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 39 weeks ended September 27, 1997
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: (847)
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 October 31, 1997, 62,007,301 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 periods ended
September 27, 1997 and September 28, 1996........ 2
Condensed Consolidated Statement of Income
(Unaudited) for the 39 week periods ended
September 27, 1997 and September 28, 1996........ 3
Condensed Consolidated Balance Sheet
as of September 27, 1997 (Unaudited) and
December 28, 1996................................ 4
Condensed Consolidated Statement of Cash Flows
(Unaudited) for the 39 week periods ended
September 27, 1997 and September 28, 1996........ 6
Notes to Condensed Consolidated
Financial Statements (Unaudited)................. 7
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
generally 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 28, 1996.
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 Ended
--------------------
Sept. 27, Sept. 28,
1997 1996
(In millions, except per share data) --------- ---------
Net sales.................................. $ 601.4 $ 563.2
--------- ---------
Costs and expenses:
Cost of products sold.................... 376.4 353.0
Delivery, sales, and
administrative expense................. 169.6 161.4
Interest expense......................... 2.9 2.9
Interest income.......................... (1.1) (2.1)
Other income, net........................ (0.4) (1.8)
--------- ---------
Total costs and expenses.............. 547.4 513.4
--------- ---------
Income before income taxes................. 54.0 49.8
Provision for income taxes................. 20.1 19.6
--------- ---------
Net income................................. 33.9 30.2
Retained earnings, beginning of period..... 718.8 652.1
Cash dividends declared.................... (5.6) (5.0)
Cost of treasury stock issued
in excess of option exercise prices...... (8.3) (4.0)
--------- ---------
Retained earnings, end of period........... $ 738.8 $ 673.3
========= =========
Net income per common and
common equivalent share.................. $ 0.52 $ 0.46
========= =========
Average number of common and common
equivalent shares outstanding............ 65.5 66.1
========= =========
Dividends declared per common share........ $ 0.09 $ 0.08
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 2 -
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
39 Weeks Ended
--------------------
Sept. 27, Sept. 28,
1997 1996
(In millions, except per share data) --------- ---------
Net sales.................................. $1,741.4 $1,657.6
--------- ---------
Costs and expenses:
Cost of products sold.................... 1,089.8 1,057.6
Delivery, sales, and
administrative expense................. 514.1 488.8
Interest expense......................... 8.9 13.2
Interest income.......................... (6.3) (3.5)
Loss on disposition of business.......... - 43.1
Other expense (income), net.............. 0.1 (2.2)
--------- ---------
Total costs and expenses.............. 1,606.6 1,597.0
--------- ---------
Income before income taxes................. 134.8 60.6
Provision for income taxes................. 51.8 35.9
--------- ---------
Income from continuing operations.......... 83.0 24.7
Income from discontinued operations........ - 62.2
--------- ---------
Net income................................. 83.0 86.9
Retained earnings, beginning of period..... 688.2 735.7
Cash dividends declared.................... (16.2) (40.2)
Cost of treasury stock issued
in excess of option exercise prices...... (16.2) (23.0)
Distribution of Tupperware Corporation
to shareholders.......................... - (86.1)
--------- ---------
Retained earnings, end of period........... $ 738.8 $ 673.3
========= =========
Income per common and
common equivalent share:
Continuing operations.................. $ 1.27 $ 0.38
Discontinued operations................ - 0.97
--------- ---------
Net income per common and
common equivalent share.................. $ 1.27 $ 1.35
========= =========
Average number of common and common
equivalent shares outstanding............ 65.5 64.4
========= =========
Dividends declared per common share........ $ 0.26 $ 0.65
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 3 -
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
Sept. 27,
1997 December 28,
(Unaudited) 1996
(In millions) --------- ---------
Cash and cash equivalents................ $ 189.7 $ 130.2
Short-term investments................... - 84.3
Accounts and notes receivable............ 412.0 402.8
Less allowances for
doubtful accounts.................... (18.9) (18.4)
--------- ---------
393.1 384.4
Inventories.............................. 399.7 333.1
Recoverable income taxes................. - 10.8
Deferred income tax benefits............. 66.4 67.4
Prepaid expenses......................... 39.1 43.8
--------- ---------
Total current assets................. 1,088.0 1,054.0
