SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-4710
WHITMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-6076573
- - -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3501 Algonquin Road, Rolling Meadows, Illinois 60008
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 818-5000
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
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As of April 29, 1994, the Registrant had 105,408,687 outstanding shares
(excluding treasury shares) of common stock, no par value.
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CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and A
Condition and Results of Operations
PART II OTHER INFORMATION
SIGNATURE
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended
March 31,
-----------------------
1994 1993
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(in millions, except
per-share data)
Sales and Revenues $ 546.9 $ 522.5
Cost of Goods Sold 353.9 339.5
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Gross Profit 193.0 183.0
Selling, General and Administrative Expenses 143.2 138.3
Amortization Expense 4.3 4.2
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Operating Income 45.5 40.5
Interest Expense (19.0) (23.8)
Interest Income 1.6 2.4
Other Expense, Net (6.2) (0.3)
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Income Before Income Taxes 21.9 18.8
Provision for Income Taxes 9.4 8.0
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Income Before Minority Interest and
Cumulative Effect of Accounting Change 12.5 10.8
Minority Interest 2.7 2.4
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Income before Cumulative Effect of
Accounting Change 9.8 8.4
Cumulative Effect of Accounting Change -- (24.0)
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Net Income (Loss) $ 9.8 $ (15.6)
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Average Number of Common Shares Outstanding 106.5 107.4
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Income (Loss) per Common Share:
Before Cumulative Effect of Accounting Change $ 0.09 $ 0.08
Cumulative Effect of Accounting Change -- (0.22)
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Net Income (Loss) $ 0.09 $(0.14)
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Cash Dividends per Common Share $0.075 $0.065
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See accompanying notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1994 1993
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(in millions)
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 50.9 $ 93.0
Receivables 287.4 324.1
Inventories 227.4 222.7
Other Current Assets 52.7 51.4
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Total Current Assets 618.4 691.2
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Investments 238.1 238.5
Property (at Cost) 1,127.7 1,106.9
Accumulated Depreciation and Amortization (552.6) (534.1)
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Net Property 575.1 572.8
Intangible Assets 539.3 525.9
Other Assets 75.8 74.8
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Total Assets $ 2,046.7 $ 2,103.2
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-Term Debt, Including Current Portion
of Long-Term Debt $ 94.5 $ 90.0
Accounts and Dividends Payable 197.9 232.9
Other Current Liabilities 129.9 149.8
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Total Current Liabilities 422.3 472.7
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Long-Term Debt 747.6 749.3
Deferred Income Taxes 62.8 66.6
Other Liabilities 124.0 124.7
Minority Interest 194.8 172.9
Shareholders' Equity:
Common Stock (No par, 250.0 million shares
authorized; 105.7 million shares outstanding
at March 31, 1994 and 107.1 million shares
outstanding at December 31, 1993) 404.9 404.4
Retained Income 174.8 172.4
Cumulative Translation Adjustment (53.1) (52.3)
Treasury Common Stock (31.4) (7.5)
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Total Shareholders' Equity 495.2 517.0
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Total Liabilities and Shareholders' Equity $ 2,046.7 $ 2,103.2
========== ==========
See accompanying notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
March 31,
------------------
1994 1993
(in millions)
Cash Flows from Operating Activities:
Income Before Cumulative Effect of Accounting Change $ 9.8 $ 8.4
Adjustments to Reconcile to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 24.3 23.6
Other 5.7 6.2
Changes in Assets and Liabilities, Net of
Acquisitions and Dispositions:
Decrease in Receivables 38.0 16.0
Increase in Inventories (4.1) (3.8)
Decrease in Payables (35.2) (6.3)
Net Change in Other Assets and Liabilities (28.4) (24.3)
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Net Cash Provided by Continuing Operations 10.1 19.8
Net Cash Used in Discontinued Operations (1.5) (2.1)
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Net Cash Provided by Operating Activities 8.6 17.7
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Cash Flows from Investing Activities:
Capital Investments, Net (20.5) (12.2)
Increase in Investments 0.5 (138.5)
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Net Cash Used in Investing Activities (20.0) (150.7)
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Cash Flows from Financing Activities:
Proceeds from Issuance of Long-Term Debt 101.6 124.3
Repayment of Long-Term Debt (52.1) (2.5)
Net Repayment of Bank Lines of Credit
and Commercial Paper (48.6) --
Common Dividends (7.9) (7.0)
Treasury Stock Purchases (23.9) --
Issuance of Common Stock 0.5 1.2
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Net Cash Provided By (Used in) Financing
Activities (30.4) 116.0
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Effect of Exchange Rate Changes on Cash and
Cash Equivalents (0.3) --
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Change in Cash and Cash Equivalents (42.1) (17.0)
Cash and Cash Equivalents at January 1 93.0 132.5
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Cash and Cash Equivalents at March 31 $ 50.9 $115.5
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See accompanying notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein have
been prepared by the Registrant, without audit. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, although the Registrant believes
that the disclosures made are adequate to make the information presented
not misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Registrant's Annual Report
to Shareholders incorporated by reference in its Annual Report on Form
10-K for the year ended December 31, 1993. In the opinion of
management, the information furnished herein reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
statement of results for the interim periods presented.
