-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ViekOwjVlpKmGO7p37oyoVZyvvHP7QRfxp868j8LuoOWJRFmms9t6n80Js2/Ohyf eKfhkuu0ZNKMTrmQ7I7gFw== 0000051410-94-000039.txt : 19941017 0000051410-94-000039.hdr.sgml : 19941017 ACCESSION NUMBER: 0000051410-94-000039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL MULTIFOODS CORP CENTRAL INDEX KEY: 0000051410 STANDARD INDUSTRIAL CLASSIFICATION: 2040 IRS NUMBER: 410871880 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06699 FILM NUMBER: 94552758 BUSINESS ADDRESS: STREET 1: 33 S SIXTH ST STREET 2: P O BOX 2942 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-0942 BUSINESS PHONE: 6123403300 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MILLING CO INC DATE OF NAME CHANGE: 19700217 10-Q 1 2ND QTR 10-Q 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 August 31, 1994 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 (State or other jurisdiction of incorporation or organization) 41-0871880 (I.R.S. Employer Identification No.) 33 South Sixth 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 September 30, 1994 was 18,003,389. PART I. FINANCIAL INFORMATION INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Operations (unaudited) (in thousands, except per share amounts) THREE MONTHS ENDED SIX MONTHS ENDED Aug. 31, Aug. 31, Aug. 31, Aug. 31, 1994 1993 1994 1993 Net sales $497,741 $521,515 $1,077,471 $1,077,299 Cost of sales (415,056) (422,677) (895,867) (877,442) Delivery and distribution (31,358) (34,127) (65,911) (69,257) Selling, general and administrative (39,123) (46,657) (94,739) (99,114) Unusual items 26,661 (47,464) 26,661 (47,464) Interest, net (2,427) (2,892) (5,782) (5,769) Corporate (685) (374) (1,018) (944) Losses from unconsolidated affiliates - (12,438) - (12,187) Earnings (loss) before income taxes 35,753 (45,114) 40,815 (34,878) Income taxes (4,393) 17,944 (6,418) 14,090 Net earnings (loss) $ 31,360 $(27,170) $ 34,397 $ (20,788) Net earnings (loss) per share of common stock $ 1.74 $ (1.41) $ 1.91 $ (1.08) Average shares of common stock outstanding 17,903 19,232 18,006 19,258 Dividends per share of common stock: Declared* $ - $ .20 $ .20 $ .40 Paid $ .20 $ .20 $ .40 $ .40 *The Company announced in May 1994 that future declaration dates for dividends would be changed to correspond to the regularly scheduled meeting of the Board of Directors closest to the dividend record date. Accordingly, no dividend was declared in the second quarter of fiscal 1995. This change will not affect any dividend record dates or payments dates. See accompanying notes to consolidated condensed financial statements. INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (dollars in thousands) Condensed from audited financial (Unaudited) statements Aug. 31, February 28, 1994 1994 Assets Current assets: Cash and equivalents $ 19,060 $ 10,507 Trade accounts receivable, net 147,033 146,455 Inventories 209,976 219,630 Other current assets 74,531 62,698 Total current assets 450,600 439,290 Property, plant and equipment, net 228,596 245,891 Goodwill 94,475 72,672 Other assets 58,952 56,922 Total assets $832,623 $814,775 Liabilities and Shareholders' Equity Current liabilities: Notes payable $ 47,460 $ 58,651 Current portion of long-term debt 2,917 3,953 Accounts payable 153,404 150,221 Other current liabilities 107,916 88,909 Total current liabilities 311,697 301,734 Long-term debt, net of current portion 189,535 195,125 Employee benefits and other liabilities 52,584 64,277 Total liabilities 553,816 561,136 Redeemable preferred stock 3,618 3,635 Shareholders' equity 275,189 250,004 Commitments and contingencies Total liabilities and shareholders' equity $832,623 $814,775 See accompanying notes to consolidated condensed financial statements. INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (unaudited) (dollars in thousands) SIX MONTHS ENDED Aug. 31, Aug. 31, 1994 1993 Cash flows from operations: Net earnings (loss) $ 34,397 $ (20,788) Adjustments to reconcile net earnings (loss) to cash provided by operations: Depreciation and amortization 12,638 14,804 Deferred income tax benefit (11,786) (8,811) Provision for losses on receivables 1,203 1,291 Provision for unusual charges 6,220 47,464 Gain on sale of business (32,881) - Equity in losses of unconsolidated affiliates - 12,187 Changes in operating assets and liabilities, net of business acquisitions and dispositions: Accounts receivable (1,106) (1,249) Inventories 144 (13,313) Other