<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, 2000
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)
(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, 2000
Common Stock, $.25 par value 274,544,917 shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
($ Millions except per share amounts) March 31,
-------------------
2000 1999
------ ------
<S> <C> <C>
Net sales $2,218 $2,195
Cost of sales 1,156 1,177
------ ------
Gross profit 1,062 1,018
Operating expenses 754 733
------ ------
Operating income 308 285
------ ------
Financing costs 47 46
------ ------
Income before taxes 261 239
Provision for income taxes 87 83
------ ------
174 156
Minority stockholders' interest 14 12
====== ======
Net income $ 160 $ 144
====== ======
AVERAGE COMMON SHARES OUTSTANDING:
Basic 276.3 280.9
Diluted 285.1 290.6
EARNINGS PER COMMON SHARE:
Basic $ 0.57 $ 0.50
Diluted $ 0.56 $ 0.49
CASH DIVIDENDS DECLARED PER COMMON SHARE $0.265 $0.245
</TABLE>
- -------
See notes to consolidated financial statements.
1
<PAGE> 3
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
($ Millions) Mar. 31, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 85 $ 68
Notes and accounts receivable, net 1,359 1,234
Inventories 769 792
Prepaid expenses 78 78
Deferred tax asset 30 32
------- -------
Total current assets 2,321 2,204
------- -------
Investments in and loans to unconsolidated affiliates 15 22
------- -------
Plant and properties 3,461 3,485
Less accumulated depreciation 1,537 1,521
------- -------
1,924 1,964
------- -------
Excess cost over net assets of businesses acquired and other
Intangible assets (net of accumulated amortization of
$383 and $374) 1,714 1,811
------- -------
Other assets 235 231
======= =======
$ 6,209 $ 6,232
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and drafts payable
$ 656 $ 624
Accounts payable and accrued liabilities 1,535 1,499
Income taxes payable 173 171
Dividends payable 73 74
------- -------
Total current liabilities 2,437 2,368
------- -------
Non-current liabilities 902 929
------- -------
Long-term debt 1,915 1,842
------- -------
Deferred taxes on income 21 7
------- -------
Minority interest 154 148
------- -------
Stockholders' equity
Preferred stock, authorized 25 million shares $1 par value -- --
Series B ESOP convertible 3 million shares designated
1.7 million shares issued at stated value (1999: 1.7
million shares) 148 151
Series A Junior Participating 2 million shares designated
- none issued -- --
Common stock authorized 900 million shares $.25 par value
- issued
390.5 million shares 98 98
Capital in excess of par value of stock 176 174
Unearned ESOP compensation (65) (65)
Accumulated other comprehensive income (737) (643)
Common stock in treasury at cost - 116.0 million shares
(1999: 112.7 million shares) (2,294) (2,145)
Retained earnings
3,454 3,368
------- -------
Total stockholders' equity 780 938
======= =======
$ 6,209 $ 6,232
======= =======
</TABLE>
- -------
See notes to consolidated financial statements.
2
<PAGE> 4
BESTFOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
($ Millions) March 31,
------------------
2000 1999
----- -----
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 160 $ 144
Non-cash charges (credits) to net income
Depreciation and amortization 66 65
Deferred taxes 5 6
Other, net 10 --
Changes in trade working capital:
Notes and accounts receivable and prepaid expenses (162) (124)
Inventories 7 (23)
Accounts payable and accrued liabilities 72 52
----- -----
Net cash flows from operating activities 158 120
----- -----
Cash flows from (used for) investing activities
Capital expenditures (38) (59)
Proceeds from disposal of plants and properties 9 5
----- -----
Net cash flows used for investing activities (29) (54)
----- -----
Net cash flows after investments 129 66
----- -----
Cash flows from (used for) financing activities
Purchase of treasury stock (153) (136)
Repayment of long-term debt (22) (5)
New long-term debt 47 5
Net change in short-term debt 96 101
Dividends paid on common stock (74) (70)
Common stock issued 4 5
Other liabilities (assets) (9) 1
----- -----
Net cash flows used for financing activities (111) (99)
----- -----
Effects of exchange rates on cash (1) 1
----- -----
Increase (decrease) in cash and cash equivalents 17 (32)
----- -----
Cash and cash equivalents, beginning of year 68 142
===== =====
Cash and cash equivalents, end of period $ 85 $ 110
===== =====
</TABLE>
- ---------------
See notes to consolidated 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, 1999 $151 $98 $174 $(65) $(643) $(2,145) $3,368
Comprehensive income
Net income for the period $160 160
Foreign currency
translation
Adjustment ($141 pre-tax) (94) (94)
Comprehensive income $ 66
ESOP shares redeemed (3) (2)
Dividends:
Common stock (74)
Shares issued for:
Stock options and deferred
compensation 4 4
Treasury stock acquired (153)
---- --- ---- ---- ----- ------- ------
Balance, March 31, 2000 $148 $98 $176 $(65) $(737) $(2,294) $3,454
==== === ==== ==== ===== ======= ======
</TABLE>
- ----------------
See notes to consolidated 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,
2000 and 1999 and the financial position as of March 31, 2000.
