SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
Commission File No. 1-4582
RALSTON PURINA COMPANY
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-0470580
------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
CHECKERBOARD SQUARE, ST. LOUIS MISSOURI 63164
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 982-1000
------------------------------------------------------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements for
the
past 90 days.
YES X NO
--- --
-
Number of shares of Ralston-Ralston Purina Group common stock,
$.10 par
value, outstanding as of the close of business on May 5, 1995 -
104,184,157.
Number of shares of Ralston-Continental Baking Group common
stock, $.10 par
value, outstanding as of the close of business on May 5, 1995 -
20,590,158.
PAGE 2
PART I - FINANCIAL INFORMATION
A. RPG Group
RALSTON PURINA GROUP
COMBINED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
1995 1994 1995 1994
Net Sales $ 1,281.7 $1,507.4 $2,795.2 $3,231.7
---------- --------- --------- ---------
Costs and Expenses
Cost of products sold 754.1 862.9 1,617.6 1,807.0
Selling, general and
administrative 242.5 270.3 473.8 523.1
Advertising and promotion 129.3 188.3 291.9 434.7
Interest 38.0 50.3 78.5 100.0
Provision for restructuring 12.1 35.0
Other (income)/expense, net 2.8 7.1 2.5 14.0
---------- --------- --------- ---------
1,178.8 1,378.9 2,499.3 2,878.8
---------- --------- --------- ---------
Loss Related to Retained
Interest in the CBG Group (2.4) (2.5) (7.1) (2.6)
---------- --------- -------- ---------
Earnings Before Income Taxes and
Extraordinary Item 100.5 126.0 288.8 350.3
Income Taxes 46.6 52.7 128.5 143.6
---------- --------- --------- ---------
Earnings Before Extraordinary Item 53.9 73.3 160.3 206.7
Extraordinary Item - Loss on Early
Retirement of Debt (7.9) (7.9)
---------- --------- --------- ---------
Net Earnings 53.9 65.4 160.3 198.8
Preferred Stock Dividend,
Net of Taxes 4.3 4.9 8.7 9.6
---------- --------- ----- -- ---------
Earnings After Preferred Stock
Dividend $ 49.6 $ 60.5 $ 151.6 $ 189.2
========== ========= ========= =========
Earnings per RPG Stock Common Share
Primary
Earnings before extraordinary item $ 0.50 $ 0.68 $ 1.52 $ 1.96
Extraordinary item (0.08) (0.08)
---------- --------- --------- ---------
Net Earnings $ 0.50 $ 0.60 $ 1.52 $ 1.88
========== ========= ========= =========
Fully Diluted
Earnings before extraordinary item $ 0.48 $ 0.65 $ 1.43 $ 1.84
Extraordinary item (0.07) (0.07)
---------- --------- -------- ---------
Net Earnings $ 0.48 $ 0.58 $ 1.43 $ 1.77
========== ========= ========= =========
Cash Dividends Declared per
Common Share $ 0.60 $ 0.60 $ 0.60 $ 0.60
See Accompanying Notes to Condensed Financial Statements.
PAGE 3
RALSTON PURINA GROUP
COMBINED BALANCE SHEET
(Condensed)
(Dollars in millions)
March 31, Sept. 30,
1995 1994
Assets
Current Assets
Cash and cash equivalents $ 79.1 $ 112.4
Receivables, less allowance for doubtful
accounts of $28.0 and $25.8, respectively 704.1 730.6
Inventories -
Raw materials and supplies 174.4 170.7
Work in process 98.5 101.5
Finished products 418.9 405.0
Other current assets 156.3 142.2
---------- ----------
Total Current Assets 1,631.3 1,662.4
---------- ----------
Retained Interest in the CBG Group 5.4 12.5
---------- ----------
Investments and Other Assets 806.8 815.7
---------- ----------
Property at Cost 2,526.9 2,456.3
Accumulated depreciation 1,212.2 1,155.9
---------- ----------
1,314.7 1,300.4
---------- ----------
Total $ 3,758.2 $ 3,791.0
========== ==========
Liabilities and Shareholders Equity
Current Liabilities
Current maturities of long-term debt $ 180.6 $ 223.2
Notes payable 439.4 454.3
Accounts payable 330.0 368.3
Other current liabilities 509.8 474.2
---------- ----------
Total Current Liabilities 1,459.8 1,520.0
---------- ----------
Long-Term Debt 1,168.8 1,251.6
---------- ----------
Deferred Income Taxes 61.3 63.6
---------- ----------
Other Liabilities 401.1 383.6
---------- ----------
Redeemable Preferred Stock 421.7 427.4
---------- ----------
Unearned ESOP Compensation (177.4) (195.3)
---------- ----------
RPG Group Equity 422.9 340.1
---------- ----------
Total $ 3,758.2 $ 3,791.0
========== ==========
See Accompanying Notes to Condensed Financial Statements.
PAGE 4
RALSTON PURINA GROUP
COMBINED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
Six Months Ended
March 31,
1995 1994
Cash Flow from Operations
Net earnings $ 160.3 $ 198.8
Extraordinary item 7.9
Retained interest in CBG Group's earnings 7.1 2.6
Non-cash items included in income 106.4 130.1
Changes in assets and liabilities used
in operations (1.7) (96.4)
Other, net 3.1 4.2
---------- ----------
Net cash flow from operations 275.2 247.2
---------- ----------
Cash Flow from Investing Activities
Acquisition of businesses (39.2)
Property additions, net (93.4) (104.4)
Other, net (7.7) 4.9
---------- ----------
Net cash provided (used) by investing activities (101.1) (138.7)
---------- ----------
Cash Flow from Financing Activities
Proceeds from issuance of debt for spin-off 370.0
Net proceeds from (payments on) centrally
managed debt (29.9) (193.6)
Net proceeds from (payments on) specifically
attributed long-term debt, including
current maturities 2.7 (11.4)
Net increase (decrease) in specifically attributed
notes payable (95.3) 46.6
Treasury stock purchases (69.4)
Dividends paid (74.3) (76.1)
Other, net (5.8) 2.7
---------- ----------
Net cash provided (used) by financing activities (202.6) 68.8
---------- ----------
Effect of Exchange Rate Changes on Cash (4.8) (14.2)
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents (33.3) 163.1
Cash and Cash Equivalents, Beginning of Period 112.4 57.4
---------- ----------
Cash and Cash Equivalents, End of Period $ 79.1 $ 220.5
========== ==========
See Accompanying Notes to Condensed Financial Statements.
PAGE 5
RALSTON PURINA GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995
(Dollars in millions except per share data)
Note 1 - The accompanying unaudited financial statements have
been
prepared in accordance with the instructions for Form 10-Q and do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Operating
results for any quarter are not necessarily indicative of the
results for any other quarter or for the full year. These
statements should be read in connection with the financial
statements of the RPG Group and notes thereto included in the
Ralston Purina Company's (the Company) Annual Report to
Shareholders
for the year ended September 30, 1994.
Note 2 - On July 30, 1993, the shareholders of the Company
approved
a plan to distribute to shareholders shares of a new class of
common
stock, Ralston-Continental Baking Group Common Stock (CBG Stock),
which is intended to reflect separately the performance of the
Company's fresh bakery products business (the CBG Group). As
part
of this plan, existing common stock was redesignated Ralston-
Ralston
Purina Group Common Stock (RPG Stock) and is intended to reflect
separately the performance of the Company's other businesses (the
RPG Group). The CBG Stock distributed to shareholders, at a
ratio
of one share for every five shares of existing common stock,
represents a 55% interest in the business, assets and liabilities
of
the CBG Group, and the RPG Group retains the remaining 45%
interest.
Holders of the RPG Stock are common shareholders of the Company.
Although the financial statements of the RPG Group and the CBG
Group separately report the assets, liabilities and shareholders
equity of the Company attributed to each group, this attribution
does not affect legal title to such assets or responsibility for
such liabilities. Financial impacts arising from the CBG Group
that affect the consolidated results of operations or financial
position of the Company could affect the results of operations or
financial position of the RPG Group. Accordingly, the Company's
consolidated quarterly financial information should be read in
connection with the RPG Group financial information.
Note 3 - Primary earnings per share are based on the average
number
of shares outstanding during the period, excluding 4,086,000
shares
of RPG Stock held by Ralston's Grantor Trust at March 31, 1995.
