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 26 weeks ended June 28, 1997
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: (847)
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 August 4, 1997, 62,481,275 shares of the Common Stock,
$1.00 par value, of the Registrant were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
a) Financial Statements of Registrant
Page
Index Number
Condensed Consolidated Statement of Income
(Unaudited) for the 13 week periods ended
June 28, 1997 and June 29, 1996.................. 2
Condensed Consolidated Statement of Income
(Unaudited) for the 26 week periods ended
June 28, 1997 and June 29, 1996.................. 3
Condensed Consolidated Balance Sheet
as of June 28, 1997 (Unaudited) and
December 28, 1996................................ 4
Condensed Consolidated Statement of Cash Flows
(Unaudited) for the 26 week periods ended
June 28, 1997 and June 29, 1996.................. 6
Notes to Condensed Consolidated
Financial Statements (Unaudited)................. 7
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 28, 1996.
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.
- 1 -
<PAGE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
13 Weeks Ended
--------------------
June 28, June 29,
1997 1996
(In millions, except per share data) --------- ---------
Net sales................................... $ 594.4 $ 565.7
-------- --------
Costs and expenses:
Cost of products sold..................... 371.1 363.9
Delivery, sales, and
administrative expense.................. 175.7 163.8
Interest expense.......................... 3.1 4.6
Interest income........................... (2.0) (1.2)
Loss on disposition of business........... - 43.1
Other expense (income), net............... 0.1 (0.3)
-------- --------
Total costs and expenses............... 548.0 573.9
-------- --------
Income (loss) before income taxes........... 46.4 (8.2)
Provision for income taxes.................. 18.1 9.1
-------- --------
Income (loss) from continuing operations.... 28.3 (17.3)
Income from discontinued operations......... - 29.4
-------- --------
Net income.................................. 28.3 12.1
Retained earnings, beginning of period...... 700.4 751.7
Cash dividends declared..................... (5.6) (18.6)
Cost of treasury stock issued
in excess of option exercise prices....... (4.3) ( 7.0)
Distribution of Tupperware Corporation
to shareholders........................... - (86.1)
-------- --------
Retained earnings, end of period............ $ 718.8 $ 652.1
======== ========
Income (loss) per common and
common equivalent share:
Continuing operations................... $ 0.43 $ (0.27)
Discontinued operations................. - 0.46
-------- --------
Net income per common and
common equivalent share................... $ 0.43 $ 0.19
======== ========
Average number of
common and common equivalent
shares outstanding........................ 65.3 63.8
======== ========
Dividends declared per common share......... $ 0.09 $ 0.30
======== ========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 2 -
<PAGE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
26 Weeks Ended
--------------------
June 28, June 29,
1997 1996
(In millions, except per share data) --------- ---------
Net sales.................................. $1,140.0 $1,094.4
--------- ---------
Costs and expenses:
Cost of products sold.................... 713.4 704.6
Delivery, sales, and
administrative expense................. 344.4 327.4
Interest expense......................... 6.0 10.3
Interest income.......................... (5.2) (1.4)
Loss on disposition of business.......... - 43.1
Other expense (income), net.............. 0.6 (0.4)
--------- ---------
Total costs and expenses.............. 1,059.2 1,083.6
--------- ---------
Income before income taxes................. 80.8 10.8
Provision for income taxes................. 31.7 16.3
-------- --------
Income (loss) from continuing operations... 49.1 (5.5)
Income from discontinued operations........ - 62.2
--------- ---------
Net income................................. 49.1 56.7
Retained earnings, beginning of period..... 688.2 735.7
Cash dividends declared.................... (10.6) (35.2)
Cost of treasury stock issued
in excess of option exercise prices...... (7.9) (19.0)
Distribution of Tupperware Corporation
to shareholders.......................... - (86.1)
--------- ---------
Retained earnings, end of period........... $ 718.8 $ 652.1
========= =========
Income (loss) per common and
common equivalent share:
Continuing operations.................. $ 0.75 $ (0.09)
Discontinued operations................ - 0.98
--------- ---------
Net income per common and
common equivalent share.................. $ 0.75 $ 0.89
========= =========
Average number of
common and common equivalent
shares outstanding....................... 65.5 63.5
========= =========
Dividends declared per common share......... $ 0.17 $ 0.57
======== ========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 3 -
<PAGE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
June 28,
1997 December 28,
