14
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 November 30, 1993
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 January 5, 1994 the Registrant had outstanding 19,643,025
shares (excluding treasury shares) of common stock of $0.33-1/3
par value, which is the Registrant's only class of common stock.
1<PAGE>
UNIVAR CORPORATION and Subsidiaries
INDEX TO FORM 10-Q
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
November 30, 1993 and February 28, 1993 3
Consolidated Statements of Operations
Three and Nine Months Ended November 30, 1993 and 1992 4
Condensed Consolidated Statements of Cash Flows
Three and Nine Months Ended November 30, 1993 and 1992 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 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2<PAGE>
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) (See Notes)
(000's)
November 30, 1993 February 28, 1993
Assets
Current Assets:
Cash and cash equivalents $ 18,416 $ 29,516
Receivables - net 218,271 230,081
Inventories 122,792 131,119
Other current assets 13,248 8,467
--------- ---------
Total current assets 372,727 399,183
Real Properties Held for 30,367 30,878
Sale
and Long Term Receivables
Property, Plant and 219,882 232,395
Equipment - net
Other Assets 31,458 29,895
------- -------
$654,434 $ 692,351
======== =========
Liabilities and
Shareholders' Equity
Current Liabilities:
Bank overdrafts $ 22,644 $ 17,896
Notes payable 14,413 31,445
Current portion of long- 5,241 6,933
term debt
Accounts payable 199,356 210,483
Accrued liabilities 40,199 38,568
--------- ---------
Total current liabilities 281,853 305,325
Long-term Debt 150,563 169,922
Other Long-term Liabilities 60,462 52,664
Minority Interest 1,276 1,150
Shareholders' Equity
Common stock 7,339 7,339
Additional paid-in capital 69,779 69,555
Retained earnings 98,750 97,495
Cumulative translation -5,694 -1,041
adjustment
Treasury stock -9,629 -9,633
Deferred stock
compensation expense -265 - 425
------- -------
Total shareholders' equity 160,280 163,290
------- -------
$654,434 $692,351
======== ========
3<PAGE>
UNIVAR CORPORATION and Subsidiaries
Consolidated Statements of Operations (Unaudited) (See Notes)
Three Months Ended Nine Months Ended
November 30, November 30,
(000's
except per share data) 1993 1992 1993 1992
Sales $430,299 $452,907 $1,392,368 $1,385,433
Cost of Sales 366,075 388,003 1,187,724 1,183,984
-------- -------- ---------- ----------
Gross Margin 64,224 64,904 204,644 201,449
Gross Margin Percentage 14.9% 14.3% 14.7% 14.5%
Operating Expenses 60,117 62,676 185,185 184,157
-------- ------- -------- --------
Income from Operations 4,107 2,228 19,459 17,292
Other Income (Expense):
Interest expense -3,133 -3,701 -10,020 -11,252
Other income-net 285 356 732 2,063
------- ------ ------- -------
Income Before Provision
for Taxes and Minority
Interest 1,259 -1,117 10,171 8,103
Provision for Taxes on
Income 877 167 4,267 3,315
----- ------ ------- ------
Income before Minority
Interest 382 -950 5,904 4,788
Minority Interest in
Univar Europe 76 203 -216 -140
---- ----- ------ ------
Net Income $ 458 $ -747 $5,688 $4,648
===== ====== ====== ======
Net Income per Share $0.02 $-0.04 $ 0.29 $ 0.24
===== ====== ====== ======
Dividends per Share $0.075 $0.075 $0.225 $0.225
====== ====== ====== ======
Weighted Average Number
of Shares Outstanding 19,689 19,692 19,684 19,699
====== ====== ====== ======
4<PAGE>
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited) (See
Notes)
Three Months Ended Nine Months Ended
November 30, November 30,
(000's) 1993 1992 1993 1992
Cash Flows Provided by
Operating Activities:
Net Income (Loss) $ 468 $ -747 $5,688 $4,648
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization 6,890 6,954 20,573 19,092
Other 889 6,307 873 1,343
Changes in assets and
liabilities:
Accounts receivable 13,952 20,499 3,640 3,756
Inventories 311 726 6,454 -856
Accounts payable 135 -6,595 -3,407 -5,173
Other current assets 938 5,649 8,209 6,759
Other current liabilities 1,156 -438 3,472 -2,231
------ ------ ------ -------
Net Cash Provided by
Operating Activities 24,729 32,355 45,502 27,338
------- ------- ------ -------
Cash Flows Used by Investing
Activities:
Investment activity -582 -2,367 239 7
Additions to property,
plant, and equipment -1,254 -2,487 -8,790 -8,453
