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, 1998
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.)
200 East Lake Street, Wayzata, Minnesota 55391
(Address of principal executive offices) (Zip Code)
(612) 594-3300
(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, 1998 was 18,783,587.
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,
1998 1997
- ----------------------------------------------------------------------
Net sales $661,123 $667,186
Cost of materials and production (571,733) (573,687)
Delivery and distribution (41,106) (40,657)
- ----------------------------------------------------------------------
Gross profit 48,284 52,842
Selling, general and administrative (39,561) (45,315)
Unusual items (37,474) -
- ----------------------------------------------------------------------
Operating earnings (loss) (28,751) 7,527
Interest, net (3,768) (4,484)
Other income (expense), net (383) (186)
- ----------------------------------------------------------------------
Earnings (loss) before income taxes (32,902) 2,857
Income taxes 8,601 (857)
- ----------------------------------------------------------------------
Net earnings (loss) $(24,301) $ 2,000
======================================================================
Earnings (loss) per share of common stock:
Basic $ (1.30) $ .11
Diluted (1.30) .11
- ----------------------------------------------------------------------
Average shares of common stock outstanding:
Basic 18,765 18,016
Diluted 18,765 18,119
- ----------------------------------------------------------------------
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,
1998 1998
- ----------------------------------------------------------------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 5,985 $ 10,363
Trade accounts receivable, net 143,065 144,201
Inventories 226,473 265,989
Other current assets 71,496 63,851
- ----------------------------------------------------------------------
Total current assets 447,019 484,404
- ----------------------------------------------------------------------
Property, plant and equipment, net 201,439 220,567
Goodwill, net 84,148 84,911
Other assets 34,829 37,504
- ----------------------------------------------------------------------
Total assets $767,435 $827,386
=======================================================================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Notes payable $ 32,313 $ 1,025
Current portion of long-term debt 4,020 25,042
Accounts payable 185,005 217,500
Other current liabilities 58,899 68,856
- ----------------------------------------------------------------------
Total current liabilities 280,237 312,423
- ----------------------------------------------------------------------
Long-term debt 162,847 162,857
Employee benefits and other liabilities 43,911 42,753
- ----------------------------------------------------------------------
Total liabilities 486,995 518,033
- ----------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Accumulated other comprehensive income:
Foreign currency translation adjustments (112,755) (110,812)
Minimum pension liability adjustment (3,499) (3,499)
Other shareholders' equity 394,510 421,480
- ----------------------------------------------------------------------
Total shareholders' equity 280,440 309,353
- ----------------------------------------------------------------------
Commitments and contingencies
- ----------------------------------------------------------------------
Total liabilities and shareholders' equity $767,435 $827,386
=======================================================================
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,
1998 1997
- ----------------------------------------------------------------------
Cash flows from operations:
Net earnings (loss) $(24,301) $ 2,000
Adjustments to reconcile net earnings (loss)
to cash provided by (used for) operations:
Depreciation and amortization 6,936 7,506
Deferred income tax expense (benefit) (9,931) 408
Provision for losses on receivables 211 845
Provision for unusual charges 37,474 -
Changes in operating assets and liabilities:
Accounts receivable (4,597) 29,092
Inventories 38,296 3,358
Other current assets (2,772) (1,353)
Accounts payable (31,326) (28,714)
Other current liabilities (21,214) (9,633)
Other, net 1,465 504
- ----------------------------------------------------------------------
Cash provided by
(used for) operations (9,759) 4,013
- ----------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (4,143) (4,045)
Proceeds from property disposals 1,224 198
- ----------------------------------------------------------------------
Cash used for investing activities (2,919) (3,847)
- ----------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 32,188 2,321
Net decrease in long-term debt (20,700) -
Dividends paid (3,748) (3,635)
Proceeds from issuance of common stock 2,341 2,107
Purchase of treasury stock (1,723) (769)
Other, net (14) (15)
- -----------------------------------------------------------------------
Cash provided by
financing activities 8,344 9
- ----------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (44) 11
- ----------------------------------------------------------------------
Net increase (decrease)in cash and cash equivalents(4,378) 186
Cash and cash equivalents at beginning of period 10,363 8,753
- -----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,985 $ 8,939
=======================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) In the Company's opinion, 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, 1998, and the
results of its operations and cash flows for the three months ended May
31, 1998 and 1997. 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, 1998. The results
of operations for the three months ended May 31, 1998, are not
necessarily indicative of the results to be expected for the full year.
(2) Comprehensive income - In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). The
Company adopted SFAS 130 beginning in the first quarter of fiscal 1999.
Comprehensive income is defined as the change in the equity of a
business from all nonowner transactions and events. The Company's
comprehensive income is as follows (in thousands):
Three Months Ended
-------------------
May 31, May 31,
1998 1997
- -----------------------------------------------------------------------
Net earnings (loss) $(24,301) $ 2,000
Foreign currency translation adjustments (1,943) (489)
- -----------------------------------------------------------------------
Comprehensive income (loss) $(26,244) $ 1,511
=======================================================================
(3) 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 $0.6 million and $0.5
million for the three months ended May 31, 1998 and 1997, respectively.
