SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
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 (I.R.S. Employer
of 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 June 30, 1997 was 18,187,844.
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- ----------------------------------------------------------------------
Net sales $667,186 $626,073
Cost of sales (573,687) (536,758)
- ----------------------------------------------------------------------
Gross profit 93,499 89,315
Delivery and distribution (40,657) (40,431)
Selling, general and administrative (45,315) (42,298)
Unusual items - (3,600)
- ----------------------------------------------------------------------
Operating earnings 7,527 2,986
Interest, net (4,484) (4,290)
Other income (expense), net (186) 222
- ----------------------------------------------------------------------
Earnings (loss) before income taxes 2,857 (1,082)
Income taxes (857) 649
Net earnings (loss) $ 2,000 $ (433)
======================================================================
Net earnings (loss) per share of common stock $ .11 $ (.02)
======================================================================
Average shares of common stock outstanding 18,016 17,969
======================================================================
Dividends per share of common stock $ .20 $ .20
======================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands)
Condensed
from audited
financial
(Unaudited) statements
May 31, Feb. 28,
1997 1997
- -----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 8,939 $ 8,753
Trade accounts receivable, net 177,259 207,459
Inventories 280,248 283,948
Other current assets 64,350 63,096
- -----------------------------------------------------------------------
Total current assets 530,796 563,256
- -----------------------------------------------------------------------
Property, plant and equipment, net 222,003 225,357
Goodwill, net 86,975 87,641
Other assets 38,748 39,034
- -----------------------------------------------------------------------
Total assets $878,522 $915,288
- -----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 90,426 $ 88,201
Current portion of long-term debt 30,078 6,790
Accounts payable 177,973 206,966
Other current liabilities 60,344 70,037
- -----------------------------------------------------------------------
Total current liabilities 358,821 371,994
- -----------------------------------------------------------------------
Long-term debt 178,834 202,328
Employee benefits and other liabilities 51,884 51,388
- -----------------------------------------------------------------------
Total liabilities 589,539 625,710
- -----------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Other shareholders' equity 286,799 287,394
- -----------------------------------------------------------------------
Total shareholders' equity 288,983 289,578
- -----------------------------------------------------------------------
Commitments and contingencies
- -----------------------------------------------------------------------
Total liabilities and shareholders' equity $878,522 $915,288
=======================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
(in thousands)
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- ---------------------------------------------------------------------------
Cash flows from operations:
Net earnings (loss) $ 2,000 $ (433)
Adjustments to reconcile net earnings (loss)
to cash provided by (used for) operations:
Depreciation and amortization 7,506 7,476
Deferred income tax expense (benefit) 408 (975)
Provision for losses on receivables 845 767
Provision for unusual charges - 3,600
Changes in operating assets and liabilities:
Accounts receivable 29,092 8,373
Inventories 3,358 (21,612)
Other current assets (1,353) 2,780
Accounts payable (28,714) 37
Other current liabilities (9,633) (10,097)
Other, net 504 515
- ---------------------------------------------------------------------------
Cash provided by (used for) operations 4,013 (9,569)
- ---------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (4,045) (4,141)
Proceeds from property disposal 198 58
- ---------------------------------------------------------------------------
Cash used for investing activities (3,847) (4,083)
- ---------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 2,321 27,733
Net decrease in long-term debt - (8,500)
Dividends paid (3,635) (3,571)
Proceeds from issuance of common stock 2,107 -
Purchase of treasury stock (769) (16)
Other, net (15) (102)
- ---------------------------------------------------------------------------
Cash provided by
financing activities 9 15,544
- ---------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents 11 190
- ---------------------------------------------------------------------------
Net increase in cash and cash equivalents 186 2,082
Cash and cash equivalents at beginning of period 8,753 7,508
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 8,939 $ 9,590
===========================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments, except as noted elsewhere in the notes to the
consolidated condensed financial statements) necessary to present fairly its
financial position as of May 31, 1997 and the results of its operations and
cash flows for the three months ended May 31, 1997 and 1996. 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, 1997. The results
of operations for the three months ended May 31, 1997 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 such borrowings, as a component of cost of sales.
Accordingly, cost of sales increased by $0.5 million and $0.3 million for the
three months ended May 31, 1997 and 1996, respectively.
(3) Interest, net consisted of the following (in thousands):
Three Months Ended
May 31, May 31,
1997 1996
- -----------------------------------------------------
Interest expense $5,422 $4,389
Capitalized interest (9) (9)
Non-operating interest income (929) (90)
- -----------------------------------------------------
Interest, net $4,484 $4,290
=====================================================
Cash payments for interest, net of amounts capitalized were $6.5 million in
each three-month period ended May 31, 1997 and 1996.
(4) Income taxes - Cash payments for income taxes for the three months ended
May 31, 1997 and 1996 were $3.8 million and $3.9 million, respectively.
