1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
-------------
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTER ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 1-13397
CORN PRODUCTS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
22-3514823
(I.R.S. Employer Identification Number)
6500 SOUTH ARCHER AVENUE,
BEDFORD PARK, ILLINOIS 60501-1933
(Address of principal executive offices) (Zip Code)
(708) 563-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days:
Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT AUGUST 2, 1999
Common Stock, $.01 par value 37,248,383 shares
10Q-1
2
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------------
1999 1998 1999 1998
---------------------------- --------------------------------
Net sales $441.3 $366.8 $837.9 $705.8
Cost of sales 364.3 326.8 697.3 626.9
---------------------------- --------------------------------
Gross profit 77.0 40.0 140.6 78.9
Operating expense 32.6 23.1 63.6 47.4
(Fees and income) from unconsolidated (0.5) (3.5) (2.3) (6.9)
affiliates
---------------------------- --------------------------------
Operating income 44.9 20.4 79.3 38.4
Financing costs 8.3 2.5 15.6 7.5
---------------------------- --------------------------------
Income before taxes 36.6 17.9 63.7 30.9
Provision for income taxes 12.8 6.5 22.3 10.8
---------------------------- --------------------------------
23.8 11.4 41.4 20.1
Minority stockholder interest 2.1 0.7 3.9 1.4
---------------------------- --------------------------------
Net income 21.7 10.7 37.5 18.7
============================ ================================
Average common shares outstanding:
Basic 37.3 35.7 37.3 35.7
Diluted 37.4 36.0 37.4 36.0
Net income per common share
Basic $0.58 $0.30 $1.00 $0.52
Diluted $0.58 $0.30 $1.00 $0.52
See Notes To Condensed Consolidated Financial Statements
10Q-2
3
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF:
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED)
-------------------- ---------------------
ASSETS
Current Assets
Cash and cash equivalents $ 51 $ 36
Accounts receivable - net 236 224
Inventories 188 175
Prepaid expenses 9 6
Deferred tax asset 24 24
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 508 465
- -----------------------------------------------------------------------------------------------------------------------------------
Plants and properties - net 1,273 1,298
Goodwill, net of accumulated amortization 159 129
Investments in joint ventures 28 28
Other assets 29 26
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,997 1,946
===================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term borrowings and current portion of long-term debt 347 250
Accounts payable 94 96
Accrued liabilities 75 59
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 516 405
- -----------------------------------------------------------------------------------------------------------------------------------
Non-current liabilities 62 63
Long - term debt 149 154
Deferred taxes on income 182 180
Minority stockholders' interest 90 91
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 - 37,618,737 and 37,611,396 issued
and outstanding on June 30, 1999 and
December 31, 1998, respectively 1 1
Additional paid in capital 1,066 1,066
Less: Treasury stock (common stock; 411,504 and 51,374 shares on June (11) (1)
30, 1999 and December 31, 1998, respectively) at cost
Deferred compensation - restricted stock (2) (2)
Accumulated comprehensive loss (124) (48)
Retained earnings 68 37
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 998 1,053
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,997 $1,946
===================================================================================================================================
See Notes To Condensed Consolidated Financial Statements
10Q-3
4
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN MILLIONS) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1999 1998 1999 1998
-------------- ------------- -------------- -------------
Net Income 21.7 11.0 37.5 19.0
Comprehensive loss:
Currency translation adjustment -- (7.0) (76.0) (11.0)
-------------- ------------- -------------- -------------
Comprehensive loss 21.7 4.0 (38.5) 8.0
============== ============= ============== =============
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN MILLIONS) COMMON ADDITIONAL TREASURY ACCUMULATED RETAINED
STOCK PAID-IN STOCK COMPREHENSIVE EARNINGS
CAPITAL LOSS
-------------------------------------------------------------------------------------------
Balance, December 31, 1998 $1 $1,066 $ (1) $ (48) $37
Net income for the period 37
Dividends declared (6)
