OVERVIEW
Description of the Company
Campbell Soup Company is a global manufacturer and marketer of high-quality, branded convenience food products. The company reports the results of operations in the following reportable segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and North America Foodservice.
Executive Summary
This Executive Summary provides significant highlights from the discussion and analysis that follows.
• Net sales were $1.821 billion in the quarter, comparable to a year ago.

• Gross profit, as a percent of sales, decreased to 38.8% in the current quarter from 40.4% a year ago.

• Net earnings per share for the quarter were $.55, compared to $.57 a year ago.

Net earnings attributable to Campbell Soup Company Net earnings and net earnings per share were impacted by restructuring charges in 2012. In 2011, the company announced a series of initiatives to improve supply chain efficiency and reduce overhead costs across the organization to help fund plans to drive the growth of the business. The company also announced its intent to close its office in Moscow and exit the Russian market. In the third quarter of 2012, the company recorded pre-tax restructuring charges of $4 million ($3 million after tax or $.01 per share) related to the initiatives. The year-to-date impact was $9 million ($6 million after tax or $.02 per share). Net earnings were $177 million ($.55 per share) in the quarter ended April 29, 2012 compared to $187 million ($.57 per share) in the year-ago quarter. The decline in net earnings and earnings per share was primarily due to a decline in gross margin percentage and higher advertising and consumer promotion expenses, mostly offset by a lower effective tax rate. Earnings per share benefited from a reduction in the weighted average diluted shares outstanding, which was primarily due to share repurchases under the company's strategic share repurchase programs.
Net earnings were $647 million ($2.01 per share) for the nine months ended April 29, 2012, compared to $705 million ($2.11 per share) for the year-ago period. The decline was primarily due to a decrease in gross margin percentage. Earnings per share benefited from a reduction in the weighted average diluted shares outstanding, which was primarily due to share repurchases under the company's strategic share repurchase programs.
Net earnings (loss) attributable to noncontrolling interests The company owns a 60% controlling interest in a joint venture formed with Swire Pacific Limited to support the development of the company's business in China. The joint venture began operations on January 31, 2011, the beginning of the third quarter of 2011. The noncontrolling interest's share in the net loss was included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings.
The company also owns a 70% controlling interest in a Malaysian food products manufacturing company. Historically, the earnings attributable to the noncontrolling interest were less than $1 million annually and, prior to the third quarter of 2011, were included in Other expenses/(income) in the Consolidated Statements of Earnings. Beginning in the third quarter of 2011, the earnings attributable to the noncontrolling interest were included in Net earnings (loss) attributable to noncontrolling interests in the Consolidated Statements of Earnings. The earnings were not material for the nine-month periods ended April 29, 2012 and May 1, 2011.

THIRD-QUARTER DISCUSSION AND ANALYSIS
Sales
An analysis of net sales by reportable segment follows:

                                           2012       2011     % Change
                                             (Millions)
U.S. Simple Meals                        $   567    $   580      (2 )%
Global Baking and Snacking                   543        527       3
International Simple Meals and Beverages     349        354      (1 )
U.S. Beverages                               208        198       5
North America Foodservice                    154        154       -
                                         $ 1,821    $ 1,813       -  %

An analysis of percent change of net sales by reportable segment follows:

                                         Global        International
                           U.S.          Baking         Simple Meals                           North
                          Simple           and              and               U.S.            America
                          Meals         Snacking         Beverages         Beverages        Foodservice        Total
Volume and Mix               (5 )%           -  %            -  %               7  %            (2 )%             (1 )%
Price and Sales
Allowances                    4              6               4                  -                3                 3
Increased Promotional
Spending (1)                 (1 )           (4 )            (2 )               (2 )             (1 )              (2 )
Currency                      -              1              (3 )                -                -                 -
                             (2 )%           3  %           (1 )%               5  %             -  %              -  %


__________________________________________

In U.S. Simple Meals, sales declined 2%, reflecting a 3% decrease in U.S. Soup sales as lower volumes were partially offset by higher selling prices. Further details of U.S. Soup include:
• Sales of Campbell's condensed soups decreased 5%, with declines in both cooking and eating varieties.

