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, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
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
- ---------------------------------------------- -------
(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
----- -----
As of April 28, 1995, the Registrant had 104,923,871 outstanding shares
(excluding treasury shares) of common stock, no par value.
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 Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
SIGNATURE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended
March 31,
-----------------
1995 1994
------- -------
(in millions, except
per-share data)
Sales and Revenues $ 594.4 $ 546.9
Cost of Goods Sold 383.1 353.9
------- -------
Gross Profit 211.3 193.0
Selling, General and Administrative Expenses 157.8 143.2
Amortization Expense 4.4 4.3
------- -------
Operating Income 49.1 45.5
Interest Expense (17.3) (19.0)
Interest Income 1.3 1.6
Other Expense, Net (2.9) (6.2)
------- -------
Income Before Income Taxes 30.2 21.9
Provision for Income Taxes 13.0 9.4
------- -------
Income Before Minority Interest 17.2 12.5
Minority Interest 3.2 2.7
------- -------
Net Income $ 14.0 $ 9.8
======= =======
Average Number of Common Shares Outstanding 105.9 106.5
======= =======
Net Income per Common Share $ 0.13 $ 0.09
======= =======
Cash Dividends per Common Share $ 0.085 $ 0.075
======= =======
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1995 1994
------------ ------------
(in millions)
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 101.5 $ 71.3
Receivables 290.4 362.5
Inventories 261.1 233.6
Other Current Assets 43.8 40.3
-------- --------
Total Current Assets 696.8 707.7
-------- --------
Investments 208.1 222.6
Property (at Cost) 1,230.2 1,205.2
Accumulated Depreciation and Amortization (605.4) (591.4)
-------- --------
Net Property 624.8 613.8
-------- --------
Intangible Assets 520.9 524.3
Other Assets 71.8 67.0
-------- --------
Total Assets $2,122.4 $2,135.4
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY:
Current Liabilities:
Short-Term Debt, Including Current Portion
of Long-Term Debt $ 90.0 $ 90.0
Accounts and Dividends Payable 243.1 238.7
Other Current Liabilities 131.0 154.4
-------- --------
Total Current Liabilities 464.1 483.1
-------- --------
Long-Term Debt 738.6 723.0
Deferred Income Taxes 16.5 15.6
Other Liabilities 161.1 154.9
Minority Interest 208.0 206.2
Shareholders Equity:
Common Stock (No par, 250.0 million shares
authorized; 104.9 million shares
outstanding at March 31, 1995 and 105.0
million shares outstanding at
December 31, 1994) 415.4 413.2
Retained Income 245.3 239.9
Cumulative Translation Adjustment (72.3) (51.8)
Unrealized Investment Gain 0.8 1.3
Treasury Common Stock (55.1) (50.0)
-------- --------
Total Shareholders Equity 534.1 552.6
-------- --------
Total Liabilities and Shareholders Equity $2,122.4 $2,135.4
======== ========
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
March 31,
------------------
1995 1994
-------- --------
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income $ 14.0 $ 9.8
Adjustments to Reconcile to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 26.0 24.3
Other 0.9 5.7
Changes in Assets and Liabilities, Net of
Acquisitions:
Decrease in Receivables 59.9 38.0
Increase in Inventories (34.1) (4.1)
Increase (Decrease)in Payables 7.5 (35.2)
Net Change in Other Assets and Liabilities (16.8) (28.4)
------- -------
Net Cash Provided by Continuing Operations 57.4 10.1
Net Cash Used in Discontinued Operations (1.9) (1.5)
------- -------
Net Cash Provided by Operating Activities 55.5 8.6
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Investments, Net (40.4) (20.5)
Purchases of Investments (94.5) (27.6)
Proceeds from Sale of Investments 107.7 28.1
------- -------
Net Cash Used in Investing Activities (27.2) (20.0)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt 149.0 101.6
Repayment of Long-Term Debt (92.2) (52.1)
Net Repayment of Bank Lines of Credit and
Commercial Paper (41.1) (48.6)
Common Dividends (8.9) (7.9)
Treasury Stock Purchases (5.1) (23.9)
Issuance of Common Stock 2.5 0.5
------- -------
Net Cash Provided By (Used in) Financing
Activities 4.2 (30.4)
------- -------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (2.3) (0.3)
------- -------
Change in Cash and Cash Equivalents 30.2 (42.1)
Cash and Cash Equivalents at January 1 71.3 93.0
------- -------
Cash and Cash Equivalents at March 31 $ 101.5 $ 50.9
======= =======
See accompanying notes to condensed consolidated financial statements.
