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, 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
incorporation or organization) Identification No.)
33 South 6th 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, 1995 was 18,010,302
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1995 1994 1995 1994
--------- --------- ----------- -----------
Net sales $ 632,104 $ 653,459 $ 1,887,992 $ 1,677,641
Cost of sales (536,225) (540,976) (1,591,763) (1,383,554)
Gross profit 95,879 112,483 296,229 294,087
Delivery and distribution (41,662) (40,750) (122,269) (106,661)
Selling, general and
administrative (39,177) (50,498) (131,446) (144,222)
Unusual items - - (5,700) 26,661
Operating earnings 15,040 21,235 36,814 69,865
Financing costs:
Interest, net (4,002) (3,045) (13,807) (8,113)
Foreign exchange losses
on cash and equivalents (1,983) - (3,002) (2,747)
Total financing costs (5,985) (3,045) (16,809) (10,860)
Earnings before
income taxes 9,055 18,190 20,005 59,005
Income taxes (2,263) (7,276) (1,662) (13,694)
Net earnings $ 6,792 $ 10,914 $ 18,343 $ 45,311
Net earnings per share
of common stock $ .38 $ .61 $ 1.01 $ 2.51
Average shares of common
stock outstanding 17,967 17,924 17,959 17,979
Dividends per share
of common stock:
Declared $ .20 $ .20 $ .60 $ .40
Paid $ .20 $ .20 $ .60 $ .60
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, Feb. 28,
1995 1995
-------- ----------
Assets
Current assets:
Cash and equivalents $ 14,201 $ 10,792
Trade accounts receivable, net 132,476 142,474
Inventories 253,637 256,878
Other current assets 68,637 61,553
Total current assets 468,951 471,697
Property, plant and equipment, net 225,646 228,025
Goodwill 100,856 108,636
Other assets 36,794 38,347
Total assets $832,247 $846,705
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 80,311 $ 47,149
Current portion of long-term debt 7,000 11,083
Accounts payable 156,957 167,114
Other current liabilities 77,237 90,646
Total current liabilities 321,505 315,992
Long-term debt, net of current portion 162,325 183,087
Employee benefits and other
liabilities 49,426 52,960
Total liabilities 533,256 552,039
Redeemable preferred stock - 3,604
Shareholders' equity 298,991 291,062
Commitments and contingencies
Total liabilities and
shareholders' equity $832,247 $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)
NINE MONTHS ENDED
Nov. 30, Nov. 30,
1995 1994
-------- --------
Cash flows from operations:
Net earnings $ 18,343 $ 45,311
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation and amortization 22,145 19,728
Deferred income tax benefit (5,904) (8,243)
Provision for losses on receivables 2,810 2,351
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 (5,186) (4,156)
Inventories (3,410) (53,448)
Other current assets (8,416) (17,222)
Accounts payable 1,484 25,799
Other current liabilities (14,517) 12,326
Other, net 4,787 5,117
Cash provided by operations 17,729 902
Cash flows from investing activities:
Business acquisitions (29,904) (115,847)
Capital expenditures (22,204) (24,001)
Proceeds from business dispositions 48,009 156,367
Proceeds from other property disposals 651 2,727
Cash provided by (used for)
investing activities (3,448) 19,246
Cash flows from financing activities:
Net increase in notes payable 35,346 4,559
Net decrease in long-term debt (24,721) (6,987)
Dividends paid (10,902) (10,950)
Proceeds from issuance of common stock 1,188 119
Purchase of treasury shares (2,472) (5,777)
Redemption of preferred stock (3,732) -
Other, net (421) (13)
Cash used for financing activities (5,714) (19,049)
Effect of exchange rate changes on cash
and equivalents (5,158) (2,758)
Net increase (decrease)in cash and equivalents 3,409 (1,659)
Cash and equivalents at beginning of period 10,792 10,507
Cash and equivalents at end of period $ 14,201 $ 8,848
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, 1995 and the results of its operations
for the three and nine months ended November 30, 1995 and 1994, and cash flows
for the nine months ended November 30, 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 nine months ended November 30, 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 $2.3
million and an increase of $0.2 million for the three months ended November
30, 1995 and 1994, respectively, and reductions of $4.0 million and $1.7
million for the nine months ended November 30, 1995 and November 30, 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):
