-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, e10gr5YJ83aHxkvyEcH45PkO+GO/R/ZHoFihDYdsZY21tZ5rTWnQQYs5L/DYghM3 xuQ0v1MUCwmc/J0u5pDTPw== 0000897069-94-000121.txt : 19941220 0000897069-94-000121.hdr.sgml : 19941220 ACCESSION NUMBER: 0000897069-94-000121 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941219 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL FOODS CORP CENTRAL INDEX KEY: 0000310142 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 390561070 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07626 FILM NUMBER: 94565320 BUSINESS ADDRESS: STREET 1: 433 EAST MICHIGAN ST CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142716755 MAIL ADDRESS: STREET 1: PO BOX 737 CITY: MILWAUKEE STATE: WI ZIP: 53201 10-K 1 UNIVERSAL FOODS CORPORATION FORM 10-K 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, 1994 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. X Indicate the number of shares outstanding of each of the issuer's classes of Common Stock as of December 2, 1994: 26,977,437 shares of Common Stock, $.10 par value, including 898,562 treasury shares. Aggregate market value of Universal Foods Corporation Common Stock, excluding treasury shares, held by non-affiliates as of December 2, 1994 was $723,688,781. Documents Incorporated By Reference 1. Portions of Universal Foods Corporation 1994 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 16, 1994 (Parts II and III of Form 10-K) PART I ITEM 1. BUSINESS - Food 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 engages in the international development, manufacture and distribution of value-added ingredients and ingredient systems to food products and other items. Principal products of the Company include food, beverage and dairy flavors; certified and natural colors for foods, cosmetics and pharmaceuticals; dehydrated vegetable products; a diverse line of yeast products; and flavor enhancers, secondary flavorings and other bioproducts. The Company exited the frozen potato business during Fiscal 1994. The following material from the Universal Foods Corporation 1994 Annual Report to Shareholders is incorporated by reference: "Management's Analysis of Operations and Financial Condition" on Pages 18 through 22. Note A of Notes to Consolidated Financial Statements - "Summary of Significant Accounting Policies" on Page 27. Note I of Notes to Consolidated Financial Statements - "Foreign Operations" on Page 32. 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 and ingredient systems to the dairy, food processor and beverage industries worldwide and is a recognized leader in the 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. In April 1990, the Company acquired the international flavor business of Felton Worldwide, a subsidiary of Harrisons and Crosfield, PLC, of Great Britain. This acquisition strengthened Universal Flavor's position as a major flavor producer in Great Britain and gave Universal Flavor a larger presence on the European continent and in the Pacific Rim. In September 1991, the Company acquired Fantasy Flavors, Inc. Combining Fantasy's product lines with the Company's existing BlankeBaer operation positions Universal Flavor as the premier dairy ingredient systems supplier in North America. The January 1992 acquisition of Curt Georgi Imes, S.P.A. brought particular strength in the Italian bakery and dairy flavor markets, as well as experienced research and development and sophisticated analytical 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 and essential oils, both of 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. This purchase brought beverages and dairy flavor technology to the Company's other existing Mexican flavor business. Color The Company, through its subsidiary Warner-Jenkinson Company ("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 such brand names as RED SEAL and SPECTRACOAT, are used by producers of soft drinks, bakery products, processed foods, confections, pet foods, alcoholic beverages and pharmaceuticals. W-J is headquartered in St. Louis, Missouri, the site of its major manufacturing facilities. 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 (formerly Dyeco Ltd.) 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 as W-J International. In August 1991, the Company acquired the international food and cosmetic color operations of Morton International, Inc. which provided additional technology in cosmetic colors and a worldwide distribution network. In June 1992, the Company acquired Butterfield Food Ingredients, Ltd., a British food color manufacturer with particular expertise in natural colors and pharmaceutical applications and additional international distribution, particularly in the Far East. During 1993, the Company acquired Spectrum S.A., 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 the Company believes it to be 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. Rogers believes it 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, the Company acquired a leading European processor of air and freeze-dried vegetables. The acquisition gives the Company a base from which to expand its dehydrated products business internationally. This acquisition in Ireland from Campbell Soup Company also expands the Company's dehydrated technology base to include freeze drying and "puffing," an air-steam process. 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 Irish operation consists of two companies managed as a single entity in Midleton, County Cork. The group employs about 120 people and now operates as Mallow Foods Ltd. Yeast The Company specializes in the production of compressed, active dry and nutritional yeast products for sale to industrial, institutional and retail accounts under the RED STAR trademark. Compressed yeast and cream yeast must be refrigerated and used soon after production. Active dry yeast is a dehydrated product which has the advantages of longer shelf life, lower shipping costs and ease of handling. Nutritional yeast is a rich source of B-complex vitamins and proteins. Other yeast strains are produced specifically for the wine industry, and the Company purchases a number of allied products, including bakery mixes and baking powder, from others and distributes them. The largest market for yeast is the domestic 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 these foreign affiliates. Company owned yeast plants are located in Milwaukee, Wisconsin; Baltimore, Maryland; Dallas, Texas; and Oakland, California. The Company distributes its fermentation products largely through its own sales force from its distribution branches. In 1994, the Company purchased a 20% stock interest in and entered an agreement with Minn-Dak Yeast Company, Inc. for contract manufacturing by Minn-Dak under the Red Star label and for Minn-Dak to supply molasses, a major raw material in yeast production, to the Company. 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 Fermentation 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 biotechnology group, was integrated into Red Star Specialty Products. This group was given the mission to develop new biotechnological products utilizing the Company's extensive expertise in fermentation, and its research strengths in the molecular biology of microorganisms. The 1994 acquisitions of Champlain Industries Limited and the Biolux Group expanded the division's product lines and international presence, making the division a more significant part of the Company. Champlain Industries Limited produces savory flavorings and flavor enhancers from vegetable proteins, yeast, meats and milk protein. It is a leading producer of hydrolyzed vegetable proteins (HVP) in North America. The company has operations in Canada, the U.S., and the United Kingdom. The Biolux Group is a leading European producer of food, nutritional and feed ingredients derived from brewer's yeast. The acquisition makes the Company a world leader in brewer's yeast extract technology, production and sales. The Biolux Group consists of New Biolux in Belgium and Vitalevor in France. Its products include flavor enhancers, health foods, feed ingredients and nutrients for pharmaceutical and biotechnology processes. The Biolux Group is a major purchaser and processor of brewer's yeast in the European market. The expanded Red Star BioProducts Division serves the food processing, fermentation, agriculture, aquaculture and chemical intermediates industries as a diversified supplier of natural extracts and specialty cultures. 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, and secondary flavorings in the food processing industries. They also enjoy widespread use as palatability enhancers in the pet food and animal foodstuffs markets. The nutritional and functional properties of Red Star BioProducts extracts are the basis for their use in cheese starter and pharmaceutical fermentations and in personal care applications. 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 and Champlain trademarks. Commercial production and export of a new product named RED STAR Phaffia Yeast began in 1993. The yeast Phaffia rhodozyma is a source of the red carotenoid compound called astaxanthin which is the natural pigment found in salmon, trout and shellfish. This product was developed for use as an ingredient for feeds given to salmon produced by aquaculture. The purchase of the technological properties of ZeaGen from ACX Technologies, Inc in 1993 provides other processes for development. The expanded division operates production facilities in Milwaukee and 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 the customer 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. for a base consideration of $163 million and an earnout consideration of approximately $57 million, payable over a five year period. The sale was a major step in Universal Foods' strategic transition to a focus on value-added 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 did have 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 advantage and ability to develop and deliver value-added products is 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 300 people in research and quality assurance. Over the past five years, research and development expenditures have increased an average of 10.4%. Expenditures in fiscal 1994 increased 13.0% over fiscal 1993 to $32.2 million from $28.5 million. Expenditures in fiscal 1993 increased 7.1% to $28.5 million from $26.6 million in fiscal 1992. 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 $17.3 million in fiscal 1992, $17.9 million in fiscal 1993 and $20.4 million in fiscal 1994, were research and development expenses as defined by the Financial Accounting Standards Board. To improve its research and development capabilities, the Company has been upgrading its technical facilities. In 1991, the Company refurbished much of its Technical Center located in Milwaukee, Wisconsin, to enhance its capabilities in product and process areas related to fermentation, including microbial genetics work carried out to develop improved strains of bakers yeast and engineering development facilities for process development and new product production scale-up activities. In 1992, an $8 million Fermentation Development Facility was completed at the Technical Center to scale-up new biotechnological products for the Red Star BioProducts Division. Two 10,000-gallon pure culture fermenters in this facility produce sufficient volumes to test market new products in order to establish them as commercially acceptable prior to investment in a full-scale production plant. In 1992, the Company completed a new research center for seed genetics and tissue culture at Livingston, California, for Dehydrated Products, and the Company enlarged food flavor research laboratories in Kearny, New Jersey. During 1993, beverage flavor laboratories in Indianapolis were enlarged, new modern laboratories for research on color products at W-J's production site in St. Louis, Missouri were completed, and a new facility for quality assurance and technical customer services was added to the Turlock, California complex. All of these facilities are designed to meet the specialized, strategic needs of the Company's operating units. The Company has a massive training program designed to introduce all personnel to team problem solving using statistical process control, teamwork and communication procedures under a program named "The Universal Way." This program promotes the Company's commitment to continuous quality improvement of its products and services as a primary Company objective. As part of its commitment to quality as a competitive advantage, the Company has undertaken efforts to achieve certification to quality standards established by the International Organization for Standardization in Geneva, Switzerland, through its ISO 9000 series. Red Star BioProducts believes it was the first North American ingredients supplier to receive ISO 9002 certification. Universal Flavor facilities in Indiana and New Jersey in the United States and facilities in The Netherlands and United Kingdom have also been certified. 