1995
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, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-4710
Whitman Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-6076573
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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 (847) 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 29, 1996, the aggregate market value of the registrant's
common stock held by non-affiliates was $2,456.2 million. The number of
shares of common stock outstanding at that date was 105,641,946 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part Item
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1. Whitman Corporation definitive proxy
statement dated March 22, 1996 for the 1996
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 1994, Pepsi General became
an international company when it began operations in a newly franchised area
of northern and western Poland. This market, when fully developed, will
serve approximately 18 million people.
In 1995, approximately 86 percent of Pepsi General's domestic 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 Tea
and others account for the remaining 14 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 one-quarter 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 1,250 routes domestically and 204 in Poland. 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 1995, Pepsi General continued
to expand its product line by adding several new flavors to its Ocean Spray
juice and the Lipton Tea lines. Increased marketing efforts in several of
the recent product additions, such as the Slice flavors, Wild Cherry Pepsi,
Caffeine Free Mountain Dew, All Sport and Big Red, produced a sales increase
of 41 percent in 1995 for these products. In July, 1995, Pepsi General
acquired the assets of the Cedar Rapids, Iowa franchise, which increased case
sales by 0.8 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. The
inability of these suppliers to deliver concentrate or other products to
Pepsi General could adversely affect operating results significantly.
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 60 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 few years in Poland. Pepsi General expects to
incur operating losses over the next two or three years as this new venture
is developed, but does not expect that such losses will be material to the
consolidated operating results of Whitman. In 1995, its first full year of
operations, Pepsi General's Poland operations sold 8.8 million cases of
product from ten distribution facilities.
MIDAS
Midas provides automotive exhaust, brake and suspension services through
approximately 2,600 franchised and company-owned Midas shops in the United
States, Canada, France, Belgium, Austria, Switzerland, Spain, Italy,
Australia, New Zealand, Taiwan, 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 automotive 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 heating, ventilating and air conditioning (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 1995, 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.
In Mexico, Hussmann 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. During
1995, Hussmann expanded its operations in South America with an acquisition
of a 75 percent interest in a small manufacturer in Chile. 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 two manufacturing plants and a
network of sales, service, and installation depots located throughout the
country. Hussmann's branch service and distribution network in the United
Kingdom is believed to be 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 and has a 55 percent interest in the Luoyang
Refrigeration Machinery Factory, China's leading producer of refrigeration
systems and food display cases. The joint venture began 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 PROTOCOL(tm), a unique refrigeration system
which is chloroflourocarbon (CFC) and hydrochloroflourocarbon (HCFC) free,
and less expensive to install and operate than conventional systems.
Hussmann had exclusive use of the PROTOCOL(tm) compressor technology through
1994; however, the loss of exclusivity has not significantly affected
Hussmann's business in 1995.
One of Hussmann's strengths is its research and development center, where
the PROTOCOL(tm) 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 new generations of
cases and systems.
The dollar amount of firm backlog at December 31, 1995 was $173.0
million, compared with $136.2 million at December 31, 1994. Substantially
all such backlog is expected to be shipped 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 16,841 persons worldwide as of December 31, 1995.
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 million. In
January, 1996, Pneumo Abex executed a Consent Decree with the EPA agreeing to
implement remediation of areas associated with the former Portsmouth facility
operations. Pneumo Abex and Whitman have brought suit against other PRPs
previously identified by the EPA which did not execute the Consent Decree.
Whitman management is optimistic that the cost of implementation of the
remedy required by the Consent Decree will be less than the estimated cost
set forth in the Amended ROD, and that a portion of the remediation costs
will be allocated to other PRPs, most of whom are financially viable.
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-Kelly 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 or the results of operations.
Item 2. PROPERTIES.
Pepsi General's facilities include seven bottling plants, three
combination bottling/canning plants, three canning plants and 68 distribution
facilities, including ten distribution facilities in Poland. Approximately
15 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 five warehouses in Canada, of which two are owned and 16
are leased. At December 31, 1995, Midas operated 142 Midas Muffler Shops in
the United States, 32 Midas Muffler Shops in Canada and 188 Midas Muffler
Shops in seven other foreign countries. Hussmann operates 11 owned and 9
leased manufacturing facilities in the United States, Canada, Mexico, China,
Chile and the United Kingdom. There are 5 owned and 44 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, in the opinion of management, are expected to have a material adverse
effect on Whitman's results of operations or financial condition.
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 1995 and 1994.
Common
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High Low Dividend
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1995:
1st quarter $ 19.375 $ 15.625 $ 0.085
2nd quarter 19.375 17.500 0.095
3rd quarter 21.625 18.625 0.095
4th quarter 23.375 20.125 0.095
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
There were 19,302 shareholders of record at December 31, 1995.
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 Company's cash flow from continuing operations remained strong,
although declining by $18.3 million in 1995 to $193.3 million. The reduction
was principally a result of increased levels of working capital (defined as
receivables and inventories, less accounts payable), principally reflecting
increased levels of business. The cash used in discontinued operations
principally reflected expenses related to settlement of certain legal claims
as well as environmental expenses of previously sold subsidiaries.
In 1995, the Company continued to invest for its future growth and
productivity. Capital spending on new plant and equipment expanded sharply
to $174.8 million, up 37.2 percent over 1994 and nearly double such
expenditures in 1993. In addition, the Company spent over $60 million to
acquire three companies and several Midas shops, including the Pepsi-Cola
franchise in Cedar Rapids, Iowa in July, 1995. The Company also invested
$18.6 million in Pepsi General's joint manufacturing facility in Poland.
Capital spending in 1996 is expected to remain near 1995 expenditure levels.
Purchases of and proceeds from sale of investments principally related to the
Company's insurance subsidiary, which provides certain levels of insurance
for Whitman's various operating companies. Funds provided by the operating
companies are invested by the insurance subsidiary and proceeds from sales
are used by the insurance subsidiary to pay insurable claims. A substantial
portion, however, of the purchases and sales of such investments represent
reinvestment of assets as such investments mature. Changes in the amount of
net purchases was not considered significant.
As a result of spending over $250 million in capital investment and new
companies and joint ventures, the Company increased its net borrowings in
1995 by $105.6 million. The Company issued $278.4 million of long-term debt
(see Note 4), which was used partially to pay off $147.8 million of debt
which came due in 1995. The Company purchased 1,034,726 shares of its common
stock at a cost of $18.8 million and the Company received $12.8 million from
the exercise of 995,944 stock options during 1995. The increase in common
dividends reflected the increase in the quarterly rate from $.085 to $.095
per share, effective with the July 1, 1995 regular dividend.
In spite of the sharp increase in capital spending, and investments in
new companies and joint ventures, the Company's financial condition remained
strong, principally reflecting the strong operating cash flow. At December
31, 1995, the Company had $300 million available under a contractual
revolving credit facility and a $200 million commercial paper program, of
which $185 million was available.
The Company has $121.7 million of debt, including $15 million of debt
under the commercial paper program, that comes due in 1996. The Company
expects to use a portion of its anticipated free cash flow to reduce its debt
and to refinance the remainder through use of its revolving credit agreements
or its commercial paper program, or through issuance of additional debt as
market conditions warrant.
The Company believes that with its strong free cash flow, the 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. 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:
1995 compared with 1994
For a description of the Company's major products and services and its
principal markets, reference is made to Part I, Item 1, Business, and to Note
12, Segment Reporting, to the Consolidated Financial Statements.
Sales and revenues increased by $287.7 million, or 10.8%, in 1995 to a
total of $2,946.5 million.
Pepsi General's revenues increased by $192.6 million in 1995, a 15.3
percent increase over 1994. Included were $34.8 million of revenues from the
Pepsi General operations in Poland, compared with only $0.8 million in 1994,
which reflected the start-up of such operations in late 1994. Unit case
volume (which represents approximately 88 percent of total domestic sales) in
the U.S. increased by 5.6 percent over 1994, including 0.8 percent from the
Cedar Rapids, Iowa franchise which was purchased in July, 1995. The remaining
increase in domestic unit volume was principally in the core Pepsi brands.
The average net selling price per case increased by approximately 6 percent
in 1995, as Pepsi General attempted to recover substantial increases in
product and packaging costs.
Midas' revenues increased by $32.9 million in 1995, up 6.1 percent, to
$576.1 million. Approximately two-thirds of the increase came from Midas'
European operations, where approximately one-half of the increase was
attributable to higher exchange rates. The higher foreign revenues also
reflected an increase in the number of company-owned shops, as Midas
continues its shop expansion program in Europe. U.S. revenues increased by
2.7 percent, and reflected increased revenues from company-owned shops,
higher product sales, and increased royalty and rent-related revenues.
Hussmann's revenues increased by $62.2 million in 1995, a 7.2 percent
increase, to $921.7 million. The increase in sales was principally in
Hussmann's North American operations, reflecting improved demand for its
product lines. Included in these sales were $33.6 million of revenues of
companies acquired during the year, but this increase was offset by lower
revenues (down $38.7 million) from Hussmann's Mexican operations. The
reduction in Mexico reflected both the devaluation of the peso and the sharp
decline in the Mexican economy.
