Whitman Announces 1998 Results
26 January 1999
Whitman Announces 1998 Results
CHICAGO, Jan. 25 -- Whitman Corporation set
records for sales, operating cash flow, and income from continuing operations
for the fourth quarter and full fiscal year of 1998.
1998 Results
Sales for 1998 totaled more than $1.6 billion, up 5 percent from 1997.
Excluding the impact of special charges recorded in 1997:
-- Operating cash flow (operating income plus depreciation and
amortization) for the year totaled $281.5 million, up 11.1 percent from
$253.3 million in 1997.
-- Income from continuing operations for the year was $62.5 million, up
31.9 percent from $47.4 million in 1997.
-- Earnings per basic share from continuing operations were 62 cents, up
31.9 percent from 47 cents per basic share in 1997.
Net income for the year totaled $43.7 million, including a loss of $0.5
million from discontinued operations and an $18.3 million extraordinary charge
recorded in the first quarter of 1998. Net income in 1997 was $4.1 million,
after special charges of $125 million or $1.23 per basic share. On a basic
per share basis, net income was 43 cents a share, up from four cents a share
in 1997.
Effective with the fourth quarter of 1998, the company changed to a 52/53
week fiscal year. The current fiscal year ended January 2, 1999.
Perspective on the Year
Bruce S. Chelberg, Chairman and Chief Executive Officer, said, "We have
finished the best year in our history by the numbers. It was also the most
historic. We began the year with one major event that transformed Whitman,
and ended with another. The spin-offs of Midas and Hussmann in January 1998
and the approval by our Board of a new relationship with PepsiCo in January
1999 are the bookends for the most remarkable year in Whitman's history. The
PepsiCo agreement will increase Whitman's sales by approximately 40 percent,
strengthen our competitive position, and enhance our opportunities to acquire
additional domestic franchises."
Chelberg continued, "We invested nearly $160 million for the growth of our
business in 1998. We placed more than 19,000 additional high-margin vending
machines in the field. We introduced several new products. All the
fundamentals are in place as we move forward in 1999, ready to take on our new
position as an Anchor Bottler in the Pepsi-Cola system."
1998 Operating Results
Pepsi-Cola General Bottlers' domestic sales for the year were more than
$1.5 billion in 1998, up 6 percent from 1997.
Domestic raw case sales were up 3.5 percent for the year. Unit volume
increased 5.3 percent on an 8-ounce equivalent basis, primarily as a result of
the growth of the single-serve and fountain channels.
For the year, the average net selling price per raw case was up 2.5
percent from 1997, reflecting a shift in mix to vending and other non-
supermarket channels.
Domestic operating profit for the year was $232 million, up 9.7 percent
from $211.4 million in 1997, excluding special charges in 1997.
International sales for the year totaled $83.5 million, down nearly 11
percent from sales of $93.5 million in 1997. The decline reflects the impact
of unusually cold summer weather, which depressed industry sales, as well as
the decline in contract sales and the economic crisis in Russia.
For the full year, International operations reported operating losses of
$17.2 million compared with losses of $15 million in 1997.
Fourth Quarter Operating Results
In the fourth quarter, Whitman reported sales of $399.1 million, up 5.4
percent from sales of $378.6 million in the fourth quarter of 1997.
Operating cash flow for the quarter was $60.8 million, up 9.2 percent from
1997.
Income from continuing operations for the quarter, excluding special
charges in 1997, was up 34.1 percent to $11.8 million, or 12 cents per basic
share.
Net income for the quarter was $11.8 million, compared to a loss of $11.3
million, including special charges and income from discontinued operations
last year. Net income per basic share was 12 cents, compared to a loss of 11
cents per basic share in 1997.
In the fourth quarter, Pepsi-Cola General Bottlers' domestic sales totaled
$383 million, up 8.4 percent from sales of $353.2 million in 1997. Excluding
the impact of year-end promotional sales price adjustments in the fourth
quarter of 1997, sales were up 6.4 percent. Raw case volume accounted for 4.4
percent of that increase, pricing 1.3 percent, and a shift mix accounted for
the balance.
