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, 1994
Commission File No. 1-4582
RALSTON PURINA COMPANY
----------------------------------------------------------
(Exact name of registrant as specified in its
charter)
MISSOURI 43-
0470580
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(State of Incorporation) (I.R.S. Employer
Identification No.)
CHECKERBOARD SQUARE, ST. LOUIS MISSOURI
63164
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(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 6,
1994
- 100,451,262.
Number of shares of Ralston-Continental Baking Group common
stock, $.10 par
value, outstanding as of the close of business on May 6,
1994
- 20,588,239.
PART I - FINANCIAL INFORMATION
A. RPG Group
RALSTON PURINA GROUP
COMBINED STATEMENT OF
EARNINGS
(Dollars in millions
except per share data)
Three Months
Ended
December 31,
1994 1993
------ ------
Net Sales $1,513.5 $1,724.3
------ ------
Costs and Expenses
Cost of products sold 863.5 944.1
Selling, general and
administrative 231.3 252.8
Advertising and promotion 162.6 246.4
Interest 40.5 49.7
Provision for
restructuring 22.9
Other (income)/expense,
net (0.3) 6.9
------ ------
1,320.5 1,499.9
------ ------
Loss Related to Retained
Interest in the CBG Group (4.7) (0.1)
------ ------
Earnings Before Income
Taxes 188.3 224.3
Income Taxes 81.9 90.9
------ ------
Net Earnings 106.4 133.4
Preferred Stock Dividend,
Net of Taxes 4.4 4.7
------ ------
Earnings After Preferred
Stock Dividend $102.0 $128.7
====== ======
Earnings per RPG Stock
Common Share
Primary $1.02 $1.27
====== ======
Fully Diluted $0.96 $1.18
====== ======
See Accompanying Notes to Condensed Financial Statements.
RALSTON PURINA GROUP
COMBINED BALANCE SHEET
(Condensed)
(Dollars in millions)
Dec. 31, Sept. 30,
1994 1994
--------- ------
ASSETS
Current Assets
Cash and cash equivalents $89.7 $112.4
Receivables, less allowance for doubtful
accounts of $27.4 and $25.8, respectively 895.1 730.6
Inventories -
Raw materials and supplies 169.1 170.7
Work in process 91.8 101.5
Finished products 380.6 405.0
Other current assets 153.1 142.2
------ ------
Total Current Assets 1,779.4 1,662.4
------ ------
Retained Interest in the CBG Group 7.8 12.5
------ ------
Investments and Other Assets 811.0 815.7
------ ------
Property at Cost 2,500.7 2,456.3
Accumulated depreciation 1,196.0 1,155.9
------ ------
1,304.7 1,300.4
------ ------
Total $3,902.9 $3,791.0
====== ======
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt $178.3 $223.2
Notes payable 468.2 454.3
Accounts payable 351.4 368.3
Other current liabilities 559.2 474.2
------ ------
Total Current Liabilities 1,557.1 1,520.0
------ ------
Long-Term Debt 1,191.9 1,251.6
------ ------
Deferred Income Taxes 68.1 63.6
------ ------
Other Liabilities 400.1 383.6
------ ------
Redeemable Preferred Stock 427.4 427.4
------ ------
Unearned ESOP Compensation (187.0) (195.3)
------ ------
RPG Group Equity 445.3 340.1
------ ------
Total $3,902.9 $3,791.0
====== ======
See Accompanying Notes to Condensed Financial Statements.
RALSTON PURINA GROUP
COMBINED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
Three Months Ended
December 31,
1994 1993
------ ------
Cash Flow from Operations
Net Earnings $106.4 $133.4
Retained interest in CBG Group's earnings 4.7 0.1
Non-cash items included in income 61.1 66.5
Changes in assets and liabilities
used in operations (11.4) (42.9)
Other, net 5.2 3.6
------ ------
Net cash flow from operations 166.0 160.7
------ ------
Cash Flow from Investing Activities
Acquisition of businesses (39.2)
Property additions, net (39.8) (45.2)
Other, net (8.4) 4.6
------ ------
Net cash provided (used) by investing
activities (48.2) (79.8)
------ ------
Cash Flow from Financing Activities
Net proceeds from (payments on) centrally
managed debt (13.7) (5.2)
Net proceeds from (payments on) specifically
attributed long-term debt, including
current maturities 7.5 0.5
Net increase (decrease) in specifically
attributed notes payable (84.4) 52.4
Proceeds from the sale of stock 0.7 2.4
Treasury stock purchases (58.1)
Dividends paid (44.3) (46.1)
Other, net (1.2)
------ ------
Net cash provided (used) by financing
activities (135.4) (54.1)
------ ------
Effect of Exchange Rate Changes on Cash (5.1) (9.7)
------ -----
Net Increase (Decrease) in Cash and Cash
Equivalents (22.7) 17.1
Cash and Cash Equivalents, Beginning of Year 112.4 57.4
------ ------
Cash and Cash Equivalents, End of Quarter $89.7 $74.5
====== ======
See Accompanying Notes to Condensed Financial Statements.
RALSTON PURINA GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(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 4,061,000 shares of RPG Stock held by Ralston's
Grantor Trust at December 31, 1994. 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 shares used in
earnings per share computations were as follows:
Three months ended Three months ended
December 31, 1994 December 31, 1993
--------------------- ------------------
Primary:
RPG Stock 100,042,000 101,488,000
Fully Diluted:
RPG Stock 110,261,000 111,505,000
Note 4 - There were RPG Stock common shares outstanding
of 100,027,000 at December 31, 1994 and 100,031,000 at
September 30, 1994, exclusive of 1) 10,599,000 and
10,620,000 RPG Stock treasury shares, respectively, and
2) 4,061,000 and 4,033,000 Grantor Trust shares,
respectively.
Note 5 - Other (income)/expense, net for three months
consists of the following:
December 31, December 31,
1994 1993
--------------- ---------------
Translation and exchange
(gain)/loss $ 2.0 $ 7.2
Investment income (1.9) (3.8)
Miscellaneous (0.4) 3.5
----- -----
$ (0.3) $ 6.9
Note 6 - Investment and Other Assets consist of the
following:
December 31, September 30,
1994 1994
--------------- ---------------
Goodwill $ 324.8 $ 325.6
Intangible Assets 185.3 191.6
Other Assets 300.9 298.5
------- -------
$ 811.0 $ 815.7
Note 7 - On February 9, 1995, the Company's Board of
Directors declared a dividend of $.30 per share of RPG
Stock, payable on March 10, 1995 to shareholders of
record on February 21, 1995.
