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Exhibit 1 Condensed Operating and Stockholder Information for Kraft, 1982-1987 (millions of dollars

except per share data)


1982

1983

1984

1985

1986

1987

$7,041
5,350
103

$6,660
4,928
80

$6,831
4,969
74

$7,065
4,963
74

$7,780
5,393
79

$9,876
6,912
103

1,183
405
24

1,157
495
(8)

1,238
550
22

1,391
637
26

1,620
688
31

2,068
793
91

Other income (expense)b

(38)

23

43

37

37

86

Income from continuing operations


before taxes

343

526

571

648

694

788

Income taxes

164

225

252

286

300

353

Income from continuing operations

179

301

319

362

394

435

Income from discontinued operationsc

171

134

137

104

19

54

Net income

$350

$435

$456

$466

$413

$489

Earnings per share


Dividends per share
Closing stock priced,e

$2.13
1.20
22.83

$2.65
1.28
22.21

$3.17
1.38
28.04

$3.24
1.52
43.38

$3.06
1.68
49.38

$3.73
1.84
48.25

11
164
0.72

8
164
0.55

9
144
0.69

13
144
1.12

16
135
1.18

13
131
0.74

Revenues
a
Cost of goods sold
Depreciation
Delivery, sales, and administrative
expenses
Operating Income(EBIT)
Interest, net

Price-earnings ratioe
Number of shares (millions)e
Betaf
Sources: Company reports and casewriters estimates.
a

Cost of goods sold does not include annual depreciation.

Includes the cumulative effect of a change in method of accounting for income taxes of $45 million in 1987 and a nonoperating item
of -$91 million in 1982.
c

Discontinued operations include Duracell, whose sale was announced in 1987, and the business of Premark International, which
was spun off on October 31, 1986. Also included in discontinued operations is a $41 million gain on the sale of KitchenAid in 1986.
d

Adjusted for a 3-for-1 stock split in 1985.

Year-end.

Calculated by ordinary least-square regression using daily stock price data.

Projections
Revenues
Revenue Growth
Operating Income(EBIT)
Operating Income % of Sales

1982
$7,041
405
5.75%

1983
$6,660
-5.41%
495
7.43%

1984
$6,831
2.57%
550
8.05%

1985
$7,065
3.43%
637
9.02%

1986
$7,780
10.12%
688
8.84%

EBIT growth
Revenues
Revenue Growth

1987
$9,876
26.94%
834
8.44%
21.22%

793
$7,041

$6,660
-5.41%

$6,831
2.57%

$7,065
3.43%

$7,780
10.12%

$9,876
22.00%

Projections
1988

1989

1990

1991

1992

1993

950

1,050

1155

1247

1310

1375

13.91%

10.53%

10%

8%

7%

7%

$11,200
13.41%

$12,501
11.61%

$13,751 $14,851 $15,593


10.00% 8.00% 5.00%

$16,217
5%

Exhibit 2 Consolidated Balance Sheets for Kraft, 1986-1987


(millions of dollars)
1986
Cash
Accounts Receivable
Inventories
Investments and long-term receivables
Prepaid and deferred items
Property, plant, equipment, net
Intangibles
Net assets of discontinued operations
Total Assets

$321.5
637.6
1,061.1
236.2
127.5
1,087.7
419.0
600.7

1987
WC
$189.0 WC growth
763.6
1,283.4
178.3
161.5
1,424.2
888.3
598.4

$4,491.3

$5,486.7

Accounts payable
Short-term borrowings
Accrued compensation
Accrued advertising and promotions
Other accrued liabilities
Accrued income taxes
Current portion of long-term debt

$492.1
596.4
148.9
113.7
188.4
335.3
108.5

$544.8
645.9
151.2
132.8
245.4
399.3
37.2

Current liabilities
Long-term debt
Deferred income taxes
Other liabilities

1,983.3
237.7
286.4
185.9

2,156.6
895.3
282.7
253.7

Total Liabilities
Shareholders equity

2,693.3
1,798.0

3,588.3
1,898.4

$4,491.3

$5,486.7

Total Liabilities and Net Worth


Source: Company reports.

