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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, 1999
Commission file number 1-13397
CORN PRODUCTS INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 22-3514823
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6500 SOUTH ARCHER AVENUE, BEDFORD PARK, ILLINOIS 60501-1933
(Address of Principal Executive Offices) ---------------------------
(Zip Code)
Registrant's telephone number, including area code (708) 563-2400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock, $.01 par value per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
(currently traded with Common Stock)
Securities registered pursuant to Section 12(g) of the Act:
NONE
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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. [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant (based upon the per share closing price of
$23.75 on March 21, 2000, and, for the purpose of this calculation only, the
assumption that all Registrant's directors and executive officers are
affiliates) was approximately $32,951,000.
The number of shares outstanding of the Registrant's Common Stock, par
value $.01 per share, as of March 21, 2000, was 35,202,654.
Documents Incorporated by Reference:
Information required by Part II (Items 6, 7 and 8) and Part IV (Item 14(a)(1))
of this document is incorporated by reference to certain portions of the
Registrant's 1999 Annual Report to Stockholders.
Information required by Part III (Items 10, 11, 12 and 13) of this document is
incorporated by reference to certain portions of the Registrant's definitive
Proxy Statement distributed in connection with its 2000 Annual Meeting of
Stockholders.
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PART I.
ITEM 1. BUSINESS
THE COMPANY
Corn Products International, Inc. (the "Company") was incorporated as a
Delaware corporation in March 1997 to assume the operations of the corn refining
business of Bestfoods, formerly CPC International Inc. ("Bestfoods") and to
effect the distribution of 100 percent of the outstanding shares of the Company
to the Bestfoods common stockholders. On December 31, 1997, Bestfoods
transferred the assets and related liabilities of its corn refining business to
the Company. Effective at 11:59:59 p.m. on December 31, 1997, Bestfoods
distributed all of the common stock of the Company to holders of common stock of
Bestfoods. Since that time, the Company has operated as an independent company
whose common stock is traded on the New York Stock Exchange. Unless the context
indicates otherwise, references to the "Company" and "Corn Products" refer to
the corn refining business of Bestfoods for periods prior to January 1, 1998 and
to Corn Products International, Inc. and its subsidiaries for the periods on or
after such date.
OVERVIEW
The corn refining business dates back to the original formation of
Bestfoods' predecessor over 90 years ago. In 1906, Corn Products Refining
Company was formed through an amalgamation of virtually all the corn syrup and
starch companies in the United States. International expansion followed soon
thereafter and in 1928 Latin American operations commenced in Brazil, followed
quickly by expansions into Argentina and Mexico.
Corn Products International, Inc., together with its subsidiaries,
produces a large variety of food ingredients and industrial products derived
from the wet milling of corn and other starch-based materials (such as tapioca
and yucca). The Company is one of the largest corn refiners in the world and the
leading corn refiner in Latin America. In addition, it is the world's leading
producer of dextrose and has strong regional leadership in cornstarch. The
Company's consolidated operations are located in 15 countries with 27 plants
and, in 1999, the Company had consolidated net sales of approximately $1.73
billion. The Company also holds interests in 7 other countries through
unconsolidated joint ventures and allied operations, which operate 15 additional
plants. Approximately 70 percent of the Company's 1999 revenues were generated
in North America with the remainder coming from South America, Asia and Africa.
Corn refining is a capital-intensive two-step process that involves the
wet milling and processing of corn. During the front-end process, corn is
steeped in water and separated into starch and co-products such as animal feed
and germ. The starch is then either dried for sale or further modified or
refined through various processes to make sweeteners and other starch-based
products designed to serve the particular needs of various industries. The
Company's sweetener products include high fructose corn syrups ("HFCS"), glucose
corn syrups, high maltose corn syrups, dextrose, maltodextrins and glucose and
corn syrup solids. The Company's starch-based products include both industrial
and food grade starches.
The Company supplies a broad range of customers in over 60 industries.
The Company's most important customers are in the food and beverage,
pharmaceutical, paper products, corrugated and
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laminated paper, textile and brewing industries and in the animal feed markets
worldwide. The Company believes its customers value its local approach to
service.
BUSINESS STRATEGY
Corn Products International's vision is to be "Your local resource,
worldwide" to users of corn refined products. We plan on working toward
achieving our Vision by continuously focusing on our customers, by providing an
environment that attracts and retains competent and committed employees and by
seeking to implement the following closely linked strategies, pursuing our
"Strategize globally - Execute locally" approach:
- - Continue to drive for leadership in delivered cost efficiency in the
markets we serve. Since ours is a cost-driven business, we intend to
continue implementing productivity improvements and cost-reduction efforts
at our factories. We expect to improve facility reliability with ongoing
preventative maintenance, and continue to drive down logistics, raw
material and supplies cost through a combination of local and corporate
strategic procurement. In the Sales, General and Administrative areas, we
plan on continuing to benchmark and analyze costs and processes to further
assure cost competitiveness.
- - Maintain our leadership positions - globally in dextrose, and regionally in
starch. We believe that our ongoing expansion and product-quality
investments position the Company for continued sales growth. We intend to
invest to satisfy future profitable customer demand and to maintain our
share leadership.
- - In North America, concentrate on continuing to restore acceptable
profitability in the United States, and seek investment opportunities to
strengthen this important business further. In the near term, given the US
pricing environment, we plan to give priority to reducing our cost
structure and optimizing volumes and product mix to deliver earnings
performance.
- - In the Rest of the World (ROW), we plan to further improve our solid South
American business through investing in profitable internal and external
growth opportunities; elsewhere, we intend to selectively enter new markets
through acquisitions and alliances to enhance our geographic business
position.
- - Evaluate other major growth investment in and outside our current
geographic and product portfolio reach. We plan to act on those that we
judge to be clearly beneficial to our long-term market position, earnings
growth and shareholder value.
PRODUCTS
The Company's sweetener products account for approximately half of net
sales while starch products and co-products each account for approximately one
quarter of net sales.
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Sweetener Products. The Company's sweetener products accounted for
approximately 51 percent, or $884 million, of the Company's net sales in 1999;
50 percent, or $731 million, of its net sales in 1998; and 54 percent, or $761
million, of its net sales in 1997.
High Fructose Corn Syrup: The Company produces three types of
high fructose corn syrup: (i) HFCS-55, which is primarily used as a
sweetener in soft drinks made in the United States, Canada, Mexico and
Japan, (ii) HFCS-42, which is used as a sweetener in various consumer
products such as fruit-flavored beverages, yeast-raised breads, rolls,
dough, ready-to-eat cakes, yogurt and ice cream, and (iii) HFCS-90
which is used in specialty and low calorie foods.
Glucose Corn Syrups: Corn syrups are fundamental ingredients
in many industrial products and are widely used in food products such
as baked goods, snack foods, beverages, canned fruits, condiments,
candy and other sweets, dairy products, ice cream, jams and jellies,
prepared mixes and table syrups. The Company offers corn syrups that
are manufactured through an ion exchange process, a method that creates
the highest quality, purest corn syrups.
High Maltose Corn Syrup: This special type of glucose syrup
has a unique carbohydrate profile, making it ideal for use as a source
of fermentable sugars in brewing beers. High maltose corn syrups are
also used in the production of confections, canning and some other food
processing applications.
Dextrose: The Company was granted the first U.S. patent for
dextrose in 1923. The Company currently produces dextrose products that
are grouped in three different categories - monohydrate, anhydrous and
specialty. Monohydrate dextrose is used across the food industry in
many of the same products as glucose corn syrups, especially in
confectionery applications. Anhydrous dextrose is used to make
solutions for intravenous injection and other pharmaceutical
applications, as well as some specialty food applications. Specialty
dextrose products are used in a wide range of applications, from
confectionery tableting to dry mixes to carriers for high intensity
sweeteners. Dextrose also has a wide range of industrial applications,
including use in wall board and production of biodegradable surfactants
(surface agents), humectants (moisture agents), and as the base for
fermentation products including vitamins, organic acids, amino acids
and alcohol.
Maltodextrins and Glucose and Corn Syrup Solids: These
products have a multitude of food applications, including formulations
where liquid corn syrups cannot be used. Maltodextrins are resistant to
browning, provide excellent solubility, have a low hydroscopicity (do
not retain moisture), and are ideal for their carrier/bulking
properties. Corn syrup solids have a bland flavor, remain clear in
solution, and are easy to handle and also provide bluing properties.
Starch Products. Starch products accounted for approximately 22
percent, or $375 million, of the Company's net sales in 1999; 25 percent, or
$357 million, of its net sales in 1998; and 23 percent, or $328 million, of its
net sales in 1997. Starches are an important component in a wide range of
processed foods, where they are used particularly as a thickener and binder.
Cornstarch is also sold to cornstarch packers for sale to consumers. Starches
are also used in paper production to produce a smooth surface for printed
communications and to improve strength in today's recycled papers. In the
corrugating industry, starches are used to produce high quality adhesives for
the production of shipping containers, display board and other corrugated
applications. The textile industry has successfully used starches for over a
century to provide size and finishes for manufactured products. Industrial
starches are used in the
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production of construction materials, adhesives, pharmaceuticals and cosmetics,
as well as in mining, water filtration and oil and gas drilling.
Enzymes. Enzymes are produced and marketed for a variety of food and
industrial applications.
Co-Products. Co-products and others accounted for 27 percent, or $477
million, of the Company's net sales in 1999; 25 percent, or $360 million, of its
net sales in 1998; and 23 percent, or $329 million, of its net sales in 1997.
Refined corn oil is sold to packers of cooking oil and to producers of
margarine, salad dressings, shortening, mayonnaise and other foods. Corn gluten
feed is sold as animal feed. Corn gluten meal and steepwater are sold as
additives for animal feed.
OPERATIONS
The Company's North American operations, which include the U.S., Canada
and Mexico, operate 11 plants producing regular and modified starches, dextrose,
high fructose and high maltose corn syrups and corn syrup solids, dextrins and
maltodextrins, caramel color and sorbitol. The Company's plant in Bedford Park,
Illinois is a major supplier of starch and dextrose products for the Company's
U.S. and export customers. The Company's other U.S. plants in Winston-Salem,
North Carolina and Stockton, California enjoy strong market shares in their
local areas, as do the Company's Canadian plants in Cardinal, London and Port
Colborne, Ontario. The Company is the largest corn refiner in Mexico and was
first to produce HFCS-55 locally for sale to the Mexican soft drink bottling
industry, having completed an HFCS channel at the San Juan Del Rio plant in
1997.
The Company is the largest corn refiner in South America, with leading
market shares in Chile, Brazil and Colombia and a strong position in Argentina.
Its South American consolidated operations have 11 plants that produce regular,
modified, waxy and tapioca starches, high maltose and corn syrups, dextrins and
maltodextrins, dextrose, caramel color, sorbitol and vegetable adhesives.
The Company has additional subsidiaries in Kenya, South Korea, Malaysia
and Pakistan, which operate five additional plants. These operations produce
modified, regular, waxy and tapioca starches, dextrins, glucose, dextrose and
caramel color.
In addition to the operations in which it engages directly, the Company
has strategic alliances through technical license agreements with companies in
Australia, India, Japan, New Zealand, Thailand, South Africa, Zimbabwe, Serbia
and Venezuela. As a group, the Company's strategic alliance partners operate 15
plants and produce high fructose, glucose and high maltose syrups (both corn and
tapioca), regular, modified, waxy and tapioca starches, dextrose and dextrins,
maltodextrins and caramel color. These products have leading market positions in
many of their target markets.
COMPETITION
The corn refining industry is highly competitive. Most of the Company's
products compete with virtually identical products and derivatives manufactured
by other companies in the industry. The U.S. is the most competitive market with
participation by eleven corn refiners. Competitors include ADM Corn Processing
Division ("ADM") (a division of Archer Daniels Midland Company), Cargill, A.E.
Staley Manufacturing Co. ("Staley") (a subsidiary of Tate & Lyle, PLC) and
National Starch and Chemical Company ("National Starch") (a subsidiary of
Imperial Chemicals Industries plc). Mexico and Canada face competition from US
imports and local production including ALMEX, a Mexican joint venture between
ADM and Staley. In South America, Cargill and National Starch have corn-refining
operations
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in Brazil and Staley has operations in Argentina. Other local corn refiners also
operate in many of our markets. Competition within markets is largely based on
price, quality and product availability.
Several of the Company's products also compete with products made from
raw materials other than corn. High fructose corn syrup and monohydrate dextrose
compete principally with cane and beet sugar products. Co-products such as corn
oil and gluten meal compete with products of the corn dry milling industry and
with soybean oil and soybean meal. Fluctuations in prices of these competing
products may affect prices of, and profits derived from, the Company's products.
CUSTOMERS
The Company supplies a broad range of customers in over 60 industries.
Historically, Bestfoods' worldwide branded foods business has been one of the
Company's largest customers, accounting for approximately 7 percent of total
sales in 1999. Approximately 18 percent of the Company's 1999 net sales were of
HFCS to international, regional and local companies engaged in the soft drink
industry, primarily in North America, and 13 percent of its 1999 net sales were
to international, regional and local companies engaged in the brewing industry.
RAW MATERIALS
The basic raw material of the corn refining industry is yellow dent
corn. In the United States, the corn refining industry processes about 10
percent to 15 percent of the annual U.S. corn crop. The supply of corn in the
United States has been, and is anticipated to continue to be, adequate for the
Company's domestic needs. The price of corn, which is determined by reference to
prices on the Chicago Board of Trade, fluctuates as a result of three primary
supply factors -- farmer planting decisions, climate and government policies --
and three major market demand factors -- livestock feeding, shortages or
surpluses of world grain supplies and domestic and foreign government policies
and trade agreements.
Corn is also grown in other areas of the world, including Canada, South
Africa, Argentina, Brazil, China and Australia. The Company's affiliates outside
the United States utilize both local supplies of corn and corn imported from
other geographic areas, including the United States. The supply of corn for
these affiliates is also generally expected to be adequate for the Company's
needs. Corn prices for the Company's non-U.S. affiliates generally fluctuate as
a result of the same factors that affect U.S. corn prices.
Due to the competitive nature of the corn refining industry and the
availability of substitute products not produced from corn, such as sugar from
cane or beet, end product prices may not necessarily fluctuate in relation to
raw material costs of corn.
Approximately 50 percent of the Company's starch and refinery products
are sold at prices established in supply contracts lasting for periods of up to
one year. The remainder of the Company's starch and refinery products is not
sold under firm pricing arrangements and actual pricing for those products is
affected by the cost of corn at the time of production and sale.
The Company follows a policy of hedging its exposure to commodity
fluctuations with commodities futures contracts for certain of its North
American corn purchases. All firm priced business is hedged when contracted.
Other business may or may not be hedged at any given time based on management's
judgment as to the need to fix the costs of its raw materials to protect the
Company's profitability. Realized gains and losses arising from such hedging
transactions are considered an integral
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part of the cost of those commodities and are included in the cost when
purchased. See Registrant's Annual Report to Stockholders "Management Analysis
and Discussion" section on "Risk and Uncertainties - Commodity Costs."
GEOGRAPHIC SCOPE
The Company engages in business in 22 countries, operating directly and
through affiliates in 14 countries with 27 plants and indirectly through joint
ventures and technical licensing agreements elsewhere in South America, Asia,
Africa, Australia and New Zealand. The Company has wholly owned operations in
North America, South America, Asia and Africa, and other joint venture interests
and licensing and technical agreements in South America, Asia and Africa. In
1999, approximately 70 percent of the Company's net sales was derived from its
operations in North America and 30 percent from operations in other geographic
areas, primarily South America (representing approximately 70 percent of sales
and operating income of other geographic areas). See Note 12 of Notes to
Consolidated Financial Statements for certain financial information with respect
to geographic areas.
RESEARCH AND DEVELOPMENT
The Company's product development activity is focused on developing
product applications for identified customer and market needs. Through this
approach, the Company has developed value-added products for use in the
corrugated paper, food, textile, baking and confectionery industries. The
Company usually collaborates with customers to develop the desired product
application either in the customers' facilities, the Company's technical service
laboratories or on a contract basis. The Company's marketing, product technology
and technology support staff devote a substantial portion of their time to these
efforts. Product development is enhanced through technology transfers pursuant
to existing licensing arrangements.
SALES AND DISTRIBUTION
Salaried sales personnel, who are generally dedicated to customers in a
geographic region, sell the Company's products directly to manufacturers and
distributors. In addition, the Company has a staff that provides technical
support to the sales personnel on an industry basis. The Company generally
utilizes contract truck drivers to deliver bulk products to customer
destinations but also has some of its own trucks for product delivery. In North
America, the trucks generally ship to nearby customers. For those customers
located considerable distances from Company plants, a combination of railcars
and trucks is used to deliver product. Railcars are generally leased for terms
of five to fifteen years.
PATENTS, TRADEMARKS AND TECHNICAL LICENSE AGREEMENTS
The Company owns a number of patents, which relate to a variety of
products and processes, and a number of established trademarks under which the
Company markets such products. The Company also has the right to use certain
other patents and trademarks pursuant to patent and trademark licenses. The
Company does not believe that any individual patent or trademark is material.
There is not currently any pending challenge to the use or registration of any
of the Company's significant patents or trademarks that would have a material
adverse impact on the Company or its results of operations.
The Company is a party to eight technical license agreements with third
parties in other countries whereby the Company provides technical, management
and business advice on the operations of corn refining businesses and receives
royalties in return. These arrangements provide the Company with
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product penetration in the various countries in which they exist, as well as
experience and relationships that could facilitate future expansion. The
duration of the agreements ranges from one to ten years or longer, and many of
these relationships have been in place for many years. These agreements in the
aggregate provide approximately $3 million of annual revenue to the Company.