Fully diluted earnings per share are based on the average number
of
shares used for the primary earnings per share calculation,
adjusted
for the dilutive effect of convertible preferred stock, stock
options, convertible debentures and compensation awards. The
PAGE 6
shares used in earnings per share computations were as follows:
(in millions)
Three Months Three Months Six Months Six Months
Mar 31, 1995 Mar 31, 1994 Mar 31, 1995 Mar 31,1994
------------ ------------ ------------ ------------
Primary:
RPG Stock 100.0 100.2 100.0 100.9
Fully Diluted:
RPG Stock 110.6 110.1 110.5 110.7
Note 4 - There were RPG Stock common shares outstanding of
100,055,000 at March 31, 1995 and 100,031,000 at September 30,
1994,
exclusive of 1) 10,547,000 and 10,620,000 RPG Stock treasury
shares,
respectively, and 2) 4,086,000 and 4,033,000 Grantor Trust
shares,
respectively.
Note 5 - Other (income)/expense, net for six months consists of
the
following:
March 31, March 31,
1995 1994
--------- ---------
Net translation
and exchange loss $8.5 $14.5
Investment income (3.8) (6.1)
Miscellaneous (2.2) 5.6
---- -----
$2.5 $14.0
==== =====
Note 6 - Investments and Other Assets consist of the following:
March 31, September 30,
1995 1994
--------- -------------
Goodwill $329.6 $325.6
Intangible Assets 174.8 191.6
Other Assets 302.4 298.5
------ ------
$806.8 $815.7
====== ======
Note 7 - During the quarter and six months ended March 31, 1995,
the RPG
Group recorded charges of $11.7, after taxes, and $28.0, after
taxes,
respectively, or $.12 and $.11 per primary and fully diluted
share for the
quarter and $.28 and $.25 per share for the six months, in
connection with
its restructuring of its worldwide carbon zinc battery production
capacity
and certain administrative functions announced in November 1994.
On a pre-tax basis, charges for restructuring for the six months
consist of
termination benefits of $23.7, other cash exit costs of $3.3 and
non-cash
charges of $8.0, primarily related to anticipated losses on
disposal of
land, buildings and machinery and equipment.
During the six months, two plants were closed and 567 employees
were
severed in connection with the restructuring plan. Cash exit
costs
PAGE 7
incurred in the quarter and six months related to the
restructuring plan
announced in November 1994 were $17.4 and $30.6, respectively.
Additional charges associated with the restructuring announced in
November 1994 are expected, including $10 to $15, pre-tax, during
1995 and
$25 to $40, pre-tax, in later years. The Company continues to
review
worldwide battery production capacity.
Note 8 - An extraordinary loss in fiscal 1994 was recognized in
conjunction with the retirement of $89.4 of centrally managed
debt
attributed to the RPG Group that had an effective interest rate
of 10.7%.
Note 9 - Subsequent to quarter end, the Company purchased the
assets of
Golden Cat Corporation, the leading manufacturer and marketer of
branded
cat box filler in the United States and Canada, and the assets of
a Mexican
pet food company for $340 and $18, respectively.
Note 10 - Under the terms of Ralston's Restated Articles of
Incorporation, on April 12, 1995, the Company announced it would
exchange
each outstanding share of CBG Stock for .0886 shares of RPG Stock
as of
May 15, 1995. The exchange ratio represents a 15% premium to the
relative
trading values of the CBG Stock and RPG Stock for the period
March 31
through April 6, 1995, as provided in Ralston's Articles.
On April 12, 1995, Ralston and Interstate Bakeries Corporation
jointly
announced the signing of a definitive sales aggreement for
Interstate to
acquire Ralston's wholly-owned subsidiary, Continental Baking
Company, for
a total purchase price of $220 in cash and 16,923,077 shares of
common
stock of Interstate. The parties also agreed to the terms of a
Shareholder
Agreement which provides that by no later than five years
following
closing, Ralston's holdings of Interstate common stock will be
less than
15% of the outstanding shares. In addition, the Shareholder
Agreement
provides that Ralston will be entitled to nominate two directors
to
Interstate's Board of Directors. The closing of the sale is
subject to
approval by the shareholders of Interstate and various regulatory
clearances.
Note 11 - On April 18, 1995, the Company announced that it has
terminated
negotiations to sell its international agribusiness to PM
Holdings
Corporation.
Note 12 - On March 31, 1994, the Company effected a spin-off of
its private
label and branded cereal, baby food, crackers and cookies, ski
resort and
coupon redemption businesses (the Distribution). The combined
earnings and
cash flows of the RPG Group reflect the operations of those
businesses
through March 31, 1994.
The following pro forma statements of earnings reflect the
results of
operations for the three and six months ended March 31, 1994 as
if the
Distribution had occurred as of the beginning of the six month
period.
Such statements have been prepared by adjusting the historical
statements
for the effect of costs, expenses, assets and liabilities and the
recapitalization which might have occurred had the Distribution
been
effected as of October 1, 1992. These pro forma financial
statements may
not necessarily reflect the combined results of operations that
would have
existed had the Distribution occurred as of that date.
PAGE 8
RALSTON PURINA GROUP
Pro Forma Combined Statement of Earnings
(Dollars in millions except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
1994 1994
--------------- --------------
Net Sales (a) $1,248.1 $2,708.6
--------------- --------------
Costs and Expenses
Cost of products sold (a) 729.4 1,540.1
Selling, general and
administrative (a) 232.8 451.5
Advertising and promotion (a) 139.7 317.9
Interest expense (b) 46.6 92.6
Other (income)/expense, net (a) 7.0 13.8
--------------- --------------
1,155.5 2,415.9
--------------- --------------
Loss Related to Retained
Interest in the CBG Group (2.5) (2.6)
--------------- -------------
Earnings Before Income Taxes and
Extraordinary Item 90.1 290.1
Income Taxes (c) 39.2 120.9
--------------- --------------
Earnings Before Extraordinary Item $50.9 $169.2
=============== ==============
Earnings per Share:
Primary
Earnings before extraordinary item (a) $0.46 $1.59
=============== ==============
Fully Diluted
Earnings before extraordinary item (a) $0.45 $1.50
=============== ==============
[FN]
(a) Excludes results of operations of Ralcorp.
(b) Reflects reduction of interest expense at an average rate of
3.9% in 1994 due to debt repayment of $370 by Ralston from the
proceeds of debt issued in connection with the spin-off.
(c) Reflects the applicable federal and state statutory tax rates
for the pro forma adjustments.
PAGE 9
RALSTON PURINA GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
-----------------------------------------------------
Operating Results
Net earnings for the six months ended March 31, 1995 were $160.3
million, compared to $198.8 million for the same period in the
prior year. During the six months ended March 31, 1995, the
Company recorded provisions for battery products restructuring of
$28.0 million, after taxes, and a loss of $7.1 million, after
taxes, related to the retained interest in the CBG Group. Net
earnings for the six months ended March 31, 1994 included $37.5
million of net earnings related to the spun-off operations of
Ralcorp, a loss of $2.6 million, after taxes, related to the CBG
Group retained interest and an extraordinary loss on the early
retirement of debt of $7.9 million, after taxes. Exclusive of
these items, earnings for the six months increased by $23.6
million on lower interest expense, higher operating profit,
higher returns on other investments and lower foreign currency
losses.
Earnings per share for the six months ended March 31, 1995,
exclusive of the aforementioned items, were $1.87 and $1.75 on a
primary and fully-diluted basis, respectively, compared to $1.62
and $1.53 in the prior year.
For the quarter ended March 31, 1995, net earnings were $53.9
million compared to $65.4 million for the same quarter in 1994.
Exclusive of previously mentioned items, earnings in the current
quarter were $68.0 million compared to $53.4 million in the
second quarter of fiscal 1994. Primary and fully-diluted
earnings per share on this basis were $.64 and $.61,
respectively, in the current quarter compared to $.49 and $.47 in
the prior year.
Business Segments
Sales for the Pet and Human Foods segment for the quarter and six
months, exclusive of results of spun-off businesses, declined
slightly as lower domestic prices reflecting expansion of
simplified promotion and pricing practices were partially offset
by higher volume, primarily in the first quarter, and a
favorable domestic product mix.
Operating profit for the six months, exclusive of spun-off
businesses, increased on favorable product mix and higher volume,
primarily in the first quarter, and favorable ingredient costs,
partially offset by spending for cost reduction programs. In the
quarter, operating profit declined slightly as such higher
spending was partially offset by lower ingredient costs. Lower
prices were offset by reductions in advertising and promotion
expense associated with the new promotional practices in both the
quarter and six months.
Sales of the Battery Products segment increased in the six months
over the same period of the prior year primarily on higher volume
in the Asia Pacific region and favorable foreign currency
exchange in Europe and the Asia Pacific region, partially offset
by unfavorable pricing in Europe. For the second quarter,
improved domestic Energizer volume partially offset the prior
quarter's domestic volume declines. Ultimate consumer purchases
and market share continued to improve, as measured by A.C.
Nielson.
Operating profit, excluding restructuring charges, for the
quarter increased on improved domestic and Asia Pacific results
partially offset by declines in Europe. For the six months,
results were down as first quarter domestic and European declines
were partially offset by second quarter increases.
