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 November 30, 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)
(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 December 31, 1999 was 18,737,655.
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 NINE MONTHS ENDED
-------------------- --------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 632,192 $ 611,147 $ 1,789,716 $ 1,723,420
Cost of materials and
production (537,155) (520,729) (1,526,617) (1,472,735)
Delivery and distribution (44,588) (38,573) (126,339) (111,380)
- --------------------------------------------------------------------------------
Gross profit 50,449 51,845 136,760 139,305
Selling, general
and administrative (34,304) (34,318) (99,398) (101,771)
Unusual items 519 - 519 (28,963)
- --------------------------------------------------------------------------------
Operating earnings 16,664 17,527 37,881 8,571
Interest, net (2,737) (2,705) (7,919) (7,731)
Other income (expense), net (297) 541 (763) 42
- --------------------------------------------------------------------------------
Earnings from continuing
operations before
income taxes 13,630 15,363 29,199 882
Income taxes (5,501) (5,548) (11,417) (1,094)
- --------------------------------------------------------------------------------
Earnings (loss) from
continuing operations 8,129 9,815 17,782 (212)
- --------------------------------------------------------------------------------
Discontinued operations:
Operating loss, after tax - - - (14,068)
Net loss on disposition,
after tax - (7,244) (19,560) (122,098)
- --------------------------------------------------------------------------------
Loss from discontinued
operations - (7,244) (19,560) (136,166)
- --------------------------------------------------------------------------------
Net earnings (loss) $ 8,129 $ 2,571 $ (1,778) $ (136,378)
================================================================================
Basic earnings (loss) per
share:
Continuing operations $ .43 $ .52 $ .95 $ (.01)
Discontinued operations - (.38) (1.04) (7.26)
- --------------------------------------------------------------------------------
Total $ .43 $ .14 $ (.09) $ (7.27)
================================================================================
Diluted earnings (loss) per
share:
Continuing operations $ .43 $ .52 $ .94 $ (.01)
Discontinued operations - (.38) (1.03) (7.26)
- --------------------------------------------------------------------------------
Total $ .43 $ .14 $ (.09) $ (7.27)
================================================================================
Average shares of common
stock outstanding:
Basic 18,760 18,743 18,755 18,758
Diluted 18,809 18,770 18,833 18,758
- --------------------------------------------------------------------------------
Dividends per share of
common stock $ .20 $ .20 $ .60 $ .60
- --------------------------------------------------------------------------------
</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
Nov. 30, Feb. 28,
1999 1999
- -----------------------------------------------------------------------
Assets
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,032 $ 13,495
Trade accounts receivable, net 141,092 124,843
Inventories 192,361 162,414
Other current assets 56,301 39,315
- -----------------------------------------------------------------------
Total current assets 400,786 340,067
- -----------------------------------------------------------------------
Property, plant and equipment, net 194,181 165,161
Goodwill, net 85,509 82,089
Net noncurrent assets of
discontinued operations - 44,905
Other assets 91,526 64,711
- -----------------------------------------------------------------------
Total assets $772,002 $696,933
=======================================================================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Notes payable $ 77,737 $ 32,489
Current portion of long-term debt 20,000 2,750
Accounts payable 169,296 161,700
Net current liabilities of
discontinued operations - 9,079
Other current liabilities 51,947 58,227
- -----------------------------------------------------------------------
Total current liabilities 318,980 264,245
- -----------------------------------------------------------------------
Long-term debt 147,199 121,199
Employee benefits and other liabilities 56,265 51,173
- -----------------------------------------------------------------------
Total liabilities 522,444 436,617
- -----------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Accumulated other comprehensive loss (14,673) (17,215)
Other shareholders' equity 262,047 275,347
- -----------------------------------------------------------------------
Total shareholders' equity 249,558 260,316
- -----------------------------------------------------------------------
Commitments and contingencies
- -----------------------------------------------------------------------
Total liabilities and shareholders' equity $772,002 $696,933
=======================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
(in thousands)
<TABLE>
NINE MONTHS ENDED
---------------------
Nov. 30, Nov. 30,
1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operations:
Earnings(loss) from continuing operations $ 17,782 $ (212)
Adjustments to reconcile earnings(loss) from continuing
operations to cash provided by (used for)
continuing operations:
Depreciation and amortization 16,318 16,676
Deferred income tax expense (benefit) 3,695 (9,561)
Provision for losses on receivables 762 172
(Gain) loss from unusual items (519) 28,963
Changes in working capital, net of business acquisition:
Accounts receivable (8,070) (16,009)
Inventories (22,604) (13,732)
Other current assets (11,287) (2,183)
Accounts payable 3,382 30,881
Other current liabilities (1,161) (18,174)
Other, net (4,083) (3,846)
- ---------------------------------------------------------------------------------
Cash provided by (used for) continuing operations (5,785) 12,975
Cash used for discontinued operations (12,197) (28,092)
- ---------------------------------------------------------------------------------
Cash used for operations (17,982) (15,117)
- ---------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (33,032) (16,043)
Acquisition of business, net of cash (27,934) -
Purchase of Venezuela operations assets (15,799) -
Proceeds from sale of investment - 2,340
Proceeds from property disposals 2,877 1,593
Discontinued operations 38,098 (4,832)
- ---------------------------------------------------------------------------------
Cash used for investing activities (35,790) (16,942)
- ---------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 45,824 35,410
Net increase(decrease) in long-term debt 42,170 (20,302)
Dividends paid (11,233) (11,252)
Proceeds from issuance of common stock 1,235 3,355
Purchase of treasury stock (2,322) (4,617)
Discontinued operations (26,195) 34,667
Other, net 2,106 (15)
- ---------------------------------------------------------------------------------
Cash provided by financing activities 51,585 37,246
- ---------------------------------------------------------------------------------
Increase in cash from discontinued operations (263) (533)
- ---------------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (13) (13)
- ---------------------------------------------------------------------------------
Net increase(decrease) in cash and cash equivalents (2,463) 4,641
Cash and cash equivalents at beginning of period 13,495 9,126
- ---------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 11,032 $ 13,767
=================================================================================
</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 November 30, 1999, and the
results of its operations for the three and nine months ended November
30, 1999 and 1998, and cash flows for the nine months ended November 30,
1999 and 1998. These statements are condensed and, therefore, do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements should be read in conjunction with the consolidated financial
statements and footnotes included in the Company's Annual Report on Form
10-K for the year ended February 28, 1999. The results of operations
for the three and nine months ended November 30, 1999, are not
necessarily indicative of the results to be expected for the full year.
(2) New accounting pronouncement - In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that companies
record derivative instruments on the consolidated balance sheet at their
fair value. Changes in fair value will be recorded each period in
earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. Gains and losses on derivative
instruments reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the hedged
item.
In June 1999, the FASB deferred the effective date for implementing SFAS
133. The Company now must adopt the standard no later than March 1,
2001.
(3) Acquisition - In October 1999, the Company completed its
acquisition of Better Brands, Inc., a broadline foodservice distributor
located in Windsor, Connecticut. The acquisition was accounted for
using the purchase method, and accordingly, the results of operations
for Better Brands have been included in the Company's consolidated
financial statements since the date of acquisition. The purchase price
of $29.1 million included goodwill of $5.1 million, which will be
amortized on a straight-line basis over 20 years.
