International Multifoods Corp. (NYSE:IMC) yesterday reported fiscal 2001 net earnings before unusual items of $22.1 million, or $1.17 per diluted share. This compares to earnings from continuing operations before unusual items of $24.7 million, or $1.31 per share, a year ago. On Feb. 5, the company announced that it expected full-year earnings per share to be in the range of $1.16 to $1.19 per diluted share.
The decline in earnings was primarily attributable to increased interest expense and lower operating earnings in Multifoods Distribution Group. As previously reported, the distribution business was adversely affected by higher fuel prices and wage rates, and by start-up costs associated with $150 million in annualized new business it began to serve during the fourth quarter.
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Net sales for the 53-week year ended March 3 increased 6 percent to $2.52 billion, up from $2.38 billion last year. Excluding unusual items, fiscal 2001 operating earnings totaled $51.8 million, flat compared with the prior year. During the year, the company achieved a $600,000 improvement in Economic Value Added.
Including unusual items and last year’s loss from the company’s discontinued Venezuelan operation, which was sold in the second quarter of fiscal 2000, full-year net earnings were $21.2 million, or $1.12 per diluted share, compared with $5.1 million, or 27 cents per diluted share, a year ago.
Gary E. Costley, International Multifoods chairman and chief executive officer, said the company’s results were in line with expectations.
“We continued to see good performance in our North America Foods manufacturing business, and we were pleased with the solid sales growth in Multifoods Distribution Group,” Costley said. “At the same time, our distribution group’s results were disappointing, mainly because the impact of higher fuel, payroll and new business transition costs offset the benefits of the sales gains.”
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By GlobalDataFourth-Quarter Summary
The company said fourth-quarter fiscal 2001 earnings, excluding unusual items, were $2.9 million, or 15 cents per diluted share, compared with $6.9 million, or 37 cents per share, for the same period a year ago.
Net sales for the quarter were $679.5 million, up 14 percent from $595 million last year, partially reflecting a 14-week vs. 13-week comparison. Excluding the extra week, sales rose 5 percent in the fourth quarter. Operating earnings before unusual items totaled $9.7 million, compared with $14.5 million in the fiscal 2000 fourth quarter.
Including unusual items, net earnings in the fourth quarter were $2.7 million, or 14 cents per diluted share. In the quarter, the company recognized an unusual pre-tax charge of $300,000, or $200,000 after tax, for exit costs related to the company’s previously announced plan to consolidate its Canadian condiment processing operations.
Other Factors
Net interest expense for the year increased $3.8 million before taxes, or 12 cents per share after tax, compared with last year, due to higher average debt balances and higher average interest rates. Higher average debt balances were driven primarily by the acquisition of the Better Brands distribution business late in third quarter 2000. For the quarter, net interest expense was up $1.5 million before taxes, or 5 cents per share after tax.
The company’s annual effective income tax rate before unusual items was 38 percent, even with the prior year.
Operating Results by Segment
Multifoods Distribution Group.
For the full year, the distribution group recorded operating earnings before unusual items of $16.8 million, down from $20.4 million in the prior year. Fiscal 2001 sales were $2.04 billion, up 7.5 percent from $1.9 billion last year. Adjusting for the extra week and the impact of lower cheese prices, sales grew 6.5 percent.
Fourth-quarter operating earnings were $1.8 million, compared with $5.1 million in the same period a year ago. Sales in the fourth quarter rose 17 percent to $559.1 million, up from $478.9 million last year. Excluding the extra week, sales increased 7.4 percent.
The decline in the distribution group’s fourth-quarter operating earnings was driven by new business start-up costs and the continuation of higher fuel, utility and labor costs. The company also was adversely affected in the quarter by a change in its business and product mix.
During the quarter, the company continued to achieve greater penetration in vending distribution. On a comparable 13-week basis, volume in the vending segment increased 5.4 percent. The company also effectively expanded its position in the targeted segments of pizza restaurants and sandwich shops, with volume up nearly 10 percent and 12 percent, respectively, for the quarter. In January, the distribution group began serving three new accounts, valued at $150 million in annual sales.
Recently, the company was selected to provide distribution services for Togo’s, a fast-growing sandwich concept. The three-year contract is valued at about $70 million in annual sales.
North America Foods.
Excluding unusual items, fiscal 2001 operating earnings in North America Foods rose 5 percent to $40.5 million, up from $38.6 million in fiscal 2000. Sales totaled $482.4 million, down slightly from $485.1 million last year. Excluding currency effects and this year’s extra week, sales declined 1 percent.
