1994
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 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 36-607657
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(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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, without par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of February 28, 1995, the aggregate market value of the registrant's
common stock held by non-affiliates was $1,978.8 million. The number of
shares of common stock outstanding at that date was 104,835,316 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part Item
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1. Whitman Corporation definitive proxy
statement dated March 22, 1995 for the 1995
Annual Meeting of Shareholders. III 10,11,12
PART I
Item 1. BUSINESS.
GENERAL
Whitman Corporation ("Whitman") is engaged in three distinct businesses:
Pepsi-Cola and other non-alcoholic beverage products, Midas automotive
services, and Hussmann refrigeration systems and equipment.
Prior to 1968, Whitman's only substantial business was the Illinois
Central Railroad. Between 1968 and 1986, Whitman effected a series of
acquisitions aimed at diversifying beyond the railroad business, including
Pepsi-Cola General Bottlers in 1970 and Midas in 1972. In 1978, Pet
Incorporated, together with its subsidiary Hussmann, was acquired as a part
of this diversification program. In 1987, Whitman began a program of
strategic restructuring designed to transform itself into an enterprise more
focused on consumer goods and services. In 1988, Whitman sold its Pneumo
Abex Corporation aerospace and defense subsidiary, and in January, 1989,
Whitman spun off its railroad operations to its shareholders. On April 1,
1991, Whitman spun off its Pet subsidiary (excluding its Hussmann subsidiary)
to its shareholders. After the Pet spin-off, the principal operating
companies of Whitman were Pepsi-Cola General Bottlers, Inc. ("Pepsi
General"), Midas International Corporation ("Midas") and Hussmann
Corporation ("Hussmann").
PEPSI GENERAL
Pepsi General produces and distributes soft drinks and non-alcoholic
beverages, under exclusive franchises, in 12 states in the Midwestern United
States - a market of approximately 25 million people. It is the largest
independent Pepsi bottler in the U.S., accounting for about 12 percent of all
Pepsi-Cola products sold in the U.S. Pepsi General products outsell all
other brands in all of its major U.S. markets. In August, 1994, Pepsi
General sold its first case of Pepsi outside the U.S. in a newly franchised
area in Northern and Western Poland. This market, when fully developed, will
serve approximately 16 million people.
In 1994, approximately 87 percent of Pepsi General's volume was from
Pepsi-Cola products, including: Pepsi, Diet Pepsi, Caffeine Free Pepsi,
Caffeine Free Diet Pepsi, Wild Cherry Pepsi, Mountain Dew, Diet Mountain Dew,
Slice and All-Sport. Other brands, including Dr Pepper, Seven-Up, Hawaiian
Punch, Dad's Root Beer, Canada Dry, A & W Root Beer, Ocean Spray, Lipton's
Tea and others account for the remaining 13 percent. Diet products account
for slightly more than 27 percent of total cases sold. Approximately three-
quarters of all cases sold are in cans and 24 percent are in non-returnable
bottles.
Volume growth in the soft drink industry has historically come from the
supermarket sector, where competition is intense. Recently, Pepsi General's
focus has been to obtain more of its growth from higher margin distribution
channels such as convenience stores, gas stations, vending machines and food
service providers.
The majority of Pepsi General's products are distributed by route sales
people to retail outlets by truck. Currently, Pepsi General operates more
than 1,200 routes. For several years, Pepsi General has been expanding its
bulk distribution system for larger customers, Pepsi Express, in efforts to
improve delivery productivity. In addition, Pepsi General has pioneered the
use of hand-held computers for route sales people. This system enables Pepsi
General to process sales and orders more efficiently, allows for better
inventory and discount controls, and enables sales personnel to handle a
wider range of products more efficiently.
Pepsi General owns, leases or sells the vending machines which dispense
its soft drink products in factories, offices, schools, stores, gasoline
stations and other locations. Pepsi General's business is seasonal and
weather conditions have a significant effect on sales.
One of Pepsi General's long-term strategic goals is to transform itself
from a carbonated soft drink company to a total beverage company and to
continue to grow faster than the industry. In 1994, Pepsi General continued
to expand its product line by adding new product lines such as new lemonades
and bottled waters; however, most of the new product effort was spent on
other products introduced in recent years such as Lipton Tea, Ocean Spray,
All Sport, Wild Cherry Pepsi, and Caffeine Free Mountain Dew products. Sales
of these products increased approximately 50% in 1994. In January, 1994,
Pepsi General acquired the Waterloo, Iowa franchise, which increased case
sales by 1.2 percent.
Pepsi General's franchises grant it the exclusive right to produce and
sell the products and use the related trade names and trademarks in the
franchised territories. The franchises require Pepsi General, among other
things, to purchase its concentrate requirements solely from the franchisor,
at prices established by the franchisor, and to promote diligently the sale
and distribution of the franchised products. Packaging materials (bottles,
bottle caps, cans, cartons, cases) are obtained from manufacturers approved
by the franchisor and other items are purchased in the general market.
Domestic franchises are for an indefinite term and are subject to termination
upon failure to comply with the provisions of the franchise agreement.
Competition among soft drinks of all kinds, and particularly in the
principal cola drink market (approximately 65 percent of all soft drinks sold
in the U.S. are colas), is intense and focuses on price to retail outlets.
Despite fluctuations in the price of high fructose corn sweetener and
materials used in soft drink packaging, Pepsi General has not experienced
difficulty in obtaining such items.
As the result of an agreement entered into in 1987, Pepsi General is 80%
owned by Whitman and 20% owned by a subsidiary of PepsiCo, Inc. ("PepsiCo"),
which is the franchisor of Pepsi-Cola products. While Pepsi General manages
all phases of its operations, including pricing of its products, PepsiCo and
Pepsi General exchange production, marketing, and distribution information.
In 1994, PepsiCo granted Pepsi General a franchise for the distribution
of Pepsi-Cola products in the western and northern areas of Poland for an
initial term of 15 years. Pepsi General anticipates an investment of as much
as $100 million over the next 5-8 years in Poland, and will in the near term
incur losses in Poland as this new venture is developed.
MIDAS
Midas provides automotive exhaust, brake and suspension services through
2,575 franchised and company-owned Midas shops in the United States, Canada,
France, Belgium, Austria, Switzerland, Spain, Italy, Australia, New Zealand,
Panama, Mexico, Honduras and the Bahamas. Domestic manufacturing plants
produce approximately 1,800 different types of mufflers and 2,750 types of
exhaust and tail pipes to service approximately 1,200 makes and models of
automobiles.
The principal source of Midas' revenue is derived from its network of
franchised and company-owned and operated retail shops. Midas collects an
initial franchise fee and receives yearly royalties based upon the
franchisee's gross revenues. In addition, Midas generates revenues from the
sale of its manufactured mufflers and tubing; the resale of purchased parts,
primarily brakes, shocks and front-end alignment components to its
franchisees; and rental real estate revenues from franchisees related to the
leasing of Midas shops. An important part of Midas' marketing program is its
warranty of mufflers, brakes, and shocks. Midas also sells its manufactured
exhaust system parts under other brand names to automotive parts
distributors, jobbers and automobile accessory stores and its fabricated tube
bending equipment to jobbers and retail installers.
The raw materials and supplies used in Midas products are purchased from
many suppliers and the company is not dependent upon any single source for
any of its raw materials or supplies.
Competition in the automotive replacement parts business is intensive at
both the wholesale and retail levels. Service and convenience, price and
warranties are the primary competitive factors. Competition includes
automotive service centers of the retail chain stores, muffler shops,
automotive dealers, gasoline stations and independent repair shops.
HUSSMANN
Hussmann produces merchandising and refrigeration systems for the world's
food industry. Products include refrigerated display cases,
commercial/industrial refrigeration systems, storage coolers, bottle coolers,
walk-in coolers, and HVAC equipment. Hussmann is the market leader in North
America, and has substantial operations in the United Kingdom. The
supermarket equipment industry in the United States, Hussmann's core
business, represents an $800 million market. The United States customer base
is comprised of approximately 13,000 independent and 18,000 chain-owned
supermarkets, plus over 52,000 other grocery stores. Every year,
approximately 4,000 stores purchase refrigeration equipment for either new
store openings or remodelings. Historically, Hussmann's supermarket business
has been divided approximately equally between new store activity and the
remodeling of existing stores. In 1994, about 45 percent of such business
was in new store openings, and 55 percent remodelings.
The convenience store/specialty equipment industry in the U.S. represents
a market of over $300 million per year, serving approximately 71,000 stores.
Hussmann maintains separate sales and manufacturing operations for this
industry.
North American commercial/industrial refrigeration represents a market of
nearly $500 million. Hussmann manufactures unit coolers, condensing units,
and air-cooled condenser products for this market.
Mexico is Hussmann's second largest profit center. It has two
manufacturing operations, and uses both a direct sales force and a network of
150 independent dealers and distributors to bring its products to the Mexican
market. A large portion of Mexico's business is in equipment for the soft
drink and brewery industries. Hussmann's Canadian operations consist of two
manufacturing plants and a network of company-owned branches and independent
distributors.
In the United Kingdom, Hussmann has a manufacturing plant located in
Glasgow, Scotland, and a network of sales, service, and installation depots
located throughout the country. Hussmann also has a 50% interest in Capital
Metalwork Ltd., a manufacturer of specialty refrigerated cases. Hussmann's
branch service and distribution network in the United Kingdom is at least
twice the size of its nearest competitor.
In the Far East, Hussmann has a joint venture with a distributor in
Singapore which sells, services, and distributes Hussmann products throughout
the Southern Pacific Rim region. In December, 1994, Hussmann established a
joint venture with the Luoyang Refrigeration Machinery Factory, China's
leading producer of refrigeration systems and food display cases. Hussmann's
initial investment will be approximately $5.5 million. It is expected that
the joint venture will begin production of cases designed by Hussmann in the
Spring of 1995. Hussmann also has distributor agreements in Japan, Taiwan,
New Zealand, Korea, Argentina, Columbia, El Salvador and Costa Rica and
licensees in Thailand and New Zealand.
In 1993, Hussmann introduced PROTOCOLTM, a unique refrigeration system
which is CFC and HCFC free, and less expensive to install and operate than
conventional systems. Hussmann had exclusive use of the PROTOCOL compressor
technology through 1994; however, the loss of exclusivity is not expected to
significantly affect Hussmann's business in 1995 or thereafter.
One of Hussmann's greatest strengths is its research and development
center, where the PROTOCOL system was developed. It is the only R&D center
of its kind in the industry. It allows Hussmann to work closely with
chemical companies and compressor, valve and controls manufacturers to create
the new generations of cases and systems.
The dollar amount of firm backlog at December 31, 1994 was $136.2
million, compared with $146.9 million in 1993. Substantially all such
backlog is expected to be filled within one year.
Hussmann products are marketed internationally by both company sales
personnel and independent distributors. The principal competitive factors in
the sale of Hussmann products are price, variety, quality and technology,
particularly energy conservation. The raw materials and supplies used in
Hussmann products are purchased from many suppliers and Hussmann is not
dependent upon any single source for any of its raw materials or supplies.
EMPLOYEES
Whitman employed 15,271 persons worldwide as of December 31, 1994.
Whitman regards its employee relations as generally satisfactory.
ENVIRONMENTAL MATTERS
Whitman maintains a continuous program to facilitate compliance with
federal, state and local laws and regulations relating to the discharge or
emission of materials into, and other laws and regulations relating to the
protection of, the environment. The capital costs of such compliance,
including the costs of the modification of existing plants and the
installation of new manufacturing processes incorporating pollution control
technology, are not material.
Hussmann, together with numerous other defendants, has been named as a
potentially responsible party ("PRP") in two state actions under the
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") involving off-site waste disposal. Hussmann
is also involved in several other, principally off-site, proceedings. None of
these matters is expected to involve any significant expense to Hussmann.
Pepsi General is a de minimus participant at seven off-site locations. Midas
has been named a PRP at one Superfund site where its participation is also
expected to be at the de minimus level, and is also involved in certain
removal and remedial activities relating to underground storage tanks which
are not anticipated to result in significant expense to Midas.
Under the agreement pursuant to which Whitman sold Pneumo Abex
Corporation in 1988 and a subsequent settlement agreement entered into with
Pneumo Abex in September, 1991, Whitman has assumed indemnification
obligations for certain environmental liabilities of Pneumo Abex, net of any
insurance recoveries. Pneumo Abex is subject to a number of federal, state
and local environmental cleanup proceedings, including proceedings under
CERCLA at off-site locations involving other major corporations which have
also been named as PRP's. Pneumo Abex is also subject to private claims and
several lawsuits for remediation of properties currently or previously owned
by Pneumo Abex, and Whitman is subject to two such suits.
There is significant uncertainty in assessing the total cost of
remediating a given site and in determining any individual party's share in
that cost. This is due to the fact that the Pneumo Abex liabilities are at
different stages in terms of their ultimate resolution, and any assessment
and determination are inherently speculative during the early stages,
depending upon a number of variables beyond the control of any party.
Additionally, the settlement of governmental proceedings or private claims
for remediation invariably involves negotiations within broad cost ranges of
possible remediation alternatives. Furthermore, there are significant timing
considerations in that a portion of the expense involved and any resulting
obligation of Whitman to indemnify Pneumo Abex may not be incurred for a
number of years.
In 1992, the United States Environmental Protection Agency ("EPA") issued
a Record of Decision ("ROD") under the provisions of CERCLA setting forth the
scope of expected remedial action at a Pneumo Abex facility in Portsmouth,
Virginia. On August 15, 1994, the EPA issued an Amended ROD revising certain
remedial actions to be undertaken in areas of the Portsmouth site to be zoned
commercial. The EPA has estimated that the cost of the revised remedial
action necessary to comply with the Amended ROD will total $31.5 million. On
December 19, 1994, Pneumo Abex, along with 20 other PRPs, received notice of
liability under CERCLA and a request to negotiate a consent decree to
undertake remedial action consistent with the Amended ROD. Whitman
management remains optimistic that ongoing discussions with the EPA will
result in a reduction in the total cost for implementation of the required
remedial action, and that a portion of the remediation cost will be allocated
to other PRPs, most of whom are financially viable, either through
negotiations or as a result of a judicial determination in litigation
initiated by Pneumo Abex and Whitman against several of the other PRPs.
Management believes that potential insurance recoveries may defray a
portion of the expenses involved in meeting Pneumo Abex environmental
liabilities. On November 20, 1992, Jensen-Kelley Corporation, a Pneumo Abex
subsidiary, Pneumo Abex and certain other of its affiliates, and Whitman and
certain of its affiliates, filed a lawsuit against numerous insurance
companies in the Superior Court of California, Los Angeles County, seeking
damages and declaratory relief for insurance coverage and defense costs for
environmental claims. Whitman is unable to predict the outcome of this
litigation.
In the opinion of management, Whitman believes that the eventual
resolution of these claims and litigation, considering amounts accrued, but
excluding potential insurance recoveries, will not have a material adverse
effect on Whitman's financial condition.
Item 2. PROPERTIES.
Pepsi General's facilities include six bottling plants, three combination
bottling/canning plants, three canning plants and 59 distribution warehouses,
including, as of year-end 1994, one distribution facility in Poland.
Approximately 16 percent of Pepsi General's production is from leased
facilities. Midas operates four manufacturing plants in the United States,
of which three are owned and one is leased. In addition, Midas maintains 13
warehouses in the United States and three warehouses in Canada, of which two
are owned and 14 are leased. At December 31, 1994, Midas operated 125 Midas
Muffler Shops in the United States, 32 Midas Muffler Shops in Canada and 189
Midas Muffler Shops in seven other foreign countries. Hussmann operates 9
owned and 8 leased manufacturing facilities in the United States, Canada,
Mexico, and the United Kingdom. There are five owned and 42 leased branch
facilities in the United States, Canada, Mexico, Hungary and the United
Kingdom which sell, install and maintain Hussmann products.
All facilities are adequately equipped and maintained and capacity is
considered to be adequate for current needs.
In addition, Whitman engages in a variety of industrial, commercial and
residential real estate activities in the United States.
Item 3. LEGAL PROCEEDINGS.
Whitman and its subsidiaries are defendants in numerous lawsuits, none of
which will, in the opinion of Whitman's counsel, have a material adverse
effect on Whitman s financial position.
See also "Environmental Matters" in item 1.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The common stock of the Company is listed on the New York, Chicago and
Pacific stock exchanges. The table below sets forth the reported high and
low sales prices as reported by THE WALL STREET JOURNAL for Whitman common
stock and indicates the Whitman dividends for each quarterly period for the
years 1994 and 1993.
Common
--------------------------
High Low Dividend
1994: ------- ------- --------
1st quarter $ 17.000 $ 14.875 $ 0.075
2nd quarter 16.375 14.750 0.085
3rd quarter 18.000 15.375 0.085
4th quarter 17.250 15.250 0.085
1993:
1st quarter $ 15.375 $ 13.875 $ 0.065
2nd quarter 15.000 12.750 0.075
3rd quarter 15.500 13.250 0.075
4th quarter 17.000 14.875 0.075
Item 6. SELECTED FINANCIAL DATA.
Included on page following Notes to Consolidated Financial Statements.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources:
The benefits of the Company's refinancing program became evident in 1994,
as the Company reduced its net interest expense by $18.7 million to $64.7
million. The average interest rate on debt refinanced was reduced by
approximately 300 basis points and total debt in 1994 was reduced by $26.3
million.
This refinancing program not only contributed significantly to the
Company's earnings performance for 1994, but also was a significant factor in
the Company's strengthened financial condition. As a result of the improved
earnings and cash flows, the Company's long-term debt-to-capital ratio
improved to 48.8 percent at the end of 1994, compared with 52.1 percent at
December 31, 1993, 55.3 percent at year-end 1992 and 64.0 percent at the time
of the Pet spin-off in April, 1991.
In addition, during 1994 the Company established a $300 million 5-year
contractual revolving credit facility and increased its commercial paper
program to $200 million. The Company has $188.6 million of debt, including
$30 million of debt under its commercial paper program, that comes due in
1995. The Company expects to use a portion of its anticipated free cash flow
to pay down debt during 1995 and to refinance the remainder under either its
revolving credit facility, commercial paper program, or through the issuance
of additional debt as market conditions warrant. In connection with this
refinancing program, the Company issued $50.5 million of 8.1% 2-year notes
and $100 million of 8-1/4% 12-year notes on January 26, 1995 and February 16,
1995, respectively.
The Company also continued to invest heavily in its future growth and in
its efforts to improve its productivity and competitive position. Capital
spending increased by 43.6 percent to $127.4 million in 1994, and is
currently projected to increase in 1995 by an additional 10 percent or more.
The Company believes that with its strong free cash flow, its outlook for
continued earnings improvements, its existing and available lines of credit
and with the potential for additional debt or equity offerings, it will have
sufficient resources to fund its future growth, including funds for capital
expenditures and possible acquisitions.
The Company uses financial derivative instruments to manage its interest
rate risk. The Company also has entered into foreign currency swap
agreements to reduce the effect of foreign currency fluctuations on its
foreign currency debts. A description of these transactions is discussed in
Note 5 to the Consolidated Financial Statements. The effects of such
transactions on the Company's results of operations and financial condition
were not significant.
Operating Results:
1994 compared with 1993
Sales and revenues increased by $129.1 million to $2,658.8 million in
1994, a 5.1 percent increase over the previous year.
Pepsi General's revenues increased $76.5 million to $1,256.1 million, a
6.5 percent increase over 1993. Unit volume amounted to 169.7 million cases,
a 5.8 percent increase over 1993. The increase in unit volume was
principally in the core Pepsi brands, although relatively new products such
as All-Sport, Lipton Teas and Ocean Spray also had significant volume
increases. The average net selling price per case improved by approximately
one percent during 1994, and primarily reflected favorable changes in brand,
package and channel mix.
