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, 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 41-0871880
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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, 1995 was 18,024,002.
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1995 1994 1995 1994
Net sales $ 621,244 $ 476,275 $ 1,255,888 $ 1,024,182
Cost of sales (520,822) (393,590) (1,055,538) (842,578)
Gross profit 100,422 82,685 200,350 181,604
Delivery and distribution (42,138) (31,358) (80,607) (65,911)
Selling, general and
administrative (42,957) (39,808) (92,269) (93,724)
Unusual items (5,700) 26,661 (5,700) 26,661
Operating earnings 9,627 38,180 21,774 48,630
Financing costs:
Interest, net (4,680) (1,713) (9,805) (5,068)
Foreign exchange losses
on cash and equivalents (1,019) (714) (1,019) (2,747)
Total financing costs (5,699) (2,427) (10,824) (7,815)
Earnings before
income taxes 3,928 35,753 10,950 40,815
Income taxes 3,059 (4,393) 601 (6,418)
Net earnings $ 6,987 $ 31,360 $ 11,551 $ 34,397
Net earnings per share
of common stock $ .38 $ 1.74 $ .63 $ 1.91
Average shares of common
stock outstanding 17,954 17,903 17,956 18,006
Dividends per share
of common stock:
Declared $ .20 $ - $ .40 $ .20
Paid $ .20 $ .20 $ .40 $ .40
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,
1995 1995
Assets
Current assets:
Cash and equivalents $ 15,089 $ 10,792
Trade accounts receivable, net 120,126 142,474
Inventories 225,706 256,878
Other current assets 68,867 61,553
Total current assets 429,788 471,697
Property, plant and equipment, net 224,341 228,025
Goodwill 101,766 108,636
Other assets 37,518 38,347
Total assets $793,413 $846,705
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 38,654 $ 47,149
Current portion of long-term debt 12,583 11,083
Accounts payable 140,174 167,114
Other current liabilities 85,806 90,646
Total current liabilities 277,217 315,992
Long-term debt, net of current portion 164,051 183,087
Employee benefits and other
liabilities 51,724 52,960
Total liabilities 492,992 552,039
Redeemable preferred stock 3,732 3,604
Shareholders' equity 296,689 291,062
Commitments and contingencies
Total liabilities and
shareholders' equity $793,413 $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)
SIX MONTHS ENDED
Aug. 31, Aug. 31,
1995 1994
Cash flows from operations:
Net earnings $ 11,551 $ 34,397
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation and amortization 14,866 12,638
Deferred income tax benefit (6,564) (11,786)
Provision for losses on receivables 3,445 1,203
Provision for unusual charges 15,493 6,220
Gain on major business dispositions (9,900) (32,881)
Changes in operating assets and liabilities,
net of business acquisitions and
dispositions:
Accounts receivable 14,810 (1,106)
Inventories 25,199 144
Other current assets (5,037) (12,374)
Accounts payable (23,658) 2,309
Other current liabilities (7,084) 7,817
Other, net 3,343 4,030
Cash provided by operations 36,464 10,611
Cash flows from investing activities:
Business acquisitions (29,904) (115,847)
Capital expenditures (14,375) (16,306)
Proceeds from business dispositions 48,009 156,367
Proceeds from other property disposals 566 1,592
Cash provided by investing
activities 4,296 25,806
Cash flows from financing activities:
Net decrease in notes payable (7,412) (7,465)
Net decrease in long-term debt (19,138) (4,633)
Dividends paid (7,309) (7,341)
Proceeds from issuance of common stock 957 119
Purchase of treasury shares (1,688) (5,777)
Other, net (45) (12)
Cash used for financing activities (34,635) (25,109)
Effect of exchange rate changes on cash
and equivalents (1,828) (2,755)
Net increase in cash and equivalents 4,297 8,553
Cash and equivalents at beginning of period 10,792 10,507
Cash and equivalents at end of period $ 15,089 $ 19,060
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, 1995 and the results of its operations
for the three and six months ended August 31, 1995 and 1994, and cash flows
for the six months ended August 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 and six months ended August 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, a reduction of
$2.7 million and an increase of $0.5 million for the three months ended
August 31, 1995 and 1994, respectively, and reductions of $1.6 million and
$1.9 million for the six months ended August 31, 1995 and August 31, 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 Two wheat flour mills
in Puerto Cabello,Vz. August 1995
Foodservice
Distribution Alum Rock Foodservice July 1995
Venezuela Foods Corn flour business
