SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
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.)
33 South 6th Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
(612) 340-3300
(Registrant's telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's Common Stock,
par value $.10 per share, as of June 30, 1997 was 18,187,844.
PART I. FINANCIAL INFORMATION
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- ----------------------------------------------------------------------
Net sales $667,186 $626,073
Cost of sales (573,687) (536,758)
- ----------------------------------------------------------------------
Gross profit 93,499 89,315
Delivery and distribution (40,657) (40,431)
Selling, general and administrative (45,315) (42,298)
Unusual items - (3,600)
- ----------------------------------------------------------------------
Operating earnings 7,527 2,986
Interest, net (4,484) (4,290)
Other income (expense), net (186) 222
- ----------------------------------------------------------------------
Earnings (loss) before income taxes 2,857 (1,082)
Income taxes (857) 649
Net earnings (loss) $ 2,000 $ (433)
======================================================================
Net earnings (loss) per share of common stock $ .11 $ (.02)
======================================================================
Average shares of common stock outstanding 18,016 17,969
======================================================================
Dividends per share of common stock $ .20 $ .20
======================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands)
Condensed
from audited
financial
(Unaudited) statements
May 31, Feb. 28,
1997 1997
- -----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 8,939 $ 8,753
Trade accounts receivable, net 177,259 207,459
Inventories 280,248 283,948
Other current assets 64,350 63,096
- -----------------------------------------------------------------------
Total current assets 530,796 563,256
- -----------------------------------------------------------------------
Property, plant and equipment, net 222,003 225,357
Goodwill, net 86,975 87,641
Other assets 38,748 39,034
- -----------------------------------------------------------------------
Total assets $878,522 $915,288
- -----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 90,426 $ 88,201
Current portion of long-term debt 30,078 6,790
Accounts payable 177,973 206,966
Other current liabilities 60,344 70,037
- -----------------------------------------------------------------------
Total current liabilities 358,821 371,994
- -----------------------------------------------------------------------
Long-term debt 178,834 202,328
Employee benefits and other liabilities 51,884 51,388
- -----------------------------------------------------------------------
Total liabilities 589,539 625,710
- -----------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Other shareholders' equity 286,799 287,394
- -----------------------------------------------------------------------
Total shareholders' equity 288,983 289,578
- -----------------------------------------------------------------------
Commitments and contingencies
- -----------------------------------------------------------------------
Total liabilities and shareholders' equity $878,522 $915,288
=======================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
(in thousands)
THREE MONTHS ENDED
May 31, May 31,
1997 1996
- ---------------------------------------------------------------------------
Cash flows from operations:
Net earnings (loss) $ 2,000 $ (433)
Adjustments to reconcile net earnings (loss)
to cash provided by (used for) operations:
Depreciation and amortization 7,506 7,476
Deferred income tax expense (benefit) 408 (975)
Provision for losses on receivables 845 767
Provision for unusual charges - 3,600
Changes in operating assets and liabilities:
Accounts receivable 29,092 8,373
Inventories 3,358 (21,612)
Other current assets (1,353) 2,780
Accounts payable (28,714) 37
Other current liabilities (9,633) (10,097)
Other, net 504 515
- ---------------------------------------------------------------------------
Cash provided by (used for) operations 4,013 (9,569)
- ---------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (4,045) (4,141)
Proceeds from property disposal 198 58
- ---------------------------------------------------------------------------
Cash used for investing activities (3,847) (4,083)
- ---------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 2,321 27,733
Net decrease in long-term debt - (8,500)
Dividends paid (3,635) (3,571)
Proceeds from issuance of common stock 2,107 -
Purchase of treasury stock (769) (16)
Other, net (15) (102)
- ---------------------------------------------------------------------------
Cash provided by
financing activities 9 15,544
- ---------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents 11 190
- ---------------------------------------------------------------------------
Net increase in cash and cash equivalents 186 2,082
Cash and cash equivalents at beginning of period 8,753 7,508
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 8,939 $ 9,590
===========================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments, except as noted elsewhere in the notes to the
consolidated condensed financial statements) necessary to present fairly its
financial position as of May 31, 1997 and the results of its operations and
cash flows for the three months ended May 31, 1997 and 1996. 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, 1997. The results
of operations for the three months ended May 31, 1997 are not necessarily
indicative of the results to be expected for the full year.
