SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996 Commission File No. 1-4582
RALSTON PURINA COMPANY
Incorporated in Missouri - IRS Employer Identification No. 43-0470580
Checkerboard Square, St. Louis, Missouri 63164
Registrant's telephone number, including area code: 314-982-1000
--------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Ralston Purina Company New York Stock Exchange, Inc.
Common Stock, par value $.10 per share Chicago Stock Exchange
Pacific Stock Exchange Incorporated
Ralston Purina Company New York Stock Exchange, Inc.
Common Stock Purchase Rights Chicago Stock Exchange
Pacific Stock Exchange Incorporated
5 3/4% Convertible Subordinated
Debentures New York Stock Exchange, Inc.
9 1/4% Debentures New York Stock Exchange, Inc.
9.30% Debentures New York Stock Exchange, Inc.
8 5/8% Debentures New York Stock Exchange, Inc.
8 1/8% Debentures New York Stock Exchange, Inc.
7 7/8 % Debentures New York Stock Exchange, Inc.
7 3/4% Debentures New York Stock Exchange, Inc.
Registrant 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 has been
subject to such filing requirements for the past 90 days.
Yes: X No:
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein and will not be contained, to the best of registrant's
knowledge, in the definitive proxy statement incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
Yes: No: X
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of the close of business on November 1, 1996: $7,499,138,720.
(Excluded from this figure is the voting stock held by Registrant's Directors,
who are the only persons known to Registrant who may be considered to be its
"affiliates" as defined under Rule 12b-2.)
Number of shares of Ralston Purina Company Common Stock ("RAL Stock"), $.10 par
value, outstanding as of close of business on November 1, 1996: 105,975,413.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Ralston Purina Company 1996 Annual Report to Shareholders
(Parts I and II of Form 10-K).
2. Portions of Ralston Purina Company Notice of Annual Meeting and Proxy
Statement dated December 6, 1996 (Part III of Form 10-K).
PART I
Item 1. Business.
The Company, incorporated in Missouri in 1894, is the world's largest producer
of dry dog and dry and soft-moist cat foods. It is also the world's largest
manufacturer of dry cell battery products. The Company is also a major producer
of other pet products, including cat box filler, dietary soy protein, fiber food
ingredients, polymer products and, outside the United States, feeds for
livestock and poultry. The Company has a number of trademarks, such as PURINA,
RALSTON, the CHECKERBOARD logo, CHOW, DOG CHOW, CAT CHOW, GOLDEN CAT, TIDY CAT,
EVEREADY and ENERGIZER among others, which it considers of substantial
importance and which it uses individually or in conjunction with other Company
trademarks.
The Company is presently comprised of four Business Segments - Pet Products,
Battery Products, Soy Protein Products and Agricultural Products.
The Pet Products Segment consists of Ralston Purina's worldwide Pet Products
operations. Pet Products produces and sells dog and cat foods under the PURINA
name, including DOG CHOW, CAT CHOW and numerous other dog and cat food brands.
Pet Products also produces and sells cat box filler and related products under
the GOLDEN CAT name, including TIDY CAT and other brands.
The Battery Products Segment consists of the Company's worldwide battery
products business. The battery products business manufactures and sells primary
batteries, rechargeable batteries and battery-powered lighting products in the
United States and worldwide, principally under the trademarks EVEREADY and
ENERGIZER. The Company's domestic and foreign battery operations have been
organized as Eveready Battery Company, Inc. and Ralston Purina Overseas Battery
Company, respectively, both wholly owned subsidiaries of the Company.
The Soy Protein Products Segment consists of the protein technologies business
of Protein Technologies International Holdings, Inc., a holding company and a
wholly owned subsidiary of the Company. Its operating subsidiaries primarily
manufacture food protein, food fiber and industrial polymer products.
The Agricultural Products Segment consists primarily of the business of
manufacturing CHOW brand formula feeds and animal health products outside the
United States.
On March 29, 1996, the Company announced its intention to separate the
businesses of its Agricultural Products Segment in a tax-free spin-off to
shareholders. Completion is anticipated in 1997 and is contingent upon a
favorable tax ruling from the Internal Revenue Service and approval by the
Company's Board of Directors. On July 22, 1995, the Company sold all of the
outstanding capital stock of Continental Baking Company, its subsidiary engaged
in the fresh bakery products business, to Interstate Bakeries Corporation and
its wholly owned subsidiary Interstate Brands Corporation. On March 31, 1994,
the Company consolidated its domestic cereal, baby food, cracker and cookie and
all seasons resort businesses in Ralcorp Holdings, Inc. ("Ralcorp") and then
spun-off the stock of Ralcorp to all holders of the Company's RAL Stock on the
basis of one share of Ralcorp Stock for every three shares of RAL Stock held on
that date.
The principal raw materials used in the Pet Products Segment are grain and grain
products, protein ingredients, meat by-products and clay; in the Battery
Products Segment, the principal raw materials used are manganese dioxide, zinc,
acetylene black and potassium hydroxide; in the Soy Protein Products Segment,
the principal raw materials used are processed soy and other proteins; and in
the Agricultural Products Segment, the principal materials used are grain and
grain products and protein ingredients. The Company purchases such raw
materials from local, regional, national and international suppliers. The cost
of raw materials used in these products may fluctuate due to weather conditions,
government regulations, economic climate, or other unforeseen circumstances.
The Company manages exposure to changes in the commodities markets as considered
necessary by hedging certain of its ingredient requirements such as soybean
meal, corn or wheat. Sales prices of the Company's agricultural products, a
large portion of the production costs of which are represented by the costs of
raw materials, are adjusted frequently to reflect changes in raw material costs.
Prices of other products are adjusted less frequently. The ability to
substitute ingredients in some of these products, such as agricultural feeds,
provides further protection against fluctuating raw material prices.
Pet products are marketed in the United States primarily through direct sales
forces and food brokers to grocery wholesalers, retail chains and other
customers. Battery products and food protein and industrial polymer products
are marketed in the United States and internationally primarily through direct
sales forces. Agricultural products are distributed primarily through a network
of approximately 3,300 independent dealers outside the United States.
Competition is intense in each of the Business Segments. In the Pet Products
and Battery Products Segments, the principal competitors are regional, national
and international manufacturers whose products compete with those of the Company
for shelf space and consumer acceptance. In the Agricultural Products Segment,
the Company competes with other large feed manufacturers, cooperatives, single-
owner establishments and in the case of many markets, government feed companies.
The business of the Battery Products Segment tends to be somewhat seasonal, with
strong fall and winter sales reflecting the effect of holiday buying of
batteries.
The operations of the Company, like those of other companies engaged in similar
businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment, including
regulations related to air and water quality, underground fuel storage tanks and
waste handling and disposal. The Company has received notices from the U.S.
Environmental Protection Agency, state agencies, and/or private parties seeking
contribution, that it has been identified as a "potentially responsible party"
(PRP), under the Comprehensive Environmental Response, Compensation and
Liability Act, and may be required to share in the cost of cleanup with respect
to 14 "Superfund" sites. The Company's ultimate liability in connection with
those sites may depend on many factors, including the volume of material
contributed to the site, the number of other PRP's and their financial
viability, and the remediation methods and technology to be used.
In 1996, 1995, and 1994, the Company recorded provisions for restructuring of
its world-wide battery production capacity and certain administrative functions.
The Company continues to review its battery production capacity and its business
structure in light of pervasive global trends, including the continuing shift
from carbon zinc to alkaline products and the easing of trade restrictions in
many regions. Future periods will likely include further provisions for
restructuring.
The Company, as a whole, employs 9,972 employees in the United States and 19,301
in foreign jurisdictions. The descriptions of the businesses of, and the
summary of selected financial data regarding, the Company appearing under
"Ralston Purina Company and Subsidiaries Financial Review-Highlights and
Outlook" on page 15, "Ralston Purina Company and Subsidiaries Financial Review-
Liquidity and Capital Resources" on pages 17 through 19, "Ralston Purina Company
and Subsidiaries Business Segment Information" on pages 21 through 26, and
"Ralston Purina Company and Subsidiaries Notes to Financial Statements - Summary
of Accounting Policies - Research and Development" on page 33 of the Ralston
Purina Company 1996 Annual Report to Shareholders are hereby incorporated by
reference.
Item 2. Properties.
A list of the Company's principal plants and facilities as of November 1, 1996
follows. The Company believes that such plants and facilities, in the
aggregate, are adequate, suitable and of sufficient capacity for purposes of
conducting its current business.
PET PRODUCTS
Pet Food Plants
United States
Atlanta, GA
Clinton, IA (2R)
Davenport, IA
Denver, CO
Dunkirk, NY
Flagstaff, AZ
Oklahoma City, OK
Zanesville, OH
International
Cuautitlan, Mexico
Encrucijada, Venezuela (7)
Guatemala City, Guatemala (7)
Innisfail, Alberta, Canada
Mississauga, Ontario, Canada
Monjos, Spain (7)
Montfort-Sur-Risle, France
Mosquera, Colombia (7)
Portogruaro, Italy (7)
Ribeirao Preto, Brazil
Songtan, Korea (7)
Strathroy, Ontario, Canada (7)
Cat Litter Plants
United States
Bloomfield, MO
Maricopa, CA
Olmsted, IL
Packaging Facilities
United States
Philadelphia, PA (9)
International
Caledonia, Ontario, Canada (9)
BATTERY PRODUCTS
Battery and Related Products Plants
United States
Asheboro, NC (4)
Bennington, VT
Fremont, OH
Gainesville, FL
Garretsville, OH
Marietta, OH
Maryville, MO
Newport News, VA
St. Albans, VT
International
Alexandria, Egypt
Banbury, United Kingdom
Bogang, People's Republic of China
Caudebec Les Elbeuf, France (2)
Cebu, Philippines
Ekala, Sri Lanka
Itapecerica, Brazil
Jakarta, Indonesia
Johor Bahru, Malaysia
Juarez, Mexico
Jurong, Singapore (4)
La Chaux-de-Fonds, Switzerland
Manila, Philippines
Macau
Nakuru, Kenya (6)
Newcastle-under-Lyme, United Kingdom
New Territories, Hong Kong
Slany, Czech Republic
Tanfield Lea, United Kingdom
Tecamac, Mexico
Tianjin, People's Republic of China
Walkerton, Ontario, Canada
AGRICULTURAL PRODUCTS
Feed Plants
International
Addison, Ontario, Canada
Arequipa, Peru (2)
Barcelona, Venezuela
Belo Horizonte, Brazil (2)
Benavente, Portugal
Benavente, Spain (1)
Borgoratto, Italy
Bucaramanga, Colombia
Buga, Colombia
Cali, Colombia (2)
Canoas, Brazil
Cantenhede, Portugal
Cartagena, Colombia
Chambe, France (1)
Chiclayo, Peru
Courchelettes, France
Cuautitlan, Mexico
Dos Hermanas, Spain
Drummondville, Quebec, Canada
Encrucijada, Venezuela (3)
Ferrard, France (1)
Galicia, Spain
Giron, Colombia (2)
Gonen, Turkey
Guadalajara, Mexico
Guatemala City, Guatemala (3)
Inhumas, Brazil
Karcag, Hungary
Kunsan, Korea
Lima, Peru
Longue, France
Luleburgaz, Turkey
Maracaibo, Venezuela
Marcilla, Spain
Maringa, Brazil
Medellin, Colombia (2)
Merida, Mexico (1)
Merida, Spain
Mexicali, Mexico
Monjos, Spain (1)(3)
Monterrey, Mexico
Mosquera, Colombia (3)
Nanjing, People's Rep. of China (8)
Nutricia, Venezuela (2)
Obregon, Mexico
Palmerston, Ontario, Canada
Paulina, Brazil
Pommevic, France
Portogruaro, Italy (3)
Pulilan, Philippines
Pusan, Korea
Recife, Brazil
St. Romuald, Quebec, Canada
Salamanca, Mexico
San Felice, Italy
Sildamin, Italy (2)
Songtan, Korea (3)
Sorcy, France
Sospiro, Italy
Strathroy, Ontario, Canada
Tehuacan, Mexico
Termoli, Italy
Torrejon, Spain
Valencia, Spain
Villasis, Philippines
Volta Redonda, Brazil
Woodstock, Ontario, Canada
Yantai, People's Rep. of China (8)
Hatcheries
Valencia, Venezuela
SOY PROTEIN PRODUCTS
Food Protein Plants
United States
Memphis, TN
Pryor, OK
International
Ieper, Belgium
Industrial Protein Plant
Louisville, KY
Powdered Alpha Cellulose Plant
Urbana, OH
Dairy Food Systems Plant
Hager City, WI
OTHER PROPERTIES
Research Facilities
United States
Cape Girardeau, MO
Gray Summit, MO (5)
St. Louis, MO (5A)
Westlake, OH (5B)
International
Tanfield Lea, United Kingdom
Machine Shop and Foundry
St. Louis, MO
Miscellaneous
Thomasville, NC
Administrative and Executive Offices
St. Louis, MO
In addition to the properties identified above, the Company and its subsidiaries
own and/or operate sales offices, regional offices, storage facilities,
distribution centers and terminals and related properties.
(1) 20% to 50% owned interests
(2) Leased; (2R) Leased pursuant to industrial revenue bond financing
(3) Also produces pet food
(4) Two plants
(5) Provides service for Human and Pet Foods; (5A) Human and Pet Foods and
Soy Protein Products; (5B) Battery Products
(6) Less than 20% owned interest
(7) Also produces feed
(8) Over 50% owned interest in Joint Venture operating facility
(9) Bulk packaging and distribution
Item 3. Legal Proceedings.
The Company is a party to a number of legal proceedings in various state,
federal and foreign jurisdictions. These proceedings are in varying stages and
many may proceed for protracted periods of time. Some proceedings involve
highly complex questions of fact and law.
On January 4, 1993, the Company was served with the first of nine
substantively identical actions currently pending in the United States District
Court for the District of New Jersey. The suits have been consolidated and
styled In Re Baby Food Antitrust Litigation, No. 92-5495 (NHP). The
consolidated proceeding is a certified class action by and on behalf of all
direct purchasers of baby foods (other than the defendants and governmental
entities), alleging that the Beech-Nut baby food business (owned by the Company
from November, 1989 until April, 1994, and now owned by Ralcorp Holdings, Inc.)
and its predecessor Nestle Holdings, Inc., together with Gerber Products Company
and H.J. Heinz Company, conspired to fix, maintain and stabilize the prices of
baby foods during the period January 1, 1975 to August 31, 1992. The suit seeks
treble damages.
On January 19 and 21, 1993, the Company was served with two class actions
on behalf of indirect purchasers (consumers) of baby food in California, which
contain substantially identical charges. These actions have been consolidated
in the Superior Court for the County of San Francisco and styled Bruce, et al.
v. Gerber Products Company, et al., No. 94-8857. On January 19, 1993, Ralston
was served with a similar action filed in Alabama state court on behalf of
indirect purchasers of baby food in Alabama, styled Johnson, et al. v. Gerber
Products Company, et al., No. 93 -L-0333-NE. The California and Alabama state
actions allege violations of state antitrust laws, seek treble damages and are
substantively identical to each other. Similar state actions may be filed in
states having laws permitting suits by indirect purchasers. The Company and
Ralcorp Holdings, Inc. have agreed that all liability and expenses related to
the above antitrust matters will be shared equally, except that the Company will
be solely responsible for any settlement or judgment exceeding a certain set
amount.
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment, including
regulations related to air and water quality, underground fuel storage tanks and
waste handling and disposal. The Company has received notices from the U.S.
Environmental Protection Agency, state agencies, and/or private parties seeking
contribution, that it has been identified as a "potentially responsible party"
(PRP), under the Comprehensive Environmental Response, Compensation and
Liability Act, and may be required to share in the cost of cleanup with respect
to 14 "Superfund" sites. The Company's ultimate liability in connection with
those sites may depend on many factors, including the volume of material
contributed to the site, the number of other PRP's and their financial
viability, and the remediation methods and technology to be used.
In the opinion of management, based on the information presently known, the
ultimate liability for all such matters, together with the liability for all
other pending legal proceedings, asserted legal claims and known potential legal
claims which are probable of assertion, taking into account established accruals
of $13.9 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 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 4.A. Executive Officers of the Registrant.
A list of the executive officers of the Company and their business experience
follows:
William P. Stiritz, 62, Chairman of the Board, Chief Executive Officer and
President since 1982 and Corporate Officer since 1973; President and Chief
Executive Officer 1981-82; Group Vice President, Grocery Products and Restaurant
Operations 1979-81. Company service, 33 years.
Jay W. Brown, 51, Vice President; Chief Executive Officer and President, Protein
Technologies International, Inc. since 1995; Chairman of the Board and Chief
Executive Officer, Continental Baking Company 1985 - 1995 and Corporate Officer
since 1984; President, Van Camp Seafood Division 1983-84; Vice President,
Foodmaker, Inc. 1981-83. Company service, 26 years.
James R. Elsesser, 52, Vice President and Chief Financial Officer since 1985 and
Corporate Officer since 1985; Vice President, March-September, 1985; Treasurer,
February-September, 1985. Company service, 11 years.
Nancy E. Hamilton, 46, Secretary and Corporate Officer since 1996; Senior
Counsel and Assistant Secretary, 1994 - 1996. Company service, 11 years.
Patrick C. Mannix, 51, Vice President; President, Eveready Battery Company,
Inc., Specialty Business since 1995; Executive Vice President, Eveready Battery
Company, International 1991 - 1995 and Corporate Officer since 1992; Area
Chairman, Asia Pacific operations, Eveready Battery, 1985-91. Company service,
33 years, including 23 years with Eveready Battery Division of Union Carbide
Corporation.
W. Patrick McGinnis, 49, Vice President; President and Chief Executive Officer,
Pet Products Group since 1992 and Corporate Officer since 1984; President and
Chief Operating Officer, Grocery Products Group 1989-92; Vice President and
President, Branded Foods Group 1987-89; Vice President and Executive Vice
President, Grocery Products Division 1984-87; Division Vice President,
Marketing, Grocery Products Division 1983-84; Executive Vice President and
Director, Grocery Products Division, Ralston Purina Canada, Inc. 1980-83.
Company service, 24 years.
George L. Meffert, Jr., 56, Vice President; President, Eveready Battery Company,
Inc. since 1995; Executive Vice President, North America, Eveready Battery
Company, 1988 - 1995 and Corporate Officer since 1992; Area Chairman, Latin
American operations, Eveready Battery, 1985-88. Company service, 31 years,
including 21 years with Eveready Battery Division of Union Carbide Corporation.
J. Patrick Mulcahy, 52, Vice President; Chairman of the Board and Chief
Executive Officer, Eveready Battery Company, Inc., and responsible for Ralston
Purina International since 1987 and Corporate Officer since 1984; Vice President
and Director, Corporate Strategic Planning and Administration 1984-86; Division
Vice President, Strategic Planning 1981-84; Division Vice President, Director of
Marketing, Grocery Products Group 1980-81. Company service, 29 years.
James M. Neville, 57, Vice President, General Counsel and Assistant Secretary
since 1996; Vice President, General Counsel and Secretary 1989 - 1996, and
Corporate Officer since 1983; Vice President and General Counsel 1984-89.
Company service, 13 years.
Ronald D. Winney, 54, Treasurer and Corporate Officer since 1985; Division Vice
President and Assistant Treasurer 1984-85; Assistant Treasurer 1977-85. Company
service, 27 years.
Anita M. Wray, 42, Vice President and Controller since April 1994; Division Vice
President and Director of Financial Accounting Services, 1985-1994. Company
service, 17 years.
(Ages and years of service as of December 31, 1996.)
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
The Company's RAL is listed on the New York Stock Exchange, Chicago Stock
Exchange, Pacific Stock Exchange and has unlisted trading privileges on the
Philadelphia, Boston and Cincinnati Stock Exchanges. As of September 30, 1996,
there were 23,024 shareholders of record of the Company's RAL Stock.
The following tables set forth dividends paid and range of market prices
for the RAL Stock and the Company's Ralston-Continental Baking Group Common
Stock ("CBG Stock")* (for the year ended September 30):
Dividends Paid
1996 1995
RAL Stock RAL Stock
First Quarter $ .30 $.30
Second Quarter .30 .30
Third Quarter .30 .30
Fourth Quarter .30 .30
Market Price Range
l996 l995
RAL Stock RAL Stock CBG Stock
First Quarter $67 - 57.25 $45.75 - 40.50 $5.50 - 3.625
Second Quarter 69 - 57.875 50.125 - 43.50 4.625 - 3.25
Third Quarter 67.75 - 56 51.75 - 46.375 4.50 - 3.625
Fourth Quarter 68.875 - 57.75 59 - 48.625 **
**Each outstanding share of CBG Stock was exchanged for .0886 shares of RAL
Stock on May 15, 1995 and is no longer outstanding.
There have been no unregistered offerings of registrant's equity securities
during the period covered by this Annual Report.
Item 6. Selected Financial Data.
The summary of selected financial data regarding Ralston Purina Company
appearing on pages 12 through 13, of the Ralston Purina Company 1996 Annual
Report to Shareholders is hereby incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Information appearing under "Ralston Purina Company and Subsidiaries Financial
Review" on pages 15 through 23 and the information appearing under "Ralston
Purina Company and Subsidiaries Business Segment Information" on pages 24
through 26 of the Ralston Purina Company 1996 Annual Report to Shareholders is
hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the Company and its subsidiaries
appearing on pages 28 through 46, together with the report thereon of Price
Waterhouse LLP on page 27, and the supplementary data under "Ralston Purina
Company and Subsidiaries Quarterly Financial Information" on pages 47 through 48
of the Ralston Purina Company 1996 Annual Report to Shareholders are hereby
incorporated by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors of the Registrant.
The information regarding directors on pages 5 through 11 and information
appearing under "Section 16(a) Beneficial Ownership Reporting Compliance" on
page 21 of the Ralston Purina Company Notice of Annual Meeting and Proxy
Statement dated December 6, 1996 is hereby incorporated by reference.
Item 11. Executive Compensation.
Information appearing under "Executive Compensation" on pages 12 through
16, "Compensation Committee Interlocks and Insider Participation" on page 16,
"Human Resources Committee Report on Executive Compensation" on page 16,
"Performance Graphs" on pages 20 through 21, "Stock Ownership" on pages 7
through 9, and the remuneration information under "Directors' Meetings,
Committees and Fees" on pages 9 through 11 of the Ralston Purina Company Notice
of Annual Meeting and Proxy Statement dated December 6, 1996 is hereby
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The discussion of the security ownership of certain beneficial owners and
management appearing under "Stock Ownership" on pages 7 through 9 of the Ralston
Purina Company Notice of Annual Meeting and Proxy Statement dated December 6,
1996 is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
Information appearing under "Compensation Committee Interlocks and Insider
Participation" on page 16 of the Ralston Purina Company Notice of Annual Meeting
and Proxy Statement dated December 6, 1996, is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
1. Documents filed with this report:
a. Financial statements previously incorporated by reference under Item 8
hereinabove.
- Report of Independent Accountants.
- Consolidated Statement of Earnings -- for years ended September 30,
1996, 1995 and 1994.
- Consolidated Balance Sheet -- for years ended September 30, 1996 and
1995.
- Consolidated Statement of Cash Flows -- for years ended September 30,
1996, 1995, and 1994.
- Consolidated Statement of Shareholders Equity -- for years ended
September 30, 1996, 1995 and 1994.
- Notes to Financial Statements.
b. Exhibits (Listed by numbers corresponding to the Exhibit Table of Item
601 in Regulation S-K).
(3i) The Restated Articles of Incorporation of Ralston Purina Company,
effective as of February 1, 1996 are hereby incorporated by
reference to the Company's Form 10-Q for the quarter ended December
31, 1995.
(3ii) The By-Laws of Ralston Purina Company, as amended November 16, 1995,
are hereby incorporated by reference to the Company's Form 10-K for
the fiscal year ended September 30, 1995.
(4) The Rights Agreement, effective as of March 28, 1996, is hereby
incorporated by reference to the Company's Form 8-A Registration
Statement filed on March 29, 1996.
(4) The Certificate of Designation of Ralston Purina Company Series A
ESOP Preferred Stock dated as of July 30, 1993, is hereby
incorporated by reference to the Company's Form 10-K for the fiscal
year ended September 30, 1993.
(4) Ralston Purina Company agrees to furnish the SEC, upon its request,
a copy of any instrument defining the rights of holders of long-term
debt of the Company and its consolidated subsidiaries and any of its
unconsolidated subsidiaries for which financial statements are
required to be filed.
(10) Material Contracts.
(i) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1983.
(a) Form of letter agreement dated June 18, 1982, to certain
officers providing for deferral of bonuses for fiscal year
1982.*
(b) Form of letter agreement to certain officers regarding
Deferred Bonus Plan.*
(ii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1985.
(a) Form of Agreement for Conversion of Deferred Compensation.*
(b) Form of Agreement for Conversion of Existing Deferrals over
$100,000.*
(c) Form of Agreement for Conversion of 1968 Restricted Stock.*
(d) Form of Agreement for Conversion of Benefits under the
Supplemental Death Benefits Plan.*
(e) Form of Agreement for Deferral of 1985 Annual Cash Bonus.*
(f) Form of Agreement for Deferral of 1985 ITIP Award Accruals.*
(g) Form of Non-Qualified Stock Option, effective September 22,
1983, as amended.*
(iii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1987.
(a) Form of Agreement for Deferral of 1986 Annual Cash Bonus.*
(b) Form of Agreement for Deferral of 1986 ITIP Award Accruals.*
(iv) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1988.
(a) Executive Life Plan, as amended September 24, 1987.*
(b) Ralston Purina Company Incentive Compensation Plan, as
adopted December 15, 1966, and amended September 1, 1968,
and September 25, 1987.*
(c) Ralston Purina Company 1972 Incentive Compensation Plan, as
amended September 25, 1987.*
(d) Form of Agreements for Deferral of 1987 Annual and Special
Cash Bonuses.*
(e) Form of Agreements for Deferral of 1988 Annual and Special
Cash Bonuses.*
(f) Form of Stock Performance Awards, effective March 24, 1988.*
(g) Ralston Purina Company 1982 Incentive Stock Plan as amended
June 19, 1985, and January 21 and March 25, 1988.*
(h) Ralston Purina Company 1988 Incentive Stock Plan, as amended
January 21 and March 25, 1988.*
(i) Personal Financial Planning Program, as amended July 21,
1988.*
(k) Form of Non-Qualified Stock Option, effective September 22,
1988.*
(l) Executive Health Plan, as amended April 1, 1985, September
24, 1987 and July 21 and November 17, 1988.*
(v) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1989.
(a) Ralston Purina Company Supplemental Retirement Plan, as
amended May 26, 1989.*
(b) Change in Control Severance Compensation Plan, as amended
September 21, 1989.*
(c) Executive Long-Term Disability Plan, as adopted September
22, 1989.*
(d) Executive Savings Investment Plan, as amended May 25, 1989.*
(e) Personal Financial Planning Program, as amended May 25,
1989.*
(vi) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1990.
(a) Form of Management Continuity Agreements, as amended
September 28, 1990.*
(b) Form of Non-Qualified Stock Option, effective May 24, 1990.*
(c) Deferred Compensation Plan for Non-Management Directors, as
amended September 25, 1987, July 22, 1988 and May 25, 1990.*
(d) Deferred Compensation Plan for Key Employees, as amended
September 21, 1989, April 9, 1990 and November 21, 1990.*
(e) Form of Agreement for Deferral of 1985, 1986 and 1989 Annual
and Special Cash Bonuses.*
(f) Form of letter amending Restricted Stock Awards and Non-
Qualified Stock Options, as of September 27, 1990.*
(vii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1991.
(a) Form of Split Dollar Second to Die Insurance Agreement.*
(b) Form of letter amending certain outstanding Restricted Stock
Awards and Non-Qualified Stock Options, as of November 21,
1991.*
(c) Form of letter for Deferral of 1992 Bonus Award.*
(viii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year
ended September 30, 1992.
(a) Form of letter amending certain outstanding Restricted Stock
Awards and Non-Qualified Stock Options, dated as of
September 29, 1992.*
(b) Form of letter for Deferral of 1993 Bonus Award.*
(c) Form of Agreement for Deferral of 1991 Annual and Special
Cash Bonuses.*
(d) Form of Agreement for Deferral of 1991 Annual Cash Bonus.*
(e) Form of 1991 Non-Qualified Stock Option.*
(f) Form of Indemnification Agreement with directors and
corporate officers.*
(ix) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1993.
(a) Form of Agreement for Deferral of 1992 Annual and Special
Bonuses.*
(b) Form of Agreement for Deferral of 1992 Annual Cash Bonus.*
(c) Form of Amendment to 1988 Non-Qualified Stock Option.*
(d) Form of Amendment to 1990 Non-Qualified Stock Option.*
(e) Form of Amendment to 1991 Non-Qualified Stock Option.*
(f) Form of Deferred Compensation Plan for Key Employees, as
amended, September 21, 1989, April 9, 1990, November 21,
1990, December 11, 1992, July 30, 1993 and November 18,
1993.*
(g) Form of Deferred Compensation Plan for Non-Management
Directors, as amended September 25, 1987, July 22, 1988, May
25, 1990, October 27, 1992, July 30, 1993 and November 18,
1993.*
(h) Form of letter amending Restricted Stock Awards, dated as of
September 24, 1993.*
(x) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1994.
(a) Form of Letter for Deferral of 1995 Bonus Award.*
(b) The Agreement and Plan of Reorganization between the Company
and Several of its Subsidiaries and Ralcorp Holdings, Inc.
dated March 31, 1994 is incorporated by reference to the
Company's Form 8-K/A dated April 14, 1994.
(d) Trust Agreement between Ralston Purina Company and Wachovia
Bank of North Carolina, N.A., dated as of September 15,
1994.
