—

 
$
22

 
$
(5
)
 
$
17

Other exit costs
 
—

 
—

 
—

 
—

 
 
$
—

 
22

 
$
(5
)
 
$
17

Accelerated depreciation
 
 
 
80

 
 
 
 
Other non-cash exit costs
 
 
 
3

 
 
 
 
Total charges
 
 
 
$
105

 
 
 
 


14





A summary of restructuring charges related to these U.S. supply chain initiatives incurred to date associated with segments is as follows:
 
U.S.
Simple
Meals
 
U.S.
Beverages
 
Total
Severance pay and benefits
$
17

 
$
5

 
$
22

Accelerated depreciation
59

 
21

 
80

Other exit costs
2

 
1

 
3

 
$
78

 
$
27

 
$
105

The company expects to incur additional pre-tax costs of approximately $15 by segment as follows: U.S. Simple Meals - $12; and U.S. Beverages - $3. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
2011 Initiatives
In the fourth quarter of 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. Details of the initiatives include:
•
In Australia, the company is investing in a new system to automate packing operations at its biscuit plant in Virginia. This investment continued through the third quarter of 2013 and will result in the elimination of approximately 190 positions. The initiative is now expected to be substantially completed by December 2013. 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.
•
In connection with exiting the Russian market, the company eliminated approximately 50 positions. The exit process commenced in 2011 and was substantially completed in 2012.
In 2012, the company recorded a restructuring charge of $10 ($6 after tax or $.02 per share) related to these initiatives. Of the amount recorded in 2012, $9 ($6 after tax or $.02 per share) was recorded through the end of the third quarter. 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
April 28, 2013
 
Remaining
Costs to be
Recognized
Severance pay and benefits
$
41

 
$
(41
)
 
$
—

Asset impairment/accelerated depreciation
23

 
(23
)
 
—

Other exit costs
10

 
(9
)
 
1

Total
$
74

 
$
(73
)
 
$
1

Of the aggregate $74 of pre-tax costs, approximately $50 represents cash expenditures, the majority of which was spent in 2012. In addition, the company expects to invest approximately $40 in capital expenditures in connection with the actions, of which approximately $31 has been invested as of April 28, 2013.

15





A summary of the restructuring activity and related reserves associated with these initiatives at April 28, 2013 is as follows:
 
 
 
 
Nine Months Ended
 
 
 
 
 
 
April 28, 2013
 
 
 
 
Accrued
Balance at
 
 
 
Cash
 
Foreign  Currency
Translation
 
Accrued
Balance at
 
 
July 29, 2012
 
Charges
 
Payments
 
Adjustment
 
April 28, 2013
Severance pay and benefits
 
$
14

 
$
—

 
$
(9
)
 
$
—

 
$
5

Other exit costs
 
2

 
—

 
—

 
—

 
2

 
 
$
16

 
$
—

 
$
(9
)
 
$
—

 
$
7

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
 
Bolthouse and Foodservice
 
Corporate
 
Total
Severance pay and benefits
$
10

 
$
14

 
$
11

 
$
3

 
$
1

 
$
2

 
$
41

Asset impairment/accelerated depreciation
20

 
—

 
3

 
—

 
—

 
—

 
23

Other exit costs
2

 
—

 
3

 
—

 
—

 
4

 
9

 
$
32

 
$
14

 
$
17

 
$
3

 
$
1

 
$
6

 
$
73

The company expects to incur additional pre-tax costs of approximately $1 in the U.S. Simple Meals segment. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
8.
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. Awards issued by the company prior to 2011 contained non-forfeitable rights to dividends or dividend equivalents.
The computation of basic and diluted earnings per share attributable to common shareowners is as follows:
 
Three Months Ended
 
Nine Months Ended
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
Net earnings attributable to Campbell Soup Company
$
181

 
$
177

 
$
616

 
$
647

Less: net earnings allocated to participating securities
—

 
(1
)
 
—

 
(3
)
Net earnings available to Campbell Soup Company common shareowners
$
181

 
$
176

 
$
616

 
$
644

 
 
 
 
 
 
 
 
Weighted average shares outstanding — basic
314

 
316

 
314

 
318

Effect of dilutive securities: stock options and other share-based payment awards
3

 
2

 
3

 
2

Weighted average shares outstanding — diluted
317

 
318

 
317

 
320

 
 
 
 
 
 
 
 
Net earnings attributable to Campbell Soup Company per common share:
 
 
 
 
 
 
 
Basic
$
.58

 
$
.56

 
$
1.96

 
$
2.03

Diluted
$
.57

 
$
.55

 
$
1.94

 
$
2.01

There were no antidilutive stock options for the three-month and nine-month periods ended April 28, 2013 and April 29, 2012.