• Sales of ready-to-serve soups decreased 1%, reflecting declines in microwavable soups, partly offset by sales from the launch in 2012 of Campbell's Slow Kettle soups. Canned ready-to-serve soup sales were comparable to a year ago. Promotional spending was increased on ready-to-serve soups to improve marketplace performance.

• Broth sales decreased 4%, primarily due to declines in canned broth, partly offset by the introduction of Swanson Flavor Boost concentrated broth in 2012.

U.S. Sauces sales were comparable to the year-ago quarter. Sales of Prego pasta sauce increased 3% driven by strong volume gains benefiting from increased advertising support and new items. Sales of Pace Mexican sauces were comparable to the prior year. Sales of other simple meals declined.
In Global Baking and Snacking, sales increased 3% from the prior-year quarter. Sales at Pepperidge Farm increased, reflecting higher selling prices across the product portfolio, partly offset by increased promotional spending. Within Pepperidge Farm, sales of cookies and crackers increased, led by double-digit growth in Goldfish snack crackers, partly offset by declines in cookies. Pepperidge Farm bakery sales decreased slightly reflecting declines in the category. Excluding the favorable impact of currency, sales at Arnott's were comparable to the prior year as strong growth in Indonesia was offset by declines in Australia, where the company continues to face a difficult customer and consumer environment. Promotional spending was increased within the segment to improve marketplace performance.
In International Simple Meals and Beverages, sales decreased 1% primarily due to currency. In Europe, sales declined due to currency. Excluding the impact of currency, sales in Europe increased due to volume-driven gains in France, partially offset by declines in Germany. In the Asia Pacific region, sales decreased primarily due to declines in soup in Australia, partially offset by the impact of currency and growth in Japan and Malaysia. In Canada, sales increased primarily due to increased soup sales, partly offset by the impact of currency and lower beverage sales. Promotional spending was increased within the

segment to improve marketplace performance.
In U.S. Beverages, sales increased 5%. Sales gains were driven by double-digit growth in V8 Splash beverages and gains in V8 V-Fusion beverages. Sales of V8 V-Fusion beverages benefited from a range of new products, including V8 V-Fusion Smoothies, Sparkling and Energy drinks, as well as increased promotional support.
In North America Foodservice, sales were comparable to the prior-year quarter as volume-driven gains in fresh chilled soup sold at retail were offset by declines in frozen and canned soup.
Gross Profit
Gross profit, defined as Net sales less Cost of products sold, decreased by $26 million in 2012. As a percent of sales, gross profit decreased from 40.4% in 2011 to 38.8% in 2012. The 1.6 percentage-point decrease was due to the following factors:

                                     Margin
                                     Impact
Cost inflation and other factors      (3.4 )
Higher level of promotional spending  (1.3 )
Mix                                   (1.0 )
Higher selling prices                  2.4
Productivity improvements              1.7
                                      (1.6 )

Marketing and Selling Expenses
Marketing and selling expenses as a percent of sales were 14.1% in 2012 and 13.4% in 2011. Marketing and selling expenses increased 5% in 2012 from 2011. The increase was primarily due to higher advertising and consumer promotion expenses (approximately 6 percentage points), partly offset by lower selling expenses (approximately 1 percentage point). Advertising and consumer promotion expenses increased 13% in 2012 from 2011, reflecting brand-building investments across many key brands, especially within U.S. Simple Meals. Administrative Expenses
Administrative expenses as a percent of sales were 7.9% in 2012 and 8.2% in 2011. Administrative expenses decreased by 3% in 2012 from 2011, reflecting the benefit of cost savings primarily from restructuring initiatives and other factors (approximately 7 percentage points) and lower incentive compensation and benefit costs (approximately 1 percentage point), partially offset by an increase in general administrative costs and inflation (approximately 5 percentage points).
Operating Earnings
Segment operating earnings decreased 13% in 2012 from 2011. An analysis of operating earnings by segment follows:

