-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N/YbRvPjtSzsImB5GrcLgeVEUaprC6SS3oK9SYu+y0QRT4OsRWqw9czLKjuQduqV H05YkWVc2FeqJVaUU3/joA== 0000051410-98-000007.txt : 19980515 0000051410-98-000007.hdr.sgml : 19980515 ACCESSION NUMBER: 0000051410-98-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL MULTIFOODS CORP CENTRAL INDEX KEY: 0000051410 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410871880 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06699 FILM NUMBER: 98619645 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-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 1-6699 INTERNATIONAL MULTIFOODS CORPORATION (Exact name of registrant as specified in its charter) Delaware 41-0871880 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 200 East Lake Street, Wayzata, Minnesota 55391 (Address of principal executive offices) (Zip Code) (612) 594-3300 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ---------------------- Common Stock (par value $.10 per share) New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10-K. [ ] The aggregate market value of Common Stock, par value $.10 per share, held by non-affiliates of the registrant (see Item 12 hereof) as of May 1, 1998 (based on the closing sale price of $30.3125 per share as reported in the consolidated transaction reporting system on such date) was $565,350,344. The number of shares outstanding of the registrant's Common Stock, par value $.10 per share, as of May 1, 1998 was 18,798,341. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Stockholders for the fiscal year ended February 28, 1998 are incorporated by reference into Parts I and II. Portions of the registrant's Proxy Statement for the Annual Meeting of Stockholders to be held June 19, 1998 are incorporated by reference into Part III. PART I Item 1. Business. General International Multifoods Corporation, incorporated in Delaware in 1969 as the successor to a business founded in 1892, operates foodservice distribution businesses in the United States and food manufacturing businesses in the United States, Canada and Venezuela. Unless indicated otherwise or the context suggests otherwise, the term "Company," as used in this Report, means International Multifoods Corporation and its consolidated subsidiaries. In fiscal year 1998, the Company divested its food exporting business. The Company's business segments are Multifoods Distribution Group, North America Foods and Venezuela Foods. Financial information for the last three fiscal years for each of the Company's business segments, which is included in Note 17 to the Company's Consolidated Financial Statements on pages 36 and 37 of the Company's Annual Report to Stockholders for the fiscal year ended February 28, 1998 ("1998 Annual Report to Stockholders"), is incorporated herein by reference. Multifoods Distribution Group The Multifoods Distribution Group segment includes the Company's vending distribution business and the foodservice distribution business. During fiscal 1998, the Company exited its food exporting business and, therefore, the results of such business have been removed from the results of the Multifoods Distribution Group segment. No single customer accounts for a significant portion of the segment's sales. Vending Distribution. The Company is the largest U.S. vending distributor, serving approximately 20,000 vending and office coffee service operators and other concessionaires. The Company distributes and sells more than 8,000 food products consisting primarily of candy, snacks, frozen and refrigerated products, pastries, hot beverages and juices. Most of the products are nationally advertised brand products. The Company also sells certain products, such as premium ground and whole-bean coffee, hot cocoa, creamer and sugar, under its own private labels, VENDOR'S SELECT and GRINDSTONE CAFE. Deliveries are made directly to vending and office coffee service operators from 19 distribution centers located nationwide. The frequency of deliveries varies, depending upon customer needs, but generally deliveries are made once a week. The Company leases a fleet of approximately 165 tractors and approximately 175 trailers, most of which are equipped with an on- board computer system from which drivers obtain delivery performance and route information. The Company also operates 18 cash-and-carry locations from which customers can make purchases. The vending distribution business is highly competitive. While the Company is the only nationwide vending distributor, it encounters significant competition from regional and local distributors as well as warehouse clubs. Price is a significant competitive element in the vending distribution business, however other important competitive factors are prompt and accurate delivery of orders, availability of a wide variety of products and customer service. Foodservice Distribution. The Company is a leading specialty distributor in the United States to independent pizza restaurants and other select limited-menu operators, including sandwich shops, Mexican restaurants, bakery shops and movie theaters. The Company distributes a broad selection of cheeses, meats, snacks, paper goods, cleaning supplies and other products, including pizza ingredients sold under the Company's ULTIMO! brand as well as major national brands. Deliveries are made directly to customers, generally once a week, from 14 distribution centers located strategically around the country to provide efficient and timely delivery to customers. The distribution centers are linked by computer network to the distribution business' headquarters. The Company maintains a fleet of more than 230 tractors and 290 trailers, a majority of which are leased by the Company. The foodservice distribution business is highly competitive. The Company competes with several national and regional broadline distributors and numerous regional specialty foodservice distributors and local independent distributors. The Company competes on the basis of product quality and consistency, customer service and the availability of a wide variety of products, as well as price and prompt and accurate delivery of orders. The Company believes that its pizza expertise, which includes providing customers with ideas on promotions, menu planning and baking, differentiates the Company in part from its competitors. North America Foods The North America Foods segment consists of two units, U.S. Foods and Robin Hood Multifoods. In addition, the North America Foods segment operates a Canadian frozen bakery business that it is presently attempting to divest. No single customer accounts for a significant portion of the segment's sales. U.S. Foods. The U.S. Foods unit produces approximately 3,000 products for retail, in-store and wholesale bakeries and foodservice customers in the United States. The Company produces bakery mix products, including mixes for breads, rolls, bagels, donuts, muffins, danish, cakes, cookies, brownies, bars and pizza crusts, as well as fillings and icings. Bakery mix products are marketed under its MULTIFOODS and JAMCO brands. In addition, the Company manufactures and markets frozen desserts under its MULTIFOODS, GOURMET BAKER and FANTASIA brands. Bakery products are marketed through the Company's own sales organization and independent distributors and brokers. The Company encounters significant competition in the bakery products market. The Company is a leading supplier of bakery mixes to retail and in-store bakeries in North America and it competes with several large corporations and regional producers of bakery mixes. With respect to frozen bakery products, the Company competes primarily in the foodservice and in-store bakery markets with several large corporations and numerous regional suppliers that have select product offerings. The Company competes on the basis of product quality and uniqueness, product convenience, brand loyalty, timely delivery and customer service as well as price. Robin Hood Multifoods. The Robin Hood Multifoods unit combines the Company's Canada consumer foods business with its Canada bakery mix business. The consumer foods business is the leading marketer in Canada of flour and specialty baking mixes sold to consumers. More than 40 consumer baking mixes are sold under the Company's ROBIN HOOD brand, while consumer flour is sold under the Company's ROBIN HOOD, BRODIE, CREAM OF THE WEST and MONARCH brands. The Company also sells hot cereals under its ROBIN HOOD, OLD MILL, RED RIVER and PURITY brands. The Company also manufactures and markets pickles, relishes and other condiments to consumers in Canada, where its BICK'S brand is the leading brand. The Company also sells condiments under its HABITANT, GATTUSO, WOODMAN'S, ROSE and MCLARENS labels. The Company produces bakery mix products, wheat flour and durum and oat products for retail, in-store and wholesale bakeries and foodservice customers in Canada. Such products are sold under the Company's ROBIN HOOD brand. The products of Robin Hood Multifoods are marketed primarily through the Company's own sales organization, supported by advertising and other promotional activities. The Company's competitors in Canada include both large corporations and regional producers. The Company competes on the basis of product quality, product convenience, the ability to identify and satisfy emerging consumer preferences, brand loyalty, timely delivery and customer service as well as price. Venezuela Foods The Venezuela Foods segment includes consumer products for home baking, bakery products for food processors and commercial and retail bakeries, and products for the agricultural sector. Consumer products include wheat flour, corn flour, whole grain rice, rice flour, corn cooking oil, oat cereals and spices, which are sold to grocery stores principally under the Company's ROBIN HOOD, JUANA, MONICA, PAYARA, GOLD BELL, LASSIE and LA COMADRE brands. Bakery products include wheat flour, which is sold under the Company's POLAR, GRAN AGUANTE, GOLDRIM and ELEFANTE brands, and prepared bakery mixes, which are sold under the ROBIN HOOD brand. Animal feeds are sold principally under the Company's SUPER-S brand to animal producers and farm distributors. The Venezuela Foods segment's products are marketed through the Company's own sales organization and independent distributors and brokers. The Company's Venezuelan subsidiary is one of the largest food companies in Venezuela and the largest producer of animal feeds for the agricultural sector. The Company is the leading producer of consumer wheat flour, flour for commercial food processors and retail bakeries, and commercial bakery mixes. No single customer accounts for a significant portion of the Venezuela Foods segment's sales. The Company competes on the basis of quality, price, uniqueness, timely delivery and customer service. The Company's operations in Venezuela are subject to risks inherent in operating under a different legal and political system along with a difficult economic environment. Among these risks are inflation, currency volatility, possible limitations on foreign investment, exchangeability of currency, dividend repatriation and changes in existing tax laws. See "Management's Discussion and Analysis of Results of Operations and Financial Condition," which is included on pages 18 through 21 of the 1998 Annual Report to Stockholders and is incorporated by reference in Part II, Item 7, hereof. Divested Businesses The Company's Divested Businesses segment consists of the Company's former food exporting business which was divested in fiscal year 1998. This business was principally involved in the international trading of food products. A significant portion of the sales of the food exporting business was to a major customer that distributes food products in Russia. During fiscal 1998, the Company entered into an exit agreement to wind down its business with the major customer. The Company's results of operations could be materially adversely affected if the customer is unable to meet its commitments to the Company under the exit agreement. In addition, 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 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 likely recognize a material charge to its results of operations. See "Management's Discussion and Analysis of Results of Operations and Financial Condition," which is included on pages 18 through 21 of the 1998 Annual Report to Stockholders and is incorporated by reference in Part II, Item 7, hereof. Other Information Relating to the Business of the Company Sources of Supply and Raw Materials. The Company's vending distribution business purchases products directly from numerous manufacturers, processors and independent suppliers. Several of these sources are large corporations from which the Company purchases significant quantities of brand name candy and snacks. The Company believes that adequate alternative sources of supply for other vending products are readily available. The Company's foodservice distribution business purchases products directly from numerous manufacturers, processors and independent suppliers. The Company's foodservice distribution business is not dependent upon any single supplier and alternative sources of supply are readily available. With respect to the Company's North America Foods and Venezuela Foods segments, raw materials generally are available from numerous sources and the Company believes that it will continue to be able to obtain adequate supplies. 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. In the United States, the Company also enters into futures contracts to reduce the risk of price fluctuations on certain anticipated raw material purchases. See Note 7 to the Company's Consolidated Financial Statements which are incorporated by reference in Part II, Item 8, hereof. The Company's Venezuelan operations are dependent on raw material imports for many of its products. Wheat, oats and soybeans are not grown in Venezuela and adequate quantities of sorghum and yellow corn are not grown in Venezuela. However, adequate wheat, oats, soybean, sorghum and yellow corn requirements generally are available and procured from sources primarily in the United States and Canada. Generally, adequate quantities of corn (other than yellow corn) and rice, which are grown in Venezuela, are available locally. In the event of a local shortage of corn or rice, the Company has, from time to time, purchased corn and rice from the world market. Trademarks and Other Intellectual Property. The Company owns numerous trademarks, service marks and product formulae which are important to the Company's business. The most significant trademarks and service marks are identified above. Most of the Company's trademarks and service marks are registered. Seasonality. The Company does not experience material seasonal variations in its sales volumes. Environmental Regulation. The Company's facilities in the United States are subject to federal, state and local environmental laws and regulations. Compliance with these provisions has not had, and the Company does not expect such compliance to have, any material adverse effect upon the Company's capital expenditures, net earnings or competitive position. On December 3, 1996, Curtice-Burns Foods, Inc. and Curtice Burns Meat Snacks, Inc. (together, "Curtice-Burns") filed a third-party complaint against the Company in the United States District Court for the District of Oregon. The complaint was filed in connection with a civil lawsuit commenced in October 1996 by Oberto Sausage Company of Oregon ("Oberto") against Curtice-Burns. The third-party complaint alleges that the Company caused or contributed to the environmental contamination of certain real property, and groundwater beneath the real property, located in Albany, Oregon. The Company operated a meat-snack manufacturing plant on the property for a period of 10 years until 1986, when the Company sold the business to Curtice-Burns. Curtice-Burns subsequently sold the property to Oberto. Curtice-Burns is seeking declaratory and monetary relief against the Company under theories of strict liability, contribution for remedial action costs under Oregon and federal statutes, and indemnity. Curtice-Burns is seeking damages in excess of $35,000, the cost of all past, present and future remedial action related to the environmental contamination of the property and the groundwater beneath the property, and costs and disbursements incurred in litigating this matter. Oberto has asserted similar causes of action and is seeking similar relief against Curtice-Burns in the underlying lawsuit. The parties to the lawsuit are in the discovery stage and the Company intends to vigorously defend itself in the lawsuit. The Company has also tendered defense of the lawsuit to the Company's primary general liability insurance carrier during the period of time at issue in the lawsuit. On January 15, 1998, VIP's Industries, Inc. ("VIP's") filed a third-party complaint against the Company in the Circuit Court of Linn County, Oregon. The third-party complaint alleges that the Company, through its former subsidiary Crown Industries, Inc. ("Crown"), caused the environmental contamination of certain real property, and the groundwater beneath the real property, located in Albany, Oregon. At the time of the Company's acquisition of Crown in 1976, Crown owned the subject real property and leased it to an operator of a retail gasoline service station. The Company sold the subject real property in 1981. VIP's has alleged that the Company is strictly liable under Oregon law for costs of removal of contamination and remediation of the subject real property. VIP's is seeking damages in excess of $210,000, the cost of all past, present and future remedial action related to the contamination of the real property and the groundwater beneath the real property. The parties to the lawsuit are in the initial stages of discovery and the Company intends to vigorously defend itself in the lawsuit. The Company has also tendered defense of the lawsuit to the Company's primary general liability insurance carrier during the period of time at issue in the lawsuit. Employees. As of February 28, 1998, the Company and its subsidiaries had 6,807 employees. Cautionary Statement Relevant to Forward-Looking Information This Report 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 and other raw materials; changes in laws and regulations; the inability of the Company to obtain the estimated fair market value of its Canadian frozen bakery business, which is being held for sale; the inability of the Company to either resolve the Company's "Year 2000" issues or 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; economic or political instability in Russia including the possibility of tariff law changes or other marketplace changes and restrictions; the inability of the major customer of the Company's former food exporting business to meet remaining commitments; the inability of the Company to collect insurance proceeds related to the theft of inventory from the port of 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. Item 2. Properties. The Company's principal executive offices are located in Wayzata, Minnesota in owned office space. Several of the Company's subsidiaries also own or lease office space. The Company operates numerous processing and distribution facilities throughout the United States, Canada and Venezuela. The Company believes that its facilities are suitable and adequate for current production or distribution volumes. Multifoods Distribution Group The Company owns two and leases 17 distribution centers aggregating approximately 1.5 million square feet for its vending distribution business. These distribution centers are located in Commerce and Fremont, California; Denver, Colorado; East Windsor, Connecticut; Orlando, Florida; Austell, Georgia; Woodridge, Illinois; Shawnee, Kansas; Louisville, Kentucky; Belleville, Michigan; Minneapolis, Minnesota; Paulsboro and Parsippany, New Jersey; Greensboro, North Carolina; Twinsburg, Ohio; Memphis, Tennessee; Dallas and Houston, Texas; and Kent, Washington. The Company's vending distribution business also operates 18 cash- and-carry distribution locations, 11 of which are separate from the Company's other distribution centers. The Company owns nine and leases five distribution centers aggregating approximately 900,000 square feet for its foodservice distribution business. These distribution centers are located in Tempe, Arizona; Anaheim, Livermore and Modesto, California; Denver, Colorado; Kissimmee, Florida; Atlanta, Georgia; Boise, Idaho; Indianapolis, Indiana; Rice, Minnesota; Springfield, Missouri; Portland, Oregon; Middletown, Pennsylvania; and Dallas, Texas. North America Foods The Company owns 13 and leases four processing facilities. These processing facilities are located in La Mirada, California; Bonner Springs, Kansas; Malden, Massachusetts; Sedalia, Missouri; Lockport, New York; Elyria, Ohio; Burnaby, British Columbia (2); Winnipeg, Manitoba; Burlington, Dunnville, Port Colborne, Scarborough and Simcoe, Ontario; Montreal, Quebec (2); and Saskatoon, Saskatchewan. The Company also operates two research and development laboratories. Venezuela Foods The Company owns 18 processing facilities and leases one processing facility. These processing facilities are located in Barcelona, Anzoategui; Ciudad Bolivar, Bolivar; Puerto Cabello (5) and Valencia, Carabobo; Calabozo, Guarico (3); Acarigua (3) and Araure, Portuguesa; Cumana, Sucre; and Maracaibo, Zulia (3). The Company owns two and leases 10 warehouse facilities. In addition, the Company owns one and leases 12 agricultural distribution centers. The Company also operates two Company-owned hatcheries and one leased hatchery and operates four Company-owned and 12 leased poultry farms. Item 3. Legal Proceedings. Neither the Company nor any of its subsidiaries is a party to any legal proceeding that is material to the business or financial condition of the Company. See the information under the heading "Other Information Relating to the Business of the Company - Environmental Regulation" in Item 1 above for a description of environmental matters in which the Company is involved. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders of the Company during the fourth quarter of the fiscal year ended February 28, 1998. EXECUTIVE OFFICERS OF THE COMPANY. The information contained in Item 10 in Part III hereof under the heading "Executive Officers of the Company" is incorporated by reference in Part I of this Report. