SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1998
Commission File No. 1-13479
AGRIBRANDS INTERNATIONAL, INC.
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1794250
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(State of Incorporation) (I.R.S. Employer Identification No.)
9811 SOUTH FORTY DRIVE, ST. LOUIS MISSOURI 63124
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(Address of principal executive offices) (Zip Code)
(314) 812-0500
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(Registrant's telephone number, including area code)
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, and (2)
has been subject to such filing requirements for the past 90 days.
YES: X NO: _____
Number of shares of Agribrands common stock, $.01 par value, outstanding as of
the close of business on June 30, 1998:
10,668,571
----------------
<PAGE>
PART I - FINANCIAL INFORMATION
AGRIBRANDS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
---------------------------------------------------------------
The following discussion is a summary of the key factors management
considers necessary in reviewing Agribrands International, Inc. ("Agribrands" or
"the Company") results of operations, liquidity, capital resources, and
operating segment results.
Business Overview
On April 1, 1998, Ralston Purina Company (Ralston) distributed the common
stock of its wholly owned subsidiary, Agribrands International, Inc., to the
holders of Ralston's common stock through a tax-free spin-off (the
Distribution). The international animal feeds and agricultural business have
been beneficially transferred to Agribrands as of April 1, 1998. Legal title is
being transferred as foreign government approvals are obtained and share
transfers are registered in the respective foreign countries. Since the
Distribution, Agribrands has conducted its business as a separate public
company.
Agribrands is one of the leading international manufacturers and marketers
of agricultural animal feeds and other animal health and nutrition products.
Agribrands' business is currently conducted almost entirely outside of the
United States. Agribrands primarily produces and sells its products in sixteen
foreign countries under different local conditions. The markets in which
Agribrands operates are highly competitive and sensitive to both pricing and
promotion.
Selling prices for Agricultural products and percent of sales gross profit
margins are directly influenced by changes in the underlying prices for the
commodity raw materials used to formulate animal feeds. Typically, the industry
operates on a unit margin basis with frequent price changes based on the
underlying commodity price movements.
Operating Results
Net earnings for the quarter ended May 31, 1998 were $3.4 million compared
to $6.6 million for the same period last year. Consolidated operating profit
margins declined to 3.2% for the quarter compared to 4.1% for the same quarter
last year as gains in the Americas and European regions were more than offset by
lower margins in the Asia Pacific region. Earnings for the current quarter were
also adversely impacted by a $2.5 million charge to write-off deferred financing
costs associated with a credit facility the Company elected not to close.
-2-
<PAGE>
Net earnings for the nine months ended May 31, 1998 were $9.4 million
compared to $14.8 million for the same period last year. Excluding restructuring
charges, consolidated operating profit margins for the current nine months were
4.0% compared to 3.7% for the same period in the prior year. Despite the higher
margins, net earnings were down $5.4 million for the nine months on higher
pretax foreign currency exchange and translation losses, principally in Korea
and Colombia. Foreign currency exchange and translation losses totaled $10.2
million for the current nine-month period compared to only $2.7 million during
the same period last year. A $2.0 million restructuring charge in Europe also
negatively impacted the current nine-month results.
<TABLE>
- --------------------------------------------------------------------------------
AMERICAS (excluding United States)
----------------------------------
<CAPTION>
Quarter ended May 31, Nine months ended May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
558 526 Tons sold (in thousands) 1,604 1,471
$ 154.8 $ 156.5 Net sales $ 460.2 $ 441.1
$ 7.7 $ 4.6 Operating profit $ 22.1 $ 12.9
5.0% 2.9% Operating profit as % of net sales 4.8% 2.9%
- --------------------------------------------------------------------------------
</TABLE>
The increase in volume for the Americas operations for the both the quarter and
the nine months ended May 31, 1998 is primarily attributable to increased feed
sales in Mexico. Agribrands' operations in Mexico experienced increased demand
resulting from improved economic conditions when compared to the same periods
last year. Despite a 6.1% increase in volume for the current quarter, net sales
dollars were down $1.7 million as a result of lower selling prices resulting
from lower commodity prices and currency devaluation against the dollar.
Operating profit increased $3.1 million for the quarter and $9.2 million
for the nine-month period on increased volume and improved margins. The
improvement in operating profit margins was broad-based but most notable in
Mexico where increased shrimp feed sales, with their overall higher margins,
helped to increase profitability.
<TABLE>
- --------------------------------------------------------------------------------
EUROPE
------
<CAPTION>
Quarter ended May 31, Nine months ended May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
404 396 Tons sold (in thousands) 1,204 1,211
$ 99.6 $ 107.8 Net sales $ 303.7 $ 345.5
$ 2.8 $ 2.8 Operating profit $ 6.0 $ 8.6
2.8% 2.6% Operating profit as % of net sales 2.0% 2.5%
- --------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
Net sales of the European operations declined $8.2 million for the quarter.
