-----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, UCPWlSxc/H+OP/omuTdtXIPafzU1kLws6yR8K2ESMo2OiUaNbOMVyhAZWqBwb8bD rnDPJ0AEDHBiocjP8vC2Aw== 0000051410-99-000005.txt : 19990514 0000051410-99-000005.hdr.sgml : 19990514 ACCESSION NUMBER: 0000051410-99-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990513 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-K405 SEC ACT: SEC FILE NUMBER: 001-06699 FILM NUMBER: 99619678 BUSINESS ADDRESS: STREET 1: 200 EAST LAKE STREET CITY: WAYZATA STATE: MN ZIP: 55391 BUSINESS PHONE: 6123403300 MAIL ADDRESS: STREET 1: 200 EAST LAKE STREET CITY: WAYZATA STATE: MN ZIP: 55391 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MILLING CO INC DATE OF NAME CHANGE: 19700217 10-K405 1 1999 10K 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, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 1-6699 INTERNATIONAL MULTIFOODS CORPORATION (Exact name of registrant as specified in its charter) Delaware 41-0871880 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 200 East Lake Street, Wayzata, Minnesota 55391 (Address of principal executive offices) (Zip Code) (612) 594-3300 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock New York Stock Exchange (par value $.10 per share) 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 10-K or any amendment to this Form 10 K. [X] 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 3, 1999 (based on the closing sale price of $21.9375 per share as reported in the consolidated transaction reporting system on such date) was $407,008,171. The number of shares outstanding of the registrant's Common Stock, par value $.10 per share, as of May 3, 1999 was 18,737,951. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Stockholders for the fiscal year ended February 28, 1999 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 18, 1999 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 a foodservice distribution business 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 August 1998, the Company announced its decision to sell its Venezuela Foods business and classified the Venezuela Foods business as a discontinued operation. The Company's business segments are Multifoods Distribution Group and North America Foods. Financial information for the last three fiscal years for each of the Company's business segments, which is included in Note 15 to the Company's Consolidated Financial Statements on pages 43 and 44 of the Company's Annual Report to Stockholders for the fiscal year ended February 28, 1999 ("1999 Annual Report to Stockholders"), is incorporated herein by reference. Multifoods Distribution Group The Multifoods Distribution Group segment is a distributor of food and other products to the foodservice industry in the United States. The Company leases a fleet of approximately 388 tractors, 466 trailers and 22 straight trucks, most of which are equipped with an on board computer system from which drivers obtain delivery performance and route information. The Company operates 31 distribution centers located nationwide. The Company also operates 19 cash and carry locations from which customers can make purchases. No single customer accounts for a significant portion of the segment's sales. The Company is a distributor of food and other products in the United States to independent pizza restaurants and other casual-dining, limited-menu operators, including sandwich shops, Mexican and Italian restaurants, movie theaters, fund-raising groups, commissaries and stadium and recreational concession stands. 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. The Company is also 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 customers, generally once a week, from distribution centers located nationwide. The 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. While the Company is the only nationwide vending distributor, it encounters significant competition from regional and local distributors as well as warehouse clubs. 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. 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, wholesale and in-store 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 batters, doughs and 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 the United States 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 consists of the Company's Canada consumer and commercial foods businesses. 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, GOLDEN TEMPLE, 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. In addition, the Company 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 the HABITANT, GATTUSO, WOODMAN'S, ROSE and MCLARENS labels. The commercial foods business produces condiments, bakery mix products, wheat flour and oat products for retail, in-store and wholesale bakeries and foodservice customers in Canada and the United States. Such products are sold under the Company's ROBIN HOOD and BICK'S brands. The Company also manufactures and markets frozen batters, doughs and desserts in Canada under its GOURMET BAKER 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. Discontinued Operations The Company is attempting to sell its Venezuela Foods business, which is classified as a discontinued operation. The Venezuela Foods business 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 products of the Venezuela Foods business 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 a 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, and in 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 24 through 28 of the 1999 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 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's 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 segment and the Venezuela Foods business, 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, 1999, the Company and its subsidiaries had 6,743 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, cheese and other raw materials; changes in laws and regulations; the inability of the Company or its business partners to resolve "Year 2000" issues or the inability of the Company to accurately estimate the cost associated with "Year 2000" compliance; economic and political conditions in Venezuela including inflation, currency volatility, possible limitations on foreign investment, exchangeability of currency, dividend repatriation and changes in existing tax laws; the Company's ability to complete the sale of the Venezuela Foods business; the Company's ability to realize the earnings benefits from the integration of its distribution businesses; the inability of the Company to collect on a $6 million insurance claim related to the theft of product in St. Petersburg, Russia; fluctuations in foreign exchange rates; risks commonly encountered in international trade; and other factors as may be discussed in the Company's reports filed with the Securities and Exchange Commission. 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. The following is a description of the Company's properties as of February 28, 1999. Multifoods Distribution Group The Company owns 12 and leases 19 distribution centers aggregating approximately 2.4 million square feet for its Multifoods Distribution Group segment. These distribution centers are located in Tempe, Arizona; Anaheim, Commerce, Fremont, Livermore and Modesto, California; Denver, Colorado (2); East Windsor, Connecticut; Kissimmee, Florida; Austell, Georgia; Boise, Idaho; Woodridge, Illinois; Indianapolis, Indiana; Shawnee, Kansas; Louisville, Kentucky; Belleville, Michigan; Minneapolis and Rice, Minnesota; Springfield, Missouri; Paulsboro and Parsippany, New Jersey; Greensboro, North Carolina; Twinsburg, Ohio; Portland, Oregon; Middletown, Pennsylvania; Memphis, Tennessee; Dallas(2) and Houston, Texas; and Kent, Washington. The Company's distribution business also operates 19 cash-and-carry distribution locations, 12 of which are separate from the Company's other distribution centers. North America Foods The Company owns 14 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, New Delhi, Port Colborne, Scarborough and Simcoe, Ontario; Montreal, Quebec (2); and Saskatoon, Saskatchewan. The Company also operates two research and development laboratories. Discontinued Operations 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 9 warehouse facilities. In addition, the Company owns one and leases 9 agricultural distribution centers. The Company also operates two Company-owned hatcheries and one leased hatchery and operates four Company-owned and 10 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, 1999. 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 16 to the Company's Consolidated Financial Statements on page 46 of the 1999 Annual Report to Stockholders, are incorporated herein by reference. As of May 3, 1999, there were 4,626 holders of record of the Common Stock of the Company. Item 6. Selected Financial Data. The information for fiscal years 1995 through 1999 in the "Five- Year Comparative Summary" on page 23 of the 1999 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 2 ("Discontinued Operations") and Note 4 ("Unusual Items") to the Company's Consolidated Financial Statements on pages 35 through 37 of the 1999 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" on pages 24 through 28 of the 1999 Annual Report to Stockholders is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The section under the heading "Management's Discussion and Analysis" entitled "Market Risk Management" on page 27 of the 1999 Annual Report to Stockholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The Independent Auditors' Report, the Company's Consolidated Financial Statements as of February 28, 1999 and February 28, 1998, and for each of the fiscal years in the three-year period ended February 28, 1999, and the Notes to the Company's Consolidated Financial Statements on pages 29 through 46 of the 1999 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 9 and the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" on page 22 of the Company's Proxy Statement dated May 12, 1999 ("1999 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 3, 1999. Unless otherwise noted, the positions described are positions with the Company or its subsidiaries. Name Age Positions Held Period - ---- --- -------------- ------ Gary E. Costley 55 Chairman of the Board, January 1, 1997 President and Chief to present Executive Officer Dean of the Babcock 1995 to 1996 Graduate School of Management at Wake Forest University Executive Vice President 1992 to 1994 of Kellog Company and President, Kellogg North America Jeffrey E. Boies 54 Vice President and April 21, 1998 President, Multifoods to present Distribution Group, Inc. President, Multifoods 1997 to 1998 Distribution Group, Inc. President, VSA, Inc. 1996 to 1997 President and Chief 1995 to 1996 Executive Officer of Sysco Food Services/ Cincinnati President and Chief 1993 to 1995 Executive Officer of Sysco Food Services/ Albany Frank W. Bonvino 57 Vice President, General 1992 Counsel and Secretary to present Anthony T. 39 Vice President and September 20, 1996 Brausen Treasurer 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 to 1994 Financial Reporting Dennis R. 47 Vice President and December 15, 1995 Johnson Controller to present Assistant Controller - 1993 to 1995 Operations and Tax Jill W. Schmidt 40 Vice President, June 1, 1997 Communications to present Vice President of 1995 to 1997 Tunheim Santrizos Co. Account Supervisor of 1992 to 1995 Tunheim Santrizos Co. William L. 52 Senior Vice President - April 23, 1998 Trubeck Finance, Chief to present Financial Officer and President, Latin America Operations Senior Vice President - 1997 to 1998 Finance and Chief Financial Officer Senior Vice President 1994 to 1996 and Chief Financial Officer of SPX Corporation Senior Vice President 1993 to 1994 and Chief Financial Officer of Honeywell Inc. Donald H. Twiner 58 President, Robin Hood June 1, 1997 Multifoods Inc. to present President-Consumer Foods 1998 to 1997 Division of Robin Hood Multifoods Inc. Robert S. Wright 52 Vice President and 1995 President, North to present America Foods President, Specialty 1994 to 1995 Brands Division of Foodbrands America, Inc. President, Prepared 1992 to 1994 Foods 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 8 and 9 and the section entitled "Executive Compensation" on pages 14 through 21 of the 1999 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 through 4 of the 1999 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 1999 Annual Report to Stockholders, are incorporated by reference in Part II, Item 8, hereof: Independent Auditors' Report Consolidated Statements of Operations - Years ended February 28, 1999, February 28, 1998 and February 28, 1997 Consolidated Balance Sheets - February 28, 1999 and February 28, 1998 Consolidated Statements of Cash Flows - Years ended February 28, 1999, February 28, 1998 and February 28, 1997 Consolidated Statements of Shareholders' Equity - Years ended February 28, 1999, February 28, 1998 and February 28, 1997 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 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1998). 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, as amended (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 and Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998).* 10.3 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).* 10.4 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)).* 10.5 Management Incentive Plan of International Multifoods Corporation, Amended and Restated as of March 1, 1998 (incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on From 10-K for the fiscal year ended February 28, 1998).* 10.6 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).* 10.7 Management Benefit Plan of International Multifoods Corporation, Restated Effective January 1, 1997, as further amended (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 and Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998).* 10.8 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).* 10.9 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).* 10.10 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).* 10.11 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).* 10.12 Employment Agreement, dated as of November 1 1996, between International Multifoods Corporation and Gary E. Costley, as amended (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 and Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998).* 10.13 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).* 10.14 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).* 10.15 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).* 10.16 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).* 10.17 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).* 10.18 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).* 10.19 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).* 10.20 Agreement dated June 15, 1998 between Molinos Nacionales, C.A. and Fidias Robuste regarding separation from employment with the Company (incorporated herein by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1998).* 10.21 Memorandum of understanding, dated September 20, 1996, between Frank W. Bonvino and International Multifoods Corporation regarding supplemental retirement benefits.* 10.22 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).* 10.23 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).* 10.24 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).* 10.25 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 1999 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 Financial Data Schedule. - ----------------- *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, 1999. (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 12, 1999 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, May 12, 1999 Gary E. Costley, Ph.D. President and Chief Executive Officer (Principal Executive Officer) and Director /s/ William L. Trubeck Senior Vice President - May 12, 1999 William L. Trubeck Finance, Chief Financial officer and President, Latin America Operations (Principal Financial Officer) /s/ Dennis R. Johnson Vice President and May 12, 1999 Dennis R. Johnson Controller (Principal Accounting Officer) /s/ Claire L. Arnold Director May 12, 1999 Claire L. Arnold /s/ Robert M. Price Director May 12, 1999 Robert M. Price /s/Nicholas L. Reding Director May 12, 1999 Nicholas L. Reding /s/Jack D. Rehm Director May 12, 1999 Jack D. Rehm /s/Lois D. Rice Director May 12, 1999 Lois D. Rice /s/Richard K. Smucker Director May 12, 1999 Richard K. Smucker /s/Dolph W. von Arx Director May 12, 1999 Dolph W. von Arx Independent Auditors' Report The Board of Directors and Shareholders of International Multifoods Corporation: Under date of March 29, 1999, we reported on the consolidated balance sheets of International Multifoods Corporation and subsidiaries as of February 28, 1999 and 1998, and the related consolidated statements of operations, cash flows and shareholders' equity for each of the years in the three-year period ended February 28, 1999, as contained in the 1999 Annual Report to Stockholders. The 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, 1999. In connection with our audits of the aforementioned consolidated financial statements, we also 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. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Minneapolis, Minnesota March 29, 1999 Schedule II INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts Three years ended February 28, 1999 (in thousands) Additions -------------------- Balance at Net charges/(credits) Balance beginning to costs and at end Description of year expenses Deductions of year - ------------ --------- -------------------- ---------- ------- Allowance deducted from assets for doubtful receivables: Year ended February 28, 1999 $ 4,317 $ 713 $1,996 (a) $3,034 ======= ====== ====== ====== Year ended February 28, 1998 $ 9,029 $ (430) $4,282 (a) $4,317 ======= ====== ====== ====== Year ended February 28, 1997 $13,783 $2,721 $7,475 (a) $9,029 ======= ====== ====== ======
