SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

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.

Yes [X]       No [  ].

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

Yes [X]       No [  ].

     There were 411,461,171 shares of Capital Stock outstanding as of December 3, 2004.

Table of Contents

PART I.

ITEM 1. FINANCIAL INFORMATION

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Earnings

(unaudited)

See Notes to Consolidated Financial Statements.

2

CAMPBELL SOUP COMPANY CONSOLIDATED

Balance Sheets

(unaudited)
(millions, except per share amounts)

See Notes to Consolidated Financial Statements.

3

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Cash Flows

(unaudited)
(millions)

See Notes to Consolidated Financial Statements.

4

CAMPBELL SOUP COMPANY CONSOLIDATED

Statements of Shareowners’ Equity

(unaudited)
(millions, except per share amounts)

See Notes to Consolidated Financial Statements.

5

CAMPBELL SOUP COMPANY CONSOLIDATED
Notes to Consolidated Financial Statements
(unaudited)
(dollars in millions, except per share amounts)

(a)		Basis of Presentation / Accounting Policies
		The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. All such adjustments are of a normal recurring nature. The accounting policies used in preparing these financial statements are consistent with those applied in the Annual Report on Form 10-K for the year ended August 1, 2004, except as discussed in Note (i). Certain reclassifications were made to the prior year amounts to conform with current presentation. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year.
		The company accounts for stock option grants and restricted stock awards in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” and related Interpretations. Accordingly, no compensation expense has been recognized for stock options since all options granted had an exercise price equal to the market value of the underlying stock on the grant date. Restricted stock awards are expensed. The following table illustrates the effect on net earnings and earnings per share if the company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123 to stock-based employee compensation.

6

(b)		Goodwill and Intangible Assets
		The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:

Changes in the carrying amount for goodwill for the period ended October 31, 2004 are as follows:

7

(c)		Comprehensive Income
		Total comprehensive income comprises net earnings, net foreign currency translation adjustments, minimum pension liability adjustments, and net unrealized gains (losses) on cash-flow hedges.
		Total comprehensive income for the three months ended October 31, 2004 and November 2, 2003, was $310 and $290, respectively.
		The components of Accumulated other comprehensive loss, as reflected in the Statements of Shareowners’ Equity, consisted of the following:

(d)		Earnings Per Share
		For the periods presented in the Statements of Earnings, the calculations of basic EPS and EPS assuming dilution vary in that the weighted average shares outstanding assuming dilution include the incremental effect of stock options and restricted stock programs, except when such effect would be antidilutive. Stock options to purchase 31 million and 23 million shares of capital stock for the three-month periods ended October 31, 2004 and November 2, 2003, respectively, were not included in the calculation of diluted earnings per share because the exercise price of the stock options exceeded the average market price of the capital stock and therefore, the effect would be antidilutive.
(e)		Segment Information
		Campbell Soup Company, together with its consolidated subsidiaries, is a global manufacturer and marketer of high quality, branded convenience food products. Through fiscal 2004, the company was organized and reported the results of operations in four segments: North America Soup and Away From Home, North America Sauces and Beverages, Biscuits and Confectionery, and International Soup and Sauces.
		As of fiscal 2005, the company changed its organizational structure and as a result will report the following segments: U.S. Soup, Sauces and Beverages, Baking and Snacking, International Soup and Sauces, and Other. Comparative periods have been restated to conform to the current year presentation. The restatements also reflect a reallocation of certain expenses between corporate and the operating segments.

8

The U.S. Soup, Sauces and Beverages segment includes the following retail businesses: the Campbell’s condensed and ready-to-serve soups; Swanson broth and canned poultry; Prego pasta sauce; Pace Mexican sauce; Campbell’s Chunky chili; Campbell’s canned pasta, gravies, and beans; Campbell’s Supper Bakes meal kits; V8 vegetable juice; V8 Splash juice beverages; and Campbell’s tomato juice.

The Baking and Snacking segment includes the following businesses: Pepperidge Farm cookies, crackers, breads and frozen products in U.S. retail; Arnott’s biscuits in Australia and Asia Pacific; and Arnott’s salty snacks in Australia.

The International Soup and Sauces segment includes the soup, sauce and beverage businesses outside of the United States, including Europe, Mexico, Latin America, the Asia Pacific region and the retail business in Canada.