Purchase of treasury stock (10)
Translation adjustment (76)
-------------------------------------------------------------------------------------------
Balance, June 30, 1999 $1 $1,066 $(11) $(124) $68
===========================================================================================
See Notes To Condensed Consolidated Financial Statements
10Q-4
5
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS) FOR THE SIX MONTHS ENDED
JUNE 30,
1999 1998
--------------- ------------------
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income $ 37 $ 19
Non-cash charges (credits) to net income:
Depreciation and amortization 51 47
Deferred taxes 7 10
Changes in trade working capital:
Accounts receivable, prepaid items, and other assets (20) (29)
Inventories (15) (10)
Accounts payable and accrued liabilities 18 (9)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 78 28
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Capital expenditures paid, net of proceeds on disposal (62) (26)
Cash consideration paid for acquired business (75) --
Investments in and loans to unconsolidated affiliates 60
- -------------------------------------------------------------------------------------------------------------------------------
Net cash flows from (used for) investing activities (137) 34
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Proceeds from short term borrowings, net of payments 89 (106)
Dividends paid (6) --
Cost of common stock repurchased (10) --
Other non-current liabilities 4 --
- -------------------------------------------------------------------------------------------------------------------------------
Net cash flows from (used for) financing activities 77 (106)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 18 (44)
Effect of exchange rates on cash (3) --
Cash and cash equivalents, beginning of period 36 85
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 51 $ 41
===============================================================================================================================
See Notes to Condensed Consolidated Financial Statements
10Q-5
6
CORN PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The unaudited condensed consolidated interim financial statements included
herein were prepared by management and reflect all adjustments (consisting
solely of normal recurring items) which are, in the opinion of management,
necessary to present a fair statement of results of operations for the interim
periods ended June 30, 1999 and 1998 and the financial position as of June 30,
1999 and December 31, 1998. The results for the three months ended June 30, 1999
are not necessarily indicative of the results expected for the year.
References to "the Company" are to Corn Products International, Inc. and its
consolidated subsidiaries. These statements should be read in conjunction with
the consolidated financial statements and the related footnotes to these
statements contained in the Company's Annual Report to Stockholders that were
incorporated by reference in Form 10-K for the fiscal year ended December 31,
1998.
2. INVENTORIES ARE SUMMARIZED AS FOLLOWS:
June 30, 1999 December 31, 1998
------------- -----------------
Finished and in process.......................... 95 110
Raw materials.................................... 67 43
Manufacturing supplies........................... 28 22
- ---------------------------------------------------------------------------------------------
Total Inventories................................ 188 175
=============================================================================================
3. FINANCIAL INSTRUMENTS
COMMODITIES
Following the Company's policy of hedging its margin exposure to firm priced
business, it had open corn futures contracts of $123 million for delivery of
corn beyond June 30, 1999. Of the total commitment, $2 million is due in July
1999, $25 million is due in September 1999, and $96 million is due December 1999
through March 2000. At June 30, 1999, the price of corn under these contracts
was $9 million above market quotations of the same date.
10Q-6
7
4. SUPPLEMENTAL GEOGRAPHIC INFORMATION
The Company operates in one business segment - Corn Refining - and is
managed on a geographic regional basis. Its North America Operations include its
wholly owned Corn Refining businesses in the United States and Canada and
majority ownership in Mexico. Its Rest of World businesses include primarily 100
percent owned Corn Refining operations in South America and Asia, and joint
ventures and alliances in Asia, Africa and other areas. Also included in this
group is its North American enzyme business.