86
164

423.6

87
241
46.53%

99.3885

88
353.00
30.00%

89
458.90
20.00%

90
550.68
15.00%

91
633.28
10.00%

92
696.61
5.00%

93
731.44
2.00%

Exhibit 3

Financial Summary for Kraft by Business Segment, 1983-1987 (millions of dollars)


1983

1984

1985

1986

1987

U.S. Consumer Food


Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profits/Identifiable assets

$3,718.0
388.1
1,450.90
54.0
58.0
26.75%

$3,781.2
446.0
1,615.40
50.0
71.7
27.61%

$3,911.3
527.3
1,309.10
37.6
63.1
40.28%

$4,016.1
545.9
1,807.60
36.6
93.7
30.20%

$4,518.9
593.3
2,509.30
47.4
151.2
23.64%

U.S. Commercial Food


Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profits/Identifiable assets

$1,172.7
0
0
0
0
0

$1,349.3
0
0
0
0
0

$1,421.0
61.7
291.4
7.6
5.2
21.17%

$1,755.8
79.5
558.9
8.0
17.6
14.22%

$3,022.0
86.4
914.6
15.3
33.7
9.45%

International Food
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profits/Identifiable assets

$1,769.7
165.4
680.9
19.2
37.3
24.29%

$1,707.2
169.4
701.1
18.9
36.2
24.16%

$1,733.0
145.9
793.7
20.6
39.2
18.38%

$2,007.7
182.8
861.1
27.5
41.7
21.23%

$2,334.8
229.8
1,000.50
34.0
48.3
22.97%

Direct Selling b
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profits/Identifiable assets

$825.1
189.3
462.7
36.0
40.7
40.91%

$776.9
138.8
488.0
28.9
62.8
28.44%

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

Consumer Products c
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profits/Identifiable assets

$1,181.0
104.7
828.0
26.9
43.0
12.64%

$1,244.8
118.4
958.8
42.9
67.9
12.35%

$962.5
66.9
849.6
34.2
47.4
7.87%

0
0
0
0
0
0

0
0
0
0
0
0

Commercial Products d
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profits/Identifiable assets

$1,047.5
104.8
727.6
30.4
25.4
14.40%

$899.3
101.0
556.9
23.9
28.1
18.14%

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

Source: Company reports.


na = not available.
a

Figures for 1983 and 1984 include both U.S. consumer foods and U.S. commercial foods.

Includes Tupperware, which was spun off to Premark International in 1988.

Includes Duracell, West Bend, Health Care, and KitchenAid. All assets except Duracell were sold or spun off to Premark
International in 1986.
d

Includes Hobart, which was spun off to Premark International in 1986.

83
84
85
86
87
Total Capex(net of depreciation)
-22.1
-39.0
-41.7
-80.9
-136.5
capex growth
76.47%
6.92%
94.00%
68.73%
assets 2,131.80 2,316.50 2,394.20 3,227.60 4,424.40
capex
95.3
107.9
107.5
153.0
233.2
asset growth as % of sales
32.01%
33.88%
33.89%
41.49%
44.80%
depreciation
73.2
68.9
65.8
72.1
96.7
dep/capex 0.768101 0.638554 0.612093 0.471242 0.414666
dep/assets
3.43%
2.97%
2.75%
2.23%
2.19%
sales growth
2.66%
3.33%
10.11%
26.94%
sales $6,660.4 $6,837.7 $7,065.3 $7,779.6 $9,875.7
capex/sales
1.43%
1.58%
1.52%
1.97%
2.36%
asset as
WC
164
241
wc as % of sales
2.11%
2.44%
delta WC
0
0
0
0
-77
Net
-22.1
-39.0
-41.7
-80.9
-60.0
capex net depreciation
-22.1
-39.0
-41.7
-80.9
-136.5
Debt
237.7
895.3
Equity
6666.3 6320.75
D/V
3.44%
12.41%

88
-204.8
50%
5,017.70
264.5
110.4

13.41%
$11,200

273
-32
-121.8
-154.1

89
-296.9
45%
5,600.11
295.2

90
-415.6
40%
6,160.12
324.7

91
-552.8
33%
6,652.93
350.7

92
-691.0
25%
7,118.64
375.2

93
-794.7
15%
7,616.94
401.5

123.2

135.5

146.4

156.6

167.6

11.61%
$12,500

10.00%
13750

8.00%
14850

305

335

362

388

415

-32
-140.3
-172.0

-30
-158.7
-189.2

-27
-177.5
-204.3

-25
-193.2
-218.6

-27
-206.8
-233.9

7.00%
7%
15889.5 17001.77

Exhibit 4 Condensed Operating and Stockholder Information for Philip Morris, 1982-1987 (millions
of dollars except per share data)
1982

