Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
X Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the fiscal year ended June 30, 1994
Commission file number 1-2944
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
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 Number)
Quaker Tower P.O. Box 049001 Chicago, Illinois 60604-9001
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: 312-222-7111
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
5% Cumulative Prior Preference New York Stock Exchange
Stock, $20 Par Value
Common Stock, $1 Par Value None
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 such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
Registrant had 2,989,371 shares of common stock outstanding on June 30,
1994, all of which were owned by The Quaker Oats Company. There is no
trading market for the registrant's voting stock held by non-affiliates.
TABLE OF CONTENTS
PART I PAGE
ITEM 1. Business 1
ITEM 2. Properties 1
ITEM 3. Legal Proceedings 1
ITEM 4. Submission of Matters to a Vote of
Security-Holders N/A
PART II
ITEM 5. Market for Registrant's Common
Equity and Related Stockholder Matters 2
ITEM 6. Selected Financial Data 2
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 3-4
ITEM 8. Financial Statements and Supplementary Data 5-16
ITEM 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure N/A
PART III
ITEM 10. Directors and Executive Officers of
the Registrant 17
ITEM 11. Executive Compensation 17-21
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management 21-22
ITEM 13. Certain Relationships and Related
Transactions 22
PART IV
ITEM 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
Consolidated Financial Statements of Stokley-Van
Camp, Inc. and subsidiaries are incorporated under
Item 8 of this Form 10-K
(a)(2) & (d) Financial Statement Schedules
II Amounts Receivable from Related Parties 23
X Supplementary Income Statement Information 24
(a)(3) & (c) Exhibits 26
3(a) Articles of Incorporation of Stokley-Van Camp, Inc.
(incorporated by reference to the Company's Form 10-K
for the fiscal year ended June 30, 1985, file number 1-2944)
3(b) By-Laws of Stokley-Van Camp, Inc. (incorporated
by reference to the Company's Form 10-K for the year
ended June 30, 1985, file number 1-2944)
10(a) GATORADE Trust Agreement dated January 1,
1984 (incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1984, file number
1-2944)
21 Subsidiaries of the Registrant
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during
the fourth quarter of its fiscal year ended June 30, 1994.
SIGNATURES 25
PART I
ITEM 1. BUSINESS
Stokely-Van Camp, Inc. and Subsidiaries (the "Company" or "Stokely"), a
wholly-owned subsidiary of The Quaker Oats Company ("Quaker") since fiscal
1984, is a processor, marketer and distributor of high-quality canned food
and beverage products to retail stores, institutional distributors and
industrial and athletic users. Stokely's current products include
GATORADE thirst quencher, a beverage specifically developed to quench
thirst during periods of physical activity. GATORADE thirst quencher is
marketed through retail grocery stores, convenience stores, food service
distributors, warehouse clubs and wholesalers, and is also sold directly to
athletic, institutional and industrial users. This product is distributed
nationally and internationally and is primarily sold through Quaker sales
organizations and food brokers. The supply of raw materials for GATORADE
thirst quencher has been adequate and continuous. The Company's sales are
somewhat seasonal, with particularly strong first and fourth fiscal quarter
sales.
The Company's other products, consisting of canned pork and beans and other
specialty canned products, are marketed under the VAN CAMP'S brand name.
Distribution of VAN CAMP'S products is national. Stokely is the largest
domestic processor of pork and beans. Specialty canned products include
BEANEE-WEENEE (beans with sliced wieners), kidney beans, hominy and chili
products. Raw materials for Stokely's canned products are purchased from
dealers and terminal and local elevators. The price and availability of
raw agricultural products are subject to market conditions. Supplies have
been adequate and continuous.
Export sales in fiscal 1994 were $50.6 million. Export sales in fiscal
1993 and 1992 were not material.
Fee Agreement
In 1984, the Company entered a novation of a series of agreements with the
trustee of the Gatorade Trust, the contracting agent of the innovators of
GATORADE thirst quencher and their successors in interest, and renewed
rights to manufacture and sell certain beverage products in return for
payment of fees based on varying levels of sales. In the event of failure
by Stokely to make payments to the Gatorade Trust, the Trustee may cancel
the Agreements and purchase back from Stokely, for a reasonable value, all
trademarks and foreign patents connected with the GATORADE thirst
quencher business.
Competition
Stokely's businesses are highly competitive. The Company competes with a
number of companies which are engaged in the production, sale or
distribution of products similar to those sold by Stokely. The principal
competitive factors affecting sales include quality, price, advertising
and service.
Employees
The total number of Stokely employees as of June 30, 1994, was
approximately 1,700.
ITEM 2. PROPERTIES
The Company owns and operates 7 plants, including manufacturing and
filling facilities. The plants are located in 6 states and in Puerto Rico.
In addition, the Company owns or leases 4 distribution centers, 3 of which
are shared with Quaker. Other distribution centers are leased as needed
throughout the year. Sales and administrative office space is shared with
Quaker. Management believes manufacturing, distribution center and
office space owned and leased are suitable and adequate for the business
and productive capacity is appropriately utilized.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings or
environmental clean-up actions that it believes will have a material
adverse effect on its financial position or results of operations.
Page 1
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since October 31, 1983, all outstanding shares of the Company's common
stock have been held by Quaker. The stock is not listed on any stock
exchange or traded on any market. The Company did not pay any dividends
on its common stock in fiscal years 1994, 1993 or 1992.
ITEM 6.
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
(Dollars in Millions)
Fiscal Year
Ended
June 30
1994(a) 1993 1992(b) 1991 1990
<S> <C> <C> <C> <C> <C>
Net Sales $1,077.0 $885.3 $876.2 $876.5 $769.6
Cost of Goods Sold $553.4 $443.7 $422.7 $435.1 $400.0
Income Before Income Taxes and
Cumulative Effect of
Accounting
Changes $120.6 $99.7 $105.4 $131.7 $101.5
Provision for Income Taxes 50.2 39.7 41.9 51.0 38.1
Income Before Cumulative Effect
of
Accounting Changes 70.4 60.0 63.5 80.7 63.4
Cumulative Effect of Accounting
Changes - Net of Tax -- 14.0 -- -- --
Net Income $70.4 $46.0 $63.5 $80.7 $63.4
As of June 30
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Property - Net $132.9 $133.4 $124.7 $121.2 $110.0
Total Assets $804.8 $707.4 $628.5 $618.0 $521.4
Long-term Debt $0.7 $0.8 $1.1 $10.6 $11.8
Redeemable Preference and
Preferred Stock $15.3 $15.3 $15.3 $15.3 $15.3
<FN>
(a) Fiscal 1994 results include a $9.4 million restructuring charge for a
manufacturing consolidation for VAN CAMP'S products and for workforce
reductions.
(b) Fiscal 1992 results include a $3.4 million charge for a recall of
certain VAN CAMP'S products.
