SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number
1-6699
INTERNATIONAL MULTIFOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-0871880
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 September 30, 1999 was 18,739,213.
PART I. FINANCIAL INFORMATION
-----------------------------
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ------------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
Net sales $ 568,709 $ 547,086 $1,157,524 $1,112,273
Cost of materials and
production (485,084) (467,956) (989,462) (952,006)
Delivery and distribution (41,163) (36,483) (81,751) (72,807)
- -------------------------------------------------------------------------------
Gross profit 42,462 42,647 86,311 87,460
Selling, general
and administrative (31,512) (32,540) (65,094) (67,453)
Unusual items - - - (28,963)
- -------------------------------------------------------------------------------
Operating earnings (loss) 10,950 10,107 21,217 (8,956)
Interest, net (2,495) (2,221) (5,182) (5,026)
Other income (expense), net (245) (239) (466) (499)
- -------------------------------------------------------------------------------
Earnings (loss) from
continuing operations
before income taxes 8,210 7,647 15,569 (14,481)
Income taxes (3,119) (3,059) (5,916) 4,454
- -------------------------------------------------------------------------------
Earnings (loss) from
continuing operations 5,091 4,588 9,653 (10,027)
- -------------------------------------------------------------------------------
Discontinued operations:
Operating loss, after tax - (4,382) - (14,068)
Net loss on disposition,
after tax (11,760) (114,854) (19,560) (114,854)
- -------------------------------------------------------------------------------
Loss from discontinued
operations (11,760) (119,236) (19,560) (128,922)
- -------------------------------------------------------------------------------
Net loss $ (6,669) $(114,648) $ (9,907) $ (138,949)
===============================================================================
Basic earnings (loss) per
share:
Continuing operations $ .27 $ .24 $ .51 $ (.53)
Discontinued operations (.63) (6.35) (1.04) (6.87)
- -------------------------------------------------------------------------------
Total $ (.36) $ (6.11) $ (.53) $ (7.40)
===============================================================================
Diluted earnings (loss) per
share:
Continuing operations $ .27 $ .24 $ .51 $ (.53)
Discontinued operations (.62) (6.30) (1.04) (6.87)
- -------------------------------------------------------------------------------
Total $ (.35) $ (6.06) $ (.53) $ (7.40)
===============================================================================
Average shares of common
stock outstanding:
Basic 18,749 18,769 18,752 18,766
Diluted 18,848 18,930 18,847 18,766
- -------------------------------------------------------------------------------
Dividends per share of
common stock $ .20 $ .20 $ .40 $ .40
- -------------------------------------------------------------------------------
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
Aug. 31, Feb. 28,
1999 1999
- -----------------------------------------------------------------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 6,566 $ 13,495
Trade accounts receivable, net 133,028 124,843
Inventories 178,517 162,414
Other current assets 51,702 39,315
- -----------------------------------------------------------------------
Total current assets 369,813 340,067
- -----------------------------------------------------------------------
Property, plant and equipment, net 176,074 165,161
Goodwill, net 80,928 82,089
Net noncurrent assets of
discontinued operations - 44,905
Other assets 87,927 64,711
- -----------------------------------------------------------------------
Total assets $714,742 $696,933
=======================================================================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Notes payable $ 65,325 $ 32,489
Current portion of long-term debt 10,500 2,750
Accounts payable 167,426 161,700
Net current liabilities of discontinued
operations - 9,079
Other current liabilities 52,094 58,227
- -----------------------------------------------------------------------
Total current liabilities 295,345 264,245
- -----------------------------------------------------------------------
Long-term debt 121,199 121,199
Employee benefits and other liabilities 54,219 51,173
- -----------------------------------------------------------------------
Total liabilities 470,763 436,617
- -----------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Accumulated other comprehensive loss (16,072) (17,215)
Other shareholders' equity 257,867 275,347
- -----------------------------------------------------------------------
Total shareholders' equity 243,979 260,316
- -----------------------------------------------------------------------
Commitments and contingencies