(5) Supplemental balance sheet information (in thousands)
May 31, Feb. 28,
1997 1997
- ----------------------------------------------------------------------
Trade accounts receivable, net:
Trade $184,185 $216,798
Allowance for doubtful accounts (6,926) (9,339)
- ----------------------------------------------------------------------
Total trade accounts receivable, net $177,259 $207,459
======================================================================
Inventories:
Raw materials, excluding grain $ 17,539 $ 15,776
Grain 71,210 86,500
Finished and in-process goods 183,656 174,274
Packages and supplies 7,843 7,398
- ----------------------------------------------------------------------
Total inventories $280,248 $283,948
======================================================================
Property, plant and equipment, net:
Land $ 13,401 $ 13,413
Buildings and improvements 93,237 93,099
Machinery and equipment 233,211 228,514
Transportation equipment 6,947 7,194
Improvements in progress 12,610 15,019
- ----------------------------------------------------------------------
359,406 357,239
Accumulated depreciation (137,403) (131,882)
- ----------------------------------------------------------------------
Total property, plant and equipment, net $222,003 $225,357
======================================================================
(6) Segment information (in millions)
Net Operating Unusual Operating
Sales Costs Items Earnings
- --------------------------------------------------------------------------
Three Months Ended May 31, 1997
Foodservice Distribution $449.4 $(445.3) $ - $4.1
North America Foods 115.5 (112.5) - 3.0
Venezuela Foods 102.3 (99.5) - 2.8
Corporate Expenses - (2.4) - (2.4)
- --------------------------------------------------------------------------
Total $667.2 $(659.7) $ - $7.5
==========================================================================
Three Months Ended May 31, 1996
Foodservice Distribution $443.3 $(438.2) $ - $5.1
North America Foods 111.6 (109.5) - 2.1
Venezuela Foods 71.2 (69.1) - 2.1
Corporate Expenses - (2.7) (3.6) (6.3)
- --------------------------------------------------------------------------
Total $626.1 $(619.5) $(3.6) $3.0
==========================================================================
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations:
For the first quarter ended May 31, 1997 compared with the corresponding
prior period
Overview
Fiscal 1998 first quarter net earnings were $2 million, or 11 cents per
share, compared with a net loss of $0.4 million, or 2 cents per share, a year
ago. Net earnings in fiscal 1998 improved on higher operating earnings in
the North America Foods and Venezuela Foods business segments. Last year's
results were adversely affected by after tax unusual charges of $2.2 million,
or 12 cents per share, for costs resulting from the resignation of the
Company's former chief executive officer and from business assessment studies.
Net sales for fiscal 1998 increased 7% to $667.2 million primarily from the
Venezuela Foods business segment.
Segment Results
Foodservice Distribution first quarter net sales increased 1% to $449.4
million, compared with $443.3 million a year ago. Vending and limited-menu
distribution businesses had an increase in net sales, which was substantially
offset by lower sales volumes to a major customer of the Company's food
exporting business that distributes food products in Russia. This volume
decline was attributable to business disruptions the customer experienced
from the Russian government commencing the enforcement of tariffs which
delayed the unloading of shipments and distribution of product in Russia.
The Company expects that the sales and earnings contribution from this
customer in fiscal 1998 will be below last year.
Foodservice Distribution operating earnings declined 20% to $4.1 million,
compared with $5.1 million last year. The decline was the result of the
lower volumes with the major customer of the food exporting business and from
lower gross margins in vending distribution. The gross margin decline was
the result of competitive pricing pressures. In addition, last year included
a benefit from the purchase of candy inventories at favorable prices which
was partially offset by the favorable impact in the current year of
purchasing coffee prior to world market price increases. Foodservice
Distribution operating results also included higher earnings in limited-menu
distribution as a result of lower operating costs.
North America Foods first quarter net sales increased 3% to $115.5 million,
compared with $111.6 million a year ago. Sales were up on higher Canadian
commercial flour volumes but were partially offset by lower volumes in
Canadian frozen bakery products resulting from continued competitive
pressures. Operating earnings increased 43% to $3 million, compared with
$2.1 million last year. Operating earnings increased on higher gross margins
from improved manufacturing efficiencies, the higher commercial flour volumes
and an improved customer mix in the United States. The increase was
partially offset by the volume decline in Canadian frozen bakery products.
Venezuela Foods first quarter net sales increased 44% to $102.3 million,
compared with $71.2 million a year ago. Net sales in the prior year were
adversely impacted by significant devaluation in the exchange rate while the
Company operated under price controls. The Venezuelan government eliminated
price controls last year. Operating earnings increased 33% to $2.8 million,
compared with $2.1 million last year. Although earnings increased, current
year results were adversely affected by competitive pricing pressures coupled
with higher costs of locally grown grain and distribution. Operating
earnings in the prior year were depressed by the significant devaluation
of the exchange rate.
The Company expects that the competitive pricing pressures coupled with the
higher costs will continue. The Company also expects that Venezuela Foods
operating results in the second quarter of fiscal 1998 will be significantly
lower than the second quarter last year. Second quarter fiscal 1997 results
were positively impacted by the removal of price and foreign exchange
controls and other effects of the transition to a free-market economy.
Non-operating Expense and Income
Net interest expense increased to $4.5 million from $4.3 million last year on
higher debt levels partially offset by lower interest rates in Canada.