(e) Leveraged Incentive Plan, adopted as of September 23, 1994.*
(xi) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended
September 30, 1995.
(a) Deferred Compensation Plan for Non-Management Directors, as
amended September 25, 1987, July 22, 1988, May 25, 1990,
October 27, 1992, July 30, 1993, November 18, 1993 and August
9, 1995.*
(b) Deferred Compensation Plan for Key Employees, as amended
September 21, 1989, April 9, 1990, November 21, 1990,
December 11, 1992, July 30, 1993, November 18, 1993, and
November 6, 1995.*
(c) Form of Letter for Deferral of 1996 Bonus Award.*
(d) Form of March 23, 1995 Non-Qualified Stock Option Contract.*
(e) Form of September 28, 1995 Non-Qualified Stock Option
Contract.*
(f) Form of September 28, 1995 Non-Qualified Performance Stock
Option Contract.*
(g) Form of Agreement for Deferral of 1995 Annual Cash Bonus.*
(h) Retirement Plan for Non-Management Directors, as amended
November 20, 1987, July 22, 1988, May 26, 1989 and November
16, 1995.*
(xii) Form of September 26, 1996 Non-Qualified Performance Stock Option
Agreement.*
(xiii) Form of September 26, 1996 Non-Qualified Stock Option Agreement.*
(xiv) Deferred Compensation Plan for Non-Management Directors, as
amended September 25, 1987, July 22, 1988, May 25, 1990, October
27, 1992, July 30, 1993, November 18, 1993, August 9, 1995, and
September 26, 1996.*
(xv) Deferred Compensation Plan for Key Employees, as amended
September 21, 1989, April 9, 1990, November 21, 1990, December
11, 1992, July 30, 1993, November 18, 1993, November 6, 1995, and
September 26, 1996.*
(xvi) Form of Agreement for Deferral of 1997 Bonus Award.*
(xvii) Form of Agreement for Deferral of 1996 Annual Cash Bonus*
(xviii) Form of Agreement for Deferral of 1996 Annual and Special Cash
Bonus.*
(xviv) Deferral of Potential Fiscal 1997 Protein Sr. Management
Incentive Award.*
(11) Statement re: Computation of Per Share Earnings.
(13) Pages 12 to 48 of the Ralston Purina Company Annual Report to
Shareholders 1996, which are incorporated herein by reference, are
filed herewith.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule.
* Denotes a management contract or compensatory plan or arrangement.
2. No Current Reports on Form 8-K were filed by the Company during the fourth
quarter of its fiscal year ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By William P. Stiritz
William P. Stiritz
Chairman of the Board and
Chief Executive Officer
Date: December 13, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 13, 1996, by the following persons on
behalf of the registrant in the capacities indicated.
Signature Title
William P. Stiritz
- ------------------------------- Chairman of the Board, Chief
William P. Stiritz Executive Officer, President
and Director
James R. Elsesser
- ------------------------------- Vice President and Chief
James R. Elsesser Financial Officer
Anita M. Wray
- ------------------------------- Vice President and Controller
Anita M. Wray
David R. Banks
- ------------------------------- Director
David R. Banks
John H. Biggs
- ------------------------------ Director
John H. Biggs
Donald Danforth, Jr.
- ------------------------------ Director
Donald Danforth, Jr.
William H. Danforth
- ------------------------------- Director
William H. Danforth
David C. Farrell
- ------------------------------- Director
David C. Farrell
M. Darrell Ingram
- ------------------------------ Director
M. Darrell Ingram
Richard A. Liddy
- ------------------------------ Director
Richard A. Liddy
John F. McDonnell
- ------------------------------ Director
John F. McDonnell
Katherine D. Ortega
- ------------------------------ Director
Katherine D. Ortega
Financial Statement and Schedules
The consolidated financial statements of the Registrant have been
incorporated by reference under Item 8. Financial statements of the
Registrant's 50% or less owned companies have been omitted because, in the
aggregate, they are not significant.
Schedules not included have been omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.
NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT
RALSTON PURINA COMPANY (the "Company"), effective September 26, 1996,
grants this Non-Qualified Performance Stock Option to
("Optionee") to purchase a total of shares of Common Stock of the
Company ("Stock") at a price of $67.25 per share pursuant to its 1996 Incentive
Stock Plan (the "Plan"). Subject to the provisions of the Plan and the
following terms, Optionee may exercise this Option from time to time by
tendering to the Company written notice of exercise together with the purchase
price in cash, or in shares of Stock which have been held by Optionee at least
six months, at their Fair Market Value as determined by the Human Resources
Committee, or both. In the event of any conflict between the terms of the Plan
and the following terms, the terms of this Option Agreement shall prevail.
1. Normal Exercise. This Option becomes exercisable at the rate of 33-1/3% of
the total shares on September 26 in each of the years 1998, 2001 and 2004,
provided that the Performance Price Target applicable to each such date is
met on such date with respect to that portion of the shares for which the
Vesting Requirement has been satisfied. The shares with respect to which
the Performance Price Target has not been met, but for which the Vesting
Requirement has been met, remain unexercisable until the earliest date
thereafter on which a Performance Price Target associated with such
subsequent date as set forth in the Stock Performance Table in paragraph 7
of this Agreement is met. If the New York Stock Exchange is closed on any
of such dates, then the applicable Performance Price Target must be met on
the next trading day thereafter. Subject to the forfeiture provisions of
paragraph 4 below, all Vesting Requirements and all Performance Price
1
Targets are waived on September 26, 2005, and all unexercised options are
exercisable on or after that date. Once both the Vesting Requirement and
Performance Price Target are met or waived with respect to shares under the
Option, such shares remain exercisable through September 25, 2006, subject
only to the provisions of paragraphs 3(b) and (c) and paragraph 4 below.
2. Acceleration. Notwithstanding the above, prior to September 26, 2005, the
Vesting Requirement is waived before the normal exercise dates set forth in
paragraph 1 hereof upon the occurrence of any of the following events:
a. Death of Optionee;
b. Declaration of Optionee's total and permanent disability;
c. Retirement from the Board of Directors of the Company; or
d. Split-up of the Company as defined by the Human Resources Committee of
the Board.
The Performance Price Target for shares for which the Vesting Requirement
is waived upon the occurrence of the events set forth in paragraphs 2a, 2b,
2c or 2d, and for shares for which the Vesting Requirement but not the
Price Performance Target previously had been met before the occurrence of
one of such events, shall be the Performance Price Target associated with
the date set forth in the Stock Performance Table immediately preceding the
date of such event. Options for such shares shall be exercisable if the
Performance Price Target is met on one day during the applicable exercise
period set forth in paragraph 3.
Notwithstanding the foregoing, all Vesting Requirements and Performance
Price Targets which have not been met as of a Change in Control of the
2
Company are waived, and all Options which have not been forfeited or
exercised prior to a Change of Control are exercisable after such Change of
Control.
3. Exercise After Certain Events. Upon the occurrence of any of the events
described below, any Options exercisable on the date of such event shall
remain exercisable during the period stated below, but, in any event, not
later than September 25, 2006:
a. Upon Optionee's retirement from the Board of Directors, declaration of
total and permanent disability or death, such Options shall remain
exercisable for the balance of the option term remaining after such
event;
b. When, prior to a Change of Control, there has been a declaration of
forfeiture pursuant to Section IV of the Plan because Optionee's
employment is Terminated for Cause, Optionee engages in competition
with the Company or an Affiliate, or Optionee engages in any activity
or conduct contrary to the best interests of the Company or any
Affiliate, such Options shall remain exercisable for seven days
thereafter; or
c. With respect to Options that are exercisable after a Change of
Control, such shares shall remain exercisable for seven days if
Optionee's employment is Terminated for Cause, Optionee engages in
competition with the Company or an Affiliate, or Optionee engages in
any activity or conduct contrary to the best interests of the Company
or any Affiliate.
The restrictions on exercise set forth in Sections II.C.1, 2 and 3(ii) of
the Plan are not applicable to the terms of this Option.
3
4. Forfeiture. Prior to a Change of Control, this Option is subject to
forfeiture for the reasons set forth in Section IV.A.1, 3 or 4 of the Plan.
If there is an event of forfeiture, only those shares that are exercisable
at that time may be exercised as set forth in paragraph 3 hereof.
5. Adjustments. Upon any stock split-up, stock dividend, issuance of any
targeted stock, combination or reclassification with respect to any
outstanding class or series of Stock, or consolidation, merger or sale of
all or substantially all of the assets of the Company, the Committee shall
cause adjustments as it deems equitable or appropriate to be made to the
terms of this Option.
7. Definitions. Unless otherwise defined in this Option Agreement, defined
terms used herein shall have the same meaning as set forth in the Plan.
"Change of Control" shall occur when (i) a person, as defined
under the securities laws of the United States, acquires beneficial
ownership of more than 50% of the outstanding voting securities of the
Company; or (ii) the directors of the Company immediately before a
business combination between the Company and another entity, or a
proxy contest for the election of directors, shall, as a result
thereof, cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company.
"Date of Grant" means September 26, 1996.
"Performance Price Target" shall mean the closing price for a
share of Stock as quoted in the New York Stock Exchange Composite
Transactions, as set forth in the Stock Performance Table below with
4
respect to each anniversary of the Date of Grant of this Option and
the last day of each quarter between such anniversary dates:
<TABLE>
<CAPTION>
<S><C><C>
Stock Performance Table
Anniversary of Date Performance Price
of Grant Target
September 26, 1996 $67.25
December 31, 1996 $68.08
March 31, 1997 $68.91
June 30, 1997 $69.76
September 26, 1997 $70.61
December 31, 1997 $71.48
March 31, 1998 $72.36
June 30, 1998 $73.24
September 26, 1998 $74.14
December 31, 1998 $75.05
March 31, 1999 $75.97
5
June 30, 1999 $76.91
September 26, 1999 $77.85
December 31, 1999 $78.81
March 31, 2000 $79.77
June 30, 2000 $80.75
September 26, 2000 $81.74
December 31, 2000 $82.75
March 31, 2001 $83.76
June 30, 2001 $84.79
September 26, 2001 $85.83
December 31, 2001 $86.88
March 31, 2002 $87.95
June 30, 2002 $89.03
September 26, 2002 $90.12
December 31, 2002 $91.23
March 31, 2003 $92.35
June 30, 2003 $93.48
September 26, 2003 $94.63
December 31, 2003 $95.79
March 31, 2004 $96.96
June 30, 2004 $98.15
6
September 26, 2004 $99.36
December 31, 2004 $100.58
March 31, 2005 $101.81
June 30, 2005 $103.06
</TABLE>
"Termination for Cause" shall mean Optionee's termination of
employment with the Company because of the willful engaging by
Optionee in gross misconduct; provided, however, that a Termination
for Cause shall not include termination attributable to (i) poor work
performance, bad judgment or negligence on the part of Optionee, (ii)
an act or omission believed by Optionee in good faith to have been in
or not opposed to the best interests of the Company and reasonably
believed by Optionee to be lawful, or (iii) the good faith conduct of
Optionee in connection with a Change of Control (including opposition
to or support of such Change of Control).
"Vesting Requirement" shall mean the provision, set forth in
paragraph 1, regarding exercise of the Option at the rate of 33-1/3%
of the total shares on September 26 of the years 1998, 2001 and 2004.
8. Severability. The invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of the
remainder hereof in that jurisdiction, or the validity or enforceability of
this Option, including that provision, in any other jurisdiction. To the
extent permitted by applicable law, the Company and Optionee each waive any
provision of law that renders any provision hereof invalid, prohibited or
unenforceable in any respect. If any provision of this Option is held to
be unenforceable for any reason, it shall be adjusted rather than voided,
7
if possible, in order to achieve the intent of the parties to the extent
possible.
9. Choice of Law. The validity, construction, interpretation and effect of
this Option Agreement shall be determined solely in accordance with the
laws, but not the laws pertaining to choice of laws, of the State of
Missouri.
ACKNOWLEDGED AND ACCEPTED: RALSTON PURINA COMPANY
By: By:
W. P. Stiritz C. S. Sommer
Vice President, Administration
Date Date
8
1
NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT
RALSTON PURINA COMPANY (the "Company"), effective September 26, 1996,
grants this Non-Qualified Performance Stock Option to [NAME] ("Optionee") to
purchase a total of [SHARES] shares of Common Stock of the Company ("Stock") at
a price of $67.25 per share pursuant to its 1996 Incentive Stock Plan (the
"Plan"). One-half of the total shares subject to this Option Agreement are
defined as "Base Award" shares and the remaining half are defined as "Peer Group
Award" shares.
Subject to the provisions of the Plan and the following terms, Optionee may
exercise this Option from time to time by tendering to the Company written
notice of exercise together with the purchase price in (a) cash or by check,
bank draft or money order payable to the order of the Company; (b) shares of
previously acquired Stock, which have been duly endorsed and are free of any
restrictions and encumbrances; or (c) any combination of (a) or (b). Shares of
Stock used to pay the purchase price must have been owned by Optionee for at
least six months, and will be valued as of the date of exercise at their Fair
Market Value as defined in the Plan. In the event of any conflict between the
terms of the Plan and the terms of this Option Agreement, the terms of this
Option Agreement shall prevail.
1. Definitions. Unless otherwise defined in this Option Agreement, defined
terms used herein shall have the same meaning as set forth in the Plan.
"Change of Control" shall occur when (i) a person, as defined
under the securities laws of the United States, acquires beneficial
ownership of more than 50% of the outstanding voting securities of the
Company; or (ii) the directors of the Company immediately before a
business combination between the Company and another entity, or a
proxy contest for the election of directors, shall, as a result
2
thereof, cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company.
"Company Service" shall mean vesting service credited to Optionee
under the Ralston Purina Retirement Plan or a successor plan or, if
Optionee does not participate in such plan, the period of Optionee's
continuous service as an employee of the Company and/or its affiliates
ending at retirement or other termination;
"Committee" shall mean the Human Resources Committee of the Board
of Directors of the Company, or any successor committee of the Board.
"Date of Grant" shall mean September 26, 1996.
"Involuntary Termination of Employment" shall mean Optionee's
involuntary termination of employment by the Company or any of its
wholly owned subsidiaries, other than a Termination for Cause or a
termination directly related to the occurrence of events described in
Section IV, paragraphs A.3 or 4 of the Plan. An Involuntary
Termination of Employment shall include, but is not limited to, the
sale or other disposition of the stock of a subsidiary, or of
substantially all of the assets of a subsidiary or division, by which
the Optionee is employed, if, following such event, the Optionee is no
longer employed by the Company or one of its wholly owned
subsidiaries.
"Peer Group" shall mean, at Date of Grant, the companies
comprising Standard & Poor's Foods Index, those comprising Standard &
Poor's Household Products Index, Duracell, and Gillette; and
thereafter, such other companies as may, from time to time, be
selected in accordance with paragraph 2 of this Option Agreement.
3
"Peer Group Target" shall be deemed achieved if Total Shareholder
Return for the Company for any relevant period is within the top 25th
percentile of Total Shareholder Return of members of the Peer Group
for such period.
"Performance Price Target" shall be deemed achieved if the
closing price for a share of Stock, as quoted in the New York
Stock Exchange Composite Transactions, as of a Target Date is
equal to or exceeds the price for such date set forth in the
Stock Performance Table below.
<TABLE>
<CAPTION>
<S><C><C>
Stock Performance Table
Stock Price at Date of Grant: $67.25
Target Date Performance Price
Target
September 26, 1997 $70.61
December 31, 1997 $71.48
March 31, 1998 $72.36
June 30, 1998 $73.24
September 26, 1998 $74.14
December 31, 1998 $75.05
March 31, 1999 $75.97
June 30, 1999 $76.91
September 26, 1999 $77.85
4
December 31, 1999 $78.81
March 31, 2000 $79.77
June 30, 2000 $80.75
September 26, 2000 $81.74
December 31, 2000 $82.75
March 31, 2001 $83.76
June 30, 2001 $84.79
September 26, 2001 $85.83
December 31, 2001 $86.88
March 31, 2002 $87.95
June 30, 2002 $89.03
September 26, 2002 $90.12
December 31, 2002 $91.23
March 31, 2003 $92.35
June 30, 2003 $93.48
September 26, 2003 $94.63
December 31, 2003 $95.79
March 31, 2004 $96.96
June 30, 2004 $98.15
September 26, 2004 $99.36
December 31, 2004 $100.58
5
March 31, 2005 $101.81
June 30, 2005 $103.06
</TABLE>
"Plan" shall mean the Company's 1996 Incentive Stock Plan.
"Service Vesting Requirement" shall, subject to achievement of
the Performance Price Target or the Peer Group Target, as the case may
be, be deemed satisfied with respect to the Base Award and Peer Group
Award shares at the rate of 33-1/3% of the shares of their respective
portions of the Option on September 26 of the years 1998, 2001 and
2004.
"Special Separation" shall mean a termination of employment
designated in writing as such at the sole discretion of the Chief
Executive Officer.
"Stock" shall mean shares of the Company's Common Stock, par
value $.10 per share.
"Target Date" shall mean any anniversary of the Date of Grant, or
the last day of a calendar quarter between any such anniversary dates,
during the Term of this Option.
"Term" of this Option shall mean the period from Date of Grant
through September 25, 2006.
"Termination for Cause" shall mean Optionee's termination of
employment with the Company because of the willful engaging by
Optionee in gross misconduct; provided, however, that a Termination
for Cause shall not include termination attributable to (i) poor work
6
performance, bad judgment or negligence on the part of Optionee, (ii)
an act or omission believed by Optionee in good faith to have been in
or not opposed to the best interests of the Company and reasonably
believed by Optionee to be lawful, or (iii) the good faith conduct of
Optionee in connection with a Change of Control (including opposition
to or support of such Change of Control).
"Total Shareholder Return" for a member of the Peer Group in any
specified period during the term of this Option shall mean the
increase in value, between September 26, 1996 and the end of any such
period, of an investment in a share of common stock of such Peer Group
member based on the closing price for such stock quoted in the New
York Stock Exchange-Composite Transactions, assuming reinvestment of
all dividends paid during that time. If there are no prices so
reported, then the Committee may exercise its discretion to determine
Total Shareholder Return for that Peer Group member in a manner it
deems reasonable under the circumstances.
2. Normal Exercise - Base Award. The Base Award shares become exercisable at
the rate of 33-1/3% of the total of such shares granted on September 26 in
each of the years 1998, 2001 and 2004, provided that the relevant
Performance Price Target is met on that date. The shares with respect to
which the applicable Service Vesting Requirement has been met, but for
which the corresponding Performance Price Target has not been met, remain
unexercisable until the earliest Target Date thereafter on which the
Performance Price Target associated with such Target Date as set forth in
the Stock Performance Table in paragraph 1 of this Agreement is met. If
the New York Stock Exchange is closed on any of such dates, then the
applicable Performance Price Target must be met on the next trading day
thereafter. Subject to the forfeiture provisions of paragraph 3 below, the
requirement that Performance Price Targets be achieved shall be waived on
September 26, 2005, and any unexercised Base Award shares are exercisable
7
on or after that date. Once both the Service Vesting Requirement and
Performance Price Target are met with respect to Base Award shares, such
shares remain exercisable through September 25, 2006, unless Optionee is no
longer employed by the Company, in which case the Option is exercisable
only to the extent permitted by paragraph 5 below.
Normal Exercise - Peer Group Award. The Peer Group Award shares become
exercisable at the rate of 33-1/3% of the total of such shares granted on
September 26 in each of the years 1998, 2001 and 2004, provided that the
Peer Group Target is met on that date. The shares with respect to which the
applicable Service Vesting Requirement has been met but for which the
corresponding Peer Group Target has not been met remain unexercisable until
the last day of the earliest calendar quarter (or anniversary date)
thereafter on which the Peer Group Target is met. If the New York Stock
Exchange is closed on any of such dates, then the applicable Peer Group
Target must be calculated as of the next trading day thereafter. The
Company will notify Optionee no less than ten business days after a
quarter-end (or an anniversary, if applicable) date on which a Peer Group
Target is met with respect to any Peer Group Award shares for which the
Service Vesting Requirement has been met. Once both the Service Vesting
Requirement and Peer Group Target are met or waived with respect to Peer
Group Award shares, such shares remain exercisable through September 25,
2006, unless Optionee is no longer employed by the Company, in which case
the Option is exercisable only to the extent permitted by paragraph 5
below.
The Human Resources Committee of the Company retains the right, in its sole
discretion, to determine which companies shall be deemed to constitute the
performance Peer Group for purposes of this Option. In exercising its
discretion, the Committee may at any time add or delete companies from the
Peer Group or select one or more new Peer Group indices to augment or
replace previously designated indices. Optionee will be notified in
8
writing of any such changes. Companies included in an index will be
reflected in the calculation of Total Shareholder Return for a particular
measurement period only to the extent and in such manner as is deemed
appropriate by the Committee in its sole discretion.
3. Forfeiture. Prior to a Change of Control, if Optionee terminates
employment (i) voluntarily before age 55, or (ii) voluntarily or
involuntarily upon the occurrence of events described in Section IV,
paragraphs A.1, 3 or 4 of the Plan, Optionee shall forfeit in their
entirety all unexercised Base Award and Peer Group Award shares, whether or
not exercisable at the time of termination; and such shares shall not
thereafter be exercisable.
Prior to a Change of Control, the Committee may in its discretion declare
an event of forfeiture upon the occurrence of events described in Section
IV, paragraphs A.3 or A.4 of the Plan. If Optionee's employment is not
terminated in connection with such declaration, then Optionee shall forfeit
only that portion of the Base Award and Peer Group Award shares which were
not otherwise exercisable at the time of the declaration of forfeiture. Any
shares that were exercisable at the time of such event will remain
exercisable only for the period set forth in paragraph 5.D.
This Option is not subject to forfeiture for any reason after a Change in
Control.
4. Acceleration of Exercisability. Notwithstanding the Normal Exercise
provisions of paragraph 2, but subject to the forfeiture provisions of
paragraph 3, the conditions on exercise described in paragraph 2 will be
waived or adjusted as described in this paragraph upon the occurrence of
any of the following events on or after September 26, 1997:
9
A. The termination of Optionee's employment with the Company on or after
the date Optionee attains the age of 55;
B. The Optionee's Involuntary Termination of Employment;
C. The declaration of Optionee's total and permanent disability during
Optionee's employment with the Company;
D. Optionee's death while employed with the Company.
Service Vesting Requirement: Upon the occurrence of any of the events
described above, the Service Vesting Requirement for both the Base Award
shares and the Peer Group Award shares shall be waived.
Performance Price Target - Base Award shares: Upon the occurrence of any
of the events described above, the Performance Price Target for all
unexercised Base Award shares for which a Performance Price Target had not
previously been met shall thereafter be fixed as of the Target Date listed
on the Stock Performance Table which nearest precedes the date of such
event, and the Optionee may exercise such Base Award shares if that fixed
Performance Price Target is met on any day during the applicable exercise
period. If Optionee has more than six months to exercise the Option, the
Performance Price Target shall remain fixed up to six months prior to the
end of the exercise period, or September 26, 2005, whichever is earlier.
The Performance Price Target shall be waived for all unexercised Base Award
shares when the entire or remaining exercise period is six months or less.
Peer Group Target - Peer Group Award shares: The Peer Group Target shall
not be waived or adjusted as a result of the occurrence of any of the
events described above. However, should the Peer Group Target not be met
on a Target Date prior to ten business days before the end of the
Optionee's exercise period as described in paragraph 5, but be met on a
10
Target Date within ten days prior to the end of such period, the exercise
period shall be automatically extended 30 days after its original
expiration date, but in no event beyond September 25, 2006.
Notwithstanding the above, upon a Change of Control, all conditions to
exercise which have not been met as of such Change of Control are waived,
and all Base Award shares and Peer Group Award shares which have not
previously been forfeited or exercised will be immediately exercisable.
5. Exercise After Certain Events. Subject to the terms set forth in
paragraphs 3 and 4 regarding acceleration and forfeiture, any Base Award
shares or Peer Group Award shares which are exercisable at the time of the
following events, or which become exercisable because of the occurrence of
such events, shall remain exercisable for the period indicated below, but
in no event later than September 25, 2006:
A. (i) Optionee's Involuntary Termination of Employment, (ii) Optionee's
voluntary termination of employment at or after age 62, or (iii)
Optionee's voluntary termination of employment at or after age 55 with
at least 15 years of Company Service: five years following such event.
B. Optionee's voluntary termination of employment at or after age 55 but
with less than 15 years of Company Service: six months following such
event.
C. Optionee's death or the declaration of Optionee's total and permanent
disability: five years following such event.
D. (i) Prior to a Change of Control, a declaration of forfeiture as a
result of the occurrence of the events described in Section IV,
paragraphs A.3 and A.4, if Optionee's employment does not terminate on
account of such conduct; or (ii) following a Change of Control,
11
occurrence of the events described in Section IV, paragraph A.1, A.3
or A.4: seven days following the event.
6. Repayment of Gain. Optionee agrees to pay to the Company an amount in cash
equal to the difference between the Option exercise price and the Fair
Market Value of a share of Stock as of the date of exercise of the Option,
multiplied by the number of shares exercised before payment of taxes
("Recoverable Gain"), if Optionee terminates employment within one year
after such exercise of this Option for reasons other than events described
in paragraph 4, subparagraphs A, B, C or D hereof or a Special Separation.
Such payment shall be made within 10 days of Optionee's date of
termination.
Optionee hereby grants the Company the right, exercisable at its discretion
and to the extent permitted by law, to withhold from any and all amounts
payable to Optionee by the Company an amount equal to the Recoverable Gain,
in full or partial satisfaction of Optionee's obligation to the Company
pursuant to this paragraph 6.
Optionee agrees to execute, at the time of each exercise of this Option, an
acknowledgment of the terms and conditions of this paragraph 6.
Optionee acknowledges and agrees that the Company's grant of this Option,
and Optionee's acceptance thereof subject to the terms herein set forth, do
not constitute a contract of employment between the parties and do not
limit any rights the Company otherwise has to terminate Optionee's
employment at any time.
The provisions of this paragraph 6 regarding repayment of Recoverable Gain
shall be void with respect to termination of employment after a Change of
Control.
12
7. Adjustments. Upon any stock split-up, stock dividend, issuance of any
targeted stock, combination or reclassification with respect to any
outstanding class or series of Stock, or consolidation, merger or sale of
all or substantially all of the assets of the Company, the Committee shall
cause appropriate adjustments to be made to the terms of this Award.
8. Employment with the Company. All references to Optionee's employment
status in this Option Agreement shall refer to Optionee's employment with
the Company or any of its wholly-owned subsidiaries.
9. Severability. The invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of the
remainder hereof in that jurisdiction, or the validity or enforceability of
this Option, including that provision, in any other jurisdiction. To the
extent permitted by applicable law, the Company and Optionee each waive any
provision of law that renders any provision hereof invalid, prohibited or
unenforceable in any respect. If any provision of this Option is held to
be unenforceable for any reason, it shall be adjusted rather than voided,
if possible, in order to achieve the intent of the parties to the extent
possible.
10. Governing Law. The validity, interpretation and effect of this Agreement
shall be governed exclusively by the laws of the State of Missouri, without
giving effect to the conflict of laws provisions thereof.
ACKNOWLEDGED AND ACCEPTED: RALSTON PURINA COMPANY
Optionee
13
By:
W. P. Stiritz
Date Chairman of the Board and
Chief Executive Officer
Location
Amended
September 26, 1996
DEFERRED COMPENSATION PLAN FOR
NON-MANAGEMENT DIRECTORS
1. General Provisions
1.1 Purpose of Plan
The purpose of the Plan is to enhance the profitability and value of
the Company for the benefit of its shareholders by providing a
retirement program to attract and retain qualified non-management
directors who have made or will make important contributions to the
success of the Company.
1.2 Definitions
(a) "Acquiring Person" means any person or group of Affiliates or
Associates who is or becomes the beneficial owner, directly or
indirectly, of shares representing 20% or more of the total votes
of the outstanding Stock entitled to vote at a meeting of
shareholders.
(b) "Affiliate" or "Associate" shall have the meanings set forth as
of March 1, 1990, in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended.
- 1 -
(c) "Beneficiary" means the person or persons (including legal
entities) who have been designated in accordance with Section 3.2
hereof to receive benefits under this Plan following a
Participant's death.
(d) "Board" means the Board of Directors of Ralston Purina Company.
(e) "Change in Control" means the time when (i) any person, either
individually or together with such person's Affiliates or
Associates, shall have become the beneficial owner, directly or
indirectly, of shares representing at least 50% of the total
votes of the outstanding shares of capital stock of the Company
entitled to vote at a meeting of shareholders and there shall
have been a public announcement of such occurrence by the Company
or such person or (ii) individuals who shall qualify as
Continuing Directors shall have ceased for any reason to
constitute at least a majority of the Board of Directors of
Ralston Purina Company; provided however, that in the case of
either clause (i) or clause (ii), a Change in Control shall not
be deemed to have occurred if the event shall have been approved
prior to the occurrence thereof by a majority of the Continuing
Directors who shall then be members of such Board of Directors.
(f) "Company" means Ralston Purina Company and its subsidiaries and
affiliates.
(g) "Compensation" means all or any part of any cash, or other
consideration to be paid to a Director by the Company as
directors' fees or retainers.
(h) "Continuing Director" means any member of the Board while such
person is a member of the Board, who is not an Affiliate or
- 2 -
Associate of an Acquiring Person or of any such Acquiring
Person's Affiliate or Associate and was a member of the Board
prior to the time when such Acquiring Person became an Acquiring
Person, and any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any
Affiliate or Associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(i) "Date of Crediting" means, with respect to any Compensation
deferred pursuant to the Plan, the first day of the month
following the date when such Compensation would otherwise be paid
to a Participant.
(j) "Director" means any member of the Board.
