UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
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Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
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 period that the
registrant was required to file such reports), and (2) has been subject to such
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 APRIL 30, 2002
Common Stock, $.01 par value 35,527,160 shares
PART I FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
March 31,
----------------------
2002 2001
----------------------
Net sales before shipping and handling costs $ 457.7 $ 498.7
Less: Shipping and handling costs 25.8 44.1
----------------------
Net sales 431.9 454.6
Cost of sales 373.1 379.6
----------------------
Gross profit 58.8 75.0
Operating expenses 36.9 39.8
Income from non-consolidated affiliates and other income 9.6 4.4
----------------------
Operating income 31.5 39.6
Financing costs 9.6 15.5
----------------------
Income before income taxes and minority interest 21.9 24.1
Provision for income taxes 7.9 8.4
----------------------
14.0 15.7
Minority interest in earnings 2.8 3.0
----------------------
Net income $ 11.2 $ 12.7
======================
Weighted average common shares outstanding:
Basic 35.5 35.3
Diluted 35.6 35.5
Earnings per common share:
Basic $ 0.31 $ 0.36
Diluted $ 0.31 $ 0.36
See Notes To Condensed Consolidated Financial Statements
1
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) MARCH 31, DECEMBER 31,
2002 2001
--------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 41 $ 65
Accounts receivable - net 252 279
Inventories 190 201
Prepaid expenses 13 10
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TOTAL CURRENT ASSETS 496 555
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Property, plant and equipment - net 1,220 1,293
Goodwill, net of accumulated amortization 264 283
Deferred tax asset 20 20
Investments 41 41
Other assets 34 35
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TOTAL ASSETS $ 2,075 $ 2,227
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current portion of long-term debt 419 444
Accounts payable and accrued liabilities 203 231
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TOTAL CURRENT LIABILITIES 622 675
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Non-current liabilities 51 50
Long-term debt 302 312
Deferred income taxes 193 186
Minority interest in subsidiaries 97 147
STOCKHOLDERS' EQUITY
Preferred stock - authorized 25,000,000 shares-
$0.01 par value - none issued -- --
Common stock - authorized 200,000,000 shares-
$0.01 par value - 37,659,887 issued
at March 31, 2002 and December 31, 2001 1 1
Additional paid in capital 1,073 1,073
Less: Treasury stock (common stock; 2,133,277 and 2,253,578 shares at
March 31, 2002 and December 31, 2001, respectively) at cost (53) (56)
Deferred compensation - restricted stock (3) (3)
Accumulated comprehensive loss (390) (333)
Retained earnings 182 175
-----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 810 857
-----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,075 $ 2,227
=======================================================================================================================
See Notes To Condensed Consolidated Financial Statements
2
PART I FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN MILLIONS ) THREE MONTHS ENDED
MARCH 31,
-------------------------------
2002 2001
-------------- -------------
Net Income $11 $13
Comprehensive income/loss:
Gain (loss) on cash flow hedges:
Cumulative effect of adoption of SFAS 133,
net of income tax effect of $8 million -- 14
Amount of (gains) losses on cash flow
hedges reclassified to earnings, net of
income tax effect of $3 million and $1
million, respectively 7 (2)
Unrealized gains (losses) on cash flow
hedges, net of income tax effect of $1
million and $12 million, respectively (3) (23)
Currency translation adjustment (61) (31)
-------------- -------------
Comprehensive income (loss) ($46) ($29)
============== =============
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
( IN MILLIONS ) ADDITIONAL ACCUMULATED
COMMON PAID-IN TREASURY DEFERRED COMPREHENSIVE RETAINED
STOCK CAPITAL STOCK COMPENSATION INCOME (LOSS) EARNINGS
----------------------------------------------------------------------------------------
Balance, December 31, 2001 $1 $1,073 $(56) $(3) $(333) $175
Net income for the period 11
Dividends declared (4)
Amount of (gains)
losses on cash flow
hedges reclassified to
earnings, net of income
tax effect of $3 million 7
Unrealized gains
(losses) on cash flow
hedges, net of income
tax effect of $1 million (3)
Translation adjustment (61)
Other 3
----------------------------------------------------------------------------------------
Balance, March 31, 2002 $1 $1,073 $(53) $(3) $(390) $182
========================================================================================