During the quarter and six months ended March 31, 1995, the RPG
Group recorded charges of $11.7 million, after taxes, and $28.0
million, after taxes, respectively, or $.12 and $.11 per primary
and fully-diluted share for the quarter and $.28 and $.25 per
share for the six months, in connection with the restructuring of
its worldwide carbon zinc battery production capacity and certain
administrative functions announced in November 1994.
PAGE 10
On a pre-tax basis, charges for restructuring for the six months
consist of termination
benefits of $23.7 million, other cash exit costs of $3.3 million
and non-cash charges of $8.0 million, primarily related to
anticipated losses on disposal of land, buildings and machinery
and equipment.
During the six months, two plants were closed and 567 employees
were severed in connection with the restructuring plan. Activity
related to the restructuring plan during the six month period was
as follows:
(millions)
----------
Reserve balance at September 30, 1994 $ 36.5
Provision recorded in the six months 35.0
Cash exit costs incurred during the six months (30.6)
Portion of current period provision
classified as property writedowns (8.0)
Increase due to translation .7
------
Reserve balance at March 31, 1995 $ 33.6
======
Additional charges associated with the restructuring announced in
November 1994 are expected including $10 to $15 million, pre-tax,
during 1995 and $25 to $40 million, pre-tax, in later years. The
Company continues to review worldwide battery production
capacity.
Sales and operating profit of the soy protein products business
increased on strong volume in food protein products, increased
productivity and favorable foreign currency exchange rates.
Sales and operating profit for international agricultural
products increased on higher volume in most world areas and
favorable foreign currency exchange rates.
Results of Operations
Cost of products sold as a percentage of sales (exclusive of
spun-off businesses) for the six months and quarter,
respectively, increased from 56.9% and 58.4% in the 1994 periods
to 57.9% and 58.8% in the current periods. Increases were
primarily from sales increases in segments with relatively
higher cost percentages and higher Pet and Human Foods segment
percentages associated with price reductions under simplified
promotion practices, partially offset by improvements in all
other segments.
Selling, general and administrative expenses (exclusive of spun-
off businesses) were 17.0% and 16.7% of sales for 1995 and 1994
six month periods, respectively. Advertising and promotion
expense (exclusive of spun-off businesses) for those periods was
10.4% and 11.7% of sales, respectively, on significantly lower
domestic pet food promotion expense associated with simplified
promotion practices. Other expense, net, (exclusive of spun-off
businesses) decreased by $11.3 million for the six months
primarily on higher returns on other investments in the current
quarter and lower foreign exchange losses in the first quarter.
Income taxes include federal, state and foreign taxes and were
44.5% of earnings before income taxes for the six months ended
March 31, 1995, compared to 41.0% in the prior year. The income
tax percentage is influenced by the inclusion of the RPG Group's
loss related to its retained interest in the CBG Group, on an
after-tax basis, in the computation of pre-tax earnings and
restructuring provisions which did not result in tax benefits due
to foreign tax loss situations. Excluding such impacts, the tax
percentage for the RPG Group was 41.0% in the current period.
PAGE 11
Financial Condition
The RPG Group's primary source of liquidity is cash flow
generated from operations. For the six months ended March 31,
1995, cash flow from operations was $275.2 million compared to
$247.2 million in the six months ended March 31, 1994. The
increase in cash flow is primarily due to changes in working
capital, partially offset by the absence of cash flow from
Ralcorp operations which was included in 1994. Working capital
was $171.5 million at March 31, 1995 compared to $142.4 million
at September 30, 1994. Cash and cash equivalents at March 31,
1995 were $79.1 million compared to $112.4 million at September
30, 1994.
As of May 1, 1995, approximately 1,883,920 shares of RPG Stock
remained under the Board of Directors' authorization for the
purchase of up to 3 million shares of RPG Stock.
Subsequent to quarter end, the Company purchased the assets of
Golden Cat Corporation, the leading manufacturer and marketer of
branded cat box filler in the United States and Canada, and the
assets of a Mexican pet food company for $340 million and $18
million, respectively.
On April 12, 1995, the Company announced it would exchange each
outstanding share of CBG Stock for .0886 shares of RPG Stock as
of May 15, 1995. The Company signed a definitive sales agreement
on April 12, 1995 for Interstate Bakeries Corporation to acquire
Continental Baking Company for a total purchase price of $220
million in cash and 16,923,077 shares of common stock of
Interstate. The closing of the sale is subject to approval by
the shareholders of Interstate and various regulatory clearances.
On April 18, 1995, the Company announced that it has terminated
negotiations to sell its international agribusiness to PM
Holdings Corporation.
PAGE 12
PART I - FINANCIAL INFORMATION
B. CBG Group
CONTINENTAL BAKING GROUP
COMBINED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
13 Weeks Ended 26 Weeks Ended
Mar. 25, Mar. 26, Mar. 25, Mar. 26,
1995 1994 1995 1994
---- ---- ---- ----
Net Sales $ 470.6 $ 491.4 $ 949.3 $ 967.4
--------- --------- ------- ---------
Costs and Expenses
Cost of products sold 241.1 243.5 488.3 474.0
Selling, general and
administrative 218.1 224.5 441.8 440.2
Advertising and promotion 11.1 20.7 27.3 42.9
Interest 8.8 7.2 17.2 13.8
Other (income)/expense, net (0.3) 0.3 (0.4) 1.0
--------- --------- -------- ---------
478.8 496.2 974.2 971.9
--------- --------- --------- ---------
Loss Before Income Taxes and
Extraordinary Item (8.2) (4.8) (24.9) (4.5)
Income Taxes (3.3) (1.4) (10.0) (1.3)
--------- --------- --------- ---------
Loss Before Extraordinary Item (4.9) (3.4) (14.9) (3.2)
Extraordinary Item - Loss on
Early Retirement of Debt (1.6) (1.6)
--------- --------- --------- ---------
Net Loss (4.9) (5.0) (14.9) (4.8)
Preferred Stock Dividend, Net
of Taxes 0.5 0.4 0.9 0.9
--------- --------- --------- ---------
Loss After Preferred Stock
Dividend (5.4) (5.4) (15.8) (5.7)
Loss Applicable to the RPG Group's
Retained Interest in the
CBG Group (2.4) (2.5) (7.1) (2.6)
--------- --------- --------- ---------
Loss After RPG Group's
Retained Interest $ (3.0) $ (2.9) $ (8.7) $ (3.1)
========= ========= ========= =========
Loss per CBG Stock Common Share
Primary
Loss before extraordinary item $ (0.15) $ (0.10) $ (0.42) $ (0.11)
Extraordinary item (0.04) (0.04)
--------- --------- --------- ---------
Net Loss $ (0.15) $ (0.14) $ (0.42) $ (0.15)
========= ========= ========= =========
Fully Diluted
Loss before extraordinary item $ (0.15) $ (0.10) $ (0.42) $ (0.11)
Extraordinary item (0.04) (0.04)
--------- --------- --------- ---------
Net Loss $ (0.15) $ (0.14) $ (0.42) $ (0.15)
========= ========= ========= =========
See Accompanying Notes to Condensed Financial Statements.
PAGE 13
CONTINENTAL BAKING GROUP
COMBINED BALANCE SHEET
(Condensed)
(Dollars in millions)
March 25, Sept. 24,
1995 1994
---- ----
Assets
Current Assets
Cash and cash equivalents $ 1.0 $ 13.6
Receivables, less allowance for doubtful
accounts of $3.6 and $3.4, respectively 100.8 98.5
Inventories -
Raw materials and supplies 49.1 45.3
Finished products 8.0 7.4
Other current assets 31.1 32.0
---------- ----------
Total Current Assets 190.0 196.8
---------- ----------
Investments and Other Assets 64.7 62.9
---------- ----------
Property at Cost 1,101.4 1,071.5
Accumulated depreciation 508.6 474.5
---------- ----------
592.8 597.0
---------- ---------
Total $ 847.5 $ 856.7
========== ==========
Liabilities and Shareholders Equity
Current Liabilities
Current maturities of long-term debt $ 45.0 $ 64.9
Notes payable 28.7
Accounts payable 66.5 86.2
Other current liabilities 106.0 126.4
---------- ---------
Total Current Liabilities 246.2 277.5
---------- ---------
Long-Term Debt 366.2 343.0
---------- ---------
Deferred Income Taxes 5.7 8.9
---------- ---------
Other Liabilities 232.1 221.9
---------- ---------
Redeemable Preferred Stock 41.7 42.3
----------- ---------
Unearned ESOP Compensation (56.6) (64.9)
---------- ---------
CBG Group Equity 12.2 28.0
---------- ---------
Total $ 847.5 $ 856.7
========== ==========
See Accompanying Notes to Condensed Financial Statements.