The balance of the portfolio reported in Other includes Godiva Chocolatier worldwide and the company’s Away From Home operations, which represent 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 2004 Annual Report on Form 10-K. The company evaluates segment performance before interest and taxes. Away From Home products are principally produced by the tangible assets of the company’s other segments, except for Stockpot soups, which are produced in a separate facility, and certain other products, which are produced under contract manufacturing agreements. Accordingly, with the exception of the designated Stockpot facility, plant assets are not allocated to the Away From Home operations. Depreciation, however, is allocated to Away From Home based on production hours.

9

October 31, 2004

November 2, 2003

1

Represents unallocated corporate expenses and unallocated assets, including corporate offices, deferred income taxes and investments.

10

Historical information on the reporting segments is as follows:

Fiscal Year 2004

Net Sales:

Earnings Before Interest and Taxes:

11

Fiscal Year 2003

Net Sales:

Earnings Before Interest and Taxes:

12

(f)

Inventories

		Approximately 55% of inventory in 2005 and in 2004 is accounted for on the last in, first out (LIFO) method of determining cost. If the first in, first out inventory valuation method had been used exclusively, inventories would not differ materially from the amounts reported at October 31, 2004 and August 1, 2004.
(g)		Accounting for Derivative Instruments
		The company utilizes certain derivative financial instruments to enhance its ability to manage risk including interest rate, foreign currency, commodity and certain equity-linked employee compensation exposures that exist as part of ongoing business operations. Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The company does not enter into contracts for speculative purposes, nor is it a party to any leveraged derivative instrument.
		All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered into, the company designates the derivative as (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair-value hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash-flow hedge), (3) a foreign-currency fair-value or cash-flow hedge (foreign-currency hedge), or (4) a hedge of a net investment in a foreign operation. Some derivatives may also be considered natural hedging instruments (changes in fair value are recognized to act as economic offsets to changes in fair value of the underlying hedged item and do not qualify for hedge accounting under SFAS No. 133).
		Interest Rate Swaps The company finances a portion of its operations through debt instruments primarily consisting of commercial paper, notes, debentures and bank loans. The company utilizes interest rate swap agreements to minimize worldwide financing costs and to achieve a targeted ratio of variable-rate versus fixed-rate debt.
		Fixed-to-variable interest rate swaps are accounted for as fair-value hedges. Gains and losses on these instruments are recorded in earnings as adjustments to interest expense, offsetting gains and losses on the hedged item. The notional amounts of all outstanding fair-value interest rate swaps at October 31, 2004

13

totaled $875 with a maximum maturity date of October 2013. The fair value of such instruments was $23 as of October 31, 2004.

Foreign Currency Contracts
The company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries, including subsidiary financing transactions. The company utilizes foreign currency forward purchase and sale contracts, options and cross-currency swaps in order to manage the volatility associated with foreign currency purchases and sales and certain intercompany transactions in the normal course of business.

Qualifying foreign exchange forward and cross-currency swap contracts are accounted for as cash-flow hedges when the hedged item is a forecasted transaction, or when future cash flows related to a recognized asset or liability are expected to be received or paid. The effective portion of the changes in fair value on these instruments is recorded in Accumulated other comprehensive income (loss) and is reclassified into the Statements of Earnings on the same line item and in the same period or periods in which the hedged transaction affects earnings. The assessment of effectiveness for contracts is based on changes in the spot rates. The fair value of these instruments was $(168) at October 31, 2004.

Qualifying foreign exchange forward contracts are accounted for as fair-value hedges when the hedged item is a recognized asset, liability or firm commitment. The fair value of such contracts was not material at October 31, 2004.

The company also enters into certain foreign exchange forward and variable-to-variable cross-currency swap contracts that are not designated as accounting hedges. These instruments are primarily intended to reduce volatility of certain intercompany financing transactions. Gains and losses on derivatives not designated as accounting hedges are typically recorded in Other expenses, as an offset to gains (losses) on the underlying transactions. The fair value of these instruments was $(26) at October 31, 2004.

Foreign exchange forward contracts typically have maturities of less than eighteen months. Cross-currency swap contracts mature in 2005 through 2014. Principal currencies include the Australian dollar, British pound, Canadian dollar, euro, Japanese yen and Swedish krona.