</TABLE>
Page 2
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fiscal 1994 Compared with Fiscal 1993
Operating Results
Consolidated net sales for fiscal 1994 were $1.08 billion, up 22 percent
from fiscal 1993. Volume increased 17 percent versus the prior year due
to strong volume increases for GATORADE thirst quencher, slightly offset
by volume decreases for VAN CAMP'S products. The GATORADE thirst
quencher volume increase was a result of the warmer summer weather in
fiscal 1994 compared to fiscal 1993 and the increased consumer demand
resulting from the conversion of the 32 ounce glass container to plastic.
GATORADE thirst quencher performance is particularly notable, in that two
major soft drink competitors have broadened the distribution of their sports
beverages throughout the United States. The Company expects this
heightened level of competition to continue in the coming year. Price
increases did not significantly affect fiscal 1994 sales.
Gross profit margin decreased to 48.6 percent of sales from 49.9 percent
in the prior year as a result of increased distribution and packaging
material costs, partially offset by improved product mix and
cost-containment initiatives. Selling, general and administrative (SG&A)
expenses increased to $406.6 million, or an increase of 17 percent,
primarily due to higher advertising and merchandising (A&M) expenditures
for GATORADE thirst quencher, as well as higher other operating expenses.
A&M expenses were 25.5 percent of sales in fiscal 1994, versus 26.6
percent in fiscal 1993, and are likely to continue at or near these levels
in the future. SG&A and A&M expenses were both lower as a percentage
of sales as a result of the significant increase in sales.
Restructuring Charge
The Company is pursuing a series of cost-reduction and realignment
activities to bring greater value to consumers and trade customers. As a
result, the Company recorded a restructuring charge of $9.4 million for a
manufacturing consolidation for VAN CAMP'S products and for workforce
reductions. Net non-cash asset write-offs amounted to $5.4 million of the
charge. Severance and termination benefits for the elimination of
approximately 200 positions are $3.0 million in cash expenses and the
remaining amount of $1.0 million in cash expenses is for other related
costs. Cash outlays will occur predominately in fiscal 1995 and will be
funded through operating cash flows. These actions are expected to save
approximately $0.9 million in fiscal 1995 and approximately $2 million
annually beginning in fiscal 1996, with about 80 percent of the savings
in cash.
The Company will continue to focus on efficiency initiatives that improve
its manufacturing, marketing, logistics and customer service processes
while lowering costs and more effectively utilizing human and financial
resources. These continuous improvement initiatives may lead to charges
in future periods.
Interest and Income Taxes
Interest income of $18.5 million increased $7.3 million from the prior year
stemming from higher average amounts due from The Quaker Oats Company, as
well as higher interest rates. See Note 4 to the consolidated financial
statements for further discussion of the Company's investing and borrowing
arrangement with Quaker.
The effective tax rate for fiscal 1994 was 41.6 percent versus 39.8 percent
in fiscal 1993. The higher U.S. statutory tax rate, including the
legislated retroactive adjustment to January 1, 1993, caused the overall
rate to increase.
Page 3
Fiscal 1993 Compared with Fiscal 1992
Operating Results
Consolidated net sales for fiscal 1993 were $885.3 million, up 1 percent
over the prior year's $876.2 million. Approximately one-half of the
change in sales was due to price increases. The remainder of the change
was primarily due to volume increases for GATORADE thirst quencher
partially offset by volume declines for VAN CAMP'S products.
Gross profit margin decreased to 49.9 percent of sales from the prior
year's 51.8 percent due to expenses related to the retooling of certain
GATORADE thirst quencher production lines. These expenses were offset
by cost-containment initiatives. Fiscal 1992 cost of goods sold included a
net charge of $3.4 million for the recall of certain VAN CAMP'S products.
SG&A expenses decreased $5.4 million primarily due to lower A&M
expenditures for GATORADE thirst quencher. A&M expenses were 26.6
percent of sales in fiscal 1993 as compared to 28.9 percent in fiscal 1992.
During fiscal 1992, the Company changed the timing of trade promotions
to align production and shipments more closely with consumer demand and to
derive greater efficiencies in its go-to-market processes. Sales and
earnings postponed in the second half of fiscal 1992 were recouped in the
first half of fiscal 1993. Unseasonably cool weather in fiscal 1993,
however, affected GATORADE thirst quencher sales and partially offset
the benefits realized by the trade promotion timing change.
Interest and Accounting Changes
Interest expense of $4.4 million decreased $2.7 million from the prior
year mainly due to lower debt resulting from the redemption of 8 percent
sinking fund debentures in fiscal 1992.
Included in net income in fiscal 1993 was the cumulative effect of adopting
Financial Accounting Standards Board (FASB) Statement #106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and FASB
Statement #109, "Accounting for Income Taxes." The combined cumulative
effect of adoption was an after-tax charge of $14.0 million. See Notes 3
and 8 to the consolidated financial statements for further discussion.
Liquidity and Capital Resources
Net cash provided by operating activities of $66.6 million, $145.0 million
and $69.0 million during fiscal 1994, 1993 and 1992, respectively, was
well in excess of the Company's dividends and capital expenditures. The
decrease in cash flows in fiscal 1994 was mainly due to changes in working
capital, primarily inventories and trade accounts receivable. Capital
expenditures for fiscal 1994, 1993 and 1992 were $21.1 million, $24.6
million and $15.1 million, respectively, with no material individual
commitments outstanding.
The Company has an investing and borrowing arrangement under which it
loans available cash to Quaker or borrows its short-term cash requirements
from Quaker. Certain subsidiaries of the Company currently maintain
cash balances. See Note 4 to the consolidated financial statements for
further discussion of this arrangement.
Pending Accounting Changes
Effective July 1, 1994, the Company adopted FASB Statement #112, "Employers'
Accounting for Postemployment Benefits." The cumulative effect of adoption
is a $0.9 million after-tax charge in the first quarter of fiscal 1995.
The adoption of this statement will not have a material effect on
operating results or cash flows in future years.
The Company is in compliance with the accounting required in the American
Institute of Certified Public Accountants' Statement of Position (SOP) 93-7,
"Reporting on Advertising Costs," that requires advertising expenses to
be expensed as incurred or the first time the advertising takes place. The
adoption of this SOP, required in fiscal 1995, will have no impact on the
Company's financial statements.
Page 4
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
<TABLE>
<CAPTION>
Fiscal Year
Ended
June 30
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Net Sales $1,077.0 $885.3 $876.2
Cost of goods sold 553.4 443.7 422.7
Gross profit 523.6 441.6 453.5
Selling, general and
administrative expenses 406.6 348.7 354.1
Restructuring charge 9.4 -- --
Interest (income) (18.5) (11.2) (13.1)
Interest expense 5.5 4.4 7.1
Income Before Income Taxes and
Cumulative Effect of
Accounting Changes 120.6 99.7 105.4
Provision for income taxes 50.2 39.7 41.9
Income Before Cumulative Effect of
Accounting Changes 70.4 60.0 63.5
Cumulative effect of accounting
changes - net of tax -- 14.0 --
Net Income 70.4 46.0 63.5
Dividends on preference and
preferred stock (0.8) (0.8) (0.8)
Reinvested Earnings - Beginning Balance 475.1 429.9 367.2
Reinvested Earnings - Ending Balance $544.7 $475.1 $429.9
See accompanying notes to consolidated financial statements.
