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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 1-13397
CORN PRODUCTS INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 22-3514823
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
6500 SOUTH ARCHER AVENUE, BEDFORD PARK, ILLINOIS 60501-1933
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (708) 563-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- -------------------------
Common Stock, $.01 par value per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
(currently traded with Common Stock)
Securities registered pursuant to Section 12(g) of the Act:
NONE
- --------------------------------------------------------------------------------
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant (based upon the per share closing price of
$23.0 on March 22, 1999, and, for the purpose of this calculation only, the
assumption that all Registrant's directors and executive officers are
affiliates) was approximately $815 million.
The number of shares outstanding of the Registrant's Common Stock, par
value $.01 per share, as of March 22, 1999, was 37,486,923.
Documents Incorporated by Reference:
Information required by Part II (Items 6, 7 and 8) and Part IV (Item 14(a)(1))
of this document is incorporated by reference to certain portions of the
Registrant's 1998 Annual Report to Stockholders.
Information required by Part III (Items 10, 11, 12 and 13) of this document is
incorporated by reference to certain portions of the Registrant's definitive
Proxy Statement distributed in connection with its 1999 Annual Meeting of
Stockholders.
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PART I.
ITEM 1. BUSINESS
THE COMPANY
Corn Products International, Inc. (the "Company") was incorporated as a
Delaware corporation in March 1997 to assume the operations of the corn refining
business of Bestfoods, Inc., formerly CPC International Inc. ("Bestfoods") and
to effect the distribution of 100% of the outstanding shares of the Company to
the Bestfoods common stock holders. On December 31, 1997, Bestfoods transferred
the assets and related liabilities of its Corn Refining Business to the Company.
Effective at 11:59:59 p.m. on December 31, 1997, Bestfoods distributed all of
the common stock of the Company to holders of common stock of Bestfoods. Since
that time, the Company has operated as an independent company whose common stock
is traded on the New York Stock Exchange. Unless the context indicates
otherwise, references to the "Company" and "Corn Products" refer to the Corn
Refining Business of Bestfoods for periods prior to January 1, 1998 and to Corn
Products International, Inc. and its subsidiaries for the periods on or after
such date.
OVERVIEW
The Corn Refining Business dates back to the original formation of
Bestfoods' predecessor over 90 years ago. In 1906, Corn Products Refining
Company was formed through an amalgamation of virtually all the corn syrup and
starch companies in the United States. International expansion followed soon
thereafter. In 1928, the Corn Refining Business commenced Latin American
operations in Brazil, followed quickly by expansions into Argentina and Mexico.
Corn Products International, Inc., together with its subsidiaries,
produces a large variety of food ingredients and industrial products derived
from the wet milling of corn and other starch-based materials (such as tapioca
and yucca). The Company is one of the largest corn refiners in the world and the
leading corn refiner in Latin America. In addition, it is the world's leading
producer of dextrose and has strong regional leadership in corn starch. The
Company's consolidated operations are located in 14 countries with 26 plants
and, in 1998, the Company had consolidated net sales of approximately $1.45
billion. The Company also holds interests in 8 other countries through
unconsolidated joint ventures and allied operations, which operate 15 additional
plants. Over 60% of the Company's 1998 revenues were generated in North America
with the remainder coming from Latin America, Asia and Africa.
Corn refining is a capital-intensive two-step process that involves the
wet milling and processing of corn. During the front-end process, corn is
steeped in water and separated into starch and co-products such as animal feed
and germ. The starch is then either dried for sale or further modified or
refined through various processes to make sweeteners and other starch-based
products designed to serve the particular needs of various industries. The
Company's sweetener products include high fructose corn syrups ("HFCS"), glucose
corn syrups, high maltose corn syrups, dextrose, maltodextrins and glucose and
corn syrup solids. The Company's starch-based products include both industrial
and food grade starches.
The Company supplies a broad range of customers in over 60 industries.
The Company's most important customers are in the food and beverage,
pharmaceuticals, paper products, corrugated and laminated paper, textiles and
brewing industries and in the animal feed markets worldwide. The Company
believes its customers value its local approach to service.
As described more fully in Proposal 2 of the Proxy Statement, the
Company purchased majority control of its Mexican Joint Venture on December 2,
1998. As part of that purchase, the Company entered into agreements to purchase
the remaining interests in the Joint Venture in two transactions over the next
several years. These transactions should continue to allow the Company to be a
major presence in the Mexican corn-refining marketplace.
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BUSINESS STRATEGY
Corn Products International's vision is to be "Your local resource,
worldwide" to users of corn refined products. We plan on working toward
achieving our Vision by continuously focusing on our customers and by providing
an environment that attracts and retains competent and committed employees and
by seeking to implement the following closely linked strategies, pursuing our
"Strategize globally - Execute locally" approach:
- - Continue to drive for leadership in delivered cost efficiency in the
markets we serve. Since ours is a cost-driven business, we intend to
continue implementing productivity improvements and cost-reduction efforts
at our factories. We expect to improve facility reliability with ongoing
preventative maintenance, and continue to drive down logistics, raw
material and supplies costs through a combination of local and corporate
strategic procurement. In the Sales, General and Administrative areas, we
plan on continuing to benchmark and analyze costs and processes to further
drive cost competitiveness.
- - Maintain our leadership positions - globally in dextrose, and regionally in
starch. The Company plans to continue to leverage its worldwide
market-leading dextrose business. We believe that recently completed
expansions and product-quality investments position the Company for sales
growth over the next several years. We intend to invest to satisfy future
customer demand and to maintain our share leadership. In starch, we plan to
support our regional leadership position through product line extensions
and capacity investment as appropriate.
- - In North America, concentrate on continuing to restore acceptable
profitability in the United States, and invest to strengthen this large
regional business further. 1998 marked a turning point for the Company's
business in the United States. We plan to continue to focus our North
American organization to regain the profitability we sustained earlier in
this decade. At the same time, we intend to seek investment, acquisition
and alliance opportunities that have a good strategic fit to our plant
processes, products and technical skills to improve profitable "top-line"
growth.
- - In the Rest of the World (ROW), continue to improve our solid South
American business through organic and external growth investments adapted
to the macro-economic environment; elsewhere, selectively enter new
countries through acquisitions and alliances to enhance geographic business
positions. This overarching long-term strategy is adapted in the short term
as needed to this region's periodic swings in economic growth and currency
values. At this point, we believe that our strategic moves will
constructively address the effects of the Brazilian crisis in the region.
