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, 1999
Commission File No. 1-13479
AGRIBRANDS INTERNATIONAL, INC.
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(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 25, 1999:
10,490,511
<PAGE>
PART I - FINANCIAL INFORMATION
AGRIBRANDS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is a summary of the key factors management
considers necessary in reviewing Agribrands' results of operations, operating
segment results, liquidity and capital resources.
Agribrands International, Inc. (the "Company") is a leading international
producer and marketer of formula animal feeds and other agricultural products.
Prior to April 1, 1998, the Company was a wholly-owned subsidiary of Ralston
Purina Company ("Ralston"). On that date, Ralston distributed the common stock
of the Company to its shareholders in a tax-free spin-off. The Company is a
successor to Ralston's over 100 years of experience in the animal feeds and
agricultural products industry.
The production and sale of animal feed was the primary business of Ralston
when it was established in 1894. From that date until the Distribution, Ralston
built and maintained its industry position by consistently providing
high-quality, research-proven products and customer service. Although this
business originated in the United States, it expanded throughout the world,
entering the Americas (outside of the United States) in 1927, Europe in 1957 and
Asia in 1967. The Company now operates 74 manufacturing plants in 16 countries,
and has more than thirty years' experience operating across four continents.
The primary animal feed business of Agribrands is conducted almost
exclusively outside the United States. Ralston sold its U.S. animal feeds and
agricultural products business in 1986. The U.S. animal feeds and agricultural
products business formerly owned by Ralston is currently a subsidiary of Koch
Agriculture.
Key Measures for Understanding the Business
Agricultural animal feed sales prices and percent of sales gross profit
margins are directly influenced by changes in prices for the commodities used as
raw materials to formulate animal feeds. The feed industry generally prices
products on the basis of aggregate ingredient cost plus a fixed margin per unit,
rather than a gross margin percentage. As ingredient prices fluctuate, the
changes are generally passed on to customers through changes in the Company's
product pricing. Income over ingredient cost ("IOIC"- which is equal to net
sales minus cost of ingredients), rather than sales dollars, is the key
indicator of sales performance because of the distortions in sales dollars
caused by changes in commodity prices. In addition to gross IOIC, IOIC per ton
sold is another key measure used by management to evaluate trends.
The Company manufactures and sells its products in countries around the
world, including countries whose currencies have tended to weaken against the
U.S. Dollar. Currency fluctuations are usually not the cause of significant
variations in average selling prices and IOIC when translated into U.S. Dollars.
Therefore, gross sales and IOIC are generally not significantly impacted by
currency fluctuations, unless the macro-economic circumstances generating the
currency fluctuations impact volume. Generally, efficient, dollar-driven global
ingredient markets cause local currency ingredient prices to adjust quickly to
changes in exchange rates. Due to the usually quick turnover of ingredient
inventories and the industry's practice of pricing based on a margin over
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ingredient costs, such changes in local currency costs are soon reflected in the
local currency price of feed products. For these reasons, changes in the dollar
cost of ingredients generally have a greater impact on the Company's dollar
translated selling prices and ingredient costs than changes in exchange rates.
RESULTS OF OPERATIONS - DOLLARS IN MILLIONS
(unless otherwise noted, all references herein to prices, costs and margins
reflect U.S. Dollar results after translation of foreign currency financial
statements in accordance with SFAS No. 52)
<TABLE>
<CAPTION>
Three Months Ended May 31, 1999 Nine Months Ended May 31, 1999
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Consolidated Americas Europe Asia Consolidated Americas Europe Asia
------------- ----------- ----------- ----------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 311.8 $ 145.2 $ 82.9 $ 83.7 $ 954.9 $ 432.6 $ 266.3 $ 256.0
Operating profit $ 16.1 (a) $ 7.5 $ 4.3 $ 8.0 $ 54.2 (a) $ 23.3 $ 14.7 $ 25.9
Tons of feed sold 1,240,000 544,000 377,000 319,000 3,728,000 1,626,000 1,145,000 957,000
IOIC $ 87.1 $ 35.1 $ 28.0 $ 24.0 $ 267.5 $ 108.5 $ 89.5 $ 69.5
Three Months Ended May 31, 1998 Nine Months Ended May 31, 1998
-------------------------------------------------- -----------------------------------------------------
Consolidated Americas Europe Asia Consolidated Americas Europe Asia
------------- ----------- ----------- ----------- -------------- ------------ ------------ ------------
Net sales $ 351.1 $ 154.8 $ 99.6 $ 96.7 $ 1,058.9 $ 460.2 $ 303.7 $ 295.0
Operating profit $ 11.4 (a) $ 7.7 $ 2.8 $ 4.5 $ 40.9 (a) $ 21.7 $ 8.0 $ 22.5
Tons of feed sold 1,304,000 558,000 404,000 342,000 3,890,000 1,604,000 1,204,000 1,082,000
IOIC $ 82.3 $ 35.5 $ 28.4 $ 18.4 $ 255.4 $ 104.5 $ 85.7 $ 65.2
</TABLE>
(a) Consolidated operating profit includes unallocated corporate expenses,
provisions for restructuring and gains on sale of property. Refer to the
Geographic Segment Information in the notes to the condensed financial
statements for a reconciliation of consolidated operating profit.
Net Sales
Lower volume and lower selling prices caused consolidated net sales to
decrease $39.3 million or 11.2% in the third quarter and $104.0 million or 9.8%
in the nine months ended May 31, 1999 as compared to the same periods last year.
Volume decreased 64,000 tons or 4.9% in the third quarter and 162,000 tons or
4.2% in the nine months. Most of the decline in volume occurred in Europe and
Asia. Average selling prices declined $18 per ton or 6.6% in the third quarter
and $16 per ton or 5.9% in the nine-month period. The lower selling prices
reflect lower commodity costs relative to the same periods last year, consistent
with the feed industry's practice of adjusting prices to reflect changes in
ingredient costs.
