<PAGE>   1
                                                                    Exhibit 13.1

    PAGES 9 THROUGH 47 OF VLASIC'S 1999 ANNUAL REPORT TO SHAREOWNERS FOR THE
                        FISCAL YEAR ENDED AUGUST 1, 1999
<PAGE>   2
FINANCIAL TABLE OF CONTENTS                                        [VLASIC
                                                             FOODS INTERNATIONAL
                                                                    LOGO]
--------------------------------------------------------------------------------
<TABLE>
<S>                                                                  <C>
Management's Discussion and Analysis of Results of
     Operations and Financial Condition ................             10

Consolidated Statements of Earnings ....................             24

Consolidated Balance Sheets ............................             25

Consolidated Statements of Cash Flows ..................             26

Consolidated Statements of Shareowners' Equity (Deficit)             27

Notes to Consolidated Financial Statements .............             28

Selected Financial Data ................................             45

Report of Management ...................................             46

Report of Independent Accountants ......................             47
</TABLE>





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<PAGE>   3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                             [VLASIC
RESULTS OF OPERATIONS AND FINANCIAL                          FOODS INTERNATIONAL
CONDITION                                                            LOGO]
--------------------------------------------------------------------------------
INTRODUCTION

     On March 30, 1998, Campbell Soup Company distributed one share of Vlasic
common stock to shareowners of Campbell for every ten shares of Campbell capital
stock held at the record date in a tax-free distribution (the "spin-off"). At
the time of the spin-off, we began operations as a separate independent
publicly-owned company. In connection with the spin-off, Campbell contributed
the following businesses: Swanson frozen foods in the United States and Canada,
Vlasic pickles, Open Pit barbecue sauce, Campbell mushrooms in the United
States, Freshbake and non-branded frozen foods and SonA and Rowats pickles and
beans in the United Kingdom, Swift and non-branded processed beef in Argentina
and Kattus gourmet foods distribution in Germany. Our historical financial
statements at dates and for periods ended prior to the date of the spin-off
present the combined historical financial position, results of operations and
cash flows of these businesses. We sold the Kattus business in January 1999 and
sold our Argentine beef business, Swift-Armour, in July 1999. Prior to the
spin-off, the businesses contributed by Campbell had been separately managed
within multiple Campbell business divisions.

     In connection with the spin-off, we incurred debt of approximately $560
million under a five-year $750 million unsecured revolving credit facility,
consisting of $500 million of indebtedness assumed from Campbell and $60 million
incurred to repay certain intercompany payables representing advances from
Campbell to subsidiaries of Vlasic. On a historical basis, we were not allocated
any amount of Campbell's debt and our historical financial statements prior to
the spin-off do not reflect the interest expense associated with the debt
incurred in connection with the spin-off. Therefore, we believe that pro forma
earnings, reflecting pro forma interest expense as if the spin-off had occurred
at the beginning of fiscal 1998, provide more meaningful comparisons than our
historical financial statements.

     Our results have also been affected to a significant extent by a number of
unusual and special, cash and non-cash charges, including: (a) restructuring
charges associated with the implementation of our strategies of reducing costs,
improving operational efficiencies and divesting non-strategic assets; (b)
duplicative expenses arising from transition service charges from Campbell for
certain services (such as payroll, employee benefits administration, information
technology, research and development, customer service and accounting services)
which overlapped our internal expenses until the completion of our
infrastructure; (c) costs incurred by us for the development of an independent
information technology structure; (d) losses on the divestiture of the Kattus
business and the divestiture of Swift-Armour in Argentina; and (e) tax on
repatriation of foreign dividends.

     For periods prior to the spin-off, our historical financial statements
reflect expenses allocated by Campbell for selling, general and administrative
services (including finance, legal, information technology, research and
development, benefits, facilities and shared sales and distribution support).
Such expenses were allocated based on net sales, utilization or other methods.
The allocated expenses for these services are not necessarily indicative of the
expenses that we would have incurred had we been a separate, independent entity
that managed these functions. As described above, Campbell had been providing
certain of these services to us on a transitional basis after the spin-off. We
have established a new corporate infrastructure to operate on a stand-alone
basis, and as of April 1999 we had substantially completed all of the operating
and management systems and capabilities necessary to handle internally the
services that had previously been provided by Campbell.

     The discussion below summarizes the significant factors affecting our
consolidated operating results, financial condition and liquidity for the fiscal
years ended August 1, 1999, August 2, 1998 and August 3, 1997. The results of
operations for the periods prior to the spin-off may not necessarily be
indicative of the results of operations that would have occurred if we had
operated as an independent company prior to the spin-off and are not necessarily
indicative of our future performance. The following discussion of results of
operations and liquidity and capital resources should be read in conjunction
with our historical consolidated financial statements and the related
accompanying notes. Unless otherwise noted, fiscal years in the discussion below
refer to our fiscal years ended on the Sunday closest to July 31. There were 52
weeks in fiscal 1999 and fiscal 1998 and 53 weeks in fiscal 1997.



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<PAGE>   4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                            [VLASIC
RESULTS OF OPERATIONS AND FINANCIAL                          FOODS INTERNATIONAL
CONDITION (continued)                                                LOGO]
--------------------------------------------------------------------------------


GOING CONCERN MATTERS [SEE "EXPLANATORY NOTE" ON PAGE 2 OF OUR AMENDED ANNUAL
REPORT ON FORM 10K/A]

     The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As discussed in Note 22, we have
significant borrowings which require, among other things, compliance with
certain financial ratios, specifically a debt/EBITDA ratio and a fixed charge
coverage ratio, on a quarterly basis. As a result of operating losses incurred
during the quarter ended January 30, 2000, we were not in compliance with the
financial ratio covenants under our senior credit facility; however, we
requested and received a waiver through February 29, 2000. We have received a
further waiver of these financial ratio covenants from our lenders through June
20, 2000 in consideration for the payment of a fee and an increase in interest
rates. The waiver required delivery of and compliance with a cash budget and
established a minimum EBITDA test to be met as of April 30, 2000. If the minimum
EBITDA test is not met, the waiver will expire on May 31, 2000. Additionally, if
the cash budget is not met, we will be unable to borrow under the senior credit
facility. The waiver also required that the senior credit facility be secured by
liens on substantially all of our real property in the United States on or
before April 30, 2000.

     We fully expect to be in compliance with the minimum EBITDA test and the
other terms and conditions of the waiver and we do not anticipate needing any
additional borrowings through June 20, 2000.

     We are exploring strategic opportunities including, but not limited to,
potential divestitures, joint manufacturing or marketing ventures, acquisitions,
a merger, a recapitalization or other actions. The investment banking firm of
Lazard Freres & Co. has been hired to assist with this strategic review and to
formulate proposed plans and actions for the consideration of our Board of
Directors. Because Lazard Freres & Co. is currently conducting its review and
formulation of proposed plans and actions, no assessment can be made of the
likelihood that such plans and actions can be effectively implemented. Moreover,
regardless of the outcome of the strategic review, an extension of the existing
waiver, a new waiver covering certain terms and conditions of the senior credit
facility, an amendment of the senior credit facility, a de novo senior credit
facility or some combination of the above will be required. Without such an
action, we will be in default on June 20, 2000. Although no assurances can be
given, we expect that the plans and actions proposed by the strategic review and
to be acted upon by our Board of Directors will enable us to successfully
fulfill such requirement and that we will be able to effectively implement them.
In particular, we anticipate being able to negotiate with our present senior
credit bank syndicate, as is necessary, for an extension of the existing waiver
or for a new waiver, before the current waiver expires on June 20, 2000, so as
to preclude any acceleration of our indebtedness. Our continuation as a going
concern is dependent upon our ability to successfully establish the necessary
financing arrangements and to comply with the terms thereof.

     A breach of any of the terms and conditions of the waiver, or subsequent
breaches of the financial covenants under the senior credit facility could
result in acceleration of our indebtedness, in which case the debt would become
immediately due and payable. Based upon our current projections, we do not
believe we will comply with the existing financial covenants unless they are
modified, as they have been in the waiver. If there is no modification of the
existing financial covenants, we may not be able to repay our debt or borrow
sufficient funds to refinance it. Even if new financing is available, it may not
be on terms that are acceptable to us. We have, however, received such
modifications in the past in the form of waivers and an amendment to our senior
credit facility.

     Our ability to operate as a going concern is dependent on our ability to
successfully negotiate with our senior credit bank syndicate to preclude
acceleration after June 20, 2000. However, although no assurances can be given,
we remain confident that we will be able to continue operating as a going
concern.

     The discussion above should be considered when reading the Liquidity
section on pages 19 and 20 of this Amended Annual Report.



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<PAGE>   5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                            [VLASIC
RESULTS OF OPERATIONS AND FINANCIAL                          FOODS INTERNATIONAL
CONDITION (continued)                                                LOGO]
--------------------------------------------------------------------------------

RESULTS OF OPERATIONS

OVERVIEW

     Net sales for the fiscal year ended August 1,1999 were $1.3 billion, a
decrease of 3.6% from net sales of $1.4 billion for the fiscal year ended August
2, 1998. Excluding sales from the divested Kattus and Swift-Armour businesses,
net sales were even in fiscal 1999 compared to fiscal 1998.

     Net loss for fiscal 1999 was $(126.3) million compared to $(6.4) million
for fiscal 1998. Included within this fiscal 1999 net loss were the following
special items and one-time costs:

     -    Divestitures. The $137.7 million non-cash loss associated with the
          divestiture of our Swift-Armour Argentine beef business partially
          offset by the $3.2 million gain on the divestiture of our Kattus
          business ($14.4 million impairment loss recorded in fiscal 1998);

     -    Restructuring. The third quarter fiscal 1999 restructuring charge of
          $3.0 million pertaining to the closure of the Dublin, Georgia mushroom
          farm and the fourth quarter fiscal 1999 restructuring charge of $1.0
          million related to administrative staff reductions in the United
          Kingdom, partially offset by a $3.2 million benefit (recognized in the
          third quarter of fiscal 1999) from completion of the fiscal 1998
          restructuring program at amounts less than originally planned;

     -    Dividend Repatriation. The third quarter fiscal 1999 income tax charge
          of $7.0 million for the impact of the repatriation of foreign
          dividends; and

     -    One-Time Costs. One-time costs of $7.0 million ($4.4 million after
          tax) for duplicative administrative transition costs and costs related
          to the development of our information technology infrastructure.

     The historical financial statements for fiscal 1998 reflected minimal
interest expense prior to the spin-off, as there was no allocation of interest
expense on Campbell's net investment. Subsequent to the spin-off, interest
expense included interest on the debt assumed from Campbell as well as the debt
related to the increase in working capital. We believe that pro forma earnings,
reflecting pro forma interest expense for the spin-off, provide more meaningful
comparisons. Assuming that the spin-off had been consummated as of the beginning
of fiscal 1998, pro forma net interest expense would have been approximately
$38.6 million for fiscal 1998.

     Excluding the special items, one-time costs and tax impact of repatriated
dividends described above, net earnings for fiscal 1999 were $20.4 million, or
$0.45 per diluted share. On a comparable basis, excluding special items of $42.5
million ($36.2 million net of tax) and one-time costs of $17.5 million ($11.2
million net of tax) recorded during fiscal 1998, pro forma net earnings, as
adjusted for interest expense, were $23.7 million, or $0.51 per diluted share.

     Net sales for the fiscal year ended August 2, 1998 were $1.4 billion, a
decrease of 10.0% from net sales of $1.5 billion for the fiscal year ended
August 3, 1997 (or down 8.3% from fiscal 1997 on a comparable 52 week basis).
The net loss of $(6.4) million for fiscal 1998 represented an $84.5 million
decrease in net earnings from fiscal 1997. The fiscal 1998 net loss included:

     -    Divestiture. The fourth quarter fiscal 1998 special charge of $14.4
          million (or $0.32 per share) for the impairment loss on assets of the
          Kattus business in Germany (with no associated tax benefit);

     -    Restructuring. The third quarter fiscal 1998 restructuring charge of
          $28.1 million ($21.8 million after tax or $0.48 per share); and

     -    One-Time Costs. Several unusual and transition charges totaling $17.5
          million ($11.2 million after tax or $0.24 per share), including
          start-up costs associated with new technology at our Vlasic pickle
          production facilities; marketing costs in the Kattus business relating
          to the stimulation of demand that was required as a result of
          significant disruptions caused by information systems implementation
          issues during 1996; costs incurred in the development of an
          independent information technology capability; and internal expenses
          arising from transition service charges from Campbell for certain
          services which overlapped internal expenses incurred by us as we
          completed our infrastructure.


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<PAGE>   6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF        [VLASIC FOODS INTERNATIONAL LOGO]
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF EARNINGS

     The following table sets forth certain items in our consolidated statements
of earnings as percentages of our net sales for the fiscal years indicated:


<TABLE>
<CAPTION>
                                                 1999          1998         1997
                                                 ----          ----         ----
<S>                                              <C>          <C>          <C>
Net sales ...............................        100.0%       100.0%       100.0%
                                                 -----        -----        -----
Cost of products sold ...................         70.6%        72.0%        69.5%
Marketing and selling expenses ..........         18.7%        18.1%        17.7%
Administrative expenses .................          4.8%         4.7%         3.5%
Research and development expenses .......          0.6%         0.6%         0.6%
Other expense (income) ..................          0.1%        (0.2%)        0.2%
Special items ...........................         10.3%         3.1%         0.8%
                                                 -----        -----        -----
   Total costs and expenses .............        105.1%        98.3%        92.3%
                                                 -----        -----        -----
Earnings (loss) before interest and taxes         (5.1%)        1.7%         7.7%
                                                 =====        =====        =====
</TABLE>

FISCAL YEAR ENDED AUGUST 1, 1999 COMPARED TO FISCAL YEAR ENDED AUGUST 2, 1998

     NET SALES. Net sales of $1.3 billion in fiscal 1999 decreased 3.6% from net
sales of $1.4 billion for fiscal 1998. Excluding sales from the divested Kattus
and Swift-Armour businesses, net sales were even in fiscal 1999 compared to
fiscal 1998. Our core U.S. Swanson and Vlasic businesses experienced an increase
in net sales of approximately 2.2% and 7.4%, respectively, from the prior year,
while our international business in the United Kingdom suffered an overall
decline in net sales year on year.

     COST OF PRODUCTS SOLD. Cost of products sold as a percentage of net sales
decreased to 70.6% in fiscal 1999 compared to 72.0% in fiscal 1998 resulting
primarily from lower cattle costs in Argentina in fiscal 1999 and cost savings
in the Swanson and Vlasic plants, which were partially offset by poor yields and
higher costs at our mushroom farms.

     MARKETING AND SELLING EXPENSES. Marketing and selling expenses as a
percentage of net sales increased in fiscal 1999 to 18.7% from 18.1% in fiscal
1998. This increase was predominately caused by an increase in advertising and
greater trade spending resulting from heavier promotions and new product
introductions such as Vlasic Hamburger Stackers and the relaunch of the Swanson
frozen fried chicken line. Partially offsetting this increase was lower selling
costs in fiscal 1999 compared to fiscal 1998.

     ADMINISTRATIVE EXPENSES. Administrative expenses as a percentage of net
sales increased slightly in fiscal 1999 to 4.8% from 4.7% in fiscal 1998.
Increased expenses as we reached a completed infrastructure staffing level were
mostly offset by a significant reduction in incentive based programs.

     RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses as a
percentage of net sales remained unchanged in fiscal 1999 compared to fiscal
1998.

