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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
4 Quarterly Report Pursuant to Section 13
or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
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
| |
|
| |
|
New Jersey
(State or other jurisdiction of incorporation or organization) |
36-1655315 (I.R.S. Employer Identification No.) |
|
Quaker Tower P.O. Box 049001 Chicago, Illinois (Address of principal executive office) |
60604-9001 (Zip Code) |
|
(312) 222-7111
|
|
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 4 NO
The number of shares of Common Stock, $5.00 par value, outstanding as
of the close of business on September 30, 1999 was 132,876,176.
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 |
|
Condensed Consolidated Balance Sheets |
5 |
Condensed Consolidated Statements of Cash Flows |
6 |
Net Sales and Operating Income by Segment for the |
7-8 |
Notes to the Condensed Consolidated Financial Statements |
9-15 |
Item 2 - Management's Discussion and Analysis |
|
|
PART II - OTHER INFORMATION |
|
26 |
|
26 |
|
|
27 |
|
|
28 |
Page 2
THE QUAKER OATS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS (UNAUDITED)
Nine Months Ended
(Dollars in Millions - Except Per Share Data)
September 30,
|
Net sales |
$ |
3,776.1 |
$ |
3,879.2 |
|||
|
Cost of goods sold |
1,683.3 |
1,892.1 |
|||||
|
Gross profit |
2,092.8 |
1,987.1 |
|||||
|
Selling, general and administrative expenses |
1,489.1 |
1,473.2 |
|||||
|
Gains on divestitures and restructuring and asset |
(1.8) |
|
|||||
|
Interest expense |
47.7 |
52.7 |
|||||
|
Interest income |
(8.0) |
(6.5) |
|||||
|
Foreign exchange loss - net |
19.0 |
11.2 |
|||||
|
Income before income taxes |
546.8 |
326.9 |
|||||
|
Provision for income taxes |
150.8 |
115.6 |
|||||
|
Net Income |
396.0 |
211.3 |
|||||
|
Preferred dividends - net of tax |
3.3 |
2.5 |
|||||
|
Net Income Available for Common |
$ |
392.7 |
$ |
208.8 |
|||
|
Per Common Share: |
|||||||
|
Net income |
$ |
2.92 |
$ |
1.52 |
|||
|
Net income - assuming dilution |
$ |
2.81 |
$ |
1.47 |
|||
|
Dividends declared |
$ |
0.855 |
$ |
0.855 |
|||
|
Average Number of Common Shares Outstanding |
|||||||
|
(in thousands) |
134,466 |
137,552 |
|||||
|
Reinvested Earnings: |
|||||||
|
Balance - beginning of period |
$ |
555.8 |
$ |
431.0 |
|||
|
Net income |
396.0 |
211.3 |
|||||
|
Dividends |
(117.3) |
(119.2) |
|||||
|
Balance - end of period |
$ |
834.5 |
$ |
523.1 |
|||
See accompanying notes to the condensed consolidated financial statements.
Page 3
Three Months Ended
(Dollars in Millions - Except Per Share Data)
September 30,
|
Net sales |
$ |
1,384.0 |
$ |
1,405.2 |
|||
|
Cost of goods sold |
600.9 |
663.4 |
|||||
|
Gross profit |
783.1 |
741.8 |
|||||
|
Selling, general and administrative expenses |
546.5 |
521.8 |
|||||
|
Restructuring and asset impairment charges and gains |
6.6 |
|
|||||
|
Interest expense |
15.2 |
16.9 |
|||||
|
Interest income |
(2.7) |
(2.5) |
|||||
|
Foreign exchange loss - net |
3.4 |
2.3 |
|||||
|
Income before income taxes |
214.1 |
161.4 |
|||||
|
Provision for income taxes |
76.8 |
53.6 |
|||||
|
Net Income |
137.3 |
107.8 |
|||||
Preferred dividends - net of tax |
1.1 |
0.8 |
|||||
|
Net Income Available for Common |
$ |
136.2 |
$ |
107.0 |
|||
|
Per Common Share: |
|||||||
|
Net income |
$ |
1.02 |
$ |
0.78 |
|||
|
Net income - assuming dilution |
$ |
0.98 |
$ |
0.75 |
|||
|
Dividends declared |
$ |
0.285 |
$ |
0.285 |
|||
|
Average Number of Common Shares Outstanding |
|||||||
|
(in thousands) |
133,433 |
136,394 |
|||||
|
Reinvested Earnings: |
|||||||
|
Balance - beginning of period |
$ |
735.8 |
$ |
454.2 |
|||
|
Net income |
137.3 |
107.8 |
|||||
|
Dividends |
(38.6) |
(38.9) |
|||||
|
Balance - end of period |
$ |
834.5 |
$ |
523.1 |
|||
See accompanying notes to the condensed consolidated financial statements.