Net sales in the Americas decreased $9.6 million or 6.2% in the third
quarter and $27.6 million or 6.0% in the nine months ended May 31, 1999 as
compared to the same periods last year. Average selling prices declined $11 per
ton in the third quarter and $21 per ton in the nine months primarily as a
result of lower ingredient costs everywhere except Colombia where a new value
added tax on certain ingredient purchases went into effect on January 1, 1999.
The losses in revenue per ton were accompanied by a 14,000 ton or 2.5% decrease
in volume during the third quarter. Volume declined 20% in Brazil following a
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slowdown in its economy and 12% in Colombia, where an earthquake in January
affected the local market for some of the Company's dealers. The volume declines
in Brazil and Colombia were mostly offset by increased sales of poultry feed in
Venezuela. Year-to-date volumes in the Americas are 1.4% higher than last year
due to strong first quarter hog and shrimp feed sales in Mexico.
Net sales in Europe decreased $16.7 million or 16.8% in the third quarter
and $37.4 million or 12.3% in the nine months ended May 31, 1999 as compared to
the same periods last year. Average selling prices declined $27 per ton in the
third quarter and $20 per ton in the nine months (versus the prior year)
primarily as a result of lower ingredient costs, consistent with the feed
industry's practice of adjusting prices to reflect changes in ingredient costs.
Volumes were down 27,000 tons or 6.7% in the third quarter and 59,000 tons or
4.9% in the nine-month period primarily due to the December sale of an
unprofitable subsidiary of the Company's French subsidiary. Increased volume in
Spain mitigated the European volume decline for both periods.
Net sales in Asia decreased $13.0 million or 13.4% in the third quarter and
$39.0 million or 13.2% in the nine months ended May 31, 1999 as compared to the
same periods last year. Volume for the Asia region was down 23,000 tons or 6.7%
in the third quarter and 125,000 tons or 11.6% in the nine-month period. Nearly
all of the volume declines occurred in Korea where low hog prices following last
year's financial crisis reduced demand for the Company's higher-price,
higher-performance hog feeds. Average selling prices in Asia declined by $20 per
ton or 7.2% in the second quarter and $5 per ton or 1.9% in the nine-month
period primarily as a result of lower ingredient costs.
Operating Profit
Consolidated operating profit increased $4.7 million or 41.2% in the third
quarter and $13.3 million or 32.5% in the nine months ended May 31, 1999 as
compared to the same periods last year. Operating profit increased significantly
in the third quarter due to both improved margins in Asia and lower operating
expenses in Europe. The third quarter increase in operating profit combined with
better margins in Europe during the first half of the year account for most of
the improvement in operating results for the nine months ended May 31, 1999. In
addition, the prior year-to-date results include restructuring charges of $2.0
million related to rationalization of facilities and overhead in Europe.
Operating profit in the Americas decreased $0.2 million or 2.6% in the
third quarter but increased by $1.6 million or 7.4% in the nine months ended May
31, 1999 as compared to the same periods last year. In the third quarter, the
Americas' IOIC decreased $0.4 million or 1.1%. This reflects a $2.1 million
decline in IOIC in Brazil, where volumes and margins languished following the
January devaluation of the Brazilian currency and the subsequent slowdown in its
economy. The decline in IOIC in Brazil was mostly offset by continued
improvement in Venezuela, where the Company's affiliate has experienced strong
volumes for poultry feeds. The year-to-date improvement in operating profit
occurred in the first quarter when significant gains in Mexico and Venezuela
were only partially offset by a $1.8 million charge to settle a claim by a
former joint venture partner in Chile.
Operating profit in Europe increased $1.5 million or 53.6% in the third
quarter and $6.7 million or 83.8% in the nine months ended May 31, 1999 as
compared to the same periods last year. In the third quarter, IOIC declined by
$0.4 million or 1.4% reflecting the loss of volume caused by the sale of an
unprofitable subsidiary of the Company's French subsidiary. This loss in volume
was only partially offset by an increase in volume in Spain. While IOIC declined
in the third quarter, operating profit improved as a result of a $1.9 million
reduction in operating expenses. Most of the reduction in expenses occurred in
France and Italy. The operations in France, Italy and Spain accounted for nearly
all of the
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improvement in third quarter operating profit. In the nine months ended May 31,
1999, operating profit in Europe improved significantly due to improved margins
across the region and lower operating expenses in France and Italy. IOIC
increased $3.8 million or 4.4% in the nine-month period as average selling
prices declined by $7 per ton less than average ingredient costs due in part to
a change in product mix.
Operating profit in Asia increased $3.5 million or 77.8% in the third
quarter and $3.4 million or 15.1% in the nine months ended May 31, 1999 as
compared to the same periods last year. Ingredient costs in the region declined
$18.6 million or $42 per ton in the third quarter and $43.3 million or $18 per
ton in the nine months ended May 31, 1999, reflecting lower worldwide commodity
prices compared to the same periods last year. Despite a decline in volumes,
IOIC improved by $5.6 million or 30.4% in the third quarter and $4.3 million or
6.6% in the nine month period because average selling prices declined by less
than average ingredient costs. The increase in third quarter IOIC reflects a
significant movement toward pre-crisis unit margins, specifically in Korea. Some
of the increase in IOIC during both periods was offset by an increase in
operating expenses which resulted from translating relatively constant local
currency costs at stronger foreign currency exchange rates.
Earnings Before Income Taxes
Earnings before income taxes increased $11.8 million or 147.5% to $19.8
million in the third quarter and $32.7 million or 148.6% to $54.7 million in the
nine months ended May 31, 1999 as compared to the same periods last year.
Interest expense totaled $1.7 million and $6.9 million in the third quarter
and the nine months ended May 31, 1999, respectively, compared to $3.4 million
and $9.5 million for the same periods last year. The decreases are primarily due
to lower levels of debt outstanding during the current periods.
Other income/expense, net, changed favorably by $5.4 million in the third
quarter and $16.8 million in the nine months ended May 31, 1999 compared to the
same periods last year. Translation and exchange gains were $1.9 million higher
in the third quarter this year as a result of foreign currency exchange gains on
U.S. Dollar denominated debt in Brazil and Mexico. For the nine month period,
translation and exchange losses were $9.6 million higher last year as a result
of foreign currency exchange losses on U.S. Dollar denominated debt in Korea and
Colombia and translation losses on local currency denominated net monetary
assets in Mexico, where the Company previously used hyper-inflationary
accounting. Investment income was $1.0 million higher in this year's third
quarter and $4.7 million higher in the nine months ended May 31, 1999 due to
higher levels of interest bearing investments. Earnings for last year's third
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.