in Ciudad Bolivar,Vz. 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):
Six Months Ended
Aug. 31, Aug. 31,
1995 1994
Fair value of current assets $ 7,252 $ 46,181
Fair value of non-current assets, excluding goodwill 21,266 56,318
Goodwill 2,626 34,480
Liabilities assumed, principally current (740) (21,132)
Purchase contract liabilities (500) -
Cash paid at closing $29,904 $115,847
(3) Businesses acquired (continued)
Assuming the Company's acquisitions had been completed on March 1, 1994, the
beginning of fiscal 1995, pro forma net sales for the six months ended August
31, 1995 and 1994 would have been $1.28 billion and $1.25 billion,
respectively. The pro forma effect on net earnings and net earnings per
share is not significant. The pro forma information is not necessarily
indicative of the combined results of operations that would have occurred had
the acquisitions been completed as of the beginning of fiscal 1995.
(4) Unusual items - During the quarter ended August 31, 1995, the Company
recognized unusual items that resulted in a net pre-tax loss of $5.7 million.
As a result of a favorable tax settlement, a net after-tax benefit of $0.5
million was recognized. Unusual items include a $9.9 million pre-tax gain
from the divestiture of the Company's surimi seafood business, a $9.4 million
pre-tax charge related to the vending distribution business and a $6.2
million pre-tax charge for a corporate restructuring plan.
The $9.4 million charge consisted of $8.9 million for the write-down of
certain computer software costs and $0.5 million for exiting a lease
commitment. The Company decided in the second quarter to limit the scope of
applications being implemented in its vending business information system.
Accordingly, the Company determined that certain software applications would
not be used. The Company expects these actions to result in an annualized
reduction in operating expenses of approximately $1.5 million, principally
from lower amortization of software costs.
During the quarter ended August 31, 1995, management approved and committed
the Company to a plan of reducing the cost of corporate administrative
operations (the Plan). The Plan has resulted in approximately 30 involuntary
terminations to corporate administrative employees. The Company also entered
into a sublease agreement for certain corporate office space at rental rates
that are lower than the rates in the Company's lease agreement. In addition,
as a result of the employee terminations and sublease agreement, certain
leasehold improvements and office equipment were written-down. Of the total
pre-tax charge of $6.2 million, $4.2 million represents anticipated future
cash outflows. All significant actions of the Plan are expected to be
completed by the first half of fiscal year 1997. The Plan is expected to
result in an annualized reduction in operating expenses of approximately $1.5
million.
During the quarter ended August 31, 1995, the IRS closed examinations of
the Company's tax returns for fiscal years 1992 and 1993. The Company also
received a stipulated agreement from the United States Tax Court regarding
proposed disallowances of certain deductions taken during fiscal years 1985
through 1991. As a result, the Company recognized a $5.0 million tax
benefit.
The following table summarizes the change in the Company's reorganization
and integration reserves for the six months ended August 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
Foodservice Distribution Bakery Corporate
------------------------ --------------------- ---------
Consoli-
Organiza- Organiza- dation/ Orgainiza-
tional Business tional Closing tional Total
Changes Integration Changes Facilities Changes Company
<S> <C> <C> <C> <C> <C> <C>
Reorganization and
integration reserves
at Feb. 28, 1995 $ 792 $ 4,406 $ 4,310 $ 2,997 $ - $ 12,505
Reserve additions 500 - - - 4,200 4,700
Reserves utilized (478) (1,951) (1,543) (1,744) (817) (6,533)
Exchange rate effect - - 130 129 - 259
Reorganization and
integration reserves
at August 31, 1995 $ 814 $ 2,455 $ 2,897 $ 1,382 $ 3,383 $ 10,931
</TABLE>
(5) Interest, net consisted of the following (in thousands):
Three Months Ended Six Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1995 1994 1995 1994
Interest expense $5,350 $2,235 $10,897 $5,930
Capitalized interest (51) (91) (95) (169)
Non-operating interest income (619) (431) (997) (693)
Interest, net $4,680 $1,713 $ 9,805 $5,068
Cash payments for interest, net of amounts capitalized, for the six months
ended August 31, 1995 and 1994 were approximately $11.1 million and $5.9
million, respectively.
