-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I8FdZWlf5V+uqXfOR0LxU4pVg0CmT5QunBBrxdQ3BT2r3BLqDWh1a1kvx/68yxx/ 6QuvrEEzIuljJo23vOqw3g== 0000897069-95-000215.txt : 19951229 0000897069-95-000215.hdr.sgml : 19951229 ACCESSION NUMBER: 0000897069-95-000215 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951228 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: 95605226 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, INC. 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, 1995 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 (Zip Code) offices) Registrant's telephone number, including area code: (414) 271-6755 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT Name of each exchange Title of each class on which registered Common Stock, $.10 par value New York Stock Exchange, Inc. Associated Common Share Purchase Rights SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate the number of shares outstanding of each of the issuer's classes of Common Stock as of December 1, 1995: 26,977,437 shares of Common Stock, $.10 par value, including 863,500 treasury shares. Aggregate market value of Universal Foods Corporation Common Stock, excluding treasury shares, held by non-affiliates as of December 1, 1995 was $873,323,603. Documents Incorporated By Reference 1. Portions of Universal Foods Corporation 1995 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 15, 1995 (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 high-performance 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 1995 Annual Report to Shareholders is incorporated by reference: "Management's Analysis of Operations and Financial Condition" on Pages 18 through 21 (but not any photographs or applicable information included therein). Note A - "Summary of Significant Accounting Policies" on Page 27. Note K - "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, ingredient systems and fragrances to the dairy, food processor, beverage and personal care and household products industries worldwide and is a recognized leader in the North American dairy and beverage flavor markets. It operates plants located in Kearny, New Jersey; Amboy, Illinois; Indianapolis, Indiana; and Fenton, Missouri. Universal Flavor has eleven additional plants in Canada, Mexico, Belgium, Great Britain, Italy, Spain, Australia, New Zealand, Hong Kong and the Philippines. Products are sold primarily through employee sales representatives with some assistance from food brokers. Strategic acquisitions have expanded Universal Flavor's product lines and processing capabilities. 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 positioned 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 which are used to create flavors as well as fragrances. In July 1994, Universal Flavor, 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 trademarks as RED SEAL and SPECTRACOAT, are used by producers of beverages, bakery products, processed foods, confections, pet foods, cosmetics and pharmaceuticals. W-J is headquartered in St. Louis, Missouri, the site of its major manufacturing facilities. Cosmetic and pharmaceutical colors are produced in New Jersey. Latin American customers are served by W-J de Mexico, S.A. de C.V., a manufacturing and sales subsidiary located just outside of Mexico City. W-J Canada (formerly Dyeco Ltd.) operates out of Kingston, Ontario. Other manufacturing facilities are located in King's Lynn, England; Amersfoort, The Netherlands; and Tullamarine, Victoria, Australia. Domestically, the W-J product line is sold principally by the Company's own sales force. International sales are made through distributors and directly by the Company. Recent acquisitions have strengthened the business internationally which operates under the W-J name. 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, pharmaceutical applications and 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 is believed 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 and 1995, the Company acquired three European dehydrated vegetable processors. The acquisitions give the Company a base from which to expand its dehydrated products business internationally. These acquisitions also expand the Company's dehydrated technology base to include freeze drying, puffed drying and vacuum drying. Vegetables processed using these technologies are premium products because they have a short reconstitution time, a benefit in today's convenience foods such as soups, snacks and other dry foods. The European businesses operate as UNIVERSAL DEHYDRATES. The acquired companies formerly operated as Mallow Foods in Midleton, County Cork, Ireland; Silva Laon, located near Laon, France; and Top Foods in Elburg, the Netherlands. The Company believes it is the leading dehydrator of specialty vegetables in Europe. Yeast The Company specializes in the production of compressed, cream, active dry and nutritional yeast products for sale to industrial, institutional and retail accounts under the RED STAR trademark. 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. In 1994, the Company purchased a 20% stock interest in and entered an agreement with Minn-Dak Yeast Company, Inc. in Wahpeton, North Dakota for contract manufacturing under the RED STAR trademark and 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 yeast group. With internally developed expertise, the group focused on highly technical product development using extracts from brewer's and baker's yeast. During 1993, Universal BioVentures, the Company's biotechnology group, was integrated into Red Star Specialty Products to develop new products utilizing the Company's expertise in fermentation and molecular biology. The BioVentures product line was discontinued in 1995 because of the continuing development costs and funding required for expansion. 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 the leading European producer of food, nutritional and feed ingredients derived from brewer's yeast. The acquisition makes the Company the 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 and feed processing and bionutrient industries with the broadest line 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. The nutritional and functional properties of Red Star BioProducts extracts are the basis for their use in enzyme and pharmaceutical production. The Company believes Red Star BioProducts is the leading supplier of yeast extracts and second in the supply of HVPs in the U.S. market. The products are marketed under a number of RED STAR and CHAMPLAIN trademarks. The expanded division operates production facilities in Juneau, Wisconsin; Harbor Beach, Michigan; Clifton, New Jersey; and in Canada, the United Kingdom, Belgium and France. More than half of the Division's products are now produced outside of the United States. Its products are marketed through technically trained sales personnel directly to 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. The sale was a major step in Universal Foods' strategic transition to a focus on high-performance ingredients and ingredient systems for foods and other products. Frozen Foods produced frozen potato products for U.S. and international markets, selling most of its product to the food service industry. It had a share of the retail market with branded and private labeled products. It operated processing facilities in Twin Falls, Idaho; Hermiston, Oregon; and Pasco, Washington. Research and Development/Quality Assurance The Company believes that its competitive advantage and ability to develop and deliver high-performance 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 400 people in research and quality assurance. Over the past five years, expenditures as a percentage of revenue have increased from 3.0% in 1991 to 3.6% in 1995. Expenditures in fiscal 1995 decreased 11.4% from fiscal 1994 to $28.6 million from $32.2 million. This decrease is a direct result of the sale of Frozen Foods. Frozen Foods accounted for $4.1 million in expenditures during fiscal 1994. Expenditures in fiscal 1994 increased 13% to $32.2 million from $28.5 million in fiscal 1993. The Company's commitment to research and product development continues at a level significantly higher than the food industry average. Of the aforesaid amounts, approximately $17.9 million in fiscal 1993, $20.4 million in fiscal 1994 and $19.3 million in fiscal 1995, were research and development expenses as defined by the Financial Accounting Standards Board. 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 continued its comprehensive 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. To date, Universal Flavor facilities in Indiana and New Jersey in the United States and facilities in The Netherlands and United Kingdom have also been certified. Dehydrated Product facilities in California, in the United States, and in Ireland, France and the Netherlands have also been certified. Competition All Company products are sold in highly competitive markets. Since the Company and its competitors utilize similar methods of production, marketing and delivery, the Company competes primarily on process and applications expertise, quality and service. Universal Foods competes with only a few companies across multiple ingredient lines and is more likely to encounter competition specific to individual businesses. With the evolution of food processing as a global business, competition to supply the industry has taken on an increasingly global nature. In the worldwide flavor market, the Company's principal competition comes from other U.S. and European producers. Building an international presence is a key goal for Universal Flavor as witnessed by acquisitions and the completion of a plant in Belgium in order to meet increasing international flavor demands. W-J is the leading producer of certified colors in North America and Western Europe. State of the art equipment, the latest process technology, a Color Service Laboratory unequaled in the industry, and the most complete range of synthetic and natural colors constitute the basis for its market leadership position. Acquisitions have resulted in product and process technology synergies, particularly in the cosmetic color market, as well as a growing international presence. For Dehydrated Products, acquisitions in Europe provide international expansion and strengthen export opportunities for U.S. based operations. The Company believes it is now the leading dehydrator of specialty vegetables in Europe and the third largest producer of onion and garlic in North America. Competition in Red Star BioProducts comes primarily from domestic and European producers. Red Star BioProducts is the leading producer of flavor enhancers in North America; competition in the European market is fragmented. Red Star yeast and Products competes primarily in the North American market and has two major competitors. Products and Application Activities With the Company's strategic focus on high-performance ingredients and ingredient systems, the Company's emphasis has shifted from the development of major new products to application activities and processing improvements in the support of its customers' numerous new and reformulated products. The Company maintains many of its proprietary processes and formulae as trade secrets and under secrecy agreements with customers. Development activities include a line of stable aqueous dispersion of colors for foods and pharmaceutical products. Patents have been granted on the products marketed under the SPECTRASPRAY label and applied for on the SPECTRABLEND label. The development of natural food colors continues to expand and is a growth opportunity for W-J. A variety of activities at Universal Flavor focus on the development of natural flavors and flavor solutions for low-fat and no-fat applications. The group has developed a reaction flavor for imparting animal fat flavor to nutritionally preferred vegetable oils. Using new reaction and extraction processes, a line of natural roasted onion, garlic and pepper flavors has been created. A new technology was installed for production of aseptically processed fruits. Emphasis has been placed on the development of low-fat dairy and bakery flavor and ingredients systems. New flavored fruit and spice pieces have also been developed to provide new textures, flavors and unique performance properties in bakery items. In 1993 Red Star BioProducts introduced the Flavor Mate 950 series, the most potent flavor enhancer on the market, and the Savory Mate series, which are flavor enhancers designed for specific areas such as beef, poultry, pork, etc. Acquisitions in 1994 expanded the divisions product line particularly in hydrolyzed vegetable proteins. The transfer of technology to European acquisitions begun in 1995 will allow the production of food and pharmaceutical grade extracts from brewing yeast. European acquisitions in 1994 and 1995 expanded the Dehydrated Products product line to include peas, carrots, beans, celery root and other specialty vegetables. In addition, the discussion of operational activities on Page 16 of the 1995 Annual Report to Shareholders is incorporated by reference. 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 Europe. 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 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 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, 1995, the Company employed about 4,100 persons worldwide (which includes approximately 200 seasonal employees). Approximately 430 employees are represented by one of 12 union contracts with whom the Company has collective bargaining relationships. The Company considers its employee relations to be good. Regulation Compliance with government provisions regulating the discharge of material into the environment, or otherwise relating to the protection of the environment, did not have a material adverse effect on the Company's operations for the year covered by this report nor is such compliance expected to have a material effect in the succeeding two years. As is true with the food industry in general, the production, packaging, labeling and distribution of the Company's products are subject to the regulations of various federal, state and local governmental agencies, in particular the Food & Drug Administration. ITEM 2. PROPERTIES Domestically, the Company operates eighteen manufacturing and processing plants in ten states as of September 30, 1995. Four plants produced bakers yeast, four facilities provided flavor enhancers and bioproducts, three produced dehydrated products, two plants produced colors and four plants produced flavors. None of these properties are held subject to any material encumbrances. The Company also has investments in fifteen companies operating yeast and allied product facilities located in twelve offshore locations. The Company operates five color plants, eleven flavor plants, five bioproducts facilities and three dehydrated vegetable plants in thirteen foreign countries. ITEM 3. LEGAL PROCEEDINGS The Company is a party to various legal proceedings of a character regarded as normal to its business and in which, the Company believes, adverse decisions, in the aggregate, would not subject the Company to damages of a material amount. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the last quarter of fiscal 1995. ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the registrant and their ages as of December 1, 1995 are as follows: EXECUTIVE OFFICERS Name Age Position Guy A. Osborn 59 Chairman, Chief Executive Officer and Director Kenneth P. Manning 53 President, Chief Operating Officer and Director Richard Carney 45 Vice President - Human Resources Steven O. Cordier 39 Treasurer Thomas J. Degnan 47 President, Red Star BioProducts Division Michael Fung 45 Vice President - Chief Financial Officer Michael L. Hennen 42 Controller Richard F. Hobbs 48 Vice President - Administration R. Steven Martin 39 President, Red Star Yeast & Products Division Terrence M. O'Reilly 50 Vice President, Secretary and General Counsel James F. Palo 55 President, Dehydrated Products Division Dr. Gary W. Sanderson 60 Vice President, Technologies Kenneth G. Scheffel 59 Vice President, Chemical Technologies Charles G. Tuchel 40 President, Flavor Division Michael A. Wick 52 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, Steven O. Cordier, Michael L. Hennen, R. Steven Martin, Charles G. Tuchel and Michael Fung. Mr. Carney was elected Vice President - Human Resources in April 1993. He joined the Company in 1981 as Treasury Manager and held various positions in the Treasurer's Department until 1986 when he assumed the Director of Benefits responsibilities which he performed until being elected a Vice President. Mr. Tuchel joined the Company in May 1992 as the Managing Director - Europe for the Color Division. In October 1994, he was promoted to Vice President and General Manager of Universal Flavors International, and in June 1995 elected President - Flavors Division. Prior to joining the Company, Mr. Tuchel was Business Manager at ICI Petrochemicals from 1990 through 1992. Mr. Martin joined the Company as Vice President - Marketing of its Red Star Yeast & Products Division in 1993. In June 1995, Mr. Martin was elected President - Red Star Yeast & Products Division. Prior to joining the Company, Mr. Martin was with the Monsanto Company since 1978 in various general management positions. Mr. Hennen joined the Company in January 1995 as Controller. From 1985 until joining the Company he was a Senior Manager at Deloitte & Touche LLP, a public accounting firm providing audit and tax services to the Company as its outside auditor. Mr. Cordier joined the Company in October 1995 as Treasurer. From 1990 until joining the Company he was Director of Financial Planning at International Flavors and Fragrances, a $1.3 billion New York Stock Exchange company. Mr. Fung joined the Company in June 1995 as Vice President - Chief Financial Officer. From 1992 to 1995 he served as Senior Vice President and Chief Financial Officer for Vanstar Corporation, the world's largest manufacturer and integrator of multi-vendor personal computer systems and services. From 1988 to 1992, Mr. Fung was Vice President and Chief Financial Officer of Bass Pro Shops & Tracker Marine, privately-held companies operated under common ownership involved in the manufacture and marketing of outdoor sporting goods. 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 1995 appearing under "Quarterly Financial Data" on Page 22 of the 1995 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, 1995, $29,737,000 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, 1995, 65,000 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 F of Notes to Consolidated Financial Statements - Shareholders' Equity on Pages 29, 30 and 31 of the 1995 Annual Report to Shareholders and which is incorporated by reference. The number of shareholders of record on December 1, 1995 was 6,065. ITEM 6. SELECTED FINANCIAL DATA The selected financial data required by this item is incorporated by reference from the "Five-Year Review" and the notes thereto of the 1995 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 1995 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data required by this item are set forth on Pages 22 through 33 of the 1995 Annual Report to Shareholders and are incorporated by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors and officers appearing under "Election of Directors" (ending before "Committees of the Board of Directors") and "Other Matters" on Pages 2 through Page 6 and Page 15, respectively, of the Notice of Annual Meeting and Proxy Statement of the Company dated December 15, 1995, 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 15, 1995. 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 15, 1995, 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, 1994 through September 30, 1995, or in any such proposed transaction. In the ordinary course of business, the Company engages in business transactions with companies whose officers or directors are also directors of the Company. These transactions are routine in nature and are conducted on an arm's-length basis. The terms of any such transactions are comparable at all times to those obtainable in business transactions with unrelated persons. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed: 1. and 2. Financial Statements and Financial Statement Schedule. (See following "List of Financial Statements and Financial Statement Schedules.") 3. Exhibits. (See Exhibit Index on the last page of this report.) (No instruments defining the rights of holders of long-term debt of the Company and its consolidated subsidiaries are filed herewith because no long-term debt instrument authorizes securities exceeding 10% of the total consolidated assets of the Company. The Company agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.) (b) Reports on Form 8-K: None List Of Financial Statements and Financial Statement Schedules Page Reference in 1995 Annual Report to 1. FINANCIAL STATEMENTS Shareholders The following consolidated financial statements of Universal Foods Corporation and Subsidiaries are incorporated by reference from the Annual Report to Shareholders for the year ended September 30, 1995. Independent Auditors' Report 33 Consolidated Balance Sheets - September 30, 1995 and 1994 24 Consolidated Earnings - Years ended September 30, 1995, 1994 and 1993 23 Consolidated Shareholders' Equity - Years ended September 30, 1995, 1994 and 1993 25 Consolidated Cash Flows - Years ended September 30, 1995, 1994 and 1993 26 Notes to Consolidated Financial Statements 27 - 32 Page Reference 2. FINANCIAL STATEMENT SCHEDULES in Form 10-K Independent Auditors' Report 15 Schedule II - Valuation and Qualifying Accounts and Reserves 16 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. Deloitte & Touche 411 East Wisconsin Avenue LLP Milwaukee, WI 53202-4496 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, 1995 and 1994 and for each of the three years in the period ended September 30, 1995, and have issued our report thereon dated November 9, 1995, 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 1995 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Universal Foods Corporation, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP November 9, 1995 SCHEDULE II UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In Thousands) Years ended September 30, 1995, 1994, and 1993
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 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 1995 Allowance for losses: Trade accounts receivable $3,527 $1,356 $ --- $1,115 (A) $3,768 (A) Divestiture and accounts written off, less recoveries.