This decline is attributable to both lower selling prices resulting from lower
commodity prices and currency devaluation experienced in Hungary and Turkey. In
the third quarter, operating profit and volumes in the region were flat with the
prior year. The operations in Hungary continue to be the largest contributor to
earnings in the region.
For the nine months, net sales in Europe declined $41.8 million, again due
to lower selling prices resulting from lower commodity prices. Year to date
operating profit as a percentage of sales declined also, primarily as a result
of restructuring charges. During February 1998, the European operations incurred
$2.0 million of pre-tax restructuring charges associated with closure of one
facility and consolidation of its volume with that of another facility in Italy
and unrelated severance costs in Spain.
<TABLE>
- --------------------------------------------------------------------------------
ASIA PACIFIC
------------
<CAPTION>
Quarter ended May 31, Nine months ended May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
342 342 Tons sold (in thousands) 1,082 1,010
$ 96.7 $ 111.2 Net sales $ 295.0 $ 342.0
$ 4.5 $ 9.4 Operating profit $ 22.5 $ 25.4
4.7% 8.5% Operating profit as % of net sales 7.6% 7.4%
- --------------------------------------------------------------------------------
</TABLE>
Asia Pacific operating results for the current quarter were adversely
affected by continued difficult economic conditions in the region, particularly
in Korea which represents approximately 75% of the Company's Asia Pacific sales
volume. A significant portion of the Korean business is in hog feed. The hog
industry in Korea is currently depressed with hog farmers experiencing end
product pricing that is lower than their cost to produce. This has restricted
the Korean operations' ability to maintain volume and margins on hog feed. In
spite of this difficult economic environment, the overall Korean operations have
remained profitable in part through successful development and introduction of
new products into the marketplace.
Net sales of the Asia Pacific operations declined approximately $47 million
for the nine months ended May 31, 1998 as increased volume in units was offset
by both lower selling prices resulting from lower commodity prices and currency
devaluation against the dollar. During the nine months ended May 31, 1998, the
Korean won and Philippine peso devalued approximately 36% and 23%, respectively,
against the dollar. Despite the decline experienced during the most recent
quarter, operating profit margins for the nine months remained in line with the
prior year.
-4-
<PAGE>
Interest Expense & Other Income/Expense
Interest expense totaled $3.4 million and $9.5 million for the quarter and nine
months ended May 31, 1998, respectively. This compares to $2.4 million and $8.0
million, respectively, for the same periods last year. The increase in the most
recent quarter is primarily due to higher interest rates when compared to the
comparable period last year.
<TABLE>
- --------------------------------------------------------------------------------
Other (Income)/Expense, net
---------------------------
<CAPTION>
Quarter ended May 31, Nine months ended May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
$ (1.0) $ 0.2 Translation and exchange loss/(gain) $ 10.2 $ 2.6
(1.5) (1.3) Investment income (3.3) (3.7)
2.5 - Write-off of deferred financing costs 2.5 -
- ------ ------ ------ -------
$ - $ (1.1) $ 9.4 $ (1.1)
====== ====== ====== =======
- --------------------------------------------------------------------------------
</TABLE>
During the quarter ended May 31, 1998 the Company recovered some of the exchange
losses it incurred in Korea during the first half of fiscal 1998 as the Korean
won strengthened against the dollar. Earnings for the current quarter were
adversely impacted by a $2.5 million charge to write-off deferred financing
costs associated with a credit facility the Company elected not to close.
Translation and exchange losses were substantially higher during the nine months
ended May 31, 1998 as a result of higher foreign currency exchange losses on
dollar denominated debt in Korea and Colombia and higher translation losses due
to hyper-inflationary accounting in Mexico. Exchange losses were greatest in
Korea.
Income taxes
Income taxes, which include United States and foreign taxes, were 58% of
pre-tax earnings for the three months ended May 31, 1998 compared to 53% of
pre-tax earnings for the same period in the prior year. The higher effective
rate for the quarter ended May 31, 1998 resulted primarily from changes in the
earnings mix.
Financial Condition
Cash flows from operations were break-even and $54.6 million for the nine
months ended May 31, 1998 and 1997, respectively. The significant decline in
operating cash flows between the two periods is due primarily to changes in
inventory levels in the respective periods. Inventory levels increased during
the nine months ended May 31, 1998 due to increased inventory levels in Korea as
well as increased inventory to meet conditions for spin-off. Conversely,
inventory levels had declined in the nine-month period ended May 31, 1997 due to
lower commodity prices. Raw material inventory levels in Korea are up at May 31,
1998 as a result of volume declines taking effect after ingredients were
purchased.