Page 4
THE QUAKER OATS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (Dollars in Millions) |
September 30, 1999 |
December 31, 1998 |
||||
| Assets | ||||||
| Current Assets: Cash and cash equivalents Marketable securities Trade accounts receivable - net of allowances Inventories: Finished goods Grains and raw materials Packaging materials and supplies Total inventories Other current assets Total Current Assets |
$ |
214.9 216.4 345.2 175.7 42.7 24.2 242.6 202.9 1,222.0 |
$ |
326.6 27.5 283.4 189.1 48.4 23.9 261.4 216.1 1,115.0 |
||
| Property, plant and equipment Less: accumulated depreciation Property - net |
1,823.1 755.2 1,067.9 |
1,818.8 748.6 1,070.2 |
||||
| Intangible assets - net of amortization | 239.0 | 245.7 | ||||
| Other assets | 67.1 | 79.4 | ||||
| Total Assets | $ | 2,596.0 | $ | 2,510.3 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current Liabilities: Short-term debt Current portion of long-term debt Trade accounts payable Other current liabilities Total Current Liabilities |
$ |
26.7 101.2 208.6 734.9 1,071.4 |
$ |
41.3 95.2 168.4 704.2 1,009.1 |
||
| Long-term debt | 715.1 | 795.1 | ||||
| Other liabilities | 539.5 | 533.4 | ||||
| Preferred Stock, Series B, no par value, authorized 1,750,000 shares; issued 1,282,051 of $5.46 cumulative convertible shares (liquidating preference of $78 per share) |
100.0 |
100.0 |
||||
| Deferred compensation | (38.5) | (48.4) | ||||
| Treasury Preferred Stock, at cost, 350,369 shares and 302,969 shares, respectively |
(36.7) |
(29.9) |
||||
| Common Shareholders' Equity: | ||||||
| Common stock, $5 par value,
authorized 400 million shares; issued 167,978,792 shares Additional paid-in capital Reinvested earnings Cumulative translation adjustment Unrealized gain on marketable securities Deferred compensation Treasury common stock, at cost, 35,102,616 shares and 32,656,284 shares, respectively |
840.0 97.9 834.5 (100.8) 4.8 (44.7) (1,386.5) |
840.0 78.9 555.8 (80.5) 0.4 (67.6) (1,176.0) |
||||
| Total Common Shareholders' Equity | 245.2 | 151.0 | ||||
| Total Liabilities and Shareholders' Equity | $ | 2,596.0 | $ | 2,510.3 | ||
See accompanying notes to the condensed consolidated financial statements.
Page 5
THE QUAKER OATS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
(Dollars in Millions) |
Nine Months Ended |
||||||||
|
Cash Flows from Operating Activities: |
$ |
396.0 92.3 3.8 (3.4) 3.3 - 12.4 (77.3) 7.7 10.5 44.7 44.8 32.9 39.7 607.4 |
$ |
211.3 100.6 (38.8) 32.4 33.7 63.5 8.0 (65.0) (19.8) 19.4 25.7 93.0 31.7 17.5 513.2 | |||||
|
Cash Flows from Investing Activities: Capital gains tax recovery Purchase of marketable securities Proceeds on sale of marketable securities Business divestitures Additions to property, plant and equipment Proceeds on sale of property, plant and equipment Net Cash (Used in) Provided by Investing Activities |
- (185.1) 0.6 14.3 (132.6) 6.2 (296.6) |
240.0 (159.1) - 160.9 (135.9) 4.2 110.1 | |||||||
|
Cash Flows from Financing Activities: Cash dividends Change in short-term debt Proceeds from long-term debt Reduction of long-term debt Issuance of common treasury stock Repurchases of common stock Repurchases of preferred stock Net Cash Used in Financing Activities |
(117.3) (11.4) 1.1 (75.3) 66.8 (277.0) (6.8) (419.9) |
(119.2) (12.3) 0.7 (103.0) 96.9 (300.2) (5.7) (442.8) |
|||||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents Net (Decrease) Increase in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning of Period Cash and Cash Equivalents - End of Period |
$ |
(2.6) (111.7) 326.6 214.9 |
$ |
1.7
182.2 84.2 266.4 |
|||||
THE QUAKER OATS COMPANY AND SUBSIDIARIES
NET SALES AND OPERATING INCOME BY SEGMENT
(UNAUDITED)
Net Sales (a)
Operating Income (Loss)(b)
Nine Months
Nine Months
(Dollars in Millions)
Ended September 30,
Ended September 30,
|
1999 |
1998 |
1999 |
1998 |
||||||||||
|
Foods: |
|||||||||||||
|
U.S. and Canadian |
$ |
1,798.9 |
$ |
1,723.2 |
$ |
294.7 |
$ |
254.8 |
|||||
|
Latin American |
227.5 |
280.5 |
16.8 |
21.7 |
|||||||||
|
Other (c) |
158.1 |
144.3 |
20.4 |
0.9 |
|||||||||
|
Total Foods |
2,184.5 |
2,148.0 |
331.9 |
277.4 |
|||||||||
|
Beverages: |
|||||||||||||
|
U.S. and Canadian |
1,311.5 |
1,186.3 |
282.4 |
244.8 |
|||||||||
|
Latin American |
179.1 |
208.4 |
15.5 |
20.4 |
|||||||||
|
Other (c) |
94.3 |
95.0 |
(2.2) |
0.1 |
|||||||||
|
Total Beverages |
1,584.9 |
1,489.7 |
295.7 |
265.3 |
|||||||||
|
Total Ongoing Businesses |
3,769.4 |
3,637.7 |
627.6 |
542.7 |
|||||||||
|
|
|
||||||||||||
|
Divested Businesses (d) |
6.7 |
241.5 |
- |
(4.7) |
|||||||||
|
Total Sales/Operating Income |
$ |
3,776.1 |
$ |
3,879.2 |
$ |
627.6 |
$ |
538.0 |
|||||
|
Less: Gains on divestitures and restructuring |
(1.8) |
129.6 |
|||||||||||
| General corporate expenses | 23.9 |
24.1 |
|||||||||||
|
Interest expense - net |
39.7 |
46.2 |
|||||||||||
| Foreign exchange loss - net | 19.0 |
11.2 |
|||||||||||
|
Income before income taxes |
$ |
546.8 |
$ |
326.9 |
|||||||||
Page 7
THE QUAKER OATS COMPANY AND SUBSIDIARIES
NET SALES AND OPERATING INCOME BY SEGMENT
(UNAUDITED)
Net Sales (a)
Operating Income (Loss)(b)
Three Months
Three Months
(Dollars in Millions)
Ended September 30,
Ended September 30,
|
1999 |
1998 |
1999 |
1998 |
||||||||||
|
Foods: |
|||||||||||||
|
U.S. and Canadian |
$ |
658.8 |
$ |
619.4 |
$ |
110.0 |
$ |
101.6 |
|||||
|
Latin American |
76.8 |
92.6 |
4.8 |
7.9 |
|||||||||
|
Other (c) |
55.1 |
51.7 |
6.3 |
3.5 |
|||||||||
|
Total Foods |
790.7 |
763.7 |
121.1 |
113.0 |
|||||||||
|
Beverages: |
|||||||||||||
|
U.S. and Canadian |
498.7 |
471.2 |
118.4 |
107.5 |
|||||||||
|
Latin American |
61.0 |
65.3 |
5.4 |
6.4 |
|||||||||
|
Other (c) |
33.6 |
35.9 |
0.6 |
(0.2) |
|||||||||
|
Total Beverages |
593.3 |
572.4 |
124.4 |
113.7 |
|||||||||
|
Total Ongoing Businesses |
1,384.0 |
1,336.1 |
245.5 |
226.7 |
|||||||||
|
Divested Businesses (d) |
- |
69.1 |
- |
(0.5) |
|||||||||
|