EMPLOYEES
As of December 31, 1999, the Company had approximately 6,000 employees,
of which approximately 1,100 were located in the U.S. Approximately 32 percent
of U.S. and 59 percent of non-U.S. employees are unionized. The Company believes
its union and non-union employee relations are good.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
As a manufacturer and maker of food items and items for use in the
pharmaceutical industry, the Company's operations and the use of many Company
products are subject to various U.S., state, foreign and local statutes and
regulations, including the Federal Food, Drug and Cosmetic Act and the
Occupational Safety and Health Act, and to regulation by various government
agencies, including the United States Food and Drug Administration, which
prescribe requirements and establish standards for product quality, purity and
labeling. The finding of a failure to comply with one or more regulatory
requirements can result in a variety of sanctions, including monetary fines. The
Company may also be required to comply with U.S., state, foreign and local laws
regulating food handling and storage. The Company believes these laws and
regulations have not negatively affected its competitive position.
The operations of the Company are also subject to various U.S., state,
foreign and local laws and regulations with respect to environmental matters,
including air and water quality and underground fuel storage tanks, and other
regulations intended to protect public health and the environment. The Company
believes it is in material compliance with all such applicable laws and
regulations. Based upon current laws and regulations and the interpretations
thereof, the Company does not expect that the costs of future environmental
compliance will be a material expense, although there can be no assurance that
the Company will remain in compliance or that the costs of remaining in
compliance will not have a material adverse effect on the Company's financial
condition and results of operations.
The Company currently anticipates that it will spend approximately $9
million in fiscal 2000 for environmental control equipment to be incorporated
into existing facilities and in planned construction projects. This equipment is
intended to enable the Company to continue its policy of compliance with
existing known environmental laws and regulations. Under the U.S. Clean Air Act
Amendments of 1990, air toxin regulations will be promulgated for a number of
industry source categories. The U.S. Environmental Protection Agency's
regulatory timetable specifies the promulgation of standards for vegetable oil
production and for industrial boilers during the year 2000. At that time, the
Company's U.S. facilities may require additional pollution control devices to
meet these standards. Currently, the Company can not accurately estimate the
ultimate financial impact of the standards.
RELATIONSHIP BETWEEN THE COMPANY AND BESTFOODS
In connection with the spin-off of the Company from Bestfoods, the
Company entered into various agreements with Bestfoods for the purpose of
governing certain of the ongoing relationships between Bestfoods and the Company
after the distribution.
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The Company entered into a tax indemnification agreement that requires
the Company to indemnify Bestfoods against tax liabilities arising from the loss
of the tax-free reorganization status of the spin-off. This agreement restricted
the Company, for a two-year period ending December 12, 1999, from entering into
certain transactions, including limitations on the liquidation, merger or
consolidation with another company, certain issuance and redemption of Company
common stock and the distribution or sale of certain assets.
The Company entered into a Master Supply Agreement to supply Bestfoods
and its affiliates with certain corn refining products at prices based generally
at prevailing market conditions for a minimum two-year term, ending December 31,
1999. The Company continues to supply Bestfoods under the extension of the
Master Supply Agreement or in accordance with the terms of locally negotiated
supply agreements at prices based generally at prevailing market conditions. See
Note 4 of Notes to Consolidated Financial Statements for certain information
relating to transactions with Bestfoods.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and ages of all executive officers of the
Company, indicating their positions and offices with the Company.
Name Age All positions and offices with the Company
- ---- --- ------------------------------------------
Konrad Schlatter 64 Chairman and Chief Executive Officer of
Corn Products since 1997. Mr. Schlatter
served as Senior Vice President of
Bestfoods from 1990 to 1997 and Chief
Financial Officer of Bestfoods from 1993 to
February 1997.
Samuel C. Scott 55 President and Chief Operating Officer of
Corn Products since 1997. Mr. Scott served
as President of Bestfoods' worldwide Corn
Refining Business from 1995 to 1997 and was
President of Bestfoods' North American Corn
Refining Business from 1989 to 1997. He was
elected a Vice President of Bestfoods in
1991. Mr. Scott is a director of Motorola,
Inc., Reynolds Metal Company, and Russell
Reynolds Associates.
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Cheryl K. Beebe 44 Vice President since 1999 and Treasurer of
Corn Products since 1997. Ms. Beebe served
as Director of Finance and Planning for the
Bestfoods Corn Refining Business worldwide
from 1995 to 1997 and as Director of
Financial Analysis and Planning for Corn
Products North America from 1993. Ms. Beebe
joined Bestfoods in 1980 and served in
various financial positions in Bestfoods.
Marcia E. Doane 58 Vice President, General Counsel and
Corporate Secretary of Corn Products since
1997. Ms. Doane served as Vice President,
Legal and Regulatory Affairs of the Corn
Products Division of Bestfoods from 1996 to
1997. Prior thereto, she served as Counsel
to the Corn Products Division from 1994 to
1996. Ms. Doane joined Bestfoods' legal
department in 1989 as Operations Attorney
for the Corn Products Division.
Jorge Fiamenghi 44 Vice President and President, South
American Division of Corn Products since
December 1999. Mr. Fiamenghi served as
President and General Manager Corn Products
Brazil from 1996 - 1999 and was elected
Vice President Corn Products International,
Inc. in 1999. Mr. Fiamenghi was General
Manager for the Bestfoods Corn Refining
affiliate in Argentina beginning in 1991.
Prior there to, he was Financial and
Planning Director for the Bestfoods South
American Corn Refining division from
1989-1991 and served as Financial and
Administrative Manager for the Bestfoods
Corn Refining division in Mexico beginning
in 1987. Mr. Fiamenghi joined Bestfoods in
1971 and served in various financial and
planning positions in Bestfoods.
Jack C. Fortnum 43 Vice President since 1999 and Comptroller
of Corn Products since 1997. Mr. Fortnum
served as the Vice President of Finance for
Refineries de Maize, Bestfoods' Argentine
subsidiary from 1995 to 1997, as the
Director of Finance and Planning for
Bestfoods Latin America Corn Refining
Division from 1993 to 1995, and as the Vice
President and Comptroller of Canada Starch
Co., Inc., the Canadian
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subsidiary of Bestfoods, and Vice President
of Finance of the Canadian Corn Refining
Business from 1989.
James I. Hirchak 45 Vice President - Human Resources of Corn
Products since 1997. Mr. Hirchak joined
Bestfoods in 1976 and held various Human
Resources positions in Bestfoods until
1984, when he joined Bestfoods' Corn
Products Division. In 1987, Mr. Hirchak was
appointed Director, Human Resources for
Corn Products' North American operation and
has served as Vice President, Human
Resources for the Corn Products Division
since 1992.
Frank J. Kocun 57 Vice President and President, Asia and
Africa Division (formerly known as
Cooperative Management Group) since 1997.
Mr. Kocun served as President of the
Cooperative Management Group of the Corn
Products Division of Bestfoods from 1991 to
1997 and as Vice President of the
Cooperative Management Group from 1985. Mr.
Kocun joined Bestfoods in 1968 and served
in various executive positions in the Corn
Products Division and in Penick
Corporation, a Bestfoods subsidiary.
Michael R. Pyatt 52 Vice President and Executive Vice
President, North American Division of Corn
Products since 1997. Mr. Pyatt served as
Chairman, President and Chief Executive
Officer of Canada Starch Co., Inc., a
Bestfoods subsidiary, from 1994 to 1997 and
as President of the Canadian business of
Bestfoods' Corn Products Division, Vice
Chairman of Canada Starch and as a Vice
President of the Corn Products Division
since 1992. Mr. Pyatt joined Bestfoods in
1982 and served in various sales and
marketing positions in the Casco business.
James W. Ripley 56 Vice President - Finance and Chief
Financial Officer of Corn Products since
1997. Mr. Ripley served as Comptroller of
Bestfoods from 1995 to 1997. Prior thereto,
he served as Vice President of Finance for
Bestfoods'
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North American Corn Refining Division from
1984 to 1995. Mr. Ripley joined Bestfoods
in 1968 as chief international accountant,
and subsequently served as Bestfoods'
Assistant Corporate Comptroller, Corporate
General Audit Coordinator and Assistant
Comptroller for Bestfoods' European
Consumer Foods Division.
Richard M. Vandervoort 56 Vice President - Strategic Business
Development and Investor Relations of Corn
Products since 1998. Mr. Vandervoort has
served as Vice President - Business
Development and Procurement, Corn Products
International North American Division from
1997 to 1998. Prior thereto, he served as
Vice President - Business Management and
Marketing for Bestfoods' Corn Products
Division from 1989 to 1997. Mr. Vandervoort
joined Bestfoods in 1971 and served in
various executive sales positions in
Bestfoods' Corn Products Division and in
Peterson/Puritan Inc., a Bestfoods
subsidiary.
ITEM 2. PROPERTIES
The Company operates, directly and through its subsidiaries, 27
manufacturing facilities, 26 of which are owned and one of which is leased
(Jundiai, Brazil). In addition, the Company owns its corporate headquarters in
Bedford Park, Illinois. The following list details the location of the Company's
manufacturing facilities:
U.S. South America
--- -------------
Stockton, California Baradero, Argentina
Bedford Park, Illinois Balsa Nova, Brazil
Winston-Salem, North Carolina Cabo, Brazil
Beloit, Wisconsin Jundiai, Brazil
Mogi-Guacu, Brazil
Conchal, Brazil
Canada Llay-Llay, Chile
------ Barranquilla, Colombia
Cardinal, Ontario Cali, Colombia
London, Ontario Medellin, Colombia
Port Colborne, Ontario Guayaquil, Ecuador
<PAGE> 13
Africa Asia
------ ----
Eldoret, Kenya Petaling Jaya, Malaysia
Faisalabad, Pakistan
Inchon, South Korea
Ichon, South Korea
Mexico
------
San Juan del Rio
Guadalajara (2 plants)
Mexico City
In addition to the foregoing, the Company has interests in 15 plants through its
unconsolidated joint ventures and allied operations.
While the Company has achieved high capacity utilization, the Company
believes its manufacturing facilities are sufficient to meet its current
production needs. The Company has preventive maintenance and de-bottlenecking
programs designed to further improve grind capacity and facility reliability.
The Company has electricity co-generation facilities at all of its U.S.
and Canadian plants, as well as its plants in San Juan del Rio, Mexico,
Baradero, Argentina and Faisalabad, Pakistan, that provide electricity at a
lower cost than is available from third parties. The Company generally owns and
operates such co-generation facilities itself, but has two large facilities at
its Stockton, California and Cardinal, Ontario locations that are owned by, and
operated pursuant to, co-generation agreements with third parties.
The Company believes it has competitive, up-to-date and cost-effective
facilities. In recent years, significant capital expenditures have been made to
update, expand and improve the Company's facilities, averaging in excess of $145
million per year for the last five years. Capital investments have included the
rebuilding of the Company's plants in Cali, Colombia and Baradero, Argentina; an
expansion of both grind capacity and dextrose production capacity at the
Company's Argo facility in Bedford Park, Illinois and Baradero, Argentina; entry
into the high maltose corn syrup business in Brazil, Colombia and Argentina;
entry into the HFCS business in Argentina and the installation of energy
co-generation facilities in Canada. In addition, prior to the Company's
acquisition of Arancia-CPC, the Mexican business completed a major expansion of
the San Juan del Rio plant to produce HFCS. The Company believes these capital
expenditures will allow the Company to operate highly efficient facilities for
the foreseeable future with further annual capital expenditures that are in line
with historical averages.
ITEM 3. LEGAL PROCEEDINGS
Under the terms of the agreements relating to the spin-off of the
Company from Bestfoods, the Company agreed to indemnify Bestfoods for certain
liabilities relating to the operation of the Corn Refining Business prior to the
spin-off, including liabilities relating to antitrust legal the proceedings
<PAGE> 14
described below.
In July 1995, Bestfoods received a federal grand jury subpoena in
connection with an investigation by the Antitrust Division of the U.S.
Department of Justice of U.S. corn refiners regarding the marketing of high
fructose corn syrup and other "food additives" (the investigation of Bestfoods
relates only to high fructose corn syrup). Bestfoods has produced the documents
sought by the Justice Department and the federal grand jury has since been
disbanded. Bestfoods, as a high fructose corn syrup producer, was also named as
one of the defendants in a number of private treble damage class actions, by
direct and indirect customers, and one individual action, alleging violations of
federal and state antitrust laws. Following the certification of the
consolidated federal class actions, Bestfoods entered into settlements of the
federal claims and the one individual action. Bestfoods remains a party to the
state law actions filed in Alabama, California, the District of Columbia, West
Virginia and Kansas, each of which was filed in 1995 or 1996. The amount of
damages claimed in the various pending state law actions is either unspecified
or stated as not exceeding $50,000 per claimant.
The Company was named as a defendant in a lawsuit filed on January 24,
2000, in the Supreme Court of the Sate of New York, County of New York, by
Indopco, Inc. d/b/a/ National Starch and Chemical Company ("National Starch").
Also named as defendants are the Company's majority-owned subsidiary,
Arancia-Corn Products, S.A. de C.V. ("Arancia-Corn Products") and Araten, S.A.
de C.V. ("Araten") and Promociones Industriales Aralia, S.A. de C.V. ("Aralia"),
companies which the complaint alleges are controlled by the family of Ignacio
Aranguren-Castiello, a member of Corn Products Board of Directors. In addition
to the claims brought only against Araten and Aralia, the complaint alleges that
by inducing certain companies controlled by the Aranguren family ("Aranguren
Companies") to enter into various agreements, the Company tortiously interfered
with a joint venture agreement that was originally between National Starch and
Aranguren y Cia. The complaint also alleges that the Company aided and abetted
the Aranguren Companies in a breach of fiduciary duty to National Starch and
conspired with the Aranguren Companies to deprive National Starch of its rights
under the joint venture agreement. The complaint further seeks a declaratory
judgement concerning the defendants' obligation to deliver raw starch pursuant
to a Supply Agreement between the joint venture and Arancia-Corn Products. In
addition to declaratory and injunctive relief, the complaint seeks compensatory
damages of $50 million and punitive damages of at least $50 million. The Company
intends to defend this suit vigorously and believes that it has meritorious
defenses.
The Company is currently subject to various other claims and suits
arising in the ordinary course of business, including certain environmental
proceedings. The Company does not believe that the results of such legal
proceedings, even if unfavorable to the Company, will be material to the
Company. There can be no assurance, however, that any claims or suits arising in
the future, whether taken individually or in the aggregate, will not have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1999.
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Shares of Corn Product's Common Stock are traded on the New York Stock
Exchange ("NYSE") under the ticker symbol "CPO." The range of the NYSE reported
high and low closing sale prices of the Company's Common Stock, holders of
record and quarterly dividends are set forth in page 35 of the Annual Report to
Stockholders for the year ended December 31, 1999 and incorporated herein by
reference.
The Company's policy is to pay a modest dividend. The amount and timing
of the dividend payment, if any, is based on a number of factors including
estimated earnings, financial position and cash flow. The payment of a dividend
is solely at the discretion of the Company's Board of Directors. It is subject
to the Company's financial results and the availability of surplus funds to pay
dividends.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the Registrant's Annual Report to
Stockholders, page 35-36, section entitled "Supplemental Financial Information."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 9-14, section entitled "Management's Discussion and
Analysis."
ITEM 7A. QUALITATIVE & QUANTITATIVE RISKS
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 13-14, section entitled "Management's Discussion and
Analysis - Risks and Uncertainties."
INTERNATIONAL OPERATIONS AND FOREIGN EXCHANGE. For more than 70 years,
the Company has operated a multinational business subject to the risks inherent
in operating in foreign countries and with foreign currencies. The Company's US
Dollar denominated results are subject to foreign exchange fluctuations, and its
non-US operations are subject to political, economic and other risks.
The Company primarily sells world commodities and; therefore, believes
that local prices will adjust relatively quickly to offset the effect of a local
devaluation. The Company generally does not enter into foreign currency hedging
transactions. The Company's policy is to hedge only commercial transactions
denominated in a currency other than the currency of the country in which the
operating unit responsible for the transaction is located.
UNCERTAIN ABILITY TO GENERATE ADEQUATE FINANCIAL PERFORMANCE. The
Company's ability to generate operating income and to increase profitability
depends to a large extent upon its ability to price finished products at a level
that will cover manufacturing and raw material costs and provide a profit
margin. The Company's ability to maintain appropriate price levels is determined
by a number of factors largely beyond the Company's control, such as aggregate
industry supply and market demand, which may vary from time to time and by the
geographic region of the Company's operations.
<PAGE> 16
UNCERTAIN ABILITY TO CONTAIN COSTS OR TO FUND CAPITAL EXPENDITURES. The
Company's future profitability and growth also depends on the Company's ability
to contain operating costs and per-unit product costs, to maintain and/or
implement effective cost control programs and to develop successfully
value-added products and new product applications, while at the same time
maintaining competitive pricing and superior quality products, customer service
and support. The Company's ability to maintain a competitive cost structure
depends on continued containment of manufacturing, delivery and administrative
costs as well as the implementation of cost-effective purchasing programs for
raw materials, energy and related manufacturing requirements. The Company plans
to focus capital expenditures on implementing productivity improvements and, if
supported by profitable customer demand, expand the production capacity of its
facilities. The Company may need additional funds for working capital as the
Company grows and expands its operations. To the extent possible, the Company
expects to fund these capital expenditures from operations. If the Company's
cash flow is insufficient to fund such expenses, the Company may either reduce
its capital expenditures or utilize certain general credit facilities. The
Company may also seek to generate additional liquidity through the sale of debt
or equity securities in private or public markets or through the sale of
non-productive assets. The Company cannot provide any assurance that cash flow
from operations will be sufficient to fund anticipated capital expenditures and
working capital requirements or that additional funds can be obtained from the
financial markets or the sale of assets at terms favorable to the Company. If
the Company is unable to generate sufficient cash flows or raise sufficient
additional funds to fund capital expenditures, it may not be able to achieve its
desired operating efficiencies and expansion plans, which may adversely impact
the Company's competitiveness and, therefore, its results of operations.
INTEREST RATE EXPOSURE. Approximately 40 percent of the Company's
borrowings are long-term fixed rate notes. Of the remaining 60 percent of the
Company's borrowings, approximately 30 percent are short-term credit facilities
with floating interest rates and 30 percent are long-term loans with variable
interest rates primarily tied to LIBOR. Should short-term rates change, this
could affect our interest costs. Current economic projections do not indicate a
significant change in the interest rate in the near future.
