UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark
One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 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 (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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock New York Stock Exchange
(par value $.10 per share)
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10 K. [X]
The aggregate market value of Common Stock, par value $.10 per
share, held by non-affiliates of the registrant (see Item 12 hereof) as
of May 3, 1999 (based on the closing sale price of $21.9375 per share as
reported in the consolidated transaction reporting system on such date)
was $407,008,171.
The number of shares outstanding of the registrant's Common Stock,
par value $.10 per share, as of May 3, 1999 was 18,737,951.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the
fiscal year ended February 28, 1999 are incorporated by reference into
Parts I and II.
Portions of the registrant's Proxy Statement for the Annual Meeting
of Stockholders to be held June 18, 1999 are incorporated by reference
into Part III.
PART I
Item 1. Business.
General
International Multifoods Corporation, incorporated in Delaware in
1969 as the successor to a business founded in 1892, operates a
foodservice distribution business in the United States and food
manufacturing businesses in the United States, Canada and Venezuela.
Unless indicated otherwise or the context suggests otherwise, the term
"Company," as used in this Report, means International Multifoods
Corporation and its consolidated subsidiaries. In August 1998, the
Company announced its decision to sell its Venezuela Foods business and
classified the Venezuela Foods business as a discontinued operation.
The Company's business segments are Multifoods Distribution Group
and North America Foods. Financial information for the last three
fiscal years for each of the Company's business segments, which is
included in Note 15 to the Company's Consolidated Financial Statements
on pages 43 and 44 of the Company's Annual Report to Stockholders for
the fiscal year ended February 28, 1999 ("1999 Annual Report to
Stockholders"), is incorporated herein by reference.
Multifoods Distribution Group
The Multifoods Distribution Group segment is a distributor of food
and other products to the foodservice industry in the United States.
The Company leases a fleet of approximately 388 tractors, 466 trailers
and 22 straight trucks, most of which are equipped with an on board
computer system from which drivers obtain delivery performance and route
information. The Company operates 31 distribution centers located
nationwide. The Company also operates 19 cash and carry locations from
which customers can make purchases. No single customer accounts for a
significant portion of the segment's sales.
The Company is a distributor of food and other products in the
United States to independent pizza restaurants and other casual-dining,
limited-menu operators, including sandwich shops, Mexican and Italian
restaurants, movie theaters, fund-raising groups, commissaries and
stadium and recreational concession stands. The Company distributes a
broad selection of cheeses, meats, snacks, paper goods, cleaning
supplies and other products, including pizza ingredients sold under the
Company's ULTIMO! brand as well as major national brands. The Company is
also the largest U.S. vending distributor, serving approximately 20,000
vending and office coffee service operators and other concessionaires.
The Company distributes and sells more than 8,000 food products
consisting primarily of candy, snacks, frozen and refrigerated products,
pastries, hot beverages and juices. Most of the products are nationally
advertised brand products. The Company also sells certain products,
such as premium ground and whole-bean coffee, hot cocoa, creamer and
sugar, under its own private labels, VENDOR'S SELECT and GRINDSTONE
CAFE. Deliveries are made directly to customers, generally once a week,
from distribution centers located nationwide.
The distribution business is highly competitive. The Company
competes with several national and regional broadline distributors and
numerous regional specialty foodservice distributors and local
independent distributors. While the Company is the only nationwide
vending distributor, it encounters significant competition from regional
and local distributors as well as warehouse clubs. The Company competes
on the basis of product quality and consistency, customer service and
the availability of a wide variety of products, as well as price and
prompt and accurate delivery of orders. The Company believes that its
pizza expertise, which includes providing customers with ideas on
promotions, menu planning and baking, differentiates the Company in part
from its competitors.
North America Foods
The North America Foods segment consists of two units, U.S. Foods
and Robin Hood Multifoods. No single customer accounts for a significant
portion of the segment's sales.
U.S. Foods. The U.S. Foods unit produces approximately 3,000
products for retail, wholesale and in-store bakeries and foodservice
customers in the United States. The Company produces bakery mix
products, including mixes for breads, rolls, bagels, donuts, muffins,
danish, cakes, cookies, brownies, bars and pizza crusts, as well as
fillings and icings. Bakery mix products are marketed under its
MULTIFOODS and JAMCO brands. In addition, the Company manufactures and
markets frozen batters, doughs and desserts under its MULTIFOODS,
GOURMET BAKER and FANTASIA brands. Bakery products are marketed through
the Company's own sales organization and independent distributors and
brokers.
The Company encounters significant competition in the bakery
products market. The Company is a leading supplier of bakery mixes to
retail and in-store bakeries in the United States and it competes with
several large corporations and regional producers of bakery mixes. With
respect to frozen bakery products, the Company competes primarily in the
foodservice and in-store bakery markets with several large corporations
and numerous regional suppliers that have select product offerings. The
Company competes on the basis of product quality and uniqueness, product
convenience, brand loyalty, timely delivery and customer service as well
as price.
Robin Hood Multifoods. The Robin Hood Multifoods unit consists of
the Company's Canada consumer and commercial foods businesses. The
consumer foods business is the leading marketer in Canada of flour and
specialty baking mixes sold to consumers. More than 40 consumer baking
mixes are sold under the Company's ROBIN HOOD brand, while consumer
flour is sold under the Company's ROBIN HOOD, GOLDEN TEMPLE, BRODIE,
CREAM OF THE WEST and MONARCH brands. The Company also sells hot
cereals under its ROBIN HOOD, OLD MILL, RED RIVER and PURITY brands. In
addition, the Company manufactures and markets pickles, relishes and
other condiments to consumers in Canada, where its BICK'S brand is the
leading brand. The Company also sells condiments under the HABITANT,
GATTUSO, WOODMAN'S, ROSE and MCLARENS labels. The commercial foods
business produces condiments, bakery mix products, wheat flour and oat
products for retail, in-store and wholesale bakeries and foodservice
customers in Canada and the United States. Such products are sold under
the Company's ROBIN HOOD and BICK'S brands. The Company also
manufactures and markets frozen batters, doughs and desserts in Canada
under its GOURMET BAKER brand.
The products of Robin Hood Multifoods are marketed primarily
through the Company's own sales organization, supported by advertising
and other promotional activities. The Company's competitors in Canada
include both large corporations and regional producers. The Company
competes on the basis of product quality, product convenience, the
ability to identify and satisfy emerging consumer preferences, brand
loyalty, timely delivery and customer service as well as price.
Discontinued Operations
The Company is attempting to sell its Venezuela Foods business,
which is classified as a discontinued operation. The Venezuela Foods
business includes consumer products for home baking, bakery products for
food processors and commercial and retail bakeries, and products for the
agricultural sector. Consumer products include wheat flour, corn flour,
whole grain rice, rice flour, corn cooking oil, oat cereals and spices,
which are sold to grocery stores principally under the Company's ROBIN
HOOD, JUANA, MONICA, PAYARA, GOLD BELL, LASSIE and LA COMADRE brands.
Bakery products include wheat flour, which is sold under the Company's
POLAR, GRAN AGUANTE, GOLDRIM and ELEFANTE brands, and prepared bakery
mixes, which are sold under the ROBIN HOOD brand. Animal feeds are sold
principally under the Company's SUPER-S brand to animal producers and
farm distributors. The products of the Venezuela Foods business are
marketed through the Company's own sales organization and independent
distributors and brokers.
The Company's Venezuelan subsidiary is one of the largest food
companies in Venezuela and the largest producer of animal feeds for the
agricultural sector. The Company is a leading producer of consumer
wheat flour, flour for commercial food processors and retail bakeries,
and commercial bakery mixes. No single customer accounts for a
significant portion of the Venezuela Foods segment's sales. The Company
competes on the basis of quality, price, uniqueness, timely delivery and
customer service.
The Company's operations in Venezuela are subject to risks inherent
in operating under a different legal and political system, and in a
difficult economic environment. Among these risks are inflation,
currency volatility, possible limitations on foreign investment,
exchangeability of currency, dividend repatriation and changes in
existing tax laws. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition," which is included on pages 24
through 28 of the 1999 Annual Report to Stockholders and is incorporated
by reference in Part II, Item 7, hereof.
Other Information Relating to the Business of the Company
Sources of Supply and Raw Materials. The Company's distribution
business purchases products directly from numerous manufacturers,
processors and independent suppliers. Several of these sources are
large corporations from which the Company purchases significant
quantities of brand name candy and snacks. The Company's distribution
business is not dependent upon any single supplier and alternative
sources of supply are readily available.
With respect to the Company's North America Foods segment and the
Venezuela Foods business, raw materials generally are available from
numerous sources and the Company believes that it will continue to be
able to obtain adequate supplies. In Canada, the Company minimizes
risks associated with wheat market price fluctuations by hedging its
wheat and flour inventories, open wheat purchase contracts and open
flour sales contracts with wheat futures contracts. In the United
States, the Company also enters into futures contracts to reduce the
risk of price fluctuations on certain anticipated raw material
purchases. See Note 7 to the Company's Consolidated Financial
Statements which are incorporated by reference in Part II, Item 8,
hereof.
The Company's Venezuelan operations are dependent on raw material
imports for many of its products. Wheat, oats and soybeans are not
grown in Venezuela and adequate quantities of sorghum and yellow corn
are not grown in Venezuela. However, adequate wheat, oats, soybean,
sorghum and yellow corn requirements generally are available and
procured from sources primarily in the United States and Canada.
Generally, adequate quantities of corn (other than yellow corn) and
rice, which are grown in Venezuela, are available locally. In the event
of a local shortage of corn or rice, the Company has, from time to time,
purchased corn and rice from the world market.
Trademarks and Other Intellectual Property. The Company owns
numerous trademarks, service marks and product formulae which are
important to the Company's business. The most significant trademarks
and service marks are identified above. Most of the Company's
trademarks and service marks are registered.
Seasonality. The Company does not experience material seasonal
variations in its sales volumes.
Environmental Regulation. The Company's facilities in the United
States are subject to federal, state and local environmental laws and
regulations. Compliance with these provisions has not had, and the
Company does not expect such compliance to have, any material adverse
effect upon the Company's capital expenditures, net earnings or
competitive position.
On December 3, 1996, Curtice-Burns Foods, Inc. and Curtice Burns
Meat Snacks, Inc. (together, "Curtice-Burns") filed a third-party
complaint against the Company in the United States District Court for
the District of Oregon. The complaint was filed in connection with a
civil lawsuit commenced in October 1996 by Oberto Sausage Company of
Oregon ("Oberto") against Curtice-Burns. The third-party complaint
alleges that the Company caused or contributed to the environmental
contamination of certain real property, and groundwater beneath the real
property, located in Albany, Oregon. The Company operated a meat-snack
manufacturing plant on the property for a period of 10 years until 1986,
when the Company sold the business to Curtice-Burns. Curtice-Burns
subsequently sold the property to Oberto. Curtice-Burns is seeking
declaratory and monetary relief against the Company under theories of
strict liability, contribution for remedial action costs under Oregon
and federal statutes, and indemnity. Curtice-Burns is seeking damages
in excess of $35,000, the cost of all past, present and future remedial
action related to the environmental contamination of the property and
the groundwater beneath the property, and costs and disbursements
incurred in litigating this matter. Oberto has asserted similar causes
of action and is seeking similar relief against Curtice-Burns in the
underlying lawsuit. The parties to the lawsuit are in the discovery
stage and the Company intends to vigorously defend itself in the
lawsuit. The Company has also tendered defense of the lawsuit to the
Company's primary general liability insurance carrier during the period
of time at issue in the lawsuit.
On January 15, 1998, VIP's Industries, Inc. ("VIP's") filed a
third-party complaint against the Company in the Circuit Court of Linn
County, Oregon. The third-party complaint alleges that the Company,
through its former subsidiary Crown Industries, Inc. ("Crown"), caused
the environmental contamination of certain real property, and the
groundwater beneath the real property, located in Albany, Oregon. At
the time of the Company's acquisition of Crown in 1976, Crown owned the
subject real property and leased it to an operator of a retail gasoline
service station. The Company sold the subject real property in 1981.
VIP's has alleged that the Company is strictly liable under Oregon law
for costs of removal of contamination and remediation of the subject
real property. VIP's is seeking damages in excess of $210,000, the cost
of all past, present and future remedial action related to the
contamination of the real property and the groundwater beneath the real
property. The parties to the lawsuit are in the initial stages of
discovery and the Company intends to vigorously defend itself in the
lawsuit. The Company has also tendered defense of the lawsuit to the
Company's primary general liability insurance carrier during the period
of time at issue in the lawsuit.
Employees. As of February 28, 1999, the Company and its
subsidiaries had 6,743 employees.
Cautionary Statement Relevant to Forward-Looking Information
This Report 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; 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 Company's
ability to complete the sale of the Venezuela Foods business; the
Company's ability to realize the earnings benefits from the integration
of its distribution businesses; 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 reports filed with the Securities and
Exchange Commission.
Item 2. Properties.
The Company's principal executive offices are located in Wayzata,
Minnesota in owned office space. Several of the Company's subsidiaries
also own or lease office space. The Company operates numerous
processing and distribution facilities throughout the United States,
Canada and Venezuela. The Company believes that its facilities are
suitable and adequate for current production or distribution volumes.
The following is a description of the Company's properties as of
February 28, 1999.
Multifoods Distribution Group
The Company owns 12 and leases 19 distribution centers aggregating
approximately 2.4 million square feet for its Multifoods Distribution
Group segment. These distribution centers are located in Tempe,
Arizona; Anaheim, Commerce, Fremont, Livermore and Modesto, California;
Denver, Colorado (2); East Windsor, Connecticut; Kissimmee, Florida;
Austell, Georgia; Boise, Idaho; Woodridge, Illinois; Indianapolis,
Indiana; Shawnee, Kansas; Louisville, Kentucky; Belleville, Michigan;
Minneapolis and Rice, Minnesota; Springfield, Missouri; Paulsboro and
Parsippany, New Jersey; Greensboro, North Carolina; Twinsburg, Ohio;
Portland, Oregon; Middletown, Pennsylvania; Memphis, Tennessee;
Dallas(2) and Houston, Texas; and Kent, Washington.
The Company's distribution business also operates 19 cash-and-carry
distribution locations, 12 of which are separate from the Company's
other distribution centers.
North America Foods
The Company owns 14 and leases four processing facilities. These
processing facilities are located in La Mirada, California; Bonner
Springs, Kansas; Malden, Massachusetts; Sedalia, Missouri; Lockport, New
York; Elyria, Ohio; Burnaby, British Columbia (2); Winnipeg, Manitoba;
Burlington, Dunnville, New Delhi, Port Colborne, Scarborough and Simcoe,
Ontario; Montreal, Quebec (2); and Saskatoon, Saskatchewan.
The Company also operates two research and development
laboratories.
Discontinued Operations
The Company owns 18 processing facilities and leases one processing
facility. These processing facilities are located in Barcelona,
Anzoategui; Ciudad Bolivar, Bolivar; Puerto Cabello (5) and Valencia,
Carabobo; Calabozo, Guarico (3); Acarigua (3) and Araure, Portuguesa;
Cumana, Sucre; and Maracaibo, Zulia (3).
The Company owns two and leases 9 warehouse facilities. In
addition, the Company owns one and leases 9 agricultural distribution
centers.
The Company also operates two Company-owned hatcheries and one
leased hatchery and operates four Company-owned and 10 leased poultry
farms.
Item 3. Legal Proceedings.
Neither the Company nor any of its subsidiaries is a party to any
legal proceeding that is material to the business or financial condition
of the Company. See the information under the heading "Other
Information Relating to the Business of the Company - Environmental
Regulation" in Item 1 above for a description of environmental matters
in which the Company is involved.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders of the
Company during the fourth quarter of the fiscal year ended February 28,
1999.
EXECUTIVE OFFICERS OF THE COMPANY.
The information contained in Item 10 in Part III hereof under the
heading "Executive Officers of the Company" is incorporated by reference
in Part I of this Report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company's Common Stock is listed on the New York Stock
Exchange. The high and low sales prices for the Company's Common Stock
as reported in the consolidated transaction reporting system and the
amount of the cash dividends paid on the Company's Common Stock for each
quarterly period within the two most recent fiscal years, shown in Note
16 to the Company's Consolidated Financial Statements on page 46 of the
1999 Annual Report to Stockholders, are incorporated herein by
reference.
As of May 3, 1999, there were 4,626 holders of record of the Common
Stock of the Company.
Item 6. Selected Financial Data.
The information for fiscal years 1995 through 1999 in the "Five-
Year Comparative Summary" on page 23 of the 1999 Annual Report to
Stockholders under the headings "Consolidated Summary of Operations,"
"Year-End Financial Position" and "Dividends Paid" is incorporated
herein by reference. The information contained in Note 2 ("Discontinued
Operations") and Note 4 ("Unusual Items") to the Company's Consolidated
Financial Statements on pages 35 through 37 of the 1999 Annual Report to
Stockholders is also incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information under the heading "Management's Discussion and
Analysis" on pages 24 through 28 of the 1999 Annual Report to
Stockholders is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The section under the heading "Management's Discussion and
Analysis" entitled "Market Risk Management" on page 27 of the 1999
Annual Report to Stockholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The Independent Auditors' Report, the Company's Consolidated Financial
Statements as of February 28, 1999 and February 28, 1998, and for each
of the fiscal years in the three-year period ended February 28, 1999,
and the Notes to the Company's Consolidated Financial Statements on
pages 29 through 46 of the 1999 Annual Report to Stockholders are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The section under the heading "Election of Directors" on pages 4
through 9 and the section entitled "Section 16(a) Beneficial Ownership
Reporting Compliance" on page 22 of the Company's Proxy Statement dated
May 12, 1999 ("1999 Proxy Statement") are incorporated herein by
reference.
