UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5858
UNIVAR CORPORATION
A Delaware I.R.S. Employer
Corporation No. 91-0816142
6100 Carillon Point
Kirkland, Washington 98033
Telephone No. (206) 889-3400
Indicate by a 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 ____
On June 20, 1994 the Registrant had outstanding 21,643,288 shares
(excluding treasury shares) of common stock of $0.33-1/3 par value,
which is the Registrant's only class of common stock.
UNIVAR CORPORATION and Subsidiaries
INDEX TO FORM 10-Q
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
May 31, 1994 and February 28, 1994 3
Consolidated Statements of Operations
Three Months Ended May 31, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended May 31, 1994 and 1993 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) (See Notes)
(000's) May 31, 1994 February 28, 1994
Assets
Current Assets:
Cash and cash equivalents $21,096 $15,530
Receivables - net 276,264 226,600
Inventories 136,694 125,638
Other current assets 10,769 9,486
------- -------
Total current assets 444,823 377,254
Real Properties Held for
Sale and Long Term
Receivables 29,268 29,590
Property, Plant and 216,285 217,201
Equipment - net
Other Assets 27,797 28,649
-------- ---------
$718,173 $ 652,694
======== =========
Liabilities and
Shareholders' Equity
Current Liabilities:
Bank overdrafts $ 17,964 $ 22,666
Notes payable 30,249 23,331
Current portion of long-
term debt 7,230 7,296
Accounts payable 254,365 201,857
Accrued liabilities 37,254 38,559
-------- ---------
Total current 347,062 293,709
liabilities
Long-term Debt 120,357 147,058
Other Long-term Liabilities 54,510 53,136
Minority Interest 1,636 1,385
Shareholders' Equity
Common stock 8,005 7,339
Additional paid-in capital 106,616 69,798
Retained earnings 97,083 97,060
Cumulative translation
adjustment -7,250 -6,961
Treasury stock -9,664 -9,610
Deferred stock
compensation expense -182 -220
------- -------
Total shareholders' 194,608 157,406
equity ------- -------
$718,173 $652,694
======== ========
UNIVAR CORPORATION and Subsidiaries
Consolidated Statements of Operations (Unaudited) (See Notes)
Three Months Ended
May 31,
(000's except per share data) 1994 1993
Sales $503,335 $487,951
Cost of Sales 432,075 417,552
-------- --------
Gross Margin 71,260 70,399
Gross Margin Percentage 14.2% 14.4%
Operating Expenses 61,052 61,980
Reengineering Costs 3,467
-
------- -------
Income from Operations 6,741 8,419
Other Income (Expense):
Interest expense -2,941 -3,519
Other income-net 50 290
------- -------
Income Before Provision for
Taxes and Minority
Interest 3,850 5,190
Provision for Taxes on
Income 1,968 1,721
------- -------
Income before Minority
Interest 1,882 3,469
------ ------
Minority Interest in Univar
Europe 385 196
-------- --------
Net Income $ 1,497 $ 3,273
======== ========
Net Income per Share $ 0.08 $ 0.17
======== ========
Dividends per Share $ 0.075 $ 0.075
======== ========
Weighted Average Number of
Shares Outstanding 20,060 19,668
======== =======
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited) (See Notes)
Three Months Ended
May 31,
(000's) 1994 1993
Cash Flows Provided (Used) by
Operating Activities:
Net Income $1,497 $3,273
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and
amortization 6,870 6,793
Other 1,525 653
Changes in assets and
liabilities:
Accounts receivable -50,663 -26,158
Inventories -11,024 -13,230
Accounts payable 49,301 31,297
Other current assets 287 7,619
Other current
liabilities -166 12,430
------- -------
Net Cash Provided (Used) by
Operating Activities -2,373 22,677
------- -------
Cash Flows Used by Investing
Activities:
Investment activity 321 201
Additions to property,
plant, and equipment -4,243 -2,575
Changes in other assets 98 -220
------- -------
Net Cash Used by Investing
Activities -3,824 -2,594
------- -------
Cash Flows Provided (Used) by
Financing Activities:
Short-term borrowing 5,200 -12,832
Common stock activity 37,432 185
Long-term debt incurred 393 10,000
Reduction in long-term
debt -28,440 -23,907
Payment of dividends -2,947 -1,472
------- -------
Net Cash Provided (Used) by
Financing Activities 11,638 -28,026
------- -------
Effect of exchange rate
changes on cash 125 -184
------- -------
Net Cash Provided (Used) 5,566 -8,127
Cash and Cash Equivalents at
Beginning of Period 15,530 29,516
------- -------
Cash and Cash Equivalents at
End of Period $21,096 $ 21,839
======= ========
UNIVAR CORPORATION and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of presentation
The accompanying unaudited condensed consolidated financial
statements were prepared in accordance with generally accepted
accounting principles for interim financial information pursuant to
the rules and regulations of the Securities and Exchange Commission
and instructions to Form 10-Q. While these statements reflect all
adjustments (which consist of normal recurring accruals) which are,
in the opinion of management, necessary to a fair presentation of
the results for the interim periods presented, they do not include
all of the information and disclosures required by generally
accepted accounting principles for complete financial statements.
