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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: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-7626
UNIVERSAL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0561070
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
433 East Michigan Street, Milwaukee, Wisconsin 53202
(Address of principal executive offices)
Registrant's telephone number, including area code: (414) 271-6755
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for at least the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock as of the latest practicable date.
Class Outstanding at April 30, 1997
Common Stock, par value $0.10 per share 25,505,111 shares
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<PAGE>
UNIVERSAL FOODS CORPORATION
INDEX
Page No.
PART I, FINANCIAL INFORMATION:
Consolidated Condensed Balance Sheets
- March 31, 1997 and September 30, 1996. 1
Consolidated Condensed Statements of Earnings
- Three and Six Months Ended
March 31, 1997 and 1996. 2
Consolidated Condensed Statements of Cash Flows
- Six Months Ended March 31, 1997 and 1996. 3
Notes to Consolidated Condensed Financial Statements. 4
Management's Discussion and Analysis of Results
of Operations, Financial Condition and
Forward Looking Information. 5
PART II, OTHER INFORMATION:
Item 6, Exhibits and Reports on Form 8-K. 7
Signatures. 8
<PAGE>
PART I
FINANCIAL INFORMATION
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($000's Omitted)
March 31
1997 September 30
ASSETS (Unaudited) 1996
CURRENT ASSETS:
Cash and cash equivalents $ 5,840 $ 3,395
Trade accounts receivable 114,450 105,850
Inventories:
Finished and in-process products 116,590 122,775
Raw materials and supplies 60,225 51,418
Prepaid expenses and other current assets 37,049 41,166
-------- --------
TOTAL CURRENT ASSETS 334,154 324,604
INVESTMENTS AND OTHER ASSETS 49,996 45,920
INTANGIBLES 176,708 141,487
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land and buildings 136,440 135,972
Machinery and equipment 365,656 343,793
-------- --------
502,096 479,765
Less accumulated depreciation 219,937 211,304
-------- --------
282,159 268,461
-------- --------
TOTAL ASSETS $843,017 $780,472
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 2,066 $ 2,919
Accounts payable and accrued expenses 107,008 127,637
Salaries, wages and withholdings from
employees 11,406 11,579
Income taxes 17,578 14,207
Current maturities of long-term debt 4,751 5,810
-------- --------
TOTAL CURRENT LIABILITIES 142,809 162,152
DEFERRED INCOME TAXES 12,661 12,770
OTHER DEFERRED LIABILITIES 21,567 19,123
ACCRUED EMPLOYEE AND RETIREE BENEFITS 38,442 38,592
LONG-TERM DEBT 264,359 196,869
SHAREHOLDERS' EQUITY
Common stock 2,698 2,698
Additional paid-in capital 77,672 78,177
Earnings reinvested in the business 349,554 333,290
-------- --------
429,924 414,165
Less: Treasury stock, at cost 47,928 49,892
Other 18,817 13,307
-------- --------
363,179 350,966
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $843,017 $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 Six Months
Ended March 31 Ended March 31
1997 1996 1997 1996
Revenue $204,826 $200,034 $398,310 $393,480
Operating costs and expenses:
Cost of products sold 138,259 132,198 265,891 258,665
Selling and administrative
expenses 38,626 41,978 79,595 83,973
-------- -------- -------- --------
Operating income 27,941 25,858 52,824 50,842
Interest expense 4,095 3,475 7,782 7,381
-------- -------- -------- --------
Earnings before income taxes 23,846 22,383 45,042 43,461
Income taxes 8,226 7,841 15,539 15,429
-------- -------- -------- --------
Net earnings $ 15,620 $ 14,542 $ 29,503 $ 28,032
======== ======== ======== ========
Weighted average number of
common shares outstanding 25,468 25,937 25,448 26,021
======== ======== ======== ========
Net earnings per common share $ .61 $ .56 $1.16 $1.08
======== ======== ======== ========
Dividends per common share $ .26 $ .25 $ .52 $ .50
======== ======== ======== ========
See Accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($000's Omitted)
(Unaudited)
Six Months Ended
March 31
1997 1996
Net cash provided by operating activities $ 25,105 $ 33,066
Cash flows from investing activities:
Acquisition of property, plant and equipment (29,213) (21,899)
