<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO ____
COMMISSION FILE NUMBER 1-5858
UNIVAR CORPORATION
<TABLE>
<S> <C>
A Delaware I.R.S. Employer
Corporation No. 91-0816142
</TABLE>
6100 Carillon Point
Kirkland, Washington 98033
Telephone No. (206) 889-3400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $.33-1/3 Par Value New York Stock Exchange
Pacific Stock Exchange
</TABLE>
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. [ X ]
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. [ X ]
The aggregate market value of voting stock held by non-affiliates of the
registrant at May 15, 1995 was approximately $125,956,000. As of such date,
21,791,964 shares of the registrant's common stock, $0.33-1/3 par value, which
is the registrant's only class of common stock, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Corporation's definitive Proxy Statement to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934 (Item 10 - Directors Only, and
Items 11, 12 and 13 of Part III)
1
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PART I
ITEM 1. BUSINESS
The Company
Univar Corporation (Univar, the Registrant, or the Corporation) was
incorporated in September, 1966 to become the successor corporation in the
merger of Van Waters & Rogers Inc. and United Pacific Corporation, both long
established companies then doing business in the western United States and
western Canada. For the fiscal year ended February 28, 1995, Univar
Corporation and its three wholly owned subsidiaries were involved in the
distribution of industrial, agricultural and pest control chemicals and related
products and services. In the United States, the Corporation conducts its
operations through Van Waters & Rogers Inc.; in Canada, through Van Waters &
Rogers Ltd.; and through Univar Europe N.V. (Univar Europe) in the United
Kingdom, Scandinavia, Switzerland, and northern Italy.
Distribution is the process by which manufacturers, both large and small, move
their products in the most economical way to many end users. As a distributor
of industrial, pest control, and agricultural chemicals and related products,
the Corporation's role is to purchase chemicals from manufacturers in truck,
railcar, or tankcar quantities and sell them in smaller quantities to various
customers. Univar adds value to its products through superior service,
selection, blending and packaging, delivery reliability, and provides customers
assistance with environmental and regulatory compliance.
The Corporation provides a hazardous waste management service in the U.S.
called ChemCare(R). ChemCare is a service providing its customers with
logistics management, temporary waste storage, and access to various treatment
and disposal technologies. ChemCare allows the Corporation to maximize existing
equipment, facilities and chemical handling knowledge to assist customers in
responsibly collecting and disposing of their chemical waste streams. It is in
essence a reverse distribution process, developed in response to customer
demand for help in coping with increasingly complex environmental regulations
at the federal, state, and local levels.
The Corporation does not, under ChemCare or any other program, actually dispose
of chemical waste streams. Rather, it contracts with Environmental Protection
Agency (EPA) permitted hazardous waste disposal sites to do so, through
incineration, recycling, or other means.
The Corporation is developing three additional ancillary services in the U.S.,
including environmental remediation services, contract chemical management
services, and third party logistics. The Corporation has entered the soil and
groundwater remediation services business and is making its internal expertise
and proprietary system technology available to the market place through the use
of Remote Sentry(TM), a monitoring and process control system. The Corporation
provides contract management services through its VIMS(TM) services. (Van
Waters & Rogers Integrated Management Services). VIMS takes full advantage of
the Corporation's UVX2000(R) networked computer system combined with expertise
in sourcing, procuring, warehousing, and transporting to reduce customers'
costs of acquiring and managing products and materials. With its new Third
Party Logistics business, the Corporation is making existing warehousing
capacities available to customers, along with services such as packaging and
terminaling of bulk liquids, for manufactured products.
Financial Information About Industry Segments
The Corporation operates in only one market segment, chemical distribution,
through its wholly owned subsidiaries, Van Waters & Rogers Inc. in the United
States, Van Waters & Rogers Ltd. in Canada, and Univar Europe N.V. in Europe.
The ancillary services described above are not yet material in relation to the
Corporation's chemical distribution business.
Operations in Canada and Europe for each of the last three years are reported
in the Univar Corporation financial statements on page 35 of this filing,
under the caption of Note 11. Such Industry Segment Information is incorporated
herein by reference.
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<PAGE> 3
ITEM 1. BUSINESS (Continued)
Raw Materials
Numerous sources of supply generally exist for nearly all raw materials
essential to the business.
Patents, Trademarks and Tradenames
Univar and its subsidiaries own certain trademarks, servicemarks, and
tradenames which are subject to renewal at various dates beginning in 1995
through 2009. These marks and names are important in the Corporation's current
operations but not indispensable.
Seasonal Business
Approximately 26% of annual sales occur in each of the first two quarters of
the year, followed by approximately 25% in the third quarter and 23% in the
fourth quarter. While quarterly sales volumes do not vary significantly, the
mix of business during the year is subject to seasonal variation. The
Corporation markets pest control and agricultural products, which together
represented 12%, 11%, and 10% of sales, respectively, in fiscal 1995, 1994, and
1993. While sales of these products occur throughout the year, approximately
69% of these annual sales occur during the first two quarters of the fiscal
year. Complimentary seasonal fluctuations of certain industrial chemical sales
such as aircraft de icing fluid, offset lower sales volumes of agricultural and
pest control products in the third and fourth quarters of the fiscal year.
This seasonal change in product mix results in expected fluctuation of gross
margin percentage from quarter to quarter during the year.
Principal Customers
No portion of the continuing operations of the Corporation is dependent upon a
single customer or a few customers, the loss of any one or more of which would
have a material adverse effect on the Corporation.
Competitive Conditions
In the distribution of chemicals and related products, Van Waters & Rogers
Inc., Van Waters & Rogers Ltd., and Univar Europe N.V. compete with local,
regional, and national distributors, as well as with manufacturers who sell
directly to end users. Although Univar is one of the largest industrial
chemical distributors in North America and has expanded its operations to
western Europe, the Corporation faces significant competition from distributors
who have a larger market share within local and regional markets as well as
from other national distributors.
The Corporation competes on a variety of factors such as price, product
quality, customer service, selection of available products, reliability,
technical support, and delivery.
Research and Development
As a distributor, Univar and its subsidiaries do not engage in research
activities relating to the development of new products or the improvement of
existing products.
Environmental Matters
See "The Environment" section of Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 17 of this filing.
3
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ITEM 1. BUSINESS (Continued)
Employees
As of February 28, 1995, Univar and its subsidiaries had 3,124 full-time
employees, of which 567 employees are members of various labor unions. At
year end, the Corporation was in negotiations with two labor unions in
connection with renewal of labor contracts. The Corporation generally enjoys
good relations with its employees.
Backlog
The Corporation records revenues as orders are shipped. Due to the nature of
the Corporation's business, no record of the backlog of orders is maintained.
4
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EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Business Experience Past Five Years Position Held
---- --- ----------------------------------- -------------
<S> <C> <C> <C>
James H. Wiborg(1) 70 Chairman of Registrant 1990 -
Chairman
Director
James W. Bernard 57 President and Chief Executive Officer
President and Chief of Registrant 1986 -
Executive Officer
Director
James P. Alampi 48 Vice President of Registrant 1991 -
Vice President President, Van Waters & Rogers Inc. 1992 -
President, Van Waters & (Distribution of chemicals and
Rogers Inc. related products)
Director of Logistics, Univar Corporation 1990 - 1991
James L. Fletcher 51 Vice President of Registrant 1989 -
Vice President
Paul Hough 56 Vice President of Registrant 1992 -
Vice President President, Van Waters & Rogers Ltd. 1991 -
President, Van Waters Vice President, Van Waters & Rogers Ltd. 1988 - 1991
& Rogers Ltd. (Distribution of chemicals and
related products)
William A. Butler 44 Vice President, General Counsel,
Vice President, General and Corporate Secretary of Registrant 1990 -
Counsel and Corporate
Secretary
Gary E. Pruitt 45 Vice President-Finance, Treasurer and
Vice President-Finance, Assistant Corporate Secretary of the Registrant 1992 -
Treasurer and Assistant Vice President, Treasurer and Assistant 1989 - 1992
Corporate Secretary Corporate Secretary of Registrant
H. Drew MacAfee 45 Vice President - Human Resources,
Vice President, Van Waters & Rogers Inc. 1992 -
Human Resources Vice President - Human Resources 1985 - 1992
Spacelabs, Inc. (Medical Electronics)
Linda C. Larrabee 47 Vice President, Information Systems,
Vice President, Van Waters & Rogers Inc. 1992 -
Information Systems Vice President, Information Systems 1989 - 1992
Hitachi Data Systems
(Distribution of Computer Equipment)
</TABLE>
(1) Family Relationships: Robert S. Rogers and N. Stewart Rogers, directors of
the Registrant, are brothers-in-law of James H. Wiborg.
No arrangement or understanding exists between any officer and any other person
pursuant to which he or she was elected as an officer.
5
<PAGE> 6
ITEM 2. PROPERTIES
The Corporation operates from 148 facilities; 98 in the United States, 22 in
Canada, and 28 in Europe, with a total of approximately 5,362,000 square feet
of office and warehouse space, (3,719,000 in the U.S., 1,026,000 in Canada, and
617,000 in Europe) of which 3,902,000 square feet is owned (78 facilities) and
the remainder leased.
Listed below are the principal plants and physical properties of the
Corporation and its subsidiaries used in the wholesale distribution of
industrial, agricultural, and pest control chemicals. The Corporation believes
its facilities are in good condition and adequate for its current operations.
VAN WATERS & ROGERS INC.
Principal Facilities
<TABLE>
<CAPTION>
Nature of Ownership
Bldg. Land ----------------------------------
Area Area Expiration
Location (Sq. Ft.) (Acres) Owned Leased Date of Lease
-------- --------- ------- ----- ------ -------------
<S> <C> <C> <C> <C> <C>
Atlanta, GA 96,000 8.6 X
Chicago, IL 55,000 2.8 X
Cleveland, OH 47,000 5.6 X
Dallas, TX 146,000 9.8 X
Denver, CO 70,000 4.9 X
Houston, TX 132,440 20.6 X
Indianapolis, IN 58,000 8.8 X
Jacksonville, FL 51,000 1.8 X
Kent, WA 132,000 11.7 X
Kirkland, WA 126,000 X August 2001
Lafayette, LA 60,000 5.1 X
(Carencro)
Los Angeles, CA 156,000 9.4 X
(Bonnie Beach)
Los Angeles, CA 140,000 7.0 X
(Jillson Street)
Omaha, NE 84,000 10.3 X
Phoenix, AZ 66,000 10.0 X
Portland, OR 95,000 9.5 X
St. Paul, MN 88,000 9.0 X September 2002
Salem, MA 188,000 10.6 X December 2000
Salt Lake City, UT 76,000 4.6 X
San Jose, CA 155,000 14.6 X
</TABLE>
6
<PAGE> 7
ITEM 2. PROPERTIES (CONTINUED)
Other Van Waters & Rogers Inc. properties (owned or leased), which consist
mainly of industrial warehouses and related office space:
<TABLE>
<S> <C> <C>
Albany, NY Glendale (Phoenix), AZ Oxnard, CA
Albuquerque, NM Grand Rapids, MI Philadelphia, PA
Altoona, PA Greensboro, NC Pittsburgh, PA
Amarillo, TX Greenville, NC Pocatello, ID
Anchorage, AK Harlingen, TX Pompano Beach, FL
Augusta, GA Harrisburg, PA Richland, MS
Beaumont, TX Helena, MT Richmond, VA
Birmingham, AL Honolulu, HI Riverside, CA
Bloomington, IL Kansas City, MO Rock Springs, WY
Buffalo, NY Kingsport, TN Sacramento, CA
Burlington, IA Knoxville, TN San Antonio, TX
Carlin, NV Las Vegas, NV San Diego, CA
Casper, WY Little Rock, AR San Juan, Puerto Rico
Charlotte, NC Longview, TX Sioux City, IA
Chattanooga, TN Memphis, TN South Bend, IN
Chicago Hts., IL Miami, FL Spartanburg, SC
Chippewa Falls, WI Milwaukee, WI Spokane, WA
Cincinnati (Evendale), OH Mobile, AL Springfield, MO
Corpus Christi, TX Nampa, ID St. Louis, MO
Delray Beach, FL Nashville, TN Tampa, FL
Detroit, MI New Orleans, LA Toledo, OH
El Paso, TX New Rochelle, NY Tucson, AZ
Fort Myers, FL Oak Brook, IL Tulsa, OK
Fort Wayne, IN Odessa, TX Wichita (Mead), KS
Fresno, CA Oklahoma City, OK Wichita (Mosley), KS
Geismar, LA Orlando, FL Woodbridge, NJ
</TABLE>
7
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ITEM 2. PROPERTIES (CONTINUED)
VAN WATERS & ROGERS LTD.