16





9.
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. In February 2013, the company and joint venture partner contributed additional cash of $5 and $3, respectively. 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 were not material in 2013 or 2012.
The noncontrolling interests in these entities were included in Total equity in the Consolidated Balance Sheets and Consolidated Statements of Equity.
10.
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
 
Nine Months Ended
 
Pension
 
Postretirement
 
Pension
 
Postretirement
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
 
April 28,
2013
 
April 29,
2012
Service cost
$
15

 
$
14

 
$
1

 
$
—

 
$
43

 
$
41

 
$
3

 
$
2

Interest cost
27

 
31

 
3

 
4

 
81

 
92

 
11

 
13

Expected return on plan assets
(44
)
 
(44
)
 
—

 
—

 
(133
)
 
(133
)
 
—

 
—

Amortization of prior service credit
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
 
(1
)
Recognized net actuarial loss
27

 
18

 
4

 
3

 
81

 
55

 
11

 
7

Curtailment loss
—

 
—

 
—

 
—

 
3

 
—

 
—

 
—

Net periodic benefit expense
$
25

 
$
19

 
$
8

 
$
7

 
$
74

 
$
55

 
$
24

 
$
21


The curtailment loss of $3 related to the planned closure of the plant in Mexico and was included in the Restructuring charges. See also Note 7.
A contribution of $75 was made to U.S. pension plans and contributions of $8 were made to non-U.S. pension plans during the nine-month period ended April 28, 2013. Additional contributions to U.S. pension plans are not expected this year. Contributions to non-U.S. pension plans are expected to be approximately $4 during the remainder of the year.
11.
Short-term Borrowings and Long-term Debt
On August 6, 2012, the company completed the acquisition of Bolthouse Farms from a fund managed by Madison Dearborn Partners, LLC, a private equity firm, for $1,550 in cash, subject to customary purchase price adjustments. On August 6, 2012, the preliminary purchase price adjustments resulted in an increase in the purchase price of $20. In the third quarter, the purchase price adjustments were finalized and reduced to $11. The acquisition was funded through a combination of short- and long-term borrowings. The terms of long-term borrowings, which were issued on August 2, 2012, were as follows:
•
$400 floating rate notes that mature on August 1, 2014. Interest on the notes is based on 3-month U.S. dollar LIBOR plus 0.3% . Interest is payable quarterly and commenced on November 1, 2012;
•
$450 of 2.50% notes that mature on August 2, 2022. Interest is payable semi-annually and commenced on February 2, 2013. The company may redeem the notes in whole or in part at any time at a redemption price of 100% of the principal amount plus accrued interest or an amount designed to ensure that the note holders are not penalized by the early redemption; and
•
$400 of 3.80% notes that mature on August 2, 2042. Interest is payable semi-annually and commenced on February 2, 2013. The company may redeem the notes in whole or in part at any time at a redemption price of 100% of the principal amount plus accrued interest or an amount designed to ensure that the note holders are not penalized by the early redemption.