(4) Unusual items - The Company recognized unusual items that resulted
in pre-tax charges of $37.5 million ($27.1 million after-tax or $1.45
per share) and were comprised of the following.
(in millions) Segment
- -----------------------------------------------------------------------
Business consolidation plan $11.5 Multifoods Distribution Group
Asset impairment and
severance costs 7.2 North America Foods
Asset impairment, severance
and other costs 8.5 Venezuela Foods
Receivable write-offs 10.3 Divested Business
- -----------------------------------------------------------------------
Total $37.5
===================================
Management adopted a plan to consolidate its vending and foodservice
operations into a single business. The plan involves reducing the
number of distribution centers by nine, reducing the size of the work
force by approximately 300 people and reducing the vehicle fleet size
by up to 10 percent. The charge covers losses on lease commitments,
employee termination benefits, costs incurred for outside consultants,
and the write-down of leasehold improvements. The Company believes
that the actions associated with the plan will be completed over the
next 24 months.
The Company recognized a charge of $7.2 million for the write-down of
assets and the cost of work-force reductions associated with its
Canadian frozen bakery business. The charge resulted from the
Company's inability to sell the business at a price acceptable to the
Company and from the loss of a major customer in May 1998. In
accordance with Statement of Financial Accounting Standards No. 121,
the Company evaluated the carrying value of its long-lived assets as a
result of these recent events and recognized a $5.8 million charge for
asset impairment. In addition, the Company recognized a charge of $1.4
million primarily for employee termination benefits.
The Company recognized a charge of $8.5 million associated with its
Venezuela Foods business. The charge included a $5.3 million asset
write-down, which resulted from the Company's decision in May 1998 to
close a durum mill. In accordance with Statement of Financial
Accounting Standards No. 121, the Company evaluated the recoverability
of the carrying value of its durum mill as a result of its decision to
close and sell the facility. The Company estimated the fair value of
the facility based on information received from prospective buyers. In
addition, unusual charges included $3.2 million primarily for costs
associated with employee severance liabilities which resulted from a
new Venezuelan law and costs associated with the departure of the
business segment's former president.
The Company recognized an unusual charge of $10.3 million for the
write-off of receivables from a major customer of its former food
exporting business. The Company had negotiated an exit agreement with
this customer in fiscal 1998, which provided for payments to the
Company for amounts due under notes and accounts receivable. The
agreement had been restructured on several occasions because of the
customer's financial difficulties. As a result of uncertainties with
respect to the customer's ability to meet its obligations, the Company
recognized a $5 million charge in the fourth quarter of fiscal 1998.
In June 1998, the Company was notified by the customer that it would
not meet its obligations under the restructured exit agreement. The
Company believes the customer's financial problems were caused by its
difficulty in moving product into the Russian marketplace and were
complicated by recent economic difficulties in Russia. Accordingly,
the Company believes that remaining amounts due from the customer are
not collectible.
(5) Interest, net, consisted of the following (in thousands):
Three Months Ended
-------------------
May 31, May 31,
1998 1997
- -----------------------------------------------------------------------
Interest expense $3,833 $5,422
Capitalized interest - (9)
Non-operating interest income (65) (929)
- -----------------------------------------------------------------------
Interest, net $3,768 $4,484
=======================================================================
Cash payments for interest, net of amounts capitalized, were $6.0
million and $6.5 million for the three months ended May 31, 1998 and
1997, respectively.
(6) Income taxes - Cash payments for income taxes for the three months
ended May 31, 1998 and 1997, were $6.7 million and $3.8 million,
respectively.