We expect that our skilled local management team, developed over decades of
operating within South America, will seek to optimize our existing business
base and adapt investments in the short term to the changed environment.
Throughout Asia and Africa, we intend to continue growing our existing
base, while seeking additional profitable growth through acquisitions and
strategic alliances.
- - Evaluate other growth opportunities beyond those investments, and act on
those that are judged vital to our long-term market position and
prosperity. The Company intends to continue to evaluate opportunities for
accretive investment. When vital to the prospects of the Company, we plan
to make significant investments we believe will provide our stockholders
reliable profitable returns and provide the Company with strong geographic
or product-based business positions.
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PRODUCTS
The Company sells sweetener products that account for approximately 50%
of the net sales of the Corn Refining Business, starch products that account for
approximately 25% of net sales, and co-products that account for approximately
25% of net sales.
Sweetener Products. The Company's sweetener products accounted for 50%,
or $731 million, of its net sales in 1998; 54%, or $761 million, and 55%, or
$842 million, of net sales in 1997 and 1996, respectively.
High Fructose Corn Syrup: The Company produces three types of
high fructose corn syrup: (i) HFCS-55, which is primarily used as a
sweetener in soft drinks made in the United States, Canada, Mexico and
Japan, (ii) HFCS-42, which is used as a sweetener in various consumer
products such as fruit-flavored beverages, yeast-raised breads, rolls,
dough, ready-to-eat cakes, yogurt and ice cream, and (iii) HFCS-90 used
in specialty and low calorie foods.
Glucose Corn Syrups: Corn syrups are fundamental ingredients
in many industrial products and are widely used in food products such
as baked goods, snack foods, beverages, canned fruits, condiments,
candy and other sweets, dairy products, ice cream, jams and jellies,
prepared mixes and table syrups. Corn Products offers corn syrups that
are manufactured through an ion exchange process, a method that creates
the highest quality, purest corn syrups.
High Maltose Corn Syrup: This special type of glucose syrup
has a unique carbohydrate profile, making it ideal for use as a source
of fermentable sugars in brewing beers. High maltose syrups are also
used in the production of confections, canning and some other food
processing applications.
Dextrose: The Company was granted the first U.S. patent for
dextrose in 1923. The Company currently produces dextrose products that
are grouped in three different categories - monohydrate, anhydrous and
specialty. Monohydrate dextrose is used across the food industry in
many of the same products as glucose corn syrups, especially in
confectionery applications. Anhydrous dextrose is used to make
solutions for intravenous injection and other pharmaceutical
applications, as well as some specialty food applications. Specialty
dextrose products are used in a wide range of applications, from
confectionery tableting to dry mixes to carriers for high intensity
sweeteners. Dextrose also has a wide range of industrial applications,
including use in wall board and production of biodegradable surfactants
(surface agents), humectants (moisture agents), and as the base for
fermentation products including vitamins, organic acids, amino acids
and alcohol.
Maltodextrins and Glucose and Corn Syrup Solids: These
products have a multitude of food applications, including formulations
where liquid corn syrups cannot be used. Maltodextrins are resistant to
browning, provide excellent solubility, have a low hydroscopicity (do
not retain moisture), and are ideal for their carrier/bulking
properties. Corn syrup solids have a bland flavor, remain clear in
solution, and are easy to handle and also provide bluing properties.
Starch Products. Starch products accounted for 25%, or $357 million, of
the Company's net sales in 1998, 23%, or $328 million, and 22%, or $336 million,
of net sales in 1997 and 1996, respectively. Starches are an important component
in a wide range of processed foods, used particularly as a thickener and binder.
Corn starch is also sold to corn starch packers for sale to consumers. Starches
are also used in paper production to produce a smooth surface for printed
communications and to improve strength in today's recycled papers. In the
corrugating industry, starches are used to produce high quality adhesives for
the production of shipping containers, display board and other corrugated
applications. The textile industry has successfully used starches for over a
century to provide size and finishes for manufactured products. Industrial
starches are used in the production of construction materials, adhesives,
pharmaceuticals and cosmetics, as well as in mining, water filtration and oil
and gas drilling.
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Enzymes. Enzymes are produced and marketed for a variety of food and
industrial applications.
Co-Products Co-products accounted for 25%, or $360 million, of the
Company's net sales in 1998, 23%, or $329 million, and 23%, or $346 million, of
net sales in 1997 and 1996, respectively. Refined corn oil is sold to packers of
cooking oil and to producers of margarine, salad dressings, shortening,
mayonnaise and other foods. Corn gluten feed is sold as animal feed. Corn gluten
meal and steepwater are sold as additives for animal feed.
OPERATIONS
The Company's North American operations, which include the U.S., Canada
and Mexico, operate 11 plants producing regular and modified starches, dextrose,
high fructose and high maltose corn syrups and corn syrup solids, dextrins and
maltodextrins, caramel color and sorbitol. The Company's plant in Bedford Park,
Illinois is a major supplier of starch and dextrose products for the Company's
U.S. and export customers. The Company's other U.S. plants in Winston-Salem,
North Carolina and Stockton, California enjoy strong market shares in their
local areas, as do the Company's Canadian plants in Cardinal, London and Port
Colborne, Ontario. The Company is the largest corn refiner in Mexico and was
first to locally produce HFCS-55 for sale to the Mexican soft drink bottling
industry, having completed an HFCS channel at the San Juan Del Rio plant in
1997.
The Company is the largest corn refiner in South America, with leading
market shares in Chile, Brazil and Colombia and a strong position in Argentina.
Its South American consolidated operations have 11 plants that produce regular,
modified, waxy and tapioca starches, high maltose and corn syrups, dextrins and
maltodextrins, dextrose, caramel color, sorbitol and vegetable adhesives. In
1998, the Company completed a significant grind and finished product expansion
at its Baradero, Argentina plant. In addition, the Company acquired a small
manioc starch plant in Brazil and, as part of the Mexican transaction, a small
sorbitol producer in Ecuador.
The Company has additional subsidiaries in Kenya, South Korea, Malaysia
and Pakistan, which operate four additional plants. These operations produce
modified, regular, waxy and tapioca starches, dextrins, glucose, dextrose and
caramel color.
In addition to the operations in which it engages directly, the Company
has numerous strategic alliances through technical license agreements with
companies in Australia, India, Japan, New Zealand, Thailand, South Africa,
Zimbabwe, Serbia and Venezuela. As a group, the Company's strategic alliance
partners operate 14 plants and produce high fructose, glucose and high maltose
syrups (both corn and tapioca), regular, modified, waxy and tapioca starches,
dextrose and dextrins, maltodextrins and caramel color. These products have
leading market positions in many of their target markets.