(6) Income taxes - Cash payments for income taxes for the six months ended
August 31, 1995 and 1994 were $2.8 million and $3.5 million, respectively.
(7) Supplemental balance sheet information (in thousands)
Aug. 31, Feb. 28,
1995 1995
Trade accounts receivable, net:
Trade $126,442 $149,132
Allowance for doubtful accounts (6,316) (6,658)
Total trade accounts receivable, net $120,126 $142,474
Inventories:
Raw materials, excluding grain $ 25,704 $ 25,683
Grain 24,946 65,402
Finished and in-process goods 165,609 158,497
Packages and supplies 9,447 7,296
Total inventories $225,706 $256,878
Property, plant and equipment, net:
Land $ 11,559 $ 11,635
Buildings and improvements 83,948 87,739
Machinery and equipment 207,976 212,262
Transportation equipment 9,082 9,042
Improvements in progress 19,281 13,381
Accumulated depreciation (107,505) (106,034)
Total property, plant and equipment, net $224,341 $228,025
(8) Financial instruments
Concentrations of credit risk - The Company's food exporting business sells
food products in the former Soviet Union. Although the Company has not
experienced any losses associated with these sales, continued payment for
such sales may be affected by political events or the economic stability of
that region.
Other financial instruments - In Canada, the Company minimizes the risk
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 (Futures). In the United States, the
Company has entered into Futures in order to reduce the risk of raw material
price increases with respect to anticipated flour purchases. Gains and
losses on Futures are deferred and recognized in cost of sales as part of the
product cost. The open Futures mature in the period September 1995 through
March 1996 and substantially coincide with the maturities of the open wheat
purchase contracts, open flour sales contracts and the anticipated timing of
flour purchases. The amount of gains deferred as of August 31, 1995 was
insignificant. Management believes the credit risk of these Futures due to
nonperformance of the counterparties is insignificant.
(9) 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 Unusual
(in millions) Sales Costs Items Total
Three Months Ended Aug. 31, 1995
Foodservice Distribution $ 400.3 $ (396.5) $(9.4) $(5.6)
Bakery 110.1 (105.4) - 4.7
Venezuela Foods 106.3 (97.8) - 8.5
Divested Businesses 4.6 (3.7) 9.9 10.8
Corporate Expenses - (2.5) (6.2) (8.7)
Total $ 621.3 $ (605.9) $(5.7) $ 9.7
Three Months Ended Aug. 31, 1994
Foodservice Distribution $ 275.2 $ (272.3) $(6.2) $(3.3)
Bakery 113.8 (109.2) - 4.6
Venezuela Foods 70.2 (66.0) - 4.2
Divested Businesses 17.1 (14.4) 32.9 35.6
Corporate Expenses - (3.0) - (3.0)
Total $ 476.3 $ (464.9) $26.7 $38.1
Six Months Ended Aug. 31, 1995
Foodservice Distribution $ 816.7 $ (807.3) $(9.4) $ -
Bakery 218.1 (211.8) - 6.3
Venezuela Foods 203.0 (188.0) - 15.0
Divested Businesses 18.1 (15.6) 9.9 12.4
Corporate Expenses - (5.7) (6.2) (11.9)
Total $1,255.9 $(1,228.4) $(5.7) $21.8
Six Months Ended Aug. 31, 1994
Foodservice Distribution $ 568.5 $ (560.6) $(6.2) $ 1.7
Bakery 217.9 (212.2) - 5.7
Venezuela Foods 146.9 (140.2) - 6.7
Divested Businesses 90.9 (83.7) 32.9 40.1
Corporate Expenses - (5.6) - (5.6)
Total $1,024.2 $(1,002.3) $26.7 $48.6
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, 1995 compared with the
corresponding prior periods
Overview
The consolidated net earnings for the second quarter were $7 million, or $.38
per share, compared with net earnings of $31.4 million, or $1.74 per share, a
year ago. Excluding unusual items, net earnings in the second quarter were
$6.5 million, or $.36 per share, compared with net earnings of $5.5 million,
or $.30 per share, a year ago. Included in unusual items were a $9.9 million
pre-tax gain from the divestiture of the Company's surimi seafood business, a
$9.4 million pre-tax charge principally from the write-down of vending
distribution computer software and a $6.2 million pre-tax charge for a
corporate restructuring plan. The corporate restructuring plan included
workforce reductions and a sublease of certain corporate office space.
