UNIVERSAL FOODS CORP, 10-K, 1996-12-30

UNIVERSAL FOODS CORP
10-K, 1996-12-30
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 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
incorporation or organization) Identification No.)

433 East Michigan Street
Milwaukee, Wisconsin 53202
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:
(414) 271-6755

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT

Name of each exchange
Title of each class on which registered

Common Stock, $.10 par value New York Stock Exchange, Inc.
Associated Common Share Purchase
Rights

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 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 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.

Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock as of December 6, 1996: 26,977,437
shares of Common Stock, $.10 par value, including 1,543,250 treasury
shares.

Aggregate market value of Universal Foods Corporation Common
Stock, excluding treasury shares, held by non-affiliates as of December 6,
1996 was $869,469,165.

Documents Incorporated By Reference

1. Portions of Universal Foods Corporation 1996 Annual Report
to Shareholders (Parts I, II and IV of Form 10-K)

2. Portions of Universal Foods Corporation Notice of Annual
Meeting and Proxy Statement dated December 18, 1996 (Parts
II and III of Form 10-K)

<PAGE>
PART I

ITEM 1. BUSINESS - Food and Other Industries

Universal Foods Corporation (the "Company") was incorporated in
1882 in Wisconsin. Its principal executive offices are located at 433
East Michigan Street, Milwaukee, Wisconsin 53202, telephone (414) 271-
6755. The Company is a technology-driven industrial marketer of high-
performance components that add functionality to foods, cosmetics,
pharmaceuticals and other products. The Company's technical expertise and
application know-how make it unique among suppliers that serve these
industries. Principal products of the Company include aroma chemicals and
flavors for foods, beverages, dairy/ice cream products, personal care and
household items; certified and natural colors for foods, cosmetics and
pharmaceuticals; dehydrated vegetable products sold primarily to food
processors; a diverse line of yeast products for commercial baking and
other uses; and flavor enhancers and other bioproducts for foods, feed,
pharmaceuticals and commercial use. The Company exited the frozen potato
business during Fiscal 1994.

The following material from the Universal Foods Corporation 1996
Annual Report to Shareholders is incorporated by reference:

"Management's Analysis of Operations and Financial Condition" on
Pages 13 through 17 (but not any photographs or graphical information
included thereon).

Note 1 - "Summary of Significant Accounting Policies" on Pages
23 and 24.

Note 10 - "Foreign Operations" on Page 29.

Description

Flavor

The Company conducts its food flavor business through its
wholly-owned subsidiary Universal Flavor Corporation ("Universal Flavor").
Universal Flavor manufactures and supplies flavors, ingredient systems,
and aroma chemicals to the dairy, food processor, beverage, and personal
care and household products industries worldwide, and is a recognized
leader in the North American dairy and beverage flavor markets. It
operates plants located in Kearny, New Jersey; Amboy, Illinois;
Indianapolis, Indiana; and Fenton, Missouri. Universal Flavor has eleven
additional plants in Canada, Mexico, Belgium, Great Britain, Italy, Spain,
Australia, New Zealand, Hong Kong and the Philippines. Products are sold
primarily through employee sales representatives with some assistance from
food brokers.

Strategic acquisitions have expanded Universal Flavor's product
lines and processing capabilities. The January 1994 acquisition of
Destillaciones Garcia de la Fuente, S.A. (DGF), based in Granada, Spain,
provided a depth of expertise for expanding into aroma chemicals, which
are used to create flavors as well as fragrances. In July, 1994 Universal
Flavors, through its international subsidiary, purchased its partner's 51%
interest in Azteca en Ambesco de Mexico S.A. de C.V. This purchase
brought beverages and dairy flavor product lines to the Company's existing
Mexican flavor business.

Color

The Company, through its subsidiary Warner-Jenkinson Company,
Inc.("W-J"), is the world's leading manufacturer of certified food colors.
It also has a growing share of the international natural color market.
Its products, sold under the Warner-Jenkinson name, are used by producers
of beverages, bakery products, processed foods, confections, pet foods,
cosmetics and pharmaceuticals. W-J is headquartered in St. Louis,
Missouri, the site of its major manufacturing facilities. Cosmetic and
pharmaceutical colors are produced in New Jersey. Latin American
customers are served by W-J de Mexico, S.A. de C.V., a manufacturing and
sales subsidiary located just outside of Mexico City. W-J Canada operates
out of Kingston, Ontario. Other manufacturing facilities are located in
King's Lynn, Norfolk, England; Amersfoort, The Netherlands; and
Tullamarine, Victoria, Australia. Domestically, the W-J product line is
sold principally by the Company's own sales force. International sales
are made through distributors and directly by the Company.

Recent acquisitions have strengthened the business
internationally which operates under the W-J name. During 1993, the
Company acquired Spectrum S.A. de C.V., a Mexican food color distributor
with approximately 20% market share in that country.

Dehydrated Products

The Company's subsidiary, Rogers Foods, Inc. ("Rogers"),
produces dehydrated onion and garlic and is the third largest producer of
these products in the United States. These items are marketed under the
trademark ROGERS FOODS and private labels. Rogers also produces and
distributes chili powder, chili pepper, paprika, dehydrated vegetables
such as parsley, celery and spinach, and oleoresin (a liquid chili pepper
used as a highly concentrated coloring agent) under the brand name CHILI
PRODUCTS and is one of the largest producers of these products.

Rogers sells dehydrated products directly and through brokers to
food manufacturers for use as ingredients and also for repackaging under
private labels for sale to the retail market and to the food service
industry. Rogers' processing facilities are located in Turlock,
Livingston and Greenfield, California.

During 1994 and 1995, the Company acquired three European
dehydrated vegetable processors. The acquisitions give the Company a base
from which to expand its dehydrated products business internationally.
These acquisitions also expanded the Company's dehydrated technology base
to include freeze drying, puffed drying and vacuum drying. Vegetables
processed using these technologies are premium products because they have
a short reconstitution time, a benefit in today's convenience foods such
as soups, snacks and other dry foods.

The acquisitions operate as UNIVERSAL DEHYDRATES. These
entities are Mallow Foods in Midleton, County Cork, Ireland; Silva Laon,
located near Laon, France; and Top Foods in the Netherlands. The Company
believes it is the leading dehydrator of specialty vegetables in Europe.

Yeast

The Company specializes in the production of compressed, cream,
active dry and nutritional yeast products for sale to commercial and
retail accounts under the RED STAR trademark. The largest market for
yeast is the U.S. baking industry. In addition, active dry yeast is sold
to food processors for inclusion in bread, pizza and similar mixes. The
compressed, active dry and fast-acting dry yeast products of the Company
bearing the RED STAR and RED STAR QUICK RISE trademarks are sold in ready-
to-use packages to retail stores and in two pound packages for food
service use. The Company believes it is the largest North American
supplier of yeast to the commercial bakery market and the second largest
supplier to the retail market.

The business also exports yeast and allied products throughout
the world and manages investments in companies operating yeast and allied
product facilities in 12 offshore locations, two of which are wholly-owned
subsidiaries. The Company receives revenues in the form of dividends and
technical assistance fees from the non-wholly-owned foreign affiliates.

Company owned yeast plants are located in Milwaukee, Wisconsin;
Baltimore, Maryland; Dallas, Texas; and Oakland, California. The Company
distributes its products largely through its own sales force. In 1994,
the Company purchased a 20% interest in and entered an agreement with
Minn-Dak Yeast Company, Inc. in Wahpeton, North Dakota for contract
manufacturing under the Red Star label and to supply molasses, a major raw
material in yeast production.

BioProducts

During 1994, the Company created the Red Star BioProducts
Division from its existing Red Star Specialty Products Division and two
acquisitions. Red Star Specialty Products had been established as a
small, stand-alone profit center in 1989 out of the Company's yeast group.
With internally developed expertise, the group focused on highly technical
product development using extracts from brewer's and baker's yeast.
During 1993, Universal BioVentures, the Company's start-up biotechnology
group, was integrated into Red Star Specialty Products to develop new
products utilizing the Company's expertise in fermentation and molecular
biology. The BioVentures product line was discontinued in 1995 because it
would not be profitable for some time.

The 1994 acquisitions of Champlain Industries Limited in Canada
and The Biolux Group in Belgium expanded the division's product lines and
international presence, making the division a more significant part of the
Company. The expanded Red Star BioProducts Division serves the food and
feed processing and bionutrient industries with the broadest line of
natural extracts and specialty flavors. It supplies various natural
extracts from brewer's yeast, baker's yeast, vegetable proteins, meat,
casein and other naturally occurring materials. These specialty extracts
function primarily as flavor and texture modifiers and enhancers in the
food processing industries. The nutritional and functional properties of
Red Star BioProducts extracts are the basis for their use in enzyme and
pharmaceutical production.

The Company believes Red Star BioProducts is the leading
supplier of yeast extracts and second in the supply of HVPs in the U.S.
market. The products are marketed under a number of Red Star trademarks.

The expanded division operates production facilities in Juneau,
Wisconsin; Harbor Beach, Michigan; Clifton, New Jersey; and in Canada, the
United Kingdom, Belgium and France. More than half of the Division's
products are now produced outside of the United States. Its products are
marketed through technically trained sales personnel directly to customers
and through distributors in some international markets.

Frozen Foods

On August 1, 1994, the Company completed the sale of Universal
Frozen Foods Company, a wholly owned subsidiary of the Company ("Frozen
Foods") to ConAgra, Inc. The sale was a major step in Universal Foods'
strategic transition to focus on high-performance ingredients and
ingredient systems for foods and other products.

Frozen Foods produced frozen potato products for U.S. and
international markets, selling most of its product to the food service
industry. It had a share of the retail market with branded and private
labeled products. It operated processing facilities in Twin Falls, Idaho,
Hermiston, Oregon and Pasco, Washington.

Research and Development/Quality Assurance

The Company believes that its competitive advantages and ability
to develop and deliver high-performance products are based on its
technical expertise in the processing and application of its technology
for foods and other products. Therefore, the Company provides an above-
industry average investment in research, development and quality
assurance, and is committed to the training and development of its people.

The Company employs approximately 400 people in research and
quality assurance. Over the past five years, expenditures as a percent of
revenue have increased from 3.0% in 1992 to 3.7% in 1996. Expenditures in
fiscal 1996 were $29.8 compared to $28.6 million in 1995. Expenditures in
1995 decreased from the fiscal 1994 level of $32.2 million, a direct
result of the sale of Frozen Foods which accounted for $4.1 million in
expenditures during fiscal 1994. Expenditures in fiscal 1994 increased
13% to $32.2 million from $28.5 million in fiscal 1993. The Company's
commitment to research and product development continues at a level
significantly higher than the food industry average. Of the aforesaid
amounts, approximately $20.4 million in fiscal 1994, $19.3 million in
fiscal 1995, and $21.4 million in 1996 were research and development
expenses as defined by the Financial Accounting Standards Board.

As part of its commitment to quality as a competitive advantage,
the Company has undertaken efforts to achieve certification to the
requirements established by the International Organization for
Standardization in Geneva, Switzerland, through its ISO 9000 series of
quality standards. Red Star BioProducts believes it was the first North
American ingredients supplier to receive ISO 9002 certification.
Facilities currently certified include Universal Flavor facilities in
Spain, Italy and the United Kingdom; Red Star BioProducts facilities in
the United States and Canada; Warner-Jenkinson facilities in The
Netherlands and United Kingdom; and Dehydrated Products facilities in the
United States, Ireland, France and The Netherlands.

Competition

All Company products are sold in highly competitive markets.
Some competitors have more product lines and greater resources than the
Company has. Since the Company and its competitors utilize similar
methods of production, marketing and delivery, the Company competes
primarily on process and applications expertise, quality and service. The
Company competes in many market niches where price is not the most
important variable. Universal Foods competes with only a few companies
across multiple ingredient lines, and is more likely to encounter
competition specific to individual businesses.

With the evolution of food processing as a global business,
competition to supply the industry has taken on an increasingly global
nature. In the worldwide flavor market, the Company's principal
competition comes from other U.S. and European producers. Building an
international presence is a key goal for Universal Flavor as demonstrated
by acquisitions.

W-J is the leading producer of certified colors in North America
and Western Europe. State-of-the-art equipment, the latest process
technology, a Color Service Laboratory unequaled in the industry, and the
most complete range of synthetic and natural colors constitute the basis
for its market leadership position. Acquisitions have resulted in product
and process technology synergies as well as a growing international
presence.

For Dehydrated Products, acquisitions in Europe provide
international expansion and strengthen export opportunities for U.S. based
operations. Competition in Red Star BioProducts comes primarily from
domestic and European producers. Red Star Yeast & Products competes
primarily in the North American market and has three major competitors.