(Unaudited) 1996
(In millions) --------- ---------
Cash and cash equivalents................. $ 190.2 $ 130.2
Short-term investments.................... - 84.3
Accounts and notes receivable............. 376.3 402.8
Less allowances for
doubtful accounts..................... (18.4) (18.4)
--------- ---------
357.9 384.4
Inventories............................... 382.8 333.1
Recoverable income taxes.................. 1.4 10.8
Deferred income tax benefits.............. 66.6 67.4
Prepaid expenses.......................... 42.9 43.8
--------- ---------
Total current assets.................. 1,041.8 1,054.0
--------- ---------
Property, plant, and equipment............ 967.3 940.9
Less accumulated depreciation........... (543.2) (524.5)
--------- ---------
424.1 416.4
Intangibles, net of accumulated
amortization............................ 117.0 106.8
Other assets.............................. 107.5 83.6
--------- ---------
Total assets.......................... $1,690.4 $1,660.8
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 4 -
<PAGE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
June 28,
1997 December 28,
(Unaudited) 1996
(In millions) --------- ---------
Accounts payable.......................... $ 114.9 $ 105.7
Short-term borrowings and current
portion of long-term debt............... 13.3 3.5
Accrued liabilities....................... 354.7 350.4
--------- ---------
Total current liabilities............. 482.9 459.6
--------- ---------
Long-term debt............................ 112.5 115.9
Accrued postretirement benefit cost....... 123.2 120.8
Other liabilities......................... 77.4 88.6
Shareholders' equity:
Preferred stock, $1.00 par value,
authorized 50,000,000 shares;
issued -- none........................ - -
Series A Junior Participating
Preferred stock, $1.00 par value,
authorized 1,000,000 shares;
issued - none......................... - -
Common stock, $1.00 par value,
authorized 200,000,000 shares;
issued -- 69,003,840 shares........... 69.0 69.0
Capital surplus........................... 345.6 342.7
Retained earnings......................... 718.8 688.2
Treasury stock, 6,690,742 shares at
June 28, 1997 and 6,276,776 shares
at December 28, 1996, at cost........... (219.8) (211.4)
Unearned portion of restricted
stock issued for future service......... (1.8) (2.3)
Cumulative foreign currency adjustments... (17.4) (10.3)
--------- ---------
Total shareholders' equity............ 894.4 875.9
--------- ---------
Total liabilities and
shareholders' equity................ $1,690.4 $1,660.8
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 5 -
<PAGE>
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
26 Weeks Ended
--------------------
June 28, June 29,
1997 1996
(In millions) --------- ---------
Cash flows from operating activities:
Net income................................ $ 49.1 $ 56.7
Adjustments to reconcile net income to
net cash provided by operating
activities from continuing operations:
Income from discontinued operations... - (62.2)
Loss on disposition of business....... - 38.6
Depreciation and amortization......... 32.5 34.8
Changes in assets and liabilities:
Accounts and notes receivable......... 29.9 19.0
Inventory............................. (48.8) (13.2)
Accounts payable and
accrued liabilities................. 6.9 (19.5)
Current income taxes.................. 9.3 3.7
Deferred income taxes................. 0.4 (2.5)
Prepaid expenses...................... 0.9 (2.5)
Other................................. (7.0) (15.5)
-------- --------
Net cash provided by
operating activities from
continuing operations.............. 73.2 37.4
-------- --------
Cash flows from investing activities:
Capital expenditures...................... (38.4) (43.8)
Net sales of short-term
investments............................. 84.3 -
Business (acquisition) disposition........ (23.0) 35.8
Other..................................... 0.7 2.5
-------- --------
Net cash provided by (used in)
investing activities from
continuing operations.............. 23.6 (5.5)
-------- --------
Cash flows from financing activities:
Net decrease in, and repayment of,
short-term borrowings................... (9.2) (119.5)
Proceeds from long-term debt.............. 0.5 5.0
Repayment of long-term debt............... - (0.2)
Dividend paid by Tupperware............... - 284.9
Proceeds from exercise of stock options... 3.8 14.7
Purchase of treasury stock................ (19.9) (7.3)
Payment of dividends...................... (10.1) (33.2)
-------- --------
Net cash (used in) provided by
financing activities from
continuing operations.............. (34.9) 144.4
-------- --------
Effect of exchange rate changes on cash
and cash equivalents...................... (1.9) (0.6)
Net cash used in
discontinued operations.................... - (48.2)
-------- --------
Net increase in cash
and cash equivalents...................... $ 60.0 $ 127.5
======== ========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 6 -
<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 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.
