SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1999
Commission File No. 1-4582
RALSTON PURINA COMPANY
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(Exact name of registrant as specified in its charter)
MISSOURI 43-0470580
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(State of Incorporation) (I.R.S. Employer Identification No.)
CHECKERBOARD SQUARE, ST. LOUIS MISSOURI 63164
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(Address of principal executive offices) (Zip Code)
(314) 982-1000
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(Registrant's telephone number, including area code)
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
YES: X NO: _____
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Number of shares of Ralston Purina common stock, $.10 par value, outstanding as
of the close of business on February 9, 2000: 301,817,726
<PAGE>
PART I - FINANCIAL INFORMATION
RALSTON PURINA COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
(dollars in millions except per share data)
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OPERATING RESULTS
Net earnings for the quarter ended December 31, 1999 were $242.8, or $.83 and
$.82 per share on a basic and diluted basis, respectively. Included in net
earnings for the current quarter is an unrealized after-tax gain of $48.4, or
$.16 per basic and diluted share, representing a market value adjustment of the
Company's stock appreciation income linked securities (SAILS) debt. Also
included in the current quarter is an after-tax reversal of prior years'
restructuring provisions of $4.5, or $.02 per basic and diluted share.
The fiscal 1999 first quarter net earnings of $176.8, or $.58 and $.55 per basic
and diluted share, respectively, included an unrealized after-tax gain of $44.9,
or $.15 and $.14 per basic and diluted share, respectively, representing a
market value adjustment of the Company's SAILS debt.
Earnings before the unusual items discussed above were $189.9 for the quarter
ended December 31, 1999 compared to $131.9 in the prior year quarter. Earnings
increased primarily on higher operating earnings. Earnings per share excluding
unusual items were $.65 and $.64 on a basic and diluted basis, respectively, for
the current quarter compared to $.43 and $.41 a year ago.
RESULTS OF OPERATIONS
Net sales increased 9.5% in the quarter ended December 31, 1999 on higher sales
in each of the Company's operating segments. See the following section for
comments on sales changes by operating segment.
Gross profit increased 18.6% in the current quarter due to increases in all
operating segments. As a percentage of sales, gross profit was 55.6% in the
current quarter compared to 51.4% in the prior year first quarter. The
increased percentage in the current quarter reflects improved margins for
Battery Products, North American Pet Foods and International Pet Foods.
Selling, general and administrative expenses decreased 5.7% in the current
quarter due primarily to decreases in Battery Products and favorable
mark-to-market adjustments on liabilities denominated in share equivalents.
These decreases were partially offset by higher expenses for North American Pet
Foods. Selling, general and administrative expenses were 15.9% and 18.5% of
sales in the current and prior year first quarters, respectively.
Advertising and promotion expense increased 18.8% in the current quarter due to
higher spending by all operating segments. As a percentage of sales,
advertising and promotion expense was 16.3% in the current quarter and 15.0% a
year ago. Other income/expense, net, was unfavorable $5.0 for the quarter
primarily due to lower returns on other investments.
Income taxes, which include federal, state and foreign taxes, were 36.6% of
pre-tax earnings before equity earnings for the current quarter compared to
36.0% in the prior year.
OPERATING SEGMENTS
See Note 2 of the Notes to Condensed Financial Statements for a table of segment
sales and profitability for the quarters ended December 31, 1999 and 1998.
Sales for North American Pet Foods increased 7.1% in the quarter on higher
volumes. Profitability increased 16.3% in the quarter due to the sales increase
coupled with lower ingredient costs, partially offset by increased advertising
and promotion expenses.
International Pet Foods' sales increased 1.5% in the quarter as a result of
volume increases in most world areas, partially offset by unfavorable net
pricing in certain South American markets. Profitability for this segment
increased 8.1% in the quarter due to the sales increase and margin improvements
as a result of cost reduction programs and plant efficiencies. These favorable
results were partially offset by increased advertising and promotion expenses.
Sales for Golden Products increased 20.2% in the quarter due to significant
volume increases in scooping litter as well as increased conventional litter
volumes. Profitability for Golden Products increased 27.7% due to the sales
increase, partially offset by increased advertising and promotion expenses and
increased selling costs.
