SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 001-04710
WHITMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-6076573
- -------------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3501 Algonquin Road, Rolling Meadows, Illinois 60008
- ---------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 818-5000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /x/ NO
As of April 30, 1997, the Registrant had 110,795,841 outstanding shares
(excluding treasury shares) of common stock, no par value.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended
March 31,
---------------------------
1997 1996
------- -------
(in millions, except
per share data)
Sales and Revenues $ 674.1 $ 657.9
Cost of Goods Sold 437.1 428.6
------- -------
Gross Profit 237.0 229.3
Selling, General and Administrative Expenses 179.0 171.3
Amortization Expense 5.1 5.0
------- -------
Operating Income 52.9 53.0
Interest Expense (18.1) (17.4)
Interest Income 1.4 1.7
Other Expense, Net (4.6) (4.0)
------- -------
Income Before Income Taxes 31.6 33.3
Income Tax Provisions 13.3 14.0
------- -------
Income Before Minority Interest 18.3 19.3
Minority Interest 2.8 3.3
------- -------
Net Income $ 15.5 $ 16.0
======= =======
Average Number of Common Shares Outstanding 103.7 107.1
======= =======
Net Income per Common Share $ 0.15 $ 0.15
======= =======
Cash Dividends per Common Share $ 0.105 $ 0.095
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
(in millions)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 80.3 $ 76.8
Receivables 360.9 396.9
Inventories 324.0 307.3
Other Current Assets 70.9 74.0
----------- -----------
Total Current Assets 836.1 855.0
----------- -----------
Investments 172.0 181.3
Property (at Cost) 1,471.2 1,445.1
Accumulated Depreciation and Amortization (725.5) (710.8)
----------- -----------
Net Property 745.7 734.3
----------- -----------
Intangible Assets, Net 563.5 553.8
Other Assets 91.5 85.0
----------- -----------
Total Assets $ 2,408.8 $ 2,409.4
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-Term Debt, Including Current Maturities of Long-Term Debt $ 96.0 $ 94.3
Accounts and Dividends Payable 247.5 266.5
Other Current Liabilities 147.9 165.2
----------- -----------
Total Current Liabilities 491.4 526.0
----------- -----------
Long-Term Debt 885.7 837.5
Deferred Income Taxes 50.4 47.1
Other Liabilities 121.5 118.1
Minority Interests 243.4 238.5
Shareholders' Equity:
Common Stock (No par, 250.0 million shares authorized; 110.8
million shares issued in 1997 and 110.6 million issued in 1996) 458.4 456.3
Retained Income 433.7 426.7
Cumulative Translation Adjustment (92.7) (82.5)
Unrealized Investment Gain 2.2 1.8
Treasury Stock (9.1 million shares in 1997 and 8.0 million
shares in 1996) (185.2) (160.1)
----------- -----------
Total Shareholders' Equity 616.4 642.2
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,408.8 $ 2,409.4
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-----------------------
1997 1996
------ ------
(in millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 15.5 $ 16.0
Adjustments to Reconcile to Net Cash Provided by Operating Activities:
Depreciation and Amortization 29.1 29.5
Other 4.6 2.3
Changes in Assets and Liabilities, Exclusive of Acquisitions:
Decrease in Receivables 40.7 36.7
Increase in Inventories (11.8) (7.0)
Decrease in Payables (24.9) (3.9)
Net Change in Other Assets and Liabilities (10.3) (9.6)
------ ------
Net Cash Provided by Continuing Operations 42.9 64.0
Net Cash Used in Discontinued Operations (2.6) (5.5)
------ ------
Net Cash Provided by Operating Activities 40.3 58.5
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Investments, Net (21.9) (24.2)
Acquisitions and Investments in Joint Ventures (39.6) (7.2)
Purchases of Investments (15.4) (33.0)
Proceeds from Sales of Investments 25.0 38.1
------ ------
Net Cash Used in Investing Activities (51.9) (26.3)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt 73.9 --
Repayment of Long-Term Debt (52.2) (0.9)
Net Borrowing (Repayment) of Bank Lines of Credit
and Commercial Paper 27.2 (6.0)
Net Increase in Notes Payable 0.9 0.4
Common Dividends (10.7) (10.0)
Treasury Stock Purchases (25.2) (4.2)
Issuance of Common Stock 2.2 8.4
------ ------
Net Cash Provided By (Used in) Financing Activities 16.1 (12.3)
------ ------
Effects of Exchange Rate Changes on Cash and Cash Equivalents (1.0) (0.2)
------ ------
Change in Cash and Cash Equivalents 3.5 19.7
Cash and Cash Equivalents at January 1 76.8 53.3
------ ------
Cash and Cash Equivalents at March 31 $ 80.3 $ 73.0
====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit. Certain information and footnote
disclosures normally included in financial statements, prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, although the Registrant believes that
the disclosures made are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996. In the opinion of management, the information
furnished herein reflects all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of results for the
interim periods presented
2. Net cash provided by operating activities reflected cash payments and
receipts for interest and income taxes as follows:
Three Months Ended
March 31,
--------------------
1997 1996
------ ------
(in millions)
Interest Paid $ 26.0 $ 24.1
Interest Received 1.6 1.6
Income Taxes Paid 3.4 1.3
3. As of March 31, 1997, the components of inventory were approximately: raw
materials and supplies -- 33 percent; work in process -- 20 percent; and
finished goods -- 47 percent.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Registrant had cash and cash equivalents of $80.3
million, compared with $76.8 million at December 31, 1996. Cash from operating
activities amounted to $40.3 million in the first three months of 1997, compared
with $58.5 million in the first three months of 1996. The decrease principally
resulted from higher payable disbursements during the first three months of 1997
compared with the same period in 1996. Cash provided by operations, together
with the cash received from the net borrowings of long-term debt, commercial
paper and bank lines, was used primarily for capital expenditures, acquisitions
and investments in joint ventures, dividends, and treasury stock purchases.
