SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1998
Commission File No. 1-4582
RALSTON PURINA COMPANY
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(Exact name of registrant as specified in its charter)
MISSOURI 43-0470580
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(State of Incorporation) (I.R.S. Employer Identification No.)
CHECKERBOARD SQUARE, ST. LOUIS MISSOURI 63164
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(Address of principal executive offices) (Zip Code)
(314) 982-1000
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(Registrant's telephone number, including area code)
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
YES: X NO:
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Number of shares of Ralston Purina common stock, $.10 par value, outstanding as
of the close of business on February 3, 1999: 328,368,334
PART I - FINANCIAL INFORMATION
RALSTON PURINA COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
(Dollars in millions except per share data)
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OPERATING RESULTS
Net earnings for the three months ended December 31, 1998 were $176.8, or $.58
and $.55 per share on a basic and diluted basis, respectively. Included in net
earnings for the current quarter is an unrealized after-tax gain of $44.9,
representing a market value adjustment of the Company's stock appreciation
income linked securities (SAILS) debt. This gain was $.15 and $.14 per basic
and diluted share, respectively. The fiscal 1998 first quarter net earnings of
$860.5, or $2.79 and $2.61 per share on a basic and diluted basis, respectively,
include an after-tax gain on the sale of the Soy Protein Products business of
$705.1 (pre-tax gain of $1.1 billion) and net earnings from discontinued
operations of $15.7. The Soy Protein Products business was sold to E.I. du Pont
de Nemours and Company (DuPont) on December 3, 1997. Discontinued operations
consist of the Soy Protein Products business through the sale date and the
Agricultural Products business, which was spun off on April 1, 1998.
Earnings before the unrealized gain on the SAILS mark-to-market adjustment for
the quarter ended December 31, 1998 were $131.9 compared to earnings from
continuing operations of $139.7 in the prior year quarter. Earnings decreased
primarily on lower Battery Products' operating earnings. Earnings per share on
this basis were $.43 and $.41 on a basic and diluted basis, respectively, for
the current quarter compared to earnings per share from continuing operations of
$.44 and $.42 a year ago.
RESULTS OF OPERATIONS
Net sales decreased 1.9% in the quarter ended December 31, 1998 on lower Battery
Products' sales, largely offset by increased Pet Products' sales. See the
following section for comments on sales changes by Business Segment.
Gross profit as a percentage of sales was 51.3% in the current quarter compared
to 50.8% in the prior year first quarter. This increase results because the
higher margin Pet Products segment represented a larger percentage of sales in
the current quarter.
Selling, general and administrative expenses increased 3.6% in the current
quarter due primarily to increases in Battery Products. Selling, general and
administrative expenses were 18.4% and 17.4% of sales in the current and prior
year first quarters, respectively, reflecting increased spending combined with
the sales decline for Battery Products.
Advertising and promotion expense increased 1.9% in the current quarter due to
higher promotion support and advertising expenditures in Pet Products, partially
offset by lower spending in Battery Products. As a percentage of sales,
advertising and promotion expense was 15.0% in the current quarter and 14.5% a
year ago. Other income/expense, net, was favorable by $10.8 for the quarter
primarily due to dividend income from the Company's investment in DuPont and
lower translation and exchange losses in the current quarter. The Company did
not receive dividend income from DuPont in the prior year quarter based on the
December 3 investment date.
Income taxes, which include federal, state and foreign taxes, were 36.0% of
pre-tax earnings before equity earnings for the current quarter compared to
36.2% in the prior year.
BUSINESS SEGMENTS
Sales for the Pet Products segment increased 8% in the quarter on the inclusion
of a full quarter of sales from the Company's December 1997 acquisition of
Edward Baker Petfoods, based in the United Kingdom, and on higher volumes.
Operating profit increased significantly in the quarter due to the sales
increase coupled with lower ingredient costs, partially offset by an unfavorable
package size mix.
Sales for the Battery Products segment decreased 11% in the quarter primarily on
lower rechargeable battery sales and lower alkaline and carbon zinc volumes,
primarily in North America. Strong competitive activity was the key factor in
the sales decline. In addition, currency devaluations, primarily in Asia, also
negatively impacted sales. Excluding the unfavorable impact of currency
devaluations, sales declined 8%.