See Notes To Condensed Consolidated Financial Statements
3
PART I FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
CORN PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( IN MILLIONS ) FOR THE THREE MONTHS ENDED MARCH 31,
2002 2001
--------------- ------------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net income $11 $13
Non-cash charges (credits) to net income:
Depreciation and amortization 26 33
Minority interest in earnings 3 3
Income from non-consolidated affiliates (1) (4)
Gain on sale of business (8) --
Changes in trade working capital, net of effect of disposal/acquisition:
Accounts receivable and prepaid items 8 (27)
Inventories 1 15
Accounts payable and accrued liabilities (15) (34)
Other 2 (3)
--------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) operating activities 27 (4)
--------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Capital expenditures, net of proceeds on disposal (13) (13)
Proceeds from sale of business 35 --
Payments for acquisitions (42) (75)
--------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (20) (88)
--------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Proceeds from borrowings 27 106
Payments on debt (52) (14)
Dividends paid (4) (4)
--------------------------------------------------------------------------------------------------------------------------------
Cash (used for) provided by financing activities (29) 88
--------------------------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash (2) --
--------------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (24) (4)
Cash and cash equivalents, beginning of period 65 41
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $41 $37
================================================================================================================================
See Notes To Condensed Consolidated Financial Statements
4
CORN PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
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 notes to
those statements contained in the Company's Annual Report to Stockholders that
were incorporated by reference in Form 10-K for the year ended December 31,
2001.
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 March 31, 2002 and 2001 and the financial position of
the Company as of March 31, 2002 and December 31, 2001. The results for the
three months ended March 31, 2002 are not necessarily indicative of the results
expected for the year.
Certain prior year amounts have been reclassified in the Condensed
Consolidated Financial Statements to conform with the current year presentation.
2. MEXICO HFCS TAX
On January 1, 2002, the Mexican Congress passed a value-added tax on
soft drinks sweetened with high fructose corn syrup (HFCS), which on March 5,
2002, was suspended until September 30, 2002. In response to the enactment of
the tax, which at the time effectively ended the use of HFCS for soft drinks in
Mexico, the Company ceased production of HFCS 55 at its San Juan del Rio plant,
one of its four plants in Mexico. Effective with the March 5, 2002 suspension of
the tax, the Company resumed the production and sale of HFCS in Mexico, although
at levels below historical volumes. Since the temporary suspension of the tax,
HFCS demand in Mexico has been depressed and earnings have suffered as a result.
Management continues to seek a permanent repeal of the tax. In the event the tax
is not permanently repealed by September 30, 2002 and customers do not return to
more normal purchasing levels, the Company's financial position, as well as its
future operating results and cash flows, could be adversely affected.
3. DEVALUATION OF THE ARGENTINE PESO
On January 6, 2002, the Argentine government announced a devaluation of
its currency and the establishment of a floating rate. The Company's financial
statements for the year ended December 31, 2001 reflect this event. In the first
quarter of 2002, the Company recognized an additional other comprehensive loss
of approximately $61 million relating to the further devaluation of the
Argentine peso in relation to the U.S. dollar. This loss was included in the
accumulated other comprehensive loss account within the stockholders' equity
section of the Company's Condensed Consolidated Balance Sheet. However, the
devaluation did not have a material adverse effect on the Company's first
quarter 2002 net income. Continued weakening of the Argentine peso relative to
the U.S. dollar could result in the recognition of additional foreign currency
translation losses in accumulated other comprehensive income and a reduction in
the Company's total stockholders' equity in the future. Additionally, any
further devaluations of the Argentine currency and/or other economic and policy
developments in Argentina could have an adverse impact on the Company's
financial position, results of operations and cash flows in future periods, and
such effects could be significant.