Net Earnings
Net earnings increased $10.1 million or 297.1% to $13.5 million in the
third quarter and $23.0 million or 244.7% to $32.4 million in the nine months
ended May 31, 1999 as compared to the same periods last year. Income taxes,
which included United States and foreign taxes, were 31.8% and 40.8% of pre-tax
earnings for the third quarter and the nine months ended May 31, 1999,
respectively, compared to 57.5% and 57.3% for the same periods last year. The
lower effective rate for the current periods resulted from a reduction in
valuation allowances against certain deferred tax assets and changes in the
earnings mix including profits in countries that previously had losses for which
no tax benefit could be recognized. During the current nine-month period, a $1.5
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million tax benefit has been recognized to reduce valuation allowances against
tax loss carryforwards in France and Spain and tax credit carryforwards in
Mexico. Further reductions in valuation allowances will occur if the operations
in these countries remain profitable.
Financial Condition
Cash flows from operations were $88.0 million and break-even for the nine
months ended May 31, 1999 and 1998, respectively. The significant increase in
operating cash flows between the two periods resulted from the improvement in
earnings and changes in working capital during the respective periods.
Receivables and inventories declined significantly during the nine months ended
May 31, 1999. Approximately $12 million of receivables due from Ralston were
collected during the current nine months. In addition, receivables declined by
nearly $6 million in Mexico due to timing of shrimp feed sales which are at
their highest between June and October. During last year's nine month period,
receivables in Mexico declined by only $2 million reflecting lower volumes for
shrimp feed. Consolidated inventories declined by $11 million during the nine
months ended May 31, 1999 due to lower volumes in Asia, lower worldwide grain
prices and strategic grain purchases made in Mexico in August 1998. Conversely,
inventories increased by $27 million during the nine months ended May 31, 1998
with approximately $17 million of the increase occurring in Korea. This reported
increase in Korea's inventories differs from the change in the historical Dollar
cost of inventories due to the combined impact of exchange rate variations and
use of the local currency as the functional currency in Korea. For reporting
purposes, changes in Korea's inventories are measured in local currency and then
translated into Dollars. By comparison, the historical Dollar cost of
inventories in Korea increased by around $9 million during the nine months ended
May 31, 1998. Korea's raw material inventory levels were up at May 31, 1998 as a
result of sales volume declines taking effect after ingredients were purchased.
Agribrands is continually evaluating new investment opportunities. In last
year's nine month period, the Company spent $16.6 million to purchase businesses
in Venezuela, Italy and China. These acquisitions were funded through a
combination of net proceeds from Ralston and local country borrowings. If these
acquisitions had occurred as of September 1, 1997, they would not have had a
material effect on net sales or net earnings during any of the periods reported.
Capital expenditures, primarily to replace or enhance existing production
facilities and equipment, totaled $21.7 million and $34.9 million during the
nine months ended May 31, 1999 and 1998, respectively.
The Company's subsidiaries generally fund their working capital needs
through short-term borrowings provided by local country banks and branches of
multi-national banks. Intercompany loans are also used by the Company if they
reduce external local borrowing costs by more than the opportunity cost of lower
U.S. invested reserves.
Cash on hand, cash flow from operations and borrowings under various lines
of credit are Agribrands' primary sources of liquidity. Management has a strong
focus on cash flow and the effective use of excess cash flow. 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.
6
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On September 25, 1998, the Company's Board of Directors authorized the
purchase by the Company of up to 2,000,000 shares of Agribrands common stock in
open market transactions at management's discretion and depending on market
conditions. The Company purchased 177,400 shares of Agribrands common stock
during the nine months ended May 31, 1999.
Year 2000 Costs
Many computer systems and other systems with embedded chip technology
process dates based on two digits for the year of a transaction rather than a
full four digits. These systems are unable to properly process dates in the year
2000 and beyond. Agribrands utilizes a number of computer systems across its
worldwide operations. The Company has identified its significant software coding
issues related to the year 2000 date recognition for key financial and
operational systems. The Company has already resolved the year 2000 matter at a
number of its locations and plans to continue resolving the matter through
either replacement of existing systems with new year 2000 compatible systems or
reprogramming existing systems. Agribrands spent approximately $1.0 million to
replace existing hardware and software during the nine months ended May 31,
1999. The Company incurred costs for year 2000 reprogramming of existing systems
of approximately $0.6 million and $0.4 million during the nine months ended May
31, 1999 and 1998, respectively. To make all of its systems year 2000 compliant,
the Company estimates incurring an additional $0.3 million of reprogramming
costs and spending an additional $0.3 million on replacement hardware and
software. Completion of all reprogramming, hardware and software replacement,
and appropriate testing is expected to occur by August 31, 1999. All costs
related to the reprogramming of existing systems for the year 2000 issue are
expensed as incurred. Hardware and software replacement costs will be
capitalized.
Based on the Company's efforts to date, management believes that its key
computer systems and other systems containing embedded chip technology will be
year 2000 compliant before January 1, 2000. The Company has identified its key
customers and suppliers and is working with them to obtain assurances that their
systems are year 2000 compliant. However, the Company does not have any control
over these third parties and, as a result, cannot currently determine to what
extent future operating results may be adversely effected by the failure of
these third parties to successfully address their year 2000 issues. In addition,
the Company operates in sixteen countries on four continents at various stages
of economic development and is dependent on systems operated by governments,
financial institutions, utilities, communications suppliers and others in each
of these countries. The failure of any of such infrastructural systems to be
year 2000 compliant could disrupt the Company's business for a period of time
and if not quickly resolved could have a material adverse effect on the Company.
The Company is currently in the process of developing contingency plans in the
event of substantial year 2000 failures. The Company believes that its
geographic diversification and transactional independence between business units
helps to limit the risk associated with isolated business interruptions.