Products and Application Activities

With the Company's strategic focus on high-performance
ingredients and ingredient systems, the Company's emphasis has shifted
from the development of major new products to application activities and
processing improvements in the support of its customers numerous new and
reformulated products. The Company maintains many of its proprietary
processes and formulae as trade secrets and under secrecy agreements with
customers.

Development activities include a line of stable aqueous
dispersion of colors for foods and pharmaceutical products. Patents have
been granted on the products marketed under the SPECTRASPRAY label and
applied for on the SPECTRABLEND label. The development of natural food
colors continues to expand and is a growth opportunity for W-J.

A variety of activities at Universal Flavor focus on the
development of natural flavors and flavor solutions for low-fat and no-fat
applications. A technology was installed for production of aseptically
processed fruits. Emphasis has been placed on the development of low-fat
dairy and bakery flavor and ingredient systems. New flavored fruit and
spice pieces have also been developed to provide new textures, flavors and
unique performance properties in bakery items.

In 1993 Red Star BioProducts introduced the Flavor Mate 950
series, the most potent flavor enhancer on the market, and the Savory Mate
series, which are flavor enhancers designed for specific areas such as
beef, poultry, pork, etc. Acquisitions in 1994 expanded the division's
product line particularly in hydrolyzed vegetable proteins. The transfer
of technology to European acquisitions, begun in 1995, will allow the
production of food- and pharmaceutical-grade extracts from brewer's yeast.

European acquisitions in 1994 and 1995 expanded the Dehydrated
Products product line to include peas, carrots, beans, celery root and
other specialty vegetables.

In addition, the discussion of operational activities in the
"Business Profile" on Pages 4 and 5 of the 1996 Annual Report to
Shareholders is incorporated by reference (but not any photographs or
graphical information included thereon).

Raw Materials

In producing its products, the Company uses a wide range of raw
materials. Chemicals and petrochemicals used to produce certified colors
are obtained from several domestic and foreign suppliers. Raw materials
for natural colors, such as carmine, beta carotene, annatto and turmeric,
are purchased from overseas and U.S. sources. In the production of
flavors, the principal raw materials include essential oils, aroma
chemicals, botanicals, fruits and juices, and are obtained from local
vendors. Flavor enhancers and secondary flavors are produced from
brewer's yeast, baker's yeast from the Company's own operations, and
vegetable materials such as corn and soybeans. The acquisition of the
Biolux Group in 1994 provides long-term supply arrangements on supplies of
brewer's yeast for European production needs. Chili peppers, onion, garlic
and other vegetables are acquired under annual contracts with numerous
growers in the western United States and Europe.

The principal raw material used in the production of yeast
products is molasses, which is purchased through brokers and producers,
usually under yearly fixed-price contracts. Processes have been developed
to permit partial replacement of molasses with alternate,
readily-available substrates for use if molasses supplies should become
limited. In 1994, the Company entered a supply agreement with Minn-Dak
Farmers Cooperative, a major North American molasses supplier, to provide
additional assurances of adequate supplies.

The Company believes that its required raw materials are
generally in adequate supply and available from numerous competitively
priced sources.

Patents, Formulae and Trademarks

The Company owns or controls many patents, formulae and
trademarks related to its businesses. The businesses are not materially
dependent upon patent or trademark protection; however, trademarks,
patents and formulae are important for the continued consistent growth of
the Company.

Employees

As of September 30, 1996, the Company employed about 4,000
persons worldwide (which includes approximately 200 seasonal employees).
Approximately 450 U.S. employees are represented by one of the 11 union
contracts with whom the Company has collective bargaining relationships.
The Company considers its employee relations to be good.

Regulation

Compliance with government provisions regulating the discharge
of material into the environment, or otherwise relating to the protection
of the environment, did not have a material adverse effect on the
Company's operations for the year covered by this report nor is such
compliance expected to have a material effect in the succeeding two years.
As is true with the food industry in general, the production, packaging,
labeling and distribution of the products of the Company are subject to
the regulations of various federal, state and local governmental agencies,
in particular the Food & Drug Administration.

ITEM 2. PROPERTIES

Domestically, the Company operates eighteen manufacturing and
processing plants in ten states as of September 30, 1996. Four plants
produced bakers yeast, four facilities provided flavor enhancers and
bioproducts, three produced dehydrated products, two plants produced
colors and four plants produced flavors. None of these properties are
held subject to any material encumbrances. The Company also has
investments in fifteen companies operating yeast and allied product
facilities located in twelve offshore locations. The Company operates
five color plants, eleven flavor plants, five bioproducts facilities and
three dehydrated vegetable plants in thirteen foreign countries.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to various legal proceedings of a character
regarded as normal to its business and in which, the Company believes,
adverse decisions, in the aggregate, would not subject the Company to
damages of a material amount.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during
the last quarter of fiscal 1996.

ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the registrant and their ages as of
December 1, 1996 are as follows:

EXECUTIVE OFFICERS

Name Age Position

Guy A. Osborn 60 Chairman and Director
Kenneth P. Manning 54 President, Chief Executive
Officer and Director
Richard Carney 46 Vice President - Human Resources
Steven O. Cordier 40 Treasurer
Thomas J. Degnan 48 Group Vice President
Michael Fung 46 Vice President and Chief
Financial Officer
Michael L. Hennen 43 Controller
Richard F. Hobbs 49 Vice President - Administration
R. Steven Martin 40 President - Red Star Yeast &
Products Division
Terrence M. O'Reilly 51 Vice President, Secretary and
General Counsel
James F. Palo 56 President - Rogers Foods, Inc.
Dr. Gary W. Sanderson 61 Vice President, Technologies
Kenneth G. Scheffel 60 Vice President - Chemical
Technologies
William Tesch 46 President - Red Star BioProducts
Charles G. Tuchel 41 President - Universal Flavors
Corporation
Michael A. Wick 53 President - Warner-Jenkinson Co.,
Inc.

All of these individuals have been employed by the Company in an
executive capacity for more than five years, except Richard Carney, Steven
O. Cordier, Michael L. Hennen, R. Steven Martin, Charles G. Tuchel and
Michael Fung.

Mr. Carney was elected Vice President - Human Resources in April
1993. He joined the Company in 1981 as Treasury Manager and held various
positions in the Treasurer's Department until 1986 when he assumed the
Director of Benefits responsibilities which he performed until being
elected a Vice President.

Mr. Cordier joined the Company in October 1995 as Treasurer. From
1990 until joining the Company he was Director of Financial Planning at
International Flavors and Fragrances, a $1.3 billion New York Stock
Exchange company.

Mr. Fung joined the Company in June 1995 as Vice President-Chief
Financial Officer. From 1992 to 1995 he served as Senior Vice President
and Chief Financial Officer for Vanstar Corporation, a leading provider of
products and services to design, build and manage computer network
infrastructures for large enterprises. From 1988 to 1992, Mr. Fung was
Vice President and Chief Financial Officer of Bass Pro Shops and Tracker
Marine Corporation, privately-held companies operated under common
ownership involved in the manufacture and marketing of outdoor sporting
goods.

Mr. Hennen joined the Company in January 1995 as Controller. From
1985 until joining the Company he was a Senior Manager at Deloitte &
Touche LLP, a public accounting firm providing audit and tax services to
the Company as its outside auditor.

Mr. Martin joined the Company as Vice President - Marketing of its
Red Star Yeast & Products Division in 1993. In June 1995, Mr. Martin was
elected President - Red Star Yeast & Products Division. Prior to joining
the Company, Mr. Martin was with the Monsanto Company since 1978 in
various general management positions.

Mr. Tesch joined the Company in 1971, becoming Plant Manager of the
Red Star BioProducts Division in 1989. From 1993 to 1994 he was Director,
Training and Development of The Universal Way and from 1994 to 1996 he
served as Vice President, Manufacturing Operations of Red Star
BioProducts. On April 16, 1996, Mr. Tesch was elected President of Red
Star BioProducts.

Mr. Tuchel joined the Company in May 1992 as the Managing Director -
Europe for the Color Division. In October 1994, he was promoted to Vice
President and General Manager of Universal Flavors International, and in
June 1995 elected President - Flavors Division. Prior to joining the
Company, Mr. Tuchel was Business Manager at ICI Petrochemicals from 1990
through 1992.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The principal market in which the common stock of the Company is
traded is the New York Stock Exchange. The range of the high and low
sales prices as quoted in the New York Stock Exchange - Composite
Transaction tape for the common stock of the Company and the amount of
dividends declared for fiscal 1996 appearing under "Common Stock prices
and dividends" on Page 18 of the 1996 Annual Report to Shareholders are
incorporated by reference. Common stock dividends were paid on a
quarterly basis, and it is expected that quarterly dividends will continue
to be paid in the future. In addition to the restrictions contained in
its Restated Articles of Incorporation, the Company is subject to
restrictions on the amount of dividends which may be paid on its common
stock under the provisions of various credit agreements. On the basis of
the consolidated financial statements of the Company as of September 30,
1996, $5,635,000 is available for the payment of dividends on the common
stock of the Company under the most restrictive loan covenants.

The Company had a stock repurchase program, initially announced June
7, 1984, under which the authorization terminated in fiscal 1994.
Consequently, on January 27, 1994 the Board of Directors established a new
share repurchase program which authorizes the Company to repurchase up to
2.5 million shares. As of September 30, 1996, 828,118 shares had been
repurchased under the new authorization.

On September 8, 1988 the Board of Directors of the Company adopted a
common stock shareholder rights plan which is described at Note 6 of Notes
to Consolidated Financial Statements - "Shareholders' Equity" on Pages 26
and 27 of the 1996 Annual Report to Shareholders and which is incorporated
by reference.

The number of shareholders of record on December 6, 1996 was 6,099.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data required by this item is incorporated by
reference from the "Five-Year Review" and the notes thereto on Page 31 of
the 1996 Annual Report to Shareholders.

ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION

"Management's Analysis of Operations and Financial Condition" is
incorporated by reference from Pages 13 through 17 of the 1996 Annual
Report to Shareholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this item
are set forth on Pages 18 through 30 of the 1996 Annual Report to
Shareholders and are incorporated by reference.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors and officers appearing under
"Election of Directors" (ending before "Committees of the Board of
Directors") and "Other Matters" on Pages 2 through Page 6 and Page 15,
respectively, of the Notice of Annual Meeting and Proxy Statement of the
Company dated December 18, 1996, is incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to compensation of directors and officers is
incorporated by reference from "Director Compensation and Benefits," and
"Compensation and Development Committee Report" and "Executive
Compensation" on Pages 7 through 11 of the Notice of Annual Meeting and
Proxy Statement of the Company dated December 18, 1996.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The discussion of securities ownership of certain beneficial owners
and management appearing under "Principal Shareholders" on Pages 18
through 30 of the Notice of Annual Meeting and Proxy Statement of the
Company dated December 18, 1996, is incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There are no family relationships between any of the directors,
nominees for director and officers of the Company nor any arrangement or
understanding between any director or officer or any other person pursuant
to which any of the nominees has been nominated. No director, nominee for
director or officer had any material interest, direct or indirect, in any
business transaction of the Company or any subsidiary during the period
October 1, 1995 through September 30, 1996, or in any such proposed
transaction. In the ordinary course of business, the Company engages in
business transactions with companies whose officers or directors are also
directors of the Company. These transactions are routine in nature and are
conducted on an arm's-length basis. The terms of any such transactions
are comparable at all times to those obtainable in business transactions
with unrelated persons.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents filed:

1. and 2. Financial Statements and Financial Statement
Schedule. (See following "List of Financial Statements and
Financial Statement Schedules.")

3. Exhibits. (See Exhibit Index on the last page of this
report.) (No instruments defining the rights of holders of long-term
debt of the Company and its consolidated subsidiaries are filed
herewith because no long-term debt instrument authorizes securities
exceeding 10% of the total consolidated assets of the Company. The
Company agrees to furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.)

(b) Reports on Form 8-K: None

List Of Financial Statements and Financial Statement Schedules

Page Reference in
1996 Annual
Report
to Shareholders
1. FINANCIAL STATEMENTS

The following consolidated financial
statements of Universal Foods Corporation
and Subsidiaries are incorporated by
reference from the Annual Report to
Shareholders for the year ended September
30, 1996.
Independent Auditors' Report 30
Consolidated Balance Sheets - September 30, 20
1996 and 1995
Consolidated Earnings - Years ended 19
September 30, 1996, 1995 and 1994
Consolidated Shareholders' Equity - Years 21
ended September 30, 1996, 1995 and 1994
Consolidated Cash Flows - Years ended 22
September 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements 21 - 29

Page Reference
2. FINANCIAL STATEMENT SCHEDULES in Form 10-K

Independent Auditors' Report 14
Schedule II - Valuation and Qualifying 15
Accounts and Reserves

All other schedules are omitted because they are inapplicable, not
required by the instructions or the information is included in the
consolidated financial statements or notes thereto.

