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 August 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 September 30, 1994 was 18,003,389.
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1994 1993 1994 1993
Net sales $497,741 $521,515 $1,077,471 $1,077,299
Cost of sales (415,056) (422,677) (895,867) (877,442)
Delivery and distribution (31,358) (34,127) (65,911) (69,257)
Selling, general and
administrative (39,123) (46,657) (94,739) (99,114)
Unusual items 26,661 (47,464) 26,661 (47,464)
Interest, net (2,427) (2,892) (5,782) (5,769)
Corporate (685) (374) (1,018) (944)
Losses from unconsolidated
affiliates - (12,438) - (12,187)
Earnings (loss) before
income taxes 35,753 (45,114) 40,815 (34,878)
Income taxes (4,393) 17,944 (6,418) 14,090
Net earnings (loss) $ 31,360 $(27,170) $ 34,397 $ (20,788)
Net earnings (loss) per share
of common stock $ 1.74 $ (1.41) $ 1.91 $ (1.08)
Average shares of common
stock outstanding 17,903 19,232 18,006 19,258
Dividends per share of
common stock:
Declared* $ - $ .20 $ .20 $ .40
Paid $ .20 $ .20 $ .40 $ .40
*The Company announced in May 1994 that future declaration dates for
dividends would be changed to correspond to the regularly scheduled meeting
of the Board of Directors closest to the dividend record date.
Accordingly, no dividend was declared in the second quarter of fiscal 1995.
This change will not affect any dividend record dates or payments dates.
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
Aug. 31, February 28,
1994 1994
Assets
Current assets:
Cash and equivalents $ 19,060 $ 10,507
Trade accounts receivable, net 147,033 146,455
Inventories 209,976 219,630
Other current assets 74,531 62,698
Total current assets 450,600 439,290
Property, plant and equipment, net 228,596 245,891
Goodwill 94,475 72,672
Other assets 58,952 56,922
Total assets $832,623 $814,775
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 47,460 $ 58,651
Current portion of long-term debt 2,917 3,953
Accounts payable 153,404 150,221
Other current liabilities 107,916 88,909
Total current liabilities 311,697 301,734
Long-term debt, net of current portion 189,535 195,125
Employee benefits and other
liabilities 52,584 64,277
Total liabilities 553,816 561,136
Redeemable preferred stock 3,618 3,635
Shareholders' equity 275,189 250,004
Commitments and contingencies
Total liabilities and
shareholders' equity $832,623 $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)
SIX MONTHS ENDED
Aug. 31, Aug. 31,
1994 1993
Cash flows from operations:
Net earnings (loss) $ 34,397 $ (20,788)
Adjustments to reconcile net earnings (loss)
to cash provided by operations:
Depreciation and amortization 12,638 14,804
Deferred income tax benefit (11,786) (8,811)
Provision for losses on receivables 1,203 1,291
Provision for unusual charges 6,220 47,464
Gain on sale of business (32,881) -
Equity in losses of unconsolidated
affiliates - 12,187
Changes in operating assets and liabilities,
net of business acquisitions and
dispositions:
Accounts receivable (1,106) (1,249)
Inventories 144 (13,313)
Other current assets (12,374) (8,931)
Accounts payable 2,309 (7,930)
Other current liabilities 7,817 (4,051)
Other, net 4,030 (502)
Cash provided by operations 10,611 10,171
Cash flows from investing activities:
Business acquisitions (115,847) (18,456)
Capital expenditures (16,306) (25,357)
Proceeds from business dispositions 156,367 4,862
Proceeds from other property disposals 1,592 308
Cash provided by (used for)
investing activities 25,806 (38,643)
Cash flows from financing activities:
Net increase (decrease) in notes payable (7,465) 30,586
Net increase (decrease) in long-term debt (4,633) 7,815
Dividends paid (7,341) (7,834)
Proceeds from issuance of common stock 119 1,067
Purchase of treasury shares (5,777) (3,152)
Other, net (12) (84)
Cash provided by (used for)
financing activities (25,109) 28,398
Effect of exchange rate changes on cash
and equivalents (2,755) (1,395)
Net increase (decrease) in cash and
equivalents 8,553 (1,469)
Cash and equivalents at beginning of period 10,507 11,044
Cash and equivalents at end of period $ 19,060 $ 9,575
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
August 31, 1994 and the results of its operations for the three and six
months ended August 31, 1994 and 1993, and cash flows for the six months
ended August 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 and six months ended
August 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 $1,900,000 and an increase
of $1,390,000 for the six months ended August 31, 1994 and 1993,
respectively, and an increase of $495,000 and $390,000 for the three
months ended August 31, 1994 and 1993, respectively, are included in cost
of sales.