During 1998, the carrying value of long-term debt approximated fair
value. At December 31, 1999, the carrying and fair value of long-term debt,
including the current portion were as follows:
<TABLE>
<CAPTION>
(in millions) Carrying value Fair value
-------------------- -------------------
<S> <C> <C>
8.45% senior notes, due 2009 $ 200 $ 196
Mexican Import Credit Facility, due 2001 at LIBOR + 1.75% 40 40
Mexican Import Credit Facility, due 2007 at LIBOR + 3.30% 60 60
Mexican Export Credit, due 2000 at LIBOR + 1.49% 24 24
Other, due in varying amounts through 2007, fixed and floating
interest rates ranging from 6.57% - 21.37% 57 57
-------------------------------------------------------------------------------------------------------------
Total $ 381 $ 377
</TABLE>
COMPETITION; EXPANDING INDUSTRY CAPACITY. The Company operates in a
highly competitive environment. Almost all of the Company's products compete
with virtually identical or similar products manufactured by other companies in
the corn refining industry. In the United States, there are ten other corn
refiners, several of which are divisions of larger enterprises that have greater
financial resources and some of which, unlike the Company, have vertically
integrated their corn refining and other operations.
<PAGE> 17
Many of the Company's products also compete with products made from raw
materials other than corn. Fluctuation in prices of these competing products may
affect prices of, and profits derived from, the Company's products. Competition
within markets is largely based on price, quality and product availability.
PRICE VOLATILITY AND UNCERTAIN AVAILABILITY OF CORN. Corn purchasing
costs, which include the price of the corn plus delivery cost, vary between 40
percent and 65 percent of the Company's product costs. The price and
availability of corn are influenced by economic and industry conditions,
including supply and demand factors such as crop disease and severe weather
conditions such as drought, floods or frost, that are difficult to anticipate
and cannot be controlled by the Company. In addition, government programs
supporting sugar prices indirectly impact the price of corn sweeteners,
especially high fructose corn syrup. The Company can not assure that it will be
able to purchase corn at prices that it can adequately pass on to customers or
in quantities sufficient to sustain or increase its profitability.
COMMODITY COSTS. The Company's finished products are made primarily from corn.
Purchased corn accounts for 40 percent to 65 percent of finished product costs.
In North America, the Company sells a large portion of finished product at firm
prices established in supply contracts lasting for periods of up to one year. In
order to minimize the effect of volatility in the cost of corn related to these
firm-priced supply contracts, the Company enters into corn futures contracts, or
takes hedging positions in the corn futures market. From time to time, the
Company may also enter into anticipatory hedges. These contracts typically
mature within one year. At expiration, the Company settles the derivative
contracts at a net amount equal to the difference between the then-current price
of corn and the fixed contract price. While these hedging instruments are
subject to fluctuations in value, changes in the value of the underlying
exposures the Company is hedging generally offset such fluctuations. While the
corn futures contracts or hedging positions are intended to minimize the
volatility of corn costs on operating profits, occasionally the hedging activity
can result in losses, some of which may be material. In the Rest of World, sales
of finished product under long-term, firm-priced supply contracts are not
material.
As the Company's hedging instruments generally relate to contracted firm-priced
business, and based on the Company's overall commodity hedge exposure at
December 31, 1999, a hypothetical 10% change in market rates applied to the fair
value of the instruments would have no material impact on the Company's
earnings, cash flows, financial position, or fair value of commodity price
risk-sensitive instruments over a one-year period.
VOLATILITY OF MARKETS. The market price for the common stock of the
Company may be significantly affected by factors such as the announcement of new
products or services by the Company or its competitors; technological innovation
by the Company, its competitors or other vendors; quarterly variations in the
Company's operating results or the operating results of the Company's
competitors; general conditions in the Company's and its customers' markets;
changes in the earnings estimates by analysts or reported results that vary
materially from such estimates. In addition, the stock market has experienced
significant price fluctuations that have affected the market prices of equity
securities of many companies that have been unrelated to the operating
performance of any individual company. These broad market fluctuations may
materially and adversely affect the market price of the Company's common stock.
<PAGE> 18
UNCERTAINTY OF DIVIDENDS. The payment of dividends is at the discretion
of the Company's Board of Directors and will be subject to the Company's
financial results and the availability of surplus funds to pay dividends. No
assurance can be given that the Company will continue to pay dividends.
CERTAIN ANTI-TAKEOVER EFFECTS. Certain provisions of the Company's
Amended and Restated Certificate of Incorporation (the "Corn Products Charter")
and the Company's By-laws (the "Corn Products By-Laws") and of the Delaware
General Corporation Law (the "DGCL") may have the effect of delaying, deterring
or preventing a change in control of the Company not approved by the Company's
Board. These provisions include (i) a classified Board of Directors, (ii) a
requirement of the unanimous consent of all stockholders for action to be taken
without a meeting, (iii) a requirement that special meetings of stockholders be
called only by the Chairman of the Board or the Board of Directors, (iv) advance
notice requirements for stockholder proposals and nominations, (v) limitations
on the ability of stockholders to amend, alter or repeal the Company's By-laws
and certain provisions of the Corn Products Charter, (vi) authorization for the
Company's Board to issue without stockholder approval preferred stock with such
terms as the Board of Directors may determine and (vii) authorization for the
Corn Products Board to consider the interests of creditors, customers, employees
and other constituencies of the Company and its subsidiaries and the effect upon
communities in which the Company and its subsidiaries do business, in evaluating
proposed corporate transactions. With certain exceptions, Section 203 of the
DGCL ("Section 203") imposes certain restrictions on mergers and other business
combinations between the Company and any holder of 15 percent or more of the
Company's Common Stock. In addition, the Company has adopted a stockholder
rights plan (the "Rights Plan"). The Rights Plan is designed to protect
stockholders in the event of an unsolicited offer and other takeover tactics,
which, in the opinion of the Company's Board, could impair the Company's ability
to represent stockholder interests. The provisions of the Rights Plan may render
an unsolicited takeover of the Company more difficult or less likely to occur or
might prevent such a takeover.
These provisions of the Corn Products Charter and Corn Products
By-laws, the DGCL and the Rights Plan could discourage potential acquisition
proposals and could delay or prevent a change in control of the Company,
although such proposals, if made, might be considered desirable by a majority of
the Company's stockholders. Such provisions could also make it more difficult
for third parties to remove and replace the members of the Company's Board.
Moreover, these provisions could diminish the opportunities for a stockholder to
participate in certain tender offers, including tender offers at prices above
the then-current market value of the Company's Common Stock, and may also
inhibit increases in the market price of the Company's Common Stock that could
result from takeover attempts or speculation.
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION. The Company's
historical financial information may not necessarily reflect the results of
operations, financial position and cash flows of the Company in the future or
the results of operations, financial position and cash flows had the Company
operated as a separate stand-alone entity during all of the periods presented.
RELIANCE ON MAJOR CUSTOMERS. Historically, Bestfoods' worldwide branded
foods business has been one of the Company's largest customers, accounting for
approximately 7 percent of total sales in 1999. The Company continues to supply
Bestfoods either under the terms of a Master Supply Agreement or in accordance
with the terms of locally negotiated supply agreements at prices based generally
at prevailing market conditions. See Note 4 of Notes to Consolidated Financial
Statements for certain information relating to transactions with Bestfoods. In
addition,
<PAGE> 19
approximately 18 percent of the Company's 1999 worldwide sales represented sales
of high fructose corn syrup to international, regional and local companies
engaged in the soft drink industry, primarily in North America. If Bestfoods
were not to continue to purchase products from the Company or the Company's soft
drink customers were to substantially decrease their purchases, the business of
the Company might be materially adversely affected.
READINESS FOR THE YEAR 2000. The year 2000 (Y2K) issue was the result of certain
computer programs using two digits rather than four to define the applicable
year. During 1997, the Company developed a plan, and established a team with
appropriate senior management support, to identify and correct Y2K issues (the
"Program"). The Program included the repair or replacement, when necessary, of
critical internal systems, hardware and software throughout its plants, building
facilities and business systems, the review of critical vendors and the
development of contingency plans. Total costs of the Program to achieve Y2K
readiness were $10 million of expense. Capital expenditures indirectly related
to Y2K added an additional $10 million to the cost of the Program.
The Company's manufacturing and administrative processes operated as normal on
January 1, 2000 and the Company has not experienced any disruptions in its
operations from Y2K related issues in 2000.
FORWARD LOOKING STATEMENTS
This annual report contains or may contain certain forward-looking statements
concerning the Company's financial position, business and future prospects, in
addition to other statements using words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend" and other similar expressions. These
statements contain certain inherent risks and uncertainties. Although we believe
our expectations reflected in these forward-looking statements are based on
reasonable assumptions, stockholders are cautioned that no assurance can be
given that our expectations will prove correct. Actual results and developments
may differ materially from the expectations conveyed in these statements, based
on factors such as the following: fluctuations in worldwide commodities markets
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 we
manufacture and sell our products, including fluctuations in the value of local
currencies; increased competitive and/or customer pressure in the corn refining
industry. Our forward-looking statements speak only as of the date on which they
are made and we do not undertake any obligation to update any forward-looking
statement to reflect events or circumstances after the date of the statement. If
we do update or correct one or more of these statements, investors and others
should not conclude that we will make additional updates or corrections. For a
further description of risk factors, see the Company's most recent Annual Report
to Stockholders and subsequent reports on Forms 10-Q and 8-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 15-34, sections entitled "Reports of Management and
Independent Auditors" and "Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE> 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the headings "Board of Directors,"
"Matters To Be Acted Upon - Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement for
the Company's 2000 Annual Meeting of Stockholders (the "Proxy Statement") and
the information contained under the heading "Executive Officers of the
Registrant" in Item 1 hereof is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the heading "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 14(a)(1) Consolidated Financial Statements and Schedules
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 15-34, sections entitled "Report by Management and
Independent Auditors" and "Financial Statements."
Item 14(a)(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.
Item 14(a)(3) Exhibits
The Exhibits set forth in the accompanying Exhibit Index are filed as a
part of this report. The following is a list of each management contract or
compensatory plan or arrangement required to be filed as an Exhibit to this
report:
Exhibit Number
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
Item 14(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended December 31, 1999.
<PAGE> 21
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 24 day of
March, 2000.
CORN PRODUCTS INTERNATIONAL, INC.
By: *Konrad Schlatter
-----------------------------------
Konrad Schlatter
Chairman 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, in the capacities indicated and on the 25 day of March, 2000.
Signature Title
- --------- -----
*Konrad Schlatter Chairman and Chief Executive Officer
Konrad Schlatter
/s/ James W. Ripley Chief Financial Officer
James W. Ripley
/s/ Jack C. Fortnum Comptroller
Jack C. Fortnum
*Ignacio Aranguren-Castiello Director
Ignacio Aranguren-Castiello
*Alfred C. DeCrane, Jr. Director
Alfred C. DeCrane, Jr.
*Guenter E. Greiner Director
Guenter E Greiner
*Ronald M. Gross Director
Ronald M. Gross
*William C. Ferguson Director
William C. Ferguson
*Bernard H. Kastory Director
Bernard H. Kastory
*Richard G. Holder Director
Richard G. Holder
*William S. Norman Director
William S. Norman
*Samuel C. Scott Director
Samuel C. Scott
*Clifford B. Storms Director
Clifford B. Storms
*By: /s/ Marcia E. Doane
Marcia E. Doane
Attorney-in-fact
(Being the principal executive officers, the principal financial and accounting
officers and all of the directors of Corn Products International, Inc.)
<PAGE> 22
EXHIBIT NO. DESCRIPTION
2.1** Distribution Agreement dated December 1, 1997, between
the Company and Bestfoods
3.1** Amended and Restated Certificate of Incorporation of
the Company, filed as Exhibit 3.1 to the Company's
Registration Statement on Form 10, File No.1-13397
3.2** Amended By-Laws of the Company, filed as Exhibit 3.2 to
the Company's Registration Statement on Form 10, File
No.1-13397
4.1** Rights Agreement dated November 19, 1997 between the
Company and First Chicago Trust Company of New York,
filed as Exhibit 1 to the Company's Registration
Statement on Form 8-Al2B, File No.1-13397
4.2** Certificate of Designation for the Company's Series A
Junior Participating Preferred Stock, filed as Exhibit
1 to the Company's Registration Statement on Form
8-Al2B, File No.1-13397
4.3** 5-Year Revolving Credit Agreement dated December 17,
1997 among the Company and the agents and banks named
therein
4.4* Indenture Agreement dated as of August 18, 1999 between
the Company and The Bank of New York, as Trustee, files
on August 27, 1999 as Exhibit 4.1 to the Company's
current report on Form 8-K, File No. 1-12297.
10.1** Master Supply Agreement dated January 1, 1998 between
the Company and Bestfoods
l0.2** Tax Sharing Agreement dated December 1, 1997 between
the Company and Bestfoods
10.3** Tax Indemnification Agreement dated December 1, 1997
between the Company and Bestfoods
10.4** Debt Agreement dated December 1, 1997 between the
Company and Bestfoods
10.5** Transition Services Agreement dated December 1, 1997
between the Company and Bestfoods
10.6** Master License Agreement dated January 1, 1998 between
the Company and Bestfoods
<PAGE> 23
EXHIBIT NO. DESCRIPTION
10.7** Employee Benefits Agreement dated December 1, 1997
between the Company and Bestfoods, filed as Exhibit 4.E
to the Company's Registration Statement on Form S-8,
File No.333-43525
10.8** Access Agreement dated January 1, 1998 between the
Company and Bestfoods
10.9** Stock Incentive Plan of the Company, filed as Exhibit
4.E to the Company's Registration Statement on Form
S-8, File No.333-43525
10.10** Deferred Stock Unit Plan of the Company
10.11** Form of Severance Agreement entered into by each of K.
Schlatter, S.C. Scott, E.J. Northacker, M.R. Pyatt and
J.W. Ripley (the "Named Executive Officers")
10.12** Letter Agreement dated December 12, 1997 between the
Company and E.J. Northacker
10.13** Form of Indemnification Agreement entered into by each
of the members of the Company's Board of Directors and
the Named Executive Officers
10.14** Deferred Compensation Plan for Outside Directors of the
Company
10.15** Supplemental Executive Retirement Plan
10.16** Executive Life Insurance Plan
10.17** Deferred Compensation Plan
10.18* Annual Incentive Plan
10.19* Performance Plan
12.1* Earnings Per Share Computation
12.2* Computation of Ratio of Earnings to Fixed Charges
13.1* Portions of the 1999 Annual Report to Stockholders of
the Company
21.1* Subsidiaries of the Company
23.1* Consent of KPMG LLP
24.1* Powers of Attorney
27.1* Financial Data Schedule
- -------------------
* Incorporated herein by reference as indicated in the exhibit description.
** Incorporated herein by reference to the exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
<PAGE> 1
EXHIBIT 10.18
CORN PRODUCTS INTERNATIONAL, INC.
ANNUAL INCENTIVE PLAN
DEFINITIONS. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
CODE - the Internal Revenue Code of 1986, as it may be amended from time to
time, and any proposed, temporary or final Treasury Regulations promulgated
thereunder.
COMMITTEE - the Compensation and Nominating Committee of the Board of
Directors of the Company. Unless the Board of Directors determines
otherwise, each member of the Committee shall be an "outside director"
within the meaning of Section 162(m) of the Code and a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act.
COMPANY - Corn Products International, Inc., a Delaware corporation.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as amended.
PARTICIPANT - Shall mean the Chairman and Chief Executive Officer and any
other executive officer or key employee of the Company who is designated by
the Committee at any time as a Participant in this Plan.
PERFORMANCE MEASURE - The Performance Measure shall be determined by the
Committee in its sole discretion; provided, however, that in the case of a
bonus that is intended to qualify as "qualified performance-based
compensation" under Section 162(m) of the Code, the Performance Measure
shall be directly and specifically tied to one or more of the following
business criteria, determined with respect to the Company: net sales;
pretax income before allocation of corporate overhead and bonus; budget;
cash flow; earnings per share; net income; division, group or corporate
financial goals; return on stockholders' equity; return on assets;
attainment of strategic and operational initiatives; appreciation in and/or
maintenance of the price of the common stock or any other publicly traded
securities of the Company; market share; gross profits; earnings before
interest and taxes; earnings before interest, taxes, depreciation and
amortization; economic value-added models; total return to stockholders;
comparisons with various stock market indices; increase in number of
customers and/or reductions in costs for the applicable Performance Period,
subject to such rules and conditions as the Committee may establish at any
time ending on or before the 90th day of the applicable Performance Period.
PERFORMANCE PERIOD - shall mean the twelve consecutive month period which
coincides with the Company's fiscal year.
<PAGE> 2
PLAN - shall mean the Corn Products International, Inc. Annual Incentive
Plan as set forth herein and as from time to time amended.
2. ADMINISTRATION.
2.1 COMMITTEE. The Plan shall be administered by the Committee.
2.2 DETERMINATIONS MADE FOR EACH PERFORMANCE PERIOD. With respect to each
Performance Period, the Committee shall:
(a) Designate Participants for that Performance Period.
(b) Determine the amount or formula for determining each
Participant's maximum bonus payment for the Performance Period.
(c) Establish the Performance Measures for the Performance Period,
including the identification of any events for which adjustments
are to be made to the Performance Measures.
(d) Establish the Performance Measure targets for the Performance
Period.
In the case of bonus payments that are intended to qualify as qualified
performance-based compensation under Section 162(m) of the Code, the
Committee shall take the above actions on or before the 90th day of the
Performance Period.
2.3 CERTIFICATION. Following the close of each Performance Period and prior
to payment of any bonus under the Plan, the Committee must certify in
writing that the applicable Performance Measure targets and all other
factors upon which a bonus is based have been attained.
2.4 STOCKHOLDER APPROVAL. The material terms of this Plan shall be
disclosed to and approved by stockholders of the Company in accordance with
Section 162(m) of the Code. No bonus shall be paid under this Plan unless
such stockholder approval has been obtained.