PAGE 14
CONTINENTAL BAKING GROUP
COMBINED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
26 Weeks Ended
Mar. 25, Mar. 26,
1995 1994
---- ----
Cash Flow from Operations
Net loss $ (14.9) $ (4.8)
Extraordinary item 1.6
Non-cash items included in income 38.3 38.8
Changes in assets and liabilities
used in operations (46.8) (6.4)
Other, net 8.4 (0.1)
---------- ----------
Net cash flow from operations (15.0) 29.1
---------- ----------
Cash Flow from Investing Activities
Property additions, net (34.5) (44.3)
Other, net (1.4) (2.1)
---------- ----------
Net cash provided (used) by investing activities (35.9) (46.4)
---------- ----------
Cash Flow from Financing Activities
Net proceeds from (payments on) centrally
managed debt 40.3 69.2
Treasury stock purchases (2.3)
Dividends paid (1.4) (3.1)
Payment attributed to retained interest (3.3)
Other, net (0.6) (2.2)
---------- ----------
Net cash provided (used) by financing activities 38.3 58.3
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents (12.6) 41.0
Cash and Cash Equivalents, Beginning of Period 13.6 0.5
---------- ----------
Cash and Cash Equivalents, End of Period $ 1.0 $ 41.5
========== ==========
See Accompanying Notes to Condensed Financial Statements.
PAGE 15
CONTINENTAL BAKING GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 25, 1995
(Dollars in millions except per share data)
Note 1 - The accompanying unaudited financial statements have
been
prepared in accordance with the instructions for Form 10-Q and do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Operating
results
for any thirteen week period are not necessarily indicative of
the results
for any other thirteen week period or for the full year. These
statements should be read in connection with the financial
statements of
the CBG Group and notes thereto included in the Ralston Purina
Company's
(the Company) Annual Report to Shareholders for the year ended
September
30, 1994.
Note 2 - On July 30, 1993, the shareholders of the Company
approved
a plan to distribute to shareholders shares of a new class of
common
stock, Ralston-Continental Baking Group Common Stock (CBG Stock),
which is intended to reflect separately the performance of the
Company's fresh bakery products business (the CBG Group). As
part
of this plan, existing common stock was redesignated Ralston-
Ralston
Purina Group Common Stock (RPG Stock) and is intended to reflect
separately the performance of the Company's other businesses (the
RPG Group). The CBG Stock distributed to shareholders, at a
ratio
of one share for every five shares of existing common stock,
represents a 55% interest in the business, assets and liabilities
of the
CBG Group, and the RPG Group retains the remaining 45% interest.
Holders of the CBG Stock are common shareholders of the Company.
Although the financial statements of the RPG Group and the CBG
Group
separately report the assets, liabilities and shareholders equity
of
the Company attributed to each group, this attribution does not
affect legal title to such assets or responsibility for such
liabilities.
Financial impacts arising from the RPG Group that affect the
consolidated
results of operations or financial position of the Company could
affect the
results of operations or financial position of the CBG Group.
Accordingly,
the Company's consolidated quarterly financial information should
be read
in connection with the CBG Group financial information.
Note 3 - Primary earnings per share are based on the average
number of
shares outstanding during the period. Fully diluted earnings per
share
are based on the average number of outstanding shares adjusted
for the
dilutive effect of convertible preferred stock, stock options,
convertible
debentures and compensation awards, when the effects of inclusion
of such
PAGE 16
securities does not result in anti-dilution. The shares used in
earnings
per share computations were as follows:
(in millions)
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Mar 25, 1995 Mar 26, 1994 Mar 25, 1995 Mar 26, 1994
------------ ------------ ------------ ------------
Primary:
CBG Stock 20.6 20.4 20.6 20.5
Fully Diluted:
CBG Stock 24.5 * 26.7 * 24.5 * 26.9 *
*Due to anti-dilution for the 13 and 26 weeks ended March 25,
1995 and
March 26, 1994, fully diluted earnings per share as reported on
the
statement of earnings is revised to exclude anti-dilutive
securities from
the computation.
Note 4 - There were CBG Stock common shares outstanding of
20,590,000 at
March 25, 1995 and 20,588,000 at September 24, 1994, exclusive of
268,000
and 270,000 CBG Stock treasury shares, respectively.
Note 5 - Other Liabilities consists of the following:
March 25, September 24,
1995 1994
---------- ------------
Self-insurance
reserves $119.7 $114.9
Other liabilities 112.4 107.0
------ ------
$232.1 $221.9
====== ======
Note 6 - The CBG Group's restructuring plan announced in June
1994 provided
for the severance of 435 employees at a cost of $16.0, pre-tax.
The plan
has been revised to cover only 360 employees, at a pre-tax cost
of $14.6.
An adjustment to the restructuring provision of $1.4, pre-tax,
was recorded in the second quarter. As of March 25, 1995, 209
employees have
been severed under the plan with $5.7 of spending occurring in
the quarter.
Note 7 - An extraordinary loss for the quarter ending March 26,
1994 was
recognized in conjunction with the retirement of $18.0 of
centrally managed
debt attributed to the CBG Group that had an effective interest
rate of
10.7%.
Note 8 - Under the terms of Ralston's Restated Articles of
Incorporation,
on April 12, 1995, the Company announced it would exchange each
outstanding
share of CBG Stock for .0886 shares of RPG Stock as of May 15,
1995. The
exchange ratio represents a 15% premium to the relative trading
values of
the CBG Stock and RPG Stock for the period March 31 through April
6, 1995,
as provided in Ralston's Articles.
On April 12, 1995, Ralston and Interstate Bakeries Corporation
jointly
announced the signing of a definitive sales agreement for
Interstate to
acquire Ralston's wholly-owned subsidiary, Continental Baking
Company, for
a total purchase price of $220 in cash and 16,923,077 shares of
common
stock of Interstate. The parties also agreed to the terms of a
Shareholder
Agreement which provides that by no later than five years
following
closing, Ralston's holdings of Interstate common stock will be
less than
PAGE 17
15% of the outstanding shares. In addition, the Shareholder
Agreement
provides that Ralston will be entitled to nominate two directors
to
Interstate's Board of Directors. The closing of the sale is
subject to
approval by the shareholders of Interstate and various regulatory
clearances.
PAGE 18
CONTINENTAL BAKING GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
-----------------------------------------------------
Operating Results
The CBG Group incurred a net loss of $14.9 million for the 26
weeks ended March 25, 1995, compared to a net loss of $4.8
million for the 26 weeks ended March 26, 1994. Net loss for the
current year includes an adjustment to reduce previously recorded
restructuring provisions of $.8 million, after taxes. Net loss
for the prior year includes extraordinary losses on the early
retirement of debt of $1.6 million, after taxes. Excluding these
items, net loss was $15.7 million in the current year compared to
$3.2 million in the prior year. Exclusive of the aforementioned
items, primary and fully diluted losses per share on this basis
were $.45 in the current period compared to $.11 in the prior
year.
For the 13 weeks ended March 25, 1995, net loss was $4.9 million,
compared to $5.0 million for the same quarter in the prior year.
Exclusive of previously mentioned items, loss in the current
quarter was $5.7 million compared to $3.4 million last year.
Loss per share on this basis was $.17 in the current quarter and
$.10 in the prior year.
Sales and gross profit declined for the 13 and 26 weeks ended
March 25, 1995 on an unfavorable product mix in bread, lower
thrift store volume, lower sweet baked goods volume in the second
quarter and higher promotional sales discounts in the first
quarter. Cost of products sold as a percent of sales increased
to 51.2% and 51.4% in the current 13 and 26 weeks, respectively,
compared to 49.6% and 49.0% in 1994.
Operating results of the CBG Group declined in the quarter and
six months on the previously mentioned items and higher material
and labor costs. The CBG Group was unable to offset higher costs
with price increases given current competitive conditions. These
factors were partially offset by continued favorable results from
cost reduction actions. Selling, general and administrative
costs increased to 46.5% of sales in the current year 26 week
period compared to 45.5% in the prior year on lower sales and
increased route distribution costs, partially offset by
administrative cost reductions. Advertising and promotion
expense was 2.9% of sales compared to 4.4% in the prior year on
lower spending.
The CBG Group's restructuring plan announced in June 1994
provided for the severance of 435 employees at a cost of $16.0
million, pre-tax. The plan has been revised to cover only 360
employees, at a pre-tax cost of $14.6 million. An adjustment to
the restructuring provision of $1.4 million, pre-tax, was
recorded in the second quarter. Annualized cost savings are
expected to be approximately $20 million, pre-tax. As of March
25, 1995, 209 employees have been severed under the plan with
$5.7 million of spending occurring in the quarter.