Unusual items also included a $5 million benefit with respect to a tax
settlement. Unusual items in the second quarter of fiscal 1995 resulted in a
net benefit of $25.9 million after-tax, or $1.44 per share. Included in
unusual items was a gain from the divestiture of the Company's Frozen
Specialty Foods business, partially offset by costs associated with the
integration of the acquired limited-menu foodservice distribution business of
Leprino Foods Company. See Note 4 to the consolidated condensed financial
statements for additional information on unusual items.
Consolidated net sales increased 30% to $621.3 million compared with $476.3
million in the second quarter last year. Second quarter fiscal 1996 results
included the limited-menu foodservice distribution business of Leprino Foods
Company, which was acquired in August 1994.
The consolidated net earnings for the six months ended August 31, 1995 were
$11.6 million, or $.63 per share, compared with net earnings of $34.4
million, or $1.91 per share, a year ago. Exclusive of the unusual items
described above, net earnings were $11.1 million, or $.61 per share, compared
with $8.5 million, or $.47 per share, a year ago. Consolidated net sales
increased 23% to $1.26 billion compared with $1.02 billion in the same period
last year. The prior year six months 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 second quarter net sales increased 45% to $400.3
million compared with $275.2 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 declined approximately 4% on lower volumes as compared to the same
period last year. Lower volumes were the result of service-related
difficulties which the Company is addressing. Foodservice Distribution's
second quarter operating earnings before unusual items increased 31% to $3.8
million compared with $2.9 million last year. The increase was primarily
from earnings of the acquired limited-menu distribution business, partially
offset by an earnings decline in the vending distribution business. The
earnings decline in the vending distribution business resulted from the lower
volumes and added costs, including depreciation, associated with the
implementation of a business information system. After reflecting unusual
items, second quarter fiscal 1996 operating results were a loss of $5.6
million compared with a loss of $3.3 million a year ago. Second quarter
fiscal 1996 unusual items of $9.4 million consisted of $8.9 million for the
write-down of certain software costs of the vending distribution business
information system and a $.5 million charge for exiting a lease commitment.
The write-down was the result of the Company's decision during the second
quarter to limit the scope of applications being implemented as part of its
business information system. Accordingly, the Company determined that
certain software applications would not be used. Unusual items of $6.2
million in the second quarter of fiscal 1995 were for costs associated with
the integration of the limited-menu distribution businesses.
Foodservice Distribution net sales for the six-month period increased 44% to
$816.7 million compared with $568.5 million in the same period last year.
Operating earnings before unusual items increased 19% to $9.4 million
compared with $7.9 million a year ago. After unusual items, operating
results were break-even in fiscal 1996 as compared to earnings of $1.7
million last year. Net sales and operating earnings were affected by the
same factors as noted above for the second quarter.
Bakery second quarter net sales declined 3% to $110.1 million compared with
$113.8 million a year ago. Sales declined primarily as a result of sales
rationalization and lower volumes in U.S. bakery and frozen products. The
decline was partially offset by increased volumes in commercial bakery
products in Canada. Second quarter operating earnings increased 2% to $4.7
million compared with $4.6 million in the second quarter last year.
