-----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, S4PCCX/aj2toNHHMNuO/Rpnoptu+kYif3Q48PfEE4S+ZHF4KefzMtzNOQ8wDihIP Dl0sZxB838//Kg9lu4Onqg== 0000912057-02-002684.txt : 20020414 0000912057-02-002684.hdr.sgml : 20020414 ACCESSION NUMBER: 0000912057-02-002684 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011113 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020125 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: 0303 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06699 FILM NUMBER: 02517291 BUSINESS ADDRESS: STREET 1: 110 CHESHIREL LANE STREET 2: SUITE 300 CITY: MINNETONKA STATE: MN ZIP: 55305-1060 BUSINESS PHONE: 9525943300 MAIL ADDRESS: STREET 1: 110 CHESHIREL LANE STREET 2: SUITE 300 CITY: MINNETONKA STATE: MN ZIP: 55305 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MILLING CO INC DATE OF NAME CHANGE: 19700217 8-K/A 1 a2068725z8-ka.txt 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 13, 2001 INTERNATIONAL MULTIFOODS CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-6699 41-0871880 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 110 Cheshire Lane, Suite 300, Minnetonka, Minnesota 55305 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (952) 594-3300 Not applicable (Former name or former address, if changed since last report) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of businesses acquired. Combined Statements of Direct Assets of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. as of September 30, 2001 (unaudited) and June 30, 2001 and 2000, and Combined Statements of Direct Earnings Before Interest and Taxes for the three months ended September 30, 2001 and 2000 (unaudited) and the years ended June 30, 2001, 2000 and 1999, with Independent Auditors' Report thereon, are attached hereto as Exhibit 99.1. (b) Pro forma financial information. Unaudited Pro Forma Financial Statements as of September 1, 2001 and for the six months ended September 1, 2001 and fiscal year ended March 3, 2001, are attached hereto as Exhibit 99.2. (c) Exhibits. 2.1 Amended and Restated Asset Purchase and Sale Agreement, dated as of October 24, 2001, by and among General Mills, Inc., The Pillsbury Company and International Multifoods Corporation. (Previously filed.) The Company hereby agrees to furnish to the Securities and Exchange Commission upon request copies of all Exhibits and Schedules to the Amended and Restated Asset Purchase and Sale Agreement. 2.2 Closing Agreement, dated as of November 13, 2001, by and among General Mills, Inc., The Pillsbury Company and International Multifoods Corporation. (Previously filed.) 23.1 Consent of KPMG LLP. 99.1 Financial statements of businesses acquired. 99.2 Pro forma financial information. 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. INTERNATIONAL MULTIFOODS CORPORATION Date: January 25, 2002 By /s/ John E. Byom ----------------------------------- John E. Byom Vice President - Finance and Chief Financial Officer (PRINCIPAL FINANCIAL OFFICER AND DULY AUTHORIZED OFFICER) 3 EXHIBIT INDEX 2.1 Amended and Restated Asset Purchase and Sale Agreement, dated as of October 24, 2001, by and among General Mills, Inc., The Pillsbury Company and International Multifoods Corporation. (Previously filed.) The Company hereby agrees to furnish to the Securities and Exchange Commission upon request copies of all Exhibits and Schedules to the Amended and Restated Asset Purchase and Sale Agreement. 2.2 Closing Agreement, dated as of November 13, 2001, by and among General Mills, Inc., The Pillsbury Company and International Multifoods Corporation. (Previously filed.) 23.1 Consent of KPMG LLP. 99.1 Financial statements of businesses acquired. 99.2 Pro forma financial information. EX-23.1 3 a2068725zex-23_1.txt EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors International Multifoods Corporation: We consent to incorporation by reference in the Registration Statement (No. 33-65221) on Form S-3 and Registration Statements (Nos. 333-51399, 333-34173, 2-84236, 33-6223, 33-30979, 333-34171, 333-69387 and 333-64075) on Form S-8 of International Multifoods Corporation of our report dated December 14, 2001, relating to the Combined Statements of Direct Assets of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. as of June 30, 2001 and 2000 and the related Combined Statements of Direct Earnings Before Interest and Taxes of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. for each of the years in the three-year period ended June 30, 2001, which report appears in the Current Report on Form 8-K/A of International Multifoods Corporation. /s/ KPMG LLP KPMG LLP Minneapolis, Minnesota January 25, 2002 EX-99.1 4 a2068725zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Combined Financial Statements June 30, 2001 and 2000 (With Independent Auditors' Report Thereon) INDEPENDENT AUDITORS' REPORT The Board of Directors General Mills, Inc.: We have audited the accompanying Combined Statements of Direct Assets of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. as of June 30, 2001 and 2000 and the related Combined Statements of Direct Earnings Before Interest and Taxes of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. for each of the years in the three-year period ended June 30, 2001. These financial statements are the responsibility of the management of General Mills, Inc. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the direct assets of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. as of June 30, 2001 and 2000, and the related direct earnings before interest and taxes of the Pillsbury Retail and Foodservice Businesses and Other Businesses of General Mills, Inc. for each of the years in the three-year period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP December 14, 2001 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Combined Statements of Direct Assets (In thousands)
Sept. 30, June 30, June 30, 2001 2001 2000 ----------- -------- -------- (unaudited) Assets: Inventories $74,799 60,138 58,376 Prepaid expenses 2,191 1,698 2,234 ------- ------- ------- Total current assets 76,990 61,836 60,610 Repair parts inventory 482 495 489 Machinery and equipment, net 22,465 23,515 26,082 ------- ------- ------- Total assets 99,937 85,846 87,181 ------- ------- ------- Liabilities: Accrued consumer promotions 5,539 4,799 5,850 ------- ------- ------- Total liabilities 5,539 4,799 5,850 ------- ------- ------- Net direct assets $94,398 81,047 81,331 ======= ======= =======
See accompanying notes to combined financial statements. 2 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Combined Statements of Direct Earnings Before Interest and Taxes (In thousands)
Three Months Ended Year Ended ------------------- ----------------------------- Sept. 30, Sept. 30, June 30, June 30, June 30, 2001 2000 2001 2000 1999 -------- -------- ------- -------- -------- (unaudited) Direct revenues, net $135,213 155,041 616,415 625,163 601,875 Cost of goods sold 74,285 84,592 334,979 346,746 333,716 -------- -------- -------- -------- -------- Gross margin 60,928 70,449 281,436 278,417 268,159 Advertising and sales promotions 33,140 34,860 150,233 148,798 133,823 Brokerage 1,762 1,929 8,089 4,384 3,664 Direct selling, administrative, and other 6,747 6,837 29,049 33,849 39,631 -------- -------- -------- -------- -------- Direct earnings before interest and taxes $ 19,279 26,823 94,065 91,386 91,041 ======== ======== ======== ======== ========
See accompanying notes to combined financial statements. 3 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 (1) DESCRIPTION OF BUSINESS International Multifoods Corporation (the "Buyer") has entered into an Amended Asset Purchase and Sale Agreement (the "Agreement"), dated October 24, 2001, with General Mills, Inc. ("General Mills") and The Pillsbury Company ("Pillsbury"). The Agreement provides, among other things, for the purchase of certain assets and assumption of certain liabilities of Pillsbury and General Mills (together, the "Company"), pertaining to the Retail and Foodservice businesses of Pillsbury (the "Pillsbury Businesses") and certain flour and meals businesses of General Mills (the "Other Businesses") (collectively the "Combined Businesses"). The Retail business included in the combined statements of direct earnings before interest and taxes consists of Pillsbury Desserts & Baking Mixes, Martha White Desserts and Baking Mixes, and Hungry Jack Potatoes and Dry Breakfast products including certain international export sales in Puerto Rico, U.S. Virgin Islands, and Mexico. Product offerings include several hundred SKUs across a broad spectrum of dessert, muffin, quick bread, biscuit, and pancake mixes that are formulated and packaged specifically for use in retail operations. The Foodservice business included in the combined statements of direct earnings before interest and taxes consists of non-custom foodservice dry mix products in boxes of seven pounds and less and non-custom frosting products in packages of eleven pounds and less. Product offerings include approximately 100 SKUs across a broad spectrum of dessert, muffin, roll, biscuit, and griddle mixes that are formulated and packaged specifically for use in foodservice operations. The Other Businesses included in the combined statements of direct earnings before interest and taxes consist of the Robin Hood, Red Band, LaPina and Softasilk flour brands, the Pet Milk Brand, and Farmhouse Food brand products. Product offerings include approximately 65 SKUs across a broad spectrum of flour and meals products that are formulated and packaged specifically for use in retail operations. The accompanying combined statements present the direct assets as of June 30, 2001 and 2000 of the Pillsbury Businesses and Other Businesses and direct revenue, costs of goods sold, advertising and sales promotion expenses, brokerage expenses, and direct selling, administrative, and other expenses for the years ended