- -----------------------------------------------------------------------
Total liabilities and shareholders' equity $714,742 $696,933
=======================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
(in thousands)
SIX MONTHS ENDED
--------------------
Aug. 31, Aug. 31,
1999 1998
- --------------------------------------------------------------------------
Cash flows from operations:
Earnings(loss) from continuing operations $ 9,653 $(10,027)
Adjustments to reconcile earnings(loss) from
continuing operations to cash provided by
(used for) continuing operations:
Depreciation and amortization 10,923 11,357
Deferred income tax expense (benefit) 1,430 (9,913)
Provision for unusual charges - 28,963
Changes in working capital:
Accounts receivable (8,006) (6,508)
Inventories (15,607) (9,260)
Other current assets (6,539) (3,648)
Accounts payable 5,392 25,263
Other current liabilities (1,778) (17,703)
Other, net (3,127) (1,777)
- --------------------------------------------------------------------------
Cash provided by (used for) continuing
operations (7,659) 6,747
Cash used for discontinued operations (10,937) (10,944)
- --------------------------------------------------------------------------
Cash used for operations (18,596) (4,197)
- --------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (21,857) (8,747)
Purchase of Venezuela operations assets (15,799) -
Proceeds from property disposals 2,620 1,424
Discontinued operations 38,098 (3,542)
- --------------------------------------------------------------------------
Cash provided by (used for) investing
activities 3,062 (10,865)
- --------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 33,464 30,359
Net increase(decrease) in long-term debt 7,670 (19,756)
Dividends paid (7,489) (7,510)
Proceeds from issuance of common stock 811 3,391
Purchase of treasury stock (1,545) (4,617)
Discontinued operations (26,195) 17,175
Other, net 2,157 (15)
- --------------------------------------------------------------------------
Cash provided by
financing activities 8,873 19,027
- --------------------------------------------------------------------------
Decrease in cash from discontinued operations (263) (1,193)
- --------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (5) (13)
- --------------------------------------------------------------------------
Net increase(decrease)in cash and cash equivalents (6,929) 2,759
Cash and cash equivalents at beginning of period 13,495 9,126
- --------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 6,566 $ 11,885
==========================================================================
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 August 31, 1999, and the
results of its operations for the three and six months ended August 31,
1999 and 1998, and cash flows for the six months ended August 31, 1999
and 1998. 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, 1999. The results of operations for the
three and six months ended August 31, 1999, are not necessarily indicative
of the results to be expected for the full year.
(2) New accounting pronouncement - In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that companies
record derivative instruments on the consolidated balance sheet at their
fair value. Changes in fair value will be recorded each period in
earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. Gains and losses on derivative
instruments reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the hedged
item.
In June 1999, the FASB deferred the effective date for implementing
SFAS 133. The Company now must adopt the standard no later than
March 1, 2001.
(3) Discontinued operations - In fiscal 1999, the Company recognized
an estimated loss of $124.6 million for the planned disposition of its
Venezuela Foods business. The disposition loss consisted of $93.3
million for the recognition of the unrealized foreign currency
translation losses previously included as a separate component of
shareholders' equity, a provision of $22.0 million for operating losses
from the measurement date (July 31, 1998) to expected disposal date, and
a $9.3 million loss on disposal. The loss on disposal of $9.3 million was
based on selling the business at net book value during fiscal 2000, with
the loss resulting from estimated transaction costs and taxes.
In the first quarter of fiscal 2000, the Company recorded an after-tax
charge of $7.8 million to discontinued operations. The charge consisted
of a $4.0 million loss on the June 1999 sale of the Venezuelan
agriculture and animal feeds business and a $3.8 million provision
resulting from higher-than-expected operating losses. The additional
operating loss provision was necessary as the first-quarter operating
results of the agriculture and animal feeds business were substantially
below the results previously forecasted. In addition, the Company also
adjusted its provision for estimated future net losses of the remaining
Venezuelan operations.