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Directors
of Universal Foods Corporation:

We have audited the consolidated financial statements of Universal Foods
Corporation as of September 30, 1996 and 1995 and for each of the three
years in the period ended September 30, 1996, and have issued our report
thereon dated November 14, 1996, which report expresses an unqualified
opinion and includes an explanatory paragraph relating to the adoption of
the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assests and for Long-Lived
Assets to be Disposed Of"; such consolidated financial statements and
report are included in your 1996 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of Universal Foods Corporation,
listed in Item 14. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin

November 14, 1996

<PAGE>
SCHEDULE II
<TABLE>
UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING

ACCOUNTS AND RESERVES

(In Thousands)

Years ended September 30, 1996, 1995 and 1994
<CAPTION>
Additions
Valuation accounts
deducted in the balance Balance at Charged to
sheet from the assets to beginning costs and Net Balance at end
which they apply of period expenses acquired Deductions(A) of period

<S> <C> <C> <C> <C> <C>
1994
Allowance for losses:
Trade accounts
receivable $3,306 971 637 1,387(B) $3,527
===== ===== ===== ===== =====

1995
Allowance for losses:
Trade accounts
receivable $3,527 1,356 --- 1,115 $3,768
===== ===== ===== ===== =====

1996
Allowance for losses:
Trade accounts
receivable $3,768 349 --- 608 $3,509
===== ===== ===== ===== =====

(A) Accounts written off, less recoveries.
(B) Includes divestiture of Frozen Foods business.

</TABLE>
<PAGE>
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.

UNIVERSAL FOODS CORPORATION

By: /s/ T. M. O'Reilly
T. M. O'Reilly, Vice President
Secretary & General Counsel

Dated: December 20, 1996

PURSUANT to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 20, 1996, by the following
persons on behalf of the Registrant and in the capacities indicated.

/s/ Guy A. Osborn
Guy A. Osborn Chairman and Director

/s/ Kenneth P. Manning
Kenneth P. Manning President, Chief Executive Officer and
Director

/s/ Michael Fung
Michael Fung Vice President and Chief Financial
Officer

/s/ Michael L. Hennen
Michael L. Hennen Corporate Controller

/s/ Michael E. Batten
Michael E. Batten Director

/s/ John F. Bergstrom
John F. Bergstrom Director

/s/ James L. Forbes
James L. Forbes Director

/s/ Dr. Carol I. Waslien Ghazaii
Dr. Carol I. Waslien Ghazaii Director

/s/ Leon T. Kendall
Leon T. Kendall Director

/s/ James H. Keyes
James H. Keyes Director

/s/ Charles S. McNeer
Charles S. McNeer Director

/s/ William U. Parfet
William U. Parfet Director

/s/ Essie Whitelaw
Essie Whitelaw Director

<PAGE>
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1996 ANNUAL REPORT ON FORM 10-K

Incorporated
Exhibit Herein by Filed
Number Description Reference Herewith

3.1 Restated Articles of (Previously filed at
Incorporation Exhibit 3.1 to the
1993 Annual Report on
Form 10-K)

3.2 Restated Bylaws (Previously filed at
Exhibit 3.2 to the
1995 Annual Report on
Form 10-K)

4 Shareholders Rights (Previously filed on
Plan Form 8-A dated
September 15, 1988 as
amended by Exhibit 3
to Form 8 dated
December 22, 1988 and
by Exhibits 4 and 5 to
Form 8 dated September
14, 1990)

10 Material Contracts

* (a) Executive (Previously filed at
Employment Exhibit 10(a) to the
Contract 1985 Annual Report on
Form 10-K)

* (b) 1981 Incentive (Previously filed with
Stock Option the Notice of Annual
Plan Meeting & Proxy
Statement dated
December 5, 1981)

* (c) 1985 Stock (Previously filed with
Plan for the Notice of Annual
Executive Meeting & Proxy
Employees Statement dated
December 12, 1985)

* (d) 1990 Employee (Previously filed with
Stock Plan the Notice of Annual
Meeting & Proxy
Statement dated
December 18, 1989)

* (e) Director Stock (Previously filed as
Grant Plan, as Exhibit 10(e) to the
amended 1991 Annual Report on
Form 10-K)

* (f) Management (Previously filed as
Income Exhibit 10(f) to the
Deferral Plan 1991 Annual Report on
Form 10-K)

* (g) Executive (Previously filed as
Income Exhibit 10(g) to the
Deferral Plan 1991 Annual Report on
Form 10-K)

* (h) Change of (Previously filed as
Control Exhibit 10(h) to the
Employment and 1995 Annual Report on
Severance Form 10-K)
Agreement

(i) Trust (Previously filed as
Agreement Exhibit 18 to
dated January Amendment No. 1 of the
18, 1988 Company's Schedule
between the 14D-9 filed December
Company and 9, 1988)
Marshall &
Ilsley Trust
Company

(j) Trust (Previously filed as
Agreement Exhibit 19 to
dated January Amendment No. 1 of the
18, 1988 Company's Schedule
between the 14D-9 filed December
Company and 9, 1988)
Marshall &
Ilsley Trust
Company

(k) Trust (Previously filed as
Agreement Exhibit 20 to
dated Amendment No. 1 of the
September 18, Company's Schedule
1988 between 14D-9 filed December
the Company 9, 1988)
and Marshall &
Ilsley Trust
Company

* (l) Management X
Incentive Plan
for Major
Corporate
Executives

* (m) Management X
Incentive Plan
for Division
Presidents

* (n) 1994 Employees (Previously filed on
Stock Option Form S-8 dated
Plan September 12, 1994)

13 Portions of Annual
Report to Shareholders
for the year ended X
September 30, 1996 that
are incorporated by
reference

21 Significant
Subsidiaries of
Universal Foods X
Corporation

23 Consent of Deloitte & X
Touche LLP

27 Financial Data Schedule X

99 Notice of Annual (Previously filed via
Meeting and Proxy the EDGAR System on
Statement, dated December 18, 1996 as
December 18, 1996 the Company's Schedule
14A)

Except to the extent
incorporated by
reference, the Proxy
Statement shall not be
deemed to be filed
with the Securities
and Exchange
Commission as part of
this annual Report on
Form 10-K.

* Indicates management contracts or compensatory plans.

Exhibit 10(l)

UNIVERSAL FOODS CORPORATION

MANAGEMENT INCENTIVE PLAN
FOR MAJOR CORPORATE EXECUTIVES

I. THE PLAN

The name of this Plan is the Universal Foods Corporation Management
Incentive Plan for Major Corporate Executives. The purpose of this
Plan is to promote the interests of the shareholders and to provide
incentive to those elected officers who can contribute most to the
profitability of the Company. It is separate and distinct from other
incentive plans in effect which are based upon divisional
performance.

II. DEFINITIONS

In this Plan, the terms used will have the following definitions:

A. "Board of Directors" means the Board of Directors of Universal
Foods Corporation.

B. "Bonus Award" means an award, either paid currently or paid on a
deferred basis, as the result of the operation of this Plan.

C. "Bonus Provision" means monies available for distribution as
Bonus Awards as the result of the operation of this Plan.

D. "Capital Employed" is defined as the sum of average
shareholders' equity plus average long-and short-term debt.
These averages are to be determined using the ending balances of
the prior and current fiscal year as shown in the Company's
certified Consolidated Balance Sheets.

E. "Committee" means the committee provided for in Section III.

F. "Company" means Universal Foods Corporation.

G. "Employee" means any employee regularly employed by Universal
Foods Corporation or any of its subsidiaries and paid on a
salary basis.

H. "Fiscal Year Salary" means base pay earned during the period
October 1 through September 30 each Company operating year
exclusive of any incentive/supplemental payments by the Company.

I. "Independent Auditors" means with respect to any fiscal year,
the independent public accounts appointed by the Board of
Directors to certify to the Board of Directors the financial
statements of the Company.

J. "Operating Income After Taxes" is defined as net earnings, as
shown in the Company's Statement of Consolidated Earnings as
certified by the Company's Independent Auditors, plus the after-
tax costs of interest on long-term and short-term debt and the
Bonus Awards for that fiscal year. This amount shall be further
adjusted for extraordinary items of income or expense if, in the
opinion of the Committee, it is appropriate to do so.

K. "Plan" means this Management Incentive Plan for Major Corporate
Executives.

L. "Return on Capital Employed" means for the purpose of computing
the amount which may be credited to the bonus reserve for any
fiscal year, the percentage of Operating Income After Taxes (per
J) to Capital Employed (per D).

M. "Subsidiary" means with respect to any year, any corporation in
which Universal Foods Corporation owns a stock interest of more
than 50%, and the financial results of whose operations are
consolidated with those of the Company in the financial
statements included in the annual report to shareholders for
that year.

III. COMMITTEE

A. The Board of Directors shall appoint a Compensation and
Development Committee composed of three non-management members
of the Company's Board of Directors. This Committee shall be
known as the "Committee" and shall have full power and authority
to interpret and administer the Plan in accordance with the
Regulations. No member of the Committee shall be eligible to
participate in the Plan while a member of the Committee.

B. The Board of Directors may, from time to time, remove members
from the Committee or add members thereto; and vacancies on the
Committee, however caused, shall be filled by action of the
Board of Directors. The Committee shall select one of its
members as Chairman and shall hold its meetings at such times
and places as it may determine. A majority of its members shall
constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. Any decision or
determination reduced to writing and signed by a majority of the
members of the Committee shall be as fully effective as if it
had been made at a meeting of the Committee duly called and
held. The members of the Committee may receive such
compensation for their services as the Board of Directors may
determine.

IV. PLAN ADMINISTRATION

The Committee shall have the power to adopt eligibility and other
rules not inconsistent with the provisions of the Plan (hereinafter
referred to as the "Regulations" and attached hereto as "Exhibit A")
for the administration thereof and to alter, amend, or revoke any
Regulations so adopted.

V. PLAN PARTICIPATION

Participation in the Plan shall be in accordance with the
Regulations.

A. At the beginning of each fiscal year, the Chairman and the
President and Chief Executive Officer shall submit to the
Committee a written list of recommended participants in the Plan
for that year.

B. Not all officers and major executives need to be selected as
participants, and selection as a participant one year does not
automatically ensure selection in future years.

C. At the end of each fiscal year, the Chairman and the President
and Chief Executive Officer shall submit to the Committee a
written list of recommendations as to the amount of Bonus Award
each participant in the Plan should receive for that fiscal
year.

D. The Committee's selection of the Employees to whom a Bonus Award
shall be made and its determination of the amount and method of
payment of each such Bonus Award shall be final.
E. This Plan is not a part of the Company's regular compensation
plan nor is it part of the Employee's regular compensation.

VI. BONUS AWARD

The performance measurement upon which the Bonus Award is based is
determined in accordance with the Regulations for each fiscal year.

VII. BONUS PROVISION

A. The Company shall create and maintain a bonus account to which
shall be credited each fiscal year (except years for which all
or part of such a credit is prohibited by the Plan, the
Regulations, or specific order of the Board of Directors) a
Bonus Provision, the amount of which shall be determined by the
following table:

10.0% Return on Capital Employed - 100% of Maximum Bonus
9.5% Return on Capital Employed - 90% of Maximum Bonus
9.0% Return on Capital Employed - 80% of Maximum Bonus
8.5% Return on Capital Employed - 70% of Maximum Bonus
8.0% Return on Capital Employed - 60% of Maximum Bonus
7.5% Return on Capital Employed - 50% of Maximum Bonus
7.0% Return on Capital Employed - 40% of Maximum Bonus
6.5% Return on Capital Employed - 30% of Maximum Bonus
6.0% Return on Capital Employed - 20% of Maximum Bonus
Below 6.0% Return on Capital Employed - 0% of Maximum Bonus

Maximum Bonus Award is defined in the Regulations. (Exhibit A,
5)

B. As promptly as possible after the end of each fiscal year, the
Independent Auditors shall determine and report to the Committee
the maximum amount available for a Bonus Provision that year in
accordance with the Plan and the Regulations; and the Committee
shall rely upon and be bound by such report.

C. Upon the determination of the amount of the Bonus Provision for
a particular fiscal year, an amount not exceeding the bonus
provision may be allotted as a Bonus Award for such fiscal year
to such Employees as are selected and in such amounts and in
such a manner as are determined in accordance with the
Regulations.