4. NEW ACCOUNTING STANDARDS
On January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"), which supersedes APB Opinion No. 17, "Intangible Assets." SFAS 142
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. SFAS 142 also
addresses how goodwill and other intangible assets should be accounted for after
they have been initially recognized in the financial statements. SFAS 142
stipulates that goodwill should no longer be amortized and should instead be
subject to an annual impairment assessment. The Company completed the
transitional impairment test required by SFAS 142 during the quarter ended
March 31, 2002. No impairment loss was recognized in connection with the
adoption of SFAS 142 as of January 1, 2002. The following information is
disclosed in accordance with SFAS 142:
Goodwill
The carrying amount of goodwill by geographic segment as of March 31,
2002, was as follows:
March 31,
2002
========
(in millions)
North America $ 119
South America 25
Asia/Africa 120
========
Total goodwill $ 264
========
The adoption of SFAS 142's provisions relating to goodwill amortization
resulted in the Company discontinuing the amortization of goodwill beginning
January 1, 2002. On a pre-tax basis, goodwill amortization recorded in the
first three months of 2001 was $3 million, which related to North America ($0.8
million), South America ($0.5 million), and Asia/Africa ($1.7 million). On an
after-tax basis, goodwill amortization recorded in the first three months of
2001 was $1.9 million. The following table provides a comparison of the effects
of adopting SFAS 142 for the quarters ended March 31, 2002 and 2001:
Three Months Ended
----------------------------------
March 31, March 31,
2002 2001
--------- ---------
(in millions, except per share data)
Net Income $ 11.2 $ 12.7
Add back: goodwill amortization (net of income taxes) -- 1.9
--------- ---------
Adjusted net income $ 11.2 $ 14.6
========= =========
Basic and diluted
earnings per common share:
As reported earnings per share $ 0.31 $ 0.36
Add back: goodwill amortization -- 0.05
--------- ---------
Adjusted earnings per share $ 0.31 $ 0.41
========= =========
5
Also on January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"), which supersedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). While SFAS 144 retains many of the fundamental recognition and
measurement provisions of SFAS 121, it changes the criteria required to be met
to classify an asset as held for sale. SFAS 144 also supersedes the accounting
and reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," and,
among other things, broadens reporting for discontinued operations to include a
component of an entity, rather than just a segment of a business. The adoption
of SFAS 144 did not have a material effect on the Company's consolidated
financial statements.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which
addresses financial accounting and reporting for legal obligations associated
with the retirement of tangible long-lived assets and the related asset
retirement costs. The Company is required to adopt SFAS 143 on January 1, 2003.
The impact of the adoption of SFAS 143, if any, is not expected to be
significant.
5. SALE OF NON-CORE BUSINESS
On February 5, 2002, the Company sold its interest in Enzyme
Bio-Systems Ltd. of Beloit, Wisconsin for approximately $35 million in cash. The
Company recorded a pretax gain from the sale of approximately $8 million, which
is included in other income in the first quarter 2002 Condensed Consolidated
Statement of Income.
6. ACQUISITIONS
On March 4, 2002, the Company increased its ownership in Arancia Corn
Products, S.A. de C.V. ("Arancia"), its consolidated Mexican subsidiary, from 90
percent to 100 percent by paying approximately $39 million in cash and issuing
70,000 shares of common stock valued at approximately $2 million.
7. RESTRUCTURING CHARGES
One of the Company's continuing business strategies is to improve North
America profitability. In order to remain competitive while improving margins,
the Company has implemented a restructuring plan that includes the termination
of approximately 200 employees throughout the three North American countries in
which it operates and the cancellation of certain lease obligations. In
connection with this restructuring plan the Company recorded charges of $4.3
million during the first quarter of 2002. Of this amount, approximately $3.5
million represents employee severance costs and related benefits and the balance
represents provisions relating to the lease obligations. The charge of $4.3
million was recorded in general and administrative expenses. As of March 31,
2002, approximately 175 of the 200 employee terminations were completed. It is
anticipated that the remaining actions under the restructuring plan will be
completed during the second quarter of 2002. The remaining accrual as of
March 31, 2002 is approximately $1 million.