On November 1, 1999, the Company completed the sale of its Energizer Power
Systems Original Equipment Manufacturers' (OEM) rechargeable battery business to
Moltech Corporation. This business contributed sales of $12.5 and $30.3 in the
current and prior year quarters, respectively, and pre-tax operating losses of
$2.9 and $4.3, respectively.
Sales for Battery Products increased 12.0% in the quarter. Excluding sales
associated with the OEM business, sales increased 15.7%. Strong Energizer
branded alkaline volume growth, particularly in the key U.S. market, was
partially offset by lower carbon zinc sales in Europe and North America. The
alkaline volume growth was fueled by Year 2000 preparedness demands.
Profitability for Battery Products increased 58.3% in the quarter. Excluding
the OEM business, profitability increased 54.9% primarily on the sales increase,
particularly in North America and Asia with improved results of 44.1% and 46.9%,
respectively. Europe also contributed to the increase as lower sales were more
than offset by lower production and overhead costs, while South and Central
American results were flat.
FINANCIAL CONDITION
The Company's primary source of liquidity is cash flow generated from
operations. The Company's investments in E.I. du Pont de Nemours and Company,
Interstate Bakeries Corporation and Conoco Inc. provide additional sources of
liquidity. For the quarter ended December 31, 1999, cash flow from operations
was $209.3 compared to $108.8 in the prior year quarter. This increase results
primarily from higher cash earnings. Current liabilities exceeded current
assets by $417.2 at December 31, 1999 and by $440.6 at September 30, 1999.
During the current quarter, the Company received net cash proceeds from the
issuance of short-term debt of $118.4 which was used for seasonal working
capital needs and for share repurchases. The Company used cash of $233.2 during
the current quarter to complete the Board of Directors' previous authorization
for share repurchases and repurchase approximately 550,000 shares under a new
authorization. As of February 7, 2000, approximately 5,387,000 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
During the quarter ended December 31, 1999, the Company recorded an unrealized
after-tax gain of $48.4, or $75.6 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 $.16 per basic and diluted share.
During the prior year first quarter, the Company recorded an unrealized gain on
the SAILS of $70.2 and $44.9 on a pre-tax and after-tax basis, respectively, or
$.15 and $.14 per basic and diluted share, respectively. At December 31, 1999,
the cumulative unrealized pre-tax gain since issuance is $199.1, 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 $18.125 at
December 31, 1999.
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 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.
ESOP CONVERSION
At the end of December 1998, the Company converted all of the outstanding shares
of Series A 6.75% Preferred Stock into RAL Stock in accordance with terms of the
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.
RESTRUCTURING ACTIVITIES
During the quarter ended December 31, 1999, the Company recorded a net pre-tax
restructuring reversal of $5.8 related to prior years' charges. On an after-tax
basis, the net reversal was $4.5, or $.02 per basic and diluted share.
The net reversal was comprised of additional charges of $3.8, including $.1 of
cash charges and $3.7 of non-cash charges, more than offset by reversals of
prior years' charges of $9.6, including $3.2 of cash charges and $6.4 of
non-cash charges. The additional charges primarily relate to inventory
write-offs, and the reversals primarily relate to adjustments to fixed asset
impairment write-offs.
During the quarter ended December 31, 1999, approximately 120 employees were
terminated in connection with restructuring accruals established by the Company
in fiscal years 1997 through 1999. See the Notes to Condensed Financial
Statements for a table that presents, by major cost component and by year of
provision, activity during the quarter ended December 31, 1999 related to the
Company's restructuring charges.
YEAR 2000 UPDATE
As of the date hereof, the Company has not experienced any significant business
disruptions as a result of Year 2000.
SPIN-OFF OF EVEREADY BATTERY COMPANY, INC.
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 expected to occur in April 2000 and is contingent
upon a favorable tax ruling from the Internal Revenue Service, effectiveness of
a registration statement relating to the spin-off and final approval by the
Ralston Purina Company Board of Directors.