VIII. CHANGE OF CONTROL OF COMPANY

In the event of a change of control of the Company in accordance
with an Employee's Severance or Employment Agreement and the
Employee's subsequent termination of employment without cause by
the successor entity, the "Change of Control Benefits" under the
Employee's Severance or Employment Agreement in respect to this
Plan shall be received as a severance payment by the Employee.

IX. SUCCESSORS AND ASSIGNS

If the Company sells, assigns or transfers all or substantially
all of its business and assets to any person, excluding
affiliates of the Company, or if the Company merges into or
consolidates or otherwise combines with any person which is a
continuing or successor entity, then the Company shall assign
all of its right, title and interest in this Plan as of the date
of such event to the person which is either the acquiring or
successor corporation, and such person(s) shall assume and
perform from and after the date of such assignment all of the
terms, conditions and provisions imposed by this Plan upon the
Company.

In case of such assignment by the Company and of such assumption
and agreement by the Company and of such person(s), all further
rights as well as all other obligations of the Company under
this Agreement thenceforth shall cease and terminate and
thereafter the expression "the Company" wherever used herein
shall be deemed to mean such person(s).

X. MISCELLANEOUS

A. All expenses incurred by the Committee in interpreting and
administering the Plan shall be charged against the bonus
reserve.

B. The amount of any Bonus Award forfeited by a participant shall
be retained by the Company and may not be recredited to the
bonus reserve.

XI. PLAN AMENDMENTS

The Board of Directors may suspend or discontinue the Plan at
anytime.

Exhibit 10(m)

UNIVERSAL FOODS CORPORATION

MANAGEMENT INCENTIVE PLAN
FOR DIVISION PRESIDENTS

I. THE PLAN

The name of this Plan is the Universal Foods Corporation Management
Incentive Plan for Division Presidents. The purpose of the Plan is
to promote the interests of the shareholders and to provide incentive
to the Division Presidents who contribute to the profitability of the
Company.

II. DEFINITIONS

In this Plan, the terms used will have the following definitions:

A. "Actual Average Assets Managed" means the twelve-month average
of month-end balances of key assets and liabilities subject to
Division control, as defined in Exhibit B, 2c.

B. "Actual Sales Operating Profit" means profit reported on the
Company's sales operating reports, as adjusted per Exhibit B,
2b.

C. Board of Directors" means the Board of Directors of Universal
Foods Corporation.

D. "Bonus Award" means an award, either paid currently or paid on a
deferred basis, as the results of the operation of this Plan.

E. "Business Unit" means a segmented profit center within a
Division.

F. "Committee" means the committee provided for in Section III.

G. "Company" means Universal Foods Corporation.

H. "Division" means a business entity designated as such by the
Corporation normally segmented based on product line.

I. "Employee" means any employee regularly employed by Universal
Foods Corporation or any of its subsidiaries, and paid on a
salary basis.

J. "Fiscal Year Salary" means base pay earned during the period
October 1 through September 30 each Company operating year
exclusive of any incentive/supplemental payments by the Company.

K. "Plan" means this Management Incentive Plan for Division
Presidents.

L. "Targeted Average Assets Managed" means the Division average
assets managed objective scheduled per Exhibit C.

M. "Targeted Profit" means the Division profit objective scheduled
per Exhibit C.

III. COMMITTEE

IV. PLAN ADMINISTRATION

V. PLAN PARTICIPATION

Participation in the Plan shall be in accordance with the
Regulations.

A. At the beginning of each fiscal year, the Chairman and the
President and Chief Executive Officer shall submit to the
Committee a written list of recommended participants in the Plan
for that year.

B. Not all division presidents need to be selected as participants,
and selection as a participant one year does not automatically
ensure selection in future years.

C. At the end of each fiscal year the Chairman and the President
and Chief Executive Officer shall submit to the Committee a
written list of recommendations as to the amount of Bonus Award
each participant in the Plan should receive for that fiscal
year.

D. The Committee's selection of the Employees to whom a Bonus Award
shall be made and its determination of the amount and method of
payment of each such Bonus Award shall be final.

E. This Plan is not a part of the Company's regular compensation
plan nor is it part of the employee's regular compensation.

VI. BONUS AWARDS

The performance measurement upon which the Bonus Award is based is
determined in accordance with the Regulations for each fiscal year.

VII. BONUS PROVISION

All Bonus Awards under this Plan will be budgeted and funded within
the operations of the specific Division in which participants are
employed.

VIII. CHANGE OF CONTROL OF COMPANY

In the event of a change of control of the Company in accordance with
an Employee's Severance or Employment Agreement and the Employee's
subsequent termination of employment without cause by the successor
entity, the "Change of Control Benefits" under the Employee's
Severance or Employment Agreement in respect to this Plan shall be
received as a severance payment by the Employee.

IX. SUCCESSORS AND ASSIGNS

If the Company sells, assigns or transfers all or substantially all
of its business and assets to any person, excluding affiliates of the
Company, or if the Company merges into or consolidates or otherwise
combines with any person which is a continuing or successor entity,
then the Company shall assign all of its right, title and interest in
this Plan as of the date of such event to the person which is either
the acquiring or successor corporation, and such person(s) shall
assume and perform from and after the date of such assignment all of
the terms, conditions and provisions imposed by this Plan upon the
Company.

In case of such assignment by the Company and of such assumption and
agreement by the Company and of such person(s), all further rights as
well as all other obligations of the Company under this Agreement
thenceforth shall cease and terminate and thereafter the expression
"the Company" wherever used herein shall be deemed to mean such
person(s).

X. PLAN AMENDMENTS

The Board of Directors may suspend or discontinue the Plan at any
time.

Business Profile

Flavors, flavor systems, and flavor-driven food ingredient systems for
food, beverage and dairy applications; aroma chemicals for fragrances and
flavors. Flavors including fruit, meat, seafood and vegetable. Ingredients
including fruit preparations, variegates, chocolate and caramel syrups,
cookie and snack bar fillings and confections. Liquid, spray dry and dry
blend flavors. Compounding and reaction chemistry are combined with
proprietary extraction, separation and aseptic processing. Operates as
Universal Flavors.

Because each color, whether natural or synthetic, has specific performance
characteristics, we pioneered the use of technical service chemists and
food technologists proactively solving food, drug and cosmetic ingredient
problems. We are acknowledged to be the number one food color supplier as
a result of this strategy. We maintain the most extensive and
knowledgeable technical service staff in the industry worldwide. Operates
as Warner-Jenkinson.

U.S. state-of-the-art drying technology for dehydrating onion, garlic,
chili products and specialty vegetables. Extensive plant breeding and seed
development programs produce increased yields and better raw material
quality. Operates as Rogers Foods. European freeze dried, air dried,
puffed dried and vacuum puffed technology produces premium vegetable
products. Operates as Universal Dehydrates.

We are the low-cost producer of a diversified line of yeast products for
baking, nutritional and wine-making needs. Over 70 yeast strains have been
developed for a variety of specific applications. Leading brands: Red Star
and Quick-Rise. Operates as Red Star Yeast & Products.

Proprietary bioprocesses extract flavor enhancers, secondary flavorings
and nutrients from yeast, vegetable, meat and milk proteins. We offer the
broadest line of modified proteins serving the food and fermentation
industry worldwide. We are unique in our ability to deliver a full range
of modified proteins based on natural sources. Our core competencies
include enzymology, protein chemistry and thermal reaction processing.
Operates as Red Star BioProducts.

1996 Review

Good performances in beverage flavors and aroma chemicals were offset by
softness in food and dairy flavors. International markets improved over
the course of the year. Results were affected by consolidations and
restructuring in the food processing industry and fewer product roll-outs.
We continued to strengthen our research, development and applications
expertise and to work with customers to help them cut costs through
innovative processing and formulations. An integrated information system
went on-line.

Continued improvement in product mix drove profit growth for the year.
Revenue was up 6% on the strength of domestic food and beverage color
sales, especially in the naturals category. Process technology
improvements resulted in a breakthrough in the concentration and
production of carminic acid, a natural red color which is soluble in
water. Presence in the U.S. cosmetics and pharmaceutical markets was
strengthened and improvements were realized in Mexico.

Revenue was up 13% bolstered by European acquisitions and U.S. onion,
garlic and chili sales. Operating profit improved significantly, due
primarily to strong demand and limited supply of U.S. chili products and
from improvements in European operations. Integration of European
acquisitions continued with the introduction of U.S. field management and
growing practices to increase yield and efficiency.

We are capitalizing on the trend toward automated handling of ingredients
in the wholesale baking industry by converting key customers to bulk yeast
delivery systems. The shift in product mix to these cream yeast systems,
along with cost reduction efforts and modest price increases, contributed
to a solid improvement in operating income. Retail yeast sales continued
to get a boost from the bread machine boom.

A significant improvement in operating income was achieved by creating
high-performance blends from our broad line of yeast and vegetable protein
based flavor enhancers. Construction of a state-of-the-art facility began
in Europe during the third quarter to produce food and fermentation grade
brewer's yeast extracts using proprietary technology developed in the U.S.

Adding Value

Flavors and food ingredients must perform under a variety of demanding
processing conditions such as extreme temperature, mixing and pumping.
Emphasis is on creating distinct flavors and flavor-driven food
ingredients that are difficult for competitors to imitate. Focus is to
simplify and improve end-product performance through customized
proprietary formulas.

Combining a practical technical service group with an enhanced basic
research group, we are creating new value-added ingredients for the
industries we serve. This process is expanding the ways we can respond to
our customers' new products and processes.

Customer service laboratories develop unique blends and applications. Our
focus is on providing the exact level of pungency, color or consistency,
or some other unique characteristic the customer desires.

Quality, consistency and reliability are critical to the production and
delivery of yeast, a living organism and key ingredient in bread making.

To create an understanding of the value of these high quality, potent
products, technical sales people and application specialists work with
customers to demonstrate and develop applications.

Opportunities

Strong demand for low-fat products and new age and nutraceutical beverages
provides continued opportunities to develop natural flavors and low-fat
food ingredients. Food flavors and aroma chemicals are avenues for growth
and acquisitions. Use of worldwide manufacturing, research, development
and global account management will spur international market penetration.

We will continue to exceed normal industry growth by expanding globally
and enhancing natural color sourcing and manufacturing. At the same time
we will expand into non-food markets where our core competencies will give
us a competitive advantage.

Broader product offerings and product sourcing, productivity improvements
and expansion of international markets and exports will provide ongoing
growth. The appeal of spicy and ethnic foods and demand for convenience
and prepared meals continues.

Our customers are more sophisticated and suppliers have consolidated.
Growth will come from improved productivity and market penetration through
the conversion of key customers to bulk yeast delivery systems. We are
also expanding international marketing of our dry yeast.

Construction of a state-of-the-art production facility in Europe will
accelerate our penetration of one of the largest markets in the world for
yeast extracts used in the food and fermentation industries. Continued
product mix shifts to high-performance blends of yeast and vegetable
protein extracts will enhance margins.

Management's Analysis of Operations and Financial Condition

[ Years ended September 30, 1996, 1995 and 1994 ]

Results of Operations

During 1996, Universal Foods Corporation benefitted from the Company's
balanced, technology-based business mix. In addition, the Company added
strength to its business base through the integration of recent
acquisitions, international expansion and a continued emphasis on its
strategy to use process and applications expertise to move it into more
advanced and sophisticated product categories. Four of our five
businesses, representing 68% of revenue, performed well during the year.
The remaining Flavor business held its own in a difficult market.

Net earnings in 1996 were $44.2 million or $1.71 per share compared with
$66.1 million or $2.54 per share in 1995. The 1996 earnings include a
pretax charge from unusual items of $25.0 million ($16.7 million after tax
or $.65 per share). The 1995 results include a pretax gain of $26.8
million ($9.2 million after tax or $.36 per share). Excluding unusual
items, net earnings per share increased 8.3% in 1996 to $2.36 compared
with $2.18 in 1995.

Unusual items in 1996 include a $20.0 million non-cash charge in adopting
Statement of Financial Accounting Standards No. 121, (SFAS No. 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." During 1996 we also recorded a $5 million
restructuring charge to address opportunities to streamline our production
base, improve efficiency and reduce operating costs. Approximately 130
positions will be eliminated, primarily in Europe, at a cost of
approximately $4 million. The restructuring plan will result in cumulative
pretax savings of approximately $10 to $14 million over the next three
years.

Unusual items in 1995 include a pretax gain from the sale of the Frozen
Foods business of $49.6 million offset by the cost of discontinuing a
product line of $14.1 million and other items totaling $8.7 million.
Approximately 70% of the unusual charges relate to the write-down of
assets to net realizable value.

