UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 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 March 31, 1996
Common Stock, par value $0.10 per share 25,802,245 shares
<PAGE>
UNIVERSAL FOODS CORPORATION
INDEX
Page No.
PART I, FINANCIAL INFORMATION:
Consolidated Condensed Balance Sheets
- March 31, 1996 and September 30, 1995. 1
Consolidated Condensed Statements of Earnings
- Three and Six Months Ended
March 31, 1996 and 1995. 2
Consolidated Condensed Statements of Cash Flows
- Six Months Ended March 31, 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)
March 31
1996 September 30
ASSETS (Unaudited) 1995
CURRENT ASSETS:
Cash and cash equivalents $ 3,539 $ 8,717
Trade accounts receivable 107,900 105,847
Inventory:
Finished and in-process products 110,881 119,885
Raw materials and supplies 59,003 59,135
Prepaid expenses and other
current assets 38,328 32,780
-------- --------
TOTAL CURRENT ASSETS 319,651 326,364
INVESTMENTS AND OTHER ASSETS 46,221 42,164
INTANGIBLES 146,447 148,654
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land and buildings 138,931 139,177
Machinery and equipment 325,854 308,204
-------- --------
464,785 447,381
Less accumulated depreciation 201,160 187,693
-------- --------
263,625 259,688
-------- --------
TOTAL ASSETS $775,944 $776,870
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,993 $ 7,108
Accounts payable, accrued expenses
and other liabilities 118,442 133,637
Federal and state income taxes 22,484 20,755
Current maturities on long-term debt 5,664 21,100
-------- --------
TOTAL CURRENT LIABILITIES 148,583 182,600
DEFERRED INCOME TAXES 14,369 14,514
OTHER DEFERRED LIABILITIES 19,290 19,198
ACCRUED EMPLOYEE AND RETIREE BENEFITS 39,066 38,100
LONG-TERM DEBT 193,906 160,678
SHAREHOLDERS' EQUITY
Common stock 2,698 2,698
Additional paid-in capital 78,375 78,955
Earnings reinvested in the business 329,903 314,883
-------- --------
410,976 396,536
Less: Treasury stock, at cost 36,813 24,770
Other 13,433 9,986
-------- --------
360,730 361,780
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $775,944 $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 Six Months
Ended March 31 Ended March 31
1996 1995 1996 1995
Revenue $200,034 $191,824 $393,480 $379,548
Operating Costs and Expenses:
Cost of Products Sold 132,198 124,653 258,665 247,024
Selling and Administrative
Expenses 41,978 41,801 83,973 84,030
Unusual Item - Gain on
Sale of Frozen
Foods Business --- --- --- (49,560)
------- ------- ------- --------
Operating Income 25,858 25,370 50,842 98,054
Interest Expense 3,475 3,962 7,381 7,930
------- ------- ------- --------
Earnings Before Income Taxes 22,383 21,408 43,461 90,124
Income Taxes 7,841 7,760 15,429 40,894
------- ------- ------- --------
Net Earnings $ 14,542 $ 13,648 $ 28,032 $ 49,230
======== ======== ======== ========
Weighted Average
Number of Common
Shares Outstanding 25,937,000 26,023,000 26,021,000 26,042,000
=========== ========== ========== ==========
Net Earnings Per
Common Share $ .56 $ .52 $1.08 $1.89
===== ===== ===== =====
Dividends Per
Common Share $ .25 $ .24 $ .50 $ .48
===== ===== ===== =====
See Accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($000's Omitted)
(Unaudited)
Six Months Ended
March 31
1996 1995
Net cash provided by (used in)
operating activities $ 33,066 $ (26,404)
-------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment (21,899) (13,936)
Acquisition of new businesses (net of
cash acquired) (529) (2,978)
Proceeds from disposition of business and
sale of property, plant and equipment
and other productive assets --- 41,609
Other items, net (3,409) (2,068)
-------- ---------
Net cash (used in) provided by
investing activities (25,837) 22,627
Cash flows from financing activities:
Proceeds from additional borrowings 90,896 30,524
Reductions in debt (78,517) (35,268)
Proceeds from options exercised and other 1,386 1,269
Purchase of treasury stock (13,159) (1,759)
Dividends paid (13,013) (12,503)
-------- ---------
Net cash used in financing activities (12,407) (17,737)
Net decrease in cash and cash equivalents (5,178) (21,514)
Cash and cash equivalents at beginning of period 8,717 43,430
-------- ---------
Cash and cash equivalents at end of period $ 3,539 $ 21,916
======== =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 7,675 $ 6,831
Income taxes 14,330 42,746
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 March 31, 1996 and September 30, 1995, the
results of operations for the three and six month periods ended March
31, 1996 and 1995 and cash flows for the six month periods ended March
31, 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 six months ended March 31, 1996 and 1995, the Company
repurchased 365,300 and 65,000 shares of common stock, respectively,
for an aggregate price of $14,006,000 and $1,759,000, respectively.
