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 November 30, 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 December 31, 1994 was 17,998,514.
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1994 1993 1994 1993
Net sales $693,772 $585,626 $1,771,243 $1,662,925
Cost of sales (581,289) (473,806) (1,477,156) (1,351,248)
Delivery and distribution (40,750) (37,702) (106,661) (106,959)
Selling, general and
administrative (50,085) (52,077) (144,824) (151,191)
Unusual items - - 26,661 (47,464)
Interest, net (3,045) (2,096) (8,827) (7,865)
Corporate (413) 337 (1,431) (607)
Losses from unconsolidated
affiliates - - - (12,187)
Earnings (loss) before
income taxes 18,190 20,282 59,005 (14,596)
Income taxes (7,276) (7,829) (13,694) 6,261
Net earnings (loss) $10,914 $ 12,453 $ 45,311 $ (8,335)
Net earnings (loss) per share
of common stock $ .61 $ .66 $ 2.51 $ (.44)
Average shares of common
stock outstanding 17,924 18,830 17,979 19,116
Dividends per share of
common stock:
Declared* $ .20 $ .20 $ .40 $ .60
Paid $ .20 $ .20 $ .60 $ .60
*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 payment 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
Nov. 30, February 28,
1994 1994
Assets
Current assets:
Cash and equivalents $ 8,848 $ 10,507
Trade accounts receivable, net 148,769 146,455
Inventories 263,146 219,630
Other current assets 77,700 62,698
Total current assets 498,463 439,290
Property, plant and equipment, net 228,704 245,891
Goodwill 110,604 72,672
Other assets 41,327 56,922
Total assets $879,098 $814,775
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 59,268 $ 58,651
Current portion of long-term debt 11,102 3,953
Accounts payable 176,752 150,221
Other current liabilities 112,276 88,909
Total current liabilities 359,398 301,734
Long-term debt, net of current portion 178,653 195,125
Employee benefits and other
liabilities 55,006 64,277
Total liabilities 593,057 561,136
Redeemable preferred stock 3,616 3,635
Shareholders' equity 282,425 250,004
Commitments and contingencies
Total liabilities and
shareholders' equity $879,098 $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)
NINE MONTHS ENDED
Nov. 30, Nov. 30,
1994 1993
Cash flows from operations:
Net earnings (loss) $ 45,311 $(8,335)
Adjustments to reconcile net earnings (loss)
to cash provided by operations:
Depreciation and amortization 19,728 22,396
Deferred income tax benefit (8,243) (8,127)
Provision for losses on receivables 2,351 1,992
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 (4,156) (5,758)
Inventories (53,448) (45,133)
Other current assets (17,222) (4,496)
Accounts payable 25,799 4,660
Other current liabilities 12,326 238
Other, net 5,117 (1,865)
Cash provided by operations 902 15,223
Cash flows from investing activities:
Business acquisitions (115,847) (18,476)
Capital expenditures (24,001) (36,902)
Proceeds from business dispositions 156,367 4,862
Proceeds from other property disposals 2,727 379
Cash provided by (used for)
investing activities 19,246 (50,137)
Cash flows from financing activities:
Net increase in notes payable 4,559 56,765
Net increase (decrease) in long-term debt (6,987) 7,330
Dividends paid (10,950) (11,715)
Proceeds from issuance of common stock 119 1,183
Purchase of treasury shares (5,777) (24,935)
Other, net (13) (84)
Cash provided by (used for)
financing activities (19,049) 28,544
Effect of exchange rate changes on cash
and equivalents (2,758) (1,121)
Net decrease in cash and equivalents (1,659) (7,491)
Cash and equivalents at beginning of period 10,507 11,044
Cash and equivalents at end of period $ 8,848 $ 3,553
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 November 30, 1994 and the results of its
operations for the three and nine months ended November 30, 1994 and 1993,
and cash flows for the nine months ended November 30, 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 nine months ended November 30, 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 $1,665,000 and an increase of
$2,470,000 for the nine months ended November 30, 1994 and 1993,
respectively, and increases of $235,000 and $1,080,000 for the three months
ended November 30, 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):
Nine Months Ended
Nov. 30, Nov. 30,
1994 1993
Fair value of current assets, net of cash acquired $ 46,383 $ 4,738
Fair value of non-current assets, excluding goodwill 39,118 12,276
Goodwill 51,478 4,650
Liabilities assumed, principally current (21,132) (688)
Purchase contract liabilities - (2,500)
Cash paid, net of cash acquired $115,847 $18,476
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.