Revenue in 1996 increased to $806 million from $793 million in 1995.
Revenue increases were achieved by four out of five businesses with
Dehydrated Products Division leading the way with revenue growth of 12.9%.
Revenue in the Flavor Division decreased 4.9% as consolidations,
restructurings and a slow down in new product roll outs among the
Division's customers in the food processing industry impacted the overall
market.

Revenue in 1995 was $793 million compared with $930 million in 1994 and
$892 million in 1993. The decrease in revenue in 1995 was caused by the
sale of the Frozen Foods business. In 1995 the Company's ongoing
operations increased revenue by $102 million compared with an increase of
$67 million in 1994. Of the 1995 revenue growth from ongoing operations,
60% was generated by the BioProducts Division due to volume gains from
acquisitions and growth from their existing business. The Dehydrated
Products Division contributed 32% of the gains through growth in the onion
and garlic business bolstered by the European acquisitions. The Flavor and
Color Divisions showed modest revenue increases while Red Star Yeast &
Products was down slightly.

Chart

Foreign
Revenue
[ in millions ]

1996 $325
1995 $313
1994 $232
1993 $184
1992 $176

Sales generated outside the United States is a significant portion of the
Company's revenue. In 1996 and 1995 foreign sales revenue, including
exports, was approximately 40% of total revenue. This compares with 25% of
total revenue in 1994. Approximately 59% and 58% of the 1996 and 1995
foreign sales were in Europe. The Company also generates revenue in
Canada, Mexico and the Pacific Rim. Historically, changes in foreign
currency rates have not been material to revenue and expenses and
management currently expects no significant impact from foreign currency
rate changes in 1997.

The cost of products sold represented 66.1% of revenue in 1996, 65.3% in
1995 and 66.3% in 1994. The increase in 1996 results primarily from
decreased margins in the Flavor business as continued market weakness in
North America negatively impacted both pricing and capacity utilization.
The 1% decrease in 1995 compared to 1994 resulted from improved product
mix and operating efficiencies.

The Company's continued focus on cost reduction resulted in a 1996
decrease in selling and administrative expenses of $7.7 million or 4.5%.
In 1996, selling and administrative expenses as a percent of revenue
decreased in all of the Company's divisions. For the Company, selling and
administrative expenses decreased to 20.4% of revenue compared to 21.7% in
1995 and 22.0% in 1994.

Operating income, excluding unusual items, increased $6 million in 1996
compared with a decrease of $6.3 million in 1995. The 1996 increase in
operating income is attributable to improved results in all of our
businesses reduced by the Flavor Division which experienced weakness in
certain markets. The 1995 decrease is primarily attributable to the sale
of the Frozen Foods business reduced by increases in operating income for
all other divisions.

The effective income tax rate was 35.6% in 1996, 42.3% in 1995 and 37.3%
in 1994. The effective tax rate in 1995 was increased by a higher than
normal tax rate on the gain on the sale of the Frozen Foods business
offset by increased tax credits.

The Company uses financial instruments in its management of foreign
currency and interest rate exposures. The Company has procedures in place
to monitor and control financial instruments, and they are not held or
issued for trading purposes. The Company's credit risk related to
financial instruments is considered low.

Chart

Operating
Margins
[ excluding unusual items ]

1996 13.5%
1995 13.0%
1994 11.7%
1993 11.9%
1992 11.6%

Liquidity and Financial Position

In 1996, cash provided by operating activities was sufficient to provide
for dividend payments to shareholders as well as fund capital investments.
The Company uses debt financing to lower its overall cost of capital,
which increases the return to shareholders. During 1996 the Company
increased long-term debt $36.2 million while repurchasing $27.6 million of
treasury stock. The Company maintains debt levels considered prudent based
on its cash flows, interest coverage and percentage of total debt to total
capital.

Cash provided by operating activities was $91.3 million in 1996, $23.1
million in 1995 and $61.6 million in 1994. The increase in 1996 of $68.2
million reflects continued improvement in earnings before unusual items
and reduced working capital amounts. The decrease in 1995 versus 1994 was
primarily the result of higher taxes paid on the sale of the Frozen Foods
business.

Cash used for investing activities increased to $61.6 million in 1996 from
$16.3 million in 1995 and $36 million provided from investing activities
in 1994. The 1995 and 1994 amounts include $39 million and $163 million,
respectively, of cash received from the sale of the Frozen Foods business.
Cash used for acquisitions decreased $12 million in 1996 and $53 million
in 1995.

Capital expenditures totaled $59 million in 1996, compared to $42.6
million in 1995. Both years reflect expenditures for productivity
improvements and plant expansions, principally in the Flavor and
BioProducts Divisions. In 1997, capital expenditures are estimated to be
between $55 and $65 million; depreciation should approximate $32 million.

Financing activities used $35 million in 1996 compared to $41.6 million in
1995. During 1996 the Company repurchased 763,118 shares of treasury stock
at a cost of $27.6 million compared to 65,000 shares at a cost of $1.8
million in 1995. Net borrowings increased $17 million in 1996 compared to
a net decrease of $16 million in 1995. The Company has a $70 million
multicurrency revolving loan agreement that supports the Company's
short-term financing requirements.

The Company has paid uninterrupted quarterly dividends since commencing
public trading in its stock over twenty years ago. In 1996, dividends paid
per share were $1.00, up 4.2% over $.96 in 1995, which was an increase of
4.3% over 1994. As evidence of the Company's continued effort to provide
shareholders with immediate and tangible participation in current
earnings, the dividends paid in 1996 represented 42.4% of net earnings
before unusual items, exceeding the Company's goal of paying annual cash
dividends between 35% and 40% of earnings. Subsequent to year-end, the
dividend on common shares was increased to an annualized rate of $1.04 per
share, a 4.0% increase.

The impact of inflation on both the Company's financial position and
results of operations has been minimal and is not expected to adversely
affect 1997 results.

The Company's financial position continues to remain strong, enabling it
to meet cash requirements for operations, capital expansion programs and
dividends to shareholders.

Chart

Total Debt to
Total Capital

1996 36.9%
1995 34.3%
1994 37.6%
1993 38.7%
1992 40.4%

Outlook

This report contains forward-looking statements that reflect management's
current assumptions and estimates of future economic circumstances,
industry conditions, Company performance and financial results, in
particular, earnings growth and return on shareholders' equity. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor
for such forward-looking statements. A variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results. These factors and assumptions include the pace and
nature of new product introductions by the Company's customers; execution
of the Company's acquisition program; industry and economic factors
related to the Company's international business; and the outcome of
various productivity-improvement and cost-reduction efforts.

Universal Foods Corporation seeks to grow in both its primary market, the
food industry, and through leveraging its technology into non-food
applications. Currently, about 10% of revenue comes from non-food
applications. These include such diverse, but technically related
applications as cosmetics, personal care, pharmaceutical and specialty
chemicals. The Company believes that technology in its Flavor, Color and
BioProducts Divisions offers opportunities to expand into non-food
markets. In addition, the Company is seeking strategic acquisitions to
increase its business base, enhance its technology and expand
geographically.

Within the food industry, the Company expects to increase revenue and
profits by targeting faster growing niches and successful customers within
each of its businesses, leveraging its process and applications expertise
to move into more advanced and sophisticated product categories, and
capitalizing on geographic expansion. The Company views current
consolidations within the food industry as an opportunity to be among the
select number of companies participating in long-term supplier
relationships with its customers. The Company also expects to continue to
increase total revenue provided by exports and manufacturing operations
outside the United States to enhance its position as a supplier to
international customers.

Certain of the Company's businesses and products provide slower, stable
growth and positive cash flows while others can be expected to achieve
higher levels of performance. As a supplier of value-added ingredients,
the Company can benefit from new trends in the food and beverage industry.
It has the technology and flexibility to meet changing customer needs as
well as to supply both brand name and private label manufacturers.

To further penetrate the growing market for flavors, flavor enhancers and
colors in Asia/Pacific Rim, the Company has established a separate
operating division headquartered in Singapore. The division will be known
in the marketplace as Universal Flavors and Colors and will coordinate
sales, marketing and technical functions previously directed from U.S.
based divisions. Resources and personnel have been devoted to build an
infrastructure for the expanded technical and marketing support in
Singapore. These activities are considered an investment in long-term
growth and should significantly boost the company's share of revenue from
the region, now 5%.

Chart

Capital Expenditures/
Depreciation
[ in millions ]

1996 $59.0/$29.2
1995 $42.6/$28.2
1994 $55.1/$31.0
1993 $36.4/$29.6
1992 $45.0/$28.1

Other Issues

Environmental Issues: Universal Foods has a proactive environmental
program which is transforming environmental issues into positive business
opportunities which will increase productivity and profitability resulting
in a competitive advantage for our business.

Increased emphasis is being placed on waste minimization to reduce any
short and long-term environmental issues. All the environmental compliance
systems utilize the most cost effective and innovative technology. These
efforts continue on a world-wide basis with increased emphasis on
environmental aspects of European operations. New environmental control
systems completed in 1996 include a state-of-the-art wastewater system at
Amboy, Illinois and new air emission monitoring and process control
systems at Baltimore and Milwaukee. Planned in 1997 are new environmental
systems at Midleton, Ireland and Elburg, Netherlands.

Equal Opportunity Policy: Universal Foods is an Equal Opportunity
Employer. The Company strives to create a working environment free of
discrimination and harassment with respect to race, sex, color, national
origin, religion, age, disability or being a veteran of the Vietnam era,
as well as to make reasonable accommodations in the employment of
qualified individuals with disabilities.

Corporate Governance: Universal Foods believes it is managed in a way that
is fair to all its shareholders and which allows its shareholders to
maximize the value of their investment by participating in the present and
future growth of the Company.

Independent Board of Directors: The Company's Board of Directors is
composed primarily of independent members. Nominees for board members are
selected to provide a diversity of expertise, experience and achievements
in general business and food-related fields which allow the Board to most
effectively represent the interests of all the Company's shareholders.

Independent Committees: The audit, nominating and compensation and
development committees of the Board are composed of directors who are not
employees of the Company. These committees, as well as the entire Board,
consult with and are advised by outside consultants and experts in
connection with their deliberations as needed.

Executive Compensation: A significant portion of executive compensation is
tied to the Company's success in meeting specific performance goals. The
overall objectives of this policy are to attract and retain the best
possible executive talent, to motivate these executives to achieve the

Company's business strategy goals, to link executive and shareholder
interests through equity-based plans and to provide a program that
recognizes individual contributions.

Scientific Advisory Committee: As an advisory committee to the Board, this
group reviews research and development programs with respect to the
quality and scope of work undertaken, advises the Company on maintaining
product leadership through technological innovation, reports on new
technological trends and suggests new emphasis for research.

Confidential Voting: The Company provides for confidential shareholder
voting by employing an independent tabulation service. Proxy cards which
identify the particular vote of a shareholder are not seen by the Company
unless it is necessary to meet legal requirements or in the event a
shareholder has made a written comment on the card.

Corporate Responsibility: The Company is committed to the health and
well-being of the communities in which it does business. The Company
supports an initiative to return 2% of pretax domestic earnings to its
communities through contributions and in-kind donations of products and
services. The Universal Foods Foundation is a not-for-profit organization
formed by the Company to manage its charitable contributions. Areas that
receive support are education, health and human services, culture and the
arts and civic and community projects.

Quarterly Data

[ Unaudited ]

(Dollars in thousands Earnings
except per share amounts) Revenue Gross Profit Earnings Per Share
1996
First Quarter $193,446 $66,979 $13,490 $ .52
Second Quarter 200,034 67,836 14,542 .56
Third Quarter 200,776 67,848 15,721 .61
Fourth Quarter 212,096 70,429 452 .02

1995
First Quarter $187,724 $65,353 $35,582 $1.37
Second Quarter 191,824 67,171 13,648 .52
Third Quarter 207,542 68,546 14,557 .56
Fourth Quarter 205,881 73,707 2,316 .09

Fourth quarter of 1996 and 1995 include unusual charges of $25 million
($16.7 million after tax or $.65 per share) and $22.7 million ($14.1
million after tax or $.54 per share), respectively.

First quarter of 1995 includes a gain on the sale of the Frozen Foods
business of $49.6 million ($23.4 million after tax or $.90 per share).

