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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, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number 1-7626
UNIVERSAL FOODS CORPORATION
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0561070
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
433 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 271-6755
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class Name of each exchange on which registered
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Common Stock, $.10 par value New York Stock Exchange, Inc.
Associated Common Share Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock as of December 5, 1997: 27,210,916 shares of Common Stock, $.10
par value, including 1,685,850 treasury shares.
Aggregate market value of Universal Foods Corporation Common Stock,
excluding treasury shares, held by non-affiliates as of December 5, 1997 was
$1,039,585,000. In determining who are affiliates of the
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Company for purposes of this computation, it is assumed that directors,
officers, and any persons filing a Schedule 13D or Schedule 13G are "affiliates"
of the Company. The characterization of such directors, officers, and other
persons as affiliates is for purposes of this computation only and should not be
construed as a determination or admission for any other purpose that any of such
persons are, in fact, affiliates of the Company.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Universal Foods Corporation Annual
Report to Shareholders for the fiscal year ended
September 30, 1997 (Parts I, II and IV of Form 10-K)
2. Portions of Universal Foods Corporation Notice
of Annual Meeting and Proxy Statement of the Company
dated December 16, 1997 (Parts II and III of Form 10-K)
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PART I
ITEM 1. BUSINESS -- FOOD AND OTHER INDUSTRIES
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 is a
technology-driven industrial marketer of high-performance components that add
functionality to foods, cosmetics, pharmaceuticals and other products. The
Company's technical expertise and application know-how make it unique among
suppliers that serve these industries. Using its core technology as a base,
the Company is committed to moving into higher-growth businesses, both in food
segments and non-food applications.
Principal products of the Company include aroma chemicals and flavors
for foods, beverages, dairy/ice cream products, personal care and household
items; certified and natural colors for foods, cosmetics, specialty inks and
pharmaceuticals; dehydrated vegetable products sold primarily to food
processors; a diverse line of yeast products for commercial baking and other
uses; and flavor enhancers and other bioproducts for foods, feed,
pharmaceuticals and commercial use. The Company exited the frozen potato
business during fiscal 1994.
The following material from the Universal Foods Corporation 1997 Annual
Report to Shareholders is incorporated by reference:
"Management's Analysis of Operations and Financial Condition"
on Pages 13 through 17.
Note 1 - "Summary of Significant Accounting Policies" on Pages 23 and
24.
Note 10 - "Foreign Operations" on Page 29.
DESCRIPTION OF BUSINESS
Flavor
The Company conducts its food flavor business through its wholly-owned
subsidiary Universal Flavor Corporation ("Universal Flavors"). Universal
Flavors manufactures and supplies flavors, ingredient systems, and aroma
chemicals to the dairy, food processor, beverage, personal care and
household products industries worldwide. It operates plants located in New
Jersey, Illinois, Indiana and Missouri. Universal Flavors has seven
additional plants in Canada, Mexico, Belgium, the United Kingdom, Italy, and
Spain. Products are sold primarily through a direct sales force with some
assistance from food brokers. In September 1997, the Company announced plans
to consolidate its flavor operations. During fiscal 1998, the Company will
close its flavor facility in New Jersey and transfer production and technical
laboratories to Indiana. As part of the consolidation, the Company also
announced additional investments in its Flavor division, including two
expanded product development and research facilities to provide increased
customer support and product creation.
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Strategic acquisitions have expanded Universal Flavors' product lines and
processing 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 Flavors, through its
international subsidiary, purchased its partner's 51% interest in Azteca en
Ambesco de Mexico S.A. de C.V. This purchase brought beverages and dairy
flavor product lines to the Company's existing Mexican flavor business.
During 1998, the Company will be integrating its BioProducts and Flavor
divisions, which have highly complementary product lines. The combined
divisions will have a broad, distinctive and fully integrated product offering,
ranging from savory flavor components to fully formulated flavor systems for
dairy, beverage, and processed food applications.
