<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 THE QUARTER ENDED MARCH 31, 1998
COMMISSION FILE NUMBER 1-4199
BESTFOODS
(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)
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, N.J. 07632-9976
(Address of principal executive offices) (Zip Code)
(201) 894-4000
(Registrant's telephone number, including area code)
CPC INTERNATIONAL, INC.
(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 the latest practicable date.
CLASS OUTSTANDING AT MARCH 31, 1998
Common Stock, $.25 par value 288,782,502 shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
($ Millions except per share amounts) Three Months Ended
March 31,
---------------------
1998 1997
------- -------
<S> <C> <C>
Net sales $ 2,121 $ 2,149
Cost of sales 1,160 1,210
------- -------
Gross profit 961 939
Operating expenses 703 706
------- -------
Operating income 258 233
------- -------
Financing costs 41 37
------- -------
Income from continuing operations before taxes 217 196
Provision for income taxes 77 71
------- -------
140 125
Minority stockholders' interest 7 7
------- -------
Income from continuing operations 133 118
Income (loss) from discontinued operations,
net of income tax benefit $(5) - 1997 -- (9)
------- -------
Net income $ 133 $ 109
======= =======
AVERAGE COMMON SHARES OUTSTANDING:
Basic 288.6 287.0
Diluted 300.2 297.3
EARNINGS PER COMMON SHARE
Basic:
Continuing operations $ 0.45 $ 0.40
Discontinued operations -- (0.03)
------- -------
Net income $ 0.45 $ 0.37
======= =======
Diluted:
Continuing operations $ 0.44 $ 0.39
Discontinued operations -- (0.03)
------- -------
Net income $ 0.44 $ 0.36
======= =======
CASH DIVIDENDS DECLARED PER COMMON SHARE $ .225 $ .205
</TABLE>
- -----------------
See notes to financial statements.
1
<PAGE> 3
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
($ Millions) Mar. 31, 1998 Dec. 31, 1997
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 192 $ 39
Notes and accounts receivable, net 1,298 1,176
Inventories 809 818
Prepaid expenses 87 95
Deferred tax asset 61 60
------- -------
Total current assets 2,447 2,188
------- -------
Investments in and loans to unconsolidated affiliates 21 22
------- -------
Plant and properties 3,354 3,440
Less accumulated depreciation 1,473 1,499
------- -------
1,881 1,941
------- -------
Excess cost over net assets of businesses acquired and other
intangible assets (net of accumulated amortization of $284 and $271) 1,723 1,742
------- -------
Other assets 210 207
------- -------
$6,282 $ 6,100
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and drafts payable $ 470 $ 668
Accounts payable and accrued liabilities 1,518 1,477
Income taxes payable 166 137
Dividends payable 65 65
------- -------
Total current liabilities 2,219 2,347
------- -------
Non-current liabilities 780 780
------- -------
Long-term debt 2,126 1,818
------- -------
Minority interest 109 113
------- -------
Stockholders' equity
Preferred stock, authorized 25 million shares $1 par value -- --
Designations: Series B ESOP convertible 3 million shares designated
1.8 million shares issued at stated value (1997: 2.0 million shares) 162 180
Series B Junior Participating 600,000 shares designated - none issued -- --
Common stock authorized 900 million shares $.25 par value - issued
390.5 million shares 98 49
Capital in excess of par value of stock 170 207
Unearned ESOP compensation (96) (96)
Accumulated other comprehensive income (430) (386)
Common stock in treasury at cost - 101.8 million shares
(1997: 102.5 million shares) (1,529) (1,517)
Retained earnings 2,673 2,605
------- -------
Total stockholders' equity 1,048 1,042
------- -------
$6,282 $ 6,100
======= =======
</TABLE>
- ---------------
See notes to financial statements.
