Corn Products International, Inc. (NYSE: CPO – news) today reported earnings per share, on a fully diluted basis, of $0.55 for the second quarter ended June 30, 2000, confirming the indications made in its July 12, 2000, press release regarding its expectations for second quarter and full-year results. This compared with $0.58 per share in the same quarter of 1999. Net income for April to June was $19 million versus $22 million earned in the same quarter last year.
The results reflect the lower-than-contracted sweetener deliveries in the quarter to the beverage industry in the United States and Canada, lower co-product prices — particularly for corn oil – in the same region and high energy costs worldwide. In addition, these comparative quarter results also reflect the weaker annual contract prices for sweeteners in the United States and Canada, previously reported in January this year.
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Konrad Schlatter, chairman and chief executive officer, said, “Our international business performed well despite a somewhat sluggish economy in the southern cone of South America, with good volume growth in our base business and important contributions from our recent acquisitions. However, our domestic business, despite notable progress with cost reduction, continues to struggle from low sweetener and co-product prices. In addition, the inclement weather during this quarter reduced product take away by the US and Canadian beverage industry, which further affected our profits.
Second quarter net sales were $474 million, up 7 percent from $441 million in the same period last year. Worldwide volume growth, including acquisitions, was 13 percent, with three fourths of the advance coming from acquisitions. Soft sweetener volumes at weak annual contract prices in the United States and Canada, and low co-product prices worldwide held back sales growth. Weaker currencies further reduced sales by approximately 2 percent.
The Company’s gross profit rose 10 percent to $85 million for the second quarter this year, up from $77 million for the same period in 1999. Operating income increased 13 percent to $51 million, up from $45 million earned in the same three months last year.
Financing costs in the second quarter were $12 million compared with $8 million a year earlier. The increase reflected higher interest rates and the greater debt level resulting from acquisitions and share repurchases. Operating cash flow continued to be strong. The Company’s effective tax rate remained at 35 percent in the second quarter.
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By GlobalDataFor the six-month period, diluted earnings were $0.65 per share, after a net of tax restructuring charge of $0.37 per share. Excluding the charge, earnings per share on a fully diluted basis were $1.02 for the first half of 2000, up from $1.00 earnings per share last year. The Company’s net income, excluding the charge, was $36 million, compared with $37 million in 1999. Cumulative net sales were $918 million, up from $838 million last year, a 10-percent increase. Operating income before special charges was $94 million versus $79 million a year ago.
The Company confirmed its July 12 estimate of $2.15 to a possible $2.20 in earnings per diluted share for fiscal year 2000, before restructuring charges of $0.37 per share.
Business breakdown by region
North American net sales were at $297 million for the second quarter, down 6 percent from $318 million last year. The reduction in sales is attributed to lower annually contracted selling prices in the US and Canada for sweeteners and co-product returns. While volumes in the quarter were up 3 percent overall, sweetener volumes in the US and Canadian markets were off from slow take-away by the beverage industry due to unusually wet weather in much of the region. Sales in the Mexican market were down slightly as lower prices and a weaker exchange rate offset strong sweetener volumes.
North American operating income dipped in the second quarter to $24 million from $27 million last year for the same reasons that hurt sales. Meanwhile, lower costs in areas targeted by the recent restructuring have started to benefit the Company’s results.
Rest of World net sales registered $176 million in the second quarter of 2000, up 43 percent from $123 million in last year’s second quarter. The increase reflects a 36-percent contribution from recent acquisitions in Argentina and Korea, with the balance coming from growth in the base business. Rest of World operating income was $31 million in the second quarter versus $22 million in the same period a year ago. The 41-percent increase tracks the sales growth and also reflects continued strong margins.
Corn Products International, Inc. is one of the world’s largest corn refiners and a major supplier of high-quality food ingredients and industrial products derived from the wet milling and processing of corn and other starch-based materials. The Company is the No. 1 worldwide producer of dextrose and a leading regional producer of starch, high fructose corn syrup and glucose. In 1999, the Company recorded sales of $1.7 billion with operations in 22 countries at 43 plants, including wholly owned businesses, affiliates and alliances. Headquartered in Bedford Park, Ill., it was founded in 1906 and became an independent public company on December 31, 1997. The Company is listed on the New York Stock Exchange under the symbol CPO. Additional information can be found on the World Wide Web at www.cornproducts.com.
This press release contains or may contain certain forward-looking statements concerning the Company’s financial position, business and future prospects, in addition to other statements using words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions. These statements contain certain inherent risks and uncertainties.
Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, stockholders are cautioned that no assurance can be given that our expectations will prove correct. Actual results and developments may differ materially from the expectations conveyed in these statements, based on factors such as the following: fluctuations in worldwide commodities markets and the associated risks of hedging against such fluctuations; fluctuations in aggregate industry supply and market demand; general economic, business and market conditions in the various geographic regions and countries in which we manufacture and sell our products, including fluctuations in the value of local currencies and changes in regulatory controls regarding quotas, tariffs and biotechnology issues; and increased competitive and/or customer pressure in the corn refining industry. Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections. For a further description of risk factors, see the Company’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q or 8-K.
Corn Products International, Inc.