Color
The Company, through its subsidiary Warner-Jenkinson Company, Inc.("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 the Warner-Jenkinson name, are used by producers of beverages, bakery
products, processed foods, confections, pet foods, cosmetics and
pharmaceuticals. The Company became a supplier of ink-jet inks for the ink-jet
printer market with the acquisition of Tricon Colors, Inc., during the second
quarter of fiscal 1997.
W-J's major manufacturing facilities are located in Missouri. Cosmetic
and pharmaceutical colors, ink-jet inks and other high-purity organic dyes are
produced in New Jersey. Other manufacturing facilities are located in Canada,
Mexico, the United Kingdom, and the Netherlands. 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. During 1993, the
Company acquired Spectrum S.A. de C.V., a Mexican food color distributor. In
September 1997, the Company strengthened its presence in Latin America by
acquiring certain assets of the food color business of Pyosa, S.A., which is
located in Monterrey, Mexico.
Dehydrated Products
The Company's subsidiary, Rogers Foods, Inc. ("Rogers"), is the third
largest producer of dehydrated onion and garlic 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 is one of the largest producers of these
products.
Domestically, 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' U.S. processing facilities are located in 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 expanded the Company's dehydrated technology base to include freeze drying
and frozen vegetables, puffed drying and vacuum drying.
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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.
In Europe, the Dehydrated Products division operates as UNIVERSAL
DEHYDRATES. Facilities are located in Ireland, the Netherlands, and France.
The Company believes it is the leading dehydrator of specialty vegetables in
Europe.
Yeast
The Company's Red Star Yeast & Products division specializes in the
production of compressed, cream, active dry and nutritional yeast products for
sale to commercial and retail customers under the RED STAR trademark. 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 has investments in companies operating yeast and allied product facilities
in 9 offshore locations, two of which are wholly-owned subsidiaries. The
Company receives revenues in the form of dividends and technical assistance
fees from the non-wholly owned foreign affiliates.
Company-owned domestic yeast plants are located in Wisconsin, Maryland,
Texas and California. The Company distributes its products largely through its
own sales force. In 1994, the Company purchased a 20% interest in and entered
into an agreement with Minn-Dak Yeast Company, Inc., located in North Dakota,
for contract manufacturing under the Red Star label and to supply molasses, a
major raw material in yeast production.
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 yeast and baker's yeast.
The 1994 acquisitions of Champlain Industries Limited in Canada and The
Biolux Group in Belgium expanded the division's product lines and international
presence. The expanded Red Star BioProducts division serves the food and feed
processing and bionutrient industries with the broadest line of natural extracts
and specialty flavors. 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 savory
flavor and texture modifiers and enhancers in the food
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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 supply of hydrolyzed vegetable proteins (HVPs)
in the U.S. market. The products are marketed under a number of Red Star
trademarks.
The division operates production facilities in Wisconsin, Michigan and New
Jersey. Foreign manufacturing is conducted in Canada, the United Kingdom,
Belgium and France. More than half of the division's products are produced
outside of the United States. Its products are marketed through technically
trained sales personnel directly to customers and through distributors in some
international markets. As part of the integration of the Flavor and
BioProducts operations, the Company plans to close its New Jersey BioProducts
facility in 1998.
Asia Pacific
In 1997, the Company established a separate operating division in the
Pacific Rim to leverage the Company's diverse business base in this region.
The Asia Pacific division, headquartered in Singapore, manages sales, marketing
and technical functions previously directed by U.S.-based divisions. Regional
technical teams create high-quality products that appeal to local and regional
preferences. The division, which offers customers the full line of Company
products under one unified name, does business as Universal Foods Corporation
(Asia Pacific). Manufacturing operations are located in Australia, Hong Kong,
New Zealand, and the Philippines.
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 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 Idaho, Oregon and Washington.
