SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
1-6699
INTERNATIONAL MULTIFOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
41-0871880
(I.R.S. Employer Identification No.)
33 South Sixth Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
(612) 340-3300
(Registrant's telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's Common Stock,
par value $.10 per share, as of June 30, 1994 was 17,995,793.
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings (unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED
May 31, May 31,
1994 1993
Net sales $ 579,730 $ 555,784
Cost of sales (480,811) (454,766)
Delivery and distribution (34,553) (35,129)
Selling, general and administrative (55,616) (52,457)
Interest, net (3,355) (2,877)
Corporate (333) (570)
Earnings from unconsolidated affiliates - 251
Earnings before income taxes 5,062 10,236
Income taxes (2,025) (3,854)
Net earnings $ 3,037 $ 6,382
Net earnings per share of common stock $ .17 $ .33
Average shares of common stock outstanding 18,107 19,283
Dividends per share of common stock $ .20 $ .20
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(dollars in thousands)
Condensed
from audited
financial
(Unaudited) statements
May 31, February 28,
1994 1994
Assets
Current assets:
Cash and equivalents $ 16,052 $ 10,507
Trade accounts receivable, net 133,593 146,455
Inventories 203,266 219,630
Other current assets 66,443 62,698
Total current assets 419,354 439,290
Property, plant and equipment, net 238,548 245,891
Goodwill 71,216 72,672
Other assets 55,744 56,922
Total assets $784,862 $814,775
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 62,753 $ 58,651
Current portion of long-term debt 3,522 3,953
Accounts payable 138,446 150,221
Other current liabilities 80,869 88,909
Total current liabilities 285,590 301,734
Long-term debt, net of current portion 188,939 195,125
Employee benefits and other
liabilities 63,776 64,277
Total liabilities 538,305 561,136
Redeemable preferred stock 3,626 3,635
Shareholders' equity 242,931 250,004
Commitments and contingencies
Total liabilities and
shareholders' equity $784,862 $814,775
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (unaudited)
(dollars in thousands)
THREE MONTHS ENDED
May 31, May 31,
1994 1993
Cash flows from operations:
Net earnings $ 3,037 $ 6,382
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation and amortization 7,150 7,412
Deferred income tax expense (benefit) 1,452 (893)
Provision for losses on receivables 809 711
Changes in operating assets and liabilities,
net of business acquisition and
disposition:
Accounts receivable (463) 10,958
Inventories 7,210 13,779
Other current assets (6,098) 1,289
Accounts payable (6,962) (33,047)
Other current liabilities (4,566) 579
Other, net 3,173 83
Cash provided by operations 4,742 7,253
Cash flows from investing activities:
Business acquisition (3,950) -
Capital expenditures (8,028) (11,643)
Proceeds from business disposition 20,595 -
Proceeds from other property disposals 507 135
Cash provided by (used for)
investing activities 9,124 (11,508)
Cash flows from financing activities:
Net increase in notes payable 7,326 150
Net increase (decrease) in long-term debt (4,195) 8,278
Dividends paid (3,733) (3,940)
Proceeds from issuance of common stock 109 190
Purchase of treasury shares (5,777) (2,873)
Other, net (6) (79)
Cash provided by (used for)
financing activities (6,276) 1,726
Effect of exchange rate changes on cash
and equivalents (2,045) (275)
Net increase (decrease) in cash and
equivalents 5,545 (2,804)
Cash and equivalents at beginning of period 10,507 11,044
Cash and equivalents at end of period $ 16,052 $ 8,240
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring adjustments, except as noted
elsewhere in the notes to the consolidated condensed financial
statements) necessary to present fairly its financial position as
of May 31, 1994 and the results of its operations and cash flows
for the three months ended May 31, 1994 and 1993. These statements
are condensed and therefore do not include all of the information
and footnotes required by generally accepted accounting principles
for complete financial statements. Certain reclassifications have
been made in the accompanying consolidated condensed financial
statements in order to conform with fiscal 1995 presentation. The
statements should be read in conjunction with the consolidated
financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended February 28, 1994. The
results of operations for the three months ended May 31, 1994 are
not necessarily indicative of the results to be expected for the
full year.