Cash used in investing activities was $51.9 million in the first three
months of 1997, compared with $26.3 million for the same period of 1996. Net
capital investments declined slightly to $21.9 million for the first three
months of 1997, compared to $24.2 million for the same period of 1996. Cash used
for acquisitions and investments in joint ventures, including Pepsi General's
acquisition of the St. Petersburg, Russia bottling operations, Hussmann's
acquisition of a 70 percent ownership in Fast Frio do Brazil, and Midas'
acquisition of eleven franchise shops in Utah, amounted to $39.6 million in the
first quarter of 1997, compared with $7.2 million spent in 1996, which reflected
additional investment in the Pepsi-Cola bottling facility in Poland. Purchases
and sales of investments principally related to the Registrant'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 often used by the insurance
company to pay claims. A substantial portion of the purchases and sales of such
investments are reinvested as the investments mature. During the first quarter
of 1997, the Registrant's insurance subsidiary liquidated $10 million of its
investment portfolio and loaned the proceeds to the Registrant. Proceeds from
this loan were used for general corporate purposes.
In the first three months of 1997, the Registrant had net borrowings of
long-term debt, bank lines and commercial paper of $48.9 million. The
Registrant's total debt increased to $981.7 million at March 31, 1997, up from
$931.8 million at December 31, 1996. Proceeds of $2.2 million were received from
the issuance of common stock, principally from stock option exercises.
The Registrant had contractual bank lines of credit of $300.0 million and
also maintained a $200.0 million commercial paper program at March 31, 1997,
unchanged from December 31, 1996. Borrowings under these facilities were $27.2
million at March 31, 1997, while no borrowings were made from either facility at
December 31, 1996.
<PAGE>
RESULTS OF OPERATIONS
1997 FIRST QUARTER COMPARED WITH 1996 FIRST QUARTER
Sales and revenues increased 2.5 percent to $674.1 million in the first
quarter of 1997, with revenue increases reported by each of the Registrant's
three major subsidiaries, as summarized below:
Quarter Ended
March 31,
---------------------- %
1997 1996 Change
-------- -------- --------
(in millions)
Pepsi General $ 333.5 $ 332.7 0.2
Midas 142.0 130.6 8.7
Hussmann 198.6 194.6 2.1
------- -------
Total Sales and Revenues $ 674.1 $ 657.9 2.5
======= =======
Pepsi General's revenues increased $0.8 million in the first quarter of
1997 and included $10.7 million of revenues (compared with $11.1 million in
1996) from international operations. Pepsi General's domestic revenues reflected
lower selling prices per case, partially offset by improved product demand. The
average domestic net selling price per case decreased 3.4 percent compared with
the first quarter of 1996, while domestic unit case volume increased 3.7 percent
over the first quarter of 1996. Midas' revenues increased $11.4 million,
primarily due to an additional selling week in the first quarter of 1997, a
successful brake promotion in the United States and improved results in Canada
and Europe. Hussmann's revenues increased $4.0 million over very strong revenues
in the first quarter of 1996. The increase resulted primarily from continued
strong demand for supermarket equipment in the United States, and revenues
contributed from the newly acquired operations in Brazil, partially offset by
lower sales in the U.K.
Gross profit improved 3.4 percent to $237.0 million, primarily from the
improvement in revenues. Gross profit margins improved to 35.2 percent from 34.9
percent, principally reflecting lower packaging costs at Pepsi General.
Selling, general and administrative (S,G&A) expenses increased $7.7
million, or 4.5 percent, with the increase reflecting costs associated with the
Midas brake promotion and the additional selling week at Midas, as well as the
effects of higher sales volumes and inflationary cost increases. S,G&A expenses
represented 26.6 percent of sales in the first quarter of 1997, up 0.7
percentage points from the same period last year. Amortization expenses remained
relatively flat.
