SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission File Number 1-4582
RALSTON PURINA COMPANY
SAVINGS INVESTMENT PLAN
RALSTON PURINA COMPANY
CHECKERBOARD SQUARE
ST. LOUIS, MISSOURI 63164
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
ESOP AGRIGRANDS U.S.
ESOP COMMON COMMON GOVERNMENT
PREFERRED RAL STOCK STOCK EQUITY FIXED MONEY
STOCK STOCK FUND FUND INDEX INCOME MARKET
FUND FUND (NOTE 3) (NOTE 6) FUND FUND FUND
-------- ----- -------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value (Note 2)
Short-term investments. . . . . . . $- $ 411 $ 9 $ 6 $ - $ 177 $ -
Shares in registered
investment company . . . . . . - 83,664* 22,266 20,879
Common stock - RAL Stock. . . . . . - 127,318* 508,767*
Common stock - Agribrands . . . . . - 2,720
Notes receivable from participants. -
---- -------- -------- ----- ------ ------ ------
TOTAL INVESTMENTS . . . . . . . . - 127,729 508,776 2,726 83,664 22,443 20,879
INSURANCE COMPANY CONTRACTS, AT
CONTRACT VALUE (Note 2) . . . . . . - 39,607
RECEIVABLES
Interest and dividends receivable . - 2
---- -------- -------- ----- ------ ------ ------
TOTAL RECEIVABLES . . . . . . . . - 2
---- -------- -------- ----- ------ ------ ------
TOTAL ASSETS. . . . . . . . . . . - 127,731 508,776 2,726 83,664 62,050 20,879
---- -------- -------- ----- ------ ------ ------
LIABILITIES
Accrued plan expenses . . . . . . . - 40 1 4
---- -------- -------- ----- ------ ------ ------
TOTAL LIABILITIES . . . . . . . - 40 1 4
---- -------- -------- ----- ------ ------ ------
NET ASSETS AVAILABLE FOR PLAN BENEFITS. $- $ 127,691 $ 508,776 $2,725 $83,664 $62,046 $20,879
==== ========= ========= ====== ======= ======= =======
GROWTH INTER- SMALL
PARTICIPANT AGGRESSIVE AND NATIONAL CAP
LOAN BALANCED GROWTH INCOME GROWTH INDEX
FUND FUND FUND FUND FUND FUND TOTAL
-------- ----- -------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value (Note 2)
Short-term investments. . . . . .$ - $ - $ - $ - $ - $ - $ 603
Shares in registered
investment company 33,932 37,312 15,267 8,921 222,241
Common stock - RAL Stock 636,085
Common stock - Agribrands 2,720
Notes receivable from participants 29,354 29,354
------ -------- -------- ------ ------- ------ -------
TOTAL INVESTMENTS . . . . . . . . 29,354 33,932 37,312 15,267 8,921 891,003
INSURANCE COMPANY CONTRACTS, AT
CONTRACT VALUE (Note 2) 39,607
RECEIVABLES
Interest and dividends receivable 2
------ -------- -------- ------ ------- ------ -------
TOTAL RECEIVABLES . . . . . . . - - - - - - 2
------ -------- -------- ------ ------- ------ -------
TOTAL ASSETS. . . . . . . . . . 29,354 33,932 37,312 15,267 8,921 930,612
------ -------- -------- ------ ------- ------ -------
LIABILITIES
Accrued plan expenses. . . . . . . 45
------ -------- -------- ------ ------- ------ -------
TOTAL LIABILITIES . . . . . . . . - - - - - - 45
------ -------- -------- ------- ------- ------ -------
NET ASSETS AVAILABLE FOR PLAN BENEFITS. $29,354 $33,932 $ - $37,312 $15,267 $8,921 $930,567
======= ======== ======== ======= ======= ====== =======
</TABLE>
See Notes to Financial Statements
* Investment represents 5% or more of Plan's net assets.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
ESOP AGRIGRANDS U.S.
ESOP COMMON COMMON GOVERNMENT
PREFERRED RAL STOCK STOCK EQUITY FIXED MONEY
STOCK STOCK FUND FUND INDEX INCOME MARKET
FUND FUND (NOTE 3) (NOTE 6) FUND FUND FUND
-------- ----- -------- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income . . . . . . . . . . . . . . . . . $ 18,021 $ 1,444 $ - $ - $ 1,287 $ 3,683 $ 1,035
Net realized and unrealized gain/(loss) . . . . . .
