<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
------------
Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 1-13397
CORN PRODUCTS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
22-3514823
(I.R.S. Employer Identification Number)
6500 SOUTH ARCHER AVENUE,
BEDFORD PARK, ILLINOIS 60501-1933
(Address of principal executive offices) (Zip Code)
(708) 563-2400
(Registrant's telephone number, including area code)
(Former name, former address and former
fiscal year, if changed since last report)
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 periods that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days:
Yes X No _____
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT NOVEMBER 5, 1998
Common Stock, $.01 par value 35,845,847 shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
( ALL FIGURES ARE IN MILLIONS EXCEPT PER SHARE AMOUNTS )
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------- ------------ --------------- ----------------
1998 1997 1998 1997
--------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
Net sales $359.5 $360.2 $1,065.3 $1,054.8
Cost of sales 315.3 318.4 942.2 958.9
--------------- ------------ --------------- ----------------
Gross profit 44.2 41.8 123.1 95.9
Operating expense 24.2 22.6 71.6 74.6
Restructuring charge 0 22.8 0 93.6
Spin - off costs 0 0 0 15.0
(Fees and income) from unconsolidated (3.5) (1.8) (10.4) (3.7)
affiliates
--------------- ------------ --------------- ----------------
Operating income (loss) 23.5 (1.8) 61.9 (83.6)
Financing costs 3.2 7.1 10.7 22.0
--------------- ------------ --------------- ----------------
Income (loss) before taxes 20.3 (8.9) 51.2 (105.6)
Provision (benefit) for income taxes 7.1 0.5 18.0 (25.0)
--------------- ------------ --------------- ----------------
13.2 (9.4) 33.2 (80.6)
Minority stockholder interest 0.6 0.6 1.9 1.6
=============== ============ =============== ================
Net income (loss) 12.6 (10.0) 31.3 (82.2)
=============== ============ =============== ================
Average common shares outstanding:
Basic 35.7 35.7 35.7 35.7
Diluted 35.8 35.7 35.9 35.7
Net income (loss) per common share
Basic $0.35 ($0.28) $0.87 ($2.31)
Diluted $0.35 ($0.28) $0.87 ($2.31)
See Notes To Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF:
( ALL FIGURES ARE IN MILLIONS ) SEPTEMBER 30, DECEMBER 31,
1998 1997
------------------ ----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $51 $85
Accounts receivable - net 223 182
Inventories 141 123
Prepaid expenses 19 13
Deferred tax asset 13 20
---------- -----------
TOTAL CURRENT ASSETS 447 423
---------- -----------
Investments in and loans to unconsolidated subsidiaries 111 168
Plants and properties - net 1,014 1,057
Other assets 18 18
---------- -----------
TOTAL ASSETS 1,590 1,666
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable 236 337
Accounts payable 104 90
Accrued liabilities 58 69
---------- -----------
TOTAL CURRENT LIABILITIES 398 496
---------- -----------
Non-current liabilities 38 37
Long - term debt 10 13
Deferred taxes on income 142 128
Minority stockholders' interest 8 6
STOCKHOLDERS' EQUITY
Preferred stock - authorized 25,000,000 shares-
$0.01 par value none issued -- --
Common stock - authorized 200,000,000 shares-
$0.01 par value - 35,843,113 and 35,597,360 issued
And outstanding on September 30, 1998 and
December 31, 1997, respectively 1 1
Additional paid in capital 1,020 1,020
Cumulative translation adjustment (55) (35)
Retained earnings 28 --
---------- -----------
TOTAL STOCKHOLDERS' EQUITY 994 986
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,590 $1,666
========== ===========
See Notes To Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 4
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
( ALL FIGURES ARE IN MILLIONS ) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (Loss) 13 (10) 31 (82)
Other comprehensive income/loss
Currency translation adjustment (9) 0 (20) (1)
------- ------- ------ -------
Comprehensive income 4 (10) 11 (83)
======= ======= ====== =======
</TABLE>
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