current assets (12,374) (8,931) Accounts payable 2,309 (7,930) Other current liabilities 7,817 (4,051) Other, net 4,030 (502) Cash provided by operations 10,611 10,171 Cash flows from investing activities: Business acquisitions (115,847) (18,456) Capital expenditures (16,306) (25,357) Proceeds from business dispositions 156,367 4,862 Proceeds from other property disposals 1,592 308 Cash provided by (used for) investing activities 25,806 (38,643) Cash flows from financing activities: Net increase (decrease) in notes payable (7,465) 30,586 Net increase (decrease) in long-term debt (4,633) 7,815 Dividends paid (7,341) (7,834) Proceeds from issuance of common stock 119 1,067 Purchase of treasury shares (5,777) (3,152) Other, net (12) (84) Cash provided by (used for) financing activities (25,109) 28,398 Effect of exchange rate changes on cash and equivalents (2,755) (1,395) Net increase (decrease) in cash and equivalents 8,553 (1,469) Cash and equivalents at beginning of period 10,507 11,044 Cash and equivalents at end of period $ 19,060 $ 9,575 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 August 31, 1994 and the results of its operations for the three and six months ended August 31, 1994 and 1993, and cash flows for the six months ended August 31, 1994 and 1993. 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. Certain reclassifications have been made in the accompanying consolidated condensed financial statements in order to conform with fiscal 1995 presentation. 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, 1994. The results of operations for the three and six months ended August 31, 1994 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 certain Venezuelan borrowings, as a component of cost of sales. Accordingly, a reduction of $1,900,000 and an increase of $1,390,000 for the six months ended August 31, 1994 and 1993, respectively, and an increase of $495,000 and $390,000 for the three months ended August 31, 1994 and 1993, respectively, are included in cost of sales. (3) Businesses acquired - The Company acquired, with cash and notes, certain businesses during fiscal 1995 and 1994. All acquisitions have been accounted for as purchases and, accordingly, the results of operations of the acquired businesses have been included since their respective dates of acquisition. The most significant acquisitions were as follows: Fiscal Business Segment Name Date Acquired 1995 U.S. Foodservice Distribution business August 1994 of Leprino Foods 1994 U.S. Foodservice Bevmatic August 1993 U.S. Foodservice JAMCO June 1993 The components of cash used for all acquisitions, as reflected in the consolidated condensed statements of cash flows, are summarized as follows (in thousands): Six Months Ended Aug. 31, Aug. 31, 1994 1993 Fair value of current assets, net of cash acquired $ 46,181 $ 4,738 Fair value of non-current assets, excluding goodwill 56,318 12,276 Goodwill 34,480 5,778 Liabilities assumed, principally current (21,132) (1,836) Purchase contract liabilities - (2,500) Cash paid, net of cash acquired $115,847 $18,456 The following unaudited pro forma financial information assumes the Company's fiscal 1995 acquisition of the specialty foodservice distribution business of Leprino Foods Company had been completed on March 1, 1993, the beginning of fiscal 1994. It includes the financing costs of the acquisition as well as depreciation and amortization associated with the allocation of the purchase price to net tangible and intangible assets acquired. The pro forma information is not necessarily indicative of the combined results of operations that would have occurred had the acquisition been completed as of the beginning of fiscal 1994. Six Months Ended Aug. 31, Aug., 31, (in thousands, except earnings per share) 1994 1993 Net sales $1,277,000 $1,264,000 Net earnings (loss) 34,700 (21,500) Net earnings (loss) per share of common stock 1.92 (1.12) (4) Unusual items - The Company divested its Frozen Specialty Foods business on June 1, 1994 for a pre-tax gain of $32,881,000. The Company recognized a $6,220,000 pre-tax charge for the integration of the recently acquired specialty foodservice distribution business of Leprino Foods Company with the Company's existing pizza and Mexican restaurant distribution business ("Business Integration") in the second quarter of fiscal 1995. The Business Integration charge included $1,100,000 for asset write-downs, $1,400,000 for severance benefits to approximately 125 warehouse, delivery and administrative employees, and $3,720,000 primarily for the write-down of lease commitments. The Business Integration is expected to provide benefits of up to $3,000,000 in fiscal 1996 and up to $6,000,000 in fiscal 1997. The following table summarizes the change in the Company's reorganization and integration reserves for the six months ended August 31, 1994 (in thousands):
