<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
-------------
Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 1994
COMMISSION FILE NUMBER 1-4199
CPC INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-2385545
(I.R.S. Employer Identification Number)
INTERNATIONAL PLAZA, P.O. BOX 8000
ENGLEWOOD CLIFFS, N.J. 07632-9976
(Address of principal executive office) (Zip Code)
(201)-894-4000
(Registrant's telephone number, including area code)
Former name, former address and former fiscal year, if changed
since last report.
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 the number of shares outstanding of each of the
registrant's classes of common stock, as of latest
practicable date.
CLASS OUTSTANDING AT MARCH 31, 1994
Common Stock, $.25 par value 149,027,359 shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
($ MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
Net sales $1,737.7 $1,636.2
-------- --------
Cost of sales 1,062.6 995.8
Operating expenses 482.4 458.7
------- -------
1,545.0 1,454.5
------- -------
Operating income 192.7 181.7
------- -------
Financing costs 20.2 22.9
------- -------
Income before income taxes 172.5 158.8
Provision for taxes on income 68.1 63.5
------- -------
104.4 95.3
Minority stockholders' interest 6.3 4.9
------- -------
Net income $ 98.1 $ 90.4
======= =======
Average common shares outstanding 149,559 150,586
Earnings per common share based on net
income reduced by "ESOP" preferred stock
dividends net of taxes $ .63 $ .58
Cash dividends declared per common share $ .34 $ .32
</TABLE>
___________
See notes to financial statements.
1
<PAGE> 3
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ MILLIONS)
<TABLE>
<CAPTION>
March 31, 1994 Dec. 31, 1993
-------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
- - - ------
Current assets
Cash and cash equivalents $ 124.6 $ 166.3
Notes and accounts receivable, net 1,006.9 899.7
Inventories 890.0 830.2
Prepaid expenses 82.1 75.7
-------- --------
Total current assets 2,103.6 1,971.9
-------- --------
Investments in unconsolidated
affiliates 80.0 69.9
-------- --------
Plant and properties 4,179.7 4,080.8
Less accumulated depreciation 1,983.9 1,960.1
-------- --------
2,195.8 2,120.7
-------- --------
Excess cost over net assets of
businesses acquired and other
intangible assets (net of accumulated
amortization of $137.5 and $132.3) 808.3 774.7
-------- --------
Other assets 127.1 123.6
-------- --------
$5,314.8 $5,060.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - ------------------------------------
Current liabilities
Notes and drafts payable $ 613.0 $ 375.0
Accounts payable and accrued items 1,036.0 1,016.3
Income taxes payable 153.1 144.2
Dividends payable 50.7 47.9
------- -------
Total current liabilities 1,852.8 1,583.4
------- -------
Non-current liabilities 688.9 673.6
------- -------
Long-term debt 879.5 897.7
------- -------
Deferred taxes on income 59.6 42.1
------- -------
Minority interest 101.4 94.9
------- -------
Stockholders' equity
Preferred stock, authorized 25,000,000
shares $1 par value -- --
Designations: Series A ESOP convertible
3,000,000 shares designated - 2,187,319
shares issued at stated value (1993:
2,192,237 shares) 195.1 195.6
Series A Junior Participating 600,000
shares designated - none issued -- --
Common stock authorized 900,000,000
shares $.25 par value - issued 195,271,444 48.8 48.8
Capital in excess of par value of stock 153.6 150.5
Retained earnings 2,821.9 2,774.5
Unearned ESOP compensation (155.2) (155.2)
Cumulative translation adjustment (217.1) (172.6)
Common stock in treasury at cost -
46,244,085 shares (1993: 45,454,592 shares) (1,114.5) (1,072.5)
-------- --------
Total stockholders' equity 1,732.6 1,769.1
-------- --------
$5,314.8 $5,060.8
======== ========
</TABLE>
__________
See notes to financial statements.
