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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
OR
[ ] 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: 1-7626
UNIVERSAL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0561070
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
433 East Michigan Street, Milwaukee, Wisconsin 53202
(Address of principal executive offices)
Registrant's telephone number, including area code: (414) 271-6755
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
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 such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for at least the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock as of the latest practicable date.
Class Outstanding at July 31, 1996
Common Stock, par value $0.10 per share 25,416,346 shares
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<PAGE>
UNIVERSAL FOODS CORPORATION
INDEX
Page No.
PART I, FINANCIAL INFORMATION:
Consolidated Condensed Balance Sheets
- June 30, 1996 and September 30, 1995. 1
Consolidated Condensed Statements of Earnings
- Three and Nine Months Ended
June 30, 1996 and 1995. 2
Consolidated Condensed Statements of Cash Flows
- Nine Months Ended June 30, 1996 and 1995. 3
Notes to Consolidated Condensed Financial Statements. 4
Management's Discussion and Analysis of Results
of Operations, Financial Condition and
Forward Looking Information. 5
PART II, OTHER INFORMATION:
Item 6, Exhibits and Reports on Form 8-K. 7
Signatures. 8
<PAGE>
PART I
FINANCIAL INFORMATION
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($000's Omitted)
June 30
1996 September 30
ASSETS (Unaudited) 1995
CURRENT ASSETS:
Cash and cash equivalents $ 4,722 $ 8,717
Trade accounts receivable 107,525 105,847
Inventories:
Finished and in-process products 109,658 119,885
Raw materials and supplies 54,696 59,135
Prepaid expenses and other current assets 41,741 32,780
-------- --------
TOTAL CURRENT ASSETS 318,342 326,364
INVESTMENTS AND OTHER ASSETS 49,582 42,164
INTANGIBLES 145,386 148,654
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land and buildings 139,210 139,177
Machinery and equipment 338,361 308,204
-------- --------
477,571 447,381
Less accumulated depreciation 208,059 187,693
-------- --------
269,512 259,688
TOTAL ASSETS $782,822 $776,870
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 4,016 $ 7,108
Accounts payable, accrued expenses
and other liabilities 120,943 133,637
Federal and state income taxes 24,743 20,755
Current maturities on long-term debt 5,271 21,100
-------- --------
TOTAL CURRENT LIABILITIES 154,973 182,600
DEFERRED INCOME TAXES 14,321 14,514
OTHER DEFERRED LIABILITIES 18,718 19,198
ACCRUED EMPLOYEE AND RETIREE BENEFITS 39,777 38,100
LONG-TERM DEBT 193,342 160,678
SHAREHOLDERS' EQUITY
Common stock 2,698 2,698
Additional paid-in capital 78,437 78,955
Earnings reinvested in the business 339,192 314,883
-------- --------
420,327 396,536
Less: Treasury stock, at cost 44,326 24,770
Other 14,310 9,986
-------- --------
361,691 361,780
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $782,822 $776,870
======== ========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
($000's Omitted Except Per Share Amounts)
(Unaudited)
Three Months Nine Months
Ended June 30 Ended June 30
1996 1995 1996 1995
Revenue $200,776 $207,542 $594,256 $587,090
Operating costs and expenses:
Cost of products sold 132,928 138,996 391,593 386,020
Selling and administrative
expenses 39,925 41,981 123,898 126,011
Unusual item - gain on sale of
Frozen Foods business --- --- --- (49,560)
------- ------- ------- -------
Operating income 27,923 26,565 78,765 124,619
Interest expense 4,071 3,729 11,452 11,659
------- ------- ------- -------
Earnings before income taxes 23,852 22,836 67,313 112,960
Income taxes 8,131 8,279 23,560 49,173
------- ------- ------- -------
Net earnings $ 15,721 $ 14,557 $ 43,753 $ 63,787
======== ======== ======== ========
Weighted average number of
common shares outstanding 25,716,000 26,076,000 25,919,000 26,053,000
========== ========== ========== ==========
Net earnings per common share $ .61 $ .56 $1.69 $2.45
===== ===== ===== =====
Dividends per common share $ .25 $ .24 $ .75 $ .72
===== ===== ===== =====
See accompanying notes to consolidated condensed financial statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($000's Omitted)
