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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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 July 31, 1997
Common Stock, par value $0.10 per share 25,655,962 shares
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<PAGE>
UNIVERSAL FOODS CORPORATION
INDEX
Page No.
PART I, FINANCIAL INFORMATION:
Consolidated Condensed Balance Sheets
- June 30, 1997 and September 30, 1996. 1
Consolidated Condensed Statements of Earnings
- Three and Nine Months Ended
June 30, 1997 and 1996. 2
Consolidated Condensed Statements of Cash Flows
- Nine Months Ended June 30, 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)
June 30,
1997 September 30,
ASSETS (Unaudited) 1996
CURRENT ASSETS:
Cash and cash equivalents $ 78 $3,395
Trade accounts receivable 116,547 105,850
Inventories:
Finished and in-process products 116,204 122,775
Raw materials and supplies 59,276 51,418
Prepaid expenses and other current assets 38,701 41,166
------- -------
TOTAL CURRENT ASSETS 330,806 324,604
INVESTMENTS AND OTHER ASSETS 54,731 45,920
INTANGIBLES 173,628 141,487
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land and buildings 136,412 135,972
Machinery and equipment 384,410 343,793
------- -------
520,822 479,765
Less accumulated depreciation 227,460 211,304
------- -------
293,362 268,461
------- -------
TOTAL ASSETS $852,527 $780,472
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,345 $ 2,919
Accounts payable and accrued expenses 104,339 127,637
Salaries, wages and withholdings from
employees 12,079 11,579
Income taxes 21,557 14,207
Current maturities of long-term debt 4,724 5,810
------- -------
TOTAL CURRENT LIABILITIES 144,044 162,152
DEFERRED INCOME TAXES 12,674 12,770
OTHER DEFERRED LIABILITIES 20,589 19,123
ACCRUED EMPLOYEE AND RETIREE BENEFITS 38,217 38,592
LONG-TERM DEBT 264,741 196,869
SHAREHOLDERS' EQUITY
Common stock 2,698 2,698
Additional paid-in capital 77,020 78,177
Earnings reinvested in the business 359,672 333,290
------- -------
439,390 414,165
Less: Treasury stock, at cost 45,770 49,892
Other 21,358 13,307
------- -------
372,262 350,966
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $852,527 $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 Nine Months
Ended June 30 Ended June 30
1997 1996 1997 1996
Revenue $209,725 $200,776 $608,035 $594,256
Operating costs and expenses:
Cost of products sold 140,315 132,928 406,206 391,593
Selling and administrative
expenses 39,723 39,925 119,318 123,898
------- ------- ------- -------
Total operating costs and
expenses 180,038 172,853 525,524 515,491
------- ------- ------- -------
Operating income 29,687 27,923 82,511 78,765
Interest expense 4,651 4,071 12,433 11,452
------- ------- ------- -------
Earnings before income taxes 25,036 23,852 70,078 67,313
Income taxes 8,288 8,131 23,827 23,560
------- ------- ------- -------
Net earnings $ 16,748 $ 15,721 $ 46,251 $ 43,753
======== ======== ======== ========
Weighted average number of
common shares outstanding 25,507 25,716 25,468 25,919
====== ====== ====== ======
Net earnings per common share $ .66 $ .61 $1.82 $1.69
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Dividends per common share $ .26 $ .25 $ .78 $ .75
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See accompanying notes to Consolidated Condensed Financial Statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($000's Omitted)
(Unaudited)
Nine Months Ended
June 30
1997 1996
Net cash provided by operating activities $ 49,724 $ 61,695
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (51,348) (34,074)
Acquisition of new businesses
(net of cash acquired) (44,492) (529)
Other items, net (5,509) (6,405)
-------- --------
Net cash used in investing activities (101,349) (41,008)
Cash flows from financing activities:
Proceeds from additional borrowings 69,253 98,801
Reductions in debt (4,041) (85,679)
Proceeds from options exercised and other
equity transactions 2,959 1,605
Purchase of treasury stock --- (19,965)
Dividends paid (19,863) (19,444)
-------- --------
Net cash provided by (used in) financing
activities 48,308 (24,682)
Net decrease in cash and cash equivalents (3,317) (3,995)
Cash and cash equivalents at beginning of period 3,395 8,717
-------- --------
Cash and cash equivalents at end of period $ 78 $ 4,722
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 11,826 $ 11,099
Income taxes 15,259 20,830
See accompanying notes to Consolidated Condensed Financial Statements.
<PAGE>
UNIVERSAL FOODS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
Consolidated Condensed Financial Statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1997 and September 30,
1996, the results of operations for the three and nine month periods
ended June 30, 1997 and 1996 and cash flows for the nine month
periods ended June 30, 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 actually incurred.
4. During the nine months ended June 30, 1996, the Company repurchased
588,670 shares of common stock for an aggregate price of $21,808,000.