RESEARCH AND DEVELOPMENT/QUALITY ASSURANCE
The Company believes that its competitive advantages and ability to
develop and deliver high-performance products are 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 3.2% in 1993 to 3.8% in 1997. Expenditures in 1997 were
$31.5 million compared with $29.8 million in 1996 and $28.6 million in 1995.
The Company's commitment to research and product development continues at a
level significantly higher than the food industry average. Of the aforesaid
amounts,
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approximately $19.7 million in 1997, $21.4 million in 1996 and $19.3 million in
1995 were research and development expenses as defined by the Financial
Accounting Standards Board.
As part of its commitment to quality as a competitive advantage, the
Company has undertaken efforts to achieve certification to the requirements
established by the International Organization for Standardization in Geneva,
Switzerland, through its ISO 9000 series of quality standards. Red Star
BioProducts believes it was the first North American ingredients supplier to
receive ISO 9002 certification. Facilities currently certified include
Universal Flavors facilities in Spain, Italy and the United Kingdom; Red Star
BioProducts facilities in the United States, the United Kingdom and Canada;
Warner-Jenkinson facilities in the United States, the Netherlands and United
Kingdom; and Dehydrated Products facilities in the United States, Ireland,
France and the Netherlands.
COMPETITION
All Company products are sold in highly competitive markets. Some
competitors have more product lines and greater resources than the Company has.
Since the Company and its competitors use similar methods of production,
marketing and delivery, the Company competes primarily on process and
applications expertise, quality and service. The Company competes in many
market niches where price is not the most important variable. Universal Foods
competes with only a few companies across multiple ingredient lines, and is
more likely to encounter competition specific to an individual business.
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 Flavors as demonstrated by acquisitions.
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 as well as a growing international presence. In 1997, W-J expanded
its business into the ink-jet inks market with the acquisition of Tricon
Colors, Inc.
For Dehydrated Products, acquisitions in Europe have provided
international expansion and enhanced export opportunities for U.S.-based
operations. Red Star Yeast & Products competes primarily in the North American
market and has two major competitors. Competition in Red Star BioProducts
comes primarily from domestic and European producers.
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.
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Development activities continue on a line of stable aqueous dispersion of
colors for foods and pharmaceutical products. Patents have been granted on the
products marketed under the SPECTRASPRAY and SPECTRABLEND CLEAR labels. The
development of natural food colors remain a growth opportunity for W-J. With
the 1997 acquisition of Tricon Colors, Inc., W-J expanded its purification
technology, with the primary opportunity in colors for ink-jet printers.
Lower calorie ingredients and nutritive sweeteners for dairy applications
are a focus of development activity for Universal Flavors. Formulations for
enriched beverages, new blends for juice drinks, and flavors for frozen and
alcoholic beverages offer opportunities as well. In 1997, the Flavor division
introduced the proprietary UNIZYME line of all-natural savory flavors, which
has unique performance characteristics. Development of savory flavors is
expected to accelerate, with the integration of the Company's BioProducts
division in 1998. Specialized ingredients are being developed for bakery
applications and the food service sector.
In 1997, the Company's BioProducts division commercialized several new
products. Introductions of high-performance baker's yeast extracts, which use
advanced enzyme technology in its production, build on the Flavor Mate series,
which was introduced in 1993. In 1997, the BioProducts division also
introduced a line of savory reaction flavor products in Europe. Acquisitions
in 1994 expanded the division's product line particularly in hydrolyzed
vegetable proteins. The transfer of technology to European acquisitions, begun
in 1995, has enabled the production of flavor enhancers as well as bionutrients
for pharmaceutical production. Highly refined yeast extracts are also supplied
to producers of diagnostic media.
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 in the "Business
Profile" on Pages 4 and 5 of the 1997 Annual Report to Shareholders is
incorporated by reference.
RAW MATERIALS
In producing its products, the Company uses a wide range of raw
materials. 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 turmeric, 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 supply
arrangements on supplies of brewer's yeast for European production needs.
