PAGE 7
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
_ Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 1-2944
STOKELY-VAN CAMP, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-0690290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Quaker Tower
P.O. Box 049001 Chicago, Illinois 60604-9001
(Address of principal executive office)(Zip Code)
(312) 222-7111
(Registrant's telephone number, including area code)
Indicate by check mark whether the 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 (or for such shorter
period that the registrant was required to file for such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES XX NO ___
Registrant had 2,989,371 shares of Common Stock outstanding on
April 30, 1994, all of which were held by The Quaker Oats Company.
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Income
and Reinvested Earnings for the Nine and Three Months
Ended March 31, 1994 and 1993 3-4
Condensed Consolidated Balance Sheets as of
March 31, 1994 and June 30, 1993 5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
March 31, 1994 and 1993 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations8-10
PART II - OTHER INFORMATION 11
SIGNATURES 12
<TABLE>
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
<CAPTION>
Dollars in
Millions
Nine Months Ended
March 31
1994 1993
<S> <C> <C>
Net sales $657.6 $540.1
Cost of goods sold 347.8 278.6
Gross profit 309.8 261.5
Selling, general and administrative 256.2 224.9
expenses
Interest (income) - net (8.8) (5.0)
Other (income) - net (2.8) (1.6)
Income before income taxes and cumulative
effect of 65.2 43.2
accounting changes
Provision for income taxes 26.2 17.3
Income before cumulative effect of 39.0 25.9
accounting changes
Cumulative effect of accounting changes - -- 14.0
net of tax
Net income 39.0 11.9
Dividends on preference and preferred (0.6) (0.6)
stock
Reinvested Earnings - Beginning Balance 475.1 429.9
Reinvested Earnings - Ending Balance $513.5 $441.2
<FN>
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<TABLE>
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
<CAPTION>
Dollars in
Millions
Three Months Ended
March 31
1994 1993
<S> <C> <C>
Net sales $191.3 $168.0
Cost of goods sold 105.3 91.5
Gross profit 86.0 76.5
Selling, general and administrative 77.0 64.1
expenses
Interest (income) - net (3.7) (2.1)
Other (income) - net (0.7) (0.6)
Income before income taxes 13.4 15.1
Provision for income taxes 5.2 6.1
Net income 8.2 9.0
Dividends on preference and preferred (0.2) (0.2)
stock
Reinvested Earnings - Beginning Balance 505.5 432.4
Reinvested Earnings - Ending Balance $513.5 $441.2
<FN>
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<TABLE>
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
Dollars in Millions March 31 June 30
1994 1993
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $16.3 $--
Due from The Quaker Oats Company 455.6 399.2
Trade accounts receivable - net of 66.0 97.1
allowances
Inventories:
Finished goods 57.9 45.7
Materials and supplies 10.6 10.6
Total inventories 68.5 56.3
Other current assets 16.3 12.7
Total Current Assets 622.7 565.3
Other Assets 6.0 8.7
Property, plant and equipment 206.4 193.1
Less accumulated depreciation (67.2) (59.7)
Property - Net 139.2 133.4
Total Assets $767.9 $707.4
Liabilities and Shareholders' Equity
Current Liabilities:
Trade accounts payable $ 59.8 $52.5
Accrued advertising and merchandising 42.0 21.2
Income taxes payable 41.3 41.1
Other current liabilities 12.6 18.8
Total Current Liabilities 155.7 133.6
Long-term Debt 0.7 0.8
Other Liabilities 26.9 28.5
Deferred Income Taxes 4.4 2.7
Redeemable Preference and
Preferred Stock 15.3 15.3
Common Shareholders' Equity:
Common stock, $1 par value, authorized
10,000,000 shares; issued 3,591,381 3.6 3.6
shares
Additional paid-in capital 68.7 68.7
Reinvested earnings 513.5 475.1
Treasury common stock, at cost, (20.9) (20.9)
602,010 shares
Total Common Shareholders' Equity 564.9 526.5
Total Liabilities and $767.9 $707.4
Shareholders' Equity
<FN>
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<TABLE>
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Dollars in
Millions
Nine Months Ended
March 31
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $39.0 $11.9
Adjustments to reconcile net income to
net
cash provided by operating activities:
Cumulative effect of accounting -- 14.0
changes
Depreciation and amortization 11.4 10.5
Deferred income taxes 1.7 1.4
Loss on disposition of property and 0.5 1.5
equipment
Decrease in trade accounts 31.1 37.8
receivable
(Increase) Decrease in inventories (12.2) 10.3
(Increase) Decrease in other current (3.6) 0.4
assets
Increase (Decrease) in trade 7.3 (16.2)
accounts payable
Increase (Decrease) in income taxes 0.2 (13.5)
payable
Increase (Decrease) in other current 14.6 (1.2)
liabilities
Other items (1.0) (4.3)
Net Cash Provided by Operating 89.0 52.6
Activities
Cash Flows from Investing Activities:
Additions to property, plant and (15.6) (18.3)
equipment
Net Cash Used in Investing (15.6) (18.3)
Activities
Cash Flows from Financing Activities:
Change in amount due from
The Quaker Oats Company (56.4) (33.6)
Cash dividends (0.6) (0.6)
Reduction of long-term debt (0.1) (0.1)
Net Cash Used in Financing (57.1) (34.3)
Activities
Net Change in Cash $16.3 $--
<FN>
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1994
Note 1 - Condensed Consolidated Financial Statements
The condensed consolidated financial statements include Stokely-Van Camp, Inc.