on investments. . . . . . . . . . . . . . . . . 30,036 21,930 - 3,581 17,962 20 -
---------- --------- -------- ------- ------- -------- --------
48,057 23,374 - 3,581 19,249 3,703 1,035
Contributions
Employer. . . . . . . . . . . . . . . . . . . . . 22,167 208 - - 246 200 253
Employee. . . . . . . . . . . . . . . . . . . . . 16,463 2,224 - - 2,984 1,461 947
---------- --------- -------- ------- ------- -------- --------
38,630 2,432 - - 3,230 1,661 1,200
Loan Repayments . . . . . . . . . . . . . . . . . . - 3,484 - - 1,941 3,128 2,904
Other additions . . . . . . . . . . . . . . . . . . - 35 - 118 5 (50) -
---------- --------- -------- ------- ------- -------- --------
TOTAL ADDITIONS . . . . . . . . . . . . . . . . 86,687 29,325 - 3,699 24,425 8,442 5,139
---------- --------- -------- ------- ------- -------- --------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid . . . . . . . . . . . . . . . . . . . 29,301 29,873 - 247 11,537 14,517 9,869
ESOP interest expense . . . . . . . . . . . . . . . 3,219 - - - - - -
Loan withdrawals. . . . . . . . . . . . . . . . . . 4,461 2,889 - 56 1,279 1,701 1,860
Administrative expenses . . . . . . . . . . . . . . 89 8 - - 4 8 11
Asset transfers out . . . . . . . . . . . . . . . . 31 4,741 - 145 333 235 304
---------- --------- -------- ------- ------- -------- --------
TOTAL DEDUCTIONS. . . . . . . . . . . . . . . . 37,101 37,511 - 448 13,153 16,461 12,044
---------- --------- -------- ------- ------- -------- --------
Net Increase/(Decrease) Prior to Interfund Transfers. 49,586 (8,186) - 3,251 11,272 (8,019) (6,905)
Final Confersion of Preferred Stock to
RAL Stock (Note 3). . . . . . . . . . . . . . . . (508,767) - 508,767 - - - -
Interfund Transfers . . . . . . . . . . . . . . . . . (21,459) (13,572) 9 (526) 4,979 9,569 10,036
---------- --------- -------- ------- ------- -------- --------
NET INCREASE/(DECREASE) . . . . . . . . . . . . . . (480,640) (21,758) 508,767 2,725 16,251 1,550 3,131
Net Assets Available for Plan Benefits
Beginning of year . . . . . . . . . . . . . . . . . 480,640 149,449 - - 67,413 60,496 17,748
---------- --------- -------- ------- ------- -------- --------
End of year . . . . . . . . . . . . . . . . . . . . $ - $127,691 $508,776 $2,725 $83,664 $62,046 $20,879
========== ========= ======== ======= ======= ======== ========
GROWTH INTER- SMALL
PARTICIPANT AGGRESSIVE AND NATIONAL CAP
LOAN BALANCED GROWTH INCOME GROWTH INDEX
FUND FUND FUND FUND FUND FUND TOTAL
-------- ----- -------- ---------- ------ ------ - -------
<S> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income . . . . . . . . . . . . . . . . . $ 2,588 $ 3,747 $ 2 $ 3,739 $ 302 $ 649 $ 36,497
Net realized and unrealized gain/(loss)
on investments. . . . . . . . . . . . . . . . . - 58 (1,591) 1,871 2,107 1,012 76,986
--------- -------- --------- -------- -------- ------ --------
2,588 3,805 (1,589) 5,610 2,409 1,661 113,483
Contributions
Employer. . . . . . . . . . . . . . . . . . . . . - 359 62 269 99 21 23,884
Employee. . . . . . . . . . . . . . . . . . . . . - 1,344 528 1,826 808 176 28,761
--------- -------- --------- -------- -------- ------ --------
- 1,703 590 2,095 907 197 52,645
Loan Repayments . . . . . . . . . . . . . . . . . . (13,885) 863 279 837 387 62 -
Other additions . . . . . . . . . . . . . . . . . . (11) - - 14 5 - 116
--------- -------- --------- -------- -------- ------ --------
TOTAL ADDITIONS . . . . . . . . . . . . . . . . (11,308) 6,371 (720) 8,556 3,708 1,920 166,244
--------- -------- --------- -------- -------- ------ --------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid . . . . . . . . . . . . . . . . . . . 4,919 7,657 1,377 8,690 1,991 262 120,240
ESOP interest expense . . . . . . . . . . . . . . . - - - - - - 3,219
Loan withdrawals. . . . . . . . . . . . . . . . . . (14,396) 843 222 713 329 43 -
Administrative expenses . . . . . . . . . . . . . . - 6 1 3 1 40 171
Asset transfers out . . . . . . . . . . . . . . . . 16 97 59 149 67 - 6,177
--------- -------- --------- -------- -------- ------ -------
TOTAL DEDUCTIONS. . . . . . . . . . . . . . . . (9,461) 8,603 1,659 9,555 2,388 345 129,807
--------- -------- --------- -------- -------- ------ --------
Net Increase/(Decrease) Prior to Interfund Transfers. (1,847) (2,232) (2,379) (999) 1,320 1,575 36,437
Final Conversion of Preferred Stock to
RAL Stock (Note 3). . . . . . . . . . . . . . . . - - - - - - -
Interfund Transfers . . . . . . . . . . . . . . . . . - 6,075 (7,868) 6,042 (631) 7,346 -
--------- -------- --------- -------- -------- ------ --------
NET INCREASE/(DECREASE) . . . . . . . . . . . . . . (1,847) 3,843 (10,247) 5,043 689 8,921 36,427
Net Assets Available for Plan Benefits
Beginning of year . . . . . . . . . . . . . . . . . 31,201 30,089 10,247 32,269 14,578 - 894,130
--------- -------- --------- -------- -------- ------ --------
End of year . . . . . . . . . . . . . . . . . . . . $ 29,354 $33,932 $ - $37,312 $15,267 $8,921 $930,557
========= ======== ========= ======== ======== ====== ========
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
U.S.