Chili peppers, onion, garlic and other vegetables are acquired under annual
contracts with numerous growers in the western United States and Europe.
The principal raw material used in the production of yeast products is
molasses, which is purchased through brokers and producers, usually under
yearly fixed-price contracts. Processes have been developed to permit partial
replacement of molasses with alternate,
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readily-available substrates for use if molasses supplies should become
limited. In 1994, the Company entered into a supply agreement with Minn-Dak
Farmers Cooperative, a major North American molasses supplier, to provide
additional assurances of adequate supplies.
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, 1997, the Company employed 4,127 persons worldwide.
Approximately 650 U.S. employees are represented by one of the 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. Compliance is not expected to have a
material adverse effect in the succeeding two years as well. As is true with
the food industry in general, the production, packaging, labeling and
distribution of the products of the Company are subject to the regulations of
various federal, state and local governmental agencies, in particular the U.S.
Food & Drug Administration.
ITEM 2. PROPERTIES
Domestically, the Company operated 18 manufacturing and processing plants
in nine states as of September 30, 1997. Four plants produced yeast, three
facilities provided flavor enhancers and other bioproducts, three produced
dehydrated products, four plants produced colors and related products, and four
plants produced flavors. None of these properties are held subject to any
material encumbrances. At September 30, 1997, the Company operated 26 foreign
manufacturing facilities located in one U.S. territory and 16 foreign
countries. Of these facilities, two produced or distributed yeast, four
produced flavor enhancers and other bioproducts, three manufactured dehydrated
and frozen vegetables, four produced colors only, twelve produced or
distributed flavors and aroma chemicals only, and one produced both flavors and
colors. In addition, the Company has minority interest investments in eight
companies located in the U.S. and seven foreign countries.
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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 1997.
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ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant and their ages as of
December 1, 1997 are as follows:
EXECUTIVE OFFICERS
Name Age Position
---- --- --------
Kenneth P. Manning 55 Chairman, President and Chief Executive Officer
Richard Carney 47 Vice President - Human Resources
Steven O. Cordier 41 Treasurer
Michael Fung 47 Vice President and Chief Financial Officer
Michael L. Hennen 44 Controller
Richard F. Hobbs 50 Vice President - Administration
R. Steven Martin 41 Vice President and Group Executive
Terrence M. O'Reilly 52 Vice President, Secretary and General Counsel
James F. Palo 57 President - Dehydrated Products
Kenneth G. Scheffel 61 Vice President - Technologies
K.T. Thomas Tchang 46 President - Red Star Yeast & Products
William Tesch 47 President - Red Star BioProducts
Charles G. Tuchel 42 President - Universal Flavor
Michael A. Wick 54 President - Color
Messrs. Carney, Cordier, Fung, Hennen, Martin, Tchang, Tesch and Tuchel
have been employed by the Company in an executive capacity for less than five
years.
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. 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 New York Stock Exchange company.
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Mr. Fung joined the Company in June 1995 as Vice President and Chief
Financial Officer. From 1992 to 1995 he served as Senior Vice President and
Chief Financial Officer for Vanstar Corporation, a leading provider of products
and services to design, build and manage computer network infrastructures for
large enterprises. From 1988 to 1992, Mr. Fung was Vice President and Chief
Financial Officer of Bass Pro Shops and Tracker Marine Corporation,
privately-held companies operated under common ownership involved in the
manufacture and marketing of outdoor sporting goods.
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. Martin was elected Vice President and Group Executive in June 1997.
He 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. Tchang was elected President - Red Star Yeast & Products Division in
September 1997. He joined the Company in 1995 as Vice President, Sales and
Marketing for the Company's BioProducts division. Immediately prior to joining
the Company, he was the business director of Huntsman Specialty Chemicals Corp.