Total Sales/Operating Income |
$ |
1,384.0 |
$ |
1,405.2 |
$ |
245.5 |
$ |
226.2 |
|||||
|
Less: Restructuring and asset impairment charges |
6.6 |
41.9 |
|||||||||||
|
General corporate expenses |
8.9 |
6.2 |
|||||||||||
|
Interest expense - net |
12.5 |
14.4 |
|||||||||||
|
Foreign exchange loss - net |
3.4 |
2.3 |
|||||||||||
|
Income before income taxes |
$ |
214.1 |
$ |
161.4 |
|||||||||
Page 8
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 months ended September 30, 1999 and 1998, the condensed consolidated balance sheet as of September 30, 1999, and the condensed consolidated statements of cash flows for the nine months ended September 30, 1999 and 1998, 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 September 30, 1999, and for all periods presented. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (GAAP) 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 report to shareholders for the year ended December 31, 1998.
Certain previously reported amounts have been reclassified to conform to the current presentation.
Note 2 - Litigation
The Company is a party to a number of lawsuits and claims, which it is vigorously defending. Such matters arise out of the normal course of business and relate to the Company's past acquisition activity and other issues. Certain of these actions seek damages in large amounts. While the results of litigation cannot be predicted with certainty, management believes that the final outcome of such litigation will not have a material adverse effect on the Company's consolidated financial position or results of operations. Changes in assumptions, as well as actual experience, could cause the estimates made by management to change.
Note 3 - Restructuring Charges and Tax Adjustments
In September 1999, the Company announced that it has begun a three-year project to upgrade and optimize its manufacturing and distribution capabilities in its U.S. and Canadian businesses ("supply chain reconfiguration project"). The project involves a rationalization of U.S. and Canadian Foods operations, an expansion of U.S. beverage manufacturing and a reconfiguration of the Company's food and beverage logistics network. This project is expected to significantly lower operating costs by removing inefficient assets, building operating scale in key product lines, and integrating Foods and Beverages warehousing. Targeted savings are in the range of $40 million to $50 million in 2001, rising to $60 million to $70 million beginning in 2002 and going forward. Actions are likely to include plant closures, line consolidations and selective outsourcing of product manufacturing and logistics. The Company is still in the process of developing specific plans to achieve targeted savings and anticipates that implementation will occur over the course of the next three years. If the project proceeds as anticipated, the Company would expect to take a series of pretax restructuring and other charges totaling in the range of $225 million to $250 million.
During the three months ended September 30, 1999 (third quarter), the Company recorded pretax restructuring charges of $6.7 million for cereal manufacturing line consolidations, an initial step of the supply chain reconfiguration project. In addition, the estimated useful lives of assets that will be replaced in conjunction with the expansion of U.S. beverage manufacturing were shortened. As a result, depreciation expense reflected in cost of goods sold increased by about $0.7 million in the third quarter.
The Company recorded pretax adjustments to reduce prior divestiture and restructuring reserves by $3.3 million and $0.1 million in the first and third quarters of 1999, respectively. These adjustments were primarily due to higher-than-anticipated proceeds on the sale of closed facilities. The Company also adjusted its tax accruals and tax assets to reflect developments and information received during the current year. The net effect of these adjustments was to reduce the current year tax provision by $46.1 million for the nine months ended September 30, 1999.
During the three and nine months ended September 30, 1998, the Company recorded pretax restructuring charges of $9.0 million and $33.7 million, respectively, for organization alignment. The Company's remaining restructuring actions are proceeding as planned, and the related reserve balances are considered adequate to cover committed restructuring actions. The Company continues to review its business strategies for other cost-reduction opportunities, some of which could result in future charges.
Note 4 - Divestitures and Asset Impairment Charges
On March 1, 1999, the Company completed the sale of its Brazilian pasta business for $14.3 million and realized a pretax gain of $5.1 million.
During the third quarter of 1998 the Company completed the sale of its Ardmore Farms juice and Continental Coffee food service businesses resulting in a pretax gain of $7.6 million. The gain reflects the sale of the Ardmore Farms business and an adjustment upon sale of the Continental Coffee business. The combined impact of these transactions for the nine months ended September 30, 1998, was a pretax loss of $32.4 million, including $40.0 million in related asset impairment losses. During the first quarter of 1998, the Company received $240.0 million from the recovery of income taxes paid on previous capital gains and cash proceeds of $73.2 million from the December 1997 divestiture of certain food service businesses.
The Company recorded pretax asset impairment losses of $15.1 million and $25.4 million related to its China foods and divested Nile Spice soup-cup businesses, respectively, during the third quarter of 1998. Reflected in the Company's operating results for the nine months ended September 30, 1998, are the aforementioned losses and a pretax asset impairment loss of $23.0 million for the divested Brazilian pasta business.