(7) Supplemental balance sheet information (in thousands)
May 31, Feb. 28,
1998 1998
- ----------------------------------------------------------------------
Trade accounts receivable, net:
Trade $146,731 $148,947
Allowance for doubtful accounts (3,666) (4,746)
- ----------------------------------------------------------------------
Total trade accounts receivable, net $143,065 $144,201
======================================================================
Inventories:
Raw materials, excluding grain $ 20,920 $ 19,823
Grain 65,235 87,769
Finished and in-process goods 132,662 151,894
Packages and supplies 7,656 6,503
- ----------------------------------------------------------------------
Total inventories $226,473 $265,989
======================================================================
Property, plant and equipment, net:
Land $ 13,723 $ 15,123
Buildings and improvements 91,022 98,204
Machinery and equipment 225,252 235,906
Transportation equipment 4,213 5,883
Improvements in progress 17,076 16,969
- ----------------------------------------------------------------------
351,286 372,085
Accumulated depreciation (149,847) (151,518)
- ----------------------------------------------------------------------
Total property, plant and equipment, net $201,439 $220,567
======================================================================
(8) Segment information (in millions)
Operating
Net Operating Unusual Earnings
Sales Costs Items (Loss)
- ----------------------------------------------------------------------
Three Months Ended May 31, 1998
Multifoods Distribution Group $454.7 $(448.2) $(11.5) $ (5.0)
North America Foods 110.5 (105.9) (7.2) (2.6)
Venezuela Foods 95.9 (97.2) (8.5) (9.8)
Divested Business - .8 (10.3) (9.5)
Corporate Expenses - (1.9) - (1.9)
- ----------------------------------------------------------------------
Total $661.1 $(652.4) $(37.5) $(28.8)
======================================================================
Three Months Ended May 31, 1997
Multifoods Distribution Group $446.7 $(443.2) $ - $ 3.5
North America Foods 115.5 (112.5) - 3.0
Venezuela Foods 102.3 (99.5) - 2.8
Divested Business 2.7 (2.1) - .6
Corporate Expenses - (2.4) - (2.4)
- ---------------------------------------------------------------------
Total $667.2 $(659.7) $ - $ 7.5
=====================================================================
(9) Contingencies - In fiscal 1998, the Company was notified that
approximately $6 million in Company-owned inventory was stolen from
a ship in the port of St. Petersburg, Russia. The ship had been
chartered by the major customer of the Company's former food exporting
business. The Company believes, based on the facts known to date, that
the loss is covered by insurance. If the loss from the theft of
product is not covered by insurance, the Company would likely recognize
a material charge to its results of operations.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations:
- ----------------------
For the three months ended May 31, 1998, compared with
- -------------------------------------------------------
the corresponding prior period
- ------------------------------
Overview
The Company reported a consolidated first quarter net loss of $24.3
million, or $1.30 per diluted share, compared with net earnings of $2
million, or 11 cents per diluted share, a year ago. The net loss was
the result of after-tax unusual charges of $27.1 million, or $1.45 per
diluted share. Excluding the unusual charges, fiscal 1999 net earnings
increased to $2.8 million, or 15 cents per diluted share. This
increase resulted from higher operating earnings in the Company's
Multifoods Distribution Group and North America Foods business
segments, which offset the decline in Venezuela Foods' operating
results.
Unusual charges in fiscal 1999 resulted from the Company's plan to
consolidate its distribution businesses and to close a durum mill in
Venezuela. In addition, unusual charges included the write-off of
receivables from a major customer of the Company's former food
exporting business and costs associated with the Canadian frozen bakery
business. The Company expects that savings achieved in fiscal 1999
from these actions will be offset by relocation costs and other one-
time costs of the business consolidation, which will be expensed as
incurred. The Company, however, expects these actions to improve
operating earnings by $5 million to $7 million in fiscal 2000 and $11
million to $14 million in fiscal 2001. Further discussion of unusual
charges follows in Segment Results and in Note 4 to the consolidated
condensed financial statements.
Net sales for fiscal 1999 declined 1% to $661.1 million as higher
Multifoods Distribution Group net sales were offset by decreases in
North America Foods and Venezuela Foods.
Segment Results
Multifoods Distribution Group: Net sales increased 2% to $454.7 million
as a result of higher sales volumes to vending distribution's
independent customer segment. Net sales in foodservice distribution
were flat as increased sales to the pizza and Mexican customer segments
were offset by the Company's decision to relinquish several low margin
accounts. Operating earnings before unusual items increased 86% to
$6.5 million, primarily as a result of lower bad debt and
administrative expenses.
In fiscal 1999, the Company recognized an $11.5 million unusual charge
for actions associated with the Company's plan to consolidate its
vending and foodservice distribution operations into a single business.
The plan involves reducing the number of distribution centers by nine,
reducing the work force by approximately 300 employees and reducing the
vehicle fleet size by up to 10 percent. The charges cover losses on
lease commitments, employee termination benefits, costs incurred for
outside consultants and the write-down of leasehold improvements.
North America Foods: Net sales declined 4% to $110.5 million due to
lower prices that resulted from a reduction in commodity costs and from
unfavorable currency translation. The decline in net sales was
partially offset by higher sales volumes. Operating earnings before
unusual items increased 53% to $4.6 million. The increase resulted
from the higher sales volumes, improved gross margins, and lower
selling and administrative expenses. The increase in gross margins was
the result of a more favorable product mix and lower ingredient costs.
In fiscal 1999, the Company recognized an unusual charge of $7.2
million for the write-down of assets and the cost of work-force
reductions associated with its Canadian frozen bakery business. The
charge resulted from the Company's inability to sell the business at a
price acceptable to the Company and from the loss of a major customer
in May 1998. In accordance with Statement of Financial Accounting
Standards No. 121, the Company evaluated the carrying value of its
long-lived assets as a result of these recent events. The Company
estimated the fair value of the assets based on information received
from prospective buyers and in consideration of the loss of the major
customer. Accordingly, the Company recognized a $5.8 million charge to
reduce the carrying value of the assets. In addition, the unusual
charge included $1.4 million primarily for employee termination
benefits.