(3) Businesses acquired - The Company acquired, with cash and notes,
certain businesses during fiscal 1995 and 1994. All acquisitions have
been accounted for as purchases and, accordingly, the results of
operations of the acquired businesses have been included since their
respective dates of acquisition. The most significant acquisitions were
as follows:
Fiscal Business Segment Name Date Acquired
1995 U.S. Foodservice Distribution business August 1994
of Leprino Foods
1994 U.S. Foodservice Bevmatic August 1993
U.S. Foodservice JAMCO June 1993
The components of cash used for all acquisitions, as reflected in the
consolidated condensed statements of cash flows, are summarized as follows
(in thousands):
Six Months Ended
Aug. 31, Aug. 31,
1994 1993
Fair value of current assets, net of cash acquired $ 46,181 $ 4,738
Fair value of non-current assets, excluding goodwill 56,318 12,276
Goodwill 34,480 5,778
Liabilities assumed, principally current (21,132) (1,836)
Purchase contract liabilities - (2,500)
Cash paid, net of cash acquired $115,847 $18,456
The following unaudited pro forma financial information assumes the
Company's fiscal 1995 acquisition of the specialty foodservice distribution
business of Leprino Foods Company had been completed on March 1, 1993, the
beginning of fiscal 1994. It includes the financing costs of the
acquisition as well as depreciation and amortization associated with the
allocation of the purchase price to net tangible and intangible assets
acquired. The pro forma information is not necessarily indicative of the
combined results of operations that would have occurred had the acquisition
been completed as of the beginning of fiscal 1994.
Six Months Ended
Aug. 31, Aug., 31,
(in thousands, except earnings per share) 1994 1993
Net sales $1,277,000 $1,264,000
Net earnings (loss) 34,700 (21,500)
Net earnings (loss) per share of common stock 1.92 (1.12)
(4) Unusual items - The Company divested its Frozen Specialty Foods
business on June 1, 1994 for a pre-tax gain of $32,881,000.
The Company recognized a $6,220,000 pre-tax charge for the integration of
the recently acquired specialty foodservice distribution business of
Leprino Foods Company with the Company's existing pizza and Mexican
restaurant distribution business ("Business Integration") in the second
quarter of fiscal 1995. The Business Integration charge included
$1,100,000 for asset write-downs, $1,400,000 for severance benefits to
approximately 125 warehouse, delivery and administrative employees, and
$3,720,000 primarily for the write-down of lease commitments. The Business
Integration is expected to provide benefits of up to $3,000,000 in fiscal
1996 and up to $6,000,000 in fiscal 1997.
The following table summarizes the change in the Company's reorganization
and integration reserves for the six months ended August 31, 1994 (in
thousands):
<TABLE>
<CAPTION>
U.S. Foodservice Canadian Foods
Consoli- Consoli-
dation/ Organiza- dation/ Organiza-
Closing tional Business Closing tional Total
Facilities Changes Integration Facilities Changes Company
<S> <C> <C> <C> <C> <C> <C>
Reorganization reserves
at Feb. 28, 1994 $4,694 $6,109 $ - $2,749 $5,486 $19,038
Reserve additions - - 5,120 - - 5,120
Reserves utilized (1,152) (3,617) - - (434) (5,203)
Exchange rate effect - - - (47) (66) (113)
Reorganization and
integration reserves
at Aug. 31, 1994 $3,542 $2,492 $5,120 $2,702 $4,986 $18,842
</TABLE>
(5) Interest, net consisted of the following (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1994 1993 1994 1993
Interest expense $2,949 $3,242 $6,644 $6,618
Less: Capitalized interest (91) (84) (169) (173)
Non-operating interest income (431) (266) (693) (676)
Interest, net $2,427 $2,892 $5,782 $5,769
Cash payments for interest, net of amounts capitalized, for the six months
ended August 31, 1994 and 1993 were approximately $5,897,000 and $6,080,000,
respectively.