Nine Months Ended
Nov. 30, Nov. 30,
(in thousands, except earnings per share) 1994 1993
Net sales $1,971,000 $1,947,000
Net earnings (loss) 45,686 (8,313)
Net earnings (loss) per share of common stock 2.53 (.44)
(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 and $5,120,000 of charges, which consist
of $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 nine months ended November 30, 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 (2,253) (4,020) (77) (129) (651) (7,130)
Exchange rate effect - - - (104) (95) (199)
Reorganization and
integration reserves
at Nov. 30, 1994 $2,441 $2,089 $ 5,043 $2,516 $4,740 $16,829
</TABLE>
(5) Interest, net consisted of the following (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1994 1993 1994 1993
Interest expense $4,293 $3,227 $10,937 $9,845
Less: Capitalized interest (87) (420) (256) (593)
Non-operating interest income (1,161) (711) (1,854) (1,387)
Interest, net $3,045 $2,096 $ 8,827 $7,865
Cash payments for interest, net of amounts capitalized, for the nine months
ended November 30, 1994 and 1993 were approximately $10,483,000 and
$10,037,000, respectively.
Total interest income was $2,610,000 and $1,795,000 for the nine months ended
November 30, 1994 and 1993, respectively.
(6) Income taxes - Cash payments for income taxes for the nine months ended
November 30, 1994 and 1993 were $3,943,000 and $2,024,000, respectively.
(7) Supplemental balance sheet information (in thousands)
Nov. 30, Feb. 28,
1994 1994
Trade accounts receivable, net:
Trade $154,594 $151,642
Allowance for doubtful accounts (5,825) (5,187)
Total trade accounts receivable, net $148,769 $146,455
Inventories:
Raw materials, excluding grain $ 23,880 $ 27,614
Grain 57,932 41,785
Finished and in-process goods 174,420 141,241
Packages and supplies 6,914 8,990
Total inventories $263,146 $219,630
Property, plant and equipment, net:
Land $ 11,747 $ 10,733
Buildings and improvements 86,628 107,741
Machinery and equipment 204,701 213,838
Transportation equipment 9,194 4,678
Improvements in progress 21,219 38,740
Accumulated depreciation (104,785) (129,839)
Total property, plant and equipment, net $228,704 $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 November 30, 1994, these deposits totaled the
equivalent of $7,800,000 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. Additionally, 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 November 30, 1994,
the Company had entered into wheat futures contracts with maturities that
substantially 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 November 30, 1994. At November 30, 1994, the foreign
currency forward contracts relating to these wheat futures contracts
totaled approximately $1,369,000.