Acquisition of new businesses (net of cash acquired) (44,492) (529)
Other items, net (2,753) (3,409)
-------- --------
Net cash used in investing activities (76,458) (25,837)
Cash flows from financing activities:
Proceeds from additional borrowings 69,050 90,896
Reductions in debt (3,472) (78,517)
Proceeds from options exercised and other 1,454 1,386
Purchase of treasury stock --- (13,159)
Dividends paid (13,234) (13,013)
-------- --------
Net cash provided by (used in) financing activities 53,798 (12,407)
Net increase (decrease) in cash and cash equivalents 2,445 (5,178)
Cash and cash equivalents at beginning of period 3,395 8,717
-------- --------
Cash and cash equivalents at end of period $ 5,840 $ 3,539
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,169 $ 7,675
Income taxes 12,935 14,330
See Accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of March 31, 1997 and September 30,
1996, the results of operations for the three and six month periods
ended March 31, 1997 and 1996 and cash flows for the six month
periods ended March 31, 1997 and 1996. 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 six months ended March 31, 1996, the Company repurchased
365,300 shares of common stock for an aggregate price of $14,006,000.
5. For the six months ended March 31, 1997, depreciation and
amortization were $17,673,000 and $2,869,000, respectively. For the
six months ended March 31, 1996, depreciation and amortization were
$16,226,000 and $2,606,000, respectively.
6. During the second quarter of 1997 the Company acquired Tricon Colors,
Inc., an ink and dye producer, at a cost of $44,492,000. The
acquisition for cash has been accounted for as a purchase and,
accordingly, the results of operations and the financial position of
Tricon Colors, Inc. are reflected in the Consolidated Condensed
Financial Statements from the date of acquisition. The preliminary
allocation of purchase price resulted in goodwill of $37,923,000
which will be amortized on a straight-line basis over 40 years. On
an unaudited pro forma basis the acquisition is not significant to
the Company's 1997 results of operations.
7. The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share". The
statement will be effective for the Company in the first quarter of
fiscal 1998. The Company is currently assessing the impact of the
Standard on earnings per share, but does not expect it to be material.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS, FINANCIAL CONDITION
AND FORWARD LOOKING INFORMATION
RESULTS OF OPERATIONS:
Revenue from operations for the three and six months ended March 31,
1997, was $204,826,000 and $398,310,000, respectively, compared with
$200,034,000 and $393,480,000 a year ago. Revenue for the three and
six months ended March 31, 1997 increased by 2.4% and 1.2%,
respectively, as compared to the prior year periods. Revenue
increases from the cosmetic and natural categories in the Color
Division and increased volumes in the Dehydrated Products Division
were partially offset by continued weakness in the North American
flavor market.
Gross profit margins decreased to 32.5% of revenues for the second
quarter as compared with 33.9% during the same period last year.
Gross profit margins for the first six months decreased to 33.2% of
revenue as compared to 34.3% of revenue during the same period last
year. The decrease in the gross profit margin is primarily the
result of increased production cost caused by lower volumes and
pricing pressures in the flavor business.
The Company's continued focus on cost reduction resulted in a
decrease of selling and administrative expenses to 18.9% of revenues
during the second quarter compared to 21.0% during the same period
last year. For the first six months of fiscal 1997, selling and
administrative expenses decreased to 20.0% of revenues from 21.3%
last year.
Interest expense in the second quarter increased to $4,095,000 from
$3,475,000 in the same period last year and increased to $7,782,000
from $7,381,000 for the six months ended March 31, 1997 and 1996,
respectively. The increase for the quarter resulted from higher
average borrowings outstanding during the quarter, but was slightly
offset by lower average interest rates.
