SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission File Number 1-4710
WHITMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-6076573
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3501 Algonquin Road, Rolling Meadows, Illinois 60008
- ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant s telephone number, including area code (847) 818-5000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
As of April 30, 1996, the Registrant had 105,453,157 outstanding shares
(excluding treasury shares) of common stock, no par value.
CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
SIGNATURE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended
March 31,
------------------
1996 1995
-------- --------
(in millions, except
per-share data)
Sales and Revenues $ 657.9 $ 594.4
Cost of Goods Sold 428.6 383.1
------- -------
Gross Profit 229.3 211.3
Selling, General and Administrative Expenses 171.3 157.8
Amortization Expense 5.0 4.4
------- -------
Operating Income 53.0 49.1
Interest Expense (17.4) (17.3)
Interest Income 1.7 1.3
Other Expense, Net (4.0) (2.9)
------- -------
Income Before Income Taxes 33.3 30.2
Provision for Income Taxes 14.0 13.0
------- -------
Income Before Minority Interest 19.3 17.2
Minority Interest 3.3 3.2
------- -------
Net Income $ 16.0 $ 14.0
======= =======
Average Number of Common Shares Outstanding 107.1 105.9
======= =======
Net Income per Common Share $ 0.15 $ 0.13
======= =======
Cash Dividends per Common Share $ 0.095 $ 0.085
======= =======
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
------------ ------------
(in millions)
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 73.0 $ 53.3
Receivables 341.8 378.5
Inventories 273.8 267.1
Other Current Assets 65.5 62.2
-------- --------
Total Current Assets 754.1 761.1
-------- --------
Investments 256.0 253.7
Property (at Cost) 1,365.6 1,356.8
Accumulated Depreciation and Amortization (669.9) (659.3)
-------- --------
Net Property 695.7 697.5
-------- --------
Intangible Assets, Net 564.2 568.8
Other Assets 81.3 82.2
-------- --------
Total Assets $2,351.3 $2,363.3
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY:
Current Liabilities:
Short-Term Debt, Including Current Portion
of Long-Term Debt $ 94.2 $ 93.8
Accounts and Dividends Payable 244.7 248.6
Other Current Liabilities 157.3 165.2
-------- --------
Total Current Liabilities 496.2 507.6
-------- --------
Long-Term Debt 820.3 828.2
Deferred Income Taxes 35.6 33.4
Other Liabilities 135.1 141.0
Minority Interest 227.6 225.3
Shareholders Equity:
Common Stock (No par, 250.0 million
shares authorized; 105.6 million shares
outstanding at March 31, 1996 and 105.2
million shares outstanding at
December 31, 1995) 435.8 427.8
Retained Income 343.0 336.6
Cumulative Translation Adjustment (82.2) (80.3)
Unrealized Investment Gain 9.7 9.7
Treasury Common Stock (69.8) (66.0)
-------- --------
Total Shareholders Equity 636.5 627.8
-------- --------
Total Liabilities and Shareholders Equity $2,351.3 $2,363.3
======== ========
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
March 31,
------------------
1996 1995
-------- --------
(in millions)
Cash Flows from Operating Activities:
Income $ 16.0 $ 14.0
Adjustments to Reconcile to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 29.5 26.0
Other 2.3 0.9
Changes in Assets and Liabilities, Net of
Acquisitions:
Decrease in Receivables 36.7 59.9
Increase in Inventories (7.0) (34.1)
Increase (Decrease) in Payables (3.9) 7.5
Net Change in Other Assets and Liabilities (9.6) (16.8)
------- -------
Net Cash Provided by Continuing Operations 64.0 57.4
Net Cash Used in Discontinued Operations (5.5) (1.9)
------- -------
Net Cash Provided by Operating Activities 58.5 55.5
------- -------
Cash Flows from Investing Activities:
Capital Investments, Net (24.2) (40.4)
Acquisitions and Joint Ventures (7.2) --
Purchases of Investments (33.0) (94.5)
Proceeds from Sale of Investments 38.1 107.7
------- -------
Net Cash Used in Investing Activities (26.3) (27.2)
------- -------
Cash Flows from Financing Activities:
Proceeds from Issuance of Long-Term Debt -- 149.0
Repayment of Long-Term Debt (0.9) (92.2)
Net Repayment of Bank Lines of Credit and
Commercial Paper (6.0) (41.1)
Increase in Current Debt 0.4 --
Common Dividends (10.0) (8.9)
Treasury Stock Purchases (4.2) (5.1)
Issuance of Common Stock 8.4 2.5
------- -------
Net Cash Provided By (Used in) Financing
Activities (12.3) 4.2
------- -------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (0.2) (2.3)
------- -------
Change in Cash and Cash Equivalents 19.7 30.2
Cash and Cash Equivalents at January 1 53.3 71.3
------- -------
Cash and Cash Equivalents at March 31 $ 73.0 $ 101.5
======= =======
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein have
been prepared by the Registrant, without audit. Certain information
and footnote disclosures normally included in financial statements,
prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission, although the Registrant
believes that the disclosures made are adequate to make the
information presented not misleading. It is suggested that these
condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995. In the opinion of management, the information furnished
herein reflects all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of results for the interim
periods presented.