TABLE OF GEOGRAPHIC INFORMATION OF NET SALES AND OPERATING INCOME
(UNAUDITED)
(In millions ) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
----------------------------- -----------------------------
NET SALES
North America $ 312.7 $ 235.0 $ 585.9 $ 435.8
Rest of the World 128.6 131.8 252.0 270.0
-------- -------- -------- --------
Total $ 441.3 $ 366.8 $ 837.9 $ 705.8
======== ======== ======== ========
OPERATING INCOME
North America 25.6 4.4 45.7 4.8
Rest of the World 22.8 18.4 40.2 38.5
Corporate (3.5) (2.4) (6.6) (4.9)
-------- -------- -------- --------
Total $ 44.9 $ 20.4 $ 79.3 $ 38.4
======== ======== ======== ========
5. ACQUISITIONS
On January 14th, 1999, the Company acquired the assets of Bang IL
Industrial Co., Ltd., a Korean corn refiner. The assets purchased included the
net working capital, plant, property and equipment of the corn wet milling
business. On June 24th, 1999, the company increased its ownership of CPC Rafhan
Ltd., its Pakistan affiliate, through the purchase of shares. The transaction
increased the Company's ownership interest in CPC Rafhan Ltd. to approximately
70 percent. Cash consideration for the Korean and Pakistani acquisitions totaled
$75 million, and were funded primarily from a combination of debt both in the
United States and from local banking sources.
10Q-7
8
ITEM 2
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999
WITH COMPARATIVES FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998
RESULTS OF OPERATIONS
NET SALES. Second quarter 1999 Net Sales totaled $441 million, up 20
percent over comparable 1998 sales of $367 million. Volumes were up 27 percent
with the addition of sales from the acquired companies in Mexico and Korea.
Sales from these acquisitions contributed 29 percent. Lower currency exchange
rates throughout the world resulted in a 9 percent reduction in revenues while
lower prices resulted in a 3 percent reduction. For the six months, Net Sales
grew 19 percent to $838 million from $705 million in 1998, on 25 percent higher
volumes partially offset by lower exchange rates.
North American Net Sales were up 33 percent in the three months ended
June 30, 1999, from the same quarter last year with increased volumes
contributing 40 percent. Excluding the addition from the full consolidation of
the Mexican business, 1999 second quarter Net Sales were 5 percent lower than
the comparable period last year. This reflected the effect of 7 percent lower
prices following lower corn costs, partially offset by a 2 percent increase from
higher volumes. Year to date, North American sales grew 35 percent over last
year, reflecting the addition of the Mexican acquisition. Excluding the Mexcian
acquisition, Net Sales were 5 percent lower than last year, reflecting 4 percent
lower prices following lower corn costs and a 1 percent reduction due to
currency devaluation.
In Other Operations, second quarter 1999 Net Sales were down 2 percent
from the second quarter of 1998 with a 24 percent decline from lower exchange
rates, mostly related to the devaluation of the Brazilian $real but also
including the devaluation of the Colombian Peso and Pakistani Rupee. Overall,
higher volumes contributed 17 percent to Net Sales while local currency
price/mix added 5 percent. Excluding Korea, increased volumes added 4 percent to
Net Sales, reflecting the rebound of the Brazilian business following the first
quarter contraction resulting from the $real devaluation, and strong gains made
by Pakistan. For the six months ended June 30, 1999, Net Sales were 7 percent
lower than last year, due primarily to effects of currency devaluation,
principally Brazil, which reduced sales by 26 percent. Excluding the Korean
acquisition, higher volumes added 1 percent while local currency price increases
added 7 percent.
COST OF SALES AND OPERATING EXPENSES. Costs of Sales for the second
quarter of 1999 were up 11 percent over the comparable quarter last year, well
below the 27 percent increase in volumes, as gross corn costs declined and we
continued to achieve improved operating efficiencies. Gross Profits for the
quarter increased 92 percent from the second quarter 1998 to $77 million,
reflecting an improvement in the Gross Profit Margin to 17 percent of Net Sales
from 11 percent in 1998. Lower net corn costs in North America contributed to
improved margins. Year to date, Cost of Sales were up 11 percent over 1998 on a
25 percent increase in volumes. Gross Profit improved 78 percent to $141 million
from $79 million in 1998 as the Gross Profit Margin increased to 17 percent of
Net Sales from 11 percent. The
10Q-8
9
improvement in the Gross Profit Margin is attributable to North America and
reflects lower corn costs and manufacturing expense.