Total interest income was $1,229,000 and $919,000 for the six months ended
August 31, 1994 and 1993, respectively.
(6) Income taxes - Cash payments for income taxes for the six months ended
August 31, 1994 and 1993 were $3,538,000 and $1,570,000, respectively.
(7) Supplemental balance sheet information (in thousands)
Aug. 31, Feb. 28,
1994 1994
Trade accounts receivable, net:
Trade $152,555 $151,642
Allowance for doubtful accounts (5,522) (5,187)
Total trade accounts receivable, net $147,033 $146,455
Inventories:
Raw materials, excluding grain $ 20,493 $ 27,614
Grain 27,380 41,785
Finished and in-process goods 155,623 141,241
Packages and supplies 6,480 8,990
Total inventories $209,976 $219,630
Property, plant and equipment, net:
Land $ 11,145 $ 10,733
Buildings and improvements 84,134 107,741
Machinery and equipment 183,377 213,838
Transportation equipment 8,744 4,678
Improvements in progress 40,864 38,740
Accumulated depreciation (99,668) (129,839)
Total property, plant and equipment, net $228,596 $245,891
(8) Financial instruments
Concentrations of Credit Risk - The Company's Venezuelan operations
maintain deposits, primarily in local currency, in Venezuelan financial
institutions. As of August 31, 1994, these deposits totaled the equivalent
of $18,200,000 in U.S. dollars. Due to exchange controls implemented by
the Venezuelan government, the Company has experienced delays in converting
these deposits to U.S. dollars and, accordingly, paying down U.S. dollar-
denominated obligations of its Venezuelan operations. The Venezuelan
government has assumed control of several local banks due to their
respective financial difficulties in order to stabilize the banking system.
Other Financial Instruments - In Canada, the Company minimizes risks
associated with wheat market price fluctuations by hedging its wheat and
flour inventories, open wheat purchase contracts, and open flour sales
contracts with wheat futures contracts. These futures contracts are traded
on U.S. exchanges and are denominated in U.S. dollars. Since the
inventories, purchase contracts and sales contracts are denominated in
Canadian dollars, the Company enters into foreign currency forward
contracts which have the effect of converting the U.S. dollar-denominated
futures contracts into Canadian dollar equivalents. At August 31, 1994,
the Company had entered into wheat futures contracts with maturities that
generally coincided with the maturities of the open wheat purchase
contracts and flour sales contracts. These future contracts hedged
substantially all of the Company's Canadian wheat and flour inventories and
commitments as of August 31, 1994. At August 31, 1994, the foreign
currency forward contracts relating to these wheat futures contracts
totaled approximately $8,800,000.
The U.S. exchanges on which the futures contracts are traded act as the
counterparties to these transactions. The foreign currency forward
contracts are purchased through major Canadian banking institutions which
act as counterparties to the transactions. In the Company's opinion, the
credit risk of these futures and foreign currency forward contracts due to
nonperformance of the counterparties is remote.
(9) 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 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
condition, results of operations or cash flows of the Company.
(10) 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. The Company's divested Frozen
Specialty Foods and Meats businesses were included in the U.S. Foodservice
business segment.