Venezuela Foods: Net sales declined 6% to $95.9 million primarily as a
result of a substantial decrease in consumer corn flour volumes.
Volumes were affected by a decline in the amount of corn flour the
Company was awarded to provide under a Venezuelan government subsidy
program. In the prior year first quarter, the Company supplied 100% of
the corn flour for this program. The decline in net sales was
partially offset by increased animal feed sales volumes that resulted
from a new customer. Excluding unusual charges, the business segment
recognized an operating loss of $1.3 million, compared with operating
earnings of $2.8 million last year. The operating loss resulted
primarily from a significant decline in gross margins and the lower
corn flour volumes. The gross margin decline resulted from difficult
economic conditions that prevented the Company from raising prices to
cover higher raw material and operating costs.
In fiscal 1999, the Company recognized an unusual charge of $8.5
million associated with its Venezuela Foods business. The charge
included a $5.3 million asset write-down, which resulted from the
Company's decision in May 1998 to close a durum mill. In accordance
with Statement of Financial Accounting Standards No. 121, the Company
evaluated the recoverability of the carrying value of its durum mill as
a result of its decision to close and sell the facility. The Company
estimated the fair value of the facility based on information received
from prospective buyers. In addition, the unusual charge included $3.2
million primarily for costs associated with employee severance
liabilities which resulted from a new Venezuelan law and costs
associated with the departure of the business segment's former
president.
The Company expects that the difficult economic and competitive
environment in Venezuela will continue to adversely affect the
Company's Venezuela Foods' operating results in fiscal 1999. In order
to improve operating performance, the Company is continuing to evaluate
additional opportunities to reduce costs and focus on strategies that
provide the highest possible returns to shareholders. As a result,
additional actions taken by the Company could result in material
unusual charges to the Company's results of operations.
Divested Business: The Company's Divested Business segment represents
its food exporting business, which the Company exited in fiscal 1998.
Operating earnings before unusual charges were $0.8 million, which
represented a refund of customs tax paid in prior years.
In fiscal 1999, the Company recognized an unusual charge of $10.3
million for the write-off of receivables from a major customer of its
former food exporting business. The Company had negotiated an exit
agreement with this customer in fiscal 1998, which provided for
payments to the Company for amounts due under notes and accounts
receivable. The agreement had been restructured on several occasions
because of the customer's financial difficulties. As a result of
uncertainties with respect to the customer's ability to meet its
obligations, the Company recognized a $5 million charge in the fourth
quarter of fiscal 1998. In June 1998, the Company was notified by the
customer that it would not be able to meet its obligations under the
restructured exit agreement. The Company believes the customer's
financial problems were caused by its difficulty in moving product into
the Russian marketplace and were complicated by recent economic
difficulties in Russia. Accordingly, the Company believes that
remaining amounts due from the customer are not collectible.
Non-operating Expense and Income
Net interest expense declined to $3.8 million, compared with $4.5
million last year as a result of lower debt levels.
Income Taxes
The effective tax rate on earnings before unusual items was 38% in
fiscal 1999, compared with 30% in fiscal 1998. The increase was due to
the substantial decline in Venezuela Foods' operating results, which
had a low effective tax rate in prior years. If fiscal 1999 Venezuela
Foods operating results fall below currently projected levels, the
Company's overall effective tax rate will increase from its current
level.
Financial Condition:
The debt-to-total capitalization ratio increased to 42% at May 31,
1998, compared with 38% at February 28, 1998, primarily as a result of
increased working capital requirements. Working capital requirements
increased as a result of the timing of payments. The increase in
working capital levels was partially offset by lower inventory
balances, which declined primarily because of seasonal factors in
Canada and Venezuela, and the emphasis on reducing inventory levels
throughout the Company.
The Company's $37.5 million unusual charge included $25.3 million of
non-cash costs and $12.2 million of cash outlays that are expected to
occur over the next 24 months. In addition, the Company estimates it
will incur capital expenditures of $15 million to $20 million over the
next 24 months associated with upgrading the remaining distribution
warehouse facilities. The Company plans to use future cash flows from
operations along with available external financing to fund these
estimated cash outlays.
Cautionary Statement Relevant to Forward-Looking Information
This document contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. In
addition, the Company and its representatives may from time-to-time
make written and oral forward-looking statements. These forward-
looking statements are based on current expectations or beliefs,
including, but not limited to, statements concerning the Company's
operations and financial performance and condition. For this purpose,
statements that are not statements of historical fact may be deemed to
be forward-looking statements. The Company cautions that these
statements by their nature involve risks and uncertainties, and actual
results may differ materially depending on a variety of important
factors, including, among others, the impact of competitive products
and pricing; market conditions and weather patterns that may affect the
costs of grain and other raw materials; changes in laws and
regulations; the inability of the Company to either resolve the
Company's "Year 2000" issues or to accurately estimate the cost
associated with "Year 2000" compliance; economic and political
conditions in Venezuela, including inflation, currency volatility,
possible limitations on foreign investment, exchangeability of
currency, dividend repatriation and changes in existing tax laws; the
inability of the Company to collect insurance proceeds related to the
theft of inventory from the port of St. Petersburg, Russia;
fluctuations in foreign exchange rates; the Company's ability to
realize the earnings benefits from the integration of its distribution
businesses; and other factors as may be discussed in the Company's
report on Form 10-K for the year ended February 28, 1998, and other
reports filed with the Securities and Exchange Commission.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Agreement dated June 15, 1998 between Molinos
Nacionales, C.A. and Fidias Robuste regarding
separation from employment with the Company.