The U.S. exchanges on which the futures contracts are traded are the
counterparties to these transactions. The foreign currency forward
contracts are purchased through major Canadian banking institutions which
are 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
(in millions) Sales Costs Total
Three Months Ended Nov. 30, 1994
U.S. Foodservice $522.4 $(514.7) $ 7.7
Canadian Foods 90.3 (82.0) 8.3
Venezuelan Foods 81.0 (75.3) 5.7
Total $693.7 $(672.0) $21.7
Segment earnings $21.7
Interest, net (3.0)
Corporate unallocated (.5)
Earnings before income taxes 18.2
Income taxes (7.3)
Net earnings $10.9
Three Months Ended Nov. 30, 1993
U.S. Foodservice $438.2 $(427.9) $10.3
Canadian Foods 82.9 (76.2) 6.7
Venezuelan Foods 64.5 (59.4) 5.1
Total $585.6 $(563.5) $22.1
Segment earnings $22.1
Interest, net (2.1)
Corporate unallocated .3
Earnings before income taxes 20.3
Income taxes (7.8)
Net earnings $12.5
Net Operating Unusual
(in millions) Sales Costs Items Total
Nine Months Ended Nov. 30, 1994
U.S. Foodservice $1,321.0 $(1,300.2) $ 26.7 $47.5
Canadian Foods 222.3 (210.1) - 12.2
Venezuelan Foods 227.9 (218.3) - 9.6
Total $1,771.2 $(1,728.6) $ 26.7 $69.3
Segment earnings $69.3
Interest, net (8.8)
Corporate unallocated (1.5)
Earnings before income taxes 59.0
Income taxes (13.7)
Net earnings $45.3
Nine Months Ended Nov. 30, 1993
U.S. Foodservice $1,249.7 $(1,223.5) $(25.7) $ .5
Canadian Foods 216.8 (205.9) (21.8) (10.9)
Venezuelan Foods 196.4 (179.9) - 16.5
Total $1,662.9 $(1,609.3) $(47.5) $ 6.1
Segment earnings $ 6.1
Interest, net (7.9)
Corporate unallocated (.6)
Losses from unconsolidated affiliates (12.2)
Loss before income taxes (14.6)
Income taxes 6.3
Net loss $(8.3)
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations:
For the third quarter and nine months ended November 30, 1994 compared with
the corresponding prior periods.
Overview
The consolidated net earnings for the third quarter were $10.9 million, or
$.61 per share, compared with net earnings of $12.5 million, or $.66 per
share, a year ago. Consolidated net sales increased 18% to $693.7 million,
compared with $585.6 million, a year ago. Third quarter fiscal 1995
included net sales of the specialty foodservice distribution business of
Leprino Foods Company, which was acquired in August 1994. Net sales in
fiscal 1994 included the Company's former Frozen Specialty Foods and Meats
businesses which were divested in June and May of 1994, respectively.
Exclusive of the effect of acquisitions and divestitures, consolidated net
sales increased 11%.
The consolidated net earnings for the nine months ended November 30, 1994
were $45.3 million, or $2.51 per share, compared with a net loss of $8.3
million, or $.44 per share, a year ago. Fiscal 1995 net earnings 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 recently acquired distribution business and the
Company's pizza and Mexican restaurant distribution business. The fiscal
1994 net loss resulted from unusual items totaling $36.3 million after-tax
related to the reorganization of operations, the loss on the disposition of
a bakery distribution business and a charge relating to the decision to
divest the Company's minority positions in two Mexican unconsolidated
affiliates. Exclusive of unusual items, net earnings were $19.4 million,
or $1.07 per share, compared with $28.0 million, or $1.44 per share, a year
ago. Consolidated net sales increased 7% to $1.77 billion, compared to
$1.66 billion in the year-ago period. Exclusive of the effect of
acquisitions and divestitures, consolidated net sales increased 9%.
Segment Results
U.S. Foodservice third quarter net sales increased 19% to $522.4 million,
compared with $438.2 million a year ago. Excluding the effect of
acquisitions and divestitures, net sales increased 9% primarily as a result
of improved volumes in pizza and Mexican restaurant distribution, bakery,
surimi seafood and export products. Volumes benefited from new customers
in these businesses. Third quarter segment earnings declined 25% to $7.7
million, compared with $10.3 million in fiscal 1994. Exclusive of the
effect of acquisitions and divestitures, segment earnings declined 18%.
The decline was 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.
U.S. Foodservice segment earnings before unusual items for the nine-month
period declined 21% to $20.8 million, compared with $26.2 million a year
ago. Segment earnings for the nine-month period were affected by the same
factors as noted above for the third quarter. After reflecting unusual
items, segment earnings were $47.5 million versus segment earnings of $.5
million a year ago. Fiscal 1995 segment earnings included a $32.9 million
pre-tax gain from the divestiture of the Frozen Specialty Foods business
and a $6.2 million pre-tax charge for integration of businesses as
described above. Fiscal 1994 segment earnings included charges related to
reorganization of operations and the loss on the disposal of a bakery
distribution business. Net sales for the nine-month period increased 6% to
$1.32 billion, compared with $1.25 billion last year. Exclusive of the
effect of acquisitions and divestitures, net sales increased 9%. Net sales
were affected by the same factors as noted above for the third quarter.