-5-
<PAGE>
Agribrands is continually evaluating new investment opportunities. In
December 1997, Agribrands invested $5.0 million in Agribrands Purina (Langfang)
Feedmill Company Ltd., a new wholly owned foreign subsidiary. The new subsidiary
utilized these funds along with $2 million in proceeds from the issuance of debt
to acquire a feed mill in Langfang, Peoples Republic of China. In January 1998,
Agribrands acquired a feed mill in Maracay, Venezuela for $4.3 million. In
January 1998, Agribrands also acquired a feed mill in Spessa, Italy for $7.3
million. Agribrands had previously leased the feed mills in both Maracay and
Spessa. These acquisitions were funded through a combination of funds provided
by Ralston and local country borrowings. Assuming these acquisitions had
occurred as of September 1, 1996, they would not have had a material effect on
net sales or net earnings.
Capital expenditures, primarily to replace or enhance existing production
facilities and equipment, totaled $34.9 million and $28.5 million for the nine
months ended May 31, 1998 and 1997, respectively.
Agribrands' capital investments and working capital needs have been
partially funded by Ralston. During the nine months ended May 31, 1998 net cash
flows provided by financing activities were $124.3 million, including $102.3
million provided by Ralston. In connection with the Distribution on April 1,
1998, Agribrands received $50.5 million of cash from Ralston. Agribrands will
receive an additional $40 million from Ralston during the fourth quarter of
fiscal year 1998. This $40 million is recorded as a receivable on the Company's
balance sheet at May 31, 1998.
After evaluating the availability of financing for the Company's foreign
affiliates from banks in their local markets, Agribrands elected not to close
the $110 million revolving credit agreement arranged prior to the Distribution.
The Company is in the process of removing Ralston's guarantees from all
Agribrands' outstanding debt. The Company is also in the process of arranging
approximately $60 million of uncommitted lines of credit for its Korean and
Brazilian subsidiaries with Agribrands' support.
Cash on hand, borrowings under various lines of credit and cash flow from
operations are Agribrands' primary sources of liquidity. Management has a strong
orientation on cash flows and the effective use of excess cash flows. The
combined operating, cash and equity position of Agribrands should continue to
provide the capital flexibility necessary to fund future opportunities as well
as to meet existing obligations.
Outlook
The Americas region experienced significant improvement in operating
results during the first nine months of this fiscal year compared to the same
period last year. Continuation of these trends, however, is uncertain given
macro-economic conditions in key countries including Brazil, Colombia and
Venezuela.
The European animal feed industry is mature, fragmented and highly
competitive with excess capacity. Consolidation of the animal feed and animal
production industries is underway throughout Europe and agricultural subsidies
are being reduced in the European Union. These trends are expected to continue,
and the Company anticipates additional restructuring charges will be necessary
to appropriately align its operations with market conditions. The Company
believes opportunities for growth exist both through consolidation and expansion
into less developed markets.
-6-
<PAGE>
In recent years, the Asia Pacific region has been Agribrands' most
profitable region. However, the current financial crises in the Asia Pacific
region will continue to have an adverse effect on Agribrands' near term results
in comparison to the prior quarter and prior year. It will be especially
prevalent with the Korean operations, which represent approximately 75% of the
Company's Asia Pacific net sales volume. Any further devaluation of the Korean
won will result in lower dollar profits for the Korean operations and increased
foreign exchange losses on its dollar denominated debt. The Korean operations
import approximately 70% of the ingredients used in its manufacturing process.
The local currency costs of these imported ingredients increase as the Korean
won devalues. At the same time, the Korean operation generally seeks approval
from government sponsored cooperatives before increasing its selling prices.
Although this restricts management's ability to respond quickly to changing
market conditions, the Korean operations have generally been able to obtain
price increases sufficient to offset most of the increased cost of ingredients.
In spite of these current conditions, Agribrands remains committed to the Asia
Pacific market and views the current financial crises as an opportunity to
strengthen its market position within the region.
Forward-looking Statements & Business Risks
Certain statements in this report are "forward-looking statements" within
the meaning of the federal securities law. This includes statements concerning
plans and objectives of management relating to Agribrands' operations or
economic performance, and assumptions related thereto. Because such
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual events or results to differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited to,
changes in general economic and business conditions (including agricultural
markets) in the various regions of the world in which Agribrands operates,
Agribrands' ability to recover its raw material costs in the pricing of its
products, the availability of capital and ingredients on acceptable terms,
actions of competitors and government entities, political and economic
instability in countries or regions where the Agribrands business is conducted,
the level of demand for Agribrands' products and change in Agribrands' business
strategies.