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 on Form 10-K for the year ended December
31, 1994. 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.
3. Net cash provided by operating activities reflected cash payments for
interest and income taxes as follows:
Three Months Ended
March 31,
------------------
1995 1994
-------- --------
(in millions)
Interest Paid $ 31.0 $ 23.9
Interest Received 1.5 1.7
Income Taxes Paid 3.9 9.6
4. As of March 31, 1995, the components of inventory were approximately:
raw materials and supplies -- 31.0 percent; work in process -- 16.6
percent; and finished goods -- 52.4 percent.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Registrant had cash and cash equivalents of
$101.5 million, compared with $71.3 million at December 31, 1994. The
increase in cash during the first quarter of 1995 principally resulted from
higher cash flow from operations, partially offset by higher capital
investments and dividends.
In the first quarter of 1995, the Registrant issued debt securities
totaling $149.0 million, primarily consisting of twelve year notes and two
year notes with interest rates of approximately 8.3 percent and 8.1
percent, respectively. The proceeds from the issuance of long-term debt
were used primarily to repay long-term debt totaling $92.2 million and
borrowings under bank lines of credit and commercial paper totaling $41.1
million. In total, the Registrant's debt increased $15.6 million from
December 31, 1994 to $828.6 million at March 31, 1995.
Cash provided from operations amounted to $55.5 million in the first
quarter of 1995, compared with $8.6 million in the first quarter of 1994.
The increase of $46.9 million principally resulted from significantly lower
payable disbursements and higher receivable collections, partially offset
by higher inventories. The higher receivable collections included cash
received on a tax refund receivable from the Internal Revenue Service of
$25.4 million. Cash provided from operations was used principally for
capital investments, and common stock repurchases.
The registrant had contractual bank lines of credit of $300.0 million at
March 31, 1995, unchanged from December 31, 1994. The registrant also
maintains a $200.0 million commercial paper program. There were borrowings
under these programs of $1.4 million and $42.5 million at March 31, 1995
and December 31, 1994, respectively.
RESULTS OF OPERATIONS
1995 FIRST QUARTER COMPARED WITH 1994 FIRST QUARTER
Sales and revenues increased 8.7 percent to $594.4 million in the first
quarter of 1995 with revenue increases being reported by each of the
Registrant's three major subsidiaries. Sales for the Registrant's three
major subsidiaries are summarized below.
Quarter Ended
March 31,
------------------ %
1995 1994 Change
-------- -------- --------
(in millions)
Pepsi General $ 298.7 $ 275.0 8.6
Midas 127.0 110.4 15.0
Hussmann 168.7 161.5 4.5
------- -------
Total Sales and Revenues $ 594.4 $ 546.9 8.7
======= =======
Pepsi General's revenues increased $23.7 million, reflecting the
benefits of both improved product demand and higher selling prices. Volume
was 4.4 percent higher when compared with the first quarter of 1994.
Pepsi General's average net selling price also increased 4.4 percent.
Midas' revenues increased $16.6 million, chiefly due to higher retail sales
in the United States. Hussmann's revenues increased $7.2 million on
significantly stronger sales in the United States, partially offset by
lower sales in Mexico due to the devaluation of the peso.
Gross profit improved 9.5 percent to $211.3 million, primarily
reflecting the higher sales. Gross profit margins increased to 35.5
percent from 35.3 percent in 1994, primarily due to improved margins at
Midas partially offset by lower margins at Hussmann, principally reflecting
a change in product selling mix. Pepsi General's margins remained
unchanged with higher selling prices offset by higher packaging costs.
Selling, general and administrative expenses increased $14.6 million, or
10.2 percent. As a percent of sales, S,G&A expenses represented 26.5
percent, up 0.3 percentage points from last year. The increase in S,G&A
expense is mainly due to higher volume at Pepsi General and Midas, as well
as startup costs at Pepsi General's new operations in Poland. Amortization
expense did not change significantly.