In December 1994, the Company announced that it is exploring the divestiture
of its surimi seafood operation. Fiscal 1994 net sales of the surimi
seafood operation were approximately $60 million.
Canadian Foods third quarter net sales increased 9% to $90.3 million,
compared with $82.9 million a year earlier. The increase in sales was
primarily the result of bakery product volume increases and improved
consumer flour volume compared to weak consumer flour volume in the third
quarter last year. Third quarter segment earnings increased 24% to $8.3
million, compared with $6.7 million a year ago. The increase in segment
earnings was primarily the result of the improved volumes and the benefits
from the reorganization of operations, partially offset by the unfavorable
impact of a 3% decline in the average exchange rate. To a lesser extent,
results also benefited from lower wheat costs. Segment earnings before
unusual items for the nine-month period increased 12% to $12.2 million,
compared with $10.9 million last year. Unusual items in fiscal 1994 were
pre-tax charges of $21.8 million associated with the reorganization of
operations. Net sales for the nine-month period increased 3% to $222.3
million, compared with $216.8 million a year ago.
Venezuelan Foods third quarter net sales increased 26% to $81.0 million,
compared with $64.5 million last year. The sales increase was primarily
the result of increased volumes in the Company's consumer, bakery and
agricultural products. Improved volumes in consumer products were
primarily the result of increased demand for the Company's products and the
impact of the acquisition of a corn flour business in May 1994. The higher
volumes in bakery products resulted from increased market share and
additional business obtained in connection with the lease of two wheat
flour mills in October 1994. Higher volumes in agricultural products were
primarily attributable to market share increases. Third quarter segment
earnings increased 12% to $5.7 million, compared with $5.1 million last
year. The segment earnings improvement resulted primarily from the
increased volumes and the near-term stability from government-imposed
foreign exchange controls, described below. Segment earnings for the nine-
month period decreased 42% to $9.6 million, compared with $16.5 million
last year, primarily from the impact of a significant devaluation of the
Venezuelan currency that occurred in 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 improved volumes and the favorable impact
of the subsequent foreign exchange controls. Net sales for the nine-month
period increased 16% to $227.9 million, compared with $196.4 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 raw material imports. However, the Company
has continued to experience 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 of
November 30, 1994, net monetary assets totaled the U.S.-dollar equivalent
of $9 million. The government has currently established the exchange rate
at 170 bolivars per dollar. The Venezuelan government has continued to
state that exchange controls are temporary. However, the Company is unable
to determine the extent and timing of any changes in the exchange controls
and the potential impact on the exchange rate. If the bolivar were to
decline in value versus the U.S. dollar and the Company continued to be in
a net monetary asset position, there would be foreign exchange losses, the
amount of which will depend upon the size of the net monetary asset
position and magnitude of the currency devaluation. In addition, 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
Third quarter net interest expense increased to $3.0 million from $2.1
million a year ago primarily as a result of higher interest rates in the
United States and Canada. The increase in interest expense was partially
offset by increased interest income in Venezuela from the temporary build-
up of local currency deposits which resulted from delays in obtaining U.S.
dollars to settle certain U.S. dollar-denominated obligations as described
above. For the nine-month period, interest expense increased to $8.8
million from $7.9 million a year ago. In addition to the factors noted
above for the third quarter, the Company's interest expense had declined in
the second quarter of fiscal 1995 from temporarily reduced debt levels in
the United States as a result of the proceeds from the divestiture of the
Frozen Specialty Foods business. Debt levels increased near the end of the
second quarter of fiscal 1995 with the acquisition of the specialty
foodservice distribution business of Leprino Foods Company.
In last year's third quarter, Corporate included a foreign exchange gain on
short-term investments in Venezuela of $.6 million.
Income Taxes
The effective tax rate increased to 40% in the third quarter of fiscal 1995
compared with 38.6% last year as a result of higher foreign taxes. For the
nine-month periods, the effective tax rate was 23.2% in fiscal 1995 and
42.9% in fiscal 1994. The low tax rate in fiscal 1995 resulted from 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 38.6% in fiscal 1995 and 1994, respectively. The increase
was the result of higher foreign taxes.
