SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000
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 May 11, 2000: 306,760,333
<PAGE>
PART I - FINANCIAL INFORMATION
RALSTON PURINA COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
(dollars in millions except per share data)
----------------------------------------------------------------
OPERATING RESULTS
Net earnings for the six months ended March 31, 2000 were $385.8, or $1.33 and
$1.32 per share on a basic and diluted basis, respectively, compared to $284.0,
or $.92 and $.89 per basic and diluted share, in the prior year. Included in
net earnings for the current six months are earnings from continuing operations
of $286.2, or $.99 and $.98 per basic and diluted share, respectively, and net
earnings from discontinued operations of $99.6, or $.34 per basic and diluted
share. For the prior year six months, net earnings included earnings from
continuing operations of $236.2, or $.76 and $.74 per basic and diluted share,
respectively, and net earnings from discontinued operations of $47.8, or $.16
and $.15 per basic and diluted share. Net earnings from discontinued operations
for both periods represents results of the Battery Products business
(Energizer), which was spun-off on April 1, 2000. Pro forma comparisons are
presented below to reflect the impact of the spin-off.
Pro forma earnings from continuing operations for the current six months were
$293.9 and include a net pro forma adjustment of $7.7 and several unusual items,
which increased earnings by $125.0, as follows: an unrealized after-tax gain of
$86.8, or $.30 and $.29 per basic and diluted share, respectively, representing
a market value adjustment of the Company's stock appreciation income linked
securities (SAILS) debt; an after-tax gain of $7.1, or $.02 per basic and
diluted share, on the sale of shares of E.I. du Pont de Nemours and Company
(DuPont) common stock; and capital loss tax benefits totaling $31.1, or $.11 per
basic and diluted share. The net pro forma adjustment in each period represents
a reduction in interest expense due to the change in debt structure associated
with the spin-off of Energizer, net of an adjustment to income taxes to reflect
the Company's post-spin-off tax rate.
Pro forma earnings from continuing operations for the prior year six-month
period were $244.0 and include a net pro forma adjustment of $7.8 and an
unrealized after-tax gain of $93.3, or $.30 and $.29 per basic and diluted
share, respectively, representing a market value adjustment of the Company's
SAILS debt.
Pro forma earnings from continuing operations before unusual items for the six
months ended March 31, 2000 were $168.9, or $.58 per basic and diluted share,
compared to $150.7, or $.48 and $.47 per basic and diluted share, respectively,
in the prior year. The $18.2 increase, or 12%, was primarily attributable to
higher operating earnings from each of the Company's operating segments.
For the quarter ended March 31, 2000, net earnings were $143.0, or $.49 per
basic and diluted share, compared to $107.2, or $.34 per basic and diluted share
for the same quarter in 1999. Net earnings for the current quarter include
earnings from continuing operations of $151.1, or $.52 per basic and diluted
share, and a net loss from discontinued operations of $8.1, or $.03 per basic
and diluted share. Net earnings for the prior year quarter include earnings
from continuing operations of $120.8, or $.38 per basic and diluted share, and a
net loss from discontinued operations of $13.6, or $.04 per basic and diluted
share.
Pro forma earnings from continuing operations were $156.5 for the current
quarter and include a pro forma adjustment of $5.4 and unusual items which
increased earnings by $76.6. These unusual items include the aforementioned
gain on the sale of DuPont stock of $7.1 and capital loss tax benefits of $31.1,
and also a market adjustment of the Company's SAILS debt of $38.4. Prior year
second quarter pro forma earnings from continuing operations were $126.1 and
include a pro forma adjustment of $5.3 and a market adjustment of the Company's
SAILS debt of $48.4.
Pro forma earnings from continuing operations before unusual items were $79.9,
or $.28 per basic and diluted share, for the current quarter, compared to $77.7,
or $.25 per basic and diluted share for the prior year quarter. The earnings
increase was attributable to higher operating earnings.
RESULTS OF CONTINUING OPERATIONS
Net sales increased 3.6% in the six months ended March 31, 2000 and were flat in
the quarter. In the six months, sales increased on higher sales in each of the
Company's operating segments. In the quarter, sales were flat as increases in
International Pet Foods and Golden Products were offset by a decrease in North
American Pet Foods. See the following section for comments on sales changes by
operating segment.
Gross profit increased $80.8 in the current six months and $23.5 in the current
quarter due to increases in all operating segments. As a percentage of sales,
gross profit was 60.0% in the current year six months compared to 56.3% a year
ago. In the current quarter, the gross profit percentage was 60.2% compared to
56.8% in the prior year second quarter. The increased percentage in both
current year periods reflects margin improvements in North American Pet Foods
and International Pet Foods, partially offset by decreased margins in Golden
Products.
Selling, general and administrative expenses increased 5.1% in the current six
months and 13.9% in the quarter. This increase for the six months is
attributable to increases in North American Pet Foods and International Pet
Foods. For the quarter, the increase is primarily due to increases in
International Pet Foods and unfavorable mark-to-market comparisons on
liabilities denominated in share equivalents. Selling, general and
administrative expenses increased to 17.1% and 18.5% of sales in the current
six-month period and current quarter, respectively, from 16.9% and 16.2% in the
same periods a year ago.
Advertising and promotion expense increased 12.1% in the current six months due
to increases in all operating segments. In the quarter, advertising and
promotion expense increased 4.0% due to increases in International Pet Foods and
Golden Products. As a percentage of sales, advertising and promotion expense
was 22.0% and 21.6% in the current six months and second quarter, respectively,
compared to 20.3% and 20.8% in the same periods a year ago.
Other income/expense, net, was $3.0 unfavorable for the six months and $3.6
favorable in the quarter. The unfavorable variance for the six months was
primarily due to lower dividend income from the Company's investments in DuPont
and Conoco Inc. (Conoco) common stock. For the quarter, the favorable variance
was primarily attributable to higher returns on other investments and lower
translation and exchange losses, partially offset by lower dividend income.
Income taxes include federal, state and foreign taxes. Pro forma income taxes,
excluding the aforementioned unusual items in each period, were 34.5% and 34.0%
of pre-tax earnings before equity earnings for the current year six months and
second quarter, respectively, compared to 33.5% in both of the prior year
periods.
BUSINESS SEGMENTS
See Note 3 of the Notes to Condensed Financial Statements for a table of segment
sales and profitability for the quarters ended March 31, 2000 and 1999.
Sales for North American Pet Foods increased 2% in the six months and decreased
3% in the quarter. The sales increase for the six months was attributable to
volume increases in the first quarter, partially offset by volume declines in
the second quarter. In the second quarter, increased super premium branded
sales were more than offset by lower volumes caused by pantry loading by
consumers related to Year 2000 uncertainties, elimination of lower margin
products and the timing of promotional activity.