--------- ---------
Property, plant, and equipment........... 980.3 940.9
Less accumulated depreciation.......... (552.4) (524.5)
--------- ---------
427.9 416.4
Intangibles, net of accumulated
amortization........................... 132.1 106.8
Other assets............................. 72.8 83.6
--------- ---------
Total assets......................... $1,720.8 $1,660.8
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 4 -
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
Sept. 27,
1997 December 28,
(Unaudited) 1996
(In millions) --------- ---------
Accounts payable......................... $ 122.5 $ 105.7
Short-term borrowings and current
portion of long-term debt.............. 9.1 3.5
Accrued liabilities...................... 368.3 350.4
--------- ---------
Total current liabilities............ 499.9 459.6
--------- ---------
Long-term debt........................... 112.5 115.9
Accrued postretirement benefit cost...... 124.4 120.8
Other liabilities........................ 73.4 88.6
Shareholders' equity:
Preferred stock, $1.00 par value,
authorized 50,000,000 shares;
issued -- none....................... - -
Series A Junior Participating
Preferred stock, $1.00 par value,
authorized 1,000,000 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.......................... 349.3 342.7
Retained earnings........................ 738.8 688.2
Treasury stock, 6,739,657 shares at
September 27, 1997 and 6,276,776 shares
at December 28, 1996, at cost.......... (223.0) (211.4)
Unearned portion of restricted
stock issued for future service........ (1.8) (2.3)
Cumulative foreign currency adjustments.. (21.7) (10.3)
--------- ---------
Total shareholders' equity........... 910.6 875.9
--------- ---------
Total liabilities and
shareholders' equity............... $1,720.8 $1,660.8
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 5 -
PREMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
39 Weeks Ended
--------------------
Sept. 27, Sept. 28,
1997 1996
(In millions) --------- ---------
Cash flows from operating activities:
Net income............................ $ 83.0 $ 86.9
Adjustments to reconcile net income
to net cash provided by
operating activities from
continuing operations:
Income from discontinued
operations...................... - (62.2)
Loss on disposition of business... - 38.6
Depreciation and amortization..... 49.1 51.6
Changes in assets and liabilities:
Accounts and notes receivable..... (5.1) 8.4
Inventory......................... (63.2) (18.4)
Accounts payable
and accrued liabilities......... 18.6 (21.2)
Current income taxes.............. 22.5 10.0
Deferred income taxes............. (1.0) 8.7
Prepaid expenses.................. (0.7) 9.0
Other............................. 10.8 (23.2)
-------- --------
Net cash provided by
operating activities from
continuing operations........... 114.0 88.2
-------- --------
Cash flows from investing activities:
Capital expenditures.................. (57.6) (58.2)
Net sales of short-term investments... 84.3 -
Business (acquisitions) disposition... (24.2) 35.3
Other................................. 1.1 5.2
-------- --------
Net cash provided by (used in)
investing activities from
continuing operations........... 3.6 (17.7)
-------- --------
Cash flows from financing activities:
Net decrease in, and repayment of,
short-term borrowings............... (13.0) (113.6)
Proceeds from long-term debt.......... - 5.0
Repayment of long-term debt........... (0.5) (0.8)
Dividend paid by Tupperware........... - 284.9
Proceeds from exercise of
stock options....................... 5.4 15.4
Purchase of treasury stock............ (31.7) (8.8)
Payment of dividends.................. (15.7) (51.8)
-------- --------
Net cash (used in) provided by
financing activities from
continuing operations........... (55.5) 130.3
-------- --------
Effect of exchange rate changes on
cash and cash equivalents............. (2.6) (0.6)
-------- --------
Net cash used in
discontinued operations............... - (36.1)
-------- --------
Net increase in cash
and cash equivalents.................. $ 59.5 $ 164.1
======== ========
See accompanying Notes to Condensed Consolidated Financial
Statements (Unaudited).
- 6 -
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 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.
Note 2: Inventories
Inventories, by component, are summarized as follows (in
millions):
September 27, December 28,
1997 1996
-------- --------
Finished goods.................. $ 218.8 $ 163.7
Work in process................. 22.4 26.2
Raw materials and supplies...... 158.5 143.2
-------- --------
Total inventories $ 399.7 $ 333.1
======== ========
Note 3: Pro Rata Distribution of Tupperware Stock
On November 1, 1995, the company's board of directors authorized
management to establish its Tupperware subsidiary as an
independent company through a stock distribution to Premark
shareholders. The distribution was effected on May 31, 1996.
