SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 27, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number
1-6699
INTERNATIONAL MULTIFOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-0871880
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Lake Street, Wayzata, Minnesota 55391
(Address of principal executive offices) (Zip Code)
(952) 594-3300
(Registrant's telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of the registrant's Common Stock, par
value $.10 per share, as of June 28, 2000 was 18,735,913.
PART I. FINANCIAL INFORMATION
-----------------------------
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
(in thousands, except per share amounts)
<TABLE>
THREE MONTHS ENDED
---------------------
May 27, May 31,
2000 1999
-----------------------------------------------------------------
<S> <C> <C>
Net sales $ 610,260 $ 588,815
Cost of materials and production (522,084) (504,378)
Delivery and distribution (43,506) (40,588)
-----------------------------------------------------------------
Gross profit 44,670 43,849
Selling, general and administrative (33,512) (33,582)
-----------------------------------------------------------------
Operating earnings 11,158 10,267
Interest, net (3,215) (2,687)
Other income (expense), net (282) (221)
-----------------------------------------------------------------
Earnings from continuing operations
before income taxes 7,661 7,359
Income taxes (2,911) (2,797)
-----------------------------------------------------------------
Earnings from continuing operations 4,750 4,562
Loss from discontinued operations - (7,800)
-----------------------------------------------------------------
Net earnings (loss) $ 4,750 $ (3,238)
=================================================================
Basic earnings (loss) per share:
Continuing operations $ .25 $ .24
Discontinued operations - (.41)
-----------------------------------------------------------------
Total $ .25 $ (.17)
=================================================================
Diluted earnings (loss) per share:
Continuing operations $ .25 $ .24
Discontinued operations - (.41)
-----------------------------------------------------------------
Total $ .25 $ (.17)
=================================================================
Average shares of common
stock outstanding:
Basic 18,736 18,756
Diluted 18,759 18,847
-----------------------------------------------------------------
Dividends per share of
common stock $ .20 $ .20
-----------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands)
<TABLE>
Condensed
from audited
financial
(Unaudited) statements
May 27, Feb. 29,
2000 2000
------------------------------------------------------------------------
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,919 $ 11,224
Trade accounts receivable, net 121,252 122,638
Inventories 164,053 171,342
Other current assets 50,855 48,784
------------------------------------------------------------------------
Total current assets 344,079 353,988
------------------------------------------------------------------------
Property, plant and equipment, net 205,936 204,924
Goodwill, net 84,016 84,894
Other assets 95,120 92,401
------------------------------------------------------------------------
Total assets $729,151 $736,207
========================================================================
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 59,671 $ 41,521
Current portion of long-term debt 16,000 20,000
Accounts payable 155,942 167,282
Other current liabilities 42,177 48,652
------------------------------------------------------------------------
Total current liabilities 273,790 277,455
------------------------------------------------------------------------
Long-term debt 146,199 147,199
Employee benefits and other liabilities 56,935 56,429
------------------------------------------------------------------------
Total liabilities 476,924 481,083
------------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Accumulated other comprehensive loss (15,907) (12,122)
Other shareholders' equity 265,950 265,062
------------------------------------------------------------------------
Total shareholders' equity 252,227 255,124
------------------------------------------------------------------------
Commitments and contingencies
------------------------------------------------------------------------
Total liabilities and shareholders' equity $729,151 $736,207
========================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
(in thousands)
<TABLE>
THREE MONTHS ENDED
--------------------
May 27, May 31,
2000 1999
-------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operations:
Earnings from continuing operations $ 4,750 $ 4,562
Adjustments to reconcile earnings from
continuing operations to cash used for
continuing operations:
Depreciation and amortization 6,067 5,611
Deferred income tax expense 792 587
Provision for losses on receivables 455 86
Changes in working capital:
Accounts receivable 729 (5,681)
Inventories 6,058 2,814