Profitability for this segment increased 10% in the six months and 4% in the
quarter. The six months' profitability increase resulted from higher volumes
and lower ingredient costs, partially offset by unfavorable package size mix and
increased advertising and promotion expense. In the quarter, lower volumes and
unfavorable package size mix were more than offset by lower ingredient costs.
International Pet Foods' sales increased 5% in the six months and 9% in the
quarter. These increases are the result of volume increases in all regions,
partially offset by unfavorable product mix in certain South American markets.
Profitability for this segment increased 11% in the six months and 14% in the
quarter. These increases are primarily due to the sales increase as well as
improved margins, partially offset by increased advertising and promotion
expenses and increased selling, general and administrative expenses.
Sales for Golden Products increased 18% in the six months and 16% in the
quarter due to significant volume increases in scooping litter as well as
increased conventional litter volumes. Profitability for Golden Products
increased 23% in the six months and 18% in the quarter due to the sales
increase, partially offset by increased product costs and higher advertising and
promotion expenses.
FINANCIAL CONDITION
The Company's primary source of liquidity is cash flow generated from
continuing operations. The Company's investments in DuPont, Interstate Bakeries
Corporation (IBC) and Conoco provide additional sources of liquidity. For the
six months ended March 31, 2000, cash flow from continuing operations was $141.2
compared to $181.6 in the six months ended March 31, 1999. The decrease in cash
flow in the current six months results from changes in working capital items,
primarily increased accounts receivable and decreased current liabilities.
Current liabilities exceeded current assets by $308.2 at March 31, 2000, which
includes $220.8 of SAILS debt that is expected to be settled with IBC shares on
August 1, 2000. The improved working capital position at March 31, 2000
results from a decrease in notes payable and current maturities of long-term
debt.
In preparation for the spin-off of Energizer on April 1, 2000, the Company
received during the quarter $478 from new borrowings and then assigned this debt
to Energizer. The majority of the proceeds from the borrowings were used by the
Company to pay down its short-term debt.
During the current six months, the Company received proceeds from the sale of
DuPont common stock of $88.6.
The Company used cash of $340.4 during the six months for share repurchases. As
of May 10, 2000, approximately 1,136,600 shares remained under the Board of
Directors' authorization dated December 20, 1999 for the purchase of 8,000,000
shares of RAL Stock. This authorization is in addition to a continuing
authorization permitting the Company to acquire, from time to time and 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
Results for the current six months include an unrealized after-tax gain of
$86.8, or $135.6 pre-tax, representing a market value adjustment of the
Company's stock appreciation income linked securities (SAILS) debt. On a per
share basis, this gain was $.30 and $.29 per basic and diluted share,
respectively. During the prior year six-month period, the Company recorded an
unrealized gain on the SAILS debt of $145.8 and $93.3 on a pre-tax and after-tax
basis, respectively, or $.30 and $.29 per basic and diluted share. At March 31,
2000, the cumulative unrealized pre-tax gain since issuance is $259.1,
representing the difference between the debt's value at issuance of $480 and the
current cash settlement value of the debt based on 15.5 million shares of IBC
common stock and an IBC stock price of $14.25 at March 31, 2000.
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 a cumulative 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 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.
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 those 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, 1999.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
---------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $690.8 $690.6 $1,419.1 $1,369.7
------- ------- --------- ---------
Costs and Expenses
Cost of products sold 274.9 298.2 567.5 598.9
Selling, general and administrative 127.5 111.9 242.6 230.9
Advertising and promotion 149.5 143.7 312.2 278.4
Interest expense 44.8 45.2 91.4 92.9
Unrealized gain on SAILS debt (60.0) (75.6) (135.6) (145.8)
Gain on sale of stock (11.1) - (11.1) -
Other (income)/expense, net (10.4) (6.8) (16.9) (19.9)
------- ------- ------- -------
515.2 516.6 1,050.1 1,035.4
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Earnings from Continuing
Operations before
Income Taxes and Equity
Earnings 175.6 174.0 369.0 334.3
Income Tax Provision (30.5) (61.4) (96.6) (115.3)
Equity Earnings, Net of Taxes 6.0 8.2 13.8 17.2
------- ------- --------- --------
Earnings from Continuing
Operations 151.1 120.8 286.2 236.2
Net Earnings/(Loss) from
Discontinued Operations (8.1) (13.6) 99.6 47.8
------- ------- --------- ---------
Net Earnings 143.0 107.2 385.8 284.0
Preferred Stock Dividend,
Net of Taxes - - - (2.6)
------- ------- --------- ---------
Earnings Available to Common
Shareholders $143.0 $107.2 $385.8 $281.4
======= ======= ========= =========
Cash Dividends Declared per
Common Share $0.17 $0.20 $0.17 $0.20
======= ======= ========= =========
Earnings Per Share
Basic
Earnings from continuing
operations $0.52 $0.38 $0.99 $0.76
Net earnings/(loss) from
discontinued operations (0.03) (0.04) 0.34 0.16
------- ------- ------- --------
Net Earnings $0.49 $0.34 $1.33 $0.92
======= ======= ========= =========
Diluted
Earnings from continuing
operations $0.52 $0.38 $0.98 $0.74
Net earnings/(loss) from
discontinued operations (0.03) (0.04) 0.34 0.15
------ ------- ------- -------
Net Earnings $0.49 $0.34 $1.32 $0.89
======= ======= ======= ========
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
MARCH 31, SEPTEMBER 30,
--------- -------------
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 133.4 $ 56.6
Receivables, less allowance for doubtful
Accounts of $4.5 and $4.7, respectively 211.8 203.6
Inventories
Raw materials and supplies 50.4 45.2
Finished products 79.5 74.0
Other current assets 12.4 38.8
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Total Current Assets 487.5 418.2
Investments and Other Assets 2,254.3 2,403.8
Investment in Discontinued Operations 697.6 1,323.7
Property at Cost 1,204.6 1,164.2
Accumulated depreciation 598.3 574.7
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606.3 589.5
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Total $4,045.7 $4,735.2
========== =========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt $ 234.4 $ 370.1
Notes payable 162.4 572.0
Accounts payable 135.0 177.2
Other current liabilities 263.9 266.3
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Total Current Liabilities 795.7 1,385.6
Long-Term Debt 1,249.7 1,249.9
Deferred Income Taxes 391.2 435.2
Other Liabilities 420.0 407.5