Changes in other assets -1,741 - 82 -2,095 - 198
------- ------ ------ ------
Net Cash Used by Investing
Activities -3,577 -4,936 -10,646 -8,644
------- ------ ------- ------
Cash Flows Used by Financing
Activities:
Short-term borrowing -5,359 15,016 -18,121 24,616
Common stock activity 72 21 290 -49
Long-term debt incurred 0 73,995 10,000 163,500
Reduction in long-term debt -3,894 -107,466 -29,921 -199,111
Payment of dividends 0 -2,943 -4,417 -5,883
------ ------- ------- --------
Net cash Used by Financing
Activities -9,181 -21,377 -42,169 -16,927
------ ------- ------- -------
Effect of exchange rate
changes on cash -235 783 -1,005 524
------ ------- ------ -------
Net Cash Provided (Used) 11,736 6,825 -8,318 2,291
Cash and Cash Equivalents at
Beginning of Period 9,462 12,812 29,516 17,346
------ ------- ------ ------
Cash and Cash Equivalents at
End of Period $21,198 $19,637 $21,198 $19,637
======= ======= ======= =======
5<PAGE>
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, 1993, 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, 1994.
2. LIFO inventory
The LIFO method of pricing is used for approximately 69% 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
Effective March 1, 1993, the Corporation adopted FASB
Statement No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions," and FASB Statement No. 109
"Accounting for Income Taxes."
FASB Statement No. 106 requires accrual of retiree health
care costs during an employee's service period instead of
expensing those costs when they are paid as has been the
generally accepted practice. The Corporation elected to
amortize over twenty years the present value of retiree
health care costs attributable to prior years.
FASB Statement No. 109 requires the use of the asset and
liability method of accounting for deferred income taxes.
The favorable cumulative effect of implementation of this
Statement, which represents the impact of adjusting
deferred tax balances to reflect current tax rates, is
insignificant and was included in the first quarter tax
provision. Prior year financial statements were not
restated.
The Corporation is required to adopt FASB Statement No. 112
"Employers' Accounting for Postemployment Benefits"
effective with fiscal 1995. The Corporation anticipates
that the financial impact will not be material.
6<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net earnings for the third quarter were $0.5 million compared to
a net loss of $0.7 million for the third quarter last fiscal
year. Sales for the quarter of $430.0 million were down from
$452.9 million in the comparable quarter last year.
For the first nine months this year, earnings were up
approximately 22% to $5.7 million compared with earnings of $4.6
million for the first nine months last year. Sales for the first
nine months totaled $1.4 billion, unchanged from the first nine
months of the prior year.
Sales in the United States were down by 2% for the third quarter
as a result of the Corporation's decision at the end of the
second quarter, to divest its textile chemical business. Most,
but not all of this business had been sold as of the end of the
third quarter. Excluding textile chemicals, sales in the United
States were up by 4%. In foreign markets served by Univar, the
Corporation experienced sales growth despite continuing sluggish
economic conditions. When measured in local currencies, sales
are up over 5% in Europe and almost 7% in Canada. However,
foreign sales expressed in U.S. dollars declined due to
unfavorable currency exchange rates, which dropped approximately
6% for the Canadian dollar and 19% for the combination of
European currencies in the markets served by Univar.
Continuing weak economic conditions in Europe are actually
working in the Corporation's favor, as manufacturers seeking to
reduce overhead are turning over more of their output to
distributors, such as Univar. The percentage of the total
chemical market in Europe available to distributors is increasing
as a result of the slow economy.
Gross margin percentage improved in each of the markets served by
Univar, resulting in a combined average of 14.9% for the quarter,
compared with 14.3% in the third quarter last year. For the
first nine months of the year, gross margin percentage was 14.7%
compared with 14.5% for the first nine months last year.