3. BONUS PAYMENT.
3.1 FORMULA. Each Participant shall be eligible to receive a bonus payment
for a Performance Period in an amount established by, or determined under a
bonus formula established by, the Committee for the Performance Period
based on the attainment of the Performance Measure targets for the
Performance Period.
3.2 LIMITATIONS. In the case of bonus payments that are intended to qualify
as qualified performance-based compensation under Section 162(m) of the
Code, the following limitations shall apply:
(a) NO PAYMENT IF PERFORMANCE MEASURE THRESHOLD NOT ACHIEVED. In no
event shall any Participant receive a bonus payment hereunder if
the
2
<PAGE> 3
minimum threshold Performance Measure requirement applicable to
the bonus payment is not achieved during the Performance Period.
(b) NO PAYMENT IN EXCESS OF PRE-ESTABLISHED AMOUNT. No Participant
shall receive a bonus payment under this Plan for any Performance
Period in excess of $2.5 million.
(c) COMMITTEE MAY REDUCE BONUS PAYMENT. The Committee retains sole
discretion to reduce the amount of or eliminate any bonus
otherwise payable to a Participant under this Plan. The Committee
may exercise such discretion by establishing conditions for the
payment of bonuses in addition to the Performance Measure
targets, including the achievement of financial, strategic or
individual goals, which may be objective or subjective, as it
deems appropriate.
4. BONUS PAYMENTS.
4.1 TIME AND FORM OF PAYMENTS. The bonus payment payable to a Participant
under the Plan for a Performance Period shall be paid to the Participant in
cash as soon as determined by the Committee after it has certified that the
Performance Measure targets and all other factors upon which the bonus
payment for the Participant is based have been attained.
4.2 NON-TRANSFERABILITY. Participants shall not have the right to assign,
encumber or otherwise anticipate the payments to be made under this Plan,
and the benefits provided hereunder shall not be subject to seizure for
payment of any debts or judgments against any Participant.
4.3 TAX WITHHOLDING. In order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as
it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a Participant, are withheld or collected from
such Participant.
5. AMENDMENT AND TERMINATION. The Committee may amend this Plan
prospectively at any time and for any reason deemed sufficient by it
without notice to any person affected by this Plan and may likewise
terminate or curtail the benefits of this Plan both with regard to persons
expecting to receive benefits hereunder in the future and persons already
receiving benefits at the time of such action.
6. MISCELLANEOUS.
6.1 EFFECTIVE DATE. Subject to approval by the Company's stockholders, the
effective date of the Plan shall be January 1, 2000.
6.2 HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any ways
3
<PAGE> 4
material or relevant to the construction or interpretation of the Plan or
any provision thereof.
6.3 APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and inure
to the benefit of the Company and each Participant, the successors and
assigns of the Company, and the beneficiaries, personal representatives and
heirs of each Participant. If the Company becomes a party to any merger,
consolidation or reorganization, this Plan shall remain in full force and
effect as an obligation of the Company or its successors in interest.
6.4 EMPLOYMENT RIGHTS AND OTHER BENEFITS PROGRAMS. The provisions of this
Plan shall not give any Participant any right to be retained in the
employment of the Company. In the absence of any specific agreement to the
contrary, this Plan shall not affect any right of the Company, or of any
affiliate of the Company, to terminate, with or without cause, the
participant's employment at any time. This Plan shall not replace any
contract of employment, whether oral, or written, between the Company and
any Participant, but shall be considered a supplement thereto. This Plan is
in addition to, and not in lieu of, any other employee benefit plan or
program in which any Participant may be or become eligible to participate
by reason of employment with the Company. Receipt of benefits hereunder
shall have such effect on contributions to and benefits under such other
plans or programs as the provisions of each such other plan or program may
specify.
6.5 NO TRUST FUND CREATED. This Plan shall not create or be construed to
create a trust or separate fund of any kind or fiduciary relationship
between the Company or any affiliate and a Participant or any other person.
To the extent that any person acquires a right to receive payments from the
Company or any affiliate pursuant to this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company or
of any affiliate.
6.6 GOVERNING LAW. The place of administration of the Plan shall be in the
State of Illinois. The Plan shall be construed and administered in
accordance with the laws of the State of Illinois, without giving effect to
principles relating to conflict of laws.
6.7 SEVERABILITY. If any provision of the Plan is or becomes or is deemed
to be invalid, illegal or unenforceable in any jurisdiction such provision
shall be construed or deemed amended to conform to applicable laws, or if
it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan,
such provision shall be stricken as to such jurisdiction, and the remainder
of the Plan shall remain in full force and effect.
6.8 QUALIFIED PERFORMANCE-BASED COMPENSATION. In the case of bonus payments
that are intended to qualify as qualified performance-based compensation
under Section 162(m) of the Code, all of the terms and conditions of the
Plan shall be interpreted in such a fashion as to qualify such payments as
qualified performance-based compensation within the meaning of Section
162(m) of the Code.
4
<PAGE> 1
EXHIBIT 10.19
January 1, 1999
CORN PRODUCTS INTERNATIONAL, INC.
PERFORMANCE PLAN
1.0 DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1 "Award Percentage" shall mean a percentage of the Cash Award Target earned
based on an amount of the Performance Goal that is attained.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Cash Award" shall mean a cash payment as determined in accordance with
Section 6 below.
1.4 "Cash Award Target" shall mean a dollar amount specified by the Committee
in accordance with Section 5 below.
1.5 "Cause" shall mean:
(1) the willful and continued failure to substantially perform the duties
assigned by the Company (other than a failure resulting from the
Participant's Disability);
(2) the willful engaging in conduct which is demonstrably injurious to the
Company or any Subsidiary, monetarily or otherwise, including conduct
that, in the reasonable judgment of the Committee, no longer conforms
to the standard of the Company's executives;
(3) any act of dishonesty;
(4) a commission of a felony; or
(5) a significant violation of any statutory or common law duty of loyalty
to the Company.
1.6 "Certification Date" shall mean the date on which the Committee certifies
that the Performance Goal for a specific Performance Cycle has been
achieved in accordance with Section 6 below.
1.7 "Change in Control of the Company" shall have the same meaning set forth in
Section 5.8(b) of the 1998 Stock Incentive Plan.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.9 "Committee" shall mean the Board, or a committee or subcommittee of the
Board appointed by the Board from among its members. The Committee may be
the Board's Compensation and Nominating Committee. Unless the Board
determines otherwise, the
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<PAGE> 2
Committee shall be comprised solely of not less than two members who each
shall qualify as:
(1) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or
any successor rule) under the Exchange Act, and
(2) an "outside director" within the meaning of Code Section 162(m) and
the Treasury Regulations thereunder.
1.10 "Common Stock" shall mean the common stock, $.01 par value per share, of
the Company.
1.11 "Company" shall mean Corn Products International, Inc., a Delaware
corporation.
1.12 "Disability" shall mean a disability as determined under the then existing
long-term disability program in effect at the Company as of the date the
disability first occurred, or if there is no long-term disability program
in effect at the Company as of the date the disability first occurs, then a
disability as defined by Code Section 22(e).
1.13 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
1.14 "Key Executive" shall mean an employee of the Company who has have
significant responsibility in setting and executing the Company's strategy
and whose actions can significantly affect the Company's market position
and financial results with related effects on it's stock price.
1.15 "Participant" shall mean a Key Executive who has been selected to
participate in the Plan in accordance with Section 3 below.
1.16 "Performance-Based Awards" shall mean the designation of a Cash Award
Target as an award intended to qualify as "performance-based compensation"
under Code Section 162(m) as described in Section 10 below.
1.17 "Performance Cycle" shall mean a period of time longer than 1 year as
specified under Section 5 below or as determined by the Committee in its
sole discretion in accordance with Section 5 below.
1.18 "Performance Goal" shall mean, with respect to a Performance Cycle, the
performance goal specified under Section 5 below or as established by the
Committee for such Performance Cycle in accordance with Section 5 below.
1.19 "Performance Measure" shall mean the measure used to determine Performance
Goals in accordance with Section 5 below.
1.20 "Plan" shall mean the Corn Products International, Inc. Performance Plan.
-2-
<PAGE> 3
1.21 "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns more than 50 percent of the Voting Stock or any other
business entity in which the Company directly or indirectly has an
ownership interest of more than 50 percent.
1.22 "Treasury Regulations" shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as amended from time
to time.
1.23 "Voting Stock" shall mean the capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2.0 PURPOSE AND TERM OF PLAN
2.1 PURPOSE. The purpose of the Plan is to provide a cash incentive award to
certain employees of the Company with respect to Performance Cycles
exceeding 1 year so that they will put forth maximum efforts toward the
long-term growth, profitability and success of the Company and to encourage
them to remain in the employ of the Company.
2.2 TERM. The Plan shall become effective as of the date the Board adopts the
Plan. The Plan shall terminate when the Board terminates the Plan under
Section 11.3 below.
3.0 ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Key Executives that are identified by the Committee shall be
eligible to participate in the Plan.
3.1 PARTICIPATION. Key Executives shall become Participants upon the grant of a
Cash Award Target to such Participant by the Committee in accordance with
Section 5 below. Designation of a Participant in any year by the grant of a
Cash Award Target with respect to a specific Performance Cycle shall not
require the Committee to designate such Key Executive to receive an Cash
Award Target with respect to any other Performance Cycle or, once
designated, to receive the same amount of Cash Award Target as granted to
the Participant in any other year. The Committee shall consider such
factors as it deems pertinent in selecting Participants and in determining
the amount of their respective Award Opportunities.
4.0 ADMINISTRATION
4.1 RESPONSIBILITY. The Committee shall have the sole responsibility to
control, operate, manage and administer the Plan in accordance with its
terms.
4.2 AUTHORITY OF THE COMMITTEE. The Committee shall have all the discretionary
authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan, including but not limited to,
the authority:
(a) to grant a Cash Award Target to each Participant;
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<PAGE> 4
(b) to determine the amount of cash attributable to each Cash Award Target
payable under the Plan;
(c) to administer the Performance Goals and certify whether, and to what
extent, they are attained;
(d) to supply any omission or correct any defect in the Plan;
(e) to make rules for carrying out and administering the Plan and to make
changes in such rules as it from time to time deems proper; and
(f) to decide any questions arising in the administration, interpretation,
and application of the Plan.
4.3 ACTION BY THE COMMITTEE. The Committee may act only by a majority of its
members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to
execute and deliver documents on behalf of the Committee.
4.4 DELEGATION OF AUTHORITY. Except to the extent prohibited by law, the
Committee may delegate some or all of its authority under the Plan to any
person or persons; provided, however, that any such delegation shall be in
writing.
5.0 ESTABLISHMENT OF PERFORMANCE CYCLES, PERFORMANCE MEASURE, PERFORMANCE GOALS
AND GRANT OF CASH AWARD TARGETS
5.1 PERFORMANCE CYCLES. There shall be a 3-year Performance Cycle beginning on
January 1, 1999, (the Performance Cycle"). Unless the Committee decides
otherwise, a new 3-year Performance Cycle shall begin on the January 1st of
each year following December 31, 1999. The Committee may, in its sole
discretion, establish a Performance Cycle for a duration other than 3 years
so long as such Performance Cycle is greater than 1 year.
5.2 PERFORMANCE MEASURE. The Committee in its sole discretion shall determine
each Performance Cycle's Performance Measure, consistent with those
measures listed in section 10.3.
5.3 GRANT OF CASH AWARD TARGET. The Committee may, in its sole discretion,
grant Cash Award Targets to Key Executives. The Committee may grant a Cash
Award Target to a Key Executive after the beginning of a Performance Cycle.
The Cash Award Target shall be a specific dollar amount designated by the
Committee at the time the Key Executive becomes a Participant with respect
to a specific Performance Cycle. The grant of each Cash Award Target shall
be evidenced in writing by a letter from the Committee to the Participant;
provided, however, that if any provision of the letter conflicts or is
inconsistent with any provision of the Plan, the provision of the Plan
shall control.
5.4 PERFORMANCE GOAL. The Committee shall, in its sole discretion, establish
the Performance Goal for each Performance Cycle. The Performance Goal shall
determine
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<PAGE> 5
the Cash Award Target that can be earned, unless the Committee, in its sole
discretion, decides otherwise.
5.5 ADJUSTMENT OR MODIFICATION OF PERFORMANCE GOAL(S). The Committee is
authorized to adjust or modify the Award Opportunity Percentage with
respect to any Performance Goal applicable to a specific Performance Cycle
at any time in order to prevent the dilution or enlargement of the rights
of any Participant as described below:
(a) in the event of any unusual or extraordinary corporate item,
transaction, event or development;
(b) in recognition of any other unusual or nonrecurring events affecting
the Company, or the financial statements of the Company, or in
response to, or in anticipation of changes in applicable laws,
regulations, accounting principles, or business conditions; and/or
(c) in view of the Board's assessment of the business strategy of the
Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
6.0 CERTIFICATION OF ACHIEVEMENT OF PERFORMANCE GOAL
6.1 CERTIFICATION BY COMMITTEE. Prior to the end of the 90-day period beginning
on each December 31st occurring within a specific Performance Cycle, the
Committee shall meet to review and certify in writing whether, and to what
extent, the Performance Goal applicable to such Performance Cycle or
portion of such Performance Cycle has been achieved. The date that the
Committee certifies that such Performance Goal has been achieved is the
Certification Date.
7.0 DETERMINATION AND PAYMENT OF CASH AWARDS
7.1 PAYMENT OF CASH AWARD. Provided that the Committee certifies that the
Performance Goal applicable to a specific Performance Cycle has been
achieved, and subject to the deferral of payment of Cash Awards in
accordance with Section 8 below, the Company shall pay to each Participant
his or her Cash Award during the 120-day period following the last day of
the applicable Performance Cycle. Unless the Committee determines
otherwise, the Cash Award shall be a dollar amount equal to the Cash Award
Target multiplied by the applicable Award Percentage. In its discretion,
the Committee can establish Award Percentages and Cash Award Targets for
portions of a Performance Cycle.
7.2 CHANGE IN CONTROL OF THE COMPANY. If there is a Change in Control of the
Company, the Company shall pay to each Participant, as of the date of the
Change in Control of the Company, a Cash Award with respect to all open
and/or unpaid Performance Cycles. Such Cash Award shall be a dollar amount
equal to the greater of (a) the applicable Cash Award Target multiplied by
an Award Percentage equal to 100%; or (b) the applicable Cash Award Target
multiplied by an Award Percentage based on performance as of the
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<PAGE> 6
date of the Change in Control, as if the date of the Change in Control were
the last day of the Performance Cycle.
8.0 DEFERRAL OF PAYMENT OF PERFORMANCE AWARDS
8.1 DEFERRAL. At the discretion of the Committee, a Participant may, subject to
such terms and conditions as the Committee may determine, elect to defer
payment of all or any part of any Cash Award which the Participant might
earn with respect to a Performance Cycle by complying with such procedures
as the Committee may prescribe. Any Cash Award, or portion thereof, upon
which such an election is made shall be deferred into, and subject to the
terms, conditions and requirements of any deferred compensation plan,
program or arrangement of the Company.
9.0 TERMINATION OF EMPLOYMENT
9.1 TERMINATION OF EMPLOYMENT. Except as otherwise provided in Section 7.2, a
Participant must be an employee at the end of a Performance Cycle in order
to be entitled to payment of a Performance Award in respect of such Cycle;
provided, however, that in the event a Participant ceases to be an employee
before the end of such Cycle by reason of (a) his/her death, (b) his/her
retirement on or after attainment of age 55 and 10 years of service, or (c)
the occurrence of his/her Disability or (d) his/her termination of
employment under any other circumstances that the Committee may determine
shall warrant the application of this provision, the Committee, in it's
sole discretion and taking into consideration the performance of such
Participant and the performance of the Company during the Cycle, may
authorize to such Participant (or his/her legal representative), at the end
of the Cycle, all or any portion of the Performance Award which would have
been paid to him/her for the Cycle.
9.2 TERMINATION OF A PARTICIPANT'S EMPLOYMENT FOR CAUSE. Subject to any written
agreement between the Company and a Participant, if a Participant's
employment is terminated by the Company for Cause prior to the date a Cash
Award is paid, the Participant shall immediately forfeit all right, title
and interest in and to such Cash Award and in and to all other Cash Awards
to which such Participant would otherwise be entitled.
10.0 PERFORMANCE-BASED AWARDS
10.1 IN GENERAL. The Committee, in its sole discretion, may designate Cash Award
Targets granted under the Plan as Performance-Based Awards (as defined
below) if it determines that such compensation might not be tax deductible
by the Company due to the deduction limitation imposed by Code Section
162(m). Accordingly, a Cash Award Target granted under the Plan may be
granted in such a manner that the compensation attributable to such Award
is intended by the Committee to qualify as "performance-based compensation"
(as such term is used in Code Section 162(m) and the Treasury Regulations
thereunder) and thus be exempt from the deduction limitation imposed by
Code Section 162(m) ("Performance-Based Awards").
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<PAGE> 7
10.2 QUALIFICATION OF PERFORMANCE-BASED AWARDS. Cash Award Targets shall only
qualify as Performance-Based Awards under the Plan if the following
conditions are satisfied (to the extent necessary to meet the requirements
of Code Section 162(m)):
(a) at the time of grant the Committee is comprised solely of two or more
"outside directors" (as such term is used in Code Section 162(m) and
the Treasury Regulations thereunder);
(b) such Cash Award Target is subject to the achievement of a performance
goal or goals based on one or more of the performance measures
specified in Section 10.3 below;
(c) the Committee establishes in writing the objective performance-based
goals applicable to a given Performance Cycle no later than 90 days
after the commencement of such Performance Cycle (but in no event
after 25 percent of such Performance Cycle has elapsed);
(d) no compensation attributable to a Performance-Based Award will be paid
to or otherwise received by a Participant until the Committee
certifies in writing that the performance goal or goals (and any other
material terms) applicable to such Performance Cycle have been
satisfied;
(e) after the establishment of a performance goal, the Committee shall not
revise such performance goal (unless such revision will not disqualify
compensation attributable to the Cash Award Target as
"performance-based compensation" under Code Section 162(m)) or
increase the amount of compensation payable with respect to such Cash
Award Target upon the attainment of such performance goal;
(f) the Plan or Cash Award Target has been approved by the Company's
shareholders in accordance with Treasury Regulation Section
1.162-27(e)(4); and
(g) after the satisfaction of any other requirements necessary for such
award to qualify as "performance-based compensation" under Code
Section 162(m).
