UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
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 ___
The registrant had 2,989,371 shares of Common Stock outstanding on April 30,
1997, all of which were held by The Quaker Oats Company.
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Income
and Reinvested Earnings for the Three Months
Ended March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended
March 31, 1997 and 1996 5
Notes to the Condensed Consolidated Financial
Statements 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II - OTHER INFORMATION 10
SIGNATURES 11
2
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS
(UNAUDITED)
Three Months Ended
Dollars in Millions March 31,
1997 1996
Net sales $215.9 $187.1
Cost of goods sold 107.2 99.7
Gross profit 108.7 87.4
Selling, general and administrative expenses 76.0 71.1
Interest income - net (11.7) (9.0)
Income before income taxes 44.4 25.3
Provision for income taxes 18.2 9.9
Net income 26.2 15.4
Dividends on preference and preferred stock (0.2) (0.2)
Reinvested Earnings - Beginning Balance 811.8 687.7
Reinvested Earnings - Ending Balance $837.8 $702.9
See accompanying notes to the condensed consolidated financial statements.
3
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
Dollars in Millions 1997 1996
ASSETS
Current Assets:
Cash and cash equivalents $ 14.1 $ 5.3
Due from The Quaker Oats Company 697.1 715.3
Trade accounts receivable - net of allowances 69.7 24.2
Inventories:
Finished goods 56.4 24.8
Materials and supplies 12.3 9.3
Total inventories 68.7 34.1
Other current assets 36.1 39.9
Total Current Assets 885.7 818.8
Other Assets 3.4 6.0
Property, plant and equipment 270.8 264.2
Less accumulated depreciation 78.4 75.4
Property - Net 192.4 188.8
Total Assets $1,081.5 $1,013.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 38.0 $ 20.9
Accrued payroll, benefits and bonus 10.0 9.7
Accrued advertising and merchandising 21.3 21.9
Income taxes payable 39.8 17.4
Other current liabilities 24.4 21.7
Total Current Liabilities 133.5 91.6
Long-term Debt 0.3 0.3
Other Liabilities 43.2 43.2
Redeemable Preference and
Preferred Stock 15.3 15.3
Common Shareholders' Equity:
Common stock, $1 par value, authorized 10 million
shares; issued 3,591,381 shares 3.6 3.6
Additional paid-in capital 68.7 68.7
Reinvested earnings 837.8 811.8
Treasury common stock, at cost, 602,010 shares (20.9) (20.9)
Total Common Shareholders' Equity 889.2 863.2
Total Liabilities and Shareholders' Equity $1,081.5 $1,013.6
See accompanying notes to the condensed consolidated financial statements.
4
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
Dollars in Millions March 31,
1997 1996
Cash Flows from Operating Activities:
Net income $ 26.2 $ 15.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4.4 4.0
Loss on disposition of property and equipment 1.6 0.1
Increase in trade accounts receivable (45.5) (40.3)
Increase in inventories (34.6) (30.7)
Decrease (increase) in other current assets 3.8 (5.5)
Increase in trade accounts payable 17.1 15.3
Increase in income taxes payable 22.4 3.1
Increase in other current liabilities 2.4 8.1
Other items 2.2 4.9
Net Cash Used in Operating Activities --- (25.6)
Cash Flows from Investing Activities:
Additions to property, plant and equipment (9.2) (13.3)
Net Cash Used in Investing Activities (9.2) (13.3)
Cash Flows from Financing Activities:
Change in amount due from The Quaker Oats Company 18.2 45.9
Cash dividends (0.2) (0.2)
Reduction of long-term debt --- (0.1)
Net Cash Provided by Financing Activities 18.0 45.6
Net Increase in Cash and Cash Equivalents 8.8 6.7
Cash and Cash Equivalents - Beginning of Year 5.3 8.4
Cash and Cash Equivalents - End of Quarter $ 14.1 $ 15.1
See accompanying notes to the condensed consolidated financial statements.
5
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
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 March 31, 1997 and 1996, the
condensed consolidated balance sheet as of March 31, 1997, and the condensed
consolidated statements of cash flows for the three months ended March 31, 1997
and 1996, have been prepared by the Company without audit. In the opinion of
management, these financial statements include all adjustments necessary to
present fairly the financial position, results of operations and cash flows as
of March 31, 1997, 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 (GAAP) 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
year ended December 31, 1996.
Note 2 - Redeemable Preference and Preferred Stock
5% Cumulative Convertible Second Preferred Stock
As of March 31, 1997, authorized shares were 500,000 and issued and outstanding
shares were 10,700. The voting 5% Cumulative Convertible Second Preferred
Stock ($20 par value) is convertible at the holder's option, on a share-for-
share basis, into non-voting 5% Cumulative Prior Preference Stock ($20 par
value).
5% Cumulative Prior Preference Stock
As of March 31, 1997, authorized shares were 1,500,000, issued shares were
753,656 and outstanding shares were 753,323.