17





The remaining balance was funded through the issuance of commercial paper.
12.
Financial Instruments
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, options, forwards and commodity futures. 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.
Concentration of Credit Risk
The company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations.  To mitigate counterparty credit risk, the company only enters into contracts with carefully selected, leading, credit-worthy financial institutions, and distributes contracts among several financial institutions to reduce the concentration of credit risk. The company does not have credit-risk-related contingent features in its derivative instruments as of April 28, 2013. During 2012, the company's largest customer accounted for approximately 17% of consolidated net sales. The company closely monitors credit risk associated with counterparties and customers.
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 hedges portions of its forecasted foreign currency transaction exposure with foreign exchange forward contracts for periods typically 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 April 28, 2013, cross-currency swap contracts mature between 2 and 26 months. The notional amount of foreign exchange forward and cross-currency swap contracts accounted for as cash-flow hedges was $148 at April 28, 2013 and $156 at July 29, 2012. 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 hedged transaction affects earnings. The notional amount of foreign exchange forward and cross-currency swap contracts that are not designated as accounting hedges was $843 and $908 at April 28, 2013 and July 29, 2012, 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 $200 at April 28, 2013 and $500 at July 29, 2012. These swaps mature in 5 months. The company manages its exposure to interest rate volatility on future debt issuances by entering into forward starting interest rate swaps to lock in the rate on the interest payments related to the forecasted debt issuances. Pay fixed rate/receive variable rate forward starting interest rate swaps are accounted for as cash-flow hedges. The notional amount of outstanding forward starting interest rate swaps totaled $250 at April 28, 2013 and $600 at July 29, 2012. Forward starting interest rate swaps with a notional value of $400 were settled in August 2012, at a loss of $2, which was recorded in other comprehensive income (loss). The loss on the forward starting interest rate swaps will be amortized over the life of the 10-year debt issued in August 2012.
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, options and swap contracts to reduce the volatility of price fluctuations of diesel fuel, soybean oil, aluminum, wheat, natural gas and cocoa, which impact the cost of raw materials. Commodity futures, options, and swap contracts are either accounted for as cash-flow hedges or are not designated as accounting hedges. The company hedges a portion of commodity requirements for periods typically up to 18 months. There were no commodity contracts accounted for as cash-flow hedges as of April 28, 2013 or July 29, 2012. The notional amount of commodity contracts not designated as accounting hedges was $116 at April 28, 2013 and $95 at July 29, 2012.



18





Equity Price Risk
The company enters into swap contracts which hedge a portion of exposures relating to certain deferred compensation obligations linked to the total return of the company’s capital stock, the total return of the Vanguard Institutional Index, and the total return of the Vanguard Total International Stock Index. Under these contracts, the company pays variable interest rates and receives from the counterparty either the total return on company capital stock; the total return of the Standard & Poor's 500 Index, which is expected to approximate the total return of the Vanguard Institutional Index; or the total return of the iShares MSCI EAFE Index, which is expected to approximate the total return of the Vanguard Total International Stock Index. These contracts were not designated as hedges for accounting purposes and are entered into for periods typically not exceeding 12 months. The notional amounts of the contracts as of April 28, 2013 and July 29, 2012 were $50 and $75, respectively.
The following table summarizes the fair value of derivative instruments recorded in the Consolidated Balance Sheets as of April 28, 2013, and July 29, 2012:
 
 
Balance Sheet Classification
 
April 28,
2013
 
July 29,
2012
Asset Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Foreign exchange forward contracts
Other current assets
 
$
—

 
$
1

Forward starting interest rate swaps
Other current assets
 
—

 
1

Interest rate swaps
Other current assets
 
4

 
4

Forward starting interest rate swaps
Other assets
 
3

 
1

Interest rate swaps
Other assets
 
—

 
9

Total derivatives designated as hedges
 
 
$
7

 
$
16

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Other current assets
 
$
3

 
$
8

Cross-currency swap contracts
Other current assets
 
4

 
19

Deferred compensation derivative contracts
Other current assets
 
1

 
1

Foreign exchange forward contracts
Other current assets
 
—

 
1

Total derivatives not designated as hedges
 
 
8

 
29

Total asset derivatives
 
 
$
15

 
$
45


 
Balance Sheet Classification
 
April 28,
2013
 
July 29,
2012
Liability Derivatives
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
Cross-currency swap contracts
Accrued liabilities
 
$
23

 
$
—

Foreign exchange forward contracts
Accrued liabilities
 
1

 
—

Cross-currency swap contracts
Other liabilities
 
—

 
25

Total derivatives designated as hedges
 
 
$
24

 
$
25

Derivatives not designated as hedges:
 
 
 
 
 
Commodity derivative contracts
Accrued liabilities
 
$
6

 
$
4

Cross-currency swap contracts
Accrued liabilities
 
48

 
25

Cross-currency swap contracts
Other liabilities
 
1

 
29

Total derivatives not designated as hedges
 
 
$
55

 
$
58

Total liability derivatives
 
 
$
79

 
$
83


19





The following tables show the effect of the company’s derivative instruments designated as cash-flow hedges for the three- and nine-month periods ended April 28, 2013 and April 29, 2012, 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 April 28, 2013, and April 29, 2012
 
 
2013
 
2012
OCI derivative gain (loss) at beginning of quarter
 
 
$
(11
)
 
$
(19
)
Effective portion of changes in fair value recognized in OCI:
 
 
 
 
 
Foreign exchange forward contracts
 
 
—

 
2

Forward starting interest rate swaps