10.3 PERFORMANCE MEASURES. The Committee may use the following performance
measures (either individually or in any combination) to set performance
goals with respect to Cash Award Targets intended to qualify as Performance
Based Awards: net sales; pretax income before allocation of corporate
overhead and bonus; budget; cash flow; earnings per share; net income;
division, group or corporate financial goals; return on stockholders'
equity; return on assets; attainment of strategic and operational
initiatives; appreciation in and/or maintenance of the price of the Common
Stock or any other publicly traded securities of the Company; market share;
gross profits; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; economic value-added
models; total return to shareholders, comparisons with various stock market
indices; increase in number of customers; and/or reductions in costs.
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<PAGE> 8
10.4 STOCKHOLDER RE-APPROVAL. As required by Treasury Regulation Section
1.162-27(e)(4)(vi), the material terms of performance goals as described in
this Section 10 shall be disclosed to and re-approved by the Company's
stockholders no later than the first stockholder meeting that occurs in the
5th year following the year in which the Company's stockholders previously
approved such performance goals.
11.0 MISCELLANEOUS
11.1 NON-ASSIGNABILITY. Cash Awards under the Plan shall not be subject in any
manner to alienation, anticipation, sale, transfer (except by will or the
laws of descent and distribution), assignment, pledge, or encumbrance, nor
shall any Cash Award be payable to anyone other than the Participant to
whom it was granted, or in the case of death, to the Participant's legal
representative.
11.2 WITHHOLDING TAXES. The Company shall be entitled to deduct from any payment
of Cash Awards under the Plan the amount of all applicable taxes required
by law to be withheld with respect to such payment.
11.3 AMENDMENT OR TERMINATION OF PLAN. The Board may suspend or terminate the
Plan at any time with or without prior notice; provided, however, that such
suspension or termination shall not become effective until after the end of
the 120-day period following the completion of the Performance Cycle in
which the action to suspend or terminate the Plan is taken. In addition,
the Board may, from time to time and with or without prior notice, amend
the Plan in any manner; provided, however, that such amendment shall not
adversely affect any Participant with respect to the Performance Cycles
commencing prior to the date such action is taken or becomes effective
without his/her prior written consent.
11.4 GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware without reference to principles of
conflict of laws, except to the extent superseded by applicable federal
law.
11.5 TENURE. A Participant's right, if any, to continue to serve the Company as
a director, officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a participant under the
Plan.
11.6 NO RIGHT, TITLE, OR INTEREST TO OR IN COMPANY ASSETS. Participants shall
have no right, title, or interest whatsoever to or in any investments that
the Company may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or
a fiduciary relationship between the Company and the Participant or his or
her beneficiary, legal representative or any other person. To the extent
that any person acquires a right to receive payments from the Company under
the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made herewith shall be
paid from the general funds of the Company and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts; provided, however, that the Company may, in its
sole
-8-
<PAGE> 9
discretion, establish a grantor trust as defined in Code section 671 to pay
benefits earned under this Plan. The establishment of such a trust shall
not relieve the Company of its obligations hereunder except to the extent
payments actually are made from such trust to a Participant for benefits
payable pursuant to this Plan. The Plan is not intended to be subject to
the Employee Retirement Income Security Act of 1974, as amended.
11.7 NO GUARANTEE OF TAX CONSEQUENCES. No person connected with the Plan in any
capacity, including, but not limited to, the Company and any of its
subsidiaries or parent and their directors, officers, agents and employees
makes any representation, commitment, or guarantee that any tax treatment,
including, but not limited to, federal, state and local income, estate and
gift tax treatment, will be applicable with respect to amounts deferred
under the Plan, or paid to or for the benefit of the Participant under the
Plan, or that such tax treatment will apply to or be available to the
Participant on account of participation in the Plan.
11.8 [reserved]
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<PAGE> 1
EXHIBIT 12.1
Earnings Per Share
Corn Products International, Inc.
Computation of Net Income
Per Share of Capital Stock
(All figures are in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
----------------------
Basic
<S> <C>
Shares outstanding at the start of the period 37,560
Weighted average of new shares issued during the period 21
Weighted average of shared issued during the period for exercise of stock options 1
Weighted average of treasury shares purchased during the period -279
---------
Average shares outstanding - basic 37,303
Effect of Dilutive Securities
Dilutive shares outstanding - Assuming dilution 823
Shares assumed to have been purchased for treasury with assumed proceeds from
the exercise of stock options -725
---------
Average shares outstanding - assuming dilution 37,401
Income from continuing operations 77,191
Net income 77,191
Income Per Share - Basic
Continuing operations 2.06
Net Income 2.06
Income Per Share - Dilutive
Continuing operations 2.06
Net Income 2.06
</TABLE>
<PAGE> 1
EXHIBIT 12.2
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CORN PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
------------------------------------------------------------
($ MILLIONS) 1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
*Income before extraordinary
charges, income taxes and minority
equity: $ 127.0 $ 71.0 $ 20.0* $ 37.0 $ 186.0* $ 188.0*
Fixed charges 47.3 24.0 34.4 38.0 34.7 26.6
Capitalized interest (6.3) (3.7) (3.3) (8.1) (2.9) (2.0)
------- ------- ------- ------- ------- -------
$ 168.0 $ 91.3 $ 51.1 $ 66.9 $ 217.8 $ 212.7
======= ======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES
3.55 3.81 1.49 1.76 6.27 7.98
======= ======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense on debt $ 45.8 $ 22.5 $ 32.9 $ 37.0 $ 34.0 $ 26.0
Amortization of discount on debt -- -- -- -- -- --
Interest portion of rental expense
on operating leases 1.5 1.5 1.5 1.0 0.7 0.6
------- ------- ------- ------- ------- -------
Total $ 37.3 $ 24.0 $ 34.4 $ 38.0 $ 34.7 $ 26.6
======= ======= ======= ======= ======= =======
Income before income taxes and
minority equity $ 127.0 $ 71.0 ($ 89.0) $ 37.0 $ 223.0 $ 169.0
Restructuring charges 0.0 0.0 109.0 0.0 (37.0) 19.0
------- ------- ------- ------- ------- -------
Adj. Income $ 127.0 $ 71.0 $ 20.0 $ 37.0 $ 186.0 $ 188.0
======= ======= ======= ======= ======= =======
</TABLE>
* - Income before extraordinary charges, income taxes and minority equity does
not include restructuring and spin-off costs
<PAGE> 1
EXHIBIT 13.1
MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW AND OUTLOOK
The strategy of Corn Products International, Inc., is to drive for delivered
cost leadership in the markets we serve and to maintain our product leadership
positions, globally in dextrose and regionally in starch; in North America, to
continue to restore acceptable profitability in the United States and seek
investment opportunities to strengthen this important business; in the Rest of
World, to further improve our solid South American business through investing in
profitable internal and external growth opportunities; and elsewhere, to
selectively enter new markets through acquisitions and alliances. In addition,
we plan to evaluate major growth investment opportunities in and outside our
current geographic and product portfolio reach and act on those we judge to be
clearly beneficial to our long-term market position and earnings growth. We
believe that this strategy will produce continuing business expansion,
attractive profit growth and steadily improving shareholder value.
In line with this strategy during 1999, we maintained our focus on cost
efficiency, quality products and growth opportunities. Our earnings per share
advanced 73 percent, operating income grew 93 percent, and volumes increased 29
percent from 1998. We achieved these excellent results despite the impact of
unfavorable foreign currency values and slow economic activity in some important
markets.
We grew our worldwide dextrose volumes significantly, supplying growing markets
from our flagship dextrose plant in the United States and from locations in Asia
and Latin America. In addition, we commenced production at our new world-class
dextrose facility in Argentina, supplying the Southern Cone of South America. In
North America, we strengthened our position across all sectors. And, despite the
highly competitive US marketplace, especially in high fructose corn syrup
(HFCS), we increased US profitability through improved pricing, cost reduction
and higher volumes. The newly added Mexican business achieved strong results and
the Canadian business performed well.
In the Rest of World, we delivered continued volume and profit growth. Our
January 1999 Korean acquisition produced excellent results. This helped our Rest
of World segment overcome the effects of the economic difficulties in South
America resulting from the January 1999 devaluation of the Brazilian $real.
Colombia and Pakistan also contributed to the overall improvement, while
profitability in Brazil, our largest South American market, remained healthy.
For 2000, we plan to build on the success achieved in 1999, and we expect
earnings per share to grow at a double-digit rate on solid volume growth.
In North America, benefiting from our NAFTA position, we plan on restoring
acceptable levels of profitability in the United States. While we are encouraged
with our US earnings progress in 1999, we expect that continued low HFCS pricing
will moderate the rate of profit improvement. Given the US pricing environment,
we plan to focus on cost structure changes and optimizing volume and product
mix.
In the Rest of World, we expect a significant increase in profits within the
Mercosur countries, resulting from our cost containment efforts and from
improved market conditions. We plan to improve our solid South American business
further through timely growth investments.
1
<PAGE> 2
Elsewhere, we plan to enhance our other geographic positions selectively. In
late December 1999, we combined our Korean business with the corn-refining
business of Doosan Corporation, strengthening our position in this important
Asian market. We expect the combined business to add approximately $100 million
to our net sales in 2000.
FORMATION OF CORN PRODUCTS INTERNATIONAL
Corn Products International, Inc., became an independent and public company as
of December 31, 1997, after being spun off from CPC International Inc. (CPC),
now Bestfoods. This discussion and the comparative financial statements included
in this Annual Report were prepared by attributing the historical data for CPC's
Corn Refining Business to the Company. The results for the periods prior to
December 31, 1997, were extracted from the consolidated results of CPC, of which
the Company was an integral part until it was spun off as a separate operation.
This may not necessarily be indicative of the result of operations or the
financial position that the Company would have obtained during the periods shown
had it been independent.
RESULTS OF OPERATIONS
NET SALES. 1999 net sales totaled $1,735 million, up 20 percent from 1998 sales
of $1,448 million. Volumes increased 29 percent with the addition of sales from
the acquired companies in Mexico and Korea. Sales from these acquisitions
contributed 26 percent. Lower currency exchange rates throughout the world
resulted in an 11-percent reduction in revenues, while improved price/mix added
2 percent. In North America, net sales grew 34 percent from 1998, reflecting the
addition of the Mexican operation. Excluding the Mexican business, net sales
were 1 percent lower than 1998. Volume increased 3 percent, while prices
declined 4 percent, which reflected lower corn costs. In the US and Canadian
market, dextrose sales and volumes increased by double digits. HFCS prices
continued to improve. In the Rest of World, net sales were 4 percent lower than
last year, due primarily to lower foreign currency values, principally in
Brazil, Colombia and Pakistan. This reduced sales by 28 percent. Excluding the
Korean acquisition, higher volumes added 3 percent, while price increases added
11 percent.
1998 net sales grew 2 percent to $1,448 million from $1,418 million in 1997,
with 4 percent higher volume. 1998 pricing was lower in some areas than in 1997,
reflecting the pass-through of lower corn costs and lower exchange rates. In
North America, net sales grew by 5 percent, including one month of additional
sales from our Mexican operations, resulting from our increased investment.
Pricing in the US business rebounded from a disappointing 1997 with a 4-percent
increase in net sales on 1-percent higher volume. The down cycle in HFCS prices,
which hit a low in 1997, improved somewhat in 1998, but remained low versus
historical levels. In Canada, lower pricing and lower exchange rates offset
volume gains, resulting in a 9-percent reduction in net sales. In the Rest of
World, net sales declined 2 percent as lower exchange rates and prices more than
offset volume gains of 7 percent.
COST OF SALES AND OPERATING EXPENSES. 1999 cost of sales was up 13 percent from
last year, but well below the 29-percent increase in volumes, as gross and net
corn costs declined and we continued to achieve improved operating efficiencies.
Gross profits for the year increased 70 percent from 1998 to $290 million. Gross
profit margins improved for the third year, climbing to 17 percent of net sales
from 12 percent in 1998 and 10 percent in 1997. The 1999 improvement
2
<PAGE> 3
in the gross profit margin is largely attributable to North America, where gross
profit margins more than doubled from 1998, and reflects lower corn costs and
manufacturing expenses.
Cost of sales for 1998 was marginally lower than 1997, despite the 4-percent
increase in volume. Lower cost of sales resulted from lower corn costs and
operating efficiencies. The Rest of World operations achieved good profit,
although somewhat moderated by financial turmoil in emerging markets.
Operating expenses for 1999 totaled $134 million, a 33-percent increase from
1998, reflecting the inclusion of the Mexican and Korean businesses and higher
corporate expenses. The increase in corporate expenses is attributable to costs
associated with strategic development initiatives and performance-based
compensation expenses.
1998 operating expense rose 6 percent to $101 million from $95 million in 1997.
The increase was largely due to corporate costs associated with being a
stand-alone entity. Excluding the corporate cost, 1998 operating expense
declined 2 percent from the prior year.
1999 fee, royalty and other income decreased to $6 million from $14 million in
1998. The decline is attributable to the former Mexican joint venture now being
consolidated. Other fees and income remained fairly constant compared to the
prior year.
Fee, royalty and other income advanced in 1998, compared to 1997, primarily due
to improved results in the Mexican joint venture.
RESTRUCTURING CHARGE. In 1997, the Company recorded a $94 million pretax ($71
million after-tax) restructuring charge. The charge was primarily for severance
and severance-related costs for more than 200 employees, principally in the
Company's international operations. By the end of fiscal 1999, the Company had
fully utilized the restructuring provision.
SPIN-OFF COSTS. In 1997, the Company also recorded a $15 million pretax ($12
million after-tax) charge for costs related to the spin-off of the Corn Refining
Business from CPC.
OPERATING INCOME. 1999 operating income was up 93 percent from 1998 to $162
million from $84 million. North America operating income increased nearly
fivefold to $95 million, up from $18 million in 1998. The improvement came from
higher profit margins in the United States and Canada and the inclusion of full
earnings from the Mexican operation. Rest of World 1999 operating income
advanced 7 percent from 1998 to $81 million from $76 million, reflecting the
strong performance of the Korean acquisition. This increase more than offset
declines in South America, which resulted from the economic crisis created by
the January 1999 Brazilian currency devaluation.
Operating income for 1998 was $84 million, up from $48 million in 1997,
excluding the 1997 special charges for spin-off and restructuring. In North
America, 1998 operating income improved $50 million from 1997, reflecting
improved margins in HFCS and glucose and solid results in Mexico. In the Rest of
World, operating income was down 7 percent to $76 million from the $82 million
achieved in 1997.
FINANCING COSTS. 1999 financing costs totaled $35 million, up from $13 million
in 1998 and $28 million in 1997. The increased financing costs reflect the debt
taken on with the Mexican and Korean transactions and higher interest rates on
the conversion of $200 million in short-term debt to long-term fixed rate senior
notes issued in August 1999.
3
<PAGE> 4
1998 financing costs decreased approximately 50 percent to $13 million from $28
million in 1997, as the Company significantly reduced its borrowings through
most of the year. Lower borrowings resulted from better operating performance
and consequently improved cash flow.
PROVISION FOR INCOME TAXES. The Company's effective tax rate for 1999 and 1998
was 35 percent. This tax rate represents the favorable effect of foreign source
income in countries where tax rates are generally lower than in the United
States. In 1997, the Company reported a pretax loss arising from restructuring
and spin-off charges. The tax benefit rate attributed to these special items was
24 percent. The tax rate attributed to 1997 operating profits was 35 percent,
resulting in a net effective rate of 21 percent for 1997.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. In 1997, the Company
recorded a $3 million after-tax charge because of a change in accounting
principle. The change in accounting principle resulted from a pronouncement by
the Emerging Issues Task Force (EITF) requiring companies to expense certain
previously capitalized reengineering costs.
MINORITY STOCKHOLDERS INTEREST IN EARNINGS. Minority stockholders' interest in
earnings increased to $5 million in 1999 from $3 million in 1998. The increase
is attributable to the minority interest in our Mexican affiliate acquired in
December 1998. 1998 minority stockholders' interest increased to $3 million from
$2 million in 1997 and was attributable to the minority interest in our Pakistan
affiliate.
NET INCOME. 1999 net income grew 80 percent to $77 million from $43 million in
1998. The improvement is attributable to the North America operations and the
accretive business additions in Mexico and Korea. Net income for 1998 was $43
million, compared to $11 million in 1997, excluding the after-tax effect of
special charges in 1997. The improvement in net income largely reflected the
improvement in the North American business, as well as the lower financing
costs. The 1997 net loss was $75 million, including the special charges for
restructuring, spin-off and the cumulative effect of the change in accounting
principle.
1999 earnings per fully diluted share increased 73 percent to $2.06 from $1.19
per fully diluted share in 1998. 1997 earnings per fully diluted share totaled
$0.30 before the restructuring and spin-off costs and the change in accounting
principle, or a loss of $2.10 after these charges.
COMPREHENSIVE INCOME. 1999 comprehensive income declined to $5 million from $18
million in 1998. This decrease resulted from improved net income which was
offset by a negative $72 million currency translation adjustment, principally
caused by the devaluation of the Brazilian $real to the US dollar. The currency
translation adjustments reflect the impact of translating net assets and
liabilities denoted in local currencies to US dollars at lower currency rates.
1998 comprehensive income improved to $18 million from a loss of $86 million in
1997. The 1998 improvement was attributable to improved net income partially
offset by a negative $25 million currency translation adjustment.
4
<PAGE> 5
LIQUIDITY & CAPITAL RESOURCES
At December 31, 1999, the Company's total assets increased to $2,212 million
from $1,946 million at December 31, 1998. The increase in total assets reflects
the acquisition of the Korean business adding to our asset base, partially
offset by the effects of lower exchange rates, principally in Brazil, used to
translate our foreign asset values.