(k) "Market Value" means, in the case of any class or series of
Stock, the average of the closing prices of such class or series
as reported by the New York Stock Exchange - Composite
Transactions during the ten (10) trading days immediately
preceding the date in question, or, if the class or series of
Stock is not quoted on such composite tape or if such class or
series is not listed on such exchange, on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934, as amended, on which the class or series of
Stock is listed, or if the class or series is not listed on any
such exchange, the average of the closing bid quotations with
respect to a share of the class or series of Stock during the ten
(10) days immediately preceding the date in question on the
NASDAQ Stock Market National Market System or any system then in
- 3 -
use, or if no such quotations are available, the fair market
value on the date in question of a share of the class or series
of Stock as determined by a majority of the Continuing Directors
in good faith.
(l) "Non-Management Director" means any Director who is not an
officer or employee of the Company.
(m) "Participant" means any Director who participates in the Plan.
(n) "Plan" means the Deferred Compensation Plan for Non-Management
Directors, as amended.
(o) "Retirement" means a Director's resignation or removal as a
Director of the Company following attainment of age 70.
(p) "Stock" means shares of the Company's $.10 par value common stock
or any other outstanding class or series of common stock,
including, without limitation, any stock split-up, stock
dividend, creation of tracking stock, or other distributions of
stock in respect of stock, or any reverse stock split-up, or
recapitalization of the Company or any merger or consolidation of
the Company with any Affiliate, or any other transaction, whether
or not with or into or otherwise involving an Acquiring Person.
(q) "Year" means calendar year unless otherwise specified.
1.3 Eligibility and Participation
Any Non-Management Director who is entitled to Compensation is
eligible to participate in the Plan. An eligible Director becomes a
- 4 -
Participant in this Plan upon the effective date of an agreement
executed by the parties pursuant to Section 2.1(c).
1.4 Administration of the Plan
The Board shall administer the Plan and, in connection therewith,
shall have full power and sole discretion to approve or disapprove
eligible Directors' requests for deferral in any option; to impose on
any deferral any terms and conditions in addition to those set forth
in the Plan; to construe and interpret the Plan; to establish rules
and regulations; to delegate responsibilities to others to assist it
in administering the Plan or performing any responsibilities
hereunder; and to perform all other acts it believes reasonable and
proper in connection with the administration of the Plan.
1.5 Power to Amend
The power to amend, modify or terminate this Plan at any time is
reserved to the Board except that no amendment, modification or
termination which would reasonably be considered to be adverse to a
Participant or Beneficiary may apply to or affect the terms of any
deferral of Compensation deferred prior to the effective date of such
amendment, modification or termination, without the consent of the
Participant or Beneficiary affected thereby.
2. Deferral Options
2.1 Terms and Conditions
- 5 -
(a) Deferral options available - The options for deferral of
Compensation offered under this Plan shall consist of the Equity
Option, the Variable Interest Option and such other options as
the Board may from time to time determine. Prior to commencement
of directorships, or with respect to existing Directors, on or
before December 31 of the Year prior to the Year in which any
such Compensation will be earned, an eligible director may
request in writing that the Board approve a deferral either into
or under any single deferral option provided under this Plan, or
any combination thereof. The Board, in its sole discretion, may
permit amounts deferred by an eligible Director pursuant to any
other deferred compensation program of the Company to be
converted into any deferral option provided under this Plan.
Participants in this Plan shall be permitted no more than twice
each calendar year, at such six month intervals as determined by
the Company, to transfer any amounts which have been deferred for
at least one year (other than Company Matching Deferrals, as
hereinafter defined) in an account credited with Stock
equivalents (a "Stock Equivalent Account") or a Deferred Cash
Account established pursuant to the Variable Interest Option.
Company Matching Deferrals may not be transferred from the Stock
Equivalent Account to which they are originally credited.
(b) Source of terms and conditions - Any deferral under the Plan
shall be subject to the provisions of the Plan, any other
conditions imposed by law, and the terms of any award of
Compensation. Approval of a deferral of Compensation shall in no
event constitute a waiver by the Company of any conditions to the
receipt of such Compensation.
- 6 -
(c) Written agreement - Every deferral that is approved by the Board
or its designees shall be made pursuant to a written agreement
signed by the Participant and the Company. Any modifications or
amendments to such agreement shall also be in writing, signed by
the parties. In the event of any conflict or inconsistency
between the terms of such written agreement and the terms of the
Plan, such written agreement shall control.
2.2 Equity Option
(a) Stock equivalents - Upon approval of a deferral in the Equity
Option, a "Stock Equivalent Account" shall be established in the
Participant's name. Stock equivalents and fractions thereof
shall be credited to such Stock Equivalent Account in an amount
determined by dividing the amount of Compensation to be deferred
in each such account by the Market Value of the relevant Stock on
the Date of Crediting. Upon the occurrence of any stock split-
up, stock dividend, issuance of any tracking stock, combination
or reclassification with respect to any outstanding series or
class of Stock, or consolidation, merger or sale of all or
substantially all of the assets of the Company, the number of
Stock equivalents in each Stock Equivalent Account shall, to the
extent appropriate, be adjusted accordingly.
(b) Company Matching Deferral - Upon a deferral into the Equity
Option and the associated crediting of Stock equivalents to a
Participant's Stock Equivalent Account, the Company shall credit
each such Stock Equivalent Account, on the same Date of
Crediting, with an additional number of Stock equivalents equal
to 33-1/3% of the Compensation deferred into each such Stock
- 7 -
Equivalent Account divided by the Market Value of the relevant
Stock on the Date of Crediting. Such additionally credited Stock
equivalents, and all dividend equivalents associated therewith,
are hereinafter referred to as "Company Matching Deferrals".
(c) Time of crediting - Deferrals in Stock equivalents shall be
credited to a Participant's Stock Equivalent Account on the Date
of Crediting.
(d) Dividend Equivalents - To the extent dividends on any class or
series of outstanding Stock are paid, dividend equivalents and
fractions thereof shall be calculated with respect to balances of
such Stock equivalents in any Stock Equivalent Account, converted
to additional equivalents of such Stock and credited to the
appropriate Stock Equivalent Account as of the dividend payment
dates. The number of Stock equivalents to be credited as of each
such date shall be determined by dividing the amount of the
dividend equivalent by the Market Value of the relevant Stock on
the dividend payment date. The Participant's Stock Equivalent
Account shall continue to earn such dividend equivalents until
fully distributed if distributed in Stock, otherwise such
dividend equivalents shall be earned only until the time of a
Participant's Retirement or other termination or the effective
date of the commencement of total and permanent disability. At
the discretion of the Committee, dividend equivalents may be
credited in cash to a Deferred Cash Account established or
existing for the Participant under the "Variable Interest
Option", described in Section 2.3 hereof, instead of converting
them to additional Stock equivalents.
- 8 -
(e) Form of distribution - Distributions under this Option, including
distributions of Company Matching Deferrals, shall be in cash
unless the Participant or Beneficiary elects to receive shares of
Stock. The amount of cash to be distributed shall be the number
of whole and/or fractional Stock equivalents in the Stock
Equivalent Account multiplied by the Market Value of the Stock.
The amount of shares of Stock distributed shall be equal to the
number of whole Stock equivalents in the Equity Account. Any
fractional share balance will be paid in cash. Both the cash and
the Stock calculations will be as of the date of the
Participant's Retirement or other termination or the effective
date of the determination of total and permanent disability, with
interest accruing, at the rate described in Section 2.3(a)
hereof, from such date of Retirement, other termination or
determination of disability until the time of distribution.
(f) Time of distribution to Participant - All amounts due to the
Participant under the Equity Option shall be payable on the 60th
day following the Participant's Retirement or other termination.
Distributions to Participants found to be totally and permanently
disabled shall be on the 60th day following the determination of
such disability. No amounts shall be payable to a Participant
prior to such Participant's Retirement, other termination or
total and permanent disability.
(g) Distribution upon death - In the event of the Participant's
death, all amounts due under this Option shall be paid to the
Beneficiary; but if none is designated then benefits shall be
paid to Participant's estate or as provided by law. Distribution
- 9 -
in full shall be made on the 60th day following the Participant's
death.
(h) Change in Control - Upon a Change in Control, deferrals into the
Equity Option will no longer be permitted and each Stock
Equivalent Account shall be immediately converted into a Deferred
Cash Account established pursuant to Section 2.3(a) hereof. The
amount of cash to be credited to each such Deferred Cash Account
shall be equal to the number of whole and/or fractional Stock
equivalents in each Stock Equivalent Account multiplied by the
Market Value as of the Change in Control. Each Participant whose
Stock Equivalent Account is hereby converted to a Deferred Cash
Account shall have the right, at his sole discretion, to convert
such Deferred Cash Account into any other deferral option which
may thereafter be established pursuant to the Plan or any other
deferred compensation plan established by the Company or any
successor.
2.3 Variable Interest Option
(a) Interest equivalents - Upon approval of a deferral in the
Variable Interest Option, a "Deferred Cash Account" shall be
established in the Participant's name. The amount of
Compensation being deferred under this option will be credited to
this account on or before the Date of Crediting. Interest
equivalents on amounts deferred under this option shall be
calculated annually as of December 31 of each year for the period
from the Date of Crediting until December 31, or, if such period
is greater than one year, for the one-year period commencing with
the previous January 1. Such equivalents shall be based on the
average of the daily close of business prime rates for the 365
- 10 -
days of such year, with respect to amounts credited prior to such
year, or, with respect to amounts credited during such year, for
the number of days from the Date of Crediting. The daily close
of business prime rates shall be as established by Morgan
Guaranty Trust Company of New York or such other bank as may be
designated by the Board. At distribution, interest equivalents
shall be similarly calculated on amounts in the Deferred Cash
Account based on average daily prime rates from the preceding
January 1, or, if later, the Date of Crediting, through the date
of distribution, and added to the total to be distributed. The
crediting of interest equivalents to the Participant's Deferred
Cash Account shall continue until the balance in such account is
fully distributed.
(b) Time of crediting - The interest equivalents calculated each
December 31 shall be credited to a Participant's Deferred Cash
Account on January 1 of the next Year. Prior to distribution to
a Participant pursuant to Section 2.3(d) hereof, interest
equivalents calculated as described above shall be credited to
such Participant's Deferred Cash Account.
(c) Form of distribution - Distribution under this option shall be in
cash.
(d) Time of distribution to Participant - All amounts due to the
Participant under the Variable Interest Option shall be payable
on the 60th day following the Participant's Retirement or other
termination. Distributions to Participants found to be totally
and permanently disabled shall be on the 60th day following the
- 11 -
determination of such disability. No amounts shall be payable to
a Participant prior to such Participant's Retirement, other
termination or total and permanent disability.
(e) Distribution upon death - In the event of the Participant's
death, all amounts due under this Option shall be paid to the
Beneficiary; but if none is designated then benefits shall be
paid to Participant's estate or as provided by law. Distribution
in full shall be made in a lump sum on the 60th day following the
Participant's death.
2.4 Transfer of Liabilities of Retirement Plan for Non-Management
Directors
Effective June 1, 1996, Participants shall be credited with an amount
equal to the present value of retirement benefits accrued by them as
of that date under the Retirement Plan for Non-Management Directors,
such present value to be determined based on the assumptions that (i)
each Participant will retire on his or her 70th birthday or, if
greater, at the age attained as of June 1, 1996, and (ii) calculations
shall be based on the UP '84 mortality table assuming a single life
annuity form of payment. Amounts shall be converted, as of June 1,
1996, into Stock equivalents and credited on that date to each
Participant's Stock Equivalent Account under the Equity Option. No
Company Matching Deferral shall be credited in connection with these
amounts.
3. Other Governing Provisions
3.1 Company's Obligations Unfunded - All benefits due a Participant or a
Beneficiary under this Plan are unfunded and unsecured and are payable
- 12 -
out of the general funds of the Company. The Company, in its sole and
absolute discretion, may establish a "grantor trust" for the payment
of benefits and obligations hereunder, the assets of which shall be at
all times subject to the claims of creditors of the Company as
provided for in such trust, provided that such trust does not alter
the characterization of the Plan as an "unfunded plan" for purposes of
the Employee Retirement Income Security Act, as amended. Such trust
shall make distributions in accordance with the terms of the Plan.
3.2 Beneficiary Designation - A Participant may file with the Secretary of
the Company a written designation of a beneficiary or beneficiaries
(subject to such limitations as to the classes and number of
beneficiaries and contingent beneficiaries as the Board may from time
to time prescribe) to receive, following the death of the Participant,
benefits payable under any option of the Plan. The Board reserves the
right to review and approve beneficiary designations. A Participant
may from time to time revoke or change any such designation of
beneficiary and any designation of beneficiary under the Plan shall be
controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Board shall be in doubt as to the right
of such beneficiary to receive any benefits under the Plan, the Board
may determine to recognize only the
rights of the legal representative of the Participant, in which case the
Company, the Board and the members thereof shall not be under any
further liability to anyone.
3.3 Hardship Withdrawals - The Board in its sole and absolute discretion
may permit withdrawal by a Participant of any amount from his accounts
under the Equity Option or the Variable Interest Option, if the Board
determines, in its discretion, that such funds are needed due to
serious and immediate financial hardship from an unforeseeable
- 13 -
emergency. Serious and immediate financial hardship to the
Participant must result from a sudden and unexpected illness or
accident of the Participant or a dependent, loss of property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising from events beyond the control of the
Participant. A distribution based upon such financial hardship cannot
exceed the amount necessary to meet such immediate financial need. In
addition, the Board may impose suspensions or other penalties as a
condition to such withdrawals.
3.4 Transferability of Benefits - The right to receive payment of benefits
under this Plan shall not be transferred, assigned or pledged except
by beneficiary designation, will or pursuant to the laws of descent
and distribution.
3.5 Address of Participant or Beneficiary - A Participant shall keep the
Company apprised of his current address and that of any Beneficiary at
all times during his participation in the Plan. At the death of a
Participant, a Beneficiary who is entitled to receive payment of
benefits under the Plan shall keep the Company apprised of his current
address until the entire amount to be distributed to him has been
paid.
3.6 Taxes - Any taxes required to be withheld under applicable federal,
state or local tax laws or regulations may be withheld from any
payment due hereunder.
3.7 Gender - The use of masculine pronouns herein shall be deemed to
include both males and females.
- 14 -
- 15 -
EXHIBIT
Amended September 26, 1996
RALSTON PURINA COMPANY
Deferred Compensation Plan for Key Employees
1. GENERAL PROVISIONS
1.1 Purpose of Plan
The purpose of the Plan is to enhance the profitability and value of the
Company for the benefit of its shareholders by providing a supplemental
retirement program to attract, retain and motivate a select group of key
employees who make important contributions to the success of the Company.
1.2 Definitions
(a) "Acquiring Person" means any person or group of Affiliates or
Associates who is or becomes the beneficial owner, directly or
indirectly, of shares representing 20% or more of the total votes of
the outstanding stock entitled to vote at a meeting of shareholders.
(b) "Acceleration of Payment" means the expiration of the period
during which Ralston Purina Company has the right to cure, but fails
to cure, a default in its obligation to fund a grantor trust
established pursuant to a Trust Agreement dated as of September 15,
1994, between Ralston Purina Company and Wachovia Bank of North
Carolina, N.A. Upon the occurrence of an Acceleration of Payment, the
time of payment of all remaining benefits to Participants and
Beneficiaries under the Plan shall be accelerated and benefit shall be
paid in lump sum form, in cash or stock as applicable, as soon as
practicable after the effective date of the Acceleration of Payment.
Such Acceleration of Payment shall occur under the Plan irrespective
of any action, or intent to take action, by Ralston Purina Company.
(c) "Administrator" means Wachovia Bank of North Carolina, N.A. or
its successor.
(d) "Affiliate" or "Associate" shall have the meanings set forth in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended.
(e) "Beneficial Owner" shall mean a person who shall be deemed to
have acquired "beneficial ownership" of, or to "beneficially own", any
securities:
(i.) which such person or any of such person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii.) which such person or any of such person's Affiliates or
Associates has (A) the right to acquire (whether such right
is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and
between underwriters and selling group members with respect
to a bona fide public offering of securities), or upon the
exercise of currently exercisable conversion or exchange
rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered
pursuant to a tender or exchange offer made by or on behalf
of such person or any of such person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to
any agreement, arrangement or understanding; provided,
however, that a person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent
given to such person in response to a public proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations promulgated under
the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii.) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of such person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and
between underwriters and selling group members with respect
to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting or disposing of any
securities of Company.
Notwithstanding anything in this definition of "Beneficial Owner"
to the contrary, the phrase "then outstanding", when used with
reference to a person's beneficial ownership of securities of
Company, shall mean the number of such securities then issued and
outstanding together with the number of such securities not then
actually issued and outstanding which such person would be deemed
to own beneficially hereunder.
(f) "Beneficiary" means the person or persons (including legal
entities) who have been designated in accordance with Section 3.2
hereof to receive benefits under this Plan following a Participant's
death.
(g) "Change of Control" shall mean the time when (A) any Acquiring
person, either individually or together with such person's Affiliates
or Associates, shall have become the Beneficial Owner, directly or
indirectly, of more than 20% of the total votes of the outstanding
stock of Ralston Purina Company; (B) individuals who shall qualify as
Continuing Directors shall have ceased for any reason to constitute at
least a majority of the Board of Directors of Ralston Purina Company;
or (C) a majority of the individuals who shall qualify as Continuing
Directors shall approve a declaration that a Change of Control has
occurred.
(h) "Committee" means the Human Resources Committee of the Board of
Directors of Ralston Purina Company or any successor to such
Committee.
(i) "Company" means Ralston Purina Company and its subsidiaries and
affiliates.
(j) "Compensation" means all or any part of any cash or other
consideration to be paid to an Employee for services rendered or to be
rendered to the Company.
(k) "Continuing Director" means any member of the Board of Directors
of Ralston Purina Company, while such person is a member of such
Board, who is not an Affiliate or Associate of an Acquiring Person or
of any such Acquiring Person's Affiliate or Associate and was a member
of such Board prior to the time when such Acquiring Person became an
Acquiring Person, and any successor of a Continuing Director, while
such successor is a member of such Board, who is not an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any Affiliate
or Associate of such Acquiring Person and is recommended or elected to
succeed the Continuing Director by a majority of the Continuing
Directors.
(l) "Corporate Compensation Department" means the Corporate
Compensation Department of Ralston Purina Company or any successor
department or individual performing the same functions.
(m) "Date of Crediting" means, with respect to any Compensation
deferred pursuant to the Plan, the first day of November of the year
during which such Compensation would otherwise be paid to a
Participant, provided, however, with respect to the deferral of
special, not annual, bonuses which are not paid at the same time as
annual bonuses and which are deferred pursuant to the Plan, Date of
Crediting shall mean the date on which such Compensation would
otherwise be paid to a Participant.
(n) "Employee" means any regular employee of the Company.
(o) "Market Value" means, in the case of any class or series of
Stock, the average of the closing prices of such class or series as
reported by the New York Stock Exchange - Composite Transactions
during the ten (10) trading days immediately preceding the date in
question, or, if the class or series of Stock is not quoted on such
composite tape or if such class or series is not listed on such
exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934, as amended, on
which the class or series of Stock is listed, or if the class or
series is not listed on any such exchange, the average of the closing
bid quotations with respect to a share of the class or series of Stock
during the ten (10) days immediately preceding the date in question on
the NASDAQ Stock Market National Market System or any system then in
use, or if no such quotations are available, the fair market value on
the date in question of a share of the class or series of Stock as
determined by a majority of the Continuing Directors in good faith.
(p) "Participant" means any Employee who participates in the Plan.
(q) "Plan" means the Deferred Compensation Plan for Key Employees, as
amended.
(r) "Plan Administrator" means Wachovia Bank of North Carolina, N. A.
or its successor.
(s) "Retirement" means an Employee's voluntary or involuntary
termination of employment with the Company following attainment of age
55.
(t) "Stock" means shares of the Company's common stock, par value
$.10 per share, which consists of shares of a class of common stock
designated as Ralston Common Stock ("RAL Stock") or any such other
security outstanding upon the reclassification or redesignation of the
Company's RAL Stock or any other outstanding class or series of common
stock, including, without limitation, any stock split-up, stock
dividend, creation of tracking stock, or other distributions of stock
in respect of stock, or any reverse stock split-up, or
recapitalization of the Company or any merger or consolidation of the
Company with any Affiliate, or any other transaction, whether or not
with or into or otherwise involving an Acquiring Person.
(u) "Termination for Cause" means a Participant's termination of
employment with the Company because the Participant willfully engaged
in gross misconduct; provided, however, that a "Termination for Cause"
shall not include a termination attributable to:
(I.) poor work performance, bad judgment or negligence on the
part of the Participant; or
(ii.) an act or omission reasonably believed by the Participant in
good faith to have been in or not opposed to the best
interests of his employer and reasonably believed by the
Participant to be lawful.
(v) "Year" means calendar year unless otherwise specified.
1.3 Eligibility and Participation
Any Employee who is entitled to Compensation, and who is permitted to
request the deferral of such Compensation by the Committee, is eligible to
participate in the Plan. An eligible Employee becomes a Participant in
this Plan upon the effective date of an agreement executed by the parties
pursuant to Section 2.1(c).
1.4 Approval of Deferrals and Administration of the Plan
The Committee shall have full power and sole discretion to designate or
approve Employees eligible to participate in the Plan; to designate types
of Compensation which may be deferred; to approve or disapprove eligible
Employees' requests for deferral into or under any option; and to impose on
any deferral any terms and conditions in addition to those set forth in the
Plan.
The Plan Administrator shall administer the Plan and, in connection
therewith, shall have full power and sole discretion to construe and
interpret the Plan; to establish rules and regulations; to delegate
responsibilities to others to assist it in administering the Plan or
performing any responsibilities hereunder; and to perform all other acts it
believes reasonable and proper in connection with the administration of the
Plan.
1.5 Power to Amend
The power to amend, modify or terminate this Plan at any time is reserved
to the Committee except that the Chief Executive Officer of the Company may
make amendments to resolve ambiguities, supply omissions and cure defects,
and may make any amendments deemed necessary or desirable to comply with
federal tax law or regulations to avoid loss of qualification or adverse
tax consequences, and any other amendments deemed necessary or desirable,
which shall be reported to the Committee. Notwithstanding the foregoing,
no amendment, modification or termination which would reasonably be
considered to be adverse to a Participant or Beneficiary may apply to or
affect the terms of any deferral of Compensation that was approved prior to
the effective date of such amendment, modification or termination, without
the consent of the Participant or Beneficiary affected thereby.
2. DEFERRAL OPTIONS
2.1 Terms and Conditions
(a) Deferral options available - The options for deferral of
Compensation offered under this Plan shall consist of the Equity
Option, the Variable Interest Option and such other options as the
Committee may from time to time determine. Prior to commencement of
employment, or with respect to existing Employees, on or before
December 31 of the Year prior to the Year in which any such
Compensation will be earned, an eligible Employee may request in
writing that the Committee approve a deferral either into or under any
single deferral option provided under this Plan, or any combination
thereof. The Committee, in its sole discretion, may permit amounts
deferred by an eligible Employee pursuant to any other deferred
compensation program of the Company to be converted into any deferral
option provided under this Plan.
Participants in this Plan shall be permitted twice each calendar year,
in such manner and at such time as may be determined by the Plan
Administrator, to transfer any amounts which have been deferred for at
least one year (other than Company Matching Deferrals, as hereinafter
defined) in an account credited with Stock equivalents (a "Stock
Equivalent Account") or a Deferred Cash Account established pursuant
to the Variable Interest Option, as the case may be, to any other
account established pursuant to the Equity Option or the Variable
Interest Option. Company Matching Deferrals may not be transferred
from the Stock Equivalent Account to which they are originally
credited.
(b) Source of terms and conditions - Any deferral under the Plan
shall be subject to the provisions of the Plan, any other conditions
imposed by law, and the terms of any award of Compensation. Approval
of a deferral of Compensation shall in no event constitute a waiver by
the Company of any conditions to the receipt of such Compensation.
(c) Written agreement - Every deferral that is approved by the
Committee shall be made pursuant to a written agreement signed by the
Participant and the Company. Any modi
2.2 Equity Option
(a) Stock equivalents - Upon approval of a deferral in the Equity
Option, a "Stock Equivalent Account" shall be established in the
Participant's name. Stock equivalents and fractions thereof shall be
credited to such Stock Equivalent Account in an amount determined by
dividing the amount of Compensation to be deferred in each such
account by the Market Value of the relevant Stock on the Date of
Crediting. Upon the occurrence of any stock split-up, stock dividend,
issuance of any tracking stock, combination or reclassification with
respect to any outstanding series or class of Stock, or consolidation,
merger or sale of all or substantially all of the assets of the
Company, the number of Stock equivalents in each Stock Equivalent
Account shall, to the extent appropriate, be adjusted accordingly.
(b) Company Matching Deferral - The Chief Executive Officer may, in
his or her sole discretion, determine that the additional matching
deferral described in this Section 2.2 (b) shall be made with respect
to Participant deferrals in any specific fiscal year of the Company.
Absent such determination with respect to any such fiscal year
deferrals, no Participant shall be entitled to the additional matching
deferrals described herein. Upon such determination by the Chief
Executive Officer and upon a deferral into the Equity Option and the
associated crediting of Stock equivalents, to a Participant's
appropriate Stock Equivalent Account, the Company shall credit each
such Stock Equivalent Account, on the same Date of Crediting, with
additional Stock equivalents, equal to a percentage (as determined by
the Chief Executive Officer) of the Compensation being deferred at
that time into each such Stock Equivalent Account divided by the
Market Value of the relevant Stock on the Date of Crediting. Such
additionally credited Stock equivalents, and all dividend equivalents
associated therewith, are hereinafter referred to as "Company Matching
Deferrals". A Participant's entitlement to Company Matching Deferrals
credited to the Participant's account shall be subject to the
forfeiture provisions set below.
A Company Matching Deferral is forfeited in its entirety in the event
that:
(i.) the Participant voluntarily terminates employment with the
Company prior to age 55, unless such termination was
approved by the Chief Executive Officer of the Company and
such termination occurs five or more years after the Date of
Crediting of such Company Matching Deferral;
(ii.) the Participant terminates involuntarily prior to age 55 and
such termination occurs less than five years after the Date
of Crediting of such Company Matching Deferral; or
(iii.) the Participant is Terminated for Cause at any age.
(iv.) In addition, a Company Matching Deferral shall also be
forfeit in its entirety if at any time within two years
after a distribution of a Company Matching Deferral to a
Participant (other than to Participants who have attained
age 55 at or prior to termination of employment), the
Committee determines that the Participant has engaged in
competition with the Company. The Participant, upon written
demand by the Company, shall promptly, remit to the Company
all Company Matching Deferrals paid to him or her upon
termination. The determination that a Participant is
engaging in competition with the Company shall be made by
the Committee in its sole and absolute discretion. In
exercising its discretion, the Committee shall consider,
among other factors, the nature of the competitive activity,
the potential harm to the Company which may result from the
competitive activity, the Participant's ability to find non-
competitive employment and the Participant's financial need.
Upon request, the Committee shall advise a Participant
whether it deems an activity in which the Participant
proposes to engage to be a competitive activity.
If a Participant terminates employment at or after age 55 (other than
for Cause), and such termination occurs within five years after the
Date of Crediting of a Company Matching Deferral, the Participant
shall be entitled to a distribution of an amount equal to 1-2/3% of
such Company Matching Deferral for each full calendar month the
Participant remained employed by the Company after the relevant Date
of Crediting through the date of his or her termination of employment.
For purposes of determining the amount of a Company Matching Deferral
payable to a Participant, a termination on the first through the
fourteenth day of a month shall be deemed to be a termination as of
the first day of that month; a termination on the fifteenth through
the last day of a month shall be deemed to be a termination as of the
last day of that month.
Notwithstanding the provisions of this Section 2.2 (b), upon a Change
of Control or the effective date of Acceleration of Payment, all
Company Matching Deferrals shall be fully vested and nonforfeitable.
(c) Time of crediting - Deferrals in Stock equivalents shall be
credited to a Participant's Stock Equivalent Account or Accounts on
the Date of Crediting.
(d) Dividend Equivalents - To the extent dividends on any class or
series of outstanding Stock are paid, dividend equivalents and
fractions thereof shall be calculated with respect to balances of such
Stock equivalents in any Stock Equivalent Account, converted to
additional equivalents of such Stock and credited to the appropriate
Stock Equivalent Account as of the dividend payment dates. The number
of Stock equivalents to be credited as of each such date shall be
determined by dividing the amount of the dividend equivalent by the
Market Value of the relevant Stock on the dividend payment date. The
Participant's Stock Equivalent Account or Accounts shall continue to
earn such dividend equivalents until fully distributed if distributed
in Stock, otherwise such dividend equivalents shall be earned only
until the earliest to occur of:
(i.) a Participant's Retirement or other termination;
(ii.) the date of the Administrator's determination of total and
permanent disability; or
(iii.) the effective date of Acceleration of Payment. At the
discretion of the Committee, dividend equivalents may be
credited in cash to a Deferred Cash Account established or
existing for the Participant under the "Variable Interest
Option", described in Section 2.3 hereof, instead of
converting them to additional Stock equivalents.
(e) Other conditions of award - Deferrals in the Equity Option are
"Other Stock Awards" under the Ralston Purina Company Incentive Stock
Plan and are subject to the provisions of that Plan in addition to the
terms of this Plan.