<PAGE>
Operating income for the Registrant's three major subsidiaries and
corporate administrative expenses are summarized below:
Quarter Ended
March 31,
--------------------- %
1997 1996 Change
------ ------ --------
(in millions)
Pepsi General $ 35.2 $ 38.1 (7.6)
Midas 12.0 11.5 4.3
Hussmann 9.6 8.0 20.0
------ ------
Subsidiary Operating Income 56.8 57.6 (1.4)
Corporate Administrative Expenses (3.9) (4.6) (15.2)
------ -------
Total Operating Income $ 52.9 $ 53.0 (0.2)
====== =======
In the first quarter of 1997, Pepsi General's operating earnings were $2.9
million below the same period of 1996 and included operating losses of $5.9
million from its international operations, compared with operating losses of
$4.3 million for the same period of 1996. The higher losses were due to the
start up losses associated with Pepsi General's new territories in Russia,
Latvia, Estonia and Lithuania. Pepsi General's domestic operating earnings were
down $1.3 million in the first quarter of 1997, compared to the same period of
1996, primarily resulting from higher S,G&A costs, due, in part, to higher unit
volumes. Midas operating earnings for the first quarter of 1997 were up $0.5
million, or 4.3 percent, from the same period last year, primarily reflecting
the benefits of an additional selling week in the first quarter of 1997, and
modestly improved results at Midas' international operations. Hussmann's
operating earnings of $9.6 million for the first three months of 1997 were up
$1.6 million, or 20.0 percent, above the same period last year. The improved
performance primarily resulted from continued strong demand for supermarket
equipment in the United States, partially offset by a continued weakness in the
U.K. market.
Net interest expense increased $1.0 million in the first quarter of 1997 to
$16.7 million, primarily resulting from higher debt levels. The increase in
total debt to $981.7 million at March 31, 1997 from $914.5 million at March 31,
1996 principally resulted from capital spending, investments in new companies
and joint ventures, dividends and treasury stock purchases.
Other expense, net, increased $0.6 million to $4.6 million in the first
quarter of 1997. The increase in other expense, net, was not related to any
individually significant item.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
12. Statement of Calculation of the Ratio of Earnings to Fixed
Charges.
(b) Reports on Form 8-K.
None filed during the first quarter ended March 31, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITMAN CORPORATION
Date: May 13, 1997 By: /s/ FRANK T. WESTOVER
------------ ------------------------------------------
Frank T. Westover
Senior Vice President and Controller
(As Chief Accounting Officer and Duly
Authorized Officer of Whitman Corporation
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION
OF THE RATIO OF EARNINGS TO FIXED CHARGES
(in Millions, Except Ratios)
<TABLE>
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
--------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income from Continuing Operations
before Taxes $ 31.6 $ 33.3 $ 275.7 $ 259.7 $ 212.7 $ 212.2 $ 170.6
Fixed Charges Excluding
Capitalized Interest 21.4 20.7 84.7 86.7 82.2 105.9 106.9
------- ------- ------- ------- ------- ------- -------
Earnings as Adjusted $ 53.0 $ 54.0 $ 360.4 $ 346.4 $ 294.9 $ 318.1 $ 277.5
======= ======= ======= ======= ======= ======= =======
Fixed Charges:
Interest Expense $ 18.1 $ 17.4 $ 72.2 $ 74.6 $ 71.1 $ 96.2 $ 97.7
Portion of Rents Representative
of Interest Factor 3.3 3.3 12.5 12.1 11.1 9.7 9.2
------- ------- ------- ------- ------- ------- -------
Fixed Charges Excluding
Capitalized Interest 21.4 20.7 84.7 86.7 82.2 105.9 106.9
Capitalized Interest 0.0 0.0 0.0 0.2 0.2 0.2 0.2
------- ------- ------- ------- ------- ------- -------
Total Fixed Charges $ 21.4 $ 20.7 $ 84.7 $ 86.9 $ 82.4 $ 106.1 $ 107.1
======= ======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 2.5x 2.6x 4.3x 4.0x 3.6x 3.0x 2.6x
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 80,300
<SECURITIES> 0
<RECEIVABLES> 360,900<F1>
<ALLOWANCES> 0
<INVENTORY> 324,000
<CURRENT-ASSETS> 836,100
<PP&E> 1,471,200
<DEPRECIATION> 725,500
<TOTAL-ASSETS> 2,408,800
<CURRENT-LIABILITIES> 491,400
<BONDS> 885,700
0
0
<COMMON> 458,400
<OTHER-SE> 158,000
<TOTAL-LIABILITY-AND-EQUITY> 2,408,800
<SALES> 674,100
<TOTAL-REVENUES> 674,100
<CGS> 437,100
<TOTAL-COSTS> 621,200<F2>
<OTHER-EXPENSES> 4,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,700<F3>
<INCOME-PRETAX> 31,600
<INCOME-TAX> 13,300
<INCOME-CONTINUING> 15,500<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,500
<EPS-PRIMARY> $0.15
<EPS-DILUTED> $0.15
<FN>
<F1>NET OF ALLOWANCE OF DOUBTFUL ACCOUNTS OF $7,800
<F2>INCLUDES SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, AMORTIZATION EXPENSE AND
COST OF GOODS SOLD
<F3>INTEREST EXPENSE IS OFFSET BY $1,400 OF INTEREST INCOME, THEREFORE, GROSS
INTEREST EXPENSE IS $18,100
<F4>INCOME FROM CONTINUING OPERATIONS IS REPORTED AFTER MINORITY INTEREST OF
$2,800
</FN>
</TABLE>