Midas' revenues increased by $39.6 million, or 7.9 percent, to $543.2
million in 1994. Approximately 70 percent of the increase was from domestic
operations, and reflected a relatively strong sales performance in its U.S.
retail system. The increased retail sales in the U.S. included an
approximate 3 percent increase in the number of jobs performed, as well as an
improvement in the average revenue per job. Revenues in Europe increased by
over 22 percent, and principally reflected an increase in the number of shops
as well as improved revenues in France and Belgium.
Hussmann's revenues increased by $13.0 million in 1994, or 1.5 percent,
to $859.5 million, with the increased revenues being reported principally by
the U.K. and Mexican operations. U.S. unit volume of refrigerated display
and reach-in door cases increased by approximately one percent in 1994, but
was offset by increasing competitive pressures which had an adverse effect
upon pricing.
Gross profit margins improved to 35.9 percent, modestly better than the
gross profit margin of 35.8 percent in 1993. The margin improvement
reflected the benefits of higher volumes and modest price increases at both
Pepsi General and Midas, while Hussmann's gross profit margins declined,
reflecting the adverse effects of increasingly competitive conditions, and a
shift in product mix.
Selling, general and administrative (S,G&A) expenses increased by 4.7
percent in 1994 to $609.8 million. The increase was less than the increase
in revenues, and as a result, such expenses declined to 22.9 percent of
sales, down from 23.0 percent in 1993. Increases at Pepsi General and Midas
generally were in line with the increases in revenues, with Midas' increase
also reflecting an increase in the number of company-owned shops,
particularly in its international operations. Hussmann's S,G&A expenses
declined by more than 6 percent, due, in part, to Hussmann's continuing cost
containment programs.
Amortization expense did not change significantly.
As a result of the increase in sales and revenues, together with the
improvement in gross profit margins and a reduction in S,G&A expenses as a
percent of sales, operating income increased by $21.5 million, or 7.0
percent, to $326.8 million. The Company's operating margin, as a percent of
sales, increased from 12.1 percent in 1993 to 12.3 percent in 1994.
Pepsi General's operating income increased by 8.8 percent to a new record
level of $185.5 million. The increase principally reflected the benefits of
the higher case volume together with the modest increase in pricing. Costs
were also favorably affected by lower aluminum can costs, offset in part by
higher ingredient and packaging costs. Included in the operating results
were $2.7 million of losses and expenses related to Pepsi General's new
venture in Poland.
Operating earnings at Midas increased by 12.1 percent, or $8.1 million,
to $75.2 million. The increase in operating income was in Midas' U.S.
operations, and principally resulted from higher royalty and rental revenues,
higher product sales and improved earnings from company-owned shops. The
increase in the U.S. operating results was partially offset by lower earnings
from its foreign operations, principally in its Canadian operations, where
wholesale and retail sales remained sluggish. Midas also provided for the
closure of additional shops in Australia.
Hussmann's operating earnings of $82.5 million were down $1.1 million
from the record level established in 1993. The reduction in earnings
primarily reflected the adverse effects of pricing pressures on profit
margins in the U.S. and a shift in product mix to lower profit margin
business in the U.K. and Mexico.
Interest expense declined sharply from $96.2 million in 1993 to $71.1
million in 1994. The reduction reflected the effects of the Company's
refinancing program, whereby approximately $530 million of debt has been
refinanced over the past 2 years at an average interest cost which was
approximately 300 basis points below the interest rate on the debt it
replaced. In addition, the Company reduced its total debt levels by $26.3
million in 1994 and by $87.5 million since December 31, 1992.
Interest income declined from $12.8 million in 1993 to $6.4 million in
1994. The reduction reflected a decline in investable funds during the
latter part of 1993 and continuing into 1994.
Other expense increased by $15.5 million to $25.2 million in 1994. The
increase principally reflected losses from asset sales in 1994 compared with
gains from asset sales in 1993, as well as additional expenses related to the
Company's real estate and leasing operations.
1993 compared with 1992
Sales and revenues increased by $141.7 million, or 5.9 percent, to
$2,529.7 million in 1993.
Pepsi General's revenues increased $68.4 million, or 6.2 percent, over
1992. The increase principally reflected higher case volume, up 4.4 percent,
and included growth in not only the core Pepsi brands, but in new products,
such as All Sport, Lipton Teas and Ocean Spray. The average net selling
price per case improved by approximately one percent, with the remainder of
the revenue increase principally reflecting improved product mix.
Midas' revenues increased by $18.0 million to $503.6 million. Midas'
domestic revenues were up 4 percent over those of 1992, in spite of a 52-week
year in 1993 compared with a 53-week year in 1992, and principally reflected
increased retail and wholesale sales during the latter part of 1993. Foreign
revenues were up 3 percent over 1992 with growth in Europe being offset in
part by lower revenues in Canada and Australia, which continued to experience
recessionary conditions.
Hussmann's revenues increased $55.3 million, or 7.0 percent, to $846.5
million, with the improvement principally reflecting the benefits of improved
demand for Hussmann's products throughout the world.
Gross profit margins improved for the third straight year after the spin-
off of Pet, increasing from 35.3 percent in 1992 to 35.8 percent in 1993.
This margin improvement reflected the benefits of lower ingredient costs,
some modest price improvement and improved volumes at Pepsi General. The
improvement was offset by modestly lower profit margins at Midas and
Hussmann, where the inability to increase prices to offset increased costs
depressed margins.
Selling, general and administrative expenses increased 5.7 percent to
$582.3 million, compared with a 5.9 percent increase in sales. As a result,
such expenses declined modestly as a percentage of sales from 23.1 percent in
1992 to 23.0 percent in 1993. Such expenses increased at all subsidiaries,
and generally reflected the effects of inflationary increases in costs, with
the most significant increase being reported by Midas, where the increase
reflected, among other items, an increase in the number of company-owned
shops, particularly in Europe, as well as expenses associated with
restructurings in the U.S. and shop closings in Australia.
Amortization expense did not change significantly.
As a result of the improved sales and revenues, as well as improved gross
profit margins, operating income increased by $30.9 million, an 11.3 percent
improvement, over 1992.
Pepsi General's operating income increased by 22.7 percent to $170.5
million in 1993. The sharply improved results reflected the benefits of
higher volume, due in part to more favorable weather conditions in 1993,
lower ingredient and can costs and a modest improvement in pricing.
Operating margins improved by 2 full percentage points to 14.5 percent.
Midas' operating earnings in 1993 declined $6.0 million to $67.1 million.
Midas' U.S. operating results were $2.8 million below 1992 and reflected,
among other items, restructuring charges in the U.S., the continuing
recessionary conditions in the Northeast and in Southern California, as well
as the inability to raise prices to offset material and wage increases.
Midas' foreign operations were down $3.2 million, principally in Australia
and Canada, reflecting weak economic conditions in those countries plus the
expenses associated with the closing of a number of shops in Australia, which
more than offset improved results in Europe.
Hussmann reported record earnings of $83.6 million, 8.9 percent over the
previous record of $76.8 million in 1992. The improved performance reflected
the benefits of improved volumes throughout their operations and the benefits
of continued emphasis on cost controls.
Interest expense declined by $1.5 million to $96.2 million. The
reduction reflected the effects of lower interest rates. Average debt levels
increased during 1993 as the Company issued debt in advance of repayments to
take advantage of favorable market conditions.
Interest income increased by $3.8 million to $12.8 million. The
additional income was principally the result of higher levels of temporarily
investable funds from proceeds of debt issued in advance of repayment
requirements.
Other expense declined by $5.4 million in 1993, with the reduction
principally reflecting gains from asset sales.
Environmental Matters
The Company is involved, directly or as a possible indemnitor, in a
number of environmental proceedings and claims. The Company continues to
actively investigate such matters in an attempt to evaluate the Company's
exposure to each claim. In many instances, many other major corporations
also have been identified as potentially responsible parties. As discussed
in Note 11 to the Consolidated Financial Statements, the Company believes
that it has made adequate provision for such potential liabilities, excluding
consideration of possible insurance recoveries. However, it is not possible
at this time to determine what the Company's ultimate liability on these
claims may be.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Information following signature page.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Whitman incorporates by reference the information contained under the
caption "Election of Directors" in its definitive proxy statement dated March
22, 1995, filed pursuant to Section 14 (a) of the Securities Exchange Act of
1934, as amended.
The executive officers of Whitman and their ages as of March 1,1995 were
as follows:
Age Position
---- ----------
Bruce S. Chelberg 60 Chairman and Chief Executive Officer
Thomas L. Bindley 51 Executive Vice President
Frank T. Westover 56 Senior Vice President-Controller
Lawrence J. Pilon 46 Senior Vice President-Human Resources
Gerald A. McGuire 63 Corporate Vice President; President and
Chief Executive Officer, Pepsi-Cola
General Bottlers, Inc.
John R. Moore 59 Corporate Vice President; President and
Chief Executive Officer, Midas
International Corporation
J. Larry Vowell 54 Corporate Vice President; President and
Chief Executive Officer, Hussmann
Corporation
Charles H. Connolly 60 Vice President-Corporate Affairs and
Investor Relations
William B. Moore 53 Vice President, Secretary and General
Counsel
Except as described in the following paragraph or as incorporated by
reference to the Registrant's definitive proxy statement, all the executive
officers of Whitman have held positions which are the same or which involve
substantially similar functions as indicated above during the past five
years.
Mr. Chelberg was elected Chairman and Chief Executive Officer in May,
1992. Prior to that, Mr. Chelberg served as Executive Vice President of the
Company since 1985. Mr. Bindley joined Whitman Corporation as Executive Vice
President in April, 1992. Prior to joining Whitman Corporation, Mr. Bindley
served as Executive Vice President of Square D Corporation from August, 1986
through September, 1991. Mr. Pilon joined Whitman Corporation as Senior Vice
President-Human Resources in February, 1994. Prior to joining Whitman
Corporation, Mr. Pilon served as Vice President-Human Resources and Secretary
of National Intergroup, Inc. from June, 1986 to January, 1994. Mr. Vowell
was elected President and Chief Executive Officer of Hussmann Corporation in
January, 1991. Prior to that, Mr. Vowell served as President and Chief
Operating Officer of Hussmann U.S. operations since March, 1990; Senior Vice
President and General Manager of Marketing from July, 1989; and President of
the Convenience and Specialty Group from 1987.
Item 11. EXECUTIVE COMPENSATION.
Whitman incorporates by reference the information contained under the
caption "Executive Compensation" and the last two paragraphs under the
caption "General Information" in its definitive proxy statement dated March
22, 1995, filed pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Whitman incorporates by reference the information contained under the
captions "Principal Shareholders" and "Securities Ownership of Directors and
Executive Officers" in its definitive proxy statement dated March 22, 1995,
filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as
amended.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) See Index to Financial Information and Exhibit Index.
(b) Through December 31, 1994, no reports on Form 8-K were filed subsequent
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 22nd day
of March, 1995.
WHITMAN CORPORATION
By: /s/ FRANK T. WESTOVER
-------------------------------
Frank T. Westover
Senior Vice President-Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on the 22nd day of March, 1995.
Signature Title
--------- -----
* Bruce S. Chelberg Chairman and Chief
------------------------- Executive Officer and Director
BRUCE S. CHELBERG (principal executive officer)
* Thomas L. Bindley Executive Vice President
------------------------- (principal financial officer)
THOMAS L. BINDLEY
/s/ FRANK T. WESTOVER Senior Vice President-Controller
------------------------- (principal accounting officer)
FRANK T. WESTOVER
* Richard G. Cline Director
-------------------------
RICHARD G. CLINE
* James W. Cozad Director *By: /s/ FRANK T. WESTOVER
------------------------- ----------------------
JAMES W. COZAD Frank T. Westover
Attorney-in-Fact
* Pierre S. du Pont Director March 22, 1995
-------------------------
PIERRE S. du PONT
* Archie R. Dykes Director
-------------------------
ARCHIE R. DYKES
Director
-------------------------
HELEN GALLAND
* Jarobin Gilbert, Jr. Director
-------------------------
JAROBIN GILBERT, JR.
* Victoria B. Jackson Director
-------------------------
VICTORIA B. JACKSON
* Donald P. Jacobs Director
-------------------------
DONALD P. JACOBS
* Charles S. Locke Director
-------------------------
CHARLES S. LOCKE
WHITMAN CORPORATION AND SUBSIDIARIES
______________________
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1994
WHITMAN CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
Statement of Financial Responsibility
Independent Auditors' Report
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets at December 31, 1994 and
December 31, 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Selected Financial Data
Financial Statement Schedules:
Financial statement schedules have been omitted because they are not
applicable or the required information is shown in the financial
statements or related notes.
STATEMENT OF FINANCIAL RESPONSIBILITY
The consolidated financial statements of Whitman Corporation and
subsidiaries have been prepared by management which is responsible for their
integrity and content. These statements have been prepared in accordance
with generally accepted accounting principles and include amounts which
reflect certain estimates and judgments by management.
The Board of Directors, acting through the Audit Committee of the Board,
has responsibility for determining that management fulfills its duties in
connection with the preparation of these consolidated financial statements.
The Audit Committee meets periodically and privately with the Independent
Auditors and with the internal auditors to review matters relating to the
quality of the financial reporting of the Company, the related internal
controls and the scope and results of their audits. The Committee also meets
with management and the internal audit staff to review the affairs of the
Company.
To meet management's responsibility for the fair and objective reporting
of the results of operations and financial condition, the Company maintains
systems of internal controls and procedures to provide reasonable assurance
of the reliability of its accounting records. These systems include written
policies and procedures, a substantial program of internal audit and the
careful selection and training of its financial staff.
The Company's Independent Auditors, KPMG Peat Marwick LLP, are engaged to
audit the consolidated financial statements of the Company and to issue their
report thereon. Their audit has been conducted in accordance with generally
accepted auditing standards. Their report follows.
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF WHITMAN CORPORATION:
We have audited the accompanying consolidated balance sheets of Whitman
Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Whitman
Corporation and Subsidiaries at December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Note 6 to the Consolidated Financial Statements,
effective January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.
KPMG Peat Marwick LLP
Chicago, Illinois
January 16, 1995
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 (in millions) 1994 1993 1992
------- ------- -------
Sales and revenues $2,658.8 $2,529.7 $2,388.0
Cost of goods sold 1,704.7 1,625.0 1,545.6
--------- --------- ---------
Gross profit 954.1 904.7 842.4
Selling, general and administrative expenses 609.8 582.3 550.7
Amortization expense 17.5 17.1 17.3
--------- --------- ---------
Operating income 326.8 305.3 274.4
Interest expense (71.1) (96.2) (97.7)
Interest income 6.4 12.8 9.0
Other expense, net (25.2) (9.7) (15.1)
Unrealized investment loss (24.2) -- --
--------- --------- ---------
Income before income taxes 212.7 212.2 170.6
Income tax provision 88.1 90.7 68.5
--------- --------- ---------
Income from continuing operations before
minority interest 124.6 121.5 102.1
Minority interest 18.2 15.1 10.0
--------- --------- ---------
Income from continuing operations 106.4 106.4 92.1
Loss from discontinued operations after taxes
(Note 2) (3.2) -- --
Loss from dispositions of discontinued
operations after taxes (Note 2) -- -- (32.3)
Extraordinary loss on early debt retirement
after taxes (Note 4) -- (4.2) --
Cumulative effect of change in accounting
principle after taxes (Note 6) -- (24.0) --
--------- --------- ---------
Net income $ 103.2 $ 78.2 $ 59.8
========= ========= =========
Average number of common shares outstanding 106.2 107.5 107.2
========= ========= =========
INCOME (LOSS) PER COMMON SHARE (IN DOLLARS):
Continuing operations $ 1.00 $ 0.99 $ 0.86
Discontinued operations (0.03) -- (0.30)
Extraordinary loss on early debt retirement -- (0.04) --
Cumulative effect of change in accounting
principle -- (0.22) --
--------- --------- ---------
Net income $ 0.97 $ 0.73 $ 0.56
========= ========= =========
Cash dividends per common share $ 0.330 $ 0.290 $ 0.255
========= ========= =========
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of December 31 (in millions)
1994 1993
ASSETS: ------ ------
Current assets:
Cash and cash equivalents $ 71.3 $ 93.0
Receivables - net of allowance for doubtful accounts
of $7.9 million in 1994 and $7.8 million in 1993 362.5 324.1
Inventories:
Raw materials and supplies 73.8 67.6
Work in process 41.2 39.5
Finished goods 118.6 115.6
--------- ---------
Total inventories 233.6 222.7
Other current assets 40.3 51.4
--------- ---------
Total current assets 707.7 691.2
Investments 222.6 238.5
Property (at cost):
Land 63.5 59.9
Buildings and improvements 308.4 298.1
Machinery and equipment 833.3 748.9
--------- ---------
Total property 1,205.2 1,106.9
Accumulated depreciation and amortization (591.4) (534.1)
--------- ---------
Net property 613.8 572.8
Intangible assets, net of accumulated amortization of
$123.6 million in 1994 and $106.7 million in 1993 524.3 525.9
Other assets 67.0 74.8
--------- ---------
Total assets $ 2,135.4 $ 2,103.2
========= =========
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of December 31 (in millions)
1994 1993
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term debt, including current maturities of
long-term debt $ 90.0 $ 90.0
Accounts and dividends payable 238.7 232.9
Income taxes payable 10.6 10.7
Accrued expenses:
Salaries and wages 40.2 39.0
Interest 26.6 22.8
Other expenses 77.0 77.3
-------- --------
Total current liabilities 483.1 472.7
Long-term debt 723.0 749.3
Deferred income taxes 15.6 66.6
Other liabilities 154.9 124.7
Minority interest 206.2 172.9
Shareholders' equity:
Common stock (no par, 250.0 million shares authorized;
105.0 million outstanding at December 31, 1994 and
107.1 million outstanding at December 31, 1993) 413.2 404.4
Retained income 239.9 172.4
Cumulative translation adjustment (51.8) (52.3)
Unrealized investment gain 1.3 --
Treasury stock (50.0) (7.5)
-------- --------
Total shareholders' equity 552.6 517.0
-------- --------
Total liabilities and shareholders' equity $2,135.4 $2,103.2
======== ========
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 (in millions)
1994 1993 1992
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 106.4 $ 106.4 $ 92.1
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 98.0 95.5 93.5
Unrealized investment loss 24.2 -- --
Other 23.9 24.0 23.3
Changes in assets and liabilities, net of
acquisitions and dispositions:
(Increase) decrease in receivables (11.7) (43.2) 16.8
(Increase) decrease in inventories (10.3) (7.1) 3.7
Increase in payables 5.7 21.8 4.0
Net change in other assets and liabilities (24.6) 15.9 (26.4)
------- ------- -------
Net cash provided by continuing operations 211.6 213.3 207.0
Net cash used by discontinued operations (5.8) (29.8) (12.2)
------- ------- -------
Net cash provided by operating activities 205.8 183.5 194.8
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments (127.4) (88.7) (79.2)
Proceeds from sales of property 18.2 14.3 12.0
Investment in joint ventures (4.5) -- --
Purchases of investments (168.8) (211.2) (121.4)
Proceeds from the sale of investments 156.9 180.2 169.8
------- ------- -------
Net cash used by investing activities (125.6) (105.4) (18.8)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (repayment of) bank lines of
credit and commercial paper (41.1) 83.6 --
Proceeds from issuance of long-term debt 231.9 263.3 38.0
Repayment of long-term debt (221.1) (430.8) (159.1)
Net increase (decrease) in short-term debt -- -- (2.2)
Issuance of common stock 6.0 2.2 3.6
Treasury stock purchases (42.5) (3.9) --
Common dividends (34.8) (31.1) (27.3)
------- ------- -------
Net cash used in financing activities (101.6) (116.7) (147.0)
------- ------- -------
Effects of exchange rate changes on cash and
cash equivalents (0.3) (0.9) (1.6)
------- ------- -------
Change in cash and cash equivalents (21.7) (39.5) 27.4
Cash and cash equivalents at beginning of year 93.0 132.5 105.1
------- ------- -------
Cash and cash equivalents at end of year $ 71.3 $ 93.0 $ 132.5
======= ======= =======
The following notes are an integral part of these statements.