(f) Form of distribution - Distributions under this option, including
distributions of Company Matching Deferrals, shall be in the form of
cash, unless the Participant elects to receive Stock with cash for any
fractional shares; provided, however, that any distribution by a trust
established pursuant to Section 3.1 hereof shall be in the form of
cash. The amount of cash to be distributed shall be the number of
whole Stock equivalents in each Stock Equivalent Account multiplied by
the Market Value of the relevant class or series of Stock on the
earliest to occur of:
(i.) the Participant's Retirement or other termination;
(ii.) the date of the Administrator's determination of total and
permanent disability; or
(iii.) the effective date of Acceleration of Payment with interest
accruing, at the rate described in Section 2.3(a) hereof,
from such date until the time of distribution.
(g) Time of distribution to Participant - All amounts due to the
Participant under the Equity Option shall be payable on the earlier to
occur of:
(i.) the 60th day following the Participant's Retirement or other
termination; or
(ii.) the 60th day following the date of the Administrator's
determination of the Participant's total and permanent
disability. No amounts shall be payable to a Participant
prior to such times except as permitted under the hardship
withdrawal provisions of Section 3.3. Notwithstanding the
foregoing, in the event Ralston Purina Company is in default
of its funding obligations under the Trust Agreement dated
as of September 15, 1994, between Ralston Purina Company and
Wachovia Bank of North Carolina, N.A., as amended, and it
fails to cure such default in a timely manner as provided
under such Trust Agreement, the Plan Administrator shall, as
soon as practicable, pay to each Participant or Beneficiary
all amounts credited to the Stock Equivalent Account of each
Plan Participant or Beneficiary, except to the extent such
individual elects, before the date such payments are made,
to continue to defer receipt of such payment.
(h) Distribution upon death - In the event of the Participant's
death, all amounts due under this Option shall be paid to the
Beneficiary; but if none is designated then benefits shall be paid to
Participant's estate or as provided by law. Distribution in full
shall be made on the 60th day following the Participant's death.
(i) Change of Control - Upon a Change of Control, deferrals into the
Equity Option will no longer be permitted and each Stock Equivalent
Account shall be immediately converted into a Deferred Cash Account
established pursuant to Section 2.3(a) hereof. The amount of cash to
be credited to each such Deferred Cash Account shall be equal to the
number of whole and/or fractional Stock equivalents in each Stock
Equivalent Account multiplied by the Market Value of the relevant
class or series of Stock as of the Change in Control. Each
Participant whose Stock Equivalent Account is hereby converted to a
Deferred Cash Account shall have the right, at his or her sole
discretion, to convert such Deferred Cash Account into any other
deferral option which may thereafter be established pursuant to the
Plan or any other deferred compensation plan established by the
Company or any successor.
2.3 Variable Interest Option
(a) Interest equivalents - Upon approval of a deferral in the
Variable Interest Option, a "Deferred Cash Account" shall be
established in the Participant's name. The amount of Compensation
being deferred under this option will be credited to this account on
or before the Date of Crediting. Interest equivalents on amounts
deferred under this option shall be calculated annually as of October
31 of each year for the period from the Date of Crediting until
October 31, or, if such period is greater than one year, for the one-
year period commencing with the previous November 1. Such equivalents
shall be based on the average of the daily close of business prime
rates for the 365 days of such year, with respect to amounts credited
prior to such year, or, with respect to amounts credited during such
year, for the number of days from the Date of Crediting. The daily
close of business rates shall be as established by Morgan Guaranty
Trust Company of New York or such other bank as may be designated by
the Committee. At distribution, interest equivalents shall similarly
be calculated on amounts in the Deferred Cash Account based on average
daily prime rates from the preceding November 1, or, if later, the
Date of Crediting, through the date of distribution, and added to the
total to be distributed. The crediting of interest equivalents to the
Participant's Deferred Cash Account shall continue until the balance
in such account is fully distributed.
(b) Time of crediting - The interest equivalent calculated each
October 31 shall be credited to a Participant's Deferred Cash Account
on November 1 of that Year. Prior to distribution to a Participant
pursuant to Section 2.3(d) hereof, interest equivalents calculated as
described above shall be credited to such Participant's Deferred Cash
Account.
(c) Form of distribution - Distribution under this option shall be in
cash; provided, however, that prior to a Change in Control, the
Committee in its discretion may change the form to any class or series
of Stock or a combination of cash and any class or series of Stock.
(d) Time of distribution to Participant - All amounts due to the
Participant under the Variable Interest Option shall be payable on the
earlier to occur of:
(i.) the 60th day following the Participant's Retirement or other
termination; or
(ii.) the 60th day following the date of the Administrator's
determination of the Participant's total and permanent
disability. No amounts shall be payable to a Participant
prior to such times except as permitted under the hardship
withdrawal provisions of Section 3.3. Notwithstanding the
foregoing, in the event Ralston Purina Company is in default
of its funding obligations under the Trust Agreement dated
as of September 15, 1994, between Ralston Purina Company and
Wachovia Bank of North Carolina, N.A., as amended, and it
fails to cure such default in a timely manner as provided
under such Trust Agreement, the Plan Administrator shall, as
soon as practicable, pay to each Participant or Beneficiary
all amounts credited to the Stock Equivalent Account of each
Plan Participant or Beneficiary, except to the extent such
individual elects, before the date such payments are made,
to continue to defer receipt of such payment.
(e) Distribution upon death - In the event of the Participant's
death, all amounts due under this Option shall be paid to the
Beneficiary; but if none is designated, then benefits shall be paid to
Participant's estate or as provided by law. Distribution in full
shall be made on the 60th day following the Participant's death or, if
death occurs after Acceleration of Payment, distribution shall be made
as soon as practicable following such event.
3. OTHER GOVERNING PROVISIONS
3.1 Company's Obligations Unfunded
All benefits due a Participant or a Beneficiary under this Plan are
unfunded and unsecured and are payable out of the general funds of the
Company. If a "grantor trust" is established for the payment of benefits
and obligations hereunder, the assets of such trust shall be at all times
subject to the claims of creditors of the Company as provided for in such
trust. The establishment of such trust shall not alter the
characterization of the Plan as an "unfunded plan" for purposes of the
Employee Retirement Income Security Act, as amended. Such trust shall make
distributions in accordance with the terms of the Plan.
3.2 Beneficiary Designation
A Participant may file with the Corporate Compensation Department a written
designation of a Beneficiary or beneficiaries (subject to such limitations
as to the classes and number of beneficiaries and contingent beneficiaries
as the Plan Administrator may from time to time prescribe) to receive,
following the death of the Participant, benefits payable under any option
of the Plan. The Plan Administrator reserves the right to review and
approve Beneficiary designations. A Participant may from time to time
revoke or change any such designation of Beneficiary and any designation of
Beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that if the Plan
Administrator shall be in doubt as to the right of any such Beneficiary to
receive any benefits under the Plan, the Plan Administrator may determine
to recognize only the rights of the legal representative of the
Participant, in which case the Company, the Plan Administrator and the
members thereof, shall not be under any further liability to anyone.
3.3 Hardship Withdrawals
The Plan Administrator in its sole and absolute discretion may permit
withdrawal by a Participant of any amount from his accounts if the Plan
Administrator determines, in its discretion, that such funds are needed due
to serious and immediate financial hardship from an unforeseeable
emergency. Serious and immediate financial hardship to the Participant
must result from a sudden and unexpected illness or accident of the
Participant or a dependent, loss of property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising from events
beyond the control of the Participant. A distribution based upon such
financial hardship cannot exceed the amount necessary to meet such
immediate financial need. In addition, the Plan Administrator may impose
suspensions of future deferrals or other penalties as a condition to such
withdrawals.
3.4 Claim Procedure
Each Participant or Beneficiary who believes his claim for benefits has
been wholly or partially denied shall have the right to request the Plan
Administrator or its delegee to review such denial. A request for review
shall be filed by the Participant or Beneficiary or duly authorized
representative on or before the sixtieth (60th) day following the
Participant or Beneficiary's receipt of notice of denial of his claim. The
Participant or Beneficiary shall have the right to review pertinent
documents and submit issues and comments in writing in connection with the
request for review. The Plan Administrator or its delegee's shall issue a
written statement on or before the sixtieth (60th) day following its
receipt of such request stating the Plan Administrator or its delegee's
decision on review and the reasons therefor, including specific references
to pertinent Plan provisions on which the decision is based, and any other
information required by applicable law. If special circumstances require
additional time for processing such review, the Plan Administrator or its
delegee may extend the period for an additional sixty (60) days provided
that the Participant or Beneficiary is notified of such circumstances. If
the decision is not issued within the prescribed period, the appeal shall
be deemed denied. No Participant or Beneficiary shall have recourse to
courts of law until the administrative review process set forth herein has
been completed.
3.5 Resumption of Benefits after Interruption of Payments
In the event payment of benefits under the Plan, including benefits that
are accelerated due to the Company's default in funding the Company's
grantor trust, are not made in a timely manner for any reason where the
Company is at fault or unable to pay, the first payment after such
interruption shall include all payments due during such period of
interruption, plus interest accrued on such amounts calculated in the same
manner as interest equivalents under the Variable Interest Option.
3.6 Transferability of Benefits
The right to receive payment of benefits under this Plan shall not be
transferred, assigned or pledged except by Beneficiary designation, will or
pursuant to the laws of descent and distribution.
3.7 Address of Participant or Beneficiary
A Participant shall keep the Company apprised of his current address and
that of any Beneficiary at all times during participation in the Plan. At
the death of a Participant, a Beneficiary who is entitled to receive
payment of benefits under the Plan shall keep the Company apprised of his
current address until the entire amount to be distributed has been paid.
3.8 Taxes
Any taxes required to be withheld under applicable federal, state or local
tax laws or regulations may be withheld from any payment due hereunder.
3.9 Gender
The use of masculine pronouns herein shall be deemed to include both males
and females.
RESPONSE DUE DECEMBER 31, 1996
November 25, 1996
PERSONAL AND HIGHLY CONFIDENTIAL
Potential Fiscal 1997 Bonus Plan Participants
DEFERRAL OF POTENTIAL FISCAL 1997 BONUS AWARD
The Deferred Compensation Plan for Key Employees gives you the opportunity to
defer all or a portion of your annual cash bonus, subject to the approval of the
Human Resources Committee of the Board of Directors. In general, deferring
compensation has the advantage of postponing payment of tax and of allowing any
earnings on the deferred amount to accumulate free of tax until distributed. To
protect the tax status of the 1997 bonus deferral program, you must:
o Decide now whether to defer all or part of any 1997 annual cash bonus
you might receive, and
o Promptly return the enclosed election form. IF YOUR ELECTION FORM IS
NOT RECEIVED BY DECEMBER 31, 1996, YOU WILL NOT BE ABLE TO DEFER ANY
1997 ANNUAL BONUS AWARD.
Deferral Options for 1997:
You may choose from three deferral accounts:
o Equity Option, which features a 25% COMPANY MATCH
(note: match may not be offered every year);
o Short-Term Variable Interest Option (payable in January, 1998);
o Variable Interest Option.
Special Reminders:
In making your election, please refer to the enclosed Deferred Compensation Plan
for Key Employees Prospectus, dated October 31, 1996. Also refer to Attachment
1, Factors to Consider. You should keep in mind that YOUR ELECTION TO DEFER MAY
NOT BE CHANGED.
You are given the opportunity to transfer your deferrals (other than the match)
between the Equity and Variable Interest accounts. Transfers are offered twice
a year (June and December).
PLEASE RETURN ONE COPY OF THE 1997 BONUS DEFERRAL ELECTION FORM, ATTACHMENT 2,
BY DECEMBER 31, 1996 WHETHER OR NOT YOU REQUEST A DEFERRAL. A duplicate form is
enclosed for your records. If you request a deferral, it will be considered for
1997 annual bonus awards only. AS WITH ALL CORRESPONDENCE INVOLVING EXECUTIVE
COMPENSATION, PLEASE TREAT THIS MATERIAL WITH THE UTMOST CONFIDENTIALITY.
If you have any questions, please feel free to call me at extension 1918.
Pam Brennan - 1A
Corporate Compensation
Enclosures
December 2, 1996 1997 BONUS DEFERRAL ELECTION Attachment 2
Please submit my request as follows with respect to any 1997 annual cash bonus
which may be awarded to me by Ralston Purina Company or its affiliates:
CHECK ONE BOX BELOW:
" NO DEFERRAL (Check here if you do not wish to defer any portion of any 1997
annual bonus. Ignore items 1) and 2) and proceed to bottom
section.)
" DEFERRAL (Check here if you wish to defer any portion of any 1997 annual
bonus. Complete items 1) and 2) and the bottom section.)
1) FILL IN ONE BLANK ONLY:
Defer % OR
Defer all up to $ OR
Defer all in excess of $
2) PLEASE ALLOCATE THE AMOUNT INDICATED IN ITEM 1) ABOVE TO THE FOLLOWING
ACCOUNTS:
[100% may go to any account or may be divided among them.]
% To the EQUITY ACCOUNT........ 25% Company Matched
% To the SHORT-TERM VARIABLE INTEREST ACCOUNT (Payable in January
1998)
% To the (LONG-TERM) VARIABLE INTEREST ACCOUNT
100 % TOTAL
I UNDERSTAND THAT ANY DECISION REGARDING ANY 1997 ANNUAL BONUS THAT MAY
BE PAID TO ME OR DEFERRED FOR FUTURE PAYMENT IS AT THE DISCRETION OF
MANAGEMENT AND THE HUMAN RESOURCES COMMITTEE. I FURTHER UNDERSTAND
THAT AN ELECTION TO DEFER, ONCE MADE, IS IRREVOCABLE.
Social Security Number Signature
Today's Date Name (Type or Print)
Division Department
Location
Home Street Address City State Zip
RETURN TO CORPORATE COMPENSATION - 1A, ST. LOUIS, MO
OR RETURN BY FAX TO #314-982-2490
NO LATER THAN DECEMBER 31, 1996
December 2, 1996 Attachment 1
FACTORS TO CONSIDER
Equity Match:
o Deferrals to the Equity Option will be credited with a 25% COMPANY MATCH FOR
1997
o The company match may not be offered every year
o Participant's entitlement to Company Matching Deferrals is subject to
forfeiture provisions. A Company Matching Deferral is forfeited if:
- participant voluntarily terminates prior to age 55; or
- participant involuntarily terminates prior to age 55 less than five years
after deferral; or
- participant is terminated for cause at any age; or
- has engaged in competition with the Company within two years after
termination prior to age 55
o For Company Matching Deferrals in the plan less than 5 years, a participant,
upon retirement (age 55 or older), is entitled to receive an amount equal to
1-2/3% of the Company Matching Deferral for each full month deferred
Transfers:
o Available on amounts deferred for at least one year
o Limited to transfers between Equity and (Long-Term) Variable Interest
Accounts
o Does not apply to the Fixed Benefit Option or Company Matching Deferral
Accounts
o Can be made twice a year
Under present Federal and state income tax laws, you will not be taxed on any
deferral amounts until you actually receive payments of cash or delivery of
stock at which time amounts received would be taxed as ordinary income in the
year received. If you are subject to the income tax laws of a foreign country,
you should consult your personal tax advisor regarding the proper tax treatment.
Tax legislation removed the limit on wages which are subject to the Medicare
Hospital Insurance (HI) Tax of 1.45% (a component of FICA). Since deferred
compensation is subject to the HI Tax, THE HI TAX ATTRIBUTABLE TO ANY BONUS YOU
MIGHT DEFER WILL BE WITHHELD FROM YOUR NOVEMBER 1997 PAYCHECK, along with the HI
Tax attributable to your nondeferred compensation received in November. In
addition, the HI Tax attributable to the portion of the company match deferral
not subject to forfeiture (participants age 55 or older) will be withheld from
the December paycheck beginning in 1996. More information will be sent to
applicable participants.
The Administrative Retirement plan definition of "final average earnings"
includes deferred compensation. Therefore, under the terms of that plan, your
pension will be calculated to include deferred bonuses.
If you are a participant in the Savings Investment Plan ("SIP"), any bonus
deferred into the Equity or Variable Interest Options will not be included in
your compensation for purposes of computing your SIP contribution or the Company
matching SIP contribution. PLEASE NOTE, HOWEVER, that your SIP contributions ARE
DEDUCTED from the Short-Term Variable Interest CASH PAYMENT MADE IN JANUARY to
employed participants.
The value of the Company's Stock can fluctuate widely as a result of market
activity, and over certain periods, the value may decline. The Company does not
guarantee the performance or the value of the Common Stock or Stock equivalents
or the payment of dividends. In evaluating the Equity Option, consider the
Company Match and the length of time your investment in Stock equivalents
subjects your deferral to market risks.
The Variable Interest Option will credit interest equivalents on your deferred
amounts annually based on the average of the daily close of business prime
rates. These equivalents may vary substantially from year to year depending on
changes in interest rates. The average prime rates established by Morgan
Guaranty Trust Company of New York during recent calendar years are listed
below. Historical rates may or may not be indicative of future rates.
1993 = 5.899% 1995 = 8.827%
1994 = 7.041% 1996 = 8.273% year to date
BENEFITS UNDER THE DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES ARE UNFUNDED.
IN CONSIDERING THE OPTIONS, YOU SHOULD NOTE THAT YOUR RIGHT TO RECEIVE
DISTRIBUTIONS FROM THE PLAN IS THAT OF AN UNSECURED GENERAL CREDITOR OF RALSTON
PURINA COMPANY. The Company has set aside funds in a grantor trust to help it
meet its benefit obligations under this Plan and certain other plans. This
trust is also subject to the claims of creditors. If the Company fails to meet
its funding commitments to the trust, an event not presently anticipated to
occur, employees will, unless they elect otherwise, be entitled to be paid by
the Company the present value of all amounts deferred under the Plan at that
time. This provision in no way is intended to alter the status of this Plan as
an unfunded plan of deferred compensation.
Consider your deferral participation carefully and consult your personal advisor
if you have any questions. Please refer to the enclosed Deferred Compensation
Plan for Key Employees Prospectus, dated October 31, 1996 for more details.
YOUR ELECTION TO DEFER MAY NOT BE CHANGED FOR ANY REASON.
AGREEMENT FOR DEFERRAL OF 1996 ANNUAL CASH BONUS
Ralston Purina Company ("Company") and agree that, effective
November 1, 1996, $ awarded to Participant under the 1996 Annual Cash Bonus
Award Program shall be deferred, as requested Participant, into the option or
options available under the Deferred Compensation Plan for Key Employees
("Plan"), which is attached hereto as Exhibit A and incorporated by reference
herein.
Pursuant to Participant's request, the following amounts have been deferred
for Participant in the manner set forth below:
(1) Equity Option -
(a) $ in a Deferred Stock Equivalent Account in Participant's
name under the Equity Option as set forth in Section 2.2 of the
Plan.
(b) $ in a Deferred Stock Equivalent Account in Participant's
name representing Company Matching Deferral (25% of amount listed
in 1(a) above) as set forth in Section 2.2b) of the Plan.
(2) Short-Term Variable Interest Option - $ in a Deferred Cash
Account in Participant's name under the Variable Interest Option as
set forth in Section 2.3 of the Plan; provided, however, that,
notwithstanding any provision to the contrary contained in the Plan,
amounts attributable to deferrals into the Short-Term Variable
Interest Option shall be paid to Participant in January 1997.
(3) Long-Term Variable Interest Option - $ in a Deferred Cash
Account in Participant's name under the Variable Interest Option as
set forth in Section 2.3 of the Plan.
Participant's deferral hereunder is pursuant to the Plan and is subject in
all respects to the terms and conditions of this Agreement and of the Plan. No
other communications or representations, written or oral, made prior or
subsequent to this Agreement shall be deemed to amend or modify the terms of
this deferral except by an agreement in writing executed by the parties
subsequent to the date of this Agreement, expressly consenting to such amendment
or modification. Participant hereby waives any rights, and releases Company
from any claim, based on any such prior communications or representations, if
any.
ACCEPTED: RALSTON PURINA COMPANY
Participant C. S. Sommer
Vice President and Director, Administration
Date
AGREEMENT FOR DEFERRAL OF 1996 ANNUAL AND SPECIAL CASH BONUS
Ralston Purina Company ("Company") and agree that, of the $
Annual Bonus and $ Special Bonus awarded to Participant under the 1996
Annual and Special Cash Bonus Award Program, $ shall be deferred,
effective November 1, 1996, as requested by Participant, into the option or
options available under the Deferred Compensation Plan for Key Employees
("Plan"), which is attached hereto as Exhibit A and incorporated by reference
herein.
Pursuant to Participant's request, the following amounts have been deferred
for Participant in the manner set forth below:
(1) Equity Option -
(a) $ in a Deferred Stock Equivalent Account in Participant's
name under the Equity Option as set forth in Section 2.2 of the
Plan.
(b) $ in a Deferred Stock Equivalent Account in Participant's
name representing Company Matching Deferral (25% of amount listed
in 1(a) above) as set forth in Section 2.2(b) of the Plan.
(2) Short-Term Variable Interest Option - $ in a Deferred Cash
Account in Participant's name under the Variable Interest Option as
set forth in Section 2.3 of the Plan; provided, however, that,
notwithstanding any provision to the contrary contained in the Plan,
amounts attributable to deferrals into the Short-Term Variable
Interest Option shall be paid to Participant in January 1997.
(3) Long-Term Variable Interest Option - $ in a Deferred Cash Account in
Participant's name under the Variable Interest Option as set forth in
Section 2.3 of the Plan.
Participant's deferral hereunder is pursuant to the Plan and is subject in
all respects to the terms and conditions of this Agreement and of the Plan.
No other communications or representations, written or oral, made prior or
subsequent to this Agreement shall be deemed to amend or modify the terms
of this deferral except by an agreement in writing executed by the parties
subsequent to the date of this Agreement, expressly consenting to such
amendment or modification. Participant hereby waives any rights, and
releases Company from any claim, based on any such prior communications or
representations, if any.
ACCEPTED: RALSTON PURINA
By:
Participant C. S. Sommer
Vice President and
Director, Administration
Date
RESPONSE DUE DECEMBER 31, 1996
December 2, 1996
PERSONAL AND HIGHLY CONFIDENTIAL
Potential Fiscal 1997 Bonus Plan Participants
Deferral of Potential Fiscal 1997 Protein Sr. Management Incentive Award
The Deferred Compensation Plan for Key Employees gives you the opportunity to
defer all or a portion of your annual cash bonus, subject to the approval of the
Human Resources Committee of the Board of Directors. In general, deferring
compensation has the advantage of postponing payment of tax and of allowing any
earnings on the deferred amount to accumulate free of tax until distributed.
You may elect to defer all or part of the Personal Performance component of your
fiscal 1997 Sr. Management Incentive Award into the deferral options listed
below.
Because the Personal Performance component is payable in November 1997, elective
deferrals of this component will be effective November 1, 1997.
The Company Performance component of the bonus will not be paid until the end of
a three-year period. During this period (November 1997 to November 2000), the
accrued award will be credited with interest at prime, identical to the
calculation under the Variable Interest option. Deferral elections for the
Company Performance component will be offered in 1999, the year before payment
will be made.
To protect the tax status of the 1997 bonus deferral program, you must:
o Decide now whether to defer all or part of the Personal Performance
component of the fiscal 1997 Sr. Management Incentive bonus you might
receive, and
o Promptly return the enclosed election form. If your election form is
not received by December 31, 1996, you will not be able to defer the
Personal Performance component of the award.
Deferral Options for 1997:
You may choose from three deferral accounts:
o Equity Option, which features a 25% Company match
(note: match may not be offered every year);
o Short-Term Variable Interest Option (payable in January, 1998);
o Variable Interest Option.
-2-
In making your election, please refer to the enclosed Deferred Compensation Plan
for Key Employees Prospectus, dated October 31, 1996. Also refer to Attachment
1, Factors to Consider. You should keep in mind that YOUR ELECTION TO DEFER MAY
NOT BE CHANGED.
You are given the opportunity to transfer your deferrals (other than the match)
between the Equity and Variable Interest accounts. Transfers are offered twice
a year (June and December).
Please return one copy of the 1997 Deferral Election form, Attachment 2, by
December 31, 1996 whether or not you request a deferral. A duplicate form is
enclosed for your records. To expedite matters, you may return your form by fax
(314-982-2490). If you request a deferral, it will be considered for the
Personal Performance component of the fiscal 1997 Sr. Management Incentive Award
only. As with all correspondence involving executive compensation, please treat
this material with the utmost confidentiality.
If you have any questions, please feel free to call me at extension 1918.
Pam Brennan - 1A
Corporate Compensation
Enclosures
<TABLE>
<CAPTION>
<S><C><C>
Exhibit 11
RALSTON PURINA COMPANY
COMPUTATION OF EARNINGS PER SHARE (PRO FORMA
IN PRIOR YEAR ASSUMING ONE CLASS OF COMMON STOCK)
(in millions except per share data)
Year Ended
September 30,
1996 1995
EARNINGS PER COMMON SHARE OUTSTANDING
Earnings before extraordinary item 361.7 300.1
Dividend on Series A ESOP convertible
preferred stock, net of tax -14.1 -18.8
347.6 281.3
Extraordinary item -2.1 -3.7
Earnings available to common shareholders 345.5 277.6
Weighted average shares - primary earnings per
share calculation 101.8 * 101.9*
Earnings per common share outstanding
Earnings before extraordinary item 3.41 2.76
Extraordinary item -0.02 -0.04
Net earnings 3.39 2.72
EARNINGS PER SHARE ASSUMING FULL DILUTION
Earnings before extraordinary item 361.7 300.1
Adjustments to earnings to reflect assumed ESOP
preferred stock conversion -4.4 -6.1
357.3 294
Extraordinary item -2.1 -3.7
Net earnings for fully diluted earnings per share
calculation 355.2 290.3
Weighted average number of common shares outstanding 101.8 * 101.9*
Convertible preferred stock 6.7 7.2
Dilutive effect of stock options 1.8 1.3
Dilutive effect of deferred compensation awards 0.3 0.2
Weighted average shares - fully diluted earnings
per share calculation 110.6 110.6
Earnings per share assuming full dilution
Earnings before extraordinary item 3.23 2.66
Extraordinary item -0.02 -0.03
Net earnings 3.21 2.63
* Excludes 4,228,000 and 4,135,000 shares held in Grantor Trust at
September 30, 1996 and 1995, respectively.
Exhibit
11
RALSTON PURINA COMPANY
COMPUTATION OF EARNINGS PER SHARE FOR RAL STOCK *
(in millions except per share data)
Year Ended
September
30, 1995
EARNINGS PER COMMON SHARE OUTSTANDING
Earnings before extraordinary item 308.1
Dividend on Series A ESOP convertible
preferred stock, net of tax -17.6
290.5
Extraordinary item -3.7
Earnings after preferred stock dividend 286.8
Weighted average shares - primary earnings per
share calculation 100.7 **
Earnings per common share outstanding
Earnings before extraordinary item 2.89
Extraordinary item -0.04
Net earnings 2.85
EARNINGS PER SHARE ASSUMING FULL DILUTION
Earnings before extraordinary item 308.1
Adjustments to earnings to reflect assumed ESOP
preferred stock conversion -5.2
302.9
Extraordinary item -3.7
Net earnings for fully diluted earnings per share
calculation 299.2
Weighted average number of common shares outstanding 100.7 **
Convertible preferred stock 7.2
Dilutive effect of stock options 1.3
Dilutive effect of deferred compensation awards 0.2
Weighted average shares - fully diluted earnings
per share calculation 109.4
Earnings per share assuming full dilution
Earnings before extraordinary item 2.77
Extraordinary item -0.03
Net earnings 2.74
* Prior to May 15, 1995, RAL Stock reflected operations of the RPG Group only.
** Excludes 4,135,000 shares held in Grantor Trust at September 30, 1995.
Exhibit 11
RALSTON PURINA COMPANY
COMPUTATION OF EARNINGS PER SHARE FOR CBG STOCK
(in millions except per share data)
34 Weeks Ended
May 15, 1995
LOSS PER COMMON SHARE OUTSTANDING
Net loss for CBG Group -15.5
Dividend on Series A ESOP convertible
preferred stock, net of tax -1.2
Loss after preferred stock dividend -16.7
Weighted average number of shares outstanding 20.6
Shares issuable with respect to RPG Group's
retained interest in the CBG Group 16.7
Weighted average shares - primary earnings per
share calculation 37.3
Loss per common share outstanding -0.45
LOSS PER SHARE ASSUMING FULL DILUTION
Net loss for CBG Group -15.5
Adjustments to net loss to reflect assumed
ESOP preferred stock conversion -1.8
Net loss for fully diluted earnings per share calculation -17.3
Weighted average number of common share outstanding 20.6
Shares issuable with respect to RPG Group's
retained interest in the CBG Group 16.7
Convertible preferred stock 1.7
Dilutive effect of deferred compensation awards 0.1
Weighted average shares - fully diluted earnings
per share calculation 39.1
Loss per share assuming full dilution -0.44
* Due to anti-dilution as computed above for the 34 weeks ended May
15, 1995, fully diluted earnings per share as reported on the
statement of earnings is revised to exclude anti-dilutive securities
from the computation.
