UNITED STATES
SECURITIES & EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5858
UNIVAR CORPORATION
A Delaware I.R.S. Employer
Corporation No. 91-0816142
6100 Carillon Point
Kirkland, Washington 98033
Telephone No. (206) 889-3400
Indicate by a check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. YES X NO ____
On September 20, 1995 the Registrant had outstanding 21,671,939
shares (excluding treasury shares) of common stock of $0.33-1/3
par value, which is the Registrant's only class of common stock.
UNIVAR CORPORATION and Subsidiaries
INDEX TO FORM 10-Q
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
August 31, 1995 and February 28, 1995 3
Consolidated Statements of Operations
Three and Six Months Ended August 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows
Three and Six Months Ended August 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) (See Notes)
(000's) August 31, 1995 February 28,
1995
Assets
Current Assets:
Cash and cash equivalents $14,636 $19,516
Receivables - net 290,515 243,899
Inventories 159,157 133,282
Other current assets 11,473 10,551
------- -------
Total current assets 475,781 407,248
Real Properties Held for Sale
and Long Term Receivables 30,584 28,780
Property, Plant and 205,419 208,355
Equipment - net
Other Assets 28,085 28,820
-------- --------
$739,869 $ 673,203
======== =========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank overdrafts $ 23,641 $ 19,584
Notes payable 46,847 36,284
Current portion of long- 657 3,978
term debt
Accounts payable 246,583 222,675
Accrued liabilities 57,252 48,119
-------- -------
Total current liabilities 374,980 330,640
Long-term Debt 131,039 122,086
Other Long-term Liabilities 45,204 44,314
Shareholders' Equity
Common stock 8,006 8,006
Additional paid-in capital 107,862 107,725
Retained earnings 83,264 74,428
Cumulative translation 35 -4,909
adjustment
Treasury stock -10,521 -9,087
------- -------
Total shareholders' equity 188,646 176,163
------- --------
$739,869 $673,203
======== ========
UNIVAR CORPORATION and Subsidiaries
Consolidated Statements of Operations (Unaudited) (See Notes)
Three Months Ended Six Months Ended
August 31, August 31,
000's except per share data) 1995 1994 1995 1994
Sales $531,054 $496,821 $1,083,986 $1,000,155
Cost of Sales 457,753 426,894 932,757 858,968
------- -------- ---------- ---------
Gross Margin 73,301 69,927 151,229 141,187
Gross Margin Percentage 13.8% 14.1% 14.0% 14.1%
Operating Expenses 63,169 62,720 124,795 123,772
Reengineering Costs - 33,289 - 36,756
------ ------- ------- ------
Income (Loss) from Operations 10,132 -26,082 26,434 -19,341
Other Income (Expense):
Interest expense -3,910 -2,974 -7,341 -5,915
Other income (loss)-net 960 -23 1,508 27
Income (Loss) Before ------- -------- -------- -------
Taxes and Minority Interest 7,182 -29,079 20,601 -25,229
Provision for (Benefit of)
Taxes on Income 2,888 -10,307 8,538 -8,339
------- -------- ------ ------
Income (Loss) before
Minority Interest 4,294 - 18,772 12,063 -16,890
Minority Interest in
Univar Europe - 322 - 707
------- -------- ------- ------
Net Income (Loss) $ 4,294 $-19,094 $12,063 $-17,597
======= ========= ======= ========
Net Income (Loss) per Share $0.20 $ -0.88 $0.56 $ -0.84
======= ======= ===== ========
Dividends per Share $0.08 $ 0.08 $0.15 $ 0.15
======= ======= ===== ========
Weighted Average Number of
Shares Outstanding 21,657 21,752 21,725 20,906
====== ====== ====== ======
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(See Notes)
Three Months Ended Six Months
Ended August 31, August 31,
(000's) 1995 1994 1995 1994
Cash Flows Provided (Used) by
Operating Activities
Net Income (Loss) $ 4,294 $-19,094 $12,063 $-17,597
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 6,739 6,954 14,128 13,824
Non cash portion of reengineering
accrual - 18,629 - 18,629
Other - net -1,150 1,028 -1,344 2,553
Changes in assets and liabilities:
Accounts receivable 18,070 20,728 -37,006 -29,935
Inventories -2,053 5,081 -20,910 -5,943
Accounts payable -47,784 -29,576 18,450 19,725
Other current assets -2,005 -1,984 -2,290 -1,697
Other current liabilities 7,298 4,805 9,381 4,639
------ ------- ------ ------
Net Cash Provided (Used by)
Operating Activities -16,591 6,571 -7,528 4,198
------ ------- ------ ------
Cash Flows Used by Investing Activities:
Proceeds from investments 1,398 305 149 626
Additions to property, plant and
equipment -2,364 -4,041 -6,871 -8,284
Changes in other assets 427 -54 -28 44
------ ------ ------ ------
Net Cash Used by Investing Activities -539 -3,790 -6,750 -7,614
------ ------ ------ ------
Cash Flows Provided (Used) by
Financing Activities:
Short-term borrowings, net -1,656 7,526 6,770 12,762
Common stock activity 175 -111 136 37,321
Long-term debt incurred 27,217 - 27,217 393
Reduction in long-term debt -19,320 -9,828 -22,811 -38,268
Payment of dividends 43 -1,633 -3,227 -4,580
------- ------ ------- -------
Net Cash Provided (Used by) Financing
Activities 6,459 -4,046 8,085 7,592
