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, 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 Identification No.)
of incorporation or organization)
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 June 30, 1999 was 18,737,251.
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,
1999 1998
- ------------------------------------------------------------------
Net sales $ 588,815 $ 565,187
Cost of materials and production (504,378) (484,050)
Delivery and distribution (40,588) (36,324)
- ------------------------------------------------------------------
Gross profit 43,849 44,813
Selling, general and administrative (33,582) (34,913)
Unusual items - (28,963)
- ------------------------------------------------------------------
Operating earnings (loss) 10,267 (19,063)
Interest, net (2,687) (2,805)
Other income (expense), net (221) (260)
- ------------------------------------------------------------------
Earnings (loss) from continuing operations
before income taxes 7,359 (22,128)
Income taxes (2,797) 7,513
- ------------------------------------------------------------------
Earnings (loss) from
continuing operations 4,562 (14,615)
- ------------------------------------------------------------------
Discontinued operations:
Operating loss, after tax - (9,686)
Net loss on disposition, after tax (7,800) -
- ------------------------------------------------------------------
Loss from discontinued operations (7,800) (9,686)
- ------------------------------------------------------------------
Net loss $ (3,238) $ (24,301)
==================================================================
Basic earnings (loss) per share:
Continuing operations $ .24 $ (.78)
Discontinued operations (.41) (.52)
- ------------------------------------------------------------------
Total $ (.17) $ (1.30)
==================================================================
Diluted earnings (loss) per share:
Continuing operations $ .24 $ (.78)
Discontinued operations (.41) (.52)
- ------------------------------------------------------------------
Total $ (.17) $ (1.30)
==================================================================
Average shares of common
stock outstanding:
Basic 18,756 18,765
Diluted 18,847 18,765
- ------------------------------------------------------------------
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,
1999 1999
- ------------------------------------------------------------------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 5,322 $ 13,495
Trade accounts receivable, net 130,578 124,843
Inventories 160,446 162,414
Other current assets 44,384 39,315
- ------------------------------------------------------------------------
Total current assets 340,730 340,067
- ------------------------------------------------------------------------
Property, plant and equipment, net 172,051 165,161
Goodwill, net 81,615 82,089
Net noncurrent assets of
discontinued operations 45,034 44,905
Other assets 64,617 64,711
- ------------------------------------------------------------------------
Total assets $704,047 $696,933
========================================================================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Notes payable $ 48,615 $ 32,489
Current portion of long-term debt 5,500 2,750
Accounts payable 153,102 161,700
Net current liabilities of discontinued
operations 13,163 9,079
Other current liabilities 55,677 58,227
- ------------------------------------------------------------------------
Total current liabilities 276,057 264,245
- ------------------------------------------------------------------------
Long-term debt 121,199 121,199
Employee benefits and other liabilities 52,061 51,173
- ------------------------------------------------------------------------
Total liabilities 449,317 436,617
- ------------------------------------------------------------------------
Shareholders' equity:
Common stock 2,184 2,184
Accumulated other comprehensive loss (15,099) (17,215)
Other shareholders' equity 267,645 275,347
- ------------------------------------------------------------------------
Total shareholders' equity 254,730 260,316
- ------------------------------------------------------------------------
Commitments and contingencies
- ------------------------------------------------------------------------
Total liabilities and shareholders' equity $704,047 $696,933
========================================================================
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,
1999 1998
- -------------------------------------------------------------------------
Cash flows from operations:
Earnings (loss) from continuing operations $ 4,562 $(14,615)
Adjustments to reconcile earnings (loss) from
continuing operations to cash used for
continuing operations
Depreciation and amortization 5,611 5,812
Deferred income tax expense (benefit) 587 (9,931)
Provision for losses on receivables 86 133
Provision for unusual charges - 28,963
Changes in working capital:
Accounts receivable (5,681) 602
Inventories 2,814 16,431
Other current assets (5,060) (668)
Accounts payable (9,199) (10,687)
Other current liabilities (6,312) (18,222)
Other, net 789 (671)
- -------------------------------------------------------------------------