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 22, 1995 PURSUANT to the requirements of the Securities Exchange Act of 1934, this report has been signed below on December 22, 1995, by the following persons on behalf of the Registrant and in the capacities indicated. /s/ Guy A. Osborn Chairman, Chief Executive Officer and Director /s/ Kenneth P. Manning President, Chief Operating Officer and Director /s/ Michael Fung Vice President - Chief Financial Officer /s/ Michael L. Hennen Corporate Controller /s/ Michael E. Batten Director /s/ John F. Bergstrom Director /s/ James L. Forbes Director /s/ Dr. Olan D. Forker Director /s/ Dr. Carol I. Waslien Ghazaii Director /s/ Leon T. Kendall Director /s/ James H. Keyes Director /s/ Charles S. McNeer Director /s/ John L. Murray Director /s/ William U. Parfet Director /s/ Essie Whitelaw Director 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 (Previously filed at Incorporation Exhibit 3.1 to the 1993 Annual Report on Form 10-K) 3.2 Restated Bylaws X 4 Shareholders Rights Plan (Previously filed on Form 8-A dated September 15, 1988 as amended by Exhibit 3 to Form 8 dated December 22, 1988 and by Exhibits 4 and 5 to Form 8 dated September 14, 1990) 10 Material Contracts *(a) Executive (Previously filed at Employment Exhibit 10(a) to the Contract 1985 Annual Report on Form 10-K) *(b) 1981 Incentive (Previously filed Stock Option Plan with the Notice of Annual Meeting & Proxy Statement dated December 5, 1981) *(c) 1985 Stock Plan (Previously filed for Executive with the Notice of Employees Annual Meeting & Proxy Statement dated December 12, 1985) *(d) 1990 Employee (Previously filed Stock Plan with the Notice of Annual Meeting & Proxy Statement dated December 18, 1989) *(e) Director Stock (Previously filed as Grant Plan, as Exhibit 10(e) to the amended 1991 Annual Report on Form 10-K) *(f) Management Income (Previously filed as Deferral Plan Exhibit 10(f) to the 1991 Annual Report on Form 10-K) *(g) Executive Income (Previously filed as Deferral Plan Exhibit 10(g) to the 1991 Annual Report on Form 10-K) *(h) Change of Control X Employment and Severance Agreement (i) Trust Agreement (Previously filed as dated January 18, Exhibit 18 to 1988 between the Amendment No. 1 of Company and the Company's Marshall & Ilsley Schedule 14D-9 filed Trust Company December 9, 1988) (j) Trust Agreement (Previously filed as dated January 18, Exhibit 19 to 1988 between the Amendment No. 1 of Company and the Company's Marshall & Ilsley Schedule 14D-9 filed Trust Company December 9, 1988) (k) Trust Agreement (Previously filed as dated September Exhibit 20 to 18, 1988 between Amendment No. 1 of the Company and the Company's Marshall & Ilsley Schedule 14D-9 filed Trust Company December 9, 1988) *(l) Management (Previously filed as Incentive Plan for Exhibit 10(i) to the Major Corporate 1991 Annual Report on Executives Form 10-K) *(m) 1994 Employees (Previously filed on Stock Option Plan Form S-8 dated September 12, 1994) 13 Portions of Annual Report to Shareholders for the year ended September 30, X 1995 that are incorporated by reference 21 Significant Subsidiaries of Universal Foods Corporation X 23 Consent of Deloitte & Touche LLP X 27 Financial Data Schedule X 99 Notice of Annual Meeting (Previously filed via and Proxy Statement, the EDGAR System on dated December 15, 1995 December 14, 1995 as the Company's Schedule 14A) Except to the extent incorporated by reference, the Proxy Statement shall not be deemed to be filed with the Securities and Exchange Commission as part of this annual Report on Form 10-K. * Indicates management contracts or compensatory plans. EX-3.2 2 EXHIBIT 3.2 - RESTATED BYLAWS Exhibit 3.2 UNIVERSAL FOODS CORPORATION BYLAWS (As Amended Through November 9, 1995) 1. OFFICES 1.1 Business Offices. The principal office of the corporation in the State of Wisconsin shall be located in the City of Milwaukee, County of Milwaukee. The corporation may have such other offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the corporation may require from time to time. 1.2 Registered Office. The registered office of the corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical with the principal office in the State of Wisconsin, and the address of the registered office may be changed from time to time by the Board of Directors. 2. SHAREHOLDERS 2.1 Annual Meeting. The date of the annual meeting of shareholders shall be set by the Board of Directors each year for the third Thursday after the first Friday of January, or on such other day as may be designated by the Board of Directors, for the purpose of electing directors and transacting such other business as may come before the meeting; provided, however, that any such other date shall be not later than March 1. In fixing a meeting date for any annual meeting of shareholders, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment. If the election of directors shall not be held at the annual meeting of shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of shareholders as soon thereafter as convenient. 2.1A Purposes of Annual Meeting. At an annual meeting of shareholders (an "Annual Meeting"), only business properly brought before the meeting as provided in this Section may be transacted. To be properly brought before an Annual Meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a shareholder of record where the shareholder has complied with the requirements of this Section. To bring business before an Annual Meeting, a shareholder must have given written notice thereof, either by personal delivery or by United States certified mail, postage prepaid, to the Secretary of the corporation, that is received by the Secretary not more than ninety (90) days and not less than fifty (50) days in advance of the third Thursday after the first Friday in the month of January next following the last Annual Meeting held; provided that if the Annual Meeting of shareholders is held earlier than the third Thursday after the first Friday in the month of January, such notice must be given on or before the later of (x) the date fifty (50) days prior to the earlier date of the Annual Meeting and (y) the date ten (10) business days after the first public disclosure, which may include any public filing with the Securities and Exchange Commission or a press release to Dow Jones & Company or any similar service, of the earlier date of the Annual Meeting. Any such notice shall set forth the following as to each matter the shareholder proposes to bring before the Annual Meeting: (A) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and, if such business includes a proposal to amend the By-laws of the corporation, the language of the proposed amendment; (B) the name and address, as they appear on the corporation's books, of the shareholder proposing such business and the beneficial owner or owners, if any, on whose behalf the business is proposed; (C) the class and number of shares of the corporation which are beneficially owned by such shareholder and beneficial owner or owners; (D) a representation that the shareholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business; and (E) any material interest of the shareholder and beneficial owner or owners in such business and such persons' reasons for conducting such business at the meeting. Notwithstanding anything in the By-laws to the contrary, no business shall be conducted at an Annual Meeting except in accordance with the procedures set forth in this Section. If the chairman of the shareholders meeting shall determine that business was not properly brought before the meeting and in accordance with the provisions of the By-laws, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. 2.2 Special Meetings. (a) A special meeting of the shareholders of the corporation (a "Special Meeting") may be called only by (i) the Chairman of the Board, (ii) the Chief Executive Officer or (iii) the Board of Directors and shall be called by the Chairman of the Board or the Chief Executive Officer upon the demand, in accordance with this Section 2.2, of the holders of record of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting. Only such business shall be conducted at a Special Meeting as shall have been described in the notice of meeting sent to shareholders pursuant to Section 2.4 of these Bylaws. (b) To enable the corporation to determine the shareholders entitled to demand a Special Meeting, the Board of Directors may fix a record date to determine the shareholders entitled to make such a demand (the "Demand Record Date"). The Demand Record Date shall not precede the date upon which the resolution fixing the Demand Record Date is adopted by the Board of Directors and shall not be more than 10 days after the date upon which the resolution fixing the Demand Record Date is adopted by the Board of Directors. Any shareholder of record seeking to have shareholders demand a Special Meeting shall, by sending written notice to the Secretary of the corporation by hand or by certified or registered mail, return receipt requested, request the Board of Directors to fix a Demand Record Date. The Board of Directors shall promptly, but in all events within 10 days after the date on which a valid request to fix a Demand Record Date is received, adopt a resolution fixing the Demand Record Date and shall make a public announcement of such Demand Record Date. If no Demand Record Date has been fixed by the Board of Directors within 10 days after the date on which such request is received by the Secretary, the Demand Record Date shall be the 10th day after the first date on which a valid written request to set a Demand Record Date is received by the Secretary. To be valid, such written request shall set forth the purpose or purposes for which the Special Meeting is to be held, shall be signed by one or more shareholders of record (or their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative) and shall set forth all information about each such shareholder and about the beneficial owner or owners, if any, on whose behalf the request is made that would be required to be set forth in a shareholder's notice described in Sections 2.1A and 3.8A of these Bylaws. (c) For a shareholder or shareholders to demand a Special Meeting, a written demand or demands for a Special Meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting must be delivered to the corporation. To be valid, each written demand by a shareholder for a Special Meeting shall set forth the specific purpose or purposes for which the Special Meeting is to be held (which purpose or purposes shall be limited to the purpose or purposes set forth in the written request to set a Demand Record Date received by the corporation pursuant to paragraph (b) of this Section 2.2), shall be signed by one or more persons who as of the Demand Record Date are shareholders of record (or their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative), and shall set forth the name and address, as they appear in the corporation's books, of each shareholder signing such demand and the class and number of shares of the corporation which are owned of record and beneficially by each such shareholder, shall be sent to the Secretary by hand or by certified or registered mail, return receipt requested, and shall be received by the Secretary within 70 days after the Demand Record Date. (d) The corporation shall not be required to call a Special Meeting upon shareholder demand unless, in addition to the documents required by paragraph (c) of this Section 2.2, the Secretary receives a written agreement signed by each Soliciting Shareholder, pursuant to which each Soliciting Shareholder, jointly and severally, agrees to pay the corporation's costs of holding the Special Meeting, including the costs of preparing and mailing proxy materials for the corporation's own solicitation, provided that if each of the resolutions introduced by any Soliciting Shareholder at such meeting is adopted, and each of the individuals nominated by or on behalf of any Soliciting Shareholder for election as director at such meeting is elected, then the Soliciting Shareholders shall not be required to pay such costs. For purposes of this paragraph (d), the following terms shall have the meanings set forth below: (i) "Affiliate" of any Person shall mean any Person controlling, controlled by or under common control with such first Person. (ii) "Participant" shall have the meaning assigned to such term in Rule 14a-11 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (iii) "Person" shall mean any individual, firm, corporation, partnership, joint venture association, trust, unincorporated organization or other entity. (iv) "Proxy" shall have the meaning assigned to such term in Rule 14a-1 promulgated under the Exchange Act. (v) "Solicitation" shall have the meaning assigned to such term in Rule 14a-11 promulgated under the Exchange Act. (vi) "Soliciting Shareholder" shall mean, with respect to any Special Meeting demanded by a shareholder or shareholders, any of the following Persons: (A) if the number of shareholders signing the demand or demands of meeting delivered to the corporation pursuant to paragraph (c) of this Section 2.2 is ten or fewer, each shareholder signing any such demand; (B) if the number of shareholders signing the demand or demands of meeting delivered to the corporation pursuant to paragraph (c) of this Section 2.2 is more than ten, each Person who either (I) was a Participant in any Solicitation of such demand or demands or (II) at the time of the delivery to the corporation of the documents described in paragraph (c) of this Section 2.2, had engaged or intended to engage in any Solicitation of Proxies for use at such Special Meeting (other than a Solicitation of Proxies on behalf of the corporation); or (C) any Affiliate of a Soliciting Shareholder, if a majority of the directors of the corporation then in office determine, reasonably and in good faith, that such Affiliate should be required to sign the written notice described in paragraph (c) of this Section 2.2 and/or the written agreement described in this paragraph (d) in order to prevent the purposes of this Section 2.2 from being evaded. (e) Except as provided in the following sentence, any Special Meeting shall be held at such hour and day as may be designated by whichever of the Chairman of the Board, the Chief Executive Officer or the Board of Directors shall have called such meeting. In the case of any Special Meeting called by the Chairman of the Board or the Chief Executive Officer upon the demand of shareholders (a "Demand Special Meeting"), such meeting shall be held at such hour and day as may be designated by the Board of Directors; provided, however, that the date of any Demand Special Meeting shall be not more than 70 days after the Meeting Record Date (as defined in Section 2.5); and provided further that in the event that the directors then in office fail to designate an hour and date for a Demand Special Meeting within 10 days after the date that valid written demands for such meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the special meeting are delivered to the corporation (the "Delivery Date"), then such meeting shall be held at 2:00 P.M. local time on the 100th day after the Delivery Date or, if such 100th day is not a Business Day (as defined below), on the first preceding Business Day. In fixing a meeting date for any Special Meeting, the Chairman of the Board, the Chief Executive Officer or the Board of Directors may consider such factors as he or it deems relevant within the good faith exercise of his or its business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding any demand for such meeting, and any plan of the Board of Directors to call an Annual Meeting or a Special Meeting for the conduct of related business. (f) The corporation may engage nationally recognized independent inspectors of elections to act as an agent of the corporation for the purpose of promptly performing a ministerial review of the validity of any purported written demand or demands for a Special Meeting received by the Secretary. For the purpose of permitting the inspectors to perform such review, no purported demand shall be deemed to have been delivered to the corporation until the earlier of (i) five Business Days following receipt by the Secretary of such purported demand and (ii) such date as the independent inspectors certify to the corporation that the valid demands received by the Secretary represent at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board of Directors or any shareholder shall not be entitled to contest the validity of any demand, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto). (g) For purposes of these Bylaws, "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Wisconsin are authorized or obligated by law or executive order to close. 