Common Stock Prices and Dividends

Market Price Dividends
High Low Per Share
1996
First Quarter $41.00 $33.75 $.25
Second Quarter 40.13 36.63 .25
Third Quarter 38.13 33.00 .25
Fourth Quarter 36.25 28.00 .25

1995
First Quarter $31.13 $26.13 $.24
Second Quarter 34.25 27.25 .24
Third Quarter 34.00 31.38 .24
Fourth Quarter 34.88 31.00 .24

Consolidated Earnings

(In thousands except per share amounts)
Years ended September 30, 1996 1995 1994
Earnings
Revenue $806,352 $792,971 $929,863
Operating costs and expenses:
Cost of products sold 533,260 518,194 616,752
Selling and administrative expenses 164,186 171,914 203,965
Unusual items 25,000 (26,847) 12,125
------- ------- -------
722,446 663,261 832,842
------- ------- -------
Operating income 83,906 129,710 97,021
Interest expense 15,266 15,107 15,888
------- ------- -------
Earnings before income taxes 68,640 114,603 81,133
Income taxes 24,435 48,500 30,222
------- ------- -------
Net earnings $ 44,205 $ 66,103 $ 50,911
------- ------- -------
Earnings per Common Share
Net earnings $1.71 $2.54 $1.95
------- ------- -------
Weighted average shares 25,798 26,061 26,131
------- ------- -------

See notes to consolidated financial statements.

Consolidated Balance Sheets

(Dollars in thousands except
per share amounts)
September 30, 1996 1995
Assets
Current Assets:
Cash and cash equivalents $ 3,395 $ 8,717
Trade accounts receivable less
allowance for losses of $3,509
and $3,768 105,850 105,847
Inventories 174,193 179,020
Prepaid expenses and other
current assets 24,793 15,230
Prepaid income taxes 16,373 17,550
------- -------
Total current assets 324,604 326,364
Investments 20,821 18,081
Other assets 25,099 24,083
Intangibles-at cost, less accumulated
amortization of $29,385 and $27,165 141,487 148,654
Property, Plant and Equipment:
Cost:
Land 15,901 15,438
Buildings 120,071 123,739
Machinery and equipment 343,793 308,204
------- -------
479,765 447,381
Less accumulated depreciation 211,304 187,693
------- -------
268,461 259,688
------- -------
Total assets $780,472 $776,870
======= =======

Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $ 2,919 $ 7,108
Accounts payable and accrued expenses 127,637 121,922
Salaries, wages and withholdings from
employees 11,579 11,715
Income taxes 14,207 20,755
Current maturities of long-term debt 5,810 21,100
------- -------
Total current liabilities 162,152 182,600
Deferred income taxes 12,770 14,514
Other deferred liabilities 19,123 19,198
Accrued employee and retiree benefits 38,592 38,100
Long-term debt 196,869 160,678
Shareholders' Equity:
Common stock par value $.10 a share,
authorized 100,000,000 shares;
issued 26,977,437 shares 2,698 2,698
Additional paid-in capital 78,177 78,955
Earnings reinvested in the business 333,290 314,883
------- -------
414,165 396,536
Less: Treasury stock, 1,557,008 and
877,961 shares, respectively, at cost 49,892 24,770
Less: Other 13,307 9,986
------- -------
350,966 361,780
------- -------
Total liabilities and
shareholders' equity $780,472 $776,870
======= =======

See notes to consolidated financial statements.

<TABLE>
Consolidated Shareholders' Equity
<CAPTION>
Other
Earnings Unearned Foreign
(Dollars in thousands Additional reinvested Unallocated portion of currency
except per share Common paid-in in the Treasury Stock ESOP restricted translation
amounts) stock capital business Shares Amount stock stock adjustments

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at September 30,
1993 $2,698 $79,826 $246,939 593,900 $(14,693) $(2,200) $(1,398) $ (6,106)
Net earnings for the year 50,911
Cash dividends paid-$.92 a
share (24,050)
Stock options exercised,
net of 8,940 shares
exchanged (524) (40,811) 1,157
ESOP contribution 690 (80,000) 1,980
Other 16 8,226 (263)
Restricted stock issued 58 (19,400) 541 (599)
Restricted stock cancelled 4,000 (125) 56
Amortization of restricted
stock 452
Translation adjustment for
year 3,942
Purchase of treasury stock 450,700 (14,118)
Reduction of ESOP loan
guarantee 2,200
------- ------- ------- ------- ------- ------- ------- -------
Balances at September 30,
1994 2,698 80,066 273,800 916,615 (25,521) - (1,489) (2,164)

Net earnings for the year 66,103
Cash dividends paid-$.96
a share (25,020)
Stock options exercised,
net of 81,593 shares
exchanged (1,180) (107,661) 2,744
Other 3 11,607 (412)
Restricted stock issued 66 (13,400) 376 (442)
Restricted stock cancelled 5,800 (198) 81
Amortization of restricted
stock 515
Translation adjustment for
year (6,487)
Purchase of treasury stock 65,000 (1,759)
------- ------- ------- ------- ------- ------- ------- -------
Balances at September 30,
1995 2,698 78,955 314,883 877,961 (24,770) - (1,335) (8,651)

Net earnings for the year 44,205
Cash dividends paid-$1.00
a share (25,798)
Stock options exercised,
net of 6,020 shares
exchanged (788) (83,414) 2,451
Other 12 1,343 (48)
Restricted stock issued (2) (2,000) 64 (62)
Amortization of restricted
stock 444
Translation adjustment for
year (3,703)
Purchase of treasury stock 763,118 (27,589)
------- ------- ------- ------- ------- ------- ------- -------
Balances at September 30,
1996 $2,698 $78,177 $333,290 1,557,008 $(49,892) $ - $ (953) $(12,354)
======= ======= ======= ========= ======= =======

</TABLE>

See notes to consolidated financial statements.

Consolidated Cash Flows

(Dollars in thousands)
Years ended September 30, 1996 1995 1994
Cash Flows from Operating
Activities
Net earnings $44,205 $66,103 $50,911
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation 29,178 28,206 31,012
Amortization 4,341 6,435 5,366
Impairment of long-lived assets
and other unusual charges 25,000 22,713 12,125
Gain on sale of property, plant
and equipment and other
productive assets (332) (50,530) (185)
Changes in operating assets and
liabilities (net of effects from
acquisition and disposition of
businesses):
Trade accounts receivable (3) (5,187) (9,617)
Inventories 4,937 (11,109) (5,082)
Prepaid expenses, income taxes
and other assets (8,681) (3,935) (3,366)
Accounts payable and accrued
expenses 715 (18,325) (15,437)
Salaries, wages and withholdings
from employees (136) 828 (3,158)
Income taxes (6,548) (8,194) 16,488
Deferred income taxes (1,744) (5,881) (4,889)
Other liabilities 417 2,009 (12,526)
------- ------- -------
Net cash provided by operating
activities 91,349 23,133 61,642
======= ======= =======
Cash Flows from Investing Activities
Acquisition of property, plant and
equipment (59,012) (42,562) (55,071)
Acquisition of new businesses-net
of cash acquired (529) (12,431) (65,909)
Proceeds from disposition of
business and sale of property,
plant and equipment and other
productive assets 658 43,317 163,807
Increase in investments (2,740) (4,574) (6,827)
------- ------- -------
Net cash (used in) provided by
investing activities (61,623) (16,250) 36,000
======= ======= =======
Cash Flows from Financing Activities
Proceeds from additional borrowings 76,822 11,948 42,629
Reduction in debt (60,110) (27,920) (70,415)
Purchase of treasury stock (27,589) (1,759) (14,118)
Dividends (25,798) (25,020) (24,050)
Proceeds from options exercised and
other equity transactions 1,627 1,155 386
------- ------- -------
Net cash used in financing
activities (35,048) (41,596) (65,568)
======= ======= =======
Net (decrease) increase in cash and
cash equivalents (5,322) (34,713) 32,074
Cash and cash equivalents at
beginning of year 8,717 43,430 11,356
------- ------- ------
Cash and cash equivalents at end
of year $ 3,395 $ 8,717 $43,430
====== ====== ======
Cash paid during the year for:
Interest $15,175 $15,352 $14,829
Income taxes 27,222 53,500 33,500

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

[ Tabular dollars in thousands except per share amounts ]

1 Summary of Significant Accounting Policies

Nature of Business The Company manufactures and distributes flavors,
colors, flavor enhancers and other bioproducts, dehydrated products and
yeast for foods and other applications.

Principles of Consolidation The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions are eliminated. The Company also
has minority interests in certain foreign companies for which it reports
earnings when cash is received for technical assistance fees and
dividends.

Use of Estimates The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting periods. Actual
results could differ from those estimates.

Cash Equivalents The Company considers all highly liquid investments with
maturities of three months or less when acquired to be cash equivalents.
The effect of the Company's foreign operations on cash flows is not
material.

Inventories Inventories are stated at the lower of cost or market. Cost is
determined using primarily the first-in, first-out (FIFO) method.

Depreciation Depreciation is provided over the estimated useful lives of
plant and equipment using the straight-line method for financial
reporting. Accelerated methods are used for income tax purposes.

Intangibles, Goodwill and Long-Lived Assets The excess cost over net
assets of businesses acquired and other intangibles, principally formulae
and supply contracts, are being amortized using the straight-line method
over periods ranging up to 40 years. In fiscal 1996, the Company adopted
Statement of Financial Accounting Standards No. 121, ("SFAS No. 121"),
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (see note 2). Prior to fiscal 1996, the carrying
value of intangibles, goodwill and long-lived assets was evaluated on the
basis of management's estimates of future undiscounted operating income
associated with the assets. Assets were generally grouped at major
operating entity levels, and these levels were reviewed for impairment.

Recoverability of other long-lived assets not included under SFAS No. 121,
primarily investments in unconsolidated affiliates and goodwill not
identified with impaired assets, will continue to be evaluated on a
recurring basis. The primary indicators of recoverability are current or
forecasted profitability over the estimated remaining life of these
assets, based on the operating profit of the businesses directly related
to these assets. If recoverability is unlikely based on the evaluation,
the carrying amount is reduced by the amount it exceeds the forecasted
operating profit and any estimated disposal value.

Financial Instruments The Company uses financial instruments in its
management of foreign currency and interest rate exposures. Financial
instruments are not held or issued for trading purposes. Non-U.S. dollar
financing transactions may be used as hedges of long-term investments or
intercompany loans in the corresponding currency. Foreign currency gains
and losses on the hedges of long-term investments are recorded as foreign
currency translation adjustments included in shareholders' equity. Gains
and losses related to hedges of intercompany loans offset the gains and
losses on intercompany loans and are recorded in net earnings. Interest
rate exchange agreements are effective at modifying the Company's interest
rate exposures. Net interest is accrued as either interest receivable or
payable with the offset recorded in interest expense. The Company also
uses short-term forward exchange contracts for hedging purposes. Realized
and unrealized gains and losses on these instruments are deferred and
recorded in the carrying amount of the related hedged asset, liability or
firm commitment.

Translation of Foreign Currencies Assets and liabilities of foreign
operations are translated into United States dollars at current exchange
rates. Income and expense accounts are translated into United States
dollars at average rates of exchange prevailing during the year.
Adjustments resulting from the translation of financial statements of
international units are included as foreign currency translation
adjustments in the equity section of the balance sheets. Net transaction
(gains) losses of $(23,000) in 1996, $140,000 in 1995 and $(697,000) in
1994, are included in earnings before income taxes.

Stock-Based Compensation The Company currently accounts for its
stock-based compensation plans using the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25).

In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, ("SFAS No. 123") Accounting for
Stock-Based Compensation. Under the provisions of SFAS No. 123, companies
can elect to account for stock-based compensation plans using a
fair-value-based method or continue measuring compensation expense for
those plans using the intrinsic value method prescribed in APB 25. SFAS
No. 123 requires that companies electing to continue using the intrinsic
value method must make pro forma disclosures of net earnings and earnings
per share as if the fair-value-based method of accounting had been
applied. The adoption of SFAS No. 123 will be reflected in the Company's
1997 consolidated financial statements.

Since the Company anticipates continuing to account for stock-based
compensation using the intrinsic value method, SFAS No. 123 will not have
an impact on the Company's results of operations or financial position.

2 Acquisitions, Divestiture and Unusual Items

The Company adopted SFAS No. 121 as of the beginning of the fourth quarter
of 1996. In this regard, certain long-lived assets which are held and used
in the business were identified as impaired. The Company considers
continued operating losses, or significant and long-term changes in
industry conditions, to be its primary indicators of potential impairment.
In 1996 an impairment was recognized when the future undiscounted cash
flows of each asset was estimated to be less than the asset's related
carrying value. As such, the carrying values of these assets were written
down to the Company's estimates of fair value. Fair value was based on
sales of similar assets, or other estimates of fair value such as
discounting estimated future cash flows. The non-cash charge for adoption
of this standard was $20,000,000 and resulted from changes in industry
conditions, continued operating losses and from the Company grouping
assets at a lower level than under its previous method of accounting.