( ALL FIGURES ARE IN MILLIONS ) PREFERRED COMMON ADDITIONAL CUMULATIVE RETAINED TOTAL
STOCK STOCK PAID-IN TRANSACTION EARNINGS
CAPITAL ADJUSTMENT
-------------- ------------- ----------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $0 $1 $1,020 $(35) $0 $986
Net income for the period 31 28
Dividends Paid (3)
Translation adjustment (20) (20)
-------- ------- ----------- --------- --------- --------
Balance, September 30, 1998 $0 $1 $1,020 $(55) $28 $994
======== ======= =========== ========= --------- ========
See Notes To Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 5
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
( ALL FIGURES ARE IN MILLIONS ) FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
--------- --------
CASH FLOWS FROM ( USED FOR ) OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $31 $(82)
Non-cash charges (credits) to net income:
Depreciation 71 71
Restructuring and spin-off charges -- 109
Deferred taxes 24 (12)
Other - net 5 (7)
Equity in earnings of unconsolidated affiliates (3) 1
Changes in trade working capital:
Accounts receivable and prepaid items (50) 25
Inventories (21) 13
Due to CPC International, Inc. -- (2)
Accounts payable and accrued liabilities 4 (2)
---- ---
Net cash flows from operating activities 61 114
---- ---
CASH FLOWS FROM ( USED FOR ) INVESTING ACTIVITIES:
Capital expenditures paid (52) (65)
Proceeds from disposal of plants and properties 3 1
Investments in and loans to unconsolidated affiliates 60 (19)
---- ---
Net cash flows from (used for) investing activities 11 (83)
---- ---
Net cash flows after investments 72 31
---- ---
CASH FLOWS FROM ( USED FOR ) FINANCING ACTIVITIES:
Net change in debt (103) --
Dividends Paid (3)
Other liabilities ( deposits ) -- 9
Increase (decrease) in transfer from CPC International, Inc.,net -- (37)
---- ---
Net cash flows from ( used for ) financing activities (106) (28)
---- ---
Increase ( decrease ) in cash and cash equivalents (34) 3
Cash and cash equivalents, beginning of period 85 32
---- ---
Cash and cash equivalents, end of period $51 $35
==== ===
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE> 6
CORN PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The unaudited condensed consolidated interim financial statements
included herein were prepared by management and reflect all adjustments
(consisting solely of normal recurring items) which are, in the opinion of
management, necessary to present a fair statement of results of operations for
the interim periods ended September 30, 1998 and 1997 and the financial position
as of September 30, 1998 and December 31, 1997. The results for the three months
and the nine months ended September 30, 1998 are not necessarily indicative of
the results expected for the year.
References to "the Company" are to Corn Products International, Inc.
and its consolidated subsidiaries. These statements should be read in
conjunction with the consolidated financial statements and the related footnotes
to these statements contained in the Company's Annual Report to Stockholders
that were incorporated by reference in Form 10-KA for the fiscal year ended
December 31, 1997.
2. ACCOUNTING PRONOUNCEMENTS
Effective for fiscal years beginning after December 15, 1997 the
Financial Accounting Standards Board issued Statement No. 130 (FAS 130),
Reporting Comprehensive Income. FAS 130 requires the reporting of comprehensive
income in addition to net income from operations. Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. Other comprehensive income refers to revenues,
expenses, gains and losses that under generally accepted accounting principles
have previously been reported as separate components of equity such as currency
translation. The Company has adopted this reporting for the current year.
Also, in June 1997, FAS 131, "Disclosure About Segments of an
Enterprise and Related Information," was issued. This statement is currently in
effect and the Company is in compliance with the requirements of this
pronouncement. The Company is in one business segment - corn refining - and
produces a wide variety of products.
