PAGE 11
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
_ 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 1-12
THE QUAKER OATS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 36-1655315
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Quaker Tower
P.O. Box 049001 Chicago, Illinois 60604-
9001
(Address of principal executive office) (Zip Code)
(312) 222-7111
(Registrant's telephone number, including area code)
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 for such reports), and (2) has been
subject
to such filing requirements for the past 90 days.
YES XX NO _____
The number of shares of Common Stock, $5.00 par value, outstanding
as of the
close of business on March 31, 1994, was 66,957,218.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Income
and Reinvested Earnings for the Nine and Three Months
Ended March 31, 1994 and 3-4
Condensed Consolidated Balance Sheets as of
March 31, 1994 and June 30, 1993 5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
March 31, 1994 and 1993 6
Net Sales and Operating Income by Segment for the
Nine and Three Months Ended March 31, 1994 and 1993 7
Notes to Condensed Consolidated Financial Statements 8-9
Item 2 - Management's Discussion and Analysis
of Financial Condition and
Results
of Operations 10-12
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX
EXHIBIT 11
<TABLE>
THE QUAKER OATS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
<CAPTION>
Dollars in
Millions
(Except Per
Share Data)
Nine Months Ended
March 31
1994 1993
<S> <C>
<C>
Net sales $4,337.4 $4,185.0
Cost of goods sold 2,125.3 2,085.7
Gross profit 2,212.1 2,099.3
Selling, general and administrative 1,767.0 1,676.5
expenses
Interest expense - net 63.3 45.9
Other expense - net 37.1 58.3
Income before income taxes and cumulative
effect of 344.7 318.6
accounting changes
Provision for income taxes
136.7 125.2
Income before cumulative effect of 208.0 193.4
accounting changes
Cumulative effect of accounting changes -
net of tax -- (115.5)
Net income 208.0 77.9
Preferred dividends - net of tax 3.1 3.2
Net Income Available for Common $204.9 $74.7
Per Common Share:
Income before cumulative effect of $3.02 $2.63
accounting changes
Cumulative effect of accounting changes -- (1.59)
Net income $3.02 $1.04
Dividends declared $1.59 $1.44
Average Number of Common Shares
Outstanding (in thousands) 67,831 72,318
Reinvested Earnings:
Balance beginning of period $1,190.1 $1,162.3
Net income 208.0 77.9
Dividends (108.5) (105.7)
Common stock issued for stock purchase
and incentive (2.6) (1.7)
plans
Balance end of period $1,287.0 $1,132.8
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</TABLE>
<TABLE>
THE QUAKER OATS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
<CAPTION>
Dollars in
Millions
(Except Per
Share Data)
Three Months Ended
March 31
1994 1993
<S> <C> <C>
Net sales $1,449.2 $1,358.1
Cost of goods sold
703.7 667.7
Gross profit 745.5 690.4
Selling, general and administrative 590.4 540.0
expenses
Interest expense - net 26.6 12.7
Other expense - net
7.1 15.0
Income before income taxes 121.4 122.7
Provision for income taxes
47.6 45.7
Net income 73.8 77.0
Preferred dividends - net of tax
1.1 1.1
Net Income Available for Common $ $
72.7 75.9
Per Common Share:
Net Income $ $
1.08 1.05
Dividends Declared $ $
0.53 0.48
Average Number of Common Shares
Outstanding (in thousands) 66,924
72,092
Reinvested Earnings:
Balance beginning of period $1,250.3 $1,091.2
Net income 73.8 77.0
Dividends (36.0) (35.2)
Common stock issued for stock purchase
and incentive
plans (1.1) (0.2)
Balance end of period $1,287.0 $1,132.8
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</TABLE>
<TABLE>
THE QUAKER OATS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
Dollars in Millions March 31 June 30
1994 1993
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 99.6 $ 61.0
Trade accounts receivable - net of 453.8 478.9
allowances
Inventories:
Finished goods 254.2 241.5
Grains and raw materials 76.9 73.1
Packaging materials and supplies
34.5 39.4
Total inventories 365.6 354.0
Other current assets 168.6 173.7
Total Current Assets 1,087.6 1,067.6
Other Receivables and Investments 86.3 88.8
Property, plant and equipment 2,136.9 2,059.2
Less accumulated depreciation 908.6 831.0
Property - Net 1,228.3 1,228.2
Intangible Assets - Net of 500.0 431.3
Amortization
Total Assets $2,902.2 $2,815.9
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 235.2 $ 128.0
Current portion of long-term debt 46.0 48.9
Trade accounts payable 377.8 391.6
Other current liabilities 458.6 536.6
Total Current Liabilities 1,117.6 1,105.1
Long-term Debt 723.6 632.6
Other Liabilities 477.3 426.2
Deferred Income Taxes 96.0 89.5
Preferred Stock, no par value,
authorized
1,750,000 shares; issued 1,282,051