Executive Officers of the Company
The following sets forth the name, age and business experience for
at least the past five years of each of the executive officers of the
Company as of May 3, 1999. Unless otherwise noted, the positions
described are positions with the Company or its subsidiaries.
Name Age Positions Held Period
- ---- --- -------------- ------
Gary E. Costley 55 Chairman of the Board, January 1, 1997
President and Chief to present
Executive Officer
Dean of the Babcock 1995 to 1996
Graduate School of
Management at Wake
Forest University
Executive Vice President 1992 to 1994
of Kellog Company and
President, Kellogg
North America
Jeffrey E. Boies 54 Vice President and April 21, 1998
President, Multifoods to present
Distribution Group, Inc.
President, Multifoods 1997 to 1998
Distribution Group, Inc.
President, VSA, Inc. 1996 to 1997
President and Chief 1995 to 1996
Executive Officer of
Sysco Food Services/
Cincinnati
President and Chief 1993 to 1995
Executive Officer of
Sysco Food Services/
Albany
Frank W. Bonvino 57 Vice President, General 1992
Counsel and Secretary to present
Anthony T. 39 Vice President and September 20, 1996
Brausen Treasurer to present
Treasurer 1996
Assistant Treasurer and 1995 to 1996
Director of Investor
Relations
Assistant Controller- 1994
Financial Reporting and
Director of Investor
Relations
Assistant Controller- 1991 to 1994
Financial Reporting
Dennis R. 47 Vice President and December 15, 1995
Johnson Controller to present
Assistant Controller - 1993 to 1995
Operations and Tax
Jill W. Schmidt 40 Vice President, June 1, 1997
Communications to present
Vice President of 1995 to 1997
Tunheim Santrizos Co.
Account Supervisor of 1992 to 1995
Tunheim Santrizos Co.
William L. 52 Senior Vice President - April 23, 1998
Trubeck Finance, Chief to present
Financial Officer and
President, Latin
America Operations
Senior Vice President - 1997 to 1998
Finance and Chief
Financial Officer
Senior Vice President 1994 to 1996
and Chief Financial
Officer of SPX
Corporation
Senior Vice President 1993 to 1994
and Chief Financial
Officer of Honeywell Inc.
Donald H. Twiner 58 President, Robin Hood June 1, 1997
Multifoods Inc. to present
President-Consumer Foods 1998 to 1997
Division of Robin Hood
Multifoods Inc.
Robert S. Wright 52 Vice President and 1995
President, North to present
America Foods
President, Specialty 1994 to 1995
Brands Division of
Foodbrands America, Inc.
President, Prepared 1992 to 1994
Foods Division of
International Multifoods
Corporation
The executive officers of the Company are elected annually by the
Board of Directors with the exception of the Presidents of the Company's
business units, who hold appointed offices.
Item 11. Executive Compensation.
The section under the heading "Election of Directors" entitled
"Compensation of Directors" on pages 8 and 9 and the section entitled
"Executive Compensation" on pages 14 through 21 of the 1999 Proxy
Statement are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The section entitled "Security Ownership of Certain Beneficial
Owners and Management" on pages 2 through 4 of the 1999 Proxy Statement
is incorporated herein by reference.
For purposes of computing the market value of the Company's Common
Stock held by non-affiliates of the Company on the cover page of this
Report, all executive officers and directors of the Company are
considered to be affiliates of the Company. This does not represent an
admission by the Company or any such person as to the affiliate status
of such person.
Item 13. Certain Relationships and Related Transactions.
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.
(a) Documents Filed as a Part of this Report
1. Financial Statements
The following consolidated financial statements of International
Multifoods Corporation and subsidiaries and the Independent Auditors'
Report thereon, included in the 1999 Annual Report to Stockholders, are
incorporated by reference in Part II, Item 8, hereof:
Independent Auditors' Report
Consolidated Statements of Operations - Years ended
February 28, 1999, February 28, 1998 and
February 28, 1997
Consolidated Balance Sheets - February 28, 1999 and
February 28, 1998
Consolidated Statements of Cash Flows - Years ended
February 28, 1999, February 28, 1998 and
February 28, 1997
Consolidated Statements of Shareholders' Equity -
Years ended February 28, 1999, February 28, 1998
and February 28, 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The consolidated financial statement schedule of International
Multifoods Corporation and subsidiaries and the Independent Auditors'
Report thereon required to be filed as part of this Report are listed
below and are included at the end of this Report.
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and,
therefore, have been omitted.
3. Exhibits
3.1 Restated Certificate of Incorporation of International Multifoods
Corporation, as amended to date (incorporated herein by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1993).
3.2 Bylaws of International Multifoods Corporation, as amended to
date (incorporated herein by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 31, 1998).
4.1 Indenture, dated as of January 1, 1990, between International
Multifoods Corporation and First Trust of New York, National
Association, successor to Morgan Guaranty Trust Company of New York
(incorporated herein by reference to Exhibit 4.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1993).
4.2 First Supplemental Indenture, dated as of May 29, 1992,
supplementing the Indenture, dated as of January 1, 1990, between
International Multifoods Corporation and First Trust of New York,
National Association, successor to Morgan Guaranty Trust Company of New
York (incorporated herein by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1993).
4.3 Officers' Certificate, with exhibits thereto, relating to the
Company's Medium-Term Notes, Series A, issued under the Indenture, dated
as of January 1, 1990, as supplemented by the First Supplemental
Indenture, dated as of May 29, 1992, between International Multifoods
Corporation and First Trust of New York, National Association, successor
to Morgan Guaranty Trust Company of New York (incorporated herein by
reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993).
4.4 Officers' Certificate and Authentication Order dated February 1,
1996, relating to the Company's Medium-Term Notes, Series B, including
the forms of Notes, issuable under the Indenture, dated as of January 1,
1990, as supplemented by the First Supplemental Indenture, dated as of
May 29, 1992, between International Multifoods Corporation and First
Trust of New York, National Association, successor to Morgan Guaranty
Trust Company of New York (incorporated herein by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated February 1, 1996).
4.5 Credit Agreement dated as of March 22, 1996 among International
Multifoods Corporation, various financial institutions, Bankers Trust Company,
as Syndication Agent, The First National Bank of Chicago, as Documentation
Agent, and Bank of America National Trust and Savings Association, as
Administrative Agent (incorporated herein by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended February 29,
1996).
4.6 Credit Agreement dated as of May 30, 1996 among Robin Hood Multifoods
Inc., various financial institutions and Canadian Imperial Bank of Commerce,
as Agent (incorporated herein by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1996).
The Company hereby agrees to furnish to the Securities and Exchange
Commission upon request copies of all other instruments defining the rights of
holders of long-term debt of International Multifoods Corporation and its
consolidated subsidiaries.
10.1 Rights Agreement, dated as of October 4, 1990, as amended as of
March 1, 1993, between International Multifoods Corporation and Norwest
Bank Minnesota, N.A., with exhibits thereto (incorporated herein by
reference to Exhibit 1 to the Company's Registration Statement on Form
8-A dated October 11, 1990 and Exhibit 1 to Amendment No. 1 on Form 8
dated March 1, 1993 to the Company's Registration Statement on Form 8-A
dated October 11, 1990).
10.2 1997 Stock-Based Incentive Plan of International Multifoods
Corporation, as amended (incorporated by reference to Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1997 and Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1998).*
10.3 Amended and Restated 1989 Stock-Based Incentive Plan of
International Multifoods Corporation (incorporated herein by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1993).*
10.4 1986 Stock Option Incentive Plan of International Multifoods
Corporation (incorporated herein by reference to Exhibit 4 to the
Company's Registration Statement on Form S-8 (Registration No. 33-
6223)).*
10.5 Management Incentive Plan of International Multifoods
Corporation, Amended and Restated as of March 1, 1998 (incorporated
herein by reference to Exhibit 10.7 to the Company's Annual Report on
From 10-K for the fiscal year ended February 28, 1998).*
10.6 Multifoods Division Long-Term Incentive Program (incorporated
herein by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 29, 1996).*
10.7 Management Benefit Plan of International Multifoods Corporation,
Restated Effective January 1, 1997, as further amended (incorporated
herein by reference to Exhibit 10.7 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997 and Exhibit 10.10
to the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1998).*
10.8 Trust Agreement, dated July 30, 1987, between International
Multifoods Corporation and Norwest Bank Minnesota, National Association,
as successor trustee to Bank of America NT and SA, relating to the
Management Benefit Plan of International Multifoods Corporation
(incorporated herein by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).*
10.9 Compensation Deferral Plan for Executives of International
Multifoods Corporation, Amended and Restated as of September 17, 1993,
as further amended (incorporated herein by reference to Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993 and Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997).*
10.10 Supplemental Deferred Compensation Plan of International
Multifoods Corporation, Adopted Effective April 1, 1997 (incorporated
herein by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997).*
10.11 Deferred Income Capital Accumulation Plan for Executives of
International Multifoods Corporation, Amended and Restated as of
September 17, 1993 (incorporated herein by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993).*
10.12 Employment Agreement, dated as of November 1 1996, between
International Multifoods Corporation and Gary E. Costley, as amended
(incorporated herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1996
and Exhibit 10.16 to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998).*
10.13 Form of Revised and Restated Severance Agreement between
International Multifoods Corporation and each of the Company's executive
officers, other than Gary E. Costley (incorporated herein by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1993).*
10.14 Letter Agreement, dated July 10, 1995, between International
Multifoods Corporation and Robert S. Wright regarding benefits and
severance arrangements (incorporated herein by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-K for the fiscal year
ended February 29, 1996).*
10.15 Memorandum of understanding, dated March 29, 1996, between
International Multifoods Corporation and Robert S. Wright regarding
supplemental retirement benefits (incorporated herein by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 29, 1996).*
10.16 Letter Agreement, dated September 24, 1996, between
International Multifoods Corporation and Jeffrey E. Boies regarding
benefits and severance arrangements (incorporated herein by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1997).*
10.17 Memorandum of understanding, dated May 7, 1997, between
International Multifoods Corporation and Jeffrey E. Boies regarding
supplemental retirement benefits (incorporated herein by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1997).*
10.18 Letter Agreement, dated February 3, 1997, between William L.
Trubeck and International Multifoods Corporation regarding benefits and
severance arrangements (incorporated herein by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended May
31, 1997).*
10.19 Memorandum of understanding, dated May 7, 1997, between William
L. Trubeck and International Multifoods Corporation regarding
supplemental retirement benefits (incorporated herein by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1997).*
10.20 Agreement dated June 15, 1998 between Molinos Nacionales, C.A.
and Fidias Robuste regarding separation from employment with the Company
(incorporated herein by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1998).*
10.21 Memorandum of understanding, dated September 20, 1996, between
Frank W. Bonvino and International Multifoods Corporation regarding
supplemental retirement benefits.*
10.22 Form of Indemnity Agreement between International Multifoods
Corporation and each of the Company's executive officers (incorporated
herein by reference to Exhibit 10.19 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).*
10.23 Fee Deferral Plan for Non-Employee Directors of International
Multifoods Corporation, Amended and Restated as of September 17, 1993,
as further amended (incorporated herein by reference to Exhibit 10.7 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993 and Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997).*
10.24 Deferred Income Capital Accumulation Plan for Directors of
International Multifoods Corporation, Amended and Restated as of
September 17, 1993 (incorporated herein by reference to Exhibit 10.8 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993).*
10.25 Form of Indemnity Agreement between International Multifoods
Corporation and each non-employee director of the Company (incorporated
herein by reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).*
11 Computation of Earnings (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 1999 Annual Report to Stockholders (only those portions expressly
incorporated by reference herein shall be deemed filed with the
Securities and Exchange Commission).
21 List of significant subsidiaries of the Company.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
- -----------------
*Management contract or compensatory plan or arrangement required to be
filed as an exhibit to Form 10-K pursuant to Item 14(c) of this Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended February 28, 1999.
(c) See Exhibit Index and Exhibits attached to this
Report.
(d) See Financial Statement Schedules included at the
end of this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: May 12, 1999 By /s/ Gary E. Costley
---------------------------------
Gary E. Costley, Ph.D.
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Gary E. Costley Chairman of the Board, May 12, 1999
Gary E. Costley, Ph.D. President and Chief
Executive Officer
(Principal Executive
Officer) and Director
/s/ William L. Trubeck Senior Vice President - May 12, 1999
William L. Trubeck Finance, Chief
Financial officer and
President, Latin America
Operations (Principal
Financial Officer)
/s/ Dennis R. Johnson Vice President and May 12, 1999
Dennis R. Johnson Controller (Principal
Accounting Officer)
/s/ Claire L. Arnold Director May 12, 1999
Claire L. Arnold
/s/ Robert M. Price Director May 12, 1999
Robert M. Price
/s/Nicholas L. Reding Director May 12, 1999
Nicholas L. Reding
/s/Jack D. Rehm Director May 12, 1999
Jack D. Rehm
/s/Lois D. Rice Director May 12, 1999
Lois D. Rice
/s/Richard K. Smucker Director May 12, 1999
Richard K. Smucker
/s/Dolph W. von Arx Director May 12, 1999
Dolph W. von Arx
Independent Auditors' Report
The Board of Directors and Shareholders of
International Multifoods Corporation:
Under date of March 29, 1999, we reported on the consolidated balance
sheets of International Multifoods Corporation and subsidiaries as of
February 28, 1999 and 1998, and the related consolidated statements of
operations, cash flows and shareholders' equity for each of the years in
the three-year period ended February 28, 1999, as contained in the 1999
Annual Report to Stockholders. The consolidated financial statements
and our report thereon are incorporated by reference in the Annual
Report on Form 10-K for the fiscal year ended February 28, 1999. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule listed in Item 14. The consolidated financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 29, 1999
<TABLE>
Schedule II
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three years ended February 28, 1999
(in thousands)
Additions
--------------------
Balance at Net charges/(credits) Balance
beginning to costs and at end
Description of year expenses Deductions of year
- ------------ --------- -------------------- ---------- -------
Allowance deducted from assets
for doubtful receivables:
<S> <C> <C> <C> <C>
Year ended February 28, 1999 $ 4,317 $ 713 $1,996 (a) $3,034
======= ====== ====== ======
Year ended February 28, 1998 $ 9,029 $ (430) $4,282 (a) $4,317
======= ====== ====== ======
Year ended February 28, 1997 $13,783 $2,721 $7,475 (a) $9,029
======= ====== ====== ======
</TABLE>
Notes: (a) Deductions include accounts charged off, net of recoveries,
and foreign currency translation adjustments which arise from
changes in current rates of exchange.
INDEX TO EXHIBITS
TO ANNUAL REPORT ON FORM 10-K OF
INTERNATIONAL MULTIFOODS CORPORATION
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1999
3.1 Restated Certificate of Incorporation of International
Multifoods Corporation, as amended to date (incorporated herein by
reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993).
3.2 Bylaws of International Multifoods Corporation, as amended to
date (incorporated herein by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 31, 1998).
4.1 Indenture, dated as of January 1, 1990, between International
Multifoods Corporation and First Trust of New York, National
Association, successor to Morgan Guaranty Trust Company of New York
(incorporated herein by reference to Exhibit 4.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1993).
4.2 First Supplemental Indenture, dated as of May 29, 1992,
supplementing the Indenture, dated as of January 1, 1990, between
International Multifoods Corporation and First Trust of New York,
National Association, successor to Morgan Guaranty Trust Company of New
York (incorporated herein by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1993).
4.3 Officers' Certificate, with exhibits thereto, relating to the
Company's Medium-Term Notes, Series A, issued under the Indenture, dated
as of January 1, 1990, as supplemented by the First Supplemental
Indenture, dated as of May 29, 1992, between International Multifoods
Corporation and First Trust of New York, National Association, successor
to Morgan Guaranty Trust Company of New York (incorporated herein by
reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993).
4.4 Officers' Certificate and Authentication Order dated February 1,
1996, relating to the Company's Medium-Term Notes, Series B, including
the forms of Notes, issuable under the Indenture, dated as of January 1,
1990, as supplemented by the First Supplemental Indenture, dated as of
May 29, 1992, between International Multifoods Corporation and First
Trust of New York, National Association, successor to Morgan Guaranty
Trust Company of New York (incorporated herein by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated February 1, 1996).
4.5 Credit Agreement dated as of March 22, 1996 among International
Multifoods Corporation, various financial institutions, Bankers Trust
Company, as Syndication Agent, The First National Bank of Chicago, as
Documentation Agent, and Bank of America National Trust and Savings
Association, as Administrative Agent (incorporated herein by reference
to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the
fiscal year ended February 29, 1996).