As of October 31, 2004, the accumulated derivative net loss in other comprehensive income for cash-flow hedges, including the foreign exchange forward and cross-currency contracts, forward starting swap contracts, and treasury lock agreements was $3, net of tax. At November 2, 2003, the accumulated derivative net gain in other comprehensive income was $1, net of tax. Reclassifications from Accumulated other comprehensive income (loss) into the Statements of Earnings during the quarter ended October 31, 2004 were not material. Reclassifications during the remainder of fiscal year 2005 are not expected to be material. There were no cash-flow hedges discontinued before

14

		maturity during the quarter. At October 31, 2004, the maximum maturity date of any cash-flow hedge was August 2013.
		Other Contracts The company is exposed to equity price changes related to certain employee compensation obligations. Swap contracts are utilized to hedge exposures relating to certain employee compensation obligations linked to the total return of the Standard & Poor’s 500 Index and the total return of the company’s capital stock. The company pays a variable interest rate and receives the equity returns under these instruments. The notional value of the equity swap contracts, which mature in 2005, was $34 at October 31, 2004. These instruments are not designated as accounting hedges. Gains and losses are recorded in the Statements of Earnings. The net gain recorded under these contracts at October 31, 2004 was approximately $1.
(h)		Restructuring
		A restructuring charge of $32 ($22 after tax) was recorded in the fourth quarter 2004 for severance and employee benefit costs associated with a worldwide reduction in workforce and with the implementation of a distribution and logistics realignment in Australia. These programs are part of cost savings initiatives designed to improve the company’s operating margins and asset utilization. Approximately 400 positions were eliminated under the reduction in workforce program resulting in a restructuring charge of $23. The reductions represent the elimination of layers of management, elimination of redundant positions due to the realignment of operations in North America, and reorganization of the U.S. sales force. The majority of the terminations occurred in the fourth quarter 2004.
		The distribution and logistics realignment in Australia represents converting a direct store delivery system to a central warehouse system. As a result of this program, over 200 positions will be eliminated due to the outsourcing of the infrastructure. A restructuring charge of $9 was recorded for this program. The majority of the terminations will occur in 2005.
		A summary of restructuring reserves at October 31, 2004 and related activity is as follows:

15

(i)		Pension and Postretirement Medical Benefits:
		The company sponsors certain U.S. and foreign defined benefit plans and U.S. postretirement medical benefit plans for employees. Components of benefit expense were as follows:

		In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduced a prescription drug benefit under Medicare Part D and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position (FSP) FAS 106-1, the company elected in January to defer recognizing the effects of the Act on accounting for postretirement health care plans until the FASB guidance was finalized.
		In May 2004, FASB issued FSP FAS 106-2, which provides accounting guidance to sponsors of postretirement health care plans that are impacted by the Act. The FSP is effective for interim or annual periods beginning after June 15, 2004. Although detailed regulations necessary to implement the Act have not yet been finalized, the company believes that certain drug benefits offered under postretirement health care plans will qualify for the subsidy under Medicare Part D. The effects of the subsidy were factored into the 2004 annual year-end valuation. The reduction in the benefit obligation attributable to past service cost was approximately $32 and has been reflected as an actuarial gain. The reduction in benefit cost for 2005 related to the Act is approximately $5.
		In the first quarter 2005, the company made a $35 voluntary contribution to a U.S. pension plan. Additional contributions to the U.S. pension plans are not expected this fiscal year. Contributions of $7 were made to the international plans as of October 31, 2004.
(j)		Contingencies
		On March 30, 1998, the company effected a spinoff of several of its non-core businesses to Vlasic Foods International Inc. (VFI). VFI and several of its affiliates (collectively, Vlasic) commenced cases under Chapter 11 of the Bankruptcy Code on January 29, 2001 in the United States Bankruptcy Court for the District of Delaware. Vlasic’s Second Amended Joint Plan of Distribution

16

		under Chapter 11 (the Plan) was confirmed by an order of the Bankruptcy Court dated November 16, 2001, and became effective on or about November 29, 2001. The Plan provides for the assignment of various causes of action allegedly belonging to the Vlasic estates, including claims against the company allegedly arising from the spinoff, to VFB L.L.C., a limited liability company (VFB) whose membership interests are to be distributed under the Plan to Vlasic’s general unsecured creditors.
		On February 19, 2002, VFB commenced a lawsuit against the company and several of its subsidiaries in the United States District Court for the District of Delaware alleging, among other things, fraudulent conveyance, illegal dividends and breaches of fiduciary duty by Vlasic directors alleged to be under the company’s control. The lawsuit seeks to hold the company liable in an amount necessary to satisfy all unpaid claims against Vlasic (which VFB estimates in the amended complaint to be $200), plus unspecified exemplary and punitive damages. While the ultimate disposition of complex litigation is inherently difficult to assess, the company believes the action is without merit and is defending the case vigorously.
		The company received an Examination Report from the Internal Revenue Service on December 23, 2002, which included a challenge to the treatment of gains and interest deductions claimed in the company’s fiscal 1995 federal income tax return, relating to transactions involving government securities. If the proposed adjustment were upheld, it would require the company to pay a net amount of approximately $100 in taxes, accumulated interest as of December 23, 2002, and penalties. Interest will continue to accrue until the matter is resolved. The company believes these transactions were properly reported on its federal income tax return in accordance with applicable tax laws and regulations in effect during the period involved and is challenging these adjustments vigorously. While the outcome of proceedings of this type cannot be predicted with certainty, the company believes that the ultimate outcome of this matter will not have a material impact on the consolidated financial condition or results of operation of the company.
(k)		Guarantees
		In November 2002, FASB Interpretation No. 45 (FIN 45) “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” was issued. FIN 45 clarifies the requirements relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The initial recognition and measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.
		The company guarantees approximately 1,300 bank loans made to Pepperidge Farm independent sales distributors by third party financial institutions for the purchase of distribution routes. The maximum potential amount of future