Agribrands, as a supplier of animal feeds and other animal health and
nutrition products, is also subject to the risks and uncertainties associated
with the animal production industry and the resulting fluctuations in demand for
Agribrands' products. The animal production industry in a particular country can
be negatively affected by a number of factors, including macro economic
conditions, weather conditions, commodity prices, price controls, alternative
feed sources, the market price of livestock, poultry and other animals, animal
diseases (such as BSE or mad cow disease, hoof and mouth and avarian flu),
changes in consumer demand, real estate values, government farm programs and
other government regulations, restrictive quota and trade policies and tariffs,
production difficulties, including capacity and supply constraints, labor
disputes and general economic conditions.
Consolidation of the animal feed production and animal production
industries around the world will continue to bring about significant changes in
the product production and distribution patterns. Such changes will affect the
growth prospects and pricing practices of Agribrands. Future growth
opportunities for Agribrands are expected to depend on its ability to implement
strategies for expanding in growing, lesser-developed agricultural markets,
making strategic acquisitions and divestitures, particularly in more mature
markets, maintaining effective cost control programs, and developing and
implementing more efficient manufacturing and distribution methodologies, while
at the same time maintaining aggressive pricing and promotion of its products.
-7-
<PAGE>
<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<CAPTION>
Quarter ended Nine Months ended May 31,
May 31,
---------------------- -----------------------
1998 1997 1998 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 351.1 $ 375.5 $1,058.9 $ 1,128.6
Costs and Expenses
Cost of products sold 304.4 323.9 909.7 972.2
Selling, general and
administrative 35.3 36.3 106.7 114.2
Interest 3.4 2.4 9.5 8.0
Provisions for restructuring - - 2.0 -
Gain on sale of property - - (0.4) -
Other (income)/expense, net - (1.1) 9.4 (1.1)
----------- ---------- ----------- -----------
343.1 361.5 1,036.9 1,093.3
----------- ---------- ----------- -----------
Earnings before Income Taxes 8.0 14.0 22.0 35.3
Income Taxes 4.6 7.4 12.6 20.5
----------- ---------- ----------- -----------
Net Earnings $ 3.4 $ 6.6 $ 9.4 $ 14.8
=========== ========== =========== ===========
Earnings Per Share
Basic * $ .32 $ .62 $ .88 $ 1.39
=========== ========== =========== ===========
Diluted * $ .32 $ .62 $ .88 $ 1.39
=========== ========== =========== ===========
* Based on common shares outstanding of 10.7 million for all periods prior to
April 1, 1998.
</TABLE>
See Accompanying Notes to Condensed Financial Statements
===============================================================================
-8-
<PAGE>
<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(CONDENSED - DOLLARS IN MILLIONS)
<CAPTION>
May 31, August 31,
1998 1997
------------- --------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 92.2 $ 25.2
Marketable securities 2.1 6.8
Receivables, less allowance
for doubtful accounts 141.4 114.4
Inventories 123.8 112.0
Other current assets 13.1 11.7
------------- --------------
Total Current Assets 372.6 270.1
------------- --------------
Investments and Other Assets 48.7 54.2
Property at Cost 340.9 329.6
Accumulated Depreciation (166.7) (172.7)
------------- --------------
174.2 156.9
------------- --------------
Total $ 595.5 $ 481.2
============= ==============
Liabilities and Shareholders Equity
Current Liabilities
Current maturities of long-term debt $ 8.4 $ 19.4
Notes payable 60.2 33.8
Accounts payable and
accrued liabilities 135.0 162.7
Income taxes 7.4 7.5
------------- --------------
Total Current Liabilities 211.0 223.4
------------- --------------
Long-Term Debt 20.6 22.8
Deferred Income Taxes 4.4 9.6
Other Liabilities 26.1 27.3
Shareholders Equity
Common stock .1
Capital in excess of par 419.5
Retained earnings 1.7
Cumulative translation adjustment (87.9)
------------- --------------
Total Shareholders Equity 333.4
------------- --------------
Ralston Equity Investment 198.1
------------- --------------
Total $ 595.5 $ 481.2
============= ==============
</TABLE>
See Accompanying Notes to Condensed Financial Statements
================================================================================
-9-
<PAGE>
<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONDENSED - DOLLARS IN MILLIONS)
<CAPTION>
Nine Months ended
May 31,
------------------------------
1998 1997
------------ -------------
<S> <C> <C>
Cash Flow from Operations
Net earnings $ 9.4 $ 14.8
Non-cash items included in income 18.5 17.2
Changes in operating assets
and liabilities used in operations (36.8) 16.7
Other, net 8.9 5.9
------------ ------------
Net cash provided by operations - 54.6
------------ ------------
Cash Flow from Investing Activities
Acquisitions of businesses (16.6) -
Property additions (34.9) (28.5)
Proceeds from the sale of property 1.2 1.0
Other, net (0.4) (6.9)
------------ ------------
Net cash used by investing activities (50.7) (34.4)
------------ ------------
Cash Flow from Financing Activities
Proceeds from sale of long-term debt 12.9 2.1
Principal payments on long-term debt,
including current maturities (19.5) (1.3)
Net increase (decrease) in notes payable 28.6 (21.0)
Net transactions with Ralston 102.3 21.2
------------ ------------
Net cash provided by financing activities 124.3 1.0
------------ ------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (6.6) (2.4)
------------ ------------
Net Increase in Cash and Cash Equivalents 67.0 18.8
Cash and Cash Equivalents, Beginning of Period 25.2 20.3
------------ ------------
Cash and Cash Equivalents, End of Period $ 92.2 $ 39.1
============ ============
</TABLE>
See Accompanying Notes to Condensed Financial Statements
================================================================================
-10-
<PAGE>
AGRIBRANDS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS MAY 31, 998
(DOLLARS IN MILLIONS)
Note 1 - Effective April 1, 1998 (the Distribution Date), Agribrands
International, Inc. became an independent, publicly owned company as a
result of the distribution by Ralston Purina Company (Ralston) of the
Company's $.01 par value Common Stock to holders of Ralston Purina Company
Common Stock at a distribution ratio of one for ten (the Distribution).