In addition, the Company identified opportunities to streamline its
production base, improve efficiency and enhance its competitiveness.
Accordingly, the Company adopted a restructuring plan which includes
closing or reconfiguring a number of production facilities and reducing
the workforce by approximately 130 employees. The restructuring charge of
approximately $5,000,000 includes primarily charges related to severance
costs, substantially all of which will be paid in fiscal 1997.

The total charge for adopting SFAS No. 121 and restructuring was
$25,000,000 ($16,700,000 after tax or $.65 per share).

In 1995, the Company recorded unusual items resulting in a net pretax gain
of $26,847,000 ($9,247,000 after tax, or $.36 per share). Unusual items
include the gain on the sale of the Frozen Foods business of $49,560,000,
offset by the costs of discontinuing a product line of $14,047,000 and
other items which include the cost of a patent infringement judgment and
the write-down of intangible assets totaling $8,666,000.

In 1995, the Company finalized the sale of its Frozen Foods business and
amended the Stock Purchase Agreement ("Agreement") with ConAgra, Inc. The
business was effectively transferred to ConAgra on August 1, 1994. Under
the amended Agreement, ConAgra agreed to acquire 100% of the stock of
Universal Frozen Foods Company for $202,000,000 cash. The sale of the
Frozen Foods business resulted in a pretax gain of $49,560,000.

In 1995, the Company reviewed its options relating to the BioVentures
product line. Based on the Company's comprehensive review, during the
fourth quarter of 1995, the Company decided to sell or discontinue this
product line. Accordingly, the Company evaluated the ongoing value of the
plant and equipment and other assets associated with this product line.
Based on the evaluation, the Company recorded a charge of $14,047,000 to
adjust the assets to estimated fair value less costs of disposal. In the
fourth quarter of 1996, the Company decided to use the plant and equipment
in its ongoing operations and terminated its efforts to sell these assets.

In August 1995, the Court of Appeals for the Federal Circuit Court
affirmed a judgment against the Company for patent infringement. The
Company has accrued $4,500,000 for the judgment. The Supreme Court is
currently reviewing the finding of the Court of Appeals for the Federal
Circuit Court and should issue their findings in fiscal 1997.

In 1995, the Company acquired the common stock of two foreign dehydrated
vegetable processors for $12,798,000 cash. On an unaudited pro-forma
basis, the effects of the acquisitions were not significant to the
Company's 1995 results of operations.

In July 1994, the Company acquired all of the outstanding stock of
Champlain Industries Limited, a manufacturer of savory flavorings and
flavor enhancers, for $61,744,000 of which $37,258,000 was paid in cash
with the remaining purchase price paid in 1995 and 1996. Also during 1994,
the Company purchased several other businesses for an aggregate purchase
price of $33,302,000. The excess of the total aggregate cost of all the
1994 acquisitions over the fair value of net assets acquired of
approximately $61,413,000 is being amortized by the straight-line method
over 40 years. On an unaudited pro forma basis, the effects of the
acquisitions were not significant to the Company's 1994 results of
operations.

The above acquisitions have been accounted for as purchases and,
accordingly, their results of operations have been included in the
financial statements since their respective dates of acquisition.

In the fourth quarter of 1994, the Company recorded a pretax restructuring
charge of $12,125,000 ($7,600,000 after tax, or $.29 per share). The
restructuring includes product line consolidation in the Company's Flavor
Division and the reorganization of sales, marketing and distribution
functions in the Red Star Yeast & Products Division.

The charge included $6,000,000 of severance and termination benefits and
$6,125,000 of asset write-offs and other items. Approximately 50% of the
charge was non-cash. Operating cash flows were used to fund severance and
other cash items. The restructuring program was substantially completed in
1995.

3 Inventories

Inventories include finished and in-process products totaling $122,775,000
and $119,885,000 at September 30, 1996 and 1995, respectively, and raw
materials and supplies of $51,418,000 and $59,135,000 at September 30,
1996 and 1995, respectively.

4 Debt

Long-term debt consists of the following obligations:

1996 1995
Payable in U.S. Dollars:
9.06% senior notes due
through July 2004 $ 42,000 $ 46,000
8.60% senior notes repaid
December 1995 - 12,600
7.59% senior notes due
through December 2008 30,000 30,000
6.99% senior notes due
through December 2007 40,000 -
6.77% senior notes due
through January 2010 15,000 -
6.70% senior notes due
through December 2009 20,000 20,000
6.68% senior notes due
through January 2011 15,000 -
6.38% senior notes due
through December 2003 20,000 20,000
6.21% senior notes repaid
December 1995 - 20,000
Commercial paper and other
short-term notes 12,407 8,215
Various mortgage notes, capital
lease obligations and other notes 6,050 6,536
Notes and credit facilities payable
in foreign currencies 2,222 18,427
------- -------
202,679 181,778
Current maturities 5,810 21,100
------- -------
Total long-term debt $196,869 $160,678
======= =======

The Company has a $70,000,000 multicurrency revolving loan agreement with
a group of three banks. Under the agreement, the Company has the option to
elect to have interest rates determined based upon the LIBOR rate plus
margin or the certificate of deposit rate plus margin. A commitment fee is
payable on the unused amount of credit. The facility matures in September
2001. Uncommitted lines of credit totalling $134,000,000 are also
available to the Company from several banks.

The Company issues short-term commercial paper obligations supported by
committed lines of credit included in the Revolving Loan Agreement. The
Company also issues other short-term notes. At September 30, 1996 and
1995, $12,407,000 and $8,215,000 of short-term borrowings were classified
as long-term debt reflecting the Company's intent and ability, through the
existence of the unused credit facility, to refinance these borrowings.

The aggregate amounts of maturities on long-term debt each year for the
five years subsequent to September 30, 1996 are as follows: 1997,
$5,810,000; 1998, $5,936,000; 1999, $6,471,000; 2000, $7,251,000 and 2001,
$18,636,000.

Substantially all of the loan agreements contain restrictions concerning
working capital, borrowings, investments and dividends. Earnings
reinvested of $5,635,000 at September 30, 1996 were unrestricted.

Short-term borrowings consist of loans to foreign subsidiaries denominated
in local currencies which are borrowed under various foreign uncommitted
lines of credit.

5 Financial Instruments and Risk Management

Currency Swaps To manage foreign exchange risk, the Company has entered
into currency swaps. The currency swaps of $14,537,000 and $22,358,000 at
September 30, 1996 and 1995, respectively, effectively hedge long-term
Canadian dollar-denominated investments and mature in 1997.

Forward Exchange Contracts The Company uses forward exchange contracts to
reduce the effect of fluctuating foreign currencies on short-term foreign
currency-denominated intercompany transactions and other known foreign
currency exposures. At September 30, 1996 and 1995, the Company had
foreign exchange contracts, generally with maturities of one year or less,
of $49,098,000 and $43,175,000, respectively.

Concentrations of Credit Risk Counterparties to currency exchange and
interest rate swaps consist of large major international financial
institutions. The Company continually monitors its positions and the
credit ratings of the counterparties involved and limits the amount of
credit exposure to any one party. While the Company may be exposed to
potential losses due to the credit risk of non-performance by these
counterparties, losses are not anticipated. Concentrations of credit risk
with respect to accounts receivable are limited due to the large number of
customers, generally short payment terms, and their dispersion across
geographic areas.

Fair Values The carrying amounts of cash and cash equivalents, trade
receivables, investments, financial instruments, accounts payable, and
short-term borrowings approxi-mated fair value as of September 30, 1996
and 1995.

The fair value of the Company's long-term debt, including current
maturities, is estimated using discounted cash flows based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements. The fair value at September 30, 1996 and 1995 was
approximately $203,714,000 and $190,000,000, respectively.

6 Shareholders' Equity

In 1988, the Board of Directors adopted a common stock shareholder rights
plan ("Right") which entitles each shareholder of record to receive a
dividend distribution of common stock upon the occurrence of certain
events. The Right becomes exercisable and tradeable ten days after a
person or group acquires 20% or more, or makes an offer to acquire 20% or
more, of the Company's outstanding common stock. When exercisable, each
Right entitles the holder to purchase $100 worth of Company common stock
for $50. Further, upon the occurrence of a merger or transfer of more than
50% of the Company's assets, the Right entitles the holder to purchase
common stock of the Company or common stock of an "acquiring company"
having a market value equivalent to two times the exercise price of the
Right. At no time does the Right have any voting power. The Right is
subject to redemption by the Company's Board of Directors for $.01 per
Right at any time prior to the date which a person or group acquires
beneficial ownership of 20% or more of the Company's common stock or
subsequent thereto at the option of the Board of Directors. The Rights
expire on September 8, 1998.

In January 1994, the shareholders approved the 1994 Employee Stock Plan
(the "1994 Plan") under which the Company may issue up to 1,200,000 shares
of common stock pursuant to the exercise of stock options or the grant of
restricted stock. Of the total number, up to 250,000 shares may be awarded
as restricted stock. The 1994 Plan also authorizes the grant of up to
400,000 stock appreciation rights (SARs) in connection with stock options.
The Company also has shares available under the previously approved 1990
Stock Plan for Executive employees (the "1990 Plan").

The Plans have awarded shares of restricted stock which become freely
transferable at the end of the period of restriction-five years. During
the period of restriction, the employee has voting rights and is entitled
to receive all dividends and other distributions paid with respect to the
stock.

The changes in outstanding stock options during the three years ended

September 30, 1996 are summarized below:

Outstanding
Reserved Options Available

Balances at September 30, 1993
($11.833 to $36.125) 1,659,311 1,414,411 244,900
Authorized under the 1994 Plan 1,200,000 - 1,200,000
Granted ($30.875 to $32.250) - 339,900 (339,900)
Restricted stock awarded (19,400) - (19,400)
Exercised ($11.833 to $29.625) (49,751) (49,751) -
Cancelled - (104,250) 104,250
--------- --------- ---------
Balances at September 30, 1994
($11.833 to $36.125) 2,790,160 1,600,310 1,189,850
Granted ($28.250 to $33.000) - 372,350 (372,350)
Restricted stock awarded (13,400) - (13,400)
Exercised ($11.833 to $33.750) (189,254) (189,254) -
Cancelled - (167,516) 167,516
--------- --------- ---------
Balances at September 30, 1995
($11.833 to $36.125) 2,587,506 1,615,890 971,616
Granted ($31.250 to $38.250) - 442,400 (442,400)
Restricted stock awarded (2,000) - (2,000)
Exercised ($11.833 to $36.125) (89,434) (89,434) -
Cancelled - (29,064) 29,064
--------- --------- ---------
Balances at September 30, 1996
($11.833 to $38.250) 2,496,072 1,939,792 556,280
========= ========= =========

At September 30, 1996, 1,175,943 shares were exercisable at prices ranging
from $11.833 to $36.125.

The Company is authorized to issue 250,000 shares of cumulative preferred
stock.

7 Retirement Plans

The Company primarily provides benefits under defined contribution plans
including a savings plan and ESOP. The savings plan covers substantially
all domestic salaried and certain non-union hourly employees and provides
for matching contributions up to 4% of each employee's salary. The ESOP
covers substantially all domestic employees not covered by a defined
benefit plan and provides for contributions of 6% to 10% of each
employees' salary. Total expense for the Company's defined contribution
plans was $7,144,000, $5,205,000 and $8,112,000 in 1996, 1995 and 1994,
respectively.

8 Other Postretirement Benefits

The Company provides certain health insurance benefits to eligible
domestic retirees and their dependents.

Postretirement benefit expense includes the following components:

1996 1995 1994
Service cost $ 831 $1,139 $1,586
Interest cost on accumulated
benefit obligation 1,212 1,733 1,977
Amortization of prior
service cost (278) (278) (352)
Other (363) (15) -
----- ----- -----
Postretirement benefit expense $1,402 $2,579 $3,211
===== ===== =====

The Company continues to fund benefit costs on a pay-as-you-go basis, with
retirees paying a portion of the costs.

The status of the Company's postretirement benefit obligation was:

1996 1995
Actuarial present value of
accumulated benefit obligation:
Retirees $ 7,142 $ 7,935
Fully eligible active plan
participants 2,032 2,343
Other active plan participants 8,327 12,702
------ ------
Accumulated benefit obligation 17,501 22,980
Unrecognized prior service cost 4,721 4,999
Unrecognized gain 10,477 3,949
------ ------
Postretirement benefits accrued $32,699 $31,928
====== ======

The weighted average discount rates used in determining the accumulated
postretirement benefit obligation at September 30, 1996 and 1995 were 7.5%
and 7.0%, respectively. The health care cost trend rates were assumed to
be 10% in 1996, gradually declining to 5.5% by the year 2002 and remaining
at that level thereafter. In 1995 the cost trend rates were assumed to be
13%, gradually declining to 7% by the year 2001. A one percentage point
increase in the assumed cost trend rate would increase the accumulated
postretirement benefit obligation as of September 30, 1996 by
approximately $3,569,000 and the aggregate of the service and interest
cost components of the 1996 postretirement benefit expense by $417,000.