Note 5 - Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Note 6 - Marketable Securities
During 1999, the Company made investments in marketable securities. These marketable securities are available for sale and consist of investments in mutual funds and preferred stock. These investments are expected to be held less than twelve months and are classified as marketable securities in the consolidated balance sheet. In 1999, the Company recorded an unrealized gain of $4.4 million on its investments in marketable securities to adjust the carrying value of these investments to fair value. The unrealized gain is classified as a separate component of common shareholders' equity and is included in comprehensive income.
Note 7 - Comprehensive Income
Total comprehensive income for the three months ended September 30, 1999 and 1998, was $139.4 million and $109.5 million, respectively. For the nine months ended September 30, 1999 and 1998, total comprehensive income was $380.1 million and $217.9 million, respectively. Total comprehensive income for the Company includes net income, foreign currency translation adjustments and unrealized gains on investments.
Note 8 - Current and Pending Accounting Changes
In January 1998, Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," was issued. This SOP provides guidance on the accounting for computer software costs. In April 1998, SOP No. 98-5, "Reporting on the Costs of Start-Up Activities," was issued. This SOP provides guidance on accounting for the cost of start-up activities. The Company's adoption of these new Statements in January 1999 did not materially affect the Company's financial statements.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that all derivative instruments (including certain derivative instruments imbedded in other contracts) be recorded in the balance sheet as either an asset or a liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The accounting provisions for qualifying hedges allow a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that the Company must formally document, designate, and assess the effectiveness of transactions that qualify for hedge accounting. The Company is not required to adopt this Statement until January 2001. The Company has not determined its method or timing of adopting this Statement or the impact on its financial statements. When adopted, this Statement could increase volatility in reported earnings and other comprehensive income of the Company.
Note 9 - Derivative Financial and Commodity Instruments
The Company actively monitors its exposure to commodity price, foreign currency exchange rate and interest rate risks and uses derivative financial and commodity instruments to manage the impact of certain risks. The Company's policy is to use derivatives only for purposes of managing risks associated with underlying exposures. The Company does not trade or use instruments with the objective of earning financial gains on the commodity price, exchange rate or interest rate fluctuations alone, nor does it utilize instruments where there are not known or anticipated underlying exposures. The Company is currently evaluating using derivative financial instruments that may result in short-term gains or losses and increased earnings volatility. Complex instruments involving leverage or multipliers are not used. Management believes that its use of these instruments to manage risk is in the Company's best interest.
Instruments used as hedges must be effective at reducing the risks associated with the underlying exposure and must be designated as a hedge at the inception of the contract. Accordingly, changes in the market value of the instruments must have a high degree of inverse correlation with changes in market values or cash flows of the underlying hedged item.
Summarized below are the specific accounting policies by market risk category.
Commodity Price Risk
The Company uses commodity futures and options to manage price exposures on commodity inventories or anticipated purchases of commodities. The deferral
method is used to account for those instruments that effectively hedge the Company's price exposures. For hedges of anticipated transactions, the
significant characteristics and terms of the anticipated transaction must be identified, and the transaction must be probable of occurring to qualify
for deferral method accounting. Under the deferral method, gains and losses on derivative instruments are deferred in the condensed consolidated balance
sheets as a component of other current assets (if a loss) or other current liabilities (if a gain) until the underlying inventory being hedged is sold.
As the hedged inventory is sold, the deferred gains and losses are recognized in the condensed consolidated statements of income as a component of cost
of goods sold. Derivative instruments that do not meet the above criteria required for deferral treatment are accounted for under the fair value method
with gains and losses recognized currently in the condensed consolidated statements of income as a component of cost of goods sold.
Foreign Currency Exchange Rate Risk
The Company uses forward contracts, purchased options and currency swap agreements to manage foreign currency exchange rate risk related to projected
operating income from foreign operations and net investments in foreign subsidiaries. The fair value method is used to account for these instruments.
Under the fair value method, the instruments are carried at fair value in the condensed consolidated balance sheets as a component of other current
assets (deferred expense) or other current liabilities (deferred income). Changes in the fair value of derivative instruments which are used to manage
exchange rate risk in foreign-currency denominated operating income and net investments in highly inflationary economies are recognized in the condensed
consolidated statements of income as foreign exchange loss or gain. Changes in the fair value of such instruments used to manage exchange rate risk on
net investments in economies that are not highly inflationary are recognized in the condensed consolidated balance sheets as a component of the cumulative
translation adjustment in common shareholders' equity and are included in comprehensive income. To the extent an instrument is no longer effective as a
hedge of a net investment due to a change in the underlying exposure, gains and losses are recognized currently in the condensed consolidated statements
of income as foreign exchange loss or gain.
Interest Rate Risk
The Company has used interest rate swap agreements to reduce its exposure to changes in interest rates and to balance the mix of its fixed and floating
rate debt. Currently, there are no interest swap agreements outstanding. The settlement costs of terminated swap agreements are reported in the
condensed consolidated balance sheets as a component of other assets and are being amortized over the life of the original swap agreements. The
amortization of the settlement amounts is reported in the condensed consolidated statements of income as a component of interest expense.
Note 10 - Share Repurchases
During 1999, the Company repurchased 4.4 million shares of its outstanding common stock for $281.6 million. Of the total shares repurchased, 1.2 million shares were repurchased during the current quarter for $81.5 million. As of September 30, 1999, the Company repurchased $546.6 million under the $1 billion repurchase program announced in March 1998.