Mr. Tesch joined the Company in 1971, becoming Plant Manager of the Red
Star BioProducts Division in 1989. From 1993 to 1994 he was Director, Training
and Development of The Universal Way and from 1994 to 1996 he served as Vice
President, Manufacturing Operations of the Red Star BioProducts Division. On
April 16, 1996, Mr. Tesch was elected President of the Red Star BioProducts
Division.
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 - Flavor Division. Prior to joining the Company, Mr.
Tuchel was Business Manager at ICI Petrochemicals from 1990 through 1992.
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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
1997 appearing under "Common Stock prices and dividends" on Page 18 of the 1997
Annual Report to Shareholders 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,
1997, $10,734,000 is available for the payment of dividends on the common stock
of the Company under the most restrictive loan covenants.
On January 27, 1994 the Board of Directors established a share repurchase
program which authorizes the Company to repurchase up to 2.5 million shares.
As of September 30, 1997, 970,718 shares had been repurchased under the new
authorization.
On September 8, 1988 the Board of Directors of the Company adopted a
common stock shareholder rights plan which is described at Note 7 of Notes to
Consolidated Financial Statements - "Shareholders' Equity" on Page 26 of the
1997 Annual Report to Shareholders and which is incorporated by reference.
The number of shareholders of record on December 5, 1997 was 5,719.
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 on Page 31 of the
1997 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
"Management's Analysis of Operations and Financial Condition" is
incorporated by reference from Pages 13 through 17 of the 1997 Annual Report to
Shareholders.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are
set forth on Pages 18 through 30 of the 1997 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 Pages 22-23, respectively, of the Notice
of Annual Meeting and Proxy Statement of the Company dated December 16, 1997,
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 15 of the Notice of Annual Meeting and Proxy Statement of the
Company dated December 16, 1997.
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 and 9 of the
Notice of Annual Meeting and Proxy Statement of the Company dated December 16,
1997, 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, 1996 through
September 30, 1997, 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.
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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
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LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page Reference in
1997 Annual Report
1. FINANCIAL STATEMENTS to 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, 1997.
Independent Auditors' Report 30
Consolidated Balance Sheets - September 30, 1997 and 1996 20
Consolidated Earnings - Years ended September 30, 1997, 1996, and 1995 19
Consolidated Shareholders' Equity - Years ended September 30, 1997,
1996 and 1995 21
Consolidated Cash Flows - Years ended September 30, 1997, 1996 and 1995 22
Notes to Consolidated Financial Statements 23 - 29
Page Reference in
2. FINANCIAL STATEMENT SCHEDULES 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.
14
17
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, 1997 and 1996 and for each of the three years in
the period ended September 30, 1997, and have issued our report thereon dated
November 13, 1997, which report expresses an unqualified opinion and includes a
paragraph relating to the adoption of the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of"; such consolidated
financial statements and report are included in your 1997 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 & TOUCH LLP
Milwaukee, Wisconsin
November 13, 1997
15
18
SCHEDULE II
UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(IN THOUSANDS)
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
Additions
Valuation accounts charged
deducted in the balance Balance at to costs Balance
sheet from the assets to beginning and at end of
which they apply of period expenses Deductions(A) period
- ------------------------ ---------- --------- ------------- ---------
1995
Allowance for losses:
Trade accounts
receivable $3,527 $1,356 $1,115 $3,768
====== ====== ====== ======
1996
Allowance for losses:
Trade accounts
receivable $3,768 $ 349 $ 608 $3,509
====== ====== ====== ======
1997
Allowance for losses:
Trade accounts
receivable $3,509 $ 572 $ 47 $4,034
====== ====== ====== ======
(A) Accounts written off, less recoveries.
16
19
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, thereunto duly authorized.