Notes: (a) Deductions include accounts charged off, net of recoveries, and foreign currency translation adjustments which arise from changes in current rates of exchange. INDEX TO EXHIBITS TO ANNUAL REPORT ON FORM 10-K OF INTERNATIONAL MULTIFOODS CORPORATION FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1999 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 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1998). 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, as amended (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 and Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998).* 10.3 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).* 10.4 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)).* 10.5 Management Incentive Plan of International Multifoods Corporation, Amended and Restated as of March 1, 1998 (incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on From 10-K for the fiscal year ended February 28, 1998).* 10.6 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).* 10.7 Management Benefit Plan of International Multifoods Corporation, Restated Effective January 1, 1997, as further amended (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 and Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998).* 10.8 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).* 10.9 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).* 10.10 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).* 10.11 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).* 10.12 Employment Agreement, dated as of November 1 1996, between International Multifoods Corporation and Gary E. Costley, as amended (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 and Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998).* 10.13 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).* 10.14 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).* 10.15 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).* 10.16 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).* 10.17 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).* 10.18 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).* 10.19 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).* 10.20 Agreement dated June 15, 1998 between Molinos Nacionales, C.A. and Fidias Robuste regarding separation from employment with the Company (incorporated herein by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1998).* 10.21 Memorandum of understanding, dated September 20, 1996, between Frank W. Bonvino and International Multifoods Corporation regarding supplemental retirement benefits.* 10.22 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).* 10.23 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).* 10.24 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).* 10.25 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 1999 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 Financial Data Schedule. - --------------------------- *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 2 EX-10.21 SUPPLEMENTAL RETIREMENT FWB Exhibit 10.21 [MULTIFOODS LETTERHEAD] Memo DATE: September 20, 1996 TO: Frank W. Bonvino FROM: Robert F. Maddocks Executive Vice President SUBJECT: SUPPLEMENTAL RETIREMENT AGREEMENT The intent of this memorandum is to set forth the terms of a supplemental benefit arrangement that will be provided to you if your employment ends prior to retirement, conditioned upon your acceptance of the terms of this arrangement. The arrangement will provide you with two benefits - a "supplemental retirement benefit" and a "severance benefit" - provided that you qualify for such benefits. The supplemental retirement benefit is designed around the Pension Equity Plan and the Management Benefit Plan. The general intent of this benefit is to provide you with the early retirement subsidy that you would have been entitled to receive under the Pension Equity Plan if you were three years older than your actual age. Because at age sixty-two (62) you will be eligible for a full retirement benefit under the Pension Equity Plan (unreduced from age sixty-five (65)), you will not receive a supplement if your employment ends after that age. The severance benefit provides you with a lump-sum payment equal to one times your annual base salary. It may be paid in two installments at the discretion of the Company. The benefits are "nonqualified" benefits and will be paid from the general assets of the Company. Your rights will be those of a general creditor of the Company. To evidence your acceptance of the terms of this supplemental benefit arrangement, please sign this document and return it to me at your earliest convenience. The document is referred to herein as the "Agreement." I Supplemental Retirement Benefit 1.1 Eligibility. You will be eligible to receive the "supplemental retirement benefit" set forth below if both of the following conditions are satisfied: (a) Your termination of employment is initiated by action of the Company other than for Cause, by your action for Good Reason, or by your action or action of the Company following a Change of Control. (b) Your termination of employment occurs prior to the date on which you attain age sixty-two (62). 1.2 Benefit Amount. The supplemental retirement benefit will be calculated as a monthly benefit and will be equal to "A" minus "B" minus "C" below: A = The monthly benefit to which you would have been entitled under the PEP if: (i) You had elected to have your benefit under the PEP calculated under the Grandfathered Formula and paid in the form of a single life annuity (regardless of whether you actually make such elections), (ii) The limits imposed under Code sections 401(a)(17) and 415 did not apply to your benefit under the PEP, (iii) You had twenty-five (25) years of Credited Service under the PEP (or your actual number of years of Credited Service if greater than twenty-five (25)), and (iv) Your date of birth was five (5) years earlier than your actual date of birth; except that, this provision will not cause your deemed age to be older than age sixty-two (62). minus B = The monthly benefit payable to you under the MBP because of the limits imposed under Code sections 401(a)17 and 415. minus C = The monthly benefit payable to you under the PEP. All monthly benefits described above will be expressed in the form of a single life annuity starting as of the date you elect to start your pension under the PEP. 1.3 Form of Benefit. The supplemental retirement benefit will be paid to you in the form of a single life annuity with monthly benefit payments. However, at the sole discretion of the Company, it may be paid in any other form. If it is paid in any form other than a single life annuity, the benefit will be adjusted so that it is the Actuarial Equivalent of the benefit that would have been paid as a single life annuity. 1.4 Commencement of Benefit. The supplemental retirement benefit will start as of the same day as the benefit paid to you under the PEP. 1.5 Spouse Benefit. If you become eligible for a supplemental retirement benefit but you die before the supplemental retirement benefit is paid or starts to be paid to you, and you are survived by a spouse, that spouse will be entitled to a monthly benefit payable in the form of a single life annuity equal to the difference between the "qualified preretirement survivor annuity" (as defined in section 417(c)) that would have been paid under the Grandfathered Formula under the PEP if your benefit were as calculated under this Agreement, and the actual qualified preretirement survivor annuity payable under the MBP and under the Grandfathered Formula under the PEP. No survivor benefits are payable with respect to the supplemental retirement benefit other than as provided above. II SEVERANCE BENEFITS 2.1 Eligibility. You will be eligible to receive the severance benefit set forth below if your termination of employment is initiated by action of the Company other than for Cause, or by your action for Good Reason. 2.2 Benefit Amount. The severance benefit will be calculated as a single lump-sum benefit, and will be equal to your annual base salary in effect immediately prior to your termination of employment. 2.3 Form of Benefit. The severance benefit will be paid to you in the form of a single lump-sum payment. However, at the sole discretion of the Company, it may be paid in two installments with the first installment being at least equal to the lump-sum amount multiplied by a fraction, the numerator of which is the number of full calendar months remaining in the calendar year in which your termination of employment occurs and the denominator of which is twelve (12). If paid in installments, the second installment will be paid as soon as practicable after the end of the calendar year in which your termination of employment occurs, and will equal the remaining lump-sum amount. 2.4 Payment Date. The severance benefit (or the first severance benefit installment) will be paid to you as soon as administratively practicable after your termination of employment. 2.5 Survivor Benefit. If you become eligible for a severance benefit but die before the severance benefit is paid in full, the benefit (or the remaining portion thereof) will be paid to the first of the following persons in order of priority: (i) your surviving spouse, (ii) your surviving children in equal shares, (iii) your estate. III MISCELLANEOUS 3.1 Definitions. The following terms are used herein: (a) "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of mortality and interest rate assumptions recommended by an actuary and approved by the Vice President - Finance and Chief Financial Officer or the Vice President and Controller of the Company. (b) "Cause" means: (1) Your willful and continued failure to perform substantially your duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that you have not substantially performed your duties; or (2) Your willful engaging in illegal conduct or gross misconduct which, in either such case, is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. The cessation of your employment shall not be deemed to be for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three- quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, you are guilty of the conduct described in subparagraph (1) or (2) above, and specifying the particulars thereof in detail. (c) "Change of Control" means: (1) The acquisition by any individual, entity or group (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 the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this section; or (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, 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; or (3) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (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 Company Common Stock and Outstanding Company 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 the Company or all or substantially all of the Company's 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 Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company 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, providing for such Business Combination; or (4) Approval by the stockholders of a Company of a complete liquidation or dissolution of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Company" means International Multifoods Corporation, and any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. (f) "Good Reason" means: (1) The assignment to you of any duties inconsistent in any respect with your position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, as of the effective date of this Agreement or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by you; (2) Any reduction in your annual base salary as in effect immediately prior to the effective date of this Agreement, or, if higher, your highest annual base salary in effect at any time after the effective date of this Agreement; (3) The Company's requiring you to be based at any office or location other than the corporate headquarters office in Minneapolis, Minnesota, or any office or location within 50 miles of such location, or the Company's requiring you to travel on Company business to a substantially greater extent than required immediately prior to the effective date of this Agreement; or (5) Any failure by the Company to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this section, any good faith determination of "Good Reason" made by you shall be conclusive. (g) "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 Employees' Retirement Plan of International Multifoods Corporation as of December 31, 1995. (h) "MBP" means the Management Benefit Plan of the Company, as it may be amended from time to time. (i) "PEP" means the Multifoods Pension Equity Plan, as adopted January 1, 1996 (as a continuation of the Employees' Retirement Plan of International Multifoods Corporation), as it may be amended from time to time. 3.2 Governing Law/Construction. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. 3.3 No Effect on Employment Rights. This Agreement is not an employment agreement and nothing in this Agreement will confer on you the right to be retained in the employ of the Company, or limit any right of the Company to discharge you or otherwise deal with you without regard to the existence of this Agreement. 3.4 FICA Taxes/Withholding. To the extent that benefit accruals hereunder are taken into account as amounts deferred under a nonqualified deferred compensation plan under Code section 3121(v), and thus are subject to tax under Code section 3101 ("FICA"), the Company may calculate the amount deferred and withhold against other compensation paid to you in any manner determined by it to be appropriate under Code section 3121(v). 3.5 Other Taxes/Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or other taxes as shall be required to be withheld pursuant to any applicable law or regulation. * * * Please indicate your receipt and acceptance of the terms of this Agreement by signing one of the enclosed copies and returning it at your earliest convenience. INTERNATIONAL MULTIFOODS CORPORATION /s/ Robert F. Maddocks ------------------------------------ By: Robert F. Maddocks Its: Executive Vice President cc: R. M. Price J. G. Traver ____________________________________________________________ ACCEPTANCE I, Frank W. Bonvino, hereby acknowledge receipt of this Agreement and wish to accept the supplemental benefit arrangement offered by this Agreement. Dated: September 27, 1996 Frank W. Bonvino /s/ Frank W. Bonvino ---------------------------- EX-11 3 EXHIBIT 11 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 28, February 29, February 28, 1999 1998 1997 1996 1995 ----------- ----------- ----------- ----------- ----------- Average shares of common stock outstanding 18,758,621 18,385,262 17,982,348 17,964,688 17,974,156 Dilutive potential common shares 144,722 233,791 - 49,358 15,809 ----------- ----------- ----------- ----------- ----------- Average shares outstanding assuming full dilution 18,903,343 18,619,053 17,982,348 18,014,046 17,989,965 =========== =========== =========== =========== =========== Earnings (loss) from continuing operations $ 6,832 $24,674 $(11,374) $15,017 $43,291 Earnings (loss) from discontinued operations (138,702) (4,650) 14,154 9,058 13,730 --------- ------- -------- ------- ------- Net earnings (loss) (131,870) 20,024 2,780 24,075 57,021 Less dividends on preferred stock - - - 260 167 --------- ------- -------- ------- ------- Net earnings (loss) applicable to common stock $(131,870) $20,024 $ 2,780 $23,815 $56,854 ========= ======= ======== ======= ======= Basic earnings (loss) per share: Continuing operations $ 0.36 $ 1.34 $ (0.63) $ 0.82 $ 2.40 Discontinued operations (7.39) (0.25) 0.78 0.51 0.76 --------- ------- -------- ------- ------- Total $ (7.03) $ 1.09 $ 0.15 $ 1.33 $ 3.16 ========= ======= ======== ======= ======= Diluted earnings (loss) per share: Continuing operations $ 0.36 $ 1.33 $ (0.63) $ 0.82 $ 2.40 Discontinued operations (7.34) (0.25) 0.78 0.50 0.76 --------- ------- -------- ------- ------- Total $ (6.98) $ 1.08 $ 0.15 $ 1.32 $ 3.16 ========= ======= ======== ======= =======
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 per share is computed similar to basic earnings per share except that the weighted average shares outstanding is increased to include additional shares from the assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the year. EX-12 4 EXHIBIT 12 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 28, February 29, February 28, 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ Earnings (loss) from continuing operations before income taxes $12,266 $36,990 $(9,767) $14,707 $53,482 Plus: Fixed charges (1) 25,719 27,154 28,052 29,314 24,795 Less: Capitalized interest (196) (8) (109) (128) (317) -------- -------- -------- -------- -------- Earnings available to cover fixed charges $37,789 $64,136 $18,176 $43,893 $77,960 Ratio of earnings to fixed charges(2)(3) 1.47 2.36 .65 1.50 3.14 (1) Fixed charges consist of the following: Years Ended --------------------------------------------------------------- February 28, February 28, February 28, February 29, February 28, 1999 1998 1997 1996 1995 ----------- ----------- ----------- ----------- ----------- Interest expense, gross $16,519 $17,651 $18,658 $19,613 $15,592 Rentals (interest factor) 9,200 9,503 9,394 9,701 9,203 ------- ------- ------- ------- ------- Total $25,719 $27,154 $28,052 $29,314 $24,795 ======= ======= ======= ======= ======= (2) For the year ended February 28, 1997, earnings were inadequate to cover fixed charges. The deficiency of $9,876 was the result of unusual items. Exclusive of these unusual items, the ratio of earnings to fixed charges would have been 1.36 for the year ended February 28, 1997. (3) Exclusive of unusual items, the ratio of earnings to fixed charges would have been 2.60 for the year ended February 28, 1999.