Battery Products' operating profit decreased significantly in the quarter
primarily due to the sales decline. The quarter results also included a decline
in the Asia Pacific region versus prior year's first quarter. This decline was
the result of the overall impact of the financial difficulties in that region,
which began impacting the Company's results in the second quarter of the prior
year.
First quarter results for the rechargeable battery business continued to be
disappointing. Sales and earnings from key Original Equipment Manufacturers are
still at depressed levels. Management is currently evaluating alternatives for
this business in order to strengthen the Battery Products segment.
FINANCIAL CONDITION
The Company's primary source of liquidity is cash flow generated from
operations. The Company's investments in DuPont and Interstate Bakeries
Corporation provide additional sources of liquidity. For the quarter ended
December 31, 1998, cash flow from operations was $108.8 compared to cash flow
from continuing operations of $132.7 in the prior year quarter. Working capital
was $70.0 at December 31, 1998 while current liabilities exceeded current assets
by $54.5 at September 30, 1998. The increase in working capital is primarily
due to increased accounts receivable and decreased accounts payable, partially
offset by increases in other current liabilities.
During the prior year quarter, the Company used the proceeds from the issuance
of short-term debt primarily for the acquisition of Edward Baker Petfoods for
$182.5.
In December 1997, the Company sold its Soy Protein Products business to DuPont
for $1,554.2, comprised of 22.5 million shares of DuPont common stock (which
stock was valued at $1,399.2 at purchase date) and the assumption of certain
liabilities. This non-cash transaction resulted in an after-tax gain of $705.1.
On February 3, 1999, the Company's Board of Directors authorized the purchase of
up to eight million shares of RAL Stock. As of February 3, 1999, approximately
8,357,000 shares remained under the previous and new Board of Directors'
authorizations for the purchase of RAL Stock. These authorizations are in
addition to a continuing authorization permitting the Company to acquire from
time to time, at prevailing market prices, shares of RAL Stock that may be
offered for sale by the trustee of the Company's Savings Investment Plan as a
result of investment directions from participants in the plan.
SAILS MARK-TO-MARKET ADJUSTMENT
Current quarter results include an unrealized after-tax gain of $44.9, or $.15
and $.14 per basic and diluted share, respectively, representing a market value
adjustment of the Company's stock appreciation income linked securities (SAILS)
debt. On a pre-tax basis, this gain was $70.2. The unrealized gain of $70.2
represents the difference between the debt's value at issuance, or $480, and the
current cash settlement value of the debt based on 15.5 million shares of
Interstate Bakeries Corporation (IBC) common stock and an IBC stock price of
$26.43750 at December 31, 1998.
At maturity on August 1, 2000, the SAILS are mandatorily exchangeable into a
number of shares of IBC common stock owned by the Company, or cash, at the
Company's option. The number of shares or the amount of cash will be based on
the average market price of IBC stock on the 20 trading days prior to maturity
(the IBC Maturity Price). If the IBC Maturity Price is greater than or equal to
$37.7819, the SAILS will be exchangeable at maturity into 12.70 million shares
of IBC stock. If the IBC Maturity Price is $30.96875 or less, the SAILS will be
exchangeable into 15.50 million shares of IBC stock. If the IBC Maturity Price
is between $30.96875 and $37.7819, the SAILS will be exchangeable into a number
of shares of IBC stock between 15.50 million and 12.70 million, respectively,
based on an exchange ratio.
For accounting purposes, terms of the SAILS require them to be marked to the
cash value of the underlying IBC common shares into which they may be exchanged.
Accordingly, a market value adjustment is required for the SAILS debt when the
IBC stock price is outside the range of $30.96875 and $37.7819. If the IBC
stock price is greater than $37.7819, the Company records an unrealized loss on
the SAILS debt, and if the IBC stock price is less than $30.96875, the Company
records an unrealized gain.
The Company's investment in IBC is included in Investments and Other Assets and
is accounted for using the equity method of accounting, which results in a
carrying value different from the current market value of the investment.
