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, 1998
/ / 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, 1998, the Registrant had 101,557,075 outstanding shares
(excluding treasury shares) of common stock, without par value, the Registrant's
only class of common stock.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Comprehensive 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)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
---------------------------------------
1998 1997
---------- ----------
(in millions, except per share data)
<S> <C> <C>
Sales $ 352.0 $ 333.5
Cost of Goods Sold 218.9 206.8
---------- ----------
Gross Profit 133.1 126.7
Selling, General and Administrative Expenses 93.9 91.5
Amortization Expense 3.9 3.9
---------- ----------
Operating Income 35.3 31.3
Interest Expense, Net (Note 4) (9.3) (10.5)
Other Expense, Net (4.9) (4.6)
---------- ----------
Income Before Income Taxes 21.1 16.2
Income Taxes 9.5 7.4
---------- ----------
Income From Continuing Operations Before Minority Interest 11.6 8.8
Minority Interest 3.5 3.0
---------- ----------
Income from Continuing Operations 8.1 5.8
Income (Loss) from Discontinued Operations After Taxes (Note 2) (0.5) 9.7
Extraordinary Loss on Early Extinguishment of Debt After Taxes (Note 3) (18.3) --
---------- ----------
Net Income (Loss) $ (10.7) $ 15.5
========== ==========
Average Shares:
Basic EPS - Weighted-Average Common Shares 101.0 102.2
Incremental Effect of Stock Options 1.7 1.1
---------- ----------
Diluted EPS - Weighted-Average Common Shares 102.7 103.3
========== ==========
Income (Loss) per Common Share - Basic:
Continuing Operations $ 0.08 $ 0.06
Discontinued Operations (0.01) 0.09
Extraordinary Loss on Early Extinguishment of Debt (0.18) --
---------- ----------
Net Income (Loss) $ (0.11) $ 0.15
=========== ==========
Income (Loss) per Common Share - Diluted:
Continuing Operations $ 0.08 $ 0.06
Discontinued Operations -- 0.09
Extraordinary Loss on Early Extinguishment of Debt (0.18) --
---------- ----------
Net Income (Loss) $ (0.10) $ 0.15
========== ==========
Cash Dividends per Common Share $ 0.05 $ 0.105
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
---------------------------------
1998 1997
-------- --------
(in millions)
<S> <C> <C>
Net Income (Loss) $ (10.7) $ 15.5
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment 2.0 (10.2)
Unrealized Gains on Securities Arising During the Period, Net of Tax
Expense of $0.4 and $0.2, Respectively 0.9 0.4
-------- --------
Other Comprehensive Income (Loss) 2.9 (9.8)
-------- --------
Comprehensive Income (Loss) $ (7.8) $ 5.7
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(in millions)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 170.3 $ 52.4
Receivables 128.5 131.7
Inventories (Note 6) 78.2 69.9
Other Current Assets 47.2 36.3
Net Current Assets of Companies Held for Disposition -- 270.5
------------ ------------
Total Current Assets 424.2 560.8
------------ ------------
Investments 155.5 157.0
Property (at Cost) 889.3 878.2
Accumulated Depreciation and Amortization (479.5) (471.6)
------------ ------------
Net Property 409.8 406.6
------------ ------------
Goodwill, Net 458.6 462.6
Other Assets 48.4 49.5
Net Non-Current Assets of Companies Held for Disposition -- 393.2
------------ ------------
Total Assets $ 1,496.5 $ 2,029.7
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-Term Debt, Including Current Maturities of Long-Term Debt $ -- $ 282.5
Accounts and Dividends Payable 118.7 97.8
Other Current Liabilities 92.2 109.7
------------ ------------
Total Current Liabilities 210.9 490.0
------------ ------------
Long-Term Debt 604.8 604.7
Deferred Income Taxes 77.4 75.4
Other Liabilities 95.5 98.4
Minority Interest 221.8 221.5
Shareholders' Equity:
Common Stock (Without par value, 250.0 million shares authorized; 112.6
million shares issued at March 31, 1998 and 111.7 million issued at
December 31, 1997) 486.8 478.2
Retained Income 54.5 363.4
Accumulated Other Comprehensive Income:
Cumulative Translation Adjustment (12.6) (78.8)
Unrealized Investment Gain 1.1 0.2
------------ ------------
Accumulated Other Comprehensive Income (11.5) (78.6)
------------ ------------
Treasury Stock (11.7 million shares at March 31, 1998 and 10.6 million
shares at December 31, 1997) (243.7) (223.3)
------------ ------------