Financial Condition
Cash used by operations in the 26 weeks ended March 25, 1995, was
$15.0 million compared to cash provided by operations of $29.1
million for the same period in the prior year. The current
period was negatively impacted by significant fluctuations in
working capital components. Net cash used for investing
activities in the period was $35.9 million. Current liabilities
in excess of current assets at March 25, 1995 were $56.2 million
compared to $80.7 million at September 24, 1994.
The Company manages most financial activities of the Group on a
centralized, consolidated basis. The liquidity and capital
resources of the Company provide financial and operating
flexibility to each group. The CBG Group's centrally managed
debt increased $40.3 million
in the first half of fiscal 1995 to fund operating, investing and
other financing activities.
As of May 1, 1995, approximately 3,757,929 shares of CBG Stock
remained under the Board of Directors' authorization for the
purchase of up to 4 million shares of CBG Stock.
PAGE 19
On April 12, 1995, the Company announced it would exchange each
outstanding share of CBG Stock for .0886 shares of RPG Stock as
of May 15, 1995. The Company signed a definitive sales agreement
on April 12, 1995 for Interstate Bakeries Corporation to acquire
Continental Baking Company for a total purchase price of $220
million in cash and 16,923,077 shares of common stock of
Interstate. The closing of the sale is subject to approval by
the shareholders of Interstate and various regulatory clearances.
PAGE 20
PART I - FINANCIAL INFORMATION
C. Consolidated
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
1995 1994 1995 1994
Net Sales $ 1,752.1 $1,997.7 $3,743.9 $4,197.0
---------- --------- -------- ---------
Costs and Expenses
Cost of products sold 995.0 1,105.3 2,105.3 2,278.9
Selling, general and
administrative 460.6 494.8 915.6 963.3
Advertising and promotion 140.4 209.0 319.2 477.6
Interest 46.8 57.5 95.7 113.8
Provision for restructuring 12.1 35.0
Other (income)/expense, net 2.5 7.4 2.1 15.0
---------- --------- --------- ---------
1,657.4 1,874.0 3,472.9 3,848.6
---------- --------- --------- ---------
Earnings Before Income Taxes and
Extraordinary Item 94.7 123.7 271.0 348.4
Income Taxes 43.3 51.3 118.5 142.3
---------- --------- --------- ---------
Earnings Before Extraordinary Item 51.4 72.4 152.5 206.1
Extraordinary Item - Loss on
Early Retirement of Debt (9.5) (9.5)
---------- --------- --------- ---------
Net Earnings 51.4 62.9 152.5 196.6
Preferred Stock Dividend,
Net of Taxes 4.8 5.3 9.6 10.5
---------- --------- --------- ---------
Earnings After Preferred Stock
Dividend $ 46.6 $ 57.6 $ 142.9 $ 186.1
========== ========= ========= =========
Cash Dividends Declared per RPG
Stock Common Share $ 0.60 $ 0.60 $ 0.60 $ 0.60
Earnings (Loss) per Common Share -
RPG Stock:
Primary
Earnings before extraordinary
item $ 0.50 $ 0.68 $ 1.52 $ 1.96
Extraordinary item (0.08) (0.08)
---------- --------- --------- ---------
Net earnings $ 0.50 $ 0.60 $ 1.52 $ 1.88
========== ========= ========= =========
Fully Diluted
Earnings before extraordinary
item $ 0.48 $ 0.65 $ 1.43 $ 1.84
Extraordinary item (0.07) (0.07)
---------- --------- -------- ---------
Net earnings $ 0.48 $ 0.58 $ 1.43 $ 1.77
========== ========= ========= =========
PAGE 21
CBG Stock:
Primary
Loss before extraordinary
item $ (0.15) $ (0.10) $ (0.42) $ (0.11)
Extraordinary item (0.04) (0.04)
---------- --------- --------- ---------
Net loss $ (0.15) $ (0.14) $ (0.42) $ (0.15)
========== ========= ========= =========
Fully Diluted
Loss before extraordinary
item $ (0.15) $ (0.10) $ (0.42) $ (0.11)
Extraordinary item (0.04) (0.04)
---------- --------- --------- ---------
Net loss $ (0.15) $ (0.14) $ (0.42) $ (0.15)
========== ========= ========= =========
See Accompanying Notes to Condensed Financial Statements.
PAGE 22
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Condensed)
(Dollars in millions)
March 31, Sept. 30,
1995 1994
Assets
Current Assets
Cash and cash equivalents $ 80.1 $ 126.0
Receivables, less allowance for doubtful
accounts of $31.6 and $29.2, respectively 804.9 829.1
Inventories -
Raw materials and supplies 223.5 216.0
Work in process 98.5 101.5
Finished products 426.9 412.4
Other current assets 187.4 174.2
---------- ----------
Total Current Assets 1,821.3 1,859.2
---------- ----------
Investments and Other Assets 856.1 865.7
---------- ----------
Property at Cost 3,628.3 3,527.8
Accumulated depreciation 1,720.8 1,630.4
---------- ----------
1,907.5 1,897.4
---------- ----------
Total $ 4,584.9 $ 4,622.3
========== ==========
Liabilities and Shareholders Equity
Current Liabilities
Current maturities of long-term debt $ 225.6 $ 288.1
Notes payable 468.1 454.3
Accounts payable 396.5 454.5
Other current liabilities 615.8 600.6
---------- ----------
Total Current Liabilities 1,706.0 1,797.5
---------- ----------
Long-Term Debt 1,535.0 1,594.6
---------- ----------
Deferred Income Taxes 67.0 72.5
---------- ----------
Other Liabilities 617.8 592.6
---------- ----------
Redeemable Preferred Stock 463.4 469.7
---------- ----------
Unearned ESOP Compensation (234.0) (260.2)
---------- ----------
Shareholders Equity
Preferred stock
Common stocks:
RPG Stock 11.5 11.5
CBG Stock 2.1 2.1
Capital in excess of par value 134.7 108.7
Retained earnings 1,125.7 1,043.2
Cumulative translation adjustment (69.5) (58.7)
Common stock in treasury, at cost:
RPG Stock (573.2) (577.4)
CBG Stock (2.6) (2.6)
PAGE 23
Unearned portion of restricted stock (3.9) (4.3)
Value of RPG Stock held in Grantor Trust (195.1) (166.9)
---------- ----------
Total Shareholders Equity 429.7 355.6
---------- -----------
Total $ 4,584.9 $ 4,622.3
========== ==========
See Accompanying Notes to Condensed Financial Statements.
PAGE 24
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
Six Months Ended
March 31,
1995 1994
Cash Flow from Operations
Net earnings $ 152.5 $ 196.6
Extraordinary item 9.5
Non-cash items included in income 144.7 168.9
Changes in assets and liabilities
used in operations (48.5) (102.8)
Other, net 11.5 4.1
---------- ---------
Net cash flow from operations 260.2 276.3
---------- ---------
Cash Flow from Investing Activities
Acquisition of businesses (39.2)
Property additions, net (127.9) (148.7)
Other, net (9.1) (2.7)
---------- ---------
Net cash provided (used) by investing activities (137.0) (190.6)
---------- ---------
Cash Flow from Financing Activities
Proceeds from issuance of debt for spin-off 370.0
Net cash flow provided (used) by debt (82.2) (89.2)
Treasury stock purchases (71.7)
Dividends paid (75.7) (79.2)
Other, net (6.4) 2.7
---------- ---------
Net cash provided (used) by financing activities (164.3) 132.6
---------- ---------
Effect of Exchange Rate Changes on Cash (4.8) (14.2)
---------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents (45.9) 204.1
Cash and Cash Equivalents, Beginning of Period 126.0 57.9
---------- ---------
Cash and Cash Equivalents, End of Period $ 80.1 $ 262.0
========== ==========
See Accompanying Notes to Condensed Financial Statements.
PAGE 25
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995
(Dollars in millions except per share data)
Note 1 - The accompanying unaudited financial statements have
been
prepared in accordance with the instructions for Form 10-Q and do
not
include all of the information and footnotes required by
generally
accepted accounting principles for complete financial statements.
In
the opinion of management, all adjustments, consisting only of
normal
recurring adjustments considered necessary for a fair
presentation,
have been included. Operating results for any quarter are not
necessarily indicative of the results for any other quarter or
for the
full year. These statements should be read in connection with
the
financial statements and notes thereto included in the Ralston
Purina
Company's (the Company) Annual Report to Shareholders for the
year
ended September 30, 1994.