U.S. Foodservice Canadian Foods Consoli- Consoli- dation/ Organiza- dation/ Organiza- Closing tional Business Closing tional Total Facilities Changes Integration Facilities Changes Company Reorganization reserves at Feb. 28, 1994 $4,694 $6,109 $ - $2,749 $5,486 $19,038 Reserve additions - - 5,120 - - 5,120 Reserves utilized (1,152) (3,617) - - (434) (5,203) Exchange rate effect - - - (47) (66) (113) Reorganization and integration reserves at Aug. 31, 1994 $3,542 $2,492 $5,120 $2,702 $4,986 $18,842
(5) Interest, net consisted of the following (in thousands): THREE MONTHS ENDED SIX MONTHS ENDED Aug. 31, Aug. 31, Aug. 31, Aug. 31, 1994 1993 1994 1993 Interest expense $2,949 $3,242 $6,644 $6,618 Less: Capitalized interest (91) (84) (169) (173) Non-operating interest income (431) (266) (693) (676) Interest, net $2,427 $2,892 $5,782 $5,769 Cash payments for interest, net of amounts capitalized, for the six months ended August 31, 1994 and 1993 were approximately $5,897,000 and $6,080,000, respectively. Total interest income was $1,229,000 and $919,000 for the six months ended August 31, 1994 and 1993, respectively. (6) Income taxes - Cash payments for income taxes for the six months ended August 31, 1994 and 1993 were $3,538,000 and $1,570,000, respectively. (7) Supplemental balance sheet information (in thousands) Aug. 31, Feb. 28, 1994 1994 Trade accounts receivable, net: Trade $152,555 $151,642 Allowance for doubtful accounts (5,522) (5,187) Total trade accounts receivable, net $147,033 $146,455 Inventories: Raw materials, excluding grain $ 20,493 $ 27,614 Grain 27,380 41,785 Finished and in-process goods 155,623 141,241 Packages and supplies 6,480 8,990 Total inventories $209,976 $219,630 Property, plant and equipment, net: Land $ 11,145 $ 10,733 Buildings and improvements 84,134 107,741 Machinery and equipment 183,377 213,838 Transportation equipment 8,744 4,678 Improvements in progress 40,864 38,740 Accumulated depreciation (99,668) (129,839) Total property, plant and equipment, net $228,596 $245,891 (8) Financial instruments Concentrations of Credit Risk - The Company's Venezuelan operations maintain deposits, primarily in local currency, in Venezuelan financial institutions. As of August 31, 1994, these deposits totaled the equivalent of $18,200,000 in U.S. dollars. Due to exchange controls implemented by the Venezuelan government, the Company has experienced delays in converting these deposits to U.S. dollars and, accordingly, paying down U.S. dollar- denominated obligations of its Venezuelan operations. The Venezuelan government has assumed control of several local banks due to their respective financial difficulties in order to stabilize the banking system. Other Financial Instruments - In Canada, the Company minimizes risks associated with wheat market price fluctuations by hedging its wheat and flour inventories, open wheat purchase contracts, and open flour sales contracts with wheat futures contracts. These futures contracts are traded on U.S. exchanges and are denominated in U.S. dollars. Since the inventories, purchase contracts and sales contracts are denominated in Canadian dollars, the Company enters into foreign currency forward contracts which have the effect of converting the U.S. dollar-denominated futures contracts into Canadian dollar equivalents. At August 31, 1994, the Company had entered into wheat futures contracts with maturities that generally coincided with the maturities of the open wheat purchase contracts and flour sales contracts. These future contracts hedged substantially all of the Company's Canadian wheat and flour inventories and commitments as of August 31, 1994. At August 31, 1994, the foreign currency forward contracts relating to these wheat futures contracts totaled approximately $8,800,000. The U.S. exchanges on which the futures contracts are traded act as the counterparties to these transactions. The foreign currency forward contracts are purchased through major Canadian banking institutions which act as counterparties to