<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-4199
CPC INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2385545
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
INTERNATIONAL PLAZA, P.O. BOX 8000
ENGLEWOOD CLIFFS, N.J. 07632-9976
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) 201-894-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
8 1/2% sinking fund
debentures, due April 15, 2016 New York
----------------------------- ---------------
New York Geneva
Chicago London
Common Stock Pacific Paris
par value $.25 per share Basle Zurich
Frankfurt
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K /X/
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Aggregate market value
Outstanding at held by non-affiliates of the
Class January 31, 1994 registrant at January 31, 1994
---------------------------- ---------------- ------------------------------
<S> <C> <C>
Common stock, par value $.25 149,733,814 $7,318,240,159
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of registrant's Annual Report to Stockholders for year
ended December 31, 1993 are incorporated into Part I, Part II hereof.
2. Portions of the registrant's Proxy Statement dated March 16, 1994
are incorporated into Part III hereof.
<PAGE> 2
PART I
ITEM 1. BUSINESS
CPC International Inc. and its consolidated subsidiaries (the
"Company") is a worldwide group of businesses, principally engaged in two major
industry segments: consumer foods and corn refining. The development of the
Company's business since the beginning of 1993 and financial information on
business segments and geographical divisions are described in the 1993 Annual
Report to Stockholders (the "Annual Report"), the following portions of which
are incorporated herein by reference:
- Text on pages 4 through 16 under the heading "Consumer Foods
Business".
- Text on pages 16 through 20 under the heading "Corn Refining".
- Text on pages 20 through 24 under the heading "New Frontiers".
- Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 27 through 30.
- Business Segment and Geographic Financial Information on pages
46 and 47.
- Financial Statements and Notes to Financial Statements on
pages 31 through 44.
The Company employs approximately 39,000 people of whom approximately
31,100 are located outside the United States. Total employee costs amounted to
$1.3 billion in 1993 compared with $1.2 billion and $1.1 billion in 1992 and
1991, respectively.
The Company's products are manufactured from raw materials, including
soybean and other vegetable oils, peanuts, corn and wheat, all of which are,
and are expected to continue to be, in adequate supply. As prices of these
materials depend upon a number of such unpredictable factors as farm plantings
and weather, and as the Company engages in only limited price hedging,
fluctuations in raw material prices may have an effect on the Company's
earnings.
The Company's products are sold primarily by the sales organizations
of its various operating units and subsidiaries. Exports represent a small
portion of total net sales. Mayonnaise sales accounted for 11.7 percent, 11.5
percent and 11.8 percent of consolidated net sales in 1993, 1992 and 1991,
respectively.
The Company has approximately 1,600 trademarks, some of which are of
significant importance to the Company, particularly in the consumer foods
business. The Company also has over 1,600 patents of various durations, some
of which are licensed to affiliates and joint ventures in which the Company or
an affiliate participates. No individual patent has a material effect on the
earnings of the Company.
The Company's products, both within the United States and abroad,
generally face strong competition, and as a result, the Company engages in
extensive marketing, advertising and promotional activities, particularly with
respect to its consumer products. The Company also conducts continuous market
research to assist in determining consumer preferences. The amount spent on
these activities was $643 million in 1993, $663.5 million in 1992, and $624.2
million in 1991.
1
<PAGE> 3
In addition, the Company conducts product and process research and
development activities. Research related to food and food technology is
conducted at facilities in Somerset, New Jersey, Heilbronn, Germany, and
Thayngen, Switzerland, and corn refining research and product support
activities are provided from facilities at Argo, Illinois and Beloit,
Wisconsin.
Research has resulted in the development of new and improved products
based on studies in nutrition, food technology, vegetable oils, enzymes,
carbohydrates, and carbohydrate-derived products, as well as developments and
improvements in process technology. The amount spent for research and
development in 1993, 1992, and 1991 was $49.3 million, $45.7 million, and $39.6
million, respectively. Research and development expenditures increased by $3.6
million in 1993 reflecting mostly additional spending for consumer foods
research. Approximately 600 full-time professional employees were engaged in
such activities during 1993.
The Company operates in 58 countries, and accordingly, operations are
subject to varying degrees of political risk and uncertainty. Loss of earnings
from any one country other than the United States would not have a material
adverse effect on the Company as a whole.
ITEM 2. PROPERTIES
The Company's headquarters buildings in Englewood Cliffs, New Jersey
are held under a lease which, including all renewal terms, expires in May 2019.
The Company owns or leases other property appropriate to its business,
including distribution centers and warehouses. None of the leases involved is
considered to be a material lease.
The Company has a total of 134 operating plants, of which 29 are in
the United States, 8 in Canada, 38 in Europe, 14 in Africa and the Middle East,
34 in Latin America and 11 in Asia. These include seven plants owned by joint
ventures in Hong Kong, Malaysia, Philippines, Taiwan and Thailand in which the
Company owns fractionally more than 50% of the equity. The Company has a 50%
interest in other joint ventures which operate three plants, one of which is
located in each of Asia (consumer foods products), Latin America (corn refining
products), and the United States (fuel ethanol).
Of the Company's 134 plants, 112 plants are engaged solely in the
manufacture of consumer food products, 21 are engaged in the manufacture of
corn refining products, 8 of which also produce consumer food products; and 1
plant is engaged in the manufacture of other products. In general, it is the
Company's belief that its plants are suitable and adequate for its needs, and,
subject to fluctuations in market demand, are fully utilized.
Included on the following page is a complete listing of all plants
owned and operated by the Company and its consolidated subsidiaries as of
December 31, 1993. Based on past loss experience, the Company believes it is
adequately insured in respect of these assets, and for liabilities which are
likely to arise from its operations.
2
<PAGE> 4
THE CONSUMER FOODS FACILITIES ARE AS FOLLOWS:
UNITED STATES: ARKANSAS-Little Rock; CALIFORNIA-Placentia, Santa Fe Springs;
CONNECTICUT-Greenwich; FLORIDA-Riviera Beach, West Palm Beach; ILLINOIS-Argo,
Chicago, Franklin Park; INDIANA-Indianapolis; MASSACHUSETTS-Weymouth;
MARYLAND-Frederick; NORTH CAROLINA- Asheboro, Gastonia; NEW JERSEY-Bayonne,
Jersey City, Totowa; NEW YORK-Bronx; TEXAS-Irving; WASHINGTON-Seattle;
WISCONSIN-Germantown, Milwaukee (2), Oconomowoc; PUERTO RICO-Arecibo
CANADA: ONTARIO-Cardinal; QUEBEC-Baie d'Urfe, Boisbriand, Pointe
Claire(2)
EUROPE: AUSTRIA-Wels; CZECH REPUBLIC-Hradec, Zabreh; DENMARK-Copenhagen,
Frederiksberg, Levring, Rodovre, Vadum; FRANCE-Duppigheim (2), Faverolles,
Ludres (Nancy), Verneuil; GERMANY-Auerbach, Bremen, Heilbronn, Krefeld,
Reinbek, Wittingen; GREECE-Schimatari; HUNGARY-Roszke; IRELAND-Dublin;
ITALY-Acerra, Calderara (Bologna), Sanguinetto; NETHERLANDS-Baarn, Loosdrecht;
POLAND-Poznan (2); PORTUGAL-Carregado; SPAIN-Martorell; SWEDEN-Simrishamn;
SWITZERLAND-Carouge, Thayngen; UNITED KINGDOM-Burton-on-Trent, Lifton, Paisley,
Redditch
LATIN AMERICA: ARGENTINA-Barracas, Florida, Mendoza, Pilar, Tucuman;
BRAZIL-Anastacio, Campina Grande, Garanhuns, Pouso Alegre, Resende;
COLOMBIA-Barranquilla (2), Cali; COSTA RICA-Ala Juela; DOMINICAN REPUBLIC-Santo
Domingo; MEXICO-Aguascalientes, Aguida, Lerma; PERU-Callao; URUGUAY-San Carlos;
VENEZUELA-Maracay, Valencia
AFRICA & MIDDLE EAST: ISRAEL-Arad, Arara, Beit-Yitzak, Hadera, Haifa, Zefat;
KENYA-Nairobi, Nakuru; LA REUNION-Bras-Panon; MOROCCO- Casablanca; SAUDI
ARABIA-Yanbu; TUNISIA-Grombalia; TURKEY-Cayirova,
ASIA: HONG KONG-Tai Po; INDIA-Dharwad, Thane; MALAYSIA-Kuala Lumpur;
PHILIPPINES-Las Pinas, Paranaque; TAIWAN-Hsin Chu Hsien, Tu-Cheng;
THAILAND-Bangpoo
THE CORN REFINING FACILITIES ARE AS FOLLOWS:
UNITED STATES: CALIFORNIA-Stockton; ILLINOIS-Argo; NORTH CAROLINA-Winston-Salem
CANADA: ONTARIO-Cardinal, London, Port Colborne
LATIN AMERICA: ARGENTINA-Baradero*, Rio Segundo; BRAZIL-Balsa Nova, Cabo*,
Mogi-Guacu*; CHILE-Llay-Llay*; COLOMBIA-Barranquilla, Cali*, Medellin;
HONDURAS-San Pedro Sula*; MEXICO-Guadalajara*, San Juan del Rio
ASIA: MALAYSIA-Petaling Jaya; PAKISTAN-Faisalabad*
AFRICA: KENYA-Eldoret
The OTHER PRODUCTS facility which produces enzymes is located in Beloit,
Wisconsin.
__________
* Indicates corn refining plant that also produce consumer foods
products.
3
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS
There have been no material developments in the legal proceedings as
previously reported on Form 10-Q for the quarter ended June 30, 1993.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of all elected officers of the
Registrant, as of December 31, 1993, indicating their positions and offices
with the Registrant and the period during which each has served as such:
<TABLE>
<CAPTION>
All positions and offices
Name Age with the Registrant
---- --- -------------------------
<S> <C> <C>
Charles R. Shoemate 54 Chairman of the Board since September 1990;
Chief Executive Officer since August 1990;
President since October 1988;
Vice President, 1984 - October 1988 and
Director since October 1988.
Robert J. Gillespie 51 Senior Vice President since September 1991;
Vice President since 1981
and Director since October 1988.
Alain Labergere 59 Senior Vice President since November 1991;
Vice President since January 1991 and
Director since December 1992.
Konrad Schlatter 58 Chief Financial Officer since July 1993;
Senior Vice President since April 1990;
Vice President since 1987, Comptroller
1981-1987.
Clifford B. Storms 61 Senior Vice President since October 1988,
Vice President, 1973 - October 1988;
and General Counsel since 1975.
Angelo S. Abdela 51 Vice President since 1990; Treasurer since 1981.
Richard P. Bergeman 55 Vice President since 1982.
Michael J. Bevilacqua 54 Vice President since 1992.
Charles Feldberg 60 Vice President since 1984.
Gordon F. Granger 56 Vice President since 1990.
Lawrence K. Hathaway 49 Vice President since 1990.
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C> <C>
Bernard H. Kastory 48 Vice President since 1992.
Axel C.A. Krauss 49 Vice President since 1992.
Fred C. Meendsen 60 Vice President since 1984.
Eugene J. Northacker 52 Vice President since 1992.
John W. Scott 58 Vice President since 1985.
Samuel C. Scott 49 Vice President since 1991.
James E. Healey 52 Comptroller since 1987.
John B. Meagher 57 Secretary since 1981.
</TABLE>
All of the above officers, except Lawrence K. Hathaway who joined the
Company in May 1989, have been executives of the Company for at least five
years.
Mr. Hathaway joined CPC in May 1989 as president of the Best Foods
Grocery Products Unit. Prior to that, he was president of the convenience food
division and then the cereals division of the Quaker Oats Company. Before
joining Quaker in 1986, he was division president and general manager - health
and beauty products for Chesebrough-Pond's Inc.
All officers serve at the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTER
Information regarding the principal markets for the Company's common
stock and market prices for each quarterly period during the past two years is
set forth on pages 48 and 49 of the Annual Report and is incorporated herein by
reference.
The approximate number of equity stockholders as of December 31, 1993
was 31,400.
The history of the Company's dividends declared for the last two years
on pages 48 and 49 of the Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the eleven years ended December 31, 1993
for the Company, as set forth on pages 48 and 49 of the Annual Report, is
incorporated herein by reference.
5
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and
results of operations of the Company for the three years ended December 31,
1993, is set forth on pages 27 through 30 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements comprising the consolidated balance sheets at
December 31, 1993, 1992, and 1991, consolidated statements of income,
stockholders' equity and cash flows, and notes to financial statements for the
years then ended, are set forth on pages 31 through 44 of the Annual Report.
Selected quarterly financial data for the years ended December 31,
1993 and December 31, 1992, set forth on pages 48 and 49 of the Annual Report
is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's Proxy Statement dated March 16, 1994 (the "1994 Proxy
Statement") has been filed pursuant to Regulation 14A and is incorporated
herein by reference. Information regarding directors of the registrant is set
forth on pages 14 through 19 of the 1994 Proxy Statement under the caption
"Election of Directors". Information regarding executive officers of the
registrant is set forth on pages 4 and 5 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth on pages 9
through 13 of the 1994 Proxy Statement under the caption "Executive
Compensation and Stock Ownership Tables".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is set forth on pages 9 and 13 of the 1994 Proxy Statement under the
caption "Executive Compensation and Stock Ownership Tables".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
6
<PAGE> 8
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
a) Financial Statements - See index on page 8.
b) Reports on Form 8-K - There was one report filed on Form 8-K during
the fourth quarter of 1993 discussing under Item 5 "Other Events" the Company's
termination of its agreement to form a joint venture in Europe.
c) Exhibits - Exhibits to this report are filed as part of this report
as set forth in the Index to Exhibits on pages 15 and 16 hereof.
7
<PAGE> 9
INDEX TO FINANCIAL STATEMENTS
1. The consolidated financial statements and reports of the independent
auditors are included in Part II of this report through incorporation
by reference from the Annual Report which is enclosed as Exhibit 13.
The documents referred to above can be found on the following pages in
the Annual Report.
<TABLE>
<CAPTION>
Annual Report
Page
-------------
<S> <C> <C>
a) Independent auditors' report 45
b) Consolidated balance sheets as of December 31,
1993, 1992 and 1991 32 - 33
c) Consolidated statements of income for the years
ended December 31, 1993, 1992 and 1991 31
d) Consolidated statements of cash flows for the
years ended December 31, 1993, 1992 and 1991 34
e) Consolidated statements of stockholders' equity for
the years ended December 31, 1993, 1992 and 1991 35
f) Notes to financial statements 36 - 44
</TABLE>
2. The following financial statement schedules and documents are
submitted herein on pages indicated below:
<TABLE>
<CAPTION>
10-K
Page
------
<S> <C> <C>
a) Independent auditors' report 11
b) Financial statement schedules for the years ended
December 31, 1993, 1992 and 1991:
V - Property, plant and equipment 12
VI - Accumulated depreciation, depletion and
amortization of property, plant and equipment 13
X - Supplementary income statement information 14
</TABLE>
All other schedules have been omitted either because the information
is not required or is otherwise included in the financial statements
and notes thereto.
8
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 15th day of
March, 1994.
CPC INTERNATIONAL INC.
By /s/ CHARLES R. SHOEMATE
-----------------------------------------
Charles R. Shoemate, Chairman,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on the 15th day of March, 1994.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ CHARLES R. SHOEMATE Chairman, President, and Chief
- --------------------------------- Executive Officer
(Charles R. Shoemate)
/s/ KONRAD SCHLATTER Senior Vice President and Chief
- --------------------------------- Financial Officer
(Konrad Schlatter)
/s/ JAMES E. HEALEY Comptroller and Chief Accounting
- --------------------------------- Officer
(James E. Healey)
/s/ THEODORE H. BLACK * Director
- ---------------------------------
(Theodore H. Black)
/s/ JEWEL PLUMMER COBB * Director
- ---------------------------------
(Jewel Plummer Cobb)
/s/ WILLIAM C. FERGUSON * Director
- ---------------------------------
(William C. Ferguson)
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C>
/s/ ROBERT J. GILLESPIE * Director
- ---------------------------------
(Robert J. Gillespie)
/s/ ELLEN R. GORDON * Director
- ---------------------------------
(Ellen R. Gordon)
/s/ GEORGE V. GRUNE * Director
- ---------------------------------
(George V. Grune)
/s/ LEO I. HIGDON, JR. * Director
- ---------------------------------
(Leo I. Higdon, Jr.)
/s/ RICHARD G. HOLDER * Director
- ---------------------------------
(Richard G. Holder)
/s/ PAUL W. JOY * Director
- ---------------------------------
(Paul W. Joy)
/s/ ALAIN LABERGERE * Director
- ---------------------------------
(Alain Labergere)
/s/ ROBERT E. MERCER * Director
- ---------------------------------
(Robert E. Mercer)
/s/ WILLIAM S. NORMAN * Director
- ---------------------------------
(William S. Norman)
/s/ DONALD E. PROCKNOW * Director
- ---------------------------------
(Donald E. Procknow)
* /s/ JOHN B. MEAGHER
--------------------------------
(John B. Meagher)
Attorney-in-Fact
</TABLE>
10
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
CPC International Inc.:
Under date of February 4, 1994, we reported on the consolidated balance sheets
of CPC International Inc. and Subsidiaries as of December 31, 1993, 1992 and
1991 and the related consolidated statements of income, stockholders' equity,
and cash flows for the years then ended, as contained in the 1993 Annual Report
to Stockholders. These consolidated financial statements and our report
thereon are incorporated by reference in the Annual Report on Form 10-K for the
year 1993. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules as listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick
New York, New York
February 4, 1994
11
<PAGE> 13
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT OTHER BALANCE AT
BEGINNING ADDITIONS RETIRE- CHANGES END
DESCRIPTION OF PERIOD AT COST(A) MENTS ADD(DEDUCT)(B) OF PERIOD
- ----------- --------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1993
- ----
Buildings $ 716.2 $ 67.5 $ (9.2) $ (37.8) $ 736.7
--------- -------- -------- --------- ---------
Machinery and
equipment 2,932.9 245.7 (64.5) (153.8) 2,960.3
Construction
in progress 226.1 89.0 (7.0) (15.5) 292.6
--------- -------- -------- --------- ---------
3,159.0 334.7 (71.5) (169.3) 3,252.9
--------- -------- -------- --------- ---------
Land 91.9 2.1 (0.2) (2.6) 91.2
--------- -------- -------- --------- ---------
Total $ 3,967.1 $ 404.3 $ (80.9) $ (209.7) $ 4,080.8
========= ======== ======== ========= =========
1992
- ----
Buildings $ 626.0 $ 75.5 $ (4.8) $ 19.5 $ 716.2
--------- -------- -------- --------- ---------
Machinery and
equipment 2,648.3 278.4 (44.2) 50.4 2,932.9
Construction
in progress 144.4 67.8 (1.3) 15.2 226.1
--------- -------- -------- --------- ---------
2,792.7 346.2 (45.5) 65.6 3,159.0
--------- -------- -------- --------- ---------
Land 76.6 13.3 (0.3) 2.3 91.9
--------- -------- -------- --------- ---------
Total $ 3,495.3 $ 435.0 $ (50.6) $ 87.4 $ 3,967.1
========= ======== ======== ========= =========
1991
- ----
Buildings $ 595.4 $ 48.5 $ (14.0) $ (3.9) $ 626.0
--------- -------- -------- --------- ---------
Machinery and
equipment 2,515.1 227.4 (75.2) (19.0) 2,648.3
Construction
in progress 184.5 5.5 (0.7) (44.9) 144.4
--------- -------- -------- --------- ---------
2,699.6 232.9 (75.9) (63.9) 2,792.7
--------- -------- -------- --------- ---------
Land 71.5 8.3 (2.3) (0.9) 76.6
--------- -------- -------- --------- ---------
Total $ 3,366.5 $ 289.7 $ (92.2) $ (68.7) $ 3,495.3
========= ======== ======== ========= =========
</TABLE>
_________
(A) Includes the following amounts related to acquisitions of businesses:
1993 - $ 18.4 million
1992 - $124.5 million
1991 - $ 12.5 million
(B) Includes currency translation adjustments and other reclassifications.
12
<PAGE> 14
SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND RETIRE- CHANGES END
DESCRIPTION OF PERIOD EXPENSES(A) MENTS ADD(DEDUCT)(B) OF PERIOD
- ----------- ---------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1993
- ----
Buildings $ 227.7 $ 28.3 $ (4.0) $ (14.1) $ 237.9
Machinery and
equipment 1,628.6 213.2 (46.5) (73.1) 1,722.2
--------- --------- -------- -------- ---------
Total $ 1,856.3 $ 241.5 $ (50.5) $ (87.2) $ 1,960.1
========= ========= ======== ======== =========
1992
- ----
Buildings $ 196.8 $ 25.4 $ ( 1.9) $ 7.4 $ 227.7
Machinery and
equipment 1,417.1 212.2 (33.6) 32.9 1,628.6
--------- --------- -------- -------- ---------
Total $ 1,613.9 $ 237.6 $ (35.5) $ 40.3 $ 1,856.3
========= ========= ======== ======== =========
1991
- ----
Buildings $ 183.2 $ 22.6 $ ( 4.7) $ (4.3) $ 196.8
Machinery and
equipment 1,285.3 211.1 (55.0) (24.3) 1,417.1
--------- --------- -------- -------- ---------
Total $ 1,468.5 $ 233.7 $ (59.7) $ (28.6) $ 1,613.9
========= ========= ======== ======== =========
</TABLE>
___________
(A) Depreciation is generally computed on the straight-line method over the
estimated useful lives of depreciable assets at rates ranging from 2% to
10% for buildings and 5% to 20% for all other assets.
(B) Includes currency translation adjustments and other reclassifications.
13
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SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
YEAR ENDED DECEMBER 31,
--------------------------------
ITEM 1993 1992 1991
---- ------- ------- --------
<S> <C> <C> <C>
1. Maintenance and repairs $ 196.1 203.1 $ 175.9
2. Depreciation 241.5 237.6 233.7
3. Advertising expense 463.2 483.3 453.5
</TABLE>
Amortization of intangible assets, preoperating costs and similar deferrals, in
addition to taxes, other than payroll and income taxes and royalties have been
omitted as none of these items exceed one percent of the Company's total sales.
14
<PAGE> 16
INDEX TO EXHIBITS
Exhibit No.
- -----------
3(a) The Certificate of Incorporation as restated April 22, 1993 is
filed herewith as Exhibit 3(a).
3(b) The By-Laws as amended on September 21, 1993 are filed
herewith as Exhibit 3(b).
4(a) No instruments defining rights of holders of debts securities
are included as exhibits because each authorized issue of debt
securities is less than 10% of total assets. The Company
agrees that it will furnish a copy of any such instrument upon
request.
4(b) Rights Agreement dated March 19, 1991 between the Company and
First Chicago Trust Company of New York is incorporated by
reference to Exhibit 4(b) of Form 10-K for the year ended
December 31, 1991.
10(a) The 1984 Stock and Performance Plan is incorporated by
reference from Exhibit A to the prospectus contained in
Post-Effective Amendment No. 1 to the Registration Statement
on Form S-8, File No. 2-92248.
10(b) The 1993 Stock and Performance Plan is incorporated by
reference to The Registration Statement filed on Form S-8,
File No. 33-49847.
10(c) Deferred Compensation Plan for Outside Directors and
Retirement Income Plan for Outside Directors
i) An amendment to the Deferred Compensation Plan for
Outside Directors, dated January 19, 1988 is incorporated by
reference to Exhibit 10(b)i Form 10-K for the year ended
December 31, 1988.
ii) The Retirement Income Plan for Outside Directors as
amended March 15, 1988, is incorporated by reference to
Exhibit 10(b)ii of Form 10-K for the year ended December 31,
1987.
10(d) Employment agreements for those directors and the five most
highly compensated executive officers who have such contracts,
including amendments thereto. Employment agreement for Mr.
C.R. Shoemate dated January 2, 1986, is incorporated by
reference to Exhibit 10(c) of Form 10-K for the year ended
December 31, 1988, along with amendments dated January 19,
1989, February 21, 1989, and January 21, 1992 are
incorporated by reference to Exhibit 10(c) of Form 10-K for
the year ended December 31, 1991. Employment agreement for
Mr. R.J. Gillespie, dated January 2, 1986, as amended, is
incorporated by reference to Exhibit 10(c) of Form 10-K for
the year ended December 31, 1988. Amendments dated January
19, 1989 and February 21, 1989 are incorporated by reference
to Exhibit 10 (c) of Form 10- K for the year ended December
31, 1992.
15
<PAGE> 17
10(d) Employment agreement for Mr. C.B. Storms dated January 2,
1986, along with amendments dated November 21, 1986, September
20, 1988, February 13, 1989, and February 21, 1989 are
incorporated by reference to Exhibit 10(c) of Form 10-K for
the year ended December 31, 1989. Employment agreement for Mr.
K. Schlatter, dated January 2, 1986, along with amendments
dated November 21, 1986, November 13, 1987, September 20,
1988, February 21, 1989 and July 5, 1990 are incorporated by
reference to Exhibit 10 (c) of Form 10-K for the year ended
December 31, 1992.
10(e) Indemnification agreements for all directors and five most
highly compensated executive officers who have such contracts
are incorporated by reference to Exhibit 10(d) of Form 10-K
for the year ended December 31, 1986.
10(f) Deferred Compensation Plan for senior executives, dated
November 10, 1988 is incorporated by reference to Exhibit
10(e) of Form 10-K for the year ended December 31, 1988.
10(g) Special Severance Program for Salaried Employees, dated
January 17, 1989 is incorporated by reference to Exhibit 10(f)
Form 10-K for the year ended December 31, 1988. An amendment
dated March 19, 1991 to the Special Severance Program for
Salaried Employees is incorporated by reference to Exhibit 10
(f) of Form 10-K for the year ended December 31, 1991.
11 Schedule of computation of earnings per share filed herewith.
13 1993 Annual Report to Stockholders filed herewith except for
such parts thereof as are expressly incorporated by reference
in this Form 10-K (graphic material contained in the Annual
Report is not included in the electronic filing of this
report). This exhibit is furnished for the information of the
Securities and Exchange Commission and is not deemed filed as
a part of hereof.
21 Subsidiaries of the Registrant
Filed herewith.
23 Consent of Independent Auditors
Filed herewith.
24 Powers of Attorney
Filed under separate cover with the SEC.
16
<PAGE> 1
Exhibit 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
CPC INTERNATIONAL INC.
CPC International Inc. (hereinafter called the "Corporation") was
originally incorporated in the State of Delaware under the name "Corn Products
Company," and its original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on February 17, 1959. This
Restated Certificate of Incorporation was duly adopted by the Board of
Directors effective as of April 22, 1993 in accordance with the provisions of
Section 245 of the General Corporation Law of the State of Delaware without a
vote of the stockholders. It only restates and integrates and does not further
amend the provisions of the Certificate of Incorporation as heretofore amended
or supplemented, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation.
FIRST : The name of the Corporation is CPC International Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The
name of the Corporation's registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 925,000,000 shares, consisting of
(a) 25,000,000 shares of Preferred Stock, par value $1.00 per share,
and
(b) 900,000,000 shares of Common Stock, par value $.25 per share.
Except as otherwise provided by law, the shares of stock of the
Corporation, regardless of class, may be issued by the Corporation from time
to time in such amounts, for such consideration and for such corporate
purposes as the Board of Directors may from time to time determine.
Shares of Preferred Stock may be issued from time to time in one or more
series of any number of shares as may be determined from time to time by the
Board of Directors, provided that the aggregate number of shares issued and
not cancelled of any and all such series shall not exceed the total number of
shares of Preferred Stock authorized by this Certificate of Incorporation.
Each series of Preferred Stock shall be distinctly designated. Except in
respect of the particulars fixed for series by the Board of Directors as
permitted hereby, all shares of Preferred Stock shall be of equal rank and
shall be identical. All shares of any one series of Preferred Stock shall be
alike in every particular, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall
be cumulative. The voting powers, if any, of each such series and the
preferences and relative, participating, optional and other special rights of
each such series and the qualifications, limitations and restrictions thereof,
if any, may differ from those of any and all other series at any time
outstanding; and the Board of Directors is hereby expressly granted authority
to fix, in the resolution or resolutions providing for the issue of stock of a
particular series of Preferred Stock, the voting powers, if any, of each such
series and the designations, preferences and relative, participating, optional
and other special rights of each such series and the qualifications,
limitations and restrictions thereof to the full extent now or hereafter
permitted by this Certificate of Incorporation and the laws of the State of
Delaware.