Net Operating Unusual
(in millions) Sales Costs Items Total
Three Months Ended Aug. 31, 1994
U.S. Foodservice $357.4 $(352.6) $ 26.7 $ 31.5
Canadian Foods 70.2 (66.5) - 3.7
Venezuelan Foods 70.2 (66.5) - 3.7
Total $497.8 $(485.6) $ 26.7 $ 38.9
Segment earnings $ 38.9
Interest, net (2.5)
Corporate unallocated (.7)
Earnings before income taxes 35.7
Income taxes (4.3)
Net earnings $ 31.4
Three Months Ended Aug. 31, 1993
U.S. Foodservice $386.5 $(378.7) $(25.7) $(17.9)
Canadian Foods 68.4 (64.7) (21.8) (18.1)
Venezuelan Foods 66.6 (60.0) - 6.6
Total $521.5 $(503.4) $(47.5) $(29.4)
Segment losses $(29.4)
Interest, net (2.9)
Corporate unallocated (.3)
Losses from unconsolidated affiliates (12.5)
Loss before income taxes (45.1)
Income taxes 17.9
Net loss $(27.2)
(10) Segment information (continued)
Net Operating Unusual
(in millions) Sales Costs Items Total
Six Months Ended Aug. 31, 1994
U.S. Foodservice $ 798.6 $ (785.5) $ 26.7 $ 39.8
Canadian Foods 132.0 (128.1) - 3.9
Venezuelan Foods 146.9 (143.0) - 3.9
Total $1,077.5 $(1,056.6) $ 26.7 $ 47.6
Segment earnings $ 47.6
Interest, net (5.8)
Corporate unallocated (1.0)
Earnings before income taxes 40.8
Income taxes (6.4)
Net earnings $ 34.4
Six Months Ended Aug. 31, 1993
U.S. Foodservice $ 811.5 $ (795.6) $(25.7) $ (9.8)
Canadian Foods 133.9 (129.7) (21.8) (17.6)
Venezuelan Foods 131.9 (120.5) - 11.4
Total $1,077.3 $(1,045.8) $(47.5) $(16.0)
Segment losses $(16.0)
Interest, net (5.8)
Corporate unallocated (.9)
Losses from unconsolidated affiliates (12.2)
Loss before income taxes (34.9)
Income taxes 14.1
Net loss $(20.8)
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations:
For the second quarter and six months ended August 31, 1994
compared with the corresponding prior period.
Overview
The consolidated net earnings for the second quarter were $31.4 million,
or $1.74 per share, compared with a net loss of $27.2 million, or $1.41
per share, a year ago. Unusual items in the second quarter of fiscal
1995 of $25.9 million after tax, or $1.44 per share, included an after-
tax gain of $29.6 million, or $1.65 per share, from the divestiture of
the Company's Frozen Specialty Foods business and an after-tax charge of
$3.7 million, or $.21 per share, for costs associated with the
integration of the specialty foodservice distribution business of Leprino
Foods Company, which was acquired in late August 1994. The integration,
which will include the closing of duplicate warehouse and administrative
facilities of the Company and the consolidation of distribution truck
routing, is expected to result in annualized benefits totaling up to $3
million and $6 million in fiscal years 1996 and 1997, respectively.
Unusual items in the second quarter of fiscal 1994 totaling $36.3 million
after tax related to the reorganization of operations, the loss on the
disposition of a bakery distribution business and included a $12.5
million charge related to the decision to divest the Company's minority
positions in two Mexican unconsolidated affiliates. See Note 4 for
additional information on unusual items and the reorganization and
integration reserves.
Excluding unusual items, net earnings in the second quarter were $5.5
million, or $.30 per share, compared with net earnings of $9.1 million,
or $.47 per share, a year ago. The decline in net earnings was primarily
the result of lower earnings in the U.S. Foodservice and Venezuelan Foods
segments. Consolidated net sales declined 5% to $497.8 million, compared
with $521.5 million, a year ago. Exclusive of the effect of acquisitions
and divestitures, consolidated net sales increased 7%.
The consolidated net earnings for the six months ended August 31, 1994
were $34.4 million, or $1.91 per share, compared with a net loss of $20.8
million, or $1.08 per share, a year ago. Exclusive of the unusual items
described above, net earnings were $8.5 million, or $.47 per share,
compared with $15.5 million, or $.80 per share, a year ago. Consolidated
net sales were even with the year-ago period. Exclusive of the effect of
acquisitions and divestitures, consolidated net sales increased 8%.
Segment Results
U.S. Foodservice second quarter net sales declined 8% to $357.4 million,
compared with $386.5 million a year ago, primarily as a result of
divested businesses. Excluding the effect of acquisitions and
divestitures, net sales increased 9% as a result of improved volumes in
pizza and Mexican restaurant distribution, surimi seafood and export
products. Second quarter segment earnings before unusual items declined
38% to $4.8 million, compared with $7.8 million in fiscal 1994. A
portion of the decline was the result of the divestitures of the Frozen
Specialty Foods and Meats businesses, which earned $1.2 million in the
second quarter last year. The remaining decline is primarily the result
of costs associated with delays in the implementation timetable of a
vending distribution business information system and lower margins in
surimi seafood compared with strong margins a year ago, both of which are
expected to continue to unfavorably impact segment earnings in the second
half of fiscal 1995. Second quarter segment earnings were $31.5 million
versus a loss of $17.9 million a year ago. Fiscal 1995 segment earnings
included a pre-tax gain of $32.9 million from the divestiture of the
Frozen Specialty Foods business and a pre-tax integration charge of $6.2
million described above. The fiscal 1994 segment loss included unusual
items of $25.7 million associated with the reorganization of operations
and the loss on the disposition of a bakery distribution business.
