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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-7626
UNIVERSAL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0561070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
433 East Michigan Street, Milwaukee, Wisconsin 53202
(Address of principal executive offices)
Registrant's telephone number, including area code: (414) 271-6755
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for at
least the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock as of the latest practicable date.
Class Outstanding at January 31, 1997
Common Stock, par value $0.10 per share 25,475,005 shares
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<PAGE>
UNIVERSAL FOODS CORPORATION
INDEX
Page No.
PART I, FINANCIAL INFORMATION:
Consolidated Condensed Balance Sheets
- December 31, 1996 and September 30, 1996. 1
Consolidated Condensed Statements of Earnings
- Three Months Ended December 31, 1996
and 1995. 2
Consolidated Condensed Statements of Cash Flows
- Three Months Ended December 31, 1996 and 1995. 3
Notes to Consolidated Condensed Financial
Statements. 4
Management's Discussion and Analysis of Results of
Operations, Financial Condition and Forward
Looking Information. 5
PART II, OTHER INFORMATION:
Item 4, Submission of Matters to a Vote of
Security Holders. 7
Item 6, Exhibits and Reports on Form 8-K. 8
Signatures. 9
<PAGE>
PART I
FINANCIAL INFORMATION
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($000's Omitted)
December 31,
1996 September 30,
ASSETS (Unaudited) 1996
CURRENT ASSETS:
Cash and cash equivalents $ 6,726 $ 3,395
Trade accounts receivable 102,107 105,850
Inventories:
Finished and in-process products 130,718 122,775
Raw materials and supplies 53,983 51,418
Prepaid expenses and other current assets 35,076 41,166
-------- --------
TOTAL CURRENT ASSETS 328,610 324,604
INVESTMENTS AND OTHER ASSETS 45,982 45,920
INTANGIBLES 140,373 141,487
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land and buildings 137,150 135,972
Machinery and equipment 356,979 343,793
-------- --------
494,129 479,765
Less accumulated depreciation 219,501 211,304
-------- --------
274,628 268,461
-------- --------
TOTAL ASSETS $789,593 $780,472
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,946 $ 2,919
Accounts payable and accrued expenses 114,016 127,637
Salaries, wages and withholdings
from employees 11,897 11,579
Income taxes 17,761 14,207
Current maturities of long-term debt 5,283 5,810
-------- --------
TOTAL CURRENT LIABILITIES 150,903 162,152
DEFERRED INCOME TAXES 12,811 12,770
OTHER DEFERRED LIABILITIES 18,856 19,123
ACCRUED EMPLOYEE AND RETIREE BENEFITS 38,317 38,592
LONG-TERM DEBT 208,887 196,869
SHAREHOLDERS' EQUITY:
Common stock 2,698 2,698
Additional paid-in capital 78,054 78,177
Earnings reinvested in the business 340,555 333,290
-------- --------
421,307 414,165
Less: Treasury stock, at cost 49,446 49,892
Other 12,042 13,307
-------- --------
359,819 350,966
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $789,593 $780,472
======== ========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
($000's Omitted Except Per Share Amounts)
(Unaudited)
Three Months Ended
December 31
1996 1995
Revenue $193,484 $193,446
Operating costs and expenses:
Cost of products sold 127,632 126,467
Selling and administrative
expenses 40,969 41,995
--------- --------
Operating income 24,883 24,984
Interest expense 3,687 3,906
--------- --------
Earnings before income taxes 21,196 21,078
Income taxes 7,313 7,588
--------- --------
Net earnings $ 13,883 $ 13,490
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Weighted average number of
common shares outstanding 25,428,000 26,103,000
========== ==========
Net earnings per common share $.55 $.52
==== ====
Dividends per common share $.26 $.25
==== ====
See accompanying notes to consolidated condensed financial statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($000's Omitted)
(Unaudited)
Three Months Ended
December 31
1996 1995
Net cash provided by operating activities $ 12,171 $ 13,292
Cash flows from investing activities:
Acquisition of property, plant and equipment (13,266) (10,397)
Acquisition of new business (net of
cash acquired) --- (529)
Other items, net 245 504
------- -------
Net cash used in investing activities (13,021) (10,422)
Cash flows from financing activities:
Proceeds from additional borrowings 12,813 50,032
Reductions in debt (2,295) (47,717)
Proceeds from options exercised and other 273 315
Purchase of treasury stock --- (846)
Dividends paid (6,610) (6,527)
------- -------
Net cash provided by (used in)
financing activities 4,181 (4,743)
Net increase (decrease) in cash and
cash equivalents 3,331 (1,873)
Cash and cash equivalents at beginning
of period 3,395 8,717
------- -------
Cash and cash equivalents at end of period $ 6,726 $ 6,844
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 3,708 $ 4,003
Income taxes 4,091 3,216
See accompanying notes to consolidated condensed financial statements.
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UNIVERSAL FOODS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of December 31, 1996 and
September 30, 1996, the results of operations and cash flows for the
three month periods ended December 31, 1996 and 1995. The results of
operations for any interim period are not necessarily indicative of
the results to be expected for the full fiscal year.
2. Refer to the footnotes in the Company's annual financial statements
for the year ended September 30, 1996, for a description of the
accounting policies, which have been continued without change, and
additional details of the Company's financial condition. The details
in those notes have not changed except as a result of normal
transactions in the interim.
3. Expenses are charged to operations in the year incurred. However,
for interim reporting purposes, certain of these expenses are charged
to operations based on an estimate rather than as expenses are
actually incurred.