The Company's gross profit margin declined from 35.9 percent in 1994 to
34.8 percent in 1995. This unfavorable variance was principally caused by
higher product and packaging costs (primarily aluminum can costs, which
increased by approximately 25 percent) at Pepsi General. In addition,
Hussmann experienced some margin reductions, reflecting continuing
competitive pricing pressure and changes in sales mix. Midas' margins
improved modestly.
Selling, general and administrative (S,G&A) expenses increased by $54.3
million in 1995, or 8.9 percent, compared with the 10.8 percent increase in
sales. As a result, S,G&A expenses, as a percentage of sales, declined to
22.5 percent in 1995, down from 22.9 percent in 1994. Pepsi General's and
Hussmann's S,G&A expenses grew at rates less than their respective revenue
growth, while Midas' expenses grew at a faster percentage than revenues,
principally in Europe where the increase reflected, among other items, the
effects of higher exchange rates as well as an increase in the number of
company-owned shops.
Amortization expense increased slightly in 1995, principally reflecting
goodwill associated with recent acquisitions.
Operating income increased by 4.7 percent to $342.3 million in 1995,
compared with a 10.8 percent increase in revenues. Operating margins, as a
percent of sales, declined to 11.6 percent in 1995, down from 12.3 percent in
1994.
Pepsi General's operating income amounted to $197.7 million in 1995,
$12.2 million, or 6.6 percent, above last year's performance. Included in
the results were operating losses of $11.3 million in Poland, principally
representing start-up costs, compared with operating losses of $2.7 million
in 1994. The increase in operating earnings in the U.S. principally
reflected the benefits of the improved volumes and higher prices. Pepsi
General's margins, however, were affected adversely by the sharp increase in
aluminum can costs.
Midas' operating earnings totaled a record $82.5 million, and exceeded
last year's performance by $7.3 million, or 9.7 percent. The improved
performance was principally in their U.S. operations and reflected the
benefits of higher product shipments, as well as higher royalty and rental
revenues. Midas' foreign operating results increased modestly, reflecting
improved results in France, Spain and Australia, offset by additional start-
up expenses as Midas continues to expand its company-owned shop network in
Europe.
The operating results at Hussmann were down $3.8 million, or 4.6 percent,
to $78.7 million in 1995. Operating earnings in Mexico were $12.4 million
below 1994, reflecting the peso devaluation and the deterioration of economic
conditions in Mexico. Excluding Mexico, North American operating results
were up 12.5 percent over 1994, reflecting the benefits of higher volumes.
Acquisitions in China, Chile and the U.K. contributed approximately $2
million to operating earnings in 1995.
Interest expense increased by $3.5 million in 1995, principally
reflecting higher debt levels. Interest income was unchanged, as the amounts
of invested funds did not change significantly during the year.
Other expense, net declined from $25.2 million in 1994 to $14.4 million
in 1995. The change primarily related to modest gains on asset dispositions
in 1995, compared with losses on similar transactions in 1994. There were no
gains or losses that were individually significant. Foreign currency gains
also were not significant.
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 1993.
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 Tea 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 (3.0%) 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.
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, 1996, 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 1,1996 were
as follows:
Age Position
----- ------------------------------------------
Bruce S. Chelberg 61 Chairman and Chief Executive Officer
Thomas L. Bindley 52 Executive Vice President
Frank T. Westover 57 Senior Vice President-Controller
Lawrence J. Pilon 47 Senior Vice President-Human Resources
Gerald A. McGuire 64 Corporate Vice President; President and
Chief Executive Officer,
Pepsi-Cola General Bottlers, Inc.
John R. Moore 60 Corporate Vice President; President and
Chief Executive Officer, Midas
International Corporation
J. Larry Vowell 55 Corporate Vice President; President and
Chief Executive Officer, Hussmann
Corporation
Charles H. Connolly 61 Vice President-Corporate Affairs and
Investor Relations
William B. Moore 54 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.
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, 1996, 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, 1996,
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, 1995, 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, 1995.
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, 1996.
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, 1996.
Signature Title
--------- -----
* Bruce S. Chelberg Chairman and Chief Executive Officer and
---------------------- 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
* Herbert M. Baum Director
----------------------
HERBERT M. BAUM
* 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
Director March 22, 1996
----------------------
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, 1995
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, 1995, 1994
and 1993
Consolidated Balance Sheets at December 31, 1995 and December 31, 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1995, 1994 and 1993
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. Actual results could
differ from these estimates.
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, 1995 and 1994, 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, 1995.
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, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1995 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 15, 1996
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 (in millions)
1995 1994 1993
-------- -------- --------
Sales and revenues $2,946.5 $2,658.8 $2,529.7
Cost of goods sold 1,921.3 1,704.7 1,625.0
-------- -------- --------
Gross profit 1,025.2 954.1 904.7
Selling, general and administrative expenses 664.1 609.8 582.3
Amortization expense 18.8 17.5 17.1
-------- -------- --------
Operating income 342.3 326.8 305.3
Interest expense (74.6) (71.1) (96.2)
Interest income 6.4 6.4 12.8
Other expense, net (14.4) (25.2) (9.7)
Unrealized investment loss -- (24.2) --
-------- -------- --------
Income before income taxes 259.7 212.7 212.2
Income tax provision 107.4 88.1 90.7
-------- -------- --------
Income from continuing operations
before minority interest 152.3 124.6 121.5
Minority interest 18.8 18.2 15.1
-------- -------- --------
Income from continuing operations 133.5 106.4 106.4
Loss from discontinued operations after
taxes (Note 2) -- (3.2) --
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 $ 133.5 $ 103.2 $ 78.2
======== ======== ========
Average number of common shares
outstanding 106.2 106.2 107.5
======== ======== ========
INCOME (LOSS) PER COMMON SHARE
(IN DOLLARS):
Continuing operations $ 1.26 $ 1.00 $ 0.99
Discontinued operations -- (0.03) --
Extraordinary loss on early debt
retirement -- -- (0.04)
Cumulative effect of change in accounting
principle -- -- (0.22)
-------- -------- --------
Net income $ 1.26 $ 0.97 $ 0.73
======== ======== ========
Cash dividends per common share $ 0.37 $ 0.33 $ 0.29
======== ======== ========
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of December 31 (in millions)
1995 1994
-------- --------
ASSETS:
Current assets:
Cash and cash equivalents $ 53.3 $ 71.3
Receivables - net of allowance for doubtful
accounts of $5.7 million in 1995 and
$7.9 million in 1994 378.5 362.5
Inventories:
Raw materials and supplies 84.5 73.8
Work in process 48.1 41.2
Finished goods 134.5 118.6
-------- --------
Total inventories 267.1 233.6
Other current assets 62.2 40.3
-------- --------
Total current assets 761.1 707.7
Investments 253.7 222.6
Property (at cost):
Land 71.2 63.5
Buildings and improvements 340.0 308.4
Machinery and equipment 945.6 833.3
-------- --------
Total property 1,356.8 1,205.2
Accumulated depreciation and amortization (659.3) (591.4)
-------- --------
Net property 697.5 613.8
Intangible assets, net of accumulated amortization
of $143.7 million in 1995 and $123.6 million
in 1994 568.8 524.3
Other assets 82.2 67.0
-------- --------
Total assets $2,363.3 $2,135.4
======== ========
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of December 31 (in millions)
1995 1994
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term debt, including current maturities
of long-term debt $ 93.8 $ 90.0
Accounts and dividends payable 248.6 238.7
Income taxes payable 9.2 10.6
Accrued expenses:
Salaries and wages 46.4 40.2
Interest 21.2 26.6
Other expenses 88.4 77.0
-------- --------
Total current liabilities 507.6 483.1
Long-term debt 828.2 723.0
Deferred income taxes 33.4 15.6
Other liabilities 141.0 154.9
Minority interest 225.3 206.2
Shareholders' equity:
Common stock (no par, 250.0 million shares
authorized; 105.2 million outstanding at
December 31, 1995 and 105.0 million outstanding
at December 31, 1994) 427.8 413.2
Retained income 336.6 239.9
Cumulative translation adjustment (80.3) (51.8)
Unrealized investment gain 9.7 1.3
Treasury stock (66.0) (50.0)
-------- --------
Total shareholders' equity 627.8 552.6
-------- --------
Total liabilities and shareholders' equity $2,363.3 $2,135.4
======== ========
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)
1995 1994 1993
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $133.5 $ 106.4 $106.4
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 108.3 98.0 95.5
Unrealized investment loss -- 24.2 --
Other 11.6 23.9 24.0
Changes in assets and liabilities, net of
acquisitions and dispositions:
Increase in receivables (21.9) (11.7) (43.2)
Increase in inventories (35.1) (10.3) (7.1)
Increase in payables 17.5 5.7 21.8
Net change in other assets and liabilities (20.6) (24.6) 15.9
------ ------ ------
Net cash provided by continuing operations 193.3 211.6 213.3
Net cash used by discontinued operations (19.7) (5.8) (29.8)
------ ------ ------
Net cash provided by operating activities 173.6 205.8 183.5
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments (174.8) (127.4) (88.7)
Proceeds from sales of property 12.5 18.2 14.3
Companies acquired, net of cash acquired (60.5) -- --
Investments in joint ventures (18.6) (4.5) --
Purchases of investments (221.4) (168.8) (211.2)
Proceeds from sales of investments 213.4 156.9 180.2
------ ------ ------
Net cash used in investing activities (249.4) (125.6) (105.4)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (repayment of) bank
lines of credit and commercial paper (27.5) (41.1) 83.6
Proceeds from issuance of long-term debt 278.4 231.9 263.3
Repayment of long-term debt (147.8) (221.1) (430.8)
Net increase in short-term debt 2.5 -- --
Issuance of common stock 12.8 6.0 2.2
Treasury stock purchases (18.8) (42.5) (3.9)
Common dividends (38.8) (34.8) (31.1)
------ ------ ------
Net cash provided by (used in) financing
activities 60.8 (101.6) (116.7)
------ ------ ------
Effects of exchange rate changes on cash
and cash equivalents (3.0) (0.3) (0.9)
------ ------ ------
Change in cash and cash equivalents (18.0) (21.7) (39.5)
Cash and cash equivalents at beginning
of year 71.3 93.0 132.5
------ ------ ------
Cash and cash equivalents at end of year $ 53.3 $ 71.3 $ 93.0
====== ====== ======
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended
December 31, 1995
1994 and 1993 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, 1993 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 compensation 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 compensation 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)
----------- ------ ------ ------- ----- ---------- ------
Net income 133.5
Treasury stock purchases (1,034,726) (18.8)
Stock compensation plans 1,094,844 14.6 2.0 (19,564) 0.1
Common stock issued for
acquisitions 126,700 2.7
Translation adjustments (28.5)
Unrealized investment gain 8.4
Dividends declared (38.8)
----------- ------ ------ ------- ----- ---------- ------
Balance, December 31, 1995 109,199,834 $427.8 $336.6 $(80.3) $ 9.7 (4,000,906) $(66.0)
=========== ====== ====== ======= ===== ========== ======
</TABLE>
The following notes are an integral part of these statements.