Financial Condition:
Capital Resources and Liquidity
The debt-to-total capitalization ratio of 51% remained unchanged from
February 28, 1997. Working capital increased on lower accounts payable
attributable to the timing of payments. Partially offsetting this increase
was a reduction in accounts receivable in the Company's food exporting
business resulting from lower sales volumes with a major customer that
distributes food products in Russia. The major customer is past due on
certain accounts receivable owed to the Company as a result of business
disruptions it has experienced, as discussed above. The Company continues to
receive payments on these receivables, although on longer payment terms, and
management expects that all amounts due will be collected.
On June 5, 1997, the Company announced that it intends to sell its Canada
Frozen bakery unit. The Company believes that the sale will not have a
material affect on full-year fiscal 1998 results of operations. The Company
anticipates using the proceeds from the sale to reduce debt.
On July 9, 1997, the Company announced that it will combine its vending
distribution and limited-menu distribution businesses into a single
distribution business to more quickly capitalize on growth opportunities and
achieve cost savings. The Company is unable to estimate one-time charges, if
any, associated with the combination as specific actions have not yet been
determined. The combination is expected to result in significant long-term
benefits, net of any one-time charges.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Letter Agreement, dated February 3, 1997, between
William L. Trubeck and International Multifoods
Corporation regarding benefits and severance
arrangements.
10.2 Consulting Agreement, dated May 1, 1997, between RFM
Enterprises, Inc. and International Multifoods
Corporation.
10.3 Memorandum of understanding, dated May 7, 1997, between
William L. Trubeck and International Multifoods
Corporation regarding supplemental retirement benefits.
10.4 Amendment to Consulting Agreement, dated May 9, 1997,
between International Multifoods Corporation and RFM
Inc.
11. Computation of Earnings (Loss) Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended May 31, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL MULTIFOODS CORPORATION
Date: July 11, 1997 By: /s/ William L. Trubeck
William L. Trubeck
Senior Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
EXHIBIT INDEX
10.1 Letter Agreement, dated February 3, 1997, between William L.
Trubeck and International Multifoods Corporation regarding
benefits and severance arrangements.
10.2 Consulting Agreement, dated May 1, 1997, between RFM
Enterprises, Inc. and International Multifoods Corporation.
10.3 Memorandum of understanding, dated May 7, 1997, between William
L. Trubeck and International Multifoods Corporation regarding
supplemental retirement benefits.
10.4 Amendment to Consulting Agreement, dated May 9, 1997, between
International Multifoods Corporation and RFM Inc.
11. Computation of Earnings (Loss) Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
EXHIBIT 10.1
February 3, 1997
Mr. William L. Trubeck
3300 Fox Street
Long Lake, MN 55356
Dear Bill:
We are pleased to extend to you an offer of employment with International
Multifoods Corporation ("Multifoods"). The offer reflects and confirms our
recent verbal discussion in which we agreed to certain employment
arrangements.
1. The position being offered is Senior Vice President - Finance and
Chief Financial Officer, International Multifoods Corporation. In
this position you will report directly to Gary E. Costley, Chairman,
President and Chief Executive Officer. Your office will be in
Minneapolis, MN. The Multifoods headquarters office is located at 33
South 6th Street.
2. The effective date of your employment with Multifoods will be March
1, 1997. We discussed your availability for a February 13 management
meeting and other potential meetings during the month. If you attend
the February 13th meeting, we will reimburse your actual and
reasonable expenses for this trip. In lieu of a consulting fee, we
will fully support your commitment to a speaking engagement in South
Africa during the month of March and other commitments as discussed.
3. The starting salary will be $280,000 annually. You will be eligible
for periodic merit increases based on performance. Merit increases
for executive officers are reviewed every 15-18 months.
4. You will receive an employment bonus of $20,000 payable on or about
March 15, 1997. If you should voluntarily terminate within one year
from date of employment, you agree to repay the $20,000.
5. A recommendation will be made to the Compensation Committee of the
Board of Directors of Multifoods for the following:
(a) A restricted stock grant of 1,200 shares of Multifoods stock.
The approximate value of this grant is $20,000. The
restriction will be time only for a two-year period.
(b) A non-qualified stock option grant of 20,000 shares of Multifoods
Common Stock. The grant price will be the average price of
Multifoods stock on your date of employment and will vest within
one year.
(c) A non-qualified stock option grant of 30,000 shares of Multifoods
Common Stock. The option grant will fully vest in eight years;
however, vesting will be accelerated one third each year for three
years if Multifoods Net Pre-Tax Earnings exceed the prior year by
15%, or by 45% in aggregate for a three-year period. The stock
option grant is dependent on the shareholders approving a 1997
stock-based incentive plan.
(d) You will be included as a participant in the Multifoods Pension
Equity Plan ("PEP") following one year of service. You will be
recommended for participation in the Management Benefit Plan of
International Multifoods Corporation, restated Effective January
1, 1997 ("MBP"). The MBP is a "non-qualified" excess benefit plan
that provides retirement benefits that would have been provided
under the PEP if the Internal Revenue Code limits on compensation
(currently $160,000 per year) and benefits (currently $125,000)
did not apply to benefits under the PEP.
The following Supplemental Retirement Plan will be proposed to the
Committee:
The arrangement will provide additional retirement benefits equal
to what you would have received under the MBP and the PEP had your
service from your employment date counted one and one-half (1.5)
for both benefit accrual and vesting purposes.