     OTHER EXPENSE (INCOME). Other expense in fiscal 1999 is principally
goodwill amortization. Other income in fiscal 1998 included a gain on a fire
insurance settlement, which was partially offset by expenses pertaining to a
Campbell-related long term incentive program that ended in fiscal 1998.



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<PAGE>   7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF        [VLASIC FOODS INTERNATIONAL LOGO]
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
--------------------------------------------------------------------------------
     SPECIAL ITEMS. During fiscal 1999, special items of $135.3 million were
recorded which included the following:

     -    the $137.7 million non-cash loss associated with the divestiture of
          our Swift-Armour Argentine beef business partially offset by the $3.2
          million gain on the divestiture of our Kattus business; and

     -    the third quarter fiscal 1999 restructuring charge of $3.0 million
          pertaining to the closure of the Dublin, Georgia mushroom farm and the
          fourth quarter fiscal 1999 restructuring charge of $1.0 million
          related to administrative staff reductions in the United Kingdom,
          partially offset by a $3.2 million benefit (recognized in the third
          quarter of fiscal 1999) from completion of the fiscal 1998
          restructuring program at amounts less than originally planned.

     During fiscal 1998, special items of $42.5 million were recorded which
included the third quarter fiscal 1998 restructuring charges of $28.1 million
($21.8 million after tax) and the fourth quarter fiscal 1998 impairment loss of
$14.4 million related to the Kattus business. Special items are more fully
described below under the heading "Special Items."


     EARNINGS (LOSS) BEFORE INTEREST AND TAXES. The loss before interest and
taxes in fiscal 1999 was $(66.7) million compared to earnings before interest
and taxes of $22.6 million in fiscal 1998. Excluding the fiscal 1999 and 1998
special items discussed above, earnings before interest and taxes were $68.6
million, or 5.2% of net sales, in fiscal 1999, compared to earnings before
interest and taxes of $65.1 million, or 4.8% of net sales in fiscal 1998. The
net increase from fiscal 1998 was driven by:


     -    improvements in Argentine cattle costs experienced in fiscal 1999
          compared to fiscal 1998;

     -    lower incentive based expenses in fiscal 1999; and

     -    reduction of the one-time costs from $17.5 million incurred in fiscal
          1998 to $7.0 million in fiscal 1999.

     These increases were partially offset by:

     -    increased marketing and advertising costs in fiscal 1999; and

     -    poor yields, higher costs and reduced contract sales at our mushroom
          farms.

     INTEREST EXPENSE, NET. Interest expense, net, for fiscal 1999 was $43.8
million. The historical financial statements for fiscal 1998 reflected minimal
interest expense prior to the spin-off as there was no allocation of interest
expense on Campbell's net investment. Subsequent to the spin-off, interest
expense included interest on the $500 million of debt assumed from Campbell as
well as the $60 million incurred to repay certain intercompany payables
representing advances from Campbell to Vlasic's subsidiaries. We believe that
pro forma earnings, reflecting pro forma interest expense for the spin-off,
provide more meaningful comparisons. Assuming that the spin-off had been
consummated as of the beginning of fiscal 1998, pro forma net interest expense
would have been approximately $38.6 million for fiscal 1998. We incurred higher
interest expense in fiscal 1999 as a result of certain costs related to our
recently amended bank facility, higher average debt balance and higher interest
rates.

     TAXES ON EARNINGS. Included in taxes on earnings for fiscal 1999 was $7.0
million for the impact of the repatriation of foreign dividends. Excluding the
impact of our special items and the $7.0 million tax charge related to dividend
repatriation, the effective tax rate was 35.5% in fiscal 1999. For fiscal year
1998, we had an effective tax rate of 41.5% excluding special items. The fiscal
1999 tax rate was lower than the fiscal 1998 tax rate principally due to losses
in Germany for which no tax benefit was available in fiscal 1998.

     CUMULATIVE EFFECT OF ACCOUNTING CHANGE. In the second quarter of fiscal
1998, we recorded the cumulative effect of an accounting change of a charge of
$0.6 million, after tax, for the adoption of the Emerging Issues Task Force
(EITF) Issue 97-13, "Accounting for Costs Incurred in Connection with a
Consulting Contract that Combines Business Process Reengineering and Information
Technology Transformation."



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<PAGE>   8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)                          [VLASIC FOODS INTERNATIONAL LOGO]
--------------------------------------------------------------------------------
FISCAL YEAR ENDED AUGUST 2, 1998 COMPARED TO FISCAL YEAR ENDED AUGUST 3, 1997

     NET SALES. Net sales of $1.4 billion in fiscal 1998 decreased 10.0% from
net sales of $1.5 billion for fiscal 1997 (down 8.3% from fiscal 1997 on a
comparable 52 week basis). The sales decrease was primarily due to lower sales
in the Swanson U.S. frozen food and Vlasic pickle businesses. The decreased
volumes were driven about equally by a reduction of retail inventories in
connection with our efforts to align shipments with consumption and by reduced
consumption driven by a lack of product innovation and advertising support.
Declines in exports from Swift-Armour as well as the United Kingdom frozen and
the Kattus businesses contributed to the decline in net sales.

     COST OF PRODUCTS SOLD. Cost of products sold as a percentage of net sales
increased by 2.5 points to 72.0% in fiscal 1998, up from 69.5% in fiscal 1997,
as a result of the highest cattle costs in over a decade in Argentina and
start-up costs associated with new technology at the pickle plants and lower
absorption of fixed costs, offset by benefits of continuing manufacturing
efficiency programs.

     MARKETING AND SELLING EXPENSES. Marketing and selling expenses as a
percentage of net sales increased in fiscal 1998 to 18.1% from 17.7% in fiscal
1997, principally due to increased selling expense for Swanson U.S. frozen food.

     ADMINISTRATIVE EXPENSES. Administrative expenses as a percentage of net
sales increased to 4.7% in fiscal 1998 from 3.5% in fiscal 1997, as a result of
duplicative transition related costs and initial costs related to the
development of our information technology infrastructure.

     RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses as a
percentage of net sales were unchanged in fiscal 1998 compared to fiscal 1997.

     OTHER EXPENSE (INCOME). Other income in fiscal 1998 was $2.9 million
compared to $2.4 million of other expense in fiscal 1997. The variance was
principally attributable to reduced expense associated with the Campbell
long-term incentive plan. Fiscal 1998 was the last year which included charges
from this plan.

     SPECIAL ITEMS. Restructuring charges and impairment losses of $42.5 million
($36.2 million after tax) were recorded in fiscal 1998 and restructuring charges
of $12.6 million ($7.8 million after tax) were recorded in fiscal 1997. These
charges are described below under "Special Items."

     EARNINGS (LOSS) BEFORE INTEREST AND TAXES. Earnings before interest and
taxes as a percentage of net sales were 1.7% in fiscal 1998 compared to 7.7% in
fiscal 1997. Excluding the restructuring charges and the impairment loss
described below under "Special Items," earnings before interest and taxes would
have been 4.8% of net sales in fiscal 1998 compared to 8.6% in fiscal 1997. The
decrease was primarily driven by:

     -    lower consumption linked to lack of innovation and advertising
          support;

     -    the alignment of shipments with consumption;

     -    higher cattle costs in Argentina;

     -    fiscal year 1998 operating losses of $6.7 million in the Kattus
          business; and

     -    several unusual and transition charges totaling $17.5 million ($11.2
          million after tax).

     The unusual and transition charges described above included $7.3 million of
start-up costs associated with new technology at our Vlasic pickle production
facilities; $1.0 million of marketing costs in the Kattus business relating to
the stimulation of demand that was required as a result of significant
disruptions caused by an information systems conversion during 1996; and $9.2
million for costs incurred in the development of an independent information
technology capability and duplicative expenses arising from transition service
charges from Campbell for certain services (such as payroll, employee benefits
administration, information technology, research and development, customer
service and accounting services) which overlapped expenses incurred by us as we
completed our infrastructure.



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<PAGE>   9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)                          [VLASIC FOODS INTERNATIONAL LOGO]
--------------------------------------------------------------------------------
     INTEREST EXPENSE. Our historical financial statements reflected minimal
interest expense prior to the spin-off as there was no allocation of interest
expense on Campbell's net investment. Subsequent to the spin-off, interest
expense included interest on the $500 million of debt assumed from Campbell as
well as the $60 million incurred to repay certain intercompany payables
representing advances from Campbell to Vlasic's subsidiaries. We believe that
pro forma earnings, reflecting pro forma interest expense for the spin-off,
provide more meaningful comparisons. Assuming that the spin-off had been
consummated as of the beginning of fiscal 1997, pro forma net interest expense
would have been approximately $38.6 million for fiscal 1998 and approximately
$40.1 million for fiscal 1997.

     TAXES ON EARNINGS. Excluding the restructuring charges and impairment loss
described below under "Special Items," the effective tax rates would have been
41.5% and 33.0% for fiscal 1998 and fiscal 1997, respectively. The higher tax
rate in fiscal 1998 was driven by losses in Germany which generated no tax
benefit and lower earnings in Argentina where the effective tax rates were
reduced by export rebates and other tax incentives which lower taxable income.

     CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Fiscal 1998 was also impacted by
the second quarter fiscal 1998 cumulative effect of an accounting change of a
charge of $0.6 million after tax for the adoption of EITF Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation."


SPECIAL ITEMS

     A special charge of $1 million was recorded in the fourth quarter of fiscal
1999 associated with administrative staff reductions in the United Kingdom. This
restructuring program was designed to align fixed employee costs with the needs
of the SonA and Freshbake businesses. Approximately 40 positions will be
eliminated as part of this program. The $1 million charge represents severance
and employee benefit costs that will be paid in cash. This restructuring program
is expected to be completed by the third quarter of fiscal 2000.

     A special charge of $3 million was recorded in the third quarter of fiscal
1999 associated with the closure of the Dublin, Georgia mushroom farm. The farm
was identified for closure due to the high costs of production and mechanical
harvesting methodology that prevents it from producing high quality retail
mushrooms. As part of the closure, approximately 70 people were terminated. The
assets were written down to the estimated fair value less costs to sell. The $3
million cost of the program included $2.4 million of non-cash charges for losses
on the disposition of plant assets and $0.6 million principally related to
severance and employee benefit costs that will be paid in cash. This
restructuring program is expected to be completed by the third quarter of fiscal
2000.

     As part of our portfolio reconfiguration program, during the third quarter
of fiscal 1999 we entered into a divestiture agreement to sell our Argentine
beef business, Swift-Armour. The sale closed in July 1999. The sale price was
$85 million and the net proceeds were used to repay a portion of the
indebtedness outstanding under our senior credit facility. The net charge to
fiscal 1999 earnings related to this divestiture was $137.7 million. During the
third quarter of fiscal 1999 we recorded as a special item a $140.0 million
charge to reduce the carrying value of the Argentine beef assets held for sale
to their fair value based on the estimated sale price less the estimated costs
to sell. Since the assets were written-down to their estimated fair value and in
accordance with accounting standards, we excluded $2.7 million of depreciation
and amortization expense from fourth quarter fiscal 1999 earnings. Additionally
in the fourth quarter of fiscal 1999, we recognized a $2.3 million benefit on
the final closing of the sale as a Special item in the Statement of Earnings.
The SAFRA trademark and equipment acquired during the second quarter of fiscal
1998 were included in the divestiture.

     Special items of $42.5 million ($36.2 million after tax) were recorded in
fiscal 1998. A special charge of $28.1 million ($21.8 million after tax) was
recorded in the third quarter of fiscal 1998 to cover the costs of a
restructuring program. The restructuring program was designed to improve
operational efficiency by exiting certain U.S. and European administrative
offices and production facilities. The restructuring program provided for the
reduction of our



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<PAGE>   10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                            [VLASIC
RESULTS OF OPERATIONS AND FINANCIAL                          FOODS INTERNATIONAL
CONDITION (continued)                                                LOGO]
--------------------------------------------------------------------------------
worldwide workforce by approximately 425 full-time administrative and
operational positions. In September 1998 we sold our Peterlee frozen foods
facility in the United Kingdom. Additionally during November 1998, we commenced
closing our seasonal pickle plant in Bridgeport, Michigan. The plant employed
approximately 25 full time workers and an additional 375 seasonal workers from
May through September. The restructuring charge included approximately $11.6
million in cash charges primarily related to severance and employee benefit
costs. The balance of the restructuring charge, amounting to $16.5 million,
related to non-cash charges for losses on the disposition of plant assets. This
program was completed during the third quarter of fiscal 1999. Third quarter
fiscal 1999 results included a $3.2 million benefit recorded as a Special item
in the Statement of Earnings to reverse the remaining unutilized restructuring
charge. The fiscal 1998 restructuring program resulted in approximately $7
million in aggregate savings in fiscal 1999 primarily from reductions in plant
overhead and depreciation and employee salaries and benefits.

     During the fourth quarter of fiscal 1998, we designed and began to
implement a program to pursue asset reduction and cost improvement
opportunities. As part of that plan, we decided to sell our Kattus business in
Germany and began to actively seek buyers. The carrying value of the assets held
for sale was reduced to fair value based on estimates of selling values less
costs to sell. Fourth quarter fiscal 1998 earnings reflected a $14.4 million
special charge (with no associated tax benefit) to reduce assets held for sale
to fair value of which approximately $10 million represented a charge for
goodwill impairment with the balance of the charge recorded against the other
long-lived assets. In January 1999, we sold the business for a gain on sale of
$3.2 million that is recorded on the Special items line of our Statement of
Earnings in fiscal 1999.

     A special charge of $12.6 million ($7.8 million after tax) was recorded in
the first quarter of fiscal 1997 to cover the costs of a restructuring program.
The restructuring program was designed to improve our operational efficiency by
closing various U.S. pickle facilities and reducing approximately 50
administrative and operational positions from the worldwide workforce. The
fiscal 1997 restructuring charge included approximately $4.6 million in cash
charges, primarily related to severance and employee benefit costs. The balance
of the restructuring charge, amounting to $8.0 million, related to non-cash
charges for losses on the disposition of plant assets. The program was completed
during the first quarter of fiscal 1998. The fiscal 1997 restructuring program
resulted in approximately $10 million in aggregate savings in fiscal 1997 and
fiscal 1998 from reductions in employee salaries and benefits, plant overhead
and depreciation.


RESULTS BY SEGMENT

     We group our businesses into three operating segments. The FROZEN FOODS
SEGMENT consists of Swanson frozen foods in the United States and Canada and
Freshbake frozen foods in the United Kingdom. The GROCERY PRODUCTS SEGMENT
includes Vlasic retail and foodservice pickles and condiments in the United
States, Open Pit barbecue sauce in the United States, SonA and Rowats pickles,
canned beans and vegetables in the United Kingdom, the Kattus business in
Germany (which was sold in January 1999) and Swift canned meat pates and other
grocery products in Argentina (which was sold in July 1999). The AGRICULTURAL
PRODUCTS SEGMENT includes the fresh mushroom business in the United States,
chilled and frozen beef, frozen cooked beef and canned corned beef exported from
Argentina (which was sold in July 1999) and contract manufacturing of frozen
foodservice product for Campbell in the United States. These operating segments
are managed as strategic units due to their distinct manufacturing processes,
marketing strategies and distribution channels. Corporate expenses and assets
have been allocated to the segments. Intersegment sales presented below as
eliminations represent the sale of beef between the agricultural products
segment and the frozen foods segment.