17

		payments the company could be required to make under the guarantees is approximately $95. The company’s guarantees are indirectly secured by the distribution routes. The company does not believe it is probable that it will be required to make guarantee payments as a result of defaults on the bank loans guaranteed. Prior to the adoption of FIN 45, no amounts were recognized on the Consolidated Balance Sheets related to these guarantees. The amounts recognized as of October 31, 2004 and November 2, 2003 were not material.
(l)		Supplemental Cash Flow Information
		Other cash used in operating activities for the three month periods is comprised of the following:

(m)		Recently Issued Accounting Pronouncements
		In November 2004, SFAS No. 151 “Inventory Costs – an amendment of ARB No. 43, Chapter 4” was issued. SFAS No. 151 is the result of efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs and spoilage to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The company is in the process of evaluating the impact, if any, of SFAS No. 151.

18

ITEM 2.

CAMPBELL SOUP COMPANY CONSOLIDATED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Results of Operations

Overview

The company reported net earnings of $230 million for the first quarter ended October 31, 2004 versus $211 million in the comparable quarter a year ago. Earnings per share were $.56, compared to $.51 a year ago. (All earnings per share amounts included in Management’s Discussion and Analysis are presented on a diluted basis.) The increase in earnings was primarily due to the increase in sales and lower corporate expenses.

FIRST QUARTER

Sales

Net sales in the quarter increased 10% to $2.1 billion from $1.9 billion last year. The growth was attributed to a 9% increase from volume and mix, a 1% decrease due to higher revenue reductions from trade promotion and consumer coupon redemption programs and a 2% increase due to currency.

An analysis of net sales by reportable segment follows:

The 10% increase in sales from U.S. Soup, Sauces and Beverages was due to a 13% increase from volume and mix, a 2% decrease from price and sales allowances, and a 1% decrease attributable to higher revenue reductions from trade promotion and consumer coupon redemption programs. Ready-to-serve soup sales rose 18%, condensed soup sales increased 10% and broth sales grew 7%. The condensed soup sales growth was led primarily by Campbell’s Chicken Noodle and other kids-oriented varieties due to

19

successful marketing programs. The strong performance of ready-to-serve soup was led by Campbell’s Chunky soups, due to significantly increased promotional activity and higher levels of advertising. Sales of Campbell’s Chunky and Campbell’s Select soups in microwavable bowls increased, while Campbell’s Soup at Hand sales declined compared to the year-ago quarter in which the brand was heavily promoted and seven new varieties were introduced. Prego pasta sauce sales increased as category trends continued to improve. Pace Mexican sauce sales declined due to a class of trade mix shift. Sales of V8 vegetable juice declined versus last year, primarily due to a shift in timing for promotional activity. V8 Splash juice beverages and Campbell’s tomato juice also declined due to competitive activity. The sales performance benefited from the introduction of new Campbell’s Chunky chili during the quarter.

Baking and Snacking reported an 8% increase in sales due to a 5% increase from volume and mix, a 2% increase from price and sales allowances, a 3% decrease due to higher revenue reductions from trade promotion and consumer coupon redemption programs, a 3% increase from currency and a 1% increase from acquisitions. The favorable currency impact principally reflects the strengthening of the Australian dollar. Pepperidge Farm sales increased due to growth in fresh bakery, from expanded distribution of Pepperidge Farm bagels and English muffins, continued strength of Pepperidge Farm whole grain breads and the introduction in the fourth quarter of 2004 of Pepperidge Farm Carb Style breads and rolls. Pepperidge Farm Goldfish snack crackers and the introduction of three new varieties of premium pot pies also contributed to the sales growth. Arnott’s reported a sales increase from gains in savory biscuits and higher sales of Kettle branded salty snacks.