4.6 Credit Agreement dated as of May 30, 1996 among Robin Hood
Multifoods Inc., various financial institutions and Canadian Imperial
Bank of Commerce, as Agent (incorporated herein by reference to Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1996).
The Company hereby agrees to furnish to the Securities and Exchange
Commission upon request copies of all other instruments defining the
rights of holders of long-term debt of International Multifoods
Corporation and its consolidated subsidiaries.
10.1 Rights Agreement, dated as of October 4, 1990, as amended as of
March 1, 1993, between International Multifoods Corporation and Norwest
Bank Minnesota, N.A., with exhibits thereto (incorporated herein by
reference to Exhibit 1 to the Company's Registration Statement on Form
8-A dated October 11, 1990 and Exhibit 1 to Amendment No. 1 on Form 8
dated March 1, 1993 to the Company's Registration Statement on Form 8-A
dated October 11, 1990).
10.2 1997 Stock-Based Incentive Plan of International Multifoods
Corporation, as amended (incorporated by reference to Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1997 and Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1998).*
10.3 Amended and Restated 1989 Stock-Based Incentive Plan of
International Multifoods Corporation (incorporated herein by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1993).*
10.4 1986 Stock Option Incentive Plan of International Multifoods
Corporation (incorporated herein by reference to Exhibit 4 to the
Company's Registration Statement on Form S-8 (Registration No. 33-
6223)).*
10.5 Management Incentive Plan of International Multifoods
Corporation, Amended and Restated as of March 1, 1998 (incorporated
herein by reference to Exhibit 10.7 to the Company's Annual Report on
From 10-K for the fiscal year ended February 28, 1998).*
10.6 Multifoods Division Long-Term Incentive Program (incorporated
herein by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 29, 1996).*
10.7 Management Benefit Plan of International Multifoods
Corporation, Restated Effective January 1, 1997, as further amended
(incorporated herein by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1997
and Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998).*
10.8 Trust Agreement, dated July 30, 1987, between International
Multifoods Corporation and Norwest Bank Minnesota, National Association,
as successor trustee to Bank of America NT and SA, relating to the
Management Benefit Plan of International Multifoods Corporation
(incorporated herein by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).*
10.9 Compensation Deferral Plan for Executives of International
Multifoods Corporation, Amended and Restated as of September 17, 1993,
as further amended (incorporated herein by reference to Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993 and Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997).*
10.10 Supplemental Deferred Compensation Plan of International
Multifoods Corporation, Adopted Effective April 1, 1997 (incorporated
herein by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997).*
10.11 Deferred Income Capital Accumulation Plan for Executives of
International Multifoods Corporation, Amended and Restated as of
September 17, 1993 (incorporated herein by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993).*
10.12 Employment Agreement, dated as of November 1 1996, between
International Multifoods Corporation and Gary E. Costley, as amended
(incorporated herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1996
and Exhibit 10.16 to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998).*
10.13 Form of Revised and Restated Severance Agreement between
International Multifoods Corporation and each of the Company's executive
officers, other than Gary E. Costley (incorporated herein by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1993).*
10.14 Letter Agreement, dated July 10, 1995, between International
Multifoods Corporation and Robert S. Wright regarding benefits and
severance arrangements (incorporated herein by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-K for the fiscal year
ended February 29, 1996).*
10.15 Memorandum of understanding, dated March 29, 1996, between
International Multifoods Corporation and Robert S. Wright regarding
supplemental retirement benefits (incorporated herein by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 29, 1996).*
10.16 Letter Agreement, dated September 24, 1996, between
International Multifoods Corporation and Jeffrey E. Boies regarding
benefits and severance arrangements (incorporated herein by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1997).*
10.17 Memorandum of understanding, dated May 7, 1997, between
International Multifoods Corporation and Jeffrey E. Boies regarding
supplemental retirement benefits (incorporated herein by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1997).*
10.18 Letter Agreement, dated February 3, 1997, between William L.
Trubeck and International Multifoods Corporation regarding benefits and
severance arrangements (incorporated herein by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended May
31, 1997).*
10.19 Memorandum of understanding, dated May 7, 1997, between William
L. Trubeck and International Multifoods Corporation regarding
supplemental retirement benefits (incorporated herein by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1997).*
10.20 Agreement dated June 15, 1998 between Molinos Nacionales, C.A.
and Fidias Robuste regarding separation from employment with the Company
(incorporated herein by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1998).*
10.21 Memorandum of understanding, dated September 20, 1996, between
Frank W. Bonvino and International Multifoods Corporation regarding
supplemental retirement benefits.*
10.22 Form of Indemnity Agreement between International Multifoods
Corporation and each of the Company's executive officers (incorporated
herein by reference to Exhibit 10.19 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).*
10.23 Fee Deferral Plan for Non-Employee Directors of International
Multifoods Corporation, Amended and Restated as of September 17, 1993,
as further amended (incorporated herein by reference to Exhibit 10.7 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993 and Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1997).*
10.24 Deferred Income Capital Accumulation Plan for Directors of
International Multifoods Corporation, Amended and Restated as of
September 17, 1993 (incorporated herein by reference to Exhibit 10.8 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993).*
10.25 Form of Indemnity Agreement between International Multifoods
Corporation and each non-employee director of the Company (incorporated
herein by reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).*
11 Computation of Earnings (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 1999 Annual Report to Stockholders (only those portions
expressly incorporated by reference herein shall be deemed filed with
the Securities and Exchange Commission).
21 List of significant subsidiaries of the Company.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
- ---------------------------
*Management contract or compensatory plan or arrangement required to be
filed as an exhibit to Form 10-K pursuant to Item 14(c) of this Report.
Exhibit 10.21
[MULTIFOODS LETTERHEAD] Memo
DATE: September 20, 1996
TO: Frank W. Bonvino
FROM: Robert F. Maddocks
Executive Vice President
SUBJECT: SUPPLEMENTAL RETIREMENT AGREEMENT
The intent of this memorandum is to set forth the terms of a
supplemental benefit arrangement that will be provided to you if your
employment ends prior to retirement, conditioned upon your acceptance of
the terms of this arrangement.
The arrangement will provide you with two benefits - a "supplemental
retirement benefit" and a "severance benefit" - provided that you
qualify for such benefits.
The supplemental retirement benefit is designed around the Pension
Equity Plan and the Management Benefit Plan. The general intent of this
benefit is to provide you with the early retirement subsidy that you
would have been entitled to receive under the Pension Equity Plan if you
were three years older than your actual age. Because at age sixty-two
(62) you will be eligible for a full retirement benefit under the
Pension Equity Plan (unreduced from age sixty-five (65)), you will not
receive a supplement if your employment ends after that age.
The severance benefit provides you with a lump-sum payment equal to one
times your annual base salary. It may be paid in two installments at
the discretion of the Company.
The benefits are "nonqualified" benefits and will be paid from the
general assets of the Company. Your rights will be those of a general
creditor of the Company.
To evidence your acceptance of the terms of this supplemental benefit
arrangement, please sign this document and return it to me at your
earliest convenience. The document is referred to herein as the
"Agreement."
I
Supplemental Retirement Benefit
1.1 Eligibility. You will be eligible to receive the
"supplemental retirement benefit" set forth below if both of the
following conditions are satisfied:
(a) Your termination of employment is initiated by action of
the Company other than for Cause, by your action for Good Reason, or by
your action or action of the Company following a Change of Control.
(b) Your termination of employment occurs prior to the date on
which you attain age sixty-two (62).
1.2 Benefit Amount. The supplemental retirement benefit will be
calculated as a monthly benefit and will be equal to "A" minus "B" minus
"C" below:
A = The monthly benefit to which you would have been entitled
under the PEP if:
(i) You had elected to have your benefit under the PEP
calculated under the Grandfathered Formula and paid in the form of a
single life annuity (regardless of whether you actually make such
elections),
(ii) The limits imposed under Code sections 401(a)(17) and 415
did not apply to your benefit under the PEP,
(iii) You had twenty-five (25) years of Credited Service under
the PEP (or your actual number of years of Credited Service if greater
than twenty-five (25)), and
(iv) Your date of birth was five (5) years earlier than your
actual date of birth; except that, this provision will not cause your
deemed age to be older than age sixty-two (62).
minus
B = The monthly benefit payable to you under the MBP because of
the limits imposed under Code sections 401(a)17 and 415.
minus
C = The monthly benefit payable to you under the PEP.
All monthly benefits described above will be expressed in the form of a
single life annuity starting as of the date you elect to start your
pension under the PEP.
1.3 Form of Benefit. The supplemental retirement benefit will be
paid to you in the form of a single life annuity with monthly benefit
payments. However, at the sole discretion of the Company, it may be paid
in any other form. If it is paid in any form other than a single life
annuity, the benefit will be adjusted so that it is the Actuarial
Equivalent of the benefit that would have been paid as a single life
annuity.
1.4 Commencement of Benefit. The supplemental retirement benefit
will start as of the same day as the benefit paid to you under the PEP.
1.5 Spouse Benefit. If you become eligible for a supplemental
retirement benefit but you die before the supplemental retirement
benefit is paid or starts to be paid to you, and you are survived by a
spouse, that spouse will be entitled to a monthly benefit payable in the
form of a single life annuity equal to the difference between the
"qualified preretirement survivor annuity" (as defined in section
417(c)) that would have been paid under the Grandfathered Formula under
the PEP if your benefit were as calculated under this Agreement, and the
actual qualified preretirement survivor annuity payable under the MBP
and under the Grandfathered Formula under the PEP.
No survivor benefits are payable with respect to the supplemental
retirement benefit other than as provided above.
II
SEVERANCE BENEFITS
2.1 Eligibility. You will be eligible to receive the severance
benefit set forth below if your termination of employment is initiated
by action of the Company other than for Cause, or by your action for
Good Reason.
2.2 Benefit Amount. The severance benefit will be calculated as a
single lump-sum benefit, and will be equal to your annual base salary in
effect immediately prior to your termination of employment.
2.3 Form of Benefit. The severance benefit will be paid to you in
the form of a single lump-sum payment. However, at the sole discretion
of the Company, it may be paid in two installments with the first
installment being at least equal to the lump-sum amount multiplied by a
fraction, the numerator of which is the number of full calendar months
remaining in the calendar year in which your termination of employment
occurs and the denominator of which is twelve (12). If paid in
installments, the second installment will be paid as soon as practicable
after the end of the calendar year in which your termination of
employment occurs, and will equal the remaining lump-sum amount.
2.4 Payment Date. The severance benefit (or the first severance
benefit installment) will be paid to you as soon as administratively
practicable after your termination of employment.
2.5 Survivor Benefit. If you become eligible for a severance
benefit but die before the severance benefit is paid in full, the
benefit (or the remaining portion thereof) will be paid to the first of
the following persons in order of priority: (i) your surviving spouse,
(ii) your surviving children in equal shares, (iii) your estate.
III
MISCELLANEOUS
3.1 Definitions. The following terms are used herein:
(a) "Actuarial Equivalent" means a benefit of equivalent value
when computed on the basis of mortality and interest rate assumptions
recommended by an actuary and approved by the Vice President - Finance
and Chief Financial Officer or the Vice President and Controller of the
Company.
(b) "Cause" means:
(1) Your willful and continued failure to perform
substantially your duties with the Company (other than any such failure
resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to you by the
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer
believes that you have not substantially performed your duties; or
(2) Your willful engaging in illegal conduct or gross
misconduct which, in either such case, is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done,
by you in bad faith or without reasonable belief that your action or
omission was in the best interests of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be
done, by you in good faith and in the best interests of the Company.
The cessation of your employment shall not be deemed to be for Cause
unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to
you and you are given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board,
you are guilty of the conduct described in subparagraph (1) or (2)
above, and specifying the particulars thereof in detail.
(c) "Change of Control" means:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (3) of this section; or
(2) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(4) Approval by the stockholders of a Company of a complete
liquidation or dissolution of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Company" means International Multifoods Corporation, and any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company.
(f) "Good Reason" means:
(1) The assignment to you of any duties inconsistent in any
respect with your position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities, as of
the effective date of this Agreement or any other action by the Company
which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by you;
(2) Any reduction in your annual base salary as in effect
immediately prior to the effective date of this Agreement, or, if
higher, your highest annual base salary in effect at any time after the
effective date of this Agreement;
(3) The Company's requiring you to be based at any office or
location other than the corporate headquarters office in Minneapolis,
Minnesota, or any office or location within 50 miles of such location,
or the Company's requiring you to travel on Company business to a
substantially greater extent than required immediately prior to the
effective date of this Agreement; or
(5) Any failure by the Company to require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
For purposes of this section, any good faith determination of "Good
Reason" made by you shall be conclusive.
(g) "Grandfathered Formula" means the benefit formula set forth in
Appendix B of the PEP, which is a continuation of the benefit formula in
effect under the Employees' Retirement Plan of International Multifoods
Corporation as of December 31, 1995.
(h) "MBP" means the Management Benefit Plan of the Company, as it
may be amended from time to time.
(i) "PEP" means the Multifoods Pension Equity Plan, as adopted
January 1, 1996 (as a continuation of the Employees' Retirement Plan of
International Multifoods Corporation), as it may be amended from time to
time.
3.2 Governing Law/Construction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Minnesota,
without reference to principles of conflict of laws. The captions of
this Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
3.3 No Effect on Employment Rights. This Agreement is not an
employment agreement and nothing in this Agreement will confer on you
the right to be retained in the employ of the Company, or limit any
right of the Company to discharge you or otherwise deal with you without
regard to the existence of this Agreement.
3.4 FICA Taxes/Withholding. To the extent that benefit accruals
hereunder are taken into account as amounts deferred under a
nonqualified deferred compensation plan under Code section 3121(v), and
thus are subject to tax under Code section 3101 ("FICA"), the Company
may calculate the amount deferred and withhold against other
compensation paid to you in any manner determined by it to be
appropriate under Code section 3121(v).
3.5 Other Taxes/Withholding. The Company may withhold from any
amounts payable under this Agreement such federal, state, local or other
taxes as shall be required to be withheld pursuant to any applicable law
or regulation.
* * *
Please indicate your receipt and acceptance of the terms of this
Agreement by signing one of the enclosed copies and returning it at your
earliest convenience.
INTERNATIONAL MULTIFOODS CORPORATION
/s/ Robert F. Maddocks
------------------------------------
By: Robert F. Maddocks
Its: Executive Vice President
cc: R. M. Price
J. G. Traver
____________________________________________________________
ACCEPTANCE
I, Frank W. Bonvino, hereby acknowledge receipt of this Agreement
and wish to accept the supplemental benefit arrangement offered by this
Agreement.
Dated: September 27, 1996
Frank W. Bonvino
/s/ Frank W. Bonvino
----------------------------
<TABLE>
Exhibit 11
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Computation of Earnings (Loss) Per Common Share
(dollars in thousands, except per share amounts)
Years Ended
--------------------------------------------------------------------
February 28, February 28, February 28, February 29, February 28,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Average shares of common
stock outstanding 18,758,621 18,385,262 17,982,348 17,964,688 17,974,156
Dilutive potential common shares 144,722 233,791 - 49,358 15,809
----------- ----------- ----------- ----------- -----------
Average shares outstanding assuming
full dilution 18,903,343 18,619,053 17,982,348 18,014,046 17,989,965
=========== =========== =========== =========== ===========
Earnings (loss) from continuing
operations $ 6,832 $24,674 $(11,374) $15,017 $43,291
Earnings (loss) from discontinued
operations (138,702) (4,650) 14,154 9,058 13,730
--------- ------- -------- ------- -------
Net earnings (loss) (131,870) 20,024 2,780 24,075 57,021
Less dividends on preferred stock - - - 260 167
--------- ------- -------- ------- -------
Net earnings (loss) applicable
to common stock $(131,870) $20,024 $ 2,780 $23,815 $56,854
========= ======= ======== ======= =======
Basic earnings (loss) per share:
Continuing operations $ 0.36 $ 1.34 $ (0.63) $ 0.82 $ 2.40
Discontinued operations (7.39) (0.25) 0.78 0.51 0.76
--------- ------- -------- ------- -------
Total $ (7.03) $ 1.09 $ 0.15 $ 1.33 $ 3.16
========= ======= ======== ======= =======
Diluted earnings (loss) per share:
Continuing operations $ 0.36 $ 1.33 $ (0.63) $ 0.82 $ 2.40
Discontinued operations (7.34) (0.25) 0.78 0.50 0.76
--------- ------- -------- ------- -------
Total $ (6.98) $ 1.08 $ 0.15 $ 1.32 $ 3.16
========= ======= ======== ======= =======
</TABLE>
Basic earnings (loss) per share is computed by dividing net earnings
(loss), after deduction of preferred stock dividends, by the weighted
average number of shares of common stock outstanding during the year.
Diluted earnings per share is computed similar to basic earnings per
share except that the weighted average shares outstanding is 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 that the proceeds from
such exercises were used to acquire shares of common stock at the
average market price during the year.