<PAGE> 2
Subject to the provisions of any applicable law or of the By-laws with
respect to the closing of the transfer books or the fixing of a record date
for the determination of stockholders entitled to vote, and except as
otherwise provided by law or by the resolution or resolutions providing for
the issue of any series of Preferred Stock, the holders of outstanding shares
of Common Stock shall exclusively possess the voting power for the election of
directors and for all other purposes, each holder of record of shares of
Common Stock being entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
SECTION 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number
of shares constituting such series shall initially be 600,000, par value $1.00
per share, such number of shares to be subject to increase or decrease by
action of the Board of Directors as evidenced by a certificate of designation.
SECTION 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash
on the last day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $110 or (b) subject to the provision for adjustment
hereinafter set forth, 200 times the aggregate per share amount of all cash
dividends, and 200 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.25 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Junior Participating Preferred Stock. In
the event the Corporation shall at any time after March 19, 1991 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each
such case the amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $110 per share
on the Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Junior Participating Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends
2
<PAGE> 3
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Junior Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
SECTION 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 200 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the number of votes per share to
which holders of shares of Series A Junior Participating Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark
the beginning of a period (herein called a "default period") which shall
extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including
holders of the Series A Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right
to elect two (2) directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of directors shall be
exercised unless the holders of ten percent in number of shares of
Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the
right, voting as a class, to elect directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two (2) directors
or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number of directors as
shall be necessary to permit the election by them of the required number.
After the holders of the Preferred Stock shall have exercised their right
to elect directors in any default period and during the continuance of
such period, the number of directors shall not be increased or decreased
except by vote of the holders of Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to or pari
passu with the Series A Junior Participating Preferred Stock.
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<PAGE> 4
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect directors,
the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total
number of shares of Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the President, a
Vice-President or the Secretary of the Corporation. Notice of such meeting
and of any annual meeting at which holders of Preferred Stock are entitled
to vote pursuant to this paragraph (C) (iii) shall be given to each holder
of record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 20 days and not later
than 60 days after such order or request or in default of the calling of
such meeting within 60 days after such order or request, such meeting may
be called on similar notice by any stockholder or stockholders owning in
the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding. Notwithstanding the provisions of
this paragraph (C) (iii), no such special meeting shall be called during
the period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect two (2)
directors voting as a class, after the exercise of which right (x) the
directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in paragraph (C) (ii) of this
Section 3) be filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class of stock which elected the
director whose office shall have become vacant. References in this
paragraph (C) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies
as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect directors shall
cease, (y) the term of any directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of directors shall be
such number as may be provided for in the Certificate of Incorporation or
By-laws irrespective of any increase made pursuant to the provisions of
paragraph (C) (ii) of this Section 3 (such number being subject, however,
to change thereafter in any manner provided by law or in the Certificate
of Incorporation or By-laws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
SECTION 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
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<PAGE> 5
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
A Junior Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. Reacquired Shares.
Any shares of Series A Junior Participating Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein.
SECTION 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $50 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A
Liquidation Preference"). Following the payment of the full amount of the
Series A Liquidation Preference, no additional distributions shall be made to
the holders of shares of Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have received an
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 200 (as appropriately
adjusted as set forth in subparagraph (C) below to reflect such events as
stock splits, stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii), the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A Junior
Participating Preferred Stock and Common Stock, respectively, holders of
Series A Junior Participating Preferred Stock and holders of shares of Common
Stock shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to 1 with
respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
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<PAGE> 6
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each
such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 200 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
SECTION 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
SECTION 9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
SECTION 10. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Junior Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of two-thirds (2/3) or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
SECTION 11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
SERIES A ESOP CONVERTIBLE PREFERRED STOCK
SECTION 1. Designation and Amount; Special Purpose Restricted Transfer
Issue.
(A) The shares of such series shall be designated as "Series A ESOP
Convertible Preferred Stock" ("Series A Preferred Stock") and the number of
shares constituting such series initially shall be 3,000,000, such number of
shares to be subject to increase or decrease by the Board of Directors as
evidenced by a certificate of designations; provided, however, that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants issued by, or upon the conversion of any outstanding securities
convertible into Series A Preferred Stock issued by, the Corporation.
(B) Shares of Series A Preferred Stock shall be issued only to The
Northern Trust Company or its successors as trustee, or their respective
nominees (the "Trustee"), of the employee stock ownership plan (together with
any successor plan, the "Plan") portion of the CPC International Inc.
Savings/Retirement Plan for Salaried Employees. All references to the holder
of shares of Series A Preferred Stock shall mean the Trustee. In the event of
any transfer of shares of Series A Preferred
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<PAGE> 7
Stock to any person or entity other than the Corporation or a Trustee, the
shares of Series A Preferred Stock so transferred, upon such transfer and
without any further action by the Corporation, the holder thereof or the
transferee thereof, shall be automatically converted into shares of Common
Stock pursuant to paragraph 5(H) hereof and no such transferee shall have any
of the voting powers, preferences and relative, optional or special rights
ascribed to shares of Series A Preferred Stock hereunder but, rather, only the
powers and rights pertaining to the Common Stock into which such shares of
Series A Preferred Stock shall be so converted. In the event of such a
conversion, the transferee of the shares of Series A Preferred Stock shall be
treated for all purposes as the record holder of the shares of Common Stock
into which such shares of Series A Preferred Stock have been automatically
converted as of the date of such transfer. Notwithstanding the foregoing, the
pledge of Series A Preferred Stock as collateral by or pursuant to any credit
agreement, indenture or other document or instrument shall not constitute a
transfer for purposes of this paragraph 1(B), but the foreclosure or other
realization upon such pledged shares shall constitute a transfer. Certificates
representing shares of Series A Preferred Stock shall bear a legend to reflect
the foregoing provisions. Notwithstanding the foregoing provisions of this
paragraph 1(B), shares of Series A Preferred Stock (i) may be converted into
shares of Common Stock as provided by Section 5 hereof and the shares of
Common Stock issued upon such conversion may be transferred by the holder
thereof as permitted by law and (ii) shall be redeemable by the Corporation
upon the terms and conditions provided by Sections 6, 7 and 8 hereof.
SECTION 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock, in preference to any shares of
any stock ranking as to dividends, or as to distributions in the event of a
liquidation in whole, dissolution or winding-up of the Corporation, junior to
the Series A Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefor,
cash dividends ("Preferred Dividends") in an amount per share equal to $7.14
per share per annum, and no more, payable semi-annually in arrears, one-half
on the 15th day of December and one-half on the 15th day of June of each year
(each a "Dividend Payment Date") commencing on June 15, 1990, to the holders
of record at the start of business on such Dividend Payment Date. In the event
that any Dividend Payment Date shall fall on any day other than a Business Day
(as defined in paragraph 9(F) hereof), the dividend payment due on such
Dividend Payment Date shall be payable on the Business Day immediately
preceding such Dividend Payment Date. Preferred Dividends shall begin to
accrue on outstanding shares of Series A Preferred Stock from and including
December 15, 1989. Preferred Dividends shall accrue on a daily basis whether
or not the Corporation shall have earnings or surplus at the time, but
Preferred Dividends accrued after issuance on the shares of Series A Preferred
Stock for any period less than a full semi-annual period between Dividend
Payment Dates shall be computed on the basis of a 360-day year of 30-day
months. Accrued but unpaid Preferred Dividends shall cumulate as of the
Dividend Payment Date on which they first become payable, but no interest
shall accrue on accumulated but unpaid Preferred Dividends.
(B) So long as any shares of Series A Preferred Stock shall be
outstanding, no dividend shall be, directly or indirectly, declared or paid or
set apart for payment on any other series of stock ranking on a parity with
the Series A Preferred Stock as to dividends, unless there shall also be or
have been declared and paid or set apart for payment on the Series A Preferred
Stock, dividends for all dividend payment periods of the Series A Preferred
Stock ending on or before the dividend payment date of such parity stock,
ratably in proportion to the respective amounts of dividends accumulated and
unpaid or payable through such dividend payment period on the Series A
Preferred Stock and accumulated and unpaid or payable on such parity stock
through the dividend payment period on such parity stock next preceding such
dividend payment date, and the Corporation shall have redeemed (i) all of the
shares of Series A Preferred Stock that it is required to redeem pursuant to
Section 7 hereof if the mandatory obligation to redeem shares of Series A
Preferred Stock set forth therein is applicable and (ii) all of the shares of
Series A Preferred Stock for which a notice of redemption has been sent
pursuant to paragraph 6(B) hereof, if any. In the event that full cumulative
dividends on the Series A Preferred Stock have not been declared and paid or
set apart for payment when due or the Corporation shall fail to discharge its
obligation to redeem shares of Series A Preferred Stock pursuant to Section 6
hereof once notice of redemption has been sent or pursuant to Section 7 hereof
once the mandatory
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<PAGE> 8
obligation to redeem shares of Series A Preferred Stock set forth therein is
applicable, the Corporation shall not, directly or indirectly, declare or pay
or set apart for payment any dividends or make any other distributions on, or
make any payment on account of the purchase, redemption or other retirement of
any other class of stock or series thereof of the Corporation ranking, as to
dividends or as to distributions in the event of a liquidation in whole,
dissolution or winding-up of the Corporation, junior to the Series A Preferred
Stock until full cumulative dividends on the Series A Preferred Stock shall
have been paid in full or declared and set apart for payment in full and any
such obligation shall have been discharged; provided, however, that the
foregoing shall not apply to (i) any dividend payable solely in any shares of
any stock ranking, as to dividends and as to distributions in the event of a
liquidation in whole, dissolution or winding-up of the Corporation, junior to
the Series A Preferred Stock, (ii) the acquisition of shares of any stock
ranking, as to dividends or as to distributions in the event of a liquidation
in whole, dissolution or winding-up of the Corporation, junior to the Series A
Preferred Stock either (A) pursuant to any employee or director incentive or
benefit plan or arrangement (including any employment, severance or consulting
agreement) of the Corporation or any subsidiary of the Corporation heretofore
or hereafter adopted or (B) in exchange solely for shares of any other stock
ranking, as to dividends and as to distributions in the event of a liquidation
in whole, dissolution or winding-up of the Corporation, junior to the Series A
Preferred Stock or (iii) any payment made in respect of the purchase or
redemption of the Rights, as defined in paragraph 5(G) hereof, or any rights
similar thereto.
SECTION 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) The holders of Series A Preferred Stock shall be entitled to vote
on all matters submitted to a vote of the holders of Common Stock of the
Corporation, voting together with the holders of Common Stock (and the
holders of any other class or series of stock which may similarly be
entitled to vote with shares of Common Stock) as one class. The holder of
each share of Series A Preferred Stock shall be entitled to a number of
votes equal to the number of shares of Common Stock into which such share
of Series A Preferred Stock could be converted on the record date for
determining the stockholders entitled to vote, rounded to the nearest
one-tenth of a vote; it being understood that whenever the "Conversion
Price" (as defined in Section 5 hereof) is adjusted as provided in Section
9 hereof, the voting rights of the Series A Preferred Stock shall also be
similarly adjusted.
(B) Except as otherwise required by law or set forth herein, the
holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with the holders of Common Stock and the holders of any
other class or series of stock which may similarly be entitled to vote
with the shares of Common Stock as set forth herein) for the taking of any
corporate action.
(C) The Restated Certificate of Incorporation of the Corporation
(including this Certificate of Designations) shall not be amended, altered
or repealed in any manner (including any amendment, alteration or repeal
effected by any merger or consolidation) which would adversely alter or
change the powers, preferences or special rights of the Series A Preferred
Stock without the affirmative vote or consent of the holders of a majority
of the outstanding shares of Series A Preferred Stock, voting separately
as a series; provided, that any increase in the authorized Preferred Stock
or the creation and issuance (whether or not authorized on or prior to the
issuance of any Series A Preferred Stock) of any other class or series of
Preferred Stock ranking senior to or on a parity with or junior to the
Series A Preferred Stock as to payment of dividends and upon liquidation
in whole, dissolution or winding-up of the Corporation or any increase or
decrease in the number of shares which constitute the Series A Preferred
Stock (but not below the number of shares thereof then outstanding) shall
not be deemed to alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect the holders thereof
adversely within the meaning of the Delaware General Corporation Law (the
"DGCL").
SECTION 4. Liquidation, Dissolution or Winding-Up.
(A) Upon any voluntary or involuntary liquidation in whole, dissolution or
winding-up of the Corporation, the holders of Series A Preferred Stock shall
be entitled to receive out of assets of the
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<PAGE> 9
Corporation which remain after satisfaction in full of all valid claims of
creditors of the Corporation and which are available for payment to
stockholders, and subject to the rights of the holders of any stock of the
Corporation ranking senior to or on a parity with the Series A Preferred Stock
in respect of distributions upon liquidation in whole, dissolution or
winding-up of the Corporation, before any amount shall be paid or distributed
among the holders of Common Stock or any other shares ranking junior to the
Series A Preferred Stock in respect of distributions upon liquidation in
whole, dissolution or winding-up of the Corporation, liquidating distributions
in the amount of $89.21 per share (the "Liquidation Preference"), plus an
amount equal to all accumulated and unpaid dividends (including dividends
declared and set aside) and accrued dividends thereon to the date fixed for
distribution, and no more. If upon any liquidation in whole, dissolution or
winding-up of the Corporation, the amounts payable with respect to the Series
A Preferred Stock and any other stock ranking as to any such distribution on a
parity with the Series A Preferred Stock are not paid in full, the holders of
the Series A Preferred Stock and such other stock shall share ratably in any
distribution of assets in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount to which
they are entitled as provided by the foregoing provisions of this paragraph
4(A), the holders of shares of Series A Preferred Stock shall not be entitled
as such to any further right or claim to any of the remaining assets of the
Corporation.
(B) Neither the merger or consolidation of the Corporation with or into
any other corporation, nor the merger or consolidation of any other
corporation with or into the Corporation, nor the sale, lease, exchange or
other transfer of all or any portion of the assets of the Corporation, nor any
partial liquidation of the Corporation, shall be deemed to be a liquidation in
whole, dissolution or winding-up of the affairs of the Corporation for
purposes of this Section 4, but the holders of Series A Preferred Stock shall
nevertheless be entitled in the event of any such merger or consolidation to
the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation in whole,
dissolution or winding-up of the Corporation, stating the payment date or
dates when, and the place or places where, the amounts distributable to the
holders of Series A Preferred Stock in such circumstances shall be payable,
shall be given by first-class mail, postage prepaid, mailed not less than
thirty (30) calendar days prior to any payment date stated therein, or such
shorter period prior to such payment date as may be necessary under the
circumstances, to the holders of Series A Preferred Stock at the addresses
shown on the books of the Corporation or any transfer agent for the Series A
Preferred Stock.
SECTION 5. Conversion into Common Stock.
(A) A holder of shares of Series A Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of
such shares pursuant to Sections 6, 7 or 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock at a conversion rate equal
to the ratio of (i) the Liquidation Preference per share to (ii) an amount
which initially shall be $89.21 and which shall be adjusted as hereinafter
provided (and which amount, as it may be so adjusted from time to time, is
hereinafter sometimes referred to as the "Conversion Price") (that is, a
conversion rate initially equivalent to one share of Common Stock for each
share of Series A Preferred Stock so converted, which is subject to adjustment
as the Conversion Price may be adjusted as hereinafter provided).
(B) Any holder of shares of Series A Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender the certificate or
certificates representing the shares of Series A Preferred Stock being
converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent for
the Series A Preferred Stock or such office or offices in the continental
United States of an agent for conversion as may from time to time be
designated by notice to the holders of the Series A Preferred Stock by the
Corporation or the transfer agent for the Series A Preferred Stock,
accompanied by written notice of conversion, on any Business Day. Such notice
of conversion shall specify (i) the number of shares of Series A Preferred
Stock to be converted and the name or names in which such holder wishes the
certificate or certificates for Common Stock and for any shares of Series A
Preferred Stock not to be so converted to be issued (subject to compliance
with applicable legal requirements, if any, of said certificates are to be
issued in a name other than the
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<PAGE> 10
name of the holder), and (ii) the address to which such holder wishes delivery
to be made of such new certificates to be issued upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series A Preferred Stock for conversion, the Corporation shall, as promptly as
practicable after such surrender, issue and send by hand delivery (with
receipt to be acknowledged) or by first-class mail, postage prepaid, to the
holder thereof or to such holder's designee, at the address designated by such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled upon conversion. In the event that
there shall have been surrendered a certificate or certificates representing
shares of Series A Preferred Stock, only part of which are to be converted,
the Corporation shall issue and deliver to such holder a new certificate or
certificates representing the number of shares of Series A Preferred Stock
which shall not have been converted.
(D) The issuance by the Corporation of shares of Common Stock upon a
conversion of shares of Series A Preferred Stock into shares of Common Stock
(otherwise than pursuant to paragraph 1(B), 5(H) or 5(I) hereof) shall be
effective as of the close of business on the day of the surrender to the
Corporation of the certificate or certificates for the shares of Series A
Preferred Stock to be converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto)
and accompanied by a written notice of conversion, as provided by this
Resolution. After the effective day of conversion, the shares of Series A
Preferred Stock so converted shall no longer be deemed to be outstanding for
any purpose, and the person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock, but no allowance or
adjustment shall be made in respect of dividends payable to the holders of
Common Stock of record on any date prior to such effective date. Except as
otherwise expressly provided for herein, the Corporation shall not be
obligated to pay any accumulated and unpaid dividends and accrued dividends on
any shares of Series A Preferred Stock being converted pursuant to the
provisions hereof or any dividends which shall have been declared and shall be
payable to holders of shares of Series A Preferred Stock on a Dividend Payment
Date if such Dividend Payment Date for such dividend shall be on or subsequent
to the effective date of the conversion of such shares.
(E) The Corporation shall not be obligated to deliver to the holders of
Series A Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of Series A Preferred Stock, but
in lieu thereof may make a cash payment in an amount equal to such fraction
multiplied by the Current Market Price (as defined in paragraph 9(F) hereof)
per share of the Common Stock at the close of business on the effective date
of conversion of such shares. The Corporation shall pay all issue taxes, if
any, incurred in respect of the Common Stock on conversion of shares of Series
A Preferred Stock as set forth in paragraph 11(C) hereof.
(F) The Corporation shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of shares of Series A Preferred Stock as herein provided, free from
any preemptive rights, such number of shares of Common Stock as shall from
time to time be issuable upon the conversion of all the shares of Series A
Preferred Stock then outstanding and convertible pursuant to paragraph 5(A)
hereof. Nothing contained herein shall preclude the Corporation from
delivering shares of Common Stock held in its treasury upon the conversion of
shares of Series A Preferred Stock into Common Stock pursuant to the terms
hereof; provided, that such shares of Common Stock held in the Corporation's
treasury shall, at the effective time of such conversion, be free and clear of
all liens and similar encumbrances. The Corporation shall prepare and shall
use its best efforts to obtain and keep in force such governmental or
regulatory or listing (to the extent the Common Stock is then listed) permits
or other authorizations as may be required by law or the securities exchange
or exchanges on which the Common Stock is then listed, if any, and shall
comply with all requirements as to registration or qualification of the Common
Stock, in order to enable the Corporation lawfully to issue and deliver to
each holder of record of Series A Preferred Stock such number of shares of its
Common Stock as shall from time to time be sufficient to effect the conversion
of all shares of Series A Preferred Stock then outstanding and convertible
into shares of Common Stock. The Corporation shall also take any corporate or
other action which is reasonably necessary and
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<PAGE> 11
permissible in order that the Corporation deliver such number of legally and
validly issued and fully paid and nonassessable shares of Common Stock as may
be required to effect said conversion.
(G) Prior to the Distribution Date (as defined in Section 3(a) of the
Rights Agreement (defined below)), if the Corporation issues shares of Common
Stock upon conversion of shares of Series A Preferred Stock as contemplated by
this Section 5, the Corporation shall issue together with each such share of
Common Stock one right (a "Right," and collectively the "Rights") to purchase
Series A Junior Participating Preferred Stock of the Corporation (or other
securities in lieu thereof) pursuant to the Rights Agreement dated as of
November 25, 1986 between the Corporation and Harris Trust Company of New
York, as Rights Agent, as such agreement may from time to time be amended (the
"Rights Agreement"), or any similar rights issued to the holders of Common
Stock of the Corporation in addition thereto or in replacement therefor. After
the Distribution Date and prior to the redemption or expiration of the Rights,
if the Corporation issues shares of Common Stock upon conversion of shares of
Series A Preferred Stock as contemplated by this Section 5, the Corporation
shall issue together with such shares of Common Stock the appropriate number
of Rights, or any similar rights, in connection therewith, in accordance with
Section 22, clause (a), of the Rights Agreement, or any similar successor
provision, subject to the provisos therein.
(H) In the event that the Trustee ceases to be the holder of any share of
Series A Preferred Stock (except in the case of the redemption or repurchase
of shares by the Corporation), such share of Series A Preferred Stock will
automatically, without any act or deed on the part of the Corporation, the
Trustee or any other person, be converted into the number of shares of Common
Stock into which such share of Series A Preferred Stock would then be
convertible if it were voluntarily presented for conversion in accordance with
the other provisions of this Section 5 plus the right to receive an amount in
cash equal to all accumulated and unpaid dividends (including dividends
declared and set aside) and accrued dividends thereon through the date of such
automatic conversion. To the extent applicable, the other provisions of this
Section 5 shall govern any automatic conversion pursuant to this paragraph
5(H), subject to the following:
(a) any share surrendered for transfer by the Trustee shall be deemed
to have been surrendered for conversion by the transferee prior to the
close of business on the day such share would otherwise be transferred
into the transferee"s name on the books of the Corporation;
(b) no notice of conversion need be submitted by either the Trustee or
its transferee in order to effect the automatic conversion provided for
hereby; and
(c) notwithstanding any provisions of paragraph 5(A) hereof, each
share of Series A Preferred Stock is subject to automatic conversion
pursuant to this paragraph 5(H) at any time prior to such share having
been redeemed or otherwise purchased by the Corporation.
(I) In the event that the Trustee shall certify that conversion of a share
of Series A Preferred Stock is necessary either (a) to provide for
distributions required to be made to participants under, or to satisfy an
investment election provided to participants in accordance with, the Plan or
(b) to make any payments of principal, interest or premium due and payable
(whether as scheduled, upon redemption, upon acceleration or otherwise) under
any indebtedness incurred by the holder for the benefit of the Plan, then such
share of Series A Preferred Stock will automatically, upon notice to the
Corporation given not less than five (5) Business Days prior to the date fixed
for conversion by the holder of such shares of Series A Preferred Stock in
such notice but without any further act or deed on the part of the
Corporation, the Trustee or any other person, be converted into the greater of
(i) the number of shares of Common Stock into which such share of Series A
Preferred Stock would then be convertible if it were voluntarily presented for
conversion in accordance with the other provisions of this Section 5 or (ii)
the number of shares of Common Stock that, when multiplied by the Fair Market
Value (as defined in paragraph 9(F) hereof) per share of Common Stock on the
date of such automatic conversion, equals the Liquidation Preference per share
plus, in each case, the right to receive an amount of cash equal to all
accumulated and unpaid dividends (including dividends declared and set aside)
and accrued dividends thereon through the date of such automatic conversion;
provided that the automatic conversion provided for in this paragraph 5(I)
shall take effect only when and to the extent necessary for the satisfaction
of either of the conditions set forth in clauses (a) and (b) of this paragraph
5(I); and provided, further, that, upon conversion of a share of Series A
Preferred Stock in satisfaction of the
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<PAGE> 12
condition described in clause (b) of this paragraph 5(I), the Corporation may,
in lieu of such conversion, make payment to the Trustee in cash in an amount
equal to the Fair Market Value (as defined in paragraph 9(F) hereof) of the
shares of Common Stock into which such share of Series A Preferred Stock would
be convertible pursuant to this paragraph 5(I).
SECTION 6. Redemption At the Option of the Corporation.
(A) The Series A Preferred Stock shall be redeemable, in whole or in part,
at the option of the Corporation at any time after December 15, 1992, or at
any time after the date of issuance, if permitted by paragraph 6(C), 6(D) or
6(E) hereof, at the following redemption prices per share (or, if pursuant to
paragraph 6(C) or 6(E) hereof, at the redemption price per share set forth
therein):
<TABLE>
<CAPTION>
REDEMPTION
DURING THE TWELVE-MONTH PRICE
PERIOD BEGINNING DECEMBER 15, PER SHARE
----------------------------- ----------
<S> <C>
1989..................................................... $ 96.35
1990..................................................... 95.64
1991..................................................... 94.92
1992..................................................... 94.21
1993..................................................... 93.49
1994..................................................... 92.78
1995..................................................... 92.06
1996..................................................... 91.35
1997..................................................... 90.64
1998..................................................... 89.92
</TABLE>
and thereafter at the Liquidation Preference per share, plus, in each case, an
amount equal to all accumulated and unpaid dividends (including dividends
declared and set aside) and accrued dividends thereon to the date fixed for
redemption. Payment of the redemption price shall be made by the Corporation
in cash or shares of Common Stock, or a combination thereof, as permitted by
paragraph 6(F) hereof. From and after the close of business on the date fixed
for redemption, unless the Corporation shall have defaulted in the payment or
setting aside in trust of moneys and/or shares of Common Stock at the time and
place specified for the payment of the full redemption price (as set forth in
this Section 6) pursuant to the redemption notice described in paragraph 6(B)
hereof, all dividends on shares of Series A Preferred Stock called for
redemption will cease to accrue, such shares will no longer be deemed to be
outstanding and will no longer be convertible and all rights in respect of
such shares of the Corporation shall cease, except the rights to receive such
full redemption price. If less than all of the outstanding shares of Series A
Preferred Stock are to be redeemed, the Corporation shall either redeem a
portion of the shares of each holder determined pro rata based on the number
of shares held by each holder or shall select the shares to be redeemed by
lot, as may be determined by the Board of Directors of the Corporation.
(B) Unless otherwise required by law, notice of any redemption effected
pursuant to this Section 6 shall be sent to the holders of Series A Preferred
Stock at the address shown on the books of the Corporation or any transfer
agent for the Series A Preferred Stock by first-class mail, postage prepaid,
mailed not less than thirty (30) calendar days nor more than sixty (60)
calendar days prior to the redemption date. Each such notice shall state: (i)
the paragraph or clause within a paragraph of this Resolution pursuant to
which the redemption is being effected, (ii) the redemption date; (iii) the
total number of shares of the Series A Preferred Stock to be redeemed and, if
fewer than all the shares held by such holder are to be redeemed, the number
of such shares to be redeemed from such holder; (iv) the redemption price; (v)
the place or places where certificates for such shares are to be surrendered
for payment of the redemption price; (vi) that dividends on the shares to be
redeemed will cease to accrue from and after the close of business on such
redemption date; and (vii) the conversion rights of the shares to be redeemed,
the period within which conversion rights may be exercised, and the Conversion
Price and number of shares of Common Stock issuable upon conversion of a share
of Series A Preferred Stock at the time. Upon surrender of the certificate for
any shares so called for redemption and not previously converted (properly
endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares shall
be
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<PAGE> 13
redeemed by the Corporation at the date fixed for redemption and at the
redemption price set forth in this Section 6.
(C) In the event (i) of a change (whether or not then effective) in the
federal tax law of the United States of America which has or would have the
effect of precluding the Corporation from claiming any of the tax deductions
for dividends paid or payable on the Series A Preferred Stock when such
dividends are used as provided under Section 404(k)(2)(C) of the Internal
Revenue Code of 1986, as amended and in effect on the date shares of Series A
Preferred Stock are initially issued, (ii) that shares of Series A Preferred
Stock are held by an employee benefit plan intended to qualify as an employee
stock ownership plan within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended, and such plan does not so qualify, or (iii)
that the voting and tender rights associated with the Series A Preferred Stock
and provided herein are not or cannot be directly or indirectly exercised by
all or substantially all of the participants in the Plan (whether or not the
shares thereof have been allocated under the Plan) other than as a result of
an unintended failure of administrative services (such as postal services),
then the Corporation may, in its sole discretion and notwithstanding anything
to the contrary in paragraph 6(A) hereof, call for redemption any or all then
outstanding shares of Series A Preferred Stock for an amount per share equal
to the redemption price per share which would be applicable were the
Corporation to redeem such shares of Series A Preferred Stock pursuant to
paragraph 6(A) hereof (without regard to whether such shares of Series A
Preferred Stock are redeemable thereunder), plus an amount equal to all
accumulated and unpaid dividends (including dividends declared and set aside)
and accrued dividends thereon to the date fixed for such redemption.