COMPETITION
The corn refining industry is highly competitive. Most of the Company's
products compete with virtually identical products and derivatives manufactured
by other companies in the industry. The U.S. is the most competitive market with
participation by eleven corn refiners. Competitors include ADM Corn Processing
Division ("ADM") (a division of Archer Daniels Midland Company), Cargill, A.E.
Staley Manufacturing Co. ("Staley") (a subsidiary of Tate & Lyle, PLC) and
National Starch and Chemical Company ("National Starch") (a subsidiary of
Imperial Chemicals Industries plc). In Latin America, Cargill has corn refining
operations in Brazil, National Starch has operations in Brazil and Mexico, and
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ALMEX, a joint venture between ADM and Staley, has operations in Mexico. Several
local corn refiners also operate in Latin America. Competition within markets is
largely based on price, quality and product availability.
Several of the Company's products also compete with products made from
raw materials other than corn. High fructose corn syrup and monohydrate dextrose
compete principally with cane and beet sugar products. Co-products such as corn
oil and gluten meal compete with products of the corn dry milling industry and
with soybean oil and soybean meal. Fluctuations in prices of these competing
products may affect prices of, and profits derived from, the Company's products.
CUSTOMERS
The Company supplies a broad range of customers in over 60 industries.
Historically, Bestfoods' worldwide branded foods business has been one of the
Company's largest customers, accounting for approximately 11% of total sales in
1998. In addition, approximately 15% of the Company's 1998 worldwide sales were
of HFCS to international, regional and local companies engaged in the soft drink
industry, primarily in North America.
RAW MATERIALS
The basic raw material of the corn refining industry is yellow dent
corn. In the United States, the corn refining industry processes about 10% to
15% of the annual U.S. corn crop. The supply of corn in the United States has
been, and is anticipated to continue to be, adequate for the Company's domestic
needs. The price of corn, which is determined by reference to prices on the
Chicago Board of Trade, fluctuates as a result of three primary supply factors
- -- farmer planting decisions, climate and government policies -- and three major
market demand factors -- livestock feeding, shortages or surpluses of world
grain supplies and domestic and foreign government policies and trade
agreements.
Corn is also grown in other areas of the world, including Canada, South
Africa, Argentina, Brazil, China and Australia. The Company's affiliates outside
the United States utilize both local supplies of corn and corn imported from
other geographic areas, including the United States. The supply of corn for
these affiliates is also generally expected to be adequate for the Company's
needs. Corn prices for the Company's non-U.S. affiliates generally fluctuate as
a result of the same factors that affect U.S. corn prices.
Due to the competitive nature of the corn refining industry and the
availability of substitute products not produced from corn, such as sugar from
cane or beet, end product prices may not necessarily fluctuate in relation to
raw material costs of corn.
Over 55% of the Company's starch and refinery products are sold at
prices established in supply contracts lasting for periods of up to one year.
The remainder of the Company's starch and refinery products is not sold under
firm pricing arrangements and actual pricing for those products is affected by
the cost of corn at the time of production and sale.
The Company follows a policy of hedging its exposure to commodity
fluctuations with commodities futures contracts for certain of its North
American corn purchases. All firm priced business is hedged when contracted.
Other business may or may not be hedged at any given time based on management's
judgment as to the need to fix the costs of its raw materials to protect the
Company's profitability. Realized gains and losses arising from such hedging
transactions are considered an integral part of the cost of those commodities
and are included in the cost when purchased. See Registrant's
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Annual Report to Stockholders "Management Analysis and Discussion" section on
"Risk and Uncertainties - Commodity Costs."
GEOGRAPHIC SCOPE
The Company engages in business in 22 countries, operating directly and
through affiliates in 14 countries with 26 plants and indirectly through joint
ventures and technical licensing agreements elsewhere in South America, Asia,
Africa, Australia and New Zealand. The Company has wholly owned operations in
North America, South America, Asia and Africa, and other joint venture interests
and licensing and technical agreements in South America, Asia and Africa. In
1998, over 60% of the Company's net sales was derived from its operations in
North America and less than 40% from operations in other geographic areas,
primarily South America (representing over 80% of sales and operating income of
other geographic areas). See Note 12 of Notes to Consolidated Financial
Statements for certain financial information with respect to geographic areas.
RESEARCH AND DEVELOPMENT
The Company's product development activity is focused on developing
product applications for identified customer and market needs. Through this
approach, the Company has developed value-added products for use in the
corrugated paper, food, textile, baking and confectionery industries. The
Company usually collaborates with customers to develop the desired product
application either in the customers' facilities, the Company's technical service
laboratories or on a contract basis. The Company's marketing, product technology
and technology support staffs devote a substantial portion of their time to
these efforts. Product development is enhanced through technology transfers
pursuant to existing licensing arrangements.
SALES AND DISTRIBUTION
Salaried sales personnel, who are generally dedicated to customers in a
geographic region, sell the Company's products directly to manufacturers and
distributors. In addition, the Company has a staff that provides technical
support to the sales personnel on an industry basis. The Company generally
utilizes contract truckers to deliver bulk products to customer destinations but
also has some of its own trucks for product delivery. In North America, the
trucks generally ship to nearby customers. For those customers located
considerable distances from Company plants, a combination of railcars and trucks
is used to deliver product. Railcars are generally leased for terms of five to
fifteen years.
PATENTS, TRADEMARKS AND TECHNICAL LICENSE AGREEMENTS
The Company owns a number of patents, which relate to a variety of
products and processes and a number of established trademarks under which the
Company markets such products. The Company also has the right to use certain
other patents and trademarks pursuant to patent and trademark licenses. The
Company does not believe that any individual patent or trademark is material.
There is not currently any pending challenge to the use or registration of any
of the Company's significant patents or trademarks that would have a material
adverse impact on the Company or its results of operations.
The Company is a party to nine technical license agreements with third
parties in other countries whereby the Company provides technical, management
and business advice on the operations of corn refining businesses and receives
royalties in return. These arrangements provide the Company with product
penetration in the various countries in which they exist, as well as experience
and relationships that could facilitate future expansion. The duration of the
agreements ranges from one to ten years or longer, and many of these
relationships have been in place for many years. These agreements in the
aggregate provide approximately $5 million of annual revenue to the Company.