2. Net cash provided by operating activities reflected cash payments and
receipts for interest and income taxes as follows:
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
(in millions)
Interest Paid $ 24.1 $ 31.0
Interest Received 1.6 1.5
Income Taxes Paid 1.3 3.9
3. As of March 31, 1996, the components of inventory were approximately:
raw materials and supplies -- 31.6 percent; work in process -- 19.0
percent; and finished goods -- 49.4 percent.
Item 2. Management s Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Registrant had cash and cash equivalents of
$73.0 million, compared with $53.3 million at December 31, 1995. The
increase in cash during the first three months of 1996 principally resulted
from cash from operations and the issuance of common stock, partially
offset by capital expenditures, investments in joint ventures, repayment of
debt, dividends, and treasury stock purchases.
Cash from operations amounted to $58.5 million in the first three
months of 1996, compared with $55.5 million in the first three months of
1995. The increase principally resulted from higher income and a smaller
increase in inventories, partially offset by lower receivable collections
and higher payable disbursements. The receivable collections in 1995
included a $25.4 million tax refund. Cash provided by operations, together
with the cash received from the issuance of common stock, was used
primarily for capital expenditures, investments in joint ventures,
repayment of debt, dividends, and treasury stock purchases.
Cash used in investing activities was $26.3 million in the first three
months of 1996, compared with $27.2 million for the same period of 1995.
Net capital investments decreased by $16.2 million to $24.2 million, with
the decrease reflecting, among other things, lower capital spending for
Pepsi General's distribution facilities in Poland. The decreased need for
net capital investments during the first three months of 1996 was partially
offset by the Registrant's investment of an additional $7.2 million in the
Pepsi-Cola bottling facility joint venture in Poland. For the first three
months of 1996, proceeds from the sale of investments of $38.1 million were
used primarily to purchase new investments of $33.0 million. Purchases of
and proceeds from the sale of investments principally related to the
Registrant's insurance subsidiary. A substantial portion of these
purchases and sales of such investments represent reinvestment of assets as
the investments mature.
In the first three months of 1996, the Registrant had repayments of
long term debt and net repayments of bank lines and commercial paper of
$6.9 million. The Registrant's total debt declined to $914.5 million at
March 31, 1996, down from $922.0 million at December 31, 1995. Proceeds of
$8.4 million were received from the issuance of common stock, principally
from stock option exercises.
The Registrant had contractual bank lines of credit of $300.0 million
and also maintained a $200.0 million commercial paper program at March 31,
1996, unchanged from December 31, 1995. Borrowings under these programs
were $9.0 million and $15.0 million at March 31, 1996 and December 31,
1995, respectively.
RESULTS OF OPERATIONS
1996 FIRST QUARTER COMPARED WITH 1995 FIRST QUARTER
Sales and revenues increased 10.7 percent to $657.9 million in the
first quarter of 1996, with revenue increases reported by each of the
Registrant's three major subsidiaries, as summarized below:
Quarter Ended
March 31,
---------------- %
1996 1995 Change
------ ------ ------
(in millions)
Pepsi General $ 332.7 $ 298.7 11.4
Midas 130.6 127.0 2.8
Hussmann 194.6 168.7 15.4
------- -------
Total Sales and Revenues $ 657.9 $ 594.4 10.7
======= =======
Pepsi General's revenues increased $34.0 million, including a $9.2
million sales increase in Poland. The increase in Pepsi General's revenues
also reflected improved product demand in the United States and higher
selling prices. Domestic unit case volume increased 6.5 percent over the
first quarter of 1995, with 2.1 percent of the increase coming from the
Cedar Rapids, Iowa franchise acquired in July, 1995. The average net
selling price per case increased approximately 2 percent over the first
quarter of 1995. Midas' revenues increased $3.6 million, primarily due to
higher revenues in Canada and France, partially offset by weaker sales in
the United States due to the harsh winter weather. Hussmann's revenues
increased $25.9 million, resulting from stronger sales in the United
States, as well as from acquisitions in China, Chile and the U.K. These
improvements were partially offset by lower sales in Europe and Mexico.
The Mexico decrease was due to the continuing softness in the Mexican
economy, as well as lower exchange rates.
Gross profit improved 8.5 percent to $229.3 million, primarily due to
the increase in sales. Gross profit margins declined to 34.9 percent from
35.5 percent, principally reflecting higher packaging costs at Pepsi
General.
Selling, general and administrative (S,G&A) expenses increased $13.5
million, or 8.6 percent, with the increase reflecting the effects of higher
sales volumes, start-up costs in Poland, as well as inflationary cost
increases. S,G&A expenses represented 26.0 percent of sales in the first
quarter of 1996, down 0.5 percentage points from the same period last year.
The increase in amortization expense was related to recent acquisitions.
Operating income increased $3.9 million, or 7.9 percent, to $53.0
million in the first quarter of 1996, with increased operating performances
reported by each of the Registrant's three major subsidiaries.