(D) Notwithstanding anything to the contrary in paragraph 6(A) hereof, the
Corporation may, in its sole discretion, elect to redeem any or all of the
shares of Series A Preferred Stock at any time on or prior to December 15,
1992 on the terms and conditions set forth in paragraphs 6(A) and 6(B) hereof,
if the last reported sales price, regular way, of a share of Common Stock, as
reported on the New York Stock Exchange Composite Tape or, if the Common Stock
is not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, on the National Market System of
the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") or, if the Common Stock is not quoted on such National
Market System, the average of the closing bid and asked prices in the
over-the-counter market as reported by NASDAQ, in each case for at least
twenty (20) trading days within a period of thirty (30) consecutive trading
days ending within five (5) calendar days of the notice of redemption, equals
or exceeds one hundred fifty percent (150%) of the Conversion Price (giving
effect in making such calculation to any adjustments required by Section 9
hereof).
(E) In the event that the Plan is terminated in accordance with its terms,
and notwithstanding anything to the contrary in paragraph 6(A) hereof, the
Corporation shall, as soon thereafter as practicable and permissible under
applicable state law and to the extent the Corporation shall have legally
available funds for such payment, call for redemption all then outstanding
shares of Series A Preferred Stock for an amount per share equal to the
redemption price per share which would be applicable were the Corporation to
redeem such shares of Series A Preferred Stock pursuant to paragraph 6(A)
hereof (without regard to whether such shares of Series A Preferred Stock are
then redeemable thereunder), plus an amount in cash equal to all accumulated
and unpaid dividends (including dividends declared and set aside) and accrued
dividends thereon to the date fixed for such redemption.
(F) Notwithstanding any provision hereof to the contrary, the Corporation,
at its option, may make payment of the redemption price or Liquidation
Preference, as the case may be, plus, in each case, any amount equal to all
accumulated and unpaid dividends (including dividends declared and set aside)
and accrued dividends thereon to the date of such redemption, required upon
redemption of shares of Series A Preferred Stock pursuant to Sections 6 and 7
hereof in cash or in shares of Common Stock (or fractional shares thereof), or
in a combination of such shares and cash, any such shares of Common Stock to
be valued for such purposes at their Fair Market Value (as defined in
paragraph 9(F) hereof). All shares of Common Stock to be delivered as full or
partial payment of the redemption price to be paid pursuant to this Section 6
or Section 7 hereof shall be validly and legally issued, fully paid and
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<PAGE> 14
nonassessable, and any shares of Common Stock delivered to make any such
payment shall, at the effective time of such redemption, be free and clear of
all liens and similar encumbrances.
SECTION 7. Other Redemption Rights. On December 15, 2014 (the "Mandatory
Redemption Date"), to the extent the Corporation shall have legally available
funds for such payment, the Corporation shall redeem, or shall set aside in
trust for the holders of the Series A Preferred Stock a sum in cash sufficient
to redeem, all shares of the Series A Preferred Stock outstanding on such
Mandatory Redemption Date, at a redemption price per share equal to the
Liquidation Preference per share, plus an amount in cash equal to all
accumulated and unpaid dividends (including dividends declared and set aside)
and accrued dividends thereon to the Mandatory Redemption Date. From and after
the close of business on the Mandatory Redemption Date, unless the Corporation
shall have defaulted in the payment or setting aside in trust of moneys and/or
shares of Common Stock, all dividends on shares of Series A Preferred Stock
called for redemption will cease to accrue, such shares will no longer be
deemed to be outstanding and will no longer be convertible and all rights in
respect of such shares of the Corporation shall cease, except the rights to
receive in full such redemption price per share, plus an amount in cash equal
to all accumulated and unpaid dividends (including dividends declared and set
aside) and accrued dividends thereon to the Mandatory Redemption Date. If, for
any reason, the Corporation shall fail to discharge its mandatory redemption
obligation pursuant to this Section 7, such mandatory redemption obligation
shall be discharged as soon as the Corporation is able to discharge such
obligation, but the redemption price shall be determined as of the date such
redemption should have occurred. Until such time after the Mandatory
Redemption Date as the Corporation shall redeem, or shall set aside in trust
for the holders of the Series A Preferred Stock a sum in cash sufficient to
redeem, all shares of the Series A Preferred Stock outstanding on such
Mandatory Redemption Date in accordance with the provisions of this Section 7,
the Corporation shall not declare or pay any cash dividend or make any
distributions in cash on, or, directly or indirectly, purchase, redeem or
otherwise acquire, any of its capital stock (including any warrants, rights or
options exercisable for or convertible into any capital stock of the
Corporation, but not including the Rights or any rights similar thereto) or
permit any of its subsidiaries or affiliates, to, directly or indirectly,
purchase or acquire any such capital stock. Until such time after the
Mandatory Redemption Date as the Corporation shall redeem, or shall set aside
in trust for the holders of the Series A Preferred Stock a sum in cash
sufficient to redeem, all shares of the Series A Preferred Stock outstanding
on such Mandatory Redemption Date in accordance with the provisions of this
Section 7, Preferred Dividends shall continue to accrue on any shares of
Series A Preferred Stock required to be redeemed by this Section 7 and not so
redeemed.
SECTION 8. Consolidation, Merger, etc.
(A) In the event that (i) the Corporation shall consummate any
consolidation or merger pursuant to which the outstanding shares of Common
Stock are exchanged solely for or changed, reclassified or converted solely
into stock of any successor or resulting corporation (including the
Corporation) that constitutes "qualifying employer securities" with respect to
a holder of Series A Preferred Stock within the meaning of Section 4975(e)(8)
of the Internal Revenue Code of 1986, as amended, and Section 407(d)(5) of the
Employee Retirement Income Security Act of 1974, as amended, or any successor
provisions of law, and, if applicable, for a cash payment in lieu of
fractional shares, if any, or (ii) the Corporation shall consummate any sale
of all or substantially all of the Corporation's assets pursuant to which
consideration consisting solely of stock of any corporation that constitutes
such qualifying employer securities with respect to a holder of Series A
Preferred Stock is distributed to holders of Common Stock, together with, if
applicable, a cash payment in lieu of fractional shares, if any, then the
shares of Series A Preferred Stock of such holder shall, in connection with
such consolidation, merger or such sale of all or substantially all of the
Corporation's assets, be assumed by and shall become preferred stock of such
successor, resulting or other corporation, having in respect of such
corporation, insofar as possible, the same powers, preferences and relative,
optional or other special rights (including the redemption and other rights
provided by Sections 6, 7 and 8 hereof), and the qualifications, limitations
or restrictions thereon, that the Series A Preferred Stock had immediately
prior to such transaction, except that after such transaction each share of
the Series A Preferred Stock shall be convertible, otherwise on the terms and
conditions provided by Section 5 hereof, into the number and kind of
qualifying employer securities so receivable by a holder of the number of
shares of Common
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Stock into which such shares of Series A Preferred Stock could have been
converted immediately prior to such transaction; provided, however, that if by
virtue of the structure of such transaction, a holder of Common Stock is
required to make an election between two or more kinds of qualifying employer
securities, which election cannot practicably be made by the holders of the
Series A Preferred Stock, then the shares of Series A Preferred Stock so
assumed by, and becoming (as described above) preferred stock of, such
successor, resulting or other corporation shall be convertible, otherwise on
the terms and conditions provided by Section 5 hereof, into the aggregate
amount of the kind of qualifying employer securities receivable by a holder of
the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted immediately prior to such
transaction if such holder of Common Stock failed to exercise any rights of
election as to the kind of qualifying employer securities receivable upon such
transaction (provided that, if the kind or amount of qualifying employer
securities receivable upon such transaction is not the same for each
non-electing share, then the kind and amount so receivable upon such
transaction for each non-electing share shall be the kind and amount so
receivable per share by the plurality of the non-electing shares). The rights
of the Series A Preferred Stock as preferred stock of such successor,
resulting or other corporation shall successively be subject to adjustments
pursuant to Section 9 hereof after any such transaction as nearly equivalent
as practicable to the adjustment provided for by such section prior to such
transaction. The Corporation shall not consummate any such consolidation,
merger or sale of all or substantially all of the Corporation's assets unless
all then outstanding shares of Series A Preferred Stock shall be assumed and
authorized by the successor, resulting or other corporation as aforesaid.
(B) In the event that (i) the Corporation shall consummate any
consolidation or merger pursuant to which the outstanding shares of Common
Stock are exchanged for or changed, reclassified or converted into stock or
securities or cash or any other property, or any combination thereof, which
consideration is not constituted solely of qualifying employer securities (as
referred to in paragraph 8(A) hereof) and cash payments, if applicable, in
lieu of fractional shares, or (ii) the Corporation shall consummate any sale
of all or substantially all of the Corporation's assets pursuant to which
consideration not consisting solely of stock constituting such qualifying
employer securities and cash payments, if applicable, in lieu of fractional
shares, is distributed, then outstanding shares of Series A Preferred Stock
shall, without any action on the part of the Corporation or any holder thereof
(but subject to paragraph 8(C) hereof), be automatically converted by virtue
of such consolidation, merger or such sale of all or substantially all of the
Corporation's assets immediately prior to such consummation into the number of
shares of Common Stock into which such shares of Series A Preferred Stock
could have been converted at such time so that each share of Series A
Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be exchanged for or changed,
reclassified or converted into, or shall entitle the holder thereof to
otherwise receive, the aggregate amount of stock, securities, cash or other
property (payable in like kind) receivable by a holder of the number of shares
of Common Stock into which such shares of Series A Preferred Stock could have
been converted immediately prior to such transaction; provided, however, that
if by virtue of the structure of such transaction, a holder of Common Stock is
required to make an election with respect to the nature and kind of
consideration to be received in such transaction, which election cannot
practicably be made by the holders of the Series A Preferred Stock, then the
shares of Series A Preferred Stock shall, by virtue of such transaction and on
the same terms as apply to the holders of Common Stock, be exchanged for or
changed, reclassified or converted into, or shall entitle the holder thereof
to otherwise receive, the aggregate amount of stock, securities, cash or other
property (payable in kind) receivable by a holder of the number of shares of
Common Stock into which such shares of Series A Preferred Stock could have
been converted immediately prior to such transaction if such holder of Common
Stock failed to exercise any rights of election as to the kind or amount of
stock, securities, cash or other property receivable upon such transaction
(provided that, if the kind or amount of stock, securities, cash or other
property receivable upon such transaction is not the same for each
non-electing share, then the kind and amount of stock, securities, cash or
other property receivable upon such transaction for each non-electing share
shall be the kind and amount so receivable per share by a plurality of the
non-electing shares).
(C) In the event the Corporation shall enter into any agreement providing
for any consolidation, merger or any sale of all or substantially all of the
Corporation's assets, in each case, described in
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paragraph 8(B) hereof, then the Corporation shall as soon as practicable
thereafter (and in any event at least ten (10) Business Days before
consummation of such transaction) give notice of such agreement and the
material terms thereof, and the earliest date of consummation thereof, to each
holder of Series A Preferred Stock, and if the Trustee would be unable to hold
the consideration receivable under paragraph 8(B) hereof as a result of such
transaction under the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute, then each such holder shall have the right
to elect, by written notice to the Corporation, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Corporation or the successor of the Corporation, in redemption and retirement
of such Series A Preferred Stock, a cash payment equal to the greater of (i)
an amount per share equal to the redemption price per share which would be
applicable were the Corporation to redeem such shares of Series A Preferred
Stock pursuant to paragraph 6(A) hereof (without regard to whether such shares
of Series A Preferred Stock are then redeemable thereunder), plus an amount
equal to all accumulated and unpaid dividends (including dividends declared
and set aside) and accrued dividends thereon to the date of the consummation
of such transaction or (ii) the Fair Market Value (as defined in paragraph
9(F) hereof) of the Common Stock into which such Series A Preferred Stock
could be converted pursuant to paragraph 5(A) hereof on the date of
consummation of such transaction. No such notice of redemption shall be
effective unless given to the Corporation prior to the close of business on
the third Business Day prior to consummation of such transaction, unless the
Corporation or the successor of the Corporation shall waive such prior notice,
but any notice of redemption so given prior to such time may be withdrawn by
notice of withdrawal given to the Corporation prior to the close of business
on the third Business Day prior to consummation of such transaction.
(D) In the event the Corporation shall, at any time or from time to time
while the shares of Series A Preferred Stock are outstanding, make a
Distribution of Other Securities (as defined in paragraph 9(F) hereof),
whether by dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including a recapitalization or
reclassification effected by a merger or consolidation to which neither
paragraph 8(A) nor 8(B) hereof apply), then upon any subsequent conversion of
shares of the Series A Preferred Stock, the holder thereof shall receive, in
addition to any shares of Common Stock received upon such conversion pursuant
to any other provisions hereof, the aggregate amount of Other Securities (as
defined in paragraph 9(F) hereof) which such holder would have received had it
converted such shares of Series A Preferred Stock immediately prior to the
distribution date with respect to such Distribution of Other Securities and
thereafter retained such Other Securities (and any other cash, securities,
evidences of indebtedness or other property subsequently distributed with
respect thereto or exchanged therefor) until the date of such conversion.
(E) In the event the Corporation shall, at any time or from time to time
while the shares of Series A Preferred Stock are outstanding, effect a
Repurchase for Other Property (as defined in paragraph 9(F) hereof), then upon
any subsequent conversion of shares of the Series A Preferred Stock, the
holder thereof shall receive the aggregate amount of Other Property (as
defined in paragraph 9(F) hereof) which such holder would have received had it
converted such shares of Series A Preferred Stock immediately prior to the
date of repurchase with respect to such Repurchase for Other Property and had
all such shares of Common Stock so issued upon such conversion been tendered
and (subject to any proration or similar terms of such Repurchase for Other
Property, but without giving effect to any provisions of such Repurchase for
Other Property regarding fractional shares) repurchased in such Repurchase for
Other Property, together with that number of shares of Common Stock into which
such shares of Series A Preferred Stock could have been converted immediately
prior to the date of repurchase with respect to such Repurchase for Other
Property which shares of Common Stock so issued upon such conversion would not
have been repurchased in such Repurchase for Other Property (due, for example,
to the proration or similar terms of such Repurchase for Other Securities) and
had such holder thereafter retained such Other Property (and any other cash,
securities, evidences of indebtedness or other property subsequently exchanged
therefor) until the date of such conversion; provided that such Other Property
shall be issued as of such conversion date and any dividend or interest
thereon shall accrue from such conversion date.
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SECTION 9. Anti-dilution Adjustments.
(A) In the event the Corporation shall, at any time or from time to time
while any of the shares of the Series A Preferred Stock are outstanding, (i)
pay a dividend or make a distribution in respect of the Common Stock in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares, in each case whether by reclassification of shares, recapitalization
of the Corporation (including a recapitalization effected by a merger or
consolidation to which Section 8 hereof does not apply) or otherwise, then,
subject to the provisions of paragraphs 9(D) and 9(E) hereof, the Conversion
Price shall be adjusted by multiplying such Conversion Price by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately before such event, and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event. An adjustment
made pursuant to this paragraph 9(A) shall be given effect, upon payment of
such a dividend or distribution, as of the record date for the determination
of stockholders entitled to receive such dividend or distribution (on a
retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof.
(B) In the event that the Corporation shall, at any time or from time to
time while any of the shares of Series A Preferred Stock are outstanding,
issue to the holders of shares of Common Stock as a dividend or distribution,
including by way of a reclassification of shares or a recapitalization of the
Corporation, any right or warrant to purchase shares of Common Stock
(including without limitation any securities convertible into such Common
Stock or any right or warrant to purchase such convertible securities, but not
including as such a right or warrant any Rights (as defined in Section 5) or
any similar rights) at a purchase price per share less than the Fair Market
Value (as defined in paragraph 9(F) hereof) of a share of Common Stock on the
date of issuance of such right or warrant, then, subject to the provisions of
paragraphs 9(D) and 9(E) hereof, the Conversion Price shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately before such
issuance of rights or warrants plus the number of shares of Common Stock which
could be purchased at the Fair Market Value of a share of Common Stock on the
date of such issuance for the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of
Common Stock that could be acquired upon exercise in full of all such rights
and warrants. An adjustment made pursuant to this paragraph 9(B) shall be
given effect, upon issuance of such rights or warrants, as of the record date
for the determination of stockholders entitled to receive such rights or
warrants (on a retroactive basis); provided, that, to the extent shares of
Common Stock otherwise issuable upon exercise of such rights or warrants are
not delivered after the expiration of such rights or warrants, the Conversion
Price will be readjusted (but only with respect to shares of Series A
Preferred Stock converted after such expiration) to the Conversion Price which
would then be in effect had the adjustments made upon such issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock actually issued.
(C) In the event the Corporation shall, at any time or from time to time
while any of the shares of Series A Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend or distribution, or effect a Pro Rata Repurchase
(as hereinafter defined), the Conversion Price in effect immediately prior to
such Extraordinary Distribution or Pro Rata Repurchase shall, subject to
paragraphs 9(D) and 9(E) hereof, be adjusted by multiplying such Conversion
Price by the fraction the numerator of which is (i) the product of (x) the
number of shares of Common Stock outstanding immediately before such
Extraordinary Distribution or Pro Rata Repurchase multiplied by (y) the
Current Market Price of a share of Common Stock on the day before the
ex-dividend date with respect to an Extraordinary Distribution, or on the
applicable expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase, or on the date of purchase with respect
to any Pro Rata Repurchase which is not a tender offer, as the case may be,
minus (ii) the Fair Market Value of the Extraordinary Distribution or the
aggregate purchase price of the Pro Rata Repurchase, as the case may be, on
such date, and the denominator of which is the product of (a) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro Rata
Repurchase, the
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number of shares of Common Stock repurchased by the Corporation, multiplied by
(b) the Current Market Price of a share of Common Stock on the day before the
ex-dividend date with respect to an Extraordinary Distribution, or on the
applicable expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase or on the date of purchase with respect
to any Pro Rata Repurchase which is not a tender offer, as the case may be.
The Corporation shall send each holder of Series A Preferred Stock (i) notice
of its intent to make any dividend or distribution and (ii) notice of any
offer by the Corporation to make a Pro Rata Repurchase, in each case at the
same time as, or as soon as practicable after, such offer is first
communicated (including by announcement of a record date in accordance with
the rules of any stock exchange on which the Common Stock is listed or
admitted to trading) to the holders of Common Stock. Such notice shall
indicate the intended record date, ex-dividend date, the applicable expiration
date, if any, the amount and nature of such dividend or distribution, and the
Other Securities, if any, to be distributed in connection therewith, or the
number of shares subject to such offer for a Pro Rata Repurchase and the
purchase price payable by, and the Other Property, if any, to be distributed
by, the Corporation pursuant to such offer, as well as the Conversion Price
and the number of shares of Common Stock into which a share of Series A
Preferred Stock may be converted at such time.
(D) Notwithstanding any other provisions of this Section 9, the
Corporation shall not be required to make any adjustment to the Conversion
Price unless such adjustment would require an increase or decrease of at least
one percent (1%) in the Conversion Price. Any lesser adjustment shall be
carried forward and shall be made no later than the time of, and together
with, the next subsequent adjustment which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease of at
least one percent (1%) in the Conversion Price.
(E) The Corporation shall be entitled to make such additional adjustments
in the Conversion Price, in addition to those required by the foregoing
provisions of this Section 9, as shall be necessary in order that any dividend
or distribution in shares of capital stock of the Corporation, subdivision,
reclassification or combination of shares of stock of the Corporation or any
recapitalization of the Corporation shall not be taxable to the holders of the
Common Stock.
(F) For purposes of this Resolution, the following definitions shall
apply:
"Business Day" shall mean each day that is not a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Distribution of Other Securities" shall mean any dividend or other
distribution to the holders of Common Stock (effected while any of the
shares of Series A Preferred Stock are outstanding) of any shares of
capital stock of the Corporation (other than shares of Common Stock),
other securities of the Corporation (other than securities of the type
referred to in paragraph 9(B) hereof and excluding the Rights and any
similar rights), evidences of indebtedness of the Corporation or any other
person or any other property (including shares of any subsidiary of the
Corporation but excluding cash) or any combination thereof (such shares of
capital stock, other securities, evidences of indebtedness and other
property being herein referred to as "Other Securities").
"Extraordinary Distribution" shall mean any dividend or other
distribution to the holders of Common Stock (effected while any of the
shares of Series A Preferred Stock are outstanding) of cash, where the
aggregate amount of such cash dividend or distribution together with the
amount of all cash dividends and distributions made during the preceding
period of 12 months, when combined with (i) the aggregate Fair Market
Value of all other Securities included in Distributions of Other
Securities made during the preceding period of 12 months and (ii) the
aggregate amount of all Pro Rata Repurchases and the aggregate Fair Market
Value of all Repurchases for Other Property (for this purpose, including
only that portion of the aggregate purchase price of such Pro Rata
Repurchase or Repurchase for Other Property, as the case may be, which is
in excess of the Fair Market Value of the Common Stock repurchased as
determined on the applicable expiration date (including all extensions
thereof) of any tender offer which is a Pro Rata Repurchase or Repurchase
for Other Property, as the case may be, or the date of purchase with
respect to any other Pro Rata Repurchase or Repurchase for Other Property,
as the case may be, which is not a tender offer made during such period),
exceeds twelve and one-half percent (12 1/2%) of the aggregate Fair Market
Value of all shares of Common Stock outstanding on the day before the
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ex-dividend date with respect to such Extraordinary Distribution. The
amount of an Extraordinary Distribution for purposes of paragraph (C) of
this Section 9 shall be equal to the sum of such Extraordinary
Distribution plus the amount of any cash dividends or distributions which
are not Extraordinary Distributions made during such 12-month period and
not previously included in the calculation of an adjustment pursuant to
said paragraph (C).
"Fair Market Value" shall mean (a) as to cash, the amount of cash, and
(b) as to shares of Common Stock or any other class of capital stock or
securities of the Corporation or any other issuer which are publicly
traded, the average of the Current Market Prices of such shares or
securities for each day of the Adjustment Period. "Current Market Price"
of publicly traded shares of Common Stock or any other class of capital
stock or other security of the Corporation or any other issuer for any day
shall mean the last reported sales price, regular way, or, in the event
that no sale takes place on such day, the average of the reported closing
bid and asked prices, regular way, in either case as reported on the New
York Stock Exchange Composite Tape or, if such security is not listed or
admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which such security is listed or admitted
to trading or, if not listed or admitted to trading on any national
securities exchange, on the NASDAQ National Market System or, if such
security is not quoted on such National Market System, the average of the
closing bid and asked prices on such day in the over-the-counter market as
reported by NASDAQ or, if bid and asked prices for such security on such
day shall not have been reported through NASDAQ, the average of the bid
and asked prices for such day as furnished by any New York Stock Exchange
member firm regularly making a market in such security on each trading day
during the Adjustment Period, which firm shall be selected for such
purpose by the Board of Directors of the Corporation or a committee
thereof. "Adjustment Period" shall mean the period of five (5) consecutive
trading days preceding the date as of which the Fair Market Value of a
security is to be determined. The "Fair Market Value" of any security
which is not publicly traded or of any other property shall mean the fair
value thereof as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors of the Corporation or a
committee thereof, or, if no such investment banking or appraisal firm is
in the good faith judgment of the Board of Directors or such committee
available to make such determination, as determined in good faith by the
Board of Directors of the Corporation or such committee.
"Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Corporation or any subsidiary thereof for cash, effected
while any of the shares of Series A Preferred Stock are outstanding,
pursuant to any tender offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer designed to be available
to all or substantially all of the holders of Common Stock; provided,
however, that no purchase of shares by the Corporation or any subsidiary
thereof made in open market or privately-negotiated transactions shall be
deemed a Pro Rata Repurchase, so long as in any such case offers to effect
such purchases shall not be made to all or substantially all of the
holders of Common Stock. For purposes of this paragraph 9(F), shares shall
be deemed to have been purchased by the Corporation or any subsidiary
thereof "in open market transactions" if they have been purchased
substantially in accordance with the requirements of Rule 10b-18 as in
effect under the Exchange Act (or any successor provision) on the date
shares of Series A Preferred Stock are initially issued by the Corporation
or on such other terms and conditions as the Board of Directors of the
Corporation or a committee thereof shall have determined are reasonably
designed to prevent such purchases from having a material effect on the
trading market for the Common Stock.
"Repurchase for Other Property" shall mean any purchase of shares of
Common Stock by the Corporation or any subsidiary thereof for shares of
other capital stock of the Corporation, other securities of the
Corporation, evidences of indebtedness of the Corporation or any other
person or any other property (including shares of a subsidiary of the
Corporation but excluding cash), or any combination thereof (such shares
of capital stock, other securities, evidences of indebtedness and other
property being herein referred to as "Other Property"), effected while any
of the shares of Series A Preferred Stock are outstanding, pursuant to any
tender offer or exchange offer subject to
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Section 13(e) of the Exchange Act, or any successor provision of law, or
pursuant to any other offer designed to be available to substantially all
holders of Common Stock; provided, however, that no purchase of shares by
the Corporation or any subsidiary thereof made in open market or
privately-negotiated transactions shall be deemed a Repurchase for Other
Property, so long as in any such case offers to effect such purchases
shall not be made to all or substantially all of the holders of Common
Stock.
(G) Whenever an adjustment to the Conversion Price and the related voting
rights of the Series A Preferred Stock is required pursuant to this
Resolution, the Corporation shall forthwith place on file with the transfer
agent for the Common Stock and the Series A Preferred Stock, and with the
Secretary of the Corporation, a statement signed by two officers of the
Corporation stating the adjusted Conversion Price determined as provided
herein and the resulting conversion ratio, and the voting rights (as
appropriately adjusted), of the Series A Preferred Stock. Such statement shall
set forth in reasonable detail such facts as shall be necessary to show the
reason and the manner of computing such adjustment, including the
determination of Fair Market Value involved in such computation. Promptly
after each adjustment to the Conversion Price and the related voting rights of
the Series A Preferred Stock, the Corporation shall mail a notice thereof and
of the then prevailing conversion ratio to each holder of shares of the Series
A Preferred Stock.
SECTION 10. Ranking; Attributable Capital and Adequacy of Surplus;
Retirement of Shares.
(A) The Series A Preferred Stock shall rank senior to the Series A Junior
Participating Preferred Stock and the Common Stock as to the payment of
dividends and the distribution of assets on liquidation in whole, dissolution
and winding-up of the Corporation, and, unless otherwise provided in the
Restated Certificate of Incorporation of the Corporation or a Certificate of
Designations relating to a subsequent series of Preferred Stock, par value
$1.00 per share, of the Corporation, the Series A Preferred Stock shall rank
junior to all series of the Corporation's Preferred Stock, par value $1.00 per
share, as to the payment of dividends and the distribution of assets on
liquidation in whole, dissolution or winding-up.
(B) In addition to any vote of stockholders required by law, the vote of
the holders of a majority of the outstanding shares of Series A Preferred
Stock shall be required to increase the par value of the Common Stock or
otherwise increase the capital of the Corporation allocable to the Common
Stock for the purpose of the DGCL if, as a result thereof, the surplus of the
Corporation for purposes of the DGCL would be less than the amount of
Preferred Dividends that would accrue on the then outstanding shares of Series
A Preferred Stock during the following three years.
(C) Any shares of Series A Preferred Stock acquired by the Corporation by
reason of the conversion or redemption of such shares as provided by this
Resolution, or otherwise so acquired, shall be retired as shares of Series A
Preferred Stock and restored to the status of authorized but unissued shares
of Preferred Stock, par value $1.00 per share, of the Corporation,
undesignated as to series, and may thereafter be reissued as part of a new
series of such Preferred Stock as permitted by law.
SECTION 11. Miscellaneous.
(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt
thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms of this Resolution) with postage pre-paid,
addressed: (i) if to the Corporation, to its office at International Plaza,
P.O. Box 8000, Englewood Cliffs, New Jersey 07632 (Attention: Secretary) or to
the transfer agent for the Series A Preferred Stock, or other agent of the
Corporation designated as permitted by this Resolution or (ii) if to any
holder of the Series A Preferred Stock or Common Stock, as the case may be, to
such holder at the address of such holder as listed in the stock record books
of the Corporation (which may include the records of any transfer agent for
the Series A Preferred Stock or Common Stock, as the case may be) or (iii) to
such other address as the Corporation or any such holder, as the case may be,
shall have designated by notice similarly given.