Page 5
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Fiscal Year
Ended
June 30
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $70.4 $46.0 $63.5
Adjustments to reconcile net income
to
net cash provided
by operating activities:
Cumulative effect of -- 14.0 --
accounting changes
Depreciation and 16.0 14.6 11.6
amortization
Deferred income taxes (0.4) 1.4 (1.0)
Restructuring charge 9.4 -- --
Loss on disposition of
property 1.2 3.2 0.5
and equipment
(Increase) decrease in trade
accounts receivable (16.4) 28.9 31.5
(Increase) decrease in (31.4) 22.6 (19.2)
inventories
(Increase) decrease in other (7.6) (1.4) 8.1
current assets
Increase in trade accounts 6.1 0.6 3.6
payable
(Decrease) increase in (1.5) 6.6 (12.7)
income taxes payable
Increase (decrease) in other 17.3 10.4 (1.8)
current liabilities
Other items 3.5 (1.9) (15.1)
Net Cash Provided By
Operating Activities 66.6 145.0 69.0
Cash Flows from Investing Activities:
Additions to property, plant and (21.1) (24.6) (15.1)
equipment
Net Cash Used in Investing (21.1) (24.6) (15.1)
Activities
Cash Flows from Financing Activities:
Change in amount due from
The Quaker Oats Company (3.5) (119.3) (43.6)
Cash dividends (0.8) (0.8) (0.8)
Reduction of long-term debt (0.1) (0.3) (9.5)
Net Cash Used in Financing (4.4) (120.4) (53.9)
Activities
Net Change in Cash and Cash Equivalents $41.1 $-- $--
See accompanying notes to consolidated financial statements.
Page 6
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30
(Dollars in Millions) 1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $41.1 $---
Due from The Quaker Oats Company 402.7 399.2
Trade accounts receivable - net of allowance of $4.6
and $3.1 as of June 30, 1994 and 1993, 113.5 97.1
respectively
Inventories:
Finished goods 70.9 45.7
Materials and supplies 16.8 10.6
Total inventories 87.7 56.3
Other current assets 20.3 12.7
Total Current Assets 665.3 565.3
Other Assets 6.6 8.7
Property, plant and equipment 203.4 193.1
Less accumulated depreciation 70.5 59.7
Property - Net 132.9 133.4
Total Assets $804.8 $707.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $44.5 $38.4
Accrued payroll, pension and bonus 23.5 10.5
Accrued advertising and merchandising 35.8 28.3
Income taxes payable 39.6 41.1
Other current liabilities 13.6 15.3
Total Current Liabilities 157.0 133.6
Long-term Debt 0.7 0.8
Other Liabilities 33.4 28.5
Deferred Income Taxes 2.3 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 shares 3.6 3.6
Additional paid-in capital 68.7 68.7
Reinvested earnings 544.7 475.1
Treasury common stock, at cost, 602,010 shares (20.9) (20.9)
Total Common Shareholders' Equity 596.1 526.5
Total Liabilities and Shareholders' Equity $804.8 $707.4
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include Stokely-Van Camp, Inc.
and Subsidiaries (the "Company" or "Stokely"). All significant
intercompany transactions have been eliminated. The Company is a
wholly-owned subsidiary of The Quaker Oats Company ("Quaker"). Certain
prior-year amounts have been reclassified to conform to the current
presentation.
Inventories
Inventories are valued at the lower of cost or market, using the last-in,
first-out (LIFO) cost method, and include the cost of raw materials,
labor and overhead. If the LIFO method of valuing these inventories was
not used, total inventories would have been $8.8 million and $7.9 million
higher than reported as of June 30, 1994 and 1993, respectively.
Property and Depreciation
Property, plant and equipment are carried at cost and depreciated on a
straight-line basis over their estimated useful lives. Useful lives range
from 10 to 40 years for buildings and improvements and from 3 to 12
years for machinery and equipment.
Software Costs
The Company defers significant software development project costs.
Software costs of $1.3 million, $1.3 million and $2.2 million were
deferred during fiscal 1994, 1993 and 1992, respectively, pending the
projects' completion. Amounts deferred are amortized over a three-year
period beginning with a project's completion. As of June 30, 1994,
approximately $8.5 million of completed project costs were subject to
amortization. Total amortization expense was $2.7 million, $2.2 million
and $0.6 million in fiscal 1994, 1993 and 1992, respectively.
Income Taxes
Deferred income taxes are provided when tax laws and financial
accounting standards differ with respect to the amount of income for
a year and the bases of assets and liabilities. Effective July 1, 1992,
the Company adopted FASB Statement #109, "Accounting for Income
Taxes," which requires an asset and liability approach to financial
accounting and reporting for income taxes. See Note 3 for further discussion.
Postretirement Benefits Other Than Pensions
The Company provides certain health and life insurance benefits for eligible
retirees. Effective July 1, 1992, the Company adopted FASB Statement #106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
whereby the cost of postretirement benefits is accrued during the years that
employees render service. See Note 8 for further discussion.
Page 8
NOTE 2
RESTRUCTURING CHARGE
The Company is pursuing a series of cost-reduction and realignment
activities to bring greater value to consumers and trade customers. As a
result, the Company recorded a restructuring charge of $9.4 million for a
manufacturing consolidation for VAN CAMP'S products and for workforce
reductions. Net non-cash asset write-offs amounted to $5.4 million of the
charge. Severance and termination benefits for the elimination of
approximately 200 positions are $3.0 million in cash expenses and the
remaining amount of $1.0 million in cash expenses is for other related
costs. Cash outlays will occur predominately in fiscal 1995 and will be
funded through operating cash flows. These actions are expected to save
approximately $0.9 million in fiscal 1995 and approximately $2 million
annually beginning in fiscal 1996, with about 80 percent of the savings in cash.
NOTE 3
INCOME TAXES
Effective July 1, 1992, the Company adopted FASB Statement #109, "
Accounting for Income Taxes," which requires an asset and liability
approach to financial accounting and reporting for income taxes. The
cumulative effect of adopting FASB Statement #109 was to increase income
by $2.8 million.
