UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1996
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 Washington 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 Corporation (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 Corporation was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. YES X NO ____
On June 17, 1996 the Corporation had outstanding 21,750,757 shares of no
par common stock, which is the Corporation's only class of common stock.
UNIVAR CORPORATION and Subsidiaries
INDEX TO FORM 10-Q
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
May 31, 1996 and February 28, 1996 3
Consolidated Statements of Operations
Three Months Ended May 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended May 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) (See Notes)
(000's) May 31, February 28,
1996 1996
Assets
Current Assets:
Cash and cash equivalents $13,948 $19,053
Receivables - net 324,952 271,893
Inventories 184,731 162,469
Other current assets 11,300 11,301
------- -------
Total current assets 534,931 464,716
Real Properties Held for Sale
and Long Term Receivables 24,170 24,193
Property, Plant and Equipment - net212,598 214,011
Other Assets 36,746 37,685
-------- --------
$808,445 $ 740,605
======== =========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank overdrafts $ 28,802 $ 21,217
Notes payable 61,814 49,502
Current portion of long-term debt 4,226 6,389
Accounts payable 314,129 253,500
Accrued liabilities 58,673 58,665
Total current liabilities 467,644 389,273
Long-term Debt 115,856 132,812
Other Long-term Liabilities 38,979 38,914
Shareholders' Equity
Common stock 106,089 105,505
Retained earnings 80,881 73,859
Cumulative translation adjustment -423 246
Deferred stock compensation expense -581 - 4
-------- --------
Total shareholders' equity 185,966 179,606
-------- --------
$808,445 $740,605
======== ========
UNIVAR CORPORATION and Subsidiaries
Consolidated Statements of Operations (Unaudited) (See Notes)
Three Months Ended
May 31,
(000's except share data) 1996 1995
-------- --------
Sales $576,432 $552,932
Cost of Sales 493,861 475,003
-------- --------
Gross Margin 82,571 77,929
Gross Margin Percentage 14.3% 14.1%
Operating Expenses 64,742 61,626
------ ------
Income from Operations 17,829 16,303
Other Income (Expense):
Interest expense (3,783) (3,431)
Other income-net 699 548
------- -------
Income Before Provision for Taxes and
Minority Interest 14,745 13,420
Provision for Taxes on Income 6,096 5,650
------- -------
Net Income $ 8,649 $ 7,770
======== ========
Net Income per Share $ 0.40 $ 0.36
======== ========
Dividends per Share $ 0.075 $ 0.075
======== ========
Weighted Average Shares Outstanding 21,813 21,793
======== ========
UNIVAR CORPORATION and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited) (See Notes)
Three Months Ended
May 31,
(000's) 1996 1995
Cash Flows Provided by Operating Activities:
Net Income $8,649 $7,770
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,381 7,388
Other 205 -194
Changes in assets and liabilities:
Accounts receivable -53,289 -55,076
Inventories -22,627 -18,857
Accounts payable 71,199 66,234
Other current assets -483 -285
Other current liabilities -1,952 2,083
------- -------
Net Cash Provided by Operating Activities 9,083 9,063
------- -------
Cash Flows Used by Investing Activities:
Investment activity 457 -1,249
Additions to property, plant, and equipment -3,457 -4,507
Changes in other assets -367 -455
----- ------
Net Cash Used by Investing Activities -3,367 -6,211
------ ------
Cash Flows (Used) Provided by Financing Activities:
Short-term borrowing - net 17,255 8,426
Common stock activity 3 -39
Long-term debt incurred 11,014 0
Reduction in long-term debt -37,464 -3,491
Payment of dividends -1,626 -3,270
------ ------
Net Cash (Used) Provided by Financing Activities -10,818
1,626
------- -------
Effect of exchange rate changes on cash -3 1,429
----- -----
Net Cash (Used) Provided -5,105 5,907
Cash and Cash Equivalents at Beginning of Period 19,053
19,516
------- -------
Cash and Cash Equivalents at End of Period$13,948 $ 25,423
======= ========
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 Corporation for
the fiscal year ended February 28, 1996, and filed as Item 8 to Form
10-K, Commission File No. 1-5858. On June 24, 1996, the Corporation
filed an amendment to its Form 10-K.
Results of operations for interim periods are not necessarily
indicative of the results that may be expected for the year ending
February 29, 1997.
2. LIFO inventory
The LIFO method of pricing is used for approximately 54% of the
Corporation'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. Subsequent Event
The Corporation announced on June 3, 1996 that it had entered into an
agreement to merge with a subsidiary of Royal Pakhoed N.V., a
Netherlands limited liability company. Pakhoed and its affiliates
currently own approximately 28% of the Corporation's common stock. The
merger will be preceded by a cash tender offer for all the outstanding
common shares of the Corporation at a price of $19.45 per common share.
The tender offer will be initiated by UC Acquisition Corp., a subsidiary
of Pakhoed which was created for this transaction.
UC Acquisition Corp. has filed with the Securities and Exchange
Commission a Tender Offer Statement on Schedule 14D-1, dated June 7,
1996 relating to the offer, and the Corporation has filed its Schedule
14D-9 Solicitation /Recommendation Statement concerning the transaction.
The offer is being made pursuant to the Agreement and Plan of
Reorganization, dated as of May 31, 1996, among the Corporation, Royal
Pakhoed N.V., and UC Acquisition Corp. The offer is subject to certain
conditions described in the Schedule 14D-1 and the Schedule 14D-9 and is
expected to close not earlier than July 15, 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The Corporation reported earnings of $8.6 million, or $0.40 per share
for its first fiscal quarter ended May 31, 1996, up from $7.8 million
or $0.36 per share for the first quarter last year.