You will also be recommended for participation in the Supplemental
Deferred Compensation Plan of International Multifoods
Corporation. This plan provides for the "non-qualified" deferral
of amounts which could have been deferred under the Voluntary
Investment and Savings Plan of International Multifoods
Corporation (the "VISA Plan") if certain Internal Revenue Code
limits did not apply, and to provide matching credits on such non-
qualified deferrals.
We have given you an estimate of the benefits from both these
plans.
(e) A Change of Control agreement similar to that of other executives
of Multifoods will also be recommended to the Compensation
Committee. While the agreement will contain the detail of the
arrangement, essentially if there is a change of control and a
subsequent termination, either involuntary or by "constructive
discharge", you will receive a payment equal to 2.5 times base
salary and the average of the last three (3) incentive awards or
the target level if there has not been any incentive payments.
6. You will be protected in the case of involuntary termination, except for
cause. If involuntary termination should occur during the first year of
your employment March 1, 1997 - February 28, 1998 you will receive two
years' salary as a severance payment. Following the first year, in the
event of involuntary termination you will receive one
years' salary. Any severance payment will require a release, including
an agreement not to compete with Multifoods or any of its subsidiaries
for a period of one year, prepared by Multifoods and signed by you.
7. Your annual incentive opportunity will be no less than 50% of base
salary at business plan level with a maximum incentive opportunity of
70%.
8. It is our intent to review the incentive plan designs for fiscal 1998
and fiscal 1999 which could positively effect the incentive
opportunities. As we have discussed, this is related to the
implementation of "economic value" as a measurement and reward system
and may not become effective until fiscal 1999. You will have a primary
role in determining the measurement system.
9. Multifoods provides a comprehensive benefit program including medical,
dental, life insurance, long term disability, etc. A summary of
Multifoods' benefit plans, which are comprehensive, are attached for
your review. The Multifoods' 401(k) program is called VISA. There is a
one year employment period for eligibility. Employees may contribute up
to 7% of base salary (maximum this year is $9,500) which is matched 50%
with Multifoods Common Stock.
10. In accordance with our prior discussion, you will be entitled to four
weeks of vacation. Our vacation year is from January 1 to December 31.
The Company will consider any need you have for additional personal
time.
11. Also in accordance with our verbal discussion, Multifoods will pay fees
and dues for a club membership. Since you are a member of the
Minneapolis Club, we will assume the monthly dues and fees. All
expenses incurred for business use of the club will be reimbursed based
on Multifoods' policies.
Bill, we have received the medical report from Dr. Owen at the Mayo Clinic.
Since the exam was completed within one year of date of employment, it
satisfies the requirement to complete an executive physical exam.
Congratulations on your good health.
We are very pleased with the prospect of having you join Multifoods. We
are counting on your contribution and strongly believe you will have a very
positive impact on the Company. We also believe that Multifoods can offer
you a significant challenge.
Will you please indicate your acceptance of this offer by signing and
dating the original letter and returning it to me at your earliest
convenience.
Very truly yours,
/s/ Robert F. Maddocks
Robert F. Maddocks
Executive Vice President
RFM:rg
cc: Gary E. Costley
Accepted by:
Dated: 02/04/97 /s/ William L. Trubeck
William L. Trubeck
Exhibit 10.2
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated and effective as of May 1, 1997, by and
between INTERNATIONAL MULTIFOODS CORPORATION, a Delaware corporation
("Multifoods"), and RFM Enterprises, Inc. an Illinois corporation
("Contractor"), hereinafter referred to as "the Agreement" or "this
Agreement".
WITNESSETH THAT:
WHEREAS, Contractor is engaged in the business of providing executive
compensation and human resources consulting services to business
organizations; and
WHEREAS, Multifoods wishes to avail itself of the experience and skill of
Contractor during the consulting period hereinafter described.
NOW, THEREFORE, in consideration of the preceding recitals and of the
mutual covenants and agreements set forth in this Agreement, Multifoods and
Contractor agree, as follows:
1. Term and Scope of Consulting Services.
A. Consulting Period.
Multifoods agrees to retain Contractor as a consultant to Multifoods,
and Contractor agrees to serve as a consultant to Multifoods, for a period of
two (2) years commencing on the date of this Agreement (the "Consulting
Period"), provided, that either Multifoods or Contractor shall have the right
at any time during the Consulting Period, after the "First Six Months" (as
that term is hereinafter defined) to terminate and cancel this Agreement upon
at least ninety (90) days prior written notice given to the other party in
accordance with notice provision contained in Section 11 of this Agreement.
Contractor shall make Robert F. Maddocks available to provide "Consulting
Services" (as that term is hereinafter defined), to Multifoods:
(i) during the period May 1, 1997 to November 1, 1997 (the "First
Six Months"), for not less than eighty (80) days and not more than ninety (90)
days during such period of time;
(ii) during the period November 1, 1997 to April 30, 1998 (the
"Second Six Months"), for not less than thirty (35) days and not more than
forty (40) days during such period; and
(iii) during the period May 1, 1998 to April 30, 1999 (the "Second
Year"), for not less than eighty (80) days and not more than ninety (90) days
during such period.
As used herein, a calendar day shall mean not less than five and not
more than eight hours during any twenty-four hour period.