In the past two years, the Company has invested $253 million in capital projects
to modernize or expand plant facilities in line with projected market demand.
The Company plans to continue investing to meet profitable customer demand and
drive for delivered cost leadership.
NET CASH FLOWS. 1999 net cash flows were used to fund the Company's capital
investment program and the quarterly dividend payments. During 1999, net cash
flows were also used to help fund the acquisition of our Korean affiliate, the
acquisition of 19-percent minority interest in our Pakistan affiliate and the
previously announced common stock repurchase program. For the year ending
December 31, 1999, net cash flows from operating activities were $198 million,
compared to $90 million for 1998, reflecting the higher net income and lower
working capital change. Cash used for investing activities totaled $271 million
for 1999, reflecting the acquisitions in Korea, increased investment in Pakistan
and $162 million in capital investments.
Cash flows in 1998 funded the Company's working capital, capital expenditure
program and a modest dividend payment. Net cash flows from 1998 operations were
$90 million, down from $215 million in 1997. The 1997 cash flows included the
results of the additional quarter in operations outside North America due to the
change in the year-end reporting period. 1997 cash flows from operations were
exceptionally high, despite the net loss for the year, and resulted from
reductions in trade working capital, combined with the adjustment for the
restructuring charge and spin-off costs described above.
Cash used for investing activities in 1998 was $60 million, compared to $133
million in 1997. This decrease resulted from lower capital expenditures of $91
million, compared to $116 million in 1997, the receipt of the repayment of the
$60 million loan made by the Company to Arancia-CPC and the initial payment on
the Arancia transaction.
The Company has a $340 million 5-year-revolving-credit facility in the United
States due December 2002. In addition, the Company has a number of short-term
credit facilities consisting of operating lines of credit. At December 31, 1999,
the Company had total debt outstanding of $544 million, compared to $404 million
at December 31, 1998. The increase in debt is attributable to the Korean
acquisitions and the increased investment in Pakistan. The debt outstanding
consisted of $200 million in public debt issued during the third quarter of
1999, as well as affiliate long-term debt of $181 million, mostly assumed in the
Arancia transaction. The current portion of long-term debt is $59 million. In
addition, the Company has $163 million in affiliate short-term borrowings
against local country operating lines in various currencies. At December 31,
1999, no funds were drawn against the unsecured revolving credit facility in the
United States. The interest rate of affiliate debt ranged from 5.38 percent to
25 percent. The Company expects these credit facilities, together with cash flow
from operations, to provide sufficient operating funds for capital expenditures
in support of its business strategies and/or the payments of dividends to its
stockholders.
MINORITY STOCKHOLDERS INTEREST. 1999 minority stockholders' interest increased
to $199 million from $91 million in 1998. This increase is attributable to the
merger of our Korean business with the corn-refining business of Doosan
Corporation at the end of December 1999.
5
<PAGE> 6
RISK AND UNCERTAINTIES
The Company operates in one business segment and in 22 countries. In each
country, the business and assets are subject to varying degrees of risk and
uncertainty. The Company insures its business and assets in each country against
insurable risk in a manner that it deems appropriate. Because of its diversity,
the Company believes that the risk of loss from non-insurable events in any one
country would not have a material adverse effect on the Company's operations as
a whole. The Company believes there is no concentration of risk with any single
customer or supplier, or small group of customers or suppliers, whose failure or
non-performance would materially affect the Company's results. The Company also
has policies to handle other financial risks discussed below.
COMMODITY COSTS. The Company's finished products are made primarily from corn.
Purchased corn accounts for 40 percent to 65 percent of finished product costs.
In North America, the Company sells a large portion of finished product at firm
prices established in supply contracts for up to one year. In order to minimize
the effect of volatility in the cost of corn related to these firm-priced supply
contracts, the Company enters into corn futures contracts or takes hedging
positions in the corn futures market. From time to time, the Company may also
enter into anticipatory hedges. These contracts typically mature within one
year. At expiration, the Company settles the derivative contracts at a net
amount equal to the difference between the then-current price of corn and the
fixed contract price. While these hedging instruments are subject to
fluctuations in value, changes in the value of the underlying exposures the
Company is hedging generally offset such fluctuations. While the corn futures
contracts or hedging positions are intended to minimize the volatility of corn
costs on operating profits, occasionally the hedging activity can result in
losses, some of which may be material. In the Rest of World, sales of finished
product under long-term, firm-priced supply contracts are not material.
The Company's hedging instruments generally relate to contracted firm-priced
business. Based on the Company's overall commodity hedge exposure at December
31, 1999, a hypothetical 10-percent change in market rates applied to the fair
value of the instruments would have no material impact on the Company's
earnings, cash flows, financial position or fair value of commodity price,
risk-sensitive instruments over a one-year period.
INTERNATIONAL OPERATIONS AND FOREIGN EXCHANGE. For more than 70 years, the
Company has operated a multinational business subject to the risks inherent in
operating in foreign countries, with foreign currencies. The Company's US
dollar-denominated results are subject to foreign exchange fluctuations, and its
non-US operations are subject to political, economic and other risks.
Because the Company primarily sells world commodities, it believes that local
prices will adjust relatively quickly to offset the effect of a local
devaluation. The Company generally does not enter into foreign currency hedging
transactions. The Company's policy is to hedge only commercial transactions that
do not use the currency of the country in which the operating unit responsible
for the transaction is located.
INTEREST RATE EXPOSURE. Approximately 40 percent of the Company's borrowings are
long-term fixed rate bonds. Of the remaining 60 percent of the Company's
borrowings, approximately 30 percent are short-term credit facilities with
floating interest rates, and 30 percent are long-term
6
<PAGE> 7
loans with variable interest rates primarily tied to the London Interbank
offered rate (LIBOR). Should short-term rates change, this could affect our
interest cost. Current economic projections do not indicate a significant change
in the interest rate in the near future.
READINESS FOR THE YEAR 2000. The Year 2000 (Y2K) issue resulted from certain
computer programs, which used two digits rather than four to define the
applicable year. During 1997, the Company developed a plan ("the Program") and
established a team with appropriate senior management support to identify and
correct Y2K issues. The Program included the repair or replacement, when
necessary, of critical internal systems, hardware and software throughout its
plants, building facilities and business systems, the review of critical vendors
and the development of contingency plans. The Program, to achieve Y2K readiness,
resulted in an expense of $10 million. Capital expenditures indirectly related
to Y2K added an additional $10 million to the cost of the Program.
The Company's manufacturing and administrative processes operated as usual on
January 1, 2000, and the Company has not experienced any disruptions in its
operations from Y2K-related issues in 2000.
FORWARD LOOKING STATEMENTS
This Annual Report contains or may contain certain forward-looking statements
concerning the Company's financial position, business and future prospects, in
addition to other statements using words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend" and other similar expressions. These
statements contain certain inherent risks and uncertainties. Although we believe
our expectations reflected in these forward-looking statements are based on
reasonable assumptions, stockholders are cautioned that no assurance can be
given that our expectations will prove correct. Actual results and developments
may differ materially from the expectations conveyed in these statements, based
on factors such as the following: fluctuations in worldwide commodities markets
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 we
manufacture and sell our products, including fluctuations in the value of local
currencies; and, increased competitive and/or customer pressure in the
corn-refining industry. Our forward-looking statements speak only as of the date
on which they are made and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
the statement. If we do update or correct one or more of these statements,
investors and others should not conclude that we will make additional updates or
corrections. For a further description of risk factors, see the Company's most
recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q
and 8-K.
7
<PAGE> 8
REPORT OF MANAGEMENT
THE MANAGEMENT OF CORN PRODUCTS INTERNATIONAL, INC., is responsible for the
financial and operating information contained in this Annual Report, including
the financial statements covered by the independent auditors' report. The
statements were prepared in conformity with generally accepted accounting
principles in the United States and include, where necessary, informed estimates
and judgments.
The results for the periods prior to January 1, 1998, were extracted from the
consolidated results of CPC International Inc., of which the Company was an
integral part until it was spun off as a separate operation on December 31,
1997. Those results may not necessarily be indicative of the results of
operations or financial position that would have been obtained if the Company
had been a separate, independent company during the period shown.
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 continuous programs of internal audits.
The Company's financial statements are reviewed by its Audit Committee, which is
composed entirely of independent outside directors. This Committee meets
periodically with the independent auditors and management to review the scope
and results of the annual audit, interim reviews, internal controls, internal
auditing and financial reporting matters. The independent auditors have direct
access to the Audit Committee.
James W. Ripley
Chief Financial Officer
January 28, 2000
8
<PAGE> 9
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CORN PRODUCTS INTERNATIONAL, INC.:
We have audited the accompanying consolidated balance sheets of Corn Products
International, Inc., and its subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of income, comprehensive
income, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1999. 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 Corn Products
International, Inc., and its subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
KPMG LLP
Chicago, Illinois
January 28, 2000
9
<PAGE> 10
CORN PRODUCTS INTERNATIONAL, INC. - CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
------------- -------------- ---------------
1999 1998 1997
------------- -------------- ---------------
<S> <C> <C> <C>
Net sales $1,735 $1,448 $1,418
Cost of sales 1,445 1,277 1,280
------------- -------------- ---------------
GROSS PROFIT 290 171 138
------------- -------------- ---------------
Selling, general and administrative costs 134 101 95
Restructuring and spin-off costs - net -- -- 109
Fee, royalty and other income (6) (14) (5)
------------- -------------- ---------------
128 87 199
------------- -------------- ---------------
OPERATING INCOME (LOSS) 162 84 (61)
Financing costs, net 35 13 28
------------- -------------- ---------------
Income (loss) before income taxes and minority interest 127 71 (89)
Income taxes (provision) benefit (45) (25) 19
Minority stockholder interest (5) (3) (2)
------------- -------------- ---------------
NET INCOME (LOSS) BEFORE CHANGE IN ACCOUNTING PRINCIPLE 77 43 (72)
Cumulative effect of change in accounting principle net -- -- 3
of income tax benefits of $2 million
------------- -------------- ---------------
============= ============== ===============
NET INCOME (LOSS) $ 77 $ 43 $ (75)
============= ============== ===============
Weighted average common shares outstanding:
Basic 37.3 36.0 35.6
Diluted 37.4 36.1 35.6
Earnings (loss) per common share*
Basic and diluted:
Net income (loss) before change in accounting principle $2.06 $1.19 $(2.02)
Cumulative effect of change in accounting principle -- -- $(0.08)
Net income (loss) per common share $2.06 $1.19 $(2.10)
</TABLE>
See notes to the consolidated financial statements.
* 1997 per share amounts are pro forma.
10
<PAGE> 11
CORN PRODUCTS INTERNATIONAL, INC. - CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1999 1998
-------------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 41 $ 36
Accounts receivable - net 261 224
Inventories 212 175
Prepaid expenses 6 6
Deferred tax asset 17 24
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 537 465
- --------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Land 91 61
Buildings 314 305
Machinery and equipment 2,369 2,287
-------------------- ------------------
2,774 2,653
Less accumulated depreciation (1,425) (1,355)
-------------------- ------------------
1,349 1,298
Goodwill and other intangible assets
(less accumulated amortization of $5 and $0) 270 129
Investments 27 28
Other assets 29 26
================================================================================================================================
TOTAL ASSETS $2,212 $1,946
================================================================================================================================
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings and current portion of long-term debt $ 222 $ 250
Accounts payable 109 96
Accrued liabilities 90 59
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 421 405
- --------------------------------------------------------------------------------------------------------------------------------
Non-current liabilities 63 63
Long-term debt 322 154
Deferred taxes on income 180 180
Minority stockholders' interest 199 91
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 - 37,659,887 and 37,611,396 issued
on December 31, 1999 and 1998, respectively 1 1
Additional paid in capital 1,067 1,066
Less: Treasury stock (common stock; 703,399 and 51,374 shares in 1999 (20) (1)
and 1998, respectively) at cost
Deferred compensation - restricted stock (2) (2)
Accumulated comprehensive income (loss) (120) (48)
Retained earnings 101 37
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,027 1,053
- --------------------------------------------------------------------------------------------------------------------------------
================================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,212 1,946
================================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
11
<PAGE> 12
CORN PRODUCTS INTERNATIONAL, INC. - CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(IN MILLIONS)
-------------- ------------- --------------
1999 1998 1997
-------------- ------------- --------------
<S> <C> <C> <C>
NET INCOME (LOSS) $77 $43 $(75)
Other comprehensive income/loss
Currency translation adjustment (72) (25) (11)
-------------- ------------- --------------
COMPREHENSIVE INCOME (LOSS) $ 5 $18 $(86)
============== ============= ==============
</TABLE>
See notes to the consolidated financial statements.
CORN PRODUCTS INTERNATIONAL, INC. - CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
<TABLE>
<CAPTION>
(IN MILLIONS) COMMON ADDITIONAL TREASURY DEFERRED ACCUMULATED RETAINED NET
STOCK PAID-IN STOCK COMPENSATION COMPREHENSIVE EARNINGS STOCKHOLDER
CAPITAL INCOME (LOSS) INVESTMENT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $0 $ 0 $ 0 $ 0 $ (12) $ 0 $1,037
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (75)
Net income for the change in 10
reporting period
Transfer from CPC-net 1,008 (972)
Currency translation (11)
adjustment
Stock issued in connection 1
with spin-off
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $1 $1,008 $ 0 $ 0 $ (23) $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 43
Dividends declared (6)
Issuance of common stock 51
in connection with
acquisition
Issuance of restricted 6
common stock as
compensation
Deferred compensation - (2)
restricted stock
Stock options exercised 1
Purchase of treasury stock (1)
Currency translation (25)
adjustment
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $1 $1,066 $ (1) $(2) $ (48) $ 37 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 77
Dividends declared (13)
Issuance of restricted 1
common stock as
compensation
Purchase of treasury stock (19)
Currency translation (72)
adjustment
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $1 1,067 $(20) $(2) $(120) $101 $ 0
- --------------------------------===================================================================================================
</TABLE>
See notes to the consolidated financial statements.
12
<PAGE> 13
CORN PRODUCTS INTERNATIONAL, INC. - Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(in millions)
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income (loss) $77 $43 $(75)
Net income for the change in reporting period -- -- 10
Non-cash charges to net income:
Depreciation and amortization 122 95 103
Restructuring and spin-off charges -- -- 109
Cumulative effect of change in accounting principle - net -- -- 3
Deferred taxes 7 10 10
Other - net -- -- 1
Changes in trade working capital:
Accounts receivable and prepaid items (21) (5) 34
Inventories (28) (32) 34
Income taxes 8 3 --
Other assets 1 (5) --
Accounts payable and accrued liabilities 32 (19) (14)
- -----------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 198 90 215
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Capital expenditures (162) (91) (116)
Proceeds from disposal of plants and properties 9 2 4
Payment for acquisition, net of cash acquired (118) (31) --
Investments in and loans to unconsolidated affiliates -- 60 (21)
- -----------------------------------------------------------------------------------------------------------
Net cash flows used for investing activities (271) (60) (133)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Payments on short term borrowings, net of proceeds (98) (86) --
Proceeds from issuance (payments on) long-term debt 198 (10) (23)
Other non-current liabilities 7 21 --
Dividends paid (13) (3) --
Cost of common stock repurchased (19) (1) --
Increase (decrease) in transfer from CPC International, Inc.-net -- -- (6)
- -----------------------------------------------------------------------------------------------------------
Net cash flows from (used for) financing activities 75 (79) (29)
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 2 (49) 53
Cash and cash equivalents, beginning of period 36 85 32
- -----------------------------------------------------------------------------------------------------------
Effects of foreign exchange on cash 3 -- --
- -----------------------------------------------------------------------------------------------------------
===========================================================================================================
Cash and cash equivalents, end of period $41 $36 $85
===========================================================================================================
</TABLE>
See notes to the consolidated financial statements.
13
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE BUSINESS
Corn Products International, Inc., (the "Company"), was founded in 1906 and
became an independent and public company as of December 31, 1997, after
being spun off from CPC International Inc. ("CPC"), now Bestfoods. The
Company is in one business segment, corn refining, with operations in 22
countries and produces a wide variety of products.
The financial statements at December 31, 1997, reflect the effects of the
spin-off. The Company carries its assets and liabilities at historical
cost. The historical actions of CPC's Corn Refining Business, including
CPC's accounting policies, are attributable to the Company. The financial
results for the year ended December 31, 1997, included in these financial
statements are not necessarily indicative of the results that would have
occurred if the Company had been an independent and public company during
that time.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial statements include all
significant subsidiaries. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Certain prior year amounts have been reclassified to conform with the
current year's presentation. These reclassifications had no effect on
previously recorded net income or stockholders' equity.
Prior to the 1998 financial year, the accounts of subsidiaries outside
North America were based on fiscal years ending September 30; however, as
of December 31, 1997, the Company changed the fiscal year-end for its
subsidiaries located outside North America to that of its North American
operation, which is the calendar year. The results of the three-month stub
period for 1997 were included as an adjustment of stockholders' equity.
Assets and liabilities of foreign subsidiaries, other than those whose
functional currency is the US dollar, 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. Where the US dollar is
considered the functional currency, monetary assets and liabilities are
translated at current exchange rates with the related adjustment included
in net income. Non-monetary assets and liabilities are translated at
historical exchange rates.
CASH AND 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.
INVENTORIES are stated at the lower of cost or market. In the United
States, inventory is valued at cost on the last-in, first-out method. Had
the first-in, first-out method been used for US inventories, the carrying
value of these inventories would have increased by $5 million and $8
14
<PAGE> 15
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
million in 1999 and 1998, respectively. Outside the United States,
inventories generally are valued at average cost.
INVESTMENTS are carried at cost or less, adjusted to reflect the Company's
proportionate share of income or loss, less dividends received.