In the second quarter of fiscal 2000, the Company recorded an additional
after-tax charge of $11.8 million from the August 1999 sale of its Venezuela
consumer and commercial foods business to Gruma S.A. de C.V. (Gruma). The
additional charge resulted primarily from a higher-than-expected loss on
the sale transaction, and a write-down of certain receivables and
properties in Venezuela that were retained by the Company. The Company
received an $18.96 million note from Gruma, payable over five years at
an annual interest rate of 7.5%, and Gruma paid off or assumed debt
obligations of the Venezuelan business totaling $55.5 million, which
comprised all of the Company's outstanding Venezuelan debt. The Company,
however, retained $11.9 million of Venezuelan receivables and properties,
which are expected to be collected or liquidated over the next 18 months.
The sales transactions complete the Company's divestiture of its Venezuela
Foods business.
(4) Comprehensive loss - The components of total comprehensive loss were
as follows:
Three Months Ended Six Months Ended
------------------ ------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
(in thousands) 1999 1998 1999 1998
- ------------------------------------------------------------------------------
Net loss $(6,669) $(114,648) $(9,907) $(138,949)
Foreign currency translation
adjustments (973) (5,479) 1,143 (7,422)
Reclassification adjustment due to
foreign currency translation
adjustment recognized - 93,351 - 93,351
- ------------------------------------------------------------------------------
Comprehensive loss $(7,642) $ (26,776) $(8,764) $ (53,020)
==============================================================================
(5) Unusual items - In fiscal 1999, the Company's continuing operations
recognized unusual items that resulted in pre-tax charges of $29.0
million. These unusual charges were related to the Company's plan to
consolidate its two distribution businesses, the write-off of
receivables from a major customer of the Company's former food-exporting
business, and the write-down of assets and costs associated with the Canadian
frozen bakery business. The liability balances as of August 31, 1999, were as
follows:
<TABLE>
Employee
Termination Lease
Benefits and Commitment
(in millions) Other Costs Total
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Liability balance as of February 28, 1999 $ 2.5 $ 1.6 $ 4.1
Cash payments (0.7) (0.3) (1.0)
- -----------------------------------------------------------------------------------
Liability balance as of August 31, 1999 $ 1.8 $ 1.3 $ 3.1
===================================================================================
</TABLE>
(6) Interest, net
Three Months Ended Six Months Ended
--------------------- --------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
(in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
Interest expense $3,078 $2,513 $5,953 $5,359
Capitalized interest (205) (31) (329) (31)
Non-operating interest income (378) (261) (442) (302)
- -------------------------------------------------------------------------------
Interest, net $2,495 $2,221 $5,182 $5,026
===============================================================================
Cash payments for interest, net of amounts capitalized, were $5.5
million and $5.7 million for the six months ended August 31, 1999 and
1998, respectively.
(7) Income taxes - Cash payments for income taxes were $4.0 million and
$8.5 million for the six months ended August 31, 1999 and 1998,
respectively.
(8) Supplemental balance sheet information
Aug. 31, Feb. 28,
(in thousands) 1999 1999
- ---------------------------------------------------------------------------
Trade accounts receivable, net:
Trade $ 136,062 $ 127,877
Allowance for doubtful accounts (3,034) (3,034)
- ---------------------------------------------------------------------------
Total trade accounts receivable, net $ 133,028 $ 124,843
===========================================================================
Inventories:
Raw materials, excluding grain $ 13,934 $ 12,742
Grain 3,631 2,745
Finished and in-process goods 155,224 142,122
Packages and supplies 5,728 4,805
- ---------------------------------------------------------------------------
Total inventories $ 178,517 $ 162,414
===========================================================================
Property, plant and equipment, net:
Land $ 12,163 $ 12,398
Buildings and improvements 82,617 82,766
Machinery and equipment 198,643 191,504
Transportation equipment 1,304 1,451
Improvements in progress 23,459 12,020
- ---------------------------------------------------------------------------
318,186 300,139
Accumulated depreciation (142,112) (134,978)
- ---------------------------------------------------------------------------
Total property, plant and equipment, net $ 176,074 $ 165,161
===========================================================================
Accumulated other comprehensive loss:
Foreign currency translation adjustment $ (12,661) $ (13,804)
