- Sales Increase 17 Percent to $684.9 Million
- Earnings Reduced By One-Time Costs
- Company expects FTC review of the General Mills/Pillsbury merger to be completed in October; remains comfortable with full-year guidance
International Multifoods Corp. (NYSE:IMC) today reported second-quarter fiscal 2002 net earnings before unusual items of $3 million, or 16 cents per diluted share, compared with $5 million, or 27 cents per share, a year ago. Including unusual items, second-quarter net earnings were $2.8 million, or 15 cents per diluted share, compared with $5.2 million, or 28 cents per share, in the prior year.
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Net sales in the second quarter ended Sept. 1 rose 17 percent to $684.9 million, up from $585.3 million a year ago. Excluding unusual items, operating earnings were $8.6 million, down from $11.7 million in the same period last year.
The strong growth in sales reflected the contribution of new foodservice distribution and foodservice manufacturing business added earlier in the year.
The decline in net earnings was driven by higher operating expenses and by one-time, non-recurring costs associated with the company’s pending acquisition of the Pillsbury desserts and specialty products portfolio, and the consolidation of two condiment-processing facilities in Canada. The one-time, non-recurring costs had about a 7-cent per share impact in the quarter. The increase in operating expenses was due primarily to new business start-up costs; higher labor and utility costs; and investments in new product platforms. The company also experienced price pressures in some areas, such as vending distribution.
“We are pleased with the solid sales growth achieved by both of our business segments in the second quarter, which demonstrates the broad demand for our product and service offerings,” said Gary E. Costley, International Multifoods chairman and chief executive officer. “While our earnings were adversely affected by the continuation of the higher costs we experienced in this year’s first quarter, we are investing in new initiatives to support future growth and are moving forward to put in place the people and processes to ensure a seamless transition of the Pillsbury baking mix businesses.
“We expect that the Federal Trade Commission will complete its review of the proposed General Mills/Pillsbury merger and our pending acquisition later this month,” Costley said. “We believe strongly in the strategic benefits of this acquisition, and are confident that the combination of the Pillsbury baking mix businesses with our existing food manufacturing operations will bring value to Multifoods customers, consumers and shareholders long term.”
Second-quarter 2002 results included a pre-tax unusual charge of $300,000, or 1 cent per share after tax, for severance costs related to a previously divested business. In last year’s quarter, the company recognized an unusual gain of 1 cent per share after tax. The year-earlier figures included a $5.3 million gain primarily from the sale of the company’s headquarters building, which was largely offset by tax expenses on the sale of the building and the repatriation of a dividend from its Canadian subsidiary, and by unusual charges to close two distribution facilities.
2nd-Quarter Operating Results by Segment
Multifoods Distribution Group.
Operating earnings were $3.6 million, compared with $3.8 million, excluding unusual items, in the second quarter a year ago. Including unusual items, operating earnings were up slightly. Net sales increased nearly 20 percent to $561.6 million, up from $468.8 million last year.
During the quarter, the company continued to benefit from sales growth in targeted foodservice segments. Volume in the sandwich segment was up 57 percent, and volume in the pizza segment rose 13 percent. These gains reflect the addition of more than $240 million of annualized new business and solid demand among existing accounts. Sales in vending distribution increased approximately 4 percent, and sales in the combined theater and fund-raising segments were up 12 percent.
The distribution group’s results were impacted by a year-over-year increase in labor rates and utility costs, as well as start-up costs and inefficiencies related to the significant and rapid ramp-up in new business. The company also continued to experience competitive pricing pressures and softness in demand in its vending distribution business, in particular at customers’ in-plant and in-office locations, due to the slowing economy.
“While we made progress in the quarter on key initiatives, such as warehouse productivity and inventory management, which are critical to enhancing our distribution group’s future operating performance, we still have work to do,” Costley said. “Actions are underway to build on this progress, and I am confident that we will continue to see improvements in our distribution group’s margin for the balance of the year.”
North America Foods.
Operating earnings for North America Foods were $7.2 million, down from $9.1 million in the second quarter a year ago. Net sales increased nearly 6 percent to $123.3 million, up from $116.5 million last year. Excluding currency effects, sales were up 8 percent.
North America Foods’ earnings declined due to production inefficiencies and lower asset utilization on new foodservice manufacturing product platforms; one-time costs to consolidate the company’s Canadian condiment-processing facilities; and an unfavorable exchange rate. In addition, higher labor, commodity and utility costs, as well as competitive pricing pressures, adversely affected results.
In Canada, the company achieved volume growth in consumer grain-based products, commercial flour and commercial baking mixes. During the quarter, the company also experienced solid demand for several of its new Canadian consumer products, such as Bick’s Mini Snack ’ems pickles and Golden Temple basmati rice, which were introduced earlier this year. In the United States, volume in the company’s foodservice manufacturing business was up 12 percent, driven primarily by a major new customer added earlier this year. In September, the company’s U.S. Foodservice Products division received the American Tasting Institute’s `Best of Show’ award for its new line of frozen donuts.