ESOP GOVERNMENT PARTI- GROWTH
PREFERRED RAL EQUITY FIXED MONEY CIPANT AGGRESSIVE AND
STOCK STOCK INDEX INCOME MARKET LOAN BALANCED GROWTH INCOME
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- ----- ------- ------ ------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value (Note 2)
Short-term investments . . . . . . . $ 57 $ 1,528 $ - $ 1,561 $ - $ - $ - $ - $ -
Shares in registered
investment company. . . . . . . - - 67,413* 19,279 17,748 - 30,089 10,247 32,269
Common stock - RAL Stock . . . . . . - 147,952* - - - - - - -
Preferred stock
Allocated. . . . . . . . . . . . . 433,014* - - - - - - - -
Unallocated. . . . . . . . . . . . 99,245* - - - - - - - -
Notes receivable from participants . - - - - - 31,201 - - -
------- ------- ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENTS. . . . . . . . . 532,316 149,480 67,413 20,840 17,748 31,201 30,089 10,247 32,269
INSURANCE COMPANY CONTRACTS, AT
CONTRACT VALUE (Note 2). . . . . . . - - - 39,661 - - - - -
RECEIVABLES
Interest and dividends receivable. . 6 - - - - - - - -
-------- -------- ------- ------- ------- ------- ------- ------- -------
TOTAL RECEIVABLES. . . . . . . . . 6 - - - - - - - -
-------- -------- ------- ------- ------- ------- ------- ------- -------
TOTAL ASSETS . . . . . . . . . . . 532,322 149,480 67,413 60,501 17,748 31,201 30,089 10,247 32,269
-------- -------- ------- ------- ------- ------- ------- ------- -------
LIABILITIES
Current maturities of notes payable. 51,682 - - - - - - - -
Accrued plan expenses. . . . . . . . - 31 - 5 - - - - -
-------- -------- ------- ------- ------- ------- ------- ------- -------
TOTAL LIABILITIES. . . . . . . . . 51,682 31 - 5 - - - - -
-------- -------- ------- ------- ------- ------- ------- ------- -------
NET ASSETS AVAILABLE FOR PLAN BENEFITS . $480,640 $149,449 $67,413 $60,496 $17,748 $31,201 $30,089 $10,247 $32,269
======== ======== ======= ======= ======= ======= ======= ======= =======
INTER-
NATIONAL
GROWTH
FUND TOTAL
------ -------
<S> <C> <C>
ASSETS
Investments, at fair value (Note 2)
Short-term investments . . . . . . . $ - $ 3,146
Shares in registered
investment company. . . . . . . 14,578 191,623
Common stock - RAL Stock . . . . . . - 147,952
Preferred stock
Allocated. . . . . . . . . . . . . - 433,014
Unallocated. . . . . . . . . . . . - 99,245
Notes receivable from participants . - 31,201
------- -------
TOTAL INVESTMENTS. . . . . . . . . 14,578 906,181
INSURANCE COMPANY CONTRACTS, AT
CONTRACT VALUE (Note 2) 39,661
RECEIVABLES
Interest and dividends receivable. . - 6
------- --------
TOTAL RECEIVABLES. . . . . . . . . - 6
------- --------
TOTAL ASSETS . . . . . . . . . . . 14,578 945,848
------- --------
LIABILITIES
Current maturities of notes payable. - 51,682
Accrued plan expenses. . . . . . . . - 36
------- ------
TOTAL LIABILITIES. . . . . . . . . - 51,718
------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS . $14,578 $894,130
======= ========
</TABLE>
See Notes to Financial Statements
*Investment represents 5% or more of Plan's net assets.
RALSTON PURINA COMPANY
----------------------
SAVINGS INVESTMENT PLAN
-----------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN
- --------------------------------------
The following is a summary description of the Ralston Purina Company Savings
Investment Plan (the Plan) and provides only general information. Participants
should refer to the Plan document for a more complete description of the Plan's
provisions.
GENERAL - The Plan is a defined-contribution pension plan, established for the
purpose of enabling employees to enhance their long-range financial security
through regular savings with the benefit of Ralston Purina Company (the Company)
matching contributions.
The Plan is subject to certain provisions of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). However, benefits under the Plan are
not eligible for plan termination insurance provided by the Pension Benefit
Guaranty Corporation under Title IV of ERISA. It is the Company's intent that
the Plan meet the requirements of Section 404(c) of ERISA. Section 404(c)
relieves plan fiduciaries of liability for losses that are the direct and
necessary result of the participant's exercise of control over assets in the
participant's savings plan account.
PLAN PARTICIPATION - Participation in the Plan is open to substantially all
regular full and part-time domestic employees of the Company and its designated
subsidiaries, including certain internationally assigned employees who are
subject to U. S. Federal Insurance Contributions Act tax. Participants may
contribute to the Plan upon enrollment; however, one year of covered service is
required in order to receive Company matching contributions (see "Contributions"
below).
