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, 1995
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 41-0871880
incorporation or organization) (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, 1995 was 18,010,212.
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,
1995 1994
Net sales $ 634,644 $ 547,907
Cost of sales (534,716) (448,988)
Gross profit 99,928 98,919
Delivery and distribution (38,469) (34,553)
Selling, general and
administrative (49,312) (53,916)
Operating earnings 12,147 10,450
Financing costs:
Interest, net (5,125) (3,355)
Foreign exchange losses on cash
and equivalents - (2,033)
Total financing costs (5,125) (5,388)
Earnings before income taxes 7,022 5,062
Income taxes (2,458) (2,025)
Net earnings $ 4,564 $ 3,037
Net earnings per share
of common stock $ .25 $ .17
Average shares of common
stock outstanding 17,956 18,107
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,
1995 1995
Assets
Current assets:
Cash and equivalents $ 8,214 $ 10,792
Trade accounts receivable, net 127,382 142,474
Inventories 250,057 256,878
Other current assets 70,649 61,553
Total current assets 456,302 471,697
Property, plant and equipment, net 231,945 228,025
Goodwill 109,308 108,636
Other assets 38,201 38,347
Total assets $835,756 $846,705
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 59,496 $ 47,149
Current portion of long-term debt 11,083 11,083
Accounts payable 142,122 167,114
Other current liabilities 83,275 90,646
Total current liabilities 295,976 315,992
Long-term debt, net of current portion 189,789 183,087
Employee benefits and other
liabilities 54,123 52,960
Total liabilities 539,888 552,039
Redeemable preferred stock 3,554 3,604
Shareholders' equity 292,314 291,062
Commitments and contingencies
Total liabilities and
shareholders' equity $835,756 $846,705
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,
1995 1994
Cash flows from operations:
Net earnings $ 4,564 $ 3,037
Adjustments to reconcile net earnings
to cash provided by (used for) operations:
Depreciation and amortization 7,582 7,150
Deferred income tax expense 547 1,452
Provision for losses on receivables 2,601 809
Changes in operating assets and liabilities,
net of business acquisitions and
dispositions:
Accounts receivable 14,187 (463)
Inventories 7,796 7,210
Other current assets (10,818) (6,098)
Accounts payable (25,413) (6,962)
Other current liabilities (7,559) (4,566)
Other, net 269 3,173
Cash provided by
(used for) operations (6,244) 4,742
Cash flows from investing activities:
Business acquisitions (5,275) (3,950)
Capital expenditures (5,370) (8,028)
Proceeds from business disposition - 20,595
Proceeds from other property disposals 675 507
Cash provided by (used for)
investing activities (9,970) 9,124
Cash flows from financing activities:
Net increase in notes payable 12,197 7,326
Net increase (decrease) in long-term debt 5,862 (4,195)
Dividends paid (3,695) (3,733)
Proceeds from issuance of common stock 428 109
Purchase of treasury shares (1,118) (5,777)
Other, net (45) (6)
Cash provided by (used for)
financing activities 13,629 (6,276)
Effect of exchange rate changes on cash
and equivalents 7 (2,045)
Net increase (decrease) in cash and equivalents (2,578) 5,545
Cash and equivalents at beginning of period 10,792 10,507
Cash and equivalents at end of period $ 8,214 $16,052
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, 1995 and the results of its
operations and cash flows for the three months ended May 31, 1995 and
1994. 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. 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, 1995. The results of operations for the three
months ended May 31, 1995 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 foreign exchange gains on Venezuelan local currency
borrowings along with the inflation element inherent in interest rates on
such borrowings as a component of cost of sales. Accordingly, an increase
of $1,075,000 and a reduction of $2,395,000 for the three months ended May
31, 1995 and 1994, respectively, are included in cost of sales.