                                      (17)
<PAGE>   11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                            [VLASIC
RESULTS OF OPERATIONS AND FINANCIAL                          FOODS INTERNATIONAL
CONDITION (continued)                                                LOGO]
--------------------------------------------------------------------------------
     The following table sets forth certain segment information for the fiscal
years indicated (in thousands):

<TABLE>
<CAPTION>
                                                    1999              1998               1997
                                                    ----              ----               ----
Net Sales
<S>                                            <C>               <C>               <C>
   Frozen Foods                                $   528,657       $   541,436       $   614,467
   Grocery Products                                452,623           477,395           538,684
   Agricultural Products                           334,059           347,872           366,113
   Eliminations                                     (7,353)           (9,429)          (10,979)
                                               -----------       -----------       -----------
     Total                                     $ 1,307,986       $ 1,357,274       $ 1,508,285
                                               ===========       ===========       ===========

Earnings (Loss) Before Interest and Taxes
   Frozen Foods                                $    37,971       $    31,469       $    56,268
   Grocery Products                                 46,149            (2,517)           49,513
   Agricultural Products                          (150,869)           (6,315)           10,846
                                               -----------       -----------       -----------
     Total                                     $   (66,749)      $    22,637       $   116,627
                                               ===========       ===========       ===========
</TABLE>

FISCAL YEAR ENDED AUGUST 1, 1999 COMPARED TO FISCAL YEAR ENDED AUGUST 2, 1998

     Net sales of the frozen foods segment decreased 2.4% to $528.7 million in
fiscal 1999 compared to fiscal 1998. A modest increase in Swanson U.S. customer
sales, attributable to the re-launch of our fried chicken products and increased
marketing efforts, was offset by substantial sales declines in the United
Kingdom frozen foods business. The segment's earnings before interest and taxes
were $38.0 million in fiscal 1999 compared to $31.5 million in fiscal 1998.
Excluding the impact of special items recorded in fiscal 1999 and 1998, earnings
before interest and taxes for the segment were $36.9 million and $41.2 million,
respectively, a decrease of 10.5%. This change was driven primarily by lower
volumes in the United Kingdom and Canada and increased advertising costs and
trade spending associated with our U.S. Swanson business.

     Net sales of the grocery products segment decreased 5.2% to $452.6 million
in fiscal 1999 compared to fiscal 1998. Excluding sales from the divested Kattus
business and Swift-Armour retail business, net sales increased 4.2% in fiscal
1999 compared to fiscal 1998. This increase was primarily driven by increased
sales in our core Vlasic pickles business. The segment's earnings before
interest and taxes were $46.1 million for fiscal 1999 compared to a loss of
$(2.5) million in fiscal 1998. Excluding the impact of special items in fiscal
1999 and 1998, earnings before interest and taxes for this segment were $41.8
million and $29.8 million, respectively, an increase of 40.3%. Excluding the
results of the divested Kattus business and Swift-Armour retail business and
special items, earnings before interest and taxes for this segment would have
been $34.9 million in fiscal 1999 and $28.0 million in fiscal 1998, an
improvement of 24.5%. This improvement was attributable to sales growth in our
Vlasic pickles business in fiscal 1999 partially offset by greater marketing and
advertising costs in fiscal 1999, and charges incurred in fiscal 1998 associated
with start-up costs of new technology at our pickle plants.

     Net sales of the agricultural products segment decreased 4.0% to $334.1
million in fiscal 1999 compared to fiscal 1998 principally due to lower
Swift-Armour export sales. Excluding sales for the divested Swift-Armour
business, net sales decreased 2.6% in fiscal 1999 compared to fiscal 1998. The
segment's loss before interest and taxes was $(150.9) million in fiscal 1999
compared to a loss of $(6.3) million in fiscal 1998. Excluding the impact of the
special items recorded in fiscal 1999 and 1998, the loss before interest and
taxes for the segment was $(10.1) million and $(5.9) million, respectively. This
was predominately a result of significantly lower mushroom earnings in fiscal
1999 due to poor yields, higher costs and reduced contract sales.



                                      (18)
<PAGE>   12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF        [VLASIC FOODS INTERNATIONAL LOGO]
    RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
--------------------------------------------------------------------------------

FISCAL YEAR ENDED AUGUST 2, 1998 COMPARED TO FISCAL YEAR ENDED AUGUST 3, 1997

     Net sales of the frozen foods segment decreased 11.9% in fiscal 1998
compared to fiscal 1997 (down 10.2% from fiscal 1997 on a comparable 52 week
basis) to $541.4 million. The decrease was primarily driven by the lower Swanson
U.S. volume related to aligning shipments with consumption as well as decreased
consumption driven by lack of product innovation and lower advertising.
Excluding the fiscal 1998 and 1997 restructuring charges, this segment's
earnings before interest and taxes decreased 30.2%, driven by lower sales
volumes.

     Net sales of the grocery products segment decreased 11.4% in fiscal 1998
compared to fiscal 1997 (down 9.7% from fiscal 1997 on a comparable 52 week
basis) to $477.4 million. The decrease was primarily driven by lower Vlasic
pickle volume related to aligning shipments with consumption as well as
decreased consumption driven by lack of product innovation and lower
advertising. This segment also experienced lower volume in the Kattus business
and Argentina. Excluding the fiscal 1998 and 1997 restructuring charges and the
1998 impairment loss, this segment's earnings before interest and taxes
decreased 49.8% in fiscal 1998 driven by the decline in sales, start-up costs
associated with new technology at the pickle plants and an increase in German
marketing costs.

     Net sales of the agricultural products segment decreased 5.0% in fiscal
1998 compared to fiscal 1997 (down 3.2% from fiscal 1997 on a comparable 52 week
basis) to $347.9 million. This segment incurred a loss of $6.3 million in fiscal
1998 compared to earnings before interest and taxes of $10.8 million in fiscal
1997. The improvements in mushroom production costs in fiscal 1998 were not
significant enough to offset the higher cattle costs in Argentina.


LIQUIDITY AND CAPITAL RESOURCES

     In connection with the spin-off, we incurred incremental debt of
approximately $560 million under a five-year $750 million unsecured revolving
credit facility, consisting of $500 million indebtedness assumed from Campbell
and $60 million incurred to repay certain intercompany payables representing
advances from Campbell to subsidiaries of Vlasic.

     We entered into an amended and restated credit agreement dated September
30, 1998 with various lenders providing for senior secured credit facilities.
Effective June 9, 1999, we further amended our restated senior credit facility
with Amendment No. 1 to the restated senior credit facility. The senior credit
facility consists of (1) a senior secured term loan in a principal amount of
$100 million and (2) senior secured revolving credit commitments providing for
revolving loans, initially in the aggregate amount of up to $550 million. We are
required to make mandatory prepayments on the senior credit facility and
permanently reduce revolving credit commitments under certain circumstances,
including upon certain asset sales, issuance of debt securities, issuance of
equity securities and receipt of casualty proceeds which include property
insurance proceeds and condemnation awards. At our option, subject to certain
requirements, loans may be prepaid in whole or in part. As a result of the
application of the net proceeds from the sale of senior subordinated notes and
the divestiture of our Swift-Armour Argentine beef business, the amount
available to be borrowed under the revolving credit commitments was permanently
reduced to $279 million. Loans under the revolving credit commitments will be
available at any time through the final maturity date of February 20, 2003 and
the term loan matures on February 20, 2003. As of August 1, 1999, $107.1 million
was available under the revolving credit commitments.

     Borrowings under the amended revolving credit facility and the term loan
bear interest at rates that, at our option, vary with the prime rate, CD rate,
LIBOR or money market rates plus applicable credit margins. The average interest
rate at August 1, 1999 was 7.2%. We are obligated to pay a facility fee ranging
from 0.15% to 0.5% on the credit exposure of the banks.



                                      (19)
<PAGE>   13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF        [VLASIC FOODS INTERNATIONAL LOGO]
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
--------------------------------------------------------------------------------

     On June 29, 1999, we issued senior subordinated notes with an aggregate
principal amount of $200 million at an issue price of 98.472%. The notes mature
on July 1, 2009. The approximately $189 million of net proceeds from this
offering were used to repay a portion of the indebtedness outstanding under our
senior credit facility. Interest on the notes accrues at the rate of 10 1/4% per
annum and is payable semi-annually in arrears on January 1 and July 1 of each
year, commencing on January 1, 2000. On or after July 1, 2004, the notes may be
redeemed in whole or in part at a stated price.

     Our liquidity needs will be primarily for capital expenditures, working
capital and interest service requirements on our debt obligations. Capital
expenditures for fiscal year 2000 are expected to approximate $35 million. We
believe that our capital expenditures for the foreseeable future will be focused
on preventive maintenance and equipment replacement, projects intended to result
in cost savings and projects related to new product introductions. The amended
revolving credit facility imposes annual limits on capital expenditures as
follows: $41 million in fiscal 2000; $41 million in fiscal 2001; $42 million in
fiscal 2002; and $42 million in fiscal 2003.

     We anticipate that our operating cash flows, together with available
borrowings under our revolving credit facility, will be sufficient to meet our
working capital requirements, capital expenditure requirements and interest
service requirements on our debt obligations.

     The senior credit facility and our senior subordinated debt contain a
number of significant covenants that, among other things, restrict our ability
to engage in mergers and sales of assets, create liens on our assets, incur
additional indebtedness, make investments and acquisitions, or engage in
transactions with our subsidiaries and affiliates. In addition, under the senior
credit facility, we are required to comply with specified ratios and tests,
including maximum debt/EBITDA ratio, minimum fixed charge coverage ratio and a
limitation on capital expenditures. Under the senior subordinated debt, we are
required to comply with a minimum fixed charge coverage ratio. A breach of any
of these covenants could result in a default under our debt agreements. A
default, if not waived, could result in acceleration of our indebtedness, in
which case the debt would become immediately due and payable. If this occurs, we
may not be able to repay our debt or borrow sufficient funds to refinance it.
Even if new financing is available, it may not be on terms that are acceptable
to us. As of August 1, 1999, we were in compliance with the covenants. If we are
not successful in executing our business plan, we may not continue to be in
compliance with the covenants.

     Interest and principal payments on the indebtedness outstanding under our
senior credit facility and senior subordinated debt represent significant cash
requirements. Our ability to raise funds to service our debt may be restricted
by our debt agreements and our ability to effect equity financing is dependent
on our results of operations and market conditions. In the event that we are
unable to refinance such indebtedness or raise funds through asset sales, sales
of equity or otherwise, our ability to pay principal of, and interest on, our
debt would be adversely affected.

     See also "Going Concern Matters" on page 11 of this Amended Annual Report.

FISCAL YEAR ENDED AUGUST 1, 1999 COMPARED TO FISCAL YEAR ENDED AUGUST 2, 1998

     Net cash provided by operating activities was $45.0 million in fiscal 1999
compared $7.3 million in fiscal 1998. The improvement in cash flows from
operations was principally driven by a smaller increase in working capital of
$19.3 million in fiscal 1999 compared to $65.0 million in fiscal 1998, partially
offset by the impact of lower net earnings in fiscal 1999.

     Net cash provided by investing activities was $58.3 million in fiscal 1999
compared to net cash used of $63.3 million in fiscal 1998. Cash proceeds, net of
costs and cash divested, of $20.7 million and $77.7 million from the
divestitures of the Kattus and Swift-Armour businesses, respectively, were used
to pay down a portion of our indebtedness under our revolving credit facility.
Capital expenditures were $50.6 million in fiscal 1999 compared to $62.3 million
in fiscal 1998.

     Net cash used in financing activities of $108.0 million in fiscal 1999 was
principally a $285.1 million decrease in borrowings under the senior credit
facility, partially offset by the issuance of $200 million in senior
subordinated notes.


                                      (20)
<PAGE>   14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL                          [VLASIC FOODS
CONDITION (continued)                                     INTERNATIONAL LOGO]
--------------------------------------------------------------------------------
     MARKET RISK SENSITIVITY

     We use or are permitted to use financial instruments, including fixed and
variable rate debt, as well as swap, forward and option contracts, to finance
our operations and to hedge interest rate and currency exposures. The swap,
forward and option contracts are entered into for periods consistent with
related underlying exposures and do not constitute positions independent of
those exposures. We do not enter into contracts for speculative purposes, nor
are we a party to any leveraged instrument.

     The information below summarizes our market risk associated with debt
obligations and other significant financial instruments outstanding as of August
1, 1999. Fair values included herein have been determined based on quoted market
prices. The information presented below should be read in conjunction with Note
22 and Note 23 to our historical consolidated financial statements.

     We rely primarily on bank and public bond market borrowings to meet our
funding requirements. In the United States, the borrowings are supported by a
revolving credit facility of $279 million. For debt obligations, the table
presents principal cash flows (in thousands) and related interest rates by
fiscal year of maturity. Capital lease obligations of $0.5 million are not
included in the table. Our fixed rate debt is net of unamortized original issue
discount of $3.0 million. Variable interest rates disclosed represent the
weighted average rates of the portfolio at the period end. For interest rate
swaps, the table presents notional amounts and related interest rates by fiscal
year of maturity.

<TABLE>
<CAPTION>
                                              Year of Maturity
                                      -------------------------------

Debt                                   2003                    2009            Total           Fair Value
                                     --------                --------          -----           ----------
<S>                            <C>                       <C>                <C>                <C>
Fixed rate                                               $    196,962       $     196,962      $     193,500
Average interest rate                                          10 1/4%
Variable rate                  $      271,900                               $     271,900      $     271,900
Average interest rate                     7.2%
Interest Rate Swaps:
Variable to fixed (1)          $       50,000                               $      50,000      $        843
Average pay rate                          5.9%
Average receive rate                      5.3%
</TABLE>


(1) Hedges U.S. Bank borrowings.

     The table below provides information as of August 1, 1999 about our forward
currency exchange contracts related to purchase commitments denominated in
foreign currencies. The table presents the contractual amount (in thousands) and
the related weighted average contract exchange rates for significant currency
contracts outstanding as of August 1, 1999. The contracts all mature before
December 1999. The aggregate cost to settle all contracts was insignificant as
of August 1, 1999.

<TABLE>
<CAPTION>
                                                                                                                     Average
                                                                                                                   Contractual
                                                                                                 Contract           Exchange
                                                                                                  Amount              Rate
                                                                                                -----------        -----------
<S>                                                                                           <C>                       <C>
Receive U.S.$ / Pay U.K. [pound sterling]                                                        $       1,210             1.612
</TABLE>

     We are exposed to credit loss in the event of non-performance by the
counterparties in swap and forward contracts. We minimize our credit risk on
these transactions by only dealing with leading, credit-worthy financial
institutions having long-term credit ratings of "A" or better and, therefore, do
not anticipate non-performance. In addition, the contracts are distributed among
several financial institutions, thus minimizing credit risk concentration.


                                      (21)
<PAGE>   15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL                             [VLASIC FOODS
CONDITION (continued)                                        INTERNATIONAL LOGO]
--------------------------------------------------------------------------------
SEASONALITY

     Our sales and cash flows are affected by seasonal cyclicality during
certain parts of the year. Sales of frozen foods and mushrooms tend to be
marginally higher during the winter months. Sales of pickles, relishes and
barbecue sauce tend to be higher in the summer months. The majority of pickles
are packed during a season extending from May through September. As a result,
our inventory levels tend to be higher in the first quarter of the fiscal year
which makes our working capital requirements significantly higher in the first
quarter, requiring us to draw more heavily on the revolving credit commitments
under our senior credit facility.