Note 8 - During the quarter, the RPG Group recorded
charges of $16.3, after taxes, or $.16 and $.15 per
primary and fully diluted share, respectively, 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 consist of
termination benefits of $12.2, other cash exit costs of
$3.3 and non-cash charges of $7.4, primarily related to
anticipated losses on disposal of land, buildings and
machinery and equipment. The RPG Group continues to
review worldwide battery production capacity.
Additional charges associated with the restructuring
announced in November 1994 are expected including $20 to
$25, pre-tax, during 1995 and $25 to $40, pre-tax, in
later years.
Note 9 - On January 6, 1995, Ralston and Interstate
Bakeries Corporation jointly announced the signing of an
agreement in principle for Interstate to acquire
Ralston's wholly-owned subsidiary, Continental Baking
Company, for a total purchase price of $330 in cash and
16,923,077 shares of common stock of Interstate. If the
market price of the Interstate Stock on the date of
Closing exceeds $16.25, Interstate may terminate the
transaction, and if the market price is less than $9.75,
Ralston can terminate the transaction unless Interstate
elects to increase the number of shares so that Ralston
will receive a number of shares then equal in value to
$165. Under the terms of Ralston's Restated Articles of
Incorporation, prior to the sale, Ralston may exchange
all of the outstanding shares of its CBG Stock for a
number of shares of its RPG Stock at a 15% premium to the
relative trading values of the CBG Stock and RPG Stock.
Following the sale, Ralston may (i) distribute to the
holders of the CBG Stock an amount, in the form of cash
and/or shares of Interstate Stock equal to their
proportionate share of the ``net proceeds" of the sale,
either by special dividend or by pro rata redemption of
all or part of the outstanding shares of CBG Stock, or
(ii) exchange all of the outstanding shares of CBG Stock
for shares of RPG Stock at a 10% premium to the relative
trading values of the CBG Stock and the RPG Stock during
the 10 trading days following closing. If the Board
determines to distribute the net proceeds, the RPG Group
will receive 45% of net proceeds in respect to its 45%
retained interest in the CBG Group. Ralston's Board of
Directors has not yet determined which option it will
elect.
The ``net proceeds'' are determined under Ralston's
Articles by deducting from the gross proceeds of the sale
various liabilities, including taxes payable in respect
of the sale, transaction expense, the value of the
preferred stock allocated to the CBG Group and allocated
debt owed to Ralston, and other liabilities, contingent
or otherwise, of the CBG Group which are retained by
Ralston following the sale. The net amount of such
liabilities was estimated to be approximately $410 as of
the end of December, but such amount may vary
substantially depending upon the results of future
operations of Continental, the terms of the definitive
agreement and the valuation of retained liabilities and
obligations.
If the Board determines to distribute the net proceeds,
the value per share of CBG Stock would be determined by
dividing the ``net proceeds'' by the number of outstanding
shares of CBG Stock plus the number of shares deemed to
represent the RPG Group's 45% retained interest, a total
of approximately 37.3 million shares. The final value
per share is not yet determinable, as the value will be
dependent upon the net liabilities of the CBG Group and
the market value of the Interstate Stock at the time of
closing. However, based upon the market close of the
Interstate Stock on February 8, 1995, and estimated net
liabilities of $410, the value per share of CBG Stock
would be approximately $4.66. The value per share is
very sensitive to changes in both the Interstate Stock
price and the amount of CBG Group net liabilities, and it
is estimated that for every one dollar change in the
Interstate Stock price the value to holders of CBG Stock
will change by approximately $.45, while every $10 change
in the amount of net liabilities will change such value
by approximately $.27.
Note 10 - 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 for the quarter ended December 31, 1993.
The following pro forma statement of earnings reflects
the results of operations for the quarter ended December
31, 1993 as if the Distribution had occurred as of the
beginning of the 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.
RALSTON PURINA GROUP
Pro Forma Combined Statement of Earnings
(Dollars in millions except per share data)
Three Months
Ended
December 31,
1993
-----
Net Sales (a) $1,460.5
------
Costs and Expenses
Cost of products sold (a) 810.7
Selling, general and administrative (a) 218.7
Advertising and promotion (a) 178.2
Interest expense (b) 46.0
Other (income)/expense, net (a) 6.8
------
1,260.4
------
Loss Related to Retained Interest in
the CBG Group (0.1)
------
Earnings Before Income Taxes 200.0
Income Taxes (c) 81.7
------
Net Earnings $118.3
======
Earnings per Share
Primary (a) $1.12
======
Fully Diluted (a) $1.05
======
[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>
RALSTON PURINA GROUP
REVIEW OF FINANCIAL INFORMATION
-------------------------------
Operating Results
Net earnings for the three months ended
December 31, 1994 were $106.4 million, compared
to $133.4 million for the same period in the
prior year. During the quarter ended December
31, 1994, the Company recorded a provision for
battery products restructurings of $16.3
million, after taxes and a loss of $4.7
million, after taxes related to the retained
interest in the CBG Group. Net earnings for
the quarter ended December 31, 1993 included
$15.1 million of net earnings related to the
spun-off operations of Ralcorp and a loss of
$.1 million, after taxes, related to the CBG
Group retained interest. Exclusive of the
aforementioned items, net earnings were $127.4
million and $118.4 million for the current and
prior quarter, respectively, on higher
operating profit, lower interest expense and
lower foreign currency losses.
Earnings per share for the three months ended
December 31, 1994 were $1.02 and $.96, on a
primary and fully-diluted basis, respectively,
compared to $1.27 and $1.18 for the same
quarter in the prior year. Exclusive of the
aforementioned items, earning per share were
$1.23 and $1.15 on a primary and fully-diluted
basis in the current quarter compared to $1.12
and $1.05 last year.
Business Segments
Sales of the Pet and Human Foods segment for
the first quarter, exclusive of results of
spun-off businesses, increased slightly
compared to the prior year first quarter as
higher volumes were offset by lower domestic
prices reflecting expansion of simplified
promotion and pricing practices. Operating
profit, exclusive of spun-off businesses,
improved primarily on a favorable product mix
and higher volume. Lower prices were offset by
reductions in advertising and promotion expense
associated with the new promotion practices.