North America Foods sales in fiscal 2001 were impacted by difficult year-over-year comparisons in the company’s U.S. foodservice manufacturing business and the loss of a customer that was acquired by a competitor earlier this fiscal year. Last year, the company achieved a 14-percent volume increase in its U.S. foodservice manufacturing business.
Fourth-quarter operating earnings before unusual items were $9.5 million, down 9 percent from $10.4 million in the same period a year ago. Sales increased nearly 4 percent to $120.4 million, up from $116.1 million in the fourth quarter last year. On a constant currency and 13-week comparable basis, sales for North America Foods were down 1 percent.
The decline in fourth-quarter earnings was due to one-time costs associated with the start-up of new business and the consolidation of the company’s condiments processing facilities in Canada; higher freight and utility costs; currency effects; and softness in the company’s Canadian consumer flour business. During the quarter, the company began supplying products to a national sweet baked-goods foodservice chain in the United States. The new business is valued at $20 million a year.
The company continued to experience strong demand in the fourth quarter for its customized, ready-to-bake items and fully prepared, thaw-and-sell offerings. The company’s Canadian business, Robin Hood Multifoods, posted volume growth in commercial baking mixes, commercial flour and ethnic grains.
Earlier this month, the company entered into an agreement with a U.S.-based frozen doughnut manufacturer. Under terms of the agreement, Multifoods will contract with the manufacturer to produce frozen doughnuts for Multifoods, using the company’s mixes and technical service support. This arrangement allows Multifoods to broaden its foodservice offerings, giving Multifoods a major new product platform to provide to its foodservice customers.
Acquisition Update
On Feb. 5, the company announced an agreement to acquire Pillsbury’s desserts and specialty products portfolio, which includes the Pillsbury, Hungry Jack and Martha White brands, Pillsbury’s non-custom foodservice baking mix business, and General Mills’ U.S. Robin Hood brand. The proposed acquisition remains in the regulatory approval process. The company expects the transaction to be completed by the end of May.
“We are moving ahead with our transition plans, and as we indicated earlier, CIBC World Markets has committed to provide the financing,” Costley said. “I am confident that this acquisition will lead to greater value for both customers and shareholders.”
Costley added that the company continues to explore strategic alternatives for Multifoods Distribution Group.
“We are just beginning the review process with the distribution business, and our first priority remains on the successful integration of the acquisition,” Costley said. “Multifoods Distribution Group is a sizable business, in a growing industry with market-leading positions in key foodservice segments. While we can’t provide a specific timetable for completing our review, we intend to proceed in a prudent manner and in a way that enhances the value of our businesses for Multifoods shareholders.”
Outlook
The company expects full-year fiscal 2002 earnings to be in the range of $1.55 to $1.65 per share. These estimates include results from the acquisition for nine months of the company’s fiscal year. On Feb. 5, the company announced that it anticipated incremental earnings-per-share benefits from the acquisition of 18 cents in the first full year after closing. Now, the company expects the acquisition to be 25 cents to 30 cents accretive to GAAP earnings per share in fiscal 2002.
The company said it will incur significant transaction-related costs in the first quarter. In addition, given the effects of the timing of the acquisition’s closing on its estimates, it will not provide specific quarterly guidance until the closing.
“Over the last several years, we have invested in our businesses to better position them for the long term,” Costley said. “We have market-leading positions in both our manufacturing and distribution businesses, and solid platforms on which to grow. Now, with the acquisition of the Pillsbury businesses and the U.S. Robin Hood brand, we will be able to provide greater long-term value through higher earnings and stronger cash flows.”