Total Shareholders' Equity 286.1 539.7
------------ ------------
Total Liabilities and Shareholders' Equity $ 1,496.5 $ 2,029.7
============ ============
</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,
--------------------------
1998 1997
-------- --------
(in millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from Continuing Operations $ 8.1 $ 5.8
Adjustments to Reconcile to Net Cash Provided by Continuing Operating Activities:
Depreciation and Amortization 19.1 17.9
Cash Outlays Related to the Prior Year's Special Charges (4.0) --
Other 3.6 4.5
Changes in Assets and Liabilities, Exclusive of Acquisitions:
Decrease in Receivables 3.2 8.6
Increase in Inventories (8.3) (2.6)
Increase in Payables 20.9 20.3
Net Change in Other Assets and Liabilities (12.7) (13.2)
-------- --------
Net Cash Provided by Continuing Operations 29.9 41.3
Net Cash Provided by (Used in) Discontinued Operations (5.4) 3.7
-------- --------
Net Cash Provided by Operating Activities 24.5 45.0
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Dispositions of Businesses 434.3 --
Capital Investments, Net (19.9) (13.8)
Companies Acquired, Net of Cash Acquired -- (21.1)
Net Activity with Joint Ventures 2.1 (0.6)
Purchases of Investments (3.8) (15.3)
Proceeds from Sales of Investments 4.6 25.0
-------- --------
Net Cash Provided by (Used in) Investing Activities 417.3 (25.8)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Debt -- 65.7
Repayment of Debt (311.2) (50.5)
Net Borrowings Under Bank Lines of Credit
and Commercial Paper -- 27.2
Cash Dividends (5.0) (10.7)
Treasury Stock Purchases (18.3) (25.2)
Issuance of Common Stock 10.7 2.2
-------- --------
Net Cash Provided by (Used in) Financing Activities (323.8) 8.7
-------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (0.1) (0.3)
-------- --------
Change in Cash and Cash Equivalents 117.9 27.6
Cash and Cash Equivalents at January 1 52.4 4.7
-------- --------
Cash and Cash Equivalents at March 31 $ 170.3 $ 32.3
======== ========
</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, 1997. 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. On January 30, 1998, Whitman Corporation ("Whitman" or the "Company")
distributed ("the Distribution") all of the issued and outstanding shares
of Hussmann International, Inc. ("Hussmann") and Midas, Inc. ("Midas") to
Whitman shareholders of record on January 16, 1998. As a result of the
Distribution, Hussmann and Midas became independent publicly-owned
companies. Whitman has retained Pepsi-Cola General Bottlers, Inc. ("General
Bottlers") as its principal operating company. The financial information
has been reclassified to reflect Hussmann and Midas as discontinued
operations. The results from discontinued operations have been reduced by
income taxes of $0.1 million and $5.9 million in the quarters ended March
31, 1998 and 1997, respectively.
3. The Company recorded an extraordinary loss after taxes of $18.3 million
during January, 1998, associated with a tender offer made on January 13,
1998, for any and all of the outstanding 7.625% and 8.25% notes maturing
June 15, 2015, and February 15, 2007, respectively. In connection with the
tender offer, the Company repurchased 7.625% and 8.25% notes with principal
amounts of $91.0 million and $88.5 million, respectively. The Company paid
total premiums related to the tender of $26.4 million and wrote-off the
remaining unamortized discount and issue costs of $2.1 million. The Company
also repaid a term loan and notes with principal amounts of $50.0 million
scheduled to mature in 1998 and 1999, notes due in 2002 with principal
amounts of $50.0 million and industrial revenue bonds of $5.0 million due
2013. Charges associated with these repayments were not significant. Total
extraordinary charges of $28.7 million were offset by tax benefits of $10.4
million.
4. Interest expense, net, is comprised of the following:
Quarter Ended
March 31,
---------------------
1998 1997
------ ------
(in millions)
Interest Expense $(12.6) $(17.4)
Interest Income from Hussmann and Midas 1.6 6.3
Interest Income 1.7 0.6
------ ------
Interest Expense, Net $(9.3) $(10.5)
===== ======
Interest income from Hussmann and Midas related to intercompany loans and
advances. The related interest expense recorded by Hussmann and Midas is
included in income (loss) from discontinued operations after taxes.