European Economic Monetary Union (EMU)
On January 1, 1999, eleven of the European Union countries (including four
countries where Agribrands' operations are located) adopted the Euro as their
single currency, and there is now a fixed conversion rate between their existing
currencies ("legacy currencies") and the Euro. Following the introduction of the
Euro, the legacy currencies will remain legal tender in the participating
countries during the transition period from January 1, 1999 through January 1,
2002. Beginning on January 1, 2002, the European Central Bank will issue
Euro-denominated bills and coins for use in cash transactions. On or before July
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1, 2002, the participating countries will withdraw all legacy bills and coins
and use the Euro as their legal currency.
The Company's key financial information systems in Europe are equipped to
process both Euro and legacy currency transactions during the transition period
from January 1, 1999 through January 1, 2002; however, they are not ready to
handle the July 1, 2002 withdrawal of all legacy currencies. Management is
currently planning to modify the Company's key financial systems so they can
handle the July 1, 2002 mandatory conversion to the Euro. The Company has not
yet incurred any costs associated with the conversion. To modify the key
financial systems so they can handle the mandatory conversion, the Company
anticipates incurring $0.2 million of reprogramming costs and spending
approximately $0.2 million on new software. All reprogramming costs will be
expensed as incurred, and all software costs will be capitalized. The Company
plans to complete system modifications and necessary testing by September 1,
2001.
From a broader business perspective, conversion to the Euro may cause
pricing disparities in different markets to narrow, lowering the Company's
margins. Nevertheless, the Company believes the conversion to the Euro will not
have a material impact on the Company's consolidated financial results.
Mexico's Status as a Highly Inflationary Economy
Effective March 1, 1999, Mexico ceased to be considered a highly
inflationary economy as defined by generally accepted accounting principles, and
the Company's subsidiary in Mexico started using the Mexican Peso as its
functional currency. As a result, changes in the value of the Peso versus the
Dollar could lead to material exchange gains or losses. The Company currently
provides approximately $16 million of intercompany, dollar-denominated financing
to the Mexican affiliate and does not anticipate changing this structure merely
to avoid exchange gains and losses. Management views exchange gains and losses
on Dollar liabilities as having neither economic nor cash flow impact on a
consolidated basis. Economic effects (in Dollar terms) of exchange rate changes
are a consequence of net working capital either directly or indirectly
denominated in the local currency.
Outlook
Assuming relative economic stability in its major markets, the Company
views the recent quarters' operating results to be reasonably representative of
its near-term prospects. While continuing to explore strategic alternatives for
long-term growth and searching for attractive investment opportunities,
management remains focused on optimizing the performance of its existing
operations.
Net earnings are more difficult to forecast due, in particular, to the
unpredictability of translation and exchange gains and losses as a result of
volatile exchange rates and changing capital structures within the foreign
affiliates. Currently, the Company's most significant exposures to translation
and exchange gains and losses impacting net earnings are in Brazilian Real,
Canadian Dollars, Mexican Pesos and Korean Won.
Due to the spread of earnings across numerous taxing jurisdictions, the
Company's effective tax rate has also contributed to net earnings volatility.
The effective tax rate will continue to be sensitive to the Company's earnings
mix across countries, foreign tax laws, and decisions regarding repatriation of
foreign earnings. In addition, changes in circumstances surrounding valuation
allowances taken against tax loss carryforwards and tax credit carryforwards
could lead to one-time reductions in the effective tax rate. Nevertheless, based
on projected earnings mix and tax planning initiatives, management now believes
its sustainable average effective tax rate will be less than 40%.
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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,
the Company's limited operating history as an independent public company, its
obligations to Ralston (such as its indemnification obligations, pet food
non-compete and tax sharing obligations), 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 Agribrands
business is conducted, the level of demand for Agribrands' products, changes in
Agribrands' business strategies and repercussions surrounding year 2000 and EMU
matters.
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 disease, avarian flu
and white spot disease in shrimp), changes in consumer demand (including changes
due to contamination scares, such as the dioxin issue in Belgium, or resistance
to genetically modified organisms), 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.
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<TABLE>
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AGRIBRANDS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
Quarter Ended Nine Months Ended
May 31, May 31,
------------------------ -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 311.8 $ 351.1 $ 954.9 $ 1,058.9
Costs and Expenses
Cost of products sold 261.9 304.4 796.3 909.7
Selling, general and administrative 33.8 35.3 104.9 106.7
Interest 1.7 3.4 6.9 9.5
Provisions for restructuring - - - 2.0
Gain on sale of property - - (0.5) (0.4)
Other (income)/expense, net (5.4) - (7.4) 9.4
-------- -------- ------- ---------
292.0 343.1 900.2 1,036.9
-------- -------- ------- ---------
Earnings before Income Taxes 19.8 8.0 54.7 22.0
Income Taxes 6.3 4.6 22.3 12.6
-------- -------- ------- ---------
Net Earnings $ 13.5 $ 3.4 $ 32.4 $ 9.4
======== ======== ======== ==========
Earnings Per Share
Basic $ 1.29 $ .32 $ 3.06 $ .88
======== ======== ======== ==========
Diluted $ 1.27 $ .32 $ 3.02 $ .88
======== ======== ======== ==========
See Accompanying Notes to Condensed Financial Statements
</TABLE>
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<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
May 31, August 31,
1999 1998
----------------- ---------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 171.4 $ 136.5
Marketable securities 1.6 1.5