CONTRIBUTIONS - Effective January 1, 1999, significant changes were made to the
contribution structure of the Plan. See Note 7 for further discussion. Prior
to these changes, participants could make basic contributions of 2% to 12% of
their compensation in 1% increments on a pre-tax basis, subject to certain
limits imposed by the Internal Revenue Service (IRS), and Plan terms. For
employees first hired before July 1, 1993, basic contributions not exceeding 6%
of the participant's compensation were matched 100% by the Company after one
year of covered service. For employees first hired on or after July 1, 1993,
after one year of covered service, the Company matched basic contributions of 2%
to 6% by initially contributing 20% of the maximum Company match, increasing in
20% increments for each additional year of service up to a maximum of 100% of
the maximum Company match after five years of service.
Participants could also make supplemental after-tax, unmatched contributions of
1% to 10% of their compensation in 1% increments, subject to certain IRS limits
and Plan terms. Participant contributions, both pre-tax and after-tax, could
not exceed 15% of their compensation. The Company imposed, on highly
compensated employees, a pre-tax contribution limit of 10% and a supplemental
after-tax contribution limit of 4%.
INVESTMENT OPTIONS - The leveraged employee stock ownership plan (ESOP), a
10-year program, was available for participation beginning February 1, 1989,
following the creation of the ESOP Preferred Stock Fund (ESOP Fund). Beginning
February 1, 1989, a participant's basic contribution of up to 6% of compensation
and the Company matching contribution thereon were invested in the ESOP Fund.
The ESOP Fund invested exclusively in Series A 6.75% ESOP Convertible Preferred
Stock of the Company (Preferred Stock). See Note 3 for further discussion of
the ESOP Fund.
Through Plan year 1998, basic contributions in excess of 6% and supplemental
after-tax contributions were invested by the Trustee at the participant's
direction, in the investment funds offered by the Plan and selected by the
participant. The funds available are listed on the face of the financial
statements. Participants could allocate the investment of these contributions
to any of the investment funds maintained pursuant to the Plan except the ESOP
Fund, the ESOP Common Stock Fund and the Agribrands Common Stock Fund. See
Notes 3 and 6, respectively, for further discussion of the ESOP Common Stock
Fund and the Agribrands Common Stock Fund.
Effective January 1, 1999, significant changes were made to the investment
options for matched pre-tax participant contributions and for the Company match.
See Note 7 for further discussion.
VESTING - Employee basic and supplemental contributions and earnings thereon
vest immediately, while Company matching contributions and earnings thereon vest
over a period of four years at a rate of 25% per year for each year of Company
service. Participants are 100% vested in Company matching contributions and
earnings thereon after 4 years of service. In the event of a participant's
retirement, death, or total and permanent disability, Company contributions and
earnings thereon become 100% vested, even if the participant has rendered fewer
than 4 years of service.
PLAN WITHDRAWALS - Plan withdrawals of before-tax contributions may be made
prior to termination or retirement for cases of financial hardship or at the age
of 59 1/2. Hardship distributions are limited to the amount required to meet
the need created by the hardship and are made at the discretion of the Plan
administrator (see "Plan Administration" below). After-tax contributions and
earnings thereon may be withdrawn at any time.
PARTICIPANT LOANS - Participants may borrow from their accounts subject to the
provisions of the Plan. Loans are limited to the lesser of $50,000 or 50% of
the vested amount in the participant's account, reduced by other outstanding
participant loan balances on the date of the loan. The minimum loan amount is
$1,000. Participants pay interest on such loans, at a fixed rate of 1
percentage point above the prime rate on the date of the loan. Participant
loans can be short or long-term, up to a maximum loan period of 5 years for
general purpose loans and 10 years for the purchase of a principal residence.
Loan repayments are made through payroll deduction each pay period. A
promissory note in the amount of the loan must be delivered to the Trustee, and,
in the event of the participant's termination, the unpaid balance and accrued
interest become due immediately and payable in full.
FORFEITURES - Upon the participant's termination of employment, any Company
matching contributions and the earnings thereon which are not vested will be
forfeited, but will be restored and eligible for additional vesting if the
participant again becomes an eligible employee within five years after
termination and completes additional years of service. Forfeitures, net of
amounts restored, are used to reduce future Company contributions required under
the Plan. Forfeitures were $190,000 and $286,000 for the years ended December
31, 1998 and 1997, respectively.
PLAN ADMINISTRATION - The Plan is administered by the Company. Management of
Plan assets is under the direction of the Company's Employee Benefit Asset
Investment Committee (EBAIC). Members of the EBAIC are Company employees and
are appointed by the Company's Chief Executive Officer. Vanguard Fiduciary
Trust Company is Trustee of the funds and assets of the Plan; however, Bankers
Trust Company served as Trustee of the ESOP Fund until February 4, 1999 (see
Note 7 for further discussion). As Trustee, Vanguard Fiduciary Trust Company
has the authority to hold, manage and protect the assets of the Plan in
accordance with the provisions of the Plan and the trust agreements.
PLAN TERMINATION - The Company may, by action of its Board of Directors,
terminate the Plan with respect to all participating companies. In case of such
termination, participants shall be fully vested in Company matching
contributions credited to their accounts and, subject to Plan provisions and
applicable law, the total amount in each participant's account shall be
distributed to the participant or for the participant's benefit.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------
The significant accounting policies followed by the Plan are described below:
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared using
the accrual basis of accounting such that income and related assets, and
expenses and related liabilities are recognized in the Plan year to which they
relate.