June 30, 2001, 2000, and 1999 for the Pillsbury Businesses and Other Businesses. The production of the Retail and Foodservice businesses is primarily performed at plants in Murfreesboro, Tennessee and Martel, Ohio, respectively. However, there are other Pillsbury manufacturing and distribution operations at these plants. At these shared sites, only the dedicated assets that are directly used in the businesses being sold are included in the combined statements of direct assets. Only certain of these direct assets will be sold under the Agreement. The revenues of the Pillsbury Businesses are primarily generated by sales within the United States. The production of the Other businesses is primarily performed at plants in Lodi and Vallejo, California and various co-pack facilities in the United States. However, there are other General Mills manufacturing and distribution operations at these California plants. At these shared sites, only the dedicated assets that are directly used in the businesses being sold are included in the combined statements of direct assets. Only certain of these direct assets will be sold under the Agreement. The revenues of the Other Businesses are primarily generated by sales within the United States 4 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (a) BASIS OF PRESENTATION - PRINCIPLES OF COMBINATION The accompanying statements have been prepared on the accrual basis of accounting. The accompanying statements may not necessarily reflect the results of operations of the Combined Businesses in the future. The Company does not account for the Combined Businesses as a separate entity. Accordingly, the information included in the accompanying financial statements has been obtained from the consolidated financial records of Pillsbury and General Mills, respectively. The statements of direct earnings before interest and taxes include allocations as discussed below. The Company's management believes that the allocations are reasonable; however, these allocated expenses are not necessarily indicative of costs that would have been incurred by the Combined Businesses on a stand-alone basis because certain other selling, administrative, and other expenses are provided to the Combined Businesses that are not included in the accompanying statements as discussed below. Interest and tax expense have not been included in the statements of direct earnings before interest and taxes, as these expenses are not specifically identifiable to the Combined Businesses. The statements of direct earnings before interest and taxes include allocations of certain plant costs, as discussed below. The Company's management believes these allocations are reasonable; however, these allocated costs may not be indicative of costs that would have been incurred by the Combined Businesses on a stand-alone basis because these allocated costs are based on the structure of certain plant operations and related activities, as managed and operated by the Company. The statements of direct earnings before interest and taxes includes depreciation expense related to the Company facilities that produced the products. The statements of direct earnings before interest and taxes for the years ended June 30, 2000 and 1999 have been adjusted to include certain allocations to conform with the presentation for the year ended June 30, 2001. The Other Businesses of General Mills are included in the statements of direct earnings before interest and taxes and the statements of net direct assets on a one-month lag. (b) INVENTORIES Raw materials and supplies consist of all ingredients and packaging of the Combined Businesses at the Company's Martel, Ohio, Murfreesboro, Tennessee and Lodi and Vallejo, California production facilities and ingredients and packaging at co-pack facilities. Finished product inventories represent all finished products of the Combined Businesses maintained at the Company's various production facilities and third-party distribution centers. Inventories are stated at the lower of cost or market. Cost is determined primarily using the last-in, first-out (LIFO) method. 5 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 (c) PREPAID EXPENSES Prepaid expenses primarily represent payments made through June 30 of each respective year relating to advertising and promotion programs which will be executed subsequent to June 30 of each respective year. (d) REPAIR PARTS INVENTORY Repair parts inventory represents spare parts for capitalized equipment, primarily tooling lines. Storeroom parts inventory is valued on an average cost basis and the parts are expensed as they are used. As equipment is removed or replaced, the associated parts are reviewed for obsolescence and written off as necessary. (e) MACHINERY AND EQUIPMENT Machinery and equipment represents certain fixed assets located at the Company's Martel, Ohio, Murfreesboro, Tennessee and Lodi and Vallejo, California production facilities that are directly used