Operating earnings increased on improved margins and higher volumes in
commercial bakery products in Canada. The increase was largely offset by the
effect of lower volumes in U.S. bakery and frozen products along with lower
margins in frozen bakery products. Margins in frozen bakery products were
impacted by higher packaging and ingredient costs. The Company expects that
competitive factors will unfavorably impact Bakery operating earnings in the
last half of fiscal 1996.
Bakery net sales for the six-month period were even with the same period last
year. Operating earnings increased 11% to $6.3 million compared with $5.7
million a year ago. In addition to the factors noted above for the second
quarter, operating earnings improved on the continued benefits of the fiscal
1994 reorganization of operations.
Venezuela Foods second quarter net sales increased 51% to $106.3 million
compared with $70.2 million a year ago. The increase in sales was the result
of price increases and increased volumes in most product categories and the
effect of a stable exchange rate as a result of government imposed foreign
exchange controls. Higher volumes in bakery products resulted primarily from
business obtained from the addition of two wheat flour mills which the
Company had leased beginning in October 1994 and subsequently purchased in
August 1995. Increased volumes in consumer products were principally from
increased demand for grain-based products along with the impact of two corn
flour business acquisitions. Higher volumes in agricultural products were
attributable to an increase in animal feeds market share. Second quarter
operating earnings increased to $8.5 million compared with $4.2 million last
year. Operating earnings increased primarily on the higher volumes and price
increases coupled with the benefit of the stable exchange rate. The increase
was partially offset by the impact of the Company's use of a free-market
exchange rate effective August 31, 1995, as described below. Operating
earnings in the second quarter of fiscal 1995 were impacted by 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.
Venezuela Foods net sales for the six-month period increased 38% to $203
million compared to $146.9 million a year ago. Operating earnings increased
to $15 million compared with $6.7 million last year. Net sales and earnings
were affected by the same factors as noted above for the second quarter.
In June 1994, the Venezuelan government implemented foreign exchange controls
and established an official exchange rate of 170 Venezuelan bolivars per U.S.
dollar. The official exchange rate has not been changed to date. Until the
second quarter of fiscal 1996, the only legal way of exchanging bolivars for
U.S. dollars was from the government at the official rate. In the second
quarter, the Venezuelan government began allowing certain bonds denominated
in U.S. dollars to be traded on local exchanges. This provided a legal
mechanism for exchanging bolivars to U.S. dollars and, accordingly,
established a free-market exchange rate.
The Company believes that for certain transactions, such as payments for raw
material imports, the Venezuelan government will continue to provide for the
exchange of bolivars to U.S. dollars at the official exchange rate. However,
due to continued high inflation and limits on the government's ability to
provide for all U.S. dollar needs at the official rate, the Company believes
that certain of its bolivar-denominated transactions and net monetary
balances will be settled in U.S. dollars at a free-market exchange rate.
Accordingly, effective August 31, 1995, the Company began translating certain
bolivar-denominated balances into U.S. dollars using the free-market exchange
rate. The free-market exchange rate on August 31, 1995 was 228.5 bolivars
per U.S. dollar.
Since August 31, 1995, the Venezuelan government has experienced difficulties
in meeting the country's U.S. dollar commitments. The Venezuelan government
is currently negotiating to obtain U.S. dollar loans with the International
Monetary Fund, World Bank and Inter-American Development Bank. It has been
reported that the loans are expected to enable the Venezuelan government to
address the country's current shortage of U.S. dollars. The shortage of
U.S. dollars coupled with uncertainty of the outcome of the negotiations
have caused a significant devaluation in the free-market exchange rate.
On October 11, 1995, the exchange rate as determined by the trading of
certain dollar-denominated bonds, described above, was 308 bolivars per
U.S. dollar. The Company is unable to determine the extent or timing of
future devaluations or recoveries of the bolivar in the free market as well
as any changes that the Venezuelan government may make to the official
exchange rate. If the free-market exchange rate continues at its current
level, the Company expects a significant adverse effect on its Venezuelan
operating results in the third quarter. The Company has implemented
product pricing strategies and has reduced its net monetary asset exposure
in order to manage currency risks. As of September 30, 1995, net monetary
assets of the Company's Venezuela operations totaled the U.S.-dollar
equivalent of $3 million. The Company's net monetary asset position was
reduced as a result of an $11 million dividend from its Venezuelan
operations which was paid in August 1995. For the dividend payment, the
Company was allowed to exchange bolivars into U.S. dollars at the official
exchange rate.