Operating expenses for the third quarter were $60.1 million or
14.0% of sales, compared with $62.7 million, or 13.8% of sales
for the third quarter of the prior year. Operating expenses as a
percentage of sales continued to decrease in Univar's foreign
operations. In the United States, decreased operating expenses
resulting from management of health care costs and other cost
containment programs were offset by expenses related to the
Corporation's re-engineering project.
Operating expenses for the first nine months this year were up by
less than 1% to $185.2 million. Expressed as a percentage of
sales, operating expenses for the first nine months this year
were 13.3%, unchanged from the first nine months of the prior
year.
7<PAGE>
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 and
first nine months:
Three months ended Nine months ended
November 30, November 30,
(millions) 1993 1992 1993 1992
Beginning balance $15,122 $4,420 $15,369 $5,119
Expense provisions 1,001 151 3,013 1,345
Insurance recoveries - - - 176
Expenditures 680 1,598 2,939 3,667
------- ------ ------- ------
Ending balance $15,443 $2,973 $15,443 $2,973
======= ====== ======= ======
Taxes were provided at an effective rate of 69.7% for the third
quarter. This comparatively higher rate is the result of
currently nondeductible foreign losses. For the first nine
months of this year, taxes were provided at an effective rate of
42.0% compared with a rate of 40.9% for the prior year comparable
period.
Liquidity and Capital Resources
Working capital at the end of the third quarter was $90.9
million, down from $93.9 million at the prior year-end. Over the
same period, the current ratio increased slightly to 1.32:1
compared with 1.31:1. The changes in working capital and current
ratios are due in part to seasonal fluctuations in working
capital components related to agricultural sales and to reduced
current borrowings.
Cash flow provided by operations totaled $24.7 million for the
quarter, down from $32.3 million for the third quarter last year.
For the first nine months this year, cash provided by operations
totaled $45.5 million compared with $27.3 million for the first
nine months last year. The fluctuation for the quarter and first
nine months reflects changes in components of working capital,
primarily through improvements in inventory and accounts
receivable management.
The Corporation has short and medium term bank lines available to
cover its anticipated liquidity requirements. In addition, the
Corporation has a unilateral right to put (sell) newly issued
shares of common stock to The Dow Chemical Company. The terms of
the put agreement, which expires on February 28, 1994, provide
for the sale of approximately 2.5 million to 2.9 million new
shares. Pricing of this stock is now set at $18.74 per share.
(See Note 8 to the financial statements included in the
Corporation's fiscal 1993 annual report on Form 10-K previously
filed with the Securities and Exchange Commission.) (See Item 5
below.)
8<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Capital Expenditures
During the third quarter of this fiscal year, additions to
property, plant, and equipment totaled $1.3 million, compared
with $2.5 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.
Part II. OTHER INFORMATION
Item 5. Other Information
The Corporation, in cooperation with The Dow Chemical
Company and Pakhoed Investeringen B.V., agreed to extend until
February 28, 1994, two agreements which were due to expire
December 31, 1993. The first of these agreements provides an
option to sell to Dow approximately 2.5 million to 2.9 million
additional shares of Univar common stock at a price of $18.74 per
share. The second agreement includes an obligation of Univar to
purchase the minority interest in Univar Europe held by Pakhoed,
if Pakhoed so elects.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit
Number Description
10.29 Third Amendment to Agreement of Purchase and Sale of Stock
10.30 Third Amendment to Shareholders Agreement
B. Reports on Form 8-K
There have been no reports on Form 8-K filed, or required
to be filed, during the quarter for which this report is
filed.
9<PAGE>
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: January 13, 1994 By: \JAMES W. BERNARD
James W. Bernard
President and Chief Executive Officer
(Duly Authorized Officer)
Date: January 13, 1994 By: \GARY E. PRUITT
Gary E. Pruitt
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
Exhibit 10.29
THIRD AMENDMENT TO
AGREEMENT OF PURCHASE AND SALE OF STOCK
This THIRD AMENDMENT TO AGREEMENT OF PURCHASE AND SALE OF
STOCK ("Third Amendment") is made as of the 21st day of December,
1993 by and between The Dow Chemical Company (the "Purchaser")
and Univar Corporation (the "Company").
Reference is made to that certain Agreement Of Purchase And
Sale Of Stock dated as of June 24, 1991, as amended by a First
Amendment dated September 24, 1993 and by a Second Amendment
dated as of November 30, 1993 (collectively, the "Agreement")
made by and between Purchaser and Company. Capitalized terms
used in this Third Amendment shall have the same meanings as set
forth in the Agreement, unless otherwise defined herein.