(3) Businesses acquired - The Company acquired, with cash, certain
businesses during fiscal 1996 and 1995. 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
1996 Venezuela Foods Ciudad Bolivar Corn
Flour business April 1995
1995 Foodservice Distribution business
Distribution of Leprino Foods August 1994
The components of cash used for all acquisitions, as reflected in the
consolidated condensed statements of cash flows, are summarized as follows
(in thousands):
Three Months Ended
May 31, May 31,
1995 1994
Fair value of current assets $ 288 $ -
Fair value of non-current assets, excluding goodwill 3,931 3,950
Goodwill 1,180 -
Liabilities assumed, principally current (124) -
Cash paid at closing $5,275 $3,950
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, 1994, the beginning of fiscal 1995. 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 1995.
Three Months Ended
(in thousands, except earnings per share) May 31, 1994
Net sales $655,950
Net earnings 3,100
Net earnings per share of common stock .17
(4) Unusual items - The following table summarizes the change in the
Company's reorganization and integration reserves for the three months
ended May 31, 1995 (in thousands):
<TABLE>
<CAPTION>
Foodservice Distribution Bakery
------------------------ ----------------------
Consoli-
Organiza- Organiza- dation/
tional Business tional Closing Total
Changes Integration Changes Facilities Company
<S> <C> <C> <C> <C> <C>
Reorganization and
integration reserves
at Feb. 28, 1995 $ 792 $ 4,406 $4,310 $2,997 $12,505
Reserves utilized (193) (1,510) (284) (578) (2,565)
Exchange rate effect - - 66 56 122
Reorganization and
integration reserves
at May 31, 1995 $ 599 $ 2,896 $4,092 $2,475 $10,062
</TABLE>
(5) Financing costs consisted of the following (in thousands):
Three Months Ended
May 31, May 31,
1995 1994
Interest expense $5,547 $3,695
Capitalized interest (44) (78)
Non-operating interest income (378) (262)
Interest, net 5,125 3,355
Foreign exchange losses - 2,033
Total financing costs $5,125 $5,388
Cash payments for interest, net of amounts capitalized, for the three
months ended May 31, 1995 and 1994 were approximately $5,634,000 and
$3,609,000, respectively.
Total interest income was $675,000 and $455,000 for the three months ended
May 31, 1995 and 1994, respectively.
(6) Income taxes - Cash payments for income taxes for the three months
ended May 31, 1995 and 1994 were $1,900,000 and $1,121,000, respectively.
(7) Supplemental balance sheet information (in thousands)
May 31, Feb. 28,
1995 1995
Trade accounts receivable, net:
Trade $133,056 $149,132
Allowance for doubtful accounts (5,674) (6,658)
Total trade accounts receivable, net $127,382 $142,474
Inventories:
Raw materials, excluding grain $ 31,034 $ 25,683
Grain 54,730 65,402
Finished and in-process goods 154,425 158,497
Packages and supplies 9,868 7,296
Total inventories $250,057 $256,878
Property, plant and equipment, net:
Land $ 11,673 $ 11,635
Buildings and improvements 90,204 87,739
Machinery and equipment 217,438 212,262
Transportation equipment 9,069 9,042
Improvements in progress 16,406 13,381
Accumulated depreciation (112,845) (106,034)
Total property, plant and equipment, net $231,945 $228,025
(8) Segment information - The Company's business segments are as follows:
Foodservice Distribution consists of U.S. vending distribution and
limited-menu foodservice distribution and food exporting business; Bakery
consists of U.S. and Canadian bakery products and consumer products in
Canada, which includes primarily home baking products and condiments;
Venezuela Foods consists of bakery products, consumer products for home
baking and agricultural products; Divested Businesses consists principally
of the frozen specialty foods and meats businesses which were divested in
fiscal 1995 and the surimi seafood business which was divested in June
1995.