Under the Distribution Agreement, on May 24, 1996, Premark
received a special dividend of $284.9 million. It is assumed that
if the distribution had occurred at the beginning of 1996, the
company would not have incurred any short-term borrowings during
the first half of 1996. Consequently, on a pro forma basis,
interest expense would have been $9.8 million for the first nine
months of 1996.
Note 4: Sale of Hartco
On June 28, 1996, the company completed the sale of the stock of
its Hartco Flooring subsidiary to Triangle Pacific Corporation for
$35.8 million in cash plus the assumption of debt. A pretax loss
of $43.1 million ($38.6 million after tax) is reflected in 1996's
year-to-date reported results of the Decorative Products Group.
Note 5: New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share," which is required to be
adopted by the company on December 27, 1997. At that time, the
company will be required to change the method currently used to
compute earnings per share and to restate all prior periods.
Under the new requirements for calculating basic earnings per
share, the dilutive effect of stock options will be excluded. The
following table illustrates what basic and diluted earnings per
share for the third quarter and first nine months of 1997 and 1996
will be upon adoption of the new Standard.
Basic Diluted
Earnings Earnings
per Share per Share
--------- ---------
1997:
Third quarter ended
September 27, 1997 $ 0.54 $ 0.52
Nine months ended
September 27, 1997 $ 1.33 $ 1.27
1996:
Third quarter ended
September 28, 1996 $ 0.49 $ 0.47
Nine months ended
September 28, 1996 --
Income from
Continuing Operations $ 0.40 $ 0.39
Net Income $ 1.40 $ 1.37
Note 6: Acquisitions
In April 1997, through a series of transactions the company
acquired certain assets and liabilities of Eurocatering SpA for
approximately $20 million in cash and the assumption of $17
million of debt. Subsequently, the name of the company was
changed to Eurotec Srl (Eurotec). Eurotec is one of Europe's
largest manufacturers of warewash equipment. Its results are
included within the Food Equipment Group.
On September 30, 1997, the company acquired the stock of Baxter
Manufacturing Company for $50 million in cash. Baxter is a
manufacturer of commercial baking equipment. Its results will be
included within the Food Equipment Group.
- 7 -
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 and 39 weeks ended September 27, 1997, compared with the
13 weeks and 39 weeks ended September 28, 1996, and changes in
financial condition during the 39 weeks ended September 27, 1997.
Overall
In late 1995, the company's board of directors authorized
management to proceed with a plan to establish Tupperware as an
independent company through a stock distribution to Premark's
shareholders. The distribution was effected on May 31, 1996.
Tupperware has been reported as a discontinued operation in these
financial statements.
Net Sales and Income from Continuing Operations
Net sales for the third quarter of 1997 were $601.4 million, an
increase of nearly 7 percent compared with net sales of $563.2
million in 1996. In the first nine months of 1997, net sales rose
to $1,741.4 million, which was an improvement of 5 percent from
1996's net sales of $1,657.6 million. Improvements in the third
quarter were seen at Wilsonart, the Food Equipment Group and
Precor. For the first nine months of 1997, sales increased at all
operating units except Florida Tile, which was essentially flat.
Excluding the effect of foreign exchange rates and, for the
year-to-date period, sales of Hartco Flooring, which was sold in
the second quarter of 1996, sales increased 9 percent for both the
third quarter and the first nine months of 1997.
Net income increased 12 percent to $33.9 million, or 52 cents per
share, in 1997 from $30.2 million, or 46 cents per share, in 1996.
Substantial improvement in profitability at Wilsonart and Precor,
coupled with continued strength at the Food Equipment Group more
than offset declines at Florida Tile and West Bend. For the first
nine months of 1997, income from continuing operations of $83.0
million, or $1.27 per share, was significantly above last year's
results of $24.7 million, or 38 cents per share, due to the loss
last year on the sale of Hartco. Excluding that loss, income from
continuing operations rose 31 percent, or 29 cents per share. The
higher income from continuing operations was a result of continued
improvements in profitability at Wilsonart and Precor, along with
lower corporate and interest expenses, which offset lower results
at West Bend.
