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 September 30, 1995
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
October 31, 1995, 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 Three Months
Ended September 30, 1995 and 1994 3
Condensed Consolidated Balance Sheets as of
September 30, 1995 and June 30, 1995 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended
September 30, 1995 and 1994 5
Notes to the Condensed Consolidated Financial
Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II - OTHER INFORMATION
Item 5 - Other Information 9
SIGNATURES 10
Page 3
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
Dollars in Millions
Three Months
Ended
September 30
1995 1994
Net sales $373.3 $350.8
Cost of goods sold 171.8 178.0
Gross profit 201.5 172.8
Selling, general and administrative
expenses 111.4 138.5
Interest (income) (8.4) (6.4)
Interest expense - 1.9
Income before income taxes and cumulative
effect of accounting change 98.5 38.8
Provision for income taxes 38.9 15.6
Income before cumulative effect of
accounting change 59.6 23.2
Cumulative effect of accounting change -
net of tax - 1.5
Net income 59.6 21.7
Dividends on preference and preferred stock (0.2) (0.2)
Reinvested Earnings - Beginning Balance 648.3 544.7
Reinvested Earnings - Ending Balance $707.7 $566.2
See accompanying notes to the condensed consolidated financial statements.
Page 4
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Dollars in Millions September 30 June 30
1995 1995
ASSETS
Current Assets:
Cash and cash equivalents $ 24.8 $ 30.0
Due from The Quaker Oats Company 661.3 560.3
Trade accounts receivable - net of allowances 69.6 134.2
Inventories:
Finished goods 32.7 42.2
Materials and supplies 9.4 15.2
Total inventories 42.1 57.4
Other current assets 31.4 30.0
Total Current Assets 829.2 811.9
Other Assets 4.2 4.7
Property, plant and equipment 200.0 194.6
Less accumulated depreciation 65.7 62.6
Property - Net 134.3 132.0
Total Assets $ 967.7 $ 948.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 30.6 $ 53.4
Accrued payroll, pension and bonus 20.7 26.1
Accrued advertising and merchandising 28.4 37.1
Income taxes payable 59.8 54.6
Other current liabilities 19.8 28.3
Total Current Liabilities 159.3 199.5
Long-term Debt 0.5 0.6
Other Liabilities 33.5 33.5
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 707.7 648.3
Treasury common stock, at cost,
602,010 shares (20.9) (20.9)
Total Common Shareholders' Equity 759.1 699.7
Total Liabilities and
Shareholders' Equity $ 967.7 $ 948.6
See accompanying notes to the condensed consolidated financial statements.
Page 5
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Dollars in Millions
Three Months Ended
September 30
1995 1994
Cash Flows from Operating Activities:
Net income $ 59.6 $ 21.7
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of accounting change - 1.5
Depreciation and amortization 4.0 4.2
Deferred income taxes - (0.1)
Decrease in trade accounts receivable 64.6 51.7
Decrease in inventories 15.3 12.7
Increase in other current assets (1.4) (1.1)
Decrease in trade accounts payable (22.8) (17.8)
Increase in income taxes payable 5.2 13.8
(Decrease) increase in other
current liabilities (22.6) 1.8
Other items (0.3) (2.2)
Net Cash Provided by Operating
Activities 101.6 86.2
Cash Flows from Investing Activities:
Additions to property, plant and equipment (5.5) (8.7)
Net Cash Used in Investing Activities (5.5) (8.7)
Cash Flows from Financing Activities:
Change in amount due from The Quaker Oats
Company (101.0) (43.7)
Cash dividends (0.2) (0.2)
Reduction of long-term debt (0.1) -
Net Cash Used in Financing Activities (101.3) (43.9)
Net (decrease) increase in Cash and Cash
Equivalents (5.2) 33.6
Cash and Cash Equivalents - Beginning of Year 30.0 41.1
Cash and Cash Equivalents - End of Quarter $ 24.8 $ 74.7
See accompanying notes to the condensed consolidated financial statements.
Page 6
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1995
Note 1 - Basis of Presentation
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
three months ended September 30, 1995 and 1994, the condensed
consolidated balance sheet as of September 30 1995, and the
condensed consolidated statements of cash flows for the three
months ended September 30, 1995 and 1994, 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 September 30, 1995 and for all periods presented. All
adjustments made have been of a normal recurring nature. 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, 1995.