2. During the first quarter of 1994, the Registrant's subsidiary, Pepsi
General, acquired a Pepsi-Cola franchise in Waterloo, Iowa, from Midland
Bottling Co. ("Midland Bottling"), a subsidiary of PepsiCo, Inc. The
acquisition was made through a tax-free merger in which Pepsi General
issued 2,025 shares of its Preferred Stock, Series A, to Midland
Bottling. The effects of this acquisition, had it been acquired on
January 1, 1994, would not have been significant to operating results.
The holder(s) of the Series A Preferred Stock are entitled to a
cumulative dividend payable semi-annually at a rate for each dividend
period equal to the sum of the six-month LIBOR rate plus 25 basis
points, multiplied by 64 percent. No dividends or payments in
liquidation may be made with respect to common stock or any other stock
ranking on a parity with, or which is subordinate in right of payment
to, the Series A Preferred Stock. PepsiCo, Inc. owns 20 percent of
Pepsi General's common stock.
The Series A Preferred Stock may be redeemed at the option of the
holder(s) thereof anytime after the fifth anniversary of the date on
which it was issued, which was January 25, 1994. The Series A Preferred
Stock may also be redeemed by Pepsi General in whole or in part at
anytime after the tenth anniversary date of issuance. The redemption
price is $10,000 per share, plus accrued dividends to the date of
redemption. The net book value of the Series A Preferred Stock is $20.3
million at March 31, 1994 and is included in the minority interest
caption on the Registrant's balance sheet.
3. In the first quarter of 1993, the Registrant adopted Statement of
Financial Accounting Standards No. 106, which among other items,
required the Registrant to reflect in its financial statements estimates
of future costs of medical and survivor benefits for certain retirees.
Previously, the costs of the Registrant's retiree medical and survivor
benefit programs were recognized in the financial statements on a cash
accounting basis. The cumulative effect of adopting this change in
accounting principle as of January 1, 1993 resulted in a non-cash pretax
charge of $38.7 million ($24.0 million after-tax, or $0.22 per share)
and is reported as a separate component in the Registrant's Condensed
Consolidated Statements of Income. The effect of Statement No. 106 on
annual postretirement benefit expense, compared with the previous
accounting method, is not significant.
4. Effective January 1, 1993, the Registrant adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Statement
No. 109 supersedes existing accounting standards for income taxes
including Statement No. 96 which the Registrant adopted in 1988.
Adoption of Statement No. 109 did not result in any cumulative
adjustment and did not have any significant effect on the Registrant's
financial statements or results of operations due to the Registrant's
use of the liability method previously adopted under Statement 96.
5. Net cash provided by operating activities reflected cash payments for
interest and income taxes as follows:
Three Months Ended
March 31,
--------------------
1994 1993
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(in millions)
Interest Paid $ 23.9 $ 17.0
Interest Received 1.7 2.6
Income Taxes Paid 9.6 8.7
6. As of March 31, 1994, the components of inventory were approximately:
raw materials and supplies -- 32.6 percent; work in process -- 18.6
percent; and finished goods -- 48.8 percent.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1994, the Registrant had cash and cash equivalents of $50.9
million, compared with $93.0 million at December 31, 1993. The decrease in
cash during the first quarter of 1994 principally resulted from the purchase
of treasury stock, capital investments and dividends.
In the first quarter, the Registrant issued debt totaling $101.6 million,
principally consisting of 12 year notes with an interest rate of 6.5
percent. The proceeds from the issuance of long-term debt was used
primarily to repay long-term debt totaling $52.1 million and borrowings
under bank lines of credit and commercial paper totaling $48.6 million. In
total, the Registrant's debt increased $2.8 million from December 31, 1993
to $842.1 million at March 31, 1994.
Cash provided from operations amounted to $8.6 million in the first
quarter of 1994, compared with $17.7 million in the first quarter of 1993.
The reduction of $9.1 million principally resulted from higher payable
disbursements, partially offset by higher receivable collections. Cash
provided from operations, together with existing cash balances, was used
principally for capital investments, dividends and treasury stock purchases.
The Registrant had contractual bank lines of credit of $250.0 million at
March 31, 1994, unchanged from December 31, 1993. The Registrant also
maintains a $100 million commercial paper program. There were borrowings
under these programs of $35.0 million and $83.6 million at March 31, 1994
and December 31, 1993, respectively.
RESULTS OF OPERATIONS
1994 FIRST QUARTER COMPARED WITH 1993 FIRST QUARTER
Sales and revenues increased 4.7 percent to $546.9 million in the first
quarter of 1994 with revenue increases being reported by each of the
Registrant's three major business segments. Sales for the Registrant's
three major business segments are summarized below:
Quarter Ended
March 31,
---------------- %
1994 1993 Change
------ ------ ------
(in millions)
Pepsi General $ 275.0 $ 257.2 6.9
Midas 110.4 103.9 6.3
Hussmann 161.5 161.4 0.1
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Total Sales and Revenues $ 546.9 $ 522.5 4.7
======= =======
Pepsi General's revenues increased by $17.8 million, reflecting the
benefits of both improved product demand and higher selling prices. Case
volume was 4.9 percent higher in the first quarter of 1994 compared with the
first quarter of 1993. Midas revenues increased $6.5 million, chiefly due
to higher retail sales in the United States. Hussmann sales were
essentially flat with last year with stronger sales in Canada, Mexico and
the United Kingdom being essentially offset by lower sales in the U.S.