ESOP CONVERSION
At the end of December 1998, the Company converted all of the outstanding shares
of Series A 6.75% Preferred Stock (Redeemable Preferred Stock) into Ralston
Purina Company common stock (RAL Stock) in accordance with terms of the
Redeemable Preferred Stock. To effect this conversion, the Company issued
13,505,609 shares held in Treasury and 2,209,192 authorized but previously
unissued shares of RAL Stock.
YEAR 2000 UPDATE
The Company is progressing with its plans and active projects to achieve 100%
Year 2000 readiness in its key application systems software, computer hardware
and operating systems software, and various other systems containing embedded
chip technology before the turn of the millennium.
The Company estimates that more than 80% of its application systems software has
been modified or replaced, which includes a higher level of remediation in the
United States than in other world areas. The remaining application systems
software is in the process of being modified or replaced with completion, in all
but a few cases, targeted for March 1999. Testing has been completed on
approximately 60% of the Company's modified or replaced application systems
software. The Company expects to complete its testing in June 1999.
Approximately 90% of the Company's computer hardware and operating systems
software have been modified or replaced, of which 80% have been tested for Year
2000 readiness. Upgrade/replacement and Year 2000 readiness testing of all
computer hardware and operating systems software is targeted for June 1999.
The inventory of systems that contain embedded chip technology is progressing as
planned, and these systems are in the process of being verified for Year 2000
readiness. Testing and upgrade/replacement of all impacted systems containing
embedded chip technology is targeted for completion in July 1999.
The estimated total cost for the Company to achieve Year 2000 readiness is
approximately $34, of which $24 has been expended through December 31, 1998.
The Company continues to evaluate critical suppliers and customers for potential
risks of major interruptions in its business due to Year 2000 issues. The
assessment of risks and development of any required contingency plans is
targeted for completion in June 1999.
RESTRUCTURING ACTIVITIES
During the quarter ended December 31, 1998, approximately 310 employees were
terminated and one plant was closed in connection with restructuring accruals
established by the Company in fiscal years 1998 and 1997. The 1998 cash
provision represented a voluntary early retirement option offered to most U.S.
Battery Products' employees and additional charges related to the Company's
European battery and international pet food operations. The 1997 provision was
primarily related to the continued rationalization of Battery Products'
production capacity and business structure. Activities impacting the
restructuring reserve during the quarter ended December 31, 1998 were as
follows:
Reserve balance at September 30, 1998 $ 57.3
Termination benefits paid (11.4)
Other cash exit costs paid (2.1)
Increase due to translation 1.7
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Reserve balance at December 31, 1998 $ 45.5
=========
In 1998 the Company recorded an impairment write-down totaling $66.4, primarily
representing a write-down of the Company's investment in lithium-ion
rechargeable battery manufacturing assets. These assets, which are currently
held for sale, have a carrying value of $9.2 at December 31, 1998. Due to rapid
changes in the business environment since the beginning of the lithium-ion
project in 1996, it has become more economical to source lithium-ion cells from
other manufacturers. The Company continues to assemble and package lithium-ion
rechargeable batteries.
FORWARD-LOOKING STATEMENTS
Statements in this document that are not historical are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made.