Nine Months Ended
Nov. 30, Nov. 30,
1995 1994
------- --------
Fair value of current assets $ 7,252 $ 46,383
Fair value of non-current assets, excluding goodwill 21,266 39,118
Goodwill 2,626 51,478
Liabilities assumed, principally current (740) (21,132)
Purchase contract liabilities (500) -
Cash paid at closing $29,904 $115,847
Assuming the Company's acquisitions had been completed on March 1, 1994, the
beginning of fiscal 1995, pro forma net sales for the nine months ended
November 30, 1995 and 1994 would have been $1.91 billion and $1.93 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 included 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 nine months ended November 30, 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 (1,292) (2,054) (2,690) (1,843) (905) (8,784)
Exchange rate effect - - 101 85 - 186
Reorganization and
integration reserves
at November 30, 1995 $ - $ 2,352 $ 1,721 $ 1,239 $ 3,295 $ 8,607
</TABLE>
(5) Interest, net consisted of the following (in thousands):
Three Months Ended Nine Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1995 1994 1995 1994
------- ------- ------- -------
Interest expense $4,384 $4,293 $15,281 $10,937
Capitalized interest (26) (87) (121) (256)
Non-operating interest income (356) (1,161) (1,353) (2,568)
Interest, net $4,002 $3,045 $13,807 $ 8,113
Cash payments for interest, net of amounts capitalized, for the nine months
ended November 30, 1995 and 1994 were approximately $15.6 million and $10.5
million, respectively.
(6) Income taxes - Cash payments for income taxes for the nine months ended
November 30, 1995 and 1994 were $3.6 million and $3.9 million, respectively.
(7) Supplemental balance sheet information (in thousands)
Nov. 30, Feb. 28,
1995 1995
------- -------
Trade accounts receivable, net:
Trade $139,425 $149,132
Allowance for doubtful accounts (6,949) (6,658)
Total trade accounts receivable, net $132,476 $142,474
Inventories:
Raw materials, excluding grain $ 19,825 $ 25,683
Grain 49,199 65,402
Finished and in-process goods 176,916 158,497
Packages and supplies 7,697 7,296
Total inventories $253,637 $256,878
Property, plant and equipment, net:
Land $ 11,514 $ 11,635
Buildings and improvements 85,525 87,739
Machinery and equipment 211,641 212,262
Transportation equipment 9,370 9,042
Improvements in progress 18,530 13,381
Accumulated depreciation (110,934) (106,034)
Total property, plant and equipment, net $225,646 $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
and Canada, 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 December 1995
through July 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 November 30, 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 fiscal 1996.
Net Operating Unusual
(in millions) Sales Costs Items Total
-------- ---------- ------- ------
Three Months Ended Nov. 30, 1995
Foodservice Distribution $ 440.8 $ (432.9) $ - $ 7.9
Bakery 126.1 (117.9) - 8.2
Venezuela Foods 65.2 (64.8) - .4
Corporate Expenses - (1.5) - (1.5)
Total $ 632.1 $ (617.1) $ - $15.0
Three Months Ended Nov. 30, 1994
Foodservice Distribution $ 423.3 $ (417.3) $ - $ 6.0
Bakery 132.7 (122.6) - 10.1
Venezuela Foods 81.0 (74.8) - 6.2
Divested Businesses 16.4 (14.2) - 2.2
Corporate Expenses - (3.3) - (3.3)
Total $ 653.4 $ (632.2) $ - $21.2
Nine Months Ended Nov. 30, 1995
Foodservice Distribution $1,257.5 $(1,240.2) $(9.4) $ 7.9
Bakery 344.2 (329.7) - 14.5
Venezuela Foods 268.2 (252.8) - 15.4
Divested Businesses 18.1 (15.6) 9.9 12.4
Corporate Expenses - (7.2) (6.2) (13.4)
Total $1,888.0 $(1,845.5) $(5.7) $36.8
Nine Months Ended Nov. 30, 1994
Foodservice Distribution $ 991.8 $ (977.9) $(6.2) $ 7.7
Bakery 350.6 (334.8) - 15.8
Venezuela Foods 227.9 (215.0) - 12.9
Divested Businesses 107.3 (97.9) 32.9 42.3
Corporate Expenses - (8.9) - (8.9)
Total $1,677.6 $(1,634.5) $26.7 $69.8
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, 1995 compared with
the corresponding prior periods
Overview
The consolidated net earnings for the third quarter were $6.8 million, or $.38
per share, compared with net earnings of $10.9 million, or $.61 per share, a
year ago. The decline in net earnings was primarily the result of earnings
declines in the Venezuela Foods and Bakery segments. Consolidated net sales
declined 3% to $632.1 million compared with $653.4 million in the third
quarter last year.