2
<PAGE> 4
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1994 1993
-------- -------
<S> <C> <C>
Cash flows from (used for ) operating activities
- - - ------------------------------------------------
Net income $ 98.1 $ 90.4
Non-cash charges (credits) to net income
Depreciation and amortization 71.3 67.6
Deferred taxes (1.7) (1.8)
Translation losses 1.3 4.5
Other, net .9 1.9
Changes in trade working capital:
Notes and accounts receivable (87.2) (57.3)
Inventories (42.9) (54.5)
Accounts payable and accrued items 34.3 (1.0)
------- -------
Net cash flows from operating activities 74.1 49.8
------- -------
Cash flows from (used for) investing activities
- - - -----------------------------------------------
Capital expenditures paid (92.6) (60.8)
Disposal of plants and properties 2.6 4.0
Businesses acquired (109.4) (16.9)
------- -------
Net cash flows used for investing activities (199.4) (73.7)
------- -------
Net cash flows after investments (125.3) (23.9)
------- -------
Cash flows from (used for) financing activities
- - - -----------------------------------------------
Purchase of treasury stock (45.9) (11.7)
Repayment of long-term debt (10.0) (8.9)
New long-term debt 7.2 31.3
Net change in short-term debt 171.4 81.6
Dividends paid on common stock (47.9) (45.1)
Common stock issued 3.9 3.5
Other liabilities (deposits) 6.5 (29.1)
------- -------
Net cash flows (used for) financing activities 85.2 21.6
------- -------
Effects of exchange rate changes on cash (1.6) (4.5)
------- -------
Increase (decrease) in cash and cash equivalents (41.7) (6.8)
------- -------
Cash and cash equivalents, beginning of year 166.3 158.0
------- -------
Cash and cash equivalents, end of period $ 124.6 $ 151.2
======= =======
</TABLE>
__________
See notes to the financial statements.
3
<PAGE> 5
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(UNAUDITED)
($ MILLION)
<TABLE>
<CAPTION>
Preferred
Stock Capital in Unearned Cumulative
Series A Common Excess of Treasury ESOP Translation Retained
ESOP Stock Par Value Stock Compensation Adjustment Earnings
-------- ------ --------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $195.6 $48.8 $150.5 $(1,072.5) $(155.2) $(172.6) $2,774.5
Net income for the period 98.1
ESOP shares redeemed (.5)
Common dividends (50.7)
Translation adjustment for
the period (44.5)
Shares issued for:
Stock options,
deferred compensation and
restricted stock awards 3.1 3.9
Treasury stock acquired (45.9)
---------------------------------------------------------------------------
Balance, March 31, 1994 $195.1 $48.8 $153.6 $(1,114.5) $(155.2) $(217.1) $2,821.9
===========================================================================
</TABLE>
__________
See notes to financial statements.
4
<PAGE> 6
CPC INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The unaudited consolidated interim financial statements included herein
were prepared by management and reflect all adjustments (consisting solely of
normal recurring items) which are, in the opinion of management, necessary to
present a fair statement of results of operations for the interim periods ended
March 31, 1994 and 1993 and the financial position as of March 31, 1994 and
December 31, 1993.
References to "the Company" are to CPC International Inc. and its
consolidated subsidiaries. These statements should be read in conjunction with
the consolidated financial statements and the related footnotes to these
statements contained in the Company's Annual Report to Stockholders which notes
were incorporated by reference in Form 10-K for the fiscal year ended December
31, 1993.
2. ACQUISITIONS
In the first quarter of 1994, 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. The total costs of these investments amounted to $195
million including assumed debt.
In the second quarter of 1994 the Company purchased the majority
interest of a newly formed company which will manufacture and market selected
CPC food brands in South Africa and export CPC products to sub-Saharan Africa.
This investment cost about $20 million and will be reflected in the second
quarter results.