the transactions. In the Company's opinion, the credit risk of these futures and foreign currency forward contracts due to nonperformance of the counterparties is remote. (9) Contingencies - The Internal Revenue Service (IRS) has completed examinations of the U.S. federal income tax returns filed by the Company for the fiscal years ended February 28, 1987 through February 28, 1991. As a result of the examinations, the IRS has issued to the Company a statutory notice of deficiency covering the fiscal years ended February 28, 1987 and February 29, 1988 and a preliminary report covering the fiscal years ended February 28, 1989 through February 28, 1991, both of which are primarily related to the proposed disallowance of certain deductions claimed by the Company in connection with acquisitions. The Company disagrees with the position of the IRS and is pursuing its judicial remedies with respect to fiscal years 1987 and 1988 and its administrative remedies with respect to fiscal years 1989 through 1991. Management believes the final outcome of this matter will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. (10) Segment information - The Company's business segments are as follows: U.S. Foodservice consists of specialty foodservice distribution and prepared foods operations; Canadian Foods consists of consumer and bakery products operations; and Venezuelan Foods consists of consumer, bakery products and agricultural operations. The Company's divested Frozen Specialty Foods and Meats businesses were included in the U.S. Foodservice business segment. Net Operating Unusual (in millions) Sales Costs Items Total Three Months Ended Aug. 31, 1994 U.S. Foodservice $357.4 $(352.6) $ 26.7 $ 31.5 Canadian Foods 70.2 (66.5) - 3.7 Venezuelan Foods 70.2 (66.5) - 3.7 Total $497.8 $(485.6) $ 26.7 $ 38.9 Segment earnings $ 38.9 Interest, net (2.5) Corporate unallocated (.7) Earnings before income taxes 35.7 Income taxes (4.3) Net earnings $ 31.4 Three Months Ended Aug. 31, 1993 U.S. Foodservice $386.5 $(378.7) $(25.7) $(17.9) Canadian Foods 68.4 (64.7) (21.8) (18.1) Venezuelan Foods 66.6 (60.0) - 6.6 Total $521.5 $(503.4) $(47.5) $(29.4) Segment losses $(29.4) Interest, net (2.9) Corporate unallocated (.3) Losses from unconsolidated affiliates (12.5) Loss before income taxes (45.1) Income taxes 17.9 Net loss $(27.2) (10) Segment information (continued) Net Operating Unusual (in millions) Sales Costs Items Total Six Months Ended Aug. 31, 1994 U.S. Foodservice $ 798.6 $ (785.5) $ 26.7 $ 39.8 Canadian Foods 132.0 (128.1) - 3.9 Venezuelan Foods 146.9 (143.0) - 3.9 Total $1,077.5 $(1,056.6) $ 26.7 $ 47.6 Segment earnings $ 47.6 Interest, net (5.8) Corporate unallocated (1.0) Earnings before income taxes 40.8 Income taxes (6.4) Net earnings $ 34.4 Six Months Ended Aug. 31, 1993 U.S. Foodservice $ 811.5 $ (795.6) $(25.7) $ (9.8) Canadian Foods 133.9 (129.7) (21.8) (17.6) Venezuelan Foods 131.9 (120.5) - 11.4 Total $1,077.3 $(1,045.8) $(47.5) $(16.0) Segment losses $(16.0) Interest, net (5.8) Corporate unallocated (.9) Losses from unconsolidated affiliates (12.2) Loss before income taxes (34.9) Income taxes 14.1 Net loss $(20.8) INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) Results of Operations: For the second quarter and six months ended August 31, 1994 compared with the corresponding prior period. Overview The consolidated net earnings for the second quarter were $31.4 million, or $1.74 per share, compared with a net loss of $27.2 million, or $1.41 per share, a year ago. Unusual items in the second quarter of fiscal 1995 of $25.9 million after tax, or $1.44 per share, included an after- tax gain of $29.6 million, or $1.65 per share, from the divestiture of the Company's Frozen Specialty Foods business and an after-tax charge of $3.7 million, or $.21 per share, for costs associated with the integration of the specialty foodservice distribution business of Leprino Foods Company, which was acquired in late August 1994. The integration, which will include the closing of duplicate warehouse and administrative facilities of the Company and the consolidation of distribution truck routing, is expected to result in annualized benefits totaling up to $3 million and $6 million in fiscal years 1996 and 1997, respectively. Unusual items in the second quarter of fiscal 1994 totaling $36.3 million after tax related to the reorganization of operations, the loss on the disposition of a bakery distribution business