Receivables, less allowance for doubtful accounts 75.5 103.0
Inventories 85.3 98.8
Other current assets 5.5 11.1
----------------- ---------------
Total Current Assets 339.3 350.9
----------------- ---------------
Investments and Other Assets 52.8 50.9
Property at Cost 350.3 346.9
Accumulated Depreciation (170.7) (170.3)
----------------- ---------------
179.6 176.6
----------------- ---------------
Total $ 571.7 $ 578.4
================= ===============
Liabilities and Shareholders' Equity
Current Liabilities
Current maturities of long-term debt $ 3.7 $ 8.7
Notes payable 26.1 46.9
Accounts payable and accrued liabilities 125.2 132.8
Income taxes 8.9 8.8
----------------- ---------------
Total Current Liabilities 163.9 197.2
----------------- ---------------
Long-Term Debt 9.5 14.2
Deferred Income Taxes and Other Liabilities 30.8 27.6
Shareholders' Equity
Common stock .1 .1
Capital in excess of par 419.5 419.5
Retained earnings 38.5 6.1
Cumulative translation adjustment (84.8) (86.3)
Common stock in treasury, at cost (5.8) -
----------------- ---------------
Total Shareholders' Equity 367.5 339.4
----------------- ---------------
Total $ 571.7 $ 578.4
================= ===============
See Accompanying Notes to Condensed Financial Statements
</TABLE>
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<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
<CAPTION>
Nine Months Ended
May 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Cash Flow from Operations
Net earnings $ 32.4 $ 9.4
Non-cash items included in income
Depreciation and amortization 17.6 15.2
Translation and exchange loss 0.6 10.2
Non-cash restructuring - 0.7
Deferred income taxes 4.1 (7.2)
Gain on sale of property (0.5) (0.4)
Changes in operating assets and liabilities used in operations 38.4 (36.8)
Other, net (4.6) 8.9
-------------- -------------
Net cash provided by operations 88.0 -
-------------- -------------
Cash Flow from Investing Activities
Acquisitions of businesses - (16.6)
Property additions (21.7) (34.9)
Proceeds from the sale of property 2.7 1.2
Other, net (1.2) (0.4)
-------------- -------------
Net cash used by investing activities (20.2) (50.7)
-------------- -------------
Cash Flow from Financing Activities
Proceeds from sale of long-term debt 8.4 12.9
Principal payments on long-term debt, including current maturities (15.2) (19.5)
Net (decrease) increase in notes payable (19.9) 28.6
Treasury stock purchases (5.8) -
Net transactions with Ralston - 102.3
-------------- -------------
Net cash (used by) provided by financing activities (32.5) 124.3
-------------- -------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (0.4) (6.6)
-------------- -------------
Net Increase in Cash and Cash Equivalents 34.9 67.0
Cash and Cash Equivalents, Beginning of Period 136.5 25.2
-------------- -------------
Cash and Cash Equivalents, End of Period $ 171.4 $ 92.2
============== =============
See Accompanying Notes to Condensed Financial Statements
</TABLE>
12
<PAGE>
AGRIBRANDS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MAY 31, 1999
(Dollars in millions)
Note 1 - Effective April 1, 1998 (the Distribution Date), Agribrands
International, Inc. (the Company) 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 principles 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 conjunction with the
financial statements of Agribrands and notes thereto for the year
ended August 31, 1998.
The Balance Sheets as of May 31, 1999 and August 31, 1998 and the
Statement of Earnings for the nine months ended May 31, 1999 are
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 combined results for the period prior to the Distribution Date
include revenues and expenses that are directly related to the
Agribrands businesses.
Note 3 - Effective with the first quarter of fiscal year 1999, the Company
adopted Statement of Financial Accounting Standards No. 130 (SFAS No.
130), "Reporting Comprehensive Income." SFAS No. 130 requires that
noncash changes in shareholders equity be combined with net income and
reported in a new financial statement category entitled "comprehensive
income." The following table sets forth the components of
comprehensive income:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
May 31, May 31,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $ 13.5 $ 3.4 $ 32.4 $ 9.4
Foreign currency translation adjustment 0.9 10.1 1.5 (16.9)
------- -------- ------- ---------
Comprehensive income $ 14.4 $ 13.5 $ 33.9 $ (7.5)
======= ======== ======= =========
</TABLE>
13
<PAGE>
Note 4 - GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
May 31, May 31,
----------------------------------- ------------------------------------
1999 1998 1999 1998
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Sales
-----
Americas $ 145.2 $ 154.8 $ 432.6 $ 460.2
Europe 82.9 99.6 266.3 303.7
Asia 83.7 96.7 256.0 295.0
---------------- ----------------- ----------------- -----------------
Total $ 311.8 $ 351.1 $ 954.9 $ 1,058.9
================ ================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Profit
----------------
Americas $ 7.5 $ 7.7 $ 23.3 $ 21.7
Europe 4.3 2.8 14.7 8.0
Asia 8.0 4.5 25.9 22.5
Provisions for Restructuring - - - (2.0)
Gain on Sale of Property - - 0.5 0.4
Unallocated Corporate Expenses (3.7) (3.6) (10.2) (9.7)
---------------- ----------------- ----------------- -----------------
Operating Profit 16.1 11.4 54.2 40.9
Interest Expense (1.7) (3.4) (6.9) (9.5)
Other Income/(Expense), Net 5.4 - 7.4 (9.4)
---------------- ----------------- ----------------- -----------------
Earnings Before Income Taxes $ 19.8 $ 8.0 $ 54.7 $ 22.0
================ ================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
May 31, August 31,
1999 1998
--------------------- --------------------
<S> <C> <C>
Total Assets
------------
Americas $ 165.5 $ 188.7
Europe 116.7 139.7
Asia 143.4 132.5
Unallocated Corporate Assets 146.1 117.5
--------------------- --------------------
Total $ 571.7 $ 578.4
===================== ====================
</TABLE>
The above information has been prepared on a basis consistent with the
Company's financial statements for the year ended August 31, 1998 and
does not necessarily meet the requirements of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which establishes new requirements for the reporting of segment
information. Management is still evaluating the effect SFAS No. 131
will have on the Company's disclosures. The Company is required to
adopt SFAS No. 131 in its financial statements for the year ending
August 31, 1999.
Note 5 - There were 10,490,511 and 10,668,571 shares of common stock
outstanding at May 31, 1999 and August 31, 1998, respectively.
14
<PAGE>
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.