EX-13 5 MDA FINANCIALS Exhibit 13 MANAGEMENT'S DISCUSSION AND ANALYSIS In fiscal 1999, the Company announced its decision to sell its Venezuela Foods business. The decision was based on management's belief that shareholders would be best served by the more predictable financial results expected from the Company's remaining businesses. As a result of this decision, the Venezuela Foods business segment has been classified as discontinued operations in the consolidated financial statements and in the following management discussion and analysis. RESULTS OF OPERATIONS Overview For the year ended February 28, 1999, the net loss from continuing and discontinued operations totaled $131.9 million, or $6.98 per diluted share, compared with net earnings of $20 million, or $1.08 per share, a year ago. The net loss in fiscal 1999 resulted from a $138.7 million loss from discontinued operations, which included a $93.3 million non- cash charge for the recognition of unrealized foreign currency translation losses. The unrealized translation losses were previously classified as a separate component of shareholders' equity. Fiscal 1999 results also included $18.7 million, or 99 cents per diluted share, of after-tax unusual charges related to continuing operations. Unusual charges resulted from the Company's plan to consolidate its two distribution businesses, the write-off of receivables from a major customer of the Company's former food-exporting business, and the write- down of assets and costs associated with the Canadian frozen bakery business. Start-up costs and temporary inefficiencies that occurred as the Company consolidated the distribution operations offset the savings achieved in fiscal 1999 from the actions associated with unusual charges. The Company expects these actions, however, to improve operating earnings by $3 million to $5 million in fiscal 2000 and $9 million to $12 million in fiscal 2001. Further information on unusual charges follows in the discussion of Segment Results and in Note 4 to the consolidated financial statements. Continuing Operations Fiscal 1999 earnings from continuing operations were $6.8 million, or 36 cents per share, compared with $24.6 million, or $1.33 per diluted share, in the prior year. Net earnings were affected by unusual charges in both years. Excluding unusual charges, fiscal 1999 earnings were $25.5 million, or $1.35 per diluted share, compared with $27.8 million, or $1.50 per diluted share, in the prior year. The decline in earnings was the result of prior year non-recurring items that contributed 33 cents per share to last year's earnings. These non-recurring items included income from the Company's divested food-exporting business, a gain on the elimination of the subsidy for post-retirement health-care benefits for future retirees and interest income on income tax refunds. In addition, last year's earnings benefited from a low effective tax rate. Segment Results The Company operates in two business segments: Multifoods Distribution Group and North America Foods. The food-exporting business, which the Company exited in fiscal 1998, is referred to as Divested Business. A description of business segments and a summary of operating results are included in Note 15 to the consolidated financial statements. Fiscal 1999 compared with Fiscal 1998 Multifoods Distribution Group: Net sales increased 4% to $1.85 billion as a result of higher sales to independent vending operators and pizza and Mexican restaurant customers. The increase was also due to higher foodservice prices that resulted from an increase in cheese costs. Operating earnings before unusual items increased 19% to $28.3 million as a result of the higher sales volumes and lower administrative costs. The increase was partially offset by higher distribution costs, resulting from temporary inefficiencies associated with the consolidation of distribution centers. Prior-year results included a $2 million curtailment gain from the elimination of the subsidy for post- retirement health-care benefits for future retirees. In fiscal 1999, the Company recognized an unusual charge of $11.5 million for actions associated with the Company's plan to consolidate the vending and foodservice distribution operations into a single business. The charge covers losses on lease commitments; employee termination benefits; costs incurred for warehouse network, logistics and transportation studies; and the write-down of leasehold improvements. North America Foods: Net sales declined 4% to $450.8 million due to unfavorable currency translation because of a stronger U.S. dollar and the impact of lower wheat costs, which reduced sales prices. Excluding these factors, sales increased approximately 2% in fiscal 1999. The increase was the result of higher U.S. bakery product and foodservice condiments sales volumes. The increase was partially offset by volume declines in consumer branded flour and commercial bakery ingredients in Canada. Operating earnings before unusual items increased 2% to $31.3 million as a result of the higher sales volumes and lower selling and administrative expenses. Operating earnings, however, were adversely affected by approximately $2.2 million from currency translation. In fiscal 1999, the Company recognized an unusual charge of $7.2 million for the write-down of assets and the cost of work-force reductions associated with its Canadian frozen bakery business. The charge resulted from the inability to sell the business at a price acceptable to the Company and from the loss of a major customer. In accordance with Statement of Financial Accounting Standards No. 121, the Company evaluated the carrying value of its long-lived assets as a result of these events. The Company estimated the fair value of the assets based on information received from prospective buyers and in consideration of the loss of the major customer. Accordingly, the Company recognized a $6.1 million charge to reduce the carrying value of the assets. In addition, the unusual charge included $1.1 million primarily for employee termination benefits. Divested Business: The divested business segment represents the Company's former food-exporting business, which the Company exited in fiscal 1998. During fiscal 1999, the Company recognized earnings of $0.8 million from a refund of customs taxes paid in prior years. The Company also recognized an unusual charge of $10.3 million for the write-off of receivables from a major customer. Fiscal 1998 compared with Fiscal 1997 Fiscal 1998 earnings from continuing operations were $24.6 million, or $1.33 per diluted share, compared with a loss of $11.4 million, or 63 cents per diluted share, in fiscal 1997. Net earnings were affected by unusual charges in both years. Excluding unusual charges, fiscal 1998 earnings were $27.8 million, or $1.50 per diluted share, compared with $3.4 million, or 19 cents per share, in fiscal 1997. The increase in fiscal 1998 was the result of higher Multifoods Distribution Group and North America Foods operating earnings and non-recurring items in fiscal 1998. Multifoods Distribution Group: Net sales increased 2% to $1.77 billion because of higher volumes to independent vending operators and fund- raising customers. The increase was partially offset by lower sales in foodservice distribution as a result of decisions to relinquish certain 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. 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. North America Foods: Net sales declined 1% to $471.7 million due to lower prices on the Company's grain-based products that resulted from a reduction in commodity costs and unfavorable currency translation. 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. 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. 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. Non-Operating Expense and Income In fiscal 1999, net interest expense for continuing operations was $10.4 million, compared with $7.5 million last year. In the prior year, the Company recognized $3.2 million in interest income from U.S. Federal income tax refunds. In fiscal 1998, net interest expense declined to $7.5 million from $12.3 million in fiscal 1997. In addition to the interest income recognized in fiscal 1998, the decline resulted from lower interest rates in Canada and lower debt levels. Interest expense for continuing operations excludes interest associated with debt obligations of the Company's discontinued Venezuela Foods business. Interest expense classified in discontinued operations for fiscal years 1999, 1998 and 1997 was $4.9 million, $4.8 million and $4.4 million, respectively. In the third quarter of fiscal 1999, the Company recognized a gain of $0.8 million from the sale of its investment in a Mexican animal feed business. Income Taxes The effective tax rates on earnings before unusual items were 38% in fiscal 1999, 33.7% in fiscal 1998 and 66.8% in fiscal 1997. The low tax rate in fiscal 1998 was the result of a change in the expected utilization of net operating loss and capital loss carryforwards of the Company's Canadian business. The high effective tax rate in fiscal 1997 was due to the impact of non-deductible items and a low tax benefit from the carryback of U.S. net operating losses against a very low pre-tax earnings base. Including the effect of unusual items, the Company's overall tax rates were 44.3% in fiscal 1999 and 33.3% in fiscal 1998. Because of a low tax benefit associated with the Canadian frozen bakery business impairment charge, fiscal 1997 reflected income tax expense on a pre-tax loss. Discontinued Operations In August 1998, the Company announced its intention to sell its Venezuela Foods business. The Company recognized an estimated loss on disposition of $114.9 million in the second quarter of fiscal 1999. The loss was based on the terms set forth in a letter of intent with a prospective buyer. During the third quarter of fiscal 1999, the Company announced that the prospective buyer had decided not to proceed with the transaction, and as a result, the Company recorded an additional loss of $7.2 million. The adjustment was necessary because the estimated sale date had changed from the assumption used in the original loss provision. During the fourth quarter, the Company recorded an additional loss of $2.5 million as a result of higher-than-expected operating losses and an adjustment to the estimated income taxes on the sale. Including the adjustments described in the preceding paragraph, the Company recognized an estimated loss on disposition of $124.6 million (after taxes of $10.8 million) in fiscal 1999. The disposition loss consisted of $93.3 million for the recognition of the unrealized foreign currency translation losses previously included as a separate component of shareholders' equity, a provision of $22 million for operating losses from the measurement date (July 31, 1998) to expected disposal date, and a $9.3 million loss on disposal. The disposition loss was based on selling the business during fiscal 2000 at a sale price that approximates the net book value of the business. In estimating the loss from discontinued operations, considerable management judgment is necessary, and actual results could differ materially from current estimates. In addition to the estimated loss on the disposition, the Company recognized a loss of $14.1 million (net of $0.7 million tax benefit) for the operating results of Venezuela Foods for the five months ended July 31, 1998. The provision for operating losses from July 31, 1998, to the anticipated sale date are reflected in the net loss on disposition. Net sales of the Venezuela Foods business declined 4% to $347.2 million in fiscal 1999. The decline was the result of a reduction in corn flour and commercial wheat flour sales volumes. Excluding loss provisions related to the disposal, operating losses were $28.1 million in fiscal 1999, compared with earnings of $0.3 million in fiscal 1998. The current-year operating loss was primarily the result of difficult economic conditions that adversely affected sales volumes and prevented the Company from raising prices to cover higher raw material and operating costs. In addition, the current-year operating loss included a charge of $8.5 million, which consisted of a $5.3 million asset write- down, and $3.2 million for employee severance liabilities and costs associated with the departure of the business segment's former president. 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. As of February 28, 1999, the Company had $320 million under committed revolving credit agreements and $110 million of uncommitted lines of credit. 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, 1999, $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. The Company's debt-to-total capitalization ratio increased to 38% at February 28, 1999, compared with 32% at February 28, 1998. The ratios for both periods exclude debt obligations of the Company's Venezuelan business that are expected to be assumed by a buyer and that have been classified as net assets of discontinued operations in the consolidated balance sheet. Including debt obligations of continuing and discontinued operations, the debt-to-total capitalization ratio was 48%, compared with 38% at February 28, 1998. The increase in the debt-to- total capitalization ratio was the result of increased working capital requirements of continuing and discontinued operations, and the impact on debt and shareholders' equity due to the loss from discontinued operations and unusual charges. Capital expenditures for continuing operations were $28.1 million in fiscal 1999, compared with $18.6 million in fiscal 1998. Approximately 45% of the fiscal 1999 capital expenditures was attributed to projects designed to increase earnings through volume improvements, new business or cost savings. For fiscal 2000, the Company currently expects to spend about $50 million on capital projects. This estimate includes approximately $30 million to consolidate and expand distribution facilities and $10 million to expand production capacity in North America Foods. 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 2000. Discontinued Operations The Company's Venezuelan business used $39.5 million of cash for operations in fiscal 1999, primarily as a result of a significant operating loss and an increase in working capital needs. Financing requirements were met by a combination of local and U.S.