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.
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<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED DECEMBER 31,
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1999 1998
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<S> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . $1,414.5 $1,291.8
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Costs and Expenses
Cost of products sold . . . . . . . . . . . . . . . . . 627.5 628.4
Selling, general and administrative . . . . . . . . . . 225.5 239.2
Advertising and promotion . . . . . . . . . . . . . . . 230.3 193.9
Interest expense. . . . . . . . . . . . . . . . . . . . 48.2 49.4
Unrealized gain on SAILS debt . . . . . . . . . . . . . (75.6) (70.2)
Restructuring reversals . . . . . . . . . . . . . . . . (5.8) -
Other (income)/expense, net . . . . . . . . . . . . . . (6.0) (11.0)
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1,044.1 1,029.7
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Earnings before Income Taxes and
Equity Earnings . . . . . . . . . . . . . . . . . . . . 370.4 262.1
Income Tax Provision. . . . . . . . . . . . . . . . . . . (135.4) (94.3)
Equity Earnings, Net of Taxes . . . . . . . . . . . . . . 7.8 9.0
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Net Earnings. . . . . . . . . . . . . . . . . . . . . . . 242.8 176.8
Preferred Stock Dividend, Net of Taxes. . . . . . . . . . - (2.6)
--------- ---------
Earnings Available to Common Shareholders . . . . . . . . $ 242.8 $ 174.2
========= =========
Net Earnings Per Share
Basic . . . . . . . . . . . . . . . . . . . . . . . . $ 0.83 $ 0.58
Diluted . . . . . . . . . . . . . . . . . . . . . . . $ 0.82 $ 0.55
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
DECEMBER 31, SEPTEMBER 30,
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<S> <C> <C>
1999 1999
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ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 110.4 $ 84.7
Receivables, less allowance for doubtful accounts
of $25.1 and $24.5, respectively. . . . . . . . . . . . . . . . . . 870.2 715.8
Inventories
Raw materials and supplies. . . . . . . . . . . . . . . . . . . . . 108.8 128.5
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . 76.6 111.1
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . 286.5 309.4
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . 66.9 123.0
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Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . 1,519.4 1,472.5
Investments and Other Assets. . . . . . . . . . . . . . . . . . . . . . 2,922.2 2,824.6
Property at Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,202.7 2,194.8
Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . 1,133.4 1,131.1
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1,069.3 1,063.7
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Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,510.9 $ 5,360.8
============== ===============
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt. . . . . . . . . . . . . . . . . $ 295.7 $ 371.3
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809.6 690.5
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 265.3 316.0
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 566.0 535.3
-------------- ---------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 1,936.6 1,913.1
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,251.2 1,251.8
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 461.0 397.4
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 551.9 541.5
Shareholders Equity
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.9 32.9
Capital in excess of par value. . . . . . . . . . . . . . . . . . . . 173.8 172.8
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 2,113.5 1,871.7
Common stock in treasury, at cost . . . . . . . . . . . . . . . . . . (722.9) (493.7)
Unearned portion of restricted stock. . . . . . . . . . . . . . . . . (2.5) (2.9)
