UNITED STATES 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 14 weeks ended April 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-9256
__________________
PREMARK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3461320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1717 Deerfield Road, Deerfield, Illinois 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 405-6000
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 May 11, 1994, 31,756,307 shares of the Common Stock, $1.00 par
value, of the Registrant were outstanding.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
a) Financial Statements of Registrant
Page
Index Number
Condensed Consolidated Statement of Income
(Unaudited) for the 14 week period ended
April 2, 1994 and the 13 week period
ended March 27, 1993............................. 2
Condensed Consolidated Balance Sheet
as of April 2, 1994, (Unaudited) and
December 25, 1993................................ 3
Condensed Consolidated Statement of Cash Flows
(Unaudited) for the 14 weeks ended
April 2, 1994 and the 13 weeks ended
March 27, 1993................................... 5
Notes to Condensed Consolidated
Financial Statements (Unaudited)................. 6
The condensed consolidated financial statements of the Registrant
included herein have been prepared, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Although certain information normally included in financial statements
prepared in accordance with general accepted accounting principles has
been condensed or omitted, the Registrant believes that the
disclosures 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 the notes thereto included in the Annual Report on Form
10-K of the Registrant for its fiscal year ended December 25, 1993.
The condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring items,
which, in the opinion of management, are necessary to present a fair
statement of the results for the interim periods presented.
The results for interim periods are not necessarily indicative of
trends or of results to be expected for a full year.
<TABLE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
14 Weeks 13 Weeks
Ended Ended
April 2, March 27,
1994 1993
-------- --------
(In millions, except per share data)
<S> <C> <C>
Net sales................................... $ 801.6 $ 706.1
-------- --------
Costs and expenses:
Cost of products sold..................... 411.6 365.5
Delivery, sales and
administrative expense.................. 331.1 300.7
Interest expense.......................... 6.3 7.5
Interest income........................... (1.5) (1.5)
Other expense, net........................ 2.2 0.6
-------- --------
Total costs and expenses............... 749.7 672.8
-------- --------
Income before income taxes.................. 51.9 33.3
Provision for income taxes.................. 14.1 9.3
-------- --------
Net income.................................. 37.8 24.0
Retained earnings, beginning of period...... 418.7 286.8
Cash dividends declared..................... (8.9) (8.0)
Cost of treasury stock issued
in excess of option exercise prices....... (7.8) -
-------- --------
Retained earnings, end of period............ $ 439.8 $ 302.8
======== ========
Net income per common and
common equivalent share<F1>............... $ .56 $ 0.36
======== ========
Average number of
common shares outstanding<F1>............. 66.9 66.3
======== ========
Dividends declared per common share<F1>..... $ 0.14 $ 0.125
======== ========
<FN>
<F1> All share-related amounts have been restated for a 2-for-1 stock
split declared on May 4, 1994.