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, 1998.
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 13, 1998 By:/s/ William L. Trubeck
----------------------------
William L. Trubeck
Senior Vice President - Finance and
Chief Financial Officer and
President Latin America Operations
(Principal Financial Officer and
Duly Authorized Officer)
EXHIBIT INDEX
10. Agreement dated June 15, 1998 between Molinos
Nacionales, C.A. and Fidias Robuste regarding
separation from employment with the Company.
11. Computation of Earnings (Loss) Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
Exhibit 10
Between MOLINOS NACIONALES, C.A. (MONACA), a corporation domiciled in
Puerto Cabello, Carabobo State, originally registered in the Mercantile
Registry of the First District on May 25, 1956, under No. 30, Volume
16-A, subsequently registered, due to the change of its domicile to the
city of Puerto Cabello, in the Mercantile Registry of the Judicial
District of the State of Carabobo on September 1, 1975, under No. 35,
Volume 8-C and due to restatement of its Charter/By-laws, registered in
the Third Mercantile Registry of the same District on January 7, 1988,
under No. 31, Volume 12-A, hereinafter referred to as MONACA,
represented in this act by Edgardo Rodriguez, of legal age, of this
domicile, and bearer of Identity Card No. 82.216.864, who acts duly
authorized by MONACA, according to Resolution of the Board of Directors
of MONACA No. 220, dated June 12, 1998, on the one hand; and on the
other, FIDIAS ROBUSTE, of legal age, domiciled in Caracas, Venezuela,
and bearer of Identity Card No. 14.300.736, hereinafter referred to as
THE EMPLOYEE, it has been agreed to enter into a labor settlement
contained in the following clauses:
FIRST: THE EMPLOYEE declares that he rendered services to MONACA from
May 15, 1974, to June 15, 1998, date on which the individual employment
contract was terminated by virtue of the resignation submitted by THE
EMPLOYEE from his position as President of MONACA. THE EMPLOYEE also
declares that on the date of termination of the labor relationship he
earned a monthly basic salary of US$ 12,692.00 equivalent, for the
purposes established in Article 95 of the Law of the Venezuelan Central
Bank to Bs. 6,815,604.00. THE EMPLOYEE considers that the cost-of-
living bonus that he monthly received from the Company and which equals
a monthly amount of US$ 1,934.47 equivalent, for the purposes
established in Article 95 of the Law of the Venezuelan Central Bank to
Bs. 1,040,744.80, must be added to the said salary, as well as the
value of the vehicle assigned to him by MONACA; also, a twelfth part of
the annual incentive bonus and of the vacation bonus and a third part
of the benefits paid by MONACA for the fiscal year which began on
March 1, 1998, and will end on February 28, 1999, all of which equals a
daily amount of US$ 140,49 equivalent, for the purposes established in
Article 95 of the Law of the Venezuelan Central Bank to Bs. 75,728.93
must be added to said salary. Likewise, THE EMPLOYEE considers that
the value of the cellular phone assigned to him by MONACA for his
personal use must be added to said salary, as well as the maintenance
fees which MONACA paid in order for THE EMPLOYEE to enjoy the shares of
membership of Club Valle Arriba and Club Puerto Azul; the value
representing the right of THE EMPLOYEE to be included in the
International Multifoods Corporation's stock option plan; the value of
the contributions made by MONACA to the retirement plan to which THE
EMPLOYEE is entitled, and the value of the payments effected by MONACA
in order for THE EMPLOYEE to be affiliated to a life insurance policy
and a health insurance policy. Based on the salary thus determined,
THE EMPLOYEE considers that the following benefits appertain to him by
virtue of the termination of the labor relationship: 55 days of salary
on account of seniority from June 19, 1997 to June 15, 1998, pursuant
to Article 108 of the prevailing Organic Labor Law, THE EMPLOYEE
expressly declares to have received to his satisfaction the payment,
with its corresponding interest, on account of the items contained in
letters a) and b) of Article 666 of the Organic Labor Law, 5 days of
salary on account of split vacations, pursuant to Article 225 of the
Organic Labor Law. In addition, THE EMPLOYEE claims payment of 245
days of salary on account of annual vacations pending as of the date of
termination of the labor relationship, corresponding to years 1994-
1995; 1995-1996; 1996-1997; and 1997-1998, as well as the payment of
the annual incentive bonus of the benefits in proportion to the
services rendered during the current fiscal year of MONACA. THE
EMPLOYEE claims calculation of double payment of his termination
benefits from the date when he began rendering services to MONACA to
the effective date of termination of his labor relationship, that is to
say, in addition to the seniority payment to which Article 108 of the
repealed Organic Labor Law referred, the double of said benefit and the
corresponding notice, as if termination of his employment contract had
been a consequence of a dismissal according to the provisions of
Article 125 of the repealed Organic Labor Law which was modified on
June 19, 1997, since THE EMPLOYEE states that such is the policy
governing MONACA and that he was assured that it would be applied upon
termination of his employment contract. Finally, THE EMPLOYEE claims
payment of the benefits to which he is entitled according to the
Retirement Plan of MONACA, given that THE EMPLOYEE states that he is
entitled thereto by reason of his time of service and age, requiring
that his benefit be paid as a lump-sum.