-based financing sources, which were substantially guaranteed by the Company. The Company believes that cash used by Venezuelan operations in fiscal 2000 will be lower than fiscal 1999 due to an expected improvement in operating results. Based on management's current estimates, the Company expects to receive net proceeds of approximately $25 million from the sale of its Venezuelan business, after payment of transaction costs and taxes. In addition, the Company expects that the buyer will assume the debt obligations of the Venezuelan business. Actual net proceeds from the sale could differ materially from this estimate. The Company intends to initially use the net proceeds to reduce debt. The Company's Venezuelan business is subject to risks inherent in operating under a different legal and political system, and in 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, 1999, the Company's Venezuelan business was in a net monetary liability position of $2 million. MARKET RISK MANAGEMENT The Company is exposed to market risks resulting from changes in commodity prices, foreign currency exchange rates and interest rates. Changes in these factors could adversely affect the Company's results of operations and financial position. To minimize these risks, the Company utilizes derivative financial instruments, such as commodity futures contracts, currency forward contracts and interest rate swaps. The Company uses derivative financial instruments as risk management tools and not for speculative or trading purposes. See Note 7 to the consolidated financial statements for further information regarding financial instruments. The Company used sensitivity analysis to determine the impact of market risk exposures on the fair values of the Company's debt and financial instruments, including derivative financial instruments. Sensitivity analysis assesses the risk of loss in market risk sensitive instruments based on hypothetical changes in market prices or rates. 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 contracts to reduce the risk of price fluctuations on anticipated flour, soybean oil and sugar purchases. The U.S. dollar-denominated futures contracts are traded on U.S. regulated exchanges. The open futures contracts mature in the period from March 1999 to March 2000 and substantially coincide with the maturities of the open wheat purchase contracts, open flour sales contracts and the anticipated timing of flour, soybean oil and sugar purchases. Based on a 10% adverse change (defined as a decrease in the current price of the commodity), the loss in fair value would be $2.1 million. The loss in fair value, if realized, would be offset by lower costs of wheat, soybean oil and sugar recognized in fiscal 2000. Foreign Currency Hedging: The Company's Canadian operations enter into foreign currency forward contracts to minimize its exposure to foreign currency fluctuations as a result of U.S. dollar-denominated sales and purchases. In addition, the Company's Canadian operations also enter into foreign currency forward contracts that have the effect of converting the U.S. dollar-denominated grain futures contracts (see Commodity Risk Management) into Canadian dollar equivalents. The Company estimates that a hypothetical 10% adverse change (defined as a weaker Canadian dollar) would result in a net pre-tax loss of $1.1 million on the U.S. dollar contracts sold and bought. The losses would be substantially offset by gains from the revaluation or settlement of the underlying positions hedged. Interest Rate Risk Management: The Company's exposure to changes in interest rates results from borrowing activities used to meet its working capital and other long-term financing needs. The borrowings are comprised of notes payable, principally to banks, which have variable interest rates, and of fixed rate medium-term notes. Based on an increase in interest rates of 53 basis points (defined as a 10% increase in current interest rates on notes payable), the potential adverse impact on annual interest expense would be approximately $0.5 million. An increase in interest rates of 66 basis points (defined as a 10% increase in current market interest rates on medium-term notes) would result in a decrease in fair value of approximately $7.3 million on medium-term notes outstanding. Conversely, a decrease in interest rates of 66 basis points would result in a $5.9 million increase in the fair value of medium-term notes outstanding. The Company entered into fixed interest rate swaps to reduce the Company's risk of increased interest costs during periods of rising interest rates. The interest rate swaps mature during time periods ranging from March 2003 to December 2008. Assuming a hypothetical interest rate change of approximately 58 basis points (defined as a 10% decrease in current interest rates), the fair values of the interest rate swaps would decrease by approximately $1.3 million. YEAR 2000 The Company is actively addressing the Year 2000 issue. Each of the Company's businesses has had Year 2000 project teams in place for approximately 18 months or longer. Each team has developed and adopted a plan of action to deal with the problems posed by the new millennium change. There is a companywide Year 2000 Project Committee to oversee the activities and the progress of each of the business-unit teams. Each of the plans is monitored on an ongoing basis, and a status report is distributed to senior management and the board of directors each month. Multifoods Distribution Group has completed a comprehensive inventory and review of both computer systems and non-computer systems that could include some type of embedded technology. An implementation plan addressing these issues has been developed with an original target completion date of June 30, 1999, for Year 2000 compliance for all computer and non-computer systems. This plan includes the detailed testing and implementation of both packaged and custom-developed software systems at all locations. Based upon preliminary tests, the Company believes that these systems are Year 2000 compliant. Detailed testing of these systems is underway, and it is anticipated that this testing will be completed by August 31, 1999, and that the full implementation of these Year 2000 compliant systems will be completed by October 31, 1999. The testing and implementation of these systems fulfills critical business needs and provides Year 2000 compliance. The non-computer systems have been inventoried and evaluated, and the critical systems tested. The Company believes that there are no critical deficiencies in these systems. The testing of these systems for Year 2000 compliance did not displace projects of a more critical nature. The costs associated with Year 2000 testing are not expected to be material to the Company's results of operations. North America Foods has completed a comprehensive review of both computer systems and non-computer systems that could include some type of embedded technology. An implementation plan addressing these issues has been developed with a target completion date of June 30, 1999, for Year 2000 compliance for all computer and non-computer systems. Progress towards compliance continues to be made in accordance with the established implementation plan. This plan includes upgrading existing packaged software in the United States and Canada, as well as testing all systems for Year 2000 compliance. The successful upgrading and testing of these packaged systems has been completed in the United States and Canada. The upgrading of the packaged software systems was driven by business needs, as well as Year 2000 issues. The non-computer systems have been inventoried and evaluated, and the critical systems tested. The Company believes that there are no critical deficiencies in these systems. The costs associated with upgrading the packaged systems and testing all systems are not expected to be material to the Company's results of operations. Multifoods Distribution Group and North America Foods are in the process of evaluating critical vendors, suppliers and customers, and developing appropriate contingency plans. Information from critical business partners has been solicited and evaluated, and additional information requested where appropriate. The Company continues to evaluate the Year 2000 readiness of its business partners and the critical nature of its customers and suppliers. Based upon this analysis, the Company will develop contingency plans, where appropriate. It is anticipated that these contingency plans will be complete by September 30, 1999. In Venezuela, the Company has completed a comprehensive review of its existing business and financial systems. These systems were not Year 2000 compliant, and the Company has chosen to replace these systems with packaged software that is Year 2000 compliant. The implementation began in June 1998, and it is scheduled to be complete by June 30, 1999. The capital cost for the new business system is estimated to be $4.6 million. The Company has completed a preliminary inventory and assessment of non-computer systems, and based upon this information, the Company believes that there are no critical deficiencies in these systems. A more complete inventory and assessment is in progress and is scheduled to be completed by June 30, 1999. The Company is also in the process of evaluating critical relationships with vendors, suppliers and customers, and will develop contingency plans, as appropriate. The Company believes that by upgrading the packaged software in North America and by replacing the business and financial systems in Venezuela, the Year 2000 issue will not create significant operational problems. Based upon the evaluation and testing completed at this time, the Company does not anticipate any significant Year 2000 issues with non-computer systems. The Company continues to monitor and assess the Year 2000 readiness of its critical vendors, suppliers and customers, and will develop contingency plans, where appropriate and necessary. All Year 2000 projects are proceeding according to current schedules and plans; however, if there are any significant delays in their completion or if major suppliers or customers experience Year 2000 issues with their systems that the Company does not anticipate, the Year 2000 issue may have a material effect on the operations of the Company. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, the Company and its representatives may from time-to-time make written and oral forward-looking statements. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations and financial performance and condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products and pricing; market conditions and weather patterns that may affect the costs of grain, cheese and other raw materials; changes in laws and regulation; the inability of the Company or its business partners to resolve "Year 2000" issues or the inability of the Company to accurately estimate the cost associated with "Year 2000" compliance; economic and political conditions in Venezuela, including inflation, currency volatility, possible limitations on foreign investment, exchangeability of currency, dividend repatriation and changes in existing tax laws; the Company's ability to complete the sale of the Venezuela Foods business; the Company's ability to realize the earnings benefit from the integration of its distribution businesses; the inability of the Company to collect on a $6 million insurance claim related to the theft of product in St. Petersburg, Russia; fluctuations in foreign exchange rates; risks commonly encountered in international trade; and other factors as may be discussed in the Company's reports filed with the Securities and Exchange Commission. 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, 1999 and 1998, and the related consolidated statements of operations, cash flows and shareholders' equity for each of the years in the three- year period ended February 28, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended February 28, 1999, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Minneapolis, Minnesota March 29, 1999 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. /s/ Gary E. Costley /s/ William L. Trubeck Gary E. Costley William L. Trubeck Chairman, President Senior Vice President, Finance, and Chief Executive Officer Chief Financial Officer and President, Latin America Operations INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES Consolidated Statements of Operations Fiscal year ended the last day of February (in thousands, except per share data) 1999 1998 1997 - ----------------------------------------------------------------------------- Net sales $ 2,296,550 $ 2,251,096 $ 2,249,106 Cost of materials and production (1,961,441) (1,915,226) (1,918,312) Delivery and distribution (150,310) (145,879) (155,538) - ----------------------------------------------------------------------------- Gross profit 184,799 189,991 175,256 Selling, general and administrative (132,943) (140,503) (152,161) Unusual items (28,963) (5,000) (20,107) - ----------------------------------------------------------------------------- Operating earnings 22,893 44,488 2,988 Interest, net (10,382) (7,552) (12,314) Other income (expense), net (245) 54 (441) - ----------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes 12,266 36,990 (9,767) Income taxes (5,434) (12,316) (1,607) - ----------------------------------------------------------------------------- Earnings (loss) from continuing operations 6,832 24,674 (11,374) - ----------------------------------------------------------------------------- Discontinued operations: Operating earnings (loss), after tax (14,068) (4,650) 14,154 Net loss on disposition, after tax (124,634) - - - ----------------------------------------------------------------------------- Earnings (loss) from discontinued operations (138,702) (4,650) 14,154 - ----------------------------------------------------------------------------- Net earnings (loss) $ (131,870) $ 20,024 $ 2,780 ============================================================================= Basic earnings (loss) per share: Continuing operations $ 0.36 $ 1.34 $ (0.63) Discontinued operations (7.39) (0.25) 0.78 - ----------------------------------------------------------------------------- Total $ (7.03) $ 1.09 $ 0.15 ============================================================================= Diluted earnings (loss) per share: Continuing operations $ 0.36 $ 1.33 $ (0.63) Discontinued operations (7.34) (0.25) 0.78 - ----------------------------------------------------------------------------- Total $ (6.98) $ 1.08 $ 0.15 ============================================================================= Average shares of common stock outstanding: Basic 18,759 18,385 17,982 Diluted 18,903 18,619 17,982 - -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES Consolidated Balance Sheets February 28, 1999 and 1998 (in thousands) 1999 1998 - ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 13,495 $ 9,126 Trade accounts receivable, net of allowance 124,843 111,944 Inventories 162,414 156,335 Deferred income taxes 13,364 12,725 Net current assets of discontinued operations - 62,962 Other current assets 25,951 30,292 - ------------------------------------------------------------------------- Total current assets 340,067 383,384 - ------------------------------------------------------------------------- Property, plant and equipment, net 165,161 169,982 Goodwill, net 82,089 84,911 Net noncurrent assets of discontinued operations 44,905 7,976 Other assets 64,711 57,341 - ------------------------------------------------------------------------- Total assets $696,933 $ 703,594 ========================================================================= Liabilities and Shareholders' Equity Current liabilities: Notes payable $ 32,489 $ 1,025 Current portion of long-term debt 2,750 24,500 Accounts payable 161,700 132,401 Net current liabilities of discontinued operations 9,079 - Other current liabilities 58,227 63,839 - ------------------------------------------------------------------------- Total current liabilities 264,245 221,765 - ------------------------------------------------------------------------- Long-term debt 121,199 120,951 Deferred income taxes 17,036 19,455 Employee benefits and other liabilities 34,137 32,070 - ------------------------------------------------------------------------- Total liabilities 436,617 394,241 - ------------------------------------------------------------------------- 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 92,000 91,340 Retained earnings 251,874 398,754 Accumulated other comprehensive loss (17,215) (114,311) Treasury stock, 3,068 and 3,106 shares, at cost (67,741) (67,480) Unearned compensation (786) (1,134) - ------------------------------------------------------------------------- Total shareholders' equity 260,316 309,353 - ------------------------------------------------------------------------- Commitments and contingencies - ------------------------------------------------------------------------- Total liabilities and shareholders' equity $696,933 $ 703,594 =========================================================================