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 technical product development, process expertise, quality and service. The Company competes in many market niches where price is not the most important variable. With the evolution of food processing as a global business, competition to supply the industry has taken on an increasingly global nature. Universal Foods competes with only a few companies across multiple ingredient lines, and is more likely to encounter competition specific to individual businesses. 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 witnessed by the acquisitions of the international flavor business of Felton Worldwide in 1990, Curt Georgi Imes, S.P.A. in 1992 and Destillaciones Garcia de la Fuente, S.A. in 1994; and the completion of a new plant in Belgium in order to meet increasing international flavor demands. The Company believes W-J is a leading producer of certified colors in North America and Western Europe; state of the art equipment, the latest process technology, 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, particularly in the cosmetic color market, as well as a growing international presence. For Dehydrated Products, the acquisition in Ireland begins an international expansion and strengthens export opportunities for U.S. based operations. Some price competition has been evident in the United States as a domestic competitor seeks to gain market share and a new competitor is adding capacity to the industry. Red Star Yeast & Products continues to experience pricing pressures as a result of industry overcapacity. Competition in Red Star BioProducts comes primarily from European producers. New Product Activity With the Company's strategic focus on value-added 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. These 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 flavor solutions for low-fat and no-fat applications. The group has developed a reaction flavor for imparting animal fat flavor to nutritionally preferred vegetable oils. A new technology was installed for production of aseptically processed fruits for frozen yogurt and other products requiring fruit pieces. Emphasis has been placed on the development of low-fat dairy flavor systems. In 1993, a low-fat, cholesterol-free program was introduced for frozen desserts. New flavored fruit pieces have also been developed to provide new textures, flavors and unique performance properties in bakery items. In 1992, Red Star BioProducts introduced RED STAR Phaffia Yeast. This is the only commercially viable natural source of pink pigmentation for farm-raised salmon which achieve their flesh color through dietary supplements. Three other processes to provide natural coloring and nutrients for aquaculture and agribusiness are currently under development. In 1993 Red Star BioProducts introduced the FlavorMate 950 series, the most potent flavor enhancer on the market, and the SavoryMate series, which are flavor enhancers designed for specific areas such as beef, poultry, pork, etc. In addition, the discussion of operational activities on Pages 6, 8, 10, 12 and 14 of the 1994 Annual Report to Shareholders is incorporated by reference (but not any photographs or related captions included thereon). Raw Materials The principal raw material used in the production of yeast products is molasses, which is purchased through brokers and producers 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 Yeast Company, Inc., a major North American molasses supplier, to provide additional assurances of adequate supplies. Chili peppers, onion, garlic and other vegetables are acquired under annual contracts with numerous growers in the western United States and Ireland. 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 tumeric, 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 spent 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 contracts on supplies of spent brewer's yeast for European production needs. 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, 1994, the Company employed about 4,100 persons worldwide (which includes approximately 200 seasonal employees). Approximately 821 employees are represented by one of 17 unions 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 had seventeen manufacturing and processing plants in nine states as of September 30, 1994. 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 is 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 one dehydrated vegetable plant in thirteen foreign countries. For information regarding lease commitments, see Note I of Notes to Consolidated Financial Statements - Commitments and Contingencies, on Page 32 of the 1994 Annual Report to Shareholders, which is hereby incorporated by reference. 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 1994. ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the registrant and their ages as of December 1, 1994 are as follows: EXECUTIVE OFFICERS Name Age Position Guy A. Osborn 58 Chairman, Chief Executive Officer and Director Richard Carney 44 Vice President - Human Resources Thomas J. Degnan 46 President, Red Star Yeast & Products Division John E. Heinrich 50 Vice President and Chief Financial Officer Geoffrey J. Hibner 45 Vice President - Finance Richard F. Hobbs 47 Vice President - Administration and Corporate Controller Kenneth P. Manning 52 President, Chief Operating Officer and Director Terrence M. O'Reilly 49 Vice President, Secretary and General Counsel James F. Palo 54 President, Dehydrated Products Division Dr. Gary W. Sanderson 59 Vice President, Technologies Kenneth G. Scheffel 58 Vice President, Red Star BioProducts Division Michael A. Wick 51 President, Color Division All of these individuals have been employed by the Company in an executive capacity for more than five years, except Richard Carney. 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. Heinrich passed away on December 6, 1994. Mr. Hibner will resign as Vice President-Finance effective January 2, 1995. Mr. Hobbs is currently serving as principal accounting and chief financial officer. 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 1994 appearing under "Quarterly Financial Data" on Page 22 of the 1994 Annual Report of the Company 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, 1994, $27,258,000 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, 1994, no 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 E of Notes to Consolidated Financial Statements - Shareholders' Equity on Pages 29 and 30 of the 1994 Annual Report to Shareholders and which is incorporated by reference. The number of shareholders of record on December 2, 1994 was 6,351. ITEM 6. SELECTED FINANCIAL DATA Long-term obligations at September 30 were as follows: 1994: $172,235,000; 1993: $171,907,000; 1992: $167,746,000; 1991: $152,213,000; and 1990: $122,454,000. Remaining information in response to this item is incorporated by reference from the "Five-Year Review" and the notes thereto of the 1994 Annual Report to Shareholders on Page 34. 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 18 through 21 of the 1994 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The supplementary financial information and financial statements required by this item are set forth on Pages 22 through 33 of the 1994 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 3 through Page 6 and Page 16, respectively, of the Notice of Annual Meeting and Proxy Statement of the Company dated December 16, 1994, 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 14 of the Notice of Annual Meeting and Proxy Statement of the Company dated December 16, 1994. 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 8 through 9 of the Notice of Annual Meeting and Proxy Statement of the Company dated December 16, 1994, 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, 1993 through September 30, 1994, 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 Schedules. (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 1994 Annual Report to Shareholders 1. FINANCIAL STATEMENTS The following consolidated financial statements of Universal Foods Corporation and Subsidiaries are incorporated by reference to the Annual Report to Shareholders for the year ended September 30, 1994. Independent Auditors' Report 33 Consolidated Balance Sheets - 24 September 30, 1994 and 1993 Consolidated Earnings - years ended 23 September 30, 1994, 1993 and 1992 Consolidated Shareholders' Equity - 25 years ended September 30, 1994, 1993 and 1992 26 Consolidated Cash Flows - years ended September 30, 1994, 1993 and 1992 27 - 32 Notes to Consolidated Financial Statements Page Reference 2. FINANCIAL STATEMENT SCHEDULES in Form 10-K Independent Auditors' Report 15 Schedule V - Property, Plant and Equipment 16 Schedule VI - Accumulated Depreciation and 17 Amortization of Plant and Equipment Schedule VIII - Valuation and Qualifying 18 Accounts and Reserves Schedule IX - Short-Term Borrowings 19 Schedule X - Supplementary Earnings 20 Statement Information 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. 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, 1994 and 1993 and for each of the three years in the period ended September 30, 1994, and have issued our report thereon dated November 10, 1994, which report expresses an unqualified opinion and includes an explanatory paragraph relating to the change in methods of accounting for postretirement benefits other than pensions and postemployment benefits to conform with Statements of Financial Accounting Standards No. 106 and No. 112, respectively; such consolidated financial statements and report are included in your 1994 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of Universal Foods Corporation, listed in Item 14. These consolidated financial statement schedules are 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 schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP November 10, 1994 SCHEDULE V UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In Thousands) Years ended September 30, 1994, 1993 and 1992
Machinery and Land Buildings equipment Total Balances, September 30, 1991 $12,579 $ 97,995 $282,660 $393,234 Additions at cost 1,005 12,308 38,196 51,509 Retirements (95) (3,178) (14,085) (17,358) ------ ------- ------- ------- Balances, September 30, 1992 13,489 107,125 306,771 427,385 Additions at cost 220 14,238 39,535 53,993 Retirements (736) (2,627) (5,860) (9,223) ------ ------- ------- ------- Balances, September 30, 1993 12,973 118,736 340,446 472,155 Additions at cost 3,013 12,601 79,363 94,977 Retirements (1,590) (27,195) (109,962) (138,747) ------ ------- ------- ------- Balances, September 30, 1994 $14,396 $104,142 $309,847 $428,385 ======= ======= ======= ======= The annual provisions to depreciation have been computed on the straight-line method using the following estimated useful lives: Buildings 15 - 40 years Building additions 20 years Machinery and equipment 6 - 20 years Includes $39,906, $4,842 and $6,527 of additions in 1994, 1993 and 1992, respectively, obtained in the acquisitions of businesses and additions relating to businesses previously accounted for on the equity method which are now consolidated. Includes adjustment of $12,788 relating to the adoption of Statement of Financial Accounting Standards No. 109 (SFAS No. 109) "Accounting For Income Taxes". Includes foreign currency translation adjustments of $3,640 and $6,824 in 1994 and 1993, respectively. The adjustments in fiscal year 1992 were not material. Includes $135,637 of retirements relating to the disposition of the Frozen Foods Division.
SCHEDULE VI UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PLANT AND EQUIPMENT (In Thousands) Years ended September 30, 1994, 1993 and 1992
Machinery and Buildings equipment Total Balances, September 30, 1991 $ 22,328 $118,101 $140,429 Additions charged to costs and expenses 5,049 23,095 28,144 Retirements (700) (9,406) (10,106) ------ ------- ------- Balances, September 30, 1992 26,677 131,790 158,467 Additions charged to costs and expenses 5,142 29,771 34,913 Retirements (279) (2,938) (3,217) ------ ------- ------- Balances, September 30, 1993 31,540 158,623 190,163 Additions charged to costs and expenses 5,017 25,995 31,012 Retirements (4,148) (44,361) (48,509) ------ ------- ------- Balances, September 30, 1994 $ 32,409 $140,257 $172,666 ======= ======= ======== Includes adjustment of $5,269 relating to the adoption of SFAS No. 109. Includes foreign currency translation adjustments of $1,609 and $1,240 in 1994 and 1993, respectively. The adjustments in fiscal year 1992 were not material. Includes $4,883 of additions relating to businesses previously accounted for on the equity method which are now consolidated. Includes $49,459 of retirements relating to the disposition of the Frozen Foods Division.