Principal Facilities
<TABLE>
<CAPTION>
Nature of Ownership
Bldg. Land -------------------------------------------
Location Area Area Expiration
(all properties are located in Canada) (Sq. Ft.) (Acres) Owned Leased Date of Lease
- -------------------------------------- --------- ------- ----- ------ -------------
<S> <C> <C> <C> <C> <C>
Abbotsford, British Columbia 27,000 4.5 X
Calgary, Alberta 58,000 4.6 X
Downsview (Toronto), Ontario 90,000 8.0 X
Edmonton, Alberta 59,000 5.6 X
Lachine (Montreal), Quebec 55,000 3.3 X
London, Ontario 40,000 X October 1998
Richmond (Vancouver), British Columbia 126,000 8.7 X
Valleyfield, Quebec 99,000 23.9 X
Weston (Toronto), Ontario 137,000 11.3 X
Winnipeg, Manitoba 36,000 4.7 X
</TABLE>
Other Van Waters & Rogers Ltd. properties in Canada (owned or leased) which
consist mainly of industrial warehouses and related office space:
Brandon, Manitoba
Coaldale, Alberta
Dartmouth, Nova Scotia
Fort St. John, British Columbia
Grand Prairie, Alberta
Kelowna, British Columbia
Lacombe, Alberta
Lethbridge, Alberta
Quebec City, Quebec
Red Deer, Alberta
Regina, Saskatchewan
Saskatoon, Saskatchewan
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ITEM 2. PROPERTIES (CONTINUED)
UNIVAR EUROPE N.V.
Principal Facilities
<TABLE>
<CAPTION>
Nature of Ownership
Bldg. Land ----------------------------------
Area Area Expiration
Location (Sq.Ft.) (Acres) Owned Leased Date of Lease
-------- -------- ------- ----- ------ -------------
<S> <C> <C> <C> <C> <C>
Birmensdorf, Switzerland 85,000 3.2 x
Copenhagen (Provestenen), Denmark 8,000 x January 2004
Croydon, United Kingdom 18,000 x June 1996
Empoli, Italy 6,500 x January 1997
Fagerstrand, Norway 43,000 1.2 x
Gothenberg, Sweden 150,000 x September 2003
Grimsby, United Kingdom 78,000 x April 2068
Kista, Sweden 5,000 x December 1995
Malmo, Sweden 37,000 x December 2018
Manchester, United Kingdom 11,000 x April 2013
Milan, Italy 4,000 x December 1995
Milton Keynes, United Kingdom 45,000 3.3 x
Scunthorpe, United Kingdom 12,000 x March 2076
Stockholm, Sweden 23,000 x December 1999
Queenborough, United Kingdom 9,000 x May 1995
Venizia Mestre, Italy 7,000 x December 1994
Zurich, Switzerland 28,000 x March 2001
</TABLE>
Other Univar Europe properties (owned or leased) which consist mainly of
industrial warehouses and related office space:
Bergen, Norway
Christchurch, United Kingdom
Exeter, United Kingdom
Fredrikstad, Norway
Gateshead, United Kingdom
Glasgow, United Kingdom
Heggedal, Norway
Kerava, Finland
Norrkiping (Fleminggatan), Sweden
Oslo, Norway
Tamworth, United Kingdom
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ITEM 3. LEGAL PROCEEDINGS
Because of the nature of its business, the Corporation is involved in numerous
contractual, product liability, and public liability cases and claims. The
liabilities for injuries to persons or property are frequently covered by
liability insurance, and the deductible and self-insured portions of these
liabilities, where applicable, have been accrued in the financial statements
set forth at Item 8 below. See also "The Environment" section of Management's
Discussion and Analysis in Item 7 of this filing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
Univar Corporation common stock is listed for trading on the New York and
Pacific Stock Exchanges under the trading symbol UVX. The high and low sales
prices for the Corporation's common stock for each quarter during the last two
years as reported on the New York Stock Exchange follows:
<TABLE>
<CAPTION>
1995 1994
------------------ -----------------
High Low High Low
------ ----- ------ -----
<S> <C> <C> <C> <C>
First Quarter $11.50 $ 9.75 $11.38 $ 9.50
Second Quarter 12.00 9.75 13.38 10.88
Third Quarter 14.50 11.75 14.25 10.00
Fourth Quarter 13.75 11.63 12.88 10.88
</TABLE>
Security Holders
As of February 28, 1995, the Corporation estimated there were approximately
6,700 beneficial shareholders.
Dividends
Quarterly cash dividends of $0.075 per share have been declared during each of
the last eight quarters.
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ITEM 6. SELECTED FINANCIAL DATA
For the Fiscal Years Ended February 28/29
(Thousands of dollars, except share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales $1,912,728 $1,802,464 $1,801,023 $1,558,496 $1,396,229
Cost of sales 1,639,055 1,532,931 1,536,817 1,334,123 1,185,576
---------- ---------- ---------- ---------- ----------
Gross margin 273,673 269,533 264,206 224,373 210,653
Operating expenses 248,767 242,388 243,008 212,783 168,848
Reengineering and restructuring charges 37,361 4,507 - 9,870 -
---------- ---------- ---------- ---------- ----------
Income (loss) from operations (12,455) 22,638 21,198 1,720 41,805
Interest expense (11,973) (12,921) (15,248) (11,358) (10,832)
Other - net 709 525 2,478 1,835 2,672
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for (benefit of)
taxes on income and minority interest (23,719) 10,242 8,428 (7,803) 33,645
Provision for (benefit of) taxes on income (loss) (8,066) 4,403 2,811 (1,785) 13,997
---------- ---------- ---------- ---------- ----------
Income (loss) before minority interest (15,653) 5,839 5,617 (6,018) 19,648
Minority interest's share in income (loss) 604 379 482 (392) -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (16,257) $ 5,460 $ 5,135 $ (5,626) $ 19,648
========== ========== ========== ========== =========
Weighted average common shares outstanding 21,346 19,703 19,698 19,247 17,796
Net income (loss) per share $ (0.76) $ 0.28 $ 0.26 $ (0.29) $ 1.10
Cash dividends declared per share .30 0.30 0.30 0.30 0.30
Total assets 673,203 652,694 692,351 716,488 532,500
Total debt 162,348 177,685 208,300 216,005 151,659
Long-term debt 122,086 147,058 169,922 202,894 135,531
Working capital 76,608 83,545 93,858 114,724 89,140
Shareholders' equity 176,163 157,406 163,290 168,407 148,337
Book value per share 8.08 8.01 8.32 8.59 8.42
Return on beginning equity (10.3)% 3.3% 3.0% (3.8)% 14.9%
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONS HIGHLIGHTS
Fiscal 1995 was characterized by a major business transformation that is taking
place in the Corporation's U.S. operations and by continued strong growth in
our Canadian and European operations. During the year, the Corporation began
the implementation activities of a major U.S. reengineering program which was
initiated during the second quarter of fiscal 1994. This effort created a
temporary disruption to our ongoing business as the Corporation introduced
sweeping changes in the U.S. organizational structure, core business processes,
and network of warehouses and distribution centers. The impact of the
disruption and costs associated with this transformation overshadowed the
significant growth in foreign operating earnings.
For fiscal 1995 losses totaled $16.3 million compared to net income of $5.5
million for fiscal 1994 and $5.1 million for fiscal 1993. Excluding the
substantial one-time charge and other costs relating to the U.S. reengineering
program, as well as a settlement gain recognized in the fourth quarter, net
income for the year would have totaled $3.9 million compared to income of $8.3
million in fiscal 1994.
FISCAL 1995 COMPARED WITH FISCAL 1994
Sales for 1995 totaling $1.9 billion are up 6.1% compared to 1994, but are not
reflective of the real growth experienced in each of the Corporation's
continuing markets. In the United States, sales increased by 1.7%, despite the
impact of legislation that has resulted in a decline in the sales of
chlorinated fluorocarbons and chlorinated solvents. These chemicals accounted
for 2.1% of total sales during 1995, down from 3.5% in 1994. Excluding these
products, sales in the United States grew by 5.1%
Foreign markets served by the Corporation posted strong sales growth for the
year. When measured in local currencies, sales are up over 8% in Europe and
more than 28% in Canada. However, due to changes in currency exchange rates,
Canadian sales expressed in U.S. dollars do not reflect this real growth. The
Canadian dollar dropped approximately 6% against the U.S. dollar. On the other
hand, the combination of European currencies in the markets served by Univar
increased approximately 2% against the U.S. dollar.
The Corporation's sales were affected by inflation rates estimated at 4.6% and
0.9%, for 1995 and 1994, respectively.
Gross margin dollars for the current year increased by $4.1 million compared
with the prior year. Gross margin percentage for 1995 was 14.3%, down from
15.0% for 1994. Sales of lower margin agricultural chemicals increased to
5.3% of total sales, up from 4.1% in the prior year. The Corporation's
business mix is changed slightly compared with the prior year.
Through-warehouse and direct sales accounted for approximately 78.0% and 20.4%,
respectively, of total sales for the current year. Other sales, consisting
primarily of ChemCare(R) services accounted for the remaining 1.6% of sales.
In the prior year, through-warehouse and direct sales accounted for
approximately 76.9% and 21.3%, respectively, of total sales. Other sales
accounted for the remaining 1.8% of sales. Along with the change in mix,
margin percentages on both through-warehouse and direct sales decreased
compared with the prior year. Margin percentage on ChemCare services increased
slightly compared with the prior year.
Consolidated operating expenses, as a percentage of sales, including
reengineering costs, were 15.0% for 1995 compared with 13.7% for 1994. In the
United States, operating expenses, as a percentage of sales, exclusive of
reengineering charges, remained constant at 14.1% for 1995 and 1994. Canadian
operating expenses dropped to 8.4% of sales for 1995 compared with 9.8% of
sales for 1994. European operating expenses decreased to 14.0% of sales
compared with 14.6% in the prior year. Reductions in operating expenses, as a
percentage of sales, in both Canada and Europe are due primarily to continuing
increased sales volumes.
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Beginning in the second quarter of fiscal 1994, the Corporation began work on a
strategic business transformation of its U.S. operating company.
As a result of this effort, at the end of the second quarter of fiscal 1995,
the Corporation announced its plans to reorganize the U.S. operating 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. In
support of this effort, during fiscal 1995 the Corporation recorded pretax
reengineering charges of $37.4 million, which included the following:
<TABLE>
<CAPTION>
MILLIONS
---------------------
PRETAX AFTER-TAX
------ ---------
<S> <C> <C>
Costs of reorganizing the U.S. company to a process-based
structure, eliminating up to two 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 10.5 6.5
----- -----
$37.4 $23.2
===== =====
</TABLE>
At February 28, 1995, the remaining accruals relating to the above captioned
charges totaled $20.4 million. For the year, cash expenditures and non-cash
accrual reductions totaled $14.6 million and $2.4 million, respectively.
Interest expense, which is net of $0.8 million pertaining to a settlement
achieved as discussed below, decreased to $12.0 million for 1995 compared with
$12.9 million for 1994. The overall average interest rate was 7.4% for 1995
compared with 7.7% for 1994.
The Corporation has entered into certain interest rate swap agreements to
manage its exposure to interest rate fluctuations. At February 28, 1995, the
aggregate notional amount of these agreements totaled $50 million, with a
weighted average remaining life of approximately 6 years. These agreements
effectively convert a portion of the Corporation's floating rate debt to fixed
rate debt with rates ranging from 6.77% to 7.25%. (See Note 3 to the financial
statements.)