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,
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per share -
Net earnings $ 13.5 $ 3.4 $ 32.4 $ 9.4
Effect of dilutive securities - - - -
-------------- --------------- -------------- ---------------
Numerator for dilutive earnings per share -
Net earnings $ 13.5 $ 3.4 $ 32.4 $ 9.4
============== =============== ============== ===============
Denominator:
Denominator for basic earnings per share -
Weighted-average shares (1) 10,504,726 10,668,571 10,603,807 10,668,571
Effect of dilutive securities:
Stock options (2) 147,752 - 116,358 -
-------------- --------------- -------------- ---------------
Denominator for dilutive earnings per share -
Weighted-average shares and assumed conversions 10,652,478 10,668,571 10,720,165 10,668,571
============== =============== ============== ===============
Basic earnings per share (3) $ 1.29 $ .32 $ 3.06 $ .88
============== =============== ============== ===============
Diluted earnings per share (3) $ 1.27 $ .32 $ 3.02 $ .88
============== =============== ============== ===============
</TABLE>
(1) Assumes 10,668,571 shares outstanding during periods prior to the
Distribution Date.
(2) Options to purchase 1,110,500 shares of common stock at prices ranging
from $34.25 to $36.68 per share were outstanding during the quarter
and nine months ended May 31, 1999 but were not included in the
computation of diluted earnings per share because the options'
exercise price was greater than the average market price of the common
shares during the respective periods.
(3) The sum of quarterly EPS data will not necessarily equal year-to-date
EPS data.
Note 6 - Receivables consist of the following:
May 31, 1999 August 31, 1998
---------------- -----------------
Gross receivables $ 86.0 $ 113.4
Allowance for doubtful accounts (10.5) (10.4)
---------------- -----------------
$ 75.5 $ 103.0
================ =================
15
<PAGE>
Note 7 - Inventories consist of the following:
May 31, 1999 August 31, 1998
----------------- ----------------
Raw materials and supplies $ 64.6 $ 77.8
Finished products 20.7 21.0
----------------- ----------------
$ 85.3 $ 98.8
================= ================
Note 8 - Investments and Other Assets consist of the following:
May 31, 1999 August 31, 1998
------------- ------------
Goodwill, net of accumulated amortization of
$6.6 at May 31 and $5.6 at August 31 $ 29.5 $ 32.4
Investments in affiliated companies 6.6 6.6
Deferred charges and other assets 16.7 11.9
------------- ------------
$ 52.8 $ 50.9
============= ============
Note 9 - Accounts payable and accrued liabilities consist of the following:
May 31, 1999 August 31, 1998
--------------- ---------------
Trade accounts payable $ 76.9 $ 81.4
Incentive compensation,
salaries and vacations 14.3 15.8
Restructuring reserves 0.4 1.3
Other items 33.6 34.3
--------------- ---------------
$ 125.2 $ 132.8
=============== ===============
Note 10 - Other (income)/expense, net consists of the following:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
May 31, May 31,
---------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Translation and exchange (gain)/loss $ (2.9) $ (1.0) $ 0.6 $ 10.2
Investment income (2.5) (1.5) (8.0) (3.3)
Write-off of deferred financing costs - 2.5 - 2.5
-------- ------- ------- -------
$ (5.4) $ - $ (7.4) $ 9.4
======== ======= ======= =======
</TABLE>
Note 11 - The Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," in
June 1998. The Company is evaluating the effect this statement will
have on its financial reporting and disclosures.
16
<PAGE>
<TABLE>
AGRIBRANDS INTERNATIONAL, INC.
SELECTED QUARTERLY FINANCIAL INFORMATION
(Dollars in Millions)
(Unaudited)
<CAPTION>
FISCAL 1999
First Second Third
------------- ------------- -------------
<S> <C> <C> <C>
Tons of feed product sold (in thousands)
Americas 557 525 544
Europe 392 376 377
Asia 329 309 319
------------- ------------- -------------
Total 1,278 1,210 1,240
============= ============= =============
Income over Ingredient Costs
Americas $ 40.3 $ 33.1 $ 35.1
Europe 32.1 29.4 28.0
Asia 22.5 23.0 24.0
------------- ------------- -------------
Total $ 94.9 $ 85.5 $ 87.1
============= ============= =============
Depreciation and Amortization
Americas $ 2.0 $ 2.1 $ 2.0
Europe 2.0 2.1 2.0
Asia 1.7 1.8 1.9
------------- ------------- -------------
Total $ 5.7 $ 6.0 $ 5.9
============= ============= =============
Translation and Exchange (Gain)/Loss
Americas $ 0.1 $ 4.0 $ (2.6)
Europe 0.2 - -
Asia (0.4) (0.4) (0.3)
------------- ------------- -------------
Total $ (0.1) $ 3.6 $ (2.9)
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998
First Second Third Fourth
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Tons of feed product sold (in thousands)
Americas 524 522 558 586
Europe 393 407 404 381
Asia 384 356 342 321
------------- ------------- ------------- -------------
Total 1,301 1,285 1,304 1,288
============= ============= ============= =============
Income over Ingredient Costs
Americas $ 35.2 $ 33.8 $ 35.5 $ 40.7
Europe 29.3 28.0 28.4 29.5
Asia 27.6 19.2 18.4 20.2
------------- ------------- ------------- -------------
Total $ 92.1 $ 81.0 $ 82.3 $ 90.4
============= ============= ============= =============
17
<PAGE>
FISCAL 1998 (continued)
First Second Third Fourth
------------- ------------- ------------- -------------
Depreciation and Amortization
Americas $ 1.6 $ 1.7 $ 1.9 $ 1.8
Europe 1.9 1.9 2.2 2.3
Asia 1.5 1.1 1.4 1.9
------------- ------------- ------------- -------------
Total $ 5.0 $ 4.7 $ 5.5 $ 6.0
============= ============= ============= =============
Translation and Exchange (Gain)/Loss
Americas $ 2.7 $ 1.4 $ 1.3 $ 3.7
Europe 0.1 0.1 (0.4) (0.3)
Asia 2.7 4.2 (1.9) (0.8)
------------- ------------- ------------- -------------
Total $ 5.5 $ 5.7 $ (1.0) $ 2.6
============= ============= ============= =============
</TABLE>
PART II - OTHER INFORMATION
There is no information required to be reported under any items except
those indicated below.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Report:
(10.1) Form of Separation Agreement with Gonzalo Dal Borgo dated
April 7, 1999
(27) Financial Data Schedule
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Company
during the quarter ended May 31, 1999.