and included a $12.5 million charge related to the decision to divest the Company's minority positions in two Mexican unconsolidated affiliates. See Note 4 for additional information on unusual items and the reorganization and integration reserves. Excluding unusual items, net earnings in the second quarter were $5.5 million, or $.30 per share, compared with net earnings of $9.1 million, or $.47 per share, a year ago. The decline in net earnings was primarily the result of lower earnings in the U.S. Foodservice and Venezuelan Foods segments. Consolidated net sales declined 5% to $497.8 million, compared with $521.5 million, a year ago. Exclusive of the effect of acquisitions and divestitures, consolidated net sales increased 7%. The consolidated net earnings for the six months ended August 31, 1994 were $34.4 million, or $1.91 per share, compared with a net loss of $20.8 million, or $1.08 per share, a year ago. Exclusive of the unusual items described above, net earnings were $8.5 million, or $.47 per share, compared with $15.5 million, or $.80 per share, a year ago. Consolidated net sales were even with the year-ago period. Exclusive of the effect of acquisitions and divestitures, consolidated net sales increased 8%. Segment Results U.S. Foodservice second quarter net sales declined 8% to $357.4 million, compared with $386.5 million a year ago, primarily as a result of divested businesses. Excluding the effect of acquisitions and divestitures, net sales increased 9% as a result of improved volumes in pizza and Mexican restaurant distribution, surimi seafood and export products. Second quarter segment earnings before unusual items declined 38% to $4.8 million, compared with $7.8 million in fiscal 1994. A portion of the decline was the result of the divestitures of the Frozen Specialty Foods and Meats businesses, which earned $1.2 million in the second quarter last year. The remaining decline is primarily the result of costs associated with delays in the implementation timetable of a vending distribution business information system and lower margins in surimi seafood compared with strong margins a year ago, both of which are expected to continue to unfavorably impact segment earnings in the second half of fiscal 1995. Second quarter segment earnings were $31.5 million versus a loss of $17.9 million a year ago. Fiscal 1995 segment earnings included a pre-tax gain of $32.9 million from the divestiture of the Frozen Specialty Foods business and a pre-tax integration charge of $6.2 million described above. The fiscal 1994 segment loss included unusual items of $25.7 million associated with the reorganization of operations and the loss on the disposition of a bakery distribution business. U. S. Foodservice segment earnings before unusual items for the six-month period declined 18% to $13.1 million, compared with $15.9 million a year ago. After reflecting unusual items, segment earnings were $39.8 million versus a segment loss of $9.8 million a year ago. Net sales for the six- month period declined 2% to $798.6 million, compared with $811.5 million last year. Net sales and segment earnings for the six-month period were affected by the same factors as noted above for the second quarter. Canadian Foods second quarter net sales increased 3% to $70.2 million, compared with $68.4 million a year earlier, primarily as a result of higher Canadian bakery volumes, partially offset by the impact of a 6% decline in the average exchange rate and lower consumer flour volumes compared with a strong quarter last year. Segment earnings before unusual items were $3.7 million, even with a year ago. The earnings benefits of improved Canadian bakery volumes and the benefits from the reorganization of operations were offset by the effects of the exchange rate decline and lower consumer flour volumes. Segment earnings before unusual items for the six-month period decreased 7% to $3.9 million, compared with $4.2 million last year. Unusual items in the second quarter of fiscal 1994 were pre-tax charges of $21.8 million associated with the reorganization of operations. Net sales declined 1% to $132.0 million versus $133.9 million in the year-ago period. Sales and earnings were affected by essentially the same factors as noted above for the second quarter. Venezuelan Foods second quarter net sales increased 5% to $70.2 million, compared with $66.6 million last year, as a result of higher consumer products and animal