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's Common Stock is listed on the New York Stock Exchange. The high and low sales prices for the Company's Common Stock as reported in the consolidated transaction reporting system and the amount of the cash dividends paid on the Company's Common Stock for each quarterly period within the two most recent fiscal years, shown in Note 18 to the Company's Consolidated Financial Statements on page 38 of the 1998 Annual Report to Stockholders, are incorporated herein by reference. As of May 1, 1998, there were 4,569 holders of record of the Common Stock of the Company. On May 9, 1997, the Company granted to Stern Stewart & Co., a partnership ("Stern Stewart"), an option to purchase 48,000 shares of the Company's Common Stock (the "Option") in a transaction that was not registered under the Securities Act of 1933, as amended (the "Securities Act"). The Option was granted pursuant to a non-qualified stock option agreement between Stern Stewart and the Company (the "Option Agreement") in lieu of $400,000 of cash compensation, as partial payment of the fee owed by the Company to Stern Stewart for consulting services. The Option has an exercise price of $25 per share and may be exercised at any time during the period commencing on May 9, 2000 and ending on May 9, 2002; provided, however, that the Option may be exercised sooner following the occurrence of a "Change of Control" of the Company as defined in the Option Agreement. In addition, in the event of a Change of Control of the Company prior to May 9, 2002, in lieu of exercising the Option, Stern Stewart may elect to receive from the Company $400,000 in cash in consideration of cancellation of the Option. The Option was granted in a transaction exempt pursuant to Section 4(2) of the Securities Act. The Company has agreed to file a registration statement under the Securities Act for the resale of the shares of Common Stock of the Company issued to Stern Stewart upon its exercise of the Option. The Company has agreed to file such registration statement upon the written request of Stern Stewart; provided, however, that Stern Stewart may not make any such request prior to the earlier to occur of (i) a Change of Control of the Company or (ii) March 15, 2000. Item 6. Selected Financial Data. The information for fiscal years 1994 through 1998 in the "Six-Year Comparative Summary" on page 17 of the 1998 Annual Report to Stockholders under the headings "Consolidated Summary of Operations," "Year-End Financial Position" and "Dividends Paid" is incorporated herein by reference. The information contained in Note 3 ("Unusual Items") to the Company's Consolidated Financial Statements on page 28 of the 1998 Annual Report to Stockholders is also incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 18 through 21 of the 1998 Annual Report to Stockholders is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. The Independent Auditors' Report, the Company's Consolidated Financial Statements as of February 28, 1998 and February 28, 1997, and for each of the fiscal years in the three-year period ended February 28, 1998, and the Notes to the Company's Consolidated Financial Statements on pages 22 through 38 of the 1998 Annual Report to Stockholders are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The section under the heading "Election of Directors" on pages 4 through 8 and the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" on page 25 of the Company's Proxy Statement dated May 14, 1998 ("1998 Proxy Statement") are incorporated herein by reference. Executive Officers of the Company The following sets forth the name, age and business experience for at least the past five years of each of the executive officers of the Company as of May 1, 1998. Unless otherwise noted, the positions described are positions with the Company or its subsidiaries. Name Age Positions Held Period - ---- --- -------------- ------ Gary E. Costley 54 Chairman of the Board, January 1, 1997 President and Chief Executive to present Officer Dean of the Babcock Graduate 1995 to 1996 School of Management at Wake Forest University Executive Vice President of 1992 to 1994 Kellogg Company and President, Kellogg North America Jeffrey E. Boies 53 Vice President and President, April 17, 1998 Multifoods Distribution to present Group, Inc. President, Multifoods 1997 to 1998 Distribution Group, Inc. President, VSA, Inc. 1996 to 1997 President and Chief Executive 1995 to 1996 Officer of Sysco Food Services/Cincinnati President and Chief Executive 1993 to 1995 Officer of Sysco Food Services/Albany Frank W. Bonvino 56 Vice President, General Counsel 1992 to present and Secretary Anthony T. Brausen 38 Vice President and Treasurer September 20, 1996 to present Treasurer 1996 Assistant Treasurer and 1995 to 1996 Director of Investor Relations Assistant Controller - 1994 Financial Reporting and Director of Investor Relations Assistant Controller - 1991 - 1994 Financial Reporting Dennis R. Johnson 46 Vice President and Controller December 15, 1995 to present Assistant Controller - 1993 to 1995 Operations and Tax Assistant Controller - Operations 1987 to 1993 Jill W. Schmidt 39 Vice President, Communications June 1, 1997 to present Vice President of 1995 to 1997 Tunheim Santrizos Co. Account Supervisor of 1992 to 1995 Tunhaim Santrizos Co. William L. Trubeck 51 Senior Vice President - Finance March 1, 1997 and Chief Financial Officer to present Senior Vice President and Chief 1994 to 1996 Financial Officer of SPX Corporation Senior Vice President and Chief 1993 to 1994 Financial Officer of Honeywell Inc. Donald H. Twiner 57 President, Robin Hood June 1, 1997 Multifoods Inc. to present President - Consumer Foods 1989 to 1997 Division of Robin Hood Multifoods Inc. Robert S. Wright 51 Vice President and President, 1995 to present North America Foods President, Specialty Brands 1994 to 1995 Division of Foodbrands America, Inc. President, Prepared Foods 1992 to 1994 Division of International Multifoods Corporation The executive officers of the Company are elected annually by the Board of Directors with the exception of the Presidents of the Company's business units, who hold appointed offices. Item 11. Executive Compensation. The section under the heading "Election of Directors" entitled "Compensation of Directors" on pages 7 and 8 and the section entitled "Executive Compensation" on pages 14 through 24 of the 1998 Proxy Statement are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The section entitled "Security Ownership of Certain Beneficial Owners and Management" on pages 2 and 3 of the 1998 Proxy Statement is incorporated herein by reference. For purposes of computing the market value of the Company's Common Stock held by non-affiliates of the Company on the cover page of this Report, all executive officers and directors of the Company are considered to be affiliates of the Company. This does not represent an admission by the Company or any such person as to the affiliate status of such person. Item 13. Certain Relationships and Related Transactions. Not applicable. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Documents Filed as a Part of this Report 1. Financial Statements The following consolidated financial statements of International Multifoods Corporation and subsidiaries and the Independent Auditors' Report thereon, included in the 1998 Annual Report to Stockholders, are incorporated by reference in Part II, Item 8, hereof: Independent Auditors' Report Consolidated Statements of Earnings - Years ended February 28, 1998, February 28, 1997 and February 29, 1996 Consolidated Balance Sheets - February 28, 1998 and February 28, 1997 Consolidated Statements of Cash Flows - Years ended February 28, 1998, February 28, 1997 and February 29, 1996 Notes to Consolidated Financial Statements 2. Financial Statement Schedules The consolidated financial statement schedule of International Multifoods Corporation and subsidiaries and the Independent Auditors' Report thereon required to be filed as part of this Report are listed below and are included at the end of this Report. Independent Auditors' Report Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. 3. Exhibits 3.1 Restated Certificate of Incorporation of International Multifoods Corporation, as amended to date (incorporated herein by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 3.2 Bylaws of International Multifoods Corporation, as amended to date (incorporated herein by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1994). 4.1 Indenture, dated as of January 1, 1990, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 4.2 First Supplemental Indenture, dated as of May 29, 1992, supplementing the Indenture, dated as of January 1, 1990, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 4.3 Officers' Certificate, with exhibits thereto, relating to the Company's Medium-Term Notes, Series A, issued under the Indenture, dated as of January 1, 1990, as supplemented by the First Supplemental Indenture, dated as of May 29, 1992, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 4.4 Officers' Certificate and Authentication Order dated February 1, 1996, relating to the Company's Medium-Term Notes, Series B, including the forms of Notes, issuable under the Indenture, dated as of January 1, 1990, as supplemented by the First Supplemental Indenture, dated as of May 29, 1992, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated February 1, 1996). 4.5 Credit Agreement dated as of March 22, 1996 among International Multifoods Corporation, various financial institutions, Bankers Trust Company, as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and Bank of America National Trust and Savings Association, as Administrative Agent (incorporated herein by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996). 4.6 Credit Agreement dated as of May 30, 1996 among Robin Hood Multifoods Inc., various financial institutions and Canadian Imperial Bank of Commerce, as Agent (incorporated herein by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1996). The Company hereby agrees to furnish to the Securities and Exchange Commission upon request copies of all other instruments defining the rights of holders of long-term debt of International Multifoods Corporation and its consolidated subsidiaries. 10.1 Rights Agreement, dated as of October 4, 1990, as amended as of March 1, 1993, between International Multifoods Corporation and Norwest Bank Minnesota, N.A., with exhibits thereto (incorporated herein by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A dated October 11, 1990 and Exhibit 1 to Amendment No. 1 on Form 8 dated March 1, 1993 to the Company's Registration Statement on Form 8- A dated October 11, 1990). 10.2 1997 Stock-Based Incentive Plan of International Multifoods Corporation (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.3 Amendment to the 1997 Stock-Based Incentive Plan of International Multifoods Corporation.* 10.4 Amended and Restated 1989 Stock-Based Incentive Plan of International Multifoods Corporation (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1993).* 10.5 1986 Stock Option Incentive Plan of International Multifoods Corporation (incorporated herein by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 (Registration No. 33- 6223)).* 10.6 Management Incentive Plan of International Multifoods Corporation, Amended and Restated as of September 17, 1993, as further amended (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993 and Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1995).* 10.7 Management Incentive Plan of International Multifoods Corporation, Amended and Restated as of March 1, 1998.* 10.8 Multifoods Division Long-Term Incentive Program (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996).* 10.9 Management Benefit Plan of International Multifoods Corporation, Restated Effective January 1, 1997 (incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.10 First Amendment to the Management Benefit Plan of International Multifoods Corporation, Restated Effective January 1, 1997.* 10.11 Trust Agreement, dated July 30, 1987, between International Multifoods Corporation and Norwest Bank Minnesota, National Association, as successor trustee to Bank of America NT and SA, relating to the Management Benefit Plan of International Multifoods Corporation (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993).* 10.12 Compensation Deferral Plan for Executives of International Multifoods Corporation, Amended and Restated as of September 17, 1993, as further amended (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993 and Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.13 Supplemental Deferred Compensation Plan of International Multifoods Corporation, Adopted Effective April 1, 1997 (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.14 Deferred Income Capital Accumulation Plan for Executives of International Multifoods Corporation, Amended and Restated as of September 17, 1993 (incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993).* 10.15 Employment Agreement, dated as of November 1 1996, between International Multifoods Corporation and Gary E. Costley (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1996).* 10.16 First Amendment to Employment Agreement, dated December 19, 1997, between International Multifoods Corporation and Gary E. Costley.* 10.17 Form of Revised and Restated Severance Agreement between International Multifoods Corporation and each of the Company's executive officers, other than Gary E. Costley (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993).* 10.18 Letter Agreement, dated July 10, 1995, between International Multifoods Corporation and Robert S. Wright regarding benefits and severance arrangements (incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996).* 10.19 Memorandum of understanding, dated March 29, 1996, between International Multifoods Corporation and Robert S. Wright regarding supplemental retirement benefits (incorporated herein by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996).* 10.20 Letter Agreement, dated September 24, 1996, between International Multifoods Corporation and Jeffrey E. Boies regarding benefits and severance arrangements (incorporated herein by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.21 Memorandum of understanding, dated May 7, 1997, between International Multifoods Corporation and Jeffrey E. Boies regarding supplemental retirement benefits (incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.22 Letter Agreement, dated February 3, 1997, between William L. Trubeck and International Multifoods Corporation regarding benefits and severance arrangements (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997).* 10.23 Memorandum of understanding, dated May 7, 1997, between William L. Trubeck and International Multifoods Corporation regarding supplemental retirement benefits (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997).* 10.24 Release, Confidentiality, Non-Disclosure and Non-Competition Agreement, dated as of October 27, 1997, between D. Bruce Kean and International Multifoods Corporation.* 10.25 Form of Indemnity Agreement between International Multifoods Corporation and each of the Company's executive officers (incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993).* 10.26 Fee Deferral Plan for Non-Employee Directors of International Multifoods Corporation, Amended and Restated as of September 17, 1993, as further amended (incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993 and Exhibit 10.26 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.27 Deferred Income Capital Accumulation Plan for Directors of International Multifoods Corporation, Amended and Restated as of September 17, 1993 (incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993).* 10.28 Form of Indemnity Agreement between International Multifoods Corporation and each non-employee director of the Company (incorporated herein by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993).* 11 Computation of Earnings (Loss) Per Common Share. 12 Computation of Ratio of Earnings to Fixed Charges. 13 1998 Annual Report to Stockholders (only those portions expressly incorporated by reference herein shall be deemed filed with the Securities and Exchange Commission). 21 List of significant subsidiaries of the Company. 23 Consent of KPMG Peat Marwick LLP. 27.1 Financial Data Schedule. 27.2 Restated Financial Data Schedule (February 28, 1997). 27.3 Restated Financial Data Schedule (February 29, 1996). 27.4 Restated Financial Data Schedule (May 31, 1997). 27.5 Restated Financial Data Schedule (August 31, 1997). 27.6 Restated Financial Data Schedule (November 30, 1997). 27.7 Restated Financial Data Schedule (May 31, 1996). 27.8 Restated Financial Data Schedule (August 31, 1996). 27.9 Restated Financial Data Schedule (November 30, 1996). *Management contract or compensatory plan or arrangement required to be filed as an exhibit to Form 10-K pursuant to Item 14(c) of this Report. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended February 28, 1998. (c) See Exhibit Index and Exhibits attached to this Report. (d) See Financial Statement Schedules included at the end of this Report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 Dated: May 14, 1998 By /s/ Gary E. Costley Gary E. Costley, Ph.D. Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Gary E. Costley Chairman of the Board, President May 14, 1998 Gary E. Costley, Ph.D. and Chief Executive Officer (Principal Executive Officer) and Director /s/ William L. Trubeck Senior Vice President - Finance May 14, 1998 William L. Trubeck and Chief Financial Officer (Principal Financial Officer) /s/ Dennis R. Johnson Vice President and May 14, 1998 Dennis R. Johnson Controller (Principal Accounting Officer) /s/ Claire L. Arnold Director May 14, 1998 Claire L. Arnold /s/ James G. Fifield Director May 14, 1998 James G. Fifield /s/ Robert M. Price Director May 14, 1998 Robert M. Price /s/ Nicholas L. Reding Director May 14, 1998 Nicholas L. Reding /s/ Jack D. Rehm Director May 14, 1998 Jack D. Rehm /s/ Lois D. Rice Director May 14, 1998 Lois D. Rice /s/ Richard K. Smucker Director May 14, 1998 Richard K. Smucker /s/ Dolph W. von Arx Director May 14, 1998 Dolph W. von Arx Independent Auditors' Report The Board of Directors and Shareholders of International Multifoods Corporation: Under date of March 30, 1998, we reported on the consolidated balance sheets of International Multifoods Corporation and subsidiaries as of February 28, 1998 and 1997 and the related consolidated statements of earnings and cash flows for each of the years in the three-year period ended February 28, 1998, as contained in the 1998 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the fiscal year ended February 28, 1998. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related consolidated financial statement schedule listed in Item 14. The consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Minneapolis, Minnesota March 30, 1998
Schedule II INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts Three years ended February 28, 1998 (in thousands) Additions ------------------------------ Balance at Net charges/(credits) Balance beginning to costs and at end Description of year expenses Other Deductions of year - --------------------------------------------------------------------------------------------------------- Allowance deducted from assets for doubtful receivables: Year ended February 28, 1998 $ 9,339 $( 228) $ - $4,365(a) $ 4,746(b) ======= ======= ====== ====== ======= Year ended February 28, 1997 $13,982 $2,862 $ - $7,505(a) $ 9,339(b) ======= ======= ====== ====== ======= Year ended February 29, 1996 $ 6,708 $5,783 $2,877 $1,386(a) $13,982(b) ======= ======= ====== ====== ======= Notes: (a) Deductions include accounts charged off, net of recoveries, and foreign currency translation adjustments which arise from changes in current rates of exchange. (b) Classified in the balance sheets as follows: 1998 1997 1996 ---- ---- ---- Trade accounts receivable $4,746 $ 9,339 $13,977 Miscellaneous receivables - current - - 5 ------ ------- ------- $4,746 $ 9,339 $13,982 ====== ======= =======
INDEX TO EXHIBITS TO ANNUAL REPORT ON FORM 10-K OF INTERNATIONAL MULTIFOODS CORPORATION FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998 3.1 Restated Certificate of Incorporation of International Multifoods Corporation, as amended to date (incorporated herein by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 3.2 Bylaws of International Multifoods Corporation, as amended to date (incorporated herein by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1994). 4.1 Indenture, dated as of January 1, 1990, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 4.2 First Supplemental Indenture, dated as of May 29, 1992, supplementing the Indenture, dated as of January 1, 1990, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 4.3 Officers' Certificate, with exhibits thereto, relating to the Company's Medium-Term Notes, Series A, issued under the Indenture, dated as of January 1, 1990, as supplemented by the First Supplemental Indenture, dated as of May 29, 1992, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993). 4.4 Officers' Certificate and Authentication Order dated February 1, 1996, relating to the Company's Medium-Term Notes, Series B, including the forms of Notes, issuable under the Indenture, dated as of January 1, 1990, as supplemented by the First Supplemental Indenture, dated as of May 29, 1992, between International Multifoods Corporation and First Trust of New York, National Association, successor to Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated February 1, 1996). 4.5 Credit Agreement dated as of March 22, 1996 among International Multifoods Corporation, various financial institutions, Bankers Trust Company, as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and Bank of America National Trust and Savings Association, as Administrative Agent (incorporated herein by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996). 4.6 Credit Agreement dated as of May 30, 1996 among Robin Hood Multifoods Inc., various financial institutions and Canadian Imperial Bank of Commerce, as Agent (incorporated herein by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1996). The Company hereby agrees to furnish to the Securities and Exchange Commission upon request copies of all other instruments defining the rights of holders of long-term debt of International Multifoods Corporation and its consolidated subsidiaries. 10.1 Rights Agreement, dated as of October 4, 1990, as amended as of March 1, 1993, between International Multifoods Corporation and Norwest Bank Minnesota, N.A., with exhibits thereto (incorporated herein by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A dated October 11, 1990 and Exhibit 1 to Amendment No. 1 on Form 8 dated March 1, 1993 to the Company's Registration Statement on Form 8- A dated October 11, 1990). 10.2 1997 Stock-Based Incentive Plan of International Multifoods Corporation (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.3 Amendment to the 1997 Stock-Based Incentive Plan of International Multifoods Corporation.* 10.4 Amended and Restated 1989 Stock-Based Incentive Plan of International Multifoods Corporation (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1993).* 10.5 1986 Stock Option Incentive Plan of International Multifoods Corporation (incorporated herein by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 (Registration No. 33- 6223)).* 10.6 Management Incentive Plan of International Multifoods Corporation, Amended and Restated as of September 17, 1993, as further amended (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993 and Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1995).* 10.7 Management Incentive Plan of International Multifoods Corporation, Amended and Restated as of March 1, 1998.* 10.8 Multifoods Division Long-Term Incentive Program (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996).* 10.9 Management Benefit Plan of International Multifoods Corporation, Restated Effective January 1, 1997 (incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.10 First Amendment to the Management Benefit Plan of International Multifoods Corporation, Restated Effective January 1, 1997.* 10.11 Trust Agreement, dated July 30, 1987, between International Multifoods Corporation and Norwest Bank Minnesota, National Association, as successor trustee to Bank of America NT and SA, relating to the Management Benefit Plan of International Multifoods Corporation (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993).* 10.12 Compensation Deferral Plan for Executives of International Multifoods Corporation, Amended and Restated as of September 17, 1993, as further amended (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993 and Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.13 Supplemental Deferred Compensation Plan of International Multifoods Corporation, Adopted Effective April 1, 1997 (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.14 Deferred Income Capital Accumulation Plan for Executives of International Multifoods Corporation, Amended and Restated as of September 17, 1993 (incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993).* 10.15 Employment Agreement, dated as of November 1 1996, between International Multifoods Corporation and Gary E. Costley (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1996).* 10.16 First Amendment to Employment Agreement, dated December 19, 1997, between International Multifoods Corporation and Gary E. Costley.* 10.17 Form of Revised and Restated Severance Agreement between International Multifoods Corporation and each of the Company's executive officers, other than Gary E. Costley (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993).* 10.18 Letter Agreement, dated July 10, 1995, between International Multifoods Corporation and Robert S. Wright regarding benefits and severance arrangements (incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996).* 10.19 Memorandum of understanding, dated March 29, 1996, between International Multifoods Corporation and Robert S. Wright regarding supplemental retirement benefits (incorporated herein by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996).* 10.20 Letter Agreement, dated September 24, 1996, between International Multifoods Corporation and Jeffrey E. Boies regarding benefits and severance arrangements (incorporated herein by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.21 Memorandum of understanding, dated May 7, 1997, between International Multifoods Corporation and Jeffrey E. Boies regarding supplemental retirement benefits (incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.22 Letter Agreement, dated February 3, 1997, between William L. Trubeck and International Multifoods Corporation regarding benefits and severance arrangements (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997).* 10.23 Memorandum of understanding, dated May 7, 1997, between William L. Trubeck and International Multifoods Corporation regarding supplemental retirement benefits (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997).* 10.24 Release, Confidentiality, Non-Disclosure and Non-Competition Agreement, dated as of October 27, 1997, between D. Bruce Kean and International Multifoods Corporation.* 10.25 Form of Indemnity Agreement between International Multifoods Corporation and each of the Company's executive officers (incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993).* 10.26 Fee Deferral Plan for Non-Employee Directors of International Multifoods Corporation, Amended and Restated as of September 17, 1993, as further amended (incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993 and Exhibit 10.26 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997).