1983

1984

1985c

1986

1987

$11,586
5,046
2,615
281

$12,976
5,028
3,510
327

$13,814
5,170
3,676
375

$15,964
5,926
3,815
424

$25,409
10,495
4,728
655

$27,695
10,664
5,416
704

2,125

2,377

2,467

3,244

6,061

7,004

71
246
44

83
230

54
273
300

82
308

111
770

126
685

Income before taxes


Income taxes

1,300
518

1,587
681

1,607
718

2,329
1,074

2,811
1,333

3,348
1,506

Net income

$782

$906

$889

$1,255

$1,478

$1,842

Earnings per share


Dividends per share
Closing stock priced

$3.11
1.20
30

$3.58
1.45
35.875

$3.62
1.70
40.375

$5.24
2.00
44.125

$6.20
2.48
71.875

$7.75
3.15
85.375

9
252
1.04

10
250
0.77

11
243
0.94

8
239
0.88

11
238
1.24

11
237
0.88

Revenues
Cost of goods solda
Excise taxes
Depreciation and amortization
Selling, administrative, and
research expensesb
Equity in net earnings of
unconsolidated subsidiaries
Interest
Other expense

Price-earnings ratiod
Number of shares (millions)d
Betae

Sources: Company reports and casewriters estimates.


a

Cost of goods sold does not include annual depreciation.

Selling, administrative, and research cost includes corporate expenses.

General Foods was acquired on November 1, 1985.

Year-end.

Calculated by ordinary least-squares regression using daily stock price data.

Exhibit 5 Consolidated Balance Sheets for Philip Morris, 19861987 (millions of dollars)

Cash
Receivables
Inventories
Other current assets
Property, plant, equipment, net
Investments in unconsolidated subsidiaries
and affiliates
Goodwill and other intangibles
Other assets
Total Assets
Notes payable
Accounts payable
Current portion of long-term debt
Accrued liabilities
Income taxes payable
Dividends payable
Current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total Liabilities
Stockholders equity
Total Liabilities and Net Worth

Source: Company reports.

1986

1987

$73
1,878
3,836
127
6,237

$189
2,083
4,154
146
6,582

1,067
3,988
436

1,244
4,052
695

$17,642

$19,145

$864
813
103
1,967
557
178

$691
803
465
2,277
727
213

4,482

5,176

5,945
994
566

5,222
1,288
636

11,987
5,655

12,322
6,823

$17,642

$19,145

Exhibit 6 Consolidated Statements of Changes in Financial Position for Philip


Morris, 1985-1987 (millions of dollars)
1985

1986

1987

Net earnings
Depreciation and amortization
Deferred income taxes
Equity in undistributed net earnings of
unconsolidated subsidiaries and affiliates

$1,255
424
159

$1,478
655
133

$1,842
704
338

(63)

(52)

(95)

Total funds from operations


Increase in accrued liabilities and other
payments
Working capital from sales of operations
Currency translation adjustments affecting
working capital
Other, net

1,775

2,214

2,789

1,467
169

226
487

505
20

18
211

77
210

139

$3,640

$3,214

$3,453

$1,005
1,174
74
347
479

($2)
9
14
678
590

$321
318
19
718
749

508

4,864

301

$7,943
($4,303)

$1,797
$1,417

$2,426
$1,027

$149
4,666
(326)
(216)
30

$289
1,788
(3385)
(140)
31

$189
492
(1534)
(200)
26

$4,303
$637
1,926

($1,417)
($494)
1,432

($1,027)
($36)
1,396

Funds Provided by:

Total Funds Provided


Funds Used for:
Increase (decrease) in:
Cash and receivables
Inventories
Other current assets
Capital expenditures
Dividends declared
Increase in property, plant, and equipment from
income tax election
Investment in General Foods Corp. exclusive of
$718 million working capital acquired
Other, net
Total Funds Used
Net funds provided (used)
Financing Activities:
Increase in current notes payable
Long-term debt financing
Reduction of long-term debt
Purchase of treasury stock
Issuance of shares
Funds (used for) Provided from Financing
Activities
Increase (decrease) in working capital
Working capital (year-end)
Source: Company reports.