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) 1999 1998 1997 - ---------------------------------------------------------------------------------------- Cash flows from operations: Earnings (loss) from continuing operations $ 6,832 $ 24,674 $(11,374) Adjustments to reconcile earnings (loss) from continuing operations to cash provided by continuing operations: Depreciation and amortization 22,081 23,965 24,024 Provision for unusual charges 28,963 5,000 20,107 Deferred income tax expense (benefit) (2,748) 2,486 3,252 Provision for losses on (recoveries of) receivables 713 (430) 2,721 Change in noncurrent notes receivable (200) (10,298) 566 Changes in working capital* (15,582) 50,222 (13,493) Other, net (2,907) (727) (4,734) - ---------------------------------------------------------------------------------------- Cash provided by continuing operations 37,152 94,892 21,069 Cash provided by (used for) discontinued operations (39,500) 35,304 (33,516) - ---------------------------------------------------------------------------------------- Cash provided by (used for) operations (2,348) 130,196 (12,447) - ---------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (28,050) (18,642) (21,714) Proceeds from sale of investment 2,340 - - Proceeds from other property disposals 2,010 669 606 Discontinued operations (6,220) (5,604) (5,776) - ---------------------------------------------------------------------------------------- Cash used for investing activities (29,920) (23,577) (26,884) - ---------------------------------------------------------------------------------------- Cash flows from financing activities: Net increase (decrease) in notes payable 31,430 (12,862) 19,664 Additions to long-term debt 3,157 - 20,000 Reductions in long-term debt (23,750) (60,658) (25,390) Dividends paid (14,995) (14,665) (14,477) Proceeds from issuance of common stock 4,129 16,108 546 Purchase of treasury stock (4,787) (799) (82) Discontinued operations 45,346 (31,974) 40,455 Other, net (2,133) (16) (230) - ---------------------------------------------------------------------------------------- Cash provided by (used for) financing activities 38,397 (104,866) 40,486 - ---------------------------------------------------------------------------------------- (Increase) decrease in cash from discontinued operations (1,747) 1,978 (827) - ---------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (13) (52) (21) - ---------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 4,369 3,679 307 Cash and cash equivalents at beginning of year 9,126 5,447 5,140 - ---------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 13,495 $ 9,126 $ 5,447 ======================================================================================== *Cash flows from changes in working capital: Accounts receivable $(17,880) $ 67,307 $(29,096) Inventories (8,693) 19,874 197 Other current assets 5,360 2,068 (9,105) Accounts payable 30,744 (38,300) 22,483 Other current liabilities (25,113) (727) 2,028 - ---------------------------------------------------------------------------------------- Net change $(15,582) $ 50,222 $(13,493) ========================================================================================
INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES Consolidated Statements of Shareholders' Equity $.10 par value Accumulated ------------------- Capital in Other Common Treasury Excess of Retained Comprehensive Unearned (in thousands) Stock Stock Par Value Earnings Loss Compensation Total - -------------------------------------------------------------------------------------------------------------------------- Balance at February 29, 1996 $2,184 $(83,948) $88,316 $ 404,813 $(110,844) $ (958) $ 299,563 Comprehensive income(a) - - - 2,780 535 - 3,315 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 - -------------------------------------------------------------------------------------------------------------------------- Balance at February 28, 1997 2,184 (83,262) 88,124 393,335 (110,309) (494) 289,578 Comprehensive income(a) - - - 20,024 (4,002) - 16,022 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 - -------------------------------------------------------------------------------------------------------------------------- Balance at February 28, 1998 2,184 (67,480) 91,340 398,754 (114,311) (1,134) 309,353 Comprehensive loss(a) - - - (131,870) 97,096 - (34,774) Dividends declared on common stock - - - (15,010) - - (15,010) 170 shares purchased for treasury - (4,787) - - - - (4,787) 208 shares issued for employee benefit plans - 4,526 660 - - (262) 4,924 Amortization of unearned compensation - - - - - 610 610 - -------------------------------------------------------------------------------------------------------------------------- Balance at February 28, 1999 $2,184 $(67,741) $92,000 $ 251,874 $ (17,215) $ (786) $ 260,316 ==========================================================================================================================
(a) Reconciliations of net earnings (loss) to comprehensive income (loss) are as follows: (in thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------ Net earnings (loss) $(131,870) $20,024 $2,780 - ------------------------------------------------------------------------------------------------ Other comprehensive income (loss): Foreign currency translation adjustments (4,547) (2,812) 170 Reclassification adjustment due to foreign currency translation adjustments recognized 101,555 - - Minimum pension liability adjustment (net of tax of $(56), $761 and $(233), respectively) 88 (1,190) 365 - ------------------------------------------------------------------------------------------------ Other comprehensive income (loss) 97,096 (4,002) 535 - ------------------------------------------------------------------------------------------------ Comprehensive income (loss) $ (34,774) $16,022 $3,315 ================================================================================================
See accompanying notes to consolidated financial statements. Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Actual results could differ from these estimates. The Company has reclassified certain amounts in the prior-year financial statements to conform with the fiscal 1999 presentation. This included classifying the Venezuela Foods business as discontinued operations (see Note 2). The notes to the consolidated financial statements, except where otherwise indicated, relate to continuing operations only. 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. 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 discontinued 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. Stock-based compensation The Company uses the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for employee stock options. Under the intrinsic value method, compensation expense is recorded only to the extent that the market price of the common stock exceeds the exercise price of the stock option on the date of grant. 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 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, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting period. The computations for basic and diluted earnings (loss) per share from continuing operations are as follows: (in thousands, except per share data) 1999 1998 1997 - ------------------------------------------------------------------------------- Earnings (loss) from continuing operations $ 6,832 $24,674 $(11,374) - ------------------------------------------------------------------------------- Average shares of common stock outstanding: Basic 18,759 18,385 17,982 Effect of stock options 144 234 - - ------------------------------------------------------------------------------- Diluted 18,903 18,619 17,982 - ------------------------------------------------------------------------------- Earnings (loss) per share from continuing operations: Basic $ 0.36 $ 1.34 $ (0.63) Diluted 0.36 1.33 (0.63) - -------------------------------------------------------------------------------
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. 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 costs of businesses acquired over the fair market value of net tangible and identifiable intangible assets. Such excess costs are 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, 1999 and 1998, was $29.3 million and $25.8 million, respectively. Recoverability of long-lived assets 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. New accounting pronouncement In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," which must be adopted by the Company no later than March 1, 2000. SFAS 133 requires that all derivative instruments be recorded on the consolidated balance sheet at their fair value. Changes in fair value will be recorded each period in earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are affected by the hedged item. The Company has not yet determined the impact that adoption or subsequent application of SFAS 133 will have on its financial position and results of operations. Note 2: Discontinued Operations In August 1998, the Company announced its intention to sell its Venezuela Foods business. The Company recognized an estimated loss on disposition of $114.9 million in the second quarter of fiscal 1999. The loss was based on the terms set forth in a letter of intent with a prospective buyer. During the third quarter of fiscal 1999, the Company announced that the prospective buyer had decided not to proceed with the transaction, and as a result, the Company recorded an additional loss of $7.2 million. The adjustment was necessary because the estimated sale date had changed from the assumption used in the original loss provision. During the fourth quarter, the Company recorded an additional loss of $2.5 million as a result of higher-than-expected operating losses and an adjustment to the estimated income taxes on the sale. Including the adjustments described above, the Company recognized an estimated loss on disposition of $124.6 million (after taxes of $10.8 million) in fiscal 1999. The disposition loss consisted of $93.3 million for the recognition of the unrealized foreign currency translation losses previously included as a separate component of shareholders' equity, a provision of $22.0 million for operating losses from the measurement date (July 31, 1998) to expected disposal date, and a $9.3 million loss on disposal. The disposition loss is based on selling the business during fiscal 2000 at a sale price that approximates the net book value of the business. In estimating the loss from discontinued operations, considerable management judgment is necessary, and actual results could differ materially from current estimates. In addition to the estimated loss on the disposition, the Company recognized a loss of $14.1 million (net of $0.7 million tax benefit) for the operating results of Venezuela Foods for the five months ended July 31, 1998. Operating losses from July 31, 1998, to the anticipated sale date are reflected in the net loss on disposition. Excluding the loss provisions related to the disposal, the operating results of Venezuela Foods for the 12 months ended February 28, 1999 and 1998, were as follows: (in thousands) 1999 1998 - ------------------------------------------------------------ Net sales $347,178 $360,696 Operating earnings (loss) (28,102) 322 Interest, net (4,901) (4,825) Net loss (34,274) (4,650) - ------------------------------------------------------------ The net assets of the Venezuela Foods business were as follows: (in thousands) 1999 1998 - ------------------------------------------------------------ Cash and cash equivalents $ 2,745 $ 1,237 Trade accounts receivable, net 34,807 32,258 Inventories 72,638 109,654 Other current assets 6,009 10,471 Notes payable (83,843) - Current portion of long-term debt (583) (542) Accounts payable (33,312) (85,099) Other current liabilities (7,540) (5,017) - ------------------------------------------------------------ Net current assets (liabilities) of discontinued operations $ (9,079) $ 62,962 ============================================================ Property, plant and equipment, net $ 46,127 $ 50,585 Other assets 1,665 1,310 Long-term debt (896) (41,906) Employee benefits and other liabilities (1,991) (2,013) - ------------------------------------------------------------ Net noncurrent assets of discontinued operations $ 44,905 $ 7,976 ============================================================ Note 3: Interest, Net Interest, net consisted of the following: (in thousands) 1999 1998 1997 - ---------------------------------------------------------------------- Interest expense $11,107 $12,754 $13,954 Capitalized interest (196) (8) (109) Non-operating interest income (529) (5,194) (1,531) - ---------------------------------------------------------------------- Interest, net $10,382 $ 7,552 $12,314 ======================================================================