2
<PAGE> 4
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
($ Millions) March 31,
------------------
1998 1997
----- -----
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 133 $ 118
Non-cash charges (credits) to net income
Depreciation and amortization 63 72
Deferred taxes 8 11
Other, net -- (1)
Changes in trade working capital:
Notes and accounts receivable and prepaid expenses (132) (130)
Inventories (6) (9)
Accounts payable and accrued liabilities 93 61
Net cash flows from discontinued operations -- 57
----- -----
Net cash flows from operating activities 159 179
----- -----
Cash flows from (used for) investing activities
Capital expenditures paid (57) (67)
Proceeds from disposal of plants and properties 30 2
Businesses acquired -- (16)
Net investing activities of discontinued operations -- (41)
----- -----
Net cash flows used for investing activities (27) (122)
----- -----
Net cash flows after investments 132 57
----- -----
Cash flows from (used for) financing activities
Purchase of treasury stock (33) (37)
Repayment of long-term debt (6) (2)
New long-term debt 354 39
Net change in short-term debt (243) (17)
Dividends paid on common stock (65) (59)
Common stock issued 10 7
Other liabilities (assets) 6 7
----- -----
Net cash flows used for financing activities 23 (62)
----- -----
Effects of exchange rates on cash (2) (1)
----- -----
Increase (decrease) in cash and cash equivalents 153 (6)
----- -----
Cash and cash equivalents, beginning of year 39 131
----- -----
Cash and cash equivalents, end of period $ 192 $ 125
===== =====
</TABLE>
- ---------------
See notes to financial statements.
3
<PAGE> 5
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
($ Millions) Accumulated
Capital in Unearned Other
Comprehensive Preferred Common Excess of ESOP Comprehensive Treasury Retained
Income Stock Stock Par Value Compensation Income Stock Earnings
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 180 $ 49 $ 207 $ (96) $ (386) $ (1,517) $ 2,605
Comprehensive income
Net income for the period $ 133 133
Foreign currency translation
adjustment ($68 pre-tax) (44) (44)
--------
Comprehensive income $ 89
========
Two-for-one stock split 49 (49)
ESOP shares redeemed (18) 2 12
Dividends: (65)
Common stock
Shares issued for:
Stock options and deferred
compensation 10 9
Treasury stock acquired (33)
-------- -------- -------- -------- -------- -------- --------
Balance, March 31, 1998 $ 162 $ 98 $ 170 $ (96) $ (430) $ (1,529) $ 2,673
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ----------------
See notes to financial statements.
4
<PAGE> 6
BESTFOODS 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,
1998 and 1997 and the financial position as of March 31, 1998.
References to "the Company" are to Bestfoods 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 were incorporated
by reference in Form 10-K for the fiscal year ended December 31, 1997.
2. ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standards Board issued Statement No. 130
(FAS 130), "Reporting Comprehensive Income," which requires separate disclosure
of comprehensive income, which encompasses changes in net asset values derived
from activity from both owner and non-owner sources. Provisions of the
statement were effective for fiscal years beginning after December 15, 1997 and
the Company provided the disclosures required by this statement for the first
time in the quarter ended March 31, 1998.
3. ACQUISITIONS AND DIVESTITURES
In the first quarter of 1998, the Company purchased additional ownership
interests in two affiliates where it did not own 100%. In Israel the Company
increased its ownership of this affiliate to 100% by purchasing the remaining
15% interest. In South Africa, the Company also increased its ownership to 100%
when it purchased its partner's share of CPC Tongaat, a consumer foods company
established in 1994. In addition, the Company also sold a small non-core tea
business in Spain. These transactions will be reflected in the second quarter
results due to the different closing dates for international operations.
4. STOCK SPLIT
On March 17, 1998, the Company's Board of Directors declared a
two-for-one stock split of the outstanding common stock on March 31, 1998,
which was effected in the form of a 100% stock dividend, payable on April 24,
1998.
The number of common shares outstanding and earnings per common share
for prior years have been adjusted to reflect this stock split.