Note 2 - On July 30, 1993, the shareholders of the Company
approved a
plan to distribute to shareholders shares of a new class of
common
stock, Ralston-Continental Baking Group Common Stock (CBG Stock),
which is intended to reflect separately the performance of the
Company's fresh bakery products business (the CBG Group). As
part
of this plan, existing common stock was redesignated Ralston-
Ralston
Purina Group Common Stock (RPG Stock) and is intended to reflect
separately the performance of the Company's other businesses (the
RPG Group). The CBG Stock distributed to shareholders, at a
ratio
of one share for every five shares of existing common stock,
represents a 55% interest in the business, assets and liabilities
of the
CBG Group, and the RPG Group retains the remaining 45% interest.
Note 3 - Primary earnings per share are based on the average
number of
shares outstanding during the period, excluding 4,086,000 shares
of RPG
Stock held by Ralston's Grantor Trust at March 31, 1995. Fully
diluted
earnings per share are based on the average number of shares used
for
the primary earnings per share calculation, adjusted for the
dilutive
effect of convertible preferred stock, stock options, convertible
debentures and compensation awards, when the effects of inclusion
of
such securities does not result in anti-dilution. The shares
used in
earnings per share computations were as follows:
(in millions)
Three Months Three Months Six Months Six Months
Mar 31, 1995 Mar 31, 1994 Mar 31, 1995 Mar 31, 1994
------------ ------------ ------------ ------------
Primary:
RPG Stock 100.0 100.2 100.0 100.9
CBG Stock 20.6 20.4 20.6 20.5
Fully Diluted:
RPG Stock 110.6 110.1 110.5 110.7
CBG Stock 24.5 * 26.7 * 24.5 * 26.9 *
*Due to anti-dilution for the quarter and six months ended March
31, 1995
and 1994, fully diluted earnings per share as reported on the
statement of
earnings is revised to exclude anti-dilutive securities from the
computation.
PAGE 26
Note 4 - As of March 31, 1995, there were 100,055,000 shares of
RPG Stock
and 20,590,000 shares of CBG Stock outstanding, and at September
30, 1994,
there were 100,031,000 shares of RPG Stock and 20,588,000 shares
of CBG
Stock outstanding. These share figures are exclusive of: 1)
shares held in
treasury, which were 10,547,000 of RPG Stock and 268,000 of CBG
Stock at
March 31, 1995 and 10,620,000 of RPG Stock and 270,000 of CBG
Stock at
September 30, 1994; and 2) Grantor Trust shares which were
4,086,000 of RPG
Stock at March 31, 1995 and 4,033,000 of RPG Stock at September
30, 1994.
Note 5 - Other (income)/expense, net for six months consists
of the following:
March 31, March 31,
1995 1994
--------- ---------
Net translation
and exchange loss $8.5 $14.5
Investment income (3.9) (6.1)
Miscellaneous (2.5) 6.6
----- -----
$2.1 $15.0
===== =====
Note 6 - Investments and Other Assets consist of the following:
March 31, September 30,
1995 1994
--------- -------------
Goodwill $369.2 $365.9
Intangible Assets 177.6 194.5
Other Assets 309.3 305.3
------ ------
$856.1 $865.7
======= ======
Note 7 - During the quarter and six months ended March 31, 1995,
the
Company recorded charges of $11.7, after taxes, and $28.0, after
taxes,
respectively, or $.12 and $.11 per primary and fully diluted
share for the
quarter and $.28 and $.25 per share for the six months, in
connection with
its restructuring of its worldwide carbon zinc battery production
capacity
and certain administrative functions announced in November 1994.
On a pre-tax basis, charges for restructuring for the six months
consist of
termination benefits of $23.7, other cash exit costs of $3.3 and
non-cash
charges of $8.0, primarily related to anticipated losses on
disposal of
land, buildings and machinery and equipment.
During the six months, two plants were closed and 567 employees
were
severed in connection with the restructuring plan. Cash exit
costs
incurred in the quarter and six months related to the
restructuring plan
announced in November 1994 were $17.4 and $30.6, respectively.
Additional charges associated with the restructuring announced in
November
1994 are expected, including $10 to $15, pre-tax, during 1995 and
$25 to
$40, pre-tax, in later years. The Company continues to review
worldwide
battery production capacity.
The Company's bakery products restructuring plan announced in
June 1994
provided for the severance of 435 employees at a cost of $16.0,
pre-tax.
The plan has been revised to cover only 360 employees, at a pre-
tax cost of
PAGE 27
$14.6. An adjustment to the restructuring provision of $1.4,
pre-tax,
was recorded in the second quarter. As of March 25, 1995, 209
employees
have been severed under the plan with $5.7 of spending occurring
in the
quarter.
Note 8 - An extraordinary loss in fiscal 1994 was recognized in
conjunction with the retirement of $107.4 of debt that had an
effective
interest rate of 10.7%.
Note 9 - Subsequent to quarter end, the Company purchased the
assets of
Golden Cat Corporation, the leading manufacturer and marketer of
branded
cat box filler in the United States and Canada, and the assets of
a Mexican
pet food company for $340 and $18, respectively.
Note 10 - Under the terms of Ralston's Restated Articles of
Incorporation, on April 12, 1995, the Company announced it would
exchange
each outstanding share of CBG Stock for .0886 shares of RPG Stock
as of May
15, 1995. The exchange ratio represents a 15% premium to the
relative
trading values of the CBG Stock and RPG Stock for the period
March 31
through April 6, 1995, as provided in Ralston's Articles.
On April 12, 1995, Ralston and Interstate Bakeries Corporation
jointly
announced the signing of a definitive sales agreement for
Interstate to
acquire Ralston's wholly-owned subsidiary, Continental Baking
Company, for
a total purchase price of $220 in cash and 16,923,077 shares of
common
stock of Interstate. The parties also agreed to the terms of a
Shareholder
Agreement which provides that by no later than five years
following
closing, Ralston's holdings of Interstate common stock will be
less than
15% of the outstanding shares. In addition, the Shareholder
Agreement
provides that Ralston will be entitled to nominate two directors
to
Interstate's Board of Directors. The closing of the sale is
subject to
approval by the shareholders of Interstate and various regulatory
clearances.
Note 11 - On April 18, 1995, the Company announced that it has
terminated
negotiations to sell its international agribusiness to PM
Holdings
Corporation.
Note 12 - On January 20, 1995, the Company and its wholly-owned
subsidiary, Continental Baking Company ("CBC"), were served with
two
substantively identical complaints filed in the Missouri Circuit
Court of St. Louis, Missouri, and styled Attanasio, et al. v.
Ralston Purina Co., et al., No. 954-00010, and Haenel, et al.
v.
Ralston Purina Co., et al., No. 954-00009. Both actions purport
to be
brought by and on behalf of all shareholders (other than the
defendants) of
CBC, and are filed against the Company, CBC, and all the
directors of each,
and allege that the defendants have engaged in unfair dealing and
otherwise
breached their duties to CBC shareholders by improperly proposing
to sell
CBC to Interstate Bakeries Corporation ("IBC") for less than
adequate
consideration. Both actions seek to enjoin the sale to IBC, as
well as
damages. The Haenel action includes an affiliate of IBC as a
defendant.
A similar suit, styled Goodsene et al. v. Stiritz, et al., No.
952-00416, was filed in the same court against the Company's and
CBC's
directors (and purportedly against two non-existent entities,
"Ralston
Purina Group" and "Continental Baking Group") on February 15,
1995. No
discovery has occurred in any such action, and the court has not
determined
that any may proceed as a class action. The Company believes
that all
actions were intended to be filed on behalf of all shareholders
(other than
defendants) of the Company's class of common
stock, and
that CBC and its directors are not proper parties to any
action.
PAGE 28
The above complaints contain questionable allegations, and in the
opinion
of management, the Company has numerous meritorious defenses to
each. The
amount of alleged liability asserted by these actions cannot be
determined
with certainty. In the opinion of management, however, the
ultimate
liability of the Company, if any, arising from these proceedings,
other
legal claims and known potential legal claims which are probable
of
assertion, taking into account established accruals for estimated
liabilities, should not be material to the financial position of
the
Company, but could be material to results of operations or cash
flows for a
particular quarter or annual period.
Note 13 - On March 31, 1994, the company effected a spin-off of
its
private label and branded cereal, baby food, crackers and
cookies,
ski resort and coupon redemption businesses (the Distribution).
The
Company's earnings and cash flows reflect the operations of those
businesses through March 31, 1994.
The following pro forma statements of earnings reflect the
results of
operations for the three and six months ended March 31, 1994 as
if the
Distribution had occurred as of the beginning of the six month
period.
Such statements have been prepared by adjusting the historical
statements
for the effect of costs, expenses, assets and liabilities and the
recapitalization which might have occurred had the Distribution
been
effected as of October 1, 1992. These pro forma financial
statements may
not necessarily reflect the consolidated results of operations
that would
have existed had the Distribution occurred as of that date.