------ ------ ------ ------
Effect of Exchange Rate
Changes on Cash -116 675 1,313 800
------ ----- ----- -----
Net Cash Provided (Used) -10,787 -590 -4,880 4,976
Cash and Equivalents at Beginning
of Period 25,423 21,096 19,516 15,530
------ ------ ------ ------
Cash and Equivalents at End of
Period $14,636 $20,506 $14,636 $20,506
======= ======= ======= =======
UNIVAR CORPORATION and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of presentation
The accompanying unaudited condensed consolidated
financial statements were prepared in accordance with
generally accepted accounting principles for interim financial
information pursuant to the rules and regulations of the
Securities and Exchange Commission and instructions to Form 10-
Q. While these statements reflect all adjustments (which
consist of normal recurring accruals) which are, in the
opinion of management, necessary to a fair presentation of
the results for the interim periods presented, they do
not include all of the information and disclosures
required by generally accepted accounting principles for
complete financial statements. These statements should be read in
conjunction with the financial statements and notes thereto
included in the Annual Report of the Registrant for the
fiscal year ended February 28, 1995, and filed as Item 8 to
Form 10-K, Commission File No. 1-5858.
Results of operations for interim periods are not
necessarily indicative of the results that may be expected for
the year ending February 28, 1996.
2. LIFO inventory
The LIFO method of pricing is used for approximately 61%
of the Registrant's inventory. Because an actual valuation of
inventory under the LIFO method can be made only at the end
of each fiscal year based on the inventory levels and costs at
that time, interim financial results are based on
estimated LIFO adjustments and are subject to final
fiscal year-end LIFO inventory amounts.
3. Reengineering charges
Beginning in the second quarter of fiscal 1994,
the Corporation began work on a strategic business
transformation of the U.S. operating company. The project began
with an analysis of all aspects of services provided,
customer profitability, logistics network design, and information
systems effectiveness. As a result of this effort, at the end of the
second quarter of fiscal 1995, the Corporation announced its
plans to reorganize the U.S. company, redesign its distribution network,
develop a national procurement and materials management strategy,
increase sales force efficiency, improve gross margins, and
reduce the amount of capital required to conduct ongoing
operations.
During the first six months of fiscal 1995, the
Corporation recorded pretax reengineering charges of $36.8
million. These charges included the write-down to fair
value of certain facilities, facility closure costs, the
estimated effect of further work force reductions, and
consultant fees. At the end of the second quarter of fiscal
1996, the remaining accrued liability for these costs,
totaling $7.9 million, is shown as a current liability,
however a portion of the cash outflows for the above actions
initiated in fiscal 1995 will occur in fiscal 1996 and fiscal
1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net earnings for the second fiscal quarter were $4.3 million.
Last year, the loss for the second quarter, totaling $19.1 million,
included after-tax reengineering costs of $20.6 million recognized in
connection with the Corporation's program to reengineer its U.S.
operations. Excluding these non-recurring costs, comparable income
for the second quarter last year was $1.5 million.
For the first six months of this fiscal year, the Corporation
reported net income of $12.1 million. Excluding after-tax
reengineering costs totaling $22.8 million, earnings for the
comparable period last year were $5.2 million.
Sales for the second quarter were $531.1 million, an increase of
6.9% over the second quarter last year. While sales in the U.S.
decreased slightly, sales in foreign markets served by the
Corporation continued to demonstrate very strong growth.
Reported in local currencies, foreign sales were up significantly.
In Canada, sales were up 17.5%, reflecting growth in both
industrial and agricultural chemicals. European sales, which
grew by 20.2%, include the benefit of an acquisition in Norway
completed during the third quarter last year, and price increases
for certain high volume chemicals. Reported in U.S. Dollars,
Canadian sales increased by 19.1% and European sales increased by
30.5%, both aided by favorable currency exchange rates.
Sales for the first six months this year increased by 8.4%,
compared with the same period last year. In the U.S., sales were
flat. Reported in constant dollars, Canadian sales increased 19.9%
and European sales grew by 20.7%. Reported in U.S. Dollars,
Canadian sales increased by 20.4% and European sales increased
by 31.2%, both again aided by favorable currency exchange rates.