2.3 Place of Meeting. The Board of Directors, the Chairman of the Board or the Chief Executive Officer may designate any place, either within or without the State of Wisconsin, as the place of meeting for the Annual Meeting, any Special Meeting or any postponement thereof. If the Board of Directors, the Chairman of the Board or the Chief Executive Officer shall fail or neglect to make such designation, the Secretary shall designate the place of such meeting. If no designation is made, the place of meeting shall be the registered office of the corporation in the State of Wisconsin. Any adjourned meeting may be reconvened at any place designated by vote of the Board of Directors or by the Chairman of the Board or the Chief Executive Officer. 2.4 Notice of Meeting. The corporation shall send written or printed notice stating the place, day and hour of any Annual Meeting or Special Meeting not less than 10 days nor more than 70 days before the date of such meeting either personally or by mail to each shareholder of record entitled to vote at such meeting and to other shareholders as may be required by law or by the Restated Articles of Incorporation. In the event of any Demand Special Meeting, such notice of meeting shall be sent not more than 30 days after the Delivery Date. If mailed, such notice of meeting shall be addressed to the shareholder at the shareholder's address as it appears on the corporation's record of shareholders. Unless otherwise required by law or the Restated Articles of Incorporation, a notice of an Annual Meeting need not include a description of the purpose for which the meeting is called. In the case of any Special Meeting, (a) the notice of meeting shall describe any business that the Board of Directors shall have theretofore determined to bring before the meeting and (b) in the case of a Demand Special Meeting, the notice of meeting (i) shall describe any business set forth in the statement of purpose of the demands received by the corporation in accordance with Section 2.2 of these Bylaws and (ii) shall contain all of the information required in the notice received by the corporation in accordance with Section 2.2(b) of these Bylaws. A shareholder's attendance at a meeting, in person or by proxy, waives objection to the following: (A) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting; and (B) consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. 2.5 Fixing of Certain Record Dates. (a) The Board of Directors may fix a future date not less than 10 days and not more than 70 days prior to the date of any Annual Meeting or Special Meeting as the record date for the determination of shareholders entitled to notice of, or to vote at, such meeting (the "Meeting Record Date"). In the case of any Demand Special Meeting, (i) the Meeting Record Date shall be not later than the 30th day after the Deliver Date and (ii) if the Board of Directors fails to fix the Meeting Record Date within 30 days after the Delivery Date, then the close of business on such 30th day shall be the Meeting Record Date. The shareholders of record on the Meeting Record Date shall be the shareholders entitled to notice of and to vote at the meeting. Except as may be otherwise provided by law, a determination of shareholders entitled to notice of or to vote at a meeting of shareholders is effective for any adjournment of such meeting unless the Board of Directors fixes a new Meeting Record Date, which it shall do if the meeting is postponed or adjourned to a date more than 120 days after the date fixed for the original meeting. (b) The Board of Directors may fix a future date as the record date for the determination of shareholders entitled to receive payment of any share dividend or distribution. If no record date is so fixed by the board, the record date for determining shareholders entitled to a distribution (other than a distribution involving a purchase, redemption or other acquisition of the corporation's shares) or a share dividend is the date on which the Board of Directors authorized the distribution or share dividend, as the case may be. 2.6 Voting Lists. After a record date for a Special Meeting or Annual Meeting has been fixed, the corporation shall prepare a list of the names of all of the shareholders entitled to notice of the meeting. The list shall be arranged by class or series of shares, if any, and show the address of and number of shares held by each shareholder. Such list shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing to the date of the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. The corporation shall make the shareholders' list available at the meeting, and any shareholder or his or her agent or attorney may inspect the list at any time during the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders' list shall not affect the validity of any action taken at a meeting of shareholders. 2.7 Quorum: Votes. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. If the corporation has only one class of stock outstanding, such class shall constitute a separate voting group for purposes of this Section 2.7. Except as otherwise provided in the Restated Articles of Incorporation or the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast on the matter shall constitute a quorum of the voting group for action on that matter. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. If a quorum exists, except in the case of the election of directors, action on a matter shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or the Wisconsin Business Corporation Law requires a greater number of affirmative votes. Unless otherwise provided in the Restated Articles of Incorporation, each director shall be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors at a meeting at which a quorum is present. 2.8 Proxies. At all meetings of shareholders, a shareholder entitled to vote may vote his or her shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, either personally or by his or her attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent of the corporation authorized to tabulate votes. An appointment is valid for eleven months from the date of its signing unless a different period is expressly provided in the appointment form. 2.9 Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or classes are enlarged, limited, or denied by the Restated Articles of Incorporation of the corporation or by the Wisconsin Business Corporation Law. 2.10 Subsidiary Shares. Shares held by another corporation, if a sufficient number of shares entitled to elect a majority of the directors of such other corporation is held directly or indirectly by the corporation, shall not be entitled to vote at any meeting, but shares held in a fiduciary capacity may be voted. 2.11 Acceptance of Instruments Showing Shareholder Action. If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (a) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity. (b) The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment. (c) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment. (d) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, consent, waiver or proxy appointment. (e) Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The corporation may reject a vote, consent, waiver or proxy appointment if the Secretary or other officer or agent of the corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. 2.12 Conduct of Meeting. The Chairman of the Board, and in his or her absence, any officer or director designated by the Chairman of the Board, and in his or her absence, the Chief Executive Officer, and in his or her absence, the President, and in his or her absence, a Corporate Vice President in the order provided under Section 4.7 of these Bylaws, and in their absence, any person chosen by the shareholders present shall call any Annual Meeting or Special Meeting to order and shall act as Chairman of the Meeting, and the Secretary of the corporation shall act as secretary of all meetings of the shareholders, but in the absence of the Secretary, the chairman may appoint any other person to act as secretary of the meeting. 2.13 Postponement; Adjournment. (a) Any Annual Meeting or any Special Meeting called by the Chairman of the Board, the Chief Executive Officer (other than a meeting called pursuant to the demand of shareholders entitled to demand such a meeting) or the Board of Directors may be postponed at any time or from time to time after written notice of the meeting has been delivered to shareholders as follows: (i) in the case of the Annual Meeting or a Special Meeting called by the Board of Directors, by action of the Board of Directors or a duly authorized committee thereof and (ii) in the case of a Special Meeting called by the Chairman of the Board or the Chief Executive Officer, at the request of the person calling the meeting and with the consent of the Board of Directors or a duly authorized committee thereof. Any such postponement or postponements shall be disclosed in any public filing with the Securities and Exchange Commission or by means of a press release to Dow Jones & Company or any similar service promptly following such postponement, and promptly thereafter written notice of such postponement stating the place, day and hour to which the meeting was postponed shall be delivered to each shareholder of record entitled to vote at such meeting. (b) A meeting of shareholders may be adjourned to a different date, time or place from time to time, whether or not there is a quorum, (i) at any time, upon a resolution of shareholders if the number of votes cast in favor of such resolution exceed the number of votes cast against such resolution or (ii) by order of the chairman of the meeting, but only where such order is delivered before any business is transacted at such meeting and such adjournment is for a period of thirty (30) days or less. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally noticed. Any such adjournment or adjournments pursuant to clause (i), if the new date, time and place of the meeting is not announced at the meeting prior to adjournment or if a new record date is or must be fixed for the meeting, or pursuant to clause (ii) shall be disclosed in any public filing with the Securities and Exchange Commission or by means of a press release to Dow Jones & Company or any similar service promptly following such adjournment, and promptly thereafter written notice of such adjournment stating the date, time and place to which the meeting was adjourned shall be delivered to each shareholder of record entitled to vote at such meeting, except that (except as may be otherwise required by law) no such disclosure in filings, press releases or notices to shareholders shall be required if an adjournment is for a period of forty-eight (48) hours or less. 3. BOARD OF DIRECTORS 3.1 General Powers. All corporate powers of the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its Board of Directors. 3.2 Number, Tenure and Qualifications. (a) The number of directors of the corporation shall be eleven (11). No more than two (2) officers or employees of the corporation or any of its subsidiaries shall simultaneously serve as directors of the corpora- tion. The directors shall be divided into three (3) classes with the first class to consist of three (3) directors and the second and third classes to consist of four (4) directors each. The term of office of those of the first class shall expire at the annual meeting to be held in January, 1984, and of the second class one year thereafter and of the third class, two years thereafter, and in all cases, until their respective successors shall have been elected and qualified. At the annual meetings following the initial election of directors by classes, the successors to the class of directors whose term expires in that year shall be elected for a term of three (3) years to succeed those whose terms expire, so that the term of office of one class of directors shall expire in each year, but, subject to the provisions of the Bylaws of the corporation, each director shall hold office for the term for which he/she is elected and until his/her successor is elected and, if necessary, qualified or until there is a decrease in the number of directors that takes effect upon or after the expiration of the term for which he/she is elected. (b) Directors need not be residents of the State of Wisconsin or shareholders of the corporation. A director having attained age Seventy (70) shall automatically cease to be a director of the corporation effective as of the Annual Meeting immediately following such director's Seventieth (70th) birthday. All directors who are also officers of the corporation shall automatically cease to be directors of the corporation, effective as of his/her date of termination of employment from the corporation, with the exception of any corporate officer holding, or who has held the position of Chief Executive Officer. (c) A Chairman of the Board shall be elected by the Board of Directors from among its members to preside at all meetings of the shareholders and the Board of Directors. The Director, who need not be an employee of the corporation, elected Chairman of the Board shall serve in such position for the term of office as elected by the shareholders or the Board of Directors and until his/her successor shall have been duly elected or until his/her death or until resignation or removal in the manner hereinafter provided. The Chairman of the Board, if an employee of the Corporation, may be elected Chief Executive Officer of the Corporation by the Board of Directors. The Chairman of the Board shall perform all duties incident to the office and such other duties as may be prescribed by the Board of Directors from time to time. (d) All directors of the corporation, who are not simultaneously employed as officers by the corporation, shall be properly compensated and reimbursed for their services as a director on the basis of an annual retainer, Board of Director and Committees of the Board meeting attendance fees and reasonable expenses incurred as a director as established, reviewed and approved annually by the Nominating Committee of the Board of Directors. Any employee of the corporation, who is elected a director of the corporation, shall not receive any compensation, expense reimbursement or participation in director benefit programs for his/her services as a director of the corporation. A Chief Executive Officer, who retires from the corporation prior to attaining age 70 while serving as a director, immediately becomes eligible for compensation, expense reimbursement and director benefit program participation as a non-employee director effective as of the individual's retirement date from the corporation. 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders, and each adjourned session thereof. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution. 3.4 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, Chief Executive Officer or a majority of the number of directors fixed by Section 3.2. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors called by them. 3.5 Notice. Notice of any special meeting shall be given at least five (5) days previously thereto by written notice mailed to each director at his or her business address, or by written or oral notice given by other means at least 48 hours previously thereto. Whenever any notice whatever is required to be given to any director of the corporation under the provisions of these Bylaws or under the provisions of the Restated Articles of Incorporation or under the provisions of any statute, a waiver thereof in writing, signed at any time, whether before or after the time of meeting, by the director entitled to such notice and retained by the corporation, shall be deemed equivalent to timely notice. The attendance of a director at or participation in a meeting shall constitute a waiver of notice of such meeting, unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. 3.6 Quorum: Votes. One-third of the number of directors fixed by Section 3.2 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but though less than such quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present shall be the act of the Board of Directors, unless the act of a greater number is required by law, by the Restated Articles of Incorporation or these Bylaws. 