UNIVERSAL FOODS CORPORATION
By: /s/ T. M. O'Reilly
------------------------------
T. M. O'Reilly, Vice President
Secretary & General Counsel
Dated: December 22, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 22, 1997, by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/ Kenneth P. Manning Chairman of the Board, President and
- -------------------------------- Chief Executive Officer
Kenneth P. Manning
/s/ Michael Fung Vice President and Chief Financial
- -------------------------------- Officer
Michael Fung
/s/ Michael L. Hennen Corporate Controller
- --------------------------------
Michael L. Hennen
/s/ Michael E. Batten Director
- --------------------------------
Michael E. Batten
Director
- --------------------------------
John F. Bergstrom
S-1
20
/s/ James A.D. Croft
- ----------------------------------
James A.D. Croft Director
/s/ James L. Forbes
- ----------------------------------
James L. Forbes Director
/s/ Dr. Carol I. Waslien Ghazaii
- ----------------------------------
Dr. Carol I. Waslien Ghazaii Director
/s/ William V. Hickey
- ----------------------------------
William V. Hickey Director
/s/ Leon T. Kendall
- ----------------------------------
Leon T. Kendall Director
/s/ James H. Keyes
- ----------------------------------
James H. Keyes Director
/s/ Guy A. Osborn
- ----------------------------------
Guy A. Osborn Director
/s/ Essie Whitelaw
- ----------------------------------
Essie Whitelaw Director
S-2
21
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1997 ANNUAL REPORT ON FORM 10-K
The Company will furnish a copy of any exhibit described below upon
request and upon reimbursement to the Company of its reasonable expenses of
furnishing such exhibit, which shall be limited to a photocopying charge of
$0.25 per page and, if mailed to the requesting party, the cost of first-class
postage.
Exhibit Incorporated Herein Filed
Number Description by Reference from 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 Previously filed at
Exhibit 3.2 to the
1995 Annual Report
on Form 10-K
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 Employment Previously filed at
Contract Exhibit 10(a) to the
1985 Annual Report on
Form 10-K
* (d) 1990 Employee Stock Previously filed with
Plan the Notice of Annual
Meeting & Proxy Statement
dated December 18, 1989
* (e) Director Stock Grant Previously filed as
Plan, as amended Exhibit 10(e) to
the 1991 Annual
Report on Form 10-K
Exhibit Index - Page 1
22
Exhibit Incorporated Herein by Filed
Number Description Reference from Herewith
- ------- ---------------- ------------------------ ----------
* (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 Previously filed as
Employment and Exhibit 10(h) to
Severance Agreement the 1995 Annual
Report on Form 10-K
(i) Trust Agreement dated Previously filed as
January 18, 1988 between Exhibit 18 to Amendment
and the Company Marshall No. 1 of the Company's
& Ilsley Trust Company Schedule 14D-9 filed
December 9, 1988
(j) Trust Agreement dated Previously filed as
January 18, 1988 Exhibit 19 to
between the Company Amendment No. 1 of
and Marshall & Ilsley the Company's Schedule 14D-9
Trust Company filed December 9, 1988
(k) Trust Agreement dated Previously filed as Exhibit
September 18, 1988 20 to Amendment No. 1 of the
between the Company Company's Schedule 14D-9 filed
and Marshall & Ilsley December 9, 1988
Trust Company
* (l) Management Incentive Plan X
for Elected Corporate
Officers
* (m) Management Incentive Plan X
for Division Management
* (n) Management Incentive Plan X
for Corporate Management
Exhibit Index - Page 2
23
Exhibit Incorporated Herein by Filed
Number Description Reference from Herewith
- -------- ------------------------------ ------------------------------- --------------
* (o) 1994 Employees Stock Previously filed on Form S-8
Option Plan dated September 12, 1994
* (p) 1998 Stock Option Plan Included as Appendix A to
Exhibit 99 hereto
13 Portions of Annual Report to X
Shareholders for the year ended
September 30, 1997 that are
incorporated by reference
21 Subsidiaries of Universal Foods X
Corporation
23 Consent of Deloitte & Touche LLP X
27 Financial Data Schedule X
99 Notice of Annual Meeting and Previously filed on
Proxy Statement, dated December 16, 1997
December 16, 1997 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.
Exhibit Index - Page 3