3. INVENTORIES ARE SUMMARIZED AS FOLLOWS:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Finished and in process ........................................ 60 51
Raw materials .................................................. 51 43
Manufacturing supplies ......................................... 30 29
--- ---
Total inventories .............................................. 141 123
=== ===
</TABLE>
<PAGE> 7
4. FINANCIAL INSTRUMENTS
COMMODITIES
Following the Company's policy of hedging its margin exposure to firm
priced business, it had open corn futures contracts of $118 million for delivery
of corn beyond September 30, 1998. Of the total commitment, $30 million is due
in December, 1998, $51 million is due in March, 1999, $13 million is due in May,
1999, and $24 million is due July, 1999 through December, 1999. At September 30,
1998, the price of corn under these contracts was $14.4 million above market
quotations of the same date.
5. RESTRUCTURING CHARGES
In 1997, the Company recorded a $94 million pre-tax restructuring
charge. The restructuring charge includes the costs of the separation of
facilities that were used by CPC International, Inc. to produce both consumer
foods and corn-derived products. The majority of the restructuring is taking
place in the Company's international operations. The spin-off charge includes
the direct costs of the spin-off including legal, tax and investment banking
fees. The restructuring change is summarized below:
<TABLE>
<CAPTION>
$ Millions 1997 Charge To Be Utilized In
Charge Utilized Future Periods
------ -------- -----------------
<S> <C> <C> <C>
RESTRUCTURING CHARGES
Employee costs .................. 54 50 4
Plant and support facilities .... 23 20 3
Other............................ 17 13 4
-- -- --
Total............................ 94 83 11
== == ==
</TABLE>
6. SUBSEQUENT EVENT
On October 21, 1998, the Company announced the signing of a definitive
agreement to acquire the controlling interest in Arancia-CPC S.A. de C.V., it's
joint venture in Mexico, and Poliquimicos del Ecuador S.A., a sorbital
manufacturer in Ecuador.
The agreement provides for an exchange of cash and stock and will be
accounted for under the purchase method. The transaction is subject to Mexican
regulatory approvals and certain other conditions. It is expected to close in
the fourth quarter of this year.
<PAGE> 8
ITEM II
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998
WITH COMPARATIVE FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1997
On December 31, 1997, CPC International, Inc. spun-off its Corn
Refining Business as a separate independent Company. The comparative financial
statements included in the report for the periods prior to January 1, 1998, were
prepared by attributing the historical data for the Corn Refining Business of
CPC International, Inc. to the Company utilizing accounting policies consistent
with those applied in the preparation of CPC's historical financial statements.
Since the Corn Refining Business was operated as a division of CPC in prior
periods, such financial information and statements may not necessarily reflect
the consolidated results of operations or financial position of the Company or
what the results of operations would have been if the Company had been an
independent, public company during these periods.
REPORTED RESULTS
Net Sales for the quarter of $359.5 million were in line with sales of
$360.2 million reported last year. Volume gains of 2% were offset by lower
exchange rates. Year to date, Net Sales of $1,065.3 million were up 1% over 1997
as volume increases of 3% were offset by lower exchange rates.
Costs of Sales for the quarter were down 1% despite the higher volumes
due to lower corn costs and exchange rates. Year to date, Costs of Sales were
down 2% primarily relating to lower corn costs.
Gross Profit for the quarter increased 5.4% to $44.2 million as the
Gross Profit Margin improved to 12.3% of net sales from 11.6% in 1997. Improved
margins are primarily the result of improved selling prices in the United
States. Year to date, Gross Profit of $123.1 million was $27.1 million higher
than 1997, while Gross Profit Margins advanced to 11.5% from 9.1% in 1997.
Operating Expenses for the quarter totaled $24.2 million, a 7% increase
over 1997. Year to date Operating Expenses of $71.6 million are 4% lower than
1997's $74.6 million. Lower Operating Expense in local operations more than
offset the additional corporate overhead required to operate on a stand-alone
basis which was not incurred in 1997 prior to the spin-off.
During the second quarter of 1997, the Company established a
restructuring reserve of $71 million and spin-off charges of $15 million to
facilitate the separation of facilities and operations that were used by CPC
International, Inc. During the third quarter of 1997, the Company increased the
$71 million reserve to $94 million. The Company has substantially completed
charges to this reserve with approximately $11 million remaining to be utilized
for outstanding items (see note 5).