18
<PAGE>
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: June 29, 1999
19
<PAGE>
EXHIBIT INDEX
- -------------
Exhibits
- --------
EX-10.1 Form of Separation Agreement with Gonzalo Dal Borgo dated
April 7, 1999.
EX-27 Financial data schedule for 3rd Quarter of Fiscal 1999.
20
SEPARATION AGREEMENT
BETWEEN
GONZALO DAL BORGO
AND
AGRIBRANDS INTERNATIONAL, INC.
07 April 1999
This Separation Agreement sets forth Agribrands International, Inc.'s (Company)
offer of the following terms and conditions concerning the termination of your
employment with the Company.
1. Your termination of employment will be considered an involuntary
termination due to the elimination of your position.
2. Your date of termination will be 30 April 1999.
3. The Company will provide you severance equivalent to twenty-four (24)
months at your current, monthly, gross, compensation rate of $16,068.00, a
total of $385,632.00.
4. The Company will pay you a performance bonus equivalent to achievement of
your target bonus level (30%) for twenty-four (24) months. Again, this
payment will be based upon your current, monthly, gross compensation rate
of $16,068.00, a total of $115,690.00.
4(A).The Company will provide you severance (payment of the amounts due in
paragraphs 3 and 4 above) in the form of salary continuation. The amounts
due will be paid as follows (based on a present value of the amounts in
paragraphs 3 and 4 above):
Date to be Paid Amount to be Paid
--------------- -----------------
May 15, 1999 $271,389.00
January 15, 2000 $38,750.00
April 15, 2000 $38,750.00
January 15, 2001 $41,000.00
April 15, 2001 $41,000.00
January 15, 2002 $43,750.00
April 15, 2002 $43,750.00
January 15, 2003 $11,750.00
April 15, 2003 $11,750.00
During this period, all payments will be taxed at the regular rates then
applicable.
5. You will be paid for all accrued but unused paid time off (PTO) which
presently is a total of 288 hours. This is equivalent to $26,698.00. The
payment will be in the form of a single lump sum.
<PAGE>
6. The Company will provide you a lump sum in the gross amount of $26,000.00
in consideration of travel expenses you may incur in resolving pension
issues in Brazil, as well as costs that may be incurred as a result of your
relocation to Brazil or alternate location.
7. The Company will provide you a lump sum in the gross amount of $20,000.00
in consideration of expenses you may incur in the search for alternate
employment.
8. The Company will provide you a lump sum in the gross amount of $5,000.00 in
consideration of expenses you may incur for legal and/or financial planning
services associated with the termination of your employment.
9. All lump sum amounts noted above in paragraphs #3 through #8, will be paid
to you within thirty (30) days of the expiration of the revocation of this
Agreement and will be taxed as required by law.
10. Your health & dental benefits will be terminated on 30 April 1999. You will
be eligible, if you wish, to continue health insurance coverage, for these
two benefits, through our group health plan as provided under applicable
federal law (COBRA), which permits an additional eighteen (18) months of
benefit continuation at employee expense. If you elect this continuation
coverage, the Company will pay the employee premiums for this coverage on
your behalf until the earlier to occur of:
i) your participation in an alternate Company benefit plan; or
ii) eighteen months following 30 April 1999.
Upon the termination of benefits on 30 April 1999, you will receive a
letter detailing your rights under this legislation.
11. Your eligibility for / participation in all other benefits will be managed
as follows:
(i) Life insurance, disability insurance, accidental death & dismemberment
insurance, voluntary accidental death & dismemberment insurance and
company travel accident insurance will terminate on 30 April 1999. You
are eligible to convert your group life insurance coverage to an
individual policy without having to provide evidence of insurability,
assuming application for this conversion is received by the insurance
company within 30 days of benefit termination. You will be provided
with the necessary materials to execute this conversion, should you
choose to do so. Additionally, you are eligible to continue your
voluntary accidental death & dismemberment insurance via election of
portability coverage, assuming application for this coverage is
received by the insurance company within 31 days of benefit
termination. Again, you will be provided with the necessary materials
to execute this portability coverage, should you choose to do so.
2
<PAGE>
(ii) Your ability to contribute to the Agribrands' Savings Investment Plan
will cease on 30 April 1999. The money that you currently have
invested in this Plan may remain in the Plan until such time as you
choose to remove it, following 30 April 1999.
(iii)Your ability to contribute to the Agribrands' Non-Qualified Deferred
Compensation Plan will cease on 30 April 1999. The money that is
currently invested in this Plan must be paid out to you. It will be
paid out in the form of a lump sum distribution, as soon as
administratively possible following expiration of the revocation of
this Agreement. These monies are subject to state and federal tax as
required by law.
(iv) The non-qualified stock options you were awarded on May 29, 1998 will
accelerate upon the termination of your employment and become
exercisable for six months thereafter. The exercise price for these
options is $34.25 per share. The exercise period will begin on the 1st
day following your date of termination and conclude six months
thereafter.
(v) The non-qualified stock options you were awarded on September 25, 1998
will accelerate upon the termination of your employment and become
exercisable for six months thereafter. The exercise price for these
options is $21.69 per share. The exercise period will begin on the 1st
day following your date of termination and conclude six months
thereafter.
(vi) You will be provided with the benefits due you under the RPI
Internationalist Retirement Plan, to which the Company is the
successor obligor.
(vii)This Agreement does not impact any benefits you may be entitled to
under benefit plans of the Ralston Purina Company. However, this
Agreement constitutes a full waiver and release of any obligation of
the Company to participate in, settle or contribute to the obligations
due to you under any benefit plans of the Ralston Purina Company.