INVESTMENT VALUATION - The Plan's investments are stated at fair value, except
for insurance company contracts, which are stated at contract value. Shares of
registered investment companies are valued at quoted market prices, which
represent the net asset value of shares held by the Plan at year end. Company
common stock (RAL Stock) and Agribrands International, Inc. common stock are
recorded at fair value, based on the closing market price of the stock on the
last business day of the Plan year. Participant loans are valued at cost, which
approximates fair value.
Investments with insurance companies are all benefit-responsive investment
contracts reported at contract value, which approximates fair value. Contract
value represents contributions made under the contract, plus earnings, less Plan
withdrawals and administrative expenses. There are no valuation reserves
against contract value for the credit risk of the contract issuer or otherwise.
The average yield for the investment contracts was 6.5% and 6.1% for the years
ended December 31, 1998 and 1997, respectively. The weighted average crediting
rate for these contracts was 6.5% at December 31, 1998 and 1997. The crediting
rate is based on an agreed upon rate with the issuer, but cannot be less than
zero.
Investments that represent 5 percent or more of the Plan net assets are
separately identified in the "Statement of Net Assets Available for Plan
Benefits with Fund Information", and the "Schedule of Assets Held for Investment
Purposes" (Attachment I).
FINANCIAL INSTRUMENTS - Some funds within the Plan use index futures contracts
and forward currency contracts. Index futures contracts are used to a limited
extent, with the objectives of maintaining full exposure to the stock market,
enhancing returns, maintaining liquidity and minimizing transaction costs.
Forward currency contracts are used to protect the value of securities, and
related receivables and payables against changes in future foreign exchange
rates. The use of these instruments during Plan years 1998 and 1997 is
considered immaterial to the Plan's investment in the funds; and therefore, is
not considered to materially subject the Plan to market or credit risk.
INCOME RECOGNITION - Interest income is recognized when earned and dividend
income is recognized on the date of record. Realized gains and losses are
determined using the average cost method.
BENEFIT PAYMENTS - Benefits are recorded when paid.
USE OF ESTIMATES - The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) PROVISION
- ---------------------------------------------------------------
The Company authorized shares of Preferred Stock to be held by the Ralston
Purina Collective Trust for Savings Investment Plans (ESOT). The Preferred
Stock assets of the Plan were held in the ESOT until the Preferred Stock was
converted to RAL Stock on December 31, 1998, in accordance with terms of the
Preferred Stock and terms of the Plan. Just prior to the close of business on
December 31, 1998, 2,207,135 remaining issued and outstanding shares of
Preferred Stock in the ESOP Fund were converted into RAL Stock at a rate of 7.12
shares of RAL Stock for one share of Preferred Stock. The ESOP Fund was renamed
the ESOP Common Stock Fund and participant accounts were credited with RAL Stock
in accordance with the conversion of the Preferred Stock. Beginning January 1,
1999, participants can transfer out of the ESOP Common Stock Fund into other
funds within the Plan at their discretion, subject to certain diversification
restrictions on Company matching contributions and earnings thereon. Effective
April 22, 1999, the ESOP Common Stock Fund merged with the RAL Stock Fund and
the diversification restrictions were removed. See Note 7 for further
discussion.
Prior to December 31, 1998, the Preferred Stock was convertible into RAL Stock
and had a guaranteed minimum value of $110.83 per share. In accordance with
provisions of the Certificate of Designation of the Preferred Stock, one share
of Preferred Stock was convertible into 7.12 shares of RAL Stock. This
conversion factor changed from the prior year rate of 2.29 due to the Agribrands
spin-off and the RAL Stock split. (See Note 6 for further discussion).
Financing for the purchase of the Preferred Stock was provided from the proceeds
of a $500 million 8.25% fixed rate, 10-year private placement issue (ESOP Notes)
by the ESOT, which matured on December 31, 1998. Semi-annual payments of $27.5
million were made during the Plan year ended December 31, 1998. Payment of
principal and interest on the ESOP Notes was unconditionally guaranteed by the
Company.
Shares of Preferred Stock were allocated to individual participants' accounts
based on the total amount of basic matched and Company matching contributions
divided by the guaranteed minimum value of the Preferred Stock. Dividends paid
by the Company on the Preferred Stock that were credited to participants'
accounts may have been used by the Plan to repay the ESOP Notes, and, if so,
additional shares equal in value to the dividends credited, were allocated to
the individual participants' accounts. If the dividends were not applied to
loan payments, the dividends were paid directly in cash to the individual
participants.
NOTE 4 - RELATED PARTY AND PARTY-IN-INTEREST
- --------------------------------------------------
The Company, as Plan administrator and sponsor, is a related party to the Plan.
At December 31, 1998 and 1997, the Plan held shares of RAL Stock with a market
value of $636,085,000 and $147,952,000, respectively. In addition, the Plan
held shares of Preferred Stock with a market value of $532,259,000 at December
31, 1997.