8. INTEREST RATE SWAPS
On March 14, 2002, the Company entered into interest rate swap
agreements to take advantage of the current interest rate environment by
effectively converting the interest rate associated with the Company's 8.45
percent $200 million senior notes due 2009 to variable rates. These agreements
involve the exchange of fixed rate payments (at 8.45 percent) for variable rate
payments on $200 million of notional principal without the exchange of the
underlying face amount. Under the terms of the agreements, the Company receives
fixed rate payments and makes variable rate payments based on the six month
U.S. dollar LIBOR rate plus a spread. The fair value of these agreements are
reflected in the accompanying Condensed Consolidated Balance Sheets as an
adjustment to the carrying value of the hedged debt obligation. Interest rate
differentials to be paid or received under these agreements are recognized over
the six month period as adjustments to interest expense. The Company does not
hold or issue interest rate swap agreements for trading purposes.
9. INVENTORIES
Inventories are summarized as follows:
At At
March 31, December 31,
(in millions) 2002 2001
---- ----
Finished and in process ............ $ 90 $ 91
Raw materials ...................... 67 75
Manufacturing supplies and other ... 33 35
-----------------------------------------------------------------------
Total Inventories .................. $190 $201
=======================================================================
6
10. SEGMENT INFORMATION
The Company operates in one business segment - Corn Refining - and is
managed on a geographic regional basis. Its North America operations include
corn-refining businesses in the United States, Canada and Mexico and its
non-consolidated equity interest in CornProductsMCP Sweeteners LLC. Its South
America operations include corn-refining businesses in Brazil, Argentina,
Colombia, Chile, Ecuador and Uruguay. Its Asia/Africa operations include
corn-refining businesses in Korea, Pakistan, Malaysia, Thailand and Kenya.
THREE MONTHS ENDED MARCH 31,
(in millions) 2002 2001
-----------------------------
NET SALES
North America $ 275.8 $ 280.1
South America 98.2 117.4
Asia/Africa 57.9 57.1
-----------------------------
Total $ 431.9 $ 454.6
=============================
OPERATING INCOME
North America $6.7 $15.0 *
South America 13.7 18.9
Asia/Africa 11.9 10.5
Corporate (5.4) (4.8) *
Non-recurring income, net 4.6 -
-----------------------------
Total $31.5 $39.6
=============================
* - Certain expenses that had previously been reflected in North America results
are now classified as corporate expenses. Prior year information has been
reclassified to conform with the current year presentation.
AT AT
(in millions) MARCH 31, 2002 DECEMBER 31, 2001
-------------- -----------------
TOTAL ASSETS
North America $1,360 $1,430
South America 415 489
Asia/Africa 300 308
-------------- -----------------
Total $2,075 $2,227
============== =================
7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
WITH COMPARATIVES FOR THE THREE MONTHS ENDED MARCH 31, 2001
NET INCOME. Net income for the quarter ended March 31, 2002 decreased
to $11.2 million, or $0.31 per diluted share, from $12.7 million, or $0.36 per
diluted share, in the first quarter of 2001. The current period results include
$4.6 million ($3.0 million after-tax) of net non-recurring earnings consisting
primarily of a gain from the sale of a business unit, net of certain one-time
charges. The non-recurring earnings include an $8.0 million pretax gain from the
February 2002 sale of Enzyme-Bio Systems Ltd. ("EBS"), partially offset by $4.3
million of charges principally related to workforce reductions in North America.
Additionally, a one-time gain of $0.9 million associated with the curtailment of
certain benefit costs pertaining to the aforementioned sale and workforce
reduction was recorded. Excluding the net non-recurring income, the Company
earned $8.2 million, or $0.23 per diluted share in the current quarter, down 35
percent from the $12.7 million earned in the comparable prior year period. This
decrease was principally due to lower sales volumes and foreign currency
weakness, which more than offset reduced financing costs.