Operating Expenses for the quarter ended June 30, 1999, totaled $33
million, a 41 percent increase over the comparable period in 1998, reflecting
the inclusion of the Mexican and Korean acquisitions. Operating Expenses have
remained approximately 7 percent of net sales. Second quarter fees and income
from unconsolidated subsidiaries decreased to $0.5 million, from $3.5 million in
1998. The decline is attributable to the former Mexican joint venture now being
consolidated, other fees and income have remained fairly constant compared to
the prior year. For the six months, Operating Expense totaled $64 million, a 34
percent increase over 1998, and remained at approximately 7 percent of sales.
OPERATING INCOME. Second quarter Operating Income was up 120 percent
over 1998 to $45 million from $20 million. North America advanced strongly with
Operating Income of $26 million, up from $4 million in the second quarter of
1998. The improvement came from higher profit margins in the U.S. and Canada and
the inclusion of full earnings from the Mexican acquisition. Rest of the World
operating income in the second quarter also advanced 24 percent over 1998 to $23
million from $18 million, reflecting the strong performance of the Korean
acquisition and despite the economic crisis created in South America by the
Brazilian devaluation. Brazil recovered as Operating Income grew 11 percent over
the same quarter last year, partially offsetting continued weakness in Argentina
and Chile. Year to date, Operating Income grew 107 percent to $79 million from
$38 million in 1998. North America Operating Income increased more than 9 times
to $46 million from $5 million in 1998, reflecting the improved margins as well
as the Mexican acquisition.
FINANCING COSTS. Financing costs for the second quarter 1999 were $8.3
million, up from $2.5 million in the comparable period last year, reflecting the
debt taken on with the Mexican and Korean transactions. Year to date Financing
Costs rose to $15.6 million from $7.5 million in 1998.
PROVISION FOR INCOME TAXES. The effective tax rate remained at 35
percent in the second quarter and year to date, unchanged from the rate at June
30, 1998. The tax rate is estimated based on the expected mix of domestic and
foreign earnings for the year.
NET INCOME. Net Income for the quarter ended June 30, 1999, grew 103
percent to $22 million, or $0.58 per diluted share, from $10.7 million, or $0.30
per diluted share, in the second quarter of 1998. The improvement is
attributable to the improvement in the North America operations and the
accretive acquisitions in Mexico and Korea. For the six months ended June 30,
1999, Net Income doubled to $37.5 million, or $1.00 per diluted share, from
$18.7 million, or $0.52 per diluted share, in 1998. As with the quarter, the
improvement is attributable to North America operations and the accretive
acquisitions in Mexico and Korea.
COMPREHENSIVE INCOME. Comprehensive Income for the second quarter 1999
was higher than the second quarter 1998 and resulted from improved net income
and no net change in currency translation, as negative adjustments, principally
from the Brazilian $real to the U.S. dollar, were offset by translation gains in
Canada and Korea. This compared to a $7 million negative adjustment for the
comparable quarter in 1998. Year to date, the decline in Comprehensive Income
resulted from the translation of
10Q-9
10
net assets and liabilities denoted in local currencies into U.S. dollars at
lower translation rates. The $76 million currency translation adjustment for the
six months ended June 30, 1999, compared to an $11 million adjustment for the
comparable period in 1998 and is related primarily to the translation of fixed
assets in Brazil from the $real to the U.S. dollar after the Brazilian
devaluation.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's Total Assets increased to $1,997
million from $1,946 million at December 31, 1998. The increase in Total Assets
reflects the acquisition of the Korean business adding to our asset base, as
well as increases in inventory and cash, partially offset by the effects of
lower exchange rates, principally in Brazil, used to translate our foreign asset
values.
Second quarter 1999 net cash flows were used to fund the Company's
capital investment program, the acquisition of minority interest in our
Pakistan affiliate, the quarterly dividend payment, and the previously
announced common stock repurchase program. In addition there was the normal
seasonal increase in North American working capital. In the six-month period of
1999, net cash flows were also used to help fund the acquisition of our new
South Korean affiliate. For the six months ending June 30, 1999, net cash flows
from operating activities were $78 million, compared to $28 million in the first
half of 1998, reflecting the higher net income and lower working capital change.