Note 2: Inventories
Inventories, by component, are summarized as follows (in
millions):
June 28, December 28,
1997 1996
-------- --------
Finished goods.................. $ 205.7 $ 163.7
Work in process................. 23.3 26.2
Raw materials and supplies...... 153.8 143.2
-------- --------
Total inventories $ 382.8 $ 333.1
======== ========
Note 3: Pro Rata Distribution of Tupperware Stock
On November 1, 1995, the company's board of directors authorized
management to establish its Tupperware subsidiary as an
independent company through a stock distribution to Premark
shareholders. The distribution was effected on May 31, 1996.
Under the Distribution Agreement, on May 24, 1996, Premark
received a special dividend of $284.9 million. It is assumed
that if the distribution had occurred at the beginning of 1996,
the company would not have incurred any short-term borrowings
during the first half of 1996. Consequently, on a pro forma
basis, interest expense would have been $3.0 million and $6.9
million for the second quarter and first half of 1996,
respectively.
Note 4: Sale of Hartco
On June 28, 1996, the company completed the sale of the stock of
its Hartco Flooring subsidiary to Triangle Pacific Corporation
for $35.8 million in cash plus the assumption of debt. A pretax
loss of $43.1 million ($38.6 million after tax) is reflected in
last year's reported results of the Decorative Products Group.
Note 5: New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is required to be
adopted by the company on December 27, 1997. At that time, the
company will be required to change the method currently used to
compute earnings per share and to restate all prior periods.
Under the new requirements for calculating basic earnings per
share, the dilutive effect of stock options will be excluded.
The following table illustrates what basic and diluted earnings
per share for the second quarter and first half of 1997 and 1996
will be upon adoption of the new Standard.
Basic Diluted
Earnings Earnings
per Share per Share
--------- ---------
1997:
Second quarter ended June 28, 1997 $0.46 $0.43
Six months ended June 28, 1997 $0.79 $0.75
1996:
Second quarter ended June 29, 1996 -
Income from Continuing Operations ($0.28) ($0.27)
Net Income $0.20 $0.19
Six months ended June 29, 1996 -
Income from Continuing Operations ($0.09) ($0.09)
Net Income $0.92 $0.90
Note 6: Purchase of Eurocatering
In April 1997, through a series of transactions the company
acquired certain assets and liabilities of Eurocatering SpA for
approximately $20 million in cash and the assumption of $17
million of debt. Subsequently, the name of the company was
changed to Eurotec Srl (Eurotec). Eurotec is one of Europe's
largest manufacturers of warewash equipment. Its results are
included within the Food Equipment Group.
- 7 -
<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 13 weeks and 26 weeks ended June 28, 1997, compared with the
13 weeks and 26 weeks ended June 29, 1996, and changes in
financial condition during the 26 weeks ended June 28, 1997.
Overall
In late 1995, the company's board of directors authorized
management to proceed with a plan to establish Tupperware as an
independent company through a stock distribution to Premark's
shareholders. The distribution was effected on May 31, 1996.
Tupperware has been reported as a discontinued operation in the
1996 financial statements.
Net Sales and Income from Continuing Operations
Net sales for the second quarter of 1997 were $594.4 million, an
increase of 5 percent compared with net sales of $565.7 million
in 1996. In the first half of 1997, net sales rose to $1,140
million, which was an improvement of 4 percent from 1996's net
sales of $1,094.4 million. Improvements in the second quarter
were seen at all operating groups except Florida Tile. For the
first half of 1997, sales increased at all operating units.
Excluding sales of Hartco Flooring, which was sold in the second
quarter of 1996, and the effect of foreign exchange rates, sales
rose 10 percent for both the second quarter and first half of
1997.
Income from continuing operations improved significantly to $28.3
million, or 43 cents per share, in 1997 from a loss of $17.3
million, or 27 cents per share, in 1996. The increase reflects
the loss on the sale of the company's Hartco subsidiary last
year. Absent that loss, income from continuing operations rose
33 percent or 10 cents per share. Substantial improvement in
profitability at Wilsonart, Precor and Florida Tile, coupled with
continued strength at the Food Equipment Group, along with lower
net interest expense and corporate overhead, more than offset a
decline at West Bend. For the first half of 1997, income from
continuing operations of $49.1 million or 75 cents per share was
significantly above last year's loss of $5.5 million or 9 cents
per share due to the loss on the sale of Hartco. Excluding that
loss, income from continuing operations rose 48 percent or 23
cents per share. The higher income from continuing operations is
being driven by large improvements in profitability at Wilsonart,
Precor and Florida Tile, along with lower corporate and interest
expenses, which offset lower results at West Bend.