Provisions for income taxes on income before the cumulative effect of
accounting changes were as follows:
<TABLE>
<CAPTION>
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Currently payable:
Federal $41.9 $32.9 $32.9
State 8.5 6.9 7.4
Total currently payable 50.4 9.8 40.3
Deferred - net:
Federal (0.7) (0.5) 1.3
State 0.5 0.4 0.3
Total deferred - net (0.2) (0.1) 1.6
Provision for income taxes $50.2 $39.7 $41.9
The components of the deferred income tax (benefit) provision were as follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Accelerated tax depreciation $0.8 $1.1 $1.5
Postretirement benefits (0.7) (0.9) --
Other (0.3) (0.3) 0.1
(Benefit) provision for deferred income taxes $(0.2) $(0.1) $1.6
Reconciliations of the statutory Federal income tax rates to the effective
income tax rates were as follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Tax provision based on the
Federal statutory rate $42.2 35.0% $33.9 34.0% $35.8 34.0%
State and local income
taxes - net of Federal
income tax benefit 5.9 4.9 4.8 4.8 5.0 4.7
Other 2.1 1.7 1.0 1.0 1.1 1.0
Provision for income taxes $50.2 41.6% $39.7 39.8% $41.9 39.7%
Page 9
The sources of pretax income before the cumulative effect of accounting changes
were as follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
U.S. sources $122.2 $95.5 $103.8
Non-U.S. sources (1.6) 4.2 1.6
Income before income taxes
and cumulative effect of
accounting changes $120.6 $99.7 $105.4
The consolidated balance sheets included the following deferred tax assets and
deferred tax liabilities:
<CAPTION>
1994 1993
Deferred Deferred Deferred Deferred
(Dollars in Millions) Tax Tax Tax Tax
Assets Liabilitie Assets Liabilitie
s s
<S> <C> <C> <C>
Depreciation and amortization $2.5 $16.7 $2.0 $15.1
Postretirement benefits 12.4 - 11.6 --
-
Other benefit plans 1.5 2.7 1.3 2.2
Accrued expenses 3.0 0.2 2.2 0.2
Other 0.2 -- 1.1 0.9
Total $19.6 $19.6 $18.2 $18.4
</TABLE>
Total income tax provisions (benefits) were allocated as $50.2 million for
continuing operations in fiscal 1994 and as $39.7 million for continuing
operations and $(13.5) million for the cumulative effect of accounting
changes in fiscal 1993.
NOTE 4
RELATED PARTY TRANSACTIONS
Stokely, through its parent Quaker, conducts its operations as an
integrated component of Quaker's U.S. and Canadian Grocery Products
Division. Certain liabilities and expenses are commingled and are charged
or allocated to Stokely from Quaker. With the exception of cost of sales
and advertising and merchandising expenses, the majority of remaining
operating, general and administrative expenses are allocated from Quaker
to Stokely. Quaker's International Grocery Products Division is licensed
to sell GATORADE thirst quencher in international markets. Stokely
reimburses Quaker and its affiliates for services provided for its benefit.
The following summarizes the significant related party transactions other
than those described elsewhere in the financial statements:
Income Taxes
Stokely is included in the consolidated Federal income tax return of
Quaker. Stokely provides for current and deferred taxes as if it filed a
separate consolidated tax return except that if any items are subject to
limitations in Stokely's tax calculations, such limitations are determined
on the basis of the Quaker consolidated group.
Employees
Current salaried employees whose services benefit the Stokely business
are employees of Quaker. Their compensation is paid by Quaker and charged
to Stokely based on actual salary and fringe benefit costs of the assigned
employees. These employees also participate in a number of Quaker
insurance and employee benefit programs. Stokely participates in these
programs through annual charges of each program's cost.
Corporate Insurance Programs
Stokely participates in Quaker's consolidated risk management programs
for property and casualty insurance.
Page 10
Stokely is charged for annual premiums and reported losses. Incurred but
not reported losses are not charged to Stokely income currently. Stokely
will recognize these costs in the future when specific identification has
been made by Quaker.
Corporate Overhead Allocations
Quaker provides certain corporate general and administrative services to
Stokely including personnel, legal, finance, facility management and
utilities. These expenses are allocated to Stokely on a basis which
approximates actual services provided.
Shared Operating Expenses
Quaker's U.S. and Canadian Grocery Products Division allocates a ratable
portion of shared operating expenses including sales force and brokers,
certain other marketing expenses, product research and general and
administrative services. These expenses are allocated to Stokely on a
basis which approximates actual services provided as determined by
various measures.
International Grocery Products Fee Agreements
Stokely has entered into a number of licensing agreements allowing the
international affiliates of Quaker to manufacture and sell certain beverage
products in return for payment of licensing fees. Fees received under these
agreements amounted to $3.6 million, $3.1 million and $3.1 million in fiscal
1994, 1993 and 1992, respectively.
Investing and Borrowing Arrangement
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. Funds collected from operations which are
remitted to Quaker increase the amount due from Quaker; conversely,
operating expenses paid by Quaker reduce the receivable from Quaker or
may result in a payable to Quaker. This arrangement provides for an interest
rate based on the yield of U.S. Treasury Bills, as determined by the weekly
U.S. Government auction. In addition, the Company has 100 percent
participation in certain loans owed to Quaker by Quaker subsidiaries. The
loans outstanding as of June 30, 1994, carried an interest rate of 11 percent
and were included in the amount due from Quaker. The Company may, at
any time, demand repayment of all or any part of the amount due from Quaker
or demand that Quaker repurchase the loans from the Company. (See Schedule
II in Part IV of this Form 10-K for further information). There were no
bank lines of credit as of June 30, 1994 or 1993.
NOTE 5
<TABLE>
LONG-TERM DEBT
<CAPTION>
(Dollars in Millions) 1994 1993
<S> <C> <C>
Industrial Revenue Bonds, 4.5%
due through October 1, 1999 $0.8 $0.9
Less Current Maturities 0.1 0.1
Long-term Debt $0.7 $0.8
Aggregate required payments of maturities on long-term debt for the next
five fiscal years are $0.1 million from 1995 to 1997 and $0.2 million in
1998 and 1999.
NOTE 6
CAPITAL STOCK
Since October 31, 1983, all outstanding shares of the Company's common
stock have been held by Quaker and the balances of common stock ($3.6
million; 3,591,381 shares issued), additional paid-in capital ($68.7
million) and treasury common stock ($20.9 million; 602,010 shares) have
remained unchanged.
Page 11
The Company has three series of preferred stock: Voting 5% Cumulative
Convertible Second Preferred Stock; non-voting 5% Cumulative Prior
Preference Stock; and Serial Preferred Stock. The Voting 5% Cumulative
Convertible Second Preferred Stock is convertible at the holder's option,
on a share for share basis, into the non-voting 5% Cumulative Prior
Preference Stock. As of June 30, 1994, authorized shares were 500,000
and issued and outstanding shares were 11,073 for the 5% Cumulative
Convertible Second Preferred Stock. As of June 30, 1994, 1,500,000
shares were authorized, 753,283 shares were issued, 752,950 shares were
outstanding and 11,073 shares were reserved for conversion for the 5%
Cumulative Prior Preference Stock. Both issues are redeemable at the
Company's option for $21 per share. No Serial Preferred Stock has been
issued, although 500,000 shares are authorized. The following chart
summarizes the changes in the outstanding preference and preferred
stock balances.