Value of common stock held in Grantor Trust . . . . . . . . . . . . . (201.0) (199.6)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . (101.7) (98.4)
Net unrealized holding gain/(loss) on available-for-sale securities 19.4 (24.5)
Minimum pension liability . . . . . . . . . . . . . . . . . . . . . (1.3) (1.3)
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Accumulated other comprehensive income. . . . . . . . . . . . . . . . (83.6) (124.2)
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Total Shareholders Equity . . . . . . . . . . . . . . . . . . . . . 1,310.2 1,257.0
-------------- ---------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,510.9 $ 5,360.8
============== ===============
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
QUARTER ENDED DECEMBER 31,
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<S> <C> <C>
1999 1998
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Cash Flow from Operations
Net earnings. . . . . . . . . . . . . . . . . . . . . . $242.8 $176.8
Unrealized gain on SAILS debt . . . . . . . . . . . . (75.6) (70.2)
Non-cash items included in income . . . . . . . . . . . 125.3 92.4
Changes in assets and liabilities used in operations. . (83.8) (58.7)
Other, net. . . . . . . . . . . . . . . . . . . . . 0.6 (31.5)
-------- -------
Net cash flow from operations . . . . . . . . . . . 209.3 108.8
-------- -------
Cash Flow from Investing Activities
Property additions, net . . . . . . . . . . . . (36.1) (32.5)
Other, net. . . . . . . . . . . . . . . . . . . . . (4.7) (3.3)
------- -------
Net cash used by investing activities . . . . . . . (40.8) (35.8)
------- -------
Cash Flow from Financing Activities
Net cash proceeds from (payment of) debt. . . . . 118.4 (38.9)
Dividends paid. . . . . . . . . . . . . . . . . . . (29.1) (38.5)
Treasury stock purchases. . . . . . . . . . . . . . . (233.2) (22.6)
Other, net. . . . . . . . . . . . . . . . . . . . . 1.6 6.2
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Net cash used by financing activities . . . . . . . (142.3) (93.8)
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Effect of Exchange Rate Changes on Cash . . . . . . . . (0.5) 1.0
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Net Increase (Decrease) in Cash and Cash Equivalents. . 25.7 (19.8)
Cash and Cash Equivalents, Beginning of Period. . . . . 84.7 89.8
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Cash and Cash Equivalents, End of Period. . . . . . . . . $110.4 $ 70.0
========= =======
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
RALSTON PURINA COMPANY AND SUBSIDAIRES
NOTES TO CONDENSED FINFNACIAL STATEMENTS
DECEMBER 31, 1999
(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 - Segment sales and profitability for the quarters ended December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Quarter ended December 31,
<S> <C> <C>
NET SALES. . . . . . . . 1999 1998
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North American Pet Foods $ 560.6 $ 523.2
International Pet Foods. 106.9 105.3
Golden Products. . . . . 60.8 50.6
Battery Products . . . . 686.2 612.7
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TOTAL. . . . . . . . $ 1,414.5 $ 1,291.8
======== =========
</TABLE>
<TABLE>
<CAPTION>
Quarter ended December 31,
<S> <C> <C>
PROFITABILITY . . . . . . . . . . . . . . . . . . . 1999 1998
------- -------
North American Pet Foods. . . . . . . . . . . . . . . $ 130.9 $112.6
International Pet Foods . . . . . . . . . . . . . . . 12.0 11.1
Golden Products . . . . . . . . . . . . . . . . . . . 15.2 11.9
Battery Products. . . . . . . . . . . . . . . . . . . 175.6 110.9
---------- -------
TOTAL SEGMENT PROFITABILITY . . . . . . . . . . . 333.7 246.5
General corporate income/(expenses) (a) . . . . 13.8 5.1
Amortization of goodwill and other intangible assets. (10.3) (10.3)
Unusual items (b) .. . . . . . . . . . . 81.4 70.2
Interest expense. . . . . . . . . . . . . . . . . . . (48.2) (49.4)
---------- -------
EARNINGS BEFORE INCOME TAXES AND EQUITY EARNINGS $ 370.4 $262.1
========== =======
</TABLE>