Third quarter fees and income from unconsolidated subsidiaries
increased to $3.5 million, from $1.8 million in 1997. Year to date, such fees
and income increased to $10.4 million from $3.7 million. The improvement is
primarily attributable to the Mexican joint venture resulting from improved
volumes
<PAGE> 9
and pricing in the Mexican market, other fees and income have remained fairly
constant compared to the prior year.
Financing Costs for the quarter were $3.2 million, 55% lower than last
year on significantly lower borrowings. Year to date, Financing Costs totaled
$10.7 million, 51% lower than 1997. Lower borrowing resulted from better
operating performance and the consequent improved cash flow with the application
of such use for debt retirement and debt restructuring earlier in the year.
The Company expects a 35% effective tax rate for 1998. The tax rate is
estimated based on the expected mix of domestic and foreign earnings for the
year. The change from the prior year is due to certain non-deductible charges
included in the restructuring expenses and a change in domestic and foreign
earnings streams previously reflected as part of CPC International, Inc.
Net Income for the quarter of $12.6 million, or $0.35 per diluted share
compares to a loss last year of $10.0 million or $0.28 per share. Excluding
restructuring charges, 1997 Net Income would have been $7.8 million or $0.22 per
share. For the nine months, the Company earned $31.3 million or $0.87 per
diluted share, compared to an $82.2 million loss, or $2.31 per share loss, in
1997. Excluding the special restructuring and spin-off charges, the Company was
at a break even last year.
OPERATING HIGHLIGHTS ON A RESTATED BASIS
ACTUAL REPORTED RESULTS LAST YEAR INCLUDED OPERATIONS OUTSIDE NORTH AMERICA ON A
THREE-MONTH ACCOUNTING LAG BASIS. BEGINNING IN 1998, THE FINANCIAL YEAR FOR ALL
UNITS WAS CHANGED TO PUT THEM ON THE SAME DECEMBER YEAR-END BASIS. FOR
COMPARATIVE PURPOSES, THE OTHER OPERATIONS 1997 BUSINESS RESULTS WERE RESTATED
TO PUT THEM ON A COMPARABLE FISCAL YEAR-END BASIS. ALL FURTHER COMMENTS REFER TO
THE COMPARABLE FINANCIAL QUARTER AND EXCLUDE THE SPECIAL CHARGE FOR 1997.
TABLE OF NET SALES AND OPERATING INCOME RESTATED FOR CHANGE IN YEAR END
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales
North America $226.9 $228.3 $ 666.4 $ 654.2
Other Operations 132.6 140.5 398.9 400.3
------ ------ -------- --------
Total 359.5 368.8 1,065.3 1,054.5
Adjustments for fiscal year end 0 (8.6) 0 0.3
------ ------ -------- --------
Reported 359.5 360.2 1,065.3 1,054.8
====== ====== ======== ========
Operating Income
North America 6.3 (0.3) 11.1 (30.1)
Other Operations 19.3 24.4 57.8 64.0
Corporate (2.1) 0 (7.0) (2.2)
----- ----- -------- --------
Total 23.5 24.1 61.9 31.7
Adjustments for fiscal year end 0 3.1 0 (6.7)
----- ----- -------- --------
23.5 21.0 61.9 25.0
Restructuring Charges and Spin - Off
Costs 0 22.8 0 108.6
----- ----- -------- --------
Reporrted 23.5 (1.8) 61.9 (83.6)
===== ===== ======== ========
</TABLE>
<PAGE> 10
THE FOLLOWING DISCUSSION COMMENTS UPON
CHANGES BETWEEN THE PERIODS 1998 AND 1997 AS RESTATED
TOTAL COMPANY Net Sales in the third quarter decreased 2.5% from last
year's comparable quarter, but showed a 2% increase in volumes. Lower exchange
rates reduced sales by 5.3% and while there was some price improvement, overall
pricing did not keep up with devaluation.