</TABLE>
<TABLE>
<CAPTION>
5% Cumulative 5% Cumulative
Prior Preference Convertible Second
Stock Preferred Stock
$20 Par Value $20 Par Value
<S> <C> <C>
Balance as of June 30, 1991 729,240 34,783
Shares Converted 23,100 (23,100)
Balance as of June 30, 1992 752,340 11,683
Shares Converted 360 (360)
Balance as of June 30, 1993 752,700 11,323
Shares Converted 250 (250)
Balance as of June 30, 1994 752,950 11,073
</TABLE>
NOTE 7
PENSION PLANS
Salaried employees assigned to the Stokely business are employees of
Quaker and are covered by a Quaker plan (see Note 4). The Company maintains
a pension plan for all hourly employees. Plan benefits are based on years
of service. Company policy is to make contributions to the Plan within the
maximum amount deductible for Federal income tax purposes. Plan assets
consist primarily of equity securities and government, corporate and other
fixed income obligations.
The components of net pension (income) for hourly employees are
detailed below:
<TABLE>
<CAPTION>
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Service cost (benefits earned during the $0.4 $0.3 $0.3
year)
Interest cost on projected benefit 1.4 1.4 1.4
obligation
Actual return on plan assets (2.0) (2.5) (3.6)
Net amortization and deferral (0.9) (0.4) 0.8
Net pension (income) $(1.1) $(1.2) $(1.1)
Page 12
Reconciliations of the funded status of the Company's defined benefit plans to
the prepaid pension costs were as follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Vested benefits $18.3 $16.0 $15.9
Non-vested benefits 0.5 0.4 0.4
Accumulated and projected benefit obligation(a) 18.8 16.4 16.3
Plan assets at market value 33.6 31.1 31.7
Projected benefit obligation less than plan 14.8 14.7 15.4
assets
Unrecognized net (gain) (3.9) (4.5) (4.7)
Unrecognized prior service cost 1.2 1.2 0.6
Unrecognized net (asset) at transition (5.1) (5.5) (6.2)
Prepaid pension costs $7.0 $5.9 $5.1
<FN>
Assumptions:
Discount rate: 8%
Rate of future compensation increases:(a) --
Long-term rate of return on plan assets: 8.5%
(a) Effect of future compensation increases is not applicable as the
Plan benefits are based on years of service.
</TABLE>
NOTE 8
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
AND OTHER POSTEMPLOYEMENT BENEFITS
The Company provides certain health care and life insurance benefits to its
retired employees who meet service-related eligibility requirements. The
Company funds only the annual cash requirements of these benefits.
Effective July 1, 1992, the Company adopted FASB Statement #106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
requires that the expected cost of these benefits be charged to expense
during the years that the employees render service. The statement was
adopted through a cumulative pretax charge of $27.5 million, or $16.8
million after-tax, which represents the accumulated postretirement benefit
obligation for years prior to fiscal 1993. The incremental effect on
fiscal 1993 results of adopting FASB Statement #106 was a pretax charge
of $2.4 million. Cash expenditures are not affected by this accounting
change.
<TABLE>
The components of postretirement benefit costs were as follows:
<CAPTION>
(Dollars in Millions) 1994 1993
<S> <C> <C>
Service cost (benefits earned during the year) $1.5 $1.0
Interest cost on projected benefit obligation 4.0 3.0
Total postretirement benefit costs $5.5 $4.0
Page 13
Postretirement benefit costs incurred and expensed in fiscal 1992 were
$0.8 million.
The Company's unfunded accumulated postretirement benefit obligations
were as follows:
<CAPTION>
(Dollars in Millions) 1994 1993
<S> <C> <C>
Current retirees $11.2 $12.1
Current active employees - fully eligible 2.7 2.1
Current active employees - not fully eligible 24.7 17.6
Accumulated postretirement benefit obligation 38.6 31.8
Unrecognized net loss (2.8) (1.4)
Unrecognized prior service cost (0.5) --
Accrued postretirement benefit costs $35.3 $30.4
<FN>
Assumptions:
Weighted average discount rate: 8%
Health care trend rates: 1995 2005 and Beyond
Pre-age 65: 10% 4%
Age 65 and over: 10% 5%
</TABLE>
If the health care trend rates were increased one percentage point, the
current-year postretirement benefit costs would have been $0.5 million
higher and the accumulated benefit obligation as of June 30, 1994 would
have been $5.2 million higher.
Effective July 1, 1994, the Company adopted FASB Statement #112, "Employers'
Accounting for Postemployment Benefits." The cumulative effect of adoption
is a $0.9 million after-tax charge in the first quarter of fiscal 1995. The
adoption of this statement will not have a material effect on operating
results or cash flows in future years.
<TABLE>
NOTE 9
SUPPLEMENTAL CASH FLOW INFORMATION
(Dollars in Millions) 1994 1993 1992
<S> <C> <C> <C>
Interest Paid $0.1 $0.1 $0.8
Income Taxes Paid $38.5 $31.2 $71.5
</TABLE>
NOTE 10
LEASES AND OTHER COMMITMENTS
Certain operating properties are rented under non-cancelable operating
leases. Total rental expense under operating leases was $5.0 million, $5.4
million and
$7.0 million in fiscal 1994, 1993 and 1992, respectively. Future minimum annual
rentals
on non-cancelable operating leases, primarily for sales offices and
distribution centers, is as follows:
<TABLE>
(Dollars in Millions)
1995 1996 1997 1998 1999 Later Total
<S> <C> <C> <C> <C> <C> <C> <C>
Total $3.1 $3.0 $3.0 $2.5 $2.5 $20.6 $34.7
Payments
</TABLE>
The Company enters into executory contracts to promote various products.
As of June 30, 1994, future commitments under these contracts amounted to
approximately $56.2 million.
Page 14
NOTE 11
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA
<CAPTION>
(Dollars in Millions)
Quarterly Financial Data (Unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
1994 1993 1994 1993 1994 1993 1994(a) 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $347.4 $275.6 $118.9 $96.5 $191.3 $168.0 $419.4 $345.2
Cost of Goods Sold 173.8 127.6 68.7 59.5 105.3 91.5 205.6 165.1
Gross Profit $173.6 $148.0 $50.2 $37.0 $86.0 $76.5 $213.8 $180.1
Income (Loss) Before
Cumulative Effect
of Accounting Changes $37.5 $27.9 $(6.7) $(11.0 $8.2 $9.0 $31.4 $34.1
)
Net Income (Loss) $37.5 $13.9 $(6.7) $(11.0 $8.2 $9.0 $31.4 $34.1
)
<FN>
(a) Includes a $9.4 million pretax restructuring charge ($5.6 million
after-tax) for a manufacturing consolidation and for workforce reductions.