The Company advises readers that various risks and uncertainties could affect
its financial performance and could cause the Company's actual results for
future periods to differ materially from those anticipated or projected. These
risks and uncertainties include, but are not limited to: the effect of general
economic conditions; fluctuations in supply and demand for the Company's
products; competition and competitive pricing pressures in the battery products
and pet products industries, both domestically and internationally; significant
increases in operating expenses, including the cost of raw materials;
fluctuations in the value of the Company's investments in DuPont and IBC common
stock; the Year 2000 readiness of critical suppliers, customers and governmental
agencies, as well as the difficulty of evaluating and remediating certain
systems and technologies utilized in the operation of the Company's businesses,
and incremental costs associated with evaluation and remediation; and other
risks detailed from time to time in the Company's publicly-filed documents,
including its Annual Report on Form 10-K for the period ended September 30,
1998, and its current report on Form 8-K dated January 26, 1999.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED DECEMBER 31,
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1998 1997
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<S> <C> <C>
Net Sales $1,291.8 $1,317.1
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Costs and Expenses
Cost of products sold 629.7 648.2
Selling, general and administrative 237.4 229.1
Advertising and promotion 194.1 190.4
Interest expense 49.7 46.3
Other (income)/expense, net (11.0) (0.2)
Unrealized gain on SAILS debt (70.2) -
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1,029.7 1,113.8
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Earnings from Continuing Operations before
Income Taxes and Equity Earnings 262.1 203.3
Income Taxes (94.3) (73.6)
Equity Earnings, Net of Taxes 9.0 10.0
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Earnings from Continuing Operations 176.8 139.7
Net Earnings from Discontinued Operations - 15.7
Gain on Sale of Discontinued Operations - 705.1
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Net Earnings 176.8 860.5
Preferred Stock Dividend, Net of Taxes (2.6) (3.1)
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Earnings Available to Common Shareholders $ 174.2 $ 857.4
========= =========
Earnings Per Share
Basic
Earnings from continuing operations $ 0.58 $ 0.44
Net earnings from discontinued operations - 0.05
Gain on sale of discontinued operations - 2.30
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Net Earnings $ 0.58 $ 2.79
========= =========
Diluted
Earnings from continuing operations $ 0.55 $ 0.42
Net earnings from discontinued operations - 0.05
Gain on sale of discontinued operations - 2.14
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Net Earnings $ 0.55 $ 2.61
========= =========
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
DECEMBER 31, SEPTEMBER 30,
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<S> <C> <C>
1998 1998
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ASSETS
Current Assets
Cash and cash equivalents $ 70.0 $ 89.8
Receivables, less allowance for doubtful accounts
of $26.0 and $24.5, respectively 867.6 717.2
Inventories
Raw materials and supplies 130.6 134.7
Work in process 115.3 124.1
Finished products 331.5 341.6
Other current assets 117.7 120.1
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Total Current Assets 1,632.7 1,527.5
Investments and Other Assets 2,868.3 2,908.2
Property at Cost 2,246.4 2,212.9
Accumulated depreciation 1,125.7 1,096.9
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1,120.7 1,116.0
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Total $5,621.7 $5,551.7
========= =========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt $ 11.2 $ 37.1
Notes payable 748.6 772.4
Accounts payable 251.3 286.2
Other current liabilities 551.6 486.3
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Total Current Liabilities 1,562.7 1,582.0
Long-Term Debt 1,725.5 1,794.8
Deferred Income Taxes 326.7 309.3
Other Liabilities 541.4 533.6
Redeemable Preferred Stock - 256.1
Unearned ESOP Compensation - (13.2)
Shareholders Equity
Preferred stock - -
Common stock 32.9 32.6
Capital in excess of par value 163.9 127.7
Retained earnings 1,680.1 2,067.0
Common stock in treasury, at cost - (766.3)
Unearned portion of restricted stock (3.9) (4.2)
Value of common stock held in Grantor Trust (194.5) (191.5)
Cumulative translation adjustment (77.8) (87.3)
Net unrealized holding loss on available-for-sale securities (135.3) (88.9)
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Accumulated other comprehensive income (213.1) (176.2)
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Total Shareholders Equity 1,465.4 1,089.1
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Total $5,621.7 $5,551.7
========= =========
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
QUARTER ENDED DECEMBER 31,
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<S> <C> <C>
1998 1997
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Cash Flow from Operations
Net earnings $176.8 $ 860.5
Unrealized gain on SAILS debt (70.2) -
Gain on sale of discontinued operations - (705.1)
Net earnings from discontinued operations - (15.7)
Non-cash items included in income 92.4 62.7
Changes in assets and liabilities used in operations (58.7) (58.8)
Other, net (31.5) (10.9)
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Cash flow from continuing operations 108.8 132.7
Cash flow from discontinued operations - 11.2
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Net cash flow from operations 108.8 143.9
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Cash Flow from Investing Activities
Acquisition of business - (182.5)
Property additions, net (32.5) (55.0)
Other, net (3.3) (8.2)
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Cash used by investing activities - continuing operations (35.8) (245.7)
Cash used by investing activities - discontinued operations - (85.9)
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Net cash used by investing activities (35.8) (331.6)
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Cash Flow from Financing Activities
Net cash proceeds from (payment of) debt (38.9) 235.9
Dividends paid (38.5) (40.9)
Other, net (16.4) (2.9)
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Net cash provided (used) by financing activities (93.8) 192.1
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Effect of Exchange Rate Changes on Cash 1.0 0.2
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Net Increase (Decrease) in Cash and Cash Equivalents (19.8) 4.6
Cash and Cash Equivalents, Beginning of Period 89.8 109.1
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Cash and Cash Equivalents, End of Period $ 70.0 $ 113.7
======= ========
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
Note 1 - The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for any quarter are not necessarily indicative of the results
for any other quarter or for the full year. These statements should be read in
conjunction with the financial statements and notes thereto included in the
Ralston Purina Company (the Company) Annual Report to Shareholders for the year
ended September 30, 1998.