(B) The term "Common Stock" as used in this Resolution means the
Corporation's Common Stock, par value $.25 per share, as the same exists at
the date of filing of a Certificate of Designations relating to Series A
Preferred Stock or any other class of stock resulting from successive changes
or
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reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
In the event that, at any time as a result of an adjustment made pursuant to
Section 9 of this Resolution, the holder of any share of the Series A
Preferred Stock surrendering such shares for conversion, shall become entitled
to receive any shares or other securities of the Corporation other than shares
of Common Stock, the Conversion Price in respect of such other shares or
securities so receivable upon conversion of shares of Series A Preferred Stock
shall thereafter be adjusted, and shall be subject to further adjustment from
time to time, in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Stock contained in Section 9 hereof, and
the provisions of Sections 1 through 8, 10 and 11 of this Resolution with
respect to the Common Stock shall apply on like or similar terms to any such
other shares or securities.
(C) The Corporation shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of
shares of Series A Preferred Stock or shares of Common Stock or other
securities issued on account of Series A Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax which may be payable in respect
of any transfer involved in the issuance or delivery of shares of Series A
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Series A Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall
not be required to make any such issuance, delivery or payment unless and
until the person otherwise entitled to such issuance, delivery or payment has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid or is not
payable.
(D) In the event that a holder of shares of Series A Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series A Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be entitled to register
such shares, and make such payment, in the name of the holder of such Series A
Preferred Stock as shown on the records of the Corporation and to send the
certificate or certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Corporation.
(E) Unless otherwise provided in the Restated Certificate of Incorporation
of the Corporation, all payments in the form of dividends, distributions on
voluntary or involuntary liquidation in whole, dissolution or winding-up or
otherwise made upon the shares of Series A Preferred Stock and any other stock
ranking on a parity with the Series A Preferred Stock with respect to such
dividend or distribution shall be pro rata, so that amounts paid per share on
the Series A Preferred Stock and such other stock shall in all cases bear to
each other the same ratio that the required dividends, distributions or
payments, as the case may be, then payable per share on the shares of the
Series A Preferred Stock and such other stock bear to each other.
(F) The Corporation may appoint, and from time to time discharge and
change, a transfer agent for the Series A Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send
notice thereof by first-class mail, postage prepaid, to each holder of record
of Series A Preferred Stock.
FIFTH: The Board of Directors is expressly authorized and empowered to
adopt, amend and repeal By-laws, subject to the power of the stockholders to
amend or repeal any By-law made by the Board of Directors.
SIXTH: Unless and except to the extent that the By-laws shall so require,
the election of directors need not be by written ballot.
SEVENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed or permitted by
21
<PAGE> 22
said laws; and all rights at any time conferred upon the stockholders of the
Corporation by this Certificate of Incorporation are granted subject to the
provisions of this Article SEVENTH.
EIGHTH: The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than nine
nor more than twenty-one directors (exclusive of directors referred to in the
following paragraph), the exact number to be determined from time to time by
resolution adopted by affirmative vote of a majority of such directors then in
office. The directors shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors determined by the
Board of Directors pursuant to this paragraph. At the 1986 annual meeting of
stockholders, Class I directors shall be elected for a one-year term, Class II
directors for a two-year term and Class III directors for a three-year term.
At each succeeding annual meeting of stockholders beginning in 1987,
successors to the directors in the class whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for the remaining term of
that class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Any vacancy
in the Board of Directors that results from an increase in the number of
directors may be filled by a majority of the directors then in office,
provided that a quorum is present, and any other vacancy may be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall hold office for the
remaining term of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the number of such directors and the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the provisions of Article FOURTH of this
Certificate of Incorporation and any resolution or resolutions adopted by the
Board of Directors pursuant thereto, and such directors shall not be divided
into classes unless expressly so provided therein.
NINTH: No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken without a
meeting, unless a consent in writing, setting forth the action so taken, shall
be signed by all the stockholders of the Corporation entitled to vote thereon.
TENTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for payment of an improper dividend, or for an
improper repurchase or redemption of the stock of the Corporation, in
violation of Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
22
<PAGE> 23
IN WITNESS WHEREOF, this Certificate has been signed by the Chairman of
the Board of the Corporation, and the corporate seal of the Corporation has
been hereunto affixed and attested to by the Secretary of the Corporation, all
as of the 22nd day of April, 1993.
<TABLE>
<S> <C>
CPC INTERNATIONAL INC.
By /S/ CHARLES R. SHOEMATE
----------------------------
Charles R. Shoemate
Chairman of the Board
ATTEST:
/S/ JOHN B. MEAGHER
- ------------------------------------
John B. Meagher
Secretary
</TABLE>
23
<PAGE> 1
Exhibit 3(b)
BY-LAWS
OF
CPC INTERNATIONAL INC.
ARTICLE I
----------------
OFFICES
SECTION 1. The registered office of the Company in the State of Delaware
shall be in the City of Wilmington, County of New Castle, and the name of the
registered agent of the Company in said State is The Corporation Trust
Company. The Company may also have an office or offices other than said
registered office at such place or places either within or without the State
of Delaware as the Board of Directors may from time to time designate or as
the business of the Company may require.
ARTICLE II
SEAL
SECTION 1. The seal of the Company shall be circular in form and shall
have the name of the Company and the words and numerals "Corporate Seal 1959
Delaware."
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of stockholders of the Company shall be held
in each year on the fourth Thursday in April, or on such other date as the
Board of Directors may designate, and at such time and place as the Board of
Directors may designate, for the election of directors and for the transaction
of such other business as may properly come before the meeting.
SECTION 2. Special meetings of the stockholders may be called on the order
of the Chairman of the Board or the Board of Directors and shall be held at
such date, time and place as may be specified by such order.
SECTION 3. Written notice of all meetings of the stockholders shall be
mailed or delivered to each stockholder not less than twenty nor more than
sixty days before the meeting. The notice or an accompanying document shall
identify the business to be transacted at the meeting and, if directors are to
be elected, the candidates therefor, as determined by the Board of Directors.
Other business may be transacted and other candidates may be nominated at the
annual meeting, but only if the Secretary of the Company has received from the
sponsoring stockholder (a) not less than sixty nor more than ninety days
before the fourth Thursday in April (or, if the Board of Directors has
designated another date for the annual meeting pursuant to Section 1 of this
Article III, not less than sixty nor more than ninety days before such other
date or, if such other date has not been publicly disclosed at least
seventy-five days in advance, then not less than fifteen days after such
public disclosure) a written notice identifying such business or candidates,
and (b) not more than ten days after receipt by the sponsoring stockholder of
a written request from the Secretary, such additional information as the
Secretary may reasonably require.
SECTION 4. The holders of a majority of the issued and outstanding shares
of the capital stock of the Company entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum for the transaction
of business at all meetings of the stockholders except as may otherwise be
provided by law, by the Certificate of Incorporation or by these By-laws; but,
if there be less than a quorum, the holders of a majority of the stock so
present or represented may adjourn the meeting from time to time.
SECTION 5. Each stockholder shall, subject to the provisions of the
Certificate of Incorporation, at each meeting of the stockholders be entitled
to one vote in person or by proxy for each share of the
<PAGE> 2
stock of the Company which has voting power on the matter in question and
which shall have been held by him and registered in his name on the books of
the Company:
(a) on the date fixed pursuant to the provisions of Section 6 of
Article VIII of these By-laws as the record date for the determination of
stockholders who shall be entitled to notice of and to vote at such
meeting, or
(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice of the
meeting shall be given.
At all meetings of the stockholders all matters, except as otherwise provided
in the Certificate of Incorporation, in these By-laws, or by law, shall be
decided by the vote of the holders of a majority of the shares entitled to
vote thereat present in person or by proxy, a quorum being present. The vote
at any meeting of the stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. The Board of Directors, or,
if the Board shall not have made the appointment, the chairman presiding at
any meeting of stockholders, shall have the power to appoint two or more
persons to act as inspectors, to receive, canvass and report the votes cast by
the stockholders at such meeting; but no candidate for the office of director
shall be appointed as an inspector at any meeting for the election of
directors.
SECTION 6. The Chairman of the Board or, in his absence, a director or
officer designated by the Board of Directors or the Chairman of the Board,
shall preside at all meetings of the stockholders.
SECTION 7. The Secretary of the Company shall act as secretary of all
meetings of the stockholders; and, in his absence, the chairman of the meeting
may appoint any person to act as secretary of the meeting.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. An annual meeting of the Board of Directors shall be held
following the annual meeting of the stockholders for the purpose of the
organization of the Board and the election of officers and for the transaction
of such other business as may properly be brought before such meeting. Unless
otherwise provided by law or by these By-laws, notice of annual meetings of
the Board need not be given.
SECTION 2. Regular meetings of the Board of Directors shall be held at
such time and at such place as may from time to time be fixed by resolution of
the Board of Directors. Unless otherwise provided by law or by these By-laws,
notice of regular meetings of the Board need not be given.
SECTION 3. Special meetings of the Board of Directors may be called by the
number of directors which would constitute a quorum of the Board of Directors
or by order of the Chairman of the Board. The Secretary shall give notice to
each director of the time, place and purpose or purposes of each special
meeting by mailing the same at least two days before the meeting, or by
delivering the same personally or by telephone or other electronic means not
later than the day before the day of the meeting.
SECTION 4. At meetings of the Board of Directors the Chairman of the Board
or, in his absence, a director designated by the Board of Directors, shall
preside.
SECTION 5. At meetings of the Board of Directors, a quorum for the
transaction of business shall be a majority of the total number of directors
determined from time to time by the Board of Directors pursuant to Article
EIGHTH of the Certificate of Incorporation. If less than a quorum shall be
present, a majority of those present may adjourn any meeting until a quorum
shall be present, whereupon the meeting may be held, as adjourned, without
further notice.
SECTION 6. The directors may participate in a meeting of the Board of
Directors by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, and such participation shall constitute presence in person at such
meeting.
2
<PAGE> 3
SECTION 7. Any action required or permitted to be taken at any meeting of
the Board of Directors may be taken without a meeting if all the directors
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
SECTION 8. The directors shall receive such compensation for their
services as may be prescribed by the Board of Directors and shall be
reimbursed by the Company for ordinary and reasonable expenses incurred in the
performance of their duties.
ARTICLE V
COMMITTEES
SECTION 1. The Board of Directors may appoint from among its members such
committees as the Board may determine, which shall consist of such number of
directors and have such powers and authority as shall from time to time be
prescribed by the Board.
SECTION 2. Regular meetings of committees shall be held at such time and
at such place as may from time to time be fixed by resolution of the Board of
Directors. Unless otherwise provided by law or by these By-laws, notice of
regular meetings of committees need not be given.
SECTION 3. Special meetings of committees may be called by order of the
chairman of the committee or the Chairman of the Board. The Secretary shall
give notice to each member of the time, place and purpose or purposes of each
special meeting by mailing the same at least two days before the meeting, or
by delivering the same personally or by telephone or other electronic means
not later than the day before the day of the meeting.
SECTION 4. At meetings of committees the chairman of the committee, or, in
his absence, a director designated by the members of the committee, shall
preside.
SECTION 5. A majority of the members of any committee shall constitute a
quorum for the transaction of business; provided, however, that in the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
SECTION 6. The members of any committee may participate in a meeting of
the committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 7. Any action required or permitted to be taken at a meeting of
any committee may be taken without a meeting if all the members consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the committee.
ARTICLE VI
OFFICERS
SECTION 1. The Board of Directors shall elect the officers of the Company,
which may include a Chairman of the Board, a President, one or more Vice
Presidents, a Comptroller, a Treasurer, a Secretary and a General Counsel. Any
Vice President may be given an additional designation of rank or function.
Each officer shall have such powers and duties as may be prescribed by these
By-laws and as may be assigned by the Board of Directors or the Chairman of
the Board.
SECTION 2. The Chairman of the Board shall be the chief executive officer
of the Company, and shall have such powers and duties as customarily pertain
to that office. He shall have general supervision over the property, business
and affairs of the Company and over its other officers. He may appoint and
remove assistant officers and other employees and agents. He may execute and
deliver in the name of the Company all powers of attorney, contracts and other
obligations and instruments.
SECTION 3. In case of the absence or disability of the Chairman of the
Board, an officer or officers designated by the Chairman of the Board or, in
the absence of such designation, by the Board of Directors, shall have the
powers and duties of the Chairman of the Board.
3
<PAGE> 4
SECTION 4. The officers other than the Chairman of the Board may execute
and deliver in the name of the Company powers of attorney, contracts, and
other obligations and instruments pertaining to the regular course of their
respective duties.
SECTION 5. An officer or officers designated by the Board of Directors
shall be responsible to the Board of Directors for financial control and
internal audit of the Company and its subsidiaries.
SECTION 6. The Treasurer shall have general supervision over the funding
and currency management affairs of the Company.
SECTION 7. The Secretary shall keep the minutes of all meetings of the
stockholders, of the Board of Directors, and of all committees appointed by
the Board.
SECTION 8. The General Counsel shall have general supervision over the
legal affairs of the Company.
SECTION 9. In case any office shall become vacant, the Board of Directors
shall have power to fill such vacancy. In case of the absence or disability of
any officer, the Board of Directors or the Chairman of the Board may assign
the powers and duties of such office to any other officer or officers. Any
officer shall be subject to removal at any time by vote of a majority of the
whole Board.
SECTION 10. The Chairman of the Board, or a Vice President thereunto duly
authorized by the Chairman of the Board, shall have full power and authority
on behalf of the Company to attend and to vote at any meeting of stockholders
of any corporation in which the Company may hold stock, and may exercise on
behalf of the Company any and all of the rights and powers incident to the
ownership of such stock at any such meeting, and shall have power and
authority to execute and deliver proxies and consents on behalf of the Company
in connection with the exercise by the Company of the rights and powers
incident to the ownership of such stock. The Board of Directors may confer
like powers upon any other person or persons.
ARTICLE VII
INDEMNIFICATION
SECTION 1. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he, or a person for whom he is the legal
representative, is or was a director, officer or employee of the Company or is
or was serving at the request of the Company as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified by the Company to the fullest extent permitted by the Delaware
General Corporation Law, as the same exists or may hereafter be amended,
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes, penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection with
such service; provided, however, that the Company shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by
him only if such proceeding was authorized by the Board of Directors, either
generally or in the specific instance. The right to indemnification shall
include the advancement of expenses incurred in defending any such proceeding
in advance of its final disposition in accordance with procedures established
from time to time by the Board of Directors; provided, however, that, if the
Delaware General Corporation Law so requires, the director, officer or
employee shall deliver to the Company an undertaking to repay all amounts so
advanced if it shall ultimately be determined that he is not entitled to be
indemnified under this Article or otherwise.
SECTION 2. The rights of indemnification provided in this Article shall be
in addition to any rights to which any person may otherwise be entitled by law
or under any By-law, agreement, vote of stockholders or disinterested
directors, or otherwise. Such rights shall continue as to any person who has
ceased to be a director, officer or employee and shall inure to the benefit of
his heirs, executors and administrators, and shall be applicable to
proceedings commenced after the adoption hereof, whether arising from acts or
omissions occurring before or after the adoption hereof.
SECTION 3. The Company may purchase and maintain insurance to protect any
person against any liability or expense asserted against or incurred by such
person in connection with any proceeding,
4
<PAGE> 5
whether or not the Company would have the power to indemnify such person
against such liability or expense by law or under this Article or otherwise.
The Company may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to insure the
payment of such sums as may become necessary to effect indemnification as
provided herein.
ARTICLE VIII
CAPITAL STOCK
SECTION 1. Certificates for stock of the Company shall be in such form as
the Board of Directors may prescribe and shall be signed by the Chairman of
the Board or a Vice President and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary. If certificates are signed by a
Transfer Agent, acting in behalf of the Company, and a Registrar, the
signatures of the officers of the Company may be facsimile.
SECTION 2. The Board of Directors shall have power to appoint one or more
Transfer Agents and Registrars for the transfer and registration of
certificates of stock of any class, and may require that stock certificates be
countersigned and registered by one or more of such Transfer Agents and
Registrars.
SECTION 3. Shares of capital stock of the Company shall be transferable on
the books of the Company only by the holder of record thereof in person or by
duly authorized attorney, upon surrender and cancellation of certificates for
a like number of shares.
SECTION 4. In case any certificate for the capital stock of the Company
shall be lost, stolen or destroyed, the Company may require such proof of the
fact and such indemnity to be given to it and to its Transfer Agent and
Registrar, if any, as shall be deemed necessary or advisable by it.
SECTION 5. The Company shall be entitled to treat the holder of record of
any share or shares of stock as the holder thereof in fact, and shall not be
bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
SECTION 6. In order that the Company may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or other allotment of any rights, or entitled to exercise any
rights in respect of any other change, conversion or exchange of stock or for
the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. If in any case involving the determination of stockholders for
any purpose (other than notice of or voting at a meeting of stockholders) the
Board of Directors shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close of business on
the day on which the Board of Directors shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
ARTICLE IX
MISCELLANEOUS
SECTION 1. The Board of Directors shall have power to fix, and from time
to time change, the fiscal year of the Company. Unless otherwise fixed by the
Board, the calendar year shall be the fiscal year.
SECTION 2. Whenever notice is required to be given by these By-laws or by
the Certificate of Incorporation or by law, a written waiver thereof, signed
by the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
5
<PAGE> 6
ARTICLE X
AMENDMENT
SECTION 1. The Board of Directors shall have power, at any meeting of the
Board, to add any provision to or to amend or repeal any provision of these
By-laws by the vote of a majority of the total number of directors determined
from time to time by the Board of Directors pursuant to Article EIGHTH of the
Certificate of Incorporation, provided that a statement of the proposed action
shall have been included in a notice or waiver of notice of such meeting of
the Board. The stockholders may add any provision to or amend or repeal any
provision of these By-laws by the vote of a majority of the stockholders
present or represented at any meeting, provided that a statement of the
proposed action shall have been included in the notice of such meeting of
stockholders.
Revised 09/21/93
6
<PAGE> 1
EXHIBIT 11
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Primary 1993 1992 1991
------- -------- -------- --------
<S> <C> <C> <C>
Net income $454,470 $223,768 $372,743
-------- -------- --------
Preferred stock dividends, net of taxes 10,673 10,457 9,893
-------- -------- --------
Net income available to common
stockholders $443,797 $213,311 $362,850
-------- -------- --------
Weighted average shares outstanding 150,398 151,212 151,166
-------- -------- --------
Primary earnings per share (*) $2.95 $1.41 $2.40
======== ======== ========
Fully diluted
-------------
Net income $454,470 $223,768 $372,743
-------- -------- --------
Adjustments to net income:
Assumed additional contribution if
ESOP is fully converted net of certain
tax benefits (4,121) (4,511) (4,967)
After tax interest on the 6% zero
coupon convertible debt 3,869*** - ** 3,119
-------- -------- --------
Fully diluted net income $454,218 $219,257 $370,895
-------- -------- --------
Average shares outstanding 150,398 151,212 151,166
Add incremental shares representing:
Shares issuable upon exercise of
stock options based on year-end
price 257 400 300
Performance incentive shares
issuable based on year-end
market price 80 90 162
Share assumed issuable upon
conversion of ESOP shares 4,384 4,428 4,462
Shares assumed issuable upon
conversion of 6% zero coupon
convertible debt 1,458*** - ** 1,248
-------- ------- -------
Weighted average number of shares
as adjusted 156,577 156,130 157,338
======== ======= =======
Fully diluted earnings per share $2.90 $1.40 $2.36
======== ======= =======
Dilutive effect of incremental shares -1.7% - .7% -1.9%
======== ======= =======
</TABLE>
(*) Incremental shares have not been considered in the computation of primary
earnings per share in accordance with generally accepted accounting
principles which requires inclusion only when dilutive effect is greater
than three percent.
(**) Actual result was antidilutive therefore not used in calculation.
(***) Redeemed August 13, 1993.
17
<PAGE> 1
Exhibit 13
page 1
1993 * ANNUAL REPORT
RESULTS IN BRIEF
<TABLE>
<CAPTION>
$ Millions except per share amounts 1993 1992
============================================================================================
<S> <C> <C>
Net sales $ 6,738 $ 6,599
Operating income $ 883 $ 849
Income from continuing operations $ 455 $ 431
Per common share
Net income from continuing operations $ 2.95 $ 2.78
Dividends declared $ 1.28 $ 1.20
Stockholders' equity $ 11.81 $ 11.03
Depreciation and amortization $ 266 $ 262
Capital expenditures $ 386 $ 311
============================================================================================
</TABLE>
<PAGE> 2
page 2
CPC * INTERNATIONAL
TO OUR STOCKHOLDERS AND EMPLOYEES
Our Company achieved solid growth in 1993, in spite of continuing recession in
North America and Europe, unfavorable currency translations affecting our
European earnings, and very unusual weather and flood conditions in North
America. While constraining our growth, these problems were counterbalanced by
some important positives, including good volume growth worldwide, the
outstanding progress of our Latin American consumer foods business, and our
strong performance in Asia. CPC's earnings per share rose 6.1% to $2.95,
compared to 1992, and net income rose 5.6% to $455 million.1
Unfortunately, CPC's progress in 1993 was not reflected in improvement in
the price of CPC's stock, which is our consistent objective. Investment
community confidence in the food industry weakened for a time, and our stock
price slipped slightly below its 1992 level. CPC ended the year at the middle
of our peer group of 20 food companies in terms of return to investors, and our
price/earnings multiple equaled the average multiple of the group.
Looking beyond the numbers, CPC made strong progress in a number of areas
during 1993 that will pay off in 1994 and beyond. We introduced many successful
new products around the world; entered four new countries; and reentered South
Africa via a licensing agreement. We acquired Pfanni potato products, the
largest such business in Europe; the Henri's salad dressings business in the
U.S.; and also new businesses in Costa Rica, Denmark, the Czech Republic, and
Turkey. We also completed a substantial part of an ongoing European efficiency
improvement program, which positions us for more effective manufacturing,
marketing, and distribution in a unified Europe. Equally important, CPC's top
managers around the world reaffirmed our ability to grow based on our unique
characteristics :
* our great market-leading products and brands, which we believe will
continue to meet the challenge of all competitors, through unrelenting
focus on quality, innovation, and value.
* our worldwide presence and our organization of entrepreneurial, flexible,
action-oriented local management teams.
* our track record of successful extension and translation of products,
concepts, and expertise across borders, allowing us to move fast and
efficiently into new markets and businesses.
These characteristics, we believe, equip our time-tested company to keep
ahead of changes in the food industry, including opening markets, new consumer
trends, and ever-tougher competitive conditions.
I am deeply grateful to CPC's 39,000 employees for their contribution to our
drive to be the best international food company by building on our core
businesses and core strengths. I'm also grateful to our stockholders, whose
expectations for a fast-growing CPC we fully intend to justify in 1994 and
future years.
/S/ C. R. SHOMATE
- ------------------------------
C. R. Shoemate
Chairman and Chief Executive Officer
February 15, 1994
1 Before the 1992 environmental charge for discontinued operations and the
cumulative effect of accounting changes (see page 31).
<PAGE> 3
page 3
1993 * ANNUAL REPORT
STRENGTH THROUGH
POSITIONING
This annual report focuses on the strengths CPC gains through its excellent
positioning -- the positioning of its highly-focused businesses and products as
market leaders; its solid financial positioning; its geographic positioning on
five continents and in the highest-potential economies in the world; and its
positioning as supplier of choice with a growing number of customers. Our
strategy is to leverage these "positioning advantages" to strengthen market
leadership, invest in new and existing ventures, thrive in markets where
opportunities are greatest, and forge lasting customer partnerships, thus
assuring CPC a consistent position among the top performers in the food
industry. In the business reviews and essays that follow, as well as in the
Company's financial statements, we document in detail the progress CPC is
making toward this objective.
<PAGE> 4
page 4
CPC * INTERNATIONAL
CONSUMER FOODS BUSINESS
CPC's consumer foods business continued to grow in 1993, reflecting the
Company's global presence and the strength of its market-leading brands. Sales
and operating income from consumer foods increased 2.4% and 3.8%, respectively.
Worldwide volumes increased 6.2%, including acquisitions. In 1993 consumer
foods sales accounted for 84% of the Company's revenues.
CONSUMER FOODS WORLDWIDE BUSINESSES
Expansion of CPC's three worldwide businesses, which together account for about
65% of CPC's consumer foods sales, continued in 1993 with the introduction of
new and better products and extension into additional markets. CPC's worldwide
businesses are soups, sauces, bouillons, and mealmakers, chiefly under the
Knorr brand; dressings, primarily Hellmann's, Best Foods, and Mazola brand
products; and foodservice (catering) operations, which market Knorr,
Hellmann's, and additional CPC brands to restaurants, cafeterias, and other
eating establishments. The worldwide positioning of these businesses allows CPC
to use its global organization to transfer and translate products and ideas
across borders. Successes from one country are extended to another.
SOUPS, SAUCES, AND BOUILLONS
Sales of Knorr soups, sauces, bouillons, and mealmakers and related CPC
brands were $2.1 billion in 1993, 2% higher, on a volume increase of 11%. The
brand is marketed in 51 of the 58 countries where the Company has operations
and is exported into many more. From roux-based sauces for fish dishes in
France to bouillons for steaming vegetables in China, Knorr products fit local
eating habits.
IN EUROPE, where the brand has been a favorite for nearly 150 years, volumes
of Knorr products and related CPC brands rose 11% in 1993. Sales were higher
in local currencies, but were 1% lower than 1992 levels at $1.5 billion when
translated into dollars. The Knorr brand is No. 1 in Europe in the soup and
bouillon categories and is second in sauces, while Knorr mealmakers are No. 1
or No. 2 in most countries. CPC continued to enhance and expand the Knorr
range in Europe during 1993 with new offerings and product improvements, and by
extending successes into additional markets.
CPC's European product development center created Knorr Roer-om-Menu liquid
mealmaker sauces in jars, launched in Holland in 1993. Moving quickly into this
fast-growing product segment, CPC introduced the liquid mealmakers in Belgium,
France,
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1993 * ANNUAL REPORT
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CPC * INTERNATIONAL
MARKET STRENGTH GIVES THE KNORR BRAND A CRITICAL COMPETITIVE EDGE. KNORR SOUPS,
SAUCES, BOUILLONS, AND MEALMAKERS HOLD NO. 1 OR NO. 2 SHARES IN MORE THAN 80%
OF THEIR MARKETS.
and Ireland in early 1994, with more markets to come.
Other new products included Knorr instant "family" soups with recipes
tailored to meet local tastes. First introduced in six countries in 1992, these
soups were added in Belgium, Spain, Sweden, and Portugal in 1993. Cubes for the
preparation of rice dishes were introduced in the U.K and Ireland, following a
successful launch of cubes for pasta in 1992. CPC also launched Knorr Finesse
bouillons in Belgium. Knorr pasta sauces were added in Austria, Germany, and
Switzerland. Capitalizing on emerging eating trends, the company launched Knorr
vegetable mealmakers in Germany and Switzerland.
Continuing the successful expansion of the Knorr brand into Central Europe,
CPC began producing Knorr products in Poland, where the brand had been
established through imports, and initiated export from Poland to Russia. CPC
also began producing a line of 19 Knorr soups in Israel, including six soups
under the Knorr Stir & Serve banner, a name that originated in the U.K.
IN LATIN AMERICA sales of soups, sauces, and bouillons increased 15% to $315
million. Volumes were 11% higher. The Knorr brand is the bouillon leader. New
varieties introduced in 1993 were tailored to fit local eating habits. Pumpkin
bouillon in Argentina is used to prepare soup popular with children. A bacon
variety launched in Brazil is a low-cost alternative for adding the bacon
flavor popular in some basic Brazilian dishes. Also in Brazil, Refoga Facil
(easy sauteing) bouillon includes garlic and onions that are often sauteed as
the first step in preparing many meals. In Colombia CPC applied its bouillon
expertise to a new entry under its Sasoned name, a strong local brand.
The strength of the Knorr bouillon business provides a foundation for
expansion of the brand in Latin America. In Mexico, where Knorr bouillons are
No. 1, Knorr soups became the soup category market leader in 1993, less than
three years after introduction. In 1993 new local rice and vegetable soup
varieties were introduced. CPC also introduced a second tomato-based cooking
sauce and Knorr bean side dishes. In Argentina Knorr instant mashed potatoes,
children's soups, and Specialty Soups were introduced. Specialty Soups are
patterned after Knorr Soups of the World soups, developed in Europe. After
imports of the European soups performed well, the Argentine affiliate began
producing locally with recipes tailored for local tastes.
