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, 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
Indicated 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 4, 1995, the Registrant had outstanding 21,794,948 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
November 30, 1994 and February 29, 1994 3
Consolidated Statements of Operations
Three and Nine Months Ended November 30, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows
Three and Nine Months Ended November 30, 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 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) (See Notes)
(000's) November 30, 1994 February 28, 1994
Assets
Current Assets:
Cash and cash equivalents $ 20,375 $ 15,530
Receivables - net 248,445 226,600
Inventories 132,565 125,638
Other current assets 10,010 9,486
--------- ---------
Total current assets 411,395 377,254
Real Properties Held for Sale
and Long Term Receivables 31,107 29,590
Property, Plant and 207,210 217,201
Equipment - net
Other Assets 30,225 28,649
------- -------
$679,937 $652,694
======== ========
Liabilities and
Shareholders' Equity
Current Liabilities:
Bank overdrafts $ 29,149 $ 22,666
Notes payable 44,606 23,331
Current portion of
long-term debt 5,191 7,296
Accounts payable 218,437 201,857
Accrued liabilities 54,630 38,559
------- -------
Total current liabilities 352,013 293,709
Long-term Debt 110,508 147,058
Other Long-term Liabilities 46,292 53,136
Minority Interest - 1,385
Shareholders' Equity
Common stock 8,006 7,339
Additional paid-in capital 107,551 69,798
Retained earnings 75,657 97,060
Cumulative translation
adjustment -10,460 -6,961
Treasury stock -9,094 -9,610
Deferred stock
compensation expense -536 -220
------- --------
Total shareholders'equity 171,124 157,406
------- -------
$679,937 $652,694
======== ========
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) 1994 1993 1994 1993
Sales $468,778 $430,299 $1,468,933 $1,392,368
Cost of Sales 399,814 366,075 1,258,782 1,187,724
------- ------- ---------- --------
Gross Margin 68,964 64,224 210,151 204,644
Gross Margin Percentage 14.7% 14.9% 14.3% 14.7%
Operating Expenses 62,873 60,117 186,645 185,185
Reengineering Costs 605 - 37,361 -
------ ------ ------- -------
Income (Loss) from Operations 5,486 4,107 -13,855 19,459
Other Income (Expense):
Interest expense -3,292 -3,133 -9,207 -10,020
Other income-net 197 285 224 732
------ ------ ------ -------
Income (Loss) Before
for Taxes on Income
and Minority Interest 2,391 1,259 -22,838 10,171
Provision for (Benefit of) 1,560 877 -6,779 4,267
Taxes on Income
------ ------ ------ ------
Income (Loss) before
Minority Interest 831 382 -16,059 5,904
Minority Interest
in Univar Europe -104 -76 604 216
----- ----- ------- ------
Net Income (Loss) $ 935 $ 458 -$16,663 $5,688
===== ===== ======= ======
Net Income (Loss) per Share $0.04 $0.02 -$0.79 $ 0.29
===== ===== ===== ======
Dividends Paid per Share $ 0.08 $ 0.08 $ 0.23 $ 0.23
------ ------ ------ ------
Weighted Average Number of
Shares Outstanding 21,791 19,689 21,198 19,684
====== ====== ====== ======
UNIVAR CORPORATION and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (See Notes)
Three Months Ended Nine Months Ended
November 30, November 30,
(000's except per share data) 1994 1993 1994 1993
-------- ------- -------- ------
Cash Flows Provided by Operating
Activities:
Net Income (Loss) $ 934 $ 458 -$16,663 $5,688
Adjustments to reconcile net
income (loss) to net
cash provided by operating
activities:
Depreciation and amortization 7,003 6,890 20,827 20,573
Non-cash portion of
reengineering accrual - - 16,389 -
Other - net -4,347 889 -1,794 873
Changes in assets and
liabilities:
Accounts receivable 16,044 13,952 -13,891 3,640
Inventories 1,071 311 -4,872 6,454
Accounts payable 1,455 135 21,180 -3,407
Other current assets, net -2,201 938 -3,898 8,209
Other current liabilities, net -4,446 1,156 2,433 3,472
------ ------ ------ -----
Net Cash Provided by
Operating Activities: 15,513 24,729 19,711 45,502
------ ------ ------ ------
Cash Flows Used by Investing
Activities:
Acquisition of
investments, net -33,339 -582 -32,713 239
Additions to property,
plant and equipment -6,966 -1,254 -15,250 -8,790
Changes in other assets 25 -1,741 69 -2,095
------ ------ ------ ------
Net Cash Used by Investing
Activities: -40,280 -3,577 -47,894 -10,646
------- ------ ------- -------
Cash Flows Provided (Used) by
Financing Activities:
Short-term borrowings - net 4,595 -5,359 17,321 -18,121
Common stock activity 194 72 37,515 290
Long-term debt incurred 20,244 - 20,351 10,000