<TABLE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
For the years ended
December 31, 1994,
1993 and 1992 Common Stock Cumulative Unrealized Treasury Stock
-------------------Retained Translation Investment ----------------
(dollars in millions) Shares Amount Income Adjustments Gain Shares Amount
----------- -------- -------- ----------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992 107,325,611 $407.7 $ 93.8 $ (25.9) $ -- (488,952) $(13.7)
----------- ------ ------ ------- ----- ---------- ------
Net income 59.8
Stock option plans 82,259 2.6
Other changes, net (4.3) 189,730 5.3
Translation adjustments (19.5)
Dividends declared (27.3)
----------- ------ ------ ------- ----- ---------- ------
Balance, December 31, 1992 107,325,611 403.4 126.3 (45.4) -- (216,963) (5.8)
----------- ------ ------ ------- ----- ---------- ------
Net income 78.2
Treasury stock purchases (282,084) (3.9)
Stock option plans 184,947 1.0 (1.0) 79,805 2.2
Translation adjustments (6.9)
Dividends declared (31.1)
----------- ------ ------ ------- ----- ---------- ------
Balance, December 31, 1993 107,510,558 404.4 172.4 (52.3) -- (419,242) (7.5)
----------- ------ ------ ------- ----- ---------- ------
Net income 103.2
Treasury stock purchases (2,656,374) (42.5)
Stock option plans 594,432 8.8 (0.9) 2,300
Translation adjustments 0.5
Unrealized investment gain 1.3
Dividends declared (34.8)
----------- ------ ------ ------- ----- ---------- ------
Balance, December 31, 1994 108,104,990 $413.2 $239.9 $ (51.8) $ 1.3 (3,073,316) $(50.0)
=========== ====== ====== ======= ===== ========== ======
</TABLE>
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNAFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Whitman Corporation and all of its significant subsidiaries
(the Company).
CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist of deposits
with banks and financial institutions which are unrestricted as to withdrawal
or use, and which have original maturities of three months or less.
Inventories. Inventories are valued at the lower of cost (principally
determined on the first-in, first-out or average methods) or net realizable
value.
INVESTMENTS. Investments include real estate held for sale, principally at
Illinois Center, a large single location, mixed use development located on
the Chicago lakefront. The investments in real estate are carried at cost
which management believes is lower than net realizable value. When real
estate is sold, the net proceeds are deducted from the carrying value. Also
included are domestic and U.S. dollar-denominated foreign government
securities and securities guaranteed by such governments or their agencies,
bank obligations and corporate obligations (which are recorded at fair market
value), as well as other miscellaneous investments.
PROPERTY. Depreciation is computed on the straight-line method and includes
depreciation for properties under capital leases. When property is sold or
retired, cost and accumulated depreciation are eliminated from the accounts
and gains or losses are recorded in income. Expenditures for maintenance and
repairs are expensed as incurred. The approximate ranges of annual
depreciation rates for major property classifications are as follows:
Buildings 2% - 5%
Machinery and equipment 5% - 33%
INTANGIBLE ASSETS. Intangible assets primarily consist of the excess of cost
over fair market value of tangible assets of acquired businesses, reflecting
premiums paid for consumer franchises, brand names, trademarks, distribution
systems, manufacturing know-how and other intangible assets. Such premiums
generally are being amortized on straight-line bases over 40 years, with
minor amounts being amortized over shorter periods. The Company evaluates
such goodwill by reviewing past and, if necessary, projected future operating
results and undiscounted cash flows from such operations. The Company does
not believe there has been any material impairment of the carrying value of
its goodwill.
INCOME PER COMMON SHARE. Income per common share is based upon the weighted
average number of common and common equivalent shares outstanding, assuming
the exercise of stock options where dilutive.
ADVERTISING. Advertising expenditures are expensed as incurred.
REVENUE RECOGNITION. Revenue is recognized when title to a product is
transferred to the customer or upon completion of a service.
INTEREST RATE AND CURRENCY SWAPS. The Company enters into a variety of
interest rate and currency swaps in its management of interest rate and
foreign currency exposures. The differential to be paid or received is
accrued as interest rates change and is recognized over the lives of the
agreements. Realized and unrealized gains and losses on foreign currency
transactions are recognized currently in other expense, net.
2. DISCONTINUED OPERATIONS
In the fourth quarter of 1994, the Company recorded a $3.2 million after
tax charge to discontinued operations. This charge was a result of an on-
going evaluation of the Company's potential liabilities for environmental
claims which principally relate to previously sold subsidiaries (see Note
11). As a result of additional claims, additional information and experience
concerning possible remediation costs, as well as continuing legal,
consulting and other related expenses, the Company provided approximately $30
million after taxes for additional estimated expenses relating to these
potential environmental liabilities. The charge also reflected settlement of
the Company's income tax audits for the years 1980-1987 with the Internal
Revenue Service (I.R.S.), which included some large potential claims for
issues related to previously discontinued operations. As a result of these
settlements, the Company has restored to income amounts of tax accruals no
longer deemed necessary.
In the third quarter of 1993, the Company settled a lawsuit filed by the
Middleby Corporation against the Company's Hussmann subsidiary for $19.5
million in cash and certain other concessions. The suit related to the 1989
sale of Hussmann's foodservice equipment operations. Provision for the
lawsuit and related expenses (after taxes), along with additional income
taxes and other expenses associated with previously discontinued operations,
were recorded in 1992 as part of discontinued operations.
3. PROVISION FOR INCOME TAXES
The income tax provision consisted of:
(in millions) 1994 1993 1992
------ ------ ------
Current:
Federal $82.1 $63.1 $51.9
Foreign 16.3 14.0 13.3
State and local 13.6 10.6 8.9
----- ----- -----
Total current 112.0 87.7 74.1
===== ===== =====
Deferred:
Federal (21.4) 3.2 (4.6)
Foreign (1.6) 1.4 (1.4)
State and local (0.9) (1.6) 0.4
Total deferred (23.9) 3.0 (5.6)
----- ----- -----
Income tax provision $88.1 $90.7 $68.5
===== ===== =====
The items which gave rise to differences between the income tax provision
in the income statements and the income tax computed at the United States
statutory rate are summarized below:
1994 1993 1992
----------- ----------- -----------
(dollars in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
Income tax expense computed at
statutory rate $ 74.4 35.0 $ 74.3 35.0 $ 58.0 34.0
State income taxes, net of federal
income tax benefit 8.3 3.9 5.9 2.8 6.1 3.6
Higher foreign effective tax rates 4.1 1.9 5.2 2.4 4.1 2.4
Goodwill amortization 5.1 2.4 4.7 2.2 4.5 2.6
Other items, net (3.8)(1.8) 0.6 0.3 (4.2)(2.4)
------ ---- ------ ---- ------ ----
Income tax provision $ 88.1 41.4 $ 90.7 42.7 $ 68.5 40.2
====== ==== ====== ==== ====== ====
Pretax income from foreign operations amounted to $31.6 million, $30.7
million, and $25.4 million in 1994, 1993 and 1992, respectively. U.S. income
taxes have not been provided on the undistributed income ($89.1 million) of
the Company's foreign subsidiaries which currently is not intended to be
remitted to the U.S.
The I.R.S. has completed its examinations of the Company's Federal income
tax returns through 1987. The IRS had proposed adjustments for the years
1980-1987 which would have substantially increased the Company's tax
liability. The Company has settled all issues for these years, and accruals
which were no longer required have been credited to income from continuing
operations or to income from discontinued operations, as appropriate (see
Note 2). The accruals which have been restored to income from continuing
operations were reflected in "other items, net" in the table above.
Deferred income taxes are created by "temporary differences" which exist
between amounts of assets and liabilities recorded for financial reporting
purposes and such amounts as measured by income tax regulations. These
temporary differences, which gave rise to deferred tax assets and liabilities
at December 31, are attributable to:
(in millions) 1994 1993
------ ------
Deferred tax assets:
Provision for closed and sold businesses $ 39.9 $ 27.0
Lease transactions 19.3 20.8
Self-insurance provisions 16.3 19.3
Postretirement benefit accruals 12.4 12.2
Other 41.6 36.8
------- -------
Total deferred tax assets 129.5 116.1
------- -------
Deferred tax liabilities:
Property, plant and equipment 68.2 70.8
Pensions 8.7 8.5
Intangibles 7.5 6.4
Other 48.6 72.9
------- -------
Total deferred tax liabilities 133.0 158.6
------- -------
Net deferred tax liability $ 3.5 $ 42.5
======= =======
Net deferred tax liability (asset) included in:
"Other current assets" $ (12.1) $ (24.1)
"Deferred income taxes" 15.6 66.6
------- -------
Net deferred tax liability $ 3.5 $ 42.5
======= =======
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Statement No. 109
superseded existing accounting standards for income taxes, including
Statement No. 96 which the Company adopted in 1988. Adoption of Statement
No. 109 did not have any significant effect on the Company's financial
position or results of operations. The increase in the statutory Federal
income tax rate to 35 percent in 1993 did not have a significant effect on
the deferred tax balances.
4. DEBT
Debt at December 31 consisted of the following:
(in millions) 1994 1993
------ ------
Whitman Corporation:
6.3% to 6.9% notes due 2000 and 2005 $ 136.5 $ 136.5
7.5% notes due 2003 125.0 125.0
6.5% notes due 2006 100.0 --
7.5% notes due 2001 75.0 --
Notes due 1996, effective interest rate 5.7% 70.0 70.0
Notes due 1997, effective interest rate 5.6% 40.0 75.0
Term loan agreements and notes, due 1995 through 1999,
effective interest rates 5.7% to 12.5% 104.9 109.9
Swiss franc bonds and notes due 1995, exchanged for U.S.
dollar liabilities at 12.4% 50.0 96.7
Canadian notes due 1995, exchanged for U.S. dollar
liabilities at 12.2% 38.1 38.1
Equipment notes due 1995 through 1996, 11.0% to 13.3% 7.0 15.4
Commercial paper and revolving credit borrowings due
1995, effective rates 6.4% to 6.5% 42.5 83.6
Whitman Finance Corporation, N.V.:
Sinking fund zero coupon bonds due 1994, 14.3% -- 54.8
Retractable notes due 1994, 5.8% -- 5.3
Other Subsidiaries:
Obligations under capital leases 17.7 19.4
Various 8.6 11.0
------- -------
Total debt 815.3 840.7
Less: Amount due within one year 90.0 90.0
Unamortized discount 2.3 1.4
------- -------
Total long-term debt $ 723.0 $ 749.3
======= =======
The Company maintains a $200 million commercial paper program and had $30
million and $50 million of commercial paper outstanding under this program at
December 31, 1994 and 1993, respectively. The Company also has a contractual
revolving credit facility which permits it to borrow up to $300 million. The
interest rates on the revolving credit facility may be floating or fixed and
are based on domestic rates or the London Interbank Offered Rate ("LIBOR") at
the option of the Company. This facility expires in 1999. There were
borrowings of $12.5 million and $33.6 million under such commitments at
December 31, 1994 and 1993, respectively. The fees payable on the unused
portion of such commitments are not significant. At December 31, 1994,
$287.5 million of the revolving credit facility remained unused and available
to back the Company's commercial paper borrowings.
The amounts of long-term debt (excluding commercial paper and revolving
credit borrowings) maturing in 1996 through 1999, are: $102.4 million, $56.2
million, $3.4 million and $11.2 million, respectively.
At December 31, 1994, $98.6 million of currently maturing notes have been
classified as long-term because the Company has the intent and the ability
(through its revolving credit facility) to refinance these obligations for
more than one year.
In September, 1993, the Company redeemed the entire issue of $95.8
million 7-1/4% split currency bonds (effective interest rate of 12.6%),
originally due September, 1997, for $101.9 million. After related expenses
and fees, this early debt retirement resulted in an after tax loss of $4.2
million, or $0.04 per share. This loss is reported separately as an
extraordinary loss in the Consolidated Statements of Income.
Interest expense included $1.9 million, $2.1 million and $2.6 million for
1994, 1993 and 1992, respectively, relating to liabilities under capital
lease agreements. Interest capitalized during periods of construction was
not significant.
At December 31, 1994, collateral of $57.3 million, consisting
predominantly of equipment and real estate, was pledged under various long-
term loan agreements. Certain of the Company's financing arrangements
contain restrictions which, among other features, require maintenance of
certain financial ratios. The Company is in compliance with these debt
covenants.
5. FINANCIAL INSTRUMENTS
The Company uses financial derivative instruments to manage its interest
rate risk. Interest rate swap transactions generally involve the exchange of
fixed and floating rate interest payment obligations without the exchange of
the underlying notional amounts.
The Company has entered into certain interest rate swap agreements with
commercial and investment banks in which it pays a floating interest rate and
receives a fixed interest rate. These contracts are summarized as follows:
Effective
Notional Effective Interest
Amount Maturity Interest Rate
Related Debt Issue: (in millions) of Swaps Rate Paid Received
---------- ---------- ---------- ----------
7.5% notes due 2003 $ 125.0 1996 7.0% 5.2%
6.5% notes due 2006 $ 40.0 1997 7.0% 5.2%
The Company's interest rate swap transactions (notional amounts) for 1993
and 1994 are summarized as follows (in millions):
Pay Pay
Fixed Variable
-------- --------
Balance, January 1, 1993 $ 140.0 $ --
------- -------
New contracts -- 135.0
Expired contracts (75.0) (10.0)
------- -------
Balance, December 31, 1993 65.0 125.0
------- -------
New contracts -- 40.0
Expired contracts (65.0) --
------- -------
Balance, December 31, 1994 $ -- $ 165.0
======= =======
Whitman's interest rate hedging programs increased the annual weighted
average cost of debt from 8.7% to 9.0% in 1994, from 8.8% to 9.3% in 1993 and
from 9.8% to 10.4% in 1992. Interest expense was increased by $2.1 million
in 1994, $5.4 million in 1993 and $6.1 million in 1992 as a result of these
hedging programs.
The Company also has entered into foreign currency swap agreements to
reduce the effect of changes in foreign exchange rates on its debt
denominated in foreign currencies. Substantially all foreign currency
denominated debt and interest payments have been hedged into U.S.dollars.
Under the hedge agreements, the Company will repay the 138.2 million Swiss
franc debt at an effective exchange rate of 2.764 Swiss francs per dollar
($50.0 million), compared to a December 30, 1994 exchange rate of 1.308 Swiss
francs per dollar ($105.6 million) and will pay the 50 million Canadian
dollar debt at an effective exchange rate of 1.312 Canadian dollars per U.S.
dollar ($38.1 million), compared to a December 30, 1994 exchange rate of
1.403 Canadian dollars per U.S. dollar ($35.6 million).
If the Company had left the interest payments payable in foreign currency
(i.e., unhedged), then the Company's interest expense would have decreased by
$0.3 million, $7.0 million and $7.0 million for 1994, 1993 and 1992,
respectively. Consequently, this would have had no material effect on
weighted average cost of borrowing in 1994, and would have lowered the
weighted average cost of borrowing to 8.6% from 9.3% in 1993 and to 9.7% from
10.4% in 1992.
At December 31, 1994, the Company had $303.1 million in floating rate
debt exposure (including notional principal on interest rate swap contracts).
Substantially all of this floating rate exposure is related to six month
LIBOR rates. If the six month LIBOR increased by 50 basis points, the
Company's 1994 interest expense would have increased by $1.4 million. In
addition, the Company had $12.5 million in revolving credit facility
borrowings and $30 million in commercial paper outstanding at December 31,
1994. The relevant indices for revolving credit and commercial paper
borrowings are generally one month LIBOR and the commercial paper composite
rate, respectively. If these rates increased by 50 basis points, the
Company's 1994 interest expense would have increased by $0.3 million.
As of the end of each of the last two years, the Company had no deferred
gains or losses related to terminated interest rate swap contracts.
The Company periodically monitors its financial instrument positions and
the credit ratings of its counterparties and limits the amount of exposure
with any one counterparty. The Company is exposed to credit loss in the
event of nonperformance by the other parties to the interest rate and foreign
currency swap agreements. The Company does not anticipate nonperformance by
any of the counterparties.
In 1992, Whitman Finance Corporation N.V. entered into a cross currency
contract in order to hedge the cost of its split currency debt. In 1993, the
Company terminated the contract, resulting in a $2.0 million gain. This gain
was recognized in 1993 as the underlying debt to which it was assigned was
called for redemption in 1993.
The fair market value of the Company's debt as of December 31, 1994 was
$827.1 million. The fair market value was based on quotes from financial
institutions for instruments with similar characteristics and upon
discounting future cash flows. The fair market value of the Company's
derivative instruments, which was obtained by quotes from financial
institutions for instruments with similar characteristics was $45.0 million
as of December 31, 1994.
6. PENSION AND OTHER POSTRETIREMENT PLANS
COMPANY-SPONSORED DEFINED BENEFIT PENSION PLANS. Substantially all of the
Company's employees are covered under various defined benefit pension plans
sponsored and funded by the Company. Plans covering salaried employees
provide pension benefits based on years of service and employees'
compensation during the five years preceding retirement. Plans covering
hourly employees generally provide benefits of stated amounts for each year
of service. Plan assets are invested primarily in common stocks, corporate
bonds and government securities.
Net periodic pension cost for 1994, 1993 and 1992 included the following
components:
(in millions) 1994 1993 1992
------ ------ ------
Service cost - benefits earned during period $ 7.5 $ 7.7 $ 7.3
Interest cost on projected benefit obligation 16.4 16.4 16.3
Actual return on assets (6.3) (28.0) (20.6)
Net amortization and deferral (12.2) 10.2 3.4
----- ----- -----
Total net periodic pension cost $ 5.4 $ 6.3 $ 6.4
===== ===== =====
Pension costs are funded in amounts not less than minimum levels required
by regulation. The principal economic assumptions used in the determination
of net periodic pension cost include the following:
1994 1993 1992
------ ------ ------
Discount rate 7.0% 7.5% 8.0%
Expected long-term rate of return on assets 10.0% 10.0% 10.0%
Rates of increase in compensation levels 4.5% 5.0% 5.5%
The following table reconciles the pension plans' funded status to the
amounts recognized in the Company's balance sheets as of December 31, 1994
and 1993:
1994 1993
------------------------ ------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(in millions) Benefits Assets Benefits Assets
---------- ---------- ---------- ----------
Actuarial present value
of benefit obligation
(measured as of September
30):
Vested benefit obligation $(148.5) $ (33.2) $(152.3) $ (50.5)
======= ======= ======= =======
Accumulated benefit
obligation (149.9) (34.8) (153.4) (52.6)
======= ======= ======= =======
Projected benefit
obligation (175.5) (38.3) (177.5) (55.9)
Plan assets at fair market
value (measured as of
September 30) 199.6 29.5 189.9 41.3
------- ------- ------- -------
Plan assets in excess of
(less than) projected
benefit obligation 24.1 (8.8) 12.4 (14.6)
------- ------- ------- -------
Unrecognized net asset at
transition to SFAS No. 87 (3.8) (0.1) (4.8) --
Unrecognized prior service
cost 15.7 4.8 19.0 6.2
Unrecognized net loss (gain) (10.9) 1.0 (3.2) 7.4
Additional liability required
to recognize minimum
liability -- (2.9) -- (10.6)
------- ------- ------- -------
Prepaid (accrued) pension
cost recognized on balance
sheets $ 25.1 $ (6.0) $ 23.4 $ (11.6)
======= ======= ======= =======
The principal economic assumptions used in determining the above benefit
obligations were: discount rates of 8.5 percent and 7.0 percent in 1994 and
1993, respectively, and rates of increase in future compensation levels of
6.0 percent and 4.5 percent, respectively.