NET SALES. First quarter net sales totaled $432 million, down 5 percent
from first quarter 2001 sales of $455 million. This decrease reflects an 8
percent decline associated with lower volume and a 6 percent reduction
attributable to weaker foreign currencies, which more than offset a 9 percent
price/mix improvement.
North American net sales for first quarter 2002 were down 2 percent
from the same period last year primarily due to the effect of the sale of EBS.
Excluding past sales generated by EBS, sales in the region were flat, as a 6
percent price/mix improvement was offset by lower volume. The volume decrease
primarily reflects reduced demand in Mexico as a result of the Mexican HFCS tax
issue (see following section entitled "Mexico HFCS Tax"). In South America, net
sales decreased 16 percent from first quarter 2001 reflecting a 12 percent
regional volume decline driven by soft economic conditions in Argentina and
Brazil. Additionally, while price/mix improvements in the region have been
significant (up approximately 19 percent from first quarter 2001), the increases
in Argentina are currently lagging the devaluation of the Argentine peso. In
Asia/Africa, net sales increased one percent from last year, as a 3 percent
price/mix improvement and modest volume growth more than offset a 2 percent
sales reduction attributable to weaker currencies.
COST OF SALES AND OPERATING EXPENSES. Cost of sales for first quarter
2002 decreased 2 percent from first quarter 2001 partially due to the effect of
the sale of EBS. Excluding past expenses of EBS, cost of sales declined 1
percent from the year ago period. Gross margins were 13.6 percent, down from
16.5 percent last year, reflecting lower volumes, as well as the impact of the
decline in value of foreign currencies, particularly in Argentina and Brazil.
Driven partially by a change in accounting that prohibits the
amortization of goodwill, first quarter 2002 operating expenses decreased to
$36.9 million from $39.8 million last year,
8
despite the recording of the aforementioned one-time charges and curtailment
gain, which together totaled $3.4 million. Excluding the effect of the one-time
items, first quarter 2002 operating expenses totaled $33.5 million, representing
7.7 percent of net sales, down from 8.1 percent last year before amortization of
goodwill. This decline in operating expenses principally reflects lower U.S. and
Canadian SG&A costs and, to a lesser extent, the disposition of EBS.
OPERATING INCOME. First quarter 2002 operating income, which includes
the previously mentioned $4.6 million of net non-recurring earnings, decreased
20 percent to $31.5 million from $39.6 million last year. Excluding the net
non-recurring earnings, operating income decreased 32 percent to $26.9 million
from $39.6 million, reflecting significantly lower earnings in North America and
South America. North America operating income of $6.7 million decreased 55
percent from $15.0 million in the first quarter of 2001, mainly due to the
impact of Mexico's HFCS tax on our Mexican business. South America operating
income of $13.7 million for first quarter 2002 decreased 28 percent from $18.9
million in the prior year period, primarily due to soft economic conditions and
weaker currencies in Argentina and Brazil. Asia/Africa operating income
increased 13 percent to $11.9 million from $10.5 million a year ago.
FINANCING COSTS. Financing costs for first quarter 2002 were $9.6
million, down from $15.5 million in the comparable period last year, reflecting
lower interest rates and reduced debt.
PROVISION FOR INCOME TAXES. The effective tax rate increased to 36
percent for the first quarter of 2002, from 35 percent in the first quarter of
2001. The higher estimated tax rate for 2002 is based on the expected change in
the mix of domestic and foreign earnings for the full year.
MINORITY INTEREST IN EARNINGS. The decrease in minority interest for
first quarter 2002 reflects the Company's increased ownership in Arancia and a
reduction in earnings from Argentina, partially offset by increased earnings in
Korea and Pakistan.