Total interest income was $0.6 million in fiscal 1999, $8.5 million in fiscal 1998 and $2.9 million in fiscal 1997. Cash payments for interest, net of amounts capitalized, totaled $11.4 million in fiscal 1999, $14.4 million in fiscal 1998 and $10.9 million in fiscal 1997. Interest expense of the Venezuela Foods business has been classified in discontinued operations. Note 4: Unusual Items Fiscal 1999 The Company recognized unusual items that resulted in pre-tax charges of $29.0 million ($18.7 million after tax or 99 cents per diluted share) and were comprised of the following: Employee Termination Lease Property, Plant Benefits Commitment and Equipment Receivable (in millions) and Other Costs Write-down Write-off Total - ------------------------------------------------------------------------------------- Multifoods Distribution Group $ 6.4 $2.3 $ 2.8 $ - $ 11.5 North America Foods 1.1 - 6.1 - 7.2 Divested Business - - - 10.3 10.3 - ------------------------------------------------------------------------------------- Total unusual charges 7.5 2.3 8.9 10.3 29.0 Asset write-down and receivable write-off - - (8.9) (10.3) (19.2) Cash payments (5.0) (0.7) - - (5.7) - ------------------------------------------------------------------------------------- Liability balance as of February 28, 1999 $ 2.5 $1.6 $ - $ - $ 4.1 =====================================================================================
Management adopted a plan to consolidate its foodservice and vending distribution operations into a single business. The plan involves reducing the number of distribution centers by nine, reducing the size of the work force by approximately 300 people and reducing the vehicle fleet size by up to 10 percent. The charge covers losses on lease commitments; employee termination benefits; costs incurred for warehouse network, logistics and transportation studies; and the write-down of leasehold improvements. The Company believes that the actions associated with the plan will be completed over a 24-month period ended June 2000. The Company recognized a charge of $7.2 million for the write-down of assets and the cost of work-force reductions associated with its Canadian frozen bakery business. The charge resulted from the inability to sell the business at a price acceptable to the Company and from the loss of a major customer. The Company evaluated the carrying value of its long-lived assets as a result of these events and recognized a $6.1 million charge for asset impairment. In addition, a charge of $1.1 million primarily for employee termination benefits was recognized. The Company recognized an unusual charge of $10.3 million for the write-off of receivables from a major customer of its former food- exporting business. The Company had negotiated an exit agreement with this customer in fiscal 1998, which provided for payments to the Company for amounts due under notes and accounts receivable. The agreement had been restructured on several occasions because of the customer's financial difficulties. As a result of uncertainties with respect to the customer's ability to meet its obligations, the Company recognized a $5.0 million charge in the fourth quarter of fiscal 1998. In June 1998, the Company was notified by the customer that it would not meet its obligations under the restructured exit agreement. The Company believes the customer's financial problems were caused by its difficulty in moving product into the Russian marketplace and were complicated by economic difficulties in Russia. Accordingly, the Company believes that the remaining amounts due from the customer are not collectible. Fiscal 1998 The Company recognized a pre-tax charge of $5.0 million ($3.2 million after tax or 17 cents per share) to reduce the carrying value of its receivables from a major customer of the Company's former food-exporting business. See further discussion under Fiscal 1999. 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 business. The impairment resulted in a $9.6 million reduction in goodwill and a $1.8 million reduction in fixed assets. During fiscal 1997, the business experienced an increase in competition in certain key markets and a significant decline in sales volume and operating results. The Company estimated the fair value of the business's assets using discounted expected future cash flows and determined that the carrying value of the business unit exceeded the fair value. 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 for 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. Note 5: Income Taxes Income tax expense was as follows: U.S. Operations ----------------- Non-U.S (in thousands) Federal Other Operations Total - ------------------------------------------------------------------------- 1999: Current expense $ 356 $ 278 $ 7,548 $ 8,182 Deferred expense (benefit) (3,845) (21) 1,118 (2,748) - ------------------------------------------------------------------------- Total tax expense (benefit) $(3,489) $ 257 $ 8,666 $ 5,434 ========================================================================= 1998: Current expense (benefit) $ (229) $ 283 $ 9,775 $ 9,829 Deferred expense (benefit) 3,241 1,472 (2,226) 2,487 - ------------------------------------------------------------------------- Total tax expense $ 3,012 $1,755 $ 7,549 $12,316 ========================================================================= 1997: Current expense (benefit) $(7,976) $ 57 $ 6,274 $(1,645) Deferred expense (benefit) 3,385 (440) 307 3,252 - ------------------------------------------------------------------------- Total tax expense (benefit) $(4,591) $ (383) $ 6,581 $ 1,607 =========================================================================
Temporary differences that gave rise to deferred tax assets and liabilities as of February 28, 1999 and 1998, were as follows: 1999 1998 -------------------- -------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax (in thousands) Assets Liabilities Assets Liabilities - -------------------------------------------------------------------------- Depreciation and amortization $ 2,072 $26,793 $ 1,483 $29,191 Accrued expenses 20,591 13,959 20,736 11,681 Inventory valuation methods 633 - 614 - Reorganization and divestiture reserves 3,261 - 637 - Provision for losses on receivables 937 - 3,425 - Loss carryforwards 8,219 - 7,137 - Foreign earnings repatriation - 2,360 - 3,139 Other 5,135 1,622 3,201 1,550 - -------------------------------------------------------------------------- Subtotal 40,848 44,734 37,233 45,561 Valuation allowance (853) - - - - -------------------------------------------------------------------------- Total deferred taxes $39,995 $44,734 $37,233 $45,561 ==========================================================================
At February 28, 1999, the Company had a U.S. federal consolidated net operating loss carryforward of approximately $13.7 million that will expire in fiscal 2013 and 2019. The Company's foreign operations had net operating loss carryforwards of approximately $2.6 million that will expire in fiscal 2005. The Company's foreign operations also had capital loss carryforwards of approximately $3.4 million that have no expiration date. The Company expects to fully utilize the net operating and capital loss carryforwards. In fiscal 1999, the Company recognized a valuation allowance for its foreign tax credit carryforward due to uncertainty over the Company's ability to utilize these credits prior to their expiration. Total income taxes from continuing operations differ from the amount computed by applying the U.S. federal income tax rate because of the following items: (in thousands) 1999 1998 1997 - ------------------------------------------------------------------------- Tax at U.S. federal statutory rate $ 4,293 $12,947 $(3,418) Differences: Effect of taxes on non-U.S. earnings 912 (1,641) 4,887 State and local income taxes 167 1,141 (249) Effect of intangibles 101 137 148 Other (39) (268) 239 - ------------------------------------------------------------------------- Total income taxes $ 5,434 $12,316 $ 1,607 =========================================================================
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 $20.1 million in fiscal 1999, $26.3 million in fiscal 1998 and $6.2 million in fiscal 1997. Cash paid (received) for income taxes totaled $13.0 million in fiscal 1999, $(1.0) million in fiscal 1998 and $5.3 million in fiscal 1997. Note 6: Supplemental Balance Sheet Information (in thousands) 1999 1998 - ------------------------------------------------------------------------ Trade accounts receivable, net: Trade $ 127,877 $ 116,261 Allowance for doubtful accounts (3,034) (4,317) - ------------------------------------------------------------------------ Total trade accounts receivable, net $ 124,843 $ 111,944 ======================================================================== Inventories: Raw materials, excluding grain $ 12,742 $ 8,302 Grain 2,745 6,258 Finished and in-process goods 142,122 137,501 Packages and supplies 4,805 4,274 - ------------------------------------------------------------------------ Total inventories $ 162,414 $ 156,335 ======================================================================== Property, plant and equipment, net: Land $ 12,398 $ 11,389 Buildings and improvements 82,766 80,172 Machinery and equipment 191,504 190,324 Transportation equipment 1,451 4,876 Improvements in progress 12,020 5,958 - ------------------------------------------------------------------------ 300,139 292,719 Accumulated depreciation (134,978) (122,737) - ------------------------------------------------------------------------ Total property, plant and equipment, net $ 165,161 $ 169,982 ======================================================================== Other assets: Prepaid pension $ 34,595 $ 29,505 Identifiable intangible assets 10,273 11,368 Other 19,843 16,468 - ------------------------------------------------------------------------ Total other assets $ 64,711 $ 57,341 ======================================================================== Other current liabilities: Wages and benefits $ 11,075 $ 15,282 Income taxes 14,954 13,784 Other 32,198 34,773 - ------------------------------------------------------------------------ Total other current liabilities $ 58,227 $ 63,839 ======================================================================== Accumulated other comprehensive loss: Foreign currency translation adjustment $ (13,804) $(110,812) Minimum pension liability adjustment (3,411) (3,499) - ------------------------------------------------------------------------ Total accumulated other comprehensive loss $ (17,215) $(114,311) ========================================================================
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 $67.0 million carrying value of medium-term notes, $2.0 million of which is classified as current, had a fair value of $66.3 million as of February 28, 1999. Commodity risk management The Company utilizes commodity futures contracts to reduce the risks associated with price fluctuations on its wheat inventories and other major bakery ingredients, such as flour, soybean oil and sugar. At February 28, 1999, the Company held futures contracts to purchase wheat, soybean oil and sugar with an aggregate contract value of $23.1 million. The amount of deferred losses, measured by using quoted market prices as of February 28, 1999, was $1.8 million. Gains and losses on commodity futures contracts are deferred in inventory until the production flows through cost of goods sold. Foreign currency hedging The Company's Canadian operations enter into foreign currency forward contracts to minimize exposure to foreign currency fluctuations with respect to U.S. dollar-denominated transactions. At February 28, 1999, the Company held foreign exchange forward contracts to sell and buy U.S. dollars totaling $20.3 million and $11.3 million, respectively. The foreign exchange forward contracts are purchased through major Canadian banking institutions. The deferred gains 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 The Company enters into fixed interest rate swaps to reduce the Company's risk of increased interest costs during periods of rising interest rates. Under the terms of the agreements, the Company will make quarterly payments at a fixed rate. In return, the Company will receive floating rate payments based on the current three-month London Interbank Offered Rate (LIBOR). The net amount received or paid under the terms of the contract is classified as interest expense. The fair value as of February 28, 1999, was $0.4 million (unrealized gain). The following table provides further information on the interest rate swaps: Pay-fixed Receive-variable Notional Amount Commencing Date Maturity Date Rate Rate - --------------------------------------------------------------------------------------- $20 million March 2, 1998 March 3, 2003 6.175% 3-month LIBOR $20 million December 15, 1998 December 15, 2008 5.320% 3-month LIBOR - ---------------------------------------------------------------------------------------
Off-balance sheet risk As of February 28, 1999 and 1998, the Company had sold with limited recourse $17.8 million and $21.2 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 operations. Concentrations of credit risk Management believes that 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. Note 8: Notes Payable Notes payable consisted of the following: (in thousands) 1999 1998 - ---------------------------------------------------------------------- Canadian bankers' acceptances $ - $ 15,451 Notes payable, principally to banks 88,688 39,525 Amounts reclassified to long-term debt (56,199) (53,951) - ---------------------------------------------------------------------- Total notes payable $ 32,489 $ 1,025 ======================================================================