in the businesses. Machinery and equipment is stated at historical cost, net of accumulated depreciation directly related to the fixed assets. Alterations and major overhauls which extend the lives or increase the capacity of the assets are capitalized. Maintenance repairs and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives, primarily within the range from 3 to 20 years for machinery and equipment. (f) ACCRUED CONSUMER PROMOTIONS Accrued consumer promotions consist primarily of coupon liabilities for the Retail business. An accrual is established at the time the promotion is made available to the consumer. Coupon liabilities represent the full amount of the liability at each respective year-end. The Buyer will assume any liabilities for manufacturer's coupons issued prior to, or on, the closing date of the Agreement and relating to the Pillsbury Businesses, which coupons are received by the clearinghouse for reimbursement beginning sixty days after the closing date of the Agreement. (g) REVENUE RECOGNITION Revenue from the sale of products is recognized at the time the products are shipped. Direct revenue includes gross sales less cash discounts which generally are 2% of gross sales, special pricing agreement discounts, and adjustments for sales returns and unsaleables for the Pillsbury Businesses products. (h) COST OF GOODS SOLD Cost of goods sold includes costs of materials, labor, overhead, and distribution. Overhead allocations are based on estimated time spent by employees, relative use of facilities, and other related costs. 6 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 Certain other corporate overhead functions are provided to the Combined Businesses by the Company and are not directly attributable or specifically identifiable to the Combined Businesses and, therefore, have been excluded from product costs in the accompanying statements. These expenses primarily include the Company's corporate related expenses, such as engineering and safety, and corporate production expenses. (i) ADVERTISING AND SALES PROMOTIONS (A&SP) Retail A&SP spending represents advertising, consumer promotions, variable trade, and fixed trade costs. The A&SP applicable to the above-referenced SKUs which is included in the statements is specific to the SKUs and does not include general Pillsbury costs such as cross-business promotions and shared allocations. Foodservice A&SP spending represents promotional, advertising, and other marketing expenses classified as trade and non-trade spending. Costs specifically identified at the SKU level were included, while remaining costs were allocated. The trade spending applicable to the above-referenced SKUs was determined using an allocation method that was based upon the ratio of total gross sales of all of the SKUs in the Foodservice Business. Non-trade spending was allocated to the Foodservice Business based on identified costs. Other Businesses A&SP spending represents promotional, advertising, and other marketing expenses classified primarily as trade spending. Costs specifically identified at the SKU level were included, while remaining costs were allocated. The trade spending applicable to the above-referenced SKUs was primarily determined using an allocation method that was based upon the ratio of total gross sales of all of the SKUs in the respective Other Businesses. (j) BROKERAGE Brokerage spending is a direct cost identified at the SKU level. (k) DIRECT SELLING, ADMINISTRATIVE, AND OTHER Retail costs include direct expenses for selling, administrative, and research and development that are specifically identifiable to the Retail business. There are other allocations for administration allocated to the Retail business based on net sales for the Retail business compared to total sales for the Pillsbury North America division. These allocated expenses represent charges that are attributable to the Retail business and include Pillsbury North America division's related expenses for human resources, finance, and operations. Other administrative expenses, which are managed at a Pillsbury corporate level, are not directly attributable to the Retail business and, therefore, have been excluded from the accompanying combined statements. Such expenses include central management systems, corporate strategy and finance, facilities rent and security, and government and corporate affairs. 