For Plan years ended December 31, 1998 and 1997, the Plan purchased $37,027,000
and $46,697,000, respectively, and sold $85,219,000 and $30,642,000,
respectively, of RAL Stock. On December 31, 1998, the Plan converted
$508,767,000 of Preferred Stock to RAL Stock, and then deposited the RAL Stock
into the ESOP Common Stock Fund (see Note 3 for further discussion). Exclusive
of the foregoing transaction, for Plan years ended December 31, 1998 and 1997,
the Plan converted $68,959,000 and $74,236,000, respectively, of Preferred Stock
to RAL Stock; and sold $63,961,000 and $29,510,000, respectively, of the
converted RAL Stock to the Company.
Vanguard Fiduciary Trust Company and Bankers Trust Company, as Trustees of the
Plan's assets, are parties-in-interest as defined by ERISA. For Plan assets
managed by Vanguard, the Plan held $222,844,000 and $194,769,000 of investment
funds and short-term investments at December 31, 1998 and 1997, respectively.
Of these investments, the Plan purchased $129,327,000 and $82,941,000 and sold
$121,541,000 and $54,988,000 for the Plan years ended December 31, 1998 and
1997, respectively. For Plan assets managed by Bankers, the Plan held
short-term liquid investments that had zero balances at December 31, 1998 and
1997. Of these investments, the Plan purchased and sold $104,235,000 and
$81,125,000 for the Plan years ended December 31, 1998 and 1997, respectively.
These transactions are allowable party-in-interest transactions per ERISA
regulations.
NOTE 5 - INCOME TAX STATUS
- -------------------------------
The Plan has received a determination letter from the IRS dated March 11, 1996
that the Plan constitutes a qualified plan and that the trust holding the Plan's
assets is exempt from income tax under the Internal Revenue Code of 1986, as
amended. Participants' basic contributions, Company matching contributions and
earnings of Plan investments are not subject to federal income tax until
distributed from the Plan. Supplemental contributions are made from a
participant's after-tax compensation and are therefore not taxed when
distributed from the Plan. Earnings related to these supplemental contributions
are not subject to federal income tax as long as they remain in the Plan;
however, such earnings are taxed when distributed from the Plan.
NOTE 6 - OTHER MATTERS
- --------------------------
On April 1, 1998, the Company effected a spin-off to shareholders of its
Agricultural Products business (Agri). The new company is Agribrands
International, Inc. Just prior to the close of business on March 31, 1998, Agri
participants' shares of Preferred Stock in the ESOP Fund were mandatorily
converted into RAL Stock, in accordance with the terms of the Preferred Stock,
and placed into the RAL Stock Fund. Subsequently, Agri employees' Plan assets,
including shares of Company stock in the RAL Stock Fund, were transferred to the
Agribrands International, Inc. qualified plan, in accordance with IRS
regulations. As of the date these assets were transferred, Agri employees are
no longer participants of the Plan.
In conjunction with the spin-off, the conversion ratio for Preferred Stock
changed from 2.29 shares of RAL Stock for one share of Preferred Stock to 2.37
shares. Additionally, as of April 1, 1998, all participants of the Plan's RAL
Stock Fund became entitled to receive, and later received, one share of
Agribrands International, Inc. common stock for every 10 shares of RAL Stock
held. Participants were required to sell the remaining Agribrands
International, Inc. common stock received and still held in the Plan by March
31, 1999, and could transfer the proceeds to any other fund within the Plan,
except to the ESOP Fund.
On May 28, 1998, the Company declared a three-for-one stock split to
shareholders of record at the close of business on June 22, 1998. Employee
shareholders who were participants in the RAL Stock Fund of the Plan received
two additional shares of RAL Stock for each share then owned. These additional
shares were credited to the participants' accounts on July 15, 1998. In
conjunction with this stock split, the conversion ratio for Preferred Stock
changed from 2.37 shares of RAL Stock for one share of Preferred Stock to 7.12
shares.
On December 3, 1997, the Company sold its Protein Technologies International
subsidiary (Protein). During December 1997, Protein participants' shares of
Preferred Stock in the ESOP Fund were mandatorily converted into RAL Stock, in
accordance with the terms of the Preferred Stock, and placed into the RAL Stock
Fund. Subsequently, and similarly to other Company terminated employees,
Protein employees were given the option to retain all or a portion of their
accounts in the funds within the Plan except the ESOP Fund, to roll all or a
portion of their account into other qualified plans or individual retirement
accounts (IRA's), and/or to take cash or stock distributions from the Plan, in
accordance with Department of Labor Regulations, ERISA and the Internal Revenue
Code.
NOTE 7 - SUBSEQUENT EVENTS
- ------------------------------
Contribution Structure Change
- -------------------------------
Effective January 1, 1999, significant changes were made to the Plan's
contribution structure. As of this date, participants can contribute from 1% to
14% of their compensation in 1% increments on a before-tax basis, subject to IRS
limits. Before-tax contributions not exceeding 4% of the participant's
compensation will be matched 25% by the Company. One year of covered service is
required in order to receive Company matching contributions.
A participants' after-tax contributions of 1% or 1.75% of compensation will
receive a Company match of 300% that will be credited to a participant's
PensionPlus Match Account in the Ralston Purina Retirement Plan, the Company's
non-contributory defined benefit pension plan covering substantially all
domestic employees. One year of covered service is required in order to receive
the Company match in the PensionPlus Match Account. Each participant's account
is credited monthly with interest based on the 30 year Treasury bond rate.