Note 2 - During the quarter ended December 31, 1998, the Company recorded an
after-tax, unrealized gain of $44.9, or $0.15 and $0.14 per basic and diluted
share, respectively, representing a market value adjustment of the Company's
stock appreciation income linked securities (SAILS) debt. On a pre-tax basis,
this gain was $70.2. The unrealized gain of $70.2 represents the difference
between the debt's value at issuance, or $480, and the current cash settlement
value of the debt based on 15.5 million shares of Interstate Bakeries
Corporation (IBC) common stock and an IBC stock price of $26.43750 per share at
December 31, 1998.
At maturity on August 1, 2000, the SAILS are mandatorily exchangeable into a
number of shares of IBC common stock owned by the Company, or cash, at the
Company's option. The number of shares or the amount of cash will be based on
the average market price of IBC stock on the 20 trading days prior to maturity
(the IBC Maturity Price). If the IBC Maturity Price is greater than or equal to
$37.7819 per share, the SAILS will be exchangeable at maturity into 12.70
million shares of IBC stock. If the IBC Maturity Price is $30.96875 per share
or less, the SAILS will be exchangeable into 15.50 million shares of IBC stock.
If the IBC Maturity Price is between $30.96875 and $37.7819 per share, the SAILS
will be exchangeable into a number of shares of IBC stock between 15.50 million
and 12.70 million, respectively, based on an exchange ratio.
For accounting purposes, terms of the SAILS require them to be marked to the
cash value of the underlying IBC common shares into which they may be exchanged.
Accordingly, a market value adjustment is required for the SAILS debt when the
IBC stock price is outside the range of $30.96875 and $37.7819 per share. If
the IBC stock price is greater than $37.7819 per share, the Company records an
unrealized loss on the SAILS debt, and if the IBC stock price is less than
$30.96875 per share, the Company records an unrealized gain.
The Company's investment in IBC is included in Investments and Other Assets and
is accounted for using the equity method of accounting, which results in a
carrying value different from the current market value of the investment.
Note 3 - At the end of December 1998, the Company converted all of the
outstanding shares of Series A 6.75% Preferred Stock (Redeemable Preferred
Stock) into Ralston Purina Company common stock (RAL Stock), in accordance with
terms of the Redeemable Preferred Stock. To effect this conversion, the Company
issued 13,505,609 Treasury shares and 2,209,192 authorized but previously
unissued shares of RAL Stock.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
Note 4 - During the current quarter, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The Company has
restated its balance sheet at September 30, 1998 to reflect "Accumulated Other
Comprehensive Income," in accordance with this statement.
The components of total comprehensive income for the quarters ended December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Quarter Ended December 31,
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<S> <C> <C>
1998 1997
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Net Earnings $176.8 $860.5
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments 9.5 (12.7)
Unrealized losses on available-for-sale securities (46.4) (30.6)
------- -------
Total Other Comprehensive Income (36.9) (43.3)
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Total Comprehensive Income $139.9 $817.2
======= =======
</TABLE>
Note 5 - On December 3, 1997, the Company completed the sale of the Soy Protein
Products business to E.I. du Pont de Nemours and Company (DuPont) for $1,554.2,
comprised of 22.5 million shares of DuPont common stock (which stock was valued
at $1,399.2 at the date of purchase) and the assumption of certain liabilities.
During the quarter ended December 31, 1997, the Company recorded a pre-tax gain
on the sale of the Soy Protein Products business of $1.1 billion and an
after-tax gain of $705.1, or $2.30 and $2.14 per basic and diluted share,
respectively.