Other current assets (2,598) (5,060)
Accounts payable (10,553) (9,199)
Other current liabilities (5,909) (6,312)
Other, net (4,192) 789
-------------------------------------------------------------------------
Cash used for continuing operations (4,401) (11,803)
Cash provided by (used for) discontinued
operations (41) 2,205
-------------------------------------------------------------------------
Cash used for operations (4,442) (9,598)
-------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (8,739) (10,049)
Proceeds from property disposals 111 68
Discontinued operations - (866)
-------------------------------------------------------------------------
Cash used for investing activities (8,628) (10,847)
-------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 18,526 16,220
Net increase (decrease) in long-term debt (5,000) 2,651
Dividends paid (3,739) (3,752)
Proceeds from issuance of common stock - 47
Purchase of treasury stock - (1,218)
Discontinued operations - (2,926)
Other, net (17) (14)
-------------------------------------------------------------------------
Cash provided by financing activities 9,770 11,008
-------------------------------------------------------------------------
Decrease in cash from discontinued operations - 1,264
-------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (5) -
-------------------------------------------------------------------------
Net decrease in cash and cash equivalents (3,305) (8,173)
Cash and cash equivalents at beginning of period 11,224 13,495
-------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 7,919 $ 5,322
=========================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) In the Company's opinion, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring adjustments, except as noted elsewhere in the
notes to the consolidated condensed financial statements) necessary to
present fairly its financial position as of May 27, 2000, and the
results of its operations and cash flows for the three months ended May
27, 2000 and May 31, 1999. These statements are condensed and,
therefore, do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements. The statements should be read in conjunction with the
consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the year ended February 29,
2000. The results of operations for the three months ended May 27,
2000, are not necessarily indicative of the results to be expected for
the full year.
(2) Discontinued operations - The Venezuela Foods business is
classified as discontinued operations in the consolidated condensed
financial statements. As previously disclosed in the Company's Annual
Report on Form 10-K for the year ended February 29, 2000, the Company
completed the sale of its Venezuelan business in August 1999.
(3) Comprehensive income (loss) - The components of total comprehensive
income (loss) were as follows:
Three Months Ended
------------------
May 27, May 31,
(in thousands) 2000 1999
-------------------------------------------------------
Net earnings (loss) $ 4,750 $(3,238)
Foreign currency translation
adjustments (3,785) 2,116
-------------------------------------------------------
Comprehensive income (loss) $ 965 $(1,122)
=======================================================
(4) Unusual items - The following table provides the liability balance
on the Company's distribution group's consolidation plan that was
initiated in fiscal 1999.
<TABLE>
Employee
Termination Lease
Benefits and Commitment
(in millions) Other Costs Total
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Liability balance as of February 29, 2000 $ 0.7 $ 1.2 $ 1.9
Cash payments (0.2) (0.1) (0.3)
---------------------------------------------------------------------------------
Liability balance as of May 27, 2000 $ 0.5 $ 1.1 $ 1.6
=================================================================================
</TABLE>
In May 2000, the Company announced plans to expand its Canadian
condiments operation in Dunnville, Ontario, and to consolidate the
condiment processing operations into that facility over the next two
years. Beginning in early 2001, processing currently handled at a plant
in Scarborough, Ontario, will be gradually shifted to Dunnville, which
will undergo an expansion. The Company plans to sell the Scarborough
facility, which is located in a growing metropolitan area. Scarborough
employees will be eligible and have first priority for positions in
Dunnville as that facility expands. The project is expected to be
completed in late fiscal 2002. The Company expects to recognize unusual
charges for exit costs and unusual gains related to the Scarborough
facility sale in several quarters over the next 18 months. Unusual
charges will be recognized when certain details of the plan are
determined, including the number of employees that will be separated and
the related costs. While individual actions will result in one-time
gains or losses, the Company believes the net effect will be an overall
one-time unusual gain for the project.