(4) Discontinued operations - In fiscal 1999, the Company recognized an
estimated loss of $124.6 million for the planned disposition of its
Venezuela Foods business. The disposition loss consisted of $93.3
million for the recognition of the unrealized foreign currency
translation losses previously included as a separate component of
shareholders' equity, a provision of $22.0 million for operating losses
from the measurement date (July 31, 1998) to expected disposal date, and
a $9.3 million loss on disposal. The $9.3 million estimated loss on
disposal was based on selling the business at net book value during
fiscal 2000, with the loss resulting from estimated transaction costs
and taxes.
In the first quarter of fiscal 2000, the Company recorded an after-tax
charge of $7.8 million to discontinued operations. The charge consisted
of a $4.0 million loss on the June 1999 sale of the Venezuelan
agriculture and animal feeds business and a $3.8 million provision
resulting from higher-than-expected operating losses. The additional
operating loss provision was necessary as the first-quarter operating
results of the agriculture and animal feeds business were substantially
below the results previously forecasted. In addition, the Company also
adjusted its provision for estimated future net losses of the remaining
Venezuelan operations.
In the second quarter of fiscal 2000, the Company recorded an additional
after-tax charge of $11.8 million from the August 1999 sale of its
Venezuela consumer and commercial foods business to Gruma S.A. de C.V.
(Gruma). The additional charge resulted primarily from a higher-than-
expected loss on the sale transaction, and a write-down of certain
receivables and properties in Venezuela that were retained by the
Company. The Company received an $18.96 million note from Gruma, payable
over five years at an annual interest rate of 7.5%, and Gruma paid off
or assumed debt obligations of the Venezuelan business totaling $55.5
million, which comprised all of the Company's outstanding Venezuelan
debt. The Company, however, retained $11.9 million of Venezuelan
receivables and properties, which are expected to be collected or
liquidated over the next 15 months. The sales transactions complete the
Company's divestiture of the Venezuela Foods business.
(5) Comprehensive income (loss) - The components of total comprehensive
income (loss) were as follows:
<TABLE>
Three Months Ended Nine Months Ended
------------------ --------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(in thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings (loss) $8,129 $ 2,571 $(1,778) $(136,378)
Foreign currency translation
adjustments 1,399 1,322 2,542 (6,100)
Reclassification adjustment due to
foreign currency translation
adjustment recognized - 8,204 - 101,555
- --------------------------------------------------------------------------------
Comprehensive income (loss) $9,528 $12,097 $ 764 $ (40,923)
================================================================================
</TABLE>
(6) Unusual items - In fiscal 1999, the Company's continuing operations
recognized pre-tax charges of $29.0 million. The charges were related
to the Company's plan to consolidate its two distribution businesses,
the write-off of receivables from a major customer of the Company's
former food-exporting business, and the write-down of assets and costs
associated with the Canadian frozen bakery business.
In the third quarter of fiscal 2000, the Company recognized a gain of
$0.5 million from the reversal of certain reserves established as part
of the distribution group's consolidation plan and from the sale of a
distribution facility. The reversal was required as management
determined that four distribution centers identified for closure under
the original plan would remain open. Consequently, the Company had
fewer-than-planned work-force reductions and lower lease commitment
costs. The decision to keep the four distribution centers open was
based on the acquisition of a foodservice distribution business in the
Northeast United States, as well as strong growth potential and
strategic opportunities in certain markets. Except for the facilities
that will now stay open, remaining actions are expected to be
implemented as planned.
The liability balances as of November 30, 1999, were as follows:
<TABLE>
Employee
Termination Lease
Benefits and Commitment
(in millions) Other Costs Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Liability balance as of February 28, 1999 $ 2.5 $ 1.6 $ 4.1
Cash payments (1.1) (0.4) (1.5)
Liability balance reversed (0.3) (0.1) (0.4)
- -------------------------------------------------------------------------------
Liability balance as of November 30, 1999 $ 1.1 $ 1.1 $ 2.2
===============================================================================
</TABLE>
(7) Interest, net
<TABLE>
Three Months Ended Nine Months Ended
-------------------- --------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest expense $3,737 $2,880 $ 9,690 $8,239
Capitalized interest (234) (23) (563) (54)
Non-operating interest income (766) (152) (1,208) (454)
- -------------------------------------------------------------------------------
Interest, net $2,737 $2,705 $ 7,919 $7,731
===============================================================================
</TABLE>
Cash payments for interest, net of amounts capitalized, were $10.2
million and $9.4 million for the nine months ended November 30, 1999 and
1998, respectively.
(8) Income taxes - Cash payments for income taxes for the nine months
ended November 30, 1999 and November 30, 1998, were $7.4 million and
$11.1 million, respectively.
(9) Supplemental balance sheet information
<TABLE>
Nov. 30, Feb. 28,
(in thousands) 1999 1999
- -----------------------------------------------------------------------
<S> <C> <C>
Trade accounts receivable, net:
Trade $ 144,737 $ 127,877
Allowance for doubtful accounts (3,645) (3,034)
- -----------------------------------------------------------------------
Total trade accounts receivable, net $ 141,092 $ 124,843
=======================================================================
Inventories:
Raw materials, excluding grain $ 15,331 $ 12,742
Grain 3,216 2,745
Finished and in-process goods 169,898 142,122
Packages and supplies 3,916 4,805
- -----------------------------------------------------------------------
Total inventories $ 192,361 $ 162,414
=======================================================================
Property, plant and equipment, net:
Land $ 14,379 $ 12,398
Buildings and improvements 90,074 82,766
Machinery and equipment 205,193 191,504
Transportation equipment 1,566 1,451
Improvements in progress 28,800 12,020
- -----------------------------------------------------------------------
340,012 300,139
Accumulated depreciation (145,831) (134,978)
- -----------------------------------------------------------------------
Total property, plant and equipment, net $ 194,181 $ 165,161
=======================================================================
Accumulated other comprehensive loss:
Foreign currency translation adjustment $ (11,262) $ (13,804)
Minimum pension liability adjustment (3,411) (3,411)
- -----------------------------------------------------------------------
Total accumulated other comprehensive loss $ (14,673) $ (17,215)
=======================================================================
</TABLE>
(10) Segment information
<TABLE>
Operating
Net Operating Unusual Earnings
(in millions) Sales Costs Items (Loss)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three Months Ended Nov. 30, 1999
Multifoods Distribution Group $ 496.2 $ (492.0) $ 0.5 $ 4.7
North America Foods 136.0 (122.1) - 13.9
Corporate Expenses - (1.9) - (1.9)
- ---------------------------------------------------------------------------
Total $ 632.2 $ (616.0) $ 0.5 $16.7
===========================================================================
Three Months Ended Nov. 30, 1998
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
===========================================================================
Nine Months Ended Nov. 30, 1999
Multifoods Distribution Group $1,420.7 $(1,405.4) $ 0.5 $15.8
North America Foods 369.0 (340.8) - 28.2
Corporate Expenses - (6.1) - (6.1)
- ---------------------------------------------------------------------------
Total $1,789.7 $(1,752.3) $ 0.5 $37.9
===========================================================================
Nine Months Ended Nov. 30, 1998
Multifoods Distribution Group $1,380.6 $(1,360.2) $(11.5) $ 8.9
North America Foods 342.8 (319.9) (7.2) 15.7
Divested Business - 0.8 (10.3) (9.5)
Corporate Expenses - (6.5) - (6.5)
- ---------------------------------------------------------------------------
Total $1,723.4 $(1,685.8) $(29.0) $ 8.6
===========================================================================
</TABLE>
(11) 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)
In August 1999, the Company completed the sale of its Venezuela Foods
business. The business segment has been classified as discontinued
operations in the consolidated financial statements and in the following
management discussion and analysis.