These statements should be read in conjunction with the financial
statements and notes thereto included in the Annual Report of the
Registrant for the fiscal year ended February 28, 1994, and filed
as Item 8 to Form 10-K, Commission File No. 1-5858.
Results of operations for interim periods are not necessarily
indicative of the results that may be expected for the year ending
February 28, 1995.
2. LIFO inventory
The LIFO method of pricing is used for approximately 66% of the
Registrant's inventory. Because an actual valuation of inventory
under the LIFO method can be made only at the end of each fiscal
year based on the inventory levels and costs at that time, interim
financial results are based on estimated LIFO adjustments and are
subject to final fiscal year-end LIFO inventory amounts.
3. Accounting changes
The Corporation adopted SFAS No. 112 "Employers' Accounting for
Postemployment Benefits" effective March 1, 1994. Postemployment
benefits are all types of benefits, other than retirement
benefits, provided to former or inactive employees, their
beneficiaries, and covered dependents. These benefits include,
but are not limited to, salary continuation, supplemental
unemployment benefits, severance benefits, disability related
benefits (including workers' compensation), job training and
counseling, and continuation of benefits such as health care
benefits and life insurance coverage. Under this statement, the
costs of postemployment benefits will be recognized on an accrual
basis. The financial impact of adoption of SFAS No. 112 was not
material for the first quarter.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net earnings for the first fiscal quarter were $1.5 million compared
with $3.3 million for the first quarter last fiscal year. Sales for the
quarter totaled $503.3 million, up 3.2% compared with sales of $488.0
million for the first quarter last year.
The Corporation experienced real sales growth in each of its continuing
markets. In the United States, reported sales for the quarter were
unchanged from the prior year. However, last year's sales volume
included sales from the textile chemical business which was divested at
the end of the second quarter, as well as sales of chlorinated
fluorocarbons and chlorinated solvents, which have declined as a result
of legislated obsolescence. Excluding these products, sales in the
United States grew by 5%. Canadian sales, measured in local currency,
increased 23%, reflecting a 40% growth in sales of agricultural
products, due in part to an acquisition completed at the end of last
year. Industrial chemical sales in Canada also increased by 6.5%.
European sales, when measured in local currencies, grew by 7%,
reflecting signs of economic recovery in the markets served by Univar
Europe.
Both Canadian and European sales, when express in U.S. dollars, fail to
reflect this substantial real growth, due to unfavorable currency
exchange rates. Compared with the first quarter last year, the Canadian
dollar dropped approximately 9% against the U.S. dollar and the
combination of European currencies in the markets served by Univar
Europe dropped approximately 2%.
Gross margin percentage was 14.2% for the quarter, down from 14.4% in
the first quarter last year. While European margin percentage improved
modestly, margin percentage is down in the United States, primarily as a
result of selling the textile chemical business. Margin percentage is
also down in Canada, where the impact of record agricultural chemical
sales which carry a lower gross margin percentage, was the major factor.
Consolidated operating expenses, including reengineering costs, as a
percent of sales, were 12.8% for the first quarter of this year,
compared with 12.7% for the first quarter last year. Operating
expenses, exclusive of reengineering costs, decreased to 12.1% of sales.
The decrease occurred across all markets and is the result of continuing
success from the Corporation's cost containment programs.
During the third quarter last year, the Corporation initiated an
intensive reengineering program which, when completed, is expected to
result in significant fundamental changes in business practices in the
operations of the Corporation. Costs of this initiative for the first
quarter totaled $3.5 million consisting primarily of consulting fees.
This effort will continue throughout fiscal 1995.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
The Corporation is involved in certain elective and required
environmental programs. The following table shows additions to and
expenditures charged against the Corporation's environmental accruals
for the current and prior year comparable quarters.
