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 December 31, 1993
_ 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
January 31, 1994, all of which were held by The Quaker Oats Company.
PAGE 2
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 Six and Three Months
Ended December 31, 1993 and 1992 3-4
Condensed Consolidated Balance Sheets as of
December 31, 1993 and June 30, 1993 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
December 31, 1993 and 1992 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security-Holders 10
SIGNATURES 11
PAGE 3
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
Dollars in Millions
Six Months Ended
December 31
1993 1992
Net sales $466.3 $372.1
Cost of goods sold 242.5 187.1
Gross profit 223.8 185.0
Selling, general and administrative expenses 179.2 160.8
Interest (income) - net (5.1) (2.9)
Other (income) - net (2.1) (1.0)
Income before income taxes and cumulative effect of
accounting changes 51.8 28.1
Provision for income taxes 21.0 11.2
Income before cumulative effect of accounting changes 30.8 16.9
Cumulative effect of accounting changes - net of tax -- 14.0
Net income 30.8 2.9
Dividends on preference and preferred stock (0.4) (0.4)
Reinvested Earnings - Beginning Balance 475.1 429.9
Reinvested Earnings - Ending Balance $505.5 $432.4
See accompanying notes to the condensed consolidated financial statements.
PAGE 4
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
Dollars in Millions
Three Months Ended
December 31
1993 1992
Net sales $118.9 $ 96.5
Cost of goods sold 68.7 59.5
Gross profit 50.2 37.0
Selling, general and administrative expenses 65.6 57.5
Interest (income) - net (3.0) (1.9)
Other (income) - net (0.4) (0.3)
(Loss) before income taxes (12.0) (18.3)
(Benefit) for income taxes (5.3) (7.3)
Net (loss) (6.7) (11.0)
Dividends on preference and preferred stock (0.2) (0.2)
Reinvested Earnings - Beginning Balance 512.4 443.6
Reinvested Earnings - Ending Balance $505.5 $432.4
See accompanying notes to the condensed consolidated financial statements.
PAGE 5
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Dollars in Millions December 31 June 30
1993 1993
Assets
Current Assets:
Due from The Quaker Oats Company $477.5 $399.2
Trade accounts receivable - net of allowances 19.2 97.1
Inventories:
Finished goods 25.2 45.7
Materials and supplies 7.2 10.6
Total inventories 32.4 56.3
Other current assets 15.1 12.7
Total Current Assets 544.2 565.3
Other Assets 7.6 8.7
Property, plant and equipment 203.0 193.1
Less accumulated depreciation 65.6 59.7
Property - Net 137.4 133.4
Total Assets $689.2 $707.4
Liabilities and Shareholders' Equity
Current Liabilities:
Trade accounts payable $ 19.9 $ 52.5
Accrued advertising and merchandising 12.0 21.2
Income taxes payable 38.5 41.1
Other current liabilities 14.3 18.8
Total Current Liabilities 84.7 133.6
Long-term Debt 0.7 0.8
Other Liabilities 26.9 28.5
Deferred Income Taxes 4.7 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 505.5 475.1
Treasury common stock, at cost, 602,010 shares (20.9) (20.9)
Total Common Shareholders' Equity 556.9 526.5
Total Liabilities and Shareholders' Equity $689.2 $707.4
See accompanying notes to the condensed consolidated financial statements.
PAGE 6
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Dollars in Millions
Six Months Ended
December 31
1993 1992
Cash Flows from Operating Activities:
Net income $ 30.8 $ 2.9
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting changes -- 14.0
Depreciation and amortization 7.5 5.9
Deferred income taxes 2.0 0.8
Loss on disposition of property and equipment 0.1 1.0
Decrease in trade accounts receivable 77.9 111.0
Decrease in inventories 23.9 22.8
(Increase) Decrease in other current assets (2.4) 1.4
(Decrease) in trade accounts payable (32.6) (30.5)
(Decrease) in income taxes payable (2.6) (12.1)
(Decrease) in other current liabilities (13.7) (6.7)
Other items (2.3) (0.1)
Net Cash Provided by Operating Activities 88.6 110.4
Cash Flows from Investing Activities:
Additions to property, plant and equipment (9.8) (12.8)
Net Cash Used in Investing Activities (9.8) (12.8)
Cash Flows from Financing Activities:
Change in amount due from
The Quaker Oats Company (78.3) (97.1)
Cash dividends (0.4) (0.4)
Reduction of long-term debt (0.1) (0.1)
Net Cash Used in Financing Activities (78.8) (97.6)
Net Change in Cash $ -- $ --
See accompanying notes to the condensed consolidated financial statements.
PAGE 7
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1993
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 six and three-month periods ended
December 31, 1993 and 1992, the condensed consolidated balance sheet as of
December 31, 1993, and the condensed consolidated statements of cash flows
for the six-month periods ended December 31, 1993 and 1992, 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 December 31,
1993 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 December
31, 1992, and for the six-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 December 31, 1992 six-month operating results was a pretax charge
of $1.2 million ($0.8 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 December 31, 1993, 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 December 31, 1993, 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.