Costs and Expenses
Cost of products sold as a percentage of net sales was 62.4
percent for the second quarter of 1997 compared with 64.3 percent
for the second quarter of 1996. For the first half, the rates in
1997 and 1996 were 62.6 percent and 64.4 percent, respectively.
The decline for both periods was due to improved mix and higher
production volume at Precor, lower costs for Wilsonart's new
flooring product and improved manufacturing efficiencies at
Florida Tile. In addition, the absence of the provision taken in
1996 to close two operating plants at the U.S. operations of the
Food Equipment Group, along with lower sales discounts and higher
production levels in Europe, positively affected the ratio.
Delivery, sales and administrative expenses as a percentage of
sales were 29.6 percent and 30.2 percent for the second quarter
and first half of 1997, respectively, compared with the 1996
ratios of 29.0 percent and 29.9 percent, respectively. The
increase in the quarter is due to higher warehousing and
marketing costs at Florida Tile.
Tax Rate
The effective tax rate was 39.0 percent for the second quarter of
1997 compared with a tax provision on a pretax loss for the same
period in 1996, and 38.9 percent for the year ended December 28,
1996. For the first half of 1997, the effective tax rate was
39.2 percent versus 150.5 percent for the first half of 1996.
The higher rate in both the second quarter and first half of 1996
reflects the company's potential inability to realize the full
tax benefit associated with the loss on the sale of Hartco.
Excluding the Hartco loss, the quarter and six month tax rate for
1996 would have been 38.8 percent and 38.5 percent, respectively.
The higher six- month 1997 rate when compared with the same
period last year is a result of the impact of higher foreign
income taxes.
Net Interest Expense
Interest expense, net of interest income, was $1.1 million in the
second quarter of 1997 versus $3.4 million in the second quarter
of 1996. For the first half of 1997, net interest expense was
$.8 million versus $8.9 million in 1996. In 1996, net interest
expense reflected interest accrued and earned on all of Premark's
borrowings and invested cash, excluding amounts that were owed or
held by Tupperware, respectively. The decrease in interest
expense in both periods in 1997 was due to the special dividend
paid to Premark by Tupperware on May 24, 1996, as described in
Note 3 to the condensed consolidated financial statements, which
was used to substantially reduce Premark's outstanding debt, cash
received from the sale of Hartco, as well as less debt required
to finance working capital needs.
Segment Results
Food Equipment Group
Net sales for the second quarter of 1997 were $329.3 million, an
increase of 7 percent from $308.2 million in 1996. Excluding the
negative impact of a stronger U.S. dollar, sales for the group
rose 9 percent. For the first half, net sales improved 3 percent
from $601.3 million in 1996 to $619.1 million in 1997. Excluding
exchange rate impacts, sales for the first half of 1997 rose 5
percent. For both periods, sales growth was driven by
improvements in all sectors on a local currency basis, along with
the effect of the acquisition of Eurotec. International
operations accounted for 42 percent of segment sales in both the
second quarter and first half of 1997.
For the second quarter, segment profit of $20.6 million was 12
percent higher than 1996's $18.4 million. Improvements in the
U.S. and Europe, as well as the inclusion of Eurotec, more than
offset a decline in other international operations. For the
first half, segment profit rose slightly to $31.4 million from
$31.1 million in 1996. Improvements in Europe, along with the
inclusion of Eurotec, were offset by a substantial decline in
other international operations. International operations
accounted for 20 percent and 14 percent of segment profit for the
second quarter and first half, respectively.
U.S. sales rose 4 percent to $190.1 million for the second
quarter as a result of increased demand for weighing, wrapping
and cooking equipment, improvements in both the food retail and
foodservice markets, higher service revenues and nominal price
increases. Segment profit of $16.6 million rose 12 percent from
the second quarter of 1996 due to a $3.3 million provision to
close two operating plants last year. Absent that provision in
1996, profits declined as a result of the lingering effects of
manufacturing realignments as well as higher new product
development investment. For the first half, sales increased 2
percent to $361.9 million reflecting higher service revenues and
growth in the food retail and cooking equipment businesses.