COMPANY-SPONSORED DEFINED CONTRIBUTION PLANS. Substantially all U.S.
salaried employees, certain U.S. hourly employees and certain Australian and
Canadian employees participate in voluntary, contributory defined
contribution plans to which the Company makes partial matching contributions.
Company contributions to these plans amounted to $9.7 million, $8.1 million
and $7.5 million in 1994, 1993 and 1992, respectively.
MULTI-EMPLOYER PENSION PLANS. The Company's subsidiaries participate in a
number of multi-employer pension plans which provide benefits to certain
unionized employee groups of the Company. Amounts contributed to the plans
totaled $4.8 million, $5.0 million and $5.3 million in 1994, 1993 and 1992,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. Effective January 1, 1993, the
Company adopted Statement of Financial Accounting Standards No. 106, which
among other items, required the Company to reflect in its financial
statements estimates of future costs of medical and survivor benefits for
certain retirees. Previously, the costs of the Company's retiree and
survivor benefit programs were recognized in the financial statements on a
cash accounting basis. The Company elected to recognize this change in
accounting on the immediate recognition basis. The cumulative effect of
adopting this change in accounting principle was an increase in accrued
postretirement costs of $38.7 million, a decrease in deferred tax liabilities
of $14.7 million and a decrease in net income of $24.0 million ($0.22 per
share).
The Company provides substantially all U.S. salaried employees who
retired prior to July 1, 1989 and selected other employees in the U.S. and
Canada with certain life and health care benefits. U.S. salaried employees
retiring after July 1, 1989 generally are required to pay the full cost of
these benefits. Eligibility for these benefits varies with the employee's
classification prior to retirement. Benefits are provided through insurance
contracts or welfare trust funds. The insurance plans generally are financed
by monthly insurance premiums and are based upon the prior year's experience.
Benefits paid from a welfare trust are financed by monthly deposits which
approximate the amount of current claims and expenses. The Company has the
right to modify or terminate these benefits.
Net periodic cost of postretirement benefits other than pensions for 1994
and 1993 included the following components:
(in millions) 1994 1993
------ ------
Service cost-benefits earned during the period $0.3 $ 0.4
Interest cost on accumulated postretirement benefit
obligation 2.2 2.9
Net amortization and deferral 0.4 --
----- -----
Net periodic postretirement benefit cost $2.9 $ 3.3
===== =====
Net periodic postretirement benefit cost in 1992 was $2.8 million.
The principal economic assumptions used in the determination of net
periodic cost of postretirement benefits other than pensions included the
following:
1994 1993
-------------- --------------
Discount rate 7.0% 7.5%
Rate of increase
in compensation levels 4.5% 5.0%
Rate of increase in the
per capita cost of 10.3% in 1994 11.0% in 1993
covered health care decreasing gradually decreasing gradually
benefits to 5.0% by the year 2006 to 5.5% by the year 2006
The Company's postretirement health care and life plans are not funded.
The unfunded status of the plans as of December 31, 1994 and 1993 was as
follows:
(in millions) 1994 1993
------ ------
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $22.1 $32.3
Fully eligible active plan participants 1.0 1.1
Other active plan participants 3.3 4.3
------ ------
Total 26.4 37.7
------ ------
Plan assets at fair market value -- --
Accumulated postretirement benefit obligation in excess
of plan assets 26.4 37.7
Unrecognized net loss 12.9 1.1
Unrecognized prior service cost (0.2) 1.7
------ ------
Accrued postretirement benefit cost $39.1 $40.5
====== ======
The principal economic assumptions used in determining the above benefit
obligations were as follows:
1994 1993
-------------- --------------
Discount rate 8.5% 7.0%
Rate of increase in
compensation levels 6.0% 4.5%
Rate of increase in the
per capita cost of 9.9% in 1995 10.3% in 1994
covered health care decreasing gradually decreasing gradually
benefits to 6.5% by the year 2006 to 5.0% by the year 2006
Increasing the assumed health care cost trend rate by 1 percentage point
would have increased the accumulated postretirement benefit obligation at
December 31, 1994 by $2.6 million and net periodic postretirement benefit
cost for 1994 by $0.3 million.
MULTI-EMPLOYER POSTRETIREMENT MEDICAL AND LIFE INSURANCE. The Company's
subsidiaries participate in a number of multiemployer plans which provide
health care and survivor benefits to unionized employees during their working
lives and after retirement. Portions of the benefit contributions, which
cannot be disaggregated, related to postretirement benefits for plan
participants. Total amounts charged against income and contributed to the
plans (including benefit coverage during their working lives) amounted to
$5.5 million in 1994 and $5.4 million in 1993.
7. LEASES
At December 31, 1994, annual minimum rental payments under capital and
operating leases that have initial noncancellable terms in excess of one year
were as follows:
Capital Operating
(in millions) Leases Leases
---------- ----------
1995 $ 3.7 $ 51.2
1996 2.8 45.4
1997 2.4 39.6
1998 2.4 33.7
1999 2.3 26.9
Thereafter 18.6 123.0
------- -------
Total minimum lease payments 32.2 $ 319.8
=======
Less imputed interest 14.5
-------
Present value of minimum lease payments $ 17.7
=======
Minimum payments under operating leases have not been reduced by $134.7
million of sublease rental income which is due in the future under
noncancellable subleases.
Total rent expense applicable to operating leases amounted to $33.2
million, $29.0 million and $27.7 million in 1994, 1993 and 1992,
respectively. These amounts have been reduced by sublease rental income of
$21.4 million, $21.2 million and $21.6 million, respectively. A majority of
the Company's leases provide that the Company pay taxes, maintenance,
insurance and certain other operating expenses.
8. STOCK OPTIONS AND SHARES RESERVED
The Company's Stock Incentive Plan (the "Plan"), originally approved by
shareholders in 1982 and subsequently amended from time to time, provides for
granting incentive stock options, nonqualified stock options, related stock
appreciation rights (SARs), restricted stock awards, and performance awards
or any combination of the foregoing. Incentive stock options and
nonqualified stock options are exercisable during a ten-year period beginning
six months to three years after the date of grant. Stock appreciation rights
have been granted with respect to certain nonqualified and incentive stock
options. Options are granted at fair market value at the date of grant.
Changes in options outstanding are summarized as follows:
Option Price
Shares per Share
---------- -----------------
Balance, January 1, 1992 3,793,861 $5.062 - $15.474
---------- ----------------
Granted 1,390,200 12.875 - 13.810
Exercised or surrendered for SARs (95,431) 5.062 - 11.750
Recaptured or terminated (53,702) 10.288 - 15.474
---------- ----------------
Balance, December 31, 1992 5,034,928 6.937 - 15.474
---------- ----------------
Granted 739,100 13.563
Exercised or surrendered for SARs (210,243) 8.440 - 14.453
Recaptured or terminated (18,618) 11.750 - 14.453
---------- ----------------
Balance, December 31, 1993 5,545,167 6.937 - 15.474
---------- ----------------
Granted 660,400 15.688 - 17.250
Exercised or surrendered for SARs (496,240) 10.288 - 15.875
Recaptured or terminated (5,134) 13.563 - 15.688
---------- ----------------
Balance, December 31, 1994 5,704,193 $6.937 - $17.250
========== ================
At December 31, 1994, 4,107,793 shares were exercisable and 6,524,910
shares were available for future grants.
During 1994 and 1993, the Company granted 110,200 and 91,900 restricted
shares of stock, respectively, to key members of management under the Plan.
There were no grants of restricted stock in 1992. At December 31, 1994,
there were 169,931 restricted shares of stock outstanding under the Plan.
In addition to shares reserved for options, there were 1,248,214 shares
of common stock reserved at December 31, 1994 for issuance pursuant to the
Company's Retirement Savings Plan.
9. SHAREHOLDER RIGHTS PLAN AND SECOND PREFERRED STOCK
In 1989, the Company adopted a Shareholder Rights Plan and declared a
dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, without par value, of the Company. Each
Right entitles the registered holder to purchase from the Company one one-
hundredth of a share of Junior Participating Second Preferred Stock
(Series 1), without par value, of the Company at a price of $120 per one one-
hundredth of a share of such Second Preferred Stock, subject to adjustment.
The Rights will become exercisable if someone buys 15 percent or more of the
Company's common stock. In addition, if someone buys 15 percent or more of
the Company's common stock, each right will entitle its holder (other than
that buyer) to purchase a number of shares of the Company's common stock
having a market value of twice the Right's $120 exercise price. If the
Company is acquired in a merger, each Right will entitle its holder to
purchase a number of the acquiring company's common shares having a market
value at the time of twice the Right's exercise price.
Prior to the acquisition of 15 percent or more of the Company's stock,
the Rights can be redeemed by the Board of Directors for one cent per Right.
The Company's Board of Directors also is authorized to reduce the threshold
to 10 percent or increase it to not more than 20 percent. The Rights will
expire on January 30, 1999. The Rights do not have voting or dividend
rights, and until they become exercisable, have no dilutive effect on the
per-share earnings of the Company.
The Company has 10 million authorized shares of Second Preferred Stock.
In January, 1989, the Company's Board of Directors designated 2.5 million
shares of the Second Preferred Stock as Junior Participating Second Preferred
Stock (Series 1) in conjunction with the Shareholder Rights Plan. There is
no Second Preferred Stock issued or outstanding.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by continuing operations reflects cash payments or cash
receipts as follows:
(in millions) 1994 1993 1992
------ ------ ------
Interest paid $ 61.0 $ 82.0 $ 85.5
Interest received (6.8) (13.4) (8.4)
Income taxes paid 115.4 75.2 57.2
Income tax refunds (8.6) -- --
11. ENVIRONMENTAL AND OTHER CONTINGENCIES
The Company is subject to certain indemnification obligations under
agreements with previously sold subsidiaries for potential environmental
liabilities. There is significant uncertainty in assessing the Company's
share of the potential liability for such claims. The assessment and
determination for cleanup at the various sites involved is inherently
speculative during the early stages, and the Company's share of such costs is
subject to various factors, including possible insurance recoveries and the
allocation of liabilities among many other potentially responsible and
financially viable parties.
Using the latest evaluations from outside advisors and consultants, the
Company believes that its potential environmental liabilities, before
possible insurance recoveries, range from $40 million to $60 million, or
possibly more. As a result of this continuing evaluation of potential
exposure for environmental liabilities, the Company has provided
approximately $30 million after taxes in 1994 through a charge to
discontinued operations (see Note 2). As of December 31, 1994, with the
additional provision, the Company had $50 million accrued to cover these
future potential liabilities.
These estimated liabilities include expenses for the remediation of
identified sites, payments to third parties for claims and expenses, and the
expenses of on-going evaluation and litigation. The estimates are based upon
current technology and remediation techniques, and do not take into
consideration any inflationary trends upon such claims or expenses, nor do
they reflect the possible benefits of continuing improvements in remediation
methods. The accruals also do not provide for any claims for environmental
liabilities or other potential issues which may be filed against the Company
in the future.
The Company also has other contingent liabilities from various pending
claims and litigation on a number of matters, for which the ultimate
liability for each claim, if any, cannot be determined. In the opinion of
management, and based upon information currently available, the ultimate
resolution of these claims and litigation, including potential environmental
exposures, and considering amounts already accrued, will not have a material
effect on the Company's financial condition. While additional claims and
liabilities may develop and may result in additional charges to income,
principally through discontinued operations, the Company does not believe
that such charges, if any, would have a material effect upon the Company's
financial condition.
<TABLE>
12. SEGMENT REPORTING
The Company is engaged in three distinct businesses: Pepsi-Cola soft drinks and other beverages; Midas automotive services;
and Hussmann refrigeration systems and equipment. Selected financial information related to these business segments is shown
below:
<CAPTION>
Sales & revenues Operating income Identifiable assets
---------------------------- ---------------------------- ----------------------------
(in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pepsi General $1,256.1 $1,179.6 $1,111.2 $ 185.5 $ 170.5 $ 139.0 $ 892.8 $ 843.6 $ 827.5
Midas 543.2 503.6 485.6 75.2 67.1 73.1 406.9 386.9 389.2
Hussmann 859.5 846.5 791.2 82.5 83.6 76.8 492.0 487.4 471.5
Eliminations and other -- -- -- -- -- -- 167.2 210.6 219.1
-------- -------- -------- -------- -------- -------- ------- -------- --------
Total before corporate
administrative expenses $2,658.8 $2,529.7 $2,388.0 343.2 321.2 288.9 1,958.9 1,928.5 1,907.3
======== ======== ========
Corporate administrative expenses (16.4) (15.9) (14.5)
Total operating income 326.8 305.3 274.4
-------- -------- --------
Interest expense, net (64.7) (83.4) (88.7)
Other income (expense), net
corporate assets (49.4) (9.7) (15.1) 176.5 174.7 155.5
-------- -------- -------- -------- -------- --------
Pretax income/total assets $ 212.7 $ 212.2 $ 170.6 $2,135.4 $2,103.2 $2,062.8
======== ======== ======== ======== ======== ========
</TABLE>
Depreciation
and Capital
amortization investments
-------------------- --------------------
(in millions) 1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ ------
Pepsi General $ 53.7 $ 52.9 $ 52.0 $ 66.0 $ 45.0 $ 41.0
Midas 16.4 15.5 14.8 28.7 24.4 20.5
Hussmann 17.3 16.5 17.2 32.7 19.2 17.3
Eliminations & other 10.6 10.6 9.5 -- 0.1 0.4
------ ------ ------ ------ ------ ------
Total before corporate
administrative expenses $ 98.0 $ 95.5 $ 93.5 $127.4 $ 88.7 $ 79.2
====== ====== ====== ====== ====== ======
<TABLE>
Selected geographical information is presented below:
<CAPTION>
Sales and revenues Operating profit Identifiable assets
---------------------------- ---------------------------- ----------------------------
(in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $2,236.3 $2,142.2 $2,002.3 $ 312.2 $ 292.4 $ 262.8 $1,629.3 $1,613.9 $1,616.0
Foreign 472.2 442.7 406.2 31.0 28.8 26.1 329.6 314.6 291.3
Eliminations (49.7) (55.2) (20.5) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total before corporate
expenses/assets $2,658.8 $2,529.7 $2,388.0 $ 343.2 $ 321.2 $ 288.9 $1,958.9 $1,928.5 $1,907.3
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Equity in net income and net assets of the Company's foreign operations
amounted to $16.7 million and $180.8 million, respectively, in 1994, $15.5
million and $157.2 million in 1993, and $13.6 million and $158.2 million in
1992.
Operating income is exclusive of net interest expense, corporate
administrative expenses, equity in net income of affiliates, other
miscellaneous income and expense items, and income taxes. Other expense,
net in 1994 includes a $24.2 million unrealized loss on investment in
Northfield Laboratories Inc. ("Northfield"). Foreign currency gains or
losses were not significant. Sales between operating segments and between
geographical areas were not significant. Export sales, sales to any single
customer and sales to domestic or foreign governments were each less than
ten percent of consolidated sales and revenues.
Corporate assets are principally cash or cash equivalents, investments,
and furniture and fixtures.
13. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
(in millions, except First Second Third Fourth Full
per-share data) Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
1994:
From continuing operations:
Sales $ 546.9 $ 673.5 $ 741.3 $ 697.1 $ 2,658.8
Gross profit 193.0 248.7 269.3 243.1 954.1
Income from continuing
operations 9.8 35.8 29.0 31.8 106.4
Income per share:
Continuing operations $ 0.09 $ 0.34 $ 0.27 $ 0.30 $ 1.00
Net income $ 0.09 $ 0.34 $ 0.27 $ 0.27 $ 0.97
1993:
From continuing operations:
Sales $ 522.5 $ 634.7 $ 703.7 $ 668.8 $ 2,529.7
Gross profit 183.0 233.7 255.5 232.5 904.7
Income from continuing
operations 8.4 29.1 39.8 29.1 106.4
Income (loss) per share:
Continuing operations $ 0.08 $ 0.27 $ 0.37 $ 0.27 $ 0.99
Net income (loss) $ (0.14) $ 0.27 $ 0.33 $ 0.27 $ 0.73
At the end of the third quarter of 1994, the Company adjusted its
investment in Northfield to reflect the then current market value. The
market value of the Northfield investment, based upon quoted market prices at
that time, was lower than the purchase cost by $24.2 million. This
unrealized loss, after reflecting deferred tax benefits of $8.7 million,
resulted in a non-cash charge to income of $15.5 million, or $0.15 per share.
14. SUBSEQUENT EVENT
In December, 1994, the Mexican peso was permitted to float against the
U.S. dollar and other currencies, and as a result, the peso has been devalued
from 3.4 pesos/dollar as of November 30, 1994 (the date used for inclusion of
Hussmann's Mexican operations in the consolidated financial statements of the
Company) to approximately 5.4 pesos/dollar as of January 16, 1995. This
devaluation of the peso is expected to reduce Whitman's shareholders' equity
by less than $20 million and will be reflected in the consolidated financial
statements for the first quarter of 1995.
In 1994, Hussmann's Mexican operations reported sales of approximately
$100 million and operating income of approximately $20 million. While it is
difficult to assess the effect on Hussmann's operating results for 1995, the
devaluation of the peso may cause Hussmann-Mexico's competitive environment
to improve, and may result in an incremental growth in revenues. It is not
possible at this time to determine what effect the devaluation will have upon
pricing or costs, but management believes the devaluation will not have a
material adverse effect upon the Company's 1995 operating results.