SECOND: MONACA does not accept in full the claims of THE EMPLOYEE
stated in Clause First hereof due to the following reasons: the
amounts received by THE EMPLOYEE on account of the use of the cellular
phone are not part of the salary of THE EMPLOYEE, given that the use of
the same was assigned to THE EMPLOYEE for the functions inherent in his
work and not for his personal use; also, the amounts paid by MONACA in
order for THE EMPLOYEE to be affiliated to a life insurance policy and
a health insurance policy are not part of the salary, since such
amounts were not a remuneration of the services rendered by THE
EMPLOYEE to MONACA, but an extraordinary benefit for the cases of
illness or death of THE EMPLOYEE; the maintenance fees paid by MONACA
in order for THE EMPLOYEE to enjoy the shares of membership of Club
Valle Arriba and Club Puerto Azul are not part of the salary, since
such maintenance fees were paid by MONACA in order for THE EMPLOYEE to
have access to entertainment places consistent with his managerial
status, outside work hours and they were not paid as a consideration
for the services that THE EMPLOYEE rendered to MONACA; the value of THE
EMPLOYEE's right to be included in the International Multifoods
Corporation's stock option plan is not part of the salary, firstly,
since said benefit was granted to THE EMPLOYEE by a legal person other
than MONACA, and which was not his employer, and secondly, because the
possible benefit to be derived from such stock option plan is the
possibility of selling the shares that THE EMPLOYEE might have bought
according to the conditions of the plan at a higher price, which would
result in a commercial profit for THE EMPLOYEE; the value of the
contributions made by MONACA to the retirement plan to which THE
EMPLOYEE is entitled is not part of the salary, since such
contributions were not delivered to THE EMPLOYEE, he might not dispose
of the same, and said contributions were not a remuneration for the
services rendered by THE EMPLOYEE. The purpose of said contributions
was to form the sufficient reserves for the payment of the
indemnification provided for in the pension fund that THE EMPLOYEE was
to receive upon the effective termination of the labor relationship and
not during the same. Finally, the cost-of-living bonus monthly paid by
MONACA to THE EMPLOYEE is not part of the salary of THE EMPLOYEE, given
that said bonus is not a remuneration of the services rendered by THE
EMPLOYEE to MONACA. The purpose of said bonus was to offer THE
EMPLOYEE access to a living standard consistent with that which MONACA
deems that its executives must enjoy. Likewise, MONACA rejects that
THE EMPLOYEE is entitled to the calculation of his termination benefits
as if he had been unjustifiably dismissed, given that THE EMPLOYEE was
an employee of direction and, as such, excluded from the scope of
application of the provisions on job security of the Organic Labor Law
and, moreover, given that MONACA does not have any policy establishing
said right for its employees, and if there had existed one, the same
has been fully repealed by virtue of the modification of the Organic
Labor Law in relation to the system of termination benefits. It must
be stated that THE EMPLOYEE accepted to be governed by the new system
of termination benefits when he received the full payment on account of
seniority until June 19, 1997, and of the transfer bonus. Therefore,
THE EMPLOYEE may not claim now the application of provisions of the
repealed system of termination benefits in addition to those of the new
system. MONACA rejects that THE EMPLOYEE is entitled to payment of the
annual incentive bonus of 1998, since the annual incentive bonus is
granted only for services rendered by any employee during the whole
fiscal year of MONACA, which is not the case of THE EMPLOYEE, who,
consequently, is not entitled to receive any annual incentive bonus in
proportion to the services rendered during the current fiscal year of
MONACA. Finally, MONACA rejects to owe any moneys on account of
seniority pay in accordance with Article 108 of the Organic Labor Law,
nor on account of interest on the same, since the amounts caused on
such account have been deposited by MONACA in THE EMPLOYEE'S trust
account with Banco Provincial, by virtue of the trust agreement entered
into between THE EMPLOYEE and said banking institution which, in
consequence, is the sole responsible entity for the payment of said
benefits and interest. Therefore, MONACA owes nothing to THE EMPLOYEE
on said account.