Cash used for investing activities totaled $137 million for the first six months
of 1999, reflecting the acquisition in Korea and Pakistan, and $62 million in
net capital investments. For the comparable period in 1998, cash from investing
activities totaled $34 million, reflecting the receipt of the repayment of a $60
million loan made by the company to Arancia-CPC and net capital expenditures of
$26 million. First half 1999 capital expenditures are in line with planned
expenditures. The spending is primarily carry-over projects from the prior
year, approximately 70 percent of which is outside the U.S., and reflects the
Company's plan to continue investing, based on business opportunity and cash
flow availability, to meet customer demand and drive for delivered cost
leadership. Capital expenditure in the U.S. was primarily carry-over of the
previously announced dextrose expansion project.
The Company has a $340 million 5-year revolving credit facility in the
United States due December 2002. In addition, the Company has a number of
short-term credit facilities consisting of operating lines of credit. At June
30, 1999, the Company had total debt outstanding of $496 million compared to
$404 million December 31, 1998. The increase in debt is attributable to the
Korean acquisition, the increased investment in Pakistan, and higher working
capital. The debt outstanding consisted of $225 million drawn from the unsecured
revolving credit facility in the United States at a rate of 5.39 percent. The
balance represents affiliate long-term debt of $149 million, mostly assumed in
the Arancia transaction, and $122 million in affiliate short term borrowings
against local country operating lines in various currencies. The weighted
average interest rate of affiliate debt was 8.55 percent.
MINORITY STOCKHOLDERS INTEREST. Minority stockholders interest
decreased $1 million in the second quarter to $90 million from $91 million in
December of 1998. The decrease is attributable to the purchase of an additional
interest in the Pakistan operation, offset by interest accrued on future
installments to the minority stockholders in the Mexican transaction.
READINESS FOR THE YEAR 2000
The Year 2000 (Y2K) issue is the result of certain computer programs
using two digits rather than four to define the applicable year. During 1997,
the Company developed a plan (the "Program") to address the Y2K issue and began
converting its computer systems to be Y2K- compliant. The Company established a
team with appropriate senior management support to identify and correct Y2K
issues. The Company implemented a program to fix or replace internal software
10Q-10
11
where necessary. This included software in all of the Company's manufacturing
plants, building facilities and business systems. If not corrected, affected
computer applications could fail or create erroneous results.
The Program involved assessment, prioritization, remediation and
testing. During 1998, the Company substantially completed the assessment and
prioritization phases of the Program and began remediation and testing. As of
June 30, 1999, remediation and testing of plant equipment and business process
were substantially completed and considerable progress had been made in
remediation and testing of information technology infrastructure. Major Y2K
projects in process but not completed at June 30, 1999, related to the
conversion of our financial software packages in the U.S. and Canada, and the
deployment of new or upgraded Y2K compliant personal computers (PC) and PC
software. The Company completed the deployment of Y2K compliant PCs and PC
software in July 1999, and expects to complete the implementation of financial
software packages for the U.S. and Canada by the end of August 1999.
Y2K compliance depends not only on our internal manufacturing and
administrative processes, but also on the ability of the different participants
in the supply chain to interchange products, services, and information without
interruption. The Company continues to communicate with high and medium risk
vendors, and carry out a site assessment of the critical suppliers and service
providers, to ascertain whether the equipment and services provided by them will
be Y2K-compliant. In addition, through the use of third party consultants, the
Company continues an ongoing process of evaluating vendor statements and
publicly-available information about the Y2K compliance of various systems in
operation at its sites.
The Company is exploring alternative solutions and developing
contingency plans for handling mission critical areas in the event that
remediation is unsuccessful. Contingency plans may include the stockpiling of
necessary supplies, the build-up of inventory, creation of computerized or
manual back-up systems, replacement of vendors, and addition of new vendors. The
Company expects to complete the Program, including establishment of contingency
plans, by the end of August 1999.