Operating Income for the quarter of $23.5 million was off 3% from last
year's comparative quarter, which had no comparable corporate overhead charge
during the spin-off restructuring period, but was up 15% over the second quarter
of 1998. For the nine-month period, Operating Income almost doubled from $31.7
million to $61.9 million.
NORTH AMERICAN Net Sales for the third quarter were down 1%, with
volumes essentially unchanged. High Fructose Corn Syrup volumes were off about
1%, as unusually high demand earlier in the year did not allow the usual
inventory building for the strong summer season, thus restricting sales somewhat
in the third quarter. Dextrose volumes improved compared to earlier quarters of
1998, but were still slightly below last year's levels. With pricing of most
products sold in the United States and Canada primarily on an annual contracted
basis, there was little price change effect from quarter to quarter. However,
compared to last year, U.S. HFCS and Glucose prices are up significantly.
Canadian sales revenue and income were reduced because of the 9% devaluation
versus last year.
The Mexican joint venture results improved on strong volumes and better
pricing, offsetting the effects of a 20% devaluation of the Peso in the third
quarter of 1998.
Third quarter Operating Income in North America improved by more than
$6 million as "spreads" (net sales less raw material cost) were generally better
than last year.
OTHER OPERATIONS Net Sales in the third quarter were off 5.6% due to
weak exchange rates in a number of countries; also lower corn cost allowed price
reductions. Volumes were up 5.5% as continued strong High Maltose sales for the
brewing industry offset declines in other business sectors. As customers are
reducing their inventories in the face of higher interest rates imposed in
several South American countries to protect the value of local exchange rates,
volume growth slowed, particularly in high margin products. The resulting
unfavorable product mix reduced the Other Operations division's third quarter
Operating Income by 21% from a very strong quarter last year. The division's
profits for the quarter; however, were higher than those of the first two
quarters of this year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company's Total Assets declined to $1,590 million
from $1,666 million at December 31, 1997. This decline was the result of the
repayment of a $60 million dollar loan made by the Company to Arancia CPC, S.A.
de C.V., its joint venture in Mexico. The proceeds from the loan along with cash
were used to repay $103 million of short-term debt in the United States. An
increase in seasonal working capital needs offset positive operating cash flows
from earnings and depreciation.
The Company has a $340 million 5-year revolving credit facility in the United
States due December 2002 and a $62 million Canadian bridge loan due December 31,
1998. There is sufficient borrowing capacity under the U.S. revolver to repay
the Canadian bridge loan. In addition, the Company has a number of short-term
credit facilities consisting of operating lines of credit.
At September 30, 1998, the Company has total debt outstanding of $246 million.
The debt outstanding consisted of $90 million drawn from the unsecured revolving
credit facility in the United States at a rate
<PAGE> 11
of 5.9% and $101 million drawn on the Canadian bridge loan and operating lines
at a rate of 5.5%. The remaining borrowings were drawn against the various local
country operating lines at a weighted average rate of 17.1%.
The Company previously announced the execution of definitive agreements
relating to the acquisition by the Company of the controlling interest in its
Mexican joint venture. The first phase of this transaction is expected to
close during the fourth quarter of 1998 and will require, as part of the
consideration paid by the Company, a cash payment of $47 million dollars. The
Company expects to satisfy this cash requirement from existing cash resources
plus borrowings under the U.S. revolver. The Company expects to make cash
payments required in the subsequent phases of this transaction from existing
cash resources, future borrowings and future cash flows.
For the nine-month period, capital expenditures totaled $52 million as compared
to $65 million for the same period last year. The lower spending level reflects
the lower capital needs as the Company's major capital expenditure program of
the last several years was substantially completed.
THE YEAR 2000 ISSUE
The Year 2000 issue is the result of certain computer programs being written
using two digits rather than four to define the applicable year. During 1997,
the Company developed a plan to address the Year 2000 issue and began converting
its computer systems to be Year 2000 compliant. A team with appropriate senior
management support was established to identify and correct Year 2000 issues.
Internal software with non-compliant codes is expected to be either fixed or
replaced with software that is compliant with the Year 2000 requirements. This
includes all of the Company's manufacturing plants, building facilities, and
business systems. If not corrected, affected computer applications could fail or
create erroneous results.