Costs and Expenses
Cost of products sold as a percentage of net sales was 62.6
percent for the third quarter of 1997 compared with 62.7 percent
for the third quarter of 1996. For the first nine months, the
rates in 1997 and 1996 were 62.6 percent and 63.8 percent,
respectively. In the quarter, higher yields and volume for both
laminate and flooring products at Wilsonart coupled with improved
mix and higher production volume at Precor were offset by lower
production volumes at both Florida Tile and West Bend. The
improvement for the first nine months was due to improved mix and
higher production volume at Precor, lower costs for Wilsonart's
flooring product, the absence of the provision taken in the second
quarter of 1996 to close two operating plants at the U.S.
operations of the Food Equipment Group, and higher production
levels in Europe.
Delivery, sales, and administrative expenses as a percentage of
sales were 28.2 percent and 29.5 percent for the third quarter and
first nine months of 1997, respectively, comparable with the 1996
ratios of 28.7 percent and 29.5 percent, respectively.
Tax Rate
The effective tax rate was 37.2 percent for the third quarter of
1997 compared with a tax rate of 39.3 percent for the same period
in 1996, and 38.9 percent for the year ended December 28, 1996.
For the first nine months of 1997, the effective tax rate was 38.4
percent versus 59.1 percent for the first nine months of 1996.
The higher rate in the first nine months of 1996 reflects the
company's potential inability to realize the full tax benefit
associated with the loss on the sale of Hartco. Excluding the
Hartco loss, the nine month tax rate for 1996 would have been 38.9
percent. The lower rate in 1997 for both the quarter and nine
months when compared with the same periods last year is the result
of slightly lower taxes on foreign earnings.
Net Interest Expense
Interest expense, net of interest income, was $1.8 million in the
third quarter of 1997 versus $0.8 million in the third quarter of
1996. The increase in net interest expense for the period is due
to a change in the investment vehicles that have been chosen for
cash, as a result of which less cash is being invested in interest
bearing instruments. The majority of income on cash investments
is included in other income. For the first nine months of 1997,
net interest expense was $2.6 million versus $9.7 million in 1996.
In 1996, net interest expense reflected interest accrued and
earned on all of Premark's borrowings and invested cash, excluding
amounts that were owed or held by Tupperware, respectively. The
decrease in net interest expense was due to the special dividend
paid to Premark by Tupperware on May 24, 1996, as described in
Note 3 to the condensed consolidated financial statements, which
was used to substantially reduce Premark's outstanding debt, cash
received from the sale of Hartco, as well as less debt required to
finance working capital needs.
Segment Results
Food Equipment Group
Net sales for the third quarter of 1997 were $323.5 million, an
increase of 3 percent from $315.3 million in 1996. Excluding the
negative impact of a stronger U.S. dollar, sales for the group
grew 7 percent. For the first nine months, net sales improved 3
percent from $916.6 million in 1996 to $942.6 million in 1997.
Excluding exchange rate impacts, sales for the first nine months
of 1997 rose 6 percent. For both periods, sales growth reflected
improvements in the international sectors on a local currency
basis, as well as the effect of the acquisition of Eurotec. In
addition, the year-to-date period includes growth in the U.S.
sector. International operations accounted for 42 percent of
segment sales in both the third quarter and first nine months of
1997.
For the third quarter, segment profit of $27.7 million was 12
percent higher than 1996's $24.8 million. Improvements in the
international operations, as well as the inclusion of Eurotec,
more than offset a slight decline in the U.S. For the first nine
months, segment profit rose nearly 6 percent to $59.1 million from
$55.9 million in 1996. Increases in Europe and the inclusion of
Eurotec more than offset a substantial decline in non-European
international operations and a slight drop in U.S. profits.
International operations accounted for 31 percent and 22 percent
of segment profit for the third quarter and first nine months,
respectively.
U.S. sales were essentially flat at $189.2 million for the third
quarter as increased demand for cooking and warewashing equipment
and nominal price increases were offset by softness in the food
retail market related to project deferrals and a back order
situation in food machines due to plant moves. Segment profit of
$19.2 million declined 2 percent from the third quarter of 1996
resulting from residual effects of manufacturing realignments as
well as higher new product development investment. For the first
nine months, sales increased 1 percent to $551.1 million,
reflecting higher service revenues and increased demand for
weighing, wrapping and cooking equipment. Segment profit,
however, declined 2 percent to $46.2 million as a result of
manufacturing inefficiencies, lower production volume, and
spending on future products and technologies. Included in last
year's results was a $3.3 million provision to close two operating
plants.