PAGE 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended December 31, 1993
Compared With Six Months Ended December 31, 1992
Net sales for the first six months of fiscal 1994 were $466.3 million, up 25
percent over last year's $372.1 million. Volumes increased 22 percent versus
the prior year. The increase was primarily due to volume increases for
GATORADE thirst quencher. Less than 3 percent of the change in sales
was due to price increases. The volume increase was a result of the warmer
summer weather this year versus last year and the conversion of 32 ounce
glass to a plastic container.
Gross profit margin decreased to 48.0 percent of sales from last year's 49.7
percent as a result of increased distribution and packaging material costs,
partially offset by improved product mix. Selling, general and
administrative (SG&A) expenses increased $18.4 million, or 11 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. A&M expenditures were 25
percent of sales in fiscal 1994 compared to 29 percent in fiscal 1993.
Cost of goods sold and SG&A expenses for the first six months of fiscal
1993 were both restated by $0.6 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 meet the competitive needs of the business
environment. In the pursuit of greater shareholder value, these continuous
improvement initiatives could lead to future charges.
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 $5.1 million increased $2.2 million from the prior
year stemming from higher amounts due from The Quaker Oats Company.
The effective tax rate for the first six months of fiscal 1994 was 40.5
percent compared to 39.9 percent in the first six months of fiscal 1993. The
higher rate was due to the higher U.S. corporate statutory tax rate for
fiscal 1994 and a retroactive adjustment to January 1, 1993, required by
new tax legislation, offset by favorable U.S. tax treatment for manufacturing
facilities in Puerto Rico.
Net income for the first six months of fiscal 1994 was $30.8 million versus
$2.9 million last year, which included a charge of $14.0 million for the
after-tax cumulative effect of adopting both FASB Statement #106 and
Statement #109.
Three Months Ended December 31, 1993
Compared with Three Months Ended December 31, 1992
Net sales for the second quarter of fiscal 1994 were $118.9 million, up 23
percent over last year's $96.5 million. Volumes increased 16 percent. Price
increases did not have an effect on sales increases for the quarter. The
increase was due to volume increases as well as product mix improvements
for both GATORADE thirst quencher and VAN CAMP'S products.
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross profit margin increased to 42.2 percent of sales from last year's 38.3
percent. The change was a result of improved product mix as well as the
prior year inclusion of expenses related to the retooling of certain
GATORADE thirst quencher production lines. SG&A expenses increased
$8.1 million, or 14 percent, primarily due to higher 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. A&M expenses were 30 percent of
sales compared to 33 percent in the prior year. Cost of goods sold and SG&A
expenses for the second quarter of fiscal 1993 were both restated by $0.3
million for the adoption of FASB Statement #106.
Net interest income of $3.0 million increased $1.1 million from the prior
year stemming from higher amounts due from The Quaker Oats Company.
Liquidity and Capital Resources
Net cash provided by operating activities of $88.6 million and $110.4 million
for the six months ended December 31, 1993 and 1992, respectively, was
well in excess of the Company's dividends and capital expenditures. Capital
expenditures for the first six months of fiscal 1994 and 1993 were $9.8
million and $12.8 million, respectively, with no material individual
commitments outstanding. The Company anticipates that cash flows provided
by operating activities in fiscal 1994 will exceed working capital
requirements, dividends and capital expenditures.
The amount due from The Quaker Oats Company increased $78.3 million
primarily reflecting changes in working capital, mainly collection of trade
accounts receivable. 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.
Pension and Other Postretirement Benefits
The Company is currently assessing its actuarial assumptions for pension
and other postretirement benefits as a result of the general decline in
interest rates. These assumptions are used to measure plan assets and
obligations for pension and other postretirement benefits. The Company
is currently determining the impact, if any, that changes in the assumptions
would have on its financial position and annual employee benefits expense.
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.
PAGE 10
PART II - OTHER INFORMATION
4. Submission of matters to a vote of security-holders.
(a) The Company's Annual Meeting of Shareholders was held on November 9, 1993.
Represented at the Meeting, either in person or by proxy, were 2,989,371
voting shares, of a total 3,000,694 voting shares outstanding. The matter
voted upon at the Meeting is described in (c) below.
(c) To elect three directors to each serve for a one-year term or until their
successors are elected and qualified. All nominees are named below.
- James F. Doyle
Votes For Election - 2,989,371
- R. Thomas Howell, Jr.
Votes For Election - 2,989,371
- Janet K. Cooper
Votes For Election - 2,989,371
There were no votes withheld, against, abstentions or broker non-votes with
respect to the election of any nominee named above.
All other items in Part II are either inapplicable to the Company during
the quarter ended December 31, 1993, 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.
PAGE 11
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: February 11, 1994 Thomas L. Gettings
Thomas L. Gettings
Vice President and Corporate
Controller