Both issues are redeemable at the Company's option for $21 per share.
6
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
Note 3 - Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Note 4 - Pending Accounting Change
In March 1997, the Financial Accounting Standards Board (FASB) issued Statement
#128, "Earnings Per Share." The adoption of this new Statement will not have a
significant impact on the Company.
Note 5 - Subsequent Event
On March 27, 1997, Quaker announced a definitive agreement to sell 100 percent
of its wholly-owned subsidiary, Snapple Beverage Corp., to Triarc Companies,
Inc. The transaction is subject to certain conditions including the receipt of
regulatory approvals. Management expects the transaction to be completed in
the second quarter of 1997. As a result of this transaction, a Snapple
facility in Tolleson, Arizona will remain with Quaker and be transferred to the
Company as a Gatorade thirst quencher facility. The net book value to be
transferred to the Company is approximately $40 million.
7
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared With
Three Months Ended March 31, 1996
Operating Results
Consolidated net sales for the three months ended March 31, 1997, were $215.9
million, up 15 percent from the three months ended March 31, 1996. This
increase is primarily due to higher Gatorade thirst quencher sales in the
United States. Gatorade thirst quencher sales and volume in the United States
increased 15 percent, reflecting incremental sales from a new product, Gatorade
Frost, and core business growth. Price changes did not significantly affect
sales.
Gross profit margin increased to 50.3 percent of sales from 46.7 percent last
year primarily due to lower packaging and ingredient costs. Selling, general
and administrative (SG&A) expenses increased 7 percent primarily due to
increases in advertising and merchandising (A&M) expenses. However, as a
percent of sales, A&M expenses decreased to 20.9 percent for the three months
ended March 31, 1997, as compared to 22.4 percent of sales for the three months
ended March 31, 1996. Media spending to support the Gatorade Frost launch will
begin in the second quarter.
Interest and Income Taxes
Net interest income of $11.7 million increased $2.7 million from last year
stemming from higher average amounts due from The Quaker Oats Company and
higher interest rates.
The effective tax rate for the three months ended March 31, 1997, was 41.0
percent versus 39.1 percent last year. The lower rate for the three months
ended March 31, 1996, was due to favorable tax treatment of operations in
Puerto Rico.
Liquidity and Capital Resources
Net cash from operating activities was zero for the three months ended March
31, 1997, and net cash used in operating activities was $25.6 million for the
three months ended March 31, 1996. The increase in cash flows was primarily
due to higher net income and an increase in income taxes payable. Capital
expenditures for the three months ended March 31, 1997 and 1996, were $9.2
million and $13.3 million, respectively. Capital expenditures are expected to
increase during the remainder of the current year as Quaker continues its
expansion of production capacity for Gatorade thirst quencher in the United
States. The Company expects that its future capital expenditures and cash
dividends will be financed through cash flows from operating activities.
8
STOKELY-VAN CAMP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pending Accounting Change
In March 1997, the FASB issued Statement #128, "Earnings Per Share." The
adoption of this new Statement will not have a significant impact on the
Company.
Subsequent Event
On March 27, 1997, Quaker announced a definitive agreement to sell 100 percent
of its wholly-owned subsidiary, Snapple Beverage Corp., to Triarc Companies,
Inc. The transaction is subject to certain conditions including the receipt of
regulatory approvals. Management expects the transaction to be completed in
the second quarter of 1997. As a result of this transaction, a Snapple
facility in Tolleson, Arizona will remain with Quaker and be transferred to the
Company as a Gatorade thirst quencher facility. The net book value to be
transferred to the Company is approximately $40 million.
Cautionary Statement on Forward-Looking Statements
Forward-looking statements within the meaning of Section 21E of the Securities
and Exchange Act of 1934, are made throughout this Management's Discussion and
Analysis. The Company's results may differ materially from those in the
forward-looking statements. Forward-looking statements are based on
management's current views and assumptions and involve risks and uncertainties
that could significantly affect expected results. For example, operating
results may be affected by external factors such as: actions of competitors;
changes in laws and regulations, including changes in governmental
interpretations of regulations and changes in accounting standards; customer
demand; effectiveness of spending or programs; and fluctuations in the cost and
availability of supply chain resources.
Continued growth in sales, earnings and cash flows from the Gatorade thirst
quencher operations is dependent on the level of competition from its two key
competitors, Coca-Cola Co. and PepsiCo Inc., and the projected outcome of
supply chain management programs, capital spending plans, markets for key
commodities, especially PET resins and cardboard, and the efficiency and
effectiveness of A&M programs.
9
PART II - OTHER INFORMATION
All other items in Part II are either inapplicable to the Company during the
quarter ended March 31, 1997, 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.
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: May 9, 1997 Thomas L. Gettings
Thomas L. Gettings
Vice President and Corporate Controller
11
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