Reduction in long-term debt -450 -3,894 -38,432 -29,921
Payment of dividends - - -4,580 -4,417
------ ------ ------- ------
Net Cash Provided (Used)
by Financing Activities: 24,583 -9,181 32,175 -42,169
------ ------ ------- ------
Effect of Exchange Rate Changes
on Cash 53 -235 853 -1,005
------ ------ ------- ------
Net Cash Provided (Used) -131 11,736 4,845 -8,318
Cash and Equivalents at
Beginning of Period 20,506 9,462 15,530 29,516
------ ------- ------- ------
Cash and Equivalents
at End of Period $20,375 $21,198 $20,375 $21,198
====== ======= ======= ======
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. Acquisition of Minority Interest
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 September 1, 1994 the
Corporation acquired the minority shareholder's 49% interest in
Univar Europe, in accordance with the terms of the Shareholder
Agreement. The acquisition included equity shares and subordinated
debt with a total value of $25.8 million.
4. Reengineering charges
Beginning in the second quarter of fiscal 1994, the
Corporation began work on a strategic business transformation of
the U.S. operating company. The project began with an analysis of
all aspects of services provided, customer profitability, logistics
network design, and information systems effectiveness. As a result
of this effort, at the end of the second quarter of fiscal 1995,
the Corporation announced its plan to reorganize the U.S. company,
redesign its distribution network, develop a national procurement
and materials management strategy, increase sales force efficiency,
improve gross margins, and reduce the amount of capital required to
conduct ongoing operations.
During the first nine months of fiscal 1995, the Corporation
recorded pretax reengineering charges of $37.4 million, which were
necessitated by the following factors:
Millions
Pre-Tax After-Tax
Accrued costs of reorganizing the U.S.
company to a process-based structure,
anticipated elimination of up to 2 layers of
management, and redesign of the company's
distribution network, including severance,
other employee benefits and facility closure
costs. $16.5 $10.3
Write-down (non-cash) to fair value of certain
facilities resulting from the decision to
implement the new logistics system. 10.4 6.4
Consultant fees and project travel costs
incurred 10.5 6.5
------ ------
$ 37.4 $ 23.2
======= =======
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net earnings for the third quarter were $0.9 million or $0.04 per share,
compared to net earnings of $0.5 million or $0.02 per share for the
third quarter last fiscal year. The loss for the first nine months this
year, totaling $16.7 million or $0.79 per share includes after tax costs
totaling $23.2 million pertaining to a comprehensive ongoing U.S.
reengineering project. Excluding reengineering charges, earnings for
the first nine months totaled $6.5 million or $0.31 per share, up from
$5.7 million or $0.29 per share for the first nine months last year.
Sales for the quarter totaled $468.8 million, up 8.9% compared with
sales of $430.3 million in the third quarter last year. Sales growth
in foreign markets served by Univar was significant. Canadian sales were
up 27% while European sales grew by 20%. While a portion of this
substantial growth is attributable to acquisitions, the increase also
reflects real growth in market share, spurred on by economic growth in
Canada and in parts of Europe. In the U.S., sales increased by more than
5%, exclusive of chlorinated fluorocarbons and chlorinated solvent
sales, which have declined as a result of legislated obsolescence.
Gross margin percentage was 14.7% for the quarter, compared with 14.9%
in the third quarter last year. Product cost inflation, which was not
immediately recovered in the United States, resulted in a LIFO charge of
$1.5 million for the quarter. Gross margin percentage was 14.3% for the
first nine months this year, compared with 14.7% for the first nine
months last year. LIFO charges total $3.4 million for the first nine
months this year while in the prior year, there was no LIFO charge.
Operating expenses for the third quarter were $62.9 million compared
with $60.1 million last year. As a percentage of sales, operating
expenses decreased to 13.4%, down from 14.0% for the third quarter last
year. Last year's third quarter included certain non-recurring
adjustments pertaining to health insurance costs and receipt of
settlement proceeds which together reduced operating expenses by more
than $1.4 million.