Prior to the Distribution, the Company was formed as a wholly owned
subsidiary of Ralston for the purpose of effecting the Distribution.
Ralston did not retain any ownership interest in the Company.
Note 2 - The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all of
the information and footnotes required by generally accepted accounting
procedures for complete financial statements. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Operating results
for any quarter are not necessarily indicative of the results for any other
quarter or for the full year. These statements should be read in connection
with the financial statements of Agribrands and notes thereto for the year
ended August 31, 1997.
The Balance Sheet as of May 31, 1998 is presented on a consolidated basis.
The Statement of Earnings for the nine months ended May 31, 1998 includes
the combined results of operations of the Agribrands businesses under
Ralston for the seven months prior to the Distribution Date and the
consolidated results of operations of the Company for the two month period
ended May 31, 1998. The financial statements as of August 31, 1997 and for
all periods prior to the Distribution Date are presented on a combined
basis and reflect periods during which the Agribrands businesses operated
primarily as wholly-owned subsidiaries of Ralston and its subsidiaries. The
combined financial statements include assets, liabilities, revenues, and
expenses that are directly related to the Agribrands businesses.
Note 3 - There were 10,668,571 shares of common stock outstanding at both May
31, 1998 and the Distribution Date.
Note 4 - Basic earnings per share is based on the average number of common
shares outstanding during the period. Diluted earnings per share is based
on the average number of shares used for the basic earnings per share
calculation, adjusted for the dilutive effect of stock options.
-11-
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Quarter ended Nine Months ended May 31,
May 31,
----------------------- -------------------------
1998 1997 1998 1997
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per share -
Net earnings $ 3.4 $ 6.6 $ 9.4 $ 14.8
Effect of dilutive securities - - - -
---------- ----------- ----------- ------------
Numerator for dilutive earnings per share -
Net earnings $ 3.4 $ 6.6 $ 9.4 $ 14.8
========== =========== =========== ============
Denominator:
Denominator for basic earnings per share -
Weighted-average shares * 10.7 10.7 10.7 10.7
========== =========== =========== ============
Effect of dilutive securities:
Stock options - - - -
---------- ----------- ----------- ------------
Denominator for dilutive earnings per share -
Weighted-average shares and assumed conversions
10.7 10.7 10.7 10.7
========== =========== =========== ============
Basic earnings per share $ .32 $ .62 $ .88 $ 1.39
========== =========== =========== ============
Diluted earnings per share $ .32 $ .62 $ .88 $ 1.39
========== =========== =========== ============
* Assumed 10.7 million shares outstanding for all periods prior to the
Distribution Date.