Participants may also contribute an additional 1% to 22% of their compensation
on an after-tax basis that is not matched by the Company, subject to IRS and
Plan limits.
Combined before-tax and after-tax participant contributions may not exceed
23.75% of compensation, as limited by federal income tax laws and Plan terms.
The total of before-tax, after-tax and Company matching contributions allocated
to participants' accounts is limited to the lesser of $30,000 or 25% of the
participants' compensation for the calendar year.
All participant contributions are invested at the participant's direction in the
investment funds offered by the Plan and selected by the participant. Effective
April 22, 1999, the RAL Stock Fund and the ESOP Common Stock Fund were combined
into a single fund, the Ralston ESOP Common Stock Fund. The 25% Company match
on the participant's first 4% of before-tax contributions will be directed to
this fund. A participant's investments in this merged fund are fully
diversifiable into other funds within the Plan. Participants may also transfer
amounts from other investment funds into the Ralston ESOP Common Stock Fund.
Dividend Pass Through
- -----------------------
Commencing with the dividend payable on June 7, 1999, dividends earned on the
Ralston ESOP Common Stock Fund will be passed through to Plan participants until
further notice and may not be reinvested in the Plan. For federal income tax
purposes, the dividend pass through is considered deductible by the Company and
taxable to participants.
Trustee Termination
- --------------------
With the conversion of the Preferred Stock to RAL Stock, Vanguard Fiduciary
Trust Company became trustee of these converted shares. Bankers Trust Company's
role as trustee was terminated on February 4, 1999 after exercising the voting
rights associated with the Preferred Stock.
Spin-off
- --------
On June 10, 1999, the Company announced its intention to separate its Eveready
Battery Company, Inc., subsidiary in a tax-free spin-off to shareholders.
Completion of the spin-off is contingent upon a favorable tax ruling from the
IRS, effectiveness of a registration statement relating to the spin-off and
final approval by the Ralston Purina Board of Directors. The impact of the
intended spin-off has not yet been determined.
<TABLE>
<CAPTION>
ATTACHMENT I
RALSTON PURINA COMPANY SAVINGS INVESTMENT PLAN
EIN 43-0470580 PLAN NO. 140
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
($000'S EXCEPT FOR SHARE/UNIT DATA)
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NUMBER OF FAIR NUMBER OF FAIR
DESCRIPTION OF INVESTMENT SHARES/UNITS COST VALUE SHARES/UNITS COST VALUE
------------ ---- ------ ------------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
**Vanguard Money Market Reserve
Fund - Prime Portfolio. . . . . . . 603,118 $ 603 $ 603 3,146 $ 3,146 $ 3,146
**Vanguard Short-Term
Corporate Bond Fund . . . . . . . . 1,430,132 15,496 15,502 1,123,587 12,049 12,209
**Vanguard Index Trust - 500 Portfolio. . . . 734,220 45,613 83,664* 748,455 40,965 67,413*
**Vanguard Money Market Reserve
Fund - Federal Portfolio. . . . . . 20,879,348 20,879 20,879 17,747,825 17,748 17,748
**Vanguard Wellington Fund. . . . . . . . . . 1,156,129 30,261 33,932 1,021,698 25,060 30,089
**Vanguard Explorer Fund. . . . . . . . . . . - - - 185,288 9,660 10,247
**Vanguard Windsor II Fund. . . . . . . . . . 1,249,981 31,299 37,312 1,127,498 25,985 32,269
**Vanguard International Growth Portfolio . . 813,356 12,667 15,267 889,434 13,510 14,578
**Vanguard Investment Contract Trust
Fund (Retire. Savings Trust) . . . 6,764,163 6,764 6,764 7,069,990 7,070 7,070
**Vanguard Small Cap Index Fund . . . . . . . 420,798 7,963 8,921 - - -
-------- -------- -------- --------
Total Investment in Shares in
Registered Investment Company . . . - 171,545 222,844 - 155,193 194,769
Agribrands Common Stock . . . . . . . . 90,662 1,471 2,720 - - -
**Ralston Purina Company Common Stock . . . . 19,647,390 311,299 636,085* 1,591,961 75,652 147,952*
-------- -------- -------- --------
Total Investment in Common Stock. . . . . - 312,770 638,805 - 75,652 147,952
**Ralston Purina Co. Series A ESOP
Convertible Preferred Stock. . . . - - - 2,500,890 277,174 532,259*
American Inter Life Insurance
Contract Separate Account . . . . . - - - 2,121 2,121
Hartford Insurance Contract Separate Account. - - - 3,329 3,329
Natwest Insurance Contract Separate Account . - 4,515 4,515 4,235 4,235
New York Life Insurance Contract
Separate Account. . . . . . . . . . - 4,441 4,441 4,169 4,169
Peoples Security Life Insurance Contract
Separate Account . . . . . . . . . - 4,464 4,464 4,182 4,182
Union Bank Switzerland Insurance Contract
Separate Account . . . . . . . . . - 8,329 8,329 7,819 7,819
West Landesbank Insurance Contract
Separate Account. . . . . . . . . . - 8,684 8,684 8,138 8,138
Rabobank Insurance Contract Separate Account. - 2,821 2,821 2,648 2,648
Rabobank Nederland Insurance Contract
Separate Account . . . . . . . . . - 6,353 6,353 3,020 3,020
-------- -------- ------ -------
Total Insurance Company Contracts . . . . - 39,607 39,607 39,661 39,661
Notes Receivable from Participants
(6% to 13% interest) . . . . . . . - 29,354 29,354 31,201 31,201
-------- -------- ------ -------
- $553,276 $930,610 $ 578,881 $945,842
======== ======== =========== ========
</TABLE>
* Investment represents 5% or more of the Plan's net assets.