3.7 Removal and Resignation. A director may be removed from office by the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote taken at a meeting called for that purpose. A director may resign at any time by delivering his written resignation to the Secretary of the corporation or to the Chairman of the Board. A resignation is effective when the notice is received unless the notice specifies a later effective date. 3.8 Vacancies. Any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled by any of the following: (i) the shareholders, (ii) the Board of Directors or (iii) if the directors remaining in office constitute fewer than a quorum of the Board, the directors, by the affirmative vote of a majority of all directors remaining in office; provided, however, that if the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group may vote to fill the vacancy if it is filled by the shareholders, and only the remaining directors elected by that voting group may vote to fill the vacancy if it is filled by the directors. The Directors so elected shall hold office until the next succeeding election of the class for which such director shall have been elected. 3.8A Nominations. Nominations for the election of directors may only be made by the Board of Directors, by the Nominating Committee of the Board of Directors (or, if none, any other committee serving a similar function) or by any shareholder entitled to vote generally in elections of directors where the shareholder complies with the requirements of this Section. Any shareholder of record entitled to vote generally in elections of directors may nominate one or more persons for election as directors at a meeting of shareholders only if written notice of such shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States certified mail, postage prepaid, to the Secretary of the corporation that is received by the Secretary (i) with respect to an election to be held at an Annual Meeting, not more than ninety (90) days nor less than fifty (50) days in advance of the third Thursday after the first Friday of the month of January next following the last Annual Meeting held; provided, that if the Annual Meeting is held earlier than the third Thursday after the first Friday of the month of January, such notice must be given on or before the later of (x) the date fifty (50) days prior to the earlier date of the Annual Meeting and (y) the date ten (10) business days after the first public disclosure, which may include any public filing with the Securities and Exchange Commission or a press release to Dow Jones & Company or any similar service, of the earlier date of the Annual Meeting, and (ii) with respect to an election to be held at a Special Meeting as to which notice of such meeting states that it is to be held for the election of directors, not earlier than ninety (90) days prior to such Special Meeting and not later than the close of business on the later of (x) the tenth (10th) business day following the date on which notice of such meeting is first given to shareholders and (y) the 50th day prior to such Special Meeting. Each such notice of a shareholder's intent to nominate a director or directors at an Annual Meeting or Special Meeting shall set forth the following: (A) the name and address, as they appear on the corporation's books, of the shareholder who intends to make the nomination and of the beneficial owner or owners, if any, on whose behalf the nomination is to be made and the name and residence address of the person or persons to be nominated; (B) the class and number of shares of the corporation which are beneficially owned by the shareholder and beneficial owner or owners; (C) a representation that the shareholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (D) a description of all arrangements or understandings between the shareholder and/or beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholders; (E) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for election of directors, or would be otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the Board of Directors; and (F) the written consent of each nominee to be named in a proxy statement and to serve as a director of the corporation if so elected. No person shall be eligible to serve as a director of the corporation unless nominated in accordance with the procedures set forth in this By-law. If the chairman of the shareholders meeting shall determine that a nomination was not made in accordance with the procedures prescribed by the By-laws, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 3.8A, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. 3.9 Compensation. The Board of Directors, irrespective of any personal interest of any of its members, may establish compensation of all directors for services to the corporation as directors, officers or otherwise, or may delegate such authority to an appropriate committee. 3.10 Presumption of Assent. A director of the corporation who is present and is announced as present at a meeting of the Board of Directors or a committee thereof of which he/she is a member at which action on any corporate matter is taken assents to the action taken, unless any of the following occurs: (i) the director objects at the beginning of the meeting or promptly upon his or her arrival to the holding of the meeting or transacting business at the meeting; (ii) the director's dissent or abstention from the action taken is entered in the minutes of the meeting; or (iii) the director delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. Such right to dissent or abstain shall not apply to a director who voted in favor of such action. 3.11 Committees. The Board of Directors by resolution approved by a majority of all directors then in office may designate one or more committees, each committee to consist of two or more directors appointed by the Board of Directors, which to the extent provided in said resolution, as initially adopted, and as thereafter supplemented or amended by further resolution adopted by a like vote, shall have and may exercise, when the Board of Directors is not in session, the authority of the Board of Directors in the management of the business and affairs of the corporation, except that a committee may not do any of the following: (a) authorize distributions; (b) approve or propose to shareholders action that the Wisconsin Business Corporation Law requires shareholders to approve; (c) fill vacancies on the Board of Directors or, unless the Board of Directors provides by resolution that any vacancies on a committee shall be filled by the affirmative vote of a majority of the remaining committee members, on any of its committees; (d) amend the corporation's Restated Articles of Incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; and (h) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board of Directors may authorize a committee to do so within limits prescribed by the Board of Directors. All members of the Board of Directors not appointed to serve as members of a committee designated by the Board of Directors shall be deemed designated to serve as alternates for such committee, any one of whom may take the place of any absent member or members at any meeting of such committee, upon request of the Chairman of the Board. Subject to any provision of law and these Bylaws, each such committee shall fix its own rules governing the conduct of its activities and shall make such reports to the Board of Directors of its activities as the Board of Directors may request. Unless otherwise provided by the Board of Directors in creating the committee, a committee may employ counsel, accountants and other consultants to assist it in the exercise of its authority. 3.12 Informal Action Without Meeting. Any action required or permitted by the Restated Articles of Incorporation or Bylaws or any provision of law to be taken by the Board of Directors or a committee at a meeting may be taken without a meeting if the action is taken by all members of the Board or of the committee. The action shall be evidenced by one or more written consents describing the action taken, signed by each director or committee member and retained by the corporation. Such action shall be effective when the last director or committee member signs the consent, unless the consent specifies a different effective date. 3.13 Telephonic Meetings. Notwithstanding any place set forth in the notice of the meeting or these Bylaws, members of the Board of Directors may participate in regular or special meetings of the Board of Directors and all Committees of the Board of Directors by or through the use of any means of communication by which all directors participating may simultaneously hear each other, such as by conference telephone; provided, however, that the Chairman of the Board or the chairman of the respective Committee of the Board or other person or persons calling a meeting may determine that the directors cannot participate by such means, in which case the notice of the meeting, or other notice to directors given prior to the meeting, shall state that each director's physical presence shall be required. If a meeting is conducted through the use of such means, then at the commencement of such meeting all participating directors shall be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by such means shall be deemed present in person at such meeting. If action is to be taken at any such Board of Directors or Committee meeting on any of the following matters, then the identity of each director participating in such a meeting must be verified by the disclosure of each director's social security number to the secretary of the meeting or in such other manner as the chairman of the meeting deems reasonable under the circumstances before a vote may be taken on any of such matters: (i) a plan of merger or share exchange; (ii) a sale, lease, exchange or other disposition of substantial property or assets of the corporation; (iii) a voluntary dissolution or the revocation of voluntary dissolution proceedings; or (iv) a filing for bankruptcy. For purposes of the preceding clause (ii), the phrase "sale, lease, exchange or other disposition of substantial property or assets" shall mean any sale, lease, exchange or other disposition of property or assets of the corporation having a net book value equal to 10% or more of the net book value of the total assets of the corporation as of the close of the fiscal year last ended prior to the date of such meeting and as to which financial statements of the corporation have been prepared. 4. OFFICERS 4.1 Number. (a) The principal executive officers of the corporation shall be a Chief Executive Officer, a President, one or more Corporate Vice Presidents, one or more of whom may be designated Executive Vice President and/or Senior Vice President, a Secretary, a Treasurer, a Controller and divisional presidents, each of whom shall be elected by the Board of Directors or, to the extent authorized by the Board of Directors, by the Chief Executive Officer. All other officers, other designated divisional or staff officers, and all assistant officers (including one or more Assistant Secretaries and/or Assistant Treasurers) shall be appointed by the Chief Executive Officer as he or she deems necessary. Any two or more offices may be held by the same person. (b) The duties of the executive officers shall be those enumerated herein and any further duties designated by the Board of Directors. The duties herein specified for particular officers may be transferred to and vested in such other officers as the Board of Directors shall elect from time to time and for such periods or without limitation as to time as the Board shall order. (c) The duties and powers of all appointed officers shall be those specifically prescribed for the position(s) by the Chief Executive Officer at the time of appointment. 4.2 Election and Term of Office. (a) The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his/her successor shall have been duly elected or until his/her death or until he/she shall resign or shall have been removed in the manner hereinafter provided. (b) A vacancy in any elected office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors for the unexpired portion of the term. (c) The Chief Executive Officer shall have authority to appoint and to terminate the appointment of all divisional staff and assistant officers from time to time and for such periods of time as serve the best interests of the corporation. 4.3 Removal. The Board of Directors may remove any officer or agent at any time, with or without cause and notwithstanding the contract rights, if any, of the officer or agent removed. Election or appointment shall not of itself create contract rights. 4.4 Resignation. An officer may resign at any time by delivering written notice to the Secretary of the corporation. The resignation is effective when the notice is delivered, unless the notice specifies a later effective date and the corporation accepts the later effective date. 4.5 The Chief Executive Officer. The Chief Executive Officer, subject to the control of the Board of Directors, shall supervise and control all of the business and affairs of the corporation. He or she shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and directors. He or she shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint certain officers and such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such appointed officers, agents and employees shall hold office at the discretion of the Chief Executive Officer. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by the Board of Directors; and except as otherwise provided by law or the Board of Directors, he or she may authorize any other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general, he or she shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time. 4.6 The President. The President shall be the chief operating officer of the corporation. He or she shall have the authority to sign all stock certificates, contracts, and other instruments of the corporation necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by the Board of Directors, and shall perform all duties as are incident to his or her office or are properly required of him or her by the Board of Directors, the Chairman of the Board or the Chief Executive Officer. He or she shall have the authority, subject to such rules, directions, or orders as may be prescribed by the Chairman of the Board, the Board of Directors or the Chief Executive Officer, to appoint and terminate the appointment of such agents and employees of the corporation as he or she shall deem necessary, to prescribe their power, duties and compensation and to delegate authority to them. 4.7 Corporate Vice Presidents. At the time of election, one or more of the Corporate Vice Presidents may be designated Executive Vice President and/or Senior Vice President. In the absence of the President or in the event of his or her death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Executive Vice President, or in the event of his or her inability to act, the Senior Vice Presidents in the order designated at the time of their election, or in the absence of any such designation, then in the order of their election, or in the event of their inability to act, then the other Corporate Vice Presidents in the order designated at the time of their election, or in the absence of any such designation, then in the order of their election, shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Any Corporate Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation and shall perform such other duties as from time to time may be assigned to him or her by the Chairman of the Board, the Chief Executive Officer or the Board of Directors. 4.8 The Secretary. The Secretary shall: (a) keep as permanent records any of the following that has been prepared: the minutes of the shareholders' and of the Board of Directors' meetings; records of actions taken by the Board of Directors without a meeting; and records of actions taken by a Committee of the Board of Directors in place of the Board of Directors and on behalf of the corporation; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) maintain or cause an authorized agent to maintain a record of the corporation's shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, by class or series of shares and showing the number and class or series of shares held by each shareholder; (e) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer or by the Board of Directors. 4.9 The Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. He or she shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation, receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 5 of these Bylaws; and (b) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer or by the Board of Directors. 