* 10.27 Deferred Income Capital Accumulation Plan for Directors of International Multifoods Corporation, Amended and Restated as of September 17, 1993 (incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993).* 10.28 Form of Indemnity Agreement between International Multifoods Corporation and each non-employee director of the Company (incorporated herein by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993).* 11 Computation of Earnings (Loss) Per Common Share. 12 Computation of Ratio of Earnings to Fixed Charges. 13 1998 Annual Report to Stockholders (only those portions expressly incorporated by reference herein shall be deemed filed with the Securities and Exchange Commission). 21 List of significant subsidiaries of the Company. 23 Consent of KPMG Peat Marwick LLP. 27.1 Financial Data Schedule. 27.2 Restated Financial Data Schedule (February 28, 1997). 27.3 Restated Financial Data Schedule (February 29, 1996). 27.4 Restated Financial Data Schedule (May 31, 1997). 27.5 Restated Financial Data Schedule (August 31, 1997). 27.6 Restated Financial Data Schedule (November 30, 1997). 27.7 Restated Financial Data Schedule (May 31, 1996). 27.8 Restated Financial Data Schedule (August 31, 1996). 27.9 Restated Financial Data Schedule (November 30, 1996). *Management contract or compensatory plan or arrangement required to be filed as an exhibit to Form 10-K pursuant to Item 14(c) of this Report. EX-10.3 2 Exhibit 10.3 AMENDMENT TO THE 1997 STOCK-BASED INCENTIVE PLAN OF INTERNATIONAL MULTIFOODS CORPORATION EFFECTIVE AS OF FEBRUARY 2, 1998 The 1997 Stock-Based Incentive Plan of International Multifoods Corporation (the "Plan") is amended, effective as of February 2, 1998, as follows: 1. The first and second sentences of Section 2 of the Plan are amended to read as follows: "Subject to adjustment as provided in Section 11 hereof, an aggregate of 1,250,000 shares of Stock shall be available to Participants under the Plan. Of such shares of Stock, a maximum of 250,000 shares shall be available for issuance pursuant to Awards of Restricted Stock and Restricted Stock Units." 2. The first sentence of Section 3(e) of the Plan is amended to read as follows: "No Eligible Employee may be granted any Award or Awards under the Plan, the value of which Award or Awards is based solely on an increase in the value of the Stock after the Date of Grant thereof, for more than 200,000 shares of Stock in the aggregate in any calendar year." EX-10.7 3 Exhibit 10.7 MANAGEMENT INCENTIVE PLAN OF INTERNATIONAL MULTIFOODS CORPORATION Approved by the Board of Directors of International Multifoods Corporation on March 20, 1998 As Amended and Restated Effective as of March 1, 1998 The purpose of the Management Incentive Plan of International Multifoods Corporation (the "Plan") is to provide incentive and reward to officers and other key management employees of International Multifoods Corporation and its subsidiaries who contribute to the success of the corporate enterprise by their industry, creativity, ability or exceptional service. Amounts paid pursuant to the Plan are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code, as amended (the "Code"). Section 1. Definitions For purposes of the Plan, the following terms shall have the meanings set forth below: "Award Year" means the fiscal year of Multifoods with respect to which a Target Award is established for a Participant. "Board of Directors" means the Board of Directors of International Multifoods Corporation. "Change in Control of Multifoods" has the meaning set forth in Section 3.5 hereof. "Committee" means the Compensation Committee of the Board of Directors or such other committee of directors as may be designated by the Board of Directors to administer the Plan. "Multifoods" means International Multifoods Corporation. "Participant" means any individual, including any officer, employed on a regular, full-time, salaried basis by Multifoods or any of its subsidiaries, designated by the Committee pursuant to Section 2 hereof. "Restricted Stock" means shares of common stock, par value $.10 per share, of Multifoods in which incentive compensation may be payable, in whole or in part, pursuant to Section 4 hereof, and which shall be issuable pursuant to, and subject to the terms and conditions of, the 1997 Stock-Based Incentive Plan of International Multifoods Corporation or such other plan of Multifoods which authorizes the issuance of restricted stock. "Target Award" means the incentive compensation amount established for a Participant pursuant to Section 3 hereof that would be payable if the performance targets are met, subject to such limitations as may apply under the Plan. Section 2. Participants Prior to or within 90 days following the commencement of each Award Year, the Committee shall designate the Participants for such Award Year. If an employee is hired during an Award Year, the Committee may designate such employee as a Participant for the remaining portion of the Award Year provided such designation is made within 90 days following the date of hire. Section 3. Determination of Incentive Awards 3.1 Performance Based Awards. The Participants for an Award Year shall be eligible to receive an award of incentive compensation upon the attainment of performance targets selected by the Committee that are established based upon measures of "economic value added" ("EVA(R)") reflecting net operating profits after taxes less a capital charge with such adjustments as are deemed appropriate by the Committee. Any such performance targets shall be designated by the Committee prior to or within 90 days following the commencement of each Award Year and may relate to one or any combination of two or more of corporate, group, unit, division, affiliate or individual performance. The Committee, in the exercise of its discretion, shall determine, as a percentage of base annual salary, the amount of the Target Award for each Participant, and the performance targets that must be met as a condition to an award of incentive compensation equal to the Target Award or an award of incentive compensation less than or greater than the Target Award. The Committee, in the exercise of its discretion, also may establish an incentive bank in the name of each Participant which shall be credited or charged in such manner as is deemed appropriate by the Committee in the event performance exceeds or falls short of the performance targets, with the incentive compensation payable in subsequent Award Years adjusted in such manner as is deemed appropriate by the Committee to account for the positive or negative balance in the incentive bank of the Participant. For purposes of this Section 3.1, the term "base annual salary" means the base annual salary paid by Multifoods and its subsidiaries to an employee for services rendered during the Award Year, exclusive of commissions, fringe benefits, expense allowances, incentive compensation and other similar payments or benefits, but inclusive of amounts contributed from base annual salary by means of salary reduction to the Supplemental Deferred Compensation Plan of International Multifoods Corporation, the Employees' Voluntary Investment and Savings Plan of International Multifoods Corporation or to the Multifoods Flexible Spending Account Plan (or any other plan maintained by Multifoods or a subsidiary of Multifoods that is intended to qualify under Sections 125 or 401(k) of the Code). 3.2 Maximum Amount of Awards. The total amount of the incentive compensation awarded to a Participant pursuant to the Plan for any Award Year shall not exceed $2,500,000, and any incentive compensation that would otherwise have been awarded but for such limit shall be forfeited by the Participant and shall not be added to the incentive bank of the Participant or otherwise serve to increase the amount of the incentive compensation awarded to the Participant in any subsequent Award Year. 3.3 Entitlements. Unless the Committee determines otherwise, (a) the designation of a Participant by the Committee and/or the establishment of a Target Award or performance targets as a condition to payment of incentive compensation (i) shall not be deemed to be the grant of incentive compensation, and (ii) shall not entitle the Participant to any amount under the Plan, and (b) incentive compensation shall be deemed to be granted to a Participant following completion of the Award Year upon written certification by the Committee that all performance targets to be met as a condition to payment of incentive compensation have been met. 3.4 Continued Employment Required. Unless the Committee determines otherwise, as a condition to receiving the payment of incentive compensation, a Participant must continue in the employ of Multifoods or a subsidiary of Multifoods as of the date that payment of the incentive compensation is authorized by the Committee. If a Participant continues in the employ of Multifoods or a subsidiary of Multifoods as of the last day of an Award Year but does not continue in the employ of Multifoods or a subsidiary of Multifoods on the date that payment of the incentive compensation is authorized by the Committee for such Award Year as a result of disability, death or retirement or for such other reason acceptable to the Committee, the Committee may, in its discretion, determine that the Participant is entitled to receive the incentive compensation which would have otherwise been payable to the Participant if such Participant had continued in the employ of Multifoods or a subsidiary of Multifoods as of the date that payment of such incentive compensation is authorized by the Committee. If a Participant does not continue in the employ of Multifoods or a subsidiary of Multifoods as of the last day of an Award Year as a result of disability, death or retirement or for such other reason acceptable to the Committee, the Committee may, in its discretion, determine that the Participant is entitled to receive any positive balance standing in his or her incentive bank as of the date of termination of employment and/or a prorata portion (through the date of termination of employment) of the Target Award or incentive compensation which would have otherwise been payable to the Participant if such Participant had continued in the employ of Multifoods or a subsidiary of Multifoods as of the last day of the Award Year. 3.5 Change in Control. Notwithstanding anything to the contrary contained in this Plan, following a Change in Control of Multifoods, each Participant shall be entitled to the following immediate payment: (a) If the Change in Control of Multifoods occurs during the first six months of the Award Year, 100% of the amount of the Target Award of the Participant for the Award Year in which the Change in Control of Multifoods occurs, plus 100% of the balance (if positive) of any incentive bank maintained in the name of the Participant; (b) If the Change in Control of Multifoods occurs during the last six months of the Award Year, 100% of the incentive compensation which would have otherwise been paid to the Participant for the full Award Year in which the Change in Control of Multifoods occurs, such amount to be determined based upon the greater of the following: (i) the Target Award of the Participant for the Award Year; or (ii) an amount determined based upon the anticipated results relating to the performance objectives to be met as a condition to payment of incentive compensation to the Participant for the Award Year; plus 100% of the balance (if positive) of any incentive bank maintained in the name of the Participant. For purposes of the Plan, the term "Change in Control of Multifoods" means any one of the following: (a) the acquisition by any individual, entity or group or (within the meaning of section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of Multifoods (the "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding voting securities of Multifoods entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from Multifoods, (ii) any acquisition by Multifoods, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Multifoods or any corporation controlled by Multifoods or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or (b) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (c) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Multifoods (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Multifoods or all or substantially all of Multifoods' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of Multifoods or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or (d) approval by the shareholders of Multifoods of a complete liquidation or dissolution of Multifoods. 3.6 Payment Form. The Committee, in the exercise of its discretion, shall also determine whether any incentive compensation shall be paid in a lump sum or in installments in equal or varying amounts over a period of not more than five years. Lump sum awards shall be paid to the Participant as soon as administratively practicable after the close of the applicable Award Year. In the case of installment awards, the first installment shall be paid as soon as administratively practicable after the close of the applicable Award Year, and the remaining installments shall be paid at the times and in the amounts determined by the Committee. All remaining installments shall be retained by Multifoods, pending payment thereof. Amounts so retained shall be treated by Multifoods as if they were the property of Multifoods for all purposes, and the only liability of Multifoods therefor shall be to pay cash installments to the Participant when and as they become due in accordance with the Plan. Unless the Committee determines otherwise, Multifoods shall not be liable for any interest on any amounts so retained. 3.7 Forfeitures. Unless the Committee determines otherwise, if incentive compensation is being paid in installments to a Participant and the Participant voluntarily terminates his or her employment, he or she shall forfeit any remaining unpaid installments; provided, that when the Committee determines it would serve the best interests of Multifoods and its subsidiaries, the Committee may waive the forfeiture in whole or in part. In addition, the Committee may accelerate payment of unpaid installments. In the event of termination of employment resulting from death, disability or retirement, the installments which remain unpaid at that time will be paid to the Participant in the same manner as if he or she were still employed, or, in the event of his or her death, in the same manner as if he or she were still living. The Committee, in its discretion, may accelerate such payments in such cases. For purposes of this Section 3, a "retirement" will be deemed to have occurred if the Participant terminates employment after satisfying such age and/or service requirements as are imposed on the receipt of an early or normal retirement benefit with respect to a grandfathered participant under the Multifoods Pension Equity Plan. 3.8 Reduction in Awards. The Committee is authorized at any time during or after an Award Year, in its sole and absolute discretion, to reduce or eliminate the incentive compensation awarded to any Participant for any reason. No reduction in the incentive compensation awarded or paid to any Participant shall increase the amount of the incentive compensation payable to any other Participant. Section 4. Payment of Incentive Compensation All incentive compensation shall be payable in cash or in Restricted Stock, or both, as determined in the sole discretion of the Committee. Section 5. Powers of Committee The Committee shall have full power and authority to interpret and administer the Plan. Any decisions, determinations or actions made or taken by the Committee pursuant to the Plan shall be final, conclusive and binding on all persons for all purposes. Section 6. Extension, Amendment or Termination The Board of Directors shall have the power to suspend or discontinue the Plan, in whole or in part, at any time, and, from time to time, to extend, modify, amend or revise the Plan in such respects as the Board of Directors, by resolution, may deem advisable. The fact that a director is, has been, or will be, a Participant in the Plan shall not disqualify him or her from voting as a director for or against a suspension, discontinuance, extension, modification, amendment or revision of the Plan or any part thereof. Section 7. No Right to Continued Employment Nothing in the Plan or the establishment of any Target Award or payment of any incentive compensation shall be interpreted to confer upon the Participant any right with respect to continuance of employment by Multifoods or any subsidiary of Multifoods, nor shall the Plan or the establishment of any Target Award or payment of any incentive compensation interfere in any way with the right of Multifoods or any subsidiary of Multifoods to terminate the employment of the Participant at any time. EX-10.10 4 Exhibit 10.10 FIRST AMENDMENT TO THE MANAGEMENT BENEFIT PLAN OF INTERNATIONAL MULTIFOODS CORPORATION (As Restated Effective January 1, 1997) The Management Benefit Plan of International Multifoods Corporation (As Restated Effective January 1, 1997) is amended effective March 1, 1998, as follows: I Section 2.1.1 is amended by adding a new paragraph to the end thereof to read as follows: For purposes of "A" and "B" above, if a Participant has accrued a "supplemental pension benefit" under Appendix D of the PEP but has not yet satisfied the age and service conditions required to start payment of such supplemental pension benefit, then the annual benefit attributable to such supplemental pension benefit shall be deemed to be the annual amount that would be payable in the form of an immediate single life annuity that is the Actuarial Equivalent of the supplemental pension benefit that would be payable under Appendix D of the PEP starting as of the first day of the month after the Participant attains age sixty-five (65). II Section A.1 of Appendix A is amended to read as follows: This Appendix A shall apply to the following Participants (referred to as "Appendix A Participants"): Jeffrey E. Boies Frank W. Bonvino Duncan H. Cocroft Gary E. Costley (except that, the Appendix A Benefit of Gary E. Costley shall not include the benefit specified in "A" of Sec. A.2.3) Howard A. Grauff Dennis R. Johnson D. Bruce Kean Kendall G. Mercer Edgardo E. Rodriguez Bernard P. Sarrazin Donald H. Twiner Joseph A. Van Bourgondien Robert S. Wright III Section A.2.4 of Appendix A is amended to read as follows: A.2.4 "Bonus" or "Bonuses" means: (a) The amount (if any) awarded to the Participant under the Management Incentive Plan of International Multifoods Corporation, as amended from time to time, for any fiscal year of the Company that ended on or prior to February 28, 1997; (b) The amount (if any) awarded to the Participant under the Management Incentive Plan of International Multifoods Corporation, as amended from time to time, for the fiscal year of the Company that ended on February 28, 1998, but disregarding any amount in excess of seventy percent (70%) of his base compensation for such fiscal year; (c) The amount (if any) awarded to the Participant under the Management Incentive Plan of International Multifoods Corporation, as amended from time to time, for any fiscal year of the Company that ended after February 28, 1998, but disregarding any such amount in excess of the "target" bonus level established under such plan for such fiscal year with respect to the Participant. (d) The amounts (if any) awarded to the Participant under the Management Bonus Program - General of International Multifoods Corporation, as amended from time to time. Any contrary provision notwithstanding, the amounts described in paragraphs (c) and (d), above, that are awarded to any of the following Participants with respect to any fiscal year of the Company ending after February 28, 1998, shall not be included as Bonuses under this Plan: Frank W. Bonvino Dennis R. Johnson Donald H. Twiner Robert S. Wright IV Section A.2.5 of Appendix A is amended to read as follows: A.2.5 "Bonus Base" means the average of the highest five (5) or less Bonuses awarded to the Participant during the last ten (10) years of employment with the Employer. For this purpose, a Bonus shall be deemed to have been awarded as of the last day of the fiscal year of the Company to which the Bonus relates, regardless of whether the Bonus is actually determined or actually paid after the end of such fiscal year, and regardless of whether payment of such Bonus is deferred or waived by the Participant. However, from and after March 1, 1990, but not applicable to Employees who are Participants before that date, unless the Committee prescribes otherwise, only Bonuses paid while a Participant shall be included in the Bonus Base. In calculating the Bonus Base with respect to a Participant, the denominator shall be "5" in all circumstances. Any contrary provision notwithstanding, with respect to any Participant listed in the last paragraph of Sec. A.2.4, the Bonus Base of such Participant after February 28, 1998, shall not be less than the Bonus Base of the Participant calculated as of February 28, 1998, taking into account all Bonuses awarded to the Participant up through and including the fiscal year of the Company ended February 28, 1998, regardless of whether such Bonuses are actually determined or actually paid after February 28, 1998. V Section A.2.7 of Appendix A is amended to read as follows: A.2.7 "Grandfathered Formula" means the benefit formula set forth in Appendix B of the PEP, which is a continuation of the benefit formula in effect under the PEP as of December 31, 1995 (then called the "Employees Retirement Plan of International Multifoods Corporation"), and also includes any "supplemental pension benefit" accrued under Appendix D of the PEP as added effective March 1, 1998. EX-10.16 5 Exhibit 10.16 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made as of the 19th day of December 1997, by and between INTERNATIONAL MULTIFOODS CORPORATION, a Delaware corporation (the "Company"), and GARY E. COSTLEY, a resident of Wayzata, Minnesota (the "Executive"). WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 1, 1996 (the "Employment Agreement"); and WHEREAS, Section 4.(a) of the Employment Agreement, entitled "Employee Benefits", provides in part, as follows, "The Compensation Committee shall approve, effective as of the first day of the Executive's actual employment with the Company, the Executive's participation in the Company's Management Benefit Plan ("MBP") and shall authorize that the Executive's participation in the MBP shall commence immediately upon the first day of his actual employment with the Company notwithstanding the provisions of the MBP."; and WHEREAS, the Executive now wishes to waive participation in, and relinquish any benefit to which the Executive is, or may in the future, be entitled under Appendix A of the Management Benefit Plan of the Corporation ("MBP") relating to incentive bonuses credited toward the unqualified excess pension benefit provided under Appendix A of the MBP, retroactive to the first day of the Executive's actual employment by the Corporation; and WHEREAS, the Compensation Committee of the Board of Directors of the Company and the Board of Directors of the Company each have considered and approved the Executive's request to waive participation in, and relinquish any benefit to which the Executive is, or may in the future, be entitled under Appendix A of the MBP related to incentive bonuses credited toward the unqualified excess pension benefit provided under Appendix A of the MBP, retroactive the first day of the Executive's actual employment with the Company. NOW, THEREFORE, in consideration of the preceding recitals and of the mutual covenants and undertakings stated herein, the Company and the Executive agree, as follows: 1. Section 4.(a) of the Employment Agreement be and the same hereby is deleted in its entirety, and a new Section 4.