** Investment represents allowable transaction with a party-in-interest.
<TABLE>
<CAPTION>
ATTACHMENT II
FORM 5500, LINE 27D, SCHEDULE OF REPORTABLE TRANSACTIONS *
RALSTON PURINA COMPANY SAVINGS INVESTMENT PLAN (EIN 43-0470580)
YEAR ENDED DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C>
(B) DESCRIPTION OF ASSET (F) EXPENSE
(A) IDENTITY OF (INCLUDE INTEREST RATE AND (C) PURCHASE (D) SELLING (E) LEASE INCURRED WITH
PARTY INVOLVED MATURITY IN THE CASE OF A LOAN) PRICE PRICE RENTAL TRANSACTION
- ----------------- --------------------------------------- ------------- ----------- ---------- --------------
Banker's Trust. . ESOP Preferred Stock $ - $ 63,960,994 $ - $ -
Banker's Trust. . Institutional Liquid Assets Fund 104,235,328 - - -
Banker's Trust. . Institutional Liquid Assets Fund - 104,235,328 - -
Vanguard Group. . RAL Stock 37,026,744 - - -
Vanguard Group. . RAL Stock - 85,218,601 - -
CONVERSION OF ESOP PREFERRED STOCK TO RAL STOCK
Banker's/Vanguard Conversion at 12/31/98 at market value 508,767,149 - - -
Banker's/Vanguard Conversion at 12/31/98 at market value - 508,767,149 - -
Banker's/Vanguard Conversion during Plan year at market value 68,959,304 - - -
Banker's/Vanguard Conversion during Plan year at market value - 68,959,304 - -
<S> <C> <C> <C> <C> <C>
(B) DESCRIPTION OF ASSET (H) CURRENT VALUE
(A) IDENTITY OF (INCLUDE INTEREST RATE AND (G) COST OF ASSET ON (I) NET
PARTY INVOLVED MATURITY IN THE CASE OF A LOAN) OF ASSET TRANSACTION DATE GAIN (LOSS)
- ----------------- --------------------------------------- ------------- ----------------- --------------
Banker's Trust. . ESOP Preferred Stock $ 33,925,291 $ 63,960,994 $ 30,035,703
Banker's Trust. . Institutional Liquid Assets Fund 104,235,328 -
Banker's Trust. . Institutional Liquid Assets Fund 104,235,328 104,235,328 -
Vanguard Group. . RAL Stock - 37,026,744 -
Vanguard Group. . RAL Stock 75,763,389 85,218,601 9,455,212
CONVERSION OF ESOP PREFERRED STOCK TO RAL STOCK
Banker's/Vanguard - 508,767,149 -
Banker's/Vanguard n/a 508,767,149 -
Banker's/Vanguard Conversion during Plan year at market value - 68,959,304 -
Banker's/Vanguard Conversion during Plan year at market value n/a 68,959,304 -
</TABLE>
* Transactions or a series of transactions in excess of 5% of the current value
of the Plan's assets as of the beginning of the plan year as defined in
section 2520.103-6 of the Department of Labor Rules and Regulations for
Reporting and Disclosure under ERISA.
REPORT OF INDEPENDENT ACCOUNTANTS
June 3, 1999
To the Participants and the Plan
Administrator of the Ralston Purina
Company Savings Investment Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Ralston Purina Company Savings Investment Plan at December
31, 1998 and 1997, and the changes in net assets available for plan benefits for
the year ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Plan Administrator; 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 the Plan Administrator, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules included in
Attachments I and II are presented for purposes of additional analysis and are
not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan
Administrator. The supplemental schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
PRICEWATERHOUSECOOPERS LLP
------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
800 Market Street
St. Louis, Missouri 63101
Pursuant to the requirements of the Securities Exchange Act of 1934, Ralston
Purina Company as Plan Administrator of the Savings Investment Plan, has duly
caused this annual report to be signed by the undersigned thereunto duly
authorized.
RALSTON PURINA COMPANY
By: /s/ C. S. Sommer
C. S. Sommer, Vice President
and Director, Administration
Ralston Purina Company
June 30, 1999
EXHIBIT INDEX
Exhibits
- ----------
23 Consent of Independent Accounts
(provided electronically)
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Company's
Registration Statements on Form S-8 (Nos. 2-96616, 33-677, 2-83297, 2-81753,
33-17875, 33-25396, 33-25674, 33-19911, 333-02033, 333-61073 and 333-73205) of
our report dated June 3, 1999 appearing on page 15 of the Ralston Purina
Company Savings Investment Plan's Annual Report on Form 11-K for the year ended
December 31, 1998.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
June 30, 1999
