UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 13 weeks ended April 1, 1995
OR
[ ] 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 1-9256
__________________
PREMARK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3461320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1717 Deerfield Road, Deerfield, Illinois 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 405-6000
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_______
As of May 10, 1995, 60,874,351 shares of the Common Stock, $1.00 par
value, of the Registrant were outstanding.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
a) Financial Statements of Registrant
Page
Index Number
Condensed Consolidated Statement of Income
(Unaudited) for the 13 week period ended
April 1, 1995 and the 14 week period
ended April 2, 1994.............................. 2
Condensed Consolidated Balance Sheet
(Unaudited) as of April 1, 1995 and
December 31, 1994................................ 3
Condensed Consolidated Statement of Cash Flows
(Unaudited) for the 13 week period ended
April 1, 1995 and the 14 week period
ended April 2, 1994.............................. 5
Notes to Condensed Consolidated
Financial Statements (Unaudited)................. 6
The condensed consolidated financial statements of the Registrant
included herein have been prepared, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Although certain information normally included in financial statements
prepared in accordance with general accepted accounting principles has
been condensed or omitted, the Registrant believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Annual Report on Form
10-K of the Registrant for its fiscal year ended December 31, 1994.
The condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring items,
which, in the opinion of management, are necessary to present a fair
statement of the results for the interim periods presented.
The results for interim periods are not necessarily indicative of
trends or of results to be expected for a full year.
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
13 Weeks 14 Weeks
Ended Ended
April 1, April 2,
1995 1994<F1>
-------- --------
(In millions, except per share data)
Net sales................................... $ 849.7 $ 788.3
-------- --------
Costs and expenses:
Cost of products sold..................... 446.2 422.6
Delivery, sales, and
administrative expense.................. 333.2 306.8
Interest expense.......................... 6.0 6.3
Interest income........................... (1.6) (1.5)
Other (income) expense, net............... (0.1) 2.2
-------- --------
Total costs and expenses............... 783.7 736.4
-------- --------
Income before income taxes.................. 66.0 51.9
Provision for income taxes.................. 19.5 14.1
-------- --------
Net income.................................. 46.5 37.8
Retained earnings, beginning of period...... 579.8 418.7
Cash dividends declared..................... (12.2) (8.9)
Cost of treasury stock issued
in excess of option exercise prices....... (2.7) (7.8)
-------- --------
Retained earnings, end of period............ $ 611.4 $ 439.8
======== ========
Net income per common share................. $ 0.71 $ 0.56
======== ========
Average number of
common shares outstanding................. 65.3 66.9
======== ========
Dividends declared per common share......... $ 0.20 $ 0.14
======== ========
<F1> Net sales and cost of products sold have been restated to
reflect the reclassification of certain promotional items
from delivery, sales, and administrative expense.
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 2 -
</PAGE)
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
April 1, December 31,
1995 1994
--------- ---------
(In millions)
Cash and cash equivalents.................. $ 110.2 $ 120.8
Accounts and notes receivable.............. 515.2 509.1
Less allowances for
doubtful accounts...................... (46.1) (43.5)
--------- ---------
469.1 465.6
Inventories................................ 567.0 512.5
Deferred income tax benefits............... 125.2 120.9
Prepaid expenses........................... 62.7 54.3
--------- ---------
Total current assets................... 1,334.2 1,274.1
--------- ---------
Investments, long term receivables,
and deferred charges..................... 225.3 217.5
Less allowances for doubtful accounts.... (22.0) (22.7)
--------- ---------
203.3 194.8
Property, plant, and equipment............. 1,825.2 1,753.2
Less accumulated depreciation............ (1,097.5) (1,041.4)
--------- ---------
727.7 711.8
Intangibles, net of accumulated
amortization............................. 176.9 177.2
--------- ---------
Total assets........................... $2,442.1 $2,357.9
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 3 -
</PAGE)
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
April 1, December 31,
1995 1994
--------- ---------
(In millions)
Accounts payable........................... $ 183.9 $ 218.8
Short-term borrowings and current
portion of long-term debt................ 295.1 83.6
Accrued liabilities........................ 619.7 618.2
--------- ---------
Total current liabilities.............. 1,098.7 920.6