Shareholders Equity
Common stock 32.9 32.9
Capital in excess of par value 177.5 172.8
Retained earnings 2,198.2 1,871.7
Common stock in treasury, at cost (1,018.2) (493.7)
Unearned portion of restricted stock (0.8) (2.9)
Value of common stock held in Grantor Trust - (199.6)
Cumulative translation adjustment (100.8) (98.4)
Net unrealized holding loss on available-for-sale
securities (98.4) (24.5)
Minimum pension liability (1.3) (1.3)
---------- ---------
Accumulated other comprehensive income (200.5) (124.2)
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Total Shareholders Equity 1,189.1 1,257.0
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Total $ 4,045.7 $ 4,735.2
========== =========
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)
SIX MONTHS ENDED MARCH 31,
--------------------------
2000 1999
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<S> <C> <C>
Cash Flow from Operations
Net earnings $ 385.8 $ 284.0
Unrealized gain on SAILS debt (135.6) (145.8)
Net earnings from discontinued operations (99.6) (47.8)
Gain on sale of investments in common stock (11.1) -
Non-cash items included in income 72.6 121.6
Changes in assets and liabilities used in operations (41.4) 16.5
Other, net (29.5) (46.9)
-------- --------
Cash flow from continuing operations 141.2 181.6
Cash flow from discontinued operations 230.9 163.5
-------- --------
Net cash flow from operations 372.1 345.1
-------- --------
Cash Flow from Investing Activities
Property additions, net (51.5) (48.9)
Proceeds from the sale of investments in common stock 88.6 -
Other, net (21.2) 1.5
-------- --------
Cash from (used by) investing activities - continuing operations 15.9 (47.4)
Cash from (used by) investing activities - discontinued operations 10.4 (16.8)
-------- --------
Net cash from (used by) investing activities 26.3 (64.2)
-------- --------
Cash Flow from Financing Activities
Net cash payment of debt (408.9) (123.6)
Dividends paid (57.9) (69.9)
Treasury stock purchases (340.4) (82.3)
Other, net 5.3 6.6
-------- --------
Cash used by financing activities - continuing operations (801.9) (269.2)
Cash from (used by) financing activities - discontinued operations 480.9 (2.9)
-------- --------
Net cash used by financing activities (321.0) (272.1)
-------- --------
Effect of Exchange Rate Changes on Cash (0.6) (1.3)
-------- -------
Net Increase in Cash and Cash Equivalents 76.8 7.5
Cash and Cash Equivalents, Beginning of Period 56.6 40.5
-------- --------
Cash and Cash Equivalents, End of Period $ 133.4 $ 48.0
======== ========
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(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, 1999.
NOTE 2 - On April 1, 2000, the Company completed the tax-free spin-off to
shareholders of its Battery Products business (Energizer). This segment is
accounted for as a discontinued operation in the financial statements and
related notes for all periods presented. See notes 3 and 16 which present
quarterly restatements for fiscal 2000 and fiscal 1999.
NOTE 3 - Segment sales and profitability for the quarters and six months ended
March 31, 2000 and 1999 are as follows. Sales and profitability for the quarter
and six months ended March 31, 1999 have been restated to reflect the spin-off
of the Battery Products segment, as discussed in Note 2, above.
<TABLE>
<CAPTION>
Quarter ended Six Months ended
March 31, March 31,
<S> <C> <C> <C> <C>
NET SALES 2000 1999 2000 1999
----- ---- ----- ------
North American Pet Foods $516.7 $534.2 $1,077.3 $1,057.4
International Pet Foods 111.8 102.9 218.7 208.2
Golden Products 62.3 53.5 123.1 104.1
-------- ------ ---------- --------
TOTAL $690.8 $690.6 $1,419.1 $1,369.7
====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Quarter ended Six Months
March 31, ended March 31,
<S> <C> <C> <C> <C>
PROFITABILITY 2000 1999 2000 1999
------- ------- ------- -------
North American Pet Foods $116.1 $111.7 $ 247.0 $ 224.3
International Pet Foods . 12.5 11.0 24.5 22.1
Golden Products 15.0 12.7 30.2 24.6
------- ------- ------- -------
TOTAL SEGMENT PROFITABILITY 143.6 135.4 301.7 271.0
General corporate income/(expenses) (a) 10.3 12.3 20.8 18.5
Amortization of goodwill and other intangible assets (4.6) (4.1) (8.8) (8.1)
Unusual items (b) 71.1 75.6 146.7 145.8
Interest expense (44.8) (45.2) (91.4) (92.9)
------- ------- -------- -------
EARNINGS BEFORE INCOME TAXES AND EQUITY EARNINGS $ 175.6 $ 174.0 $ 369.0 $ 334.3
======= ======= ======== ========
</TABLE>
(a) Primarily includes general corporate expenses, mark to market
adjustments on liabilities denominated in share equivalents, net
unallocated pension income and investment income.
(b) Includes unrealized gains on SAILS debt for all periods and a gain on
the sale of DuPont stock for the quarter and six months ended
March 31, 2000.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(Dollars in millions except per share data)
Restated segment sales and profitability for the third and fourth quarters of
fiscal 1999 and full year fiscal 1999 are presented below to reflect the
spin-off of the Battery Products business.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NET SALES 3rd Qtr 4th Qtr Year 1999
------- ------- ----------
North American Pet Foods $500.9 $534.0 $2,092.3
International Pet Foods 102.2 101.5 411.9
Golden Products 52.8 59.4 216.3
------- ------- -------
TOTAL $655.9 $694.9 $2,720.5
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PROFITABILITY 3rd Qtr 4th Qtr Year 1999
------- ------- -----------
North American Pet Foods $ 102.5 $112.1 $438.9
International Pet Foods . 7.7 7.1 36.9
Golden Products 11.9 13.1 49.6
------- ------- -------
TOTAL SEGMENT PROFITABILITY 122.1 132.3 525.4
General corporate income/(expenses) (a) 1.8 3.7 24.0
Amortization of goodwill and other intangible assets (4.3) (4.1) (16.5)
Unusual items (b) 2.7 64.2 212.7
Interest expense (43.9) (42.8) (179.6)
------- ------- --------
EARNINGS BEFORE INCOME TAXES
AND EQUITY EARNINGS $ 78.4 $ 153.3 $ 566.0
======== ======= ========
</TABLE>
(a) Primarily includes general corporate expenses, mark to market
adjustments on liabilities denominated in share equivalents, net
unallocated pension income and investment income.
(b) Includes unrealized gains on SAILS debt in all periods; a
restructuring reversal in the 3rd quarter; and gains on the sale or
conversion of DuPont stock in all periods.
NOTE 4 - During the six months and quarter ended March 31, 2000, the Company
recorded an unrealized after-tax gain of $86.8 and $38.4, respectively, or
$135.6 and $60.0 pre-tax, representing a market value adjustment of the
Company's stock appreciation income linked securities (SAILS) debt. On a per
share basis, this gain was $.30 and $.29 per basic and diluted share,
respectively, for the six months and $.13 per basic and diluted share for the
quarter. For the prior year, the unrealized after-tax gain was $93.3 and $48.4
for the six months and quarter, respectively, or $.30 and $.29 per basic and
diluted share for the six months and $.15 per basic and diluted share for the
quarter. The prior year six-month and quarter pre-tax unrealized gains were
$145.8 and $75.6, respectively.