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EMPLOYEES
As of December 31, 1998, the Company had approximately 5,550 employees,
of which approximately 1,000 were located in the U.S. Approximately 30% of U.S.
and 28% of non-U.S. employees are unionized. The Company believes its union and
non-union employee relations are good.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
As a manufacturer and maker of food items and items for use in the
pharmaceutical industry, the Company's operations and the use of many Company
products are subject to various U.S., state, foreign and local statutes and
regulations, including the Federal Food, Drug and Cosmetic Act and the
Occupational Safety and Health Act, and to regulation by various government
agencies, including the United States Food and Drug Administration, which
prescribe requirements and establish standards for product quality, purity and
labeling. The finding of a failure to comply with one or more regulatory
requirements can result in a variety of sanctions, including monetary fines. The
Company may also be required to comply with U.S., state, foreign and local laws
regulating food handling and storage. The Company believes these laws and
regulations have not negatively affected its competitive position.
The operations of the Company are also subject to various U.S., state,
foreign and local laws and regulations with respect to environmental matters,
including air and water quality and underground fuel storage tanks, and other
regulations intended to protect public health and the environment. The Company
believes it is in material compliance with all such applicable laws and
regulations. Based upon current laws and regulations and the interpretations
thereof; the Company does not expect that the costs of future environmental
compliance will be a material expense, although there can be no assurance that
the Company will remain in compliance or that the costs of remaining in
compliance will not have a material adverse effect on the Company's financial
condition and results of operations.
The Company currently anticipates that it will spend approximately $7
million in fiscal 1999 for environmental control equipment to be incorporated
into existing facilities and in planned construction projects. This equipment is
intended to enable the Company to continue its policy of compliance with
existing known environmental laws and regulations. Under the U.S. Clean Air Act
Amendments of 1990, air toxin regulations will be promulgated for a number of
industry source categories. The U.S. Environmental Protection Agency's
regulatory timetable specifies the promulgation of standards for vegetable oil
production and for industrial boilers by the year 2000. At that time, the
Company's U.S. facilities may require additional pollution control devices to
meet these standards. Currently, the Company can not accurately estimate the
ultimate financial impact of the standards.
RELATIONSHIP BETWEEN THE COMPANY AND BESTFOODS
In connection with the spin-off of the Company from Bestfoods at the
end of 1997, the Company entered into various agreements with Bestfoods for the
purpose of governing certain of the ongoing relationships between Bestfoods and
the Company in the future.
The Company entered into a tax indemnification agreement that requires
the Company to indemnify Bestfoods against tax liabilities arising from the loss
of the tax-free reorganization status of the spin-off. This agreement could
restrict the Company, for a two-year period, from entering into certain
transactions, including limitations on the liquidation, merger or consolidation
with another company, certain issuance and redemption of common stock and the
distributions or sale of certain assets.
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The Company entered into a Master Supply Agreement to supply Bestfoods
and its affiliates with certain corn refining products at prices based generally
on prevailing market conditions for a minimum two-year term, ending December 31,
1999. Pursuant to the Master Supply Agreement, Bestfoods will purchase certain
products exclusively from the Company and the Company is restricted from
engaging in certain activities that are competitive with Bestfoods involving the
sale, manufacture or packaging of "Commodity Consumer products," which are
defined in the Master Supply Agreement as "corn starch, corn oil, corn syrup and
dextrose which are branded and packaged for sale to the retail trade, club
stores, mass merchandisers and food services sector." These are activities in
which the Company has not engaged in the past. The Master Supply Agreement is
renewable in whole or in part thereafter upon mutual agreement of the parties.
At this time, neither Bestfoods nor the Company has expressed an intention not
to renew the Master Supply Agreement upon its expiration.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is the names and ages of all executive officers of the
Company, indicating their positions and offices with the Company.
Name Age All positions and offices with the Company
- ---- --- ------------------------------------------------------
Konrad Schlatter 63 Chairman and Chief Executive Officer of Corn
Products since 1997. Mr. Schlatter served as Senior Vice
President of Bestfoods from 1990 to 1997 and Chief
Financial Officer of Bestfoods from 1993 to
February 1997
Samuel C. Scott 54 President and Chief Operating Officer of Corn
Products since 1997. Mr. Scott served as President
of Bestfoods' worldwide Corn Refining Business from
1995 to 1997 and was President of Bestfoods' North
American Corn Refining Business from 1989 to 1997.
He was elected a Vice President of Bestfoods in
1991. Mr. Scott is a director of Motorola, Inc.
and Reynolds Metal Company.
Marcia E. Doane 57 Vice President, General Counsel and Corporate
Secretary of Corn Products since 1997. Ms. Doane
served as Vice President, Legal and Regulatory Affairs
of the Corn Products Division of Bestfoods from 1996
to 1997. Prior thereto, she served as Counsel to
the Corn Products Division from 1994 to 1996. Ms.
Doane joined Bestfoods' legal department in 1989
as Operations Attorney for the Corn Products
Division.
Frank J. Kocun 56 Vice President and President, Cooperative
Management Group since 1997. Mr. Kocun served as
President of the Cooperative Management Group of the
Corn Products Division of Bestfoods from 1991 to 1997
and as Vice President of the Cooperative
Management Group from 1985. Mr. Kocun joined
Bestfoods in 1968 and served in various executive
positions in the Corn Products Division and in
Penick Corporation, a Bestfoods subsidiary.
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Eugene J. Northacker 57 Vice President and President, Latin American
Division since 1997. Mr. Northacker was appointed
President of Bestfoods' Latin America Corn Refining
Division and elected a Vice President of Bestfoods
in 1992. Prior to that, he served as Business Director
of Bestfoods' Latin America Corn Refining Division
from 1989 to 1992, as Corn Refining General
Manager of Bestfoods' then Mexican subsidiary from
1984 to 1986. Mr. Northacker joined Bestfoods in
1968 in the financial group of Bestfoods' North
American consumer foods division, and has held
executive assignments in several Bestfoods
subsidiaries.
Michael R. Pyatt 51 Vice President and Executive Vice President, North
American Division since 1997. Mr. Pyatt served as
Chairman, President and Chief Executive Officer of
Canada Starch Co., Inc., a Bestfoods subsidiary, from
1994 to 1997 and as President of the Canadian business
of Bestfoods' Corn Products Division, Vice
Chairman of Canada Starch and as a Vice President
of the Corn Products Division since 1992. Mr.
Pyatt joined Bestfoods in 1982 and served in
various sales and marketing positions in the Casco
business.