7 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 Foodservice costs include direct expenses for selling, administrative, and research and development that are specifically identifiable to Foodservice products. There are other allocations for administration allocated to Foodservice products based on sales of the Foodservice products business compared to total sales for the Pillsbury Bakeries and Foodservice division. These allocated expenses represent charges that are attributable to Foodservice products and include Pillsbury Bakeries and Foodservice division's related expenses for human resources, finance, and operations. Other administrative expenses, which are managed at a Pillsbury corporate level, are not directly attributable to Foodservice products and, therefore, have been excluded in the accompanying statements. Such expenses include central management systems, corporate strategy and finance, facilities rent and security, and government and corporate affairs. Other Businesses costs include direct expenses for selling, administrative, and research and development that are specifically identifiable to their respective products. There are other allocations for administration allocated to Other Businesses products based on sales for the respective products compared to total sales for the respective divisions. These allocated expenses represent charges that are attributable to the respective Other Businesses products and include each division's related expenses for human resources, finance, marketing, operations and corporate management functions. (l) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Effective July 1, 2000, the Pillsbury Businesses adopted SFAS 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. At adoption, the Pillsbury Businesses considered all derivatives to be cash flow hedges. The effects of the adoption of SFAS 133 resulted in a charge to other comprehensive income (OCI) of $440 thousand. This amount was recorded as a charge to earnings during the year ended June 30, 2001. The Other Businesses do not directly utilize any derivatives for hedging activities. (m) USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results could differ from these estimates. Also, as discussed in note 2(a), these financial statements include allocations and estimates that are not necessarily indicative of the costs and expenses that would have resulted if the Combined Businesses had been operated as a separate entity, or of the future results of the Combined Businesses. 8 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 (3) INVENTORIES The components of inventories are as follows (in thousands):
2001 2000 ---------- ---------- Raw materials $ 6,907 6,809 Finished goods 53,231 51,567 ---------- ---------- $ 60,138 58,376 ========== ==========
The carrying value of inventories approximates current cost. Raw materials, which have been allocated based on usage during the preceding year, for Pillsbury Businesses are $5.1 million and $3.6 million at June 30, 2001 and 2000, respectively. (4) DERIVATIVES The Pillsbury Businesses are exposed to risk from fluctuating prices for grain products used in the manufacturing process. The Pillsbury Businesses hedge a portion of this risk through the use of commodity futures and options contracts. These derivatives are recorded as assets and liabilities with changes in values recorded in earnings currently. At June 30, 2001, the Pillsbury Businesses had a series of futures and option contracts outstanding through October 2001 with contract values of $10.5 million. The unrealized net losses on these derivative contracts recorded in cost of goods sold at June 30, 2001 was $711 thousand. (5) MACHINERY AND EQUIPMENT The components of machinery and equipment are as follows (in thousands):
2001 2000 -------- -------- Machinery and equipment $ 59,066 59,157 Construction in process 1,280 711 -------- -------- 60,346 59,868 Less accumulated depreciation (36,831) (33,786) -------- -------- $ 23,515 26,082 ======== ========
9 PILLSBURY RETAIL AND FOODSERVICE BUSINESSES AND OTHER BUSINESSES OF GENERAL MILLS, INC. Notes to Combined Financial Statements June 30, 2001 and 2000 (6) COMMITMENTS AND CONTINGENCIES (a) LEGAL PROCEEDINGS From time to time, the Combined Businesses may be subjected to certain lawsuits and claims, and other actions arising in the normal course of business. Such lawsuits and claims to the extent they relate to activities of the Company through the closing date, as defined in the Agreement, are the responsibility of the Company. (b) COMMITMENTS Certain products of the Retail business are manufactured by third parties, and International Multifoods Corporation will assume Pillsbury's co-packing agreements with these third parties. Under the terms of the Agreement, approximately one year from the date of the closing of the Agreement, the Company will sell to International Multifoods Corporation its plant in Toledo, Ohio for $11.5 million. In order to comply with the Agreement and close the sale of the plant, the Company is committed to installing new production assets over the next 12 months at an estimated cost of approximately $70 million. 