At March 31, 2000, the cumulative unrealized pre-tax gain since debt issuance is
$259.1, representing the difference between the debt's value at issuance of $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
$14.25 per share at March 31, 2000.
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.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(Dollars in millions except per share data)
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 a
cumulative unrealized loss on the SAILS debt, and if the IBC stock price is less
than $30.96875 per share, the Company records a cumulative 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 5 - During the quarter and six months ended March 31, 2000, the Company
sold shares of its investment in E.I. du Pont de Nemours and Company (DuPont)
common stock for $88.6 and recorded an $11.1, pre-tax, or $7.1, after-tax, gain
on this sale. The cost basis of these shares was determined using the average
cost method. On a per share basis, this gain was $.02 per basic and diluted
share for the quarter and six months.
NOTE 6 - Current quarter and six-month results include capital loss tax benefits
totaling $31.1, or $.11 per basic and diluted share for the quarter and six
months. These benefits relate to the sale and reorganization of two of the
Company's subsidiaries.
NOTE 7 - The components of total comprehensive income for the quarter and
six-month periods ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------- ----------------
<S> <C> <C> <C> <C>
3/31/00 3/31/99 3/31/00 3/31/99
--------- --------- --------- ---------
Net Earnings $ 143.0 $ 107.2 $ 385.8 $ 284.0
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments .9 (20.1) (2.4) (10.6)
Unrealized gains/(losses) on available-for-
sale securities (110.7) 71.7 (66.8) 25.3
Reclassification adjustment (7.1) - (7.1) -
--------- --------- --------- ---------
Total Other Comprehensive Income (116.9) 51.6 (76.3) 14.7
--------- --------- --------- ---------
Total Comprehensive Income $26.1 $158.8 $309.5 $298.7
========= ========= ========= =========
</TABLE>
NOTE 8 - Other (income)/expense, net, for the six months ended March 31, 2000
and 1999, consists of the following:
<TABLE>
<CAPTION>
Six Months Ended March 31,
<S> <C> <C>
2000 1999
------- -------
Dividends on available-for-sale securities $(13.6) $(15.8)
Return on other investments (1.8) (2.3)
Miscellaneous (income)/expense (1.5) (1.8)
------- -------
$(16.9) $(19.9)
======= =======
</TABLE>
NOTE 9 - 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.
NOTE 10 - The following table sets forth the computation of basic and diluted
earnings per share for the quarters and six-month periods ended March 31, 2000
and 1999.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(Dollars in millions except per share data)
Quarter Ended Six Months
March 31, Ended March 31,
------------- ----------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
------ ------ ------ -------
Numerator:
Earnings from continuing operations $ 151.1 $ 120.8 $ 286.2 $ 236.2
Preferred stock dividends - - - (2.6)
------ ------ ------ -------
Numerator for basic earnings per share -
Earnings from continuing operations
available to common shareholders $ 151.1 $ 120.8 $ 286.2 $ 233.6
Effect of dilutive securities:
ESOP stock - - 2.4
------- ------- ------ -------
Numerator for diluted earnings per
share -
Earnings from continuing operations
available to common shareholders $ 151.1 $ 120.8 $ 286.2 $ 236.0
------- ------- ------ -------
Net earnings (loss) from discontinued
operations $ (8.1) $ (13.6) $ 99.6 $47.8
------- ------- ------ ------
Denominator:
Denominator for basic earnings per share -
weighted average shares * 288.1 314.5 290.2 306.7
Effect of dilutive securities:
ESOP stock - - - 8.1
Stock options 2.4 3.0 2.5 3.5
----- ----- ----- -----
Dilutive potential common shares 2.4 3.0 2.5 11.6
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 290.5 317.5 292.7 318.3
===== ===== ===== =====
Basic earnings per share:
Earnings from continuing operations $ 0.52 $ 0.38 $ 0.99 $ 0.76
Net earnings (loss) from discontinued
operations (0.03) (0.04) 0.34 0.16
------- ------- ----- -----
Net earnings $ 0.49 $ 0.34 $ 1.33 $ 0.92
======= ======= ======= =======
Diluted earnings per share:
Earnings from continuing operations $ 0.52 $ 0.38 $ 0.98 $ 0.74
Net earnings (loss) from discontinued
operations (0.03) (0.04) 0.34 0.15
------- ------- ----- -----
Net earnings $0.49 $0.34 $ 1.32 $ 0.89
======= ======= ===== =======
</TABLE>
* Weighted average shares used for the computation of basic earnings per share
excludes 13,621,000 shares of common stock held by the Company's Grantor
Trust at March 31,1999. The Grantor Trust held no shares at
March 31, 2000. See Note 11.
NOTE 11 - At March 31, 2000, there were 286,658,000 shares of common stock
outstanding, exclusive of 41,922,000 shares held in treasury. At September 30,
1999, there were 297,673,000 shares of common stock outstanding, exclusive of
17,149,000 shares held in treasury and 13,733,000 Grantor Trust shares. On
March 30, 2000, the Company exchanged its commercial paper with a maturity of
approximately 30 days for the RAL common shares then held by the Grantor Trust.
Upon maturity of the commercial paper, the Company exchanged with the Grantor
Trust the commercial paper for 21,535,675 RAL common shares with a value of
$367.5.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(Dollars in millions except per share data)
NOTE 12 - Investments and Other Assets consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, Sept. 30,
2000 1999
-------- --------
Goodwill $ 290.0 $ 294.9
Other intangible assets 133.8 120.9
Investments in affiliated companies 377.3 363.7
Available-for-sale securities 992.5 1,185.5
Deferred charges and other assets 460.7 438.8
-------- --------
$ 2,254.3 $ 2,403.8
========= =========
</TABLE>
NOTE 13 - Available-for-sale securities at March 31, 2000 and September 30,
1999 consist primarily of shares of DuPont common stock and Conoco, Inc.
(Conoco) B common stock. 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 loss, tax benefit, and net unrealized holding
loss for these securities as of March 31, 2000 and September 30, 1999. The
changes in net unrealized holding loss, net of tax, for the quarters and
six-month periods ended March 31, 2000 and 1999 are included as a component of
Other Comprehensive Income as shown in Note 7, above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Net Unrealized
Fair Value Holding Loss Tax Benefit Holding Loss
----------- --------------- ----------- --------------
March 31, 2000 $992.5 ($153.7) $ 55.3 ($98.4)
September 30, 1999 $1,185.5 ($38.3) $13.8 ($24.5)
</TABLE>
NOTE 14 - In fiscal year 1997, the Company changed its method of computing
foreign tax credits and recognized tax benefits of approximately $24 related to
foreign tax credit refund claims for years 1993 through 1995. The Internal
Revenue Service has denied this refund claim and the Company plans to litigate
this issue. While it is difficult to quantify with certainty the potential
impact of this issue, based upon the information currently available, the
Company believes that the ultimate resolution of this issue should not be
material to its financial position. Resolution of this matter could, however,
be material to results of operations or cash flows for a particular period.