Whitman Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT 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,
on at least an annual basis, the carrying value of its goodwill by reviewing
undiscounted cash flows by operating units. If the sum of the projected
undiscounted cash flows over the remaining lives of the related assets does
not exceed the carrying value of the related goodwill, goodwill would be
adjusted for the difference between the fair value and the carrying value of
such goodwill. The Company does not believe there has been any material
impairment 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 $46.8 million
($29.9 million after tax) 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 (IRS), which included some large potential claims for issues
related to previously discontinued operations. As a result of these
settlements, the Company has restored $26.7 million to income for 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) 1995 1994 1993
------ ------ ------
Current:
Federal $ 72.6 $ 82.1 $ 63.1
Foreign 11.8 16.3 14.0
State and local 10.0 13.6 10.6
------ ------ ------
Total current 94.4 112.0 87.7
====== ====== ======
Deferred:
Federal 9.7 (21.4) 3.2
Foreign 0.4 (1.6) 1.4
State and local 2.9 (0.9) (1.6)
------ ------ ------
Total deferred 13.0 (23.9) 3.0
------ ------ ------
Income tax provision $107.4 $ 88.1 $ 90.7
====== ====== ======
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:
1995 1994 1993
-------------- ------------- -------------
(dollars in millions) Amount % Amount % Amount %
------- ----- ------- ----- ------- -----
Income tax expense
computed at statutory
rate $ 90.9 35.0 $ 74.4 35.0 $ 74.3 35.0
State income taxes, net
of federal income tax
benefit 8.4 3.2 8.3 3.9 5.9 2.8
Higher foreign effective
tax rates 5.8 2.2 4.1 1.9 5.2 2.4
Goodwill amortization 5.2 2.0 5.1 2.4 4.7 2.2
Other items, net (2.9) (1.0) (3.8) (1.8) 0.6 0.3
------ ----- ------ ----- ------ -----
Income tax provision $ 107.4 41.4 $ 88.1 41.4 $ 90.7 42.7
====== ===== ====== ===== ====== =====
Pretax income from foreign operations amounted to $18.9 million, $31.6
million, and $30.7 million in 1995, 1994 and 1993, respectively. U.S. income
taxes have not been provided on the undistributed income ($105.2 million) of
the Company's foreign subsidiaries which currently is not intended to be
remitted to the U.S.
The IRS 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 were 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 in 1994 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) 1995 1994
------- -------
Deferred tax assets:
Provision for closed and sold businesses $ 33.9 $ 39.9
Lease transactions 17.8 19.3
Self-insurance provisions 18.6 16.3
Postretirement benefit accruals 11.9 12.4
Other 36.3 41.6
------- -------
Total deferred tax assets 118.5 129.5
------- -------
Deferred tax liabilities:
Property, plant and equipment 71.0 68.2
Pensions 8.8 8.7
Intangibles 9.2 7.5
Other 50.5 48.6
------- -------
Total deferred tax liabilities 139.5 133.0
------- -------
Net deferred tax liability $ 21.0 $ 3.5
======= =======
Net deferred tax liability (asset) included in:
"Other current assets" $ (12.4) $ (12.1)
"Deferred income taxes" 33.4 15.6
------- -------
Net deferred tax liability $ 21.0 $ 3.5
======= =======
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.
4. DEBT
Debt at December 31 consisted of the following:
(in millions) 1995 1994
------- -------
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 100.0 100.0
7.6% notes due 2015 100.0 --
8.3% notes due 2007 100.0 --
7.5% notes due 2001 75.0 75.0
Notes due 1996, effective interest rate 6.3% 70.0 70.0
8.1% notes due 1997 50.5 --
Notes due 1998, effective interest rate 6.7% 40.0 40.0
Term loan agreements and note due 1996 through 2000,
effective interest rates 6.1% to 8.3% 85.0 104.9
Swiss franc bonds and notes due 1995, exchanged for
U.S. dollar liabilities at 12.4% -- 50.0
Canadian notes due 1995, exchanged for U.S. dollar
liabilities at 12.2% -- 38.1
Commercial paper and revolving credit borrowings due
1996, effective interest rate 6.2% 15.0 42.5
Obligations under capital leases 17.4 17.7
Other 12.3 15.6
------- -------
Total debt 926.7 815.3
Less: Amount due within one year 93.8 90.0
Unamortized discount 4.7 2.3
------- -------
Total long-term debt $ 828.2 $ 723.0
======= =======
The Company maintains a $200 million commercial paper program and had $15
million and $30 million of commercial paper outstanding under this program at
December 31, 1995 and 1994, 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 2000. There were no
borrowings under the revolving credit facility at December 31, 1995, while
there were borrowings of $12.5 million under such commitments at December 31,
1994. The fees payable on the unused portion of such commitments are not
significant. At December 31, 1995, the entire $300 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) maturing in
1997 through 2000, are: $66.9 million, $41.4 million, $11.2 million, and
$106.7 million, respectively.
At December 31, 1995, $27.9 million of the currently maturing notes have
been reclassified 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 $1.6 million, $1.9 million and $2.1 million for
1995, 1994 and 1993, respectively, relating to liabilities under capital
lease agreements. Interest capitalized during periods of construction was
not significant.
At December 31, 1995, collateral of $40.4 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 and forward rate contracts
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. During 1995, the Company also entered into
several forward rate agreements. The agreements outstanding at December 31,
1995 are summarized as follows:
Effective
Notional Effective Interest
Related Debt Issue - Amount Maturity Interest Rate
Financial Instrument: (in millions) of Swaps Rate Paid Received
---------- ---------- ---------- ---------
7.5% notes due 2003 -
Interest rate swap $ 125.0 1996 5.5% 5.2%
6.5% notes due 2006 -
Interest rate swap $ 40.0 1997 5.5% 5.2%
7.5% notes due 2003 -
Forward rate agreement $ 125.0 1996 6.1% 5.9%
6.5% notes due 2006 -
Forward rate agreement $ 40.0 1996 6.2% 5.9%
The notional amounts related to the Company's interest rate swap
transactions and forward rate agreement activity for 1994 and 1995 are
summarized as follows (in millions):
Interest Rate Forward Rate
Swaps Agreements
------------------ ------------------
Pay Pay Pay Pay
Fixed Variable Fixed Variable
------ -------- ------ --------
Balance, January 1, 1994 $ 65.0 $125.0 $ -- $ --
------ ------ ------ ------
New contracts -- 40.0 -- --
Expired contracts (65.0) -- -- --
------ ------ ------ ------
Balance, December 31, 1994 -- 165.0 -- --
------ ------ ------ ------
New contracts -- -- 225.0 --
Expired contracts -- -- (60.0) --
------ ------ ------ ------
Balance, December 31, 1995 $ -- $165.0 $165.0 $ --
====== ====== ====== ======
Whitman's interest rate hedging programs increased the annual weighted
average cost of debt from 8.2 percent to 8.3 percent in 1995, from 8.7
percent to 9.0 percent in 1994 and from 8.8 percent to 9.3 percent in 1993.