Europe's sales were $104.5 million and $312.2 million for the
third quarter and first nine months of 1997, up 2 percent and 3
percent, respectively, as a result of the inclusion of Eurotec and
despite the unfavorable effect of foreign exchange. Excluding
Eurotec and foreign exchange rate impacts, sales rose 6 percent
and 4 percent for the third quarter and first nine months of 1997,
respectively. Segment profit for the sector rose significantly to
$6.0 million in the third quarter of 1997. For the first nine
months of 1997, segment profit of $9.9 million was a substantial
improvement over last year. The improvement in both periods was
due to higher local currency sales, inclusion of Eurotec and
favorable manufacturing variances. For the first nine months of
1997, a $4.1 million provision for organizational changes and
manufacturing realignments was taken, versus a $1.9 million
expense in 1996 for reductions in force.
Sales of the other international operations were $29.8 million and
$79.3 million for the third quarter and first nine months of 1997,
up 25 percent and 15 percent, respectively. For both periods, on
a local currency basis, growth occurred in all markets, especially
in Hong Kong, Mexico and Brazil. Segment profit for the third
quarter rose 25 percent to $2.5 million on the strength of the
increased volume. On a year-to-date basis, segment profit
declined substantially to $3.0 million, caused by a second quarter
$2.0 million provision for closing of the Australian plant.
Profit was also adversely impacted in 1997 by startup costs in new
markets and an inventory adjustment in Australia in the first
quarter.
Decorative Products Group
Net sales were $206.3 million for the third quarter of 1997, a
growth of nearly 16 percent compared with $178.6 million in the
same period in 1996. For the first nine months, sales grew more
than 5 percent from $559.2 million to $589.4 million in 1997.
Excluding the 1996 impact of Hartco sales, sales rose nearly 14
percent for the first nine months. For the third quarter, a
segment profit of $23.9 million was reported versus $20.5 million
last year. For the first nine months of 1997, segment profit was
$67.4 million versus $10.6 million in 1996. The large improvement
in the year-to-date results was the result of the $43.1 million
pretax loss on the sale of the company's Hartco subsidiary in
1996. Excluding the loss, segment profit would have been $53.7
million for the first nine months of 1996.
Wilsonart reported record sales and profit for both the third
quarter and first nine months of 1997. Sales increased 22 percent
for the quarter and 18 percent for the first nine months,
reflecting higher laminate volume, increased sales of laminate
flooring products, and, for the year-to-date comparison, improved
pricing. Segment profit rose 41 percent and 28 percent for the
third quarter and first nine months, respectively, on higher
volume, lower manufacturing costs, and, for the first nine months,
improved pricing, which more than offset higher marketing expenses
associated with new product introductions as well as costs to
expand internationally.
Florida Tile's sales declined 8 percent for the third quarter, as
a result of competitive pricing pressures and lower volume. A
segment loss was incurred versus a profit last year, as a result
of lower sales and production volumes. For the first nine months
of 1997, sales declined 1 percent, reflective of higher volumes in
the earlier part of the year. Segment profit increased from 1996
due to improvement in manufacturing efficiencies during the first
half of the year.
Consumer Products Group
Net sales were $71.6 million for the third quarter of 1997, an
increase of 3 percent compared with $69.3 million in 1996. For
the first nine months, sales rose 15 percent from $181.8 million
to $209.4 million in 1997. Segment profit for the third quarter
declined 14 percent from $8.2 million to $7.0 million. For the
first nine months, segment profit rose to $19.5 million from $15.9
million last year.
For the quarter, West Bend sales declined 8 percent from 1996.
Despite strong volumes in breadmakers, drip coffee makers and
stand mixers, Housewares sales dropped slightly due to competitive
pricing pressures and lower volumes on other products.
Direct-to-the-home cookware sales fell significantly due to
declines in most categories. For the first nine months, sales
rose 3 percent as a good increase at Housewares was offset by a
shortfall in the cookware sector. Segment profit for both periods
decreased substantially from 1996. For the quarter, lower sales
volume in the cookware sector coupled with lower pricing at
Housewares and lower production levels overall caused the segment
profit decline. For the year-to-date period, higher volume and
lower operating expenses at Housewares were more than offset by
lower Housewares pricing and lower sales and production volumes in
the cookware sector.
Precor's sales grew to record levels for both the third quarter
and first nine months of 1997, increasing 43 percent and 48
percent, respectively, with a major part of the increase being
attributed to volume improvements in the commercial sector. The
elliptical cross trainer and, for the year-to-date period,
treadmills showed strong growth. The unit's segment profit
improved significantly in both periods as a result of the higher
volume and improved mix.