Sales for the Battery Products segment
increased 1.3% in the quarter on higher volume
and favorable foreign exchange rates in the
Asia Pacific region, partially offset by
unfavorable U.S. volume comparisons. U.S.
sales declined both on lower sales to the
warehouse class of trade and lower retail
inventories compared to the prior year first
quarter. These inventory adjustments resulted
in lower Energizer brand sales to trade
customers. However, ultimate consumer
purchases and Energizer market share improved
in the current quarter, as measured by A. C.
Nielsen. Operating profit declined in the
quarter as lower sales in the U.S. and an
unfavorable product mix in Europe were
partially offset by improved results in the
Asia Pacific and Latin America regions.
During the quarter, the RPG Group recorded
charges of $16.3 million, after taxes, or $.16
and $.15 per primary and fully diluted share,
respectively, 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
consist of termination benefits of $12.2
million, other cash exit costs of $3.3 million
and non-cash charges of $7.4 million, primarily
related to anticipated losses on disposal of
land, buildings and machinery and equipment.
The RPG Group continues to review worldwide
battery production capacity.
During the quarter, one plant was closed and
260 employees were severed in connection with
the restructuring plan. Activity related to
the restructuring plan during the quarter was
as follows:
(millions)
Reserve balance at September 30, 1994 $ 36.5
Provision recorded in the quarter 22.9
Cash exit costs incurred during the quarter (13.2)
Portion of current quarter provision
classified as property writedowns (7.4)
Increase due to translation .1
------
Reserve balance at December 31, 1994 $ 38.9
Additional charges associated with the
restructuring announced in November 1994 are
expected including $20 to 25 million, pre-tax,
during 1995 and $25 to 40 million, pre-tax, in
later years.
Sales of the soy protein products business
increased on strong volume in food protein
products. Operating profit increased on
higher sales and increased productivity.
Sales for international agricultural products
increased on higher volume and favorable
foreign currency exchange rates. Operating
profit increased on higher sales and improved
margins.
Results of Operations
Cost of products sold as a percentage of sales
increased from 55.5% in the prior year first
quarter (exclusive of spun-off businesses) to
57.1% in the current period due to higher cost
percentages in Battery Products segment and
sales increases in segments with relatively
higher cost percentages. Selling, general and
administrative expenses were 15.3% of sales
for the current period compared to 15.0% in
the prior period (exclusive of spun-off
businesses). Advertising and promotion
expense was 10.7% of sales compared to 12.2%
(exclusive of spun-off businesses) in the
prior year. Income taxes include federal,
state and foreign taxes and were 43.5% of
earnings before income taxes for the current
year first quarter compared to 40.5% in the
prior period. 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
income tax percentage for the RPG Group was
41.0% in the current period.
Financial Condition
The RPG Group's primary source of liquidity is
cash flow from operations, which was $166.0
million in the three months ended December 31,
1994, compared to $160.7 million for the same
period in the prior year. Working capital was
$222.3 million at December 31, 1994 compared
to $142.4 million at September 30, 1994.
As of February 10, 1995, 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.
On January 6, 1995, Ralston and Interstate
Bakeries Corporation jointly announced the
signing of an agreement in principle for
Interstate to acquire Ralston's wholly-owned
subsidiary, Continental Baking Company, for a
total purchase price of $330 million in cash
and 16,923,077 shares of common stock of
Interstate. If the market price of the
Interstate Stock on the date of Closing
exceeds $16.25, Interstate may terminate the
transaction, and if the market price is less
than $9.75, Ralston can terminate the
transaction unless Interstate elects to
increase the number of shares so that Ralston
will receive a number of shares then equal in
value to $165 million. Under the terms of
Ralston's Restated Articles of Incorporation,
prior to the sale, Ralston may exchange all of
the outstanding shares of its Ralston -
Continental Baking Group Common Stock (``CBG
Stock'') for a number of shares of its Ralston
- Ralston Purina Group Common Stock (``RPG
Stock'') at a 15% premium to the relative
trading values of the CBG Stock and RPG Stock.
Following the sale, Ralston may (i) distribute
to the holders of the CBG Stock an amount, in
the form of cash and/or shares of Interstate
Stock equal to their proportionate share of
the ``net proceeds'' of the sale, either by
special dividend or by pro rata redemption of
all or part of the outstanding shares of CBG
Stock, or (ii) exchange all of the outstanding
shares of CBG Stock for shares of RPG Stock at
a 10% premium to the relative trading values
of the CBG Stock and the RPG Stock during the
10 trading days following closing. If the
Board determines to distribute the net
proceeds, the RPG Group will receive 45% of
net proceeds in respect to its 45% retained
interest in the CBG Group. Ralston's Board of
Directors has not yet determined which option
it will elect.
The ``net proceeds'' are determined under
Ralston's Articles by deducting from the gross
proceeds of the sale various liabilities,
including taxes payable in respect of the
sale, transaction expense, the value of the
preferred stock allocated to the CBG Group and
allocated debt owed to Ralston, and other
liabilities, contingent or otherwise, of the
CBG Group which are retained by Ralston
following the sale. The net amount of such
liabilities was estimated to be approximately
$410 million as of the end of December, but
such amount may vary substantially depending
upon the results of future operations of
Continental, the terms of the definitive
agreement and the valuation of retained
liabilities and obligations.
If the Board determines to distribute the net
proceeds, the value per share of CBG Stock
would be determined by dividing the ``net
proceeds'' by the number of outstanding shares
of CBG Stock plus the number of shares deemed
to represent the RPG Group's 45% retained
interest, a total of approximately 37.3
million shares. The final value per share is
not yet determinable, as the value will be
dependent upon the net liabilities of the CBG
Group and the market value of the Interstate
Stock at the time of closing. However, based
upon the market close of the Interstate Stock
on February 8, 1995, and estimated net
liabilities of $410 million, the value per
share of CBG Stock would be approximately
$4.66. The value per share is very sensitive
to changes in both the Interstate Stock price
and the amount of CBG Group net liabilities,
and it is estimated that for every one dollar
change in the Interstate Stock price the value
to holders of CBG Stock will change by
approximately $.45, while every $10 million
change in the amount of net liabilities will
change such value by approximately $.27.