Note 11 - Earnings Per Share
Reconciliations of basic earnings per share (EPS) to diluted EPS were as follows:
|
(Dollars in Millions - Except Per Share Data) |
Nine Months Ended September 30, |
||||||||||||||||||
|
1999 |
1998 |
||||||||||||||||||
Income |
Shares |
Income |
Shares |
||||||||||||||||
Net income |
$ |
396.0 |
$ |
211.3 |
|||||||||||||||
Less: Preferred dividends - net of tax |
3.3 |
2.5 |
|||||||||||||||||
Net income available for common |
$ |
392.7 |
134,466 | $ |
208.8 |
137,552 |
|||||||||||||
Net income per common share |
$ |
2.92 |
$ |
1.52 |
|||||||||||||||
Net income available for common |
$ |
392.7 |
134,466 | $ |
208.8 |
137,552 |
|||||||||||||
Effect of dilutive securities: |
|||||||||||||||||||
Stock options |
- |
3,636 | - |
3,551 |
|||||||||||||||
Non-vested awards |
- |
228 | - |
218 |
|||||||||||||||
ESOP Convertible Preferred Stock |
1.5 |
2,059 | 2.3 |
2,198 |
|||||||||||||||
$ |
394.2 |
140,389 | $ |
211.1 |
143,519 |
||||||||||||||
|
Net income per common share - |
|
|
|
|
|||||||||||||||
The decrease in average common shares outstanding at September 30, 1999, compared to September 30, 1998, reflects the continuation of the Company's share repurchase program, partly offset by the exercise of employee stock options.
As of September 30, 1999 and 1998, certain stock options were excluded from the computation of diluted EPS because the exercise prices were higher than the average market price.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 Compared with
Nine Months Ended September 30, 1998
Consolidated net sales for the nine months ended September 30, 1999 (current year) decreased 3 percent from the nine months ended September 30, 1998 (prior year), due to the absence of divested businesses. Excluding divested businesses, sales increased 4 percent from the prior year, led by 11 percent growth in the U.S. and Canadian Gatorade business and 4 percent growth in the U.S. and Canadian Foods business, partly offset by declines in the Latin American business. Weaker exchange rates, mainly in Latin America, negatively affected sales. Price changes did not significantly affect the comparison of current and prior year net sales.
The consolidated gross profit margin increased to 55.4 percent in the current year versus 51.2 percent in the prior year. More than one-half of the gross margin improvement was driven by ongoing businesses, primarily due to lower commodity and packaging costs and other cost-reduction efforts. The remaining margin improvement resulted from the divestiture of lower-margin businesses.
Selling, general and administrative (SG&A) expenses increased $15.9 million, or 1 percent, due to higher advertising and merchandising (A&M) spending. Other SG&A expenses decreased due to cost-reduction programs, previous restructuring actions and business divestitures. For ongoing businesses, SG&A expenses increased $68.3 million, or 5 percent, driven by a 9 percent increase in A&M spending.
Business segment operating income increased 17 percent to $627.6 million in the current year from $538.0 million in the prior year, primarily driven by increased gross profit and lower overhead costs, resulting in improved operating margins in both the U.S. and Canadian Gatorade and Foods businesses.
Net financing costs (net interest expense and foreign exchange losses) increased $1.3 million in the current year, reflecting higher foreign exchange expenses. Lower interest expense, as a result of lower debt levels, substantially offset Brazilian foreign exchange losses, which increased $10.1 million in the current year.
Page 16
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In September 1999, the Company announced that it has begun a three-year project to upgrade and optimize its manufacturing and distribution capabilities in its U.S. and Canadian businesses ("supply chain reconfiguration project"). The project involves a rationalization of U.S. and Canadian Foods operations, an expansion of U.S. beverage manufacturing and a reconfiguration of the Company's food and beverage logistics network. This project is expected to significantly lower operating costs by removing inefficient assets, building operating scale in key product lines, and integrating Foods and Beverages warehousing. Targeted savings are in the range of $40 million to $50 million in 2001, rising to $60 million to $70 million beginning in 2002 and going forward. Actions are likely to include plant closures, line consolidations and selective outsourcing of product manufacturing and logistics. The Company is still in the process of developing specific plans to achieve targeted savings and anticipates that implementation will occur over the course of the next three years. If the project proceeds as anticipated, the Company would expect to take a series of pretax restructuring and other charges totaling in the range of $225 million to $250 million.
During the current year, the Company recorded pretax restructuring charges of $6.7 million for cereal manufacturing line consolidations, an initial step of the supply chain reconfiguration project. In addition, the estimated useful lives of assets that will be replaced in conjunction with the expansion of U.S. beverage manufacturing were shortened, which increased depreciation expense reflected in cost of goods sold by about $0.7 million in the current year. The Company recorded pretax adjustments in the current year to reduce prior divestiture and restructuring reserves by $3.4 million. These adjustments were primarily due to higher-than-anticipated proceeds on the sale of closed facilities. During the prior year, the Company recorded pretax restructuring charges of $33.7 million for organization alignment. The Company's remaining restructuring actions are proceeding as planned, and the related reserve balances are considered adequate to cover committed restructuring actions. The Company continues to review its business strategies for other cost-reduction opportunities, some of which could result in future charges.
On March 1, 1999, the Company completed the sale of its Brazilian pasta business for $14.3 million and realized a pretax gain of $5.1 million. During the prior year, the Company completed the sale of its Ardmore Farms juice and Continental Coffee food service businesses resulting in a pretax gain of $7.6 million. The gain reflects the sale of the Ardmore Farms business and an adjustment upon sale of the Continental Coffee business. The combined impact of these transactions including $40.0 million in related asset impairment losses was a pretax loss of $32.4 million for the prior year. In the prior year, the Company also recorded pretax asset impairment losses of $15.1 million, $25.4 million and $23.0 million related to its China foods, divested Nile Spice soup-cup and divested Brazilian pasta businesses, respectively.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company also adjusted its tax accruals and tax assets to reflect developments and information received during the current year. The net effect of these adjustments was to reduce the current year tax provision by $46.1 million. Excluding these tax adjustments and the tax effects of restructuring and impairment charges and gains on divestitures, the Company's effective tax rate was 36.1 percent in the current year and 36.6 percent in the prior year. The decrease in the effective tax rate was primarily due to lower effective state tax rates.