Results of Operations:
- ----------------------
Overview
Earnings from continuing operations in the third quarter were $8.1
million, or 43 cents per share, compared with $9.8 million, or 52 cents
per share, a year ago. The decline was primarily due to lower operating
earnings in Multifoods Distribution Group, which continued to experience
higher delivery and distribution costs. The increase in these costs was
related to issues associated with the distribution group's facility
consolidations and information systems conversion. The Company is in
the process of addressing these issues and expects to return to more
normalized cost levels by the middle of next fiscal year.
For the nine months ended November 30, 1999, the net loss from
continuing and discontinued operations totaled $1.8 million, or 9 cents
per share. The net loss resulted from a $19.6 million charge to
discontinued operations. Information on the charge follows in the
discussion of discontinued operations.
Continuing Operations
Segment Results
Multifoods Distribution Group: Net sales in the third quarter
increased 3% to $496.2 million, as a result of higher volumes to
independent vending operators and the addition of results from Better
Brands, Inc., a foodservice distribution business that was acquired in
October 1999. This increase was partially offset by lower cheese
prices, which declined significantly during the quarter and reduced
the Company's sales prices. Excluding the impact of the cheese price
decline and the acquisition of Better Brands, overall sales increased
2% in the quarter. Operating earnings before unusual items declined
50% to $4.2 million. This decline was primarily due to increased
labor and delivery costs associated with the Company's distribution
center consolidations and information systems conversion. In
addition, the drop in the market price of cheese reduced operating
earnings by nearly $2 million in the quarter. The decline in
operating earnings, however, was partially offset by lower
administrative and pension costs.
In the first quarter of last year, the Company recognized an unusual
charge of $11.5 million for actions associated with the Company's plan
to consolidate its vending and foodservice operations into a single
business. The Company expects that high delivery and distribution costs
will more than offset the operating earnings benefits this year from the
consolidation program. The Company continues to expect the
consolidation plan to provide long-term annualized improvement in
operating earnings of $9 million to $12 million from additional capacity
to grow sales and cost-savings. The timing of achieving these full
benefits, however, is expected to be delayed a year to fiscal 2002.
In the third quarter of fiscal 2000, the Company recognized a gain of
$0.5 million from the reversal of certain reserves established as part
of the distribution group's consolidation plan and from the sale of a
distribution facility. The reversal was required as management
determined that four distribution centers identified for closure under
the original plan would remain open. Consequently, the Company had
fewer-than-planned work-force reductions and lower lease commitment
costs. The decision to keep the four distribution centers open was
based on the acquisition of a foodservice distribution business in the
Northeast United States, as well as strong growth potential and
strategic opportunities in certain markets. Except for the facilities
that will now stay open, remaining actions are expected to be
implemented as planned.
Net sales for the nine-month period increased 3% to $1.42 billion, as a
result of higher volumes to independent vending operators and sandwich
shops. The increase was partially offset by a decline in sales to pizza
restaurants. Operating earnings before unusual items declined 25% to
$15.3 million, compared with $20.4 million last year. Operating
earnings were affected by the same factors described above for the third
quarter.
North America Foods: Net sales in the third quarter increased 7% to
$136 million, primarily due to higher volumes in the United States and
Canada. Sales of U.S. bakery products were up 9% in the quarter,
primarily because of additional business with large in-store bakery
chains. In Canada, consumer flour and commercial bakery ingredients
volumes increased during the quarter. In addition, sales were affected
by favorable currency translation but were reduced by the impact of
lower wheat costs. Operating earnings increased 22% to $13.9 million
because of the higher sales volume. The increase in operating earnings
as a percent of sales resulted primarily from the effects of spreading
fixed expenses over the higher sales volume.
Net sales for the nine-month period increased 8% to $369 million, up
from $342.8 million last year. Operating earnings before unusual items
increased 23% to $28.2 million, compared with $22.9 million last year.
Net sales and operating earnings were affected by the same factors
described above for the third quarter.
In the first quarter last year, the Company recognized an unusual charge
of $7.2 million for the write-down of assets and the cost of work-force
reductions associated with its Canadian frozen bakery business.
Non-operating Expense and Income
Third quarter net interest expense of $2.7 million was even with last
year. An increase in interest expense resulting from higher debt levels
was offset by higher interest income. In the current year, the Company
recognized interest income on a note from Gruma S.A. de C.V. (Gruma)
that was received from the sale of its Venezuelan consumer and
commercial foods business.
In the third quarter last year, the Company recognized a gain of $0.8
million from the sale of its investment in a Mexican animal feed
business.
Discontinued Operations
In fiscal 1999, the Company recognized an estimated loss of $124.6
million for the planned disposition of its Venezuela Foods business.
The disposition loss consisted of $93.3 million for the recognition of
the unrealized foreign currency translation losses previously included
as a separate component of shareholders' equity, a provision of $22
million for operating losses from the measurement date (July 31,1998) to
the expected disposal date, and a $9.3 million loss on disposal. The
$9.3 million estimated loss on disposal was based on selling the
business at net book value during fiscal 2000, with the loss resulting
from estimated transaction costs and taxes.
In the first quarter of fiscal 2000, the Company recorded a charge of
$7.8 million to discontinued operations. The charge consisted of a $4
million loss on the June 1999 sale of the Venezuelan agriculture and
animal feeds business and a $3.8 million provision resulting from
higher-than-expected operating losses. The additional operating loss
provision was necessary as the first-quarter operating results of the
agriculture and animal feeds business were substantially below the
results previously forecasted. In addition, the Company also adjusted
its provision for estimated future net losses of the remaining
Venezuelan operations.
In the second quarter of fiscal 2000, the Company recorded an additional
charge of $11.8 million from the August 1999 sale of its Venezuelan
consumer and commercial foods business to Gruma. The additional charge
resulted primarily from a higher-than-expected loss on the sale
transaction, and a write-down of certain receivables and properties in
Venezuela that were retained by the Company.
Financial Condition:
- --------------------
The debt-to-total-capitalization ratio increased to 50% at November 30,
1999, compared with 38% at February 28, 1999. The ratio at February 28,
1999, excludes debt obligations of the Company's Venezuelan business, as
such obligations were expected to be assumed by a buyer and were
classified as net assets of discontinued operations. The increase in
the debt-to-total-capitalization ratio was primarily the result of an
increase in working capital, planned capital expenditures and the
acquisition of Better Brands, Inc.
Working capital increased primarily because of higher accounts
receivable, inventories and other current assets. Accounts receivable
increased due to higher sales volume and extended terms given to a large
customer. In Canada, inventory levels increased as a result of seasonal
factors and a build-up requested by certain customers as part of Year
2000 contingency plans. The increase in the distribution group's
inventories was driven by its consolidation, expansion and system
conversion efforts. Other current assets increased on seasonally higher
levels of receivables from vendors and other receivables retained from
the sale of Venezuela Foods.