SCHEDULE VIII UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In Thousands)
Years ended September 30, 1994, 1993, and 1992 Valuation accounts deducted in the Additions balance sheet from Balance at Charged to Balance at the assets to which beginning costs and Net end of they apply of period expenses acquired Deductions period 1992 Allowance for losses: Trade accounts receivable $3,754 $ 808 $ --- $1,205 (A) $3,357 ====== ===== ====== ====== ====== 1993 Allowance for losses: Trade accounts receivable $3,357 $ 988 $ --- $1,039 (A) $3,306 ====== ===== ====== ====== ====== 1994 Allowance for losses: Trade accounts receivable $3,306 $ 971 $ 637 $1,387 (A) $3,527 ====== ====== ======= ====== ====== (A) Divestiture and accounts written off, less recoveries.
SCHEDULE IX UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES SCHEDULE IX - SHORT-TERM BORROWINGS (In Thousands) Years ended September 30, 1994, 1993 and 1992
Maximum Average Weighted amount amount average Balance outstanding outstanding interest rate at end during during during of period(C) the period the period(A) the period (B)(C) September 30, 1992 $32,229 $44,899 $25,940 9.6% September 30, 1993 $14,945 $57,677 $38,545 6.6% September 30, 1994 $4,527 $84,298 $45,349 4.8% (A) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal balance by 365. (B) Average interest rate for the year is computed by dividing the actual short-term interest expense by the average short-term borrowings. (C) Domestic borrowings are predominantly short-term money market loans and bankers' acceptances with terms of approximately 30 days. Also included in fiscal 1994, 1993 and 1992 are short-term borrowings denominated in foreign currency at interest rates higher than the average domestic rate.
SCHEDULE X UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES SCHEDULE X - SUPPLEMENTARY EARNINGS STATEMENT INFORMATION (In Thousands) Years ended September 30, 1994, 1993 and 1992
Charges to costs and expenses Item 1994 1993 1992 Maintenance and repairs $16,352 $15,949 $15,200 ======= ======= ======= Advertising $14,176 $13,562 $18,260 ======= ======= ======= The amount of royalties, taxes other than payroll and income taxes, and amortization of intangible assets are not presented as such amounts are less than one percent of net sales.
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, duly authorized. UNIVERSAL FOODS CORPORATION /s/ T. M. O'Reilly T. M. O'Reilly, Vice President Secretary & General Counsel Dated: December 16, 1994 PURSUANT to the requirements of the Securities Exchange Act of 1934, this report has been signed below on December 16, 1994, by the following persons on behalf of the Registrant and in the capacities indicated. /s/ Guy A. Osborn Chairman and Chief Executive Officer Guy A. Osborn /s/ Kenneth P. Manning President & Chief Operating Officer Kenneth P. Manning Director /s/ Richard F. Hobbs Vice President - Corporate Richard F. Hobbs Controller /s/ Michael E. Batten Director Michael E. Batten /s/ John F. Bergstrom Director John F. Bergstrom /s/ James L. Forbes Director James L. Forbes /s/ Dr. Olan D. Forker Director Dr. Olan D. Forker /s/ Dr. Carol I. Waslien Ghazaii Director Dr. Carol I. Waslien Ghazaii /s/ Leon T. Kendall Director Leon T. Kendall /s/ James H. Keyes Director James H. Keyes /s/ Charles S. McNeer Director Charles S. McNeer /s/ John L. Murray Director John L. Murray /s/ William U. Parfet Director William U. Parfet /s/ Essie Whitelaw Director Essie Whitelaw UNIVERSAL FOODS CORPORATION EXHIBIT INDEX 1994 ANNUAL REPORT ON FORM 10-K Incorporated Exhibit Herein by Filed Number Description Reference Herewith 3.1 Restated Articles of (Previouly filed at Exhibit Incorporation 3.1 to the 1993 Annual Report on Form 10-K) 3.2 Restated Bylaws (Previously filed at Exhibit 3.2 to the 1993 Annual Report on Form 10-K) 4 Shareholders Rights (Previously filed on Form Plan 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 Exhibit Employment 10(a) to the 1985 Annual Contract Report on Form 10-K) (b) 1981 Incentive (Previously filed with the Stock Option Plan Notice of Annual Meeting & Proxy Statement dated December 5, 1981) (c) 1985 Stock Plan (Previously filed with the for Executive Notice of Annual Meeting & Employees Proxy Statement dated December 12, 1985) (d) 1990 Employee (Previously filed with the Stock Plan Notice of Annual Meeting & Proxy Statement dated December 18, 1989) (e) Director Stock (Previously filed as Exhibit Grant Plan, as 10(e) to the 1991 Annual amended Report on Form 10-K) (f) Management Income (Previously filed as Exhibit Deferral Plan 10(f) to the 1991 Annual Report on Form 10-K) (g) Executive Income (Previously filed as Exhibit Deferral Plan 10(g) to the 1991 Annual Report on Form 10-K) (h) Executive (Previously filed as Exhibit Employment and 10(h) to the 1991 Annual Severance Report on Form 10-K) Agreement (i) Trust Agreement (Previously filed as Exhibit dated January 18, 18 to Amendment No. 1 of the 1988 between the Company's Schedule 14D-9 Company and filed December 9, 1988) Marshall & Ilsley Trust Company (j) Trust Agreement (Previously filed as Exhibit dated January 18, 19 to Amendment No. 1 of the 1988 between the Company's Schedule 14D-9 Company and filed December 9, 1988) Marshall & Ilsley Trust Company (k) Trust Agreement (Previously filed as Exhibit dated September 20 to Amendment No. 1 of the 18, 1988 between Company's Schedule 14D-9 the Company and filed December 9, 1988) Marshall & Ilsley Trust Company (Previously filed as Exhibit 10(i) to the 1991 Annual (l) Management Report on Form 10-K) Incentive Plan for Major Corporate (Previously filed on Form Executives S-8 dated September 12, 1994) (m) 1994 Employees Stock Option Plan 13 Portions of Annual Report to Shareholders for the year ended X September 30, 1994 that are incorporated by reference 21 Significant Subsidiaries of Universal Foods X Corporation 23 Consent of Deloitte & Touche LLP X 27 Financial Data Schedule X 99 Notice of Annual (Previously filed on Meeting and Proxy December 15, 1994 as the Statement, dated Company's Schedule 14A) December 16, 1994 * Indicates management contracts or compensatory plans. EX-13 2 EXHIBIT 13 - ANNUAL REPORT [text of pages 6, 8, 10, 12 and 14, exclusive of photographs and related captions] FLAVOR Improved operating margins, strong U.S. food and beverage flavor performance and market penetration in the Pacific Rim were the ingredients for recovery in our Flavor Division. Operating profits were up and revenue rose by 9%. Flavor formulations for teas, juices and isotonic beverages helped boost beverage flavor revenues 11% in the U.S. Food flavor revenues were up 16% on the strength of new bread and pizza dough flavor systems and snack flavors. More development efforts were devoted to applications in food service, the fastest growing segment of the food industry. And with 90% of U.S. shoppers turning to lite foods, our low fat bakery and dairy flavor systems were incorporated into leading brand cookies and super premium ice creams. We also continue to leverage our dairy technology to value-added uses. International growth came from our expanding presence in the Pacific Rim where we established a technical service and application laboratory in Japan. In Europe, where the economy is still recovering, we opened new business opportunities through the acquisition of a Spanish aroma chemical business for flavor and fragrance formulations. Capital spending focused on establishing an integrated information system and on expanding and upgrading dairy flavors and aroma chemical facilities and equipment. COLOR The Color Division continued its strong performance in 1994. Revenue was up 16%, volumes rose 26% and operating income continued to improve. Domestic food and cosmetic color revenue rose 15%. Sales of value-added color dispersions climbed 25% as we created specialized solutions for customers. Non-food uses and new markets boosted revenues from dyes by 19%. New Age and fruit beverages helped propel a 23% increase in natural colors. We strengthened our process technology leadership through the ongoing transformation of our St. Louis, Missouri, manufacturing complex into the most modern color production facility in the world. During the year we completed the construction of a state-of-the-art facility to produce Lake pigments. These high-performance pigments are safe, water- insoluble coloring agents for foods, drugs, cosmetics, personal care items and food packaging materials. We also expanded our technical capabilities for manufacturing several new dye intermediates and drug and cosmetic dyes. Process technologies to purify and separate natural colors and blending and drying operations were improved. Internationally, improved economic conditions in Europe and strong Pacific Rim sales offset flat results in Latin America during 1994. A new warehousing and production facility serves Asia from Australia. We also expanded our European production and warehousing facilities. It's the extra measure of reliability and technical expertise that makes our colors more than a commodity for international candy manufacturer Leaf, Inc. Whether it's customized shades, easier-to-apply coatings, single color systems for use worldwide, research on foreign regulations and labeling or on-site help during production start-up, our color specialists have created a relationship that spells sweet success for such familiar brands as Good & Plenty, Switzer Licorice and Jolly Rancher Mega Fruit Gummis. DEHYDRATED PRODUCTS The acquisition of a European base for expanding our Dehydrated Products business and three top supplier awards for our North American operations marked the year. Operating profits and revenue were up. Intensified attention to customer needs through on site interviews and our own ongoing employee involvement teams paid off for our California-based operations during 1994. They were named supplier of the year by three food processors for product quality, reliability and the intangibles related to exceeding customer expectations. Our North American operations are also expanding their product line in response to customer needs. Additions include bell peppers, leeks and carrots with a number of others being considered and tested. For our major onion, garlic and chili product lines, crop conditions were generally good and harvests normal. Volumes of specialty parsley and other dehydrated greens were up significantly. As a base from which to expand internationally, we purchased a leading European processor of dehydrated vegetables in June. The acquisition in Ireland from Campbell Soup Company also expands our technology to include freeze drying and "puffing," an air-steam process. Vegetables processed using these technologies are premium products because they have a short reconstitution time, a benefit in today's soups, snacks and other convenience foods. The Pillsbury Company expects more of its suppliers and is sparing in its awards. The $4 billion food company has over 1,000 suppliers; fewer than 1% are honored each year. We were the first dehydrated vegetable supplier to earn their coveted