B. Consulting Services.
The Consulting Services to be performed by Contractor shall include
corporate level organization, executive and compensation services as may be
requested and specified by the Chairman of the Board, President and Chief
Executive Officer of Multifoods, the Chairman of the Compensation Committee or
the Chairman of the Nominating and Corporate Governance Committee of the Board
of Directors of Multifoods (collectively the "Consulting Services").
C. Contractor's Other Activities.
Multifoods acknowledges and agrees that Contractor has the right
during the Consulting Period to pursue his personal, business and investment
interests so long as they are not in conflict with Contractor's duties and
obligations under this Agreement.
2. Compensation and Travel Expenses Payable by Multifoods to Contractor.
A. Compensation for Consulting Services.
As compensation for the Consulting Services to be rendered by
Contractor to Multifoods during the Consulting Period, Multifoods shall pay to
Contractor:
(i) for the First Six Months and the Second Six Months of the
Consulting Period, an aggregate amount of One Hundred and Thirty Thousand
Dollars ($130,000) in consecutive quarterly installments of (a) $40,000 each,
on the first day of May and August, 1997, (b) $30,000 on the first day of
November, 1997, and (c) $30,000 on the first day of February, 1998; and
(ii) for the Second Year, an aggregate amount of Eighty Thousand
Dollars ($80,000) in equal consecutive quarterly installments of $20,000 each,
on the first day of May, August and November, 1998, and on the first day of
February, 1999.
Multifoods will report the payment of compensation paid to Contractor
for Consulting Services rendered by Contractor to Multifoods under this
Agreement on Form No. 1099, or such other form as may be prescribed by
applicable federal, state and local tax authorities. If either Multifoods or
Contractor should exercise its right to terminate the Consulting Period at any
time during the Consulting Period as provided in Section 1A of this Agreement,
the compensation due and payable to Contractor for such calendar quarter shall
be prorated by the number of days elapsed in the quarter to the effective date
of termination
B. Travel Expenses of Contractor During Performance of Consulting Services.
If Contractor is requested to travel by Multifoods to perform Consulting
Services during the Consulting Period, Multifoods will reimburse Contractor on
a basis that is consistent with Multifoods' travel polices for its employees
in effect at such time, for the reasonable travel and travel related expenses,
reasonably incurred by Contractor solely and exclusively with respect to
Contractor's performance of the Consulting Services requested by Multifoods
during the Consulting Period. Contractor shall provide Multifoods with
receipts and other evidence reasonably requested by Multifoods to substantiate
any such travel and travel related expenses incurred by Contractor while on
assignment for Multifoods as provided hereunder. All of the Contractor's
travel and travel related expenses shall be subject to the approval of the
Chairman of the Board, President and Chief Executive Officer of Multifoods, or
his designee. Multifoods shall reimburse Contractor for all such approved
travel and travel related expenses submitted by Contractor, within thirty (30)
days following the date of Multifoods receipt of Contractors' invoice for such
reimbursement and supporting documentation.
C. Office Space, Office Services and Parking Space.
During the Consulting Period, Multifoods shall provide Contractor with
the use of an office, free of charge, for Contractor's use in connection with
the performance of the Consulting Services, in the headquarters office of
Multifoods, and secretarial services, free of charge, in connection with the
performance by Contractor of the Consulting Services. Also, during the
Consulting Period, Multifoods shall provide Contractor the use of a parking
space, free of charge, in the garage facility used by the executive officers
of Multifoods who office in Multifoods headquarters office, to the extent that
such parking perquisite is made available to the Multifoods' executive
officers.
D. Change of Control.
As used in this Agreement, the term "Change of Control" shall have the
same meaning that term has in the form of Severance Agreement adopted by the
Board of Directors of Multifoods at a meeting of the Board of Directors on
September 17, 1993, as the same may be amended from time-to-time.
Notwithstanding any term or provision in this Agreement to the contrary, if
during the Consulting Period a Change of Control should occur, and unless
otherwise agreed by the parties in writing, this Agreement shall terminate
effective upon the effective date of the Change of Control, and in such event
an amount equal to the unpaid quarterly installments of compensation described
in Paragraph A of this Section 2, shall be paid to Contractor within thirty
(30) days following the effective date of the Change of Control.
3. Contractor's Covenants Not to Compete and Confidentiality.
A. Contractor's Covenant Not to Compete.
During the Consulting Period, Contractor and its principal
shareholder, Robert F. Maddocks ("Maddocks"), subscribing to this Agreement on
the signature page hereof, will refrain from carrying on, either directly or
indirectly (whether as a principal, agent, investor, employee, employer,
consultant, shareholder, partner or in any other individual or representative
capacity whatsoever), anywhere in the United States of America, or its
territories and possessions, and Canada, any business which competes with any
of the businesses conducted by Multifoods and its subsidiaries which are
described in Multifoods' Annual Report on Form 10-K for the fiscal year ended
on February 28, 1997. An investment by Contractor or Maddocks of not more
than one percent (1%) of all the issued and outstanding capital stock of a
corporation which is publicly traded on a national stock exchange, shall not
violate Contractor's and Maddocks' non-competition covenant set forth herein.