“We have invested aggressively in major new platforms in our foodservice manufacturing business to broaden our product portfolio and position Multifoods for important growth opportunities in faster-growing categories,” Costley said. “In the near term, we are facing a higher cost structure as we work to secure new sales and improve productivity. Yet, we believe our strategies are the right ones for customers that are seeking high-quality, custom food solutions.”
Six-Month Summary
Excluding unusual items, net earnings for the first half of fiscal 2002 were $5.1 million, or 27 cents per diluted share, compared with $9.8 million, or 52 cents per diluted share, a year ago. Net sales increased 13 percent to $1.35 billion, up from $1.2 billion in the first six months of the prior year.
Earnings Outlook
“Despite the uncertain economic outlook, we believe we are on track to deliver full-year earnings in the range of $1.25 to $1.35 per share,” Costley said. “These results assume a contribution from the acquisition of the Pillsbury mix businesses beginning in November. Overall, we believe that we are well positioned in the current environment as our business is largely concentrated in areas that should not be significantly impacted by the slowing economy.”
About International Multifoods
International Multifoods is a manufacturer for and distributor to the foodservice industry in North America. The company also is a leading manufacturer and marketer of consumer foods in Canada. Further information about International Multifoods is available on the Internet at www.multifoods.com.
Forward-Looking Language
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the company’s operations and financial performance and condition. 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 consummation of the proposed acquisition and the timing of the close; costs associated with the acquisition should it fail to close; actions in the financial markets; regulatory approval related to the proposed acquisition; integration problems associated with the proposed acquisition; the results of our review of strategic alternatives for Multifoods Distribution Group; the impact of competitive products and pricing; market or weather conditions that may affect the costs of grain, cheese, other raw materials, fuel and labor; changes in laws and regulations; fluctuations in interest rates; fluctuations in foreign exchange rates; risks commonly encountered in international trade; and other factors as may be discussed in the company’s Annual Report on Form 10-K for the year ended March 3, 2001, and other reports filed with the Securities and Exchange Commission.
International Multifoods Corporation
Segment and Earnings Digest
(unaudited)
(in millions, except per share data)
FY 2002 – Second Quarter Ended September 1
——————————————
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $ 561.6 $ (558.0) $ 3.6 $ – $ 3.6
North America Foods 123.3 (116.1) 7.2 – 7.2
Corporate Expenses – (2.2) (2.2) (0.3) (2.5)
——– ——— ——– ——– ———
Total $ 684.9 $ (676.3) $ 8.6 $ (0.3) $ 8.3
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 8.6 $ (0.3) $ 8.3
Interest, net (3.5) – (3.5)
Other income (expense), net (0.3) – (0.3)
——– ——– ———
Earnings before income taxes 4.8 (0.3) 4.5
Income taxes (1.8) 0.1 (1.7)
——– ——– ———
Net earnings $ 3.0 $ (0.2) $ 2.8
======== ======== =========
Earnings per share:
Basic $ 0.16 $(0.01) $ 0.15
======== ======== =========
Diluted $ 0.16 $(0.01) $ 0.15
======== ======== =========
FY 2001 – Second Quarter Ended August 26
—————————————-
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $ 468.8 $ (465.0) $ 3.8 $ (0.3) $ 3.5
North America Foods 116.5 (107.4) 9.1 – 9.1
Corporate Expenses – (1.2) (1.2) 5.6 4.4
——– ——— ——– ——– ———
Total $ 585.3 $ (573.6) $ 11.7 $ 5.3 $ 17.0
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 11.7 $ 5.3 $ 17.0
Interest, net (3.3) – (3.3)
Other income (expense), net (0.3) – (0.3)
——– ——– ———
Earnings before income taxes 8.1 5.3 13.4
Income taxes (3.1) (5.1) (8.2)
——– ——– ———
Net earnings $ 5.0 $ 0.2 $ 5.2
======== ======== =========
Earnings per share:
Basic $ 0.27 $ 0.01 $ 0.28
======== ======== =========
Diluted $ 0.27 $ 0.01 $ 0.28
======== ======== =========
International Multifoods Corporation
Segment and Earnings Digest
(unaudited)
(in millions, except per share data)
FY 2002 – Six Months Ended September 1
————————————–