COMPREHENSIVE INCOME (LOSS). The Company recorded a comprehensive loss
of $46 million for the first quarter of 2002 as compared with a comprehensive
loss of $29 million for the same period last year. The increase resulted from a
$30 million unfavorable variance in the currency translation adjustment,
partially offset by gains from cash flow hedges, net of income taxes. The
unfavorable $30 million currency translation adjustment related primarily to the
negative impact of weakened local currencies, particularly in Argentina, versus
a stronger U.S. dollar.
MEXICO HFCS TAX
On January 1, 2002, the Mexican Congress passed a value-added tax on
soft drinks sweetened with high fructose corn syrup (HFCS), which on March 5,
2002, was suspended until September 30, 2002. In response to the enactment of
the tax, which at the time effectively ended the use of HFCS for soft drinks in
Mexico, the Company ceased production of HFCS 55 at its San Juan del Rio plant,
one of its four plants in Mexico. Effective with the March 5, 2002 suspension of
the tax, the Company resumed the production and sale of HFCS in Mexico, although
at levels below historical volumes. Since the temporary suspension of the tax,
HFCS demand in Mexico has been depressed and earnings have suffered as a result.
9
While the Company is hopeful for a permanent solution ahead of September 30th
(the date that the temporary suspension of the tax is scheduled to expire), in
the absence of such, it is likely that HFCS demand in Mexico, although expected
to improve from the current situation, will remain below normal levels for some
time. Management continues to seek a permanent repeal of the tax. In the event
the tax is not permanently repealed by September 30, 2002 and customers do not
return to more normal purchasing levels, the Company's financial position, as
well as its future operating results and cash flows, could be adversely
affected.
DEVALUATION OF THE ARGENTINE PESO
On January 6, 2002, the Argentine government announced a devaluation of
its currency and the establishment of a floating rate. The Company's financial
statements for the year ended December 31, 2001 reflect this event. In the first
quarter of 2002, the Company recognized an additional other comprehensive loss
of approximately $61 million relating to the further devaluation of the
Argentine peso in relation to the U.S. dollar. This loss was included in the
accumulated other comprehensive loss account within the stockholders' equity
section of the Company's Condensed Consolidated Balance Sheet. However, the
devaluation did not have a material adverse effect on the Company's first
quarter 2002 net income. Continued weakening of the Argentine peso relative to
the U.S. dollar could result in the recognition of additional foreign currency
translation losses in accumulated other comprehensive income and a reduction in
the Company's total stockholders' equity in the future. Additionally, any
further devaluations of the Argentine currency and/or other economic and policy
developments in Argentina could have an adverse impact on the Company's
financial position, results of operations and cash flows in future periods, and
such effects could be significant.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, the Company's total assets decreased to $2,075
million from $2,227 million at December 31, 2001. The decline in total assets
mainly reflects further weakening of the Argentine peso.
For the three months ended March 31, 2002, cash provided by operating
activities was $27 million, compared to cash used for operations of $4 million
in the prior year period. This increase primarily reflects a reduction in cash
used for working capital purposes, compared to the year-ago period. Cash used
for investing activities totaled $20 million for the first three months of 2002,
reflecting capital expenditures and acquisition-related payments, partially
offset by proceeds from the sale of EBS. Capital expenditures of $13 million for
the first three months of 2002 are in line with the Company's capital spending
plans for the year, which target a reduction of at least 10 percent from the
previous year. The Company's capital expenditures and acquisition of the 10
percent minority interest in Arancia were funded by operating cash flows and
with proceeds from the sale of EBS.