YEAR 2000

     The Year 2000 issue is the result of date-sensitive computer programs using
two digits rather than four to define the applicable year. If not corrected,
this could result in system failures or miscalculations leading to significant
disruptions in a company's operations. Prior to our spin-off from Campbell, a
worldwide information technology project was initiated to identify areas
impacted by Year 2000 issues. The purpose of this high-priority project was to
identify and remediate non-ready systems and devices before business processes
were affected. We completed a global business impact assessment and formulated
plans for timely correction, retirement, replacement or updating of non-ready
systems. We were aided in this effort by the fact that we were only recently
spun-off as an independent entity on March 30, 1998 and many of our business and
information systems in the United States have been newly purchased and
implemented with Year 2000 compliant technologies. The implementation of newly
purchased systems has been substantially completed.

     We have completed the work on our identified critical systems and
substantially completed the work on our other systems. Critical systems include
business planning and control process manufacturing, sales order billing and
warehouse management systems, that, if shut down or interrupted, could have a
material adverse effect on our results of operations, financial condition and
cash flows. We partner with experienced systems integration and Year 2000
vendors in the execution of our Year 2000 master plan.

     The project has clear management responsibility, budgets, plans and
reporting requirements. Monthly project tracking and management reporting
processes are in place. The tracking process measures progress (plan versus
actual) for applications at a milestone level. The scope of the project covers
information technology systems, our infrastructure, including plant floor
devices, and our service partners, including logistical operations. An
assessment of our global information technology infrastructure has been
completed and engineers are currently remediating the plant production
facilities. Remediation of the technology infrastructure is targeted for
completion by October 31, 1999 and was approximately 95% completed as of August
1, 1999.

     We completed our testing of electronic interfaces with trading partners and
suppliers as part of the new system development project. Additionally,
questionnaires have been sent to major suppliers. Responses from suppliers are
continually evaluated and updated reports are requested.

     We reviewed the risks of Year 2000 issues and believe the risks are
minimized due to our policy of implementing standard tested and certified Year
2000 systems. The completed risk analysis performed by the independent engineers
for plant non-information technology systems has not identified any significant
risks. Because our Year 2000 compliance is dependent upon key third parties also
being Year 2000 compliant on a timely basis, there can be no guarantee that our
efforts will prevent a material adverse impact on our results of operations,
financial condition and cash flows. The possible consequences of not being fully
Year 2000 compliant include temporary plant closings, delays in the delivery of
finished products, delays in the receipt of key ingredients, containers and
packaging supplies, invoice and collection errors and inventory and supply
obsolescence. These consequences could have a material adverse impact on our
results of operations, financial condition and cash flows if we are unable to
conduct business in the ordinary course. We believe that our readiness program
should significantly reduce the adverse effect any such disruptions may have.

     Concurrently with the Year 2000 readiness measures described above, we and
our operating subsidiaries


                                      (22)
<PAGE>   16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF     [VLASIC FOODS INTERNATIONAL LOGO]
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
-------------------------------------------------------------------------------

develop contingency plans intended to mitigate the possible disruption in
business operations that may result from the Year 2000 issue. These contingency
plans and related cost estimates are continually refined as additional
information becomes available.

     The anticipated costs associated with modifying current systems to be Year
2000 compliant are expensed as incurred; such anticipated costs and the costs of
contingency plans total $3 million of which approximately $1 million was
incurred during 1999 and $1 million was incurred during fiscal 1998. While there
can be no assurance that we and our suppliers and customers will fully resolve
all Year 2000 issues, neither the estimated cost to become Year 2000
operationally effective nor the outcome of the Year 2000 issue is expected to
have a material impact on our operations, liquidity or financial position.


RECENT DEVELOPMENTS

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FAS Statement 133," which postponed the adoption date of SFAS No. 133. We
must adopt the statement beginning fiscal 2001. We are currently evaluating the
effect that implementation of the new standard will have on our results of
operations and financial position.


FORWARD-LOOKING INFORMATION

     This Annual Report and our filings with the Securities and Exchange
Commission contain certain forward-looking statements within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. We caution
readers that any such forward-looking statements made by us or on our behalf are
based on our current expectations and beliefs but are not guarantees of future
performance. Actual results could differ materially from those expressed or
implied in the forward-looking statements. Important facts that could cause such
differences include, but are not limited to:

     -    our ability to continue to comply with covenants and the terms of the
          senior credit facility and the senior subordinated notes;

     -    our ability to maintain capital expenditures within the forecast
          limits, which are based on assumptions about infrastructure
          requirements;

     -    issues associated with our business and information systems and
          embedded technology, including Year 2000 and other system problems
          which could disrupt our operations -- we would also be impacted by
          software and system problems of our vendors and customers;

     -    Campbell Soup Company's future requirements for mushrooms and
          foodservice products;

     -    the impact of strong competitive response to our efforts to leverage
          our brand power with product innovation and new advertising;

     -    the inherent risks in the marketplace associated with our products,
          including uncertainties about trade and consumer acceptance;

     -    the inherent risks associated with an agricultural business;

     -    changes in prices of raw materials and other inputs;

     -    the impact of unforeseen economic and political changes in
          international markets where we compete;

     -    the market risks associated with financial instruments which may be
          subject to unforeseen economic changes, such as currency exchange
          rates, interest rates, inflation rates and recessionary trends;

     -    our ability to achieve the gains anticipated from our cost
          productivity programs; and

     -    our ability to achieve the forecasted savings related to restructuring
          programs.


                                      (23)
<PAGE>   17
CONSOLIDATED STATEMENTS OF EARNINGS            [VLASIC FOODS INTERNATIONAL LOGO]
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                   1999              1998               1997
                                                                                  52 weeks         52 weeks          53 weeks
                                                                                -----------       -----------       -----------
<S>                                                                             <C>               <C>               <C>
Net sales                                                                       $ 1,307,986       $ 1,357,274       $ 1,508,285
                                                                                -----------       -----------       -----------

Costs and expenses
   Cost of products sold                                                            922,357           978,025         1,048,433
   Marketing and selling expenses                                                   244,810           245,119           266,475
   Administrative expenses                                                           62,799            64,063            53,050
   Research and development expenses                                                  8,034             7,907             8,620
   Other expense (income)                                                             1,421            (2,927)            2,446
   Special items                                                                    135,314            42,450            12,634
                                                                                -----------       -----------       -----------
     Total costs and expenses                                                     1,374,735         1,334,637         1,391,658
                                                                                -----------       -----------       -----------

Earnings (loss) before interest and taxes                                           (66,749)           22,637           116,627
   Interest expense                                                                  44,521            13,446             1,600
   Interest income                                                                      739               388               588
                                                                                -----------       -----------       -----------
Earnings (loss) before taxes                                                       (110,531)            9,579           115,615
Taxes on earnings                                                                    15,800            15,378            37,475
                                                                                -----------       -----------       -----------
Earnings (loss) before cumulative effect of
   accounting change                                                               (126,331)           (5,799)           78,140
Cumulative effect of accounting change                                                   --              (600)               --
                                                                                -----------       -----------       -----------
Net earnings (loss)                                                             $  (126,331)      $    (6,399)      $    78,140
                                                                                ===========       ===========       ===========

Earnings (Loss) Per Share:

   Per share -- basic                                                           $     (2.78)      $     (0.14)

   Weighted average shares outstanding -- basic                                      45,500            45,458

   Per share -- assuming dilution                                               $     (2.78)      $      (0.14)

   Weighted average shares outstanding -- assuming dilution                           45,500 *           45,458 *
</TABLE>



* Excludes potentially dilutive shares as the result would be antidilutive.

See accompanying Notes to Consolidated Financial Statements


                                      (24)
<PAGE>   18
CONSOLIDATED BALANCE SHEETS                    [VLASIC FOODS INTERNATIONAL LOGO]
--------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
                                                                       August 1,      August 2,
                                                                         1999           1998
                                                                     -----------     ----------
<S>                                                                  <C>             <C>
Current assets
   Cash and cash equivalents                                         $  11,475       $  16,333
   Accounts receivable                                                  91,693         127,644
   Inventories                                                         148,631         183,763
   Other current assets                                                 16,401          25,200
                                                                     ---------       ---------
     Total current assets                                              268,200         352,940
                                                                     ---------       ---------
   Plant assets, net                                                   317,651         520,075
   Other assets, principally intangible assets, net                     79,582          86,258
                                                                     ---------       ---------
     Total assets                                                    $ 665,433       $ 959,273
                                                                     =========       =========
Current liabilities
   Notes payable                                                     $     194       $  12,535
   Payable to suppliers and others                                      99,876         121,210
   Accrued liabilities                                                  53,987          93,330
                                                                     ---------       ---------
     Total current liabilities                                         154,057         227,075
                                                                     ---------       ---------


Long-term debt                                                         469,134         558,873
Deferred income taxes                                                   13,429          19,673
Other liabilities                                                       49,214          47,048
                                                                     ---------       ---------
   Total liabilities                                                   685,834         852,669
                                                                     ---------       ---------

Shareowners' equity (deficit)
   Preferred stock, no par value; authorized 4,000 shares;
     none issued                                                            --              --
   Common stock, no par value; authorized 56,000 shares;
     issued shares 45,502 shares and 45,488 shares at August 1,
     1999 and August 2, 1998, respectively                             137,758         137,473
   Accumulated deficit                                                (151,446)        (25,115)
   Accumulated other comprehensive earnings (loss)                      (6,713)         (5,754)
                                                                     ---------       ---------
     Total shareowners' equity (deficit)                               (20,401)        106,604
                                                                     ---------       ---------
                                                                            --              --
Total liabilities and shareowners' equity (deficit)                  $ 665,433       $ 959,273
                                                                     =========       =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements


                                      (25)
<PAGE>   19
CONSOLIDATED STATEMENTS OF CASH FLOWS          [VLASIC FOODS INTERNATIONAL LOGO]
--------------------------------------------------------------------------------

(in thousands)

<TABLE>
<CAPTION>
                                                                   1999            1998            1997
                                                                ---------       ---------       ---------
<S>                                                             <C>             <C>             <C>
Cash flows from operating activities:
   Net earnings (loss)                                          $(126,331)      $  (6,399)      $  78,140
   Non-cash charges to net earnings (loss)
     Loss on sale of businesses, net                              134,529          14,400              --
     Restructuring charges, net                                       785          28,050          12,634
     Depreciation and amortization                                 44,243          45,125          44,808
     Deferred income taxes                                          8,862          (7,701)          9,199
     Postretirement healthcare benefits                             3,428             963              --
     Cumulative effect of accounting change                            --             600              --
     Other, net                                                    (1,263)         (2,700)          1,515
   Changes in working capital
     Accounts receivable                                          (14,393)        (17,213)         11,016
     Inventories                                                      184         (19,263)         16,858
     Other current assets and liabilities                          (5,084)        (28,514)          4,269
                                                                ---------       ---------       ---------
       Net cash provided by operating activities                   44,960           7,348         178,439
                                                                ---------       ---------       ---------

Cash flows from investing activities:
   Purchases of plant assets                                      (50,593)        (62,273)        (79,301)
   Sales of plant assets                                            8,898           6,424           8,431
   Proceeds from businesses sold, net of cash sold                 98,425              --              --
   Business acquired                                                   --          (6,350)             --
   Other, net                                                       1,521          (1,101)            846
                                                                ---------        --------        --------
       Net cash provided by (used in) investing activities         58,251         (63,300)        (70,024)
                                                                ---------        --------        --------

Cash flows from financing activities:
   Long-term borrowings                                           411,556          98,542              --
   Repayment of long-term borrowings                             (499,800)        (42,000)           (427)
   Short-term borrowings (repayments)                             (12,116)         12,335             (17)
   Deferred debt issuance costs                                    (7,944)             --              --
   Issuance of common stock                                           285             519              --
   Net transactions with Campbell                                      --          (6,500)       (104,029)
                                                                ---------       ---------        --------
       Net cash provided by (used in) financing activities       (108,019)         62,896        (104,473)
                                                                ---------       ---------        --------

   Effect of exchange rate changes on cash                            (50)            (20)            (86)
                                                                ---------       ---------       ---------
       Net change in cash and cash equivalents                     (4,858)          6,924           3,856

Cash and cash equivalents -- beginning of period                   16,333           9,409           5,553
                                                                ---------       ---------       ---------
Cash and cash equivalents -- end of period                      $  11,475       $  16,333       $   9,409
                                                                =========       =========       =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements


                                      (26)
<PAGE>   20
                                                                  [VLASIC
CONSOLIDATED STATEMENTS                                      FOODS INTERNATIONAL
OF SHAREOWNERS' EQUITY (DEFICIT)                                    LOGO]
--------------------------------------------------------------------------------
(in thousands)

<TABLE>
<CAPTION>
                                                                                                        Other
                                             Common Stock                             Campbell       Comprehensive      Total
                                             ------------              Accumulated       Net           Earnings      Shareowners'
                                         Shares         Amount          Deficit       Investment        (Loss)      Equity (Deficit)
                                         ------         ------          -------       ----------        ------      ----------------

<S>                                      <C>            <C>            <C>           <C>            <C>            <C>
Balance at July 28, 1996                                                             $  659,057     $       809    $   659,866
Comprehensive earnings (loss):
   Net earnings (loss) prior to spin-off                                                 78,140                         78,140
   Other comprehensive earnings (loss)
     Foreign currency translation
       adjustments                                                                                       (1,679)        (1,679)
                                                                                                                    ----------
   Comprehensive earnings (loss)                                                                                        76,461
                                                                                                                    ----------
Net transactions with Campbell                                                         (104,029)                      (104,029)
                                                                                       --------            ----     ----------

Balance at August 3, 1997                                                               633,168            (870)       632,298
                                                                                        -------            ----        -------



Comprehensive earnings (loss):
   Net earnings (loss) prior to spin-off                                                 18,716                         18,716
   Net earnings (loss) after the spin-off                            $   (25,115)                                      (25,115)
                                                                                                                    ----------
     Total net earnings (loss)                                                                                          (6,399)
                                                                                                                    ----------
   Other comprehensive earnings (loss)
     Foreign currency translation
       adjustments                                                                                       (4,884)        (4,884)
                                                                                                                    ----------
   Comprehensive earnings (loss)                                                                                       (11,283)
                                                                                                                    ----------
Net transactions with Campbell as of
   the spin-off date:
   Assumption of debt, pension and
     postretirement obligations and net
     deferred tax liabilities                                                          (514,930)                      (514,930)
   Contribution to capital of remaining
     Campbell net investment                          $  136,954                       (136,954)                         -   .
Issuance of shares of common stock
   in connection with the spin-off         45,455
Issuance of shares of common stock as
   a result of exercised stock options         33            519                                                           519
                                           ------     ----------     -----------       --------     -----------    -----------

Balance at August 2, 1998                  45,488        137,473         (25,115)            --          (5,754)       106,604
                                           ------     ----------     -----------       --------     -----------    -----------



Comprehensive earnings (loss):
   Net earnings (loss)                                                  (126,331)                                     (126,331)
   Other comprehensive earnings (loss)
     Foreign currency translation
       adjustments                                                                                         (282)          (282)
     Reclassification adjustment for
       business sold                                                                                       (677)          (677)
                                                                                                                    ----------
   Comprehensive earnings (loss)                                                                                      (127,290)
                                                                                                                    ----------
Issuance of shares of common stock as
   a result exercised of stock options         14            285                                                           285
                                           ------     ----------     -----------                    -----------    -----------

Balance at August 1, 1999                  45,502     $  137,758     $  (151,446)                   $    (6,713)   $   (20,401)
                                           ======     ==========     ===========                    ===========    ===========
</TABLE>





See accompanying Notes to Consolidated Financial Statements


                                      (27)
<PAGE>   21
NOTES TO CONSOLIDATED FINANCIAL                                    [VLASIC
STATEMENTS                                                   FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)


1.  VLASIC FOODS INTERNATIONAL SPIN-OFF FROM CAMPBELL SOUP COMPANY

     On March 30, 1998, Campbell distributed one share of Vlasic common stock to
shareowners of Campbell for every ten shares of Campbell capital stock held at
the record date in a tax-free distribution (the "spin-off"). At the time of the
spin-off, we began operations as a separate independent publicly-owned company.
In connection with the spin-off, Campbell contributed the following businesses:
Swanson frozen foods in the United States and Canada, Vlasic pickles, Open Pit
barbecue sauce, Campbell mushrooms in the United States, Freshbake and
non-branded frozen foods and SonA and Rowats pickles and beans in the United
Kingdom, Swift and non-branded processed beef in Argentina and Kattus gourmet
foods distribution in Germany. Our historical financial statements at dates and
for periods ended prior to the date of the spin-off present the combined
historical financial position, results of operations and cash flows of these
businesses. We sold the Kattus business in January 1999 and sold our Argentine
beef business, Swift-Armour, in July 1999. Prior to the spin-off, the businesses
contributed by Campbell had been separately managed within multiple Campbell
business divisions.

