1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-4199
CPC INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 36-2385545
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
INTERNATIONAL PLAZA, P.O. BOX 8000
ENGLEWOOD CLIFFS, N.J. 07632-9976
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) 201-894-4000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Name of each exchange
Title of each class on which registered
------------------- -------------------
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8 1/2% sinking fund
debentures, due April 15, 2016 New York
-----------------------------------------------------------------
New York Geneva
Chicago London
Common Stock Pacific Paris
par value $.25 per share Basle Zurich
Frankfurt
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
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Aggregate market value
Outstanding at held by non-affiliates of the
Class January 31, 1995 registrant at January 31, 1995
---------------------------- ---------------- ------------------------------
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Common stock, par value $.25 146,570,195 $7,969,754,353
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DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of registrant's Annual Report to Stockholders for year ended
December 31, 1994 are incorporated into Part I and Part II hereof.
2. Portions of the registrant's Proxy Statement dated March 15, 1995 are
incorporated into Part III hereof.
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PART I
ITEM 1. BUSINESS.
CPC International Inc. and its consolidated subsidiaries (the "Company") is a
worldwide group of businesses, principally engaged in two major industry
segments: consumer foods and corn refining. The development of the Company's
business since the beginning of 1994 and financial information on business
segments and geographical divisions are described in the 1994 Annual Report to
Stockholders (the "Annual Report"), the following portions of which are
incorporated herein by reference:
- Text on pages 8 through 13 under the heading "Consumer Foods Business".
- Text on pages 14 through 16 under the heading "Corn Refining Business".
- Text on pages 18 through 21 under the headings "Geographic Overview" and
"Business Extension 1992-1994".
- Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 22 through 25.
- Financial Statements and Notes to Financial Statements on pages 27
through 45.
The Company employs approximately 41,900 people of whom approximately 33,700
are located outside the United States. Total employee costs amounted to $1.4
billion in 1994 compared with $1.3 billion and $1.2 billion in 1993 and 1992,
respectively.
The Company's products are manufactured from various agricultural raw
materials including soybean and other vegetable oils, peanuts, corn and wheat,
all of which are, and are expected to continue to be, in adequate supply. As
prices of these materials depend upon a number of such unpredictable factors as
farm plantings and weather, and as the Company engages in only limited price
hedging, fluctuations in raw material prices may have an effect on the Company's
earnings.
The Company's products are sold primarily by the sales organizations of its
various operating units and subsidiaries. Exports represent a small portion of
total net sales. Mayonnaise sales accounted for 11.3 percent, 11.7 percent and
11.5 percent of consolidated net sales in 1994, 1993 and 1992, respectively.
The Company has approximately 1,700 trademarks, some of which are of
significant importance to the Company, particularly in the consumer foods
business. The Company also has over 1,610 patents of various durations, some of
which are licensed to affiliates and joint ventures in which the Company or an
affiliate participates. No individual patent has a material effect on the
earnings of the Company.
The Company's products, both within the United States and abroad, generally
face strong competition, and as a result, the Company engages in extensive
marketing, advertising and promotional activities, particularly with respect to
its consumer products. The Company also conducts continuous market research to
assist in determining consumer preferences. The amount spent on these activities
was $712 million in 1994, $643 million in 1993, and $664 million in 1992.
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In addition, the Company conducts product and process research and
development activities. Research related to food and food technology is
conducted at facilities in Somerset, New Jersey, Heilbronn, Germany, and
Thayngen, Switzerland, and corn refining research and product support activities
are provided from facilities at Argo, Illinois and Beloit, Wisconsin.
Research has resulted in the development of new and improved products based
on studies in nutrition, food technology, vegetable oils, enzymes,
carbohydrates, and carbohydrate-derived products, as well as developments and
improvements in process technology. The amount spent for research and
development in 1994, 1993, and 1992 was $58 million, $49 million, and $46
million, respectively. Research and development expenditures increased by $9
million in 1994 reflecting mostly additional spending for consumer foods
research. Approximately 660 full-time professional employees were engaged in
such activities during 1994.
The Company operates in 59 countries, and accordingly, operations are subject
to varying degrees of political risk and uncertainty. Loss of earnings from any
one country other than the United States would not have a material adverse
effect on the Company as a whole.
ITEM 2. PROPERTIES.
The Company's headquarters buildings in Englewood Cliffs, New Jersey are held
under a lease which, including all renewal terms, expires in May 2019. The
Company owns or leases other property appropriate to its business, including
distribution centers and warehouses. None of the leases involved is considered
to be a material lease.
The Company has a total of 143 operating plants, of which 27 are in the
United States, 8 in Canada, 42 in Europe, 20 in Africa and the Middle East, 32
in Latin America and 14 in Asia. In addition, the Company has a 50% interest in
joint ventures which operates three plants, one of which is located in each of
Asia (consumer foods products), Latin America (corn refining products), and the
United States (fuel ethanol).
Of the Company's 143 plants, 122 plants are engaged solely in the manufacture
of consumer food products, 20 are engaged in the manufacture of corn refining
products, 7 of which also produce consumer food products; and 1 plant is engaged
in the manufacture of other products. In general, it is the Company's belief
that its plants are suitable and adequate for its needs, and, subject to
fluctuations in market demand, are fully utilized.
Included on the following page is a complete listing of all plants owned and
operated by the Company and its consolidated subsidiaries as of December 31,
1994. Based on past loss experience, the Company believes it is adequately
insured in respect of these assets, and for liabilities which are likely to
arise from its operations.
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THE CONSUMER FOODS FACILITIES ARE AS FOLLOWS:
UNITED STATES:ARKANSAS-Little Rock; CALIFORNIA-Placentia, Santa Fe Springs;
CONNECTICUT-Greenwich; FLORIDA-Riviera Beach; ILLINOIS- Argo, Chicago, Franklin
Park; INDIANA-Indianapolis; MARYLAND-Frederick; NORTH CAROLINA-Asheboro,
Gastonia; NEW JERSEY-Bayonne, Jersey City, Totowa; NEW YORK-Bronx; TEXAS-Irving;
WASHINGTON-Seattle; WISCONSIN-Germantown, Milwaukee (2), Oconomowoc; PUERTO
RICO-Arecibo
CANADA:ONTARIO-Cardinal; QUEBEC-Baie d'Urfe, Boisbriand, Pointe Claire(2)
EUROPE:AUSTRIA-Wels; CZECH REPUBLIC-Hradec, Zabreh; DENMARK-Copenhagen,
Frederiksberg, Levring, Rodovre, Vadum; FRANCE-Duppigheim (2), Faverolles,
Ludres (Nancy), Verneuil; GERMANY-Auerbach, Bremen, Cloppenburg, Heilbronn,
Krefeld, Krumbach, Munchen, Reinbek, Stavenhagen, Wittingen; GREECE-Schimatari;
HUNGARY-Roszke; IRELAND-Dublin; ITALY, Calderara (Bologna), Sanguinetto;
NETHERLANDS- Baarn, Loosdrecht; POLAND-Poznan (2), Torun; PORTUGAL-Carregado;
SPAIN-Martorell; SWEDEN-Simrishamn; SWITZERLAND-Carouge, Thayngen; UNITED
KINGDOM-Burton-on-Trent, Lifton, Paisley, Redditch
LATIN AMERICA:ARGENTINA-Barracas, Florida, Mendoza, Pilar, Tucuman; BRAZIL,
Campina Grande, Garanhuns, Itatiaia, Pouso Alegre; COLOMBIA-Barranquilla (2),
Cali; COSTA RICA-Ala Juela; DOMINICAN REPUBLIC-Santo Domingo;
MEXICO-Aguascalientes, Aguida, Lerma; PERU- Callao; URUGUAY-San Carlos;
VENEZUELA-Maracay, Valencia
AFRICA & MIDDLE EAST:ISRAEL-Arad, Arara, Beit-Yitzak, Hadera, Haifa, Zefat;
KENYA-Nairobi, MOROCCO-Casablanca; SAUDI ARABIA-Yanbu; SOUTH AFRICA-Cape Town,
Durban (2), East London, Estcourt, Klerksdorp, Tarlton, Vryheid;
TUNISIA-Grombalia; TURKEY-Cayirova
ASIA:HONG KONG-Tai Po; INDIA-Dharwad, Thane; INDONESIA-Purwakarta;
MALAYSIA-Kuala Lumpur; PAKISTAN-Pernawan; PHILIPPINES-Las Pinas, Paranaque; SRI
LANKA-Kothalawala; TAIWAN-Hsin Chu Hsien; THAILAND-Bangpoo, Gateway City
THE CORN REFINING FACILITIES ARE AS FOLLOWS:
UNITED STATES:CALIFORNIA-Stockton; ILLINOIS-Argo; NORTH CAROLINA-Winston-Salem
CANADA:ONTARIO-Cardinal, London, Port Colborne
LATIN AMERICA:ARGENTINA-Baradero*, Rio Segundo; BRAZIL-Balsa Nova, Cabo*,
Mogi-Guacu*; CHILE-Llay-Llay*; COLOMBIA-Barranquilla, Cali*, Medellin;
MEXICO-Guadalajara*, San Juan del Rio
ASIA:MALAYSIA-Petaling Jaya; PAKISTAN-Faisalabad*
AFRICA:KENYA-Eldoret
The OTHER PRODUCTS facility which produces enzymes is located in Beloit,
Wisconsin.
- ----------
*Indicates corn refining plant that also produce consumer foods products.
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ITEM 3. LEGAL PROCEEDINGS.
Updating previous reports concerning the site of a former subsidiary of the
Company, Ott Chemical Company, located in Muskegon, Michigan, in which it was
reported that the Company, together with the present owner of the site, was held
liable in August 1991 under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), and that the U.S. Environmental
Protection Agency ("EPA") had issued orders under Section 106 of CERCLA
directing the Company and the present owner to carry out a program of
groundwater remediation but subsequently withdrew these orders, EPA's selected
groundwater remedy for the facility is presently under construction. EPA is also
initiating field work on a soil remediation program at the site. The Company's
appeal from the liability ruling is presently pending before the Sixth Circuit
Court of Appeals.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of all elected officers of the
Registrant, as of December 31, 1994, indicating their positions and offices with
the Registrant and the period during which each has served as such:
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All positions and offices
Name Age with the Registrant
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Charles R. Shoemate 55 Chairman of the Board since September 1990;
Chief Executive Officer since August 1990;
President since October 1988;
Vice President, 1984 - October 1988 and
Director since October 1988.
Robert J. Gillespie 52 Senior Vice President since November 1991;
Vice President since 1981 and Director since
October 1988.
Alain Labergere 60 Senior Vice President since November 1991;
Vice President since January 1991 and
Director since December 1992.
Konrad Schlatter 59 Chief Financial Officer since July 1993;
Senior Vice President since April 1990;
Vice President since 1987, Comptroller
1981-1987.
Clifford B. Storms 62 Senior Vice President since October 1988,
Vice President, 1973 - October 1988;
and General Counsel since 1975.
Angelo S. Abdela 52 Vice President since 1990; Treasurer since
1981.
Richard P. Bergeman 56 Vice President since 1982.
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Michael J. Bevilacqua 55 Vice President since 1992.
Charles Feldberg 61 Vice President since 1984.
Gordon F. Granger 57 Vice President since 1990.
Lawrence K. Hathaway 50 Vice President since 1990.
Bernard H. Kastory 49 Vice President since 1992.
Axel C.A. Krauss 50 Vice President since 1992.
Fred C. Meendsen 61 Vice President since 1984.
Eugene J. Northacker 53 Vice President since 1992.
John W. Scott 59 Vice President since 1985.
Samuel C. Scott 50 Vice President since 1991.
James E. Healey 53 Comptroller since 1987.
John B. Meagher 58 Secretary since 1981.
</TABLE>
All officers serve at the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information regarding the principal markets for the Company's common stock
and market prices for each quarterly period during the past two years is set
forth on pages 46 and 47 of the Annual Report and is incorporated herein by
reference.
The approximate number of equity stockholders as of December 31, 1994 was
30,100.
The history of the Company's dividends declared for the last two years on
pages 46 and 47 of the Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the eleven years ended December 31, 1994 for the
Company, as set forth on pages 46 and 47 of the Annual Report, is incorporated
herein by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations of the Company for the three years ended December 31, 1994, is set
forth on pages 22 through 25 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements comprising the consolidated balance sheets at
December 31, 1994 and 1993, and the consolidated statements of income,
stockholders' equity and cash flows, and notes to financial statements for each
of the years in the three year period ended December 31, 1994 are set forth on
pages 27 through 45 of the Annual Report.
Selected quarterly financial data for the years ended December 31, 1994 and
December 31, 1993, set forth on pages 46 and 47 of the Annual Report is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company's Proxy Statement dated March 15, 1995 (the "1995 Proxy
Statement") has been filed pursuant to Regulation 14A and is incorporated herein
by reference. Information regarding directors of the registrant is set forth on
pages 16 through 22 of the 1995 Proxy Statement under the caption "Election of
Directors". Information regarding executive officers of the registrant is set
forth on pages 4 and 5 of this report.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is set forth on pages 11 through
14 of the 1995 Proxy Statement under the caption "Executive Compensation and
Stock Ownership Tables".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management is set forth on pages 14 and 15 of the 1995 Proxy Statement under the
caption "Stock Ownership Table".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
a) Financial Statements - See index on page 8.
b) Reports on Form 8-K - There were no reports filed on Form 8-K during the
fourth quarter of 1994.
c) Exhibits - Exhibits to this report are filed as part of this report as
set forth in the Index to Exhibits on pages 11 and 12 hereof.
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INDEX TO FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The consolidated financial statements and reports of the independent
auditors are included in Part II of this report through incorporation by
reference from the Annual Report which is enclosed as Exhibit 13. The documents
referred to above can be found on the following pages in the Annual Report.
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Annual Report
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Page
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a) Independent auditors' report 26
b) Consolidated balance sheets as of December 31,
1994 and 1993 28 - 29
c) Consolidated statements of income for the years
ended December 31, 1994, 1993 and 1992 27
d) Consolidated statements of cash flows for the
years ended December 31, 1994, 1993 and 1992 30
e) Consolidated statements of stockholders' equity for
the years ended December 31, 1994, 1993 and 1992 31
f) Notes to financial statements 32 - 45
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2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted either because the
information is not required or is otherwise included in the financial
statements and notes thereto.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 21st day of
March, 1995.
CPC INTERNATIONAL INC.
-----------------------------------------
By /s/ Charles R. Shoemate
--------------------------------------
Charles R. Shoemate, Chairman,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on the 21st day of March, 1995.
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Signature Title
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<S> <C>
/s/ Charles R. Shoemate Chairman, President, and Chief
- --------------------------------- Executive Officer
(Charles R. Shoemate)
/s/ Konrad Schlatter Senior Vice President and Chief
- --------------------------------- Financial Officer
(Konrad Schlatter)
/s/ James E. Healey Comptroller and Chief Accounting
- --------------------------------- Officer
(James E. Healey)
/s/ Theodore H. Black * Director
- ---------------------------------
(Theodore H. Black)
/s/ Alfred C. DeCrane, Jr. * Director
- ---------------------------------
(Alfred C. DeCrane, Jr.)
/s/ William C. Ferguson * Director
- ---------------------------------
(William C. Ferguson)
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/s/ Robert J. Gillespie * Director
- ---------------------------------
(Robert J. Gillespie)
/s/ Ellen R. Gordon * Director
- ---------------------------------
(Ellen R. Gordon)
/s/ George V. Grune * Director
- ---------------------------------
(George V. Grune)
/s/ Leo I. Higdon, Jr. * Director
- ---------------------------------
(Leo I. Higdon, Jr.)
/s/ Richard G. Holder * Director
- ---------------------------------
(Richard G. Holder)
/s/ Eileen S. Kraus * Director
- ---------------------------------
(Eileen S. Kraus)
/s/ Alain Labergere * Director
- ---------------------------------
(Alain Labergere)
/s/ William S. Norman * Director
- ---------------------------------
(William S. Norman)
* /s/ John B. Meagher
--------------------------------
(John B. Meagher)
Attorney-in-Fact
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INDEX TO EXHIBITS
Exhibit No.
- -----------
3(a) The Certificate of Incorporation as restated April 22, 1993 is
incorporated by reference to Exhibit 3(a) of Form 10-K for the year
ended December 31, 1993.
3(b) The By-Laws as amended on September 21, 1993 are incorporated by
reference to Exhibit 3(b) of Form 10-K for the year ended December
31, 1993.
4(a) No instruments defining rights of holders of debts securities are
included as exhibits because each authorized issue of debt
securities is less than 10% of total assets. The Company agrees that
it will furnish a copy of any such instrument upon request.
4(b) Rights Agreement dated March 19, 1991 between the Company and First
Chicago Trust Company of New York is incorporated by reference to
Exhibit 4(b) of Form 10-K for the year ended December 31, 1991.
10(a) The 1984 Stock and Performance Plan is incorporated by reference
from Exhibit A to the prospectus contained in Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8, File No.
2-92248.
10(b) The 1993 Stock and Performance Plan is incorporated by reference to
the Registration Statement filed on Form S-8, File No. 33-49847.
10(c) Deferred Compensation Plan for Outside Directors and Retirement
Income Plan for Outside Directors
i) The Deferred Compensation Plan for Outside Directors, as
amended and restated effective May 1, 1994 is filed herewith as
Exhibit 10(c)i).
ii) The Retirement Income Plan for Outside Directors as amended
March 15, 1988, is incorporated by reference to Exhibit 10(b)ii of
Form 10-K for the year ended December 31, 1987.
10(d) Employment agreements for those directors and the five most highly
compensated executive officers who have such contracts, including
amendments thereto. Employment agreement for Mr. C.R. Shoemate dated
January 2, 1986, is incorporated by reference to Exhibit 10(c) of
Form 10-K for the year ended December 31, 1988, along with
amendments dated January 19, 1989, February 21, 1989, and January
21, 1992 are incorporated by reference to Exhibit 10(c) of Form 10-K
for the year ended December 31, 1991. Employment agreement for Mr.
R.J. Gillespie, dated January 2, 1986, as amended, is incorporated
by reference to Exhibit 10(c) of Form 10-K for the year ended
December 31, 1988. Amendments dated January 19, 1989 and February
21, 1989 are incorporated by reference to Exhibit 10 (c) of Form
10-K for the year ended December 31, 1992.
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10(d) Employment agreement for Mr. C.B. Storms dated January 2, 1986,
along with amendments dated November 21, 1986, September 20, 1988,
February 13, 1989, and February 21, 1989 are incorporated by
reference to Exhibit 10(c) of Form 10-K for the year ended December
31, 1989. Employment agreement for Mr. K. Schlatter, dated January
2, 1986, along with amendments dated November 21, 1986, November 13,
1987, September 20, 1988, February 21, 1989 and July 5, 1990 are
incorporated by reference to Exhibit 10(c) of Form 10- K for the
year ended December 31, 1992.
10(e) Indemnification agreements for all directors and five most
highly compensated executive officers who have such contracts are
incorporated by reference to Exhibit 10(d) of Form 10-K for the year
ended December 31, 1986.
10(f) Deferred Compensation Plan for senior executives, dated November
10, 1988 is incorporated by reference to Exhibit 10(e) of Form 10-K
for the year ended December 31, 1988.
10(g) Special Severance Program for Salaried Employees, dated January
17, 1989 is incorporated by reference to Exhibit 10(f) Form 10-K for
the year ended December 31, 1988. An amendment dated March 19, 1991
to the Special Severance Program for Salaried Employees is
incorporated by reference to Exhibit 10 (f) of Form 10-K for the
year ended December 31, 1991.
10(h) Deferred Stock Unit Plan for senior executives, dated December
20, 1994, is filed herewith as Exhibit 10(h).
10(i) Executive Life Insurance Plan and amendment No.1 related thereto
are filed herewith as Exhibit 10(i).
11 Schedule of computation of earnings per share filed herewith.
13 1994 Annual Report to Stockholders is filed herewith. Except for
such parts thereof as are expressly incorporated by reference in
this Form 10-K, this exhibit is furnished for the information of the
Securities and Exchange Commission and is not deemed filed as a part
hereof. Graphic material contained in the Annual Report is not
included in the electronic filing of this report.
21 Subsidiaries of the Registrant
Filed herewith.
23 Consent of Independent Auditors
Filed herewith.
24 Powers of Attorney
Filed under separate cover with the Commission.
27 Financial Data Schedule
Filed herewith as Exhibit 27.
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Exhibit 10(c)(i)
================================================
CPC INTERNATIONAL INC.
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
================================================
As Amended and Restated
Effective May 1, 1994
WHEREAS, CPC International Inc. (the "Company") maintains a Deferred
Compensation Plan for Outside Directors (the "Plan");
WHEREAS, the Plan, as approved by the shareholders of the Company on
April 28, 1988 authorizes payment (in accordance with the terms of the Plan) of
a portion of the annual retainer of the directors, not to exceed 50%, as
determined by the Board of Directors (the "Board"), in the form of mandatorily
deferred shares of Common Stock; and
WHEREAS, in order to cause the Plan to comply with the requirements of
revised Rule 16b-3 under the Securities Exchange Act of 1934, the Board desires
to establish the portion of the annual retainer to be paid in the form of
mandatorily deferred shares of Common Stock.