Cash used for continuing operations (11,803) (2,853)
Cash provided by (used for) discontinued
operations 2,205 (6,906)
- -------------------------------------------------------------------------
Cash used for operations (9,598) (9,759)
- -------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (10,049) (3,230)
Proceeds from property disposals 68 1,127
Discontinued operations (866) (816)
- -------------------------------------------------------------------------
Cash used for investing activities (10,847) (2,919)
- -------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 16,220 24,055
Net increase (decrease) in long-term debt 2,651 (20,700)
Dividends paid (3,752) (3,748)
Proceeds from issuance of common stock 47 2,341
Purchase of treasury stock (1,218) (1,723)
Discontinued operations (2,926) 8,132
Other, net (14) (13)
- -------------------------------------------------------------------------
Cash provided by financing activities 11,008 8,344
- -------------------------------------------------------------------------
Decrease in cash from discontinued operations 1,264 1,136
- -------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents - (13)
- -------------------------------------------------------------------------
Net decrease in cash and cash equivalents (8,173) (3,211)
Cash and cash equivalents at beginning of period 13,495 9,126
- -------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,322 $ 5,915
=========================================================================
See accompanying notes to consolidated condensed financial statements.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) In the Company's opinion, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring adjustments, except as noted elsewhere in the
notes to the consolidated condensed financial statements) necessary to
present fairly its financial position as of May 31, 1999, and the
results of its operations and cash flows for the three months ended May
31, 1999 and 1998. These statements are condensed and, therefore, do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements should be read in conjunction with the consolidated financial
statements and footnotes included in the Company's Annual Report on Form
10-K for the year ended February 28, 1999. The results of operations
for the three months ended May 31, 1999, are not necessarily indicative
of the results to be expected for the full year.
(2) Discontinued operations - In fiscal 1999, the Company announced its
intention to sell its Venezuela Foods business and recognized an
estimated loss on disposition of $124.6 million. 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 the shareholders' equity, a provision of $22.0 million for operating
losses from the measurement date (July 31, 1998) to expected disposal
date, and a $9.3 million loss on disposal. The loss on disposal of $9.3
million was based on selling the business at net book value during
fiscal 2000, with the loss resulting from estimated transaction costs
and taxes.
In the first quarter of fiscal 2000, the Company recorded an additional
charge of $7.8 million. The charge consisted of a $4.0 million loss on
the 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 estimating future
operating losses and the loss on disposal of the discontinued Venezuelan
operations, considerable management judgment is necessary, and actual
results could differ materially from current estimates.
The Company sold its Venezuelan agriculture and animal feeds business on
June 3, 1999 for $27.5 million in cash. The Company recognized the $4.0
million loss on the sale in its first quarter results, as described
above. The book value of the net assets sold were approximately $31
million and consisted of facilities, equipment and working capital. The
net assets of the sold business are included in the Company's May 31,
1999 consolidated condensed balance sheet as the transaction closed in
the Company's second quarter. The business had fiscal 1999 net sales of
approximately $117 million.
Excluding the loss on the sale of the agriculture and animal feeds
business, the operating results of Venezuela Foods for the three months
ended May 31, 1999 and 1998, were as follows:
Three Months Ended
------------------
May 31, May 31,
(in thousands) 1999 1998
- -------------------------------------------------------
Net sales $77,232 $95,936
Operating loss (1,730) (9,688)
Interest, net (1,566) (963)
Net loss (3,868) (9,686)
- -------------------------------------------------------
The net assets of the Venezuela Foods business were as follows:
May 31, Feb 28,
(in thousands) 1999 1999
- ------------------------------------------------------------------------------
Cash and cash equivalents $ 1,412 $ 2,745
Trade accounts receivable, net 35,096 34,807
Inventories 65,437 72,638
Other current assets 5,708 6,009
Notes payable (80,437) (83,843)
Current portion of long-term debt (561) (583)
Accounts payable (34,356) (33,312)
Other current liabilities (5,462) (7,540)
- ------------------------------------------------------------------------------
Net current liabilities of discontinued operations $(13,163) $ (9,079)
==============================================================================
Property, plant and equipment, net $ 45,735 $ 46,127