Net Operating Operating
(in millions) Sales Costs Earnings
Three Months Ended May 31, 1995
Foodservice Distribution $416.4 $(410.8) $ 5.6
Bakery 108.0 (106.4) 1.6
Venezuela Foods 96.7 (90.2) 6.5
Divested Businesses 13.5 (11.9) 1.6
Corporate Expenses - (3.2) (3.2)
Total $634.6 $(622.5) $12.1
Three Months Ended May 31, 1994
Foodservice Distribution $293.3 $(288.3) $ 5.0
Bakery 104.1 (103.0) 1.1
Venezuela Foods 76.7 (74.2) 2.5
Divested Businesses 73.8 (69.3) 4.5
Corporate Expenses - (2.6) (2.6)
Total $547.9 $(537.4) $10.5
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, 1995 compared with the corresponding
prior period
Overview
The consolidated net earnings for the first quarter were $4.6 million, or
$.25 per share, compared with net earnings of $3.0 million, or $.17 per
share a year ago. Consolidated net sales increased 16% to $634.6 million,
compared with $547.9 million in the first quarter last year. First
quarter fiscal 1996 results included the limited-menu foodservice
distribution business of Leprino Foods Company, which was acquired in
August 1994. The prior year first quarter results included the Company's
former Frozen Specialty Foods and Meats businesses, which were divested in
June and May 1994, respectively.
Segment Results
Foodservice Distribution first quarter net sales increased 42% to $416.4
million, compared with $293.3 million a year ago. The increase was
primarily from sales of the limited-menu distribution business of Leprino
Foods Company acquired in August 1994. Net sales of the Company's vending
distribution business were even with the same period last year.
Foodservice Distribution's first quarter operating earnings increased 12%
to $5.6 million compared with $5.0 million last year. Operating earnings
increased primarily from earnings of the acquired limited-menu
distribution business. The increase was partially offset by lower
earnings in vending distribution which resulted from additional costs,
including depreciation, associated with the implementation of a business
information system.
Bakery first quarter net sales increased 4% to $108.0 million, compared
with $104.1 million a year ago. Sales benefited from improved volumes in
both commercial and consumer bakery products. First quarter operating
earnings increased 45% to $1.6 million compared with $1.1 million in the
first quarter last year. Operating earnings increased as a result of the
improved volumes and the continued benefits of the fiscal 1994
reorganization of operations.
Venezuela Foods first quarter net sales increased 26% to $96.7 million,
compared with $76.7 million a year ago. The increase was primarily the
result of strong animal feed volumes, the current year benefit from the
effect of the near-term stability from government imposed foreign exchange
controls and the unfavorable impact in the prior year of a significant
currency devaluation. Higher volumes in animal feed were the result of an
increase in market share. First quarter operating earnings increased to
$6.5 million, compared with $2.5 million last year. The improved earnings
were primarily due to the comparison with a weak first quarter in fiscal
1995, which resulted from the large currency devaluation, as well as the
volume improvement and the current year benefit of the stability of the
local currency.
Divested Businesses first quarter net sales were $13.5 million, compared
with $73.8 million in fiscal 1995. Operating earnings declined to
$1.6 million compared with $4.5 million in the first quarter last year.
The current fiscal year's first quarter results include only the Company's
surimi seafood business, which was divested in June 1995 at a net gain.
The net gain will be reported in the Company's second quarter results.
Sales and earnings declined from the first quarter last year as a result
of the fiscal 1995 divestitures of the Frozen Specialty Foods and Meats
businesses. Earnings in the first quarter of fiscal 1996 also declined in
the surimi seafood business as a result of higher raw material costs.
Non-operating Expense and Income
Net interest expense increased to $5.1 million from $3.3 million a year
ago as a result of higher interest rates. In fiscal 1995, the Company
recognized foreign exchange losses of $2.1 million from local currency
cash and equivalents in Venezuela. The loss resulted from a significant
currency devaluation coupled with a temporary build-up of local currency
cash and equivalents which was due to delays in obtaining U.S. dollars to
settle certain U.S. dollar-denominated obligations.
Income Taxes
The first quarter effective tax rate was 35% compared to 40% a year ago.