U. S. Foodservice segment earnings before unusual items for the six-month
period declined 18% to $13.1 million, compared with $15.9 million a year
ago. After reflecting unusual items, segment earnings were $39.8 million
versus a segment loss of $9.8 million a year ago. Net sales for the six-
month period declined 2% to $798.6 million, compared with $811.5 million
last year. Net sales and segment earnings for the six-month period were
affected by the same factors as noted above for the second quarter.
Canadian Foods second quarter net sales increased 3% to $70.2 million,
compared with $68.4 million a year earlier, primarily as a result of
higher Canadian bakery volumes, partially offset by the impact of a 6%
decline in the average exchange rate and lower consumer flour volumes
compared with a strong quarter last year. Segment earnings before
unusual items were $3.7 million, even with a year ago. The earnings
benefits of improved Canadian bakery volumes and the benefits from the
reorganization of operations were offset by the effects of the exchange
rate decline and lower consumer flour volumes. Segment earnings before
unusual items for the six-month period decreased 7% to $3.9 million,
compared with $4.2 million last year. Unusual items in the second
quarter of fiscal 1994 were pre-tax charges of $21.8 million associated
with the reorganization of operations. Net sales declined 1% to $132.0
million versus $133.9 million in the year-ago period. Sales and earnings
were affected by essentially the same factors as noted above for the
second quarter.
Venezuelan Foods second quarter net sales increased 5% to $70.2 million,
compared with $66.6 million last year, as a result of higher consumer
products and animal feed volumes. Segment earnings declined 44% to $3.7
million from $6.6 million a year ago. The decline resulted primarily
from the impact of a significant devaluation of the Venezuelan currency
that occurred in the latter part of the first quarter and early in the
second quarter of fiscal 1995, and the Company's use of the U.S. dollar
as the functional currency for translation purposes. These unfavorable
impacts were partially offset by the benefits of the improved volumes and
the near-term currency stability resulting from government-imposed foreign
exchange controls, described below. Segment earnings for the six-month
period decreased 66% to $3.9 million, compared with $11.4 million last
year, as a result of the factors noted above for the second quarter and
the significant effect that the first quarter currency devaluation had on
the earnings in the first quarter. Net sales for the six-month period
increased 11% to $146.9 million, versus $131.9 million last year,
primarily on higher consumer products and animal feed volumes.
In June 1994, the Venezuelan government implemented price controls, which
affect most of the Venezuelan operations' products, and a foreign
exchange control system. The government has allowed reasonable price
increases for most of the Company's products. In connection with the
implementation of exchange and price controls, the government has
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 government has allowed the exchange of
Venezuelan bolivars to U.S. dollars for payments by the Company for
recent raw material imports. However, the Company has experienced delays
in obtaining U.S. dollars for transactions that occurred prior to the
implementation of exchange controls, including dollars required for the
repayment of U.S. dollar-denominated obligations of the Company's
Venezuelan operations. As a result, net monetary assets and commitments
denominated in bolivars have increased. As of August 31, 1994, net
monetary assets and commitments totaled the U.S.-dollar equivalent of $29
million. The government has currently established the exchange rate at
170 bolivars per dollar. If the bolivar were to decline in value versus
the U.S. dollar, there would be foreign exchange losses on the net
monetary assets and commitments and, additionally, the Company may be
unable to immediately increase selling prices to maintain current gross
profit margins. At the present time, strategies for the management of
currency risks are limited to working capital management techniques and
product pricing strategies.