International Soup and Sauces reported an increase in sales of 8%. The sales increase was due to a 7% increase from the favorable impact of currency, a 3% increase from volume and mix, a 1% decrease from price and sales allowances and a 1% decrease due to higher revenue reductions from trade promotion and consumer coupon redemption programs. In Europe, sales declined as growth in Belgium and growth in the United Kingdom due to the successful launch of Batchelors Super Noodles to Go were offset by sales declines in Germany. Sales in Asia Pacific declined as growth in soup and beverage sales in Australia was more than offset by declines in soup sales in Asia. In Canada, soup and beverage sales increased, rebounding from a weak year-ago period.

The 12% increase in sales from Other was due to an 8% increase from volume and mix, a 3% increase from price and sales allowances, and a 1% increase from currency. Godiva Chocolatier sales increased, with double-digit growth in same store sales in North America driven by new product introductions and improved in-store merchandising. Away From Home sales increased primarily due to the growth of refrigerated soups, partially offset by lower sales of frozen soups.

Gross Margin

Gross margin, defined as net sales less cost of products sold, increased $45 million. As a percent of sales, gross margin decreased from 42.0% in 2004 to 40.5% in 2005. The percentage decrease was primarily due to increased trade promotion (approximately 0.8 percentage points) and the impact of cost inflation and other factors (approximately 2.3

20

percentage points), partially offset by productivity improvements (approximately 1.4 percentage points) and product mix (approximately 0.2 percentage points).

Marketing and Selling Expenses

Marketing and selling expenses increased 7% in 2005 as a result of higher advertising, consumer promotion, and currency translation. As a percent of sales, Marketing and selling expenses were 15% in both 2005 and 2004.

Administrative Expenses

Administrative expenses increased by $6 million, or 5%, primarily due to currency translation and expenses associated with the implementation of the distribution and logistics realignment in Australia, which was announced in the fourth quarter of 2004.

Other Expenses

Other expenses decreased by $8 million primarily due to lower adjustments to the carrying value of investments in affordable housing partnerships.

Operating Earnings

Segment operating earnings increased 4% from the prior year.

An analysis of operating earnings by reportable segment follows:

Earnings from U.S. Soup, Sauces and Beverages increased 4% primarily due to higher sales volumes, partially offset by increased trade promotion, advertising, and higher raw and packaging material costs.

Earnings from Baking and Snacking increased 10% due to higher net sales, the favorable impact of currency and productivity improvements, partially offset by commodity cost inflation and costs associated with the distribution and logistics realignment in Australia.

21

Earnings from International Soup and Sauces increased 4% due to the favorable impact of currency.

Earnings from Other were flat versus prior year, as growth in Away From Home was offset by an earnings decline at Godiva, reflecting increased marketing, including a new advertising campaign.

Corporate expenses decreased to $17 million from $28 million primarily due to lower expenses related to the carrying value of the company’s investment in affordable housing partnerships and lower costs related to ongoing litigation.

Nonoperating Items

Interest expense increased to $44 million from $43 million in the prior year, primarily due to higher interest rates.

The effective tax rate for the quarter was 31.8% for 2005, which is consistent with the full year expected rate and the full year 2004 rate of 31.7%. The effective rate for the year-ago quarter was 32.2%.

Restructuring Program

A restructuring charge of $32 million ($22 million after tax) was recorded in the fourth quarter 2004 for severance and employee benefit costs associated with a worldwide reduction in workforce and with the implementation of a distribution and logistics realignment in Australia. These programs are part of cost savings initiatives designed to improve the company’s operating margins and asset utilization. Approximately 400 positions were eliminated under the reduction in workforce program resulting in a restructuring charge of $23 million. The reductions represent the elimination of layers of management, elimination of redundant positions due to the realignment of operations in North America, and reorganization of the U.S. sales force. The majority of the terminations occurred in the fourth quarter of 2004. Annual pre-tax savings from the reduction are expected to be approximately $40 million beginning in 2005.

The distribution and logistics realignment in Australia represents converting a direct store delivery system to a central warehouse system. A restructuring charge of $9 million was recorded for this program. As a result of this program, over 200 positions will be eliminated due to the outsourcing of the infrastructure. The majority of the terminations will occur in 2005. Annual pre-tax benefits are expected to be approximately $10 - $15 million beginning in 2008.

The cash outflows related to these programs are not expected to have a material adverse effect on the company’s liquidity. See Note (h) to the Consolidated Financial Statements for further discussion of these programs.