<TABLE>
Exhibit 12
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
Years Ended
----------------------------------------------------------------
February 28, February 28, February 28, February 29, February 28,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings (loss) from continuing operations
before income taxes $12,266 $36,990 $(9,767) $14,707 $53,482
Plus: Fixed charges (1) 25,719 27,154 28,052 29,314 24,795
Less: Capitalized interest (196) (8) (109) (128) (317)
-------- -------- -------- -------- --------
Earnings available to cover fixed charges $37,789 $64,136 $18,176 $43,893 $77,960
Ratio of earnings to fixed charges(2)(3) 1.47 2.36 .65 1.50 3.14
<FN>
(1) Fixed charges consist of the following:
Years Ended
---------------------------------------------------------------
February 28, February 28, February 28, February 29, February 28,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Interest expense, gross $16,519 $17,651 $18,658 $19,613 $15,592
Rentals (interest factor) 9,200 9,503 9,394 9,701 9,203
------- ------- ------- ------- -------
Total $25,719 $27,154 $28,052 $29,314 $24,795
======= ======= ======= ======= =======
(2) For the year ended February 28, 1997, earnings were inadequate to
cover fixed charges. The deficiency of $9,876 was the result of unusual
items. Exclusive of these unusual items, the ratio of earnings to fixed
charges would have been 1.36 for the year ended February 28, 1997.
(3) Exclusive of unusual items, the ratio of earnings to fixed charges
would have been 2.60 for the year ended February 28, 1999.
</FN>
</TABLE>
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
In fiscal 1999, the Company announced its decision to sell its Venezuela
Foods business. The decision was based on management's belief that
shareholders would be best served by the more predictable financial
results expected from the Company's remaining businesses. As a result
of this decision, the Venezuela Foods 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 year ended February 28, 1999, the net loss from continuing and
discontinued operations totaled $131.9 million, or $6.98 per diluted
share, compared with net earnings of $20 million, or $1.08 per share, a
year ago. The net loss in fiscal 1999 resulted from a $138.7 million
loss from discontinued operations, which included a $93.3 million non-
cash charge for the recognition of unrealized foreign currency
translation losses. The unrealized translation losses were previously
classified as a separate component of shareholders' equity.
Fiscal 1999 results also included $18.7 million, or 99 cents per diluted
share, of after-tax unusual charges related to continuing operations.
Unusual charges resulted from 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.
Start-up costs and temporary inefficiencies that occurred as the Company
consolidated the distribution operations offset the savings achieved in
fiscal 1999 from the actions associated with unusual charges. The
Company expects these actions, however, to improve operating earnings by
$3 million to $5 million in fiscal 2000 and $9 million to $12 million in
fiscal 2001. Further information on unusual charges follows in the
discussion of Segment Results and in Note 4 to the consolidated
financial statements.
Continuing Operations
Fiscal 1999 earnings from continuing operations were $6.8 million, or 36
cents per share, compared with $24.6 million, or $1.33 per diluted
share, in the prior year. Net earnings were affected by unusual charges
in both years. Excluding unusual charges, fiscal 1999 earnings were
$25.5 million, or $1.35 per diluted share, compared with $27.8 million,
or $1.50 per diluted share, in the prior year. The decline in earnings
was the result of prior year non-recurring items that contributed 33
cents per share to last year's earnings. These non-recurring items
included income from the Company's divested food-exporting business, a
gain on the elimination of the subsidy for post-retirement health-care
benefits for future retirees and interest income on income tax refunds.
In addition, last year's earnings benefited from a low effective tax
rate.
Segment Results
The Company operates in two business segments: Multifoods Distribution
Group and North America Foods. The food-exporting business, which the
Company exited in fiscal 1998, is referred to as Divested Business. A
description of business segments and a summary of operating results are
included in Note 15 to the consolidated financial statements.
Fiscal 1999 compared with Fiscal 1998
Multifoods Distribution Group: Net sales increased 4% to $1.85 billion
as a result of higher sales to independent vending operators and pizza
and Mexican restaurant customers. The increase was also due to higher
foodservice prices that resulted from an increase in cheese costs.
Operating earnings before unusual items increased 19% to $28.3
million as a result of the higher sales volumes and lower administrative
costs. The increase was partially offset by higher distribution costs,
resulting from temporary inefficiencies associated with the
consolidation of distribution centers. Prior-year results included a $2
million curtailment gain from the elimination of the subsidy for post-
retirement health-care benefits for future retirees.
In fiscal 1999, the Company recognized an unusual charge of $11.5
million for actions associated with the Company's plan to consolidate
the vending and foodservice distribution operations into a single
business. The charge covers losses on lease commitments; employee
termination benefits; costs incurred for warehouse network, logistics
and transportation studies; and the write-down of leasehold
improvements.
North America Foods: Net sales declined 4% to $450.8 million due to
unfavorable currency translation because of a stronger U.S. dollar and
the impact of lower wheat costs, which reduced sales prices. Excluding
these factors, sales increased approximately 2% in fiscal 1999. The
increase was the result of higher U.S. bakery product and foodservice
condiments sales volumes. The increase was partially offset by volume
declines in consumer branded flour and commercial bakery ingredients in
Canada.
Operating earnings before unusual items increased 2% to $31.3
million as a result of the higher sales volumes and lower selling and
administrative expenses. Operating earnings, however, were adversely
affected by approximately $2.2 million from currency translation.
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 inability to sell the business at a price
acceptable to the Company and from the loss of a major customer. 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 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 $6.1 million charge to reduce the carrying value of
the assets. In addition, the unusual charge included $1.1 million
primarily for employee termination benefits.
Divested Business: The divested business segment represents the
Company's former food-exporting business, which the Company exited in
fiscal 1998. During fiscal 1999, the Company recognized earnings of
$0.8 million from a refund of customs taxes paid in prior years. The
Company also recognized an unusual charge of $10.3 million for the
write-off of receivables from a major customer.
Fiscal 1998 compared with Fiscal 1997
Fiscal 1998 earnings from continuing operations were $24.6 million, or
$1.33 per diluted share, compared with a loss of $11.4 million, or 63
cents per diluted share, in fiscal 1997. Net earnings were affected by
unusual charges in both years. Excluding unusual charges, fiscal 1998
earnings were $27.8 million, or $1.50 per diluted share, compared with
$3.4 million, or 19 cents per share, in fiscal 1997. The increase in
fiscal 1998 was the result of higher Multifoods Distribution Group and
North America Foods operating earnings and non-recurring items in fiscal
1998.
Multifoods Distribution Group: Net sales increased 2% to $1.77 billion
because of higher volumes to independent vending operators and fund-
raising customers. The increase was partially offset by lower sales in
foodservice distribution as a result of decisions to relinquish certain
low-margin accounts.
Operating earnings before unusual items increased 384% to $23.7
million as a result of a substantial improvement in vending
distribution. Vending distribution results improved on higher volumes,
lower delivery and distribution costs, and a reduction in bad debt
expense. In addition, vending distribution earnings benefited from the
purchase of coffee prior to world-market price increases. Operating
earnings also increased in foodservice distribution because of lower
delivery and distribution costs.
Fiscal 1997 unusual items included a $4 million charge for a
restructuring plan and a $1.1 million charge to consolidate two
foodservice distribution facilities. The restructuring plan involved
moving key customer support functions from a central location to each of
the Company's vending distribution centers. All significant actions
related to the plan were completed in fiscal 1998.
North America Foods: Net sales declined 1% to $471.7 million due to
lower prices on the Company's grain-based products that resulted from a
reduction in commodity costs and unfavorable currency translation. The
decline was partially offset by higher volumes in Canadian commercial
flour and U.S. bakery products.
Operating earnings before unusual items increased 47% to $30.6
million as a result of higher volumes and margins in Canadian commercial
flour and U.S. bakery products. The increase in margins was the result
of a more favorable product and customer mix, lower manufacturing costs
and lower ingredient costs. The increase in operating earnings was
partially offset by an operating loss in the Company's Canadian frozen
bakery business due to lower volumes and margins, and unfavorable
currency translation.
In fiscal 1997, the Company recognized an unusual charge of $11.4
million for asset impairment in its Canadian frozen bakery business.
The impairment resulted from a significant decline in operating results
during fiscal 1997, which occurred because of competitive pressures.
Corporate: Fiscal 1997 corporate expenses included $2.2 million in
costs associated with the resignation of the Company's former chief
executive officer and $1.4 million principally for the cost of business
assessment studies.
Non-Operating Expense and Income
In fiscal 1999, net interest expense for continuing operations was $10.4
million, compared with $7.5 million last year. In the prior year, the
Company recognized $3.2 million in interest income from U.S. Federal
income tax refunds.
In fiscal 1998, net interest expense declined to $7.5 million from $12.3
million in fiscal 1997. In addition to the interest income recognized
in fiscal 1998, the decline resulted from lower interest rates in Canada
and lower debt levels.
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
fiscal years 1999, 1998 and 1997 was $4.9 million, $4.8 million and $4.4
million, respectively.
In the third quarter of fiscal 1999, the Company recognized a gain of
$0.8 million from the sale of its investment in a Mexican animal feed
business.
Income Taxes
The effective tax rates on earnings before unusual items were 38% in
fiscal 1999, 33.7% in fiscal 1998 and 66.8% in fiscal 1997. The low tax
rate in fiscal 1998 was the result of a change in the expected
utilization of net operating loss and capital loss carryforwards of the
Company's Canadian business. The high effective tax rate in fiscal 1997
was due to the impact of non-deductible items and a low tax benefit from
the carryback of U.S. net operating losses against a very low pre-tax
earnings base. Including the effect of unusual items, the Company's
overall tax rates were 44.3% in fiscal 1999 and 33.3% in fiscal 1998.
Because of a low tax benefit associated with the Canadian frozen bakery
business impairment charge, fiscal 1997 reflected income tax expense on
a pre-tax loss.
Discontinued Operations
In August 1998, the Company announced its intention to sell its
Venezuela Foods business. The Company recognized an estimated loss on
disposition of $114.9 million in the second quarter of fiscal 1999. The
loss was based on the terms set forth in a letter of intent with a
prospective buyer. During the third quarter of fiscal 1999, the Company
announced that the prospective buyer had decided not to proceed with the
transaction, and as a result, the Company recorded an additional loss of
$7.2 million. The adjustment was necessary because the estimated sale
date had changed from the assumption used in the original loss
provision. During the fourth quarter, the Company recorded an
additional loss of $2.5 million as a result of higher-than-expected
operating losses and an adjustment to the estimated income taxes on the
sale.
Including the adjustments described in the preceding paragraph, the
Company recognized an estimated loss on disposition of $124.6 million
(after taxes of $10.8 million) in fiscal 1999. 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 expected disposal date, and
a $9.3 million loss on disposal. The disposition loss was based on
selling the business during fiscal 2000 at a sale price that
approximates the net book value of the business. In estimating the loss
from discontinued operations, considerable management judgment is
necessary, and actual results could differ materially from current
estimates.
In addition to the estimated loss on the disposition, the Company
recognized a loss of $14.1 million (net of $0.7 million tax benefit) for
the operating results of Venezuela Foods for the five months ended July
31, 1998. The provision for operating losses from July 31, 1998, to the
anticipated sale date are reflected in the net loss on disposition.
Net sales of the Venezuela Foods business declined 4% to $347.2 million
in fiscal 1999. The decline was the result of a reduction in corn flour
and commercial wheat flour sales volumes. Excluding loss provisions
related to the disposal, operating losses were $28.1 million in fiscal
1999, compared with earnings of $0.3 million in fiscal 1998. The
current-year operating loss was primarily the result of difficult
economic conditions that adversely affected sales volumes and prevented
the Company from raising prices to cover higher raw material and
operating costs. In addition, the current-year operating loss included
a charge of $8.5 million, which consisted of a $5.3 million asset write-
down, and $3.2 million for employee severance liabilities and costs
associated with the departure of the business segment's former
president.
FINANCIAL CONDITION
Capital Resources and Liquidity
The Company's short-term financing is provided by borrowings against its
U.S. and Canadian revolving credit agreements and uncommitted lines of
credit. As of February 28, 1999, the Company had $320 million under
committed revolving credit agreements and $110 million of uncommitted
lines of credit. The Company has a medium-term note program under its
shelf registration statement filed with the Securities and Exchange
Commission that provides for the issuance of up to $150 million in
medium-term notes in various amounts. As of February 28, 1999, $140
million was available under the medium-term note program. See Notes 8
and 9 to the consolidated financial statements for additional
information on capital resources.
The Company's debt-to-total capitalization ratio increased to 38% at
February 28, 1999, compared with 32% at February 28, 1998. The ratios
for both periods exclude debt obligations of the Company's Venezuelan
business that are expected to be assumed by a buyer and that have been
classified as net assets of discontinued operations in the consolidated
balance sheet. Including debt obligations of continuing and
discontinued operations, the debt-to-total capitalization ratio was 48%,
compared with 38% at February 28, 1998. The increase in the debt-to-
total capitalization ratio was the result of increased working capital
requirements of continuing and discontinued operations, and the impact
on debt and shareholders' equity due to the loss from discontinued
operations and unusual charges.
Capital expenditures for continuing operations were $28.1 million in
fiscal 1999, compared with $18.6 million in fiscal 1998. Approximately
45% of the fiscal 1999 capital expenditures was attributed to projects
designed to increase earnings through volume improvements, new business
or cost savings. For fiscal 2000, the Company currently expects to
spend about $50 million on capital projects. This estimate includes
approximately $30 million to consolidate and expand distribution
facilities and $10 million to expand production capacity in North
America Foods.
The Company believes that cash flows from operations together with
available external financing will be sufficient to fund operations,
dividend payments and capital expenditures anticipated for fiscal 2000.
Discontinued Operations
The Company's Venezuelan business used $39.5 million of cash for
operations in fiscal 1999, primarily as a result of a significant
operating loss and an increase in working capital needs. Financing
requirements were met by a combination of local and U.S.-based financing
sources, which were substantially guaranteed by the Company. The
Company believes that cash used by Venezuelan operations in fiscal 2000
will be lower than fiscal 1999 due to an expected improvement in
operating results.
Based on management's current estimates, the Company expects to receive
net proceeds of approximately $25 million from the sale of its
Venezuelan business, after payment of transaction costs and taxes. In
addition, the Company expects that the buyer will assume the debt
obligations of the Venezuelan business. Actual net proceeds from the
sale could differ materially from this estimate. The Company intends to
initially use the net proceeds to reduce debt.
The Company's Venezuelan business is subject to risks inherent in
operating under a different legal and political system, and in a
difficult economic environment. Among these risks are inflation,
currency volatility, possible limitations on foreign investment,
exchangeability of currency, dividend repatriation and changes in
existing tax laws.
The Company's present strategies for managing Venezuelan currency risk
include product pricing strategies and active management of its net
monetary exposure, principally through U.S. dollar versus bolivar-
denominated financing. With respect to product pricing strategies, the
Company is exposed to the risk of declines in gross profit margins if
the bolivar were to decline in value versus the U.S. dollar. With
respect to the Company's Venezuela monetary position (which includes its
bolivar-denominated assets and liabilities, except for inventory and
fixed assets), the Company is exposed to the risk of foreign exchange
gains and losses if the bolivar were to change in value versus the U.S.
dollar. For example, if the bolivar were to decline in value and the
Company were in a net monetary asset position (i.e., bolivar-denominated
assets exceed liabilities), there would be foreign exchange losses, the
amount of which would depend upon the size of the net monetary asset
position and the magnitude of the currency devaluation. Conversely, if
the Company were in a net monetary liability position (i.e., bolivar-
denominated liabilities exceed assets) and the bolivar declined in
value, there would be foreign exchange gains. As of February 28, 1999,
the Company's Venezuelan business was in a net monetary liability
position of $2 million.
MARKET RISK MANAGEMENT
The Company is exposed to market risks resulting from changes in
commodity prices, foreign currency exchange rates and interest rates.
Changes in these factors could adversely affect the Company's results of
operations and financial position. To minimize these risks, the Company
utilizes derivative financial instruments, such as commodity futures
contracts, currency forward contracts and interest rate swaps. The
Company uses derivative financial instruments as risk management tools
and not for speculative or trading purposes. See Note 7 to the
consolidated financial statements for further information regarding
financial instruments.
The Company used sensitivity analysis to determine the impact of market
risk exposures on the fair values of the Company's debt and financial
instruments, including derivative financial instruments. Sensitivity
analysis assesses the risk of loss in market risk sensitive instruments
based on hypothetical changes in market prices or rates.
Commodity Risk Management: The Company's Canadian operations minimize
the risk associated with wheat market price fluctuations by hedging its
wheat and flour inventories, open wheat purchase contracts and open
flour sales contracts with wheat futures contracts. In the United
States, the Company has entered into futures contracts to reduce the
risk of price fluctuations on anticipated flour, soybean oil and sugar
purchases. The U.S. dollar-denominated futures contracts are traded on
U.S. regulated exchanges.
The open futures contracts mature in the period from March 1999 to March
2000 and substantially coincide with the maturities of the open wheat
purchase contracts, open flour sales contracts and the anticipated
timing of flour, soybean oil and sugar purchases. Based on a 10%
adverse change (defined as a decrease in the current price of the
commodity), the loss in fair value would be $2.1 million. The loss in
fair value, if realized, would be offset by lower costs of wheat,
soybean oil and sugar recognized in fiscal 2000.