Financial Condition of Premark
Under the Distribution Agreement, Premark received a special
dividend of $284.9 million on May 24, 1996, which was used to
substantially reduce the company's outstanding debt. On June 28,
1996, the company completed the sale of its Hartco subsidiary for
$35.8 million and assumption of debt.
Net cash provided by operating activities in the first nine months
of 1997 was $114.0 million compared with $88.2 million in the
first nine months of 1996. Higher cash generation in 1997
primarily reflects an increase in income from continuing
operations as well as an increase in accounts payable and accrued
liability balances in 1997 versus a decrease in 1996. Partially
offsetting these items was a further increase in inventories,
compared with last year, primarily at Florida Tile and Wilsonart.
Net cash provided by investing activities in 1997 was $3.6 million
versus cash used in investing activities of $17.7 million in 1996.
Improvement year to year was due to the sale of short-term
investments in 1997 of $84.3 million, offset in part by the
acquisition of Eurotec for $20.0 million. In 1996, the company
received $35.8 million on the sale of Hartco. Capital
expenditures decreased slightly between years, from $58.2 million
in 1996 to $57.6 million in 1997.
Net cash used in financing activities was $55.5 million for the
first nine months of 1997 versus cash provided of $130.3 million
in 1996. The variation between years is primarily due to a
significant part of the company's short-term debt being repaid in
1996 using the cash received from the special dividend from
Tupperware.
The total debt-to-capital ratio at the end of the third quarter of
1997 was 11.8 percent, compared with 13.9 percent at the end of
the third quarter of 1996, and 12.0 percent as of December 28,
1996. The lower ratio as of September 27, 1997, compared with
last year's third quarter was the result of both lower short-term
debt as well as the effect of a higher equity base on the ratio.
Working capital as of September 27, 1997 decreased by $6.3 million
from December 28, 1996. The largest changes among the components
of working capital were an increase in accounts payable and
accrued liabilities, offset by higher net inventories. The net
decrease in cash and cash equivalents and short-term investments
from the end of the year reflects, in part, the cash paid to
acquire Eurotec and the share repurchase program.
In October 1997, the company amended its $250 million revolving
credit agreement with a group of nine banks, changing the maturity
date from May 2001 to October 2002. As of September 27, 1997,
unused lines of credit were approximately $504.2 million,
including $250 million under the revolving credit agreement.
Future cash flows, lines of credit, and other short-term financing
are expected to be adequate to fund operating and investing
activities.
In August, 1996, the company announced it would repurchase 6
million of its shares, with volume and timing to depend on market
conditions. Purchases will be made in the open market or through
other transactions and will be financed through available cash,
cash flow from operations or issuance of additional debt. Under
this plan, through September 27, 1997, and October 31, 1997,
respectively, the company has repurchased 1,432,500 shares and
1,942,200 shares at an average cost of $25 and $26 per share,
respectively.
The company's previous stock repurchase plan, announced in August,
1995, was terminated prior to June 29, 1996. Under that plan, the
company had repurchased 588,000 shares at an average cost of $51
per share.
In early April, 1997, the company acquired certain assets and
liabilities of Eurotec for approximately $20 million in cash and
the assumption of $17 million of debt. As of September 27, 1997,
the majority of this debt has been repaid. On September 30, 1997,
the company acquired the stock of Baxter Manufacturing Company for
approximately $50 million in cash. Funds used to purchase both
Eurotec and Baxter came from available cash.
PART II
OTHER INFORMATION
Item 5. Other Information
On September 30, 1997, Warren L. Batts, Chairman of the Board,
retired. On October 1, 1997, James M. Ringler, President and
Chief Executive Officer of the company, assumed the additional
position of Chairman of the Board.
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 third quarter
of 1997 is filed as an exhibit to this Report.
(b) Reports on Form 8-K
During the quarter, the Registrant did not file any
current reports on Form 8-K.
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: John M. Costigan
------------------------
Senior Vice President,
General Counsel and Secretary
By: Lawrence B. Skatoff
------------------------
Senior Vice President and
Chief Financial Officer
Deerfield, Illinois
November 6, 1997
EXHIBIT INDEX
Exhibit No. Description
(11) A statement of the computation
of per share earnings is filed
as an exhibit to this Report.
(27) A Financial Data Schedule for
the third fiscal quarter of 1997
is filed as an exhibit to this
Report.