IN NORTH AMERICA sales of soups, sauces, and bouillons, which include LeGoct
brand foodservice products, rose 3% to $256 million. Volumes were 3% higher.
New products include a line of Knorr soups packaged in single-serve cups. Each
soup is low in fat and calories, contains no cholesterol, and is prepared in
its package. Sales of Knorr pasta sauces increased in the U.S. and Canada, as
these businesses continued to share recipe improvements and add new varieties.
CPC also expanded the Knorr Haute Cuisine soup line in Canada, which, like
Knorr Chef's Collection soups in the U.S., are patterned after Knorr
Feinschmecker soups from Germany. CPC also markets bouillons and other Knorr
products to the growing Hispanic population in the U.S. New in 1993 was a
"sazon," a traditional seasoning for Caribbean heritage markets.
IN ASIA Knorr bouillons and soups hold No. 1 share positions in eight
countries, including Japan through a licensing agreement.
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LEADING SHARE POSITIONS POWER CPC BRANDS IN MARKETS AROUND THE WORLD
Knorr and Hellmann's products are retail markets leaders and are trusted
by foodservice professionals, like this chef checking his order outside the
Thistle Hotel in London.
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CPC * INTERNATIONAL
CPC MARKETS MAYONIASE IN 38 COUNTRIES ON FIVE CONTINENTS, CHIEFLY UNDER THE
HELLMANN'S BRAND. THE COMPANY HOLDS A NO. 1 MARKET SHARE IN 21 COUNTRIES AND
NO. 2 IN SIX.
Knorr Cup Soup soups continued to grow strongly in Japan in 1993. Locally made
Knorr bouillons were launched in China.
The "village marketing" approach, used by the Company in Latin America, has
been adapted by CPC for use in many Asian markets. These programs put product
into the hands of consumers to generate trials, accelerate home and trade stock
turnover, expand distribution, and build brand awareness.
Among the new offerings in 1993 were Knorr ramen noodles in Pakistan, where
CPC is building a new consumer foods plant. Knorr bouillons and soups imported
from Malaysia were also launched.
DRESSINGS
Worldwide sales of CPC's mayonnaise, corn oil, and other dressings were $1.4
billion, up 3%. Volumes increased 6%. Sales of mayonnaise, chiefly under the
Hellmann's brand, were up 5% to $890 million, with volume 8% higher.
IN NORTH AMERICA volumes of mayonnaise and other Hellmann's and Best Foods
products grew 4%, despite a modest decline in the size of the mayonnaise
category and intense price competition. These products' sales were slightly
higher. CPC continued to hold an about 50% share of the mayonnaise category,
near its all-time high, with leading positions in the regular and "health"
segments. Hellmann's and Best Foods Reduced Fat mayonnaise dressing was
successfully introduced in the U.S., replacing cholesterol free mayonnaise. The
new product has one-third the fat of regular mayonnaise and is cholesterol
free.
In addition to the needs of health-conscious consumers, CPC focused on
convenience and value in its dressings products. A new squeeze bottle for
summer mayonnaise use and a large package for warehouse club sales were added.
Other new products included Best Foods Homestyle ranch dressing mix, introduced
in West Coast markets, which offers an appealing new concept: "You make it
fresh. Just add milk." In early 1994 CPC broadened this line and also
introduced Hellmann's One Step dressings for coleslaw, potato salad, and tuna
salad in the Northeastern U.S.
CPC's innovative entry in the mustard category, Hellmann's and Best Foods
Dijonnaise creamy mustard blend, completed its rollout in the U.S. in 1993 and
was added in Canada and Argentina.
CPC also acquired the Henri's pourable salad dressings business. The
products are manufactured in Milwaukee and marketed in six Midwestern states.
With a significant presence in the foodservice sector, Henri's products also
bolster the salad dressings component of CPC's U.S. foodservice business.
IN LATIN AMERICA, CPC's largest dressings market outside the U.S., sales and
volumes of mayonnaise each increased 10%. CPC has strong dressings businesses
throughout the region, with No. 1 shares in eight of the 15 markets where it
sells mayonnaise. In Chile a youth-focused advertising and promotion campaign
added to CPC's market-leading share. Flexible packaging, first used by CPC in
Chile, was extended to Brazil and Argentina, where Hellmann's Light mayonnaise
was also introduced. Hellmann's mayonnaise was also added in Peru, via imports
from Chile. Cremutcho cheese-flavored bread spread, an award-winning new
product in Brazil, continued its rollout.
IN EUROPE mayonnaise volumes were 33% higher, due chiefly to acquisitions.
Sales rose 7%, impacted by unfavorable currency values. Hellmann's mayonnaise
is the market leader in the United Kingdom, Ireland, and Portugal, as well as
Greece, where Hellmann's Cholesterol Free mayonnaise was introduced in 1993.
CPC's mayonnaise products are also leaders in three newer mar-
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1993 * ANNUAL REPORT
SINCE 1988, CPC HAS GROWN FOODSERVICE BY SALES 12.8%, COMPOUNDED
ANNUALLY, AND INCREASED THE NUMBER OF COUNTRIES WHERE IT MARKETS FOODSERVICE
PRODUCTS TO 53 FROM 31.
kets: Israel, the Czech Republic, and Slovakia. In Israel, where CPC's Telma
brand is No. 1, imports of Hellmann's mayonnaise from the U.S. were added in
1993.
During the year production of Hellmann's mayonnaise began in Saudi Arabia,
where CPC has a strong Mazola corn oil business.
IN ASIA, where CPC sells mayonnaise under the Best Foods and Lady's Choice
brands, the Company markets mayonnaise in eight countries, with leading shares
in Malaysia, the Philippines, Singapore, and Thailand. In 1993 CPC added new
dressings in flexible packaging in Hong Kong and introduced new sandwich spread
varieties in Korea.
CORN OIL sales worldwide, sold mainly under the Mazola brand, increased 2%.
In the U.S. volume and share increased through distribution gains in warehouse
club stores, use within the growing Hispanic population, and the launch of
Mazola RightBlend oil, a blend of corn and canola oils low in saturated fat.
Mazola corn oil is the market leader in eight of the 14 countries of Latin
America where it is sold, and is No. 1 in five markets in Europe. CPC also
markets corn oil in eight countries of Asia.
FOODSERVICE
Further leveraging the strength of its brands, CPC markets products to
restaurants, cafeterias, and other eating establishments through its
foodservice operations (known as Caterplan in most markets outside the U.S.).
CPC's foodservice sales are included as part of the appropriate product groups
in this report and totaled approximately $900 million in 1993. Sales were
lower, chiefly due to recession in Europe and unfavorable currency comparisons
affecting European results.
In addition to its traditional range, CPC provides many products specially
formulated to meet the needs of the foodservice industry. It also offers menu
planning and other support to build strong links to the chefs who use CPC
products. Through this approach, developed by CPC in Europe and adapted for use
around the world, the Company forms partnerships with chefs to solve their
business problems. CPC also builds relationships with chefs by sponsoring their
professional organization, the World Association of Cooks Societies.
Like its retail businesses, CPC's foodservice operations are run by local
managers whose expert knowledge of individual markets is a key advantage.
Global trends are also creating opportunities for CPC's global organization. In
many countries, for example, an increase in the number of women working is
raising the number of meals eaten away from home at a time when skilled chefs
are scarce. CPC has responded with high quality products that are easy to
prepare in any foodservice kitchen.
IN EUROPE a range of aseptically packaged liquid heat-and-serve Knorr sauces
has been introduced in nine national markets. The cooperative effort brings
economies of scale to the combined production. CPC also tested chilled products
in Europe in 1993, and added innovative, high quality mixes for flans that
require no cooking.
IN NORTH AMERICA CPC introduced ready-to-heat Knorr frozen sauces in the
U.S. and Knorr frozen soups in Canada in 1993. These products utilize the
skills in frozen food technology acquired with the 1992 purchase of the LeGoct
foodservice business. Also capitalizing on the demand for ready-to-use products
is CPC's Milwaukee Seasonings unit, which provides custom-blended products to
its foodservice customers, including national and international fast-food chain
operators.
IN ASIA the rapid increase in the number of meals eaten away
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CPC * INTERNATIONAL
from home and the shortage of skilled chefs are contributing to double-digit
growth in foodservice sales and volumes. CPC's foodservice businesses are also
benefiting from increases in Asian tourism and business travel and the growth
of international hotel and restaurant chains. New markets hold additional
promise for the foodservice business. The plant CPC is building in China will
produce Knorr chicken granules for foodservice customers, as well as for retail
sales.
IN LATIN AMERICA, where strong brands and improving economies provide a
foundation for faster growth, CPC has placed a new focus on building the
foodservice business. The Company is improving coordination among foodservice
operations to move marketing programs and other successes more quickly between
countries. Recent retail acquisitions, particularly the purchase of JB sauces
in Chile and Lizano sauces in Costa Rica, have also helped build the
foodservice business.
CONSUMER FOODS SELECTED BUSINESSES
Selected businesses in key markets around the world provide CPC with additional
opportunities for growth. These businesses have strong market positions built
on well-known brands, such as Maizena starches, Alsa and Ambrosia desserts,
Thomas' and Arnold baked goods, Skippy peanut butter, and Mueller's pasta. Some
of these brands and businesses are strong in national markets, while others are
positioned regionally to take advantage of common market characteristics,
similarities in eating habits, and manufacturing and distribution efficiencies.
STARCHES
Packaged starches and flours made from corn and other grains are an integral
part of diets in most Latin American countries. Prepared as hot porridges and
cereals, used to make hearty cakes, or mixed with milk or water and served as
beverages, these products are consumed daily in many households. CPC's starches
business in Latin America had sales of approximately $175 million in 1993.
Volumes grew strongly.
CPC's Maizena brand has long been the No. 1 corn starch in Latin America.
During the last six years the Company has built on this strength to broaden the
business, acquiring six new brands and developing new flavored and fortified
varieties of its products.
In Brazil CPC acquired Cremogema corn-based cereals for children in 1988,
later improving the line with flavored and vitamin-fortified varieties. The
Company also purchased in 1992 the Arrozina brand, a mixture of corn and rice
flours, and the Vitamilho brand business, which includes pre-cooked corn flour,
desserts, and instant rice flour, both in Brazil; and Polly and Ne-nerina
rice-based cereals and flours for child feeding in Venezuela. Also in 1992 CPC
acquired AdeS soy-based drinks in Argentina, increasing production capacity of
the aseptically packaged beverages during 1993 as improved flavors and broader
distribution increased sales.
While extending its starch business through acquisitions, CPC continues to
develop the Maizena brand. In 1993 a new genera-
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1993 * ANNUAL REPORT
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CPC'S STRONG FINANCIAL POSITION SUPPORTS GROWTH INVESTMENTS WORLDWIDE
Vitamilho corn meal, acquired by CPC in 1992, in used throughout Northeast
Brazil. Cuscuz, the bright yellow cake made from Vitamilho, is a
traditional breakfast food, cooked in minutes.
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1993 * ANNUAL REPORT
WITH ECONOMIES GROWING IN LATIN AMERICA, 120 MILLION NEW CONSUMERS WILL
GRADUALLY ENTER THE MARKETPLACE AND BUY BASIC BRANDED FOODS, SUCH AS MAIZENA
STARCHES.
tion of mixed grain, flavored, and fortified child feeding products was
introduced: Maizena Primeros Platos (first meals) cereals in Mexico and Maizena
Colada Ninos in Colombia.
CPC markets corn starch in North America under the Argo, Kingsford's, St.
Lawrence, and Maizena brands. The Maizena and Brown & Polson brands are used in
Europe, and the Brown & Polson and Kingsford's brands are sold in Asia.
SPECIALTY BAKING
CPC's U.S.-based bakery business includes Thomas' English muffins, Arnold,
Brownberry, Levy's and Bran'nola breads and rolls, and Sahara pita bread. Sales
of CPC bakery products, approximately $460 million, were higher in 1993,
despite unchanged volumes. Introduction of a record number of higher-value
products and recipe reformulations contributed to the improved performance.
For the second consecutive year the Thomas' muffins business gained volume
and share, helped significantly in 1993 by new Sandwich Size Thomas' English
muffins. The new product is one-third larger in diameter than regular muffins.
It can be substituted for hamburger buns or used to prepare single-serving
pizzas, taking the brand beyond breakfast usage. CPC reformulated its Thomas'
bagels line, which is sold on the West Coast, and added a multigrain variety.
CPC enhanced the Arnold bread line in 1993 with new products and product
improvements. Arnold Country Wheat bread, an extra moist, soft, and slightly
sweet new product, was added as a companion to Arnold Country White bread.
Arnold bakers developed a premium-priced cranberry bread, a seasonal item
introduced in November, which recorded strong sales. Arnold hamburger and hot
dog rolls and rye bread were reformulated, as were Brownberry raisin and walnut
breads. CPC added a new onion variety of Sahara pita bread and introduced this
market-leading brand in the Southeastern U.S.
CPC began adding the U.S. Department of Agriculture's food guide pyramid to
bakery product packages in 1993. Emphasizing the dietary benefits of complex
carbohydrates, the guide calls for Americans to eat six to eleven servings from
the bread, cereal, rice, and pasta food group each day.
DESSERTS
Shelf-stable desserts are CPC's second largest retail business in Europe.
The Company has strong desserts businesses in the U.K., Southern Europe, and
new markets in Israel and Central Europe. Sales of these CPC products total
approximately $275 million. Sales declined significantly in 1993 due to
unfavorable currency comparisons, and, chiefly in France, lower volumes caused
by strong price competition and competitive challenges.
CPC has been in the desserts business in Europe for many years, primarily
through the Alsa brand, a longtime market leader in France, as well as several
strong national brands. These products include a range of dry mixes for flans
and cakes, baking aids, drink mixes, and mousses and diet puddings.
To position the business for faster growth, CPC has broadened its view of
desserts in Europe to encompass ready-to-eat products. In this fast-growing
segment, CPC markets Yabon ready-to-eat cakes in cans and Poti fruit compotes
in portion packs in France and Ambrosia dairy desserts in single-serve pots and
aseptic packs in the U.K. All are local favorites.
New in 1993 were Alsa Desserts of the World mixes, launched in Portugal and
Greece and destined for additional
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WE POSITION OUR PRODUCTS IN MARKETS WHERE OPPORTUNITIES ARE GREATEST
Skippy peanut butter bridges the generation gap in many countries around
the world. It's a great tasting, nutritious, and convenient food -- now
available in a reduced fat variety.
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1993 * ANNUAL REPORT
MUELLER'S IS THE NO. 1 BRAND OF PASTA IN THE UNITED STATES. MUELLER'S MARKETS
38 DIFFERENT SHAPES, AND ITS VOLUMES ARE MORE THAN 10% GREATER THAN ITS NEAREST
RIVAL.
markets. Borrowing from the successful Knorr Soups of the World soup concept,
Desserts of the World include mixes for authentic French, Italian, and
Brazilian dessert favorites.
Central Europe provides new opportunities for desserts. After entering
Hungary with the Alsa brand in 1992, CPC extended its desserts business to
Poland in 1993 with a line of 18 Alsa dessert mixes. These desserts, produced
in Poland, are also being imported by CPC's newly established business in
Russia.
CPC markets desserts and syrups around the world, including Karo corn syrup,
sold in North America and Latin America, Crown and Bee Hive corn syrups in
Canada, and Alsa, Rafhan, Rex, and Robertson's desserts in Asia.
PEANUT BUTTER
CPC has well-established peanut butter businesses and strong brands in North
America and Asia and exports peanut butter into many other markets around the
world. Worldwide, peanut butter sales total approximately $185 million.
In North America, where CPC has its largest peanut butter business, the
combination of price reductions in a very competitive category and consumers'
dietary concerns relating to fat content resulted in a total peanut butter
category decline in 1993. Skippy peanut butter sales and volumes were
significantly lower. CPC addressed dietary concerns with Skippy Reduced Fat
peanut butter, introduced in early 1994. The creamy and Super Chunk varieties
of this peanut butter have 30% and 25% less fat, respectively, and are expected
to bring consumers back to the peanut butter category.
Roasted Honey Nut Skippy peanut butter, a unique, slightly sweeter version
of original Skippy peanut butter, completed its U.S. rollout in 1992 and was
added in Canada in 1993. CPC markets Skippy and Squirrel peanut butter in
Canada. CPC further leverages its North American peanut butter business by
exporting Skippy peanut butter into 13 European markets and a handful of
countries in Latin America including Mexico, where Roasted Honey Nut Skippy
peanut butter is also sold.
In Asia, where peanuts and peanut butter are a part of local cuisines, CPC's
peanut butter sales and volumes grew well. CPC makes or imports peanut butter
in nearly all of its Asian markets. Skippy peanut butter is the market leader
in Singapore, Hong Kong, Thailand, and Indonesia, and the Lady's Choice brand
is No. 1 in Malaysia and the Philippines. To meet consumers' preferences for a
sweeter, easier-to-spread product, CPC introduced Best Foods peanut spread in
the Philippines, and, in Thailand, a creamy spread under the Skippy brand
imported from Malaysia.
In addition to peanut butter, CPC's bread spread group includes margarine
and jams and jellies. CPC's jams and jellies are marketed in Asia under the
Best Foods, Lady's Choice, Regal, and Rex brands. CPC's largest brand for jams
and jellies in Latin America is Fruco, marketed in Colombia and Ecuador. Other
jams and jellies brands include Santa Rosa in Italy, Mateus in Portugal, 778 in
Israel, and Frank Cooper in the United Kingdom. In the U.K. CPC markets Marmite
savory spread, which also has a devoted following among consumers in several
Asian countries.
PASTA
CPC markets pasta in many countries and regions around the world, chiefly
the United States and in Asia. Worldwide sales of pasta total approximately
$140 million. The largest business is in the U.S., where pasta volumes grew
strongly, outpacing a grow-
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CPC * INTERNATIONAL
ing category. The Mueller's brand, marketed in 22 states east of the
Mississippi River, benefited from expansion into new retail outlets. Volumes
and profits were also enhanced by the performance of two newer pasta cuts:
angel hair and fettuccine.
CPC also began marketing pasta in California, using its European brand for
pasta, Napolina. The U.S. Napolina pasta line includes 15 pasta cuts and is
positioned as the premium pasta without the premium price. Extension of the
Napolina brand into markets in Texas began in 1993 and has continued in 1994.
The Napolina brand in Europe includes a broad range of pasta, condiments,
antipasti, pasta sauces, and bases and toppings for pizza. The brand is
marketed in 10 countries of Europe through CPC's retail and catering
operations. Italian and pasta-related sauces and mealmakers are also marketed
under the Knorr brand in Europe.
In Asia CPC's brands for pasta are Royal and Best Foods.
CORN REFINING
Progress and improvements marked CPC's corn refining business performance
during 1993, despite the impact of the low quality 1992 North American corn
crop, processed in 1993, and the 1993 Midwest floods. Although sales of $1.1
billion were unchanged from 1992, operating income rose 1.2% to $182 million,
and volumes rose 3.5%.
Sales of sweeteners, which make up approximately 60% of total corn refining
business sales, were $633 million, level with 1992; volumes were up 6%.
Sweetener products include high fructose corn syrup, dextrose, and glucose. The
corn refining business also produces starches, which had sales of $230 million
in 1993; and co-products, which include protein feed and corn oil, with $144
million in sales. All other products accounted for $95 million.
In 1993 the following major capital projects were under construction: a new
high maltose corn syrup channel in Brazil; a new, larger corn germ oil
extraction facility at Argo, Illinois; and steam and power cogeneration
systems at CPC's three Canadian corn refining plants. These projects are
expected to be completed in time to improve 1994 profitability.
OPERATING UNIT RESULTS
The corn refining business provides products or services in 23 countries
through a variety of wholly-owned affiliates, joint ventures, and technology
licensing agreements. The business is made up of three major operating units:
Corn Products, the North America division; the Latin America Corn Refining
Division; and the Cooperative Management Group (CMG).
Corn Products recorded a 5.6% decline in operating income due to unusual
circumstances. The low quality of the 1992 corn crop, processed in 1993,
increased costs considerably and reduced yields; and the 1993 Midwest floods
disrupted normal transportation routes making it difficult to get product to
customers.
However, through the Company's continuous cost improvement efforts,
reductions in manufacturing and overhead costs were achieved. Additionally,
corn grind records were set in five
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1993 * ANNUAL REPORT
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CPC * INTERNATIONAL
CPC SUPPLIES CUSTOMERS IN 65 INDUSTRIES WITH INGREDIENTS FOR PRODUCTS SUCH AS
BAKED GOODS, BEER, CANDY, CORRUGATED BOARD, COSMETICS, PAPER, SALAD OILS, AND
SOFT DRINKS.
of six plants. Quality improvements and a capacity increase strengthened Corn
Products' leading dextrose position in North America; a line of modified
starches serving the corrugating industry was strengthened; and the unit
successfully reentered the maltodextrin market.
In Latin America, where CPC has 13 plants and is the leading corn refiner,
volumes and sales each increased 11%. Operating income for the Latin America
division improved 14%. The successful 1993 introduction of high maltose corn
syrup to the largest beer maker in Brazil should add significant sales and
profits beginning in 1994.
The Cooperative Management Group (CMG), which manages ventures in 14
countries, including 11 countries in Africa and Asia, posted a 17% increase in
operating income. Profits in Pakistan and Malaysia hit all-time highs, as
operating income grew 58% and 56%, respectively.
CMG also operates Pekin Energy Company, a joint venture with Texaco to
produce fuel ethanol. Pekin is the nation's No. 2 producer of ethanol, a
clean-burning, high-quality, fermentation-grade alcohol used as an octane
enhancer in gasoline.
STRATEGIC ACTION
Each operating unit sets its own objectives and tactics compatible with the
corn refining business's five key strategies: 1) continuously deliver quality
in products and services that is valued by CPC's customers; 2) continuously
drive for delivered cost leadership; 3) leverage and grow leading market
positions and strategic relationships; 4) improve and expand positions in
higher value-added and differentiated corn refining products; and 5)
continuously improve organizational effectiveness.
Ongoing quality programs, such as Total Quality Excellence at Corn Products
in North America, Total Quality in Colombia, and a plan called Terra Nova in
Brazil, continue to yield improved customer satisfaction ratings.
Quality-driven performance also earns the corn refining business the chance to
partner with customers on future business opportunities. In Latin America
customer surveys were initiated to establish a quality and service benchmark
for future improvement.
CPC's corn refining business is well positioned to take advantage of the
new, more open economies, as trade barriers fall worldwide and countries change
policies to increase cross-border business. CPC is the only corn refiner with
plants in Canada, Mexico, and the U.S., and the passage of the North American
Free Trade Agreement (NAFTA) will allow for more sharing of products and
technology, more exports, and a more efficient business.
In Latin America, where privatization continues at a rapid pace and trade
pacts are reducing tariffs, affiliates are pooling resources to produce more
cost-competitive products. Grind of waxy corn was eliminated in Mexico and
Chile because the starch could be produced and shipped more cheaply from
Brazil. The Colombian affiliate expanded exports into the Andean Pact nations
of Ecuador and Peru, spurring strong volume growth.
SHARING EXPERTISE
One of CPC's core strengths is its vast global organization built from solid
local management. Another is its ability to share technology and expertise
across regions and countries. In the corn refining business, a special unit
called the Business Experience Transfer Group evaluates processes and systems,
sharing the best and most successful of these with the rest of the corn
refining
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AS A SUPPLIER OF CHOICE, WE'RE POSITIONED TO BUILD SALES, PROFITS, AND CUSTOMER
PARTNERSHIPS
Our customers rely on Corn Products' consistently high standards
and strict quality controls. Pictured below, a corn
starch customer checks a sample during a visit to
the Argo, Illinois, plant.
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CPC * INTERNATIONAL
organization. Traveling "circuit riders" adapt what has been perfected in one
area of the world to the needs of another.
The group helped the Brazilian affiliate create a new business selling high
maltose corn syrup to the beer industry, transferring brewing business
expertise from Canada and decolorizing experience from the U.S. In Canada the
transfer group was instrumental in setting up cogeneration systems with the
help of colleagues from a corn refining plant at Stockton, California, and a
consumer foods plant at Bayonne, New Jersey.
CPC's corn refining expertise also crosses over into CPC's consumer foods
business. Corn refining experience in food ingredients technology was
instrumental in the development of the new Skippy Reduced Fat peanut butter. To
produce a higher quality corn oil, personnel from Corn Products and the
Brazilian affiliate teamed up with their colleagues from Best Foods to design
the new, larger corn germ oil extraction facility at Argo, Illinois.
NEW FRONTIERS
Always a highly international company, CPC has sharply accelerated its pace of
geographic expansion over the last several years. Since 1991 we have
established operations in 13 additional countries of Europe, the Mideast, Latin
America, and Asia. These include Hungary, Poland, Costa Rica, the Czech
Republic, Israel, Indonesia, Russia, China, and Sri Lanka. In addition, CPC
opened an office in Vietnam and reentered South Africa via a licensing
agreement.
All of these expansion countries already have, or can expect to have,
faster-than-average economic growth. All, we believe, are excellent markets for
CPC's worldwide businesses: soups, sauces, and bouillons; dressings; and
foodservice.
EUROPEAN FRONTIERS
CPC's investments in Eastern and Central Europe are a natural and important
extension of our 150-year-old Western European business. As formerly
inaccessible countries have opened to free enterprise and foreign investment,
we have identified and purchased businesses complementary to our own: soup and
bouillon businesses in eastern Germany, Hungary, and Poland, and mayonnaise
businesses in the Czech Republic.
CPC's priority in these businesses is to quickly establish our flagship
European brands, first importing and later manufacturing locally. Sales,
volumes, and market shares of Knorr, Hellmann's, and Alsa products are growing
rapidly, as their quality and convenience, attractive packaging, aggressive
marketing, and recognized tradition have captured consumers' loyalty.
CPC's expansion into Central Europe began with the 1990 acquisition of a
business in eastern Germany. Initially a joint venture, it is now wholly owned
and fully integrated with the Company's operations in the western part of the
country.
In Hungary, where local manufacture began in 1991, CPC sales and profits
have grown rapidly. Both the Knorr and Alsa brands hold leading positions after
only two years on the market.
CPC became the No. 1 mayonnaise producer in the Czech
<PAGE> 21
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1993 * ANNUAL REPORT
<PAGE> 22
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CPC * INTERNATIONAL
THREE YEARS AFTER ENTERING CENTRAL EUROPE, CPC HAS NO. 1 MARKET SHARES IN SOUPS
AND SAUCES IN HUNGARY, MEALMAKERS IN POLAND, AND MAYONAISE THE CZECH REPUBLIC
AND SLOVAKIA.
Republic through acquisition of two of the country's major mayonnaise
producers. Higher-quality Hellmann's mayonnaise has now replaced the acquired
products, and Czech-produced Hellmann's is also being exported to Hungary,
Slovakia, and Poland.
Russia is CPC's newest European market, one where soup is traditionally
prepared at home and eaten daily in most households. CPC is currently importing
Knorr products, specially formulated to Russian tastes, from Poland into the
Moscow area, where they are being sold by a freshly recruited and trained team
of Russian employees. Distribution in additional urban areas of western Russia
and local manufacturing are expected to follow.
A SPRINGBOARD IN THE MIDEAST
The acquisition of a majority share in the TAMI business in Israel, with its
broad portfolio of market-leading soups, sauces, mayonnaise, and desserts,
provides important critical mass to the Company's operations in the Mideast and
Africa. Eighteen months after its acquisition, TAMI is fully meeting all of
CPC's projections for performance and growth.
CPC'S RETURN TO SOUTH AFRICA
Having divested its South African business in 1987, CPC has now entered into a
licensing agreement with a South African company, Tongaat-Hulett. A new venture
established by Tongaat-Hulett will market various CPC brands in South Africa
and export CPC brand products to other countries of sub-Saharan Africa. CPC
also has an option to purchase majority equity in the new venture.
ASIAN FRONTIERS
Active in Asia for 35 years, CPC has targeted this region, with its
burgeoning economies and huge populations, for major new investment and
growth. To our licensing agreement in Japan and our businesses in nine other
Asian countries, we have recently added businesses in three promising
markets.
Indonesia, with its population of 180 million people and dynamically growing
economy, was CPC's first new Asian country. Having entered in 1991 through
products imported from Singapore, we now plan to build a manufacturing plant.
CPC entered the thriving Guangdong region of South China through majority
ownership in a venture with a local government agency. While CPC produces
bouillon cubes in leased facilities, construction of a plant to open in 1994
has begun.