                                          2012      2011      % Change
                                            (Millions)
U.S. Simple Meals                        $ 120     $ 139       (14 )%
Global Baking and Snacking                  73        82       (11 )
International Simple Meals and Beverages    37        41       (10 )
U.S. Beverages                              45        54       (17 )
North America Foodservice                   20        22        (9 )
                                           295       338       (13 )%
Corporate                                  (27 )     (31 )
Restructuring charges                       (4 )       -
                                         $ 264     $ 307

Earnings from U.S. Simple Meals decreased 14%, reflecting declines in both U.S. Soup and U.S. Sauces. The decline in operating earnings was primarily due to lower volumes, cost inflation, and increased advertising and consumer promotion expenses, partly offset by higher selling prices and productivity improvements. Earnings from Global Baking and Snacking decreased 11% primarily due to cost inflation and increased promotional spending, partly offset by higher selling prices and productivity improvements. Promotional spending was increased to support the businesses.
Earnings from International Simple Meals and Beverages decreased 10%. The decrease in operating earnings was primarily due to lower earnings in the Asia Pacific region.
Earnings from U.S. Beverages decreased 17% primarily due to cost inflation, increased promotional spending and advertising expense, partly offset by volume gains.
Earnings from North America Foodservice decreased 9% due to a decline in gross margin percentage.
Interest Expense/Income
Interest expense increased to $29 million from $27 million in the prior year, primarily due to higher levels of fixed-rate debt, partly offset by lower interest rates on fixed-rate debt.
Taxes on Earnings
The effective tax rate was 26.2% for the current quarter compared to 34.3% in the year-ago quarter. The decrease in the rate was primarily due to lower taxes on foreign earnings associated with intercompany dividend projections.

NINE-MONTH DISCUSSION AND ANALYSIS
Sales
An analysis of net sales by reportable segment follows:

                                           2012       2011     % Change
                                             (Millions)
U.S. Simple Meals                        $ 2,265    $ 2,320      (2 )%
Global Baking and Snacking                 1,637      1,597       3
International Simple Meals and Beverages   1,110      1,147      (3 )
U.S. Beverages                               593        583       2
North America Foodservice                    489        465       5
                                         $ 6,094    $ 6,112       -  %

An analysis of percent change of net sales by reportable segment follows:

                                         Global        International
                           U.S.          Baking         Simple Meals                           North
                          Simple           and              and               U.S.            America
                          Meals         Snacking         Beverages         Beverages        Foodservice        Total
Volume and Mix               (6 )%          (3 )%           (4 )%               4  %             2 %              (3 )%
Price and Sales
Allowances                    4              6               2                  -                3                 4
Increased Promotional
Spending (1)                  -             (2 )            (1 )               (2 )              -                (1 )
Currency                      -              2               -                  -                -                 -
                             (2 )%           3  %           (3 )%               2  %             5 %               -  %


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In U.S. Simple Meals, sales decreased 2%, reflecting a decline in U.S. Soup. U.S. Soup sales decreased 3% as lower volumes were partially offset by higher selling prices and lower promotional spending. Promotional spending was reduced in the current year to improve price realization, partly offset by an increase in support of new products. Further details of U.S. Soup include:

• Sales of Campbell's condensed soups decreased 1%, with declines in both eating and cooking varieties.

• Sales of ready-to-serve soups decreased 9%. Ready-to-serve soup volumes were especially impacted by the company's shift to improve price realization through higher selling prices and reduced promotional spending. The introduction of Campbell's Slow Kettle soups positively impacted sales performance for the year.

• Broth sales increased 3%, primarily due to a strong holiday performance and the benefit from new item launches.