Operating Segment Results
FoodsU.S. and Canadian Foods - Volume and sales increased 2 percent and 4 percent, respectively, led by growth in hot cereals. The sales increase in hot cereals reflects the impact of advertising and merchandising programs and new product introductions. Sales also increased in most of the other product lines: ready-to-eat boxed cereals, grain-based snack bars, flavored rice, syrups and mixes, corn goods and many of the Company's Canadian foods lines. Sales declined in rice cakes and bagged ready-to-eat cereals. U.S. and Canadian Foods operating income increased 16 percent due to sales growth, lower supply chain costs and a favorable product mix, partly offset by increases in A&M spending.
Latin American Foods - Volume and sales decreased 1 percent and 19 percent, respectively, primarily driven by the Brazilian recession and currency devaluation. As a result, operating income decreased $4.9 million as the impact of the recession and devaluation more than offset cost savings from prior-year restructuring actions and other cost management efforts. Although the Brazilian currency has been relatively stable in the past two quarters, the recession in the Brazilian economy continues to affect the current outlook for this business.
Other Foods - Volume and sales increased 8 percent and 10 percent, respectively, reflecting growth in the European and Asian/Pacific cereals businesses. Operating income increased $19.5 million due to the sales growth and significantly reduced operating expenses in the Asian/Pacific business resulting from recent restructuring actions.
BeveragesU.S. and Canadian Beverages - Volume and sales grew 14 percent and 11 percent, respectively. New flavors, such as Gatorade Fierce, and new packaging, such as the expansion of the single-serve E.D.G.E. sport bottle and 20-ounce wide-mouth bottle, helped drive growth. Expanded availability, outside traditional retail channels, also drove sales growth. Operating income grew 15 percent to $282.4 million, an increase of $37.6 million from the prior year, reflecting strong sales growth, partly offset by increased A&M spending.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Latin American Beverages - Volume and sales decreased 9 percent and 14 percent, respectively, primarily driven by the recessions and currency devaluations in Brazil and Colombia, offsetting double-digit sales growth in Mexico. As a result of these declines, operating income decreased $4.9 million. Although the Brazilian currency has been relatively stable in the past two quarters, the recessions in Brazil and Colombia continue to affect the current outlook for these businesses.
Other Beverages - Combined, European and Asian/Pacific Gatorade volume increased 1 percent while sales decreased 1 percent. In China, volume and sales increased because of new products and packaging, supported by increased media spending. In Europe, Gatorade volume and sales declined modestly compared to the prior year's 23 percent volume growth which was aided by extremely warm weather conditions. Operating results decreased $2.3 million as a result of the lower European sales.
Divested
Current year operating results from divested businesses reflect the Brazilian pasta business through its divestiture date of March 1, 1999. Prior year operating results from divested businesses reflect the Ardmore Farms and Continental Coffee businesses through their divestiture dates and the Nile Spice, Liqui-Dri and Brazilian pasta business.
Three Months Ended September 30, 1999 Compared with
Three Months Ended September 30, 1998
Consolidated net sales for the three months ended September 30, 1999 (current year) decreased 2 percent from the three months ended September 30, 1998 (prior year), due to the absence of divested businesses. Excluding divested businesses, sales increased 4 percent from the prior year, led by 6 percent growth in both the U.S. and Canadian Foods and Gatorade businesses, partly offset by declines in the Latin American business. Weaker exchange rates, mainly in Latin America, negatively affected sales. Price changes did not significantly affect the comparison of current and prior year net sales.
The consolidated gross profit margin increased to 56.6 percent in the current year from 52.8 percent in the prior year. More than one-half of the expanded gross margin was driven by ongoing businesses, primarily due to lower commodity and packaging costs and other cost-reduction efforts. The remaining margin improvement resulted from the divestiture of lower-margin businesses.
SG&A expenses increased $24.7 million, or 5 percent, due to higher A&M spending. Other SG&A expenses decreased due to cost-reduction programs, previous restructuring actions and business divestitures. For ongoing businesses, SG&A expenses increased $40.7 million, driven by a 13 percent increase in A&M spending.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business segment operating income increased 9 percent to $245.5 million in the current year from $226.2 million in the prior year, primarily driven by increased gross profit and lower overhead costs in both the U.S. and Canadian Gatorade and Foods businesses.
Net financing costs (net interest expense and foreign exchange losses) decreased $0.8 million in the current year due to lower interest expense reflecting a decline in debt levels, partly offset by increased foreign exchange expenses.
During the current year, the Company recorded pretax restructuring charges of $6.7 million for cereal manufacturing line consolidations, an initial step of the supply chain reconfiguration project. The Company also recorded pretax adjustments to reduce prior divestiture reserves by $0.1 million in the current year. In addition, the estimated useful lives of assets that will be replaced in conjunction with the expansion of U.S. beverage manufacturing were shortened, which increased depreciation expense reflected in cost of goods sold by about $0.7 million in the current year.
During the prior year, the Company recorded pretax restructuring charges of $9.0 million for organization alignment and pretax impairment losses of $25.4 million and $15.1 million related to its China foods and divested Nile Spice soup-cup businesses, respectively. The Company also completed the sale of its Ardmore Farms juice and Continental Coffee food service businesses resulting in a pretax gain of $7.6 million. The gain reflects the sale of the Ardmore Farms business and an adjustment upon sale of the Continental Coffee business.
Excluding restructuring and impairment charges and gains on divestitures, the Company's effective tax rate in the current and prior year was 36.1 percent.