Note 6 - Discontinued operations consist of the Company's Soy Protein Products
business through the sale date (see Note 5) and the Agricultural Products
business, which was spun off on April 1, 1998.
Note 7 - Other (income)/expense, net, for the three months ended December 31,
1998 and 1997, consists of the following:
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1998 1997
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Net translation and exchange loss $ 1.5 $ 3.8
Dividends on DuPont common stock (7.9) -
Other investment income (1.9) (1.2)
Return on other investments (3.1) (2.9)
Miscellaneous (income)/expense 0.4 0.1
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$(11.0) $(0.2)
======= ======
</TABLE>
Note 8 - In December 1997, the Company acquired Edward Baker Petfoods, a United
Kingdom manufacturer of extruded complete pet foods and a supplier of branded
and private label products to the European market, for $182.5.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
Note 9 - In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This statement
requires that certain internal and external costs associated with the purchase
and/or development of internal use software be capitalized rather than expensed.
The Company implemented this statement in the second quarter of fiscal year
1998. Accordingly, the Company has restated first quarter results for the prior
fiscal year to reflect this change in accounting.
Note 10 - The following table sets forth the computation of basic and diluted
earnings per share for the quarters ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
Quarter Ended December 31,
--------------------------
<S> <C> <C>
1998 1997
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Numerator:
Earnings from continuing operations $176.8 $139.7
Preferred stock dividends (2.6) (3.1)
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Numerator for basic earnings per share -
Earnings from continuing operations
available to common shareholders $174.2 $136.6
Effect of dilutive securities:
ESOP stock 2.5 2.8
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Numerator for diluted earnings per share -
Earnings from continuing operations
available to common shareholders $176.7 $139.4
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Net earnings from discontinued operations $ - $ 15.7
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Gain on sale of discontinued operations $ - $705.1
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Denominator:
Denominator for basic earnings per share -
weighted average shares * 299.1 307.2
Effect of dilutive securities:
ESOP stock 16.2 18.5
Stock options 4.1 3.9
Deferred Compensation - -
------- -------
Dilutive potential common shares 20.3 22.4
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 319.4 329.6
======= =======
Basic earnings per share:
Earnings from continuing operations $ 0.58 $ 0.44
Net earnings from discontinued operations - 0.05
Gain on sale of discontinued operations - 2.30
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Net earnings $ 0.58 $ 2.79
======= =======
Diluted earnings per share:
Earnings from continuing operations $ 0.55 $ 0.42
Net earnings from discontinued operations - 0.05
Gain on sale of discontinued operations - 2.14
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Net earnings $ 0.55 $ 2.61
======= =======
</TABLE>
* Weighted average shares used for the computation of basic earnings per share
excludes 13,559,000 and 12,963,000 shares of common stock held by the
Company's Grantor Trust at December 31, 1998 and 1997, respectively.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
Note 11 - On December 31, 1998, after the conversion of the outstanding shares
of Redeemable Preferred Stock into Ralston Purina Company common stock (see Note
3), there were 314,954,000 shares of common stock outstanding, exclusive of
13,559,000 Grantor Trust shares. At September 30, 1998, there were 298,958,000
shares of common stock outstanding, exclusive of 13,875,000 shares held in
treasury and 13,470,000 Grantor Trust shares.
Note 12 - Investments and Other Assets consist of the following:
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
<S> <C> <C>
1998 1998
-------- --------
Goodwill $ 538.2 $ 545.9
Other intangible assets 228.8 231.2
Investments in affiliated companies 331.8 319.3
Available-for-sale securities 1,210.8 1,281.2
Deferred charges and other assets 558.7 530.6
-------- --------
$2,868.3 $2,908.2
======== ========
</TABLE>
Note 13 - Available-for-sale securities at September 30 and December 31, 1998
consist primarily of shares of DuPont common stock obtained in connection with
the sale of the Company's Soy Protein Products business (see Note 5).