Divested Businesses second quarter net sales were $4.6 million compared with
$17.1 million a year ago. Operating earnings before unusual items declined
to $.9 million compared with $2.7 million in the second quarter last year.
Sales and operating earnings declined as the result of the June 1995
divestiture of the Company's surimi seafood business. The unusual item of
$9.9 million in the second quarter of fiscal 1996 was from the gain on the
divestiture of the surimi seafood business. The unusual item of $32.9
million in the second quarter of fiscal 1995 was from the gain on the
divestiture of the Company's Frozen Specialty Foods business.
Divested Businesses net sales for the six-month period were $18.1 million
compared with $90.9 million a year ago. Operating earnings before unusual
items declined to $2.5 million compared with $7.2 million in the same period
last year. In addition to the factors noted above for the second quarter,
net sales and operating earnings declined as a result of the fiscal 1995
divestitures of the Frozen Specialty Foods and Meats businesses.
Non-operating Expense and Income
Second quarter net interest expense increased to $4.7 million from $1.7
million a year ago. The increase was primarily the result of higher interest
rates, a higher U.S. debt level and lower interest income in Venezuela. The
U.S. debt level was low in the second quarter of fiscal 1995 because proceeds
from the June 1994 divestiture of the Frozen Specialty Foods business were
used to reduce debt. Debt levels subsequently increased at the end of that
quarter with the August 1994 acquisition of the distribution business of
Leprino Foods Company. For the six-month period, interest expense increased
to $9.8 million from $5.1 million a year ago as a result of essentially the
same factors noted above for the second quarter.
Income Taxes
Excluding unusual items, the Company's effective tax rates were 32% and 40%
in the second quarters of fiscal 1996 and 1995, respectively. The decline
was the result of a lower effective tax rate in Venezuela. In the second
quarter of fiscal 1996 the Company recognized a $5 million benefit from a tax
settlement. The Company's effective tax rate, including unusual items, for
the second quarter of fiscal 1995 was 12.3%. The overall effective tax rate
was impacted by the low tax rate on the Frozen Specialty Foods divestiture.
For the six-month periods, the effective tax rates were impacted by the same
factors affecting the second quarter in each year.
Financial Condition:
The Company's balance sheet at August 31, 1995 reflected the impact of
working capital changes, business acquisitions and the divestiture of the
surimi seafood business. The debt-to-total capitalization ratio was 42% at
August 31, 1995 as compared to 45% at February 28, 1995.
The decline in inventory was primarily the result of seasonal variations and
increased sales volumes in Venezuela along with the impact of the business
divestiture. The decline was partially offset by seasonal inventory
purchases in the condiments business. Accounts receivable and accounts
payable declined due to the timing of cash receipts and payments,
respectively. In addition, certain Venezuelan assets and liabilities
declined from the impact of using a free-market exchange rate effective
August 31, 1995, as described above.
Fiscal 1996 business acquisitions, which included a corn flour business and
two wheat flour mills in Venezuela and a foodservice distribution business in
the United States, totaled $29.9 million. The balance sheet impact from
acquisitions is summarized in Note 3 to the consolidated condensed financial
statements. In June 1995, the Company divested its surimi seafood business
for $48 million in cash. The net proceeds from the disposition were used to
reduce debt obligations.
In the first six months of fiscal 1996 the Company replaced variable rate
debt in the United States with $25 million of notes under its medium-term
note program. In September 1995, the Company issued an additional $25
million of medium-term notes which also replaced variable rate debt. The
notes mature in fiscal years 1999 to 2004 and have interest rates ranging
from 6.39% to 7%. As of September 30, 1995, $20 million remained available
under the medium-term note program.