Bouillons are used extensively in every regional cuisine in China, but until
now there has been virtually no commercial production of packaged bouillons.
With a population of more than one billion people and income on the rise, China
offers a market with nearly unlimited opportunity for expansion for CPC's
businesses, not only in bouillons, but also in soups, mayonnaise, bread
spreads, and desserts.
<PAGE> 23
page 23
GLOBAL POSITIONING ALLOWS CPC TO SEIZE OPPORTUNITIES EFFICIENTLY IN NEW MARKETS
CPC's business in Asia is providing the product formulation, engineering, and
other support for a quick move into China, where Knorr bouillons were already
established through imports.
<PAGE> 24
page 25
CPC * INTERNATIONAL
In Sri Lanka, where 200 tons of Marmite spread has been imported by a
distributor, CPC acquired a food business and manufacturing facilities.
In Vietnam, after obtaining necessary licenses, CPC established an office
and began importing products.
LATIN AMERICAN FRONTIERS
With consumer foods businesses in 12 countries of Latin America already, CPC
has now filled in the map by adding "venture posts" in Bolivia, Ecuador, and
Paraguay. Though not full-fledged operations, these new posts are part of a
longer-term business- building effort in the region, which is benefiting from
several regional free-trade initiatives. Knorr, Maizena, and Hellmann's brand
products can now move freely into these countries, allowing CPC to establish a
strong presence without the need to manufacture locally. The combined
population thus added to CPC's marketplace is about 22 million. In addition,
CPC, through a small acquisition, entered the bouillon and soup business in
Central America. The acquisition provides a platform for the introduction of
Knorr soups into Central America for the first time, in line with the Company's
commitment to market Knorr products in all of its markets.
A NEW PRODUCT FRONTIER: PFANNI
The term "New Frontiers" can be appropriately applied to product categories
as well as geographies. In that sense, the broad range of market-leading Pfanni
potato products is a pioneer, opening broad new opportunities for CPC.
Acquired in Germany in October 1993, Pfanni products include mashed
potatoes, dumplings, hash browns, and many other potato dish varieties. Its
opportunities to grow in its current major markets -- Germany, Austria, and
Italy -- are rich. In addition, we believe that the "Pfanni concept," with its
enormous capacity for variation and growth, has the potential to cross borders
around the world to become, like the Knorr brand business, a worldwide
powerhouse.
1993 CONSUMER FOODS
<PAGE> 25
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1993 * ANNUAL REPORT
THE CPC WAY
The preceding pages of this report tell the CPC story in terms of brands,
businesses, and financial measurements. They depict a leading and steadily
growing food Company with operations in 58 countries of North America, Europe,
Latin America, Asia, the Mideast, and Africa, and a portfolio of some of the
most well-known and valued food brands in the world.
There is, however, another equally important CPC story. It concerns the
framework on which we build our businesses -- our basic values and objectives
- -- and how this framework defines the way we do business and interact with our
communities in our dozens of markets.
This story begins with the CPC Company Policies Manual and its sections on
CPC Conduct, Business Ethics, Community Relations, Compliance with Antitrust
Laws, Customer and Consumer Relations, Disclosure and Insider Trading, Employee
Relations, and Protection of the Environment. Published in 13 languages, the
Policies Manual is distributed to employees throughout the world.
In his introduction to the Policies Manual, CPC Chairman Dick Shoemate says:
"Our primary mission -- to maximize the financial return to our stockholders --
is not in any way inconsistent with the observance of high moral and ethical
standards. To the contrary, I believe we cannot succeed without such standards.
We must actively aspire to the kind of corporate conduct and achievement that
will make us and our successors proud to be CPC employees and will give us a
competitive advantage in the long run."
Representative examples of "The CPC Way" can be found in many areas.
ENVIRONMENTAL PROTECTION: Like the other policies in the manual, CPC's
policy on protection of the environment is overseen by top management and the
Board's Corporate Affairs Committee and is communicated comprehensively
throughout the Company. This policy states that CPC is committed to satisfying
all applicable legislative and regulatory requirements or even higher,
self-imposed, standards, and that CPC will prevent or correct conditions that
pose a threat to the environment.
The great majority of CPC's facilities are consumer foods processing plants
and as such present relatively few serious environmental risks. Thus
environmental efforts in our consumer foods business typically focus on
improvements rather than corrections -- for example reductions in packaging
materials, recycling programs and the use of recycled materials, and increased
energy efficiency.
In corn refining the challenges are greater. Environmental efforts at CPC's
Argo, Illinois, corn refining plant illustrate our commitment to meeting them.
Compliance with new regulations, modernization of the plant, and CPC
initiatives have resulted in: a 70% reduction in air pollutant emissions since
1976; a substantial reduction in wastewater volume generated by the plant,
coupled with a 30% reduction in biodegradable organic discharges since 1980; a
reduction in the volume of packaging material; and expansion of a plant-wide
recycling program. The rebuild of a corn oil extraction facility, to be
completed in 1994, will cut odor emissions, and atmospheric emissions of
volatile organic material from corn germ processing will be reduced by more
than 40%.
<PAGE> 26
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CPC * INTERNATIONAL
Also in 1993, CPC reviewed usage of chemical materials at its plants
worldwide, and, wherever possible, is substituting safer materials and
technologies for those posing the greatest risks.
Environmental clean-up programs at the sites of several chemical companies
divested by CPC in the 1970s and 1980s are progressing in cooperation with
federal and state authorities.
On environmental or any other matters affecting our communities, CPC
encourages its managers to maintain frank and frequent communication with local
citizens and officials.
EMPLOYEE DEVELOPMENT AND OPPORTUNITY: CPC believes that the profitable
growth of its businesses depends vitally on the development and effective
deployment of the full range of our employees' abilities, and on strong mutual
commitment between CPC and its employees. Thus our goal in each of our 58
countries, and for each of our approximately 39,000 employees, is to hire
wisely, train thoroughly, compensate fairly, and provide challenging career
development opportunities -- all within safe and healthy working environments.
CPC continued its emphasis on management and leadership development in 1993.
Through formal and informal programs and methods, CPC seeks to develop and
motivate managers who not only deliver results locally but also participate in
an active international network to help build business worldwide.
The Company is committed to the principles of equal employment opportunity
and fair employment practices. Thirty-five percent of CPC's nearly 8,000 U.S.
employees are minorities and 30% are women. In recent years, and in 1993
especially, CPC has promoted valuing differences in our employee population
through training programs and other experiences. The Company has several
programs to further the hiring and upward mobility of women and minorities,
including four-year internship programs for talented minority students.
CONTRIBUTIONS: Financial and other support for our communities' institutions
and activities is an essential part of "The CPC Way." In 1993, the Company made
contributions valued at approximately $20 million in cash and food products,
mainly to educational institutions; health, welfare, and community service
organizations; and other cultural and charitable groups. A significant part of
CPC's contributions is donated through CPC's Matching Gifts Program in the
U.S., which matches $2 for every $1 employees contribute. To this financial
support are added the volunteer and Company-sponsored service activities of
employees at many of our facilities, often in connection with local schools and
educational projects.
COMMITMENT TO THE CONSUMER: CPC is committed to marketing only the highest
quality products at prices that truly reflect value. We constantly strive to
meet and anticipate consumers' preferences regarding health, taste, and
convenience. CPC regularly disseminates information to consumers, stressing the
importance of the total dietary approach to good health and physical fitness.
<PAGE> 27
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1993 * ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CPC International Inc. and Subsidiaries
OVERVIEW OF 1993 AND OUTLOOK
CPC International's primary objective continues to be to improve shareholder
value through aggressive growth of its consumer foods business and selective
growth of its corn refining business.
In line with this strategy, during 1993 the Company continued to seek volume
growth in all its existing businesses; introduced many new products throughout
the world and in both the consumer foods and corn refining businesses; entered
several new countries in Europe, Africa, and Asia; acquired businesses in the
U.S., Europe, the Middle East, and Latin America; and expanded and built
production facilities.
These actions resulted in solid earnings improvement in 1993, even though
progress was negatively affected during the year by a number of external
conditions: recession in Europe and a continuing slow economy in the U.S.,
unfavorable European currency values, and, impacting particularly our corn
refining business, flood conditions and unsatisfactory corn quality in North
America.
In 1994 the significant trends relating to consumption, costs, currency
values, competition, and political and social environments in the economies and
industries in which CPC operates are not expected to change direction
significantly. It is expected that in 1994 economies in most areas of the world
will continue to progress at current, generally modest, rates of growth. Europe
is expected to emerge slowly from its 1992/93 recession. More specifically:
* In the U.S. if, as expected, the level of economic activity
continues to improve, it is likely that the current, extremely
competitive environment will ease and that this may benefit the Best
Foods Division.
* In Europe's southern countries, where recession was deeper than
elsewhere, the expected recovery will be slower. In this climate, strong
competition will continue and have a moderating effect on the division's
volume and margin growth. CPC's leading brands, wide geographic
presence, and its new businesses and markets will partially counteract
these forces.
* Also in Europe, the anticipated continuing weakness of currencies
in 1994 is expected to moderate the division's sales and earnings
progress when translated into U.S. dollars.
* In Latin America it is expected that current successful programs
for freer market economies, open borders, and trading blocs will be
maintained. The exception is Brazil, where CPC has its most important
Latin American businesses. The overall effect of freer economies on the
Company's results in the area is expected to be positive.
* In Asia economic growth in 1994 is expected to remain fair for most
of the year, although Japan's slow economy may continue to have a
moderating effect on other Asian countries' progress. Despite this
situation, with its products still having relatively low market
penetration in that area, CPC continues to see opportunity for strong
growth.
* CPC's U.S. operations slightly decreased their relative
contributions to the Company's sales and operating income in 1993.
Depending on acquisition opportunities, this situation may change in
1994.
The last three years' financial results are discussed below. A general
description of operations appears on pages 2 through 24 of this report.
<PAGE> 28
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CPC * INTERNATIONAL
RESULTS OF OPERATIONS
NET SALES in 1993 increased 2.1% over last year to $6.7 billion, with consumer
foods accounting for virtually all of the increase. Of the overall sales gain,
higher volumes including acquisitions accounted for a 5.7% gain, which was
largely offset by weaker currency values. Acquisitions in 1993 and 1992
increased 1993 sales by approximately $173 million or 2.6%. In 1992 sales
advanced 6.6% over the prior year to $6.6 billion, with consumer foods
accounting for more than 90% of the increase, mostly the result of higher
volumes. Businesses acquired in 1992 and 1991 contributed approximately $180
million to the 1992 sales gain.
Consumer foods sales rose 2.4 % in 1993 to $5.6 billion, with good volume
gains and better prices mostly offset by lower currency values. Sales in
Europe declined 1% due to lower exchange values, while in North America sales
were even with last year. Latin American sales rose 21% on higher volumes
related to improving economic conditions in several countries. Asian sales
advanced 15% on strong volume gains. In 1992 consumer foods sales increased
7.5% to $5.5 billion. Volume gains accounted for one-half of the increase,
while stronger currency values and better prices shared evenly in the rest.
Sales advanced 6% in Europe, 5% in North America, and 17% in Latin America and
Asia.
Corn refining sales in 1993 remained even with 1992 levels at $1.1 billion,
as volume gains of 3.5% were matched by reduced prices and lower exchange
values. Sales in North America were 4.1% below last year, reflecting lower
prices related to lower raw material costs and a weaker Canadian exchange rate.
Latin American sales advanced 11% on much improved volumes. In 1992 corn
refining sales increased 2.4%, mostly from volume gains of nearly 7%, which
compensated for lower prices related to lower raw material costs. Sales in
North America were essentially flat, while Latin American sales advanced 4% on
stronger volumes.
COST OF SALES AND OPERATING EXPENSES. Cost of sales as a percentage of net
sales was approximately 60% in 1993 resulting in a 40% gross profit, slightly
higher than the last two years. Efficiency gains and lower raw material costs
counteracted very competitive pricing conditions.
Translation gains and losses and the principal-preservation element inherent
in local interest costs applicable to businesses in highly inflationary
economies resulted in charges to cost of sales of $86.6 million in 1993, $52.9
million in 1992, and $68.4 million in 1991. These costs were largely recovered
through higher selling prices.
Marketing expenses in 1993 declined by $20.5 million as a result of lower
exchange values and were 9.5% of sales, down slightly from the 1992 and 1991
ratios.
Research and development expenditures increased 7.9%, or $3.6 million, over
the 1992 level, which was $6.1 million higher than the 1991 level. These
increases reflect additional spending for consumer foods research.
The ratio of selling, administrative, and general expenses to sales
increased slightly compared to 1992. This ratio was higher than in 1991,
reflecting the 1992 effects of changes in accounting principles, discussed
below, and higher costs related to incentive programs.
OPERATING INCOME in 1993 increased 4% to $883.3 million, with both business
segments reporting gains generated from higher volumes. In 1992 operating
income increased 6.4% to $849.1 million, but included a $13 million charge for
the effects of changes in accounting principles. Excluding this charge,
operating income advanced 8% with both segments reporting gains generated
primarily from higher volumes.
Consumer foods operating income in 1993 was 3.8% higher than the prior year.
Good volume gains in all geographical areas accounted for most of the increase.
Weaker exchange values and lower margins negated most of the benefit of the
volume gains. Operating income in North America advanced 5.4%, Latin America
30%, and Asia 13%. In Europe operating income was down 8.4% on overall reduced
currency values and weak economic conditions in several countries. In 1992
consumer foods operating income, excluding its portion of the accounting
charge, was 8% above 1991 on good volume gains in all geographical areas.
Operating income in North America advanced 12%, Latin America 25%, and Asia
19%. In Europe operating income was slightly below 1991's level.
Corn refining operating income in 1993 advanced 1.2% to $182 million. In
North America operating income was 5.6% lower than in 1992 as a result of
higher costs related to flooding in the Midwest and poor quality corn. In Latin
America results were 14% ahead of 1992 on strong volume gains. Corn refining
operating income in 1992 advanced
<PAGE> 29
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1993 * ANNUAL REPORT
13% to $182.9 million, excluding its $3 million portion of the
accounting charge. All geographical areas reported gains on a combination of
higher volumes and improved margins. Sixty percent of the overall gain was
attributable to Latin America, where economic conditions improved.
FINANCING COSTS of $93 million in 1993 were $11.6 million, or 11.1%, lower than
in 1992. Weaker European currencies and favorable cash flows reduced borrowing
levels for most of the year and combined with lower interest rates to reduce
interest expense for the year by $9 million. In addition exchange losses
declined by $2.6 million. In 1992 financing costs were virtually even with
1991, as lower interest costs were offset by an increase in exchange losses.
PROVISION FOR INCOME TAXES. The effective tax rate for the past three years
remained at 40%. This was higher than the U.S. statutory rate of 35% in 1993,
and 34% in 1992 and 1991, because it includes foreign income generally taxed at
rates higher than the U.S. statutory rate and state income taxes. As noted
below, the Company changed its method of accounting for income taxes effective
January 1, 1992.
CHANGES IN ACCOUNTING PRINCIPLES. Effective January 1, 1992, the Company
adopted Financial Accounting Standard (FAS) 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," FAS 112, "Employers' Accounting
for Postemployment Benefits", and FAS 109, "Accounting for Income Taxes." These
changes resulted in a total non-cash charge of $303.5 million, $160 million
after taxes or $1.06 per common share in 1992.
FAS 106 requires that the expected cost of providing health care and life
insurance benefits during retirement be accrued during employees' working years
rather than on a pay-as-you-go basis as was previously permitted. The
cumulative impact of this change at January 1, 1992, was a charge of $280
million, $168 million after taxes or $1.11 per common share. In addition,
starting in 1992 operating results include additional costs for the effects
of this change.
Like FAS 106, FAS 112 requires recognition of expense on an accrual basis
for postemployment benefits, rather than the pay-as-you-go approach used
previously. Postemployment benefits include salary continuation,
disability-related benefits, severance pay, and continuation of health costs
during the period after employment but before retirement. The cumulative impact
of this change at January 1, 1992, was a charge of $23.5 million, $14.1 million
after taxes or $.09 per common share.
The Company also changed its method for accounting for income taxes in
compliance with FAS 109 from a deferred method to an asset and liability
method. The cumulative impact of this change was a benefit of
$22.1 million, or $.14 per common share in 1992.
DISCONTINUED OPERATIONS. In 1992 the Company recorded a charge of $78 million,
$46.8 million after taxes or $.31 per common share, for anticipated
environmental costs relating to chemical operations divested by the Company
from the early 1970s to the mid 1980s. This charge increased the Company's
existing environmental reserve for the costs relating to two Superfund sites,
in Michigan and Rhode Island, as well as seven other sites. In the third
quarter of 1991, the Company took a similar charge of $52.5 million, $31.5
million after taxes or $.21 per common share, related to these divested
chemical operations. Actual disbursement of cash is expected to take place over
the next 10 to 15 years. At December 31, 1993, the Company believed that its
environmental reserve was adequate. No recoveries from other potential
responsible parties or insurers have been considered in the determination of
the reserve.
NET INCOME in 1993 was $454.5 million ($2.95 per common share) compared with
$223.8 million ($1.41 per common share) in 1992. The 1992 results included
special charges related to environmental costs for discontinued operations
<PAGE> 30
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CPC * INTERNATIONAL
and the cumulative effects of changes in accounting principles
discussed above. Excluding the impact of these 1992 items from the comparisons,
1993 income from continuing operations and earnings per common share from
continuing operations increased 5.6% and 6.1%, respectively. This improvement
resulted from a combination of higher operating income and lower financing
costs. Excluding special items in both 1992 and 1991, income from continuing
operations and earnings per common share from continuing operations in 1992
each advanced 6.5%. However, 1992 operating results also included a charge of
$13 million, $7.8 million after taxes or $.05 per common share, for the effects
in 1992 of changes in accounting principles discussed above. Excluding this
charge, results increased 8.4% over 1991 due to higher operating income.
KEY BALANCE SHEET ITEMS
At year end 1993 total assets decreased $110 million from a year earlier, due
largely to the effects of weaker European currency values, which reduced
translated asset values by some $352 million. Acquisitions and capital
expenditures offset part of this decline. Total debt decreased $178 million to
$1,273 million at year end 1993. This decrease related to good cash flow and
decreased dollar value of European currency denominated debt. In 1992 total
assets increased by $661 million, due largely to acquisitions that added $341
million and stronger European currencies that increased asset values by $184
million.
NET CASH FLOW
Good cash flow continued to finance CPC's working capital and capital
expenditure needs, and enabled the Company to continue to increase dividends
with earnings growth. Funds generated in excess were used for acquisitions and
share repurchases. Net cash flows from operations in 1993 of $771.1 million
were 1.3% above 1992, which was 4% higher than 1991. These internally-generated
funds continue to be the Company's primary source of liquidity.
Investing activities in 1993 of $429.4 million were lower than in 1992,
despite the increase in capital expenditures, largely due to a reduction in the
number of acquisitions. In 1992 investment activities were more than double the
level in 1991, due to an increase in acquisitions. Capital expenditures in 1993
of $363.2 million increased $65.8 million. Nearly 65% of the capital
expenditures were for new facilities and plant upgrades for the consumer foods
business. The Company expects to invest in capital projects at a slightly
higher level in 1994.
The quarterly dividend rate increased 6.7% in March 1993, 12 months after
the previous increase of 9.1%.
The Company has access to various sources of funds at attractive rates
based on its strong financial condition. CPC's long-term debt rating was
upgraded to A+ with Standard & Poors, and remained at A2 with Moody's and A+
with Duff & Phelps.
<PAGE> 31
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1993 * ANNUAL REPORT
CONSOLIDATED STATEMENTS OF INCOME
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the years ended December 31
$ Millions except per share amounts 1993 1992 1991
==================================================================================================
<S> <C> <C> <C>
NET SALES $6,738.0 $6,599.0 $6,189.1
- --------------------------------------------------------------------------------------------------
Cost of sales 4,043.2 3,992.8 3,804.0
Marketing 643.0 663.5 624.2
Research and development 49.3 45.7 39.6
Selling, administrative and general expense 1,132.8 1,058.8 932.2
Income from affiliates and equity in net income
of unconsolidated subsidiaries (13.6) (10.9) (9.1)
- --------------------------------------------------------------------------------------------------
Cost, expenses, and other income--net 5,854.7 5,749.9 5,390.9
- --------------------------------------------------------------------------------------------------
OPERATING INCOME 883.3 849.1 798.2
- --------------------------------------------------------------------------------------------------
FINANCING COSTS
Exchange losses 2.9 5.5 .5
Interest on bonds, mortgages and similar debt 56.1 64.7 73.6
Other interest 53.7 51.0 54.3
Interest expense included in cost of
construction of plants (6.7) (6.4) (9.2)
Interest income (13.0) (10.2) (14.5)
- --------------------------------------------------------------------------------------------------
Total financing costs 93.0 104.6 104.7
- --------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST 790.3 744.5 693.5
Provision for income taxes 316.1 297.8 277.4
Minority stockholders' interest 19.7 16.1 11.9
- --------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE THE CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 454.5 430.6 404.2
- --------------------------------------------------------------------------------------------------
Cumulative effect to January 1, 1992, of changes
in accounting principles, net of taxes -- (160.0) --
Environmental charges for discontinued operations,
net of taxes -- (46.8) (31.5)
- --------------------------------------------------------------------------------------------------
NET INCOME $454.5 $223.8 $372.7
- --------------------------------------------------------------------------------------------------
Earnings per common share from
continuing operations before cumulative
effect of changes in accounting principles $2.95 $2.78 $2.61
Cumulative effect to January 1, 1992, of changes
in accounting principles -- (1.06) --
Environmental charges for discontinued operations -- (.31) (.21)
- --------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE $2.95 $1.41 $2.40
==================================================================================================
</TABLE>
See notes to financial statements.
<PAGE> 32
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CPC * INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31
$ Millions 1993 1992 1991
==================================================================================================
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 166.3 $ 158.0 $ 215.9
Notes and accounts receivable:
Notes and drafts receivable 61.4 81.2 44.4
Accounts receivable -- trade 782.6 795.8 676.8
-- other 84.0 78.8 73.7
Allowances for doubtful accounts (28.3) (28.7) (20.1)
Inventories:
Finished and in process 491.6 539.8 472.5
Raw materials 202.6 217.3 158.1
Manufacturing supplies and mechanical stores 136.0 129.8 114.2
Prepaid expenses 75.7 80.3 56.0
- --------------------------------------------------------------------------------------------------
Total current assets 1,971.9 2,052.3 1,791.5
- --------------------------------------------------------------------------------------------------
INVESTMENTS IN UNCONSOLIDATED AFFILIATES 69.9 69.6 70.0
- --------------------------------------------------------------------------------------------------
PLANTS AND PROPERTIES
Land 91.2 91.9 76.6
Buildings 736.7 716.2 626.0
Machinery and equipment 3,252.9 3,159.0 2,792.7
- --------------------------------------------------------------------------------------------------
4,080.8 3,967.1 3,495.3
Less accumulated depreciation 1,960.1 1,856.3 1,613.9
- --------------------------------------------------------------------------------------------------
Total plants and properties 2,120.7 2,110.8 1,881.4
- --------------------------------------------------------------------------------------------------
INTANGIBLES
Excess cost over net assets of businesses acquired 598.0 612.1 457.2
Other intangibles 309.0 324.1 311.6
- --------------------------------------------------------------------------------------------------
907.0 936.2 768.8
Less accumulated amortization 132.3 116.5 91.2
- --------------------------------------------------------------------------------------------------
Total intangibles 774.7 819.7 677.6
- --------------------------------------------------------------------------------------------------
OTHER ASSETS 123.6 118.8 89.8
- --------------------------------------------------------------------------------------------------
TOTAL ASSETS $5,060.8 $5,171.2 $4,510.3
==================================================================================================
</TABLE>
See notes to financial statements.
<PAGE> 33
page 33
1993 * ANNUAL REPORT
<TABLE>
<CAPTION>
$ Millions 1993 1992 1991
=============================================================================================
<S> <C> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Loans payable -- banks $ 200.4 $ 272.0 $ 257.1
Other notes and drafts payable 174.6 224.8 108.4
Accounts payable 352.9 381.4 291.5
Accrued expenses:
Accrued compensation 50.7 50.5 46.8
Accrued advertising and other 567.2 539.5 391.1
Taxes payable other than taxes on income 45.5 44.9 32.8
Income taxes 144.2 147.3 190.7
Dividends payable 47.9 45.2 41.6
- ---------------------------------------------------------------------------------------------
Total current liabilities 1,583.4 1,705.6 1,360.0
- ---------------------------------------------------------------------------------------------
NONCURRENT LIABILITIES
Employees' pension, indemnity, retirement
and related provisions 476.6 480.4 153.6
Other noncurrent liabilities 197.0 218.7 111.4
Minority stockholders' interest 94.9 100.5 46.6
- ---------------------------------------------------------------------------------------------
Total noncurrent liabilities 768.5 799.6 311.6
- ---------------------------------------------------------------------------------------------
LONG-TERM DEBT 897.7 953.6 1,016.2
- ---------------------------------------------------------------------------------------------
DEFERRED TAXES ON INCOME 42.1 50.6 191.9
- ---------------------------------------------------------------------------------------------
EQUITY
STOCKHOLDERS' EQUITY
Preferred stock--authorized 25,000,000 shares
$1 par value -- -- --
Designations
Series A ESOP Convertible
3,000,000 shares designated 195.6 197.5 199.0
Series A Junior Participating
600,000 shares designated--none issued -- -- --
Common stock--authorized 900,000,000 shares
$.25 par value--issued 195,271,444 shares 48.8 48.8 24.4
Capital in excess of par value stock 150.5 146.7 167.6
Retained earnings 2,774.5 2,523.0 2,491.0
Unearned ESOP compensation (155.2) (168.2) (180.0)
Cumulative translation adjustment (172.6) (55.9) (79.5)
Common stock in treasury, at cost (1,072.5) (1,030.1) (991.9)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 1,769.1 1,661.8 1,630.6
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,060.8 $ 5,171.2 $4,510.3
=============================================================================================
</TABLE>
<PAGE> 34
page 34
CPC * International
CONSOLIDATED STATEMENTS OF CASH FLOWS
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the years ended December 31
$ Millions 1993 1992 1991
======================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income $ 454.5 $ 223.8 $ 372.7
Non-cash charges (credits) to net income
Depreciation and amortization 265.8 261.5 254.5
Changes in accounting principles, net of taxes -- 160.0 --
Discontinued operations, net of taxes -- 46.8 31.5
Deferred taxes (22.6) (18.5) 22.7
Translation losses 6.6 1.6 9.7
Other, net 32.1 51.1 (10.9)
Changes in trade working capital
Notes and accounts receivable (24.1) (96.8) 10.5
Inventories (26.2) (47.9) (6.8)
Accounts payable and accrued items 85.0 179.3 47.4
- ------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 771.1 760.9 731.3
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES
Capital expenditures paid (363.2) (297.4) (282.1)
Proceeds from disposal of plants and properties 22.2 8.0 18.4
Proceeds from businesses sold -- 9.0 37.2
Businesses acquired (72.7) (229.8) (11.0)
Purchase of minority interests in affiliates (15.7) -- --
- ------------------------------------------------------------------------------------------------------
Net cash flows used for investing activities (429.4) (510.2) (237.5)
- ------------------------------------------------------------------------------------------------------
Net cash flows after investments 341.7 250.7 493.8
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES
Purchase of treasury stock (47.9) (46.5) (2.2)
New long-term debt 178.1 52.9 296.5
Repayment of long-term debt (262.3) (100.6) (213.2)
Net change in short-term debt (8.7) (21.8) (234.6)
Dividends paid on common stock (189.6) (177.7) (162.4)
Dividends paid on preferred stock (15.7) (15.8) (16.0)
Common stock issued 5.5 8.3 8.8
Other liabilities (deposits) 12.4 (14.3) 3.0
- ------------------------------------------------------------------------------------------------------
Net cash flows used for financing activities (328.2) (315.5) (320.1)
- ------------------------------------------------------------------------------------------------------
Effects of exchange rate changes on cash (5.2) 6.9 (5.3)
- ------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8.3 (57.9) 168.4
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 158.0 215.9 47.5
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $166.3 $158.0 $215.9
======================================================================================================
</TABLE>
See notes to financial statements.