On an 8-ounce equivalent basis, volume was up 6.2 percent. Pricing was
essentially flat with the fourth quarter of 1997, reflecting the impact of the
competitive pricing environment and the introduction of Pepsi One.
International sales declined to $16.1 million from $25.4 million primarily
as a result of a weak economy and depressed sales in Russia.
International reported operating losses of $6.2 million in the quarter,
compared with losses of $3.5 million in 1997.
The 1998 Condensed Consolidated Statements of Income are attached.
WHITMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE FOURTH QUARTER AND FULL FISCAL YEAR OF 1998
COMPARED WITH THE SAME PERIODS OF FISCAL 1997
(IN MILLIONS, EXCEPT PER SHARE DATA)
Fourth Quarter Fiscal Year
1998 1997 1998 1997
Sales $399.1 $378.6 $1,635.0 $1,557.5
Cost of Goods Sold 252.5 239.1 1,024.5 972.6
Gross Profit 146.6 139.5 610.5 584.9
Selling, General and
Administrative Expenses 102.0 98.7 391.1 389.7
Amortization Expense 3.8 4.0 15.6 15.7
Special Charges (Note 7) -- 39.9 -- 49.3
Operating Income (Loss) 40.8 (3.1) 203.8 130.2
Interest Expense, Net (Note 5) (9.2) (10.0) (36.1) (42.3)
Other Expense, Net (3.4) (3.3) (15.5) (18.0)
Income (Loss) Before Income Taxes 28.2 (16.4) 152.2 69.9
Income Taxes 12.9 (3.5) 69.7 37.9
Income (Loss) From Continuing Operations
Before Minority Interest 15.3 (12.9) 82.5 32.0
Minority Interest 3.5 2.4 20.0 16.2
Income (Loss) from Continuing
Operations 11.8 (15.3) 62.5 15.8
Income (Loss) from Discontinued
Operations
After Taxes (Note 2) -- 4.0 (0.5) (11.7)
Extraordinary Loss on Early Extinguishment
of Debt After Taxes (Note 3) -- -- (18.3) --
Net Income (Loss) $11.8 $(11.3) $43.7 $4.1
Weighted Average Common Shares:
Basic 100.9 101.2 101.1 101.6
Incremental Effect of Stock Options 1.7 -- 1.8 1.3
Diluted 102.6 101.2 102.9 102.9
Income (Loss) per Common Share
- Basic:
Continuing Operations $0.12 $(0.15) $0.62 $0.16
Discontinued Operations -- 0.04 (0.01) (0.12)
Extraordinary Loss on Early
Extinguishment of Debt -- -- (0.18) --
Net Income (Loss) $0.12 $(0.11) $0.43 $0.04
Income (Loss) per Common Share
- Diluted:
Continuing Operations $0.12 $(0.15) $0.61 $0.15
Discontinued Operations -- 0.04 (0.01) (0.11)
Extaordinary Loss on Early
Extinguishment of Debt -- -- (0.18) --
Net Income (Loss) $0.12 $(0.11) $0.42 $0.04
Cash Dividends Per Common Share $0.05 $0.115 $0.20 $0.45
See accompanying notes.
WHITMAN CORPORATION AND SUBSIDIARIES
SUMMARY OF SALES AND OPERATING INCOME (LOSS)
FOR THE FOURTH QUARTER AND FULL FISCAL YEAR OF 1998
COMPARED WITH THE SAME PERIODS OF FISCAL 1997
(IN MILLIONS)
Fourth Quarter Fiscal Year
1998 1997 1998 1997
Sales:
U.S. Operations $383.0 $353.2 $1,551.5 $1,464.0
International Operations 16.1 25.4 83.5 93.5
Total Sales $399.1 $378.6 $1,635.0 $1,557.5
Operating Income (Loss):
U.S. Operations $48.6 $44.4 $232.0 $211.4
International Operations (6.2) (3.5) (17.2) (15.0)
Total General Bottlers 42.4 40.9 214.8 196.4
Corporate Administrative Expenses (1.6) (4.1) (11.0) (16.9)
Operating Income Before
Special Charges 40.8 36.8 203.8 179.5
Special Charges (Note 7) -- (39.9) -- (49.3)
Operating Income (Loss) $40.8 $(3.1) $203.8 $130.2
Operating Cash Flow
(Excluding Special Charges):
U.S. Operations $66.0 $60.9 $300.1 $275.9
International Operations (4.3) (1.8) (10.2) (9.1)
Total General Bottlers $61.7 $59.1 $289.9 $266.8
Total Whitman Corporation $60.8 $55.7 $281.5 $253.3
See accompanying notes.