On September 1, 1995, the Company redeemed 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 funded the redemption,
which was approximately $3.7 million, with borrowings.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1995 Annual Meeting of Stockholders of International
Multifoods Corporation (the "Company") was held on June 16, 1995 (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 1, 1995 were entitled to one vote per share, voting
together as though constituting a single class on each proposal presented
at the Annual Meeting.
(c) At the Annual Meeting, Anthony Luiso, Lois D. Rice and Peter S.
Willmott 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
Anthony Luiso 15,566,987 383,601
Lois D. Rice 15,569,741 380,847
Peter S. Willmott 15,586,727 363,861
The other directors whose term of office as a director continued after the
meeting are William A. Andres, James G. Fifield, Robert M. Price, Nicholas
L. Reding and Jack D. Rehm. Mr. Andres subsequently retired from the board
of directors in the second quarter.
With respect to the proposal to approve the appointment of KPMG Peat
Marwick LLP as independent auditors of the Company for the fiscal year
ending February 29, 1996, there were 15,851,949 votes cast for the
proposal, 53,433 votes cast against the proposal and 45,206 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 Tyson Foods, Inc. (Buyer) dated
as of June 7, 1995 (incorporated herein by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated June 26, 1995).
10.1 Memorandum of understanding, dated July 24, 1995, between
International Multifoods Corporation and Jay I. Johnson
regarding severance and retirement arrangements.
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, 1995, the Company filed a
report on Form 8-K dated June 26, 1995 relating to the sale of the
Company's surimi seafood business.
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 13, 1995 By /s/ Duncan H. Cocroft
Duncan H. Cocroft
Vice President - Finance, Chief Financial
Officer and Treasurer
(Principal Financial Officer and Duly
Authorized Officer)
EXHIBIT INDEX
2.1 Stock Purchase Agreement between International Multifoods Corporation
(Seller) and Tyson Foods, Inc. (Buyer) dated as of June 7, 1995
(incorporated herein by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K dated June 26, 1995).
10.1 Memorandum of understanding, dated July 24, 1995, between
International Multifoods Corporation and Jay I. Johnson regarding
severance and retirement arrangements.
11. Computation of Earnings Per Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
Exhibit 10.1
[Multifoods Letterhead]
DATE: July 24, 1995
TO: Jay I. Johnson
FROM: Robert F. Maddocks
SUBJECT: SEPARATION FROM MULTIFOODS
cc: A. Luiso
This will confirm the verbal understanding we have reached regarding the
terms and conditions of your separation from Multifoods.
1. You will continue as an active employee of Multifoods until
July 31, 1995. For the period August 1, 1995 to February 29, 1996 you
will be on inactive status, and will be paid at your current base salary
rate on a semi-monthly basis. During this period, you will continue
to participate in all Multifoods Benefit Plans, except Long-Term
Disability. Your termination date from Multifoods will be
February 29, 1996 at which time you have indicated your intention to
retire. Salary continuation will include a deduction for the waiver of
salary for stock options granted to you under the agreement of
November 16, 1990. The final salary waiver will be November 16, 1995.
2. A severance payment in the amount of $110,000 will be paid to you on or
about March 1, 1996. This payment, combined with the payment you will
receive as an inactive employee, represents the total severance payment.
It will be necessary for you to sign the attached standard release
agreement in order to receive this payment. The agreement should be
returned to me by August 15, 1995.
3. A performance recognition bonus in the amount of $21,250 will be paid to
you on or about January 15, 1996. This reflects the understanding
between you and Multifoods regarding the granting of this special
performance award for your part in the divestiture of the Seafood
Division.
4. You will be paid for all unused earned and accrued vacation thorough
July 31, 1995. Since you will be an inactive employee from
August 1, 1995 to February 29, 1996, you will not accrue further
vacation entitlement during this period.
5. Joyce Traver, Director, Benefits, has provided you with benefit
calculations for the Management Benefit Plan (MBP), the Employee's
Retirement Plan (ERP) and the 401(k) Plan. The benefit values were
determined assuming a February 29, 1996 retirement date. They will be
recalculated during the latter part of 1995. You will also receive
instructions on elections you have for each of the benefit plans and the
timing of those elections.