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, 1999.
2. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 2000
presentation. Net sales and cost of sales have been restated for the first
quarter of 1999 to reclassify certain transportation costs from sales deductions
to cost of sales.
3. ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging
Activities," which requires the recognition of all derivatives as assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Changes in fair value of derivatives are recorded in earnings or
other comprehensive income depending upon the intended use of the derivative and
the resulting designation. The effective date of this statement has been delayed
to fiscal years beginning after June 15, 2000. The Company is in the process of
determining the impact the adoption of this statement will have on its financial
position and results of operations, which is not expected to be significant.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation", which provides guidance for issues
that have arisen in applying APB No. 25, "Accounting for Stock Issued to
Employees". This Interpretation, which is effective July 1, 2000, applies
prospectively to new awards, exchanges of awards in a business combination,
modifications to outstanding awards, and changes in grantee status that occur on
or after July 1, 2000, except for the provisions related to repricings and the
definition of an employee which apply to awards issued after December 31, 1998.
The Company is in the process of determining the impact the adoption of this
Interpretation will have on its financial position and results of operations,
which is not expected to be significant.
5
<PAGE> 7
4. ACQUISITIONS
On February 8, 2000, the Company became the 100% owner of Arisco Produtos
Alimenticios S.A. (Arisco), a privately-held food company in Brazil. Bestfoods
paid $490 million for 100% of the shares in Arisco. Included on the Arisco
balance sheet is approximately $262 million of net debt. Arisco had annual sales
of approximately $440 million. This transaction will be accounted for as a
purchase. The Company expects to finance this investment through existing credit
facilities. Also, following the announcement of the transaction, Standard &
Poor's, Moody's, and Duff & Phelps reaffirmed the Company's credit rating with a
stable outlook. Consistent with the Company's international reporting schedule,
Arisco's financial results and financial condition will be included for the
first time in the Company's financial statements in the second quarter.
5. INVENTORIES
Inventories are summarized as follow:
<TABLE>
<CAPTION>
($ Millions) Mar. 31, 2000 Dec. 31, 1999
-------------- ---------------
<S> <C> <C>
Finished and goods in process $480 $501
Raw materials 174 181
Supplies 115 110
====== =====
$769 $792
====== =====
</TABLE>
6. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
($ Millions) Mar. 31, 2000 Dec. 31, 1999
-------------- -------------
<S> <C> <C>
7.71% ESOP guaranteed notes due December 2004 $ 94 $94
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 250 250
Medium term notes at various rates due 2000-2005 175 175
5% Swiss franc debentures 126 133
6.75% German mark debentures 103 109
2.3% Japanese yen term loan 16 17
Other secured and unsecured notes and loans at
various rates and due dates 512 281
------- --------
2,141 1,924
------- --------
Less current maturities 226 82
======= ========
$1,915 $ 1,842
======= ========
</TABLE>
6
<PAGE> 8
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 Mar. 31,
2000 1999
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $ 36 $ 38
Income taxes 76 32
</TABLE>
8. FINANCIAL INSTRUMENTS
The Company's policies regarding hedging of foreign currency cash flows and
commodity purchases are set forth in the Annual Report to Stockholders which was
filed as Exhibit 13 to Form 10-K for the year ended December 31, 1999.
FOREIGN EXCHANGE CONTRACTS
At March 31, 2000, the Company had forward exchange contracts to deliver $5
million in almost equal amounts in Hong Kong dollars and new Taiwan dollars and
to purchase $12 million in foreign currencies all in German marks.