Operating income increased $3.6 million, or 7.9 percent, to $49.1
million with increases at Pepsi General and Midas, partially offset by a
decline at Hussmann. Operating income for each of the Registrant's three
major subsidiaries is summarized below.
Quarter Ended
March 31,
------------------ %
1995 1994 Change
-------- -------- --------
(in millions)
Pepsi General $ 36.3 $ 33.8 7.4
Midas 10.9 8.8 23.9
Hussmann 6.2 7.0 (11.4)
------- -------
Subsidiary Operating Income 53.4 49.6 7.7
Corporate Administrative Expenses (4.3) (4.1) 4.9
------- -------
Total Operating Income $ 49.1 $ 45.5 7.9
======= =======
In the first quarter, Pepsi General had record operating earnings of
$36.3 million, primarily reflecting the benefits of higher volumes and
prices. Pepsi General's results included $2.2 million in losses from its
operations in Poland. Excluding the losses in Poland, Pepsi General's
operating income increased 13.9 percent. Midas also had record operating
earnings of $10.9 million, up $2.1 million or 23.9 percent, primarily
reflecting improved retail sales in the U.S. and unusually warm weather
early in the quarter, as well as the effects of increased promotional
efforts. Hussmann reported earnings of $6.2 million, down 11.4 percent
from last year. The decrease primarily resulted from lower earnings in
Mexico, reflecting both the devaluation of the peso and the decline in the
Mexican economy. This decline completely offset improved earnings from the
U.S. operations as a result of higher sales.
Net interest expense declined $1.4 million, or 8.0 percent, as the
Registrant continued its debt refinancing program.
Other expense declined $3.3 million to $2.9 million in the first quarter
of 1995. The decrease principally reflects variances in gains and losses
from asset sales, and foreign currency translation gains.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 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, 1995
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 12, 1995 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,
------------ ------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
Earnings:
Income from Continuing
Operations before
Taxes $ 30.2 $ 21.9 $212.7 $212.2 $170.6 $161.7 $(39.0)
Fixed Charges Excluding
Capitalized Interest 20.3 21.5 82.2 105.9 106.9 138.2 168.1
------ ------ ------ ------ ------ ------ ------
Income as Adjusted $ 50.5 $ 43.4 $294.9 $318.1 $277.5 $299.9 $129.1
====== ====== ====== ====== ====== ====== ======
Fixed Charges:
Interest Expense $ 17.3 $ 19.0 $ 71.1 $ 96.2 $ 97.7 $128.6 $158.7
Portion of Rents
Representative of
Interest Factor 3.0 2.5 11.1 9.7 9.2 9.6 9.4
------ ------ ------ ------ ------ ------ ------
Fixed Charges Excluding
Capitalize Interest 20.3 21.5 82.2 105.9 106.9 138.2 168.1
Capitalized Interest 0.0 0.0 0.2 0.2 0.2 0.2 0.3
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges $ 20.3 $ 21.5 $ 82.4 $106.1 $107.1 $138.4 $168.4
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges 2.5x 2.0x 3.6x 3.0x 2.6x 2.2x 0.8x
====== ====== ====== ====== ====== ====== ======
(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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 101,500
<SECURITIES> 0
<RECEIVABLES> 290,400<F1>
<ALLOWANCES> 5,800
<INVENTORY> 261,100
<CURRENT-ASSETS> 696,800
<PP&E> 1,230,200
<DEPRECIATION> 605,400
<TOTAL-ASSETS> 2,122,400
<CURRENT-LIABILITIES> 464,100
<BONDS> 738,600
<COMMON> 415,400
0
0
<OTHER-SE> 118,700
<TOTAL-LIABILITY-AND-EQUITY> 2,122,400
<SALES> 594,400
<TOTAL-REVENUES> 594,400
<CGS> 383,100
<TOTAL-COSTS> 545,300
<OTHER-EXPENSES> 2,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000<F2>
<INCOME-PRETAX> 30,200
<INCOME-TAX> 13,000
<INCOME-CONTINUING> 14,000<F3>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,000
<EPS-PRIMARY> $0.13
<EPS-DILUTED> $0.13
<FN>
<F1> Net of allowance for doubtful accounts of$5,800
<F2> Interest expense reported is offset by $1,300 of interest income, therefore
gross interest expense equals $17,300
<F3> Income from continuing operations is reported after minority interest of
$3,200
</FN>
</TABLE>