22

Liquidity and Capital Resources

The company generated cash from operations of $64 million compared to $(66) million last year. The increase in cash flow reflects a lower seasonal increase in working capital, primarily due to changes in accounts payable and accrued liabilities.

Capital expenditures were $47 million compared to $23 million a year ago. Capital expenditures are expected to be approximately $380 million in 2005.

The company repurchased 165,000 shares in the quarter ended October 31, 2004 at a cost of $4 million. The company repurchased 178,000 shares in the quarter ended November 2, 2003 at a cost of $4 million. The company expects to repurchase sufficient shares over time to offset the impact of dilution from shares issued under the company’s stock compensation plans. See “Unregistered Sales of Equity Securities and Use of Proceeds” for more information.

At October 31, 2004, the company had approximately $892 million of notes payable due within one year and $33 million of standby letters of credit issued on behalf of the company. The company maintains $1.5 billion of committed revolving credit facilities, which remain unused at October 31, 2004, except for $8 million of standby letters of credit issued on behalf of the company. Another $25 million of standby letters of credit were issued on behalf of the company under a separate facility.

In September 2004, the company entered into a $500 million committed 364-day revolving credit facility, which replaced an existing $900 million 364-day facility that matured in September 2004. The 364-day revolving credit facility contains a one-year term-out feature. The company also entered into a $1 billion revolving credit facility that matures in September 2009, which replaced the existing $900 million revolving credit facility that was scheduled to mature in September 2006. These agreements support the company’s commercial paper program. The company is in compliance with the covenants contained in its revolving credit facilities and debt securities.

The company guarantees approximately 1,300 bank loans to Pepperidge Farm independent sales distributors by third party financial institutions used to purchase distribution routes. The maximum potential amount of the future payments the company could be required to make under the guarantees is approximately $95 million. The company’s guarantees are indirectly secured by the distribution routes. The company does not believe that it is probable that it will be required to make guarantee payments as a result of defaults on the bank loans guaranteed. See also Note (k) to the Consolidated Financial Statements for information on guarantees.

The company believes that foreseeable liquidity, including the resolution of the contingencies described in Note (j) to the Consolidated Financial Statements, and capital resource requirements are expected to be met through anticipated cash flows from operations, management of working capital, long-term borrowings under its shelf registration, and short-term borrowings, including commercial paper. The company believes that its sources of financing are adequate to meet its future liquidity and capital

23

resource requirements. The cost and terms of any future financing arrangements depend on the market conditions and the company’s financial position at that time.

Significant Accounting Estimates

The consolidated financial statements of the company are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. The significant accounting policies of the company are described in Note 1 to the Consolidated Financial Statements and the significant accounting estimates are described in Management’s Discussion and Analysis included in the 2004 Annual Report on Form 10-K. The impact of new accounting standards is discussed in the following section. There have been no other changes in the company’s accounting policies in the current period that had a material impact on the company’s consolidated financial condition or results of operation.

Recently Issued Accounting Pronouncements

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduced a prescription drug benefit under Medicare Part D and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position (FSP) FAS 106-1, the company elected in January to defer recognizing the effects of the Act on accounting for postretirement health care plans until the FASB guidance was finalized.

In May 2004, FASB issued FSP FAS 106-2, which provides accounting guidance to sponsors of postretirement health care plans that are impacted by the Act. The FSP is effective for interim or annual periods beginning after June 15, 2004. Although detailed regulations necessary to implement the Act have not yet been finalized, the company believes that certain drug benefits offered under postretirement health care plans will qualify for the subsidy under Medicare Part D. The effects of the subsidy were factored into the 2004 annual year-end valuation. The reduction in the benefit obligation attributable to past service cost was approximately $32 million and has been reflected as an actuarial gain. The reduction in benefit cost for 2005 related to the Act is approximately $5 million.

In November 2004, SFAS No. 151 “Inventory Costs – an amendment of ARB No. 43, Chapter 4” was issued. SFAS No. 151 is the result of efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs and spoilage to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The company is in the process of evaluating the impact, if any, of SFAS No. 151.

24

Recent Developments

On November 22, 2004, the company announced results for the first quarter 2005 and commented on the outlook for earnings per share for the full year.

Forward-Looking Statements

This quarterly report contains certain statements that reflect the company’s current expectations regarding future results of operations, economic performance, financial condition and achievements of the company. The company tries, wherever possible, to identify these forward-looking statements by using words such as “anticipate,” “believe,” “estimate,” “expect,” “will” and similar expressions. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements reflect the company’s current plans and expectations and are based on information currently available to it. They rely on a number of assumptions regarding future events and estimates which could be inaccurate and which are inherently subject to risks and uncertainties.