U.S. Sauces sales were comparable to the prior year. Sales of Prego pasta sauce increased 4% due to volume-driven sales gains, partially offset by increased promotional spending. Sales of Pace Mexican sauce declined 3% reflecting the impact of increased private label competitive activity. Sales of other simple meals declined. In U.S. Sauces, promotional spending was increased to improve marketplace performance.
In Global Baking and Snacking, sales increased 3%. Sales at Pepperidge Farm increased, primarily due to an increase in cracker sales, driven by growth in Goldfish snack crackers and the launch of Cracker Chips in 2011, partly offset by declines in cookies. Sales at Arnott's increased due to currency. Excluding the impact of currency, sales at Arnott's declined primarily due to increased promotional spending and lower volumes, partially offset by higher selling prices. The company continues to face a difficult customer and consumer environment in Australia. Promotional spending was increased within the segment to improve marketplace performance.
In International Simple Meals and Beverages, sales decreased 3%, primarily due to lower sales performance in Europe and Canada, partly offset by gains in the Asia Pacific region. In Europe, sales decreased primarily due to volume declines in Germany and France. In Canada, sales decreased primarily due to declines in soup sales.
In U.S. Beverages, sales increased 2% primarily due to increases in sales of both V8 Splash and V8 V-Fusion beverages, while sales of V8 vegetable juice declined. Sales of V8 V-Fusion beverages benefited from new product launches. In response to intensified competition, the company increased promotional spending. In North America Foodservice, sales increased 5% primarily due to volume-driven gains in fresh chilled soup sold at retail. Gross Profit
Gross profit, defined as Net sales less Cost of products sold, decreased by $93 million in 2012. As a percent of sales, gross profit decreased from 40.3% in 2011 to 38.9% in 2012. The 1.4-percentage-point decrease was due to the following factors:

                                     Margin
                                     Impact
Cost inflation and other factors      (4.3 )
Higher level of promotional spending  (0.6 )
Mix                                   (0.4 )
Higher selling prices                  2.1
Productivity improvements              1.8
                                      (1.4 )

Marketing and Selling Expenses
Marketing and selling expenses as a percent of sales were 13.4% in 2012 and 13.3% in 2011. Marketing and selling expenses in 2012 were comparable to 2011. An increase in advertising and consumer promotion expenses (approximately 1 percentage point) was offset by lower selling expenses (approximately 1 percentage point).
Administrative Expenses
Administrative expenses as a percent of sales were 7.2% in 2012 and 2011. Administrative expenses in 2012 were comparable to 2011. The benefit of cost savings primarily from restructuring initiatives and other factors (approximately 7 percentage points) was offset by higher incentive compensation and benefit costs (approximately 4 percentage points); an increase in general administrative costs and inflation (approximately 2 percentage points); and the impact of currency (approximately 1 percentage point). Operating Earnings
Segment operating earnings decreased 8% in 2012 from 2011.

An analysis of operating earnings by segment follows:

                                           2012        2011       % Change
                                              (Millions)
U.S. Simple Meals                        $   554     $   556         -  %
Global Baking and Snacking                   232         263       (12 )
International Simple Meals and Beverages     138         161       (14 )
U.S. Beverages                               109         152       (28 )
North America Foodservice                     75          66        14
                                           1,108       1,198        (8 )%
Corporate                                    (90 )       (88 )
Restructuring charges                         (9 )         -
                                         $ 1,009     $ 1,110

Earnings from U.S. Simple Meals were $554 million in 2012 compared to $556 million in 2011. The slight decrease in operating earnings reflected lower earnings in U.S. Sauces, mostly offset by earnings gains in U.S. Soup. For the segment, lower volumes and cost inflation were mostly offset by higher selling prices, productivity improvements, and lower promotional spending. Earnings from Global Baking and Snacking decreased 12% primarily due to cost inflation, increased promotional spending and higher advertising expense, partially offset by higher selling prices and productivity improvements. Earnings from International Simple Meals and Beverages decreased 14%. The decrease was primarily due to lower earnings in the Asia Pacific region and increased costs associated with the company's market expansion in China. Earnings from U.S. Beverages decreased 28%, primarily due to cost inflation, increased promotional spending and higher advertising expense, partly offset by productivity improvements.
Earnings from North America Foodservice increased 14%. The increase was primarily due to higher selling prices, productivity improvements, and volume gains, partly offset by cost inflation.
Interest Expense/Income
Interest expense decreased to $87 million from $93 million in the prior year, primarily due to lower interest rates on fixed-rate debt. Taxes on Earnings
The effective tax rate was 31.1% for the current period compared to 31.3% for the year-ago period.
Restructuring Charges
On June 28, 2011, the company announced a series of initiatives to improve supply chain efficiency and reduce overhead costs across the organization to help fund plans to drive the growth of the business. The company also announced its intent to exit the Russian market. Details of the initiatives include:
• In Australia, the company will invest in a new system to automate packing operations at its biscuit plant in Virginia. This investment will occur through the second quarter of 2013 and will result in the elimination of approximately 190 positions. Further, the company improved asset utilization in the U.S. by shifting production of ready-to-serve soups from Paris, Texas, to other facilities in 2012. In addition, the manufacturing facility in Marshall, Michigan, was closed in 2011, and manufacturing of Campbell's Soup at Hand microwavable products was consolidated at the Maxton, North Carolina, plant in 2012.