NOW, THEREFORE, the Plan is hereby amended and restated in its
entirety.
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1. Purpose and Eligibility
The purpose of the Plan is to: (i) provide outside directors with an
opportunity to defer receipt of all or a portion of their cash compensation as
members of the Board, (ii) establish terms for such deferral and (iii) provide
for compensation in the form of mandatorily deferred shares of Common Stock of
the Company. All directors who are not, and have never been, employees of the
Company shall be eligible to participate in the Plan.
2. Administration
The Plan shall be administered by the Compensation and Nominating
Committee (the "Committee") of the Board of Directors. The members of the
Committee shall be appointed by the Board. The Committee shall have full power
and authority to interpret the terms of the Plan, to determine all questions
arising in the administration of the Plan, and to adopt such rules and
procedures as it may deem advisable for the administration of the Plan.
3. Stock Compensation
Thirty-three and one-third percent (33 1/3%) of the annual retainer of
the directors, will be paid in the form of mandatorily deferred shares of
Common Stock, which shall be credited to each director's Stock Account as
provided in Section 5 and paid after resignation or retirement from the Board
as provided in Section 7.
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4. Election to Defer Cash Compensation
On or before June 30 of any year, a director may deliver to the
Committee a written election to defer all or any part of his cash compensation
for the succeeding calendar year. Such election shall be irrevocable and shall
specify whether and to what extent such compensation shall be deferred in the
form of Common Stock and credited to the director's Stock Account. The
balance, if any, shall be deferred in cash and credited to the director's
Interest-Bearing Account as provided in Section 5. A director who first
assumes office after July 1 of any year may elect, prior to the first day of
the next full calendar quarter, to defer all or any part of such compensation
for the succeeding calendar year; provided, however, that an election to invest
such deferred compensation in the Stock Account shall not be effective until
six months after such election.
5. Deferred Compensation Accounts
The Committee shall establish and maintain two deferred compensation
accounts for each director: (i) a Stock Account, to which there shall be
credited stock compensation and the portion of cash compensation which the
director has elected to defer in the form of Common Stock and (ii) an
Interest-Bearing Account to which all other deferred cash compensation shall be
credited.
At the end of each calendar quarter, there shall be credited to the
respective Accounts the deferred compensation accrued during such quarter. If
a director has elected to defer cash compensation in the form of Common Stock,
the number of full shares to be
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credited to the Stock Account for each quarter shall be determined on the basis
of the closing price of the Common Stock on the last trading day of the quarter
as reported for New York Stock Exchange-Composite Transactions, and any amount
which would represent a fractional share shall be credited to the director's
Interest-Bearing Account.
Amounts credited to a director's Interest-Bearing Account shall earn
interest equivalents at such rate (which may be a floating rate) as shall be
determined from time to time by the Committee.
Dividend equivalents on shares credited to a director's Stock Account
shall, if the director so elects, be credited at the end of each quarter to his
or her Stock Account in the form of full shares of Common Stock, any amount
which would represent a fractional share being credited to his or her
Interest-Bearing Account. In the absence of such election, all dividend
equivalents shall be credited to the director's Interest-Bearing Account.
6. Annual Limitation on Deferrals in Common Stock
The maximum number of shares of Common Stock which may be credited
under the Plan to all the directors' Stock Accounts in any year shall not
exceed 10,000. Any deferrals which would cause such number to exceed 10,000
shares in any year shall be credited to the Interest-Bearing Accounts.
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7. Payment
Payment of a director's Accounts shall be made at such dates as may be
determined by the Committee, but in no event earlier than six months after
resignation or retirement as a director nor later than ten years thereafter.
Payment of a director's Stock Account may be made in cash or shares of Common
Stock, or any combination thereof, as the director shall request subject to the
approval of the Committee. Payment of a director's Interest-Bearing Account
shall be in cash.
In the event of a director's death prior to receiving all payments due
under the Plan, the remaining amount shall be paid in a lump sum to the
beneficiary or beneficiaries designated by the director in a writing filed with
the Committee or, in the absence of an effective designation, to the director's
estate.
8. Grantor Trust
The Company may establish an irrevocable grantor trust with an
independent trustee, which shall be a bank or trust company selected by the
Company, and transfer to the trustee of that trust shares of Common Stock and
cash or other assets in order to assist the Company in fulfilling its payment
obligations hereunder. The governing trust instrument must require that the
trustee shall establish a separate account in the trust fund for each director,
based on the contributions made by or for such director, that all assets held
in the trust shall remain available to satisfy the
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claims of general creditors of the Company in case of insolvency or bankruptcy
and that the Company shall give timely written notice to the trustee of the
insolvency or bankruptcy of the Company.
9. Non-Assignability
The rights and interests of a director hereunder may not be assigned,
pledged or otherwise transferred except by will or the laws of descent and
distribution.
10. Amendments and Termination
Except as provided below, the Board may at any time amend or terminate
the Plan. No amendment or termination shall alter or impair existing rights in
respect of a director's Accounts. The provisions of Section 3 shall not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
If the outstanding shares of Common Stock are changed by reason of any
stock dividend or split, recapitalization, merger, consolidation, combination,
exchange of shares, or other corporate change, the Committee shall make such
substitutions or adjustments to the Stock Accounts and the annual limitation on
deferrals in Common Stock as it deems to be equitable and consistent with the
provisions contained herein.
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11. General Matters
Cash and Common Stock credited to Accounts under the Plan will be paid
at the dates and in the manner provided for in Section 7 from the assets of the
grantor trust established under Section 8 and, to the extent the assets therein
are not sufficient or such a trust has not been established, from the general
assets of the Company. Prior to such payment, a director will have no interest
under the Plan in any specific asset of the Company or any security interest in
the assets of a grantor trust established under Section 8. Until the
establishment of such a trust, no certificates shall be issued for shares
credited to a director's Stock Account.
All expenses incurred in administering the Plan and a grantor trust
established under Section 8 will be paid by the Company.
Adopted: April 22, 1969
Amended: March 20, 1984
January 19, 1988
March 15, 1988
September 21, 1993
May 1, 1994
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EXHIBIT 10(h)
CPC INTERNATIONAL INC.
DEFERRED STOCK UNIT PLAN
SECTION 1. PURPOSE
The purpose of this CPC International Inc. Deferred Stock Unit Plan is to
provide certain senior management employees of the Company and its subsidiaries
an opportunity to defer, in the form of Stock Units, all or part of the bonuses
awarded to them.
SECTION 2. DEFINITIONS
"ACCOUNT" means a Participant's deferral balance maintained on the books of the
Company pursuant to Section 3(c).
"BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of CPC
International Inc.
"BONUS" means an amount awarded to a Participant under the CPC International
Inc. Corporate Bonus Plan, the CPC International Inc. Operations Bonus Plan, or
any other bonus plan or program approved by the Board, but not including any
amounts awarded or paid under the CPC International Inc. 1993 Stock and
Performance Plan or any successor plan thereto.
"COMMITTEE" means the Compensation and Nominating Committee of the Board, or any
other compensation committee designated by the Board.
"COMPANY" means CPC International Inc.
"DETERMINATION DATE" means the date as of which all or a portion of a
Participant's Account is to be valued for purposes of making a distribution to a
Participant or beneficiary.
"ELIGIBLE GROUP" means those employees of CPC International Inc. and its
subsidiaries and affiliates who are eligible to receive a Bonus.
"PARTICIPANT" means a member of the Eligible Group who is authorized to
participate in the Plan pursuant to Section 3.
"PLAN" means this CPC International Inc. Deferred Stock Unit Plan.
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"STOCK UNIT" means a unit corresponding to one share of the common stock of the
Company in which a Participant's Account is deemed invested pursuant to Section
3(c).
"TERMINATION DATE" means a Participant's Retirement Date as defined in the CPC
International Inc. Non-Contributory Retirement Income Plan for Salaried
Employees (or a successor plan thereto or a similar pension plan of a subsidiary
or affiliate or any such similar plan applicable to the Participant), or the
date on which a Participant's employment with the Company and its subsidiaries
and affiliates terminates other than by retirement.
SECTION 3. PARTICIPATION AND BENEFITS
(a) All members of the Eligible Group are eligible to be selected for
participation in the Plan. Prior to December 22 of each calendar year, the
Committee shall designate, in accordance with procedures it establishes, those
members of the Eligible Group who shall be Participants for that year.
(b) A Participant shall be allowed to defer all or any portion of a
Bonus, in accordance with procedures established by the Committee. Such deferral
election shall be made (i) in writing, (ii) prior to December 25 of the
applicable year for which the Committee has designated the individual as a
Participant, and (iii) prior to the date on which the Board of Directors
determines the Bonuses, if any, awarded to the Participants for that year. A
deferral election pursuant to this Section 3(b) shall be irrevocable.
(c) The amount of Bonus which a Participant elects to defer shall be
recorded in an account established by the Company. Such amounts shall be deemed
to be invested in common stock of the Company in the form of Stock Units,
effective as of the date on which the Board approves the Bonus to which the
Participant's election relates. The Participant's Stock Units shall be increased
by dividend equivalents equal to any cash dividends declared by the Company with
respect to the equivalent number of actual shares of common stock, effective as
of the payment date for such dividends. All such dividend equivalents shall be
deemed reinvested in additional shares of common stock of the Company and shall
result in additional Stock Units. A Participant's Account shall consist of the
total number of Stock Units maintained in the Company's records pursuant to this
Section 3(c).
(d) Participant deferrals under the Plan, and deemed dividend
reinvestments, shall be converted into deemed shares of Company common stock,
and resulting Stock Units, by using the average of the high and low prices of
the Company's common stock on the New York Stock Exchange for the applicable
date specified in subsection (c) above.
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SECTION 4. DISTRIBUTIONS
(a) The value of a Participant's Account shall be calculated in
accordance with the method set forth in Section 3(d) as of the applicable
Determination Date. A Participant's Account shall be paid in cash in accordance
with the distribution method specified pursuant to subsection (b) as soon as
practicable after the applicable Determination Date, subject to all applicable
tax withholding requirements.
(b) A Participant shall elect in writing, no later than the
Termination Date, and pursuant to procedures specified by the Committee, to
receive the value of the Account in one cash lump sum or pursuant to any other
distribution method as such Participant shall specify; provided, however, that
(i) no distribution may occur earlier than the first anniversary of the
Participant's Termination Date; (ii) distribution must commence no later than
the fifth anniversary of the Participant's Termination Date; and (iii) full
distribution of the Participant's Account must be completed no later than the
tenth anniversary of such Termination Date. The election shall be irrevocable as
of the Participant's Termination Date. If a Participant dies in active service
as an employee of the Company, the named beneficiary under the Plan shall make
such irrevocable election as soon as practicable after the Participant's death.
If no election is made, the Participant's Account will be paid in one cash lump
sum as soon as practicable following the Determination Date which is one year
after the Participant's Termination Date. Until the distribution of the full
value of a Participant's Account, the undistributed portion of such Account
shall continue to be treated as invested pursuant to section 3(c) until the
applicable Determination Date relating to the distribution method specified by
the Participant or beneficiary.
(c) A Participant shall name a beneficiary hereunder to receive the
value of the Account in the event the Participant dies prior to being paid the
full value of such Account. If a Participant fails to make a designation, the
beneficiary shall be the Participant's estate.
SECTION 5. GENERAL PROVISIONS
(a) The Plan shall be administered by the Committee. The Committee may
appoint subcommittees or individuals (who may be Company employees) to assist it
in carrying out administrative duties and responsibilities. The Committee shall
have sole and complete authority and discretion to adopt, alter and repeal
administrative rules, guidelines and practices governing the operation of the
Plan, to decide questions of fact under the Plan, and to interpret and apply the
terms and provisions of the Plan in all respects.
(b) Participation in the Plan shall not be deemed to be a contract of
employment between the Company and any Participant or member of the Eligible
Group
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or to give any Participant or Eligible Group member the right to be retained in
employment.
(c) The Board of Directors may amend, suspend or terminate the Plan or
any portion thereof at any time, provided, however, that no amendment,
suspension or termination may impair existing rights in respect of Participants'
Accounts.
(d) Participants and beneficiaries may not alienate or transfer their
Accounts in any matter whatsoever (other than transfers upon a Participant's
death pursuant to Section 4(c)) and any attempt to do so shall be null and void.
(e) The Plan is unfunded, but the Committee may in its discretion
direct the Company to establish a trust with an independent trustee to which the
Company may transfer assets to assist the Company in paying Accounts under the
Plan. The trust instrument shall contain such provisions as the Company may deem
necessary or appropriate to carry out the purposes of the Plan and the trust;
provided, however, that any such trust shall provide that its assets shall be
subject to the claims of the Company's general creditors in the event of the
Company's insolvency. The establishment of such trust shall not be construed as
limiting the Company's obligation to pay the benefits provided for in the Plan
to the extent not fully paid from such trust. Notwithstanding the establishment
of such trust, the rights of a Participant or beneficiary under the Plan shall
not be superior to those of an unsecured creditor of the Company.
(f) Claims for benefits under the Plan shall be governed by the claims
procedures set forth in the CPC International Inc. Executive Life Insurance
Plan, which are incorporated herein by reference, except that the term
"Committee" as defined in this Plan shall be substituted for the terms
"Committee" or "Pension Committee" in that plan.
(g) In the event of any change in the outstanding shares of common
stock of the Company, the provisions of Section 1.5(b) of the CPC International
Inc. 1993 Stock and Performance Plan shall be applicable under this Plan.
(h) The Committee is authorized to impose any restrictions consistent
with Securities and Exchange Commission ("SEC") Rule 16b-3, and other SEC rules,
which may apply to participation in the Plan by Participants who are persons
subject to Section 16 of the Securities Exchange Act of 1934.
(i) The Plan shall be construed, regulated and administered under the
laws of the state of New Jersey.
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EXHIBIT 10(i)
CPC INTERNATIONAL INC.
EXECUTIVE LIFE INSURANCE PLAN
Effective as of December 31, 1993, CPC International Inc., a Delaware
corporation ('CPC"), hereby establishes an Executive Life Insurance Plan by the
adoption of this document.
ARTICLE I
NAME, PURPOSE, AND DEFINITIONS
Section 1.1. Name. This Plan shall be known as the "CPC International
Inc. Executive Life Insurance Plan."
Section 1.2. Purpose.
(a) The purpose of this Plan is to encourage certain
employees of the Company, who contribute materially to the prosperity of the
Company, to remain in the employ of the Company, and to provide incentives for
such individuals to devote their full abilities and industry to the success and
progress of the Company, and encourage them to continue to promote the best
interests of the Company. The Plan is also intended as a means of attracting and
retaining employees of outstanding abilities and specialized skills by providing
certain benefits, including potential death benefits for their families.
(b) The benefits made available under this Plan are in
addition to any death benefits provided under other plans maintained by the
Company. The benefits made available under this Plan are welfare benefits, and
the Plan is intended to qualify as an employee welfare benefit plan under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). These
benefits shall be separate and apart from and not in any way dependent upon,
connected to or related to any retirement benefits provided by the Company and
shall not be deemed to be benefits under an "employee pension benefit plan" as
that term is defined in ERISA.
Section 1.3. Definitions. Whenever used herein, the following words and
phrases shall have the meanings ascribed to them in this Section, unless
otherwise specifically defined or unless the context clearly otherwise requires:
(a) "Agreement" or "Participation Agreement": An agreement
executed by CPC and a Participant, as described in Section 3.2 hereof.
(b) "Beneficiary": The beneficiary or beneficiaries designated
by the Participant (in the manner required by the Insurer) to receive a portion
of the death benefit as provided in Section 4.5 hereof.
(c) "Board of Directors" or "Board": The Board of Directors of
CPC.
(d) "Code": The Internal Revenue Code of 1986, as amended and
now in effect and as it may be amended from time to time. All citations to
sections of the Code are to such sections as they may from time to time be
amended or renumbered.
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(e) "Collateral Assignment": The form by which the Participant
assigns certain Policy Rights to the Company to secure payment of the
Liabilities.
(f) "Committee": The Pension and Welfare Committee appointed
by the Board of Directors to administer CPC's pension and welfare plans.
(g) "Company": CPC and all of its subsidiaries which
participate in this Plan with the written approval of the Committee, as provided
herein. CPC and its subsidiaries which participate in this Plan are listed on
Exhibit A which is attached hereto and incorporated herein by this reference,
and such Exhibit may be amended by the Committee from time to time.
(h) "CPC": CPC International Inc., a Delaware corporation.
(i) "Death Benefit": The proceeds payable under a Policy by
reason of a Participant's death.
(i) "Default": A Participant's failure to make the
reimbursement or transfer of a Policy as provided in Section 4.4 hereof.
(k) "Disability": A physical or mental condition which
qualifies the Participant for disability benefits under the CPC International
Inc. Long-Term Disability Income Plan for Salaried Employees or any similar
successor program maintained by CPC; provided, however, if the Participant is
not covered by any such plan for any reason at the time of his injury or
illness, he will be under a Disability for purposes of this Plan if in the
determination of the Plan Administrator in the exercise of its sole and absolute
discretion based upon competent medical evidence, the Participant's physical or
mental condition totally and permanently prevents the Participant, for the first
twelve months, from performing the material duties of his regular occupation,
and thereafter from performing the material duties of any occupation for which
the Participant would have been qualified in the absence of such disability.
(1) "Dividends": Dividends declared by the Insurer on a
Policy. Dividends may or may not occur.
(m) "ERISA": The Employee Retirement Income Security Act of
1974, as amended and as now in effect, or as hereafter amended.
(n) "Insurer": Northwestern Mutual Life Insurance Company, or
such other insurance company as CPC may designate from time to time.
(o) "Liabilities": The amounts to which CPC is entitled under
this Plan and the Agreement.
(p) "Participant": An employee of a Company who meets the
conditions for participation in this Plan, and is made a participant hereunder,
all in accordance with the provisions of Article III hereof.
(q) "Plan Administrator" or "Administrator": The Committee.
(r) "Policy": A life insurance policy on the life of a
Participant as provided in Section 4.1 hereof.
(s) "Policy Date": The date of the Policy as shown on the
specifications page of the Policy.
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(t) "Policy Rights": Any and all rights, options, privileges
and powers which a Policy grants to the owner of the Policy.
(u) "Policy Year": A period of twelve consecutive months
during which a Policy is in force. The Policy Date begins the first Policy Year,
and each anniversary thereof begins a subsequent Policy Year, provided the
Policy is in force.
(v) "Premiums": The premiums payable on a Policy.
(w) "Reimbursement Trigger": The first of the following to
occur:
(1) if the Participant's employment with the Company
terminates for any reason after he attains age 55 and
after the end of the 5th Policy Year, the later of
the end of the Policy Year closest to the
Participant's 65th birthday or the end of the 15th
Policy Year, provided that the Participant paid his
share of the Premiums until the later of the two
dates (for example, if the Policy Date is 12/31/93,
the Participant retires at age 55 on 12/31/99, and
pays his share of the Premiums until attaining age
65, the reimbursement trigger would occur when the
Participant attains age 65 on December 31, 2009) (as
another example, if the Policy Date is 12/31/93 and
the Participant retires at age 65 on 12/31/95, the
reimbursement trigger would occur on 12/31/95);
(2) if the Participant becomes subject to a Disability
while working for the Company and was not able to
return to work for the Company or any other employer
because of such Disability, the later of the end of
the Policy Year closest to the Participant's 65th
birthday or the end of the 15th Policy year, provided
that the Participant paid his share of the Premiums
until the later of the two dates;
(3) the Participant's employment with the Company
terminates because of his death or under any
circumstances not described in clauses (1) or (2);
(4) the Participant fails to timely pay his share of the
Premiums through withholding or otherwise at any time
for any reason;
(5) the Participant gives the Company written notice of
cancellation of the Agreement;
(6) CPC terminates the Plan with respect to all
Participants;
(7) CPC amends the Plan with respect to all Participants
which causes a Reimbursement Trigger for the
Participant; or
(8) the Participation Agreement with the Participant
terminates for any reason.
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ARTICLE II
ADMINISTRATION OF THE PLAN
Section 2.1. Plan Administrator.
(a) The Plan shall be administered by the Committee as
appointed by the Board of Directors from time to time. The Committee shall be
the Plan Administrator of this Plan, provided that the Board of Directors, at
its option, may at any time assume the responsibilities of and act as the
Committee if the Board of Directors so desires. The Committee shall act in
accordance with the practices and procedures established by CPC and the
Committee from time to time.
(b) The Committee shall have the power to designate one or
more persons, other than members of the Committee, to carry out its
administrative responsibilities. Any such designation shall be made in
accordance with rules prescribed by the Committee. The Committee is authorized
to employ accountants, counsel, and other consultants and to employ clerical
assistance as it may require in carrying out the provisions of this Plan.