B. Contractor's Covenant of Confidentiality.
Further, during the Consulting Period and thereafter, Contractor and
Maddocks covenant and agree with Multifoods that each of them will maintain in
strict confidence and not disclose to any corporation, partnership, or other
entity or person, any information including, without limitation, financial
information, customer names or lists of customers, or business plans of
Multifoods, or any of Multifoods' subsidiaries or affiliates, or any
proprietary information of Multifoods or any subsidiary or affiliate of
Multifoods, to which Contractor or Maddocks had access to or knowledge of
prior to the date of this Agreement, or to which Contractor or Maddocks may
have access to or knowledge of in the performance of Contractor's obligations
under this Agreement ("Confidential Information"). As used in this paragraph,
Confidential Information shall not include any information: (i) which was
generally known to the public on the date of this Agreement; (ii) which
becomes known to the public following the date of this Agreement through no
fault of Contractor or any of its directors, officers, employees and agents;
or (iii) which is disclosed to Contractor or Maddocks by a third party who has
the right to disclose such information without violating any agreement of
confidentiality with Multifoods.
C. Remedies.
Contractor and Maddocks agree that in the event there is a breach or
threatened breach by Contractor or Maddocks of Contractor's or Maddocks'
covenant not to compete and Contractor's and Maddocks' covenant of
confidentiality described in Paragraphs A and B of this Section 3, Multifoods
shall have the right, in addition to all legal remedies available to it, to
specific performance or other equitable remedy for any breach or threatened
breach by Contractor or Maddocks of their covenants of non-competition and
confidentiality set forth in Paragraphs A and B of this Section 3.
4. Independent Contractor.
The parties acknowledge that Contractor shall perform its duties under
this Agreement as an independent contractor and that this Agreement is not
intended nor shall this Agreement be deemed to create an employment
relationship or any other relationship between Multifoods and Contractor and
Contractor's employees, other than that of independent contractor. Contractor
and its employees shall at all times be free to exercise its and their own
initiative, judgment and discretion as to how best to perform or provide the
Consulting Services. Since Contractor is an independent contractor Multifoods
shall not withhold any federal, state or local income taxes related to the
compensation paid to Contractor. Contractor agrees that it shall report such
compensation to taxing authorities and pay all federal, state and local taxes
payable by Contractor in a manner consistent with its status as an independent
contractor. Contractor further agrees to indemnify and hold Multifoods
harmless and free from and against any tax, penalty and interest which
Multifoods may be held liable to pay any governmental authority by reason of
Contractor's breach of its obligation to pay its taxes on the compensation
paid by Multifoods hereunder for Consulting Services.
5. Indemnification
In the event that Contractor and/or Maddocks become involved in any legal
action or proceeding as a result of advice and counsel provided by Contractor
pursuant to this Agreement, Multifoods will indemnify Contractor and Maddocks
against all claims, demands, actions, lawsuits and liabilities, and all
reasonable attorneys' fees and disbursements, made against or incurred by
Contractor and Maddocks, except to the extent that any such claim, demand,
action, lawsuit or liability resulted from the willful misconduct or gross
negligence of Contractor or Maddocks.
6. No Waiver.
The waiver by Multifoods or Contractor of a breach by Multifoods or
Contractor, as applicable, of any provision of this Agreement, shall not
operate or be construed as a waiver of any subsequent breach by Multifoods or
Contractor, as applicable.
7. Successors and Assigns.
The rights and obligations of Contractor under this Agreement shall not
be assignable, transferable or delegable in whole or in part by Contractor.
This Agreement is binding upon the successors and assigns of Multifoods.
8. Governing Law.
This Agreement is a Minnesota contract and shall be governed by and
interpreted under the laws of the State of Minnesota.
9. Severability.
If any provision of this Agreement or the application of any such
provision to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement.
10. Entire Agreement.
This Agreement contains the entire agreement of Multifoods and Contractor
with respect to the subject matter of this Agreement, and may only be amended
by an agreement in writing executed and delivered by a duly authorized officer
of Contractor and an executive officer of Multifoods.
11. Notices.
All notices and other communications provided for in this Agreement must
be in writing and shall be sent by prepaid and certified mail, telecopied or
delivered, as to each party hereto, at its address sent forth below, or at
such other address designated by such party in a written notice to the other
party. Any such notice or other communication so given or made shall be
deemed to have been given, made and received on the day of actual receipt if
mailed or delivered, on the same day as telecopying if telecopied.
If to Multifoods:
Gary E. Costley, Chairman of the Board, President
and Chief Executive Officer
International Multifoods Corporation
Multifoods Tower - Box 2942
33 South Sixth Street
Minneapolis, Minnesota 55402
FAX NO.: (612) 340-6502
with copy to:
Frank W. Bonvino, Vice President, General Counsel
and Secretary
International Multifoods Corporation
Same address and FAX NO. as above; and
If to RFM Enterprises, Inc.:
Robert F. Maddocks, President
Ocean Village - CAT II 7421
2400 S. Ocean Drive
Fort Pierce, FL 34949
Tel. (407) 466-2305
IN WITNESS WHEREOF, Multifoods and Contractor have executed and delivered this
Agreement as of the day and year first above written.
INTERNATIONAL MULTIFOODS CORPORATION
WITNESS:
/s/ Frank W. Bonvino By:/s/ Gary E. Costley
Frank W. Bonvino Gary E. Costley, Chairman of the Board,
Secretary President and Chief Executive Officer
RFM Enterprises, Inc.