Operating Segment Results
Foods
U.S. and Canadian Foods - Volume and sales increased 4 percent and 6 percent, respectively, reflecting sales growth across most product lines, led by ready-to-eat and hot cereals. New product innovations and effective marketing programs drove sales increases in hot cereals, ready-to-eat boxed and bagged cereals, grain-based snack bars, flavored rice and pasta and many of the Company's Canadian food lines. Rice cakes sales declines continued, but at a lower rate than the first half of 1999. U.S. and Canadian operating income increased 8 percent, primarily due to sales growth and improved gross margin, significantly offset by increases in A&M spending.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Latin American Foods - Volume increased less than 1 percent, while sales decreased 17 percent, primarily reflecting the currency devaluation in Brazil. As a result, operating income decreased $3.1 million. Although the Brazilian currency has been relatively stable in the past two quarters, the recession continues to affect the current outlook for this business.
Other Foods - Volume and sales increased 7 percent, primarily due to growth in the European and Asian/Pacific cereals businesses. Operating income increased $2.8 million due to the sales growth and reduced operating expenses in the Asian/Pacific business resulting from recent restructuring actions.
Beverages
U.S. and Canadian Beverages - Volume and sales grew 9 percent and 6 percent, respectively, despite difficult year-on-year comparisons. In the prior year, Gatorade volume and sales increased 22 percent and 17 percent, respectively. New flavors, such as Gatorade Fierce, and new packaging, such as the expansion of the single-serve E.D.G.E. sport bottle and 20-ounce wide-mouth bottle, helped drive growth. Expanded availability, outside traditional retail channels, also drove sales growth. Operating income grew 10 percent to $118.4 million, an increase of $10.9 million from the prior year, reflecting strong sales growth and supply chain and SG&A overhead efficiencies, partly offset by increased A&M spending.
Latin American Beverages - Volume and sales decreased 3 percent and 7 percent, respectively, primarily driven by the recessions and currency devaluations in Brazil and Colombia, offsetting double-digit sales growth in Mexico. As a result of these declines, operating income decreased $1.0 million. Although the Brazilian currency has been relatively stable in the past two quarters, the recessions in Brazil and Colombia continue to affect the current outlook for these businesses.
Other Beverages - Volume and sales decreased 3 percent and 6 percent, respectively. In Europe, Gatorade volume and sales declined compared to the prior year's 36 percent volume growth which was aided by extremely warm weather. In Asia/Pacific, Gatorade volume and sales increased, driven by growth in China, partly offset by decreases in other Asia/Pacific markets. Operating results improved $0.8 million, reflecting reduced operating expenses in the Asia/Pacific business resulting from recent restructuring actions, partly offset by the impact of the sales declines in Europe.
Divested
Prior year operating results from divested businesses reflect the Ardmore Farms and Continental Coffee businesses through their divestiture dates and the Nile Spice, Liqui-Dri and Brazilian pasta businesses.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Net cash provided by operating activities was $607.4 million, an increase of $94.2 million from the prior year, reflecting improved operating profitability. Capital expenditures for the current and prior year were $132.6 million and $135.9 million, respectively. The rate of capital expenditures is expected to increase during the remainder of the year as the Company continues to invest in cost-reduction projects and Gatorade production capacity. The Company expects that capital expenditures and cash dividends for the remainder of the year will be financed through cash flow from operating activities and proceeds from investing activities.
Cash used in investing activities in the current year includes the Company's purchase of marketable securities of $185.1 million, partly offset by proceeds from the sale of the Brazilian pasta business. Cash provided by investing activities in the prior year included a $240 million recovery of income taxes paid on previous capital gains and $160.9 million of divestiture proceeds. These prior year cash flows were offset partly by the Company's purchase of marketable securities of $159.1 million.
Financing activities used cash of $419.9 million and $442.8 million in the current year and prior year, respectively, primarily to repurchase shares, pay dividends and reduce debt. During the current year, the Company repurchased 4.4 million shares of its outstanding common stock for $281.6 million under the $1 billion repurchase program announced in March 1998. During the current year, approximately 1.8 million employee stock options were exercised providing cash of $62.7 million.
Short-term and long-term debt (total debt) as of September 30, 1999 was $843.0 million, a decrease of $88.6 million from December 31, 1998. Amounts available under revolving credit facilities and debt and commercial paper ratings were unchanged during the current quarter.
Derivative Financial and Commodity Instruments
The Company actively monitors its exposure to commodity price, foreign currency exchange rate and interest rate risks and uses derivative financial and commodity instruments to manage the impact of certain risks. The Company's policy is to use derivatives only for purposes of managing risks associated with underlying exposures. The Company does not trade or use instruments with the objective of earning financial gains on the commodity price, exchange rate or interest rate fluctuations alone, nor does it utilize instruments where there are not known or anticipated underlying exposures. The Company is currently evaluating using derivative financial instruments that may result in short-term gains or losses and increased earnings volatility. Complex instruments involving leverage or multipliers are not used. Management believes that its use of these instruments to manage risk is in the Company's best interest.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has estimated its market risk exposures using sensitivity analyses. Market risk exposure has been defined as the change in fair value of a derivative commodity or financial instrument, assuming a hypothetical 10 percent adverse change in market prices or rates. Fair value was determined using quoted market prices, if available. The results of the sensitivity analyses as of September 30, 1999, did not differ materially from the amounts reported as of December 31, 1998. Actual changes in market prices or rates may differ from hypothetical changes.