10 EX-99.2 5 a2068725zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined financial statements have been prepared based on our historical financial statements and those of the acquired Pillsbury and General Mills Businesses (Acquired Businesses). The pro forma combined financial statements include adjustments to give pro forma effect to (i) the acquisition and (ii) new financing arrangements that were entered into to purchase the Acquired Businesses and refinance our debt obligations. The pro forma combined balance sheet gives pro forma effect to the acquisition as if it occurred on September 1, 2001 and combines our consolidated balance sheet as of September 1, 2001 with the Acquired Businesses Combined Statement of Direct Assets as of September 30, 2001. The pro forma combined statements of operations gives pro forma effect to the acquisition as if it occurred on March 1, 2000. Our consolidated statement of operations for the fiscal year ended March 3, 2001 is combined with the Acquired Businesses Combined Statement of Direct Earnings before Interest and Taxes for the twelve months ended March 31, 2001. Our consolidated statement of operations for the six months ended September 1, 2001 is combined with the Acquired Businesses Combined Statement of Direct Earnings before Interest and Taxes for the six months ended September 30, 2001. The pro forma adjustments are based upon available information and various assumptions that we believe are reasonable. The pro forma adjustments are described in accompanying notes. The acquisition will be accounted for using the purchase method of accounting. Allocation of the purchase price has been determined based upon preliminary information and appraisals that are still in progress, and is subject to change. The pro forma adjustments do not reflect additional costs, including marketing and product development, which we expect to incur to operate the Acquired Businesses. In addition, the pro forma adjustments do not reflect non-recurring transition costs that will be incurred subsequent to the acquisition. The unaudited pro forma combined financial statements do not purport to represent what our financial position or results of operations would actually have been if the acquisition had in fact occurred on the dates indicated. In addition, the unaudited pro forma combined financial statements are not necessarily representative of our financial position or results of operations at any future date or for any future period. The unaudited pro forma combined financial statements should be read in conjunction with the historical financial statements of International Multifoods, filed as part of our Annual Report on Form 10-K for the fiscal year ended March 3, 2001, and the historical financial statements of the Acquired Businesses, which are contained herein. International Multifoods Corporation and Subsidiaries Unaudited Pro Forma Combined Balance Sheet As of September 1, 2001 (in thousands)
Pro Forma Acquired ------------------------------ Historical Businesses Adjustments Results ---------- ---------- ----------- ---------- ASSETS Current assets: Cash and cash equivalents $ 11,157 $ - $ - $ 11,157 Trade accounts receivable, net 150,436 - 19,334 (a) 169,770 Inventories 207,947 74,799 (8,390)(b) 274,356 Other current assets 61,948 2,191 3,328 (c) 67,467 -------- ------- -------- ---------- Total current assets 431,488 76,990 14,272 522,750 Property, plant and equipment, net 208,544 22,465 1,016 (d) 232,025 Goodwill and other acquisition related intangibles, net 91,397 - 160,990 (e) 252,387 Other assets 89,401 482 97,800 (f) 187,683 -------- ------- -------- ---------- Total assets $820,830 $99,937 $274,078 $1,194,845 ======== ======= ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $102,472 $ - $(52,023)(g) $ 50,449 Current portion of long-term debt - - 22,000 (g) 22,000 Accounts payable 205,724 - - 205,724 Other current liabilities 39,683 5,539 16,856 (h) 62,078 -------- ------- -------- ---------- Total current liabilities 347,879 5,539 (13,167) 340,251 Long-term debt, net of current portion 145,462 - 382,538 (g) 528,000 Employee benefits and other liabilities 65,214 - 5,930 (i) 71,144 -------- ------- -------- ---------- Total liabilities 558,555 5,539 375,301 939,395 -------- ------- -------- ---------- Shareholders' equity 262,275 94,398 (101,223)(j) 255,450 -------- ------- -------- ---------- Total liabilities and shareholders' equity $820,830 $99,937 $274,078 $1,194,845 ======== ======= ======== ==========
(a) Reflects termination of receivable securitization agreement, which was required as a result of our new financing arrangements. (b) Reflects adjustment as we only purchased finished goods of the Pillsbury businesses as of the closing date. (c) Reflects the capitalization of deferred financing costs (current portion) in connection with the financing of the acquisition, the tax benefit on a loss on the cancellation of a debt offering (see note (j)) and the elimination of prepaid expenses of the Acquired Businesses, which Multifoods did not purchase. (d) Adjustment reflects that Multifoods did not purchase the production equipment at Pillsbury's Murfreesboro, Tennessee and Martel, Ohio plants, which are included in the historical financial statements of the Acquired Businesses. Adjustment also includes the addition