On August 18, 1999, the Company completed the sale of its Venezuelan
consumer and commercial foods business to Gruma. The Company received an
$18.96 million note from Gruma, payable over five years at an annual
interest rate of 7.5%, and Gruma paid off or assumed debt obligations of
the Venezuelan business totaling $55.5 million. The Company, however,
retained $11.9 million of Venezuelan receivables and properties, which
are expected to be collected or liquidated over the next 15 months. On
June 3, 1999, the Company sold its Venezuelan agriculture and animal
feeds business for $27.5 million in cash. Proceeds were used to reduce
debt obligations of the Venezuelan business. The sales transactions
complete the Company's divestiture of the Venezuela Foods business.
On October 25, 1999, the Company acquired the assets of Better Brands,
Inc., for $29.1 million, principally in cash. Better Brands is a
Connecticut-based broadline foodservice distributor with annual sales of
approximately $85 million.
Year 2000
- ---------
The Company actively addressed the Year 2000 issue by initiating Year
2000 project teams in each of its major businesses. The project teams
have been in place for over two years. Prior to December 31, 1999, each
business completed a comprehensive inventory and review of both computer
systems and non-computer systems that could include some kind of
embedded technology, upgraded or fixed all major critical systems which
were not Year 2000 compliant, tested each of these systems to insure the
systems were Year 2000 compliant and implemented these systems, as
appropriate, at all locations. Each business also completed the
development of contingency plans based upon the evaluation of critical
vendors, suppliers and customers. The Company's projects addressing the
Year 2000 compliance of its computer and non-computer systems did not
displace projects of a more critical nature. The costs associated with
the Year 2000 effort were not material to the Company's results of
operations.
All major critical systems have continued to function correctly and as
planned in the year 2000. To date, there have been no significant
operational problems due to any Year 2000 issues and based upon this
experience and the testing completed prior to December 31, 1999, the
Company does not anticipate that the Year 2000 issue will have a
material effect on the operations of the Company. The Company will,
however, continue to monitor closely the performance of its systems and
the Year 2000 readiness of its critical vendors, suppliers and
customers.
Cautionary Statement Relevant to Forward-Looking Information
- ------------------------------------------------------------
This document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. In addition, the
Company and its representatives may from time-to-time make written and
oral forward-looking statements. These forward-looking statements are
based on current expectations or beliefs, including, but not limited to,
statements concerning the Company's operations and financial performance
and condition. For this purpose, statements that are not statements of
historical fact may be deemed to be forward-looking statements. The
Company cautions that these statements by their nature involve risks and
uncertainties, and actual results may differ materially depending on a
variety of important factors, including, among others, the impact of
competitive products and pricing; market conditions and weather patterns
that may affect the costs of grain, cheese and other raw materials;
changes in laws and regulations; the inability of the Company or its
business partners to resolve "Year 2000" issues or the inability of the
Company to accurately estimate the cost associated with "Year 2000"
compliance; the Company's ability to realize the book value of its
remaining Venezuelan assets; the Company's ability to 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 report on Form 10-K
for the year ended February 28, 1999, and other reports filed with the
Securities and Exchange Commission.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Agreement, dated October 20, 1999, between Jeffrey E. Boies
and International Multifoods Corporation regarding retirement and severance
arrangements.
11. Computation of Earnings Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended November 30,
1999.
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: January 12, 2000 By: /s/ William L. Trubeck
------------------------
William L. Trubeck
Senior Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
EXHIBIT INDEX
10.1 Agreement, dated October 20, 1999, between Jeffrey E. Boies and
International Multifoods Corporation regarding retirement and severance
arrangements.
11. Computation of Earnings (loss) Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
Exhibit 10.1
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as
of the 20th, day of October, 1999, by and between INTERNATIONAL
MULTIFOODS CORPORATION, a Delaware corporation (the "Company"), having
its principal offices at 200 East Lake Street, Wayzata, Minnesota
55391, and JEFFREY E. BOIES, whose principal residence is 135 Capulin
Place, Castle Rock, Colorado 80184 ("Boies").
WHEREAS, Boies is Vice President of the Company and President
of the Multifoods Distribution Group (which, through various
subsidiaries of the Company comprises the Company's vending and
foodservice distribution businesses, and is hereinafter sometimes
called "MDG", and together with the Company is hereinafter collectively
called the "Company"); and
WHEREAS, Boies has advised the Company that he intends to
retire from the Company by one of the following dates, any of which
shall constitute a "Retirement Date" for purposes of this Agreement:
(1) June 4, 2004, (2) February 29, 2000, or (3) any date after February
29, 2000, but before June 4, 2004, provided that Boies gives the
Company three (3) months' prior written notice of his intent to retire
on a Retirement Date; and
WHEREAS, in view of Boies' intention to voluntarily retire
from the Company on the Retirement Date, although the Company is not
obligated, the Company is willing to pay Boies an amount equal to his
current annual salary as of the Retirement Date, as a severance amount,
and to recommend that the Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee"), award to Boies
and authorize the Company to pay him any incentive award, or part of an
incentive award, earned by him under the Company's EVA Incentive Plan,
or such other incentive plan then in effect, for the fiscal year of the
Company during which the Retirement Date occurs, in consideration of
Boies' agreements, (1) to continue his employment with the Company
through the Retirement Date as Vice President of the Company and
President of MDG, (2) to consult with the Company for a period of one
(1) year from and after the Retirement Date, (3) not to engage in any
business that competes with the Company's vend and foodservice
distribution businesses in the United States, or its territories and
possessions, conducted by the Company at the Retirement Date, for a
term to expire one (1) year from and after the Retirement Date, other
than to carry out his duties and responsibilities as both Vice
President of the Company and President of MDG through the Retirement
Date, and as a consultant to the Company following the Retirement Date,
and (4) to execute and deliver on the Retirement Date a Release
Agreement substantially in the form attached hereto as Exhibit B (the
"Release Agreement"); and
WHEREAS, Boies is desirous of entering into the agreements
described in the preceding recital.
NOW, THEREFORE, in consideration of the preceding recitals
and the terms and conditions hereinafter set forth, the Company and
Boies agree, as follows:
1. Consideration for this Agreement. In consideration of, and
subject to, Boies performance of his covenants and agreements as set
forth in this Agreement, the Company agrees to provide the following
consideration to Boies (hereinafter referred to as the "Consideration
for this Agreement"). Notwithstanding any term or provision contained
in this Agreement to the contrary, if Boies elects, in writing, to
voluntarily retire from the Company effective before the Retirement
Date of February 29, 2000, this Agreement shall terminate and each
party hereto shall be excused from performance under this Agreement,
without liability or obligation to the other party by reason of this
Agreement, and if Boies elects, in writing, to voluntarily retire from
the Company effective on any date after February 29, 2000 and before
June 4, 2004, this Agreement shall continue in full force and effect in
accordance with its terms. Further, notwithstanding any term or
provision contained in this Agreement to the contrary, in the event of
Boies' death before or after the Retirement Date, or Boies'
"Disability" (as that term is hereinafter defined), before the
Retirement Date, the Company shall have no obligation or liability to
pay the "Severance Payment" (as that term is defined in Paragraph A of
this Section 1), or any remaining installments thereof, as the case may
be, to Boies, his heirs, executors or the personal representatives of
his estate. As used herein the term "Disability" shall mean the
inability of Boies to perform the duties and responsibilities of his
employment by reason of illness or other physical or mental impairment
or condition, if such inability continues for an uninterrupted period
of ninety (90) days or more.