Current and Pending Accounting Changes
In January 1998, Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," was issued. This SOP provides guidance on the accounting for computer software costs. In April 1998, SOP No. 98-5, "Reporting on the Costs of Start-Up Activities," was issued. This SOP provides guidance on accounting for the cost of start-up activities. The Company's adoption of these new Statements in January 1999 did not materially affect the Company's financial statements.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that all derivative instruments (including certain derivative instruments imbedded in other contracts) be recorded in the balance sheet as either an asset or a liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The accounting provisions for qualifying hedges allow a derivative's gains and losses to offset related results of the hedged item in the income statement, and require that the Company must formally document, designate and assess the effectiveness of transactions that qualify for hedge accounting. The Company has not determined its method or timing of adopting this Statement, but will be required to adopt it by January 2001. When adopted, this Statement could increase volatility in reported earnings and other comprehensive income of the Company.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year 2000
The Company uses software and other related technologies throughout its business that will be affected by the date change in year 2000. The three areas where year 2000 issues may affect the Company include: (1) the computer systems, both hardware and software; (2) imbedded systems, as in computer chips in machinery and process controls; and (3) third parties with material relationships with the Company, such as major service providers, vendors, suppliers and customers.
To address the year 2000 issues, the Company has developed and is executing a detailed four-phase comprehensive readiness plan. The first phase of the readiness plan, the assessment of the Company's internal systems, was completed. The second phase, the remediation, replacement and testing of internal systems, was completed for the computer systems and was 99 percent complete for the imbedded systems. The remaining equipment or controls for the imbedded systems are scheduled for replacement during the remainder of the year. The third phase, the assessment of the year 2000 readiness plans of the Company's material third parties, will continue through 1999. All of the Company's major service providers, vendors, suppliers and customers who are believed to be critical to the business operations after January 1, 2000, have been contacted to determine their stage of year 2000 compliance, with approximately 80 percent indicating that they are fully compliant. All but a few of the remaining 20 percent have plans in place to achieve compliance before the end of the year. Completing the fourth phase involves the development of contingency plans to further mitigate the impact of possible year 2000 disruptions, including disruptions resulting from non-compliant, material third parties. These contingency plans have been completed and are being monitored and fine-tuned as additional information becomes available. Elements of these plans include stockpiling raw and packaging materials, increasing finished goods inventory levels, assigning key personnel to be on-site or on-call during the year-end rollover and other appropriate measures.
While the Company's year 2000 readiness plans are nearly complete, the consequences of non-compliance by the Company, its major service providers, vendors, suppliers or customers, could have a material adverse effect on the Company's operations. Although the Company does not anticipate any major non-compliance issues, some of the possible consequences of non-compliance by the Company or its material third parties include, among other things: temporary plant closings; delays in the delivery and receipt of products and supplies; invoice and collection errors; and inventory obsolescence. It is currently estimated that the aggregate cost of the Company's year 2000 efforts will be approximately $12 million, of which approximately $11 million has been incurred to date. All of these costs are being funded through operating cash flow. These amounts do not include any costs associated with the implementation of contingency plans.
The Company's year 2000 readiness plan is an ongoing process, and the estimates of costs and completion dates for various components of the program as described above are subject to change.
THE QUAKER OATS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement on Forward-Looking Statements
Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis. Statements that are not historical facts, including statements about expectations or projected results, are forward-looking statements. The Company's results may differ materially from those suggested by the forward-looking statements. Forward-looking statements are based on management's current views and assumptions, and involve risks and uncertainties that could significantly affect expected results. For example, operating results may be affected by factors such as: actions of competitors; changes in laws and regulations, including changes in governmental interpretations of regulations and changes in accounting standards; customer demand; effectiveness of spending, investments or programs, including cost-reduction projects; changes in market prices or rates; fluctuations in the cost and availability of supply chain resources; foreign economic conditions, including currency rate fluctuations; weather; the ability of the Company to effectuate manufacturing, distribution and outsourcing initiatives and plant consolidations; and the ability of the Company, and its major service providers, vendors, suppliers and customers, to adequately address the year 2000 issue. In addition, capital expenditures and cash dividends may be affected by the amount of cash flow from operating activities; restructuring actions may be affected by the amount of reserve balances; and the Company's market risk exposures may be affected by actual changes in market prices of derivative financial and commodity instruments if actual changes differ from the hypothetical changes used in sensitivity analyses. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
Note 2 in Part I is incorporated by reference herein.
Item 6 Exhibits and Reports on Form 8-K
Item 6(a) See Exhibit Index.
All other items in Part II are either inapplicable to the Company during the quarter ended September 30, 1999, 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.
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: November 1, 1999
/s/ Terence D. Martin
Terence D. Martin
Senior Vice President - Finance and
Chief Financial Officer
Date: November 1, 1999
/s/ Richard M. Gunst
Richard M. Gunst
Vice President and
Corporate Controller
| Exhibit Number |
Description |
Paper (P) or Electronic (E) |
| 10(a) | First Amendment to the 1984 Long-Term Incentive Plan, as amended and restated, effective as of September 1, 1996 | E |
| 10(b) | First Amendment to The Quaker Supplemental Executive Retirement Program, as amended and restated, effective as of November 1, 1996 | E |
| 10(c) | First Amendment to The Quaker Eligible Earnings Adjustment Plan, as amended and restated, effective as of November 1, 1996 | E |
| 10(d) | First Amendment to The Deferred Compensation Plan for Executives of The Quaker Oats Company, as amended and restated, effective as of November 1, 1996 | E |
| 10(e) | First Amendment to The Quaker Long Term Incentive Plan of 1990, as amended and restated, effective as of September 1, 1996 | E |
| 10(f) | First Amendment to the Quaker Salaried Employees Compensation and Benefits Protection Plan, as amended and restated, effective as of November 1, 1996 | E |
| 10(g) | First Amendment to The Quaker 415 Excess Benefit Plan, as amended and restated, effective as of November 1, 1996 | E |
| 10(h) | Second Amendment to the Quaker Officers Severance Program, as amended and restated, effective as of July 9, 1997 | E |
| 10(i) | Management Incentive Bonus Plan of The Quaker Oats Company, as amended and restated, effective as of May 13, 1998 | E |
| 27 | Financial Data Schedule | E |
|
|