Demand for supermarket equipment in the U.S., which was unusually strong in
the first quarter of 1993, returned to more normalized levels in 1994.
Gross profit improved 5.5 percent to $193.0 million, primarily due to
the increase in sales. Gross profit margins increased to 35.3 percent from
35.0 percent in 1993, generally caused by both higher sales volume and
higher selling prices at Pepsi General.
Selling, general and administrative expenses increased $4.9 million, or
3.5 percent. As a percent of sales, S,G&A expense represented 26.2 percent,
down 0.3 percentage points from last year. Amortization expense did not
change significantly.
Operating income increased $5.0 million, or 12.3 percent, to $45.5
million with increases reported by Pepsi General and Midas, partially offset
by a decline reported by Hussmann. Operating income for the Registrant's
major business segments for the first quarter of 1994 compared with 1993 is
summarized below:
Quarter Ended
March 31,
----------------- %
1994 1993 Change
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(in millions)
Pepsi General $ 33.8 $ 28.6 18.2
Midas 8.8 8.2 7.3
Hussmann 7.0 7.4 (5.4)
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Subsidiary Operating Income 49.6 44.2 12.2
Corporate Admin. Expenses (4.1) (3.7) 10.8
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Total Operating Income $ 45.5 $ 40.5 12.3
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In the first quarter, Pepsi General had record operating earnings,
primarily reflecting the benefits of higher volumes and prices. Midas'
operating earnings were up $0.6 million, or 7.3 percent, principally
reflecting improved retail sales in the U.S. and the impact of its new sales
and marketing programs. Hussmann reported earnings of $7.0 million, down
5.4 percent from last year's record of $7.4 million. The decrease chiefly
resulted from lower U.S. earnings, principally reflecting lower sales.
Hussmann's lower U.S. earnings were partially offset by improved earnings in
Canada and the U.K. due to higher sales.
Net interest expense declined by $4.0 million as a result of the
Registrant's debt refinancing program. During 1993 and the first quarter of
1994, the Registrant repaid $482.9 million of debt from cash provided by
operations and proceeds from $364.9 million of debt issued during 1993 and
the first quarter of 1994 which had an average interest cost of 6.3%, more
than 300 basis points below the debt the refinancings replaced.
Other expense increased $5.9 million to $6.2 million for the first
quarter of 1994. The increase principally reflected a variance in gains and
losses from asset sales.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
12. Statement of Calculation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K.
None filed during the first quarter ended March 31, 1994
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SIGNATURE
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.
WHITMAN CORPORATION
Date: May 5, 1994 By: /s/ FRANK T. WESTOVER
-----------------------------------
Frank T. Westover
Senior Vice President and Controller
(As Chief Accounting Officer and Duly
Authorized Officer of Whitman
Corporation)
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION
OF RATIO OF EARNINGS TO FIXED CHARGES
(in Millions, Except Ratios)
Three Months
March 31, Years Ended December 31,
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1994 1993 1993 1992 1991 1990 1989
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Earnings:
Income from Continuing
Operations before
Taxes $ 21.9 $18.8 $212.2 $170.6 $161.7 $(39.0) $146.8
Fixed Charges Excluding
Capitalized Interest 21.5 26.2 105.9 106.9 138.2 168.1 166.1
------ ------ ------ ------ ------ ------ ------
Income as Adjusted $ 43.4 $ 45.0 $318.1 $277.5 $299.9 $129.1 $312.9
====== ====== ====== ====== ====== ====== ======
Fixed Charges:
Interest Expense $ 19.0 $ 23.8 $ 96.2 $ 97.7 $128.6 $158.7 $156.2
Portion of Rents
Representative of
Interest Factor 2.5 2.4 9.7 9.2 9.6 9.4 9.9
------ ------ ------ ------ ------ ------ ------
Fixed Charges Excluding
Capitalize Interest 21.5 26.2 105.9 106.9 138.2 168.1 166.1
Capitalized Interest 0.0 0.0 0.2 0.2 0.2 0.3 0.3
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges $ 21.5 $ 26.2 $106.1 $107.1 $138.4 $168.4 $166.4
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges 2.0x 1.7x 3.0x 2.6x 2.2x 0.8x 1.9x
====== ====== ====== ====== ====== ====== ======
(1)
(1) In 1990, the ratio of earnings to fixed charges was less than
one to one coverage principally as a result of a $170 million
restructuring charge. The dollar amount of fixed charge coverage
deficiency in 1990 was $39.3 million. Excluding the restructuring
charge, the ratio of earnings to fixed charges was 1.8 times in 1990.