12. In exchange for the additional pay and benefits provided, you agree to
release the Company, its subsidiaries and affiliates, and all of their
employees, officers, directors and agents from any and all claims of any
kind, that you may have against them or any of them arising out of your
employment or the termination thereof with the Company. This release of
claims includes, but is not limited to, claims under the Age Discrimination
in Employment Act of 1967 (29 U.S.C.ss.621), Title VII of the Civil Rights
Act of 1964 (42 U.S.C. ss. 2000e, et. seq.), the Civil Rights Act of 1991,
3
<PAGE>
and the laws of the State of missouri relating to employment practices,
discrimination and/or civil rights, as well as all other federal, state and
local statutes, ordinances and regulations relating in any way to
employment, breach of express or implied contract, breach of the covenant
of good faith & fair dealing, wrongful descharge or any other violation of
federal, state or local statute or common law. You further agree that you
have not and shall not in the future, file any charge, claim, proceeding or
suit, of any kind, against the Company or any person or entity released
above arising out of your employment or the termination thereof.
13. You understand and acknowledge, by your execution of this document, that
the release and other agreements set forth in the preceding paragraph is in
exchange for consideration in addition to that to which you already are
entitled. Should you choose to not accept this offer of separation, your
employment will be terminated effective 30 April 1999 and you will be
provided with compensation and benefits to which you are entitled, only.
Details of this entitlement are outlined in Appendix A of this document.
14. You acknowledge, by your execution of this document, your understanding
that the intent of this Agreement is to bring to a conclusion all
employment, compensation, benefit or other agreements in existence between
you and Agribrands International, Inc., or any of its subsidiaries. This is
a comprehensive settlement of all employment claims or rights that you may
have with Agribrands or any of its affiliates, including but not limited to
Agribrands Purina do Brasil, Ltda. or its predecessors. Any amounts or
benefits due under any other such arrangements shall be deducted from the
amounts due hereunder, except that you may retain any benefits due to you
under the Brazilian social security or retirement system. However, this
Separation Agreement is a release and waiver of any right you may have to
sue or claim a termination or severance indemnity from Agribrands or any of
its affiliates, including but not limited to Agribrands Purina do Brasil,
Ltda. or its predecessors.
15. You acknowledge that you are being advised by this letter to consult with
an attorney prior to the execution of this document, and that you have been
given a period of at least 21 days in which to consider this agreement
prior to its execution.
16. You acknowledge that you understand that, even if you sign this document
within the 21- day period permitted above, you may, thereafter, revoke your
decision at any time during the 7-day period following the date of
execution. You further acknowledge that this document will not be effective
or enforceable until that 7-day period of time has expired.
17. You agree that the existence of this Agreement and its terms are
confidential and that you will not, therefore, discuss, or otherwise
disclose the existence of this Agreement, the terms of this Agreement, or
any fact concerning its negotiation, execution, or implementation to any
person, firm, or entity, other than your spouse, tax preparer or attorney,
except as may be required by law.
4
<PAGE>
18. You further agree that this Agreement does not constitute any admission by
the Company of any wrongdoing or violation of any law, regulation or
ordinance.
19. You also agree that no representation or promise inconsistent or additional
to this Agreement has been made to you, and that this Agreement is the full
and complete Agreement between you and the Company. You further acknowledge
that this Agreement cannot be modified or supplemented except in a writing
signed by both parties hereto, and that no facts currently unknown to you,
but which may later become known to you, shall affect in any way or manner
the final nature of this Agreement.
20. Finally, you also agree that:
(i) Through 30 April 1999 you shall cooperate with and assist the Company
whenever reasonably possible, so that all of your duties,
responsibilities and pending matters can be transferred to others in
an orderly way;
(ii) you shall return all Company materials that may have been issued to
you, including, but not limited to, computer(s), office equipment and
supplies, credit cards, files (in any format), cash advances and, if
necessary, shall file a final expense report(s);
(iii)you shall not use or disclose, either directly or indirectly, to
anyone not connected with the Company any confidential information or
trade secrets which you obtained during the term of your employment
with the Company;
(iv) you shall not make any copies for use outside of the Company of any
client lists or any memoranda, books, records, or documents which
contain confidential information or trade secrets belonging to the
Company;
(v) upon the Company's request, and when you might have relevant
information, you shall provide the Company with reasonable cooperation
and assistance in legal or fiscal matters such as testifying at
trials, tax reviews, customs investigations or customer issues. The
Company shall pay you for any reasonable and necessary expenses and
any loss of wages or salary you incur because of your requested
cooperation with, and assistance to, the Company;
(vi) unless the Company and you mutually agree to the contrary, you shall
not, at any future date, make application for employment with the
Company, and
(vii)you shall execute and deliver to Company resignations from all
boards, offices or other positions you hold by virtue of your
employment with the Company and redeliver to Company, without charge,
all shares of any affiliates which may be issued in your name as a
representative of the Company.
5
<PAGE>
By your signature on the duplicate originals of this letter, you
acknowledge that you have read, and had the opportunity to review with
counsel of your choice, the foregoing agreement and understand it, and are
executing it voluntarily of your own choice.
Agreed and voluntarily accepted this _____ day of _____________________,
1999.
By: ________________________________ ________________________________
Bill G. Armstrong Gonzalo Dal Borgo
Chief Operating Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 5/31/99
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-31-1999
<PERIOD-END> MAY-31-1999
<CASH> 171,400
<SECURITIES> 1,600
<RECEIVABLES> 86,000
<ALLOWANCES> 10,500
<INVENTORY> 85,300
<CURRENT-ASSETS> 339,300
<PP&E> 350,300
<DEPRECIATION> 170,700
<TOTAL-ASSETS> 571,700
<CURRENT-LIABILITIES> 163,900
<BONDS> 9,500
<COMMON> 100
0
0
<OTHER-SE> 367,400
<TOTAL-LIABILITY-AND-EQUITY> 571,700
<SALES> 954,900
<TOTAL-REVENUES> 954,900
<CGS> 796,300
<TOTAL-COSTS> 796,300
<OTHER-EXPENSES> 97,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,900
<INCOME-PRETAX> 54,700
<INCOME-TAX> 22,300
<INCOME-CONTINUING> 32,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,400
<EPS-BASIC> 3.06
<EPS-DILUTED> 3.02
<FN>
F1 LOSS - PROVISION INCLUDED IN OTHER-EXPENSE ABOVE
</FN>
</TABLE>