The Venezuelan government 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
Second quarter net interest expense declined to $2.5 million from $2.9
million a year ago as a result of lower debt levels during the quarter,
partially offset by the effect of higher interest rates in the United
States and Canada. The Company reduced debt levels early in the quarter
with the proceeds from the divestiture of the Frozen Specialty Foods
business. Debt levels increased near the end of the quarter in
connection with the acquisition of the Leprino Foods Company distribution
business. For the six-month period, net interest expense was even with
the year-ago period at $5.8 million as the factors noted above for the
second quarter were offset by higher interest expense in the first
quarter resulting from higher debt levels and interest rates.
Income Taxes
The effective tax rate was 12.3% in the second quarter of fiscal 1995
compared with 39.8% last year. The low tax rate in the second quarter of
fiscal 1995 was attributable to a low tax rate on the Frozen Specialty
Foods transaction. Excluding unusual items and losses from
unconsolidated affiliates, the effective tax rates were 40.0% and 38.6%
in the second quarters of fiscal 1995 and 1994, respectively. This
increase was the result of higher foreign taxes. For the six-month
periods, the effective tax rate was 15.7% in fiscal 1995 and 40.4% in
fiscal 1994 as a result of the low tax rate on the Frozen Specialty Foods
transaction. Excluding unusual items and losses from unconsolidated
affiliates, the effective tax rates were 40.0% and 38.7% in fiscal 1995
and 1994, respectively. The increase was the result of higher foreign
taxes.
Financial Condition:
During the second quarter of fiscal 1995, the Company acquired the
specialty foodservice distribution business of Leprino Foods Company.
The Company's balance sheet at August 31, 1994 reflected the acquisition
of the distribution business and the divestitures of the Company's Frozen
Specialty Foods and Meats businesses.
The increase in cash at August 31, 1994 is due primarily to an increase
in local currency deposits in Venezuela as a result of the delays in
obtaining U.S. dollars to settle certain dollar-denominated obligations.
See Note 8 for further discussion.
The reduction in inventories and property, plant and equipment reflected
the divestitures, partially offset by the acquisition. The increase in
intangibles as of August 31, 1994 was the result of the acquisition,
partially offset by the reduction from the divestiture of the Frozen
Specialty Foods business. The increase in other current liabilities
included the charge for the integration of businesses (see Note 4) and
income taxes associated with the gain on the sale of the Frozen Specialty
Foods business. In addition, the significant devaluation of the
Venezuelan currency that occurred since April 1994 resulted in a decline
in the translated amounts of certain Venezuelan assets and liabilities.
As of August 31, 1994, the Company's debt-to-total-capitalization ratio
had declined to 46%, as compared to 50% at February 28, 1994. The
Company's debt declined, as proceeds from the sale of the Frozen
Specialty Foods business exceeded the cost of the acquisition of the
specialty foodservice distribution business of Leprino Foods Company.
Certain repurchases of outstanding common stock were made during the six
months ended August 31, 1994 under the previously announced share
repurchase program. The Company expects that any future share
repurchases under this program will be funded by borrowings.
In Canada, the Company minimizes risks associated with wheat market price
fluctuations by hedging its wheat and flour inventories, open wheat
purchase contracts and open flour sales contracts with wheat futures
contracts. See Note 8 for further discussion.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1994 Annual Meeting of Stockholders of International
Multifoods Corporation (the "Company") was held on June 17, 1994 (the
"Annual Meeting"). Holders of the Company's common stock, par value $.10
per share, and holders of the Company's Cumulative Redeemable Sinking
Fund First Preferred Capital Stock, Series A, C, D and E, par value $100
per share, of record on May 2, 1994 were entitled to one vote per share,
voting together as though constituting a single class on each proposal
presented at the meeting.
(c) At the Annual Meeting, Nicholas L. Reding and Jack D. Rehm
were elected directors for a term of three years. The number of votes
cast for the election of each director and the number of votes withheld
are as follows:
FOR WITHHELD
Nicholas L. Reding 15,387,667 560,542
Jack D. Rehm 15,381,527 566,682
The other directors whose term of office as a director continued after
the meeting are William A. Andres, James G. Fifield, Anthony Luiso,
Robert M. Price, Lois D. Rice and Peter S. Willmott.