5. Net cash provided by operating activities reflected cash payments and
receipts for interest and income taxes as follows:
Quarter Ended
March 31,
---------------------
1998 1997
------ ------
(in millions)
Interest Paid $ 26.2 $ 25.1
Interest Received 2.5 0.9
Income Taxes Paid, Net of Refunds 1.9 1.2
Whitman also received interest from Hussmann and Midas during the first
quarter of 1998, which was included as part of the funds received to settle
intercompany indebtedness prior to the spin-offs. Interest received from
Hussmann and Midas during the first quarter of 1997 was essentially the
same as the intercompany interest income recorded by the Company.
6. As of March 31, 1998, the components of inventory were approximately: raw
materials and supplies - 46 percent and finished goods - 54 percent.
7. During the quarter ended March 31, 1998, the Company and its principal
operating company paid, and charged against reserves, severance and related
severance benefits of $3.1 million. The payments were related to employees
severed during 1997 and approximately 10 positions eliminated during the
current quarter. These payments are classified in the Condensed
Consolidated Statement of Cash Flows as a component of "Cash Outlays
Related to the Prior Year's Special Charges".
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash from operating activities decreased by $20.5
million in the first three months of 1998 to $24.5 million.
Net cash provided by continuing operations decreased $11.4 million to
$29.9 million in the first quarter of 1998 compared to the same period of the
prior year. Income from continuing operations for the first quarter of 1998 was
$8.1 million, $2.3 million higher than a year ago. Expenditures related to
special charges amounted to $4.0 million for the first three months of 1998.
Changes in primary working capital (defined as receivables and inventories less
payables) were the primary causes of the decrease in net cash provided by
continuing operations compared to the prior year. In the first quarter of 1998,
the primary working capital reduction resulted in cash inflow of $15.8 million,
while in the same period of 1997, the cash inflow from changes in primary
working capital was $26.3 million. Activity in the first quarter of 1998
included a build-up of raw materials in advance of anticipated price increases.
Net cash used by discontinued operations amounted to $5.4 million in the
first quarter of 1998, compared with net cash provided of $3.7 million in the
same period of 1997. The overall net change in discontinued operations between
the first quarters of 1998 and 1997 was due to 1998 containing only one month of
activity for Hussmann and Midas, compared with three months in 1997.
Investing activities during the first quarter of 1998 included $434.3
million received in January, 1998, from Hussmann and Midas prior to their
spin-offs to settle intercompany indebtedness and to pay special dividends.
Capital investments, net of proceeds from asset sales, amounted to $19.9
million, up $6.1 million from the same period of last year, and included
increased spending for vending machines. Cash used for acquisitions of $21.1
million in the first quarter of 1997 related to General Bottlers' acquisition of
the St. Petersburg, Russia bottling operations. The net activity with joint
ventures represented additional investments in and loan repayments from the
Pepsi-Cola bottling joint venture in Poland. Purchases and sales of investments
principally related to the Company's insurance subsidiary, which provides
certain levels of insurance for General Bottlers and previously for the
discontinued operations of Hussmann and Midas. Funds provided through premiums
are invested by the insurance subsidiary and proceeds from the sale of
investments are used by the insurance subsidiary to pay claims and other
expenses. A substantial portion of the purchases and sales of such investments
are reinvested as the investments mature. During the first quarter of 1997, the
insurance subsidiary liquidated $10.0 million of its investment portfolio and
loaned the proceeds to the Company, which used the funds for general corporate
purposes.
During the first three months of 1998, as discussed in Note 3 to the
Condensed Consolidated Financial Statements, the Company repaid debt, including
premiums, of $311.2 million. The Company's total debt decreased to $604.8
million at March 31, 1998, from $887.2 million at December 31, 1997. As part of
its ongoing share repurchase program, the Company repurchased approximately 1.0
million shares of its stock for $18.3 million in the first quarter of 1998.
Management currently has the authority to repurchase an additional 3.2 million
shares under the existing program. The company paid common stock dividends of
$5.0 million in the first quarter of 1998, based on a quarterly cash dividend of
$0.05 per share, compared with $10.7 million in the first quarter of 1997, based
on a quarterly cash dividend of $0.105 per share. The issuance of common stock
from the exercise of stock options resulted in cash inflows of $10.7 million and
$2.2 million for the first quarters of 1998 and 1997, respectively.