Supplier of the Year Award, not just for on-time delivery of quality products or technical support, but for going the "extra mile." Through our innovative Voice of the Customer program, we visited Pillsbury's operations, interviewed people at all levels, listened to their needs and, most importantly, took action. RED STAR YEAST & PRODUCTS Securing our position as the leading, low cost yeast supplier in North America was the top priority for Red Star Yeast & Products. Volumes and revenue were up though operating margins declined. With continued pricing pressure in the baker's yeast market due to the competitive environment and overcapacity, we took several steps to reduce costs while ensuring a high level of customer satisfaction. These included restructuring our sales and marketing group, improving manufacturing efficiency and enhancing product quality. We also developed partnerships with distributors to provide reliable service at lower costs. To secure an adequate source of molasses, the raw material that feeds yeast cell growth, we entered a supply agreement with a major molasses producer. With shifts in consumer habits and new nutritional guidelines, we've benefitted from the growing market for bagels, nutritional and "boutique" breads, and frozen dough for restaurant use. We also introduced a new dough conditioner with all natural ingredients to meet commercial bakers' needs. Retail yeast sales continued to get a boost from the bread machine boom, promoted through joint marketing and couponing with bread machine and packaged bread mix makers. We also introduced a yeast specially formulated and packaged for bread machines. Creating healthy breads is the passion of the people at Natural Ovens of Manitowoc, Wisconsin. Only natural, quality ingredients will do. That's why they have relied on Red Star Yeast as their business has blossomed over the past 17 years. Whether it's fresh yeast for rising 25,000 loaves a day or active-dry yeast for new low-fat bread machine mixes, we nurture consistent product quality through continuous improvement efforts like the one that won our Presidential Leadership Award for a Milwaukee, Wisconsin, production team. RED STAR BIOPRODUCTS Red Star BioProducts was created in 1994 from our Specialty Products Division and two acquisitions to quadruple the size of this business. Revenue and operating profits were up significantly in the base business, with additional contributions from the acquisitions. From an internal venture developing highly technical products using our baker's yeast and spent brewer's yeast, this business has grown to become the leading North American producer of flavor extracts. It is poised for rapid global expansion with over half of our production now outside the U.S. The fourth quarter acquisitions of Champlain Industries and the Biolux Group significantly expanded our product lines and international reach. By combining our technology with their expertise, we can create new, high performance natural extracts and specialty cultures, and have a European base from which to build a strong international market position. Champlain Industries produces savory flavorings and flavor enhancers from vegetable, meat and milk proteins and yeast. It is a leading producer of hydrolyzed vegetable proteins in North America, with operations in Canada, the U.S., and the United Kingdom. The acquisition of the Biolux Group makes us the world leader in brewer's yeast extract technology, production and sales. With operations in Belgium and France, its products include flavor enhancers, health foods, feed ingredients and micro-nutrients for pharmaceutical and biotechnology processes. Today's multi-national food companies expect their research and development people to roll out and support hundreds of products a year. Our specialists know that effectively presenting ideas that meet these companies' needs helps drive their innovation. By going beyond traditional sales calls, we educate customers on the unique characteristics of our Red Star flavor enhancers. And we demonstrate their capabilities by formulating them into our customers' existing products. For our customers, the demonstration of good taste is the ultimate test. [pages 18-22] MANAGEMENT'S ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION Years ended September 30, 1994, 1993 and 1992 Summary of Operations In line with Universal Foods' strategy to seek higher-growth opportunities, the Company divested its Frozen Foods Division in 1994 and made four acquisitions totalling approximately $100 million in annualized revenue. Results for the year were affected by the sale of the Frozen Foods Division, which represented 26% of 1994 revenue and 30% of 1993 revenue, but less than that of operating income. The acquisitions made modest contributions to the results of the year, based on when they were acquired during fiscal 1994. Net earnings in 1994 were $50.9 million or $1.95 per share compared with $33.0 million or $1.25 per share in 1993. The 1994 net earnings include a one time pre-tax charge for restructuring of $12.1 million or $0.29 per share after tax. The 1993 net earnings include the cumulative effect of accounting changes of $23.6 million or $0.90 per share. Excluding the restructuring charge and accounting changes, earnings per share rose 4% to $2.24 in 1994 from $2.15 in 1993. Revenue for 1994 also rose 4% to $929.9 million compared with $891.6 million in 1993. The restructuring includes product line consolidations in the Company's Flavor Division and the reorganization of sales, marketing and distribution functions in the Red Star Yeast & Products Division. The restructuring is being implemented during the first half of fiscal 1995 and will help boost the Company's future performance. Results in 1994 were favorably impacted by the strong performance of the Color Division and improvements in the Flavor Division's domestic food and beverage business, as well as results in the Pacific Rim and the contribution of an acquisition in Europe. Strong growth in its base business and two acquisitions benefitted the Red Star BioProducts Division. Financial Condition and Outlook Universal Foods' financial condition remains sound. The company is conservative in its financial dealings, but will take prudent risks when the anticipated return is appropriate. The ratio of current assets to current liabilities was 1.7 in 1994 compared with 1.8 in 1993 and 1.6 in 1992. Long-term debt was 31.2% of total invested capital at the conclusion of 1994, 32.1% at the end of 1993 and 33.9% at the end of 1992. Although the Company focuses on higher-growth businesses, it continues to compete in a low-inflation and slow-growth environment in the food industry, especially domestically where food processors are experiencing only modest volume growth coupled with competitive pricing. The result will be an ongoing emphasis on cost reduction efforts aimed at suppliers, and further consolidation and downsizing among food processors. The Company views these industry conditions as an opportunity to be among the select number of companies participating in long-term supplier relationships. Universal Foods' growth in this industry environment will come from volume gains generated by market share growth, the impact of previous acquisitions, modest price increases, a continued shift to high-margin product mixes and decreased costs. Additional growth is possible through acquisitions. 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 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. Additional opportunities exist in leveraging its food-related technology and processing expertise into other areas. Currently, about 10% of revenue comes from non-food applications. Review of Operations Revenue: Revenue in 1994 was $930 million compared with $892 million in 1993 and $883 million in 1992. In 1994 the Company's ongoing operations increased revenues by $67 million which was offset by revenue declines of $29 million in the Frozen Foods Division which was sold on August 1, 1994. Of the 1994 sales growth from ongoing operations, 33% was generated from the Flavor Division by volume gains through acquisitions, growth in U.S. food and beverage flavors and strong sales in the Pacific Rim. The Color Division generated 29% of the revenue growth through volume gains and a concentration of sales in higher dollar-value products. The BioProducts Division contributed 22% of the gains through growth in higher-value products and the benefit of two acquisitions in the fourth fiscal quarter. Modest revenue gains were also achieved by the Dehydrated and Red Star Yeast & Products Divisions. In 1993, the Company was able to continue growth in revenue through acquisitions, volume increases and market share growth, both domestically and internationally, despite the loss of approximately $35 million in revenue from the closing of a Minnesota french fry processing plant in 1992. Of the 1993 increase in revenue of $43 million from ongoing operations, 24% of the growth was generated by the Color Division due to volume gains from acquisitions and a concentration of sales in higher dollar-value products. Increased volumes and strong retail sales fueled the Red Star Yeast & Products Division's contribution of another 23% to the total revenue gain. The gains more than offset the 6% revenue decline in the Frozen Foods Division resulting primarily from the closing of the Minnesota plant in 1992. Revenue from the Flavor Division declined slightly due to weak demand in Europe and in the domestic dairy flavors market. International Revenue: Revenue generated outside the United States is becoming increasingly important to the Company. In 1994, such revenue was $232 million, or approximately 25% of total revenue. Approximately 20% of total revenue was from international manufacturing activities and the remaining 5% from export sales. The Company continues to recognize that expansion internationally will play a key role in its overall growth. With the 1994 sale of the Frozen Foods Division and the full-year impact of acquisitions made in the fourth quarter of fiscal 1994, the percentage of revenue generated outside of the U.S. is expected to reach approximately 35% in 1995. Revenue generated outside the United States was $184 million in 1993, or 21% of total Company sales. In 1992, it was $176 million or 20%. Cost of Products Sold: The cost of products sold represented 66% of revenue in 1994 and 1993, and 67% in 1992. The flat level in 1994 compared with 1993 reflects higher raw material costs in the Frozen Foods Division which were offset by volume efficiencies in the Flavor and BioProducts Divisions. Selling and Administrative Expenses: Expenses remained flat at 22% of revenue in 1994 and 1993, compared with 21% in 1992. The flat level of expenses reflects the Company's continued focus on cost reduction. Operating Income: Excluding a one-time charge for restructuring of $12.1 million, operating income in 1994 increased by $3 million, or 3%. This compares with an increase of $3 million, or 3%, in 1993 when compared with 1992 operating