James W. Ripley 55 Vice President - Finance and Chief Financial
Officer since 1997. Mr. Ripley served as Comptroller
of Bestfoods from 1995 to 1997. Prior thereto, he
served as Vice President of Finance for Bestfoods'
North American Corn Refining Division from 1984 to
1995. Mr. Ripley joined Bestfoods in 1968 as chief
international accountant, and subsequently served
as Bestfoods' Assistant Corporate Comptroller,
Corporate General Audit Coordinator and Assistant
Comptroller for Bestfoods' European Consumer Foods
Division.
Richard M. Vandervoort 55 Vice President -Strategic Business Development and
Investor Relations since 1998. Mr. Vandervoort has
served as Vice President - Business Development and
Procurement, Corn Products International North
American Division from 1997 to 1998. Prior
thereto, he served as Vice President - Business
Management and Marketing for Bestfoods'
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Corn Products Division from 1989 to 1997. Mr.
Vandervoort joined Bestfoods in 1971 and served in
various executive sales positions in Bestfoods'
Corn Products Division and in Peterson/Puritan
Inc., a Bestfoods subsidiary.
Cheryl K. Beebe 43 Treasurer since 1997. Ms. Beebe served as Director
of Finance and Planning for the Bestfoods Corn Refining
Business worldwide from 1995 to 1997 and as
Director of Financial Analysis and Planning for
Corn Products North America from 1993. Ms. Beebe
joined Bestfoods in 1980 and served in various
financial positions in Bestfoods.
James I. Hirchak 44 Vice President - Human Resources since 1997. Mr. Hirchak
joined Bestfoods in 1976 and held various Human
Resources positions in Bestfoods until 1984, when
he joined Bestfoods' Corn Products Division. In
1987, Mr. Hirchak was appointed Director, Human
Resources for Corn Products' North American
operation and has served as Vice President, Human
Resources for the Corn Products Division since
1992.
Jack C. Fortnum 42 Comptroller since 1997. Mr. Fortnum served as the Vice
President of Finance for Refineries de Maize,
Bestfoods' Argentine subsidiary from 1995 to 1997,
as the Director of Finance and Planning for
Bestfoods Latin America Corn Refining Division
from 1993 to 1995, and as the Vice President and
Comptroller of Canada Starch Co., Inc., the
Canadian subsidiary of Bestfoods and Vice
President of Finance of the Canadian Corn Refining
Business from 1989.
ITEM 2. PROPERTIES
The Company operates, directly and through its subsidiaries, 26
manufacturing facilities, 25 of which are owned and one of which is leased
(Jundiai, Brazil). In addition, the Company owns its corporate headquarters in
Bedford Park, Illinois. The following list details the location of the Company's
manufacturing facilities:
13
U.S. South America
---- -------------
Stockton, California Baradero, Argentina
Bedford Park, Illinois Balsa Nova, Brazil
Winston-Salem, North Carolina Cabo, Brazil
Beloit, Wisconsin Jundiai, Brazil
Mogi-Guacu, Brazil
Canada Conchal, Brazil
------ Llay-Llay, Chile
Barranquilla, Colombia
Cardinal, Ontario Cali, Colombia
London, Ontario Medellin, Colombia
Port Colborne, Ontario Guayaquil, Ecuador
Asia
Africa ----
------
Petaling Jaya, Malaysia
Eldoret, Kenya Faisalabad, Pakistan
Inchon, South Korea
Mexico
------
San Juan del Rio
Guadalajara (2 plants)
Mexico City
In addition to the foregoing, the Company has interests in 15 plants through its
unconsolidated joint ventures and allied operations.
While the Company has achieved high capacity utilization, the Company
believes its manufacturing facilities are sufficient to meet its current
production needs. The Company has preventive maintenance and de-bottlenecking
programs designed to further improve grind capacity and facility reliability.
The Company has electricity co-generation facilities at all of its U.S.
and Canadian plants, as well as its plants in San Juan del Rio, Mexico,
Baradero, Argentina and Faisalabad, Pakistan, that provide electricity at a
lower cost than is available from third parties. The Company generally owns and
operates such co-generation facilities itself, but has two large facilities at
its Stockton, California and Cardinal, Ontario locations that are owned by, and
operated pursuant to co-generation agreements with, third parties.
The Company believes it has competitive, up-to-date and cost-effective
facilities. In recent years, significant capital expenditures have been made to
update, expand and improve the Company's facilities, averaging in excess of $140
million per year for the last five years. Capital investments have included the
rebuilding of the Company's plants in Cali, Colombia and Baradero, Argentina; an
expansion of both
14
grind capacity and dextrose production capacity at the Company's Argo facility
in Bedford Park, Illinois; entry into the high maltose corn syrup business in
Brazil, Colombia and Argentina; and the installation of energy co-generation
facilities in Canada. In addition, Arancia-CPC completed a major expansion of
the San Juan del Rio plant to produce HFCS. The Company believes these capital
expenditures will allow the Company to operate highly efficient facilities for
the foreseeable future with further annual capital expenditures that are in line
with historical averages.
ITEM 3. LEGAL PROCEEDINGS
Under the terms of the agreements relating to the spin-off of the
Company from Bestfoods, the Company agreed to indemnify Bestfoods for certain
liabilities relating to the operation of the Corn Refining Business prior to the
spin-off, including liabilities relating to the proceedings described below.
In July 1995, Bestfoods received a federal grand jury subpoena in connection
with an investigation by the Antitrust Division of 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 has produced the documents sought by the
Justice Department. Bestfoods, as a high fructose corn syrup producer, was also
named as one of the defendants in a number of private treble damage class
actions, by direct and indirect customers, and one individual action, alleging
violations of federal and state antitrust laws. Following the certification of
the consolidated federal class actions, Bestfoods entered into a settlement of
the federal claims for $7 million. Bestfoods also settled the one individual
action (Gray and Company v. Archer Daniels Midland et al., Civ. No. 97-69-AS) in
the United States District Court for the District of Oregon (subsequently
transferred to the United States District Court for the Central District of
Illinois, Peoria Division for consolidation in MDL, Docket No. 1087 and Matter
File No. 95-1477). A stipulated joint dismissal of Bestfoods from the Gray and
Company litigation was received by the court on January 28, 1998. Bestfoods
remains a party to the state law actions filed in Alabama, California, the
District of Columbia, West Virginia, and Kansas, each of which was filed in 1995
or 1996. A state law action filed in Michigan was dismissed on February 4, 1998
for lack of progress after plaintiffs' motion to certify a class was denied. The
amount of damages claimed in the various state law actions is either unspecified
or stated as not exceeding $50,000 per claimant.