Minimum pension liability adjustment (3,411) (3,411)
- ---------------------------------------------------------------------------
Total accumulated other comprehensive loss $ (16,072) $ (17,215)
===========================================================================
<TABLE>
(9) Segment information
Operating
Net Operating Unusual Earnings
(in millions) Sales Costs Items (Loss)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three Months Ended Aug. 31, 1999
Multifoods Distribution Group $ 452.5 $ (447.7) $ - $ 4.8
North America Foods 116.2 (108.2) - 8.0
Corporate Expenses - (1.9) - (1.9)
- --------------------------------------------------------------------------------
Total $ 568.7 $ (557.8) $ - $10.9
================================================================================
Three Months Ended Aug. 31, 1998
Multifoods Distribution Group $ 442.1 $ (436.6) $ - $ 5.5
North America Foods 105.0 (98.1) - 6.9
Corporate Expenses - (2.3) - (2.3)
- --------------------------------------------------------------------------------
Total $ 547.1 $ (537.0) $ - $10.1
================================================================================
Six Months Ended Aug. 31, 1999
Multifoods Distribution Group $ 924.5 $ (913.4) $ - $11.1
North America Foods 233.0 (218.7) - 14.3
Corporate Expenses - (4.2) - (4.2)
- --------------------------------------------------------------------------------
Total $1,157.5 $(1,136.3) $ - $21.2
================================================================================
Six Months Ended Aug. 31, 1998
Multifoods Distribution Group $ 896.8 $ (884.8) $(11.5) $ .5
North America Foods 215.5 (204.0) (7.2) 4.3
Divested Business - .8 (10.3) (9.5)
Corporate Expenses - (4.3) - (4.3)
- --------------------------------------------------------------------------------
Total $1,112.3 $(1,092.3) $(29.0) $(9.0)
================================================================================
</TABLE>
(10) 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 a 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)
In the second quarter ended August 31, 1999, the Company completed the
sale of its Venezuela Foods business. The business segment has been
classified as discontinued operations in the consolidated financial
statements and in the following management discussion and analysis.
Results of Operations:
- ----------------------
Overview
For the second quarter ended August 31, 1999, the net loss from
continuing and discontinued operations totaled $6.7 million, or 35 cents
per diluted share. The net loss resulted from an $11.8 million charge to
adjust the estimated loss from discontinued operations. The
adjustment was due to a higher-than-expected loss on the sale of the
Venezuelan business and a write-down of certain Venezuelan assets
retained by the Company. The retained assets include receivables and
properties that are expected to be collected or liquidated over the next
18 months. Further information on the Company's Venezuelan business
follows in the discussion of Discontinued Operations.
For the six months ended August 31, 1999, the net loss from continuing
and discontinued operations totaled $9.9 million, or 53 cents per
diluted share. The net loss resulted from a $19.6 million charge to
discontinued operations.
Continuing Operations
Earnings from continuing operations in the second quarter were $5.1
million, or 27 cents per share, compared with $4.6 million, or 24 cents
per share, a year ago. The increase was primarily due to higher
operating earnings in the North America Foods business segment, which
more than offset an earnings decline in Multifoods Distribution Group
resulting from higher delivery and distribution expenses.
For the six-month periods ended August 31, 1999 and 1998, the Company
reported earnings of $9.7 million, or 51 cents per share, compared with
a loss of $10 million, or 53 cents per share. Prior-year results were
affected by after-tax unusual charges of $18.7 million, or $1 per share.
Segment Results
Multifoods Distribution Group: Net sales in the second quarter increased
2% to $452.5 million, as a result of higher sales volumes to independent
vending operators and sandwich shops. The increase was partially offset
by a decline in sales to pizza restaurants. Operating earnings declined
13% to $4.8 million, because of increased labor and delivery costs
associated with the Company's distribution center consolidations and
information systems conversion. The Company expects that these increased
costs will continue to adversely affect the segment's operating results
for the balance of the fiscal year. The decline in operating earnings,
however, was partially offset by lower administrative costs.
Net sales for the six-month period increased 3% to $924.5 million.
Operating earnings before unusual items declined 8% to $11.1 million,
compared with $12 million last year. Net sales and operating earnings
were affected by the same factors described above for the second
quarter.