PART I - FINANCIAL INFORMATION
B. CBG Group
CONTINENTAL BAKING GROUP
COMBINED STATEMENT OF EARNINGS
(Dollars in millions except per share
data)
13 Weeks Ended
Dec. 24, Dec. 25,
1994 1993
------ ------
Net Sales $ 478.7 $ 476.0
------ ------
Costs and Expenses
Cost of products sold 247.2 230.5
Selling, general and administrative 223.7 215.7
Advertising and promotion 16.2 22.2
Interest 8.4 6.6
Other (income)/expense, net (0.1) 0.7
------ ------
495.4 475.7
------ ------
Earnings (Loss) Before Income Taxes (16.7) 0.3
Income Taxes (6.7) 0.1
------ ------
Net Earnings (Loss) (10.0) 0.2
Preferred Stock Dividend, Net of Taxes 0.4 0.5
------ ------
Loss After Preferred Stock Dividend (10.4) (0.3)
Loss Applicable to the RPG Group's
Retained Interest in the CBG Group (4.7) (0.1)
------ ------
Loss After RPG Group's Retained
Interest $(5.7) $(0.2)
====== ======
Loss per CBG Stock Common Share
Primary $(0.28) $(0.01)
====== ======
Fully Diluted $(0.28) $(0.01)
====== ======
See Accompanying Notes to Condensed
Financial Statements.
CONTINENTAL BAKING GROUP
COMBINED BALANCE SHEET
(Condensed)
(Dollars in millions)
Dec. 24, Sept. 24,
1994 1994
------ ------
ASSETS
Current Assets
Cash and cash equivalents $4.5 $13.6
Receivables, less allowance for doubtful
accounts of $3.4 and $3.4, respectively 99.8 98.5
Inventories -
Raw materials and supplies 50.5 45.3
Finished products 9.3 7.4
Other current assets 38.0 32.0
------ ------
Total Current Assets 202.1 196.8
------ ------
Investments and Other Assets 63.9 62.9
------ ------
Property at Cost 1,086.8 1,071.5
Accumulated depreciation 491.7 474.5
------ ------
595.1 597.0
------ ------
Total $861.1 $856.7
====== ======
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt $44.0 $64.9
Notes payable 30.5
Accounts payable 72.7 86.2
Other current liabilities 117.9 126.4
------ ------
Total Current Liabilities 265.1 277.5
------ ------
Long-Term Debt 362.2 343.0
------ ------
Deferred Income Taxes 7.1 8.9
------ ------
Other Liabilities 227.2 221.9
------ ------
Redeemable Preferred Stock 42.3 42.3
------ ------
Unearned ESOP Compensation (60.4) (64.9)
------ ------
CBG Group Equity 17.6 28.0
------ ------
Total $861.1 $856.7
====== ======
See Accompanying Notes to Condensed Financial Statements.
CONTINENTAL BAKING GROUP
COMBINED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
13 Weeks Ended
Dec. 24, Dec. 25,
1994 1993
------ ------
Cash Flow from Operations
Net Earnings (Loss) $(10.0) $0.2
Non-cash items included in income 19.4 18.0
Changes in assets and liabilities
used in operations (35.9) (25.6)
Other, net 3.9 (1.5)
------ ------
Net cash flow from operations (22.6) (8.9)
------ ------
Cash Flow from Investing Activities
Property additions, net (17.4) (15.9)
Other, net (1.0) 0.9
------ ------
Net cash provided (used) by investing
activities (18.4) (15.0)
------ ------
Cash Flow from Financing Activities
Net proceeds from (payments on) centrally
managed debt 33.3 35.0
Treasury stock purchases (2.3)
Dividends paid (1.4) (3.1)
Payment attributed to retained interest (3.3)
------ ------
Net cash provided (used) by financing
activities 31.9 26.3
------ ------
Net Increase (Decrease) in Cash and
Cash Equivalents (9.1) 2.4
Cash and Cash Equivalents, Beginning of
Period 13.6 0.5
------ ------
Cash and Cash Equivalents, End of Period $4.5 $2.9
====== ======
See Accompanying Notes to Condensed Financial Statements.
CONTINENTAL BAKING GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 24, 1994
(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 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 securities does not result
in anti-dilution. The shares used in earnings
per share computations were as follows:
13 weeks ended 13 weeks ended
December 24, 1994 December 25, 1993
----------------------- -------------------
Primary:
CBG Stock 20,588,000 20,577,000
Fully Diluted:
CBG Stock 26,675,000* 26,699,000
*Due to anti-dilution for the quarter ended
December 24, 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 20,588,000 at December 24, 1994
and 20,588,000 at September 24, 1994,
exclusive of 270,000 CBG Stock treasury shares
at both dates.
Note 5 - Other Liabilities consists of the
following:
December 24, September 24,
1994 1994
------------- ---------------
Self-insurance
reserves $ 118.2 $ 114.9
Other liabilities 109.0 107.0
-------- ---------
$227.2 $ 221.9
Note 6 - On January 6, 1995, Ralston and
Interstate Bakeries Corporation jointly
announced the signing of an agreement in
principle for Interstate to acquire Ralston's
wholly-owned subsidiary, Continental Baking
Company, for a total purchase price of $330 in
cash and 16,923,077 shares of common stock of
Interstate. If the market price of the
Interstate Stock on the date of Closing
exceeds $16.25, Interstate may terminate the
transaction, and if the market price is less
than $9.75, Ralston can terminate the
transaction unless Interstate elects to
increase the number of shares so that Ralston
will receive a number of shares then equal in
value to $165. Under the terms of Ralston's
Restated Articles of Incorporation, prior to
the sale, Ralston may exchange all of the
outstanding shares of its CBG Stock for a
number of shares of its RPG Stock at a 15%
premium to the relative trading values of the
CBG Stock and RPG Stock. Following the sale,
Ralston may (i) distribute to the holders of
the CBG Stock an amount, in the form of cash
and/or shares of Interstate Stock equal to
their proportionate share of the ``net
proceeds'' of the sale, either by special
dividend or by pro rata redemption of all or
part of the outstanding shares of CBG Stock,
or (ii) exchange all of the outstanding shares
of CBG Stock for shares of RPG Stock at a 10%
premium to the relative trading values of the
CBG Stock and the RPG Stock during the 10
trading days following closing. Ralston's
Board of Directors has not yet determined
which option it will elect.