1. The definition of "Put Expiration" as set forth in Section
2.4 of the Agreement, and as used in said Agreement, shall be
changed from "December 31, 1993" to be "February 28, 1994."
2. Section 2.5 of the Agreement shall be deleted and the
following shall be inserted in its place:
"2.5 Purchase Price of Additional Shares. The price
for the Additional Shares shall be $18.74 per share
(the "Purchase Price)."
3. The reference in the next to last sentence of Section 2.6 of
the Agreement, as amended, to the fact that Purchaser shall
select the closing date for each Additional Closing which shall
be no later than "90 days" after the date of the Put Notice shall
be amended to provide that such closing date shall be no later
than "30 days" after the date of the Put Notice.
4. The last sentence of Section 2.6 of the Agreement shall be
deleted and the following shall be inserted in its place:
"The Put Notice may be given by the Company at any time
on or before the date of the Put Expiration.
Except as modified by this Third Amendment, the Agreement
shall continue in full force and effect.
11<PAGE>
IN WITNESS WHEREOF, this Third Amendment has been duly
executed by the parties hereto as of the date first above
written.
UNIVAR CORPORATION
By: /James L. Fletcher
Senior Vice President
THE DOW CHEMICAL COMPANY
By: /Enrique J. Sosa
Its: Senior Vice President
Exhibit 10.30
THIRD AMENDMENT TO SHAREHOLDERS AGREEMENT
This THIRD AMENDMENT TO SHAREHOLDERS AGREEMENT is made this
21st day of December, 1993.
Reference is made to that certain Shareholders Agreement (as
amended by a First Amendment To Shareholders Agreement dated
December 4, 1992, and as further amended by a Second Amendment To
Shareholders Agreement dated June 25, 1993, said Agreement is
referred to herein as the "Shareholders Agreement") made the 27th
day of June, 1991, by and among:
I. Univar Corporation ("Univar"), a corporation incorporated
under the laws of the State of Delaware, having its
principal place of business at Kirkland, Washington;
II. Pakhoed Investeringen B.V. ("Pakhoed"), a corporation
incorporated under the laws of the Netherlands, having its
statutory seat at Rotterdam;
III. Univar Europe N.V. ("Univar Europe"), a corporation
incorporated under the laws of the Netherlands, having its
statutory seat at Rotterdam.
RECITALS
A. Article 8 of the Shareholders Agreement sets forth a
procedure under which the purchase price to be paid by Univar for
Pakhoed's Shares (as defined in the Shareholders Agreement) will
be calculated in the event that, on or before January 1, 1994,
Pakhoed exercises its right to put Pakhoed's Shares to Univar in
accordance with Article 6 of the Shareholders Agreement. The
period from the date of execution of the Shareholders Agreement
through January 1, 1994 is referred to in the Shareholders
Agreement as the "Initial Period."
B. Article 14 of the Shareholders Agreement provides that
for each period after January 1, 1994, 50% of the net income
after tax of Univar Europe shall be distributed to Univar and
Pakhoed as dividends.
C. The parties desire to further amend Articles 8 and 14
as provided below.
NOW, THEREFORE, the parties hereto agree as follows:
1. Article 8, and all other affected provisions of the
Shareholders Agreement, shall be amended by extending the
termination date of the "Initial Period" from January 1, 1994
until February 28, 1994. Similarly, references in the
Shareholders Agreement to "January 1, 1994" in the context of the
termination of the Initial Period shall be changed to be
"February 28, 1994."
2. The provisions of Article 14 shall be amended to
provide that the obligation to distribute net income after tax as
a dividend to Univar and Pakhoed shall not apply except for any
net income earned by Univar Europe from and after March 1, 1994.
13<PAGE>
3. Except as modified by this Third Amendment to
Shareholders Agreement, the Shareholders Agreement, as amended by
the First and Second Amendments, shall continue in full force and
effect.
UNIVAR CORPORATION
By /James W. Bernard
Its President and C.E.O.
PAKHOED INVESTERINGEN B.V.
By /Nicolaas J. Westdijk
Its Managing Director
UNIVAR EUROPE N.V.
By /Paul H. Hough
Its Managing Director