Last year, the Company recognized an unusual charge of $11.5 million for
actions associated with the Company's plan to consolidate its vending and
foodservice operations into a single business. The Company expects that
high delivery and distribution costs will offset the operating earnings
benefits this year from the consolidation program. The Company continues
to expect the consolidation plan to provide long-term annualized
improvement in operating earnings of $9 million to $12 million from
additional capacity to grow sales and cost-savings. The timing of
achieving these full benefits, however, is expected to be delayed a
year to fiscal 2002.
The Company is in the process of assessing its consolidation plan due
to the planned acquisition of a foodservice distribution business in
the Northeast United States, strong growth potential and strategic
opportunities in certain markets. The Company expects to complete its
assessment of the consolidation plan during the third quarter of fiscal
2000. If changes are made to the consolidation plan, the Company would
likely recognize an unusual gain from the reversal of certain unusual
charges recognized last year.
North America Foods: Net sales in the second quarter increased 11% to
$116.2 million, primarily due to higher sales volumes across most
product lines. Sales of U.S. bakery products were up 21% in the
quarter, primarily because of additional business with large in-store
bakery chains. Operating earnings increased 16% to $8 million from the
higher sales volume.
Net sales for the six-month period increased 8% to $233 million,
compared with $215.5 million last year. Operating earnings before
unusual items increased 24% to $14.3 million, compared with $11.5
million last year. Net sales and operating earnings were affected by
the same factors described above for the second quarter. The increase
in operating earnings as a percent of sales resulted primarily from the
effects of spreading fixed expenses over the higher sales volume.
Last year 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.
Non-operating Expense and Income
Second quarter net interest expense for continuing operations increased
to $2.5 million, from $2.2 million last year. The increase was the
result of higher debt levels caused by increased working capital
requirements and capital expenditures. For the six-month periods, net
interest expense increased to $5.2 million, up from $5 million last
year.
Interest expense for continuing operations excludes interest associated
with debt obligations of the Company's discontinued Venezuela Foods
business. Interest expense classified in discontinued operations for
the six months ended August 31, 1999 and 1998, were $2.6 million and $2
million, respectively.
Discontinued Operations
In fiscal 1999, the Company recognized an estimated loss of $124.6
million for the planned disposition of its Venezuela Foods business.
The disposition loss consisted of $93.3 million for the recognition of
the unrealized foreign currency translation losses previously included
as a separate component of shareholders' equity, a provision of $22
million for operating losses from the measurement date (July 31,1998)
to the expected disposal date, and a $9.3 million loss on disposal. The
loss on disposal of $9.3 million was based on selling the business at
net book value during fiscal 2000, with the loss resulting from
estimated transaction costs and taxes.
In the first quarter of fiscal 2000, the Company recorded a charge of
$7.8 million to discontinued operations. The charge consisted of a $4
million loss on the June 1999 sale of the Venezuelan agriculture and
animal feeds business and a $3.8 million provision resulting from
higher-than-expected operating losses. The additional operating loss
provision was necessary as the first-quarter operating results of the
agriculture and animal feeds business were substantially below the
results previously forecasted. In addition, the Company also adjusted
its provision for estimated future net losses of the remaining
Venezuelan operations.
In the second quarter of fiscal 2000, the Company recorded an additional
charge of $11.8 million from the August 1999 sale of its Venezuelan consumer
and commercial foods business to Gruma S.A. de C.V. (Gruma). The additional
charge resulted primarily from a higher-than-expected loss on the sale
transaction, and a write-down of certain receivables and properties in
Venezuela that were retained by the Company.
Financial Condition:
- --------------------
The debt-to-total capitalization ratio increased to 45% at August 31,
1999, compared with 38% at February 28, 1999. The ratio at February 28,
1999, excludes debt obligations of the Company's Venezuelan business,
as such obligations were expected to be assumed by a buyer and were
classified as net assets of discontinued operations. The increase in
the debt-to-total capitalization ratio was primarily the result of a
seasonal increase in working capital and capital expenditures.