PAGE 29
RALSTON PURINA COMPANY
Pro Forma Consolidated Statement of Earnings
(in millions)
Three Months Ended Six Months Ended
March 31, March 31,
1994 1994
---------------- ----------------
Net Sales (a) $1,739.0 $3,675.1
---------------- ----------------
Costs and Expenses
Cost of products sold (a) 972.4 2,013.2
Selling, general and
administrative (a) 457.3 891.7
Advertising and promotion (a) 160.4 360.8
Interest expense (b) 53.8 106.4
Other (income)/expense, net (a) 7.3 14.8
---------------- ----------------
1,651.2 3,386.9
---------------- ----------------
Earnings Before Income Taxes
and Extraordinary Loss 87.8 288.2
Income Taxes (c) 37.8 119.6
---------------- ----------------
Earnings Before Extraordinary Loss $50.0 $168.6
================ ================
[FN]
(a) Excludes results of operations of Ralcorp.
(b) Reflects reduction of interest expense at an average rate of
3.9% in 1994 due to debt repayment of $370 by Ralston from the
proceeds of debt issued in connection with the spin-off.
(c) Reflects the applicable federal and state statutory tax rates
for the pro forma adjustments.
PAGE 29
RALSTON PURINA COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
-----------------------------------------------------
Operating Results
Net earnings for the six months ended March 31, 1995 were $152.5
million, compared to $196.6 million for the same period in the
prior year. During the six months ended March 31, 1995, the
Company recorded provisions for battery products restructuring of
$28.0 million, after taxes. Net earnings for the six months
ended March 31, 1994 included $37.5 million of net earnings
related to the spun-off operations of Ralcorp and an
extraordinary loss on the early retirement of debt of $9.5
million, after taxes. Exclusive of these items, earnings for the
six months increased by $11.9 million on lower interest expense,
higher returns on other investments and lower foreign currency
losses, partially offset by lower operating profit in the Bakery
Products segment.
For the quarter ended March 31, 1995, net earnings were $51.4
million compared to $62.9 million for the same quarter in 1994,
reflecting factors previously mentioned. Exclusive of previously
mentioned charges and results of spun-off Ralcorp operations,
earnings in the current quarter were $63.1 million, compared to
$50.0 million in the second quarter of fiscal 1994.
Business Segments
Sales for the Pet and Human Foods segment for the quarter and six
months, exclusive of results of spun-off businesses, declined
slightly as lower domestic prices reflecting expansion of
simplified promotion and pricing practices were partially offset
by higher volume, primarily in the first quarter, and a
favorable domestic product mix.
Operating profit for the six months, exclusive of spun-off
businesses, increased on favorable product mix and higher volume,
primarily in the first quarter, and favorable ingredient costs,
partially offset by spending for cost reduction programs. In the
quarter, operating profit declined slightly as such higher
spending was partially offset by lower ingredient costs. Lower
prices were offset by reductions in advertising and promotion
expense associated with the new promotional practices in both the
quarter and six months.
Sales of the Battery Products segment increased in the six months
over the same period of the prior year primarily on higher volume
in the Asia Pacific region and favorable foreign currency
exchange in Europe and the Asia Pacific region, partially offset
by unfavorable pricing in Europe. For the second quarter,
improved domestic Energizer volume partially offset the prior
quarter's domestic volume declines. Ultimate consumer purchases
and market share continued to improve, as measured by A.C.
Nielson.
Operating profit, excluding restructuring charges, for the
quarter increased on improved domestic and Asia Pacific results
partially offset by declines in Europe. For the six months,
results were down as first quarter domestic and European declines
were partially offset by second quarter increases.
During the quarter and six months ended March 31, 1995, the
Company recorded charges of $11.7 million, after taxes, and $28.0
million, after taxes, respectively, or $.12 and $.11 per primary
and fully-diluted share for the quarter and $.28 and $.25 per
share for the six months, in connection with the restructuring of
its worldwide carbon zinc battery production capacity and certain
administrative functions announced in November 1994.
On a pre-tax basis, charges for restructuring for the six months
consist of termination
benefits of $23.7 million, other cash exit costs of $3.3 million
and non-cash charges of $8.0 million, primarily related to
anticipated losses on disposal of land, buildings and machinery
and equipment.
PAGE 31
During the six months, two plants were closed and 567 employees
were severed in connection with the restructuring plan. Activity
related to the restructuring plan during the six month period was
as follows:
(millions)
----------
Reserve balance at September 30, 1994 $ 36.5
Provision recorded in the six months 35.0
Cash exit costs incurred during the six months (30.6)
Portion of current period provision
classified as property writedowns (8.0)
Increase due to translation .7
------
Reserve balance at March 31, 1995 $ 33.6
======
Additional charges associated with the restructuring announced in
November 1994 are expected including $10 to $15 million, pre-tax,
during 1995 and $25 to $40 million, pre-tax, in later years. The
Company continues to review worldwide battery production
capacity.
Sales of the Bakery Products segment decreased for the six months
on an unfavorable product mix in bread, lower thrift store
volume, lower sweet baked goods volume in the second quarter and
higher promotional sales discounts in the first quarter.
Operating results declined for the quarter and six months on
sales declines combined with higher material and labor costs.
Due to competitive conditions, price increases could not be taken
to offset higher costs. These factors were partially offset by
continued favorable results from cost reduction actions.
Sales and operating profit of the soy protein products business
increased on strong volume in food protein products, increased
productivity and favorable foreign currency exchange rates.
Sales and operating profit for international agricultural
products increased on higher volume in most world areas and
favorable foreign currency exchange rates.
Results of Operations
Cost of products sold as a percentage of sales (exclusive of
spun-off businesses) for the six months and quarter,
respectively, increased from 54.8% and 55.9% in the 1994 periods
to 56.2% and 56.8% in the current periods. Increases were from
higher cost percentages in the Bakery Products segment, sales
increases in segments with relatively higher cost percentages and
higher Pet and Human Foods segment percentages associated with
price reductions under simplified promotion practices, partially
offset by improvements in all other segments.
Selling, general and administrative expenses (exclusive of spun-
off businesses) were 24.5% and 24.3% of sales for 1995 and 1994
six month periods, respectively. Advertising and promotion
expense (exclusive of spun-off businesses) for those periods was
8.5% and 9.8% of sales, respectively, on significantly lower
domestic pet food promotion expense associated with simplified
promotion practices and lower spending in the Bakery Products
segment. Other expense, net, (exclusive of spun-off businesses)
decreased by $12.7 million for the six months on higher return on
other investments in the current quarter and lower foreign
currency exchange losses in the first quarter.
Income taxes include federal, state and foreign taxes and were
43.7% of earnings before income taxes for the six months ended
March 31, 1995, compared to 40.8% in the prior year. The income
tax percentage is influenced by restructuring provisions which
did not result in tax benefits due to foreign tax loss
situations. Excluding such impacts, the tax percentage for the
Company was 41.0% in the current period.
PAGE 32
Financial Condition
The Company's primary source of liquidity is cash flow generated
from operations. For the six months ended March 31, 1995, cash
flow from operations was $260.2 million compared to $276.3
million in the six months ended March 31, 1994. The decrease in
cash flow is primarily due to the absence of cash flow from
Ralcorp operations which was included in 1994, partially offset
by changes in working capital. Working capital was $115.3
million at March 31, 1995 compared to $61.7 million at September
30, 1994. Cash and cash equivalents at March 31, 1995 were $80.1
million compared to $126.0 million at September 30, 1994.
As of May 1, 1995, approximately 1,883,920 shares of RPG Stock
and 3,757,929 shares of CBG Stock remained under the Board of
Directors' authorization for the purchase of up to 3 million
shares of RPG Stock and up to 4 million shares of CBG Stock.
Subsequent to quarter end, the Company purchased the assets of
Golden Cat Corporation, the leading manufacturer and marketer of
branded cat box filler in the United States and Canada, and the
assets of a Mexican pet food company for $340 million and $18
million, respectively.
On April 12, 1995, the Company announced it would exchange each
outstanding share of CBG Stock for .0886 shares of RPG Stock as
of May 15, 1995. The Company signed a definitive sales agreement
on April 12, 1995 for Interstate Bakeries Corporation to acquire
Continental Baking Company for a total purchase price of $220
million in cash and 16,923,077 shares of common stock of
Interstate. The closing of the sale is subject to approval by
the shareholders of Interstate and various regulatory clearances.
On April 18, 1995, the Company announced that it has terminated
negotiations to sell its international agribusiness to PM
Holdings Corporation.
PAGE 33
PART II - OTHER INFORMATION
-----------------
There is no information required to be reported under any items
except
those indicated below.
Item 1. Legal Proceedings.