The Company has a $340 million 5-year revolving credit facility in the
United States due December 2002. The Company plans to refinance the credit
facility this year. In addition, the Company has a number of short-term credit
facilities consisting of operating lines of credit. At March 31, 2002, the
Company had total debt outstanding of $721 million compared to $756 million at
December 31, 2001. The decrease mainly reflects payments made during the
quarter. The debt outstanding includes: $287 million outstanding under the U.S.
revolving credit facility at a weighted average interest rate of 2.2 percent for
the three months ended March 31, 2002; $200 million of 8.45 percent senior notes
due 2009 (the "Senior Notes"); and various affiliate indebtedness totaling $234
million which includes borrowings outstanding under local country operating
credit lines. The weighted average interest rate on affiliate debt was
approximately 6.7 percent for the first three months of 2002. On March 14, 2002,
the Company entered into interest rate swap agreements that effectively
converted the interest rate associated with the Company's Senior Notes to a
variable interest rate.
The Company expects that its operating cash flows and borrowing
availability under its credit facilities will be more than sufficient to fund
its anticipated capital expenditures, dividends and other investing and/or
financing strategies for the foreseeable future.
MINORITY INTEREST IN SUBSIDIARIES. Minority interest in subsidiaries
decreased $50 million to $97 million at March 31, 2002 from $147 million at
December 31, 2001. The decrease is mainly attributable to the Company's purchase
of the minority interest in Arancia. Effective with the purchase, Arancia became
a wholly-owned subsidiary of the Company.
10
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains or may contain forward-looking statements concerning the
Company's financial position, business and future earnings and prospects, in
addition to other statements using words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend" and other similar expressions. These
statements contain certain inherent risks and uncertainties. Although we believe
our expectations reflected in these forward-looking statements are based on
reasonable assumptions, stockholders are cautioned that no assurance can be
given that our expectations will prove correct. Actual results and developments
may differ materially from the expectations conveyed in these statements, based
on factors such as the following: fluctuations in worldwide commodities markets
and the associated risks of hedging against such fluctuations; fluctuations in
aggregate industry supply and market demand; general political, economic,
business, market and weather conditions in the various geographic regions and
countries in which we manufacture and sell our products, including fluctuations
in the value of local currencies, energy costs and availability and changes in
regulatory controls regarding quotas, tariffs, taxes and biotechnology issues;
and increased competitive and/or customer pressure in the corn-refining
industry. Our forward-looking statements speak only as of the date on which they
are made and we do not undertake any obligation to update any forward-looking
statement to reflect events or circumstances after the date of the statement. If
we do update or correct one or more of these statements, investors and others
should not conclude that we will make additional updates or corrections. For a
further description of risk factors, see the Company's most recently filed
Annual Report on Form 10-K and subsequent reports on Forms 10-Q or 8-K.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is set forth in the Company's Annual Report on Form
10-K for the year ended December 31, 2001, and is incorporated herein by
reference. Except for the items referenced below, there have been no material
changes to the Company's market risk during the three months ended March 31,
2002.
On January 1, 2002, the Mexican Congress passed a value-added tax on
soft drinks sweetened with high fructose corn syrup (HFCS), which on March 5,
2002, was suspended until September 30, 2002. Please refer to Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, section entitled "Mexico HFCS Tax", included herewith, for
information pertaining to the tax.
On January 6, 2002, the Argentine government announced a devaluation
of its currency and the establishment of a floating currency rate. Please refer
to Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations, section entitled "Devaluation of the Argentine Peso",
included herewith, for information pertaining to the devaluation.
As described in Note 8 to the Financial Statements included herewith,
on March 14, 2002, the Company entered into interest rate swap agreements that
effectively converted the interest rate associated with the Company's 8.45
percent $200 million Senior Notes to a variable interest rate.
11
PART II OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
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 by the Company during the quarter
ended March 31, 2002.
All other items hereunder are omitted because either such item is inapplicable
or the response is negative.
12
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: June 26, 2002 By /s/ James Ripley
-------------------------------
James Ripley
Vice President - Finance and
Chief Financial Officer
DATE: June 26, 2002 By /s/ Robin Kornmeyer
-------------------------------
Robin Kornmeyer
Corporate Controller
13
EXHIBIT INDEX
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
10 Supplemental Executive Retirement Plan, amended and restated as of
January 1, 2001
11 Statement re: computation of earnings per share
14