feed volumes. Segment earnings declined 44% to $3.7 million from $6.6 million a year ago. The decline resulted primarily from the impact of a significant devaluation of the Venezuelan currency that occurred in the latter part of the first quarter and early in the second quarter of fiscal 1995, and the Company's use of the U.S. dollar as the functional currency for translation purposes. These unfavorable impacts were partially offset by the benefits of the improved volumes and the near-term currency stability resulting from government-imposed foreign exchange controls, described below. Segment earnings for the six-month period decreased 66% to $3.9 million, compared with $11.4 million last year, as a result of the factors noted above for the second quarter and the significant effect that the first quarter currency devaluation had on the earnings in the first quarter. Net sales for the six-month period increased 11% to $146.9 million, versus $131.9 million last year, primarily on higher consumer products and animal feed volumes. In June 1994, the Venezuelan government implemented price controls, which affect most of the Venezuelan operations' products, and a foreign exchange control system. The government has allowed reasonable price increases for most of the Company's products. In connection with the implementation of exchange and price controls, the government has announced that sufficient U.S. dollars will be made available at the controlled exchange rate for basic food imports, which include the Company's raw material needs. The government has allowed the exchange of Venezuelan bolivars to U.S. dollars for payments by the Company for recent raw material imports. However, the Company has experienced delays in obtaining U.S. dollars for transactions that occurred prior to the implementation of exchange controls, including dollars required for the repayment of U.S. dollar-denominated obligations of the Company's Venezuelan operations. As a result, net monetary assets and commitments denominated in bolivars have increased. As of August 31, 1994, net monetary assets and commitments totaled the U.S.-dollar equivalent of $29 million. The government has currently established the exchange rate at 170 bolivars per dollar. If the bolivar were to decline in value versus the U.S. dollar, there would be foreign exchange losses on the net monetary assets and commitments and, additionally, the Company may be unable to immediately increase selling prices to maintain current gross profit margins. At the present time, strategies for the management of currency risks are limited to working capital management techniques and product pricing strategies. The Venezuelan government announced that companies intending to repatriate dividends in U.S. dollars must obtain government approval. It is unclear whether there will be limits imposed on such dividend repatriations. Non-operating Expense Second quarter net interest expense declined to $2.5 million from $2.9 million a year ago as a result of lower debt levels during the quarter, partially offset by the effect of higher interest rates in the United States and Canada. The Company reduced debt levels early in the quarter with the proceeds from the divestiture of the Frozen Specialty Foods business. Debt levels increased near the end of the quarter in connection with the acquisition of the Leprino Foods Company distribution business. For the six-month period, net interest expense was even with the year-ago period at $5.8 million as the factors noted above for the second quarter were offset by higher interest expense in the first quarter resulting from higher debt levels and interest rates. Income Taxes The effective tax rate was 12.3% in the second quarter of fiscal 1995 compared with 39.8% last year. The low tax rate in the second quarter of fiscal 1995 was attributable to a low tax rate on the Frozen Specialty Foods transaction. Excluding unusual items and losses from unconsolidated affiliates, the effective tax rates were 40.0% and 38.6% in the second quarters of fiscal 1995 and 1994, respectively. This increase was the result of higher foreign taxes. For the six-month periods, the effective tax rate was 15.7% in fiscal 1995 and 40.4% in fiscal 1994 as a result of the low tax rate on the Frozen Specialty Foods transaction. Excluding unusual items and losses from unconsolidated affiliates, the effective tax rates were 40.0% and 38.7% in fiscal 1995 and 