Foreign Currency Hedging: The Company's Canadian operations enter into
foreign currency forward contracts to minimize its exposure to foreign
currency fluctuations as a result of U.S. dollar-denominated sales and
purchases. In addition, the Company's Canadian operations also enter
into foreign currency forward contracts that have the effect of
converting the U.S. dollar-denominated grain futures contracts (see
Commodity Risk Management) into Canadian dollar equivalents.
The Company estimates that a hypothetical 10% adverse change (defined as
a weaker Canadian dollar) would result in a net pre-tax loss of $1.1
million on the U.S. dollar contracts sold and bought. The losses would
be substantially offset by gains from the revaluation or settlement of
the underlying positions hedged.
Interest Rate Risk Management: The Company's exposure to changes in
interest rates results from borrowing activities used to meet its
working capital and other long-term financing needs. The borrowings are
comprised of notes payable, principally to banks, which have variable
interest rates, and of fixed rate medium-term notes.
Based on an increase in interest rates of 53 basis points (defined as a
10% increase in current interest rates on notes payable), the potential
adverse impact on annual interest expense would be approximately $0.5
million.
An increase in interest rates of 66 basis points (defined as a 10%
increase in current market interest rates on medium-term notes) would
result in a decrease in fair value of approximately $7.3 million on
medium-term notes outstanding. Conversely, a decrease in interest rates
of 66 basis points would result in a $5.9 million increase in the fair
value of medium-term notes outstanding.
The Company entered into fixed interest rate swaps to reduce the
Company's risk of increased interest costs during periods of rising
interest rates. The interest rate swaps mature during time periods
ranging from March 2003 to December 2008. Assuming a hypothetical
interest rate change of approximately 58 basis points (defined as a 10%
decrease in current interest rates), the fair values of the interest
rate swaps would decrease by approximately $1.3 million.
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 18 months or longer. Each team has developed and adopted
a plan of action to deal with the problems posed by the new 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 has been developed with an original target
completion date of June 30, 1999, for Year 2000 compliance for all
computer and non-computer systems. This plan includes the 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 will be completed by August 31, 1999, and that 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
has been developed with a target completion date of June 30, 1999, for
Year 2000 compliance for all computer and non-computer systems.
Progress towards compliance continues to be made 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 complete by September 30, 1999.
In Venezuela, the Company has completed a comprehensive review of its
existing business and financial systems. These systems were not Year
2000 compliant, and the Company has chosen to replace these systems with
packaged software that is Year 2000 compliant. The implementation began
in June 1998, and it is scheduled to be complete by June 30, 1999. The
capital cost for the new business system is estimated to be $4.6
million. The Company has completed a preliminary inventory and
assessment of non-computer systems, and based upon this information, the
Company believes that there are no critical deficiencies in these
systems. A more complete inventory and assessment is in progress and is
scheduled to be completed by June 30, 1999. The Company is also in the
process of evaluating critical relationships with vendors, suppliers and
customers, and will develop contingency plans, as appropriate.
The Company believes that by upgrading the packaged software in North
America and by replacing the business and financial systems in
Venezuela, 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 regulation; 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; 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 Company's ability to complete the sale
of the Venezuela Foods business; the Company's ability to realize the
earnings benefit from the integration of its distribution businesses;
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 reports
filed with the Securities and Exchange Commission.
Independent Auditors' Report
The Board of Directors and Shareholders of
International Multifoods Corporation:
We have audited the accompanying consolidated balance sheets of
International Multifoods Corporation and subsidiaries as of February 28,
1999 and 1998, and the related consolidated statements of operations,
cash flows and shareholders' equity for each of the years in the three-
year period ended February 28, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of International Multifoods Corporation and subsidiaries as of February
28, 1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended February 28,
1999, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 29, 1999
Management's Responsibility for Financial Statements
The consolidated financial statements have been prepared by management
in conformity with generally accepted accounting principles and include,
where required, amounts based on management's best estimates and
judgments. Management continues to be responsible for the integrity and
objectivity of data in these consolidated financial statements, which it
seeks to assure through an extensive system of internal controls. Such
controls are designed to provide reasonable, but not absolute, assurance
that assets are safeguarded from unauthorized use or disposition and
that financial records are sufficiently reliable to permit the
preparation of consolidated financial statements. It is recognized that
estimates and judgments are required to assess and balance the relative
cost and expected benefits of any system of internal controls.
The system of internal accounting controls is designed to provide
reasonable assurance that the books and records reflect the Company's
transactions and that its established policies and procedures are
carefully followed. The system includes written policies and
procedures, a financial reporting system, an internal audit department
and careful selection and training of qualified personnel.
/s/ Gary E. Costley /s/ William L. Trubeck
Gary E. Costley William L. Trubeck
Chairman, President Senior Vice President, Finance,
and Chief Executive Officer Chief Financial Officer and
President, Latin America Operations
INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
Fiscal year ended the last day of February
(in thousands, except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 2,296,550 $ 2,251,096 $ 2,249,106
Cost of materials and production (1,961,441) (1,915,226) (1,918,312)
Delivery and distribution (150,310) (145,879) (155,538)
- -----------------------------------------------------------------------------
Gross profit 184,799 189,991 175,256
Selling, general and
administrative (132,943) (140,503) (152,161)
Unusual items (28,963) (5,000) (20,107)
- -----------------------------------------------------------------------------
Operating earnings 22,893 44,488 2,988
Interest, net (10,382) (7,552) (12,314)
Other income (expense), net (245) 54 (441)
- -----------------------------------------------------------------------------
Earnings (loss) from continuing
operations before income taxes 12,266 36,990 (9,767)
Income taxes (5,434) (12,316) (1,607)
- -----------------------------------------------------------------------------
Earnings (loss) from continuing
operations 6,832 24,674 (11,374)
- -----------------------------------------------------------------------------
Discontinued operations:
Operating earnings (loss),
after tax (14,068) (4,650) 14,154
Net loss on disposition,
after tax (124,634) - -
- -----------------------------------------------------------------------------
Earnings (loss) from discontinued
operations (138,702) (4,650) 14,154
- -----------------------------------------------------------------------------
Net earnings (loss) $ (131,870) $ 20,024 $ 2,780
=============================================================================
Basic earnings (loss) per share:
Continuing operations $ 0.36 $ 1.34 $ (0.63)
Discontinued operations (7.39) (0.25) 0.78
- -----------------------------------------------------------------------------
Total $ (7.03) $ 1.09 $ 0.15
=============================================================================
Diluted earnings (loss) per share:
Continuing operations $ 0.36 $ 1.33 $ (0.63)
Discontinued operations (7.34) (0.25) 0.78
- -----------------------------------------------------------------------------
Total $ (6.98) $ 1.08 $ 0.15
=============================================================================
Average shares of common stock
outstanding:
Basic 18,759 18,385 17,982
Diluted 18,903 18,619 17,982
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
February 28, 1999 and 1998
(in thousands) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,495 $ 9,126
Trade accounts receivable, net of allowance 124,843 111,944
Inventories 162,414 156,335
Deferred income taxes 13,364 12,725
Net current assets of discontinued operations - 62,962
Other current assets 25,951 30,292
- -------------------------------------------------------------------------
Total current assets 340,067 383,384
- -------------------------------------------------------------------------
Property, plant and equipment, net 165,161 169,982
Goodwill, net 82,089 84,911
Net noncurrent assets of discontinued operations 44,905 7,976
Other assets 64,711 57,341
- -------------------------------------------------------------------------
Total assets $696,933 $ 703,594
=========================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 32,489 $ 1,025
Current portion of long-term debt 2,750 24,500
Accounts payable 161,700 132,401
Net current liabilities of discontinued
operations 9,079 -
Other current liabilities 58,227 63,839
- -------------------------------------------------------------------------
Total current liabilities 264,245 221,765
- -------------------------------------------------------------------------
Long-term debt 121,199 120,951
Deferred income taxes 17,036 19,455
Employee benefits and other liabilities 34,137 32,070
- -------------------------------------------------------------------------
Total liabilities 436,617 394,241
- -------------------------------------------------------------------------
Shareholders' equity:
Preferred capital stock - -
Common stock, authorized 50,000 shares;
issued 21,844 shares 2,184 2,184
Capital in excess of par value 92,000 91,340
Retained earnings 251,874 398,754
Accumulated other comprehensive loss (17,215) (114,311)
Treasury stock, 3,068 and 3,106 shares, at cost (67,741) (67,480)
Unearned compensation (786) (1,134)
- -------------------------------------------------------------------------
Total shareholders' equity 260,316 309,353
- -------------------------------------------------------------------------
Commitments and contingencies
- -------------------------------------------------------------------------
Total liabilities and shareholders' equity $696,933 $ 703,594
=========================================================================
</TABLE>
<TABLE>
See accompanying notes to consolidated financial statements.
INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal year ended the last day of February
(in thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operations:
Earnings (loss) from continuing operations $ 6,832 $ 24,674 $(11,374)
Adjustments to reconcile earnings (loss) from
continuing operations to cash provided by
continuing operations:
Depreciation and amortization 22,081 23,965 24,024
Provision for unusual charges 28,963 5,000 20,107
Deferred income tax expense (benefit) (2,748) 2,486 3,252
Provision for losses on (recoveries of)
receivables 713 (430) 2,721
Change in noncurrent notes receivable (200) (10,298) 566
Changes in working capital* (15,582) 50,222 (13,493)
Other, net (2,907) (727) (4,734)
- ----------------------------------------------------------------------------------------
Cash provided by continuing operations 37,152 94,892 21,069
Cash provided by (used for)
discontinued operations (39,500) 35,304 (33,516)
- ----------------------------------------------------------------------------------------
Cash provided by (used for)
operations (2,348) 130,196 (12,447)
- ----------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (28,050) (18,642) (21,714)
Proceeds from sale of investment 2,340 - -
Proceeds from other property disposals 2,010 669 606
Discontinued operations (6,220) (5,604) (5,776)
- ----------------------------------------------------------------------------------------
Cash used for
investing activities (29,920) (23,577) (26,884)
- ----------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in notes payable 31,430 (12,862) 19,664
Additions to long-term debt 3,157 - 20,000
Reductions in long-term debt (23,750) (60,658) (25,390)
Dividends paid (14,995) (14,665) (14,477)
Proceeds from issuance of common stock 4,129 16,108 546
Purchase of treasury stock (4,787) (799) (82)
Discontinued operations 45,346 (31,974) 40,455
Other, net (2,133) (16) (230)
- ----------------------------------------------------------------------------------------
Cash provided by (used for)
financing activities 38,397 (104,866) 40,486
- ----------------------------------------------------------------------------------------
(Increase) decrease in cash from discontinued
operations (1,747) 1,978 (827)
- ----------------------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (13) (52) (21)
- ----------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 4,369 3,679 307
Cash and cash equivalents at beginning of year 9,126 5,447 5,140
- ----------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 13,495 $ 9,126 $ 5,447
========================================================================================
*Cash flows from changes in working capital:
Accounts receivable $(17,880) $ 67,307 $(29,096)
Inventories (8,693) 19,874 197
Other current assets 5,360 2,068 (9,105)
Accounts payable 30,744 (38,300) 22,483
Other current liabilities (25,113) (727) 2,028
- ----------------------------------------------------------------------------------------
Net change $(15,582) $ 50,222 $(13,493)
========================================================================================
</TABLE>
<TABLE>
INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
$.10 par value Accumulated
------------------- Capital in Other
Common Treasury Excess of Retained Comprehensive Unearned
(in thousands) Stock Stock Par Value Earnings Loss Compensation Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
February 29, 1996 $2,184 $(83,948) $88,316 $ 404,813 $(110,844) $ (958) $ 299,563
Comprehensive income(a) - - - 2,780 535 - 3,315
Dividends declared on
common stock - - - (14,258) - - (14,258)
5 shares purchased for
treasury - (82) - - - - (82)
35 shares issued for
employee benefit plans - 768 (192) - - (569) 7
Amortization of unearned
compensation - - - - - 1,033 1,033
- --------------------------------------------------------------------------------------------------------------------------
Balance at
February 28, 1997 2,184 (83,262) 88,124 393,335 (110,309) (494) 289,578
Comprehensive income(a) - - - 20,024 (4,002) - 16,022
Dividends declared on
common stock - - - (14,605) - - (14,605)
36 shares purchased for
treasury - (799) - - - - (799)
764 shares issued for
employee benefit plans - 16,581 3,216 - - (1,289) 18,508
Amortization of unearned
compensation - - - - - 649 649
- --------------------------------------------------------------------------------------------------------------------------
Balance at
February 28, 1998 2,184 (67,480) 91,340 398,754 (114,311) (1,134) 309,353
Comprehensive loss(a) - - - (131,870) 97,096 - (34,774)
Dividends declared on
common stock - - - (15,010) - - (15,010)
170 shares purchased for
treasury - (4,787) - - - - (4,787)
208 shares issued for
employee benefit plans - 4,526 660 - - (262) 4,924
Amortization of unearned
compensation - - - - - 610 610
- --------------------------------------------------------------------------------------------------------------------------
Balance at
February 28, 1999 $2,184 $(67,741) $92,000 $ 251,874 $ (17,215) $ (786) $ 260,316
==========================================================================================================================
</TABLE>
(a) Reconciliations of net earnings (loss) to comprehensive income
(loss) are as follows:
<TABLE>
(in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss) $(131,870) $20,024 $2,780
- ------------------------------------------------------------------------------------------------
Other comprehensive income (loss):
Foreign currency translation adjustments (4,547) (2,812) 170
Reclassification adjustment due to foreign currency
translation adjustments recognized 101,555 - -
Minimum pension liability adjustment (net of tax
of $(56), $761 and $(233), respectively) 88 (1,190) 365
- ------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 97,096 (4,002) 535
- ------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (34,774) $16,022 $3,315
================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
financial statements and related notes to financial statements. Actual
results could differ from these estimates.
The Company has reclassified certain amounts in the prior-year
financial statements to conform with the fiscal 1999 presentation. This
included classifying the Venezuela Foods business as discontinued
operations (see Note 2). The notes to the consolidated financial
statements, except where otherwise indicated, relate to continuing
operations only.
Basis of statement presentation
The accompanying consolidated financial statements include the accounts
of International Multifoods Corporation and all of its subsidiaries.
Intercompany accounts and transactions have been eliminated in
consolidation.
Foreign currency translation and transactions
The functional currency of the Company's Canadian operations is the
Canadian dollar. Assets and liabilities are translated at current
exchange rates, and results of operations are translated using the
weighted average exchange rate in effect during the fiscal year. The
gains or losses resulting from translation are included as a separate
component of shareholders' equity.
The functional currency of the Company's discontinued Venezuelan
operations is the U.S. dollar. Nonmonetary assets and liabilities,
principally inventory and fixed assets, are translated at historical
exchange rates, while monetary assets and liabilities are translated at
current exchange rates. Results of operations are translated using the
weighted average exchange rate in effect during the fiscal year, except
that cost of sales and depreciation are translated at historical rates.
The gains or losses resulting from translation are included in the
determination of net earnings.
Stock-based compensation
The Company uses the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for employee stock
options. Under the intrinsic value method, compensation expense is
recorded only to the extent that the market price of the common stock
exceeds the exercise price of the stock option on the date of grant.
Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the financial
statement carrying amount and the tax basis of assets and liabilities.
Earnings per share
Basic earnings per share are computed by dividing net earnings by the
weighted average shares outstanding during the reporting 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 that the proceeds from
such exercises were used to acquire shares of common stock at the
average market price during the reporting period.
The computations for basic and diluted earnings (loss) per share
from continuing operations are as follows:
<TABLE>
(in thousands, except per share data) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings (loss) from continuing operations $ 6,832 $24,674 $(11,374)
- -------------------------------------------------------------------------------
Average shares of common stock outstanding:
Basic 18,759 18,385 17,982
Effect of stock options 144 234 -
- -------------------------------------------------------------------------------
Diluted 18,903 18,619 17,982
- -------------------------------------------------------------------------------
Earnings (loss) per share from continuing
operations:
Basic $ 0.36 $ 1.34 $ (0.63)
Diluted 0.36 1.33 (0.63)
- -------------------------------------------------------------------------------
</TABLE>
Cash and cash equivalents
Included in cash and cash equivalents are cash on hand, time deposits
and highly liquid short-term investments purchased with original
maturities of three months or less.
Inventories
Inventories, excluding grain in Canada, are valued principally at the
lower of cost (first-in, first-out) or market (replacement or net
realizable value).
In Canada, inventories of grain are valued on the basis of
replacement market prices prevailing at fiscal year-end. The Company
generally minimizes risks associated with market price fluctuations by
hedging those inventories with futures contracts. Therefore, included
in inventories is the amount of gain or loss on open grain contracts,
including futures contracts, which generally has the effect of adjusting
those inventories to cost.
The Company also enters into futures contracts to reduce the risk of
price increases with respect to certain anticipated raw material
purchases. The futures contracts are accounted for as hedges, with
gains and losses deferred in inventory and subsequently included in cost
of sales as the inventory is sold.