of
$5.46 cumulative convertible shares
(liquidating preference $78 per 100.0 100.0
share)
Deferred Compensation (80.8) (85.9)
Treasury Preferred Stock, at cost,
44,649 shares and
34,447 shares, respectively (3.6) (2.7)
Common Shareholders' Equity:
Common stock, $5 par value,
authorized
200,000,000 shares; issued 420.0 420.0
83,989,396 shares
Reinvested earnings 1,287.0 1,190.1
Cumulative translation adjustment (73.9) (65.4)
Deferred compensation (144.1) (154.0)
Treasury common stock, at cost,
17,032,178
shares and 14,533,157 shares, (1,016.9)
respectively (839.6)
Total Common Shareholders' 472.1 551.1
Equity
Total Liabilities and $2,902.2 $2,815.9
Shareholders' Equity
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</TABLE>
<TABLE>
THE QUAKER OATS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Dollars in
Millions
Nine Months Ended
March 31
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $208.0 $ 77.9
Adjustments to reconcile net income to
net
cash provided by operating activities:
Cumulative effect of accounting -- 115.5
changes
Depreciation and amortization 131.3 118.6
Deferred income taxes and other 7.6 (39.0)
items
Other charges and gains on -- 20.5
divestitures - net
Loss on disposition of property and 9.5 9.1
equipment
(Increase) Decrease in trade (32.9) 61.9
accounts receivable
(Increase) Decrease in inventories (30.1) 18.9
Decrease (Increase) in other current 0.6 (38.0)
assets
Increase (Decrease) in trade 15.5 (12.3)
accounts payable
(Decrease) in other current (36.7) (11.7)
liabilities
Change in deferred compensation 15.0 9.9
Other items 62.5 59.3
Net Cash Provided by Operating 350.3 390.6
Activities
Cash Flows from Investing Activities:
Additions to property, plant and (116.0) (128.0)
equipment
Change in other receivables and (9.0) (10.1)
investments
Purchase and sale of property and (92.1) 41.6
businesses - net
Net Cash Used in Investing (217.1) (96.5)
Activities
Cash Flows from Financing Activities:
Cash dividends (108.5) (105.7)
Change in short-term debt 107.2 (1.5)
Proceeds from long-term debt 187.0 --
Reduction of long-term debt (99.8) (59.5)
Issuance of common treasury stock 6.8 14.8
Repurchases of common stock (197.2) (118.1)
Repurchases of preferred stock
(0.9) (0.8)
Net Cash Used in Financing (270.8)
Activities (105.4)
Effect of Exchange Rate Changes on Cash
and Cash 13.6
Equivalents 10.8
Net Increase in Cash and Cash Equivalents 38.6 36.9
Cash and Cash Equivalents - Beginning of 61.0 95.2
Year
Cash and Cash Equivalents - End of Quarter $ 99.6 $ 132.1
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</TABLE>
<TABLE>
THE QUAKER OATS COMPANY AND
SUBSIDIARIES
NET SALES AND OPERATING INCOME BY
SEGMENT
(UNAUDITED)
<CAPTION>
Dollars in Mill
ions
Net Sales Operatin
g Income
Nine Nine
Months Months
Ended Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
U.S. and
Canadian
$3,096.2 $2,847.9 $ $ 2
Grocery 377.4 97.6
Products
Internati
onal
1,241.2 1,337.1 79.3 97.6
Grocery
Products
Total
Sales/
$4,337.4 $4,185.0 $ $ 3
Operating 456.7 95.2
Income
Less: 29.7 23.3
General
corporate
expenses
63.3 45.9
Interest
expense -
net
19.0 7.4
Foreign
exchange
loss -
net
Income
before
income
taxes and
$ $ 3
cumulativ 344.7 18.6
e effect
of
accountin
g changes
Three Three
Months Months
Ended Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
U.S. and
Canadian
$1,042.9 $ $ $ 1
Grocery 954.7 131.2 11.5
Products
Internat
ional
406.3 4
Grocery 03.4 33.7 38.1
Products
Total
Sales/
$1,449.2 $1,358.1 $ $ 1
Operatin 164.9 49.6
g Income
Less: 12.0 9.4
General
corporat
e
expenses
26.6 12.7
Interest
expense
- net
4.8
Foreign 4.9
exchange
loss -
net
Income $ $ 1
before 121.4 22.7
income
taxes
</TABLE>
THE QUAKER OATS COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH
31, 1994
Note 1 - Basis of Presentation
The condensed consolidated financial statements include The Quaker Oats
Company
and its subsidiaries (the "Company"). The condensed consolidated
statements
of income and reinvested earnings for the nine and three-month periods
ended
March 31, 1994 and 1993, the condensed consolidated balance sheet as of
March 31, 1994, and the condensed consolidated statements of cash flows
for the
nine-month periods ended March 31, 1994 and 1993, have been prepared
by the
Company without audit. In the opinion of management, these financial
statements include all adjustments necessary to present fairly the
financial
position, results of operations and cash flows as of March 31, 1994 and
for all
periods presented. All adjustments made have been of a normal
recurring
nature, except for as described below. Certain information and
footnote
disclosures normally included in financial statements prepared in
accordance
with generally accepted accounting principles have been condensed or
omitted.