</TABLE>
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FIVE YEAR FINANCIAL SUMMARY
(In millions except per share and percentage data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
STATEMENT OF EARNINGS DATA 1996 1995<Fd> 1994<Fg> 1993 1992
---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales......................................................... $6,114.3 $7,171.6 $7,676.6 $7,874.8 $7,725.9
Depreciation and Amortization..................................... 237.1 289.5 309.4 309.7 292.4
Earnings before Interest Expense, Income Taxes, Equity Earnings,
Extraordinary Item and Cumulative Effect of Accounting
Changes......................................................... 752.6 714.0 642.1 818.5 785.0
As a Percent of Sales......................................... 12.3% 10.0% 8.4% 10.4% 10.2%
Earnings before Income Taxes, Equity Earnings,
Extraordinary Item and Cumulative Effect of
Accounting Changes.............................................. $ 562.3 $ 514.2 $ 421.7 $ 580.4 $ 542.1
Income Taxes...................................................... 212.2 215.0 203.3 239.1 221.4
Earnings before Extraordinary Item and Cumulative Effect of
Accounting Changes<Fa>.......................................... 361.7 300.1 218.4 341.3 320.7
As a Percent of Sales......................................... 5.9% 4.2% 2.8% 4.3% 4.2%
Net Earnings<Fb>.................................................. $ 359.6 $ 296.4<Fe> $ 208.9 $ 122.6 $ 313.2
Earnings Available to Common Shareholders......................... 345.5 277.6 188.7 101.6 292.2
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------
BALANCE SHEET DATA 1996 1995<Fd> 1994<Fg> 1993 1992
---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Working Capital................................................... $ (22.1) $ 21.8 $ 61.7 $ 188.7 $ 35.0
Property at Cost, Net............................................. 1,455.9 1,350.9 1,897.4 2,331.6 2,306.4
Additions (during the year)................................... 314.1 284.6 332.1 320.8 325.4
Depreciation (during the year)................................ 181.3 238.5 264.7 263.5 254.7
Total Assets...................................................... 4,785.1 4,567.2 4,622.3 5,071.9 5,150.5
Long-Term Debt.................................................... 1,437.0 1,602.1 1,594.6 2,054.5 2,111.3
Redeemable Preferred Stock........................................ 323.5 348.7<Ff> 469.7 509.8 509.8
Shareholders Equity............................................... 689.0 494.2 355.6 469.8 655.2
Common Shares Outstanding:
RAL Stock<Fc>................................................. 101.7 101.7 100.0 101.8
CBG Stock..................................................... 20.6 20.7
Ralston Purina Company Common Stock........................... 103.7
<FN>
- ---------
<Fa> Before extraordinary charges for early retirement of debt of $2.1 for 1996, $3.7 for 1995, $9.5 for 1994, $11.8 for 1993
and $7.5 for 1992. Also, before charges for the cumulative effect of accounting changes of $206.9 in 1993.
<Fb> After-tax provisions reduced earnings by $15.5 in 1996, $70.0 in 1995, $82.4 in 1994 and $32.9 in 1992. Provisions were
for restructuring in all years and also included gains on disposition of property in 1992. Also, the incremental impact
of adopting FAS 106 and FAS 109 resulted in a reduction of net earnings of $15.1 in 1993.
<Fc> Does not include 4.2, 4.1 and 4.0 shares of RAL Stock held by the Company's Grantor Trust in 1996, 1995 and 1994,
respectively.
<Fd> Effective July 22, 1995, the Company sold its Continental Baking Company (CBC) subsidiary. The Company's earnings and
cash flows reflect the operations of CBC through July 22, 1995. Pro forma results of operations of the Company without
CBC appear on page 14.
<Fe> Includes an after-tax gain on the sale of CBC of $42.0.
<Ff> Reflects conversion of 1.0 shares of Redeemable Preferred Stock in connection with the sale of CBC.
<Fg> On March 31, 1994, the Company effected a spin-off of Ralcorp Holdings, Inc., (Ralcorp), its private label and branded
cereal, baby food, crackers and cookies, ski resort and coupon redemption businesses. The Company's earnings and cash
flows reflect the operations of those businesses through March 31, 1994. Pro forma results of operations of the Company
without Ralcorp appear on page 14.
</TABLE>
12
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FIVE YEAR FINANCIAL SUMMARY (Continued)
(In millions except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
PER SHARE DATA 1996 1995 1994 1993<Fa> 1992
---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
RAL Stock (pro forma in 1995 and 1994 assuming one class of common
stock):
Earnings before Extraordinary Item............................
Primary................................................... $ 3.41 $ 2.76 $ 1.93
Fully Diluted............................................. 3.23 2.66 1.88
Net Earnings
Primary................................................... 3.39 2.72 1.84
Fully Diluted............................................. 3.21 2.63 1.80
Average Shares Outstanding.................................... 101.8 101.9 102.4
RAL Stock (based on RPG Group earnings through May 15, 1995 and
consolidated Ralston earnings thereafter):
Earnings before Extraordinary Item and Cumulative Effect of
Accounting Changes
Primary................................................... $ 2.89 $ 2.12 $ .40
Fully Diluted............................................. 2.77 2.05 .39
Net Earnings
Primary................................................... 2.85 2.04 .36
Fully Diluted............................................. 2.74 1.98 .35
CBG Stock (through May 15, 1995):
Earnings (Loss) before Extraordinary Item and Cumulative
Effect of Accounting Changes
Primary................................................... $ (.45) $ (.74) $ .21
Fully Diluted............................................. (.45) (.74) .19
Net Earnings (Loss)
Primary................................................... (.45) (.78) .19
Fully Diluted............................................. (.45) (.78) .17
Ralston Purina Company Common Stock (through July 30, 1993):
Earnings before Extraordinary Item and Cumulative Effect of
Accounting Changes..........................................
Primary................................................... $ 2.65 $ 2.82
Fully Diluted............................................. 2.52 2.65
Net Earnings
Primary................................................... .59 2.75
Fully Diluted............................................. .63 2.59
Average Shares Outstanding:
RAL Stock..................................................... 100.7 100.5 102.2
CBG Stock (through May 15, 1995).............................. 20.6 20.5 20.7
Ralston Purina Company Common Stock........................... 103.6 106.3
Dividends Declared:
RAL Stock..................................................... $ 1.20 $ 1.20 $ 1.20 $ .60<Fb>
CBG Stock..................................................... .16<Fb>
Ralston Purina Company Common Stock........................... .632<Fb> $ 1.20
<FN>
- ---------
<Fa> Actual earnings per share for 1993 are segregated due to the redesignation of Ralston Purina Company Common Stock and
the issuance of CBG Stock, both occurring on July 30, 1993. RAL Stock and CBG Stock earnings are for the period after
July 30 through September 30, 1993.
<Fb> Represents dividends declared on redesignated RAL Stock and newly issued CBG Stock from July 30, 1993 through September
30, 1993 and dividends declared on Ralston Purina Company Common Stock from October 1, 1992 through July 30, 1993.
</TABLE>
13
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
Effective July 22, 1995, the Company sold Continental Baking Company
(CBC) to Interstate Bakeries Corporation (IBC). On May 15, 1995, the Company
exchanged each outstanding share of Ralston-Continental Baking Group Common
Stock (CBG Stock) for shares of its Ralston-Ralston Purina Group Common Stock
(CBG Stock Exchange). 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 (Ralcorp).
In order to analyze the Company's results on a comparable basis, pro forma
results are presented for the fiscal years ended September 30, 1995 and 1994.
The following pro forma consolidated statement of earnings reflects the results
of operations of the Company for the years ended September 30, 1995 and 1994 as
if the sale of CBC, the spin-off of Ralcorp and the CBG Stock Exchange had
occurred as of October 1, 1993. The pro forma financial statement has been
prepared by adjusting the historical statement for the effect of revenues,
expenses, assets and liabilities and the recapitalization which might have
occurred had the sale of CBC, the spin-off of Ralcorp and the CBG Stock
Exchange been effected as of October 1, 1993. The pro forma financial statement
may not necessarily reflect the consolidated results of operations that would
have existed had the sale of CBC, the spin-off of Ralcorp and the CBG Stock
Exchange occurred on October 1, 1993.
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED
SEPTEMBER 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Net Sales<Fa>................................................................... $5,583.4 $5,206.1
-------- --------
Cost and Expenses
Cost of products sold<Fa>................................................... 3,271.9 3,029.6
Selling, general and administrative<Fa>..................................... 1,012.8 921.0
Advertising and promotion<Fa>............................................... 554.2 577.3
Interest<Fb>................................................................ 190.8 202.2
Provisions for restructuring<Fa>............................................ 90.8 83.9
Other (income)/expense, net<Fa>............................................. (3.0) 17.1
-------- --------
5,117.5 4,831.1
-------- --------
Earnings before Income Taxes, Equity Earnings and Extraordinary Item............ 465.9 375.0
Income Taxes<Fc>................................................................ (207.5) (186.1)
-------- --------
Earnings before Equity Earnings and Extraordinary Item.......................... 258.4 188.9
Equity Earnings (Loss), Net of Taxes<Fd>........................................ 4.5 (1.2)
-------- --------
Earnings before Extraordinary Item.............................................. $ 262.9 $ 187.7
======== ========
Earnings per Share
Primary<Fe>................................................................. $ 2.42 $ 1.66
Fully Diluted<Fe>........................................................... $ 2.32 $ 1.62
Average Shares Outstanding Used in Earnings per Share Computation
Primary<Fe>................................................................. 101.9 102.4
Fully Diluted<Fe>,<Ff>...................................................... 110.6 111.3
<FN>
- ---------
<Fa> Excludes results of operations for CBC and Ralcorp.
<Fb> Reflects reduction of interest expense at an average rate of 6.75% assuming debt repayment of $160 by the Company from a
portion of the CBC sales proceeds, and the reduction of interest expense at an average rate of 3.9% assuming debt
repayment of $370 by the Company from the proceeds of debt issued in connection with the Ralcorp spin-off.
<Fc> Reflects the applicable federal and state statutory tax rates for the pro forma adjustments.
<Fd> Reflects the Company's 46% share of IBC pro forma earnings (loss).
<Fe> Reflects exchange of CBG Stock for 1.8 million shares of RAL Stock.
<Ff> Reflects conversion of Redeemable Preferred Stock allocated to CBC ESOP participants.
</TABLE>
14
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW
The following discussion is a summary of the key factors management
considers necessary in reviewing the Company's results of operations,
liquidity, capital resources, and operating segment results. This discussion
should be read in conjunction with the Business Segment Information,
Consolidated Financial Statements and related Notes to Financial Statements.
HIGHLIGHTS AND OUTLOOK
Net earnings were $359.6 million for the year compared to $296.4 million
in 1995. Included in net earnings in 1996 is an extraordinary loss on early
debt retirement of $2.1 million, after taxes, and restructuring charges in the
Pet Products, Agricultural Products and Battery Products segments of $15.5
million, after taxes. Net earnings in 1995 included an extraordinary loss on
early debt retirement of $3.7 million, after taxes, and charges for battery
products restructuring of $70.0 million, after taxes.
Effective July 22, 1995, the Company sold CBC to IBC and recognized an
after-tax gain on the sale of $42.0 million. On May 15, 1995, the Company
exchanged each outstanding share of its CBG Stock for .0886 shares of its
Ralston-Ralston Purina Group Common Stock (RAL Stock). On March 31, 1994, the
Company distributed all of the capital stock of Ralcorp to holders of the RAL
Stock. Pro forma earnings assume that each of these events had occurred on
October 1, 1993, and do not include the gain on the sale of CBC.
Earnings before charges described in the first paragraph, increased $44.3
million in 1996 to $377.2 million, compared to pro forma earnings before
charges of $332.9 million in 1995. The 1996 earnings increase resulted from
higher operating profit in all business segments, a lower tax rate and
increased IBC equity earnings. Earnings per share for 1996, on this basis, were
$3.56 and $3.37 on a primary and fully diluted basis, respectively, compared to
$3.10 and $2.95 in the prior year.
In 1995, net earnings increased $87.5 million. Unusual or non-recurring
charges in 1994 include an extraordinary loss on early debt retirement of $9.5
million, after taxes, and restructuring charges in the Battery Products and
Bakery Products segments of $82.4 million, after taxes. Excluding the effect of
these 1994 charges, the 1995 charges previously discussed and earnings related
to sold and spun-off businesses, net earnings increased in 1995 by $72.4
million primarily on higher operating profit, higher returns on other
investments and a lower income tax rate. Earnings per share on this basis
increased in 1995 by $.73 and $.67 on a primary and fully diluted basis,
respectively.
Net earnings in the fourth quarter of 1996 were $89.8 million compared to
$75.7 million in the 1995 fourth quarter. Net earnings, exclusive of
restructuring provisions of $15.5 million, after taxes, in the current quarter
increased $28.4 million compared to pro forma earnings before an extraordinary
loss of $3.7 million, after taxes, restructuring provisions of $37.7 million,
after taxes, and a $42.0 million after-tax gain on the sale of CBC in the prior
year quarter. This increase is primarily due to higher operating profit, a
lower tax rate and higher equity earnings. Primary and fully diluted earnings
per share on this basis were $1.00 and $.94, respectively, in the current
quarter compared to $.72 and $.68 in the prior year.
15
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
TRANSACTIONS AFFECTING COMPARABILITY OF RESULTS
During 1996, the Company acquired an interest in several agricultural
products businesses for approximately $25 million.
On April 7, 1995 the Company acquired the assets of Golden Cat
Corporation, the leading manufacturer and marketer of branded cat box filler in
the United States and Canada, for $340 million.
Effective July 22, 1995, the Company sold CBC to IBC for $220 million in
cash and 16,923,077 shares of common stock of IBC. The Company's earnings and
cash flows reflect the operations of CBC through July 22, 1995, and reflect an
equity interest in IBC thereafter.
On March 31, 1994, the Company effected a spin-off of Ralcorp. The
Company's earnings and cash flows reflect the operations of those businesses
through March 31, 1994.
NET SALES
Net sales decreased $1,057.3 million or 14.7% in 1996 on the exclusion of
sales of CBC, partially offset by increases in all segments and the inclusion
of a full years' sales of Golden Cat. Excluding CBC sales in 1995, net sales
increased 9.5% in 1996. In 1995, net sales decreased $505.0 million or 6.6% due
to the exclusion of Ralcorp sales and the exclusion of sales of CBC after July
22, 1995, partially offset by increases in all segments and the inclusion of
sales from Golden Cat. Excluding sold and spun-off businesses, sales increased
7.2% in 1995. Comments on sales changes by business segment may be found on
pages 22 and 23 of this report.
GROSS PROFIT
Gross profit decreased 20.7% in 1996 and 9.1% in 1995 on the exclusion of
divested businesses. Excluding such operations, gross profit increased 5.8% in
1996 and 6.2% in 1995 on increases in all segments. On this basis, gross profit
as a percentage of sales was 40.0% in 1996 compared to 41.4% in 1995 and 41.8%
in 1994. The decreased percentage in 1996 reflects improvements in battery and
soy protein products which were more than offset by decreased percentages in
pet and agricultural products. In 1996, the battery products' 1995 plant
closings had a favorable impact on margins. Pet and agricultural products'
margins were unfavorably impacted by higher grain prices as price increases in
these segments were insufficient to maintain historical margin levels. In
addition, sales increases in the lower margin Agricultural Products segment
negatively impacted Company margin percentages in 1996. The 1995 percentage was
unfavorably impacted by a lower Pet Products segment percentage associated with
price reductions under simplified promotion practices and by sales growth in
segments with generally lower margin percentages. These unfavorable factors
were partially offset by the inclusion of the acquired Golden Cat operations
and higher margin percentages in the Battery Products and Soy Protein Products
segments.
Cost of products sold in the Pet Products, Agricultural Products, and Soy
Protein Products segments are somewhat dependent on agricultural commodity
market prices. Prices may fluctuate due to weather conditions, government
regulations, economic climate or other unforeseen circumstances. The Company
manages exposure to changes in the commodities markets as considered necessary
by hedging certain of its ingredient requirements such as soybean meal, corn or
wheat. Agricultural commodity costs of the Company's continuing businesses have
represented 30% to 35% of cost of products sold during the three year period
ended September 30, 1996. The Company used futures contracts to hedge
approximately 15% to 20% of such commodity purchases or 4% to 7% of cost of
products sold during that period. As of September 30, 1996, the Company owned
futures contracts with an aggregate face value of approximately $20.0 million.
16
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
OPERATING EXPENSES
Selling, general and administrative expenses, exclusive of CBC operations
in the prior year, increased 5.5% in 1996 primarily due to acquisitions and to
the inclusion of a full year of Golden Cat expenses. In 1995, selling, general
and administrative expenses, excluding sold and spun-off businesses, increased
10% due to the Golden Cat acquisition and higher spending on cost reduction
programs. Selling, general and administrative expenses on this basis were
17.5%, 18.1% and 17.7% of sales in 1996, 1995 and 1994, respectively.
Advertising and promotion expense, exclusive of CBC operations in the
prior year, increased 7.0% in 1996 on the inclusion of a full year of Golden
Cat expenses and on increased brand development spending in pet products. Pro
forma advertising and promotion expense decreased 4.0% in 1995 as a result of
simplified promotion practices in the Pet Products segment, partially offset by
the inclusion of Golden Cat operations. Excluding sold and spun-off businesses,
advertising and promotion expense was 9.7% of sales in 1996 compared to 9.9% in
1995 and 11.1% in 1994.
INTEREST EXPENSE AND OTHER INCOME/EXPENSE
Interest expense decreased in 1996 to $190.3 million compared to $199.8
million in 1995 and $220.4 million in 1994. The 1996 decrease resulted
primarily from lower interest rates associated with the Company's maintaining a
larger percentage of its total debt on a short-term basis. The decrease in 1995
was attributable to lower interest rates and the reduction of debt due to the
spin-off of Ralcorp. Other income/expense, net, was unfavorable by $18.1
million in 1996 due to lower returns on other investments and higher foreign
currency translation and exchange losses, primarily related to Mexican and
Venezuelan operations. In 1995, other income/expense, net, improved by $23.0
million on higher returns on other investments and lower foreign currency
translation and exchange losses.
INCOME TAXES
Income taxes, which include federal, state and foreign taxes, were 37.7%
of pre-tax earnings before equity earnings and extraordinary item in 1996,
41.8% in 1995 and 48.2% in 1994. Income taxes in the current year are lower due
to the elimination or moderation of operating losses in certain foreign
jurisdictions where valuation allowances had been established for tax benefits
on such losses and due to the realization of certain previously unrecognized
net operating loss carryforwards. The higher income tax percentage in 1994, and
to a lesser extent in 1995, reflects pre-tax restructuring provisions which did
not result in tax benefits due to tax loss situations or particular statutes of
a country. The 1995 provision was favorably impacted by a lower tax rate on the
gain on sale of CBC. Income tax percentages, excluding the impact of
restructuring provisions and the sale gain, were 37%, 41% and 42.3% in 1996,
1995 and 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations is the Company's primary source of liquidity.
Management continues to have a strong orientation toward cash flows and
effective management of cash generated. In addition, the Company uses financial
leverage to minimize the overall cost of capital and maintain adequate
operating and financial flexibility. Management monitors leverage through its
interest coverage ratio (defined as earnings before interest expense,
amortization, provisions for restructuring, gain on the sale of CBC, income
taxes, equity earnings and extraordinary items divided by interest expense),
debt to internal funds ratio (defined as average debt divided by earnings
before non-cash restructuring reserves, depreciation and amortization, deferred
income tax provision and gain on the sale of CBC (cash earnings)) and total
debt as a percentage of total capitalization.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1996 1995 1994
- ------------------- ---- ---- ----
<S> <C> <C> <C>
Cash Flow from Operations............................................. $464.4 $473.7 $471.0
Interest Coverage..................................................... 4.3 4.0 3.6
Debt to Internal Funds................................................ 4.0 4.3 4.6
Total Debt as a Percent of Total Capitalization....................... 73% 78% 81%
</TABLE>
17
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
On a current equity market basis, total debt as a percentage of total
capitalization was 25% at September 30, 1996, compared to 28% at September 30,
1995 and 34% at September 30, 1994. For purposes of the debt ratios, the
guarantee of the ESOP debt is treated as debt and redeemable preferred stock
and related unearned compensation are treated as capital. The historical cost
basis ratio is significantly influenced by the large amount of stock
repurchased by the Company.
Cash flow from operations decreased slightly in 1996 due to changes in
working capital items, primarily accounts payable and accrued liabilities as a
result of spending against restructuring accruals established in the prior
year, largely offset by higher cash earnings. Cash flow from operations was
flat in 1995 as higher cash earnings were offset by higher working capital
requirements. In 1995, higher cash earnings from continuing businesses more
than offset loss of cash flows from divested businesses. The interest coverage
ratio improved in 1996 and in 1995 on higher earnings and lower interest
expense. The debt to internal funds ratio also improved in 1996 and 1995 on
higher cash earnings and, in 1995, on a lower average debt balance.
The Company's working capital requirements for inventories and receivables
are influenced by seasonality, the availability of raw materials and changes in
raw materials costs, and as a result, may fluctuate widely. The Company has
traditionally used short-term debt to finance these seasonal and other working
capital requirements and, from time to time, to finance capital expenditures on
a temporary basis. In addition, the Company is currently using international
short-term debt to minimize its overall after-tax cost of debt. Bank lines of
credit provide future credit availability and support the sale of commercial
paper. Payment for lines of credit is effected primarily through fees. At
September 30, 1996 the total unused lines of credit were $183.2 million.
At September 30, 1996, current liabilities exceeded current assets by
$22.1 million. Working capital (current assets less current liabilities) was
$21.8 million at September 30, 1995 compared to $61.7 million at September 30,
1994. The decreases in working capital are primarily due to the Company's
maintaining a larger percentage of its total debt on a short-term basis. This
trend was partially offset by higher inventories and accounts receivable in
1996 and by lower accounts payable and accrued liabilities in 1995.
INVESTING ACTIVITIES
Cash flow used for investing activities decreased to $307.5 million in
1996 from $428.0 million in 1995. The 1995 acquisition of the assets of Golden
Cat Corporation for $340 million represented a significant investment, which
was partially offset by the cash proceeds of $220 million from the sale of CBC.
Capital expenditures were $314.1 million, $284.6 million and $332.1 million in
fiscal years 1996, 1995 and 1994, respectively. Anticipated capital
expenditures of approximately $450 million in 1997 are expected to be financed
with funds generated from operations.
FINANCING ACTIVITIES
Long-term financings are arranged as necessary to meet the Company's
capital or other requirements, with the timing of issue, principal amount and
form depending on the prevailing securities markets and general economic
conditions. The Company received $199.7 million, $272.8 million and $37.7
million in proceeds from new debt issuances, offset by payments on long-term
debt of $355.3 million, $318.1 million and $233.8 million in 1996, 1995 and
1994, respectively. The Company also increased short-term obligations by $203.2
million in 1996 and $222.6 million in 1995. At September 30, 1996, the Company
has an unused shelf registration statement for the issuance of $400.0 million
of debt securities.
The Company returned cash to its common shareholders during the three
years ended September 30, 1996 through dividends on common stock and common
stock repurchases. These outflows totaled $121.9 million and $9.4 million for
dividends and stock repurchases, respectively, in 1996 compared to $120.9
million and $15.3 million in 1995 and $122.0 million and $103.2 million in
1994. As of November 18, 1996, 1,438,362 shares of RAL Stock remained under the
current Board of Director's authorization for the purchase of up to 3 million
shares of RAL Stock.
18
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
To meet ongoing share redemption requirements of the ESOP, in 1996 shares
of the Company's Series A 6.75% Preferred Stock (Redeemable Preferred Stock)
were converted into RAL Stock and simultaneously repurchased from the ESOP for
$24.3 million. In connection with the sale of CBC in 1995, $69.0 million of
allocated and $57.0 million of unallocated Redeemable Preferred Stock was
converted into RAL Stock and simultaneously repurchased from the ESOP.
In accordance with the Shareholder Agreement signed upon closing of the
sale of CBC to IBC, the Company's ownership of IBC Stock must be reduced to no
more than 14.9% of total outstanding shares of IBC by July 22, 2000. At
September 30, 1996, the current fair market value of the Company's investment
in IBC, calculated based upon the closing market price of IBC shares traded on
the New York Stock Exchange, was $617.7 million, as compared to the Company's
recorded basis of $286.9 million.
ENVIRONMENTAL MATTERS
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received notices
from the U.S. Environmental Protection Agency, state agencies, and/or private
parties seeking contribution, that it has been identified as a ``potentially
responsible party'' (PRP), under the Comprehensive Environmental Response,
Compensation and Liability Act, and may be required to share in the cost of
cleanup with respect to 14 ``Superfund'' sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used. While it is difficult to quantify the potential financial impact of
actions involving environmental matters, particularly remediation costs at
waste disposal sites and future capital expenditures for environmental control
equipment, in the opinion of management, the ultimate liability arising from
such environmental matters, 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.
INFLATION
Management recognizes that inflationary pressures may have an adverse
effect on the Company through higher asset replacement costs and related
depreciation and higher material costs. The Company tries to minimize these
effects through cost reductions and productivity improvements as well as price
increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in the
three years ended September 30, 1996.
FOREIGN EXCHANGE
The Company is engaged in the manufacture and sale of products in over 160
countries on a global basis. The Company enters into foreign exchange forward
contracts and options to mitigate the Company's economic exposure to changes in
exchange rates. See Financial Instruments and Risk Management note to the
financial statements for additional information about foreign currency
contracts.
The Company generally views as long-term its investments in foreign
subsidiaries with a functional currency other than the U.S. dollar. As a
result, the Company does not generally hedge these net investments. However,
the Company uses capital structuring techniques to manage its net investment in
foreign currencies as considered necessary. Additionally, the Company attempts
to limit its U.S. dollar net monetary liabilities in currencies of
hyperinflationary countries primarily in South America. Net foreign investments
as of September 30, 1996 were:
<TABLE>
<CAPTION>
NET INVESTMENT
REGION (IN MILLIONS)
------ --------------
<S> <C>
Europe.............................................................................................. $ 357.1
Asia Pacific........................................................................................ 212.0
South and Central America........................................................................... 167.7
Other............................................................................................... 32.6
-------
$ 769.4
=======
</TABLE>
19
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
RESTRUCTURING ACTIVITIES
In 1996, the Company recorded provisions for restructuring which reduced
earnings before income taxes, net earnings and net earnings per primary share
by $18.0 million, $15.5 million and $.15, respectively. These charges are
associated with the closing of the Company's European cereal operations, the
streamlining of operations of the international agricultural animal feeds
business in advance of the planned spin-off and additional battery products'
restructuring. Charges were $8.4 million, pre-tax and after-tax, for the cereal
operations, $5.6 million and $4.5 million, pre-tax and after-tax, respectively,
for agricultural products and $4.0 million and $2.6 million, pre-tax and
after-tax, respectively, for battery products. The 1996 provision for
restructuring consisted of termination benefits of $10.8 million, relating to
the termination of approximately 315 employees, other cash exit costs of $1.8
million and non-cash charges of $5.4 million, primarily related to impairment
losses on land, buildings and machinery and equipment.
During 1996, approximately 180 employees associated with the Company's
foreign operations were terminated and termination benefits of $5.3 million
were paid in connection with the 1996 provision. The remaining reserve balance
of $7.3 million, which excludes the portion of the provision classified as
property and other asset write-downs, is expected to be utilized during 1997.
Pre-tax cost savings from these restructuring actions are expected to be
as follows: 1997-$12.1; 1998-$14.1; and ultimate annual reduction-$14.3.
During 1995 and 1994, the Company recorded provisions for restructuring of
its world-wide carbon zinc battery production capacity and certain
administrative functions. The provisions provided for the closing of a total of
ten plants and the severance of approximately 2,600 employees. The 1995
provisions reduced earnings before income taxes, net earnings and net earnings
per pro forma primary share by $90.8 million, $70.0 million and $.68,
respectively. The 1995 provision for restructuring consisted of termination
benefits of $46.2 million, other cash exit costs of $11.6 million and non-cash
charges of $33.0 million, primarily related to anticipated losses on disposal
of land, buildings and machinery and equipment.
The 1994 provisions were $83.9 million before income taxes and $72.8
million after taxes. The provision included cash costs for termination benefits
of $26.2 million, payment of guaranteed debt of $4.3 million and other exit
costs of $7.0 million. Non-cash charges of $46.4 million primarily related to
anticipated losses on disposal of land, buildings and machinery and equipment.
As of September 30, 1996, 8 plants have been closed and approximately
2,250 employees have been terminated in connection with the 1994 and 1995
restructuring provisions. Activity related to these provisions is summarized as
follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
1996 1995
---- ----
<S> <C> <C>
Reserve balance at beginning of year............................................................ $ 43.9 $ 36.5
Provision recorded.............................................................................. -- 90.8
Termination benefits paid....................................................................... (20.7) (32.6)
Other cash exit costs incurred.................................................................. (7.3) (21.2)
Portion of current period provision classified as property and other asset writedowns........... -- (33.0)
Increase due to translation..................................................................... .8 3.4
------ ------
Reserve balance at September 30................................................................. $ 16.7 $ 43.9
====== ======
</TABLE>
Restructuring actions are expected to be completed by 1997 for the
remaining 2 plants. The Company expects to fund the remaining costs from
internal sources and available borrowing capacity.
As a result of the restructuring actions covered under the 1994 and 1995
provisions, pre-tax cost savings have been or are expected to be as follows:
1995-$9.1; 1996-$29.2; 1997-$44.9; and ultimate annual reduction-$47.7.
In 1994, bakery products' restructuring provisions were recorded which
reduced 1994 earnings before income taxes and net earnings by $16.0 million and
$9.6 million, respectively. The charge covered severance and related payroll
costs for 435 headquarters and field employees.
20
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
BUSINESS SEGMENT INFORMATION
Summarized financial information on a worldwide basis by business segment
for the three years ended September 30, 1996 is set forth below. During these
years, the segments comprised the following:
PET PRODUCTS--pet foods, cat box filler and cereal and other foods
(international)
Pet Products is the world's largest producer of dry dog and dry and
soft-moist cat foods, the leading producer of soft-moist dog food in the United
States and the leading manufacturer and marketer of cat box filler in the
United States. Pet products are marketed primarily through a direct sales force
to grocery, mass merchandisers and speciality retailers, wholesalers and other
customers.
BATTERY PRODUCTS--alkaline, carbon zinc, lithium and rechargeable batteries,
miniatures, flashlights and other related products
Battery Products is the world's leading manufacturer of dry cell batteries
and flashlights and a global leader in the dynamic business of providing
portable power. Battery products' brands are recognized around the world and
are marketed and sold in more than 160 countries. Battery products are marketed
through a direct sales force to mass merchandisers, wholesalers and other
customers.