Property, plant and equipment
Property, plant and equipment is stated at cost, and depreciation is
computed using the straight-line method for determining financial
statement income. When permitted, accelerated depreciation methods are
used to calculate depreciation for income tax purposes.
Goodwill and other intangibles
Goodwill represents the excess of costs of businesses acquired over the
fair market value of net tangible and identifiable intangible assets.
Such excess costs are amortized on a straight-line basis over various
periods not exceeding 40 years. Identifiable intangible assets
represent costs allocated to noncompete agreements, trade names and
other specifically identifiable assets arising from business
acquisitions. These assets are amortized on a straight-line basis over
their estimated useful lives. Accumulated amortization of goodwill and
other intangibles at February 28, 1999 and 1998, was $29.3 million and
$25.8 million, respectively.
Recoverability of long-lived assets
The Company assesses the recoverability of goodwill and other long-lived
assets whenever events or changes in circumstances indicate that
expected future undiscounted cash flows may not be sufficient to support
the carrying amount of an asset. The Company deems an asset to be
impaired if a forecast of undiscounted future operating cash flows is
less than its carrying amount. If an asset is determined to be
impaired, the loss is measured as the amount by which the carrying value
of the asset exceeds its fair value.
New accounting pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities," which must be adopted by
the Company no later than March 1, 2000. SFAS 133 requires that all
derivative instruments be recorded 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. The Company has not yet determined the impact that adoption or
subsequent application of SFAS 133 will have on its financial position
and results of operations.
Note 2: Discontinued Operations
In August 1998, the Company announced its intention to sell its
Venezuela Foods business. The Company recognized an estimated loss on
disposition of $114.9 million in the second quarter of fiscal 1999. The
loss was based on the terms set forth in a letter of intent with a
prospective buyer. During the third quarter of fiscal 1999, the Company
announced that the prospective buyer had decided not to proceed with the
transaction, and as a result, the Company recorded an additional loss of
$7.2 million. The adjustment was necessary because the estimated sale
date had changed from the assumption used in the original loss
provision. During the fourth quarter, the Company recorded an
additional loss of $2.5 million as a result of higher-than-expected
operating losses and an adjustment to the estimated income taxes on the
sale.
Including the adjustments described above, the Company recognized an
estimated loss on disposition of $124.6 million (after taxes of $10.8
million) in fiscal 1999. 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 disposition loss is based on
selling the business during fiscal 2000 at a sale price that
approximates the net book value of the business. In estimating the loss
from discontinued operations, considerable management judgment is
necessary, and actual results could differ materially from current
estimates.
In addition to the estimated loss on the disposition, the Company
recognized a loss of $14.1 million (net of $0.7 million tax benefit) for
the operating results of Venezuela Foods for the five months ended July
31, 1998. Operating losses from July 31, 1998, to the anticipated sale
date are reflected in the net loss on disposition.
Excluding the loss provisions related to the disposal, the operating
results of Venezuela Foods for the 12 months ended February 28, 1999 and
1998, were as follows:
(in thousands) 1999 1998
- ------------------------------------------------------------
Net sales $347,178 $360,696
Operating earnings (loss) (28,102) 322
Interest, net (4,901) (4,825)
Net loss (34,274) (4,650)
- ------------------------------------------------------------
The net assets of the Venezuela Foods business were as follows:
(in thousands) 1999 1998
- ------------------------------------------------------------
Cash and cash equivalents $ 2,745 $ 1,237
Trade accounts receivable, net 34,807 32,258
Inventories 72,638 109,654
Other current assets 6,009 10,471
Notes payable (83,843) -
Current portion of long-term debt (583) (542)
Accounts payable (33,312) (85,099)
Other current liabilities (7,540) (5,017)
- ------------------------------------------------------------
Net current assets (liabilities) of
discontinued operations $ (9,079) $ 62,962
============================================================
Property, plant and equipment, net $ 46,127 $ 50,585
Other assets 1,665 1,310
Long-term debt (896) (41,906)
Employee benefits and other
liabilities (1,991) (2,013)
- ------------------------------------------------------------
Net noncurrent assets of
discontinued operations $ 44,905 $ 7,976
============================================================
Note 3: Interest, Net
Interest, net consisted of the following:
<TABLE>
(in thousands) 1999 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $11,107 $12,754 $13,954
Capitalized interest (196) (8) (109)
Non-operating interest income (529) (5,194) (1,531)
- ----------------------------------------------------------------------
Interest, net $10,382 $ 7,552 $12,314
======================================================================
</TABLE>
Total interest income was $0.6 million in fiscal 1999, $8.5 million
in fiscal 1998 and $2.9 million in fiscal 1997.
Cash payments for interest, net of amounts capitalized, totaled
$11.4 million in fiscal 1999, $14.4 million in fiscal 1998 and $10.9
million in fiscal 1997.
Interest expense of the Venezuela Foods business has been classified
in discontinued operations.
Note 4: Unusual Items
Fiscal 1999
The Company recognized unusual items that resulted in pre-tax charges of
$29.0 million ($18.7 million after tax or 99 cents per diluted share)
and were comprised of the following:
<TABLE>
Employee
Termination Lease Property, Plant
Benefits Commitment and Equipment Receivable
(in millions) and Other Costs Write-down Write-off Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Multifoods Distribution
Group $ 6.4 $2.3 $ 2.8 $ - $ 11.5
North America Foods 1.1 - 6.1 - 7.2
Divested Business - - - 10.3 10.3
- -------------------------------------------------------------------------------------
Total unusual charges 7.5 2.3 8.9 10.3 29.0
Asset write-down and
receivable write-off - - (8.9) (10.3) (19.2)
Cash payments (5.0) (0.7) - - (5.7)
- -------------------------------------------------------------------------------------
Liability balance as of
February 28, 1999 $ 2.5 $1.6 $ - $ - $ 4.1
=====================================================================================
</TABLE>
Management adopted a plan to consolidate its foodservice and vending
distribution 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 warehouse
network, logistics and transportation studies; and the write-down of
leasehold improvements. The Company believes that the actions
associated with the plan will be completed over a 24-month period ended
June 2000.
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 inability
to sell the business at a price acceptable to the Company and from the
loss of a major customer. The Company evaluated the carrying value of
its long-lived assets as a result of these events and recognized a $6.1
million charge for asset impairment. In addition, a charge of $1.1
million primarily for employee termination benefits was recognized.
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
$5.0 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
economic difficulties in Russia. Accordingly, the Company believes that
the remaining amounts due from the customer are not collectible.
Fiscal 1998
The Company recognized a pre-tax charge of $5.0 million ($3.2 million
after tax or 17 cents per share) to reduce the carrying value of its
receivables from a major customer of the Company's former food-exporting
business. See further discussion under Fiscal 1999.
Fiscal 1997
The Company recognized unusual items that resulted in pre-tax charges of
$20.1 million ($14.8 million after tax or 83 cents per share) and were
comprised of the following:
<TABLE>
(in millions) Segment
- -----------------------------------------------------------------------------
<S> <C> <C>
Asset impairment $11.4 North America Foods
Restructuring plan 4.0 Multifoods Distribution Group
Severance and other costs 3.6 Corporate
Facility consolidation plan 1.1 Multifoods Distribution Group
- -----------------------------------------------------------------------------
Total $20.1
========================================
</TABLE>
The Company recognized a charge of $11.4 million for asset
impairment in its Canadian frozen bakery business. The impairment
resulted in a $9.6 million reduction in goodwill and a $1.8 million
reduction in fixed assets. During fiscal 1997, the business experienced
an increase in competition in certain key markets and a significant
decline in sales volume and operating results. The Company estimated
the fair value of the business's assets using discounted expected future
cash flows and determined that the carrying value of the business unit
exceeded the fair value.
Management adopted a restructuring plan at its vending distribution
business directed at improving customer service. The plan included
moving certain customer support functions from a central location to the
distribution centers. Accordingly, the Company recorded a $2.8 million
charge primarily for losses on lease commitments and a $1.2 million
charge for involuntary employee termination benefits covering
approximately 190 customer support employees. All significant actions
related to the plan were completed in fiscal 1998.
The Company recognized $2.2 million in severance and other costs
resulting from the resignation of the Company's former chief executive
officer and $1.4 million principally for costs of business assessment
studies.
Management adopted a plan to consolidate two foodservice
distribution centers. As a result, the Company recorded a $1.1 million
charge for the loss on lease commitments and employee termination
benefits. Involuntary employee termination benefits covered
approximately 40 warehouse, delivery and administrative employees. All
significant actions related to the plan were completed in fiscal 1998.
Note 5: Income Taxes
<TABLE>
Income tax expense was as follows:
U.S. Operations
----------------- Non-U.S
(in thousands) Federal Other Operations Total
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999:
Current expense $ 356 $ 278 $ 7,548 $ 8,182
Deferred expense (benefit) (3,845) (21) 1,118 (2,748)
- -------------------------------------------------------------------------
Total tax expense (benefit) $(3,489) $ 257 $ 8,666 $ 5,434
=========================================================================
1998:
Current expense (benefit) $ (229) $ 283 $ 9,775 $ 9,829
Deferred expense (benefit) 3,241 1,472 (2,226) 2,487
- -------------------------------------------------------------------------
Total tax expense $ 3,012 $1,755 $ 7,549 $12,316
=========================================================================
1997:
Current expense (benefit) $(7,976) $ 57 $ 6,274 $(1,645)
Deferred expense (benefit) 3,385 (440) 307 3,252
- -------------------------------------------------------------------------
Total tax expense (benefit) $(4,591) $ (383) $ 6,581 $ 1,607
=========================================================================
</TABLE>
<TABLE>
Temporary differences that gave rise to deferred tax assets and
liabilities as of February 28, 1999 and 1998, were as follows:
1999 1998
-------------------- --------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(in thousands) Assets Liabilities Assets Liabilities
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation and
amortization $ 2,072 $26,793 $ 1,483 $29,191
Accrued expenses 20,591 13,959 20,736 11,681
Inventory valuation methods 633 - 614 -
Reorganization and
divestiture reserves 3,261 - 637 -
Provision for losses
on receivables 937 - 3,425 -
Loss carryforwards 8,219 - 7,137 -
Foreign earnings repatriation - 2,360 - 3,139
Other 5,135 1,622 3,201 1,550
- --------------------------------------------------------------------------
Subtotal 40,848 44,734 37,233 45,561
Valuation allowance (853) - - -
- --------------------------------------------------------------------------
Total deferred taxes $39,995 $44,734 $37,233 $45,561
==========================================================================
</TABLE>
At February 28, 1999, the Company had a U.S. federal consolidated
net operating loss carryforward of approximately $13.7 million that will
expire in fiscal 2013 and 2019. The Company's foreign operations had
net operating loss carryforwards of approximately $2.6 million that will
expire in fiscal 2005. The Company's foreign operations also had
capital loss carryforwards of approximately $3.4 million that have no
expiration date. The Company expects to fully utilize the net operating
and capital loss carryforwards.
In fiscal 1999, the Company recognized a valuation allowance for its
foreign tax credit carryforward due to uncertainty over the Company's
ability to utilize these credits prior to their expiration.
Total income taxes from continuing operations differ from the amount
computed by applying the U.S. federal income tax rate because of the
following items:
<TABLE>
(in thousands) 1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Tax at U.S. federal statutory rate $ 4,293 $12,947 $(3,418)
Differences:
Effect of taxes on non-U.S. earnings 912 (1,641) 4,887
State and local income taxes 167 1,141 (249)
Effect of intangibles 101 137 148
Other (39) (268) 239
- -------------------------------------------------------------------------
Total income taxes $ 5,434 $12,316 $ 1,607
=========================================================================
</TABLE>
Provision has been made for U.S. income taxes applicable to
anticipated remittances of earnings from non-U.S. affiliates. It is not
practicable to estimate the remaining deferred tax liability associated
with temporary differences related to investments in non-U.S.
affiliates. Earnings before income taxes from non-U.S. affiliates were
$20.1 million in fiscal 1999, $26.3 million in fiscal 1998 and $6.2
million in fiscal 1997.
Cash paid (received) for income taxes totaled $13.0 million in
fiscal 1999, $(1.0) million in fiscal 1998 and $5.3 million in fiscal
1997.
Note 6: Supplemental Balance Sheet Information
<TABLE>
(in thousands) 1999 1998
- ------------------------------------------------------------------------
<S> <C> <C>
Trade accounts receivable, net:
Trade $ 127,877 $ 116,261
Allowance for doubtful accounts (3,034) (4,317)
- ------------------------------------------------------------------------
Total trade accounts receivable, net $ 124,843 $ 111,944
========================================================================
Inventories:
Raw materials, excluding grain $ 12,742 $ 8,302
Grain 2,745 6,258
Finished and in-process goods 142,122 137,501
Packages and supplies 4,805 4,274
- ------------------------------------------------------------------------
Total inventories $ 162,414 $ 156,335
========================================================================
Property, plant and equipment, net:
Land $ 12,398 $ 11,389
Buildings and improvements 82,766 80,172
Machinery and equipment 191,504 190,324
Transportation equipment 1,451 4,876
Improvements in progress 12,020 5,958
- ------------------------------------------------------------------------
300,139 292,719
Accumulated depreciation (134,978) (122,737)
- ------------------------------------------------------------------------
Total property, plant and equipment, net $ 165,161 $ 169,982
========================================================================
Other assets:
Prepaid pension $ 34,595 $ 29,505
Identifiable intangible assets 10,273 11,368
Other 19,843 16,468
- ------------------------------------------------------------------------
Total other assets $ 64,711 $ 57,341
========================================================================
Other current liabilities:
Wages and benefits $ 11,075 $ 15,282
Income taxes 14,954 13,784
Other 32,198 34,773
- ------------------------------------------------------------------------
Total other current liabilities $ 58,227 $ 63,839
========================================================================
Accumulated other comprehensive loss:
Foreign currency translation adjustment $ (13,804) $(110,812)
Minimum pension liability adjustment (3,411) (3,499)
- ------------------------------------------------------------------------
Total accumulated other comprehensive loss $ (17,215) $(114,311)
========================================================================
</TABLE>
Note 7: Financial Instruments
Fair value of financial instruments
The carrying value of cash and cash equivalents, accounts receivable,
accounts payable and short-term debt approximate fair value. The
Company's $67.0 million carrying value of medium-term notes, $2.0
million of which is classified as current, had a fair value of $66.3
million as of February 28, 1999.
Commodity risk management
The Company utilizes commodity futures contracts to reduce the risks
associated with price fluctuations on its wheat inventories and other
major bakery ingredients, such as flour, soybean oil and sugar.
At February 28, 1999, the Company held futures contracts to purchase
wheat, soybean oil and sugar with an aggregate contract value of $23.1
million. The amount of deferred losses, measured by using quoted market
prices as of February 28, 1999, was $1.8 million. Gains and losses on
commodity futures contracts are deferred in inventory until the
production flows through cost of goods sold.
Foreign currency hedging
The Company's Canadian operations enter into foreign currency forward
contracts to minimize exposure to foreign currency fluctuations with
respect to U.S. dollar-denominated transactions. At February 28, 1999,
the Company held foreign exchange forward contracts to sell and buy U.S.
dollars totaling $20.3 million and $11.3 million, respectively. The
foreign exchange forward contracts are purchased through major Canadian
banking institutions. The deferred gains on such contracts were
insignificant. The gains and losses arising on these transactions are
recognized in income at the maturity of the contracts.
Interest rate risk management
The Company enters into fixed interest rate swaps to reduce the
Company's risk of increased interest costs during periods of rising
interest rates. Under the terms of the agreements, the Company will
make quarterly payments at a fixed rate. In return, the Company will
receive floating rate payments based on the current three-month London
Interbank Offered Rate (LIBOR). The net amount received or paid under
the terms of the contract is classified as interest expense. The fair
value as of February 28, 1999, was $0.4 million (unrealized gain). The
following table provides further information on the interest rate swaps:
<TABLE>
Pay-fixed Receive-variable
Notional Amount Commencing Date Maturity Date Rate Rate
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$20 million March 2, 1998 March 3, 2003 6.175% 3-month LIBOR
$20 million December 15, 1998 December 15, 2008 5.320% 3-month LIBOR
- ---------------------------------------------------------------------------------------
</TABLE>
Off-balance sheet risk
As of February 28, 1999 and 1998, the Company had sold with limited
recourse $17.8 million and $21.2 million of accounts receivable,
respectively, related to its Canadian operations. Collections received
on these accounts may be replaced by new receivables in order to
maintain the aggregate outstanding balance. The credit risk of
uncollectible accounts has been substantially transferred to the
purchaser. Fees associated with these transactions are included in
other income (expense), net in the consolidated statements of
operations.
Concentrations of credit risk
Management believes that the credit risk of exchange-traded futures
contracts, foreign exchange forward contracts and interest rate
contracts due to nonperformance of the counterparties is insignificant.
The Company extends credit on a regular basis under various terms to
customers that meet certain financial and other criteria. In general,
the Company does not require collateral or security. The Company
believes that its trade receivables do not represent significant
concentrations of credit risk due to the large number of customers and
markets into which its products are sold, as well as their dispersion
across geographic areas.