--------- ---------
Long-term debt............................. 122.5 122.3
Accrued postretirement benefit cost........ 152.9 151.4
Deferred income taxes...................... 13.2 9.9
Other liabilities.......................... 179.0 181.4
Shareholders' equity:
Preferred stock, $1.00 par value,
authorized 50,000,000 shares;
issued -- none......................... - -
Common stock, $1.00 par value,
authorized 200,000,000 shares;
issued -- 69,003,840 shares............ 69.0 69.0
Capital surplus............................ 571.7 571.7
Retained earnings.......................... 611.4 579.8
Treasury stock, 8,268,995 shares at
April 1, 1995 and 5,105,347 shares
at December 31, 1994, at cost............ (261.3) (125.6)
Unearned portion of restricted
stock issued for future service.......... (1.4) (0.3)
Cumulative foreign currency adjustments.... (113.6) (122.3)
--------- ---------
Total shareholders' equity............. 875.8 972.3
--------- ---------
Total liabilities and
shareholders' equity................. $2,442.1 $2,357.9
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 4 -
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
13 Weeks 14 Weeks
Ended Ended
April 1, April 2,
1995 1994
-------- --------
(In millions)
Cash flows from operating activities:
Net income................................ $ 46.5 $ 37.8
Adjustment to reconcile net income to
net cash used in operating activities:
Depreciation and amortization......... 33.2 29.5
Changes in assets and liabilities:
Decrease in accounts
and notes receivable................ 8.0 24.6
Increase in inventory................. (46.3) (29.9)
Decrease in accounts payable
and accrued liabilities............. (52.1) (48.6)
Decrease in income taxes payable...... (9.0) (5.4)
Increase in deferred income taxes..... (2.6) (2.1)
Increase in prepaid expenses.......... (6.7) (6.0)
Other, net................................ (4.5) (2.1)
-------- --------
Net cash used in operating
activities......................... (33.5) (2.2)
-------- --------
Cash flows from investing activities:
Capital expenditures...................... (30.8) (38.6)
Other..................................... (5.6) (1.2)
-------- --------
Net cash used in
investing activities............... (36.4) (39.8)
-------- --------
Cash flows from financing activities:
Net increase in short-term debt........... 206.4 182.1
Repayment of long-term debt............... (0.2) (150.5)
Proceeds from exercise of stock options... 2.7 5.4
Purchase of treasury stock................ (147.3) (38.3)
Payment of dividends...................... (12.8) (9.0)
-------- --------
Net cash provided by (used in)
financing activities............... 48.8 (10.3)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents...................... 10.5 (1.1)
-------- --------
Net decrease in cash and
cash equivalents.......................... $ (10.6) $ (53.4)
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
- 5 -
PREMARK INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q
and therefore do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations,
and changes in financial position in conformity with generally
accepted accounting principles. In the opinion of management, the
unaudited condensed consolidated financial statements include all
adjustments, consisting only of normal recurring items, necessary for
a fair presentation of the financial position and results of
operations. The results of operations of any interim period are not
necessarily indicative of the results that may be expected for a full
fiscal year.
Premark's (the company's) fiscal year ends on the last Saturday of
December. Fiscal 1995 will consist of 52 weeks compared with 53 weeks
in 1994. As a result, the first quarter includes 13 weeks in 1995
compared with 14 weeks in 1994. Certain prior year amounts have been
reclassified to conform with the current year's presentation.
Note 2: Inventories
Inventories, by component, are summarized as follows (in millions):
April 1, December 31,
1995 1994
----------- -----------
Finished goods.................. $ 290.4 $ 257.0
Work in process................. 77.6 62.5
Raw materials and supplies...... 199.0 193.0
-------- --------
Total inventories $ 567.0 $ 512.5
======== ========
- 6 -
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is a discussion of the results of operations for the 13
weeks ended April 1, 1995, compared with the 14 weeks ended April 2,
1994, and changes in financial condition during the 13 weeks ended
April 1, 1995. The prior year's quarter included 14 weeks because the
company's fiscal year ends on the last Saturday of December and
included 53 weeks in 1994. Certain prior year amounts have been
reclassified to conform with the current year's presentation.
Net Sales
Net sales for the first quarter of 1995 were $849.7 million, an
increase of 8 percent compared with net sales of $788.3 million in
1994. The key factors in the 1995 improvement were higher reported
sales by Tupperware Europe and throughout the Food Equipment Group.
These gains more than offset lower sales by Precor. Foreign exchange
rate differences accounted for 3 percentage points of the increase.