Segment profit, however, declined 2 percent to $27.0 million as a
result of manufacturing inefficiencies, lower production volume,
and spending on future products and technologies.
European sales were $112.6 million and $207.7 million for the
second quarter and first half of 1997, up 11 percent and 3
percent, respectively, despite the unfavorable effect of foreign
exchange, as a result of the inclusion of Eurotec. Excluding
Eurotec and foreign exchange rate impacts, sales rose 4 percent
and 3 percent for the second quarter and first six months of
1997, respectively. Segment profit for the sector rose
significantly to $3.9 million in the second quarter of 1997. For
the first six months of 1997, segment profit of $3.9 million was a
substantial improvement over a small loss last year. The
improvement for both periods was due to higher local currency
sales, inclusion of Eurotec and favorable manufacturing
variances. In the second quarter of 1997, a $1.7 million
provision for manufacturing realignments was made. For the first
six months of 1997, a $4.1 million provision for organizational
changes and manufacturing realignments was taken, versus a $1.9
million expense in 1996 for reductions in force.
Sales of the other international operations grew by $2.7 million
or 11 percent and $4.2 million or 9 percent for the second
quarter and first half of 1997, respectively. For both periods,
growth in most markets, especially Hong Kong and Australia, more
than offset a slight decline in Canada. Segment profit for both
periods fell substantially from last year, caused by a $2.0
million provision for manufacturing restructuring. The first
half of 1997 was also adversely impacted by startup costs in new
markets and an inventory adjustment in Australia in the first
quarter.
Decorative Products
Net sales were $201.2 million for the second quarter of 1997, a
decline of nearly 2 percent compared with $204.4 million in the
same period in 1996. For the first half, sales grew less than 1
percent from $380.6 million to $383.1 million in 1997. Excluding
the 1996 impact of Hartco sales, sales rose 10 percent and 13
percent for the second quarter and first half, respectively. For
the second quarter, a segment profit of $25.2 million was
reported, versus a loss last year of $22.3 million. For the first
half of 1997, segment profit was $43.5 million versus a loss last
year of $10.0 million. The segment loss for both periods of 1996
was a result of the pretax loss on the sale of the company's
Hartco subsidiary of $43.1 million. Excluding the loss, segment
profit would have been $20.8 million and $33.2 million for the
second quarter and six months of 1996, respectively.
Wilsonart reported record sales and profit for both the second
quarter and first six months of 1997. Sales increased 14 percent
for the quarter and 15 percent for the first half, reflecting
higher volume, improved pricing and growth related to the
laminate flooring products. Segment profit rose 21 percent for
both periods on higher volume, improved pricing and, for the six
month period, lower manufacturing costs, which more than offset
higher marketing expenses associated with new product
introductions.
Florida Tile's sales declined 5 percent for the second quarter,
due to lower private label volume as well as competitive pricing
pressures. However, segment profit rose significantly as a
result of improvements in manufacturing efficiencies. For the
first six months of 1997, sales improved 3 percent in spite of
competitive pricing pressures, because of higher volume. Segment
profit increased substantially from a breakeven position last
year on the strength of the higher volume and improvement in
manufacturing efficiencies.
Consumer Products
Net sales were $63.9 million for the second quarter of 1997, an
increase of 20 percent compared with $53.1 million in 1996. For
the first half, sales rose almost 23 percent from $112.5 million
to $137.8 million in 1997. Segment profit for the second quarter
rose 24 percent from $3.6 million to $4.5 million. For the first
half, segment profit rose to $12.5 million from $7.7 million last
year.
For the quarter, West Bend sales rose 5 percent from 1996.
Housewares sales reached a new record on higher volume in bread
makers, drip coffeemakers and stand mixers, despite competitive
pricing pressures. Direct-to-the-home cookware sales fell
significantly due to declines in most categories. For the first
six months, sales rose 11 percent on a large increase at
Housewares and a slight improvement in the cookware sector.
Segment profit for both periods declined substantially from 1996
as the higher volume and improved operating expenses were more
than offset by lower pricing at Housewares and manufacturing
inefficiencies in the cookware sector.
Precor's sales grew to record levels for both the second quarter
and first half of 1997, increasing 69 percent and 50 percent,
respectively, with a major part of the increase being attributed
to volume improvement in the commercial sector. The elliptical
cross trainer and treadmills both showed strong growth. The
unit's segment profit improved significantly in both periods as a
result of the higher volume and improved mix.