During 1994, the Company curtailed postretirement benefits relating to
employees of the Frozen Foods business which was sold effective July 31,
1994. The gain resulting from the curtailment has been included with the
gain on the sale of Frozen Foods (see note 2).

9 Income Taxes

The provision for income taxes, is as follows:

1996 1995 1994
Currently payable:
Federal $14,179 $33,181 $36,759
State 2,683 5,636 6,684
Foreign 8,140 8,305 5,754
Deferred (benefit):
Federal 1,792 1,021 (16,592)
State 180 210 (2,862)
Foreign (2,539) 147 479
------ ------ ------
$24,435 $48,500 $30,222
====== ====== ======

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities consist of the following:

1996 1995
Deferred tax assets:
Benefit plans $(19,300) $(19,165)
Liabilities and reserves (9,097) (9,919)
Other (13,605) (17,836)
------- -------
Gross deferred tax assets (42,002) (46,920)
Valuation allowance 8,794 5,587
------- -------
Total deferred tax assets (33,208) (41,333)
------- -------
Deferred tax liabilities:
Property, plant and equipment 15,587 17,609
Other 14,018 20,688
------- --------
Total deferred tax liabilities 29,605 38,297
------- --------
Net deferred tax (assets)
liabilities $ (3,603) $ (3,036)
======= ========

The effective tax rate differs from the statutory Federal income tax rate
of 35% as described below:

1996 1995 1994
Taxes at statutory rate $24,024 $40,114 $28,397
State income taxes, net of
Federal income tax benefit 1,861 3,800 2,484
Tax credits (2,300) (3,100) (1,980)
Sale of business 00,000 5,900
Other, net 850 1,786 1,321
------ ------ ------
Provision for income taxes $24,435 $48,500 $30,222
====== ====== ======
Effective tax rate 35.6% 42.3% 37.3%
==== ==== ====

Earnings before income taxes are summarized as follows:

1996 1995 1994
United States $ 55,228 $ 92,043 $63,079
Foreign 13,412 22,560 18,054
------ ------- ------
$ 68,640 $114,603 $81,133
====== ======= ======

Domestic income taxes have not been provided on undistributed earnings of
foreign subsidiaries which are considered to be permanently invested. If
undistributed foreign earnings were to be remitted, foreign tax credits
would substantially offset any resulting domestic tax liability.

10 Foreign Operations

Summarized information relating to the Company's domestic and foreign
operations are as follows:

1996 1995 1994
Revenue:
United States $517,678 $516,683 $745,487
Europe 186,547 174,931 104,375
Other foreign 102,127 101,357 80,001
------- ------- -------
$806,352 $792,971 $929,863
======= ======= =======
Operating Income:
United States $ 67,850 $ 98,816 $ 76,315
Europe 2,160 14,912 8,060
Other foreign 13,896 15,982 12,646
------- ------- -------
$ 83,906 $129,710 $ 97,021
======= ======= =======
Identifiable Assets:
United States $439,471 $439,634 $482,934
Europe 241,434 238,497 175,539
Other foreign 99,567 98,739 105,191
------- ------- -------
$780,472 $776,870 $763,664
======= ======= =======

Fiscal 1996 operating income includes pretax unusual charges of
$25,000,000 relating to the adoption of SFAS No. 121 and the restructuring
plan (see note 2). The charges were as follows: United States $11,100,000;
Europe $13,900,000. The fiscal 1995 and 1994 unusual items of
$(26,847,000) and $12,125,000 are included with operating income of the
United States.

Transfers of product between geographic areas are not significant.
Operating income is total revenue less operating expenses. Identifiable
assets include all assets identified with the operations in each
geographic area, and an allocable portion of intangible assets recorded by
the parent.

11 Contingencies

The Company is involved in various claims and litigation arising in the
normal course of business. In the opinion of management and Company
counsel, the ultimate resolution of these actions will not materially
affect the consolidated financial position, results of operations, or cash
flows of the Company.

<PAGE>

Management's Responsibility for Financial Statements

[ Years ended September 30, 1996, 1995 and 1994 ]

The management of Universal Foods Corporation is responsible for
preparation of the financial statements and other financial information
included in this annual report. The financial statements have been
prepared in accordance with generally accepted accounting principles.

It is management's policy to maintain a control-conscious environment
through an effective system of internal accounting controls. These
controls are supported by the careful selection of competent and
knowledgeable personnel and by the communication of standard accounting
and reporting policies and procedures throughout the Company. These
controls are adequate to provide reasonable assurance that assets are
safeguarded against material loss or unauthorized use and to produce the
records necessary for the preparation of reliable financial information.
There are limits inherent in all systems of internal control based on the
recognition that the costs of such systems should be related to the
benefits to be derived. Management believes that its systems provide this
appropriate balance.

The control environment is complemented by the Company's internal audit
function, which evaluates the adequacy of the controls, policies and
procedures in place, as well as adherence to them, and recommends
improvements for implementation when applicable. In addition, the
Company's independent auditors, Deloitte & Touche LLP, have developed an
understanding of the Company's accounting and financial controls and have
conducted such tests as they considered necessary to render an opinion on
the Company's financial statements.

The Board of Directors pursues its oversight role with respect to the
Company's financial statements through the Audit Committee, which is
composed solely of outside directors. The Audit Committee recommends
selection of the Company's auditors and meets with them and the internal
auditors to review the overall scope and specific plans for their
respective audits and results from those audits. The Committee also meets
with management to review overall accounting policies relating to the
reporting of financial results. Both the independent auditors and internal
auditors have unrestricted access to the Audit Committee.

Kenneth P. Manning
President and Chief Executive Officer

Michael Fung
Vice President and Chief Financial Officer

Independent Auditors' Report

To the Shareholders and Board of Directors of Universal Foods Corporation:

We have audited the accompanying consolidated balance sheets of Universal
Foods Corporation and subsidiaries as of September 30, 1996 and 1995, and
the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the three years in the period ended September 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies as of
September 30, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended September 30,
1996, in conformity with generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, in fiscal
1996 the Company adopted the provisions of the Financial Accounting
Standards Boards' Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."

Deloitte & Touche LLP

Milwaukee, Wisconsin
November 14, 1996

<PAGE>
<TABLE>
Five Year Review
<CAPTION>
(Dollars in thousands except
per share data) 1996 1995 1994 1993 1992
Summary of Operations

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $806,352 100.0% $792,971 100.0% $929,863 100.0% $891,566 100.0% $883,438 100.0%
Operating costs
and expenses:
Cost of products sold 533,260 66.1 518,194 65.3 616,752 66.3 589,735 66.1 593,006 67.1
Selling and
administrative expenses 164,186 20.4 171,914 21.7 203,965 22.0 196,102 22.0 187,727 21.3
Unusual items 25,000 3.1 (26,847) (3.4) 12,125 1.3 - - 19,300 2.2
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
722,446 89.6 663,261 83.6 832,842 89.6 785,837 88.1 800,033 90.6
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Operating income 83,906 10.4 129,710 16.4 97,021 10.4 105,729 11.9 83,405 9.4
Interest expense 15,266 1.9 15,107 1.9 15,888 1.7 15,172 1.7 16,423 1.9
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Earnings before income
taxes and cumulative
effect of accounting
changes 68,640 8.5 114,603 14.5 81,133 8.7 90,557 10.2 66,982 7.5
Income taxes 24,435 3.0 48,500 6.2 30,222 3.2 33,959 3.9 25,286 2.8
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Earnings before cumulative
effect of accounting
changes 44,205 5.5 66,103 8.3 50,911 5.5 56,598 6.3 41,696 4.7
Cumulative effect of
accounting changes
net of tax - - - - - - 23,563 2.6 - -
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net earnings $ 44,205 5.5% $ 66,103 8.3% $ 50,911 5.5% $ 33,035 3.7% $ 41,696 4.7%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
Earnings per common share
before cumulative effect
of accounting changes $ 1.71 $ 2.54 $ 1.95 $ 2.15 $ 1.57
Net earnings per
common share $ 1.71 $ 2.54 $ 1.95 $ 1.25 $ 1.57
======= ======= ======= ======= =======
Other Related Data
Earnings per common share
excluding unusual items
and cumulative effect of
accounting changes $ 2.36 $ 2.18 $ 2.24 $ 2.15 $ 2.02
Dividend per
common share 1.00 0.96 0.92 0.88 0.84
Average shares
outstanding 25,798,482 26,061,269 26,130,783 26,350,346 26,608,350
Book value per
common share $ 13.85 $ 13.89 $ 12.60 $ 11.60 $ 11.57
Price range per
common share 28.00-41.00 26.13-34.88 28.88-35 30.25-37.25 26.75-39.88
Share price at
September 30 32.50 34.88 29.63 33.88 31.38
Research and development
expenditures 29,824 28,558 32,217 28,460 26,597
Capital expenditures 59,012 42,562 55,071 36,363 44,982
Depreciation 29,178 28,206 31,012 29,644 28,144
Amortization 4,341 6,435 5,366 5,409 4,894
Total assets 780,472 776,870 763,664 729,993 702,130
Long-term debt 196,869 160,678 172,235 171,907 167,746
Shareholders' equity 350,966 361,780 327,390 305,066 303,174
Return on average
shareholders' equity
before cumulative effect
of accounting change 12.2% 18.5% 16.1% 18.7% 13.8%
Total debt to total capital 36.9% 34.3% 37.6% 38.7% 40.4%
Employees 4,035 4,104 4,063 5,450 5,400

</TABLE>

The 1996 results include pretax charges of $20 million relating to
adopting SFAS No. 121 and $5 million for restructuring costs.

The 1995 results include a pretax gain of $49.6 million relating to the
sale of the Frozen Foods business and the cost of discontinuing a product
line and other unusual items totaling $22.7 million. The 1994 results
include a pretax restructuring charge of $12.1 million. The 1992 results
include a pretax restructuring charge of $19.3 million relating to the
Frozen Foods business.

EXHIBIT 21

SIGNIFICANT SUBSIDIARIES OF
UNIVERSAL FOODS CORPORATION

Warner-Jenkinson Company, a New York corporation formerly known
as H. Kohnstamm & Co., Inc. through which the Company conducts its food
color business, has 5 foreign subsidiaries.

Rogers Foods Inc., a California corporation formerly the
Company's Dehydrated Division.

Universal Holdings Inc., a Nevada investment subsidiary which is
the parent company of Rogers Foods Inc. and the Warner-Jenkinson Company.

Universal Flavor Corporation, an Indiana corporation through
which the Company conducts its food flavor business, has 6 domestic and 15
foreign subsidiaries.

EXHIBIT 23

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Amendment No. 1 to
Registration Statements No. 33-7235, 33-34555 and 33-55437, and
Registration Statements No. 33-27356 and 33-35707 of Universal Foods
Corporation on Form S-8 of our report dated November 14, 1996, which
expresses an unqualified opinion and includes a paragraph relating to the
adoption of the provisons of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of," appearing in and incorporated by
reference in the Annual Report on Form 10-K of Universal Foods Corporation
for the year ended September 30, 1996.

DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin

December 26, 1996

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNIVERSAL FOODS CORPORATION AS OF AND FOR THE
YEAR ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,395
<SECURITIES> 0
<RECEIVABLES> 109,359
<ALLOWANCES> 3,509
<INVENTORY> 174,193
<CURRENT-ASSETS> 324,604
<PP&E> 479,765
<DEPRECIATION> 211,304
<TOTAL-ASSETS> 780,472
<CURRENT-LIABILITIES> 162,152
<BONDS> 196,869
0
0
<COMMON> 2,698
<OTHER-SE> 348,268
<TOTAL-LIABILITY-AND-EQUITY> 780,472
<SALES> 806,352
<TOTAL-REVENUES> 806,352
<CGS> 533,260
<TOTAL-COSTS> 533,260
<OTHER-EXPENSES> 25,000<F1>
<LOSS-PROVISION> 349
<INTEREST-EXPENSE> 15,266
<INCOME-PRETAX> 68,640
<INCOME-TAX> 24,435
<INCOME-CONTINUING> 44,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,205
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
<FN>
<F1>Unusual Item: Includes chargs of $20 million relating to adopting SFAS No. 121
and $5 million for restructuring costs.
</FN>

</TABLE>