3. INVENTORIES
Inventories are summarized as follow:
<TABLE>
<CAPTION>
March 31,1994 Dec.31,1993
------------- -----------
<S> <C> <C>
Finished and goods in process $521.2 $491.6
Raw Materials 229.3 202.6
Supplies 139.5 136.0
------ ------
$890.0 $830.2
====== ======
</TABLE>
5
<PAGE> 7
4. LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
March 31,1994 Dec.31,1993
------------- -----------
<S> <C> <C>
7.78% ESOP guaranteed notes due
December 2004 $ 183.3 $ 183.3
5.625% -- 6.75% pollution control
revenue bonds due 2007-2016 15.3 15.3
8.5% sinking fund debentures due
April 2016 100.0 100.0
5.75% Swiss franc debentures 134.2 140.8
6.75% German mark debentures 114.9 122.7
Other secured and unsecured notes
and loans at various rates and
due dates 412.5 398.9
------- -------
960.2 961.0
------- -------
Less current maturities 80.7 63.3
------- -------
$ 879.5 $ 897.7
======= =======
</TABLE>
5. CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplementary information for the consolidated statements of cash flows is
set forth below:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
Cash paid during the period for: 1994 1993
---- ----
<S> <C> <C>
Interest $ 30.5 $ 30.9
Income taxes 59.1 65.6
Details of businesses acquired
were as follows:
Fair value of assets acquired $289.3 $ 19.0
Liabilities assumed 179.9 2.1
------ -------
Cash paid 109.4 16.9
Less cash acquired -- --
------ -------
Net cash paid for acquisitions $109.4 $ 16.9
====== =======
</TABLE>
The details of businesses acquired in 1994, as shown above, are based on
estimates which will be finalized later in 1994.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
First quarter 1994 earnings per share advanced 8.6% to $.63 from $.58 in
the first quarter of 1993. Net income rose 8.5% to $98.1 million from $90.4
million in the same period last year. The results benefited from solid
operating gains and from lower financing costs.
CPC's worldwide sales rose 6.2% to $1.74 billion from $1.64 billion in last
year's first quarter. Volume growth of 9.1%, about one-third of which was from
acquisitions, and higher prices contributed to the gains, which were, however,
restrained by unfavorable foreign currency values. Operating income advanced
6.1%.
Commenting on the company's first quarter results, Chairman and Chief
Executive Officer C.R. Shoemate said, "CPC is off to a good start in 1994,
particularly when we look at results in local currencies. Our recent
acquisitions, chiefly the Pfanni potato products business in Germany, are
contributing. And, our geographic expansion and new product introductions are
also producing growth in our base businesses.
"Once again, CPC's Latin America consumer foods business had a very strong
quarter. We expect, however, that in the second quarter this business will be
significantly impacted by the currently difficult, but we believe temporary,
business environment in Brazil, caused by uncertainties about the new economic
plan there."
CONSUMER FOODS
CPC's worldwide sales of consumer foods rose 5.4% to $1.46 billion from
$1.39 billion in the same period of 1993. First quarter operating income from
consumer foods was 7.8% higher, advancing to $164.1 million from $152.3 million
in the first quarter of 1993.
Best Foods, CPC's North American consumer foods business, reported sales
growth of 8.8% on volumes higher by 7.1%. Increased volumes of Hellmann's
mayonnaise, Mazola corn oil, Skippy peanut butter, Karo syrups, and Knorr
products, contributed to the gains, along with added volumes from the Henri's
pourable dressing business acquired during 1993. Specialty baking and
Mueller's pasta volumes were lower.
Best Foods' operating income was flat, reflecting increased expenditures on
marketing and product development, and also the impact of higher commodity
prices, which were not fully recovered in the quarter, due to the timing of
price increases.
7
<PAGE> 9
Sales and operating income of CPC's European consumer foods business grew
2.2% and 5.4%, respectively, compared to the same period last year, despite the
strongly negative impact of unfavorable currency values. Added volumes from
the recently acquired Pfanni business in Germany contributed importantly to a
10.6% volume gain. The business also benefited from higher prices and margins.
Marketing expenditures in Europe were significantly higher during the quarter.
CPC's consumer foods business in Latin America reported a 9% sales gain and
a 25% advance in operating income, compared to first quarter 1993. Volumes
advanced 10.8%.