Financial Condition
Under the Distribution Agreement, Premark received a special
dividend of $284.9 million on May 24, 1996, which was used to
substantially reduce the company's outstanding debt. On June 28,
1996, the company completed the sale of its Hartco subsidiary for
$35.8 million and assumption of debt.
Net cash provided by operating activities in the first half of
1997 was $73.2 million compared with $37.4 million in the first
half of 1996. Higher cash generation in 1997 primarily reflects
an increase in income from continuing operations, a further
decrease in accounts receivable balances as well as a decrease in
accounts payable and accrued liability balances in 1997 versus an
increase in 1996. Partially offsetting these items were a
further increase in inventories, compared with last year, driven
by Florida Tile and Wilsonart.
Net cash provided by investing activities in 1997 was $23.6
million versus cash used in investing activities of $5.5 million
in 1996. The improvement year to year was due to the sale of
short-term investments in 1997 of $84.3 million, offset in part
by the acquisition of Eurotec for $20.1 million. In 1996, the
company received $35.8 million on the sale of the company's
Hartco subsidiary. Capital expenditures decreased somewhat
between years, from $43.8 million in 1996 to $38.4 million in
1997.
Net cash used in financing activities was $34.9 for the first
half of 1997 versus cash provided of $144.4 million in 1996. The
variation between years is primarily due to a significant part of
the company's short term debt being repaid in 1996 using the cash
received from the special dividend from Tupperware.
The total debt-to-capital ratio at the end of the second quarter
of 1997 was 12.3 percent, compared with 13.8 percent at the end
of the second quarter of 1996, and 12.0 percent as of December
28, 1996. The lower ratio as of June 28, 1997, compared with
last year's second quarter was a result of the effect of a higher
equity base on the ratio.
Working capital as of June 28, 1997 decreased by $35.5 million
from December 28, 1996. The largest changes among the components
of working capital were a decrease in accounts and notes
receivable and an increase in accounts payable offset by higher
net inventories. The net decrease in cash and cash equivalents
and short-term investments from the end of the year reflects, in
part, the cash paid to acquire Eurotec.
As of June 28, 1997, unused lines of credit were approximately
$507.1 million, including $250 million under a revolving credit
agreement that expires in May, 2001. Future cash flows, lines of
credit, and other short-term financing are expected to be
adequate to fund operating and investing activities.
In August, 1996, the company announced it would repurchase 6
million of its shares, with volume and timing to depend on market
conditions. Purchases will be made in the open market or through
other transactions and will be financed through available cash,
cash flow from operations or issuance of additional debt. Under
this plan, through June 28, 1997, and August 4, 1997,
respectively, the company has repurchased 997,500 shares and
1,007,500 shares at an average cost of $23 per share for both
periods.
The company's previous stock repurchase plan, announced in
August, 1995, was terminated prior to June 29, 1996. Under that
plan, the company had repurchased 588,000 shares at an average
cost of $51 per share.
In early April, 1997, the company acquired certain assets and
liabilities of Eurotec for approximately $20 million in cash and
the assumption of $17 million in debt. As of June 28, 1997, the
majority of this debt has been repaid. Funds used to purchase
Eurotec came from available cash.
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1997 annual meeting of shareholders of the Registrant
occurred on May 7, 1997. The following matters were voted upon
at the meeting: the election as a director of the Registrant of
each of Harry W. Bowman, W. James Farrell, Richard S. Friedland,
David R. Parker and James M. Ringler, and the ratification of the
appointment of Ernst & Young LLP as independent auditors of the
Registrant.
The results of the voting were as follows:
Votes
Votes Against/ Broker
Matter Voted For Withheld* Abstained Non-Votes
Election of
Harry W. Bowman 50,991,478 6,707,815 N/A 0
Election of
W. James Farrell 51,022,994 6,676,299 N/A 0
Election of
Richard S. Friedland 50,992,958 6,706,335 N/A 0
Election of
David R. Parker 51,026,414 6,672,879 N/A 0
Election of
James M. Ringler 51,026,930 6,672,363 N/A 0
Approval of
Ernst & Young 57,370,647 102,569 266,077 0
*Numbers shown for Director elections are votes withheld. For
the other matter voted upon, numbers shown are votes against.
In addition to the directors elected at the meeting, the
directors of the Registrant whose terms of office continued
after the meeting are: Warren L. Batts, Ruth M. Davis, Lloyd C.