Note 2 - Redeemable Preference and Preferred Stock
5% Cumulative Convertible Second Preferred Stock
As of September 30, 1995, authorized shares were 500,000 and issued
and outstanding shares were 10,860. 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 September 30, 1995, authorized shares were 1,500,000, issued
shares were 753,496 and outstanding shares were 753,163.
Both issues are redeemable at the Company's option for $21 per
share.
Note 3 - Accounting Change
Effective July 1, 1994, the Company adopted Financial Accounting
Standards Board (FASB) Statement #112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect of adoption was a
$2.5 million pretax charge, or $1.5 million after-tax, in the first
quarter of fiscal 1995. The adoption of this statement did not
have a material effect on operating results or cash flows in fiscal
1995 nor is it expected to have a material effect in future years.
Note 4 - Fiscal-Year Change
On May 10, 1995, the Board of Directors approved a change in the
Company's fiscal year end from June 30 to December 31, effective
the calendar year beginning January 1, 1996. The Company is
currently in a six-month fiscal transition period that precedes the
start of the new calendar-year cycle. The Company will file a Form
10-K no later than March 30, 1996 covering the six-month transition
period from July 1, 1995 through December 31, 1995.
Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Three Months Ended September 30, 1995
Compared With Three Months Ended September 30, 1994
On June 8, 1995, the Company sold its Van Camp's pork and beans
business. Consequently, Stokely's products consist only of
Gatorade thirst quencher.
Consolidated net sales for the first quarter of the six-month
transition period ending December 31, 1995 were $373.3 million, up
six percent from the first quarter of fiscal 1995. Volume was
relatively flat. Volume increased 17 percent in Gatorade thirst
quencher in the United States. However, this increase was offset
substantially by the absence of sales and volume from the divested
Van Camp's business and declines in export sales to Mexico. If the
Van Camp's business results were excluded, sales would have
increased 16 percent and volume eight percent. Gatorade thirst
quencher maintains approximately 80 percent market share of the
sports beverage category despite the fact that two major soft drink
competitors have broadened their distribution of competitive
beverage products throughout the United States. The Gatorade
thirst quencher volume increase was a result of increased consumer
demand due to new packaging and flavor innovations and warmer
weather as compared to the prior year's July-to-September period.
The change in sales relative to volume was also affected by
product mix. Price increases did not have a significant impact on
sales.
Gross profit margin was 54.0 percent compared to 49.3 percent in
the prior year. The increase is due to product mix changes
resulting from the divestiture of the Van Camp's business.
Selling, general and administrative (SG&A) expenses decreased 20
percent to $111.4 million. This is primarily due to a decrease of
15 percent in advertising and merchandising (A&M) expenses and the
absence of expenses associated with the Van Camp's business. A&M
expenses were 23.5 percent of sales compared to 29.4 percent of
sales in the prior year. The reduction in the ratio of A&M
expenses to sales is due to the increased efficiency in spending
for Gatorade thirst quencher.
Interest income of $8.4 million increased $2.0 million from the
prior year due to higher average amounts due from Quaker as well as
higher interest rates.
Liquidity and Capital Resources
Net cash provided by operating activities of $101.6 million and
$86.2 million for the three months ended September 30, 1995 and
1994, respectively, were well in excess of the Company's dividends
and capital expenditures. The increase in net cash provided by
operating activities resulted mainly from increased net income and
working capital changes. Capital expenditures for the three months
ended September 30, 1995 and 1994 were $5.5 million and $8.7
million, respectively, with no material individual commitments
outstanding.
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
currently maintain cash balances. The amount due from Quaker
increased $101.0 million primarily reflecting changes in accounts
receivable.
Page 8
Accounting and Fiscal-Year Change
Effective July 1, 1994, the Company adopted FASB Statement #112,
"Employer's Accounting for Postemployment Benefits." The
cumulative effect of adoption was a $1.5 million after-tax charge
in the first quarter of fiscal 1995. The adoption of this
statement did not have a material effect on operating results or
cash flows in fiscal 1995 nor is it expected to have a material
effect in future years.
To capture the results of a full beverage season in a single fiscal-
year period, the Company is changing its fiscal year to align with
the calendar year, beginning January 1, 1996. The Company is
currently in a six-month transition period that precedes the start
of the new calendar-year cycle.
Page 9
PART II - OTHER INFORMATION
Item 5 Other Information
Note 4 in Part I is incorporated by reference herein.
All other items in Part II are either inapplicable to the
Company during the quarter ended September 30, 1995, 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 10
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: November 14, 1995 s/ Thomas L. Gettings
Thomas L. Gettings
Vice President and Corporate Controller
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