Note 8: Notes Payable
<TABLE>
Notes payable consisted of the following:
(in thousands) 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Canadian bankers' acceptances $ - $ 15,451
Notes payable, principally to banks 88,688 39,525
Amounts reclassified to long-term debt (56,199) (53,951)
- ----------------------------------------------------------------------
Total notes payable $ 32,489 $ 1,025
======================================================================
</TABLE>
The Company has $320 million under committed revolving credit
agreements, of which $270 million expires in March 2001 and $50 million
expires in February 2000. The Company had available $229 million under
these revolving credit agreements as of February 28, 1999. The interest
rates on borrowings under these agreements are variable and based on
current market factors. There are no restrictions on the use of these
facilities for general corporate purposes and support for commercial
paper issued by the Company. The credit agreements contain certain
restrictive covenants that include maintenance of minimum tangible net
worth, a fixed charge coverage ratio and an indebtedness to
capitalization ratio. None of the restrictive covenants is expected to
affect the payment of dividends based on the Company's present dividend
rate. Related facility fees were $0.4 million in fiscal 1999 and 1998.
Notes payable totaling $56.2 million have been classified as long-
term debt as a result of the Company's intent to refinance this debt on
a long-term basis and the availability of such financing under the terms
of the revolving credit agreements.
The weighted average interest rates on notes payable outstanding at
February 28, 1999 and 1998, were 5.3% and 5.6%, respectively.
At February 28, 1999, the Company had total uncommitted lines of
credit from banks in the United States and Canada of approximately $110
million, of which $90 million was available. No compensating balances
were required for any of these credit lines.
Note 9: Long-Term Debt
<TABLE>
Long-term debt, net of current portion of $2.8 million in fiscal 1999
and $24.5 million in fiscal 1998, was as follows:
(in thousands) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Medium-term notes $ 65,000 $ 67,000
Notes payable, reclassified 56,199 53,951
- -------------------------------------------------------------------------
Total long-term debt $121,199 $120,951
=========================================================================
</TABLE>
The Company maintains a shelf registration statement with the
Securities and Exchange Commission for the issuance of $150 million of
debt securities, of which $140 million remained available at February
28, 1999. The Company may issue up to the entire amount as medium-term
notes, Series B, in varying amounts, rates and maturities. Medium-term
notes outstanding at February 28, 1999, mature in fiscal 2000 to 2006
and have a weighted average interest rate of 6.6%.
Minimum principal payments totaling $121.2 million are due as
follows: $20.0 million in fiscal 2001, $56.2 million in fiscal 2002,
$1.0 million in fiscal 2003, $14.0 million in fiscal 2004, $6.0 million
in fiscal 2005 and $24.0 million in fiscal 2006. Minimum principal
payments of $56.2 million in fiscal 2002 represent notes payable that
were classified as long-term debt due to the revolving credit agreements
that expire in March 2001 (see Note 8). The Company intends to
refinance these obligations by establishing new long-term credit
facilities.
Note 10: Shareholders' Equity
The Company has authorized 10,000,000 shares of Preferred Capital Stock,
par value $1.00 per share, which may be designated and issued as
convertible into common shares. The Company has created a series of
such Preferred Capital Stock, designated as Series 1990 Junior
Participating Capital Preferred Stock, consisting of 500,000 shares, par
value $1.00 per share. No Preferred Capital Stock was outstanding
during the three years ended February 28, 1999.
The Company has a shareholder rights plan that entitles one preferred
share purchase right for each outstanding share of common stock. The
rights become exercisable only after a person or group (with certain
exceptions) becomes the beneficial owner of 10% or more of the Company's
outstanding common stock or announces a tender offer, the consummation
of which would result in beneficial ownership by a person or group of
10% or more of the Company's outstanding common stock. Each right will
entitle its holder to purchase one one-hundredth share of Series 1990
Junior Participating Preferred Capital Stock (consisting of 500,000
shares, par value $1.00 per share) at an exercise price of $100, subject
to adjustment. If a person or group acquires beneficial ownership of 10%
or more of the Company's outstanding common stock, each right will
entitle its holder (other than such person or group) to purchase, at the
then-current exercise price of the right, a number of shares of the
Company's common (or, in certain circumstances, preferred) stock having
a market value of twice the then-current exercise price of the right.
In addition, if the Company is acquired in a merger or other business
combination transaction or if 50% or more of its consolidated assets or
earnings power are acquired, each right will entitle its holder to
purchase, at the then-current exercise price of the right, a number of
the acquiring company's common shares having a market value of twice the
then-current exercise price of the right. Following the acquisition by
a person or group of beneficial ownership of 10% or more of the
Company's outstanding common stock and prior to an acquisition by any
person or group of 50% or more of the Company's outstanding common
stock, the Board of Directors may exchange the outstanding rights (other
than rights owned by such person or group), in whole or in part, for
common (or, in certain circumstances, preferred) stock of the Company.
Prior to the acquisition by a person or group of beneficial ownership of
10% or more of the Company's outstanding common stock, the rights are
redeemable for $.01 per right at the option of the Board of Directors.
Note 11: Leases
The Company leases certain plant, office space and equipment for varying
periods. Management expects that in the normal course of business,
leases will be renewed or replaced by other leases.
The following is a schedule of future minimum lease payments for
operating leases that had initial or remaining noncancelable lease terms
in excess of one year as of February 28, 1999:
Operating
(in thousands) Leases
- ------------------------------------------------------------
2000 $17,417
2001 13,685
2002 10,591
2003 7,635
2004 5,862
2005 and beyond 10,258
- ------------------------------------------------------------
Total minimum lease payments* $65,448
============================================================
*Minimum payments do not include contingent rentals or vehicle lease
payments based on mileage.
Total net rent expense for operating leases, including those with
terms of less than one year, consisted of the following:
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------
Minimum rentals $25,091 $26,663 $27,096
Contingent rentals 53 46 6
Sublease rentals (355) (53) -
- --------------------------------------------------------------------
Total net rent expense $24,789 $26,656 $27,102
====================================================================
Note 12: Commitments and 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 recognize a material charge to its results of operations.
In fiscal 1998, the Company signed an exclusive supply agreement
with a customer in Venezuela that requires the Company to guarantee debt
obligations of up to $4.4 million. The customer has pledged certain
assets that have an estimated market value in excess of the guarantee.
It is not practicable to estimate the fair value of the guarantee;
however, the Company does not expect that it will incur losses as a
result of this guarantee.
At February 28, 1999, the Company had guaranteed and provided
standby letters of credit totaling $113.3 million related to bank loans
and trade obligations of its discontinued Venezuela Foods business.
At February 28, 1999, the estimated cost to complete improvements in
progress totaled approximately $15 million.
Note 13: Stock Plans
The 1989 and 1997 stock-based plans of the Company permit awards of
restricted stock, incentive units and stock options to directors and key
employees subject to the provisions of the plans and as determined by
the Compensation Committee of the Board of Directors. At February 28,
1999, a total of 725,062 common shares were available for grants.
In fiscal 1999, grants of 11,222 shares of restricted stock were
awarded with varying performance criteria and vesting periods. At
February 28, 1999, the total number of restricted shares outstanding was
55,357. The market value of shares issued under the plans, as of the
date of grant, has been recorded as unearned compensation and is shown
as a separate component of shareholders' equity. Unearned compensation
is expensed over the period that restrictions lapse.
Stock options are granted to purchase shares of Company common stock
at not less than fair market value at dates of grant. With the
exception of certain options that become exercisable over a period of
years based on varying performance criteria, options generally become
exercisable one year after the date of grant. In addition, options
generally expire 10 years after the date of grant.
The per share weighted average fair values of stock options granted
were $6.91 in fiscal 1999, $4.28 in fiscal 1998 and $4.40 in fiscal
1997. The fair value of options at the date of grant was estimated
using the Black-Scholes option pricing model. The following weighted-
average assumptions were used in the calculation:
Assumptions 1999 1998 1997
- ----------------------------------------------------------------------
Expected dividend yield 3.8% 4.0% 3.8%
Expected volatility 24.0% 20.7% 19.8%
Risk-free interest rates 5.7% 6.2% 6.6%
Expected life (in years) 8.2 8.3 8.3
- ----------------------------------------------------------------------
The Company applies APB Opinion No. 25 in accounting for the
compensation costs of employee stock options in the financial
statements. Had the Company determined compensation costs based on the
fair value at the date of grant for its stock options, the Company's
earnings (loss) from continuing operations would have been reduced to
the pro forma amounts indicated below:
(in thousands, except per share data) 1999 1998 1997
- -------------------------------------------------------------------
Earnings (loss) from continuing
operations:
As reported $6,832 $24,674 $(11,374)
Pro forma 5,944 23,915 (11,784)
Diluted earnings (loss) per share
from continuing operations:
As reported $ 0.36 $ 1.33 $ (0.63)
Pro forma 0.31 1.28 (0.66)
- -------------------------------------------------------------------
The following table contains information on stock options:
Option Price
Shares Per Share-Range
- ----------------------------------------------------------
Outstanding at
February 29, 1996 1,566,822 $16.06 - 29.00
Granted 273,509 16.00 - 20.81
Exercised (30,250) 16.63 - 19.21
Expired or canceled (285,050) 16.75 - 28.06
- ----------------------------------------------------------
Outstanding at
February 28, 1997 1,525,031 $16.00 - 29.00
Granted 583,066 18.19 - 27.69
Exercised (731,451) 16.75 - 28.06
Expired or canceled (40,150) 18.69 - 28.06
- ----------------------------------------------------------
Outstanding at
February 28, 1998 1,336,496 $16.00 - 29.00
Granted 181,564 23.25 - 29.28
Exercised (191,879) 18.69 - 28.06
Expired or canceled (25,222) 18.69 - 29.28
- ----------------------------------------------------------
Outstanding at
February 28, 1999 1,300,959 $16.00 - 29.28
==========================================================
Options exercisable at:
February 28, 1997 1,321,281 $16.06 - 29.00
February 28, 1998 831,396 $16.00 - 29.00
February 28, 1999 875,009 $16.00 - 29.00
- ----------------------------------------------------------
Note 14: Retirement Plans
Defined benefit pension plans and other post-retirement benefits
In the United States and Canada, defined benefit pension plans cover
substantially all employees. Benefits are based primarily on years of
credited service and average compensation or stated amounts for each
year of service. These plans are generally funded by contributions to
tax-exempt trusts in amounts sufficient to provide assets to cover the
plans' obligations. Plan assets consist principally of listed equity
securities, fixed income securities and cash equivalents.
The Company also provides post-retirement health and life insurance
benefits for retirees in the United States and Canada who meet minimum
age and service requirements. Life insurance benefits are funded on a
pay-as-you-go basis through an insurance company. Health-care benefits
are provided under a self-insured program administered by an insurance
company.
Summaries related to the changes in benefit obligations and plan
assets, and to the funded status of the plans are as follows:
<TABLE>
Post-Retirement
Pension Benefits Benefits
------------------- --------------------
(in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at
beginning of year $193,627 $180,074 $ 13,811 $ 18,522
Service cost 3,337 2,492 101 356
Interest cost 12,518 12,883 907 1,154
Plan participants'
contributions 556 592 526 443
Amendments 2,989 1,149 (967) -
Plan expenses (527) (434) - -
Actuarial (gain) loss 9,835 14,165 2,093 (1,559)
Benefits payments (15,127) (14,708) (1,760) (2,020)
Curtailments - (166) - (2,915)
Foreign exchange adjustment (3,397) (2,420) (249) (170)
- -------------------------------------------------------------------------------
Benefit obligation at end
of year $203,811 $193,627 $ 14,462 $ 13,811
===============================================================================
Change in plan assets
Fair value of plan assets
at beginning of year $231,032 $202,131 $ - $ 535
Actual return on plan assets 44,012 45,148 - 17
Employer contribution 1,017 982 1,234 1,025
Plan participants'
contributions 556 592 526 443
Benefits payments (15,127) (14,708) (1,760) (2,020)
Plan expenses (527) (434) - -
Foreign exchange adjustment (3,933) (2,679) - -
- -------------------------------------------------------------------------------
Fair value of plan assets at
end of year $257,030 $231,032 $ - $ -
===============================================================================
Funded status
Funded status at end of year $ 53,219 $ 37,405 $(14,462) $(13,811)
Unrecognized transition
asset (5,902) (7,663) - -
Unrecognized prior service
cost 5,999 4,864 (575) 348
Unrecognized net (gain) loss (29,800) (15,375) 1,692 (220)
- -------------------------------------------------------------------------------
Net amount recognized $ 23,516 $ 19,231 $(13,345) $(13,683)
===============================================================================
Amounts recognized in the
consolidated balance sheet
consist of:
Prepaid benefit cost $ 34,595 $ 29,505 $ - $ -
Accrued benefit liability (16,679) (16,018) (13,345) (13,683)
Intangible asset 8 8 - -
Accumulated other
comprehensive loss 5,592 5,736 - -
- -------------------------------------------------------------------------------
Net amount recognized $ 23,516 $ 19,231 $(13,345) $(13,683)
===============================================================================
</TABLE>
<TABLE>
Post-Retirement
Pension Benefits Benefits
---------------- ----------------
Weighted-average assumptions 1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 6.2% 6.7% 6.2% 6.8%
Expected return on plan assets 10.3% 9.5% N/A N/A
Rate of compensation increase 4.0% 4.0% N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
The assumed annual rate of increase in per capita costs of post-
retirement health-care benefits for fiscal 1999 ranged from 4% to 8%.
The rate is assumed to decrease gradually to between 4% to 4.8% for
fiscal 2004 and thereafter.
Assumed health-care cost trends could have an effect on the amounts
reported for the health-care plans. The effects of a one-percentage
change in the assumed health-care cost trends are as follows:
<TABLE>
1% point 1% point
(in thousands) Increase Decrease
- -------------------------------------------------------------
<S> <C> <C>
Total of service and interest cost $ 37 $ (35)
Accumulated post-retirement
benefit obligation 548 (486)
- -------------------------------------------------------------
</TABLE>
<TABLE>
Post-Retirement
Pension Benefits Benefits
---------------------------- -------------------------
(in thousands) 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost $ 3,337 $ 2,492 $ 2,492 $ 101 $ 356 $ 474
Interest cost 12,518 12,883 12,438 907 1,154 1,351
Expected return on plan
assets (20,419) (16,419) (15,972) - (9) (21)
Amortization of transition
(asset) obligation (1,532) (1,443) (1,197) - - -
Amortization of prior
service cost 1,367 820 807 (34) (791) (1,411)
Recognized actuarial
(gain) loss 760 575 814 117 (61) 15
- -------------------------------------------------------------------------------------
Net periodic (benefit)
cost $ (3,969) $ (1,092) $ (618) $1,091 $ 649 $ 408
=====================================================================================
</TABLE>
The Company recognized a $2.9 million curtailment gain in fiscal
1998 from the elimination of subsidized retiree medical coverage for
most active employees in the United Sates.
The following information pertains to pension plans with accumulated
benefit obligations in excess of plan assets:
Pension Benefits
------------------------
(in thousands) 1999 1998
- ------------------------------------------------------------
Projected benefit obligation $17,251 $16,018
Accumulated benefit obligation 17,197 16,018
Plan assets - -
- ------------------------------------------------------------
The minimum liability recorded for pension plans where the
accumulated benefit obligation exceeded the fair market value of assets
is as follows:
(in thousands) 1999 1998
- ------------------------------------------------------------
Minimum liability recognized in
comprehensive loss $(5,592) $(5,736)
Tax benefit 2,181 2,237
- ------------------------------------------------------------
Minimum liability recognized in
comprehensive loss, net of tax $(3,411) $(3,499)
============================================================
Defined contribution plans
Defined contribution plans cover substantially all salaried, sales and
certain hourly employees in the United States and Canada. The Company
makes contributions equal to 50% of the participating employee's
contributions subject to certain limitations. Employer contributions,
which are invested in shares of the Company's common stock, were $2.2
million in fiscal 1999, $2.0 million in fiscal 1998 and $2.1 million in
fiscal 1997.
Note 15: Multifoods' Business Segments
The Company has two reportable business segments: Multifoods
Distribution Group and North America Foods.
Multifoods Distribution Group is a distributor of food and other
products to the foodservice industry in the United States. The business
offers foodservice customers a broad selection of national brand-name,
regional and private-label items, including food products, paper goods
and cleaning supplies, through its national network of distribution
centers. Customers include casual-dining, limited-menu restaurants,
such as pizza, Mexican and Italian establishments, and sandwich shops;
vending operators; the office coffee service market; movie theaters;
fund-raising groups; commissaries; and stadium and recreational
concession stands. The Company holds leadership positions in the
independent pizza restaurant, vending and office coffee service
foodservice categories.
North America Foods is comprised of two business units: U.S. Foods
and Robin Hood Multifoods in Canada. U.S. Foods is a manufacturer and
provider of baking mixes and frozen batters, doughs and desserts to
commercial customers and foodservice operators. Customers include
retail, wholesale and in-store bakeries, and foodservice
establishments, such as restaurants and convenience stores. In Canada,
Robin Hood Multifoods is a leading consumer foods manufacturer and
marketer of flour and baking mixes, primarily under the Robin Hood
brand name; and condiments, primarily under the Bick's brand name. The
Company also serves as a leading provider of grain-based products and
condiments to commercial customers and foodservice operators.