The consolidated net earnings for the nine months ended November 30, 1995 were
$18.3 million, or $1.01 per share, compared with net earnings of $45.3
million, or $2.51 per share, a year ago. Excluding unusual items, net
earnings were $17.8 million, or $.99 per share, compared with $19.4 million,
or $1.07 per share, a year ago. Unusual items in fiscal 1996 included a $9.9
million pre-tax gain from the June 1995 divestiture of the Company's surimi
seafood business, a pre-tax charge of $9.4 million related to the Company's
vending distribution business and a pre-tax charge of $6.2 million for a
corporate restructuring plan. The Company also recognized a $5 million
benefit with respect to a tax settlement. Unusual items in fiscal 1995
included a $32.9 million pre-tax gain from the divestiture of the Company's
Frozen Specialty Foods business, partially offset by $6.2 million of costs
associated with the integration of the Company's limited-menu foodservice
distribution businesses. See Note 4 to the consolidated condensed financial
statements for additional information on unusual items. Consolidated net
sales for the nine months ended November 30, 1995 increased 13% to $1.89
billion compared with $1.68 billion in the same period last year. Net sales
benefited from sales of the limited-menu distribution business of Leprino
Foods Company which was acquired in August 1994.
Segment Results
Foodservice Distribution third quarter net sales increased 4% to $440.8
million compared with $423.3 million a year ago. The increase was from higher
volumes in the Company's limited-menu foodservice distribution business,
including the addition of sales from the July 1995 acquisition of Alum Rock
Foodservice. The increase in sales was partially offset by a 4% decline in
net sales of the Company's vending distribution business as a result of lower
volumes as compared to the same period last year. The lower volumes were the
result of service-related difficulties, which the Company is addressing.
Foodservice Distribution's third quarter operating earnings increased 32%
to $7.9 million compared with $6 million last year. The increase was the
result of lower operating costs in the vending distribution business along
with higher earnings in the Company's food exporting business. The earnings
improvement was partially offset by an earnings decline in the limited-menu
foodservice distribution business, which is experiencing temporarily higher
operating costs associated with the integration of the recently acquired
Alum Rock Foodservice business.
Foodservice Distribution net sales for the nine-month period increased 27% to
$1.26 billion compared with $991.8 million in the same period last year. The
increase was primarily from sales of the limited-menu distribution business of
Leprino Foods Company acquired in August 1994. Operating earnings before
unusual items increased 24% to $17.3 million compared with $13.9 million a
year ago. In addition to the factors noted above for the third quarter,
operating earnings benefited from the earnings of the limited-menu
distribution business acquired from Leprino Foods Company and were negatively
impacted by added costs in the vending distribution business associated with
the implementation of the business information system. After reflecting
unusual items, fiscal 1996 operating earnings were $7.9 million compared with
$7.7 million last year. 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 $0.5 million charge for exiting
a lease commitment. Unusual items of $6.2 million in fiscal 1995 were for
costs associated with the integration of the limited-menu distribution
businesses.
The Company previously disclosed that the integration of its limited-menu
foodservice distribution businesses was expected to provide pre-tax benefits
of up to $3 million in fiscal 1996. However, the benefits are occurring more
slowly than originally anticipated and will approximate $1 million in fiscal
1996.
Bakery third quarter net sales declined 5% to $126.1 million compared with
$132.7 million a year ago. Third quarter operating earnings declined 19% to
$8.2 million compared with $10.1 million last year. The sales and earnings
declines were primarily the result of lower volumes in North American frozen
products and U.S. bakery mix products. The Company expects that competitive
factors will unfavorably impact Bakery operating earnings in the fourth
quarter of fiscal 1996.