DEPRECIATION, AMORTIZATION, AND GOODWILL VALUATION -- Depreciation is
generally computed on the straight-line method over the estimated useful
life of depreciable assets at rates ranging from 10 to 50 years for
buildings and three to 20 years for all other assets. Where permitted by
law, accelerated depreciation methods are used for tax purposes. Goodwill
represents the excess of cost over fair value of net assets acquired and is
amortized over a period not exceeding 40 years, using the straight-line
method. The carrying value of goodwill is reviewed if the facts and
circumstances suggest that it may be impaired. Negative operating results
and negative cash flows from operations, among other factors, could be
indicative of the impairment of goodwill. If this review indicates that
goodwill will not be recoverable, the Company's carrying value of the
goodwill would be reduced.
REVENUE RECOGNITION - The Company recognizes operating revenues upon
shipment of goods to customers, except for consigned inventories where the
revenue is recognized at the time the shipment is used by the customer.
HEDGING INSTRUMENTS - The Company follows a policy of hedging its exposure
to commodity fluctuations with commodity futures contracts for its North
American corn purchases. All firm-priced business is hedged; other business
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 to protect the
Company's profitability. Realized gains and losses arising from such
hedging transactions are considered an integral part of the cost of these
commodities and are included in the cost when purchased.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities," which
is required to be adopted in years beginning after June 15, 2000. The
Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the
hedged assets, liabilities or firm commitments through earnings or be
recognized in other comprehensive income until the hedged item is
recognized in earnings. The derivative's change in fair value, which is not
directly offset by hedging, will be immediately recognized in earnings.
EARNING PER COMMON SHARE - Basic earnings per common share were computed by
dividing net income (loss) by the weighted average shares outstanding, 37.3
million at December 31, 1999, 36.0 million at December 31, 1998, and 35.6
million at December 31, 1997, the distribution date. For the purpose of
this calculation and the diluted earnings per share (EPS), the shares
outstanding at December 31, 1997, were assumed to be outstanding for all
prior periods. Diluted EPS were computed by dividing net income (loss) by
the weighted average shares outstanding at December 31, 1999, 1998 and
1997, including the dilutive effects of stock options outstanding for a
total of 37.4, 36.1 and 35.6 million, respectively. In 1999, options on
1,054,800 shares of common stock were not included in the calculation of
the weighted average
15
<PAGE> 16
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
shares for the diluted EPS because their effects would be antidilutive.
1997 EPS is presented on a pro forma basis, assuming 35.6 million shares
were outstanding.
CHANGE IN ACCOUNTING PRINCIPLE - In November 1997, Emerging Issues Task
Force (EITF) issued No. 97-13, "Accounting for Business Process
Reengineering Costs," which requires that certain costs related to
reengineering business processes, either done separately or in conjunction
with an information technology project, be expensed rather than
capitalized. This requirement was effective in the fourth quarter of 1997
and required that any unamortized balance of previously capitalized costs
be expensed and treated as a change in accounting principle. Accordingly,
for the year ended December 31, 1997, the Company recorded a cumulative
effect of a change in accounting principle of $5 million before taxes, $3
million after taxes, or $0.08 per common share.
RISK AND UNCERTAINTIES - The Company operates in one business segment and
in 22 countries. In each country, the business and assets are subject to
varying degrees of risk and uncertainty. The Company insures its business
and assets in each country against insurable risk in a manner that it deems
appropriate. Because of its diversity, the Company believes that the risk
of loss from non-insurable events in any one country would not have a
material adverse effect on the Company's operations as a whole.
Additionally, the Company believes there is no concentration of risk with
any single customer or supplier, or small group of customers or suppliers,
whose failure or non-performance would materially affect the Company's
results.
NOTE 3 - ACQUISITIONS
During 1999, the Company acquired the corn wet-milling business of Bang-IL
Industrial Co., Ltd., a Korean corporation, through an asset purchase for
$65 million and included the results of the business from the first quarter
of 1999. In December, the Company completed the second phase of its entry
into Korea by combining its business with the corn-refining business of
Doosan Corporation, also a Korean corporation, for $47 million. The Company
maintains a controlling interest in the combined company. Also, in the
second quarter of 1999, the Company increased its ownership of its Pakistan
affiliate to approximately 70 percent by purchasing an additional
19-percent interest. All of the acquisitions in 1999 were accounted for
under the purchase method. Had the acquisitions occurred at the beginning
of the year, the effect on the Company's pro forma financial statements
would not have been significant.
During the first quarter of 1995, the Company entered into a joint venture
with Arancia, S.A. de C.V. (the "Joint Venture"), a corn-refining business
located in Mexico. This investment had been accounted for under the equity
method. In October 1998, the Company entered into certain agreements to
purchase the remaining interest in its Joint Venture in three transactions
over the next several years. The closing of the initial transaction
occurred on December 2, 1998, whereby the Company obtained effective
control of the Joint Venture through the issuance of common stock and the
payment of cash. The Company has the option to acquire all of the remaining
interest in the Joint Venture in two additional transactions. On January
18, 2000, the Company completed the second transaction through the transfer
of common stock from treasury and payment of cash. The transaction was
accounted for under the purchase method.
16
<PAGE> 17
The fair value of the net assets of the Joint Venture at December 2, 1998,
was $136 million. In addition, the Company recorded goodwill of $127
million. The Company has reflected the series of transactions as if they
were completed on December 2, 1998. The future installment payments are
reflected as minority stockholders' interest and accrued interest at the
same rate as the Company's short-term US credit facility, which was 6.52
percent and 5.45 percent at December 31, 1999 and 1998, respectively.
NOTE 4 - SPIN-OFF AND RESTRUCTURING
SPIN-OFF FROM AND TRANSACTIONS WITH CPC, NOW BESTFOODS
On December 31, 1997, CPC distributed 100 percent of the Corn Products
International common stock through a special dividend to its shareholders.
After the spin-off, CPC had no direct ownership of the Company. In
connection with the spin-off, the Company entered into various agreements
for the purpose of governing certain of the ongoing relationships between
CPC and the Company after the distribution. The Company has entered into a
tax indemnification agreement that requires the Company to indemnify CPC
against tax liabilities arising from the loss of the tax-free
reorganization status of the spin-off. This agreement restricted the
Company, for a two-year period ending December 31, 1999, from entering into
certain transactions, including limitations on liquidation, merger or
consolidation with another company, certain issuance and redemption of its
common stock and the distribution or sale of certain assets.
A master supply agreement was negotiated to supply CPC and its affiliates
with certain corn-refining products at prices based generally on prevailing
market conditions for a minimum two-year term, ending December 31, 1999.
The Company continues to supply CPC under the extension of the master
supply agreement or the terms of locally negotiated supply agreements,
based generally on prevailing market conditions.
The Company had sales to CPC for the years ended December 31, 1999 and
1998, of $128 million and $161 million, respectively. Prior to the
spin-off, intercompany sales with CPC for the year ended December 31, 1997,
amounted to $177 million.
RESTRUCTURING CHARGES - NET AND SPIN-OFF COSTS
In 1997, the Company recorded a $15 million pretax spin-off charge and a
$94 million pretax restructuring charge from CPC. The spin-off charge
utilized entirely during 1997 encompassed the direct costs of the spin-off,
including legal, tax and investment banking fees. The restructuring charge,
$76 million of which was utilized in 1997, $9 million in 1998, and $9
million in 1999, included the costs of the separation of facilities that
were used by CPC to produce both consumer foods and corn-derived products,
employee costs and other charges.
17
<PAGE> 18
NOTE 5 - FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, accounts receivable, accounts
payable and short-term borrowings approximate fair values. Based on market
quotes or interest rates currently available to the Company for issuance of
debt with similar terms and remaining maturities, the fair value of
long-term debt, including the current portion of long-term debt at December
31, 1999 and 1998, was $377 million and $161 million, respectively.
COMMODITIES
At December 31, 1999 and 1998, the Company had open corn commodity futures
contracts of $196 million and $295 million, respectively. Contracts open
for delivery beyond March 31, 2000, amounted to $158 million, of which $50
million is due in May 2000, $41 million is due in July 2000, $35 million is
due in September 2000 and $32 million is due in December 2000. At December
31, 1999, the price of corn under these contracts was $5 million above
market quotations of the same dates.
NOTE 6 - FINANCING ARRANGEMENTS
The Company had total debt outstanding of $544 million and $404 million on
December 31, 1999 and 1998, respectively. Short-term borrowings consist
primarily of various unsecured local country lines of credit for
operations. The Company also has available for use an unsecured credit line
facility in the United States, which provides for a maximum of $340 million
in borrowings. No funds were drawn on the facility at December 31, 1999.
At December 31, short-term borrowings consist of the following:
<TABLE>
<CAPTION>
(in millions) 1999 1998
--------------- ---------------
<S> <C> <C>
Korean revolving credit facility (8.3%) $ 31 $ --
US revolving credit facility -- 152
Other borrowings in various currencies (5.38% - 25% interest) 132 91
Current portion of long-term debt 59 7
----------------------------------------------------------------------------------------------------
Total $ 222 $ 250
====================================================================================================
</TABLE>
18
<PAGE> 19
During 1999, the Company filed a shelf registration with the Securities and
Exchange Commission for borrowings up to $600 million. Under this filing,
the Company issued $200 million of 8.45% senior notes maturing in 2009.
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
--------------- ---------------
<S> <C> <C>
8.45% senior notes, due 2009 $ 200 $ --
Mexican Import Credit Facility, due 2001 at LIBOR + 1.75% 40 40
Mexican Import Credit Facility, due 2007 at LIBOR + 3.30% 60 60
Mexican Export Credit, due 2000 at LIBOR + 1.49% 24 24
Other, due in varying amounts through 2007, fixed and floating
interest rates ranging from 6.57% - 21.37% 57 37
----------------------------------------------------------------------------------------------------
Total $ 381 $ 161
----------------------------------------------------------------------------------------------------
Less current maturities 59 7
----------------------------------------------------------------------------------------------------
Long-term debt $ 322 $ 154
====================================================================================================
</TABLE>
Maturities of long-term debt are $64 million in 2001, $12 million in 2002,
$11 million in 2003, $235 million in 2004 and thereafter. The LIBOR rate at
December 31, 1999 was 6.13%.
NOTE 7 - LEASES
The Company leases rail cars and certain machinery and equipment under
various operating leases. Rental expense under operating leases was $17.8
million, $18.7 million, and $18.3 million in 1999, 1998 and 1997,
respectively. Minimum lease payments existing at December 31, 1999 are
shown below:
---------------------------------------------------------------------
(IN MILLIONS)
YEAR MINIMUM LEASE PAYMENT
---------------------------------------------------------------------
2000 $16.2
2001 10.5
2002 7.6
2003 6.7
Balance thereafter 32.9
19
<PAGE> 20
NOTE 8 - INCOME TAXES
Income before income taxes and the components of the provision for income
taxes are shown below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES:
United States $ 16 $ 8 $(128)
Outside the United States 111 63 39
-------------------------------------------------------------------------------------------------------------
Total $127 $71 $ (89)
-------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES:
Current tax expense
US federal 6 1 (31)
State and local 1 1 (4)
Foreign 31 13 6
-------------------------------------------------------------------------------------------------------------
Total current $ 38 $15 $ (29)
-------------------------------------------------------------------------------------------------------------
Deferred tax expense (benefit)
US federal (4) 5 7
State and local (1) -- 2
Foreign 12 5 1
-------------------------------------------------------------------------------------------------------------
Total deferred 7 10 10
-------------------------------------------------------------------------------------------------------------
Total provision (benefit) $ 45 $25 $ (19)
=============================================================================================================
</TABLE>
Deferred income taxes are provided for tax effects of temporary differences
between the financial reporting basis and tax basis of assets and
liabilities. Significant temporary differences at December 31, 1999 and
December 31, 1998, respectively, are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plants and properties $195 $210
-------------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities 195 210
-------------------------------------------------------------------------------------------------------------
Restructuring reserves -- 2
Employee benefit reserves 10 11
Pensions 5 4
Other 21 39
-------------------------------------------------------------------------------------------------------------
Gross deferred tax assets 36 56
-------------------------------------------------------------------------------------------------------------
Valuation allowance (4) (2)
-------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities $163 $156
=============================================================================================================
</TABLE>
The valuation allowance at December 31, 1999 increased to $4 million from
$2 million at December 31, 1998, as it is more likely than not that certain
foreign net operating loss carryforwards will not be fully utilized to
offset taxable income.
20
<PAGE> 21
A reconciliation of the federal statutory tax rate to the Company's
effective tax rate follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for tax at U.S. statutory rate 35.0% 35.0% (35.0)%
Taxes related to foreign income (3.0) (2.3) (7.5)
State and local taxes - net (0.1) 0.5 (1.5)
Restructuring and spin-off charges -- 14.0
Non-deductible Goodwill 1.0
Other items - net 2.1 1.8 8.7
-------------------------------------------------------------------------------------------------------------
Provision at effective tax rate 35.0% 35.0% (21.3)%
=============================================================================================================
</TABLE>
Provisions are made for estimated US and foreign income taxes, less credits
which may be available, on distributions from foreign subsidiaries to the
extent dividends are anticipated. No provision has been made for income
taxes on approximately $309 million of undistributed earnings of foreign
subsidiaries at December 31, 1999, as such amounts are considered
permanently reinvested.
21
<PAGE> 22
NOTE 9. BENEFIT PLANS
The Company and its subsidiaries sponsor non-contributory defined benefit
pension plans covering substantially all employees in the United States and
Canada, including certain employees in other foreign countries. Plans for
most salaried employees provide pay-related benefits based on years of
service. Plans for hourly employees generally provide benefits based on
flat dollar amounts and years of service. The Company's general funding
policy is to provide contributions within the limits of deductibility under
current tax regulations. 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
applicable plan. Domestic plan assets consist primarily of common stock,
corporate debt securities and short-term investment funds.
Effective January 1, 1998, the plan for domestic salaried employees was
amended to a defined benefit "cash balance" pension plan, which provides
benefits based on service and company credits to the participating
employees' accounts of between 3 percent and 10 percent of base salary,
bonus and overtime.
The Company also provides healthcare and life insurance benefits for
retired employees in the United States and Canada. Effective January 1,
1998, the Company amended its US post-retirement medical plans for salaried
employees to provide Retirement Health Care Spending Accounts. The Company
provides access to retiree medical insurance post-retirement. US salaried
employees accrue an account during employment, which can be used after
employment to purchase post-retirement medical insurance from the Company
and Medigap or Medicare HMO policies after age 65. The accounts are
credited with a flat dollar amount, and indexed for inflation annually
during employment. The accounts accrue interest credits using a rate equal
to a specified amount above the yield on 5-year Treasury notes. These
employees become eligible for benefits when they meet minimum age and
service requirements. The Company accrues a flat dollar amount on an annual
basis for each domestic salaried employee. These amounts, plus credited
interest, can be used to purchase post-retirement medical insurance. The
Company has the right to modify or terminate these benefits. Healthcare
benefits for retirees outside the United States and Canada are generally
covered through local government plans.
PENSION PLANS - Net pension cost (income) consisted of the following for
the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
(IN MILLIONS) U.S. PLANS NON-U.S. PLANS
------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2 $ 2 $ 3 $ 1 $ 1 $ 1
Interest cost 4 4 4 3 3 3
Expected return on plan assets (5) (4) (22) (4) (3) (3)
Net amortization and deferral -- (1) 17 -- (1) --
------------------------------------------------------------------------------------------------------
Net pension cost $ 1 $ 1 $ 2 $-- $-- $ 1
======================================================================================================
</TABLE>
22
<PAGE> 23
The changes in benefit obligations and plan assets, as well as the funded
status of the Company's pension plans at December 31, 1999 and 1998,
respectively were as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) U.S. PLANS NON-U.S. PLANS
1999 1998 1999 1998
<S> <C> <C> <C> <C>
BENEFIT OBLIGATION AT
January 1 $57 $52 $47 $45
Service cost 2 2 1 1
Interest cost 4 4 3 3
Benefits paid (2) (1) (2) (1)
Actuarial (gain) loss (4) -- -- --
Foreign currency exchange -- -- 3 (1)
=======================================================================================================
Benefit obligation at December 31 $57 $57 $52 $47
=======================================================================================================
FAIR VALUE OF PLAN ASSETS AT
at January 1 $63 $60 46 48
Actual return on plan assets 3 4 6 1
Employer contributions -- -- 1 1
Benefits paid (2) (1) (2) (2)
Foreign currency exchange -- -- 2 (2)
=======================================================================================================
Fair value of plan assets at December 31 $64 $63 $53 $46
=======================================================================================================
Funded status $ 7 $ 6 1 ($1)
Unrecognized net actuarial loss (gain) (23) (22) 1 3
Unrecognized prior service cost 4 4 1 1
-------------------------------------------------------------------------------------------------------
Net prepaid pension asset (liability) ($12) ($12) $ 3 $3
=======================================================================================================
</TABLE>
Included in the pension benefits above, are non-qualified pension plans.
The Company is therefore not required to set aside assets in order to fund
these plans. As a result, for these non-qualified plans, both the projected
benefit obligation and accumulated benefit obligation exceeded the fair
value of plan assets by $5 million as of December 31, 1999 and 1998.
The following weighted average assumptions were used to determine the
Company's obligations under the plans:
<TABLE>
<CAPTION>
U.S. PLANS NON-U.S. PLANS
-----------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rates 8.0 % 6.75 % 7.0 % 6.5 % 6.5 % 7.4 %
Rate of compensation increase 5.0 % 3.75 % 5.0 % 4.5 % 4.5 % 5.5 %
Expected return on plan assets 9.5 % 8.25 % 10.0 % 8.5 % 8.5 % 8.5 %
===========================================================================================================
</TABLE>
The Company and certain of its subsidiaries maintain defined contribution
plans. Contributions are determined by matching a percentage of employee
contributions. Amounts charged to expense for defined contribution plans
totaled $4.4 million, $4.2 million and $3.6 million, in 1999, 1998, and
1997, respectively.