On August 18,1999, the Company completed the sale of its Venezuelan
consumer and commercial foods business to Gruma. The Company received
an $18.96 million note from Gruma, payable over five years at an annual
interest rate of 7.5%, and Gruma paid off or assumed debt obligations
of the Venezuelan business totaling $55.5 million. The Company, however,
retained $11.9 million of Venezuelan receivables and properties, which
are expected to be collected or liquidated over the next 18 months. On
June 3, 1999, the Company sold its Venezuelan agriculture and animal feeds
business for $27.5 million in cash. Proceeds were used to reduce debt
obligations of the Venezuelan business. The sales transactions complete
the Company's divestiture of its Venezuela Foods business.
On September 21, 1999, the Company announced that it had signed a
definitive agreement to acquire the assets of Better Brands, Inc., for
approximately $26 million in cash. Better Brands is a Connecticut-based
broadline foodservice distributor with annual sales of approximately
$85 million. The transaction is expected to be completed by the end
of October, subject to regulatory approval. The Company will fund the
acquisition with available external borrowing sources.
Year 2000
- ---------
The Company is actively addressing the Year 2000 issue. Each of the
Company's businesses has had Year 2000 project teams in place for
approximately 24 months or longer. Each team has developed and adopted
a plan of action to deal with the problems posed by the millennium
change. There is a companywide Year 2000 Project Committee to oversee
the activities and the progress of each of the business-unit teams.
Each of the plans is monitored on an ongoing basis, and a status report
is distributed to senior management and the board of directors each
month.
Multifoods Distribution Group has completed a comprehensive inventory
and review of both computer systems and non-computer systems that could
include some type of embedded technology. An implementation plan
addressing these issues was developed for Year 2000 compliance for all
computer and non-computer systems. This plan includes detailed testing
and implementation of both packaged and custom-developed software
systems at all locations. Based upon preliminary tests, the Company
believes that these systems are Year 2000 compliant. Detailed testing
of these systems is underway, and it is anticipated that this testing
and the full implementation of these Year 2000 compliant systems will
be completed by October 31, 1999. The testing and implementation of
these systems fulfills critical business needs and provides Year 2000
compliance. The non-computer systems have been inventoried and
evaluated, and the critical systems tested. The Company believes that
there are no critical deficiencies in these systems. The testing of
these systems for Year 2000 compliance did not displace projects of a
more critical nature. The costs associated with Year 2000 testing are
not expected to be material to the Company's results of operations.
North America Foods has completed a comprehensive review of both
computer systems and non-computer systems that could include some type
of embedded technology. An implementation plan addressing these issues
was developed for Year 2000 compliance for all computer and non-computer
systems. Progress towards compliance is substantially complete in
accordance with the established implementation plan. This plan includes
upgrading existing packaged software in the United States and Canada, as
well as testing all systems for Year 2000 compliance. The successful
upgrading and testing of these packaged systems has been completed in the
United States and Canada. The upgrading of the packaged software systems
was driven by business needs, as well as Year 2000 issues. The non-
computer systems have been inventoried and evaluated, and the critical
systems tested. The Company believes that there are no critical
deficiencies in these systems. The costs associated with upgrading
the packaged systems and testing all systems are not expected to be
material to the Company's results of operations.
Multifoods Distribution Group and North America Foods are in the process
of evaluating critical vendors, suppliers and customers, and developing
appropriate contingency plans. Information from critical business
partners has been solicited and evaluated, and additional information
requested where appropriate. The Company continues to evaluate the Year
2000 readiness of its business partners and the critical nature of its
customers and suppliers. Based upon this analysis, the Company will
develop contingency plans, where appropriate. It is anticipated that
these contingency plans will be completed by October 31, 1999.
The Company believes that by upgrading the existing packaged software,
the Year 2000 issue will not create significant operational problems.
Based upon the evaluation and testing completed at this time, the
Company does not anticipate any significant Year 2000 issues with non-
computer systems. The Company continues to monitor and assess the Year
2000 readiness of its critical vendors, suppliers and customers, and
will develop contingency plans, where appropriate and necessary. All
Year 2000 projects are proceeding according to current schedules and
plans; however, if there are any significant delays in their completion
or if major suppliers or customers experience Year 2000 issues with
their systems that the Company does not anticipate, the Year 2000 issue
may have a material effect on the operations of the Company.