The company wishes to caution the reader that the following important factors and those important factors described in other Securities and Exchange Commission filings of the company, or in the company’s 2004 Annual Report on Form 10-K, could affect the company’s actual results and could cause such results to vary materially from those expressed in any forward-looking statements made by, or on behalf of, the company:

	•		the impact of strong competitive response to the company’s efforts to leverage its brand power with product innovation, promotional programs and new advertising, and of changes in consumer demand for the company’s products;
	•		the risks in the marketplace associated with trade and consumer acceptance of product improvements, shelving initiatives and new product introductions;
	•		the company’s ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume and product mix and the impact of increased marketing plans;
	•		the company’s ability to realize projected cost savings and benefits, including those contemplated by restructuring programs and other cost-savings initiatives;
	•		the company’s ability to successfully manage changes to its business processes, including selling, distribution, production capacity, information management systems and the integration of acquisitions;
	•		the increased significance of certain of the company’s key trade customers;
	•		the difficulty of predicting the pattern of inventory movements by the company’s trade customers and of predicting changes in the policies of its customers, such as changes in customer inventory levels and access to shelf space;
	•		the impact of fluctuations in the supply and cost of raw materials;

25

	•		the uncertainties of litigation described from time to time in the company’s Securities and Exchange Commission filings;
	•		the impact of unforeseen economic changes in currency exchange rates, tax rates, interest rates, equity markets, inflation rates, recession and other external factors over which the company has no control; and
	•		the impact of unforeseen business disruptions in one or more of the company’s markets due to political instability, civil disobedience, armed hostilities or other calamities.

This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact the company’s outlook. The company disclaims any obligation or intent to update any forward-looking statements made by the company in order to reflect new information, events or circumstances after the date they are made.

26

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding the company’s exposure to certain market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the 2004 Annual Report on Form 10-K. There have been no significant changes in the company’s portfolio of financial instruments or market risk exposures from the fiscal 2004 year-end except as follows:

In August 2004, a pay fixed SEK/receive fixed USD swap with a notional value of $47 million matured. In addition, a pay variable SEK/receive variable USD swap with a notional value of $18 million matured. The company entered into a pay variable SEK/ receive variable USD swap with a notional value of $32 million which matures in 2008. The company also entered into a pay fixed SEK/receive fixed USD swap with a notional value of $32 million which matures in 2010.

27

ITEM 4. CONTROLS AND PROCEDURES

a.		Evaluation of Disclosure Controls and Procedures
		The company, under the supervision and with the participation of its management, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of October 31, 2004 (the “Evaluation Date”). Based on such evaluation, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer have concluded that, as of the Evaluation Date, the company’s disclosure controls and procedures are effective, and are reasonably designed to ensure that all material information relating to the company (including its consolidated subsidiaries) required to be included in the company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
b.		Changes in Internal Controls
		During the quarter ended October 31, 2004, there were no changes in the company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, such internal control over financial reporting, except that in August 2004, the company implemented the final phase of a new customer promotion spending management process. The new process uses an integrated software application system for planning, funding, paying and analyzing promotional programs for the U.S. Soup, Sauces and Beverages business. The final phase focused on customer payment processing and analysis of promotional activity.

28

PART II

ITEM 1. LEGAL PROCEEDINGS

As previously reported, on March 30, 1998, the company effected a spinoff of several of its non-core businesses to Vlasic Foods International Inc. (“VFI”). VFI and several of its affiliates (collectively, “Vlasic”) commenced cases under Chapter 11 of the Bankruptcy Code on January 29, 2001 in the United States Bankruptcy Court for the District of Delaware. Vlasic’s Second Amended Joint Plan of Distribution under Chapter 11 (the “Plan”) was confirmed by an order of the Bankruptcy Court dated November 16, 2001, and became effective on or about November 29, 2001. The Plan provides for the assignment of various causes of action allegedly belonging to the Vlasic estates, including claims against the company allegedly arising from the spinoff, to VFB L.L.C., a limited liability company (“VFB”) whose membership interests are to be distributed under the Plan to Vlasic’s general unsecured creditors.

On February 19, 2002, VFB commenced a lawsuit against the company and several of its subsidiaries in the United States District Court for the District of Delaware alleging, among other things, fraudulent conveyance, illegal dividends and breaches of fiduciary duty by Vlasic directors alleged to be under the company’s control. The lawsuit seeks to hold the company liable in an amount necessary to satisfy all unpaid claims against Vlasic (which VFB estimates in the amended complaint to be $200 million), plus unspecified exemplary and punitive damages. While the ultimate disposition of complex litigation is inherently difficult to assess, the company believes the action is without merit and is defending the case vigorously.