The ``net proceeds'' are determined under
Ralston's Articles by deducting from the gross
proceeds of the sale various liabilities,
including taxes payable in respect of the
sale, transaction expense, the value of the
preferred stock allocated to the CBG Group and
allocated debt owed to Ralston, and other
liabilities, contingent or otherwise, of the
CBG Group which are retained by Ralston
following the sale. The net amount of such
liabilities was estimated to be approximately
$410 as of the end of December, but such
amount may vary substantially depending upon
the results of future operations of
Continental, the terms of the definitive
agreement and the valuation of retained
liabilities and obligations.
If the Board determines to distribute the net
proceeds, the value per share of CBG Stock
would be determined by dividing the ``net
proceeds'' by the number of outstanding shares
of CBG Stock plus the number of shares deemed
to represent the RPG Group's 45% retained
interest, a total of approximately 37.3
million shares. The final value per share is
not yet determinable, as the value will be
dependent upon the net liabilities of the CBG
Group and the market value of the Interstate
Stock at the time of closing. However, based
upon the market close of the Interstate Stock
on February 8, 1995, and estimated net
liabilities of $410, the value per share of
CBG Stock would be approximately $4.66. The
value per share is very sensitive to changes
in both the Interstate Stock price and the
amount of CBG Group net liabilities, and it is
estimated that for every one dollar change in
the Interstate Stock price the value to
holders of CBG Stock will change by
approximately $.45, while every $10 change in
the amount of net liabilities will change such
value by approximately $.27.
Note 7 - 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, and annualized cost savings of
approximately $20 pre-tax. The plan has been
revised to cover only 365 employees, however,
cost and savings estimates are unchanged. As
of December 24, 1994, 209 employees have been
severed under the plan with $2.2 of spending
occurring in the quarter.
CONTINENTAL BAKING GROUP
REVIEW OF FINANCIAL INFORMATION
-------------------------------
Operating Results
The CBG Group incurred a net loss of $10.0
million for the 13 weeks ended December 24,
1994 compared to net income of $.2 million for
the 13 weeks ended December 25, 1993. Loss per
share was $.28 in the current quarter on a
primary and fully diluted basis. After
reducing the first quarter of fiscal 1994
earnings for preferred stock dividends, the net
loss per CBG Stock share was $.01 on a primary
and fully-diluted basis.
Sales increased slightly compared to the prior
year first quarter as increases in sweet baked
goods were nearly offset by declines in bread.
Higher volume was nearly offset by an
unfavorable product mix, higher promotional
sales discounts and lower thrift store volume.
Operating results of the CBG Group declined
significantly in the first quarter on the
previously mentioned items and higher
ingredient 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. Cost of products sold as a percent of
sales increased to 51.6% in the current quarter
compared to 48.4% in the prior year. Selling,
general and administrative costs increased to
46.7% of sales compared to 45.3% on increased
route distribution costs, partially offset by
administrative cost reductions. Advertising
and promotion expense was 3.4% of sales
compared to 4.7% 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,
and annualized cost savings of approximately
$20 million pre-tax. The plan has been revised
to cover only 365 employees, however, cost and
savings estimates are unchanged. As of
December 24, 1994, 209 employees have been
severed under the plan with $2.2 million of
spending occurring in the quarter.
Financial Condition
Cash used by operations in the first quarter of
fiscal 1995 was $22.6 million compared to $8.9
million for the same period in the prior year
with both periods impacted by fluctuations in
working capital components. Net cash used for
investing activities in the quarter was $18.4
million. In light of current operating
results, the CBG Group has revised its
projection of capital expenditures for the
remainder of fiscal 1995 to $30 million.
Current liabilities in excess of current assets
at December 24, 1994 were $63.0 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 $33.3 million
in the first quarter of fiscal 1995 to fund
operating, investing and other financing
activities.
As of February 10, 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.
On January 6, 1995, Ralston and Interstate
Bakeries Corporation jointly announced the
signing of an agreement in principle for
Interstate to acquire Ralston's wholly-owned
subsidiary, Continental Baking Company, for a
total purchase price of $330 million in cash
and 16,923,077 shares of common stock of
Interstate. If the market price of the
Interstate Stock on the date of Closing exceeds
$16.25, Interstate may terminate the
transaction, and if the market price is less
than $9.75, Ralston can terminate the
transaction unless Interstate elects to
increase the number of shares so that Ralston
will receive a number of shares then equal in
value to $165 million. Under the terms of
Ralston's Restated Articles of Incorporation,
prior to the sale, Ralston may exchange all of
the outstanding shares of its Ralston -
Continental Baking Group Common Stock (``CBG
Stock'') for a number of shares of its Ralston
- Ralston Purina Group Common Stock (''RPG
Stock'') at a 15% premium to the relative
trading values of the CBG Stock and RPG Stock.
Following the sale, Ralston may (i) distribute
to the holders of the CBG Stock an amount, in
the form of cash and/or shares of Interstate
Stock equal to their proportionate share of the
``net proceeds'' of the sale, either by special
dividend or by pro rata redemption of all or
part of the outstanding shares of CBG Stock, or
(ii) exchange all of the outstanding shares of
CBG Stock for shares of RPG Stock at a 10%
premium to the relative trading values of the
CBG Stock and the RPG Stock during the 10
trading days following closing. Ralston's
Board of Directors has not yet determined which
option it will elect.
The ''net proceeds'' are determined under
Ralston's Articles by deducting from the gross
proceeds of the sale various liabilities,
including taxes payable in respect of the sale,
transaction expense, the value of the preferred
stock allocated to the CBG Group and allocated
debt owed to Ralston, and other liabilities,
contingent or otherwise, of the CBG Group which
are retained by Ralston following the sale.
The net amount of such liabilities was
estimated to be approximately $410 million as
of the end of December, but such amount may
vary substantially depending upon the results
of future operations of Continental, the terms
of the definitive agreement and the valuation
of retained liabilities and obligations.