THIRD: Notwithstanding the foregoing, the parties, in order to avoid
any litigation between them, as well as the possible institution of a
judicial proceeding with all the costs, attorney fees, delays, damages
and losses that the same might cause to them, agree to enter into the
following settlement: MONACA agrees to pay THE EMPLOYEE, for any and
all items claimed by the same in Clause First hereof, the amount of
NINE HUNDRED NINETY-EIGHT THOUSAND ONE HUNDRED FORTY-EIGHT DOLLARS AND
FIFTEEN CENTS OF THE UNITED STATES OF AMERICA (US$ 998,148.15), which
for the purposes established in Article 95 of the Law of the Venezuelan
Central Bank is equivalent to the amount of Bs. 536,005,556.55, and
which shall be transferred, following THE EMPLOYEE's instructions, to
account No. 125767306 with Santander Global Bank, Miami office and the
amount of THIRTY-ONE MILLION TWO HUNDRED THIRTY-TWO THOUSAND EIGHT
HUNDRED FORTY-NINE BOLIVARS AND TWENTY-EIGHT CENTS (Bs. 31,232,849.28),
from which sum the following amounts must be deducted: Bs. 527,049.00,
on account of 1998-1999 vehicle insurance policy, Bs. 1,802,737.35, on
account of Income Tax, and Bs. 1,100,537.00 which is the price agreed
by MONACA to sell to THE EMPLOYEE a Century vehicle, year 1993. Such
sale shall be performed through a separate document. Therefore, a net
amount remains in favor of THE EMPLOYEE of Bs. 27,802,525.93, which is
paid to THE EMPLOYEE as follows: Bs. 15,435,583.00, by means of a set-
off of the credits which for the same amount MONACA granted to THE
EMPLOYEE for the acquisition of shares of membership of Valle Arriba
Golf Club and Puerto Azul Club and the balance, that is to say, Bs.
12,366,942.93, by means of a transfer, following instructions from THE
EMPLOYEE, to current account No. 301-26886-U with Banco Provincial.
Finally, MONACA agrees to grant THE EMPLOYEE as a part of this
settlement the following benefits: 1) MONACA agrees to pay fifty
percent (50%) of the value of a premium of a basic medical expenses
policy which covers THE EMPLOYEE for the rest of his life, for up to
the amount of Bs. 2,000,000.00 of coverage per year, with an excess
coverage for up to a maximum of US$50,000.00, which for the purposes
established in Article 95 of the Law of the Venezuelan Central Bank is
equivalent to the amount of Bs. 27,000,000.00 always provided that THE
EMPLOYEE pays the remaining fifty percent (50%) of the value of said
premium; 2) MONACA will continue to pay the total value of the premium
of the life insurance policy of THE EMPLOYEE for up to the amount of
Bs. 5,000,000.00 of coverage; 3) MONACA binds itself to pay the
airplane ticket, hotel and other reasonable expenses incurred by THE
EMPLOYEE on account of one (1) trip from Caracas to Minneapolis,
Minnesota, United States of America and the corresponding trip back of
THE EMPLOYEE, who will travel within a period of twelve months as from
June 15, 1998; and 4) MONACA will pay the cost of two (2) executive
medical examination for THE EMPLOYEE at the Mayo Clinic located in
Jacksonville, Florida, United States of America, as well as the
expenses corresponding to the Caracas-Jacksonville airplane tickets to
be acquired so that THE EMPLOYEE may travel to undergo such
examinations. THE EMPLOYEE may undergo said examinations at any time
of his life.
FOURTH: The parties declare to be mutually satisfied with this
settlement and they declare that they have nothing to claim for any
matter derived or not from this settlement or from the labor
relationship existing between them until June 15, 1998. They agree
that this settlement will have the effect of the matter decided, in
order to which said parties will attend the Labor Inspector's Office of
the corresponding jurisdiction, so that said Office may issue its
approval, pursuant to the provision of Article 3 of the Organic Labor
Law.
FIFTH: THE EMPLOYEE declares that no other claims will be made to
MONACA or to any other company, subsidiary or affiliate of MOLINOS
NACIONALES C.A. or of INTERNATIONAL MULTIFOODS CORPORATION, or to any
subsidiary or affiliate of said companies, since this document
constitutes a total and final release of any possible obligations that
said companies may have had with THE EMPLOYEE as of the date hereof.
This Agreement is signed in four (4) counterparts in Caracas, on the
fifteenth day in the month of June, Nineteen Hundred Ninety-Eight.