(c) The Committee shall administer the Plan in accordance
with its terms and shall have all powers necessary to carry out the provisions
of the Plan (except such powers as are reserved by the Board of Directors),
whether or not such powers are specifically enumerated herein, but not
inconsistent with any of the express terms and provisions of this Plan.
(d) The Plan Administrator shall have the power to interpret,
apply, and administer the provisions of this Plan, determine any questions of
fact under this Plan, resolve any ambiguities under this Plan, and make all
decisions and determinations necessary under this Plan or in connection with its
administration, interpretation, and application, to the full extent permitted by
law. The Committee shall have the authority in its discretion to identify the
employees of the Company who satisfy the eligibility requirements set forth
herein and are eligible to participate in this Plan. Decisions by the Committee
shall be final and binding upon all parties to the extent permitted by law.
(e) A subsidiary of CPC must obtain the prior written
approval of the Committee before it may be considered a "Company" for purposes
of this Plan and as described in Section 1.3(g) of this Plan, and before its
employees may be eligible to participate in this Plan.
Section 2.2. Compensation of Committee Members. Unless otherwise
determined by the Board of Directors, the members of the Committee shall serve
without compensation for their services as such. All reasonable and necessary
expenses of the Committee and its members, including but not limited to legal,
accounting, and other professional fees and expenses, may be paid by CPC or
reimbursed by CPC.
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ARTICLE III
ELIGIBILITY, PARTICIPATION,
AND AMOUNT OF DEATH BENEFIT PAYABLE
TO PARTICIPANT'S BENEFICIARY
Section 3.1. Eligibility. Individual participation in the Plan shall be
determined in the sole and absolute discretion of CPC, and shall be limited to
those employees of a Company who (i) are receiving a base salary (disregarding
all bonuses and all other amounts other than base salary) of Seventy Thousand
Dollars ($70,000.00) or more per annum as reflected in the records of the
Company, and (ii) are insurable at rates acceptable to CPC. CPC in its sole and
absolute discretion may determine that any individual is not eligible to
participate in this Plan. In addition, in the sole and absolute discretion of
CPC, a United States citizen working outside the United States for a CPC
affiliate on a full-time basis, and who meets all the requirements for
eligibility other than being employed by a Company, may participate in this
Plan. An employee is eligible to participate in this Plan on a one-time basis
only, when he first becomes eligible to participate in this Plan and is provided
with notice thereof pursuant to Section 3.2 hereof. An employee shall not be
eligible to participate thereafter, except as determined by the Committee in its
sole discretion. When an employee becomes a Participant in this Plan, his
coverage under the Company's basic and supplemental term insurance will
terminate. An employee is not ineligible to participate in this Plan solely
because he is a member of the Board of Directors or the Committee or is a
participant in any other Company plan.
Section 3.2. Notification and Participation. Each employee of the
Company eligible to be a Participant hereunder shall be notified by CPC or the
Committee and may begin participation in the Plan on the next December 31st.
After notification, an employee who desires to participate in the Plan shall be
required as a condition of participation to execute (i) a Participation
Agreement, and (ii) a Collateral Assignment, on forms to be provided by CPC or
the Committee, agreeing to be bound by all of the terms and provisions thereof,
and such other forms and document as CPC or the Committee may require from time
to time. By means of the Participation Agreement (and any other documents), the
employee and CPC may agree to vary the terms of this Plan as to such employee.
Section 3.3. Insurance Policy.Except as otherwise provided in the
Participation Agreement, the portion of the Death Benefit under the Policy
payable to the Participant's Beneficiary upon the Participant's death shall be
as set forth in Exhibit B attached hereto and hereby made a part hereof. As a
Participant's salary increases to higher salary ranges as set forth in Exhibit
B, if the Participant meets the other eligibility requirements, the Participant
shall have the option of purchasing additional life insurance coverage as
indicated in Exhibit B, subject to all of the terms and conditions of this Plan,
the Participation Agreement, the Collateral Assignment, and any additional
documents related thereto or executed to increase such coverage, all in the
manner as determined by the Committee from time to time. The salary ranges and
the portions of the Death Benefit as set forth in Exhibit B may be changed at
any time by the Committee.
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ARTICLE IV
PREMIUM ARRANGEMENT
Section 4.1. The Policy. The Participant will complete and sign an
application for the issuance of a life insurance policy on his life (referred to
herein as the "Policy").
Section 4.2. Owner of the Policy. The Participant will own the Policy
and may exercise the rights which the Policy grants to the owner, subject to
this Plan, the Participation Agreement, and the Collateral Assignment. The
Policy shall be delivered to CPC as agent for the Participant, and the
Participant hereby directs CPC to retain possession of the Policy hereafter as
his agent, provided that the Participant may request to inspect the Policy
during regular business hours, and such request shall not be unreasonably
denied.
Section 4.3. Payment of the Premiums.
(a) The Participant and CPC will each pay a portion of the
Premiums until the occurrence of a Reimbursement Trigger. The Participant will
pay a part of each Premium as provided in the Participation Agreement, and CPC
will pay the rest of the Premium until the occurrence of a Reimbursement
Trigger. Procedurally, CPC will pay the total amount of each Premium to the
Insurer as it becomes due, and the Company shall withhold amounts from the
Participant's wages sufficient to pay his share of the Premiums, provided that
(i) as specifically provided in clauses (1) or (2) of Section 1.3(w) hereof, the
Participant will be required to pay his portion of the Premiums directly to CPC,
or (ii) if a trust is a party to the Participation Agreement rather than the
Participant, the Participant's share of the Premiums shall be paid to CPC by the
trust as required. By the execution of the Participation Agreement, the
Participant consents to the withholding.
(b) CPC will have no obligation to pay any portion of any
Premiums after the occurrence of a Reimbursement Trigger.
Section 4.4. CPC's Right to Reimbursement.
(a) Within 60 days following the occurrence of a Reimbursement
Trigger, the Participant must either (1) reimburse CPC for the total Premiums
CPC paid (excluding the Premiums paid by the Participant through withholding or
otherwise), or (2) transfer ownership of the Policy to CPC by signing such forms
as CPC deems necessary. The cash surrender value of the Policy may be used to
reimburse CPC for all or part of the Premiums it has paid, as permitted by the
Insurer. Upon timely making such reimbursement, the Participant and CPC will
promptly cancel the Collateral Assignment and so notify the Insurer, and the
Participant will own the Policy free and clear of the Collateral Assignment. If
the Participant transfers the Policy to CPC, all of the Participant's rights in
the Policy, the Participation Agreement and this Plan will automatically
terminate, and CPC will own the Policy free and clear. If the Participant does
not timely make such reimbursement or transfer of the Policy, the Participant
will be in Default and will forfeit to CPC all Policy values. For example, after
Default CPC may surrender the Policy and receive the Policy's cash surrender
value or hold the Policy until the Participant's death and receive the entire
Death Benefit.
(b) If the Participant dies after the occurrence of a
Reimbursement Trigger and before the Participant reimburses CPC or transfers the
Policy as provided in Section 4.4(a) hereof, and before the Participant
Defaults, then in lieu of such reimbursement or transfer CPC shall be entitled
to a share of the Death Benefits as set forth in Section 4.5 below.
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(c) Any payments made to CPC under a Policy in connection with
CPC's right to reimbursement as set forth in this Article IV shall be made first
from Policy values attributable to Dividends. The Participant will have no
interest in Policy values attributable to Dividends except to the extent such
values exceed CPC's interest in the Policy.
Section 4.5. Sharing of the Death Benefits. If the Participant dies
before the occurrence of a Reimbursement Trigger, the Insurer will pay CPC,
except as otherwise provided in the Participation Agreement, an amount from the
Death Benefit equal to the total Premiums paid by CPC (excluding the Premiums
the Participant paid through withholding or otherwise), and the Participant's
Beneficiary will receive the amount specified by the Participation Agreement,
which shall be the remainder of the Death Benefit. The Death Benefit
attributable to Dividends will be allocated first to CPC's share. In no event
will the amount payable to CPC exceed the Death Benefit. The beneficiary
designation provisions of the Policy shall comply with these provisions.
Section 4.6. Securing CPC's Rights to Reimbursement and Death Benefits.
(a) When the Participant signs the Participation Agreement,
he must also sign the Collateral Assignment to secure payment of the
Liabilities. Under the Collateral Assignment, the Participant will assign to CPC
all of his Policy Rights, except the Policy Rights to make a gift of his
interest in the Policy in accordance with Section 4.8 hereof, to designate a
Beneficiary of his share of any Death Benefit, and to select any optional mode
of settlement thereof, which rights the Participant retains and may exercise in
his sole discretion. The Policy Rights assigned to CPC include, but are not
limited to, the right to surrender the Policy after Default and the right to
exchange the Policy for another cash value whole life insurance policy, whether
issued by the Insurer or another life insurance company.
(b) CPC may exercise any Policy Right assigned to it, as it
elects in its sole and absolute discretion, subject, however, to the following
limitations:
(1) Prior to Default, CPC will not surrender or partially
surrender the Policy, borrow under the Policy, or
withdraw cash from the Policy; and
(2) until the occurrence of a Reimbursement Trigger, CPC
will direct the Insurer to apply Dividends to purchase
paid-up additional insurance.
The foregoing will not in any way limit the rights of CPC to: (i) surrender the
Policy after Default, (ii) exchange the Policy at any time as provided in
paragraph (a) above, or (iii) direct the Insurer after the occurrence of a
Reimbursement Trigger to pay Premiums with Dividends, through the surrender of
Policy values, or through a combination of Dividends and surrendered values.
Section 4.7. The Participant's Basic and Supplemental Term Insurance
Coverage Will Be Terminated. The Company will provide employees with basic term
insurance coverage, and the Company may have an arrangement under which
employees may purchase supplemental term insurance coverage. When an employee
becomes a Participant, the basic term insurance coverage and supplemental term
insurance coverage provided thereunder will terminate on the Policy Date of the
Policy. The Participant consents to the termination of such coverages and upon
such termination waives, for himself and on behalf of his Beneficiaries, any
benefits
- 7 -
8
Section 4.8. The Participant May Make a Gift of His Interest. The
Participant may at any time make a gift of his interest in the Policy. To do
this the Participant must sign such forms as the Insurer and the Committee may
require. Upon signing such forms the recipient shall be substituted as the owner
of the Policy and shall be subject to the terms and conditions of the
Participation Agreement and the Collateral Assignment, and the recipient's
rights shall be subject to this Plan, and the Participant shall have no further
interest.
Section 4.9. The Participant's Interest is Exempt from Creditors (to
the Extent Permitted by Law). To the extent enforceable under applicable law,
neither the Participant's nor the Beneficiary's interest in the Policy, nor any
rights in the Participation Agreement or this Plan shall be subject in any
manner to (1) any claims of any creditor of the Participant, (2) the debts,
contracts, liabilities or torts of the Participant, or (3) voluntary or
involuntary transfers to, on behalf of, or on account of any creditor of the
Participant. No future right, expectancy, distribution or payment pursuant to
this Plan to the Participant, any successor to the Participant, or any
Beneficiary, shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void, provided that gifts may be
made as provided in Section 4.8 hereof. If any person or entity attempts to take
any action contrary to this Section and if this Section is enforceable under
applicable law, such action will have no effect, and CPC and the Participant
will disregard the action, will not in any manner be bound by it, and will not
incur any liability on account of it or the disregard of it.
Section 4.10. Rights in the Policy. Prior to satisfaction of the
Liabilities under Section 4.4 of this Plan and in accordance with Section 4.6 of
this Plan, the Participant will not sell, assign, transfer, borrow against,
surrender or cancel the Policy, nor change the Dividend election, without the
prior written consent of CPC.
Section 4.11. Merger or Consolidation of CPC. If CPC merges or
consolidates with another entity, or if another entity purchases substantially
all of the assets or outstanding stock of CPC, CPC shall either (i) arrange for
the successor or acquiring entity to assume the obligations of CPC under this
Plan and the Participation Agreements so that the Participants, rights will
continue, or (ii) arrange for a trust to be established which shall assume the
obligations of CPC under this Plan and the Participation Agreements so that the
Participants' rights will continue. Such a trust would be funded with CPC's
interest in the Policies under the Collateral Assignments and its related rights
and any amounts necessary to pay CPC's share of all of the future Premiums on
the Policies of all Participants (until the anticipated occurrence of a
Reimbursement Trigger). The establishment, funding, and the provisions of such a
trust would be determined in the sole and absolute discretion of CPC.
Section 4.12. ERISA. The Plan is a 'welfare benefit plan, under ERISA.
Section 4.13. Cooperation. The Participant and CPC will take such
action as is necessary to cause the Insurer to issue the Policy, and will take
any further action which may be necessary to carry out the provisions of this
Plan with the intention of establishing a split-dollar insurance arrangement
between the Participant and CPC. The Participant will sign such forms as CPC,
the Committee or the Insurer may require as a condition of participation.
- 8 -
9
ARTICLE V
CLAIM PROCEDURE
Section 5.1. Claim Procedure.
(a) Claims for benefits under the Plan shall be submitted in
writing to the Committee or a person designated by the Committee for this
purpose.
(b) The Administrator shall provide notice in writing to any
person whose claim for benefits has been denied within 90 days after the receipt
of the claim. Such 90 day notice shall be extended for an additional 90 days if
the Administrator determines that such an extension of time is necessary to
process the claim and so advises the claimant within 90 days after the receipt
of the claim. Such notice shall set forth the specific reason or reasons for the
denial and shall be written in a manner calculated to be understood by the
recipient. Such notice shall also refer specifically to pertinent Plan
provisions on which the denial is based; shall describe any additional material
or information necessary for the claimant to perfect his claim; and shall
explain why such material or information is necessary. Such notice shall also
explain the Plan's claims review procedure. A claim for benefits shall be deemed
denied for purposes of proceeding to the review stage if the Administrator does
not provide written notice to the claimant within the foregoing time period.
(c) The Committee shall afford to any person whose claim for
benefits has been denied a reasonable opportunity for a full and fair review of
the decision denying the claims. The claimant or his duly authorized
representative shall request such review in writing not more than 90 days after
receipt by the claimant of written notification of denial of his claim. Within
60 days after, or as part of, a timely request for review, the claimant may
submit issues and comments in writing and may review pertinent documents.
(d) Upon receipt of a timely request for review, the
Committee may, in its discretion, designate one or more persons to hear the
claimant's request and inquire into the merits of the claim. Such designee(s)
shall meet promptly with the claimant and his duly authorized representative and
shall hear such arguments and examine such documents as the claimant or his
representative shall present. The designee(s) shall then report his (their)
findings to the Committee orally or in writing.
(e) A decision of the Committee on review of a claim shall be
in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant and setting forth specific
references to the pertinent Plan provisions on which the decision is based. The
decision shall be made promptly but not later than 60 days after receipt of a
request for review, unless special circumstances require an extension of time
for processing. In such case, the claimant shall be advised in writing prior to
the expiration of the initial 60 day period that a decision shall be rendered as
soon as possible, but not later than 120 days after receipt of a request for
review. A claim shall be deemed denied on review if the decision on review is
not furnished to the claimant within the foregoing time period.
- 9 -
10
ARTICLE VI
AMENDMENT AND TERMINATION OF PLAN
Section 6.1. Amendment and Termination of the Plan. CPC shall have the
right to amend this Plan in any respect, in whole or in part, or may terminate
this Plan, at any time and from time to time, subject to the participants'
rights, if any, established at such time pursuant to the Participation
Agreements (the definition of Reimbursement Trigger under Section 1.3(w) hereof
includes a termination of t his Plan and any amendment of this Plan which causes
a Reimbursement Trigger). Such right may be exercised by a duly authorized
delegate of CPC.
ARTICLE VII
MISCELLANEOUS
Section 7.1. No Guarantee of Employment. Neither this Plan nor any
action taken hereunder shall be construed as a contract of employment between
the Company and any Participant, to be a consideration for, or an inducement or
condition of, the employment of a Participant, or as giving any Participant any
right to be retained in the employ of the Company, or to interfere with the
right of the Company to discharge any Participant at any time.
Section 7.2. Gender and Number. For purposes of this Plan document, the
masculine pronouns shall be construed to include the feminine, the feminine
shall be construed to include the masculine, the singular to include the plural,
and the plural to include the singular.
Section 7.3. Additional Information. Each Participant, and each
employee who is eligible to participate in the Plan and desires to participate
in the Plan, shall furnish to the Company such documents, evidence o r other
information as is necessary or desirable for the purpose of administering this
Plan, and it shall be a condition of participation in this Plan that each such
employee furnish such information promptly and sign such documents as the
Committee may require before any benefit becomes payable under this Plan.
Section 7.4. Incapacity of Recipient. If the Committee determines that
any person entitled to payment sunder this Plan is incapable of personally
receiving any such payment, then unless and until a claim shall have been made
by a duly appointed legal guardian or other legal representative of such person,
the Committee may cause any or all payment s hereunder becoming due to such
person to be made to any other person or institution for the incapable person's
benefit if such person or institution is then contributing toward or providing
for the care and maintenance of the incapable person, and neither the Committee
nor CPC shall have any responsibility to follow the application of amount so
paid. Payments made pursuant to this provision shall completely discharge CPC,
the Committee, and the Plan thereof.
Section 7.5. Applicable Law. This Plan and all rights hereunder are
governed by ERISA, and to the extent that any state law is applicable, the
provisions of this Plan shall be construed, regulated, and administered under
the laws of the State of New Jersey (without regard to its conflict of law
rules).
- 10 -
11
IN WITNESS WHEREOF, CPC has caused this Plan to be adopted by
its duly authorized officer as of December 31, 1993.
(SEAL) CPC INTERNATIONAL INC.
ATTEST:
By:_______________________________ By: ________________________________
Print Name: Print Name :
Secretary Print Title:
- 11 -
12
EXHIBIT A
PARTICIPATING COMPANIES
EFFECTIVE DATE
COMPANY OF PARTICIPATION
CPC International Inc. December 31, 1993
Arnold Foods Company, Inc. December 31, 1993
CPC Specialty Products Inc. December 31, 1993
Enzyme Bio-Systems Ltd. December 31, 1993
S.B. Thomas, Inc. December 31, 1993
- 12 -
13
EXHIBIT B
SCHEDULE OF PORTION OF POLICY
DEATH BENEFIT PAYABLE TO THE PARTICIPANT'S BENEFICIARY
<TABLE>
<CAPTION>
PORTION OF POLICY
DEATH BENEFIT PAYABLE
RANGE OF EMPLOYEE'S TO THE PARTICIPANT'S
ANNUAL BASE SALARY BENEFICIARY
<S> <C>
$ 70,000.00 - $ 79,999.99 $ 250,000.00
$ 80,000.00 - $ 99,999.99 $ 350,000.00
$100,000.00 - $149,999.99 $ 500,000.00
$150,000.00 - $199,999.99 $ 750,000.00
$200,000.00 - $299,999.99 $1,000,000.00
$300,000.00 or more $1,500,000.00
</TABLE>
- 13 -
14
CPC INTERNATIONAL INC.
EXECUTIVE LIFE INSURANCE PLAN
AMENDMENT NO. 1
THIS INSTRUMENT made this 23rd day of September, 1994, by CPC
International Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the CPC International Inc.
Executive Life Insurance Plan, effective as of December 31, 1993; and
WHEREAS, the Company reserves the right to amend the Plan
pursuant to Section 6.1 thereof; and
WHEREAS, the Board of Directors of the Company has approved
modification of the Plan's procedures governing Plan amendment and termination;
and
WHEREAS, the Board of Directors of the Company has authorized
and directed the Company's Pension and Welfare Committee to adopt an amendment
to the Plan to memorialize the Board's action;
NOW, THEREFORE, the Plan is amended as follows:
FIRST: The second sentence of Section 6.1 of the Plan is
deleted and the following language is inserted in its place:
15
2
"Such action may be accomplished through duly authorized action by the
Board of Directors of CPC or, with respect to amendments only, through
duly authorized action of the Plan Administrator. Notwithstanding the
foregoing, the Plan Administrator shall not have authority to amend the
Plan regarding any matter that would have a material effect on the
Company or on Participants taken as a whole, as deter-mined by the
General Counsel of CPC or his delegee, who shall have complete and sole
discretion in making such determination. The Plan Administrator shall
report quarterly to the Board of Directors or a committee thereof as to
the amendments which the Plan Administrator has adopted."
SECOND: This Amendment is effective as of June 20, 1994.
IN WITNESS WHEREOF, CPC International Inc. has caused this
Amendment to be executed by the Chairman of the Pension Committee on the date
first set forth above.
CPC INTERNATIONAL INC.