<TABLE>
Whitman Corporation
SELECTED FINANCIAL DATA
<CAPTION>
For the years ended December 31
(dollars in millions except per share) 1994 1993 1992 1992 1990(B) 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Results:
Sales and revenues:
Pepsi General $ 1,256.1 $ 1,179.6 $ 1,111.2 $ 1,121.9 $ 1,041.2 $ 961.4
Midas 543.2 503.6 485.6 476.0 476.4 433.7
Hussmann 859.5 846.5 791.2 795.4 787.4 788.9
--------- --------- --------- --------- --------- --------
Total $ 2,658.8 $ 2,529.7 $ 2,388.0 $ 2,393.3 $ 2,305.0 $2,184.0
========= ========= ========= ========= ========= ========
Operating income:
Pepsi General $ 185.5 $ 170.5 $ 139.0 $ 144.7 $ 117.5 $ 108.1
Midas 75.2 67.1 73.1 76.4 66.7 68.0
Hussmann 82.5 83.6 76.8 66.1 35.2 60.6
Corporate administrative expenses (16.4) (15.9) (14.5) (15.4) (157.8) (26.3)
--------- --------- --------- --------- --------- --------
Total operating income 326.8 305.3 274.4 271.8 61.6 210.4
Interest expense, net (64.7) (83.4) (88.7) (114.2) (96.2) (84.7)
Other income (expense), net (A) (49.4) (9.7) (15.1) 4.1 (4.4) 21.1
--------- --------- --------- --------- --------- --------
Income (loss) before income taxes 212.7 212.2 170.6 161.7 (39.0) 146.8
Income tax provision (benefit) 88.1 90.7 68.5 70.3 (17.9) 50.9
Minority Interest 18.2 15.1 10.0 11.0 10.2 10.3
--------- --------- --------- --------- --------- --------
Income (loss) from continuing operations 106.4 106.4 92.1 80.4 (31.3) 85.6
Income (loss) from discontinued operations (3.2) -- (32.3) 17.2 50.6 105.1
Extraordinary loss on early debt retirement -- (4.2) -- -- -- --
Cumulative effect of changes in accounting principle -- (24.0) -- -- -- --
--------- --------- --------- --------- --------- --------
Net income 103.2 78.2 59.8 97.6 19.3 190.7
Preferred dividends requirement -- -- -- -- 38.6 36.6
--------- --------- --------- --------- --------- --------
Income (loss) applicable to common stock $ 103.2 $ 78.2 $ 59.8 $ 97.6 $ (19.3) $ 154.1
========= ========= ========= ========= ========= ========
Net Income (Loss) Per Share:
From continuing operations $ 1.00 $ 0.99 $ 0.86 $ 0.76 $ (0.68) $ 0.48
From discontinued operations (0.03) -- (0.30) 0.16 0.49 1.02
Extraordinary loss on early debt retirement -- (0.04) -- -- -- --
Cumulative effect of change in accounting principle -- (0.22) -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) $ 0.97 $ 0.73 $ 0.56 $ 0.92 $ (0.19) $ 1.50
======== ======== ======== ======== ======== ========
Average shares (in millions) 106.2 107.5 107.2 105.9 102.8 102.6
======== ======== ======== ======== ======== ========
Cash dividends per common share $ 0.33 $ 0.29 $ 0.255 $ 0.445 $ 1.05 $ 1.005
======== ======== ======== ======== ======== ========
Other Statistics:
Total assets $ 2,135.4 $ 2,103.2 $ 2,062.8 $ 2,123.0 $ 3,347.3 $3,334.6
Long-term debt $ 723.0 $ 749.3 $ 791.8 $ 895.9 $ 1,643.4 $1,655.9
Capital investments $ 127.4 $ 88.7 $ 79.2 $ 79.2 $ 96.4 $ 117.6
Depreciation and amortization $ 98.0 $ 95.5 $ 93.5 $ 86.6 $ 84.3 $ 76.2
Number of employees at December 31 15,271 14,868 14,374 14,703 15,129 15,165
</TABLE>
(A) 1994 includes a $24.2 million unrealized loss on investment in Northfield
Laboratories Inc.
(B) Included in the 1990 operating results were costs associated with a
restructuring charge of $15.1 million at Pepsi General, $10.9 million at
Midas, $10.5 million at Hussmann, and $134.3 million at the Whitman
corporate office.
WHITMAN CORPORATION AND SUBSIDIARIES
______________________
EXHIBITS
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1994
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------ ---------------------------------
(3)a+ Certificate of Incorporation as Restated April 30, 1987, and
subsequently amended through June 24, 1992.
(3)b@ By-Laws, as Amended July 17, 1989.
(4)# Indenture dated as of January 15, 1993, between Whitman Corporation
and The First National Bank of Chicago, Trustee. The Registrant will
furnish to the Securities and Exchange Commission, upon request,
copies of the forms of the debt securities issued from time to time
pursuant to the Indenture dated as of January 15, 1993.
(10)a# **1982 Stock Option, Restricted Stock Award and Performance Award Plan
(as amended through June 16, 1989).
(10)b# **Amendment No. 2 to 1982 Stock Option, Restricted Stock Award and
Performance Award Plan made as of September 1, 1992.
(10)c# **Form of Nonqualified Stock Option Agreement.
(10)d# **Amendment to 1982 Stock Option, Stock Award and Performance Award
Plan made as of February 19, 1993.
(10)e# **Form of Severance Compensation and Change in Control Agreement dated
as of March 17, 1989.
(10)f# **Form of Amendment to Severance Compensation and Change in Control
Agreement dated July 1, 1992.
(10)g# **Management Incentive Compensation Plan.
(10)h# **Long Term Performance Compensation Program.
(10)i **Whitman Corporation Executive Retirement Plan, as Amended and
Restated Effective January 1, 1995.
(10)j **Hussmann Corporation Executive Retirement Plan, as Amended and
Restated Effective January 1, 1995.
(10)k **Midas International Corporation Executive Retirement Plan, as
Amended and Restated Effective January 1, 1995.
(10)l **Pepsi-Cola General Bottlers, Inc. Executive Retirement Plan, as
Amended and Restated Effective January 1, 1995.
(10)m# **Deferred Compensation Plan for Directors, as Amended November 18,
1988.
(10)n# **Director Emeritus Program, as amended through February 16, 1990.
(10)o* **Form of Restricted Stock Award Agreement.
(12) Statement of Calculation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the Registrant.
(23) Independent Auditors' Consent.
(24) Powers of Attorney.
Exhibit Reference Explanations
- ------------------------------
** Exhibit constitutes a management contract or compensatory plan, contract
or arrangement described under Item 601(b) (10) (iii) (A) of Regulation
S-K.
+ Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 as Exhibit 3.
@ Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989 as Exhibit 3.
# Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 under the indicated Exhibit number.
* Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993 as Exhibit (10)p
EXHIBIT 10(i)
Whitman Corporation
Executive Retirement Plan
As Amended and Restated Effective January 1, 1995
Whitman Corporation Executive Retirement Plan
Whitman Corporation amends and restates, effective as of January 1, 1995, an
unfunded, deferred compensation plan on behalf of certain designated
management or highly compensated employees of Whitman Corporation. This
document defines the provisions of such plan and shall be known as the
"Whitman Corporation Executive Retirement Plan."
This plan is intended in part to be an unfunded, deferred compensation plan
for a select group of management or highly compensated employees, as
described in sections 201(2), 301(a)(3), and 401(a)(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA") and in part to be an excess
benefit plan described in section 3(36) of ERISA.
ARTICLE I
DEFINITIONS
1.1 "Accounting Period"
1.2 "Accounts"
1.3 "Actuarial Equivalent"
1.4 "Appendix"
1.5 "Beneficiary"
1.6 "Benefit Trust Committee"
1.7 "Board of Directors"
1.8 "Change of Control"
1.9 "Company"
1.10 "Company Stock"
1.11 "Compensation"
1.12 "Compensation Committee"
1.13 "Compensation Limit"
1.14 "Contribution Dollar Limit"
1.15 "Conversion Election"
1.16 "Death Benefit"
1.17 "Deferrals"
1.18 "Deferral Election" or "Election"
1.19 "Deferral Percentage"
1.20 "Designated Participant"
1.21 "Effective Date"
1.22 "Eligible Employee"
1.23 "Employee"
1.25 "ERISA"
1.26 "Exchange Act"
1.27 "Guaranty"
1.28 "Insider"
1.29 "Installment Form of Payment"
1.30 "Internal Revenue Code" or "Code"
1.31 "Investment Election"
1.32 "Investment Fund" or "Fund"
1.33 "Investment Grade Rating"
1.34 "Maximum Annual Additions Limitation"
1.35 "Maximum Annual Benefit Limitation"
1.36 "MIC Award"
1.37 "Notice Date"
1.38 "Parent"
1.39 "Participant"
1.40 "Payment Date"
1.41 "Pension Plan"
1.42 "Plan"
1.43 "Plan Year"
1.44 "Retirement Benefit"
1.45 "RSP"
1.46 "Section 401(m) Limitation"
1.47 "Settlement Date"
1.48 "Spouse"
1.49 "Successor Plan"
1.50 "Sweep Date"
1.51 "Termination of Employment"
1.52 "Trade Date"
1.53 "Trust"
ARTICLE II
PARTICIPATION
2.1 Eligibility
2.2 Enrollment Election.
ARTICLE III
PARTICIPANT DEFERRALS
3.1 Replacement RSP Employee Deferral Election
3.2 Election Procedures
3.3 Coordination with RSP
ARTICLE IV
DEFERRALS AND POSTINGS
4.1 Replacement RSP Employer Deferral
4.2 MIC Deferral
4.3 Pay Based Deferral
4.4 Replacement RSP Employee Deferral
4.5 RSP Employer Deferral
4.6 RSP Employee Deferral
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
5.1 Amount of Pension Benefits
5.2 Amount of Death Benefit
5.3 Pre-1994 Benefits
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting
6.2 Accounting for Investment Funds
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
7.1 General
7.2 Investment of Deferrals
7.3 Investment of Accounts
7.4 Insiders
7.5 Investment Returns on MIC Deferrals
7.6 Restrictions on Measurement
7.7 Procedures
ARTICLE VIII
VESTING AND FORFEITURES
8.1 Fully Vested Deferral Accounts
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals for Hardship
9.2 Withdrawal Processing
ARTICLE X
DISTRIBUTIONS
10.1 Retirement Benefit
10.2 Pension Death Benefit
10.3 Accounts
10.4 MIC Account.
10.5 Death Benefit of Accounts
10.6 Prior to 1994
10.7 Payments of Retirement and Death Benefit Due to an Investment
Grade Rating Change
10.8 Payment of Accounts Due to an Investment Grade Rating Change
10.9 Payment of Retirement and Death Benefits Due to a Change of
Control
10.10 Payment of Accounts Due to a Change of Control
ARTICLE XI
AMENDMENT
11.1 Prior to a Change of Control
11.2 After a Change of Control
ARTICLE XII
TERMINATION
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Administration
13.2 Finality of Determination
13.3 Expenses
13.4 Indemnification and Exculpation
13.5 Funding
13.6 Corporate Action
13.7 Interests not Transferable
13.8 Effect on Other Benefit Plans
13.9 Legal Fees and Expenses
13.10 Deduction of Taxes from Amounts Payable
13.11 Facility of Payment
13.12 Merger
13.13 Gender and Number
13.14 Invalidity of Certain Provisions
13.15 Headings
13.16 Notice and Information Requirements
13.17 Governing Law
ARTICLE I
DEFINITIONS
The following sections of this Article I provide basic definitions of
terms used throughout this Plan, and whenever used herein in a capitalized
form, except as otherwise expressly provided, the terms shall be deemed to
have the following meanings:
1.1 "Accounting Period" means each business day.
1.2 "Accounts" means the record of a Participant's interest in this
Plan represented by his or her:
(a) "MIC Deferral Account" which means a Participant's interest
in this Plan composed of MIC Deferrals posted for each Plan Year on or
after January 1, 1994 to the Participant under this Plan, if any (as
identified by the Benefit Trust Committee) for such Plan Year, plus
all interest deemed credited to and minus all withdrawals and
distributions actually charged to such account.
(b) "Pay Based Account" which means a Participant's interest in
this Plan composed of Pay Based Deferrals posted for each Plan Year on
or after January 1, 1994 to the Participant under this Plan, plus all
income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all
withdrawals and distributions actually charged to such account.
(c) "Replacement RSP Accounts" which consists of the following
two accounts:
(1) "Replacement RSP Employee Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employee Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, if any (as
identified by the Benefit Trust Committee) for such Plan Year,
plus all income and gains deemed credited to and minus all losses
deemed charged to such account, as measured by the investment
returns of each Investment Fund designated by the Participant,
and minus all withdrawals and distributions actually charged to
such account; and
(2) "Replacement RSP Employer Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employer Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan (as identified
by the Benefit Trust Committee) for such Plan Year, plus all
income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of
each Investment Fund designated by the Participant, and minus all
withdrawals and distributions actually charged to such account.
(d) "RSP Employee Account" which means a Participant's interest
in this Plan composed of RSP Employee Deferrals posted under this Plan
prior to January 1, 1994, if any (as identified by the Benefit Trust
Committee), plus all income and gains deemed credited to and minus all
losses deemed charged to such account, as measured by the investment
returns of each Investment Fund designated by the Participant, and
minus all withdrawals and distributions actually charged to such
account.
(e) "RSP Employer Account" which means a Participant's interest
in this Plan composed of RSP Employer Deferrals posted under this Plan
prior to January 1, 1994, if any (as identified by the Benefit Trust
Committee), plus all income and gains deemed credited to and minus all
losses deemed charged to such account, as measured by the investment
returns of each Investment Fund designated by the Participant, and
minus all withdrawals and distributions actually charged to such
account.
1.3 "Actuarial Equivalent" means an amount equal in value to the
benefit replaced as determined (i) in accordance with the terms of the
Pension Plan with respect to the determination of any form of benefit other
than a single sum, (ii) with respect to a single sum distribution, by using:
(A) an assumed annual discount rate for each Payment Date within a Plan Year
equal to the weekly average, as of the last full week of the immediately
preceding Plan Year, of the Bond Buyer's Average of 20 Municipal Bonds,
rounded to the nearest 1/4%, as published weekly by the Federal Reserve Bank
of St. Louis and (B) assumed mortality as set forth in the Pension Plan.
1.4 "Appendix" means a written supplement attached to this Plan and
made a part hereof which has been added in accordance with the provisions of
this Plan.
1.5 "Beneficiary" means
(a) with respect to the Death Benefit payable upon the death of
a Participant, any person designated by the Participant (actually or
by default) to receive any retirement benefits which are payable with
respect to the death of a Participant under the Pension Plan; and
(b) with respect to the balance of a Participant's Accounts as
of the death of such Participant, each person designated by the
Participant on his or her most recent Enrollment Election form
approved by the Benefit Trust Committee; provided that if a
Participant fails to designate a Beneficiary on an Enrollment Election
form or if all such designated persons predecease the Participant
without the Participant completing a new, approved Enrollment Election
form, then Beneficiary means any person designated by the Participant
(actually or by default) to receive the balance of any of his or her
accounts which are payable with respect to the death of such
Participant under the RSP.
An individual who is entitled to receive a Death Benefit on and after
the death of a Participant will remain a Beneficiary until the latest of
(a) receipt of the balance of all of such Accounts to which he or she is
entitled to receive; or (b) receipt of such Beneficiary's Death Benefit, if
any, is completed (or made in a single sum).
1.6 "Benefit Trust Committee" means the Benefit Trust Committee
appointed pursuant to the terms of the Trust which will have the power to
manage and control the operation and administration of this Plan.
1.7 "Board of Directors" means the board of directors of the Company
or the Parent.
1.8 "Change of Control" means an event which shall be deemed to have
occurred if (i) there shall be consummated (A) any consolidation or merger of
the Parent, if one exists, or the Company in which either the Parent or the
Company, respectively, is not the continuing or surviving corporation or
pursuant to which shares of the Parent's or the Company's common stock are
converted into cash, securities or other property, other than a merger in
which the holders of the Parent's or the Company's common stock,
respectively, immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other
transfer (in one transaction or in a series of related transactions) of all
or substantially all the assets of either the Parent or the Company, or (ii)
the shareholders of either the Parent or the Company shall approve any plan
or proposal for such corporation's liquidation or dissolution, or (iii) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act, other than the Parent, Company or its subsidiaries, or any employee
benefit plan sponsored by the Company or its subsidiaries, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of either the Parent or the Company representing twenty-five
percent (25%) or more of the combined voting power of the Parent's or the
Company's, respectively, then outstanding securities ordinarily (and apart
from rights accruing in special circumstances) having the right to vote in
the election of directors, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, or (iv) at any
time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors shall cease for
any reason to constitute at least a majority thereof, unless the election or
the nomination for election by the Parent's or the Company's shareholders,
respectively, of each new director during such two-year period was approved
by a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such two-year period.
1.9 "Company" means Whitman Corporation or any successor entity by
operation of law or any successor entity which affirmatively adopts the Plan,
the Trust and the obligations of Whitman Corporation with respect to the Plan
and the Trust.
1.10 "Company Stock" means common stock issued by the Parent, or if
none, then by the Company.
1.11 "Compensation" means
(a) for purposes of Replacement RSP Employee Deferrals,
Replacement RSP Employer Deferrals and Pay Based Deferrals for any
Plan Year, a Participant's "Compensation", as defined in the RSP
(disregarding any provision having the effect of excluding Replacement
RSP Employee Deferrals and MIC Deferrals), for a Plan Year to the
Participant;
(b) for purposes of RSP Employee Deferrals and RSP Employer
Deferrals, a Participant's Compensation, as defined in the RSP
(disregarding any provision having the effect of excluding RSP
Employee Deferrals), for a Plan Year;
(c) for purposes of MIC Deferrals, a Participant's MIC Award
(other than that portion of the MIC Award which is a Replacement RSP
Employee Deferral and excluding an amount equal to the Employee's
portion of taxes imposed by the Federal Insurance Contributions Act
with respect to the MIC Award and with respect to the Replacement RSP
Employer Deferrals on the portion of the MIC Award which is a
Replacement RSP Employee Deferral, and if needed, the Retirement
Benefit accrual, for that Plan Year); and
(d) for purposes of computing the Retirement Benefit, a
Participant's "Compensation," as defined in the Pension Plan
(disregarding any provision having the effect of excluding RSP
Employee Deferrals, Replacement RSP Employee Deferrals and MIC
Deferrals), for a Plan Year, as adjusted by the Benefit Trust
Committee from Plan Year to Plan Year, and effective January 1, 1994,
Compensation shall include a Participant's MIC Award earned for
services rendered during such Plan Year, but shall not include an MIC
Award paid during the same Plan Year for services rendered during the
prior Plan Year.
Notwithstanding the above, the definition of "Compensation" in the RSP
and the Pension Plan shall not include the Compensation Limit.
1.12 "Compensation Committee" means the Compensation Committee of the
Board of Directors.
1.13 "Compensation Limit" means the limitation on the amount of
Compensation which may be considered after application of Code section
401(a)(17).
1.14 "Contribution Dollar Limit" means the annual limit imposed on
each Participant pursuant to section 402(g) of the Code, which is seven
thousand dollars ($7,000) per Plan Year (as indexed for cost of living
adjustments pursuant to Code section 402(g)(5) and 415(d)).
1.15 "Conversion Election" means, effective on or after January 1,
1994, an election, on such form that may be required by the Benefit Trust
Committee, by a Participant to change the method of measuring the investment
return on all or some specified portion of such Participant's Accounts. No
Conversion Election shall be deemed to have been given to the Benefit Trust
Committee unless it is complete and delivered in accordance with the
procedures established by such Benefit Trust Committee for this purpose.
1.16 "Death Benefit" means a monthly (or single sum) benefit payable
to a Beneficiary and determined in accordance with Article V.
1.17 "Deferrals" means amounts posted to this Plan by the Company or
an Eligible Employee. Specific types of deferrals include:
(a) "MIC". An amount posted after 1993 based upon the
Participant's Deferral Election to defer some or all of his
or her Compensation.
(b) "Pay Based". An amount posted and allocated on a pay based
formula to an eligible Participant's Accounts.
(c) "Replacement RSP Employee". An amount posted after 1993
based upon the Participant's Deferral Election to defer some
of his or her Compensation.
(d) "Replacement RSP Employer". An amount posted after 1993
based upon the Replacement RSP Employee Deferral made by the
eligible Participant.
(e) "RSP Employee". An amount posted prior to 1994 on a pre-tax
basis which the Participant could have elected if he or she
were participating actively in the RSP.
(f) "RSP Employer". An amount posted prior to January 1, 1994
related to pre-tax contributions which the Participant could
not make to the RSP or which are made on behalf of
Designated Participants without regard to such pre-tax
contributions.
1.18 "Deferral Election" or "Election" means irrevocable elections
made by a Participant (a) to reduce his or her Compensation for a Plan Year
by an amount equal to the product of his or her Deferral Percentage and such
Compensation subject to the Deferral Election; (b) to select whether
Deferrals for that Plan Year will be paid in an Installment Form of Payment;
and (c) to select a Payment Date for the MIC Deferrals for that Plan Year.