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 2 -
</PAGE)
<PAGE>
<TABLE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<CAPTION>
April 2,
1994 December 25,
(Unaudited) 1993
--------- ---------
(In millions)
<S> <C> <C>
Cash and cash equivalents................... $ 86.6 $ 140.0
Accounts and notes receivable............... 448.5 471.5
Less allowances for
doubtful accounts....................... (41.0) (37.1)
--------- ---------
407.5 434.4
Inventories................................. 472.7 441.2
Deferred income tax benefits................ 94.3 96.3
Prepaid expenses............................ 33.7 27.5
--------- ---------
Total current assets.................... 1,094.8 1,139.4
--------- ---------
Investments, long term receivables
and deferred charges...................... 160.3 152.8
Less allowances for doubtful accounts..... (26.0) (29.0)
--------- ---------
134.3 123.8
Property, plant and equipment............... 1,638.1 1,606.4
Less accumulated depreciation............. (954.8) (934.9)
--------- ---------
683.3 671.5
Intangibles, less accumulated
amortization.............................. 183.5 182.3
--------- ---------
Total assets............................ $2,095.9 $2,117.0
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 3 -
</PAGE)
<PAGE>
<TABLE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
April 2,
1994 December 25,
(Unaudited) 1993
--------- ---------
(In millions)
<S> <C> <C>
Accounts payable............................ $ 153.5 $ 194.4
Short-term borrowings and current
portion of long-term debt................. 176.0 143.4
Accrued liabilities......................... 545.0 549.8
--------- ---------
Total current liabilities............... 874.5 887.6
--------- ---------
Long-term debt.............................. 167.5 168.0
Accrued postretirement benefit cost......... 146.8 144.5
Deferred income taxes....................... 10.1 9.0
Other liabilities........................... 92.4 96.0
Shareholders' equity:
Preferred stock, $1.00 par value,
authorized 50,000,000 shares;
issued -- none.......................... - -
Common stock, $1.00 par value,
authorized 200,000,000 shares;
issued -- 69,003,840 shares<F1>
at April 2, 1994 and 34,501,920
at December 25, 1993.................... 69.0 34.5
Capital surplus............................. 547.8 582.3
Retained earnings........................... 439.8 418.7
Treasury stock, 5,491,526 shares<F1> at
April 2, 1994 and 2,595,387 shares
at December 25, 1993, at cost............. (123.5) (93.0)
Unearned portion of restricted
stock issued for future service........... (0.8) (1.0)
Cumulative foreign currency adjustments..... (127.7) (129.6)
--------- ---------
Total shareholders' equity.............. 804.6 811.9
--------- ---------
Total liabilities and
shareholders' equity.................. $2,095.9 $2,117.0
========= =========
<FN>
<F1> Reflects a 2-for-1 stock split declared on May 4, 1994.
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 4 -
</PAGE>
<PAGE>
<TABLE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
14 Weeks 13 Weeks
Ended Ended
April 2, March 27,
1994 1993
-------- --------
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Net income................................ $ 37.8 $ 24.0
Adjustment to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization......... 29.5 27.4
Changes in assets and liabilities:
Decrease in accounts
and notes receivable................ 24.6 25.4
Increase in inventory................. (29.8) (16.4)
Decrease in accounts payable
and accrued liabilities............. (48.6) (21.9)
Decrease in income taxes payable...... (5.4) (5.4)
Increase in deferred income taxes..... (2.1) (1.3)
Other, net................................ (8.2) (4.1)
-------- --------
Net cash (used in) provided by
operating activities............... (2.2) 27.7
-------- --------
Cash flows from investing activities:
Capital expenditures...................... (38.6) (27.2)
Other..................................... (1.2) 0.4
-------- --------
Net cash used in
investing activities............... (39.8) (26.8)
-------- --------
Cash flows from financing activities:
Net increase in short-term debt........... 182.1 14.5
Repayment of long-term debt............... (150.5) (0.9)
Proceeds from exercise of stock options... 5.4 1.0
Purchase of treasury stock................ (38.3) -
Payment of dividends...................... (9.0) (8.0)
-------- --------
Net cash (used in) provided by
financing activities............... (10.3) 6.6
-------- --------
Effect of exchange rate changes on cash
and cash equivalents...................... (1.1) (2.8)
-------- --------
Net (decrease) increase in
cash and cash equivalents................. $ (53.4) $ 4.7
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 5 -
</PAGE>
<PAGE>
PREMARK INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q
and therefore do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations,
and changes in financial position in conformity with generally
accepted accounting principles. In the opinion of management, the
unaudited condensed consolidated financial statements include all
adjustments, consisting only of normal recurring items, necessary for
a fair presentation of the financial position and results of
operations. The results of operations of any interim period are not
necessarily indicative of the results that may be expected for a full
fiscal year.
The company's fiscal year ends on the last Saturday of December.
Fiscal 1994 will consist of 53 weeks compared to 52 weeks in 1993. As
a result, the first quarter includes 14 weeks in 1994 compared with 13
weeks in 1993.