The Company believes that the disclosures included are adequate and
provide a
fair presentation of interim period results. Interim financial
statements are
not necessarily indicative of the financial position or operating
results for
an entire year. It is suggested that these interim financial
statements be
read in conjunction with the audited financial statements and the notes
thereto
included in the Company's annual report to shareholders for the fiscal
year
ended June 30, 1993.
The condensed consolidated interim financial statements as of March 31,
1993,
and for the nine-month period then ended, have been restated for the
adoption,
retroactive to July 1, 1992, of Financial Accounting Standards Board
(FASB)
Statement #106, "Employers' Accounting for Postretirement Benefits
Other Than
Pensions" and Statement #109, "Accounting for Income Taxes." The
combined
cumulative effect of adoption was an after-tax charge of $115.5
million. The
incremental effect of adopting FASB Statement #106 on March 31, 1993
nine-month
operating results was a pretax charge of $11.1 million ($6.8 million
after-tax
or $.09 per share). Excluding the cumulative effect, the adoption of
FASB
Statement #109 had no material effect on results.
Certain previously reported amounts have been reclassified to conform
to the
current presentation.
Note 2 - Litigation
On December 18, 1990, Judge Prentice H. Marshall of the United States
District
Court for the Northern District of Illinois issued a memorandum
opinion
stating that the Court would enter judgment against the Company in
favor of
Sands, Taylor & Wood Co. The Court found that the use of the words
"thirst
aid" in advertising Gatorade thirst quencher infringed the Plaintiff's
rights
in the trademark THIRST-AID. On July 9, 1991, Judge Marshall entered
a
judgment of $42.6 million, composed of $31.4 million in principal, plus
prejudgment interest of $10.6 million and fees, expenses and costs of
$0.6
million. The order enjoined use of the phrase "THIRST-AID" in
connection
with the advertising or sale of Gatorade thirst quencher in the United
States.
The Company subsequently appealed the judgment. On September 2,
1992, the
Court of Appeals for the Seventh Circuit vacated the monetary award
component
of the District Court's judgment. The appellate court affirmed the
finding of
infringement, but found that the monetary award was an inequitable
"windfall"
to the Plaintiff. The case was remanded to the District Court for
further
proceedings. The Company filed a request for rehearing that was
denied. The
Company also filed a petition for Certiorari with the U.S. Supreme
Court that
was denied. On June 7, 1993, Judge Marshall issued a judgment on
remand of
$26.5 million, composed of $20.7 million in principal, prejudgment
interest of
$5.4 million and fees, expenses and costs of $0.4 million. The Company
has
appealed this judgment to the Court of Appeals for the Seventh Circuit.
Management, with advice from outside legal counsel, has determined that
the
amount of liability that might ultimately exist in this case will not
be
material.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1994
The Company is not a party to any pending legal proceedings that it
believes
will have a material adverse effect on its financial position or
results of
operations.
Note 3 - Other Expense
Included in other expense in fiscal 1993 was a $38.6 million charge for
the
consolidation of production facilities at a U.S. pet foods plant, a
$17.4
million gain on the sale of two businesses in Italy, a $10.4 million
gain on
the sale of a business in the United Kingdom and a $9.7 million charge
for cost reduction programs in Europe.