Notes:
1. On January 30, 1998, Whitman Corporation ("Whitman" or the "Company")
distributed ("the Distribution") all of the issued and outstanding shares of
Hussmann International, Inc. ("Hussmann") and Midas, Inc. ("Midas") to Whitman
shareholders of record on January 16, 1998. As a result of the Distribution,
Hussmann and Midas became independent publicly-owned companies. Whitman has
retained Pepsi-Cola General Bottlers, Inc. ("General Bottlers") as its
principal operating company. The financial information has been reclassified
to reflect Hussmann and Midas as discontinued operations.
2. Losses from discontinued operations include the net losses of Hussmann
and Midas. Results for the fourth quarter and full 1997 fiscal year include
the after-tax impact of charges totaling $17.4 million and $93.4 million,
respectively. The results have been reduced by income taxes of $0.1 million
and $39.1 million for fiscal 1998 and fiscal 1997, respectively, and $23.0
million for the fourth quarter of fiscal 1997.
3. The Company recorded an extraordinary loss after taxes of $18.3
million during January, 1998, associated with a tender offer made by Whitman
on January 13, 1998 for any and all of the outstanding 7.625% and 8.25% notes
maturing June 15, 2015, and February 15, 2007, respectively. In connection
with the tender offer, Whitman repurchased 7.625% and 8.25% notes with
principal amounts of $91.0 million and $88.5 million, respectively. Whitman
paid total premiums of $26.4 million and wrote-off the remaining unamortized
discount and issue costs of $2.1 million. The Company also repaid a term loan
and notes with principal amounts of $50.0 million scheduled to mature in 1998
and 1999, notes due in 2002 with principal amounts of $50.0 million and
industrial revenue bonds of $5.0 million due 2013. Charges associated with
these repayments were not significant. Total extraordinary charges of $28.7
million were offset by tax benefits of $10.4 million.
4. Effective with the fourth quarter of fiscal 1998, the Company changed
its fiscal year from a calendar year to a year consisting of 52 or 53 weeks
ending on the Saturday closest to December 31. The Company's 1998 fiscal year
commenced January 1, 1998 and ended January 2, 1999. Such period is referred
to herein as "fiscal 1998."
5. Interest expense, net, was comprised of the following:
Fourth Quarter Fiscal Year
1998 1997 1998 1997
Interest Expense $(11.3) $(17.1) $(46.4) $(69.0)
Interest Income from Hussmann
and Midas -- 5.2 1.6 23.1
Other Interest Income 2.1 1.9 8.7 3.6
Interest Expense, Net $(9.2) $(10.0) $(36.1) $(42.3)
Interest income from Hussmann and Midas related to intercompany loans and
advances. The related interest expense recorded by Hussmann and Midas is
included in loss from discontinued operations after taxes.
6. Depreciation expense was as follows for the fourth quarters and full
fiscal years of 1998 and 1997:
Fourth Quarter Fiscal Year
1998 1997 1998 1997
U.S. Operations $13.7 $12.6 $52.7 $49.0
International Operations 1.8 1.6 6.8 5.7
Total General Bottlers 15.5 14.2 59.5 54.7
Other Corporate 0.7 0.7 2.6 3.4
Total Whitman $16.2 $14.9 $62.1 $58.1
7. In the third and fourth quarters of fiscal 1997, the Company recorded
special charges related to staff reductions, expenses in connection with the
spin-offs of Hussmann and Midas and the write-down of certain assets,
principally in the international operations.
8. Subsequent Event - See press release dated January 25, 1999 discussing
the proposed transaction with PepsiCo.