<PAGE> 35
page 35
1993 * ANNUAL REPORT
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
=======================================================================================================================
Preferred Stock Common Stock
--------------- ------------
Series A ESOP Issued Issued Treasury Stock Capital in Unearned
Shares in thousands -------------------- ------ -------------- Excess of ESOP
$ Millions Shares Amount Amount Shares Amount Par Value Compensation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 2,241.9 $200.0 $24.4 (22,180.0) $(998.5) $167.6 $(190.4)
Net income
Cash dividends declared
($1.10 per share)
Stock issued in connection with:
Stock options 76.0 3.4
Deferred compensation 121.9 5.4
Translation adjustment including the
effects of hedging, net of taxes
Series A ESOP preferred stock
dividend, net of taxes
ESOP compensation earned 10.4
ESOP shares redeemed (11.2) (1.0)
Treasury stock acquired (27.7) (2.2)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 2,230.7 199.0 24.4 (22,009.8) (991.9) 167.6 (180.0)
Net income
Cash dividends declared
($1.20 per share)
Stock issued in connection with:
Stock options 98.5 2.6 .2
Stock split 24.4 (21,903.7) (24.4)
Deferred compensation 151.3 5.6 3.2
Translation adjustment including the
effects of hedging, net of taxes
Series A ESOP preferred stock
dividend, net of taxes
ESOP compensation earned 11.8
ESOP shares redeemed (16.7) (1.5) 3.7 .1 .1
Treasury stock acquired (975.2) (46.5)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 2,214.0 197.5 48.8 (44,635.2) (1,030.1) 146.7 (168.2)
Net income
Cash dividends declared
($1.28 per share)
Stock issued in connection with:
Stock options 26.7 .6 (.1)
Deferred compensation 205.6 4.8 3.8
Translation adjustment including the
effects of hedging, net of taxes
Series A ESOP preferred stock
dividend, net of taxes
ESOP compensation earned 13.0
ESOP shares redeemed (21.8) (1.9) 5.3 .1 .1
Treasury stock acquired (1,057.0) (47.9)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 2,192.2 $195.6 $48.8 (45,454.6) $(1,072.5) $150.5 $(155.2)
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================
Cumulative
Shares in thousands Translation Retained
$ Millions Adjustment Earnings
- -----------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1990 $(42.4) $2,292.4
Net income 372.7
Cash dividends declared
($1.10 per share) (166.3)
Stock issued in connection with:
Stock options
Deferred compensation 2.1
Translation adjustment including the
effects of hedging, net of taxes (37.1)
Series A ESOP preferred stock
dividend, net of taxes (9.9)
ESOP compensation earned
ESOP shares redeemed
Treasury stock acquired
- -----------------------------------------------------------------
Balance, December 31, 1991 (79.5) 2,491.0
Net income 223.8
Cash dividends declared
($1.20 per share) (181.3)
Stock issued in connection with:
Stock options
Stock split
Deferred compensation
Translation adjustment including the
effects of hedging, net of taxes 23.6
Series A ESOP preferred stock
dividend, net of taxes (10.5)
ESOP compensation earned
ESOP shares redeemed
Treasury stock acquired
- -----------------------------------------------------------------
Balance, December 31, 1992 (55.9) 2,523.0
Net income 454.5
Cash dividends declared
($1.28 per share) (192.3)
Stock issued in connection with:
Stock options
Deferred compensation
Translation adjustment including the
effects of hedging, net of taxes (116.7)
Series A ESOP preferred stock
dividend, net of taxes (10.7)
ESOP compensation earned
ESOP shares redeemed
Treasury stock acquired
- -----------------------------------------------------------------
Balance, December 31, 1993 $(172.6) $2,774.5
=================================================================
</TABLE>
See notes to financial statements.
<PAGE> 36
page 36
CPC * INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS
CPC International Inc. and Subsidiaries
SUMMARY OF ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries. The accounts of subsidiaries
outside of the U.S., except for those in Canada, are based on fiscal years
ending September 30.
Changes in accounting principles - Effective January 1, 1992, the Company
adopted Financial Accounting Standards (FAS) 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," FAS 112, "Employers' Accounting
for Postemployment Benefits," and FAS 109, "Accounting for Income Taxes."
These changes resulted in a total non-cash charge of $303.5 million, $160
million after taxes or $1.06 per share, representing the cumulative effect of
the changes. (See separate footnotes for further discussions.)
Foreign currency translation - The Company follows FAS 52, "Foreign Currency
Translation," for translating foreign currency financial statements. Under FAS
52, assets and liabilities of foreign operations other than those in highly
inflationary economies are translated at the current exchange rate at the
balance sheet date with the related translation adjustment reported as a
separate component of stockholders' equity. In highly inflationary economies
(for CPC, most Latin American countries), certain assets are translated at
historical exchange rates, while all other assets and liabilities are
translated at current exchange rates with the related foreign exchange
adjustment included in the determination of net income.
Cash and cash equivalents - Cash equivalents consist of all investments
purchased with an original maturity of three months or less, and which have
virtually no risk of loss in value. At December 31, 1993, 1992, and 1991, the
Company had $37.1 million, $29.4 million, and $124.6 million, respectively, of
cash equivalents.
Investments in unconsolidated affiliates are carried at cost or less, adjusted
to reflect the Company's proportionate share of income or loss less dividends
received. Consolidated retained earnings at December 31, 1993, included $9.7
million of undistributed earnings of unconsolidated affiliates, primarily
representing companies of which the Company owns 50% or less.
Inventories are stated at the lower of cost or market. Cost elements included
in finished and in-process inventories are raw materials, direct labor, and
factory overhead. Outside the U.S., inventories generally are valued at average
cost. In the U.S. vegetable oils and corn are valued at cost on the last-in,
first-out method. Other U.S. inventories are valued at cost on the first-in,
first-out method. Had the first-in, first-out method been used for all U.S.
inventories, the carrying value of these inventories would have increased by
$19.3 million, $12.8 million, and $17.8 million in 1993, 1992, and 1991,
respectively.
The Company also follows a policy of hedging, with commodities futures
contracts, certain of its key domestic raw material purchases in line with
production requirements to minimize cost risk due to market fluctuations. Gains
or losses arising from hedging transactions are included with the cost of raw
material purchases.
Plant and properties are stated at cost. Depreciation is generally computed on
the straight-line method over the estimated useful lives of depreciable assets
at rates ranging from 2% to 10% for buildings and 5% to 20% for all other
assets. Where permitted by law, accelerated depreciation methods are used for
tax purposes.
Income taxes - Deferred income taxes reflect the differences between the assets
and liabilities recognized for financial reporting purposes and amounts
recognized for tax purposes. Deferred taxes are based on tax laws as currently
enacted. The significant components of deferred tax assets and liabilities are
related to plants and properties, employee benefit plans, and certain
non-current liabilities. In addition to providing for local income taxes, the
Company makes provisions for estimated U.S. and foreign income taxes, less
available tax credits and deductions, that may be incurred on the remittance by
the Company's subsidiaries of undistributed earnings, except those deemed to be
indefinitely reinvested.
Excess cost over net assets of businesses acquired - The Company amortizes, on
a straight-line basis, the excess cost of net assets acquired after October 31,
1970, over periods not exceeding 40 years.
Financing costs - In line with the functional currency concept under which the
Company uses the U.S. dollar for most of its Latin American subsidiaries, the
principal-preservation element inherent in local interest charges has been
classified in cost of sales, rather than under financing costs, consistent with
the classification of translation gains resulting from holding local currency
debt. In 1993, 1992, and 1991, $7.2 million, $16.5 million, and $45.1 million,
respectively, were classified in cost of sales.
<PAGE> 37
page 37
1993 * ANNUAL REPORT
Earnings per common share has been computed by dividing net income, less
preferred stock dividends in 1993, 1992, and 1991 of $10.7 million, $10.5
million, and $9.9 million, respectively, net of taxes, by the weighted-average
number of common shares outstanding of 150.4 million in 1993 and 151.2 million
in 1992 and 1991.
Environmental Contingencies - The Company accounts for environmental
contingencies in accordance with FAS 5 "Accounting for Contingencies," which
requires expense recognition when it is both "probable" that an obligation
exists and that the obligation can be "reasonably estimated". In assessing
probability, as well as estimating costs, the Company uses the coordinated
efforts of environmental professionals and consultants as well as on-staff and
outside lawyers and accountants taking into account possible methods of
remediation acceptable to all parties. Whenever the Company believes it can
recover fully or partially such liabilities from other potential responsible
parties or from its insurers, such recovery is aggressively pursued.
Nevertheless, unless final agreement has been reached for such claims from
these parties, in accordance with FAS 5 such expected recoveries are not
considered in establishing estimated costs. In addition, estimated costs are
based on expected future costs which have not been discounted.
ACQUISITIONS
During 1993 the Company acquired a consumer foods company located in the U.S.
for approximately $41 million. Outside the U.S. the Company acquired several
small consumer foods businesses and the remaining minority interests in several
of its affiliates for a total cost of approximately $47 million.
During the fourth quarter of 1993, the Company acquired an 85% interest in a
European producer and marketer of brand-name potato products. In addition, the
Company acquired the jams, juices, and related food products business of a
company in Sri Lanka. These post-international-year-end investments cost
approximately $195 million including assumed debt and have annualized sales of
approximately $200 million. During this same period the Company also signed an
agreement allowing a South African company through a newly-formed company to
manufacture and market selected CPC food brands in South Africa and export CPC
products to sub-Saharan Africa. The Company has an option to purchase a
majority interest in the newly-formed company at a later date.
In 1992 the Company acquired a foodservice business located in the U.S. for
approximately $115 million. Outside of the U.S. the Company acquired nine
consumer foods companies or businesses for a total of approximately $109
million. Six of these companies are located in Latin America, two are in
Europe, and one is in the Middle East. The 10 acquisitions had annualized sales
of $370 million. In addition, the Company acquired the remaining minority
interest in its Turkish affiliate for approximately $5.5 million.
In 1991 the Company acquired a small consumer foods business in Europe for
approximately $11 million. The business had sales on an annualized basis of $13
million. In addition, a consumer foods joint venture was formed in Hungary with
a local manufacturer, with CPC acquiring a 50% interest.
DISCONTINUED OPERATIONS
In the fourth quarter of 1992, the Company recorded a charge of $78 million,
$46.8 million after taxes or $.31 per common share, for anticipated
environmental costs relating to chemical operations divested by the Company
from the early 1970s to the mid-1980s. This charge increased the Company's
existing environmental reserve for costs relating to two Superfund sites, in
Michigan and Rhode Island, as well as seven other sites. In the third quarter
of 1991, the Company took a similar charge of $52.5 million, $31.5 million
after taxes or $.21 per common share, related to these divested chemical
operations. Actual disbursement of cash is expected to take place over the next
10 to 15 years. At December 31, 1993, the Company believed that the
environmental reserve was adequate. No recoveries from other potential
responsible parties or insurers have been considered in the determination of
the reserve.
<PAGE> 38
page 38
CPC * INTERNATIONAL
<TABLE>
<CAPTION>
======================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplementary information for the consolidated statements of cash flows is set forth below:
$ Millions 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $93.6 $100.7 $113.5
Income taxes 298.3 264.7 221.7
- ------------------------------------------------------------------------------------------------------
Details of businesses acquired:
Fair value of assets acquired $83.7 $340.7 $16.2
Liabilities assumed 11.0 110.9 5.2
---------------------------------------
Cash paid for acquisitions $72.7 $229.8 $11.0
======================================================================================================
</TABLE>
FINANCING ARRANGEMENTS-
SHORT-TERM
The Company uses the commercial paper market in the U.S. to supplement
long-term borrowings. Quarterly average commercial paper borrowings in 1993,
1992, and 1991 were $151.9 million, $45.7 million, and $89.9 million,
respectively, with maximum borrowings in 1993, 1992, and 1991 of $286.6
million, $109.1 million, and $287.4 million, and a weighted-average interest
rate in 1993, 1992, and 1991 of 3.2%, 3.6%, and 7.65%.
For the international operations, the maximum month-end balance of bank
borrowings during 1993, 1992, and 1991 was $344 million, $394.9 million, and
$421.6 million, respectively. Quarterly average bank borrowings were $288.8
million for 1993, $332.3 million for 1992, and $334.6 million in 1991. The
weighted-average interest rate for bank borrowing in 1993, 1992, and 1991 was
10.3%, 10.8%, and 11.9%.
The Company had unused lines of credit totaling $1,079.6 million, $1,081
million, and $1,029.5 million at December 31, 1993, 1992, and 1991,
respectively.
LONG-TERM
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
$ Millions 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAYABLE IN U.S. DOLLARS
7.78% ESOP guaranteed notes due December 2004 $183.3 $191.2 $196.2
9.30%-9.65% medium term notes -- 42.0 61.0
8.5% sinking fund debentures due April 2016 100.0 100.0 100.0
5.625%-6.75% pollution control revenue bonds
due 2007-2016 15.3 15.3 15.3
6.00% zero coupon notes -- 129.8 122.3
Commercial paper supported by revolving credit
agreements at a weighted interest rate of 3.2% 100.0 -- --
Other notes and loans at various rates and
due dates 38.8 18.5 20.4
- ------------------------------------------------------------------------------------------------------
Total 437.4 496.8 515.2
- ------------------------------------------------------------------------------------------------------
PAYABLE IN OTHER CURRENCIES
5.75% Swiss franc debentures, due March 2045,
ten year variable interest rates 140.8 161.3 137.9
6.75% German mark bearer bonds due January 2001 122.7 141.8 120.5
Bank and other loans at prevailing interest
rates with various due dates:
-- Secured 64.4 74.3 19.9
-- Unsecured 195.7 214.8 301.6
- ------------------------------------------------------------------------------------------------------
Total 523.6 592.2 579.9
- ------------------------------------------------------------------------------------------------------
961.0 1,089.0 1,095.1
- ------------------------------------------------------------------------------------------------------
Less current maturities 63.3 135.4 78.9
- ------------------------------------------------------------------------------------------------------
Total $897.7 $953.6 $1,016.2
======================================================================================================
</TABLE>
<PAGE> 39
page 39
1993 * ANNUAL REPORT
The Company is required to apply toward retirement of the principal of the
indebtedness not less than the following amounts in the period 1994 through
1998: 1994 (included in current liabilities), $63.3 million; 1995, $137.3
million; 1996, $87.0 million; 1997, $69.6 million; and 1998, $83.6 million. At
December 31, 1993, buildings, equipment, and certain other assets located
outside the U.S. totaling approximately $30.8 million, have been pledged as
collateral for the secured loans.
During 1993, the Company redeemed all of its 6.00% zero coupon notes due
June 2006 for $134.6 million.
The Company has classified $100 million of existing commercial paper
borowings as long-term debt, since it is the Company's intention either to
continue that debt for more than one year or to refinance it on a long-term
basis.
The Company filed in February 1994 a "shelf" registration with the
Securities and Exchange Commission to cover borrowings of up to $300 million.
This facility replaced the shelf registration that was filed in 1988 and
amended in 1990.
The Company has long-term revolving credit agreements with a group of U.S.
and international banks. These agreements permit the Company to borrow up to
$350 million on an unsecured basis at variable interest rates. Covenants in
these agreements require the Company to maintain net worth of not less than
$600 million. Net worth as defined at December 31, 1993, was $1,769.1 million.
There were no borrowings outstanding under these facilities.
The Company is the guarantor of the ESOP notes (see Employee Stock Ownership
Plan note) which were issued in 1989 in the initial amount of $200 million.
When appropriate, the Company attempts to minimize its financing costs by
entering into interest rate caps or interest rate swaps with major financial
institutions. Any interest rate differential on interest rate swaps is
recognized as a reduction of interest expense over the life of the agreement.
At December 31, 1993, the Company had interest rate swap agreements outstanding
with several financial institutions. The notional amounts of these agreements
totaled $300 million with amounts expiring in 1994 through 2000. The notional
amount is used to measure the volume of these agreements and does not represent
exposure to credit loss. In the event of default by a counterparty, the risk in
these transactions is the cost of replacing the swap agreement at current
market rates. The Company continually monitors its positions and the credit
ratings of its counterparties, and limits the number of agreements it enters
into with any one party. Management believes the risk of incurring losses is
remote, and that if incurred, such losses would be immaterial.
The Company also uses foreign currency swaps and forward exchange contracts
to hedge foreign currency exposure related to either operating activities or
net investments in certain foreign operations. As a matter of policy, the
Company does not speculate in foreign currencies. Realized and unrealized
gains and losses on foreign currency swaps and forward exchange contracts that
hedge operating activities are recognized currently in exchange gains and
losses. Realized and unrealized exchange gains and losses in foreign currency
swaps and forward exchange contracts, which are effective as hedges of net
investments, are recognized as part of the translation adjustment in
stockholders' equity. At December 31, 1993, the Company had forward exchange
contracts maturing in 1994 to sell $376.1 million and purchase $31.2 million of
foreign currencies.
PENSION PLANS
The Company and its subsidiaries have a number of defined benefit pension plans
covering substantially all U.S. employees and certain groups of employees in
foreign countries. Plans covering salaried employees generally provide benefits
based on the employee's final salary level or on the average salary level for a
specified period. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. The Company's general funding policy
is to contribute annually the maximum amount that can be deducted for income
tax purposes. However, certain foreign countries allow income tax deductions
without regard to contribution levels, and the Company's policy in those
countries is to make the contribution required by the terms of the plan.
<PAGE> 40
page 40
CPC * INTERNATIONAL
The following is a summary of the funded status of the Company's major domestic
and foreign pension plans based on valuations as of September 30, 1993, and
1992:
<TABLE>
<CAPTION>
$ Millions 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Assets exceed Accumulated benefits Assets exceed Accumulated benefits
accumulated benefits exceed assets accumulated benefits exceed assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC PLANS
Accumulated benefit obligation:
Vested $(476.6) $(30.8) $(404.8) $(33.5)
Nonvested (18.4) (1.1) (9.6) (1.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $(495.0) $(31.9) $(414.4) $(34.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $(567.9) $(46.8) $(479.6) $(36.5)
Plan assets at fair value 542.7 20.8 513.8 23.6
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
(in excess of) less than plan assets (25.2) (26.0) 34.2 (12.9)
Unrecognized prior service costs 9.5 16.2 12.8 9.7
Unrecognized net loss (gain) 75.5 5.0 (3.1) 1.2
Unrecognized net obligation (asset) 13.7 (0.3) 14.6 .3
Additional minimum liability (3.8) -- (5.1)
- ------------------------------------------------------------------------------------------------------------------------------------
(Accrued) prepaid pension cost
at December 31 $73.5 $(8.9) $58.5 $(6.8)
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN PLANS
Accumulated benefit obligation:
Vested $(154.0) $(264.6) $(89.7) $(375.0)
Nonvested (9.3) (14.2) (.3) (28.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $(163.3) $(278.8) $(90.0) $(403.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $(197.8) $(311.2) $(112.7) $(463.1)
Plan assets at fair value 208.4 106.9 130.6 220.3
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
(in excess of) less than plan assets 10.6 (204.3) 17.9 (242.8)
Unrecognized prior service costs 10.6 4.6 13.5 5.5
Unrecognized net loss (gain) (17.1) 34.5 (16.5) 46.2
Unrecognized net obligation (asset) 2.6 15.7 (6.4) 25.7
Additional minimum liability -- (28.9) -- (41.0)
- ------------------------------------------------------------------------------------------------------------------------------------
(Accrued) prepaid pension cost
at December 31 $6.7 $(178.4) $8.5 $(206.4)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net periodic pension cost for 1993, 1992, and 1991 included the following
components:
<TABLE>
<CAPTION>
$ Millions Domestic Plans Foreign Plans
- ------------------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cost of benefits earned during the year $12.9 $11.2 $9.4 $15.6 $16.4 $14.9
Interest on projected benefit obligation 38.0 37.3 36.8 35.5 37.4 28.8
Actual return on plan assets (40.9) (48.8) (102.3) (26.4) (25.5) (20.2)
Net amortization and deferral (7.9) .7 60.4 8.7 6.2 5.0
- ------------------------------------------------------------------------------------------------------
Net periodic pension cost $2.1 $.4 $4.3 $33.4 $34.5 $28.5
- ------------------------------------------------------------------------------------------------------
</TABLE>
The long-term rate of return on plan assets used in the determination of net
periodic pension cost for 1993, 1992, and 1991 for the domestic plans was 9.5%,
9.5%, and 10.0%, respectively. For the foreign plans the rate was 7.9%, 8.0%,
and 8.1% in 1993, 1992, and 1991, respectively.
Weighted averages of actuarial assumptions used in the measurement of
projected benefit obligation are as follows:
<TABLE>
<CAPTION>
Domestic Plans Foreign Plans
- --------------------------------------------------------------------------------------------------------
1993 1992 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 6.5% 7.5% 7.5% 7.7%
Average annual increase in compensation 5.0% 6.0% 5.1% 5.3%
- -------------------------------------------------------------------------------------------------------
</TABLE>
In addition, certain employees in the U.S. and in some foreign subsidiaries
are covered by pension plans under
<PAGE> 41
page 41
1993 * ANNUAL REPORT
which the Company's obligation to make contributions is defined as a percentage
of the current salary of each employee covered by the plan. Benefits are based
on the funds available in each employee's account from contributions and from
investment income on such contributions. The aggregate pension cost for these
plans was $17.1 million in 1993, $13.2 million in 1992, and $8.1 million in
1991.
OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for its domestic retired employees. Substantially all
of the Company's domestic employees become eligible for these benefits when
they meet minimum age and service requirements. The Company has the right to
modify or terminate these benefits.
Effective January 1, 1992, the Company implemented FAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires
recognition of the cost of postretirement benefits on an accrual basis rather
than a cash, or "pay-as-you-go" basis. In 1991 such cost amounted to $12.4
million. The Company elected to recognize the cumulative effect of this
accounting change by recording a non-cash charge of $280 million, $168 million
after taxes or $1.11 per common share, which represents the accumulated
postretirement benefit obligation (APBO) existing at January 1, 1992. The
weighted-average discount rate used in determining the APBO was 7.8%.
The following is a summary of the status of the Company's major domestic
postretirement benefit plans based on valuations as of September 30, 1993 and
1992:
<TABLE>
<CAPTION>
$ Millions 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $185.9 $197.2
Fully eligible active plan participants 41.2 34.8
Other active plan participants 45.6 45.2
- ----------------------------------------------------------------------------------------------------
Total 272.7 277.2
Unrecognized prior service cost 1.5 --
Unrecognized net gain 21.0 2.1
- ----------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $295.2 $279.3
- ----------------------------------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
$ Millions 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Service costs-benefits earned during the year $4.6 $3.9
Interest cost on the accumulated postretirement
benefit obligation 20.8 20.7
- ----------------------------------------------------------------------------------------------------
Net periodic postretirement benefit $25.4 $24.6
- ----------------------------------------------------------------------------------------------------
</TABLE>
Annual increases in per capita costs of health care benefits of 11%
pre-age-65 and 9% post-age-65 were assumed for 1994 to 1995. Rates were assumed
to decrease by 1% thereafter until reaching 4.5%. Increasing the assumed health
care cost trend rate by 1% increases the APBO by $35.2 million. The net
periodic postretirement benefit cost should not be materially affected by this
change. The discount rate used to determine the APBO is 6.5%.
In addition to the change in accounting for postretirement benefits, the
Company also changed its accounting for postemployment benefits from a
"pay-as-you-go" basis to an "accrual" approach, in compliance with FAS 112,
"Employers' Accounting for Postemployment Benefits." Postemployment benefits
include salary continuation, disability-related benefits, severance pay, and
continuation of health care costs during the period after employment but before
retirement. The cumulative impact of this accounting change, at January 1,
1992, was a non-cash charge of $23.5 million, $14.1 million after taxes or $.09
per common share.
SHAREHOLDER RIGHTS PLAN
Under the Company's shareholder rights plan, each share of the Company's common
stock carries with it one preferred stock purchase right. The rights will at no
time have voting power or pay dividends. The rights will become exercisable if
a person or group acquires 15% or more of the Company's common stock, or
announces a tender or
<PAGE> 42
page 42
CPC * INTERNATIONAL
exchange offer that could result in the acquisition of 15% or more thereof.
When exercisable, each right will entitle a holder to buy one two-hundredths of
a share of Series A Junior Participating Preferred Stock at a price of $325. If
the Company is involved in a merger or other business combination with a 15% or
more stockholder, each right will entitle a holder to buy a number of the
acquiring company's shares having a value of twice the exercise price of the
right. Alternatively, if a 15% stockholder engages in certain self-dealing
transactions or acquires the Company in such a manner that the Company and its
common stock survive, or if any person acquires 15% or more of the common stock
except pursuant to an offer for all shares at a fair price, each right not
owned by a 15% or more stockholder may be exercised for common stock of the
Company (or, in certain circumstances, other consideration) having a market
value of twice the exercise price of the right. The Company may redeem the
rights for one cent each at any time before an acquisition of 15% or more of
its voting securities and for at least 10 business days thereafter. Unless
redeemed earlier, the rights will expire on March 19, 2001.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan (ESOP) as part of its
Savings/Retirement Plan covering substantially all U.S. salaried employees. The
ESOP is designed to provide employees with increased ownership in the Company's
stock. To accomplish this, the ESOP borrowed $200 million in a public offering
and used the proceeds to buy a like amount of the Company's Series A ESOP
convertible preferred stock. The preferred stock is convertible into
approximately 4.4 million shares of the Company's common stock. The preferred
stock pays an annual dividend of $7.14 per share and will be used by the ESOP,
together with the Company's contributions, to service the ESOP notes. The ESOP
is intended to satisfy the Company's obligation to match employees'
contributions to the Savings/Retirement Plan on a $1 for $1 basis. Since the
ESOP notes are guaranteed by the Company, they are reflected in the
consolidated balance sheet as short-term and long-term debt with a
corresponding amount shown in the stockholders' equity section as unearned ESOP
compensation.
In 1993 and 1992, 145,072 shares and 130,486 shares, respectively, of
preferred stock valued at $13.0 million and $11.8 million were allocated to
Plan participants based on the semi-annual payments of both principal and
interest due on the ESOP notes. The notes have a 15-year maturity and a fixed
interest rate of 7.78%. Principal paid on the ESOP notes was $7.9 million in
1993 and $5.1 million in 1992.
STOCK AND PERFORMANCE PLAN
In 1993 the stockholders approved the 1993 Stock and Performance Plan (the 1993
Plan), which replaced the 1984 Stock and Performance Plan. The 1993 Plan
provides for grants of stock options, restricted stock awards, and performance
units. A Committee of non-employee members of the Board of Directors
administers the Plan. Seven and a half million shares of common stock were
reserved for issuance under the 1993 Plan including those shares remaining
under the 1984 Plan.
Under the 1993 Plan, stock options were granted at 100% of market value at
date of grant and expire not more than 10 years from date of grant. The
following table summarizes transactions during 1993, 1992, and 1991, including
balances from previous plans:
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER OF SHARES
Balance beginning of year 1,613,724 1,198,666 973,560
Granted 647,050 543,150 547,300
Exercised (26,680) (115,177) (173,308)
Cancelled (227,246) (12,915) (148,886)
- ------------------------------------------------------------------------------------------------------
Balance end of year 2,006,848 1,613,724 1,198,666
- ------------------------------------------------------------------------------------------------------
Exercisable at year-end 985,149 765,282 368,796
- ------------------------------------------------------------------------------------------------------
Available for future grants of stock options 7,250,900 3,453,213 4,130,244
- ------------------------------------------------------------------------------------------------------
OPTION PRICE PER SHARE
Outstanding $9.28-49.06 $9.28-47.81 $9.28-43.72
Exercised $9.28-43.72 $9.61-43.72 $8.97-37.69
Granted $44.63-49.06 $43.03-47.81 $38.94-43.72
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
page 43
1993 * ANNUAL REPORT
In addition, 68,250 shares were awarded to employees in 1993 under the
restricted stock award provision of the 1984 and 1993 plans. The cost of these
awards is being amortized over the five-year restriction period.
At December 31, 1993, 29,191 shares of common stock in treasury were
reserved for deferred compensation programs.
SHARE REPURCHASE PROGRAM
On October 20, 1993, the Board of Directors authorized the purchase by the
Company of up to 4 million of its outstanding shares of common stock. This
repurchase program commenced in January 1994 upon completion of an earlier
program for the repurchase of 2 million shares. The Company will repurchase
shares of common stock from time to time over the next three years.
OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Information concerning operations by business segment and geographic area
appears on pages 46 and 47.