Elam, John B. McKinnon and Janice D. Stoney.
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.
(27) A Financial Data Schedule for the second quarter
of 1997 is filed as an exhibit to this Report.
(b) Reports on Form 8-K
During the quarter, the Registrant did not file any
Current Reports on Form 8-K.
<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
August 7, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(11) A statement of the computation
of per share earnings is filed
as an exhibit to this Report.
(27) A Financial Data Schedule for
the second quarter of 1997 is
filed as an exhibit to this
Report.
Exhibit 11
PREMARK INTERNATIONAL, INC.
Statement of Computation of Per Share Earnings
(Unaudited)
13 Weeks Ended
-------------------
June 28, June 29,
1997 1996
(Dollars in millions, shares in thousands) -------- --------
Earnings
Income (loss) from continuing operations $ 28.3 $ (17.3)
Income from discontinued operations - 29.4
-------- --------
Net income $ 28.3 $ 12.1
======== ========
PRIMARY METHOD
Shares
Cumulative average outstanding shares 62,309 61,757
Common equivalent shares 2,981 2,048
-------- --------
Weighted average number of common
shares and common equivalent
shares outstanding 65,290 63,805
======== ========
Primary earnings (loss) per share:
Continuing operations $ 0.43 $ (0.27)
Discontinued operations - 0.46
-------- --------
Net income per share $ 0.43 $ 0.19
======== ========
FULLY DILUTED METHOD
Shares
Cumulative average outstanding shares 62,309 61,757
Common equivalent shares 3,086 2,110
-------- --------
Weighted average number of common
shares and common equivalent
shares outstanding 65,396 63,867
======== ========
Fully diluted earnings (loss) per share:
Continuing operations $ 0.43 $ (0.27)
Discontinued operations - 0.46
-------- --------
Net income per share $ 0.43 $ 0.19
======== ========
<PAGE>
Exhibit 11
PREMARK INTERNATIONAL, INC.
Statement of Computation of Per Share Earnings
(Unaudited)
26 Weeks Ended
-------------------
June 28, June 29,
1997 1996
(Dollars in millions, shares in thousands) -------- --------
Earnings
Income (loss) from continuing operations $ 49.1 $ (5.5)
Income from discontinued operations - 62.2
-------- --------
Net income $ 49.1 $ 56.7
======== ========
PRIMARY METHOD
Shares
Cumulative average outstanding shares 62,531 61,544
Common equivalent shares 2,934 1,956
-------- --------
Weighted average number of common
shares and common equivalent
shares outstanding 65,465 63,500
======== ========
Primary earnings (loss) per share:
Continuing operations $ 0.75 $ (0.09)
Discontinued operations - 0.98
-------- --------
Net income per share $ 0.75 $ 0.89
======== ========
FULLY DILUTED METHOD
Shares
Cumulative average outstanding shares 62,531 61,544
Common equivalent shares 2,994 1,997
-------- --------
Weighted average number of common
shares and common equivalent
shares outstanding 65,525 63,541
======== ========
Fully diluted earnings (loss) per share:
Continuing operations $ 0.75 $ (0.09)
Discontinued operations - 0.98
-------- --------
Net income per share $ 0.75 $ 0.89
======== ========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMARK
INTERNATIONAL, INC.'S SECOND QUARTER 1997 FINANCIAL STATEMENTS AS FILED IN ITS
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 190,200
<SECURITIES> 0
<RECEIVABLES> 376,300
<ALLOWANCES> 18,400
<INVENTORY> 382,800
<CURRENT-ASSETS> 1,041,800
<PP&E> 967,300
<DEPRECIATION> 543,200
<TOTAL-ASSETS> 1,690,400
<CURRENT-LIABILITIES> 482,900
<BONDS> 112,500
0
0
<COMMON> 69,000
<OTHER-SE> 825,400
<TOTAL-LIABILITY-AND-EQUITY> 1,690,400
<SALES> 1,140,000
<TOTAL-REVENUES> 1,140,000
<CGS> 713,400
<TOTAL-COSTS> 713,400
<OTHER-EXPENSES> 600
<LOSS-PROVISION> 2,750
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> 80,800
<INCOME-TAX> 31,700
<INCOME-CONTINUING> 49,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,100
<EPS-PRIMARY> .75
<EPS-DILUTED> 0
</TABLE>