(5) Interest, net
Three Months Ended
--------------------
May 27, May 31,
(in thousands) 2000 1999
------------------------------------------------------
Interest expense $4,207 $2,875
Capitalized interest (231) (124)
Non-operating interest income (761) (64)
------------------------------------------------------
Interest, net $3,215 $2,687
======================================================
Cash payments for interest, net of amounts capitalized, were $5.3
million and $3.8 million for the three months ended May 27, 2000 and May
31, 1999, respectively.
(6) Income taxes - Cash payments for income taxes were $1.9 million and
$2.4 million for the three months ended May 27, 2000 and May 31, 1999,
respectively.
(7) Supplemental balance sheet information
<TABLE>
May 27, Feb. 29,
(in thousands) 2000 2000
---------------------------------------------------------------------------
<S> <C> <C>
Trade accounts receivable, net:
Trade $ 124,455 $ 127,576
Allowance for doubtful accounts (3,203) (4,938)
---------------------------------------------------------------------------
Total trade accounts receivable, net $ 121,252 $ 122,638
===========================================================================
Inventories:
Raw materials, excluding grain $ 10,576 $ 12,470
Grain 3,772 2,736
Finished and in-process goods 145,489 152,493
Packages and supplies 4,216 3,643
---------------------------------------------------------------------------
Total inventories $ 164,053 $ 171,342
===========================================================================
Property, plant and equipment, net:
Land $ 14,882 $ 14,938
Buildings and improvements 106,445 97,022
Machinery and equipment 223,765 219,978
Transportation equipment 1,438 1,570
Improvements in progress 10,913 20,921
---------------------------------------------------------------------------
357,443 354,429
Accumulated depreciation (151,507) (149,505)
---------------------------------------------------------------------------
Total property, plant and equipment, net $ 205,936 $ 204,924
===========================================================================
Accumulated other comprehensive loss:
Foreign currency translation adjustment $ (13,989) $ (10,204)
Minimum pension liability adjustment (1,918) (1,918)
---------------------------------------------------------------------------
Total accumulated other comprehensive loss $ (15,907) $ (12,122)
===========================================================================
</TABLE>
(8) Segment information
<TABLE>
Net Operating Operating
(in millions) Sales Costs Earnings
--------------------------------------------------------------------------
<S> <C> <C> <C>
Three Months Ended May 27, 2000
Multifoods Distribution Group $495.9 $(490.7) $ 5.2
North America Foods 114.4 (106.9) 7.5
Corporate Expenses - (1.5) (1.5)
--------------------------------------------------------------------------
Total $610.3 $(599.1) $11.2
==========================================================================
Three Months Ended May 31, 1999
Multifoods Distribution Group $472.0 $(465.7) $ 6.3
North America Foods 116.8 (110.5) 6.3
Corporate Expenses - (2.3) (2.3)
--------------------------------------------------------------------------
Total $588.8 $(578.5) $10.3
==========================================================================
</TABLE>
(9) Contingencies - In fiscal 1998, the Company was notified that
approximately $6 million in Company-owned inventory was stolen from a
ship in the port of St. Petersburg, Russia. The ship had been chartered
by a major customer of the Company's former food-exporting business.
The Company believes, based on the facts known to date, that the loss is
covered by insurance. If the loss from the theft of product is not
covered by insurance, the Company would recognize a material charge to
its results of operations.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations
---------------------
Overview
Earnings from continuing operations in the first quarter ended May 27,
2000, were $4.8 million, or 25 cents per share, compared with $4.6
million, or 24 cents per share, a year ago. Current year earnings
increased because of higher operating earnings in North America Foods
and by lower administrative expenses, which benefited from reduced
pension costs.
In the first quarter ended May 31, 1999, the Company recognized a net
loss of $3.2 million. The net loss resulted from a $7.8 million charge
to the discontinued Venezuela Foods business, which was sold last year.