6. The group health and dental care coverage extended to you by the Company
will end on February 29, 1996. You have the option to continue group
health insurance coverage under the Company's retiree medical progam.
You have the right under COBRA to continue dental coverage for 18 months
at your cost, but at the Company's group rates. Joyce Traver will
notify you as to when you must make these elections.
7. Stock options granted to you under the Company's shareholder approved
plans will expire in either three or five years from the date of
termination; however, the expiration date may not extend beyond the
original 10-year term of the option. I have attached a schedule showing
the expiration dates for each of your options granted since 1988.
8. The Compensation Committee, as part of the share ownership program,
granted you 620 shares of restricted stock on March 18, 1994, and 440
shares of restricted stock on March 17, 1995. These shares will vest
when you retire on February 29, 1996.
9. Your participation in the FY 1996 Annual Incentive Plan and the
FY '93-'96 Long Term Incentive Plan will end on July 31, 1995. You,
therefore, will not be eligible for any payments from these plans which
might otherwise have been earned. The Revised and Restated Severance
Agreement dated September 17, 1993 will terminate on February 29, 1996.
10. It will be necessary for you to resign as an officer of Multifoods as of
July 31, 1995, and the officer resignation form is attached. Please
return this to me by July 31, 1995.
Jay, I believe the above fully reflects the understanding we have reached
regarding your separation from Multifoods. If you concur, will you please
sign and return one copy of this letter to me.
/s/ Robert F. Maddocks /s/ Jay I. Johnson
Robert F. Maddocks Jay I Johnson
Date: 7/24/95 Date: 7/27/95
RFM:rg
attachments
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,
1995 1994 1995 1994
Average shares of common
stock outstanding 17,954 17,903 17,956 18,006
Common stock equivalents 103 7 89 14
Total common stock and
equivalents assuming
full dilution 18,057 17,910 18,045 18,020
Net earnings $6,987 $31,360 $11,551 $34,397
Less dividends on redeemable
preferred stock (218) (42) (260) (84)
Net earnings applicable to
common stock $6,769 $31,318 $11,291 $34,313
Earnings per share of
common stock:
Primary $ .38 $ 1.74 $ .63 $ 1.91
Fully diluted $ .37 $ 1.74 $ .63 $ 1.90
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,
1995 1994 1995 1994
Earnings before income taxes $ 3,928 $35,753 $10,950 $40,815
Plus: Fixed charges (1) 7,826 4,355 15,814 10,364
Less: Capitalized interest (51) (91) (95) (169)
Earnings available to cover
fixed charges $11,703 $40,017 $26,669 $51,010
Ratio of earnings to
fixed charges 1.50 9.19 1.69 4.92
(1) Fixed charges consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1995 1994 1995 1994
Interest expense, gross $ 5,350 $ 2,235 $10,897 $ 5,930
Rentals (1/3) 2,476 2,120 4,917 4,434
Total fixed charges $ 7,826 $ 4,355 $15,814 $10,364
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS 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> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1995
<CASH> 15,089
<SECURITIES> 0
<RECEIVABLES> 126,442
<ALLOWANCES> 6,316
<INVENTORY> 225,706
<CURRENT-ASSETS> 429,788
<PP&E> 331,846
<DEPRECIATION> 107,505
<TOTAL-ASSETS> 793,413
<CURRENT-LIABILITIES> 277,217
<BONDS> 164,051
<COMMON> 2,184
3,732
0
<OTHER-SE> 294,505
<TOTAL-LIABILITY-AND-EQUITY> 793,413
<SALES> 1,255,888
<TOTAL-REVENUES> 1,255,888
<CGS> 1,055,538
<TOTAL-COSTS> 1,055,538
<OTHER-EXPENSES> 80,607
<LOSS-PROVISION> 3,445
<INTEREST-EXPENSE> 10,802
<INCOME-PRETAX> 10,950
<INCOME-TAX> (601)
<INCOME-CONTINUING> 11,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,551
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
