Interview - Multifoods dealing with computer woesgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Thursday November 11, 5:27 pm Eastern Time
INTERVIEW - Multifoods dealing with computer woes
By Emily Kaiser
CHICAGO, Nov 11 (Reuters) - Food distributor International Multifoods Corp. (NYSE:IMC - news) thought it had addressed Year 2000 computer problems when it installed a Y2K-compliant computer system in its food service distribution operations.
But it discovered problems that had nothing to do with older computers mistaking the year 2000 for 1900, and that led to a profit warning issued on Thursday.
The computer system, which was previously used in the company's vending business, used different words to describe orders. Employees had difficulty with the changes, Gary Costley, the company's chairman and chief executive officer, said in a telephone interview.
Customers who placed orders did not always get the food they requested, because Multifoods employees either entered the orders incorrectly or misinterpreted data when filling orders.
A number of expensive redeliveries pushed costs higher, leading International Multifoods to warn that its third quarter and full-year profits would fall short of Wall Street forecasts.
The warning sent its shares tumbling nearly 20 percent. The stock closed down 3-3/4 at 16-1/8 after notching a 52-week low of 15.
Costley said International Multifoods replaced the computer system in its food service distribution business with the one used in its vending operation because it was Y2K compliant.
``Two years ago, that looked like a very smart move,'' he said. ``In hindsight, we underestimated the complexity of having a vending system run a distribution system. In vending, the word 'each' means a case. In food service, 'each' means one.''
So, when workers typed the orders into the computer or packed the food for delivery, employees who had worked on the vending side thought ``each'' meant a case, while food service workers thought it meant one.
``Customers would order a case of ketchup and get a bottle, or order a bottle and get a case,'' Costley said.
Costley said the ``each'' problem was just one example of the types of snags the food service business encountered when it switched computer systems.
He said International Multifoods planned to increase spending on training for the employees at its distribution and order centers in hopes of reducing order mix-ups.
``We're pushing through a fairly aggressive training program,'' he said. ``We are also making some enhancements on our system.''
The company said it now expected third-quarter earnings to be in the range of 42 to 45 cents per diluted share, compared with last year's 52 cents. Analysts had expected a third-quarter profit of 58 cents a share, according to First Call/Thomson Financial.
It expected full-year earnings to be between $1.30 and $1.35 per share, compared with last year's $1.35 per diluted share, before unusual items.
Costley said the company expected costs to normalize by the middle of next year.
-- Homer Beanfang (Bats@inbellfry.com), November 12, 1999