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

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

In the third quarter of 2012, the company recorded a restructuring charge of $4 million ($3 million after tax or $.01 per share) related to these initiatives, resulting in a year-to-date charge of $9 million ($6 million after tax or $.02 per share). In the fourth quarter of 2011, the company recorded a restructuring charge of $63 million ($41 million after tax or $.12 per share). A summary of the pre-tax charges and remaining costs associated with the initiatives is as follows:

                                                          Recognized         Remaining
                                            Total            as of          Costs to be
(Millions)                                 Program      April 29, 2012       Recognized
Severance pay and benefits                $      43    $         (41 )     $           2
Asset impairment/accelerated depreciation        23              (23 )                 -
Other exit costs                                  9               (8 )                 1
Total                                     $      75    $         (72 )     $           3

Of the aggregate $75 million of pre-tax costs, the company expects approximately $50 million will be cash expenditures, the majority of which will be spent in 2012. In addition, the company expects to invest approximately $40 million in capital expenditures in connection with the actions. The cash outflows related to these programs are not expected to have a material adverse impact on the company's liquidity. The initiatives are expected to be completed by the end of 2013. See also Note 6 to the Consolidated Financial Statements.
The initiatives included in this program are expected to generate annual pre-tax cash savings of approximately $60 million beginning in 2012 and increasing to approximately $70 million in 2014.
The total pre-tax costs of $75 million associated with each segment are expected to be as follows: U.S. Simple Meals $32 million, Global Baking and Snacking $15 million, International Simple Meals and Beverages $18 million, U.S. Beverages $3 million, North America Foodservice $1 million, and Corporate $6 million. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.

LIQUIDITY AND CAPITAL RESOURCES
The company expects that foreseeable liquidity and capital resource requirements, including cash outflows to repurchase shares, pay dividends and fund pension plan contributions, will be met through anticipated cash flows from operations; long-term borrowings under its shelf registration statement; short-term borrowings, including commercial paper; and cash and cash equivalents. The company believes that its sources of financing will be adequate to meet its future liquidity and capital resource requirements.
The company generated cash from operations of $838 million in 2012, compared to $858 million last year. The decline was primarily due to lower cash earnings, partially offset by the benefit of lower cash payments associated with pension and other benefit plans in 2012.
Capital expenditures were $173 million in 2012 compared to $133 million a year ago. To date, capital expenditures in 2012 include the packing automation and capacity expansion projects at one of the company's Australian biscuit plants (approximately $23 million), an advanced planning system in North America (approximately $10 million), capacity expansion at Pepperidge Farm (approximately $6 million), the ongoing initiative to simplify the soup-making process in North America (also known as the soup common platform initiative) (approximately $5 million), continued enhancement of the company's corporate headquarters (approximately $9 million), and Pepperidge Farm's 34,000-square-foot innovation center (approximately $7 million). Capital expenditures are expected to total approximately $325 million in 2012. Dividend payments were $281 million in 2012 and $284 million in 2011. Year-to-date dividends declared were $.87 per share in 2012 and $.855 per share in 2011.
Excluding shares owned and tendered by employees to satisfy tax withholding requirements on the vesting of restricted shares and for stock option exercises, the company repurchased approximately 8 million shares at a cost of $272 million during the nine-month period ended April 29, 2012 and approximately 20 million shares at a cost of $696 million during the nine-month period ended May 1, 2011. . . .