Additionally, segment sales and profitability for the quarters ended March 31,
June 30, and September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Quarter ended
<S> <C> <C> <C>
March 31, June 30, Sept. 30,
-------- ------- ---------
1999 1999 1999
NET SALES . . . . . . . . . . . . . . . -------------- -------------- --------
North American Pet Foods $ 534.2 $ 500.9 $ 534.0
International Pet Foods 102.9 102.2 101.5
Golden Products 53.5 52.8 59.4
Battery Products 439.6 432.6 515.1
---------- -------- --------
TOTAL $ 1,130.2 $1,088.5 $1,210.0
============== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Quarter ended
<S> <C> <C> <C>
PROFITABILITY. . . . . . . . . . . . . . . . . . . . . . . March 31, June 30, Sept. 30,
--------- -------- ---------
1999 1999 1999
---- ---- ----
North American Pet Foods . . . . . . . . . . . . . . . . . $ 111.7 $ 102.5 $ 112.1
International Pet Foods. . . . . . . . . . . . . . . . . . 11.0 7.7 7.1
Golden Products. . . . . . . . . . . . . . . . . . . . 12.7 11.9 13.1
Battery Products . . . . . . . . . . . . . . . . 42.4 45.3 76.6
-------- ---------- -----------
TOTAL SEGMENT PROFITABILITY. . . . . . . . . . 177.8 167.4 208.9
General corporate income/(expenses) (a). . . . . . . . 11.2 6.6 2.9
Amortization of goodwill and other
intangible assets. (10.3) (10.4) (10.5)
Unusual items (b) .. . . . . . . . . . . . . . . 18.9 (46.2) 71.4
Interest expense . . . . . . . . . . . . . . . . . . . . . (44.9) (45.2) (43.9)
-------- ---------- ----------
EARNINGS BEFORE INCOME TAXES AND EQUITY EARNINGS. . . $ 152.7 $ 72.2 $ 228.8
================ =============== ========
</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 or losses on SAILS debt for all
quarters; restructuring provisions or reversals for the quarters
ended March 31, June 30, September 30 and December 31, 1999; gain
on the sale of DuPont stock for the quarters ended June 30 and
September 30, 1999; and gain on the conversion of DuPont stock
for the quarter ended September 30, 1999.
NOTE 3 - During the quarter ended December 31, 1999, the Company recorded an
unrealized after-tax gain of $48.4, or $75.6 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 $.16 per basic and diluted
share. For the prior year first quarter, the unrealized gain on the SAILS was
$70.2 and $44.9 on a pre-tax and after-tax basis, respectively, or $.15 and $.14
per basic and diluted share, respectively.
At December 31, 1999, the cumulative unrealized pre-tax gain since debt issuance
is $199.1, 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 $18.125 per share at December 31, 1999.
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 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 4 - During the quarter ended December 31, 1999, the Company recorded a net
pre-tax restructuring reversal of $5.8 related to prior years' charges. On an
after-tax basis, the net reversal was $4.5, or $.02 per basic and diluted share.
The net reversal was comprised of additional charges of $3.8, including $.1 of
cash charges and $3.7 of non-cash charges, more than offset by reversals of
prior years' charges of $9.6, including $3.2 of cash charges and $6.4 of
non-cash charges. The additional charges primarily relate to inventory
write-offs, and the reversals primarily relate to adjustments to fixed asset
impairment write-offs.
During the quarter ended December 31, 1999, approximately 120 employees were
terminated in connection with restructuring accruals established by the Company
in fiscal years 1997 through 1999. The following table presents the activity,
including all reserve adjustments and spending against reserve balances for
termination benefits and other cash costs, impacting the restructuring reserve
during the quarter ended December 31, 1999. This table reflects activity by
plan year that each restructuring reserve was taken. Except for disposition of
certain assets held for disposal, substantially all actions associated with the
total remaining reserve balance will be completed by the end of fiscal 2000.