At December 31, 1999, the Company had forward exchange contracts to deliver
$29 million of foreign currencies comprising $18 million in Canadian dollars and
$11 million in Euros. The Company also had contracts to purchase $66 million in
foreign currencies consisting of $51 million in Euros, $7 million in German
marks, $5 million in Swiss Francs, and $3 million in various other currencies.
COMMODITIES
At March 31, 2000 and December 31, 1999 the outstanding commodity contracts
were not material to the Company's financial position or results of operations.
INTEREST RATE SWAPS
At March 31, 2000 and December 31, 1999, the Company had interest rate swap
agreements outstanding with notional amounts of $200 million. A portion of the
Company's fixed-rate debt position was hedged with these agreements. The
floating weighted-average pay rate was 6.1% and the fixed weighted-average
receive rate was 5.3% at both March 31, 2000 and December 31, 1999. These swap
agreements terminate on various dates through 2003.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES for the three months ended March 31, 2000 increased $23 million to
$2,218 million, up 1% from the $2,195 million for the same period last year.
Contributing to the increase was a 6.8% improvement in worldwide volumes
(including the impact of acquisition of 2.2%) as well as a 1% overall
improvement in prices. Significantly offsetting these increases was the negative
6.7% impact of currency values, particularly in Latin America and Europe.
An analysis of net sales by division is as follows:
<TABLE>
<CAPTION>
Three Months Ended
($ Millions) March 31,
--------------------
2000 1999
------ ------
<S> <C> <C>
North America $ 424 $ 374
Europe 954 995
Latin America 281 300
Asia 114 99
Baking 445 427
====== ======
Total $2,218 $2,195
====== ======
</TABLE>
North American sales were up 13% for the quarter due mainly to increased
volumes of mayonnaise, peanut butter, Knorr products and dressings, as well as
added volumes from the Case-Swayne acquisition. Overall, prices for the division
decreased.
In Europe, net sales declined 4.1% or $41 million for the quarter due
entirely to unfavorable exchange rates. Volumes improved 5%, mainly from
existing businesses, and prices were up. Excluding the impact of exchange sales
would have been up nearly 6%.
Net sales in Latin America, for the first quarter were 6.2% lower compared to
the prior year. Volumes and prices were both up but were more than offset by
lower currencies primarily in Brazil.
In Asia, net sales improved 16% for the quarter compared to the prior year.
Improved volumes were the main factor in this increase, improving by 20%. Prices
were lower, and currency comparisons were slightly negative for the quarter.
Net sales in the Baking business for the quarter increased 4.3% compared to
last year. Volumes increased 3.2% in the quarter. Also contributing to the
increased sales were higher prices.
COST OF SALES AND OPERATING EXPENSES. Cost of sales as a percentage of net
sales was 52.1% for the three months ended March 31, 2000, resulting in a gross
profit margin of 47.9%, which is better than the 46.4% in the same period last
year. These gains were derived from improved pricing, better efficiencies and
lower commodity costs. Operating expenses increased 2.9% from the prior year
including a $10 million provision for the write-off of a receivable in the North
American operation with a distributor who filed for bankruptcy protection.
OPERATING INCOME for the three months ended March 31, 2000 increased 8% to
$308 million compared to $285 million last year. This increase was chiefly the
result of the higher volumes and improved margins in all divisions except North
America. Unfavorable exchange rates partially offset the gains mentioned above.
8
<PAGE> 10
FINANCING COSTS of $47 increased 2.3% compared to the last year mainly due to
higher borrowing levels for the share buyback program.
PROVISION FOR INCOME TAXES. The effective tax rate was 33.5% in the first
quarter of 2000 compared to 34.5% for the same period a year ago. The lower rate
in 2000 resulted from a decrease in the effective tax rates in various foreign
jurisdictions. The Company expects the effective tax rate to remain at 33.5% for
the foreseeable future.
NET INCOME AND EARNINGS PER DILUTED COMMON SHARE for the three months ended
March 31, 2000 increased 10.9% and 14%, respectively to $160 million or $.56 per
diluted share compared to $144 million or $.49 per diluted share last year.
Contributing to the improved results were a $.05 per share improvement in
operating income, a slightly lower effective tax rate contributing $.01 per
share, and fewer shares outstanding also adding $.01 per share.