SOY PROTEIN PRODUCTS--dietary soy protein, fiber food ingredients and polymer
products
Soy Protein Products is the world's leading producer and marketer of
high-quality dietary isolated soy protein and fiber food ingredients, and a
leading marketer of polymer products worldwide. Principal markets served
include food, meat, paper/paperboard and animal feed industries. Food protein
and industrial polymer products are marketed through a direct sales force.
AGRICULTURAL PRODUCTS (INTERNATIONAL)--animal feeds
Agricultural Products is one of the world's largest producers and
marketers of formula animal feeds and operates 62 manufacturing plants.
Agricultural products are marketed through a worldwide network of 3,300
independent dealers, as well as an independent and a direct sales force.
DIVESTED BUSINESSES
Bakery products--bread and sweet baked goods (sold as of July 22, 1995)
Cereals and other specialty grocery products--domestic (spun-off March 31,
1994)
All seasons resorts (spun-off March 31, 1994)
Baby food products (spun-off March 31, 1994)
21
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
BUSINESS SEGMENT REVIEW
Pet products includes restructuring provisions of $8.4 million in 1996.
Battery products includes restructuring provisions of $4.0 million in 1996,
$90.8 million in 1995 and $80.5 million in 1994. Agricultural products includes
restructuring provisions of $5.6 million in 1996. Comments, amounts and
percentages in the remaining Business Segment discussion exclude the effects of
divestitures and restructuring provisions.
PET PRODUCTS
Sales for the Pet Products segment increased 12.0% in 1996 on the
inclusion of a full year's sales of Golden Cat, acquired in April 1995, higher
pet food volume and higher prices. In 1995, sales increased 7.5% on the
inclusion of Golden Cat and higher volume, partially offset by lower domestic
prices reflecting expansion of simplified promotion practices.
Operating profit for the Pet Products segment increased 4.9% in 1996 on
the inclusion of a full year's results of Golden Cat. In addition, higher pet
food volume and pricing were offset by higher ingredient and advertising and
promotion costs. Gross profit margins declined significantly in 1996,
reflecting the higher ingredient costs. In 1995, operating profit increased
10.4% on higher volume, favorable product mix, the inclusion of Golden Cat, and
lower ingredient costs, partially offset by spending for cost reduction
programs. Lower sales prices in 1995 were offset by reductions in advertising
and promotion expenses associated with the new promotional practices.
The domestic pet food and cat box filler industry is well developed and
non-cyclical with strong cash flows. The improvement in pet ownership trends in
recent years is supporting modest volume growth in the industry. The
competitive environment continues to be challenging, particularly as
manufacturers consolidate. Consolidation of the retail industry, growth of the
mass merchandiser and category-dominant retailer segments and an increase in
store-branded product has resulted, and will continue to result, in significant
changes in the product distribution pattern and trade promoting and pricing
practices of the Company. Increased profitability depends on maintaining brand
loyalty, developing higher performance capabilities and on the successful
development of mutually beneficial trading relationships with our customers.
The international pet food market presents opportunities for sales and
profit growth for pet products. Continued growth of the global network of
technology and operational expertise that has been created should enable pet
products to capitalize on these opportunities.
BATTERY PRODUCTS
Sales for the Battery Products segment increased slightly in 1996 on
higher volumes in the Asia Pacific region and higher alkaline volume and prices
and favorable mix in the United States. These gains were nearly offset by
volume declines and unfavorable mix in Europe, by volume declines and
unfavorable foreign exchange rates in South and Central America and by
decreased volume of rechargeable batteries sold to Original Equipment
Manufacturer (OEM) customers. In 1995, sales increased 4.0% on strong alkaline
volume growth in the Asia Pacific and North America regions and favorable
foreign currency exchange rates, primarily in Europe, partially offset by
declines in South and Central America.
Battery products' operating profit increased 4.8% in 1996 on strong
performances in Asia Pacific and in the United States, partially offset by
lower rechargeable sales to the OEM market segment, sales declines in Europe
and higher information systems development costs in the first half of the year.
Margin percentages in Europe and South America improved in 1996 reflecting
benefits from the 1995 plant closings. In 1995, operating profit increased
10.1% primarily as a result of higher Asia Pacific and North American sales and
improved results in Europe.
The battery products business faces intense competition. There continues
to be a shift from carbon zinc batteries to alkaline batteries in most world
areas. In each of the last three years, the Company has recorded provisions
related to restructuring its world-wide carbon zinc battery production capacity
and certain administrative functions. The Company continues to review its
battery production capacity and its business structure, particularly in Europe,
in light of pervasive global trends, including the continuing shift from carbon
zinc to alkaline products and easing of trade restrictions in many regions.
(See Restructuring Activities discussion in this section.)
22
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW (Continued)
SOY PROTEIN PRODUCTS
Sales for the Soy Protein Products segment increased 7.0% in 1996 and
10.6% in 1995 on strong volume in food protein products. Operating profit
increased slightly in 1996 as higher volumes and prices were largely offset by
increased business development costs and higher raw material costs in the
second half of the year. In 1995, operating profit increased 23.5% on higher
volume, increased productivity, lower raw material prices and favorable foreign
currency exchange rates, partially offset by increased selling, general and
administrative costs.
AGRICULTURAL PRODUCTS
Sales in the Agricultural Products segment increased 22.7% in 1996 on
higher volumes, acquisitions and higher prices in most world areas related to
increased raw material prices. In 1995, sales increased 12.0% on higher volume
and prices and favorable foreign currency exchange rates in most world areas.
Operating profit increased 15.8% in 1996 on higher volumes, acquisitions
and prior year one-time management costs. In 1995, operating profit declined
3.4% as higher volumes in most world areas were more than offset by one-time
management costs and lower earnings in South and Central America.
On March 29, 1996, the Company announced its intention to separate its
international agricultural animal feeds business in a tax-free spin-off to
shareholders. Completion of the spin-off is expected during 1997 and is
contingent upon a favorable tax ruling from the Internal Revenue Service and
approval by the Ralston Purina Board of Directors.
DIVESTED BUSINESSES
In 1994 and continuing through the July 22, 1995 sale of CBC, the Bakery
Products segment experienced sales declines primarily on an unfavorable product
mix in bread, lower sweet baked goods volume and lower thrift store volume.
Operating results for 1995, exclusive of restructuring charges, declined on
lower sales combined with higher material and labor costs, which were partially
offset by cost reduction actions.
Sales and operating profit for the first half of 1994 include the results
of the Company's domestic cereal, baby food, crackers and cookies, and
all-season resorts which were spun-off on March 31, 1994.
23
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
Export sales and sales between geographic segments were immaterial. No
single customer accounted for 10% or more of sales. Intersegment sales have
been recorded at amounts approximating market.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1996 1995 1994
- ------------------- ---- ---- ----
<S> <C> <C> <C>
SALES
Pet Products................................................ $2,161.2 $1,929.4 $1,794.2
Battery Products<Fa>........................................ 2,183.5 2,168.4 2,084.0
Soy Protein Products........................................ 420.7 393.1 355.5
Intersegment Sales...................................... (35.3) (35.7) (34.8)
-------- -------- --------
385.4 357.4 320.7
Agricultural Products....................................... 1,384.2 1,128.2 1,007.2
-------- -------- --------
6,114.3 5,583.4 5,206.1
Divested Businesses<Fb><Fc>................................. -- 1,588.2 2,470.5
-------- -------- --------
Total........................................... $6,114.3 $7,171.6 $7,676.6
======== ======== ========
OPERATING PROFIT
Pet Products
Operating profit before amortization.................... $ 389.3<Fd> $ 374.2 $ 333.7
Amortization of goodwill and other intangibles.......... (11.8) (6.2) (.5)
-------- -------- --------
377.5 368.0 333.2
-------- -------- --------
Battery Products
Operating profit before amortization.................... 347.5<Fe> 248.7<Fe> 231.0<Fe>
Amortization of goodwill and other intangibles.......... (41.2) (43.4) (42.5)
-------- -------- --------
306.3 205.3 188.5
-------- -------- --------
Soy Protein Products
Operating profit before amortization.................... 84.5 82.8 67.1
Amortization of goodwill and other intangibles.......... (.2) (.2) (.2)
-------- -------- --------
84.3 82.6 66.9
-------- -------- --------
Agricultural Products
Operating profit before amortization.................... 47.8<Ff> 45.2 46.9
Amortization of goodwill and other intangibles.......... (1.3) (.2) (.3)
-------- -------- --------
46.5 45.0 46.6
-------- -------- --------
814.6 700.9 635.2
Divested Businesses<Fb><Fg>................................. -- 7.1 65.3
-------- -------- --------
Total........................................... 814.6 708.0 700.5
Unallocated Corporate and Miscellaneous Expenses............ (62.0) (44.3) (58.4)
Interest Expense............................................ (190.3) (199.8) (220.4)
Gain on Sale of CBC......................................... -- 50.3 --
-------- -------- --------
Earnings before Income Taxes, Equity Earnings
and Extraordinary Item........................ $ 562.3 $ 514.2 $ 421.7
======== ======== ========
<FN>
- ---------
<Fa> A reclassification between sales and advertising and promotion expense was made in 1995 and 1994 to conform to current
year presentation.
<Fb> Effective July 22, 1995, the Company sold CBC. The Company's sales and earnings reflect the operations of CBC through
that date. On March 31, 1994, the Company effected a spin-off of Ralcorp. The Company's sales and earnings reflect the
operations of Ralcorp through that date. Pro forma results of operations of the Company without CBC and Ralcorp appear
on page 14.
<Fc> Divested Businesses include bakery products with sales of $1,588.2 in 1995 and $1,948.6 in 1994 and other businesses
with sales of $521.9 in 1994.
<Fd> Includes restructuring provisions of $8.4.
<Fe> Includes restructuring provisions of $4.0 in 1996, $90.8 in 1995 and $80.5 in 1994.
<Ff> Includes restructuring provisions of $5.6.
<Fg> Operating profit (losses) for bakery products were $7.1 in 1995 and $(2.6) in 1994 which includes restructuring
provisions of $16.0. Operating profit for other businesses were $67.9 in 1994.
</TABLE>
24
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1996 1995 1994
- ------------------- ---- ---- ----
<S> <C> <C> <C>
ASSETS AT YEAR END
Pet Products................................................ $ 992.0 $ 955.7 $ 515.4
Battery Products............................................ 2,107.8 2,098.9 2,114.3
Soy Protein Products........................................ 388.7 340.8 324.1
Agricultural Products....................................... 460.2 375.8 318.9
Divested Businesses<Fa>..................................... -- -- 797.5
-------- -------- --------
Subtotal........................................ 3,948.7 3,771.2 4,070.2
Corporate................................................... 836.4 796.0 552.1
-------- -------- --------
Total........................................... $4,785.1 $4,567.2 $4,622.3
======== ======== ========
DEPRECIATION AND AMORTIZATION EXPENSE
Pet Products................................................ $ 56.8 $ 48.5 $ 40.4
Battery Products............................................ 126.2 128.0 126.3
Soy Protein Products........................................ 22.4 22.2 21.7
Agricultural Products....................................... 19.3 17.8 16.0
Divested Businesses<Fb>..................................... -- 65.9 97.5
-------- -------- --------
Subtotal........................................ 224.7 282.4 301.9
Corporate................................................... 12.4 7.1 7.5
-------- -------- --------
Total........................................... $ 237.1 $ 289.5 $ 309.4
======== ======== ========
PROPERTY ADDITIONS
Pet Products................................................ $ 74.4 $ 68.2 $ 58.4
Battery Products............................................ 150.2 100.7 114.6
Soy Protein Products........................................ 55.7 21.1 20.6
Agricultural Products....................................... 28.4 26.7 21.5
Divested Businesses<Fc>..................................... -- 49.8 109.4
-------- -------- --------
Subtotal........................................ 308.7 266.5 324.5
Corporate................................................... 5.4 18.1 7.6
-------- -------- --------
Total........................................... $ 314.1 $ 284.6 $ 332.1
======== ======== ========
<FN>
- ---------
<Fa> Represents the bakery products business.
<Fb> Depreciation and amortization expense was $65.9 in 1995 and $76.5 in 1994 for bakery products and $21.0 in 1994 for
other divested businesses.
<Fc> Property additions were $49.8 in 1995 and $89.6 in 1994 for bakery products and $19.8 in 1994 for other divested
businesses.
</TABLE>
25
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION (Continued)
GEOGRAPHIC SEGMENT INFORMATION
Financial information by geographic location for the past three years is
set forth below.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1996 1995 1994
- ------------------- ---- ---- ----
<S> <C> <C> <C>
Sales<Fa>
United States.......................................................... $2,994.2 $4,354.6<Fb> $5,112.8<Fb>
Europe................................................................. 1,147.1 1,018.7 920.9
South & Central America................................................ 821.8 770.5 721.9
Asia Pacific........................................................... 904.0 806.7 683.0
Other.................................................................. 247.2 221.1 238.0
-------- -------- --------
Total.............................................................. $6,114.3 $7,171.6 $7,676.6
======== ======== ========
Operating Profit<Fc>
United States.......................................................... $ 620.0 $ 604.4<Fb> $ 599.6<Fb>
Europe................................................................. 21.3 8.3 .8
South & Central America................................................ 43.7 15.7 26.2
Asia Pacific........................................................... 116.9 72.0 68.5
Other.................................................................. 12.7 7.6 5.4
-------- -------- --------
Total.............................................................. $ 814.6 $ 708.0 $ 700.5
======== ======== ========
Assets
United States.......................................................... $2,154.1 $2,077.7<Fb> $2,465.0<Fb>
Europe................................................................. 882.5 856.6 834.2
South & Central America................................................ 307.6 272.1 252.4
Asia Pacific........................................................... 507.6 468.2 414.1
Other.................................................................. 96.9 96.6 104.5
-------- -------- --------
Total.............................................................. $3,948.7 $3,771.2 $4,070.2
======== ======== ========
<FN>
- ---------
<Fa> See Note (a) on page 24.
<Fb> See Note (b) on page 24.
<Fc> Includes restructuring provisions of:
<CAPTION>
Area 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C>
United States.............................................................. $ 1.5 $10.7 $18.9
Europe..................................................................... 17.1 34.4 32.8
South & Central America.................................................... 1.1 28.8 21.7
Asia Pacific............................................................... -- 16.9 14.7
Other...................................................................... (1.7) -- 8.4
</TABLE>
26
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The preparation and integrity of the financial statements of Ralston Purina
Company are the responsibility of its management. These statements have been
prepared in conformance with generally accepted accounting principles, and in
the opinion of management, fairly present the Company's financial position,
results of operations and cash flows.
The Company maintains accounting and internal control systems which it
believes are adequate to provide reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition and that the
financial records are reliable for preparing financial statements. The
selection and training of qualified personnel, the establishment and
communication of accounting and administrative policies and procedures, and an
extensive program of internal audits are important elements of these control
systems.
The report of Price Waterhouse LLP, independent accountants, on their
audits of the accompanying financial statements is shown below. This report
states that the audits were made in accordance with generally accepted auditing
standards. These standards include a study and evaluation of internal control
for the purpose of establishing a basis for reliance thereon relative to the
scope of their audits of the financial statements.
The Board of Directors, through its Audit Committee consisting solely of
nonmanagement directors, meets periodically with management, internal audit and
the independent accountants to discuss audit and financial reporting matters.
To assure independence, Price Waterhouse LLP has direct access to the Audit
Committee.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Ralston Purina Company
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of earnings, of shareholders equity and of cash
flows present fairly, in all material respects, the financial position of
Ralston Purina Company and its subsidiaries at September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
St. Louis, Missouri
November 1, 1996
27
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Year ended September 30
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) 1996 1995 1994
- ------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net Sales................................................................................ $6,114.3 $7,171.6 $7,676.6
-------- -------- --------
Costs and Expenses
Cost of products sold................................................................ 3,668.1 4,088.0 4,282.5
Selling, general and administrative.................................................. 1,068.1 1,734.1 1,861.3
Advertising and promotion............................................................ 592.8 598.4 771.2
Interest............................................................................. 190.3 199.8 220.4
Provisions for restructuring......................................................... 18.0 90.8 99.9
Gain on sale of CBC.................................................................. -- (50.3) --
Other (income)/expense, net.......................................................... 14.7 (3.4) 19.6
-------- -------- --------
5,552.0 6,657.4 7,254.9
-------- -------- --------
Earnings before Income Taxes, Equity Earnings and Extraordinary Item..................... 562.3 514.2 421.7
Income Taxes............................................................................. (212.2) (215.0) (203.3)
-------- -------- --------
Earnings before Equity Earnings and Extraordinary Item................................... 350.1 299.2 218.4
Equity Earnings, Net of Taxes............................................................ 11.6 .9 --
-------- -------- --------
Earnings before Extraordinary Item....................................................... 361.7 300.1 218.4
Extraordinary Item--Loss on Early Retirement of Debt..................................... (2.1) (3.7) (9.5)
-------- -------- --------
Net Earnings............................................................................. 359.6 296.4 208.9
Preferred Stock Dividend, Net of Taxes................................................... (14.1) (18.8) (20.2)
-------- -------- --------
Earnings Available to Common Shareholders................................................ $ 345.5 $ 277.6 $ 188.7
======== ======== ========
Earnings per share of RAL Stock (Pro forma in 1995 and 1994 assuming one class of common
stock, unaudited):
Primary
Earnings before Extraordinary Item............................................... $ 3.41 $ 2.76 $ 1.93
Extraordinary Item............................................................... (.02) (.04) (.09)
-------- -------- --------
Net Earnings..................................................................... $ 3.39 $ 2.72 $ 1.84
======== ======== ========
Fully Diluted
Earnings before Extraordinary Item............................................... $ 3.23 $ 2.66 $ 1.88
Extraordinary Item............................................................... (.02) (.03) (.08)
-------- -------- --------
Net Earnings..................................................................... $ 3.21 $ 2.63 $ 1.80
======== ======== ========
Earnings per share of RAL Stock (Based on RPG Group earnings through May 15, 1995 and
consolidated Ralston Purina Company earnings thereafter):
Primary
Earnings before Extraordinary Item............................................... $ 2.89 $ 2.12
Extraordinary Item............................................................... (.04) (.08)
-------- --------
Net Earnings..................................................................... $ 2.85 $ 2.04
======== ========
Fully Diluted
Earnings before Extraordinary Item............................................... $ 2.77 $ 2.05
Extraordinary Item............................................................... (.03) (.07)
-------- --------
Net Earnings..................................................................... $ 2.74 $ 1.98
======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Loss per share of CBG Stock (Through May 15, 1995):
Primary and Fully Diluted
Loss before Extraordinary Item................................................... $ (.45) $ (.74)
Extraordinary Item............................................................... -- (.04)
------ ------
Net Loss......................................................................... $ (.45) $ (.78)
====== ======
The above financial statement should be read in conjunction with the Notes
to Financial Statements.
</TABLE>
28
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) 1996 1995
- ------------------------------------------- ---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................................................ $ 62.3 $ 44.3
Receivables, less allowance for doubtful accounts.................................... 845.6 801.4
Inventories.......................................................................... 816.2 766.2
Other current assets................................................................. 149.3 151.1
-------- --------
Total Current Assets............................................................. 1,873.4 1,763.0
Investments and Other Assets............................................................. 1,455.8 1,453.3
Property at Cost
Land................................................................................. 48.4 50.4
Buildings............................................................................ 504.6 495.6
Machinery and equipment.............................................................. 2,069.3 1,946.1
Construction in progress............................................................. 175.0 113.9
-------- --------
2,797.3 2,606.0
Accumulated depreciation......................................................... 1,341.4 1,255.1
-------- --------
1,455.9 1,350.9
-------- --------
Total........................................................................ $4,785.1 $4,567.2
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt................................................. $ 98.0 $ 303.2
Notes payable........................................................................ 881.9 503.2
Accounts payable and accrued liabilities............................................. 843.9 875.5
Dividends payable.................................................................... 36.0 36.4
Income taxes......................................................................... 35.7 22.9
-------- --------
Total Current Liabilities........................................................ 1,895.5 1,741.2
Long-Term Debt........................................................................... 1,437.0 1,602.1
Deferred Income Taxes.................................................................... 50.0 53.6
Other Liabilities........................................................................ 500.7 479.3
Redeemable Preferred Stock--Series A 6.75%, $1 par value, issued 2,919,209 and 3,146,209
shares in 1996 and 1995, respectively.................................................. 323.5 348.7
Unearned ESOP Compensation............................................................... (110.6) (151.9)
Shareholders Equity
Preferred stock, $1 par value, none outstanding
Common Stock--$.10 par value, issued 114,688,225 and 114,687,476 shares in 1996 and
1995, respectively.................................................................. 11.5 11.5
Capital in excess of par value....................................................... 217.3 169.6
Retained earnings.................................................................... 1,302.9 1,089.7
Cumulative translation adjustment.................................................... (66.6) (50.3)
Common stock in treasury, at cost, 8,739,872 and 8,831,457 shares in 1996 and 1995,
respectively........................................................................ (482.3) (481.7)
Unearned portion of restricted stock................................................. (4.2) (5.3)
Value of 4,228,314 and 4,135,314 shares of Common Stock held in Grantor Trust in 1996
and 1995, respectively.............................................................. (289.6) (239.3)
-------- --------
Total Shareholders Equity........................................................ 689.0 494.2
-------- --------
Total........................................................................ $4,785.1 $4,567.2
======== ========
The above financial statement should be read in conjunction with the Notes
to Financial Statements.
</TABLE>
29
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended September 30
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS) 1996 1995 1994
- --------------------- ---- ---- ----
<S> <C> <C> <C>
Cash Flow from Operations
Net earnings................................................................... $ 359.6 $ 296.4 $ 208.9
Adjustments to reconcile net earnings to net cash flow provided by operations
Extraordinary item......................................................... 2.1 3.7 9.5
Non-cash restructuring reserves............................................ 5.4 33.0 46.4
Depreciation and amortization.............................................. 237.1 289.5 309.4
Deferred income tax provision.............................................. (2.8) (8.6) (34.3)
Gain on sale of CBC........................................................ -- (50.3) --
Changes in assets and liabilities used in operations
(Increase) in accounts receivable...................................... (48.6) (75.4) (137.4)
(Increase) decrease in inventories..................................... (56.8) (73.2) 1.0
(Increase) decrease in other current assets............................ (1.3) 11.5 (27.8)
Increase (decrease) in accounts payable and accrued liabilities........ (48.2) 7.4 73.3
Increase in other current liabilities.................................. 29.0 12.7 2.8
Other, net................................................................. (11.1) 27.0 19.2
------- ------- -------
Net cash flow from operations........................................ 464.4 473.7 471.0
------- ------- -------
Cash Flow from Investing Activities
Property additions............................................................. (314.1) (284.6) (332.1)
Proceeds from the sale of property............................................. 22.5 17.7 40.1
Proceeds from the sale of CBC.................................................. -- 220.0 --
Acquisitions of businesses..................................................... (25.1) (358.0) (39.2)
Other, net..................................................................... 9.2 (23.1) (6.6)
------- ------- -------
Net cash used by investing activities................................ (307.5) (428.0) (337.8)
------- ------- -------
Cash Flow from Financing Activities
Proceeds from issuance of debt for spin-off.................................... -- -- 370.0
Proceeds from sale of long-term debt........................................... 199.7 272.8 37.7
Principal payments on long-term debt, including current maturities............. (355.3) (318.1) (233.8)
Net increase in notes payable.................................................. 203.2 222.6 40.9
Treasury stock purchases....................................................... (9.4) (15.3) (103.2)
Dividends paid................................................................. (145.0) (153.8) (155.8)
Stock repurchases in connection with the ESOP.................................. (24.3) (126.0) --
Other, net..................................................................... (3.8) (8.8) (.6)
------- ------- -------
Net cash used by financing activities................................ (134.9) (126.6) (44.8)
------- ------- -------
Effect of Exchange Rate Changes on Cash............................................ (4.0) (.8) (20.3)
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents............................... 18.0 (81.7) 68.1
Cash and Cash Equivalents, Beginning of Year....................................... 44.3 126.0 57.9
------- ------- -------
Cash and Cash Equivalents, End of Year............................................. $ 62.3 $ 44.3 $ 126.0
======= ======= =======
The above financial statement should be read in conjunction with the Notes
to Financial Statements.
</TABLE>
30
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
Three years ended September 30, 1996
<TABLE>
<CAPTION>
NUMBER OF SHARES AMOUNT
(IN THOUSANDS) (DOLLARS IN MILLIONS)
-------------------------- --------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Common Stocks:
RAL Stock:
Balance at beginning of year........................ 114,687 114,685 114,679 $ 11.5 $ 11.5 $ 11.5
Common stock issued on conversion of
debentures.................................... 1 2 6
------- ------- ------- ------- ------- -------
Balance at end of year.............................. 114,688 114,687 114,685 $ 11.5 $ 11.5 $ 11.5
======= ======= ======= ======= ======= =======
CBG Stock:
Balance at beginning of year........................ 20,857 20,694 $ 2.1 $ 2.1
Shares issued in connection with preferred
stock redemption.............................. 162
Common stock issued on conversion of
debentures.................................... 1 1
Exchange of CBG Stock for RAL Stock............ (20,858) (2.1)
------- ------- ------- -------
Balance at end of year.............................. -- 20,857 $ -- $ 2.1
======= ======= ======= =======
Common Stocks in Treasury:
RAL Stock:
Balance at beginning of year........................ (8,831) (10,620) (12,917) $(481.7) $(577.4) $(744.3)
Shares issued in connection with CBG Stock
exchange...................................... 1,816 98.7
Activity under stock plans..................... 237 210 100 11.7 12.6 7.5
Treasury stock purchased....................... (146) (300) (2,560) (9.4) (15.3) (100.9)
Shares issued in connection with preferred
stock redemption/conversion................... 391 2,319 789 21.4 125.7 43.9
Share repurchases in connection with the
ESOP.......................................... (391) (2,256) (24.3) (126.0)
Restricted Stock Award transfer in connection
with Ralcorp spin-off......................... (65) (2.9)
Establishment of grantor trust................. 4,033 219.3
------- ------- ------- ------- ------- -------
Balance at end of year.............................. (8,740) (8,831) (10,620) $(482.3) $(481.7) $(577.4)
======= ======= ======= ======= ======= =======
CBG Stock:
Balance at beginning of year........................ (270) (1) $ (2.6) $ --
Activity under stock plans..................... 2 (17) (.2)
Treasury stock purchased....................... (242) (2.3)
Restricted Stock Award transfer in connection
with Ralcorp spin-off......................... (10) (.1)
Cancellation of shares......................... 268 2.6
------- ------- ------- -------
Balance at end of year.............................. -- (270) $ -- $ (2.6)
======= ======= ======= =======
Grantor Trust:
Balance at beginning of year........................ (4,135) (4,033) $(239.3) $(166.9) $ --
Establishment of grantor trust................. (4,033) (169.4)
Shares purchased............................... (93) (102) (6.0) (5.0)
Market value adjustment........................ (44.3) (67.4) 2.5
------- ------- ------- ------- ------- -------
Balance at end of year.............................. (4,228) (4,135) (4,033) $(289.6) $(239.3) $(166.9)
======= ======= ======= ======= ======= =======
</TABLE>
31
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Continued)
Three years ended September 30, 1996
<TABLE>
<CAPTION>
AMOUNT
(DOLLARS IN MILLIONS)
----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Capital in Excess of Par Value:
Balance at beginning of year....................................... $ 169.6 $ 108.7 $ 115.2
Effect of exchange of CBG Stock for RAL Stock................. (5.8)
Effect of preferred stock conversion.......................... (3.2)
Activity under stock plans.................................... 3.4 2.5 .6
Establishment of grantor trust................................ (4.6)
Market value adjustment of grantor trust...................... 44.3 67.4 (2.5)
-------- -------- --------
Balance at end of year............................................. $ 217.3 $ 169.6 $ 108.7
======== ======== ========
Retained Earnings:
Balance at beginning of year....................................... $1,089.7 $1,043.2 $1,159.3
Net earnings.................................................. 359.6 296.4 208.9
Effect of exchange of CBG Stock for RAL Stock................. (93.8)
Effect of preferred stock conversion.......................... (2.5) (10.4)
Activity under stock plans.................................... (7.7) (5.3) (4.4)
Dividends declared on preferred stock, net of taxes........... (14.1) (18.8) (20.2)
Dividends declared on RAL Stock............................... (122.1) (121.6) (121.5)
Impact of Ralcorp spin-off.................................... (133.6)
Establishment of grantor trust................................ (45.3)
-------- -------- --------
Balance at end of year............................................. $1,302.9 $1,089.7 $1,043.2
======== ======== ========
Unearned Portion of Restricted Stock:
Balance at beginning of year....................................... $ (5.3) $ (4.3) $ (3.9)
Activity under stock plans.................................... (1.2) (2.0)
Market value adjustment on restricted stock................... (.5)
Amortization of restricted stock.............................. 1.1 .7 1.6
-------- -------- --------
Balance at end of year............................................. $ (4.2) $ (5.3) $ (4.3)
======== ======== ========
Cumulative Translation Adjustment:
Balance at beginning of year....................................... $ (50.3) $ (58.7) $ (70.1)
Translation adjustments....................................... (16.3) 8.4 11.4
-------- -------- --------
Balance at end of year............................................. $ (66.6) $ (50.3) $ (58.7)
======== ======== ========
The above financial statement should be read in conjunction with the
Notes to Financial Statements.
</TABLE>
32
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions except per share data)
SUMMARY OF ACCOUNTING POLICIES
Ralston Purina Company's (the Company) significant accounting policies,
which conform to generally accepted accounting principles and are applied on a
consistent basis among years, except as indicated, are described below:
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its majority-owned subsidiaries. All
significant intercompany transactions are eliminated. Investments in affiliated
companies, 20% through 50%-owned, are carried at equity.