</TABLE>
NOTE 12
FINANCIAL INSTRUMENTS
Financial instruments are primarily used to fund working capital and to
reduce the impact of commodity price fluctuations. The Company uses
commodity options and futures contracts to reduce the risk that raw
material purchases will be adversely affected as commodity prices change.
While the hedge instruments are subject to the risk of loss from changing
commodity prices, the losses would generally be offset by lower costs of
the purchases being hedged. The Company does not trade these instruments
with the objective of earning financial gains on the commodity price
fluctuations alone, nor does it trade in commodities for which there are
no underlying exposures. Management believes that its use of financial
instruments to reduce risk is in the Company's best interest.
The Company primarily hedges purchases of corn. Approximately one percent
of cost of goods sold is in commodities that may be hedged. The Company's
strategy is to typically hedge most of the production requirements for the
following twelve-month period. As of June 30, 1994, approximately 90 percent
of fiscal 1995 production requirements were hedged. The carrying values
of these commodity instruments approximates the fair values. Realized
gains and losses charged to cost of goods sold in fiscal 1994 and 1993
were not material.
The carrying value of cash and long-term debt approximates fair value. The
counterparties to the Company's financial instruments are major financial
institutions. The Company continually evaluates the creditworthiness of
the counterparties and has never experienced, nor does it anticipate
nonperformance by any of its counterparties.
Page 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Stokely-Van Camp, Inc.:
We have audited the accompanying consolidated balance sheets of Stokely-Van
Camp, Inc. (an Indiana corporation and wholly-owned subsidiary of The Quaker
Oats Company) and subsidiaries as of June 30, 1994 and 1993, and the related
consolidated statements of income and reinvested earnings and cash flows for
each of the three fiscal years in the period ended June 30, 1994. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Stokely-Van Camp, Inc.
and subsidiaries as of June 30, 1994 and 1993, and the results of their
operations and their cash flows for each of the three fiscal years in the
period ended June 30, 1994, in conformity with generally accepted
accounting principles.
As indicated in Note 3 and Note 8, effective July 1, 1992, the Company
changed their accounting for income taxes and for postretirement benefits
other than pensions.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedules II and X are presented for
purposes of complying with the Securities and Exchange Commission's rules
and are not a required part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois,
August 3, 1994
Page 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the directors and
executive officers of Stokely-Van Camp, Inc. as of September 1, 1994.
Name Principal Occupation Age
James F. Doyle Senior Vice President - President - 42
Gatorade Worldwide Division of
Quaker; Chief Executive
Officer and President of Stokely.
R. Thomas Howell, Jr. Vice President and General 52
Corporate Counsel of Quaker;
Director, Vice President and
Secretary of Stokely.
Janet K. Cooper Vice President and Treasurer of 41
Quaker and Stokely and Director
of Stokely.
Thomas L. Gettings Vice President and Corporate 37
Controller of Quaker and Stokely.
Mr. Doyle has served since May, 1992. Mr. Howell has served in his
capacity since 1983. Ms. Cooper and Mr. Gettings have served since
July, 1992. All of the above-named directors and officers have been employed
by Quaker in an executive capacity more than five years.
ITEM 11. EXECUTIVE COMPENSATION
The following table details annual and long-term compensation paid during the
Company's three most recent fiscal years to the Company's Chief Executive
Officer and President. No other executive officer of the Company was
paid in excess of $100,000 in salary and bonus relative to their services
for the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-term Compensation
Other Restrict All
ed
Annual Stock Other
Fiscal Salary Bonus Compensatio Awards Options Compensation
Name Year ($) ($)(1) n ($)(2) (#)(3) ($)(4)
($)
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Doyle 1994 $299,208 $254,800 -- $25,247 24,000 $55,753
1993 $270,790 $221,100 -- $19,416 30,000 $54,938
1992 $215,506 $110,000 -- $10,932 16,000 --
<FN>
(1)Amounts for fiscal 1993 include the cash awards that have been paid
under the Management Incentive Bonus Plan ("MIB") based on Quaker's
financial performance and Mr. Doyle's personal performance for fiscal 1993;
and the portion of the MIB award for fiscal 1992 which was withheld from the
Page 17
fiscal 1992 MIB award pool and put at risk, subject to achievement of
certain financial objectives during the first half of fiscal 1993. The
financial objectives were achieved in fiscal 1993, and paid in fiscal 1993
along with the 1993 MIB award as follows for Mr. Doyle: $31,900
and $189,200.
(2)Restricted stock award values reflect the fair market value of Quaker's
common stock on the date of each grant. The values reflect Quaker
matching awards of restricted stock under a broad-based long-term
incentive program, the Incentive Investment Program. Dividends on
restricted shares were and continue to be paid on an on-going basis at
the same rate as paid to all shareholders. The aggregate number and
value of restricted shares for Mr. Doyle, valued as of the last day of the
Company's fiscal year (June 30, 1994) are as follows:
Number of
Shares Value
851 $60,106
<FN>
Upon a change in control of Quaker (see definition under Pension Plans),
restricted shares outstanding on the date of the change in control will be
canceled and an immediate lump-sum cash payment will be paid which is
equal to the product of (1) the higher of (i) the closing price of common
stock as reported on the New York Stock Exchange Composite Index
on or nearest to the date of payment (or, if not listed on such exchange,
on a nationally recognized exchange or quotation system on which trading
volume in the common stock is highest) or (ii) the highest per share price
for common stock actually paid in connection with the change in control
and (2) the number of shares of such restricted stock.
(3) All stock option awards in fiscal 1994 were granted with an exercise
price that is equal to the fair market value of the Quaker common
stock on the date of the grant. Fifty percent of the stock option
awards in fiscal 1992 and fiscal 1993 were granted with an
exercise price that is equal to the fair market value of Quaker's
common stock on the date of the grant. The remaining 50%
were granted with an exercise price that is 125% of the fair
market value of Quaker's common stock on the date of the grant.
(4) Amounts shown are the total value of the stock allocations under The
Quaker Employee Stock Ownership Plan ("ESOP"), and cash awards based
on earnings in excess of the Internal Revenue Code limits on the amount of
earnings deemed eligible for purposes of the annual stock allocation made
directly under the ESOP.
</TABLE>
Page 18
The following table contains information covering the grant of stock options
to the Company's Chief Executive Officer and President during fiscal 1994
under The Quaker Long Term Incentive Plan of 1990. The exercise price
for options granted is equal to the fair market value of Quaker's common
stock on the date of the grant.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed Annual
Individual Grants (1) Rates of Stock Price
Appreciation for Option
Term (2)
% of
Total
Options
Granted
to
Options Employee
Granted s Exercise Expiration
Name (#) In Price Date 5% 10%
Fiscal ($/Sh)
Year
<S> <C> <C> <C> <C> <C> <C>
James F. Doyle 24,000 1.7% $68.88 09/08/03 $1,039,63 $2,634,64
8 8
<FN>
(1) All options were granted on September 8, 1993. One-third of the options
granted will vest on each of the three anniversaries following the date of
grant. The options would be cancelled and a lump-sum cash payment would
be paid for realizable value upon the occurrence of a change in control.