4.10 The Controller. The Controller shall be the chief accounting officer of the corporation. He or she shall: (a) maintain appropriate accounting records for the corporation; (b) cause regular audits of these accounting records to be made; and (c) in general perform all of the duties incident to the office of Controller and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer or by the Board of Directors. 4.11 Salaries. (a) The salaries of the elected officers shall be fixed from time to time by the Board of Directors or by an appropriate committee of the Board of Directors and no such officer shall be prevented from receiving such salary by reason of the fact that he or she is also a Director of the corporation. (b) The salaries of all divisional staff and assistant officers, appointed by the Chief Executive Officer, shall be set by the Chief Executive Officer from time to time, in the best interests of the corporation. 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS 5.1 Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. 5.2 Loans. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the Board of Directors. Such authorization may be general or confined to specific instances. 5.3 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or under the authority of resolution of the Board of Directors. 5.4 Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as may be selected by or under the authority of the Board of Directors. 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER 6.1 Certificates for Shares. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the Chairman, Chief Executive Officer, President or Vice President-Finance and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and the date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe. 6.2 Uncertificated Shares. The Board of Directors may authorize the issuance of any shares of any of the corporation's classes or series without certificates. The authorization does not affect shares already represented by certificates until the certificates are surrendered to the corporation. 6.3 Transfer of Shares. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. 6.4 Stock Regulations. The Board of Directors shall have the power and authority to make all such rules and regulations not inconsistent with the statutes of the State of Wisconsin as they may deem expedient concerning the issue, transfer and registration of certificates representing shares of the corporation, including the appointment or designation of one or more stock transfer agents and one or more stock registrars. 7. GENERAL 7.1 Limited Liability of Directors to Corporation and Shareholders. A director is not liable to the corporation, its shareholders, or any person asserting rights on behalf of the corporation or its shareholders, for damages, settlements, fees, fines, penalties or other monetary liabilities arising from a breach of, or failure to perform, any duty resulting solely from his or her status as a director, unless the person asserting liability proves that the breach or failure to perform constitutes any of the following: (a) A willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director has a material conflict of interest. (b) A violation of criminal law, unless the director had reasonable cause to believe his or her conduct was lawful, or no reasonable cause to believe his or her conduct was unlawful. (c) A transaction from which the director derived an improper personal profit. (d) Willful misconduct. 7.2 Indemnification. (a) A corporation shall indemnify a director or officer, to the extent he or she has been successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if the director or officer was a party because he or she is a director or officer of the corporation. (b) In cases not included under the foregoing paragraph, a corporation shall indemnify a director or officer against liability incurred by the director or officer in a proceeding to which the director or officer was a party because he or she is a director or officer of the corporation, unless liability was incurred because the director or officer breached or failed to perform a duty he or she owes to the corporation and the breach or failure to perform constitutes any of the following: 1. A willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director or officer has a material conflict of interest. 2. A violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful. 3. A transaction from which the director or officer derived an improper personal profit. 4. Willful misconduct. (b) Determination of whether indemnification is required under this subsection shall be made under Wis. Stats. 180.0855. (c) The termination of a proceeding by judgment, order, settlement or conviction, or upon a plea of no contest or an equivalent plea, does not, by itself, create a presumption that indemnification of the director or officer is not required under this subsection. (d) A director or officer who seeks indemnification under this section shall make a written request to the corporation. (e) Indemnification under this section is not required if the director or officer has previously received indemnification or allowance of expenses from any person, including the corporation, in connection with the same proceeding. 7.3 Reliance by Directors and Officers. (a) Unless a director or officer has knowledge that makes reliance unwarranted, a director or officer, in discharging his or her duties to the corporation, may rely on information, opinions, reports or statements, any of which may be written or oral, formal or informal, including financial statements and other financial data, if prepared or presented by any of the following: 1. An officer or employee of the corporation whom the director or officer believes in good faith to be reliable and competent in the matters presented. 2. Legal counsel, public accountants or other persons as to matters the director or officer believes in good faith are within the person's professional or expert competence. 3. In the case of reliance by a director, a committee of the board of directors of which the director is not a member if the director believes in good faith that the committee merits confidence. 7.4 Consideration of Interests in Addition to Shareholders' Interests. In discharging his or her duties to the corporation and in determining what he or she believes to be in the best interests of the corporation, a director or officer may, in addition to considering the effects of any action on shareholders, consider the following: (a) The effects of the action on employees, suppliers and customers of the corporation. (b) The effects on the action on communities in which the corporation operates. (c) Any other factors the director or officer considers pertinent. 7.5 Insurance. The corporation may purchase and maintain insurance on behalf of an individual who is an employee, agent, director or officer of the corporation against liability asserted against or incurred by the individual in his or her capacity as an employee, agent, director or officer or arising from his or her status as an employee, agent, director or officer, regardless of whether the corporation is required or authorized to indemnify or allow expenses to the individual against the same liability under Wis. Stats. 180.0851, 180.0853, 180.0856 and 180.0858. 7.6 General. (a) Except as limited by law, the indemnification and allowance of expenses provided by Sections 7.1 through 7.5 of this Article do not preclude any additional right to indemnification or allowance of expenses that a director, officer or employee may have under any written agreement between such person and the corporation, resolution of the Board or resolution adopted by the corporation's shareholders. (b) For purposes of this article, the definitions contained in Wis. Stat. 180.0850 are incorporated herein by this reference. The term "employee" shall mean a natural person who is or was an employee of the corporation or who, while an employee of the corporation, is or was serving at the corporation's request as a director, officer, partner, committee, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, and, unless the context requires otherwise, the estate or personal representative of the employee. (c) The corporation, by its Board of Directors, may indemnify under Section 7.2, or with any limitations, any employee or former employee of the corporation with respect to any action taken or not taken in his/her capacity as or while an employee. Notwithstanding the foregoing, the corporation shall indemnify an employee who is not a director or officer of the corporation, to the extent that he or she has been successful on the merits or otherwise in defense of a proceeding, for all expenses incurred in the proceeding if the employee was a party because he or she was an employee of the corporation. 7.7 Fiscal Year. The fiscal year of the corporation shall end on September 30 of each year, commencing September 30, 1961. 7.8 Seal. The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Wisconsin". 7.9 Notices. Except as otherwise required by law or these Bylaws, any notice required to be given by these Bylaws may be given orally or in writing and notice may be communicated in person, by telephone, telegraph, teletype, facsimile or other form of wire or wireless communication, or by mail or private carrier. Except where these Bylaws require a notice to be delivered to or received by the recipient of the notice, written notice required to be given by these Bylaws is effective, if communicated (a) by mail, when deposited in the United States mail, if mailed postpaid and correctly addressed, (b) by private carrier, when delivered to the carrier and (c) by telegram, when the telegram is delivered to the telegraph company. 7.10 No Nominee Procedures. The corporation has not established, and nothing contained in these Bylaws shall be deemed to establish, any procedure by which a beneficial owner of the corporation's shares that are registered in the name of a nominee is recognized by the corporation as the shareholder under Section 180.0723 of the Wisconsin Statutes. 8. AMENDMENTS 8.1 Power to Amend and Repeal. Except as may be limited pursuant to Section 8.2, these Bylaws may be amended or repealed, and new Bylaws may be adopted, either by the shareholders at any meeting, or by vote of a majority of the shares present or represented thereat, or by the Board of Directors by a vote of a majority of the Board; except that Sections 2.2, 2.7, 3.2, 3.7, 3.8, 8.1, and 8.2 of the Bylaws may be amended only by the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote thereon or by the affirmative vote of a majority of the directors. Except as may be limited pursuant to Section 8.2, the Board of Directors shall have the power to amend or repeal any Bylaw adopted by the shareholders, and any Bylaw adopted by the Board of Directors shall be subject to amendment or repeal by the shareholders as well as by the directors. 8.2 Restrictions on Amendment and Repeal. (a) The Board of Directors shall have no power to amend or repeal any Bylaw or amendment adopted by the shareholders which contains a specific provision to the effect that such Bylaw or amendment shall not be subject to amendment or repeal by the Board of Directors. (b) No amendment or repeal of these Bylaws by the shareholders at any meeting shall be effective unless the notice of such meeting shall have set forth the general nature of the proposed amendment or repeal. EX-10 3 EXHIBIT 10(H) CHANGE OF CONTROL AGREEMENT Exhibit 10(h) CHANGE OF CONTROL EMPLOYMENT AND SEVERANCE AGREEMENT AGREEMENT by and between Universal Foods Corporation, a Wisconsin corporation (the "Company"), and ____________________________ ____________________ (the "Executive"), dated as of the first day of October 1995. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (2) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination, or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to its terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any or office location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed and increased a minimum of 3% no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement and shall be commensurate with increases given to peer executives. Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's [Management Incentive Plan], or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all qualified and non-qualified incentive (cash and stock related), savings and retirement plans, and/or comparable practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for performance is delivered to the Executive by the Chief Executive Officer of the Company which specifically identifies the manner in which the Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. Any termination of the Executive's employment by the Company during the Employment Period (other than a termination under Section 5(a)) shall be deemed to be a termination other than for Cause unless it meets all requirements of this Section 5(b). (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason where the Date of Termination (as defined below) is during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason, Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and C. an amount equal to all vested and nonforfitable amounts, as defined under the Company's savings and retirement plans and programs (qualified and non-qualified) described in Section 4(b)(iii) and (ii) for three years after the Executive's Date of Termination, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; and (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive for any reason. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive and that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within ten days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which said claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or Income Tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or Income Tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) Notices given pursuant to this Agreement shall be in writing and shall be deemed given when actually received by the Executive or actually received by the Company's secretary. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to Attention: Secretary (or President, if the Executive is then Secretary), or if to the Executive, at the address set forth below the Executive's signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. 13. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. Any dispute arising out of this Agreement shall, at the Executive's election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be Wisconsin. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written. UNIVERSAL FOODS CORPORATION By________________________________ Guy A. Osborn Chairman and CEO CORPORATE SEAL Attest_____________________________ Secretary ________________________________ Signature ________________________________ Name (please print) Address___________________________ ___________________________ ___________________________ EX-13 4 EXHIBIT 13 ANNUAL REPORT Exhibit 13 [Start Page 16] Operations Review Flavor Continued strong performance internationally and growth in our U.S. food and beverage flavors offset softness in the U.S. dairy flavors market. Operating margins increased while revenue for the year was up 4%. U.S. food flavor and ingredients revenue was up as a result of increasing penetration of the segment. Formulations for juices, teas, and sports beverages boosted beverage flavor revenues in the U.S. Dairy flavor revenue declined due to weaknesses with major customer brands and further industry consolidation. U.S. operations were reorganized in the fourth quarter by food, beverage and dairy industries to capitalize on technical expertise in those markets and to improve responsiveness to target customers. European operations were restructured geographically and product lines consolidated. Strong results in the Pacific Rim and Canada offset a decline in Mexico due to economic conditions in that country. Development of new fragrance components for household and personal care items boosted results from our European aroma chemical business. We significantly strengthened our research, development and applications expertise and enhanced processing technology for natural flavors. An integrated information system was launched which will improve responsiveness. Color Continued improvement in product mix and good international demand drove profit growth for the year. Revenue was up 5% despite the impact of economic conditions in Mexico which represents 11% of division sales. Domestic food and beverage color revenue was up. Sales of value-added color dispersions rose as we created specialized solutions to meet customer needs. Fruit and other new-age beverages propelled a significant increase in revenue from natural colors. Presence in the U.S. cosmetic and pharmaceutical markets was strengthened through a restructuring of sales and marketing efforts and the addition of other ingredients to the product line. Semi-permanent hair dyes boosted cosmetic color sales in Europe. The ongoing transformation of the St. Louis, Missouri, manufacturing complex into the most modern color production facility in the world continued. A state-of-the-art facility to produce water-insoluble pigments went into full production and construction of a new warehouse began. Process technology improvements resulted in more efficient manufacturing, production of additional raw and intermediate materials as well as fine chemicals, and more sophisticated extraction of natural colors. Dehydrated Products Revenue was up 38% bolstered by European acquisitions; operating profit improved. Revenue from the existing business was up 11% reflecting strong U.S. onion and garlic volumes. Acquisitions in France and The Netherlands, combined with a 1994 purchase in Ireland, gave us market leadership in the European dehydrated vegetable business with a broad line of specialty products and opportunities to enhance exports. Our product line now includes carrots, peas, beans, celeriac and a variety of other vegetables in addition to our onion, garlic and chili products. We also expanded our dehydration technology to include freeze and vacuum drying to produce premium products with short reconstitution times. Integration of the European acquisitions began. Sales and marketing have been centralized. U.S. processing technology and agricultural growing expertise is being transferred to the region. Vegetables will be grown and dehydrated in those locations best suited for each product. Certification to international quality standards (ISO 9002) was achieved by the U.S. production facility in Turlock, California; laboratories in Livingston and Greenfield, California; and by our acquired facility in France. Other European facilities were certified previously. Red Star Bioproducts Acquisitions made in the fourth quarter of 1994 significantly boosted 1995 revenue and operating profit in the division. Over half of revenue was derived from outside of the United States. The acquisition of Champlain Industries and the Biolux Group significantly expanded our product lines and international reach. We integrated and strengthened sales and marketing efforts of the combined group. With a broadened product line for food processors that includes flavor enhancers derived from yeast and vegetable proteins, we strengthened our market position in North America and built upon our new presence in Europe. To produce food- and pharmaceutical-grade extracts from spent brewer's yeast in Europe, we undertook the transfer of proprietary U.S. technology to our acquired operations. Investment in additional equipment and capacity is slated to begin in 1996 to meet anticipated demand. Marketing of yeast extracts as bionutrients was strengthened. High-performance extracts serve as a source of nutrition for the production of enzymes, natural flavors and pharmaceuticals, as well as in biotechnology and environmental clean-up. Red Star yeast & Products With solid improvements in operating profit, we widened our advantage as the leading, low-cost yeast supplier in North America. The boost in operating margin was the result of recovering prices and successful cost reduction efforts. We captured the benefits of restructuring our sales and marketing group and developed partnerships with distributors to provide reliable service at lower costs. Capital investments continued to improve the efficiency of operations. Significant changes also occurred in the infrastructure of the industry in 1995, with the exit of two yeast producers from the North American market and a subsequent reduction in capacity. We are capitalizing on the trend towards automated handling of ingredients in the wholesale baking industry by taking a leadership position in the conversion of key customers to bulk yeast delivery systems. Retail yeast sales continued to get a boost from the bread machine boom. Promotional activities included joint marketing and couponing with bread machine and packaged bread mix makers, and the introduction of a line of Red Star bread machines. [End Page 16] [Start Text of Pages 18-21] Management's Analysis of Operations and Financial Condition Years ended September 30, 1995, 1994 and 1993 Results of Operations During 1995, Universal Foods Corporation focused on strengthening its existing businesses to position the Company for future growth. The businesses were strengthened through acquisitions, international expansion and a continued emphasis on its strategy to use process and applications expertise to move into more advanced and sophisticated product categories. With the sale of the Frozen Foods business in the 1994 fourth quarter, 1995 was the Company's first full year of operations as a developer and marketer of high-performance ingredients for foods and other uses. Revenue from the Company's continuing businesses was $793 million in 1995 compared to $691 million in 1994. Net earnings in 1995 were $66.1 million or $2.54 per share compared with $50.9 million or $1.95 per share in 1994. The 1995 earnings include a net pretax gain from unusual items of $26.8 million or $.36 per share. The 1994 results include a pretax restructuring charge of $12.1 million or $.29 per share. Unusual items in 1995 include a pretax gain from the sale of the Frozen Foods business of $49.6 million offset by the cost of discontinuing a product line of $14.1 million and other items totaling $8.7 million. Approximately 70% of the unusual charges relate to the write-down of assets to net realizable value. In the fourth quarter of 1994, the Company recorded a pretax restructuring charge of $12.1 million. The restructuring includes product line consolidation in the Company's Flavor Division and the reorganization of sales, marketing and distribution functions in the Red Star Yeast & Products Division. The charge included $6 million of severance and termination benefits and $6.1 million of asset write-offs and other items. Approximately 50% of the charge was non-cash. Operating cash flows were used to fund severance and other cash items. The restructuring program was substantially completed in 1995 and will reduce operating costs in 1996. Revenue in 1995 was $793 million compared with $930 million in 1994 and $892 million in 1993. The decrease in revenue in 1995 was caused by the sale of the Frozen Foods business. In 1995 the Company's ongoing operations increased revenue by $102 million compared with an increase of $67 million in 1994. Of the 1995 revenue growth from ongoing operations, 60% was generated by the BioProducts Division due to volume gains from acquisitions and growth from their existing business. The Dehydrated Products Division contributed 32% of the gains through growth in the onion and garlic business bolstered by the European acquisitions. The Flavor and Color Divisions showed modest revenue increases while Red Star Yeast & Products was down slightly. In 1994, the Company was able to continue growth in revenue through acquisitions, volume increases and market share growth, both domestically and internationally. 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 quarter. Modest revenue gains were also achieved by the Dehydrated Products and Red Star Yeast & Products Divisions. Sales generated outside the United States is a significant portion of the Company's revenue. In 1995 foreign sales revenue was $313 million, or approximately 40% of total revenue. This compares with $232 million or 25% of total revenue in 1994. In 1993 revenue generated outside the United States was $184 million, or 21% of total Company revenue. Approximately 58% of the 1995 international sales were in Europe. The Company also generates revenue in Canada, Mexico and the Pacific Rim. Historically, changes in foreign currency rates have not been material to revenue and expenses and management currently expects no significant impact from foreign currency rate changes in 1996. The cost of products sold represented 65.3% of revenue in 1995, 66.3% in 1994 and 66.1% in 1993. The 1% decrease in 1995 resulted from improved product mix and operating efficiencies. In 1994, the cost of products sold as a percentage of revenue did not change significantly from 1993 as higher raw material costs in the Frozen Foods Division were offset by volume efficiencies in the Flavor and BioProducts Divisions. Despite a decrease in 1995 revenue, selling and administrative expenses decreased to 21.7% of revenue as compared to 22.0% in 1994 and 1993. The Company's continued focus on cost reduction resulted in a decrease in total expenses in 1995. Operating income, excluding unusual items, decreased $6.3 million in 1995 compared with an increase of $3.4 million in 1994. The 1995 decrease is primarily attributable to the sale of the Frozen Foods business reduced by increases in operating income for all other divisions. The 1994 increase in operating income is attributable to 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 effective income tax rate was 42.3% in 1995 compared with 37.3% in 1994 and 37.5% in 1993. The effective tax rate in 1995 was increased by a higher than normal tax rate on the gain on the sale of the Frozen Foods business offset by increased tax credits. The Company uses financial instruments in its management of foreign currency and interest rate exposures. The Company has procedures in place to monitor and control financial instruments, and they are not held or issued for trading purposes. The Company's credit risk related to financial instruments is considered low. During 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions," SFAS No. 112 "Employer's 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. Liquidity and Financial Position Cash provided by operating activities was $23.1 million in 1995 and $61.6 million in 1994. The decrease in 1995 versus 1994 was primarily the result of higher taxes paid resulting from the sale of the Frozen Foods business. The decrease in cash provided by operating activities of $21.1 million in 1994 versus 1993 was the result of higher working capital requirements principally related to increased international sales levels. Cash used for investing activities was $16.3 million in 1995 versus $36 million provided by investing activities in 1994. The 1995 and 1994 amounts include $39 million and $163 million, respectively, of cash received from the sale of the Frozen Foods business. Acquisitions of $12.4 million in 1995 included two European dehydrated vegetable businesses. During 1994, the Company used $65.9 of cash to acquire four businesses. The acquisitions included Destillaciones Garcia de la Fuente, S.A., a Spanish flavor and fragrance business; Mallow Foods, a dehydrator of vegetable products based in Ireland; Champlain Industries Limited, a Canadian producer of flavor enhancers and savory flavorings; and the Biolux Group, a European producer of ingredients from brewer's yeast. 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. Capital expenditures totaled $42.6 million in 1995, compared to $55.1 million in 1994. Both years reflect expenditures for productivity improvements and plant expansions, principally in the Flavor and Color Divisions. In 1996, capital expenditures are estimated to be between $50 and $60 million; depreciation should approximate $32 million. Financing activities used $41.6 million in 1995 compared to $65.6 million in 1994. In 1995 and 1994, the Company used proceeds from the sale of the Frozen Foods business to pay down debt and fund acquisitions. In 1995, the Company refinanced its $55 million revolving loan agreement with a $70 million multicurrency revolving loan agreement. The revolving loan agreement supports the Company's commercial paper program. The Company has an agreement in place to issue $40 million of 6.99% senior notes on December 28, 1995. Proceeds will be used to refinance $20 million of senior notes coming due in December 1995 and for general corporate purposes. The Company has paid uninterrupted quarterly dividends since commencing public trading in its stock over twenty years ago. In 1995, dividends paid per share were $0.96 up 4% over $.92 in 1994, which was an increase of 5% over 1993. As evidence of the Company's continued effort to provide shareholders with immediate and tangible participation in current earnings, the dividends paid in 1995 represented 44% of net earnings before unusual items, exceeding the Company's goal of paying annual cash dividends between 35% and 40% of earnings. Subsequent to year-end, the dividend on common shares was increased to an annualized rate of $1.00 per share, a 4% increase. The impact of inflation on both the Company's financial position and results of operations has been minimal and is not expected to adversely affect 1996 results. The Company's financial position continues to remain strong, enabling it to meet cash requirements for operations, capital expansion programs and dividends to shareholders. Outlook Universal Foods Corporation's primary market is the food industry. Despite a slow-growth environment in the industry, the Company expects to increase revenue and profits by targeting faster growing niches and successful customers within each of its businesses, leveraging its process and applications expertise to move into more advanced and sophisticated product categories, and capitalizing on geographic expansion. The Company views consolidations within the food industry as an opportunity to be among the select number of companies participating in long-term supplier relationships with its customers. The Company also expects to continue to increase total revenue provided by exports and manufacturing operations outside the United States to enhance its position as a supplier to international customers. Certain of the Company's businesses and products provide slower, stable growth 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 expertise into non-food areas. Currently, about 10% of revenue comes from non-food applications. These include such diverse, but technically related applications as cosmetics, personal care, pharmaceuticals and specialty chemicals. Universal Foods expects to achieve further synergies from its recent acquisitions in the Red Star BioProducts and Dehydrated Products Divisions as manufacturing operations and sourcing of materials are rationalized and enhanced. The transfer of U.S. technology to acquired European operations will provide for improved processing efficiencies and upgraded product quality, both of which should improve operating margins in those operations. In addition, the Company expects to continue to benefit from the integration of acquired Flavor and Color operations which have been restructured over the past few years. To further penetrate the growing market for flavors, flavor enhancers and colors in Asia/Pacific Rim, the Company will strengthen its regional presence. Resources and personnel will be devoted to building an infrastructure for expanded technical and marketing support from a central location. These activities are considered an investment in long-term growth and should significantly boost the company's share of revenue from the region, now 4%. Other Issues 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. For example, the Red Star Yeast & Product Division has re-engineered its manufacturing process to be more efficient and control emissions through the same state-of-the-art system. The system, installed in two facilities, is the culmination of six years of cooperative efforts with federal and state regulatory agencies. Equal Opportunity Policy: Universal Foods is an Equal Opportunity Employer. The Company strives to create a working environment free of discrimination and harassment with respect to race, sex, color, national origin, religion, age, disability or being a veteran of the Vietnam era, as well as to make reasonable accommodations in the employment of qualified individuals with disabilities. Corporate Governance: Universal Foods believes it is managed in a way that is fair to all its shareholders and which allows its shareholders to maximize the value of their investment by participating in the present and future growth of the Company. Independent Board of Directors: The Company's Board of Directors is composed primarily of independent