RISKS AND UNCERTAINTIES
The Company operates in more than sixty countries, and in each country, the
business is subject to varying degrees of risk and uncertainty. It insures its
business and assets in each country against insurable risks in a manner it deems
appropriate. Because of its diversity, the Company believes that the risk of
loss from non-insurable events in any one business or country would not have a
material adverse affect on the Company's operations as a whole. Additionally,
the Company believes there is no concentration of risk with any single customer
or supplier, or small group of suppliers or customers, whose failure or
non-performance would materially affect the Company's results.
Also because of the Company's broad operational reach, it is subject to risks
due to changes in foreign currencies that could affect earnings. As a practical
matter, it is not feasible to cover these fluctuations with currency hedges.
Additionally, the Company believes that over time most currencies of major
countries in which it operates will equalize against the U.S. dollar. However,
the Company does maintain a policy of hedging its exposure to foreign currency
cash flows to cover planned dividends, fees and royalties, inter-company loans,
and other similar transactions. In addition, the Company hedges certain net
investments with borrowings denominated in the particular currency. As a matter
of policy, the Company does not speculate in foreign currencies.
For certain of its North American raw material purchases, the Company hedges
its exposure to commodity price fluctuations with commodity futures contracts.
The Company's products are manufactured from a number of raw materials,
including soybean and other edible oils, peanuts and wheat, all of which are,
and are expected to be, in adequate supply. Such raw materials may or may not be
hedged at any given time based on management's decisions as to the need to fix
the cost of raw materials to protect the Company's profitability. The value of
raw materials subject to commodity hedging represents a small percentage of the
total worldwide cost of sales. The historical price volatility of raw materials,
combined with the relatively low percentage of raw materials to cost of sales,
have never yielded a material adverse effect on gross margins and are not
expected to in the future. In addition, any significant change in commodity
prices can generally be recovered in higher selling prices, thereby further
minimizing the impact on the Company's margins.
LIQUIDITY AND CAPITAL RESOURCES
During the three-month period ended March 31, 2000, strong cash flows from
operations continued to fund the Company's working capital requirements, capital
expenditures and dividend payments. Working capital on a cash flow basis
increased $83 million during the first three months of 2000 compared to $95
million for the same period of 1999. Capital expenditures at $38 million were
lower than last year's three-month period of $59 million. The Company share
buyback program continued totaling $153 million (3.3 million shares) for the
year-to-date period.
9
<PAGE> 11
The Company's indebtedness at March 31, 2000 and December 31, 1999 is
summarized herein under the caption "Long-term debt" on page 6. Material terms
of all loans, lines of credit and covenants are discussed in the "Long-term
debt" note found on pages 35 and 36 of the Company's 1999 Annual Report and
filed as Exhibit 13 to the 1999 Form 10-K.
At March 31, 2000, the ratio of consolidated borrowed debt to EBITDA was 1.6.
Additionally, the ratio of EBITDA to interest was 8.5 at March 31, 2000.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This report may contain forward-looking statements based on our best current
information and reasonable assumptions about anticipated developments.
Statements including such words as "believes," "expects," "anticipates,"
"intends," "plans," "estimates," and other similar expressions are intended to
identify such forward-looking statements. Because of the risks and uncertainties
that always exist in any operating environment or business, we cannot make
assurances that these expectations will prove correct. Actual results and
developments may differ materially depending upon currency values, competitive
pricing, consumption levels, costs and political and social conditions in the
economies and environments where Bestfoods operates.
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 three months ended March 31, 2000.
Qualitative Disclosure - This information is set forth on page 33, under the
caption "Financial Instruments," of the Company's 1999 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, 1999 and is incorporated herein by reference.
10
<PAGE> 12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed on May 2, 2000, the Board of Directors, with the
advice of independent financial and legal counsel and after thorough review of
the matter, determined to reject an unsolicited proposal from Unilever to
acquire, under certain conditions, all of the outstanding shares of Bestfoods.
The Board determined that the Unilever proposal is financially inadequate and
not in the best interest of Bestfoods, its shareholders, and other constituents,
given Bestfoods' successful business strategies and growth prospects. See report
on Form 8-K, dated May 4, 2000. Immediately following public announcement of the
Board's determination, ten shareholders, each purporting to sue on behalf of a
class of all Bestfoods shareholders, began to file putative class actions
against the Company and the Board of Directors in the Court of Chancery for the
State of Delaware in and for New Castle County. The actions are as follows:
Joan Cohen v. Bestfoods et al., C.A. No. 18024-NC; Crandon Capital
Partners v. Harold McGraw, III et al., C.A. No. 18025-NC; Daniel Lifshitz v.