5. For the nine months ended June 30, 1997, depreciation and
amortization were, $25,163,000 and $3,540,000, respectively. For the
nine months ended June 30, 1996, depreciation and amortization were
$23,978,000 and $3,591,000, 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. In June 1997, the Financial Accounting Standards Board
issued statements No. 130 "Reporting Comprehensive Income" and No.
131 "Disclosures about Segments of an Enterprise and Related
Information". These statements will be effective for the Company in
fiscal 1999. The Company is currently evaluating the impact of
adopting these new pronouncements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS, FINANCIAL CONDITION
AND FORWARD LOOKING INFORMATION
RESULTS OF OPERATIONS:
Revenue for the three and nine months ended June 30, 1997, was
$209,725,000 and $608,035,000, respectively, compared with
$200,776,000 and $594,256,000 a year ago. Revenue for the three and
nine months ended June 30, 1997, increased by 4.5% and 2.3%,
respectively, from the prior year periods. Strong sales in the
pharmaceutical, dispersion and lake categories in the Color Division
and increased sales for the Asia Pacific Division were partially
offset by continued weakness in the North American flavor market.
Gross profit margins decreased to 33.1% for the third quarter from
33.8% for the same period last year. Gross profit margin for the
first nine months decreased to 33.2% from 34.1% for the same period
last year. The decrease in the gross profit margin was primarily the
result of increased production costs caused by lower volumes, product
mix and pricing pressures primarily in the flavor and bioproducts
businesses.
The Company's continued focus on operating costs resulted in a
decrease in selling and administrative expenses to 18.9% of revenue
for the third quarter from 19.9% for the same period last year. For
the first nine months of fiscal 1997, selling and administrative
expenses decreased to 19.6% of revenue from 20.8% last year.
Interest expense for the third quarter increased to $4,651,000 from
$4,071,000 for the same period last year and increased to $12,433,000
from $11,452,000 for the nine months ended June 30, 1997 and 1996,
respectively. The increases resulted from higher average borrowings
outstanding during the periods as a result of the Tricon Colors
acquisition, but was slightly offset by lower average interest rates.
The effective income tax rate for the quarter and nine months ended
June 30, 1997, was below the 35.0% statutory rate as a result of
federal income tax credits which more than offset the effect of state
income taxes.
FINANCIAL CONDITION:
The current ratio increased to 2.3 at June 30, 1997, from 2.0 at
September 30, 1996, due to a decrease of $18,108,000 in current
liabilities. Net working capital increased $24,310,000 to
$186,762,000 at June 30, 1997, from $162,452,000 at September 30,
1996.
Net cash provided by operating activities was $49,724,000 for the
nine months ended June 30, 1997, compared with $61,695,000 for the
nine months ended June 30, 1996. The decrease in cash provided by
operating activities in fiscal 1997 was due to increases in working
capital primarily from the timing and amount of inventory purchases
in the Dehydrated Products Division.
Net cash used in investing activities was $101,349,000 for the nine
months ended June 30, 1997, compared with $41,008,000 for fiscal
1996. The change was 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 $51,348,000 for the
nine months ended June 30, 1997, and $34,074,000 for the nine months
ended June 30, 1996. The increase in expenditures for the first nine
months of 1997 reflects the Company's continuing commitment to
automate and upgrade manufacturing processes and expand capacity.
Major projects include construction of a new aroma chemical and
fragrance facility in Spain and a BioProducts facility in France
which began commercial production during the third quarter.
Net cash provided by financing activities was $48,308,000 for the
nine months ended June 30, 1997, compared with $24,682,000 used in
financing activities last year. Proceeds from additional borrowings
of $69,253,000 were used to fund the acquisition of a new business
and capital expenditures. Dividends of $19,863,000 and $19,444,000
were paid during the first nine months of fiscal 1997 and 1996,
respectively.
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were required to be filed during
the quarter ended June 30, 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: August 13, 1997 By: /s/ Terrence M. O'Reilly
Terrence M. O'Reilly, Vice President,
Secretary and General Counsel
Date: August 13, 1997 By: /s/ Michael L. Hennen
Michael L. Hennen, Corporate Controller
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF UNIVERSAL FOODS
CORPORATION AS OF AND FOR THE PERIOD ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 78
<SECURITIES> 0
<RECEIVABLES> 116,547
<ALLOWANCES> 3,866
<INVENTORY> 175,480
<CURRENT-ASSETS> 330,806
<PP&E> 520,822
<DEPRECIATION> 227,460
<TOTAL-ASSETS> 852,527
<CURRENT-LIABILITIES> 144,044
<BONDS> 264,741
0
0
<COMMON> 2,698
<OTHER-SE> 369,564
<TOTAL-LIABILITY-AND-EQUITY> 852,527
<SALES> 608,035
<TOTAL-REVENUES> 608,035
<CGS> 406,206
<TOTAL-COSTS> 406,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 461
<INTEREST-EXPENSE> 12,433
<INCOME-PRETAX> 70,078
<INCOME-TAX> 23,827
<INCOME-CONTINUING> 46,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,251
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