The Company is currently subject to claims and suits arising in the
ordinary course of business, including environmental proceedings. The Company
does not believe that the results of such legal proceedings, even if unfavorable
to the Company, will be material to the Company. There can be no assurance,
however, that any claims or suits arising in the future, taken individually or
in the aggregate, will not have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
There were no matters submitted to a vote of securityholders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1998.
15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Shares of Corn Product's Common Stock are traded on the New York Stock
Exchange ("NYSE") under the ticker symbol "CPO." The range of the NYSE reported
high and low closing sale prices of the Company's Common Stock, holders of
record, and quarterly dividends are set forth in page 35 of the Annual report to
Stockholders for the year ended December 31, 1998 and incorporated herein by
reference.
On December 2, 1998, the Company issued an aggregated of 1,764,706
shares of the Company's Common Stock as partial consideration related to the
acquisition the controlling interest in the Company's Mexican Joint Venture (as
more fully described in Form 8-K filed by the Company on October 21, 1998,
regarding the transaction along with the Transaction Agreement, Stockholders
Agreement and Option Agreement filed therewith as exhibits 1-3 respectively.)
All of the shares were acquired by the recipient for investment with no
view toward public resale or distribution thereof without registration. The
recipient qualified as an accredited investor, the offer and sale were made
without any public solicitation, and the stock certificate bears a restrictive
legend.
The Company's policy is to pay a modest dividend. The amount and timing
of the dividend payment, if any, is based on a number of factors including
estimated earnings, financial position and cash flow. The payment of a dividend
is solely at the discretion of the Corn Products' Board of Directors. It is
subject to the Company's financial results and the availability of surplus funds
to pay dividends.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the Registrant's Annual Report to
Stockholders, page 35-36, section entitled "Supplemental Financial Information."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 8-13, section entitled "Management's Discussion and
Analysis."
QUALITATIVE & QUANTITATIVE RISKS
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 11-13, section entitled "Management's Discussion and
Analysis - Risks and Uncertainties."
INTERNATIONAL OPERATIONS AND FOREIGN EXCHANGE. For more than 70 years,
the Company has operated a multinational business subject to the risks inherent
in operating in foreign countries and with foreign currencies. The Company's US
Dollar denominated results are subject to foreign exchange fluctuations, and its
non-US operations are subject to political, economic and other risks.
The Company primarily sells world commodities and; therefore, believes
that local prices will adjust relatively quickly to offset the effect of a local
devaluation. Corn Products generally does not enter into foreign currency
hedging transactions. The Company's policy is to hedge only commercial
transactions denominated in a currency other than the currency of the country in
which the operating unit responsible for the transaction is located.
UNCERTAIN ABILITY TO GENERATE ADEQUATE FINANCIAL PERFORMANCE. The
Company's ability to generate operating income and to increase profitability
depends to a large extent upon its ability to price finished products at a level
that will cover manufacturing and raw material costs and provide a profit
margin. The Company's ability to maintain appropriate price levels is determined
by a number of factors largely beyond the Company's control, such as aggregate
industry supply and market demand, which may vary from time to time and by the
geographic region of the Company's operations. For example, the Company's
profits sharply declined in 1996 and 1997. The primary reason for the profit
decline in 1997 was a significant expansion of high fructose corn syrup industry
capacity in North America ahead of demand. The sharp and unusual increase in the
cost of corn during 1996, which could not be fully passed on in increased
prices, was the primary cause of the profit decline in 1996. Other factors also
affect the
16
Company's profitability, including the economic conditions in various geographic
regions and countries in which the Company manufactures and sells its finished
products. Accordingly, there can be no assurance that the Company will
successfully reverse these declines in profit.
UNCERTAIN ABILITY TO CONTAIN COSTS OR TO FUND CAPITAL EXPENDITURES. The
Company's future profitability and growth also depends on the Company's ability
to contain operating costs and per-unit product costs, to maintain and/or
implement effective cost control programs and to develop successfully
value-added products and new product applications, while at the same time
maintaining competitive pricing and superior quality products, customer service
and support. The Company's ability to maintain a competitive cost structure
depends on continued containment of manufacturing, delivery and administrative
costs as well as the implementation of cost-effective purchasing programs for
raw materials, energy and related manufacturing requirements. The Company plans
to focus capital expenditures on implementing productivity improvements and, if
supported by customer demand, expand the production capacity of its facilities.
Additional funds may be needed for working capital as the Company grows and
expands its operations. To the extent possible, these capital expenditures and
other expenses are expected to be funded from operations. If the Company's cash
flow is insufficient to fund such expenses, the Company may either reduce its
capital expenditures or utilize certain general credit facilities. The Company
may also seek to generate additional liquidity through the sale of debt or
equity securities in private or public markets or through the sale of
non-productive assets. The Company cannot provide any assurance that cash flow
from operations will be sufficient to fund anticipated capital expenditures and
working capital requirements or that additional funds can be obtained from the
financial markets or the sale of assets at terms favorable to the Company. If
the Company is unable to generate sufficient cash flows or raise sufficient
additional funds to fund capital expenditures, it may not be able to achieve its
desired operating efficiencies and expansion plans, which may adversely impact
the Company's competitiveness and, therefore, its results of operations.
INTEREST RATE EXPOSURE. Approximately 60% of the Company's borrowings
are short term credit facilities with floating interest rates. In the future,
the Company may convert a portion of the current debt into a longer term fixed
rate instrument. The remaining 40% of the Company's debt is long term with
variable interest rates primarily tied to LIBOR. Should short-term rates change,
this could affect our interest costs: current economic projections do not
indicate a significant change in the interest rate in the near future.
COMPETITION; EXPANDING INDUSTRY CAPACITY. The Company operates in a
highly competitive environment. Almost all of the Company's products compete
with virtually identical or similar products manufactured by other companies in
the corn refining industry. In the United States, there are ten other corn
refiners, several of which are divisions of larger enterprises that have greater
financial resources and some of which, unlike the Company, have vertically
integrated their corn refining and other operations. Many of the Company's
products also compete with products made from raw materials other than corn.
Fluctuation in prices of these competing products may affect prices of, and
profits derived from, the Company's products. Competition within markets is
largely based on price, quality and product availability.