NOTE 15 - On March 30, 2000, the Company and IBC amended the Shareholder
Agreement executed by the parties on July 22, 1995 in connection with the sale
by the Company of Continental Baking Company to IBC. Under the amended
agreement, the Company will use IBC shares for the exchange of the SAILS debt on
August 1, 2000 if the Company still holds IBC shares at that time. The amended
agreement also provides that the Company will reduce its remaining ownership of
IBC outstanding stock to no more than 20% by September 30, 2000, 15% by August
1, 2004, and 10% by August 1, 2005. The original Shareholder Agreement, as
amended on July 3, 1997, provided that the Company's ownership of IBC stock
would be reduced to no more than 14.9% by August 15, 2000.
NOTE 16 - Presented below are quarterly results from continuing operations which
have been restated to account for the Battery Products business as a
discontinued operation. The second table presents pro forma continuing
operations reflecting a reduction in interest expense due to the change in the
debt structure associated with the spin-off of the Battery Products business,
and an adjustment to income taxes to reflect the Company's post-spin-off tax
rate.
The pro forma consolidated statements of earnings present the Company's results
as if the distribution had occurred as of the beginning of the periods
presented. Pro forma financial statements may not necessarily reflect the
consolidated results of operations that would have existed had the distribution
been effected on the dates specified nor are they indicative of future results.
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
FISCAL YEAR 2000
1ST QTR 2ND QTR 6 MONTHS
------- ------- --------
<S> <C> <C> <C>
Net Sales $728.3 $690.8 $1,419.1
Costs and Expenses
Cost of products sold 292.6 274.9 567.5
Selling, general and administrative 115.1 127.5 242.6
Advertising and promotion 162.7 149.5 312.2
Interest expense 46.6 44.8 91.4
Unrealized gain on SAILS debt (75.6) (60.0) (135.6)
Gain on sale of stock - (11.1) (11.1)
Other (income)/expense, net (6.5) (10.4) (16.9)
------- ------- ---------
534.9 515.2 1,050.1
Earnings from Continuing Operations
before Income Taxes and Equity Earnings 193.4 175.6 369.0
Income Tax (Provision)/Benefit (66.1) (30.5) (96.6)
Equity Earnings, Net of Taxes 7.8 6.0 13.8
------- ------- ---------
Earnings from Continuing Operations $135.1 $151.1 $286.2
======= ======= =========
Earnings Per Share from Continuing Operations
Basic $ 0.46 $ 0.52 $ 0.99
Diluted $ 0.46 $ 0.52 $ 0.98
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR 2000
1ST QTR 2ND QTR 6 MONTHS
------- ------- --------
<S> <C> <C> <C>
Net Sales $728.3 $690.8 $1,419.1
Costs and Expenses
Cost of products sold 292.6 274.9 567.5
Selling, general and administrative 115.1 127.5 242.6
Advertising and promotion 162.7 149.5 312.2
Interest expense 39.6 37.3 76.9
Unrealized gain on SAILS debt (75.6) (60.0) (135.6)
Gain on sale of stock - (11.1) (11.1)
Other (income)/expense, net (6.5) (10.4) (16.9)
------- ------- ---------
527.9 507.7 1,035.6
Earnings from Continuing Operations
before Income Taxes and Equity Earnings 200.4 183.1 383.5
Income Tax (Provision)/Benefit (70.8) (32.6) (103.4)
Equity Earnings, Net of Taxes 7.8 6.0 13.8
------- ------- ---------
Earnings from Continuing Operations $ 137.4 $156.5 $293.9
======= ======= =========
Earnings Per Share from Continuing
Operations
Basic $0.47 $0.54 $ 1.01
Diluted $0.47 $0.54 $ 1.00
</TABLE>
The results presented above for both continuing operations and pro forma reflect
the following after-tax unusual items:
<TABLE>
<CAPTION>
1ST QTR 2ND QTR 6 MONTHS
------- ------- --------
<S> <C> <C> <C>
Unrealized gain on SAILS $ 48.4 $ 38.4 $ 86.8
Gain on the sale of stock - 7.1 7.1
Capital loss tax benefits - 31.1 31.1
----- ----- ------
$48.4 $ 76.6 $125.0
===== ===== ======
Earnings Per Share for Total Unusuals
Basic $0.17 $0.26 $0.43
Diluted $0.17 $0.26 $0.42
</TABLE>
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
FISCAL YEAR 1999
1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net Sales $679.1 $690.6 $655.9 $694.9 $2,720.5
Costs and Expenses
Cost of products sold 300.7 298.2 277.1 282.7 1,158.7
Selling, general and administrative 119.0 111.9 125.1 127.9 483.9
Advertising and promotion 134.7 143.7 139.5 158.0 575.9
Interest expense 47.7 45.2 43.9 42.8 179.6
Restructuring reversal - - (3.2) - (3.2)
Unrealized (gain)/loss on SAILS debt (70.2) (75.6) 13.6 8.7 (123.5)
Gain on sale or conversion of stock - - (13.1) (72.9) (86.0)
Other (income)/expense, net (13.1) (6.8) (5.4) (5.6) (30.9)
------- ------- ------- ------- ---------
518.8 516.6 577.5 541.6 2,154.5
Earnings from Continuing Operations
before Income Taxes and Equity Earnings 160.3 174.0 78.4 153.3 566.0
Income Tax (Provision)/Benefit (53.9) (61.4) (25.6) (41.1) (182.0)
Equity Earnings, Net of Taxes 9.0 8.2 8.6 10.1 35.9
------- ------- ------- ------- ---------
Earnings from Continuing Operations $115.4 $120.8 $61.4 $122.3 $419.9
======= ======= ======= ======= =========
Earnings Per Share from Continuing Operations
Basic $0.38 $0.38 $0.19 $0.40 $1.35
Diluted $0.36 $0.38 $0.19 $0.40 $1.33
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR 1999
1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net Sales $679.1 $690.6 $655.9 $694.9 $2,720.5
Costs and Expenses
Cost of products sold 300.7 298.2 277.1 282.7 1,158.7
Selling, general and administrative 119.0 111.9 125.1 127.9 483.9
Advertising and promotion 134.7 143.7 139.5 158.0 575.9
Interest expense 41.5 39.0 37.6 36.6 154.7
Restructuring reversal - - (3.2) - (3.2)
Unrealized gain on SAILS debt (70.2) (75.6) 13.6 8.7 (123.5)
Gain on sale or conversion of stock - - (13.1) (72.9) (86.0)
Other (income)/expense, net (13.1) (6.8) (5.4) (5.6) (30.9)
------- ------- ------- ------- ---------
512.6 510.4 571.2 535.4 2,129.6
Earnings from Continuing Operations
before Income Taxes and Equity Earnings 166.5 180.2 84.7 159.5 590.9
Income Tax Provision (57.6) (62.3) (27.2) (45.0) (192.1)
Equity Earnings, Net of Taxes 9.0 8.2 8.6 10.1 35.9
------- ------- ------- ------- ---------
Earnings from Continuing Operations $117.9 $126.1 $66.1 $124.6 $434.7
======= ======= ======= ======= =========
Earnings Per Share from Continuing Operations
Basic $0.39 $0.40 $0.21 $0.41 $1.40
Diluted $0.37 $0.40 $0.21 $0.41 $1.38
</TABLE>
The results presented above for both continuing operations and pro forma reflect
the following after-tax unusual items:
<TABLE>
<CAPTION>
1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Unrealized gain/(loss) on SAILS $44.9 $48.4 $(8.7) $(5.6) $79.0
Gain on the sale or conversion of stock - - 8.4 46.6 55.0
Restructuring reversal - - 3.2 - 3.2
Capital loss tax benefits - - - 10.0 10.0
----- ----- ------ ------ ------
$44.9 $48.4 $2.9 $51.0 $147.2
===== ===== ====== ====== ======
Earnings Per Share for Total Unusuals
Basic $ 0.15 $ 0.15 $ 0.01 $ 0.17 $ 0.48
Diluted $ 0.14 $ 0.15 $ 0.01 $ 0.17 $ 0.47
</TABLE>
PART II - OTHER INFORMATION
------------------
There is no information required to be reported under any items except those
indicated below.