By ______________________________________
Chairman, Pension Committee
1
EXHIBIT 11
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Primary 1994 1993 1992
------- ---- ---- ----
<S> <C> <C> <C>
Net income $345,086 $454,470 $223,768
-------- -------- --------
Preferred stock dividends, net of taxes 10,921 10,673 10,457
-------- -------- --------
Net income available to common
stockholders $334,165 $443,797 $213,311
-------- -------- --------
Weighted average shares outstanding 148,371 150,398 151,212
-------- -------- --------
Primary earnings per share (*) $2.25 $2.95 $1.41
======== ======== ========
Fully diluted
-------------
Net income $345,086 $454,470 $223,768
-------- -------- --------
Adjustments to net income:
Assumed additional contribution if
ESOP is fully converted net of certain
tax benefits (3,386) (4,121) (4,511)
After tax interest on the 6% zero
coupon convertible debt -- 3,869*** --**
-------- -------- --------
Fully diluted net income $341,700 $454,218 $219,257
-------- -------- --------
Average shares outstanding 148,371 150,398 151,212
Add incremental shares representing:
Shares issuable upon exercise of
stock options based on year-end
price 426 257 400
Performance incentive shares
issuable based on year-end
market price 88 80 90
Share assumed issuable upon
conversion of ESOP shares 4,342 4,384 4,428
Shares assumed issuable upon
conversion of 6% zero coupon
convertible debt -- 1,458*** --**
-------- ------- -------
Weighted average number of shares
as adjusted 153,227 156,577 156,130
======== ======= =======
Fully diluted earnings per share $2.23 $2.90 $1.40
======== ======= =======
Dilutive effect of incremental shares -1.0% -1.7% - .7%
======== ======= =======
</TABLE>
(*) Incremental shares have not been considered in the computation of primary
earnings per share in accordance with generally accepted accounting
principles which requires inclusion only when dilutive effect is greater
than three percent.
(**) Actual result was antidilutive therefore not used in calculation.
(***) Redeemed August 13, 1993.
13
1
Exhibit 13
CPC INTERNATIONAL
1994 Annual Report
2
CPC INTERNATIONAL 8 1994 ANNUAL REPORT
CONSUMER FOODS BUSINESS
CPC's consumer foods business, accounting for 84% of the Company's revenues,
continued to grow well in 1994, fueled by acquisitions, geographic extensions,
and new products. Sales rose 10.1% to $6.2 billion and operating income
increased 5% to $760 million, before a restructuring charge. Worldwide volumes,
including acquisitions, increased 9.9%.
WORLDWIDE BUSINESSES
SOUPS, SAUCES, BOUILLONS, AND RELATED PRODUCTS
Soups, sauces, bouillons, and related products are marketed by CPC in 58 of the
59 countries where it operates, chiefly under the Knorr brand. Ranging from
dehydrated soups to value-added ethnic dishes, Knorr products have in common --
and share with a number of related CPC brands -- high quality, convenience, and
innovative recipes. Worldwide sales of Knorr and related products were $2.4
billion, 13% higher than last year. Within this group of products, sales of
soups, sauces, bouillons, and mealmakers increased 4% to $2 billion on volumes
that rose 2%. Sales of potato products and meal dishes, boosted by the October
1993 acquisition of the Pfanni brand business in Germany, totaled $340 million
on volumes that nearly tripled.
EUROPEAN sales of Knorr and related products, which include sales from
businesses in Africa and the Middle East, were $1.7 billion, higher by 15%.
Contributing to the gain was the market-leading Pfanni potato products
business. Sales of soups, sauces, bouillons, and mealmakers rose 3% on volumes
that were unchanged.
Knorr products were first introduced in Germany in 1838 and today are sold in
22 European markets, most recently Russia, where a CPC team began selling
imported Knorr products at the start of 1994. Across Europe the Knorr brand is a
market leader: No. 1 in soups and bouillons; No. 2 in sauces; and a strong
performer in other categories. In 1994 new products focused on convenience.
Soups with shorter cooking times, higher quality instant soups, and bouillon
cubes formulated for stir frying and preparing rice and pasta were introduced
or extended into new markets.
The addition of the Pfanni brand gives CPC a new platform for growth. The
Pfanni line, like the Knorr line, primarily consists of dehydrated convenience
products that range from simple foods to more complex, value-added meal dishes.
They are highly adaptable to local tastes and transferable across borders.
IN LATIN AMERICA sales of Knorr and related products increased 3% to $319
million on volumes that declined 3%, hindered by a briefly difficult economic
environment in Brazil. In most of CPC's other Latin markets, sales and volumes
of Knorr products grew well.
Knorr bouillon is No. 1 in Latin America. New Knorr products include a stirfry
bouillon cube for preparing a variety of dishes and new extensions of the Knorr
Sopao soup line in Brazil; and additions in Mexico of new rice dishes, bean
dishes, and soups in cups.
3
GERMANY
CPC has turned a product innovation in Germany into an opportunity for the Knorr
brand across Europe. Knorr Gemusekuche (vegetable cuisine) mealmakers are added
to vegetables to create delicious side or main dishes. From Germany the concept
was extended to Switzerland, where CPC chefs created recipes that further
simplify preparation and clean-up. With vegetable consumption rates rising in
many countries, a European task force was formed to assess additional market
opportunities. So far CPC businesses in Austria, Denmark, Greece, Norway, and
Sweden have introduced Knorr vegetable mealmakers.
ACROSS EUROPE
4
CPC INTERNATIONAL 10 1994 ANNUAL REPORT
In Argentina Knorr instant mashed potatoes grew strongly.
IN NORTH AMERICA sales of Knorr and related products increased 10% to $282
million. Volumes were up 8%. The product group includes LeGout foodservice
products and a newly-acquired Hispanic foods business, Iberia Foods, which
strengthens CPC's efforts in the U.S. Hispanic market.
Building on the success of Knorr soups packaged in single-serve cups, CPC
introduced Knorr meals in cups in 1994. Sales of Knorr pasta sauces increased in
the U.S. and Canada.
IN ASIA sales of Knorr and related products increased 22% to $95 million.
Volumes rose 38%. In addition, unconsolidated sales from a joint venture in
Korea and a licensing agreement in Japan together generated sales of several
hundred million dollars. In 1994 CPC extended its Knorr bouillon business into
South China, where CPC began production at a new plant, and Sri Lanka and
Vietnam, where imported Knorr products were launched.
DRESSINGS
Worldwide sales of mayonnaise, other dressings, and corn oil were $1.6 billion,
up 13%. About one-half of these sales came from North America. Worldwide volumes
increased 11%. Sales of Hellmann's mayonnaise and other dressings excluding corn
oil were $1.1 billion, 11% higher, on volumes that increased 10%. During 1994
CPC successfully extended Hellmann's mayonnaise into new markets and introduced
a variety of new dressings products.
IN NORTH AMERICA sales of mayonnaise and other dressings, including
acquisitions, increased 15%. Volumes were 10% higher. Hellmann's and Best Foods
mayonnaise maintained their combined market share at 50%, while the category
declined, primarily due to consumers' concerns about fat in their diets. CPC
introduced a new low fat mayonnaise dressing in early 1995. The Hellmann's and
Best Foods brands continue to hold the leading share in the "health" segment,
which includes products with less fat, fewer calories, and no cholesterol.
One Step dressings for cole slaw, potato salad, and tuna salad successfully
extended the Hellmann's brand into a new category. Launched in the Northeastern
U.S., the products quickly became top sellers. Also contributing to CPC's
dressings business were sales from Dijonnaise creamy mustard blend and two
acquired pourable salad dressings brands, Henri.s (1993) and Western (1994).
Together the two regional brands give CPC a foothold in the pourable dressings
category in selected Midwestern markets.
IN LATIN AMERICA sales and volumes of mayonnaise and other dressings increased
10% and 8%, respectively. In 1994 CPC extended its use of flexible packaging for
mayonnaise to Costa Rica, under the Lizano brand, and added an individual
portion pack of Hellmann's mayonnaise in Chile. Hellmann's Light mayonnaise,
already produced in Argentina and Brazil, was imported into Mexico, Venezuela,
and other markets for the first time.
IN EUROPE sales and volumes of mayonnaise and other dressings increased 11%
and 22%, respectively. CPC continued its drive to establish dressings businesses
ahead of competitors in Central and Eastern European markets. Having built a
strong foundation in the Czech and Slovak Republics, CPC launched Hellmann's
mayonnaise in Hungary and Russia in 1994. In 1993 the Hellmann's brand was
introduced in Poland. In Israel, where CPC's Telma mayonnaise is already a
strong market leader, Hellmann's mayonnaise was launched in 1993.
5
In early 1995 CPC announced that it had agreed to acquire the Lesieur
dressings business, a market
6
CPC INTERNATIONAL 11 1994 ANNUAL REPORT
leader in France. And the Company will introduce Hellmann's mayonnaise in
Germany in 1995. CPC has had no dressings businesses in these two important
markets.
IN ASIA CPC markets mayonnaise and other dressings under the Best Foods and
Lady's Choice brands. Sales and volumes grew well. The Company has No. 1 or No.
2 market share positions in eight countries. In 1994 CPC formed a joint venture
in China with an established, state-owned company to produce and market
mayonnaise and other dressings, as well as bouillons, in North China.
SALES OF CORN OIL and other oils, mainly under the Mazola brand, increased 17%
on volumes that were 14% higher. Results include the addition of an oils
business in South Africa, a new market for CPC.
In North America, where Mazola is the No. 1 corn oil brand, sales were higher
and the brand maintained its premium price positioning. Volumes were unchanged.
The brand made gains among Hispanic consumers, and Mazola RightBlend oil, a
blend of corn and canola oils, performed well.
Mazola corn oil is also No. 1 in four Latin American markets. The Mazola brand
name was extended to sunflower oil in Argentina and, through a licensing
agreement, to margarine in Brazil. The brand is also No. 1 in seven countries of
Europe and Asia.
FOODSERVICE
The Company markets Knorr, Hellmann's and other products to restaurants,
cafeterias, fast food chains, and other eating establishments in virtually all
of the countries where it operates. Sales of products sold through CPC's
foodservice operations (known as Caterplan in most markets outside the U.S.) are
included in the appropriate product categories in this report. They totaled
approximately $1 billion in 1994, about 10% higher than in 1993, and included
foodservice sales of the newly-acquired Pfanni potato products business in
Europe.
CPC MARKETS SOUPS, SAUCES, BOUILLONS, AND MEALMAKERS IN 58 COUNTRIES ON FIVE
CONTINENTS. SOLD CHIEFLY UNDER THE KNORR BRAND, THESE PRODUCTS HOLD A NO. 1 OR
NO. 2 SHARE IN THREE-QUARTERS OF THEIR MARKETS.
Increased coordination among countries created new opportunities. In Europe
Ambrosia chocolate mousse from the U.K. was introduced in three markets and CPC
began rolling out a Knorr lasagna created for introduction across Europe. In
Asia Knorr oyster sauce and other liquid seasonings were extended across
borders.
SELECTED BUSINESSES
CPC excels in selected businesses around the world, some of which are a
priority for CPC in a specific region. For example, while the Company markets
starch in many countries, starches are a regional priority in Latin America.
STARCHES AND SYRUPS
Sales of starches and syrups, including acquisitions, totaled $484 million in
1994, up 10% on sharply higher volumes.
In Latin America, where Maizena corn starch is No. 1, CPC has broadened its
starch business by adding new products under the Vitamilho, Cremogema, Arrozina,
Polly, and other brand names. These packaged starches and flours made from corn
and other grains are used to prepare porridges and cereals, hearty cakes,
coladas, atoles, and other favorite foods eaten daily in many households.
Sales of these products in Latin America were approximately $170 million,
lower in 1994 due to a briefly difficult economic environment in Brazil, where
CPC has its largest starch business. New products include: Cremavena cereal, a
mix of oat flakes and corn starch marketed in Peru; and, in Uruguay, Maizena
polenta. In South Africa CPC's new operation markets Comet, Bluebird, and
other brands of white maize meal, a staple food constituting the base of local
diets.
CPC also sells corn starch in Asia, Europe, and North America, where
7
CPC INTERNATIONAL 12 1994 ANNUAL REPORT
it is chiefly used as a cooking aid. Leading brands are Argo, Mondamin, Brown &
Polson, and Kingsford.s. Syrups include Karo corn syrup in North America and
Latin America.
BREAD SPREADS
Peanut butter and other bread spreads are marketed by CPC in many countries
around the world. Sales totaled $343 million, 4% higher than in 1993. Volumes
increased 3%.
CPC's largest bread spread business is in North America, where Skippy peanut
butter sales and volumes increased and the brand gained market share. In 1994
CPC introduced a reduced fat Skippy product.
In Asia, where peanuts and peanut butter are part of local cuisines, CPC
markets Skippy, Best Foods, and Lady's Choice peanut butter, with No. 1
positions in six countries. In the Philippines CPC won the leading position by
adding a sweeter peanut butter variety and two lower-priced peanut spreads.
CPC's bread spreads group includes the following brands of jams: Fruco in
Colombia and Ecuador, Santa Rosa in Italy, Mateus in Portugal, 778 in Israel,
and Frank Cooper.s in the U.K. Marmite savory spread, a market leader in the
U.K., is also exported to Canada and Asia. In Brazil Cremutcho cheese-flavored
spread, a product similar to an expensive creamy cheese, continued to perform
well.
DESSERTS AND BAKING AIDS
Sales of desserts and baking aids were unchanged in 1994 at $274 million.
Volumes were 3% higher.
In Europe, where CPC markets ready-to-eat desserts, dessert mixes, and baking
aids, sales were approximately $250 million, even with 1993's level, while
volumes increased. New in 1994 were Alsa Express flans. Introduced in France to
the retail and foodservice markets, the mixes are prepared with cold milk,
making them easy and quick to use. New ready-to-eat products include Yabon cakes
in France and new varieties of Ambrosia rice puddings in the U.K.
HELLMANN'S MAYONNAISE AND OTHER CPC DRESSINGS BRANDS HOLD NO. 1 OR NO. 2 SHARE
POSITIONS IN 27 COUNTRIES AND HAVE BEEN EXTENDED INTO THE COMPANY'S NEWEST
MARKETS, INCLUDING CHINA, RUSSIA, AND VIETNAM.
In Latin America, where desserts and sweets are widely popular, CPC markets
dessert mixes under the Kremel, Maizena, and Maravilla brands. In 1994 CPC and
General Mills established a joint venture, International Dessert Partners, to
market certain products of each partner.
In Asia, where CPC markets a variety of dessert products, the company acquired
the Torto brand of dessert soups in Hong Kong.
PASTA
Pasta sales worldwide increased 7% to $147 million on volumes that rose
slightly. In the U.S. sales of Mueller's pasta grew well, and volume and market
share also increased. Mueller's pasta is marketed in 22 states east of the
Mississippi River. Three new varieties, including bow ties, were added in 1994.
In Europe pasta is marketed under the Napolina and Knorr brands. In Asia sales
and volumes of Royal and Best Foods pasta grew well.
SPECIALTY BAKING
Specialty baking includes some of the best-known baked goods brands in the U.S.
- -- Thomas' English muffins, Sahara pita breads, and Arnold, Brownberry, and
Bran'nola breads and rolls. The business had sales of $467 million, moderately
higher than in 1993, on a modest volume decline. Thomas' Sandwich Size English
muffins and Thomas' bagels were extended into new geographic markets in 1994.
Also CPC improved some of its best-selling sliced breads. Arnold Brick Oven
white bread was reformulated to make it softer and more flavorful, and slices
8
of Arnold Stoneground whole wheat bread were made 25% larger.
9
UNITED STATED
Global expertise in dressings and local marketing savvy helped transfer a
winning product from the U.S. to the U.K. Hellmann's Dijonnaise creamy mustard
blend was created in the U.S. to leverage the strong Hellmann's brand. Led by a
food scientist who had developed the original product in the U.S., a team at
CPC's Euro R&D center in Spain adjusted the recipe for the U.K. market. Not
everything about the products is similar. A favorite in the U.S. on hot dogs and
ham sandwiches, Dijonnaise is marketed by U.K. managers as a sauce for
hamburgers, chips, sausages, and baked potatoes.
UNITED KINGDOM
10
CPC INTERNATIONAL 14 1994 ANNUAL REPORT
CORN REFINING BUSINESS
In 1994 operating income from CPC's corn refining business advanced 14% to $207
million, before a restructuring charge. Sales rose 10.9% to $1.2 billion on
volumes that increased 4.8%, as all major affiliates recorded advances. The corn
refining business also improved operating efficiencies significantly and
developed important new business.
Sales of sweeteners, the largest product segment of CPC's corn refining
business, were $650 million, up 3% from 1993. Sweeteners include high fructose
and high maltose corn syrups, dextrose, and glucose. Sales of starches were $224
million in 1994; and sales of coproducts, which include protein feed ingredients
and corn oil, were $273 million. All other products generated sales of $75
million.
Capital projects completed in 1994 included an expansion of CPC's largest
North American plant, in Argo, Illinois, to increase the capacity and efficiency
of its corn oil extraction operation. A 100-million pound expansion of the
plant's dextrose facility and an overall production increase will be phased in
this year. New cogeneration power systems to reduce costs at three Canadian
plants were all up and running by year's end.
In Latin America production expansions are in progress at eight plants to meet
the needs of this growing market. The Cali, Colombia, plant is undergoing a
major renovation to improve competitiveness and meet the increasing needs of the
Andean Pact nations.
In Petaling Jaya, Malaysia, a new production channel was installed to supply
maltodextrins for that country and neighboring markets.
OPERATING UNIT RESULTS
The corn refining business has operations in 17 countries. Three major units
make up the business: Corn Products, the North American division; the Latin
America Corn Refining Division; and the Cooperative Management Group.
Rebounding from a difficult, flood-disrupted 1993, Corn Products registered an
operating income gain of 10.8%. Sales were 11% higher. Increased production and
strong margins from improved pricing contributed, as did continued improvements
in plant operations and a strong safety performance.
In 1994 Corn Products successfully commercialized three new value-added
products: a very fine grade of dextrose that bolstered the unit's already strong
position; a starch used in the corrugating industry; and a modified food starch
perfected in Brazil.
The North American division also increased its number of preferred and sole
supplier relationships during 1994. Included were a pharmaceutical company that
buys dextrose and a paper manufacturer that now purchases 100% of its starches
from CPC, relying totally on Corn Products. quality controls. In Canada a CPC
plant won a 100% rating from a large soft drink manufacturer -- the first time
this manufacturer had awarded a perfect score to a corn refiner.
In Latin America CPC is the foremost corn refiner, with 15 plants in six
countries. The division had an outstanding year. Sales rose 14%, volumes grew
13%, and operating income increased 40%.
11
NORTH AMERICA
Effective sharing of technology and expertise is one way CPC stays ahead of its
competition. When an opportunity was identified to sell high maltose corn syrup
to beer makers in Brazil, the local affiliate called upon the resources of Corn
Products, the North American division, whose Canadian unit had sold high maltose
syrup to brewers for years. That experience was combined with Brazilian know-how
as well as expertise developed at the Company's U.S. technical center. Brazilian
technical personnel and CPC "circuit riders" demonstrated to Brazilian brewers
that the use of the syrup increases productivity significantly without capital
investment. The result: long-term contracts with the country.s two largest
brewers.
LATIN AMERICA
12
CPC INTERNATIONAL 16 1994 ANNUAL REPORT
In Mexico CPC and the Arancia group combined their existing businesses. The new
company, Arancia CPC, has a leading position in this important, fast-growing
market and serves as a platform from which to rapidly enter the potentially
large market for high fructose corn syrup, an ingredient used in manufacturing
soft drinks.
The Cooperative Management Group manages ventures in 15 countries, including
12 countries in Africa and Asia. Cooperative arrangements vary. They include
majority equity ownership, combinations of partial equity ownership and
technology/management assistance agreements, and technology licensing. In 1994 a
new technical licensing agreement was established in India and a distributorship
was begun in Jordan; a capacity expansion was completed in Pakistan; and a
technology licensing joint venture for sub-Saharan Africa was set up with
AFPROD, a division of one of the continent.s largest companies. In Kenya a
capacity expansion was begun.
STRATEGIC ACTION
The corn refining business has five overall strategies: (1) to continuously
deliver quality products and services that are valued by customers; (2) to
continuously drive for delivered cost leadership in core commodity businesses;
(3) to leverage and grow leading market positions and strategic relationships;
(4) to improve and expand positions in higher value-added and differentiated
corn refining products; and (5) to continuously improve individual and team
effectiveness.
In line with these strategies, customer surveys on quality, service, and
pricing were instituted businesswide. All plants are now competitive on a
delivered cost basis and are driving for sustained cost leadership.
CPC IS THE MARKET LEADER IN DEXTROSE IN NORTH AMERICA. A KEY VALUE-ADDED
PRODUCT, DEXTROSE IS AN INGREDIENT IN CANDY, BAKED GOODS, CHEMICALS,
PHARMACEUTICALS, AND INTRAVENOUS AND DIALYSIS SOLUTIONS.
The passage of the North American Free Trade Agreement (NAFTA), progress of
the General Agreement on Tariffs and Trade (GATT), and rising regional trade
pact activity are creating opportunities. As countries reduce or eliminate trade
barriers, cross-border business is increasing. CPC is the only corn refiner with
plants in the U.S., Canada, and Mexico, and the new Arancia venture provides a
platform for additional NAFTA related activities. In Latin America CPC is
increasing exports from its major operations in Argentina, Brazil, and Colombia.