FOREIGN CURRENCY TRANSLATION -- Foreign currency financial statements of
foreign operations where the local currency is the functional currency are
translated using exchange rates in effect at period end for assets and
liabilities and average exchange rates during the period for results of
operations. Related translation adjustments are reported as a separate
component of shareholders equity. For foreign operations where the U.S. dollar
is the functional currency and for countries which are considered highly
inflationary, translation practices differ in that inventories, properties,
accumulated depreciation and depreciation accounts are translated at historical
rates of exchange and related translation adjustments are included in earnings.
Gains and losses from foreign currency transactions are generally included in
earnings.
FINANCIAL INSTRUMENTS -- The Company uses financial instruments in its
management of foreign currency and interest rate exposures. Financial
instruments are not held or issued for trading purposes.
Interest rate swap and cap agreements are utilized in the management of
interest rate exposure. The differential to be paid or received is normally
accrued as interest rates change and is recognized as a component of interest
expense over the life of the agreements. In addition, in order to hedge foreign
currency exposures on firm commitments, the Company regularly enters into
foreign currency forward and option contracts. Realized and unrealized gains
and losses resulting from financial instruments which are effective as hedges
are deferred in the cost basis of the asset or liability being hedged and are
recognized in the same period as the underlying hedged transaction. Cash flow
from hedging transactions are classified in the same category as the cash flow
from the item being hedged. Other realized and unrealized gains and losses on
financial instruments are recognized currently in earnings.
CASH EQUIVALENTS for purposes of the statement of cash flows are
considered to be all highly liquid investments with a maturity of three months
or less when purchased.
INVENTORIES are valued generally at the lower of cost or market, with cost
being determined using average cost or the first-in, first-out (FIFO) method.
The Company hedges certain of its grain and commodity purchases as considered
necessary to reduce the risk associated with market price fluctuations. Gains
and losses on hedges of future grain and commodity purchases are recognized in
the same period as the related inventory is sold.
PROPERTY AT COST -- Expenditures for new facilities and those which
substantially increase the useful lives of the property, including interest
during construction, are capitalized. Maintenance, repairs and minor renewals
are expensed as incurred. When properties are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the accounts and
gains or losses on the dispositions are reflected in earnings.
DEPRECIATION is generally provided on the straight-line basis by charges
to costs or expenses at rates based on the estimated useful lives of the
properties. Estimated useful lives range from 3 to 25 years for machinery and
equipment and 10 to 50 years for buildings.
GOODWILL AND OTHER INTANGIBLE ASSETS, which are included in Investments
and Other Assets, represent the excess of cost over the net tangible assets of
acquired businesses and are amortized over estimated periods of related benefit
ranging from 7 to 40 years.
Subsequent to acquisition, the Company continually evaluates whether later
events and circumstances have occurred that indicate the remaining estimated
useful life of an intangible asset may warrant revision or that the remaining
balance of an intangible asset may not be recoverable. The measurement of
possible impairment is based on the ability to recover the balance of
intangible assets from expected future operating cash flows on an undiscounted
basis. In the opinion of management, no such impairment existed as of September
30, 1996 and 1995.
ADVERTISING COSTS -- The Company expenses advertising costs as incurred.
RESEARCH AND DEVELOPMENT costs are expensed as incurred and were $84.2,
$80.9 and $74.9 in 1996, 1995 and 1994, respectively.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
33
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
INCOME TAXES -- Deferred income taxes are recognized for the effect of
temporary differences between financial and tax reporting. No additional U.S.
taxes have been provided on earnings of foreign subsidiaries expected to be
reinvested indefinitely. Additional income taxes are provided, however, on
planned repatriations of foreign earnings after taking into account tax-exempt
earnings and applicable foreign tax credits.
EARNINGS PER SHARE -- Primary earnings per share are based on the average
number of shares outstanding during the period for which earnings per share are
reported. The average number of shares of RAL Stock outstanding for the year
ended September 30, 1996 was 101,776,000.
As discussed in the CBG Stock Exchange note to the financial statements,
on May 15, 1995, the Company exchanged all outstanding shares of Ralston-
Continental Baking Group Common Stock (CBG Stock) for shares of Ralston-Ralston
Purina Group Common Stock (RAL Stock), which remains the Company's sole
outstanding class of common stock. The average number of shares of RAL Stock
outstanding for the year ended September 30, 1995 was 100,700,000. For the
period October 1, 1994 through May 15, 1995, the average number of shares of
CBG Stock outstanding was 20,589,000. The average number of shares of RAL Stock
and CBG Stock outstanding for the year ended September 30, 1994 was 100,547,000
and 20,542,000, respectively.
The 1995 and 1994 pro forma earnings per share are based on the assumption
that the CBG Stock exchange had occurred as of the beginning of the periods
presented. The average number of shares of RAL Stock assumed outstanding was
101,850,000 in 1995 and 102,363,000 in 1994. The pro forma earnings per share
are not necessarily indicative of the results that would have occurred had the
RAL Stock been the sole class of common stock outstanding during the periods
presented.
Fully diluted earnings per share assumes the conversion of the Series A
6.75% Preferred Stock (Redeemable Preferred Stock) and other dilutive
securities into common stock. For purposes of calculating fully diluted
earnings per share, net earnings have been adjusted for the additional
contribution to the ESOP portion of the Company's Savings Investment Plan and
its related trust (ESOP) that would have been required had the Redeemable
Preferred Stock been converted as of the beginning of the period.
ACCOUNTING FOR STOCK-BASED COMPENSATION -- In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123 ``Accounting for Stock-Based Compensation'' (SFAS No. 123). SFAS 123
establishes a fair value based method of accounting for the issuance of stock
or similar equity instruments to employees. The Company currently accounts for
stock compensation using Accounting Principles Board Opinion No. 25
``Accounting for Stock Issued to Employees'' (APB 25). SFAS 123 allows
companies to elect fair value based accounting for stock compensation or
continue using the intrinsic value method of accounting for stock compensation
as required by APB 25. For companies electing to continue the use of APB 25,
SFAS 123 requires pro forma disclosures of net earnings and earnings per share
as if the provisions of SFAS 123 had been adopted. The Company will continue to
apply APB 25 in its consolidated financial statements and will provide required
disclosures effective in fiscal 1997. As a result, SFAS 123 will have no effect
on the financial condition or results of operations of the Company.
RECLASSIFICATIONS -- Certain reclassifications have been made to the 1995
and 1994 financial statements to conform with the 1996 presentation.
BUSINESS SEGMENT INFORMATION
The Business Segment Information and Geographic Segment Information
sections, appearing on pages 21 through 26 herein, are an integral part of
these financial statements.
ACQUISITIONS
On April 7, 1995, 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 for $340. Also in the third quarter of 1995, the
Company acquired the assets of a Mexican pet food company for $18.
These acquisitions were accounted for using the purchase method of
accounting, and accordingly, the results of operations are included in the
consolidated statement of earnings from the date of acquisition. Assuming these
acquisitions had occurred as of the beginning of their respective fiscal years,
they would not have had a material effect on net sales or net earnings.
CBG STOCK EXCHANGE
On May 15, 1995, the Company exchanged each outstanding share of CBG Stock
for .0886 shares of RAL Stock as permitted by the Company's Restated Articles
of Incorporation (Articles). The exchange represented a 15% premium to the
relative trading values of the CBG Stock and RAL Stock for the period March 31
through April 6, 1995, as provided in the Articles.
34
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
DIVESTITURES
Effective July 22, 1995, the Company sold its Continental Baking Company
(CBC) subsidiary to Interstate Bakeries Corporation (IBC) and its wholly owned
subsidiary, Interstate Brands Corporation, for $220.0 in cash and 16,923,077
shares of common stock of IBC (the IBC Stock). The Company recorded a pre-tax
and after-tax gain on the sale of CBC of $50.3 and $42.0, respectively, or $.41
per pro forma primary share. Due to the Company's continuing ownership interest
in IBC, an additional $18.5 after-tax gain was deferred.
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. One share of stock of the new company, Ralcorp Holdings,
Inc. (Ralcorp), was distributed for each three shares of RAL Stock held by
shareholders.
The Company's earnings and cash flows reflect the operations of CBC
through July 22, 1995 and reflect the operations of spun-off businesses through
March 31, 1994.
INVESTMENT IN INTERSTATE BAKERIES CORPORATION
The Company's equity investments in affiliated companies includes a 45.2%
interest in IBC at September 30, 1996. The Company accounts for its investment
in IBC by the equity method of accounting. The carrying value of this
investment was $286.9 and $281.2 at September 30, 1996 and 1995, respectively.
The market value of the Company's investment in IBC was $617.7 and $357.5 at
September 30, 1996 and 1995, respectively. As of the July 1995 sale of CBC, the
market value of the IBC shares received exceeded the underlying net assets of
IBC by $95.2. This excess is included in the carrying value of the Company's
investment in IBC, and is amortized over 30 years. Cash dividends received from
IBC were $8.5 in 1996.
Terms of a shareholder agreement provide that, with certain limited
exceptions, the Company will not acquire any additional shares of IBC Stock for
a period of six years from the July 1995 closing of the sale of CBC. The
agreement also provides that within five years of closing, the Company's
ownership of IBC Stock will be reduced to no more than 14.9% of the total
outstanding shares. The Company has registration rights with respect to the IBC
Stock, but the shareholder agreement provides that, with certain limited
exceptions, the Company may not sell any of the IBC Stock without first
offering the securities to IBC. IBC also has the right, during the fifth year
following closing, to acquire any of the IBC Stock then held by the Company at
a price equal to 110% of its then current market price. The shareholder
agreement provides that the Company will vote the shares of IBC Stock in
accordance with the recommendation of IBC's Board with respect to shareholder
proposals and nominations to that Board, and with respect to other proposals,
in proportion to the votes of all other shareholders; provided, however, that
the Company may vote as it deems appropriate with respect to proposals for the
merger of IBC, the sale of all IBC assets, or the issuance of any other class
of voting stock of IBC. The Company has two representatives on the IBC Board of
Directors.
35
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
Presented below is summary financial information of IBC:
<TABLE>
<CAPTION>
AUGUST 24, AUGUST 26,
1996 1995
---------- ----------
<S> <C> <C>
Current assets............................................................. $ 331.3 $ 321.6
Noncurrent assets.......................................................... 1,160.7 1,167.9
-------- --------
Total assets........................................................... $1,492.0 $1,489.5
======== ========
Current liabilities........................................................ $ 371.2 $ 300.3
Noncurrent liabilities..................................................... 644.8 744.7
Stockholders equity........................................................ 476.0 444.5
-------- --------
Total liabilities and stockholders equity.............................. $1,492.0 $1,489.5
======== ========
<CAPTION>
52 WEEKS 12 WEEKS
ENDED ENDED
AUGUST 24, AUGUST 26,
1996 1995
---------- ----------
<S> <C> <C>
Net sales.................................................................. $3,160.4 $ 471.4
Cost of products sold...................................................... 1,586.0 241.3
-------- --------
Gross profit............................................................... $1,574.4 $ 230.1
======== ========
Net income................................................................. $ 37.4 $ 5.7
Company equity income, net of taxes (1995 amount represents July 23 through
August 26, 1995)......................................................... $ 11.6 $ .9
</TABLE>
RESTRUCTURING ACTIVITIES
In 1996, the Company recorded provisions for restructuring which reduced
earnings before income taxes, net earnings and net earnings per primary share
by $18.0, $15.5 and $.15, respectively. These charges are associated with the
closing of the Company's European cereal operations, the streamlining of
operations of the international agricultural animal feeds business in advance
of the planned spin-off and additional battery products' restructuring. Charges
were $8.4, pre-tax and after-tax, for the cereal operations, $5.6 and $4.5,
pre-tax and after-tax, respectively, for agricultural products and $4.0 and
$2.6, pre-tax and after-tax, respectively, for battery products. The 1996
provision for restructuring consisted of termination benefits of $10.8,
relating to the termination of approximately 315 employees, other cash exit
costs of $1.8 and non-cash charges of $5.4, primarily related to impairment
losses on land, buildings and machinery and equipment.
During 1996, approximately 180 employees associated with the Company's
foreign operations were terminated and termination benefits of $5.3 were paid
in connection with the 1996 provision. The remaining reserve balance of $7.3,
which excludes the portion of the provision classified as property and other
asset write-downs, is expected to be utilized during 1997.
During 1995 and 1994, the Company recorded provisions for restructuring of
its world-wide carbon zinc battery production capacity and certain
administrative functions. The provisions provided for the closing of a total of
ten plants and the severance of approximately 2,600 employees. The 1995
provisions reduced earnings before income taxes, net earnings and net earnings
per pro forma primary share by $90.8, $70.0 and $.68, respectively. The 1995
provision for restructuring consisted of termination benefits of $46.2, other
cash exit costs of $11.6 and non-cash charges of $33.0, primarily related to
anticipated losses on disposal of land, buildings and machinery and equipment.
The 1994 provisions were $83.9 before income taxes and $72.8 after taxes.
The provision included cash costs for termination benefits of $26.2, payment of
guaranteed debt of $4.3 and other exit costs of $7.0. Non-cash charges of $46.4
primarily related to anticipated losses on disposal of land, buildings and
machinery and equipment.
36
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
As of September 30, 1996, 8 plants have been closed and approximately
2,250 employees have been severed in connection with the 1994 and 1995
restructuring provisions. Activity related to these provisions is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Reserve balance at beginning of year....................................... $ 43.9 $ 36.5
Provision recorded......................................................... -- 90.8
Termination benefits paid.................................................. (20.7) (32.6)
Other cash exit costs incurred............................................. (7.3) (21.2)
Portion of current period provision classified as property and other asset
writedowns............................................................... -- (33.0)
Increase due to translation................................................ .8 3.4
------ ------
Reserve balance at September 30............................................ $ 16.7 $ 43.9
====== ======
</TABLE>
Restructuring actions are expected to be completed in 1997 for the
remaining 2 plants.
In 1994, bakery products' restructuring provisions were recorded which
reduced 1994 earnings before income taxes and net earnings by $16.0 and $9.6,
respectively. The charge covered severance and related payroll costs for 435
headquarters and field employees.
INCOME TAXES
The provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Currently payable
United States.......................................................... $154.1 $161.0 $167.8
State.................................................................. 12.3 16.5 18.3
Foreign................................................................ 48.6 46.1 51.5
------ ------ ------
Total current...................................................... 215.0 223.6 237.6
------ ------ ------
Deferred
United States.......................................................... (7.2) (9.0) (17.6)
State.................................................................. -- (1.7) (2.3)
Foreign................................................................ 4.4 2.1 (14.4)
------ ------ ------
Total deferred..................................................... (2.8) (8.6) (34.3)
------ ------ ------
Income taxes before equity earnings and extraordinary item................. $212.2 $215.0 $203.3
====== ====== ======
</TABLE>
The source of pre-tax earnings follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
United States.............................................................. $442.3 $465.4 $398.0
Foreign.................................................................... 120.0 48.8 23.7
------ ------ ------
Pre-tax earnings before equity earnings and extraordinary item............. $562.3 $514.2 $421.7
====== ====== ======
</TABLE>
A reconciliation of income taxes with the amounts computed at the
statutory federal rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Computed tax at federal statutory rate....................... $196.8 35.0% $180.0 35.0% $147.6 35.0%
State income taxes, net of federal tax benefit............... 8.0 1.4 9.6 1.9 10.4 2.5
Foreign tax in excess of domestic rate....................... 5.3 .9 26.1 5.1 28.8 6.8
Taxes on repatriation of foreign earnings.................... 21.0 3.7 16.0 3.1 20.5 4.9
Taxes on gain on sale of CBC less than domestic rate......... -- -- (10.3) (2.0) -- --
Other, net................................................... (18.9) (3.3) (6.4) (1.3) (4.0) (1.0)
------ ---- ------ ---- ------ ----
$212.2 37.7% $215.0 41.8% $203.3 48.2%
====== ==== ====== ==== ====== ====
</TABLE>
37
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
The tax benefit related to the extraordinary loss on early retirement of
debt was $1.3 in 1996, $2.3 in 1995 and $6.1 in 1994.
The deferred tax assets and deferred tax liabilities recorded on the
balance sheet as of September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and property differences.................................. $(165.2) $(165.6)
Pension plans.......................................................... (74.3) (65.0)
Other.................................................................. (57.7) (47.3)
------- -------
Gross deferred tax liabilities..................................... (297.2) (277.9)
------- -------
Deferred Tax Assets:
Postretirement benefits other than pensions............................ 177.1 164.2
Accrued liabilities.................................................... 72.4 74.9
Tax loss carryforwards and tax credits................................. 61.2 62.8
Self-insurance reserves................................................ 6.0 5.7
Intangible assets...................................................... 34.7 31.3
Other.................................................................. 16.0 16.5
------- -------
Gross deferred tax assets.......................................... 367.4 355.4
------- -------
Valuation allowance.................................................... (63.8) (72.3)
------- -------
Net deferred tax assets................................................ $ 6.4 $ 5.2
======= =======
</TABLE>
Total net deferred tax assets shown above include current and noncurrent
elements.
Tax loss carryforwards and tax credits totaling $7.6 expired in 1996.
Future expiration of tax loss carryforwards and credits, if not utilized, are
as follows: 1997, $4.4; 1998, $4.2; 1999, $4.8; 2000, $10.3; 2001, $5.8;
thereafter or no expiration, $31.7. The valuation allowance is primarily
attributed to certain accrued liabilities, tax loss carryforwards and tax
credits outside the U.S. The valuation allowance decreased in 1996 by $8.5.
At September 30, 1996, $202.0 of foreign subsidiary net earnings were
considered permanently invested in those businesses. Accordingly, U.S. income
taxes have not been provided for such earnings. It is not practicable to
determine the amount of unrecognized deferred tax liabilities associated with
such earnings.
INCENTIVE COMPENSATION
The Company's 1996 Incentive Stock Plan (1996 Plan), adopted in February,
1996, replaces the 1988 Incentive Stock Plan (the 1988 Plan). No additional
awards may be granted under the 1988 Plan, or the 1982 Incentive Stock Plan,
both of which will continue in existence until granted awards are exercised or
terminated.
The 1996 Plan provides that eligible employees may receive stock option
awards and other stock awards payable in whole or in part by the issuance of
RAL Stock. Stock option awards are issued at an option price at least equal to
the fair market value of RAL Stock at the date of grant. Performance-based
options granted under the various plans result in charges to earnings. These
charges may reverse in future periods if performance triggers are not met.
Charges to earnings for performance based options were $2.1 in 1996.
Changes in nonqualified RAL Stock options outstanding are summarized as
follows:
<TABLE>
<CAPTION>
SHARES
UNDER
OPTION
---------
<S> <C>
Outstanding beginning of year ($31.71 to $132.63 per share)..................................... 5,250,233
Granted ($67.25 per share)...................................................................... 1,928,000
Exercised ($31.71 to $48.00 per share).......................................................... (380,327)
Cancelled....................................................................................... (79,424)
---------
Outstanding September 30, 1996 ($31.71 to $132.63 per share).................................... 6,718,482
=========
Exercisable at September 30, 1996............................................................... 965,662
=========
</TABLE>
38
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
At September 30, 1996 and 1995, there were 3,072,000 and 4,077,679 shares
of RAL Stock available for future awards.
In addition, at September 30, 1996 and 1995, there were 141,944 and
155,728 restricted shares of RAL Stock outstanding. Restrictions on shares of
restricted stock issued to eligible employees lapse over various periods,
provided continued employment and, in certain cases, minimum stock price
requirements are met. Compensation cost is recognized over this vesting period.
Charges to earnings were $1.1 in 1996, $.7 in 1995 and $1.6 in 1994.
PENSION PLANS
The Company has several noncontributory defined benefit pension plans
covering substantially all regular employees in the United States not
participating in a multiemployer pension plan and certain employees in other
countries. The plans provide retirement benefits based on years of service and
earnings. It is the Company's practice to fund pension liabilities in the
United States in accordance with the minimum and maximum limits imposed by the
Employee Retirement Income Security Act of 1974 (ERISA) and federal income tax
laws. In prior years, the Company also contributed to jointly administered
multiemployer defined benefit pension plans covering certain CBC union
employees.
Certain foreign pension arrangements, which include various retirement and
termination benefit plans, some of which are required by local law or
coordinated with government-sponsored plans, are not material in the aggregate
and are not included in these disclosures.
Pension cost and other retirement savings plan costs included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Defined benefit plans
Service cost for benefits earned during the year....................... $ 22.0 $ 28.5 $ 31.4
Interest cost on projected benefit obligation.......................... 65.5 64.6 64.5
Return on plan assets.................................................. (169.1) (221.0) (33.2)
Net amortization and deferral.......................................... 62.7 123.7 (68.7)
------- ------- -------
Total defined benefit plans................................................ (18.9) (4.2) (6.0)
Multiemployer plans........................................................ -- 46.9 56.1
Defined contribution plans................................................. 22.9 29.0 34.3
------- ------- -------
Total.............................................................. $ 4.0 $ 71.7 $ 84.4
======= ======= =======
</TABLE>
The following table presents the funded status of the Company's principal
defined benefit plans and amounts recognized in the balance sheet at September
30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefits........................................................ $ (752.4) $ (727.0)
Nonvested benefits..................................................... (30.7) (28.4)
-------- --------
Accumulated benefit obligation......................................... (783.1) (755.4)
Effect of future salary increases...................................... (123.6) (107.5)
-------- --------
Projected benefit obligation........................................... (906.7) (862.9)
Plan assets at fair value.................................................. 1,380.0 1,265.2
-------- --------
Plan assets in excess of projected benefit obligation...................... 473.3 402.3
Unrecognized net gain...................................................... (273.8) (222.6)
Unrecognized prior service cost............................................ 6.7 7.8
Unrecognized net asset at transition, net of amortization.................. (13.5) (17.4)
-------- --------
Prepaid pension cost included in Investments and Other Assets.............. $ 192.7 $ 170.1
======== ========
</TABLE>
The sale of CBC in 1995 reduced the projected benefit obligation by $39.0.
This pension curtailment gain was recognized in the gain on sale of CBC.
39
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
The assumptions used in determining the information above, which reflect
weighted averages for the component plans, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Discount rate......................................................... 7.8% 7.8%
Rate of increase of future compensation levels........................ 5.5% 5.4%
Long-term rate of return on assets.................................... 8.9% 8.9%
</TABLE>
Assets of the plans consist primarily of listed common stocks and bonds,
including 1,731,005 shares of RAL Stock with a market value of $118.6 at
September 30, 1996.
Substantially all U.S. regular employees are eligible to participate in
the Company-sponsored leveraged ESOP. The Company makes a matching contribution
of up to 100% of the participant's contribution based on specified limits of
the participant's salary. The cost of the ESOP is recognized as incurred and
was $20.7 for 1996, $26.8 for 1995 and $31.0 for 1994.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides health care and life insurance benefits for
certain groups of retired employees who meet specified age and years of service
requirements. The Company also sponsors plans whereby certain management
employees may defer compensation in exchange for cash benefits after
retirement.
The net periodic costs for postretirement benefits included the following
components for the year ended September 30:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- --------------------
MEDICAL OTHER MEDICAL OTHER MEDICAL OTHER
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Service cost............. $ .6 $ 3.2 $ 1.0 $ 3.5 $ 1.2 $ 5.3
Interest cost............ 8.1 17.4 12.4 16.5 15.0 14.8
Net amortization......... (1.8) -- (.8) -- -- --
----- ----- ----- ----- ----- -----
$ 6.9 $20.6 $12.6 $20.0 $16.2 $20.1
===== ===== ===== ===== ===== =====
</TABLE>
The following table presents the status of the Company's postretirement
benefit plans at September 30:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
MEDICAL OTHER MEDICAL OTHER
------- ----- ------- -----
<S> <C> <C> <C> <C>
Accumulated benefit obligation
Retirees................................................ $ 66.8 $154.1 $ 63.3 $148.3
Fully eligible plan participants........................ 33.5 57.8 30.6 51.2
Other active plan participants.......................... 10.1 28.8 11.1 26.8
------ ------ ------ ------
Accumulated benefit obligation.............................. 110.4 240.7 105.0 226.3
Fair value of plan assets................................... 5.1 -- 5.2 --
------ ------ ------ ------
Accumulated benefit obligation in excess of plan assets..... 105.3 240.7 99.8 226.3
Unrecognized experience gain (loss)......................... 28.2 (12.4) 30.6 (7.6)
Unrecognized prior service gain............................. 9.4 -- 10.0 --
------ ------ ------ ------
Accrued postretirement benefit liability.................... 142.9 228.3 140.4 218.7
Less current portion........................................ (3.7) (12.0) (3.7) (10.0)
------ ------ ------ ------
Non-current portion included in Other Liabilities........... $139.2 $216.3 $136.7 $208.7
====== ====== ====== ======
</TABLE>
In 1995, the accumulated medical benefit obligation decreased
approximately $50.4 due to the assumption by IBC of accumulated benefits
related to CBC employees.
The discount rate used in determining the information above was 7.9% in
1996 and 1995. The assumed health care cost trend rate for participants under
age 65 is 9% for 1997, declining 1% per year to 6% in 2000 and thereafter. For
participants age 65 and over, the trend rate is 6% in 1997 and thereafter.
40
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
If the assumed health care cost trend rate increased by 1 percentage
point, the accumulated benefit obligation as of September 30, 1996 would
increase by approximately $11.3 and expense would increase by $1.4 annually.
Coincident with the adoption of the ESOP in January of 1989, the Company
began phasing out its subsidy of medical benefits for future retirees. In
addition, retiree contributions are adjusted periodically and it is expected
that such adjustments will continue in the future.
NOTES PAYABLE
Notes payable at September 30, 1996 and 1995 consisted of notes payable to
financial institutions and had a weighted average interest rate of 6% and 8% at
September 30, 1996 and 1995, respectively.
At September 30, 1996, total unused lines of credit were $183.2.
LONG-TERM DEBT
The detail of long-term debt as of September 30 follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Debentures
9 1/4% due 2009................................................... $ 181.0 $ 181.0
9 1/2% due 2016................................................... -- 40.5
9 3/8% due 2016................................................... -- 27.0
9.30% due 2021.................................................... 200.0 200.0
8 5/8% due 2022................................................... 250.0 250.0
8 1/8% due 2023................................................... 175.0 175.0
7 7/8% due 2025................................................... 225.0 225.0
7 3/4% due 2015................................................... 175.0 --
Other Debt
ESOP loan guarantee............................................... 110.6 151.9
Medium-term Notes, 7.75% to 10.18%................................ 84.5 84.5
9% Notes due 1996................................................. -- 200.0
Capitalized lease obligations, 5.8% to 11.1%...................... 6.2 5.4
Industrial revenue bonds, 4.7% to 12.75%.............................. 29.1 36.5
Other................................................................. 98.6 155.2
Notes payable reclassified as long-term............................... -- 173.3
-------- --------
1,535.0 1,905.3
Less current portion.............................................. (98.0) (303.2)
-------- --------
$1,437.0 $1,602.1
======== ========
</TABLE>
On October 2, 1995, the Company refinanced $173.3 of short-term notes
payable with the issuance of $175.0 of 7 3/4% debentures due in 2015. Such
notes have been reclassified as long-term debt at September 30, 1995.
Aggregate maturities on all long-term debt, exclusive of debentures held
in treasury, are $63.5, $42.0, $14.8 and $5.2 for the years ending September
30, 1998 through 2001, respectively. These aggregate maturities do not include
the future maturities of the ESOP loan guarantee.
To fund its purchase of the Company's Redeemable Preferred Stock, the
trust for the Company-sponsored ESOP borrowed $500.0 principal amount in ten-
year 8.25% notes (ESOP loan). The ESOP loan is unconditionally guaranteed by
the Company and is included in the Company's consolidated balance sheet as
long-term debt, along with corresponding unearned ESOP compensation. In
connection with the sale of CBC in 1995, approximately $56.7 of the ESOP loan
was assigned to the Company's Employee Stock Ownership Plan for Continental
Baking Company Employees (CBC ESOP) which utilized the proceeds of unallocated
Redeemable Preferred Stock held in that plan to prepay such portion of the ESOP
loan. Both the remaining long-term debt and the unearned ESOP compensation will
be reduced
41
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
as employee and employer contributions to the ESOP are used to reduce the
outstanding ESOP loan. During 1996 and 1995, the ESOP incurred $12.2 and $20.3,
respectively, of interest expense on the ESOP loan.
REDEEMABLE PREFERRED STOCK
At September 30, 1996, the Company had 10,600,000 shares of $1 par value
preferred stock authorized, of which 4,600,000 shares were authorized as Series
A 6.75% Preferred Stock (Redeemable Preferred Stock). Redeemable Preferred
Stock has a guaranteed minimum value of $110.83 per share and is convertible
into the Company's $.10 par value RAL Stock at the ratio of 2.29 shares of RAL
Stock for each share of Redeemable Preferred Stock. The shares have a
preference in liquidation and each share has one voting right. Dividends are
cumulative, compounded and payable semi-annually. In accordance with financial
reporting requirements of the Securities and Exchange Commission, the
Redeemable Preferred Stock has been classified outside of permanent equity.
Approximately 227,000 shares of its Redeemable Preferred Stock in 1996 and
78,955 shares in 1995 were redeemed or converted to meet ongoing share
redemption requirements of the ESOP. In addition, as a result of the 1995 sale
of CBC, 1,012,503 shares of Redeemable Preferred Stock were converted into
shares of RAL Stock. Following the above described redemptions and conversions,
2,919,209 shares of Redeemable Preferred Stock remained issued and outstanding
and continued to be held by the ESOP at September 30, 1996. Of these shares,
approximately 1,921,600 shares have been allocated to participant accounts at
September 30, 1996.