In Asia, sales of consumer foods rose 2.4%, and operating income rose 7% on
growing volumes. The results reflect both a negative exchange impact and CPC's
continuing investment in new Asian markets.
CORN REFINING
Sales of CPC's worldwide corn refining business rose 10.7%, but operating
income for the quarter was flat, compared to first quarter last year. Volumes
were 6.1% higher. North American corn refining sales and operating income grew
strongly compared to a weak first quarter last year, benefiting from improved
prices and volumes. In Latin America, while sales grew well, operating income
was significantly lower, due to margin pressures in Brazil. Corn refining
results were also negatively impacted by significantly lower earnings in the
Pekin Energy business, resulting from lower petroleum prices. Pekin Energy is
a non- consolidated joint venture producing fuel grade ethanol.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources and uses of funds as well as its general
financial policy are discussed on pages 27-30 of the 1993 Annual Report to
Stockholders which were incorporated by reference in Form 10-K for the year
ended December 31, 1993.
The Company's capital expenditures are expected to be approximately $375
million in 1994.
___________
Note: The brand names shown above in distinctive type are trademarks of CPC
International Inc. and its affiliates.
8
<PAGE> 10
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in the legal proceedings as
previously reported in Form 10-K for the year ended December 31, 1993.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Company held its annual meeting of stockholders on April 28, 1994.
b) Proxies for the meeting were solicited pursuant to Regulation 14 of
the Securities Exchange Act of 1934; there were no solicitations in
opposition to management's nominees, and all such nominees were
elected.
c) The four nominees were elected directors of our Company for terms
expiring at the 1997 annual meeting, with the results follows:
<TABLE>
<CAPTION>
For Withheld
----------- ----------
<S> <C> <C>
W. C. Ferguson 128,229,947 86,639
L. I. Higdon, Jr. 128,134,946 181,640
W. S. Norman 128,161,799 154,787
C. R. Shoemate 128,264,619 51,967
</TABLE>
The appointment of KPMG Peat Marwick as independent auditors was
ratified with the results as follows:
<TABLE>
<CAPTION>
For Against Abstained
----------- ----------- ---------
<S> <C> <C>
127,258,879 1,222,696 461,815
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits pursuant to Item 601 of Regulation S-K.
Exhibit 11 - Statements re: computation of earnings per common share
(Part I data)
b) Reports on Form 8-K.
None filed.
9
<PAGE> 11
CPC INTERNATIONAL INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has dully caused this report to be signed on its behalf by the
undersigned thereunto dully authorized.
CPC INTERNATIONAL, INC.
DATE: May 12, 1994
/S/Konrad Schlatter
Konrad Schlatter
Senior Vice President &
Chief Financial Officer
DATE: May 12, 1994
/S/James E. Healey
James E. Healey
Comptroller & Chief
Accounting Officer
10
<PAGE> 1
EXHIBIT 11
CPC INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
Earnings per common share for CPC International Inc. is based on net income
available to common stockholders and the average number of common shares
outstanding during each period. Net income available to common shareholders
has been reduced by the pro rata ESOP preferred stock dividend net of the tax
benefit. A potentially dilutive effect on earnings per common share results
from the operation of the 1993 Stock and Performance Plan, the deferred
compensation and stock options arising from a previous executive incentive
compensation plan, and the Deferred Compensation Plan for Outside Directors.
The effect on earnings per common share resulting from the assumed exercise of
outstanding options and delivery of deferred stock awards under these programs
is not material. The maximum number of shares of common stock issuable and
deliverable under such assumptions, without giving effect to the assumed
reacquisitions of common stock with the proceeds from options exercised,
amounted to the following percentages of the average number of shares of common
stock outstanding at March 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C>
1.7% 1.4%
</TABLE>
Since the dilution resulting from deferred stock awards and stock options
is less than 3%, these items have not been considered in the computation of
shares outstanding. Furthermore, the potentially dilutive effect derived from
using the if-converted method in calculating fully diluted earnings per share
for the ESOP would not cause the dilution to exceed 3% even when considered
with the aforementioned programs.
11