<PAGE>
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDAIRES
NOTES TO CONDENSED FINFNACIAL STATEMENTS
DECEMBER 31, 1999
(Dollars in millions except per share data)
<S> <C> <C> <C> <C>
BALANCE PROVISION/ BALANCE
9/30/99 REVERSALS ACTIVITY 12/31/99
1995 PLAN
Termination benefits. . - - - -
Other cash costs. . . . 0.8 - - 0.8
Fixed asset impairments - (3.2) 3.2 -
Other noncash charges . - - - -
-------- ------------ --------- --------
Total . . . . . . . . . 0.8 (3.2) 3.2 0.8
-------- ----------- --------- --------
1996 PLAN
Termination benefits. . - - - -
Other cash costs. . . . 0.8 - - 0.8
Fixed asset impairments - 1.0 (1.0) -
Other noncash charges . - - - -
-------- ------------ --------- --------
Total . . . . . . . . . 0.8 1.0 (1.0) 0.8
-------- ------------ --------- --------
1997 PLAN
Termination benefits. . 6.8 (2.8) (1.6) 2.4
Other cash costs. . . . 1.7 (0.4) - 1.3
Fixed asset impairments - (2.2) 2.2 -
Other noncash charges . - 2.7 (2.7) -
-------- ------------ --------- --------
Total . . . . . . . . . 8.5 (2.7) (2.1) 3.7
-------- ------------ --------- --------
1998 PLAN
Termination benefits. . 2.4 - (0.7) 1.7
Other cash costs. . . . 2.0 - (0.2) 1.8
Fixed asset impairments - - - -
Other noncash charges . - - - -
-------- ------------ --------- --------
Total . . . . . . . . . 4.4 - (0.9) 3.5
-------- ------------ --------- --------
1999 PLAN
Termination benefits. . 0.5 0.1 (0.2) 0.4
Other cash costs. . . . 0.2 - - 0.2
Fixed asset impairments - (1.0) 1.0 -
Other noncash charges . - - - -
-------- ------------ --------- --------
Total . . . . . . . . . 0.7 (0.9) 0.8 0.6
-------- ------------ --------- --------
GRAND TOTAL . $ 15.2 $ (5.8) $ - $ 9.4
======== ============ ========== =========
</TABLE>
NOTE 5 - On November 1, 1999, the Company completed the sale of its Energizer
Power Systems Original Equipment Manufacturers' (OEM) rechargeable battery
business to Moltech Corporation for approximately $20.
NOTE 6 - 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 7 - The components of total comprehensive income for the quarters ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Quarter Ended December 31,
1999 1998
--------- -------
<S> <C> <C>
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . $ 242.8 $ 176.8
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments . . . . . . . . . (3.3) 9.5
Unrealized gains/(losses) on available-for-sale securities 43.9 (46.4)
-------- ------
Total Other Comprehensive Income . . . . . . . . . . . . . 40.6 (36.9)
------- -------
Total Comprehensive Income . . . . . . . . . . . $ 283.4 $139.9
======= =======
</TABLE>
NOTE 8 - Other (income)/expense, net, for the quarters ended December 31, 1999
and 1998, consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Quarter ended December 31,
1999 1998
---------- -------
Net translation and exchange loss. . . . . $ 1.1 $ 1.5
Dividends on available-for-sale securities (7.0) (7.9)
Return on other investments. . . . . . . . 0.8 (3.1)
Miscellaneous (income)/expense . . . . . . (0.9) (1.5)
------- -------
$ (6.0) $(11.0)
======= =======
</TABLE>
NOTE 9 - The following table sets forth the computation of basic and diluted
earnings per share for the quarters ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDAIRES
NOTES TO CONDENSED FINFNACIAL STATEMENTS
DECEMBER 31, 1999
(Dollars in millions except per share data)
Quarter Ended December 31,
--------------------------
<S> <C> <C>
1999 1998
------ -------
Numerator:
Net Earnings . . . . . . . . . . . . . . . . . $ 242.8 $176.8
Preferred stock dividends. . . . . . . . . - (2.6)
Numerator for basic earnings per share - ------- -------
Earnings available to common shareholders $ 242.8 $174.2
Effect of dilutive securities:
ESOP stock. . . . . . . . . . . . . . . - 2.5
Numerator for diluted earnings per share - ------- -------
Earnings available to common shareholders $ 242.8 $176.7
------- -------
Denominator:
Denominator for basic earnings per share -
weighted average shares * . . . . . . 292.2 299.1
Effect of dilutive securities:
ESOP stock. . . . . . . . . . . . - 16.2
Stock options . . . . . . . . . . . . 2.9 4.1
------- -------
Dilutive potential common shares . . . . . . . 2.9 20.3
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions. . . . . 295.1 319.4
======= =======
Net earnings per share:
Basic. . . . . . . . . . . . . . . . . . . . . $ 0.83 $ 0.58
Diluted. . . . . . . . . . . . . . . . . . . . $ 0.82 $ 0.55
</TABLE>
*Weighted average shares used for the computation of basic earnings per share
excludes 13,785,000 and 13,559,000 shares of common stock held by the Company's
Grantor Trust at December 31, 1999 and 1998, respectively.