The Corporation recorded an income tax benefit of $8.0 million in fiscal 1995,
compared with income tax expense of $4.4 million in fiscal 1994. The
Corporation's effective income tax rate was 34.0 % in fiscal 1995 compared with
43.0% for 1994. The change in the effective rate for fiscal 1995 was due to a
change in the mix of domestic and foreign income coupled with higher Canadian
tax rates compared with U.S. rates, and to settlement gains which were not
subject to foreign taxes.
FISCAL 1994 COMPARED WITH FISCAL 1993
Sales for 1994 totaling $1.8 billion were comparable to 1993. In the United
States, sales grew by 1.5% despite the Corporation's decision at the end of the
second quarter to divest its textile chemical business and despite the impact
of legislation that resulted in a precipitous decline in the sales of
chlorinated fluorocarbons and chlorinated solvents. Textile chemicals and
chemicals impacted by legislative action accounted for 5.5% of total sales
during 1994, down from 8.6% in 1993. Excluding these products, sales in the
United States grew by 5.0%.
Foreign markets served by the Corporation experienced sales growth. When
measured in local currencies, sales were up over 7% in Europe and more than 12%
in Canada. However, due to unfavorable currency exchange rates, foreign sales
expressed in U.S. dollars did not reflect this level of growth. The Canadian
13
<PAGE> 14
dollar dropped approximately 6% against the U.S. dollar and the combination of
European currencies in the markets served by Univar dropped approximately 19%
against the U.S. dollar.
The Corporation's sales were affected by inflation rates estimated at 0.9% and
2.3%, for 1994 and 1993, respectively. Higher inflation in fiscal 1993 was
caused in part by increasing prices for products such as chlorinated
fluorocarbons and chlorinated solvents. The proportion of sales attributable
to these products declined by approximately 30% compared with fiscal 1993 as a
result of the legislative actions described previously.
Gross margin dollars for the fiscal 1994 increased by $5.3 million compared
with the prior year. Gross margin percentage for 1994 was 15.0%, up from
14.7% for 1993. The Corporation's business mix was not significantly changed
in 1994 compared with the prior year. Through-warehouse and direct sales
accounted for approximately 76.9% and 21.3%, respectively, of total sales for
1994. Other sales, consisting primarily of ChemCare(R) services accounted for
the remaining 1.8% of sales. While the mix did not change, margin percentage
on both through-warehouse and direct sales increased compared with the prior
year. Margin percentage on ChemCare services was unchanged from the prior
year.
Consolidated operating expenses, including reengineering costs, as a percentage
of sales, were 13.7% for 1994 compared with 13.5% for 1993. In the United
States, operating expenses, exclusive of reengineering charges, as a percentage
of sales, increased to 14.1% for 1994 compared with 13.8% for 1993. Increases
in wages, depreciation, and environmental costs were partially offset by
savings realized from management of health care costs and lease costs, and by
continuing benefits from expense reduction programs. Canadian operating
expenses dropped to 9.8% of sales for 1994 compared with 10.5% of sales for
1993. European operating expenses decreased to 14.6% of sales in 1994
compared with 15.1% in the prior year.
During the second quarter of fiscal 1994, the Corporation initiated a
reengineering program in its U.S. operations. The Corporation retained a
consulting firm with broad experience assisting both chemical industry and
wholesale distribution clients to identify and implement the type of changes
necessary in order for the Corporation to achieve a significant competitive
advantage. Reengineering costs for fiscal 1994 totaled $4.5 million,
consisting primarily of consulting fees and travel costs incurred in the study
of the U.S. company's operations and preliminary designs for change.
Interest expense decreased to $12.9 million for 1994 compared with $15.2
million for 1993. The decrease was due to a combination of reduced borrowings
and reduced effective interest rates. The overall average interest rate was
7.7% for 1994 compared with 8.1% for 1993.
Income tax expense was $4.4 million in fiscal 1994 compared with $2.8 million
in fiscal 1993. The Corporation's effective income tax rate was 43.0 % in
fiscal 1994 compared with 33.4% for 1993. The increase in the effective rate
for fiscal 1994 was due to a change in the mix of domestic and foreign income
coupled with higher Canadian tax rates compared with U.S. rates, and losses in
certain European countries for which no benefit was recognized. During fiscal
1994, the portion of income before taxes provided by Canadian operations
increased to 85%, up from 70% for fiscal 1993.
SETTLEMENT ACHIEVED
In fiscal 1992 Univar Europe executed a foreign currency denominated note (U.S.
dollar equivalent of $6.8 million) in connection with certain business
acquisitions. The note was contingently payable in June 1995, or could be
deferred until December 1998 if the seller did not achieve certain minimum net
worth requirements by December 1994. In accordance with contract provisions,
the seller agreed to provide indemnification to Univar Europe for certain
environmental and other undisclosed contingencies that may have existed as of
the acquisition date. Univar Europe had the right to offset these liabilities
against the note's principal balance. Univar Europe had also agreed to pay
additional consideration, in the minimum amount of $1.8 million, which was
non-interest bearing and payable in 1995.
Shortly after the acquisition, the Corporation began negotiations with the
seller to settle certain disputes regarding acquisition asset values and other
claims. When the seller subsequently entered bankruptcy, the
14
<PAGE> 15
seller's largest secured creditor, a Swedish bank, was appointed the receiver
in bankruptcy for the seller's assets, liabilities and contingent obligations.
In addition to the original claims and disputes with the seller, certain
disputes also arose with the receiver, due to its handling of the seller's
bankruptcy proceedings and the attachment of certain of Univar Europe's assets.
The Corporation and the receiver reached a settlement of all claims,
counterclaims and disputes on October 31,1994. As part of the settlement
agreement, the note plus accrued interest and the additional consideration
discussed above were satisfied. A settlement gain totaling $3.0 million, net
of related costs, was recorded as a recovery of representations and warranties
pertaining to environmental costs ($0.9 million), interest ($0.8 million) and
damages caused by the receiver's actions as part of the bankruptcy proceedings
($1.3 million). Univar Europe is consolidated using its financial year-end,
December 31. Accordingly, recognition of the settlement gain was included in
the Corporation's fourth quarter of fiscal 1995.
RECENT ACCOUNTING PRONOUNCEMENTS
In the first quarter of fiscal 1995, the Corporation adopted FASB Statement No.
112, "Employers' Accounting for Postemployment Benefits." 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 cost of postemployment benefits is
recognized on an accrual basis. The adoption of this statement increased
operating expense by $0.2 million.
In the first quarter of fiscal 1994, the Corporation adopted FASB Statement No.
106, "Employer's Accounting for Postretirement Benefits Other Than Pensions,"
and FASB Statement No. 109 "Accounting for Income Taxes." Financial statements
for prior years were not restated.
FASB Statement No. 106 requires employers to recognize the cost of certain
health care and life insurance benefits provided to retirees and their
dependents as a liability during the employees' active years of service. The
Corporation elected to amortize the transition liability over twenty years,
resulting in a net increase for fiscal 1994 in reported costs of retiree health
and related costs of $0.7 million.
FASB Statement No. 109 changes the method of accounting for income taxes. The
favorable cumulative effect of implementation of this statement totaled $0.4
million which represents the impact of adjusting deferred tax balances to
reflect current tax rates. Based on the insignificant amount of the cumulative
effect, it was included in the fiscal 1994 provision for taxes on income.
In March 1995, the Financial Accounting Standards Board issued FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which the Corporation must adopt by fiscal 1997.
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If the sum of the expected future cash
flows is less than the carrying amount of the asset, an impairment loss is
recognized. This Statement also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. Due to the recent release of this
Statement, the Corporation has not determined the impact of adoption of FASB
Statement No. 121 on its financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations totaled $15.9 million for the current year,
compared with $35.4 million for fiscal 1994 and $39.9 million for fiscal 1993.
The reduction in operating cash flows for the current year is due primarily to
the costs of the U.S. reengineering efforts. Cash provided by operations was
used to finance the Corporation's capital expenditures, pay dividends, and
reduce debt.
15
<PAGE> 16
The Corporation has domestic and foreign short-term credit lines totaling
$124.3 million, of which $88.0 million was available at fiscal year-end 1995.
The Corporation and its domestic and Canadian subsidiaries are parties to a
medium-term revolving credit agreement with a group of banks which provide up
to $210 million in available borrowings, of which $110 million was available at
February 28, 1995. Total short, medium, and long-term borrowings at fiscal
year-end 1995 were $162.3 million, compared with $177.7 million at the end of
fiscal 1994. (See Notes 2 and 3 to the financial statements.) The ratio of
interest bearing debt to equity, which the Corporation has targeted at 1:1
historically, was 0.92:1 at the end of the current year, down from 1.13:1 at
the end of the prior year.
The Corporation believes its internally generated cash, together with its
access to available worldwide bank lines, will be adequate to cover anticipated
liquidity requirements.
Working capital, excluding cash and cash equivalents and short-term borrowings,
totaled $97.4 million at the end of fiscal 1995, compared with $98.6 million at
the end of fiscal 1994. At fiscal year-end 1995, the ratio of current assets
to current liabilities was 1.23:1 compared to 1.28:1 at fiscal year-end 1994.
The decrease in both working capital and the current ratio is due primarily to
accruals pertaining to the U.S. reengineering efforts.
EXERCISE OF DOW PUT AGREEMENT
On June 24, 1991, the Corporation and The Dow Chemical Company ("Dow") entered
into an Agreement of Purchase and Sale of Stock (the "Dow Purchase Agreement").
In accordance with the Dow Purchase Agreement, Univar sold 1,900,000 shares of
its common stock to Dow at a price of $15.84 per share. In addition, Univar
reserved the right to put to Dow between approximately 2,500,000 and 2,900,000
additional shares of common stock at a price that escalated over time, but
which reached a maximum price of $18.74 per share. The number of additional
shares that could be sold depended on whether Pakhoed Investeringen B.V.
("Pakhoed") exercised its right to acquire shares from Univar at the same price
as they were sold to Dow in order for Pakhoed to maintain its percentage share
ownership in Univar. Pakhoed elected not to exercise its right to acquire
additional shares. Therefore, based on the manner in which the calculation of
the number of additional shares to be sold was made, the actual maximum number
of shares that Univar could put to Dow was 2,509,371. In lieu of the
unilateral right of Univar to put these shares of common stock to Dow, on May
13, 1994, Univar and Dow executed an Amended and Restated Agreement of Purchase
and Sale of Stock (the "Amended Agreement").
Under the terms of the Amended Agreement, Dow purchased from Univar 2,000,000
shares of common stock at a price of $18.74 per share (a total purchase price
of $37,480,000). Dow now holds 3,900,000 shares of common stock representing
17.89% of the issued and outstanding shares of Univar. In addition, Dow and
Univar have agreed that, at any time within the 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, by either Dow or
Univar, into five shares of common stock. In the event of a call or put,
either all or half the 101,874 shares must be called by Dow or put by Univar.
With respect to the conversion of the Series A Convertible Preferred Stock into
Univar common stock, Univar has agreed that it will not convert the preferred
shares if, following the conversion, Dow would own in excess of 19.9% of the
issued and outstanding common stock of the Corporation. Dow has agreed that it
will pay to Univar $350,000 per year for each of the three years ending May 12,
1995, 1996, and 1997, in the event Univar does not elect to put the Series A
Convertible Preferred Stock to Dow, or in the event Dow does not call the
Series A Convertible Preferred Stock.
DIVIDENDS AND RETURN ON EQUITY
Cash dividends declared and paid during the year totaled $0.30 per share,
unchanged from the two prior years. Return on beginning equity for the past
three years has varied, with a 10.3% negative return for the current year
compared with a return of 3.3% for the fiscal year ended 1994, and 3.0% for
fiscal 1993.