income, excluding a one-time, pre-tax charge of $19.3 million. Operating income decreased $4 million, or 3%, in 1992. The 1994 increase is attributable to operating income increases in the Flavor, Color and BioProducts Divisions which offset weak operating earnings in the Frozen Foods Division due to increased selling costs and production costs associated with raw material quality. The 1993 increase was attributable to a sales focus on higher-margin products Company-wide, and to improvements in the Frozen Foods Division. The operating income decline in 1992 was attributable to very competitive conditions in the frozen french fry and baker's yeast industries. Income Tax: The effective rate of income tax expense was 37.3% in 1994, compared with 37.5% in 1993 and 37.8% in 1992. The effective tax rate varies from the statutory rate due to the addition of state taxes and the non-tax-deductibility of intangible amortization, less the benefits of tax credits. We anticipate the effective tax rate for fiscal 1995 will be approximately 37.5%, excluding any impact from the sale of the Frozen Foods Division. In August 1993, the Revenue Reconciliation Act of 1993 was signed into law as an amendment to the United States Internal Revenue Code. The Company has reviewed the provisions of the Act and, based on the initial assessment, it is anticipated that the new tax act will not have a material impact on the Company's future operating results. Accounting Changes: During 1993, Universal Foods adopted Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions," SFAS No. 112 "Employers' Accounting for Postemployment Benefits," and SFAS No. 109 "Accounting for Income Taxes." Standards 106 and 112 require the accrual of certain benefit costs during the years an employee provides service rather than when they are paid. The combined impact of these accounting changes resulted in a cumulative, non-cash charge to net earnings in 1993 of $23.6 million or $0.90 per share. Review of Financial Condition--Balance Sheet Assets: Assets increased 5%. The increase reflects approximately $130 million of assets acquired offset by the sale of Frozen Foods Division assets of approximately $171 million. Cash and cash equivalents increased primarily as a result of $163 million of cash proceeds received to date from the sale of the Frozen Foods Division less the cost of businesses acquired and the reduction in short-term borrowings. In 1993, assets increased 4%. A strong sales performance in September resulted in a 6% increase in trade accounts receivable as well as the flat inventory levels at the end of the year. Two small business acquisitions, Spectrum, S.A. and Columbia Sun, Inc., and the 1993 capital expenditure program contributed to the increase. Assets increased 7% in 1992 primarily due to acquisitions. Trade accounts receivable increased 19%, reflective of three European acquisitions made since August 1991. Current Liabilities and Long-Term Debt: Current liabilities in 1994 increased 10% primarily as a result of the 1994 acquisitions and the Frozen Foods sale. Long-term debt, including current maturities, increased $15 million. During 1994 the Company borrowed $40 million of fixed-rate long-term debt at interest rates of approximately 6.54%. In 1993, current liabilities decreased 5% while long-term debt experienced an increase of 2%. Certain short-term borrowings were paid off from positive cash flow generated in 1993 or were refinanced with long-term borrowings. Two 1993 business acquisitions and the purchase of certain technological properties from a third business also required the use of additional long-term debt. The increase in total liabilities in fiscal 1992 was a direct result of two European acquisitions and the repurchase of approximately 459,000 shares of Company stock. Floating rate borrowings under a commercial paper program are classified as long-term debt because the committed revolving credit line which backs up this program has a two-year term. Universal Foods has a goal of maintaining long-term debt below 35% of invested capital, and if exceeded, to return to that level within a three- year period. Long-term borrowings were in line with this objective in 1994. Shareholders' Equity: Total shareholders' equity rose $22.3 million, or 7%, in 1994. The Company's goal is to achieve a return on average shareholders' equity of 20% each year. In 1994, this return was 18.5% compared with 18.0% in 1993 and 17.6% in 1992, excluding adjustments for accounting changes and unusual items. Review of Financial Condition Cash Flow Operating Activities: Liquidity, defined as cash and equivalents net of short-term borrowings, improved by $42.4 million in 1994 following an increase of $17.6 million in 1993 and a $25.6 million decrease in 1992. The increase was due to the sale of the Frozen Foods Division. The Company's primary sources of liquidity are cash provided from operating activities and external debt. Historically, the Company's liquidity position has been adequate to fund substantial investments to sustain the Company's growth. Working capital needs and plant and equipment requirements during 1994 were funded from internally generated cash and the proceeds of the sale of the Frozen Foods Division, as well as long-term borrowing made in accordance with the Company's credit agreements. It is anticipated that the Company's internally generated cash will be sufficient to fund anticipated operating and capital expenditures during fiscal 1995. Acquisitions may require additional funding but will be made in accordance with the Company's long-term debt-to-capital ratio objective as well as other measures of financial strength. Investing Activities: With customers placing increased responsibility on their suppliers to develop unique products and provide the best service, continued investment in technology and process expertise is key to remaining a supplier of choice. Capital spending in 1994 totaled $55.1 million compared with $36.3 million during 1993. Among the more significant capital projects in 1994 were ones to add capacity and upgrade computer systems in the Flavor Division, to improve efficiencies in the Frozen Foods Division, and to increase capacity in the Color Division. During 1994, the Company acquired four businesses: Destillaciones Garcia de la Fuente, S.A., a Spanish flavor and fragrance business; a unit of the Campbell Soup Company based in Ireland which now operates as Mallow Foods, a dehydrator of vegetables products; Champlain Industries Limited, a Canadian producer of flavor enchancers and savory flavorings; and the Biolux Group, a European producer of ingredients from brewer's yeast. The total purchase price was $91.5 million. In 1994, the Company also entered an agreement with Minn-Dak Yeast Company, Inc. for contract manufacturing under the Red Star label and to supply molasses, a major raw material in yeast production. In keeping with the Company's overall business strategy, these acquisitions are expected to enhance current manufacturing and distribution capabilities, as well as expand its abilities in new product development. In fiscal 1995, capital expenditures are anticipated to be between $40 and $50 million; depreciation should approximate $30 million. Financing Activities: The Company is favorably viewed by many lenders in the short-term debt market and can borrow at very attractive rates. For this reason, it uses commercial paper raised in the Milwaukee market as a source for much of its working capital needs. The Company has paid uninterrupted quarterly dividends since commencing public trading in its stock over twenty years ago. In 1994 dividends paid per share were $0.92, up 5% over $0.88 in 1993, which was an increase of 5% over $0.84 in 1992. As evidence of the Company's continued effort to provide shareholders with immediate and tangible participation of current earnings, the dividends paid in 1994 represented 41% of net earnings before the one-time restructuring charge, 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 $0.96 per share, a 4% increase. Other Issues Inflation: Over the last three fiscal years, inflation has had a minimal effect on reported results of operations and the Company's financial condition. The Company attempts to mitigate the effects of inflation by adjusting product prices, as well as aggressively making cost and quality improvements, including capital investments in more efficient plants and equipment and investment in employee training and development. Although inflation has slowed in the United States in recent years, it is still a factor in some of the Company's markets around the world. Nevertheless, inflation is not expected to adversely affect 1995 results. Environmental Issues: Universal Foods has a proactive environmental program, taking the initiative rather than waiting for legal mandates to prod action. The Company provides employee training and encourages active employee involvement with respect to environmental concerns. The Company has strengthened its environmental policy, placing emphasis on process changes to reduce or eliminate environmental discharges, rather than relying on costly emission control investments to treat waste after it is produced. 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 principle 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. Corporate Responsibility: The Company is committed to the health and well- being of the communities in which it does business. Universal Foods supports an initiative to return 2% of pre-tax 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 causes. (Bar charts) International Revenue In millions 1994 $232 1993 $184 1992 $176 1991 $127 1990 $97 Operating Margins 1994(1) 11.7% 1993 11.9% 1992(1) 11.6% 1991 12.7% 1990(1) 10.8% (1) Excludes unusual item; see Note B on page 27 and notes on page 34 for discussion. Long-Term Debt to Invested Capital 1994 31.2% 1993 32.1% 1992 33.9% 1991 32.6% 1990 31.5% Capital Expenditures/Depreciation In millions 1994 $55.1/$31.0 1993 $36.4/$29.6 1992 $45.0/$28.1 1991 $54.8/$24.2 1990 $74.4/$21.8 [page 22] QUARTERLY FINANCIAL DATA (Unaudited) (Dollars in thousands except per share data)
Gross Earnings Market Price Dividends Revenue Profit Earnings Per Share High Low Per Share 1994 First Quarter $220,791 $76,632 $14,460 $.55 $35.00 $30.38 $.23 Second Quarter 237,082 79,437 14,574 .56 34.38 30.00 .23 Third Quarter 249,467 81,199 15,310 .59 34.25 29.50 .23 Fourth Quarter 222,523 75,843 6,567 .25 33.38 28.88 .23 1993 First Quarter $209,374 $72,701 $13,521 $.51 $35.75 $30.25 $.22 Second Quarter 216,663 71,975 13,406 .51 35.50 31.63 .22 Third Quarter 228,036 76,285 14,340 .55 37.25 33.00 .22 Fourth Quarter 237,493 80,870 15,331 .58 36.00 31.13 .22 See Note B of notes to consolidated financial statements for an explanation of the unusual item reported in the fourth quarter of 1994. The first three quarters of 1993 have been restated to reflect the accounting changes effective October 1, 1992. Earnings and Earnings Per Share for the first quarter of 1993 are shown before the Cumulative Effect of Accounting Changes (see Note G).