     In connection with the spin-off, we incurred debt of approximately $560
million under a five-year $750 million unsecured revolving credit facility,
consisting of $500 million of indebtedness assumed from Campbell and $60 million
incurred to repay certain intercompany payables representing advances from
Campbell to subsidiaries of Vlasic. See Note 22 for a description of current
financing arrangements. On a historical basis, we were not allocated any amount
of Campbell's debt and our historical financial statements prior to the spin-off
do not reflect the interest expense associated with the debt incurred in
connection with the spin-off. Therefore, we believe that pro forma earnings,
reflecting pro forma interest expense as if the spin-off had occurred at the
beginning of fiscal 1998, provide more meaningful comparisons than our
historical financial statements.

     For periods prior to the spin-off, our historical financial statements
reflect expenses allocated by Campbell for selling, general and administrative
services (including finance, legal, information technology, research and
development, benefits, facilities and shared sales and distribution support).
Such expenses were allocated based on net sales, utilization or other methods.
The allocated expenses for these services are not necessarily indicative of the
expenses that we would have incurred had we been a separate, independent entity
that managed these functions.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CONSOLIDATION. The consolidated financial statements include the
accounts of Vlasic Foods International Inc. and its wholly-owned subsidiaries.
Significant intercompany transactions have been eliminated in consolidation.

     FISCAL YEAR. Our fiscal year ends on the Sunday nearest July 31. There were
52 weeks in fiscal 1999 and fiscal 1998 and 53 weeks in fiscal 1997.

     CASH AND CASH EQUIVALENTS. All highly liquid debt instruments purchased
with an initial maturity of three months or less are classified as cash
equivalents.

     INVENTORIES. Substantially all domestic inventories are valued at the
lower of cost or market, with cost determined by the last-in, first-out method.
Other inventories are valued at the lower of average cost or market.

     PLANT ASSETS. Plant assets are stated at historical cost. Alterations and
major overhauls which extend the lives or increase the capacity of plant assets
are capitalized. The amounts for property disposals are removed from plant asset
and accumulated depreciation accounts and any resultant gain or loss is included
in earnings. Ordinary repairs and maintenance are charged to operating costs.

     DEPRECIATION. Depreciation provided in costs and expenses is calculated
using the straight-line method. Buildings and machinery and equipment are
depreciated over periods not exceeding 45 years and 15 years, respectively.
Accelerated methods of depreciation are used for income tax purposes in certain
jurisdictions.

                                      (28)
<PAGE>   22
NOTES TO CONSOLIDATED FINANCIAL                                    [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                    LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)

     LONG-LIVED ASSETS. Intangible assets consist principally of excess
purchase price over net assets of businesses acquired and trademarks, and are
amortized on a straight-line basis over periods not exceeding 40 years. The
recoverability of plant assets and intangibles is periodically reviewed based
principally on an analysis of cash flows.

     ADVERTISING. Advertising costs include the cost of working media
(advertising on television, radio or in print), the cost of producing
advertising, and the cost of coupon insertion and distribution. Working media
and coupon insertion and distribution costs are expensed in the period the
advertising is run or the coupons are distributed. The cost of producing
advertising is expensed as of the first date the advertisements takes place.
Advertising included in marketing and selling expenses was $19,997, $16,297 and
$21,125 in fiscal 1999, 1998, 1997 respectively. There were no amounts of
advertising included in assets on the Consolidated Balance Sheets.

     EARNINGS PER SHARE. Earnings per share have been calculated in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." For fiscal 1999 and 1998, weighted average shares outstanding assuming
dilution excludes no shares and 513 shares, respectively, relating to
outstanding stock option grants as the result would be antidilutive. Historical
earnings per share prior to fiscal 1998 are not presented since our common stock
was not part of the capital structure of Campbell for the period presented.

     USE OF ESTIMATES. Generally accepted accounting principles require
management to make estimates and assumptions that affect assets and liabilities,
contingent assets and liabilities, and revenues and expenses. Actual results
could differ from those estimates.

3.  SPECIAL ITEMS

<TABLE>
<CAPTION>
SPECIAL CHARGES (CREDITS)                        1999         1998        1997
                                              ---------    ---------   ---------
<S>                                           <C>          <C>         <C>
Swift-Armour divestiture (Note 4)             $ 137,729    $      --   $      --
Kattus divestiture (Note 4)                      (3,200)      14,400          --
Dublin mushroom farm restructuring (Note 5)       3,000           --          --
Fiscal 1998 restructuring program (Note 5)       (3,215)      28,050          --
Fiscal 1997 restructuring program (Note 5)           --           --      12,634
United Kingdom restructuring (Note 5)             1,000           --          --
                                              ---------    ---------   ---------
   Total                                      $ 135,314    $  42,450   $  12,634
                                              =========    =========   =========
</TABLE>

     Also, during the third quarter of fiscal 1999, we recorded a special
provision for taxes of $7 million on the repatriation of foreign dividends (Note
9).

4.  DIVESTED BUSINESSES

     As part of our portfolio reconfiguration program, during the third quarter
of fiscal 1999 we entered into a divestiture agreement to sell our Argentine
beef business, Swift-Armour. The sale closed in July 1999. The sale price was
$85 million and the net proceeds were used to repay a portion of the
indebtedness outstanding under our senior credit facility. The net charge to
fiscal 1999 earnings related to this divestiture was $137.7 million. During the
third quarter of fiscal 1999 we recorded as a special item a $140.0 million
charge to reduce the carrying value of the Argentine beef assets held for sale
to their fair value based on the estimated sale price less the estimated costs
to sell. Since the assets were written-down to their estimated fair value and in
accordance with accounting standards, we excluded $2.7 million of depreciation
and amortization expense from fourth quarter fiscal 1999 earnings. Additionally
in the fourth quarter of fiscal 1999, we recognized a $2.3 million benefit on
the final closing of the sale as a Special item on the Statement of Earnings.
The SAFRA trademark and equipment acquired during the second quarter of fiscal
1998 were included in the divestiture. Fourth quarter 1998 earnings included a
$14.4 million charge to reduce the Kattus assets held for sale to fair value. In
January 1999, we sold the Kattus business for a gain on sale of $3.2 million
that is recorded on the Special items line on the Statements of Earnings.

                                      (29)
<PAGE>   23
NOTES TO CONSOLIDATED FINANCIAL                                     [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)

5.  RESTRUCTURING CHARGES

<TABLE>
<CAPTION>
                                   Loss on Asset   Severance
                                    Disposition   and Benefits  Other       Total
                                   -------------  ------------  --------    --------
<S>                                <C>            <C>           <C>         <C>
Balance at July 28, 1996             $ 14,343       $  9,152    $  6,049    $ 29,544
   Restructuring accrual                7,991          3,253       1,390      12,634
   Fiscal 1997 spending               (16,810)        (9,485)     (6,049)    (32,344)
                                     --------       --------    --------    --------
Balance at August 3, 1997               5,524          2,920       1,390       9,834
   Restructuring accrual               16,500          8,200       3,350      28,050
   Fiscal 1998 spending                (7,345)        (4,169)     (1,636)    (13,150)
                                     --------       --------    --------    --------
Balance at August 2, 1998              14,679          6,951       3,104      24,734
   Restructuring accrual                2,400          1,400         200       4,000
   Fiscal 1999 spending               (16,377)        (4,768)     (3,025)    (24,170)
   Unutilized restructuring charge       (702)        (2,434)        (79)     (3,215)
                                     --------       --------    --------    --------
Balance at August 1, 1999            $     --       $  1,149    $    200    $  1,349
                                     ========       ========    ========    ========
</TABLE>


     A special charge of $1 million was recorded in the fourth quarter of fiscal
1999 associated with administrative staff reductions in the United Kingdom. This
restructuring program was designed to align fixed employee costs with the needs
of the SonA and Freshbake businesses. Approximately 40 positions will be
eliminated as part of this program. The $1 million charge represents severance
and employee benefit costs that will be paid in cash. This restructuring program
is expected to be completed by the third quarter of fiscal 2000.

     A special charge of $3 million was recorded in the third quarter of fiscal
1999 associated with the closure of the Dublin, Georgia mushroom farm. The farm
was identified for closure due to the high costs of production and mechanical
harvesting methodology that prevents it from producing high quality retail
mushrooms. As part of the closure, approximately 70 people were terminated. The
assets were written down to the estimated fair value less costs to sell. The $3
million cost of the program included $2.4 million of non-cash charges for losses
on the disposition of plant assets and $0.6 million principally related to
severance and employee benefit costs that will be paid in cash. This
restructuring program is expected to be completed by the third quarter of fiscal
2000.

     A special charge of $28.1 million ($21.8 million after tax) was recorded in
the third quarter of fiscal 1998 to cover the costs of a restructuring program.
The restructuring program was designed to improve operational efficiency by
exiting certain U.S. and European administrative offices and production
facilities. The restructuring program provided for the reduction of our
worldwide workforce by approximately 425 full-time administrative and
operational positions. In September 1998 we sold our Peterlee frozen foods
facility in the United Kingdom. Additionally, during November 1998, we commenced
closing our seasonal pickle plant in Bridgeport, Michigan. The plant employed
approximately 25 full-time workers and an additional 375 seasonal workers from
May through September. The restructuring charge included approximately $11.6
million in cash charges primarily related to severance and employee benefit
costs. The balance of the restructuring charge, amounting to $16.5 million,
related to non-cash charges for losses on the disposition of plant assets. This
program was completed during the third quarter of fiscal 1999. Third quarter
fiscal 1999 results included a $3.2 million benefit recorded as a Special item
in the Statement of Earnings to reverse the remaining unutilized restructuring
charge.

     A special charge of $12.6 million ($7.8 million after tax) was recorded in
the first quarter of 1997 to cover the costs of a restructuring program. The
restructuring program was designed to improve operational efficiency by closing
various pickle facilities and reducing approximately 50 administrative and
operational positions from the worldwide workforce. The fiscal 1997
restructuring charge included approximately $4.6 million in cash charges
primarily related to severance and employee benefit costs. The balance of the
restructuring charge, amounting to $8.0 million, related to non-cash charges for
losses on the disposition of plant assets. The program was completed during the
first quarter of fiscal 1998.

     The balance of the restructuring accrual is included in Accrued liabilities
on the Consolidated Balance Sheets.

                                      (30)
<PAGE>   24
NOTES TO CONSOLIDATED FINANCIAL                                    [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

6. SEGMENT AND GEOGRAPHIC AREA INFORMATION

     We group our businesses in three operating segments. The FROZEN FOODS
SEGMENT consists of Swanson frozen foods in the United States and Canada and
Freshbake frozen foods in the United Kingdom. The GROCERY PRODUCTS SEGMENT
includes Vlasic retail and foodservice pickles and condiments in the United
States, Open Pit barbecue sauce in the United States, SonA and Rowats pickles,
canned beans and vegetables in the United Kingdom, Kattus gourmet foods
distribution in Germany (which was sold in January 1999) and Swift canned meat
pates and other grocery products in Argentina (which was sold in July 1999). The
AGRICULTURAL PRODUCTS SEGMENT includes the United States fresh mushroom
business, chilled and frozen beef, frozen cooked beef and canned corned beef
exported from Argentina (which was sold in July 1999) and contract manufacturing
of frozen foodservice product for Campbell in the United States. These operating
segments are managed as strategic units due to their distinct manufacturing
processes, marketing strategies and distribution channels. Corporate expenses
and assets have been allocated to the segments. Intersegment sales presented
below as eliminations represent the sale of beef between the agricultural
products segment and the frozen foods segment.

<TABLE>
<CAPTION>
SEGMENT INFORMATION                            1999           1998           1997
                                            -----------    -----------    -----------
<S>                                         <C>            <C>            <C>
Net Sales

   Frozen Foods                             $   528,657    $   541,436    $   614,467
   Grocery Products                             452,623        477,395        538,684
   Agricultural Products                        334,059        347,872        366,113
   Eliminations                                  (7,353)        (9,429)       (10,979)
                                            -----------    -----------    -----------
     Total                                  $ 1,307,986    $ 1,357,274    $ 1,508,285
                                            ===========    ===========    ===========

Earnings (Loss) Before Interest and Taxes

   Frozen Foods                             $    37,971    $    31,469    $    56,268
   Grocery Products                              46,149         (2,517)        49,513
   Agricultural Products                       (150,869)        (6,315)        10,846
                                            -----------    -----------    -----------
     Total                                  $   (66,749)   $    22,637    $   116,627
                                            ===========    ===========    ===========

Total Assets

   Frozen Foods                             $   303,650    $   286,197    $   259,132
   Grocery Products                             274,340        374,178        369,922
   Agricultural Products                         87,443        298,898        266,054
                                            -----------    -----------    -----------
     Total                                  $   665,433    $   959,273    $   895,108
                                            ===========    ===========    ===========

Depreciation and Amortization

   Frozen Foods                             $    15,687    $    14,896    $    13,614
   Grocery Products                              13,849         14,636         16,061
   Agricultural Products                         14,707         15,593         15,133
                                            -----------    -----------    -----------
     Total                                  $    44,243    $    45,125    $    44,808
                                            ===========    ===========    ===========

Capital Expenditures

   Frozen Foods                             $    21,472    $    20,349    $    35,576
   Grocery Products                              17,184         19,356         29,399
   Agricultural Products                         11,937         22,568         14,326
                                            -----------    -----------    -----------
     Total                                  $    50,593    $    62,273    $    79,301
                                            ===========    ===========    ===========
</TABLE>

                                      (31)
<PAGE>   25
NOTES TO CONSOLIDATED FINANCIAL                                    [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------

(in thousands, except per share amounts)


<TABLE>
<CAPTION>
GEOGRAPHIC INFORMATION                         1999           1998           1997
                                            -----------    -----------    -----------
<S>                                         <C>            <C>            <C>
Net Sales

   United States                            $   904,384    $   883,288    $   991,523
   Europe                                       225,915        276,679        306,210
   South America                                185,040        206,736        221,531
   Eliminations                                  (7,353)        (9,429)       (10,979)
                                            -----------    -----------    -----------
     Total                                  $ 1,307,986    $ 1,357,274    $ 1,508,285
                                            ===========    ===========    ===========

Earnings (Loss) Before Interest and Taxes

   United States                            $    51,383    $    44,723    $    85,965
   Europe                                        13,015        (22,217)        10,424
   South America                               (131,147)           131         20,238
                                            -----------    -----------    -----------
     Total                                  $   (66,749)   $    22,637    $   116,627
                                            ===========    ===========    ===========

Total Assets

   United States                            $   502,945    $   480,983    $   453,935
   Europe                                       162,488        216,794        205,496
   South America                                     --        261,496        235,677
                                            -----------    -----------    -----------
     Total                                  $   665,433    $   959,273    $   895,108
                                            ===========    ===========    ===========
</TABLE>

     Transfers between segments and geographic areas are recorded at cost plus
markup or at market. Identifiable assets are those assets, including goodwill,
which are identified with the operations in each segment or geographic region.
Contributions to earnings (loss) before interest and taxes include the impact of
special items (see Note 3).