16
<PAGE> 17
BUSINESS ACQUISITIONS AND DIVESTITURES
At the time of the organization of Univar Europe in 1991, Univar and its then
31% shareholder, 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. Funding for this
aggregate purchase price was provided through the sale of 2 million shares of
the Corporation's common stock to The Dow Chemical Company as described above.
During fiscal 1995, the Corporation completed an acquisition in Europe. The
acquired company had annual revenues of approximately $6.5 million. The
aggregate purchase price was $3.2 million, consisting of fixed assets,
inventories, and customer lists.
During fiscal 1994, the Corporation completed acquisitions in Canada and the
U.S. The acquired companies had annual revenues of approximately $28 million.
The aggregate purchase price was $4.4 million, consisting of inventories,
customer lists, and non-compete covenants.
During fiscal 1994, in a series of transactions, the Corporation sold its
textile chemical distribution business. This business contributed
approximately $21 million of sales for fiscal 1994 and $37 million in sales for
fiscal 1993. Proceeds from the combined transactions totaled $2.8 million,
resulting in a gain on the sale of $0.4 million. Identifiable assets sold
consisted primarily of inventories and fixed assets.
See Note 11 to the financial statements for sales and other operations data by
geographic area.
CAPITAL EXPENDITURES
Capital expenditures for fiscal 1995 totaled $23.0 million. Capital
expenditures include normal additions, upgrades, and expansions of offices,
plants, delivery equipment, and similar items. Capital expenditures during
fiscal 1994 and 1993 totaled $14.0 million and $16.6 million, respectively.
Capital expenditures related to the development of the UVX2000 computer system
totaled $1.3 million for fiscal 1993. Capital expenditures for fiscal 1996 are
projected to be $31 million, which includes plans for two new warehouse
facilities.
THE ENVIRONMENT
The Corporation is subject to a variety of environmental laws and regulations
and faces exposure from actual or potential claims and legal proceedings
involving environmental matters. The Corporation or related entities have been
contacted by various governmental agencies regarding potential liability for a
share of the cost of clean up of independent waste disposal or recycling sites
with alleged or confirmed contaminated soil and/or groundwater to which the
Corporation or related entities may have taken waste products. With regard to
many of these sites, the Corporation has denied liability because of an absence
of any connection between the Corporation or related entities and the waste
disposal or recycling site. The Corporation believes there are thirty-one
sites in which the Corporation may be liable for a share of the cost of clean
up. With the exception of one site, at those sites which show some alleged
evidence of an association between the Corporation or related entities and the
waste disposal or recycling site, the Corporation is considered a de minimis,
or small quantity, "potentially responsible party." The Corporation estimates
the probable liability for the remediation of independent waste disposal sites
totals $1.0 million, which is included in the Corporation's environmental
accrual. Possible costs for these sites could range up to $2.6 million.
Thirty-six owned, previously owned, or leased sites of the Corporation are
currently undergoing remediation efforts or are in the process of active review
of the need for potential remedial efforts. Some of these efforts are being
conducted pursuant to governmental proceedings or investigations, while others
are being conducted voluntarily by the Corporation, with appropriate state or
federal agency oversight and approval. The following table shows additions to
and expenditures charged against the Corporation's environmental accruals
during the past three fiscal years:
17
<PAGE> 18
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
--------------------- ------- ------ ------
<S> <C> <C> <C>
Beginning balance $ 15.6 $ 15.4 $ 5.1
Expense provisions 5.4 4.0 0.7
Insurance recoveries - - 13.7
Expenditures (4.0) (3.8) (4.1)
------ ------ ------
Ending balance $ 17.0 $ 15.6 $ 15.4
====== ====== ======
</TABLE>
During fiscal 1993, the Corporation reached final settlements with its
insurance carriers in a lawsuit which sought recovery for certain environmental
expenditures. The settlements, which cover historical and ongoing cleanup
costs at various sites in the U.S., were added to the Corporation's
environmental accrual.
Annual cash expenditures for remedial, monitoring and investigatory activities
have averaged approximately $4.0 million during the past three years. In
addition, annual cash expenditures for environmental capital expenditures have
averaged $1.0 million. While the Corporation does not anticipate a material
increase in the projected annual level of its environmental related
expenditures, there is the possibility that such increases may occur in the
future. The precision of the Corporation's environmental estimates is affected
by several uncertainties such as the developments at sites that result from
investigatory studies; the extent of required cleanup; the complexity of
applicable government laws and regulations and their interpretations; the
varying costs and effectiveness of alternative cleanup technologies and
methods; the uncertainty concerning recovery of such costs from third-parties
which may be jointly liable; and the questionable level of the Corporation's
involvement at various sites at which the Corporation is allegedly associated.
The Corporation periodically reviews the status of all significant existing or
potential environmental issues and adjusts its accruals as new remediation
requirements are defined, as information relevant to reasonable estimates to be
made becomes available, and to reflect new and changing facts. The accruals do
not reflect any possible future insurance recoveries.
Although the Corporation believes adequate accruals have been provided for
environmental contingencies, it is possible, due to the uncertainties
previously noted, that additional accruals could be required in the future that
could have a material effect on the results of operations in a particular
quarter or annual period. However, the ultimate resolution of these
contingencies, to the extent not previously provided for, is not expected to
have a material adverse effect on the Corporation's financial position.
STOCK PRICE
During the fiscal year ended February 28, 1995, the price of Univar common
shares ranged between a high of $14.50 on November 9, 1994, and a low of $9.75
per share on April 14, 1994. The range, on a fiscal quarter by quarter basis
is presented in Part II, Item 5.
The closing price on the New York Stock Exchange at February 28, 1995 was
$12.63 per share, up from $11.25 per share a year earlier and up from $10.63 at
the end of 1993. The S&P 500 Index for the same dates was 487.39, 467.14, and
443.38, respectively.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended February 28
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Sales $1,912,728 $1,802,464 $1,801,023
Cost of Sales 1,639,055 1,532,931 1,536,817
---------- ---------- ----------
Gross Margin 273,673 269,533 264,206
Operating Expenses 248,767 242,388 243,008
Reengineering Charges 37,361 4,507 -
---------- ---------- ----------
Income (Loss) from Operations (12,455) 22,638 21,198
Other Income (Expense):
Interest expense (11,973) (12,921) (15,248)
Other - net 709 525 2,478
---------- ---------- ----------
Income (Loss) Before Provision for (Benefit of)
Taxes on Income and Minority Interest (23,719) 10,242 8,428
Provision for (Benefit of) Taxes on Income (Loss) (8,066) 4,403 2,811
---------- ---------- ----------
Income (Loss) Before Minority Interest (15,653) 5,839 5,617
Minority Interest's Share in Income of Foreign Subsidiary 604 379 482
---------- ---------- ----------
Net Income (Loss) $ (16,257) $ 5,460 $ 5,135
========== ========== ==========
Net Income (Loss) Per Share $ (0.76) $ 0.28 $ 0.26
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended February 28
(Thousands of dollars)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Cash Flows Provided by Operating Activities
Net income (loss) $(16,257) $ 5,460 $ 5,135
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 27,020 27,449 25,881
Deferred taxes on income (4,463) (2,452) (3,310)
Other liabilities and deferred credits 836 (1,483) 5,837
Non-cash portion of reengineering charges 16,389 - -
Other-net 53 (294) 993
Change in assets and liabilities, net of effect
of businesses acquired and sold:
Accounts receivable (11,656) (4,804) 1,119
Inventories (5,864) 6,212 7,861
Accounts payable 16,463 (3,991) (1,194)
Other current assets (2,734) 5,226 565
Other current liabilities (3,841) 4,063 (2,940)
-------- -------- ---------
Net Cash Provided by Operating Activities 15,946 35,386 39,947
-------- -------- ---------
Cash Flows Used by Investing Activities
Proceeds from investments 1,790 1,132 109
Additions to property, plant, and equipment (21,437) (14,121) (11,667)
Acquisition of businesses and investments (32,065) (4,383) -
Sale of business - 2,812 -
Change in other assets 305 (106) 149
-------- -------- ---------
Net Cash Used by Investing Activities (51,407) (14,666) (11,409)
-------- -------- ---------
Cash Flows Provided (Used) by Financing Activities
Short-term borrowing - net 7,685 (6,813) 26,069
Common stock activity 37,770 286 45
Long-term debt proceeds 50,000 20,000 163,500
Reduction in long-term debt (50,704) (40,739) (198,840)
Payment of dividends (6,215) (5,895) (5,883)
-------- -------- ---------
Net Cash Provided (Used) by Financing Activities 38,536 (33,161) (15,109)
-------- -------- ---------
Effect of Exchange Rate Changes on Cash 911 (1,545) (1,259)
-------- -------- ---------
Net Cash Provided (Used) 3,986 (13,986) 12,170
Cash and Equivalents at Beginning of Year 15,530 29,516 17,346
-------- -------- ---------
Cash and Equivalents at End of Year $ 19,516 $ 15,530 $ 29,516
======== ======== =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (net of capitalized interest) $ 13,309 $ 13,325 $ 15,592
Taxes on income 3,259 6,008 6,573
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28
(Thousands of dollars) 1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 19,516 $ 15,530
--------- ---------
Receivables-
Trade accounts (less allowance for losses of
$1,695 in 1995 and $1,848 in 1994) 233,844 218,892
Other 10,055 7,708
Inventories 133,282 125,638
Prepaid expenses and other 10,551 9,486
--------- ---------
Total current assets 407,248 377,254
Real Properties Held for Sale and Long-Term Receivables 28,780 29,590
Property, Plant, and Equipment
Land 24,052 23,345
Buildings 112,267 105,530
Equipment 222,448 210,192
Leased property under capital leases 5,213 5,399
Construction in progress 7,251 5,895
--------- ---------
371,231 350,361
Accumulated depreciation and amortization (162,876) (133,160)
--------- ---------
Net property, plant, and equipment 208,355 217,201
Other Assets 28,820 28,649
--------- ---------
$ 673,203 $ 652,694
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 22
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28
(Thousands of dollars) 1995 1994
- ---------------------- -------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank overdrafts $ 19,584 $ 22,666
Notes payable 36,284 23,331
Current portion of long-term debt 3,978 7,296
Accounts payable 222,675 201,857
Accrued payroll and other liabilities 48,119 38,559
-------- --------
Total current liabilities 330,640 293,709
Long-Term Debt, less Current Portion 122,086 147,058
Other Long-Term Liabilities
Deferred taxes on income 12,408 26,088
Other liabilities and deferred credits 31,906 27,048
-------- --------
Total other long-term liabilities 44,314 53,136
Commitments and Contingencies - -
Minority Interest - 1,385
Shareholders' Equity
Preferred stock, no par value
Authorized 750,000 shares - -
Common stock, par value $.33 1/3 per share
Authorized - 40,000,000 shares
Issued - 24,018,502 in 1995 and 22,018,502 in 1994 8,006 7,339
Additional paid-in capital 107,799 69,798
Retained earnings 74,428 97,060
Cumulative translation adjustment (4,909) (6,961
Treasury stock, at cost, - 2,222,539 shares in 1995
and 2,370,915 shares in 1994 (9,087) (9,610
Deferred stock compensation expense (74) (220
-------- --------
Total shareholders' equity 176,163 157,406
-------- --------
$673,203 $652,694
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE> 23
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Stock Total
For the Three Years Ended Additional Cumulative Deferred Compen- Share-
February 28, 1995 Common Paid-in Retained Translation Treasury sation holders'
(Thousands of dollars) Stock Capital Earnings Adjustment Stock Expense Equity
- ------------------------- ------ ---------- -------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 29, 1992 $7,339 $ 69,472 $ 98,243 $ 3,622 $(9,502) $ (767) $168,407
Net income - - 5,135 - - - 5,135
Exercise of stock options - 83 - - 233 - 316
Cash dividends at
$.30 per share - - (5,883) - - - (5,883)
Foreign currency
translation adjustment - - - (4,663) - - (4,663)
Purchase of treasury stock - - - - (271) - (271)
Stock compensation expense - - - - (93) 342 249
------ -------- ------- ------- ------- ------- --------
Balance, February 28, 1993 7,339 69,555 97,495 (1,041) (9,633) (425) 163,290
Net income - - 5,460 - - - 5,460
Exercise of stock options - 58 - - 85 - 143
Cash dividends at
$.30 per share - - (5,895) - - - (5,895)
Foreign currency
translation adjustment - - - (5,920) - - (5,920)
Purchase of treasury stock - - - - (44) - (44)
Stock compensation expense - - - - (18) 205 187
Other - 185 - - - - 185
------ -------- ------- ------- ------- ------- --------
Balance, February 28, 1994 7,339 69,798 97,060 (6,961) (9,610) (220) $157,406
Net loss - - (16,257) - - - (16,257)
Sale of stock
(2.0 million shares) 667 36,813 - - - - 37,480
Exercise of stock options - 63 - - 62 - 125
Stock awards (144,345 shares) - 887 - - 587 (1,474) -
Cash dividends at
$.30 per share - - (6,375) - - - (6,375)
Foreign currency
translation adjustment - - - 2,052 - - 2,052
Purchase of treasury stock - - - - (73) - (73)
Stock compensation expense - - - - (53) 1,620 1,567
Other - 238 - - - - 238
------ -------- ------- ------- ------- ------- --------
Balance, February 28, 1995 $8,006 $107,799 $74,428 $(4,909) $(9,087) $ (74) $176,163
====== ======== ======= ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE> 24
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Corporation
and all of its majority-owned domestic and foreign subsidiaries, after
elimination of significant intercompany accounts and transactions.