/s/ Edgardo Rodriguez
/s/ Fidias Robuste
REPUBLIC OF VENEZUELA. THIRD NOTARY PUBLIC'S OFFICE OF THE
MUNICIPALITY OF CHACAO OF MIRANDA STATE, formerly Seventh Notary
Public's Office of Chacao, Los Palos Grandes, June 15, Nineteen Hundred
and Ninety-Eight, 188 degrees and 139 degrees. The foregoing document
drawn up by lawyer OSCAR J. TORRES, registered in the Inpreabogado
under No. 20.487 was presented to be authenticated and returned, as per
form No. 89762, dated 06-15-1998. The parties executing the document
being present, they stated that their names were EDGARDO RODRIGUEZ AND
FIDIAS ROBUSTE VENTURA, of legal age, holders of Identity Cards Nos.
82.216.864 and 14.300.736, both divorced, an American and a Venezuelan,
domiciled in Caracas, respectively. The document having been read to
them and compared to its copies before the Notary, they stated: "IT'S
CONTENT IS TRUE AND OURS THE SIGNATURES THAT APPEAR AT THE BOTTOM
THEREOF". The Notary, by virtue whereof, declares it authenticated in
the presence of witnesses JUAN CARLOS ARAQUE and ALEXANDRA MILANO,
holders of Identity Card Nos. 12.112.219 and 6.902.079 and the document
was recorded under No. 70, Volume 92 of the Books of Authentication
kept by this Notary Public's Office. The Notary certifies that she saw
the Charter of MOLINOS NACIONALES C.A., registered in the Mercantile
Registry of the First District of Puerto Cabello, Carabobo State, on
05-25-1956, under No. 30, Volume 16-A and resolution of the Board of
Directors of MONACA, No. 220, dated 06-12-1998. According to Article
35 of the Law on Fiscal Stamps, the corresponding fiscal stamps were
invalidated in the original counterpart. The Notary Public's Office
was convened at Centro Colgate, piso 4, Los Ruices, at 4:30.
THE NOTARY
Dr. Isabel Aleala Perdomo
Third Notary Public of the Municipality
of Chacao
THE EXECUTING PARTIES
THE WITNESSES
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,
1998 1997
- -----------------------------------------------------------------------
Average shares of
common stock outstanding 18,765 18,016
Common stock equivalents - 103
- -----------------------------------------------------------------------
Total common stock and equivalents
assuming full dilution 18,765 18,119
=======================================================================
Net earnings (loss)
applicable to common stock $(24,301) $ 2,000
=======================================================================
Earnings (loss) per
share of common stock:
Basic $ (1.30) $ .11
Diluted $ (1.30) $ .11
=======================================================================
Basic earnings (loss) per share are computed by dividing net earnings (loss)
by the weighted average number of shares of common stock outstanding during
the period.
Diluted earnings per share are computed similar to basic earnings per share
except that the weighted average shares outstanding are increased to include
additional shares from the assumed exercise of stock options, if dilutive.
The number of additional shares is calculated by assuming that outstanding
stock options were exercised and the proceeds from such exercises were used
to acquire shares of common stock at the average market price during the
period.
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,
1998 1997
- -----------------------------------------------------------------------
Earnings (loss) before income taxes $(32,902) $ 2,857
Plus: Fixed charges (1) 6,078 7,766
Less: Capitalized interest - (9)
- -----------------------------------------------------------------------
Earnings available to cover
fixed charges (2) N/A $10,614
=======================================================================
Ratio of earnings to fixed charges (2) N/A 1.37
=======================================================================
(1) Fixed charges consisted of the following:
THREE MONTHS ENDED
-----------------
May 31, May 31,
1998 1997
- ----------------------------------------------------------------------
Interest expense, gross $3,833 $5,422
Rentals (Interest factor) 2,245 2,344
- ----------------------------------------------------------------------
Total fixed charges $6,078 $7,766
======================================================================
(2) For the three months ended May 31, 1998, earnings were inadequate to cover
fixed charges by $32,902. The deficiency was the result of unusual items as
described in Note 4 to the consolidated condensed financial statements.
Excluding unusual items, the ratio of earnings to fixed charges would have
been 1.75 for the three months ended May 31, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF OPERATIONS AND CASH
FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAY-31-1998
<CASH> 5,985
<SECURITIES> 0
<RECEIVABLES> 146,731
<ALLOWANCES> 3,666
<INVENTORY> 226,473
<CURRENT-ASSETS> 447,019
<PP&E> 351,286
<DEPRECIATION> 149,847
<TOTAL-ASSETS> 767,435
<CURRENT-LIABILITIES> 280,237
<BONDS> 162,847
0
0
<COMMON> 2,184
<OTHER-SE> 278,256
<TOTAL-LIABILITY-AND-EQUITY> 767,435
<SALES> 661,123
<TOTAL-REVENUES> 661,123
<CGS> 612,839
<TOTAL-COSTS> 612,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 211
<INTEREST-EXPENSE> 3,833
<INCOME-PRETAX> (32,902)
<INCOME-TAX> (8,601)
<INCOME-CONTINUING> (24,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,301)
<EPS-PRIMARY> (1.30)
<EPS-DILUTED> (1.30)
</TABLE>