(2) Cost of sales - To more closely match costs with related revenues, the
Company classifies the inflation element inherent in interest rates on
Venezuelan local currency borrowings and the foreign exchange gains and
losses, which occur on such borrowings, as a component of cost of sales.
Accordingly, cost of sales increased by $0.5 million and $0.3 million for the
three months ended May 31, 1997 and 1996, respectively.
(3) Interest, net consisted of the following (in thousands):
Three Months Ended
May 31, May 31,
1997 1996
- -----------------------------------------------------
Interest expense $5,422 $4,389
Capitalized interest (9) (9)
Non-operating interest income (929) (90)
- -----------------------------------------------------
Interest, net $4,484 $4,290
=====================================================
Cash payments for interest, net of amounts capitalized were $6.5 million in
each three-month period ended May 31, 1997 and 1996.
(4) Income taxes - Cash payments for income taxes for the three months ended
May 31, 1997 and 1996 were $3.8 million and $3.9 million, respectively.
(5) Supplemental balance sheet information (in thousands)
May 31, Feb. 28,
1997 1997
- ----------------------------------------------------------------------
Trade accounts receivable, net:
Trade $184,185 $216,798
Allowance for doubtful accounts (6,926) (9,339)
- ----------------------------------------------------------------------
Total trade accounts receivable, net $177,259 $207,459
======================================================================
Inventories:
Raw materials, excluding grain $ 17,539 $ 15,776
Grain 71,210 86,500
Finished and in-process goods 183,656 174,274
Packages and supplies 7,843 7,398
- ----------------------------------------------------------------------
Total inventories $280,248 $283,948
======================================================================
Property, plant and equipment, net:
Land $ 13,401 $ 13,413
Buildings and improvements 93,237 93,099
Machinery and equipment 233,211 228,514
Transportation equipment 6,947 7,194
Improvements in progress 12,610 15,019
- ----------------------------------------------------------------------
359,406 357,239
Accumulated depreciation (137,403) (131,882)
- ----------------------------------------------------------------------
Total property, plant and equipment, net $222,003 $225,357
======================================================================
(6) Segment information (in millions)
Net Operating Unusual Operating
Sales Costs Items Earnings
- --------------------------------------------------------------------------
Three Months Ended May 31, 1997
Foodservice Distribution $449.4 $(445.3) $ - $4.1
North America Foods 115.5 (112.5) - 3.0
Venezuela Foods 102.3 (99.5) - 2.8
Corporate Expenses - (2.4) - (2.4)
- --------------------------------------------------------------------------
Total $667.2 $(659.7) $ - $7.5
==========================================================================
Three Months Ended May 31, 1996
Foodservice Distribution $443.3 $(438.2) $ - $5.1
North America Foods 111.6 (109.5) - 2.1
Venezuela Foods 71.2 (69.1) - 2.1
Corporate Expenses - (2.7) (3.6) (6.3)
- --------------------------------------------------------------------------
Total $626.1 $(619.5) $(3.6) $3.0
==========================================================================
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
Results of Operations:
For the first quarter ended May 31, 1997 compared with the corresponding
prior period
Overview
Fiscal 1998 first quarter net earnings were $2 million, or 11 cents per
share, compared with a net loss of $0.4 million, or 2 cents per share, a year
ago. Net earnings in fiscal 1998 improved on higher operating earnings in
the North America Foods and Venezuela Foods business segments. Last year's
results were adversely affected by after tax unusual charges of $2.2 million,
or 12 cents per share, for costs resulting from the resignation of the
Company's former chief executive officer and from business assessment studies.
Net sales for fiscal 1998 increased 7% to $667.2 million primarily from the
Venezuela Foods business segment.
Segment Results
Foodservice Distribution first quarter net sales increased 1% to $449.4
million, compared with $443.3 million a year ago. Vending and limited-menu
distribution businesses had an increase in net sales, which was substantially
offset by lower sales volumes to a major customer of the Company's food
exporting business that distributes food products in Russia. This volume
decline was attributable to business disruptions the customer experienced
from the Russian government commencing the enforcement of tariffs which
delayed the unloading of shipments and distribution of product in Russia.
The Company expects that the sales and earnings contribution from this
customer in fiscal 1998 will be below last year.