members. Nominees for board members are selected to provide a diversity of expertise, experience and achievements in general business and food-related fields which allow the Board to most effectively represent the interests of all the Company's shareholders. Independent Committees: The audit, nominating and compensation and development committees of the Board are composed of directors who are not employees of the Company. These committees, as well as the entire Board, consult with and are advised by outside consultants and experts in connection with their deliberations as needed. Executive Compensation: A significant portion of executive compensation is tied to the Company's success in meeting specific performance goals. The overall objectives of this policy are to attract and retain the best possible executive talent, to motivate these executives to achieve the Company's business strategy goals, to link executive and shareholder interests through equity-based plans and to provide a program that recognizes individual contributions. Scientific Advisory Committee: As an advisory committee to the Board, this group reviews research and development programs with respect to the quality and scope of work undertaken, advises the Company on maintaining product leadership through technological innovation, reports on new technological trends and suggests new emphasis for research. Confidential Voting: The Company provides for confidential shareholder voting by employing an independent tabulation service. Proxy cards which identify the particular vote of a shareholder are not seen by the Company unless it is necessary to meet legal requirements or in the event a shareholder has made a written comment on the card. Corporate Responsibility: The Company is committed to the health and well-being of the communities in which it does business. Universal Foods supports an initiative to return 2% of pretax domestic earnings to its communities through contributions and in-kind donations of products and services. The Universal Foods Foundation is a not-for-profit organization formed by the Company to manage its charitable contributions. Areas that receive support are education, health and human services, culture and the arts, and civic and community projects. [End Pages 18-21] [Start Page 22] Consolidated Financial Data (Dollars in thousands except per share amounts) Earnings Revenue Gross Profit Earnings Per Share 1995 First Quarter $187,724 $65,353 $35,582 $1.37 Second Quarter 191,824 67,171 13,648 .52 Third Quarter 207,542 68,546 14,557 .56 Fourth Quarter 205,881 73,707 2,316 .09 1994 First Quarter $220,791 $76,632 $14,460 $ .55 Second Quarter 237,082 79,437 14,574 .56 Third Quarter 249,467 81,199 15,310 .59 Fourth Quarter 222,523 75,843 6,567 .25 Fourth quarter of 1995 includes unusual charges of $22,713,000. First quarter of 1995 includes a gain on the sale of the Frozen Foods business of $49,560,000. Fourth quarter of 1994 includes a restructuring charge of $12,125,000. Common Stock Prices and Dividends Market Price Dividends High Low Per Share 1995 First Quarter $31.13 $26.13 $.24 Second Quarter 34.25 27.25 .24 Third Quarter 34.00 31.38 .24 Fourth Quarter 34.88 31.00 .24 1994 First Quarter $35.00 $30.38 $.23 Second Quarter 34.38 30.00 .23 Third Quarter 34.25 29.50 .23 Fourth Quarter 33.38 28.88 .23 [End Page 22] [Start Pages 23-33] Consolidated Earnings (In thousands except per share amounts) Years ended September 30, 1995 1994 1993 Earnings Revenue $792,971 $929,863 $891,566 Operating costs and expenses: Cost of products sold 518,194 616,752 589,735 Selling and administrative expenses 171,914 203,965 196,102 Unusual items (26,847) 12,125 - ------- -------- -------- 663,261 832,842 785,837 ------- -------- -------- Operating income 129,710 97,021 105,729 Interest expense 15,107 15,888 15,172 ------- -------- -------- Earnings before income taxes and cumulative effect of accounting changes 114,603 81,133 90,557 Income taxes 48,500 30,222 33,959 ------- -------- -------- Earnings before cumulative effect of accounting changes 66,103 50,911 56,598 Cumulative effect of accounting changes (net of income taxes of $14,137) - - 23,563 ------- -------- -------- Net earnings $ 66,103 $ 50,911 $ 33,035 ------- -------- -------- Earnings per Common Share Earnings before cumulative effect of accounting changes $2.54 $1.95 $2.15 Accounting changes - - (.90) ------- -------- -------- Net earnings $2.54 $1.95 $1.25 ------- -------- -------- Weighted average shares 26,061 26,131 26,350 ------- -------- -------- See notes to consolidated financial statements. Consolidated Balance Sheets (Dollars in thousands) September 30, 1995 1994 Assets Current assets: Cash and cash equivalents $ 8,717 $ 43,430 Trade accounts receivable less allowance for losses of $3,768 and $3,527 105,847 95,336 Inventories 179,020 156,121 Prepaid expenses and other current assets 15,230 19,145 Prepaid income taxes 17,550 13,796 -------- -------- Total current assets 326,364 327,828 Investments 18,081 13,944 Other assets 24,083 18,384 Intangibles-at cost, less accumulated amortization of $27,165 and $26,042 148,654 147,789 Property, Plant and Equipment: Cost: Land 15,438 14,396 Buildings 123,739 104,142 Machinery and equipment 308,204 309,847 -------- -------- 447,381 428,385 Less accumulated depreciation 187,693 172,666 -------- -------- 259,688 255,719 Total assets $776,870 $763,664 -------- -------- Liabilities and Shareholders' Equity Current Liabilities: Short-term borrowings $ 7,108 $ 4,527 Accounts payable and accrued expenses 121,922 127,823 Salaries, wages and withholdings from employees 11,715 10,330 Income taxes 20,755 28,697 Current maturities on long-term debt 21,100 20,775 -------- -------- Total current liabilities 182,600 192,152 Deferred income taxes 14,514 17,300 Other deferred liabilities 19,198 19,414 Accrued employee and retiree benefits 38,100 35,173 Long-term debt 160,678 172,235 Shareholders' Equity: Common stock par value $.10 a share authorized 100,000,000 shares; issued 26,977,437 shares 2,698 2,698 Additional paid-in capital 78,955 80,066 Earnings reinvested in the business 314,883 273,800 -------- -------- 396,536 356,564 Less: Treasury stock, 877,961 and 916,615 shares, respectively, at cost 24,770 25,521 Other 9,986 3,653 -------- -------- 361,780 327,390 -------- -------- Total liabilities and shareholders' equity $776,870 $763,664 -------- -------- 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, 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) Net earnings for the year 66,103 Cash dividends paid- $.96 a share (25,020) Stock options exercised, net of 81,593 shares exchanged (1,180) (107,661) 2,744 Other 3 11,607 (412) Restricted stock issued 66 (13,400) 376 (442) Restricted stock cancelled 5,800 (198) 81 Amortization of restricted stock 515 Translation adjustment for year (6,487) Purchase of treasury stock 65,000 (1,759) Balances at September 30, 1995 $2,698 $78,955 $314,883 877,961 $(24,770) - $(1,335) $(8,651)
See notes to consolidated financial statements. Consolidated Cash Flows (Dollars in thousands) Years ended September 30, 1995 1994 1993 Cash Flows from Operating Activities Net earnings $66,103 $50,911 $33,035 Adjustments to reconcile net earnings to net cash provided by operating activities: Cumulative effect of accounting changes - - 23,563 Depreciation 28,206 31,012 29,644 Amortization 6,435 5,366 5,409 Provision for losses on accounts receivable 1,356 971 988 Gain on sale of property, plant and equipment and other productive assets (41,423) (185) (167) Changes in operating assets and liabilities (net of effects from acquisition and disposition of businesses): Accounts receivable (6,543) (10,588) (4,299) Inventories (11,109) (5,082) 1,498 Prepaid expenses, income taxes and other assets (3,935) (3,366) (9,886) Accounts payable and accrued expenses (4,719) (3,312) (4,073) Salaries, wages and withholdings from employees 828 (3,158) 845 Income taxes (8,194) 16,488 2,285 Deferred income taxes (5,881) (4,889) 2,976 Other liabilities 2,009 (12,526) 933 ------- -------- ------- Net cash provided by operating activities 23,133 61,642 82,751 ------- -------- ------- Cash Flows from Investing Activities Acquisition of property, plant and equipment (42,562) (55,071) (36,363) Acquisition of new businesses- net of cash acquired (12,431) (65,909) (9,614) Proceeds from disposition of business and sale of property, plant and equipment and other productive assets 43,317 163,807 589 Increase in investments (4,574) (6,827) (2,225) ------- ------- ------- Net cash (used in) provided by investing activities (16,250) 36,000 (47,613) ------- ------- ------- Cash Flows from Financing Activities Proceeds from additional borrowings 11,948 42,629 27,521 Reduction in debt (27,920) (70,415) (39,240) Purchase of treasury stock (1,759) (14,118) - Dividends (25,020) (24,050) (23,191) Proceeds from options exercised and other equity transactions 1,155 386 98 ------- ------- ------- Net cash used in financing activities (41,596) (65,568) (34,812) ------- ------- ------- Net (decrease) increase in cash and cash equivalents (34,713) 32,074 326 Cash and cash equivalents at beginning of year 43,430 11,356 11,030 ------- ------- ------- Cash and cash equivalents at end of year $ 8,717 $43,430 $11,356 ------- ------- ------- Cash paid during the year for: Interest $15,352 $14,829 $16,234 Income taxes 53,500 33,500 29,080 See notes to consolidated financial statements. [Start page 27] Notes to Consolidated Financial Statements (tabular dollars in thousands except per share amounts) note a Summary of Significant Accounting Policies: Nature of Business The Company manufactures and distributes flavors, colors, flavor enhancers and other bioproducts, dehydrated products and yeast for foods and other applications. 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. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less when acquired to be cash equivalents. The effect of the Company's foreign operations on cash flows is not material. Inventories Inventories are stated at the lower of cost or market. Cost is determined using primarily the first-in, first-out (FIFO) method. Depreciation Depreciation is provided over the estimated useful lives of plant and equipment using the straight-line method for financial reporting. Accelerated methods are used for income tax purposes. Intangibles The excess cost over net assets of businesses acquired and other intangibles, principally formulae and supply contracts, are being amortized using the straight-line method over periods ranging up to 40 years. The Company continually evaluates whether events or circumstances have occurred which would indicate the carrying value may not be recoverable or the useful life warrants revision. When factors indicate that goodwill and other intangible assets should be evaluated for possible impairment, the Company analyzes the future recoverability of the asset using an estimate of the related undiscounted future cash flows of the business, and recognizes any adjustment to its carrying value on a current basis. Financial Instruments The Company uses financial instruments in its management of foreign currency and interest rate exposures. Financial instruments are not held or issued for trading purposes. Non-U.S. dollar financing transactions may be used as hedges of long-term investments or intercompany loans in the corresponding currency. Foreign currency gains and losses on the hedges of long-term investments are recorded as foreign currency translation adjustments included in stockholders' equity. Gains and losses related to hedges of intercompany loans offset the gains and losses on intercompany loans and are recorded in net income. Interest rate exchange agreements are effective at modifying the Company's interest rate exposures. Net interest is accrued as either interest receivable or payable with the offset recorded in interest expense. The Company also uses short-term forward exchange contracts for hedging purposes. Realized and unrealized gains and losses on these instruments are deferred and recorded in the carrying amount of the related hedged asset, liability or firm commitment. Translation of Foreign Currencies Assets and liabilities of foreign operations are translated into United States dollars at current exchange rates. Income and expense accounts are translated into United States dollars at average rates of exchange prevailing during the year. Adjustments resulting from the translation of financial statements of international units are included as foreign currency translation adjustments in the equity section of the balance sheets. Net transaction (gains) losses of $140,000 in 1995, ($697,000) in 1994 and $162,000 in 1993, are included in earnings before income taxes. note b Acquisitions, Divestiture and Unusual Items: In 1995, the Company recorded unusual items resulting in a net pretax gain of $26,847,000 ($9,247,000 after tax, or $.36 per share). Unusual items include the gain on the sale of the Frozen Foods business of $49,560,000, offset by the costs of discontinuing a product line of $14,047,000 and other items which include the cost of a patent infringement judgment and the write-down of intangible assets totaling $8,666,000. In 1995, the Company finalized the sale of its Frozen Foods business and amended the Stock Purchase Agreement ("Agreement") with ConAgra, Inc. The business was effectively transferred to ConAgra on August 1, 1994. Under the amended Agreement, ConAgra agreed to acquire 100% of the stock of Universal Frozen Foods Company for $202,000,000 cash. The sale of the Frozen Foods business resulted in a pretax gain of $49,560,000. In 1995, the Company reviewed its options relating to the BioVentures product line. Based on the Company's comprehensive review, during the fourth quarter of 1995, the Company decided to sell or discontinue this product line. Accordingly, the Company evaluated the ongoing value of the plant and equipment and other assets associated with this product line. Based on the evaluation, the Company recorded a charge of $14,047,000 to adjust the assets to estimated fair value less costs of disposal. In August 1995, the Court of Appeals for the Federal Circuit Court affirmed a judgment against the Company for patent infringement. The Company has accrued $4,500,000 for the judgment. The Company is in the process of petitioning the Supreme Court to review the finding of the Court of Appeals for the Federal Circuit Court. In 1995, the Company acquired the common stock of two foreign dehydrated vegetable processors for $12,798,000 cash. On an unaudited pro-forma basis, the effects of the acquisitions were not significant to the Company's 1995 results of operations. In July 1994, the Company acquired all of the outstanding stock of Champlain Industries Limited, a manufacturer of savory flavorings and flavor enhancers, for $61,744,000 of which $37,258,000 was paid in cash 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 40 years. On an unaudited pro forma basis, the effects of the acquisitions were not significant to the Company's 1994 results of operations. The above acquisitions have been accounted for as purchases and, accordingly, their results of operations have been included in the financial statements since their respective dates of acquisition. In the fourth quarter of 1994, the Company recorded a pretax restructuring charge of $12,125,000 ($7,600,000 after tax, or $.29 per share). The restructuring includes product line consolidation in the Company's Flavor Division and the reorganization of sales, marketing and distribution functions in the Red Star Yeast & Products Division. The charge included $6,000,000 of severance and termination benefits and $6,125,000 of asset write-offs and other items. Approximately 50% of the charge was non-cash. Operating cash flows were used to fund severance and other cash items. The restructuring program was substantially completed in 1995. note c Inventories: Inventories include finished and in-process products totaling $119,885,000 and $101,046,000 at September 30, 1995 and 1994, respectively, and raw materials and supplies of $59,135,000 and $55,075,000 at September 30, 1995 and 1994, respectively. note d Debt: Long-term debt consists of the following obligations: 1995 1994 Payable in U.S. Dollars: 9.06% senior notes due through July 2004 $ 46,000 $ 50,000 8.60% senior notes due through November 2001 12,600 14,800 7.59% senior notes due through December 2008 30,000 30,000 6.70% senior notes due through December 2009 20,000 20,000 6.38% senior notes due through December 2003 20,000 20,000 6.21% senior notes due December 1995 20,000 20,000 Commercial paper supported by long-term loan commitments 8,215 1,031 Various mortgage notes, capital lease obligations and other notes 6,536 2,311 Notes and credit facilities payable in foreign currencies 18,427 34,868 ------- ------- 181,778 193,010 Current maturities 21,100 20,775 ------- ------- Total long-term debt $160,678 $172,235 ======== ======== In June 1995, the Company refinanced the $55,000,000 revolving loan agreement, replacing the facility with a $70,000,000 multicurrency revolving loan agreement entered into with a group of five banks. Under the agreement, the Company has the option to elect to have interest rates determined based upon the LIBOR rate plus margin or the certificate of deposit rate plus margin. A commitment fee is payable on the unused amount of credit. The facility matures in June 2000. Uncommitted lines of credit totalling $144,000,000 are also available to the Company from several banks, some of which participate in the revolver. In June 1995, the Company entered into an agreement to issue on December 28, 1995, 6.99% senior notes totalling $40,000,000. The notes fully mature in December 2007 with mandatory principal prepayments of $10,000,000 in December 2005, $10,000,000 in December 2006 and the remaining $20,000,000 due in December 2007. Proceeds will be used for general corporate purposes and to refinance the $20,000,000 of 6.21% senior notes due in December 1995 which have been reclassified to long-term debt. 