As previously reported, the company received an Examination Report from the Internal Revenue Service on December 23, 2002, which included a challenge to the treatment of gains and interest deductions claimed in the company’s fiscal 1995 federal income tax return, relating to transactions involving government securities. If the proposed adjustment were upheld, it would require the company to pay a net amount of approximately $100 million in taxes, accumulated interest to December 23, 2002, and penalties. Interest will continue to accrue until the matter is resolved. The company believes these transactions were properly reported on its federal income tax return in accordance with applicable tax laws and regulations in effect during the period involved and is challenging these adjustments vigorously. While the outcome of proceedings of this type cannot be predicted with certainty, the company believes that the ultimate outcome of this matter will not have a material impact on the consolidated financial condition or results of operation of the company.

As previously reported, on April 22, 2004, the company entered into an Administrative Consent Order (“ACO”) with the New Jersey Department of Environmental Protection (“NJDEP”) to settle alleged violations of the New Jersey Air Pollution Control Act related to certain air emissions from the company’s South Plainfield, New Jersey flavoring and spice mix plant. On September 30, 2004, the NJDEP informed the company that the ACO had been terminated following the company’s completion of its

29

obligations under the ACO. The ACO did not constitute an admission of liability by the company.

As previously reported, on July 15, 2003, Pepperidge Farm, Incorporated, an indirect wholly-owned subsidiary of the company, made a submission to the United States Environmental Protection Agency (“EPA”) relating to its use and replacement of certain appliances containing ozone-depleting refrigerants. The submission was made pursuant to the terms of the Ozone-Depleting Substance Emission Reduction Bakery Partnership Agreement (the “EPA Agreement”) entered into by and between Pepperidge Farm and the EPA. Pepperidge Farm executed the EPA Agreement in April 2002 as part of a voluntary EPA-sponsored program relating to the reduction of ozone-depleting refrigerants used in the bakery industry. As a result of the EPA Agreement, as of October 31, 2004, Pepperidge Farm has incurred costs of approximately $4.75 million relating to the evaluation and replacement of certain of its refrigerant appliances. Of this amount, $4 million was incurred in fiscal 2003; the remainder was incurred in fiscal 2004. If the submission is approved by the EPA, in addition to the expenditures previously made, Pepperidge Farm will be required to pay a penalty in the amount of approximately $370 thousand. The company does not expect that the cost of complying with the EPA Agreement will have a material impact on the consolidated financial condition or results of operation of the company.

On August 12, 2004, the company received a Finding and Notice of Violation (“NOV”) from the EPA alleging air emissions from the company’s Stockton, California tomato processing plant violated federal Clean Air Act provisions. On September 27, 2004, the company received a Complaint and Notice of Opportunity for Hearing (“Complaint”) from the EPA regarding the same matter. The NOV and the Complaint both allege that nitrogen oxide emissions from the Stockton plant exceeded allowable levels over a five (5) day period in 2002. The Complaint also requests the company be assessed a penalty, which the Clean Air Act generally limits to $200 thousand since the Complaint is an administrative action. As of October 31, 2004, the company incurred costs of approximately $20 thousand related to the evaluation and defense of this matter. The company does not expect that the potential penalty will have a material impact on the consolidated financial condition or results of operation of the company.

30

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

(1)		The company repurchases shares of capital stock to offset the dilutive impact to existing shareowners of issuances under the company’s stock compensation plans. The company also repurchases shares of capital stock that are owned and tendered by employees to satisfy tax withholding obligations on the vesting of restricted shares. All share repurchases were made in open-market transactions, except for the shares owned and tendered by employees to satisfy tax withholding obligations (which, unless otherwise indicated, were purchased at the closing price of the company’s shares on the date of tender). None of these transactions were made pursuant to a publicly announced repurchase plan or program.
(2)		Average price paid per share is calculated on a settlement basis and excludes commission.
(3)		Represents shares owned and tendered by employees to satisfy tax withholding requirements on the vesting of restricted shares.
(4)		Includes 824 shares owned and tendered by employees at an average price per share of $26.29 to satisfy tax withholding requirements on the vesting of restricted shares.
(5)		Includes 1,071 shares owned and tendered by employees at an average price per share of $26.35 to satisfy tax withholding requirements on the vesting of restricted shares.

31

ITEM 6. EXHIBITS

32

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

33

INDEX TO EXHIBITS

Exhibits

34