Interest expense was increased by $1.5 million in 1995, $2.1 million in 1994
and $5.4 million in 1993 as a result of these hedging programs.
The Company also had 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 outstanding at December 31, 1994, and its related interest
payments had been hedged in U.S. dollars. Under the hedge agreements, in
January, 1995, the Company repaid the 138.2 million Swiss franc debt at an
effective exchange rate of 2.764 Swiss francs per U.S. dollar ($50.0
million), compared to the actual exchange rate of 1.288 Swiss francs per U.S.
dollar ($107.3 million). Additionally, in February, 1995, the Company repaid
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 the actual
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
less than $0.1 million in 1995, and by $0.3 million and $7.0 million in 1994
and 1993, respectively. Consequently, the impact of hedging had no material
effect on the weighted average cost of borrowing in 1995 or 1994, and would
have lowered the weighted average cost of borrowing to 8.6 percent from 9.3
percent in 1993.
At December 31, 1995, the Company had $123.9 million in floating rate
debt exposure (including notional principal on interest rate swap
agreements). Substantially all of the floating rate exposure is related to
six month LIBOR rates. If the six month LIBOR rates increased by 50 basis
points (0.50 percent), the Company's 1995 interest expense related to the
floating rate debt outstanding during 1995 would have increased by an
additional $1.0 million. In addition, the Company had no borrowings
outstanding under its revolving credit facility and $15 million in commercial
paper outstanding at December 31, 1995. The relevant indices for revolving
credit and commercial paper borrowings are generally one month LIBOR and the
commercial paper composite rate. If these rates increased by 50 basis
points, the Company's 1995 interest expense would have increased by $0.2
million, based upon the weighted average outstanding revolving credit and
commercial paper borrowings.
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 agreements.
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 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 floating rate debt as of December
31, 1995 approximated its carrying value. The fixed rate debt of the Company
had a carrying value of $802.8 million and a fair market value of $848.3
million at December 31, 1995. The fair market value of the fixed rate debt
was based on quotes from financial institutions for instruments with similar
characteristics and upon discounting future cash flows. The fair market
value owed by the Company related to its derivative instruments, which was
based on quotes from financial institutions for instruments with similar
characteristics, was $0.2 million at December 31, 1995.
6. PENSION AND OTHER POSTRETIREMENT PLANS
COMPANY SPONSORED DEFINED BENEFIT PENSION PLANS. Substantially all of the
Company's U.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 1995, 1994 and 1993 included the following
components:
(in millions) 1995 1994 1993
------- ------- -------
Service cost - benefits earned during period $ 7.7 $ 7.5 $ 7.7
Interest cost on projected benefit obligation 17.9 16.4 16.4
Actual return on assets (37.8) (6.3) (28.0)
Net amortization and deferral 18.4 (12.2) 10.2
------ ------ -------
Total net periodic pension cost $ 6.2 $ 5.4 $ 6.3
====== ====== =======
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:
1995 1994 1993
------- ------- -------
Discount rate 8.5% 7.0% 7.5%
Expected long-term rate of return on assets 9.5% 10.0% 10.0%
Rates of increase in compensation levels 6.0% 4.5% 5.0%
The following table reconciles the pension plans' funded status to the
amounts recognized in the Company's balance sheets as of December 31, 1995
and 1994:
1995 1994
------------------------ ----------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
(in millions)
Actuarial present value
of benefit obligation
(measured as of September
30):
Vested benefit obligation $(155.0) $ (40.1) $(148.5) $ (33.2)
======= ======= ======= =======
Accumulated benefit
obligation (162.1) (46.2) (149.9) (34.8)
======= ======= ======= =======
Projected benefit
obligation (189.5) (49.5) (175.5) (38.3)
Plan assets at fair market
value (measured as
of September 30) 209.3 40.7 199.6 29.5
------- ------- ------- -------
Plan assets in excess of
(less than) projected
benefit obligation 19.8 (8.8) 24.1 (8.8)
------- ------- ------- -------
Unrecognized net asset at
transition to SFAS No. 87 (3.2) (0.4) (3.8) (0.1)
Unrecognized prior service
cost 13.9 5.7 15.7 4.8
Unrecognized net loss (gain) (7.7) 2.6 (10.9) 1.0
Additional liability required
to recognize minimum
liability -- (5.7) -- (2.9)
------- ------- ------- -------
Prepaid (accrued) pension
cost recognized on
balance sheets $ 22.8 $ (6.6) $ 25.1 $ (6.0)
======= ======= ======= =======
The principal economic assumptions used in determining the above benefit
obligations were: discount rates of 7.5 percent and 8.5 percent in 1995 and
1994, respectively, and rates of increase in future compensation levels of
5.0 percent and 6.0 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 $10.5 million, $9.7 million
and $8.1 million in 1995, 1994 and 1993, 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 $5.5 million, $4.8 million and $5.0 million in 1995, 1994 and 1993,
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
1995, 1994 and 1993 included the following components:
(in millions) 1995 1994 1993
------ ------ ------
Service cost-benefits earned during the period $ 0.2 $ 0.3 $ 0.4
Interest cost on accumulated postretirement
benefit obligation 2.2 2.2 2.9
Net amortization and deferral (0.7) 0.4 --
------ ----- ------
Net periodic postretirement benefit cost $ 1.7 $ 2.9 $ 3.3
====== ===== ======
The principal economic assumptions used in the determination of net
periodic cost of postretirement benefits other than pensions included the
following:
1995 1994 1993
------------ ------------ ------------
Discount rate 8.5% 7.0% 7.5%
Rate of increase
in compensation levels 6.0% 4.5% 5.0%
Rate of increase in the
per capita cost of covered 9.9% in 1995 10.3% in 1994 11.0% in 1993
health care benefits decreasing decreasing decreasing
gradually gradually gradually
to 6.5% by to 5.0% by to 5.5% by
the year 2006 the year 2006 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, 1995 and 1994 was as
follows:
(in millions) 1995 1994
------ ------
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $ 25.6 $ 22.1
Fully eligible active plan participants 0.5 1.0
Other active plan participants 3.0 3.3
------ ------
Total 29.1 26.4
------ ------
Plan assets at fair market value -- --
Accumulated postretirement benefit obligation in
excess of plan assets 29.1 26.4
Unrecognized net gain 8.8 12.9
Unrecognized prior service cost 0.2 (0.2)
------ ------
Accrued postretirement benefit cost $ 38.1 $ 39.1
====== ======
The principal economic assumptions used in determining the above benefit
obligations were as follows:
1995 1994
------------ ------------
Discount rate 7.5% 8.5%
Rate of increase in compensation levels 5.0% 6.0%
Rate of increase in the per capita cost 9.5% in 1996 9.9% in 1995
of covered health care benefits decreasing decreasing
gradually gradually
to 5.5% by to 6.5% by
the year 2006 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, 1995 by $2.3 million and net periodic postretirement benefit
cost for 1995 by $0.1 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
$6.0 million, $5.5 million, and $5.4 million in 1995, 1994 and 1993,
respectively.
7. LEASES
At December 31, 1995, 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
------- --------
1996 $ 2.8 $ 53.1
1997 2.6 46.5
1998 2.5 40.9
1999 2.4 32.1
2000 2.4 26.6
Thereafter 18.7 121.9
------ ------
Total minimum lease payments 31.4 $ 321.1
======
Less imputed interest 14.0
------
Present value of minimum lease payments $ 17.4
======
Minimum payments under operating leases have not been reduced by $127.7
million of sublease rental income which is due in the future under
noncancellable subleases.
Total rent expense applicable to operating leases amounted to $36.3
million, $33.2 million and $29.0 million in 1995, 1994 and 1993,
respectively. These amounts have been reduced by sublease rental income of
$22.2 million, $21.4 million and $21.2 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, 1993 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
--------- ------------------
Granted 926,400 18.250 - 19.438
Exercised or surrendered for SARs (1,014,328) 6.937 - 18.250
Recaptured or terminated (14,500) 12.875 - 18.250
--------- ------------------
Balance, December 31, 1995 5,601,765 $10.288 - $19.438
========= ==================
At December 31, 1995, 3,989,066 shares were exercisable and 5,512,110
shares were available for future grants.