SHARING EXPERTISE
The corn refining business continued to build on its record of successful
sharing of skills and technology, facilitated by a group of process engineers
and customer application professionals known as the "circuit riders." The group
applies CPC's best processes and systems to appropriate operations within the
organization.
For example waxy modified food starch technology from Japan was shared with
Brazil and the finished product was exported from Brazil to Japan and the U.S.
Also, corrugating starches were produced in Latin America with help from the
U.S., and maltodextrins were produced in Malaysia, drawing on worldwide
resources. Production of high maltose corn syrup was added in Colombia, with the
help of Brazilian colleagues. CPC's business in Brazil began producing the syrup
in 1994 on a large scale, with important input from North America.
CPC's corn refining expertise also benefits CPC's consumer foods business. The
division provides essential ingredients for Mazola corn oil, Karo syrup, and
Argo and Maizena corn starches. Corn refining food ingredient technology
contributed to the development of Reduced Fat Skippy peanut butter spread; and
personnel from both the U.S. and Brazil were instrumental in the design of the
Argo, Illinois, plant expansion to produce a higher quality corn oil.
13
CPC INTERNATIONAL 18 1994 ANNUAL REPORT
GEOGRAPHIC OVERVIEW
CONSUMER FOODS
NORTH AMERICA
Sales: $2.1 billion
Operations in U.S., Canada, Caribbean.
Major Brands:
Hellmann's, Best Foods, Skippy, Mueller's, Mazola, Knorr, Thomas', Arnold, Karo
Manufacturing Plants: 27
Strategic Priorities:
Grow core businesses
Launch new products
Expand foodservice business
Reduce costs to increase value to consumers
CONSUMER FOODS
EUROPE
Sales: $2.9 billion
Operations in 28 countries of Europe, Africa, and the Middle East.
Major Brands:
Knorr, Hellmann's, Ambrosia, Maizena, Pfanni, Alsa, Yabon, Marmite, Mazola,
Telma, Santa Rosa, Caterplan
Manufacturing Plants: 52
Strategic Priorities:
Grow core businesses; emphasis on dressings
Expand in Central/Eastern Europe
Restructure for cost effectiveness in unifying markets
Launch new products and extend across borders
CONSUMER FOODS
LATIN AMERICA
Sales: $921 million
Operations in 15 countries.
Major Brands: Knorr, Hellmann's, Mazola, Karo, Maizena, Vitamilho, Fruco,
Lizano, JB, Polly, Caterplan
Manufacturing Plants: 20
Strategic Priorities:
Grow core businesses
Extend starch/cereals business
Increase focus on foodservice businesses
Improve cost effectiveness for open market competition
CORN REFINING
14
BUSINESS
Total sales: $1.2 billion
Operations in 17 countries.
Nature of Business: Producer of corn sweeteners, starches, oil, and other
products sold to a variety of industries and used as ingredients in some CPC
consumer foods products.
Manufacturing Plants: 25
Strategic Priorities:
Build and expand leading market positions
Increase and improve higher value-added products
Grow technical licensing business
Extend cost leadership
CONSUMER FOODS
ASIA
Sales: $264 million
Operations in 12 countries, including 7 joint ventures. Licensing agreement in
Japan; representative office in Vietnam.
Major Brands:
Knorr, Best Foods, Lady's Choice, Skippy, Caterplan
Manufacturing Plants: 16
Strategic Priorities:
Grow core businesses
Extend in emerging markets, especially China.
Increase focus on foodservice businesses
15
CPC INTERNATIONAL 19 1994 ANNUAL REPORT
1 Leader in Market Share
2 Second in Market Share
@ Present in the Market
+ Technical or Licensing Agreement
<TABLE>
<CAPTION>
POTATO POURABLE CORN FOODSERVICE/
SAUCES* SOUPS* BOUILLONS MEALMAKERS* PRODUCTS MAYONNAISE DRESSINGS OIL CATERING**
- -----------------------------------------------------------------------------------------------------------------------------------
WORLDWIDE BUSINESSES
- -----------------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA, CARIBBEAN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Canada 2 1 1 @ @ 1 1 @
United States @ @ 2 @ @ 1 @ 1 @
Dominican Republic @ @ 2 @ @
EUROPE, AFRICA/MIDDLE EAST
Austria 1 2 1 1 1 1 @
Belgium 2 1 1 1 @
Czech Republic 2 @ @ @ @ 1 @
Denmark 1 1 1 1 2 2 @
Finland 2 1 1 2 @
France 1 2 2 @ @ @
Germany 1 2 2 2 1 1 @
Hungary 1 2 2 @ @ 2 @
Ireland 1 1 2 1 1 1 @ @ @
Italy 1 @ 2 @ 1 @ @
Netherlands 2 1 2 2 2 @ @
Norway 2 2 @ 2 @
Poland 1 2 2 @ 1 @ @
Portugal 1 @ 1 2 1 @ @
Russia 1 1 1 2 @ @
Slovak Republic @ @ @ @ 1 @
Spain 2 @ @ @ @ @ @
Sweden 2 2 1 1 @ 1 @
Switzerland 1 1 1 1 1 2 @ @
United Kingdom 2 1 2 @ 1 @ @
- -----------------------------------------------------------------------------------------------------------------------------------
Israel 1 2 1 @ @ @
Kenya 1 1 @ @
Morocco 1 1 @ @
Saudi Arabia 2 2 2 @ @
South Africa @ @ @ @
Tunisia 1 1 @
Turkey 1 2 @
LATIN AMERICA
Argentina 1 1 1 2 1 1 1 @
Bolivia @
Brazil 2 2 1 2 1 2 @
Chile @ @ @ @ 1 @ @
Colombia 2 2 2 2 1 1 @
Costa Rica @ 1 2 @ 1 @
Ecuador @ @ @ @ @ @
Guatemala @ 1 @ @ @ @ @
Honduras @ @ @ @ @ @ @
Mexico 1 1 1 1 2 1 @
Panama @ @ @
Paraguay 1 1 1 1 1 1 @
Peru 2 2 2 2 2 @
Uruguay 1 1 1 1 1 1 1 @
</TABLE>
16
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Venezuela 2 2 2 2 @ @
ASIA
China 1 @ @
Hong Kong 1 1 2 2 @ @
India @
Indonesia @ @ @
Japan + 1 1 1 2 2 2 1 @
Malaysia 1 @ 2 1 1 1 @
Pakistan 1 1 @ 1 @
Philippines 1 1 1 1 @ @
Singapore 1 1 1 @ @ @
South Korea 2 2 2 2 @
Sri Lanka 2 @
Taiwan 1 1 2 @ @
Thailand 1 @ 1 @ 1 1 @
Vietnam (Representative Office) @ 1 @
<FN>
* Dehydrated products only.
** CPC foodservice products hold leading share positions in many of the categories in which they compete.
</TABLE>
17
CPC INTERNATIONAL 19 1994 ANNUAL REPORT (Continued)
<TABLE>
<CAPTION>
PEANUT DESSERTS SPECIALTY CORN
BUTTER STARCHES PASTA (AMBIENT) BAKING REFINING
- -----------------------------------------------------------------------------------------------------
SELECTED BUSINESSES
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NORTH AMERICA, CARIBBEAN
Canada 2 1 1
United States 2 1 @ @ @ @
Dominican Republic @
EUROPE, AFRICA/MIDDLE EAST
Austria 1
Belgium 1
Czech Republic
Denmark 1
Finland 2
France 1 1
Germany 1 @
Greece 2 2
Hungary 2
Ireland 2 @ @
Italy 1
Netherlands 1
Norway 1
Poland @ @
Portugal 1 2
Russia
Slovak Republic
Spain 1 2
Sweden @ 1
Switzerland 1
United Kingdom 1 @ 1
- -----------------------------------------------------------------------------------------------------
Israel @ @ 2
Kenya 1 1
Morocco 1 1
Saudi Arabia @ 2
South Africa @ 2 +
Tunisia 1 @
Turkey @
LATIN AMERICA
Argentina 1 @ 1
Bolivia 1
Brazil 1 @ 1
Chile 1 @ 1
Colombia 1 @ 1
Costa Rica @
Ecuador @
Guatemala 2
Honduras @
Mexico 2 1 @ 1
Panama 1
Paraguay 1
Peru 1
Uruguay 1 @ 1
Venezuela +
ASIA
China @ @
</TABLE>
18
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Hong Kong 1 1 1
India 1 1 +
Indonesia @
Japan + +
Malaysia 1 @ 1 1
Pakistan 1 2 1 1
Philippines 1 @ 1 1
Singapore 1 1 @ 1
South Korea 2 +
Sri Lanka
Taiwan 1
Thailand 1 1 1 1 +
Vietnam (Representative Office)
</TABLE>
19
CPC INTERNATIONAL 20 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
BUSINESS EXTENSION 1992-1994
ACQUISITIONS, NEW BUSINESSES, JOINT VENTURES
COUNTRY BRAND/BUSINESS NAME KEY PRODUCTS
<S> <C> <C>
NORTH AMERICA
United States LeGo.t brand soups, bouillons, gravies, entrees, desserts
United States Henri.s and Western brands pourable dressings
United States Iberia brand soups, bouillons, canned vegetables, oils
EUROPE, AFRICA/MIDDLE EAST
Czech Republic CPC Foods a.s. soups, bouillons, dressings
Germany Pfanni brand convenience potato products
Hungary CPC Hungary Rt. soups, bouillons, desserts, dressings
Poland CPC Polska SP.zo.o soups, sauces, bouillons, desserts
Russia CPC Foods Company Ltd. soups, sauces, bouillons, dressings
Israel TAMI soups, bouillons, dressings, desserts, cereals
South Africa CPC Tongaat Foods soups, sauces, oils, desserts, starches
Turkey Bozkurt brand bread spreads, desserts
LATIN AMERICA
Regional International Dessert Partners baking and dessert mixes
Argentina AdeS brand soya products
Brazil Vitamilho brand pre-cooked corn flour to make dietary staple
Chile Juan Bas brand sauces, mustards, mayonnaise
Costa Rica Don Luis & Maravilla brands soups, bouillons, sauces, dressings, desserts
Mexico Arancia CPC J.V. to produce corn refining products
Venezuela Ne-nerina, Polly brands processed cereal
ASIA
China CPC (Guangzhou) Foods Ltd. bouillons
China CPC (Beijing) Foods Ltd. bouillons, dressings
Indonesia P.T. Knorr Indonesia soups, bouillons, corn oil
Sri Lanka Kist brand sauces, jams
Vietnam Representative Office bouillons, soups, dressings, bread spreads (imported)
</TABLE>
20
CPC INTERNATIONAL 21 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
BUSINESS EXTENSION 1992-1994 (Continued)
ACQUISITIONS, NEW BUSINESSES, JOINT VENTURES
COUNTRY STRATEGIC CONTRIBUTION
<S> <C>
NORTH AMERICA
United States Doubles CPC's foodservice business in U.S.; adds frozen food products.
United States Adds to dressings capabilities; strong foothold in Midwestern markets.
United States Builds Hispanic foods lines; provides vehicle for introducing other CPC Hispanic products.
EUROPE, AFRICA/MIDDLE EAST
Czech Republic New business in newly-opened market; dressings leader; exporting Hellmann's mayonnaise to new businesses
in Central and Eastern Europe.
Germany Leading, extendable brand, compatible with the Knorr brand; also contributes to foodservice business.
Hungary New business in newly-opened market; soups and bouillons leader.
Poland New business in newly-opened market; also currently providing soups, bouillons, and desserts for new
business in Russia.
Russia New business in newly-opened market; first major international company to introduce soups, bouillons, and
dressings.
Israel Leading brands and market positions in new market for CPC.
South Africa J.V. reestablishes CPC in South Africa; platform for extension into sub-Saharan Africa.
Turkey No. 2 brand for jams and helva desserts; a sales organization to support CPC's soups, bouillons, and
desserts.
LATIN AMERICA
Regional J.V. combines CPC's organization and infrastructure with General Mills. expertise in dessert mixes.
Argentina Unique, fast-growing nutritional beverages, with potential for geographic expansion.
Brazil Leader in huge Northeast Brazil market; extends CPC's participation in starch/basic nutritious foods
business.
Chile Strong market leader in chili sauces.
Costa Rica Adds to CPC's No. 1 mayonnaise and sauce business; provides entry into bouillon and desserts categories.
Mexico J.V. combines CPC's corn refining business with Arancia business to strengthen CPC's position in Mexico
and in the NAFTA market.
Venezuela Market-leading products; well-established distribution network utilized to strengthen CPC's existing
Venezuelan business.
ASIA
China New business in newly-opened South China market; first major international company to manufacture
bouillons.
China New business in newly-opened North China market; first major international company in dressings business.
Indonesia New business in fast-growing market of 185 million people.
Sri Lanka New business in fast-growing market; distribution for launch of CPC soups and bouillons.
Vietnam Coordinating distribution by local companies to establish new business in newly-opened market.
</TABLE>
21
CPC INTERNATIONAL 22 1994 ANNUAL REPORT
MANAGEMENT.S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CPC INTERNATIONAL INC. AND SUBSIDIARIES
OVERVIEW OF 1994 AND OUTLOOK FOR 1995
CPC International.s primary objective continues to be to improve shareholder
value through focused development of its two businesses, consumer foods and corn
refining. The Company's strategy for its consumer foods business is to pursue
growth worldwide in its core businesses: soups, sauces, bouillons, and related
products; dressings; and foodservice. For the corn refining business, CPC's
strategy is to maximize its return through a combination of improving
profitability, investing selectively for growth, and leveraging this business'
strength through strategic relationships.
In line with these strategies, during 1994 the Company continued to build
volume growth in all its existing businesses; introduced many new products
throughout the world in both the consumer foods and corn refining businesses;
established two strategic alliances in Latin America; acquired businesses in the
U.S., Europe, and Asia; expanded and built production facilities; and undertook
a major restructuring program.
These actions resulted in a solid earnings gain, excluding the restructuring
charge of $227 million, even though the following conditions held back growth:
in North America, high commodity costs together with consumer concerns over fat
consumption reduced demand in several important product categories; economic
difficulties in Brazil reduced food purchases by consumers for several months;
and European currency values in 1994, compared to the prior year, were
unfavorable for most of the year.
In 1995 the conditions relating to consumption, cost, currency values,
competition, and political and social environments in the economies and
industries in which CPC operates are, overall, not expected to change
significantly. It is expected that in 1995 economies in most areas of the
world will continue to progress at current, generally modest, rates of growth.
More specifically:
* In the U.S. it is expected that economic growth will remain at a level similar
to 1994. It is likely that this will benefit the Company, as will Best Foods'
increased offerings of reduced and low fat products and other new products.
* In Europe the economic recovery in progress is expected to continue steadily
in northern countries but remain weak in the south. Currency values on average
in 1995 are likely to be close to 1994 levels. Competition will continue
strong as the European Union.s food manufacturers and retail trade continue to
seek efficiencies. These factors will continue to have a moderating effect on
the division.s volumes and margins, and therefore its sales and profit growth.
CPC's leading brands, wide geographic presence, and its new products and
businesses are expected to provide the needed strength to counteract these
forces.
* In Latin America the currency devaluations in Mexico, beginning in December
1994, and the resulting capital flight and economic disruption will
significantly reduce new capital inflows into the area and therefore moderate
the rate of business growth. A widening of the Mexican crisis to other Latin
American countries cannot be ruled out. However, it is more likely that Mexico
will regain economic stability in 1995 and thereby restore a level of
confidence in that country and the rest of Latin America. Apart from that,
Latin America.s freer markets and open borders of recent years have led to
higher regional business activity that should continue to benefit income and
consumption levels. CPC, with its strong market positions throughout the area,
is expected to make good progress in 1995, even with economic conditions
somewhat less favorable than in 1994.
* In Asia economic growth in 1995 is expected to remain good. Because the
Company's products have relatively low market penetration in most countries in
that area, CPC continues to see important opportunities for strong growth in
its businesses there.
22
* The worldwide restructuring program initiated in 1994 will continue to be
implemented during 1995 and 1996. The resulting cost benefits from greater
efficiencies are expected to enhance CPC's competitive position, particularly
in Europe and North America.
The last three years. financial results are discussed below. A general
description of operations appears on pages 2 through 21 of this report.
23
CPC INTERNATIONAL 23 1994 ANNUAL REPORT
RESULTS OF OPERATIONS: 1994 COMPARED TO 1993
NET SALES in 1994 advanced 10.2% over last year to $7.4 billion, with consumer
foods accounting for 83% of the increase. Of the overall sales gain, 9.1% came
from higher volume, including acquisitions, and 3.3% came from better prices.
Weaker currency values reduced the gain by 2.2%. Acquisitions increased sales by
approximately $440 million or 6.5%. Consumer foods sales rose 10.1% in 1994 to
$6.2 billion on solid volume gains. The effect of better prices was largely
offset by lower currency values. Sales in Europe and North America advanced
11.8% and 8.8%, respectively, as both benefited from acquisitions. Latin
American sales rose 6.2%, restrained by economic uncertainties in Brazil during
the latter part of the year. Asian sales advanced 15% on solid volume gains.
Corn refining sales increased 10.9% on better prices and higher volumes, despite
weaker currency values. Sales in North America were up 11% compared to a weak
prior year, on corn-cost-driven price increases and volume gains. Latin American
sales advanced more than 10% on strong volume gains.
COST OF SALES AND OPERATING EXPENSES. Cost of sales as a percentage of net
sales was approximately 61% in 1994 resulting in a gross profit ratio of 39%,
slightly lower than 1993. Higher raw material costs and the impact of
acquisitions more than offset gains achieved from better pricing and efficiency
improvements made in existing businesses. Marketing expenses as a percentage of
net sales increased slightly from last year. The ratio of selling,
administrative, and general expenses to sales was virtually the same as in 1993.
RESTRUCTURING CHARGE. In June 1994 the Company recorded a charge of $227
million, $137 million after taxes or $.92 per common share, to recognize the
cost of a worldwide restructuring program. This program compresses into a period
from mid-1994 to mid-1996 restructuring activities needed to ensure
competitiveness through the rest of the decade. The majority of this charge
relates to the Company.s European ($120 million) and North American ($73
million) consumer foods businesses. The charge is designed to cover the costs
associated with a combination of manufacturing-related changes and a reduction
in sales, distribution, and administrative personnel.
OPERATING INCOME in 1994 increased 6.3% to $939 million, excluding a special
charge for restructuring of $227 million, as both business segments reported
gains derived primarily from higher volumes. Consumer foods operating income,
excluding its portion of the restructuring charge, was 5% higher than the prior
year on good volume gains in all geographic areas. Weaker exchange rates and
lower margins moderated some of this gain. Operating income from consumer foods
in Europe advanced 13%, North America 1.4%, and Asia 14%. In Latin America,
after strong gains early in the year, operating income was down 4.7% for the
full year as a result of events in Brazil, where consumers held back purchasing
in response to economic uncertainties surrounding a new economic plan. Corn
refining operating income advanced 14% to $207 million, excluding its portion of
the restructuring charge. The gain was achieved on a combination of higher
volumes and improved margins. In North America corn refining results were 10.8%
higher primarily on margins that recovered from the depressed 1993 levels caused
by flooding in the Midwest and poor corn quality. In Latin America earnings rose
40% on strong volume gains.
FINANCING COSTS of $97 million in 1994 were $4 million higher than 1993,
resulting from higher exchange losses and increased net interest expense.
PROVISION FOR INCOME TAXES. The effective tax rate was 39.5% versus 40% for
the prior year. This was higher than the U.S. statutory rate of 35% because it
includes foreign income generally taxed at effective rates higher than the U.S.
statutory rate and state income taxes.
NET INCOME AND EARNINGS PER COMMON SHARE of $345 million and $2.25,
respectively, included the after-tax charge for restructuring of $137 million or
$.92 per common share. Excluding this charge, net income was $482 million and
earnings per common share was $3.17. These compare with $454 million and $2.95
per common share in 1993 and represent increases of 6.2% and 7.5%, respectively.
The
24
increase resulted from higher operating income. The fewer number of shares
outstanding in 1994 also contributed to the gain in earnings per common share.
25
CPC INTERNATIONAL 24 1994 ANNUAL REPORT
* Excludes restructuring charge of $227 million
RESULTS OF OPERATIONS: 1993 COMPARED TO 1992
NET SALES increased 2.1% over the previous year to $6.7 billion, with consumer
foods accounting for virtually all of the increase. Of the overall sales gain,
higher volumes, including acquisitions, accounted for a 5.7% gain, which was
largely offset by weaker currency values. Acquisitions increased sales by
approximately $173 million or 2.6%. Consumer foods sales rose 2.4% to $5.6
billion, with good volume gains and better prices mostly offset by lower
currency values. Sales in Europe declined 1% due to lower exchange values, while
in North America sales were even with the prior year. Latin American sales of
consumer foods rose 21% on higher volumes related to improving economic
conditions in several countries. Asian sales advanced 15% on strong volume
gains. Corn refining sales remained at $1.1 billion, as volume gains of 3.5%
were counterbalanced by the effects of reduced prices and lower exchange values.