(Unaudited)
Nine Months Ended
June 30
1996 1995
Net cash provided by operating activities $ 61,695 $ 6,514
------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment (34,074) (28,437)
Acquisition of new businesses (net of
cash acquired) (529) (12,633)
Proceeds from disposition of business and
sale of property, plant and equipment
and other productive assets --- 41,609
Other items, net (6,405) (4,418)
------- -------
Net cash used in investing activities (41,008) (3,879)
Cash flows from financing activities:
Proceeds from additional borrowings 98,801 53,114
Reductions in debt (85,679) (63,181)
Proceeds from options exercised and other
equity transactions 1,605 1,393
Purchase of treasury stock (19,965) (1,759)
Dividends paid (19,444) (18,760)
------- -------
Net cash used in financing activities (24,682) (29,193)
Net decrease in cash and cash equivalents (3,995) (26,558)
Cash and cash equivalents at beginning of period 8,717 43,430
------- -------
Cash and cash equivalents at end of period $ 4,722 $ 16,872
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 11,099 $ 10,912
Income taxes 20,830 49,180
See accompanying notes to consolidated condensed financial statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1996 and September 30,
1995, the results of operations for the three and nine month periods
ended June 30, 1996 and 1995 and cash flows for the nine month
periods ended June 30, 1996 and 1995. The results of operations for
any interim period are not necessarily indicative of the results to
be expected for the full fiscal year.
2. Refer to the footnotes in the Company's annual financial statements
for the year ended September 30, 1995, for a description of the
accounting policies, which have been continued without change, and
additional details of the Company's financial condition. The details
in those notes have not changed except as a result of normal
transactions in the interim.
3. Expenses are charged to operations in the year incurred. However,
for interim reporting purposes, certain of these expenses are charged
to operations based on an estimate rather than as expenses are
actually incurred.
4. During the nine months ended June 30, 1996 and 1995, the Company
repurchased 588,670 and 65,000 shares of common stock, respectively,
for an aggregate price of $21,808,000 and $1,759,000, respectively.
5. For the nine months ended June 30, 1996, depreciation and
amortization were $23,978,000 and $3,591,000, respectively. For the
nine months ended June 30, 1995, depreciation and amortization were
$22,967,000 and $4,628,000, respectively.
6. On January 8, 1996, the Company issued two senior notes of
$15,000,000 each, one bearing interest at 6.77%, due January 2010 and
the other bearing interest at 6.68%, amortizing in seven equal,
annual principal payments beginning January 2005. Proceeds will be
used for general corporate purposes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS, FINANCIAL CONDITION
AND FORWARD LOOKING INFORMATION
RESULTS OF OPERATIONS:
Revenue from operations for the three and nine months ended June 30,
1996, was $200,776,000 and $594,256,000, respectively, compared with
$207,542,000 and $587,090,000 a year ago. Revenue for the three
months ended June 30, 1996 decreased by 3.3% as compared to the prior
year third quarter. Revenue for the nine months ended June 30, 1996
increased by 1.2% compared with the prior year period. The
elimination of some lower margin business and weakness in selected
markets in the Flavor Division caused revenue to be below the prior
year quarter. These factors also partially offset increased revenues
from the Color and Dehydrated operations for the nine months ended
June 30, 1996.
Gross profit margins increased to 33.8% of revenues during the third
quarter as compared with 33.0% during the same period last year.
Gross profit margins for the first nine months decreased slightly
to 34.1% of revenue as compared to 34.2% of revenue during the same
period last year.
The Company's continued focus on cost reduction resulted in a
decrease of selling and administrative expenses to 19.9% of revenues
during the third quarter compared to 20.2% during the same period
last year. For the first nine months of fiscal 1996, selling and
administrative expenses decreased to 20.8% of revenues from 21.5%
last year.