[pages 23-33] CONSOLIDATED EARNINGS
(Dollars in thousands) Years ended September 30, 1994 1993 1992 Earnings Revenue $929,863 $891,566 $883,438 Operating costs and expenses: Cost of products sold 616,752 589,735 593,006 Selling and administrative expenses 203,965 196,102 187,727 Unusual items--Note B 12,125 -- 19,300 -------- -------- -------- 832,842 785,837 800,033 -------- -------- -------- Operating income 97,021 105,729 83,405 Interest expense 15,888 15,172 16,423 -------- -------- -------- Earnings before income taxes and cumulative effect of accounting changes 81,133 90,557 66,982 Income taxes--Note H 30,222 33,959 25,286 -------- -------- -------- Earnings before cumulative effect of accounting changes 50,911 56,598 41,696 Cumulative effect of accounting changes (net of income taxes of $14,137)--Note G -- 23,563 -- -------- -------- -------- Net Earnings $ 50,911 $ 33,035 $ 41,696 -------- -------- -------- Earnings per Common Share Earnings before cumulative effect of accounting changes $1.95 $2.15 $1.57 Accounting changes -- (.90) -- -------- -------- -------- Net Earnings $1.95 $1.25 $1.57 -------- -------- -------- Weighted average shares (in thousands) 26,131 26,350 26,608 -------- -------- --------
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, 1994 1993 Assets Current Assets: Cash and cash equivalents--Note A $ 43,430 $ 11,356 Trade accounts receivable less allowance for losses of $3,527 and $3,306 95,336 94,339 Inventories--Notes A and C 156,121 174,582 Prepaid expenses and other current assets 19,145 20,716 Prepaid income taxes 13,796 11,125 ------- ------- Total Current Assets 327,828 312,118 Investments--Note A 13,944 9,259 Other Assets 18,384 19,243 Intangibles--at cost, less accumulated amortization of $26,042 and $24,898--Notes A and B 147,789 107,381 Property, Plant and Equipment--Notes A and D: Cost: Land 14,396 12,973 Buildings 104,142 118,736 Machinery and equipment 309,847 340,446 -------- -------- 428,385 472,155 Less accumulated depreciation 172,666 190,163 -------- -------- 255,719 281,992 -------- -------- Total Assets $763,664 $729,993 -------- -------- Liabilities and Shareholders' Equity Current Liabilities: Short-term borrowings--Note D $ 4,527 $ 14,945 Accounts payable and accrued expenses--Notes A and B 127,823 129,481 Salaries, wages and withholdings from employees 10,330 13,499 Income taxes 28,697 11,035 Current maturities on long-term debt 20,775 5,663 -------- -------- Total Current Liabilities 192,152 174,623 Deferred Income Taxes--Note H 17,300 20,557 Other Deferred Liabilities 19,414 20,571 Accrued Employee and Retiree Benefits--Note G 35,173 37,269 Long-Term Debt--Note D 172,235 171,907 Shareholders' Equity--Notes A, D and E: 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 80,066 79,826 Earnings reinvested in the business 273,800 246,939 -------- -------- 356,564 329,463 Less: Treasury stock, 916,615 and 593,900 shares, respectively, at cost 25,521 14,693 Other 3,653 9,704 -------- -------- 327,390 305,066 -------- -------- Total Liabilities and Shareholders' Equity $763,664 $729,993 -------- --------
See notes to consolidated financial statements. CONSOLIDATED SHAREHOLDERS' EQUITY
Other ----------------------------------- Earnings Unearned Foreign Additional reinvested Treasury Stock Unallocated portion of currency Common paid-in in the ----------------- ESOP restricted translation (Dollars in thousands) stock capital business Shares Amount stock stock adjustments Balances at September 30, 1991 $2,698 $80,104 $217,790 283,938 $(3,221) $ (5,700) $(1,617) $1,948 Net earnings for the year 41,696 Cash dividends paid--$.84 a share (22,391) Stock options exercised, net of 9,249 shares exchanged (110) (49,080) 656 Dividend reinvestment plan and other 517 (27,723) 132 Amortization of restricted stock 529 Translation adjustment for year 1,938 Purchase of treasury stock 458,900 (13,795) Reduction of ESOP loan guarantee 2,000 ---------------------------------------------------------------------------------------------------------------------------- Balances at September 30, 1992 2,698 80,511 237,095 666,035 (16,228) (3,700) (1,088) 3,886 Net earnings for the year 33,035 Cash dividends paid--$.88 a share (23,191) Stock options exercised, net of 11,029 shares exchanged (883) (72,013) 1,761 Other (16) 21,916 (764) Restricted stock issued 214 (23,200) 569 (783) Restricted stock cancelled 1,162 (31) 13 Amortization of restricted stock 460 Translation adjustment for year (9,992) Reduction of ESOP loan guarantee 1,500 ---------------------------------------------------------------------------------------------------------------------------- Balances at September 30, 1993 2,698 79,826 246,939 593,900 (14,693) (2,200) (1,398) (6,106) Net earnings for the year 50,911 Cash dividends paid--$.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) ----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. CONSOLIDATED CASH FLOWS (Dollars in thousands)
Years ended September 30, 1994 1993 1992 Cash Flows from Operating Activities Net earnings $50,911 $33,035 $41,696 Adjustments to reconcile net earnings to net cash provided by operating activities: Cumulative effect of accounting changes -- 23,563 -- Depreciation 31,012 29,644 28,144 Amortization 5,366 5,409 4,894 Provision for losses on accounts receivable 971 988 808 (Gain) loss on sale of property, plant and equipment and other productive assets (185) (167) 5,623 Changes in operating assets and liabilities (net of effects from acquisitions and disposition of businesses): Accounts receivable (10,588) (4,299) (7,936) Inventories (5,082) 1,498 3,757 Prepaid expenses, income taxes and other assets (3,366) (9,886) (1,097) Accounts payable and accrued expenses (3,312) (4,073) (5,792) Salaries, wages and withholdings from employees (3,158) 845 1,841 Income taxes 16,488 2,285 1,496 Deferred income taxes (4,889) 2,976 1,989 Other liabilities (12,526) 933 (7,884) Net Cash Provided by Operating Activities 61,642 82,751 67,539 Cash Flows from Investing Activities Acquisition of property, plant and equipment (55,071) (36,363) (44,982) Acquisition of new businesses--net of cash acquired (65,909) (9,614) (18,541) Proceeds from disposition of business and sale of property, plant and equipment and other productive assets 163,807 589 1,624 Increase in investments (6,827) (2,225) (1,485) Net Cash Provided by (Used in) Investing Activities 36,000 (47,613) (63,384) Cash Flows from Financing Activities Proceeds from additional borrowings 42,629 27,521 45,066 Reduction in debt (70,415) (39,240) (16,400) Proceeds from options exercised 633 878 546 Other shareholders' equity transactions (247) (780) 649 Purchase of treasury stock (14,118) -- (13,795) Dividends (24,050) (23,191) (22,391) Net Cash Used in Financing Activities (65,568) (34,812) (6,325) Net increase (decrease) in cash and cash equivalents 32,074 326 (2,170) Cash and cash equivalents at beginning of year 11,356 11,030 13,200 Cash and cash equivalents at end of year $43,430 $11,356 $11,030 Cash paid during the year for: Interest $14,829 $16,234 $15,722 Income taxes 33,500 29,080 17,487
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended September 30, 1994, 1993 and 1992 Note A Summary of Significant Accounting Policies: Nature of Business The Company manufactures and distributes dehydrated products, food colors and flavors, frozen potato products, yeast and other fermentation products. In 1994, the Company sold its frozen potato products business (see Note B). Consolidated Subsidiaries and Investments in Other Companies Substantially all of the Company's subsidiaries are wholly-owned and their accounts are consolidated into the Company's financial statements. 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. There are no immediate prospects of other earnings distributions. Cash and Cash Equivalents Checks outstanding in excess of related cash balances for disbursing accounts of approximately $5,211,000 and $7,584,000 at September 30, 1994 and 1993, respectively, have been reclassified as accounts payable and accrued expenses. 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 Intangibles represent primarily the excess of cost over net tangible assets of companies acquired. Goodwill is being amortized on the straight-line method over forty years. Other intangibles, including supply contracts, non-compete agreements and formulae, are stated at cost and amortized on the straight-line basis over periods of two to twenty years. Financial Instruments In the normal course of its business, the Company enters into financial instrument transactions with off-balance sheet risk in order to hedge its exposure to market risk regarding currency transactions and interest rates. Foreign Currency Contracts The Company enters into contracts to hedge transactions denominated in international currencies and to hedge payment of intercompany transactions with its foreign subsidiaries. At September 30, 1994, the Company had approximately $27,600,000 of foreign currency forward contracts and currency swaps outstanding. The difference between the contracts and estimated fair values at September 30, 1994 is not significant. Realized and unrealized gains and losses on contracts that hedge operating activities are recognized currently in net earnings. Realized and unrealized gains and losses on contracts that hedge net investments are recognized in the foreign currency adjustment in shareholders' equity. Interest Rate Swaps The Company utilizes interest rate swaps of various maturities with multiple major financial institutions to manage interest rate exposure associated with the Company's debt. The notional amount of interest rate swaps outstanding as of September 30, 1994 and 1993 was $40,000,000. Credit and market risk exposure are limited to net interest differentials which are reflected in interest expense as they are accrued. The fair value of the swaps, a (payable) receivable of ($200,000) and $1,200,000, are the approximate amounts that would be paid or received to terminate the agreements as of September 30, 1994 and 1993, respectively. 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 most international units are included as foreign currency translation adjustments in the equity section of the balance sheets. Net transaction (gains) losses of ($697,000) in 1994, $162,000 in 1993 and ($705,000) in 1992, are included in earnings before income taxes. Note B Acquisitions, Divestiture and Unusual Items: The Company entered into an agreement to sell its Frozen Foods Subsidiary effective July 31, 1994. The sale price has not been finalized and, accordingly, at September 30, 1994 the base consideration received of $163,000,000 less the net book value of the subsidiary and other costs related to the sale has been included on the balance sheet with accounts payable and accrued expenses. The anticipated gain resulting from the sale will be reflected in the Company's results of operations upon resolution of the closing balance sheet valuation. 