(a) is hereby inserted in full and complete substitution therefore, as follows: "(a) While the Executive is employed by the Company hereunder, the Executive shall be entitled to participate in the Company's Voluntary Investment and Savings Plan ("VISA") and the Company's Pension Equity Plan ("PEP") in accordance with the provisions of such plans. The Compensation Committee shall approve, effective as of the first day of the Executive's actual employment with the Company, the Executive's participation in the Company's Management Benefit Plan ("MBP"), and shall authorize that the Executive's participation in the MBP shall commence immediately upon the first day of his actual employment with the Company notwithstanding the provisions of the MBP; provided, however that the Executive shall not be included as a participant in Section A.1 of Appendix A of the MBP or have an entitlement to any benefit under Appendix A of the MBP relating to incentive bonuses credited toward the unqualified excess pension benefit provided by Appendix A of the MBP." 2. Section 6. (f) (iii) of the Employment Agreement be and the same hereby is deleted in its entirety, and a new Section 6. (f) (iii) is hereby inserted in full and complete substitution therefore, as follows: "(iii) a material reduction of the Executive's Base Salary, or material modifications to the Incentive Plan, the Stock Option Plan (or any similiar stock option plan), or the MBP to the extent of the Executive's participation as described in Section 4(a) of the Agreement, that amount to a material reduction in the Executive's total compensation hereunder;" 3. Except as amended by the terms of this Amendment, all of the other agreements and undertakings set forth and contained in the Employment Agreement shall remain unchanged and continue in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date and year first above written. INTERNATIONAL MULTIFOODS CORPORATION 200 East Lake Street Wayzata, Minnesota 55391 By:/s/ William L. Trubeck William L. Trubeck Senior Vice President-Finance and Chief Financial Officer GARY E. COSTLEY 1185 Ferndale Road West Wayzata, Minnesota 55391 /s/ Gary E. Costley Gary E. Costley EX-10.24 6 Exhibit 10.24 RELEASE, CONFIDENTIALITY, NON-DISCLOSURE AND NON-COMPETITION AGREEMENT NOTE: MULTIFOODS HEREBY ADVISES KEAN TO CONSULT WITH AN ATTORNEY- AT-LAW OF KEAN'S CHOICE BEFORE KEAN SIGNS AND DELIVERS THIS AGREEMENT. THIS AGREEMENT (hereinafter "the Agreement" or "this Agreement"), dated as of October 27, 1997, by and between INTERNATIONAL MULTIFOODS CORPORATION, a Delaware corporation ("Multifoods"), and D. BRUCE KEAN, residing at 567 Fox Hunt Circle, Highlands Ranch, Colorado 80126 ("Kean"). WITNESSETH THAT: WHEREAS, Kean will terminate his employment as Executive Vice President of Multifoods' Distribution Business Unit and as President of Multifoods Specialty Distribution, Inc., a Delaware corporation, wholly owned by Multifoods, effective as of the close of business on October 31, 1997, and WHEREAS, Multifoods and Kean wish to enter this Agreement. NOW, THEREFORE, in consideration of the preceding recitals and of the mutual covenants and agreements hereinafter set forth, Multifoods and Kean agree as follows: 1. Consideration For This Agreement. In consideration of the Release given by Kean in Section 2 of this Agreement and Kean's covenants of confidentiality, non-disclosure and non-competition set forth in Section 3 of this Agreement, Multifoods agrees to pay the amounts and perform its other obligations set forth in that certain Memorandum, dated October 27, 1997, from Jeffrey E. Boies, President of Multifoods' Distribution Business Unit, to Bruce Kean, and the attachment to such memo entitled Employee Benefit Plans, copies of which are attached hereto as Exhibit A and Exhibit B, respectively, including, but not limited to, Multifoods' agreement to pay Kean the amount of $262,500 severance pay, as described in paragraph 3 of Exhibit A, less all applicable federal, state and local withholding taxes, commencing on a date which is the later to occur of November 1, 1997 or the date immediately following the date on which the "Rescission Period" (as defined in Section 2.E. of this Agreement) expires. The foregoing is hereinafter collectively called the "Consideration.") 2. Release. A. In consideration of the Consideration payable by Multifoods to Kean set forth and described in Section 1 of this Agreement, and for other good and valuable consideration, Kean hereby releases and discharges Multifoods and its subsidiaries and affiliates, and the directors, officers, employees, agents and insurers of each (collectively, the "Released Parties"), from all causes of action, claims, demands, debts, contracts and agreements to which Kean or his heirs, executors, administrators, legal representatives, successors or assigns and beneficiaries, have or may have in connection with Kean's employment with or termination of employment from Multifoods, for all time to the date of this Agreement, except for (i) the Consideration for this Agreement, (ii) any rights that Kean has as a result of his participation in any benefit plan or plans of Multifoods to which Kean is entitled by reason of his employment by Multifoods or any of its subsidiaries, including, but not limited to, pension, health and welfare plans in accordance with and subject to the terms and conditions of such plans, and (iii) any indemnification right to which Kean is entitled by reason of his employment by Multifoods, under (a) the Restated Certificate of Incorporation, as amended, of Multifoods, (b) the Bylaws of Multifoods, and/or (c) any policy of liability insurance issued to Multifoods under which Kean is an insured and entitled to coverage (the foregoing herein called the "Release"). B. Except as specifically provided in Paragraph A of this Section 2, the Release applies to any action, claim, demand, debt, contract and/or agreement that Kean has or may have as of the date of this Agreement including, without limitation, any and all claims relating to Kean's employment with or termination of employment from Multifoods including, but not limited to, breach of contract claims and claims alleging violation of the Fair Labor Standards Act, the Age Discrimination In Employment Act, as amended; Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1866, the National Labor Relations Act, the Americans With Disabilities Act, the Employee Retirement Income Security Act, and/or any other federal, state or local statute, law, ordinance, regulation, order or principle of common law. C. Kean acknowledges that Multifoods willingness to enter into this Agreement is not an admission that Multifoods or any of the other Released Parties has engaged in any wrongful conduct towards Kean, has acted in any way to cause injury to Kean, or is responsible or legally obligated to Kean in any way, except as specifically provided in this Agreement. D. Kean acknowledges that he may have twenty-one (21) calendar days from the day that he receives this Agreement, not counting the day upon which he receives it, to consider whether he wishes to sign this Agreement. If Kean cannot make up his mind in that period of time, Multifoods may or may not allow Kean more time. Kean agrees that if he signs this Agreement before the end of the twenty-one (21) day period, it is because he has decided that he already has had a sufficient period of time to decide whether to sign this Agreement. E. Kean acknowledges that he has been advised and that he understands, that he has fifteen (15) days from the date that he signs this Agreement (the "Rescission Period") to rescind this Agreement in its entirety, if he notifies Multifoods, in writing, at Multifoods Tower, Box 2942, 33 South Sixth Street, Minneapolis 55402, Attention: Frank W. Bonvino, Vice President, General Counsel and Secretary of Multifoods, of his decision to rescind this Agreement. This Agreement will not be effective or enforceable until the expiration of the Recission Period. Kean also understands that if he rescinds this Agreement, he shall forfeit the Consideration. Kean further acknowledges and understands that to be effective, his notice of rescission must be in writing and must be delivered to the address stated above either by hand or by mail within the Rescission Period. If delivered by mail, the rescission must be: (1) postmarked within the fifteen (15) day period; (2) properly addressed to Multifoods; and (3) sent by certified mail, return receipt requested. F. Kean represents that he has read this Agreement and understands all of the terms and conditions contained in this Agreement, and that he has been encouraged by Multifoods to discuss this Agreement with an attorney-at-law of his choice. Kean's manual signature on this Agreement, set forth below in the signature block, constitutes Kean's acknowledgment that he understands the effect of this Agreement, and that he has signed this Agreement KNOWINGLY AND VOLUNTARILY, and that he has not relied on any representations, statements or explanations made by Multifoods, its attorneys or any of the Released Parties. G. Concurrent with the execution and delivery of this Agreement, Kean shall execute and deliver a resignation, effective as of October 31, 1997, of all officerships and/or directorships that Kean currently holds in any subsidiary of Multifoods, in the form of Resignation attached hereto as Exhibit C. 3. Covenants of Confidentiality, Non-Disclosure and Non- Competition. A. In consideration of the Consideration for this Agreement, Kean covenants and agrees with Multifoods that at all times from and after the date of this Agreement, Kean will maintain in strict confidence and not disclose to any corporation, partnership or other entity or person, any non-public or proprietary information including, without limitation, financial information, customer names or lists of customers, or business plans of Multifoods, or any of Multifoods' subsidiaries or affiliates, or any proprietary information of Multifoods or any subsidiary or affiliate of Multifoods to which Kean had access to or knowledge of while he was employed by Multifoods or any of its subsidiaries (herein collectively called "Confidential Information"). For purposes of this Agreement, Confidential Information shall not include any information: (i) which was known to the public on the date of this Agreement; (ii) which becomes known to the public following the date of this Agreement through no fault of Kean; or (iii) which is disclosed to Kean by a third party who has the right to disclose such information without violating any agreement of confidentiality with Multifoods. B. In the event that Kean is compelled by subpoena, civil investigative demand, court order or other legal process in any proceeding to disclose any Confidential Information, Kean shall give Multifoods prompt notice so that Multifoods may seek an appropriate protective order or other confidential treatment of such Confidential Information. If Multifoods shall fail for any reason to obtain a protective order and Kean shall be compelled to disclose any such Confidential Information based upon the advice of Kean's counsel, Kean may disclose such information without liability under this Agreement, provided that Kean shall give Multifoods written notice of the information to be disclosed as far in advance of its disclosure as is reasonably practicable and the name of the party to whom Kean is required to disclose such information, and in any event, such disclosure shall be limited to the specific information that Kean is legally required to disclose based upon the advice of Kean's counsel. C. During the period beginning November 1, 1997 through December 31, 1998, inclusive (the "Non-competition Period"), Kean will refrain from carrying on, either directly or indirectly (whether as a principal, agent, investor, employee, employer, consultant, shareholder, partner or in any other individual or representative capacity whatsoever), anywhere in the United States of America or its territories and possessions, any business engaged in specialty distribution of any food and other products to: (i) independent or national chain pizza restaurants; and (ii) vending and office service and other concessionaires. An investment by Kean of not more than one percent (1%) of all the issued and outstanding stock of a corporation which is publicly traded on a national stock exchange and competes with Multifoods in the aforementioned manner, shall not violate Kean's non- competition covenant set forth herein. D. Kean agrees that in the event there is a breach or threatened breach by Kean of Kean's covenants set forth in Paragraphs A or C of this Section 3, Multifoods shall have the right to pursue all available legal and equitable remedies (including, without limitation, injunctive relief) without an obligation to post bond. 4. No Waiver. The waiver by Multifoods or Kean of a breach by Multifoods or Kean, as applicable, of any term of this Agreement shall not operate or be construed as a waiver of any subsequent breach by Multifoods or Kean, as applicable. 5. Governing Law. This Agreement shall be interpreted under and governed by the laws of the State of Colorado. 6. Entire Agreement. This Agreement contains the entire agreement between Multifoods and Kean with respect to the Release and Kean's covenants of non- disclosure, confidentiality and non-competition, and supersedes any prior oral or written agreement or understanding with respect to the subject matter hereof. IN WITNESS WHEREOF, Multifoods and Kean have signed and delivered this Agreement as of the day and year first above written. WITNESS: INTERNATIONAL MULTIFOODS CORPORATION /s/ Rachael Galarneau By: /s/Gary E. Costley Gary E. Costley Its: Chairman of the Board, President and Chief Executive Officer WITNESS: /s/ Kim L. Blackerby /s/ D. Bruce Kean D. Bruce Kean EXHIBIT A [MULTIFOODS LOGO] Memo DATE: October 27, 1997 TO: D. Bruce Kean FROM: Jeffrey E. Boies SUBJECT: Separation from Service This will confirm the understanding reached regarding your separation from International Multifoods: 1. Employment Status and Term. You will continue as Executive Vice President - Distribution Operations until October 31, 1997. Prior to such date you will confirm your resignation as an officer of Multifoods Special Distribution, Inc. (the "Company") as of October 31, 1997. You will continue as an inactive employee on paid leave of absence from November 1, 1997 until March 31, 1998, at which time your employment with the Company will terminate. 2. Salary and Vacation Pay. For the period from November 1, 1997 through March 31, 1998, you will receive your current base salary, less all applicable withholding amounts. The Company will pay you in a lump sum, less all applicable withholding amounts, the amount of any unpaid vacation as of October 31, 1997. No further vacation pay will be earned after October 31, 1997. 3. Severance Pay. The Company will pay you severance payments equal to $262,500 (14 months' base salary). Salary continuation payments for the period from November 1, 1997 through March 31, 1998 will count toward the $262,500 and will be paid to you on regularly-scheduled pay dates. On March 31, 1998, the unpaid balance will be paid in a lump sum, less all applicable withholding amounts. 4. Employee Benefits for the Period from November 1, 1997 through March 31, 1998. During this period, you will be eligible to participate in and receive benefits under Multifoods' employee benefit plans (other than the long-term disability plan, the Management Incentive Plan and any long-term incentive plan or program), which plans are listed in the attachment entitled " Employee Benefit Plans," unless you elect to discontinue coverage or cease to make the required contributions. The Company will deduct contributions for such employee benefit plans from the salary payments described in Section 2 above. Your participation in the Multifoods' Management Incentive Plan and any long-term incentive plan or program or successor plan or program, will terminate on October 31, 1997 provided, however, that Multifoods' management will recommend to the Compensation Committee of the Board that you receive a bonus award under the Management Incentive Plan equal to the amount you would otherwise have been eligible to receive if your participation in the Management Incentive Plan continued through February 28, 1998. To the extent any bonus is payable, the 20% discretionary portion of such bonus will be deemed to have been fully attained. As you know, any bonus award consideration under the Management Benefit Plan is wholly within the discretion of the Compensation Committee. 5. Employee Benefits After March 31, 1998. After March 31, 1998, you will be eligible to participate in and receive benefits under the Multifoods' employee benefit plans available to similarly-situated retirees of Multifoods in accordance with the provisions of such plans and other applicable requirements. Such plans, and certain estimates and assumptions relating thereto, are listed in the attachment entitled " Employee Benefit Plans." Multifoods has the right to amend or terminate any such plans at any time and for any reason, and the contribution amounts are subject to change by Multifoods. 6. Stock Options. Shown below are the expiration dates of your outstanding options to purchase common stock of Multifoods. The expiration dates are determined based on the date of your termination of employment (March 31, 1998) and in accordance with the terms of the respective stock option plans and stock option agreements relating to the options. Date of Number Exercise Expiration Grant of Shares Price Date 3/17/95 5,000 $18.6875 3/31/2003 3/15/96 5,000 $19.3125 3/31/2003 3/21/97 6,000 $21.4375 3/31/2001 7. Outplacement. The Company will pay directly to a nationally- recognized outplacement firm located in Denver, Colorado, selected by you, an aggregate amount not to exceed $10,000 of outplacement services. 8. Company Car. The Company will purchase the vehicle which it currently leases on your behalf and transfer title of that vehicle to you. The fair market value, less $5,000, will be reported as taxable income to you, and you will be responsible for payment of the taxes associated with this transaction. Details of this transaction will be worked out in the near future. 9. Club Memberships. The Company will assign its rights, if any, in the membership presently used by you at the Glenmore Country Club. The Company will pay any transfer fee required by the country club in connection with the assignment. You will be responsible for any fees or dues incurred after October 31, 1997. 10. Release. As a condition of Multifoods' willingness to provide the separation program outlined above, you will be required to sign a Form of Release and Confidentiality Agreement. Exhibit B Employee Benefit Plans Employee Benefits for the Period November 1, 1997 through March 31, 1998 I. GROUP BENEFITS Subject to the terms and conditions of the Agreement, of which this Exhibit B is a part, the group benefit plans listed below will remain in effect unless you choose to discontinue coverage or cease to make the required contributions. Contributions for group benefits will be deducted from your salary payments. The bi-weekly contributions are as follows: Contributions in effect: 11/01/97 1/01/98 through through 12/31/97 3/31/98 CIGNA Point-of-service, family coverage $30.92 $38.65 Dental plan, family coverage $ 3.23 $ 4.04 Life insurance coverage equal to $450,000 $ 0.00 $ 0.00 Dependent life insurance $ 1.05 $ 1.05 Health Care Flexible Spending Account $57.70 Unknown Note: Contribution amounts are subject to change by Multifoods. II. RETIREMENT PLANS You will continue as an active participant in the Employees' Voluntary Investment and Savings Plan of International Multifoods Corporation, the Multifoods Pension Equity Plan and the Management Benefit Plan of International Multifoods Corporation until March 31, 1998. Employee Benefits after March 31, 1998 I. GROUP BENEFITS Effective April 1, 1998, you will be eligible to enroll in retiree group insurance plans available to similarly-situated employees under the plans that exist on that date. The plans currently available are: A. LIFE INSURANCE You can convert all or any portion of your group term life insurance to an individual policy (except term insurance or a policy which contains disability benefits). B. MEDICAL INSURANCE Your participation in the Multifoods medical plan available to employees would cease on March 31, 1998. However, you would have the option to continue company-sponsored medical coverage under Multifoods Retiree Medical Program. You and your wife can continue coverage under an indemnity plan option and receive increased benefits when services are received within a network of preferred providers. An HMO option may also be available depending on where you reside at that time. C. DENTAL AND VISION PLANS Your participation in the dental and vision plans would cease on March 31, 1998. However, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), you and your eligible dependents could continue these plans for up to 18 months. II. VISA PLAN Distribution may be made promptly following your termination of employment date or deferred until not later than the April 1 following the year in which you reach age 70-1/2. At your election, distribution may be made in one lump sum or in a series of approximately-equal annual installments over a period not exceeding 10 years. III. MULTIFOODS PENSION EQUITY PLAN AND MANAGEMENT BENEFIT PLAN You will be eligible to receive monthly pension benefits commencing April 1, 1998 under one of the payment options shown below in the approximate amounts noted: PENSION BONUS EQUITY BASE TOTAL PAYMENT OPTION FORMULA* FORMULA PENSION Life only $681.96 $755.56 $1,437.52 Life with 10 years certain $654.00 $724.58 $1,378.58 100% joint and survivor, with benefits $492.38 $545.51 $1,037.89 equal to the amounts shown continuing to your surviving spouse following your death 50% joint and survivor, with benefits $564.67 $625.60 $1,190.27 equal to 50% of the amounts shown to your surviving spouse following your death *Amounts which could not be paid from the Pension Equity Plan because of Internal Revenue Code limits would be paid from the Management Benefit Plan. The above estimates were calculated assuming there are no future changes in plan design or increases in the Social Security covered wage base. EXHIBIT C RESIGNATION I hereby resign as President of Multifoods Specialty Distribution, Inc. and as an officer and/or director of any other subsidiary, division or business unit of International Multifoods Corporation, effective as of October 31, 1997. /s/ D. Bruce Kean ------------------------------- D. Bruce Kean EX-11 7
Exhibit 11 INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Computation of Earnings (Loss) Per Common Share (dollars in thousands, except per share amounts) Years Ended -------------------------------------------------------------------- February 28, February 28, February 29, February 28, February 28, 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ Average shares of common stock outstanding 18,385,262 17,982,348 17,964,688 17,974,156 18,910,748 Common stock equivalents 233,791 4,550 49,358 15,809 - ---------- ---------- ---------- ---------- ---------- Total common stock and equivalents assuming full dilution 18,619,053 17,986,898 18,014,046 17,989,965 18,910,748 ========== ========== ========== ========== ========== Earnings (loss) $20,024 $ 2,780 $24,075 $57,021 $ (13,438) Less dividends on preferred stock - - 260 167 174 ---------- ---------- ---------- ---------- ---------- Earnings (loss) applicable to common stock $20,024 $ 2,780 $23,815 $56,854 $ (13,612) ======== ======== ======== ======== ========== Earnings (loss) per share of common stock: Basic $ 1.09 $ .15 $ 1.33 $ 3.16 $ (.72) ======== ======== ======== ======== ========== Diluted $ 1.08 $ .15 $ 1.32 $ 3.16 $ (.72) ======== ======== ======== ======== ==========
Basic earnings (loss) per share is computed by dividing net earnings (loss), after deduction of preferred stock dividends, by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the weighted average shares outstanding is increased to include additional shares from the assumed exercise of stock options. The number of additional shares is calculated by assuming that outstanding stock options were exercised and the proceeds from such exercises were used to acquire shares of common stock at the average market price during the year. EX-12 8
Exhibit 12 INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges (dollars in thousands) Years Ended ---------------------------------------------------------------- February 28, February 28, February 29, February 28, February 28, 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ Earnings (loss) before income taxes (1) $32,395 $ 5,016 $27,754 $71,739 $(12,717) Plus: Fixed charges (2) 27,154 28,052 29,314 24,795 22,001 Less: Capitalized interest (8) (109) (128) (317) (746) ------- ------- ------- ------- -------- Earnings available to cover fixed charges $59,541 $32,959 $56,940 $96,217 $ 8,538 ======= ======= ======= ======= ======== Ratio of earnings to fixed charges(3) 2.19 1.17 1.94 3.88 .39 ======= ======= ======= ======= ======== (1)Earnings (loss) before income taxes have also been adjusted to exclude losses from less-than-fifty-percent- owned persons. (2) Fixed charges consist of the following: Years Ended --------------------------------------------------------------- February 28, February 28, February 29, February 28, February 28, 1998 1997 1996 1995 1994 ---------------------------------------------------------------- Interest expense, gross $17,651 $18,658 $19,613 $15,592 $12,578 Rentals (interest factor) 9,503 9,394 9,701 9,203 9,423 ------- ------- ------- ------- ------- Total $27,154 $28,052 $29,314 $24,795 $22,001 ======= ======= ======= ======= ======= (3) For the year ended February 28, 1994, earnings were inadequate to cover fixed charges. The deficiency of $13,463 was the result of unusual items. Exclusive of these unusual items, the ratio of earnings to fixed charges would have been 3.57 for the year ended February 28, 1994.