A. Severance Payment. The Company agrees to pay
Boies an amount equal to Boies' current annual salary as of the
Retirement Date (the "Severance Payment"), in four (4) equal,
consecutive quarterly installments, less any applicable withholding
taxes, with the first installment due and payable on the Retirement
Date.
B. Bonuses. The Company agrees to recommend that the
Compensation Committee award to Boies and authorize the Company to pay
him any incentive award, or part of any incentive award, earned by him
during the fiscal year in which the Retirement Date occurs (the
"Incentive Award"), under the Company's EVA Incentive Plan, adopted
under the Amended and Restated Management Incentive Plan of
International Multifoods Corporation, or such other incentive plan of
the Company then in effect (the " Incentive Plan"), subject to the
terms and conditions of the Incentive Plan. Boies acknowledges that the
Compensation Committee has the authority under the Incentive Plan, in
its sole discretion, to pay or not to pay any Incentive Award, and has
sole discretion with respect to the "personal performance" portion of
any Incentive Award. The Company shall pay Boies any Incentive Award
earned by him and awarded by the Compensation Committee at or about the
same time as other participants in the Incentive Plan are paid or would
have been paid an incentive award.
2. Consulting Services.
A. Consulting Period.
Boies agrees to make himself available to consult with the
Company to provide "Consulting Services" (as hereinafter described) at
mutually convenient dates and times during the one (1) year period from
and after the Retirement Date (the "Consulting Period"), provided that
Boies shall not be obligated to make himself available for more than
eight (8) calendar days during each calendar month during the
Consulting Period. As used herein, a "calendar day" shall mean not less
than five (5) nor more than eight (8) hours during any twenty-four (24)
hour period.
B. Consulting Services.
The Consulting Services to be performed by Boies shall be as
requested and specified by the Senior Vice President, U.S. Foodservice
of the Company or such other officer of the Company with responsibility
to manage MDG or its successor, from time-to-time during the Consulting
Period, and shall include, but not be limited to, consulting services
of an advisory nature, based on Boies' extensive vend and foodservice
distribution experience and expertise, and/or attendance at meetings
and consultations with customers and suppliers of the Company (the
"Consulting Services"). The Company acknowledges and agrees that Boies
has the right during the Consulting Period to pursue his personal,
business and investment interests so long as they are not in conflict
with Boies' duties and obligations under this Agreement, and are
subject to Boies' covenants set forth in Section 3 of this Agreement.
C. Compensation for Consulting Services.
As compensation for the Consulting Services to be rendered by
Boies to the Company during the Consulting Period, the Company shall
pay Boies Twelve Hundred Dollars ($1,200.00) per calendar day for
Consulting Services performed by Boies under and pursuant to this
Agreement, with such daily fee to be paid by the Company to Boies on a
monthly basis as such Consulting Services are performed. The Company
will report the payment of any compensation paid to Boies for
Consulting Services under this Agreement on Form No. 1099, or such
other form as may be prescribed by applicable federal and state tax
authorities.
D. Reimbursement of Travel Expenses.
If Boies is requested to travel by the Company to perform Consulting
Services during the Consulting Period, the Company will reimburse Boies
for his reasonable travel and travel related expenses, reasonably
incurred by him, solely and exclusively with respect to Boies'
performance of the Consulting Services requested by the Company during
the Consulting Period. Boies shall provide the Company with receipts
and other evidence, reasonably requested by the Company, to
substantiate any such travel and travel related expenses incurred by
him while on assignment for the Company. All of Boies' travel and
travel related expenses shall be subject to the approval of the Senior
Vice President, U.S. Foodservice Operations of the Company, or the Vice
President, Human Resources of the Company, and such approval shall not
be unreasonably withheld or delayed. The Company shall reimburse Boies
for all such approved travel and travel related expenses submitted by
Boies, within thirty (30) days following the date of the Company's
receipt of Boies' invoice for such reimbursement and supporting
documentation.
E. Independent Contractor.
During the Consulting Period, Boies shall provide the
Consulting Services as an independent contractor and nothing in this
Agreement shall be construed to create the relationship of employer and
employee between the Company and Boies during the Consulting Period.
Boies shall at all times be free to exercise his own initiative,
judgment and discretion as to how best to perform the Consulting
Services. Boise will not be an employee of the Company and he shall not
represent or otherwise hold himself out to the public as an employee of
the Company during the Consulting Period.
3. Boies' Covenants.
A. Boies' Agreement to Continue Employment through
Retirement Date.
In part consideration of the Consideration for this Agreement
set forth Section 1 of this Agreement, Boies covenants and agrees to
continue his "at will" employment with the Company through the
Retirement Date as Vice President of the Company and President of MDG,
provided that, at any time after February 29, 2000, Boies shall give
the Company at least three (3) months' prior written notice of the
Retirement Date. Boies shall faithfully devote his best efforts and all
reasonable necessary time, energy and skill to the performance of such
duties to advance the interests of the Company through the Retirement
Date. If the Company determines to terminate Boies' employment with the
Company, without "cause" (as that term is defined in this Section
3.A.), at any time from and after the date of this Agreement, the
Company will give Boies as much advance notice of his termination date
as is reasonably practicable under the circumstances as determined in
the sole judgment of the Company.
As used in this Agreement the phrase "at will" shall mean
that the Company shall have the right to terminate Boies' employment
with the Company at any time for any reason or no reason, and Boies
shall have the right to terminate his employment with the Company at
any time for any reason or no reason, subject, however, to the terms of
and the respective agreements and obligations of the parties under this
Agreement.
As used in this Agreement, and in that certain letter
agreement, dated September 24, 1996, between the Company and Jeffrey
Boies (the "September 24, 1996 Letter"), a copy of which is attached
hereto as Exhibit A, the term "cause" shall mean Boies' employment
termination for:
a) a persistent failure by Boies to perform the duties and
responsibilities of his employment, which failure is willful and
deliberate on Boies' part and is not remedied by him in a reasonable
period of time after Boies' receipt of written notice from the Company
of such failure;
b) an act or acts of dishonesty undertaken by Boies and intended to
result in gain or personal enrichment of Boies at the expense of the
Company;
c) unlawful conduct or gross misconduct that is willful and
deliberate on Boies' part; or
d) the conviction of Boies of a felony.
B. Boies' Covenant Not to Compete.
In part consideration of the Consideration for this Agreement
set forth in Section 1 of this Agreement, Boies covenants and agrees
that for a period from and after the date of this Agreement and for one
(1) year from and after the Retirement Date, inclusive (the "Non-
Competition Period"), other than to carry out his duties and
responsibilities both as Vice President of the Company and President of
MDG through the Retirement Date, and as a consultant with respect to
any Consulting Services to be provided to the Company and under this
Agreement during the Consulting Period, Boies will refrain from
carrying on, whether as a principal, agent, investor, employee,
employer, consultant, shareholder, partner or in any other individual
or representative capacity whatsoever, anywhere in the United States of
America, or its territories and possessions, any business in
competition with the vend and/or foodservice distribution businesses
conducted by the Company at the Retirement Date; provided, however that
Boies may own up to one percent (1%) of any outstanding class of equity
securities of a company engaged in the vend and/or foodservice
distribution business, which are publicly traded on a domestic or
foreign stock exchange or on a domestic or foreign over the counter
market, without violating this covenant not to compete.