1.19 "Deferral Percentage" means (a) with respect to Replacement RSP
Employee Deferrals, the percentage of a Participant's Compensation for a Plan
Year which is to be deferred and posted to this Plan; and (b) with respect to
MIC Deferrals, the percentage of a Participant's Compensation for a Plan Year
which is to be deferred and posted to this Plan.
1.20 "Designated Participant" means an individual who is a Participant
of this Plan because he or she is on the list of Employees set forth in an
Appendix to the Pension Plan as not being an eligible employee for the
purpose of the Pension Plan.
1.21 "Effective Date" means generally January 1, 1991 and, where
noted, January 1, 1994, the dates upon which certain provisions of this
document become effective.
1.22 "Eligible Employee" means with respect to each Plan Year:
(a) with respect to the Retirement Benefit, each Employee who is
a participant in the Pension Plan or would be a participant in the
Pension Plan if they were not a Designated Participant.
(b) prior to 1994 with respect to Deferrals:
(1) each Employee who is a Participant in the RSP for that
Plan Year and whose pre-tax contributions which would otherwise
have been made for that Plan Year to the RSP are limited by the
Contribution Dollar Limit; or
(2) each Employee who is a Designated Participant for that
Plan Year.
(c) after 1993 with respect to Deferrals, each Employee who is
participating in the Whitman Corporation Management Incentive
Compensation Plan during that Plan Year.
1.23 "Employee" means any person who is considered to be an employee
of the Company pursuant to the personnel policies of the Company; and on and
after a Change of Control, who renders services as a common law employee to
the Company.
1.24 "Enrollment Election" means irrevocable elections made by a
Participant (a) to select the term of his or her Installment Form of Payment;
(b) to select the Payment Date of his or her Accounts following Termination
of Employment; and (c) to select the form of payment of his or her Accounts
as of December 31, 1993.
1.25 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.26 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.27 "Guaranty" means:
(a) an irrevocable, nonassignable contractual assurance by the
Parent of the payment in cash to a Participant or Beneficiary of the
Company's obligation under the Plan with respect to such Participant
or Beneficiary and a covenant to pay any and all legal expenses
incurred by a Participant or Beneficiary to enforce such contractual
assurance, both of which shall remain valid and enforceable until the
earlier of (1) the date all amounts due to each Participant and
Beneficiary under the Plan and such Guaranty are satisfied; or (2) the
date a new Parent's Guaranty becomes effective with respect to each
Participant and Beneficiary; and
(b) an irrevocable, nonassignable contractual assurance by the
Parent of the payment in cash to a Participant or Beneficiary of the
Company's obligation under the Plan with respect to each member of the
Benefit Trust Committee, but only in his or her capacity as such a
member, and a covenant to pay any and all legal expenses incurred by
such member to enforce such contractual assurance, both of which shall
remain valid and enforceable until the earlier of (1) the date all
amounts due to each Benefit Trust Committee member under the Plan and
such Guaranty are satisfied; or (2) the date a new Parent's Guaranty
becomes effective with respect to each Benefit Trust Committee member.
1.28 "Insider" means for a Plan Year, or any portion thereof, the
Participant is subject to the reporting requirements of Section 16 of the
Exchange Act.
1.29 "Installment Form of Payment" means separately with respect to
(a) his or her Accounts (other than his or her MIC Account) or (b) his or her
MIC Account, the term of years selected by the Participant in his or her
Enrollment Election form over which to pay such Accounts in annual
installments commencing as of what would otherwise have been the Payment Date
of such Accounts and payable on each January 1 thereafter over a period of
not less than two (2) nor more than fifteen (15) years (stated as a number of
whole integers), with each installment being an amount equal to the amount
determined by dividing the applicable balance of such Accounts as of the date
of payment by the number of dates of payment remaining in the installment
period (including the current date of payment).
1.30 "Internal Revenue Code" or "Code" means the Internal Revenue Code
of 1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to
comparable sections of any subsequent Internal Revenue Code.
1.31 "Investment Election" means, effective on and after January 1,
1994, an election, on such form that may be required by the Benefit Trust
Committee, made by a Participant to direct the method of measuring the
investment return on his or her Deferrals (other than MIC Deferrals). No
Investment Election shall be deemed to have been given to the Benefit Trust
Committee unless it is complete and delivered in accordance with the
procedures established by such Benefit Trust Committee for this purpose.
1.32 "Investment Fund" or "Fund" means one or more of the investment
alternatives which are available under the RSP at any determination date
unless designated otherwise by the Benefit Trust Committee, and which are
used by this Plan as a measurement of investment return on Accounts other
than the MIC Account.
1.33 "Investment Grade Rating" means a rating either (a) at or above
Baa3 by Moody's Investors Service, Inc. or (b) at or above BBB by Standard &
Poor's Corporation, or the prevailing equivalent ratings at the time.
1.34 "Maximum Annual Additions Limitation" means the limitation
imposed by Code section 415 on benefits payable by defined contribution plans
qualified under Code section 401(a).
1.35 "Maximum Annual Benefit Limitation" means the limitation imposed
by Code section 415 on benefits payable by defined benefit pension plans
qualified under Code sections 401(a) including application of the combination
limitations of Code section 415(e) to cause a further reduction, if any, of
such benefits.
1.36 "MIC Award" means the amount of award payable to a Participant
under the Whitman Corporation Management Incentive Compensation Plan.
1.37 "Notice Date" means the date established by the Benefit Trust
Committee as the deadline for it to receive a Deferral Election or any other
notification with respect to an administrative matter in order to be
effective under this Plan.
1.38 "Parent" means any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act), other than any employee benefit plan
sponsored by the Parent or the Company, (i) having directly or indirectly a
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities of the Company representing twenty-five percent (25%) or
more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of directors; and
(ii) with an Investment Grade Rating.
1.39 "Participant" means an Eligible Employee who begins to
participate in this Plan after completing the eligibility requirements. An
individual will remain a Participant until the latest of (a) distribution of
the balance of all of his or her Accounts; or (b) payment of his or her
Retirement Benefit, if any, is completed (or made in a single sum).
1.40 "Payment Date" means:
(a) with respect to Accounts, the date payment is made in
accordance with Article X or the first day of the fifteenth (15th)
month following a Participant's Termination of Employment unless such
Participant has selected an earlier Payment Date for (1) his or her
Accounts on an Enrollment Election form or (2) his or her MIC Accounts
on a Deferral Election Form; or
(b) the date a Participant's Retirement Benefit is distributed
or commences to be distributed as described in Article X.
1.41 "Pension Plan" means the Whitman Corporation Pension Plan;
effective January 1, 1992, the Pepsi-Cola General Bottlers, Inc. Pension Plan
for Salaried Employees and any Successor Plan.
1.42 "Plan" means the Whitman Corporation Executive Retirement Plan,
as it may be validly amended from time to time.
1.43 "Plan Year" means the annual accounting period of this Plan which
ends on each December 31.
1.44 "Retirement Benefit" means a monthly (or single sum) pension
benefit payable to a Participant and determined in accordance with Article V.
1.45 "RSP" means the Whitman Corporation Retirement Savings Plan, as
amended from time to time and any Successor Plan.
1.46 "Section 401(m) Limitation" means the limit imposed by Code
section 401(m).
1.47 "Settlement Date" means the date on which financial transactions
from a Trade Date are considered to be settled which is deemed to be the same
date as of which such transaction would have settled under the RSP with
respect to the same type of financial transaction (e.g. Investment Election,
Conversion Election, Payment Date).
1.48 "Spouse" means a person who is considered the Participant's
spouse under the RSP and Pension Plan, whichever is applicable.
1.49 "Successor Plan" means a tax-qualified, retirement plan described
in section 401(a) of the Code into which the assets and liabilities have been
merged or transferred in accordance with section 414(l) of the Code and
section 208 of ERISA from the Pension Plan or the RSP, respectively, and
which provides benefits, options, features and rights, each comparable in
material respects to those available in the Pension Plan or RSP, whichever is
applicable.
1.50 "Sweep Date" means the date established by the Benefit Trust
Committee as the cutoff date and time for the Benefit Trust Committee to
receive notification with respect to a financial transaction in order to be
processed with respect to such Trade Date.
1.51 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Company; provided
however, transfer of employment from the Company, or from one affiliate of
the Company, to another affiliate of the Company shall not constitute a
Termination of Employment for purposes of this Plan. If a person would cease
to be an Employee because of a Change of Control, solely for the purpose of
this Plan, such person will not be considered to have incurred a Termination
of Employment if the person's successor employer, either expressly or by
operation of law, assumes the Plan and Trust, the obligations and liabilities
of the Plan and Trust, and agrees to the responsibilities of the Company
under the Plan and Trust.
1.52 "Trade Date" means the date as of which a financial transaction
is considered by this Plan to have occurred which is deemed to be the same
date as of which such transaction would have occurred under the RSP with
respect to the same type of financial transaction (e.g. Investment Election,
Conversion Election, Payment Date).
1.53 "Trust" means the trust created by the Whitman Corporation
Benefit Trust Agreement as it may be validly amended from time to time.
ARTICLE II
PARTICIPATION
2.1 Eligibility. On or after the Effective Date:
(a) Participant on January 1, 1991. Each person who has a
balance in his or her Accounts, or who has accrued a Retirement
Benefit, as of January 1, 1991 shall be a Participant as of January 1,
1991.
(b) Other Eligible Employee. Each other Eligible Employee shall
become a Participant with respect to the Plan Year in which he or she
becomes an Eligible Employee; provided however, on or after January 1,
1994, a person who was an Employee prior to becoming an Eligible
Employee shall become a Participant as of the first day of the Plan
Year commencing on or after the date he or she became an Eligible
Employee.
2.2 Enrollment Election.
(a) Participant on January 1, 1994. Each person who is a
Participant on January 1, 1994 shall complete, sign and return an
Enrollment Election form provided for that purpose by the Benefit
Trust Committee, to the Benefit Trust Committee no later than the
designated Notice Date.
(b) Other Eligible Employees. Each person first eligible to
become a Participant shall complete, sign and return an Enrollment
Election form provided for that purpose by the Benefit Trust
Committee, to the Benefit Trust Committee no later than the designated
Notice Date.
<PAGE>
ARTICLE III
PARTICIPANT DEFERRALS
3.1 Replacement RSP Employee Deferral Election. Prior to the date
payments of Accounts are accelerated under Section 10.8, the following shall
apply; after such date, no Deferral Elections will be effective.
(a) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have
Replacement RSP Employee Deferrals made on his or her behalf shall
file a Deferral Election pursuant to procedures specified by the
Benefit Trust Committee specifying (1) his or her Deferral Percentage
of not less than two percent (2%) nor more than ten percent (10%)
(stated as a whole integer percentage) and authorizing the
Compensation otherwise payable to him or her for a Plan Year to be
reduced and deferred hereunder to such Participant's Payment Date; and
(2) whether or not the Replacement RSP Employee Account created with
respect to such Plan Year will be distributed in the Installment Form
of Payment.
(b) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have an MIC
Deferral made on his or her behalf shall file a Deferral Election
pursuant to procedures specified by the Benefit Trust Committee
specifying (1) his or her Deferral Percentage of not less than 5% nor
more than 100% (stated as a whole integer percentage) and authorizing
his or her Compensation payable for a Plan Year to be reduced and
deferred hereunder to a fixed Payment Date not earlier than two (2)
full Plan Years after the date the Deferral Election is received by
the Benefit Trust Committee; and (2) whether or not the MIC Account
created with respect to such Plan Year will be distributed in the
Installment Form of Payment.
(c) Notwithstanding Subsection (a) hereof, for any Plan Year the
Benefit Trust Committee may, without amending this Plan, determine
that the maximum Deferral Percentage shall be greater or lesser than
the percentages set forth in Subsection (a) hereof. Otherwise, the
maximum Deferral Percentage as provided in Subsection (a) hereof shall
apply.
(d) Any Replacement RSP Employee Deferral Election which has not
been properly completed, or which is submitted at a time when the
Participant does not have outstanding a properly completed Investment
Election, will be deemed not to have been received and be void. A
Participant's Deferral Election shall be effective only if received by
the Benefit Trust Committee on or before the Notice Date for a Plan
Year.
3.2 Election Procedures. If properly received by the Benefit Trust
Committee, a Deferral Election may be effective only with respect to
Compensation paid in a Plan Year to which the Deferral Election applies and
only with respect to Compensation paid after the Notice Date for the Deferral
Election. Consistent with the above, the Benefit Trust Committee may
establish rules and procedures governing when a Deferral Election will be
effective and what Compensation will be deferred by the Deferral Election;
provided such rules and procedures are not more permissive than the terms and
provisions of this Plan.
3.3 Coordination with RSP. Notwithstanding a Participant's Deferral
Election, if a Participant makes a "401(k) Hardship" withdrawal from the RSP
during a Plan Year, the "401(k) Hardship" withdrawal rules of the RSP, which
are intended to be applicable to this Plan, are incorporated by reference
herein and made a part hereof, but only to the extent required by Treas. Reg.
Sec. 1.401(k)-1, in order for the RSP to be a qualified cash or deferred
arrangement.
ARTICLE IV
DEFERRALS AND POSTINGS
4.1 Replacement RSP Employer Deferral.
(a) Frequency and Eligibility. For each period after 1993 for
which a Participant makes a Replacement RSP Employee Deferral, the
Company shall post to this Plan on behalf of such Participant an
Replacement RSP Employer Deferral as described in the following
Posting and Allocation Method paragraph.
(b) Posting and Allocation Method. The Replacement RSP Employer
Deferral for each period shall total one hundred percent (100%) of
each eligible Participant's Replacement RSP Employee Deferral for the
period, provided that no Replacement RSP Employer Deferral shall be
made based upon a Participant's Replacement RSP Employee Deferral in
excess of six percent (6%) of his or her Compensation. The
Replacement RSP Employer Deferral shall be posted to the Replacement
RSP Employer Account of such Participant as of the same date the
Replacement RSP Employee Deferral which it matches is posted.
4.2 MIC Deferral.
(a) Frequency and Eligibility. For each period after 1993 for
which a Deferral Election is in effect, the Company shall post to this
Plan on behalf of each Participant an amount equal to the amount
designated by the Participant as an MIC Deferral on his or her
Deferral Election.
(b) Posting. The MIC Deferral shall be posted to the MIC
Deferral Account of such Participant as of the date his or her MIC
Award would otherwise have been paid to the Participant.
4.3 Pay Based Deferral.
(a) Frequency and Eligibility. For each Plan Year, the Company
may make a Pay Based Deferral in an amount determined by the Company
on behalf of each Participant who is an Eligible Employee and who
would have qualified for a similar deferral in the RSP had such person
been eligible to participate in the RSP and in an amount determined in
the Posting and Allocation Method paragraph.
(b) Posting and Allocation Method. The Pay Based Deferral for
each period shall be posted as of the date determined by the Benefit
Trust Committee (but not later than the tax filing deadline for the
Company's federal income tax return for the Plan Year with respect to
which the Pay Based Deferral relates, including extensions) to the Pay
Based Account of each of the Participants for the Plan Year in direct
proportion to their Compensation.
4.4 Replacement RSP Employee Deferral.
(a) Frequency and Eligibility. For each period for which a
Deferral Election is in effect, the Company shall post to this Plan on
behalf of each Participant an amount equal to the amount designated by
the Participant as an Replacement RSP Employee Deferral on his or her
Deferral Election.
(b) Posting. The Replacement RSP Employee Deferral shall be
posted to the Replacement RSP Employee Account of such Participant as
of the date such Compensation amount would otherwise have been paid to
the Participant.
4.5 RSP Employer Deferral.
(a) Frequency and Eligibility.
(1) Pre-1991. Amounts posted to a Participant's Accounts
for each Plan Year prior to 1991 are determined under the terms
and provisions of this Plan as it existed during any such Plan
Year.
(2) Post-1990 and Pre-1994. For each Plan Year after 1990
and prior to 1994, the Company shall post to this Plan on behalf
of each Participant whose pre-tax contribution to the RSP was
limited by the Contribution Dollar Limit for that Plan Year, and
who is not a Designated Participant for that Plan Year, an RSP
Employer Deferral as described in (b)(2) of the following Posting
and Allocation Method paragraph.
(3) Designated Participant. For each Plan Year after 1990
and prior to 1994, the Company shall post to this Plan on behalf
of each Participant who is a Designated Participant and an
Employee for that Plan Year, an RSP Employer Deferral as
described in (b)(3) of the following Allocation Method paragraph.
(b) Posting and Allocation Method.
(1) Pre-1991. RSP Employer Deferrals for Plan Years prior
to 1991 shall be posted as of January 1, 1991, to the RSP
Employer Account.
(2) Post-1990 and Pre-1994. The RSP Employer Deferral for
each Plan Year after 1990 and prior to 1994 shall be an amount
equal to (A) minus (B) where:
(A) is equal to the amount of matching contribution
which would have been made to the RSP for the Plan Year
based on the assumptions that (i) the Participant has made
pre-tax contributions to the RSP at the rate of six percent
(6%) of his or her compensation as defined in the RSP,
without regard to the Maximum Annual Additions Limitation,
the Contribution Dollar Limit and the Compensation Limit;
and (ii) matching contributions to the RSP were made with
respect to such amounts in accordance with the terms of the
RSP without regard to the Maximum Annual Additions
Limitation and the Section 401(m) Limitation; and
(B) is equal to the actual amount of matching
contribution made on behalf of the Participant to the RSP
for the Plan Year.
The RSP Employer Deferral after 1990 shall be posted to the
RSP Employer Account as of the same date it would have been made
as a matching contribution to the RSP, if it could have been made
(or as a pay based contribution to the RSP in 1991, if it could
have been made).
(3) Designated Participant. The RSP Employer Deferral for
each Plan Year after 1990 and prior to 1994 shall be an amount
equal to six percent (6%) of the Participant's Compensation,
without regard to the Maximum Annual Benefit Limitation. For the
1991 Plan Year, an amount shall be posted equal to 2% of such
Participant's Compensation. The RSP Employer Deferral after 1990
shall be posted to the RSP Employer Account as of the same date
it would have been made as a matching contribution to the RSP, if
it could have been made (or as a pay based contribution to the
RSP in 1991, if it could have been made).
4.6 RSP Employee Deferral.
(a) Frequency and Eligibility. Amounts posted to a
Participant's Accounts for each Plan Year prior to 1994 are determined
under the terms and provisions of this Plan as it existed during any
such Plan Year.
(b) Allocation Method. RSP Employee Deferrals for Plan Years
prior to 1994 shall be posted to the RSP Employee Account in
accordance with the terms of the Plan at that time.
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
5.1 Amount of Pension Benefits. Effective on and after January 1,
1994, a Retirement Benefit will be paid under this Plan, only as provided in
Article X, to a Participant in an annual amount payable monthly equal to the
amount by which (a) exceeds (b):
(a) The amount of the annual retirement benefit payable in the form
of a single life annuity the Participant would have been entitled to receive
under the Pension Plan (1) had the Pension Plan not applied the Maximum
Annual Benefit Limitation in determining benefits payable from the Pension
Plan; and (2) had the Participant not been excluded from being an "Eligible
Employee" by being listed on an Appendix to the Pension Plan. For purposes
of this Section 5.1(a), the compensation used for determining retirement
benefits payable from the Pension Plan shall mean Compensation as defined in
this Plan for a Plan Year.