EX-13 9 Exhibit 13 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations Overview Fiscal 1998 net earnings were $20 million, or $1.09 per basic share, compared with $2.8 million, or 15 cents per basic share, in fiscal 1997. Net earnings increased on substantially higher operating earnings in Multifoods Distribution Group and North America Foods, which offset a significant decline in Venezuela Foods operating results and a higher effective tax rate. Net earnings were also affected by unusual items in both years. Excluding unusual items, fiscal 1998 net earnings were $23.2 million, or $1.26 per basic share, compared with $17.6 million, or 98 cents per basic share, in fiscal 1997. Fiscal 1998 results included an unusual after-tax charge of $3.2 million, or 17 cents per share, as a result of a determination that receivables from a major customer of the Company's former food exporting business may not be fully recoverable. The Company exited its food exporting business in fiscal 1998. Unusual items in fiscal 1997 resulted in a $14.8 million after-tax charge, or 83 cents per share. Further discussion of unusual items follows in Segment Results and in Note 3 to the consolidated financial statements. Net sales for fiscal 1998 increased 1% to $2.6 billion. Segment Results The Company operates in three business segments: Multifoods Distribution Group, North America Foods and Venezuela Foods. In fiscal 1998, the Company changed the name of its Foodservice Distribution segment to Multifoods Distribution Group. In addition, the Company is now reporting the results of its former food exporting business in Divested Businesses. Food exporting results were previously included in Multifoods Distribution Group. Previously reported segment financial information has been reclassified to conform with the fiscal 1998 presentation. A description of the business segments and summary of operating results are included in Note 17 to the consolidated financial statements. Fiscal 1998 compared with Fiscal 1997 Multifoods Distribution Group: Net sales increased 2% to $1.8 billion. An increase in vending distribution net sales from higher volumes in the independent and fund-raising customer segments was partially offset by lower sales in the foodservice distribution business (formerly referred to as limited-menu distribution). Foodservice distribution net sales declined as a result of decisions to relinquish low-margin accounts. Operating earnings before unusual items increased 384% to $23.7 million as a result of a substantial improvement in vending distribution. Vending distribution results improved on higher volumes, lower delivery and distribution costs, and a reduction in bad debt expense. In addition, vending distribution earnings benefited from the purchase of coffee prior to world-market price increases. Operating earnings also increased in foodservice distribution because of lower delivery and distribution costs. Segment results also included a $2 million curtailment gain from the elimination of the subsidy for post-retirement health-care benefits for future retirees. See Note 16 to the consolidated financial statements for additional information. Fiscal 1997 unusual items included a $4 million charge for a restructuring plan and a $1.1 million charge to consolidate two foodservice distribution facilities. The restructuring plan involved moving key customer support functions from a central location to each of the Company's vending distribution centers. All significant actions related to the plan were completed in fiscal 1998. In fiscal 1998, the Company announced that it would combine its vending and foodservice distribution businesses into a single distribution business to capitalize on growth and cost-saving opportunities. As a result, the Company expects to incur unusual charges during fiscal 1999. Although the Company believes such charges will be material to its results of operations, it is presently unable to estimate the amount of the charges or the benefits from such actions as the details and timetable of the consolidation plan have yet to be completed. The recognition of these charges will be dependent upon the timing of management's approval of the consolidation plan. North America Foods: Net sales declined 1% to $471.7 million due to lower prices of the Company's grain-based products that resulted from a reduction in commodity costs and from unfavorable currency translation because of a weakening Canadian dollar. The decline was partially offset by higher volumes in Canadian commercial flour and U.S. bakery products. Operating earnings before unusual items increased 47% to $30.6 million as a result of higher volumes and margins in Canadian commercial flour and U.S. bakery products. The increase in margins was the result of a more favorable product and customer mix, lower manufacturing costs and lower ingredient costs. Segment results also included a $0.6 million curtailment gain from the elimination of the subsidy for post-retirement health-care benefits for future retirees. The increase in operating earnings was partially offset by an operating loss in the Company's Canadian frozen bakery business due to lower volumes and margins, and unfavorable currency translation. In fiscal 1997, the Company recognized an unusual charge of $11.4 million for asset impairment in its Canadian frozen bakery business. The impairment resulted from a significant decline in operating results during fiscal 1997, which occurred because of competitive pressures. The Company estimated the fair value of the assets in accordance with Statement of Financial Accounting Standards No. 121. During the second quarter of fiscal 1998, the Company announced its decision to sell the business, which had net assets of approximately $15 million as of February 28, 1998. If the Company is not successful in realizing its current estimate of fair value, it may be required to recognize an additional material charge to its results of operations. Venezuela Foods: Net sales increased 4% to $360.7 million, as prior year sales were adversely affected by a significant devaluation in the exchange rate while the Company operated under price controls. The Venezuelan government eliminated price controls in April 1996. The net sales increase was partially offset by a substantial decrease in consumer corn flour volumes. The volume decline resulted from difficult economic conditions that caused a loss of consumer purchasing power and a shift in consumer buying patterns, including an overall decline in corn flour consumption. Volumes were also affected by continued competitive pressures and the Company being awarded less than its anticipated share of corn flour for a Venezuelan government subsidy program. The program is designed to make available to low-income consumers certain basic food products at below market prices and involves competitive bids by suppliers. The business segment recognized an operating loss of $0.2 million, compared with operating earnings of $18.6 million last year. In addition to the lower corn flour volumes, the operating loss resulted from economic and competitive conditions that prevented the Company from raising prices sufficiently to cover higher raw material and operating costs. Operating costs increased primarily because of local inflation, which was approximately 37% in fiscal 1998. The Company expects that the difficult economic and competitive environment in Venezuela will continue to adversely affect the Company's Venezuela Foods operating results in fiscal 1999. In order to improve Venezuela Foods' operating performance, the Company will be evaluating opportunities to reduce costs and focus on strategies that provide the highest possible returns to shareholders. As a result, future actions taken by the Company could result in material unusual charges to the Company's results of operations. Divested Business: The Company's Divested Business segment in fiscal 1998 and 1997 represents the results of its former food exporting business. This business was principally involved in the international trading of food products. A significant portion of food exporting's sales was to a major customer that distributes food products in Russia. During fiscal 1998, the Company entered into an exit agreement to wind down its business with the major customer. In addition, the remainder of the food exporting business was sold. The proceeds and earnings impact from the sale were immaterial. The decline in fiscal 1998 net sales and operating earnings before unusual items is a result of the Company's decision to exit this business. In fiscal 1998, the Company recognized an unusual pre-tax charge of $5 million as a result of a determination that receivables from the major customer may not be fully recoverable. The charge reduced the carrying value of the receivables to their estimated net realizable value. Prior to the charge, the Company's financial position included a $10.7 million note receivable and accounts receivable of $4.6 million from the major customer. In estimating net realizable value, considerable management judgment is necessary and, accordingly, future events may result in additional charges that could be material to the Company's results of operations. See Note 12 to the consolidated financial statements for additional discussion. 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 the 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 likely recognize a material charge to its results of operations. Corporate: Fiscal 1997 corporate expenses included $2.2 million in costs associated with the resignation of the Company's former chief executive officer and $1.4 million principally for the cost of business assessment studies. Fiscal 1997 compared with Fiscal 1996 Fiscal 1997 net earnings were $2.8 million, or 15 cents per basic share, compared with net earnings of $24.1 million, or $1.33 per basic share, in fiscal 1996. The decline in net earnings was primarily the result of unusual charges and an operating loss in the Company's vending distribution business. Excluding unusual items, fiscal 1997 net earnings were $17.6 million, or 98 cents per basic share, compared with $23.6 million, or $1.31 per basic share, in fiscal 1996. Net sales for fiscal 1997 were up 3% to $2.6 billion. All of the Company's business segments recorded sales increases. Multifoods Distribution Group: Net sales increased 2% to $1.7 billion, primarily because of higher volumes in the foodservice distribution business, which resulted from the addition of several new customer accounts in fiscal 1997. The increase was partially offset by a sales decline in vending distribution, resulting from lower volumes. The Company addressed the decline in sales volumes by restructuring certain customer support functions that resulted in a $4 million unusual charge, as described above. Operating earnings before unusual charges declined 73% to $4.9 million as a result of the vending distribution operating loss. The decline was partially offset by higher earnings in foodservice distribution as a result of lower operating costs and the higher volumes. Fiscal 1996 operating earnings included an unusual charge of $9.4 million, primarily from the write-down of vending distribution software. North America Foods: Net sales increased 4% to $476.7 million because of price increases resulting from higher worldwide wheat costs and volume growth in consumer products. The increase was partially offset by lower volumes in U.S. bakery mix, which resulted from softness in a large customer's business, and lower volumes in Canadian frozen bakery products. Operating earnings before unusual items were $20.8 million, unchanged from the prior year. While higher consumer product volumes increased earnings, lower U.S. bakery mix and Canadian frozen bakery volumes adversely affected results. In addition, fiscal 1996 earnings benefited from a 53-week reporting period. Venezuela Foods: Net sales increased 6% to $346.8 million on higher sales prices and increased consumer corn flour volumes. The increase was partially offset by lower volumes in commercial wheat flour and animal feeds. Sales volumes were affected by substantially higher local prices, which caused consumers to shift to lower-priced products, such as corn flour, and away from higher-priced products, such as meat and prepared foods products. Sales in the prior year were adversely affected by a significant devaluation in the free-market exchange rate while the Company operated under government price controls. Operating earnings declined 3% to $18.6 million as a result of significant prior year currency devaluation, which affected first quarter results, competitive pricing pressures following the April 1996 implementation of economic reforms and a major increase in the cost of locally grown grain. Prior year results were adversely affected by a significant devaluation in the free-market exchange rate and a $3.9 million charge associated with the December 1995 change in the official exchange rate. When the official exchange rate was changed, the Company had to settle certain U.S. dollar obligations at a substantially higher cost. Corporate: Fiscal 1996 corporate expenses included an unusual charge of $6.2 million for costs associated with reducing corporate administrative operations. Divested Businesses: Fiscal 1997 results represent the Company's former food exporting business, which the Company exited in fiscal 1998. In addition to the food exporting business, fiscal 1996 Divested Businesses results included the surimi seafood business, which was sold in June 1995. Fiscal 1997 operating earnings before unusual items increased 15% to $7.7 million as a result of higher volumes to the major customer of the food exporting business. The unusual gain of $9.9 million in fiscal 1996 was from the sale of the surimi seafood business. Non-Operating Expense and Income In fiscal 1998, net interest expense declined to $12.4 million from $16.8 million last year. The decline was primarily the result of $3.2 million in interest income recognized on U.S. Federal income tax refunds, lower interest rates in Canada and lower debt levels. In fiscal 1997, net interest expense declined to $16.8 million from $17.9 million as a result of lower interest rates in Canada and $1 million in interest income recognized on U.S. Federal income tax refunds. In fiscal 1996, other income (expense) included foreign exchange losses of $3.6 million on cash and cash equivalents in Venezuela. Income Taxes The effective tax rates on earnings before unusual items were 38% in fiscal 1998, 30% in fiscal 1997 and 29.4% in fiscal 1996. The increase in fiscal 1998 was due to the substantial decline in Venezuela Foods operating results, which had a low effective tax rate in prior years. Including the effects of unusual items, the Company's overall tax rates were 38.2% in fiscal 1998, 44.6% in fiscal 1997 and 13.3% in fiscal 1996. The high tax rate in fiscal 1997 was primarily caused by a low tax benefit associated with the Canadian frozen bakery business impairment charge. The low tax rate in fiscal 1996 was the result of a $5 million benefit from a tax settlement. Financial Condition Capital Resources and Liquidity The Company's short-term financing is provided by borrowings against its U.S. and Canadian revolving credit agreements and uncommitted lines of credit. Approximately $280 million in committed U.S. and Canadian revolving credit agreements and $140 million of uncommitted lines of credit in the United States are maintained to ensure availability of funds. Additionally, the Company's Venezuelan subsidiary has uncommitted lines of credit totaling $148 million. The Company has a medium-term note program under its shelf registration statement filed with the Securities and Exchange Commission that provides for the issuance of up to $150 million in medium-term notes in various amounts. As of February 28, 1998, $140 million was available under the medium- term note program. See Notes 8 and 9 to the consolidated financial statements for additional information on capital resources. During fiscal 1998, the debt-to-total-capitalization ratio decreased from 51% to 38%. The improvement was due primarily to an increase in cash provided by operations, including a significant reduction in working capital, and proceeds from the exercise of stock options. The reduction in working capital was the result of lower accounts receivable and inventory balances along with an increase in accounts payable. The reduction in accounts receivable and inventories was partially caused by the Company's decision to wind down its business with a major customer of the former food exporting business. The Company also had substantial collections against a significant prior year-end accounts receivable balance with this customer. In addition, working capital requirements were reduced in all businesses through improved management processes, including the Company's implementation of Economic Value Added principles. For example, a new grain procurement process in Venezuela was established that resulted in extended payment terms and, accordingly, increased the accounts payable balance outstanding at fiscal year-end. Capital expenditures for fiscal 1998 were $26.1 million, compared with $27.5 million in fiscal 1997. Approximately 25% of the fiscal 1998 capital expenditures was attributable to projects designed to increase earnings through volume improvements, new business or cost savings. The remaining capital expenditures were related to projects required to maintain existing facilities and equipment. The Company believes that cash flows from operations together with available external financing will be sufficient to fund operations, dividend payments and capital expenditures anticipated for fiscal 1999. Business and Credit Concentrations The Company's Venezuelan operations are subject to risks inherent in operating under a different legal and political system along with a difficult economic environment. Among these risks are inflation, currency volatility, possible limitations on foreign investment, exchangeability of currency, dividend repatriation and changes in existing tax laws. The Company's present strategies for managing Venezuelan currency risk include product pricing strategies and active management of its net monetary exposure, principally through U.S. dollar versus bolivar denominated financing. With respect to product pricing strategies, the Company is exposed to the risk of declines in gross profit margins if the bolivar were to decline in value versus the U.S. dollar. With respect to the Company's Venezuela monetary position (which includes its bolivar denominated assets and liabilities, except for inventory and fixed assets), the Company is exposed to the risk of foreign exchange gains and losses if the bolivar were to change in value versus the U.S. dollar. For example, if the bolivar were to decline in value and the Company were in a net monetary asset position (i.e., bolivar denominated assets exceed liabilities), there would be foreign exchange losses, the amount of which would depend upon the size of the net monetary asset position and the magnitude of the currency devaluation. Conversely, if the Company were in a net monetary liability position (i.e., bolivar denominated liabilities exceed assets) and the bolivar declined in value, there would be foreign exchange gains. As of February 28, 1998, the Company's Venezuelan operation was in a net monetary asset position of $7 million. The Company has a carrying value of approximately $10.3 million ($15.3 million net of a $5 million reserve) in notes and accounts receivable from the major customer of the Company's former food exporting business. In the event of economic or political instability in Russia or if the customer experienced difficulty in meeting its commitments, there could be a material adverse effect on the Company's results of operations. Commodity Risk Management The Company's Canadian operations minimize 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. The Company also enters into futures contracts to reduce the risk of price increases on certain anticipated raw material purchases. See Note 7 to the consolidated financial statements for further discussion. Year 2000 The Company has completed a comprehensive inventory and review of its computer systems and identified the systems that could be affected by the "Year 2000" issue. An implementation plan addressing these issues has been developed. The Company believes that implementation of scheduled upgrades to packaged software systems in North America will resolve the remaining "Year 2000" issues. The costs associated with implementing these upgrades, as well as ongoing testing of North American systems, are not expected to be material to the Company's results of operations. North American systems are scheduled to be compliant by June 30, 1999. In Venezuela, the Company is in the process of evaluating packaged software to replace existing business and financial systems that are not "Year 2000" compliant. The capital cost for a new business system is estimated at $5.5 million. Alternatively, the Company may choose to modify some or all of its existing systems making them "Year 2000" compliant. The cost of these modifications is estimated at up to $1 million. The replacement or modification of existing systems is expected to be completed prior to the year 2000. The Company believes that with upgrades to existing packaged systems in North America and conversion to new replacement systems in Venezuela, the "Year 2000" issue will not pose significant operational problems. However, if such upgrades or conversions are not completed in a timely manner, or major suppliers or customers experience "Year 2000" issues in their respective systems, the "Year 2000" issue may have a material adverse effect on the operations of the Company. Cautionary Statement Relevant to Forward-Looking Information This document contains certain statements that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. 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. 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 and other raw materials; changes in laws and regulation; the inability of the Company to obtain its estimated fair value of its Canadian frozen bakery business, which is being held for sale; the inability of the Company to either resolve the Company's "Year 2000" issues or 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; economic or political instability in Russia, including the possibility of tariff law changes or other marketplace changes and restrictions; the inability of the major customer of the Company's former food exporting business to meet remaining commitments; the inability of the Company to collect insurance proceeds related to the theft of inventory from the port of St. Petersburg, Russia; fluctuations in foreign exchange rates; other 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. Independent Auditors' Report The Board of Directors and Shareholders of International Multifoods Corporation: We have audited the accompanying consolidated balance sheets of International Multifoods Corporation and subsidiaries as of February 28, 1998 and 1997, and the related consolidated statements of earnings and cash flows for each of the years in the three-year period ended February 28, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of International Multifoods Corporation and subsidiaries as of February 28, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended February 28, 1998, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Minneapolis, Minnesota March 30, 1998 Management's Responsibility for Financial Statements The consolidated financial statements have been prepared by management in conformity with generally accepted accounting principles and include, where required, amounts based on management's best estimates and judgments. Management continues to be responsible for the integrity and objectivity of data in these consolidated financial statements, which it seeks to assure through an extensive system of internal controls. Such controls are designed to provide reasonable, but not absolute, assurance that assets are safeguarded from unauthorized use or disposition and that financial records are sufficiently reliable to permit the preparation of consolidated financial statements. It is recognized that estimates and judgments are required to assess and balance the relative cost and expected benefits of any system of internal controls. The system of internal accounting controls is designed to provide reasonable assurance that the books and records reflect the Company's transactions and that its established policies and procedures are carefully followed. The system includes written policies and procedures, a financial reporting system, an internal audit department and careful selection and training of qualified personnel. Gary E. Costley William L. Trubeck Chairman, President Senior Vice President, Finance, and Chief Executive Officer and Chief Financial Officer; President, Latin America Operations INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES Consolidated Statements of Earnings Fiscal year ended the last day of February (in thousands, except per share data) 1998 1997 1996 - ------------------------------------------------------------------------ Net sales $2,611,792 $2,595,873 $2,523,197 Cost of materials and production (2,237,586) (2,215,366) (2,135,707) Delivery and distribution (163,915) (167,788) (162,870) - ------------------------------------------------------------------------ Gross profit 210,291 212,719 224,620 Selling, general and administrative (160,481) (170,508) (168,825) Unusual items (5,000) (20,107) (5,700) - ------------------------------------------------------------------------ Operating earnings 44,810 22,104 50,095 Interest, net (12,377) (16,758) (17,908) Other income (expense), net (38) (330) (4,433) - ------------------------------------------------------------------------ Earnings before income taxes 32,395 5,016 27,754 Income taxes (12,371) (2,236) (3,679) - ------------------------------------------------------------------------ Net earnings $ 20,024 $ 2,780 $ 24,075 ======================================================================== Earnings per share of common stock: Basic $ 1.09 $ .15 $ 1.33 Diluted 1.08 .15 1.32 - ----------------------------------------------------------------------- Average shares of common stock outstanding: Basic 18,385 17,982 17,965 Diluted 18,619 17,987 18,014 - ---------------------------------------------------------------------- See accompanying notes to consolidated financial statements. INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES Consolidated Balance Sheets February 28, 1998 and 1997 (in thousands) 1998 1997 - ------------------------------------------------------------------------ Assets Current assets: Cash and cash equivalents $ 10,363 $ 8,753 Trade accounts receivable, net of allowance 144,201 207,459 Inventories 265,989 283,948 Deferred income taxes 7,080 9,418 Other current assets 56,771 53,678 - ----------------------------------------------------------------------- Total current assets 484,404 563,256 - ----------------------------------------------------------------------- Property, plant and equipment, net 220,567 225,357 Goodwill, net 84,911 87,641 Other assets 37,504 39,034 - ----------------------------------------------------------------------- Total assets $827,386 $915,288 ======================================================================= Liabilities and Shareholders' Equity Current liabilities: Notes payable $ 1,025 $ 88,201 Current portion of long-term debt 25,042 6,790 Accounts payable 217,500 206,966 Other current liabilities 68,856 70,037 - ----------------------------------------------------------------------- Total current liabilities 312,423 371,994 - ----------------------------------------------------------------------- Long-term debt 162,857 202,328 Deferred income taxes 13,810 17,419 Employee benefits and other liabilities 28,943 33,969 - ----------------------------------------------------------------------- Total liabilities 518,033 625,710 - ----------------------------------------------------------------------- Shareholders' equity: Preferred capital stock - - Common stock, authorized 50,000 shares; issued 21,844 shares 2,184 2,184 Capital in excess of par value 91,340 88,124 Retained earnings 398,754 393,335 Equity adjustment from foreign currency translation (110,812) (108,000) Equity adjustment from minimum pension liability (3,499) (2,309) Treasury stock, 3,106 and 3,835 shares, at cost (67,480) (83,262) Unearned compensation (1,134) (494) - ------------------------------------------------------------------------ Total shareholders' equity 309,353 289,578 - ------------------------------------------------------------------------ Commitments and contingencies - ------------------------------------------------------------------------ Total liabilities and shareholders' equity $827,386 $915,288 ======================================================================== See accompanying notes to consolidated financial statements.
INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES Consolidated Statements of Cash Flows Fiscal year ended the last day of February (in thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Cash flows from operations: Net earnings $ 20,024 $ 2,780 $ 24,075 Adjustments to reconcile net earnings to cash provided by (used for) operations: Depreciation and amortization 30,670 30,748 29,772 Provision for unusual charges 5,000 20,107 15,493 Gain on major business disposition - - (9,900) Deferred income tax expense 2,486 3,252 4,544 Provision for losses on (recoveries of) receivables (228) 2,862 5,783 Change in noncurrent notes receivable (10,298) (328) 485 Changes in working capital, net of business acquisitions and disposition* 85,877 (71,196) (43,456) Other, net (3,334) (672) (1,215) - --------------------------------------------------------------------------------- Cash provided by (used for) operations 130,197 (12,447) 25,581 - --------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions of businesses, net of cash acquired - - (29,904) Capital expenditures (26,125) (27,507) (31,181) Proceeds from business disposition - - 48,009 Proceeds from other property disposals 2,562 623 1,707 Other, net (14) - - - -------------------------------------------------------------------------------- Cash used for investing activities (23,577) (26,884) (11,369) - -------------------------------------------------------------------------------- Cash flows from financing activities: Net increase (decrease) in notes payable (86,521) 60,119 (12,203) Additions to long-term debt 9,278 20,000 85,945 Reductions in long-term debt (28,251) (25,390) (65,165) Dividends paid (14,665) (14,477) (14,471) Proceeds from issuance of common stock 16,108 546 1,470 Purchase of treasury stock (799) (82) (2,877) Redemption of preferred stock - - (3,732) Other, net (16) (230) (712) - --------------------------------------------------------------------------------- Cash provided by (used for) financing activities (104,866) 40,486 (11,745) - --------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (144) 90 (5,751) - --------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 1,610 1,245 (3,284) Cash and cash equivalents at beginning of year 8,753 7,508 10,792 - --------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 10,363 $ 8,753 $ 7,508 ================================================================================= *Cash flows from changes in working capital, net of business acquisitions and disposition: Accounts receivable $ 60,774 $(45,043) $(45,993) Inventories 16,065 (53,086) 19,172 Other current assets (4,019) (9,671) (4,759) Accounts payable 13,184 36,688 16,871 Other current liabilities (127) (84) (28,747) - ---------------------------------------------------------------------------------- Net change $ 85,877 $(71,196) $(43,456) ==================================================================================
See accompanying notes to consolidated financial statements. Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Basis of statement presentation The accompanying consolidated financial statements include the accounts of International Multifoods Corporation and all of its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Net sales The Company reports the gross margin earned from commodity sales of its former food exporting business as net sales. If gross commodity sales had been reported, net sales and cost of sales would have increased by $60.5 million in fiscal 1998, $278.2 million in fiscal 1997 and $227.2 million in fiscal 1996. 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 components of cost of sales. Accordingly, cost of sales was increased by $0.9 million in fiscal 1998 and $2.6 million in fiscal 1997, and was reduced by $7.8 million in fiscal 1996. Foreign currency translation and transactions The functional currency of the Company's Canadian operations is the Canadian dollar. Assets and liabilities are translated at current exchange rates, and results of operations are translated using the weighted average exchange rate in effect during the fiscal year. The gains or losses resulting from translation are included as a separate component of shareholders' equity. The functional currency of the Company's Venezuelan operations is the U.S. dollar. Nonmonetary assets and liabilities, principally inventory and fixed assets, are translated at historical exchange rates, while monetary assets and liabilities are translated at current exchange rates. Results of operations are translated using the weighted average exchange rate in effect during the fiscal year, except that cost of sales and depreciation are translated at historical rates. The gains or losses resulting from translation are included in the determination of net earnings. The Company recognized in its results of operations net foreign exchange gains of $0.1 million in fiscal 1998, $0.4 million in fiscal 1997 and $2.4 million in fiscal 1996. Stock-based compensation The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations in accounting for its stock-based compensation. Under APB 25, compensation expense is recorded for stock options if the market price of the underlying stock exceeds the exercise price on the date of grant. The Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which the Company adopted in fiscal 1997. SFAS 123 gives the Company the option either to continue the Company's current method of accounting for stock- based compensation or to adopt the fair value method of accounting. The Company elected to continue accounting for stock-based compensation using APB 25 and to provide pro forma disclosure as if the fair value method had been applied. See Note 14. Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities. Earnings per share The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), in the fourth quarter of fiscal 1998. SFAS 128 establishes standards for computing and presenting earnings per share and requires restatement of previously reported earnings per share amounts. For the Company, basic earnings per share under SFAS 128 are equivalent to earnings per share previously reported. Basic earnings per share are computed by dividing net earnings by the weighted average shares outstanding during the reporting period. Diluted earnings per share are computed similar to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options. The number of additional shares is calculated by assuming that outstanding stock options were exercised and the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting period. Cash and cash equivalents Included in cash and cash equivalents are cash on hand, time deposits and highly liquid short-term investments purchased with original maturities of three months or less ("cash equivalents"). Inventories Inventories, excluding grain in Canada, are valued principally at the lower of cost (first-in, first-out) or market (replacement or net realizable value). In Canada, inventories of grain are valued on the basis of replacement market prices prevailing at fiscal year-end. The Company generally minimizes risks associated with market price fluctuations by hedging those inventories with futures contracts. Therefore, included in inventories is the amount of gain or loss on open grain contracts, including futures contracts, which generally has the effect of adjusting those inventories to cost. The Company also enters into futures contracts to reduce the risk of price increases with respect to certain anticipated raw material purchases. The futures contracts are accounted for as hedges, with gains and losses deferred in inventory and subsequently included in cost of sales as the inventory is sold. Property, plant and equipment Property, plant and equipment is stated at cost, and depreciation is computed using the straight-line method for determining financial statement income. When permitted, accelerated depreciation methods are used to calculate depreciation for income tax purposes. Goodwill and other intangibles Goodwill represents the excess of cost of businesses acquired over the fair market value of net tangible and identifiable intangible assets. Such excess costs are being amortized on a straight-line basis over various periods not exceeding 40 years. Identifiable intangible assets represent costs allocated to noncompete agreements, trade names and other specifically identifiable assets arising from business acquisitions. These assets are amortized on a straight-line basis over their estimated useful lives. Accumulated amortization of goodwill and other intangibles at February 28, 1998 and 1997, was $25.9 million and $22.2 million, respectively. The Company assesses the recoverability of goodwill and other long-lived assets whenever events or changes in circumstances indicate that expected future undiscounted cash flows may not be sufficient to support the carrying amount of an asset. The Company deems an asset to be impaired if a forecast of undiscounted future operating cash flows is less than its carrying amount. If an asset is determined to be impaired, the loss is measured as the amount by which the carrying value of the asset exceeds its fair value. An estimate of fair value is based on the best information available, including values for similar assets or the results of valuation techniques such as discounting estimated future cash flows. The Company generally measures fair value by discounting estimated future cash flows. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. New accounting pronouncements In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), which establishes standards for reporting comprehensive income and its components in the financial statements. Comprehensive income is defined as the change in the equity of a business from all nonowner transactions and events. The Company is required to adopt SFAS 130 in the first quarter of fiscal 1999. The Company does not expect the adoption of SFAS 130 to have a material effect on the consolidated financial statements. In June 1997, the FASB also issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131), which establishes standards for disclosure of operating segments, products and services, geographic areas and major customers. The Company is required to adopt SFAS 131 beginning with its annual report for the fiscal year ending February 28, 1999. The Company does not expect the adoption of SFAS 131 to have a material effect on its current definition of operating segments or the consolidated financial statements. Note 2: Interest, Net Interest, net consisted of the following: (in thousands) 1998 1997 1996 - ----------------------------------------------------------------- Interest expense $17,651 $18,658 $19,613 Capitalized interest (8) (109) (128) Non-operating interest income (5,266) (1,791) (1,577) - ----------------------------------------------------------------- Interest, net $12,377 $16,758 $17,908 ================================================================= Total interest income was $8.8 million in fiscal 1998, $3.4 million in fiscal 1997 and $2.5 million in fiscal 1996. Cash payments for interest, net of amounts capitalized, totaled $17.1 million in fiscal 1998, $18.9 million in fiscal 1997 and $20.7 million in fiscal 1996. Note 3: Unusual Items Fiscal 1998 The Company recognized a pre-tax charge of $5.0 million ($3.2 million after tax or 17 cents per share) as a result of a determination that receivables from a major customer of the Company's former food exporting business may not be fully recoverable. See Note 12 for additional discussion. Fiscal 1997 The Company recognized unusual items that resulted in pre-tax charges of $20.1 million ($14.8 million after tax or 83 cents per share) and were comprised of the following: (in millions) Segment - ----------------------------------------------------------------------- Asset impairment $11.4 North America Foods Restructuring plan 4.0 Multifoods Distribution Group Severance and other costs 3.6 Corporate Facility consolidation plan 1.1 Multifoods Distribution Group - ------------------------------------------------------------------------ Total $20.1 ======================================= The Company recognized a charge of $11.4 million for asset impairment in its Canadian frozen bakery operation. The impairment resulted in a $9.6 million reduction in goodwill and a $1.8 million reduction in fixed assets. During fiscal 1997, the operation experienced a significant increase in competition in certain key markets. As a result, there was a significant decline in sales volume and operating results. The Company reviews its long-lived assets and goodwill for impairment whenever changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. In this situation, the Company believes that the operating unit is the lowest level for which identifiable cash flows could be determined. Accordingly, the Company estimated the fair value of the operation's assets using discounted expected future cash flows and determined that the carrying value of the business unit exceeded the fair value. In estimating future cash flows, considerable management judgment is necessary, and actual results could vary significantly from such estimates. Management adopted a restructuring plan at its vending distribution business directed at improving customer service. The plan included moving certain customer support functions from a central location to the distribution centers. Accordingly, the Company recorded a $2.8 million charge primarily from losses on lease commitments and a $1.2 million charge for involuntary employee termination benefits covering approximately 190 customer support employees. All significant actions related to the plan were completed in fiscal 1998. The Company recognized $2.2 million in severance and other costs resulting from the resignation of the Company's former chief executive officer and $1.4 million principally for costs of business assessment studies. Management adopted a plan to consolidate two foodservice distribution centers. As a result, the Company recorded a $1.1 million charge for the loss on lease commitments and employee termination benefits. Involuntary employee termination benefits covered approximately 40 warehouse, delivery and administrative employees. All significant actions related to the plan were completed in fiscal 1998. Fiscal 1996 The Company recognized unusual items that resulted in a net pre-tax charge of $5.7 million ($0.5 million after-tax benefit or 2 cents per share) and were comprised of the following: (in millions) Segment - ----------------------------------------------------------------------- Write-down of software costs $8.9 Multifoods Distribution Group Corporate restructuring plan 6.2 Corporate Lease commitment loss .5 Multifoods Distribution Group Gain on business divestiture (9.9) Divested Businesses - ----------------------------------------------------------------------- Total $5.7 ======================================= The Company recognized an $8.9 million charge for the write-down of vending distribution computer software costs. The charge resulted from the Company's decision to limit the scope of the software applications being implemented. In addition, a $0.5 million charge for a loss on a lease commitment was also recognized in the vending distribution business. The Company recognized charges of $2.0 million for asset write-downs and $4.2 million for termination benefits in order to streamline corporate administrative operations. All significant actions relating to the plan were completed in fiscal 1997. The Company divested its surimi seafood business in June 1995 for a $9.9 million gain. The Company recognized a $5.0 million tax benefit that resulted from an agreement with the IRS regarding proposed disallowances of certain deductions taken during fiscal years 1985 through 1991 and the benefit of the closure by the IRS of its examinations of the Company's fiscal 1992 and 1993 tax returns. Note 4: Income Taxes Income tax expense was as follows: U.S. Operations Non-U.S. (in thousands) Federal Other Operations Total - ------------------------------------------------------------------------ 1998: Current expense (benefit) $ (229) $ 283 $ 9,831 $ 9,885 Deferred expense (benefit) 3,240 1,472 (2,226) 2,486 - ----------------------------------------------------------------------- Total tax expense $ 3,011 $ 1,755 $ 7,605 $12,371 ======================================================================= 1997: Current expense (benefit) $(7,976) $ 57 $ 6,903 $(1,016) Deferred expense (benefit) 3,385 (440) 307 3,252 - ------------------------------------------------------------------------ Total tax expense (benefit) $(4,591) $ (383) $ 7,210 $ 2,236 ======================================================================== 1996: Current expense (benefit) $(4,336) $ (442) $ 3,913 $ (865) Deferred expense (benefit) 2,501 (922) 2,965 4,544 - ------------------------------------------------------------------------ Total tax expense (benefit) $(1,835) $(1,364) $ 6,878 $ 3,679 ======================================================================== Temporary differences that gave rise to deferred tax assets and liabilities as of February 28, 1998 and 1997, were as follows: 1998 1997 ------------------- -------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax (in thousands) Assets Liabilities Assets Liabilities - ------------------------------------------------------------------------ Depreciation and amortization $ 1,483 $29,247 $ 1,633 $28,256 Accrued expenses 20,952 11,738 21,429 11,055 Inventory valuation methods 743 - 974 - Reorganization and divestiture reserves 637 - 3,640 - Provision for losses on receivables 3,571 - 3,263 - Loss carryforwards 7,137 - 4,591 - Foreign earnings repatriation - 3,139 - 3,027 Other 4,631 2,246 2,983 2,558 - ------------------------------------------------------------------------ Subtotal 39,154 46,370 38,513 44,896 Valuation allowance (1,111) - (2,420) - - ------------------------------------------------------------------------ Total deferred taxes $38,043 $46,370 $36,093 $44,896 ======================================================================== At February 28, 1998, the Company had a U.S. federal consolidated net operating loss carryforward of approximately $7.9 million that will expire in fiscal 2013. The Company's foreign operations had net operating loss carryforwards of approximately $3.2 million that will expire in fiscal 2005. The Company's foreign operations also had capital loss carryforwards of approximately $3.6 million that have no expiration date. The Company expects to fully utilize the net operating and capital loss carryforwards. In fiscal 1998, the Company's valuation allowance decreased approximately $1.3 million. Approximately $0.9 million of the decrease resulted from a change in the expected utilization of the net operating loss carryforwards of the Company's foreign operations. The remaining decrease resulted from a decline in Venezuelan deferred tax assets and had no effect on income tax expense. Total income taxes differ from the amount computed by applying the U.S. federal income tax rate because of the following items: (in thousands) 1998 1997 1996 - ------------------------------------------------------------------------ Tax at U.S. federal statutory rate (35.0%) $11,338 $1,756 $9,714 Differences: Effect of taxes on non-U.S. earnings (130) 176 (2,049) State and local income taxes 1,141 (249) (887) Effect of intangibles 137 148 209 Basis difference for business disposals - - 355 Resolution of tax examinations - - (5,000) Other (115) 405 1,337 - ------------------------------------------------------------------------ Total income taxes $12,371 $2,236 $3,679 ======================================================================== Provision has been made for U.S. income taxes applicable to anticipated remittances of earnings from non-U.S. affiliates. It is not practicable to estimate the remaining deferred tax liability associated with temporary differences related to investments in non-U.S. affiliates. Earnings before income taxes from non-U.S. affiliates were $22.1 million in fiscal 1998, $21.5 million in fiscal 1997 and $28.4 million in fiscal 1996. Cash paid (received) for income taxes totaled $(0.9) million in fiscal 1998, $6.7 million in fiscal 1997 and $4.8 million in fiscal 1996. Note 5: Earnings Per Share The Company adopted SFAS No. 128 "Earnings Per Share" in fiscal 1998. The table below reconciles average shares outstanding used to compute basic and diluted earnings per share. There was no earnings impact for the assumed conversion of stock options in each of the fiscal years.