</TABLE>
Note 5 - Receivables consist of the following:
<TABLE>
<CAPTION>
May 31, 1998 August 31, 1997
------------ ---------------
<S> <C> <C>
Gross receivables $ 152.6 $ 124.2
Allowance for doubtful accounts (11.2) (9.8)
==================== ====================
$ 141.4 $ 114.4
</TABLE>
==================== ====================
Note 6 - Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, 1998 August 31, 1997
------------ ---------------
<S> <C> <C>
Raw materials and supplies $ 94.6 $ 89.7
Finished products 29.2 22.3
==================== ====================
$ 123.8 $ 112.0
==================== ====================
</TABLE>
-12-
<PAGE>
Note 7 - Investments and Other Assets consist of the following:
<TABLE>
<CAPTION>
May 31, 1998 August 31, 1997
------------ ---------------
<S> <C> <C>
Goodwill, net of accumulated amortization of
$5.5 at May 31 and $4.1 at August 31 $ 32.8 $ 34.0
Investments in affiliated companies 4.9 4.1
Deferred charges and other assets 11.0 16.1
================ ================
$ 48.7 $ 54.2
================ ================
</TABLE>
Note 8 - Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
May 31, 1998 August 31, 1997
------------ ---------------
<S> <C> <C>
Trade accounts payable $ 81.7 $ 107.2
Incentive compensation, salaries, and vacations 14.1 14.8
Restructuring reserves 1.2 1.4
Other items 38.0 39.3
============== ===============
$ 135.0 $ 162.7
============== ===============
</TABLE>
Note 9 - Other (income)/expense, net consists of the following:
<TABLE>
<CAPTION>
Quarter ended Nine Months ended May 31,
May 31,
-------------------------- -------------------------
1998 1997 1998 1997
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Translation and exchange (gain)/loss $ (1.0) $ 0.2 $ 10.2 $ 2.7
Investment income (1.5) (1.3) (3.3) (3.8)
Write-off deferred financing costs 2.5 - 2.5 -
============= =========== =========== ============
$ - $ (1.1) $ 9.4 $ (1.1)
============= =========== =========== ============
</TABLE>
Note 10 - A claim has been asserted against Ralston in connection with the
phased withdrawal from an unsuccessful joint venture in Chile. The former joint
venture partner in Chile has sought compensatory damages, punitive damages and
damages under the United States Racketeer Influenced and Corrupt Organization
Act ("RICO") totalling approximately $300 million. This dispute has been
submitted to arbitration in Santiago, Chile. Ralston and Agribrands have agreed
that Agribrands will pay 80% and Ralston will pay 20% of any award or settlement
and all costs related to this claim up to $2.5 million. Any amounts over $2.5
million will be shared equally. Agribrands and Ralston believe that the
termination of the joint venture was proper and legal. Management of Agribrands
believes that, in the event Ralston is found liable for damages, the ultimate
liability for such dispute, taking into account established accruals for
estimated liabilities, should not be material to the financial position of
Agribrands but could be material to the results of operations or cash flows for
a particular quarter or annual period.
-13-
<PAGE>
PART II - OTHER INFORMATION
There is no information required to be reported under any items except
those indicated below.
Item 1. Legal Proceedings
A claim has been asserted against Ralston in connection with the Company's
phased withdrawal from an unsuccessful joint venture in Chile, which has
been submitted to arbitration in Santiago, Chile. The Company has agreed
with Ralston to share costs related to this claim. Information about this
proceeding is set forth in Note 10 of the Notes to Condensed Financial
Statements set forth above.
Item 6.
and Reports on Form 8-K
(a) Exhibits filed with this Report:
(10.1) Form of Non-Qualified Stock Option Agreement, entered into by
the Company on May 12, 1998, with William P. Stiritz, Chief Executive
Officer of the Company.
(10.2) Form of Non-Qualified Stock Option Agreement, entered into by
the Company on May 29, 1998, with certain executive officers of the
Company.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
On May 18, 1998, the Registrant filed a Current Report on Form 8-K to
file its press release dated that same day announcing management had
decided not to close a $110 million credit facility.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGRIBRANDS INTERNATIONAL, INC.
------------------------------------
Registrant
By: /S/ DAVID R. WENZEL
-----------------------------
David R. Wenzel
Chief Financial Officer
Date: July 2, 1998
-14-
<PAGE>
EXHIBIT INDEX
-------------
Exhibits
--------
EX-10.1 Form of Non-Qualified Stock Option Agreement, entered into by the
Company on May 12, 1998, with William P. Stiritz, Chief Executive Officer of the
Company.
EX-10.2 Form of Non-Qualified Stock Option Agreement, entered into by the
Company on May 29, 1998, with certain executive officers of the Company.
EX-27 Financial data schedule for 3rd Quarter 1998.
-15-
EXHIBIT 10.1
NON-QUALIFIED STOCK OPTION
AGRIBRANDS INTERNATIONAL, INC. (the "Company"), effective May 12, 1998,
grants this Non-Qualified Stock Option to W. P. Stiritz ("Optionee") to purchase
a total of one million (1,000,000) shares of Agribrands International, Inc.
Common Stock ("Agribrands Stock") at a price of $36.68 per share pursuant to its
1998 Incentive Stock Plan (the "Plan"). Subject to the provisions of the Plan
and the following terms, Optionee may exercise this Option from time to time by
tendering to the Company written notice of exercise together with the purchase
price in cash, or in shares of Agribrands Stock at their Fair Market Value as
determined by the Nominating and Compensation Committee (the "Committee"), or
both.