5
<PAGE> 7
5. INVENTORIES
Inventories are summarized as follow:
<TABLE>
<CAPTION>
($ Millions) Mar. 31, 1998 Dec. 31, 1997
------------- -------------
<S> <C> <C>
Finished and goods in process $503 $510
Raw materials 196 202
Supplies 110 106
---- ----
$809 $818
==== ====
</TABLE>
6. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
($ Millions) Mar. 31, 1998 Dec. 31, 1997
------ ------
<S> <C> <C>
7.71% ESOP guaranteed notes due December 2004 $ 131 $ 131
5.625% -- 6.75% pollution control revenue bonds due
2007-2016 15 15
5.6% notes due 2097 (effective rate 7.3%) 100 100
7.0% notes due 2017 150 150
6.15% notes due 2006 300 300
7.25% notes due 2026 300 300
6.625% notes due 2028 250 --
Medium term notes at various rates due 1998-2005 200 200
5% Swiss franc debentures 137 138
6.75% German mark debentures 111 114
2.3% Japanese yen term loan 23 24
Other secured and unsecured notes and loans at various
rates and due dates 498 427
------ ------
2,215 1,899
------ ------
Less current maturities 89 81
------ ------
$2,126 $1,818
====== ======
</TABLE>
On March 24 1998, the Company issued $250 million of 6.625% medium-term
notes due in 2028 under a previously filed shelf registration incorporating a
$500 million medium-term note program. The issuance of these notes completed
the authorization under the shelf registration.
7. CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplementary information for the consolidated statements of cash flows is set
forth below:
<TABLE>
<CAPTION>
($ Millions) Three Months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $33 $43
Income taxes 38 58
Details of businesses acquired were as follows:
Fair value of assets acquired -- 16
Less: Liabilities assumed -- --
--- ---
Net cash paid -- $16
=== ===
</TABLE>
6
<PAGE> 8
8. FINANCIAL INSTRUMENTS
The Company's policies regarding hedging foreign currency cash flows
and commodities are set forth in the Annual Report to Stockholders which was
filed with the Commission as Exhibit 13 to Form 10-K for the year ended December
31, 1997.
FOREIGN EXCHANGE CONTRACTS
At March 31, 1998, the Company had forward exchange contracts to
deliver $191 million of foreign currencies comprising $41 million in German
marks, $39 million in Italian lira, $31 million in Dutch guilders, $43 million
in French francs, and $37 million in various other currencies. The Company also
had, at March 31, 1998, contracts to purchase $28 million worth of foreign
currencies comprising $15 million in Italian lira, $12 million in Norwegian
kroner and $1 million in other currencies.
At December 31, 1997, the Company had forward exchange contracts to
deliver $237 million of foreign currencies comprising $ 51 million in Spanish
pesetas, $45 million in French francs, $39 million in Italian lira, $30 million
in Dutch guilders, and $72 million in various other currencies. The Company also
had contracts to purchase $120 million in foreign currencies consisting of $20
million in Italian lira, $21 million in Dutch guilders, and the remaining
balance in various other currencies.
COMMODITIES
At March 31, 1998 and December 31, 1997 the outstanding commodity
contracts were not material to the Company's financial position or results of
operations.
9. RESTRUCTURING AND SPIN-OFF RESERVES
In the second quarter of 1997, the Company recorded a $242 million
pre-tax restructuring charge for its continuing consumer foods operations. In
addition in the second and third quarters of 1997, the Company recorded pre-tax
charges of $86 million and $23 million, repectively, for the spin-off and
restructuring of its discontinued corn refining operations.