Item 5. Other Information. As a result of Registrant's distribution on
------------------
April 1, 2000 of all of the issued and outstanding shares of the $.01 par value
common stock of its subsidiary Energizer Holdings, Inc. to holders of its $.10
par value Ralston Purina Common Stock, and pursuant to Section 11 (c) of the
Rights Agreement dated March 28, 1996, as amended May 28, 1998, between the
Registrant and Norwest Bank, N.A., as Rights Agent and successor to
Boatmen's Trust Company, the Purchase Price, as defined in the Rights
Agreement, has been adjusted from $64.27 for each Common Share pursuant to
the exercise of a Right to $46.48.
Item 6. Exhibits and Reports on Form 8-K
-------------------------------------
(a) Exhibits filed with this Report:
(10).(i) Form of Non-Qualified Stock Option dated April 18, 2000
(10).(ii) Form of Non-Qualified Stock Option dated April 18, 2000
with Chief Executive Officer
(10).(iii) Form of Non-Qualified Stock Option dated April 18, 2000
with Chief Financial Officer
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated February 18, 2000 was filed by the Company to
provide, based on the impending spin-off of the Company's battery products
business, pro forma consolidated financial information for the Company for the
quarters ended December 31, 1999 and December 31, 1998 and the year ended
September 30, 1999, reflecting the battery products business as a discontinued
operation and pro forma adjustments associated with the distribution of this
business to the Company's shareholders.
A Current Report on Form 8-K dated April 1, 2000 was filed by the Company to
disclose the completion of the spin-off of the Company's battery products
business and to provide pro forma consolidated financial information for the
Company for the quarters ended December 31, 1999 and December 31, 1998 and the
year ended September 30, 1999, reflecting the battery products business
as a discontinued operation and pro forma adjustments associated with the
distribution of this business to the Company's shareholders. Also provided
were consolidated statements of earnings for the year ended September 30, 1998
and September 30, 1997 reflecting the battery products business as a
discontinued operation. This Report also disclosed an amendment to the
Company's Shareholder Agreement with Interstate Bakeries Corporation.
<PAGE>
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,
Chief Financial Officer and Treasurer
Date: May 12, 2000
<PAGE>
EXHIBIT INDEX
- ---------------------
Exhibits
- ----------
EX-27 Financial data schedule for 2nd Quarter 2000
(provided electronically)
EX-10 Material Contracts
(10).(i) Form of Non-Qualified Stock Option dated April 18,
2000
(10).(ii) Form of Non-Qualified Stock Option dated April 18,
2000 with Chief Executive Officer
(10).(iii) Form of Non-Qualified Stock Option dated April
18, 2000 with Chief Financial Officer
Exhibit 27
(Document prepared on Edgar)
sec\10q\2qtr-2000.doc
NON-QUALIFIED STOCK OPTION
--------------------------
RALSTON PURINA COMPANY (the "Company"), effective April 18, 2000 grants this
Non-Qualified Stock Option to Optionee ("Optionee") to purchase a total of
_________ shares of Common Stock of the Company ("Common Stock") at a price
of $18.25 per share pursuant to its 1999 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 Common Stock at their Fair Market Value as
determined by the Human Resources Committee, or both.
1. Normal Exercise. This Option becomes exercisable at the rate of 25% of
----------------
the total shares on April 18 in each of the years 2002, 2003, 2004 and 2005.
This Option remains exercisable through April 17, 2010 unless Optionee is no
longer employed by the Company, in which case the Option is exercisable only in
accordance with the provisions of paragraph 3 below.
2. Acceleration. Notwithstanding the above, any shares not previously
------------
forfeited under this Option will become fully exercisable before the normal
exercise dates set forth in paragraph 1 hereof upon the occurrence of any of the
following events while Optionee is employed by the Company:
a. death of Optionee;
b. declaration, by the Committee, of Optionee's total and
permanent disability;
c. the voluntary termination of employment of Optionee (i) at or after
age 55 with 15 years of service with the Company or its Affiliates; or (ii) at
or after age 62;
d. a Change of Control; or
e. the involuntary termination of employment of Optionee, other than a
termination for any of the following reasons: Termination for Cause, Optionee's
engaging in competition with the Company or an Affiliate, or Optionee's engaging
in any activity or conduct contrary to the best interests of the Company or any
Affiliate. For purposes of this Option, involuntary termination shall include
(i) Optionee's involuntary termination of employment with the Company or an
Affiliate which employs Optionee; or (ii) the sale or other disposition of a
majority of the stock or assets of an Affiliate which employs Optionee. In no
event shall transfers of employment between the Company and any of its
Affiliates, or the creation of a class of stock of the Company which tracks the
performance of an Affiliate, be deemed to constitute an involuntary termination
of employment.