The Year 2000 plan involves assessment, evaluation, testing, and remediation.
The Company has substantially completed the assessment phase of the plan which
consisted of identifying information technology ("IT") hardware and software and
non-IT devices containing embedded systems, such as telecommunications and
internal security systems, and prioritizing these systems based on their
criticality to business operations. Currently, the Company is engaged in
evaluation and testing. Evaluation involves the analysis of identified IT and
non-IT systems for Year 2000 compliance. In addition, through use of third party
consultants, the Company continues an ongoing process of evaluating vendor
statements and publicly available information about the Year 2000 compliance of
various systems in operation at its sites. Systems, particularly those of high
or medium priority, which appear non-compliant will be modified or replaced as
appropriate. Testing is an ongoing process, which has already begun for some
systems, and which the Company anticipates will be completed in August, 1999.
The Company also is communicating with suppliers and service providers to
ascertain whether the equipment and services provided by them will be Year 2000
compliant, as well as those providers' internal compliance. This is being done
because Year 2000 compliance depends not only on our internal manufacturing and
administrative processes, but also on the ability of the different participants
in the supply chain to interchange products, services and information without
interruption. Until the responses from suppliers and providers have been
received and analyzed, the Company cannot assess the potential impact of third
party supplier and service provider Year 2000 issues.
Under the Year 2000 Program, the Company is also exploring alternative solutions
and developing contingency plans for handling mission critical areas in the
event that remediation is unsuccessful. Completion of the Program, including
establishment of contingency plans, is anticipated in August 1999.
<PAGE> 12
The Company anticipates that contingency plans may include the stockpiling of
necessary supplies, creation of computerized or manual back-up systems, and
replacement of vendors or addition of new vendors. The Company will continue to
develop contingency plans as more information becomes available through the
remediation and testing phase, and for third parties, upon analysis of third
party responses and other publicly available information.
The total costs of Program activities to achieve Year 2000 readiness are
currently estimated at approximately $7 to $10 million of expense and planned
capital not directly related to Year 2000 of an additional $5 to $7 million. As
of November 1998, the direct costs incurred by the Program to remediate Year
2000 issues were $2 million. Corn Products International, Inc.'s Year 2000
Program is subject to a variety of risks and uncertainties, some of which, such
as the Year 2000 preparedness of third party vendors and service providers and
unidentified issues with hardware, software and embedded systems, are beyond the
Company's control. No assurance can be given that the Company will achieve Year
2000 readiness prior to January 1, 2000 or a critical failure date. There can be
no assurance that the project will be successfully completed on a timely basis,
and a failure to successfully complete the Year 2000 project could have a
material adverse impact on the Company's ability to manufacture and/or deliver
its products.
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes or may include certain forward-looking statements that
involve risks and uncertainties. This Form 10-Q contains certain forward-looking
statements concerning the Company's financial position, business strategy,
budgets, projected costs and plans and objectives of management for future
operations as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "expect," "intend," and other similar
expressions. Although the Company believes its expectations reflected in such
forward-looking statements are based on reasonable assumptions, stockholders are
cautioned that no assurance can be given that such expectations will prove
correct and that actual results and developments may differ materially from
those conveyed in such forward-looking statements. Important factors that could
cause actual results to differ materially from the expectations reflected in the
forward-looking statements herein include fluctuations in worldwide commodities
market and the associated risks of hedging against such fluctuations;
fluctuations in aggregate industry supply and market demand; general economic,
business and market conditions in the various geographic regions and countries
in which the Company manufactures and sells its products, including fluctuations
in the value of local currencies; costs or difficulties related to the
establishment of the Company as an independent entity; and increased competitive
and/or customer pressure in the corn refining industry. Such forward-looking
statements speak only as of the date on which they are made and the Company does
not undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this Form 10-Q. If the Company does
update or correct one or more forward-looking statements, investors and others
should not conclude that the Company will make additional updates or corrections
with respect thereto or with respect to other forward-looking statements.