Three months ended
May 31,
(000's) 1994 1993
Beginning balance $15.5 $15.4
Expense
provisions 1.5 1.0
Expenditures -.7 -1.3
----- -----
Ending balance $16.3 $15.1
===== =====
Income taxes for the first quarter were provided at an effective rate of
51% compared with 33% for the first quarter last year. The increase is
due to a combination of non-recurring tax provision reductions in the
prior year and a change in the mix of domestic and foreign income. The
prior year quarter included the effect of adopting SFAS No. 109,
"Accounting for Income Taxes," which resulted in a cumulative adjustment
to reduce deferred taxes in the amount of $0.4 million. During the
current quarter, the portion of taxable income earned in Canada, which
is subject to higher rates compared with United States rates, increased
by 40%.
Liquidity and Capital Resources
Working capital at the end of the first quarter was $97.8 million, up
from $83.5 million at the prior year-end. Over the same period, the
current ratio remained unchanged at 1:28:1. The change in working
capital is due in part to seasonal fluctuations in working capital
components related to agricultural sales.
Cash flow used by operations totaled $2.4 million for the quarter,
compared with cash provided by operations totaling $22.7 million for the
first quarter last year. The fluctuation for the quarter reflects
changes in components of working capital which are consistent with the
significant increase in agricultural sales.
The Corporation has domestic and foreign short-term credit lines
totaling $85.6 million, of which $55.4 million was available at quarter-
end. The Corporation also has access to funds up to $210 million under
a medium-term revolving credit agreement with a group of banks, of which
$140 million was available at quarter-end. The Corporation believes its
internally generated cash, together with its access to bank lines, will
be adequate to fund the planned capital expenditures, investments, and
to support its working capital requirements.
Capital Expenditures
During the first quarter of this fiscal year, additions to property,
plant, and equipment totaled $4.2 million, compared with $2.6 million
for the prior year quarter. Current quarter additions consisted
primarily of normal replacement and upgrading of fixed assets and
construction expenditures for refurbishing warehouse and office
facilities. The Corporation utilized available cash to fund the capital
expenditures.
Exercise of Dow Put Agreement
On May 13, 1994, the Corporation exercised its unilateral right to put
(sell) 2 million shares of common stock , priced at $l8.74 per share, to
The Dow Chemical Company ("Dow"). Proceeds from the sale totaled $37.5
million. Dow now holds 3.9 million shares of common stock representing
approximately 18% of the issued and outstanding shares of Univar. In
addition, Dow and Univar have agreed that, at any time within the three
year period ending May 12, 1997, Univar can put to Dow, or Dow can call,
up to 101,874 shares of Series A Convertible Preferred Stock. The price
per share will be $93.70. Each share of Series A Convertible Preferred
Stock is convertible into five shares of Univar Common Stock. Dow has
agreed that it will pay to Univar $350,000 per year for each of the
three years ending May 12, 1997, in the event Univar does not elect to
put, or Dow does not call, the Series A Convertible Preferred Stock .
(See Note 12 to the financial statements included in the Corporation's
fiscal 1994 annual report on Form 10-K previously filed with the
Securities and Exchange Commission.)
Univar Europe Stock Purchase Agreement
At the time of the organization of Univar Europe, Univar and its then
31% shareholder, Pakhoed Investeringen B.V. (Pakhoed), entered into a
Shareholder Agreement resulting in the formation of Univar Europe,
which was incorporated in the Netherlands in 1990. At the time Univar
Europe was capitalized, it was 51% owned by the Corporation and 49%
owned by Pakhoed. On May 18, 1994, Pakhoed gave notice to Univar that
Pakhoed, in accordance with terms of the Shareholder Agreement, had
elected to require Univar to purchase Pakhoed's interest in Univar
Europe. The purchase is expected to close on September 1, 1994. The
anticipated purchase price is approximately $25 million.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Form 8-K, as of May 13, 1994, was filed May 17, 1994 to report (1) the
amendment of two agreements with The Dow Chemical Company ("Dow"),
including an Agreement of Purchase and Sale of Stock, and a Standstill
Agreement, and (2) the sale by the Registrant of 2,000,000 shares of its
common stock to Dow.
Form 8-K, as of May 18, 1994, was filed on May 19, 1994, to report the
Registrant's upcoming acquisition of the minority's 49% interest in
Univar Europe held by Pakhoed Investeringen B.V. as described above in
this Form 10-Q.
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.
UNIVAR CORPORATION
Date: June 28, 1994 By: \ JAMES W. BERNARD
James W. Bernard
President and Chief Executive Officer
(Duly Authorized Officer)
Date: June 28, 1994 By: \ GARY E. PRUITT
Gary E. Pruitt
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