Sales in North America were 4.1% below the prior year, reflecting lower prices
related to lower raw material costs and a weaker Canadian exchange rate. Latin
American sales advanced 11% on much improved volumes.
COST OF SALES AND OPERATING EXPENSES. Cost of sales as a percentage of net
sales was approximately 60% in 1993 resulting in a gross profit ratio of 40%,
slightly higher than the prior year. Efficiency gains and lower raw material
costs counteracted very competitive pricing conditions. Marketing expenses in
1993 declined by $21 million as a result of lower exchange values and were
9.5% of sales, down slightly from 1992. The ratio of selling, administrative,
and general expenses to sales increased slightly compared to 1992.
OPERATING INCOME increased 4% to $883 million, with both business segments
reporting gains generated from higher volumes. Consumer foods operating income
was 3.8% higher than the prior year. Good volume gains in all geographic areas
accounted for most of the increase. Weaker exchange values and lower margins
negated most of the benefit of the volume gains. Operating income in North
America advanced 5.4%, Latin America 30%, and Asia 13%. In Europe operating
income was down 8.4% on overall reduced currency values and weak economic
conditions in several countries. Corn refining operating income advanced 1.2%
to $182 million. In North America operating income was 5.6% lower as a result of
higher costs related to flooding in the Midwest and poor quality corn. In Latin
America corn refining results were 14% ahead of 1992 on strong volume gains.
FINANCING COSTS of $93 million were 11.1% lower than in 1992. Weaker European
currencies and favorable cash flows reduced borrowing levels for most of the
year and combined with lower interest rates to reduce interest expense for the
year by $9 million.
PROVISION FOR INCOME TAXES. The effective tax rate remained at 40%. This was
higher than the U.S. statutory rate of 35% in 1993 because it included foreign
income generally taxed at effective rates higher than the U.S. statutory rate
and state income taxes.
CHANGES IN ACCOUNTING PRINCIPLES. Effective January 1, 1992, the Company
adopted Financial Accounting Standard (FAS) 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," FAS 112, "Employers' Accounting
for Postemployment Benefits," and FAS 109, "Accounting for Income Taxes." These
changes resulted in a total non-cash charge in 1992 of $304 million, $160
million after taxes or $1.06 per common share.
DISCONTINUED OPERATIONS. In 1992 the Company also recorded a charge of $78
mi-
26
llion, $47 million after taxes or $.31 per common share, for anticipated
environmental costs relating to chemical operations divested by the Company from
the early 1970s to the mid-1980s. This charge increased the Company's
27
CPC INTERNATIONAL 25 1994 ANNUAL REPORT
existing environmental reserve.
NET INCOME AND EARNINGS PER COMMON SHARE were $454 million and $2.95,
respectively, compared with $224 million and $1.41, respectively, in 1992. The
1992 results included special charges discussed above. Excluding these items,
1993 income from continuing operations and earnings per common share from
continuing operations increased 5.6% and 6.1%, respectively. This improvement
resulted from a combination of higher operating income and lower financing
costs.
KEY BALANCE SHEET ITEMS
Total assets in 1994 increased $607 million to $5,668 million from year-end
1993. The majority of this increase resulted from acquisitions. Capital
expenditures in 1994 plus stronger European exchange rates at year-end
contributed the balance of the overall increase. At December 31, 1994, total
debt increased $271 million to $1,543 million, largely to finance acquisitions
and the Company's share repurchase program.
At year-end 1993 total assets decreased $110 million from a year earlier, due
largely to the effects of weaker European currency values, which reduced
translated asset values by some $352 million. Acquisitions and capital
expenditures offset part of this decline. Total debt decreased $178 million to
$1,272 million at year-end 1993. This decrease related to good cash flow and
decreased dollar value of European currency denominated debt.
FINANCIAL INSTRUMENTS
The Company uses various financial instruments, primarily foreign exchange
contracts, interest rate swap agreements, and commodity futures contracts, to
reduce known risks within the business environments in which it operates. As a
matter of policy the Company does not use such instruments on a leveraged basis.
A more detailed discussion of such instruments is included in the notes to the
consolidated financial statements.
NET CASH FLOWS
Good cash flow continued to finance CPC's working capital and capital
expenditure needs and enabled the Company to continue to increase dividends with
earnings growth. Funds generated in excess were used for acquisitions and share
repurchases. Net cash flows from operations in 1994 of $736 million were 4.5%
below 1993, which was 1.3% higher than 1992. The 4.5% decline in 1994 reflects
mostly an increase in working capital. These internally-generated funds continue
to be the Company's primary source of liquidity.
Investing activities in 1994 of $577 million were higher than in 1993, because
of acquisitions and an increase in capital expenditures. In 1993 investment
activities were lower than 1992 largely due to a reduction in the number of
acquisitions. Capital expenditures in 1994 of $401 million increased $38
million. Sixty-six percent of the capital expenditures were for new facilities
and plant upgrades for the consumer foods business. The Company expects to
invest in capital projects at a similar level in 1995 and continue its share
buyback program, employing internally-generated funds augmented by borrowings as
necessary. The quarterly dividend rate increased 6.3% in March 1994 and 5.9% in
December 1994.
The Company has access to various sources of funds at attractive rates based
on its strong financial condition. CPC's long-term debt rating remained at A+
with Standard & Poor.s and Duff & Phelps, and A2 with Moody.s.
28
CPC INTERNATIONAL 26 1994 ANNUAL REPORT
REPORT OF MANAGEMENT
The management of CPC International Inc. is responsible for the financial and
operating information contained in the Annual Report including the financial
statements covered by the independent auditors. report. These statements were
prepared in conformity with United States generally accepted accounting
principles and include, where necessary, informed estimates and judgements.
The Company maintains systems of accounting and internal control designed to
provide reasonable assurance that assets are safeguarded against loss, and that
transactions are executed and recorded properly so as to ensure that the
financial records are reliable for preparing financial statements.
Elements of these control systems are the establishment and communication of
accounting and administrative policies and procedures, the selection and
training of qualified personnel, and the continuous programs of internal audits.
The Company's financial statements are reviewed by its Audit Committee, which
is composed entirely of outside Directors. This Committee meets periodically
with the independent auditors, management, and the corporate general auditor to
review the scope and results of the annual audit, interim reviews, internal
controls, internal auditing, and financial reporting matters. The independent
auditors and the corporate general auditor have direct access to the Audit
Committee.
Konrad Schlatter
Senior Vice President and Chief Financial Officer
February 6, 1995
INDEPENDENT AUDITORS' REPORT
KPMG PEAT MARWICK LLP
The Board of Directors and Stockholders
CPC International Inc.:
We have audited the accompanying consolidated balance sheets of CPC
International Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CPC
International Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in the Notes to Consolidated Financial Statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statements
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," No. 109, "Accounting for Income
Taxes," and No. 112, "Employers' Accounting for Postemployment Benefits" in
1992.
29
KPMG Peat Marwick LLP
New York, New York
February 6, 1995
30
CPC INTERNATIONAL 27 1994 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF INCOME
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the years ended December 31
$ Millions except per share amounts 1994 1993 1992
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 7,425 $ 6,738 $ 6,599
- ------------------------------------------------------------------------------------
Cost of sales 4,496 4,043 3,993
Marketing 712 643 664
Selling, administrative and general expense 1,289 1,182 1,104
Restructuring charge 227 -- --
Income from affiliates and equity in net income
of unconsolidated subsidiaries (11) (13) (11)
- ------------------------------------------------------------------------------------
Cost, expenses, and other income -- net 6,713 5,855 5,750
- ------------------------------------------------------------------------------------
OPERATING INCOME 712 883 849
- ------------------------------------------------------------------------------------
FINANCING COSTS
Exchange losses 5 3 5
Interest expense -- net 92 90 99
- ------------------------------------------------------------------------------------
TOTAL FINANCING COSTS 97 93 104
- ------------------------------------------------------------------------------------
Income from continuing operations before
income taxes and minority interest 615 790 745
Provision for income taxes 243 316 298
Minority stockholders' interest 27 20 16
- ------------------------------------------------------------------------------------
Income from continuing operations before
the cumulative effect of changes in
accounting principles 345 454 431
- ------------------------------------------------------------------------------------
Cumulative effect to January 1, 1992, of changes
in accounting principles, net of taxes -- -- (160)
Environmental charges for discontinued operations,
net of taxes -- -- (47)
- ------------------------------------------------------------------------------------
NET INCOME $ 345 $ 454 $ 224
- ------------------------------------------------------------------------------------
Earnings per common share from
continuing operations before cumulative
effect of changes in accounting principles $ 2.25 $ 2.95 $ 2.78
Cumulative effect to January 1, 1992, of changes
in accounting principles -- -- (1.06)
Environmental charges for discontinued operations -- -- (.31)
- ------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE $ 2.25 $ 2.95 $ 1.41
- ------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
31
CPC INTERNATIONAL 28 1994 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31
$ Millions 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 125 $ 166
Accounts receivable -- net 1,093 900
Inventories 907 830
Prepaid expenses 90 76
- -----------------------------------------------------------------------------
Total current assets 2,215 1,972
- -----------------------------------------------------------------------------
INVESTMENTS IN UNCONSOLIDATED AFFILIATES 65 70
- -----------------------------------------------------------------------------
PLANTS AND PROPERTIES
Land 98 91
Buildings 844 737
Machinery and equipment 3,603 3,253
- -----------------------------------------------------------------------------
4,545 4,081
Less accumulated depreciation 2,264 1,960
- -----------------------------------------------------------------------------
Total plants and properties 2,281 2,121
- -----------------------------------------------------------------------------
INTANGIBLES
Excess cost over net assets of businesses acquired 755 598
Other intangibles 371 309
- -----------------------------------------------------------------------------
1,126 907
Less accumulated amortization 172 132
- -----------------------------------------------------------------------------
Total intangibles 954 775
- -----------------------------------------------------------------------------
DEFERRED TAXES ON INCOME 15 --
- -----------------------------------------------------------------------------
OTHER ASSETS 138 123
- -----------------------------------------------------------------------------
TOTAL ASSETS $ 5,668 $ 5,061
- -----------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
32
CPC INTERNATIONAL 29 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
$ Millions 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
Current liabilities
Notes payable $ 598 $ 311
Current portion of long-term debt 66 63
Accounts payable 443 354
Accrued liabilities 847 711
Income taxes payable 134 144
- -------------------------------------------------------------------------------------
Total current liabilities 2,088 1,583
- -------------------------------------------------------------------------------------
NONCURRENT LIABILITIES 810 674
- -------------------------------------------------------------------------------------
LONG-TERM DEBT 879 898
- -------------------------------------------------------------------------------------
DEFERRED TAXES ON INCOME -- 42
- -------------------------------------------------------------------------------------
MINORITY STOCKHOLDERS' INTEREST 142 95
- -------------------------------------------------------------------------------------
EQUITY
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 25,000,000 shares
$1 par value -- --
Designations
Series A ESOP Convertible
3,000,000 shares designated 194 196
Series A Junior Participating
600,000 shares designated -- none issued -- --
Common stock -- authorized 900,000,000 shares
$.25 par value -- issued 195,271,444 shares 49 49
Capital in excess of par value stock 155 151
Unearned ESOP compensation (141) (155)
Cumulative translation adjustment (181) (173)
Treasury stock, at cost (1,231) (1,073)
Retained earnings 2,904 2,774
- -------------------------------------------------------------------------------------
Total stockholders' equity 1,749 1,769
- -------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,668 $ 5,061
- -------------------------------------------------------------------------------------
</TABLE>
33
CPC INTERNATIONAL 30 1994 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the years ended December 31
$ Millions 1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income $ 345 $ 454 $ 224
Non-cash charges (credits) to net income
Depreciation and amortization 288 266 262
Restructuring charge 227 -- --
Changes in accounting principles, net of taxes -- -- 160
Discontinued operations, net of taxes -- -- 47
Deferred taxes (54) (23) (18)
Translation losses 3 7 1
Other -- net 25 32 51
Changes in trade working capital
Accounts receivable (117) (24) (97)
Inventories (18) (26) (48)
Accounts payable and accrued liabilities 37 85 179
Net cash flows from operating activities 736 771 761
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES
Capital expenditures paid (401) (363) (297)
Proceeds from disposal of plants and properties 9 23 8
Proceeds from businesses sold -- -- 9
Purchase of minority interests in affiliates -- (16) --
Businesses acquired (185) (73) (230)
- ----------------------------------------------------------------------------------
Net cash flows used for investing activities (577) (429) (510)
- ----------------------------------------------------------------------------------
Net cash flows after investments 159 342 251
- ----------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES
Purchase of treasury stock (165) (48) (47)
New long-term debt 82 178 53
Repayment of long-term debt (89) (262) (101)
Net change in short-term debt 182 (9) (22)
Dividends paid on common stock (199) (190) (178)
Dividends paid on preferred stock (16) (16) (16)
Common stock issued 7 5 9
Other liabilities (deposits) (4) 13 (14)
- ----------------------------------------------------------------------------------
Net cash flows used for financing activities (202) (329) (316)
- ----------------------------------------------------------------------------------
Effects of exchange rate changes on cash 2 (5) 7
- ----------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (41) 8 (58)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 166 158 216
- ----------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 125 $ 166 $ 158
- ----------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
34
CPC INTERNATIONAL 31 1994 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
Capital in Unused Cumulative
Preferred Common excess of ESOP translation Treasury Retained
$ Millions stock stock par value compensation adjustment stock earnings
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $199 $ 25 $168 $(180) $ (80) $ (992) $2,491
- --------------------------------------------------------------------------------------------------------------------------------
Net income 224
Cash dividends declared
($1.20 per share) (181)
Stock issued in connection with:
Stock options 3
Stock split 24 (24)
Deferred compensation 3 6
Translation adjustment including the
effects of hedging, net of taxes 24
Series A ESOP preferred stock
dividend, net of taxes (11)
ESOP compensation earned 12
ESOP shares redeemed (1)
Treasury stock acquired (47)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 198 49 147 (168) (56) (1,030) 2,523
- --------------------------------------------------------------------------------------------------------------------------------
Net income 454
Cash dividends declared
($1.28 per share) (192)
Stock issued in connection with:
Deferred compensation 4 5
Translation adjustment including the
effects of hedging, net of taxes (117)
Series A ESOP preferred stock
dividend, net of taxes (11)
ESOP compensation earned 13
ESOP shares redeemed (2)
Treasury stock acquired (48)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 196 49 151 (155) (173) (1,073) 2,774
- --------------------------------------------------------------------------------------------------------------------------------
Net income 345
Cash dividends declared
($1.38 per share) (204)
Stock issued in connection with:
Stock options 2
Deferred compensation 4 5
Translation adjustment including the
effects of hedging, net of taxes (8)
Series A ESOP preferred stock
dividend, net of taxes (11)
ESOP compensation earned 14
ESOP shares redeemed (2)
Treasury stock acquired (165)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $194 $ 49 $155 $(141) $(181) $(1,231) $2,904
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
See notes to consolidated financial statements.
36
CPC INTERNATIONAL 32 1994 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CPC International Inc. and Subsidiaries
SUMMARY OF ACCOUNTING POLICIES
Principles of consolidation -- The consolidated financial statements include the
accounts of the Company and its subsidiaries. The accounts of subsidiaries
outside of the U.S., except for those in Canada, are based on fiscal years
ending September 30.
Changes in accounting principles -- Effective January 1, 1992, the Company
adopted Financial Accounting Standards (FAS) 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," FAS 112, "Employers' Accounting
for Postemployment Benefits," and FAS 109, "Accounting for Income Taxes." These
changes resulted in a total non-cash charge of $304 million, $160 million after
taxes or $1.06 per share, detailed as follows: FAS 106 -- a charge of $280
million, $168 million after taxes or $1.11 per common share; FAS 112 -- a charge
of $24 million, $14 million after taxes or $.09 per common share; and FAS 109 --
a benefit of $22 million or $.14 per common share.
Foreign currency translation -- Assets and liabilities of foreign subsidiaries
other than those in highly inflationary economies are translated at current
exchange rates with the related translation adjustments reported as a separate
component of stockholders' equity. Income statement accounts are translated at
the average exchange rate during the period. In highly inflationary economies
where the U.S. dollar is considered the functional currency, monetary assets and
liabilities are translated at current exchange rates with the related
adjustments included in net income.
Cash equivalents -- Cash equivalents consist of all investments purchased with
an original maturity of three months or less, and which have virtually no risk
of loss in value. At December 31, 1994, and 1993, the Company had $9 million,
and $37 million of cash equivalents, respectively.
Inventories are stated at the lower of cost or market. In the U.S. vegetable
oils and corn are valued at cost on the last-in, first-out method. Other U.S.
inventories are valued at cost on the first-in, first-out method. Had the
first-in, first-out method been used for all U.S. inventories, the carrying
value of these inventories would have increased by $18 million and $19 million,
in 1994 and 1993, respectively. Outside the U.S., inventories generally are
valued at average cost.
Investments in unconsolidated affiliates are carried at cost or less, adjusted
to reflect the Company's proportionate share of income or loss less dividends
received. Consolidated retained earnings at December 31, 1994, included $10
million of undistributed earnings of unconsolidated affiliates, primarily
representing companies of which the Company owns 50% or less.
Plant and properties are stated at cost. Depreciation is generally computed on
the straight-line method over the estimated useful lives of depreciable assets
at rates ranging from 2% to 10% for buildings and 5% to 20% for all other
assets. Where permitted by law, accelerated depreciation methods are used for
tax purposes.
Intangible assets -- The Company amortizes, on a straight-line basis, the excess
cost of net assets acquired after October 31, 1970, over periods not exceeding
40 years. Other intangible assets, which include trademarks, licenses, and
patents, are amortized over their economic lives. The recoverability of the
carrying values of intangible assets is evaluated on a regular basis using
current and forecasted profitability of the related acquired business after
amortization.
Financing costs -- In line with the functional currency concept under which the
Company uses the U.S. dollar for highly inflationary economies, the
principal-preservation element inherent in local interest charges has been
recorded in cost of sales, rather than under financing costs, consistent with
the classification of translation gains resulting from holding local currency
debt. In 1994, 1993, and 1992, $21 million, $7 million, and $17 million,
respectively, were in-
37
cluded in cost of sales.
Income taxes -- Deferred income taxes reflect the differences between the assets
and liabilities recognized for financial reporting purposes and amounts
recognized for tax purposes. Deferred taxes are based on tax laws as currently
enacted. The Company makes provisions for estimated U.S. and foreign income
taxes, less available tax credits and deductions, that may be incurred on the
remittance by the Company's subsidiaries of undistributed earnings, except those
deemed to be indefinitely reinvested.
Earnings per common share has been computed by dividing net income, less
preferred stock dividends net of taxes, of $11 million in 1994, 1993, and 1992,
by the weighted average number of common shares outstanding of
38
CPC INTERNATIONAL 33 1994 ANNUAL REPORT
148 million in 1994, 150 million in 1993, and 151 million in 1992.
Environmental contingencies -- The Company accounts for environmental
contingencies in accordance with FAS 5 "Accounting for Contingencies," which
requires expense recognition when it is both "probable" that an obligation
exists and that the obligation can be "reasonably estimated." In assessing
probability, as well as in estimating costs, the Company uses the coordinated
efforts of environmental professionals and consultants as well as in-house and
outside counsel and accountants, taking into account possible methods of
remediation acceptable to all parties. The Company believes it can recover fully
or partially such liabilities from other potential responsible parties or from
its insurers. Wherever this is the case such recovery is aggressively pursued.
Nevertheless, unless final agreement has been reached for such claims from
these parties, in accordance with FAS 5, such expected recoveries are not
considered in establishing estimated costs. In addition, estimated costs are
based on expected future costs which have not been discounted.
- --------------------------------------------------------------------------------
ACQUISITIONS
In the first quarter of 1994, the Company acquired an 85% interest in a European
producer and marketer of brand-name potato products. In addition, the Company
acquired the jams, juices, and related food products business of a company in
Sri Lanka. The total costs of these investments amounted to $196 million
including assumed debt.
In the second quarter of 1994, the Company purchased the majority interest of
a newly formed company, which manufactures and markets selected CPC food brands
in South Africa and exports CPC products to other countries of sub-Saharan
Africa. This investment cost about $20 million. Also in the second quarter, the
Company acquired three consumer foods businesses located in the United States,
for a total cost of approximately $67 million. These businesses are Western
salad dressings and specialty sauces; Iberia Foods, a marketer of Hispanic
products; and a smaller business which produces snacks.
In November 1994 the Company's Mexican corn refining business entered into a
joint venture with Arancia, S.A. de C.V., a corn refining business located in
Mexico. The venture expects to have combined annual sales of approximately $250
million and will be accounted for on the equity method. In December 1994 the
Company announced that it had reached an agreement with General Mills, Inc. to
form a joint venture to develop a baking and desserts mixes business in Latin
America. In January 1995 the Company announced that it was negotiating to
acquire the Lesieur mayonnaise and salad dressings business in France, which has
sales of approximately $100 million. These three post-international-year-end
investments will be reflected in 1995.