C. Boies' Covenant Not to Solicit.
In part consideration of the Consideration for this Agreement
set forth in Section 1 of this Agreement, Boies covenants and agrees
that during the term of this Agreement and the Non-Competition Period,
Boies will not (1) solicit any employee of the Company for employment
or encourage any employee of the Company to terminate his or her
employment with the Company, other than as necessary in the performance
of his duties as President of MDG and (2) solicit or encourage any
current or prospective customer or supplier of the Company from
terminating or changing its relationship with the Company, other than
as necessary in the performance of his duties as President of MDG.
D. Boies' Covenants of Confidentiality and Non-
Disclosure.
In part consideration of the Consideration for this Agreement
set forth in Section 1 of this Agreement, Boies covenants and agrees
with the Company, that Boies will maintain in strict confidence and not
disclose to any corporation, partnership or other entity or person, any
confidential information including, but not limited to, any non-public
information obtained by Boies relating to the Company and its
subsidiaries, and its businesses, plans, organization, information
systems, present and prospective customers, customer buying patterns or
requirements, products, techniques, methods, cost, pricing, price
methods, margins, rebates, and promotional allowances, trade secrets or
any other proprietary information of the Company or any of its
subsidiaries, to which Boies had access to or knowledge of during
Boies' employment by the Company, or to which Boies may have access to
or knowledge of in the performance of Consulting Services during the
Consulting Period. Boies agrees that all confidential information,
trade secrets and other proprietary information of the Company, are and
shall remain the property of the Company at all times during his
employment with the Company and after his termination of employment on
the Retirement Date. Boies further agrees that none of the confidential
information, trade secrets and any other proprietary information of the
Company, nor any part thereof, is to be removed from the premises of
the Company, in original or duplicate form or transmitted verbally, by
electronic means or otherwise, except in the course of conducting
ordinary business for the Company. Boies recognizes and acknowledges
that all confidential information, trade secrets and other proprietary
information of the Company are valuable to the Company and the
disclosure or use of the same would cause irreparable harm to the
Company.
E. Boies' Covenant to Execute and Deliver Release
Agreement
In part consideration for the Consideration for this
Agreement set forth in Section 1 of this Agreement, Boies covenants and
agrees that he will execute and deliver the Release Agreement (in the
form substantially attached hereto as Exhibit B), on the Retirement
Date.
F. Boies' Other Covenant.
In part consideration of the Consideration for this Agreement
set forth in Section 1 of this Agreement, Boies covenants and agrees
that he will not, in any way, disparage the Company or any of its
subsidiaries and affiliates, or any of its directors, officers and
employees, or any of its products or services during and after the date
of this Agreement.
G. Construction and Interpretation.
The Company and Boies agree that if any clause of Paragraphs
B or C of this Section 3 shall be held by any court or other tribunal
of competent jurisdiction to be illegal, invalid or unenforceable, the
remainder of such provision shall not thereby be affected and shall be
given full effect. The Company and Boies further agree that if any
court construes Paragraph B or Paragraph C to be illegal, invalid or
unenforceable because of the duration of such provision, area or matter
covered thereby, such court shall reduce the duration, area, or matter
of either such provision, and, in its reduced form, such provision
shall then be enforceable and shall be enforced.
4. General.
A. Boies understands and acknowledges that the
Company is agreeing to pay him the Consideration for this Agreement set
forth in Section 1 of this Agreement, in consideration of his
execution, delivery and performance of this Agreement, and his
agreement to execute and deliver the Release Agreement on the
Retirement Date. Boies further understands and acknowledges that the
Company is under no obligation to pay him the Consideration for this
Agreement set forth in Section 1 of this Agreement, unless and until he
signs this Agreement and the Release Agreement, and the applicable
recission periods set forth in the Release Agreement have expired.
B. Boies understands and agrees, though the Company
has agreed to pay him the Consideration for this Agreement set forth in
Section 1 of this Agreement, on the terms and conditions set forth
herein, in exchange for the Boies' covenants and agreements set forth
in Section 3 of this Agreement, and Boies' agreement to execute and
deliver the Release Agreement, this does not mean that the Company has
engaged in any wrongful conduct, has acted in any way to cause him
injury, either physical or mental (such as, but not limited to,
emotional stress) or is responsible or legally obligated to him for
anything, except as provided in this Agreement.
C. Boies understands that to the extent that any
provision of this Agreement shall be determined to be invalid or
unenforceable, the invalid or unenforceable portion of such provision
shall be deleted from this Agreement, and the validity and
enforceability of the remainder of such provision and of this Agreement
shall be unaffected.
D. Boies acknowledges that he has read this
Agreement and understands all of its terms and conditions. In agreeing
to sign this Agreement, Boise signs it knowingly and voluntarily, and
represents that he has not relied on any statements or explanations
made by the Company, its employees or attorneys.
E. The waiver by the Company or Boies of a breach by
the Company or Boies, as applicable, of any provision of this
Agreement, shall not operate or be construed as a waiver of any
subsequent breach by the Company or Boies, as applicable.
F. The rights and obligations of Boies under this
Agreement shall not be assignable, transferable or delegable in whole
or in part by Boies. This Agreement is binding upon the successors and
assigns of the Company.
G. This Agreement is a Colorado contract and shall
be governed by the laws of the State of Colorado. This Agreement,
including the recitals set forth on pages 1 and 2 hereof and the
Release Agreement, constitute the entire agreement between the Company
and Boies, and supersede any prior oral or written agreement between
the Company and Boies with respect to the subject matter hereof, other
than paragraphs 7 through 12, inclusive, of the September 24, 1996
Letter, which paragraphs 7 through 12, inclusive, shall continue in
full force and effect and shall not be superseded by this Agreement.
The Company and Boies agree that by executing and delivering this
Agreement, paragraph 7 of the September 24, 1996 Letter shall be
amended coincidentally to include the definition of "cause" set forth
in Section 3.A. of this Agreement, immediately following the last
sentence of paragraph 7.
H. This Agreement shall not be amended or modified
in any way other than by an agreement, in writing, executed and
delivered by the parties hereto.
I. In the event of a breach or threatened breach of
any provision of this Agreement by Boies, Boies agrees that the Company
shall be entitled to injunctions, both preliminary and final, enjoining
and restraining such breach or threatened breach, without any
obligation to post bond, and that such remedies shall be in addition to
all other remedies available at law or in equity.
NOTICE
The Company hereby advises Boies to consult an attorney
before he signs this Agreement.
IN WITNESS WHEREOF, the parties have signed and delivered
this Agreement on the day and year first above written.
INTERNATIONAL MULTIFOODS CORPORATION
ATTEST:
/s/ Frank W. Bonvino By: /s/ Gary E. Costley
- -------------------- ---------------------
Secretary Gary E. Costley
Chairman of the Board, President
and Chief Executive Officer
WITNESS:
/s/ Judith Weaver Jeffrey E. Boies
- ----------------- -----------------
Jeffrey E. Boies
EXHIBIT A
[MULTIFOODS LETTERHEAD]
September 24, 1996
Jeffrey Boies
7415 Spyglass Court
Cincinnati, Ohio 45244
Dear Jeff:
I am pleased to extend to you an offer of employment with International
Multifoods Corporation ("Multifoods"). The offer reflects our recent
discussion in which you described your present total compensation and
expressed your expectations inc ertain areas.
1. The position being offered is President, VSA, Inc., a subsidiary of
Multifoods.