(2) Cost of sales - To more closely match costs with related
revenues, the Company classifies the inflation element inherent in
interest rates on Venezuelan local currency borrowings and the
foreign exchange gains and losses, which occur on certain
Venezuelan borrowings, as a component of cost of sales.
Accordingly, a reduction of $2,395,000 and an increase of
$1,000,000 for the three months ended May 31, 1994 and 1993,
respectively, are included in cost of sales.
(3) Interest, net consisted of the following (in thousands):
THREE MONTHS ENDED
May 31, May 31,
1994 1993
Interest expense $3,695 $3,376
Less: Capitalized interest (78) (89)
Non-operating interest income (262) (410)
Interest, net $3,355 $2,877
Cash payments for interest, net of amounts capitalized, for the
three months ended May 31, 1994 and 1993 were approximately
$3,609,000 and $3,718,000, respectively.
Total interest income was $455,000 and $520,000 for the three
months ended May 31, 1994 and 1993, respectively.
(4) Income taxes - Cash payments for income taxes for the three
months ended May 31, 1994 and 1993 were $1,121,000 and $750,000,
respectively.
(5) Supplemental balance sheet information (in thousands)
May 31, Feb. 28,
1994 1994
Trade accounts receivable, net:
Trade $ 139,480 $ 151,642
Allowance for doubtful accounts (5,887) (5,187)
Total trade accounts receivable, net $ 133,593 $ 146,455
Inventories:
Raw materials, excluding grain $ 20,832 $ 27,614
Grain 39,615 41,785
Finished and in-process goods 134,546 141,241
Packages and supplies 8,273 8,990
Total inventories $ 203,266 $ 219,630
Property, plant and equipment, net:
Land $ 10,102 $ 10,733
Buildings and improvements 99,091 107,741
Machinery and equipment 202,826 213,838
Transportation equipment 4,666 4,678
Improvements in progress 46,311 38,740
Accumulated depreciation (124,448) (129,839)
Total property, plant and equipment, net $ 238,548 $ 245,891
(6) Contingencies - The Internal Revenue Service (IRS) has
completed examinations of the U.S. federal income tax returns filed
by the Company for the fiscal years ended February 28, 1987 through
February 28, 1991. As a result of the examinations, the IRS has
issued to the Company a statutory notice of deficiency covering the
fiscal years ended February 28, 1987 and February 29, 1988 and a
preliminary report covering the fiscal years ended February 28,
1989 through February 28, 1991, both of which are primarily related
to the proposed disallowance of certain deductions claimed by the
Company in connection with acquisitions. The Company disagrees
with the position of the IRS and is vigorously pursuing its
judicial remedies with respect to fiscal years 1987 and 1988 and
its administrative remedies with respect to fiscal years 1989
through 1991. Management believes the final outcome of this matter
will not have a material adverse effect on the financial position
or results of operations of the Company.
(7) Segment information - The Company's business segments are as
follows: U.S. Foodservice consists of specialty foodservice
distribution and prepared foods operations; Canadian Foods consists
of consumer and bakery products operations; and Venezuelan Foods
consists of consumer, bakery products and agricultural operations.