PRICE VOLATILITY AND UNCERTAIN AVAILABILITY OF CORN. Corn purchasing
costs, which include the price of the corn plus delivery cost, vary between 40%
and 65% of the Company's product costs. The price and availability of corn are
influenced by economic and industry conditions, including supply and demand
factors such as crop disease and severe weather conditions such as drought,
floods or frost, that are difficult to anticipate and cannot be controlled by
the Company. In 1996, profitability was adversely impacted by an exceptional
increase in corn costs, which the Company was not able to offset with an
increase in the price of its products. In addition, the price of corn
sweeteners, especially high fructose
17
corn syrup, is indirectly impacted by government programs supporting sugar
prices. There can be no assurance that the Company will be able to purchase corn
at prices that can be adequately passed on to customers or in quantities
sufficient to sustain or increase its profitability.
COMMODITY COSTS. The Company's finished products are made primarily
from corn. Purchased corn accounts for 40% to 65% of finished product costs. In
North America, the Company sells a large portion of finished product at firm
prices established in supply contracts lasting for periods of up to one year. In
order to minimize the effect of volatility in the cost of corn related to these
firm-priced supply contracts, the Company enters into corn futures contracts, or
takes hedging positions in the corn futures market. From time to time, the
Company may also enter into anticipatory hedges. These contracts typically
mature within one year. At expiration, the Company settles the derivative
contracts at a net amount equal to the difference between the then-current price
of corn and the fixed contract price. While these hedging instruments are
subject to fluctuations in value, changes in the value of the underlying
exposures the Company is hedging generally offset such fluctuations. While the
corn futures contracts or hedging position are intended to minimize the
volatility of corn costs on operating profits, occasionally the hedging activity
can result in losses, some of which may be material. In the Rest of the World,
sales of finished product under long-term firm-priced supply contracts are not
material.
Based on the Company's overall commodity hedge exposure at December 31,
1998, a hypothetical 10% change in market rates applied to the fair value of the
instruments would have no material impact on the Company's earnings, cash flows,
or financial position.
VOLATILITY OF MARKETS. The market price for the common stock of the
Company may be significantly affected by factors such as the announcement of new
products or services by the Company or its competitors, technological innovation
by the Company, its competitors or other vendors, quarterly variations in the
Company's operating results or the operating results of the Company's
competitors, analysts or reported results that vary materially from such
estimates. In addition, the stock market has experienced significant price
fluctuations that have affected the market prices of equity securities of many
companies that have been unrelated to the operating performance of any
individual company. These broad market fluctuations may materially and
adversely affect the market price of the Company's common stock.
UNCERTAINTY OF DIVIDENDS. The payment of dividends is at the discretion
of the Corn Products Board and will be subject to the Company's financial
results and the availability of surplus funds to pay dividends. No assurance can
be given that the Company will continue to pay any dividends.
CERTAIN ANTI-TAKEOVER EFFECTS. Certain provisions of the Company's
Amended and Restated Certificate of Incorporation (the "Corn Products Charter")
and the Company's By-Laws (the "Corn Products By-Laws") and of the Delaware
General Corporation Law (the "DGCL") may have the effect of delaying, deterring
or preventing a change in control of the Company not approved by the Corn
Products Board. These provisions include (i) a classified Board of Directors,
(ii) a requirement of the unanimous consent of all stockholders for action to be
taken without a meeting, (iii) a requirement that special meetings of
stockholders be called only by the Chairman of the Board or the Board of
Directors, (iv) advance notice requirements for stockholder proposals and
nominations, (v) limitations on the ability of stockholders to amend, alter or
repeal the Corn Products By-Laws and certain provisions of the Corn Products
Charter, (vi) authorization for the Corn Products Board to issue without
stockholder approval preferred stock with such terms as the Board of Directors
may determine and (vii) authorization for the Corn Products Board to consider
the interests of creditors, customers, employees and other constituencies of the
Company and its subsidiaries and the effect upon communities in which the
Company and its subsidiaries do business, in evaluating proposed corporate
transactions. With certain exceptions, Section 203 of the DGCL ("Section 203")
imposes certain restrictions on mergers and other business combinations between
the Company and any holder of 15% or more of the Corn Products Common Stock. In
addition, the Company has adopted a stockholder rights plan (the "Rights Plan").
The Rights Plan is designed to protect stockholders in the event of an
unsolicited offer and other takeover tactics, which, in the opinion of the Corn
Products Board, could impair the Company's ability to represent stockholder
interests. The provisions of the Rights Plan may render an unsolicited takeover
of the Company more difficult or less likely to occur or might prevent such a
takeover.
These provisions of the Corn Products Charter and Corn Products
By-Laws, the DGCL and the Rights Plan could discourage potential acquisition
proposals and could delay or prevent a change in
18
control of the Company, although such proposals, if made, might be considered
desirable by a majority of the Company's stockholders. Such provisions could
also make it more difficult for third parties to remove and replace the members
of the Corn Products Board. Moreover, these provisions could diminish the
opportunities for a stockholder to participate in certain tender offers,
including tender offers at prices above the then-current market value of Corn
Products Common Stock, and may also inhibit increases in the market price of
Corn Products Common Stock that could result from takeover attempts or
speculation.
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION. The Company's
historical financial information may not necessarily reflect the results of
operations, financial position and cash flows OF the Company in the future or
the results of operations, financial position and cash flows had the Company
operated as a separate stand-alone entity during the periods presented.
RELIANCE ON MAJOR CUSTOMERS. Historically, Bestfoods' worldwide branded
foods business has been one of the Company's largest customers, accounting for
approximately 11% of total sales in 1998. A master supply agreement was
negotiated with Bestfoods to supply Bestfoods with Company product at prices
based generally on market conditions for a minimum two year term ending December
31, 1999, which can be renewed upon the agreement of both parties. In addition,
approximately 15% of the worldwide sales of the Corn Refining Business in 1997
represented sales of high fructose corn syrup to international, regional and
local companies engaged in the soft drink industry, primarily in North America.
If Bestfoods were not to continue to purchase products from the Company or the
Company's soft drink customers were to substantially decrease their purchases,
the business of the Company might be materially adversely affected.
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 Year 2K 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 expects to fix or
replace internal software where necessary. This includes 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 involves assessment, evaluation, testing and remediation.
During 1998, the Company substantially completed the assessment phase of the
Program and prioritized these systems based on their criticality to business
operations, and began evaluation and remediation. Evaluation involves the
analysis of identified information technology (IT) and non-IT systems for Y2K
compliance. Remediation includes rewriting code in existing software,
installation of new software and replacement of non-compliant equipment. As of
December 31, 1998, considerable progress had been made in remediation. 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 intends to modify or replace systems, as appropriate, which
appear non-compliant, particularly those of high or medium priority.