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 http://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 closing of the proposed acquisition and the timing of the close; actions in the financial markets; regulatory approvals; 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 Report on Form 10-K for the year ended Feb. 29, 2000, 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 2001 – Fourth Quarter Ended March 3
————————————–
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $ 559.1 $ (557.3) $ 1.8 $ – $ 1.8
North America Foods 120.4 (110.9) 9.5 (0.3) 9.2
Corporate Expenses – (1.6) (1.6) – (1.6)
——– ——— ——– ——– ———
Total $ 679.5 $ (669.8) $ 9.7 $ (0.3) $ 9.4
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 9.7 $ (0.3) $ 9.4
Interest, net (4.6) – (4.6)
Other income (expense), net (0.5) – (0.5)
——– ——– ———
Earnings from continuing operations
before income taxes 4.6 (0.3) 4.3
Income taxes (1.7) 0.1 (1.6)
——– ——– ———
Earnings from continuing operations 2.9 (0.2) 2.7
Loss from discontinued operations – – –
——– ——– ———
Net earnings $ 2.9 $ (0.2) $ 2.7
======== ======== =========
Basic earnings per share:
Continuing operations $ 0.15 $(0.01) $ 0.14
Discontinued operations – – –
——– ——– ———
Total $ 0.15 $(0.01) $ 0.14
======== ======== =========
Diluted earnings per share:
Continuing operations $ 0.15 $(0.01) $ 0.14
Discontinued operations – – –
——– ——– ———
Total $ 0.15 $(0.01) $ 0.14
======== ======== =========
International Multifoods Corporation
Segment and Earnings Digest
(unaudited)
(in millions, except per share data)
FY 2000 – Fourth Quarter Ended February 29
——————————————
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $ 478.9 $ (473.8) $ 5.1 $ – $ 5.1
North America Foods 116.1 (105.7) 10.4 – 10.4
Corporate Expenses – (1.0) (1.0) – (1.0)
——– ——— ——– ——– ———
Total $ 595.0 $ (580.5) $ 14.5 $ – $ 14.5
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 14.5 $ – $ 14.5
Interest, net (3.1) – (3.1)
Other income (expense), net (0.2) – (0.2)
——– ——– ———
Earnings from continuing operations
before income taxes 11.2 – 11.2
Income taxes (4.3) – (4.3)
——– ——– ———
Earnings from continuing operations 6.9 – 6.9
Loss from discontinued operations – – –
——– ——– ———
Net earnings $ 6.9 $ – $ 6.9
======== ======== =========
Basic earnings per share:
Continuing operations $ 0.37 $ – $ 0.37
Discontinued operations – – –
——– ——– ———
Total $ 0.37 $ – $ 0.37
======== ======== =========
Diluted earnings per share:
Continuing operations $ 0.37 $ – $ 0.37
Discontinued operations – – –
——– ——– ———
Total $ 0.37 $ – $ 0.37
======== ======== =========
International Multifoods Corporation
Segment and Earnings Digest
(unaudited)
(in millions, except per share data)
FY 2001 – Twelve Months Ended March 3
————————————-
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $2,042.5 $(2,025.7) $ 16.8 $ (0.3) $ 16.5
North America Foods 482.4 (441.9) 40.5 (1.8) 38.7
Corporate Expenses – (5.5) (5.5) 5.6 0.1
——– ——— ——– ——– ———
Total $2,524.9 $(2,473.1) $ 51.8 $ 3.5 $ 55.3
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 51.8 $ 3.5 $ 55.3
Interest, net (14.8) – (14.8)
Other income (expense), net (1.4) – (1.4)
——– ——– ———
Earnings from continuing operations
before income taxes 35.6 3.5 39.1
Income taxes (13.5) (4.4) (17.9)
——– ——– ———
Earnings from continuing operations 22.1 (0.9) 21.2
Loss from discontinued operations – – –
——– ——– ———
Net earnings $ 22.1 $ (0.9) $ 21.2
======== ======== =========
Basic earnings per share:
Continuing operations $ 1.18 $(0.05) $ 1.13
Discontinued operations – – –
——– ——– ———
Total $ 1.18 $(0.05) $ 1.13
======== ======== =========
Diluted earnings per share:
Continuing operations $ 1.17 $(0.05) $ 1.12
Discontinued operations – – –
——– ——– ———
Total $ 1.17 $(0.05) $ 1.12
======== ======== =========
International Multifoods Corporation
Segment and Earnings Digest
(unaudited)
(in millions, except per share data)
FY 2000 – Twelve Months Ended February 29
—————————————–
Operating
Earnings
Before
Net Operating Unusual Unusual Operating
Sales Costs Items Items Earnings
——– ——— ——– ——– ———
Multifoods
Distribution Group $1,899.6 $(1,879.2) $ 20.4 $ 0.5 $ 20.9
North America Foods 485.1 (446.5) 38.6 – 38.6
Corporate Expenses – (7.1) (7.1) – (7.1)
——– ——— ——– ——– ———
Total $2,384.7 $(2,332.8) $ 51.9 $ 0.5 $ 52.4
======== ========= ======== ======== =========
Reconciliation of operating earnings to net earnings:
—————————————————–
Before
Unusual Unusual
Items Items Total
——– ——– ———
Operating earnings $ 51.9 $ 0.5 $ 52.4
Interest, net (11.0) – (11.0)
Other income (expense), net (1.0) – (1.0)
——– ——– ———
Earnings from continuing operations