Divested Business consists of the food-exporting business, which
the Company exited in fiscal 1998.
The Company does not allocate interest expense, income taxes or
certain corporate expenses to its business segments. Inter-segment
revenues were immaterial for the years ended February 28, 1999, 1998 and
1997. The following tables set forth information by business segment:
<TABLE>
Operating
Net Operating Unusual Earnings
(in millions) Sales Costs Items (Loss)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999:
Multifoods Distribution Group $1,845.8 $(1,817.5) $(11.5) $ 16.8
North America Foods 450.8 (419.5) (7.2) 24.1
Divested Business - 0.8 (10.3) (9.5)
Corporate Expenses - (8.5) - (8.5)
- ----------------------------------------------------------------------------
Total $2,296.6 $(2,244.7) $(29.0) $ 22.9
============================================================================
1998:
Multifoods Distribution Group $1,770.2 $(1,746.5) $ - $ 23.7
North America Foods 471.7 (441.1) - 30.6
Divested Business 9.2 (4.8) (5.0) (0.6)
Corporate Expenses - (9.2) - (9.2)
- ----------------------------------------------------------------------------
Total $2,251.1 $(2,201.6) $ (5.0) $ 44.5
============================================================================
1997:
Multifoods Distribution Group $1,729.9 $(1,725.0) $ (5.1) $ (0.2)
North America Foods 476.7 (455.9) (11.4) 9.4
Divested Business 42.5 (34.8) - 7.7
Corporate Expenses - (10.3) (3.6) (13.9)
- ----------------------------------------------------------------------------
Total $2,249.1 $(2,226.0) $(20.1) $ 3.0
============================================================================
</TABLE>
<TABLE>
1999 1998 1997
---------------------------------- ---------------------------------- ------------------------------
Depreciation Depreciation Depreciation
Capital and Capital and Capital and
(in millions) Expenditures Amortization Assets Expenditures Amortization Assets Expenditures Amortization Assets
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifoods
Distribution
Group $13.0 $11.4 $354.3 $ 5.4 $12.6 $338.3 $ 7.2 $12.9 $367.0
North America Foods 14.7 10.3 215.6 6.5 11.0 216.3 14.0 10.7 233.7
Divested Business - - 6.7 - - 16.6 0.1 - 63.9
Corporate 0.4 0.4 75.4 6.7 0.4 61.5 0.4 0.4 65.0
Discontinued
Operations - - 44.9 - - 70.9 - - 75.2
- ------------------------------------------------------------------------------------------------------------------------
Total $28.1 $22.1 $696.9 $18.6 $24.0 $703.6 $21.7 $24.0 $804.8
========================================================================================================================
</TABLE>
Corporate assets include cash and cash equivalents, U.S. prepaid
pension assets, and current and deferred income tax assets.
Geographic Information
The Company's North America Foods business segment operates in the
United States and Canada. The Canadian operations had revenues of
$297.3 million, $324.7 million and $332.0 million for fiscal years
1999, 1998 and 1997, respectively. In addition, long-lived assets of
the Canadian operations were $79.3 million, $84.9 million and $90.0
million at February 28, 1999, 1998 and 1997, respectively. Long-lived
assets consist of property, plant and equipment; goodwill; and
identifiable intangible assets.
<TABLE>
Note 16: Quarterly Summary (unaudited)
Operating
Net Operating Unusual Earnings
(in millions) Sales Costs Items (Loss)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter - 1999
Multifoods Distribution Group $454.7 $(448.2) $(11.5) $ (5.0)
North America Foods 110.5 (105.9) (7.2) (2.6)
Divested Business - 0.8 (10.3) (9.5)
Corporate Expenses - (2.0) - (2.0)
- ----------------------------------------------------------------------------
Total $565.2 $(555.3) $(29.0) $(19.1)
============================================================================
First Quarter - 1998
Multifoods Distribution Group $446.7 $(443.2) $ - $ 3.5
North America Foods 115.5 (112.5) - 3.0
Divested Business 2.7 (2.1) - 0.6
Corporate Expenses - (2.6) - (2.6)
- ----------------------------------------------------------------------------
Total $564.9 $(560.4) $ - $ 4.5
============================================================================
Second Quarter - 1999
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
============================================================================
Second Quarter - 1998
Multifoods Distribution Group $422.2 $(417.1) $ - $ 5.1
North America Foods 116.7 (111.4) - 5.3
Divested Business 2.7 (0.6) - 2.1
Corporate Expenses - (1.9) - (1.9)
- ----------------------------------------------------------------------------
Total $541.6 $(531.0) $ - $ 10.6
============================================================================
Third Quarter - 1999
Multifoods Distribution Group $483.8 $(475.4) $ - $ 8.4
North America Foods 127.3 (115.9) - 11.4
Corporate Expenses - (2.2) - (2.2)
- ----------------------------------------------------------------------------
Total $611.1 $(593.5) $ - $ 17.6
============================================================================
Third Quarter - 1998
Multifoods Distribution Group $456.8 $(449.0) $ - $ 7.8
North America Foods 133.4 (119.4) - 14.0
Divested Business 3.4 (2.1) - 1.3
Corporate Expenses - (2.4) - (2.4)
- ----------------------------------------------------------------------------
Total $593.6 $(572.9) $ - $ 20.7
============================================================================
Fourth Quarter - 1999
Multifoods Distribution Group $465.2 $(457.3) $ - $ 7.9
North America Foods 108.0 (99.6) - 8.4
Corporate Expenses - (2.0) - (2.0)
- ----------------------------------------------------------------------------
Total $573.2 $(558.9) $ - $ 14.3
============================================================================
Fourth Quarter - 1998
Multifoods Distribution Group $444.5 $(437.2) $ - $ 7.3
North America Foods 106.1 (97.8) - 8.3
Divested Business 0.4 - (5.0) (4.6)
Corporate Expenses - (2.3) - (2.3)
- ----------------------------------------------------------------------------
Total $551.0 $(537.3) $ (5.0) $ 8.7
============================================================================
</TABLE>
<TABLE>
Note 16: Quarterly Summary (unaudited) (continued)
First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
(in millions) --------------- ---------------- --------------- --------------- ---------------
except per share data) 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross profit $ 44.8 $44.3 $ 42.7 $ 44.7 $51.8 $55.7 $45.5 $45.3 $184.8 $190.0
Earnings (loss) from
continuing operations (14.6)(b) 0.9 4.6 6.1 9.8 13.1 7.0 4.5(d) 6.8 24.6
Earnings (loss) from
discontinued operations (9.7)(c) 1.1 (119.2) (1.6) (7.3) (3.7) (2.5) (0.4) (138.7) (4.6)
- -----------------------------------------------------------------------------------------------------------------------
Net earnings (loss) (24.3) 2.0 (114.6) 4.5 2.5 9.4 4.5 4.1 (131.9) 20.0
Basic earnings (loss) per
share of common stock (a):
Continuing operations (0.78)(b) 0.05 0.24 0.33 0.52 0.70 0.38 0.24(d) 0.36 1.34
Discontinued operations (0.52)(c) 0.06 (6.35) (0.08) (0.38) (0.19) (0.14) (0.02) (7.39) (0.25)
- -----------------------------------------------------------------------------------------------------------------------
Total (1.30) 0.11 (6.11) 0.25 0.14 0.51 0.24 0.22 (7.03) 1.09
Diluted earnings (loss) per
share of common stock (a):
Continuing operations (0.78)(b) 0.05 0.24 0.33 0.52 0.69 0.37 0.24(d) 0.36 1.33
Discontinued operations (0.52)(c) 0.06 (6.30) (0.08) (0.38) (0.19) (0.13) (0.03) (7.34) (0.25)
- -----------------------------------------------------------------------------------------------------------------------
Total (1.30) 0.11 (6.06) 0.25 0.14 0.50 0.24 0.21 (6.98) 1.08
Comprehensive income
(loss) (26.2) 1.5 (26.8) 4.0 12.1 7.5 6.1 3.0 (34.8) 16.0
Dividend paid per share
of common stock 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.80 0.80
Market price of
common stock:
Close 29 3/4 28 1/4 17 3/8 26 7/8 25 7/16 26 7/8 21 11/16 27 15/16 21 11/16 27 15/16
High 30 15/16 28 1/4 31 7/16 29 3/8 25 9/16 32 7/16 26 13/16 29 1/4 31 7/16 32 7/16
Low 27 5/8 20 17 5/16 24 1/2 15 3/8 26 3/16 20 15/16 24 5/8 15 3/8 20
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings (loss) per share are computed independently for each
period presented. As a result, the sum of the quarterly earnings
(loss) per share in fiscal 1999 and 1998 does not equal the total
computed for the year.
(b) Includes a net after-tax charge of $18.7 million, or 99 cents per
diluted share, from unusual items.
(c) Includes a net after-tax charge of $8.4 million, or 45 cents per
share, from unusual items.
(d) Includes a net after-tax charge of $3.2 million, or 17 cents per
share, from unusual items. Also includes a net after-tax gain of
$1.8 million, or 10 cents per share, from the elimination of
subsidized retiree medical coverage for most active employees in
the United States.
<TABLE>
Five-Year Comparative Summary
Fiscal year ended the last day of February
(dollars and shares in millions, except per share data) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Summary of Operations
Net sales $ 2,296.6 $ 2,251.1 $ 2,249.1 $ 2,194.7 $ 1,977.5
Cost of materials and production (1,961.5) (1,915.2) (1,918.3) (1,856.3) (1,637.7)
Delivery and distribution (150.3) (145.9) (155.5) (154.1) (138.2)
Selling, general and administrative (132.9) (140.5) (152.2) (148.2) (162.2)
Unusual items (29.0) (5.0) (20.1) (5.6) 26.2
Interest, net (10.4) (7.5) (12.3) (15.0) (11.4)
Other income (expense), net (0.2) - (0.5) (0.8) (0.7)
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations
before income taxes 12.3 37.0 (9.8) 14.7 53.5
Income taxes (5.5) (12.4) (1.6) 0.3 (10.2)
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 6.8 24.6 (11.4) 15.0 43.3
- -----------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Operating earnings (loss), after tax (14.1) (4.6) 14.2 9.1 13.7
Net loss on disposition, after tax (124.6) - - - -
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) from discontinued operations (138.7) (4.6) 14.2 9.1 13.7
- -----------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (131.9) $ 20.0 $ 2.8 $ 24.1 $ 57.0
=======================================================================================================================
Basic earnings (loss) per share:
Continuing operations $ 0.36 $ 1.34 $ (0.63) $ 0.82 $ 2.40
Discontinued operations (7.39) (0.25) 0.78 0.51 0.76
- -----------------------------------------------------------------------------------------------------------------------
Total $ (7.03) $ 1.09 $ 0.15 $ 1.33 $ 3.16
=======================================================================================================================
Diluted earnings (loss) per share:
Continuing operations $ 0.36 $ 1.33 $ (0.63) $ 0.82 $ 2.40
Discontinued operations (7.34) (0.25) 0.78 0.50 0.76
- -----------------------------------------------------------------------------------------------------------------------
Total $ (6.98) $ 1.08 $ 0.15 $ 1.32 $ 3.16
=======================================================================================================================
Year-End Financial Position
Current assets (3) $ 340.1 $ 383.4 $ 439.9 $ 389.7 $ 377.2
Current liabilities (3) 264.2 221.8 257.6 215.7 232.6
Working capital (excluding cash and short-term debt)(3) 179.3 177.3 268.6 211.1 195.6
Property, plant and equipment, net (2) 165.2 170.0 175.4 175.6 197.8
Long-term debt (2) 121.2 121.0 200.9 196.5 179.5
Shareholders' equity 260.3 309.4 289.6 299.6 291.1
Total assets (3) 696.9 703.6 804.8 768.5 764.2
- -----------------------------------------------------------------------------------------------------------------------
Dividends Paid
Preferred stock $ - $ - $ - $ 0.1 $ 0.2
Common stock 15.0 14.7 14.5 14.4 14.4
Per share of common stock 0.80 0.80 0.80 0.80 0.80
- -----------------------------------------------------------------------------------------------------------------------
Other Financial Data
Current ratio 1.3:1 1.7:1 1.7:1 1.8:1 1.6:1
Equity per share of common stock $ 13.86 $ 16.51 $ 16.08 $ 16.66 $ 16.16
Debt to total capitalization (2) 38% 32% 43% 41% 39%
Depreciation (2) $ 18.6 $ 20.3 $ 19.9 $ 20.1 $ 19.7
Capital expenditures, excluding acquisitions (2) $ 28.1 $ 18.6 $ 21.7 $ 26.2 $ 25.3
Average common shares outstanding:
Basic 18.8 18.4 18.0 18.0 18.0
Diluted 18.9 18.6 18.0 18.0 18.0
Number of common shareholders 4,658 4,705 5,087 4,930 5,234
Number of employees (3) 6,743 6,807 7,176 7,115 7,495
Market price per share of common stock:
Close $21 11/16 $27 15/16 $ 21 1/8 $ 18 5/8 $ 18 5/8
High $ 31 7/16 $32 7/16 $ 22 $ 23 7/8 $ 19 5/8
Low $ 15 3/8 $20 $ 15 1/8 $ 17 1/4 $ 15 1/8
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In fiscal 1999, the Company classified its Venezuela Foods business
as discontinued operations. Prior year information has been
reclassified accordingly.
(2) Continuing operations only.
(3) Includes discontinued operations.
Exhibit 21
SUBSIDIARIES OF INTERNATIONAL MULTIFOODS CORPORATION
The following is a list of the Company's subsidiaries as of March
1, 1999, except for unnamed subsidiaries which, considered in the
aggregate as a single subsidiary, would not constitute a significant
subsidiary.
Jurisdiction
of
Name of Subsidiary Incorporation
- ------------------ -------------
Damca International Corporation Delaware
Inversiones MONACA, C.A. Venezuela
AGROMONACA, C.A. Venezuela
Molinos Nacionales, C.A. (MONACA) Venezuela
Robin Hood Multifoods Inc. Ontario
Multifoods Inc. Ontario
Gourmet Baker Inc. Ontario
980964 Ontario Limited Ontario
Fantasia Confections, Inc. California
Multifoods Bakery Distributors, Inc. Delaware
Multifoods Distribution Management, Inc. Delaware
Multifoods Distribution Group, Inc. Colorado
Multifoods Merchandising, Inc. Delaware
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
International Multifoods Corporation
We consent to incorporation by reference in Registration Statement No.
333-51399 on Form S-8 relating to the Employees' Voluntary Investment
and Savings Plan of International Multifoods Corporation, No. 333-34173
on Form S-8 relating to the Stock Purchase Plan of Robin Hood
Multifoods Inc., No 2-84236 on Form S-8 relating to the 1983 Stock
Option Incentive Plan of International Multifoods Corporation, No. 33-
6223 on Form S-8 relating to the 1986 Stock Option Incentive Plan of
International Multifoods Corporation, No. 33-30979 on Form S-8 relating
to the Amended and Restated 1989 Stock-Based Incentive Plan of
International Multifoods Corporation, No. 333-34171 on Form S-8 and No.
333-69387 on Form S-8 relating to the 1997 Stock-Based Incentive Plan
of International Multifoods Corporation, No.333-64075 on Form S-8
relating to the Consulting Agreement between International Multifoods
Corporation and Daryl Schaller and No. 33-65221 on Form S-3 relating to
certain debt securities of International Multifoods Corporation of our
reports dated March 29, 1999, relating to the consolidated balance
sheets of International Multifoods Corporation and subsidiaries as of
February 28, 1999 and 1998 and the related consolidated statements of
operations, cash flows, and shareholders' equity, and related financial
statement schedule for each of the fiscal years in the three-year
period ended February 28, 1999, which reports appear or are
incorporated by reference in the Annual Report on Form 10-K for the
fiscal year ended February 28, 1999, of International Multifoods
Corporation.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 11, 1999
<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>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<CASH> 13,495
<SECURITIES> 0
<RECEIVABLES> 127,877
<ALLOWANCES> 3,034
<INVENTORY> 162,414
<CURRENT-ASSETS> 340,067
<PP&E> 300,139
<DEPRECIATION> 134,978
<TOTAL-ASSETS> 696,933
<CURRENT-LIABILITIES> 264,245
<BONDS> 121,199
0
0
<COMMON> 2,184
<OTHER-SE> 258,132
<TOTAL-LIABILITY-AND-EQUITY> 696,933
<SALES> 2,296,550
<TOTAL-REVENUES> 2,296,550
<CGS> 2,111,751
<TOTAL-COSTS> 2,111,751
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 713
<INTEREST-EXPENSE> 10,911
<INCOME-PRETAX> 12,266
<INCOME-TAX> 5,434
<INCOME-CONTINUING> 6,832
<DISCONTINUED> (138,702)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (131,870)
<EPS-PRIMARY> (7.03)
<EPS-DILUTED> (6.98)
</TABLE>