1994, respectively. The increase was the result of higher foreign taxes. Financial Condition: During the second quarter of fiscal 1995, the Company acquired the specialty foodservice distribution business of Leprino Foods Company. The Company's balance sheet at August 31, 1994 reflected the acquisition of the distribution business and the divestitures of the Company's Frozen Specialty Foods and Meats businesses. The increase in cash at August 31, 1994 is due primarily to an increase in local currency deposits in Venezuela as a result of the delays in obtaining U.S. dollars to settle certain dollar-denominated obligations. See Note 8 for further discussion. The reduction in inventories and property, plant and equipment reflected the divestitures, partially offset by the acquisition. The increase in intangibles as of August 31, 1994 was the result of the acquisition, partially offset by the reduction from the divestiture of the Frozen Specialty Foods business. The increase in other current liabilities included the charge for the integration of businesses (see Note 4) and income taxes associated with the gain on the sale of the Frozen Specialty Foods business. In addition, the significant devaluation of the Venezuelan currency that occurred since April 1994 resulted in a decline in the translated amounts of certain Venezuelan assets and liabilities. As of August 31, 1994, the Company's debt-to-total-capitalization ratio had declined to 46%, as compared to 50% at February 28, 1994. The Company's debt declined, as proceeds from the sale of the Frozen Specialty Foods business exceeded the cost of the acquisition of the specialty foodservice distribution business of Leprino Foods Company. Certain repurchases of outstanding common stock were made during the six months ended August 31, 1994 under the previously announced share repurchase program. The Company expects that any future share repurchases under this program will be funded by borrowings. In Canada, the Company minimizes risks associated with wheat market price fluctuations by hedging its wheat and flour inventories, open wheat purchase contracts and open flour sales contracts with wheat futures contracts. See Note 8 for further discussion. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The 1994 Annual Meeting of Stockholders of International Multifoods Corporation (the "Company") was held on June 17, 1994 (the "Annual Meeting"). Holders of the Company's common stock, par value $.10 per share, and holders of the Company's Cumulative Redeemable Sinking Fund First Preferred Capital Stock, Series A, C, D and E, par value $100 per share, of record on May 2, 1994 were entitled to one vote per share, voting together as though constituting a single class on each proposal presented at the meeting. (c) At the Annual Meeting, Nicholas L. Reding and Jack D. Rehm were elected directors for a term of three years. The number of votes cast for the election of each director and the number of votes withheld are as follows: FOR WITHHELD Nicholas L. Reding 15,387,667 560,542 Jack D. Rehm 15,381,527 566,682 The other directors whose term of office as a director continued after the meeting are William A. Andres, James G. Fifield, Anthony Luiso, Robert M. Price, Lois D. Rice and Peter S. Willmott. With respect to the proposal to approve the appointment of KPMG Peat Marwick as independent auditors of the Company for the fiscal year ending February 28, 1995, there were 15,796,686 votes cast for the proposal, 96,681 votes cast against the proposal and 54,842 abstentions. There were no broker nonvotes with respect to such matter. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 2.1 Stock Purchase Agreement between International Multifoods Corporation (Seller) and Doskocil Companies Incorporated (Buyer) dated as of March 17, 1994 (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 1, 1994). 2.2 Asset Purchase Agreement among Multifoods Distribution, Inc. (Buyer), International Multifoods Corporation (Buyer's Parent) and Leprino Foods Company (Seller) and James G. Leprino (Seller's Shareholder) dated as of July 29, 1994 (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated August 22, 1994). 11. Computation of Earnings Per Share. 12. Computation of Ratio of Earnings to Fixed Charges. 