Bakery net sales for the nine-month period declined 2% to $344.2 million
compared with $350.6 million a year ago. Operating earnings declined 8% to
$14.5 million compared with $15.8 million a year ago. In addition to the
factors noted above for the third quarter, earnings benefited from improved
margins and higher volumes in commercial bakery products in Canada.
Venezuela Foods third quarter net sales declined 20% to $65.2 million compared
with $81 million a year ago. The decline in sales was the result of a
significant devaluation in the free-market exchange rate during the third
quarter, as described below. Sales benefited from increased volumes in
consumer and agricultural products. Increased volumes in consumer products
were principally from increased demand for grain-based products along with the
impact of a corn flour business acquisition. Higher volumes in agricultural
products were attributable to an increase in animal feeds market share. Third
quarter operating earnings declined to $0.4 million compared with $6.2 million
last year. The substantial decline in operating earnings was a result of a
$3.9 million charge associated with the Venezuelan government's decision in
December 1995 to change the official exchange rate from 170 to 290 Venezuelan
bolivars per U.S. dollar and the significant devaluation in the free-market
exchange rate during the third quarter. The $3.9 million charge resulted from
the Company having to settle certain U.S. dollar obligations, principally from
raw material imports, at the new official exchange rate.
Venezuela Foods net sales for the nine-month period increased 18% to $268.2
million compared with $227.9 million a year ago. Operating earnings increased
19% to $15.4 million compared with $12.9 million last year. In addition to
the factors noted above for the third quarter, net sales and operating
earnings improved due to a stable exchange rate which existed as a result of
government imposed foreign exchange controls during the first half of the
fiscal year.
Effective August 31, 1995, the Company began translating certain bolivar-
denominated balances into U.S. dollars using a free-market exchange rate. The
Company believes that certain of its bolivar-denominated transactions and net
monetary balances will be settled in U.S. dollars at the free-market exchange
rate, rather than the official exchange rate, because of continued high
inflation and limits on the government's ability to provide for all U.S.
dollar needs at the official rate. The Company also 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 of 290 bolivars per U.S. dollar. On
November 30, 1995 the free-market exchange rate, as determined by the trading
of certain dollar-denominated bonds, was 358 bolivars per U.S. dollar as
compared to an August 31, 1995 rate of 228.5 bolivars per U.S. dollar. The
Company expects that the currency devaluation will continue to have a
significant adverse effect on its Venezuela Foods operating results in the
fourth quarter. The Company, however, was able to obtain government-approved
price increases effective January 1996 for most of its products, which should
partially offset the adverse effect of the third quarter devaluation of the
bolivar.
While it has been reported that the Venezuelan government is negotiating with
the International Monetary Fund to obtain U.S. dollar loans, the outcome of
such negotiations remains uncertain. In addition, 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.
As of November 30, 1995, net monetary liabilities of the Company's Venezuelan
operations totaled the U.S.-dollar equivalent of $9 million.
Divested Businesses net sales for the nine-month period were $18.1 million
compared with $107.3 million a year ago. Operating earnings before unusual
items declined to $2.5 million compared with $9.4 million in the same period
last year. Fiscal 1996 results consisted of the Company's surimi seafood
business which was divested in June 1995. In addition to the surimi seafood
business, fiscal 1995 results included the Frozen Specialty Foods and Meats
businesses which were divested in June and May 1994, respectively. The
unusual item of $9.9 million in fiscal 1996 was from the gain on the
divestiture of the surimi seafood business. The unusual item of $32.9 million
in fiscal 1995 was from the gain on the divestiture of the Frozen Specialty
Foods business.
Non-operating Expense and Income
Third quarter net interest expense increased to $4 million from $3 million a
year ago. The increase was primarily the result of higher overall interest
rates and lower interest income in Venezuela. The Company also recognized
foreign exchange losses of $2 million from Venezuelan local currency cash and
equivalents. For the nine-month period, net interest expense increased to
$13.8 million from $8.1 million a year ago. In addition to the factors noted
above for the third quarter, the Company's interest expense had temporarily
declined in fiscal 1995 because proceeds from the June 1994 divestiture of the
Frozen Specialty Foods business were used to reduce debt. Debt levels
subsequently increased with the August 1994 acquisition of the limited-menu
distribution business of Leprino Foods Company.