Note 4 - Acquisition
In August 1993, the Company purchased the Near East flavored rice
business.
Pro forma information was not included because the effect of the
acquisition
on current-year results was not material.
Note 5 - Long-term Debt and Financing Arrangements
During the first nine months of fiscal 1994, the Company issued $187.0
million
of medium-term notes. The medium-term notes were issued pursuant to an
August 1993 prospectus supplement filing with the Securities and
Exchange
Commission for the intended issuance of $200.0 million of medium-term
notes,
under a shelf registration covering $600.0 million of debt securities
filed
with the Commission in fiscal 1990. In addition, in November 1993, the
Company replaced its then-existing revolving credit facilities with
$350.0
million of new revolving credit financing.
Nine Months Ended March 31, 1994
Compared with Nine Months Ended March 31, 1993
Consolidated net sales for the first nine months of fiscal 1994 were
$4.34
billion, up 4 percent from the first nine months of fiscal 1993.
Volumes
increased 4 percent versus the prior year. The increase in net sales
resulted
from volume increases on existing products, as well as new product
introductions and product mix improvements, significantly offset by
negative
currency changes in translating European sales to U.S. dollars. Price
increases were not significant.
U.S. and Canadian Grocery Products sales increased 9 percent to $3.10
billion
and volumes were up 6 percent. The increase in sales was related
primarily
to Gatorade thirst quencher, ready-to-eat cereals and grain-based
snacks
partly offset by decreases in Food Service. International Grocery
Products
sales decreased 7 percent to $1.24 billion, while volumes were even
with the
prior year. The change in sales between years reflects the effect of
translating weaker European currencies to the U.S. dollar, as well as
decreases in pet foods volumes in Europe partially offset by increases
in
Gatorade thirst quencher volumes in Latin America. Excluding the
effect of
European currency changes, sales for the first nine months of fiscal
1994
would have been $126.2 million higher than the reported amount.
Gross profit margins increased to 51.0 percent from 50.2 percent in the
prior
year primarily due to product mix improvements and, to a lesser extent,
price
increases. Although commodity costs have increased, the increases have
been
mostly offset by cost containment initiatives. Selling, general and
administrative (SG&A) expenses rose 5 percent to $1.77 billion and
increased
slightly as a percentage of sales, mainly due to increases in
advertising and
merchandising (A&M) expenses. A&M expenses were 26.6 percent of sales,
slightly higher than in the prior year. Cost of goods sold and SG&A
expenses
for the first nine months of fiscal 1993 were restated by $6.0 million
and
$5.1 million, respectively, for the adoption, retroactive to July 1,
1992, of
FASB Statement #106.
Consolidated operating income was $456.7 million in the first nine
months of
fiscal 1994 compared to $395.2 million in the first nine months of
fiscal 1993.
U.S. and Canadian Grocery Products operating income was $377.4
million
compared to $297.6 million last year. Fiscal 1993 operating income
included
a $38.6 million charge for the consolidation of production facilities
at a
U.S. pet foods plant. Excluding the pet foods charge, U.S. and
Canadian
Grocery Products operating income increased $41.2 million, or 12
percent, due
primarily to volume increases in Gatorade thirst quencher and ready-to-
eat
cereals, partly offset by volume decreases in Food Service.
Gatorade thirst quencher continues to represent one of the Company's
key
profitable growth opportunities. The attractiveness of the category
has
drawn a number of competitors.
International Grocery Products operating income decreased to $79.3
million
from $97.6 million last year. Fiscal 1993 operating income included a
$17.4
million gain on the sale of two businesses in Italy, a $10.4 million
gain on
the sale of a business in the United Kingdom and a $9.7 million charge
for
cost reduction programs in Europe. Excluding these items, operating
income
decreased $0.2 million. The decrease was mainly a result of increases
in
operating income in Brazil due to the effects of inflation, offset by
lower
pet food volumes in Europe that reflect the continuing weak European
economy
and the retail trade's tight management of inventories. The Company
expects
the weak economy to continue in the near term.
The Company continues to focus on supply chain and other worldwide
efficiency
initiatives in order to lower costs, improve productivity and better
utilize
its assets and human resources. These initiatives may result in work
force
reductions, as well as plant consolidations and product line
discontinuations
. In pursuit of greater shareholder value, these continuous
improvement
initiatives will most likely lead to charges in the fourth quarter and
future periods.