Financial Condition:
The Company's balance sheet at November 30, 1994 reflected the acquisition
of the specialty foodservice distribution business of Leprino Foods Company
and the divestitures of the Company's Frozen Specialty Foods and Meats
businesses.
The increase in inventories and accounts payable was primarily due to the
acquisition, seasonal requirements in Canada and seasonal grain purchases
in Venezuela, partially offset by the effect of the divestitures. The
decreases in property, plant, and equipment and other noncurrent assets and
the increase in goodwill were the result of the impact of the acquisition
and divestitures. The increase in other current liabilities was primarily
the result of the charge for the integration of businesses (see Note 4) and
taxes associated with the sale of the Frozen Specialty Foods business.
As of November 30, 1994, the Company's debt-to-total-capitalization ratio
had declined to 47%, as compared to 50% at February 28, 1994. The
Company's debt declined, as proceeds from the Frozen Specialty Foods
disposition exceeded the cost of the acquisition of the specialty
foodservice distribution business of Leprino Foods Company. Certain
repurchases of outstanding stock were made in the first quarter of fiscal
1995 under the previously announced share repurchase program. The Company
expects that future share repurchases under this program, if any, will be
funded by borrowings or proceeds from any divestitures.
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 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 November 30, 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: January 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 NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1994 1993 1994 1993
Average shares of common
stock outstanding 17,924 18,830 17,979 19,116
Common stock equivalents 7 103 15 138
Total common stock and
equivalents assuming
full dilution 17,931 18,933 17,994 19,254
Net earnings (loss) $10,914 $12,453 $45,311 $(8,335)
Less dividends on redeemable
preferred stock (42) (44) (126) (132)
Net earnings (loss) applicable to
common stock $10,872 $12,409 $45,185 $(8,467)
Earnings (loss) per share of
common stock:
Primary $ .61 $ .66 $ 2.51 $ (.44)
Fully diluted $ .61 $ .66 $ 2.51 $ (.44)
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 NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1994 1993 1994 1993
Earnings (loss) before
income taxes (1) $18,190 $20,282 $59,005 $(2,409)
Plus: Fixed charges (2) 6,655 5,545 17,733 16,971
Less: Capitalized interest (87) (420) (256) (593)
Earnings available to cover
fixed charges (3) $24,758 $25,407 $76,482 $13,969
Ratio of earnings to
fixed charges (3) 3.72 4.58 4.31 .82
(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 NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1994 1993 1994 1993
Interest expense, gross $4,293 $3,227 $10,937 $ 9,845
Rentals (1/3) 2,362 2,318 6,796 7,126
Total fixed charges $6,655 $5,545 $17,733 $16,971
(3) For the nine months ended November 30, 1993, earnings were inadequate
to cover fixed charges. The resulting deficiency was $3,002 for the nine-
month period. The deficiency was the result of unusual items. Exclusive
of unusual items, the ratio of earnings to fixed charges would have been 3.62
for the nine months ended November 30, 1993.
<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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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> NOV-30-1994
<CASH> 8,848
<SECURITIES> 0
<RECEIVABLES> 154,594
<ALLOWANCES> 5,825
<INVENTORY> 263,146
<CURRENT-ASSETS> 498,463
<PP&E> 333,489
<DEPRECIATION> 104,785
<TOTAL-ASSETS> 879,098
<CURRENT-LIABILITIES> 359,398
<BONDS> 178,653
<COMMON> 2,184
3,616
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<OTHER-SE> 280,241
<TOTAL-LIABILITY-AND-EQUITY> 879,098
<SALES> 1,771,243
<TOTAL-REVENUES> 1,771,243
<CGS> 1,477,156
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<OTHER-EXPENSES> 106,661
<LOSS-PROVISION> 2,351
<INTEREST-EXPENSE> 10,681
<INCOME-PRETAX> 59,005
<INCOME-TAX> 13,694
<INCOME-CONTINUING> 45,311
<DISCONTINUED> 0
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<NET-INCOME> 45,311
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.51
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