SPECIAL ITEMS IMPACT BY SEGMENT
<TABLE>
<CAPTION>
                                               1999         1998        1997
                                            ---------    ---------   ---------
<S>                                         <C>          <C>         <C>
Frozen Foods                                $  (1,115)   $   9,700   $   2,697
Grocery Products                               (4,300)      32,350       9,937
Agricultural Products                         140,729          400          --
                                            ---------    ---------   ---------
   Total                                    $ 135,314    $  42,450   $  12,634
                                            =========    =========   =========
</TABLE>

SPECIAL ITEMS IMPACT BY GEOGRAPHIC REGION

<TABLE>
<CAPTION>
                                              1999         1998        1997
                                            ---------    ---------   ---------
<S>                                         <C>          <C>         <C>
United States                               $   1,900    $  15,650   $  12,634
Europe                                         (4,315)      26,800          --
South America                                 137,729           --          --
                                            ---------    ---------   ---------
   Total                                    $ 135,314    $  42,450   $  12,634
                                            =========    =========   =========
</TABLE>

                                      (32)
<PAGE>   26
NOTES TO CONSOLIDATED FINANCIAL                [VLASIC FOODS INTERNATIONAL LOGO]
STATEMENTS (CONTINUED)

--------------------------------------------------------------------------------
(in thousands, except per share amounts)


7. PENSION PLANS AND RETIREMENT BENEFITS

     PENSION PLANS. Substantially all U.S. employees participate in Vlasic
sponsored noncontributory defined benefit pension plans. Prior to the spin-off,
the participants in the plans were included in plans with similar benefits
sponsored by Campbell. Under an agreement with Campbell, we assumed pension
liabilities related to the active Vlasic participants, but not to pre-spin
retirees from the U.S. Vlasic businesses. Campbell will transfer certain trust
assets from its funded plans to our plans based upon actuarial determinations
consistent with regulatory requirements. Benefits are generally based on years
of service and employees' compensation during the last years of employment. All
plans are funded and contributions are made in amounts not less than minimum
statutory funding requirements nor more than the maximum amount that can be
deducted for U.S. income tax purposes. Pension benefits for operations outside
the United States are provided principally through government plans and also to
a lesser extent by company sponsored plans. Pension expense for operations
outside the United States was $4,100 in fiscal 1999, $4,543 in fiscal 1998 and
$5,089 in fiscal 1997.

     RETIREE BENEFITS. We provide postretirement benefits, including health care
and life insurance, to most U.S. employees retiring after the spin-off and their
dependents. Employees who have 10 years of service after the age of 45 and
retire are eligible to participate in the postretirement benefit plans.
Obligations related to non-U.S. postretirement benefit plans are not significant
since these benefits are generally provided through government-sponsored plans.

<TABLE>
<CAPTION>
                                                       Pension Benefits        Other Postretirement Benefits
                                                    -----------------------    -----------------------------
                                                      1999          1998(1)      1999               1998(1)
                                                    --------       --------    --------            --------
<S>                                                 <C>            <C>         <C>                 <C>
CHANGE IN BENEFIT OBLIGATION

   Net benefit obligation at beginning of year      $ 77,020       $ 66,380    $ 24,786            $ 21,450
   Service cost                                        4,911          1,291       2,888                 727
   Interest cost                                       5,515          1,666       1,619                 481
   Actuarial (gain)/loss                             (12,295)         7,745      (5,068)              2,128
   Gross benefits paid                                  (530)           (62)       (329)                 --
                                                    --------       --------    --------            --------
       Net benefit obligation at end of year          74,621         77,020      23,896              24,786
                                                    --------       --------    --------            --------

CHANGE IN PLAN ASSETS

   Fair value of plan assets at beginning of year     69,140         68,176
   Actual return on plan assets                        7,458          1,026
   Change in estimated assets to be
     transferred by Campbell                          (5,139)
   Miscellaneous                                          --             --         329                  --
   Gross benefits paid                                  (530)           (62)       (329)                 --
                                                    --------       --------    --------            --------
       Fair value of plan assets at end of year       70,929         69,140          --                  --
                                                    --------       --------    --------            --------

   Funded status at end of year                       (3,692)        (7,880)    (23,896)            (24,786)
   Unrecognized net actuarial (gain)/loss             (1,213)         7,193     (12,025)             (7,707)
   Unrecognized prior service cost                     2,572          2,934
   Unrecognized net transition obligation (asset)       (236)          (423)
                                                    --------       --------    --------            --------
       Net amount recognized at end of year         $ (2,569)      $  1,824    $(35,921)           $(32,493)
                                                    ========       ========    ========            ========

   Amounts recognized in the Consolidated
     Balance Sheets:

       Prepaid benefit cost                         $    461       $  3,348
       Accrued benefit cost                           (3,030)        (1,524)   $(35,921)           $(32,493)
                                                    --------       --------    --------            --------
         Net amount recognized at end of year       $ (2,569)      $  1,824    $(35,921)           $(32,493)
                                                    ========       ========    ========            ========
</TABLE>

(1) Four month period March 30, 1998 ending August 2, 1998.

                                      (33)
<PAGE>   27
NOTES TO CONSOLIDATED FINANCIAL                [VLASIC FOODS INTERNATIONAL LOGO]
STATEMENTS (CONTINUED)

--------------------------------------------------------------------------------
(in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                  Pension Benefits      Other Postretirement Benefits
                                              ---------------------     -----------------------------
                                               1999         1998(1)      1999               1998(1)
                                              -------       -------     -------             -------
<S>                                           <C>           <C>         <C>                 <C>
WEIGHTED AVERAGE ASSUMPTIONS AS OF AUGUST 1

   Discount rate                                 7.75%         7.00%       7.75%               7.00%
   Expected return on plan assets                9.75%         9.75%
   Rate of compensation increase                 4.25%         4.25%       4.25%               4.25%
   Healthcare cost trend on covered charges                                5.00%               4.00%

COMPONENTS OF NET PERIODIC BENEFIT COST

   Service cost                               $ 4,911       $ 1,291     $ 2,888             $   727
   Interest cost                                5,515         1,666       1,619                 481
   Expected return on assets                   (6,215)       (1,919)
   Amortization of:
     Actuarial (gain) loss                        166            64        (751)               (245)
     Prior service cost                           212            71
     Transition obligation (asset)               (188)          (63)
                                              -------       -------     -------             -------
       Total net periodic benefit cost        $ 4,401       $ 1,110     $ 3,756             $   963
                                              =======       =======     =======             =======
</TABLE>


(1) Four month period March 30, 1998 ending August 2, 1998.

<TABLE>
<CAPTION>
                                                                                                   Other
                                                                                              Postretirement
                                                                                                 Benefits
                                                                                                -----------
                                                                                                   1999
                                                                                                -----------
<S>                                                                                           <C>
SENSITIVITY OF RETIREE WELFARE RESULTS

   Effect of a one percentage point increase in assumed health care cost trend
     - on total service and interest cost components                                            $       810
     - on postretirement benefit obligation                                                     $     3,398

   Effect of a one percentage point decrease in assumed health care cost trend
     - on total service and interest cost components                                            $      (695)
     - on postretirement benefit obligation                                                     $    (2,973)
</TABLE>

     The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets were $3,506, $899, and $0, respectively as of August 1,
1999 and $3,349, $840, and $0 as of August 2, 1998.

     PRIOR TO THE SPIN-OFF. Net periodic U.S. pension expense allocated to
Vlasic was $2,396 for the first eight months of fiscal 1998 prior to the
spin-off (resulting in total U.S. pension expense of $3,506 in fiscal year
1998), and $2,140 in fiscal 1997. Postretirement benefit expense allocated to
Vlasic was $2,493 for the first eight months of fiscal 1998 prior to the
spin-off (resulting in total expense of $3,456 in fiscal 1998) and $2,667 in
fiscal 1997.

     SAVINGS PLANS. Vlasic U.S. employees participate in Vlasic's savings plans
and formerly in Campbell's savings plans. After one year of continuous service,
Vlasic matches 50% of employee contributions up to five percent of compensation.
In fiscal 1998 and fiscal 1997 Campbell increased its contribution to 60%
because earnings goals were achieved. In fiscal 1999 the matching contribution
was 50%. Employer contributions relating to these savings plans were $1,709 in
fiscal 1999, $2,382 in fiscal 1998 and $2,671 in fiscal 1997.

                                      (34)
<PAGE>   28
NOTES TO CONSOLIDATED FINANCIAL                [VLASIC FOODS INTERNATIONAL LOGO]
STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

8.  STOCK OPTIONS AND RESTRICTED STOCK

     In connection with the spin-off from Campbell, we adopted the Vlasic Foods
Long-Term Incentive Plan (the Plan). Employees who held vested Campbell stock
options as of the spin-off retained Campbell options to purchase Campbell's
capital stock in accordance with the grants' original terms and conditions as
long as they remain Vlasic employees, except that the number of options and
exercise price were adjusted to preserve the inherent economic value of the
options taking into account the spin-off. Stock options held by employees which
were not vested were converted into options to purchase Vlasic stock. For each
Campbell option that was converted to a Vlasic option, the number of options and
exercise price were converted based upon a formula that preserved the inherent
economic value and vesting and term provisions of original Campbell options.

     Under the Plan restricted stock and stock options may be granted to certain
officers and key employees. The Plan authorized the issuance of up to 5.8
million shares of Vlasic common stock pursuant to the exercise of nonqualified
stock options. Options are granted at a price not less than the fair value of
the shares on the date of grant and expire not later than ten years after the
date of grant. Options vest over a three-year period. Our officers and key
employees participate in this plan.

     We account for the 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 in the Statements of Earnings because
options are granted at a price not less than the fair value of the shares on the
date of the grant. In fiscal 1997, we adopted the disclosure provisions of SFAS
No.123, "Accounting for Stock-Based Compensation."

     Had the compensation cost for the stock option plan been determined based
on the fair value at the grant dates for awards under the plan, consistent with
the alternative method set forth under SFAS 123, our net loss would have been
changed to the pro forma (for the purpose of applying SFAS 123) amounts set
forth below:

<TABLE>
<CAPTION>
                                                                                                 1999               1998
                                                                                              -----------        -----------
<S>                                                                                           <C>                <C>
Reported net loss                                                                             $ (126,331)        $   (6,399)
Pro forma (for the purpose of applying SFAS 123) net loss                                     $ (131,025)        $   (8,843)
Reported loss per share                                                                       $    (2.78)        $    (0.14)
Pro forma (for the purpose of applying SFAS 123) loss per share                               $    (2.88)        $    (0.19)
</TABLE>


     The fair value of each option grant was estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in fiscal 1999 and fiscal 1998:

<TABLE>
<CAPTION>
                                                                                                   1999               1998
                                                                                                -----------        -----------
<S>                                                                                             <C>                <C>
Risk-free interest rate                                                                                 4.9%               5.6%
Expected life of option                                                                              6 YEARS            6 years
Expected volatility of Vlasic stock                                                                    55.0%              27.0%
Expected dividend yield on Vlasic stock                                                                 0%                 0%
</TABLE>

                                      (35)
<PAGE>   29
NOTES TO CONSOLIDATED FINANCIAL               [VLASIC FOODS INTERNATIONAL LOGO]
STATEMENTS (CONTINUED
--------------------------------------------------------------------------------

(in thousands, except per share amounts)


     The weighted-average fair value of options granted during fiscal 1999 and
fiscal 1998 is as follows:

<TABLE>
<CAPTION>
                                             1999      1998
                                          -------   -------
<S>                                       <C>       <C>
Fair value of each option granted         $  9.04   $  8.72
Number of options granted                     113     1,665
                                          -------   -------
Total fair value of all options granted   $ 1,022   $14,519
                                          =======   =======
</TABLE>


     In accordance with SFAS 123, the weighted-average fair value of stock
options granted is required to be based on a theoretical statistical model in
accordance with assumptions noted above. In actuality, because employee stock
options do not trade on a secondary exchange, employees receive no benefit and
derive no value from holding stock options under these plans without an increase
in the market price of our stock.

     The following table summarizes the stock option transactions under the
Vlasic incentive plan:

<TABLE>
<CAPTION>
                                                                            Weighted
                                                                             Average
                                                                            Exercise
                                                                Shares        Price
                                                              -----------  -----------
<S>                                                           <C>           <C>
Converted from Campbell as of the spin-off date,
  March 30, 1998                                                   2,287    $   15.02
   Granted                                                         1,665        22.66
   Exercised                                                         (33)       12.87
                                                                  ------    ---------
Outstanding, August 2, 1998                                        3,919        18.29
                                                                  ------    ---------
   Granted                                                           113        16.29
   Exercised                                                         (14)       13.63
   Cancelled                                                        (408)       21.06
                                                                  ------    ---------
Outstanding, August 1, 1999                                        3,610    $   17.93
                                                                  ======    =========
</TABLE>


     The following table summarizes information for options currently
outstanding at August 1, 1999:

<TABLE>
<CAPTION>
                                                      Options Outstanding                            Exercisable Options
                                        ------------------------------------------------        ------------------------------
                                                            Weighted           Weighted                             Weighted
                                                             Average            Average                              Average
                                                            Remaining          Exercise                             Exercise
Range of Prices                           Shares              Life               Price            Shares              Price
                                        -----------        -----------        -----------       -----------        -----------
<S>         <C>                               <C>                <C>          <C>                     <C>          <C>
$   9.71  - $ 13.70                           1,476              7 YRS        $    12.98              1,428        $    12.99
$  14.28  - $ 19.87                             751              8 YRS             18.96                419             18.98
$  19.91  - $ 22.94                           1,383              9 YRS             22.66                115             22.58
                                        -----------        -----------        -----------       -----------        -----------
$   9.71  - $ 22.94                           3,610              8 YRS        $    17.93              1,962        $    14.84
                                        ===========        ===========        ===========       ===========        ===========
</TABLE>


     RESTRICTED STOCK. In connection with the separation from Campbell,
restricted stock on which the earnings-based restriction period ended in fiscal
1998 was issued in the form of Campbell stock. Restricted stock for Vlasic's
employees with an earnings-based restriction period ending in fiscal 2000 were
canceled.