At March 31, 1997 the Company had $300 million available under a
contractual revolving credit facility and $200 million available under its
commercial paper program. Neither facility was in use at March 31, 1998. The
Company believes that with its operating cash flows and available lines of
credit, it has sufficient resources to fund its future growth and expansion,
including potential domestic franchise acquisitions.
<PAGE>
RESULTS OF OPERATIONS
1998 FIRST QUARTER COMPARED WITH 1997 FIRST QUARTER
Sales increased 5.5 percent to $352.0 million in the first quarter of
1998, with revenue increases reported by both the domestic and international
operations, as summarized below:
Quarter Ended
March 31,
----------------------- %
1998 1997 Change
-------- -------- ------
(in millions)
Domestic $ 336.2 $ 322.8 4.2
Foreign 15.8 10.7 47.7
-------- --------
Total Sales $ 352.0 $ 333.5 5.5
======== ========
General Bottler's domestic sales increased $13.4 million in the first
quarter of 1998 compared with the same period of 1997. This increase reflected
improved pricing and increased volumes. The average domestic net selling prices
for raw cases rose approximately one percent and volume, on an 8 ounce
equivalent basis, grew approximately four percent over the first quarter of
1997. Volume growth continued to be led by strong demand for the Mountain Dew
and Dr Pepper brands. Channel growth was principally in the gas
station/convenience store and full service vending channels, reflecting a shift
in package mix to 20/24 ounce non-returnable ("NR") packages. The 20 ounce NR
package growth was also aided by an increase in vending machine placements
during the quarter.
Internationally, General Bottlers' sales for the first quarter of 1998
were $5.1 million higher than the same period of 1997. The increase principally
reflected a full quarter of revenues from Russia and the Baltics, compared to
one month of sales in the first quarter of 1997. Poland reported double digit
sales growth, reflecting a realignment to more polyethylene ("PET") packaging
and favorable results from newly introduced juice products.
Gross profit improved 5.1 percent to $133.1 million, primarily due to the
increase in revenues. The gross profit margin decreased to 37.8 percent of sales
in the first quarter of 1998, compared with 38.0 percent of sales in the
comparable period of 1997. This decrease reflected lower margin international
sales, as the domestic gross profit margin remained essentially unchanged.
Selling, general and administrative (S,G&A) expenses increased $2.4
million, or 2.6 percent. S,G&A expenses represented 26.7 percent of sales in the
first quarter of 1998, down 0.7 percentage points from the same period last
year. Domestic selling expenses were higher, reflecting increased volume,
partially offset by lower general and administrative expenses, reflecting the
benefits of the restructurings which occurred in the latter half of 1997. S,G&A
expenses in the international operations were higher due to three months of
expenses for Russia and the Baltics, compared with one month in the comparable
period of 1997. Amortization expense was essentially unchanged from last year.
<PAGE>
Operating results for the Registrant's two geographic segments, as well as
corporate administrative expenses, are summarized below:
Quarter Ended
March 31, %
1998 1997 Change
-------- -------- ------
(in millions)
Domestic $ 44.8 $ 41.1 9.0
Foreign (5.9) (5.9) --
-------- --------
Subsidiary Operating Income 38.9 35.2 10.5
Corporate Administrative Expenses (3.6) (3.9) 7.7
-------- --------
Total Operating Income $ 35.3 $ 31.3 12.8
======== ========
In the first quarter of 1998, General Bottlers' domestic operating income
increased $3.7 million, or nine percent. The improvement in operating income was
due in part to higher volumes and improved pricing, along with lower S,G&A
expenses as a percentage of sales. Domestic operating margins increased 0.6
percentage points to 13.3 percent in the first quarter of 1998. The improved
domestic operating margins reflected a favorable shift in product mix to the
more profitable NR packages, as well as growth in the food service channel.
The international operating losses were unchanged from last year.
Operating losses in Poland were reduced by $1.8 million, which reflected a shift
to a more profitable packaging mix. This reduction was offset by increased
operating losses in Russia and the Baltics as the start-up of those operations
continued, with the current quarter including three months of operating losses,
compared with one month in the previous year's first quarter.
Net interest expense decreased $1.2 million to $9.3 million. The decrease
was due principally to the repayment of debt using funds received from Hussmann
and Midas prior to the spin-off transactions. Cash in excess of debt repayments
was invested short term, resulting in higher external interest income in the
current quarter compared with the first quarter of 1997. Decreases in net
external interest expense were offset by lower interest income on loans and
advances to Hussmann and Midas, which were repaid in January, 1998, prior to the
spin-off transactions.