Note 2: Inventories
Inventories, by component, are summarized as follows (in
millions):
<TABLE>
<CAPTION>
April 2,
1994 December 25,
(Unaudited) 1993
----------- -----------
<S> <C> <C>
Finished goods.................. $ 219.6 $ 196.8
Work in process................. 76.2 65.1
Raw materials and supplies...... 176.9 179.3
-------- --------
Total inventories $ 472.7 $ 441.2
======== ========
</TABLE>
Note 3: Subsequent Event
On May 4, 1994, the company's board of directors declared a 2-for-1
stock split to be effected in the form of a 100 percent stock
dividend. The additional shares will be issued on July 5, 1994 to
shareholders of record on June 16, 1994. All previously reported per
share amounts have been restated to reflect the stock split.
- 6 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is a discussion of the results of operations for the 14
weeks ended April 2, 1994, compared with the 13 weeks ended March 27,
1993, and changes in financial condition during the 14 weeks ended
April 2, 1994. The current year's quarter includes 14 weeks because
the company's fiscal year ends on the last Saturday of each calendar
year and will include 53 weeks in 1994.
Net Sales
Net sales for the first quarter of 1994 were $801.6 million, an
increase of 13.5 percent compared with net sales of $706.1 million in
1993. All units reported double digit percentage gains over last
year, in part attributable to the extra week in 1994.
Costs and Expenses
Cost of products sold as a percentage of net sales was 51.3 percent
for the first quarter of 1994 compared with 51.8 percent in 1993. The
slight improvement reflects lower costs at Tupperware's international
operations.
Delivery, sales and administrative expenses as a percentage of net
sales were 41.3 percent in 1994, compared with 42.6 percent in the
first quarter of 1993. The lower ratio in the 1994 quarter resulted
from lower marketing expenses at the Food Equipment Group.
Additionally, at Tupperware, lower selling expenses internationally
and lower operating expenses worldwide were only partially offset by
higher distribution costs in the United States.
Provision for Income Taxes
The effective tax rate was 27.2 percent for the first quarter of 1994,
which is comparable with 28.0 percent for the first quarter of 1993,
and 24.9 percent for the year ended December 25, 1993. The increase
from 1993's full year rate primarily reflects the lower amount of
available foreign tax credits. The company's effective tax rates have
been below the statutory rates due to the strength of U.S. operating
results, which has allowed the recognition of previously reserved
assets for temporary differences, and the benefit of foreign tax
credits.
Net Income
Net income increased 57.6 percent to $37.8 million, or 56 cents per
share, in 1994 from $24.0 million, or 36 cents per share, in 1993,
after reflecting the 2-for-1 stock split declared on May 4, 1994 (see
Note 3 to the financial statements). The improvement in 1994 reflects
substantial increases in profitability at all units except Florida
Tile. Tupperware accounted for almost half of the improvement with
all major areas contributing, led by Asia Pacific. The Food Equipment
Group also achieved substantially better results led by the
performance of its domestic operations. Ralph Wilson Plastics
reported record profit for the quarter, in spite of a higher provision
for adhesive claims. West Bend and Precor also reported record
results.
Segment results
Tupperware. Net sales for the first quarter of 1994 were $311.9
million, an increase of 13 percent from $275.2 million in 1993. The
increase was driven by higher volume in all areas except Canada.
Segment profit of $34.2 million rose 31.3 percent from $26.0 million
last year. The profit improvement was due to significantly better
results in Asia Pacific, continued improvement in Europe and Latin
America, as well as in the United States. Tupperware's
international operations accounted for 85 percent of the segment's
sales and all of its segment profit.
Tupperware's European sales increased 4 percent to $154.1 million, and
profits rose 6 percent. The sales improvement was led by Germany,
the United Kingdom and Austria due to favorable volume resulting from
continued growth of the sales force as well as higher selling prices,
offset in part by unfavorable foreign exchange rates. The profit
growth resulted from the higher sales along with lower administrative
costs, partially offset by higher volume-related promotional expenses.