If the Board determines to distribute the net
proceeds, the value per share of CBG Stock
would be determined by dividing the ''net
proceeds'' by the number of outstanding shares
of CBG Stock plus the number of shares deemed
to represent the RPG Group's 45% retained
interest, a total of approximately 37.3 million
shares. The final value per share is not yet
determinable, as the value will be dependent
upon the net liabilities of the CBG Group and
the market value of the Interstate Stock at the
time of closing. However, based upon the
market close of the Interstate Stock on
February 8, 1995, and estimated net liabilities
of $410 million, the value per share of CBG
Stock would be approximately $4.66. The value
per share is very sensitive to changes in both
the Interstate Stock price and the amount of
CBG Group net liabilities, and it is estimated
that for every one dollar change in the
Interstate Stock price the value to holders of
CBG Stock will change by approximately $.45,
while every $10 million change in the amount of
net liabilities will change such value by
approximately $.27.
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
December 31,
1994 1993
---- ----
Net Sales $1,991.8 $2,199.3
------ ------
Costs and Expenses
Cost of products sold 1,110.3 1,173.6
Selling, general and administrative 455.0 468.5
Advertising and promotion 178.8 268.6
Interest 48.9 56.3
Provision for restructuring 22.9
Other (income)/expense, net (0.4) 7.6
------ ------
1,815.5 1,974.6
------ ------
Earnings Before Income Taxes 176.3 224.7
Income Taxes 75.2 91.0
------ ------
Net Earnings 101.1 133.7
Preferred Stock Dividend, Net of Taxes 4.8 5.2
------ ------
Earnings After Preferred Stock Dividend $96.3 $128.5
====== ======
Earnings (Loss) per Common Share -
RPG Stock:
Primary $1.02 $1.27
====== ======
Fully Diluted $0.96 $1.18
====== ======
CBG Stock:
Primary $(0.28) $(0.01)
====== ======
Fully Diluted $(0.28) $(0.01)
====== ======
See Accompanying Notes to Condensed Financial Statements.
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Condensed)
(Dollars in millions)
Dec. 31, Sept. 30,
1994 1994
---- ----
ASSETS
Current Assets
Cash and cash equivalents $94.2 $126.0
Receivables, less allowance for
doubtful accounts of $30.8 and
$29.2, respectively 994.9 829.1
Inventories -
Raw materials and supplies 219.6 216.0
Work in process 91.8 101.5
Finished products 389.9 412.4
Other current assets 184.6 174.2
------ ------
Total Current Assets 1,975.0 1,859.2
------ ------
Investments and Other Assets 860.7 865.7
------ ------
Property at Cost 3,587.5 3,527.8
Accumulated depreciation 1,687.7 1,630.4
------ ------
1,899.8 1,897.4
------ ------
Total $4,735.5 $4,622.3
====== ======
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt $222.3 $288.1
Notes payable 498.7 454.3
Accounts payable 424.1 454.5
Other current liabilities 670.6 600.6
------ ------
Total Current Liabilities 1,815.7 1,797.5
------ ------
Long-Term Debt 1,554.1 1,594.6
------ ------
Deferred Income Taxes 75.2 72.5
------ ------
Other Liabilities 613.1 592.6
------ ------
Redeemable Preferred Stock 469.7 469.7
------ ------
Unearned ESOP Compensation (247.4) (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 121.7 108.7
Retained earnings 1,140.2 1,043.2
Cumulative translation adjustment (56.4) (58.7)
Common stock in treasury, at cost:
RPG Stock (576.1) (577.4)
CBG Stock (2.6) (2.6)
Unearned portion of restricted stock (4.1) (4.3)
Value of RPG Stock held in
Grantor Trust (181.2) (166.9)
------ ------
Total Shareholders Equity 455.1 355.6
------ ------
Total $4,735.5 $4,622.3
====== ======
See Accompanying Notes to Condensed Financial Statements.
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
Three Months
Ended
December 31,
1994 1993
---- ----
Cash Flow from Operations
Net Earnings $101.1 $133.7
Non-cash items included in income 80.5 84.5
Changes in assets and liabilities
used in operations (47.3) (68.5)
Other, net 9.1 2.1
------ ------
Net cash flow from operations 143.4 151.8
------ ------
Cash Flow from Investing Activities
Acquisition of businesses (39.2)
Property additions, net (57.2) (61.1)
Other, net (9.4) 2.2
------ ------
Net cash provided (used) by investing
activities (66.6) (98.1)
------ ------
Cash Flow from Financing Activities
Net cash flow provided (used) by debt (57.3) 82.7
Proceeds from the sale of stock 0.7 2.4
Treasury stock purchases (60.4)
Dividends paid (45.7) (49.2)
Other, net (1.2)
------ ------
Net cash provided (used) by financing
activities (103.5) (24.5)
------ ------
Effect of Exchange Rate Changes on Cash (5.1) (9.7)
------ ------
Net Increase (Decrease) in Cash and
Cash Equivalents (31.8) 19.5
Cash and Cash Equivalents, Beginning
of Year 126.0 57.9
------ ------
Cash and Cash Equivalents, End of
Quarter $94.2 $77.4
====== ======
See Accompanying Notes to Condensed Financial Statements.<PAGE>
RALSTON PURINA COMPANY
Pro Forma Consolidated Statement of Earnings
(in millions)
Three Months
Ended
December 31,
1993
------
Net Sales (a) $1,936.1
------
Costs and Expenses
Cost of products sold (a) 1,040.8
Selling, general and administrative (a) 434.4
Advertising and promotion (a) 200.4
Interest expense (b) 52.6
Other (income)/expense, net (a) 7.5
------
1,735.7
------
Earnings Before Income Taxes 200.4
Income Taxes (c) 81.8
------
Net Earnings $118.6
======
[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.
RALSTON PURINA COMPANY AND SUBSIDIARIES
REVIEW OF FINANCIAL INFORMATION
---------------------------------------
Operating Results
Net earnings for the three months ended
December 31, 1994 were $101.1 million compared
to $133.7 million for the same period in the
prior year. During the quarter ended December
31, 1994, the Company recorded a provision for
battery products restructurings of $16.3
million, after tax. Net earnings for the
quarter ended December 31, 1993 included $15.1
million of net earnings related to the spun-off
operations of Ralcorp. Exclusive of the
aforementioned items, net earnings were $117.4
million and $118.6 million for the current and
prior quarter, respectively.
Business Segments
Sales of the Pet and Human Foods segment for
the first quarter, exclusive of results of
spun-off businesses, increased slightly
compared to the prior year first quarter as
higher volumes were offset by lower domestic
prices reflecting expansion of simplified
promotion and pricing practices. Operating
profit, exclusive of spun-off businesses,
improved primarily on a favorable product mix
and higher volume. Lower prices were offset by
reductions in advertising and promotion expense
associated with the new promotion practices.