The Company granted 98,900, 110,200 and 91,900 restricted shares of stock
in 1995, 1994 and 1993, respectively, to key members of management under the
Plan. At December 31, 1995, there were 191,640 restricted shares of stock
outstanding under the 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) 1995 1994 1993
------ ------ ------
Interest paid $ 78.9 $ 61.0 $ 82.0
Interest received (6.6) (6.8) (13.4)
Income taxes paid 99.3 115.4 75.2
Income tax refunds (26.4) (8.6) --
Details of businesses acquired in purchase transactions in 1995 were as
follows:
(in millions) 1995
------
Fair value of assets acquired $ 85.4
Liabilities assumed (13.0)
------
Cost of acquisition 72.4
Notes issued to sellers (7.4)
Common stock issued to sellers (2.7)
Cash and cash equivalents acquired (1.8)
------
Net cash paid for acquisitions $ 60.5
======
The Company acquired several companies in 1995, including a Pepsi-Cola
franchise in Cedar Rapids, Iowa, a Hussmann equipment distributor in Chile,
the remaining 50 percent interest in a refrigeration manufacturer and
distributor in the United Kingdom, and 10 Midas muffler shops from a previous
franchisee, at a total cost of $60.5 million. All such acquisitions were
accounted for as purchases, and the operating results include such
acquisitions from the dates of purchase. The effects of these acquisitions,
had they been made as of January 1, 1995, would not have been significant to
operating results.
In 1995, the Company issued 126,700 shares of its common stock with a
value of $2.7 million in connection with the acquisition of a group of Midas
shops from the former franchisee.
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 $20 million to $40 million, or
possibly more. As a result of its continuing evaluation of potential
exposure for environmental liabilities, the Company provided $46.8 million
in 1994 through a charge to discontinued operations (see Note 2). At
December 31, 1995, the Company had approximately $40 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 or the results of operations.
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 or the results of operations.
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:
<TABLE>
<CAPTION>
Sales & revenues Operating income Identifiable assets
---------------------------- ---------------------------- ----------------------------
(in millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pepsi General $1,448.7 $1,256.1 $1,179.6 $ 197.7 $ 185.5 $ 170.5 $1,034.9 $ 892.8 $ 843.6
Midas 576.1 543.2 503.6 82.5 75.2 67.1 440.8 406.9 386.9
Hussmann 921.7 859.5 846.5 78.7 82.5 83.6 540.1 492.0 487.4
Eliminations and other -- -- -- -- -- -- 171.4 167.2 210.6
-------- -------- -------- -------- -------- -------- ------- -------- --------
Total before corporate
administrative expenses $2,946.5 $2,658.8 $2,529.7 358.9 343.2 321.2 2,187.2 1,958.9 1,928.5
======== ======== ========
Corporate administrative expenses (16.6) (16.4) (15.9)
-------- -------- --------
Total operating income 342.3 326.8 305.3
Interest expense, net (68.2) (64.7) (83.4)
Other income (expense), net
corporate assets (14.4) (49.4) (9.7) 176.1 176.5 174.7
-------- -------- -------- -------- -------- --------
Pretax income/total assets $ 259.7 $ 212.7 $ 212.2 $2,363.3 $2,135.4 $2,103.2
======== ======== ======== ======== ======== ========
</TABLE>
Depreciation
and Capital
amortization investments
-------------------- --------------------
(in millions) 1995 1994 1993 1995 1994 1993
------ ------ ------ ------ ------ ------
Pepsi General $ 60.0 $ 53.7 $ 52.9 $110.4 $ 66.0 $ 45.0
Midas 18.1 16.4 15.5 34.3 28.7 24.4
Hussmann 19.6 17.3 16.5 29.3 32.7 19.2
Eliminations & other 10.6 10.6 10.6 0.8 -- 0.1
------ ------ ------ ------ ------ ------
Total before corporate
administrative expenses $108.3 $ 98.0 $ 95.5 $174.8 $127.4 $ 88.7
====== ====== ====== ====== ====== ======
Selected geographical information is presented below:
<TABLE>
<CAPTION>
Sales and revenues Operating profit Identifiable assets
---------------------------- ---------------------------- ----------------------------
(in millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $2,489.8 $2,236.3 $2,142.2 $ 345.4 $ 312.2 $ 292.4 $1,783.3 $1,629.3 $1,613.9
Foreign 517.2 472.2 442.7 13.5 31.0 28.8 403.9 329.6 314.6
Eliminations (60.5) (49.7) (55.2) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total before corporate
expenses/assets $2,946.5 $2,658.8 $2,529.7 $ 358.9 $ 343.2 $ 321.2 $2,187.2 $1,958.9 $1,928.5
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Equity in net income and net assets of the Company's foreign operations
amounted to $5.2 million and $215.5 million, respectively, in 1995, $16.7
million and $180.8 million in 1994, and $15.5 million and $157.2 million
in 1993.
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
-------- -------- ------- -------- --------
1995:
From continuing operations:
Sales $594.4 $734.7 $827.1 $790.3 $2,946.5
- ----------------------------------------------------------------------------
Gross profit 211.3 263.7 292.0 258.2 1,025.2
- ----------------------------------------------------------------------------
Income from continuing
operations 14.0 38.0 47.5 34.0 133.5
- ----------------------------------------------------------------------------
Income per share:
Continuing operations $ 0.13 $ 0.36 $ 0.45 $ 0.32 $ 1.26
- ----------------------------------------------------------------------------
Net income $ 0.13 $ 0.36 $ 0.45 $ 0.32 $ 1.26
- ----------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------
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.
By year-end 1994, the market value had recovered by $2.1 million. During
1995, the market value of Northfield increased another $13.0 million. Such
unrealized gains have been credited, on after-tax bases, to shareholders'
equity in 1994 and 1995, respectively.
Whitman Corporation
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the years ended December 31
(dollars in millions except per share) 1995 1994 1993 1992 1991 1990(B)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales and revenues:
Pepsi General $1,448.7 $1,256.1 $1,179.6 $ 1,111.2 $1,121.9 $1,041.2
Midas 576.1 543.2 503.6 485.6 476.0 476.4
Hussmann 921.7 859.5 846.5 791.2 795.4 787.4
-------- -------- -------- --------- -------- --------
Total $2,946.5 $2,658.8 $2,529.7 $ 2,388.0 $2,393.3 $2,305.0
======== ======== ======== ========= ======== ========
Operating income:
Pepsi General $ 197.7 $ 185.5 $ 170.5 $ 139.0 $ 144.7 $ 117.5
Midas 82.5 75.2 67.1 73.1 76.4 66.7
Hussmann 78.7 82.5 83.6 76.8 66.1 35.2
Corporate administrative expenses (16.6) (16.4) (15.9) (14.5) (15.4) (157.8)
-------- -------- -------- --------- -------- --------
Total operating income 342.3 326.8 305.3 274.4 271.8 61.6
Interest expense, net (68.2) (64.7) (83.4) (88.7) (114.2) (96.2)
Other income (expense), net (14.4) (49.4)(A) (9.7) (15.1) 4.1 (4.4)
-------- -------- -------- --------- -------- --------
Income (loss) before income taxes 259.7 212.7 212.2 170.6 161.7 (39.0)
Income tax provision (benefit) 107.4 88.1 90.7 68.5 70.3 (17.9)
Minority interest 18.8 18.2 15.1 10.0 11.0 10.2
-------- -------- -------- --------- -------- --------
Income (loss) from continuing operations 133.5 106.4 106.4 92.1 80.4 (31.3)
Income (loss) from discontinued operations -- (3.2) -- (32.3) 17.2 50.6
Extraordinary loss on early debt retirement -- -- (4.2) -- -- --
Cumulative effect of accounting change -- -- (24.0) -- -- --
-------- -------- -------- --------- -------- --------
Net income 133.5 103.2 78.2 59.8 97.6 19.3
Preferred dividends requirement -- -- -- -- -- 38.6
-------- -------- -------- --------- -------- --------
Income (loss) applicable to common stock $ 133.5 $ 103.2 $ 78.2 $ 59.8 $ 97.6 (19.3)
======== ======== ======== ========= ======== ========
NET INCOME (LOSS) PER SHARE:
From continuing operations $ 1.26 $ 1.00 $ 0.99 $ 0.86 $ 0.76 $ (0.68)
From discontinued operations -- (0.03) -- (0.30) 0.16 0.49
Extraordinary loss on early debt retirement $ -- -- (0.04) -- -- --
Cumulative effect of accounting change -- -- (0.22) -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) $ 1.26 $ 0.97 $ 0.73 $ 0.56 $ 0.92 $ (0.19)
======== ======== ======== ======== ======== ========
Average shares (in millions) 106.2 106.2 107.5 107.2 105.9 102.8
======== ======== ======== ======== ======== ========
Cash dividends per common share $ 0.37 $ 0.33 $ 0.29 $ 0.255 $ 0.445 $ 1.05
======== ======== ======== ======== ======== ========
OTHER STATISTICS:
Total assets $2,363.3 $2,135.4 $2,103.2 $ 2,062.8 $2,123.0 $3,347.3
Long-term debt $ 828.2 $ 723.0 $ 749.3 $ 791.8 $ 895.9 $1,643.4
Capital investments $ 174.8 $ 127.4 $ 88.7 $ 79.2 $ 79.2 $ 96.4
Depreciation and amortization $ 108.3 $ 98.0 $ 95.5 $ 93.5 $ 86.6 $ 84.3
Number of employees at December 31 16,841 15,271 14,868 14,374 14,703 15,129
</TABLE>
(A) 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, 1995
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 Change in Control Agreement dated November 17, 1995.