RESTRUCTURING RESERVE
The restructuring charge and its utilization as of March 31, 1998 are
summarized below:
<TABLE>
<CAPTION>
($ Millions) Total Utilized in Utilized in To be utilized
Charge prior periods current quarter in future periods
------ ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Employee costs $114 $ 15 $ 10 $ 89
Plant and support facilities 67 67 -- --
Other 61 22 19 20
---- ---- ---- ----
Total $242 $104 $ 29 $109
==== ==== ==== ====
</TABLE>
7
<PAGE> 9
SPIN-OFF RESERVE
The spin-off charge and its utilization as of March 31, 1998 are
summarized below:
<TABLE>
<CAPTION>
($ Millions) Utilized in Transferred Utilized in To be utilized
Total prior to Corn current in future
Charge periods Products quarter periods
------ ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Spin-off costs $ 15 $ 9 $ -- $ 5 $ 1
---- ---- ---- ---- ----
Restructuring charge
Employee costs 54 38 8 8 --
Plant and support facilities 23 15 5 -- 3
Other 17 12 5 -- --
---- ---- ---- ---- ----
Restructuring charge 94 65 18 8 3
---- ---- ---- ---- ----
Total $109 $ 74 $ 18 $ 13 $ 4
==== ==== ==== ==== ====
</TABLE>
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
For the three months ended March 31, 1998, the Company had net income
of $133.4 million or $.45 per basic common share ($.44 diluted) compared with
net income of $108.9 million or $.37 per basic common share ($.36 diluted) in
the same period last year. However, last year's results included a loss from
discontinued operations of $8.6 million after taxes or $.03 per basic and
diluted common share. Excluding the loss from discontinued operations, income
increased 14% while both basic and diluted earnings per share increased 13%.
Strong volume growth and improved margins, due to recent restructuring
activities, more than overcame the strong negative impact of unfavorable
currency values in the international operations.
Worldwide sales for the three months ended March 31, 1998 were $2.1
billion, 1.3% lower than the same period last year. First quarter sales were
negatively impacted by unfavorable currency values in the Company's
international operations which more than offset a 4.7% volume growth.
The Company's North American division had a disappointing quarter due
in part to the strength of last year's first quarter for the division. Sales
were 2.6% lower on lower volumes. However, the majority of the volume decline
was due to the timing of Easter holiday promotions in a year when the holiday
fell in the second quarter. Operating income was up slightly compared to the
first quarter of the prior year mainly due to improved margins as the benefits
of restructuring are realized.
In spite of extremely unfavorable currency values, the European
division achieved excellent results for the first quarter. Sales for the quarter
were 3.1% lower than last year as improved volumes were more than offset by
weaker currency values. Operating income increased 14% as the benefits of
restructuring, including consolidating production across country borders and
streamlining plant operations, are being realized. In addition volumes increased
7% including a contribution of 2.9% from the recently acquired Starlux business.
New products and the continuing successful expansion activities in Central and
Eastern Europe accounted for the remaining volume growth.
The Company's Latin American division experienced a slight decline in
sales compared to the first quarter of last year as both improved volumes and
prices were more than offset by weaker currency values. Operating income
improved 3.2% mainly as a result of the improved volumes. The Company's large
Brazilian business experienced a short-lived "Asian Flu" effect but overcame
these difficulties near the end of the quarter.
The results of the Company's Asian division strongly reflect the
economic difficulties in the region, including significant devaluations in
several countries. Sales were 12% lower and operating income was slightly lower
compared to the same period of the prior year. However, in local currencies
sales and operating income grew 13% and 37%, respectively.
Bestfoods Baking division had an excellent quarter, with sales,
volumes, and operating income all significantly higher than last year's first
quarter. The 12% gain in operating income reflects strong volume growth and new
efficiencies achieved in the division during the last year. The 5.3% volume
growth came from all important segments including cake, bread, English muffins
and bagels, and pizza crusts.
9
<PAGE> 11
QUARTER HIGHLIGHTS
- - Bestfoods completed its first quarter as a 100% consumer foods company,
following the spin-off of the corn refining operations and the name
change from CPC International Inc. at the end of 1997.
- - On March 17, 1998, the Company announced a two-for-one stock split of
the Bestfoods' common stock outstanding on March 31, payable on April
24.
- - In March 1998, Bestfoods expanded geographically by purchasing its
partner's share of CPC Tongaat a consumer foods business established in
1994 in South Africa. Also the Company began work on a production
facility in Tula, Russia which will produce Hellmann's mayonnaise. This
locally-produced mayonnaise will replace Hellmann's imported into
Russia from other Company affiliates since 1993.
- - In January, the Company sold the small non-core Horniman's tea business
in Spain.
- - In February, the Company acquired the final 15% of the $230 million
Israeli business, bringing its ownership to 100%.