4. During the three months ended December 31, 1995, the Company
repurchased 24,500 shares of common stock for an aggregate price of
$846,000.
5. For the three months ended December 31, 1996, depreciation and
amortization were $7,813,000 and $1,197,000, respectively. For the
three months ended December 31, 1995, depreciation and amortization
were $8,102,000 and $1,466,000, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS, FINANCIAL CONDITION
AND FORWARD LOOKING INFORMATION
RESULTS OF OPERATIONS:
Revenue from operations during the three months ended December 31,
1996 was flat at $193,484,000, compared with $193,446,000 a year ago.
The revenue increase from cosmetic and pharmaceutical products in the
Color Division was offset by weakness in selected markets in the
Flavor Division.
Gross profit margins decreased as a result of competitive price
pressures in synthetic dyes in the Color Division and from
continuing competition in the Flavor Division. Decreased volume in
the Flavor Division also contributed to the decrease in gross profit
margin. Gross profit margins declined to 34.0% of revenue during the
three months ended December 31, 1996 as compared to 34.6% for the
same period last year.
Selling and administrative expenses decreased to 21.2% of revenue
during the three months ended December 31, 1996 compared to 21.7% for
the same period last year due to the Company's continued focus on
cost reduction.
Interest expense in the first quarter decreased to $3,687,000 from
$3,906,000 in the same period last year primarily as a result of
lower average interest rates.
FINANCIAL CONDITION:
The current ratio increased to 2.2 at December 31, 1996, compared
with 2.0 at September 30, 1996. Net working capital increased
$15,255,000 to $177,707,000 at December 31, 1996 from $162,452,000 at
September 30, 1996.
Net cash provided by operating activities was $12,171,000 for the
quarter ended December 31, 1996 compared to $13,292,000 provided by
operating activities for the quarter ended December 31, 1995. The
decrease in cash provided by operating activities in fiscal 1997 was
due to a larger net increase in working capital during the current
quarter than last year.
Net cash used in investing activities was $13,021,000 for the three
months ended December 31, 1996. Included in investing activities are
capital additions of $13,266,000. The capital expenditure program
reflects the Company's continuing commitment to maintain and enhance
product quality, further automate and upgrade manufacturing
processes, and expand the business through internal growth. Major
projects in-process include construction of a new aroma chemical and
fragrance facility in Spain and a BioProducts facility in France.
Net cash provided by financing activities was $4,181,000 for the
quarter compared with $4,743,000 used in financing in the comparable
period last year. Proceeds from additional borrowings of $12,813,000
were used primarily to fund capital expenditures. Dividends of
$6,610,000 and $6,527,000 were paid during the first three months of
fiscal 1997 and 1996, respectively.
FORWARD LOOKING INFORMATION:
The Company has announced that it will expand into the specialty inks
market with an agreement in principle to acquire Tricon Colors Inc.
With 1996 revenue of $20 million, Tricon Colors produces inks for
computer printers and dyes for the agricultural, pharmaceutical and
cosmetic industries. The purchase for cash is expected to be
completed by the end of the second quarter.
PART II
OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Universal Foods
Corporation was held on Thursday, January 23, 1997. At the
meeting the following matters were voted upon by the
Shareholders.
25,434,187 shares were entitled to vote at the meeting, and
23,100,115 shares (90.82%) were voted.
The following persons were elected to a three year term as
Directors of the Company:
For Against
John F. Bergstrom 22,554,533 545,582
William V. Hickey 22,559,046 541,069
Leon T. Kendall 22,551,967 548,148
Kenneth P. Manning 22,608,432 491,683
The following persons continued in office as Directors in
accordance with their previous election:
Michael E. Batten
James L. Forbes
Dr. Carol I. Waslien Ghazaii
James H. Keyes
Guy A. Osborn
William U. Parfet
Essie Whitelaw
The Shareholders ratified the appointment of Deloitte & Touche
LLP, certified public accountants, as the independent auditors
of the Company for fiscal 1997. Of the 25,434,187 shares
entitled to vote at the meeting, 22,979,825 shares voted for
ratification, 60,904 shares voted against ratification and
59,386 shares abstained.
There were no broker non-votes at the Annual Meeting.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) No reports on Form 8-K were required to be filed during the
quarter ended December 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL FOODS CORPORATION
Date: February 13, 1997 By: /s/ Terrence M. O'Reilly
Terrence M. O'Reilly, Vice President,
Secretary and General Counsel
Date: February 13, 1997 By: /s/ Michael L. Hennen
Michael L. Hennen, Corporate Controller
<PAGE>
EXHIBIT INDEX
UNIVERSAL FOODS CORPORATION
FORM 10Q
Quarterly Period Ended December 31, 1996
Exhibit No. Exhibit
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF UNIVERSAL FOODS
CORPORATION AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,726
<SECURITIES> 0
<RECEIVABLES> 105,747
<ALLOWANCES> 3,640
<INVENTORY> 184,701
<CURRENT-ASSETS> 328,610
<PP&E> 494,129
<DEPRECIATION> 219,501
<TOTAL-ASSETS> 789,593
<CURRENT-LIABILITIES> 150,903
<BONDS> 208,887
0
0
<COMMON> 2,698
<OTHER-SE> 357,121
<TOTAL-LIABILITY-AND-EQUITY> 789,593
<SALES> 193,484
<TOTAL-REVENUES> 193,484
<CGS> 127,632
<TOTAL-COSTS> 127,632
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 242
<INTEREST-EXPENSE> 3,687
<INCOME-PRETAX> 21,196
<INCOME-TAX> 7,313
<INCOME-CONTINUING> 13,883
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,883
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