Segment Results
Multifoods Distribution Group: Net sales increased 5% to $495.9 million
as a result of higher sales volumes to independent vending operators and
the addition of Better Brands, Inc., a foodservice distribution business
that was acquired in October 1999. The increase was partially offset by
a decline in cheese prices, lower sales to pizza restaurants and the
loss of a regional foodservice account during the quarter. Excluding
the impact of the lost account and Better Brands, overall sales volumes
increased 3% in the quarter.
Operating earnings declined 17% to $5.2 million due to higher delivery
and distribution expenses, driven in part by increased fuel costs, and
competitive pricing pressures in certain regions in vending
distribution. Delivery and distribution costs were impacted by higher
costs associated with productivity issues resulting from facility
consolidations and information system conversion. During the first
quarter the Company continued to make progress at reducing excess labor
and delivery costs at its distribution facilities.
North America Foods: Net sales declined 2% to $114.4 million due to
lower consumer product volumes and lower wheat costs, which affect the
Company's sales prices. The sales decline was partially offset by
higher volumes in ready-to-bake products, frozen desserts and
foodservice condiments.
Operating earnings increased 19% to $7.5 million, compared with $6.3
million in the first quarter last year. Operating earnings improved on
lower ingredient costs, a favorable foodservice product mix and improved
manufacturing efficiency.
In May 2000, the Company announced plans to expand its Canadian
condiments operation in Dunnville, Ontario, and to consolidate the
condiment processing operations into that facility over the next two
years. Beginning in early 2001, processing currently handled at a plant
in Scarborough, Ontario, will be gradually shifted to Dunnville, which
will undergo an expansion. The Company plans to sell the Scarborough
facility, which is located in a growing metropolitan area. Scarborough
employees will be eligible and have first priority for positions in
Dunnville as that facility expands. The project is expected to be
completed in late fiscal 2002. The Company expects to recognize unusual
charges for exit costs and unusual gains related to the Scarborough
facility sale in several quarters over the next 18 months. Unusual
charges will be recognized when certain details of the plan are
determined, including the number of employees that will be separated and
the related costs. While individual actions will result in one-time
gains or losses, the Company believes the net effect will be an overall
one-time unusual gain for the project.
Non-operating Expense and Income
Net interest expense increased to $3.2 million, from $2.7 million last
year. The increase was the result of higher debt levels and interest
rates in the United States. Debt levels increased primarily due to
capital expenditures and the acquisition of Better Brands. Interest
income increased over last year as a result of a note received in August
1999 from the sale of the Venezuelan consumer and commercial foods
business.
Financial Condition
-------------------
The debt-to-total capitalization ratio increased to 47% at May 27, 2000,
compared with 45% at February 29, 2000. The increase was primarily the
result of increased working capital requirements and capital
expenditures.
In June 2000, the Company signed an agreement to sell its headquarters
building in Minnesota for approximately $12 million. The transaction is
expected to close in August and result in an after-tax unusual gain of
approximately $3.5 million. Proceeds will be used to reduce debt
obligations.
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 or weather conditions that may
affect the costs of grain, cheese, other raw materials and fuel; changes
in laws and regulations; fluctuations in interest rates; the Company's
ability to realize the book value of its remaining Venezuelan assets;
the Company's ability to reduce delivery and distribution costs and
realize the earnings benefits related to the distribution group's
consolidation and expansion plans; the inability of the Company to
collect on a $6 million insurance claim related to the theft of product
in St. Petersburg, Russia; fluctuations in foreign exchange rates; risks
commonly encountered in international trade; and other factors as may be
discussed in the Company's reports filed with the Securities and
Exchange Commission.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings (Loss) per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended May 27, 2000, the Company filed a Current
Report on Form 8-K dated March 6, 2000, relating to the change of the
Company's fiscal year-end.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INTERNATIONAL MULTIFOODS CORPORATION
Date: June 29, 2000 By /s/ John E. Byom
John E. Byom
Vice President, Finance, and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
EXHIBIT INDEX
11. Computation of Earnings (Loss) per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