Exhibit 7

Financial Summary for Philip Morris by Business Segment, 1982-1987 (millions of dollars)
1982

1983

1984

1985

1986

1987

Tobacco:
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profit/Identifiable assets

$7,821.8
1,475.7
5,070.7
97.7
498.0
29.10%

$9,094.9
1,647.0
5,114.3
124.7
319.9
32.20%

$9,802.0 $10,539.0 $12,691.0 $14,644.0


2,141.0
2,441.0
2,827.0
3,273.0
5,149.0
5,622.0
5,808.0
6,467.0
151.0
166.0
200.0
214.0
163.0
151.0
191.0
256.0
41.58%
43.42%
48.67%
50.61%

Food Products:
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profit/Identifiable assets

$1,632.0
95.0
7,974.00
29.0
71.0
1.19%

$9,664.0
624.0
8,629.00
167.0
395.0
7.23%

$9,946.0
605.0
9,129.00
201.0
402.0
6.63%

$3,054.0
154.0
1,736.0
136.0
80.0
8.87%

$3,105.0
170.0
1,680.0
137.0
57.0
10.12%

Beer:
Sales
Operating profit
Identifiable assets
Depreciation
Capital expenditures
Operating profit/Identifiable assets

$2,935.5
159.0
2,113.7
122.3
286.3
7.52%

$2,935.5
227.1
2,138.9
130.5
174.6
10.62%

$2,940.0
116.0
1,892.0
144.0
94.0
6.13%

$2,925.0
136.0
1,779.0
134.0
87.0
7.64%

$822.9
(2.4)
979.4

-0.25%

$945.5
(10.9)
1,007.3

-1.08%

$1,072.0
23.0
1,018.0

2.26%

$868.0
14.0
643.0

2.18%

Other a:
Sales
Operating profit (loss)
Identifiable assets
Depreciation
Capital expenditures
Operating profit/Identifiable assets
Source: Company reports.
a

Includes the Seven-Up Company, which was sold in 1986.

($9.0)

$19.0

Exhibit 9

Mergers and Acquisitions in the Food Processing and Beverage Industries, 1981-1987

Number and Dollar Value of Mergers in the Food and Beverage


Amount Paid
No. of Transactions ($ billions)
1981
1982
1983
1984
1985
1986
1987

88
83
85
79
105
127
97

$4.55
4.96
2.71
7.95
12.86
8.43
7.75

Bidder

Mergers in the Food and Beverage Industry Over $1 Billion ($ millions)


Targets
Amount
Premium
Year
Sales
Paid
Percent
Target

Philip Morris
RJ Reynolds
Nestle S.A.
Beatrice Foods
RJ Reynolds
Bond Corporate Holdings Ltd.

General Foods
Nabisco Brands
Carnation Co.
Esmark, Inc.
Heublein, Inc.
G. Heileman Brewing Co.

Source: W.T. Grimm and Co., Mergerstat Review, 1981-1987.

1985
1985
1984
1984
1982
1987

$9,022.4
5,985.0
3,370.0
4,120.0
2,140.0
1,173.8

$5,627.5
4,906.4
2,885.4
2,508.6
1,302.6
1,083.6

35.2%
31.5
9.9
39.5
36.5
21.6

Price-Earnings
Ratio

Multiple to
Book

18.7
16.7
14.4
15.7
13.1
23.0

3.5
4.1
2.7
2.5
2.7
3.2

Exhibit 10

Stock Price Indexes and Returns on Equity, 1982-1987

Stock price indexes (1981 = 100)


Kraft
Philip Morris
RJR Nabisco
Pillsbury
Food index
Tobacco index
S&P 500 index
Return on equity (ROE)
Kraft
Philip Morris
RJR Nabisco
Pillsbury
Food index
Tobacco index
S&P 500 index