- - The Company's baking division began shutting down its Miami, Florida
plant and part of its Northlake, Illinois plant as part of the
restructuring announced last year. Also, the division sold four
previously closed-down facilities (Seattle, Washington; North
Hollywood, California; Tulare, California; and Totowa, New Jersey).
- - All divisions rolled out new products during the quarter. These include
Knorr Tastebreaks, instant pot soups in the United Kingdom, Knorr
instant soups in Hungary and the Czech Republic, and Knorr
aseptically-packaged soups in Ireland; AdeS soy drinks in Brazil;
Boboli breadsticks and Thomas' Maple French Toast English muffins and
Niagra Easy Iron in the United States; and a peanut butter spread under
the Regal brand in Taiwan as well as Knorr bottled sauces and ketchup
in China.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative Disclosure - There have been no material changes in the
Company's market risk during the first quarter ended March 31, 1998.
Qualitative Disclosure - This information is set forth on pages 28 and
29, under the caption "Financial Instruments," of the Company's 1997 Annual
Report which was filed as Exhibit 13 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 and is incorporated herein by
reference.
10
<PAGE> 12
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, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on April 23, 1998, the
following matters were submitted to a vote of security holders along with the
number of votes cast for, against or withheld, as to each such matter:
1. ELECTION OF DIRECTORS:
The following directors were elected each for a term of three
years expiring in 2001:
Director Name Votes For Votes Withheld
- --------------------------------- ----------------------- ----------------------
Alfred C. DeCrane, Jr. 250,486,510 254,788
Robert J. Gillespie 250,683,854 57,444
Ellen R. Gordon 250,564,050 177,248
George V. Grune 250,374,212 367,086
Henrique De Campos Meirelles 250,412,072 329,226
The following director was elected for a term of one year
expiring in 1999:
Director Name Votes For Votes Withheld
- --------------------------------- ------------------------- --------------------
Clateo Castellini 250,696,002 45,296
2. AMENDMENTS TO THE 1984 AND 1993 STOCK AND PERFORMANCE PLANS -
Stockholders were asked to vote upon amendments to the 1984
and 1993 Stock and Performance plans as follows: i)to increase
the number of shares reserved under the 1993 Plan from 7.5
million (15 million after the stock split) to 14.5 million
(29 million after the stock split) due to the increased
number of employees who are eligible to participate. The
increased participation was intended to create greater
incentives for more Company employees and further align
their interest with those of the Company's stockholders;
ii)to increase the annual amount of options awarded under
the 1993 Plan to any individual from 150,000 to 250,000;
iii)to remove the restriction that requires shareholder
approval for amendments which materially increase benefits
to participants based upon securities regulations regarding
short-swing trading which no longer apply; iv)to allow the
compensation and nominating committee of the Board of
Directors to amend these plans in certain circumstances, in
addition to the full Board of Directors; and v)to reflect
the Company's new name.
These amendments were approved by the stockholders with
231,871,912 votes cast for, 18,070,038 votes cast against and
3,042,366 votes withheld.
11
<PAGE> 13
3. RE-AFFIRMATION OF PERFORMANCE GOALS - Shareholders were asked
to reaffirm the performance goals approved in 1995 as part of
an amendment to the 1993 Stock and Performance Plan. This
amendment to the Plan satisfied the requirements of Section
162(m) of the Internal Revenue Code for full deductibility of
compensation paid to named executives under this Plan. This
matter was reaffirmed by the stockholders with 244,827,810
votes cast for, 5,730,946 votes cast against and 2,856,560
votes withheld.
4. APPOINTMENT OF INDEPENDENT AUDITORS - The stockholders were
asked to vote upon the appointment of KPMG Peat Marwick, LLP
as independent auditors for the Company for 1997. This matter
was approved by the stockholders with 251,655,752 votes cast
for, 644,298 votes cast against and 1,121,266 votes withheld.