before income taxes 39.9 0.5 40.4
Income taxes (15.2) (0.5) (15.7)
——– ——– ———
Earnings from continuing operations 24.7 – 24.7
Loss from discontinued operations (19.6) – (19.6)
——– ——– ———
Net earnings $ 5.1 $ – $ 5.1
======== ======== =========
Basic earnings (loss) per share:
Continuing operations $ 1.32 $ – $ 1.32
Discontinued operations (1.05) – (1.05)
——– ——– ———
Total $ 0.27 $ – $ 0.27
======== ======== =========
Diluted earnings (loss) per share:
Continuing operations $ 1.31 $ – $ 1.31
Discontinued operations (1.04) – (1.04)
——– ——– ———
Total $ 0.27 $ – $ 0.27
======== ======== =========
International Multifoods Corporation
Consolidated Statements of Earnings
(unaudited)
Fourth Quarter Ended
———————–
March 3, Feb. 29,
(in millions, except per share data) 2001 2000
—————————————————————–
Net sales $ 679.5 $ 595.0
Cost of materials and production (581.8) (505.7)
Delivery and distribution (51.0) (42.1)
—————————————————————–
Gross profit 46.7 47.2
Selling, general and administrative (37.0) (32.7)
Unusual items (0.3) –
—————————————————————–
Operating earnings 9.4 14.5
Interest, net (4.6) (3.1)
Other income (expense), net (0.5) (0.2)
—————————————————————–
Earnings from continuing operations
before income taxes 4.3 11.2
Income taxes (1.6) (4.3)
—————————————————————–
Earnings from continuing operations 2.7 6.9
Loss from discontinued operations – –
—————————————————————–
Net earnings $ 2.7 $ 6.9
=================================================================
Basic earnings per share:
Continuing operations $ 0.14 $ 0.37
Discontinued operations – –
—————————————————————–
Total $ 0.14 $ 0.37
=================================================================
Diluted earnings per share:
Continuing operations $ 0.14 $ 0.37
Discontinued operations – –
—————————————————————–
Total $ 0.14 $ 0.37
=================================================================
Average shares outstanding:
Basic 18.7 18.7
Diluted 19.0 18.7
—————————————————————–
International Multifoods Corporation
Consolidated Statements of Earnings
(unaudited)
Twelve Months Ended
———————–
March 3, Feb. 29,
(in millions, except per share data) 2001 2000
—————————————————————–
Net sales $ 2,524.9 $ 2,384.7
Cost of materials and production (2,151.0) (2,032.3)
Delivery and distribution (184.9) (168.4)
—————————————————————–
Gross profit 189.0 184.0
Selling, general and administrative (137.2) (132.1)
Unusual items 3.5 0.5
—————————————————————–
Operating earnings 55.3 52.4
Interest, net (14.8) (11.0)
Other income (expense), net (1.4) (1.0)
—————————————————————–
Earnings from continuing operations
before income taxes 39.1 40.4
Income taxes (17.9) (15.7)
—————————————————————–
Earnings from continuing operations 21.2 24.7
Loss from discontinued operations – (19.6)
—————————————————————–
Net earnings $ 21.2 $ 5.1
=================================================================
Basic earnings (loss) per share:
Continuing operations $ 1.13 $ 1.32
Discontinued operations – (1.05)
—————————————————————–
Total $ 1.13 $ 0.27
=================================================================
Diluted earnings (loss) per share:
Continuing operations $ 1.12 $ 1.31
Discontinued operations – (1.04)
—————————————————————–
Total $ 1.12 $ 0.27
=================================================================
Average shares outstanding:
Basic 18.7 18.8
Diluted 18.9 18.8
—————————————————————–
International Multifoods Corporation
Consolidated Condensed Balance Sheets
(unaudited)
March 3, Feb. 29,
(in millions) 2001 2000
————————————————————–
Assets
——
Current assets:
Cash and cash equivalents $ 10.2 $ 11.2
Trade accounts receivable, net 131.8 122.6
Inventories 185.2 171.3
Other current assets 51.1 48.9
————————————————————–
Total current assets 378.3 354.0
————————————————————–
Property, plant and equipment, net 206.2 204.9
Goodwill, net 81.9 84.9
Other assets 98.2 92.4
————————————————————–
Total assets $764.6 $736.2
==============================================================
Liabilities and Shareholders’ Equity
————————————
Current liabilities:
Notes payable $ 39.5 $ 41.5
Current portion of long-term debt 1.0 20.0
Accounts payable 216.1 167.3
Other current liabilities 42.3 48.7
————————————————————-
Total current liabilities 298.9 277.5
————————————————————–
Long-term debt 145.4 147.2
Employee benefits and other liabilities 64.3 56.4
————————————————————–
Total liabilities 508.6 481.1
————————————————————–
Shareholders’ equity 256.0 255.1
————————————————————–
Total liabilities and
shareholders’ equity $764.6 $736.2
==============================================================