On a worldwide basis, gross margin percentage was 13.8% for the
second quarter, down from 14.1% in the second quarter last year.
Higher volumes of lower margin products, such as agricultural,
bulk and commodity chemicals contributed to the decrease in gross
margin percentage. For the first six months this year, gross
margin percentage was 14.0%, compared with 14.1% for the first six
months of the prior year.
Operating expenses for the second quarter this year were $63.2
million, an increase of less than 1% compared with the second quarter
last year. In the U.S., operating expenses decreased, while in
Canada and Europe, operating expenses increased, a direct result of
the increase in sales volumes. As a percentage of sales, operating
expenses dropped to 11.9%, compared with 12.6% in the second quarter
last year. For the first six months this year, operating expenses
also grew by less than 1% to $124.8 million, compared with $123.8
million last year. As a percentage of sales, operating expenses
were 11.5%, down from 12.4% in the first six months last year. As a
percentage of sales, operating expenses decreased in each of the
Corporation's operations, worldwide.
The Corporation is involved in certain elective and
required environmental programs. The following table shows additions to
and expenditures charged against the Corporation's environmental
accruals for the current and prior year comparable quarters and first
six months:
Quarter ended Six months ended
Aug. 31, Aug. 31, (millions)
1995 1994 1995 1994
Beginning balance $17.4 $16.3 $17.0 $15.5
Expense provisions 1.3 1.7 2.7 3.2
Expenditures -1.4 -1.1 -2.4 -1.8
---- ---- ----- -----
Ending balance $17.3 $16.9 $17.3 $16.9
===== ===== ===== =====
The Corporation provided for taxes for the quarter at an effective
rate of 40.2% compared with a provision for tax benefits at an
effective rate of 35.4 % for the second quarter last year. The effective
tax rate for the Corporation varies from period to period primarily as a
result of changes in the proportion of taxable income earned in
Canada where the effective tax rate is 43.5%. Additional factors
which had the effect of increasing the tax expense provision rate
while decreasing the tax benefit rate include operating losses
and goodwill amortization in certain foreign countries for which
no immediate tax benefit is available.
Liquidity and Capital Resources
Working capital at the end of the second quarter was $100.8
million, compared with $74.5 million at the prior year-end. Over
the same period, the current ratio increased to 1.27:1 compared with
1.23:1. The changes in working capital and current ratios are
due in part to seasonal fluctuations in working capital
components related to agricultural sales and to accruals related to
the U.S. reengineering efforts, which are classified as current liabilities.
During the second quarter and first six months of the current year,
cash flows totaling $16.6 million and $7.5 million,
respectively, were utilized by operating activities. During the
same periods last year, cash was provided by operating activities
totaling $6.6 million and $4.2 million. The utilization of cash flow
for the second quarter of this year is consistent with the
significant increase in agricultural sales and the seasonal pattern
of these sales. The increase for the first six months reflects a
combination of the non-recurring cash impact of last year's reengineering
costs off-set by changes in components of working capital necessitated
by the growth of sales in both Canada and Europe.
The Corporation has domestic and foreign short-term credit
lines totaling $98.0 million, of which $51.2 million was available at
quarterend. The Corporation also has access to funds up to $285
million under two medium-term revolving credit agreements, of which
$175 million was available at quarter end. The Corporation
believes its internally generated cash, together with its access to
bank lines, will be adequate to fund planned capital expenditures and
investments, and to support its working capital requirements.
Capital Expenditures
During the second quarter of this fiscal year, additions to
property, plant, and equipment totaled $2.4 million, compared with
$4.0 million for the prior year second quarter. For the first six
months, additions to property, plant and equipment totaled $6.9
million compared with $8.3 million in the same period last year.
Additions in the current year consisted primarily of normal
replacement and upgrading of fixed assets and construction
expenditures for refurbishing warehouse and office facilities. The
Corporation utilized available cash and credit capacity to fund the
capital expenditures.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
There have been no reports on Form 8-K filed, or required to be
filed, during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNIVAR CORPORATION
Date: October 13, 1995 By:\ JAMES W. BERNARD
----------------
James W. Bernard
President and Chief Executive Officer
(Duly Authorized Officer)
Date: October 13, 1995 By:\ GARY E. PRUITT
--------------
Gary E. Pruitt
Vice President - Finance and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
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<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1995
<CASH> 14,636,000
<SECURITIES> 0
<RECEIVABLES> 280,720,000
<ALLOWANCES> 2,030,000
<INVENTORY> 159,157,000
<CURRENT-ASSETS> 475,781,000
<PP&E> 376,780,000
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<OTHER-SE> 180,640,000
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