WITNESS:
/s/ Rachael L. Galarneau By:/s/ Robert F. Maddocks
Robert F. Maddocks, President
Agreement
Robert F. Maddocks, in his individual capacity and not as a shareholder,
director, employee or affiliate of RFM Enterprises, Inc., in consideration of
the execution and delivery of this Agreement by Multifoods, does hereby agree
to be bound by and perform the covenants and agreement set forth in Paragraphs
A, B and C of Section 3 of this Agreement.
/s/ Robert F. Maddocks
Robert F. Maddocks
EXHIBIT 10.3
[MULTIFOODS LOGO]
DATE: May 7, 1997
TO: William L. Trubeck
FROM: Frank W. Bonvino
SUBJECT: SUPPLEMENTAL RETIREMENT BENEFIT
The intent of this memorandum is to set forth the terms and conditions of
the supplemental retirement benefit provided under Paragraph 5(d) of your
employment offer letter dated February 3, 1997.
Paragraph 5(d) provides that you will be recommended for participation in
the Management Benefit Plan of International Multifoods Corporation ("MBP")
and will participate in the Multifoods Pension Equity Plan ("PEP").
Paragraph 5(d) further provides that you will receive additional retirement
benefits equal to what you would have received under the MBP and the PEP if
your service counted one and one-half times for both benefit accrual and
vesting purposes.
The PEP Plan is a "qualified" defined benefit pension plan that was adopted
January 1, 1996, as a restructuring of a prior defined benefit plan
maintained by Multifoods (called the "Employees' Retirement Plan of
International Multifoods Corporation").
The MBP is a nonqualified excess benefit plan that generally provides the
additional benefits that would have been provided under the PEP if the
limits imposed under Code sections 401(a)(17) and 415 did not apply to your
benefit under the PEP.
The benefits described in this memorandum are in addition to those provided
under the PEP and MBP.
SUPPLEMENTAL RETIREMENT BENEFIT
(a) Definitions. The following terms are used herein:
"Actuarial Equivalent" means a benefit of equivalent value when computed
on the basis of mortality and interest rate assumptions recommended by an
actuary and approved by the Vice President and Controller of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means International Multifoods Corporation, and any successor
thereto.
"MBP" means the Management Benefit Plan of International Multifoods
Corporation, as it may be amended from time to time.
"PEP" means the Multifoods Pension Equity Plan, as adopted January 1,
1996 (as a continuation of the Employees' Retirement Plan of International
Multifoods Corporation), as it may be amended from time to time.
"Supplemental Retirement Benefit" means the benefit payable to you under
the terms of this memorandum.
(b) Vesting Service. For purposes of determining your Supplemental
Retirement Benefit, your vesting service under this memorandum will be equal
to one and one-half times (1-1/2x) your vesting service earned under the PEP
and MBP.
(c) Supplemental Retirement Benefit. You will be entitled to receive the
following Supplemental Retirement Benefit:
(1) Less Than Five Years of Vesting Service. If you have less than 5 years
of vesting service at your termination of employment, then you will not be
entitled to any Supplemental Retirement Benefit.
(2) Five or More Years of Vesting Service. If you have 5 or more years of
vesting service at your termination of employment, then your monthly benefit
will be equal to "A" minus "B" minus "C" below:
A = The monthly benefit to which you would have been entitled
under the PEP if (i) you were fully vested (regardless of
whether you actually are vested), (ii) your Base Points were
equal to one and one-half times (1-1/2x) your actual Base
Points, and your Integration Points were equal to one and
one-half times (1-1/2x) your actual Integration Points, (iii)
your benefit was paid in the form of a single life annuity,
and (iv) the limits imposed under Code sections 401(a)(17)
and 415 did not apply to your benefit under the PEP.
minus
B = The monthly benefit (if any) actually paid to you under the
PEP (or, if you receive your benefit other than in the form of
a single life annuity, the monthly benefit that would have
been paid to you if you had received your benefit in the form
of a single life annuity under the PEP).
minus
C = The monthly benefit (if any) actually paid to you under the
MBP (or, if you receive your benefit other than in the form of
a single life annuity, the monthly benefit that would have
been paid to you if you had received your benefit in the form
of a single life annuity under the MBP).
All monthly benefits described above will be computed as of the date of your
termination of employment and each will be expressed in the form of a single
life annuity starting as of the first day of the month after age 65 (or as
of the first day of the month after your termination of employment, if your
termination of employment occurs after age 65).
(d) Form of Benefit. The Supplemental Retirement Benefit will be paid to
you in the form of a single life annuity with monthly benefit payments.
However, at the sole discretion of the Company, it may be paid in any other
form. If it is paid in any form other than a single life annuity starting
as of the first day of the month after you attain age 65, the benefit
will be adjusted so that it is the Actuarial Equivalent of the benefit that
would have been paid as a single life annuity starting as of the first day
of the month after you attain age 65.
(e) Commencement of Benefit. The Supplemental Retirement Benefit will
start as of the same day as the benefit paid to you under the PEP. If you
have less than 5 years of vesting service under the PEP at your termination
of employment (and thus are not entitled to a benefit), the Supplemental
Retirement Benefit will start on the same day as the benefit would have been
paid to you if you had 5 years of vesting service under the PEP.