(a wholly-owned subsidiary of The Quaker Oats Company, or "Quaker")
and its subsidiaries (the "Company"). The condensed consolidated statements
of income and reinvested earnings for the nine and three-month periods
ended March 31, 1994 and 1993, the condensed consolidated balance sheet as
of March 31, 1994, and the condensed consolidated statements of cash flows
for the nine-month periods ended March 31, 1994 and 1993, have been
prepared by the Company without audit. In the opinion of management,
these financial statements include all adjustments necessary to present
fairly the financial position, results of operations and cash flows as of
March 31, 1994 and for all periods presented. All adjustments made have
been of a normal recurring nature, except for as described below.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company
believes that the disclosures included are adequate and provide a fair
presentation of interim period results. Interim financial statements are
not necessarily indicative of the financial position or operating results
for an entire year. It is suggested that these interim financial statements
be read in conjunction with the audited financial statements and the notes
thereto included in the Company's Form 10-K for the fiscal year ended
June 30, 1993.
The condensed consolidated interim financial statements as of
March 31, 1993, and for the nine-month period then ended, have been
restated for the adoption, retroactive to July 1, 1992, of Financial
Accounting Standards Board (FASB) Statement #106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and
Statement #109, "Accounting for Income Taxes." The combined cumulative
effect of adoption was an after-tax charge of $14.0 million. The
incremental effect of adopting FASB Statement #106 on March 31, 1993
nine-month operating results was a pretax charge of $1.8 million
($1.2 million after-tax). Excluding the cumulative effect, the adoption of
FASB Statement #109 had no material effect on results. Certain previously
reported amounts have been reclassified to conform to the current presentation.
Note 2 - Redeemable Preference and Preferred Stock
5% Cumulative Convertible Second Preferred Stock
As of March 31, 1994, authorized shares were 500,000 and issued and
outstanding shares were 11,073. The voting 5% Cumulative Convertible
Second Preferred Stock ($20 par value) is convertible at the holder's option,
on a share-for-share basis, into non-voting 5% Cumulative Prior Preference
Stock ($20 par value).
5% Cumulative Prior Preference Stock
As of March 31, 1994, authorized shares were 1,500,000, issued shares were
753,283 and outstanding shares were 752,950.
Both issues are redeemable at the Company's option for $21 per share.
Nine Months Ended March 31, 1994
Compared With Nine Months Ended March 31, 1993
Net sales for the first nine months of fiscal 1994 were $657.6 million,
up 22 percent over last year's $540.1 million. Volumes increased 20
percent versus the prior year due to strong volume increases for GATORADE
thirst quencher, slightly offset by decreases in VAN CAMP'S products.
The GATORADE thirst quencher volume increase was a result of the warmer
summer weather this fiscal year versus last year and the conversion of
the 32 ounce glass container to plastic. Price increases were not
significant.
Gross profit margin decreased to 47.1 percent of sales from last year's
48.4 percent as a result of increased packaging and distribution costs
partially offset by improved product mix and cost containment
initiatives. Selling, general and administrative (SG&A) expenses increased
to $256.2 million, or an increase of 14 percent, primarily due
to higher advertising and merchandising (A&M) expenditures for
GATORADE thirst quencher, as well as higher other operating
expenses. SG&A and A&M expenses were both lower as a percentage of
sales as a result of the significant increase in sales. Cost of goods
sold and SG&A expenses for the first nine months of fiscal 1993
were both restated by $0.9 million, for the adoption, retroactive
to July 1, 1992, of FASB Statement #106.