During 1993 the Company acquired a consumer foods company located in the U.S.
for approximately $41 million. Outside the U.S. the Company acquired several
small consumer foods businesses and the remaining minority interests in several
of its affiliates for a total cost of approximately $47 million.
- --------------------------------------------------------------------------------
RESTRUCTURING CHARGE
In June 1994 the Company recorded a charge of $227 million, $137 million after
taxes or $.92 per common share, to recognize the cost of restructuring. This
program compresses into a period from mid-1994 to mid-1996 restructuring
activities needed to meet the competitive challenge of increasingly unifying
markets throughout the world.
The majority of the charge relates to the Company's European and North
American consumer foods businesses. The restructuring charge and its utilization
is summarized below:
<TABLE>
<CAPTION>
To be
Total Utilized utilized in
$ Millions charge in 1994 future periods
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee severance $ 102 $ 12 $ 90
</TABLE>
39
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Plant and support facilities 114 114 --
Other 11 -- 11
- --------------------------------------------------------------------------------
Total $ 227 $ 126 $ 101
- --------------------------------------------------------------------------------
</TABLE>
The charge is designed to cover the cost of a phased reduction of about 2,600
employees worldwide
40
CPC INTERNATIONAL 34 1994 ANNUAL REPORT
and the cost of realignment of manufacturing capacity. The realignment will be
achieved through a combination of plant closures, specializations, and
relocations of production. In total, 24 consumer foods plants and four corn
refining plants will be affected by the restructuring.
The time period for completion of the restructuring is from a few months at
some sites to two years in instances where alternative production facilities are
to be constructed.
At December 31, 1994, $57 million was included in current liabilities and $44
million was included in noncurrent liabilities.
- --------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
In the fourth quarter of 1992, the Company recorded a charge of $78 million, $47
million after taxes or $.31 per common share, for anticipated environmental
costs relating to chemical operations divested by the Company from the early
1970s to the mid 1980s. This charge increased the Company's existing
environmental reserve. Actual disbursement of cash is expected to take place
over the next 10 to 15 years.
The Company believed that the environmental reserve was adequate at December
31, 1994. No recoveries from other potentially responsible parties or insurers
have been considered in the determination of the reserve.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplementary information for the consolidated statements of cash flows is set
forth below:
<TABLE>
<CAPTION>
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 102 $ 94 $ 101
Income taxes 283 298 265
- --------------------------------------------------------------------------------
Details of businesses acquired were as follows:
Fair value of assets acquired $ 452 $ 84 $ 341
Liabilities assumed 267 11 111
Cash paid for acquisitions $ 185 $ 73 $ 230
- --------------------------------------------------------------------------------
</TABLE>
FINANCING ARRANGEMENTS --
SHORT-TERM
The Company uses the commercial paper market in the U.S. to supplement long-term
borrowings. Average quarterly commercial paper borrowings in 1994 and 1993 were
$372 million and $152 million, respectively, with maximum borrowings in 1994 and
1993 of $515 million and $287 million, respectively, and a weighted-average
interest rate in 1994 and 1993 of 4.5% and 3.2%, respectively.
For the international operations, the maximum month-end balance of bank
borrowings during 1994 and 1993 was $409 million and $344 million, respectively.
Average quarterly bank borrowings were $343 million for 1994 and $289 million
for 1993. The weighted-average interest rate for bank borrowing in 1994 and 1993
was 10.9% and 10.3%, respectively.
The Company had unused lines of credit totaling $1,195 million, and $1,080
million, at December 31, 1994, and 1993, respectively.
41
CPC INTERNATIONAL 35 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCING ARRANGEMENTS --
LONG-TERM
A summary of long-term debt is as follows:
$ Millions 1994 1993
<S> <C> <C>
Payable in U.S. dollars
7.78% ESOP guaranteed notes due December 2004 $ 173 $ 183
8.5% sinking fund debentures due April 2016 100 100
5.625%-6.75% pollution control revenue bonds due 2007-2016 15 15
Medium-term notes, due 1996 at variable rates 50 --
Commercial paper supported by revolving credit agreements
at a weighted interest rate of 4.5% in 1994 and 3.2% in
1993 100 100
Other notes and loans at various rates and due dates 37 39
- --------------------------------------------------------------------------------
Total 475 437
- --------------------------------------------------------------------------------
PAYABLE IN OTHER CURRENCIES
5.75% Swiss franc debentures, due March 2045,
ten year variable interest rates 155 141
6.75% German mark bearer bonds due January 2001 129 123
Bank and other loans at prevailing interest rates with
various due dates:
-- Secured 25 64
-- Unsecured 161 196
- --------------------------------------------------------------------------------
Total 470 524
- --------------------------------------------------------------------------------
945 961
- --------------------------------------------------------------------------------
Less current maturities 66 63
- --------------------------------------------------------------------------------
Total $ 879 $ 898
- --------------------------------------------------------------------------------
</TABLE>
The Company is required to apply toward retirement of the principal of the
indebtedness not less than the following amounts in the period 1995 through
1999: 1995 (included in current liabilities), $66 million; 1996, $121 million;
1997, $87 million; 1998, $64 million; and 1999, $81 million. At December 31,
1994, buildings, equipment, and certain other assets located outside the U.S.
totaling approximately $68 million have been pledged as collateral for the
secured loans.
During 1994 the Company entered into new revolving credit agreements with a
group of U.S. and international banks. These agreements permit the Company to
borrow up to $500 million on an unsecured basis at variable interest rates.
These agreements mature in 1995 through 1999. Covenants in these agreements
require the Company to maintain total debt at no more than 60% of total
capitalization. At December 31, 1994, the debt to capitalization ratio was 45%.
There were no borrowings outstanding under these facilities. For several years
prior to entering into these agreements the Company had a revolving credit
agreement, which permitted it to borrow up to $350 million on an unsecured
basis.
In February 1994 the Company filed a shelf registration with the Securities
and Exchange Commission to cover the borrowings of up to $300 million.
The Company is the guarantor of the ESOP notes (see Stockholders' equity
note), which were issued in 1989 in the initial amount of $200 million.
42
CPC INTERNATIONAL 36 1994 ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
Fair value of financial instruments -- The carrying values of cash equivalents,
accounts receivable, accounts payable, and short-term debt approximate fair
values. The fair value of long-term debt at December 31, 1994, and 1993 was $870
million and $899 million, respectively. The fair value of long-term debt was
based on quotes obtained from brokers.
Foreign exchange contracts -- The Company's policy is to hedge its exposure to
foreign currency cash flows resulting from planned dividends, fees and
royalties, intercompany loans, and other similar transactions. The Company also
hedges certain net investments in foreign operations with foreign exchange
contracts or with borrowings denominated in the particular foreign currency. As
a matter of policy, the Company does not speculate on foreign currencies. Gains
and losses, both realized and unrealized, on financial instruments that hedge
operating activities and related cashflows, flow through income in the same
period as the items being hedged. Gains and losses, both realized and
unrealized, on financial instruments that hedge the Company's investments in
foreign operations are recognized as part of the cumulative translation
adjustment in stockholders' equity.
At December 31, 1994, the Company had forward exchange contracts to deliver
$414 million of foreign currencies comprising $137 million in German marks, $87
million in British pounds, $14 million in Swiss francs, $71 million in Italian
lira, $26 million in Dutch guilders, $52 million in French francs, and $27
million in various other currencies. The Company also had, at December 31, 1994,
contracts to purchase $56 million worth of foreign currencies consisting of $15
million in Italian lira, $13 million in Austrian schillings, and $28 million in
other currencies. At December 31, 1993, the Company had forward exchange
contracts to deliver $376 million of foreign currencies comprising $192 million
in German marks, $90 million in British pounds, $35 million in French francs,
$33 million in Dutch guilders, and $26 million in various other currencies. The
Company also had, at December 31, 1993, contracts to purchase $31 million in
foreign currencies, primarily German marks. Most of the forward currency
contracts outstanding mature within 90 days of the respective balance sheet
dates. Interest rate swaps -- The Company utilizes interest rate swap agreements
to minimize its financing costs and to balance its current and non-current asset
levels with floating and fixed-rate debt positions. The Company's risk related
to swap agreements is limited to the cost of replacing such agreements at
current market rates. The Company continually monitors its positions and credit
ratings of its counterparties, and limits the number of agreements it enters
into with any one party. Management believes the risk of incurring a material
loss is remote. Any interest rate differential on interest rate swaps is
recognized as an adjustment to interest expense over the term of the agreement.
At December 31, 1994, the Company had $280 million notional amount of interest
rate swap agreements outstanding. A portion of the Company's variable interest
rate debt position was hedged with $100 million notional amount of swap
agreements with a weighted average receive rate of 6.50% and a weighted average
pay rate of 5.09%. The remaining agreements with maturity dates through 2000
effectively convert fixed interest rate debt into variable interest rate debt
with a weighted average receive rate of 5.89% and a weighted average pay rate of
6.50%. At December 31, 1993, the Company had $300 million notional amount of
interest rate swap agreements outstanding. A portion of these agreements with
maturity dates through 1995 effectively converted an aggregate principal amount
of $100 million variable interest rate debt into fixed interest rate debt with a
weighted average receive rate of 7.21% and a weighted average pay rate of 3.44%.
The remaining agreements with maturity dates through 2000 also effectively
converted $200 million of fixed interest rate debt into a variable interest rate
debt with a weighted average interest receive rate of 5.88% and a weighted
average pay rate of 5.09%. Net unrealized gains and losses at December 31, 1994
and 1993 were not significant.
43
Commodities -- The Company follows a policy of fixing the cost, with commodities
futures contracts, of certain of its key North American raw material purchases
in line with production requirements to minimize cost risk due to market
fluctuations. Such raw materials may or may not be hedged at any given time
based on management.s decisions as to the need to fix the cost of such raw
materials. In addition,
44
CPC INTERNATIONAL 37 1994 ANNUAL REPORT
commodity futures contracts are employed to fix the raw material cost of certain
fixed price sales contracts of the corn refining business. Gains and losses
arising from such hedging transactions are included with the cost of raw
material purchases.
The Company's products are manufactured from a number of raw materials,
including soybean and other edible oils, peanuts, corn, and wheat, all of which
are, and are expected to continue to be, in adequate supply. However, as market
prices of these materials depend on a number of unpredictable factors, such as
farm plantings and weather, resulting fluctuations may have an effect on the
Company.s earnings to the extent such fluctuations cannot, for competitive
reasons, be passed on immediately through pricing adjustments of the Company's
products. It is the possible exposure to such relatively short-term cost/pricing
imbalances that the Company attempts to cover through fixing, when appropriate,
the costs of certain commodities in the short term by using commodities futures
contracts.
At December 31, 1994, and 1993, the Company had commodity futures contracts to
purchase primarily corn totaling $138 million and $111 million, respectively.
The commodity futures contracts at December 31, 1994, principally call for
delivery in the period January to July 31, 1995. Contracts for delivery beyond
March 31, 1995, aggregate about $89 million, of which $46 million is due in May,
$38 million in July, and the balance later in the year. At December 31, 1994,
the Company had unrealized gains of $2 million on these contracts.
- --------------------------------------------------------------------------------
PENSION PLANS
The Company and its subsidiaries have a number of defined benefit pension plans
covering substantially all U.S. employees and certain groups of employees in
foreign countries. Plans covering salaried employees generally provide benefits
based on the employee's final salary level or on the average salary level for a
specified period. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. The Company's general funding policy is
to contribute annually the maximum amount that can be deducted for income tax
purposes. However, certain foreign countries allow income tax deductions without
regard to contribution levels, and the Company's policy in those countries is to
make the contribution required by the terms of the plan.
The components of net periodic pensions cost are as follows:
<TABLE>
<CAPTION>
U.S. Plans International Plans
- --------------------------------------------------------------------------------
$ Millions 1994 1993 1992 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost (benefits
earned during the period) $ 17 $ 13 $ 11 $ 16 $ 16 $ 17
Interest cost on projected
benefit obligation 39 38 37 38 35 38
Actual return on plan assets (38) (41) (49) (19) (26) (26)
Net amortization and deferral (10) (8) 1 (2) 8 6
- --------------------------------------------------------------------------------
Net periodic pension cost $ 8 $ 2 $ -- $ 33 $ 33 $ 35
- --------------------------------------------------------------------------------
</TABLE>
45
CPC INTERNATIONAL 38 1994 ANNUAL REPORT
The funded status for the Company's major pension plans based on valuations as
of September 30, 1994, and 1993, is as follows:
<TABLE>
<CAPTION>
U.S. PLANS Assets exceed Accumulated benefits
accumulated benefits exceed assets
$ Millions 1994 1993 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value
of benefits obligation:
Vested $(450) $(477) $ (17) $ (31)
Nonvested (17) (18) (1) (1)
- ---------------------------------------------------------------------------------------
Accumulated benefit obligation (467) (495) (18) (32)
Effect of projected future
compensation levels (77) (73) (19) (15)
- ---------------------------------------------------------------------------------------
Projected benefit obligation for
service rendered to date (544) (568) (37) (47)
Plan assets at fair value 576 543 8 21
- ---------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 32 (25) (29) (26)
Unrecognized net loss 29 75 7 5
Unrecognized prior service cost 12 10 14 16
Unrecognized net transition obligation 12 14 -- --
Additional minimum liability -- -- (2) (4)
- ---------------------------------------------------------------------------------------
(Accrued) prepaid pension cost at December 31 $ 85 $ 74 $ (10) $ (9)
- ---------------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL PLANS Assets exceed Accumulated benefits
accumulated benefits exceed assets
- ---------------------------------------------------------------------------------------
$ Millions 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Actuarial present value
of benefits obligation:
Vested $(165) $(154) $(321) $(265)
Nonvested (9) (9) (16) (14)
- ---------------------------------------------------------------------------------------
Accumulated benefit obligation (174) (163) (337) (279)
Effect of projected future
compensation levels (35) (35) (38) (32)
- ---------------------------------------------------------------------------------------
Projected benefit obligation for
service rendered to date (209) (198) (375) (311)
Plan assets at fair value 252 208 107 107
- ---------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 43 10 (268) (204)
Unrecognized net loss (gain) (43) (17) 50 35
Unrecognized prior service cost 9 11 4 5
Unrecognized net transition obligation 1 3 17 15
Additional minimum liability -- -- (40) (29)
- ---------------------------------------------------------------------------------------
(Accrued) prepaid pension cost at December 31 $ 10 $ 7 $(237) $(178)
- ---------------------------------------------------------------------------------------
</TABLE>
46
CPC INTERNATIONAL 39 1994 ANNUAL REPORT
Weighted averages of actuarial assumptions used to measure the projected benefit
obligation are as follows:
<TABLE>
<CAPTION>
U.S. Plans International Plans
- --------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount Rates 7.7% 6.5% 7.5% 7.5% 7.5% 7.7%
Rates of increase
in compensation levels 6.3% 5.0% 6.0% 4.9% 5.1% 5.3%
- --------------------------------------------------------------------------------
</TABLE>
The long-term rate of return on plan assets used in the determination of net
periodic pension cost for 1994, 1993, and 1992, for the domestic plans was 8.6%,
9.5%, and 9.5%, respectively. For the foreign plans the rate was 8%, 7.9%, and
8% in 1994, 1993, and 1992, respectively.
The Company's pension plan assets include common stocks, corporate bonds, and
limited partnerships. Approximately $47 million (9%) of U.S. qualified plan
assets are in the Company's common stock. In addition, certain employees in the
U.S. and in some foreign subsidiaries are covered by pension plans under which
the Company's obligation to make contributions is defined as a percentage of the
current salary of each employee covered by the plan. Benefits are based on the
funds available in each employee's account from contributions and from
investment income on such contributions. The aggregate pension cost for these
plans was $19 million in 1994, $17 million in 1993, and $13 million in 1992.
- --------------------------------------------------------------------------------
OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
In addition to pension benefits, the Company provides certain medical, dental,
and life insurance benefits for its domestic retired employees. Substantially
all of the Company's domestic employees become eligible for these benefits when
they meet minimum age and service requirements. The Company has the right to
modify or terminate these benefits.
The following is a summary of the status of the Company's major domestic
post-retirement benefit plans based on valuations as of September 30, 1994, and
1993:
<TABLE>
<CAPTION>
$ Millions 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $188 $186
Fully eligible active plan participants 42 41
Other active plan participants 44 46
- --------------------------------------------------------------------------------
Total 274 273
- --------------------------------------------------------------------------------
Unrecognized prior service cost 7 1
Unrecognized net gain 27 21
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost at December 31 $308 $295
- --------------------------------------------------------------------------------
Net periodic postretirement benefit cost included the following components:
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
Service cost (benefits earned during the year) $ 4 $ 4 $ 4
Interest cost on the accumulated postretirement
benefit obligation 18 21 21
Net amortization and deferral (1) -- --
- --------------------------------------------------------------------------------
Net periodic postretirement benefit $21 $25 $25
- --------------------------------------------------------------------------------
</TABLE>
Annual increases in per capita cost of health care benefits of 11.25% pre-age-
65 and 9.25% post-age-
47
65 were assumed for 1995 to 1996. Rates were assumed to decrease by 1%
thereafter until reaching 5.75%. Increasing the assumed health care cost trend
rate by 1% increases the APBO by $36 million, with a corresponding effect on the
service and interest cost components of the net periodic postretirement benefit
cost of $4 million. The discount rate used to determine the APBO is 7.75%.
48
CPC INTERNATIONAL 40 1994 ANNUAL REPORT
SUPPLEMENTAL BALANCE SHEET AND INCOME STATEMENT INFORMATION
Supplemental balance sheet information is set forth below:
<TABLE>
<CAPTION>
$ Millions 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE -- NET
Accounts receivable -- trade $1,026 $ 844
Accounts receivable -- other 100 84
Allowance for doubtful accounts (33) (28)
- --------------------------------------------------------------------------------
Accounts receivable -- net 1,093 900
- --------------------------------------------------------------------------------
INVENTORIES
Finished and in process 559 492
Raw materials 207 202
Manufacturing supplies and mechanical stores 141 136
- --------------------------------------------------------------------------------
Inventories 907 830
- --------------------------------------------------------------------------------
ACCRUED LIABILITIES
Marketing expenses 91 88
Compensation expenses 105 90
Restructuring provision 57 --
Taxes payable other than taxes on income 55 46
Dividends payable 53 48
Other 486 439
- --------------------------------------------------------------------------------
Accrued liabilities 847 711
- --------------------------------------------------------------------------------
NONCURRENT LIABILITIES
Employees. pension, indemnity, retirement,
and related provisions 523 477
Other noncurrent liabilities 287 197
- --------------------------------------------------------------------------------
Noncurrent liabilities $ 810 $ 674
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental income statement information is set forth below:
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
DEPRECIATION EXPENSE $259 $242 $238
AMORTIZATION EXPENSE 29 24 24
RESEARCH AND DEVELOPMENT COST 58 49 46
- --------------------------------------------------------------------------------
INTEREST EXPENSE -- NET
Interest expense 107 110 116
Interest expense capitalized (6) (7) (7)
Interest income (9) (13) (10)
- --------------------------------------------------------------------------------
Interest expense -- net $ 92 $ 90 $ 99
- --------------------------------------------------------------------------------
</TABLE>
OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Information concerning operations by business segment and geographic area
appears on pages 44 and 45.
49
CPC INTERNATIONAL 41 1994 ANNUAL REPORT
- --------------------------------------------------------------------------------
INCOME TAXES
Income from continuing operations before income taxes and the components of the
provision for income taxes are shown below:
<TABLE>
<CAPTION>
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations before income taxes:
United States $285 $358 $334
Outside the United States 330 432 411
- --------------------------------------------------------------------------------
Total $615 $790 $745
- --------------------------------------------------------------------------------
Provision for income taxes charged to continuing
operations:
Current tax expense
U.S. Federal $126 $125 $125
State and local 26 25 31
Foreign 145 189 160
- --------------------------------------------------------------------------------
Total current 297 339 316
- --------------------------------------------------------------------------------
Deferred tax expense (benefit)
U.S. Federal (20) 8 (20)
State and local (5) 1 (3)
Foreign (29) (32) 5
- --------------------------------------------------------------------------------
Total deferred (54) (23) (18)
- --------------------------------------------------------------------------------
Total provision $243 $316 $298
- --------------------------------------------------------------------------------
</TABLE>
The tax effects of significant temporary differences, which comprise the
deferred tax (assets) liabilities at December 31, 1994, and 1993, are as
follows:
<TABLE>
<CAPTION>
$ Millions 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Plants and properties $222 $265
Inventory 20 18
Pensions 47 48
- --------------------------------------------------------------------------------
Gross deferred tax liabilities 289 331
- --------------------------------------------------------------------------------
Restructuring reserves 43 --
Environmental reserves 46 52
Employee benefit reserves 138 143
Unrealized exchange losses 58 66
Other 37 40
- --------------------------------------------------------------------------------
Gross deferred tax assets 322 301
- --------------------------------------------------------------------------------
Valuation allowance (2) (2)
- --------------------------------------------------------------------------------
Total deferred tax (assets) liabilities $(31) $ 32
- --------------------------------------------------------------------------------
</TABLE>
Total net deferred tax (assets) liabilities shown above included current and
noncurrent elements.