Net interest expense of $63.3 million increased $17.4 million and
foreign
exchange losses of $19.0 million increased $11.6 million versus last
year.
The change resulted primarily from increased net financing costs in
Brazil,
where inflation and devaluation of the local currency continued to
accelerate.
Higher net financing costs for Brazil were partially offset by higher
operating income in that country. In addition, increases in net
financing
costs resulted from the issuance of $187.0 million of medium-term notes
and
increased commercial paper borrowings in the U.S., as well as lower
foreign
exchange hedge gains for Europe. Through various hedging strategies,
the
Company will continue to attempt to mitigate the effects of foreign
exchange
fluctuations on its financial results, except in areas like Brazil
where
hedging opportunities are limited and costly.
The effective tax rate for the first nine months of fiscal 1994 was
39.7
percent compared to 39.3 percent in the first nine months of fiscal
1993.
Excluding the tax effect of the pet foods charge and the gain on the
sale
of a United Kingdom business, the prior year's effective tax rate was
38.9 percent. The higher U.S. corporate statutory tax rate and a
retroactive
adjustment to January 1, 1993, required by the 1993 tax legislation,
caused
the increase in the fiscal 1994 effective rate. The Company has
evaluated
its deferred tax assets and believes future taxable income will be
sufficient
to realize these assets. For those deferred tax assets that are not
expected
to be realized under the `more likely than not' criteria of FASB
Statement #109, a valuation allowance has been provided.
Net income for the first nine months of fiscal 1994 was $208.0 million
versus $77.9 million last year, which included an after-tax charge of
$115.5 million for the cumulative effect of adopting both FASB
Statement #106
and Statement #109.
Three Months Ended March 31, 1994
Compared with Three Months Ended March 31, 1993
Consolidated net sales for the third quarter of fiscal 1994 were $1.45
billion, up 7 percent from the prior year. The increase in net sales
resulted from a 3 percent volume increase and product mix improvements.
Price increases were not significant.
U.S. and Canadian Grocery Products sales increased 9 percent to $1.04
billion
and volumes increased 6 percent, primarily due to increases in Gatorade
thirst quencher, ready-to-eat cereals, pet foods, Golden Grain rice and
pasta products and grain-based snacks partially reduced by decreases in
Food Service, Van Camp's products and hot cereals. International
Grocery
Products sales increased 1 percent to $406.3 million. Volumes
decreased 1
percent, as lower pet food and cereal volumes in Europe were only
partially
offset by increases in Gatorade thirst quencher in Latin America.
Gross profit margins for the quarter increased to 51.4 percent from
50.8
percent in the prior year primarily due to product mix improvements.
SG&A
expenses rose 9 percent to $590.4 million and were higher as a
percentage of
sales primarily due to higher A&M expenses. A&M expenses were 26.4
percent
of sales, slightly higher than in the prior year. Cost of goods sold
and
SG&A expenses for the third quarter of fiscal 1993 were restated by
$2.0
million and $1.7 million, respectively, for the adoption of FASB
Statement #106.
Consolidated operating income for the third quarter was $164.9 million
compared to $149.6 million in fiscal 1993. U.S. and Canadian Grocery
Products operating income was $131.2 million compared to $111.5 million
last
year, due primarily to improvements in ready-to-eat cereals and
Gatorade
thirst quencher, partly reduced by decreases in Food Service.
International Grocery Products operating income for the third quarter
decreased to $33.7 million from $38.1 million in the prior year.
Fiscal 1993
operating income included a $10.4 million gain on the sale of a
business in
the United Kingdom. Excluding the gain, operating income for the
quarter
increased by $6.0 million. The increase principally resulted from the
effects of inflation in Brazil. The Brazilian operation also incurred
more
interest expense, as a result of inflation-caused interest rate
increases.
The increase in net financing costs in Brazil was partially offset by
the
increase in operating income.
Net interest expense for the third quarter of $26.6 million increased
$13.9
million from the prior year. The increase was primarily due to the
increase
in Brazil, as well as the issuance of $187.0 million of medium-term
notes
during the first nine months of fiscal 1994 and increased commercial
paper
borrowings. Foreign exchange losses were $4.9 million compared to
losses of
$4.8 million last year.
The effective tax rate for the third quarter was 39.2 percent versus
37.2 percent last year. Excluding the tax effect of the gain on the
sale of
a United Kingdom business, the prior year's effective tax rate was 38.9
percent. The change in the effective rate was primarily due to the
increase
in the U.S. corporate statutory tax rate.