23
<PAGE> 24
POST-EMPLOYMENT BENEFIT PLANS - Net post-employment benefit costs consisted
of the following for the years ended December 31, 1999, 1998 and 1997:
(IN MILLIONS)
----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
Service cost $ 1 $ 1 $ 1
Interest cost 1 1 1
Net amortization and deferral (1) (1) --
----------------------------------------------------------------
Net post-employment costs $ 1 $ 1 $ 2
================================================================
The Company's post-employment benefit plans currently are not funded. The
changes in the benefit obligations of the plans at December 31, 1999 and
1998, respectively, were as follows:
(IN MILLIONS) 1999 1998
ACCUMULATED POST-EMPLOYMENT BENEFIT OBLIGATION
at January 1 $17 $15
Service cost 1 1
Interest cost 1 1
Actuarial (gain) loss 2 --
----------------------------------------------------------------------
ACCUMULATED POST-EMPLOYMENT BENEFIT OBLIGATION
at December 31 ($21) ($17)
Unrecognized net actuarial loss (gain) 2 -
Unrecognized prior service cost (4) (5)
----------------------------------------------------------------------
ACCRUED POST-EMPLOYMENT BENEFIT COSTS ($23) ($22)
======================================================================
Annual increases in per capita cost of health care benefits of 8 percent
pre-age-65 and 6.75 percent post-age-65 were assumed for 1999 to 2000 for
health care related post-retirement employment benefit, gradually declining
to 5.5% by the year 2002 and remaining at that level thereafter. An
increase or decrease in the assumed health care cost trend rate by 1
percentage point, increases or decreases the accumulated post-employment
benefit obligation at December 31, 1999 by $1.7 million, with a
corresponding effect on the service and interest cost components of the net
periodic post-retirement benefit cost for the year then ended of $0.2
million.
The accumulated post-employment benefit obligation for U.S. plans at
December 31, 1999 and 1998, was determined using assumed discount rates of
8% and 6.75%, respectively. The accumulated post-employment benefit
obligation at December 31, 1999 and 1998, for Canadian plans was determined
using an assumed discount rate of 6.5%.
24
<PAGE> 25
NOTE 10 - SUPPLEMENTARY INFORMATION
BALANCE SHEET - supplementary information is set forth below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE - NET
Accounts receivable - trade $222 $193
Accounts receivable - other 44 36
Allowance for doubtful accounts (5) (5)
-------------------------------------------------------------------------------------------------------------
Total accounts receivable - net 261 224
-------------------------------------------------------------------------------------------------------------
INVENTORIES
Finished and in process 84 110
Raw materials 97 43
Manufacturing supplies 31 22
-------------------------------------------------------------------------------------------------------------
Total inventories 212 175
-------------------------------------------------------------------------------------------------------------
ACCRUED LIABILITIES
Compensation expenses 15 12
Dividends payable 4 3
Accrued interest 10 3
Restructuring reserves -- 9
Taxes payable on income 9 --
Taxes payable other than taxes on income 13 12
Other 39 20
-------------------------------------------------------------------------------------------------------------
Total accrued liabilities 90 59
-------------------------------------------------------------------------------------------------------------
NONCURRENT LIABILITIES
Employee's pension, indemnity, retirement, and related provisions 43 39
Other noncurrent liabilities 20 24
-------------------------------------------------------------------------------------------------------------
Total noncurrent liabilities 63 63
=============================================================================================================
</TABLE>
25
<PAGE> 26
INCOME STATEMENT - supplementary information is set forth below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCING COSTS
Interest expense 38 16 29
Interest income (5) (3) (1)
Foreign exchange loss 2 -- --
- -------------------------------------------------------------------------------------------------------------------------------
Financing costs, net 35 13 28
===============================================================================================================================
</TABLE>
STATEMENT OF CASH FLOWS - supplementary information is set forth below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid $27 11 19
Income taxes paid $29 12 10
- -------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
</TABLE>
NOTE 11 -- STOCKHOLDERS' EQUITY
COMMON STOCK
During 1999, the Company issued 47,800 restricted common shares and 1,534 common
shares upon the exercise of stock options under the stock incentive plan.
During 1998, the Company issued 1,764,706 common shares in connection with the
purchase of the controlling interest of Arancia-Corn Products, S.A. de C.V. In
addition, the Company substituted 143,018 restricted common shares upon the
spin-off and issued 36,600 additional restricted shares and 72,712 common shares
upon the exercise of stock options under the stock incentive plan.
PREFERRED STOCK AND STOCKHOLDER'S RIGHTS PLAN
The Company has authorized 25 million shares of $0.01 par value preferred stock,
of which one million shares were designated as Series A Junior Participating
Preferred Stock for the stockholders' rights plan. Under this plan, each share
of the Corn Products International common stock issued in the distribution
carries with it the right to purchase one one-hundredth of a share of preferred
stock. The rights will at no time have voting power or pay dividends. The rights
will become exercisable if a person or group acquires or announces a tender
offer that would result in the acquisition of 15 percent or more of the Corn
Products International common stock. When exercisable, each full right entitles
a holder to buy one one-hundredth of a share of Series A Junior Participating
Preferred Stock at a price of $120. If the Company is involved in a merger or
other business combination with a stockholder with at least 15 percent, each
full right will entitle a holder to buy a number of the acquiring company's
shares having a value of twice
26
<PAGE> 27
the exercise price of the right. Alternatively, if a 15-percent stockholder
engages in certain self-dealing transactions or acquires the Company in such a
manner that Corn Products International and its common stock survive, or if any
person acquires 15 percent or more of the Corn Products International common
stock, except pursuant to an offer for all shares at a fair price, each full
right not owned by a stockholder with at least 15 percent may be exercised for
Corn Products International common stock (or, in certain circumstances, other
consideration) having a market value of twice the exercise price of the right.
The Company may redeem the rights for one cent each at any time before an
acquisition of 15 percent or more of its voting securities. Unless redeemed
earlier, the rights will expire on December 31, 2007.
TREASURY STOCK
The Company purchased on the open market 419,900 and 33,000 shares of its common
stock at an average purchase price of $27.23 and $28.70 per share, during the
years ended December 31, 1999 and 1998, respectively. In addition, the Company
acquired 231,350 shares in a single block trade for $32.77 per share, or the
average market price on the date of purchase. Also, the Company acquired 6,382
and 18,454 shares of its common stock through conversion from cancelled
restricted shares and repurchase from employees under the stock incentive plan
at an average purchase price of $30.15 and $30.76 per share, or fair value at
the date of purchase, during the years ended December 31, 1999 and 1998,
respectively. All of the acquired shares are held as common stock in treasury,
less shares issued to employees under the stock incentive plan.
On September 16, 1998, the Company's Board of Directors approved a repurchase
program of up to 2 million shares. This program began immediately upon
announcement and the shares are being repurchased over a three-year period at
times determined by management. At December 31, 1999, 684,250 shares were
repurchased under this program at a total cost of approximately $20 million. On
January 21, 2000, the Company's Board of Directors authorized an increase in the
stock repurchase program to 6 million shares of common stock over a five-year
period.
STOCK OPTION PLAN
The Company has established a stock incentive plan for certain key employees. In
addition, all existing CPC stock options of Company employees were converted to
stock options to acquire Corn Products International common stock. These stock
options retain their vesting schedules and existing expiration dates. The
Company granted additional non-qualified options to purchase 413,000 and
1,097,200 shares of the Company's common stock during 1999 and 1998,
respectively. These options are exercisable upon vesting and vest in 50-percent
increments at one- and two-year anniversary dates from the date of grant. As of
December 31, 1999, certain of these non-qualified options have been forfeited
due to the termination of employees.
In addition to stock options, 50,670 and 36,600 shares were granted under the
restricted stock award provisions of the plan at December 31, 1999 and 1998,
respectively. The cost of these awards is being amortized over the applicable
restriction period.
Under the provisions of SFAS 123, the Company accounts for stock-based
compensation using the intrinsic value method prescribed by APB 25. On a pro
forma basis, net income would have been $72 million or $1.93 per share in 1999,
$38 million or $1.05 per share in 1998 and a loss
27
<PAGE> 28
of $76 million or $2.13 per share in 1997. For purposes of this pro forma
disclosure under SFAS 123, the estimated fair market value of the awards is
amortized to expense over the awards' applicable vesting period.
The fair value of the awards was estimated at the grant date using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of
5.67, 5.67 and 6.57 percent; volatility factor of 35 percent; and a weighted
average expected life of the awards of five years. No dividends were assumed for
the periods presented.
The Black-Scholes model requires the input of highly subjective assumptions and
does not necessarily provide a reliable measure of fair value.
A summary of stock option and restricted stock transactions for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1999 1998
STOCK OPTIONS RESTRICTED STOCK OPTIONS RESTRICTED
STOCK STOCK
Number of shares:
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 1,478,506 122,376 477,371 143,018
Granted 413,000 50,670 1,097,200 36,600
Exercised / vested (2,534) (17,580) (72,712) (44,598)
Canceled (11,300) (1,567) (23,353) (12,644)
Outstanding at end of year 1,877,672 153,899 1,478,506 122,376
- ------------------------------------------------------------------------------------------------------------
Exercisable at end of year 691,938 -- 393,806 --
- ------------------------------------------------------------------------------------------------------------
Price range at end of year $13.06-32.31 -- $13.06-32.31 --
- ------------------------------------------------------------------------------------------------------------
Weighted average exercise price $28.72 -- $29.24 --
- ------------------------------------------------------------------------------------------------------------
Weighted average fair value of options
granted during the current year $26.87 -- $11.38 --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
NOTE 12 - GEOGRAPHIC INFORMATION
The Company operates in one business segment - corn refining - and is
managed on a geographic regional basis. Its North American operations
include its wholly owned corn-refining businesses in the United States and
Canada and majority ownership in Mexico. Its Rest of World businesses
include primarily 100-percent-owned corn-refining operations in South
America and joint ventures and alliances in Asia, Africa and other areas.
Also included in this group is its North American enzyme business.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS:
North America $1,217 $ 909 $ 871
Rest of the World 518 539 547
-------------------------------------------------------------------------------------------------------------
Total $1,735 $1,448 $1,418
=============================================================================================================
OPERATING INCOME:
North America 95 18 $ (32)
Rest of the World 81 76 82
Corporate (14) (10) (2)
Restructuring and spin-off costs -- -- (109)*
-------------------------------------------------------------------------------------------------------------
TOTAL $ 162 $ 84 $ (61)
=============================================================================================================
TOTAL ASSETS:
North America $1,376 $1,316 $1,089
Rest of the World 836 630 577
-------------------------------------------------------------------------------------------------------------
TOTAL $2,212 $1,946 $1,666
=============================================================================================================
DEPRECIATION AND AMORTIZATION:
North America $ 88 $ 63 $ 63
Rest of the World 34 32 32
-------------------------------------------------------------------------------------------------------------
TOTAL $ 122 $ 95 $ 95
=============================================================================================================
CAPITAL EXPENDITURES:
North America $ 118 $ 40 $ 53
Rest of the World 44 51 47
-------------------------------------------------------------------------------------------------------------
TOTAL $ 162 $ 91 $ 100
=============================================================================================================
</TABLE>
All data for Rest of World is based on a 12-month fiscal year.
*1997 includes a $30 million charge from CPC for consumer and corporate
restructuring; $30 million for North American corn refining; $49 million
for other restructuring costs.
29
<PAGE> 30
SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) 1st QTR 2nd QTR 3rd QTR 4th QTR
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Net sales $ 397 $ 441 $ 445 $ 452
Gross profit 64 77 77 72
Net income 16 22 22 17
Basic earnings per common share $0.42 $0.58 $0.61 $0.45
Diluted earnings per common share $0.42 $0.58 $0.61 $0.45
- ------------------------------------------------------------------------------------------------------------
1998
Net sales $ 339 $ 367 $ 359 $ 383
Gross profit 39 40 44 48
Net income 8 11 13 11
Basic earnings per common share $0.22 $0.30 $0.35 $0.32
Diluted earnings per common share $0.22 $0.30 $0.35 $0.32
- ------------------------------------------------------------------------------------------------------------
</TABLE>
COMMON STOCK MARKET PRICES AND DIVIDENDS
The Company's common stock is listed and traded on the New York Stock Exchange.
The following table sets forth, for the periods indicated, the high, low and
closing market prices of the common stock and common stock cash dividends.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1st QTR 2nd QTR 3rd QTR 4th QTR
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Market price range of common stock
High $30.37 $32.13 $35.25 $33.81
Low 21.56 22.50 29.75 29.00
Close 23.94 30.44 30.44 32.75
Dividends declared per common share $0.08 $0.08 $0.10 $0.10
1998
Market price range of common stock
High $35.87 $38.31 $33.82 $30.37
Low 27.00 31.50 23.25 23.00
Close 35.87 33.87 25.25 30.37
- ------------------------------------------------------------------------------------------------------------
Dividends declared per common share -- -- $ 0.08 $ 0.08
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The number of shareholders of the Company's stock at December 31, 1999 was
approximately 15,000.
30
<PAGE> 31
SEVEN-YEAR FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) 1999 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $ 1,735 $ 1,448 $ 1,418 $ 1,524 $ 1,387 $ 1,385 $ 1,243
Restructuring and spin-off charges - net -- -- 83 -- (23) 12 --
Net income (loss) 77 43 (75) 23 135 100 99
Basic earnings per common share $ 2.06 $ 1.19 $ (2.10) $ 0.64 $ 3.79 $ 2.81 $ 2.78
Cash dividend declared per common share $ 0.36 $ 0.16 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Working capital $ 116 $ 60 $ (73) $ 147 $ 31 $ 106 $ 33
Plants and properties - net 1,349 1,298 1,057 1,057 920 830 792
Total assets 2,212 1,946 1,666 1,663 1,306 1,207 1,110
Total debt 544 404 350 350 363 294 209
Stockholders' equity 1,027 1,053 986 1,025 600 550 484
Shares outstanding, year-end in millions 36.9 37.6 35.6 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA*
Depreciation and amortization $ 122 $ 95 $ 95 $ 88 $ 82 $ 80 $ 78
Capital expenditures 162 91 100 192 188 145 122
Maintenance and repairs 84 67 69 61 65 65 57
Total employee costs 192 131 142 170 164 149 177
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* All data is based on a 12-month fiscal year
31
<PAGE> 1
EXHIBIT 21.1
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.
DOMESTIC - 100 PERCENT
Corn Products International, Inc. (Delaware)
Corn Products Sales Corporation (Delaware)
Crystal Car Line, Inc. (Illinois)
Enzyme Bio-Systems Ltd. (Delaware)
Feed Products Limited (New Jersey)
The Chicago, Peoria and Western Railway Company (Illinois)
Cali Investment Corp. (Delaware)
Colombia Millers Ltd. (Delaware)
Hispano-American Company, Inc. (Delaware)
Inversiones Latinoamericanas S.A. (Delaware)
Bedford Construction Company (New Jersey)
Corn Products Puerto Rico, Inc. (Delaware)
FOREIGN - 100 PERCENT
Argentina: Productos de Maiz, S.A.
Barbados: Corn Products International Sales Company, Inc.
Brazil: Corn Products Brasil Ingredientes Industriais, Ltda.
Canada: Canada Starch Company
-Canada Starch Operating Company, Inc.
-Casco Inc.
-Casco Sales Company Inc.
-Corn Products Canada Inc.
Chile: Corn Products Chile Inducorn S.A.
Colombia: Industrias del Maiz S.A. - Corn Products Andina
. Honduras: Almidones del Istmo S.A. de C.V.
Japan: Corn Products Japan Ltd.
Kenya: Corn Products Kenya Ltd.
Malaysia: Stamford Food Industries Sdn. Berhad
Mexico: Productos Modificados S.A. de C.V.
Singapore: Corn Products Trading Co. Pte. Ltd.
Uruguay: Productos de Maiz Uruguay, S.A.
Venezuela: Corn Products Venezuela. C.A.
Ecuador: Indumaiz del Ecuador S.A
Thailand: Corn Products Marketing (Thailand) Ltd
<PAGE> 2
OTHER
Pakistan: Rafhan Maize Products Co. Ltd. - 70.31 percent
Mexico: Arancia S.A. de C.V. - 90 percent (Indirect and Direct)
Aracorn S.A. de C.V - 49 percent
Arendadora de Gefemesa S.A.de C.V. (100 percent)
Korea: Doosan Corn Products Korea, Inc. - 50 percent
Ecuador: Poliquimicos del Ecuador S.A. - 91.7 percent
Japan: Nihon Skokuhin Kaho Company, Ltd. - 22.96 percent
Brazil: GETEC - 20.17 percent
The Company also has other subsidiaries, which, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary.
<PAGE> 1
Exhibit 23.1
CONSENT OF KPMG LLP
The Board of Directors
Corn Products International, Inc.
We consent to incorporation by reference in the Registration Statements on Forms
S-8 (No. 333-43479, 333-43525, 333-71573, 333-83557, and 333-33100) of Corn
Products International, Inc. of our report dated January 28, 2000, relating to
the consolidated balance sheets of Corn Products International, Inc. and
subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of income, stockholders' equity, comprehensive income and cash flows
for each of the years in the three-year period ended December 31, 1999 which
report is incorporated by reference in the December 31, 1999 annual report on
Form 10-K of Corn Products International, Inc.
/s/ KPMG LLP
March 24, 2000
Chicago, Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Summary financial information extracted from the consolidated balance sheet of
Corn Products International, Inc. at December 31, 1999 and the consolidated
statement of income for the twelve-months ended December 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 41
<SECURITIES> 0
<RECEIVABLES> 261
<ALLOWANCES> 0
<INVENTORY> 212
<CURRENT-ASSETS> 537
<PP&E> 2774
<DEPRECIATION> 1425
<TOTAL-ASSETS> 2212
<CURRENT-LIABILITIES> 421
<BONDS> 200
0
0
<COMMON> 1
<OTHER-SE> 1026
<TOTAL-LIABILITY-AND-EQUITY> 2212
<SALES> 1735
<TOTAL-REVENUES> 0
<CGS> 1445
<TOTAL-COSTS> 1573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 127
<INCOME-TAX> 45
<INCOME-CONTINUING> 77
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77
<EPS-BASIC> 2.06
<EPS-DILUTED> 2.06
</TABLE>