Redeemable Preferred Stock shares are held, on behalf of the ESOP, by the
ESOP's trustee and are allocated to individual participants' accounts based on
the amount of employee and employer matching contributions to the ESOP.
Dividends on unallocated Redeemable Preferred Stock are used to fund the debt
service requirements of the ESOP. The trustee, as holder of Redeemable
Preferred Stock, may convert its shares into RAL Stock at any time, or may
require the Company to redeem the Redeemable Preferred Stock shares, under
certain limited circumstances, at the guaranteed minimum value, in cash or in
shares of RAL Stock. The Company may elect to redeem the Redeemable Preferred
Stock, under limited circumstances, in cash or in shares of RAL Stock.
SHAREHOLDERS EQUITY
From July 30, 1993 through May 15, 1995, the Company had two classes of
common stock, RAL Stock and CBG Stock. The CBG Stock was intended to reflect
the performance of the CBG Group, which consisted of the Company's bakery
products business. The RAL Stock was intended to reflect the performance of the
RPG Group, which consisted of the Company's other businesses.
On May 15, 1995, the Company exchanged each outstanding share of CBG Stock
for .0886 shares of RAL Stock, now the Company's sole outstanding class of
common stock. The exchange represented a 15% premium to the relative trading
values of the CBG Stock and the RAL Stock for the period March 31 through April
6, 1995, as provided in the Company's Articles.
On February 1, 1996, shareholders approved the amendment of the Company's
Restated Articles of Incorporation to reduce the number of authorized shares of
common stock from 730,600,000 to 610,600,000 (reflecting the elimination of the
authorization to issue 120,000,000 shares of CBG Stock), redesignate the
Company's Ralston-Ralston Purina Group Common Stock as Ralston Purina Common
Stock, and eliminate various provisions relating to CBG Stock. The amendments
did not change the voting power or other rights of holders of RAL Stock nor the
rights of the Company with respect to the outstanding RAL Stock.
On March 28, 1996, the Board of Directors declared a dividend distribution
of one share purchase right (``Right'') for each outstanding share of RAL
Stock. The Rights were intended to replace the previously issued share purchase
rights which were initially distributed in January of 1986 and which expired on
March 28, 1996.
Each Right entitles a shareholder of RAL Stock to purchase an additional
share of RAL Stock at an exercise price of $200 per share, subject to
antidilution adjustments. The Rights, however, only become exercisable at the
time a person or group acquires, or commences a public tender for, shares of
RAL Stock representing 20% or more of the RAL Stock then outstanding (except
pursuant to a tender or exchange offer which is for all outstanding shares of
RAL Stock at a price and on terms which a majority of the Board of Directors
determines to be adequate and in the best interests of shareholders). If an
acquiring person or group acquires shares representing 20% or more of the RAL
Stock then outstanding, the exercise price will be further adjusted so that a
holder of a Right (other than the acquiring person or group) may purchase a
share of RAL Stock at one-third of its then market price. In the event that the
Company merges with, or transfers 50% or more of its assets or earnings power
to, any person or group after the Rights become exercisable, holders of Rights
may purchase, at the exercise price, common stock of the acquiring entity
having a value equal to twice the exercise price. The Rights can be redeemed by
the Board of Directors at $.01 per Right, only up to the date a person or group
acquires shares representing 20% or more of the RAL Stock then outstanding.
Also, following the acquisition by a person or group of beneficial ownership of
shares representing 20% but less than 50% of the RAL Stock then outstanding,
the Board may exchange each Right for one share of RAL Stock. The terms of the
Rights may be amended by the Board of Directors at any time prior to the
acquisition by a person or group of beneficial ownership of shares
42
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
representing 20% of the RAL Stock then outstanding, including an amendment to
lower such threshold to not less than the greater of (i) any percentage greater
than the largest percentage then held by any shareholder, or (ii) 10%. The
Rights expire on March 28, 2006. At September 30, 1996, 123,733,468 shares of
RAL Stock have been reserved for issuance upon exercise of the Rights.
At September 30, 1996, there were 6,684,989 shares of RAL Stock reserved
for conversion of Redeemable Preferred Stock, 20,078 shares of RAL Stock
reserved for conversion of the 5 3/4% subordinated debentures and 11,080,048
shares of RAL Stock reserved under various employee incentive compensation and
benefit plans.
GRANTOR TRUST
On September 15, 1994, the Company established the Ralston Purina Company
Grantor Trust (the Trust) to provide a source of funds to assist the Company in
meeting its obligations under various employee benefit plans and programs. The
Trust supports certain employee benefit plans and does not change those plans
or the amounts of stock expected to be issued for those plans. However, payment
of certain benefits would be accelerated if minimum funding requirements of the
Trust are not met.
Among the assets used to initially fund the Trust were 4,033,347 shares of
RAL Stock having a fair market value on the date of transfer of $169.4. The RAL
Stock transferred to the Trust was issued out of treasury.
For financial reporting purposes, the Trust is consolidated with the
Company. The fair market value of the shares held by the Trust is shown as a
reduction to shareholders equity in the Company's consolidated balance sheet.
Any dividend transactions between the Company and the Trust are eliminated, and
the difference between the fair value of the shares on the date of contribution
to the Trust, plus the fair value of shares on the date of purchase by the
Trust, and the fair value of the shares at September 30 is included in
consolidated additional paid-in capital. RAL Stock held in the Trust is not
considered outstanding in the computation of earnings per share. The Trust held
4,228,314 and 4,135,314 shares of RAL Stock at a fair market value of $289.6
and $239.3 at September 30, 1996 and 1995, respectively.
The Trustee is responsible for voting the shares of RAL Stock held in the
Trust.
COMMITMENTS AND CONTINGENCIES
LEGAL AND ENVIRONMENTAL MATTERS -- The Company is a party to a number of
legal proceedings in various state, federal and foreign jurisdictions. These
proceedings are in varying stages and many may proceed for protracted periods
of time. Some proceedings involve highly complex questions of fact and law.
On January 4, 1993, the Company was served with the first of nine
substantively identical actions currently pending in the United States District
Court for the District of New Jersey. The suits have been consolidated in Re
Baby Food Antitrust Litigation. The consolidated proceeding is a certified
class action by and on behalf of all direct purchasers of baby foods (other
than the defendants and governmental entities), alleging that the Beech-Nut
baby food business (owned by the Company from November, 1989 until April, 1994,
and now owned by Ralcorp) and its predecessor Nestle Holdings, Inc., together
with Gerber Products Company and H.J. Heinz Company, conspired to fix, maintain
and stabilize the prices of baby foods during the period January 1, 1975 to
August 31, 1992. The suit seeks treble damages.
On January 19 and 21, 1993, the Company was served with two class actions
on behalf of indirect purchasers (consumers) of baby food in California, which
contain substantially identical charges. These actions have been consolidated
in the Superior Court for the County of San Francisco in Bruce, et al. v.
Gerber Products Company, et al. On January 19, 1993, the Company was served
with a similar action filed in Alabama state court on behalf of indirect
purchasers of baby food in Alabama, Johnson, et al. v. Gerber Products Company,
et al. The California and Alabama state actions allege violations of state
antitrust laws, seek treble damages and are substantively identical to each
other. Similar state actions may be filed in states having laws permitting
suits by indirect purchasers. The Company and Ralcorp have agreed that all
liability and expenses related to the above antitrust matters will be shared
equally, except that the Company will be solely responsible for any settlement
or judgment exceeding a certain set amount.
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received notices
from the U.S. Environmental Protection Agency, state agencies, and/or private
parties seeking contribution, that it has been identified as a ``potentially
responsible party'' (PRP), under the Comprehensive Environmental Response,
Compensation and Liability Act, and may be required to share in the cost of
cleanup with respect to 14 ``Superfund'' sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used.
43
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
In the opinion of management, based on the information presently known,
the ultimate liability for all such matters, together with the liability for
all other pending legal proceedings, asserted legal claims and known potential
legal claims which are probable of assertion, taking into account established
accruals of $13.9 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.
OTHER COMMITMENTS -- At September 30, 1996, the Company had third party
guarantees outstanding in the aggregate amount of approximately $100. These
guarantees relate primarily to workers compensation claims associated with CBC
prior to the sale, and revenue bonds for various facilities.
Future minimum rental commitments under noncancellable operating leases in
effect as of September 30, 1996 were: 1997--$12.1, 1998--$9.6, 1999--$6.5,
2000--$4.7, 2001--$4.0 and thereafter--$22.7.
Total rental expense for all operating leases was $48.5 in 1996, $67.9 in
1995 and $72.4 in 1994, of which $20.1 and $28.7 in 1995 and 1994,
respectively, related to CBC operations.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
FOREIGN CURRENCY CONTRACTS -- The Company enters into foreign exchange
forward contracts and options to mitigate the Company's economic exposure to
changes in exchange rates. The Company views these exposures as arising from
three major areas: (a) non-U.S. dollar cash flows to the U.S. from foreign
subsidiaries expected within a year or less, (b) cash flows to a foreign
country in a currency other than the subsidiary's functional currency, and (c)
future cash flows at the operating margin level. The level of such actions is
dependent on seasonality of the Company's activities and on specific market
conditions involving various currencies.
The tables below summarize by instrument and by major currency the
contractual amounts of the Company's forward exchange contracts and purchased
currency options in U.S. dollar equivalents at year end. Foreign currency
contracts are generally for one year or less.
<TABLE>
<CAPTION>
INSTRUMENT 1996 1995
---- ----
<S> <C> <C>
Forwards................................................ $301.2 $224.2
Options................................................. 11.5 12.8
CURRENCY
Belgian franc<Fa>....................................... $242.7 $156.5
French franc............................................ 17.5 11.4
Indonesian rupiah....................................... 10.5 4.5
Swiss franc............................................. 10.1 16.2
Japanese yen............................................ 6.2 10.0
Other currencies........................................ 25.7 38.4
<FN>
- ---------
<Fa> The Company has a Belgian Coordination Center which functions as an intragroup bank. The exposures and hedges in Belgium
result primarily from funding affiliated companies in various European currencies.
</TABLE>
INTEREST RATE SWAP AGREEMENTS -- The Company utilizes interest rate swap
agreements to reduce exposure to changes in interest rates and manage the mix
of fixed and variable rate debt. The swaps mature in fiscal 1998.
The Company had $41.6 notional amount of interest rate swap agreements
outstanding at September 30, 1996. These agreements effectively convert Swiss
franc variable rate debt into fixed interest rate debt with a weighted average
pay rate of 4.2%.
At September 30, 1995, the Company had $136.4 notional amount of interest
rate swap agreements outstanding. These agreements effectively converted French
franc, Hong Kong dollar, Australian dollar and Swiss franc variable rate debt
into fixed interest rate debt with a weighted average pay rate of 7.6%.
CONCENTRATION OF CREDIT RISK -- The counterparties to foreign currency
contracts and interest rate swap agreements consist of a number of major
international financial institutions and are generally institutions with which
the Company maintains lines of credit. The Company does not enter into foreign
exchange contracts through brokers nor does it trade foreign exchange contracts
on any other exchange or over the counter markets. Risk of currency positions
and mark-to-market valuation of positions are strictly monitored at all times.
The Company continually monitors the credit ratings of its counterparties both
internally
44
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
and by using outside rating agencies. The Company has implemented policies which
limit the amount of agreements it enters into with any one party. While
nonperformance by these counterparties exposes the Company to potential credit
losses, such losses are not anticipated due to the control features mentioned.
Concentrations of credit risk with respect to accounts receivable are
limited due to the large number of customers, generally short payment terms and
their dispersion across geographic areas.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments
include cash and cash equivalents, short- and long-term debt, Redeemable
Preferred Stock, foreign currency contracts and interest rate swap agreements.
As of September 30, 1996 and 1995, the fair value of long-term debt was
$1,630.5 and $2,050.9, respectively, compared to its carrying value of $1,535.0
and $1,905.3, respectively. The fair value of the Company's long-term debt has
been estimated using quoted market prices and yields obtained through
independent pricing sources for the same or similar types of borrowing
arrangements, taking into consideration the underlying terms of the debt, such
as the coupon rate, term to maturity, tax impact to investors and imbedded call
options.
Redeemable Preferred Stock had a fair value of $457.9 and $417.0 at
September 30, 1996 and 1995, respectively, based upon the greater of the fair
market value of RAL Stock into which the Redeemable Preferred Stock may be
converted or the guaranteed minimum value.
Due to the nature of cash equivalents and short-term borrowings, including
current notes payable, carrying amounts on the balance sheet approximate fair
value.
The fair value of foreign currency contracts and interest rate management
agreements is the amount that the Company would receive or pay to terminate the
specific agreements, considering first, quoted market prices of comparable
agreements, or in the absence of quoted market prices, such factors as interest
rates, currency exchange rates and remaining maturities. Based on these
considerations, the calculated fair values of foreign currency contracts and
interest rate management agreements outstanding at September 30, 1996 and 1995
were not material.
OTHER INCOME AND EXPENSE
Other (income)/expense, net consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Translation and exchange loss.................................... $ 22.5 $ 16.1 $ 22.0
Investment income................................................ (8.7) (9.4) (15.4)
Miscellaneous (income)/expense................................... 0.9 (10.1) 13.0
------ ------ ------
$ 14.7 $ (3.4) $ 19.6
====== ====== ======
</TABLE>
45
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in millions except per share data)
SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Receivables (current)--
Trade...................................................................................... $ 788.5 $ 743.1
Notes and other............................................................................ 93.0 92.6
Allowance for doubtful accounts............................................................ (35.9) (34.3)
-------- --------
$ 845.6 $ 801.4
======== ========
Inventories--
Raw materials and supplies................................................................. $ 242.1 $ 209.1
Work in process............................................................................ 123.6 111.4
Finished products.......................................................................... 450.5 445.7
-------- --------
$ 816.2 $ 766.2
======== ========
Other Current Assets--
Prepaid expenses........................................................................... $ 92.9 $ 92.3
Deferred income tax benefits............................................................... 56.4 58.8
-------- --------
$ 149.3 $ 151.1
======== ========
Investments and Other Assets--
Goodwill (net of accumulated amortization: 1996--$100.0 and 1995--$75.0)................... $ 509.1 $ 519.6
Other intangible assets (net of accumulated amortization: 1996--$309.5 and 1995--$279.3)... 256.3 286.9
Equity investments in affiliated companies................................................. 301.6 292.6
Deferred charges and other assets.......................................................... 388.8 354.2
-------- --------
$1,455.8 $1,453.3
======== ========
Accounts Payable and Accrued Liabilities--
Trade accounts payable..................................................................... $ 407.9 $ 400.5
Incentive compensation, salaries and vacations............................................. 122.0 98.4
Accrued interest........................................................................... 40.5 43.8
Restructuring reserves..................................................................... 24.0 43.9
Other...................................................................................... 249.5 288.9
-------- --------
$ 843.9 $ 875.5
======== ========
Other Liabilities--
Postretirement medical benefits............................................................ $ 139.2 $ 136.7
Other postretirement benefits.............................................................. 216.3 208.7
Minority interests......................................................................... 10.6 15.3
Other...................................................................................... 134.6 118.6
-------- --------
$ 500.7 $ 479.3
======== ========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest paid......................................................... $185.2 $201.0 $217.2
Income taxes paid..................................................... 187.6 203.2 236.8
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year............................................ $34.3 $29.2 $ 31.2
Provision charged to expense.......................................... 9.6 11.8 5.8
Writeoffs, less recoveries............................................ (8.0) (6.7) (7.8)
----- ----- ------
Balance, end of year.................................................. $35.9 $34.3 $ 29.2
===== ===== ======
</TABLE>
46
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL 1996 FIRST SECOND THIRD FOURTH<Fa>
- ----------- ----- ------ ----- ----------
<S> <C> <C> <C> <C>
Net sales<Fb>.......................................... $1,639.3 $1,432.1 $1,478.6 $1,564.3
Gross profit........................................... 694.7 564.6 572.3 614.6
Earnings before extraordinary item..................... 128.5 59.1 84.3 89.8
Net earnings........................................... 128.5 59.1 82.2 89.8
Earnings per share of RAL Stock
Primary
Earnings before extraordinary item............. 1.23 .55 .79 .85
Net earnings................................... 1.23 .55 .77 .85
Fully diluted
Earnings before extraordinary item............. 1.15 .52 .75 .80
Net earnings................................... 1.15 .52 .73 .80
Dividends paid per share........................... .30 .30 .30 .30
Market price range of RAL Stock........................ 67- 69- 67 3/4- 68 7/8-
57 1/4 57 7/8 56 57 3/4
<FN>
- ---------
<Fa> Net earnings in the fourth quarter of 1996 were reduced by $15.5 or $.15 and $.14 per primary and fully diluted share,
respectively, due to restructuring charges.
<Fb> Reflects a reclassification between sales and advertising and promotion expense.
</TABLE>
47
<PAGE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
QUARTERLY FINANCIAL INFORMATION (Continued)
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL 1995 FIRST<Fa> SECOND<Fa> THIRD<Fa> FOURTH<Fa><Fb><Fc>
- ----------- --------- ---------- --------- ------------------
<S> <C> <C> <C> <C>
Net sales<Fd>.......................................... $1,978.1 $1,743.9 $1,853.0 $ 1,596.6
Gross profit........................................... 867.8 748.9 803.7 663.2
Earnings before extraordinary item..................... 101.1 51.4 68.2 79.4
Net earnings........................................... 101.1 51.4 68.2 75.7
Earnings per share of RAL Stock<Fe>
Primary
Earnings before extraordinary item............. 1.02 .50 .63 .74
Net earnings................................... 1.02 .50 .63 .70
Fully diluted
Earnings before extraordinary item............. .95 .48 .60 .70
Net earnings................................... .95 .48 .60 .67
Loss per share of CBG Stock
Primary
Loss before extraordinary item................. (.28) (.15) (.02)<Ff>
Net loss....................................... (.28) (.15) (.02)<Ff>
Fully diluted
Loss before extraordinary item................. (.28) (.15) (.03)<Ff>
Net loss....................................... (.28) (.15) (.03)<Ff>
Dividends paid per share:
RAL Stock.......................................... .30 .30 .30 .30
Market price range of RAL Stock........................ 45 3/4- 50 1/8- 51 3/4- 59-
40 1/2 43 1/2 46 3/8 48 5/8
Market price range of CBG Stock........................ 5 1/2- 4 5/8- 4 1/2-<Ff>
3 5/8 3 1/4 3 5/8
<FN>
- ---------
<Fa> Net earnings and earnings per share in 1995 were reduced by the following amounts due to provisions for restructuring:
<CAPTION>
NET PRIMARY FULLY
EARNINGS EPS DILUTED EPS
-------- ------- -----------
<S> <C> <C> <C>
First quarter............................................... $16.3 $.16 $.15
Second quarter.............................................. 11.7 .12 .11
Third quarter............................................... 4.3 .04 .04
Fourth quarter.............................................. 37.7 .37 .34
<Fb> Excludes results of operations of CBC after sale, effective July 22, 1995.
<Fc> Includes an after-tax gain on the sale of CBC of $42.0 or $.41 and $.38 per primary and fully diluted share,
respectively.
<Fd> Reflects a reclassification between sales and advertising and promotion expense.
<Fe> Based on RPG Group earnings through May 15, 1995 and consolidated Ralston Purina Company earnings thereafter.
<Ff> Through exchange of CBG Stock on May 15, 1995.
</TABLE>
48
EXHIBIT 21
Subsidiaries of the Registrant
Jurisdictions of
Subsidiary Name Incorporation Percentage of Control
Alimentos Nutritivos, S.A. de C.V. Mexico 100%
Auto-Cafes Purina, S.A. Guatemala 100%
Benco Pet Foods, Inc. Illinois 100%
Berec Components Limited UK 100%
Berec International Limited UK 100%
Berec Overseas Investments Limited UK 100%
Chambe, S.A. France 34%
Checkerboard Insurance Company, Ltd. Bermuda 100%
Checkerboard Media Company, Inc. Missouri 100%
Checkerboard Properties, Inc. Delaware 100%
Chirouze, S.A. France 60%
Cofanimo, S.A. France 51%
Compagnie Ralston Energy Systems France 100%
EBC Batteries, Inc. Delaware 100%
EBC Centroamerica S.A. Costa Rica 100%
EBC (India) Company Private Ltd. India 100%
Eletro Manganes Ltda. Brazil 83.7%
Energizer Battery (Tianjin)
Co., Ltd. China 100%
Energizer Hungary Trading Ltd. Hungary 100%
Energizer Korea, Ltd. Korea 100%
Energizer India Limited India 100%
Energizer Ltd. UK 100%
1
Energizer Nordic A/S Denmark 100%
Energizer Pil Ticaret
Limited Company Turkey 100%
Energizer Polska Spolka zo.o Poland 100%
Energizer Rechargeable Products
Asia Pacific Ltd. Hong Kong 100%
Energizer Rechargeable Products
Nordic, A.B. Sweden 100%
Energizer Rechargeabe Products
UK) Ltd. UK 100%
Energizer Slovakia, Spol.Sr.O. Slovak Republic 100%
Energizer (South Africa) Ltd. Delaware 100%
Energizer (Thailand) Limited Thailand 100%
Etablissements Leandre Ferard
Et Fils S.A. France 95%
Ever Ready (Ireland) Limited Ireland 100%
Ever Ready Limited UK 100%
Ever Ready Trust Limited UK 100%
Eveready Australia Pty. Limited Australia 100%
Eveready Batteries Hong Kong
Limited Hong Kong 100%
Eveready Batteries Kenya Limited Kenya 14%
Eveready Batteries Ltd. Delaware 100%
Eveready Battery Company
Asia Pacific, Inc. Delaware 100%
Eveready Battery Company, Inc. Delaware 100%
Eveready Battery Company Lanka
Limited Sri Lanka 60%
Eveready Battery Company (Malaysia)
SDN.BHD. Malaysia 80%
Eveready Battery Company
Philippines, Inc. Philippines 100%
2
Eveready Battery Distributing LLC Russia 100%
Eveready Battery International, Inc. Delaware 100%
Eveready Battery Netherlands B.V. Netherlands 100%
Eveready Cote d'Ivoire S.A. Ivory Coast 100%
Eveready de Chile S.A. Chile 100%
Eveready de Colombia, S.A. Colombia 100%
Eveready de Mexico S.A. de C.V. Mexico 100%
Eveready de Venezuela, C.A. Venezuela 100%
Eveready Ecuador C.A. Ecuador 100%
Eveready Egypt S.A.E. Egypt 51%
Eveready Ghana Limited Ghana 66.6%
Eveready Hong Kong Company Hong Kong 100%
Eveready New Zealand Limited New Zealand 100%
Eveready Pil Sanayii ve Ticaret,
Anonim Sirketi Turkey 60%
Eveready Puerto Rico, Inc. Puerto Rico 100%
Eveready Singapore Pte. Ltd. Singapore 100%
Fiber Sales & Development
Corporation Delaware 100%
Financiacion Internacional
de Negocios Alimentarios, Ltd. Cayman Islands 100%
Foodmaker Limited UK 100%
Forez Grains S.A. France 10%
Fuji - Purina Protein, Ltd. Japan 25%
Fundacio Purivada Purina Spain 100%
Gallina Blanca Purina, S.A. Spain 50%
Granjas Geneticas Porcinas de
Venezuela, C.A. Venezuela 24%
Imperial Biotechnology Products,
Limited UK 100%
Imperial Biotechnology, U.S., Inc. Delaware 100%
Industrias Purina Ltd. Cayman Islands 99.78%
3
Industrias Purina, S.A. de C.V. Mexico 100%
LaSalle Park Redevelopment
Corporation Missouri 100%
Latin American Agribusiness
Development Corporation Panama .69%
Nippon Purina Eveready, Inc. Delaware 100%
Nutrimentos Lomgimar, C.A. Venezuela 51%
Nutritious Foods, Inc. Delaware 100%
Pilas Secas Tudor S.A. Spain 100%
Pointer Specialty Chemicals, Inc. Delaware 100%
PPA Investments, Inc. Delaware 100%
Protein Technologies International
Asia Pacific Corporation Delaware 100%
Protein Technologies International
Australia Pty. Limited Australia 100%
Protein Technologies International
(Deutschland) G.m.b.H. Germany 100%
Protein Technologies International
Europe, Inc. Delaware 100%
Protein Technologies International
Financial Services, N.V. Belgium 100%
Protein Technologies International
France S.A.R.L. France 100%
Protein Technologies International
Holdings, Inc. Delaware 100%
Protein Technologies International
Iberica S.A. Spain 100%
Protein Technologies International,
Inc. Delaware 100%
Protein Technologies International
(Ireland) Ltd. Ireland 100%
Protein Technologies International
4
Italia S.r.L. Italty 100%
Protein Technologies International
Manufacturing Belgium N.V. Belgium 100%
Protein Technologies International
Moscow Russia 100%
Protein Technologies International
Overseas B.V. Netherlands 100%
Protein Technologies International
S.A. de C.V. Mexico 100%
Protein Technologies International
Sales, Inc. Delaware 100%
Protein Technologies Trading
S.A. Switzerland 100%
Protein Technologies International
(U.K.) UK 100%
Proveedora de Alimentos
Ave-Pecaurios, S.A. de C.V. Mexico 50%
PT Eveready Battery Company
Indonesia Indonesia 80%
PT Eveready Trading Company Indonesia 100%
Purina Besin MadderLeri Sanayi ve
Ticaret A.S. Turkey 100%
Purina China, Inc. Delaware 100%
Purina Colombiana S.A. Colombia 100%
Purina Dalian Trade & Consulting
Company, Ltd. China 100%
Purina de Guatemala, S.A. Guatemala 100%
Purina Espana, S.A. Spain 100%
Purina Polska SP, Zo. o. Poland 100%
Purina de Venezuela, C.A. Venezuela 100%
Purina Hungaria Animal Feed
Production & Trading Company Ltd. Hungary 100%
5
Purina Italia S.p.A. Italy 100%
Purina Japan KK Japan 100%
Purina Korea, Inc. Korea 100%
Purina Nanjing Feed Mill
Company ltd. China 60%
Purina Peru S.A. Peru 100%
Purina Philippines, Inc. Philippines 100%
Purina Portugal Alimentacao e
Sanidade Animal, Ltda. Portugal 100%
Purina Protein Management S.A. Belgium 100%
Purina S.A. de C.V. Mexico 40%
Purina SUD EST France 57.95%
Purina Yantai Feedmill Company
Limited China 60%
Puriphil Realty Development Philippines 100%
Ralston/Bateria Spol. Sr.O. Czech Republic 100%
Ralston Battery Systems Ges.m.b.H. Austria 100%
Ralston de Mexico, S.A. de C.V. Mexico 100%
Ralston Energy Systems BeneLux, N.V. Belgium 100%
Ralston Energy Systems Deutschland
G.m.b.H. Germany 100%
Ralston Energy Systems France France 100%
Ralston Energy Systems Hellas
Industrial and Commerical S.A. Greece 100%
Ralston Energy Systems Iberica, S.A. Spain 100%
Ralston Energy Systems Italia, S.p.A.Italy 100%
Ralston Energy Systems Portugal 100%
Ralston Energy Systems S.A. Switzerland 100%
Ralston Energy Systems U.K. Limited UK 100%
Ralston International Service
Corporation Delaware 100%
Ralston Products, Inc. Delaware 100%
6
Ralston Purina Argentina S.A. Argentina 100%
Ralston Purina Americas, Inc. Delaware 100%
Ralston Purina Canada, Inc. Canada 100%
Ralston Purina Child Development
Center, Inc. Missouri 100%
Ralston Purina do Brasil Ltda. Brazil 100%
Ralston Purina Europe, Inc. Delaware 100%
Ralston Purina Europe, S.A. Spain 100%
Ralston Purina France France 99.4%
Ralston Purina Government
Affairs, Inc. Delaware 100%
Ralston Purina Holdings (U.K.)
Company UK 100%
Ralston Purina Holdings Mexico,
S.A. de C.V. Mexico 100%
Ralston Purina International
(UK) Limited UK 100%
Ralston Purina International
Development Corporation Delaware 100%
Ralston Purina International
Holding Company, Inc. Delaware 100%
Ralston Purina Mexico, S.A. de C.V. Mexico 100%
Ralston Purina Overseas Battery
Company Delaware 100%
Ralston Purina Sales, Inc. American Samoa 100%
Ralston Purina Sales, Limited Barbados 100%
Ralston Purina Trading Italia S.R.L. Italy 100%
Red & White, Inc. Delaware 100%
SA Sofidelf France 99.76%
SARL Ferard France France 49.5%
Sistemas de Baterias S.A. de
C.V. Mexico 100%
7
Socadhoc Picrea France 100%
Societe Civile Immobiliere Du Cap
de La Costa France 100%
Sonca (Macau) Limited Macau 100%
Sonca Products Limited Hong Kong 100%
Sorelap S.A. France 34%
Technomene Pet Foods, Inc. Delaware 100%
Tower Enterprises, Inc. Missouri 100%
Tradico, Inc. Delaware 100%
VCS Holding Company Delaware 100%
Venezuelan Protein Technologies
International PTI C.A. Venezuela 100%
Wonder Guadeloupe Guadeloupe 100%
Wonder Martinique SNC Martinique 100%
Wonder Reunion SNC France 100%
8
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-02033, 2-96616, 33-677, 2-77778, 2-83297, 2-
81753, 33-17875, 33-19911, 33-25396, 33-25674) and on Form S-3 (Nos. 333-2069,
33-45213, 33-59663) of Ralston Purina Company and the Prospectuses thereto, of
our report dated November 1, 1996 appearing on page 27 of the Ralston Purina
Company 1996 Annual Report to Shareholders which is incorporated by reference in
this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
St. Louis, Missouri
December 13, 1996
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 9/30/96
RALTSON PURINA CO. BALANCE SHEET & STMT OF EARNINGS & IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STMTS.
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