The effective income tax rate for the quarter and six months ended
March 31, 1997 and 1996 exceeded the 35.0% statutory rate primarily
as a result of state income taxes.
FINANCIAL CONDITION:
The current ratio increased to 2.3 at March 31, 1997, from 2.0 at
September 30, 1996 due to a decrease of $19,343,000 in current
liabilities. Net working capital increased $28,893,000 to
$191,345,000 at March 31, 1997 from $162,452,000 at September 30,
1996.
Net cash provided by operating activities was $25,105,000 for the six
months ended March 31, 1997, compared to net cash provided by
operating activities of $33,066,000 for the six months ended March
31, 1996. The decrease in cash provided by operating activities in
fiscal 1997 was due to a larger net increase in working capital.
This change is consistent with prior years primarily as a result of
the building inventory and related payments in the Dehydrated
Products Division.
Net cash used in investing activities was $76,458,000 for the six
months ended March 31, 1997 as compared with $25,837,000 in fiscal
1996. The change is primarily due to the acquisition of a new
business as discussed in Note 6 on page 4. Also included in
investing activities are capital additions of $29,213,000 for the six
months ended March 31, 1997 as compared to $21,899,000 for the six
months ended March 31, 1996. The increase in capital expenditures for
the first six months of 1997 reflects the Company's continuing
commitment to maintain and enhance product quality, further automate
and upgrade manufacturing processes, and expand capacity required by
the businesses' internal growth. Major projects in-process include
construction of a new aroma chemical and fragrance facility in Spain
and a BioProducts facility in France.
Net cash provided by financing activities was $53,798,000 for the six
months ended March 31, 1997 as compared with $12,407,000 used in
financing activities in the comparable period last year. Proceeds
from additional borrowings of $69,050,000 were used primarily to fund
the acquisition of a new business and capital expenditures. Dividends
of $13,234,000 and $13,013,000 were paid during the first six months
of fiscal 1997 and 1996, respectively.
FORWARD LOOKING INFORMATION:
Net earnings from the Company's continuing operations were up 5.2%
for the first six months of fiscal 1997 compared with fiscal 1996.
The Company expects that earnings from these operations will continue
to improve over the remainder of fiscal 1997 as product categories
are upgraded to more sophisticated flavorings and colors for foods
and other applications.
This document contains forward-looking statements that reflect
management's current assumptions and estimates of future economic
circumstances, industry conditions, Company's performance and
financial results, in particular, earnings growth. 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 introduction by the Company's
customers; execution of the Company's acquisition program; industry
economic factors related to the Company's international business; and
the outcome of various productivity-improvement and cost-reduction
efforts.
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were required to be filed during the
quarter ended March 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL FOODS CORPORATION
Date: May 14, 1997 By: /s/ Terrence M. O'Reilly
Terrence M. O'Reilly, Vice President,
Secretary and General Counsel
Date: May 14, 1997 By: /s/ Michael L. Hennen
Michael L. Hennen, Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF UNIVERSAL FOODS
CORPORATION AS OF AND FOR THE PERIOD ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 5,840
<SECURITIES> 0
<RECEIVABLES> 114,450
<ALLOWANCES> 3,633
<INVENTORY> 176,815
<CURRENT-ASSETS> 334,154
<PP&E> 502,096
<DEPRECIATION> 219,937
<TOTAL-ASSETS> 843,017
<CURRENT-LIABILITIES> 142,809
<BONDS> 264,359
0
0
<COMMON> 2,698
<OTHER-SE> 360,481
<TOTAL-LIABILITY-AND-EQUITY> 843,017
<SALES> 398,310
<TOTAL-REVENUES> 398,310
<CGS> 265,891
<TOTAL-COSTS> 265,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 155
<INTEREST-EXPENSE> 7,782
<INCOME-PRETAX> 45,042
<INCOME-TAX> 15,539
<INCOME-CONTINUING> 29,503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,503
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