Net Operating
(in millions) Sales Costs Total
Three Months Ended May 31, 1994
U.S. Foodservice $441.2 $(432.9) $ 8.3
Canadian Foods 61.8 (61.6) .2
Venezuelan Foods 76.7 (76.5) .2
Total $579.7 $(571.0) $ 8.7
Segment earnings $ 8.7
Interest, net (3.3)
Corporate unallocated (.3)
Earnings before income taxes 5.1
Income taxes (2.1)
Net earnings $ 3.0
Three Months Ended May 31, 1993
U.S. Foodservice $425.0 $(416.9) $ 8.1
Canadian Foods 65.5 (65.0) .5
Venezuelan Foods 65.3 (60.5) 4.8
Total $555.8 $(542.4) $13.4
Segment earnings $13.4
Interest, net (2.9)
Corporate unallocated (.6)
Earnings from unconsolidated affiliates .3
Earnings before income taxes 10.2
Income taxes (3.8)
Net earnings $ 6.4
(8)- Subsequent events - On June 1, 1994, the Company completed the
divestiture of its Frozen Specialty Foods business for a cash price of
approximately $136 million. The divestiture will result in a net gain
which will be reported in the Company's second quarter results.
On June 17, 1994, the Company announced that it had signed an agreement
in principle to acquire the specialty foodservice distribution business
of Leprino Foods Company. The proceeds from the divestitures of the
Meats and Frozen Specialty Foods businesses are expected to be
substantially reinvested in the Leprino acquisition. The transaction,
which is subject to the signing of a definitive agreement and the
approval of governmental regulatory agencies, is expected to be completed
in August 1994.
INTERNATIONAL MULTIFOODS CORPORATION
AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations:
For the first quarter ended May 31, 1994 compared with the
corresponding prior period.
Overview
The consolidated net earnings for the first quarter were $3.0
million, or 17 cents per share, compared with net earnings of
$6.4 million, or 33 cents per share, a year ago. The decline in
net earnings was primarily the result of a significant reduction
in the earnings of the Venezuelan Foods segment. Consolidated
net sales increased 4% to $579.7 million, compared with $555.8
million in the year-ago quarter.
Segment Results
U.S. Foodservice first quarter net sales increased 4% to $441.2
million, compared with $425.0 million a year ago. The
improvement in sales resulted primarily from strong volumes in
U.S. bakery, pizza and Mexican restaurant distribution, surimi
seafood and export products, partially offset by the effect of
previously divested businesses. First quarter segment earnings
increased 2% to $8.3 million compared with $8.1 million in the
year-ago quarter. The increase resulted from the strong
performance in the surimi seafood business and the absence of
losses of divested businesses. This was partially offset by
earnings declines in vending distribution, which continues to
experience lower volumes from a major customer, competitive
pricing pressures and higher operating costs, and a decline in
Frozen Specialty Foods earnings. The Frozen Specialty Foods
business was divested in June 1994 at a net gain, which will be
reported in the Company's second quarter results. The Company
has extended the implementation timetable of a vending
distribution business information system, which will have an
unfavorable impact on fiscal 1995 U.S. Foodservice segment
earnings.
Canadian Foods first quarter net sales declined 6% to $61.8
million, compared with $65.5 million in the year-ago quarter.
This decrease was the result of a 7% decline in the average
exchange rate. Segment earnings declined to $0.2 million,
compared with $0.5 million a year ago. The earnings decline was
the result of costs related to the introduction of consumer
salsa products and the impact of exchange rates.
Venezuelan Foods first quarter net sales improved 17% to $76.7
million, compared with $65.3 million in the year-ago quarter.
The sales improvement was the result of strong consumer and
agricultural product volumes and price increases in the bakery
and consumer product lines. Venezuelan Foods earnings declined
significantly to $0.2 million, compared with $4.8 million in the
year-ago quarter. The earnings decline resulted from a 29%
devaluation of the Venezuelan currency during the quarter and
the Company's use of the U.S. dollar as the functional currency
for translation purposes.
In June 1994, the Venezuelan government announced that it will
implement price controls and a single-rate foreign exchange
system. Full details are not yet available; however, most of
the Company's products, which are basic foods, have been
included on the list of price controlled items. In connection
with the implementation of these price controls, the government
also announced that sufficient U.S. dollars will be made
available at the controlled exchange rate for basic food
imports, which include the Company's raw material needs.
The Company expects that the currency devaluation will continue
to unfavorably affect its results in the second quarter.
Consequently, the decline in Venezuelan Foods fiscal 1995
segment earnings will be greater than previously disclosed.