NOTE 10 - At December 31, 1999, there were 290,116,000 shares of common stock
outstanding, exclusive of 24,654,000 shares held in treasury and 13,785,000
Grantor Trust shares. 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.
NOTE 11 - Investments and Other Assets consist of the following:
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
<S> <C> <C>
1999 1999
--------- --------
Goodwill. . . . . . . . . . . . . . $ 493.2 $ 499.9
Other intangible assets . . . . . . 227.4 215.3
Investments in affiliated companies 373.6 363.7
Available-for-sale securities . . . 1,254.2 1,185.5
Deferred charges and other assets . 573.8 560.2
--------- ---------
$ 2,922.2 $ 2,824.6
========== ========
</TABLE>
NOTE 12 - Available-for-sale securities at September 30 and December 31, 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 gain/(loss), tax (provision)/benefit, and net
unrealized holding gain/(loss) for these securities as of September 30 and
December 31, 1999. The changes in net unrealized holding gain/(loss), net of
tax, for the quarters ended December 31, 1999 and 1998 are included as a
component of Other Comprehensive Income as shown in Note 7, above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Unreliazed Tax Net Unrealized
Aggregate Holding (Provision)/ Holding
Fair Value Gain/(Loss) Benefit Gain/(Loss)
---------- ---------------- ------------- ---------------
December 31, 1999. $ 1,254.2 $ 30.4 ($11.0) $ 19.4
September 30, 1999 $1,185.5 ($38.3) $13.8 ($24.5)
</TABLE>
PART II - OTHER INFORMATION
------------------
There is no information required to be reported under any items except those
indicated below.
Item 4. Submission of Matter to a Vote of Security Holders
----------------------------------------------------------
The Company held its Annual Meeting of Shareholders on January 27, 2000, for the
purpose of electing five directors to serve three-year terms ending in January
2003, to ratify the Board of Directors' appointment of PricewaterhouseCoopers
LLP as independent accountants for the Company for the fiscal year ending
September 30, 2000, and to approve the adoption of the Ralston Purina Company
Executive Incentive Compensation Plan.
The number of votes cast, and the number of shares voting for or against each
candidate and the number of votes cast for the other matters submitted for
approval, as well as the number of abstentions with respect thereto, is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
VOTES VOTES
FOR WITHHELD
John H. Biggs. . . . . . . . . . . 254,689,144 3,240,172
David C. Farrell . . . . . . . . . 254,745,719 3,183,597
J. Patrick Mulcahy . . . . . . . 253,960,863 3,968,453
William P. Stiritz . . . . . . . . 253,538,367 4,390,949
Ronald L. Thompson . . . . . . . 254,676,282 3,253,034
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VOTES VOTES VOTES
FOR AGAINST ABSTAINED
Ratification of
PricewaterhouseCoopers LLP . . . . . 254,676,033 1,756,587 1,496,696
Adoption of the Ralston Purina
Company Executive Incentive
Compensation Plan 234,524,131 18,753,352 4,651,833
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
-------------------------------------
(a) Exhibits filed with this Report:
(10)(i) Ralston Purina Company Executive Incentive
Compensation Plan, incorporated by reference
to Appendix A of the Company's Proxy Statement
dated December 10, 1999
(10)(ii) Form of Amendment to 1998 Leveraged Incentive
Award
(10)(iii) Amendment to Executive Health Plan dated
December 16, 1999
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter for which this report is filed.
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: February 14, 2000
<PAGE>
EXHIBIT INDEX
- ---------------------
Exhibits
- ----------
EX-27 Financial data schedule for 1st Quarter 2000
(provided electronically)
EX-10 Material Contracts
(10)(ii) Form of Amendment to 1998 Leveraged Incentive
Award
(10)(iii) Amendment to Executive Health Plan dated
December 16, 1999
Exhibit 27
(Document prepared on Edgar)
AMENDMENT TO 1998 LEVERAGED INCENTIVE AWARD
-------------------------------------------
This Amendment effective as of October 1, 1998, by and between Ralston Purina
Company, a Missouri corporation (the "Company") and___________, ("Executive"),
to the 1998 Leveraged Incentive Plan Award (the "1998 LIP Award") granted to
the Executive on October 1, 1998.