-----------------
On January 20, 1995, the Company and its wholly-owned subsidiary,
Continental Baking Company (``CBC''), were served with two
substantively identical complaints filed in the Missouri Circuit
Court of St. Louis, Missouri, and styled Attanasio, et al. v.
Ralston Purina Co., et al., No. 954-00010, and Haenel, et al. v.
Ralston Purina Co., et al., No. 954-00009. Both actions purport
to be brought by and on behalf of all shareholders (other than
the defendants) of CBC, and are filed against the Company, CBC,
and all the directors of each, and allege that the defendants
have engaged in unfair dealing and otherwise breached their
duties to CBC shareholders by improperly proposing to sell CBC to
Interstate Bakeries Corporation (``IBC'') for less than adequate
consideration. Both actions seek to enjoin the sale to IBC, as
well as damages. The Haenel action includes an affiliate of IBC
as a defendant. A similar suit, styled Goodsene et al. v.
Stritz, et al., No. 952-00416, was filed in the same court
against the Company's and CBC's directors (and purportedly
against two non-existent entities, ``Ralston Purina Group'' and
``Continental Baking Group'') on February 15, 1995. No discovery
has occurred in any such action, and the court has not determined
that any may proceed as a class action. The Company believes
that all actions were intended to be filed on behalf of all
shareholders (other than defendants) of the Company's class of
common stock, and that CBC and its directors are not proper
parties to any action.
The above complaints contain questionable allegations, and in the
opinion of management, the Company has numerous meritorious
defenses to each. The amount of alleged liability asserted by
these actions cannot be determined with certainty. In the
opinion of management, however, the ultimate legal claims and
known potential legal claims which are probable of assertion,
taking into account established accruals for estimated
liabilities, should not be material to the financial position of
the Company, but could be material to results of operations or
cash flows for a particular quarter or annual period.
Item 2. Changes in Securities.
---------------------
On April 12, 1995 the Board of Directors of the Company, pursuant to
the terms of the Company's Restated Articles of Incorporation, authorized
the exchange of each outstanding share of the Company's Ralston-Continental
Baking Group Common Stock ("CBG Stock") for .0886 shares of the Company's
Ralston-Ralston Purina Group Common Stock ("RPG Stock"), effective as of
May 15, 1995. Approximately 1,800,000 shares of RPG Stock will be issued in
the exchange, although fractional shares will be paid in the
form of cash based on the value of the RPG Stock on May 8, 1995. Following
the exchange, no shares of CBG Stock will be outstanding, and none will
be issued in the future. The RPG Stock will be the sole class of common
stock of the Company outstanding thereafter.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits filed with this Report:
(11) Statement, re: Computation of Per Share
Earnings.
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a Report on Form 8-K on April 21, 1995,
to file its press release dated April 12, 1995, disclosing that the
Board of Directors authorized the exchange of each outstanding share
of CBG Stock for .0886 shares of RPG Stock.
PAGE 34
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.
RALSTON PURINA COMPANY
----------------------
Registrant
By JAMES R. ELSESSER
----------------------
James R. Elsesser
Vice President and Chief
Financial Officer
Date: May 12, 1995
PAGE 35
Exhibit Index
Exhibits
-----
EX-11 Computation of Earnings Per Share
(provided electronically)
EX-27 Financial Data Schedule
Exhibit 11
RALSTON PURINA GROUP
COMPUTATION OF EARNINGS PER SHARE
(In millions, except per share data)
Six Months Ended
Mar 31, Mar 31,
1995 1994
EARNINGS PER COMMON SHARE OUTSTANDING ----------- ---------
Earnings before extraordinary item $160.3 $206.7
Dividend on Series A ESOP convertible
preferred stock, net of tax (8.7) (9.6)
--------- ---------
151.6 197.1
Extraordinary item (7.9)
--------- ---------
Net Earnings $151.6 $189.2
========= =========
Weighted average shares-primary
earnings per share calculation 100.0 * 100.9
========= =========
Earnings per common share outstanding:
Earnings before extraordinary item $1.52 $1.96
Extraordinary item (0.08)
--------- ---------
Net earnings $1.52 $1.88
========= =========
EARNINGS PER SHARE ASSUMING FULL DILUTION
Earnings before extraordinary item $160.3 $206.7
Adjustments to earnings to reflect assumed
ESOP preferred stock conversion (2.0) (2.8)
--------- ---------
158.3 203.9
Extraordinary item (7.9)
Net earnings for fully diluted --------- ---------
earnings per share calculation $158.3 $196.0
========= =========
Weighted average number of shares outstanding 100.0 100.9
Convertible preferred stock 9.4 9.4
Dilutive effect of stock options 0.9 0.3
Shares issuable on conversion of debentures
Dilutive effect of deferred compensation awards 0.2 0.1
Weighted average shares-fully diluted --------- ---------
earnings per share calculation 110.5 110.7
========= =========
Earnings per share assuming full dilution:
Earnings before extraordinary item $1.43 $1.84
Extraordinary item (0.07)
--------- ---------
Net earnings $1.43 $1.77
========= =========
Excludes 4.1 shares held in Grantor Trust
Exhibit 11
CONTINENTAL BAKING GROUP
COMPUTATION OF EARNINGS PER SHARE
(In millions, except per share data)
26 Weeks 26 Weeks
Ended Ended
Mar 25, 1995 Mar 26, 1994
LOSS PER COMMON SHARE OUTSTANDING ------------ ------------
Loss before extraordinary item ($14.9) ($3.2)
Dividend on Series A ESOP convertible
preferred stock, net of tax (0.9) (0.9)
--------- -----------
(15.8) (4.1)
Extraordinary item (1.6)
--------- ---------
Net loss ($15.8) ($5.7)
========= =========
Weighted average shares outstanding 20.6 20.5
Shares issuable with respect to RPG Group's
retained interest in the CBG Group 16.7 16.8
Weighted average shares-primary --------- ---------
earnings per share calculation 37.3 37.3
========= =========
Loss per common share outstanding:
Loss before extraordinary item ($0.42) ($0.11)
Extraordinary item (0.04)
--------- ---------
Net loss ($0.42) ($0.15)
========= =========
LOSS PER SHARE ASSUMING FULL DILUTION
Loss before extraordinary item ($14.9) ($3.2)
Adjustments to loss to reflect assumed
ESOP preferred stock conversion (1.4) (1.5)
--------- ---------
(16.3) (4.7)
Extraordinary item (1.6)
Net loss for fully diluted --------- ---------
earnings per share calculation ($16.3) ($6.3)
========= =========
Weighted average number of shares outstanding 20.6 20.5
Shares issuable with respect to RPG's retained
interest in the CBG Group 16.7 16.8
Convertible preferred stock 3.8 6.4
Dilutive effect of stock options
Shares issuable on conversion of debentures
Dilutive effect of deferred compensation awards 0.1
Weighted average shares-fully diluted --------- ---------
earnings per share calculation 41.2 43.7
========= =========
Loss per share assuming full dilution:
Loss before extraordinary item ($0.40) ($0.11)
Extraordinary item (0.04)
--------- ---------
Net loss ($0.40)* ($0.15)*
========= =========
[FN]
* Due to anti-dilution as computed above for the 26 weeks ended
March 25, 1995 and March 26, 1994, fully diluted loss per share
reported on the statement of earnings is revised to exclude
anti-dilutive securities from the computation.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
COMMON STOCK OF 13,600 REPRESENTS RPG STOCK OF 11,500 AND CBG STOCK OF 2,100.
PRIMARY AND FULLY DILUTED EPS FOR RPG ARE 1.52 & 1.43. PRIMARY AND FULLY DILUTED
EPS FOR CBG ARE (.42) &(.42). THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE 3/31/95 RALSTON PURINA CO. BALANCE SHEET & STMT
OF EARNINGS & IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STMTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 80,100
<SECURITIES> 0
<RECEIVABLES> 836,500
<ALLOWANCES> 31,600
<INVENTORY> 748,900
<CURRENT-ASSETS> 1,821,300
<PP&E> 3,628,300
<DEPRECIATION> 1,720,800
<TOTAL-ASSETS> 4,584,900
<CURRENT-LIABILITIES> 1,706,000
<BONDS> 1,535,000
<COMMON> 13,600
463,400
0
<OTHER-SE> 416,100
<TOTAL-LIABILITY-AND-EQUITY> 4,584,900
<SALES> 3,743,900
<TOTAL-REVENUES> 3,743,900
<CGS> 2,105,300
<TOTAL-COSTS> 2,105,300
<OTHER-EXPENSES> 1,271,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,700
<INCOME-PRETAX> 271,000
<INCOME-TAX> 118,500
<INCOME-CONTINUING> 152,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,900
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
LOSS-PREVENTION INCLUDED IN OTHER-EXPENSE ABOVE.
</TABLE>