Income Taxes
The Company's effective tax rate was 25% in the third quarter of fiscal 1996
compared with 40% last year. The decline was the result of a lower effective
tax rate in Venezuela. For the nine-month periods, the effective tax rate was
8.3% in fiscal 1996 and 23.2% in fiscal 1995. The low tax rate in fiscal 1996
resulted from a $5 million benefit from a tax settlement. The fiscal 1995
effective tax rate was impacted by the low tax rate on the Frozen Specialty
Foods divestiture. Exclusive of unusual items, the effective tax rates for
the nine-month periods were 30.4% in fiscal 1996 and 40% in fiscal 1995.
Financial Condition:
The Company's balance sheet at November 30, 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 46% at
November 30, 1995 as compared to 45% at February 28, 1995.
The decline in other current liabilities was primarily the result of payments
associated with the Company's integration of businesses and reorganization of
operations, as well as the impact of the business divestiture. 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 the significant devaluation of the
free-market exchange rate, as described above.
Fiscal 1996 business acquisitions, which included a corn flour business and
two wheat flour mills in Venezuela and a limited-menu 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 nine months of fiscal 1996 the Company replaced variable rate
debt in the United States with $59 million of notes under its medium-term note
program. The notes mature in fiscal years 1999 to 2006 and have interest
rates ranging from 6.39% to 7%. As of November 30, 1995, $11 million remained
available under the medium-term note program. In December 1995, the Company
filed a shelf registration statement with the Securities and Exchange
Commission to provide for the issuance of up to $150 million in debt
securities.
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 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, 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: January 11, 1996 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
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,
1995 1994 1995 1994
------- ------- ------- -------
Average shares of common
stock outstanding 17,967 17,924 17,959 17,979
Common stock equivalents 125 7 101 15
Total common stock and
equivalents assuming
full dilution 18,092 17,931 18,060 17,994
Net earnings $6,792 $10,914 $18,343 $45,311
Less dividends on redeemable
preferred stock - (42) (260) (126)
Net earnings applicable to
common stock $6,792 $10,872 $18,083 $45,185
Earnings per share of
common stock:
Primary $ .38 $ .61 $ 1.01 $ 2.51
Fully diluted $ .38 $ .61 $ 1.00 $ 2.51
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,
1995 1994 1995 1994
------- ------- ------- -------
Earnings before income taxes $ 9,055 $18,190 $20,005 $59,005
Plus: Fixed charges (1) 6,749 6,655 22,563 17,733
Less: Capitalized interest (26) (87) (121) (256)
Earnings available to cover
fixed charges $15,778 $24,758 $42,447 $76,482
Ratio of earnings to
fixed charges 2.34 3.72 1.88 4.31
(1) Fixed charges consisted of the following:
THREE MONTHS ENDED NINE MONTHS ENDED
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1995 1994 1995 1994
------- ------- ------- -------
Interest expense, gross $ 4,384 $ 4,293 $15,281 $10,937
Rentals 2,365 2,362 7,282 6,796
Total fixed charges $ 6,749 $ 6,655 $22,563 $17,733
<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 NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 14,201
<SECURITIES> 0
<RECEIVABLES> 139,425
<ALLOWANCES> 6,949
<INVENTORY> 253,637
<CURRENT-ASSETS> 468,951
<PP&E> 336,580
<DEPRECIATION> 110,934
<TOTAL-ASSETS> 832,247
<CURRENT-LIABILITIES> 321,505
<BONDS> 162,325
0
0
<COMMON> 2,184
<OTHER-SE> 296,807
<TOTAL-LIABILITY-AND-EQUITY> 832,247
<SALES> 1,887,992
<TOTAL-REVENUES> 1,887,992
<CGS> 1,591,763
<TOTAL-COSTS> 1,591,763
<OTHER-EXPENSES> 122,269
<LOSS-PROVISION> 2,810
<INTEREST-EXPENSE> 15,160
<INCOME-PRETAX> 20,005
<INCOME-TAX> 1,662
<INCOME-CONTINUING> 18,343
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,343
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 0
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