The Corporation's 100% owned subsidiary, Univar Europe N.V. (Univar Europe), is
consolidated using its financial year-end, December 31.
REVENUE RECOGNITION
The Corporation records revenues as orders are shipped.
INVENTORIES
Inventories consist primarily of finished goods. The methods of valuation of
inventories at the balance sheet dates were as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ---------------------- -------- --------
<S> <C> <C>
At Cost (last-in, first-out method) $ 66,571 $ 72,876
At Lower of Cost or Market (average-cost method) 66,711 52,762
-------- --------
$133,282 $125,638
======== ========
</TABLE>
If the inventories valued on the last-in, first-out (LIFO) method had been
valued at average costs, they would have been $32.0 and $28.9 million higher
than reported at year-end 1995 and 1994, respectively.
The Corporation has experienced decreases in certain LIFO inventories that were
carried at lower costs prevailing in prior years. The effect of these
decreases was to increase earnings before income taxes by approximately $1.4
million and $1.1 million in fiscal years 1995 and 1994, respectively.
PROPERTY, PLANT, & EQUIPMENT
Expenditures for property, plant, and equipment and for renewals and
betterments that extend the originally estimated economic lives of assets are
capitalized at the related cost. Expenditures for maintenance, repairs, and
other renewals are charged to expense. Gain or loss is recognized for
dispositions. For financial reporting purposes, depreciation has been provided
using the straight-line method over the estimated useful lives of the related
assets which range from three to forty years. For income tax purposes,
depreciation on certain assets is computed using accelerated methods. Interest
costs of approximately $0.4 million and $1.0 million for fiscal years 1994 and
1993, respectively, have been capitalized to the cost of new assets.
Costs incurred in developing or purchasing management information systems are
capitalized and included in property, plant, and equipment. These costs are
depreciated over their estimated useful lives from the date the systems become
operational.
INTANGIBLE ASSETS
Intangible assets, which consist of covenants not to compete and goodwill, are
amortized using the straight-line method over their estimated useful lives,
typically no more than ten and twenty years, respectively.
ENVIRONMENT
Accruals for contamination removal costs are recorded when it is probable that
a liability has been incurred and the amount of the liability can be reasonably
estimated. Accruals for such environmental liabilities are included in the
balance sheet caption "Other Liabilities and Deferred Credits." Accruals for
insurance or other third-party recoveries for environmental costs are recorded
when it is probable that recoveries on the claim will be realized.
Environmental costs are capitalized if the costs extend the life of the
property, increase its capacity, and/or mitigate or prevent contamination from
future operations. Costs related to investigation of potential environmental
matters are expensed as incurred.
24
<PAGE> 25
SELF-INSURANCE RESERVES
The Corporation retains certain exposures in its insurance plan under various
deductible or self-insured programs. Reserves for claims made are recorded at
estimated costs as current liabilities. Reserves for estimated claims incurred
but not yet reported are recorded as other long-term liabilities.
INCOME TAXES
Taxes on income are calculated using the asset and liability method which
results in recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and tax basis of assets and liabilities, using enacted rates. The principal
differences between financial and tax reporting arise from depreciation,
self-insurance, reengineering, restructuring and other accruals and reserves,
pension accruals, alternative minimum tax credits, foreign tax credits, and net
operating loss carryforwards. Accumulated undistributed earnings after taxes
for the Canadian subsidiary amounted to approximately $63 million at February
28, 1995. The European subsidiaries have accumulated undistributed earnings of
approximately $5 million at February 28, 1995. No provision for foreign
withholding or United States federal income taxes is necessary, as it is
management's intention that dividends will be paid only under circumstances
which will not generate additional net tax cost.
MINORITY INTEREST
The 49% shareholder's interest in the total equity of Univar Europe at February
28, 1994, after elimination of intercompany and consolidation adjustments, is
shown as minority interest. As described in Note 8, the Corporation acquired
the minority shareholder's interest in Univar Europe during fiscal 1995.
FAIR VALUE
The carrying value of financial instruments approximates fair value, unless
otherwise disclosed. Fair values have been estimated using available market
prices for similar issues and maturities.
TRANSLATION OF FOREIGN CURRENCY
Local currencies have been used as the functional currency throughout the
world. The balance sheet accounts of foreign subsidiaries are translated using
the exchange rates in effect at their respective years-end. Results of
operations are translated using the average exchange rates prevailing
throughout the periods. The effects of unrealized exchange rate fluctuations on
translating foreign currency assets and liabilities into U.S. dollars are
accumulated as the cumulative translation adjustment in shareholders' equity.
Realized gains and losses from foreign currency transactions are included in
net income for the period.
DERIVATIVES
The Corporation has limited involvement with derivative financial instruments
and does not use them for trading purposes. Derivatives are used to manage
well-defined interest rate and foreign exchange risks. Interest rate swaps are
entered into with major banks in which the Corporation pays a floating rate and
receives a fixed rate with interest payments being calculated on a notional
amount, as described in Note 3. Amounts received or paid by the Corporation at
the settlement dates under the swap agreements are included in interest
expense. Forward foreign exchange contracts are used to hedge fluctuations in
prices on inventory purchases caused by changes in exchange rates and as hedges
for foreign denominated accounts receivable and payable. Foreign exchange
contracts have gains and losses recognized at the settlement date. The use of
derivatives does not have a significant effect on the Corporation's results of
operations or its financial position.
EARNINGS PER SHARE
Net income (loss) per common share is based on the weighted average number of
shares outstanding during each year (21,345,622 for 1995, 19,703,273 for 1994,
and 19,697,632 for 1993). There is no material dilution due to outstanding
stock options.
STATEMENTS OF CASH FLOWS
The Corporation considers cash on hand, certificates of deposit, and short-term
marketable securities with maturities of less than 90 days, as cash and
equivalents for purposes of the statements of cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," which the Corporation must
25
<PAGE> 26
adopt by fiscal 1997. This Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the expected
future cash flows is less than the carrying amount of the asset, an impairment
loss is recognized. This Statement also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. Due to the recent release of
this Statement, the Corporation has not determined the impact of adoption of
SFAS No. 121 on its financial position or results of operations.
NOTE 2 - NOTES PAYABLE
As of February 28, 1995, the Corporation has domestic and foreign short-term
lines of credit totaling $124.3 million, with loans against these bank lines of
$36.3 million. The approximate average aggregate short-term borrowing and
weighted average short-term interest rates were $50.6 million and 5.8% in
1995 and $27.3 million and 5.8% in 1994. The maximum amount of short-term
borrowing during the year was $75.4 million in 1995 and $40.5 million in 1994.
NOTE 3 - LONG-TERM DEBT AND REVOLVING CREDIT
Long-term debt consists of the following at February 28:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ---------------------- -------- --------
<S> <C> <C>
Senior Debt:
Revolving credit agreement $100,000 $ 95,000
Term credit agreements, 5.26% and 9.84%, unsecured, payable
from 1995 to 1996 13,333 16,667
Note payable, 90 Day STIBOR (Stockholm Interbank Offering Rate)
plus 2.0%, payable contingently in 1995 through 1998 - 6,000
Industrial revenue bonds, 4.32% to 7.25%, secured by certain
real property, payable in installments to 1999 1,000 4,400
Non-interest bearing, deferred consideration, payable in 1995 - 1,379
Non-U.S. mortgage loans, 5.75%, payable in installments to
fiscal 2015 1,949 1,751
Other 6,117 5,067
Subordinated Debt:
Non-interest bearing notes payable, see below - 13,600
Interest bearing notes payable, see below - 6,502
Capitalized Lease Obligations:
8.51% to 11.75%, secured by certain real property,
payable in monthly installments to 2020 3,665 3,988
-------- --------
126,064 154,354
Current portion (3,978) (7,296)
-------- --------
$122,086 $147,058
======== ========
</TABLE>
Maturities of long-term debt for the fiscal years ending 1997-2000 are as
follows:
<TABLE>
<S> <C>
1997 $14,390
1998 693
1999 726
2000 525
</TABLE>
The Corporation and its domestic and Canadian subsidiaries are parties to a
revolving credit agreement with a group of banks. Under the terms of the
agreement, the borrowers may borrow up to $210 million at the prime rate,
certificate of deposit rate plus 7/8%, or LIBOR (London Interbank Offering
Rate) plus 7/8%, at the Corporation's option. The interest rates in effect
were 7.04% and 4.26% as of year-end 1995 and 1994,
26
<PAGE> 27
respectively. The credit commitment extends for three years, with annual one
year renewals, thereafter. In addition, the agreement requires fees of 3/8% on
unused commitments, and compensating balances of not less than 5% of the
outstanding loan amount, or the payment of fees in lieu thereof. Certain banks
have elected, under provisions of the agreement, to waive the compensating
balance requirements and instead charge an additional 1/8% on all loans made by
such banks.
The long-term debt instruments include provisions specifying current ratio,
interest bearing debt to equity ratios, and a minimum equity level, among other
restrictions. Under the most restrictive of the financial covenants, the
Corporation's current ratio, as defined, may not fall below 1.20:1; the ratio
of total interest bearing debt, as defined, to equity may not exceed 1.40:1;
and the Corporation's shareholders' equity may not be less than $161.7 million.
At year end, the Corporation was in compliance with all loan covenants.
The Corporation has entered into certain interest rate swap agreements to
manage its exposure to interest rate fluctuations. At February 28, 1995, the
aggregate notional amount of these agreements totaled $50 million, with a
weighted average remaining life of approximately 6 years. These agreements
effectively convert a portion of the Corporation's floating rate debt to fixed
rate debt with rates ranging from 6.77% to 7.25% The estimated aggregate fair
value of the contracts, as measured by the amount the Corporation would have
received if the agreements were terminated at the balance sheet date, was
approximately $0.9 million. The Corporation is exposed to, but does not
anticipate, credit loss in the event of counterparty nonperformance.
In 1992, Univar Europe executed a foreign currency denominated note (U.S.
dollar equivalent of $6.0 million at February 28, 1994) in connection with its
acquisition of certain subsidiaries. As described in Note 13, this note was
paid during fiscal 1995.