The Venezuelan government also announced that companies
intending to repatriate dividends in U.S. dollars must obtain
government approval. It is unclear whether there will be limits
imposed on such dividend repatriations.
Non-operating Expense and Income
Net interest expense increased to $3.3 million from $2.9 million
a year ago, primarily as a result of higher debt levels and
higher interest rates in the United States and Venezuela.
Income Taxes
The first quarter effective tax rate was 40.0%, compared to
37.7% a year ago. The increase was primarily the result of
higher foreign taxes.
Financial Condition:
During the first quarter of fiscal 1995, the Company continued
to implement its plan to reorganize and focus on its core
businesses. Accordingly, the Company completed the divestiture
of its Meats business and, as of June 1, 1994, also completed
the sale of its Frozen Specialty Foods business. The proceeds
from these divestitures are expected to be substantially
reinvested in the purchase of the specialty foodservice
distribution business of Leprino Foods Company (see footnote 8
for further discussion). The Company also continued to reinvest
in its operations through capital expenditures and the
acquisition of a corn flour business in Venezuela.
The Meats business divestiture contributed to the declines in
accounts receivable, inventories, property, plant and equipment,
and accounts payable. Also, the decrease in accounts receivable
was related to the timing of Specialty Foodservice Distribution
sales and seasonal fluctuations in Canadian Foods operations.
The decrease in other current liabilities was primarily the
result of costs incurred as part of the Company's reorganization
plan. In addition, the significant devaluation of the
Venezuelan currency during the first quarter resulted in a
decline in the translated amounts of certain Venezuelan assets
and liabilities. As of May 31, 1994, the Company's debt-to-
total-capitalization ratio was 51%, compared to 50% at February
28, 1994.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings Per Share.
12. Computation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
May 31, 1994.
SIGNATURE
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.
INTERNATIONAL MULTIFOODS CORPORATION
Date: July 13, 1994 By /s/ Duncan H. Cocroft
Duncan H. Cocroft
Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
EXHIBIT INDEX
11. Computation of Earnings Per Share.
12. Computation of Ratio of Earnings to Fixed Charges.
Exhibit 11
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Schedule of Computation of Earnings per Share
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED
May 31, May 31,
1994 1993
Average shares of common
stock outstanding 18,107 19,283
Common stock equivalents 11 195
Total common stock and
equivalents assuming full dilution 18,118 19,478
Net earnings $3,037 $6,382
Less dividends on redeemable
preferred stock (42) (44)
Net earnings applicable to
common stock $2,995 $6,338
Earnings per share of
common stock:
Primary $ .17 $ .33
Fully diluted $ .17 $ .33
Primary earnings per share has been computed by dividing net
earnings, after deduction of preferred stock dividends, by the
weighted average number of shares of common stock outstanding
during the period. Common stock options and other common stock
equivalents have not entered into the primary earnings per share
computations since their effect is not significant.
Fully diluted earnings per share has been computed assuming
issuance of all shares for stock options deemed to be common
stock equivalents, using the treasury stock method.
Exhibit 12
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Schedule of Computation of Ratio of Earnings to Fixed Charges
(unaudited)
(dollars in thousands)
THREE MONTHS ENDED
May 31, May 31,
1994 1993
Earnings before income taxes (1) $ 5,062 $ 9,985
Plus: Fixed charges (2) 6,010 5,837
Less: Capitalized interest (78) (89)
Earnings available to cover
fixed charges $10,994 $15,733
Ratio of earnings to fixed charges 1.83 2.70
(1) Earnings before income taxes have been adjusted to exclude earnings from
less-than-fifty-percent-owned subsidiaries.
(2) Fixed charges consisted of the following:
THREE MONTHS ENDED
May 31, May 31,
1994 1993
Interest expense, gross $ 3,695 $ 3,376
Rentals (1/3) 2,315 2,461
Total fixed charges $ 6,010 $ 5,837