                                      (36)
<PAGE>   30
NOTES TO CONSOLIDATED FINANCIAL                                    [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)

9.  TAXES ON EARNINGS

<TABLE>
<CAPTION>

PROVISION FOR INCOME TAXES                                   1999          1998          1997
                                                           ---------     ---------     ---------
<S>                                                        <C>           <C>           <C>
Currently payable

   Federal                                                 $   2,051     $  16,340     $  22,229
   State                                                         714         4,285         3,521
   Non-U.S                                                     4,173         2,454         2,526
                                                           ---------     ---------     ---------
                                                               6,938        23,079        28,276
                                                           ---------     ---------     ---------

Deferred

   Federal                                                     7,504        (5,238)        7,258
   State                                                       1,263        (2,835)        1,207
   Non-U.S                                                        95           372           734
                                                           ---------     ---------     ---------
                                                               8,862        (7,701)        9,199
                                                           ---------     ---------     ---------
     Total                                                 $  15,800     $  15,378     $  37,475
                                                           =========     =========     =========

Earnings (loss) before income taxes:

   United States                                           $   8,194     $  41,037     $  85,965
   Non-U.S                                                  (118,725)      (31,458)       29,650
                                                           ---------     ---------     ---------
     Total                                                 $(110,531)    $   9,579     $ 115,615
                                                           =========     =========     =========
</TABLE>

<TABLE>
<CAPTION>
EFFECTIVE INCOME TAX RATES                                      1999          1998          1997
                                                           ---------     ---------     ---------
<S>                                                        <C>           <C>           <C>
Federal statutory income tax rate                               35.0%         35.0%         35.0%
State income taxes (net of federal benefit)                      2.3%          1.8%          2.6%
Tax effect resulting from other international activities        (2.6%)         3.9%         (1.1%)
Tax loss carryforwards                                          (1.0%)        (0.8%)        (1.6%)
Nontaxable export rebate                                          --            --          (2.7%)
Other                                                            1.8%          1.6%          0.2%
                                                           ---------     ---------     ---------
   Effective income tax rate                                    35.5%         41.5%         32.4%
                                                           =========     =========     =========
</TABLE>

     Including the impact of special items, the effective income tax rate would
have been (14.3%) in fiscal 1999 and 160.5% in fiscal 1998.

<TABLE>
<CAPTION>
DEFERRED TAX LIABILITIES
  AND ASSETS                          1999         1998
                                    ---------    ---------
<S>                                 <C>          <C>
Depreciation                        $  30,239    $  26,741
Capitalized interest                    1,183        7,637
Other                                   8,564        7,117
                                    ---------    ---------
   Deferred tax liabilities            39,986       41,495
                                    ---------    ---------

Benefits and compensation              20,788       16,881
Restructuring accruals                  4,000        5,395
Tax loss and credit carryforwards     108,551       32,402
Other                                   2,281        3,134
                                    ---------    ---------
   Deferred tax assets                135,620       57,812
Valuation allowance                   (97,899)     (17,918)
                                    ---------    ---------
   Deferred tax assets, net            37,721       39,894
                                    ---------    ---------
   Net deferred tax liability       $   2,265    $   1,601
                                    =========    =========
</TABLE>

                                      (37)
<PAGE>   31
NOTES TO CONSOLIDATED FINANCIAL                                    [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)

     We have available net operating loss carryforwards of approximately $15
million in the United States which expire in 2018 and approximately $18 million
in the United Kingdom which may be carried forward indefinitely. A partial
valuation allowance of $0.6 million is recorded as a reduction to our estimate
of the deferred tax assets relating to the United Kingdom tax loss carryforwards
due to the uncertainty of the ultimate realization of future benefits from such
assets.

     We have a capital loss carryforward of approximately $95 million for income
tax purposes that expires 2004. The carryforward was primarily generated from
the divestiture of our Swift-Armour Argentine beef business in fiscal 1999.
Additionally, we have a foreign tax credit carryforward of $2.3 million for
income tax purposes that expires 2004. The foreign tax credit was primarily
generated from the repatriation of earnings from the United Kingdom and Canada.
A valuation allowance was deducted for the full amount of the deferred tax
benefit related to the capital loss carryforward and the foreign tax credit.
Divested businesses decreased our net deferred tax liabilities by $7.8 million
in fiscal 1999.

     During fiscal 1999, $15 million of non-U.S. earnings from the United
Kingdom and Canada were repatriated. In general, it is our practice and
intention to reinvest the earnings of our non-U.S. subsidiaries in those
operations. Applicable federal taxes are provided only on amounts planned to be
remitted. Accumulated net earnings of non-U.S. subsidiaries for which no federal
taxes have been provided as of August 1, 1999 were approximately $20 million,
which does not include amounts that, if remitted, would result in little or no
additional tax because of the availability of tax credits or other deductions.
These earnings, if remitted, would be subject to U.S. taxes at the statutory
rate. However, the U.S. taxes may be reduced or mitigated by available tax
credits.

10.  TRANSACTIONS WITH CAMPBELL SUBSEQUENT TO THE SPIN-OFF

     We sold to Campbell beef and mushrooms for use as ingredients in Campbell's
finished products and frozen foodservice finished products from our agriculture
products segment. We also purchased from Campbell retail frozen food finished
products in Canada and purchased Open Pit barbeque sauce in fiscal 1998 and
fiscal 1997. These transactions were at negotiated prices. Included in the
Consolidated Statements of Earnings are sales to Campbell of $148,083 in fiscal
1999, $154,764 in fiscal 1998 and $155,563 in fiscal 1997. Included in Costs of
product sold are purchases from Campbell of $11,585 in fiscal 1999, $24,696 in
fiscal 1998 and $26,255 in fiscal 1997.

     We entered into a multi-year agreement with Campbell for the continued (1)
supply of beef and mushrooms, and production of frozen foodservice products in
the United States by us and (2) production of frozen retail products in Canada
by Campbell. As a result of the divestiture of our Swift-Armour Argentine beef
business, the beef supply contract was terminated in July 1999. In connection
with the spin-off, we entered into an agreement with Campbell for transitional
services such as administrative and support services that terminated April 1999.
The transitional service agreement provided that we pay a fee intended to
approximate Campbell's cost to provide such services. These fees amounted to
$8,943 in fiscal 1999 and $9,078 in fiscal 1998 for the four months following
the spin-off.

11.  TRANSACTIONS WITH CAMPBELL PRIOR TO THE SPIN-OFF

     Certain Vlasic businesses participated in Campbell's centralized cash
management system to finance operations. Cash deposits from Vlasic were
transferred to Campbell on a daily basis and Campbell funded Vlasic disbursement
bank accounts as required. Unpaid balances of checks were included in accounts
payable. No interest was charged on transactions with Campbell. Campbell
provided certain selling, general and administrative services to Vlasic
including finance, legal, information technology, research and development,
benefits, facilities and shared sales and distribution support. These expenses
were allocated to Vlasic based on net sales, utilization or other methods which
management believes to be reasonable. These allocations were $33,601 in the
first eight months of fiscal 1998 prior to the spin-off, and $51,288 in fiscal
1997 and are included in the appropriate lines of the Consolidated Statements of
Earnings. The expenses allocated to Vlasic for these services are not
necessarily

                                      (38)
<PAGE>   32
NOTES TO CONSOLIDATED FINANCIAL            [VLASIC FOODS INTERNATIONAL LOGO]
STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

indicative of the expenses that would have been incurred if Vlasic had been a
separate, independent entity and had managed these functions. Subsequent to the
spin-off, Vlasic manages these functions. Vlasic was included in the combined
federal and certain state income tax returns of Campbell prior to spin-off.
Income tax expense was calculated as if Vlasic had filed separate income tax
returns for the entire fiscal year.

12.  OTHER EXPENSE (INCOME)

<TABLE>
<CAPTION>
                                                1999       1998       1997
                                              -------    -------    -------
<S>                                           <C>        <C>        <C>
Amortization of intangible and other assets   $ 2,833    $ 2,738    $ 2,764
Campbell stock related incentive programs          --      3,207      8,628
Gain on asset sales                                --     (3,957)    (8,179)
Gains on fire insurance settlement                 --     (2,814)        --
Other, net                                     (1,412)    (2,101)      (767)
                                              -------    -------    -------
   Total                                      $ 1,421    $(2,927)   $ 2,446
                                              =======    =======    =======
</TABLE>

     Fiscal 1998 was the last year which included charges pertaining to
Campbell's stock related incentive programs.

13.  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

     In the second quarter of fiscal 1998, we adopted Emerging Issues Task Force
(EITF) Issue 97-13, "Accounting for Costs Incurred in Connection with a
Consulting Contract that Combines Business Process Reengineering and Information
Technology Transformation." The EITF provided that costs of business process
reengineering activities that are part of a systems development project are to
be expensed as incurred. We previously capitalized certain consulting costs
related to business process reengineering. The cumulative effect of this change
in accounting principle was a $600 charge (net of $370 tax), or $(0.01) per
diluted share for the fiscal year ended August 2, 1998.

14.  ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                1999         1998
                                              ---------    ---------
<S>                                           <C>          <C>
Customers                                     $  88,851    $ 106,246
Allowances for cash discounts and bad debts      (4,547)      (5,055)
                                              ---------    ---------
                                                 84,304      101,191
Other                                             7,389       26,453
                                              ---------    ---------
   Total                                      $  91,693    $ 127,644
                                              =========    =========
</TABLE>

15.  INVENTORIES

<TABLE>
<CAPTION>
                                           1999         1998
                                         ---------    ---------
<S>                                      <C>          <C>
Raw materials, containers and supplies   $  43,883    $  52,074
Finished product                           119,089      144,044
                                         ---------    ---------
                                           162,972      196,118
Less: Adjustment to LIFO basis             (14,341)     (12,355)
                                         ---------    ---------
   Total                                 $ 148,631    $ 183,763
                                         =========    =========
</TABLE>

     Inventories for which the last in, first out (LIFO) method of determining
cost is used represented approximately 75% and 62% of inventories in 1999 and
1998, respectively.

                                      (39)
<PAGE>   33
NOTES TO CONSOLIDATED FINANCIAL                [VLASIC FOODS INTERNATIONAL LOGO]
STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

16.  OTHER CURRENT ASSETS

<TABLE>
<CAPTION>
                                                                                    1999         1998
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Prepaid expenses                                                                  $   5,237    $   6,029
Deferred taxes                                                                       11,164       18,058
Other                                                                                    --        1,113
                                                                                  ---------    ---------
   Total                                                                          $  16,401    $  25,200
                                                                                  =========    =========
</TABLE>

17.  PLANT ASSETS

<TABLE>
<CAPTION>
                                                                                    1999         1998
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Land                                                                              $   7,843    $  16,615
Building                                                                            197,770      294,224
Machinery and equipment                                                             380,874      538,228
Projects in progress                                                                 36,430       28,063
                                                                                  ---------    ---------
                                                                                    622,917      877,130
Accumulated depreciation                                                           (305,266)    (357,055)
                                                                                  ---------    ---------
   Total                                                                          $ 317,651    $ 520,075
                                                                                  =========    =========
</TABLE>

     Depreciation provided in costs and expenses was $41,743 in fiscal 1999,
$42,387 in fiscal 1998 and $42,044 in fiscal 1997. Fiscal 2000 capital
expenditures are expected to approximate $35 million.

18.  OTHER ASSETS, PRINCIPALLY INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                                                    1999         1998
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Purchase price in excess of net assets of businesses acquired (goodwill)          $  41,117    $  41,771
Trademarks                                                                           13,875       19,850
Other intangibles                                                                    36,920       36,920
                                                                                  ---------    ---------
                                                                                     91,912       98,541
Accumulated amortization                                                            (23,249)     (21,106)
                                                                                  ---------    ---------
   Total intangible assets                                                           68,663       77,435
                                                                                  ---------    ---------

Deferred debt issuance costs, net                                                     7,868           --
Prepaid pension benefit costs                                                           461        3,348
Other assets                                                                          2,590        5,475
                                                                                  ---------    ---------
   Total                                                                          $  79,582    $  86,258
                                                                                  =========    =========
</TABLE>

     Deferred debt issuance costs were incurred in connection with our issuance
of senior subordinated notes and the amendment to our senior credit facility.

19.  PAYABLES TO SUPPLIERS AND OTHERS

<TABLE>
<CAPTION>
                                                                                    1999         1998
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Trade payables                                                                    $  88,691    $ 113,340
Book overdrafts                                                                      11,185        7,870
                                                                                  ---------    ---------
   Total                                                                          $  99,876    $ 121,210
                                                                                  =========    =========
</TABLE>

     Book overdrafts represent outstanding checks in excess of funds on deposit.

                                      (40)
<PAGE>   34
NOTES TO CONSOLIDATED FINANCIAL                                     [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

20.  ACCRUED LIABILITIES

<TABLE>
<CAPTION>
                                                             1999       1998
                                                           --------   --------
<S>                                                        <C>        <C>
Employee compensation and benefits                         $  7,097   $ 20,147
Accrued pension benefit costs                                 3,030      1,524
Marketing                                                    10,052     16,778
Restructuring                                                 1,349     24,734
Interest                                                      4,364      2,874
Other                                                        28,095     27,273
                                                           --------   --------
   Total                                                   $ 53,987   $ 93,330
                                                           ========   ========
</TABLE>


21.  OTHER LIABILITIES

<TABLE>
<CAPTION>
                                                             1999       1998
                                                           --------   --------
<S>                                                        <C>        <C>
Postretirement benefits                                    $ 35,921   $ 32,493
Deferred compensation                                         6,459      7,721
Postemployment benefits                                       6,834      6,834
                                                           --------   --------
   Total                                                   $ 49,214   $ 47,048
                                                           ========   ========
</TABLE>

22.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                             1999       1998
                                                           --------   --------
<S>                                                        <C>        <C>
Senior credit facility                                     $271,900   $557,000
$200 million 10 1/4% Senior subordinated notes due 2009,
   less unamortized discount                                196,962         --
Capital lease obligations and other                             272      1,873
                                                           --------   --------
   Total                                                   $469,134   $558,873
                                                           ========   ========
</TABLE>

     In connection with the spin-off, we incurred debt of approximately $560
million under a five-year $750 million unsecured revolving credit facility,
consisting of $500 million indebtedness assumed from Campbell and $60 million
incurred to repay certain intercompany payables representing advances from
Campbell to subsidiaries of Vlasic.

     We entered into an amended and restated credit agreement dated September
30, 1998 with various lenders providing for senior secured credit facilities.
Effective June 9, 1999, we further amended our restated senior credit facility
with Amendment No. 1 to the restated senior credit facility. The senior credit
facility consists of (1) a senior secured term loan in a principal amount of
$100 million and (2) senior secured revolving credit commitments providing for
revolving loans, initially in the aggregate amount of up to $550 million. We are
required to make mandatory prepayments on the senior credit facility and
permanently reduce revolving credit commitments under certain circumstances,
including upon certain asset sales, issuance of debt securities, issuance of
equity securities and receipt of casualty proceeds which include property
insurance proceeds and condemnation awards. At our option, subject to certain
requirements, loans may be prepaid in whole or in part. As a result of the
application of the net proceeds from the sale of our senior subordinated notes
and the divestiture of our Swift-Armour Argentine beef business, the amount
available to be borrowed under the revolving credit commitments was permanently
reduced to $279 million. Loans under the revolving credit commitments will be
available at any time through the final maturity date on February 20, 2003 and
the term loan matures on February 20, 2003. As of August 1, 1999, $107.1 million
was available under the revolving credit commitments.

     Borrowings under the amended revolving credit facility and the term loan
bear interest at rates that, at our option, vary with the prime rate, CD rate,
LIBOR or money market rates plus applicable credit margins. The average interest
rate at August 1, 1999 was 7.2%. We are obligated to pay a facility fee ranging
from 0.15% to 0.5% on the credit exposure of the banks.