Foodservice Distribution operating earnings declined 20% to $4.1 million,
compared with $5.1 million last year. The decline was the result of the
lower volumes with the major customer of the food exporting business and from
lower gross margins in vending distribution. The gross margin decline was
the result of competitive pricing pressures. In addition, last year included
a benefit from the purchase of candy inventories at favorable prices which
was partially offset by the favorable impact in the current year of
purchasing coffee prior to world market price increases. Foodservice
Distribution operating results also included higher earnings in limited-menu
distribution as a result of lower operating costs.
North America Foods first quarter net sales increased 3% to $115.5 million,
compared with $111.6 million a year ago. Sales were up on higher Canadian
commercial flour volumes but were partially offset by lower volumes in
Canadian frozen bakery products resulting from continued competitive
pressures. Operating earnings increased 43% to $3 million, compared with
$2.1 million last year. Operating earnings increased on higher gross margins
from improved manufacturing efficiencies, the higher commercial flour volumes
and an improved customer mix in the United States. The increase was
partially offset by the volume decline in Canadian frozen bakery products.
Venezuela Foods first quarter net sales increased 44% to $102.3 million,
compared with $71.2 million a year ago. Net sales in the prior year were
adversely impacted by significant devaluation in the exchange rate while the
Company operated under price controls. The Venezuelan government eliminated
price controls last year. Operating earnings increased 33% to $2.8 million,
compared with $2.1 million last year. Although earnings increased, current
year results were adversely affected by competitive pricing pressures coupled
with higher costs of locally grown grain and distribution. Operating
earnings in the prior year were depressed by the significant devaluation
of the exchange rate.
The Company expects that the competitive pricing pressures coupled with the
higher costs will continue. The Company also expects that Venezuela Foods
operating results in the second quarter of fiscal 1998 will be significantly
lower than the second quarter last year. Second quarter fiscal 1997 results
were positively impacted by the removal of price and foreign exchange
controls and other effects of the transition to a free-market economy.
Non-operating Expense and Income
Net interest expense increased to $4.5 million from $4.3 million last year on
higher debt levels partially offset by lower interest rates in Canada.
Financial Condition:
Capital Resources and Liquidity
The debt-to-total capitalization ratio of 51% remained unchanged from
February 28, 1997. Working capital increased on lower accounts payable
attributable to the timing of payments. Partially offsetting this increase
was a reduction in accounts receivable in the Company's food exporting
business resulting from lower sales volumes with a major customer that
distributes food products in Russia. The major customer is past due on
certain accounts receivable owed to the Company as a result of business
disruptions it has experienced, as discussed above. The Company continues to
receive payments on these receivables, although on longer payment terms, and
management expects that all amounts due will be collected.
On June 5, 1997, the Company announced that it intends to sell its Canada
Frozen bakery unit. The Company believes that the sale will not have a
material affect on full-year fiscal 1998 results of operations. The Company
anticipates using the proceeds from the sale to reduce debt.
On July 9, 1997, the Company announced that it will combine its vending
distribution and limited-menu distribution businesses into a single
distribution business to more quickly capitalize on growth opportunities and
achieve cost savings. The Company is unable to estimate one-time charges, if
any, associated with the combination as specific actions have not yet been
determined. The combination is expected to result in significant long-term
benefits, net of any one-time charges.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Letter Agreement, dated February 3, 1997, between
William L. Trubeck and International Multifoods
Corporation regarding benefits and severance
arrangements.
10.2 Consulting Agreement, dated May 1, 1997, between RFM
Enterprises, Inc. and International Multifoods
Corporation.
10.3 Memorandum of understanding, dated May 7, 1997, between
William L. Trubeck and International Multifoods
Corporation regarding supplemental retirement benefits.
10.4 Amendment to Consulting Agreement, dated May 9, 1997,
between International Multifoods Corporation and RFM
Inc.
11. Computation of Earnings (Loss) Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended May 31, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL MULTIFOODS CORPORATION
Date: July 11, 1997 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 Letter Agreement, dated February 3, 1997, between William L.
Trubeck and International Multifoods Corporation regarding
benefits and severance arrangements.
10.2 Consulting Agreement, dated May 1, 1997, between RFM
Enterprises, Inc. and International Multifoods Corporation.
10.3 Memorandum of understanding, dated May 7, 1997, between William
L. Trubeck and International Multifoods Corporation regarding
supplemental retirement benefits.
10.4 Amendment to Consulting Agreement, dated May 9, 1997, between
International Multifoods Corporation and RFM Inc.
11. Computation of Earnings (Loss) Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.