(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..
(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
& Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 under the indicated Exhibit
number.
Exhibit 10(e)
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT dated November 17,
1995, between WHITMAN CORPORATION, a Delaware corporation (the
"Company"), and _______________________________________ (the
"Executive").
WHEREAS, the Company's Board of Directors has
determined that, in light of the importance of the Executive's
continued services to the stability and continuity of management
of the Company and its subsidiaries, it is appropriate and in
the best interests of the Company and of its shareholders to
reinforce and encourage the Executive's continued disinterested
attention and undistracted dedication to his duties in the
potentially disturbing circumstances of a possible change in
control of the Company by providing some degree of personal
financial security;
WHEREAS, in order to induce the Executive to remain in
the employ of the Company or a subsidiary of the Company (a
"Subsidiary"), the Company's Board of Directors has determined
that it is desirable to pay the Executive the severance compen-
sation set forth below if the Executive's employment with the
Company or a Subsidiary terminates in one of the circumstances
described below following a Change in Control (as defined
below); and
WHEREAS, the Company has previously entered into
Severance Compensation and Change in Control Agreements with
certain executive officers of the Company and its Subsidiaries,
including the Executive, and this Agreement constitutes an
amendment and restatement of all such prior Agreements, each of
which shall be superseded in its entirety hereby;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained in this Agreement, the Company
and the Executive agree as follows:
1. Term of Agreement. (a) The term of this Agreement
shall commence on the date hereof and shall terminate, except to
the extent that any obligation of the Company hereunder remains
unpaid as of such time, on the earlier to occur of the date on
which the Executive reaches age 65 and November 17, 1998, subject
to extension as provided in Section 1(b) below; provided,
however, that this Agreement shall continue in effect until the
earlier to occur of the date on which the Executive reaches age
65 and the date three years beyond the initial or any extended
date of termination of this Agreement if a Change in Control
shall have occurred prior to such date of termination of this
Agreement (and shall continue for such additional period as any
obligation of the Company under this Agreement shall remain
unpaid).
(b) Commencing on November 17, 1996, and on each
subsequent anniversary of such date (such date and each
subsequent anniversary thereof is hereinafter referred to as a
"Renewal Date"), the term of this Agreement shall be automati-
cally extended so as to terminate three years thereafter, unless
at least 60 days prior to the next Renewal Date the Company shall
give written notice to the Executive that the term of this
Agreement shall not be so extended.
2. Change in Control. No compensation shall be payable
under this Agreement unless and until (a) there shall have been a
Change in Control while the Executive is still an employee of the
Company or a Subsidiary, and (b) the Executive's employment by the
Company or a Subsidiary thereafter shall have been terminated in
accordance with Section 3 of this Agreement. For purposes of this
Agreement, a "Change in Control" shall be deemed to have occurred
if (i) there shall be consummated (A) any consolidation or merger
of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders
of the Company's Common Stock 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 a
series of related transactions) of all or substantially all the
assets of the Company, or (ii) the shareholders of the Company
shall approve any plan or proposal for the liquidation or
dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), other than the Company or
a Subsidiary or any employee benefit plan sponsored by the Company
or a Subsidiary, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 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, 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 of the Company shall cease for
any reason to constitute at least a majority thereof, unless the
election or the nomination for election by the Company's
shareholders 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, or (v) there shall be consummated any sale or other
disposition of a majority of the voting stock or of all or
substantially all of the assets of one or more of the Company's
Significant Subsidiaries in one or more transactions, or any
distribution to or exchange with the Company's shareholders of a
majority of the voting stock of one or more of the Company's
Significant Subsidiaries. For the purposes of the preceding clause
(v), a "Significant Subsidiary" shall mean any direct or indirect
Subsidiary of the Company whose consolidated sales, assets,
operating income or number of employees represent, as of the date
of determination, or have during any of the previous three fiscal
years of the Company represented, as of such date, 20% or more of
the Company's consolidated sales, assets or operating income or
total number of employees.
3. Termination Following Change in Control. (a) If a
Change in Control shall have occurred while the Executive is still
an employee of the Company or a Subsidiary, the Executive shall be
entitled to the compensation provided in Section 4 of this Agreement
upon the subsequent termination of the Executive's employment with
the Company or Subsidiary within three years of the date upon which
the Change in Control shall have occurred, unless such termination
is as a result of (i) the Executive's death, (ii) the Executive's
Disability (as defined in Section 3(b) below), (iii) the Executive's
Retirement (as defined in Section 3(c) below), (iv) the Executive's
termination for Cause (as defined in Section 3(d) below), or (v) the
Executive's decision to terminate employment other than for Good
Reason (as defined in Section 3(e) below). Notwithstanding anything
to the contrary in this Agreement, if a Change in Control occurs and
if the Executive's employment with the Company was terminated prior
to the date on which the Change in Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who had taken
steps reasonably calculated to effect the Change in Control, or (ii)
otherwise arose in connection with or anticipation of the Change in
Control, then for all purposes of this Agreement, the termination of
the Executive's employment shall be deemed to have occurred
immediately following the Change in Control.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall
qualify for benefits under the Company's long-term disability plan
and shall have been absent from his duties with the Company or a
Subsidiary on a full-time basis for a continuous period of six
months commencing with the date of Change in Control or the first
day of such absence (whichever is later) the Company or such
Subsidiary may terminate the Executive's employment for "Disability"
without the Executive's being entitled to the compensation provided
in Section 4.
(c) Retirement. The term "Retirement" as used in this
Agreement shall mean termination by the Company or a Subsidiary or
the Executive of the Executive's employment based on the Executive's
having reached age 65. Termination based on "Retirement" shall not
include, for purposes of this Agreement, the Executive's taking of
early retirement by reason of a termination by the Executive of his
employment for Good Reason.
(d) Cause. The Company or a Subsidiary may terminate
the Executive's employment for Cause without the Executive's being
entitled to the compensation provided in Section 4. For purposes of
this Agreement, the Company or Subsidiary shall have "Cause" to
terminate the Executive's employment only on the basis of (i) the
Executive's wilful and continued failure substantially to perform
his duties with the Company or Subsidiary (other than any such
failure resulting from his incapacity due to physical or mental
illness or any such failure resulting from the Executive's
termination for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Chief Executive
Officer (or if the Executive is Chief Executive officer, by the
Board of Directors) which specifically identifies the manner in
which the Chief Executive Officer (or the Board of Directors if the
Executive is Chief Executive Officer) believes that the Executive
has not substantially performed his duties, or (ii) the Executive's
wilful engagement in gross conduct materially and demonstrably
injurious to the Company or a Subsidiary. For purposes of this
subsection, no act or failure to act on the Executive's part shall
be considered "wilful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company or a
Subsidiary. The Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a written statement of the Chief
Executive Officer (or if the Executive is Chief Executive Officer,
a copy of a resolution duly adopted by the affirmative vote of
not less than two-thirds of the entire membership of the Board of
Directors at a duly convened meeting of the Board of Directors),
finding that in the good faith opinion of the Chief Executive
Officer (or the Board of Directors if the Executive is Chief
Executive Officer) the Executive was guilty of conduct set forth in
clause (i) or (ii) of the second sentence of this Section 3(d) and
specifying the particulars thereof in detail.