Condensed Consolidated Statements of Income
(In millions except per share amounts)
Three Months Ended Change Six Months Ended Change
June 30, % June 30, %
2000 1999 2000 1999
Net sales $473.9 $441.3 7% $918.1 $837.9 10%
Cost of sales 389.2 364.3 7% 755.5 697.3 8%
Gross profit 84.7 77.0 10% 162.6 140.6 16%
Operating expense 34.5 32.6 6% 71.0 63.6 12%
(Fees and income)
from unconsolidated
affiliates (0.7) (0.5) 50% (2.1) (2.3) -8%
Operating income
before special
charge 50.9 44.9 13% 93.7 79.3 18%
Special charge – – N/M 20.0 – N/M
Operating income 50.9 44.9 13% 3.7 79.3 -7%
Financing costs 12.3 8.3 48% 22.7 15.6 46%
Income before
taxes 38.6 36.6 5% 51.0 63.7 -20%
Provision for
income taxes 13.5 12.8 6% 17.8 22.3 -20%
25.1 23.8 5% 33.2 1.4 -20%
Minority
stockholder
interest 5.8 2.1 183% 10.3 3.9 160%
Net income $19.3 $21.7 -11% $22.9 $37.5 -39%
Weighted average
common shares
outstanding:
Basic 35.2 37.3 35.3 37.3
Diluted 35.2 37.4 35.3 37.4
Earnings per common
share
Basic and diluted $0.55 $0.58 -5% $0.65 $1.00 -35%
Corn Products International, Inc.
Condensed Consolidated Balance Sheets
As of:
(In millions except share and per share amounts) June 30, December 31,
2000 1999
Assets
Current assets
Cash and cash equivalents $35 $41
Accounts receivable – net 272 261
Inventories 246 212
Prepaid expenses 15 6
Deferred tax asset 17 17
Total current assets 585 537
Plants and properties – net 1,410 1,349
Goodwill, net of accumulated amortization 317 270
Investments in joint ventures 28 27
Other assets 29 29
Total assets 2,369 2,212
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings and current portion of
long-term debt 521 222
Accounts payable 73 109
Accrued liabilities 118 90
Total current liabilities 712 421
Non-current liabilities 45 63
Long-term debt 241 322
Deferred taxes on income 196 180
Minority stockholders’ interest 187 199
Stockholders’ equity
Preferred stock – authorized 25,000,000 shares-
$0.01 par value none issued — —
Common stock – authorized 200,000,000 shares-
$0.01 par value – 37,659,887 issued
on June 30, 2000 and December 31, 1999 1 1
Additional paid in capital 1,067 1,067
Less: Treasury stock (common stock; 2,489,027 (62) (20)
and 703,399 shares on June 30, 2000 and
December 31, 1999, respectively) at cost
Deferred compensation – restricted stock (2) (2)
Accumulated comprehensive loss (133) (120)
Retained earnings 117 101
Total stockholders’ equity 988 1,027
Total liabilities and stockholders’ equity $2,369 $2,212
Corn Products International, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions) For The Six Months Ended 30,
2000 1999
Cash flows from (used for) operating activities
Net income $23 $37
Non-cash charges (credits) to net income:
Depreciation and amortization 69 51
Deferred taxes – 7
Loss on disposal of fixed assets 3 –
Changes in trade working capital:
Accounts receivable, prepaid items, and
other assets 7 (20)
Inventories (26) (15)
Accounts payable and accrued liabilities (20) 18
Net cash flows from operating activities 56 78
Cash flows from (used for) investing activities:
Capital expenditures paid, net of proceeds on
disposal (56) (62)
Cash consideration paid for acquired business (117) (75)
Net cash flows from (used for) investing
activities (173) (137)
Cash flows from (used for) financing activities:
Proceeds from short-term borrowings,
net of payments 164 89
Dividends paid (7) (6)
Cost of common stock repurchased (44) (10)
Other non-current liabilities (3) 4
Net cash flows from (used for)
financing activities 110 77
Increase (decrease) in cash and cash equivalents (7) 18
Effect of exchange rates on cash 1 (3)
Cash and cash equivalents, beginning of period 41 36
Cash and cash equivalents, end of period $35 $51
Corn Products International, Inc.
Supplemental Financial Information
I.Geographic Information of Net Sales and Operating Income
(In millions) Three Months Ended Six Months Ended
June 30, Change June 30, Change
2000 1999 % 2000 1999 %
Net sales
North America $297.4 $317.9 -6% $580.6 $597.5 -3%
Rest of World 176.5 123.4 43% 337.5 240.4 40%
Total 473.9 441.3 7% 918.1 837.9 10%
Operating income
North America $23.9 $26.8 -11% $44.1 $47.9 -8%
Rest of World 30.6 21.6 41% 56.3 38.0 48%
Corporate (3.5) (3.5) 0% (6.7) (6.6) -3%
Special charge – – (20.0) –
Total 50.9 44.9 13% 73.7 79.3 -7%
II.Estimated Source of Earnings Per Share for the Three and Six Months
Ended June 30(1)
The following is a list of the major items that impacted our second
quarter and year to date results.The amounts are calculated on a net after
tax basis and attempt to estimate total business effects.
Earnings Earnings
Per Share Per Share
Three Six
Months Months
Net income per share June 30, 1999 $0.58 $1.00
Change
Volumes 0.18 0.47
Operating margin (0.05) (0.23)
Foreign currency translation (0.01) 0.02
Financing costs (0.07) (0.12)
Minority interest (0.11) (0.17)
Stock buy-back program 0.03 0.05
Special charge — (0.37)
Net change (0.03) (0.35)
Net income per share June 30, 2000 $0.55 $0.65
(1)All amounts were calculated on a pro-forma basis
III. Common Stock:
June 30, 2000 Dec. 31, 1999
Common stock issued and outstanding 37,659,887 37,659,887
Held in treasury 2,489,027 703,399
Net 35,170,860 36,956,488