Other assets 1,494 1,665
Long-term debt (640) (896)
Employee benefits and other liabilities (1,555) (1,991)
- ------------------------------------------------------------------------------
Net noncurrent assets of discontinued operations $ 45,034 $ 44,905
==============================================================================
(3) Comprehensive loss - The components of total comprehensive loss were
as follows:
Three Months Ended
------------------
May 31, May 31,
(in thousands) 1999 1998
- -------------------------------------------------------
Net loss $(3,238) $(24,301)
Foreign currency translation
adjustments 2,116 (1,943)
- -------------------------------------------------------
Comprehensive loss $(1,122) $(26,244)
=======================================================
(4) Unusual items - In fiscal 1999, the Company's continuing operations
recognized unusual items that resulted in pre-tax charges of $29.0
million. These unusual charges resulted from the Company's plan to
consolidate its two distribution businesses, the write-off of
receivables from a major customer of the Company's former food-exporting
business, and the write-down of assets and costs associated with the
Canadian frozen bakery business. The liability balances as of May 31,
1999 were as follows:
Employee
Termination Lease
Benefits and Commitment
(in millions) Other Costs Total
- -----------------------------------------------------------------------------------
Liability balance as of February 28, 1999 $ 2.5 $ 1.6 $ 4.1
Cash payments (0.5) (0.2) (0.7)
- -----------------------------------------------------------------------------------
Liability balance as of May 31, 1999 $ 2.0 $ 1.4 $ 3.4
===================================================================================
(5) Interest, net
Three Months Ended
--------------------
May 31, May 31,
(in thousands) 1999 1998
- ------------------------------------------------------
Interest expense $2,875 $2,846
Capitalized interest (124) -
Non-operating interest income (64) (41)
- ------------------------------------------------------
Interest, net $2,687 $2,805
======================================================
Cash payments for interest, net of amounts capitalized, were $3.8
million and $4.4 million for the three months ended May 31, 1999 and
1998, respectively.
(6) Income taxes - Cash payments for income taxes were $2.4 million and
$6.4 million for the three months ended May 31, 1999 and 1998,
respectively.
(7) Supplemental balance sheet information
May 31, Feb. 28,
(in thousands) 1999 1999
- ----------------------------------------------------------------------
Trade accounts receivable, net:
Trade $ 133,864 $ 127,877
Allowance for doubtful accounts (3,286) (3,034)
- ----------------------------------------------------------------------
Total trade accounts receivable, net $ 130,578 $ 124,843
======================================================================
Inventories:
Raw materials, excluding grain $ 11,668 $ 12,742
Grain 2,461 2,745
Finished and in-process goods 141,395 142,122
Packages and supplies 4,922 4,805
- ----------------------------------------------------------------------
Total inventories $ 160,446 $ 162,414
======================================================================
Property, plant and equipment, net:
Land $ 12,436 $ 12,398
Buildings and improvements 85,947 82,766
Machinery and equipment 195,035 191,504
Transportation equipment 1,451 1,451
Improvements in progress 17,645 12,020
- ----------------------------------------------------------------------
312,514 300,139
Accumulated depreciation (140,463) (134,978)
- ----------------------------------------------------------------------
Total property, plant and equipment, net $ 172,051 $ 165,161
======================================================================
(8) Segment information
Operating
Net Operating Unusual Earnings
(in millions) Sales Costs Items (Loss)
- --------------------------------------------------------------------------
Three Months Ended May 31, 1999
Multifoods Distribution Group $472.0 $(465.7) $ - $ 6.3
North America Foods 116.8 (110.5) - 6.3
Corporate Expenses - (2.3) - (2.3)
- --------------------------------------------------------------------------
Total $588.8 $(578.5) $ - $ 10.3
==========================================================================
Three Months Ended May 31, 1998
Multifoods Distribution Group $454.7 $(448.2) $(11.5) $ (5.0)
North America Foods 110.5 (105.9) (7.2) (2.6)
Divested Business - .8 (10.3) (9.5)
Corporate Expenses - (2.0) - (2.0)
- --------------------------------------------------------------------------
Total $565.2 $(555.3) $(29.0) $(19.1)
==========================================================================
(9) Contingencies - In fiscal 1998, the Company was notified that
approximately $6 million in Company-owned inventory was stolen from a
ship in the port of St. Petersburg, Russia. The ship had been
chartered by a major customer of the Company's former food-exporting
business. The Company believes, based on the facts known to date, that
the loss is covered by insurance. If the loss from the theft of product
is not covered by insurance, the Company would recognize a material
charge to its results of operations.
INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of
Operations and Financial Condition
(Unaudited)
In fiscal 1999, the Company announced its decision to sell its Venezuela
Foods business. As a result of this decision, the Venezuela Foods
business segment has been classified as discontinued operations in the
consolidated financial statements and in the following management
discussion and analysis.
Results of Operations
- ---------------------
Overview
For the first quarter ended May 31, 1999, the net loss from continuing
and discontinued operations totaled $3.2 million, or 17 cents per share.
The net loss resulted from a $7.8 million charge to discontinued
operations, which included a $4 million loss on the sale of the
Venezuelan agriculture and animal feeds business and a $3.8 million
provision related to higher than expected operating losses. The Company
is currently in discussions to sell the remaining Venezuelan operations.
Further information on the Company's Venezuelan business follows in the
discussion of Discontinued Operations.
Last year, the net loss from continuing and discontinued operations
totaled $24.3 million, or $1.30 per share. Prior year results were
affected by a $9.7 million loss from discontinued operations and after-
tax unusual charges related to continuing operations of $18.7 million.
Unusual charges resulted from the Company's plan to consolidate its two
distribution businesses, the write-off of receivables from a major
customer of the Company's former food-exporting business, and the write-
down of assets and costs associated with the Canadian frozen bakery
business.
Continuing Operations
Earnings from continuing operations in the first quarter were $4.6
million, or 24 cents per share, compared with a loss of $14.6 million,
or 78 cents per share, a year ago. Excluding unusual charges, last
year's earnings from continuing operations were $4.1 million, or 22
cents per share. The increase in current year earnings was due to
significantly higher operating earnings in the North America Foods
business segment.
Segment Results
Multifoods Distribution Group: Net sales in the first quarter increased
4% to $472 million as a result of higher sales volumes to vending
operators and sandwich shops. The increase was partially offset by a
decline in sales to pizza restaurants resulting primarily from the loss
of a customer account in the second quarter of last year. Operating
earnings before unusual items declined 3% to $6.3 million primarily from
losses at the Company's Atlanta distribution center. The losses were
due to higher temporary labor and other delivery and distribution costs
that have occurred since the January 1999 consolidation of two Atlanta
distribution centers into a single location. The Company is in the
process of addressing the problems that are causing these increased
costs. The decline in Multifoods Distribution Group's operating
earnings was partially offset by lower administrative costs.
Last year the Company recognized an unusual charge of $11.5 million for
actions associated with the Company's plan to consolidate the Vending
and Foodservice operations into a single business. The charge covers
losses on lease commitments; employee termination benefits; costs
incurred for warehouse, logistics and transportation studies; and the
write-down of leasehold improvements.
North America Foods: Net sales in the first quarter increased 6% to
$116.8 million from higher U.S. bakery products and foodservice
condiments sales volumes. The increase was partially offset by a volume
decline in consumer branded flour. Operating earnings before unusual
items increased 37% to $6.3 million from the higher sales volumes.
Operating earnings as a percent of sales increased primarily due to the
effects of spreading fixed expenses over the higher sales volume.
Last year the Company recognized an unusual charge of $7.2 million for
the write-down of assets and the cost of work-force reductions
associated with its Canadian frozen bakery business.
Divested Business: The divested business segment represents the
Company's former food-exporting business, which the Company exited in
fiscal 1998. In the first quarter last year, the Company recognized
earnings of $0.8 million from a refund of customs taxes paid in prior
years. The Company also recognized an unusual charge of $10.3 million
for the write-off of receivables from a major customer.
Non-operating Expense and Income
Net interest expense for continuing operations declined to $2.7 million,
compared with $2.8 million last year primarily as a result of lower debt
levels in Canada.
Interest expense for continuing operations excludes interest associated
with debt obligations of the Company's discontinued Venezuela Foods
business. Interest expense classified in discontinued operations for
the three months ended May 31, 1999 and 1998, were $1.6 million and $1
million, respectively.
Discontinued Operations
In fiscal 1999, the Company recognized an estimated loss of $124.6
million for the planned disposition of its Venezuela Foods business.