of certain equipment at the General Mills' Toledo, Ohio plant that was purchased at the closing date. (e) Reflects the preliminary allocations, based on currently available information, of the purchase price to the estimated fair value of the net assets acquired in the acquisition. The asset purchase and sale agreement related to the acquisition sets a target inventory balance of $51,500. The purchase price for the Acquired Businesses on the closing date of the acquisition will be adjusted to the extent that the actual inventory balance is greater than or less than $51,500. For purposes of determining the inventory adjustment to the purchase price below, we have assumed that the value of such inventory on the date of closing of the acquisition will be $65,390, which is equal to the value of such inventory on September 30, 2001. The allocation of the purchase price is subject to adjustment based on the actual inventory balance of the Acquired Businesses on the closing date and based on the results of appraisals and analyses. Purchase price, including transaction costs $ 310,210 Purchase price, inventory adjustment: Acquired business inventory 65,390 Target inventory (51,500) ------- Inventory adjustment to purchase price 13,890 ---------- Adjusted purchase price 324,100 ---------- Less net assets acquired: Net assets at historical cost 94,398 Adjustment for assets not acquired and liabilities not assumed (13,237) Advance for equipment to be delivered after closing, estimated value (see note (f)) 68,879 Deferred tax liability on write-up of assets (see note (i)) (5,930) Receivable from Sellers 10,000 Fair value of loan guarantee (see note (j)) 9,000 ---------- Estimated fair market value of net assets acquired 163,110 ---------- Excess of purchase price over fair value of net assets acquired $ 160,990 ==========
The adjustment of $160,990 represents the excess of the purchase price over the sum of the estimated amounts assigned to identifiable assets acquired, less liabilities assumed in the acquisition. A portion of this amount will ultimately be assigned to identifiable intangible assets acquired as part of the final purchase price allocation. Intangible assets acquired include trademarks and trademark licenses. After the final allocation to identifiable assets and assumed liabilities is completed, the remaining balance will be classified as goodwill. (f) Reflects the following adjustments: Capitalization of deferred financing costs $10,985 Reclassification of repair parts to inventory (482) Write-off of capitalized financing costs on existing credit facilities (582) Receivable from Sellers 10,000 Fair value of loan guarantee 9,000 Advance for equipment to be delivered (see note below) 68,879 ------- $97,800 =======
Under the agreements related to the acquisition, General Mills must purchase and install certain additional equipment at its Toledo, Ohio plant as part of the conversion of this plant for Multifoods use. In addition, General Mills will purchase and install certain equipment at our Elyria, Ohio plant. (g) Reflects the net borrowings to finance the acquisition and repay existing debt. (h) Reflects balance due to General Mills for the purchase price adjustment associated with inventory (see note (e)) and elimination of liabilities that Multifoods did not assume. (i) Reflects deferred tax liability on the write-up of assets that are not recognized for tax purposes. (j) Reflects the following adjustments: Elimination of equity associated with net assets of the Acquired Businesses $ (94,398) Write-off of capitalized financing costs on existing credit facilities, a loss on the redemption of our outstanding medium-term notes and a loss on cancellation of a high-yield debt offering, net of tax benefit (see note below) (6,825) --------- $(101,223) =========
We incurred a pre-tax loss of $10,304 for underwriting and other direct costs associated with the planned issuance of $200 million in high-yield unsecured notes. We cancelled the debt offering as more favorable financing become available when, as part of the acquisition, a Seller agreed to guarantee $200 million of our debt obligations. International Multifoods Corporation and Subsidiaries Unaudited Pro Forma Combined Statement of Operations Six Months Ended September 1, 2001 (in thousands, except per share amounts)
Pro Forma Acquired -------------------------- Historical Businesses Adjustments Results ----------- ---------- ----------- ---------- Net sales $1,350,981 $250,182 $(46,311)(a) $1,554,852 Cost of goods sold (1,265,201) (136,369) - (1,401,570) ----------- ---------- ----------- ---------- Gross profit 85,780 113,813 (46,311) 153,282 Selling, general and administrative (70,041) (77,998) 46,311 (b) (101,728) Unusual items (344) - - (344) ----------- ---------- ----------- ---------- Operating earnings 15,395 35,815 - 51,210 Interest, net (7,155) - (10,747)(c) (17,902) Other income (expense), net (369) - 369 (d) - ----------- ---------- ----------- ---------- Earnings before income taxes 7,871 35,815 (10,378) 33,308 Income taxes (2,991) - (9,793)(e) (12,784) ----------- ---------- ----------- ---------- Net earnings $ 4,880 $ 35,815 $(20,171) $ 20,524 =========== ========== =========== ========== Earnings per share: Basic $ 0.26 $ 1.09 Diluted $ 0.26 $ 1.08 Average shares of common stock outstanding: Basic 18,789 18,789 Diluted 19,017 19,017