1. Normal Exercise. This Option becomes exercisable on May 12, 2003. This
Option remains exercisable through May 11, 2008, unless Optionee is no longer
employed by the Company, in which case the Option is exercisable only in
accordance with the provisions of below.
2. Acceleration. Notwithstanding the above, this Option is fully
exercisable before the normal exercise dates set forth in Section 1 hereof upon
the occurrence of any of the following events while Optionee is employed by the
Company.
a. Death of Optionee;
b. Declaration of Optionee's Disability;
c. The involuntary termination of employment of Optionee, other than a
Termination for Cause, including but not limited to, the sale or other
disposition of the stock of the subsidiary or business unit or of
substantially all of the assets of the subsidiary or business unit
which employs Optionee; or
d. A Change of Control.
3. Exercise After Certain Events. Upon the occurrence of any of the events
described below, any shares exercisable on the date of such event shall
remain exercisable during the period stated below, but, in any event, not
later than May 11, 2008:
a. If Optionee's employment is terminated due to death or Disability, if
no event of forfeiture occurs, such shares shall remain exercisable
for three (3) years thereafter;
b. If Optionee's employment is involuntarily terminated for reasons other
than Termination for Cause, such shares shall remain exercisable for
six (6) months thereafter; or
<PAGE>
c. When, prior to a Change of Control, there has occurred an event of
forfeiture as defined in Section 4 herein, the Option, to the extent
exercisable, shall remain exercisable for thirty (30) days thereafter.
4. Forfeiture. Prior to a change of Control, this Option is subject to
forfeiture upon the occurrence of one of the following events:
a. The Optionee's employment is Terminated for Cause; or
b. Optionee engages in competition with the Company or an Affiliate.
If there is an event of forfeiture, the portion of the Option that is
exercisable at that time may be exercised as set forth in Section 3 hereof.
5. Definitions. Unless otherwise defined in this Non-Qualified Stock Option,
defined terms used herein shall have the same meaning as set forth in the
Plan.
"Disability" shall mean a mental or physical disability as, in
the opinion of the Committee, will prevent an Optionee from ever
resuming work of the same general nature as that which he performed
for the employer prior to his disability.
"Termination for Cause" shall mean Optionee's termination of
employment with the Company because of the willful engaging by
Optionee in gross misconduct; provided, however, that a Termination
for Cause shall not include termination attributable to (i) poor work
performance, bad judgment or negligence on the part of Optionee, (ii)
an act or omission believed by Optionee in good faith to have been in
or not opposed to the best interests of the Company and reasonably
believed by Optionee to be lawful, or (iii) the good faith conduct of
Optionee in connection with a Change of Control (including opposition
to or support of such Change of Control).
6. Severability. The invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of the
remainder hereof in that jurisdiction, or the validity or enforceability of
this Non-Qualified Stock Option, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, the Company and
Optionee each waive any provision of law that renders any provision hereof
invalid, prohibited or unenforceable in any respect. If any provision of
this Option is held to be unenforceable for any reason, it shall be
adjusted rather than voided, if possible, in order to achieve the intent of
the parties to the extent possible.
7. Adjustments. Upon any extraordinary dividend, stock split-up, stock
dividend, issuance of any targeted stock, recapitalization, warrant or
rights issuance or combination, exchange or reclassification with respect
to any outstanding class or series of Stock, or consolidation, merger or
sale of all or substantially all of the assets of the Company, the
Committee shall cause appropriate adjustments to be made to the terms of
this Award.
<PAGE>
ACKNOWLEDGED AND ACCEPTED: AGRIBRANDS INTERNATIONAL, INC.
By:
Optionee David R. Wenzel
Chief Financial Officer
Date
Location
EXHIBIT 10.2
NON-QUALIFIED STOCK OPTION
AGRIBRANDS INTERNATIONAL, INC. (the "Company"), effective May 29, 1998,
grants this Non-Qualified Stock Option to _________________ ("Optionee") to
purchase a total of _____________shares of Agribrands International, Inc. Common
Stock ("Agribrands Stock") at a price of $34.25 per share pursuant to its 1998
Incentive Stock Plan (the "Plan"). Subject to the provisions of the Plan and the
following terms, Optionee may exercise this Option from time to time by
tendering to the Company written notice of exercise together with the purchase
price in cash, or in shares of Agribrands Stock at their Fair Market Value as
determined by the Nominating and Compensation Committee (the "Committee"), or
both.
1. Normal Exercise. This Option becomes exercisable on May 29, 2003. This
Option remains exercisable through May 28, 2008, unless Optionee is no
longer employed by the Company, in which case the Option is exercisable
only in accordance with the provisions of Section 3 below.