Available-for-sale securities are carried at fair value, based on quoted market
prices. The difference between fair value and cost basis of these securities,
net of tax, is shown as a separate component within Accumulated Other
Comprehensive Income in the shareholders equity section of the Consolidated
Balance Sheet. The table below shows the aggregate fair value, gross unrealized
holding gain/(loss), tax benefit, and net unrealized holding gain/(loss) for
these securities as of September 30 and December 31, 1998. The changes in net
unrealized holding gain/(loss), net of tax, for the quarters ended December 31,
1998 and 1997 are included as a component of Other Comprehensive Income as shown
in Note 4, above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Unrealized Net Unrealized
Aggregate Holding Holding
Fair Value Gain/(Loss) Tax Benefit Gain/(Loss)
----------- ----------- ------------ -----------
December 31, 1998 $ 1,210.8 ($211.4) $ 76.1 ($135.3)
September 30, 1998 $ 1,281.2 ($138.9) $ 50.0 ($88.9)
</TABLE>
PART II - OTHER INFORMATION
------------------
There is no information required to be reported under any items except those
indicated below.
Item 4. Submission of Matter to a Vote of Security Holders
----------------------------------------------------------
The Company held its Annual Meeting of Shareholders on February 3, 1999, for the
purpose of electing four directors to serve three-year terms ending in January
2002, to ratify the Board of Directors' appointment of PricewaterhouseCoopers
LLP as independent accountants for the Company for the fiscal year ending
September 30, 1999, to approve the adoption of the Ralston Purina Company 1999
Incentive Stock Plan, and to approve an amendment to the Company's Articles of
Incorporation to delete a reference to the Company's Series A ESOP Convertible
Preferred Stock.
The number of votes cast, and the number of shares voting for or against each
candidate and the number of votes cast for the other matters submitted for
approval, as well as the number of abstentions with respect thereto, is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
VOTES VOTES
FOR WITHHELD
Donald Danforth, Jr. 253,068,769 2,200,976
----------- ----------
William H. Danforth 253,161,266 2,108,479
----------- ----------
Richard A. Liddy 252,572,586 2,697,159
----------- ----------
Katherine D. Ortega 252,638,540 2,631,205
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VOTES VOTES VOTES BROKER
FOR AGAINST ABSTAINED NON-VOTES
Ratification of
PricewaterhouseCoopers LLP 253,119,071 1,189,476 961,198 --
Adoption of the Ralston Purina
Company 1999 Incentive Stock
Plan 158,973,443 73,587,901 3,029,490 19,678,911
Approval of Amendment to the
Company's Articles of
Incorporation 227,358,362 5,507,911 2,724,562 19,678,910
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
-------------------------------------
(a) Exhibits filed with this Report:
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated January 26, 1999, was filed to set forth a
cautionary statement for purposes of the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995, with respect to forward-looking
statements which may be made by the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALSTON PURINA COMPANY
- ------------------------------------------
Registrant
By: /s/ James R. Elsesser
James R. Elsesser
Vice President and Chief Financial Officer
Date: February 12, 1999
<PAGE>
EXHIBIT INDEX
- ---------------------
Exhibits
- ----------
EX-27 Financial data schedule for 1st Quarter 1999
(provided electronically)
Exhibit 27
(Document prepared on Edgar)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 12/31/98
RALSTON PURINA COMPANY BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 70,000
<SECURITIES> 0
<RECEIVABLES> 893,600
<ALLOWANCES> 26,000
<INVENTORY> 577,400
<CURRENT-ASSETS> 1,632,700
<PP&E> 2,246,400
<DEPRECIATION> 1,125,700
<TOTAL-ASSETS> 5,621,700
<CURRENT-LIABILITIES> 1,562,700
<BONDS> 1,725,500
0
0
<COMMON> 32,900
<OTHER-SE> 1,432,500
<TOTAL-LIABILITY-AND-EQUITY> 5,621,700
<SALES> 1,291,800
<TOTAL-REVENUES> 1,291,800
<CGS> 629,700
<TOTAL-COSTS> 629,700
<OTHER-EXPENSES> 350,300
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 49,700
<INCOME-PRETAX> 262,100
<INCOME-TAX> 94,300
<INCOME-CONTINUING> 176,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,800
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.55
<FN>
<F1>LOSS-PROVISION INCLUDED IN OTHER-EXPENSES ABOVE.
</FN>
</TABLE>