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 and the remaining purchase price is payable in equal installments of $12,243,000 on June 30, 1995 and June 30, 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 forty years. On an unaudited pro forma basis, the effects of the acquisitions were not significant to the Company's 1994 results of operations. In the fourth quarter of 1994, the Company provided for the costs of restructuring its worldwide operations. The charge relates primarily to the consolidation of its operations. This restructuring charge reduced 1994 earnings before income taxes, net earnings and earnings per share by $12,125,000, $7,600,000 and $.29, respectively. In 1993, the Company acquired technology and two businesses for $9,614,000 cash. During 1992, the Company acquired two foreign businesses for an aggregate purchase price of $23,741,000. The excess of the total aggregate cost over the fair value of net assets acquired of approximately $20,159,000 is being amortized by the straight-line method over forty years. 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 July 1992, the Company terminated the lease of its frozen potato processing facility in Park Rapids, Minnesota. In connection with the lease termination, a one-time pre-tax charge to earnings of $19,300,000 was recorded and is shown as an unusual item. This charge includes early termination of the lease, disposition of leasehold improvements and other costs related to ceasing production in this facility. The charge resulted in a decrease in net earnings of $12,014,000 ($.45 per share) for the year ended September 30, 1992. Note C Inventories: Inventories include finished and in-process products in the amount of $101,046,000 and $114,178,000 at September 30, 1994 and 1993, respectively, and raw materials and supplies of $55,075,000 and $60,404,000 at September 30, 1994 and 1993, respectively. Note D Debt: Long-term debt consists of the following obligations: (Dollars in thousands) 1994 1993 Payable in U.S. Dollars: 9.06% senior notes to insurance company payable $4,000,000 to $6,000,000 annually, from July 1995 to July 2004 $ 50,000 $ 50,000 8.60% senior notes to insurance company payable $2,200,000 to $2,370,000 annually, from November 1993 to November 2001 14,800 19,200 7.59% senior notes to insurance company payable $4,286,000 annually from December 2002 30,000 30,000 6.70% senior notes to insurance companies payable $2,222,000 annually from December 2001 20,000 -- 6.38% senior notes to insurance companies payable $5,000,000 annually from December 2000 20,000 -- 6.21% senior notes to insurance company payable in December 1995 20,000 20,000 Commercial paper supported by long-term loan commitments 1,031 46,489 Corporate guaranty of loan between ESOP and a bank -- 2,200 Various mortgage notes, capital lease obligations and other notes 2,311 2,942 Notes and credit facilities payable in foreign currencies 34,868 6,739 ------- ------- 193,010 177,570 Current maturities 20,775 5,663 ------- ------- Total long-term debt $172,235 $171,907 ------- ------- The Company has a $55,000,000 Revolving Loan Agreement with a group of five banks. Under the agreement, the Company has the option to elect to have the interest rates determined based upon the prime commercial rate, Eurodollar 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 July 1996. Uncommitted lines of credit totalling $139,000,000 are also available to the Company from several banks, some of which participate in the Revolver. The Company issues short-term commercial paper obligations supported by committed lines of credit included in the Revolving Loan Agreement. The Company intends to exercise its option to borrow under the commitment prior to its expiration date, or in the event commercial paper borrowings cannot be renewed. Consequently, at September 30, 1994 and September 30, 1993, $1,031,000 and $46,489,000 have been reclassified as long-term debt, respectively. The aggregate amounts of maturities on long-term debt each year for the five years subsequent to September 30, 1994 are as follows: 1995, $20,775,000; 1996, $41,912,000; 1997, $7,066,000; 1998, $7,781,000 and 1999, $9,817,000. Substantially all of the loan agreements contain restrictions concerning working capital, borrowings, investments and dividends. Earnings reinvested of $27,258,000 at September 30, 1994 were unrestricted. The fair value of long-term debt (including current maturities) is calculated using discounted cash flows for all fixed rate debt. Market interest rates are used to determine discount factors used in the calculation. The fair value at September 30, 1994 and 1993 was approximately $190,000,000 and $193,000,000, respectively. Short-term borrowings consist of the following obligations: (Dollars in thousands) 1994 1993 Loans to foreign subsidiaries denominated in local currencies borrowed under various foreign uncommitted lines of credit $4,527 $11,944 Short-term loan borrowed under uncommitted lines of credit -- 3,001 ------ ------ Total short-term borrowings $4,527 $14,945 ------ ------ Note E 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"). Under the 1990 Plan, SARs have been granted in connection with certain stock options. In lieu of exercising a stock option, SAR holders are entitled, upon exercise of a SAR, to receive cash in an amount equal to the excess of the fair market value of such shares on the date of exercise over the option price. 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. Transactions with respect to stock options are summarized as follows: Shares Outstanding Reserved Options Available Balances at September 30, 1991 ($10.591 to $36.125) 1,833,632 1,025,082 808,550 Granted ($30.00 to $33.125) -- 257,300 (257,300) Exercised ($10.591 to $24.125) (58,329) (58,329) -- Cancelled -- (21,250) 21,250 ----------------------------------------------------------------------- Balances at September 30, 1992 ($10.591 to $36.125) 1,775,303 1,202,803 572,500 Granted ($33.75 to $34.75) -- 311,600 (311,600) Restricted stock awarded (23,200) -- (23,200) Exercised ($10.591 to $34.125) (83,042) (83,042) -- Cancelled -- (16,950) 16,950 ----------------------------------------------------------------------- Balances at September 30, 1993 ($11.833 to $36.125) 1,669,061 1,414,411 254,650 Authorized under the 1994 Plan 1,200,000 -- 1,200,000 Granted ($30.875 to $32.25) -- 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) 2,799,910 1,600,310 1,199,600 ---------------------------------------------------------------------- At September 30, 1994, 868,662 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. The Company's Employee Stock Ownership Plan ("ESOP") had loans with a third party lender which were guaranteed by the Company. During 1994, the ESOP repaid the loans with proceeds from Company contributions and dividends paid on Company stock. The ESOP's debt of $2,200,000 at September 30, 1993 is shown as a reduction of shareholders' equity. Note F 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 the employees salary. Total expense for the Company's defined contribution plans was $8,112,000, $7,364,000 and $6,994,000 in 1994, 1993 and 1992, respectively. Note G Postretirement and Postemployment Benefits: The Company provides certain health insurance benefits to eligible domestic retirees and their dependents. Effective October 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 (SFAS No. 106) "Employers' Accounting for Postretirement Benefits Other Than Pensions," whereby the cost of postretirement benefits is accrued during an employee's active service period. Prior to October 1, 1992, benefits were charged to operations in the period the claims were paid and were not material. The Company elected to immediately recognize the transition obligation for future benefits to be paid relating to past employee services in fiscal 1993. The postretirement benefit expense includes the following components: (Dollars in thousands) 1994 1993 Service cost $1,586 $1,784 Interest cost on accumulated benefit obligation 1,977 2,118 Amortization of prior service cost (352) -- Other -- 160 ------------------------------------------------------------------------- Postretirement benefit expense $3,211 $4,062 ------------------------------------------------------------------------- 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 at September 30, 1994 and 1993 was: (Dollars in thousands) 1994 1993 Actuarial present value of accumulated benefit obligation: Retirees $ 8,287 $ 8,422 Fully eligible active plan participants 2,253 2,555 Other active plan participants 11,506 14,230 ------------------------------------------------------------------------ Accumulated benefit obligation 22,046 25,207 Unrecognized prior service cost 5,277 7,032 Unrecognized gain 2,662 -- ------------------------------------------------------------------------ Postretirement benefits accrued $29,985 $32,239 The weighted average discount rates used in determining the accumulated postretirement benefit obligation at September 30, 1994 and 1993 were 8.0% and 7.5%, respectively. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 15% in 1993, 14% in 1994, gradually declining to 7% by the year 2001 and remaining at that level thereafter. A one percentage point increase in the assumed cost trend rate would increase the accumulated postretirement benefit obligation as of September 30, 1994 by approximately $4,300,000 and the aggregate of the service and interest cost components of the 1994 postretirement benefit expense by $867,000. During 1994, the Company had a curtailment of accumulated postretirement benefits relating to employees of the Frozen Foods Subsidiary which was sold effective July 31, 1994. The gain resulting from the curtailment has been included with other costs of the transaction and will be recognized when the sale is finalized (see Note B). In addition, effective October 1, 1992, the Company adopted Financial Accounting Standards No. 112 (SFAS No. 112), "Employers' Accounting For Postemployment Benefits." This standard requires employers to accrue the cost of benefits to former or inactive employees after employment but before retirement. The adoption of SFAS Nos. 106 and 112, resulted in a non-cash pre-tax charge of $37,700,000 as of October 1, 1992 and has been reflected as a cumulative effect of accounting changes. Net earnings per share, before cumulative effect of accounting changes, for the year ended September 30, 1993 would have been $2.25, as compared to $2.15, if SFAS Nos. 106 and 112 had not been adopted. Note H Income Taxes: Effective October 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS No. 109). The cumulative and fiscal 1993 effect of the accounting change was not material. SFAS No. 109 requires the Company to compute deferred income taxes based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes, including the income tax effect of accounting changes in 1993, is as follows: (Dollars in thousands) 1994 1993 1992 Currently payable: Federal $36,759 $23,394 $18,023 State 6,684 4,082 3,246 Foreign 5,754 3,954 2,581 Deferred (benefit): Federal (16,592) (10,057) 863 State (2,862) (1,521) 186 Foreign 479 (30) 387 -------- ------- -------- $30,222 $19,822 $25,286 -------- -------- -------- The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consist of the following: (Dollars in thousands) 1994 1993 Deferred tax assets: Inventory valuation $ 5,690 $ 5,747 Employee and retiree benefits 16,432 15,601 Sale of assets, plant closings and asset write-downs 6,874 8,761 Other 13,910 14,744 ------------------------------------------------------------------------- Gross deferred tax assets 42,906 44,853 Valuation allowance (6,112) (5,878) ------------------------------------------------------------------------- Total deferred tax assets $36,794 $38,975 ------------------------------------------------------------------------- Deferred tax liabilities: Property, plant and equipment $21,234 $33,080 Other 19,064 15,327 ------------------------------------------------------------------------- Total deferred tax liabilities $40,298 $48,407 ------------------------------------------------------------------------- Net deferred tax liability $ 3,504 $ 9,432 ------------------------------------------------------------------------- The effective tax rate differs from the statutory Federal income tax rates of 35% in 1994 and 1993, and 34% in 1992, as described below: (Dollars in thousands) 1994 1993 1992 Taxes at statutory rate $28,397 $18,500 $22,774 State income taxes, net of Federal income tax benefit 2,484 1,665 2,265 Affordable housing tax credits (1,980) (531) -- Other, net 1,321 188 247 ------------------------------------------------------------------------- Provision for income taxes $30,222 $19,822 $25,286 ------------------------------------------------------------------------- Effective tax rate 37.3% 37.5% 37.8% ------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of accounting changes are summarized as follows: (Dollars in thousands) 1994 1993 1992 United States $63,079 $80,483 $59,107 Foreign 18,054 10,074 7,875 ------------------------------------------------------------------------ $81,133 $90,557 $66,982 ------------------------------------------------------------------------ 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. Note I Commitments and Contingencies: Aggregate minimum rental commitments at September 30, 1994 for all noncancelable operating leases with an initial term greater than one year were as follows: (Dollars in thousands) 1995 $ 3,697 1996 2,577 1997 1,454 1998 917 1999 614 After 1999 1,563 ------- $10,822 ------- Rent expense totaled $16,478,000, $15,663,000 and $19,757,000 for the years ended September 30, 1994, 1993 and 1992, respectively. The Company is involved in various claims and litigation arising in the normal course of business. In the opinion of management, the ultimate resolution of these actions will not have a material effect on the Company's financial position. Note J Foreign Operations: Summarized information relating to the Company's domestic and foreign operations are as follows: (Dollars in thousands) 1994 1993 1992 Revenue: United States $745,487 $752,335 $747,699 Europe 104,375 74,646 78,468 Other Foreign 80,001 64,585 57,271 ------------------------------------------------------------------------- $929,863 $891,566 $883,438 ------------------------------------------------------------------------- Operating Income: United States $76,315 $ 91,477 $ 66,272 Europe 8,060 4,315 8,290 Other Foreign 12,646 9,937 8,843 ------------------------------------------------------------------------- $97,021 $105,729 $ 83,405 ------------------------------------------------------------------------- Identifiable Assets: United States $482,934 $569,840 $532,660 Europe 175,539 102,603 120,775 Other Foreign 105,191 57,550 48,695 ------------------------------------------------------------------------- $763,664 $729,993 $702,130 ------------------------------------------------------------------------- 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. MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS 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 over-sight 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. Guy A. Osborn Chairman and Chief Executive Officer John E. Heinrich 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, 1994 and 1993, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended September 30, 1994. 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, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles. As discussed in Note G to the consolidated financial statements, effective October 1, 1992, the companies changed their methods of accounting for postretirement benefits other than pensions and postemployment benefits to conform with Statements of Financial Accounting Standards No. 106 and No. 112, respectively. DELOITTE & TOUCHE LLP Milwaukee, Wisconsin November 10, 1994 [page 34] FIVE YEAR REVIEW
(Dollars in thousands except per share data) Years ended September 30, 1990 through 1994 1994 1993 1992 1991 1990 Revenue $929,863 100.0% $891,566 100.0% $883,438 100.0% $834,329 100.0% $873,697 100.0% Operating costs and expenses: Costs of products sold 616,752 66.3 589,735 66.1 593,006 67.1 557,917 66.9 609,552 69.8 Selling and administrative expenses 203,965 22.0 196,102 22.0 187,727 21.3 170,137 20.4 169,797 19.4 Unusual items 12,125 1.3 -- -- 19,300 2.2 -- -- (2,899) (0.3) 832,842 89.6 785,837 88.1 800,033 90.6 728,054 87.3 776,450 88.9 Operating income 97,021 10.4 105,729 11.9 83,405 9.4 106,275 12.7 97,247 11.1 Interest expense 15,888 1.7 15,172 1.7 16,423 1.9 13,975 1.7 12,179 1.4 Earnings before income taxes and cumulative effect of accounting changes 81,133 8.7 90,557 10.2 66,982 7.5 92,300 11.0 85,068 9.7 Income taxes 30,222 3.2 33,959 3.9 25,286 2.8 34,520 4.1 33,176 3.8 Earnings before cumulative effect of accounting changes 50,911 5.5 56,598 6.3 41,696 4.7 57,780 6.9 51,892 5.9 Cumulative effect of accounting changes net of tax -- -- 23,563 2.6 -- -- -- -- -- -- Net earnings $50,911 5.5% $ 33,035 3.7% $41,696 4.7% $57,780 6.9% $51,892 5.9% Earnings per common share before unusual items and cumulative effect of accounting changes 2.24 2.15 2.02 2.18 1.93 Net Earnings per common share 1.95 1.25 1.57 2.18 1.98 Cash dividend--paid per common share 0.92 .88 .84 .76 .68 S Corporation distributions by pooled company -- -- -- 5,078 377 Weighted average shares outstanding 26,130,783 26,350,346 26,608,350 26,537,996 26,249,552 Total assets 763,664 729,993 702,130 653,176 569,840 Shareholders' equity 327,390 305,066 303,174 292,002 252,634 Book value per common share 12.60 11.60 11.57 10.99 9.61 Price range per common share 287/8-35 301/4-371/4 263/4-397/8 285/8-403/8 213/8-337/8 Share price at September 30 29.63 33.88 31.38 38.25 29.88 Working capital 135,676 137,495 115,517 126,875 96,669 Return on Average Invested Capital 11.8% 12.4% 12.7% 15.2% 15.3% Return on Average Shareholders' Equity 18.5% 18.0% 17.6% 21.2% 22.1% Research and Development Expenditures 32,217 28,460 26,597 25,211 21,745 Capital Expenditures 55,071 36,363 44,982 54,750 74,414 Depreciation 31,012 29,644 28,144 24,153 21,796 Amortization 5,366 5,409 4,894 5,252 5,785 Current Ratio 1.7 1.8 1.6 1.8 1.7 Long-Term Debt to Invested Capital 31.2% 32.1% 33.9% 32.6% 31.5% Employees 4,063 5,450 5,400 5,924 5,784 Based on earnings excluding the after-tax effect of the unusual item of $7,600,000. Including this expense, return on average invested capital and return on average shareholders' equity would have been 10.5% and 16.1%, respectively Based on earnings including the annual charge for SFAS No. 106. Excluding this charge, earnings per share before cumulative effect of accounting changes, return on average invested capital and return on average shareholders' equity would have been $2.25, 12.9% and 18.7%, respectively. Years 1991 and prior were restated for the 1991 pooling, except for cash dividends per common share which are on an as- reported basis, adjusted for subsequent stock splits. Based on earnings excluding the after-tax effect of the unusual item of $12,014,000. Including this expense, return on average invested capital and return on average shareholders' equity would have been 10.3% and 13.8%, respectively. Based on earnings excluding the after-tax gain of $1,222,000 on the sale of the Cheese Division, combined with the redeployment, disposition, and reduction in carrying value of certain Company assets. Including this gain, return on average invested capital and return on average shareholders' equity would have been 15.6% and 22.6%, respectively.
EX-21 3 EXHIBIT 21 - SUBSIDIARIES EXHIBIT 21 SIGNIFICANT SUBSIDIARIES OF UNIVERSAL FOODS CORPORATION Warner-Jenkinson Company, a New York corporation formerly known as H. Kohnstamm & Co., Inc., 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, has 9 domestic and 18 foreign subsidiaries. EX-23 4 EXHIBIT 23 - AUDITORS' CONSENT Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No.'s 33-7235, 33-27356, 33-34555, 33-35704 and 33-55437 of Universal Foods Corporation on Form S-8 of our reports dated November 10, 1994, which reports express unqualified opinions and include an explanatory paragraph relating to the change in method of accounting for postretirement benefits other than pensions and postemployment benefits to conform with Statements of Financial Accounting Standards No. 106 and No. 112, respectively, appearing in and incorporated by reference in the Annual Report on Form 10-K of Universal Foods Corporation for the year ended September 30, 1994. DELOITTE & TOUCHE LLP December 16, 1994 Milwaukee, Wisconsin EX-27 5 EXHBIT 27 - FDS
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF UNIVERSAL FOODS CORPORATION AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR SEP-30-1994 JAN-01-1994 SEP-30-1994 43,430 0 95,336 3,527 156,121 327,828 428,385 172,666 763,664 192,152 172,235 2,698 0 0 324,692 763,664 929,863 929,863 616,752 616,752 12,125 971 15,888 81,133 30,222 50,911 0 0 0 50,911 1.95 1.95 Charge for restructuring
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