Asia Pacific sales increased by 35 percent to $73.8 million, and
segment profit grew substantially from 1993. The favorable sales
comparison was driven by higher volume in Japan, Korea and some of the
smaller markets which offset weaknesses in Australia, Thailand and the
Philippines. The growth in sales, plus lower manufacturing and
administrative expenses contributed to the profit improvement. In the
U.S., sales for the quarter rose to $45.4 million from $42.0 million
in 1993. The U.S. segment loss was $4.9 million, a $1.1 million
improvement over 1993. The favorable comparison was a result of
the higher volume being somewhat offset by higher distribution
costs and an unfavorable product mix. Latin America sales rose 37
percent to $32.8 million, and segment profit grew significantly,
primarily due to continued strength in Mexico. Canadian sales were
$5.5 million, down 10 percent, due to a decrease in the productivity
of the dealer force. Segment profit declined significantly due to the
lower sales and higher promotional spending and operating costs.
Food Equipment Group. Net sales for the first quarter of 1994 were
$256.2 million, an increase of 10 percent compared with $233.6 million
in 1993. Segment profit was $11.0 million, significantly better than
$6.6 million in 1993. International operations accounted for 38
percent of segment sales and 27 percent of segment profit for the
quarter.
U.S. sales rose 16 percent to $161.4 million due to increases in
all markets and across all product lines. Segment profit was
almost double last year's due to the higher volume and nominal price
increases. European sales of $84.4 million were essentially even
with last year's sales of $83.3 million as improvement in the United
Kingdom was mostly offset by continued weakness in Germany and France
and unfavorable foreign exchange rates. Profits, however, rose 35
percent as the small increase in sales plus savings due to a reduction
in the work force more than offset the impact of product discounting.
Canadian sales declined slightly, due to unfavorable foreign exchange,
but segment profit dropped significantly due to lower production
levels.
Consumer and Decorative Products. Net sales were $233.5 million for
the first quarter of 1994, an increase of 18 percent compared with
$197.3 million in 1993. Segment profit was $17.6 million, a 50
percent increase from $11.7 million in 1993.
The sales improvement was due to volume increases at all units, as
well as favorable pricing at Ralph Wilson Plastics and Tibbals.
Higher segment profit was driven by improvements at all units except
Florida Tile. Ralph Wilson Plastics' segment profit was a record,
increasing significantly on improved volume and pricing as well as
lower manufacturing costs, all of which were only partially offset by
higher adhesive claims costs and other operating expenses. The
provision for adhesive claims was $6.0 million in the 1994 quarter
compared with $1.4 million in the first quarter of 1993. The company
continues to evaluate adhesive claims, and has recorded reserves
associated with the issue. However, the company has not been able to
predict the aggregate cost associated with the claims, and the
reserves are subject to revision based on an ongoing review of new
claims data. Charges could continue during the remainder of 1994 and
beyond. At Tibbals, improved operating efficiencies as well as the
increased sales drove the profit improvement. Florida Tile, despite
higher volume, saw profits decline substantially due to higher
manufacturing costs as well as increased sales, marketing and
administrative expenses.
West Bend achieved record segment profit from higher volume, including
especially strong sales of its bread maker. The sole domestic
supplier of one of the primary raw materials used by West Bend to
produce its premiere cookware lines is involved in a labor dispute.
To date, this situation has not disrupted West Bend's production or
ability to fill customer orders, however it could do so in the future
if the dispute remains unresolved. West Bend is considering other
sources of supply and other alternatives to meet its needs. The
company does not expect this matter to materially affect its results
of operations, financial condition or cash flows. Precor also had
record-setting profits, reflecting strong treadmill demand.
Financial Condition
Net cash used in operating activities was $2.2 million in the first
quarter of 1994 compared with $27.7 million of net cash provided by
operating activities in the first quarter of 1993. The decrease was
due to an increase in the level of net inventories and the timing of
accounts payable disbursements. The increased levels of inventories
are to support the higher sales levels. Also, at Tupperware
inventories increased due to an expanded product line with more new
colors, increased levels of purchased product, mixed results
associated with some of the holiday promotions and more product to
improve service levels.