1998 1997 1996 --------------- --------------- --------------- (in thousands, except Average Per Average Per Average Per per share data) Shares Share Shares Share Shares Share - ----------------------------------------------------------------------------------- Basic E.P.S. 18,385 $1.09 17,982 $ .15 17,965 $1.33 Effect of Stock Options 234 - 5 - 49 - - ----------------------------------------------------------------------------------- Diluted E.P.S. 18,619 $1.08 17,987 $ .15 18,014 $1.32 - -----------------------------------------------------------------------------------
Note 6: Supplemental Balance Sheet Information (in thousands) 1998 1997 - ------------------------------------------------------------------------ Trade accounts receivable, net: Trade $148,947 $216,798 Allowance for doubtful accounts (4,746) (9,339) - ------------------------------------------------------------------------ Total trade accounts receivable, net $144,201 $207,459 ======================================================================== Inventories: Raw materials, excluding grain $ 19,823 $ 15,776 Grain 87,769 86,500 Finished and in-process goods 151,894 174,274 Packages and supplies 6,503 7,398 - ------------------------------------------------------------------------ Total inventories $265,989 $283,948 ======================================================================== Property, plant and equipment, net: Land $ 15,123 $ 13,413 Buildings and improvements 98,204 93,099 Machinery and equipment 235,906 228,514 Transportation equipment 5,883 7,194 Improvements in progress 16,969 15,019 - ------------------------------------------------------------------------ 372,085 357,239 Accumulated depreciation (151,518) (131,882) - ------------------------------------------------------------------------ Total property, plant and equipment, net $220,567 $225,357 ======================================================================== Other current liabilities: Wages and benefits $ 18,510 $ 12,445 Income taxes 13,784 12,946 Other accrued expenses 36,562 44,646 - ------------------------------------------------------------------------ Total other current liabilities $ 68,856 $ 70,037 ======================================================================== Note 7: Financial Instruments Fair value of financial instruments The carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value. The Company's $90 million carrying value of medium-term notes, $23 million of which is classified as current, had a fair value of $87 million as of February 28, 1998. Commodity risk management The Company's Canadian operations minimize the risk 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. In the United States, the Company has entered into futures to reduce the risk of price fluctuations on anticipated flour and soybean oil purchases. The U.S. dollar-denominated futures contracts are traded on U.S. regulated exchanges. The amount of deferred gains, measured by using quoted market prices as of February 28, 1998, was immaterial. At February 28, 1998, the Company held futures to purchase wheat and soybean oil with an aggregate contract value of $17.1 million. The open futures mature in the period from March 1998 through December 1998 and substantially coincide with the maturities of the open wheat purchase contracts, open flour sales contracts and the anticipated timing of flour and soybean oil purchases. Foreign currency hedging As the Company's Canadian operations' inventories, purchase contracts and sales contracts are generally denominated in Canadian dollars, the Company enters into foreign exchange forward contracts that have the effect of converting the U.S. dollar-denominated futures contracts (see Commodity risk management) into Canadian dollar equivalents. At February 28, 1998, the Company held foreign exchange forward contracts to sell and buy U.S. dollars totaling $5.5 million and $13.5 million, respectively. The foreign exchange forward contracts are purchased through major Canadian banking institutions. The Company's Canadian operations also purchase foreign currency forward contracts to minimize its exposure to foreign currency fluctuations as a result of U.S. dollar-denominated sales to customers. As of February 28, 1998, the aggregate notional amount of these contracts in U.S. dollars was $16.2 million, and the losses on such contracts were insignificant. The gains and losses arising on these transactions are recognized in income at the maturity of the contracts. Interest rate risk management In December 1997, the Company entered into a five-year interest-rate swap contract commencing March 2, 1998, and expiring March 3, 2003. Under the terms of the agreement, the Company will make quarterly payments based on a $20 million notional amount at a fixed rate of 6.175%. In return, the Company will receive a floating rate payment based on the current three-month London Interbank Offered Rate (LIBOR). The net amount received or paid under the terms of the contract will be classified as interest expense. In December 1997, the Company also entered into a $20 million notional value 10-year forward Treasury lock at a rate of 5.815% with a settlement date of July 15, 1998. At the settlement date, the instrument is priced based on the then-current 10-year U.S. Treasury yield. The agreement provides for the Company to receive a payout if rates rise above 5.815% and to make a payment if rates fall below 5.815%. The result of this settlement will be amortized into interest expense. Off-balance sheet risk As of February 28, 1998 and 1997, the Company had sold with limited recourse $21.2 million and $14.6 million of accounts receivable, respectively, related to its Canadian operations. Collections received on these accounts may be replaced by new receivables in order to maintain the aggregate outstanding balance. The credit risk of uncollectible accounts has been substantially transferred to the purchaser. Fees associated with these transactions are included in other income (expense), net in the consolidated statements of earnings. Concentrations of credit risk Management believes the credit risk of exchange-traded futures contracts, foreign exchange forward contracts and interest rate contracts due to nonperformance of the counterparties is insignificant. The Company extends credit on a regular basis under various terms to customers that meet certain financial and other criteria. In general, the Company does not require collateral or security. The Company believes that its trade receivables do not represent significant concentrations of credit risk due to the large number of customers and markets into which its products are sold, as well as their dispersion across geographic areas. The Company has a carrying value of $10.3 million ($15.7 million net of a $5 million reserve) in notes and accounts receivable from a major customer of the Company's former food exporting business. See Note 12 for further discussion. Note 8: Notes Payable Notes payable consisted of the following: (in thousands) 1998 1997 - ----------------------------------------------------------------------- U.S. commercial paper $ - $ 1,200 Canadian bankers' acceptances 15,451 43,854 Notes payable, principally to banks 80,303 154,077 Amounts reclassified to long-term debt (94,729) (110,930) - ----------------------------------------------------------------------- Total notes payable $ 1,025 $ 88,201 ======================================================================= The Company has a $200 million revolving credit agreement in the U.S. and an $80 million revolving credit agreement in Canada that expire March 15, 2001. The Company had available $251 million under these revolving credit agreements as of February 28, 1998. The interest rate on borrowings under these agreements is variable and based on current market factors. There are no restrictions on the use of these facilities for general corporate purposes and support for commercial paper issued by the Company. The credit agreements contain certain restrictive covenants that include maintenance of minimum tangible net worth, a fixed charge coverage ratio and an indebtedness to capitalization ratio. None of the restrictive covenants is expected to affect the payment of dividends based on the Company's present dividend rate. Related facility fees were $0.4 million in fiscal 1998 and 1997. Notes payable totaling $94.7 million have been classified as long-term debt as a result of the Company's intent to refinance this debt on a long-term basis and the availability of such financing under the terms of the revolving credit agreements. The weighted average interest rate on notes payable outstanding at February 28, 1998 and 1997, was 6.0% and 5.7%, respectively. At February 28, 1998, the Company had total uncommitted lines of credit from banks in the United States and Venezuela of approximately $288 million, of which $208 million was available. No compensating balances were required for any of these credit lines. Note 9: Long-Term Debt Long-term debt, net of current portion of $25.0 million in fiscal 1998 and $6.8 million in fiscal 1997, was as follows: (in thousands) 1998 1997 - ------------------------------------------------------------------------ Medium-term notes $ 67,000 $ 90,000 Other 1,128 1,398 Notes payable, reclassified 94,729 110,930 - ------------------------------------------------------------------------ Total long-term debt $162,857 $202,328 ======================================================================== The Company maintains a shelf registration statement with the Securities and Exchange Commission for the issuance of $150 million of debt securities, of which $140 million remained available at February 28, 1998. The Company may issue up to the entire amount as medium-term notes, Series B, in varying amounts, rates and maturities. Medium-term notes outstanding at February 28, 1998, mature in fiscal 1999 to 2006 and had a weighted average interest rate of 6.6%. Minimum principal payments totaling $162.9 million are due as follows: $2.3 million in fiscal 2000, $20.3 million in fiscal 2001, $95.1 million in fiscal 2002, $1.2 million in fiscal 2003, $14.0 million in fiscal 2004 and $30.0 million in fiscal 2005 and beyond. Note 10: Preferred Capital Stock The Company has authorized 10,000,000 shares of Preferred Capital Stock, par value $1.00 per share, which may be designated and issued as convertible into common shares. The Company has created a series of such Preferred Capital Stock, designated as Series 1990 Junior Participating Capital Preferred Stock, consisting of 500,000 shares, par value $1.00 per share. No Preferred Capital Stock was outstanding during the three years ended February 28, 1998. Note 11: Leases The Company leases certain plant, office space and equipment for varying periods. Management expects that in the normal course of business, leases will be renewed or replaced by other leases. The following is a schedule of future minimum lease payments for operating leases that had initial or remaining noncancelable lease terms in excess of one year as of February 28, 1998: Operating (in thousands) Leases - ------------------------------------------------------------ 1999 $19,295 2000 14,732 2001 9,708 2002 5,370 2003 2,341 2004 and beyond 1,696 - ----------------------------------------------------------- Total minimum lease payments * $53,142 =========================================================== * Minimum payments do not include contingent rentals or vehicle lease payments based on mileage. Total net rent expense for operating leases, including those with terms of less than one year, consisted of the following: (in thousands) 1998 1997 1996 - --------------------------------------------------------------------- Minimum rentals $28,508 $28,181 $29,104 Contingent rentals 99 29 79 Sublease rentals (94) (2) (8) - --------------------------------------------------------------------- Total net rent expense $28,513 $28,208 $29,175 ===================================================================== Note 12: Commitments and Contingencies In fiscal 1998, the Company entered into an exit agreement with a major customer of the Company's former food exporting business. The terms of the exit agreement have been restructured on several occasions because of the customer's financial difficulties, which the Company believes were caused by delays in moving product into the Russian marketplace. As of February 28, 1998, the Company had a note receivable from the customer of $10.7 million and accounts receivable of $4.6 million. The current agreement provides for payments on the accounts receivable balance totaling $3.0 million by June 1998 with the remaining balance added to the note receivable. The note receivable has a term of 60 months, bears interest at 8.5% and provides for monthly payments of interest only for the first 12 months, followed by 48 monthly payments of interest and principal in equal installments. As a result of uncertainities with respect to the customer's ability to meet its obligations, the Company recognized a $5.0 million pre-tax charge in the fourth quarter of fiscal 1998 to reduce the carrying value of the receivables to their estimated net realizable value. In estimating the net realizable value, considerable management judgment is necessary and, accordingly, future events may result in additional charges that could be material to the Company's results of operations. 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 the 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 likely recognize a material charge to its results of operations. In February 1998, the Company signed an exclusive supply agreement with a customer in Venezuela that requires the Company to guarantee debt obligations of up to $6.8 million. The customer has pledged certain assets that have an estimated market value in excess of the guarantee. It is not practicable to estimate the fair value of the guarantee; however, the Company does not expect that it will incur losses as a result of this guarantee. At February 28, 1998, the estimated cost to complete improvements in progress totaled approximately $10 million. Note 13: Shareholders' Equity The following summarizes the changes in shareholders' equity for the three years ended February 28, 1998:
Equity Adjustment from: $.10 par value ----------------------- ---------------- Capital in Foreign Minimum Common Treasury Excess of Retained Currency Pension Unearned (in thousands) Stock Stock Par Value Earnings Translation Liability Compensation Total - ------------------------------------------------------------------------------------------------------------------------------ Balance at February 28, 1995 $2,184 $(83,417) $88,862 $395,406 $(108,884) $(1,641) $(1,448) $291,062 Net earnings - - - 24,075 - - - 24,075 Translation adjustments - - - - 714 - - 714 Dividends declared: Common stock - - - (14,408) - - - (14,408) Preferred stock - - - (260) - - - (260) 137 shares purchased for treasury - (2,877) - - - - - (2,877) 108 shares issued for employee benefit plans - 2,346 (277) - - - (311) 1,758 Amortization of unearned compensation - - - - - - 532 532 Adjustment associated with long-term incentive program amendment - - (269) - - - 269 - Adjustment associated with recognition of minimum pension liability - - - - - (1,033) - (1,033) - ------------------------------------------------------------------------------------------------------------------------------- Balance at February 29, 1996 2,184 (83,948) 88,316 404,813 (108,170) (2,674) (958) 299,563 Net earnings - - - 2,780 - - - 2,780 Translation adjustments - - - - 170 - - 170 Dividends declared on common stock - - - (14,258) - - - (14,258) 5 shares purchased for treasury - (82) - - - - - (82) 35 shares issued for employee benefit plans - 768 (192) - - - (569) 7 Amortization of unearned compensation - - - - - - 1,033 1,033 Adjustment associated with recognition of minimum pension liability - - - - - 365 - 365 - ------------------------------------------------------------------------------------------------------------------------------- Balance at February 28, 1997 2,184 (83,262) 88,124 393,335 (108,000) (2,309) (494) 289,578 Net earnings - - - 20,024 - - - 20,024 Translation adjustments - - - - (2,812) - - (2,812) Dividends declared on common stock - - - (14,605) - - - (14,605) 36 shares purchased for treasury - (799) - - - - - (799) 764 shares issued for employee benefit plans - 16,581 3,216 - - - (1,289) 18,508 Amortization of unearned compensation - - - - - - 649 649 Adjustment associated with recognition of minimum pension liability - - - - - (1,190) - (1,190) - ------------------------------------------------------------------------------------------------------------------------------ Balance at February 28, 1998 $2,184 $(67,480) $91,340 $398,754 $(110,812) $(3,499) $(1,134) $309,353 ==============================================================================================================================
The 1997 stock-based plan and the 1989 stock-based plan of the Company permit awards of restricted stock and incentive units to directors and key employees subject to the provisions of the plans and as determined by the Compensation Committee of the Board of Directors. In fiscal 1998, grants of 3,450 shares of restricted stock were awarded with varying performance criteria and vesting periods. At February 28, 1998, the total number of restricted shares outstanding was 59,479. The market value of shares issued under the plans, as of the date of grant, has been recorded as unearned compensation and is shown as a separate component of shareholders' equity. Unearned compensation is expensed over the period that restrictions lapse. The Company has a shareholder rights plan that entitles one preferred share purchase right for each outstanding share of common stock. The rights become exercisable only after a person or group (with certain exceptions) becomes the beneficial owner of 10% or more of the Company's outstanding common stock or announces a tender offer, the consummation of which would result in beneficial ownership by a person or group of 10% or more of the Company's outstanding common stock. Each right will entitle its holder to purchase one one-hundredth share of Series 1990 Junior Participating Preferred Capital Stock (consisting of 500,000 shares, par value $1.00 per share) at an exercise price of $100, subject to adjustment. If a person or group acquires beneficial ownership of 10% or more of the Company's outstanding common stock, each right will entitle its holder (other than such person or group) to purchase, at the then-current exercise price of the right, a number of shares of the Company's common (or, in certain circumstances, preferred) stock having a market value of twice the then-current exercise price of the right. In addition, if the Company is acquired in a merger or other business combination transaction or if 50% or more of its consolidated assets or earnings power are acquired, each right will entitle its holder to purchase, at the then-current exercise price of the right, a number of the acquiring company's common shares having a market value of twice the then-current exercise price of the right. Following the acquisition by a person or group of beneficial ownership of 10% or more of the Company's outstanding common stock and prior to an acquisition by any person or group of 50% or more of the Company's outstanding common stock, the Board of Directors may exchange the outstanding rights (other than rights owned by such person or group), in whole or in part, for common (or, in certain circumstances, preferred) stock of the Company. Prior to the acquisition by a person or group of beneficial ownership of 10% or more of the Company's outstanding common stock, the rights are redeemable for $.01 per right at the option of the Board of Directors. Note 14: Stock Options Stock options are granted to directors, officers and key management employees to purchase shares of Company common stock generally at not less than fair market value at dates of grant. Options generally become exercisable one year after the date of grant and expire 10 years after the date of grant. At February 28, 1998, a total of 409,476 common shares were available for grants of stock options or restricted stock under the Company's 1989 and 1997 stock-based plans. The per share weighted average fair values of stock options granted were $4.28 in fiscal 1998, $4.40 in fiscal 1997 and $4.87 in fiscal 1996. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. The following assumptions were used in the calculation: Assumptions 1998 1997 1996 - ---------------------------------------------------------------------- Expected dividend yield 4.0% 3.8% 3.5% Expected volatility 20.7% 19.8% 19.9% Risk-free interest rates 5.7% to 6.8% 6.5% to 7.0% 6.1% to 7.0% Expected life (in years) 8.3 8.3 7.7 - ---------------------------------------------------------------------- The Company applies APB Opinion No. 25 in accounting for the compensation cost of employee stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the date of grant for its stock options under SFAS 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below: (in thousands, except per share data) 1998 1997 1996 - -------------------------------------------------------------------- Net earnings: As reported $20,024 $2,780 $24,075 Pro forma 19,265 2,370 23,519 Basic earnings per share: As reported $ 1.09 $ .15 $ 1.33 Pro forma 1.05 .13 1.30 - -------------------------------------------------------------------- The following table contains information on stock options: Option Price Shares Per Share-Range - ---------------------------------------------------------- Outstanding at February 28, 1995 1,567,829 $14.97 - 29.00 Granted 220,513 18.69 - 22.69 Exercised (83,545) 14.97 - 20.17 Expired or canceled (137,975) 16.50 - 28.06 - ---------------------------------------------------------- Outstanding at February 29, 1996 1,566,822 $16.06 - 29.00 Granted 273,509 16.00 - 20.81 Exercised (30,250) 16.63 - 19.21 Expired or canceled (285,050) 16.75 - 28.06 - ---------------------------------------------------------- Outstanding at February 28, 1997 1,525,031 $16.00 - 29.00 Granted 583,066 18.19 - 27.69 Exercised (731,451) 16.75 - 28.06 Expired or canceled (40,150) 18.69 - 28.06 - ---------------------------------------------------------- Outstanding at February 28, 1998 1,336,496 $16.00 - 29.00 ========================================================== Options exercisable at: February 29, 1996 1,383,422 $16.06 - 29.00 February 28, 1997 1,321,281 $16.06 - 29.00 February 28, 1998 831,396 $16.00 - 29.00 - ---------------------------------------------------------- Note 15: Retirement Plans The Company sponsors two defined contribution plans and several defined benefit retirement plans. The defined contribution plans cover substantially all salaried, sales and certain hourly employees in the United States and Canada. The Company makes contributions equal to 50% of the participating employee's contributions subject to certain limitations. Employer contributions, which are invested in shares of the Company's common stock, were $2.0 million in fiscal 1998, $2.1 million in fiscal 1997 and $1.8 million in fiscal 1996. In the United States and Canada, defined benefit plans cover substantially all employees. Benefits are based primarily on years of credited service and average compensation or stated amounts for each year of service. These plans are generally funded by contributions to tax-exempt trusts in amounts sufficient to provide assets to cover the plans' obligations. Plan assets consist principally of listed equity securities, fixed income securities and cash equivalents. Net pension credit for the defined benefit plans was as follows: (in thousands) 1998 1997 1996 - -------------------------------------------------------------------- Service costs $ 2,492 $ 2,492 $ 1,946 Interest costs 12,883 12,438 12,767 Actual return on plan assets (45,148) (30,382) (39,431) Net amortization and deferral 28,681 14,834 23,891 - -------------------------------------------------------------------- Net pension credit $(1,092) $ (618) $ (827) ==================================================================== The funded status of the defined benefit plans and the amounts recognized in the balance sheets were as follows: 1998 1997 ------------------- ------------------- Assets Benefit Assets Benefit Exceed Obli- Exceed Obli- Benefit gations Benefit gations Obli- Exceed Obli- Exceed (in thousands) gations Assets gations Assets - ------------------------------------------------------------------------ Actuarial present value of benefit obligations: Vested $169,799 $ 15,355 $148,102 $ 11,169 Nonvested 3,408 663 2,753 1,926 - ------------------------------------------------------------------------ Accumulated benefit obligations 173,207 16,018 150,855 13,095 Effect of future salary increases 4,402 - 6,227 351 - ------------------------------------------------------------------------ Projected benefit obligations 177,609 16,018 157,082 13,446 Plan assets at fair value 231,032 - 202,131 - - ------------------------------------------------------------------------ Plan assets in excess of (less than) projected benefit obligations 53,423 (16,018) 45,049 (13,446) Unamortized prior service cost 4,864 - 5,217 - Unrecognized effect from past experience different from that assumed (21,119) 5,744 (13,899) 4,145 Unrecognized transition (assets) obligations, net of amortization (7,663) - (9,428) - Adjustment required to recognize minimum pension liability - (5,744) - (3,794) - ------------------------------------------------------------------------ Prepaid (accrued) pension costs $ 29,505 $(16,018) $ 26,939 $(13,095) ========================================================================= The Company amortizes prior service costs and unrecognized gains and losses on a straight-line basis over not more than 16 years. Other assumptions used, which reflect weighted averages of the U.S. and Canadian defined benefit plans, were as follows: 1998 1997 - ----------------------------------------------------------------------- Discount rate 6.7% 7.6% Expected long-term return rate on assets 9.5% 9.5% Rate of increase in future compensation 4.0% 4.0% - ----------------------------------------------------------------------- In Venezuela, all employees are entitled to certain severance indemnities based on compensation and cause of separation. This post- employment arrangement qualifies as a defined benefit plan under the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." The Company has elected to define the vested benefit obligation for this arrangement as the actuarial present value of vested benefits the employee is entitled to if immediately separated at the measurement date. This arrangement has not been funded, and the corresponding expense recognized was $3.6 million in fiscal 1998, $2.9 million in fiscal 1997 and $3.8 million in fiscal 1996. Note 16: Post-Retirement Health and Life Insurance Benefits The Company provides post-retirement health and life insurance benefits for retirees in the United States and Canada who meet minimum age and service requirements. The costs of the U.S. life insurance benefits are funded over the employees' active working lives through contributions to an insurance continuation fund maintained by an insurance company. Life insurance benefits for Canadian retirees are funded on a pay-as-you-go basis through an insurance company. Health-care benefits for U.S. and Canadian retirees are provided under a self-insured program administered by an insurance company. The net periodic post-retirement benefit cost (credit) was as follows: (in thousands) 1998 1997 1996 - --------------------------------------------------------------------- Service costs $ 356 $ 474 $ 222 Interest costs 1,154 1,351 999 Net amortization and deferral (861) (1,417) (1,785) - --------------------------------------------------------------------- Net post-retirement benefits cost (credit) $ 649 $ 408 $ (564) ===================================================================== In addition to the net post-retirement benefit cost, the Company recorded a $2.9 million curtailment gain in fiscal 1998. The curtailment gain resulted from the Company's decision to eliminate subsidized retiree medical coverage for most of its active employees in the United States. Employees affected by this change who meet certain age and service requirements at the time of retirement can elect coverage under Company-sponsored retiree medical plans by paying the full cost of such plans. The actuarial present value of benefit obligations and the amounts recognized in the consolidated balance sheets were as follows: (in thousands) 1998 1997 - ------------------------------------------------------------------- Actuarial present value of benefit obligations: Retirees $11,159 $12,952 Fully eligible active plan participants 1,137 1,640 Other active plan participants 1,515 3,930 - ------------------------------------------------------------------- Accumulated benefit obligations 13,811 18,522 Plan assets at fair value - 535 - ------------------------------------------------------------------- Accumulated obligation in excess of plan assets 13,811 17,987 Unrecognized effect from past experience different from that assumed 220 (1,319) Unrecognized effect from plan amendments (348) 443 - ------------------------------------------------------------------- Accrued post-retirement cost $13,683 $17,111 =================================================================== The assumed annual rate of future increases in per capita cost of health-care benefits ranged from 4% to 8.8% for each of the next five years and 4% thereafter. These trend rates reflect the Company's prior experience, plan provisions and management's expectation of future rates. Increasing the health-care cost trend by 1% in each year would result in an insignificant change to the accumulated benefit obligation and the service and interest costs. The weighted average discount rates used were 6.8% and 7.6% in fiscal 1998 and 1997, respectively. Note 17: Multifoods' Business Segments The Company's business segments are Multifoods Distribution Group, North America Foods, Venezuela Foods and Divested Businesses. In fiscal 1998, the Company changed the name of its Foodservice Distribution segment to Multifoods Distribution Group. In addition, the Company changed the reporting of its former food exporting business results from the Multifoods Distribution Group to the Divested Businesses segment. Fiscal 1997 and 1996 segment financial information has been reclassified to conform with the fiscal 1998 presentation. Multifoods Distribution Group includes the Company's vending and foodservice distribution businesses. The foodservice distribution business was formerly referred to as limited-menu distribution. The vending distribution business is the largest U.S. distributor of food products to vending and office coffee service operators. The foodservice distribution business is a distributor in the United States to foodservice operators. The foodservice business distributes a broad selection of items, including food products, paper goods and cleaning supplies. North America Foods consists of two groups, U.S. Foods and Robin Hood Multifoods. U.S. Foods markets bakery products, such as bakery mixes and frozen desserts, to commercial customers in the United States. Robin Hood Multifoods sells flour, bakery mixes and condiments to consumer and commercial customers primarily in Canada. As of February 28, 1998, the Company had approximately $84 million of net assets located in Canada. Venezuela Foods includes consumer foods, commercial foods and animal feeds. The business provides grain-based products to consumers, food processors, and commercial and retai bakeries. Principal consumer products include wheat flour, corn flour, whole grain rice and rice flour. The Company's operations in Venezuela are subject to risks inherent in operating under a different legal and political system along with a difficult economic environment. Among these risks are inflation, currency volatility, possible limitations on foreign investment, exchangeability of currency, dividend repatriation and changes in existing tax laws. The Company's Venezuelan operations are also dependent on raw material imports for many of its products. As of February 28, 1998, the Company had approximately $70 million of net assets located in Venezuela. Divested Businesses consists of the surimi seafood business, which was divested in fiscal 1996, and the food exporting business, which was divested in fiscal 1998.