1982

1983

1984

1985

1986

1987

144.1
128.8
114.8
133.0
132.9
117.7
114.7

148.5
161.2
144.8
202.1
161.1
142.4
134.5

200.6
190.0
192.2
256.4
186.9
165.7
136.4

321.2
218.3
220.1
365.4
297.6
179.2
172.3

397.3
368.7
357.4
413.5
387.4
279.7
197.6

409.3
453.0
337.0
440.8
398.8
299.0
201.5

12.6%
21.3
20.8
16.6
14.3
19.0
10.9

14.9%
22.4
17.1
15.0
17.0
18.2
11.7

17.6%
21.7
22.3
17.0
17.9
19.4
13.1

16.2%
26.5
20.8
17.3
18.0
21.6
11

23.0%
26.1
20.0
16.8
12.0
20.0
10.5

25.8%
27.0
22.8
13.5
12.5
20.3
11.8

Exhibit 11
dollars)

Pre-Bid Sales and Profit Forecasts for Kraft, 1988-1989 (millions of

1987 Est. 1988 Est. 1989


Revenues
Earnings before interest and taxes
Interest, net
Income from continuing operations before taxes
Income taxes
Accounting change
Income from continuing operations
a
Income from discontinued operations
Net income

$9,876
834
91
743
353
45

$11,200
950
95
855
333
-

$12,500
1,050
108
942
368
-

435
54

522
658

574
-

$489

$1,180

$574

Source: Analysts estimates.


a

Duracell was sold to Kohlberg, Kravis, Roberts & Co. for $1.8 billion on June 24, 1988. Duracells 1987
after-tax income was $54 million, and Krafts 1988 gain on its sale was $658 million.

Exhibit 12

Projections for Krafts Restructuring Plan, 1989-1998 (millions of dollars)

Sales
Earnings before interest and taxes
Interest
Taxes
Profit (loss) after taxes from continuing
operations
Cash flow available for capital
paymentsa
Principal payments
Preexisting debt
Bank debt
Year-end book values
Preexisting debt
Bank debt
High-yield debt
Cram-down debt
Total

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

$6,515
1,280
1,380
(39)

$6,804
1,487
1,270
89

$7,125
1,671
1,310
148

$7,481
1,755
1,286
192

$7,855
1,842
1,278
231

$8,248
1,935
1,257
278

$8,660
2,031
1,212
336

$9,093
2,133
1,155
401

$9,548
2,239
1,086
473

$10,025
2,351
1,010
550

(61)

128

213

277

333

400

483

577

680

791

2,481b

496

636

630

742

334

411

500

597

728

111
2,370

33
463

57
579

287
343

100
642

100
234

100
311

100
400

16
581

0
728

793
4,430
3,000
1,974

759
3,968
3,000
2,286

703
3,389
3,000
2,648

416
3,046
3,000
3,067

316
2,404
3,000
3,553

216
2,170
3,000
3,553

116
1,859
3,000
3,553

16
1,459
3,000
3,553

0
878
3,000
3,553

0
150
3,000
3,553

$10,197

$10,013

$9,740

$9,529

$9,273

$8,939

$8,528

$8,028

$7,431

$6,703

Sources: Kraft and casewriters estimates.


a

Cash flow available for capital payments = net income + depreciation, amortization, deferred taxes - capital expenditures - change in working capital + net proceeds from asset sales & non-cash
interest. bIncludes the $2,146 million in cash proceeds from the sale of businesses in 1989.

Exhibit 13

Stock Prices and Market Index, October 1988

Date

Philip
Morris

Oct. 3
4
5
6
7

$97.000
98.000
97.375
96.875
100.875

$60.000
58.500
59.375
59.375
60.625

10
11
12
13
14

101.125
100.750
98.875
99.250
98.625

60.750
60.375
59.500
59.250
59.500

655.320
654.680
645.470
648.480
649.230

17
18
19
20
21

100.000
95.500
94.000
99.000
97.375

60.125
88.250
90.375
90.250
92.000

651.460
658.560 Philip Morris bids $90 per share for Kraft.
652.970
666.990 RJR Nabisco management proposes a $17 billion
668.920 leveraged buyout.

24
25
26
27
28

97.500
95.875
95.500
95.000
94.750

102.000
99.000
97.500
94.500
96.500

Kraft

S&P 500

Event

638.710
637.010 Grand Metropolitan bids for Pillsbury Company.
640.020
641.360
654.830

665.760 Kraft proposes its restructuring plan and Kohlberg,


666.090 Kravis, Roberts announces its bid for RJR Nabisco.
663.820
654.240
657.280