Costs and Expenses
Cost of products sold as a percentage of net sales was 52.5 percent
for the first quarter of 1995 compared with 53.6 percent in 1994. The
lower percentage in 1995 reflects the absence of 1994's adhesive
claims provision and lower costs at Florida Tile, which were only
partially offset by West Bend's product recall provision. Delivery,
sales and administrative expenses as a percentage of net sales were
39.2 percent in 1995, comparable with 38.9 percent in the first
quarter of 1994.
Provision for Income Taxes
The effective tax rate was 29.5 percent for the first quarter of 1995,
compared with 27.2 percent for the first quarter of 1994, and 27.5
percent for the year ended December 31, 1994. The lower 1994 rate
primarily reflects a reduction in the valuation allowance against
deferred tax assets.
Net Income
Net income increased 23 percent to $46.5 million, or 71 cents per
share, in 1995 from $37.8 million, or 56 cents per share, in 1994.
The increase in 1995's first quarter reflects significant improvement
by Tupperware, the Food Equipment Group, and Florida Tile, which
returned to profitability in 1995, along with the absence of 1994's $6
million, pretax, adhesive claims provision by Ralph Wilson Plastics.
Partially offsetting these factors were an $8 million, pretax,
provision for a product recall by West Bend, which otherwise would
have reported a substantial improvement over 1994, and a sharp
decrease in the profitability of Precor.
Segment results
Tupperware
Net sales for the first quarter of 1995 were $330.1 million, an
increase of 11 percent from $298.6 million in 1994. Sales and cost
of products sold for 1994 have been restated to reflect the
reclassification of certain promotional items from delivery, sales,
and administrative expense. The sales increase was driven by higher
international volume. Segment profit of $43.1 million rose 26 percent
from $34.2 million last year. The profit improvement was due to
significantly better results in Europe and Latin America, partially
offset by a substantial decline in Asia Pacific. Tupperware's
international operations accounted for 87 percent of its sales and all
of its segment profit.
Tupperware's European sales increased 18 percent to $173.4 million,
and profits rose 34 percent. The sales improvement was due to
favorable foreign exchange rates as well as increased volume in
Germany and South Africa, resulting from continued growth in the
average active sales force. The profit growth resulted from the
higher sales along with lower marketing, administrative, and
promotional expenses, partially offset by higher manufacturing costs.
Germany continues to be the dominant unit in the region in terms of
both sales and profits. Asia Pacific's sales increased by 5 percent
to $72 million, while segment profit declined 32 percent from 1994.
The improved sales comparison was driven by favorable foreign exchange
rates as well as higher volume in the Philippines and some of the
region's smaller markets, offsetting the negative impact of the Kobe
earthquake in Japan. The segment profit decline reflects the impact
of the earthquake, as well as a less favorable mix of sales and higher
operating expenses. In the U.S., sales for the quarter were $43.0
million versus $42.9 million in 1994. The U.S. segment loss was $4.6
million, a $0.2 million improvement from 1994. The favorable
comparison was the result of an improved product mix, somewhat offset
by higher promotion and selling expenses. Latin American sales rose 5
percent to $36.7 million, and segment profit grew significantly, as
substantial improvement in Brazil, growth in Venezuela and continued
operational strength in Mexico more than offset the effects of the
peso devaluation in Mexico. Canadian sales were $4.5 million, down 17
percent, due to lower volume. The segment loss was reduced slightly
due to lower promotional expenses offsetting the effect of the decline
in sales.
Food Equipment Group
Net sales for the first quarter of 1995 were $291.5 million, an
increase of 14 percent compared with $256.2 million in 1994. Segment
profit was $19.7 million, an improvement of 80 percent over the $11.0
million reported in 1994. International operations accounted for 42
percent of segment sales and 24 percent of segment profit for the
quarter.
U.S. sales rose 8 percent to $170.4 million due to increases in all
markets and across all product lines. Segment profit almost doubled
due to the higher volume and nominal price increases. European sales
of $102.5 million improved 21 percent over last year, due to favorable
foreign exchange rates and improved economies in most markets.
Profits rose 68 percent as the increase in volume more than offset
higher operating expenses. Sales of the other international
operations rose substantially, reflecting the inclusion in the current
year's results of the Australian and Japanese operations that were
acquired in the second quarter of 1994, plus improving market
conditions in Canada. These operations were close to breakeven in
profits in 1995 and 1994. In 1995, improvement in Canada and Japan
was offset by foreign exchange losses in Mexico.