The disposition loss consisted of $93.3 million for the recognition of
the unrealized foreign currency translation losses previously included
as a separate component of shareholders' equity, a provision of $22
million for operating losses from the measurement date (July 31,1998) to
the expected disposal date, and a $9.3 million loss on disposal. The
loss on disposal of $9.3 million was based on selling the business at
net book value during fiscal 2000, with the loss resulting from
estimated transaction costs and taxes.
In the first quarter of fiscal 2000, the Company recorded an additional
charge of $7.8 million. The charge consisted of a $4 million loss on the
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 estimating future
operating losses and the loss on disposal of the discontinued Venezuelan
operations, considerable management judgment is necessary, and actual
results could differ materially from current estimates.
First quarter net sales of the Venezuela Foods business declined 19% to
$77.2 million. The decline was the result of a significant decline in
animal feeds sales volumes, along with lower sales volumes in corn flour
and commercial wheat flour. Excluding the loss related to the sale of
the agriculture and animal feeds business, the Venezuelan operations had
a net loss of $3.9 million in the quarter. The loss resulted from a
significant decline in the Company's agriculture and animal feeds
business resulting from difficult economic conditions that adversely
affected sales volumes and prices. The operating loss was partially
offset by improved results in consumer products, which had lower
material costs and benefited from a relatively stable foreign currency
exchange rate.
Financial Condition
- -------------------
The debt-to-total capitalization ratio increased to 41% at May 31, 1999
compared with 38% at February 28, 1999. The ratios for both periods
excludes debt obligations of the Company's Venezuelan business which are
expected to be assumed by a buyer and that have been classified as net
assets of discontinued operations in the consolidated condensed balance
sheet. Including debt obligations of continuing and discontinued
operations, the debt-to-total capitalization ratio was 50%, compared
with 48% at February 28, 1999. The increase in the debt-to-total
capitalization ratio is the result of increased working capital
requirements and capital expenditures.
The Company sold its Venezuelan agriculture and animal feeds business on
June 3, 1999 for $27.5 million in cash. Proceeds were used to reduce
Venezuelan business' debt obligations. Although the Company recognized
the $4 million loss on the sale in its first quarter results, the net
assets of the sold business are included in the Company's May 31, 1999
consolidated condensed balance sheet as the sale occurred in the
Company's second quarter. The business had fiscal 1999 net sales of
approximately $117 million.
Based on management's current estimates, the Company expects to receive
net proceeds of approximately $17 million from the sale of its remaining
Venezuelan business, after payment of transaction costs and taxes. In
addition, the Company expects that the buyer will assume the debt
obligations of the Venezuelan business. Actual net proceeds from the
sale could differ materially from this estimate. The Company intends to
initially use the net proceeds to reduce debt.
YEAR 2000
- ---------
The Company is actively addressing the Year 2000 issue. Each of the
Company's businesses has had Year 2000 project teams in place for
approximately 18 months or longer. Each team has developed and adopted
a plan of action to deal with the problems posed by the new millennium
change. There is a companywide Year 2000 Project Committee to oversee
the activities and the progress of each of the business-unit teams.
Each of the plans is monitored on an ongoing basis, and a status report
is distributed to senior management and the board of directors each
month.
Multifoods Distribution Group has completed a comprehensive inventory
and review of both computer systems and non-computer systems that could
include some type of embedded technology. An implementation plan
addressing these issues has been developed with an original target
completion date of June 30, 1999, for Year 2000 compliance for all
computer and non-computer systems. This plan includes the detailed
testing and implementation of both packaged and custom-developed
software systems at all locations. Based upon preliminary tests, the
Company believes that these systems are Year 2000 compliant. Detailed
testing of these systems is underway, and it is anticipated that this
testing will be completed by August 31, 1999, and that the full
implementation of these Year 2000 compliant systems will be completed by
October 31, 1999. The testing and implementation of these systems
fulfills critical business needs and provides Year 2000 compliance. The
non-computer systems have been inventoried and evaluated, and the
critical systems tested. The Company believes that there are no
critical deficiencies in these systems. The testing of these systems
for Year 2000 compliance did not displace projects of a more critical
nature. The costs associated with Year 2000 testing are not expected to
be material to the Company's results of operations.
North America Foods has completed a comprehensive review of both
computer systems and non-computer systems that could include some type
of embedded technology. An implementation plan addressing these issues
has been developed with a target completion date of June 30, 1999, for
Year 2000 compliance for all computer and non-computer systems.