Univar Europe was capitalized, in part, with interest and non-interest bearing
subordinated debt provided to Univar Europe by the Corporation and Pakhoed
Investeringen B.V. (Pakhoed), the minority shareholder. As described in Note 8,
the subordinated notes made by Pakhoed to Univar Europe were satisfied in
conjunction with the Corporation's acquisition of Pakhoed's interest in Univar
Europe. While the loans made by the Corporation to Univar Europe are
eliminated in the consolidated balance sheet, the subordinated loans,
denominated in foreign currencies, made by the minority shareholder to Univar
Europe were included in the Corporation's 1994 consolidated balance sheet:
<TABLE>
<CAPTION>
Subordinated Debt (Thousands of dollars) 1994
-------
<S> <C>
Non-interest bearing notes payable $13,600
Interest bearing notes payable 6,502
-------
$20,102
=======
</TABLE>
NOTE 4 - LEASES
Rental expense, net of amounts capitalized in connection with equipment used in
the development of the UVX2000(R) U.S. computer system, was $24.1 million,
$23.2 million, and $25.8 million, for 1995, 1994, and 1993, respectively. The
Corporation and its subsidiaries occupy certain leased premises and lease
certain other equipment. Leases that qualify as capital leases have been
capitalized. The amount of such capitalized leases included in property, plant,
and equipment and the related accumulated amortization was $5.2 million and
$2.3 million in 1995, and $5.4 million and $2.4 million in 1994. Lease
amortization is included in depreciation expense.
27
<PAGE> 28
Future minimum lease payments as of year-end under capital leases and
non-cancelable operating leases, having initial lease terms of more than one
year, are as follows:
<TABLE>
<CAPTION>
Capital Operating
(Thousands of dollars) Leases Leases
---------------------- ------- ---------
<S> <C> <C>
1996 $ 707 $23,725
1997 707 17,785
1998 707 11,225
1999 707 7,541
2000 723 4,984
Thereafter 2,051 17,425
------- -------
Total minimum lease payments 5,602 $82,685
Amounts representing interest (1,937) =======
-------
Present value of net minimum lease payments $ 3,665
=======
</TABLE>
The present value of the capital lease payments is presented in the 1995
balance sheet as long-term debt.
NOTE 5 - REENGINEERING CHARGES
In the second quarter of fiscal 1994, the Corporation began work on a strategic
business transformation of its U.S. operating company. As a result of this
effort, at the end of the second quarter of fiscal 1995, the Corporation
announced its plans to reorganize the U.S. operating 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.
In support of this effort, during fiscal 1995 the Corporation recorded pretax
reengineering charges of $37.4 million, which included the following:
<TABLE>
<CAPTION>
Millions
Pre-tax After Tax
<S> <C> <C>
Severance, other employee benefits, and facility closure costs $16.5 $10.3
Write-down (non-cash) to fair value of certain facilities 10.4 6.4
Consultant fees and travel costs 10.5 6.5
----- -----
$37.4 $23.2
===== =====
</TABLE>
NOTE 6 - TAXES ON INCOME
Effective as of the beginning of fiscal 1994, the Corporation adopted FASB
Statement No. 109 "Accounting for Income Taxes," resulting in a change in the
method of accounting for income taxes. The favorable impact of the change was
not material and was included in the provision for taxes on income for that
year.
The components of income (loss) before income taxes and minority interest were
as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994 1993
---------------------- -------- ------- ------
<S> <C> <C> <C>
Domestic $ (6,971) $ 4,261 $1,618
Foreign 20,612 10,488 6,810
Reengineering charge (37,360) (4,507) -
-------- ------- ------
$(23,719) $10,242 $8,428
======== ======= ======
</TABLE>
The provision for (benefit of) taxes on income (loss) consisted of the
following components:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994 1993
---------------------- -------- ------- -------
<S> <C> <C> <C>
Current
Federal $ (332) $ 889 $ 408
State and Local (88) 140 498
Foreign 7,123 5,261 1,900
-------- ------- -------
6,703 6,290 2,806
-------- ------- -------
Deferred
Federal (13,850) (1,770) 358
State and Local (1,696) 291 (770)
Foreign 777 (408) 417
-------- ------- -------
(14,769) (1,887) 5
-------- ------- -------
$ (8,066) $ 4,403 $ 2,811
======== ======= =======
</TABLE>
28
<PAGE> 29
Deferred tax balances consisted of the following temporary differences at
February 28:
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
(Thousands of dollars) Assets Liabilities Assets Liabilities
---------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Alternative minimum tax $ 6,476 $ - $ 7,500 $ -
Tax loss and credit carryforward 4,758 - 480 -
Foreign tax credit carryforward 3,482 - - -
Self-insurance loss reserves 3,731 - 2,410 -
Pension and other compensation
accruals - 795 1,266 -
State income tax accrual 260 - 1,268 -
Vacation accrual 1,459 - 1,268 -
Property - 36,369 - 37,233
Reengineering charges 8,139 - - -
Valuation allowance (1,038) - - -
Other 3,259 3,039 4,162 4,784
------- ------- ------- -------
$30,526 $40,203 $18,354 $42,017
======= ======= ======= =======
</TABLE>
Deferred tax provisions result from timing differences in the recognition of
certain items for income tax and financial statement purposes. The sources of
these differences and the tax effect of each for fiscal 1993, prepared
according to APB Opinion No. 11, are as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1993
---------------------- -----
<S> <C>
Depreciation and amortization $(788)
Net operating loss carry-over (798)
Self-insurance reserves 770
Pension accrual 153
Software development 529
Receivable valuation 173
Environmental reserves 313
Alternative minimum tax credit (399)
Other - net 52
-----
$ 5
=====
</TABLE>
The accompanying financial statements reflect effective tax (benefit) rates of
(34.0%) in 1995, 43.0% in 1994, and 33.4% in 1993. An analysis of the
differences between these rates and the Federal statutory rate is set forth
below:
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ----------------- -----------------
(Thousands of dollars) AMOUNT PERCENT Amount Percent Amount Percent
- ---------------------- ------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Federal tax at statutory rates $(8,302) (35.0%) $3,483 34.0% $2,866 34.0%
State taxes, net of federal
tax benefit (1,160) (4.9) 285 2.8 (179) (2.1)
Foreign income tax rate differential 1,248 5.2 1,099 10.7 328 3.9
Travel and entertainment limitation 561 2.4 210 2.1 190 2.3
Research and experimentation credit - - (787) (7.7) - -
Non-deductible amortization 492 2.1 226 2.2 179 2.1
Settlement gain (1,029) (4.3) - - - -
Other - net 124 0.5 (113) (1.1) (573) (6.8)
------- ----- ------ ---- ------ ----
$(8,066) (34.0%) $4,403 43.0% $2,811 33.4%
======= ===== ====== ==== ====== ====
</TABLE>
The Corporation's federal income tax returns are closed for all years up to
1988. The Corporation has U.S. federal tax net operating loss carry-overs
totaling $7.7 million, which expire in 2010. In addition, the Corporation has
alternative minimum tax credit carry-overs totaling $6.5 million, which have no
carry-over limitation period. Research and experimentation credit carry-overs
total $0.5 million and expire through 2007.
29
<PAGE> 30
Charitable contribution carry-overs total $1.5 million and expire through the
year 2000. Foreign tax credit carry-overs total $3.5 million and expire in the
year 2000.
NOTE 7 - PENSION AND OTHER POSTRETIREMENT BENEFITS
PENSION BENEFITS
The Corporation and its subsidiaries have defined benefit pension plans
covering substantially all employees in the U.S., Canada, and the United
Kingdom, excluding those employees covered by unions that operate plans
independent of the Corporation or its subsidiaries. The Corporation's funding
policy is to contribute annually amounts that provide for benefits attributed
to service to date and benefits expected to be earned during the plan year,
based on the projected final average compensation and where pension laws or
economics either require or encourage funding.
The U.S. funded plan is the largest plan. Its benefits are based on length of
service and the employee's highest five-year average compensation. The rate of
increase in future compensation levels and the expected long-term rate of
return on plan assets used in determining the actuarial present value of the
projected benefit obligations were 6% and 10%, respectively, for both 1995 and
1994. The weighted average discount rate used was 8.8% and 7.8%, for 1995 and
1994, respectively. The market value of assets, consisting primarily of cash
equivalents and equity securities is as reported by the trustee bank serving
the pension plan.
Employees of non-U.S. subsidiaries generally receive pension benefits from
corporate sponsored plans or from statutory plans administered by governmental
agencies in their countries. Corporate sponsored foreign plans have applied
the provisions of Statement of Financial Accounting Standards No. 87 using
assumptions that are similar to those utilized for the U.S. plans.
The status of the Corporation's funded defined benefit plans is as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
---------------------- ------- -------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested $80,427 $84,544
Non-vested 1,978 2,228
------- -------
Accumulated benefit obligation $82,405 $86,772
======= =======
Projected benefit obligation $102,209 $109,866
Plan assets at fair value (83,417) (80,395)
-------- --------
Projected benefit obligation in excess of plan assets 18,792 29,471
Unrecognized net transition obligation 283 327
Unrecognized prior service cost 1,204 (244)
Unrecognized net loss (plan changes and actuarial losses) (17,832) (26,251)
-------- --------
Accrued pension cost, included in current and long-term liabilities $ 2,447 $ 3,303
======== ========
</TABLE>
The status of the Corporation's unfunded defined benefit plans is as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ---------------------- ------ ------
<S> <C> <C>
Accumulated benefit obligation, all of which is vested $3,994 $4,073
====== ======
Projected benefit obligation $5,259 $4,742
Unrecognized prior service cost (2,282) (2,446)
Unrecognized net loss (plan changes and actuarial losses) (102) (86)
------ ------
Accrued pension cost, included in long-term liabilities $2,875 $2,210
====== ======
</TABLE>
30
<PAGE> 31
Net periodic pension expense for all defined benefit plans sponsored by the
Corporation and its subsidiaries includes the following components:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994 1993
- ---------------------- ------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 4,732 $ 4,214 $ 3,832
Interest cost on projected benefit obligation 8,537 7,719 6,850
Actual return on plan assets (607) (8,357) (6,508)
Net amortization and deferral (5,384) 3,003 1,341
------- ------- -------
$ 7,278 $ 6,579 $ 5,515
======= ======= =======
</TABLE>
Certain employees are covered under union-sponsored, collectively bargained,
defined benefit plans. Expenses for these plans were $0.9 million in 1995 and
$0.8 million in both 1994 and 1993, as determined in accordance with negotiated
labor contracts.
Provisions of the Multi-Employer Pension Amendments Act of 1980 require
participating employers to assume a proportionate share of a multi-employer
plan's unfunded, vested benefits in the event of withdrawal from or termination
of such plan. Information concerning the Corporation's share of unfunded,
vested benefits is not available from plan administrators. Provisions of the
Act may have the effect of increasing the level of contributions in future
years.
OTHER POST RETIREMENT BENEFITS
In addition to providing pension benefits, in the United States, the
Corporation provides certain health care benefits to its retired employees.
Effective for fiscal 1994, the Corporation adopted FASB Statement No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions", which
requires accrual of these benefits during an employee's service period. For
fiscal 1994, the pre-tax increase in operating expense resulting from adoption
of the statement was $0.7 million. Prior to the adoption of FASB Statement No.
106, the cost of providing these benefits was recognized as the benefits were
paid.
The plan provides health care benefits including hospital, physicians',
dentists', and eye care services and major medical expense benefits. The plan
provides benefits supplemental to Medicare after retirees are eligible for
these benefits. The cost of the benefits provided are shared by the
Corporation and the retiree, with the Corporation portion increasing as the
retiree has increased years of credited service. The Corporation has the
ability to change these benefits at any time.
The retiree health care cost provision was $1.9 million and $1.3 million for
fiscal 1995 and 1994, respectively. The components of the expense were as
follows:
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Service costs (benefits earned during the period) $ 418 $ 276
Interest cost on accumulated postretirement benefit obligation 975 675
Amortization and deferred amounts 505 381
------ ------
Net periodic postretirement cost $1,898 $1,332
====== ======
</TABLE>
Benefit costs were calculated based on assumed cost growth for retiree health
care costs of a 16.0% annual rate for 1996, decreasing to a 7.5% annual growth
rate over a ten year period. The health care cost trend rate assumed has a
significant effect on the amount reported. To illustrate, increasing the
assumed medical cost trend rate by 1 percentage point would increase the
accumulated postretirement benefit obligation at February 28, 1995 by $1.8
million and the net periodic postretirement benefit cost for the year by $0.3
million. The accumulated retiree health care obligation at February 28, 1995
and 1994 was determined using a weighted average discount rate of 9.2% and
8.2%, respectively.