Total sales for the quarter were $576.4 million, an increase of 4% over
the first quarter last year. European operations lead the way, with
sales up 21%, which was attributable to an acquisition in the U.K.
Canadian sales decreased 2%, while sales in the United States increased
by 1%. In Canada, industrial chemical sales continued to grow, however,
adverse weather conditions delayed normal agricultural chemical sales.
Gross margin dollars increased by 6% for the quarter. The gross margin
percentage increased to 14.3% compared with 14.1% for the first quarter
last year. The increase in margin percentage is due to a change in the
mix of products sold, notably decreased volumes of lower margin
agricultural chemical sales in Canada. Margin percentage was constant
in the U.S. while margin percentage in Europe decreased compared with
last year's first quarter.
Total operating expenses for the quarter were $64.7 million, compared
with $61.6 million for the first quarter last year. Expenses for the
first quarter last year were lower, in part as a result of reversing
$1.5 million in unearned executive incentive compensation related to the
prior year. Excluding the non-recurring reduction last year, operating
expenses increased by 2.6%. As a percentage of sales, operating expenses
decreased to 11.2% of sales, compared with 11.4% in the first quarter
last year, excluding the non-recurring item.
The Corporation is involved in certain elective and required
environmental programs. The following table shows additions to and
expenditures charged against the Corporation's environmental accruals
for the current and prior year comparable quarters.
Three months ended
May 31,
(000's) 1996 1995
- -----------------------------------------------------------------------
Beginning balance $16.6 $17.0
Expense provisions 1.4 1.4
Expenditures -1.4 -1.0
----- -----
Ending balance $16.5 $17.4
===== =====
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Liquidity and Capital Resources
Working capital at the end of the first quarter was $67.3 million,
compared with $75.4 million at the prior year-end. Over the same
period, the current ratio decreased to 1.14:1 compared with 1.19:1 The
change in working capital is due in part to seasonal fluctuations in
working capital components and to temporary replacement of long term
borrowings with short term borrowings.
Cash flow provided by operations is unchanged at $9.1 million for the
quarter, compared to the first quarter last year.
The Corporation has domestic and foreign short-term credit lines
totaling $104.7 million, of which $42.9 million was available at quarter-
end. The Corporation also has access to funds of up to $195 million
under a medium-term revolving credit agreement with a group of banks, of
which $95 million was available at quarter-end. Additionally, the
Corporation's non-U.S. subsidiaries have access to funds under terms of
a $90 million multi-currency revolving credit agreement, of which $80.8
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, investments, and to support
working capital requirements.
Capital Expenditures
During the first quarter of this fiscal year, additions to property,
plant, and equipment totaled $3.5 million, compared with $4.5 million
for the prior year quarter. Current quarter additions consisted
primarily of normal replacement and upgrading of fixed assets and
construction expenditures for warehouse facilities. The Corporation
utilized available cash to fund the capital expenditures.
Subsequent Event
The Corporation announced on June 3, 1996 that it had entered into an
agreement to merge with a subsidiary of Royal Pakhoed N.V., a
Netherlands limited liability company. Pakhoed and its affiliates
currently own approximately 28% of the Corporation's common stock. The
merger will be preceded by a cash tender offer for all the outstanding
common shares of the Corporation at a price of $19.45 per common share.
The tender offer will be initiated by UC Acquisition Corp., a subsidiary
of Pakhoed which was created for this transaction.
UC Acquisition Corp. has filed with the Securities and Exchange
Commission a Tender Offer Statement on Schedule 14D-1, dated June 7,
1996 relating to the offer, and the Corporation has filed its Schedule
14D-9 Solicitation/Recommendation Statement concerning the transaction.
The offer is being made pursuant to the Agreement and Plan of
Reorganization, dated as of May 31, 1996, among the Corporation, Royal
Pakhoed N.V., and UC Acquisition Corp. The offer is subject to certain
conditions described in the Schedule 14D-1 and the Schedule 14D-9 and is
expected to close not earlier than July 15, 1996.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A Form 8-K, dated May 31, 1996, and filed June 7, 1996, announced the
commencement by Royal Pakhoed N.V. of a tender offer for all of the
outstanding shares of the Corporation at a per share price of $19.45, to
be followed as soon as practicable by a cash out merger for all
remaining untendered shares, pursuant to an Agreement and Plan of
Reorganization, which was filed as Exhibit 2.1 to the Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
UNIVAR CORPORATION
Date: June 25, 1996 By: \PAUL H. HOUGH
-----------------------
Paul H. Hough
President and Chief Executive Officer
(Duly Authorized Officer)
Date: June 25, 1996 By: \ GARY E. PRUITT
-----------------
Gary E. Pruitt
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> MAY-31-1996
<CASH> 13,948,000
<SECURITIES> 0
<RECEIVABLES> 316,042,000
<ALLOWANCES> (2,157,000)
<INVENTORY> 184,731,000
<CURRENT-ASSETS> 11,300,000
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<TOTAL-ASSETS> 808,445,000
<CURRENT-LIABILITIES> 467,644,000
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0
0
<COMMON> 106,089,000
<OTHER-SE> 79,877,000
<TOTAL-LIABILITY-AND-EQUITY> 808,445,000
<SALES> 576,432,000
<TOTAL-REVENUES> 576,432,000
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<INCOME-TAX> 6,096,000
<INCOME-CONTINUING> 8,649,000
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<EPS-PRIMARY> 0.40
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