(f) Spouse Benefit. If you have 5 or more years of vesting service, you
die before your Supplemental Retirement Benefit is paid or starts to be paid
to you, and you are survived by a spouse, that spouse will be entitled to a
single lump-sum benefit to be paid as soon as practicable following the date
of your death in an amount that is the Actuarial Equivalent of your
Supplemental Retirement Benefit.
(g) No Effect on Employment Rights. This memorandum is not an employment
agreement and nothing in this memorandum will confer on you the right to be
retained in the employ of the Company, or limit any right of the Company to
discharge you or otherwise deal with you without regard to the existence of
this memorandum.
(h) FICA Taxes/Withholding. To the extent that benefit accruals hereunder
are taken into account as amounts deferred under a nonqualified deferred
compensation plan under Code section 3121(v), and thus are subject to tax
under Code section 3101 ("FICA"), the Company may calculate the amount
deferred and withhold against other compensation paid to you in any manner
determined by it to be appropriate under Code section 3121(v).
Please indicate your receipt and acceptance of the terms of this memorandum
by signing one of the enclosed copies and returning it at your earliest
convenience.
INTERNATIONAL MULTIFOODS CORPORATION
/s/ Frank W. Bonvino
By:Frank W. Bonvino
Its:Vice President & General Counsel
cc: Joyce G. Traver
ACCEPTANCE
I, William L. Trubeck, hereby acknowledge receipt of this memorandum and
hereby agree to the manner in which Paragraph 5(d) of my offer letter dated
February 3, 1997, is to be implemented as set forth in this memorandum.
Dated: May 7, 1997
WILLIAM L. TRUBECK
s/s William L. Trubeck
EXHIBIT 10.4
AMENDMENT TO CONSULTING AGREEMENT BETWEEN
INTERNATIONAL MULTIFOODS CORPORATION
AND RFM INC.
THIS AMENDMENT, dated as of May 9, 1997, to Consulting Agreement,
dated as of May 1, 1997 (the "Consulting Agreement"), between
International Multifoods Corporation ("Multifoods") and RFM, Inc., an
Illinois corporation (the "Contractor").
WITNESSETH:
WHEREAS, Multifoods and the Contractor wish to amend the Consulting
Agreement as hereinafter provided.
NOW, THEREFORE, the Consulting Agreement be and the same hereby is
amended effective as of May 9, 1997, as follows:
1. The name and address of the Contractor be and hereby is changed
to RFM Inc., 401 South First Street, #111. Minneapolis,
Minnesota 55401.
2. Add new paragraph E to Section 2 of the Consulting Agreement,
entitled "Signing Bonus", as follows:
"E. As an incentive to execute and deliver this Agreement and
provide the Consulting Services, Multifoods shall pay the
Contractor, in addition to the compensation for Consulting
Services described in Section 2 of this Agreement, a
"signing bonus" of $50,000, in a lump sum, on or before
June 10, 1997."
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the day and year first above written.
INTERNATIONAL MULTIFOODS CORPORATION
By: /s/ Gary E. Costley
Gary E. Costley
Chairman of the Board, President and
Chief Executive Officer
RFM, INC.
By: /s/ Robert F. Maddocks
Robert F. Maddocks
President
Exhibit 11
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Computation of Earnings (loss) per Common Share
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- --------------------------------------------------------------------
Average shares of common stock outstanding 18,016 17,969
Common stock equivalents 289 33
- -------------------------------------------------------------------
Total common stock and equivalents
assuming full dilution 18,305 18,002
===================================================================
Net earnings (loss) applicable to common stock $2,000 $ (433)
===================================================================
Earnings (loss) per
share of common stock:
Primary $ .11 $ (.02)
Fully diluted $ .11 $ (.02)
===================================================================
Primary earnings (loss) per share has been computed by dividing net
earnings (loss) 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 (loss) 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
Computation of Ratio of Earnings to Fixed Charges
(unaudited)
(in thousands)
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- -------------------------------------------------------------
Earnings (loss) before income taxes $ 2,857 $(1,082)
Plus: Fixed charges (1) 7,766 6,680
Less: Capitalized interest (9) (9)
- -------------------------------------------------------------
Earnings available to cover
fixed charges $10,614 $ 5,589
=============================================================
Ratio of earnings to fixed charges(2) 1.37 .84
=============================================================
(1) Fixed charges consisted of the following:
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- -------------------------------------------------------------
Interest expense, gross $5,422 $4,389
Rentals (Interest factor) 2,344 2,291
- -------------------------------------------------------------
Total fixed charges $7,766 $6,680
=============================================================
(2) For the three months ended May 31, 1996 earnings were
inadequate to cover fixed charges by $1,091. The
deficiency was the result of unusual items. Excluding
the unusual items the ratio of earnings to fixed
charges would have been 1.38 for the three months ended
May 31, 1996.
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF OPERATIONS AND CASH FLOWS
AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND NOTES.
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<PERIOD-END> MAY-31-1997
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<CURRENT-ASSETS> 530,796
<PP&E> 359,406
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0
0
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<SALES> 667,186
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