ITEM 5. OTHER INFORMATION
The Company hereby provides net sales and operating income by division
for the periods presented below:
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1998 1997 %
-------- -------- --------
<S> <C> <C> <C>
NET SALES:
North America $ 368.2 $ 378.1 (2.6)
Europe 923.7 952.7 (3.1)
Latin America 313.0 314.7 (0.5)
Asia 96.0 108.7 (11.7)
Baking 420.5 395.2 6.4
-------- -------- --------
Total $2,121.4 $2,149.4 (1.3)
======== ======== ========
OPERATING INCOME:
North America $ 44.2 $ 42.8 3.2
Europe 129.9 113.6 14.4
Latin America 62.3 60.4 3.2
Asia 14.2 14.3 (0.7)
Baking 17.9 16.0 12.1
Corporate Expenses (10.0) (14.0) --
-------- -------- --------
Total $ 258.5 $ 233.1 10.9
======== ======== ========
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1997 1996 %
-------- -------- --------
<S> <C> <C> <C>
NET SALES:
North America $ 378.1 $ 363.0 4.2
Europe 952.7 935.1 1.9
Latin America 314.7 290.2 8.4
Asia 108.7 111.3 (2.3)
Baking 395.2 399.9 (1.2)
-------- -------- --------
Total $2,149.4 $2,099.5 2.4
======== ======== ========
OPERATING INCOME:
North America $ 42.8 $ 40.0 7.0
Europe 113.6 95.9 18.5
Latin America 60.4 58.8 2.8
Asia 14.3 14.5 (1.6)
Baking 16.0 19.7 (18.8)
Corporate Expenses (14.0) (11.5) --
-------- -------- --------
Total $ 233.1 $ 217.4 7.2
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------- ----------------------------------------
1997 1996 % 1997 1996 %
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
North America $ 480.0 $ 462.8 3.7 $ 858.1 $ 825.8 3.9
Europe 891.0 976.0 (8.7) 1,843.7 1,911.1 (3.5)
Latin America 243.5 246.7 (1.3) 558.2 536.9 4.0
Asia 88.1 92.1 (4.4) 196.8 203.4 (3.2)
Baking 401.9 384.6 4.5 797.1 784.5 1.6
-------- -------- -------- -------- -------- --------
Total $2,104.5 $2,162.2 (2.7) $4,253.9 $4,261.7 (0.2)
======== ======== ======== ======== ======== ========
OPERATING INCOME:
North America $ 92.3 $ 84.9 8.7 $ 135.1 $ 124.9 8.1
Europe 125.0 120.1 4.1 238.6 216.0 10.5
Latin America 45.2 42.7 5.8 105.6 101.6 4.0
Asia 9.5 10.1 (5.8) 23.8 24.6 (3.3)
Baking 20.9 17.2 21.6 36.8 36.8 --
Corporate Expenses (10.2) (9.5) -- (24.2) (21.0) --
-------- -------- -------- -------- -------- --------
Total $ 282.7 $ 265.5 6.5 $ 515.7 $ 482.9 6.8
======== ======== ======== ======== ======== ========
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------- ----------------------------------------
1997 1996 % 1997 1996 %
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
North America $ 420.1 $ 422.7 (0.6) $1,278.2 $1,248.5 2.4
Europe 829.8 858.0 (3.3) 2,673.5 2,769.0 (3.4)
Latin America 275.3 267.2 3.0 833.6 804.2 3.7
Asia 95.7 96.3 (0.7) 292.5 299.7 (2.4)
Baking 402.6 389.4 3.4 1,199.7 1,173.9 2.2
-------- -------- -------- -------- -------- --------
Total $2,023.5 $2,033.6 (0.5) $6,277.5 $6,295.3 (0.3)
======== ======== ======== ======== ======== ========
OPERATING INCOME:
North America $ 70.2 $ 69.4 1.2 $ 205.3 $ 194.3 5.7
Europe 109.6 100.4 9.2 348.2 316.4 10.1
Latin America 63.4 62.5 1.4 169.0 164.1 3.0
Asia 13.4 11.8 13.4 37.2 36.4 2.1
Baking 26.1 24.9 4.5 62.9 61.7 1.9
Corporate Expenses (4.8) -- -- (28.9) (21.0) --
-------- -------- -------- -------- -------- --------
Total $ 277.9 $ 269.0 3.3 $ 793.7 $ 751.9 5.6
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE MONTHS FOR THE TWELVE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------------- ----------------------------------------