(a) Reflects the reclassification of trade spending costs, which were classified as selling expense by the Acquired Businesses, to a deduction of net sales by Multifoods. (b) Reflects the reclassification of trade spending costs (see (a)). Since the appraisal to determine the fair value of acquired assets and assumed liabilities is in process, the allocation of purchase price to identifiable intangible assets is not yet complete. As a result, there is no additional amortization expense included in the Pro Forma Combined Statement of Operations. When the appraisal is complete and amounts are assigned to identifiable intangible assets with definite lives, there will be additional amortization expense included in our statement of operations. (c) Adjustment to reflect pro forma interest expense associated with debt for the acquisition, refinancing existing debt and amortization of deferred debt issuance costs: $200 million senior notes (6.60%) $6,602 $150 million term A loan (5.37%) 3,490 $200 million term B loan (6.05%) 5,994 Senior revolving credit facility (5.88%) 1,184 Commitment fee on unused portion of the credit facility 133 Amortization of debt issuance costs and loan guarantee 2,002 Amortization of gain on terminated interest rate swap agreement (622) -------- Subtotal 18,783 Elimination of interest expense for existing debt repaid (8,036) -------- $10,747 ========
(d) Reflects elimination of fees associated with receivable securitization agreement. (e) Reflects adjustment to income tax expense for the tax effect of the results of operations for the Acquired Businesses and the pro forma adjustments. International Multifoods Corporation and Subsidiaries Unaudited Pro Forma Combined Statement of Operations Fiscal Year Ended March 3, 2001 (in thousands, except per share amounts)
Pro Forma Acquired -------------------------- Historical Businesses Adjustments Results ----------- ---------- ----------- ---------- Net sales $ 2,524,907 $ 617,372 $ (115,124)(a) $ 3,027,155 Cost of goods sold (2,335,866) (337,932) - (2,673,798) ----------- ---------- ----------- ----------- Gross profit 189,041 279,440 (115,124) 353,357 Selling, general and administrative (137,283) (183,072) 115,124 (b) (205,231) Unusual items 3,488 - - 3,488 ----------- ---------- ----------- ----------- Operating earnings 55,246 96,368 - 151,614 Interest, net (14,801) - (22,295)(c) (37,096) Other income (expense), net (1,346) - 1,346 (d) - ----------- ---------- ----------- ----------- Earnings before income taxes 39,099 96,368 (20,949) 114,518 Income taxes (17,924) - (29,036)(e) (46,960) ----------- ---------- ----------- ----------- Net earnings $ 21,175 $ 96,368 $ (49,985) $ 67,558 =========== ========== =========== =========== Earnings per share: Basic $ 1.13 $ 3.61 Diluted $ 1.12 $ 3.58 Average shares of common stock outstanding: Basic 18,739 18,739 Diluted 18,874 18,874
(a) Reflects the reclassification of trade spending costs, which were classified as selling expense by the Acquired Businesses, to a deduction of net sales by Multifoods. (b) Reflects the reclassification of trade spending costs (see (a)). Since the appraisal to determine the fair value of acquired assets and assumed liabilities is in process, the allocation of purchase price to identifiable intangible assets is not yet complete. As a result, there is no additional amortization expense included in the Pro Forma Combined Statement of Operations. When the appraisal is complete and amounts are assigned to identifiable intangible assets with definite lives, there will be additional amortization expense included in our statement of operations. (c) Adjustment to reflect pro forma interest expense associated with debt for the acquisition, refinancing existing debt and amortization of deferred debt issuance costs: $200 million senior notes (6.60%) $13,204 $150 million term A loan (5.37%) 7,785 $200 million term B loan (6.05%) 12,066 Senior revolving credit facility (5.88%) 3,927 Commitment fee on unused portion of the credit facility 131 Amortization of debt issuance costs and loan guarantee 4,152 Amortization of gain on terminated interest rate swap agreement (1,243) -------- Subtotal 40,022 Elimination of interest expense for existing debt repaid (17,727) -------- $22,295 ========
(d) Reflects elimination of fees associated with receivable securitization agreement. (e) Reflects adjustment to income tax expense for the tax effect of the results of operations for the Acquired Businesses and the pro forma adjustments. -----END PRIVACY-ENHANCED MESSAGE-----