INCOME TAXES
The Company adopted FAS 109, "Accounting for Income Taxes," effective January
1, 1992. Prior years have not been restated. FAS 109 changes the method of
accounting for income taxes from the deferred method, as required by Accounting
Principles Board Opinion 11 (APB 11) "Accounting for Income Taxes," to an asset
and liability approach. This requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the amounts carried for financial reporting and tax
purposes. The cumulative effect of the change amounted to a benefit of $22.1
million, or $.14 per common share, resulting from a lower current tax rate
compared with a higher tax rate used to establish the original net deferred tax
liability.
Income from continuing operations before income taxes in the United States
and outside the United States, along with the components of the provision for
income taxes shown below, is after elimination of intercompany items and
allocation of income and expense to their respective sources.
<TABLE>
<CAPTION>
$ Millions 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations before income taxes:
United States $358.6 $334.0 $327.1
Outside the United States 431.7 410.5 366.4
- ---------------------------------------------------------------------------------------------------
Total $790.3 $744.5 $693.5
- ---------------------------------------------------------------------------------------------------
Provision for income taxes charged to continuing operations:
Current tax expense
U.S. Federal $125.1 $124.8 $106.2
State and local 25.1 31.0 19.5
Foreign 188.5 160.5 129.0
- ---------------------------------------------------------------------------------------------------
Total current 338.7 316.3 254.7
- ---------------------------------------------------------------------------------------------------
Deferred tax expense (benefit)
U.S. Federal 8.3 (20.3) 5.3
State and local 1.2 (2.9) --
Foreign (32.1) 4.7 17.4
Total deferred (22.6) (18.5) 22.7
- ---------------------------------------------------------------------------------------------------
Total provision $316.1 $297.8 $277.4
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 44
page 44
CPC * INTERNATIONAL
Deferred tax liabilities (assets) including those derived from the changes in
accounting principles and environmental charges related to discontinued
operations at December 31 are shown below:
<TABLE>
<CAPTION>
$ Millions 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plants and properties $265.1 $263.7
Inventory 18.5 35.4
Pensions 47.6 38.3
- --------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities 331.2 337.4
- --------------------------------------------------------------------------------------------------------
Environmental reserves (51.9) (48.6)
Employee benefit reserves (143.4) (141.2)
Unrealized exchange losses (66.4) (58.1)
Other (39.6) (42.0)
- --------------------------------------------------------------------------------------------------------
Gross deferred tax assets (301.3) (289.9)
- --------------------------------------------------------------------------------------------------------
Valuation allowance 2.0 6.0
- --------------------------------------------------------------------------------------------------------
Total $31.9 $53.5
- --------------------------------------------------------------------------------------------------------
</TABLE>
Total net deferred tax liabilities shown above included current and noncurrent
elements.
The total tax expenses for continuing operations for 1993, 1992, and 1991 of
$316.1 million, $297.8 million, and $277.4 million, respectively, are different
from the amounts that would have been provided by applying the U.S. statutory
income tax rate to income before income taxes. The reasons for the differences
are as follows:
<TABLE>
<CAPTION>
$ Millions 1993 1992 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
% % %
Provision for tax at U.S. statutory rate $276.6 35.0 $253.1 34.0 $235.8 34.0
Additional taxes related to foreign income 21.3 2.7 25.6 3.4 21.8 3.1
State and local taxes--net 17.1 2.2 20.5 2.8 12.9 1.9
Other items--net 1.1 0.1 (1.4) (.2) 6.9 1.0
- -------------------------------------------------------------------------------------------------------
Provision at effective tax rate $316.1 40.0 $297.8 40.0 $277.4 40.0
- -------------------------------------------------------------------------------------------------------
</TABLE>
Taxes that would result from dividend distributions by foreign subsidiaries to
the U.S. are provided to the extent dividends are anticipated. Retained
earnings of the Company included, as of December 31, 1993, approximately
$515.3 million of retained earnings of foreign subsidiaries which are
indefinitely retained by the subsidiaries for capital and operating
requirements.
<PAGE> 45
page 45
1993 * ANNUAL REPORT
REPORT OF MANAGEMENT
The management of CPC International Inc. is responsible for the financial and
operating information contained in the Annual Report including the financial
statements covered by the independent auditors' report. These statements were
prepared in conformity with United States generally accepted accounting
principles and include, where necessary, informed estimates and judgements.
The Company maintains systems of accounting and internal control designed to
provide reasonable assurance that assets are safeguarded against loss, and that
transactions are executed and recorded properly so as to ensure that the
financial records are reliable for preparing financial statements.
Elements of these control systems are the establishment and communication of
accounting and administrative policies and procedures, the selection and
training of qualified personnel, and continuous programs of internal audits.
The Company's financial statements are reviewed by its Audit Committee,
which is composed entirely of non-employee Directors. This Committee meets
periodically with the independent auditors, management, and the corporate
general auditor to review the scope and results of the annual audit, interim
reviews, internal controls, internal auditing, and financial reporting matters.
The independent auditors and the corporate general auditor have direct access
to the Audit Committee.
/S/ KONRAD SCHLATTER
- --------------------
KONRAD SCHLATTER
Senior Vice President and Chief Financial Officer
February 4, 1994
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
CPC International Inc.:
We have audited the accompanying consolidated balance sheets of CPC
International Inc. and Subsidiaries as of December 31, 1993, 1992, and 1991,
and the related consolidated statements of income, stockholders' equity and
cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CPC
International Inc. and Subsidiaries as of December 31, 1993, 1992, and 1991,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in the Notes to Financial Statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No.106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions," No. 109, "Accounting for Income Taxes," and No.
112, "Employers' Accounting for Postemployment Benefits" in 1992.
/S/ KPMG PEAT MARWICK
- ---------------------
KPMG PEAT MARWICK
New York, New York
February 4, 1994
<PAGE> 46
page 46
CPC * INTERNATIONAL
BUSINESS SEGMENT FINANCIAL INFORMATION
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
$ Millions 1993 1992 1991
==============================================================================================
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS
Consumer foods $5,635.7 $5,501.5 $5,117.7
Corn refining 1,102.3 1,097.5 1,071.4
- ----------------------------------------------------------------------------------------------
6,738.0 6,599.0 6,189.1
- ----------------------------------------------------------------------------------------------
SALES INTERSEGMENT
Consumer foods -- -- --
Corn refining 140.3 153.0 156.4
- ----------------------------------------------------------------------------------------------
140.3 153.0 156.4
- ----------------------------------------------------------------------------------------------
OPERATING INCOME
Consumer foods 723.8 697.4 652.0
Corn refining 182.1 179.9 161.3
Corporate expenses (22.6) (28.2) (15.1)
- ----------------------------------------------------------------------------------------------
883.3 849.1 798.2
- ----------------------------------------------------------------------------------------------
ASSETS AT DECEMBER 31
Consumer foods 3,850.5 4,046.9 3,316.6
Corn refining 1,023.9 968.6 964.7
Corporate 186.4 155.7 229.0
- ----------------------------------------------------------------------------------------------
5,060.8 5,171.2 4,510.3
- ----------------------------------------------------------------------------------------------
DEPRECIATION
Consumer foods 164.1 158.5 143.2
Corn refining 76.9 78.6 90.2
Corporate .5 .5 .3
- ----------------------------------------------------------------------------------------------
241.5 237.6 233.7
- ----------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Consumer foods 247.9 239.3 210.9
Corn refining 137.7 70.8 66.1
Corporate .3 .4 .2
- ----------------------------------------------------------------------------------------------
385.9 310.5 277.2
==============================================================================================
</TABLE>
Intersegment sales generally are priced with reference to prevailing market
prices.
<PAGE> 47
page 47
1993 * ANNUAL REPORT
GEOGRAPHIC FINANCIAL INFORMATION
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
$ Millions 1993 1992 1991
==============================================================================================
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS
United States $2,412.3 $2,434.9 $2,308.5
Canada 245.8 257.6 281.8
- ----------------------------------------------------------------------------------------------
North America 2,658.1 2,692.5 2,590.3
Europe 2,622.9 2,661.3 2,504.4
Latin America 1,177.9 999.3 885.6
Asia 279.1 245.9 208.8
- ----------------------------------------------------------------------------------------------
6,738.0 6,599.0 6,189.1
- ----------------------------------------------------------------------------------------------
SALES INTERAREA
United States 28.1 22.1 18.2
Canada 71.7 71.4 61.9
- ----------------------------------------------------------------------------------------------
North America 99.8 93.5 80.1
Europe 7.7 9.3 10.2
Latin America 7.4 1.6 .9
Asia 1.5 1.1 .5
- ----------------------------------------------------------------------------------------------
116.4 105.5 91.7
- ----------------------------------------------------------------------------------------------
OPERATING INCOME
United States 373.4 363.8 324.9
Canada 27.3 31.6 46.0
- ----------------------------------------------------------------------------------------------
North America 400.7 395.4 370.9
Europe 267.8 292.4 295.4
Latin America 181.6 144.3 110.2
Asia 55.8 45.2 36.8
Corporate expenses (22.6) (28.2) (15.1)
- ----------------------------------------------------------------------------------------------
883.3 849.1 798.2
- ----------------------------------------------------------------------------------------------
ASSETS AT DECEMBER 31
United States 1,585.5 1,494.1 1,354.6
Canada 249.7 250.6 269.5
- ----------------------------------------------------------------------------------------------
North America 1,835.2 1,744.7 1,624.1
Europe 2,075.6 2,406.9 1,934.3
Latin America 768.1 693.4 586.5
Asia 195.5 170.5 136.4
Corporate 186.4 155.7 229.0
- ----------------------------------------------------------------------------------------------
5,060.8 5,171.2 4,510.3
==============================================================================================
</TABLE>
Interarea sales generally are priced with reference to prevailing market
prices.
<PAGE> 48
page 48
CPC * INTERNATIONAL
ELEVEN-YEAR FINANCIAL HIGHLIGHTS
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
$ Millions except per share amounts 1993 1992 1991 1990
===========================================================================================================================
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net sales $6,738.0 $6,599.0 $6,189.1 $5,781.1
- --------------------------------------------------------------------------------------------------------------------------
Earnings for the year 454.5 223.8(1,2) 372.7(3) 373.9
- --------------------------------------------------------------------------------------------------------------------------
Earnings per common share 2.95 1.41(1,2) 2.40(3) 2.41
- --------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 150.4 151.2 151.2 150.8
- --------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share 1.28 1.20 1.10 1.00
===========================================================================================================================
BALANCE SHEET DATA
- --------------------------------------------------------------------------------------------------------------------------
Working capital $388.5 $346.7 $431.5 $159.6
- --------------------------------------------------------------------------------------------------------------------------
Plants and properties (net) 2,120.7 2,110.8 1,881.4 1,898.0
- --------------------------------------------------------------------------------------------------------------------------
Total assets 5,060.8 5,171.2 4,510.3 4,490.3
- --------------------------------------------------------------------------------------------------------------------------
Long-term debt 897.7 953.6 1,016.2 990.2
- --------------------------------------------------------------------------------------------------------------------------
Short-term debt 375.0 496.8 365.5 595.0
------- ------- ------- ------
- --------------------------------------------------------------------------------------------------------------------------
Total debt 1,272.7 1,450.4 1,381.7 1,585.2
- --------------------------------------------------------------------------------------------------------------------------
Translation adjustment included in
stockholders' equity (172.6) (55.9) (79.5) (42.4)
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 1,769.1 1,661.8 1,630.6 1,453.1
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity per share 11.81 11.03 10.78 9.63
- --------------------------------------------------------------------------------------------------------------------------
Shares outstanding, year-end 149.8 150.6 151.2 151.0
==========================================================================================================================
STATISTICAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Capital expenditures $385.9 $310.5 $277.2 $261.5
- --------------------------------------------------------------------------------------------------------------------------
Maintenance and repairs 196.1 203.1 175.9 169.2
- --------------------------------------------------------------------------------------------------------------------------
Advertising expenses 463.2 483.3 453.5 418.4
- --------------------------------------------------------------------------------------------------------------------------
Rental expense for operating leases 62.6 65.0 60.7 48.2
- --------------------------------------------------------------------------------------------------------------------------
Total employee costs 1,279.8 1,203.2 1,095.7 1,005.0
==========================================================================================================================
</TABLE>
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
==========================================================================================================================
(Unaudited)
$ Millions except per share amounts 1st Q 2nd Q 3rd Q 4th Q
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Market Price Range of Common Stock
High $51 1/8 $45 5/8 $45 7/8 $49
Low 44 40 1/4 39 7/8 43 1/8
Close 45 41 1/8 43 7/8 47 5/8
- --------------------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $.32 $.32 $.32 $.32
- --------------------------------------------------------------------------------------------------------------------------
Quarterly Results
Net Sales $1,636.2 $1,689.8 $1,664.1 $1,747.9
Gross Profit 640.4 674.4 666.2 713.8
Net Income 90.4 116.9 122.0 125.2
Earnings per Common Share $.58 $.76 $ .79 $ .82
==========================================================================================================================
</TABLE>
See notes to financial statements.
(1)Includes the cumulative effect to January 1, 1992, of changes in accounting
principles of $160 million after taxes, or $1.06 per common share, and the
effect of these changes in 1992 of $13 million, $7.8 million after taxes or
$.05 per common share.
<PAGE> 49
page 49
1993 * ANNUAL REPORT
<TABLE>
<CAPTION>
$ Millions except per share amounts 1989 1988 1987 1986
============================================================================================================================
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net sales $5,103.1 $4,700.0 $4,903.0 $4,548.8
- ----------------------------------------------------------------------------------------------------------------------------
Earnings for the year 327.5 289.1 354.8 219.2
- ----------------------------------------------------------------------------------------------------------------------------
Earnings per common share 2.11 1.84 2.17 1.15
- ----------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 155.2 157.0 163.4 190.6
- ----------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share .87 .76 .64 .56
============================================================================================================================
BALANCE SHEET DATA
- ----------------------------------------------------------------------------------------------------------------------------
Working capital $230.6 $98.3 $345.5 $(186.4)
- ----------------------------------------------------------------------------------------------------------------------------
Plants and properties (net) 1,738.7 1,687.9 1,638.0 1,991.6
- ----------------------------------------------------------------------------------------------------------------------------
Total assets 3,704.7 3,342.0 3,260.5 3,650.6
- ----------------------------------------------------------------------------------------------------------------------------
Long-term debt 845.3 589.5 775.8 806.6
- ----------------------------------------------------------------------------------------------------------------------------
Short-term debt 354.5 374.7 165.9 736.4
------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------------------------
Total debt 1,199.8 964.2 941.7 1,543.0
- ----------------------------------------------------------------------------------------------------------------------------
Translation adjustment included in
stockholders' equity (69.0) (80.3) (90.3) (84.1)
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 1,217.6 1,194.5 1,086.5 956.1
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity per share 8.05 7.63 6.81 5.79
- ----------------------------------------------------------------------------------------------------------------------------
Shares outstanding, year-end 151.2 156.6 159.6 165.2
============================================================================================================================
STATISTICAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Capital expenditures $215.4 $226.0 $257.4 $361.1
- ----------------------------------------------------------------------------------------------------------------------------
Maintenance and repairs 155.8 152.3 197.6 174.1
- ----------------------------------------------------------------------------------------------------------------------------
Advertising expenses 366.5 316.2 292.7 230.0
- ----------------------------------------------------------------------------------------------------------------------------
Rental expense for operating leases 42.2 40.7 48.3 38.9
- ----------------------------------------------------------------------------------------------------------------------------
Total employee costs 870.7 835.6 922.5 806.6
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
$ Millions except per share amounts 1985 1984 1983
===========================================================================================================
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------
Net sales $4,209.9 $4,373.3 $4,010.9
- -----------------------------------------------------------------------------------------------------------
Earnings for the year 142.0 193.4 136.2
- -----------------------------------------------------------------------------------------------------------
Earnings per common share .73 .99 .70
- -----------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 194.4 194.2 194.4
- -----------------------------------------------------------------------------------------------------------
Dividends declared per common share .55 .55 .55
===========================================================================================================
BALANCE SHEET DATA
- -----------------------------------------------------------------------------------------------------------
Working capital $309.5 $356.9 $406.6
- -----------------------------------------------------------------------------------------------------------
Plants and properties (net) 1,632.8 1,382.3 1,183.7
- -----------------------------------------------------------------------------------------------------------
Total assets 3,016.6 2,683.4 2,482.8
- -----------------------------------------------------------------------------------------------------------
Long-term debt 495.1 388.8 320.5
- -----------------------------------------------------------------------------------------------------------
Short-term debt 254.0 183.0 128.6
------- ------- -------
- -----------------------------------------------------------------------------------------------------------
Total debt 749.1 571.8 449.1
- -----------------------------------------------------------------------------------------------------------
Translation adjustment included in
stockholders' equity (173.1) (183.9) (114.8)
- -----------------------------------------------------------------------------------------------------------
Stockholders' equity 1,371.9 1,324.3 1,306.0
- -----------------------------------------------------------------------------------------------------------
Stockholders' equity per share 7.05 6.81 6.73
- -----------------------------------------------------------------------------------------------------------
Shares outstanding, year-end 194.4 194.4 194.0
===========================================================================================================
STATISTICAL DATA
- -----------------------------------------------------------------------------------------------------------
Capital expenditures $423.8 $310.6 $187.4
- -----------------------------------------------------------------------------------------------------------
Maintenance and repairs 136.7 146.3 143.4
- -----------------------------------------------------------------------------------------------------------
Advertising expenses 205.8 190.0 181.5
- -----------------------------------------------------------------------------------------------------------
Rental expense for operating leases 34.4 32.0 31.1
- -----------------------------------------------------------------------------------------------------------
Total employee costs 704.9 673.2 704.2
===========================================================================================================
</TABLE>
See notes to financial statements.
(1)Includes the cumulative effect to January 1, 1992, of changes in accounting
principles of $160 million after taxes, or $1.06 per common share, and the
effect of these changes in 1992 of $13 million, $7.8 million after taxes or
$.05 per common share.
<TABLE>
<CAPTION>
===========================================================================================================================
(Unaudited)
$ Millions except per share amounts 1st Q 2nd Q 3rd Q 4th Q
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992
Market Price Range of Common Stock
High $46 $46 1/4 $51 1/4 $51 5/8
Low 39 3/4 40 3/4 45 5/8 44 3/4
Close 42 11/16 46 1/8 48 1/4 50 5/8
- ---------------------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $.30 $.30 $.30 $.30
- ---------------------------------------------------------------------------------------------------------------------------
Quarterly Results
Net Sales $1,534.3 $1,672.6 $1,601.5 $1,790.6
Gross Profit 584.0 654.3 642.8 725.1
Net Income (Loss)(1) (73.7) 111.3 115.4 70.8(2)
Earnings per Common Share $(.51) $.72 $.74 $.46(2)
===========================================================================================================================
</TABLE>
(2)Includes an environmental charge related to discontinued operations of $46.8
million after taxes, or $.31 per common share.
(3)Includes an environmental charge related to discontinued operations of $31.5
million after taxes, or $.21 per common share.
<PAGE> 50
page 50
CPC * INTERNATIONAL
BOARD OF DIRECTORS
THEODORE H. BLACK (2*,4)
Former Chairman and
Chief Executive Officer
Ingersoll-Rand Company
JEWEL PLUMMER COBB (1,3*)
President Emeritus
California State University, Fullerton
WILLIAM C. FERGUSON (2,3)
Chairman and
Chief Executive Officer
NYNEX Corporation
ROBERT J. GILLESPIE (4)
Senior Vice President,
CPC International Inc.,
President, Best Foods Division
ELLEN R. GORDON (1*,3)
President and
Chief Operating Officer
Tootsie Roll Industries, Inc.
GEORGE V. GRUNE (1,4)
Chairman and
Chief Executive Officer
The Reader's Digest
Association, Inc.
LEO I. HIGDON, JR. (1,3)
Dean, Colgate Darden
Graduate School of
Business Administration,
University of Virginia
RICHARD G. HOLDER (2,3)
Chairman and Chief
Executive Officer
Reynolds Metals Company
PAUL W. JOY (1,4*)
Former Vice Chairman
American Brass Company
ALAIN LABERGERE (3)
Senior Vice President,
CPC International Inc.,
President, CPC Europe Division
ROBERT E. MERCER (2,4)
Former Chairman
The Goodyear
Tire & Rubber Company
WILLIAM S. NORMAN (2,4)
Executive Vice President
National Railroad
Passenger Corp. (AMTRAK)
DONALD E. PROCKNOW (2,4)
Former Vice Chairman and
Chief Operating Officer
AT&T Technologies, Inc.
CHARLES R. SHOEMATE
Chairman, President, and
Chief Executive Officer,
CPCInternational Inc.
COMMITTEES OF THE BOARD
(1) Audit
(2) Compensation and
Nominating
(3) Corporate Affairs
(4) Finance
* denotes chairman
During 1993 the Executive and Administrative committees were dissolved and
their duties transferred to the Board or the Compensation and Nominating
Committee.
ALEXANDER N. MCFARLANE
JAMES W. MCKEE, JR.
Honorary Chairmen
of the Board
BOARD CHANGES
WILLIAM S. NORMAN and
LEO I. HIGDON, JR., were elected
to the Board, effective July 20
and October 19, 1993,
respectively.
JEWEL PLUMMER COBB, PAUL W.
JOY, ROBERT E. MERCER, AND
DONALD E. PROCKNOW will retire
from the Board on April 28,
1994, pursuant to the Board's
policy on tenure of directors.
CORPORATE OFFICERS
CHARLES R. SHOEMATE
Chairman, President, and
Chief Executive Officer
ROBERT J. GILLESPIE
Senior Vice President
and President,
Best Foods Division
ALAIN LABERGERE
Senior Vice President
and President,
CPC Europe Division
KONRAD SCHLATTER
Senior Vice President
and Chief Financial Officer
CLIFFORD B. STORMS
Senior Vice President
and General Counsel
VICE PRESIDENTS
ANGELO S. ABDELA
Strategic Investments and
Treasurer
RICHARD P. BERGEMAN
Human Resources
MICHAEL J. BEVILACQUA
President, Best Foods Affiliate
Group, Best Foods Division
CHARLES FELDBERG
Health, Safety, and
Quality Assurance
GORDON F. GRANGER
President, CPC Latin America
Consumer Foods Division
LAWRENCE K. HATHAWAY
President, Best Foods
Grocery Products Group,
Best Foods Division
BERNARD H. KASTORY
President,
Corn Refining Business
AXEL C.A. KRAUSS
Executive Senior
Vice President,
CPC Europe Division
FRED C. MEENDSEN
Government Affairs
EUGENE J. NORTHACKER
President, Latin America
Corn Refining Division,
Corn Refining Business
JOHN W. SCOTT
Investor Relations
SAMUEL C. SCOTT
President, Corn Products,
Corn Refining Business
COMPTROLLER
JAMES E. HEALEY
SECRETARY
JOHN B. MEAGHER
MANAGEMENT CHANGE
KONRAD SCHLATTER, Senior Vice
President, was elected Chief
Financial Officer
July 1, 1993.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Following is a list of the Registrant's subsidiaries and their
subsidiaries showing the percentage of voting securities owned, or other bases
of control, by the immediate parent of each.
<TABLE>
<CAPTION>
Percentage of
voting securi-
ties owned by
its immediate
parent
--------------
<S> <C> <C>
CPC International Inc.
(a) Subsidiaries included in the Company's
consolidated financial statements
United States
-------------
CPC Europe (Group) Ltd. (Delaware) 100.00
Best Foods - Caribbean, Inc. (Delaware) 100.00
S. B. Thomas, Inc. (New York) 100.00
Arnold Foods Company, Inc. (Delaware) 100.00
Henri's Food Products Co., Inc. (Wisconsin) 100.00
Canada
------
Canada Starch Company (1990) Inc. 100.00
Europe(1)
------
Knorr Holding Gesellschaft mbH, Wels - Austria 100.00
CPC Monda N.V./S.A. - Belgium 99.90
CPC Foods A.S. - Czech Republic 82.00
CPC Foods A/S - Denmark 100.00
CPC Foods OY - Finland 100.00
CPC France S.A. - France 99.81
Maizena Gesellschaft mbH - Germany 100.00
Knorr (Hellas) A.B.E.E. - Greece 100.00
CPC Benelux B.V. - Holland 100.00
CPC Hungary RT - Hungary 100.00
CPC Foods (Ireland) Ltd. - Ireland 100.00
CPC Italia S.P.A. - Italy 90.19
CPC Foods A/S - Norway 100.00
CPC Amino S.A. - Poland 99.00
Knorr Portuguesa-Produtos
Alimentares S.A. - Portugal 100.00
CPC Espana, S.A. - Spain 100.00
CPC Foods AB - Sweden 100.00
CPC Knorr Holding AG - Switzerland 100.00
CPC (United Kingdom) Ltd. - United Kingdom 100.00
Africa and Middle East(1)
----------------------
Israel Edible Products Ltd. "TAMI" - Israel 51.00
CPC Kenya Ltd. - Kenya 50.10
CPC Maghreb, S.A. - Morocco 100.00
</TABLE>
18
<PAGE> 2
<TABLE>
<S> <C> <C>
Latin America
-------------
Refinerias de Maiz S.A.I.C. - Argentina 100.00
Refinacoes de Milho, Brasil Ltda. - Brazil 100.00
Industrias de Maiz y Alimentos S.A. - Chile 100.00
Industrias del Maiz S.A. - Colombia 100.00
Maizena de Costa Rica S.A. - Costa Rica 100.00
Productos de Maiz y Alimentos S.A. - Guatemala 100.00
Almidones del Istmo, S.A. de C.V. - Honduras 100.00
Productos de Maiz, S.A. de C.V. - Mexico 100.00
Alimentos y Productos de Maiz, S.A. - Peru 99.06
Industrializadora de Maiz, S.A. - Uruguay 100.00
Aliven S.A. - Venezuela 100.00
Asia
----
CPC/AJI (Hong Kong) Ltd. - Hong Kong 50.00(2)
P.T. Knorr Indonesia - Indonesia 95.00
CPC/AJI (Malaysia) Sdn. Berhad - Malaysia 50.00(2)
Rafhan Maize Products Co. Ltd. - Pakistan 51.00(1)
California Manufacturing Co., Inc. - Philippines 50.00(2)
CPC/AJI (Singapore) Pte. Ltd. - Singapore 50.00(2)
CPC/AJI (Taiwan) Ltd. - Taiwan 50.00(2)
CPC/AJI (Thailand) Ltd. - Thailand 50.00(2)
</TABLE>
The names of forty-five (45) domestic subsidiaries and one
hundred-seventeen (117) international subsidiaries have been omitted
since these unnamed subsidiaries considered in the aggregate as a
single entity do not constitute a significant subsidiary.
(b) Domestic subsidiary not consolidated:
One (1) wholly-owned subsidiary which has minor real estate
holdings.
(c) International subsidiaries not consolidated:
Five (5) international subsidiaries of which all or a majority of
the share capital is owned by the Registrant.
(d) Domestic 50% owned company
One (1) joint venture in which the Registrant owns 50% interest
with 50% being owned by single other interests.
(e) International 50% owned companies
Two (2) companies in which the Registrant owns 50% of the voting
securities with 50% of such securities being held by single other
interests. One (1) company in which the Registrant owns 50% of the
voting securities with 50% of such securities being held by two
(2) or more other interests.
______________
(1) Owned by CPC Europe (Group) Ltd., or its wholly-owned
subsidiaries.
(2) Owned fractionally more than 50% and fully consolidated for
accounting purposes.
19
<PAGE> 3
If the companies included in (b), (c), (d) and (e) were considered in the
aggregate as a single entity, they would not constitute a significant
subsidiary since: (1) the assets of the subsidiaries, or the investments in
and advances to the subsidiaries by its parent and the parent's other
subsidiaries, if any, did not exceed 10 percent of the assets of the parent and
its subsidiaries on a consolidated basis, and (2) the sales and operating
revenues of the parent and its subsidiaries on a consolidated basis, and the
Company's equity in their income before income taxes and extraordinary items
did not exceed 10 percent of the income of the parent and its subsidiaries on a
consolidated basis.
20
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CPC International Inc.:
We consent to incorporation by reference in the Registration Statements on Form
S-8 (No. 2-48849, 2-92248 and 33-49847) and on Form S-3 (No. 33-30813,
33-28989, 33-40759 and 33-52213) of CPC International Inc. of our reports dated
February 4, 1994, relating to the consolidated balance sheets of CPC
International Inc. and subsidiaries as of December 31, 1993, 1992 and 1991, and
the related consolidated statements of income, stockholders' equity, and cash
flows and related schedules for the years then ended which reports appear in
the December 31, 1993 annual report on Form 10-K of CPC International Inc.
/s/ KPMG Peat Marwick
New York, New York
March 15, 1994
21