1997 1996 % 1997 1996 %
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
North America $ 508.2 $ 495.4 2.6 $1,786.4 $1,744.0 2.4
Europe 845.2 923.1 (8.4) 3,518.8 3,692.1 (4.7)
Latin America 271.4 272.1 (0.3) 1,104.9 1,076.2 2.7
Asia 89.7 98.3 (8.8) 382.2 398.0 (4.0)
Baking 408.5 393.3 3.8 1,608.1 1,567.3 2.6
-------- -------- -------- -------- -------- --------
Total $2,123.0 $2,182.2 (2.7) $8,400.4 $8,477.6 (0.9)
======== ======== ======== ======== ======== ========
OPERATING INCOME:
North America $ 102.2 $ 90.2 13.2 $ 307.4 $ 284.6 8.1
Europe 108.9 108.9 -- 457.1 425.3 7.5
Latin America 63.9 47.5 34.6 232.9 211.5 10.1
Asia 15.4 12.5 23.5 52.6 48.9 7.6
Baking 34.4 27.6 24.9 97.3 89.3 9.0
Corporate Expenses (9.8) (11.4) -- (38.7) (32.4) --
-------- -------- -------- -------- -------- --------
Total $ 315.0 $ 275.3 14.4 $1,108.6 $1,027.2 7.9
======== ======== ======== ======== ======== ========
</TABLE>
14
<PAGE> 16
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.
Exhibit 12 - Statement regarding the computation of ratios of
earnings to fixed charges.
Exhibit 27 - Financial data schedule.
b) Reports on Form 8-K.
There were two (2) reports filed on Form 8-K, under Item 5.
Other Events, during the first quarter of 1998 as follows:
1) Press release describing a presentation to security
analysts regarding higher projected growth rates
following the corn refining spin off and announcing
the Company's intention to repurchase 860,000 shares
by mid-year. This report was filed on February 23,
1998.
2) Press release announcing that the Company's Board of
Directors declared a two-for-one stock split of the
Company's common stock outstanding on March 31, 1998.
This report was filed on March 19, 1998.
15
<PAGE> 17
BESTFOODS AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BESTFOODS
DATE: May 13, 1998
/S/ Bernard H. Kastory
-----------------------------------
(Bernard H. Kastory)
Senior Vice President, Finance
and Administration
DATE: May 13, 1998
/S/ Rainer H. Mimberg
-----------------------------------
(Rainer H. Mimberg)
Vice President, Finance,
Comptroller & Chief Accounting
Officer
16
<PAGE> 1
EXHIBIT 11
BESTFOODS AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(In millions, except per share amounts)
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED MARCH 31,
BASIC 1998 1997
------- -------
<S> <C> <C>
Income from continuing operations $ 133.4 $ 117.5
Preferred stock dividends, net of taxes (2.8) (2.9)
------- -------
Income from continuing operations available to common stockholders 130.6 114.6
Income (loss) from discontinued operations -- (8.6)
------- -------
Net income available to common stockholders $ 130.6 $ 106.0
======= =======
Weighted average shares outstanding 288.6 287.0
------- -------
BASIC EARNINGS PER SHARE:
Income from continuing operations $ 0.45 $ 0.40
Income (loss) from discontinued operations -- (0.03)
------- -------
Net income $ 0.45 $ 0.37
======= =======
DILUTED
Income from continuing operations $ 133.4 $ 117.5
Adjustments to net income:
Assumed additional cost if ESOP shares are fully converted net of
certain tax benefits (.6) (.7)
------- -------
Diluted income from continuing operations 132.8 116.8
Income (loss) from discontinued operations -- (8.6)
------- -------