Interest expense in the third quarter increased to $4,071,000 from
$3,729,000 in the same period last year and decreased to $11,452,000
from $11,659,000 for the nine months ended June 30, 1996 and 1995,
respectively. The increase in interest for the quarter as compared
to the prior year third quarter resulted from higher average long-
term debt balances used for general corporate purposes.
The effective income tax rate for the quarter and nine months ended
June 30, 1996 exceeded the 34.0% statutory rate primarily as a result
of state income taxes. The effective income tax rate in 1995
exceeded 34.0% as a result of a higher than normal effective tax rate
on the sale of the Frozen Foods business.
FINANCIAL CONDITION:
The current ratio increased to 2.1 at June 30, 1996, from 1.8 at
September 30, 1995 due primarily to a decrease in current liabilities
of $27,627,000. Current liabilities were reduced primarily by a
reduction in short-term borrowings and current maturities on long-
term debt totaling $18,921,000. Net working capital increased
$19,605,000 to $163,369,000 at June 30, 1996 from $143,764,000 at
September 30, 1995.
Net cash provided by operating activities was $61,695,000 for the
nine months ended June 30, 1996, compared to net cash provided by
operating activities of $6,514,000 for the nine months ended June 30,
1995. The cash provided by operations in fiscal 1995 was reduced by
tax payments related to the sale of the Frozen Foods business.
Net cash used in investing activities was $41,008,000 for the nine
months ended June 30, 1996 as compared with $3,879,000 used in
investing activities in fiscal 1995. The change is primarily due to
the proceeds received in 1995 from the sale of the Frozen Foods
business. Included in investing activities are capital additions of
$34,074,000 for the nine months ended June 30, 1996. The capital
expenditure program reflects the Company's continuing commitment to
maintain and enhance product quality, further automate and upgrade
manufacturing processes, and expand capacity required by the
businesses' internal growth. Major projects in-process include
construction of additional capacity for our aroma chemical and
fragrance facility in Spain and a state-of-the-art BioProducts
facility in France.
Financing activities used $24,682,000 for the nine months ended June
30, 1996 compared to $29,193,000 in 1995. Proceeds from additional
borrowings of $98,801,000 in 1996 were used to refinance other long-
term debt obligations and facilitate share repurchases. Dividends of
$19,444,000 and $18,760,000 were also paid during the first nine
months of 1996 and 1995, respectively.
FORWARD LOOKING INFORMATION:
Four of the five businesses performed well during the quarter and
should continue to perform well for the remainder of the year. The
Flavor business results were below expectations due to weakness in
selected markets. The Company is working with customers on a variety
of new product development projects to provide for future growth.
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were required to be filed during the
quarter ended June 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL FOODS CORPORATION
Date: August 13, 1996 By: /s/ Terrence M. O'Reilly
Terrence M. O'Reilly, Vice President,
Secretary and General Counsel
Date: August 13, 1996 By: /s/ Michael L. Hennen
Michael L. Hennen, Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF UNIVERSAL FOODS
CORPORATION AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 4,722
<SECURITIES> 0
<RECEIVABLES> 110,698
<ALLOWANCES> 3,173
<INVENTORY> 164,354
<CURRENT-ASSETS> 318,342
<PP&E> 477,571
<DEPRECIATION> 208,059
<TOTAL-ASSETS> 782,822
<CURRENT-LIABILITIES> 154,973
<BONDS> 193,342
0
0
<COMMON> 2,698
<OTHER-SE> 358,993
<TOTAL-LIABILITY-AND-EQUITY> 782,822
<SALES> 594,256
<TOTAL-REVENUES> 594,256
<CGS> 391,593
<TOTAL-COSTS> 515,491
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 11,452
<INCOME-PRETAX> 67,313
<INCOME-TAX> 23,560
<INCOME-CONTINUING> 43,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,753
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
</TABLE>