The Company currently estimates the total costs of the Program to
achieve Y2K readiness at $10 million of expense. Planned capital expenditures
indirectly related to Y2K, could add an additional $11 million to the cost of
the Program. As of June 1999, the direct costs incurred by the Program to
remediate Y2K issues were $9 million and committed capital expenditures
indirectly related to Y2K were an additional $8 million.
Corn Products' Y2K plan is subject to a variety of risks and
uncertainties. Some of the risks and uncertainties are beyond the Company's
control, such as the Y2K preparedness of third party vendors and service
providers and unidentified issues with hardware, software and embedded systems.
The Company can not assure that it will successfully complete the Program on a
timely basis, achieving Y2K readiness prior to January 1, 2000, or a prior
critical failure date. The Company's failure to successfully complete the Y2K
project could have a material adverse impact on its ability to manufacture
and/or deliver its products.
10Q-11
12
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements concerning
the Company's financial position, business strategy, budgets, projected costs
and plans and objectives of management for future operations as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend," and other similar expressions. These statements contain
certain inherent risks and uncertainties. Although the Company believes its
expectations reflected in such forward-looking statements are based on
reasonable assumptions, stockholders are cautioned that no assurance can be
given that such expectations will prove correct and that actual results and
developments may differ materially from those conveyed in such forward-looking
statements. Important factors that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
herein include 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 the Company manufactures
and sells its products, including fluctuations in the value of local currencies;
increased competitive and/or customer pressure in the corn refining industry;
and Year 2000 preparedness. Such forward-looking statements speak only as of the
date on which they are made and the Company does not undertake any obligation to
update any forward-looking statement to reflect events or circumstances after
the date of this Form 10-Q Report. If the Company does update or correct one or
more forward-looking statements, investors and others should not conclude that
the Company would make additional updates or corrections with respect thereto or
with respect to other forward-looking statements.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is set forth in the Company's Annual Report on Form
10K for the year ended December 31, 1998, and is incorporated herein by
reference. There have been no material changes to the Company's market risk
during the six and three months ended June 30, 1999.
10Q-12
13
PART II OTHER INFORMATION
ITEM: 1. LEGAL PROCEDINGS
In past reports, the Company indicated that in July 1995, Bestfoods,
Inc., the Company's former parent, received a federal grand jury subpoena in
connection with an investigation by the U.S. Department of Justice of U.S. corn
refiners regarding the marketing of high fructose corn syrup and other "food
additives". (The investigation of Bestfoods relates only to high fructose corn
syrup.) Bestfoods produced the documents sought by the Justice Department.
The U.S. Department of Justice has notified the Company that the grand
jury investigation regarding the marketing of high fructose corn syrup has been
dismissed.
ITEM: 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on May 19, 1999 the
following matters were submitted to a vote of security holders with the number
of votes cast for, against, or withheld, and the number of abstentions as to
each such matter:
1. ELECTION OF DIRECTORS
The following Directors were elected for terms expiring in the year
indicated:
Name Term Expires Votes For Votes Withheld
---- ------------ --------- --------------
Alfred C. DeCrane, Jr. 2002 33,134,034 8,760
Guenther E. Greiner 2002 33,138,056 4,738
Richard G. Holder 2002 33,138,937 3,857
Konrad Schlatter 2002 33,142,066 728
Ronald M. Gross 2000 33,142,794 0
The following Directors are continuing in office for terms expiring
in the year indicated:
Name Term Expires
---- ------------
Ignacio Aranguren-Castillo 2000
William S. Norman 2000
Clifford B. Storms 2000
William C. Fergusen 2001
Bernard H. Kastory 2001
Samuel C. Scott 2001
2. RATIFICATION AND APPROVAL OF ISSUANCE OF COMMON STOCK OF THE COMPANY
IN CONNECTION WITH THE ACQUISITION BY THE COMPANY OF THE REMAINING
INTEREST IN ARANCIA- CORN PRODUCTS S.A. DE C.V., THE COMPANY'S
MEXICAN JOINT VENTURE.