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 also is communicating with suppliers and service
providers to ascertain whether the equipment and services provided by them will
be Y2K compliant. Until the Company receives and analyzes responses from
suppliers and providers, the Company cannot assess the potential impact of third
party supplier and service provider Y2K issues.
The Company is exploring alternative solutions and developing
contingency plans for handling mission critical areas in the event that
remediation is unsuccessful. The Company anticipates that
19
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, in August
1999.
The Company currently estimates the total costs of the Program to
achieve Y2K readiness at $10 to $14 million of expense. Planned capital
expenditures indirectly related to Y2K, could add an additional $5 to $7 million
to the cost of the Program. As of December 1998, the direct costs incurred by
the Program to remediate Y2K issues were $7 million and capital expenditures
indirectly related to Y2K were an additional $1.
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.
FORWARD-LOOKING STATEMENTS
This Form 10-K 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-K Report. If the Company does update or correct one or
more forward-looking statements, investors and others should not conclude that
the Company will make additional updates or corrections with respect thereto or
with respect to other forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from the Registrant's Annual Report to
Stockholders, pages 14-36, sections entitled "Independent Auditors' Report," and
"Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the headings "Board of Directors,"
"Matters To Be Acted Upon - Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement for
the Company's 1999 Annual Meeting of Stockholders (the "Proxy Statement") and
the information contained under the heading "Executive Officers of the
Registrant" in Item 1 hereof is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the heading "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 14(a)(1) Consolidated Financial Statements and Schedules
Incorporated by reference from The Registrant's Annual Report to
Stockholders, pages 14-36, sections entitled "Independent Auditors' Report," and
"Financial Statements."
Item 14(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted either because the
information is not required or is otherwise included in the financial statements
and notes thereto.
Item 14(a)(3) Exhibits
The Exhibits set forth in the accompanying Exhibit Index are filed as a
part of this report. The following is a list of each management contract or
compensatory plan or arrangement required to be filed as an Exhibit to this
report;
21
Exhibit Number
- --------------
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
Item 14(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter ended
December 31, 1998.
09/16/98 - Press Release - First Quarterly Dividend and Share Buyback
Program
10/21/98 - Arancia Acquisition Announcement
12/02/98 - Arancia Acquisition Completion Announcement
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 31
day of March, 1999.
CORN PRODUCTS INTERNATIONAL, INC.
By: *Konrad Schlatter
---------------------------------------
Konrad Schlatter
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant, in the capacities indicated and on the 31 day of March, 1999.
Signature Title
- --------- -----
*Konrad Schlatter Chairman and Chief Executive Officer
Konrad Schlatter
/s/ James W. Ripley Chief Financial Officer
James W. Ripley
/S/ Jack Fortnum Comptroller
Jack Fortnum
*Ignacio Aranguren-Castiello Director
Ignacio Aranguren-Castiello
*Alfred C. DeCrane. Jr Director
Alfred C. DeCrane, Jr.
*William C. Ferguson Director
William C. Ferguson
*Bernard H. Kastory Director
Bernard H. Kastory
*Richard G. Holder Director
Richard G. Holder
*William S. Norman Director
William S. Norman
23
*Samuel C. Scott Director
Samuel C. Scott
*Clifford B. Storms Director
Clifford B. Storms
*By: /s/ Marcia E. Doane
Marcia E. Doane
Attorney-in-fact
(Being the principal executive officers, the principal financial and accounting
officers and all of the directors of Corn Products International, Inc.)
24
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1** Distribution Agreement dated December 1, 1997, between the
Company and Bestfoods
3.1** Amended and Restated Certificate of Incorporation of the
Company, filed as Exhibit 3.1 to the Company's Registration
Statement on Form 10, File No.1-13397
3.2** Amended By-Laws of the Company, filed as Exhibit 3.2 to the
Company's Registration Statement on Form 10, File
No.1-13397
4.1** Rights Agreement dated November 19, 1997 between the
Company and First Chicago Trust Company of New York, filed
as Exhibit 1 to the Company's Registration Statement on
Form 8-Al 2B, File No.001-13397
4.2** Certificate of Designation for the Company's Series A
Junior Participating Preferred Stock, filed as Exhibit 1 to
the Company's Registration Statement on Form 8-Al 2B, File
No.001-13397
4.3** 5-Year Revolving Credit Agreement dated December 17, 1997
among the Company and the agents and banks named therein
10.1** Master Supply Agreement dated January 1, 1998 between the
Company and Bestfoods
l0.2** Tax Sharing Agreement dated December 1, 1997 between the
Company and Bestfoods
10.3** Tax Indemnification Agreement dated December 1, 1997
between the Company and Bestfoods
10.4** Debt Agreement dated December 1, 1997 between the Company
and Bestfoods
10.5** Transition Services Agreement dated December 1, 1997
between the Company and Bestfoods
10.6** Master License Agreement dated January 1, 1998 between the
Company and Bestfoods
25
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.7** Employee Benefits Agreement dated December 1, 1997 between
the Company and Bestfoods, filed as Exhibit 4.E to the
Company's Registration Statement on Form S-8, File
No.333-43525
10.8** Access Agreement dated January 1, 1998 between the Company
and Bestfoods
10.9** Stock Incentive Plan of the Company, filed as Exhibit 4.E
to the Company's Registration Statement on Form S-8, File
No.333-43525
10.10** Deferred Stock Unit Plan of the Company
10.11** Form of Severance Agreement entered into by each of K.
Schlatter, S.C. Scott, E.J. Northacker, J.W. Ripley and
F.J. Kocun (the "Named Executive Officers")
10.12** Letter Agreement dated December 12, 1997 between the
Company and E.J. Northacker
10.13** Letter Agreement dated December 12, 1997 between the
Company and F.J. Kocun
10.14** Form of Indemnification Agreement entered into by each of
the members of the Company's Board of Directors and the
Named Executive Officers
10.15** Deferred Compensation Plan for Outside Directors of the
Company
10.16** Supplemental Executive Retirement Plan
10.17** Executive Life Insurance Plan
10.18** Deferred Compensation Plan
12.1 Earnings Per Share Computation
13.1* The 1998 Annual Report to Stockholders
21.1* Subsidiaries of the Company
23.1* Consent of KPMG LLP
24.1* Powers of Attorney
27.1* Financial Data Schedule
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* Incorporated herein by reference as indicated in the exhibit description.
** Incorporated herein by reference to the exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.