Operating Net Operating Unusual Earnings (in millions) Sales Costs Items (Loss) - ---------------------------------------------------------------------------- 1998: Multifoods Distribution Group $1,770.2 $(1,746.5) $ - $ 23.7 North America Foods 471.7 (441.1) - 30.6 Venezuela Foods 360.7 (360.9) - (.2) Divested Business 9.2 (4.8) (5.0) (.6) Corporate Expenses - (8.7) - (8.7) - ---------------------------------------------------------------------------- Total $2,611.8 $(2,562.0) $ (5.0) $ 44.8 ============================================================================ 1997: Multifoods Distribution Group $1,729.9 $(1,725.0) $ (5.1) $ (.2) North America Foods 476.7 (455.9) (11.4) 9.4 Venezuela Foods 346.8 (328.2) - 18.6 Divested Business 42.5 (34.8) - 7.7 Corporate Expenses - (9.8) (3.6) (13.4) - ---------------------------------------------------------------------------- Total $2,595.9 $(2,553.7) $(20.1) $ 22.1 ============================================================================ 1996: Multifoods Distribution Group $1,691.6 $(1,673.5) $ (9.4) $ 8.7 North America Foods 459.7 (438.9) - 20.8 Venezuela Foods 328.5 (309.4) - 19.1 Divested Businesses 43.4 (36.7) 9.9 16.6 Corporate Expenses - (8.9) (6.2) (15.1) - ---------------------------------------------------------------------------- Total $2,523.2 $(2,467.4) $ (5.7) $ 50.1 ============================================================================
1998 1997 1996 ---------------------------------- ---------------------------------- ---------------------------------- Depreciation Depreciation Depreciation Capital and Capital and Capital and (in millions) Expenditures Amortization Assets Expenditures Amortization Assets Expenditures Amortization Assets - -------------------------------------------------------------------------------------------------------------------------------- Multifoods Distribution Group $ 5.4 $12.6 $341.4 $ 7.2 $12.9 $372.9 $13.9 $13.2 $392.5 North America Foods 6.5 11.0 217.2 14.0 10.7 234.7 12.0 10.0 241.8 Venezuela Foods 7.5 6.7 205.2 5.8 6.7 191.8 5.0 5.2 125.8 Divested Businesses - - 18.9 .1 - 64.5 .1 .9 23.4 Corporate 6.7 .4 44.7 .4 .4 51.4 .2 .5 38.8 - -------------------------------------------------------------------------------------------------------------------------------- Total $26.1 $30.7 $827.4 $27.5 $30.7 $915.3 $31.2 $29.8 $822.3 ================================================================================================================================
Amounts expended for business acquisitions are not considered as part of capital expenditures. Assets are identifiable to business segments either by their direct use or by allocations when used jointly by two or more segments.
Note 18: Quarterly Summary (unaudited) Operating Net Operating Unusual Earnings (in millions) Sales Costs Items (Loss) - ------------------------------------------------------------------------------ First Quarter - 1998 Multifoods Distribution Group $446.7 $(443.2) $ - $ 3.5 North America Foods 115.5 (112.5) - 3.0 Venezuela Foods 102.3 (99.5) - 2.8 Divested Business 2.7 (2.1) - .6 Corporate Expenses - (2.4) - (2.4) - ----------------------------------------------------------------------------- Total $667.2 $(659.7) $ - $ 7.5 ============================================================================= First Quarter - 1997 Multifoods Distribution Group $425.3 $(421.9) $ - $ 3.4 North America Foods 111.6 (109.5) - 2.1 Venezuela Foods 71.2 (69.1) - 2.1 Divested Business 18.0 (16.3) - 1.7 Corporate Expenses - (2.7) (3.6) (6.3) - ----------------------------------------------------------------------------- Total $626.1 $(619.5) $ (3.6) $ 3.0 ============================================================================= Second Quarter - 1998 Multifoods Distribution Group $422.2 $(417.1) $ - $ 5.1 North America Foods 116.7 (111.4) - 5.3 Venezuela Foods 87.6 (89.0) - (1.4) Divested Business 2.7 (.6) - 2.1 Corporate Expenses - (1.8) - (1.8) - ----------------------------------------------------------------------------- Total $629.2 $(619.9) $ - $ 9.3 ============================================================================= Second Quarter - 1997 Multifoods Distribution Group $424.6 $(425.3) $ - $ (.7) North America Foods 114.4 (110.8) - 3.6 Venezuela Foods 87.4 (78.5) - 8.9 Divested Business 8.1 (7.0) - 1.1 Corporate Expenses - (2.6) - (2.6) - ----------------------------------------------------------------------------- Total $634.5 $(624.2) $ - $ 10.3 ============================================================================= Third Quarter - 1998 Multifoods Distribution Group $456.8 $(449.0) $ - $ 7.8 North America Foods 133.4 (119.4) - 14.0 Venezuela Foods 83.2 (86.0) - (2.8) Divested Business 3.4 (2.1) - 1.3 Corporate Expenses - (2.2) - (2.2) - ----------------------------------------------------------------------------- Total $676.8 $(658.7) $ - $ 18.1 ============================================================================= Third Quarter - 1997 Multifoods Distribution Group $452.6 $(450.9) $ - $ 1.7 North America Foods 139.7 (130.4) - 9.3 Venezuela Foods 95.9 (90.6) - 5.3 Divested Business 8.9 (6.0) - 2.9 Corporate Expenses - (2.3) - (2.3) - ----------------------------------------------------------------------------- Total $697.1 $(680.2) $ - $ 16.9 ============================================================================= Fourth Quarter - 1998 Multifoods Distribution Group $444.5 $(437.2) $ - $ 7.3 North America Foods 106.1 (97.8) - 8.3 Venezuela Foods 87.6 (86.4) - 1.2 Divested Business .4 - (5.0) (4.6) Corporate Expenses - (2.3) - (2.3) - ----------------------------------------------------------------------------- Total $638.6 $(623.7) $ (5.0) $ 9.9 ============================================================================= Fourth Quarter - 1997 Multifoods Distribution Group $427.4 $(426.9) $ (5.1) $ (4.6) North America Foods 111.0 (105.2) (11.4) (5.6) Venezuela Foods 92.3 (90.0) - 2.3 Divested Business 7.5 (5.5) - 2.0 Corporate Expenses - (2.2) - (2.2) - ----------------------------------------------------------------------------- Total $638.2 $(629.8) $(16.5) $ (8.1) =============================================================================
Note 18: Quarterly Summary (unaudited) (continued) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year (in millions, ------------- -------------- ------------- -------------- -------------- except per share data) 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Gross profit $52.8 $48.9 $48.4 $53.2 $58.4 $61.2 $50.7 $49.4 $210.3 $212.7 Net earnings (loss) 2.0 (.4)(b) 4.5 4.0 9.4 8.6 4.1(c) (9.4)(d) 20.0 2.8 Earnings (loss) per share of common stock (a): Basic .11 (.02)(b) .25 .22 .51 .48 .22(c) (.53)(d) 1.09 .15 Diluted .11 (.02)(b) .25 .22 .50 .48 .21(c) (.53)(d) 1.08 .15 Dividends paid per share of common stock .20 .20 .20 .20 .20 .20 .20 .20 .80 .80 Market price of common stock: Close 28 1/4 19 7/8 26 7/8 16 5/8 26 7/8 15 3/4 27 15/16 21 1/8 27 15/16 21 1/8 High 28 1/4 21 3/8 29 3/8 20 3/8 32 7/16 17 1/2 29 1/4 22 32 7/16 22 Low 20 18 1/4 24 1/2 16 1/4 26 3/16 15 1/8 24 5/8 15 5/8 20 15 1/8 - --------------------------------------------------------------------------------------------------------------------------- (a) Earnings (loss) per share are computed independently for each period presented. As a result of the effect of common shares issued from the exercise of employee stock options, the total of diluted per share results for the four quarters does not equal annual diluted earnings per share in fiscal 1998. (b) Includes a net after-tax charge of $2.2 million, or 12 cents per share, from unusual items. (c) Includes a net after-tax charge of $3.2 million, or 17 cents per share, from unusual items. Also includes a net after-tax gain of $1.8 million, or 10 cents per share, from the elimination of subsidized retire medical coverage for most active employees in the United States. (d) Includes a net after-tax charge of $12.6 million, or 71 cents per share, from unusual items.
Six-Year Comparative Summary Fiscal year ended the last day of February (dollars and shares in millions, except per share data) 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------------- Consolidated Summary of Operations Net sales $2,611.8 $2,595.9 $2,523.2 $2,295.1 $2,158.4 $2,199.2 Cost of materials and production (2,237.6) (2,215.4) (2,135.7) (1,901.9) (1,743.9) (1,783.4) Delivery and distribution (163.9) (167.8) (162.9) (146.2) (141.8) (141.7) Selling, general and administrative (160.5) (170.5) (168.8) (186.7) (204.9) (199.0) Unusual items (5.0) (20.1) (5.7) 26.2 (70.0) - Interest, net (12.4) (16.8) (17.9) (11.4) (10.1) (10.9) Other income (expense), net - (.3) (4.4) (3.4) (.4) .1 Earnings (losses) from unconsolidated affiliates - - - - (12.2) 1.8 - -------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes 32.4 5.0 27.8 71.7 (24.9) 66.1 Income taxes (12.4) (2.2) (3.7) (14.7) 11.5 (24.9) - -------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 20.0 $ 2.8 $ 24.1 $ 57.0 $ (13.4) $ 41.2 ================================================================================================================================ Earnings (loss) per share of common stock: Basic $ 1.09 $ .15 $ 1.33 $ 3.16 $ (.72) $ 2.13 Diluted 1.08 .15 1.32 3.16 (.72) 2.10 - -------------------------------------------------------------------------------------------------------------------------------- Year-End Financial Position Current assets $ 484.4 $ 563.3 $ 459.0 $ 471.7 $ 439.3 $ 415.9 Current liabilities 312.4 372.0 272.3 316.0 301.7 243.5 Working capital (excluding cash and short-term debt) 187.7 277.5 218.8 203.1 189.7 187.9 Property, plant and equipment, net 220.6 225.4 226.5 228.0 245.9 245.7 Long-term debt 162.9 202.3 202.9 183.1 195.1 167.0 Shareholders' equity 309.4 289.6 299.6 291.1 250.0 322.0 Total assets 827.4 915.3 822.3 846.7 814.8 803.5 - -------------------------------------------------------------------------------------------------------------------------------- Dividends Paid Preferred stock $ - $ - $ .1 $ .2 $ .2 $ .2 Common stock 14.7 14.5 14.4 14.4 15.2 15.4 Per share of common stock .80 .80 .80 .80 .80 .80 - -------------------------------------------------------------------------------------------------------------------------------- Other Financial Data Current ratio 1.6:1 1.5:1 1.7:1 1.5:1 1.5:1 1.7:1 Equity per share of common stock $ 16.51 $ 16.08 $ 16.66 $ 16.16 $ 13.63 $ 16.64 Debt to total capitalization 38% 51% 45% 45% 50% 37% Depreciation $ 27.0 $ 26.6 $ 25.3 $ 22.8 $ 24.9 $ 23.8 Capital expenditures, excluding acquisitions $ 26.1 $ 27.5 $ 31.2 $ 30.8 $ 51.9 $ 45.7 Average common shares outstanding: Basic 18.4 18.0 18.0 18.0 18.9 19.3 Diluted 18.6 18.0 18.0 18.0 18.9 19.5 Number of common shareholders 4,705 5,087 4,930 5,234 4,939 5,097 Number of employees 6,807 7,176 7,115 7,495 8,390 8,341 Market price per share of common stock: Close $ 27 15/16 $ 21 1/8 $ 18 5/8 $ 18 5/8 $ 17 3/8 $ 25 3/4 High $ 32 7/16 $ 22 $ 23 7/8 $ 19 5/8 $ 26 3/8 $ 28 7/8 Low $ 20 $ 15 1/8 $ 17 1/4 $ 15 1/8 $ 16 3/4 $ 23 1/4 - --------------------------------------------------------------------------------------------------------------------------------
EX-21 10 Exhibit 21 SUBSIDIARIES OF INTERNATIONAL MULTIFOODS CORPORATION The following is a list of the Company's subsidiaries as of March 1, 1998, except for unnamed subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. Jurisdiction of Name of Subsidiary Incorporation - ------------------ ------------- Damca International Corporation Delaware Inversiones MONACA, C.A. Venezuela AGROMONACA, C.A. Venezuela Molinos Nacionales, C.A. (MONACA) Venezuela Robin Hood Multifoods Inc. Ontario Multifoods Inc. Ontario Gourmet Baker Inc. Ontario 980964 Ontario Limited Ontario Fantasia Confections, Inc. California MINETCO - Minnesota International Export Trading Company, Inc. Minnesota Multifoods Bakery Distributors, Inc. Delaware Multifoods Bakery International, Inc. Delaware Multifoods Distribution Group, Inc. Delaware Multifoods Specialty Distribution, Inc. Delaware VSA, Inc. Colorado EX-23 11 Exhibit 23 Independent Auditors' Consent The Board of Directors International Multifoods Corporation: We consent to incorporation by reference in Registration Statement No. 333-51399 on Form S-8 relating to the Employees' Voluntary Investment and Savings Plan of International Multifoods Corporation, No. 333-34173 on Form S-8 relating to the Stock Purchase Plan of Robin Hood Multifoods Inc., No. 2-84236 on Form S-8 relating to the 1983 Stock Option Incentive Plan of International Multifoods Corporation, No. 33- 6223 on Form S-8 relating to the 1986 Stock Option Incentive Plan of International Multifoods Corporation, No. 33-30979 on Form S-8 relating to the Amended and Restated 1989 Stock-Based Incentive Plan of International Multifoods Corporation, No. 333-34171 on Form S-8 relating to the 1997 Stock-Based Incentive Plan of International Multifoods Corporation and No. 33-65221 on Form S-3 relating to certain debt securities of International Multifoods Corporation of our reports dated March 30, 1998, relating to the consolidated balance sheets of International Multifoods Corporation and subsidiaries as of February 28, 1998 and 1997 and the related consolidated statements of earnings and cash flows and related financial statement schedule for each of the fiscal years in the three-year period ended February 28, 1998, which reports appear or are incorporated by reference in the Annual Report on Form 10-K for the fiscal year ended February 28, 1998, of International Multifoods Corporation. KPMG Peat Marwick LLP Minneapolis, Minnesota May 13, 1998 EX-27.1 12
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENT OF EARNINGS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 YEAR FEB-28-1998 FEB-28-1998 10,363 0 148,947 4,746 265,989 484,404 372,085 151,518 827,386 312,423 162,857 0 0 2,184 307,169 827,386 2,611,792 2,611,792 2,401,501 2,401,501 0 (228) 17,643 32,395 12,371 20,024 0 0 0 20,024 1.09 1.08
EX-27.2 13
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 YEAR FEB-28-1997 FEB-28-1997 8,753 0 216,798 9,339 283,948 563,256 357,239 131,882 915,288 371,994 202,328 0 0 2,184 287,394 915,288 2,595,873 2,595,873 2,383,154 2,383,154 0 2,862 18,549 5,016 2,236 2,780 0 0 0 2,780 0.15 0.15
EX-27.3 14
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 YEAR FEB-29-1996 FEB-29-1996 7,508 0 179,504 13,977 230,626 459,035 341,958 115,460 822,257 272,295 202,937 0 0 2,184 297,379 822,257 2,523,197 2,523,197 2,298,577 2,298,577 0 5,783 19,485 27,754 3,679 24,075 0 0 0 24,075 1.33 1.32
EX-27.4 15
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CO NSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 3-MOS FEB-28-1998 MAY-31-1997 8,939 0 184,185 6,926 280,248 530,796 359,406 137,403 878,522 358,821 178,834 0 0 2,184 286,799 878,522 667,186 667,186 614,344 614,344 0 845 5,413 2,857 857 2,000 0 0 0 2,000 0.11 0.11
EX-27.5 16
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS 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-28-1998 AUG-31-1997 5,568 0 165,572 6,552 269,622 498,830 362,453 143,214 842,982 316,697 178,769 0 0 2,184 293,064 842,982 1,296,399 1,296,399 1,195,168 1,195,168 0 183 9,949 9,341 2,802 6,539 0 0 0 6,539 0.36 0.36
EX-27.6 17
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 9-MOS FEB-28-1998 NOV-30-1997 9,118 0 173,863 6,518 305,682 549,034 368,900 148,156 890,178 350,352 178,001 0 0 2,184 305,723 890,178 1,973,202 1,973,202 1,813,660 1,813,660 0 94 14,111 25,317 9,367 15,950 0 0 0 15,950 0.87 0.86
EX-27.7 18
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 3-MOS FEB-28-1997 MAY-31-1996 9,590 0 166,676 9,925 252,275 472,044 343,139 118,743 832,700 285,337 203,094 0 0 2,184 293,572 832,700 626,073 626,073 577,189 577,189 0 767 4,380 (1,082) (649) (433) 0 0 0 (433) (0.02) (0.02)
EX-27.8 19
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS 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-28-1997 AUG-31-1996 5,315 0 167,845 9,468 256,471 475,141 351,241 123,630 837,731 288,710 203,154 0 0 2,184 294,488 837,731 1,260,572 1,260,572 1,158,491 1,158,491 0 2,376 8,918 4,625 1,063 3,562 0 0 0 3,562 0.20 0.20
EX-27.9 20
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF EARNINGS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 9-MOS FEB-28-1997 NOV-30-1996 11,128 0 186,584 9,924 332,538 577,783 357,471 129,845 941,832 382,268 203,733 0 0 2,184 300,358 941,832 1,957,704 1,957,704 1,794,457 1,794,457 0 3,009 13,349 16,963 4,765 12,198 0 0 0 12,198 0.68 0.68
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