The stockholders approved the matter with 28,617,842 votes cast for,
189,054 votes cast against and 533,532 votes abstained. There were
3,882,516 broker non-votes.
10Q-13
14
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
The stockholders were asked to ratify the appointment of KPMG LLP as
independent auditors for the Company for 1999. The matter was
approved with 33,153,437 votes cast for, 27,569 votes cast against
and 41,938 votes abstained.
ITEM: 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits pursuant to Item 601 of Regulation S-K.
Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index hereto.
b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter ended June 30,
1999.
10Q-14
15
CORN PRODUCTS INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORN PRODUCTS INTERNATIONAL, INC.
DATE: August 3, 1999
/s/ James Ripley
--------------------------
James Ripley
Chief Financial Officer
DATE: August 3, 1999
/s/ Jack Fortnum
--------------------------
Jack Fortnum
Controller - Principal Accounting Officer
10Q-15
16
EXHIBIT INDEX
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
11 Statement re: computation of earnings per share
12 Statement re: computation of ratios of earnings to fixed charges
27 Financial Data Schedule
10Q-16
1
EXHIBIT 11
EARNINGS PER SHARE
CORN PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF NET INCOME
PER SHARE OF CAPITAL STOCK
(UNAUDITED)
(ALL FIGURES ARE IN MILLIONS EXCEPT PER SHARE DATA ) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------------ ----------------
Average shares outstanding - Basic 37.3 37.3
Effect of dilutive securities:
Stock options 0.1 0.1
------------------ ----------------
Average share outstanding - Assuming dilution 37.4 37.4
================== ================
Net income 21.7 37.5
Earnings per share
Basic $0.58 $1.00
Dilutive $0.58 $1.00
1
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CORN PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
FOR THE SIX FOR THE YEARS ENDED DECEMBER 31,
MONTHS -----------------------------------------------------------------
($ MILLIONS) ENDED 1998 1997 1996 1995 1994
JUNE 30,
1999
------------- --------- --------- -------- ---------- -----------
*Income before extraordinary
charges, income taxes and minority
equity: $ 63.7 $ 71.0 $ 20.0* $ 37.0 $ 186.0* $ 188.0*
Fixed charges 22.0 24.0 34.4 38.0 34.7 26.6
Capitalized interest (3.3) (3.7) (3.3) (8.1) (2.9) (2.0)
------------- --------- --------- -------- ---------- -----------
$ 82.4 $ 91.3 $ 51.1 $ 66.9 $ 217.8 $ 212.7
============= ========= ========= ======== ========== ===========
RATIO OF EARNINGS TO FIXED CHARGES
3.75 3.81 1.49 1.76 6.27 7.98
============= ========= ========= ======== ========== ===========
FIXED CHARGES:
Interest expense on debt $ 21.2 $ 22.5 $ 32.9 $ 37.0 $ 34.0 $ 26.0
Amortization of discount on debt -- -- -- -- -- --
Interest portion of rental expense
on operating leases 0.8 1.5 1.5 1.0 0.7 0.6
------------- --------- --------- -------- ---------- -----------
Total $ 22.0 $ 24.0 $ 34.4 $ 38.0 $ 34.7 $ 26.6
============= ========= ========= ======== ========== ===========
Income before income taxes and
minority equity $ 63.7 $ 71.0 ($ 89.0) $ 37.0 $ 223.0 $ 169.0
Restructuring charges 0.0 0.0 109.0 0.0 (37.0) 19.0
------------- --------- --------- -------- ---------- -----------
Adj. Income $ 63.7 $ 71.0 $ 20.0 $ 37.0 $ 186.0 $ 188.0
============= ========= ========= ======== ========== ===========
* - Income before extraordinary charges, income taxes and minority equity does
not include restructuring and spin-off costs
5
1,000
6-MOS
DEC-31-1998
JAN-01-1999
JUN-30-1999
510
0
2,360
0
1,880
5,080
26,410
13,680
19,970
5,160
0
0
0
10
10,660
19,970
8,379
0
6,973
7,586
0
0
156
637
223
375
0
0
0
375
1.00
1.00