Progress towards compliance is substantially complete in accordance with
the established implementation plan. This plan includes upgrading
existing packaged software in the United States and Canada, as well as
testing all systems for Year 2000 compliance. The successful upgrading
and testing of these packaged systems has been completed in the United
States and Canada. The upgrading of the packaged software systems was
driven by business needs, as well as Year 2000 issues. The non-computer
systems have been inventoried and evaluated, and the critical systems
tested. The Company believes that there are no critical deficiencies in
these systems. The costs associated with upgrading the packaged systems
and testing all systems are not expected to be material to the Company's
results of operations.
Multifoods Distribution Group and North America Foods are in the process
of evaluating critical vendors, suppliers and customers, and developing
appropriate contingency plans. Information from critical business
partners has been solicited and evaluated, and additional information
requested where appropriate. The Company continues to evaluate the Year
2000 readiness of its business partners and the critical nature of its
customers and suppliers. Based upon this analysis, the Company will
develop contingency plans, where appropriate. It is anticipated that
these contingency plans will be complete by September 30, 1999.
In Venezuela, the Company has completed a comprehensive review of its
existing business and financial systems. These systems were not Year
2000 compliant, and the Company has chosen to replace these systems with
packaged software that is Year 2000 compliant. The implementation began
in June 1998, and it is scheduled to be complete by July 31, 1999. The
capital cost for the new business system is estimated to be $4.6
million. The Company has completed an inventory and assessment of non-
computer systems, and based upon this information, the Company believes
that there are no critical deficiencies in these systems. The Company
is also in the process of evaluating critical relationships with
vendors, suppliers and customers, and will develop contingency plans, as
appropriate.
The Company believes that by upgrading the packaged software in North
America and by replacing the business and financial systems in
Venezuela, the Year 2000 issue will not create significant operational
problems. Based upon the evaluation and testing completed at this time,
the Company does not anticipate any significant Year 2000 issues with
non-computer systems. The Company continues to monitor and assess the
Year 2000 readiness of its critical vendors, suppliers and customers,
and will develop contingency plans, where appropriate and necessary.
All Year 2000 projects are proceeding according to current schedules and
plans; however, if there are any significant delays in their completion
or if major suppliers or customers experience Year 2000 issues with
their systems that the Company does not anticipate, the Year 2000 issue
may have a material effect on the operations of the Company.
Cautionary Statement Relevant to Forward-Looking Information
- ------------------------------------------------------------
This document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. In addition, the
Company and its representatives may from time-to-time make written and
oral forward-looking statements. These forward-looking statements are
based on current expectations or beliefs, including, but not limited to,
statements concerning the Company's operations and financial performance
and condition. For this purpose, statements that are not statements of
historical fact may be deemed to be forward-looking statements. The
Company cautions that these statements by their nature involve risks and
uncertainties, and actual results may differ materially depending on a
variety of important factors, including, among others, the impact of
competitive products and pricing; market conditions and weather patterns
that may affect the costs of grain, cheese and other raw materials;
changes in laws and regulations; the inability of the Company or its
business partners to resolve "Year 2000" issues or the inability of the
Company to accurately estimate the cost associated with "Year 2000"
compliance; economic and political conditions in Venezuela, including
inflation, currency volatility, possible limitations on foreign
investment, exchangeability of currency, dividend repatriation and
changes in existing tax laws; the Company's ability to complete the sale
of the Venezuela Foods business; the Company's ability to realize the
earnings benefit from the integration of its distribution businesses;
the Company's ability to successfully address the increased costs
related to the integration of the Company's two Atlanta distribution
centers; the inability of the Company to collect on a $6 million
insurance claim related to the theft of product in St. Petersburg,
Russia; fluctuations in foreign exchange rates; risks commonly
encountered in international trade; and other factors as may be
discussed in the Company's reports filed with the Securities and
Exchange Commission.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings 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, 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: July 2, 1999 By /s/ William L. Trubeck
-------------------------------------
William L. Trubeck
Senior Vice President - Finance and
Chief Financial Officer and President
Latin America Operations
(Principal Financial Officer
and Duly Authorized Officer)
EXHIBIT INDEX
11. Computation of Earnings Per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.