Consumer and Decorative Products
Net sales were $228.1 million for the first quarter of 1995, a
decrease of 2 percent compared with $233.5 million in 1994. Segment
profit was $13.8 million, a 22 percent decline from $17.6 million in
1994.
The sales decline was due to lower volume at Precor and Hartco, which
more than offset a volume improvement at West Bend and favorable
pricing at Ralph Wilson Plastics. The lower segment profit was driven
by a provision for a product recall at West Bend and lower sales at
Precor. Improvement at Ralph Wilson Plastics was based on the absence
of a provision for adhesive claims, which had been fully reserved by
the end of 1994. In the first quarter of 1994, $6 million was
provided for this issue. Excluding this amount, 1995 segment profit
declined due to higher raw material costs and increased operating
expenses related to new product designs to be launched in the second
quarter. At Florida Tile, sales increased slightly, but due to
improved manufacturing costs and lower operating expenses, segment
profit rose significantly from a loss last year. At Hartco, despite a
sales decline, improved manufacturing costs and higher pricing due to
a favorable product mix led to a profit improvement. West Bend sales
showed a strong increase, driven by a substantial rise in sales of
breadmakers. The unit had a segment loss, however, due to a provision
for a recall of certain breadmakers. Precor's sales and segment
profit both declined significantly, driven by a soft retail market for
fitness equipment.
Financial Condition
Net cash used in operating activities was $33.5 million in the first
quarter of 1995 compared with $2.2 million in the first quarter of
1994. The increase in cash used was due to a smaller decrease in
accounts and notes receivable and a larger increase in the level of
inventory in 1995 than in 1994. Both of these factors reflect the
increase in working capital necessary to support the higher level of
business. Overall, working capital turns were similar in the first
quarters of 1995 and 1994.
Net cash used in investing activities, mainly for capital
expenditures, was $36.4 million and $39.8 million in the first
quarters of 1995 and 1994, respectively. Net cash provided by
financing activities was $48.8 million in the first quarter of 1995
compared with net cash used of $10.3 million in 1994's first quarter.
The variation in net cash flows associated with financing activities
primarily reflects the higher cash balance at April 1, 1995 compared
with April 2, 1994, along with the financing of the higher level of
working capital.
The total debt-to-capital ratio as of the end of the first quarter of
1995 was 32.3 percent, modestly higher than the 29.9 percent at the
end of the first quarter of 1994, and significantly higher than the
17.5 percent ratio as of December 31, 1994. The higher ratio as of
April 1, 1995 reflects stock repurchases under the company's plan that
were funded through borrowings, which more than offset the effect on
the ratio of net income generated. Working capital as of April 1,
1995 decreased by $118.0 million from December 31, 1994 as higher
short-term borrowings, associated with stock repurchases, were only
partially offset by a higher level of inventory and a lower level of
accounts payable.
As of April 1, 1995, unused lines of credit were approximately $620
million, including $250 million under an unsecured revolving credit
facility which expires in May, 1999. Future cash flows, lines of
credit, and other short-term financing are expected to be adequate to
fund operating and investing requirements.
On March 14, 1995, the company completed its stock repurchase plan.
Under the plan announced in May, 1993, the company repurchased a total
of 6 million of its shares of common stock at an average cost of $41
per share. Shares acquired are being used to satisfy stock option
exercises. Of the total, 3,396,600 shares at an average cost of $42
per share were repurchased during the first quarter of 1995.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
(11) A statement of computation of per share earnings is
filed as an exhibit to this Report.
(27) A Financial Data Schedule for the first quarter of
1995 is filed as an exhibit to this Report
(b) Reports on Form 8-K
During the quarter, the Registrant filed the following
current report on Form 8-K:
Dated March 17, 1995, regarding the completion of the
company's share repurchase program.
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.
PREMARK INTERNATIONAL, INC.
By: /s/ Lawrence B. Skatoff
-------------------------
Lawrence B. Skatoff
Senior Vice President and
Chief Financial Officer
By: /s/ Robert W. Hoaglund
-------------------------
Robert W. Hoaglund
Vice President, Control
and Information Systems
(Principal Accounting Officer)
Deerfield, Illinois
May 11, 1995