Cautionary Statement Relevant to Forward-Looking Information
- ------------------------------------------------------------
This document contains 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, cheese and other raw materials; changes in laws and regulations;
the inability of the Company or its business partners to resolve "Year 2000"
issues or the inability of the Company to accurately estimate the cost
associated with "Year 2000" compliance; the Company's ability to realize
the book value of its remaining Venezuelan assets; the Company's ability
to realize the earnings benefits from the distribution group's consolidation
and expansion plans; the inability of the Company to collect on a $6 million
insurance claim related to the theft of product in St. Petersburg, Russia;
fluctuations in foreign exchange rates; risks commonly encountered in
international trade; and other factors as may be discussed in the Company's
report on Form 10-K for the year ended February 28, 1999, and other reports
filed with the Securities and Exchange Commission.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1999 Annual Meeting of Stockholders of International
Multifoods Corporation (the "Company") was held on June 18, 1999 (the
"Annual Meeting"). Holders of the Company's common stock, par value
$.10 per share, of record on May 3, 1999, were entitled to one vote
per share.
(c) At the Annual Meeting, Robert M. Price and Richard K.
Smucker were elected directors for a term of three years. The number
of votes cast for the election of each director and the number of votes
withheld are as follows:
FOR WITHHELD
Robert M. Price 17,071,732 228,504
Richard K. Smucker 17,126,496 173,740
The other directors whose terms of office as directors continued after
the meeting were Claire L. Arnold, Gary E. Costley, Nicholas L. Reding,
Jack D. Rehm, Lois D. Rice and Dolph W. von Arx.
With respect to the proposal to approve the appointment of KPMG
Peat Marwick LLP as independent auditors of the Company for the fiscal
year ending February 29, 2000, there were 17,229,571 votes cast for the
proposal, 24,255 votes cast against the proposal and 46,410 abstentions.
There were no broker nonvotes with respect to such matter.
Item 5. Other Information
Stockholders who wish to submit proposals to be included in the
Company's proxy statement for the 2000 Annual Meeting of Stockholders
must be received at the principal executive offices of the Company by
the close of business on January 13, 2000. In addition, the Company's
Bylaws provide that if a stockholder desires to nominate a director or
bring other business before the stockholders at the Company's annual
meeting of stockholders (and such business is not the subject of a
stockholder proposal timely submitted for inclusion in the proxy statement),
written notice of such business containing the information required under
the Company's Bylaws must be received by the Company at its principal
executive offices no later than 90 days prior to the date of the annual
meeting of stockholders. Under the Company's Bylaws, the annual meeting
of stockholders shall be held on the third Friday in June in each year.
Therefore, any stockholder that desires to nominate a director or bring
other business before the stockholders at the Company's 2000 Annual Meeting
of Stockholders (and such business is not the subject of a stockholder
proposal timely submitted for inclusion in the proxy statement), the
requisite written notice must be received by the Company at its principal
executive offices on or before March 20, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1. Stock Purchase Agreement dated as of August 6, 1999, by and
between International Multifoods Corporation and Gruma S.A. de C.V.,
including Note Purchase Agreement attached as Exhibit A thereto (incorporated
herein by reference to Exhibit 2.1 to the Company's Report on Form 8-K
dated August 18, 1999).
11. Computation of Earnings Per Common Share.
12. Computation of Ratio of Earnings to Fixed
Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended August 31, 1999, the Company filed
the following reports on Form 8-K:
1. Current Report on Form 8-K dated June 4, 1999, relating
to the sale of its discontinued Venezuelan agriculture and animal feeds
business, Alimentos Super-S, C.A., to La Caridad Group.
2. Current Report on Form 8-K dated August 9, 1999,
relating to the announcement that the Company had entered into a
definitive agreement to sell its discontinued Venezuelan consumer and
commercial foods operation to Gruma, S.A. de C.V.