2. Acceleration. Notwithstanding the above, this Option is fully exercisable
before the normal exercise dates set forth in Section 1 hereof upon the
occurrence of any of the following events while Optionee is employed by the
Company.
a. Death of Optionee;
b. Declaration of Optionee's Disability;
c. The voluntary termination of employment of Optionee at or after
attainment of age 62;
d. The involuntary termination of employment of Optionee, other than a
Termination for Cause, including but not limited to, the sale or other
disposition of the stock of the Company or of substantially all of the
assets of the Company; or
e. A Change of Control.
3. Exercise After Certain Events. Upon the occurrence of any of the events
described below, any shares exercisable on the date of such event shall
remain exercisable during the period stated below, but, in any event, not
later than May 28, 2008:
a. If Optionee's employment is terminated due to death, Disability or
retirement at or after attainment of age 62, if no event of forfeiture
occurs, such shares shall remain exercisable for three (3) years
thereafter;
b. If Optionee's employment is involuntarily terminated for reasons other
than Termination for Cause, such shares shall remain exercisable for
six (6) months thereafter; or
<PAGE>
c. When, prior to a Change of Control, there has occurred an event of
forfeiture as defined in Section 4 herein, the Option, to the extent
exercisable, shall remain exercisable for thirty (30) days thereafter.
4. Forfeiture. Prior to a change of Control, this Option is subject to
forfeiture upon the occurrence of one of the following events:
a. The Optionee's employment is Terminated for Cause; or
b. Optionee engages in competition with the Company or an Affiliate.
If there is an event of forfeiture, the portion of the Option that is
exercisable at that time may be exercised as set forth in Section 3 hereof.
5. Definitions. Unless otherwise defined in this Non-Qualified Stock Option,
defined terms used herein shall have the same meaning as set forth in the
Plan.
"Disability" shall mean a mental or physical disability as, in
the opinion of the Committee, will prevent an Optionee from ever
resuming work of the same general nature as that which he performed
for the Company prior to his disability.
"Termination for Cause" shall mean Optionee's termination of
employment with the Company because of the willful engaging by
Optionee in gross misconduct; provided, however, that a Termination
for Cause shall not include termination attributable to (i) poor work
performance, bad judgment or negligence on the part of Optionee, (ii)
an act or omission believed by Optionee in good faith to have been in
or not opposed to the best interests of the Company and reasonably
believed by Optionee to be lawful, or (iii) the good faith conduct of
Optionee in connection with a Change of Control (including opposition
to or support of such Change of Control).
6. Severability. The invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of the
remainder hereof in that jurisdiction, or the validity or enforceability of
this Non-Qualified Stock Option, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, the Company and
Optionee each waive any provision of law that renders any provision hereof
invalid, prohibited or unenforceable in any respect. If any provision of
this Option is held to be unenforceable for any reason, it shall be
adjusted rather than voided, if possible, in order to achieve the intent of
the parties to the extent possible.
7. Adjustments. Upon any extraordinary dividend, stock split-up, stock
dividend, issuance of any targeted stock, recapitalization, warrant or
rights issuance or combination, exchange or reclassification with respect
to any outstanding class or series of Stock, or consolidation, merger or
sale of all or substantially all of the assets of the Company, the
Committee shall cause appropriate adjustments to be made to the terms of
this Award.
<PAGE>
ACKNOWLEDGED AND ACCEPTED: AGRIBRANDS INTERNATIONAL, INC.
By:
Optionee David R. Wenzel
Chief Financial Officer
Date
Location
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 5/31/98
AGRIBRANDS INTERNATIONAL, INC. BALANCE SHEET AND STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001047598
<NAME> AGRIBRANDS INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 92,200
<SECURITIES> 2,100
<RECEIVABLES> 152,600
<ALLOWANCES> 11,200
<INVENTORY> 123,800
<CURRENT-ASSETS> 372,600
<PP&E> 340,900
<DEPRECIATION> 166,700
<TOTAL-ASSETS> 595,500
<CURRENT-LIABILITIES> 211,000
<BONDS> 20,600
<COMMON> 100
0
0
<OTHER-SE> 333,300
<TOTAL-LIABILITY-AND-EQUITY> 595,500
<SALES> 1,058,900
<TOTAL-REVENUES> 1,058,900
<CGS> 909,700
<TOTAL-COSTS> 909,700
<OTHER-EXPENSES> 117,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,500
<INCOME-PRETAX> 22,000
<INCOME-TAX> 12,600
<INCOME-CONTINUING> 9,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,400
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
<FN>
F1 LOSS - PROVISION INCLUDED IN OTHER-EXPENSE ABOVE
</FN>
</TABLE>