                                      (41)
<PAGE>   35
NOTES TO CONSOLIDATED FINANCIAL                                     [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------

(in thousands, except per share amounts)

     On June 29, 1999, we issued senior subordinated notes with an aggregate
principal amount of $200 million at an issue price of 98.472%. The notes mature
on July 1, 2009. The approximately $189 million of net proceeds from the
offering were used to repay a portion of the indebtedness outstanding under our
senior credit facility. Interest on the notes accrues at the rate of 10 1/4% per
annum and is payable semi-annually in arrears on January 1 and July 1 of each
year, commencing on January 1, 2000. On or after July 1, 2004, the notes may be
redeemed in whole or in part at a stated price.

     The senior credit facility and our senior subordinated debt contain a
number of significant covenants that, among other things, restrict our ability
to engage in mergers and sales of assets, create liens on our assets, incur
additional indebtedness, make investments and acquisitions, or engage in
transactions with our subsidiaries and affiliates. In addition, under the senior
credit facility, we are required to comply with specified ratios and tests,
including maximum debt/EBITDA ratio, minimum fixed charge coverage ratio and a
limitation on capital expenditures. Under the senior subordinated debt we are
required to comply with a minimum fixed charge coverage ratio. A breach of any
of these covenants could result in a default under our debt agreements. A
default, if not waived, could result in acceleration of our indebtedness, in
which case the debt would become immediately due and payable. If this occurs, we
may not be able to repay our debt or borrow sufficient funds to refinance it.
Even if new financing is available, it may not be on terms that are acceptable
to us. As of August 1, 1999, we were in compliance with the covenants. If we are
not successful in executing our business plan, we may not continue to be in
compliance with the covenants.

23.  FINANCIAL INSTRUMENTS

     We utilize derivative financial instruments to enhance our ability to
manage risks, including interest rate and foreign currency, which exist as part
of ongoing business operations. We do not enter into contracts for speculative
purposes, nor are we a party to any leveraged derivative instrument. The use of
derivative financial instruments is monitored through regular communication with
senior management and the utilization of written guidelines.

     We rely primarily on bank and public bond market borrowings to meet our
funding requirements. We utilize interest rate swap agreements to reduce the
potential exposure to interest rate movements and to achieve a desired
proportion of variable versus fixed rate debt. The amounts paid or received on
hedges related to debt are recognized as an adjustment to interest expense. The
notional amount of the outstanding interest rate swap was $50 million at August
1, 1999. As a result of the net proceeds received from the sale of the senior
subordinated notes and the Swift-Armour Argentine beef business, the amount
available to be borrowed under the revolving credit commitments was permanently
reduced to $279 million. Accordingly, we settled two interest rate swap
contracts during the fourth quarter of fiscal 1999 with a total notional amount
of $100 million for a $1.2 million gain which was recorded as a reduction of
interest expense.

     We utilize an irrevocable standby letter of credit with one-year renewable
terms to satisfy worker's compensation self-insurance security deposit
requirements. The contract value of the outstanding standby letter of credit as
of August 1, 1999 was $2.7 million, which approximates fair value. We also
utilize foreign currency exchange contracts, including swap and forward
contracts, to hedge existing foreign currency exposures. Foreign exchange gains
and losses on derivative financial instruments are recognized and offset foreign
exchange gains and losses on the underlying exposures. At August 1, 1999, we had
contracts, which mature prior to December 1999, to receive approximately U.S.
$1.2 million and pay British pounds. The contracts are for our U.K. operations
which buy products from the United States.

     We are exposed to credit loss in the event of non-performance by the
counterparties in swap and forward contracts. We minimize our credit risk on
these transactions by only dealing with leading, credit-worthy financial
institutions having long-term credit ratings of "A" or better and, therefore, do
not anticipate non-performance. In addition, the contracts are distributed among
several financial institutions, thus minimizing credit risk concentration.

     The carrying values of cash and cash equivalents, accounts receivable,
accounts payable, and short-term and long-term debt approximate fair value.

                                      (42)
<PAGE>   36
NOTES TO CONSOLIDATED FINANCIAL                                     [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)


24.  STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                       1999      1998      1997
                    -------   -------   -------
<S>                 <C>       <C>       <C>
Interest paid       $43,031   $10,572   $ 1,600
Interest received   $   739   $   388   $   588
Income taxes paid   $ 6,938   $23,079   $28,276
</TABLE>

25. QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          1999
                                                         ---------------------------------------------------------------------
                                                              FIRST             SECOND             THIRD             FOURTH
                                                         -------------      -------------     -------------      -------------
<S>                                                      <C>                <C>               <C>                <C>
Net sales                                                $     327,050      $     356,625     $     320,633      $     303,678
Cost of products sold                                    $     236,539      $     249,209     $     222,175      $     214,434
Net earnings (loss)                                      $       4,664      $      11,805     $    (140,128)     $      (2,672)

Earnings (loss) per share - basic                        $        0.10      $        0.26     $       (3.08)     $       (0.06)
Earnings (loss) per share - assuming dilution            $        0.10      $        0.26     $       (3.08)(1)  $       (0.06)(1)

Market price
   High                                                  $    19 15/16      $    23 13/16     $      21          $       9 1/4
   Low                                                   $    14  3/16      $    18   1/2     $       7 15/16    $      6 15/16
</TABLE>

<TABLE>
<CAPTION>
                                                                                          1998
                                                         ---------------------------------------------------------------------
                                                              First             Second             Third             Fourth
                                                         -------------      -------------     -------------      -------------
<S>                                                      <C>                <C>               <C>                <C>
Net sales                                                $     347,852      $     375,317     $     320,694      $     313,411
Cost of products sold                                    $     251,340      $     267,884     $     231,457      $     227,344
Net earnings (loss)                                      $      16,073      $      18,238     $     (16,598)     $     (24,112)

Earnings (loss) per share - basic                        $        0.35      $        0.40     $       (0.37)     $      (0.53)
Earnings (loss) per share - assuming dilution            $        0.35      $        0.40     $       (0.37)(1)  $      (0.53)(1)

Market price
   High                                                                                       $       26 5/8     $     24 9/16
   Low                                                                                        $       21 7/8     $     16 9/16
</TABLE>

(1) Excludes potentially dilutive shares as the result would be antidilutive.

     Net earnings (loss) for fiscal 1999 includes the impact of special items
totaling $135.3 million before taxes, $142.3 million after taxes, including a $7
million income tax charge on repatriated foreign dividends, or $3.13 per share.
The second quarter fiscal 1999 included a gain of $3.2 million after tax or
$0.07 per share, the third quarter fiscal 1999 included net special items of
$146.8 million or $3.23 per share, and the fourth quarter fiscal 1999 included a
gain of $1.3 million or $0.03 per share.

     Net earnings (loss) for fiscal 1998 includes the impact of special items
totaling $42.5 million before taxes or $0.80 per share as follows: the
impairment loss on assets held for sale of $14.4 million or $0.32 per share in
the fourth quarter and year ended fiscal 1998 and a restructuring charge of
$28.1 million before tax, $21.8 million after tax or $0.48 per share, in the
third quarter and year ended fiscal 1998.

     Earnings (loss) per share calculations for each of the quarters are based
on the average shares outstanding for each period; consequently, the sum of the
quarters may not necessarily be equal to the full year earnings (loss) per share
amount.

                                      (43)
<PAGE>   37
NOTES TO CONSOLIDATED FINANCIAL                                     [VLASIC
STATEMENTS (CONTINUED)                                       FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)

     26. SUBSEQUENT EVENT

     The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As discussed in Note 22, we have
significant borrowings which require, among other things, compliance with
certain financial ratios, specifically a debt/EBITDA ratio and a fixed charge
coverage ratio, on a quarterly basis. As a result of operating losses incurred
during the quarter ended January 30, 2000, we were not in compliance with the
financial ratio covenants under our senior credit facility; however, we
requested and received a waiver through February 29, 2000. We have received a
further waiver of these financial ratio covenants from our lenders through June
20, 2000 in consideration for the payment of a fee and an increase in interest
rates. The waiver required delivery of and compliance with a cash budget and
established a minimum EBITDA test to be met as of April 30, 2000. If the minimum
EBITDA test is not met, the waiver will expire on May 31, 2000. Additionally, if
the cash budget is not met, we will be unable to borrow under the senior credit
facility. The waiver also required that the senior credit facility be secured by
liens on substantially all of our real property in the United States on or
before April 30, 2000.

     We fully expect to be in compliance with the minimum EBITDA test and the
other terms and conditions of the waiver and we do not anticipate needing any
additional borrowings through June 20, 2000.

     We are exploring strategic opportunities including, but not limited to,
potential divestitures, joint manufacturing or marketing ventures, acquisitions,
a merger, a recapitalization or other actions. The investment banking firm of
Lazard Freres & Co. has been hired to assist with this strategic review and to
formulate proposed plans and actions for the consideration of our Board of
Directors. Because Lazard Freres & Co. is currently conducting its review and
formulation of proposed plans and actions, no assessment can be made of the
likelihood that such plans and actions can be effectively implemented. Moreover,
regardless of the outcome of the strategic review, an extension of the existing
waiver, a new waiver covering certain terms and conditions of the senior credit
facility, an amendment of the senior credit facility, a de novo senior credit
facility or some combination of the above will be required. Without such an
action, we will be in default on June 20, 2000. Although no assurances can be
given, we expect that the plans and actions proposed by the strategic review and
to be acted upon by our Board of Directors will enable us to successfully
fulfill such requirement and that we will be able to effectively implement them.
In particular, we anticipate being able to negotiate with our present senior
credit bank syndicate, as is necessary, for an extension of the existing waiver
or for a new waiver, before the current waiver expires on June 20, 2000, so as
to preclude any acceleration of our indebtedness. Our continuation as a going
concern is dependent upon our ability to successfully establish the necessary
financing arrangements and to comply with the terms thereof.

     A breach of any of the terms and conditions of the waiver, or subsequent
breaches of the financial covenants under the senior credit facility could
result in acceleration of our indebtedness, in which case the debt would become
immediately due and payable. Based upon our current projections, we do not
believe we will comply with the existing financial covenants unless they are
modified, as they have been in the waiver. If there is no modification of the
existing financial covenants, we may not be able to repay our debt or borrow
sufficient funds to refinance it. Even if new financing is available, it may not
be on terms that are acceptable to us. We have, however, received such
modifications in the past in the form of waivers and an amendment to our senior
credit facility.

     Our ability to operate as a going concern is dependent on our ability to
successfully negotiate with our senior credit bank syndicate to preclude
acceleration after June 20, 2000. However, although no assurances can be given,
we remain confident that we will be able to continue operating as a going
concern.

                                      (44)
<PAGE>   38
SELECTED FINANCIAL DATA                                             [VLASIC
                                                             FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                         1999(1)           1998(2)             1997(3)(4)        1996(5)        1995
                                       -----------       -----------          -----------      -----------   -----------
<S>                                    <C>               <C>                  <C>              <C>           <C>
STATEMENT OF EARNINGS DATA:

Net sales                              $ 1,307,986       $ 1,357,274          $ 1,508,285      $ 1,498,967   $ 1,504,318
Earnings (loss) before cumulative
   effect of accounting change            (126,331)           (5,799)              78,140           60,867        70,982
Cumulative effect of accounting
   change                                       --              (600)                  --               --            --
Net earnings (loss)                       (126,331)           (6,399)              78,140           60,867        70,982
Earnings (loss) per share -- basic(6)  $     (2.78)      $     (0.14)
Weighted average shares
   outstanding -- basic                     45,500            45,458
Earnings (loss) per share --
   assuming dilution(6)                $     (2.78)      $     (0.14)
Weighted average shares
   outstanding -- assuming dilution         45,500(5)          45,458(6)

BALANCE SHEET DATA:

Total assets                           $   665,433       $   959,273          $   895,108      $   923,331   $   923,659
Long-term debt(7)                          469,134           558,873                2,252            3,166         3,591
Shareowners' equity (deficit) (7)          (20,401)          106,604              632,298          659,866       693,736
</TABLE>

(1) Includes after-tax special items of $142,314 or $3.13 per share, consisting
of $134,529 relating to the divestitures of our Kattus business and our
Swift-Armour Argentine beef business, net restructuring charges of $785 and a
$7,000 income tax charge for the impact of the repatriation of foreign
dividends.

(2) Includes after-tax special charges of $36,220, or $0.80 per share,
consisting of restructuring charges of $21,820 and an impairment loss of
$14,400. Also includes the cumulative effect of a change in accounting principle
for business process engineering costs -- a charge of $600 or $0.01 per share.

(3) Fiscal 1997 includes 53 weeks compared to 52 weeks in fiscal 1999, fiscal
1998, fiscal 1996 and fiscal 1995.

(4) Includes after-tax restructuring charges of $7,757.

(5) Includes after-tax restructuring charges of $22,842.

(6) Per share data for years prior to 1998 have not been presented because
Vlasic was not a publicly held company.

(7) At the March 30, 1998 spin-off, Vlasic assumed $500 million of long-term
debt from Campbell.

(8) Excludes potentially dilutive shares as the result would be antidilutive.

                                      (45)
<PAGE>   39
REPORT OF MANAGEMENT                                                [VLASIC
                                                             FOODS INTERNATIONAL
                                                                     LOGO]
--------------------------------------------------------------------------------
     The accompanying financial statements have been prepared by our management
in conformity with generally accepted accounting principles to reflect the
financial position of Vlasic and our operating results. Financial information
appearing throughout this Annual Report is consistent with that in the financial
statements. Management is responsible for the information and representations in
such financial statements, including the estimates and judgements required for
their preparation. In order to meet its responsibility, management maintains a
system of internal controls designed to assure that assets are safeguarded and
that financial records properly reflect all transactions. We also maintain a
worldwide auditing function to periodically evaluate the adequacy and
effectiveness of such internal controls, as well as our administrative
procedures and reporting practices.

     The report of PricewaterhouseCoopers LLP, our independent accountants,
covering their audit of the financial statements, is included in this annual
report. Their independent audit of our financial statements includes a review of
the system of internal accounting controls to the extent they consider necessary
to evaluate the system as required by generally accepted auditing standards. Our
internal auditors report directly to the Audit Committee of the Board of
Directors, which is composed entirely of Directors who are not officers or
employees of Vlasic.

     The Audit Committee meets periodically with the internal auditors, other
management personnel, and the independent accountants. The independent
accountants and the internal auditors have had, and continue to have, direct
access to the Audit Committee without the presence of other management
personnel, and have been directed to discuss the results of their audit work and
any matters they believe should be brought to the Committee's attention.

         /s/ Robert F. Bernstock                  /s/ Mitchell P. Goldstein
         ------------------------                 --------------------------
             Robert F. Bernstock                      Mitchell P. Goldstein
               President and                           Vice President and
           Chief Executive Officer                   Chief Financial Officer


     /s/ Joseph Adler
------------------------
         Joseph Adler
 Vice President and Controller


September 15, 1999

                                      (46)
<PAGE>   40
REPORT OF INDEPENDENT ACCOUNTANTS                                  [VLASIC
                                                             FOODS INTERNATIONAL
                                                                    LOGO]
--------------------------------------------------------------------------------
To the Board of Directors and Shareowners of Vlasic Foods International Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, shareowners' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of Vlasic
Foods International Inc. and its subsidiaries at August 1, 1999 and August 2,
1998, and the results of their operations and their cash flows for each of the
three years in the period ended August 1, 1999, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 26 to the financial
statements, the Company has been unable to maintain compliance with certain
financial ratio covenants of its bank borrowing which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regards
to this matter, including receipt on February 28, 2000 of a waiver of those
covenants through June 20, 2000, are also described in Note 26. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


/s/ PricewaterhouseCoopers LLP
------------------------------
Philadelphia, Pennsylvania
September 15, 1999,
except Note 26 which is as of
March 13, 2000

                                      (47)