For the first nine months this year, operating expenses, exclusive of
reengineering costs, were up by less than 1% to $186.6 million, compared
with $185.2 million for the first nine months last year. Such
operating expenses, expressed as a percentage of sales were 12.7%, down
from 13.3% for the first nine months last year.
During the third quarter, the Corporation continued to focus on its
reengineering initiative. Progress has been made in laying the
foundation to meet the Corporation's goals. The Corporation completed
the reorganization of its management and sales positions in the United
States and has begun consolidating inventory at major hub locations.
When the new logistics system is fully implemented over the next 18
months, nearly half of the 100-plus full service facilities in the U.S.
will be converted to service points, with reduced staffing and
inventory.
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:
Quarter ended Nine months ended
November 30, November 30,
(millions) 1994 1993 1994 1993
Beginning balance $16.9 $15.1 $15.5 $15.3
Expense provisions 1.7 1.0 4.8 3.0
Expenditures -1.1 -0.7 -2.8 -2.9
----- ----- ----- -----
Ending balance $17.5 $15.4 $17.5 $15.4
===== ===== ===== =====
The Corporation provided for taxes for the quarter at an effective rate
of 65.2% compared with an effective rate of 69.7% for the third quarter
last year. For the first nine months of the year, a tax benefit was
provided at a rate of 29.7% compared with tax expense at an effective
rate of 42.0% for the first nine months of the prior year. The effective
tax rate for the Corporation varies from period to period primarily as a
result of changes in the proportion of taxable income earned in Canada
where the effective tax rate is 43.5%. Additional factors which
increase the tax expense provision rate while decreasing the tax benefit
rate include operating losses and goodwill amortization in certain
foreign countries for which no tax benefit is available.
Liquidity and Capital Resources
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 September 1, 1994 the Corporation acquired the minority
shareholder's 49% interest in Univar Europe, in accordance with the
terms of the Shareholder Agreement. The acquisition included equity
shares and subordinated debt with a total value of $25.8 million.
Working capital at the end of the third quarter was $59.4 million, down
from $83.5 million at the prior year-end. Over the same period, the
current ratio decreased to 1.17:1 compared with 1.28:1. The changes in
working capital and current ratio are due to a combination of factors:
the net investment in inventories and accounts receivable has increased
as a result of the increase in sales volume; accruals related to the
reengineering charge; and a temporary increase in notes payable
resulting from funding of the acquisition of the minority shareholder's
49% interest in Univar Europe.
Cash flow provided by operations totaled $15.5 million for the quarter,
compared with $24.7 million for the third quarter last year. For the
first nine months this year, cash provided by operations totaled $19.7
million compared with $45.4 million for the first nine months last year.
The decrease in cash flow for the quarter and first nine months reflects
a combination of the cash impact of reengineering costs added to the
cost of changes in components of working capital necessitated by the
addition of increased sales volumes.
The Corporation has domestic and foreign short-term credit lines
totaling $115.6 million, of which $71.0 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
$130 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 third quarter of this fiscal year, additions to property,
plant, and equipment totaled $7.0 million, compared with $1.3 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 6. Exhibits and 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.
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, 1995 By: /s/ JAMES W. BERNARD
Date: January 13, 1995 By: /s/ GARY E. PRUITT
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE PERIOD ENDED NOVEMBER 30, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-1-1994
<PERIOD-END> NOV-1-1994
<CASH> 20,375,000
<SECURITIES> 0
<RECEIVABLES> 236,803,000
<ALLOWANCES> 2,721,000
<INVENTORY> 132,565,000
<CURRENT-ASSETS> 411,395,000
<PP&E> 365,664,000
<DEPRECIATION> 158,454,000
<TOTAL-ASSETS> 679,937,000
<CURRENT-LIABILITIES> 352,013,000
<BONDS> 0
<COMMON> 8,006,000
0
0
<OTHER-SE> 163,118,000
<TOTAL-LIABILITY-AND-EQUITY> 679,937,000
<SALES> 1,468,932,492
<TOTAL-REVENUES> 1,468,932,492
<CGS> 1,258,781,895
<TOTAL-COSTS> 186,645,003
<OTHER-EXPENSES> 37,360,475
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,207,504
<INCOME-PRETAX> (22,838,231)
<INCOME-TAX> (6,779,668)
<INCOME-CONTINUING> (16,058,563)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,058,563)
<EPS-PRIMARY> (0.79)
<EPS-DILUTED> (0.79)
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