The Company has $320 million under committed revolving credit agreements, of which $270 million expires in March 2001 and $50 million expires in February 2000. The Company had available $229 million under these revolving credit agreements as of February 28, 1999. The interest rates on borrowings under these agreements are 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 1999 and 1998. Notes payable totaling $56.2 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 rates on notes payable outstanding at February 28, 1999 and 1998, were 5.3% and 5.6%, respectively. At February 28, 1999, the Company had total uncommitted lines of credit from banks in the United States and Canada of approximately $110 million, of which $90 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 $2.8 million in fiscal 1999 and $24.5 million in fiscal 1998, was as follows: (in thousands) 1999 1998 - ------------------------------------------------------------------------- Medium-term notes $ 65,000 $ 67,000 Notes payable, reclassified 56,199 53,951 - ------------------------------------------------------------------------- Total long-term debt $121,199 $120,951 =========================================================================
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, 1999. 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, 1999, mature in fiscal 2000 to 2006 and have a weighted average interest rate of 6.6%. Minimum principal payments totaling $121.2 million are due as follows: $20.0 million in fiscal 2001, $56.2 million in fiscal 2002, $1.0 million in fiscal 2003, $14.0 million in fiscal 2004, $6.0 million in fiscal 2005 and $24.0 million in fiscal 2006. Minimum principal payments of $56.2 million in fiscal 2002 represent notes payable that were classified as long-term debt due to the revolving credit agreements that expire in March 2001 (see Note 8). The Company intends to refinance these obligations by establishing new long-term credit facilities. Note 10: Shareholders' Equity 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, 1999. 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 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, 1999: Operating (in thousands) Leases - ------------------------------------------------------------ 2000 $17,417 2001 13,685 2002 10,591 2003 7,635 2004 5,862 2005 and beyond 10,258 - ------------------------------------------------------------ Total minimum lease payments* $65,448 ============================================================ *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) 1999 1998 1997 - -------------------------------------------------------------------- Minimum rentals $25,091 $26,663 $27,096 Contingent rentals 53 46 6 Sublease rentals (355) (53) - - -------------------------------------------------------------------- Total net rent expense $24,789 $26,656 $27,102 ==================================================================== Note 12: Commitments and Contingencies In fiscal 1998, the Company was notified that approximately $6 million in Company-owned inventory was stolen from a ship in the port of St. Petersburg, Russia. The ship had been chartered by 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 recognize a material charge to its results of operations. In fiscal 1998, the Company signed an exclusive supply agreement with a customer in Venezuela that requires the Company to guarantee debt obligations of up to $4.4 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, 1999, the Company had guaranteed and provided standby letters of credit totaling $113.3 million related to bank loans and trade obligations of its discontinued Venezuela Foods business. At February 28, 1999, the estimated cost to complete improvements in progress totaled approximately $15 million. Note 13: Stock Plans The 1989 and 1997 stock-based plans of the Company permit awards of restricted stock, incentive units and stock options to directors and key employees subject to the provisions of the plans and as determined by the Compensation Committee of the Board of Directors. At February 28, 1999, a total of 725,062 common shares were available for grants. In fiscal 1999, grants of 11,222 shares of restricted stock were awarded with varying performance criteria and vesting periods. At February 28, 1999, the total number of restricted shares outstanding was 55,357. 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. Stock options are granted to purchase shares of Company common stock at not less than fair market value at dates of grant. With the exception of certain options that become exercisable over a period of years based on varying performance criteria, options generally become exercisable one year after the date of grant. In addition, options generally expire 10 years after the date of grant. The per share weighted average fair values of stock options granted were $6.91 in fiscal 1999, $4.28 in fiscal 1998 and $4.40 in fiscal 1997. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. The following weighted- average assumptions were used in the calculation: Assumptions 1999 1998 1997 - ---------------------------------------------------------------------- Expected dividend yield 3.8% 4.0% 3.8% Expected volatility 24.0% 20.7% 19.8% Risk-free interest rates 5.7% 6.2% 6.6% Expected life (in years) 8.2 8.3 8.3 - ---------------------------------------------------------------------- The Company applies APB Opinion No. 25 in accounting for the compensation costs of employee stock options in the financial statements. Had the Company determined compensation costs based on the fair value at the date of grant for its stock options, the Company's earnings (loss) from continuing operations would have been reduced to the pro forma amounts indicated below: (in thousands, except per share data) 1999 1998 1997 - ------------------------------------------------------------------- Earnings (loss) from continuing operations: As reported $6,832 $24,674 $(11,374) Pro forma 5,944 23,915 (11,784) Diluted earnings (loss) per share from continuing operations: As reported $ 0.36 $ 1.33 $ (0.63) Pro forma 0.31 1.28 (0.66) - ------------------------------------------------------------------- The following table contains information on stock options: Option Price Shares Per Share-Range - ---------------------------------------------------------- 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 Granted 181,564 23.25 - 29.28 Exercised (191,879) 18.69 - 28.06 Expired or canceled (25,222) 18.69 - 29.28 - ---------------------------------------------------------- Outstanding at February 28, 1999 1,300,959 $16.00 - 29.28 ========================================================== Options exercisable at: February 28, 1997 1,321,281 $16.06 - 29.00 February 28, 1998 831,396 $16.00 - 29.00 February 28, 1999 875,009 $16.00 - 29.00 - ---------------------------------------------------------- Note 14: Retirement Plans Defined benefit pension plans and other post-retirement benefits In the United States and Canada, defined benefit pension 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. The Company also provides post-retirement health and life insurance benefits for retirees in the United States and Canada who meet minimum age and service requirements. Life insurance benefits are funded on a pay-as-you-go basis through an insurance company. Health-care benefits are provided under a self-insured program administered by an insurance company. Summaries related to the changes in benefit obligations and plan assets, and to the funded status of the plans are as follows: Post-Retirement Pension Benefits Benefits ------------------- -------------------- (in thousands) 1999 1998 1999 1998 - ------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at beginning of year $193,627 $180,074 $ 13,811 $ 18,522 Service cost 3,337 2,492 101 356 Interest cost 12,518 12,883 907 1,154 Plan participants' contributions 556 592 526 443 Amendments 2,989 1,149 (967) - Plan expenses (527) (434) - - Actuarial (gain) loss 9,835 14,165 2,093 (1,559) Benefits payments (15,127) (14,708) (1,760) (2,020) Curtailments - (166) - (2,915) Foreign exchange adjustment (3,397) (2,420) (249) (170) - ------------------------------------------------------------------------------- Benefit obligation at end of year $203,811 $193,627 $ 14,462 $ 13,811 =============================================================================== Change in plan assets Fair value of plan assets at beginning of year $231,032 $202,131 $ - $ 535 Actual return on plan assets 44,012 45,148 - 17 Employer contribution 1,017 982 1,234 1,025 Plan participants' contributions 556 592 526 443 Benefits payments (15,127) (14,708) (1,760) (2,020) Plan expenses (527) (434) - - Foreign exchange adjustment (3,933) (2,679) - - - ------------------------------------------------------------------------------- Fair value of plan assets at end of year $257,030 $231,032 $ - $ - =============================================================================== Funded status Funded status at end of year $ 53,219 $ 37,405 $(14,462) $(13,811) Unrecognized transition asset (5,902) (7,663) - - Unrecognized prior service cost 5,999 4,864 (575) 348 Unrecognized net (gain) loss (29,800) (15,375) 1,692 (220) - ------------------------------------------------------------------------------- Net amount recognized $ 23,516 $ 19,231 $(13,345) $(13,683) =============================================================================== Amounts recognized in the consolidated balance sheet consist of: Prepaid benefit cost $ 34,595 $ 29,505 $ - $ - Accrued benefit liability (16,679) (16,018) (13,345) (13,683) Intangible asset 8 8 - - Accumulated other comprehensive loss 5,592 5,736 - - - ------------------------------------------------------------------------------- Net amount recognized $ 23,516 $ 19,231 $(13,345) $(13,683) ===============================================================================
Post-Retirement Pension Benefits Benefits ---------------- ---------------- Weighted-average assumptions 1999 1998 1999 1998 - ------------------------------------------------------------------------------- Discount rate 6.2% 6.7% 6.2% 6.8% Expected return on plan assets 10.3% 9.5% N/A N/A Rate of compensation increase 4.0% 4.0% N/A N/A - -------------------------------------------------------------------------------
The assumed annual rate of increase in per capita costs of post- retirement health-care benefits for fiscal 1999 ranged from 4% to 8%. The rate is assumed to decrease gradually to between 4% to 4.8% for fiscal 2004 and thereafter. Assumed health-care cost trends could have an effect on the amounts reported for the health-care plans. The effects of a one-percentage change in the assumed health-care cost trends are as follows: 1% point 1% point (in thousands) Increase Decrease - ------------------------------------------------------------- Total of service and interest cost $ 37 $ (35) Accumulated post-retirement benefit obligation 548 (486) - -------------------------------------------------------------
Post-Retirement Pension Benefits Benefits ---------------------------- ------------------------- (in thousands) 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------- Components of net periodic benefit cost Service cost $ 3,337 $ 2,492 $ 2,492 $ 101 $ 356 $ 474 Interest cost 12,518 12,883 12,438 907 1,154 1,351 Expected return on plan assets (20,419) (16,419) (15,972) - (9) (21) Amortization of transition (asset) obligation (1,532) (1,443) (1,197) - - - Amortization of prior service cost 1,367 820 807 (34) (791) (1,411) Recognized actuarial (gain) loss 760 575 814 117 (61) 15 - ------------------------------------------------------------------------------------- Net periodic (benefit) cost $ (3,969) $ (1,092) $ (618) $1,091 $ 649 $ 408 =====================================================================================
The Company recognized a $2.9 million curtailment gain in fiscal 1998 from the elimination of subsidized retiree medical coverage for most active employees in the United Sates. The following information pertains to pension plans with accumulated benefit obligations in excess of plan assets: Pension Benefits ------------------------ (in thousands) 1999 1998 - ------------------------------------------------------------ Projected benefit obligation $17,251 $16,018 Accumulated benefit obligation 17,197 16,018 Plan assets - - - ------------------------------------------------------------ The minimum liability recorded for pension plans where the accumulated benefit obligation exceeded the fair market value of assets is as follows: (in thousands) 1999 1998 - ------------------------------------------------------------ Minimum liability recognized in comprehensive loss $(5,592) $(5,736) Tax benefit 2,181 2,237 - ------------------------------------------------------------ Minimum liability recognized in comprehensive loss, net of tax $(3,411) $(3,499) ============================================================ Defined contribution plans 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 $2.2 million in fiscal 1999, $2.0 million in fiscal 1998 and $2.1 million in fiscal 1997. Note 15: Multifoods' Business Segments The Company has two reportable business segments: Multifoods Distribution Group and North America Foods. Multifoods Distribution Group is a distributor of food and other products to the foodservice industry in the United States. The business offers foodservice customers a broad selection of national brand-name, regional and private-label items, including food products, paper goods and cleaning supplies, through its national network of distribution centers. Customers include casual-dining, limited-menu restaurants, such as pizza, Mexican and Italian establishments, and sandwich shops; vending operators; the office coffee service market; movie theaters; fund-raising groups; commissaries; and stadium and recreational concession stands. The Company holds leadership positions in the independent pizza restaurant, vending and office coffee service foodservice categories. North America Foods is comprised of two business units: U.S. Foods and Robin Hood Multifoods in Canada. U.S. Foods is a manufacturer and provider of baking mixes and frozen batters, doughs and desserts to commercial customers and foodservice operators. Customers include retail, wholesale and in-store bakeries, and foodservice establishments, such as restaurants and convenience stores. In Canada, Robin Hood Multifoods is a leading consumer foods manufacturer and marketer of flour and baking mixes, primarily under the Robin Hood brand name; and condiments, primarily under the Bick's brand name. The Company also serves as a leading provider of grain-based products and condiments to commercial customers and foodservice operators. Divested Business consists of the food-exporting business, which the Company exited in fiscal 1998. The Company does not allocate interest expense, income taxes or certain corporate expenses to its business segments. Inter-segment revenues were immaterial for the years ended February 28, 1999, 1998 and 1997. The following tables set forth information by business segment: Operating Net Operating Unusual Earnings (in millions) Sales Costs Items (Loss) - ---------------------------------------------------------------------------- 1999: Multifoods Distribution Group $1,845.8 $(1,817.5) $(11.5) $ 16.8 North America Foods 450.8 (419.5) (7.2) 24.1 Divested Business - 0.8 (10.3) (9.5) Corporate Expenses - (8.5) - (8.5) - ---------------------------------------------------------------------------- Total $2,296.6 $(2,244.7) $(29.0) $ 22.9 ============================================================================ 1998: Multifoods Distribution Group $1,770.2 $(1,746.5) $ - $ 23.7 North America Foods 471.7 (441.1) - 30.6 Divested Business 9.2 (4.8) (5.0) (0.6) Corporate Expenses - (9.2) - (9.2) - ---------------------------------------------------------------------------- Total $2,251.1 $(2,201.6) $ (5.0) $ 44.5 ============================================================================ 1997: Multifoods Distribution Group $1,729.9 $(1,725.0) $ (5.1) $ (0.2) North America Foods 476.7 (455.9) (11.4) 9.4 Divested Business 42.5 (34.8) - 7.7 Corporate Expenses - (10.3) (3.6) (13.9) - ---------------------------------------------------------------------------- Total $2,249.1 $(2,226.0) $(20.1) $ 3.0 ============================================================================