Sales for the Battery Products segment
increased 1.3% in the quarter on higher volume
and favorable foreign exchange rates in the
Asia Pacific region, partially offset by
unfavorable U.S. volume comparisons. U.S.
sales declined both on lower sales to the
warehouse class of trade and lower retail
inventories compared to the prior year first
quarter. These inventory adjustments resulted
in lower Energizer brand sales to trade
customers. However, ultimate consumer
purchases and Energizer market share improved
in the current quarter, as measured by A. C.
Nielsen. Operating profit declined in the
quarter as lower sales in the U.S. and an
unfavorable product mix in Europe were
partially offset by improved results in the
Asia Pacific and Latin America regions.
During the quarter, the Company recorded
charges of $16.3 million, after taxes, 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
consist of termination benefits of $12.2
million, other cash exit costs of $3.3 million
and non-cash charges of $7.4 million, primarily
related to anticipated losses on disposal of
land, buildings and machinery and equipment.
The Company continues to review worldwide
battery production capacity.
During the quarter, one plant was closed and
260 employees were severed in connection with
the restructuring plan. Activity related to
the restructuring plan during the quarter was
as follows:
(millions)
Reserve balance at September 30, 1994 $ 36.5
Provision recorded in the quarter 22.9
Cash exit costs incurred during the quarter (13.2)
Portion of current quarter provision
classified as property writedowns (7.4)
Increase due to translation .1
------
Reserve balance at December 31, 1994 $38.9
Additional charges associated with the
restructuring announced in November 1994 are
expected including $20 to 25 million, pre-tax,
during 1995 and $25 to 40 million, pre-tax, in
later years.
Sales for the Bakery Products segment increased
slightly compared to the prior year first
quarter as increases in sweet baked goods were
nearly offset by declines in bread. Higher
volume was nearly offset by an unfavorable
product mix, higher promotional sales discounts
and lower thrift store volume. Operating
results declined significantly in the first
quarter on the previously mentioned items and
higher ingredient and labor costs. Given
current competitive conditions in the bakery
industry, the Company was unable to offset
higher costs with price increases. These
factors were partially offset by continued
favorable results from cost reduction actions.
Sales of the soy protein products business
increased on strong volume in food protein
products. Operating profit increased on higher
sales and increased productivity.
Sales for international agricultural products
increased on higher volume and favorable
foreign currency exchange rates. Operating
profit increased on higher sales and improved
margins.
Consolidated Results of Operations
Cost of products sold as a percentage of sales
increased from 53.8% in the prior year first
quarter (exclusive of spun-off businesses) to
55.7% in the current period primarily due to
higher cost percentages in the Bakery Products
and Battery Products segments and sales
increases in business segments with generally
higher cost of products sold. Selling, general
and administrative expenses were 22.8% for
sales for the current period compared to 22.4%
in the prior period (exclusive of spun-off
businesses). Advertising and promotion expense
was 9.0% of sales compared to 10.4% (exclusive
of spun-off businesses) in the prior year
primarily on declines in pet foods related to
simplified promotion practices.
Income taxes include federal, state and foreign
taxes and were 42.7% of earnings before income
taxes for the current year first quarter
compared to 40.5% in the prior period,
primarily due to pre-tax restructuring
provisions which did not result in tax benefits
due to foreign tax loss situations.
Financial Condition
At December 31, 1994, total debt as a
percentage of total capitalization was 77%
compared to 81% at September 30, 1994. For the
purpose of this ratio, guaranteed ESOP debt is
treated as long-term debt and redeemable
preferred stock and related unearned
compensation are treated as capital.
The Company's primary source of liquidity is
cash flow generated from operations. For the
three months ended December 31, 1994, cash flow
from operations was $143.4 million compared to
$151.8 million for the same period in the prior
year. Working capital was $159.3 million at
December 31, 1994, compared to $61.7 million at
September 30, 1994.
As of February 10, 1995, 1,883,920 shares of
RPG Stock and 3,757,929 share 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.
On January 6, 1995, Ralston and Interstate
Bakeries Corporation jointly announced the
signing of an agreement in principle for
Interstate to acquire Ralston's wholly-owned
subsidiary, Continental Baking Company, for a
total purchase price of $330 million in cash
and 16,923,077 shares of common stock of
Interstate. If the market price of the
Interstate Stock on the date of Closing exceeds
$16.25, Interstate may terminate the
transaction, and if the market price is less
than $9.75, Ralston can terminate the
transaction unless Interstate elects to
increase the number of shares so that Ralston
will receive a number of shares then equal in
value to $165 million. Under the terms of
Ralston's Restated Articles of Incorporation,
prior to the sale, Ralston may exchange all of
the outstanding shares of its Ralston -
Continental Baking Group Common Stock (``CBG
Stock'') for a number of shares of its Ralston
- Ralston Purina Group Common Stock (``RPG
Stock'') at a 15% premium to the relative
trading values of the CBG Stock and RPG Stock.
Following the sale, Ralston may (i) distribute
to the holders of the CBG Stock an amount, in
the form of cash and/or shares of Interstate
Stock equal to their proportionate share of the
``net proceeds'' of the sale, either by special
dividend or by pro rata redemption of all or
part of the outstanding shares of CBG Stock, or
(ii) exchange all of the outstanding shares of
CBG Stock for shares of RPG Stock at a 10%
premium to the relative trading values of the
CBG Stock and the RPG Stock during the 10
trading days following closing. Ralston's
Board of Directors has not yet determined which
option it will elect.
The ``net proceeds'' are determined under
Ralston's Articles by deducting from the gross
proceeds of the sale various liabilities,
including taxes payable in respect of the sale,
transaction expense, the value of the preferred
stock allocated to the CBG Group and allocated
debt owed to Ralston, and other liabilities,
contingent or otherwise, of the CBG Group which
are retained by Ralston following the sale.
The net amount of such liabilities was
estimated to be approximately $410 million as
of the end of December, but such amount may
vary substantially depending upon the results
of future operations of Continental, the terms
of the definitive agreement and the valuation
of retained liabilities and obligations.