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $1,113.5 $(1,105.6) $ 7.9 $ – $ 7.9
North America Foods 237.5 (224.8) 12.7 – 12.7
Corporate Expenses – (4.9) (4.9) (0.3) (5.2)
——– ——— ——– ——– ———
Total $1,351.0 $(1,335.3) $ 15.7 $ (0.3) $ 15.4
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 15.7 $ (0.3) $ 15.4
Interest, net (7.1) – (7.1)
Other income (expense), net (0.4) – (0.4)
——– ——– ———
Earnings before income taxes 8.2 (0.3) 7.9
Income taxes (3.1) 0.1 (3.0)
——– ——– ———
Net earnings $ 5.1 $ (0.2) $ 4.9
======== ======== =========
Earnings per share:
Basic $ 0.27 $(0.01) $ 0.26
======== ======== =========
Diluted $ 0.27 $(0.01) $ 0.26
======== ======== =========
FY 2001- Six Months Ended August 26
———————————–
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $ 964.7 $ (955.7) $ 9.0 $ (0.3) $ 8.7
North America Foods 230.9 (214.3) 16.6 – 16.6
Corporate Expenses – (2.7) (2.7) 5.6 2.9
——– ——— ——– ——– ———
Total $1,195.6 $(1,172.7) $ 22.9 $ 5.3 $ 28.2
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 22.9 $ 5.3 $ 28.2
Interest, net (6.5) – (6.5)
Other income (expense), net (0.6) – (0.6)
——– ——– ———
Earnings before income taxes 15.8 5.3 21.1
Income taxes (6.0) (5.1) (11.1)
——– ——– ———
Net earnings $ 9.8 $ 0.2 $ 10.0
======== ======== =========
Earnings per share:
Basic $ 0.53 $ 0.01 $ 0.54
======== ======== =========
Diluted $ 0.52 $ 0.01 $ 0.53
======== ======== =========
International Multifoods Corporation
Consolidated Statements of Earnings
(unaudited)
Second Quarter Ended
———————–
Sept. 1, Aug. 26,
(in millions, except per share data) 2001 2000
—————————————————————–
Net sales $ 684.9 $ 585.3
Cost of materials and production (590.4) (496.8)
Delivery and distribution (50.9) (43.5)
—————————————————————–
Gross profit 43.6 45.0
Selling, general and administrative (35.0) (33.3)
Unusual items (0.3) 5.3
—————————————————————–
Operating earnings 8.3 17.0
Interest, net (3.5) (3.3)
Other income (expense), net (0.3) (0.3)
—————————————————————–
Earnings before income taxes 4.5 13.4
Income taxes (1.7) (8.2)
—————————————————————–
Net earnings $ 2.8 $ 5.2
=================================================================
Earnings per share:
Basic $ 0.15 $ 0.28
Diluted 0.15 0.28
—————————————————————–
Average shares outstanding:
Basic 18.8 18.7
Diluted 19.1 18.9
—————————————————————–
Six Months Ended
———————–
Sept. 1, Aug. 26,
(in millions, except per share data) 2001 2000
—————————————————————–
Net sales $ 1,351.0 $ 1,195.6
Cost of materials and production (1,164.8) (1,018.9)
Delivery and distribution (100.4) (87.0)
—————————————————————–
Gross profit 85.8 89.7
Selling, general and administrative (70.1) (66.8)
Unusual items (0.3) 5.3
—————————————————————–
Operating earnings 15.4 28.2
Interest, net (7.1) (6.5)
Other income (expense), net (0.4) (0.6)
—————————————————————–
Earnings before income taxes 7.9 21.1
Income taxes (3.0) (11.1)
—————————————————————–
Net earnings $ 4.9 $ 10.0
=================================================================
Earnings per share:
Basic $ 0.26 $ 0.54
Diluted 0.26 0.53
—————————————————————–
Average shares outstanding:
Basic 18.8 18.7
Diluted 19.0 18.8
—————————————————————–
International Multifoods Corporation
Consolidated Condensed Balance Sheets
(unaudited)
Sept. 1, March 3, Aug. 26,
(in millions) 2001 2001 2000
——————————————————————-
Assets
——
Current assets:
Cash and cash equivalents $ 11.2 $ 10.2 $ 8.2
Trade accounts receivable, net 150.4 131.8 130.5
Inventories 207.9 185.2 187.1
Other current assets 62.0 51.1 52.7
——————————————————————-
Total current assets 431.5 378.3 378.5
Property, plant and equipment, net 208.5 206.2 203.7
Goodwill, net 80.6 81.9 83.4
Other assets 100.2 98.2 96.9
——————————————————————-
Total assets $820.8 $764.6 $762.5
===================================================================
Liabilities and Shareholders’ Equity
————————————
Current liabilities:
Notes payable $102.5 $ 39.5 $ 62.9
Current portion of long-term debt – 1.0 11.0
Accounts payable 205.7 216.1 178.2
Other current liabilities 39.7 42.3 47.4
——————————————————————-
Total current liabilities 347.9 298.9 299.5
Long-term debt 145.5 145.4 146.2
Employee benefits and other liabilities 65.1 64.3 61.3
——————————————————————-
Total liabilities 558.5 508.6 507.0
——————————————————————-
Shareholders’ equity 262.3 256.0 255.5
——————————————————————-
Total liabilities and
shareholders’ equity $820.8 $764.6 $762.5
===================================================================