(e) Good Reason. The Executive may terminate the
Executive's employment for Good Reason within three years after a
Change in Control and during the term of this Agreement and become
entitled to the compensation provided in Section 4. For purposes of
this Agreement "Good Reason" shall mean any of the following events,
unless it occurs with the Executive's express prior written consent:
(i) the assignment to the Executive by the Company or a
Subsidiary of any duties inconsistent with, or a diminution
of, the Executive's position, duties, titles, offices,
responsibilities or status with the Company or a Subsidiary
immediately prior to a Change in Control, or any removal of
the Executive from or any failure to reelect the Executive
to any of such positions, except in connection with the
termination of the Executive's employment for Disability,
Retirement or Cause or as a result of the Executive's death
or by the Executive other than for Good Reason;
(ii) a reduction by the Company or a Subsidiary in the
Executive's base salary as in effect on the date hereof or
as the same may be increased from time to time during the
term of this Agreement or the Company's or Subsidiary's
failure to increase (within 15 months of the Executive's
last increase in base salary) the Executive's base salary
after a Change in Control in an amount which is substan-
tially similar, on a percentage basis, to the average
percentage increase in base salary for all officers of the
Company or the Subsidiary effected during the preceding 12
months, other than a reduction of the Executive's base
salary pursuant to the terms of the Company's short-term
disability plan or long-term disability plan during a period
in which the Executive is disabled (within the meaning of
such plan or plans) and qualifies for benefits under such
plan or plans;
(iii) any failure by the Company or a Subsidiary to
continue in effect any benefit plan or arrangement
(including, without limitation, any pension or retirement
plan, group life insurance plan, medical, dental, accident
and disability plans and educational assistance reimburse-
ment plan) in which the Executive is participating at the
time of a Change in Control (or to substitute and continue
other plans providing the Executive with substantially
similar benefits) (hereinafter referred to as "Benefit
Plans"), the taking of any action by the Company or a
Subsidiary which would adversely affect the Executive's
participation in or materially reduce the Executive's
benefits under any such Benefit Plan or deprive the
Executive of any material fringe benefit enjoyed by the
Executive at the time of a Change in Control, or the
failure by the Company or Subsidiary to provide the
Executive with the number of paid vacation days to which
the Executive is entitled in accordance with the vacation
policies in effect at the time of a Change in Control;
(iv) any failure by the Company or a Subsidiary to
continue in effect any incentive plan or arrangement
(including, without limitation, the Company's annual bonus
and contingent bonus arrangements and credits and the right
to receive performance awards and similar incentive
compensation benefits) in which the Executive is partici-
pating at the time of a Change in Control (or to substitute
and continue other plans or arrangements providing the
Executive with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any
action by the Company or a Subsidiary which would adversely
affect the Executive's participation in any such Incentive
Plan or reduce the Executive's benefits under any such
Incentive Plan in an amount which is not substantially
similar, on a percentage basis, to the average percentage
reduction of benefits under any such Incentive Plan effected
during the preceding 12 months for all officers of the
Company or a Subsidiary participating in any such Incentive
Plan;
(v) any failure by the Company or a Subsidiary to
continue in effect any plan or arrangement to receive
securities of the Company (including, without limitation,
the Company's Stock Incentive Plan and any other plan or
arrangement to receive and exercise stock options, stock
appreciation rights, restricted stock or grants thereof or
to acquire stock or other securities of the Company) in
which the Executive is participating at the time of a Change
in Control (or to substitute and continue plans or
arrangements providing the Executive with substantially
similar benefits) (hereinafter referred to as "Securities
Plans") or the taking of any action by the Company or a
Subsidiary which would adversely affect the Executive's
participation in or materially reduce the Executive's
benefits under any such Securities Plan;
(vi) a relocation of the Company's principal executive
offices or the Executive's relocation to any metropolitan
area other than the metropolitan area in which the Executive
performed the Executive's duties prior to a Change in
Control;
(vii) a substantial increase in business travel
obligations over such obligations as they existed at the
time of a Change in Control;
(viii) any material breach by the Company or a
Subsidiary of any provision of this Agreement;
(ix) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of
the Company pursuant to Section 7(a); or
(x) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 3(f),
including any purported termination under the circumstances
described in the last sentence of Section 3(a).
(f) Notice of Termination. Any termination of the
Executive's employment by the Company or a Subsidiary pursuant to
Section 3(b), 3(c) or 3(d) or by the Executive pursuant to Section
3(e) shall be communicated to the other party by a Notice of
Termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this
Agreement, no such purported termination by the Company or
Subsidiary shall be effective without such Notice of Termination.
(g) Date of Termination. "Date of Termination" shall
mean (a) if this Agreement is terminated by the Company or a
Subsidiary for Disability, 30 days after Notice of Termination is
given to the Executive (provided that the Executive shall not have
returned to the performance of the Executive's duties on a full-time
basis during such 30-day period) or (b) if the Executive's employ-
ment is terminated for any other reason, the date on which a Notice
of Termination is given.
4. Severance Compensation upon Termination. (a) If the
Executive's employment by the Company or a subsidiary is terminated
(i) by the Company or Subsidiary pursuant to Section 3(b), 3(c) or
3(d) or by reason of death or (ii) by the Executive other than for
Good Reason, the Executive shall not be entitled to any severance
compensation under this Agreement, but the absence of the
Executive's entitlement to any benefits under this Agreement shall
not prejudice the Executive's right to the full realization of any
and all other benefits to which the Executive shall be entitled
pursuant to the terms of any employee benefit plans or other agree-
ments of the Company or a Subsidiary in which the Executive is a
participant or to which the Executive is a party.
(b) If the Executive's employment by the Company or a
Subsidiary is terminated (a) by the Company or such Subsidiary other
than pursuant to Section 3(b), 3(c) or 3(d) or by reason of death or
(b) by the Executive for Good Reason, then the Executive shall be
entitled to the severance compensation provided below:
(i) In lieu of any further salary or incentive
payments to the Executive for periods subsequent to the
Date of Termination, the Company shall pay in cash as
severance compensation to the Executive at the time
specified in subsection (ii) below, a lump-sum severance
payment equal to three (3) times the Executive's Adjusted
Annual Compensation. For purposes of this Agreement,
"Adjusted Annual Compensation" shall mean the sum of (x)
an amount equal to the highest level of the Executive's
annual base salary in effect between the time of the
Change in Control and the time a Notice of Termination is
given, (y) an amount equal to the greater of the amounts
earned by the Executive under the Company's Management
Incentive Compensation Plan (or any successor plan) for
the two preceding calendar years, or, if the Executive has
participated in such Plan for only one year, an amount
equal to the amount earned under such Plan for the
preceding calendar year, and (z) an amount equal to one-
third of the sum of the amounts of the current "Target"
values for the Executive under the Company's Management
Incentive Compensation Plan and Long Term Performance
Compensation Plan, respectively, such Target values to be
prorated from the beginning of the applicable measurement
period for each such Plan through the end of the month in
which the Date of Termination occurs. If the Date of
Termination occurs after the Executive reaches age 62,
such lump-sum severance payment shall be equal to the
Executive's Adjusted Annual Compensation multiplied by a
fraction of which the numerator shall be the number of
months from such date until the Executive reaches age 65
and the denominator shall be twelve (12).
(ii) The severance compensation provided for in
subsection (i) above shall be paid not later than the 10th
day following the Date of Termination; provided, however,
that, if the amount of such compensation cannot be finally
determined on or before such day, the Company shall pay to
the Executive on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such
compensation and shall pay the remainder of such
compensation (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Internal Revenue Code of 1986,
as amended (the "Code")) as soon as the amount thereof can
be determined, but in no event later than the 30th day after
the Date of Termination. In the event that the amount of
the estimated payment exceeds the amount subsequently deter-
mined to have been due, such excess shall constitute a loan
by the Company to the Executive payable on the 30th day
after demand by the Company (together with interest at the
rate provided in Section 1274 (b)(2)(B) of the Code,
commencing on the 31st day following such demand).
(iii) The Company shall arrange to provide the
Executive for a period of thirty-six (36) months following
the Date of Termination (or, if such date occurs after the
Executive reaches age 62, for a period equal to the number
of months after such date until the Executive reaches age
65) or until the Executive's earlier death, with life,
health, disability and accident insurance benefits and
a package of "executive benefits", including capital
assessments and dues for pre-existing club memberships
and the use of an automobile or an allowance therefor
(collectively, "Employment Benefits"), substantially
similar to those which the Executive was receiving
immediately prior to the Notice of Termination.
(iv) During the term of this Agreement and through the
period of thirty-six (36) months following the Date of
Termination (or, if such date occurs after the Executive
reaches age 62, for a period equal to the number of months
after such date until the Executive reaches age 65), all
benefits under the Company s pension plans, Executive
Retirement Plans and any other plan or agreement relating to
retirement benefits (collectively, "Retirement Benefits")
shall continue to accrue to the Executive, crediting of
service of the Executive with respect to Retirement Benefits
shall continue, and the Executive shall be entitled to
receive all Retirement Benefits provided to the Executive as
a fully vested participant under any such plan or agreement
relating to retirement benefits. No contributions shall be
required to be made by the Executive to the Executive
Retirement Plans, or any other such plan providing for
employee contributions, following the Date of Termination.
To the extent that the amount of any Retirement Benefits are
or would be payable from a nonqualified plan, the Company
shall, as soon as practicable following the Date of
Termination, pay directly to the Executive in one lump sum
an amount equal to the additional benefits that would have
been provided had such accrual or crediting been taken into
account in calculating such Retirement Benefits. Such lump
sum payment shall be calculated as provided in the relevant
plan and, in the case of a defined contribution plan, shall
include an amount equal to the gross amount of the maximum
employer contributions.
(c) In the event the severance compensation payable
under this Section 4, either alone or together with any other
payments to the Executive from the Company or a Subsidiary
(including, but not limited to, payments under the Company's Stock
Incentive Plan or any agreement or award issued pursuant to such
Plan or any successor plan), would constitute a "parachute payment"
(as defined in Section 280G of the Code), and subject the Executive
to the excise tax imposed by Section 4999 of the Code, the Company
shall pay the Executive, as additional severance compensation
hereunder and payable at the same time or times as such severance
compensation, the amount of such excise tax and any additional taxes
payable by the Executive by reason of such payment (on the basis of
a customary "gross-up" formula), as calculated by the Company. The
Company agrees to indemnify and hold harmless the Executive from and
against any liability for the payment of additional taxes arising
from any deficiency in the amount of such excise tax and any
additional taxes thereon so calculated by the Company, together with
any interest or penalties applicable thereto; provided, however,
that it shall be a condition of this obligation to indemnify and
hold harmless the Executive that the Executive shall have timely
notified the Company of any proposed assessment relating to any
claimed deficiency therein and offered the Company the right to
contest such assessment or participate in, at the expense of the
Company, any proceeding relating thereto.