3. Exercise After Certain Events. Upon the occurrence of any of the events
------------------------------
described below, any shares that are exercisable upon such occurrence shall
remain exercisable during the period stated below, but, in any event, not later
than April 17, 2010:
a. If Optionee's employment is terminated due to declaration of total
and permanent disability, voluntary termination at or after the time set forth
in paragraph 2(c)(i) or (ii), or involuntary termination of employment (other
than for events described in Sections IV.A.1, 3 or 4 of the Plan), such shares
that are exercisable shall remain exercisable for five years thereafter;
b. If Optionee's employment is terminated due to death, such shares
that are exercisable shall remain exercisable for three years thereafter;
c. If Optionee's employment is terminated voluntarily prior to the time
set forth in paragraph 2(c) (i) or (ii), such shares that are exercisable shall
remain exercisable for six months after such voluntary termination;
d. 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 shares that are then exercisable
shall remain exercisable for seven days after such declaration; or
e. After a Change of Control, 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, such shares that are then exercisable shall remain
exercisable for seven days after a declaration that any of such events has
occurred.
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 a declaration of forfeiture, those shares that are exercisable at the
time of the declaration may be exercised as set forth in paragraph 3 hereof; all
other shares are forfeited.
5. Definitions. Unless otherwise defined in this Non-Qualified Stock
-----------
Option, 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
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 of any successor to the Company.
"Eligible Optionee" shall mean an Optionee who is actively at work at, or
on an approved leave of absence from, the Company or an Affiliate at the time of
exercise of an Eligible Option.
"Eligible Option" shall mean an outstanding Option, held by an Eligible
Optionee, which has a remaining term of at least one year.
6. 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
Non-Qualified Stock 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.
7. Grants of Restoration Options. If Optionee exercises this Option by
--------------------------------
tendering shares of Common Stock that have been held for at least six months,
and if Optionee is an Eligible Optionee and the Option qualifies as an Eligible
Option at the time of such exercise, then Optionee shall be entitled to a grant
of a Restoration Option to purchase a number of shares of Common Stock equal to
the number of shares so tendered. Such Restoration Option shall permit the
Optionee to purchase shares of Common Stock of the Company at an exercise price
equal to the New York Stock Exchange - Composite Transactions closing price on
the date of grant, and shall be subject to such other terms and conditions as
the Human Resources Committee of the Board shall determine.
ACKNOWLEDGED AND ACCEPTED: RALSTON PURINA COMPANY
- ---------------------------
Optionee
By:
-------------------------------
- ---------------------------- W. P. McGinnis,
Date Chief Executive Officer
NON-QUALIFIED STOCK OPTION
--------------------------
RALSTON PURINA COMPANY (the "Company"), effective April 18, 2000 grants this
Non-Qualified Stock Option to Chief Executive Officer("Optionee") to
purchase a total of _________shares of Common Stock of the Company
("Common Stock") at a price of $18.25 per share pursuant to its
1999 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 Common Stock
at their Fair Market Value as determined by the Human Resources Committee,
or both.
1. Normal Exercise. This Option becomes exercisable at the rate of 50% of
----------------
the total shares on April 18 in each of the years 2001 and 2002. This Option
remains exercisable through April 17, 2010 unless Optionee is no longer employed
by the Company, in which case the Option is exercisable only in accordance with
the provisions of paragraph 3 below.
2. Acceleration. Notwithstanding the above, any shares not previously
------------
forfeited under this Option will become fully exercisable before the normal
exercise dates set forth in paragraph 1 hereof upon the occurrence of any of the
following events while Optionee is employed by the Company:
a. death of Optionee;
b. declaration, by the Committee, of Optionee's total and
permanent disability;
c. a Change of Control; or
d. the involuntary termination of employment of Optionee, other than a
termination for any of the following reasons: Termination for Cause, Optionee's
engaging in competition with the Company or an Affiliate, or Optionee's engaging
in any activity or conduct contrary to the best interests of the Company or any
Affiliate. For purposes of this Option, involuntary termination shall include
(i) Optionee's involuntary termination of employment with the Company or an
Affiliate which employs Optionee; or (ii) the sale or other disposition of a
majority of the stock or assets of an Affiliate which employs Optionee. In no
event shall transfers of employment between the Company and any of its
Affiliates, or the creation of a class of stock of the Company which tracks the
performance of an Affiliate, be deemed to constitute an involuntary termination
of employment.
3. Exercise After Certain Events. Upon the occurrence of any of the events
------------------------------
described below, any shares that are exercisable upon such occurrence shall
remain exercisable during the period stated below, but, in any event, not later
than April 17, 2010:
a. If Optionee's employment is terminated due to declaration of total
and permanent disability or involuntary termination of employment (other than
for events described in Sections IV.A.1, 3 or 4 of the Plan), such shares that
are exercisable shall remain exercisable for five years thereafter;
b. If Optionee's employment is terminated due to death, such shares
that are exercisable shall remain exercisable for three years thereafter;
c. If Optionee's employment is terminated voluntarily prior to his
attainment of age 55, such shares that are exercisable shall remain exercisable
for six months after such voluntary termination;
d. 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 shares that are then exercisable
shall remain exercisable for seven days after such declaration; or
e. After a Change of Control, 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, such shares that are then exercisable shall remain
exercisable for seven days after a declaration that any of such events has
occurred.
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 a declaration of forfeiture, those shares that are exercisable at the
time of the declaration may be exercised as set forth in paragraph 3 hereof; all
other shares are forfeited.
5. Definitions. Unless otherwise defined in this Non-Qualified Stock
-----------
Option, 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
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 of any successor to the Company.
"Eligible Optionee" shall mean an Optionee who is actively at work at, or
on an approved leave of absence from, the Company or an Affiliate at the time of
exercise of an Eligible Option.
"Eligible Option" shall mean an outstanding Option, held by an Eligible
Optionee, which has a remaining term of at least one year.
6. 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
Non-Qualified Stock 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.
7. Grants of Restoration Options. If Optionee exercises this Option by
--------------------------------
tendering shares of Common Stock that have been held for at least six months,
and if Optionee is an Eligible Optionee and the Option qualifies as an Eligible
Option at the time of such exercise, then Optionee shall be entitled to a grant
of a Restoration Option to purchase a number of shares of Common Stock equal to
the number of shares so tendered. Such Restoration Option shall permit the
Optionee to purchase shares of Common Stock of the Company at an exercise price
equal to the New York Stock Exchange - Composite Transactions closing price on
the date of grant, and shall be subject to such other terms and conditions as
the Human Resources Committee of the Board shall determine.
<PAGE>
ACKNOWLEDGED AND ACCEPTED: RALSTON PURINA COMPANY
- ----------------------------
Optionee
By:
------------------------------
- ---------------------------- C. S. Sommer
Date Vice President, Administration
NON-QUALIFIED STOCK OPTION
--------------------------
RALSTON PURINA COMPANY (the "Company"), effective April 18, 2000 grants this
Non-Qualified Stock Option to Chief Financial Officer ("Optionee") to purchase a
total of ______shares of Common Stock of the Company ("Common Stock") at a
price of $18.25 per share pursuant to its 1999 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 Common Stock at their Fair Market Value as
determined by the Human Resources Committee, or both.