31
<PAGE> 32
The accumulated retiree health care obligation at February 28 consisted of the
following components:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
---------------------- ------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 4,643 $ 3,864
Fully eligible active plan participants 2,486 1,821
Other active plan participants 3,541 3,699
------- -------
Unfunded accumulated postretirement benefit obligation 10,670 9,384
Unrecognized transition obligation (5,872) (7,235)
Unrecognized losses (1,665) (1,522)
------- -------
Accrued postretirement benefit cost $ 3,133 $ 627
======= =======
</TABLE>
NOTE 8 - BUSINESS ACQUISITIONS AND DIVESTITURES
At the time of the organization of Univar Europe in 1991, 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. Funding for this aggregate purchase price was
provided through the sale of 2 million shares of the Corporation's common stock
to The Dow Chemical Company (Dow) as described in Note 9.
During fiscal 1995, the Corporation completed an acquisition in Europe. The
acquired company had annual revenues of approximately $6.5 million. The
aggregate purchase price was $3.2 million, consisting of fixed assets,
inventories and customer lists.
During fiscal 1994, the Corporation completed acquisitions in Canada and the
U.S. The acquired companies had annual revenues of approximately $28 million.
The aggregate purchase price was $4.4 million, consisting of inventories,
customer lists, and non-compete covenants.
During fiscal 1994, in a series of transactions, the Corporation sold its
textile chemical distribution business. This business contributed
approximately $21 million of sales for fiscal 1994 and $37 million of sales for
fiscal 1993. Proceeds from the combined transactions totaled $2.8 million,
resulting in a gain on the sale of $0.4 million. Identifiable assets sold
consisted primarily of inventories and fixed assets.
NOTE 9 - COMMON STOCK TRANSACTIONS
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
The Corporation's long-term incentive stock plans (the Plans) provide for the
granting, to non-employee directors, officers, and key employees, of
non-qualified stock options, incentive stock options, and restricted stock
awards. For incentive stock options, the option price may not be less than the
fair market value of the common stock at the date of grant. Non-qualified
stock options may be granted at less than the fair market value of the common
stock. Under the 1993 Non-Employee Director Stock Option Plan, options become
exercisable six months after grant or upon termination of service to the Board,
whichever is earlier, and expire three months to five years after termination
of service to the Board, depending on the circumstances of retirement. Under
the 1992 Long-Term Incentive Plan, options become exercisable beginning 3 years
after the date of grant, and expire 10 years and 3 months after the date of
grant, based on the Corporation's performance compared with performance of a
selected peer group. Under the 1986 Long-Term Incentive Stock Plan, options
become exercisable at the rate of 20% per year beginning two years after the
date of grant, and expire ten years after the date of grant. Options may be
exercisable as determined by the committee of the Board of Directors that
administers the Plans. Restricted Stock Awards (RSA's) may be granted or sold
to officers and key employees. RSA's may not be sold or otherwise disposed of
during the established restriction periods, presently up to six years. At the
the end of fiscal 1995, RSA's totaling 142,293
32
<PAGE> 33
shares were held for the benefit of certain executive and other officers in
connection with an incentive compensation arrangement. Vesting of these RSA's
and payment of the related dividends were subject to performance criteria that
were measured and to be confirmed after year-end.
Unamortized deferred stock compensation expense related to RSA's granted of
approximately $74,000 and $220,000 is classified as such in the shareholders'
equity section of the Corporation's balance sheet for 1995 and 1994,
respectively.
The Compensation Committee of the Board of Directors may, at its discretion,
determine the number of shares, the purchase price, applicable vesting periods,
and any other terms of each option or award. Options and awards include
provisions for acceleration of such applicable vesting periods in the event of
certain transactions that may result in a change of control of the Corporation.
The following table summarizes activity in the Plans:
<TABLE>
<CAPTION>
Number of Shares
-----------------------------------------------
Restricted Available
Under Stock for Future
Option Awards Option or Award Price Range
--------- ---------- --------------- ------------
<S> <C> <C> <C>
Outstanding, year-end 1993 561,557 108,150 1,012,985 $4.19 - $14.56
Granted 263,074 - (263,074) 10.63
Exercised (20,996) - - 4.19 - 11.20
Canceled or expired (9,076) (1,324) 10,400 8.72 - 13.75
RSA's vested - (27,819) -
---------- -------- ----------
Outstanding, year-end 1994 794,559 79,007 760,311 4.19 - 14.56
Granted 353,114 144,345 (497,459) 4.58 - 13.75
Exercised (15,167) - - 4.19 - 11.20
Canceled or expired (25,098) (4,540) 29,638 5.91 - 13.75
RSA's vested - (26,329) -
Reserved under 1992 Plan - - 750,000
Reserved under 1993 Plan - - 150,000
--------- ------- ---------
Outstanding, year-end 1995 1,107,408 192,483 1,192,490 $4.58 - $14.56
========= ======= =========
Exercisable at year-end 1995 163,788
=========
</TABLE>
PUT AGREEMENT WITH THE DOW CHEMICAL COMPANY
On June 24, 1991, the Corporation and The Dow Chemical Company ("Dow") entered
into an Agreement of Purchase and Sale of Stock (the "Dow Purchase Agreement").
In accordance with the Dow Purchase Agreement, Univar sold 1,900,000 shares of
its common stock to Dow at a price of $15.84 per share. In addition, Univar
reserved the right to put to Dow between approximately 2,500,000 and 2,900,000
additional shares of common stock at a price that escalated over time, but
which reached a maximum price of $18.74 per share. The number of additional
shares that could be sold depended on whether Pakhoed Investeringen B.V.
(Pakhoed) exercised its right to acquire shares from Univar at the same price
as they were sold to Dow in order for Pakhoed to maintain its percentage share
ownership in Univar. Pakhoed elected not to exercise its right to acquire
additional shares. Therefore, based on the manner in which the calculation of
the number of additional shares to be sold was made, the actual maximum number
of shares that Univar could put to Dow was 2,509,371. In lieu of the
unilateral right of Univar to put 2,509,371 shares of common stock to Dow, on
May 13, 1994, Univar and Dow executed an Amended and Restated Agreement of
Purchase and Sale of Stock (the "Amended Agreement").
Under the terms of the Amended Agreement, Dow purchased from Univar 2,000,000
shares of common stock at a price of $18.74 per share (a total purchase price
of $37,480,000). Dow now holds 3,900,000 shares of common stock representing
17.89% of the issued and outstanding shares of Univar. In addition, Dow and
33
<PAGE> 34
Univar have agreed that, at any time within the 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
common stock by either Dow or Univar. In the event of a call or put, either
all or half the 101,874 shares must be called by Dow or put by Univar. With
respect to the conversion of the Series A Convertible Preferred Stock into
Univar common stock, Univar has agreed that it will not convert the preferred
shares if, following the conversion, Dow would own in excess of 19.9% of the
issued and outstanding common stock of the Corporation. Dow has agreed that it
will pay to Univar $350,000 per year for each of the three years ending May 12,
1995, 1996, and 1997, in the event Univar does not elect to put the Series A
Convertible Preferred Stock to Dow, or in the event Dow does not call the
Series A Convertible Preferred Stock.
NOTE 10 - LITIGATION AND CONTINGENCIES
Because of the nature of its business, the Corporation is involved in numerous
contractual, product liability, and public liability cases and claims. The
liabilities for injuries to persons or property are frequently covered by
liability insurance, and the deductible and self-insured portions of these
liabilities, where applicable, have been accrued in these financial statements.
The Corporation is subject to a variety of environmental laws and regulations
and faces exposure from actual or potential claims and legal proceedings
involving environmental matters. The Corporation or related entities have been
contacted by various governmental agencies regarding potential liability for a
share of the cost of clean up of independent waste disposal or recycling sites
with alleged or confirmed contaminated soil and/or groundwater to which the
Corporation or related entities may have taken waste products. With regard to
many of these sites, the Corporation has denied liability because of an absence
of any connection between the Corporation or related entities and the waste
disposal or recycling site. The Corporation believes there are thirty-one
sites in which the Corporation may be liable for a share of the cost of clean
up. With the exception of one site, those sites which show some alleged
evidence of an association between the Corporation or related entities and the
waste disposal or recycling site, the Corporation is considered a de minimis,
or small quantity, "potentially responsible party." The Corporation estimates
the probable liability for the remediation of independent waste disposal sites
totals $1.0 million, which is included in the Corporation's environmental
accrual. Possible costs for these sites could range up to $2.6 million.
Thirty-six owned, previously owned, or leased sites of the Corporation are
currently undergoing remediation efforts or are in the process of active review
of the need for potential remedial efforts. Some of these efforts are being
conducted pursuant to governmental proceedings or investigations, while others
are being conducted voluntarily by the Corporation, with appropriate state or
federal agency oversight and approval. The following table shows additions to
and expenditures charged against the Corporation's environmental accruals
during the past three fiscal years:
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
--------------------- ----- ----- -----
<S> <C> <C> <C>
Beginning balance $15.6 $15.4 $ 5.1
Expense provisions 5.4 4.0 .7
Insurance recoveries - - 13.7
Expenditures (4.0) (3.8) (4.1)
----- ----- -----
Ending balance $17.0 $15.6 $15.4
===== ===== =====
</TABLE>
During fiscal 1993, the Corporation reached final settlements with its
insurance carriers in a lawsuit which sought recovery for certain environmental
expenditures. The settlements, which cover historical and ongoing cleanup
costs at various sites in the U.S., were added to the Corporation's
environmental accrual.
Annual cash expenditures for remedial, monitoring and investigatory activities
have averaged approximately $4.0 million during the past three years. In
addition, annual cash expenditures for environmental capital expenditures have
averaged $1.0 million. While the Corporation does not anticipate a material
increase in the projected annual level of its environmental related
expenditures, there is the possibility that such increases
34
<PAGE> 35
may occur in the future. The precision of the Corporation's environmental
estimates is affected by several uncertainties such as the developments at
sites resulting from investigatory studies; the extent of required cleanup; the
complexity of applicable government laws and regulations and their
interpretations; the varying costs and effectiveness of alternative cleanup
technologies and methods; the uncertainty concerning recovery of such costs
from third-parties which may be jointly liable; and the questionable level of
the Corporation's involvement at various sites at which the Corporation is
allegedly associated. The Corporation periodically reviews the status of all
significant existing or potential environmental issues and adjusts its accruals
as new remediation requirements are defined, as information relevant to
reasonable estimates to be made becomes available, and to reflect new and
changing facts. The accruals do not reflect any possible future insurance
recoveries.
Although the Corporation believes adequate accruals have been provided for
environmental contingencies, it is possible, due to the uncertainties
previously noted, that additional accruals could be required in the future that
could have a material effect on the results of operations in a particular
quarter or annual period. However, the ultimate resolution of these
contingencies, to the extent not previously provided for, is not expected to
have a material adverse effect on the Corporation's financial position.
At year end 1995, the Corporation had letters of credit outstanding totaling
approximately $10.7 million, which guaranteed various insurance and financing
activities. Substantially all of these are automatically renewable each year.
NOTE 11 - GEOGRAPHIC INFORMATION
Univar operates in only one industry segment (chemical distribution) in the
United States, Canada, and Europe.