Harold McGraw, III et al., C.A. No. 18026-NC; Rochelle Phillips v. Charles R.
Shoemate et al., C.A. No. 18027-NC; Tozour Energy Systems v. Charles R.
Shoemate et al., C. A. No. 18028-NC; Roger Mondschein v. Bestfoods et al., C.
A. No. 18029-NC; Donald Van Dyck v. Bestfoods et al., C. A. No. 18031-NC;
Harriet Rand v. Harold McGraw et al., C. A. No. 18033-NC; William K. Glaubach
v. Harold McGraw, III et al., C. A. No. 18034-NC; Paul Green v. Bestfoods et
al., C. A. No. 18038-NC.
All actions allege violations of fiduciary duty by the Board of Directors in
relation to its rejection of Unilever's unsolicited acquisition proposal. Each
action seeks an order enjoining the Board of Directors from violating its
fiduciary duties to the public shareholders by, among other things, informing
itself about offers from and negotiating with Unilever and other bona fide
offerors for the Company and otherwise acting so as to maximize the value of the
shareholders' investments. Additionally each action seeks actual damages as well
as the costs of bringing the action, including attorney's fees, expert's fees
and disbursements.
The Company believes that these actions are clearly without merit and intends
to defend them vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on April 7, 2000, 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 director was elected for a term of three years expiring in
2002:
<TABLE>
<CAPTION>
DIRECTOR NAME VOTES FOR VOTES WITHHELD
------------- --------- --------------
<S> <C> <C>
Harold McGraw III 237,204,750 1,973,032
</TABLE>
11
<PAGE> 13
The following directors were elected each for a term of three years
expiring in 2003:
<TABLE>
<CAPTION>
DIRECTOR NAME VOTES FOR VOTES WITHHELD
------------- --------- --------------
<S> <C> <C>
William C. Ferguson 237,118,060 2,059,722
Bruce S. Gordon 237,037,757 2,140,025
Leo I. Higdon, Jr. 237,245,656 1,932,126
William S. Norman 237,188,214 1,989,568
Charles R. Shoemate 237,256,676 1,921,106
</TABLE>
2. APPOINTMENT OF INDEPENDENT AUDITORS:
The stockholders were asked to ratify the appointment of KPMG LLP as
independent auditors for the Company for 2000. This matter was approved by the
stockholders with 237,496,633 votes cast for 587,321 votes cast against and
1,093,828 votes withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits pursuant to Item 601 of Regulation S-K.
<TABLE>
<S> <C>
Exhibit 3 (b) - The By-Laws amended as of April 28, 2000 (corrected exhibit).
Exhibit 11 - Statements regarding the computation of earnings per share.
Exhibit 12 - Statement regarding the computation of ratios of earnings to fixed charges.
Exhibit 27 - Financial data schedule.
Exhibit 27 (a) - Financial data schedule (amended 1999).
</TABLE>
b) Reports on Form 8-K.
There was one report filed on Form 8-K during the first quarter of 2000
which incorporated under Item 5, Other Events, two press releases, dated
February 7 and 8, 2000, describing the Company's acquisition of Arisco
Produtos Alimenticios S.A.
12
<PAGE> 14
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 9, 2000
/S/ Robert J. Gillespie
-------------------------------------
(Robert J. Gillespie)
Executive Vice President, Strategic
Business
Development and Finance
DATE: May 9, 2000
/S/ Philip V. Terenzio
-------------------------------------
(Philip V. Terenzio)
Vice President and Controller
13
<PAGE> 1
EXHIBIT 3 (b)
BY-LAWS
OF
BESTFOODS
--------------
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 90 nor more than 120 days in advance of
the date which is the anniversary of the date the Company's proxy statement was
released to security holders in connection with the previous year's annual
meeting or if the date of the applicable annual meeting has been changed by more
than 30 days from the date contemplated at the time of the previous year's proxy
statement, not less than 90 days before the date of the applicable annual
meeting, 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 stock of the
<PAGE> 2
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. 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 2. 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 3. 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 4. 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 5. 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.
SECTION 6. 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 7. 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.
2
<PAGE> 3
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 and permitted by subsection (2) of Section 141(c) of the
Delaware General Corporation Law.
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.
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.
3
<PAGE> 4
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, 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.