5. For the six months ended March 31, 1996, depreciation and amortization
were $16,226,000 and $2,606,000, respectively. For the six months
ended March 31, 1995, depreciation and amortization were $15,018,000
and $3,193,000, 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 six months ended March 31,
1996, was $200,034,000 and $393,480,000, respectively, compared with
$191,824,000 and $379,548,000 a year ago. Revenue for the three and
six months ended March 31, 1996 increased by 4.3% and 3.7%,
respectively, as compared to the prior year periods. The revenue
increase which was mostly attributable to the Color and Dehydrated
operations was partially offset by lower revenues in the Flavor
Division as a result of eliminating some lower margin business and
weakness in selected markets.
Gross profit margins decreased to 33.9% of revenues during the second
quarter as compared with 35.0% during the same period last year
primarily as a result of lower production volumes in the Flavor
Division. Gross profit margins for the first six months decreased
slightly to 34.3% of revenue as compared to 34.9% 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 21.0% of revenues during the
second quarter compared to 21.8% during the same period last year.
For the first six months of fiscal 1996, selling and administrative
expenses decreased to 21.3% of revenues from 22.1% last year.
Interest expense in the second quarter decreased to $3,475,000 from
$3,962,000 in the same period last year and decreased to $7,381,000
from $7,930,000 for the six months ended March 31, 1996 and 1995,
respectively. The decrease for the quarter resulted from lower
interest rates, but was slightly offset by higher average borrowings
outstanding during the quarter.
The effective income tax rate for the quarter and six months ended
March 31, 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 2.2 at March 31, 1996, from 1.8 at
September 30, 1995 due to a decrease of $34,017,000 in current
liabilities. The reduction in current liabilities is attributable to
decreased short-term borrowings and current maturities on long-term
debt. Net working capital increased $27,304,000 to $171,068,000 at
March 31, 1996 from $143,764,000 at September 30, 1995.
Net cash provided by operating activities was $33,066,000 for the six
months ended March 31, 1996, compared to net cash used in operating
activities of $26,404,000 for the six months ended March 31, 1995.
The use of cash in fiscal 1995 is primarily attributable to the tax
payments related to the sale of the Frozen Foods business.
Net cash used in investing activities was $25,837,000 for the six
months ended March 31, 1996, as compared with $22,627,000 provided by
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
$21,899,000 for the six months ended March 31, 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 a new aroma chemical and fragrance facility in Spain
and a BioProducts facility in France.
Net cash used in financing activities was $12,407,000 for the six
months ended March 31, 1996. Proceeds from additional borrowings were
used to refinance other long-term debt obligations and facilitate
share repurchases. Dividends of $13,013,000 were also paid during
the first six months.
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.
During the remainder of the year, which is traditionally stronger for
the Flavor business, improvement is expected.
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 March 31, 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: May 14, 1996 By: /s/ Terrence M. O'Reilly
Terrence M. O'Reilly, Vice President,
Secretary and General Counsel
Date: May 14, 1996 By: /s/ Michael L. Hennen
Michael L. Hennen, Corporate Controller
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<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 PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,539
<SECURITIES> 0
<RECEIVABLES> 107,900
<ALLOWANCES> 3,090
<INVENTORY> 169,884
<CURRENT-ASSETS> 319,651
<PP&E> 464,785
<DEPRECIATION> 201,160
<TOTAL-ASSETS> 775,944
<CURRENT-LIABILITIES> 148,583
<BONDS> 193,906
0
0
<COMMON> 2,698
<OTHER-SE> 358,032
<TOTAL-LIABILITY-AND-EQUITY> 775,944
<SALES> 393,480
<TOTAL-REVENUES> 393,480
<CGS> 258,665
<TOTAL-COSTS> 258,665
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (110)
<INTEREST-EXPENSE> 7,381
<INCOME-PRETAX> 43,461
<INCOME-TAX> 15,429
<INCOME-CONTINUING> 28,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,032
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