WHEREAS, Company adopted the 1998 Leveraged Incentive Plan effective October 1,
1998, (the "1998 LIP") to provide intermediate incentive awards to certain key
executives;
WHEREAS, Company granted Executive a 1998 LIP Award effective October 1, 1998,
payable September 30, 2001, in accordance with the terms of the 1998 LIP;
WHEREAS, the 1998 LIP Award is subject to a mandatory deferral in the event it
is not deductible compensation for the fiscal year ending September 30, 2001
because of the million dollar deduction limitation set forth in Section 162(m)
of the Internal Revenue Code (the "Code");
WHEREAS, on November 18, 1999, the Company adopted an Executive Incentive
Compensation Plan (the "Executive Incentive Plan") to be presented to
shareholders of the Company for approval at the January 27, 2000, Annual
Shareholder Meeting, for the purpose of qualifying annual incentive awards and
intermediate incentive awards to certain key executives as "performance-based
compensation", defined under Code Section 162(m) exempt from the million dollar
deduction limitation.
WHEREAS, the Company has designed the Executive Incentive Plan to be
retroactively effective with respect to the 1998 LIP Award granted Executive;
and,
WHEREAS, the 1998 LIP Award will qualify as performance-based compensation
exempt from the million dollar deduction and no longer subject to mandatory
deferral if subject to the terms and conditions of the Executive Incentive Plan
as ultimately approved by shareholders.
NOW THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive agree as follows:
The 1998 Leveraged Incentive Plan Award (the "1998 LIP Award") granted to
Executive as of October 1, 1998 by the Company, is hereby amended, retroactively
effective as of October 1, 1998, to be governed solely by the terms and
conditions of the Executive Incentive Compensation Plan as of October 1, 1998
with respect to the 1998 LIP Award, and no longer to be subject to the terms and
conditions of the 1998 Leveraged Incentive Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of December 8, 1999.
EXECUTIVE RALSTON PURINA COMPANY
- ------------------- by C. S. SOMMER
----------------------
C.S. Sommer
AMENDMENT TO EXECUTIVE HEALTH PLAN
----------------------------------
Under authority delegated to it, Management elects to modify the Executive
Health Plan, effective January 1, 2000, to increase the lifetime benefit maximum
from $750,000 to $1,000,000 for retirees participating in the Executive Health
Plan who are ineligible for the Comprehensive Health Plan. The increased
lifetime maximum will be consistent with the lifetime maximum provided under the
Comprehensive Health Plan.
W. P. McGinnis
- ---------------
W. P. McGinnis
Date: -----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 12/31/99
RALSTON PURINA COMPANY BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 110,400
<SECURITIES> 0
<RECEIVABLES> 895,300
<ALLOWANCES> 25,100
<INVENTORY> 471,900
<CURRENT-ASSETS> 1,519,400
<PP&E> 2,202,700
<DEPRECIATION> 1,133,400
<TOTAL-ASSETS> 5,510,900
<CURRENT-LIABILITIES> 1,936,600
<BONDS> 1,251,200
0
0
<COMMON> 32,900
<OTHER-SE> 1,277,300
<TOTAL-LIABILITY-AND-EQUITY> 5,510,900
<SALES> 1,414,500
<TOTAL-REVENUES> 1,414,500
<CGS> 627,500
<TOTAL-COSTS> 627,500
<OTHER-EXPENSES> 368,400
<LOSS-PROVISION> 0 <F1>
<INTEREST-EXPENSE> 48,200
<INCOME-PRETAX> 370,400
<INCOME-TAX> 135,400
<INCOME-CONTINUING> 242,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,800
<EPS-BASIC> .83
<EPS-DILUTED> .82
<FN>
<F1> LOSS - PROVISION INCLUDED IN OTHER-EXPENSES ABOVE
</TABLE>