(See definition under "Pension Plans".)
(2) Based on fair market value on the date of grant and an annual
appreciation at the rate stated (compounded annually) of such fair market
value through the expiration date of such options. The dollar amounts
under these columns are the result of calculations at the 5% and 10% stock
price appreciation rates set by the Securities and Exchange Commission and
therefore do not forecast possible future appreciation, if any, of Quaker's
stock price.
</TABLE>
The following table contains information covering the exercise of options by
the Chief Executive Officer and President during fiscal 1994 and unexercised
options held as of the end of fiscal 1994.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of Unexercised, In-the-Money
Number of Unexercised Options Options at Fiscal Year End ($)(2)
at
Fiscal Year End(#)
Shares Value
Acquired Realized Exer- Unexer- Exer- Unexer-
Name On ($)(1) cisable cisable cisable cisable
Exercise
(#)
<S> <C> <C> <C> <C> <C> <C>
James F. 1,385 $60,007 56,406 49,540 $871,590 $113,054
Doyle
<FN>
(1) Represents the difference between the option exercise price and the fair
market value of Quaker's common stock on the date of exercise.
(2) Represents the difference between the option exercise price and the fair
market value of Quaker's common stock on the last day of fiscal
1994 (June 30, 1994).
</TABLE>
Page 19
Pension Plans
Quaker and its subsidiaries maintain several pension plans. The Quaker
Retirement Plan (the "Retirement Plan"), which is the principal plan, is a
noncontributory, defined benefit plan covering eligible salaried and hourly
employees of the Company who have completed one year of service as
defined by the Retirement Plan.
Under the Retirement Plan, the participant accrues a benefit based upon the
greater of a Years-of-Service Formula and an Earnings/Service Formula.
Under the Years-of-Service Formula, participants accrue annual benefits
equivalent to credited years of service times $216. Under the
Earnings/Service Formula a participant's benefit is the sum of two parts:
1. Past Service Accrual -- Benefits accrued through December 31, 1994 are
set at the greater of (a) those earned or (b) 1% of Five-Year Average
earnings to $22,700 plus 1.65% of earnings above $22,700, times credited
years of service; and
2. Future Service Accrual -- For each year beginning January 1, 1994 and
after, participants accrue benefits of 1.75% of annual earnings to 80%
of the Social Security wage base plus 2.5% of annual earnings above 80%
of the Social Security wage base.
Eligible earnings used to calculate retirement benefits include wages,
salaries, bonuses, contributions to The Quaker Investment Plan and
allocations under The Quaker Employee Stock Ownership Plan. Normal
retirement age under the Retirement Plan is age 65. The Retirement Plan
contains provision for early retirement benefits.
Benefit amounts payable under the Retirement Plan are limited to the extent
required by the Employee Retirement Income Security Act of 1974 ("ERISA"),
as amended, and the Internal Revenue Code of 1986, as amended. If the
benefit formula produces an amount in excess of those limitations, the excess
will be paid out of general corporate funds in accordance with the terms
of The Quaker 415 Excess Benefit Plan and The Quaker Eligible Earnings
Adjustment Plan. The Quaker Eligible Earnings Adjustment Plan also provides
for payment out of general corporate funds, based upon benefit amounts which
would otherwise have been payable under the Retirement Plan and The Quaker
415 Excess Benefit Plan, if the executive had not previously elected to defer
compensation under the Executive Deferred Compensation Plan.
The estimated annual retirement benefits that Mr. Doyle would receive under
the Retirement Plan, The Quaker 415 Excess Benefit Plan, and The Quaker
Eligible Earnings Adjustment Plan, if he retired at age 65, is $211,754. The
amount assumes that he will continue to work for Quaker until his normal
retirement date and that his earnings will remain the same as in calendar
year 1993 and that he will elect a straight-lifetime benefit without survivor
benefits. (Payment options such as a 50% joint and survivor annuity or
other annuities are available.)
The Retirement Plan assures active and retired employees that, to the
extent of sufficient plan assets, it will continue in effect for a
reasonable period following a change in control of Quaker without a
reduction of anticipated benefits, and under certain circumstances may
provide increased benefits.
Generally, under the Retirement Plan a change in control shall be deemed
to have occurred in any of the following circumstances:
(i) An acquisition of 30% or more of Quaker's stock unless such acquisition
is pursuant to an agreement with Quaker approved by the Board before the
acquisitor becomes the beneficial owner of 5% of Quaker's outstanding
voting power;
(ii) A majority of the Board of Directors is comprised of persons who were
not nominated by the Board of Directors for election as directors;
(iii) A plan of complete liquidation of Quaker; or
(iv) A merger, consolidation or sale of all or substantially all of Quaker's
assets unless thereafter (a) directors of Quaker immediately prior
thereto continue to constitute at least 50% of the directors of the
surviving entity or purchaser; or (b) Quaker's securities continue to
Page 20
represent, or are converted to securities which represent, more than 70%
of the combined voting power of the surviving entity or purchaser.
For a five-year period following a change in control of Quaker, the accrual
of benefits for service during such period cannot be decreased while there
are excess assets (as defined in the Retirement Plan). For a two-year
period following such a change in control, the accrued benefits of members
who meet specified age and service requirements and who are terminated will
be increased. For so long as there are excess assets during that five-year
period, if the Retirement Plan is merged with any other plan, the accrued
benefit of each member and the amount payable to retired or deceased members
shall be increased until there are no excess assets. If during that
five-year period the Retirement Plan is terminated, to the extent that assets
remain after satisfaction of liabilities, the accrued benefits shall be
increased such that no assets of the Retirement Plan will directly or
indirectly revert to Quaker.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding common stock of Stokely is owned by Quaker whose
corporate offices are located at 321 North Clark, Chicago, IL 60610.
The following table presents information with respect to all persons known
to Stokely to own more than 5% of any other class of Stokely's voting
securities as of September 19, 1994. Each beneficial owner has, to the
knowledge of Stokely, sole voting power and sole investment power with
respect to the shares listed opposite such owner's name.
Amount and Percent
Name and Address Nature of of
Title of Class of Beneficial Owner Ownership Class
Second Preferred The William B. Stokely, Jr. 2,012 18.2
Stock (1) Foundation
620 Campbell Station Road
Station West, Suite 4
Knoxville, TN 37922
Marjorie M. Cochran 1,125 10.2
6201 Linwood Drive
Covington, GA 30209-3953
Esther M. Minter 1,125 10.2
230 East College Street
Griffin, GA 30223-4348
Cooper N. Mills 926 8.4
666 Brook Circle
Griffin, GA 30223-4413
(1)Holders of common stock and Second Preferred Stock vote collectively
and not as a separate class. As of June 30, 1994, the outstanding shares
of Second Preferred Stock comprise less than 1% of the aggregate number
of outstanding shares of common stock and Second Preferred Stock.