1. Normal Exercise. This Option becomes exercisable at the rate of 33-1/3%
----------------
of the total shares on April 18 in each of the years 2003, 2004 and 2005. This
Option remains exercisable through April 17, 2010 unless Optionee is no longer
employed by the Company, in which case the Option is exercisable only in
accordance with the provisions of paragraph 3 below.
2. Acceleration. Notwithstanding the above, any shares not previously
------------
forfeited under this Option will become fully exercisable before the normal
exercise dates set forth in paragraph 1 hereof upon the occurrence of any of the
following events while Optionee is employed by the Company:
a. death of Optionee;
b. declaration, by the Committee, of Optionee's total and
permanent disability; or
c. a Change of Control.
3. Exercise After Certain Events. Upon the occurrence of any of the events
------------------------------
described below, any shares that are exercisable upon such occurrence shall
remain exercisable during the period stated below, but, in any event, not later
than April 17, 2010:
a. If Optionee's employment is terminated due to declaration of total
and permanent disability, such shares that are exercisable shall remain
exercisable for five years thereafter;
b. If Optionee's employment is terminated due to death, such shares
that are exercisable shall remain exercisable for three years thereafter;
c. If Optionee's employment is terminated voluntarily or involuntarily
(other than a Termination for Cause), such shares that are exercisable shall
remain exercisable for six months after such termination;
d. 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 shares that are then exercisable
shall remain exercisable for seven days after such declaration; or
e. After a Change of Control, 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, such shares that are then exercisable shall remain
exercisable for seven days after a declaration that any of such events has
occurred.
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 a declaration of forfeiture, those shares that are exercisable at the
time of the declaration may be exercised as set forth in paragraph 3 hereof; all
other shares are forfeited.
5. Definitions. Unless otherwise defined in this Non-Qualified Stock
-----------
Option, 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
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 of any successor to the Company.
"Eligible Optionee" shall mean an Optionee who is actively at work at, or
on an approved leave of absence from, the Company or an Affiliate at the time of
exercise of an Eligible Option.
"Eligible Option" shall mean an outstanding Option, held by an Eligible
Optionee, which has a remaining term of at least one year.
6. 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
Non-Qualified Stock 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.
7. Grants of Restoration Options. If Optionee exercises this Option by
--------------------------------
tendering shares of Common Stock that have been held for at least six months,
and if Optionee is an Eligible Optionee and the Option qualifies as an Eligible
Option at the time of such exercise, then Optionee shall be entitled to a grant
of a Restoration Option to purchase a number of shares of Common Stock equal to
the number of shares so tendered. Such Restoration Option shall permit the
Optionee to purchase shares of Common Stock of the Company at an exercise price
equal to the New York Stock Exchange - Composite Transactions closing price on
the date of grant, and shall be subject to such other terms and conditions as
the Human Resources Committee of the Board shall determine.
ACKNOWLEDGED AND ACCEPTED: RALSTON PURINA COMPANY
____________________________
Optionee
By:
_________________________
____________________________ W. P. McGinnis,
Date Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 3/31/00
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> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 133,400
<SECURITIES> 0
<RECEIVABLES> 216,300
<ALLOWANCES> 4,500
<INVENTORY> 129,900
<CURRENT-ASSETS> 487,500
<PP&E> 1,204,600
<DEPRECIATION> 598,300
<TOTAL-ASSETS> 4,045,700
<CURRENT-LIABILITIES> 795,700
<BONDS> 1,249,700
<COMMON> 32,900
0
0
<OTHER-SE> 1,156,200
<TOTAL-LIABILITY-AND-EQUITY> 4,045,700
<SALES> 1,419,100
<TOTAL-REVENUES> 1,419,100
<CGS> 567,500
<TOTAL-COSTS> 567,500
<OTHER-EXPENSES> 391,200
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 91,400
<INCOME-PRETAX> 369,000
<INCOME-TAX> 96,600
<INCOME-CONTINUING> 286,200
<DISCONTINUED> 99,600
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 385,800
<EPS-BASIC> 1.33
<EPS-DILUTED> 1.32
<FN>
<F1>LOSS - PROVISION INCLUDED IN OTHER-EXPENSE ABOVE
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
RALSTON PURINA COMPANY STATEMENT OF EARNINGS FOR THE PERIOD ENDING 3/31/99 AND
BALANCE SHEET AT 9/30/99 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1999
<PERIOD-END> MAR-31-1999 SEP-30-1999
<CASH> 0<F2> 56,600<F3>
<SECURITIES> 0<F2> 0<F3>
<RECEIVABLES> 0<F2> 208,300<F3>
<ALLOWANCES> 0<F2> 4,700<F3>
<INVENTORY> 0<F2> 119,200<F3>
<CURRENT-ASSETS> 0<F2> 418,200<F3>
<PP&E> 0<F2> 1,164,200<F3>
<DEPRECIATION> 0<F2> 574,700<F3>
<TOTAL-ASSETS> 0<F2> 4,735,200<F3>
<CURRENT-LIABILITIES> 0<F2> 1,385,600<F3>
<BONDS> 0<F2> 1,249,900<F3>
<COMMON> 0<F2> 32,900<F3>
0<F2> 0<F3>
0<F2> 0<F3>
<OTHER-SE> 0<F2> 1,224,100<F3>
<TOTAL-LIABILITY-AND-EQUITY> 0<F2> 4,735,200<F3>
<SALES> 1,369,700<F3> 0<F2>
<TOTAL-REVENUES> 1,369,700<F3> 0<F2>
<CGS> 598,900<F3> 0<F2>
<TOTAL-COSTS> 598,900<F3> 0<F2>
<OTHER-EXPENSES> 343,600<F3> 0<F2>
<LOSS-PROVISION> 0<F1> 0<F2>
<INTEREST-EXPENSE> 92,900<F3> 0<F2>
<INCOME-PRETAX> 334,300<F3> 0<F2>
<INCOME-TAX> 115,300<F3> 0<F2>
<INCOME-CONTINUING> 236,200<F3> 0<F2>
<DISCONTINUED> 47,800<F3> 0<F2>
<EXTRAORDINARY> 0<F3> 0<F2>
<CHANGES> 0<F3> 0<F2>
<NET-INCOME> 284,000<F3> 0<F2>
<EPS-BASIC> 0.92<F3> 0<F2>
<EPS-DILUTED> 0.89<F3> 0<F2>
<FN>
<F1>LOSS - PROVISION INCLUDED IN OTHER-EXPENSE ABOVE
<F2>INFORMATION NOT PROVIDED AS PART OF 10-Q FILING FOR PERIOD ENDED 3-31-00
<F3>AMOUNTS HAVE BEEN RESTATED DUE TO THE SPIN-OFF OF THE BATTERY PRODUCTS BUSINESS
</FN>
</TABLE>