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. Consequently, at September 30, 1995 and September 30, 1994, $8,215,000 and $1,031,000 have been reclassified to long-term debt, respectively. The aggregate amounts of maturities on long-term debt each year for the five years subsequent to September 30, 1995 are as follows: 1996, $21,100,000; 1997, $7,943,000; 1998, $7,521,000; 1999, $9,537,000 and 2000, $18,173,000. Substantially all of the loan agreements contain restrictions concerning working capital, borrowings, investments and dividends. Earnings reinvested of $29,737,000 at September 30, 1995 were unrestricted. Short-term borrowings consist of loans to foreign subsidiaries denominated in local currencies which are borrowed under various foreign uncommitted lines of credit. note e Financial Instruments and Risk Management: Interest Rate Swaps To reduce interest rate risk and lower its cost of borrowing, the Company has entered into interest rate swaps. As of September 30, 1995 and 1994 the notional amount of interest rate swaps outstanding was $20,000,000 and $40,000,000, respectively. The interest rate swaps require the Company to pay variable and receive fixed interest rates and the swaps outstanding at September 30, 1995 mature in 1996. Currency Swaps To manage foreign exchange risk, the Company has entered into currency swaps. The currency swaps of $22,358,000 and $17,055,000 at September 30, 1995 and 1994, respectively, effectively hedge long-term Canadian dollar-denominated investments and mature in 1997 and 1998. Forward Exchange Contracts The Company uses forward exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated intercompany transactions and other known foreign currency exposures. At September 30, 1995 and 1994, the Company had foreign exchange contracts, generally with maturities of one year or less, of $43,175,000 and $11,607,000, respectively. Concentrations of Credit Risk Counterparties to currency exchange and interest rate swaps consist of large major international financial institutions. The Company continually monitors its positions and the credit ratings of the counterparties involved and limits the amount of credit exposure to any one party. While the Company may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, generally short payment terms, and their dispersion across geographic areas. Fair Values The carrying amounts of cash and equivalents, trade receivables, investments, accounts payable, and short-term borrowings approximated fair value as of September 30, 1995 and 1994. The fair value of the Company's long-term debt, including current maturities, is estimated using discounted cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The fair value at September 30, 1995 and 1994 was approximately $190,000,000. note f 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 1991 Stock Plan for Executive employees (the "1990 Plan"). The Plans have awarded shares of restricted stock which become freely transferable at the end of the period of restriction-five years. During the period of restriction, the employee has voting rights and is entitled to receive all dividends and other distributions paid with respect to the stock. Shares ------------------------------------- Outstanding Reserved Options Available Balances at September 30, 1992 ($10.591 to $36.125) 1,765,553 1,202,803 562,750 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) 1,659,311 1,414,411 244,900 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) 2,790,160 1,600,310 1,189,850 Granted ($28.25 to $33.00) - 372,350 (372,350) Restricted stock awarded (13,400) - (13,400) Exercised ($11.833 to $33.75) (189,254) (189,254) - Cancelled - (167,516) 167,516 Balances at September 30, 1995 ($11.833 to $36.125) 2,587,506 1,615,890 971,616 At September 30, 1995, 964,865 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. note g Retirement Plans: The Company primarily provides benefits under defined contribution plans including a savings plan and ESOP. The savings plan covers substantially all domestic salaried and certain non-union hourly employees and provides for matching contributions up to 4% of each employee's salary. The ESOP covers substantially all domestic employees not covered by a defined benefit plan and provides for contributions of 6% to 10% of each employees' salary. Total expense for the Company's defined contribution plans was $5,205,000, $8,112,000 and $7,364,000 in 1995, 1994 and 1993, respectively. note h 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. 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: 1995 1994 1993 Service cost $1,139 $1,586 $1,784 Interest cost on accumulated benefit obligation 1,733 1,977 2,118 Amortization of prior service cost (278) (352) - Other (15) - 160 ------ ------ ------ Postretirement benefit expense $2,579 $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, 1995 and 1994 was: 1995 1994 Actuarial present value of accumulated benefit obligation: Retirees $ 7,935 $ 8,287 Fully eligible active plan participants 2,343 2,253 Other active plan participants 12,702 11,506 ------- ------- Accumulated benefit obligation 22,980 22,046 Unrecognized prior service cost 4,999 5,277 Unrecognized gain 3,949 2,662 ------- ------- Postretirement benefits accrued $31,928 $29,985 The weighted average discount rates used in determining the accumulated postretirement benefit obligation at September 30, 1995 and 1994 were 7.0% and 8.0%, respectively. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 13% in 1995, 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, 1995 by approximately $4,697,000 and the aggregate of the service and interest cost components of the 1995 postretirement benefit expense by $591,000. During 1994, the Company had a curtailment of accumulated postretirement benefits relating to employees of the Frozen Foods business which was sold effective July 31, 1994. The gain resulting from the curtailment has been included with the gain on the sale of Frozen Foods (see Note 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 pretax charge of $37,700,000 as of October 1, 1992 and has been reflected as a cumulative effect of accounting changes. note i 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, is as follows: 1995 1994 1993 Currently payable: Federal $33,181 $36,759 $23,394 State 5,636 6,684 4,082 Foreign 8,305 5,754 3,954 Deferred (benefit): Federal 1,021 (16,592) (10,057) State 210 (2,862) (1,521) Foreign 147 479 (30) ------- ------- ------- $48,500 $30,222 $19,822 The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consist of the following: 1995 1994 Deferred tax assets: Inventory valuation $ (5,728) $ (5,690) Employee and retiree benefits (18,345) (16,432) Sale of assets, plant closings and asset write-downs (3,985) (6,874) Other (18,862) (13,910) -------- -------- Gross deferred tax assets (46,920) (42,906) Valuation allowance 5,587 6,112 -------- -------- Total deferred tax assets $(41,333) $(36,794) ======== ======== Deferred tax liabilities: Property, plant and equipment $ 24,772 $ 21,234 Other 13,525 19,064 -------- -------- Total deferred tax liabilities $ 38,297 $ 40,298 -------- -------- Net deferred tax (assets) liabilities $ (3,036) $ 3,504 ======== ======== The effective tax rate differs from the statutory Federal income tax rate of 35% as described below: 1995 1994 1993 Taxes at statutory rate $40,114 $28,397 $18,500 State income taxes, net of Federal income tax benefit 3,800 2,484 1,665 Tax credits (3,100) (1,980) (531) Sale of business 5,900 - - Other, net 1,786 1,321 188 ------- ------- ------- Provision for income taxes $48,500 $30,222 $19,822 ------- ------- ------- Effective tax rate 42.3% 37.3% 37.5% Earnings before income taxes and cumulative effect of accounting changes are summarized as follows: 1995 1994 1993 United States $ 92,043 $63,079 $80,483 Foreign 22,560 18,054 10,074 -------- ------- ------- $114,603 $81,133 $90,557 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 j Contingencies: The Company is involved in various claims and litigation arising in the normal course of business. In the opinion of management and Company counsel, the ultimate resolution of these actions will not materially affect the consolidated financial position, results of operations, or cash flows of the Company. note k Foreign Operations: Summarized information relating to the Company's domestic and foreign operations are as follows: 1995 1994 1993 Revenue: United States $516,683 $745,487 $752,335 Europe 174,931 104,375 74,646 Other foreign 101,357 80,001 64,585 -------- -------- -------- $792,971 $929,863 $891,566 ======== ======== ======== Operating Income: United States $ 98,816 $ 76,315 $ 91,477 Europe 14,912 8,060 4,315 Other foreign 15,982 12,646 9,937 -------- -------- -------- $129,710 $ 97,021 $105,729 ======== ======== ======== Identifiable Assets: United States $439,634 $482,934 $569,840 Europe 238,497 175,539 102,603 Other foreign 98,739 105,191 57,550 -------- -------- -------- $776,870 $763,664 $729,993 ======== ======== ======== 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 oversight role with respect to the Company's financial statements through the Audit Committee, which is composed solely of outside directors. The Audit Committee recommends selection of the Company's auditors and meets with them and the internal auditors to review the overall scope and specific plans for their respective audits and results from those audits. The Committee also meets with management to review overall accounting policies relating to the reporting of financial results. Both the independent auditors and internal auditors have unrestricted access to the Audit Committee. Guy A. Osborn Chairman and Chief Executive Officer Michael Fung Vice President and Chief Financial Officer Independent Auditors' Report To the Shareholders and Board of Directors of Universal Foods Corporation: We have audited the accompanying consolidated balance sheets of Universal Foods Corporation and subsidiaries as of September 30, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended September 30, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note h 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 9, 1995 [End Pages 23-33] [Start Page 34] Five Year Review
(Dollars in thousands except per share data) 1995 1994 1993 1992 1991 Summary of Operations Revenue $792,971 100.0% $929,863 100.0% $891,566 100.0% $883,438 100.0% $834,329 100.0% Operating costs and expenses: Cost of products sold 518,194 65.3 616,752 66.3 589,735 66.1 593,006 67.1 557,917 66.9 Selling and administra- tive expenses 171,914 21.7 203,965 22.0 196,102 22.0 187,727 21.3 170,137 20.4 Unusual items (26,847) (3.4) 12,125 1.3 - - 19,300 2.2 - - ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- 663,261 83.6 832,842 89.6 785,837 88.1 800,033 90.6 728,054 87.3 ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- Operating income 129,710 16.4 97,021 10.4 105,729 11.9 83,405 9.4 106,275 12.7 Interest expense 15,107 1.9 15,888 1.7 15,172 1.7 16,423 1.9 13,975 1.7 ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- Earnings before income taxes and cumulative effect of accounting changes 114,603 14.5 81,133 8.7 90,557 10.2 66,982 7.5 92,300 11.0 Income taxes 48,500 6.2 30,222 3.2 33,959 3.9 25,286 2.8 34,520 4.1 ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- Earnings before cumulative effect of accounting changes 66,103 8.3 50,911 5.5 56,598 6.3 41,696 4.7 57,780 6.9 Cumulative effect of accounting changes net of tax - - - - 23,563 2.6 - - - - ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- Net earnings $ 66,103 8.3% $ 50,911 5.5% $ 33,035 3.7% $ 41,696 4.7% $ 57,780 6.9% ======= ==== ======= ==== ======= ==== ======= ==== ======= ==== Earnings per common share before cumulative effect of accounting changes 2.54 1.95 2.15 1.57 2.18 Net earnings per common share 2.54 1.95 1.25 1.57 2.18 ---- ----- ---- ---- ---- Other Related Data Earnings per common share excluding unusual items and cumulative effect of accounting changes 2.18 2.24 2.15 2.02 2.18 Dividend per common share 0.96 0.92 0.88 0.84 0.76 Average shares outstanding 26,061,269 26,130,783 26,350,346 26,608,350 26,537,996 Book value per common share 13.89 12.60 11.60 11.57 10.99 Price range per common share 26.13-34.88 28.88-35 30.25-37.25 26.75-39.88 28.63-40.38 Share price at September 30 34.88 29.63 33.88 31.38 38.25 Research and development expenditures 28,558 32,217 28,460 26,597 25,211 Capital expenditures 42,562 55,071 36,363 44,982 54,750 Depreciation 28,206 31,012 29,644 28,144 24,153 Amortization 6,435 5,366 5,409 4,894 5,252 Total assets 776,870 763,664 729,993 702,130 653,176 Long-term debt 160,678 172,235 171,907 167,746 152,213 Shareholders' equity 361,780 327,390 305,066 303,174 292,002 Return on average shareholders' equity before cumulative effect of accounting change 18.5% 16.1% 18.7% 13.8% 21.2% Total debt to total capital 34.3% 37.6% 38.7% 40.4% 36.9% Employees 4,104 4,063 5,450 5,400 5,924
The 1995 results include a pretax gain of $49.6 million relating to the sale of the Frozen Foods business and the cost of discontinuing a product line and other unusual items totaling $22.8 million. The 1994 results include a pretax restructuring charge of $12.1 million. The 1992 results include a pretax restructuring charge of $19.3 million relating to the Frozen Foods business. [End Page 34] EX-21 5 EXHIBIT 21 SUBSIDIARY LIST EXHIBIT 21 SIGNIFICANT SUBSIDIARIES OF UNIVERSAL FOODS CORPORATION Warner-Jenkinson Company, a New York corporation formerly known as H. Kohnstamm & Co., Inc. through which the Company conducts its food color business, has 5 foreign subsidiaries. Rogers Foods Inc., a California corporation formerly the Company's Dehydrated Division. Universal Holdings Inc., a Nevada investment subsidiary which is the parent company of Rogers Foods Inc. and the Warner-Jenkinson Company. Universal Flavor Corporation, an Indiana corporation through which the Company conducts its food flavor business, has 6 domestic and 15 foreign subsidiaries. EX-23 6 EXHIBIT 23 CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Amendment No. 1 to Registration Statement No.'s 33-7235, 33-34555 and 33-55437, and Registration Statement No.'s 33-27356 and 33-35704 of Universal Foods Corporation on Form S-8 of our reports dated November 9, 1995, which reports express unqualified opinions and include 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, appearing in and incorporated by reference in the Annual Report on Form 10-K of Universal Foods Corporation for the year ended September 30, 1995. December 22, 1995 Milwaukee, Wisconsin EX-27 7 FINANCIAL DATA SCHEDULE
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, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR SEP-30-1995 JAN-01-1995 SEP-30-1995 8,717 0 109,615 3,768 179,020 326,364 447,381 187,693 776,870 182,600 160,678 0 0 2,698 359,082 776,870 792,971 792,971 518,194 518,194 (26,847) 1,356 15,107 114,603 48,500 66,103 0 0 0 66,103 2.54 2.54 Unusual Item: Includes the gain on the sale of the Frozen Foods busines offset by the costs of discontinuing a product line and other items which include the cost of a patent infringement judgment and the write-down of intangible assets.
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