27. Financial Data Schedule. (b) Reports on Form 8-K During the quarter ended August 31, 1994, the Company filed a report on Form 8-K dated June 1, 1994 relating to the sale of the Company's Frozen Specialty Foods business. In addition, during the quarter, the Company filed a report on Form 8-K dated August 22, 1994 relating to the acquisition by the Company of substantially all of the assets of the specialty foodservice distribution business of Leprino Foods Company, which report included financial statements of Leprino Foodservice Distribution (a division of Leprino Foods Company). 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: October 14, 1994 By /s/ Duncan H. Cocroft Duncan H. Cocroft Vice President - Finance and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) EXHIBIT INDEX 2.1 Stock Purchase Agreement between International Multifoods Corporation (Seller) and Doskocil Companies Incorporated (Buyer) dated as of March 17, 1994 (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 1, 1994). 2.2 Asset Purchase Agreement among Multifoods Distribution, Inc. (Buyer), International Multifoods Corporation (Buyer's Parent) and Leprino Foods Company (Seller) and James G. Leprino (Seller's Shareholder) dated as of July 29, 1994 (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated August 22, 1994). 11. Computation of Earnings Per Share. 12. Computation of Ratio of Earnings to Fixed Charges. 27. Financial Data Schedule. EX-11 2 2ND QTR EXHIBIT 11 Exhibit 11 INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Schedule of Computation of Earnings per Share (unaudited) (in thousands, except per share amounts) THREE MONTHS ENDED SIX MONTHS ENDED Aug. 31, Aug. 31, Aug. 31, Aug. 31, 1994 1993 1994 1993 Average shares of common stock outstanding 17,903 19,232 18,006 19,258 Common stock equivalents 7 123 14 157 Total common stock and equivalents assuming full dilution 17,910 19,355 18,020 19,415 Net earnings (loss) $31,360 $(27,170) $34,397 $(20,788) Less dividends on redeemable preferred stock (42) (44) (84) (88) Net earnings (loss) applicable to common stock $31,318 $(27,214) $34,313 $(20,876) Earnings (loss) per share of common stock: Primary $ 1.74 $ (1.41) $ 1.91 $ (1.08) Fully diluted $ 1.74 $ (1.41) $ 1.90 $ (1.08) Primary earnings per share has been computed by dividing net earnings, after deduction of preferred stock dividends, by the weighted average number of shares of common stock outstanding during the period. Common stock options and other common stock equivalents have not entered into the primary earnings per share computations since their effect is not significant. Fully diluted earnings per share has been computed assuming issuance of all shares for stock options deemed to be common stock equivalents, using the treasury stock method. EX-12 3 2ND QTR EXHIBIT 12 Exhibit 12 INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Schedule of Computation of Ratio of Earnings to Fixed Charges (unaudited) (dollars in thousands) THREE MONTHS ENDED SIX MONTHS ENDED Aug. 31, Aug. 31, Aug. 31, Aug. 31, 1994 1993 1994 1993 Earnings (loss) before income taxes (1) $35,753 $(32,676) $40,815 $(22,691) Plus: Fixed charges (2) 5,069 5,589 11,078 11,426 Less: Capitalized interest (91) (84) (169) (173) Earnings available to cover fixed charges (3) $40,731 $ N/A $51,724 $ N/A Ratio of earnings to fixed charges (3) 8.04 N/A 4.67 N/A (1) Losses before income taxes have been adjusted to exclude losses from less- than-fifty-percent-owned subsidiaries. (2) Fixed charges consisted of the following: THREE MONTHS ENDED SIX MONTHS ENDED Aug. 31, Aug. 31, Aug. 31, Aug. 31, 1994 1993 1994 1993 Interest expense, gross $2,949 $3,242 $ 6,644 $ 6,618 Rentals (1/3) 2,120 2,347 4,434 4,808 Total fixed charges $5,069 $5,589 $11,078 $11,426 (3) For the three months and six months ended August 31, 1993, earnings are inadequate to cover fixed charges. The resulting deficiency is $32,760 for the three months ended August 31, 1993 and $22,864 for the six months ended August 31, 1993. The deficiency is the result of unusual items. Exclusive of unusual items, the ratio of earnings available to cover fixed charges would have been 3.63 and 3.15 for the three months and six months ended August 31, 1993, respectively. EX-27 4 2ND QTR EXHIBIT 27
5 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. 1,000 6-MOS FEB-28-1995 AUG-31-1994 19,060 0 152,555 5,522 209,976 450,600 328,264 99,668 832,623 311,697 189,535 2,184 3,618 0 273,005 832,623 1,077,471 1,077,471 895,867 895,867 65,911 1,203 6,475 40,815 6,418 34,397 0 0 0 34,397 1.91 1.90
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