2. In this position you will report directly to Robert M. Price, Chairman
and Chief Executive Officer, Multifoods and his successor when
appointed by the Board of Directors.
3. The effective date of your employment with VSA, Inc. will be no later
than November 1, 1996. We anticipate an earlier start date, however, we
understand that is subject to your availability based on present
business commitments. Your primary office will be in Denver, Colorado.
The VSA, Inc. headquarters office is located at 370 17th Street, Suite
1400, Denver, Colorado 80217.
4. Your starting salary will be $285,000 annually with a commitment to a
performance based salary increase of $20,000 within 12 months (November
1, 1997). "Performance based" means reasonable performance based on
achieving the FY98 business plan.
5. Since you will be joining VSA, Inc. on November 1, 1996, Multifoods
will guarantee the bonus you would likely have received from your
present employer. If your bonus for 1996 would have been $160,000 then
$80,000 will be treated as an employment bonus to be paid by Novemer
15, 1996 and $80,000 will be treated as a guaranteed bonus to be paid
by April 15, 1997. You agree to reimburse Multifoods for $80,000 if you
voluntarily terminate within a period of one year, November 1, 1996 -
October 31, 1997.
6. A recommendation will be made to the Compensatio Committee of the
Board of Directors of Multifoods for the following:
(a) A stock option grant of 6,000 shares of Multifoods Common Stock. The
grant price will be the average price of Multifoods stock on your date
of employment; you will also be considered for a stock option grant
when the Compensation Committee meets in March at which time grants are
considered for all senior executives. The recommendation to the
Committee will be for no less than 4,000 shares.
(b) In consideration of the expected loss on your present employer's match
to the deferred incentive funds and the loss on matching 401(K) shares,
a restricted stock grant of 8,650 shares of Multifoods stock will be
recommended to the Committee. This value is determined based on the
$79,000 of value at risk with the incentive match and $68,000 at risk
with the 401(K) match. You agree to confirm the actual loss of value at
the time of your employment with Multifoods. The number of restricted
shares granted may be modified to reflect a greater or lessor loss of
value.
(c) You will be recommended for participation in the Multifoods'
Management Benefit Plan. You will also be eligible for the Multifoods'
Pension Equity Plan. Considering your retirement opportunity at age 60
with you present employer, the following Supplemental Retirement Plan
will be proposed to the Committee.
This arrangement would provide retirement benefits (in addition to any
other benefits payable under the qualified or non-qualified retirement
plans of Multifoods) based upon the benefits you would have received
from the Pension Equity Plan and the Management Benefit Plan had your
service from your employment date counted double for both benefit
accrual and vesting purposes.
In addition, the hypothetical Pension Equity Plan benefit would be
calculated assuming you had satisfied the age and service requirements
necessary to qualify for the "grandfather" benefit formula. This would
allow you to receive pension benefits under the prior Employees'
Retirement Plan formula if that formula would produce a larger benefit
than the new Pension Equity Plan formula.
(d) We will also recommend to the Compensation Committee that you receive
a Change of Control agreement similar to that of other executives of
Multifoods.
7. You will be protected in the case of involuntarey termination, except
for cause. If involuntary termination should occur during the first
year of yoru employment November 1, 1996 - October 31, 1997 you will
receive three years' salary as a severance payment. If the termination
should occur during the second year of employment, November 1, 1997 -
October 31, 1998, you will receive two years' salary as a severance
payment. Following the two year period, in the event of involuntary
termination you will receive one years' salary. Any severance payment
will require a release prepared by Multifoods and signed by you as well
as an agreement not to compete with Multifoods or any of its
subsidiaries for a period of one year.
8. Your annual incentive opportunity will be no less than 50% of base
salary at business plan level with a maximum incentive opportunity of
70%.
However, it is our intent to design an incentive arrangement based
either on a percent of operating earnings and/or agreed upon return on
sales of VSA, Inc. that will provide an incentive opportunity
significantly in excess of the 50% target and 70% maximum
opportunities. This incentive plan will be designed by January 1, 1997
for the fiscal year which begins on March 1, 1997.
9. Multifoods provides a comprehensive benefit program including medical,
dental, life insurance, long term disability, etc. Multifoods' medical
plan does not have a "pre-existing condition" provision, therefore your
son's condition would be covered by the medical plans. A summary of
Multifoods' benefit plans, which are comprehensive, are attached for
your review. Multifoods also has a 401(K) program called VISA. There is
a one year employment period for eligibility, however, this provision
is currently under review. Employees may contribute up to 7% of base
salary (maximum this year is $9,500) which is matched 50% with
Multifoods Common Stock.
10. You will be eligible for all benefits under the Multifoods Employee
Relocation Policy. It is a comprehensive policy and includes: home
marketing assistance (for your current residence), house hunting trips
to the new location, transportation of household goods, one month's
salary as a relocation allowance, reasonable closing costs as well as a
home buyout option. With the home buyout option, Multifoods' third party
relocation company will forward a list of qualified relocation
appraisers to you, from which you select two appraisers to determine
the market value of your home. An average of those two appraisals is
taken, and an offer made to you. If the appraisals are more than 5%
apart, then a 3rd certified relocation appraiser will be selected by
you to conduct an appraisal on your home. The offer price will be the
average of the two closest appraisals. In addition, we will provide you
with temporary living expense reimbursement for up to six months at the
new location.
11. In accordance with your prior discussion, you will be entitled to four
weeks of vacation. Our vacation year is from January 1, to December 31.
12. Also in accordance with your verbal discussion, Multifoods will pay
fees and dues for a country club membership of your choice in the
Denver area. We expect a condition of reasonableness to apply to the
selection. All expenses incurred for business use of the club will be
reimbursed based on Multifoods' policies.
Jeff, this offer is contingent upon your completion of an executive
type physical examination. If you have had a recent physical exam
(within one year) the written assurance from your doctor, followed by a
written summary of the condition of your health will constitute
"satisfactory completion."
We will also need to complete discussions with references.
We are very pleased with the prospect of having you join Multifoods. We
are counting on your contribution and strongly believe you will have a
very positive impact on the Company. We also believe that Multifoods
can offer you a significant challenge as well as growth opportunities
in the years ahead.
Will you please indicate your acceptance of this offer by signing and
dating the original letter and returning it to me at your earliest
convenience.
Very truly yours,
/s/ Robert F. Maddocks
Robert F. Maddocks
Executive Vice President
Accepted by:
/s/ Jeffrey E. Boies
--------------------
Jeffrey Boies
Dated: 10/5/96
RFM/pr/fboies
cc: Robert M. Price
EXHIBIT B
RELEASE AGREEMENT
In part consideration of the "Consideration for this
Agreement" as set forth in Section 1 of the Agreement dated October
____, 1999 (the "Retirement Agreement") between International
Multifoods Corporation (the "Company") and Jeffrey E. Boies ("Boies"),
the sufficiency of which is hereby acknowledged, Boies hereby releases
the Company, and its subsidiaries and affiliates, and the current and
former insurers, successors, assigns, directors, officers, agents and
employees of each, from all causes of action, claims, demands, debts,
contracts and agreements which he or his heirs, executors,
administrators, legal representatives, successors or assigns and
beneficiaries, have or may have by reason of any matter, act or thing
occurring or arising prior to or on the date of this Release Agreement,
whether presently known or unknown (the "Release").