50
CPC INTERNATIONAL 42 1994 ANNUAL REPORT
A reconciliation of the federal statutory tax rate to the Company's effective
tax rate follows:
<TABLE>
<CAPTION>
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for tax at U.S. statutory rate 35.0% 35.0% 34.0%
Additional taxes related to foreign income 1.6 2.7 3.4
State and local taxes -- net 2.3 2.2 2.8
Other items -- net .6 .1 (.2)
- --------------------------------------------------------------------------------
Provision at effective tax rate 39.5% 40.0% 40.0%
- --------------------------------------------------------------------------------
</TABLE>
Taxes that would result from dividend distributions by foreign subsidiaries to
the U.S. are provided to the extent dividends are anticipated. Retained earnings
of the Company included, as of December 31, 1994, approximately $602 million of
retained earnings of foreign subsidiaries, which are indefinitely retained by
the subsidiaries for capital and operating requirements.
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY --
PREFERRED STOCK
The Company has authorized 25,000,000 shares of $1 par value preferred stock of
which 3,000,000 shares were designated for the Company's ESOP and 600,000 shares
of Series A Junior Participating shares were designated for the shareholders
rights plan. At December 31, 1994, 1993, and 1992, there were 2,170,854,
2,192,237, and 2,213,991 Series A ESOP shares outstanding, respectively. No
Series A Junior Participating shares were issued.
Employee Stock Ownership Plan (ESOP) -- The Company has an Employee Stock
Ownership Plan (ESOP) as part of its Savings/Retirement Plan covering
substantially all U.S. salaried employees. The ESOP is designed to provide
employees with increased ownership in the Company's stock. To accomplish this,
the ESOP borrowed $200 million in a public offering (ESOP Notes) and used the
proceeds to buy a like amount of the Company's Series A ESOP convertible
preferred stock. The preferred stock is convertible into approximately 4.4
million shares of the Company.s common stock. The preferred stock pays an annual
dividend of $7.14 per share, and will be used by the ESOP, together with the
Company's contributions, to repay the ESOP notes. The ESOP is intended to
satisfy the Company's obligation to match employees. contributions to the
Savings/Retirement Plan on a $1 for $1 basis. Since the ESOP notes are
guaranteed by the Company, they are reflected in the consolidated balance sheet
as short-term and long-term debt with a corresponding amount shown in the
stockholders' equity section as unearned ESOP compensation.
In 1994 and 1993, 158,297 shares and 145,072 shares, respectively, of
preferred stock valued at $14 million and $13 million, respectively, were
allocated to Plan participants based on the semi-annual payments of both
principal and interest due on the ESOP notes. The notes have a 15-year maturity
and an original fixed interest rate of 7.78%. A portion of the notes was
refinanced, resulting in an overall effective rate of 7.51%. In 1994 and 1993,
$11 million and $8 million of principal, respectively, was paid on the ESOP
notes.
Shareholder rights plan -- Under the Company's shareholder rights plan,
each share of the Company's common stock carries with it one preferred stock
purchase right. The rights will at no time have voting power or pay dividends.
The rights will become exercisable if a person or group acquires 15% or more of
the Company.s common stock, or announces a tender or exchange offer that could
result in the acquisition of 15% or more thereof. When exercisable, each right
entitles a holder to buy one-two hundredths of a share of Series A Junior
Participating Preferred Stock at a price of $325. If the Company is involved in
a merger or other business combination with a 15% or more stockholder, each
right will entitle a holder to buy a number of the acquiring company's shares
having a value of twice the exercise price of the right. Alternatively, if a 15%
stockholder engages in certain self-dealing transactions or acquires the Company
in such a man-
51
ner that the Company and its common stock survive, or if any person
acquires 15% or more of the common stock, except pursuant to an offer for all
shares at a fair price, each right not owned by a 15% or more stockholder may be
exercised for common stock of the Company (or, in certain circumstances, other
consideration) having a market value of twice the exercise price of the right.
The Company may redeem the rights
52
CPC INTERNATIONAL 43 1994 ANNUAL REPORT
for one cent each at any time before an acquisition of 15% or more of its voting
securities and for at least ten business days thereafter. Unless redeemed
earlier, the rights will expire on March 19, 2001.
TREASURY STOCK
The Company had common stock in treasury at the end of 1994, 1993, and 1992,
totaling 48,510,458, 45,454,592, and 44,635,160 shares, respectively.
In October 1993 the Board of Directors approved a 4 million share buyback
program, which commenced in January 1994 and is expected to be completed during
the first half of 1995. On January 17, 1995, the Board of Directors approved a 5
million share buyback program to begin upon completion of the existing program.
- --------------------------------------------------------------------------------
STOCK AND PERFORMANCE PLAN
The Company has a Stock and Performance Plan (the 1993 Plan), which provides for
grants of stock options, restricted stock awards, and performance units. A
Committee of non-employee members of the Board of Directors administers the
Plan. Under the 1993 Plan, stock options were granted at 100% of market value at
date of grant and expire not more than 10 years from date of grant. The
following table summarizes transactions during 1994, 1993, and 1992, including
balances from previous plans:
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER OF SHARES
Balance beginning of year 2,006,848 1,613,724 1,198,666
Granted 749,950 647,050 543,150
Exercised (82,843) (26,680) (115,177)
Cancelled (249,944) (227,246) (12,915)
- --------------------------------------------------------------------------------
Balance end of year 2,424,011 2,006,848 1,613,724
- --------------------------------------------------------------------------------
Exercisable at year-end 1,249,617 985,149 765,282
- --------------------------------------------------------------------------------
Available for future grants
of stock options 6,501,750 7,250,900 3,453,213
- --------------------------------------------------------------------------------
OPTION PRICE PER SHARE
Outstanding $10.64-51.25 $ 9.28-49.06 $ 9.28-47.81
Exercised $ 9.28-49.06 $ 9.28-43.72 $ 9.61-43.72
Granted $47.50-51.25 $44.63-49.06 $43.03-47.81
- --------------------------------------------------------------------------------
</TABLE>
In addition, 37,700 shares were awarded to employees in 1994 under the
restricted stock award provision of the 1993 plan. The cost of these awards is
being amortized over the five-year restriction period.
At December 31, 1994, 22,683 shares of common stock in treasury were reserved
for deferred compensation programs.
53
CPC INTERNATIONAL 44 1994 ANNUAL REPORT
BUSINESS SEGMENT FINANCIAL INFORMATION
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS
Consumer foods $6,203 $5,636 $5,502
Corn refining 1,222 1,102 1,097
- --------------------------------------------------------------------------------
7,425 6,738 6,599
- --------------------------------------------------------------------------------
SALES INTERSEGMENT
Consumer foods -- -- --
Corn refining 163 140 153
- --------------------------------------------------------------------------------
163 140 153
- --------------------------------------------------------------------------------
OPERATING INCOME
Consumer foods 552* 724 697
Corn refining 188* 182 180
Corporate expenses (28) (23) (28)
- --------------------------------------------------------------------------------
712 883 849
- --------------------------------------------------------------------------------
ASSETS AT DECEMBER 31
Consumer foods 4,399 3,851 4,047
Corn refining 1,121 1,024 969
Corporate 148 186 155
- --------------------------------------------------------------------------------
5,668 5,061 5,171
- --------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Consumer foods 205 185 180
Corn refining 80 78 79
Corporate 3 3 3
- --------------------------------------------------------------------------------
288 266 262
- --------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Consumer foods 248 248 240
Corn refining 129 138 71
Corporate -- -- --
- --------------------------------------------------------------------------------
377 386 311
- --------------------------------------------------------------------------------
</TABLE>
Intersegment sales generally are priced with reference to prevailing market
prices.
* After restructuring charge of $208 million for consumer foods and $19
million for corn refining.
54
CPC INTERNATIONAL 45 1994 ANNUAL REPORT
GEOGRAPHIC FINANCIAL INFORMATION
CPC International Inc. and Subsidiaries
<TABLE>
<CAPTION>
$ Millions 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS
United States $2,645 $2,412 $2,435
Canada 262 246 258
North America 2,907 2,658 2,693
Europe 2,933 2,623 2,661
Latin America 1,273 1,178 999
Asia 312 279 246
- --------------------------------------------------------------------------------
7,425 6,738 6,599
SALES INTERAREA
United States 47 28 22
Canada 71 72 71
North America 118 100 93
Europe 6 8 9
Latin America 8 7 2
Asia 2 1 1
- --------------------------------------------------------------------------------
134 116 105
OPERATING INCOME
United States 321* 373 364
Canada 23* 27 31
North America 344* 400 395
Europe 181* 268 292
Latin America 166* 182 145
Asia 49* 56 45
Corporate expenses (28) (23) (28)
- --------------------------------------------------------------------------------
712 883 849
ASSETS AT DECEMBER 31
United States 1,666 1,585 1,494
Canada 243 250 251
North America 1,909 1,835 1,745
Europe 2,508 2,076 2,407
Latin America 859 768 693
Asia 244 196 170
Corporate 148 186 156
- --------------------------------------------------------------------------------
5,668 5,061 5,171
- --------------------------------------------------------------------------------
</TABLE>
Interarea sales generally are priced with reference to prevailing market prices.
* After restructuring charge of $65 million for U.S.; $10 million for Canada;
$120 million for Europe; $25 million for Latin America; and $7 million for Asia.
55
CPC INTERNATIONAL 46 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
ELEVEN-YEAR FINANCIAL HIGHLIGHTS
CPC International Inc. and Subsidiaries
$ Millions except per share amounts 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $7,425 $6,738 $6,599 $6,189
Earnings for the year 345(1) 454 224(2,3) 373(4)
Earnings per common share 2.25(1) 2.95 1.41(2,3) 2.40(4)
Average number of common shares outstanding 148 150 151 151
Dividends declared per common share 1.38 1.28 1.20 1.10
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Working capital $ 127 $ 389 $ 347 $ 432
Plants and properties -- net 2,281 2,121 2,111 1,881
Total assets 5,668 5,061 5,171 4,510
Long-term debt 879 898 953 1,016
Short-term debt 664 374 497 366
Total debt 1,543 1,272 1,450 1,382
Translation adjustment included in stockholders' equity (181) (173) (56) (80)
Stockholders' equity 1,749 1,769 1,662 1,631
Stockholders' equity per share 11.92 11.81 11.03 10.78
Shares outstanding, year-end 147 150 151 151
- ----------------------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA
Capital expenditures $ 377 $ 386 $ 311 $ 277
Maintenance and repairs 219 196 203 176
Advertising expenses 500 463 483 454
Rental expense for operating leases 76 63 65 61
Total employee costs 1,389 1,280 1,203 1,096
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
$ Millions except per share amounts 1st Q 2nd Q 3rd Q 4th Q
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Market price range of common stock
High $ 50 1/2 $ 51 7/8 $ 54 1/2 $ 55 5/8
Low 45 1/4 44 1/4 47 1/2 49 5/8
Close 47 3/8 48 1/4 50 5/8 53 1/4
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ .34 $ .34 $ .34 $ .36
- ----------------------------------------------------------------------------------------------------------------------------------
Quarterly results
Net sales $1,738 $1,856 $1,813 $2,018
Gross profit 675 716 702 836
Net income 98 (15) (1) 125 137
Earnings per common share $ .63 $ (.11) (1) $ .83 $ .90
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
(1) After restructuring charge of $137 million after taxes or $.92 per common
share recorded in the second quarter.
(2) Includes the cumulative effect to January 1, 1992, of changes in accounting
principles of $160 million after taxes or $1.06 per
56
common share and the effect of these changes in 1992 of $13 million, $8
million after taxes or $.05 per common share.
57
CPC INTERNATIONAL 47 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
ELEVEN-YEAR FINANCIAL HIGHLIGHTS (Continued)
CPC International Inc. and Subsidiaries
$ Millions except per share amounts 1990 1989 1988 1987 1986 1985 1984
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales $5,781 $5,103 $4,700 $4,903 $4,549 $4,210 $4,373
Earnings of the year 374 328 289 355 219 142 193
Earnings per common share 2.41 2.11 1.84 2.17 1.15 .73 .99
Average number of common shares outstanding 151 155 157 163 191 194 194
Dividends declared per common share 1.00 .87 .76 .64 .56 .55 .55
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Working capital $ 160 $ 231 $ 98 $ 346 $ (186) $ 310 $ 357
Plants and properties -- net 1,898 1,739 1,688 1,638 1,992 1,633 1,382
Total assets 4,490 3,705 3,342 3,261 3,651 3,017 2,683
Long-term debt 990 845 589 776 807 495 389
Short-term debt 595 355 375 166 736 254 183
Total debt 1,585 1,200 964 942 1,543 749 572
Translation adjustment included in stockholders' equity (42) (69) (80) (90) (84) (173) (184)
Stockholders' equity 1,453 1,218 1,195 1,087 956 1,372 1,324
Stockholdres' equity per share 9.63 8.05 7.63 6.81 5.79 7.05 6.81
Shares outstanding, year-end 151 151 157 160 165 194 194
- ----------------------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA
Capital expenditures $ 262 $ 215 $ 226 $ 258 $ 361 $ 424 $ 311
Maintenance and repairs 169 156 152 198 174 137 146
Advertising expenses 418 367 316 293 230 206 190
Rental expense for operatiog leases 48 42 41 48 39 34 32
Total employee cost 1,005 871 836 923 807 705 673
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
$ Millions except per share amounts 1st Q 2nd Q 3rd Q 4th Q
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Market price range of common stock
High $ 51 1/8 $ 45 5/8 $ 45 7/8 $ 49
Low 44 40 1/4 39 7/8 43 1/8
Close 45 41 1/8 43 7/8 47 5/8
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ .32 $ .32 $ .32 $ .32
- ----------------------------------------------------------------------------------------------------------------------------------
Quarterly results
Net sales $1,636 $1,690 $1,664 $1,748
Gross profit 640 675 666 714
Net income 90 117 122 125
Earnings per common share $ .58 $ .76 $ .79 $ .82
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Includes an environmental charge related to discontinued operations of $47
million after taxes or $.31 per common share.
(4) Includes an environmental charge related to discontinued operations of $32
million after taxes or $.21 per common share.
1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Following is a list of the Registrant's subsidiaries and their subsidiaries
showing the percentage of voting securities owned, or other bases of control, by
the immediate parent of each.
<TABLE>
<CAPTION>
Percentage of
voting securi-
ties owned by
its immediate
parent
--------------
<S> <C> <C>
CPC International Inc.
(a)Subsidiaries included in the Company's
consolidated financial statements
United States
CPC Europe (Group) Ltd. (Delaware) 100.00
Best Foods - Caribbean, Inc. (Delaware) 100.00
S. B. Thomas, Inc. (New York) 100.00
Arnold Foods Company, Inc. (Delaware) 100.00
Henri's Food Products Co., Inc. (Wisconsin) 100.00
Canada
Canada Starch Company (1990) Inc. 100.00
Europe(1)
C.H. Knorr Nahrungsmittelfabrik
Ges.mbH - Austria 100.00
CPC Monda N.V./S.A. - Belgium 99.90
CPC Foods A.S. - Czech Republic 82.01
CPC Foods A/S - Denmark 100.00
CPC Foods OY - Finland 100.00
CPC France S.A. - France 99.82
CPC Maizena GmbH - Germany 100.00
Knorr (Hellas) A.B.E.E. - Greece 100.00
CPC Benelux B.V. - Holland 100.00
CPC Hungary RT - Hungary 100.00
CPC Foods (Ireland) Ltd. - Ireland 100.00
CPC Italia S.P.A. - Italy 90.19
CPC Foods A/S - Norway 100.00
CPC Amino S.A. - Poland 99.90
Knorr Portuguesa-Produtos
Alimentares S.A. - Portugal 100.00
CPC Espana, S.A. - Spain 100.00
CPC Foods AB - Sweden 100.00
CPC Knorr Holding AG - Switzerland 100.00
CPC (United Kingdom) Ltd. - United Kingdom 100.00
Africa and Middle East(1)
Israel Edible Products Ltd. "TAMI" - Israel 51.00
CPC Kenya Ltd. - Kenya 50.10
CPC Maghreb, S.A. - Morocco 100.00
CPC Tongaat Foods (Pty) Ltd. - South Africa 50.00(2)
</TABLE>
14
2
<TABLE>
<S> <C> <C>
Latin America
Refinerias de Maiz S.A.I.C. - Argentina 100.00
Refinacoes de Milho, Brasil Ltda. - Brazil 100.00
Industrias de Maiz y Alimentos S.A. - Chile 100.00
Industrias del Maiz S.A. - Colombia 100.00
Maizena de Costa Rica S.A. - Costa Rica 100.00
Productos de Maiz y Alimentos S.A. - Guatemala 100.00
Productos de Maiz, S.A. de C.V. - Mexico 100.00
Alimentos y Productos de Maiz, S.A. - Peru 99.06
Industrializadora de Maiz, S.A. - Uruguay 100.00
Aliven S.A. - Venezuela 100.00
Asia
CPC (Guangzhou) Foods Ltd. - China 80.00
CPC/AJI (Hong Kong) Ltd. - Hong Kong 50.00(2)
P.T. Knorr Indonesia - Indonesia 100.00
CPC/AJI (Malaysia) Sdn. Berhad - Malaysia 50.00(2)
Rafhan Maize Products Co. Ltd. - Pakistan 51.00(1)
California Manufacturing Co., Inc. - Philippines 50.00(2)
CPC/AJI (Singapore) Pte. Ltd. - Singapore 50.00(2)
CPC/AJI (Taiwan) Ltd. - Taiwan 50.00(2)
CPC/AJI (Thailand) Ltd. - Thailand 50.00(2)
</TABLE>
The names of forty-eight (48) domestic subsidiaries and one hundred-thirty
six (136) international subsidiaries have been omitted since these unnamed
subsidiaries considered in the aggregate as a single entity do not
constitute a significant subsidiary.
(b) Domestic subsidiary not consolidated:
One (1) wholly-owned subsidiary which has minor real estate holdings.
(c) International subsidiaries not consolidated:
Five (5) international subsidiaries of which all or a majority of the
share capital is owned by the Registrant.
(d) Domestic 50% owned company
Two (2) joint ventures in which the Registrant owns 50% interest with
50% being owned by single other interests.
(e) International 50% owned companies
One (1) company in which the Registrant owns 50% of the voting
securities with 50% of such securities being held by single other
interests. One (1) company in which the Registrant owns 50% of the
voting securities with 50% of such securities being held by two (2) or
more other interests.
--------------
(1) Owned by CPC Europe (Group) Ltd., or its wholly-owned subsidiaries.
(2) Owned fractionally more than 50% and fully consolidated for accounting
purposes.
15
3
If the companies included in (b), (c), (d) and (e) were considered in the
aggregate as a single entity, they would not constitute a significant subsidiary
since: (1) the assets of the subsidiaries, or the investments in and advances to
the subsidiaries by its parent and the parent's other subsidiaries, if any, did
not exceed 10 percent of the assets of the parent and its subsidiaries on a
consolidated basis, and (2) the sales and operating revenues of the parent and
its subsidiaries on a consolidated basis, and the Company's equity in their
income before income taxes and extraordinary items did not exceed 10 percent of
the income of the parent and its subsidiaries on a consolidated basis.
16
1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CPC International Inc.:
We consent to incorporation by reference in the Registration Statements on Form
S-8 (No. 2-48849, 2-92248 and 33-49847) and on Form S-3 (No. 33-30813, 33-28989,
33-40759 and 33-52213) of CPC International Inc. of our report dated February 6,
1995, relating to the consolidated balance sheets of CPC International Inc. and
Subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three year period ended December 31, 1994 which report appears in the
December 31, 1994 annual report on Form 10-K of CPC International Inc.
/s/ KPMG Peat Marwick LLP
--------------------------
(KPMG Peat Marwick LLP)
New York, New York
March 17, 1995
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1993
<PERIOD-END> DEC-31-1994
<CASH> 125
<SECURITIES> 0
<RECEIVABLES> 1026
<ALLOWANCES> 33
<INVENTORY> 907
<CURRENT-ASSETS> 2215
<PP&E> 4545
<DEPRECIATION> 2264
<TOTAL-ASSETS> 5668
<CURRENT-LIABILITIES> 2088
<BONDS> 879
<COMMON> 49
<PREFERRED-MANDATORY> 0
<PREFERRED> 194
<OTHER-SE> 3059
<TOTAL-LIABILITY-AND-EQUITY> 5668
<SALES> 7425
<TOTAL-REVENUES> 7425
<CGS> 4496
<TOTAL-COSTS> 4496
<OTHER-EXPENSES> 712
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 92
<INCOME-PRETAX> 615
<INCOME-TAX> 243
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 0
</TABLE>