ITEM III
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NOT APPLICABLE
<PAGE> 13
PART II OTHER INFORMATION
ITEM: 5. LITIGATION
In October 1998, the Company received a Notice of Violations and Intent To File
Suit under the Federal Water Pollution Control Act from an environmental group
known as the San Francisco Baykeeper and Bill Jennings, an individual. The
letter claims that the Company's Stockton, California, manufacturing facility
has violated its sewer discharge permits by discharging sulfides which have
allegedly caused corrosion to the City of Stockton's sewer system, requiring a
$19 million retrofit of the Stockton Southern Industrial Trunkline. Although it
is impossible to predict the outcome of any future legal proceeding related to
this claim, the Company believes that the claimants lack standing to bring suit
and that in any event, the Company has meritorious defenses to the alleged
claims.
ITEM: 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits pursuant to Item 601 of Regulation S-K.
Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index hereto.
b) Reports on Form 8-K.
On September 16, 1998, a report was filed which was the press release
dated September 16, 1998 announcing the declaration of quarterly
dividends of $0.08 per share and a stock repurchase program of up to
two million shares.
On October 21, 1998, a report was filed disclosing a definitive
agreement enabling Corn Products International, Inc. to acquire the
controlling interest in its Mexican joint venture Arancia-CPC S.A. de
C.V. and in Poliquimicos del Ecuador S.A.
<PAGE> 14
CORN PRODUCTS INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORN PRODUCTS INTERNATIONAL, INC.
DATE: November 13, 1998
/s/ James Ripley
-----------------------
James Ripley
Chief Financial Officer
DATE: November 13, 1998
/s/ Jack Fortnum
------------------------
Jack Fortnum
Comptroller - Principal
Accounting Officer
<PAGE> 15
EXHIBIT INDEX
NUMBER DESCRIPTION OF EXHIBIT
11 Statement re: computation of earnings per share
27.1 Financial Data Schedule
27.2 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
EARNINGS PER SHARE
CORN PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF NET INCOME
PER SHARE OF CAPITAL STOCK
(UNAUDITED)
<TABLE>
<CAPTION>
(ALL FIGURES ARE IN MILLIONS EXCEPT PER SHARE DATA ) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Average shares outstanding - Basic 35.7 35.6
Effect of dilutive securities:
Stock options 0.1 0.3
---- ----
Average share outstanding - Assuming dilution 35.8 35.9
==== ====
Income from continuing operations 12.6 31.3
Net income 12.6 31.3
Income per share - Basic and Dilutive
Continuing operations .35 .87
Net income .35 .87
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> SEP-30-1997
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 192
<ALLOWANCES> 0
<INVENTORY> 147
<CURRENT-ASSETS> 416
<PP&E> 2,170
<DEPRECIATION> 1,119
<TOTAL-ASSETS> 1,642
<CURRENT-LIABILITIES> 328
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 954
<TOTAL-LIABILITY-AND-EQUITY> 1,642
<SALES> 1,055
<TOTAL-REVENUES> 0
<CGS> 959
<TOTAL-COSTS> 1,034
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> (106)
<INCOME-TAX> (25)
<INCOME-CONTINUING> (81)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82)
<EPS-PRIMARY> (2.31)
<EPS-DILUTED> (2.31)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 51
<SECURITIES> 0
<RECEIVABLES> 223
<ALLOWANCES> 0
<INVENTORY> 141
<CURRENT-ASSETS> 447
<PP&E> 2,199
<DEPRECIATION> 1,185
<TOTAL-ASSETS> 1,590
<CURRENT-LIABILITIES> 398
<BONDS> 0
<COMMON> 1
0
0
<OTHER-SE> 1,020
<TOTAL-LIABILITY-AND-EQUITY> 1,590
<SALES> 1,065
<TOTAL-REVENUES> 0
<CGS> 942
<TOTAL-COSTS> 1,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 51
<INCOME-TAX> 18
<INCOME-CONTINUING> 33
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
</TABLE>