4
<PAGE> 5
ARTICLE VIII
CAPITAL STOCK
SECTION 1. The Board of Directors may authorize the issuance of stock
either in certificated or in uncertificated form. If shares are issued in
uncertificated form, each stockholder shall be entitled upon written request to
a stock certificate or certificates, representing and certifying the number and
kind of full shares held, 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, which signatures 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 04/28/00
6
<PAGE> 1
EXHIBIT 11
BESTFOODS AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
BASIC 2000 1999
-------- --------
<S> <C> <C>
Net income $ 160 $ 144
Preferred stock dividends, net of taxes (3) (3)
-------- --------
Net income available to common stockholders $ 157 $ 141
======== ========
Weighted average shares outstanding 276.3 280.9
======== ========
BASIC EARNINGS PER SHARE:
Net income $ 0.57 $ 0.50
======== ========
DILUTED
Net income $ 160 $ 144
Adjustments to net income:
Assumed additional cost if ESOP shares
are fully converted net of tax benefits (1) (1)
-------- --------
Diluted net income $ 159 $ 143
======== ========
Weighted average shares outstanding 276.3 280.9
Add incremental shares representing:
Exercise of stock options 1.3 2.4
Performance plan shares .1 .3
Conversion of ESOP shares 7.4 7.0
-------- --------
Weighted average number of shares as adjusted 285.1 290.6
======== ========
DILUTED EARNINGS PER SHARE:
Net income $ 0.56 $ 0.49
</TABLE>
<PAGE> 1
EXHIBIT 12
BESTFOODS AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
($ Millions) FOR THE THREE
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
MAR. 31, 2000 1999 1998 1997 1996 1995
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES: $ 260.6 $1,147.1 $1,021.1 $ 704.2 $ 880.2 $ 654.9
-------- -------- -------- -------- -------- --------
Add (subtract):
Portion of rents representative
of interest 8.8 35.0 33.3 32.2 33.4 25.6
Interest on bonds, mortgages
& similar debt 32.6 131.6 125.5 100.9 68.4 52.6
Other interest 18.8 66.2 60.7 72.8 100.0 55.7
Interest expense included in
cost of plant construction (.7) (6.9) (3.5) (3.4) (4.8) (3.7)
-------- -------- -------- -------- -------- --------
Income as adjusted $ 320.1 1,373.0 $1,237.1 $ 906.7 $1,077.2 $ 785.1
======== ======== ======== ======== ======== ========
FIXED CHARGES:
Portion of rents representative
of interest $ 8.8 $ 35.0 $ 33.3 $ 32.2 $ 33.4 $ 25.6
Interest on bonds, mortgages
& similar debt 32.6 131.6 125.5 100.9 68.4 52.6
Other interest 18.8 66.2 60.7 72.8 100.0 55.7
-------- -------- -------- -------- -------- --------
$ 60.2 $ 232.8 $ 219.5 $ 205.9 $ 201.8 $ 133.9
======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 5.3 5.9 5.6 4.4 5.3 5.9
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 85
<SECURITIES> 0
<RECEIVABLES> 1,359
<ALLOWANCES> 0
<INVENTORY> 769
<CURRENT-ASSETS> 2,321
<PP&E> 3,461
<DEPRECIATION> 1,537
<TOTAL-ASSETS> 6,209
<CURRENT-LIABILITIES> 2,437
<BONDS> 1,915
0
148
<COMMON> 98
<OTHER-SE> 534
<TOTAL-LIABILITY-AND-EQUITY> 6,209
<SALES> 2,218
<TOTAL-REVENUES> 2,218
<CGS> 1,156
<TOTAL-COSTS> 1,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 261
<INCOME-TAX> 87
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160
<EPS-BASIC> .57
<EPS-DILUTED> .56
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 110
<SECURITIES> 0
<RECEIVABLES> 1,403
<ALLOWANCES> 0
<INVENTORY> 848
<CURRENT-ASSETS> 2,512
<PP&E> 3,495
<DEPRECIATION> 1,530
<TOTAL-ASSETS> 6,522
<CURRENT-LIABILITIES> 2,533
<BONDS> 1,963
0
155
<COMMON> 98
<OTHER-SE> 683
<TOTAL-LIABILITY-AND-EQUITY> 6,522
<SALES> 2,195
<TOTAL-REVENUES> 2,195
<CGS> 1,177
<TOTAL-COSTS> 1,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 239
<INCOME-TAX> 83
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144
<EPS-BASIC> .50
<EPS-DILUTED> .49
</TABLE>