3. Current Report on Form 8-K dated August 18, 1999,
relating to the sale of the Company's discontinued Venezuelan consumer
and commercial foods operation to Gruma, S.A. de C.V., including proforma
financial information relating to such disposition.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INTERNATIONAL MULTIFOODS CORPORATION
Date: October 12, 1999 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
2.1. Stock Purchase Agreement dated as of August 6, 1999, by and
between International Multifoods Corporation and Gruma S.A. de C.V.,
including Note Purchase Agreement attached as Exhibit A thereto
(incorporated herein by reference to Exhibit 2.1 to the Company's
Report on Form 8-K dated August 18, 1999).
11. Computation of Earnings Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
Exhibit 11
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Computation of Earnings (Loss) per Common Share
(unaudited)
(in thousands, except per share amounts)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- -------------------
<S> <C> <C> <C> <C>
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1999 1998 1999 1998
- --------------------------------------------------------------------------------
Average shares of
common stock outstanding 18,749 18,769 18,752 18,766
Dilutive potential common shares 99 161 95 -
- --------------------------------------------------------------------------------
Total common stock and equivalents
assuming full dilution 18,848 18,930 18,847 18,766
================================================================================
Earnings (loss) from continuing
operations $ 5,091 $ 4,588 $ 9,653 $ (10,027)
Loss from discontinued operations (11,760) (119,236) (19,560) (128,922)
- --------------------------------------------------------------------------------
Net loss applicable
to common stock $ (6,669) $(114,648) $ (9,907) $(138,949)
================================================================================
Basic earnings (loss) per share:
Continuing operations $ .27 $ .24 $ .51 $ (.53)
Discontinued operations (.63) (6.35) (1.04) (6.87)
- --------------------------------------------------------------------------------
Total $ (.36) $ (6.11) $ (.53) $ (7.40)
================================================================================
Diluted earnings (loss) per share:
Continuing operations $ .27 $ .24 $ .51 $ (.53)
Discontinued operations (.62) (6.30) (1.04) (6.87)
- --------------------------------------------------------------------------------
Total $ (.35) $ (6.06) $ (.53) $ (7.40)
================================================================================
</TABLE>
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 SIX MONTHS ENDED
-------------------- -----------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
Earnings (loss) from
continuing operations
before income taxes $ 8,210 $ 7,647 $15,569 $(14,481)
Plus: Fixed charges (1) 6,062 5,849 13,067 11,927
Less: Capitalized interest (205) (31) (329) (31)
- -------------------------------------------------------------------------------
Earnings available to cover
fixed charges (2) $14,067 $13,465 $28,307 $ (2,585)
===============================================================================
Ratio of earnings to fixed charges (2) 2.32 2.30 2.17 N/A
===============================================================================
(1) Fixed charges consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- -----------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
Interest expense, gross $3,852 $3,602 $ 8,447 $ 7,435
Rentals (Interest factor) 2,210 2,247 4,620 4,492
- -------------------------------------------------------------------------------
Total fixed charges $6,062 $5,849 $13,067 $11,927
===============================================================================
(2) For the six months ended August 31, 1998, earnings were inadequate
to cover fixed charges by $14,481. The deficiency was the result of
unusual items as described in Note 5 to the consolidated condensed
financial statements. Excluding unusual items, the ratio of earnings
to fixed charges would have been 1.21 for the six months ended
August 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> 6-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> AUG-31-1999
<CASH> 6,566
<SECURITIES> 0
<RECEIVABLES> 136,062
<ALLOWANCES> 3,034
<INVENTORY> 178,517
<CURRENT-ASSETS> 369,813
<PP&E> 318,186
<DEPRECIATION> 142,112
<TOTAL-ASSETS> 714,742
<CURRENT-LIABILITIES> 295,345
<BONDS> 121,199
0
0
<COMMON> 2,184
<OTHER-SE> 241,795
<TOTAL-LIABILITY-AND-EQUITY> 714,742
<SALES> 1,157,524
<TOTAL-REVENUES> 1,157,524
<CGS> 989,462
<TOTAL-COSTS> 989,462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (76)
<INTEREST-EXPENSE> 5,624
<INCOME-PRETAX> 15,569
<INCOME-TAX> 5,916
<INCOME-CONTINUING> 9,653
<DISCONTINUED> (19,560)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,907)
<EPS-BASIC> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