Liquidity and Capital Resources
The ability to generate funds internally remains one of the Company's
significant financial strengths. Net cash provided by operating
activities
of $350.3 million and $390.6 million for the nine months ended March
31, 1994
and 1993, respectively, was well in excess of the Company's dividends
and
capital expenditures. The decrease in net cash provided by operating
activities resulted mainly from changes in working capital items,
primarily
accounts receivable and inventories. The Company has now reached a
more
optimal level of accounts receivable and future decreases should not be
as
significant. Capital expenditures for the first nine months of fiscal
1994
and 1993 were $116.0 million and $128.0 million, respectively, with no
material individual commitments outstanding. The Company anticipates
that
cash flows from operating activities for the year ending June 30, 1994,
will
exceed working capital requirements, dividends and capital
expenditures.
In August 1993, the Company announced its intent to repurchase, from
time to
time, five million shares of its outstanding common stock through open
market
purchases and privately negotiated transactions. As of March 31,
1994, 2.8
million shares had been repurchased for $191.9 million.
Short-term and long-term debt (total debt) as of March 31, 1994,
increased
$195.3 million from June 30, 1993. The total debt-to-total
capitalization
ratio (total debt divided by total debt plus total equity including
preferred
stock, net of deferred compensation) was 67.3 percent and 59.0 percent
as
of March 31, 1994 and June 30, 1993, respectively. One of the
Company's
financial objectives is to generate economic value through the use of
leverage,
while maintaining a solid financial position through strong operating
cash flows. The increase in debt resulted primarily from the issuance
of
$187.0 million of medium-term notes and increased commercial paper
borrowings. The medium-term notes were issued pursuant to an August
1993
prospectus supplement filing with the Securities and Exchange
Commission for
the intended issuance of $200.0 million of medium-term notes, under a
shelf
registration covering $600.0 million of debt securities filed with the
Commission in fiscal 1990.
Commercial paper has been the Company's primary source of short-term
financing. In November 1993, the Company replaced its then-existing
revolving credit facilities with $350.0 million of new revolving credit
financing. The available levels of borrowings are adequate to meet the
Company's working capital needs.
Pending Accounting Changes
In November 1992, the FASB issued Statement #112, "Employers'
Accounting for
Postemployment Benefits." The Company has not yet adopted this
statement,
which must be implemented no later than fiscal 1995. The Company is
currently determining the impact this statement will have on its
financial
position.
6(a). See Exhibit 11.
Note 2 in Part I is incorporated by reference herein for Item I in Part
II.
All other items in Part II are either inapplicable to the Company
during the
quarter ended March 31, 1994, the answer is negative or a response has
been
previously reported and an additional report of the information need
not be
made, pursuant to the Instructions to Part II.
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.
The Quaker Oats Company
(Registrant)
Date May 3, 1994 Terry G. Westbrook
Terry G. Westbrook
Senior Vice President - Finance and
Principal Financial Officer
Date May 3, 1994 Thomas L. Gettings
Thomas L. Gettings
Vice President and
Corporate Controller
EXHIBIT INDEX
Exhibit Paper (P) or
Number Description Electronic (E)
(11) Statement Re Computation E
of Per Share Earnings
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EXHIBIT 11
THE QUAKER OATS COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
March 31
1994 1993
<S> <C> <C>
Calculation of Fully Diluted Earnings Per Share
Dollars in Millions (Except Per Share Data)
Income Before Cumulative Effect of Accounting $ $193.4
Changes 208.0
Less: Adjustments attributable to conversion (1.1) (1.4)
of ESOP Convertible
Preferred Stock
Income Before Cumulative Effect of Accounting 206.9 192.0
Changes Used for
Fully Diluted Calculation
Cumulative Effect of Accounting Changes - Net -- (115.5)
of Tax
Net Income Used for Fully Diluted Calculation $ $76.5
206.9
Shares in Thousands
Average Number of Common Shares Outstanding 67,831 72,318
Plus Dilutive Securities:
Stock Options 860 1,021
ESOP Convertible Preferred Stock 1,340 1,355
Average Shares Outstanding Used for Fully 70,031 74,694
Diluted
Calculation
Fully Diluted Earnings Per Share Before $2.95 $2.57
Cumulative Effect of
Accounting Changes
Fully Diluted Cumulative Effect of Accounting -- (1.55)
Changes
Fully Diluted Earnings Per Share $2.95 $
1.02
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