If the Board determines to distribute the net
proceeds, the value per share of CBG Stock
would be determined by dividing the ``net
proceeds'' by the number of outstanding shares
of CBG Stock plus the number of shares deemed
to represent the RPG Group's 45% retained
interest, a total of approximately 37.3 million
shares. The final value per share is not yet
determinable, as the value will be dependent
upon the net liabilities of the CBG Group and
the market value of the Interstate Stock at the
time of closing. However, based upon the
market close of the Interstate Stock on
February 8, 1995, and estimated net liabilities
of $410 million, the value per share of CBG
Stock would be approximately $4.66. The value
per share is very sensitive to changes in both
the Interstate Stock price and the amount of
CBG Group net liabilities, and it is estimated
that for every one dollar change in the
Interstate Stock price the value to holders of
CBG Stock will change by approximately $.45,
while every $10 million change in the amount of
net liabilities will change such value by
approximately $.27.
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. No discovery has occurred in either action, and
the court
has not determined that either may proceed as a class action.
The Company
believes that both actions were intended to be filed on behalf of
all
shareholders (other than defendants) of the ``Ralston-Continental
Baking
Group'' common stock, and that CBC and its directors are not
proper parties
to either 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 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.
<TABLE>
Item 4. Submission of Matters to a Vote of Security Holders.
--------------------------------------------------------
The Company held its Annual Meeting of Shareholders on February
9, 1995,
for the purpose of electing three directors to serve three year
terms ending
in January, 1998 or until their successors are elected and
qualified, and
ratifying the Board of Directors appointment of Price Waterhouse
as
independent accountants for the Company for the fiscal year
ending
September 30, 1995. The number of votes cast, and the number of
shares
voting, for or against each candidate and the number of votes
cast for the
ratification, as well as the number of abstentions with respect
thereto, is
as follows:
<CAPTION>
SHARES VOTING VOTES
VOTES FOR WITHHELD
FOR
<S> <C> <C> <C>
David R. Banks 96,329,345 111,319,068 1,172,875
M. Darrell Ingram 96,532,337 111,529,802 969,882
John F. McDonnell 96,513,803 111,513,901 988,416
SHARES
WITHHELD
<C>
David R. Banks 1,671,139
M. Darrell Ingram 1,460,405
John F. McDonnell 1,476,306
SHARES SHARES
VOTING VOTES VOTING
VOTES FOR FOR AGAINST AGAINST
<S> <C> <C> <C> <C>
Ratification 96,342,873 111,664,329 724,195 826,112
of Price
Waterhouse
VOTES SHARES
ABSTAINED ABSTAINED
<C> <C>
435,151 503,766
</TABLE>
III. 6. Exhibits and Reports on Form 8-K
---------------------------------------------
(a) Exhibits filed with this report:
(11) Statement re Computation of
Per Share Earnings.
(b) Report on Form 8-K
On October 21, 1994, the Registrant
filed an amended Report
on Form 8-K with respect to its Report dated March 31, 1994.
This amendment
contained amended pro forma financial information with respect to
its
distribution of the stock of Ralcorp Holdings, Inc.
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 ANITA M. WRAY
------------------------------
------------
Anita M. Wray
Vice President and
Controller
Date: February 14, 1995
Exhibit 11
RALSTON PURINA GROUP
COMPUTATION OF EARNINGS PER SHARE
(in millions, except per share data)
Quarter Ended
December 31,
1994 1993
------ ----
EARNINGS PER COMMON SHARE
OUTSTANDING
Net earnings $106.4 $133.4
Dividend on Series A ESOP convertible
preferred stock, net of tax (4.4) (4.7)
------ ------
Earnings after preferred stock dividend $102.0 $128.7
====== ======
Outstanding shares 104.0 101.5
Grantor Trust shares excluded from EPS (4.0)
------ ------
Weighted average shares - primary
earnings per share calculation 100.0 101.5
====== ======
Earnings per common share outstanding $1.02 $1.27
====== ======
EARNINGS PER SHARE ASSUMING
FULL DILUTION
Net earnings $106.4 $133.4
Adjustments to earnings to reflect
assumed ESOP preferred stock conversion (0.7) (1.5)
------ ------
Net earnings for fully diluted earnings
per share calculation $105.7 $131.9
====== ======
Wtd. average number of shares
outstanding 100.0 101.5
Convertible preferred stock 9.4 9.7
Dilutive effect of stock options 0.7 0.2
Shares issuable on conversion of
debentures
Dilutive effect of deferred compensation 0.2 0.1
awards
------ ------
Weighted average shares - fully diluted
earnings per share calculation 110.3 111.5
====== ======
Earnings per share assuming full $0.96 $1.18
dilution
====== ======
Exhibit 11
CONTINENTAL BAKING GROUP
COMPUTATION OF EARNINGS PER
SHARE
(in millions, except per
share data)
13 Weeks Ended
December 24, December 25,
1994 1993
------ ------
EARNINGS (LOSS) PER COMMON
SHARE OUTSTANDING
Net earnings (loss) $(10.0) $0.2
Dividend on Series A ESOP
convertible preferred stock,
net of tax (0.4) (0.5)
------ ------
Loss after preferred stock
dividend $(10.4) $(0.3)
====== ======
Wtd. average number of
shares outstanding 20.6 20.6
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 37.4
====== ======
Loss per common share
outstanding $(0.28) $(0.01)
====== ======
EARNINGS (LOSS) PER SHARE
ASSUMING FULL DILUTION
Net earnings (loss) $(10.0) $0.2
Adjustments to net loss to
reflect assumed
ESOP preferred stock
conversion (0.6) (0.8)
------ ------
Net loss for fully diluted
Earnings per share
calculation $(10.6) $(0.6)
====== ======
Wtd. average number of
common shares outstanding 20.6 20.6
Shares issuable with
respect to RPG Group's
retained interest in the
CBG Group 16.7 16.8
Convertible preferred stock 6.0 6.1
Dilutive effect of stock
options 0.1
Dilutive effect of deferred
compensation awards
------ ------
Weighted average shares -
fully diluted earnings per
share calculation 43.4 43.5
====== ======
Loss per share assuming $(0.24)* $(0.01)
full dilution
[FN]
* Due to anti-dilution as
computed above for the 13
weeks ended December
24, 1994, fully diluted
earnings per share as
reported on the statement
of earnings is revised to
exclude anti-dilutive
securities from the
computation.