The decline was the result of a lower effective tax rate in Venezuela.
Financial Condition:
The Company's balance sheet at May 31, 1995 reflected the impact of
working capital requirements and business acquisitions. The debt-to-total
capitalization ratio was 47% at May 31, 1995 as compared to 45% at
February 28, 1995.
In the first quarter of fiscal 1996, operating working capital increased
$21.8 million. Working capital requirements increased as a result of the
timing of payments to suppliers along with payments associated with the
Company's integration of its limited-menu distribution businesses and
reorganization of operations. The decline in accounts receivable was
primarily due to the timing of cash receipts.
Business acquisitions, which included a corn flour business in Venezuela,
totaled $5.3 million. The balance sheet impact from acquisitions is
summarized in Note 3 to the consolidated condensed financial statements.
In June 1995, the Company completed the divestiture of its surimi seafood
business for $48 million in cash. The net proceeds from the disposition
were used to reduce debt obligations.
In May 1995, the Company entered into an $84 million revolving credit
agreement in Canada which expires in March 1997. The interest rate on
borrowings under the new agreement is variable and based on current market
factors. The new revolving credit agreement replaces a $62 million
revolving credit agreement in Canada and short-term lines of credit of
approximately $22 million. In the first quarter of fiscal 1996 the
Company also replaced variable rate debt in the United States with $20
million of notes under its medium-term note program. The notes mature in
fiscal years 1999 to 2001 and have interest rates ranging from 6.75% to
7%.
In June 1995, the Company's Board of Directors approved the redemption of
all of the Company's outstanding shares of Cumulative Redeemable Sinking
Fund First Preferred Capital Stock at a redemption price of $105 per
share. The Company expects to complete the redemption on September 1, 1995.
The Company will fund the redemption, which will total
approximately $3.7 million, with borrowings.
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.
27. Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
May 31, 1995.
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 12, 1995 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.
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
May 31, May 31,
1995 1994
Average shares of common
stock outstanding 17,956 18,107
Common stock equivalents 75 11
Total common stock and
equivalents assuming
full dilution 18,031 18,118
Net earnings $4,564 $3,037
Less dividends on redeemable
preferred stock (42) (42)
Net earnings applicable to
common stock $4,522 $2,995
Earnings per share of
common stock:
Primary $ .25 $ .17
Fully diluted $ .25 $ .17
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,
1995 1994
Earnings before income taxes $ 7,022 $ 5,062
Plus: Fixed charges (1) 7,988 6,010
Less: Capitalized interest (44) (78)
Earnings available to cover
fixed charges $14,966 $10,994
Ratio of earnings to
fixed charges 1.87 1.83
(1) Fixed charges consisted of the following:
THREE MONTHS ENDED
May 31, May 31,
1995 1994
Interest expense, gross $ 5,547 $ 3,695
Rentals (1/3) 2,441 2,315
Total fixed charges $ 7,988 $ 6,010
<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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> MAY-31-1995
<CASH> 8,214
<SECURITIES> 0
<RECEIVABLES> 133,056
<ALLOWANCES> 5,674
<INVENTORY> 250,057
<CURRENT-ASSETS> 456,302
<PP&E> 344,790
<DEPRECIATION> 112,845
<TOTAL-ASSETS> 835,756
<CURRENT-LIABILITIES> 295,976
<BONDS> 189,789
<COMMON> 2,184
3,554
0
<OTHER-SE> 290,130
<TOTAL-LIABILITY-AND-EQUITY> 835,756
<SALES> 634,644
<TOTAL-REVENUES> 634,644
<CGS> 534,716
<TOTAL-COSTS> 534,716
<OTHER-EXPENSES> 38,469
<LOSS-PROVISION> 2,601
<INTEREST-EXPENSE> 5,503
<INCOME-PRETAX> 7,022
<INCOME-TAX> 2,458
<INCOME-CONTINUING> 4,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,564
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