Other expense, net, increased $0.3 million to $4.9 million in the first
quarter of 1998. The increase was not related to any single significant item.
<PAGE>
Current and Pending Accounting Changes
Beginning with the calendar year 1998, the Company has adopted Statement
of Financial Accounting Standards No. 130, "Comprehensive Income", establishing
standards for reporting and displaying comprehensive income and its components.
Comprehensive income includes all changes in equity during a period except those
resulting from owner sources, such as investments by owners and distributions to
owners. Included in this Form 10-Q are Condensed Consolidated Statements of
Comprehensive Income for the three months ended March 31, 1998 and 1997.
In February, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits" (Statement No. 132), effective
for fiscal years beginning after December 15, 1997. Statement No. 132 revises
employers' disclosure requirements for pension and postretirement benefit plans,
requiring, to the extent practicable, additional information on changes in the
benefit obligations and fair values of plan assets, which will facilitate
financial analysis. Statement No. 132 does not change the measurement or
recognition dates of the plans. Commencing with its annual financial statements
for the year ended December 31, 1998, the Company will adopt this statement as
required.
In March, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1), effective for
fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance on
the expense or capitalization of costs of computer software developed or
obtained for internal use. The Company began applying the guidelines of SOP 98-1
in the first quarter of 1998.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
12. Statement of Calculation of Ratio of Earnings to Fixed
Charges.
27. Financial Data Schedules for the three months ended March 31,
1998 and 1997.
(b) Reports on Form 8-K.
The Company filed a current report on January 6, 1998, during the
quarter ended March 31, 1998. The current report included pro
forma condensed consolidated income statements under Item 7 for
the nine months ended September 30, 1997, and the year ended
December 31, 1996, and a pro forma condensed consolidated balance
sheet as of September 30, 1997. The pro forma financial statements
presented the results of the Company's continuing operations
assuming the transactions contemplated by the Distribution,
including borrowings to be incurred by Hussmann and Midas, had
been completed on January 1, 1996, and contained all material
adjustments necessary to restate the Company's historical
information.
The Company also filed a current report on February 13, 1998,
which, under Item 2, discussed the distribution of all of the
outstanding shares of common stock of Hussmann and Midas that
occurred on January 30, 1998. Prior to the Distribution, the
Company entered into Distribution and Indemnity Agreements
("Distribution Agreements") and Tax Sharing Agreements separately
with both Hussmann International, Inc. and Hussmann Corporation
(the "Hussmann Companies") and Midas, Inc. and Midas International
Corporation (the "Midas Companies"). The agreements govern the
relationship between each company with respect to or as a result
of the Distribution. Included as exhibits to this current report
were the Distribution Agreements and Tax Sharing Agreements dated
as of December 31, 1997, entered into by and among the Company,
the Hussmann Companies and the Midas Companies.
<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 14, 1998 By: /s/ FRANK T. WESTOVER
------------ ---------------------
Frank T. Westover
Executive Vice President
(As Chief Financial 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,
---------------------- ------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income from Continuing Operations
before Taxes $ 21.1 $ 16.2 $ 69.9 $ 127.7 $ 118.2 $ 80.3 $ 81.1
Fixed Charges 13.9 19.2 75.6 74.4 76.7 72.2 96.4
-------- -------- -------- -------- -------- -------- --------
Earnings as Adjusted $ 35.0 $ 35.4 $ 145.5 $ 202.1 $ 194.9 $ 152.5 $ 177.5
======== ======== ======== ======== ======== ======== ========
Fixed Charges:
Interest Expense $ 12.6 $ 17.4 $ 69.0 $ 68.2 $ 70.3 $ 67.0 $ 93.0
Preferred Stock Dividend Requirements
Of Majority Owned Subsidiary -- 0.6 1.7 1.5 1.4 1.1 --
Portion of Rents Representative of
Interest Factor 1.3 1.2 4.9 4.7 5.0 4.1 3.4
-------- -------- -------- -------- -------- -------- --------
Fixed Charges $ 13.9 $ 19.2 $ 75.6 $ 74.4 $ 76.7 $ 72.2 $ 96.4
======== ======== ======== ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges* 2.5x 1.8x 1.9x 2.7x 2.5x 2.1x 1.8x
======== ======== ======== ======== ======== ======== ========
</TABLE>
* Intercompany interest income from Hussmann and Midas was $1.6 million and
$6.3 million for the quarters ended March 31, 1998 and 1997, respectively,
and was $23.1 million, $23.7 million, $21.8 million, $20.6 million and $16.2
million for the years ended December 31, 1997, 1996, 1995, 1994 and 1993,
respectively. Such amounts are included in income from continuing operations
before taxes. If this intercompany interest income had reduced interest
expense, thereby reducing fixed charges and earnings as adjusted, the ratio
of earnings to fixed charges for the quarters ended March 31, 1998 and 1997
and the years ended December 31, 1997, 1996, 1995, 1994 and 1993 would have
been 2.7x, 2.3x, 2.3x, 3.5x, 3.2x, 2.6x and 2.0x, respectively.