Operating income for the Registrant's three major subsidiaries and
corporate administrative expenses are summarized below:
Quarter Ended
March 31,
---------------- %
1996 1995 Change
------ ------ ------
(in millions)
Pepsi General $ 38.1 $ 36.3 5.0
Midas 11.5 10.9 5.5
Hussmann 8.0 6.2 29.0
------- -------
Subsidiary Operating Income 57.6 53.4 7.9
Corporate Administrative Expenses (4.6) (4.3) 7.0
------- -------
Total Operating Income $ 53.0 $ 49.1 7.9
======= =======
In the first quarter of 1996, Pepsi General had record operating
earnings of $38.1 million, primarily reflecting the benefits of higher
volumes and selling prices. Pepsi General's results included $4.3 million
in operating losses from its operations in Poland, compared with operating
losses of $2.2 million for the same period of 1995. Excluding the operating
losses in Poland, Pepsi General's operating income increased 10.1 percent.
Midas reported operating earnings of $11.5 million, up $0.6 million, or 5.5
percent, from last year, primarily reflecting the benefits from higher
revenues in Canada and France, partially offset by weaker results in the
United States due to the harsh winter weather. Hussmann reported
operating earnings of $8.0 million, up $1.8 million, or 29.0 percent, from
last year. The increase primarily resulted from stronger sales in the
United States, partially offset by the effects of lower sales in Europe and
Mexico.
Net interest expense decreased to $15.7 million in the first quarter
of 1996 from $16.0 million in the first quarter of 1995, resulting from
increased interest income and lower weighted average interest rates offset
by higher debt levels. The increase in total debt to $914.5 million at
March 31, 1996 from $828.6 million at March 31, 1995 principally resulted
from capital spending, investments in new companies and joint ventures,
higher working capital requirements, and treasury stock purchases.
Other expense, net, increased $1.1 million to $4.0 million in the
first quarter of 1996. The increase primarily reflects variances in
foreign currency gains and losses. Gains and losses from asset sales were
not significant in the first three months of 1996 or 1995.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 12. Statement of Calculation of Ratio of Earnings to Fixed
Charges.
(b) Reports on Form 8-K.
None filed during the first quarter ended March 31, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WHITMAN CORPORATION
Date: May 10, 1996 By: /s/ FRANK T. WESTOVER
-----------------------------------
Frank T. Westover
Senior Vice President and Controller
(As Chief Accounting Officer and
Duly Authorized Officer of Whitman
Corporation)
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION
OF RATIO OF EARNINGS TO FIXED CHARGES
(in Millions, Except Ratios)
Three Months
March 31, Years Ended December 31,
------------- ------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
Earnings:
Income from Continuing
Operations before
Taxes $ 33.3 $ 30.2 $259.7 $212.7 $212.2 $170.6 $161.7
Fixed Charges Excluding
Capitalized Interest 20.7 20.3 $ 86.7 82.2 105.9 106.9 138.2
------ ------ ------ ------ ------ ------ ------
Earnings as Adjusted $ 54.0 $ 50.5 $346.4 $294.9 $318.1 $277.5 $299.9
====== ====== ====== ====== ====== ====== ======
Fixed Charges:
Interest Expense $ 17.4 $ 17.3 $ 74.6 $ 71.1 $ 96.2 $ 97.7 $128.6
Portion of Rents
Representative of
Interest Factor 3.3 3.0 12.1 11.1 9.7 9.2 9.6
------ ------ ------ ------ ------ ------ ------
Fixed Charges Excluding
Capitalize Interest 20.7 20.3 86.7 82.2 105.9 106.9 138.2
Capitalized Interest 0.0 0.0 0.2 0.2 0.2 0.2 0.2
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges $ 20.7 $ 20.3 $ 86.9 $ 82.4 $106.1 $107.1 $138.4
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges 2.6x 2.5x 4.0x 3.6x 3.0x 2.6x 2.2x
====== ====== ====== ====== ====== ====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 73,000
<SECURITIES> 0
<RECEIVABLES> 341,800<F1>
<ALLOWANCES> 6,200
<INVENTORY> 273,800
<CURRENT-ASSETS> 754,100
<PP&E> 1,365,600
<DEPRECIATION> 669,900
<TOTAL-ASSETS> 2,351,300
<CURRENT-LIABILITIES> 496,200
<BONDS> 820,300
0
0
<COMMON> 435,800
<OTHER-SE> 200,700
<TOTAL-LIABILITY-AND-EQUITY> 2,351,300
<SALES> 657,900
<TOTAL-REVENUES> 657,900
<CGS> 428,600
<TOTAL-COSTS> 604,900<F2>
<OTHER-EXPENSES> 4,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,700<F3>
<INCOME-PRETAX> 33,300
<INCOME-TAX> 14,000
<INCOME-CONTINUING> 16,000<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,000
<EPS-PRIMARY> $0.15
<EPS-DILUTED> $0.15
<FN>
<F1>Net of allowance for doubtful accounts of $6,200
<F2>Includes Selling, General and Administrative Expenses, Amortization
Expense and Cost of Goods Sold
<F3>Interest expense is offset by $1,700 of interest income, therefore
gross interest expense equals $17,400
<F4>Income from continuing operations is reported after minority interest of
$3,300
</FN>
</TABLE>