(b) The Actuarial Equivalent of the amount of the annual retirement
benefit payable monthly which the Participant is entitled to receive under
the Pension Plan if it were to commence on the Payment Date and to be paid in
the form elected by such Participant under the Pension Plan, or if the
Participant has not made such an election under the Pension Plan, then in the
form of either a joint and 100% annuity, if married, or a single life
annuity, if not married.
5.2 Amount of Death Benefit. Effective on and after January 1, 1994,
a Death Benefit will be paid under this Plan, only as provided in Article X,
to a Beneficiary of a deceased Participant in an annual amount payable
monthly equal to the amount by which (a) exceeds (b):
(a) The amount of the annual death benefit payable in the form of a
single life annuity the Beneficiary of a deceased Participant would have been
entitled to receive under the Pension Plan (1) had the Pension Plan not
applied the Maximum Annual Benefit Limitation in determining benefits payable
from the Pension Plan; and (2) had the Participant not been excluded from
being an "Eligible Employee" by being listed on an Appendix to the Pension
Plan. For purposes of this Section 5.3(a), the compensation used for
determining death benefits payable from the Pension Plan means Compensation
as defined in this Plan for a Plan Year.
(b) The amount of the annual death benefit payable monthly which the
Beneficiary of a deceased Participant is entitled to receive under the
Pension Plan if it were to commence on the same date as the Death Benefit
under this Plan and to be paid in the form of single life annuity.
5.3 Pre-1994 Benefits. Any Retirement Benefit accrued by a
Participant prior to 1994, who is never an Eligible Employee after 1993,
shall be determined and paid solely under the terms of this Plan as it
existed prior to 1991.
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting.
(a) Account Maintenance. The Benefit Trust Committee shall
cause the Accounts for each Participant to reflect transactions
involving amounts posted to the Accounts and the measurement of
investment returns on Accounts in accordance with this Plan.
Investment returns during or with respect to an Accounting Period
shall be accounted for at the individual account level by "posting"
such returns to each of the appropriate Accounts of each affected
Participant. Account values shall be maintained in shares, units or
dollars.
(b) Trade Date Accounting and Investment Cycle. For any
financial transaction involving a change in the measurement of
investment returns, withdrawals or distributions to be processed as of
a Trade Date, the Benefit Trust Committee must receive instructions by
the Sweep Date and such instructions shall apply only to amounts
posted to the Accounts as of the Trade Date. Such financial
transactions in an Investment Fund shall be posted to a Participant's
Accounts as of the Trade Date and based upon the Trade Date values.
All such transactions shall be effected on the Settlement Date (or as
soon as is administratively feasible) relating to the Trade Date as of
which the transaction occurs.
(c) Suspension of Transactions. Whenever the Benefit Trust
Committee considers such action to be appropriate, the Benefit Trust
Committee, in its discretion, may suspend from time to time the Trade
Date.
(d) Error Correction. The Benefit Trust Committee may correct
any errors or omissions in the administration of this Plan by
restoring or charging any Participant's Accounts with the amount that
would be credited or charged to the Accounts had no error or omission
been made.
6.2 Accounting for Investment Funds. The investment returns of each
Investment Fund shall be tracked in the same manner as such Investment Funds
are tracked under the RSP. Investment income, earnings, and losses charged
against the Accounts shall be based solely upon the actual performance (net
of expenses and charges allowed under the RSP) of each of the Investment
Funds for the period of time all or some portion of each of the Accounts has
been designated to use such Investment Fund as a measurement of investment
returns. A change of measurement of returns from one Investment Fund to
another, or a distribution or withdrawal, shall be determined as of the same
dates and in the same manner as if amounts posted in Accounts were actually
invested in the RSP and such financial transactions were being implemented in
the RSP.
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
7.1 General. Prior to January 1, 1994, a Participant's Investment
Election and Conversion Election (except as provided in Section 7.4) with
respect to this Plan were deemed to be identical to each comparable
investment direction made by the Participant under the RSP. Effective
January 1, 1994, this Plan will no longer use a Participant's RSP investment
directions, and other than as provided in Section 7.5, a separate Investment
Election and Conversion Election must be made with respect to the Deferrals
and Accounts; provided however, if no Investment Election or Conversion
Election is received from a Participant on or after January 1, 1994, such
Participant will be deemed to have submitted a Conversion Election, effective
January 1, 1994 with respect to his or her Accounts as of December 31, 1993,
which designates a percentage of such Accounts to have its investment returns
measured by an Investment Fund which is the same percentage and investment
fund in the RSP that such Participant had previously been deemed to have
designated prior to January 1, 1994, with the exception that any amounts
designated to measure the investment returns of the Windsor Fund shall
instead use the Large Company Fund.
7.2 Investment of Deferrals.
(a) Investment Election. Each Participant may direct, by
submission to the Benefit Trust Committee of a completed Investment
Election form provided for that purpose by the Benefit Trust
Committee, to select a measurement of investment returns for Deferrals
(other than MIC Deferrals) posted to his or her Accounts (and the
portion of such Accounts attributable to such Deferrals) in one or
more Investment Funds. Each Investment Election shall apply
proportionately to all Deferrals (other than MIC Deferrals) based upon
the relative amount of each.
(b) Effective Date of Investment Election; Change of Investment
Election. A Participant's initial Investment Election will be
effective with respect to a Fund on the Trade Date which relates to
the Sweep Date on which or prior to which the Investment Election is
received pursuant to procedures specified by the Benefit Trust
Committee. Any Investment Election which has not been properly
completed will be deemed not to have been received. A Participant's
Investment Election shall continue in effect, notwithstanding any
change in his or her Compensation or his or her Deferral Percentage,
until the effective date of a new Investment Election. A change in
Investment Election shall be effective with respect to a Fund on the
Trade Date which relates to the Sweep Date on which or prior to which
the Benefit Trust Committee receives the Participant's new Investment
Election.
7.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's
Investment Election, a Participant or Beneficiary may direct the
Benefit Trust Committee, by submission of a completed Conversion
Election form provided for that purpose to the Benefit Trust
Committee, to change the measurement of investment returns of his or
her Accounts (other than the MIC Deferral Account). Each Conversion
Election shall apply proportionately to all affected Accounts based
upon the relative balance of each.
(b) Effective Date of Conversion Election. A Conversion
Election to change a Participant's measurement of investment returns
of his or her Accounts in one Investment Fund to another Fund shall be
effective with respect to such Funds on and after the Trade Date which
relates to the Sweep Date on which or prior to which the Election is
received pursuant to procedures specified by the Benefit Trust
Committee. Notwithstanding the foregoing, to the extent required by
any provisions of an Investment Fund, the effective date of any
Conversion Election may be delayed or the amount of any permissible
Conversion Election may be reduced. Any Investment Election which has
not been properly completed will be deemed not to have been received.
7.4 Insiders.
Prior to January 1, 1994, and as of the later of May 5, 1992 or the
date on which such Participant becomes an Insider (as determined by the
Benefit Trust Committee) ("Transfer Date"):
(a) The measurement of investment returns for an RSP Employer
Deferral hereunder shall initially be assumed to be the same as the
Investment Funds in which the Insider's pre-tax contributions are
initially invested in the RSP; and if the Insider does not make pre-
tax contributions to the RSP, then it shall be assumed to be that of
the Investment Fund primarily invested in Company Stock.
(b) Each Insider's change in investment directions under the RSP
shall be disregarded for purposes of this Plan:
(1) if such change would cause any portion of the Insider's
Deferral or Accounts to use the Fund invested primarily in
Company Stock as a measurement of investment return; or
(2) if such change is not in amounts and effective as of
such dates as are determined by the Benefit Trust Committee under
a set of rules applicable to all Insiders.
7.5 Investment Returns on MIC Deferrals. All MIC Deferral Accounts
shall have interest as a measurement of investment return. The rate of
interest deemed to be earned on such Accounts on any day during a 6-month
period shall be the stated prime rate of interest charged by Continental
Bank, N.A. on the first business day in January or July of such period.
7.6 Restrictions on Measurement. The following additional
restrictions shall apply to the measurement of investment return of Deferrals
and Accounts other than those described in Section 7.5:
(a) Effective after January 1, 1994, no Investment Election
shall be permitted which results in a measurement of investment return
for Deferrals to be an Investment Fund invested primarily in Company
Stock and no Conversion Election shall be permitted which results in a
measurement of investment return for Accounts into or out of an
Investment Fund invested primarily in Company Stock;
(b) Any limitations, conditions or restrictions which may be
imposed by the Benefit Trust Committee; and
(c) Any limitation, condition or restriction which is imposed on
the measurement of investment returns in or the liquidation of funds
out of any Investment Fund in the RSP.
7.7 Procedures. The procedures, frequency and time deadlines for
making an Investment Election or Conversion Election shall be the same as the
applicable procedures, frequency and time deadlines in the RSP, except to the
extent provided otherwise in this Plan or by the Benefit Trust Committee.
ARTICLE VIII
VESTING AND FORFEITURES
8.1 Fully Vested Deferral Accounts.
A Participant shall be fully vested and have a nonforfeitable
right to his or her Accounts at all times.
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals for Hardship.
(a) Requirements. A Participant may request the withdrawal of
any amount from the portion of his or her Accounts (not in excess of
the balance of such Accounts) needed to satisfy a financial need by
making a withdrawal request in accordance with a procedure established
by the Benefit Trust Committee. A financial need for this purpose is
a severe, unanticipated hardship, the occurrence of which is beyond
the Participant's control and for which the amount needed to satisfy
the hardship is determined only after the Participant has used other
readily available funds or resources (other than this Plan and the
RSP).
(b) Account Sources for Withdrawal. The withdrawal amount
shall come only from the following Accounts, in the following priority
order:
RSP Employee Account
RSP Employer Account
Replacement RSP Employer Account
Replacement RSP Employee Account
Pay Based Account
MIC Deferral Account
9.2 Withdrawal Processing.
(a) Minimum Amount. There is no minimum payment for any type
of withdrawal.
(b) Application by Participant. A Participant must submit a
withdrawal request, in accordance with a procedure established by the
Benefit Trust Committee, to the Benefit Trust Committee to apply for
any type of withdrawal.
(c) Approval by Benefit Trust Committee. The Benefit Trust
Committee is responsible for determining that a withdrawal request
conforms to the requirements described in this Section and notifying
the Company of any payments to be made in a timely manner. Any
request to make a withdrawal by a member of the Benefit Trust
Committee may be approved only by disinterested members of the Benefit
Trust Committee, or if none, the Compensation Committee.
(d) Time of Processing. The Company shall process all
withdrawal requests which it receives by a Sweep Date, based on the
value as of the Trade Date to which it relates, and fund them on the
next Settlement Date. The Company shall then make payment to the
Participant as soon thereafter as is administratively feasible;
provided however, if such payment will result in any portion of the
payment (or any other amount paid to such Participant during the same
Plan Year) not being deductible by reason of Code section 162(m), the
Compensation Committee may defer payment to a later Payment Date
designated by it.
(e) Medium and Form of Payment. The medium of payment for
withdrawals is cash. The form of payment for withdrawals shall be a
single installment.
(f) Investment Fund Sources. Within each Account used for
funding a withdrawal, amounts shall be taken by type of investment
measurement in direct proportion to the value of the Participant's
Accounts in each Investment Fund at the time the withdrawal is made.
ARTICLE X
DISTRIBUTIONS
Benefits payable under this Plan shall be paid in the form and time
prescribed below.
10.1 Retirement Benefit. A Participant who has a nonforfeitable right
to receive a retirement benefit from the Pension Plan (or would have a
nonforfeitable right if such Participant were eligible to participate in the
Pension Plan) shall receive a Retirement Benefit (less any amounts previously
paid to the Participant under Section 10.7) in the following Actuarial
Equivalent form of payment and as of the following Payment Date:
(a) Form of Payment. The Participant may elect a form of
payment of the Retirement Benefit in the same manner and form as
permitted under the Pension Plan (other than the Social Security
Leveling Option) without the necessity of spousal consent; provided,
however, the Compensation Committee in its discretion, or such
Participant by irrevocably electing in writing on a form delivered to
the Benefit Trust Committee at least six (6) months prior to the
Payment Date, may convert the Retirement Benefit payable under this
Plan into an Actuarial Equivalent single sum form of payment.
(b) Time of Payment. The Payment Date of a Participant's
Retirement Benefit shall be the earliest date on or after the
Participant's Termination of Employment as of which he or she could
have commenced payment of his or her retirement benefits from the
Pension Plan; or in the case of a single sum payment, as soon as
practicable following the Participant's Termination of Employment;
provided however, if such single sum payment will result in any
portion of the payment (or any other amount paid to such Participant
during the same Plan Year) not being deductible by reason of Code
section 162(m), the Benefit Trust Committee may defer such Actuarial
Equivalent single sum payment to a later Payment Date designated by
it.
10.2 Pension Death Benefit.
(a) Form of Payment. The Death Benefit payable to the
Beneficiary of a Participant who is entitled to a Retirement Benefit
(less any amounts previously paid to the Participant under
Section 10.7) and who dies on or after his or her Payment Date shall
be in the form selected by the Participant commencing as of such
Payment Date. Where a Participant who is entitled to a Retirement
Benefit (less any amounts previously paid to the Participant under
Section 10.7) dies prior to his Payment Date, the form of payment of
his or her Beneficiary's Death Benefit shall be the same as the form
of payment of any death benefit payable under the Pension Plan;
provided however, the Compensation Committee in its discretion, or
such Participant by electing in writing on a form delivered to the
Benefit Trust Committee prior to his or her Payment Date, may convert
the Death Benefit payable under this Plan into an Actuarial Equivalent
single sum form of payment.
(b) Time of Payment. A Beneficiary's Death Benefit shall
commence to be paid as of the earliest date as of which he or she
could have commenced payment of a death benefit from the Pension Plan;
or in the case of a single sum payment, as soon as practicable
following the Participant's death; provided however, if such single
sum payment will result in any portion of the payment (or any other
amount paid to such Beneficiary during the same Plan Year) not being
deductible by reason of Code section 162(m), the Benefit Trust
Committee may defer such Actuarial Equivalent single sum payment to a
later Payment Date designated by it.
10.3 Accounts.
(a) Form of Payment. The form of payment of the balance of a
Participant's Accounts (other than his or her MIC Account for each
Plan Year) will be a single sum payment except with respect to those
Accounts for which the Participant has selected the Installment Form
of Payment on his or her Deferral Election Form, in which case such
Accounts will be paid in the Installment Form of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's Accounts (other than his or her MIC Account) shall be
the Payment Date following Termination of Employment selected by the
Participant on his or her Enrollment Election form; provided however,
if such payment will result in any portion of the payment (or any
other amount paid to such Participant during the same Plan Year) not
being deductible by reason of Code section 162(m), the Benefit Trust
Committee may defer payment to a later Payment Date designated by it
and such Accounts shall continue to have investment returns measured
under this Plan.
10.4 MIC Account.
(a) Form of Payment. The form of payment of the balance of a
Participant's MIC Account for each Plan Year will be a single sum
payment except with respect to those MIC Accounts for which the
Participant has selected the Installment Form of Payment on his or her
Deferral Election Form, in which case such MIC Accounts will be paid
in the Installment Form of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's MIC Account for each Plan Year shall be the earlier of
the fixed Payment Date selected by the Participant on the Deferral
Election Form for the Plan Year or the Payment Date following a
Termination of Employment selected in his or her Enrollment Election
form; provided however, if such payment will result in any portion of
the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m),
the Benefit Trust Committee may defer payment to a later Payment Date
designated by it and such Accounts shall continue to have investment
returns measured under this Plan.
10.5 Death Benefit of Accounts. Upon the death of a Participant, the
remaining balance in his or her Accounts shall be paid to the Participant's
Beneficiary in a single sum as soon as administratively possible after the
Participant's death; provided however, if such payment will result in any
portion of the payment (or any other amount paid to such Beneficiary during
the same Plan Year) not being deductible by reason of Code section 162(m),
the Benefit Trust Committee may defer payment to a later Payment Date
designated by it and such Accounts shall continue to have investment returns
measured under this Plan.
10.6 Prior to 1994. The timing and form of payment of a Retirement
Benefit, Death Benefit and balance of Accounts with respect to a Participant
or Beneficiary as of any date of determination prior to 1994 shall be
determined by the terms and provisions of this Plan as of such date.
10.7 Payments of Retirement and Death Benefit Due to an Investment
Grade Rating Change. Notwithstanding Sections 10.1, 10.2 or 10.6, the
following shall apply:
(a) Retirement Benefit. If, prior to a Change of Control or
more than three (3) years after a Change of Control, either (1) the
Company or (2) the Parent is rated below an Investment Grade Rating,
then on such date, and on each December 31 after such date and prior
to the date the Company and the Parent both have an Investment Grade
Rating, a single sum payment shall be made immediately to such
Participant of the amount by which the Actuarial Equivalent of (1)
exceeds the sum of (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to
his benefit from the Pension Plan, (B) the Participant incurs a
Termination of Employment as of the date of determination, and
(C) benefits payable from the Pension Plan would commence upon
the earliest payment date allowed under the Pension Plan
immediately following such Termination of Employment.
(2) the Actuarial Equivalent of the amount determined in
Section 5.1(b) based upon the same assumptions as those in
Section 10.7(a)(1).
(3) the Actuarial Equivalent of amounts paid to such
Participant based on any prior determination date pursuant to
this Section 10.7(a).
(b) Retirement Benefit After Payment Date. On or after the
Payment Date of a Participant's Retirement Benefit, if either (1) the
Company or (2) the Parent is rated below an Investment Grade Rating,
then an Actuarial Equivalent single sum payment of such unpaid
Retirement Benefit shall be made immediately to such Participant.
(c) Death Benefit. If either (1) the Company or (2) the
Parent is rated below an Investment Grade Rating, then a Beneficiary
who is receiving, or would as of such date otherwise be eligible to
commence to receive a Death Benefit shall be paid immediately an
Actuarial Equivalent single sum payment of such unpaid Death Benefit.
10.8 Payment of Accounts Due to an Investment Grade Rating Change.
Notwithstanding Sections 10.3, 10.4 or 10.5, if either (1) the Company or
(2) the Parent is rated below an Investment Grade Rating, then the balance of
his or her Accounts shall be paid immediately in a single sum to such
Participant as if such Participant had incurred a Termination of Employment
as of such date the rating drops below an Investment Grade Rating.
10.9 Payment of Retirement and Death Benefits Due to a Change of
Control. On and after a Change of Control and notwithstanding Sections 10.1,
10.2 or 10.6, the following shall apply:
(a) Termination of Employment. Upon Termination of Employment
of a Participant within three (3) years following a Change of Control,
a single sum payment shall be made immediately to such Participant of
the amount by which the Actuarial Equivalent of (1) exceeds (2) plus
(3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to
his benefit from the Pension Plan, (B) the Participant's early
retirement benefit under the Pension Plan is determined using the
Table of reduction factors that would have been available to such
Participant had he or she not incurred a Termination of
Employment until the third (3rd) anniversary of the Change of
Control date and based upon the Participant's age as of the
Payment Date, and (C) benefits payable from the Pension Plan
would commence upon the earliest payment date allowed under the
Pension Plan.
(2) the Actuarial Equivalent of the amount determined in
Section 5.1(b) based upon the same assumptions as those in
Section 10.9(a)(1) except (A).
(3) the Actuarial Equivalent of any amounts previously
paid to the Participant under Section 10.7.
(b) Parent Guaranty for Retirement Benefit. If either (1) the
Benefit Trust Committee has not received a written Guaranty within
ten (10) days after a Change of Control or (2) the Company does not,
as a result of the Change of Control, have a Parent, then payment
shall be made immediately to such Participant of an amount determined
in Section 10.9(a) hereof as if such Participant had incurred a
Termination of Employment as of the Change of Control date.