1999 1998 1997 ---------------------------------- ---------------------------------- ------------------------------ Depreciation Depreciation Depreciation Capital and Capital and Capital and (in millions) Expenditures Amortization Assets Expenditures Amortization Assets Expenditures Amortization Assets - ------------------------------------------------------------------------------------------------------------------------ Multifoods Distribution Group $13.0 $11.4 $354.3 $ 5.4 $12.6 $338.3 $ 7.2 $12.9 $367.0 North America Foods 14.7 10.3 215.6 6.5 11.0 216.3 14.0 10.7 233.7 Divested Business - - 6.7 - - 16.6 0.1 - 63.9 Corporate 0.4 0.4 75.4 6.7 0.4 61.5 0.4 0.4 65.0 Discontinued Operations - - 44.9 - - 70.9 - - 75.2 - ------------------------------------------------------------------------------------------------------------------------ Total $28.1 $22.1 $696.9 $18.6 $24.0 $703.6 $21.7 $24.0 $804.8 ========================================================================================================================
Corporate assets include cash and cash equivalents, U.S. prepaid pension assets, and current and deferred income tax assets. Geographic Information The Company's North America Foods business segment operates in the United States and Canada. The Canadian operations had revenues of $297.3 million, $324.7 million and $332.0 million for fiscal years 1999, 1998 and 1997, respectively. In addition, long-lived assets of the Canadian operations were $79.3 million, $84.9 million and $90.0 million at February 28, 1999, 1998 and 1997, respectively. Long-lived assets consist of property, plant and equipment; goodwill; and identifiable intangible assets. Note 16: Quarterly Summary (unaudited) Operating Net Operating Unusual Earnings (in millions) Sales Costs Items (Loss) - ---------------------------------------------------------------------------- First Quarter - 1999 Multifoods Distribution Group $454.7 $(448.2) $(11.5) $ (5.0) North America Foods 110.5 (105.9) (7.2) (2.6) Divested Business - 0.8 (10.3) (9.5) Corporate Expenses - (2.0) - (2.0) - ---------------------------------------------------------------------------- Total $565.2 $(555.3) $(29.0) $(19.1) ============================================================================ First Quarter - 1998 Multifoods Distribution Group $446.7 $(443.2) $ - $ 3.5 North America Foods 115.5 (112.5) - 3.0 Divested Business 2.7 (2.1) - 0.6 Corporate Expenses - (2.6) - (2.6) - ---------------------------------------------------------------------------- Total $564.9 $(560.4) $ - $ 4.5 ============================================================================ Second Quarter - 1999 Multifoods Distribution Group $442.1 $(436.6) $ - $ 5.5 North America Foods 105.0 (98.1) - 6.9 Corporate Expenses - (2.3) - (2.3) - ---------------------------------------------------------------------------- Total $547.1 $(537.0) $ - $ 10.1 ============================================================================ Second Quarter - 1998 Multifoods Distribution Group $422.2 $(417.1) $ - $ 5.1 North America Foods 116.7 (111.4) - 5.3 Divested Business 2.7 (0.6) - 2.1 Corporate Expenses - (1.9) - (1.9) - ---------------------------------------------------------------------------- Total $541.6 $(531.0) $ - $ 10.6 ============================================================================ Third Quarter - 1999 Multifoods Distribution Group $483.8 $(475.4) $ - $ 8.4 North America Foods 127.3 (115.9) - 11.4 Corporate Expenses - (2.2) - (2.2) - ---------------------------------------------------------------------------- Total $611.1 $(593.5) $ - $ 17.6 ============================================================================ Third Quarter - 1998 Multifoods Distribution Group $456.8 $(449.0) $ - $ 7.8 North America Foods 133.4 (119.4) - 14.0 Divested Business 3.4 (2.1) - 1.3 Corporate Expenses - (2.4) - (2.4) - ---------------------------------------------------------------------------- Total $593.6 $(572.9) $ - $ 20.7 ============================================================================ Fourth Quarter - 1999 Multifoods Distribution Group $465.2 $(457.3) $ - $ 7.9 North America Foods 108.0 (99.6) - 8.4 Corporate Expenses - (2.0) - (2.0) - ---------------------------------------------------------------------------- Total $573.2 $(558.9) $ - $ 14.3 ============================================================================ Fourth Quarter - 1998 Multifoods Distribution Group $444.5 $(437.2) $ - $ 7.3 North America Foods 106.1 (97.8) - 8.3 Divested Business 0.4 - (5.0) (4.6) Corporate Expenses - (2.3) - (2.3) - ---------------------------------------------------------------------------- Total $551.0 $(537.3) $ (5.0) $ 8.7 ============================================================================
Note 16: Quarterly Summary (unaudited) (continued) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year (in millions) --------------- ---------------- --------------- --------------- --------------- except per share data) 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------------------------------- Gross profit $ 44.8 $44.3 $ 42.7 $ 44.7 $51.8 $55.7 $45.5 $45.3 $184.8 $190.0 Earnings (loss) from continuing operations (14.6)(b) 0.9 4.6 6.1 9.8 13.1 7.0 4.5(d) 6.8 24.6 Earnings (loss) from discontinued operations (9.7)(c) 1.1 (119.2) (1.6) (7.3) (3.7) (2.5) (0.4) (138.7) (4.6) - ----------------------------------------------------------------------------------------------------------------------- Net earnings (loss) (24.3) 2.0 (114.6) 4.5 2.5 9.4 4.5 4.1 (131.9) 20.0 Basic earnings (loss) per share of common stock (a): Continuing operations (0.78)(b) 0.05 0.24 0.33 0.52 0.70 0.38 0.24(d) 0.36 1.34 Discontinued operations (0.52)(c) 0.06 (6.35) (0.08) (0.38) (0.19) (0.14) (0.02) (7.39) (0.25) - ----------------------------------------------------------------------------------------------------------------------- Total (1.30) 0.11 (6.11) 0.25 0.14 0.51 0.24 0.22 (7.03) 1.09 Diluted earnings (loss) per share of common stock (a): Continuing operations (0.78)(b) 0.05 0.24 0.33 0.52 0.69 0.37 0.24(d) 0.36 1.33 Discontinued operations (0.52)(c) 0.06 (6.30) (0.08) (0.38) (0.19) (0.13) (0.03) (7.34) (0.25) - ----------------------------------------------------------------------------------------------------------------------- Total (1.30) 0.11 (6.06) 0.25 0.14 0.50 0.24 0.21 (6.98) 1.08 Comprehensive income (loss) (26.2) 1.5 (26.8) 4.0 12.1 7.5 6.1 3.0 (34.8) 16.0 Dividend paid per share of common stock 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.80 0.80 Market price of common stock: Close 29 3/4 28 1/4 17 3/8 26 7/8 25 7/16 26 7/8 21 11/16 27 15/16 21 11/16 27 15/16 High 30 15/16 28 1/4 31 7/16 29 3/8 25 9/16 32 7/16 26 13/16 29 1/4 31 7/16 32 7/16 Low 27 5/8 20 17 5/16 24 1/2 15 3/8 26 3/16 20 15/16 24 5/8 15 3/8 20 - -----------------------------------------------------------------------------------------------------------------------
(a) Earnings (loss) per share are computed independently for each period presented. As a result, the sum of the quarterly earnings (loss) per share in fiscal 1999 and 1998 does not equal the total computed for the year. (b) Includes a net after-tax charge of $18.7 million, or 99 cents per diluted share, from unusual items. (c) Includes a net after-tax charge of $8.4 million, or 45 cents per share, from unusual items. (d) 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 retiree medical coverage for most active employees in the United States. Five-Year Comparative Summary Fiscal year ended the last day of February (dollars and shares in millions, except per share data) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- Consolidated Summary of Operations Net sales $ 2,296.6 $ 2,251.1 $ 2,249.1 $ 2,194.7 $ 1,977.5 Cost of materials and production (1,961.5) (1,915.2) (1,918.3) (1,856.3) (1,637.7) Delivery and distribution (150.3) (145.9) (155.5) (154.1) (138.2) Selling, general and administrative (132.9) (140.5) (152.2) (148.2) (162.2) Unusual items (29.0) (5.0) (20.1) (5.6) 26.2 Interest, net (10.4) (7.5) (12.3) (15.0) (11.4) Other income (expense), net (0.2) - (0.5) (0.8) (0.7) - ----------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes 12.3 37.0 (9.8) 14.7 53.5 Income taxes (5.5) (12.4) (1.6) 0.3 (10.2) - ----------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations 6.8 24.6 (11.4) 15.0 43.3 - ----------------------------------------------------------------------------------------------------------------------- Discontinued operations: Operating earnings (loss), after tax (14.1) (4.6) 14.2 9.1 13.7 Net loss on disposition, after tax (124.6) - - - - - ----------------------------------------------------------------------------------------------------------------------- Earnings (loss) from discontinued operations (138.7) (4.6) 14.2 9.1 13.7 - ----------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ (131.9) $ 20.0 $ 2.8 $ 24.1 $ 57.0 ======================================================================================================================= Basic earnings (loss) per share: Continuing operations $ 0.36 $ 1.34 $ (0.63) $ 0.82 $ 2.40 Discontinued operations (7.39) (0.25) 0.78 0.51 0.76 - ----------------------------------------------------------------------------------------------------------------------- Total $ (7.03) $ 1.09 $ 0.15 $ 1.33 $ 3.16 ======================================================================================================================= Diluted earnings (loss) per share: Continuing operations $ 0.36 $ 1.33 $ (0.63) $ 0.82 $ 2.40 Discontinued operations (7.34) (0.25) 0.78 0.50 0.76 - ----------------------------------------------------------------------------------------------------------------------- Total $ (6.98) $ 1.08 $ 0.15 $ 1.32 $ 3.16 ======================================================================================================================= Year-End Financial Position Current assets (3) $ 340.1 $ 383.4 $ 439.9 $ 389.7 $ 377.2 Current liabilities (3) 264.2 221.8 257.6 215.7 232.6 Working capital (excluding cash and short-term debt)(3) 179.3 177.3 268.6 211.1 195.6 Property, plant and equipment, net (2) 165.2 170.0 175.4 175.6 197.8 Long-term debt (2) 121.2 121.0 200.9 196.5 179.5 Shareholders' equity 260.3 309.4 289.6 299.6 291.1 Total assets (3) 696.9 703.6 804.8 768.5 764.2 - ----------------------------------------------------------------------------------------------------------------------- Dividends Paid Preferred stock $ - $ - $ - $ 0.1 $ 0.2 Common stock 15.0 14.7 14.5 14.4 14.4 Per share of common stock 0.80 0.80 0.80 0.80 0.80 - ----------------------------------------------------------------------------------------------------------------------- Other Financial Data Current ratio 1.3:1 1.7:1 1.7:1 1.8:1 1.6:1 Equity per share of common stock $ 13.86 $ 16.51 $ 16.08 $ 16.66 $ 16.16 Debt to total capitalization (2) 38% 32% 43% 41% 39% Depreciation (2) $ 18.6 $ 20.3 $ 19.9 $ 20.1 $ 19.7 Capital expenditures, excluding acquisitions (2) $ 28.1 $ 18.6 $ 21.7 $ 26.2 $ 25.3 Average common shares outstanding: Basic 18.8 18.4 18.0 18.0 18.0 Diluted 18.9 18.6 18.0 18.0 18.0 Number of common shareholders 4,658 4,705 5,087 4,930 5,234 Number of employees (3) 6,743 6,807 7,176 7,115 7,495 Market price per share of common stock: Close $21 11/16 $27 15/16 $ 21 1/8 $ 18 5/8 $ 18 5/8 High $ 31 7/16 $32 7/16 $ 22 $ 23 7/8 $ 19 5/8 Low $ 15 3/8 $20 $ 15 1/8 $ 17 1/4 $ 15 1/8 - -----------------------------------------------------------------------------------------------------------------------
(1) In fiscal 1999, the Company classified its Venezuela Foods business as discontinued operations. Prior year information has been reclassified accordingly. (2) Continuing operations only. (3) Includes discontinued operations. EX-21 6 EXHIBIT 21 Exhibit 21 SUBSIDIARIES OF INTERNATIONAL MULTIFOODS CORPORATION The following is a list of the Company's subsidiaries as of March 1, 1999, 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 Multifoods Bakery Distributors, Inc. Delaware Multifoods Distribution Management, Inc. Delaware Multifoods Distribution Group, Inc. Colorado Multifoods Merchandising, Inc. Delaware EX-23 7 EXHIBIT 23 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 and No. 333-69387 on Form S-8 relating to the 1997 Stock-Based Incentive Plan of International Multifoods Corporation, No.333-64075 on Form S-8 relating to the Consulting Agreement between International Multifoods Corporation and Daryl Schaller and No. 33-65221 on Form S-3 relating to certain debt securities of International Multifoods Corporation of our reports dated March 29, 1999, relating to the consolidated balance sheets of International Multifoods Corporation and subsidiaries as of February 28, 1999 and 1998 and the related consolidated statements of operations, cash flows, and shareholders' equity, and related financial statement schedule for each of the fiscal years in the three-year period ended February 28, 1999, which reports appear or are incorporated by reference in the Annual Report on Form 10-K for the fiscal year ended February 28, 1999, of International Multifoods Corporation. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Minneapolis, Minnesota May 11, 1999 EX-27 8 FDS
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. YEAR FEB-28-1999 FEB-28-1999 13,495 0 127,877 3,034 162,414 340,067 300,139 134,978 696,933 264,245 121,199 0 0 2,184 258,132 696,933 2,296,550 2,296,550 2,111,751 2,111,751 0 713 10,911 12,266 5,434 6,832 (138,702) 0 0 (131,870) (7.03) (6.98)
-----END PRIVACY-ENHANCED MESSAGE-----