5. Payment of Taxes; Continuation of Employment.
Notwithstanding any other provision of this Agreement or the
premises hereto, in the event the Executive is entitled to receive
compensation (whether in the form of cash, securities or other form
of compensation) under or pursuant to any plan or agreement of or
with the Company or a Subsidiary as the result of a Change in
Control, the Company shall pay to the Executive any applicable
excise tax, and any taxes thereon, and shall indemnify and hold
harmless the Executive in respect thereof, as provided in Section
4(c) above, regardless of whether the employment of the Executive
with the Company or a Subsidiary shall have terminated.
6. No Obligation To Mitigate Damages; No Effect on other
Contractual Rights. (a) The Executive shall not be required to
mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor shall
the amount of any payment provided for under this Agreement be
reduced by any compensation earned by the Executive as the result
of employment by another employer after the termination of the
Executive's employment or otherwise.
(b) The provisions of this Agreement, and any payment
provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish the Executive's existing rights, or
rights which would accrue solely as a result of the passage of time,
under any Benefit Plan, Incentive Plan or Securities Plan, employ-
ment agreement or other contract, plan or arrangement of the Company
or any Subsidiary.
7. Successor to the Company. (a) The Company will require
any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all the
business and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken
place. Any failure of the Company to obtain such agreement prior to
the effectiveness of any such succession or assignment shall be a
material breach of this Agreement and shall entitle the Executive to
terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor or assign to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in
this Section 7 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees. If the Executive should die while any amounts are
still payable to the Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or
other designee or, if there be no such designee, to the Executive's
estate.
8. Notices. For purposes of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States certified mail, return receipt requested,
postage prepaid, as follows:
If to the Company:
Whitman Corporation
3501 Algonquin Road
Rolling Meadows, Illinois 60008
Attention of: General Counsel
If to the Executive, to the Executive s home address as
shown on the Company s personnel records; or such other address as
either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall
be effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and the
Company. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
10. Employment. The Executive agrees to be bound by the
terms and conditions of this Agreement and to remain in the employ
of the Company or Subsidiary during any period following any public
announcement by any person of any proposed transaction or trans-
actions which, if effected, would result in a Change in Control
until a Change in Control has taken place or, in the opinion of the
Board of Directors, such person has abandoned or terminated its
efforts to effect a Change in Control. Subject to the foregoing,
nothing contained in this Agreement shall impair or interfere in any
way with the right of the Executive to terminate the Executive's
employment or the right of the Company or any Subsidiary to
terminate the employment of the Executive with or without cause
prior to a Change in Control. Nothing contained in this Agreement
shall be construed as a contract of employment between the Company
or any Subsidiary and the Executive or as a right of the Executive
to continue in the employ of the Company or any Subsidiary, or as a
limitation of the right of the Company or any Subsidiary to
discharge the Executive with or without cause prior to a Change in
Control.
11. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
13. Legal Fees and Expenses. (a) The Company shall pay all
legal fees and expenses which the Executive may incur as a result of
the Company or a Subsidiary contesting the validity, enforceability
or the Executive's interpretation of, or determinations under, this
Agreement.
(b) The Company shall pay all legal fees and expenses
which the Executive may incur by reason of the termination of the
Executive s employment, other than as a result of (i) the
Executive s death, (ii) the Executive s Disability (as defined in
Section 3(b) above), (iii) the Executive s Retirement (as defined in
Section 3(c) above), (iv) the Executive s termination for Cause (as
defined in Section 3(d) above), or (v) the Executive s decision to
terminate employment other than for Good Reason (as defined in
Section 3(e) above; such fees and expenses shall include, without
limitation, those incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement.
(c) The Company shall pay all legal fees and expenses
which the Executive may incur as a result of any tax assessments or
proceedings arising from payments made by the Company pursuant to
Section 4(c) or Section 5 above.
(d) If the payment by the Company of any legal fees and
expenses pursuant to this Section 13 shall constitute compensation
to the Executive, the Company agrees, as a separate and independent
undertaking, to pay to the Executive upon demand any and all taxes,
of whatever nature or description, applicable to such payment,
together with any taxes thereon (on the basis of a customary "gross-
up" formula).
14. Confidentiality. The Executive shall retain in
confidence any and all confidential information known to the
Executive concerning the Company and its Subsidiaries and their
business so long as such information is not otherwise publicly
disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
WHITMAN CORPORATION
By
Name: Lawrence J. Pilon
Title: Senior Vice President
EXECUTIVE
By
Name:
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in Millions, Except Ratios)
Years Ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Earnings:
Income from Continuing
Operations before Taxes $ 259.7 $ 212.7 $ 212.2 $ 170.6 $ 161.7
Fixed Charges Excluding
Capitalized Interest 86.7 82.2 105.9 106.9 138.2
------- ------- ------- ------- -------
Income as Adjusted $ 346.4 $ 294.9 $ 318.1 $ 277.5 $ 299.9
======= ======= ======= ======= =======
Fixed Charges:
Interest Expense $ 74.6 $ 71.1 $ 96.2 $ 97.7 $ 128.6
Portion of Rents
Representative of
Interest Factor 12.1 11.1 9.7 9.2 9.6
------- ------- ------- ------- -------
Fixed Charges Excluding
Capitalized Interest 86.7 82.2 105.9 106.9 138.2
Capitalized Interest 0.2 0.2 0.2 0.2 0.2
------- ------- ------- ------- -------
Total Fixed Charges $ 86.9 $ 82.4 $ 106.1 $ 107.1 $ 138.4
======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 4.0x 3.6x 3.0x 2.6x 2.2x
======= ======= ======= ======= =======
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of March 1, 1996
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
Whitman Insurance Co., Ltd. Bermuda 100
Illinois Center Corporation Delaware 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 FSC, Inc. Barbados 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
Coira S.A. Spain 100
Top Escape Spain 100
SOS Escape S.A. 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
GB International, Inc. Delaware 80
General Bottlers Sp.z o.o Poland 80
Hussmann Corporation Missouri 100
Krack Corporation Illinois 100
Hussmann International Sales Corporation Barbados 100
Hussmann Tempcool Holdings PTE Limited Singapore 50
Luoyang Hussmann Refrigeration Co., Ltd. China 55
Refrigeracion Frio Lux S.A.I. Chile 75
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
Capital Metalworks Limited Great Britain 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 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,
1995, 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, 1996.
Date Date
------- -------
/s/ Bruce S. Chelberg 3/22/96 /s/ Archie R. Dykes 3/22/96
- ------------------------ --------------------------
Bruce S. Chelberg Archie R. Dykes
/s/ Thomas L. Bindley 3/22/96
- ------------------------ --------------------------
Thomas L. Bindley Helen Galland
/s/ Frank T. Westover 3/22/96 /s/ Jarobin Gilbert, Jr. 3/22/96
- ------------------------ --------------------------
Frank T. Westover Jarobin Gilbert, Jr.
/s/ Richard G. Cline 3/22/96 /s/ Victoria B. Jackson 3/22/96
- ------------------------ --------------------------
Richard G. Cline Victoria B. Jackson
/s/ James W. Cozad 3/22/96 /s/ Donald P. Jacobs 3/22/96
- ------------------------ --------------------------
James W. Cozad Donald P. Jacobs
/s/ Charles S. Locke 3/22/96
- ------------------------ --------------------------
Pierre S. duPont Charles S. Locke
/s/ Herbert M. Baum 3/22/96
- ------------------------
Herbert M. Baum
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 53,300
<SECURITIES> 0
<RECEIVABLES> 378,500<F1>
<ALLOWANCES> 5,700
<INVENTORY> 267,100
<CURRENT-ASSETS> 761,100
<PP&E> 1,356,800
<DEPRECIATION> 659,300
<TOTAL-ASSETS> 2,363,300
<CURRENT-LIABILITIES> 507,600
<BONDS> 828,200
<COMMON> 427,800
0
0
<OTHER-SE> 200,000
<TOTAL-LIABILITY-AND-EQUITY> 2,363,300
<SALES> 2,946,500
<TOTAL-REVENUES> 2,946,500
<CGS> 1,921,300
<TOTAL-COSTS> 2,604,200<F2>
<OTHER-EXPENSES> 14,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,200<F3>
<INCOME-PRETAX> 259,700
<INCOME-TAX> 107,400
<INCOME-CONTINUING> 133,500<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,500
<EPS-PRIMARY> $1.26
<EPS-DILUTED> $1.26
<FN>
<F1>Net of allowance for doubtful accounts of $5,700.
<F2>Includes Selling, General and Administrative Expenses, Amortization Expense
and Cost of Goods Sold.
<F3>Interest expense is reported offset by $6,400 of interest income, therefore
gross interest expense equals $74,600.
<F4>Income from continuing operations is reported after minority interest of
$18,800.
</FN>
</TABLE>