(c) Investment Grade Rating Within Three Years. If, within
three (3) years following a Change of Control, either (1) the Company
or (2) the Parent is rated below an Investment Grade Rating, then a
single sum payment shall be made immediately to such Participant of an
amount determined in Section 10.9(a) hereof as if such Participant had
incurred a Termination of Employment as of such date the rating drops
below an Investment Grade Rating.
(d) Parent Guaranty for Retirement Benefit After Payment Date.
If the occurrence of a Change of Control is on or after the Payment
Date of a Participant's Retirement Benefit and either (1) the Benefit
Trust Committee has not received a written Guaranty within ten (10)
days after a Change of Control or (2) the Company does not, as a
result of the Change of Control, have a Parent, then an Actuarial
Equivalent single sum payment of such unpaid Retirement Benefit shall
be made immediately to such Participant.
(e) Parent Guaranty for Death Benefit. If either (1) the
Benefit Trust Committee has not received a written Guaranty within ten
(10) days after a Change of Control or (2) the Company does not, as a
result of the Change of Control, have a Parent, then a Beneficiary who
is receiving, or would as of such date otherwise be eligible to
commence to receive, a Death Benefit shall be paid immediately an
Actuarial Equivalent single sum payment of such unpaid Death Benefit.
10.10 Payment of Accounts Due to a Change of Control. On and
after a Change of Control and notwithstanding Sections 10.3, 10.4 or 10.5,
the following shall apply:
(a) Termination of Employment. In the event of a Participant's
Termination of Employment within three (3) years following a Change of
Control, the balances of his or her Accounts shall be paid immediately
in a single sum.
(b) Parent Guaranty. If either (1) the Benefit Trust Committee
has not received a written Guaranty within ten (10) days after a
Change of Control or (2) the Company does not, as a result of a Change
of Control, have a Parent, then payment shall be made immediately to
such Participant of an amount determined in (a) hereof as if such
Participant had incurred a Termination of Employment as of the Change
of Control date.
ARTICLE XI
AMENDMENT
11.1 Prior to a Change of Control. The Company reserves the right to
amend this Plan from time to time by action of the Board of Directors, but
without the written consent of each Participant and Beneficiary of a deceased
Participant, no such action may reduce or relieve the Company of any
obligation with respect to any Retirement Benefit (or Death Benefit) accrued
or balance of Accounts maintained under this Plan by such Participant (or
Beneficiary) as of the date of such amendment, except to the extent such
amendment is required by written opinion of counsel to the Company to avoid
recognition of income by a Participant or Beneficiary subject to federal
income taxation.
11.2 After a Change of Control. If within ten (10) days after a
Change of Control, the Company has received a written, irrevocable Guaranty
as described in Sections 10.9(b), (d), (e) and 10.10(b) of payment of all
amounts due under the Plan from a Parent, then the Company may amend this
Plan solely for the purpose of freezing benefit accruals, provided such
freeze provides for a measurement of investment returns or Accounts
substantially comparable to the Investment Elections, Conversion Elections
and investment return measurements under Section 7.5 available under the Plan
immediately prior to the date of a Change of Control; and provided further,
such freeze does not change the definition of Actuarial Equivalent amounts,
limit the Participant's right to accrue a subsidy for early payment of any
benefit under the Plan that existed as of the Change of Control date nor the
ability to elect timing and optional forms of payment or a Beneficiary on or
after such Change of Control Date or reduce in any manner or to any extent
the Parent's Guaranty.
<PAGE>
ARTICLE XII
TERMINATION
The Company, by action of the Board of Directors, reserves the right
to terminate this Plan, provided the Company pays to each Participant and
Beneficiary, on such date of termination of this Plan, the Actuarial
Equivalent single sum value of a Participant's unpaid Retirement Benefit (or
of a Beneficiary's unpaid Death Benefit) and the balance of Accounts
maintained for such Participant (or for a Beneficiary) as of the date of
termination shall be paid as soon as administratively possible; provided
however, for this purpose a Participant's Retirement Benefit shall be equal
to the amount by which the Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon
the assumption that (A) the Participant has a nonforfeitable
right to his benefit from the Pension Plan, (B) the Participant's
early retirement benefit under the Pension Plan is determined
using the Table of reduction factors that would have been
available to such Participant had he or she not incurred a
Termination of Employment until the day preceding his or her
sixty-fifth (65th) birthday and based upon the Participant's age
as of the Payment Date, and (C) benefits payable from the Pension
Plan would commence upon the earliest payment date allowed under
the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in
Section 5.1(b) based upon the same assumptions as those in
subsection (a)(1) above except (A).
(3) the Actuarial Equivalent of any amounts previously
paid to the Participant under Section 10.7.
If within ten (10) days after a Change of Control, the requirements of
Sections 10.9(b), (d), (e) and 10.10(b) hereof are not satisfied, the Plan
shall automatically terminate upon final payment of all amounts due in
accordance with Sections 10.9(b), (d), (e), 10.10, 13.3, 13.4 and 13.9 of
this Plan.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Administration. This Plan shall be administered by the Benefit
Trust Committee. The Benefit Trust Committee shall have, to the extent
appropriate, the same powers, rights, duties, and obligations with respect to
this Plan as the committee of the Trust has under the Trust document (other
than the power to amend this Plan).
13.2 Finality of Determination. The determination of the Benefit
Trust Committee as to any disputed questions arising under this Plan,
including questions of construction and interpretation shall be final,
binding, and conclusive upon all persons.
13.3 Expenses. The expenses of administering this Plan shall be
borne by the Company.
13.4 Indemnification and Exculpation. The members of the Benefit
Trust Committee, its agents and officers, directors and employees of the
Company shall be indemnified and held harmless by the Company against and
from any and all loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by them in connection with or resulting from any
claim, action, suit, or proceeding to which they may be a party or in which
they may be involved by reason of any action taken or failure to act under
this Plan and against and from any and all amounts paid by them in settlement
(with the Company's written approval) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding. The foregoing provision
shall not be applicable to any person if the loss, cost, liability, or
expense is due to such person's gross negligence or willful misconduct.
13.5 Funding. While all benefits payable under this Plan constitute
general corporate obligations, the Company may establish a separate
irrevocable grantor trust for the benefit of all Participants, which trust
shall be subject to the claims of the general creditors of the Company in the
event of such corporation's insolvency, to be used as a reserve for the
discharge of the Company's obligations under this Plan to such Participants.
Any payments made to a Participant under the separate trust for his benefit
shall reduce dollar for dollar the amount payable to the Participant from the
general assets of the Company. The amounts payable under this Plan shall be
reflected on the accounting records of the Company or the Parent but shall
not be construed to create or require the creation of a trust, custodial, or
escrow account, except as described above in this section. No Participant
(or Beneficiary of a Participant) shall have any right, title, or interest
whatever in or to any investment reserves, accounts, or funds that the
Company or the Parent may purchase, establish, or accumulate to aid in
providing benefits under this Plan. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create a trust or fiduciary
relationship of any kind between the Company, the Parent or Compensation
Committee and a Participant, Beneficiary or any other person. Neither a
Participant nor Beneficiary shall acquire any interest greater than that of
an unsecured, general creditor.
13.6 Corporate Action. Any action required of or permitted by the
Company under this Plan shall be by resolution of its Board of Directors, the
Compensation Committee or any person or persons authorized by resolution of
such Compensation Committee.
13.7 Interests not Transferable. The interests of the Participants
and their Beneficiaries under this Plan are not subject to the claims of
their creditors and may not be voluntarily or involuntarily transferred,
assigned, alienated, or encumbered by them.
13.8 Effect on Other Benefit Plans. Amounts credited or paid under
this Plan shall not be considered to be compensation for the purposes of a
qualified pension plan maintained by the Company or the Parent. The
treatment of such amounts under other employee benefits plans shall be
determined pursuant to the provisions of such plans.
13.9 Legal Fees and Expenses. After a Change of Control, the
Company shall pay all reasonable legal fees and expenses which the
Participant or a Beneficiary may incur as a result of either (1) the Parent's
contesting the validity or enforceability of the Parent's Guaranty of payment
of the Company's obligations under this Plan; or (2) the Company's contesting
the validity, enforceability or the Participant's interpretation of, or
determinations made under, this Plan or the Trust.
13.10 Deduction of Taxes from Amounts Payable.
(a) Distribution. The Company shall deduct from the amount to
be distributed such amount as the Company, in its sole discretion,
deems proper to protect the Company against liability for the payment
of death, succession, inheritance, income, or other taxes, and out of
money so deducted, the Company may discharge any such liability and
pay the amount remaining to the Participant, the Beneficiary or the
deceased Participant's estate, as the case may be.
(b) Withholding. The Company may withhold whatever taxes
(including FICA, state or federal taxes) it, in its sole discretion,
deems proper to protect the Company against liability for the payment
of such withholding taxes and out of the money so deducted, the
Company may discharge any such liability. Withholding for this
purpose may come from any wages due to the Participant, or if none,
from the Participant's Accounts hereunder.
13.11 Facility of Payment. If a Participant or Beneficiary is
declared an incompetent or is a minor and a conservator, guardian, or other
person legally charged with his or her care has been appointed, any benefits
to which such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian, or other person legally charged with his or her care.
The decision of the Benefit Trust Committee in such matters shall be final,
binding, and conclusive upon the Company and upon each Participant,
Beneficiary, and every other person or party interested or concerned. The
Company and the Benefit Trust Committee shall not be under any duty to see to
the proper application of such payments.
13.12 Merger. This Plan shall be binding and enforceable with
respect to the obligation of the Company against any successor to the Company
by operation of law or by express assumption of the Plan, and such successor
shall be substituted hereunder for the Company.
13.13 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
13.14 Invalidity of Certain Provisions. If any provision of this
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof and this Plan
shall be construed and enforced as if such provisions, to the extent invalid
or unenforceable, had not been included.
13.15 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings
and the text of this Plan, the text shall control.
13.16 Notice and Information Requirements. Except as otherwise
provided in this Plan or as otherwise required by law, the Company shall have
no duty or obligation to affirmatively disclose to any Participant or
Beneficiary, nor shall any Participant or Beneficiary have any right to be
advised of, any material information regarding the Company, or at any time
prior to, upon or in connection with the Company's purchase, or any other
distribution or transfer (or decision to defer any such distribution) of any
Company Stock or any other stock held under this Plan.
13.17 Governing Law. This Plan shall be governed by the laws of the
State of Delaware.
Adopted on the ________ day of _______________ by the Board of
Directors of the Company as to its obligations.
By:
---------------------------------
Title:
---------------------------------
Exhibits 10(j), 10(k), 10(l)
Pursuant to Instruction 2 of Item 601 of Regulation S-K, Whitman is only
filing the Whitman Corporation Executive Retirement Plan (Exhibit 10(i))
because Exhibits 10(j), 10(k), 10(l) are substantially identical to Exhibit
10(i) except the parties thereto. All other portions of the plans are
identical.
Schedule of Material Differences:
10(j) Hussmann Corporation Executive Retirement Plan, as Amended and
Restated Effective January 1, 1995. Hussmann Corporation (the
"Company") is the principal party to the plan.
10(k) Midas International Corporation Executive Retirement Plan, as Amended
and Restated Effective January 1, 1995. Midas International
Corporation (the "Company") is the principal party to the plan.
10(l) Pepsi-Cola General Bottlers, Inc. Executive Retirement Plan, as
Amended and Restated Effective January 1, 1995. Pepsi-Cola General
Bottlers, Inc. (the "Company") is principal party to the plan.
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in Millions, Except Ratios)
Years Ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Earnings:
Income from Continuing
Operations before Taxes $ 212.7 $ 212.2 $ 170.6 $ 161.7 $ (39.0)
Fixed Charges Excluding
Capitalized Interest 82.2 105.9 106.9 138.2 168.1
------- ------- ------- ------- -------
Income as Adjusted $ 294.9 $ 318.1 $ 277.5 $ 299.9 $ 129.1
======= ======= ======= ======= =======
Fixed Charges:
Interest Expense $ 71.1 $ 96.2 $ 97.7 $ 128.6 $ 158.7
Portion of Rents
Representative of
Interest Factor 11.1 9.7 9.2 9.6 9.4
------- ------- ------- ------- -------
Fixed Charges Excluding
Capitalized Interest 82.2 105.9 106.9 138.2 168.1
Capitalized Interest 0.2 0.2 0.2 0.2 0.3
------- ------- ------- ------- -------
Total Fixed Charges $ 82.4 $ 106.1 $ 107.1 $ 138.4 $ 168.4
======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 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>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of March 1, 1995
Percentage Of
Voting Stock
Owned Or
Place of Controlled By
Name Incorporation The Registrant
- --------------------------------- -------------- --------------
Whitman Corporation (Registrant) Delaware
IC Equities, Inc Delaware 100%
Cove Development Corp. Delaware 100
Whitman Leasing, Inc. Delaware 100
Illinois Center Corporation Delaware 100
S&T South, Inc. Illinois 100
Mid-America Improvement Corporation Illinois 100
South Properties, Inc. Illinois 100
Environ of Inverrary, Inc. Florida 100
S&T of Mississippi, Inc. Mississippi 100
Midas International Corporation Delaware 100
Cosmic Enterprises, Inc. Delaware 100
Cosmic Stores, Inc. New York 100
Midas Euro, Inc. Delaware 100
Midas Realty Corporation Delaware 100
Midas Properties, Inc. New York 100
Muffler Corporation of America Illinois 100
Midas France S.A. France 100
Midas Mufflers (Vic.) Pty. Ltd. Australia 100
Midas Australia Pty. Ltd. Australia 100
Midas S.A. Belgium 100
Midas Silenciador, S.A. Spain 100
Top Escape Spain 100
Carex Uitlaatcenter N.V. Belgium 100
Midas International Corporation Wyoming 100
Midas Canada Holdings, Ltd. Canada 100
Midas Canada, Inc. Canada 100
Midas Realty Corp. of Canada, Inc. Canada 100
Midas Autoservice GESMBH Austria 100
Midas Schweiz AG Switzerland 100
Pepsi-Cola General Bottlers, Inc. Delaware 80
PCGB, Inc Illinois 80
Genadco Advertising Agency, Inc. Illinois 80
General Bottlers, Inc. Delaware 80
Iowa Vending, Inc. Delaware 80
Kolmar Products Corporation Wisconsin 80
Pepsi-Cola General Bottlers of Indiana, Inc. Delaware 80
Pepsi-Cola General Bottlers of Ohio, Inc. Delaware 80
Pepsi-Cola General Bottlers of Virginia, Inc. Virginia 80
Pepsi-Cola General Bottlers of Princeton, Inc. West Virginia 80
Pepsi-Cola Bottling Co. of Bloomington, Inc. Delaware 80
Pepsi-Cola Bottling Co. of Wisconsin, Inc. Wisconsin 80
Marquette Bottling Works, Incorporated Michigan 80
Northern Michigan Vending, Inc. Michigan 80
Pepsi-Cola General Bottlers of Iowa, Inc. Iowa 80
Pepsi-Cola Bottling Company, Inc.
of Waterloo, Iowa Iowa 80
GB International, Inc. Delaware 80
General Bottlers Sp.z o.o Poland 80
Hussmann Corporation Missouri 100
Krack Corporation Illinois 100
Hussmann Tempcool Holdings PTE Limited Singapore 50
Luoyang Hussmann Refrigeration Co., Ltd. China 55
Whitman Insurance Co., Ltd. Bermuda 100
Hussmann Canada Holdings, Ltd. Canada 100
Hussmann Canada, Inc. Canada 100
Hussmann Holdings, Ltd. Great Britain 100
Hussmann (Europe) Ltd. Great Britain 100
Hussmann Refrigeration Ltd. Great Britain 100
Hussmann Manufacturing, Ltd. Scotland 100
Hussmann Mexico S.A. de C.V. Mexico 100
American Refrigeration Products S.A. de C.V. Mexico 100
Industrias Frigorificas S.A. de C.V. Mexico 100
Hussmann Inmobiliaria, S.A. de C.V. Mexico 100
The names of certain subsidiaries are omitted because such subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
EXHIBIT 23
INDEPENDENT AUDITORS CONSENT
The Board of Directors and Shareholders of
Whitman Corporation:
We consent to incorporation by reference in Registration Statements Nos. 33-
28238 and 33-65006 on Form S-8 and No. 33-50109 on Form S-3 of Whitman
Corporation of our reports dated January 16, 1995, relating to the
consolidated balance sheets of Whitman Corporation and subsidiaries as of
December 31, 1994 and 1993 and the related consolidated statements of income,
shareholders equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, which report appears in this annual report on
Form 10-K. Our report refers to a change in the method of accounting for
postretirement benefits other than pensions.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Chicago, Illinois
March 22, 1995
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and or
Officer of Whitman Corporation, a Delaware corporation (the "Company"),
hereby constitutes and appoints BRUCE S. CHELBERG, THOMAS L. BINDLEY and
FRANK T. WESTOVER, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign the
Company s Annual Report on Form 10-K for the fiscal year ended December 31,
1994, and any and all amendments thereto, and to file the same, with all
exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as
he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
this 22nd day of March, 1995.
Date Date
------- -------
/s/ Bruce S. Chelberg 3/22/95 /s/ Archie R. Dykes 3/22/95
- ------------------------ --------------------------
Bruce S. Chelberg Archie R. Dykes
/s/ Thomas L. Bindley 3/22/95
- ------------------------ --------------------------
Thomas L. Bindley Helen Galland
/s/ Frank T. Westover 3/22/95 /s/ Jarobin Gilbert, Jr. 3/22/95
- ------------------------ --------------------------
Frank T. Westover Jarobin Gilbert, Jr.
/s/ Richard G. Cline 3/22/95 /s/ Victoria B. Jackson 3/22/95
- ------------------------ --------------------------
Richard G. Cline Victoria B. Jackson
/s/ James W. Cozad 3/22/95 /s/ Donald P. Jacobs 3/22/95
- ------------------------ --------------------------
James W. Cozad Donald P. Jacobs
/s/ Pierre S. duPont 3/22/95 /s/ Charles S. Locke 3/22/95
- ------------------------ --------------------------
Pierre S. duPont Charles S. Locke
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 71,300
<SECURITIES> 0
<RECEIVABLES> 362,500<F1>
<ALLOWANCES> 7,900
<INVENTORY> 233,600
<CURRENT-ASSETS> 707,700
<PP&E> 1,205,200
<DEPRECIATION> 591,400
<TOTAL-ASSETS> 2,135,400
<CURRENT-LIABILITIES> 483,100
<BONDS> 723,000
<COMMON> 413,200
0
0
<OTHER-SE> 139,400
<TOTAL-LIABILITY-AND-EQUITY> 2,135,400
<SALES> 2,658,800
<TOTAL-REVENUES> 2,658,800
<CGS> 1,704,700
<TOTAL-COSTS> 2,332,000
<OTHER-EXPENSES> 49,400<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,700<F3>
<INCOME-PRETAX> 212,700
<INCOME-TAX> 88,100
<INCOME-CONTINUING> 106,400<F4>
<DISCONTINUED> (3,200)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,200
<EPS-PRIMARY> $0.97
<EPS-DILUTED> $0.97
<FN>
<F1>Net of allowance for doubtful accounts of $7,900.
<F2>Includes unrealized loss on investment in Northfield Laboratories of $24,200.
<F3>Interest expense reported is offset by $6,400 of interest income, therefore
gross interest expense equals $71,100.
<F4>Income from continuing operations is reported after minority interest of
$18,200.
</FN>
</TABLE>