With respect to the proposal to approve the appointment of KPMG Peat
Marwick as independent auditors of the Company for the fiscal year ending
February 28, 1995, there were 15,796,686 votes cast for the proposal,
96,681 votes cast against the proposal and 54,842 abstentions. There
were no broker nonvotes with respect to such matter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Stock Purchase Agreement between International
Multifoods Corporation (Seller) and Doskocil Companies Incorporated
(Buyer) dated as of March 17, 1994 (incorporated herein by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 1,
1994).
2.2 Asset Purchase Agreement among Multifoods
Distribution, Inc. (Buyer), International Multifoods Corporation (Buyer's
Parent) and Leprino Foods Company (Seller) and James G. Leprino (Seller's
Shareholder) dated as of July 29, 1994 (incorporated herein by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K dated
August 22, 1994).
11. Computation of Earnings Per Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended August 31, 1994, the Company filed a report
on Form 8-K dated June 1, 1994 relating to the sale of the Company's
Frozen Specialty Foods business. In addition, during the quarter, the
Company filed a report on Form 8-K dated August 22, 1994 relating to the
acquisition by the Company of substantially all of the assets of the
specialty foodservice distribution business of Leprino Foods Company,
which report included financial statements of Leprino Foodservice
Distribution (a division of Leprino Foods Company).
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: October 14, 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
2.1 Stock Purchase Agreement between International Multifoods
Corporation (Seller) and Doskocil Companies Incorporated (Buyer) dated as
of March 17, 1994 (incorporated herein by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated June 1, 1994).
2.2 Asset Purchase Agreement among Multifoods Distribution, Inc.
(Buyer), International Multifoods Corporation (Buyer's Parent) and
Leprino Foods Company (Seller) and James G. Leprino (Seller's
Shareholder) dated as of July 29, 1994 (incorporated herein by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K dated
August 22, 1994).
11. Computation of Earnings Per Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
Exhibit 11
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Schedule of Computation of Earnings per Share
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1994 1993 1994 1993
Average shares of common
stock outstanding 17,903 19,232 18,006 19,258
Common stock equivalents 7 123 14 157
Total common stock and
equivalents assuming full dilution 17,910 19,355 18,020 19,415
Net earnings (loss) $31,360 $(27,170) $34,397 $(20,788)
Less dividends on redeemable
preferred stock (42) (44) (84) (88)
Net earnings (loss) applicable to
common stock $31,318 $(27,214) $34,313 $(20,876)
Earnings (loss) per share of
common stock:
Primary $ 1.74 $ (1.41) $ 1.91 $ (1.08)
Fully diluted $ 1.74 $ (1.41) $ 1.90 $ (1.08)
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 SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1994 1993 1994 1993
Earnings (loss) before
income taxes (1) $35,753 $(32,676) $40,815 $(22,691)
Plus: Fixed charges (2) 5,069 5,589 11,078 11,426
Less: Capitalized interest (91) (84) (169) (173)
Earnings available to cover
fixed charges (3) $40,731 $ N/A $51,724 $ N/A
Ratio of earnings to
fixed charges (3) 8.04 N/A 4.67 N/A
(1) Losses before income taxes have been adjusted to exclude losses from less-
than-fifty-percent-owned subsidiaries.
(2) Fixed charges consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1994 1993 1994 1993
Interest expense, gross $2,949 $3,242 $ 6,644 $ 6,618
Rentals (1/3) 2,120 2,347 4,434 4,808
Total fixed charges $5,069 $5,589 $11,078 $11,426
(3) For the three months and six months ended August 31, 1993, earnings are
inadequate to cover fixed charges. The resulting deficiency is $32,760 for
the three months ended August 31, 1993 and $22,864 for the six months ended
August 31, 1993. The deficiency is the result of unusual items. Exclusive
of unusual items, the ratio of earnings available to cover fixed charges
would have been 3.63 and 3.15 for the three months and six months ended
August 31, 1993, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF OPERATIONS AND CASH
FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS AND NOTES.
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> AUG-31-1994
<CASH> 19,060
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<RECEIVABLES> 152,555
<ALLOWANCES> 5,522
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<CURRENT-ASSETS> 450,600
<PP&E> 328,264
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3,618
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<SALES> 1,077,471
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<OTHER-EXPENSES> 65,911
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<INTEREST-EXPENSE> 6,475
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