Whitman Corporation recorded special charges of $49.3 million during the
third and fourth quarters of 1997. Excluding these special charges, the ratio
of earnings to fixed charges for the year ended December 31, 1997, would have
been 2.6x. If the fixed charges for 1997 were adjusted for the intercompany
interest income noted above, the ratio of earnings to fixed charges would
have been 3.3x.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WHITMAN
CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 170,300 0
<SECURITIES> 0 0
<RECEIVABLES> 130,300 0
<ALLOWANCES> 1,800 0
<INVENTORY> 78,200 0
<CURRENT-ASSETS> 47,200 0
<PP&E> 889,300 0
<DEPRECIATION> 479,500 0
<TOTAL-ASSETS> 1,496,500 0
<CURRENT-LIABILITIES> 210,900 0
<BONDS> 604,800 0
0 0
0 0
<COMMON> 486,800 0
<OTHER-SE> (200,700) 0
<TOTAL-LIABILITY-AND-EQUITY> 1,496,500 0
<SALES> 352,000 333,500
<TOTAL-REVENUES> 352,000 333,500
<CGS> 218,900 206,800
<TOTAL-COSTS> 316,700<F1> 302,200<F6>
<OTHER-EXPENSES> 4,900 4,600
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,300<F2> 10,500<F7>
<INCOME-PRETAX> 21,100 16,200
<INCOME-TAX> 9,500 7,400
<INCOME-CONTINUING> 8,100<F3> 5,800<F8>
<DISCONTINUED> (500) 9,700
<EXTRAORDINARY> (18,300) 0
<CHANGES> 0 0
<NET-INCOME> (10,700) 15,500
<EPS-PRIMARY> (0.11)<F4> 0.15<F9>
<EPS-DILUTED> (0.10)<F5> 0.15<F10>
<FN>
<F1>
TOTAL COSTS INCLUDE COSTS OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION
EXPENSE OF $218,900, $93,900 AND $3,900, RESPECTIVELY.
<F2>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
AND MIDAS AND OTHER INTEREST INCOME OF $12,600, $1,600 AND $1,700, RESPECTIVELY.
INTEREST INCOME FROM HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND
ADVANCES, WHICH WERE REPAID PRIOR TO THE SPIN-OFFS. THE RELATED INTEREST EXPENSE
RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN THE LOSS FROM DISCONTINUED
OPERATIONS AFTER TAXES.
<F3>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $3,500.
<F4>
BASIC INCOME (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.08
DISCONTINUED OPERATIONS (0.01)
EXTRAORDINARY LOSS (0.18)
NET LOSS $ (0.11)
<F5>
DILUTED INCOME (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.08
DISCONTINUED OPERATIONS 0.00
EXTRAORDINARY LOSS (0.18)
NET LOSS $ (0.10)
<F6>
TOTAL COSTS INCLUDE COSTS OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION
EXPENSE OF $206,800, $91,500 AND $3,900, RESPECTIVELY.
<F7>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
AND MIDAS AND OTHER INTEREST INCOME OF $17,400, $6,300 AND $600, RESPECTIVELY.
INTEREST INCOME FROM HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND
ADVANCES. THE RELATED INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS
INCLUDED IN INCOME FROM DISCONTINUED OPERATIONS AFTER TAXES.
<F8>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $3,000.
<F9>
BASIC INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.06
DISCONTINUED OPERATIONS 0.09
NET INCOME $ 0.15
<F10>
DILUTED INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.06
DISCONTINUED OPERATIONS 0.09
NET INCOME $ 0.15
</FN>
</TABLE>