The Release applies to any cause of action, claims,
demands, debts, contracts and agreements that Boies has or may have by
reason of any matter, act or thing occurring or arising prior to or on
the date of this Release Agreement, whether or not he now knows about
them, including, without limitation, any and all claims relating to his
employment with the Company and/or its subsidiaries, or Boies' decision
to voluntarily terminate his employment and retire, including, but not
limited to, breach of contract claims, a breach of that certain
employment letter agreement, dated September 24, 1996, between the
Company and Boies, tort claims, claims for wages, bonuses or other
compensation, and claims alleging violation of the Fair Labor Standards
Act, the Age Discrimination in Employment Act, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1866,
the National Labor Relations Act, the Colorado human rights laws, the
Americans with Disabilities Act, the Employee Retirement Income
Security Act, the Colorado Wage Act, and/or any other federal, state or
local statute, law, ordinance, regulation, order, or principle of
common law.
The Release does not include any claims that the law does
not allow to be waived or any claims that arise after the date on which
this Release Agreement is signed by Boies. In addition, the Release
does not affect any rights that Boies has (1) as a result of his
participation in any pension, health or welfare benefit plan or plans
of the Company under the terms and conditions set forth in such plan or
plans as of the date of this Release Agreement; and (2) under any
indemnification to which Boies is entitled under (A) the Restated
Certificate of Incorporation, as amended, of the Company, (B) the
Bylaws, as amended, of the Company, or (C) under any contract of
insurance maintained by the Company.
Boies understands that to the extent that any provision of
this Release Agreement shall be determined to be invalid or
unenforceable, the invalid or unenforceable portion of such provision
shall be deleted from this Release Agreement, and the validity and
enforceability of the remainder of such provision and of this Release
Agreement shall be unaffected.
Boies understands that he may have twenty-one (21)
calendar days from the date that he receives this Release Agreement,
not counting the day upon which he receives it, to consider whether he
wishes to sign this release Agreement. If Boies does not sign this
Release Agreement in that period of time, the Company may or may not
allow more time. Boies agrees that if he signs this Release Agreement
before the end of the twenty-one (21) day period, it is because he
decided that he already has had a sufficient period of time to decide
whether to sign this Release Agreement.
Boies has been advised, and he understands, that he has
the right to rescind this Release Agreement if he notifies the Company,
in writing at International Multifoods Corporation, 200 East Lake
Street, Wayzata, Minnesota 55391, Attention: Ralph P. Hargrow, Vice
President, Human Resources, of his decision to rescind within seven (7)
days of the date that he signs this Release Agreement. Boies
understands that this Release Agreement shall not become effective or
enforceable until the revocation period has expired. Boies also
understands that if he rescinds, he shall forfeit the Severance Payment
(described in Section 1 A of the Retirement Agreement). Boies also
understands that to be effective his notice of rescission must be in
writing and must be delivered to the address stated above either by
hand or by mail within the seven (7) day period. If delivered by mail,
the rescission must be: (1) postmarked within the seven (7) day period;
(2) properly addressed to the Company; and (3) sent by certified mail,
return receipt requested.
Boies acknowledges that he has read this Release Agreement
and understands all of its terms and conditions. In agreeing to sign
this Release Agreement, Boise signs it knowingly and voluntarily, and
represents that he has not relied on any statements or explanations
made by the Company, its employees or attorneys.
NOTICE TO EMPLOYEE:
The Company hereby advises Boies to consult an attorney
before signing this Release Agreement.
WITNESS:
- ------------------- ----------------------------
Jeffrey E. Boies
Date Signed:
---------------
Send signed and witnessed form to:
Ralph P. Hargrow
Vice President, Human Resources
International Multifoods Corporation
200 East Lake Street
Wayzata, Minnesota 55391-1662
Exhibit 11
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Computation of Earnings (Loss) per Common Share
(unaudited)
(in thousands, except per share amounts)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- ------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average shares of
common stock outstanding 18,760 18,743 18,755 18,758
Dilutive potential common shares 49 27 78 -
- --------------------------------------------------------------------------------
Total adjusted average shares 18,809 18,770 18,833 18,758
================================================================================
Earnings (loss) from continuing
operations $ 8,129 $ 9,815 $ 17,782 $ (212)
Loss from discontinued operations - (7,244) (19,560) (136,166)
- --------------------------------------------------------------------------------
Net earnings (loss) applicable
to common stock $ 8,129 $ 2,571 $ (1,778) $(136,378)
================================================================================
Basic earnings (loss) per share:
Continuing operations $ .43 $ .52 $ .95 $ (.01)
Discontinued operations - (.38) (1.04) (7.26)
- --------------------------------------------------------------------------------
Total $ .43 $ .14 $ (.09) $ (7.27)
================================================================================
Diluted earnings (loss) per share:
Continuing operations $ .43 $ .52 $ .94 $ (.01)
Discontinued operations - (.38) (1.03) (7.26)
- --------------------------------------------------------------------------------
Total $ .43 $ .14 $ (.09) $ (7.27)
================================================================================
</TABLE>
Basic earnings (loss) per share are computed by dividing net earnings
(loss) by the weighted average number of shares of common stock
outstanding during the period.
Diluted earnings per share are computed similar to basic earnings per
share except that the weighted average shares outstanding are increased
to include additional shares from the assumed exercise of stock options,
if dilutive. The number of additional shares is calculated by assuming
that outstanding stock options were exercised and the proceeds from such
exercises were used to acquire shares of common stock at the average
market price during the period.
Exhibit 12
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(unaudited)
(in thousands)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- -----------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings from
continuing operations
before income taxes $13,630 $15,363 $29,199 $ 882
Plus: Fixed charges (1) 5,920 6,316 18,987 18,244
Less: Capitalized interest (234) (23) (563) (54)
- -------------------------------------------------------------------------------
Earnings available to cover
fixed charges $19,316 $21,656 $47,623 $19,072
===============================================================================
Ratio of earnings to fixed charges 3.26 3.43 2.51 1.05
===============================================================================
</TABLE>
(1) Fixed charges consisted of the following:
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- -----------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest expense, gross $3,737 $3,976 $12,184 $11,411
Rentals (Interest factor) 2,183 2,340 6,803 6,833
- -------------------------------------------------------------------------------
Total fixed charges $5,920 $6,316 $18,987 $18,244
===============================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed balance sheet, statements of operations and cash flows
and accompanying notes and is qualified in its entirety by reference to such
financial statements and notes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> NOV-30-1999
<CASH> 11,032
<SECURITIES> 0
<RECEIVABLES> 144,737
<ALLOWANCES> 3,645
<INVENTORY> 192,361
<CURRENT-ASSETS> 400,786
<PP&E> 340,012
<DEPRECIATION> 145,831
<TOTAL-ASSETS> 772,002
<CURRENT-LIABILITIES> 318,980
<BONDS> 147,199
0
0
<COMMON> 2,184
<OTHER-SE> 227,374
<TOTAL-LIABILITY-AND-EQUITY> 772,002
<SALES> 1,789,716
<TOTAL-REVENUES> 1,789,716
<CGS> 1,652,956
<TOTAL-COSTS> 1,652,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 762
<INTEREST-EXPENSE> 9,127
<INCOME-PRETAX> 29,199
<INCOME-TAX> 11,417
<INCOME-CONTINUING> 17,782
<DISCONTINUED> (19,560)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,778)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