The Company continues to focus on supply chain and other
efficiency initiatives in order to lower costs, improve productivity
and better utilize its assets and human resources. These initiatives may
result in work force reductions, as well as plant consolidations. In
pursuit of greater shareholder value, these continuous improvement
initiatives will most likely lead to charges in the fourth quarter and
future periods.
GATORADE thirst quencher continues to represent the Company's key
profitable growth opportunity. The attractiveness of the category has
drawn a number of competitors.
Net interest income of $8.8 million increased $3.8 million from the
prior year stemming from higher amounts due from The Quaker Oats Company.
The effective tax rate for the first nine months of fiscal 1994 was 40.2
percent compared to 40.0 percent in the first nine months of fiscal 1993.
The slight increase was attributable to a higher U.S. corporate statutory
tax rate for fiscal 1994 and a retroactive adjustment to January 1, 1993,
required by the 1993 tax legislation, largely offset by favorable U.S. tax
treatment for manufacturing facilities in Puerto Rico.
Net income for the first nine months of fiscal 1994 was $39.0 million
versus $11.9 million last year, which included an after-tax charge of
$14.0 million for the cumulative effect of adopting both FASB
Statement #106 and Statement #109.
Three Months Ended March 31, 1994
Compared With Three Months Ended March 31, 1993
Net sales for the third quarter of fiscal 1994 were $191.3 million, up
14 percent over last year's $168.0 million. Volumes increased
14 percent. The increase in sales was due to volume increases, as
well as product mix improvements for GATORADE thirst quencher.
Price increases were not significant.
Gross profit margin decreased to 45.0 percent of sales from last year's
45.5 percent. The change was a result of increased packaging and
distribution costs, partially offset by improved product mix and
cost containment initiatives, as well as prior year inclusion of expenses
related to the retooling of certain GATORADE thirst quencher
production lines. SG&A expenses increased $12.9 million, or 20
percent, primarily due to higher A&M expenditures for GATORADE thirst
quencher, as well as higher other operating expenses. Cost of goods sold
and SG&A expenses for the third quarter of fiscal 1993 were both restated
by $0.3 million for the adoption of FASB Statement #106.
Net interest income of $3.7 million increased $1.6 million from the prior
year stemming from higher amounts due from The Quaker Oats Company.
The effective tax rate for the third quarter of fiscal 1994 was 38.8
percent compared to 40.4 percent for the third quarter of fiscal 1993.
The decrease is attributable to favorable U.S. tax treatment for
manufacturing facilities in Puerto Rico, partly offset by a higher
U.S. corporate statutory tax rate for fiscal 1994.
Liquidity and Capital Resources
Net cash provided by operating activities of $89.0 million and $52.6
million for the nine months ended March 31, 1994 and 1993, respectively,
was well in excess of the Company's dividends and capital expenditures.
The increase in cash flows in fiscal 1994 was due to increased income
as well as changes in working capital. Capital expenditures for the first
nine months of fiscal 1994 and 1993 were $15.6 million and $18.3 million,
respectively, with no material individual commitments outstanding.
The Company anticipates that cash flows provided by operating activities
for the year ending June 30, 1994, will exceed working capital requirements,
dividends and capital expenditures.
The Company has an investing and borrowing arrangement under which it
loans its available cash to Quaker or borrows its short-term cash
requirements from Quaker. Certain subsidiaries of the Company maintain
cash balances. The amount due from The Quaker Oats Company increased
$56.4 million primarily reflecting changes in working capital as well as
increased income.
Pending Accounting Changes
In November 1992, the FASB issued Statement #112, "Employer's Accounting for
Postemployment Benefits." The Company has not yet adopted this statement,
which must be implemented no later than fiscal 1995. The Company is
currently determining the impact this statement will have on its financial
position.
All other items in Part II are either inapplicable to the Company
during the quarter ended March 31, 1994, the answer is negative or a
response has been previously reported and an additional report of the
information need not be made, pursuant to the Instructions to Part II.
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 as an officer and as chief
accounting officer.
Stokely-Van Camp, Inc.
(Registrant)
Date: June 15, 1994 Thomas L. Gettings
Thomas L. Gettings
Vice President and Corporate Controller