Net cash used in investing activities, mainly for capital
expenditures, was $39.8 million and $26.8 million in the first quarter
of 1994 and 1993, respectively. Net cash used in financing activities
was $10.3 million in the first quarter of 1994 compared with net cash
provided of $6.6 million in 1993's first quarter. The variation in
net cash flows associated with financing activities reflects outflows
for repurchases of the company's common stock under its repurchase
plan. Partially offsetting this outflow was an increase in debt
levels to finance the higher level of working capital. On February 1,
1994, the company called its $150 million 8 3/8% notes, which had a
stated maturity date in 1997. The redemption was funded through
available cash and the issuance of commercial paper at more favorable
rates.
The total debt-to-capital ratio as of the end of the first quarter of
1994 was 29.9 percent, slightly lower than the 30.3 percent at the end
of the first quarter of 1993, but higher than the 27.7 percent ratio
as of December 25, 1993, as a result of the higher level of
borrowings. Working capital as of April 2, 1994 decreased by $31.5
million from December 25, 1993 as decreases in cash and receivables
and an increase in short-term borrowings was only partially offset by
an increase in inventories and a decrease in accounts payable.
As of April 2, 1994, unused lines of credit were approximately $298
million, including $99 million under a $250 million unsecured
revolving credit facility which expires in May, 1995. Future cash
flows, lines of credit and other short-term financing are expected to
be adequate to fund operating and investment requirements.
On May 4, 1994, the company's board of directors declared a 2-for-1
stock split to be effected in the form of a 100 percent stock
dividend. Additionally, the company's quarterly cash dividend rate
was increased by 43 percent to 40 cents per share on a pre-split
basis. On an annualized after-split basis, the new cash dividend rate
is 80 cents per share. The stock split will be effected and the new
dividend will be paid on July 5, 1994, to shareholders of record on
June 16, 1994.
From the beginning of the current fiscal year through April 2 and
May 4, 1994, respectively, on a post-split basis, the company
repurchased 973,600 and 1,040,600 shares, at an average cost of $41
and $40 per share, under its repurchase plan announced in May 1993.
Under the plan, the company is purchasing up to six million of its
shares of common stock, also on a post-split basis, over five years,
with volume and timing dependent on market conditions, in order to
minimize the fluctuation in the number of shares outstanding resulting
from the exercise of employee stock options.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
(11) A statement of computation of per share earnings is
filed as an exhibit to this Report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant
during the quarter for which this Report is filed.
<PAGE>
SIGNATURES
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.
PREMARK INTERNATIONAL, INC.
By: John M. Costigan
Senior Vice President,
General Counsel and Secretary
By: Lawrence B. Skatoff
Senior Vice President and
Chief Financial Officer
Deerfield, Illinois
May 12, 1994
Exhibit 11
PREMARK INTERNATIONAL, INC.
Statement of Computation of Per Share Earnings
(Unaudited)
<TABLE>
<CAPTION>
14 Weeks 13 Weeks
Ended Ended
April 2, March 27,
1994 1993
(Dollars in millions, shares in thousands) -------- --------
<S> <C> <C>
Earnings $ 37.8 $ 24.0
======== ========
PRIMARY METHOD
Shares<F1>
Cumulative average outstanding shares 63,624 63,648
Common equivalent shares 3,245 2,686
-------- --------
Weighted average number of common
shares and common equivalent
shares outstanding 66,869 66,334
======== ========
Primary earnings per share<F1> $ .56 $ .36
======== ========
FULLY DILUTED METHOD
Shares<F1>
Cumulative average outstanding shares 63,624 63,648
Common equivalent shares 3,269 3,136
-------- --------
Weighted average number of common
shares and common equivalent
shares outstanding 66,893 66,784
======== ========
Fully diluted earnings per share<F1> $ .56 $ .36
======== ========
<FN>
<F1> All share-related amounts have been restated for a 2-for-1
stock split declared on May 4, 1994.
</TABLE>