<TABLE>
<CAPTION>
(Thousands of dollars) UNITED STATES CANADA EUROPE
---------------------- ------------- -------- --------
<S> <C> <C> <C>
1995
Sales $1,273,429 $356,089 $283,210
Income (loss) from operations(1) (34,785) 15,370 6,960
Identifiable assets 418,659 122,041 132,503
Depreciation and amortization expense 21,723 2,168 3,129
Capital expenditures 13,723 4,538 4,774
1994
Sales $1,251,549 $295,564 $255,351
Income from operations(1) 8,755 9,940 3,943
Identifiable assets 438,519 102,241 111,934
Depreciation and amortization expense 21,496 2,353 3,600
Capital expenditures 7,844 2,141 4,039
1993
Sales $1,232,782 $277,439 $290,802
Income from operations 9,304 7,559 4,335
Identifiable assets 459,669 112,576 120,106
Depreciation and amortization expense 19,586 2,301 3,994
Capital expenditures 10,593 2,003 3,961
</TABLE>
(1) The loss from operations includes reengineering charges totaling
$37.4 million and $4.5 million, respectively, in fiscal 1995 and
1994.
35
<PAGE> 36
NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(Thousands of dollars,
except per share data) First Second Third Fourth
---------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Sales $503,335 $496,820 $468,778 $443,795
Gross margin 71,260 69,927 68,964 63,522
Net income (loss) 1,497 (19,094) 935 405
Net income (loss) per share .08 (.88) .04 .02
1994
Sales $487,951 $474,118 $430,299 $410,096
Gross margin 70,399 70,022 64,224 64,888
Net income (loss) 3,273 1,957 458 (228)
Net income (loss) per share .17 .10 .02 (.01)
1993
Sales $468,432 $464,094 $452,907 $415,590
Gross margin 68,299 68,246 64,904 62,757
Net income (loss) 2,455 2,940 (747) 487
Net income (loss) per share .13 .15 (.04) .03
</TABLE>
The net loss in the second quarter of 1995 includes recognition of net-of-tax
reengineering charges totaling $20.6 million. These charges represent the
costs to reorganize the U.S. operating company, eliminate up to 2 layers of
management, 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. Costs accrued included severance, other employee benefits,
facility closure costs, the non-cash write-down to fair value of certain
facilities, and consultant fees and expenses.
Significant items increasing income for the fourth quarter of 1995 include
settlement gains, net of related costs and deferrals totaling $2.7 million,
reduction of reserves and accruals totaling $1.4 million, costing adjustments
totaling $0.8 million, and reduction of the LIFO reserve by $0.8 million.
Significant items increasing income for the fourth quarter of 1994 include
costing adjustments totaling $1.4 million, reductions in self-insurance
reserves for general liability totaling $0.9 million, and reductions in
self-insured health reserves by $1.0 million. The significant item which
decreased fourth quarter 1994 net income was the cost of the Corporation's
re-engineering effort of ($1.8 million).
Significant items increasing fourth quarter 1993 net income include costing
adjustments totaling $2.0 million and reduction of reserves and accruals
totaling $1.0 million.
The total of the amounts shown as quarterly earnings per share may differ from
the amount shown on the Consolidated Statement of Operations because the annual
computation is made separately and is based upon average numbers of shares and
equivalent shares outstanding for the entire year.
NOTE 13 - SETTLEMENT ACHIEVED
In fiscal 1992, Univar Europe executed a foreign currency denominated note
(U.S. dollar equivalent of $6.8 million) in connection with certain business
acquisitions. The note was contingently payable in June 1995, or could be
deferred until December 1998 if the seller did not achieve certain minimum net
worth requirements by December 1994. In accordance with contract provisions,
the seller agreed to provide indemnification to Univar Europe for certain
environmental and other undisclosed contingencies that may have existed as of
the acquisition date. Univar Europe had the right to offset these liabilities
against the note's principal balance.
36
<PAGE> 37
Univar Europe had also agreed to pay additional consideration, in the minimum
amount of $1.8 million, which was non-interest bearing and payable in 1995.
Shortly after the acquisition, the Corporation began negotiations with the
seller to settle certain disputes regarding acquisition asset values and other
claims. When the seller subsequently entered bankruptcy, the seller's largest
secured creditor, a Swedish bank, was appointed the receiver in bankruptcy for
the seller's assets, liabilities, and contingent obligations. In addition to
the original claims and disputes with the seller, certain disputes also arose
with the receiver, due to its handling of the seller's bankruptcy proceedings
and the attachment of certain of Univar Europe's assets.
The Corporation and the receiver reached a settlement of all claims,
counterclaims and disputes on October 31,1994. As part of the settlement
agreement, the note plus accrued interest and the additional consideration
discussed above were satisfied. A settlement gain totaling $3.0 million, net
of related costs, was recorded as a recovery of representations and warranties
pertaining to environmental costs ($0.9 million), interest ($0.8 million) and
damages caused by the receiver's actions as part of the bankruptcy proceedings
($1.3 million). Univar Europe is consolidated using its financial year-end,
December 31. Accordingly, recognition of the settlement gain is included in
the Corporation's fourth quarter.
37
<PAGE> 38
MANAGEMENT RESPONSIBILITY FOR FINANCIAL DATA
The management of Univar Corporation has prepared and is responsible
for the integrity and fairness of the financial statements and other financial
information presented in this annual report. The statements have been prepared
in accordance with generally accepted accounting principles and, to the extent
appropriate, include amounts based on management's judgment and/or estimates.
In order to discharge its responsibilities for these financial statements and
information, management maintains accounting systems and related internal
controls. These controls are designed to provide reasonable assurance that
transactions are properly authorized and recorded, that assets are safeguarded,
and that financial records are reliably maintained. The concept of reasonable
assurance, however, incorporates an acknowledgment that the cost of a control
system must be related to the benefits derived.
Management continually monitors the effectiveness of and compliance
with its control systems. The Corporation maintains a strong internal auditing
program that independently assesses the effectiveness of the internal controls
and recommends possible improvements thereto.
The Corporation's financial statements have been audited by Arthur
Andersen LLP, independent public accountants. Management has made available to
Arthur Andersen LLP all the Corporation's financial records and related data,
as well as the minutes of shareholders' and directors' meetings. Furthermore,
management believes that all representations made to Arthur Andersen LLP during
its audit were valid and appropriate.
Management has reviewed the recommendations of both the internal
auditors and of Arthur Andersen LLP, and has responded in what we believe to be
appropriate and cost-effective ways.
The Audit Committee of the Board of Directors, which is composed
solely of outside directors, meets periodically with management and with the
internal and independent auditors to review the quality of financial reporting,
the operation and development of the internal control systems, and the work of
internal and independent auditors.
The independent auditors and also the internal auditors each regularly
meet with the Audit Committee without the presence of any other parties.
JAMES W. BERNARD
President and Chief Executive Officer
GARY E. PRUITT
Vice President-Finance and Treasurer
(Principal Financial Officer)
(Principal Accounting Officer)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Univar Corporation:
We have audited the accompanying consolidated balance sheets of Univar
Corporation (a Delaware corporation) and subsidiaries as of February 28, 1995
and shareholders' equity for each of the three years in the period ended
February 28, 1995. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of the Corporation's wholly-owned Canadian subsidiary as of February
28, 1993, which statements reflect 15% of the 1993 consolidated net revenues.
Those statements were audited by other auditors whose report has been furnished
to us and our opinion, insofar as it relates to the amounts included for those
entities, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Univar Corporation and subsidiaries as of
February 28, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended February 28, 1995, in
conformity with generally accepted accounting principles.
As explained in Note 6 and Note 7 to the consolidated financial
statements, effective March 1, 1993, the Corporation changed its methods of
accounting for income taxes and postretirement benefits other than pensions.
Arthur Andersen LLP
Seattle, Washington,
April 25, 1995
38
<PAGE> 39
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Identification of Directors, Identification of Executive
Officers, Business Experience and Family Relationships
The information required of directors of the Corporation by this
item is incorporated by reference to the Corporation's
definitive Proxy Statement which the Corporation will have filed
with the Commission pursuant to Regulation 14A within 120 days
after the close of the fiscal year.
The information required of executive officers of the
Corporation by this item is included in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Cash Compensation, Bonuses and Deferred Compensation,
Compensation Pursuant to Plans, Pension Table, and Stock Option
Plans
The information required by this item is incorporated by
reference to the Corporation's definitive Proxy Statement which
the Corporation will have filed with the Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners, Security
Ownership of Management, and Changes in Control
The information required by this Item is incorporated by
reference to the Corporation's definitive Proxy Statement which
the Corporation will have filed with the Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal
year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Related Transactions, Certain
Business Relationships and Indebtedness of Management
The information required by this Item is incorporated by
reference to the Corporation's definitive Proxy Statement which
the Corporation will have filed with the Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal
year.
39
<PAGE> 40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) (1) Financial Statements INDEX
-----
<S> <C>
Consolidated Statements of Operations Page 19
Consolidated Statements of Cash Flows Page 20
Consolidated Balance Sheets Page 21-22
Consolidated Statements of Shareholders' Equity Page 23
Notes to Consolidated Financial Statements Page 24-37
</TABLE>
(2) Financial Statement Schedules
(a) Selected Quarterly Data (see page 36)
(b) The following financial schedule is submitted herewith.
All other financial schedules are either not applicable
or are fully disclosed in the applicable section of the
Corporation's financial statements and Management's
Discussion and Analysis of Financial Condition and
Results of Operations.
Schedule II Valuation and Qualifying Accounts
(c) Report of Independent Public Accountants, Arthur
Andersen LLP, dated April 25,1995.
(b) Reports on Form 8-K
There have been no reports on Form 8-K filed, or required to be
filed, during the fourth quarter of the year.
(c) Exhibits
The required exhibits are included at the end of the Form 10-K
Annual Report and are described in the Exhibit Index immediately
preceding the first exhibit.
40
<PAGE> 41
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
UNIVAR CORPORATION AND SUBSIDIARIES
FOR THE YEARS ENDED FEBRUARY 28, 1995, 1994, AND 1993
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION> Additions
Balance -------------------------- Balance
at Charged to Charged to at
Beginning of Costs and Other End of
Description Year Expenses Accounts Deductions Year
----------- ------------ ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
Allowance for losses on receivables for the year ended:
February 28, 1995 $1,848 $1,481 $ 0 $1,634(1) $1,685
====== ====== === ====== ======
February 28, 1994 $1,852 $2,294 $ 0 $2,298(1) $1,848
====== ====== === ====== ======
February 28, 1993 $2,294 $1,800 $ 0 $2,242(1) $1,852
====== ====== === ====== ======
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
41
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: May 26, 1995 /s/ James W. Bernard
-------------------------------------
James W. Bernard,
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
UNIVAR CORPORATION
Date: May 26, 1995 /s/ Gary E. Pruitt
------------------------------------
Gary E. Pruitt,
Vice President-Finance and Treasurer
(Principal Financial and
Accounting Officer)
DIRECTORS
- ---------
James W. Bernard
Sjoerd D. Eikelboom
Richard E. Engebrecht
Curtis P. Lindley
Roger L. Kesseler
N. Stewart Rogers
Robert S. Rogers
John G. Scriven
Roy E. Wansik
Nicolaas J. Westdijk
James H. Wiborg
By: /s/ William A. Butler
-----------------------------------
William A. Butler, Attorney-in-Fact
Power of Attorney dated April 27, 1995
42
<PAGE> 43
ARTHUR ANDERSEN LLP
801 Second Avenue, Suite 800
Seattle, WA 98104
(206) 623-8023
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Univar Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Univar Corporation and subsidiaries
included in this Form 10-K, and have issued our report thereon dated April 25,
1995. Our report on the consolidated financial statements includes an
explanatory paragraph with respect to the change in the methods of accounting
for income taxes and postretirement benefits other than pensions in 1994 as
discussed in Notes 6 and 7 to the consolidated financial statements. Our audit
was made for the purpose of forming an opinion on those financial statements
taken as a whole. The schedules included in this Form 10-K are presented for
the purposes of complying with the Securities and Exchange Commission rules and
are not part of the basic consolidated financial statements. We did not audit
the financial statements of the Corporation's wholly-owned Canadian subsidiary
as of February 28, 1993, which statements reflect 15% the 1993 consolidated net
revenues. Those statements were audited by other auditors whose report has
been furnished to us and our opinion, insofar as it relates to the amounts
included for those entities, is based solely on the report of the other
auditors. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
Arthur Andersen LLP
Seattle, Washington,
April 25, 1995
43