Diluted net income $ 132.8 $ 108.2
======= =======
Weighted average shares outstanding 288.6 287.0
Add incremental shares representing:
Shares issuable upon exercise of stock options 3.2 1.7
Performance incentive shares issuable .3 .2
Shares issuable upon conversion of ESOP shares 8.1 8.4
------- -------
Weighted average number of shares as adjusted 300.2 297.3
======= =======
DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 0.44 $ 0.39
Income (loss) from discontinued operations -- (0.03)
------- -------
Net income $ 0.44 $ 0.36
======= =======
</TABLE>
16
<PAGE> 1
EXHIBIT 12
BESTFOODS AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE FOR THE YEARS ENDED DECEMBER 31,
MONTHS ENDED ------------------------------------------------------------------------
MAR. 31, 1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES: $ 217.4 $ 704.2 $ 880.2 $ 654.9 $ 446.6 $ 624.4
-------- -------- -------- -------- -------- --------
Add (subtract):
Portion of rents representative
of interest 8.3 32.2 33.4 25.6 24.6 20.2
Interest on bonds, mortgages
& similar debt 30.6 100.9 68.4 52.6 50.1 53.6
Other interest 14.7 72.8 100.0 55.7 33.9 42.4
Interest expense included in
cost of plant construction (.8) (3.4) (4.8) (3.7) (4.2) (5.6)
Income of unconsolidated
venture -- -- -- -- 3.9 --
-------- -------- -------- -------- -------- --------
Income as adjusted $ 270.2 $ 906.7 $1,077.2 $ 785.1 $ 554.9 $ 735.0
======== ======== ======== ======== ======== ========
FIXED CHARGES:
Portion of rents representative
of interest $ 8.3 $ 32.2 $ 33.4 $ 25.6 $ 24.6 $ 20.2
Interest on bonds, mortgages
& similar debt 30.6 100.9 68.4 52.6 50.1 53.6
Other interest 14.7 72.8 100.0 55.7 33.9 42.4
-------- -------- -------- -------- -------- --------
$ 53.6 $ 205.9 $ 201.8 $ 133.9 $ 108.6 $ 116.2
======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 5.0 4.4 5.3 5.9 5.1 6.3
======== ======== ======== ======== ======== ========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 192
<SECURITIES> 0
<RECEIVABLES> 1,298
<ALLOWANCES> 0
<INVENTORY> 809
<CURRENT-ASSETS> 2,447
<PP&E> 3,354
<DEPRECIATION> 1,473
<TOTAL-ASSETS> 6,282
<CURRENT-LIABILITIES> 2,219
<BONDS> 2,126
0
162
<COMMON> 98
<OTHER-SE> 788
<TOTAL-LIABILITY-AND-EQUITY> 6,282
<SALES> 2,121
<TOTAL-REVENUES> 0
<CGS> 1,160
<TOTAL-COSTS> 1,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41
<INCOME-PRETAX> 217
<INCOME-TAX> 77
<INCOME-CONTINUING> 133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133
<EPS-PRIMARY> .45<F1>
<EPS-DILUTED> .44
<FN>
<F1>The amounts presented for earnings per share data comply with the
requirements of SFAS No. 128, "Earnings Per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 125
<SECURITIES> 0
<RECEIVABLES> 1,275
<ALLOWANCES> 0
<INVENTORY> 898
<CURRENT-ASSETS> 2,461
<PP&E> 3,549
<DEPRECIATION> 1,544
<TOTAL-ASSETS> 7,338
<CURRENT-LIABILITIES> 2,604
<BONDS> 1,676
0
185
<COMMON> 49
<OTHER-SE> 1,861
<TOTAL-LIABILITY-AND-EQUITY> 7,338
<SALES> 2,149
<TOTAL-REVENUES> 0
<CGS> 1,210
<TOTAL-COSTS> 1,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 196
<INCOME-TAX> 71
<INCOME-CONTINUING> 118
<DISCONTINUED> (9)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109
<EPS-PRIMARY> .37<F1>
<EPS-DILUTED> .36
<FN>
<F1>The amounts presented for earnings per share data comply with the
requirements of SFAS No. 128, "Earnings Per Share."
</FN>
</TABLE>