Page 21
The table below sets forth information with respect to beneficial ownership
of common stock of Quaker by the directors of Stokely as of
September 1, 1994, and by the directors and executive officers as a group.
No director or officer owns any equity securities of Stokely.
<TABLE>
<CAPTION>
Shares Subject
Amount of to Acquisition
Beneficial Within 60
Ownership(a) Days(a)
<S> <C> <C>
James F. Doyle 10,229(c)(d) 74,226
R. Thomas Howell, Jr. 23,988(b)(c)(d)(e) 67,374
Janet K. Cooper 2,711(c)(d)(e)(f) 11,946
All Directors and Officers as 39,327(b)(c)(d) 162,980
a group
</TABLE>
[FN]
(a) Unless otherwise indicated, each named individual and each person in
the group has sole voting power and sole investment power with respect to
shares shown. These shares represent less than 1 percent for every person,
and less than 1 percent for all directors and officers as a group, of the
total shares outstanding, including shares subject to acquisition within 60
days following September 1, 1994.
(b) The figures shown for these executive officers include an aggregate of
1,094 shares representing their proportionate interests in the Quaker
Stock Fund of The Quaker Investment Plan.
(c) The figures shown for these executive officers include an aggregate of
8,921 shares (which includes 1,543 shares on the basis of the conversion
of 1,428 shares of Series B ESOP Convertible Preferred at the conversion
rate of 1.08) allocated to them in The Quaker Employee Stock Ownership Plan.
(d) The figures shown for these executive officers include an aggregate
of 1,685 shares granted to them under The Quaker Long Term Incentive Plan
of 1990 for which the restricted period has not lapsed.
(e) Of these shares, 747 are held by Mr. Howell's children.
(f) Of these shares, 50 are held by Ms. Cooper's husband and 1 is held by
Ms. Cooper's daughter.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of related transactions with Quaker, reference should
be made to Part II, Items 7 and 8 (Notes 1, 4 and 7), and Part IV, Schedule II.
Page 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES
FOR THE FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
<CAPTION>
(Millions of Dollars)
Balance Balance
For at at
the Beginning End of
Period Name of of Amounts Period
Ended Debtor Period Additions Collecte
d
<S> <S> <C> <C> <C> <C>
June 30, 1992 Intercompany
receivable
from/(to)
Quaker (a) $231.1 $ 52.9 $(9.7) $274.3
Loans
receivable
from Quaker
subsidiaries 5.2 0.4 --- 5.6
(b)
Total $236.3 $ 53.3 $(9.7) $279.9
June 30, 1993 Intercompany
receivable
from/(to)
Quaker (a) $274.3 $118.9 $--- $393.2
Loans
receivable
from Quaker
subsidiaries 5.6 0.4 --- 6.0
(b)
Total $279.9 $119.3 $--- $399.2
June 30, 1994 Intercompany
receivable
from/(to)
Quaker (a) $393.2 $ 3.1 $--- $396.3
Loans
receivable
from Quaker
subsidiaries 6.0 0.4 --- 6.4
(b)
Total $399.2 $3.5 $--- $402.7
</TABLE>
[FN]
(a)This amount primarily represents an investing arrangement between
Stokely and its parent, Quaker. It also includes miscellaneous
intercompany activity. Interest is accrued on the outstanding balance
each month using a rate based on the yield of U.S. Treasury Bills (see
Note 4 to the consolidated financial statements under Item 8).
(b) Stokely purchased a 100 percent participation in certain loans owed
to Quaker by certain Quaker subsidiaries. Quaker has agreed to repurchase
these loans at any time upon Stokely's request.
Page 23
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
(Dollars in Millions)
1994 1993 1992
<S> <C> <C> <C>
ITEM
Maintenance and Repairs $ 16.6 $ 15.2 $ 12.9
Depreciation $ 12.9 $ 12.4 $ 10.7
Royalty Expense* $ 21.2 $ 15.2 $ 15.5
Advertising & Merchandising $274.6 $235.2 $253.1
Other Marketing $ 61.3 $ 52.3 $ 50.2
</TABLE>
*Royalty expense represents fees paid to the Gatorade Trust. See description in
Item 1, Business.
Page 24
SIGNATURES
Pursuant to the requirements of Sections 13 and 15 (d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
STOKELY-VAN CAMP, INC.
(Registrant)
By: /s/ James F. Doyle
James F. Doyle
Chief Executive Officer
and President
Date: September 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the 28th day of September, 1994, by the
following persons on behalf of the Registrant and in the capacities indicated.
Signature Title
/s/ James F. Doyle Chief Executive Officer and
James F. Doyle President
/s/ Janet K. Cooper Vice President and Treasurer
Janet K. Cooper (Principal Financial Officer)
/s/ R. Thomas Howell, Jr. Vice President,
R. Thomas Howell, Jr. Secretary and Director
/s/ Thomas L. Gettings Vice President and Corporate
Thomas L. Gettings Controller
Page 25
EXHIBIT INDEX
Paper (P),
Electronic (E)
or Incorporated by
EXHIBIT NO. DESCRIPTION Reference (IBRF)
3 (a) Articles of Incorporation of Stokely-Van IBRF
Camp, Inc. (incorporated by reference to
the Company's Form 10-K for the fiscal year
ended June 30, 1985, file number 1-2944).
3 (b) By-Laws of Stokely-Van Camp, Inc. IBRF
(incorporated by reference to
the Company's Form 10-K for the fiscal year
ended June 30, 1985, file number 1-2944).
10 (a) GATORADE Trust Agreement dated January 1, 1984 IBRF
(incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1984, file
number 1-2944).
21 Subsidiaries of the Registrant. E
Page 26
Exhibit 21
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
Subsidiaries of the Registrant
State of
Subsidiary Incorporation
The Gatorade Company Delaware
Gatorade Puerto Rico Company Delaware
Stokely-Van Camp Overseas, Inc. Delaware
Van Camp's, Inc. Indiana
The Gatorade Company of Australia Pty. Ltd. Australia
Gatorade Portugal Servicos da Marketing S.A. Portugal
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 41
<SECURITIES> 0
<RECEIVABLES> 118
<ALLOWANCES> 5
<INVENTORY> 88
<CURRENT-ASSETS> 665
<PP&E> 203
<DEPRECIATION> 70
<TOTAL-ASSETS> 805
<CURRENT-LIABILITIES> 157
<BONDS> 1
<COMMON> 4
0
15
<OTHER-SE> 592
<TOTAL-LIABILITY-AND-EQUITY> 805
<SALES> 1077
<TOTAL-REVENUES> 1077
<CGS> 553
<TOTAL-COSTS> 553
<OTHER-EXPENSES> 9
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> (13)
<INCOME-PRETAX> 121
<INCOME-TAX> 50
<INCOME-CONTINUING> 70
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
